Market Analysis
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2011-06-16 09:58:16

TANKERS
CHARTERING
Crude
The VLCC market ex-MEG has gone a little quiet as June draws to a close. It seems that only a few charterers are covering their positions early, with the majority comfortable in the present supply of tonnage and waiting for stems to be confirmed. The Atlantic VLCC market saw little joy in light of weak  Suezmax  rates.  VLCC  rates  are  expected  to  remain  steady  around present levels. The Atlantic Suezmax market remained flat this past week and is believed to have bottomed out. Although we saw a somewhat busier market this week there is still sufficient tonnage available for dates in play, enabling charterers to maintain current rate levels. As there was no change in  rates  or  activity  for  Suezmaxes  in  the  MED  and  Black  Sea  this  past week, owners seeking employment in West Africa are enabling charterers to keep the pressure on the rates in this region. It was also a quiet week in the Nsea and Baltic, although end of the month cargoes coming into play could result in  increased activity. Rates are definitely at bottom levels, as  they have been for quite some time now. MED activity picked up a bit this week and rates have improved. Black sea on the other hand seems quiet but rates are up due to the MED market.
Product
Despite their best efforts to push the market back up from their current low levels, Owners have not been able to see anything more than a mild dead- cat bounce in Transatlantic rates for now, with MRS fixing around ws147.5 for UKC/USAC basis 37kt. The pain for the big ships is worse, as the continent is clogged up with far too much available tonnage; LR1s trading Baltic/USAC is fixing at ws112.5 basis 60kt. Smaller tonnage is neither in scarce  supply,  with  Handies  trading  across  NWEurope  at  ws152.5  basis 30kt, and Flexis at ws195 basis 22kt. On the bright side, Caribs and USG activity seems bottomed out, with upcoast voyages fixing at ws130 basis 38kt,  backhaul  voyages  USG/UKC-Med  at  ws90  level  basis  38kt.  We continue to see a flat trend for clean tonnage in the West. East of Suez we observe yet another drop in freight rates for the LR1s, while the LR2s are dead flat. We expect that the market is very close to bottoming out, and do not expect any substantial downside from current levels. For LR1s trading MEG/JPN fixtures are being concluded at WS 120 basis 55kt, and on the LR2s fixtures are being concluded at WS 105 basis 75kt on the same route. We have seen quite a few jet fuel cargoes heading west, but with recent rate levels on the Continent, Owners are reluctant on taking more vessels in this direction. Jet fuel liftings MEG/UKC basis 65kt are fixing at USD 1.875 million. MRs trading Spore/JPN are seeing rates around ws155 basis 30kt, whilst MRs trading MEG/JPN are seeing rates around ws142 basis 35kt.

 

DRY BULK
CHARTERING
Handy
Stable market in the Atlantic across the board with a ´good balance´ between tonnage and cargoes. More enquiries for the rest of June thus expect rates to firm up in the second half of the month but the element of uncertainty will be the effect from the important volume of ballasters coming from India/South Africa/PG. In the Pacific we have been seeing plenty of enquiries in the market. For short period business the level is around 15k per day. West coast tonnage may see close to usd 10k for trip to China with freight levels hovering between USD 15/17.00 pmt. Ec coast tonnage will compete for indo position with China business. Hmx/Spmx getting fixed at usd low/mid 20´s ex Rsea/India.
Panamax
Hot  for  spot!  June  loaders  for  a  still  active  ECSA  grain  season  and Indonesian coal requirements have pushed the market in both hemispheres to be  more  comfortable  than  perhaps  anticipated.  Furthermore,  increased mineral activity in the Atlantic improved opportunities for prompt positions, in  particular  on  the  Continent.  Overall,  the  Panamax  market  maintains healthier levels than the bigger size  at least for now. Transatlantic rounds in the USD 17,000 range, Fronthaul from ECSA typically 25,500 + 550 GBB. Pacific rounds in the mid teens with some stronger levels achieved for Indo rounds or trips to India. Period and forward market not affected much at all by the current lively spot market. The so called summer lull is not here - yet.
Capesize
Signs of life again after a week in the doldrums. Atlantic is heating up, with a sudden dramatic increase in transatlantic demand - too fresh to be reflected in levels concluded. Fronthaul volumes are stable at low volumes - rates unchanged w-o-w ie around usd 22k for fhaul trips, around usd 20/mt on the Tubarao/Qingdao ore run. Major miners steadily picking tonnage for iron ore Waust/China, but rates improved only marginally to some usd 7.80 pmt on the Dampier/Qingdao reference trade. Moderate period activity - exemplified by 169,000 dwt/built 2009 done for 12 mos at usd 10,500 and 17,6000 dwt/ built 2010 done for 4/6 mos at usd 10,250 - both basis prompt delivery in Far East.

