Scrapping of older vessels to intensify in coming months, says Braemar SeascopeBy total
Published: 2011.11.07
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EmailSo far this year, demolition of older vessels has been feverish, in an attempt by ship owners to help alleviate the tonnage oversupply pressures that the global shipping market has been dealing with, in almost every shipping trade, from dry bulk to tanker.
According to Rodney North, Braemar Seascope Director in Demolition, the level of scrapping activity in the dry bulk segment so far this year, is 400% more than in 2010, while in the tanker sector levels are approximately 25% lower than in the previous year.
But, as Mr North says in an interview with Hellenic Shipping News Worldwide, the size of the orderbook and the number of vessels delivered from shipyards around the world has been such, that the rate of scrapping has done little to diminish the global fleet, thus applying pressure to freight rates. As he says, scrapping activity must continue to remain high and increase in the coming months and years, in order for the shipping industry to recover and return to a healthier balance between demand and supply.
How has the demolition activity been progressing so far this year both in the tanker and dry bulk segments?
Bulker - 23.6m dwt sold for demo in 2011, 400% higher than in 2010 at same point.
Tanker - 8.25m dwt sold for demo in 2011, 25% lower than in 2010 at same point.
In 2011 the demolition market has been dominated by sales of dry bulk vessels with a notable number of larger lightweight vessels i.e. panamax and capesize vessels being sold for scrap. For the most part activity relating to tanker scrapping has been subdued compared to the number of dry vessels being sold for demolition. This is partly because the vast majority of single hull tankers have already been phased out. Over the last few months we have seen a greater supply of overaged double hull tankers coming onto the market, especially late 80s and early 90s built MR and Aframax tonnage, although this trend is likely to spread to all tanker tonnage.
Overall this year has seen prices rise steadily with small peaks and troughs for both wet and dry tonnage respectively, with levels well in excess of US$500/Ldt being maintained throughout the majority of the year. Tanker demolition has been somewhat more complicated this year with new regulations being imposed in Bangladesh whereby all tankers have to be gas free for man entry and hot works (the same as in India). Pakistan has been the main beneficiary of this new regulation with many owners unwilling to undertake gas free cleaning for hot works at their expense prior to arriving at the final breaking port. Many of the cash buyers have been left having to purchase vessels on an ‘as is’ basis, cleaning the vessel at their cost and expense before undertaking the final voyage to India or Bangladesh to satisfy the needs of the buyers there. The vessels that are gas free for man entry and hot works have seen a premium in terms of the prices being offered this year.
Do you think these levels of activity are enough to help alleviate oversupply pressures in both markets?
No. According to our Research Department this year will see a net bulk carrier fleet growth of 10% compared to a 6% demand growth, while the figures for tankers are at 6% and 2% respectively.
As it stands given the current number of newbuilding deliveries and those projected for the next two years, even with large number of vessels being scrapped the global fleet is still set to grow. Supply is still exceeding demand and this will continue unless we see a significant increase in the amount of vessels being scrapped or we see a marked increase in newbuilding cancellations. The question also remains as to whether the demolition market can sustain increasing numbers of scrap vessels, and the possibility of oversupply of scrap tonnage leading to a fall in prices.
Do you expect that pressure from a tonnage supply point of view will improve next year?
No. As far as bulk carriers are concerned we anticipate a net fleet growth of 8%-10% as against a steady demand increase of 6%
In terms of scrap prices offered, would you say that they are attractive to ship owners or not?
Yes. For example if selling today, owners could expect to realise US$16million to $18m for a single hull VLCC and US$21m-$22m for a first generation double hull VLCC (the latter having a higher lightweight and therefore higher price). Considering this against the background of owners facing negative spot market earnings on the major trading routes, it is clear there is pressure on potential sellers to seriously consider taking advantage of the current strong demolition levels. Owners purchasing older tonnage are naturally using the current demolition value of the vessel as the starting point in terms of valuing the vessel.
This year has seen historically very strong demolition prices, with prices now around US$500/Ldt being offered for all tonnage types for delivery on the Indian subcontinent. Combined with falling second hand values and depressed freight rates, demolition values should be considered attractive for Owners with potential scrapping candidates.
How has the situation regarding the ban of demolition activity in Bangladesh been affecting the market so far?
Over the past year Bangladesh has seen numerous closures and resumptions in shipbreaking activity relating to moves by the High Court and the Bangladesh Environmental Lawyers Association relative to the implementation of improved health and safety procedures and recycling regulations. Overall the impact on prices has not been negative, with Pakistan and India remaining aggressive even in the periods of Bangladesh’s absence. The main effect of the various openings and closures of the Bangladesh Shipbreaking market has been to create volatility with cash buyers and breakers speculating on price against anticipated demand fluctuations. In the past when Bangladesh has been unable to purchase vessels for long periods, we have seen China absorb some tonnage finishing in the Far East, as Bangladesh was removed from the competition, and India being that much further to ballast to with high bunker prices. However, more recently the very firm prices available from India and, to a lesser extent Pakistan, have negated the influence of Bangladesh’s absence with China simply being unable to compete on the larger lightweight vessels.
Do you think that demolition activity will be more intense in the months to come?
In short YES. With the outlook for global trade growth recently worsening and supply still far surpassing demand, it would seem inevitable that as more and more vessels fail to make a profit or even break even, owners could be left facing the alternatives of cold lay-up or demolition.
from, Hellenic Shipping News Worldwide
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Medium range tankers surviving the downturn so far in the year By total
Published: 2011.11.04
Print EmailWith the vast majority of tanker markets in the red, it's difficult to discern a silver lighting. One of those is the medium-range product tanker market, with MRs hanging in there. According to a recent report from CR Weber, "since the start of 2011, tanker time charter rates have been under negative pressure as the prolonged state of recessed spot market earnings -- and expectations for a continuation thereof – have taken their toll. This trend has been most observable for the VLCC class, for which the one‐year time charter rate assessment has declined by 36% to $19,000/day" said the shipbroker’s analysis. For the MR class, however, the rate assessment presently stands at $13,500/day – precisely the same level as at the start of the year said CR Weber.
