Dry Bulk - BRS

Dry Bulk

The Covid YearSoft fundamentals and a first half heavily impacted by the global pandemic combined to make 2020 the weakest year for the dry bulk market since 2016, with levels on average 25% lower than in 2019. But the second half of the year was all about recovery and sharply increased volatility, and the Covid gloom gradually yielded to a new confidence. By year-end the stage was set for an exceptionally strong start to 2021 in all sectors.

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CSL ARGOSYMV Bulk carrier, 74,423 dwt belt unloader, berthing manoeuvre at Punta Catalina terminal in Dominican Republic.

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DRY BULKCHARTERING

Capesize (>120,000 dwt)A tough year globally in many ways presented the Capsize market with plenty of new challenges and adversities to navigate. Covid-19 of course had its impact, however, it was not the only complexity in the market. While many people had to get used to different working conditions, the fundamentals did not vary too much from what is expected in a normal year in this sector.

At the start of Q1, an overwhelming supply of ships in the Pacific resulted in a sharp drop in January numbers from December highs. As Covid-19 began to spread, cargo disruptions were seen across most basins. Lockdowns in South Africa, Peru, Colombia, Canada and Malaysia in particular reduced mining and exports for both iron ore and coal. Meanwhile, the lockdown in India led to ports discharging slower under force majeure. Furthermore, European car factories halted production which resulted in steel producers cutting their output. Time charter equivalents dropped close to zero in February due to weak demand. However, arguably this had more to do with poor exports out of Brazil than the pandemic. Indeed, Brazil faced a prolonged period of strong rainfall throughout Q1 (double 2019's volume in some areas) meaning that export levels were even lower than 2019 following the Brumadinho dam incident.

In Q2, particularly towards the end of the period, the market made some strong gains. This was down to several factors. Iron ore prices stayed above $100/ton and as such, miners continued to ship as much as possible. Increased exports from Western Australia was the main driving force as China’s appetite for iron ore remained strong. Fleet growth also slowed due to an increase in scrapping activity which saw several elderly VLOC’s sent to the breakers. Furthermore, Vale stopped accepting vessels above 20 years old. Meanwhile, new vessel deliveries were slower due to lockdown issues in the yards. In fact, arguably Covid-19 disruptions actually supported the market creating inefficiencies in the deployment of the fleet. 14-day quarantines were introduced in Australia and other countries meaning that some vessels needed to idle before tendering NOR. New Australian regulations resulted in over 200 Capesize vessels deviating to Manila Bay for crew changes, some of which arrived at their destinations with Covid-19 cases on board, resulting in more waiting time for these ships. Moreover, the typhoon season started in the Pacific resulting in port closures. Accordingly, this saw congestion at Chinese ports rise resulting in waiting times of more than 10 days per ship.

Following the rush at the end of Q2, we saw a typical summer lull over the end of July and August. Maintenance took place at several major mining projects in Australia and Brazil. This combined with the easing of congestion in China and saw more tonnage in the market. In turn, this resulted in rates retreating from the peaks of early July. C3 declined from $22/mt to largely trade between $16/mt and $18/mt. However, towards the end of September,

CHARTERINGsupply and demand fundamentals changed dramatically as an increase in Brazilian iron ore shipments coincided with a lack of available tonnage in the Atlantic basin. Indices rose sharply, reaching new yearly highs. The time charter average reached $35,000/day, while C3 peaked at $24/mt.

While iron ore and bauxite flows were steady in 2020, coal shipments suffered several disruptions. China started limiting imports from Australia, and in October actually introduced a ban, which saw many Capes waiting for months to discharge. Quotas and customs clearance delays (arguably due to political tensions) discouraged Chinese coal traders from sourcing Australian coal. Accordingly, Australia to China volumes started plummeting in Q3 and were almost nonexistent in Q4 and this doesn’t show any signs of changing heading into the new year. Meanwhile, Colombian coal exports were affected by a worker strike at the end of August. Force majeure was declared at Cerrejon and shipments were pushed into 2021. Transatlantic cargo volumes suffered as a result. End users are now turning to suppliers from South Africa and Russia for replacement cargoes. The bull market in Q4 did not last past early October. Congestion in China eased and an early rainy season in Brazil in December put an end to any hopes of a late push in rates.

