I stare out my office window on the 23rd floor and there they are, stretched out as far as my eyes can see, dry bulk vessels sitting pretty in the Singapore strait.
Although each vessel is of a different shape and size they all have one common enemy — unemployment.
With the engines running and crew on board, these vessels are burning fuel into thin air, literally waiting for orders.
Owners are holding steady, with many unwavering in the face of historical lows in the freight market.
The time charter equivalent of current Capesize freight voyage rates is around $1,000-$2,000/day in the Pacific, and operating a Capesize vessel even with the current bunker market rout, costs around $6,000-$7,000/day, depending on the vessel specs of course.
With these sorts of numbers, do the economics make sense for owners to park their vessels in cold lay-up, i.e. turn off the engine, move the crew onshore, and employ two watchmen to sit on deck?
According to sources, the cost of cold lay-up only makes sense if the vessel is squared away for at least a period of time.
The upfront fixed cost of putting a vessel into lay-up is high, considering the cost incurred to remove and reinstate the crew and ballast the vessel to and fro.
If a vessel is locked in Malaysia’s Labuan, the daily cost of the lay-up was heard to be around $1,000-$2,000/day, over a minimum of six months. In order to bring the vessel back to life, it would take from two weeks up to one month.
At the moment, there’s a trickle of vessels calling it quits and heading to rehab, but many more are waiting for a recovery in the market. In effect, it’s like putting a plaster on a cancer cell.
The absorption of tonnage has to be significant, culling out the long tonnage currently drifting in North China and Singapore, in order to see rates go back to black.
Owners are looking for divine intervention – such as weather disruptions at discharge ports, or a surge in positional tightness from an increase in energy needs in Europe after an unseasonably hot summer.
And as the Goddess of Fortune looks down from the Singapore river into the sea, one can only wonder when the tides will return in favor of owners.