The enthusiasm for newbuild orders across most shipping markets has started to wane after over USD 10 billion were committed in the first quarter of 2018, according to a report from VesselsValue.
The total committed to new deliveries is now the lowest since the start of 2016. Ordering trends in the start of the year were highest in the markets that recorded the highest returns. This includes the dry bulk and LNG carrier markets, while interest in the low earnings environment tanker markets was softer.
“In one sense this highlights the short-term view that some investors take of the market. It still appears to be easier to secure financing for ships in a strong market as opposed to those that are suffering in the doldrums.”
VesselsValue explained that rising asking prices from shipyards are partially to blame in the downturn in new orders. Higher steel prices, smaller workforces, and less willingness by yard creditors to accept low margins are contributing to lower buyer interest.
“The slowdown in newbuilds is an encouraging sign that over-ordering may not be a significant issue.”
Some of the market segments have a large outstanding orderbook, but most of these are offset by an equal number of ships on the water which are equal to their recycling value. If orders remain between USD 4 and 8 billion level through rest of the year it should support the asset values of younger ships as well, VesselsValue said.
The headwinds to global trade may give some owners pause in fleet renewal plans, especially in the container and dry bulk markets, however, most shipping markets appear to be at their trough level or improving.
German container shipping line Hapag-Lloyd has lowered its profit forecast for the financial year 2018 amid increasing operational costs.
This in particular relates to fuel related costs and charter rates combined with a slower than expected recovery of freight rates in the first five months of this year, the liner explained.
“These developments cannot be fully offset by cost saving measures that have already been initiated,” the company said announcing the decision of its Executive Board.
Hapag-Lloyd also referred to the uncertainty regarding the development of freight rates in the upcoming peak season as one of the factors for the outlook revision.
The new figures forecast an EBIT in a range between EUR 200-450 million and an EBITDA ranging between EUR 900 million and 1.150 billion.
Hapag-Lloyd managed to shrink its net loss in the first quarter of this year, however, market challenges persist, the company’s CEO Rolf Habben Jansen warned.
The company’s net loss for the period stood at EUR 34.3 million (USD 41 million), almost halved when compared to the last year’s loss of EUR 58.1 million.
Aside from UASC merger, the better financial performance was ascribed to a positive development of the worldwide container transport volume and a slight recovery of freight rates.
Following the mergers with the container activities of CSAV (2014) and UASC (2017) the number of the company’s employees increased by around 70 pct.
In order to streamline its operations, the company is also embarking on a workforce redundancy plan, which is expected to result in the cutting of up to 12 percent of its almost 11,000 land-based workforce.
In addition, 159 full time employees are planned to be laid off in the company’s headquarters in Hamburg by the end of 2019.
Speaking to World Maritime News, a company spokesman said that this number could be somewhat lower, adding that there are some positions in the company yet to be filled.
However, overall, a greater number of people is expected to be affected by the redundancy measures, as there are plans of outsourcing jobs and eliminating certain positions.
South Korea's Hyundai Heavy Industries has cut a third of the executive workforce in its offshore and engineering division, Yonhap said citing the shipbuilder.
The world's biggest shipbuilder is shrinking the workforce as its orders in the sector completely dried up.
The decision was made only weeks after Hyundai Heavy said it decided to temporarily shut down its offshore shipyard.
At the time, the shipbuilding major informed that the facility would run out of work by the end of July, when it finalizes its last order secured in November 2014, and subsequently close its doors in August.
This would be the first time the facility shuts down since the start of operations in 1983.
Yonhap earlier informed that the shipyard closure will leave some 5,600 offshore workers redundant, 2,600 of which are regular employees and 3,000 are supplier workforce.
The shipbuilder established a task force with its labor union in an effort to devise a solution for the redundant workers. HHI informed that the union demands paid leave for workers in rotation, however, the company is considering a number of options.
Shipping confidence held steady in the three months to end-May 2018, according to Moore Stephens' latest Shipping Confidence Survey.
The average confidence level was unchanged at the four-year high of 6.4 out of 10.0 recorded in February 2018. Confidence on the part of owners was also sustained at a four-year high, of 6.6, while managers’ confidence was up from 6.4 to 6.7.
The rating for charterers was up to 6.7 from 5.0 and confidence in the broking sector was up from 6.1 to 6.3. The survey was launched in May 2008 with an overall rating for all respondents of 6.8.
Moore Stephens said that the likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey from 5.5 to 5.2 out of a maximum possible score of 10.0.
