Total Shipping Co., Ltd

Ore Cargoes Lift Dry-Bulk Shipping Costs to Highest in a Year
By total
Published: 2011.08.25

The cost to hire capesize vessels that haul iron ore and coal climbed for an 11th consecutive day to the highest level this year as increased shipments pushed earningsfor some cargoes over $40,000 a day.
Average daily capesize rents rose 5.6 percent to $19,010, the most since Dec. 24 and more than double levels at the start of the month, according to the London-based Baltic Exchange, which tracks freight costs on 29 dry-cargo routes.
The Baltic Dry Index, a broader measure of commodity costs, gained 2.4 percent to 1,602 points.
Rents for the ships that account for 40 percent of dry-bulk fleet capacity have rallied this month as higher commodity exports helped relieve a vessel glut. The surplus caused average rents to plunge to the lowest level since 2002 over the year’s first two quarters.
Trading in forward freight agreements, used to bet on or hedge the cost of shipping dry-bulk commodities by sea, suggest rates may be peaking, Frode Morkedal, an analyst at Oslo-based RS Platou Markets AS, wrote in an e-mailed report.
October-to-December capesize contracts were trading lower for the first time in 12 sessions, after gaining 16 percent over the last week, according to data compiled by Clarkson Securities Ltd., the freight derivatives unit of the world’s largest shipbroker.
The contract was trading at $14,575 a day by 3:47 p.m. in London, down from yesterday’s closing price of $14,700 a day.
“The paper market is yet to signal the sustainability of this rally and questions remain on its strength,” Morkedal said.
Still, voyages for capesize vessels booked for loading from ports in the Atlantic region may have secured rates equating to $43,500 daily, the Baltic Exchange said in a daily report to members yesterday.
Cargoes from mining companies are increasing because iron ore produced in China costs more for the first time this year than imports of the steelmaking raw material from Australia and China, Omar Notka, an analyst with Dahlman Rose & Co. in New York, said Aug. 17. He forecast rents will rise as high as $33,000 daily.
The cost to hire panamax vessels, the largest to transit the Panama Canal, gained 0.9 percent to $13,281, according to the Baltic Exchange. Supramax vessels, about 25 percent smaller, were up 0.7 percent to $14,412 a day. Daily rates for handysize ships, the smallest tracked by the gauge, rose 0.7 percent to $9,765.

Source : Bloomberg

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Baltic index at near 5-month high, demand firm
By total
Published: 2011.08.24

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The Baltic Exchange's main sea freight index , which tracks rates to ship dry commodities, rose to its highest in nearly five months on Tuesday driven by further iron ore cargo

bookings to China on the larger capesize vessels.
Nevertheless, brokers said growing world financial turmoil, tighter bank financing and rapid fleet growth would keep dry bulk freight rates under pressure in the coming months.
The overall index rose 3.3 percent or 50 points to 1,565 points, up for the 10th straight session and at its highest since the end of March. It has risen over 23 percent since first moving higher on Aug. 10.
"We had been expecting a correction in the second half of this year -- recent rises have been very strong, and the market seems to have tightened," said Will Fray, senior analyst with consultants MSI.
"It's likely to be related to a short-term, localised, squeeze on cape tonnage."
Brokers said firm iron ore cargo bookings to China from Australia and Brazil, together with support from freight derivatives contract buying, had bolstered rates over the past week.
"A 40 percent increase in the Baltic capesize average since last Tuesday has brought new life to the dry bulk market. Rates have not been stronger since January," said broker Lorentzen & Stemoco.
"Front-haul capesize rates have improved with higher demand for iron ore shipments from mining companies coupled with relatively fewer vessels available in the Atlantic, giving owners leverage to push rates higher."
Earlier this month the index dropped to its lowest in more than three months after falling for 18 consecutive sessions. It has remained erratic and has declined nearly 8 percent this year.
The Baltic's capesize index rose 5.25 percent on Tuesday, with average daily earnings rising to $18,000 a day and at their highest since early January. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
The Baltic's panamax index rose 1.04 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $13,158.
Brokers said they were watching for further economic developments in China, which had been a vital supporting factor for the freight market.
Analysts said ship supply continued to act as a major drag on the dry freight sector.
"We note that Chinese iron ore inventory levels at port still remain quite high, and we would look for inventory declines to signal a more sustainable recovery," Deutsche Bank said.
"We note the market is still oversupplied and the current limited prompt cape tonnage may just be temporary as a result of recent Chinese weather issues."
Worries over the health of the world economy have signalled more pain and even bankruptcies among dry bulk ship owners, who face a glut of new vessels ordered when times were good.
Source : Reuters

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International Group Circular: Regulations of the People’s Republic of China on the prevention and control of marine pollution fr
By total
Published: 2011.08.23

