Market Analysis
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2011-05-09 10:06:16

SECONDHAND MARKET
In terms of S&P activity, the week ended with 51 sales reported in the secondhand and demolition market posting a 16% positive w-o-w change. The highest activity has been recorded again in the newbuilding market with 37 orders.
Overall, 32 vessels reported to have changed hands this week at a total invested capital in the region of US$ 402 million. In terms of the reported number of transactions, the S&P activity has been marked with a 23% positive w-o-w change, while is up by 39% comparable with previous year’s weekly S&P activity when 23 vessels induced buyers’ interest with bulk carriers grasping 26% share and tankers 52% 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 47% of the total amount of money invested.

NEWBUILDING MARKET
In the newbuilding market, after almost three weeks of intense activity the ordering sentiment has cooled off in the bulk carrier segment with containers looming as the protagonists of the newbuilding scene. The week ended with 37 units reported on order, equalling to a total deadweight of around 3,2 mil tons, representing a 43% negative w-o-w change. The total invested capital of this week is more than $2,2 bn of dollars with containers grasping the 62% share of the total ordering activity. The offshore segment has been on the sidelines, while no ordering interest has been revealed for the gas carriers. However, market holds an optimistic view for further newbuilding business in the LNG or LPG segment.
At a similar week in 2010, the newbuilding activity in the dry bulk and tanker segment was up by 55% and 60% respectively, while it now seems that the shipyards worldwide are trying to being evolved in the construction of more specialized units as the eager appetite for bulk carriers and tankers has faded out, although several spikes of activity has been recorded in some weeks.

DEMOLITION MARKET
Although there were fears during the last days that the Bangladesh Enviromental Lawyers Association will show resistance against the recent lifting of vessels' ban for scrapping, hungry buyers in Chittagong continue their purchases. Scrap prices in India remain firm at $500-$520/ldt for dry and $530-$540/ldt for wet tonnage, while Bangladesh levels are still not so competitive that the owners will risk sending their vessels for scrapping in Chittagong. China still tries to compete with its rivals at the low levels of $445/ldt for dry and $465/ldt for wet tonnage, while Pakistan is still on the sidelines paying less than India and Bangladesh and with no success for securing some more tonnage. Thus, India drives the market for one week more; as there is still uncertainty in Bangladesh and the temporary spike in levels do not yet offer comfort for the vessels’ beaching.
The scrapping spree for capesize tonnage continues with two more large units heading to the scrap yards this week. The demo deal grasping the headlines of this week is for a VLOC “ALSTER N” 305,000dwt of 41,500 ldt fetching $510/ldt in Bangladesh. In general, bulk carriers seem to dominate the demolition scene due to sharp volatility of the freight market.
The week ended with 19 vessels reported to have been headed to the scrap yards of total deadweight 1,396,745 tons. In terms of the reported number of transactions, the demolition activity was almost the same however in terms of deadweight sent for scrap there has been a 78% increase. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker sector by India for a tanker of 28,750dwt “WASEL” at 568/ldt.  India this week attracted almost 58% of the total demolition activity. Comparing to a similar week in 2010, demolition activity has been decreased by 13.6%, when 22 vessels had been reported for scrap. China was leading the game by paying $400/ldt for dry and $425/ldt for wet cargo and Bangladesh was offering just $325/ldt for securing dry and $410/ldt for wet cargo.

GREEK PRESENCE
The week ended with the little activity by Greek investors. In the secondhand market just one transaction has been reported of a panamax bulkcarrier, while in the newbuilding market Eastern Med. Maritime contracted 3 more 1700teu containers. The total investment of the Greek presence is calculated at region $ 31.5 mil in the secondhand market and $ 90mil in the newbuilding market.

2011-05-06 13:48:36

 

In the government’s 11th five-year plan, Chinese shipbuilding realized leaping development to grow as one of the shipbuilding giants in the world. However the industry development in the 12th five-year plan would be more challenging and complex.

Chinese shipbuilding industry gained gratifying results during the 11th five-year development plan and the three main indices of the industry made great breakthrough in 2010. The newbuilding output, the new orders and the order book hit 6.56m dwt, 7.532m dwt and 1.91dwt, accounting for 43.6%, 54.8% and 41.2% respectively of the global total. However, behind the excellent performance, Chinese shipbuilding is confronted with more severe situations and challenges.