It went on to explain that “contributing to the halting of MR time charter rate declines are the stronger earnings the class has earned on the spot market this year due to heavier demand and a relatively better‐balanced fleet growth profile. Rising levels of US product exports on the back of better refining margins for US Gulf area refineries capable of sourcing crude inputs priced at widened WTI prices (relative to Brent prices) against sluggish domestic demand and rising Latin American demand has formed one of the bases of this scenario. Similarly, poor refining margins in Europe have seen refinery utilization rates there stagnate at low levels. These features have created opportunity for the MR spot market by offsetting a lull in demand for US product imports with longer‐haul US‐Latin America runs and reduced ballast time on trans‐Atlantic trades. Though a boon for MR owners, for charterers these developments have
meant greater exposure to costlier rates—and greater volatility thereof.
By taking MR tonnage on time charters, charterers can hedge exposure to future rate developments or, potentially, profit by operating tonnage on the spot market. At present rates, an MR trading a cargo from the US Gulf to the ARA ranges followed by a subsequent cargo from ARA to New York, may potentially obtain triangulated earnings of ~$22,100/day over an assumed 38 days. In this scenario, gross freight paid by a spot charterer equals $1.7m. Performing the same voyages on tonnage chartered in at $13,500/day plus bunkers and port costs would equate to a savings of ~$363,000 over the 38 days.
Similarly, trading a cargo from the US Gulf range to Central America's east coast followed by a subsequent cargo from the Caribbean to the US Atlantic Coast can obtain potential triangulated earnings of ~$22,800/day over an assumed 22 days at present rates. Performing these voyages on chartered in tonnage at $13,500/day plus bunkers and port costs would have saved the charterer ~$227,000.
Examining the prospects for time charted tonnage being operated purely on the spot market as a profit play shows that period charterers can earn as much as $9,115/day once time charter costs, freight income and voyage costs are accounted for on the aforementioned triangulated trades at today's rates. With the MR outlook considerably better than for the class' larger piers, it is possible that time charterer rates are now firmly at attractive levels" concluded CR Weber's analysis.
Meanwhile, in the product tanker market this past week, Fearnley's said that "on the back of many fresh TC2 inquiries in the market, the week seemed to start without any clouds on the horizon. In addition to a handful of uncovered cargoes left over from last week, ws180 or higher was on the owners´ minds for movements UKC/USAC basis 37kt. The charterers however stepped back and fixing activity was largely muted until mid-week, pushing rates down to around ws165. On the larger tonnage activity is slow, with fixing levels steady at ws115 basis 60kt. Despite the run-up in rates for MRs on the Continent, the smaller tonnage has been relatively unaffected. Handy- and Flexi-size rates are stable at ws165 basis 30kt, and ws215 basis 22kt for NWEurope trading. Despite high fixing activity, the backhaul
voyages ex USG for destination UKC-Med has slightly softened to ws137.5 basis 38kt, however Caribs upcoast is firming further to ws177.5 basis 38kt.
In the Middle East, the LR1s are still not experiencing any positive movement in the market. For voyages MEG/JPN, rates have taken another turn down, and we are now estimating rates to ws107.5 basis 55kt. Rates for LR1s trading Jet MEG/UKC are now estimated at usd 1.75 million basis 65kt. The list of available tonnage remains substantial, without any signs of sudden improvement. LR2s trading MEG/JPN are still experiencing a softer market, with rates now estimated to ws105 basis 75kt. MRs trading SPORE/JPN are still seeing rates at around ws150 basis 30kt, and MRs trading MEG/JPN are fixing at around ws140 basis 35kt” concluded Fearnley's.
from: Hellenic Shipping News Worldwide
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Dry bulk market officially in the “red” on lower cargo demand By total
Published: 2011.11.03
Print EmailThe dry bulk market kept falling yesterday, on lower iron ore demand, which has caused the industry’s benchmark, the BDI (Baltic Dry Index) to plunge to more than one-month lows, ending the session down to 1,859 points, or by 2.77%.
All shipping segments were down yesterday, with the Capesize market sustaining the biggest losses by 3.23%. The Panamax market was down by 1.20%.
According to the latest report from Shiptrade Services, after the previous weeks’ steady increase, the market turned downwards with Capesizes suffering the most. Commenting on the Capesize market, it mentioned that “the week began positively, but lack of cargoes in the Pacific forced Owners to lower their levels, or start ballasting towards the Atlantic.
Atlantic basin was active, with good cargo volume mostly coming ex Brazil.
Rates for Transatlantic rounds concluded at USD 34.000 per day, while on the Fronthaul trade, rates for trips to F.East, levels concluded at USD 49.000 per day. On the Tubarao/Qingdao trade rates were fluctuating between USD 30.00 – 30.50 pmt but week’s closing rates softened as an effect of the ballasters from the Pacific.
Pacific basin was quiet due to the absence of the iron ore majors but Owners could see a few alternative cargoes ex S.Africa / W.Canada. Rates softened, and at weeks closing, rates for the Australia/China trade concluded at USD 11.00pmt, while on TCT basis, rates for Pacific round concluded at USD 25.000 per day basis N.China delivery” said Shiptrade.In a separate report Fearnley’s said that “after a relatively long period with improving rates, the Cape market experiences a correction mid last week. Rates kept dropping throughout this week, with West Australia/China being done just bellow usd 10 pmt. Tubarao/Qingdao was done last week around usd 32 pmt, the lowest done this week is just below usd 25 pmt. The drop in spot rates has resulted in less period activity with chrtrs aiming around mid teens, a level perceived to be of non interest to the owners. The rest of the week is remained to be quiet with Eisbein going on in Germany” said the report.
On the Panamax front, the Nordic-based shipbroker it said “fair activity with mineral requirements in the North Atlantic from USEC and Baltic catering for healthy levels as market is tight for prompt loaders. Fixing levels in the 20´s for Baltic rounds, upper teens for TA rounds. Less activity and weakness in the USG and ECSA from an increasing number of
ballasters appears from the Med and Far East. Levels for trip out hovering in the 26 + 600 range basis APS. In the Far East activity is low, tonnage lists grow, and rates are under downward pressure. NOPAC rounds 12500, period activity scant. The general sentiment is losing confidence from a slow and descending forward market” said Fearnley’s.
