|
|
|
|
|
|
 News |
|
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
View Comments(0)
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
View Comments(0)
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
View Comments(0)
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
View Comments(0)
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 View Comments(0)
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
View Comments(0)
Tanker fleet’s additional supply set to hurt earnings through to 2012 By total Published: 2011.10.18 Print EmailTanker market conditions aren’t expected to alter significantly in the coming months, thus leaving no room for respite for tanker owners, struck by rising operating costs and tonnage oversupply. According to a recent report from BIMCO, the tanker fleet is expected to grow by 7.6% in 2011, , adding continued supply pressure on the market. Fleet growth should come down to 7.0% in 2012 but has no material effect unless cargo volumes grow significantly. Four months ago it seemed as if 2012 was to surpass 2011 in terms of crude tanker deliveries. But things have turned around now and more near-term supply-side pressure than originally forecasted is now in the making for crude tankers.
In its report, the organization said that “the peak month of the Hurricane season, September, has passed with little effect on freight rates. Hurricane Irene proved to be the only one causing a commotion in the shipping industry, being an Atlantic Hurricane that did nothing to the offshore oil installations in the Gulf of Mexico.
BIMCO expects that freight rates in all crude and product tanker segments will stay at unexciting levels as demand continues to soften and supply is set to move on” it said.
Meanwhile, it mentioned that crude oil VLCC floating storage currently employs a bit more that 20 vessels on a flat development in 2011, which leaves room for improvement. But as long as the forward curve on crude oil prices remains in backwardation, as has been the case for most of 2011, the incentive to use VLCC for floating storage is low. “Moreover, the economic conditions in the large oil consuming regions in the Western hemisphere leaves oil demand growth in that part of the world negative or flat at best. That means present and near-term future oil demand is short-haul demand and not what the tanker sector needs. An example of this is the fact that US seaborne crude oil imports have been south of 5 year-average since February, with a likely seasonal slowdown in coming months.
Despite the initiatives to lower active fleet efficiency by slow-steaming and the like, BIMCO still roughly estimates the level of VLCCs that would need to be made idle is in the range of 40-50 for overall crude oil tanker freight rates to return to a sustainable level from the present doldrums. The trouble is, however, that the Winter market is getting too close now and owners are unlikely to dare missing out on potential exciting fixtures related to a Winter spike. Without the prospect of idling or laying up vessels in coming months, the adjacent downside to non-action is a continuing of the present poor earnings” concluded the analysis.
As far as the market performance of the previous week, London-based shipbroker mentioned that it was “a repeat poor performance for VLCCs in the Middle East Gulf, but this week the salt has been firmly rubbed into Owners' wounds as the Atlantic took a turn for the better, posting rates far and away higher than those available here. If the Atlantic maintains the gain, then some will go bounty hunting, and that may lead to some re-balancing in the medium term. Rates, for now, remain in the very low WS 40’s East and down to WS 32.5 for the West. Suezmaxes started slowly, but picked up some pace by the weeks end, and rates to the East pushed towards 130,000 by WS 85, though West levels remained at around WS 50 with plenty of keen players remaining for that direction. Same as, same as, for aframaxes with only slack interest keeping rates pegged at 80,000 by WS 95 for Singapore, and little early change anticipated” GIBSON said.
It went to mention that “West Africa suezmax drums started to beat in earnest, as Owners initially took heart from better news in the Mediterranean, and then wallowed in a glut of concentrated enquiry that allowed for rates to spike above 130,000 by WS 90 for all options, with WS 100 threatened for European destinations. VLCCs on those positions then enjoyed more co-load attention, and tight availability allowed the market to rise to 260,000 by WS 65 for US Gulf, with over WS 50 now called for Eastern movements. Eventually, ballasters from the soggy Middle East will dilute the scene, but for now things should hold.
The Mediterranean saw the catalyst for the general improvement, and that was the news that new Bosphoros traffic regulations were in place that would quickly lead to heavier delays. The delays didn’t actually have to happen of course for the sentiment to get carried away - and it did! Aframaxes jumped sharply to 80,000 by WS 160 cross-Mediterranean, with the rumour factory machining even higher values. Suezmaxes inflated to 135,000 by WS 100ish from the Black Sea to Europe with up to WS 95 paid for an East Mediterranean to the States run. No retreat in the short term, though perhaps consolidation, rather than further glory.