Director the ship department with MIIT Chen Yingtao put forward that the 12th five-years would be the essential period for China’ shipbuilding industry to transform from a “big” shipbuilding powerhouse to a “strong” shipbuilding giant. Currently Chinese shipbuilding industry encounters six main challenges to overcome: uncertainty of domestic and economic development, long-standing demand shortage in the international market, gradually intensified competition among shipyards, the release of new international shipbuilding regulations and policies; increasing raw materials and labor cost as well as inflation pressure and price instability from appreciation of the yuan.

Nevertheless, to our delight, Chinese shipbuilding industry is in growth under the sound domestic macroeconomic surroundings and good financing situations and still boasts its advantages in technology, capital and market. In the significant transformation period for China’s shipbuilding industry, it will focus on “three transformation”: the transformation from cost advantage to products advantage, from enhancing efficiency to developing innovation and from focusing on shipbuilding to coordinated development of shipbuilding, repairing and supporting industries.

The concrete development target of China's shipbuilding industry for the 12th five-year plan is to lift China's shipbuilding industry to the world best class with CNY 1trn ($153bn) in profit and 40% market share globally by 2015. In addition, China aims to strengthen its independent innovation capability by establishing meet more than 50 world famous brands which meet the international standards and lead the international market. At the same time, China will strive to realize industry structural optimization and upgrading by making China's top 10 shipbuilders to occupy over 70% market share of China's total and promoting 6 Chinese shipyards into the world top 10, as well as to promote industry modernization and supporting capability to a new level by realizing the below targets: localization rate of main ship types average equipment and facilities to exceed 80%, domestic market share of marine diesel engine, dock machinery and other equipments to pass 80% and the loading rate of self-owned brand marine equipments to reach 30%.

 

2011-05-06 11:28:20

Bangladesh demolition sector was again plunged into uncertainty last week on news that the recent court order allowing yards to reopen was only temporary.
According to local reports, Chittagong yards may have to go back to court to secure permission to continue beaching vessels.
The news prompted rates to jump north as buyers rushed to secure prompt tonnage ahead of any potential new regulatory hiccups for the market.
Recent sales included a large 171,924 gt capesize bulk carrier that fetched a formidable price and is almost certainly bound for Chittagong.
The 1988-built, 41,500 ldt Alster N, operated by Neu Seeschiffarht, was reported sold for delivery to Bangladesh for $505 per ldt, or just under $21m.
In another deal last week, China Shipping’s 1982-built, 9,145 ldt bulk carrier Bao Tong Hai was reported sold for delivery to Bangladesh for $500 per ldt, or nearly $4.6m.

2011-05-06 10:03:42

The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, rose for a fourth session on Wednesday, helped by grains and coal demand carried on smaller vessels.
The index rose 0.77 percent to 1,302 points.
"The BDI gained 10 points today, driven by strong performance in the panamax market," Dahlman Rose & Co said.
The Baltic's panamax index .BPNI gained 5.52 percent, with average daily earnings rising to $13,185. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal or grains.
Floods and cyclones in Australia in February had hit coal production, and some producers are still struggling to return to normal operations, hurting capesize activity. Weather-related and logistics problems at Brazilian ports have also disrupted iron ore shipments from there.
Brokers said an expected strengthening of iron ore imports into China in the second quarter was likely to provide modest support as the freight market continued to struggle with rising fleet growth.
The main index has fallen by over 25 percent this year as rising ship supply has outpaced demand for commodities.
The Baltic's capesize index .BACI fell 0.76 percent, with average daily earnings inching lower to $6,545 after making modest gains on Tuesday. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
"The misery continues," broker Fearnleys said. "The crisis caused by the unprecedented flow of newbuilding (capesize) deliveries is now being ever more felt on the cross-trades."
The Baltic's main index, which tracks the cost of shipping key commodities such as iron ore, cement, grain and coal, has more than halved in the past six months to below 1,500 points, close to levels last seen during the financial crisis in 2008.
While there are indications of some vessel cancellations and delays, analysts expect deliveries to gather pace between 2011 and 2012, putting further pressure on dry bulk earnings.
"We believe the dry bulk shipping market is likely to remain challenging for the foreseeable future, given the significant number of new shipyard deliveries," said securities and investment bank Jefferies in a note.

