Newbuildings remain the “weapon of choice” for ship owners amid shipping slump By total
Published: 2011.08.10
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EmailAttractive pricing, coupled with long-term prospects in freight markets usher ship owners to continue investing in new building vessels, despite the more than unfavorable current market conditions. According to the latest report from Golden Destiny,
“in the new building market, more business came to light this week with activity in all main segments, bulk carriers, tankers and containers, against fears of late recovery in the shipping environment. Market players seem that they seek for more newbuilding investments so as to explore the bottom lows of the prices that yards are offering, while Japan is slipping behind due to price competitiveness from yen appreciation against dollar. However, some hidden business has been revealed this week with robust activity in the tanker segment for small product carriers and liners. The notable deal of this week was revealed in the bulk carrier segment with the ordering of two Very Large Ore Carrier units of 405,000dwt by BW Group (Berge Bulk) of Norway in Bohai Shipyard for delivery in 2014. The units will be long term chartered to Vale Brazil and the order leaves questions about the investments strategies of shipping conglomerates as they seem that dismiss fears of oversupply in the capesize segment. Overall, the week closed with 56 new orders reported worldwide, up by 87% from a similar week in 2010 when 30 contracts had been reported with bulk carriers grasping 50% of the activity. In terms of invested capital, the passenger / cruise sector appears this week the most overweight segment due to the investment decision of Carnival for placing three newbuilding units at a total cost of close to $2,15 billion. The offshore segment has experienced no activity the last days, while it used to be the most heavily invested segment in previous weeks” said the Piraeus-based shipbroker.
In a separate report, Clarksons said that “with the Korean yards due to return from their holidays next week and resume construction within their facilities, we hope the lull in the market as witnessed this week will be short lived and contracting will again begin to pick up. Of course with many Owners away for their own summer vacations this may take a little longer to really get going again.
Whilst the newbuilding market has been understandably subdued this week the Global Financial Markets have not. The Bank of Japan has again waded into the markets in an attempt to stem the appreciation of the Yen. Whilst this was effective on the day, seeing a 3.5% reverse swing it remains to be seen what the long term effect is on the currency. This intervention will likely give the Japanese yards some comfort in the knowledge that the Japanese export market has not been completely forgotten by its Government, however until there is a significant depreciation in the value of the Yen back to levels witnessed last in 2010 in the 90s (yen per dollar) then it is likely the Japanese yards will continue to struggle to compete with their Far East rivals.
This intervention has not however been the only source of news in the Financial markets with both uncertainties in Europe, along with a certain deadline in the US adding to a great deal of turbulence and a seeming loss of confidence. We will need to wait and see whether this uncertainty in the market (and the conservative investment attitudes that typically follow) will have an effect on the Ship building market, as both owners and shipyards return from their vacations and take stock for the remainder of the year” said the world’s leading shipbroker and researcher.
In terms of business concluded in the bulk carrier segment, Greek owner Capital Product Partners, a division of parent Capital Maritime & Trading, entered the bulk carrier sector for the first time by ordering one kamsarmax unit in Sainty Shipyard of China for delivery in 2014. Moreover, Cardiff Marine of Greece has added two more 176,000dwt units at Shanghai Waigaoqiao for delivery in 2014, mentioned Golden Destiny. In the tanker segment, the majority of the business came from the Japanese yards by domestic owners, while one MR unit has
been placed in Korean Hyundai Mipo for delivery in 2013. In the container market, following the ordering plethora of post panamax units this week new deals emerged in the handy sector. German owner Hermann Buss has placed an order for four 1,705 units in Chinese yard Guangzhou Wenchong, which has a long history of building tonnage for German owners, for delivery in 2012 and 2013 at an undisclosed contract price. More fresh business has also been revealed in the handy sector by Sinotrans of China and Pan Continental Shippping of South Korea. In total, 8 orders is estimated to have been placed for container units in the handy sector this week, but this does not imply that the mega containerships’ ordering trend has been faded out.
from : Hellenic Shipping News Worldwide
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Growth fears add to dry bulk shipping crisis By total
Published: 2011.08.08
Print EmailThe dry freight market faces a growing ship glut, which has battered freight rates in recent months. Owners went on a ship ordering spree before the economic turmoil in 2008
and it normally takes three years for a ship to hit the water from when it is ordered.
Growing fears for the world economy signal more pain and even bankruptcies among dry bulk ship owners who are getting rock-bottom rates to carry cargoes like coal and now face a glut of new vessels ordered when times were good.
The tougher climate has hit the sector hard this year and confidence is at a record low. Korea Line (005880.KS), South Korea's debt-stricken second largest dry bulk shipping line, is among the casualties. The firm, under court receivership, has filed a restructuring plan to the court.
While cheaper rates could benefit buyers of commodities, the weak economic prospects are set to hit more ship owners.
"Smaller companies tend to have less access to capital, especially in weak markets. High financial leverage and weak earnings could force covenant breaches or defaults in the sector," Deutsche Bank analyst Justin Yagerman said.
The Baltic Exchange's main sea freight index .BADI or BDI, which track rates to ship raw materials, has already declined nearly 30 percent since the start of the year as ship supply has outpaced demand to transport strategic commodities including coal, iron ore and grains.
"A recession or recession like situation will actually prolong the period with poor freight markets," said Sverre Svenning, a director with broker Fearnley Consultants.
"In normal circumstances, governments -- especially in Europe -- would try and stimulate the economy through infrastructure and construction work but there is no government in Europe that has money for that now and the U.S. government definitely does not have money."
