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Print articleFanning the flames
Hot bulker market drives prices up
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As dry market rates spike, the price of ships has followed suit – along with the number of orders, and the level of activity on the S&P market. Clarksons reports that some 187 capesize orders were placed during the first half of 2007, with total dry newbuilding orders over the same period worth a total of some $31.5 billion. This is a drastic increase over the same period last year, when just $4.2 billion of bulkers were ordered. In the second half of last year, bulker orders reached $15.2 billion, making a total of $19.4 billion for the whole year. Bulkers currently represent almost 40 per cent of all orders placed in this half of the year, up from just eight per cent in the first half of 2006.
A number of large fleet transfers took place with owners seeking to cash in on the latest bulk market spike. Perhaps the two most spectacular deals of the summer were Eagle Bulkers’ purchase of 26 supramaxes from Anemi Maritime Services for a reported $1.1 billion in July, and Genco’s purchase of nine capesizes, again for $1.1 billion.
Tanker owners join the bulk party
Even players who are normally regarded as tanker specialists are looking to get in on the action. TOP Tankers made its first venture into the bulk market with the purchase of three vessels: a panamax, a supramax and a handymax, for a total price of $150 million. The vessels will be delivered between September 2007 and January 2008, and will be operated on long-term charter. According to chief executive Evangelos Pistiolis: “This acquisition represents the company’s first entry into the dry bulk sector, which has demonstrated significant growth in the past few years and is expected to remain robust based on strong fundamentals.” It went on to buy a futher three panamaxes in August.
Navios, also a newcomer to the capesize market, was reported as paying $240 million for two capesizes scheduled for delivery in 2009. Similar vessels had been ordered for some $95 million apiece just two months earlier. Turkish tanker specialist Besiktas Shipping purchased four capesize bulkers, and announced that it intended to expand its dry fleet to 10 vessels, although plans may change following its recent takeover by Double Hull Tankers.
With spot rates for capesize bulkers currently about three times those for VLCCs, some owners are also looking to convert single-hull tankers, which would in any case have to be phased out in three years time, into bulkers. Taiwanese Maritime Transport (TMT) currently has seven VLCCs waiting to be converted into VLOCs, a process which takes eight to nine months. China-based Hebei Ocean Shipping, which had already converted two single-hull VLCCs into ore carrier, has bought a further three vessels for conversion, in addition to a 16- strong capesize building programme, with the ships due for delivery between 2009 and 2011. Malaysia-based Wawasan Bulk Services, meanwhile, went against the trend altogether, putting its five remaining bulk vessels, one panamax and four handymaxes, out to tender, leaving it with a fleet of five chemical tankers.
Bull run or bubble?
Many bulker owners are taking advantage of the booming markets to make a quick turnround on vessels bought earlier this year before the steep rise in rates became apparent.
At the beginning of May, Fearnleys were predicting that growth in the world economy would be matched, but not exceeded, by the shipping capacity that will become available over the next few years. So far this year, increased bulker deliveries have been matched by an unexpected increase in world trade. But if orders continue to increase at the pace we have seen over this summer, shipowners could be ruing the prices that they are currently paying to get into the bulk game.
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