We refer Members to previous circulars on the Regulations of the People’s Republic of China (PRC) on the Prevention and Control of MarinePollution from Ships (the Regulations), and the postponement of the requirement that owners/operators of (a) any ship carrying polluting and hazardous cargoes in bulk or (b) any other vessel above 10,000 gt enter into a pollution clean up contract with a Maritime Safety Agency (MSA) approved pollution response company before the vessel enters a PRC port.
Members were previously informed that the MSA Notice issued on 20 May 2011 stated that the lists of level 2, 3 and 4 contractors would be issued by the MSA by 31 August 2011 and the list of level 1 contractors issued during the course of the year.
The International Group has maintained contact with the MSA and now understands that the lists of all approved contractors will be issued in October 2011. The requirement to contract with an approved clean up contractor will still be enforced in all Chinese ports from 1 January 2012. There will therefore be a relatively short period of time for operators to contract with an approved spill responder.
Members have also previously been advised that the term “operator” for the purposes of concluding and signing the contract with a clean up contractor is defined by the MSA as the owner, manager or actual operator of a ship. In respect of those operators not domiciled in China, the International Group now understands that the ship’s agent in port, Club correspondent, local law firm or another legal entity located in mainland China (not Hong Kong, China or Macau, China) may sign the contract on behalf of the operator if authorised by the operator to do so. The International Group understands that the Master may also sign the contract, which may be necessary in certain circumstances, for example where speed is necessary, although an authorisation would still be necessary for the Master to sign on behalf of the operator.
The International Group is considering the development of a standard form authorisation letter for overseas operators for this purpose and is also continuing to consider the development of supplemental and amending clauses for inclusion in the contract.
A further update to Members with detailed guidance on the contract will be provided in the near future.

Source : Skuld

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Global economic gloom to sink tanker market recovery hopes
By total
Published: 2011.08.19

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The crude oil tanker market's hopes for a recovery next year could run aground as global economic turmoil stifles oil demand in the United States and Europe, denting prospects for a sector already battling a supply glut and a rate rout.
Strong global oil demand, driven mainly by China, has been the lone bright spot in the depressed dirty tanker market this year, although earnings for ship owners still slipped to record lows this month as supply of new ships outpaces demand growth.
An economic slowdown, or worse yet a recession, could push oil consumption in the United States -- the world's top oil consumer -- into an irreversible decline and overshadow China's growing needs for the energy resource.
"The crude tanker markets have been really bad so far in 2011, but the bad news is that it can get worse," said Peter Sand, chief shipping analyst with ship association BIMCO.
"Supply is not stalling the way demand is, in particular for crude tankers."
The U.S. Energy Information Administration (EIA) last week lowered its forecast for domestic oil demand from growth to decline in 2011. It also cut its forecasts for growth in global oil demand, as did the Organization of the Petroleum Exporting Countries and the International Energy Agency (IEA).
For 2012, agencies were mixed with OPEC lowering global demand growth estimates, while the EIA and IEA raised theirs. The IEA, however, said its forecast could more than halve if the economy grew slower than expected next year.
SUPPLY TO OUTSTRIP DEMAND
The global dirty tanker fleet, dedicated to transporting crude and fuel oil, is expected to grow 9 percent this year with the delivery of 36 million deadweight tonnes of new vessels, BIMCO said.
Further expansion is seen in 2012 with 29 million more deadweight tonnes, a 7 percent increase in supply.
That compares to global oil demand growth of between 1-2 percent in 2011 and 2012 forecast by the IEA.
The current oversupply problem stems from a ship ordering spree before the economic turmoil in 2008. Those tankers, which typically take three years to build, are only now entering the market.
"The current supply side picture is not seeing any improvement in recent months," said shipping consultants Maritime Strategies International in a research report.
"The large crude segments continue to be pounded by new deliveries and there will be little respite from this assault over the next year."
A similar situation is playing out in the dry bulk freight market, which ships iron ore, coal, grains and other dry goods. More economic turmoil could lead to further casualties and possibly bankruptcies in both the tanker and dry bulk sectors.
"The market is jumpy and things are about to get very unpleasant for some tanker owners," said a ship industry source.
IN THE RED
Crude oil tanker earnings on the Baltic Exchange's benchmark Middle East route tumbled to a record low this month, dipping into negative territory for 10 of the 13 trading days in August so far, plummeting as low as -$1,889 a day.
In other words, ship owners briefly paid $1,889 more a day in bunker fuel and other variable voyage costs than they received from companies using their very large crude carriers (VLCCs) to ship crude oil on the TD3 route.
This is the first time that average earnings have traded negative since the Baltic Exchange started collating earnings-equivalent data in 2008.
"With negative returns, you are paying charterers to lift their oil -- that makes no sense," said Nigel Prentis, head of research, consulting & advisory with HSBC.
"Unfortunately, the market is too fragmented to see any solidarity of action. So if one owner is willing to cut and run and keep his ship at a negative return then it spoils it for everyone else."
Average TD3 earnings so far this year was around $11,000 a day, down more than 65 percent from last year's $32,000 a day average.
"The sour state of the macro economic situation in the largest oil consuming areas, with the exception of China, is very worrying for the shipping industry," said BIMCO's Sand.
"The recovery of tanker earnings is not likely to happen during the next 15 months, but visibility is low at the moment making forecasting extra challenging."
Oslo-listed Frontline, the world's largest independent tanker operator, said this month it was pulling some of its largest crude oil carriers from the market -- also known as laying up -- to limit its losses.
"The financial turmoil has pushed the (industry's) confidence level to a new all-time low," Frontline's Chief Executive Jens Martin Jensen told Reuters. "I don't think the market can get worse."
He urged ship owners to refuse to take negative earnings and to lower the speed of their tankers, which would lower supply, for the industry to have any hope of recovery. Frontline does not expect a recovery before 2016.
Nevertheless, some analysts say there is a remote possibility an economic slowdown could actually support earnings for ship owners.
If global oil demand falls due to a downturn but OPEC is unable to match that with a cut in its production, then it could revive the use of tankers for storing crude.
The amount of crude oil stored at sea has steadily declined to around 6 million barrels since hitting a peak of more than 100 million barrels in April 2009, after changes in the oil market structure that made floating storage less profitable.
In 2009, floating storage employed the equivalent of 50 tankers, mainly VLCCs, or about 10 percent of the VLCC fleet at the time.
"If OPEC were to keep total production around current levels despite lower oil demand, the return of floating storage would clearly be helpful for tankers," said RS Platou Markets in a research note.
Source: Reuters