Investors worry that fiscal cutbacks due to Western credit softness and stagnating output are holding back global recovery. Weak U.S. services sector data and poor manufacturing data this week have compounded the fragile outlook.
Former U.S. Treasury Secretary Lawrence Summers wrote in a Reuters column this week that there is a one in three chance of a U.S. recession.
"If there were to be a double dip recession in both the USA and Europe, then it would feel like the mother of all recessions for the dry bulk market," said Khalid Hashim, managing director of the Thai-listed group Precious Shipping PSL.BK.
"It would probably take us to the bad old days of the mid 1980s when the BDI was barely above its all-time low of 557 points."
Hashim said that in such tougher economic conditions, he would not be surprised to see the BDI fall below the 1,000 point level and remain depressed for four to six quarters.
The index was seen by investors in 2008 as an indicator of the global contagion from the financial crisis, highlighting the fall-off in demand for raw materials.
During the boom times, the index posted a record high in May 2008 of 11,793 points. The financial crisis drove it as low as 663 points in December 2008. It reached 1,268 points on Thursday, having hit its lowest in more than three months early this week.
"A further a slowdown from here would be very bad news for the freight market," said Georgi Slavov, head of dry research and structured products at broker ICAP Shipping. "I really hope this is a short lived seasonal slowdown in the West."
The dry freight market faces a growing ship glut, which has battered freight rates in recent months.
Owners went on a ship ordering spree before the economic turmoil in 2008 and it normally takes three years for a ship to hit the water from when it is ordered.
Fearnleys said net fleet growth was forecast to reach 13 to 14 percent this year, despite a pick up in scrapping, versus more than 16 percent in 2010 and nearly 10 percent in 2009.
"There is an acceleration of deliveries since the early part of this year. We will have a market driven by the supply side with far too many ships," Fearnleys' Svenning said.
"The reduction of transportation that has taken place through slow steaming I believe has been used already," he said, referring to a method where ships slow down their speed to cut fuel consumption.
LONG PATH TO RECOVERY
Bank of America Merrill Lynch said this week it saw few prospects for a "sharp and unforeseen upswing" in demand.
"Given the softening in the global economy and a weaker outlook for iron ore demand in 2H11, we believe the dry bulk freight market will remain depressed near term," it said.
"Looking into the next years, we now believe that a real recovery in dry freight is unlikely before 2013/14 when vessel growth finally really lets up, giving demand a real chance to catch up with supply," it added in a report.
Analysts said a slowdown in western demand could also be compounded by softer raw materials interest from China, which has been a lifeline for the dry freight market in recent years.
Earnings for capsize vessels, typically hauling 150,000 tonne cargoes such as iron ore and coal, have fallen to record lows this year. Rates for smaller panamaxes have been volatile.
"I am less concerned about a double-dip recession but if you look at the latest steel production forecasts out of China, 2H (the second half) is forecast to be flat with 1H," said Janet Lewis, shipping analyst at Macquarie Securities.
"I'm not so sure that capesize rates get much worse but probably not much better. I think panamax rates will be the next to falter given the strong supply coming on the market."
Source: Reuters
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Dry bulk market finally takes a breather By total
Published: 2011.08.05
Print EmailThe dry bulk market at last caught a break mid-week after a constant fall which saw the industry’s benchmark, the BDI (Baltic Dry Index) falling to more than a three-month low. Yesterday, the index posted its second straight rise, ending at 1,268 points,
up by 0.63% on the back of firming up signs in the capesize market. The Capesize Index was up by 1.80% to 1,807 points, while the Panamax markets remained subdued to 1,475 points, down by 0.41% on the day.
Commenting on the Panamax market, shipbroker Fearnley’s stated that “summer silence continue with limted cargo flow and softening levels. Atlantic somewhat, especially north, is firmer than pacific. Levels hovering arnd 14k. Some cargoes even stay unfixed due to owners not accepting charterers ideas. Limited period activtity and owners like to hold back doing short employment and wait for better levels. In the pacific rounds being closed just above 8000,- and more and more vessels ballast dir ecsa. Backhaul´ s now at weak 3600/3700 and hopefully it find some resistance now preventing further drop. Expectation´s for next 1-2 weeks is still slow activity but if rates move up or down reamins to be seen” the report said.
On the Capesize front, it mentioned that “after a quiet week and with rates dropping day by day, we finally see more activity. at the time of writing Rio Tinto taken ships in the range usd 7,85 to usd 8 pmt for west australia / china and there is clearly more support in the pacific. The other majors have been active elyer this week, but are now absent. for the front haul marked, charters have been aiming usd 19 - 19,10 rnge throughout the week, with owners at mid 19s and encouragement to do slightly less. In spite of a couple of fixtures, activity has remained week. The same goes for TARV activity, where there is few cargoes. Short period is more or less non excisting after the hype last week” the shipbroker said.
In a separate report, shipbroker Shiptrade Services said on the supramax market that it was a week with mixed feelings at both basins. “In the Atlantic region, the Continent/Mediterranean market was quiet with supras’ reported fixed around USD 4.000 per day for cargoes to USG, while scrap stems ex Continent to Mediterranean sea were done at USD mid teens. Rates for Transatlantic round remained around USD 14-15.000 per day. Fixtures for trips to Far East reported USD high teens - 20.000per day, for GOA traders ex Mediterranean. On the ECSA/F.East market fixtures reported at levels around USD 20.000 – low twenties per day basis W.Africa delivery. In the pacific market increased, with Indonesia being the driving force. Rates for Pacific round held at levels USD 9.000-10.000per day, while trips ex Nopac were performed around USD 10.000 per day basis N.China delivery (M/V Cos Orchid 55.539/06&rsquo
” said Shiptrade in its report.