Supply

Fleet (120k+ dwt) – 1,695 ships of 344.6m dwt – increase 3.4% year on year.

The orderbook stands at only 8%, which is the lowest in the last few years as Owners are reluctant to place new orders due to the uncertainty surrounding propulsion options (in the context of reducing GHG emissions) and market conditions. Some miners announced specific projects backing LNG-dual-fueled vessels and therefore several of these ships were ordered. So far, the price premium of these units does not allow owners to consider them if not attached to a specific project.

Demand

• Brazil 2020 iron ore exports were 342mt which is +2mt year on year.

• Australia 2020 iron ore exports were 876mt which is +34mt year on year.

• China Steel production in 2020 was 1,054mt which is +58mt year on year.China’s share of global steel production in 2020 was up to 58% from 54%.China coal imports for 2020 was 304mt which is +4mt year on year despite restrictions.

Babycape and Post-Panamax(85,000-120,000 dwt)The effects of the coronavirus were more pronounced on the Post-Panamax and Babycape segments. The Over-Panamax segment is naturally more susceptible to market downturns, as charterers look to minimize their parcel sizes. However, during the pandemic’s first wave, whereas the Kamsarmaxes had some support from a record output of Brazilian soybeans to the Far East, less than 4% of the 70-100k deadweight volume was carried on vessels over 85,000 dwt.

Instead, Overpanamax volume remain focused on the far east, with 38% of the volume carried by Post-Panamaxes accounted for by the traditional Australian coal and bauxite trade. Meanwhile, 30% of the volume hauled by Babycapes was from three Australian iron ore miners (Atlas, PMI, Citic). Consequently, the Chinese ban on Australian coal imports heavily disrupted this niche market which in turn, resulted in a 17% y-o-y decline in Post-Panamax volume from East Australia to China in the fourth quarter. However, on an annual basis, total volumes were flat with 2019 last year.

For those looking to keep their Over-Panamaxes employed carrying clean cargos, the accelerated growth of chrome ore parceling from South Africa to China which has been evident since 2019 has brought more liquidity for larger sizes ballasting in the Indian ocean. Your author noted a rare Capesize doing this business last year.

Rare Black Sea and Eastern Mediterranean volume was also to be found, often as an arbitrage opportunity for Capesize shippers. Ultimately, this trade reflects the opportunism needed from operators and traders to make use of these units. Taking sugar as a case in point, last year, exports from Santos, Brazil were almost double the exports of 2018 and 2019 combined, yet there has not been a Babycape fixture on this trade since 2017!

BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021

The 3 major operators (Oldendorff, Swissmarine, and Cobelfret) were rejoined by Cargill, who moved their book back under the control of their parceling department. Oldendorff remain the largest overall operator, although Swissmarine have closed the gap having increased their Babycape fleet. Meanwhile, Cobelfret have taken delivery of several modern Post-Panamax units.

Considering last year’s low bunker costs, the comparative cost of running older, less energy efficient ships was limited. However, if, as expected, bunker costs rebound going forward, modern newbuild eco tonnage could begin to divide the market. For example, there is a clear performance and fuel-consumption gap between the early generations of Tsuneishi “98s” delivered over 2010-13, and the Tsuneishi and Oshima “99s” currently coming out of the yards, with very few of this type of unit built in the intervening years (373 Over-Panamaxes were built over 2010-13 vs only 97 built during 2014-17). A special mention must be made to Oshima for announcing the inclusion of an emission reducing collapsible sail on one of their new designs! Logically, one expects older units to remain deployed on the aforementioned Australian trades, whilst newer eco-tonnage can explore longer sea passages. However, this is shipping, and logic rarely prevails.

Picture: SHANDONG DE LONG , MV Bulk carrier, 180,000 dwt, built in 2020 by Shanghai Waigaoqiao Shipyard (SWS), owned by Shandong Shipping Corporation.