Shiptrade Services mentioned that “Panamax rates dropped slightly since the cargo volume was not enough to cover the available tonnage. In the Atlantic basin, the USG market remained the driving force, especially for the Fronthaul cargoes with fixtures at USD 26.500+650.000 GBB basis APS USG. Rates for Transatlantic round remained at USD 17.500 - 18.000 per day. In the Pacific basin activity remained flat with many Charterers waiting for rates to drop further. At week’s closing, rates for S.China/S.E.Asia positions interested for Indonesia round, concluded at USD 14.000 – 14.500 per day. Positions at N.china/Japan range interested for trips ex NOPAC could get USD 13-14.500 per day” said Shiptrade.
On the Supramax trades the Piraeus-based shipbroker mentioned that “the market followed the same trend, with less cargoes and rates dropping. In the Atlantic basin, we could notice a decrease in the number of cargoes, but some areas were more attractive. In the USG region rates for trip to continent/East Mediterranean remained steady close to USD 30.000 per day, while for trips to F.East fixtures reported at USD 38.000 per day. On the Mediterranean/Bl.Sea market, rates for trips to F.East held around USD 24 - 25.000per day, while rates for trips to USG were between USD 9 -10.000per day. On the ECSA region, vessels concluded at rates close to USD 18-19.000per day + 400.000 ballast bonus basis APS ECSA delivery for trips to F.East, and for trips to Continent/Med rates concluded at USD 16-17.000per day. In the pacific basin, rates dropped, as there were not many cargoes from Indonesia, and many Charterers preferred not to move and see how the market will proceed. Some fixtures concluded to direction India but levels were fluctuating between USD 8.000 – 11.000per day. On the other hand, for the N.China positions, a few cargoes ex NOPAC remained an attractive solution at rates of USD 12.000per day (M/V Prabhu Jivesh 50956 / 02') ” concluded the shipbroker.
from: Hellenic Shipping News Worldwide
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Vessel operating costs expected to rise By total
Published: 2011.11.01
Print EmailVessel operating costs are expected to rise by 3.8% in 2011 and by 3.7% in 2012, with lube expenditure and crew costs identified as the categories most likely to produce the highest levels of increase, according to a new survey by international accountant and shipping consultant Moore Stephens. The survey is based on responses from key players in the international shipping industry, predominantly ship owners and managers in Europe and Asia. And those responses identified lubricants as the cost category likely to increase most significantly over the two-year period – by 3.6% in 2011, and by 3.1% in 2012. Crew wages, meanwhile, are expected to increase by 3.1% in both 2011 and 2012, while the cost of spares is expected to escalate by 2.7 % and 2.6 %, respectively, in the two years covered by the survey. Expenditure on stores, meanwhile, is expected to increase by 2.5 % in each of the two years. The cost of repairs and maintenance is expected to increase by 2.8% and 2.6 % in 2011 and 2012 respectively, while the increase in P&I costs for those two years was estimated by respondents at 2.4 % and 2.3 % respectively. As was the case in the previous survey, in 2010, management fees was identified as the category likely to produce the lowest level of increase in both 2011 and 2012, at 1.8 % and 2.0 % respectively.
“Bunkers and lubes are our biggest cost,” said one respondent, while another observed, “The cost of bunkers is unrealistically high. There is no reason for that. If the price of bunkers remained at a reasonable level, shipowners would not be struggling in the way they are at the moment.” Another still said, “There will be an inevitable cost consequence of implementing fuel efficiency measures at the request of charterers, while the benefits of such measures will not be seen in terms of operating costs”. One respondent expected dry cargo crewing costs to increase more than tanker crewing costs, while another noted, “The Manila amendments to STCW will result in significant increases for ‘other’ crew costs, especially in respect of training.”
A number of respondents expressed concern about overtonnaging and the weakness of rates in the freight and charter markets, “Overcapacity and newbuilding deliveries involving larger tonnage on the main routes will maintain downward pressure on rates,” said one. Another maintained that there was “no sign of resolving the overtonnaging problems in the dry bulk sector”, arguing that this, together with unpredictable trade volumes, would lead to pressure for cost increases and for reflagging as a means of driving operating costs down. Another respondent pointed out, “Depressed charter rates will lead owners to seek in vain to minimise operating costs.”
Predictably, worldwide economic and political problems were uppermost in the thoughts of some respondents, with one commenting, “World financial conditions will depress shipping revenues, and this will impact on ship requirements and charter rates.” Another respondent felt, “China’s effective control of the market, together with inflation, will make shipping markets difficult for most people involved in the business.” Yet another said, “It all depends on whether the global economy – and particularly that of the US – can recover, and whether the US dollar continues to be the only currency for oil trading.”
Moore Stephens also asked respondents to identify the three factors that were most likely to influence the level of vessel operating costs over the next 12 months. Overall, 26% of respondents identified finance costs as the most significant factor, followed closely by crew supply (25%). Demand trends were in third place, with 14%. In last year’s survey, 30% of respondents identified crew supply as the most significant factor, followed by finance costs, at 28%, and demand trends at 16%. “Finance costs and potential interest rate hikes will be key factors for the market,” said one respondent.
Labour costs, competition and raw materials costs were other significant influencing factors which featured in the responses to the survey. One respondent said, “Raw materials will increase in cost, so there will be upward pressure on stores, spares and repairs.” Moore Stephens shipping partner Richard Greiner says, “Ship operating costs increased by an average of 2.2% across all the main ship types in 2010. And it is no surprise that our latest survey anticipates that costs will rise in both 2011 and 2012.
“These projected increases are nowhere near the increases we saw in the 2000s. They point to a less volatile period for operating costs. But any increase in costs is going to be a problem for a shipping industry struggling with overtonnaging, declining freight rates, and the cost of regulatory compliance and environmental accountability. Add to that the continuing economic and political problems which form the background to shipping’s operating arena, and you can see that the industry is not going to be for either the faint-hearted or the short-termist.”
Source: MooreStephens
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Demolition of dry bulk ships hitting new records: Navios execs By total
Published: 2011.10.28
Print EmailDemolition of dry bulk ships has reached record levels in deadweight tonnage terms due to a combination of low freight rates, high fuel costs and high prices being offered by ship breakers to owners, executives with a major listed dry bulk shipowner said.As of October 14, 300 dry bulk carriers, aggregating 19.6 million dwt, had been sold for scrap so far this year, beating by 160% the previous record of 12.2 million dwt set in the whole of 1986, Frangou Angeliki, chairman and CEO of Navios Maritime Partners told analysts on a conference call to discuss the company's third-quarter results.