2011-05-05 09:48:15

60 LNG carriers set to be booked Orders for LNG carriers, which have been sluggish until last year, are expected to be placed in full swing from this year. And we raise our evaluation to "overweight" on shipbuilding stocks, the Taurus Investment & Securities Co., LTD. said on May 3.
With the launch of the Qatari LNG project in the mid 2000s, a lot of orders for LNG carriers have been placed until 2007. However, from 2008 on, orders plummeted, with 4 ships in 2008, 0 ships in 2009 and 5 ships in 2010. So, LNG issue has not been discussed much.  
But things have changed and demand for natural gases is likely to increase in mid-European countries, Central and South Africa, and Southeastern Asian countries.
European countries increase LNG imports in order to their dependancy on LNG from Russia, and Central and South Africa start to use natural gas as a new energy source. Southeastern Asian countries are likely to increase LNG imports due to increase in domestic demand and depletion of existing LNG.
Also on the production side, new projects are expected to be launched. Projects for producing a total of 240,000,000 tons of LNG(140,000,000 tons in Australia, 50,000,000 tons in the US and 50,000,000 tons in Russia) can be launched. If countries like Canada, Papua New Guinea, Indonesia and Nigeria join the projects, projects worth about 300,000,000 tons are expected.  
"Just simple calculation suggests around 386 LNG carriers will be needed to carry the gas and to do this, orders for 60 additional LNG carriers will have to be placed in the future. The fact that Golar LNG, which is not engaged in any LNG production project, ordered 6 ships recently shows sharp increase in orders for LNG carriers is expected", said Taurus Investment & Securities Co., LTD. researcher, Sang-hoo Lee.
Drastic increase in LNG carrier order is expected from 2012, and fierce competition between shipbuilders in South Korea and China are expected. South Korean shipbuilders, which are the world's strongest players in building LNG carriers, will have advantageous position in the competition, Lee added.

2011-05-05 09:45:02

Since the beginning of 2011, there has been a significant drop in ordering levels for sectors such as the dry bulk and wet markets compared to last year.
“By this point in 2010, we had already seen over 94 new orders in the wet sector compared to only 23 so far this year. On the dry side, the story follows in a similar vein, with 113 new reported orders in 2011 compared to 348 new orders in 2010," Clarksons says.
However, there has been significant evidence of activity in other sectors such as containerships, offshore and gas with the revival in container activity particularly significant.
In this sector we have seen a substantial increase in the number of orders, with over 81 new contracts placed thus far this year, in comparison to only 6 vessels ordered in the similar period of 2010.
With high profile contracts having also been signed in both the Offshore and Gas sectors, again something missing in the during the early stages of 2010, the yards have found their positions far more stable thus allowing them to push into the next stage of 2011 with continued optimism” said Clarksons’ report.

 

2011-05-05 09:32:19

TANKERS
CHARTERING
Crude
The MEG VLCC market continued to limp along with fairly steady activity, but only minor adjustments to rates. With some 65 fixtures done for May and  steady  supply  of  tonnage charterers seem  to  have  no  rush  to  secure cover  for  their  remaining  May  stems,  nor  to  have  fear  about  any  major change in present rate levels. VLCC owners might see some more demand ex WAFR due to renewed activity for SMAX but doubtful enough to boost present meagre earnings. The Atlantic Suezmax market weakened somewhat mainly due to the long wedding weekend, but has regained speed this week with renewed interest from charterers. The MED/Black Sea Suezmax activity remains quiet and has so far not come back to life after the holidays and the rates softened. Aframax rates in the Nsea/Baltic gained strength last week due to tonnage sensitivity for certain dates in play. Almost opposite scenario was true for Aframaxes in the Med/Bsea as rates declined due to too many ships available.
Product
The wheels are again in motion on the continent and activity has picked up nicely in the transatlantic market. That said, rates seem to have come off their highs and is MR vessels are now fixing around ws237.5 for UKC/USAC basis 37kt. With an overhand of larger tonnage, rates have come under pressure  for  LR1s  Baltic/USAC,  now  trading  around  ws140  basis  60kt. There  is  effectively  no  ice-premium  left  to  be  had,  and  handies  trading across NWEurope are under pressure around ws195 basis 30kt, with Flexis softer at ws210 basis 22kt. On the back of a longer tonnage list, Caribs upcoast rates are softer at ws185 basis 38kt, and backhaul voyages USG/UKC- Med softer at ws115 level basis 38kt. As expected, we have seen a slightly softer product tanker market east of Suez the last week. We expect the market to remain stable, although rates are still date-sensitive. For LR1s trading MEG/JPN fixtures are being concluded at ws145 basis 55kt. On the LR2s, we have seen a stabilized market still fixing at WS 130 basis 75kt on the same route. Rates for Jet fuel liftings MEG/UKC basis 65kt have spiked and are now fixing at USD 2.1 million. MRs trading Spore/JPN are seeing rates around ws155 basis 30kt, whilst MRs trading MEG/JPN are seeing rates around ws165 basis 35kt.

