Wednesday, 18 April 2012

Capes of misfortune

A very succinct piece of analysis, on the parlous state of the Capesize market, which the AM came across this week;

According to online shipping database Sea-Web, Jan-2007 to Oct-2008 bore witness to an unprecedented period in Capesize contracting: 458 vessels were ordered, swelling the orderbook to beyond 100% of the then trading fleet.

During this time quoted newbuild prices for a standard 180,000-dwt vessel accelerated from $71M to $99M with the required break-even time-charter rate ranging from $27,500 per day to $35,600 per day. To date, 314 vessels have been delivered (23% of the current fleet) with many trading in a market whereby Owners are recouping 14%-18% of the required breakeven amount.

Those ordered in early to mid-2007, if traded individually on the spot market, would have briefly traded profitably over the last 12 months. The picture is far worse for those ordered as mid-2008 whereby losses were incurred every day over the last year.

For a Capesize fleet Owner using a portfolio approach for their average cost of cover, these ships would increase the required daily return beyond what is tolerable in the current market, making it particularly difficult for heavily indebted Owners to cover, or refinance their borrowing costs and remain solvent.


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