The number of dry bulk carriers sold for demolition so far this year represented 3.65% of the global dry bulk carrier fleet, she said.
Last year 5.8 million dwt of dry bulk tonnage was sold for scrap, representing just 1.3% of the global fleet.
George Achniotis, senior vice president of business development at Navios Maritime, said an average of 1.2% of the world fleet was committed for demolition each year in the period 2000-2010, inclusive.
Of the 300 dry bulk carriers sold for demolition this year, 64 were Capesize bulkers, but gave no comparison for prior years, he said.
At the current level of demolition, Achniotis said, the industry is set to commit 24.9 million dwt of dry bulk tonnage for demolition in the whole of 2011, representing 4.7% of the existing global dry bulk fleet.
The ongoing problem of delayed deliveries of new ships from ship builders was continuing this year, with around 31% slippage from the schedule so far in 2011 as of the end of September, he said.
Last year, the size of the global fleet swelled to 536.4 million dwt, up from 459.2 million dwt, Achniotis said. During 2011, the rate of slippage from scheduled deliveries from the yards amounted to 38%.
For 2011, while the amount of new ships entering the market was likely to exceed that for 2010, he said, "the rate of slippage and taking the volume of scrapping so far this year, the net fleet growth may not be as large as seen in 2010."
Around 11.4% of the global dry bulk fleet was over 20 years of age, of which 11.4% is more than 25 years, "which gives scrapping potential for another 106 million dwt," Achniotis said. HIGH INCENTIVE FOR SCRAPPING
Achniotis said the incentive for owners of such ships to scrap, because of low freight rates and the current price levels being offered to shipowners by demolition yards would yield an owner approximately $11 million-$12 million for a Capesize, which was the equivalent to around 30% of the secondhand value of a five-year-old Capesize bulk carrier.
Navios is a major carrier of iron ore, coal and grain, owning and operating six Capesize dry bulkers, nine Panamaxes and one Supramax. According to a slide presentation at the analysts' call, Navios Maritime lists Constellation Energy, Rio Tinto, ArcelorMittal and Vitol from the world of metals, mining and energy among its top 15 customers.
The shipowner derived 7.5% of its revenues in Q3 from Constellation Energy, 5.7% from Rio Tinto, 1.09% from ArcelorMittal and 1.3% from Vitol. Its biggest customer was STX Pan Ocean, one of the world's largest vessel owner/operators and carrier of iron ore and coal in its own right, and accounting for 13.2% of Navios Maritime's revenues.
Earlier Monday, the company reported a sharp increase in third-quarter revenues, helped by the effects of operating a larger fleet, but flat income, caused largely by a lower fleet utilization rate.
In the three months to September 30, revenues rose to $48 million from $38 million in the corresponding 2010 period, but net income only grew to $16.6 million from $16.3 million a year earlier.
The company said the increase in revenue was largely attributable to operating a fleet with two additional ships in Q3 2011 compared with Q3 2010.
Navios reported fleet utilization in Q3 2011 of only 90.8% compared with 99.9% in Q3 2010. It did not specify what caused the lower utilization rate, other than attributing it to "unspecified off-hires." This cost the company $3.8 million in the quarter, it said.
Lower freight rates resulted in reduced time charter equivalent earnings of $28,992/day per ship in Q3 2011, down from $29,978/day per ship in Q3 2010.
In the first nine months of the year, revenues rose sharply to $136.5 million from $100.7 million in the corresponding 2010 period. Net income rose to $46.7 million from $42.1 million.
Source: Anthony Poole, Platts
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Dry bulk market edges down as China’s iron ore demand loses ground By total
Published: 2011.10.27
Print EmailA plunge in Chinese iron ore demand, as a result of high steel inventories and a bleak outlook regarding steel prices, has prompted the dry bulk market’s benchmark, the BDI (Baltic Dry Index) to fall by 0.74% yesterday, ending the session at 2,145 points.
All dry bulk segments retreated yesterday, with reports of lower iron ore prices leading the market’s sentiment. In the recent past, those lower iron ore prices had prompted a restockpiling of iron ore from Chinese steel mills, but the trend is currently shifting. The Capesize market was down by 0.71% to 3,612 points, while the Panamax one was down by 0.76% yesterday to 1,961 points.
The latest weekly report from shipbroker Fearnley’s, referring to the Capesize market said that “reaching new highs, primarily due to a combination of widespread pacific congestion, generally healthy spot volumes and increased atlantic activity in particular. Having reached y-t-d best spot average of usd 32k, it seems however this segment may be in for a short-term slide. Major miners and mills are predominantly absent, with a resultant build-up of pacific ballasters - remaining spot activity is driven by traders and operators with atlantic focus. Before dropping sharply, forward paper values has given good support to period - resulting in 180000 dwt/2009/china beg nov done for 11-13 months at usd 18k, 207000 dwt/2008/china end nov fixing usd 19500 for 11-13 months and 179000 dwt/2010/china spot for 5-7 months at usd 21k” said Fearnley’s.
In a separate report, Piraeus-based shipbroker Shiptrade Services mentioned that the week begun slowly as most of the majors were at the conferences in Madrid, and activity at both basins being slim. “Atlantic basin was quiet, but still some fixtures occurred. Rates for Transatlantic rounds concluded at USD 35.000per day, while on the Fronthaul trade, rates for trips to F.East, levels concluded at USD 50.500per day. On the Tubarao/Qingdao trade rates were fluctuating between USD 29.00 - 29.75 pmt. In the Pacific basin we could see only a few alternative cargoes ex S.Africa so Owners were looking for the Australian parcels. At weeks closing, rates for the Australia/China trade concluded at USD 12.50pmt, while on TCT basis, rates for Pacific round concluded at USD 30.000 per day basis N.China delivery” said Shiptrade.
In the Panamax market, Fearnley’s said that “the Atlantic basin stays tight for prompt/November tonnage, consequently rates keep stabile at good levels. Owners asking 18-19k in the Atlantic, whilst fronthaul still at firm 27k+ 700 from US Gulf to Far East, and 25/26k from Brazil out. Fresh amount of coal cargoes in Atlantic together with grain out of Gulf to Far East give positive signs for coming weeks. In the Pacific short periods pending around USD 13,250/13,500 while the NoPac round are being fixed around USD 12k. The backhauls are still hovering around a conservative USD 5k. Despite the constant delivery of new tonnage, demand seems to continue in good pace” said the Nordic-based shipbroker.