Aframaxes in the Caribbean spent most of the week looking wistfully across the pond, and some threatened to ballast accordingly. Eventually rates moved up a notch to 70,000 by WS 95 upcoast, with some more points on the cards, but a rate spike looks unlikely. VLCCs saw less action, but the better news from West Africa hardened sentiment, and rate demands moved back above USD 3 million for Singapore.
North Sea aframaxes relied upon events to the south for leverage, rather than any particular home-grown excuse. A slow catch-up game is underway, however, and rates have moved to 80,000 by WS 110 cross U.K. Continent and 100,000 by WS 85 from the Baltic with some more to come - maybe. Suezmaxes saw little attention, but sights were raised by events elsewhere, and as high as 135,000 by WS 107.5 was seen for a short-ish movement to the U.S. Atlantic Coast. 'arb' rates for VLCCs to Singapore operated below the market with USD 2.8 million theoretically on offer. Owners ideas pushed more towards USD 3.25 million, and the result was little, or nothing, being concluded” concluded GIBSON.
from: Hellenic Shipping News Worldwide
View Comments(0)
A snapshot on the economic and shipping environment By total Published: 2011.10.17 Print EmailThe Franco-Belgian lender Dexia disrupted last week the financial markets with fears for a rapid contagion of eurozone debt crisis. The week opened with European leaders laying out plans to strengthen region’s banks and upcoming news for Dexia’s nationalization.
Brussels will pay €4bn to take over Dexia Bank Belgium, which includes a large retail bank in a group that is otherwise focused on lending to local governments, along with state guarantees worth €90bn ($120bn) to finance the rest of the group.
The week ended with one more downgrade in the eurozone with S&P cutting Spain’s sovereign debt rating by one notch from douple A to douple A minus, holding a negative outlook on the country due to slowing growth, high unemployment, high level of debt and weakening financial system. S&P highlighted the financial profile of the Spanish banking system expressing concerns for the future solidness of the country’s banking system as it foresees that Spain’s banks will continue to accumulate problematic assets into 2012 with access to market funding being scarce and expensive. Observers have also noted that Spain is unlikely to meet its budgetary targets for this year for cutting the deficit to GDP ratio from 11.1% last year to 9.2% this year and 4.4% next year amid the slowing eurozone economic growth.
France and Germany, the two leading countries of the eurozone, have recognized that the sovereign debt crisis is spreading with signs for further infection, while they appear determined to reach an agreement by the end of October on a comprehensive package of measures to stabilize the eurozone, including the recapitalization of European banks. France is keen to use the euro zone’s 400 billion rescue fund, the European Financial Stability Facility, to recapitalize its own banks, whereas Berlin insists that the Fund should be used as last alternative. European Commission President Jose Manuel Barosso, speaking before the European Parliament in Strasbourg, said that banks would be required firstly to seek private sources of capital with national governments providing support, if necessary, and if support is unavailable then recapitalization could be funded by loans from the European Financial Stability Facility. The International Monetary Fund (IMF) estimates that the European banks need 200 billion euros in additional funds to withstand the sovereign debt crisis and secure their cash liquidity.
Furthermore, in one more attempt to reinforce the banking system, global banking regulators will push banks to hold more liquid assets and restrain the industry’s reliance on short-term funding, despite complaints that the rule changes could damage the broader economy, according to the new chairman of the Basel Committee on Banking Supervision. In his first interview in the Financial Times, he said that the Basel group plans to put uniform implementation of the Basel III reforms at the top of its agenda.
That deal, which was struck last year by the 27 member countries, will force banks to hold more top quality capital against unexpected losses, but there are rising concerns that some countries will not stick to the agreement. Leading European banks say they would rather sell assets than raise expensive new capital to meet compulsory demands from the European Union for higher capital ratios, threatening a further contraction of credit in the eurozone economy.
