Bulk Carrier Secondhand Sales Booming
The festive season is here, so shoppers are out and looking to buy. However, when it comes to the bulk carrier sale and purchase market, business has been booming throughout 2016, says Clarkson Research Services.
The depressed earnings environment and limited availability of finance have seen increased ‘distressed’ sales, while some investors have been hoping to pick up a bargain. Let us take a look at this ship shopping spree.
A total of 567 bulkers of a combined 40m dwt were sold secondhand in January to November 2016, equivalent to 5% of bulker fleet capacity at the start of 2016. In terms of tonnage, sales were up 15% on full year 2015 and slightly above the previous annual record in 2007.
Bulker sales have increased across the sectors, but most robustly in the Panamax sector, with 153 units of a combined 12m dwt sold in January to November, up 37% y-o-y in terms of tonnage.
Meanwhile, there were 80 Capesize sales of 14m dwt in the same period, up 11% y-o-y, while Handymax and Handysize sales totalled 179 and 155 vessels respectively.
The high level of bulkcarrier sale and purchase activity in the year to date is partly a product of continued depressed dry bulk market conditions.
The duration of the downturn has exerted severe financial strain on bulkcarrier owners, and this has been exacerbated recently by increasing pressure from banks, leading to a greater share of secondhand transactions being accounted for by ‘distressed’ sales this year.
Japanese and Greek owners have accounted for the largest volumes of bulker sales in the year to date, with 103 units (7m dwt) and 93 units (5m dwt) sold respectively.
Interestingly, the volume of tonnage sold by German owners nearly tripled y-o-y to 3m dwt in January to November 2016, accounting for 10% of total bulker sales in the period in terms of tonnage, compared to a 4% German owned share of the total bulkcarrier fleet.
Meanwhile, historically low secondhand prices have seemed attractive to investors, supporting interest in asset play. In Q1 2016, the 5 year old Panamax price stood at $13m, the lowest level for almost 30 years, having dropped from $20m at start 2015.
Weak secondhand prices have also encouraged resale activity over contracting, with the guideline Capesize resale price standing at $36.5m in recent months, compared to a guideline newbuild price of $42m. Similar price trends in the other bulker sectors have contributed to firm sales this year, and the extremely limited level of ordering.
A number of sales this year have been to ‘top-tier’ companies, with heritage owners playing an active role. Greek owners have bought the largest volume of tonnage, with 100 ships of 8m dwt, whilst Chinese buyers acquired the second largest volume, with 72 ships of 5m dwt.
So, there has been a high level of activity in the bulker sale and purchase market this year, characterised by low prices and keen bargain hunters, with a new record of tonnage sold reached.
Many bulker owners may be struggling to feel much festive cheer after an extremely difficult year, but time will tell whether recent investors have cause for greater optimism.