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Tanker Shipping:A bad day just turned worse. Global economic “soft patch” weight heavily on tankers
By total
Published: 2011.08.18

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Demand: Projected oil demand continues to slide, with growth entirely driven by non-OECD countries. OECD-demand is expected to contract by 0.4 million barrels per day (mb/d) this year and 0.1 mb/d in 2012. The 2012 forecast by IEA leaves little room for optimism, as the current estimate is as low as 1.7% (1.5 mb/d). China is the main driver in this game and set to increase demand by 0.6 mb/d in 2011 and another 0.5 mb/d in 2012.
The recent IEA interference was bad news for an already struggling tanker market as oil was suddenly sourced to the market from the “backyard”, and not the other side of the Earth. Crude oil equivalent to 30 fully laden VLCCs was released in a joint action to bridge the current undersupply of the market with a much needed hike in OPEC production.
It goes without saying that once the eventual restocking gets underway, tankers are in for a positive impact.
CRUDE -Even though the total number of VLCC spot fixtures Westbound and Eastbound out of AG are fairly similar to the numbers last year, freight rates have halved on the Eastbound trades but have crumbled to a quarter of last year’searnings on the Westbound trades. At early August calculated average earnings for a VLCC going from AG to the US Gulf were USD 78 per day! The market is heavily oversupplied.
The recent development prompted Frontline to announce that they would pull 2-3 VLCCs from the market as only few signs of short term improvement on the tanker market were visible and there is “no point in transporting oil for free”. Down the same alley, fellow VLCC owner, BW Maritime has avoided fixing VLCCs at current market level as rates
are“dangerously low”. The recent market development has also made the second hand market come to an almost complete stop, as only MT Star II, 1989, 304,622 DWT, has been reported sold since end-March.
The 22 year-old single-skin went for as much as USD 30 million and will surely head for conversion into FPSO, which is the main business area for buyer Modec.
PRODUCT –Clean “MR” average earnings remains in horrible conditions due to subdued demand and plenty of tonnage. Average earning in 2009- 2011 is USD 7,500 per day, as compared to 2006-2008 earnings of USD 24,500 per day.
With the “driving season” ongoing, it’s relevant to watch out for motor gasoline imports into the US. Data from EIA on July imports is surprisingly low. BIMCO expected the “driving season” impact on freight rates to be uneventful and so it has been, the low import levels crushed sen-timent before it took off, hitting USD 15,000 per day during one single week mid-June only to drop to touch the USD 10,000 mark the following week and sliding further from there.
With a weekly average of just 768,000 barrels per day in July – that is 32% below last year’s July imports at 1,133,000 barrels per day. You need to go back to 2002 to find a more sluggish demand picture.
The active crude oil tanker and product tanker fleet has grown by 3.6% and 2.5% respectively so far in 2011. 18.6 million DWT of crude tanker tonnage and 3.8 million DWT of product tanker tonnage has been launched so far in 2011.
The delivery pace of product tankers appears to be slightly higher than previously expected. This means that the supply growth now seems to reach 8 million DWT as compared to 7.5 million DWT four months ago. This increased supply growth by 6% from 5.2. It is a general trend across segments that yard output is marginally higher than foreseen
has come off again, getting back in line with the BIMCO forecast. BIMCO expects the crude tanker fleet to grow by 9.1% in 2011, adding even more supply pressure to the market than today. Fleet growth should come down to 7.5% in 2012 but the result is the same. Four months ago it seemed as if 2012 was set to surpass 2011 in terms of crude tanker deliveries. But things have turned around now, and more near-term supply-side pressure than originally forecastis now in the making for crude tankers.
Outlook : as demolition is limited, idling or lay-up of crude oil tankers would ease the supply-side pressure to some extent. The perfect example of a successful idling of vessels to bring back earnings was seen in the container segment during the first half of 2010. But idling remains a “prisoner’s dilemma” – which is a fundamental problem in game theory that demonstrates why two parties might not co-operate even if it is in both their best interest to do so – as defecting from the equilibrium might leave the defecting party better off at the expense of the other party.
As US gasoline stocks are getting close to upper limit in the average range, despite record low imports, and the “cancelled” US Summer driving season is coming to an end, it proved to be a negative surprise to the clean product tanker market in the North Atlantic basin more than just a non-event.
As we are on the way in a sluggish third quarter, tanker owners have started to look forward to the Winter market in the Northern Hemisphere by December/January, where the right fixtures and being in the right place at the right time can mean a huge difference for your annual earnings, especially during such a poor 2011. A special swing factor going forward will be a potential second market intervention by the IEA. The Agency has made clear that the knock-on effect from the situation in Libya could prompt further action. So it basically depends on OPEC to increase oil supply sufficiently from which the tanker market would benefit or risk another IEA action which would ease tonnage demand further.
BIMCO expects that freight rates in all crude and product tanker segments will experience an unexciting Autumn, as demand continues to soften. End-user oil demand leaves little room for optimism and rates could remain in current low territory. Moreover, the crude tanker segments will see strong inflow of new tonnage adding downside to the demand- supply balance.
Assessing the market price on assets, whether it’s a newbuilding (NB) or a second hand vessel, has become increasingly difficult as the number of uncertainties in the equation seem to get more and bigger. Before the world fell of the cliff in the Autumn of 2008, a stable relationship was in place and markets were treating us well. Nowadays, a relationship is difficult to define. As MR newbuilding contracting never dried up, the slide in prices has been steady but not dramatic. On the other hand, high activity in the second hand market has pushed up prices – recently seen in the busy months of May and June this year. As the active MR fleet to orderbook now stand at 12% it’s likely that NB prices are not going to close the USD 5 million gap. This leaves some upside or the second hand value in order to re-establish the historic price difference which is a bit tighter than today. BIMCO expects that the gap is going to narrow over the coming 12 months as the intangible sentiment supports higher asset prices, despite a weaker tanker market.
Source: Peter Sand Bimco

