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2017-09-01 13:06:34

Tanker owners left and right have been conceding this week, that it’s not demand, but an oversupply of ships, which have been hurting their earnings. According to Frontline, “the growth in crude tanker tonne-mile demand suggests that the current tanker market is not suffering from weak demand growth, but rather from excess supply growth which has occurred over the last 18 months. Despite current market weakness which is forecast to continue in the near-term, the Company continues to believe that the market will begin to improve in 2018 as the pace of deliveries of newbuilding vessels slows and vessels are retired from the global fleet. There are nearly 110 VLCCs built in 2000 or earlier that continue to operate. This is roughly equal to the current VLCC order book. At some point in time these older vessels will permanently exit the fleet. We believe that increased scrapping is inevitable in the near term, driven by the weak spot market and the increased scrap value of tankers, which is up by approximately 50 percent year on year”, Frontline noted.

In its market outlook, Cosco Shipping said that “in terms of oil shipping demand, the overall demand for global crude oil shipping maintains a stable uptrend during the first half of 2017. Asian Pacific countries such as China and India demonstrated a stable growth in crude oil imports. Factors such as reduced production by members of the Organization of Petroleum Exporting Countries (“OPEC”) and increased crude oil exports in USA have both contributed to the increment in global crude oil shipping distance. During the same period, global shipping demand of finished oil also increased with sustained growth, mainly due to the strong import demand in Latin America and Asia, yet the increment is slightly slower than the corresponding period of last year”, Cosco Shipping said.

The Chinese conglomerate added that “in terms of the supply of shipping capacity, according to the latest information released by a research institute, shipping capacities of various types of tankers followed last year ’s trend and continued to expand during the first half of 2017, except for the Panamax, reflecting the pace of new vessels commencing operation is still ahead of vessel scrapping. In terms of shipping price, the fast growth of foreign oil trade shipping capacities in the first half of 2017 led to a general decrease in shipping prices of various types of vessels as compared to the corresponding period of last year.

According to the market benchmark, World Scale (“WS”) average index of very large crude carrier (“VLCC”) for the Middle East/ Japan shipping route is 63, representing a decrease of approximately 25% as compared to the corresponding period of last year (after including a basic fee discount, same for the statistics below). Shipping prices of other small to medium crude oil vessels also decreased (at different rates) as compared to the corresponding period of last year. The finished oil market also demonstrated weak performance, WS points of finished oil LR2 and LR1 vessels dropped approximately 20% as compared to the corresponding period of last year”, the ship owner concluded.

2017-08-31 11:35:04

Among the tragedy that is the latest Hurricane Harvey, which has hit the US over the past few days, owners of product tankers are bound to exploit the benefits. In its latest weekly report, Allied Shipbroking said that “in the aftermath of Hurricane Harvey, one of the worst disasters to hit Texas, we are now looking to get a clearer picture of the possible disruptions the extensive flooding may have brought down with it. Days before the hurricane hit the US coast we were already hearing of an anticipation of strong short-term effects to descend on the crude oil and oil products markets. The downward pressure on crude oil was already being witnessed days in advance, with the closure of 10 key refineries in the Gulf Coast with a capacity to refine about 2 million barrels of oil a day and accounting for 11% of the U.S. total refining capacity.

According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations, “outages were not limited to just oil refineries with a 10% of oil production from the U.S. Gulf of Mexico being taken out of active operation (around 150,000 barrels per day) along with a number of inland crude oil producers (around 1.4 million barrels per day from the Eagle Ford shale basin) and closing ports all along the Texas coast. The extent of the total damages recorded will take days to properly assess, however as things stand now the temporary disruptions have already caused significant effects on the market. The biggest gains so far have been noted in the oil products markets, with the significant cuts in output bringing in a higher demand for commodities such as gasoline (with gasoline futures jumping as much as 7% reaching their highest level in more than two years) as the drop in supply has left many to scramble for new sources. The Continent has already started to note an upsurge in demand and created a respective kick -up in freight rates in the region”.