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2020

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Panamax (68,000-84,999 dwt)

The average of the 4 Time Charter Average (4TC) indexes started 2020 at $7,695/day. As expected, the first quarter was tumultuous with a low of $3,345/day hit on 5 February. From there, the index found support and picked up to reach $8,274/day on 6 March, but then declined again. It took until 3 July for the indexes to break $10,000/day ($10,504/day) and on 14 August the market peaked at $15,079/day and then remained above $10,000/day for the vast majority of Q3 and Q4. Accordingly, 2020 averaged $8,587/day, 22.9% below 2019’s average of $11,134/day.

A tough start. December 2019 saw a rapid fall in freight rates with the Panamax spot 4TC losing $1,345/day over the course of the month. As a result of IMO 2020, many shipowners were hurt by the fuel changeover as they rushed into discharging their old bunkers and then paid a premium for obtaining the newly compliant fuel.

Once most of the transition to compliant fuel demand had occurred, bunker prices re-treated leading to reduced time charter rates and proportionally cheaper bunkers available on the market.

On 15 January, the United States and China signed their Phase One trade deal which cut US tariffs and boosted China’s purchases of US products. China agreed to buy an additional $200 billion worth of US goods and services during 2020 and 2021 including $80 billion worth of US agricultural prod-ucts.

Whilst the world was aware of the Covid-19 outbreak, most thought that it would be confined to China. However, on 11 March the World Health Organisation declared the outbreak a pandemic. This initiated a slowdown in global trade flows as many operators declined to take new business and placed most of their existing business in-house whilst they tried to figure out the pandemic’s likely repercussions.

In line with reduced trades flows, demand for oil decreased significantly over the next month which was worsened by further limitations on travel. On 20 April, the West Texas Intermediate (WTI) crude futures contract dropped into negative territory for the first time in history. In the same month, Australia called for an inquiry into the origins of Covid-19 implying China had been covering up the true sequence of events. China retaliated in October by banning all Australian coal imports. The relationship between Australia and China soured further after a Chinese government office tweeted a fake image pertaining two Australian soldiers alleged involvement in war crimes in Afghanistan, thereby angering their counter parts in Canberra.

The Chinese economy shrank 6.8% year-on-year in the first quarter of 2020, its first ever recorded GDP contraction after posting 6% growth over the last three months of 2019. This reflected the severe damage caused by the Covid-19 outbreak after authorities enforced a near-2-month-long shutdown

of all non-essential business activity. To counteract this slowdown, the Chinese government increased their infrastructural spending, leading the economy to grow by a seasonally adjusted 11.5% quarter-on-quarter in the three months to June 2020.

Furthermore, the Chinese ban on Australian coal resulted in tight supply in some parts of China and led to power blackouts and factory closures. This did not encourage a softening of China’s stance but rather, with Indonesian supply limited, it forced China to look for supplies elsewhere. In shipping terms this might be a positive for 2021 as the new stems are likely to add ton miles to the market considering that Canadian, South African and even Black Sea coal have all mentioned as likely replacements.

By June, China’s imports of steel increased to 4.358 million tonnes making the country a net importer of steel for the first time since the first half of 2009. This came despite an 11.2% increase in iron ore imports over the first 10 months of the year compared with 2019. Cuts in Vale’s expected production for 2020 also led iron ore prices strengthening over the course of the year, boosting export volumes out of Brazil.

On 14 July, China booked its biggest single day purchase of US corn as it purchased 1.762 million metric tons. Nonetheless, experts have been dubious that China would fulfil their trade deal obliga-tions. Between January and November, China bought $22.5 billion of US agricultural goods against a commitment of $33.4 billion for all of 2020. Whilst the two countries are still clashing over technologies, Covid and Hong Kong, Joe Biden has stated that he will not immediately remove tariffs imposed by the Trump administration on China. He first wants to conduct a full review of the trade deal and consult with the US’ allies to develop a “coherent strategy” on China.