On the Handysize segment, the general trend was also downward. “Rates drifted further down. “In the Atlantic region the Continent/Mediterranean/Black Sea remains flat, with not many cargoes moving eventhough we could see some coal stems to Mediterranean Sea and some grain cargoes from the Black sea. On the ECSA market grain are still available but sugar parcels are scarce. In the Pacific there was still a constant flow of coal to China, clinker to destination Bangladesh is always there, and a few steel parcels” said the report.
Meanwhile, attention should be brought on the impact of Typhoon Muifa which is likely to hit Eastern China. In a notice issued yesterday from Commodore Research & Consultancy, it mentioned that “Typhoon Muifa has continued to gain strength and remains likely to make landfall near Shanghai. As of now, the typhoon is expected to make landfall south of Shanghai, near the ports of Zhoushan and Taizhou, late Saturday night. If Typhoon Muifa ends up making landfall close to a port, port damage could occur. Coastal trade is also very likely to be affected at several ports including Wenzhou, Taizhou, Zhoushan, and Shanghai. We will continue to monitor the storm very closely and will be publishing additional updates” said Commodore.
from： Hellenic Shipping News Worldwide
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Shipbuilding activity to take a break for summer as Korean yards officialy on holiday By total
Published: 2011.08.04
Print EmailThis week market the beginning of the summer holidays for all South Korean yards, which means that most activity will be subdued ahead of September, apart from a few deals recorded in China. According to the latest weekly report from Clarksons,
“with all the Korean Yards on Holiday, they will no doubt be reflecting during their summer break on the good level of turnover they have achieved during the first half of the year from the various orders they have taken. This has typically been achieved by signing up on the big value projects, not only in the LNG and offshore sectors, but also with many large scale container projects.
Whilst the story of year to date has very much been about the larger container ships, we do believe that as the week’s progress post holidays that we will start to see increased activity in the 1-3,000 TEU sector. This sector typically operates an older fleet and with the orderbook currently sitting at well below 10% of the existing fleet, it does seem as if this sector might prove interesting for potential new orders going forward. Whilst it is very clear of the great economies of scale that can be achieved on the long haul routes by the behemoths that have been contracted so far this year, it should also be clearly noted that the feeding off from these large ports to the smaller inter regional trades will require a greater level of these feeder ships. Thus as the Year progresses, it will be interesting to see how this story develops further” said Clarksons.
In a separate report, Golden Destiny said that “in the newbuilding market, the massive order for 25 river / sea tankers by Volga Shipping Company, Russia has boosted again the ordering volumes this week, up by 72% from last week’s levels, giving false impression for the newbuilding business. There has been a soft market sentiment lately as the freight rates for the dry and wet market are being pushed downwards with players being skeptical for the placement of new orders, given the plethora of new vessel deliveries. Gas carriers and containers have been in the frontline as newbuilding investments, while offshore vessels follow with high demand for platform supply vessels and drilling rigs. Overall, the week closed with 43 new orders reported worldwide, being in parity with the levels of similar week in 2010 when 24 bulk carriers contracts had been reported. Once again it is difficult to estimate this week’s total invested capital, since 95% of the total newbuilding transactions are reported as an undisclosed contract price” said the Piraeus-based shipbroker.
In terms of business deals concluded the report mentioned that “in the bulk carrier segment, Mitsui Engineering & Shipbuilding has announced a contract to build two 66,000 dwt units for an undisclosed contractor to be delivered by 2014. The two “Neo Supramax 66 BC’ bulk carriers” that will have a post panamax beam of 36m are considered to be the next generation, low-fuel consumption vessels. What is noteworthy is the news that the Australian iron ore producer Fortescue Metals Group is planning to order up to six 250,000 dwt ore carriers in South Korea or China. Market players say that the group is developing its own ports that will be able to accommodate its units. Sources suggest that if the vessels are going to built in Korea they would like cost in excess of $480 mil in total, more than $80 mil each unit. In the handysize segment, Japan’s Kitanihon Shipbuilding has received an order from Taiwan’s Unison Marine to build two units of 28,000 dwt at an undisclosed contract price for delivery in the third quarter of 2012. The yard, which specializes in chemical tankers, has decided to enter the handysize market last year after sluggish demand for its main product, chemical tankers. In the supramax segment, new Turkish shipping player Aruna Shipping has placed an order for three 56,000-dwt units at South Korea’s Hyundai Mipo Dockyard for delivery in August/November 2012 and March 2013. One source close to the deal says that the Turkish company booked the bulkers two months ago, but the deal was not reported. Deputy General Manager of Aruna says that they pay between $30-$31 mil for the units, including extras.
In the tanker segment, Aker Philadelphia confirmed that it might win the first US orders for crude tankers in half a decade. The yard has signed a letter of intent to build two 115,000dwt aframax tankers for delivery in 2014. Definitive agreements are expected in third quarter of the year.
In the gas tanker segment, sources suggest that Dryships of George Economou has penned an order for four 159,000 cbm LNG units in South Korea at a total cost of $848 mil, with an option for two more units, for delivery in 2014” concluded Golden Destiny.
from: Hellenic Shipping News Worldwide
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Dry bulk market sinks to three-month lows, but Capesizes could turn things around By total
Published: 2011.08.03
Print EmailThe dry bulk market kept on falling this week, on the back of slow cargo demand amid the summer season. Yesterday, the BDI (Baltic Dry Index), the industry’s benchmark edged further down to 1,253 points, 0.24% lower on the day, but the big news could be found in the positive signs emerged in the Capesize segment. The Baltic Capesize Index (BCI) was up by 0.63% yesterday, which could be coincidental, but could also be the start of a tipping point to the market’s negative sentiment. Elsewhere, Panamaxes were still down by 0.8%, while supramaxes were also down by 0.16% to 1,252 points.
