(Source : BanqueThaler; Bloomberg)
Newbuild orders continue to be very limited: only three vessels were ordered in September in the Panamax and Capesize segments, bringing this year’s order book to 101 vessels (less than 2.5% of the existing fleet). The total dry bulk order book remains just below 10% of the existing fleet (to be delivered over the next two to three years) and barely covers the expected acceleration in scrapping of older vessels due to the IMO 2020 sulphur emission rules.
Activity in the second hand market was relatively weak during September, with stable 5-year old Capesize vessel prices (ca. USD 36 million) and slightly lower 5-year old Panamax prices (ca. USD 22 million vs. ca. USD 23 million during the summer).
Ship-owners are clearly hesitant to invest in newbuilds and/or buy vessels in the second hand market, an attitude that we attribute both to the global trade uncertainties created by President Trump’s protectionist measures and to the pending introduction of low sulphur emission rules (their possible consequences on fuel cost and freight rates still being unclear).
In any event, the market should hold up well through at least the end of 2018, thanks to strong Chinese demand for iron ore and coal, and surprisingly high Indian demand for thermal coal. Moreover, Chinese authorities have decided not to cap steel production during the winter months (as they did last year), which means that demand for high grade (Brazilian) iron ore and high quality (Australian) coal will remain very strong.
On the supply side, large ship owners recently decided to install sulphur scrubbers on their bigger vessels, in order to be able to continue burning cheap heavy fuel from 2020 onwards. An increasing number of vessels will thus be temporarily out of business, having these scrubbers installed. While not yet a major factor, this could help freight rates post further gains during the next couple of months.
Update : October 2018