The Panamax dry bulk short period freight market is currently trading below operating costs and some owners may be tempted to lay up their vessels as the outlook for 2016 is very weak, sources said.
The Panamax short period market is currently plumbing new lows and many Greek owners are now willing to accept levels of $5,000/d to fix vessels on four-to-seven month period contracts. Operating costs on a Panamax are approximately $5,500-6,000/d depending on the fuel consumption and the age of the vessel, sources said.
According to a shipbroker, "they are effectively fixing a loss for four to seven months."
Fixtures have been heard even lower and Oldendorff was heard to have fixed Paganini, a 75,118 dwt, 2008-built Panamax, at $4,500/d for a period of four to seven months, with delivery in China.
However, this vessel has relatively high fuel consumption and this is reflected in the lower price paid, as the charterer is responsible for bunkers, sources said.
The outlook for 2016 is currently very bearish and in the freight forward agreement market, paper for the first quarter of 2016 is currently trading at $4,450/d, while the second quarter is trading at $5,350/d, according to data from Freight Investor Services.
This averages out at $4,900/d, which is still well below operating costs, sources said.
Owners have a number of options though. They can either keep the ship in the spot market and hope for the best, or they can go into a "warm lay-up," sources said.
This is when the vessel drops anchor in a safe port and keeps the engines idling with the crew aboard, so it is able to swiftly return to service when market conditions improve. This typically cuts operating costs down to $2,500-$2,750/d.
However, according to a shipbroker, "you must commit to a significant duration of time and it requires a lot of forward planning."
There are also environmental issues, depending on where you lay them up, sources said.
The course of action an owner takes will also be affected by the level of debt they have on their vessels. Some owners may have banks putting pressure on them to bring in revenue and this is driving the decision to accept low-rated period fixtures, sources said.
However, if an owner has cash reserves and has paid off the debts on their vessels then they only have to cover operating costs.
By fixing a vessel on short period at a low level of $5,000/d they are giving away any potential upside that may occur if the market picks up to a third party, said a shipbroker.