In Greece, following lengthy negotiations with international lenders the vital aid of the next installment of country’s EUR 110 billion bailout has been finally secured to be paid in early November. The European Commission, the European Central Bank and the International Monetary Fund completed their fifth review of Greece and agreed on the economic and financial policies needed to bring the government’s economic program back on track. The officials said that they believe Greece will be able to meet its 2011-2012 fiscal targets, but the recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards. In the meantime, a lot of discussion has been emerged on the hair cut of Greek debt. In July, private holders of Greek bonds were asked to take an average haircut, or
writedown, on their holdings of 21%, while now a group of countries led by German asks for a bigger haircut of 50%-60%. However, this haircut seems unlikely with the European Central Bank saying that attempts to involve private investor may put at risk the financial stability of the currency area as a whole.
The ongoing economic turmoil has already damaged the growth of Chinese trade as Europe and U.S. are the most important trading partners of the country. China’s trade surplus narrowed for a second straight month in September to $14,5 billion with both imports and exports being lower than expected.
September’s trade surplus was smaller than Augusts’ surplus of $17,8 billion and less than half of the $31,5 billion recorded in July. Exports increased 17.1% overall in September from a year earlier, down from a 24.5% increase in August, according to data released by Chinese customs. The slowdown was stronger in Chinese trade with Europe, as exports showed only a 9.8% rise in September from the last year, compared with a 22.3% rise in August. Chinese imports also slowed down as they increased by 20.9% from a year earlier, compared with a 30.2% rise in August. Overall, Chinese economy is under the threat of eurozone contagion as there are signs for a further significant slowdown in trade. According to National Bureau of Statistics, China's economic growth, which has averaged around 10% for a decade, slowed to 9.6 % annually in the first half of 2011. In the second quarter, its GDP rose 9.5 percent, a dip from the 9.7 percent growth in the first quarter. The Chinese Academy of Social Sciences,
a major government think tank, forecasts China's gross domestic product will grow 9.2% in 2012 on condition that the domestic and international environments will not worsen.
SHIPPING MARKET
On ongoing fears for a significant slowdown in the worldwide trade from the economic recession, HSBC said in its latest quarterly Trade Connections Report that Asia’s trade will almost double by 2025 as a key driver of the world trade growth despite current economic headwinds. Asia’s trade volume will grow 96% to nearly $14 trillion by 2025, recording annual year-on-year growth of 4.8% versus an estimated of 3.8% for global trade. By 2025, world trade is expected to increase 73% from the current level, driven mainly by India, Vietnam, Indonesia and China. However, the report noted a dip in confidence among Asian importers and exporters about the trade outlook for the next 6 months, with 41% expecting the global economy to decline.
In the dry market, the positive sentiment persists with significant gains in the panamax and capesize segment as charter rates are hovering at the highest levels from the start up of the year, while the BDI keeps its constant rally standing above 2,000 points level. Capesize and panamax earnings are up by ..% and % respectively from the lowest level of this year, when capesizes were earning $4,567/day on February 28th and panamaxes $10,372/day on February 2nd. Global grain and coal demand remains strong favoring smaller vessel sizes, supramaxes and handysizes, whereas there are still expectations for further surge in Chinese thermal coal demand. The recent upturn of the market from the end of July seems to stabilize with the global demand for dry commodities showing signs of firm demand. However, the dry bulk shipping market is still being hunted by oversupply and there is some market disbelief for a rebalance earlier than the end of 2012 / early 2013.
The capesize segment is being supported from strong congestion at major Australian and Brazilian ports, around 90 vessels are calculated to be anchored, whereas panamax earnings from strong Chinese thermal coal fixtures due to extremely low coal port stockpiles at Qinhuangdao from the recent maintenance in China’s coal dedicated Daqin Railway. Chinese iron ore port stockpiles have declined from the previous week, but are still high. According to Commodore Research, approximately 92.4 million tons of iron ore are currently stockpiled at Chinese ports, 700,000 tons less than a week ago.
The amount of iron ore stockpiles threatens the recovery of the capesize segment with worries for one more slowdown in the fourth quarter of the year.
Strong iron ore and coal imports from China are the one of the main beneficiary factors for the recent buoyed dry sentiment. According to data from China’s customs authority, China imported 60,57 million tonnes of iron ore in September, the highest monthly volume since January, up 2.5% from August. Over the first three quarters of the year, Chinese iron ore imports sum up to 508 million tonnes, 11% more compared with the same period last year. Despite the increase, Chinese traders remain pessimistic about their prospects in the coming months due to economic uncertainties and tight domestic credit. In terms of coal imports, China’s imports for the first nine months of the year reached 120 million tonnes, up 1.9% from last year, whereas imports on September are estimated to be at 15,6 million tonnes, down by 5.97% from 16,59 million tonnes recorded in August and much lower than traders’ expectations of some 20 million tonnes.