According to the latest weekly report from Paris-based shipbroker Barry Rogliano Salles (BRS), during the course of last week the BDI fell by 4.5%, mainly as a result of a 5% fall of the Capesize market. “In Japan the Institute of Energy Economics for Japan (IEEJ) reported that alternative energy imports would rise significantly if local authorities kept reactors shut after routine maintenance due to safety concerns after Fukushima. According to the IEEJ, power companies would boost run rates for existing coal plants to 85%, up from current levels of 80%. This would lead to an 8.65m tone increase in coal imports for the 2012/13 year, a near 10% increase on the previous year. By May 2012, all 54 of Japan’s commercial reactors could go off line if safety fears delay their restart after regular maintenance” said BRS
Referring on the Capesize segment the report said that “a 6% slip in the BCI and a $1,400 drop in the four time charter average Fridayto-Friday confirmed there was more softening in the market, with the biggest declines in the Atlantic market where, although tonnage remains relatively tight, sentiment is falling away. That said, TA rates were still around $10,000 per day, and Braz-China is still offering $19-$20 per tonne. In the paper market, Q4 rates have now fallen to $10,900 per day, although there is some expectation of a market improvement in Q1 2012 which is now trading around $11,100” it mentioned.
On the Panamax front “in the Atlantic the overall supply of tonnage remained high over the past week, with many ballasters arriving from the Pacific. A degree of resistance has been seen from owners, leading to a relatively steady 1A index trend although overall sentiment remains bearish. The 1A index declined by an average of $55 per day (22/07/2011 – 01/08/2011), a total decline of $384. Reported fixtures were thin on the ground, and there remains little impetus for a sustained rise in rates anytime soon. In the Pacific the number of vessels ballasting towards the Atlantic provided some degree of stability to rates, however little change was seen in the past week, with 3A rates finding an apparent ‘floor’ at around $8,000 per day+. Overall activity remains fairly muted in what was a very quiet week, and this trend may continue unless we see some notable improvement in cargo volumes. On the period front, there was limited enquiry over the week, with just a few fixtures to report. The overall trend was one of further softening, and TESS 74 were getting fixed at around $11,000 for short period” said the report.
Finally, on the Supramax/Handy segment, the Baltic Supramax Index went down by 12 points to finish at 1,259 points last week, while the average of the time charter routes lost about $120 daily to finish at $13,161 per day. The market was active in the Atlantic, tonnage and cargoes remaining quite balanced. Supras ex South America fixed for trip to the Far East at rates close to $20,000 daily with equivalent ballast bonus. In the Med and Black Sea, we noticed some lack of requirement - sustained with interest for ships for few legs or short period. In the Pacific, EC India-China was fixing at rates close to $9/10,000 daily while China-India via Indonesia rated $11,000 daily. On the smaller sizes, the Baltic Handysize Index went down by 21 points to finish at 676 points with the time charter routes losing $328 to reach $9,944 daily. The TARV was worth $11,000 per day, whereas the Pacific round voyage was trading close to $8,500 daily. On the period front, a recently built 57,000 dwt fixed with delivery China for 4/6 months, redelivery worldwide, at $11,000 daily” concluded BRS.
from: Hellenic Shipping News Worldwide
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Shipping line reveals strong return to profit By total
Published: 2011.08.02
Print EmailShipping giant CMA CGM has sailed back into the black at its Liverpool-based UK operation as revenues increased by more than £100m.The company, which is the UK arm
of the global maritime group, posted a pre-tax profit of £48.8m last year, up from a loss of £28.6m a year earlier. Increasing cargo volumes and freight rates resulted in margins rising from 0.4 per cent to 20 per cent.
The recovery in profits was matched by a 40 per cent hike in sales to £361m, putting the performance on a par with 2008 trading levels after a sharp fall in 2009.
French-owned CMA CGM is the world's third largest container shipping line after Denmark's AP Moller-Maersk and Switzerland-based Mediterranean Shipping Company.
The UK subsidiary’s head office is at Princes Parade in Liverpool city centre and it employs more than 230 staff from the site. The business operates seven container ships on a series of worldwide trading routes.
Jacques Saadé, the chairman and chief executive of CMA CGM, last week told Lloyd's List that he expects the overall group to remain in the black in 2011 despite weak freight rates on major east-west trades.
"I will not say we are doing very well because it is not like 2010, that was a marvellous year, but 2011 will be positive," he said.
However, some analysts are forecasting that the container shipping industry's combined results will be negative in 2011 as supply growth outpaces demand.
Earlier this year, CMA CGM was one of several liner shipping companies to be raided by European Union regulators on suspicion of price fixing.
The European Commission made unannounced inspections at the offices of companies active in "container liner shipping in several member states", it said in a statement.
The regulator said it had "reason to believe" that some companies may have breached EU cartel or monopoly-abuse rules, although pointed out the raid did not mean the businesses were guilty of anti-competitive behaviour. CMA CGM said it was cooperating with regulators.
Source: Insider Media
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This Week’s News: A snapshot on the economic and shipping environment By total
Published: 2011.08.01
Print EmailEurope admitted its debt problem in a historical meeting last week and took one more step forward to save the euro. EU leaders recognized that it is not just Greece that faces a problem, but it is a European problem that requires a European solution.
