Slumped freight rates lifted capesize scrapping to a record high in the first five months of 2011.
It counts 35 ships from the sector heading to the breakers beaches between January and the close of May, smashing the previous benchmark set 15 years ago.
Derek Langston, senior director at SSY Consultancy and Research, tells Reuters a further 11 capes have been sent to the scrap heap since the start of June but have yet to be beached.
He said: "Those 35 that have already reached the ship breakers in the first five months of this year have already surpassed the previous annual record of 24 capesize ships being scrapped in 1996.”
While the new benchmark is a welcome sight for owners struggling with freight rates around $10,000 per day in the spot market, the scrapping figure is a long way short of the 105 capesize newbuilidings which have been delivered so far this year.
Yangzijiang Shipbuilding’s $700m order for seven 10,000 teu containerships from Seaspan, with options for 18 more, could signal the start of a major shift in boxship building from South Korea to China.
Yangzijiang chairman Ren Yuanlin said the deal represented a “strategic move” for the company. “The successful design and manufacture of the 10,000 teu container vessel is important to promote and transform Yangzijiang and also the overall Chinese shipbuilding industry,” he said.
Barclays Capital research analysts Jon Windham and Patrick Xu said they believed the shipbuilder to be “one of the best-quality container yards in China”.
They said: “Securing these orders confirms our view that Yangzijiang will take leadership by moving into larger vessels, thus marking a shift in container shipbuilding in China, over the next five years.”
Yangzijiang’s orders prior to the latest one from Seaspan have been for smaller boxships, with the largest order on its books up to now being 4,800 teu.
Other Chinese shipyards have also shared this focus on smaller sized boxships, but data from Clarkson suggests a gradual clawing away of market share in larger vessels of more than 8,000 teu from South Korean yards, which traditionally have dominated the field.
There are 257 vessels comprising 2.8m teu on the global order book for containerships of greater than 8,000 teu. Of these, 77% are on order at South Korean yards and 13% at Chinese yards. The rest is made up of orders with builders mainly in Taiwan and Japan.
Looking purely at orders for post-panamax containerships in 2011, of the 702,200 teu booked year to date, 74% of orders have been placed at South Korean yards, while 14%, or 70,000 teu, went to China.
While the 70,000 teu is purely as a result of the Seaspan deal, should some or all of the options on the 18 additional vessels be exercised, then China could see its presence grow significantly.
“It is apparent that Chinese yards have begun to compete aggressively for orders,” noted Clarkson Research Services in its second quarter 2011 Container Intelligence Quarterly, pointing out that Jiangnan Changxiang has the fifth largest orderbook for containerships.
Mr Wu of Barclays Capital said Chinese yards had the advantage of lower labour costs, while at the same time many were improving their shipbuilding capabilities.
There has been a quite soft sentiment in the markets this week with bulk carriers attracting the buying appetite of investors in the secondhand market and demolition activity showing some signs of easing off. The newbuidling business has seen a slow pace of weekly growth with bulk carriers being out of the game. However, newbuilding units are still fashionable as appealing newbuilding prices stimulate the interest of the industry players, especial in the container segment. Overall, the week ended with 24 transactions reported in the secondhand and demolition market, while the highest activity has been recorded again in the newbuilding market with 20 new contracts reported worldwide.
In the secondhand market, 14 vessels reported to have changed hands this week at a total invested capital in the region of US$ 161 million, 6 transactions reported with undisclosed sale price. In terms of the reported number of transactions, the S&P activity has been marked with a 8% negative w-o-w change, while is down by 33% comparable with previous year’s weekly S&P activity when 21 vessels induced buyers’ interest with bulk carriers grasping 62% share of the total volume of S&P activity. In terms of invested capital, the most overweight sector for this week is the tanker segment grasping 51% of the total amount of money invested. In the tanker segment, more preference was been witness to modern tonnage versus vintage tonnage for bulk carriers.
In the newbuilding market, the week closed with limited fresh activity posting a 72% week-on-week decline as only 20 units reported to have been placed, after last week’s record activity of 72 new transactions. After almost three weeks, no contracting activity has been witnessed again in the bulk carrier segment that seems comforting for the industry, taken into consideration the ongoing scheduled deliveries till the end of 2012. The total invested capital estimated to be around $4,4 bn, 4 newbuilding transactions reported with no revealed contract price, with offshore segment grasping 75% of the investment value. The floating storage booked by Shell for delivery within 2016 is the world’s largest floating gas production and storage vessel and one of the highest capital intensive investments. Thus, in terms of invested capital, the most overweight sector appears to be the offshore, while containers have won the largest share (45%) of this week’s newbuilding activity. At a similar week in 2010, the newbuilding activity was up by 55% than current levels with 31 new contracts to had been reported worldwide and bulk carriers winning 80% share of the total volume of reported contracts.