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Analyst lowers VLCC forecast for this year to flat growth
By total
Published: 2011.08.17

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In its latest report, US-based Mcquilling Services takes a look on the tanker market’s first half performance, compared to its estimates at the start of the year, while making its predictions for the rest of the year. As it notes, its January estimates have

generally reflected market activity despite unpredictable events such as the natural disaster in Japan, the Libyan civil war, release of Strategic Petroleum Reserves and unnerving global economic situation.
“Thus far, spot freight for a combination of clean and dirty rates have performed within 6% of our forecast. Our expectations for tanker demand fundamentals are also in line with market activity with the exception of lower VLCC ton mile demand growth. However, given the precedence of the unexpected events we lowered our VLCC forecast to a more or less flat growth rate for this year. Overall, ton mile demand contracted by roughly 1% in the first half of 2011 versus the same time period one year ago. In the various tanker classes, all sizes, bar one, chalked up a slide in demand. All of these movements were within our forecasting range.
As we have noted since 2009, there is an increasing volume of tonnage moving west to east. This development is spurred by the rapid growth occurring in Asia-Pacific and its resulting appetite for raw materials. This is taking place as crude transported on the traditional benchmark TD1 contracts. The share of west to east trades has expanded from 19.5% in 2009 to 23% last year, according to our proprietary data. Through the first half of 2011 the share of trade west to east already made up 22% of the total cargoes shipped. The strong volumes recorded so far can be partially attributed to shifting supply sources, and highlights the growing importance of the west to east trade route” said Mcquilling Services.
It went to analyze the clean tanker markets, stating that they “performed somewhat below our expectation of a 4% growth in ton mile demand over the first half of the year. This performance however, is in line with McQuilling Services’ expectations that demand centers would shift from traditional sources within OECD to countries in emerging markets. The weak economic situation in the European Union and the US has pressured demand in these regions, resulting in exports from non-OECD refineries to customers in non-OECD countries rising” said the consultant.
“Turning to the physical side of the market, asset prices continued their downward trajectory in the first half of the year. Activity on the newbuilding side has decreased strongly and owners will refrain from pressuring shipyards for deliveries. Demand for vessels such as container ships and FPSOs have kept shipyard operations near capacity, helping limit the volume of deliveries and the future orderbook. As a result, second hand ship sales have been a key force in driving the market. Net trading fleet growth through July was just over 45% compared to our January estimate. Deliveries and deletions were about 40% of our forecast” it mentioned.
Recently, financial and commodity markets took a dive in reaction to the latest news regarding to US debt ceiling and American politician’s willingness to play chicken with the global economy. By the end of the first week in August, it seemed like markets could have found a toehold to prevent sliding into an abyss, but after the US saw its Standard and Poor’s credit rating cut from AAA to AA+, markets moved lower than had been anticipated. Traditional safe haven gold has seen its price climb to new highs and the outlook of the global economy as a whole continues walking a fine line.
Making its projections for the remainder of the year, Mcquilling Services says that “it is clear that markets in Western countries will face tougher times in the short term, but how heavily this impacts the developing world will be a crucial factor in determining future demand patterns. These conditions were already considered in our Tanker Market Outlook. The International Energy Agency forecasts that oil demand will rise by 1.5 million b/d to 91 million b/d in 2012. This growth will be solely based on rises in non-OECD countries. Looking forward, McQuilling Services opted to not make any significant revisions to our five year forecast as we let the dust settle from recent events. The front years of the forecast period will remain pressured from an uncertain demand outlook and an oversupplied tanker market. Eventually market forces will result in a consolidation among industry players, tightening up tonnage and helping lift rates from their trough. We still assume the global economy will recover and growth, albeit relatively low, will return to OECD countries while economic expansion will be supported by demand in other parts of the world. In the short term, we see upward potential limited and anticipate that any noticeable strength in the overall market will only be apparent in the out years. For the remainder of 2011, a revision by the National Oceanic and Atmospheric Administration for a more intense hurricane season could result in market swings. Baring that, worried eyes are likely to stay fixed towards stock market, jobs and commodity price figures in the short term” concluded Mcquilling Services.

