A key figure that points out this difference is the price levels being noted for second-hand assets, which under the current environment have showed a remarkable resilience. Prices today are on average more than 50% above the lowest point noted in 2016. This ranges between as low as 22% for a 5-yrs old Capesize to 153% for a 15-yrs old Panamax. However, we should keep in mind that due to lack of liquidity in the market, we may well be already facing a much steeper drop.
Interestingly enough, the biggest differences noted are in the vintage age class units (with the Capesize segment being an exception), possibly displaying the lack of keen sellers even for vessels closer to their scrap age. The reason behind this is primarily the impression that the current crisis is not based on true long-term supply/demand trends but a mere temporary slow-down. To what extent however is this argument of sound basis? Taking a deeper look at the supply side of the market, we get a mixed picture.
On the one hand, the y-o-y fleet growth this May compared to May 2016 is a bearish factor, with a 3.2% growth noted this year, which is approximately 1% higher than what was being seen in 2016. On the other hand, when taking a look at the orderbook, we see a more optimistic perspective emerge. Right now, we have approximately 252 units in the global orderbook for delivery in 2021, much lower compared to 2016 number, as well as a much healthier ratio to overage fleet which is now at 24.3% compared to 51.1% back in 2016. Yet, it is also important to mention that this year we have seen more new orders placed compared to what was being seen during Jan-May 2016 period and a lower cancellation/slippage ratio of around 32.5%. This illustrates once again the confidence that owners have in the market and the strong hope that a ‚compressed spring effect” is being noted in the global economy.
On the demand side, forecasts for 2021 are much more bullish than most were seeing back in 2016 for the prospects of 2017. For example, the WTO is forecasting that global trade growth will sit somewhere between 21%-24% next year. However, starting from a much lower base as estimates for 2020 are between -12.9% and -31.9%. The respective slowdown of trade in 2016 was 1.3% and the forecast back then for 2017 was 2.5% according to WTO.
In addition, the global GDP growth forecast by the IMF for 2021 is 5.8%, a bullish figure compared to the corresponding forecast back in 2016 for 2017 which was 3.5%. These figures should not be taken on their face value but more so as an indicator that most still hold a fair bit of optimism over what the future holds.
With all this in mind, it is interesting to note that SnP activity has remained anemic this year so far, with levels much lower to those that were witnessed in the respective period of 2016. One of the biggest issues faced has been the gap between buyers and sellers in the market increasing considerably, with the former hoping to see bargain deals of the likes they would have seen back in 2016, while the latter would rather take a wait and see attitude rather than rush any sale. Who will eventually fold in this tug of war will be seen over the next couple of months.