Lazaridis said that “product tankers have already started to see a significant amount of strengthening and given that these disruptions are likely to push for longer haul trades to strengthen it should also boost the overall supply/demand balance. Things have not been as positive on the crude oil trade, with the closure of refineries in the U.S. having also caused a drop in demand for shipments of crude oil. The slight positive gains having been noted in terms of prices for crude oil can mainly be attributed to the cutting back in production, though if this is to show face in the shipping markets it will likely be take the form of improved seaborne trade at a latter point in the year as the U.S. looks to restock any strategic reserves it decides to use up during the next couple of weeks”.

Allied’s analyst added that “for the moment it seems as though the September program for most main exporting regions has remained stable and has shown little appetite for change, leaving crude oil tankers still struggling with the relatively sub-par rates that are being seen in the market now. The disruption in port operations has also been the cause for subdued activity being seen in the region over the past couple of days, while it has also taken out some fixing volume from other regions as charterers take a wait and see stance before placing any new orders they may had planned beforehand. The closure of ports surely was the cause for large delays in operations, causing in turn a percentage of the fleet for several sectors to be taken out of action. Given that the hurricane is still causing disruption on the U.S. coast, it is still too early to tell the final influence this major natural disaster will play on the market”, the shipbroker concluded.

2017-08-31 11:25:48

Among the tragedy that is the latest Hurricane Harvey, which has hit the US over the past few days, owners of product tankers are bound to exploit the benefits. In its latest weekly report, Allied Shipbroking said that “in the aftermath of Hurricane Harvey, one of the worst disasters to hit Texas, we are now looking to get a clearer picture of the possible disruptions the extensive flooding may have brought down with it. Days before the hurricane hit the US coast we were already hearing of an anticipation of strong short-term effects to descend on the crude oil and oil products markets. The downward pressure on crude oil was already being witnessed days in advance, with the closure of 10 key refineries in the Gulf Coast with a capacity to refine about 2 million barrels of oil a day and accounting for 11% of the U.S. total refining capacity.

According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations, “outages were not limited to just oil refineries with a 10% of oil production from the U.S. Gulf of Mexico being taken out of active operation (around 150,000 barrels per day) along with a number of inland crude oil producers (around 1.4 million barrels per day from the Eagle Ford shale basin) and closing ports all along the Texas coast. The extent of the total damages recorded will take days to properly assess, however as things stand now the temporary disruptions have already caused significant effects on the market. The biggest gains so far have been noted in the oil products markets, with the significant cuts in output bringing in a higher demand for commodities such as gasoline (with gasoline futures jumping as much as 7% reaching their highest level in more than two years) as the drop in supply has left many to scramble for new sources. The Continent has already started to note an upsurge in demand and created a respective kick -up in freight rates in the region”.

Lazaridis said that “product tankers have already started to see a significant amount of strengthening and given that these disruptions are likely to push for longer haul trades to strengthen it should also boost the overall supply/demand balance. Things have not been as positive on the crude oil trade, with the closure of refineries in the U.S. having also caused a drop in demand for shipments of crude oil. The slight positive gains having been noted in terms of prices for crude oil can mainly be attributed to the cutting back in production, though if this is to show face in the shipping markets it will likely be take the form of improved seaborne trade at a latter point in the year as the U.S. looks to restock any strategic reserves it decides to use up during the next couple of weeks”.

Allied’s analyst added that “for the moment it seems as though the September program for most main exporting regions has remained stable and has shown little appetite for change, leaving crude oil tankers still struggling with the relatively sub-par rates that are being seen in the market now. The disruption in port operations has also been the cause for subdued activity being seen in the region over the past couple of days, while it has also taken out some fixing volume from other regions as charterers take a wait and see stance before placing any new orders they may had planned beforehand. The closure of ports surely was the cause for large delays in operations, causing in turn a percentage of the fleet for several sectors to be taken out of action. Given that the hurricane is still causing disruption on the U.S. coast, it is still too early to tell the final influence this major natural disaster will play on the market”, the shipbroker concluded.


2017-08-31 11:24:46

Two South Korean shipbuilders — Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. — are expected to win a combined $1.5 billion deal, industry sources said Wednesday.

According to industry tracker TradeWinds, the Mediterranean Shipping Co. is working on an order for up to 11 container vessels.

MSC is close to a deal with Samsung Heavy for up to six 22,000-TEU vessels and is expected to turn to Daewoo Shipbuilding for a further five, the report said.

The deals, if clinched, will help local shipyards struggling to win more shipbuilding deals.