Confidence was highest among charterers, followed by owners (down from 5.9 to 5.5), managers (down from 5.6 to 5.4) and brokers (down from 4.0 to 3.5).
The number of respondents expecting higher freight rates in both the tanker and container ship sectors was up, from 39% to 50% and from 38% to 43% respectively. In the dry bulk trades, such expectations were unchanged at 54%.
“We first launched the survey in 2008 just months before the Lehman Brothers bankruptcy which was to trigger a protracted global financial recession. Shipping markets were buoyant at the time, with an average confidence level of 6.8 out 10.0.”
“Ten years is a long time in shipping, and the past decade has doubtless felt a lot longer still to those industry participants who have lived through it, even those inured to the peculiar cyclicality of the industry. Confidence may have fluctuated, but it has never collapsed, and portents for the coming decade can reasonably be expected to be better,” Moore Stephens concluded.
European Transport Workers Federation (ETF) and the European Community Shipowners’ Associations (ECSA) have discussed possible solutions to increase women’s participation in the shipping industry in Europe.
Currently only 2% of the seafaring workforce available for the EU fleet consist of women, whilst gender equality is being put at the heart of the EU’s fundamental values for sustainable and inclusive growth.
Discussions focused on maritime training and career development for women, as well as the recruitment and retention of women in the shipping industry.
Alongside representatives of both the ETF and the ECSA, participants came from a wide range of stakeholders such as the European Commission, the European Economic and Social Council, the UK Merchant Navy Training Board, national administrations from France and the UK, researchers from the Paris Descartes University, and the Community of European Railway and Infrastructure Companies (CER), who were there to share good practices from other sectors.
“If we want strong, prosperous and socially sustainable maritime clusters in Europe, gender diversity should be a leading principle as a means to attract and retain new talent in the shipping industry,” Said Martin Dorsman, Secretary General of the ECSA, said.
ECSA said that the meeting has proven that social partners “are willing to work together on this issue and have taken a first step towards finding concrete proposals for joint action.”
French container shipping giant CMA CGM has decided to acquire Containerships, a Finland-based company specialized in the intra-European market.
As informed, CMA CGM has signed an agreement with Container Finance pursuant to which the container shipping and logistics business Containerships and Container Finance’s holdings in Multi-Link Terminals and CD Holding will become part of the CMA CGM Group.
The agreement remains subject to approval by the relevant authorities and the estimated closing is between 3-6 months, according to Containerships.
Upon closing of the transaction, Container Finance’s entire container logistics operations will integrate CMA CGM intra-regional market offering in Europe and Mediterranean area.
CMA CGM Group is already present on the intra-regional market through its subsidiaries: CNC in Intra Asia, Mercosul in Brazil, Sofrana in the Pacific Islands regional maritime trade, and MacAndrews in Europe.
“The acquisition of Containerships will strengthen even more the development strategy implemented by Rodolphe Saadé, CMA CGM Group’s Chairman and CEO, aimed at densifying the group’s regional network,” CMA CGM said in a statement.
Founded in 1966, Containerships is an intra-European Shortsea specialist with a presence in the Baltic market, Russia, Northern Europe, North Africa and Turkey. With a workforce of 560 people, Containerships offers a complete range of services, as well as logistics solutions by ship, truck, rail and barges.
Commenting on the recently signed agreement, Containerships said it“continues to execute its LNG strategy as planned and will launch four LNG-fuelled vessels between August 2018 and January 2019.”
The outlook for the global shipping sector for the next 12 months remains stable on the back of expected supply-demand improvements in the dry bulk and container shipping segments and overall sector earnings growth of 4%-5%, according to ratings agency Moody’s.
However, the outlook for the tanker segment is negative as supply remains high and charter rates low.
“Demand will slightly outstrip supply in the dry bulk segment, while supply and demand are likely to be pretty evenly matched in the container shipping segment. This combined with our expectation of 4%-5% organic earnings growth in the next 12 months underpin our stable outlook on the global shipping sector, despite continued oversupply in the tanker segment,” Maria Maslovsky, Vice President – Senior Analyst at Moody’s, said.
“Recent US tariff announcements targeting steel and aluminium imports from certain countries and potential retaliatory action pose downside risks to the global shipping sector,” Maslovsky added.
