* Sales of second hand ships climb to seven-year high
* Dry-bulk index has soared after record low in January
* 2016 cargo demand set for 1 pct rise after zero in 2015
* Shipping industry still "on a hospital bed", says broker
By Keith Wallis
SINGAPORE, Nov 29 Sales of second-hand ships
used to haul commodities such as iron ore, coal, grain and
fertiliser have hit a seven-year high in 2016 as the industry
creeps out of an eight-year downturn that has sunk several
fleets of shippers.
Seaborne transport, which accounts for 85 percent of global
trade, has seen a tentative recovery in the rates shippers
charge to carry dry-bulk cargoes, which has encouraged buyers to
jump at the bargain prices for second-hand vessels.
Nearly 560 such dry-cargo ships, which as a class make up
half the world's merchant fleet, have changed hands in deals
worth $4.3 billion up to the end of November, data from
shipbroker Clarkson showed, the highest number since 2009.
"We've seen a lot of interest from Asian buyers in 10-15
year old ships, which is partly due to the surge in rates," said
Ziad Nakhleh, managing director of Greek owner Teo Shipping
"Mineral demand from China is one of the bright spots for
dry bulk," he told Reuters.
Teo Shipping has put a 15-year old 74,107 deadweight tonne
(DWT) panamax bulk carrier called the Cretan Wave up for sale at
a price tag of $4.65 million, according to the nautisnp.com
It is one of thousands of dry cargo ships on the market at
traditional and online brokers.
"We believe the sector is approaching a turning point after
a long period of depressed rates," said Aristides Pittas,
chairman and chief executive of dry bulk owner Euroseas
, which has recently agreed to buy the Capetan Tassos, a
16-year old 75,100 DWT bulk carrier for about $4.4 million.
After crashing to its lowest level on record earlier this
year, the Baltic Dry Bulk Index, a basket of freight
rates to transport dry raw materials like iron ore, coal and
grain, has soared over 300 percent to 1,257 points, albeit still
way off its almost 12,000 point peak from 2008.
"It does make more financial sense to buy second-hand at the
moment than order new-builds, given the very attractive prices,"
said Ralph Leszczynski, head of research at ship broker Banchero
Costa (Bancosta) in Singapore.
A five-year old 180,000 DWT iron ore and coal carrier costs
around $24 million now compared with $39 million in 2014. A
10-year-old, 32,000-tonne ship to carry fertiliser, logs or
steel products is worth around $6.8 million now against $12.5
million two years ago, according to data from shipping services
The revenues those cheap ships can generate is on the rise.
Average rates for large 180,000 DWT ships, known as capesize,
had plunged to around $2,800 per day at the end of January,
about 60 percent below daily operating costs of $7,200, but have
since recovered to around $22,000 per day, ship broker data
While some of the recovery is cyclical - the first quarter
is traditionally the weakest for dry bulk cargo, and the fourth
quarter the strongest - freight rates have been buoyed by a
rebalancing in cargo demand and vessel supply.
The number of new ship orders dropped to its lowest level in
more than 35 years in the first eight months of 2016, Clarkson
figures show, while the scrapping of older dry cargo ships hit
an all-time record in the first half of the year, says Bancosta.
Tougher controls from September 2017 on seawater pumped in
and out of ships could see the demolition of up to 2,500 vessels
in a global fleet of 9,500 dry bulk ships over 20,000 DWT,
according to a report in mid-November by Bancosta.
Brokers and analysts said the cost of upgrading older
vessels didn't make financial sense.
Cargo demand, meanwhile, is set to rise 1 percent this year
after zero growth last year, Bancosta said.
"There are people thinking ship prices are cheap, and if
they hold the vessel for two or three years they may see a
serious return," said Nick Shaw, head of shipping at law firm
Reed Smith in London.
For all that, after a downturn that triggered bankruptcies
across the globe, including Korea's Hanjin Shipping, one of the
world's biggest container shippers, the industry still has some
way to go to return to health.
"Dry-bulk may be off the critical list, but it's still lying
on a hospital bed feeling rather sorry for itself," said Martin
Rowe, managing director of shipbroker Clarksons Platou Asia in
And though the metrics have improved, the fleet size is
still outgrowing the rise in trade, according to Clarkson - a
1.9 percent rise in bulk carrier tonnage versus a 1 percent rise
in cargoes this year.
"We need more scrapping, no newbuildings, and expanded trade
growth to restore the dry-bulk market to health," said Rowe.
(Reporting by Keith Wallis; Editing by Henning Gloystein and