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How to explain the handymax sales rush?

Commodore Research’s Jeffrey Landsberg tries to get to grips with a quirk in the S&P scene this year.

Notable in the dry bulk market recently is that there has been a significant surge in handymax (including supramax and ultramax) deals in the S&P market. April saw a total of 31 handymax vessels trade hands in the S&P market. This marks the largest amount of deals seen in any of the four major dry bulk segments since October 2016.

Sentiment in recent weeks had been improving in the dry bulk market, and handymax activity in the S&P market has been particularly brisk. The 31 handymax deals that were completed in April exceeded the 23 handysize deals that were completed during all of Q1 and dwarfed the one capesize deal that was completed. In addition, it came fairly close to matching the 37 handymax deals that were completed during Q1 and fell just moderately short of the 43 panamax deals that were completed.

It is not often that 30 or more of any type of dry bulk vessel trades hands in a given month. This did not occur at all in 2018 and occurred only twice in 2017 (March 2017 saw 30 panamax deals completed and September 2017 saw 30 handymax deals completed). Whenever such a robust amount of deals are completed, this almost always occurs in an environment where freight rates are rising. March 2017, for example, saw panamax rates increase by 38% and September 2017 saw handymax rates rise by 18%. April, however, saw handymax rates decline by 6% — but that did not stop a very large amount of handymax deals from being completed.

Sentiment in the handymax market experienced a significant boost in April, even as handymax freight rates were decreasing. Sentiment has remained rather optimistic in May as well, with a large amount of handymax deals continuing to be completed. Overall, though, we remain concerned regarding the ongoing growth in the handymax (including supramax and ultramax) fleet and also the growth in panamax fleet. Already, the handymax and panamax fleets have grown by a net addition of 65 vessels during just the first four months of 2019.

The first four months of this year have seen the handymax fleet grow by a net addition of 24 vessels (27 handymax vessels have been delivered and three handymax vessels have been scrapped), while the panamax fleet has grown by a net addition of 41 vessels (44 panamax vessels have been delivered and three panamax vessels have been scrapped). Sentiment has been particularly bullish in the handymax sector, but we continue to anticipate that handymax and panamax fleet growth issue will have more of an impact on these segments later this year. It remains only the capesize fleet that is undergoing a small contraction.

This article first appeared in the latest issue of Maritime CEO magazine, published yesterday. Splash readers can access the full article for free by clicking here.

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