Similarly, Shiptrade mentioned that “rates slightly dropped since the cargo volume was not enough to cover the available tonnage. In the Atlantic basin, the USG market still remained the driving force, especially for the Fronthaul cargoes with fixtures reported at USD 26.500+650.000 GBB basis APS USG. On the other hand, Bl. Sea seemed to be a premium area as fixtures reported at USD 45.000 per day for 1 trip to China. Rates for Transatlantic round remained at USD 17.500 - 18.000per day. In the Pacific basin activity reduced starting from Tuesday, as many Charterers with November stems decided not to cover their enquiries yet, and rates slightly dropped. At week’s closing, rates for S.China/S.E.Asia positions interested for Indonesia round, concluded at USD 15.500 - 16.000per day. Positions at N.china/Japan range interested for trips ex NOPAC could get USD 15-15.000per day, while some fixtures reported at USD 16.000per day” said Shiptrade.
As for the Supramax market, which sustained the most losses on Wednesday’s session, Shiptrade said that “the market remained steady in the Atlantic, but Pacific lost steam. In the Atlantic basin, the USG region kept the league once again. Rates ex USG for trip to continent/East Mediterranean concluded close to USD 30.000 per day, while for trips to F.East fixtures reported at USD 36.000 per day. On the Mediterranean/Bl.Sea market, rates for trips to F.East held around USD 25.000per day, while rates for trips to USG were between USD 7-9.000per day. On the ECSA region, vessels concluded at rates close to USD 22-23.000 basis W.Africa delivery for trips to F.East, and for trips to Continent/Med rates concluded at USD 16-17.000per day. In the pacific basin, rates slightly dropped, but many Owners still preferred to cover their vessels for short period at rates between USD 14--15.000per day, rather than keeping them in the spot market. Those who remained on the spot market could fix cargoes ex Indonesia to direction India but levels were fluctuating. Some fixtures reported at rates from USD 9.000 - 15.000 per day. On the other hand, for the N.China positions, the cargoes ex Nopac remained an attractive solution at rates of USD 14 -15.000per day” said Shiptrade.
from: Hellenic Shipping News Worldwide
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Ship owners unable to secure financing for new buildings on the back of the eurozone crisis By total
Published: 2011.10.26
Print EmailIt could be a blessing in disguise in terms of helping alleviating the oversupply of vessels in the global market, but certainly the new trend emerging in ship financing shouldn’t be viewed as something positive, quite the opposite. According to Clarksons latest weekly report, the continuing dithering of European leaders to reach a deal on a suitable rescue package for the Eurozone, merely heaps more pressure on the banks and their ability (or inability) to lend to the shipping community; this issue remains prevalent in the newbuilding market, with owners and shipbuilders trying to understand the longer term implications of the turmoil in the financial world.
Clarksons said that “some of the implications are pretty clear, the flight to quality will continue, liquidity will remain tight in the ship finance markets and buyers will remain cautious in the light of both the shipping and the financial risk of an investment today. However, the longer term impact is more difficult to judge, as it is impossible to tell at the moment what measures governments will be able to take to prop up the financial system and whether this current difficult period will come to be seen as the bottom or close to the bottom of the market, or whether we are entering a new and more difficult phase for shipbuilding.
Whilst there are clearly legitimate concerns about the ability of some owners to finance the orderbook and to fund new deals, many others are still relatively cash rich and will see this period as one of opportunity rather than concern; as a result, for many owners, newbuilding activity may well continue to be driven by traditional shipping market considerations, against a backdrop of a volatile economy and strained debt market, as opposed to being totally inhibited by the financial markets; however there is no doubt that this volatile environment is certainly impacting sentiment and creating a much more conservative and cautious demand side” concluded Clarksons.
In a separate report, shipbroker Golden Destiny said that the week ended with the newbuilding sentiment being at quite firm levels with no contracting activity for a second week in the container market. “The ordering business in the offshore segment continues with platform supply vessels being on spotlight, while the primary two main segments, bulk carriers and tankers, have grasped 31% and 22% respectively of the total number of units ordered. In the LNG segment, the ordering spree seems to have no end with 4 more fresh LNG units ordered this week in South Korean yards. What is noteworthy is some uncovered business that came to light this week again by Japanese shipbuilding industry in the bulk carrier segment for panamax and capesize units, with no further details emerging for the contractor owner or the newbuilding price. In the past, we revealed some hidden Japanese newbuilding business that pushed the newbuilding momentum to higher levels of activity, but this week we decided to not report these contracts due to the misguidance they create for the firmness of the ordering momentum. Furthermore, some activity has been noticed by Chinese yards for bulk carriers, panamax and kamsarmax size, but the contractor owner has not been yet revealed and we remain cautious before reporting them” said the Piraeus-based shipbroker.
According to the report, overall, the week closed with 36 fresh orders reported worldwide at a total deadweight of 3,966,600 tons, posting a 125 % weekon-week increase due to 175% higher activity in the bulk carrier segment and 8 fresh tanker orders. This week’s total newbuilding is up by 44% from similar week’s closing in 2010, when 25 fresh orders had been reported with bulk carriers, tankers and containers grasping 36%, 24% and 32% share respectively of the total ordering activity. In terms of invested capital, the total amount of money invested is estimated at region $1,16 billion with 58% of the total number of orders being reported at an undisclosed contract price. The most overweight segment appears to be the LNG market by grasping about 74,5% of the total invested capital this week.
“In the bulk carrier segment, a post-panamax order has been revealed by Archer Daniels Midland of USA for the placement of three 95,000 dwt units in Oshima shipbuilding of Japan for delivery in 2014 at a price of $36 mil each. The vessels are designed to reduce carbon emissions by 25% compared to today’s modern units.
In the tanker segment, new ordering business came to light in the crude market with the placement of new units in Korean yards. SK Shipping of South Korea has placed an order for three VLCCs of 319,000 dwt in Hyundai at an estimated price of region $100-$102 mil with delivery in 2013, while Geden Lines of Turkey has ordered three aframax units of 115,900 dwt in Samsung for delivery in 2013-2014.