The index closed today at 2,173 points, up by 8.6% from last week’s closing and down by 21.3% from a similar week closing in 2010 when it was 2,762 points. The index has reached once more its highest level of this year standing 108.3% up from the lowest level of 1,043 points on February 4th. The highest rate increase has been in the capesize segment, BCI up 11.4% w-o-w, BPI up 8.9% w-o-w, BSI up 3.9% w-o-w, BHSI up 6.2% w-o-w.
Capesizes are currently earning $31,329/day, an increase of $3,453/day from a week ago, while panamaxes are earning $16,702/day, an increase of $1,376/day. At similar week in 2010, capesizes were earning $45,279/day, while panamaxes were earning $18,143/day. Supramaxes are trading at 47% lower levels than capesizes by earning $16,671/day, up by $643/day from last week’s closing, but are 0.1% lower than panamax earnings. At similar week in 2010, supramaxes were getting $19,425/day, hovering at discounted levels from capesize earnings and 7% above panamax earnings. Handysizes are trading at $ 11,911/day; up by $641/day from last week, when at similar week in 2010 were earning $14,533/day.
In the wet market, crude freight outlook is still dark from the oversupply of vessels and the slowing growth of oil demand with average earnings for very large crude carriers on the benchmark Middle East Gulf to Japan route being at record lows. The prospects for the crude market remain bleak for the rest of the year with limited hopes for a recovery in 2012, while the slide in VLCC values continues and owners seem to be in middle of the decision of either sending their overaged VLCC units to the scrap yards or starting the laying up or applying the slow steaming policy to ease the oversupply pressure.
The International Energy Agency in its monthly oil Market Report cut its forecast for global oil demand for a second month as the economic recovery loses momentum. The Paris-based organization reduced its estimates for world demand for next year by 210,000 barrels a day, to 90.5 million a day, which means that consumption will increase by 1.3 million barrels a day, or 1.4 percent, from this year. The IEA said that “there is still robust growth but it’s being affected by this economic slowdown. Global oil demand has grown at a moderate, but stable pace in recent months. The picture could deteriorate, however, with a downward spiral in economic prospects”. This year world oil demand will increase by 1 million barrels a day, or 1.1 percent, to 89.2 million a day, following a downward revision of 50,000 barrels, according to the agency.
The downward revision of global oil demand distress further the financial status of tanker operators, who are already facing serious glut of ships that drives them in a constant slide down of freight rates, below vessel’s operating expenses. The dreadful economic conditions in U.S. and Europe narrows the opportunities for a fast recovery of oil demand that could match the available list of tankers seeking a profitable charter deal. Additionally, the crude demand has also slowed in China and India with signs of growth in Japan due to need for oil-fired power from the earthquake crisis. As per data from the International Energy Agency, China’s oil demand grew 5.8% month-on-month in August, down by 6.6% from July’s demand, while Indian oil demand rose by 2.7% in August, which is slightly slower than the
2.9% increase in July. In contrast, Japan’s oil demand rose 4% year-on-year in August, underpinned by power generation.
According to the chief executive officer of the largest U.S. listed tanker owner, Teekay Group, tanker market is bottoming and demand for oil tankers will match supply by the Northern Hemisphere’s next winter, lifting charter rates for the vessels. He added that the smaller-sized oil tankers, which dominate Teekay’s fleet, will recover before larger carriers. The combination of too many ships and the slow pace of oil demand growth could lead to about 6% of laid up fleet in a year, according to a Bloomberg survey of eight brokers and analysts.
In the gas market, the massive earthquake and tsunami in Japan continues to build LNG imports to replace nuclear power loss with forecasts that Japanese utilities will need to charter in as many as 15 extra LNG carriers in the coming couple of years. Chubu Electric Power, Japan’s third biggest power firm is said to be in discussions with suppliers to secure an additional 800,000 tonnes of LNG in the six months to March 2012. The company is planning to use a total of 13million tones of LNG in 2011/2012, up from a pre-earthquake estimate of 8,4 million tones. The prospects for a stable strong Japan LNG demand are high since the country’s nuclear power outlook remains unclear with just 10 of Japan’s 54 reactors operating. The full restart of Japan’s nuclear power utilities is highly dependent on the radiation risks due to the controversy that was created from the burst of nuclear power crisis.