Entering this year, local shipyards have bagged more new orders than expected but recently have suffered a setback in securing more contracts.

South Korean shipbuilders have been under severe financial strain since the 2008 global economic crisis, which sent new orders tumbling amid a glut of vessels and tougher competition from Chinese rivals.

The country’s top three shipyards suffered a combined operating loss of 8.5 trillion won in 2015. The loss was due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump, with Daewoo Shipbuilding alone posting a 5.5 trillion-won loss.

In 2016, Hyundai Heavy managed to post profits, but the other two suffered losses.  


2017-08-30 10:41:05

Over the past four months owners have been busy ordering new tankers, keeping the crude oil tanker fleet expansion on course for a six-year-high, measured in DWT, BIMCO said.

However, the fleet growth percentage is down from last years’ 5.9%, to 4.7% for the full year of 2017.

The order book included 14 LR2 and 14 Suezmaxes ordered in June, supplementing the 9 VLCCs ordered in May. In total 32 VLCCs have now been ordered in 2017, up from 12 in the first quarter.

Meanwhile, 23 LR2, equal to 45% of the total added oil product tanker capacity overshadowed the recent years’ favourite: MR, as ‘only’ 38 new ships were delivered during the first seven and a half months.

“The fast-growing fleets come as no surprise. But the continued low levels of demolition in both tanker segments are a roadblock to changes to the current poor earnings environment in the freight market and a possible recovery,” BIMCO said.

The fact that one VLCC was reportedly sold for demolition in April, but was then subsequently sold to a new owner, one month later at a higher price, seems irrational, BIMCO added, as overcapacity is increasing amongst crude oil tankers in general and VLCC’s in particular.

Amongst oil product tankers, just two LR2 left the fleet in 2017, a year that has seen MRs, almost exclusively being demolished.

“BIMCO continues to believe that demolition will pick up during the final five months of 2017, but the actual demolition rate only amounted to a one-third of forecasted full year levels by mid-August. The ongoing poor freight market conditions will drive demolition,” the association further noted.

Assuming 2.5 million DWT of oil product tanker capacity will be demolished; fleet growth will hit 4.1% in 2017. Should demolition fall short of that by 1 million DWT, the fleet will expand by 4.8%.

The fast growing fleet is pushing down tanker earnings, which have already been affected by below normal demand for seaborne transport of oil.

Earnings for VLCCs in the spot market are as low as USD 8,775 per day, a level last seen during the difficult years of 2011-2013. The year-to-date average stands at USD 20,489 per day.

BIMCO estimates that spot trading VLCCs built in 2005 and later are loss making at that level, because of heavy financing costs. For the whole industry, any profits made from older ships do not outweigh the losses of the younger vessels.

As earnings very often follow from one segment to the next, Suezmax and Aframax ships are suffering too.

“Earnings for the oil product tanker sector on average appears to have stopped falling, as they dropped steadily throughout 2016, reaching the present level at the end of the year. BIMCO is forecasting that average earnings in this segment will also be loss-making,” the organization added.

MRs have made no more than USD 10,040 per day, while Handysize rates have dropped to USD 7,658 in 2017 down from USD 8,962 in 2016. LR1s have a year-to-date average of USD 7,873 and LR2 USD 9,235 per day.

“We tend to forget however, that demand is not that bad. Looking beyond the regular draw on stocks, other demand factors remain strong,” BIMCO said.

Global oil demand as forecasted by International Energy Agency (IEA) may pass the 100 million bpd mark for the first time, hitting 100.1 million bpd in Q4- 2018, and for 2017, growth has been revised up to 1.5 million bpd.

In addition, China is still believed to be increasing its strategic petroleum reserves (SPR) and crude oil imports were up by 13.8% year-on-year in the first half of 2017 hitting 8.55 million bdp on average.


2017-08-30 10:38:58

Newbuilding orders are bound for a quick pick up of pace over the next few weeks, as buying interest from ship owners is more than active, in a reverse of the trend set over the course of the previous year. In its latest weekly report, shipbroker Allied Shipbroking noted that "there was a fair amount of activity to be reported during the past two weeks, despite being right in the midst of the summer holiday season. We started to see a good flow of interest emerge amongst owners, while this should surely gain momentum over the coming weeks as we enter the Autumn period and prospects start to show a brighter side in terms of trade growth. A big part has also been played by the emergence of new financing structures over the past couple of months, which having been tested now to some degree and worked with some of the bigger names in the market, shipbuilders have started to take on a bigger marketing push which will surely pay its dividends moving forward. In terms of pricing we are still seeing things hold stable, though given that activity has started to show fresh signs of life, there could now be extra room being created for a further upward push in terms of pricing", said the shipbroker.