In the gas market, Stena Bulk of Sweden is said to have ordered four LNG units with Daewoo and Samsung of South Korea at a total cost of $870 mil with delivery in 2014-2015. The two LNG units with gas capacity excess of 170,000 cu.m are estimated to cost $217-$220 mil each, while the other two of 160,000 cu.m are contracted at a price region of $215 mil each” concluded Golden Destiny.
from: Hellenic Shipping News Worldwide
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Ship owners newbuilding ordering appetite unabated; reliability and quality their main objectives By total
Published: 2011.10.24
Print EmailWith the current newbuildings orderbook at huge levels, ship owners could very well use the expertise of consulting and services companies, which know their way around ship yards and can provide valuable assistance in all stages of a newbuilding ordering
and taking delivery process. From negotiating with yards, to determining ship specifications to project management, companies like P&P Marine Consultants, which has built more than 50 vessels for various shipowners, often make the difference between failure and success.
In an interview with Hellenic Shipping News, Mr. Harilaos Petrakakos, Senior Naval Architect and Shipbuilding project leader with P&P, talks about the company’s services and projects, about ship owners’ mentality prior and after the crisis and offers a valuable insight in the shipbuilding business. Mr. Petrakakos has over 30 years of shipping experience. Since 1995 Mr. Petrakakos has been a partner in P&P Marine Consultants Inc and currently a Resident Consultant of P&P Marine Consultants in China. He was and is the Project Manager of various new building projects of diverse vessels from Chemical tankers and Floating Docks to Capesize Bulk carriers, VLCC tankers and LNG carriers.
First of all, could you let us know about P&P Marine’s core of activities and services offered?
P&P Marine Consultants Inc. was established in 1977 in New York in order to cover the need of qualitative services in the marine industry. The core activities of the company are New building Management & Supervision, Repair Management and Supervision, Claims Handling and Advanced Design Consultancy. Currently the company is the New Building Project Manager for Alpha Tankers & Freighters and AVIN International SA amongst others. Since our establishment we have built more than 50 vessels of diverse type and size and handled over than 600 claim cases and repairs with more than 100.000.000$ in adjusted claims. In addition our experienced team of Naval Architects offers services of design optimization (propeller optimization, design modifications, hydro analysis etc.) in order to provide our clients with the most efficient solutions for their vessels. The company has presence in Piraeus and Ningbo, China and also operates representative offices in Tuzla, Turkey, Durban, South Africa and New York, USA and can provide its extensive know how in any place in the world.
It must be mentioned that our company was a keynote speaker on “New Building Contract & Negotiations” in the 2nd Annual Shipping Finance China Summit, which was held in Shanghai in August 2011, and we are planning to present our tailored workshops on New Building Contract Negotiations and on Quality in Ship Building in future venues as well.
Since the crisis of late 2008 until today, the face of global shipping is safe to say has changed radically. Based on your experience how have ship owners reacted to the glut of the global orderbook?
One should go back to the onset of the 2008 crisis and examine what were the orders that followed. The owners brought the new orders to zero. That did not last long. As the market started improving so did the new orders.
Unfortunately I do not believe that the shipping world, and ship-owners mentality has changed as much as it needs to since the crisis. The old crisis is gone and a new one is looming.
So we now see that two major changes have taken place. The first one is how owners now look for reliability and quality (some owners always did look for quality) and the second one the new way of funding for their projects up non traditional lanes, an area where we are active in and assist our clients given our exposure in China.
Owners are unfortunately still overly optimistic, regardless of the reality of the influx of newbuildings in all large ship sizes. Owners and brokers still remember the good times a bit too vividly, which creates an illusion.
Traditionally the “good-reliable – shipping houses of old”, place orders to renew their fleet which consists mainly or solely of own built ships, irrespective of market conditions. But many smaller owners that somehow now had or have access to capital via private placement or through the capital markets are eager to place orders.
Brokers and analysts continue to show high growth rates for BRIC countries, and show 40-50% cancellations and delays to newbuild deliveries, pushing owners to believe the turning point is “just around the corner”. Parts of the industry is still influenced too heavily by day-to-day emotional changes, and not actually by logic and farsighted planning.
Which are you main clients?
One must say that our main clients are the shipowners of good reputation who care sincerely for high quality ships to be delivered from the Chinese or indeed the Korean shipyards. We have also insurance companies as our clients including P&I clubs of repute. As you have seen our scope of services is quite diverse and we pride ourselves to offer and deliver top class services in all the sectors we are involved.
Newbuilding ordering picked up pace lately, not as hot as 2010, as a result of lower pricing and aggressive marketing strategies by yards looking to fill up berths. Would you say that this trend is now coming to an end?
We do not believe the ordering activity will subside anytime soon, and is a strategy, which primarily China is implementing. China with the abundant labour force, which acquires skills primarily through the shipbuilding industry, has to keep the yards working. This has been evident by the placing of the VLCC orders by local – Chinese that is – owners. Apart from these orders in China the majority of orders is in the bulk carriers and containers sector. Korea has thus far successfully evolved into the high value projects. This is why we see the LNG orders heading to Korea rather then China. Japan is following but with labour getting older it seems to follow the route of the likes of the Northern European brethren, that is specialized ships and innovative designs.
We believe China will ramp up its strategy of assisting out its larger stated owned yards and state owned ship owners, to keep social unrest at bay and continue to strengthen its position of gaining control of their own freight needs.
We feel that newbuilding prices still have room to drop especially from the Chinese private shipyards. In the Government owned shipyards the new pricing will not necessarily be profitable. The key to go that way, is a few years ahead of us of aggressive pricing and limited losses while keeping everyone employed, is better for many yards and for their governments than seeing unemployment rise.
Moreover, many owners are cash rich or can find equity investor partners who are willing to see the long term savings. Newbuildings, although tie up cash reserves in a critical time like the present market, do offer great returns down the line given where secondhand prices are today.
The large orderbook in most segments of the shipping industry has caused many concerns and forced some owners to cancel orders. According to your experience how is this process conducted?
Firstly, we would like to point out that many of these cancellations are not cancellations in the first place. Some of what is reported cancelled is actually projects that never in fact materialized in the first place, or were options not exercised, and others were simply converted to different types or sizes of ships now showing up as new orders. Most cancellations have been in the smaller sizes, where both owners and yards are typically smaller and more likely to lose their funding and have to cancel. Some were only ships on speculation by the smaller shipyard owners who had to cancel the construction following the crisis of 2008 because of lack of buyers.