from：Hellenic Shipping News Worldwide

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Ship owners could face pain on the back of gloomy economy’s predictions
By total
Published: 2011.08.16

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The latest market turmoil, coupled with the renewed risk of a global recession could very well signal more troubled times for ship owners of all ship types. After all, owners, especially tanker ones, are already struggling amid extremely weak rates,

abundant tonnage supply and prospects of more new tankers entering the fleet in the next few years. Similar conditions were faced by owners in 2009, yet back then the balance sheets were much healthier following years of prosperity in the industry between 2004 and 2008.
In its latest weekly report, London-based shipbroker notes some striking similarities between today’s crisis and the one of 2008. It says that “the whole world was taken aback when Standard & Poor’s downgraded the US’s credit rating from AAA by one level to AA+. The downgrade took place after a week of rapidly falling equity markets internationally and a perilous escalation of the debt crisis in Europe.
As a result, the equity markets this week also have been very volatile. Shipping stocks have not been immune to turmoil, with many publicly traded companies seeing double digit losses. A similar picture was observed in many commodities markets, with Brent front month futures falling to a low of $102.57/bbl earlier this week, from a recent peak of $126.65/bbl in mid-April. The latest developments create a sense of déjà vu, with what economies around the globe went through at the outset of the recession in the second half of 2008. Back then, equity markets also witnessed a rapid decline. Likewise, oil and many other commodities plummeted. Of course, the crisis now is not exactly the same as the economic meltdown back in late 2008. However, the striking similarities are alarming and intensify the fears of a double-dip recession.
Indeed, we are already noting signs of slowdown both in the global economy and in world oil demand. Many advanced economies are revising down their growth expectations on the back of sluggish economic activity in recent months. In terms of oil, the International Energy Agency provided initial estimates of net zero growth in global oil demand in June.
Furthermore, it warned that current economic climate poses a major threat to future demand growth. The agency estimated that a 1.4% reduction in world GDP figures this year and next will cut the expansion in global oil consumption by 0.3 million b/d in 2011 and by 1.3 million b/d in 2012” noted Gibson.
Still, it offers a note of optimism, commenting that “however it is still too early to forecast the doom and gloom seen back in late 2008 and throughout 2009 to be relived this time around. Nonetheless, the world appears to be a different place now than it was two weeks ago, with the latest developments clearly posing a colossal new threat not only to global economy at large but also to the tanker industry” concluded Gibson.
Meanwhile, in its analysis of the past week for the tanker markets, Gibson mentioned that “Chinese refineries undergoing maintenance, a midweek holiday in Singapore and a softer bunker price was always going to continue to provide impetus to Charterers to exert pressure on what is already a very weak VLCC market. And this will probably be unrelenting as we veer towards the end of the August programme with East continuing at around WS 45 and West at WS 35. Suezmaxes have gradually thinned out, but without sufficient enquiry to help support them, rates will continue to march sideways at around WS 77.5 East and WS 57.5 West. An exceedingly quiet week on the Aframaxes leads them to being relatively untested by their usual standards, but the continued weakness in the Far East will allow 80 x WS 110 East to be the prevailing benchmark set by Charterers for Arabian Gulf to Singapore.
Suezmax enquiry in West Africa remains at a drip feed basis as it continues to test Owners' mettle. Voyages to the Atlantic are now being achieved at 130 x WS 62.5 with voyages to the
continent commanding around 5 points higher with the status quo persisting into next week. The VLCC market remains relatively unchanged rate wise since last week as Eastern destinations are operating a shade below 260,000 x WS 44, with West at WS 47.5 with moderate forward enquiry unlikely to provide few surprises on the horizon.
Aframaxes began the week as the previous ended, with activity continuing. The critical mass seemed to have been achieved as rates crept up 2.5 points for all areas with WS 90 for Ceyhan loads and reports of WS 92.5 for Black Sea loads being achieved. However, as the cargos began to dry up a little in the Mediterranean and fixing dates began to drift further away, rate increases hit a wall and look to be stable now. However, as the new bunker price filters through to Owners' calculations we may see erosion once more. Suezmax enquiry emanating from the Black Sea is just enough to keep rates at around 135 x WS 70, but a mild discount can possibly be on the cards next week if the same mood and inactivity persists” said Gibson.
from: Hellenic Shipping News Worldwide

