The total number of incidents of piracy and armed robbery against ships in Asia during January-August 2018 increased by 5% compared to the same period in 2017, according to the regional piracy watchdog ReCAAP ISC.
A total of 57 incidents comprising 45 actual and 12 attempted incidents were reported during January-August 2018 compared to 54 incidents comprising 46 actual and eight attempted incidents reported during the same period in 2017.
There was no CAT 1 incident reported during January-August 2018, and the majority of incidents were CAT 4. However, of concern was the increase in number of incidents reported at anchorages off Chittagong, Bangladesh, mostly petty theft in nature. A total of 11 incidents, comprising nine actual incidents and two attempted incidents, were reported during January-August 2018 compared to six incidents reported during the same period in 2017.
During August, a total of eight incidents of armed robbery against ships were reported in Asia. There were no reports of piracy, abduction of crew in the Sulu-Celebes Seas and hijacking of ships for theft of oil cargo reported in August 2018. Compared to the preceding month, the number of incidents has decreased slightly from nine incidents reported in July 2018.
Of the eight incidents reported in August, six occurred on board ships at anchor and two on board ships while underway. Seven of these were actual incidents, one was CAT 2 incident and the other six were CAT 4 incidents.
On August 4, 2018, a Kuching-registered oil tanker was underway from Bintulu to Miri, Sarawak, East Malaysia when five perpetrators armed with pistol and long knife boarded the tanker at about 12 nm off Tanjung Kidurong. The perpetrators tied all crew and took away their cash, mobile phones and some jewelry items before escaping off from the ship. The perpetrators were arrested on August 17, 2018 and handed over to the investigation team.
"This is the first incident of armed robbery at sea reported off Bintulu since January 2018. No incident was reported off Bintulu in 2017," ReCAAP said.
French container shipping company CMA CGM plans to continue to look for acquisition opportunities after its plans for merging with German rival Hapag-Lloyd fell through, Reuters reports.
Speaking on the sidelines of the inauguration of the company's new flagship, the 20,600 TEU CMA CGM Antoine de Saint Exupery, in the Port of le Havre, the company's CEO Radolphe Saade, confirmed to Reuters his company was interested in Hapag-Lloyd, but added that the matter was closed now.
Potential future targets of the company have not been revealed.
Information on CMA CGM's exploratory approach toward Hapag-Lloyd on a potential merger emerged in July 2018, however, the German company turned down the proposal.
Commenting on the consolidation of top-tier carriers like CMA-CGM and Hapag-Lloyd, Drewry said earlier that such a business combination was unlikely as it would probably be challenged by regulatory authorities amid fears of breaking fair competition rules.
One of the most recent acquisitions saw CMA CGM buy Brazil's container shipping line Mercosul Line from Maersk Line.
CMA CGM and Maersk Line announced the deal in June as part of Maersk Line's move to acquire Hamburg Süd, which Maersk finalized at the end of November.
The move was preceded by CMA CGM's acquisition of Neptune Orient Lines (NOL), which operates through the APL brand, a year earlier.
When asked about the rising tensions between the U.S. and China and the impact on the company's business from the spat, Saade said that the trade flow between the two countries remains strong, especially on the Transpacific route. Nevertheless, should tensions further escalate with the introduction of new tariffs, transported volumes are likely to be impacted.
DNV GL – Maritime has released its second Maritime Forecast to 2050, further developing its concept of "carbon robust" ship design that now evaluates fuel and technology options by comparing the break-even costs of a design to that of the competing fleet of ships.
Remi Eriksen, Group President and CEO of DNV GL, said that "the energy transition is undeniable … Last year, more gigawatts of renewable energy were added than those from fossil fuels and this is reflected in where lenders are putting their money.”
Following on from the 2017 report, the new Maritime Forecast to 2050 focusses on the challenges of decarbonizing the shipping industry. It examines recent changes in shipping activity and fuel consumption, future developments in the types and levels of cargoes transported, and future regulations, fuels and technology drivers.
"Decarbonization will be one of the megatrends that will shape the maritime industry over the next decades, especially in light of the new IMO greenhouse gas strategy,” Knut Ørbeck-Nilssen, CEO DNV GL – Maritime.
"Combined with the current and future trends in technology and regulations, this means that investment decisions should be examined through a new lens. Therefore, we propose a ‘carbon robust’ approach, which looks at future CO2 regulations and requirements and emphasizes flexibility, safety, and long term competitiveness. With this new framework, we hope to help empower robust decision making on assets.”