GAS
CHARTERING
The  activity  level  picked  up  slightly  with  a  few  spot  fixtures  being concluded towards the end of last week. The start of this week saw activity levels drop again, much owing to a bank holiday on Monday and the P&G conference in Singapore. Despite the Baltic LPG rate increasing throughout the last week, there were reportedly fixtures being made in the low usd 40´s basis Ras Tanura / Chiba. In effect, July cargoes seems to have fixed at a small discount compared to the June rates and when the seemingly bullish sentiment amongst owners was put to the test it proved to be weaker than expected. This week another FOB tender was floated and a few Far East and India cargoes emerged for loading in the MEG, something which reduced the number of open spot vessels in the area to a large extent. The number of prompt vessels in the MEG (including relets) will increase fairly rapidly in July and perhaps put a downward pressure on rates again. In the West there has been very limited activity although a few fixtures were reported towards the end of last week, including a short TC for an LGC which will be trading in the Caribs. Unless some spot cargoes appear in the market the activity level is not likely to change to any extent, particularly considering that the port of Houston is scheduled for maintenance from end June and halfway through July.

 

NEWBUILDING
GENERAL COMMENT
Some activity in the gas and container markets this week. Although most of the newbuilding contracts in the gas sector over the last couple of months have been in LNG, Norwegian owner Solvang placed a order for a LPG carrier at Korean major HHI. The delivery is set to 3Q2013. In addition, Seaspan adds another 7 large container carriers at Chinese yard Yangzijiang, the price for the 10,000 TEU ship is reported at USD 100 mill.

 

DEMOLITION

MARKET BRIEF

2011-06-16 09:38:30

The latest figures from shipbrokers indicate that ship owners appear to still be active in the second hand vessel purchase market, in fact with rejuvenated interest, although, the sellers’ reluctancy to put more vessels to the market, is trimming buyers’ appetite. According to the latest report from Shiptrade Services, the purchase interest remains strong this week, as well in the dry bulk sector. “The demand for tankers continued as well. Buyers for Containers vessels continued to search the market for the right candidate” said the shipbroker in its weekly report.
Highlights of the week included: The sale of M/V “Ansac Asia” (33.945 dwt, Built 1998 Kanda, JPN) which is reported sold for USD 17 mill to Undisclosed buyers sets a new basis for similar vessels, compared to the sale of M/V “F&K” (32.942 dwt, Built 1998 Kand, JPN) which was reported sold in early February for USD 18.75 mill.
Torm has sold one more LR II tanker, the M/T “Torm Marie” (abt 109.000 dwt,, Built 2006 Dalian, CHN) for USD 46 mill, to First Ship Lease Trust (FSL) of Singapore with a 7 year Bareboat Back to “Torm” at undisclosed rates. An Identical deal with the one reported in the previous week.
In a separate report Golden Destiny said that “there was 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” said the shipbroker in its report.
Meanwhile, in an interesting analysis, shipbroker Intermodal found that asset values in the dry bulk market, are well below their 11-year averages for modern vessels (ships of 5 years old or less). Capesizes are the biggest losers in terms of value, with 23.83% below their average, with Panamaxes following with -10.63%. Supramaxes are trading lower by almost 10% from their average, while the only gainers are the Handysizes, which are actually higher by 4.91%, compared to their average. In terms of freight rate correlation, Intermodal noted that Capesizes are now earning almost 75% lower (1-year time-charter) from their historical average (11 years back), with Panamaxes at -40.16% lower.
In terms of demolition activity, Shiptrade said that “with monsoon season fully underway across the Indian subcontinent, which is creating a downward trend, buyers are generally unwilling to offer at high levels and only a few sales have been reported this week. There was not much activity in Bangladesh last week with buyers reluctant to move in this volatile market. No change at the Pakistani market as well due to the low budget of the buyers. China has a gap of about USD 50 with the Indian subcontinent which is expected to be reduced” said the shipboker.

