Newbuild & Second-Hand Activity Shows Owners Betting on Capesize Prospects

[By: Maritime Strategies International]

Investors have continued to place bets on the dry bulk market with newbuilding and second-hand activity holding up strongly into the third quarter of 2024. “A recent softening in year-over-year comparisons for both newbuild prices and vessel earnings could indicate early signs that the second-hand market may follow suit,” says Plamen Natzkoff on the back of late-reported deals. And despite a slight decline in sale and purchase volumes in August’s brief summer lull, second-hand bulker values remain very firm.

MSI expects just over 30m dwt of dry bulk capacity to be delivered in 2024, with the orderbook forecast to rise still further by the end of the year, driven by strong contracting activity seen so far, with 2024 totals expected to hit 34m dwt.

A notable feature of newbuild contracting activity in recent months is the persistent interest in Capesize vessels. A total of 4.4m dwt of Capesize capacity was ordered during Q2, up by a third on Q1 levels and the highest quarterly total since Q2 2021. By contrast, the relative lack of interest in new Handysize vessels has persisted, with Q2 orders just 0.16m dwt.

In the second-hand market, demand for dry bulk ships remains robust, with MSI’s assessment of five year-old Capesize prices staying above $60m, a level not seen in almost 15 years. Prices for older ships are close to their 2022 peaks, with even 18 year-old Capesizes selling for over $20m.

Prices for younger vessels are even stronger, supported by rising newbuild markets. Year-to-date transaction volumes are nearly 25% higher than the same period in 2023.

Over the past three years, newbuild and second-hand price cycles have broadly tracked each other, despite lagging behind the bulker earnings cycle. The latter has had only a marginal effect, slightly advancing the peaks and troughs of older asset values compared to younger vessels.

“A recent softening in year-over-year comparisons for both newbuild prices and vessel earnings could indicate early signs that the second-hand market may follow suit,” says Plamen Natzkoff, Associate Director, Dry Bulk Commodities and Freight, MSI. “This suggests that prices may continue to rise year-over-year in the near term, albeit at a slower pace, but could start to decline within six months, implying a peak in asset prices around the end of 2024 and the beginning of 2025.”