Dry Bulk Update

October 6, 2016

Dry Bulk Update:

 

The dry bulk indices, (especially the BCI) traditionally experience a weakening during the Chinese holiday known as Golden Week.  On Monday, I forecast the potential for a rough week given the lack of major market participation from China.  As my friend, Rob Perri of Axia Capital Markets has said, “predictions come here to die.”  This is shipping, and yes, my prediction has in fact passed away like so many others.    The Capes firmed well enough for the Panasisters to catch their wake.

BCI 4 T/C ~ $13,800 (+15%)

BCI 5 T/C ~ $14,400 (+13%)

BPI 4 T/C ~ $5,600

BSI T/C ~ $7,100

BHSI T/C ~ $5,975

 

Dry FFA:  The people at FIS tell us the paper markets are trading up today.

Nov. 2016

Capes $11,250 +650

Pmax $6,750 +100

Soups $7,300 +100

 

Dry Scoop:

About the scrapping of dry bulk carriers we quote from the Axia Shipping Weekly

“When people talk about scrapping and assume an average vessel life of 25 years, so that 4% of the fleet must be replenished annually to maintain the current fleet. That makes sense if the average age of the fleet was 12.5 years and the orderbook was consistent every year, but we all know that is simply not true. This is more pronounced in drybulk where the average age of the fleet is 8.6 years versus 10.0 years for the tanker fleet but both are skewed towards newer vessels. Given this, the number of scrap candidates is much lower than 4% of the fleet, and in fact only 2.3% of the drybulk fleet and 0.8% of the tanker fleet is currently older than 25 years, with an average of 1.0% and 0.8% per year of the drybulk and tanker fleets, respectively, reaching scrapping age over the next five years. However, when the markets are poor the average age of scrapping candidates decreases, so we can include a percentage of vessels between 20-25 years as scrapping candidates (and even 15-19 year old vessels in certain circumstances). For drybulk, we can assume 50% of the vessels between 20-24 years (5.1% of the fleet) and 25% of vessels between 15-19 years (7.8%) are scrapping candidates, then we can determine that 6.8% of the fleet could be scrapped over the next year, which is good news for the market although based on our estimates the market is closer to 20% oversupplied, so we would need to see at least 10% of the fleet get scrapped before we are in an improved market. For Tankers, 6.2% of the fleet are scrapping candidates, as only 4.0% of the fleet is aged 20-24 years, while 13.4% is between 15-19 years, so despite the recent drought of scrapping, the tanker market has a better potential to fix itself sooner.”

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