In the tanker market, the MR ordering trend continues with India’s Great Eastern Shipping placing two units of 51,000dwt in the South Korean yard “SHINAsb” at a price of $36 mil each.
In the container segment, the ordering spree for the mega containerships seems limitless with Seaspan placing a firm contract of $700 mil to build seven 10,000 TEU boxships in China’s Yangzijiang Shipbuilding. Seaspan signed letters of intent with the yard on February to build 22 identical units.
In the offshore segment, the buoyed sentiment is still there with some new fresh orders expecting in the coming days. Petrobras’ board of directors have officially sent into motion a tender for the construction of 21 drilling rigs, ultra deepwater drillships, to be built in Brazil.
In the demolition market, the keen interest for scrapping tonnage is still high with prices remaining at the same levels during the last days and bulk carriers remaining on the top of scrapping appetite. Bangladesh and India offering the highest levels by paying close to $500/ldt for dry and excess $500/ldt for wet cargo, while China is still far below the best levels offered in the Indian subcontinent region. With the monsoon period and the upcoming closure of Bangladesh on the beginning of July, there is more hope for a bounce back of China within summer period. Pakistan is quite inactive during the last days as the result of its budget announcement is being filtered by the local buyers. There has been a kind of softness in the activity, but there are still deals concluded at very appealing levels for the owners.
The week ended with 10 vessels reported to have been headed to the scrap yards of total deadweight 578,408 tons. In terms of the reported number of transactions, the demolition activity has been marked with a 44% week-on-week decline and 62% in terms of total deadweight sent for scrap. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker sector by India for a MR tanker of 43,644 dwt “OVERSEAS NEW ORLEANS” at 525/ldt and by Bangladesh for a capesize of 201,227 dwt “BRAZIL STAR” at the same price. India along with Bangladesh has attracted 80% of the total demolition activity. At a similar week in 2010, demolition activity was down by 30% than the current levels, in terms of the reported number of transactions, 7 vessels had been reported for scrap of total deadweight 123 mil tons with only two bulk carriers scrapped and India offering the highest levels $350/ldt for dry and $380/ldt for wet cargo.
The Greek presence appears absent this week from the investment scene with no transactions concluded either in the secondhand or newbuilding market.
Greek shipowners have been cautious when it comes to placing new ship contracts in the first five months of 2011, according to Piraeus-based shipbroking house Golden Destiny.
A more bullish attitude has been seen in contracting container vessels with shipyards, with 29 boxships ordered so far this year by Greek owners.
But this mirrored international confidence in the sector’s prospects as overall a total 183 containerships were ordered up to the end of May, the broker said.
Greek companies have clearly curbed their activity in contracting further dry bulk carriers and tankers since last year.
According to Golden Destiny, Greece-based owners ordered 35 bulk carriers of an aggregate 2.6m dwt in the year to end-May.
This was about 10% of dry bulk capacity ordered internationally and compares with 53 bulkers of 5m dwt ordered by Greeks in the first quarter alone in 2010.
In the tanker sector, Golden Destiny counted just nine vessels ordered by Greeks in the first five months of the year, aggregating 1.3m dwt.
This compared with 20 tankers of 2.7m dwt contracted in the first quarter of 2010.
Altogether only 53 tankers of 5m dwt have been ordered worldwide so far this year, according to the broker’s statistics.
In the container sector, Greek owners are showing “preference towards large sizes, large panamaxes and post-panamaxes,” the broker said.
Both state-owned and privately-run Chinese shipyards are receiving many mid-size containership orders.
Yangzijiang Shipbuilding has won four 4,800-teu containership orders. And the yard announced yesterday that it inked seven 10,000-teu ships with Canadian owner Seaspan.
Zhejiang Ouhua Shipbuilding inked two 4,800-teu ships from Greece's Thenamaris and the same pair from Eveland Shipping.
Dalian Shipbuilding Industry Corporation booked four 4,800TEU's from Singapore's Pacific International Lines.
Shanghai Shipyard also contracted 4,800TEU quartet with John Fredriksen-led Ship Finance International.
Meanwhile, Rongsheng Heavy Industries is in negotiation with Greek owners to build 6,600TEU's.
Although ultra-large containership orders are mostly contracted at South Korean yards, some Chinese yards with boxship building technology are expanding mid-size boxship orders.
Late deliveries of containership newbuildings will decrease compared to the past three years.
