Monday, December 01, 2008
Imarex Brief 1st December 2008
Tankers
Crude
VLCC Ag/East: ws 62.5 ($49 k/day) about same – watch
storage issues
Suezmax Wafr/Usac: ws 160‐180 ($70k/day) big jump in rates, date dependent
Turkish Straits delays 4.5 n / 1.5 s fewer delays
southbound
Though the AG remains steadily soft, the Wafr Suezmax market got its mojo back
late last week. It bounced from about ws 90/95 all the way to 180, and now sits
somewhere in the 160‐180 range. While this hasn’t yet boosted the V market – it
is a clear sign that the overall market may indeed be more in balance than some
had thought. As an isolated event, this is of course good news for Owners, but
the real Christmas cheer will only be felt if the energy can spread. With more
Vs reported to have been taken for storage – the market that refuses to die is
still refusing to die. Keep a close eye on this one.
The futures market already has a close eye on the physical – as we see good
volumes thus far. TD3 Dec adds 10 points to 80, while Jan adds 3 points to 47
and Feb adds 7 points to 50. The Q1 trades up 6 points to 49. TD5 Dec takes a
big leap upward on the back of the physical, it adds 20 points to 170.
Clean
37k Cont/Usac: ws 175 ($16k/day) same/mildly
softer
38k Caribs/Usac: ws 165 ($13.5k/day) same
55kt Ag/East: ws 205 ($33k/day) down a
touch, again
Though some ws 165 fixtures have been reported for Cont/Usac, we are told of palm
oil last on both. Calling it 175 for today is close enough for a post holiday
estimate. Eastern clean markets remain steadily soft. We are still seeing a few
points disappearing here and there – though nothing that would indicate any sort
of “fire sale” market. Our Spore office mentions that LR1 and LR2 newbuilds
coming into the market in the near term will keep downward pressure on rates.
Though naphtha prices had begun to recover recently – there is still a very soft
undertone.
Clean FFAs have been slow thus far. TC2 Dec sits only slightly above spot at
180, implying minimal holiday cheer ahead. TC5 Dec trades flat at 188, though
Jan adds 7 to 131. Volumes have been fair in the East.
Dry Bulk
BDI 700 down 15
BCI 833 down 5
BPI 590 down 32
BSI 610 down 12
BHSI 314 down 1
BB King once sang “The way I used to love you, baby that’s the way I hate you
now!” Commodore Landsberg has similar thoughts, though they required some
modifications and deletions. “Although freight rates continue to fall, today’s
descent is mild compared with the end of last week. Cape rates fell 2.5% today
to $2,364/day – a stark contrast with Friday’s 12.5% decline. Panamaxes have
fared better as well, falling only 5.2% to $4,759/day. Panamax day rates fell
13.5 % on Friday.
But is this really what it’s coming to – finding solace in single digit declines?
Short‐answer: yes. The only legitimate piece of good news (for Panamax owners)
is Indian iron ore cargo is now being routinely taken by Panamax vessels.
Although normally a Supramax cargo due to draft restriction, it’s been hard for
Indian iron ore charterers to pass up taking a Panamax when smaller Supramaxes
cost roughly $1,500 more per day.”
Dry Bulk FFAs
Contract Close Current Diff
======================================
BDI Dec 1025 1025 ‐flat
BDI Q1 1425 1425 ‐flat
BDI Q2 2075 2075 ‐flat
CS4 Q1 $7,656 $7,650 ‐$6
CS4 Cal 09 $13,055 $13,000 ‐$55
PM4 Q1 $8,125 $8,100 ‐$25
PM4 Cal 09 $10,734 $10,700 ‐$34
SM6 Q1 $7,063 $7,000 ‐$63
SM6 Cal09 $9,195 $9,100 ‐$95
>From the Seer of Baerum: There’s not much to report this morning, as the market
is extremely quiet. Am not picking up many trades in the market today, which
makes it very difficult to determine where the market is. The interest we do see
indicates little change from Friday. The FFABA meeting in Beijing this week has
attracted a number of traders which means they will be occupied for a few days.
Golden Ocean reported surprisingly good numbers, though they are in need of cash,
which is not appreciated by investors in this market. Index is expected to be
almost flat today.
>From Justin Yagerman at Wachovia: "Industry Wide Dearth Of Capital. Greek
owners continually highlighted an industry wide dearth of capital. Falling asset
values are beginning to make project return profiles more attractive, if one
assumes a return to historical average day rates, however most owners noted a
need for more capital and better visibility before getting constructive on
acquisitions. While we believe there will likely be a 'light at the end of the
tunnel' for dry bulk day rates (and project return profiles), the question now is
'how long is the tunnel' Given the likelihood of continued demand malaise and
supply growth, we believe it is still too early to consider acquisitions lest one
can afford to be early (i.e. average down)."
Equities
In ratings news…
Golden Ocean – 2 BUYS and 1 HOLD
‐ Anders Rosenlund maintains a HOLD on GOGL.OL ($0.80), noting that 2009 risks
seem to be the downside, though he expects management to do their best to avoid a
share issue.
‐ Glenn Lodden maintains a BUY on GOGL.OL and believes that the company will
succeed in securing financing for their new building plan. Target price is under
review.
‐ Frode Morkedal maintains a BUY on on GOGL.OL (NOK 11). He considers them to
have good counterparts on their contracts, though mentions that current market
conditions warrant ongoing risk considerations.
FRO
‐ Anders Rosenlund maintains a SELL on FRO and reduces target to $22 (from $25),
citing increased dividend uncertainty and discounting 2009 V rates at $40k/day.
“Mind the newbuilding program.”
‐ Omar Nokta maintains a HOLD on FRO, he cites tight credit markets as
problematic, though points out that if the credit backdrop improves, FRO may be
able to revert to their previous dividend policy.
SFL
‐ Omar Nokta maintains a BUY on SFL ($20) due to attractive valuation, among
other items.
‐ Anders Rosenlund maintains a HOLD on SFL, though increases target price to $12
(from $9.50), reflecting his increased confidence on future dividend
distributions. “They do what they do and they do it well.”
Dry bulk equity comment from Omar Nokta at Dahlman Rose: “Despite continued
weakness in the dry bulk market, several dry bulk stocks staged large rallies
last week amidst a 16% climb in the Dow since November 20th. Given the tough
financial position of several dry bulk companies, dry bulk stocks should continue
to trade unpredictably in the coming weeks until there is a clearer indication of
how lenders will move forward.”
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