'Cherry-picking' charterers look only to one-year horizon

Technorati Tags: Baltic Dry Index,Baltic Dry Indices,Ship Chartering,Shipchartering,Voyage Fixtures,Time Charter Fixtures,Panamax,Capesize,Handymax,Handysize,Supramax,Dry Cargo Fixtures,Bulk Cargo Fixtures,Baltic Exchange,Freight Review,Maritime Baltic Index,TNT Freight Review,Maersk,Glory wealth

Michelle Wiese Bockmann - Tuesday 13 January 2009

MAERSK Broker said “cherry-picking” charterers would focus on period deals of around 12-24 months for the rest of 2009, as they replaced expensive ships with modern and cheaper supramax and panamax bulk carriers at daily rates of around $10,000 to $12,000. 
There will be fewer deals concluded for longer than two years, with most for one year, Maersk Broker’s fourth quarter Dry Bulk Market report concluded. 
“People don’t want to commit themselves to anything longer — the one-year horizon is all they feel comfortable with,” a broker with Maersk Broker said. 
However, there had been discussions for longer periods as rates were now so low that exposure appeared to have “limited downside”, he said. 
One-year panamax time charters had fallen from $33,000 per day in September to $11,000 per day by December and were forecast to rise to $13,000 by March. 
Maersk forecast supramax one-year time charters at $12,000 per day by March, and handysizes at $8,000. 
The unprecedented rates collapse for bulk carriers in the final quarter of 2008 has completely overhauled chartering behaviour for owners and operators of ships in the 5,200 global fleet of bulk carriers, amid widespread defaults and extreme counterparty risk. 
Formerly reliable charterers have redelivered ships early, refused to pay charter hire or failed to meet freight contract commitments, after negotiating longer-term rates during the market peak, some at 10 times more than today’s prices. 
Troubled operators like Glory Wealth were fixing panamax tonnage for seven-eight months for $84,500 per day in June last year, while grains commodities giant Bunge signed a two-year panamax charter deal for $66,000 per day. 
“Those charterers who are willing to take on tonnage today are predominantly only interested in doing so with head owners, rather than committing to the numerous problems coming with a chain that circulates twice around the world,” Maersk Broker said. 
“Attention has been focused inwards in attempts to maintain existing business and dealings with contract partners hoping to renegotiate, while charter parties have been dusted off and all hire payments are closely monitored with any delay in payment fiercely scrutinised,” the report added. 
It forecast further casualties among established operators if the market remained at current levels for the next three-six months. 
“Instead of committing to a period of five years or longer, many charterers will also continue to source relatively cheap tonnage from the hands of banks, either in the form of commercial management or as a purchase at cheap/distress prices,” Maersk Broker said. 
Capesize newbuilding prices fell by 16% last year, the Maersk Broker data also showed, ending the year at $81m. The price opened at $97m in 2008. 
Panamax tonnage fell 15%, from $55m to $47m, while supramax and handysize newbuilding prices both fell by 9%. 
“Prices are expected to remain under downward pressure and some yards will be quite aggressive in their pursuit of new business,” the Maersk Broker quarterly report said. 
Owners with existing tonnage on order sought to postpone dry bulk carrier deliveries, convert to other ship types, amend payment terms or cancel or restructure existing contracts.