In the first Maritime Forecast, DNV GL introduced the concept of the "carbon robust" ship. A case study utilizing the model in several vessel designs reveals some striking findings, including that investing in energy efficiency and reduced carbon footprint beyond existing standards can increase the competitiveness of a vessel over its lifetime. The study also suggests that owners of high-emitting vessels could be exposed to significant market risks in 2030 and 2040.
The Maritime Forecast predicts a rise of nearly a third (32%) in seaborne-trade measured in tonne-miles for 2016–2030, but only 5% growth over the period 2030–2050. This is based on the results of DNV GL’s updated global model, which is described in detail in the DNV GL Energy Transition Outlook 2018. The model encompasses the global energy supply and demand, and the use and exchange of energy within and between ten world regions.
Tanker owners are set to see an increase in freight rates in the second half of 2018, a welcome rebound from the historic lows over the recent months.
Seasonal demand should support the market in Q3 and, especially, in Q4, according to BIMCO. However, a long-term recovery is highly dependent on removal of outdated capacity from the fleet through demolition.
"For crude oil tankers to really enjoy solid earnings, however, patience is required, as overcapacity is currently significant. The fundamental balance could worsen in 2019 if demand growth does not pick up, as the fleet could grow by 2.5% unless extensive demolition activity continues,” BIMCO's Chief Shipping Analyst Peter Sand said.
Unfortunately, despite high demolition prices owners have not been that eager to part from their older ships as they still believe market will turn for the better in the second half of the year.
During the first half of the year, 13.1 m dwt of crude oil tanker capacity has been demolished, a level equal to the total for the preceding 40 months, BIMCO's data shows.
But, there has been a reversal in demolition trend in the second half of the year with only one VLCC broken up in July, and little more that 1 million dwt demolished in total.
"BIMCO expects that there will be a cooling in demolition activity in the final six months of 2018, as the market is likely to deliver somewhat higher freight rates on the back of increased demand in the second half of the year,” Sand said, saying the expected demolition for crude oil tankers is 19 million dwt and 2.5 million dwt for oil product tankers.
Fleet growth year to date has been muted by the massive demolition activity. The crude oil tanker fleet was 0.2% smaller by early August than it was at the start of the year. The oil product tanker fleet has grown 1.7% in the first seven months of 2018.
"Our fleet growth forecast for the full year of 2018 is at 0.8% for the crude oil sector and 2.4% for the oil products sector," Sand concluded.
Transporting crude oil and petroleum products across the oceans is expected get significantly more expensive for charterers from 2020 due to new sulphur regulations.
Charterers, who will get to choose from scrubber-fitted ships and those running on compliant low sulphur fuels, are expected to foot the majority of these costs.
Charterers of very large crude carriers (VLCC) that opt for marine gas oil (MGO) to comply with the new sulphur regulations will need to pay a 33% premium come 2020, when compared to VLCCs fitted with scrubbers, Poten & Partners said in their latest tanker report.
The report looked at the potential impact of IMO 2020 at a number of tanker segments and calculated the expected freight costs. The estimates were based on the average 2016 tanker rates: a Time Charter Equivalent (TCE) of USD38,520 per day for VLCCs.
On this basis, an owner of a VLCC consuming low sulphur MGO, costing USD657 per ton, would need to charge a charterer USD14.87 per ton to move its cargo from the Arabian Gulf to the Far East.
The owner of a vessel equipped with scrubbers only needs to charge USD11.14 per ton to generate the same TCE of USD38,250/day, because it can fuel its ship with much cheaper HFO, costing USD326 per ton, Poten said.
The analysis used the average prices for 3.5% sulphur fuel oil FOB Rotterdam Barges and 0.1% Gasoil FOB Rotterdam Barges in 2020 based on yesterday's forward curve.
"In this example, the charterer of a VLCC that runs MGO will need to pay a 33% premium. The differentials for the other segments are also significant, ranging from 16% for MR's on the UK/Continent – US Atlantic Coast route to 41% for LR2's on the Arabian Gulf – Far East route, with Suezmaxes and Aframaxes somewhere in between," the report said, adding that the premium is higher on longer haul routes.
It is expected that a small percentage of vessels will be equipped with scrubbers by January 1st, 2020 when the new IMO rules go into effect.
"We expect that tanker rates will initially be negotiated based on the assumption that vessels use low sulphur MGO," Poten said.