In the dry bulk segment, over the last 12-months to April 2018, the size of the global dry-bulk fleet grew by just 1%, a positive for the segment. Moody’s expects that demand will outstrip supply by about 1% in 2018. Charter rates have improved, but the rating agency expects them to remain volatile.
In the container shipping segment, broad macroeconomic growth coupled with trade growth will support demand. However, high supply growth, especially in the first half of 2018, “will likely prevent material further increases in freight rates.”
In the tanker segment, significant new deliveries will continue in 2018 after a surge in supply in 2017, with crude tankers representing the lion's share. Moody's said that the industry will take time to absorb these deliveries so charter rates “are likely to stay low over the coming 12 months.”
Danish shipping registries will soon expand with another 11 vessels which are set to fly the Danish flag.
The units in questions are the ones belonging to the fleets of Danish shipping companies TORM and Dampskibsselskabet Norden A/S, according to the Danish Maritime Authority.
“This builds on the historic milestone when Danish shipping registries recently reached 20 million GT,” the authority informed.
Even though Denmark is not the world's biggest ship registry, it is now in front when it comes to growth rate over the past year, which means that in just one month, the Danish International Shipping Register has grown from 20 to 20.5 million GT, with more than 700 ships registered in DIS.
“It is encouraging to see the Danish flag continuing its growth. Our political initiatives are having a positive effect, and we will continue the efforts to reduce administrative burdens, digitalize and improve the framework conditions and overall service for the industry,” Brian Mikkelsen, Minister of Business, Industry and Growth, said.
Since the beginning of 2018 around 230 second-hand sales have been reported in the dry bulk sector, according to Intermodal’s market insight.
Handysizes and Ultramaxes seem to have sparked the greatest interest with 160 sales in the dwt range. The high demand for such tonnage has seen asset values leap upwards.
“We recently saw a 38k dwt non-Japanese bulk carrier built in 2011 being sold for USD 11.3 million and a 33k dwt Japanese unit built in the same year fetching more than USD 15 million. Both these prices are indicative of the increasing popularity Handysize vessels above 33kdwt are currently enjoying,” Intermodal’s George Iliopoulos said.
Supramax and Ultramax bulkers were also the popular choices of owners, with Chinese and Japanese-built tonnage attracting the most buyers.
Two types of Supramaxes attracted buyers’ interest, according to Intermodal, small Supras ranging between 50,000 and 52, 000 dwt, built in the early 2000’s and bigger vessels over 55,000, built between 2006- 2012.
A 2006-built MV Darya Vishnu fetched a price in excess of USD 13 million. For the purpose of comparison, about a year ago, a sister ship of the bulker, was sold for around USD 10 million, only to be resold at the end of 2017 for slightly above USD 11.5 million.
“Prices appear to be on the rise again and the performance of the freight market during the summer season will definitely help shape expectations for the last quarter of the year,” Iliopoulos added.
The likely oil exports decline from Iran stemming from the planned reimposition of sanctions against the country by the United States could leave up to 20 Very Large Crude Carriers (VLCCs) without work, according to Drewry.
Curbing of Iran’s oil production would come at a very bad time for the tanker market with supply being very tight taking into account restrictions of OPEC production and declining Venezuelan output.
“If we consider a situation similar to the 2012 sanctions, it will wipe-out all the gains of close to 1.0 thousand barrels per day (mbpd) in Iranian production which came after the nuclear deal. The potential impact on oil and tanker market this time around would be more severe,” Drewry said.
Even in the absence of sanctions, the call on OPEC crude and stock change for the remainder of the year will be about 0.6 mbpd higher than OPEC’s March production levels of 31.8 mbpd not-withstanding the rising US-led non-OPEC production. In 2019 the situation should ease as further gains in US production will bring down the call on OPEC crude, the UK shipping consultancy said.
“Theoretically, OPEC producers have more than enough spare capacity (3.4 mbpd) to fill the possible void created by Iran sanctions. The majority of this spare capacity lies with Saudi Arabia and other Middle Eastern producers,” Drewry went on to say.
Consequently, should Middle Eastern OPEC producers ramp up production to fully compensate for any decline in Iranian supply, the sanctions would have no impact on oil trade and tanker demand.
However, if that is not the case, the market could be in deep trouble, as the gap will have to be met by inventory drawdown, which in turn will curb trade by an equivalent volume.
“In this scenario, we could see a decline in seaborne crude oil trade close to 50 million tonnes (equivalent to 2.2 pct of 2017 trade). Or put another way, 15-20 VLCCs, could be without employment,” Drewry said.