A strategic partnership came to light this week in the LNG segment. Teekay's LNG subsidiary, Teekay LNG, has announced its joint venture with Japanese trading house Marubeni to acquire eight owned and partially owned LNG carriers from Maersk. Teekay and Marubeni JV acquired a 100% interest in six modern LNG carriers and a 26% interest in two additional LNG carriers for a total consideration of $1.4 billion, the transaction is expected to close in early 2012. Five of the carriers currently operate on longterm contracts (17-year average duration) and three of them are on short-term contracts.
In the container market, rates are unchanged from last week due to Chinese holidays with the
Shanghai Container Freight index standing at 973 points and the momentum being negative from previous weeks’ falling freight rates. The weak freight environment exposes major container operators at a high risk due to their massive expensive newbuilding programs for new vessel deliveries in the next two years. According to Alphaliner estimates, owners have added $27 billion of new containership orders (for 2,4 Mteu) to the remaining pipeline of $30 billion (for 2,1 Mteu) that was committed prior the collapse of Lehman Brothers on September 2008. The new vessel capital expenditures commitments of nineteen of the largest carriers amount to over $33 billion. Among the top-20 carriers, only two Japanese shipping lines, MOL and NYK, do not have any outstanding new vessel commitments. Yasumi
Kudo, president of NYK, has stated that the company shall not endeavor to compete with other shipping companies on the basis of the containership fleet size, but will try to stay ahead by focusing on cargo collection capacity and volumes.
APM-Maersk is said to have the largest capex commitment, estimated at $6,5 billion due to its 20 Triple-E class 18,000 TEU orders, at a total cost of $3,8 billion in total, $190mil each unit, with option for ten additional units. It is worth clarifying that last week’s rumors for CMA-CGM being in talks with Chinese yards to build up to 20 boxship units of 9,000-10,000 TEUs, have been denied by the company reassuring that it no short-term plans for new purchases or charter-ins, and is focused on reducing its debt load over the near-term as the freight rate environment remains weak In the shipping finance, ABN AMRO is looking to expand its business by picking up shipping loan portfolios or rival banks. A senior ABN AMRO official, Joep Gorgels, head transportation West-Europe, said in Reuters: "We have a clear strategy that we want to grow in this market, we are thinking anticyclical here". "We are looking at buying loan portfolios in shipping and offshore," he added on the sidelines of a Capital Link shipping conference in London. Gorgels said lending conditions to the ship industry remained tough. "At the moment we are at the lowest point of ship finance available in general to the shipping industry," he said. "The typical shipping banks are deleveraging, are recapitalizing."
European bank lending has dwindled with DNB NOR Bank ASA expressing its pessimism for any prompt rebound on the ongoing eurozone debt crisis. Kjartan Bru, senior vice president of shipping, offshore and logistics at Oslo-based DnB NOR, said by telephone interview in Bloomberg that shipfinance deals fell to “slightly over” 20 in the third quarter from almost 60 in the second quarter, while rising costs for European lenders to borrow dollars and an interbank market that's “not functioning,” are curbing the region's banks' ability to fund ship owners. “
Under the tough lending conditions, Star Bulk Carriers Corp., announced this week that it has entered into a new $64.5 million secured term loan agreement with HSH Nordbank, which has up to a five year term with interest at LIBOR plus a margin. The borrowings under this new loan agreement together with $5.3 million in cash were used to repay in full the Company's two existing loan facilities with Piraeus Bank as agent and lender, respectively. Furthermore, Hanjin Shipping of South Korea has sealed $80.5m of shipbuilding financing for its new ordered capesize bulkers for delivery at the end of 2012 in a syndicate loan Korea Finance Corporation and DVB Bank.