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Increased OPEC oil production reflects on global spot fixtures during July
By total
Published: 2011.08.15

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Higher oil production from OPEC members, notably Saudi Arabia, as an attempt to lower global oil prices (that of course was before last fortnight’s oil’s plunge, as a a result of increasing worries of a new global recession), has helped tanker markets,at least in terms of cargo supply. According to the latest monthly report from OPEC for the month of July, global spot fixtures increased by 9% in July compared to the previous month. OPEC spot fixtures continued the upward movement in July, rising by 11% compared to the previous month. The increase was mainly driven by Middle East to East fixtures as many Asian refineries start to enquire tonnage for their August requirements. Middle East to West fixtures declined by 6% in July compared to last month partially on end of summer season long haul tonnage demand.
OPEC sailings were steady in July with a minor decrease of less than 1% compared to the previous month. OPEC sailings in July indicated a drop of 4%, when compared to the same period a year ago. Middle East sailings remained steady in July from the previous month with a minor decline, according to preliminary data. Initial estimates indicate Far East and West Asia arrivals decreased by 4% and 5% respectively and Europe arrivals gained 2% in July compared to previous month. US arrivals remained flat in July compared to last month.
Dirty tanker sentiment remained bearish in July compared to the previous month as result of tonnage over-supply, refinery and field maintenance, and lower trade activities. In the clean freight market, rates declined in July relative to last month. Refinery maintenance in Asia lowered product exports that depressed clean rates in East of Suez while closed arbitrage dragged down West of Suez. In July, dirty spot freight rates edged down by 2% and clean rates decreased by 4% compared to the previous month.
VLCC spot freight rates declined 11% on average on all reported routes in July compared to the previous month. From the Middle East, VLCC long-haul spot freight rates to eastbound and westbound destinations fell 14% and 4% respectively. Rates from West Africa to the East also declined by 13% in July compared to previous month. The decline of VLCC spot freight rates from both Middle East to East and West Africa to East was driven by the heavy maintenance across Asia during June-July. The decline of VLCC spot freight rates from Middle East to West was partially due to the IEA crude oil stock release and spillover of excess tonnage left by lower demand from Asia. Compared to a year ago, spot freight rates for VLCC from Middle East to East and from West Africa to East as well as Middle East to West are down by 16%, 22% and 13% respectively, reflecting the weakness of VLCC tankers this year.
Suezmax spot freight rates remained flat on average on all reported routes in July compared to the previous month. On the West Africa to US Gulf Coast (USGC) route, Suezmax spot freight rates gained 8% in July from the previous month, while on Northwest Europe to USGC route, spot freight rates decreased by the same rate. Higher lifting of West African crude to Europe due to various fields’ maintenance and shutdowns in the North Sea as well as West African crude oil premiums to Dated Brent affected tonnage availability from West Africa to the US and supported spot freight rates. The release of IEA crude oil stocks, mostly in the US, as well as the premium of Brent to WTI, limited trade between the US and Western Europe in July and negatively affected spot freight rates on the Northwest Europe to US route. Closed arbitrage of fuel oil added more pressure on Northwest Europe to USGC spot freight rates. Compared to last year, West Africa to USGC and Northwest Europe to US East Coast – USGC spot freight rates dropped 12% and 25% respectively, underscoring the weakness of the Suezmax sector.
Aframax spot freight rates declined in July by 3% on average, with both West of Suez and East of Suez spot freight rates decreasing from the previous month. East of Suez, refinery maintenance across Asia as well as the continuing shutdown of some of capacity in Japan on the effect of the earthquake reduced spot freight rates on the Indonesia to East route. West of Suez, spot freight on Caribbean to US East Coast gained 3% on the back of higher trade activity between Latin America and the US. In the Mediterranean, both Mediterranean to Mediterranean and Mediterranean to Northwest Europe Aframax spot freight rates declined by 6.5% and 7.4% respectively, compared to the previous month. Tonnage oversupply due lower trade activities from Baltic Sea and North Africa were partially behind the decline of spot freight rates. Compared to last year, Aframax spot freight rates on average were down by 20% in July.
Clean tanker market sentiments weakened further in July, with East of Suez spot freight rates experiencing a decline of 1.4% and West of Suez dropping 2.2%. Lower product output in Asia on the back of refinery maintenance and closed transatlantic arbitrage were the main factors behind the weakness in the clean tanker market.
In the East, Middle East to East spot freight rates in July remained flat and Singapore to East rates declined by 3%. Balanced trade activities on naphtha from Middle East to East are behind the unchanged rates from Middle East to East. Singapore to East clean spot freight rates continued to be under pressure from the Japan earthquake and closed down by 3%. Northwest Europe spot freight rates were depressed by the lower transatlantic activities due to closed arbitrage and lower gasoline imports from the US. Clean spot freight rates from Northwest Europe to the US declined by 5% in July compared to the previous month. In the Mediterranean, clean spot freight rates for tankers operating the Mediterranean to Mediterranean and Mediterranean to Northwest Europe routes declined by 4% and 3.8% respectively. Lower naphtha trades as well as lack of arbitrage
opportunity to move diesel and naphtha were behind the drop. In West of Suez, only Caribbean to US Gulf Coast spot freight registered gain of 3% in July compared to the previous month. The gain in clean spot freight rates was supported by higher diesel and gasoline demand in Latin America from the US. Jet fuel demand in Europe from the Caribbean further supported clean spot freight rates from the Caribbean to the US.
from： Hellenic Shipping News Worldwide