The process is governed by the shipbuilding contracts and can be summed up in very few words. The buyers see that the value of their order has at times been halved at post crisis valuations. The deposit – normally of 20% - represents a smaller loss rather then if the vessel was to be constructed.
The buyers approach through their broker or through companies such as ours – knowledgeable of the shipbuilding market – to negotiate the old contract.
The two parties then would typically lower the price in the absence of any other buyer.
After an order is cancelled, which is the usual approach from a shipyard?
The order cancellation is dictated by the shipbuilding contract.
If the owner wishes to cancel the contract, he will have to face the consequences stipulated there.
The shipyard may choose to continue building and at the end to place the vessel for sale and the proceeds to be applied towards the contract price. If buyers have given a corporate or bank guarantee for all the installments, the shipyard will try to call on this guarantees.
If the owners and the shipyard have a long term relationship, the approach from the shipyard would be to delay the construction in agreement with the buyers until a better market condition arrives. This is what we often see.
In the Chinese market, the government issued a stimulus program with which many government owned shipping companies took over where the foreign owners left , it may be an option that the shipyard and owners agree to change the type of vessel, which is evident in the post 2008 era.
How do you expect newbuilding ordering activity to shape up during 2012?
As mentioned already, we expect it to ramp up in China despite the fears for continuing global economic downturn and increasing strength of FEast currencies.
There is still a lot of room in the smaller bulker sizes for new orders, something many Chinese yards are starting to look at despite the lower margins. This is where we see China moving into more heavily next year. This is justified as with the crash in 2008, most infrastructure projects that were in the pipeline have been put on ice or cancelled, thus preventing many ports from being able to handle larger sizes, maintaining the global efficiency and need for the smaller sizes far longer into the future. Moreover, as with every economic downturn, new entrants always rise up to take advantage of opportunities, most of which are smaller scale and thus not able to support the larger size ships.
LNG and mega Containers will continue to dominate the Korean market as investors will try to enter. LNG is creating a lot of hype in the finance industry at the moment generating increasing interest, whereas on the Container side, many owners will play follow the leader and order mega containers just so they are not left behind by competition on economies of scale, despite the fundamentals pointing otherwise.
Is currency exchange rate a major factor when an owner is considering placing an order to a shipyard in Asia?
I will not say so. The orders are placed in USDollars – mainly – and the shipyards and their banks take up the currency risk.
So far we’ve seen many Hellenic ship owners preferring to return to shipyards in order to acquire modern vessels, instead of opting for second hand vessels. In your opinion why do owners adopt this approach?
As long as commodity prices remain high due to demand, and in turn keeping scrap prices high, and owners not willing to execute fire sales, the secondhand prices will remain high. The new buildings will on the other side, with aggressive shipbuilders lowering prices, attract owners, and keep their laborers working. You see, the yards have been spoiled to a certain degree and need to be kept fed.
Owners who were frugal and didn’t overextend themselves in the boom period, who have sufficient cash reserves, are in a position to have greater foresight and examine the benefits of the new buildings vs. secondhand, in this low market as opposed to the expected higher market down the road. Most traditional Hellenic owners have indeed followed this model, having been conservative and having exited the market timely.
With rules and regulations regarding shipping activity and transportation becoming increasingly complex, do you believe that maritime services companies can only grow?
We must stress that unlike the older times, the Hellenic Shipping offices are currently manned with educated and well-trained personnel. Our company and similar ones, are in need in special markets such as China and Korea in the new building sectors but also in the secondary stages of the ships lives that of the special surveys. As consultants we keep our staff well trained and accustomed in the new rules in order to be in a position to assist our clients worldwide.
from: Hellenic Shipping News Worldwide
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Ship owners invested $14.6 billion for second hand vessels since the start of 2011 By total
Published: 2011.10.21
Print EmailDespite the large number of vessels changing hand since the start of the year, investment activity in the shipping market is lower than the past year, amid a challenging financing environment and the global economic uncertainty. According to a report from Piraeus-based shipbroker Golden Destiny, secondhand purchases of ships fell 27 percent in the third quarter, compared to the previous quarter, while a decline of 24% was noted in the newbuilding ordering activity, while an additional 23 vessels were sold for scrap. “Overall, 840 vessels of total deadweight around 40million tons changed hands, 1305 vessels of 78million tons ordered and 640 vessels of 29million tons scrapped, during the period January – September of the year. The enormous newbuilding tonnage under construction for delivery in the forthcoming two years jeopardizes the prosperity of shipping players, as the deadweight sent for disposal is only 37% of the total deadweight ordered” said Golden Destiny.
In terms of the presence of Hellenic ship owners, the third quarter of the year ended with weaker investment plans in the secondhand market by Greek shipping players, showing a 24% quarterly decline in terms of vessel acquisitions, due to 42% and 31% downward revision in bulk carriers and tanker purchases. “The expectations for a firmer Hellenic buying activity, from the positive upturn seen in the second quarter of the year, were not confirmed. Hellenic owners increased their buying interest only in the container market by 57% from the previous quarter concluding 11 more vessel purchases. Overall, 125 vessels reported to have gone to Greek hands at a total invested capital of more than $3,1 billion, 7 transactions reported at an undisclosed sale price, posting a 44% decline from the period January – September 2010, when Hellenic players have invested more than $7,4 billion for 222 vessel acquisitions” said Golden Destiny.
Bulk carriers are in the first rankings of Hellenic appetite, by grasping 41% of their total secondhand ship purchasing activity, tankers follow with 27% and containers 22%.
It is difficult to foresee if the investment plans of Hellenic owners will rebound in the fourth quarter. It seems that Hellenic players have lost some of their confidence in the positive outlook of the traditional main shipping segments, bulk carriers, tankers and containers. Their cautiousness could be justified by 54% lower purchases in the bulk carrier, 40% in the tanker and 33% in the container segments from their level of buying activity in January – September 2010.
However, Hellenic owners are still outpacing Chinese purchasing plans due to stronger appetite in the tanker and container market with 27 and 25 respectively more vessel acquisitions. Chinese have bought 97 vessels during January-September 2011 at a total invested capital of more than $1 billion, which implies that their interest is still being centered on more vintage tonnage. Their volume of buying activity is down by 22.5% from the Hellenic buying momentum, but 65% lower from the total invested capital of Greek owners in the shipping market. What is noteworthy is the invested capital of Chinese in the purchasing of bulk carriers, which is region $660 million for 58 total vessel acquisitions in contrast with region $1,37 billion for 51 vessel purchases by Hellenic owners.