Source: Maria Bertzeletou – Golden Destiny S.A Research Department
View Comments(0)
Ship Lines Delay Asia-U.S. Rates Plan on Unpredictable Cargo By total Published: 2011.10.13 Print EmailContainer-shipping lines delayed announcing targets for next year’s rates on Asia-U.S. routes as they struggle to forecast volumes amid unsteady economic growth and an expanding global fleet.“No one is able to predict even the near-term outlook,” Brian Conrad, executive administrator at the Transpacific Stabilization Agreement, a group of 15 container lines, said yesterday in Shenzhen, China. Publication of the TSA’s annual rates guidelines, which usually happens around this month, may be delayed until early next year, he said.
The delay reflects U.S. retailers’ unwillingness to commitment to orders for Asian-made toys, flat-screen TVs and sneakers amid a 9 percent jobless rate and stock-market fluctuations. An increase in the number of container vessels in service this year has also hindered shipping lines’ efforts to secure higher rates.
“It’s very, very difficult to look far ahead,” said Rolf Habben-Jansen, chief executive officer of Damco, the freight- forwarding arm of AP Moeller-Maersk A/S, the world’s largest container-shipping line. “The economic news is not consistent, and there is a lot of nervousness in the market.”
The container rates squeeze and concerns about the outlook has contributed to a Copenhagen, Denmark-based Maersk losing about 30 percent of its market value this year. China Shipping Container Lines Co. has fallen 60 percent in Hong Kong, while Evergreen Marine Corp. has tumbled 43 percent in Taipei.
China Shipping Container rose 5.4 percent to HK$1.37 today. Evergreen fell 1 percent to NT$15.65.Lower Surcharges Less-than-expected demand and excess capacity meant shipping lines were generally forced to levy lower peak-season surcharges this year than in 2010, Habben-Jansen said at the Journal of Commerce’s TPM Asia Conference. Maersk, China Cosco Holdings Co. and other TSA members delayed the introduction of suggested levies of $400 per forty-foot box to August from June.
The TSA, which has limited antitrust protection, publishes voluntary guidelines for annual rates negotiations each year, including targeted increases and peak-season surcharges. Contracts generally start about May.
Cargo Guess
By this time of year, the group can usually predict what shipping for Christmas and the Lunar New Year will be like, Conrad said. That’s not possible this year as many companies are making last-minute orders, he said.
“Even now, some of them are not sure how much they are going to ship,” he said. “It’s a real guess, which is new this year.”
The later ordering means that October volumes are “reasonably strong,” with shipments about the same as September, Habben-Jansen said. Customers are also more prepared to hold off on shipments as they are less concerned about finding space on ships, he said.
Sears Holdings Corp., the operator of more than 4,000 stories in the U.S. and Canada, expects international shipments for this year’s Christmas holidays to be in line with last year, said Richard Smith, its transportation vice president. The retailer may take advantage of the greater shipping flexibility to place more orders if needed, he said.
U.S. “demand is picking up as we are getting closer to the end of the year,” said Rodolphe Saade, executive officer at CMA CGM SA, the world’s third-largest container line. “Europe is down, but the U.S. is picking up.”
U.S. Consumers
Retail sales in the U.S. probably increased 0.7 percent in September, the fastest pace in six months, according to the median of 69 forecasts in a Bloomberg News survey ahead of Commerce Department figures on Oct. 14. Shops’ inventories in July were at the lowest level for that month since the department began compiling data in 1992. August figures are yet to be released.
Inbound shipments at U.S. container ports may rise 9.5 percent this month and 8 percent in November after shops delayed orders earlier in the year, according to the National Retail Federation. The Washington-based trade group was expecting a 12 percent increase for last month, the first gain this year, according to a Sept. 19 statement.
Still, the container-shipping industry will probably lose money this year because overcapacity will offset an expected 7 percent increase in global volumes, London-based Drewry Shipping Consultants Ltd. said Oct. 10.
The losses will force container lines to mothball ships, Saade said. Marseilles-based CMA CGM will park some vessels in early 2012, he said without giving more details. The global container-shipping fleet comprised 5,066 vessels at the start of September, up from 4,964 at the beginning of the year, according to data from shipbroker Clarkson Plc.
“Many carriers can’t afford to keep losing money the way they are,” Saade said. “Small players with no big ships will not be able to sustain this.”
Source: Bloomberg
View Comments(0)
|
|
|
086-10-67093780
086-10-67159635
E-mail: 
Sorry, your account does not have access to post comments!