"This could provide a windfall to vessels that are equipped with scrubbers. Assuming that charterers are indifferent to whether vessels have scrubbers or not, a VLCC could generate a TCE of USD51,000/day, a USD12,500 premium based on the same freight (USD14.87/ton).”
The capacity of the containership fleet is growing too fast for the demand side to keep up, exerting further pressure on the freight rates and hopes of market recovery.
The delivery of newbuilds has been rampant since the beginning of this year, especially of ultra large container vessels (ULCVs). What is more, newbuild deliveries for the remainder of the year are still biased toward ultra large ships but not as much as in the first seven months.
The yards have delivered 947,000 TEU of newbuilt containership capacity, according to the figures from BIMCO, with only 36,833 TEU of capacity demolished by early August.
"During Q2-2018, just five ships (9,608 TEU) were taken out. It’s been 10 years since we last had such a low level of capacity removed. Only small and old ships have been broken up. In 2018, the average ship being demolished was 24 years old, with a capacity of 1,754 TEU. In 2017, the average ship was 21 years old and 2,807 TEU in size,” BIMCO’s Chief Shipping Analyst Peter Sand says.
To cap it all, considerable portion of the idle fleet has been reactivated fuelling further the supply growth and pushing freight rates down.
BIMCO said that the idle fleet dropped from 417,000 TEU at the beginning of the year to 341,000 TEU at the end of July 2018.
Sand explained that due to the ongoing trends on the market BIMCO has downgraded its demolition estimate from 250,000 TEU to just 80,000 TEU. This results in an estimated nominal fleet growth of 5.5% for 2018.
"If you keep demand growth and idle fleet fixed, the fundamental balance will deteriorate if the fleet growth goes up from 5.5% to 5.7%,” he added.
Due to faster fleet growth and slower demand growth, the expected improvement of fundamental balance seems to be a long way ahead. What is more, demand growth is bigger in the short intra-regional hauls than in the longer-distance trades for which the ULCVs are intended for.
With 3.8%, global demand growth and a year-to-date fleet growth of 4.4%, BIMCO expects a worsening of the fundamental market balance, resulting in lower freight rates.
However, things are looking brighter for next year.
"Currently, 2019 is on target for much more manageable fleet growth, that not even a very low level of demolition would be capable of putting off track, unless a sudden rush by shipowners towards the yards emerges. Contracting interest tends to come in waves, and its been low so far in 2018,” Sand added.
Hull losses recorded in the first half of the year stood at their lowest level since 1996, according to a report from The Nordic Association of Marine Insurers (Cefor).
Major claims impact continued to be low in the first half of 2018, despite one grounding with a cost of USD 25 million in the first quarter of the year. The overall claims frequency continued its positive trend and stabilized at a relatively low level.
Cefor said that, although it is too early to conclude for the whole year 2018, the general trend over the last eight years has been a stabilization of the total loss frequency at low levels, with some oscillation between 0.05% and 0.10%.
Insured values dropped on average 2.5% on 2018 renewals, compared to a drop of 5.8% in 2017 and 7.% in 2016. The report showed that the improvement is especially due to some recovery in the supply/offshore segment in 2018 after an increase in the oil price, following a recovery in the bulk market in 2017. However, Cefor noted that there is an increasing gap between the development of vessel values as compared to the average vessel size.
The number and impact of major and total losses has remained low since 2016. This trend continues into the first half of 2018. As of June 30, three losses exceeding USD 10 million were reported, the largest of which was USD 25 million. During the whole year 2017, eight claims exceeding USD 10 million were registered (two of these exceeding USD 20 million), compared to fourteen in 2016.
After the substantial drop in insured values on renewals from the last quarter of 2008, the annual reduction stabilized between 4% and 7% between 2011 and 2014. From 2015, the average reduction accelerated again. Especially two-digit value reductions on bulk and supply/offshore vessels contributed to this. The bulk market recovered somewhat in 2017, while the supply/offshore market still was under the influence of the low oil price level.
In 2018, also the supply/offshore market showed some signs of recovery, thus bringing the overall annual value change on renewed vessel back to a more moderate level. Under unchanged market conditions, a certain reduction in the insured value of a vessel, compared to the previous insurance period, is expected due to the aging factor.
Italian shipbuilding major Fincantieri and China State Shipbuilding Corporation (CSSC) have signed a Memorandum of Understanding for the extension of industrial cooperation to all segments of merchant shipbuilding.