The grain market was also favourable to Panamax rates during 2020 thanks to good export seasons out of Brazil and the Black Sea. Brazilian agribusiness exports stood at record levels in June, with foreign sales of $10.17 billion. This was 24.5% higher year on year. In short, the second half of the year managed to keep the freight rates in check, helped by some improved trade flows across all commodities. However, the market was still undermined by heightened geopolitical tensions with this uncertainty expected to affect cargo supply going forward. Our outlook into 2021 is cautiously optimistic considering strong demand in the wake of increased government stimulus while the order book remains historically low.

Supramax and Handysize (25,000-67,999 dwt)It’s a no brainer that 2020 was a forgettable year in the dry bulk business, as the Covid-pandemic shaved off freight gains across the board that were painstakingly accrued over the past few years. The silver lining of 2020 for Supramax and Handymax owners was that they dodged the “scrubber bet” bullet as the scrubber spread collapsed from $350/mt to $65/mt with global distillates prices plunging while refineries cut run rates which tightened 3.5% HSFO availability.

Moreover, if there is one lesson we can take away from 2020 regarding smaller-sized vessels, it would be the comparative resilience displayed by them even in the face of an unprecedented pandemic which sent annual global GDP growth into negative territory for the first time in nearly three decades. In fact, over 1H20, C5TC underperformed the S10TC for 54% of the time. On a y-o-y basis, the annual average C5TC and P5TC indices underperformed by 27.6% and 20% respectively, while S10TC and HS7TC bore a slightly softer brunt at -17.6% and -13.8%, respectively.

DRY BULKCHARTERING

Panamax 4 Time Charter rates average 2020$/Day

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A very eventful year in the Panamax sector


Supramax & Handysize’ resiliency tested in

2020 while primed for a rebound in 2021’

Picture: LOWLAND CRIMSON , Bulk carrier, 100,309 dwt, built in 2020 by Oshima Shipyard, owned by Cobelfret.

Pictures: Aerial view of the new 756 MW Punta Catalina Power Plant and dedicated port, recently inaugurated in Dominican Republic;RT. HON. PAUL E.MARTIN , MV Bulk carrier, 71,400 dwt, operated by CSL International, discharging the first coal shipment received at Punta Catalina Power Plant.

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DRY BULKTHE FFA MARKET

If we further breakdown the SMX category into Ultramax (60,000-67,999 dwt), Supramax (50,000-59,999 dwt) and Handymax (37,000-49,999 dwt), the distribution in ton mile demand decline (voyage intake multiplied by voyage sea duration) for the first 10 months of 2020 was asymmetrical. According to AXSDry, Supramax’ ton miles contracted by 7.7% which was driven by the different volume decreases for bulk, coal, grain. Meanwhile, the respective contraction for Handymaxes was 2.7%. In contrast, Ultramaxes ton mile demand rose by 10.8% which was driven by volume increases in iron ore, breakbulk, agricultural products and steel.

A major reason behind the steep decline in freight was the anemic appetite for coal. Hence, any slight swing in coal imports from major importing countries, notably India and China, provided a tailwind for Pacific SMX rates such as seen during September and November. Spurred by an increase in Indonesian coal demand (4.9 million mt) to India in September after economic activity had returned almost to pre-Covid levels, S8_58 accordingly hit a year-to-date high of $7,702/day compared with its annual low of $2,925 posted in Feb (3.26 million mt). Fast forward to November and tonnage from the region was quickly swooped up due to the unforeseen announcement of China granting an additional 20 million mt quota. This development also coincided with the Australian grain harvest whereby Australia exported 3.38 million mt worth of grain cargoes in December alone based on AXSMarine data (178% y-o-y increase), most of it was wheat at 2.10 million mt.

2020 Summary Put simply, 2020 was a year of two halves. Many worried that the IMO sulphur fuel emissions legislation changes would disrupt activity, but of course it was Covid-19 that quickly took all of the headlines. And with those headlines went any hope of a decent dry bulk market it seemed. The capes crashed from January onwards, remaining on life support as traders made money selling $4,000/day for March. Panamaxes and Supras fared a little better, and baseline hedging brought enough interest to keep the markets above the disaster zone for the big ships.