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Capesize demand helps lifting of dry bulk market
By total
Published: 2011.08.12

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The dry bulk market has recovered a small fraction of its lost ground this week, with higher returns as a result of increased capesize demand. This triggered similar increases in other segments as well, most notably the panamax one.

Yesterday, the Baltic Dry Index (BDI) was once again up by 0.95% to 1,277 points, as a result of another increase of the Capesize market by 1.44% this time, which saw the BCI (Baltic Capesize Index) rising to 1,836 points. Panamaxes were also up by 1.35% to 1,501 points.
According to the latest weekly report from Fearnley’s “the fall in the Cape rates stopped towards the end of last week and started to move sideways, if not slightly upwards. This upward trend was supported by a major miner artificially fixing at higher rates on Friday last, despite owners willing to fix below their bid. This, for reasons only know to the miner in question. This week started with rates falling back to around the USD 8.00 mark, down from a high of USD 8.25, for the West Australia /China leg. The Brazil to China leg was fueled by this activity as fewer vessels set off in ballast towards Brazil and as such the rates have moved upwards towards the USD 20.00 mark. The transatlantic market has remained soft and is not showing signed of increased activity. On the period front, only a few short deals have been struck at just over USD 10k daily” said the shipbroker.

In a separate analysis, Piraeus-based shipbroker Shiptrade Services mentioned that “it was a week of mixed feelings across Atlantic and Pacific basins as we noticed an increase on the cargo volume, but on the other hand the high level of tonnage supply was enough to prevent the market from pushing forward. In the Atlantic we could see an increasing number of cargoes going to F. East, and levels closing at USD 19.30 – 19.50 pmt basis Tubarao/Qingdao. Transatlantic trade was not so strong and Owners had to discount their levels in order to secure employment. As a result, Transatlantic round closed around USD 9.000 - 9.500 per day. In the Pacific region, there was some activity with the iron ore majors covering around 15 vessels. This cleared out a large amount of the prompt tonnage supply. Rates started from USD 7.70pmt and moved higher up to USD 8.25pmt during week’s closing basis W.Australia/China” said the shipbroker.

On the Panamax front, it said that “activity remained in good levels but rates moved downwards in the Atlantic, while remained steady in the Pacific. In the Atlantic rates softened just a bit with rates for Transatlantic round concluding at USD 14.000 per day. On the Fronthaul trade, there were not too much of activity and rates dropped around USD high teens/low twenties per day for trips ex Continent/Med, while the ECSA/F.EAST trade, concluded at levels around USD 22.000 plus USD 400.000 ballast bonus. In the Pacific there is still a high level of tonnage oversupply. Rates for Pacific round were done around USD 8.000-8.500 per day basis N. China delivery, while rates for trips ex NOPAC moved at levels below USD 10.000 per day basis delivery N.China/Japan range. (M/V Lowlands Nello 76.830/04&rsquo” said Shiptrade.
Referring to the Panamax market, Fearnley’s mentioned that it “continued its summer dull this week as well. However it seems that rates have found their logical bottom - at least in the Pacific basin. This week we also saw more cargoes entering the market in the Atlantic and seem rates are stabilizing here as well. The period market has been more or less non-existing the last couple of weeks, but it was reported one 1-year deal being done at USD 12k basis delivery Singapore. The fronthaul market is hovering around USD 21k while the transatlantic rounds are fetching around USD 13/14k. In the Pacific the rounds are being fixed in the region of low 8k and the backhauls around USD 3/4k” said the shipbroker.
Finally, Shiptrade’s comments on the Supramax market was that “rates fell in the atlantic, but Pacific was slightly better. In the Atlantic region, the Continent/Mediterranean market remained quiet with a few supra’s reported fixed around USD 4.000 per day for cargoes to USG, while scrap stems ex Continent to Mediterranean sea were done at USD low mid teens. Rates for Transatlantic round remained around USD 14-15.000 per day. Fixtures for trips to Far East remained at USD high teens - 20.000per day, for GOA traders ex Mediterranean. On the ECSA/F.East market fixtures reported at levels around USD high teens - 20.000per day basis W.Africa delivery, or otherwise USD very low twenties + 400.000 ballast bonus.
In the pacific, Indonesia remained the driving force with coal to China. Rates for Pacific round improved a bit close to USD 10.000per day, while trips ex Nopac were performed around USD 9.000-10.000 per day basis N.China delivery (M/V Mykali 55912/11&rsquo” it concluded.
from: Hellenic Shipping News Worldwide