2011-06-15 14:01:09

Newbuilding prices for large containerships rose for the second consecutive month and South Korean shipbuilding stocks are recommended by local analysts.
IBK Investment Securities analyst Park Seung-hyun said on 15th that new order intake momentum for local shipbuilders is still good for the second half of the year.
Recently, newbuilding prices for large boxships rose for second straight month and the uptrend is expected to stretch into the latter half.
In LNG carrier sector, demand is expected to rise steadily and newbuilding prices would rise as well.
Park recommended Hyundai Heavy Industries and Hanjin Heavy Industries & Construction.
He said, "Hanjin is now facing complex labor-management problem but if the issue is resolved, the yard will be able to receive midsize containership and LNG carrier orders in earnest."

2011-06-15 13:42:39

Japanese shipbuilders signed 18 export ships of 550,000 gt in May, down 41% on a year ago in gt terms.
Japan Ship Exporters' Association announced on June 14 that the new orders consisted of 16 bulkers (seven handies, four handymaxes and five panamaxes) and two seismic vessels.
Despite the decrease in May, Japan's export ship order intake during January-May rose 27% year-on-year to 4.51m gt.
In May, JPY-based contracts occupied 28% while foreign currency deals took 52%.
Last month 29 newbuildings of 1.4m gt made it through customs, up 25% while 7.8m gt of newbuildings cleared customs by May this year, down 6% y-o-y.
Japanese yards' export ship orderbook stood at 933 ships of 43.14m gt (18.78m cgt) decreasing 2% m-o-m and 9% on 2010 end.

2011-06-15 13:37:09

Chinese shipyards' competitive edge is getting 'blunt' in process of time due to cost increase and lack of high-value ship technology and experience.
China Association of National Shipbuilding Industry (CANSI) revealed that 313 shipbuilding companies fell into losses of the 1519 companies above certain level in the first quarter of this year. The combined losses came to CNY 1.11bn ($171m). 
Chinese yards are now faced with two major difficulties. One is a rise in building costs. Shipbuilding steel plate prices rose by 8.74% (by CNY 321 per ton) by April this year, labor cost jumped by 15% on average, and CNY appreciated by 1.85%.
Another big problem is that global newbuilding demand is changing in structure. Chinese new ship order intakes decreased in the first half of this year as newbuilding ordering centered on high-value vessels like ultra-large containerships, drillships, LNG carriers and other offshore facilities.
Chinese new orders rose in January-April compared to a year ago but newbuilding deliveries surpassed new orders, leading to reduced orderbook.
CANSI forecast Chinese shipyards would face further difficulties for a while as high-value ships lead global newbuilding market and the yards face higher cost pressure.

2011-06-15 09:41:19

CSBC Corp, Taiwan, the nation’s biggest shipbuilder, expects the industry’s growth momentum to rebound in 2013 on the back of higher prices, a company official said yesterday.
“Although the shipbuilding sector’s current growth momentum remains at a low level, from my perspective, the situation might change in 2013,” CSBC chairman Paul Tang told reporters after the company’s annual shareholders meeting.
Demand for ships might rise gradually next year, driving up prices and leading to robust growth in the sector in 2013, Tang said.
In addition, Tang said some shipbuilders might quit the market by the end of next year, allowing orders to be transferred to the remaining companies, such as CSBC.
CSBC has a total of 45 ships currently on order and to help make it through the economic downturn, the firm has been focusing additional resources on ship design in an effort to attract new orders, he added.
Last month, the Kaohsiung-based shipbuilder won a bid from Evergreen Group to build 10 container vessels for US$1.03 billion. Delivery of these vessels is set to begin in the fall of 2013 or earlier, CSBC said on May 20.
CSBC remained tight-lipped yesterday about the potential earnings the Evergreen order might generate.
At yesterday’s meeting, shareholders approved a plan to provide a cash dividend of NT$1.8 per common share based on last year’s net income of NT$1.7 billion (US$59.01 million), or NT$2.36 per share, according to a company statement filed with the Taiwan Stock Exchange.
However, shareholders issued three requests to CSBC officials: That the company should earn more than the current conservative guidance, decrease this year’s dividend to maintain more cash to boost development and raise wages for employees.
CSBC said in February that it expected revenues would total NT$29.42 billion this year, up 12.4 percent from a year ago. Full-year profits are expected to reach NT$1.41 billion, or NT$1.94 per share, the company said.
Tang said yesterday the company’s conservative guidance was made on the back of their lack of economic scale, insufficient support from periphery industries and less government attention on the shipbuilding sector.
Nevertheless, he said the company’s profitability this year would still depend on shipbuilding prices, supply and demand conditions, as well as the exchange value of the New Taiwan dollar.
Shares of CSBC fell 0.68 percent to NT$29 yesterday on the local stock exchange.