Then in May, it seemed that traders finally got bored of being miserable and rates started to rise. First the Capes went up, then Panamax and Supras quickly followed. The Cape index moved up from $1,992/day in mid-May to reach over $34,000/day in early-July. The paper market went along for the ride as well, with June and Q3 contracts reaching close to $30,000/day before starting to slide again before the end of Q3.

The Panamax market was a lot more subdued and less volatile than the Capes, touching $15,000/day in August and Q4 trading briefly over $14,000/day, with the Supras touching $12,000/day, but never enjoying the intense highs and lows of the Capes. Throughout the year though, there was a general consensus that 1Q21 was nothing good to own. No matter how high the spot contracts and Q4 got on any size, the Q1 remained low and unloved. This proved to be very instructive come December time, when it turns out that there might be something worth loving in Q1 after all.

Surging volatility has led to surging risk and surging volumes


THE FFA MARKET

Looking into 2021, the consensus is that the global economy should approach its pre-pandemic level driven by the steady rollout of vaccines. However, it will not be plain sailing due to the ongoing tensions between Australia and China whereby Australian coal shipments (a reliable source of tonnage employment throughout the year) may be disrupted and/or displaced by the recent MoU signed between Indonesia and China whereby China has agreed a 3-year, $1.5bn trade deal for Indonesian coal starting in 2021. Due to the shorter nautical miles involved, increased volumes from Indonesia rather than Australia would be negative for the dry bulk sector overall, with LME and Supramaxes benefiting at the expenses of Capesize vessels. From a capacity perspective, the preference for Ultramaxes was evident with deliveries in 2020 equaling 8.2 million dwt (slightly behind the 15.3 and 10.4 million dwt of Capesize and Kamsarmax tonnage delivered, respectively). Meanwhile, by end-year the Ultramax orderbook expressed as a percentage of the active fleet stood at 13.8% compared with 1% for Supramaxes and 5.8% for Handymaxes.

Towards the end of December, all sizes were supposed to fizzle out into ‘seasonal’ lulls in January. However, first the Capes started rising, then the others followed suit. However, while the Capes came and went, the Panamax market just continued going up and up, faster and faster, until March and Q2 contracts were trading in mid-20s and low 20s, respectively. The Supras also traded at $20,000/day for March. So here we are.

2021 outlook

At this point in the year, typically we are looking for optimism in a languid market. Not in 2021 though. Volumes have doubled on a year-on-year basis. Volatility has been extreme on all sizes. What has been unusual though, is that while many market participants are looking for the post-Covid boom to arrive almost a year after the Covid bust took over the market, the three size ranges have decoupled. Capes are at historical lows compared with Panamaxes, which are at historical highs compared to Supras. This boom is now Panamax-led, unlike early-January when it was all Cape led. You cannot have a market boom without Capes, so this current market is local traffic, not the super-highway to the super cycle it seems.

The thought that 2021 can be an ‘above average’ year for dry bulk is writ large in the FFA market, where traders seem reluctant to take on a big short position, despite the asymmetric nature of the BDI at the moment. It would be a tragedy to be bullish and not make money if the market goes up, right? So short sellers are nervous, talk is of boom time, and volatility in extreme remains hard to predict or trade without the risk of giving back any gains in minutes rather than days. Nonetheless, volumes and liquidity are high, so we appear to be shaping up for a really fascinating and productive year ahead.

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As was the case with every shipping sector in 2020, the effects of the Covid-19 pandemic created unprecedented disruption and posed a significant challenge to the dry bulk market.

We witnessed a very depressed 1H20 when the BDI hovered for the most part below 600 points. In this period of global lockdowns, the negative freight market outlook coupled with the inability to perform physical inspections and crew changes - due to port closures and quarantine regulations - forced many shipowners to retreat from the second-hand market.