That is the view of consultancy firm Alphaliner in a market commentary which concludes that slippage rates are set to decline after the high levels seen recently that have helped to keep a lid on annual fleet expansion numbers.
Since the industry crisis began in 2008, the delivery dates of many ships on order have been pushed back, helping to slow year-on-year capacity increases and stabilise the market.
In 2009, only 57% of the 1.87m teu scheduled for delivery was actually handed over, Alphaliner estimates, with slippage of 43%.
The following year, slippage was estimated at 34%, with actual deliveries totalling 66% of what had been expected back in January 2009.
In 2011, slippage is forecast by Alphaliner to be down to 25%, with the firm predicting that cancellations and deferrals “will no longer play a significant part” in reducing the level of new containership deliveries.
The firm had originally forecast 1.81m teu of deliveries for 2011, then scaled that number right back, but has now made an upwards adjustment to 1.36m teu as slippage slows.
Alphaliner’s new forecast for 2011 deliveries are not far off those of Clarksons that has also been keeping as close watch on slippage and has accordingly revised its 2011 delivery forecast up to a little over 1.2m teu from closer to 1m teu previously.
Alphaliner also reports that the idle containership fleet fell last month to 111,000 teu or 0.7% of the fleet. Reactivation of larger ships has left only 15 ships of 2,000 teu or larger unemployed. Most of those now inactive are smaller than 2,000 teu.
Cash-rich owners are starting to jump on depressed newbuilding prices in the product carrier market.
A new products tanker in South Korea today has a price tag 30% below the 2008 peak, Poten & Partners says.
“To a cash-rich owner in a bad market, newbuildings have the added advantage of delayed delivery, which in theory will allow the market to recover by the time the ship begins to trade,” its weekly report said.
“But aye, there’s the rub. While attractive on a microeconomic level, a widespread resurgence in newbuilding activity could seriously exacerbate oversupply woes and jeopardize the recovery of tanker rates anytime in the near future.”
South Korea has captured 45% of all tanker newbuildings during the past five years, the broker says.
Now owners are turning to China for fresh contracts, with the majority of tankers slated to arrive in 2013 coming from the country.
The trend that has recently been seen in the MEG VLCC market continues with steady fixing, a shorter list of available tonnage, and slightly firmer rates. With about 110 fixtures now concluded from the MEG for June lifting and about 47 VLCCs still open basis Fujairah for the balance of the month, there is probably still more than enough tonnage available for any remaining June liftings. But the situation gradually appears to be turning more in owners´ favour. The Atlantic VLCC market is suffering due to a weak Suezmax market, and only Chinese and Indian charterers are active in moving cargoes to Asia. Suezmax rates in WAF took a further dip into the mid ws60s. With the Atlantic basin well over-tonnaged with Suezmaxes, there is little or no reason to expect a better WAF market in the near future. In the Med/Bsea, there was scant Suezmax activity and the market remains soft with a strong downward pressure. The same was true for the Aframax markets in the Nsea/Baltic and the Med/Bsea where available tonnage far exceeded cargoes. In the Med, the Aframax market bottomed out at ws82.5 and has remained at this low level for some time. For Aframaxes trading Caribs/upcoast rates remained unchanged at the ws100 level.
West; the CPP market remained weak in all segments with TC equivalent earnings for LR1s and MRs approaching the usd zero mark. A lack of cargoes combined with the accumulation of available tonnage placed considerable downward pressure on rate levels. We assess the MR TA market to be ws140 basis 37k m/t which fails to generate earnings that are positive on a TA round voyage basis. Our assessment for LR1s on the same voyage is ws117.5 (around usd 7k/day). With most owners incurring waiting time of up to one week prior to obtaining employment, net earnings are close to zero. There was limited activity in the fuel oil market which resulted in a further surplus of tonnage and a further decline in rates of about 10 ws points. The Handy cross UK market dropped about 7.5 ws points to ws157.5 basis 30k m/t whilst the Flexis dropped to ws197.5 basis 22k m/t. In the Caribs, upcoast rates dropped about ws15 to around the ws130 level. Limited activity on backhauls to Europe and rates remained around ws85/90 basis 38k m/t. We see little reason to expect any improvement in any of these markets in the near future. East; the clean tanker market east of Suez remained unchanged for a few days but has now turned downwards. We see little reason for optimism in the near term. Rates MEG/Japan are at the ws130 level basis 55k m/t for LR1s and at ws105 basis 75k m/t for LR2s. Jet fuel cargoes MEG/UKC are being concluded at the usdm 1.9 level basis 65k m/t. For MRs rates are around ws155 basis 30k m/t on the Spore/Japan route and around ws145 basis 35k m/t on the MEG/Japan route.