2011-06-14 11:05:21

LNG carrier newbuilding market is overheating and industry players started to express worries.
Massive oversupply has led many vessels to lay-up and profitability faced a big drop.
But LNG demand is surging recently and rates soared four times on last summer. Against this backdrop, some players are placing speculative orders for LNG newbuildings for the first time in around seven years.
Industry pundits, however, stress that it's necessary to stay cool-headed and avoid speculative ordering.
As LNG market heats up, new LNG carrier orders sharply increased with speculative orders totaling 15 plus 5 options of the entire 24 plus 11 options inked so far this year.
LNG carrier speculative ordering (without securing long-term charter contracts) is for the first time since 2003-2004 boom period.
But the over-ordering led to over-supply of modern tonnage after 2007, making many LNG players suffer from slump in rates.
Speculative ordering started to appear since the turn of this year as optimism prevails in the market.
But some are concerned that the speculative ordering may be premature as LNG supply projects could lag behind the surging demand.

2011-06-14 10:22:09

Scrapping of large capesize vessels in the first five months of this year has hit its highest level since 1996, although rising fleet growth will pressure the dry bulk market,
shipbroker SSY said. The outlook for dry bulk shipping rates has been grim because ship supply has outpaced demand for shipments of commodities.
SSY, one the world's biggest ship brokers, said 35 capesizes had been scrapped so far this year.
"We have also had another 11 sales of capesizes for scrap, but they have not actually reached the breakers as yet," said Derek Langston, a senior director at SSY Consultancy and Research.
"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," he told Reuters.
Average capesize earnings have fallen to below $5,000 a day this year, below operating costs estimated at $7,500 to $8,000 a day, compared with over $200,000 a day before the economic turmoil in 2008. They reached $9,758 a day on Thursday, Baltic Exchange data showed.
SSY estimated that new building deliveries this year would total over 90 million deadweight tonnes (dwt) compared with 78.7 million dwt last year.
Net fleet growth was forecast to reach over 70 million dwt this year even allowing for record scrapping levels, Langston said. Net fleet growth last year was 76.8 million dwt.
Langston said 105 capesizes had entered the fleet since the start of the year, with a further eight ships converted from tankers into capes. That compared with 214 capes delivered last year and a further 17 conversions. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
"The freight market is clearly facing downward pressure from the supply growth in this fleet," Langston said.
Other shipping analysts said earlier this week the dry freight market was expected to remain low for up to 12 to 24 months as fleet growth takes its toll. Broker Fearnleys said a major upturn in rates was not expected before the end of 2013.

2011-06-14 09:14:31

In what appears to be good news for the future long-term prospects of the shipping industry, it seems that ship owners’ appetite for newbuilding vessels has abated, while older vessels are finding their way to scrapyards in Asia on a faster pace. This means
that in the future the current tonnage oversupply problems could be alleviated, should demand keep picking up across the world.
According to the latest weekly report from shipbroker Golden Destiny, “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” said the report.
According to data compiled from the shipbroker, 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.
Meanwhile, 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” concluded Golden Destiny, adding that shipowners from Hellas were absent from this week’s activity both in the second hand, as well as in the newbuilding markets.

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