They eventually agreed on a new EUR 109bn bail out of Greece in an attempt to resolve the debt crisis and avoid a contagion evolving in Italy and Spain. It is the first time that private bondholders have been called on to participate so as to shoulder part of the debt burden and contribute in a further injection of EUR 37bn. The debt swap would increase Greece’s borrowing terms by up to 30 years. In addition to the €109bn deal in new loans from international lenders, the agreement includes a commitment from Europe’s leaders to support Athens until it is able to return to the financial markets. Prime Minister, Mr. Papandreou commented that this deal would cover Greece’s funding needs till 2020 and will make the debt more sustainable. Additionally, Greece will be given a 10 year grace period on the new loans.
As far as the loan terms, the EU leaders agreed to ease the terms of the bailout loans for Greece, as well as for Ireland and Portugal, by extending the maturities to 15 years from 7.5 years as well as cut the interests to 3.5% from the current levels of 4.5%-5.8%. French President Nicolas Sarkozy noted that the measures agreed on the summit will reduce Greece’s debt/GDP by 24%. In other words, the Greek debt will be reduced to EUR 300bn (130% of GDP) from now EUR 354bn (154% of GDP). However, ratings agency Moody’s cut Greece sovereign debt by three notches, just one notch above default, saying that the new bailout will set a negative precedent for creditors of other debt-burdened countries. As a result, Greece has now the lowest rating of any country in the world covered by Moody’s and the agency would offer a new rating after the dept swap is completed.
In the US, the Congress has not decided yet about the federal debt issue that remains pending over the past months and unless a solution comes, the US economy will be led to a slowdown as a result of dollar’s depreciation and high interest rates. Unemployment rates have increased in more than half of U.S. states in June, as per data from Labor Department. The economy expanded only 1.9% in the January-March period and most economists expect similar growth in the April-June quarter.
In Japan, an unexpected trade surplus has been recorded for the first time in three months, indicating that manufacturers are recovering from the huge disruption caused by the March 11th earthquake and tsunami. Japan returned to a narrow trade surplus of Y70,7BN ($898,4mil) in June, compared with a market forecast for a deficit of Y150bn, as per data from the finance ministry. The pace of the decline in exports slowed to 1.6% compared with double digit falls in the previous two months, while imports rose 9.8%, a smaller increase from May’s 12.3% rise. The strong yen remains serious concern for Japanese exporters as it makes exported Japanese goods less competitive and adds pressure to companies to shift more production overseas.
In China, the latest statistics show some signs of slowdown for one of the most promising emerging countries. China's gross domestic product (GDP) rose by 9.5% y-o-y in the second quarter of 2011, compared with a 9.7% growth posted in the first quarter and 9.8% in the fourth quarter of last year, the National Bureau of Statistics (NBS) announced. One more sign that the world’s second largest economy is slowing is that China’s imports increased only by 19.3% in June from the same month a year earlier, a sharp deceleration from May’s 28.4% annual increase and well below what most economists were expecting. Meanwhile, inflation persists and the rise in China’s consumer price index is likely to average 3% to 5% over the next 10 years. However, Deputy Chief of the macroeconomic research institute of the National Development and Reform Commission, Chen Dongqi, said that inflation is a short-term risk for China, and the country shouldn't sacrifice economic growth or employment to control it. In the next 10 years, especially during the period of the 12th five-year plan (2011-2015), the rise in the CPI is expected to be higher than in the last ten years, averaging 3% to 5%--not a high rate of inflation, he said.
SHIPPING MARKET
The week opened with a strategic partnership announcement by George Economou-led Dryships to acquire the outstanding shares of OceanFreght for consideration per share of $19.85, consisting of $11.25 in cash and 0.52326 of a share of common stock of Ocean Rig UDW Inc., a global provider of offshore ultra deepwater drilling services that is 78% owned by Dryships. The transaction will allow Dryships to acquire high-quality, modern dry bulk vessels with attractive long-term charters. George Economou, Chairman and CEO of Dryships, commented: “We are pleased to announce the merger agreement with Ocean Freight. The transaction provides Dryships with a unique opportunity to consolidate the fragmented dry bulk sector by acquiring a high quality, modern fleet with long term charters to solid charters. “In the dry market, the sentiment is still obscure with capesize rates leading dry bulk drop as the BDI is steadily losing its strength, falling by 59.points from last week’s closing standing at 1,264 points, and down by 36% from similar week in 2010 when it was standing at 1,967 points. The index remains erratic for several days without showing any signs of positive trends as period activity remains depressed with Chinese iron ore fixtures recording low levels of activity. The summer lull in Chinese iron ore fixtures is attributable to a set of new record increase in domestic iron ore production during June and massive port stockpiles totalling approximately 94.1 million tons of iron ore. Chinese iron ore imports seem to have been affected by the high levels of domestic production and they have shown a slow pace of growth as they fell to 51,09 million tones in June, compared with 53,3 million tones in May, as per data from the customs agency. India’s monsoon season along with Karnataka’s iron ore ban have also cut Chinese iron ore exports. Sources suggest that China sliced its purchases by 4% in June from previous month as India’s wet season curbed shipments and Chinese mills sought supplies from domestic mines.
Government officials in Karnataka have announced that the ban in iron ore exports will continue for at least another three months. But, reports of illegal mining came to light by India’s Lokayukta, an anticorruption organization operating under a mandate from the Supreme Court, identifying 787 government officials for involving in illegal iron ore mining and transportation. Among those named is the current chief minister of Karnataka, B. S. Yeddyurappa. In terms of thermal coal, the Chinese demand appears stronger due to domestic thermal prices, moderate port stockpiles and surging electricity demand.