 

DRY BULK
CHARTERING
Handy
The Atlantic market is stable/flat with positive undertone meaning more enquiries hitting the market today. Lack of prompt vessels. Trips to the Far East around $22-25,000 per day for Supras nevertheless a lot of actors are still assessing the market´s direction. The Pacific market remains extremely quiet and owners and charterers are both holding and watching cautiously how the market moves. For Indo-India, Supras in North China are getting close to 13k. WCI-China rates slided to 15k and rates from ECI around 13k, but few ships seen ballasting to Indonesia as not much cargoes ex-ECI. Red Sea, ferts on handymax/ Supras are fixed at very mid 20´s pmt on voyage basis to WC India. Not too much activity on  short period as  market bit volatile and speculative and hear index type vessels fixed at mid-teens.
Panamax
After holidays in several countries last week and beginning this week the market returned with an active upturn on Tuesday. Increased activity and elevated levels caused by more prompt coal cargos and a still active ECSA grain market and lack of prompt positions. Typical levels mid week around 13k for TA and healthy 26 + 600 BB fixed from ECSA. In the eastern hemisphere    Nopac  rounds  done  at  13k  and  even  short  period  activity showed signs of a recovery with fixtures in the mid 14 range. The FFA market not reflecting the spot market upswing, indicating there is some nervousness to the fundamentals behind a lasting rebounce.
Capesize
The  misery  continues,  with  average  spot  earning  stable  at  below  "opex" levels  -  only  a  cosmetic  change  to  the  worse  during  last  few  days  and presently standing at usd 6500. The crisis caused by the unprecedented flow of  NB  deliveries  is  now  being  ever  more  felt  on  the  cross-trades,  with fronthaul coming off another 5% to come in at some usd 18500, backhaul sinking further into the red  to  around -usd 5k.  Transatlantic and  -pacific activity is fair in comparison, with resultant levels improving somewhat to usd 5k/7k, respectively. Period fixing remains limited, with a fair usd 13500 done on 180kdwt ex yard mid May for 13/15 mos, 6/8 months concluded on similar unit/delivery at average 4tc for 1st 30 days/balance period at usd 12500.

 

GAS
CHARTERING
It has been a quiet week in the VLGC market - May Day, Golden Week and Chinese holidays have slowed down the activity level. May posted prices came out from the main suppliers and they were basically all at "all time high". It will most likely take a little while to digest the new record high prices with the softer crude prices, and therefore it may take a few days until shipping activity resumes. The majority of the little activity there was, happened in the western hemisphere caused by the open arbitrage from USG to Europe and a few vessels were fixed accordingly. The east rates were talked in line with April rates, i.e. in the low USD 50´s basis RT/Chiba - or equivalent to USD 22/23,000 per day on a modern fullsize VLGC. By the look  of  it  the  freight  market  seems  soft  ahead  with  more  vessels  than cargoes, however, practically all May vessels are in control of independent owners  and  therefore  we  do  not  believe  rates  will  change  much  in  the nearest future.

 

NEWBUILDING
GENERAL COMMENT
Quiet newbuilding market with few new orders to report, explainable given the Golden Week celebrations in the Far East. Zodiac has switched a part of an order for VLOC at STX to 2 Capesize bulkers. In addition, Zodiac has added 3 more Panamax bulk carriers at the yard with delivery slated for 2013. While we report few new orders, the major Korean yards are reporting high activity in the LNG segment where we expect to see more contracts to be placed over the next weeks. Newbuilding prices are still stable, but we observe a price increase in raw materials which will most likely impact on newbuilding prices.

 

DEMOLITION

 

MARKET BRIEF

2011-04-28 14:52:24

In the first quarter of 2011, Jiangsu shipbuilding industry kept its rapid growing momentum and three shipbuilding indices took the lead nationally again.

Jiangsu combined newbuilding output hit 91 vessels of 5.218m DWT and grew by 13.5% against the same period of last year, occupying 14.7% of the world total and 36.1% of Chinese total respectively.  Export ships account for 90.4% of the total output.

In the first three months, the province’s new orders stood at 66 vessels and 2.924m DWT, growing by 10.2% year-on-year. And the province accounted for 15.1% globally and 26.8% nationally in volume and tonnage respectively.

Till the end of March, Jiangsu’s orderbook has reached 1397 vessel with 72.07DWT and increased by 10.2% compared with the previous year. The province possessed 16.0% globally and 37.9% nationally in volume and tonnage respectively.

Jiangsu Provincial Economy and Information Technology Commission official said that currently new orders were dominated by big shipyard. Many local shipyards are paying more attention on developing new ship types and market to adapt to new international standards and regulations.

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