Equities analysts for once are predicting a prolonged upturn for capesize bulk carriers, thanks to depressed asset values and historically low orderbook levels.
Cleaves Securities anticipates “one of the longest expansionary dry bulk cycles” in its records, which go back to the 1740s, according to a research note on Thursday.
"I believe the cycle will contract in 2022 at the earliest, but potentially not until 2023/24," Joakim Hannisdahl, Cleaves’ head of research, explained to TradeWinds today.
"Thus, the expansionary phase will last from 2016 and for six to eight years. One of the longest on record."
Asset prices and time-charter rates have dislocated, the note said, with firm freight rates suggesting that capes are currently undervalued.
Recent one-year capesize time-charters have been concluded in the region of $17,000 to $18,000 per day, the note said.
“This implies a fair value for a generic five-year-old capesize around $36m, or 24% above our current valuation,” Hannisdahl wrote in the note.
But, as he observed, a 2005-built capesize was reported sold this week at $13.5m, way below Cleaves’ March value assessment on a generic 2005-built vessel at $14.9m.
The securities analyst has adjusted its previous assessments for capesize asset values downwards by an extra 3%, compared to its last estimate in March.
“The impact is an 8% reduction of NAV on average, with highly leveraged capesize players most affected,” wrote Hannisdahl.
Capesize valuations are currently 10% below the cyclical lows of 2012 and only 25% above the all-time-lows seen in early 2016, according to the research.
Meanwhile, the orderbook for capesizes stands at 11% of the live fleet, way down on the average 25% seen since 1996, wrote Hannisdahl.
Cleaves is a firm buyer of both dry bulk assets and most dry bulk stocks at current valuations, the note said.