Fortunately, the dry bulk market began to show signs of recovery early in 2H20. Freight rates continued to rally on the back of strong dry bulk demand from a rebounding Chinese economy. Accordingly, by October the BDI had surpassed 2,000 points. The same trend was also observed in the sale and purchase market with a flurry of transactions being concluded towards the end of the year and asset values appreciating compared with those in 1H20. For example, we noted a significant 60-65% increase in Capesize sales during Q3 and Q4 with an approximate total of 65 units changing hands throughout the year.

Prices for 5-year old vessels of the 4 main dry bulk asset sizes fell on average between 5-10% during 2020. Taking into account the wider economic damage caused by Covid-19, many would agree that this was a relatively light reduction in asset values.

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In 2019 shipowners were preoccupied with trade wars and propulsion methods only to have these worries overshadowed in 2020 by Covid-19. In 2021 the pandemic-induced anxiety could be forgotten – if analysts are correct – in an environment of vaccine rollouts, government stimulus packages and surging commodity markets, with shipping further benefitting from a weak US Dollar.

So long as these optimistic predictions hold true and freight market activity increases further, then the positive dry S&P trends witnessed towards the end of 2020 should continue well into the new year.

THE SECOND HAND MARKET

Capesize values end-2020(175,000 - 182,000 dwt)

10 year old: A special survey passed and BWTS retrofitted Capesize, built in Korea or Japan, was worth about $19 - 20 million at end of the year, i.e. 9 - 9.5% less than end of 2019 where values ranged between $21 - 22 million.

5 year old: Eco-type (180,000 dwt) Capesize values stood at $32 million by end-2020, a discount of 5.8% from 2019 values of $34 million.

Newbuilding re-sale: The value of a Capesize re-sale built in China was around $47 million at end-2020, 2% lower than 2019. The equivalent re-sale built in Japan posted a slightly higher depreciation of 3.8%, ending 2020 around $50 million.

Panamax-Kamsarmax values end-2020(76,000-82,000 dwt)

10 year old: At the end of 2020, Panamax (76,000 dwt) values remained unchanged at about $13 million, whereas Kamsarmax (82,000 dwt) values lost some ground (-6.8%) compared to 2019 with prices finishing the year (2020) at $14.5 million.

5 year old: Kamsarmax (eco-type) values closed out the year at about $22 million which indicates a reduction of 4.3% versus end 2019 values of $23 million.

Newbuilding re-sale: For prompt (3-6 month) delivery ex-Japanese yards, Kamsarmax re-sales based on NSF contract and 20/80% payment terms were priced at $29.5 - 30 million as opposed to twelve months earlier at $30.5 - 31 million (-3.2%). Similarly, Chinese-built Kamsarmax re-sale values were reduced from $27 million in 2019 to $26 million in 2020 (-3.8%).

Supramax-Ultramax values end-2020(56-58,000/60-64,000 dwt)

10 year old: The price for this type/age of asset (56,000 dwt) came under pressure in 2020, falling by 12% - 12.5% over 12 months and ending the year in the region of $10.5 - 11 million.

5 year old: Supramax (58,000 dwt) values ended the year at levels of $15 - 15.5 million recording a decrease of 8.8% - 9% from the previous year.

Newbuilding re-sale: By the end of 2020, China-built Ultramaxes were priced at about $23.5 - 24 million, whereas Ultramaxes built in Japan were priced at about $27 - 27.5 million, a relatively small year-on-year decline of 2 - 4% and 1.7 - 3.5%, respectively.

Handysize values end-2020(32,000-43,000 dwt)

10 year old: A Japanese-built Handysize (32,000 dwt) was worth about $8.5 million at end 2020 which illustrates stability in the values of this asset class when compared with end-2019 values of $8.5 - 9 million.

5 year old: The larger units of 35,000 - 38,000 dwt ended the year with values in the region of $13.5 -15 million depreciating by 9% - 10% in 12-months.

