According to Mr. Panos Makrinos, SnP broker with Intermodal, "the market bears firmly belief that there is more than enough room for prices to fall 10% - 15% from their currents levels and that in no way this continuous price strengthening witnessed those past few months could repeat itself, at least until the end of the year, especially in the dry bulk market. On the other hand, those who are less pessimistic believe that due to lack of sales candidates, especially 90s Supras and Handies and modern Panamaxes, prices will not soften further but most probably will inch up a bit due to competition amongst willing buyers", Makrinos said in his analysis.
He added that "the direction of the demolition market will undoubtedly play a very important role to the overall SnP market. The fact that during the first half of the year the number of vessels that have gone for scrap in India is less than half compared to the same period in 2012, certainly doesn’t draw a rosy picture for what the second half of the year might hold. What was expected to be another record year for demolition activity, that would further relief the market from excess tonnage, has proved to be quite disappointing, due to slowing steel demand, and a trembling Indian Rupee, which hopefully will be supported more decisively by the Indian government going forward.
While the demo market has been shaking, the newbuilding market has been going from strength to strength in 2013. As yards fought for survival during 2012, a year extremely tough on the balance sheet of most of them, they drove newbuilding prices down to levels extremely attractive for those owners who could access financing. The low price levels in combination with attractive specs/ new fuel efficient designs has managed to lure more and more owners into the ordering game", the shipbroker`s analyst noted.
He concluded his argument by adding that "fewer vessels are coming off the market and more will be added starting next year. And even though everyone had realized that for the past four years tonnage overcapacity has denied this market a faster recovery, it seems that this very same problem is appearing once again in front of our eyes. Unless a reversal in the current trends takes place soon, it does seem more likely that asset values will go down rather than up and that the scrap age of –teens might become the new normal. Scary but possible.