Fairly quiet markets across the board with another flat week/stagnant rates in store. Nevertheless, tonnage is thinning out in the Black Sea for the second half of June which might give some improvement on rates. Little activity on the Continent. USG remains stable on the back of regular petcoke exports. In the ECSA more cargoes are programmed for the second half of June thus look for better rates there in near future. The Pacific market is falling further with less activity. For Indo-India, Supras in North China are getting close to 10k. Nickel-ore rounds are getting firm rates in low-mid teens from Indonesia. WCI-China rates slided to 13k and from ECI around 12k. Red Sea, ferts on Handymax/Supras are fixed at very mid 20´s pmt on voyage basis to WC India. Large Supras for RBCT/India round now asking 14k. Period deals done at 14-15k for large Supras.
After a slow end to last week and even slower start to this week, the market improved on Tuesday in both hemispheres. The Atlantic saw several fresh cargoes fm USEC and ECSA, and in the Far East the upturn came due to fresh coal cargoes from Aussie and Indonesia to China. Now, at mid week, we are again at a crossroad with the players not sure where the market will be heading. We see some more interest in period deals now, and seems chrts feel the rates at ard USD 14k are interesting for twelve months. Atlantic rounds are getting fixed at ard USD 16k while front hauls are being fixed in the low/mid USD 20k´s. Pacific rounds are being fixed around 13.5/14k while the backhauls are getting fixed around USD 6k´s.
Cold water is again coming out of the shower for owners as spot levels fall due to softening demand - average daily earnings down 10% w-o-w to come in at USD 10k. In Atlantic, fronthaul activity is cooling down, although rates not yet dramatically affected. The sudden lack of transatlantic trade is more felt, with a resultant drop of almost 30% to an estimated USD 10k/day. Far East remains challenging and keeps hovering around OPEX levels - low USD 7k´s for rounds and uninspiring USD 7.50 pmt for the Dampier/ Qingdao conference trade. As forward paper prices give no support at present, period activity has come to a halt after a handful of units were concluded for short and medium periods - exemplified by 174kdwt/blt 2006 done for 12 months at USD 11k and 169kdwt/blt 2009 done for 4-6 months at USD 10500, both basis prompt delivery in Far East.
There was not too much wrong with the activity level last week; Producers floated a few FOB tenders, some freight negos took place and a few deals were subfixed and confirmed. Rates, however, remained where they have been the last fortnight in the very low USD 40´s per ton basis Ras Tanura/ Chiba. Owners are attempting to somehow lift rates step by step, but the liquidity in the market is not high enough to make it happen yet, and patience seems to be the word. There are about 7-8 available VLGCs in the MEG for the balance of June, a fairly modest number compared to previous months, nonetheless probably outnumbering remaining cargoes that need freight. The Indian charterers have not been as active as they were in previous months lately, and it shows how vulnerable the VLGC freight market is when a few cargoes disappear. In the West there was some activity, too, charterers tried their best to squeeze owners, but at the end of the day very little had materialized. A Status Quo week, indeed.
Some activity in the product market this week. It seems there is a renewed interest in MR segment. All together 9 MRs confirmed at Korean shipyards. In addition, LNG is still in demand. Russian owner, Sovcomflot, placed an order for two 170,000 cbm LNG carriers at STX Jinhae with delivery end 2013 and mid 2014.
John Fredriksen says tanker prices will crash during the next couple of years and he is looking to use that window to expand his fleet.
Clarksons presently values a five-year-old VLCC at $83m, down from $104m at the end of 2008. According to Fredriksen, however, the greater fall is yet to come.
It will be within “a year or two” that the market “collapses”, he said in an interview with Bloomberg.
Fredriksen will then look to pick up vessels at a discount, the newswire says.
The report emerged only a couple of weeks after
Fredriksen’s closest aide Tor Olav Troim also predicted a lot of pain ahead for the VLCC market. He quipped shipping is facing its worst period since the Black Death.
Buying prices for new panamax commodity-hauling ships will drop 10 percent by the end of next year as slumping charter rates curb owners’ vessel purchases, said Maritime Strategies International Ltd.
Prices will “trough” in 2012’s second quarter and be at $30 million by the end of the year, Adam Kent, a director at the freight forecaster, said during a conference in London today. That compares with around $33 million to $33.5 million now, he said.
There are 648 panamaxes on order at shipyards worldwide, equating to 34 percent of the trading fleet of 1,886 vessels, according to data from Clarkson Research Securities Ltd., a unit of the world’s biggest shipbroker. Charter rates for the vessels provided by the Baltic Exchange have slipped 2.3 percent in 2011 after falling 49 percent last year.