Newbuilding Prices Could Come Down In Near Future On Lack Of Demand

All indications have started to point towards the emergence of “a buyer’s market”, when it comes to newbuildings. Activity has slowed down considerably when compared to previous years, with the focus remaining on the more optimistic tanker and containership sectors. As such, prices remain under pressure said Allied Shipbroking in its latest weekly report. According to the shipbroker, “interest on the tanker side has started to surge despite what we had been seeing so far during the year. Though taking into account the fact that one of the Suezmax orders reported this week was for shuttle tankers backed by a long term contract and another was for ice class Aframaxes backed by long term contract to Shell, things remain mainly focused on individual projects, with limited buyers willing to taking up any speculative posi-tion as of yet”, said the shipbroker.
It added that “as such it seems as though the discounts offered by shipbuilders thus far have proved little success in terms of enticing new interest. The way things are going, it goes without saying that competition will heat up further, and as it seems that shipbuilders have limited space to offer any sudden discounts of any significance to the market right now, buyers will keep their main focus on the secondhand market which heavily competes with any decision to place new contracts under the current freight market conditions”.
Meanwhile, in a separate report, Clarksons Platou Hellas Shipbroking said that “continued ordering in the tanker segment with Teekay announcing an order for three firm plus one option 155,000dwt DP2 shuttle tankers, understood to have been signed with Samsung Heavy. Delivery is due from the final quarter of 2017 with pricing announced just above USD 120m per vessel. Cara Shipping (Rizhao Steel) are also understood to have ordered two 113,000dwt LR2 at Dalian for delivery in 2017, with the deal including the removal of one Capesize from their orderbook at the yard. In containers, Delphis (part of CBM) have extended their series of 1,900teu Ice 1A container feeders at Hanjin by adding a further two vessels for delivery at the end of 2016. These declared options take the series to four units with pricing in line with the original order around USD 34m”, Clarksons Platou concluded.
Similarly, in the S&P market, Allied said that “despite an overall trend towards further price discounts, we have started to see increasing volatility between the reported last done sales, which could be an indication that we are closing in on the abso-lute floor that can be achieved for the moment. What will play a cru-cial role over the coming weeks with regards to breaking through this floor will be the decisions that will be made by Japanese owners after the follow on drop of the Japanese Yen against the dollar, while a lot will also be played on the performance of the freight market during the summer months. On the tanker side, things have been holding fairly steady for some time now, with main gains being noted mainly on the overage units which have suddenly seen a rejuvenation in their values, escaping from the previous scrap value related prices. This has become more evident in the VL segment were high earnings and increased earnings potential through storage contracts pushing values by around 5%”.
Finally, in the demolition market, Allied noted that “as anticipated, things showed an overall downward trend this week, as the anticipated budget announcements and decreased appetite continued to take their toll on the market. Overall, in terms of the budget announcements, it seems that the only material change was that seen in Pakistan, with an increase in taxes set to take out some of the bullish forward momentum in prices that we have seen over the past couple of weeks. Nevertheless, the main markets of India and Bangladesh, which have been accounting for the two biggest portions of the reported sales so far this year, are set to continue on course, possibly leading to minimal effect, as Pakistani breakers will inevitably have to keep their prices competitive with the other two markets in the Indian Sub-Continent in order to be able to entice further demo candidates. What is left now is to see to what degree the monsoon weather will influence the activity volume, with a drop in reported sales having already made a noticeable sign during the past couple of weeks”, the shipbroker concluded.