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Tanker owners contemplating intensifying scrapping activity to alleviate oversupply issues
By total
Published: 2011.08.11

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Recent tanker market developments, such as a growing competition among tanker owners for cargoes, coupled with the latest negative trends in terms of oil consumption and demand, as stated by the latest forecasts from OPEC and IEA, suggest that

tanker owners should be thinking towards scrapping a larger portion of their older fleet. This is what contemplates CR Weber in its latest report, where it mentions that thus far in 2011, the market has experienced several developments which, given a different trading environment, would have provided a major boost to tanker earnings: monthly Middle East VLCC spot‐market cargo counts have reached 11‐year highs, ton‐mile demand growth has exceeded expectations, and orderbook slippage and cancellation rates have accelerated.
“The inability of these developments to drive the markets back into a true start of the recover stage has been apparent: overcapacity has reached levels at which in many cases the market is incapable of overcoming. The decision to layup vessels, which in other shipping sectors is a viable intermediate‐term option, remains generally out of the question for tanker owners over fears of returning units to service following a period of disuse and implications for the vetting process of the remainder of their fleet.
The next most obvious solution to overcapacity is the exit option vis‐àvis demolition markets. Demolition values, per lightweight ton, have risen some 9% since the start of 2011 and 109% since the 2009 trough to an average of $512 this week. However, with most remaining single hull units having exited from trading over the past two years, the pace of tanker demolitions has recently decelerated. Owners of elderly double hull units (some 11% of the Panamax‐and‐larger fleet is 15 years or older) are reluctant to consider demolition sales as an option implying that the present trend could continue. Indeed, only one double hull unit has been sold for demolition this year—this unit having been originally single hulled but converted to double hull in August 2008.
The case against progressing into demolition for the oldest units in the double hull fleet has thus far been logical. Most of these units carry no debt and can therefore elk out small profits, even in a recessed market—allowing owners to wait for further gains in demolition values. Moreover, with a number of offshore oil production projects scheduled over the coming 2 years, the prospect remains for further tanker‐FPSO conversions to offer alternative resale options.
Mounting global economic uncertainty, however, poses fresh threats to this ideology. A double‐dip recession would pose a significant threat to commodities prices, potentially eroding ton‐mile demand growth and crushing demolition values simultaneously. Admittedly, it is still too soon to tell what direction the tanker global markets will take going forward and the affect this will have on tanker earnings. Thus, whether owners will start to eye demolitions markets more closely remains to be seen, but in the case where steel futures are strongly impacted and tanker prospects sour further, then this option could step in to provide a quick change to the supply/demand ratio” concluded CR Weber.
Meanwhile, in a separate report on this week’s demolition activity, Golden Destiny said that Bangladesh is still closed. “In the meantime, players of the industry are nervous with many cash buyers feeling ambitious for the official opening of the beaches till mid-August. India continues to take the large appetite of scrapping tonnage by offering prices excess $500/ldt, while some vessels are also heading to the scrap yards in China at levels offered excess $450/ldt. In Pakistan, prices are still low comparing to the best levels offered by Indian scrap buyers, but there has been some increased demand and with the month of Ramadan being ahead we may see some improvement in rates and more vessels coming in the shore.
The week ended with 12 vessels reported to have been headed to the scrap yards of total deadweight 717,968 tons. In terms of the reported number of transactions, the demolition activity has been marked with no change from previous week’s activity, while there has been a 29% increase of the total deadweight sent for scrap due to large size units sent for scrap in the bulk carriers and tanker segment. Bulk carriers are still holding the lion’s share, 42% of this week’s total demolition activity. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker carrier sector by India for an aframax unit of 84,040 dwt “BEL TAYLOR” of 14,830 LDT at $575/ldt incl 900 tons of IFO remaining on board. India has attracted 67% of the total demolition activity offering $525/ldt for dry/general cargo and $550/ldt for wet cargo, the highest levels seen from the 2008 fall. At a similar week in 2010, demolition activity was standing at similar currently levels, in terms of the reported number of transactions, 12 vessels had been reported for scrap of total deadweight 536 mil tons with only three bulk carriers scrapped and India with Pakistan offering the $410/ldt for dry and $440/ldt for wet cargo” concluded the shipbroker.
from: Hellenic Shipping News Worldwide

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