Newbuilding re-sale: At the end of 2020 the values of 38,000 dwt Japanese-built units were in the region of $21 million, 8.7% lower than 2019.

the dry bulk market began

to show signs of recovery early

in 2H20

Dry bulk carrier S&P prices 5 year old ships

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Dry Bulk Carrier S&P Prices - 5 years

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DRY BULKTHE SECOND HAND MARKET


Estimated Values are for Japanese, Korean and top tier Chinese yards – for units built at lower quality Chinese yards, a discount of at least 10-15% should be expected.

Picture: LADY BELLAMELIA , Bulk carrier, 82,499 dwt, launched in 2021 by Tsuneishi Cebu, owned by Kambara.

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Picture: CIELO DI DUBLINO , Bulk carrier, 37,000 dwt, delivered in 2011 by Hyundai Mipo Dockyard, Korea, owned by “d’Amico Shipping Italia SpA”.

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Once authorities gave the green light for re-opening, yards and cash buyers’ ship-buying hunger returned and prices steadily increased

DRY BULKTHE DEMOLITION AND RECYCLING MARKET

Picture: ARTVIN , Bulk carrier, 81,827 dwt, built in 2011 by Hyundai Mipo Dockyard, owned by Ciner.

Dry bulk carrier demolition prices

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Demolition activity was badly disrupted by the Covid-19 pandemic, which forced the authorities in India (Alang), Pakistan (Gadani) and Bangladesh (Chittagong) to prohibit the beaching of freshly purchased vessels and stop demolition operations already underway. Unable to cut and sell steel scrap, demolition yards soon found themselves in a difficult financial situation and stopped entering into firm agreements with cash buyers. This forced cash buyers to re-negotiate prices or even cancel MOAs altogether to cover themselves. At certain points over the March to May period, the market essentially ceased to exist, with cash buyers quoting theoretical prices in the $200-300/ldt range. Some of these quotes turned into actual deals executed at high $200s levels in May/June. This was in stark contrast to the same period in 2019 during when prices hovered around the $430/ldt mark.

Fortunately, the appetite for steel in fast-growing economies is insatiable and once authorities gave the green light for re-opening, yards and cash buyers’ ship-buying hunger returned and prices steadily increased to peak in December in Pakistan at $440/ldt (an average of $410/ldt across the three markets). Pakistan made something of a ‘re-entrance’ to the demolition market at the start of the year thanks to a beneficial tweak in tax policy, so it was fitting for the country’s yards to finish the year on such a high note.

We saw a total of 12.9 million in deadweight terms or 101 vessels removed from the dry bulk fleet, compared with 7.8 million deadweight and 81 vessels in 2019. The substantial year-on-year increase in deadweight removed can be explained by Vale’s announcement in April 2020 that it would remove around 25 ageing VLOCs from its chartered-in fleet. These VLOCs had been converted from VLCCS and concerns around their safety had been mounting for some time. The processing of these VLOCs serves as a reminder that in an efficient free market, supply surges can be managed regardless of tumultuous goings-on in the wider world, even a global pandemic.

25 bulkers over 260,000 dwt were demolished in 2020 totaling 7.05 million in deadweight capacity vs 11 units over 200,000 dwt in 2019.

Aside from VLOC scrapping, 2020 saw an end to 44 Handysizes (1.82 million dwt), 2 Supramaxes, 9 Panamaxes (633,000 dwt), 2 Post-Panamaxes and 19 Capesizes (3.178 million dwt). In 2019 Handysize – Panamax demolition accounted for 50 vessels / 1.9 million dwt vs 55 vessels / 2.56 million dwt in 2020. The sharp dwt growth but limited unit increase over the past year can be explained by the demise in larger Handysize/Handymax bulkers and Owners’ firm preferences for Ultramaxes. 32 Handysizes ranging from 40,000 to 49,999 dwt were scrapped during the year, representing 1.44 million dwt.

THE DEMOLITION AND RECYCLING MARKET

Picture: CS JI NAN , Bulk carrier, 179,606 dwt, launched in 2021 by Quingdao Beihai Shipbuilding, owned by Cape Amber.

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Dry Bulk - BRS

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