Global demand for grain and minor bulk cargoes has remained relatively firm, but the South American’s grain season is coming to an end and it may add some pressure on grain fixtures and freight rates.
It is noteworthy that strikes by South African coal workers that have taken place may also hit exports if they continue into August. Current stockpiles at Richards Bay Coal Terminal give miners a cushion as at the beginning of July the terminal was holding approximately 3 million tons of coal, which is about double of the amount that the port held at the start of the year. Additionally, sporadic coking coal miner strikes are on progress and there are currently no signs that an agreement will be reached soon. Given the current state of the dry bulk market, which is facing pressure from swings in iron ore demand with capesizes loosing most of the money, additional external factors such as miners’ strikes, Karnataka’s iron ore ban, high inflation in commodity prices add more strain on the demand side and leaves less hopes for the rebalance with the supply side.
However, an analysis from Wood Mackenzie, China’s commodity agency, brings positive news in the weak environment that owners are now experiencing with capesize earnings being squeezed to less than $10,000/day, when at similar period in 2010 capesizes were earning more than $14,000/day and more than $57,000/day in 2009. The analysis noted on July 20th that Chinese construction spending won’t show a slowdown until 2020 and iron ore demand won’t drop greatly by 2015. The Chinese iron ore production has increased significantly, but China still needs to import 1000 billion mt of iron ore due the domestic high cost and the lower quality of domestic iron ore.
Overall, the dry bulk market remains weak with capesizes currently earning $9,408/day, 13% down week-on-week and 26% month-on month decline when at similar week in 2010 were earning $14,965/day. Panamaxes are earning 28% more than capesizes, but are trading 8.4% down from supramaxes, with earnings $12,061/day, 1.6% down week-on-week and 7.7% month-on-month decline.
Supramaxes are earning $13,161/day, 9% down week-on-week and 3.8% month-on-month decline, while earnings for handysizes are standing at $9,944/day, when at similar period in 2010 were earning more than $14,000/day.
In the wet market, the ample tonnage remains with tanker earnings floating at or below breakeven levels for all major vessel classes, VLCC, aframax and suezmax. The depressed freight market conditions in the crude market has also reversed the intense crude ordering trend seen in 2010 with LNG tankers appearing now more fashionable newbuilding investments as demand prospects encourage players to foresee healthier earnings in the gas segment. The Brent oil price still hovers at high levels above $110/barrel, while the strategic announcement from the IEA to release nearly 60 million barrels from members’ stockpiles last month seems that didn’t provide any boost in the market. Furthermore, the recently statement of IEA that it had completed its 30 day review of its collective stock release and at this stage is not intending to release further volumes may distress longer the rates for crude tankers on key Asian freight routes. Additionally, China’s crude oil imports levels are disappointing as they fell 11.5% in June from a year earlier to a eight month low of 19,7 million tons or 4,82 million barrels a day, according to the latest government data. The figure was the lowest since October 2010, when China imported 16,39 million tons (3,88 million barrels per day).
In terms of LNG demand, June figures are very promising for China and Japan as imports surged to record levels in both countries. Imports by Japan rose 10.6% year-on-year in June, for a third consecutive month as utilities have increased their demand to rebalance the loss of nuclear reactors shutdown by the March earthquake and tsunami. Industry experts have said that LNG will serve a key substitute for nuclear power. In a worst case scenario, a total nuclear shutdown in Japan would likely add 20 million tones of LNG to the nation’s yearly demand. In 2010, Japan imported 70 million tons of LNG, while recently data show that Japan’s imports of LNG totaled 6,228 million tones last month.
Chinese demand for LNG has also increased rapidly this year as power consumption grows and new terminals come online this year. China has imported a record of 1,04 million tones of LNG in June as the country is being prepared for increased summer demand when gas-fired power plants will rev up their operations.
In the container market, third quarter results for the container lines could be in red and the outlook of the industry in 2012 and 2013 remains uncertain as the weakened freight environment during July has impaired the profitability of major container lines, despite a slight improvement in bunker prices. The numbers of fixtures and fixture periods have declined significantly since April, while in June the number of reported fixtures reached at the lowest level this year. Estimations for a rising number of idle ships and negative demand sentiment due to weak European and US economy leaves lot of doubts for a stronger rebound in the charter market till the end of the year.
Statistics figures from Paris-based Alphaliner suggest that the world’s idle fleet has grown from 75,000 TEU to 95,000 TEU in just two weeks and unless volumes pick unexpectedly in July-August, prompting carriers to start new strings, the idle fleet is expected to rise. Moreover, vessel deliveries are rising and market fundamentals are looking even less favorable with Alphaliner suggesting that deliveries will total 213 ships of 1,34 million TEUS in 2011, and 235 vessels of 1,44 million TEUS in 2012, equating to annual fleet growth of 8.7% in each year. More alarming is the large capacity scheduled for delivery in 2013, which so far has reached a record high of 1,73 million TEUS compared with the previous record of
1,57 million TEUS delivered in 2008 and the figure could rise even further as some yards continue to offer newbuilding slots for 2013 deliveries.