Under the agreement, the two parties are planning to expand cooperation beyond the cruise sector into the oil & gas industry; cruise-ferries; mega-yachts; special vessels; steel infrastructures; marine engineering and equipment procurement. The plan also covers the establishment of a supply chain in the cruise segment in China, according to a joint press release.
To this end, Fincantieri and CSSC will establish a joint working group, composed of 6 members with appropriate technical expertise, 3 selected by each side.
The group aims, by the end of the year, to conclude the preliminary activities: to define potential opportunities for each of the areas identified for the collaboration, to analyze the market size and to identify preferential sales channel, to analyze potential partnership among CSSC and Fincantieri group companies or its network of suppliers.
“This agreement is a further recognition of our decision to access to the great potential represented by China. Acting as a first mover for the shipbuilding, today we are able to create new opportunities for small and medium-sized companies of our supply chain, through the successfully consolidation of the relations with the major groups of the country in this sector, and, at the same time, to continue to do the same in the West, taking advantage of the cruise segment boom and maintaining the acquired leaderships," CEO of Fincantieri Giuseppe Bono said.
In February 2017 Fincantieri, CSSC and Carnival Corporation signed a contract for the construction of two cruise ships, with an option for additional four, at the Shanghai Waigaoqiao Shipbuilding (SWS) shipyard.
The group also signed a letter of intent (LOI) with CSSC and the Shanghai City's district of Baoshan for the development of the supply chain mainly dedicated to cruise activities, as well as shipbuilding and maritime. The Italian shipbuilder has also inked a deal with Huarun Dadong Dockyard (HRDD) in the field of ship repair and conversions, aimed at serving the cruise ships based in China.
I summarized China's current LPG shipping industry on Aug. 20 in terms of data, regulations and capacity limiting policy. Today, let's talk about the prospects for the industry in 2019 from the aspects of oil price trend and market demand.
Oil Price Trend
In the first seven months of this year, bunker prices jumped amid high international crude prices driven up by many factors including OPEC's production reduction, the United States' exit of the Iran nuclear deal and the deterioration of Syria's situation. Brent crude oil reached a four-year high of USD80 per barrel. Data collected by Eshiptrading.com show that during the period, prices of fuel oil 180CST ranged from RMB3,500 per ton to RMB4,700 per ton, compared with the range of RMB3,100 per ton to RMB3,800 per ton witnessed during the same period a year earlier.
International crude prices have started to go down since mid-August due to OPEC's forecast cut for global oil demand and the appreciation of the U.S. dollar. However, it is worth noting that the U.S. will carry out the sanctions on Iran's crude export on Nov. 4, which will cause a supply crisis. Therefore, international oil prices are expected to surge in the fourth quarter of this year, and those of China are forecast to go up accordingly. In this case, the operating costs of China's shipowners, including LPG carrier owners, will increase.
Refining and Chemical Integration Projects
The first phase of the huge refining and chemical integration project invested by Zhejiang Petrochemical Co., Ltd. will conduct its trial operation this December. The next phase, which is the final one, will be kicked off around 2020. Upon the completion of the project, the refining capacity will hit 40 million tons per year. Additionally, the annual outputs of arene and ethylene will reach 1,040 tons and 280 tons respectively. It is said that the total investment in the project hits as high as RMB173 billion.
In addition, many other projects of this kind are underway in China. Therefore, the domestic demand for LPG shipping is anticipated to rise.
Thus, the operating costs for China's LPG carrier owners are forecast to climb, but at the same time, refining and chemical integration projects will boost the demand for LPG shipping, which will push up freight rates and rents.
Greek dry bulk shipping company Diana Shipping has secured more work for one of its Capesize dry bulk vessels, the m/v Semirio.
The company inked a time charter contract with Hong Kong-based Pacific Bulk Cape Company for the 174,261dwt ship.
As informed, the gross charter rate is USD20,050 per day for a period of minimum ten to about twelve months. This is a considerably higher rate given that the 2007-built ship is currently chartered to Koch Shipping at USD14,150 per day.
The new charter is expected to commence on Aug. 30, 2018.
According to Diana, the employment is anticipated to generate approximately USD 6.02 million of gross revenue for the minimum scheduled period of the time charter.
Diana Shipping's fleet currently comprises 50 dry bulk vessels. As of today, the combined carrying capacity of the company's fleet is approximately 5.8 million dwt with a weighted average age of 9 years.