Here we go again – dry bulk newbuild ordering takes off

The writing is on the charts and it doesn't look good for the dry bulk market. Newbuild ordering in just the two and a half months or so of the second half of the year is already almost double the figure for the entire first half of 2017.

According to VesselsValue, 110 vessels have been ordered so far in the period compared with 63 in the first six months of the year. And this does not include the latest order of eight kamarmaxes from Aegean Shipping Management, which heralded their entry into the dry bulk space.

VesselsValue associate director Claudia Norrgren pointed out that after dry bulk resale values plunged to their lowest in 25 years in early 2016, with a five-year-old capesize going for just under $21m, they then rebounded around March.

"As typically happens when values and rates drop, newbuild ordering also slowed down. This happened over 2016 and the first half of 2017," said Norrgren.

"However since we entered into the second half of this year, owners have ramped up drybulk ordering (and) interestingly, the main protagonists are Japanese," she noted.

With some optimism returning and hopes that the market is turning, owners seem to be making the same old bad decisions again and jumping into cheap newbuilds in the hope of timing the market correctly.

For example, Pacific Basin Shipping astutely got into the game early and in the first half, took delivery of its last batch of newbuilding orders from Japanese yards that it made very early on. However the minor bulks specialist reiterated in its first half financial report that more scrapping and limited ordering are still required for market balance to be sustained.

"If too many people order and the market is flooded with vessels, rates will never recover, and we will be left with too many vessels and too few cargoes: the classic supply and demand imbalance in shipping," Norrgren concluded.

Posted 22 September 2017

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Vincent Wee

Asia Editor, Seatrade Maritime News

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