Analysts mixed over dry bulk new building deliveries.
Yet another report on the issue of dry bulk tonnage supply this week, sends mixed emotions for ship owners and investors alike, as analysts seem to share divided notions on the issue, which will in a large part determine the course of the Baltic Dry Index (BDI) this year and subsequently the cost of freight rates. According to Jefferies & Co, about 40% of new building deliveries for 2010 could very well not materialize, which will undoubtedly serve the market well.
In its analysis, Jefferies says that the drop of capesize values by more than $35 million, compared with the not so long ago market highs, will lead to a delay of scheduled deliveries. Based on estimates, the book value of a capesize, originally ordered during 2007 or 2008 stood at $90 million, while at delivery its value will have dropped at $56 million, a reduction which will reduce the ship owner"s equity. As a result, the analysts expect that about 40% of newbuilding deliveries won"t be realized this year.
This will in effect keep the balance steady for ship owners, which should be able to reap profits from the market, throughout the next 12-14 months. Jefferies predicts that demand for dry bulk vessels will increase by 8-9% in 2010 and 6-7% in 2011. The average capesize charter will be at $50,000 for 2010, while the respective hire rates for panamaxes will be $25,000 and for handymaxes at $20,000.
Still, earlier Clarksons had said that dry bulk deliveries would rise in 2010 from 2009 by about 6 percent. According to its analysts deliveries fell by 1 percent last year. Clarksons placed the surplus in the sector for 2010 at 20 percent. Meanwhile, ship financier DVB Bank believes most new buildings ordered at Asian shipyards will be delivered, despite the difficulties in raising funding. Dagfinn Lunde member of the board of managing directors for DVB Bank said the newbuilding orderbook due for delivery in 2009 had been financed, despite fears that it would not be. He explained that as newbuildings were already financed by the yard constructing the vessel, if the owner could not afford then to pay the yard, the bank will be stuck with the newbuilding. Shipowners are also getting finance from export credit banks in shipbuilding countries. So far in 2010 Lunde states that newbuilding deliveries have been seen every day and that cancellations have come largely from the yards where there was a failure as per the contract over terms such as delivery date.
He noted that it was not easy for owners negotiate with the South Korean yards even if they ordered newbuildings at ?horrible? prices as the values of some types of vessels have dropped by as much as 50% over the last 18 months.
According to Allied Shipbroking"s research, during 2010 an expected 1,533 dry bulk carriers are to be delivered, based on the global orderbook. They include 296 capesizes, 114 post panamaxes, 194 panamaxes-kamsarmaxes, 466 supras, 12 handymaxes, 395 handysizes, 24 minibulks and 32 over 200,000 tons vessels. As for 2011, an expected 1,047 bulkers are thought to hit the market. Just for comparison, during 2009, Allied estimates that a total of 530 dry bulk carriers were delivered, but an additional 330 vessels were sold for scrap as well.