In Hellenic Shipping News 04/03/2015
When a crisis is evident in any shipping market segment, one of the main defense that ship owners can resort to, is to invest in the largest vessel possible. This has already happened in the container shipping business, where the norm is “the bigger the better” and according to the latest weekly report from shipbroker Allied Shipbroking, it could also happen again in the dry bulk market, although not in the same degree.
According to Allied’s report, “with such a depressed market noted in the dry bulk secondhand market and prices changing rapidly (with the downward direction being the only one seen so far), assets have been under review and scrutiny amongst potential buyers, with large premiums offered for candidates that offer what some considered valuable attributes. It may be the case that the benefits of the much touted Eco Ships have dropped drastically, yet other aspects of their technical specifications still provide added value. One of these that has become a cliché in shipping is that “bigger is better” and as has always happened during downturns in the market cycle, bigger ships start to phase out their smaller capacity counterparts. This is not to say that we are seeing the same sort of cascading effect that has taken place in the containership sector over the past couple of years, but it is not something that can be shrugged away either”, said Allied’s George Lazaridis, Head of Market Research & Asset Valuations.
Allied’s analyst noted that “the Handysize sector (10,000-39,999dwt) was once the main entry point to the inter-national shipping markets, commanding the biggest fleet in terms of number of vessels (compared to the larger sizes) making it one of the most liquid and much traded segments. This has changed considerably over the past 5 years as they have slowly lost their poll position to the Supramax (40,000-64,999dwt) vessels which now are the big-gest in number of vessels (although only just) while the Panamax (60,000-84,999dwt) segment is also slowly catching up having also surpassed the 2,000 ship mark”.
According to Mr. Lazaridis, “this has not been the only change noted here. Handies, which have typically incorpo-rated two main sizes (that of the mid 20,000dwt and the low/mid 30,000dwt) have seen a slow growth in size. There has been a growing trend (thanks in part by the new designs on offer) for the mid 20,000dwt vessels which are being replaced by the low/ mid 30,000dwt units, while the latter has started to grow reaching and almost moving into Handymax (40-49,999dwt) territory. This trend for ordering bigger and bigger has been similar to what had been seen with the Ultramaxes and Kamsarmaxes, although in this case it has been a more subtle trend with much more profound consequences to the smaller capacity competitors. Both Ultramaxes and Kamsarmaxes have yet to show any significant premiums in hires and even when they are sold hardly see any real pre-mium beyond the percentage difference in dwt. Beyond the newbuilding market, this preference has also now been reflected in the secodhand market, where vessels in the 25-29,000dwt range have been seeing a considerable discount which doesn’t reflect the difference in carrying capacity compared to the 30-35,000 dwt range”, he said.
Lazaridis added that “what’s more is that price differences in all size segments are not only noted in terms of carrying capacity. Higher spec Japanese built units or vessels with a bigger plethora of offerings (things like being log fitted, 3 generators etc. are commanding a much bigger premium over their counterparts then what they use to. After all why not, since buyers are spoilt for choice when they look around in the market and since most are shopping opportunistically thinking that the market is primed for “bargain hunting” there is little reason to chase after units that will be lacking in charterers’ preference. Therefore following this new market reality, buyers need to be careful where they place their “bets”. Prices may well be at their lows and some units might be asking even lower prices compared to others, however one also needs to always take note which units offer a more promising/prosperous future”, he concluded.