In the shipbuilding industry, China was the world’s largest shipbuilding country in 2010, surpassing South Korea and Japan in terms of output, new orders and orders on hand. China emerged to be the biggest but not yet the strongest shipbuilding industry. According to the Ministry of Knowledge Economy, South Korea regained its status as the world’s leading shipbuilding nation in the first half of 2011 by sealing orders for 224 ships, totaling 8,92 million compensated gross tons, 53.2% of the 16.88 million CGTs worth of orders placed worldwide. Chinese yards have secured orders worth US$8,8 billion that amounted to 5.17 million CGTs in the six month period, while South Korean yards have won orders worth $31,4 billion that are fetching over 90% of the $34,8 billion orders the country secured the whole period of 2010. Meanwhile, the Korea Shipbuilders’ Association (Koshipa) announced results for the nine big South Korea’s shipbuilders indicating an increase of 98.6%, in terms of volume of orders, from a similar period a year earlier, securing a total of 195 contracts of Ships and Offshore plants of 7,97 mil CGT. The nine yards include Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Samsung Heavy Industries, STX Offshore and Shipbuilding, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard, Hanjin Heavy Industries & Construction, SHINASB Yard and Daesun Shipbuilding and
Engineering.
Japanese shipbuilders are still slipping behind Korea and China as according to statistics released on July 19th from the Japan Ship Exporters’ Association, June’s new orders bring the year to date orders (January-June) to a total of 120 vessels amounting to 5,05m GT (2,3m CGT). The figure is down 2% from the same period of last year, in terms of gross tonnage. Around 90% of the orders were for bulk carriers with small and midsize vessels below panamax units grasping 76% of the activity. Efforts from Japanese shipyards to win some orders have been hampered by continued fall on ship values. Sources from Japanese shipbuilders said that in case of panamax bulkers, shipowners require about 10% lower prices than that from the end of last year.
In the capital markets, Athens-based Nautilus Marine Acquisition Corp, led by former Star Bulk executives raised last week $48 million in an IPO, below the target rise of $60 million. The company, which currently has no operations, will have 19 months to complete a business transaction in the maritime industry.
In terms of shipping finance, a term loan facility of $48mil has been signed by D’ Amico Tankers Ltd. Ireland to finance most of the cost of two newbuildings of 52,000 dwt product / chemical tankers to be delivered by Hyundai Mipo Dockyard in March and April next year. The company said in a statement that the loan amount largely covers the remaining installments to be paid to the shipyard for the two newbuildings and the lenders are the Credit Agricole Corporate & Investment Bank and DNB NoR Bank.
Source: Maria Bertzeletou – Golden Destiny S.A Research Department
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Genco sees ship breaking rising on high scrap prices/low freight By total
Published: 2011.08.01
Print EmailScrapping of dry bulk tonnage is set to rise further, stimulated by high ferrous scrap prices and a prolonged period of depressed freight rates, New York-listed dry bulk ship owner Genco Shipping & Trading forecast.Gerald Buchanan, president and CEO
of Genco, told analysts on a second-quarter earnings call that Capesize demolition in 2011 could reach 100 vessels after 51 ships were scrapped in the first half of this year.
The company did not give any 2010 comparisons for Capesize demolition, but, according to Norwegian ship broker Fearnleys, only one ship was scrapped in the first half of last year and two in all of 2010.
Quoting statistics from Clarkson Research Services, he said that some 13.5 million dwt of all dry bulk carrier types had been scrapped so far this year compared with 5.7 million dwt in the whole of 2010.
He said the world Capesize fleet had grown by a net 75 vessels, taking account of 126 new deliveries and 51 deletions. At the end of June, the world Capesize fleet numbered 1,233 ships, up 6.5% from the 1,158 at end-2010. Overall, the world dry bulk carrier fleet, encompassing all size ranges, had seen net additions of 382 vessels. The world bulk carrier fleet numbered 8,536 ships at the end of June, up 4.7% from the 8,154 vessels at the end of December.
Buchanan noted that 18% of the world's dry bulk fleet is more than 25 years of age, while 24% of it is more than 20 years old. John Wobensmith, CFO at Genco, said that among the Capesize ships scrapped so far this year were vessels that were 18-20 years of age, which meant that shipowners were being "proactive" in addressing the supply/demand imbalance of ships.
"Scrapping will continue to play a significant role, especially if the freight rate environment remains depressed for a prolonged period," said Buchanan. "Scrapping is essentially an economic equation. It is our opinion that the current combination of high scrap steel prices and suppressed rates will support increased scrapping."
Wobensmith said the company expected to see a turnaround in freight rates in about 12-18 months, with a return to a supply/demand balance. "we base it on a slowdown of newbuild deliveries. Even more importantly, a lot of the expansion plans from the miners will be coming on stream, with a projected large push in 2012 and an even larger push in 2013, with 500 million [metric] tons of iron ore coming on stream over the next several years, which is more than half of what was shipped in 2010."
Buchanan said that public statements from the key mining groups pointed towards a 50.5% increase in seaborne iron ore capacity between 2010 and 2015, to 501 million mt.
GENCO'S Q2 EARNINGS SLIDE ON LOWER FREIGHT RATES
On Tuesday, Genco reported second quarter net attributable income of $10.1 million, or 29 cents/share, down from $36.8 million ($1.16/share) a year earlier. The Q2 result, released after the New York Stock Exchange closed, beat analysts' expectations of around 24 cents/share.
Earnings fell because of lower freight rates, but revenues held up better, as a result of operating a larger fleet.
Genco's voyage revenues fell to $98.5 million in Q2 2011 from $105.3 million a year earlier. The number of ships operated in Q2 was 60 compared with 40 in Q2 2010. Time charter equivalent earnings per vessel fell to $18,299/day in Q2 from $30,405/day in Q2 2010.
In the first half of the year, net attributable income fell to $23.5 million, (67 cents/share) from $70.2 million ($2.24/share). But voyage revenues were flat at $199.1 million in Q2 2011 compared with $200 million a year earlier.
The company operated 60 ships in the first half of the year compared with 40 in the corresponding 2010 period. Average time-charter equivalent rates per ship fell to $18,720/day in the first half of 2011 from $30,326/day a year earlier.