Golden Destiny went on to mention that “bulk carriers and tankers appear in the first rankings as the most popular purchase candidates in the secondhand market, with liners and containers to follow and asset prices signaling sharp reductions for larger vessel sizes, especially in the tanker market for crude carriers. Despite a 17% decline in the S&P momentum for bulk carriers during the third quarter, they are still holding the lion share of secondhand ship purchasing activity by grasping 34% share of the total number of vessels changed hands. Overall, 284 bulk carriers reported sold at a total invested capital of more than $5 billion, down by 26% from January-September 2010. It is worth emphasizing that the secondhand ship purchasing activity showed a sharper quarterly decline for the other two main vessel segments, 34% for tankers and 40% for liners.
In the tanker market, 229 vessels have been reported sold, down by 17% from January-September 2010, with the purchasing interest in the crude market being downsized from the dark outlook that looms in the charter market.
In the container market, vessel acquisitions were in a downward trend from the start up of the year with newbuildings being more appealing investment types, but during the third quarter of the year there has been a shift towards more vessel purchases and less ordering. During July – September 2011, the newbuilding activity for boxship units posted a 42% decline from the previous quarter in contrast with a 32% rise in the purchasing of secondhand units. During January-September 2011, 78 container vessels reported sold at a total invested capital of more than $2,1 billion, down by 43% from January – September 2010.
Under the current distressed shipping environment and the worldwide economic turmoil, there are still investment opportunities at attractive asset prices, in the dry and wet market, which support the high volume of invested capital in the secondhand market. Smaller and modern size units seem flexible and profitable types of investments in today’s instability of freight markets for larger size units and the tight financial credit status of many European banks. We still maintain our position that secondhand investments seem to hold lesser risk of exposure than newbuildings, with bulk carriers and tankers being more popular candidates in the secondhand rather in the newbuilding market” concluded Golden Destiny.
from: Hellenic Shipping News WorldwideView Comments(0)
Newbuilding orders pick up as a result of increased demand in the dry bulk sector By total
Published: 2011.10.19
Print EmailAppetite for dry bulk carriers has resurfaced as a result of the latest upward trend of the freight market, prompting ship owners to head back to shipyards in order to negotiate more newbuilding orders. According to the latest report from Clarksons, there were further reports of contracting again this week – and although demand levels have certainly diminished post summer break, the dry sector continues to keep the market ticking over.
“In Korea – the Big 3 remain in a holding pattern. Having had a relatively active year to date – 2013 and in some cases 2014 capacity has been filled, and this in turn has alleviated the immediate pressure for yards to continue to push the market. With a number of outstanding options still pending, particularly for labour intensive asset classes such as LNG, we will need to wait until the year end before having a clear picture as to how capacity at the major yards will look going forward.
The situation in China remains much the same as we have discussed over the previous weeks and appetite for new business shows no signs of relenting from both State and Private yards. With Dry continuing to remain the key focus – there is certainly an opportunity for owners to take advantage of competitive pricing from top tier Chinese yards and there is still a great deal of pressure in China, for yards to commit a large chunk of vacant 2013 capacity.
As to whether we have finally arrived at a clear bottom of the market - not an easy question to answer. From a shipyard perspective, this answer can be considered on two levels – Firstly, as we are seeing with the state yards in China, it is perhaps productivity that remains more critical than profitability and this is translating into some competitively priced opportunities. However, this is against what is becoming an increasingly strained environment for yards in terms of their input costs – and the last time the dry market exhibited similar asset values, major input costs such as steel, were at almost 50% of present value.
Therefore, certainly questions over how sustainable existing asset pricing will be from the quality shipyards in both China and Korea, but also clear opportunities for owners prepared to make a move and take advantage of the current dynamic!” concluded Clarksons in its report.
In a separate report, Piraeus-based shipbroker Golden Destiny said that the past week ended with newbuilding business showing lower levels of contracting activity from previous week’s high levels of 51 new orders. Offshore vessels have been the most popular newbuilding investments with bulk carriers posting a 79% week-on-week decline of ordering volume, no emerged deals in the container market and fresh activity in the LPG segment. Overall, the week closed with 16 fresh orders reported worldwide at a total deadweight of 181,850 tons, posting a 68.6 % week-on-week decline. “This week’s total newbuilding business is in close parity with similar week’s closing in 2010, when 17 fresh orders had been reported with bulk carriers grasping 41% share respectively of the total ordering activity. In terms of invested capital, the total amount of money invested is estimated at region $405 mil with 69% of the total number of orders being reported at an undisclosed contract price. The offshore units along with LPG carriers seem to have attracted most of the invested capital.
In the bulk carrier segment, an order has been emerged by the Turkish player, Ciner Group, for the construction of a new fuel efficient design at China’s Sinopacific Shipbuilding, constructed at the group’s Dayang facility. The Turkish group has said that it has signed a contract for four 63,000 dwt bulker, but the yard suggests that the deal includes an option for two more units. No prices has been revealed, but market sources suggest that the vessels, which are a new Crown 63 design, are costing below $30 mil each with first delivery in August 2012. Furthermore, one order came to light for an ordering spree of 10 76,000dwt panama bulkers by Chinese coal shipper Guangdong Lanhai Shipping in Chinese Zhoushan based Yangfan Group, but it is not a fresh order as a source close to the deal confirms that the contract has been booked during the first half of this year.
In the tanker segment, one more MR order came to light by East Med of Greece for two 52,000dwt product tankers in SPP Shipbuilding of South Korea at a price of $35,5 mil each for delivery in 2012, with an option for two more units. In the gas market, there was finally some ordering activity in the LPG segment with Pertamina of Indonesia confirming an order for one 84,000 cu.m unit in Hyundai at a price of $79,5mil with delivery in 2013, while KSS line of South Korea is said to have signed a contract with a South Korean yard for the construction of a 35,000 cu.m unit at a price of $49 mil with a long term charter to Mitsui & Co. In the offshore sector, the activity grasped this week’s lion share of newbuilding unit with 8 units reported to have been ordered, 62.5% of the volume being contracted for platform supply vessels” concluded Golden Destiny.
from: Hellenic Shipping News Worldwide
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