Source: Platts
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Shipbuilding orders to “thin out” as summer season is underway in many countries By total
Published: 2011.07.29
Print EmailWith the annual Summer shipyard holidays in Korea now approaching, we anticipate that the coming two weeks will remain a little subdued Clarksons said in a recent weekly report. The leading researcher and shipbroker also mentioned that
“the newbuilding story of the year has been dominated by high value business - with LNG, Container and Offshore sectors leading the charge. Competition across these sectors has been fierce and with a much narrower pool of yards competing for the same business, buyers prepared to invest into high value assets, have been to realise competitive pricing, as a result of the competitive dynamic that exists between the yards.
This week we saw HHI announce a 10% drop in their operating profit against an increased year on year sales performance - Samsung also announced $14.2bn of orders year to date - but again a much reduced level of profitability. So whilst there is no doubt that the shipyards in Korea have been successful in terms of maintaining productivity and certainly winning some high value and profile business - this has not been as profitable an endeavour as the market might assume. This will certainly impact on how the pricing story will evolve in the 3rd and 4th quarters of the year - and whilst there will certainly be an interest from Seller's to continue to drive momentum into the market - this will be against a continued pressure to improve margin - and as to whether Buyers will be accommodate such a potential firming of values - this remains to be seen!” concluded Clarksons.
On a similar note, the Piraeus-based shipbroker Golden Destiny said that investments continued in a slower pace in the newbuilding market, presenting a 47% decline from last week in terms of contracted orders. “Overall, the week closed with 25 new orders reported worldwide, down by 71% from similar week closing in 2010 when an impressive figure of 86 new orders had reported worldwide. Bulkcarriers and containers are again in the top preference of investors, representing 32% each of the total orders reported. The total investment capital is calculated to be more than usd $ 965.5mil, however the actual figure remains undisclosed since for 13 of these orders, no price related detailed were disclosed.
In the bulkcarrier segment, it appears that despite the already reported orders of 8 units, Japanese investors rumored to be proceeding with speculative orders al local Japanese yards for standard bulkcarrier designs. In total, a number of 20 orders have been recorded to various Japanese yards i.e. Koyo, Imabari, I-S Shipyard and Shin Kasado Shipyard. This move seems to be giving a boost to the Japanese production, while according to our sources these units might be probably sold at a later stage or will be bareboated out by trading houses with purchase options” said the shipbroker.
It also mentioned that “in the container segment, activity remains vivid with Greek investors continuing to show their belief in the sector by investing in the post & small panamax sector, while the state owned company of India, Shipping Corporation of India contracted a 3,500teu unit at China’s Rongsheng Shenfei. In the gas segment, Golar LNG and Ceres LNG (though Gaslog) continued their ordering spree by adding more units in their fleet. Lastly, the investments in the special projects, continue on a weekly basis. This week one Drillship and one Jack up Drilling Rig have been reported” concluded Golden Destiny.
In terms of the presence from Hellenic ship owners the shipbroker said that the week ended with the nine transactions in total concerning greek investments. In the secondhand market, just one sale of a 5000teu container vessel built 2003 and acquired at $ 55 mil concerned greek investments, while in the newbuilding market eight greeks appeared to have invested in new contracts. More specifically, in the newbuilding market, Thenamaris is again in the spotlight with ordering 4 x 5023 container units from Hyundai Samho, while in the same shipyard Aeolos Management has placed an order for three 6,700 teu. In the gas tanker sector Ceres ordered one more LNG carrier of 155,000cum having on order now six such units. The total invested capital for the secondhand market is usd $ 55 mil, while for the newbuilding investments taking into consideration that the contract prices of the orders of Aeolos remains unknown, a total capital of $ 440mil has been calculated” said the report.
From：Hellenic Shipping News Worldwide
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Commodity Shipping Market Is Showing No Glut, Arrow’s Webb Says By total
Published: 2011.07.28
Print EmailThere are no signs of a glut of ships competing to haul iron ore and coal as indicated by charter rates for the vessels, said David Webb, a shipbroker at Arrow Capesize (U.K.) Ltd. in London.
Earnings for capesize vessels that sail around the Cape of Good Hope or Cape Horn to deliver cargoes dropped 49 percent this year, according to the Baltic Exchange in London. The Bloomberg Dry Ships Index of 12 commodity-shipping stocks declined 22 percent to 1,347 points over the same period.
“There’s no evidence of oversupply in the spot market,” Webb, who’s been matching cargoes with ships for three decades, said by phone today. Prices are dropping because of sentiment rather than vessel supply and demand, he said.
The fleet is set to expand three times more quickly than trade, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. The combined transportation capacity of the carriers will swell by 13 percent this year, compared with the 4 percent growth it forecasts for shipping commodities at sea.
Lower speeds increase the amount of time needed for a vessel to complete a voyage, essentially curbing ship supply.
Daily capesize rents slid 3.3 percent to $10,115 today, according to the Baltic Exchange. The Baltic Dry Index, a wider measure of commodity transportation costs, fell 1.1 percent to 1,296 points.
Panamax vessels, the largest to pass through the Panama Canal, dropped 0.4 percent to $12,232 a day, according to the bourse.
Smaller supramax and handysize carriers, both of which carry ore, coal and grains, also fell. Supramaxes lost 0.1 percent to a daily $13,223 and handysizes declined 0.7 percent to $10,112.
“Everybody believes the market is over-tonnaged full stop,” said Webb. “But the physical evidence of fixing ships is that there’s not an oversupply.”
Source: Alaric Nightingale, Bloomberg
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