In a separate newbuilding report, Clarkson Platou Hellas said that there were "a few orders to report since previous week, albeit some just coming to light having been firmed up earlier in the summer. In the dry market, clients of Angelakos are understood to have placed an order for 4 firm plus two optional 82,000dwt bulk carriers at Yangzijiang Shipbuilding – the deal is understood to have been signed in July and the vessels to be delivering from early 2019 onwards. Meanwhile it has been reported that Foremose Maritime have returned to Oshima to order a pair of 85,000dwt bulk carriers, both for delivery in 2020. This looks to be a continuation of their relationship with the yard, having taken delivery of four vessels of this size over the past year. In Tankers, Socatra are understood to have placed an order at Avic Dingheng in China for 2+1 IMO II chemical tankers of 7,950 dwt. Both the firm units are understood to be delivering in 2019. In the container sector, the Pasha Group have announced they have signed a deal for 2+2 x 2,525 TEU Container carriers to be built at Keppel AmFELS in Texas. These Jones act ships will be delivered in 2020 and will be constructed with dual fuel LNG bunkering capacity", the shipbroker said.

Meanwhile, on the S&P market, Allied Shipbroking said that "on the dry bulk side, boosted sentiment over-spilling from the improving freight market seemed to have brought about a strong buying interest, with activity picking up considerably over the past couple of weeks. We witnessed a strong interest for most of the larger size segments while prices have already started to show signs of making strong gains. Overall it seems as though confidence in the potential prospects of the market has once again resumed and we should see things improve further over the coming months. On the tanker side, activity was relatively slow over the past couple of weeks with only a handful of units changing hands over the two week period being reported, while the majority involved tonnage in the smaller size segments of the market. Prices continue to remain under pressure, though there is now hope that things may improve slightly as we enter in to the autumn season which traditionally has shown better activity levels".

In a separate note, ships' valuations expert VesselsValue said that bulker values have remained stable. "Privatlantic (75,100 DWT, Feb 2012, Sasebo) sold for USD 18.5 mil, VV value USD 17.97 mil. There has been an en bloc deal of 4 Ultramax vessels Tiger Tiangin, Zhejiang, Hongkong and Beijing (63,500 DWT, 2015, Chengxi) for USD 80 mil. In mid age tonnage Ocean Leader (56,100 DWT, Jan 2010, Mitsui Ichihara) was sold for USD 14.5 mil, VV value USD 14.26 million", VV concluded.

2017-08-30 10:34:59

German container carrier Hapag-Lloyd doesn't plan to make any investments in ordering of new vessels over the next couple of years, the company said during a conference call today.

"In terms of Capexes, we said that we don't anticipate any material Capexes in new vessels in the upcoming couple of years. We will continue to invest in container boxes and our investment level will be around EUR 400 million every year," the company said.

As disclosed, there have been no significant orders in the container shipping sector over the recent period, and Hapag-Lloyd believes that new orders are not necessary as there is sufficient capacity in the market to meet the volume growth.

As a result, it is not expected that a surge in orders would occur.

Regarding the IMO regulations, Hapag said that most of its vessels are in principle suited for various types of fuel and may require some additional investment. Tough, huge investments on a per vessel basis are not expected.

The company added that it would be watching very closely what would happen to the fuel prices after 2020 when the new regulations kick in. The costs are anticipated to go up, but the company said it should be able to pass them on to the customers.

For the first half of 2017, the German container carrier booked a net loss of EUR -46.1 million (USD 55.1 million,  slashed from last year's equivalent of EUR 142.1 million.

The company said that the half-year result includes a number of one-off effects related to the United Arab Shipping Company (UASC) merger, resulting in a net impact on EBIT of approximately EUR -19 million.

Hapag-Lloyd's results were announced as the carrier welcomes the fourth of its five Valparaiso Express class 10,500 TEU vessels, the Callao Express.

The ship, built by Hyundai Samho Heavy Industries, has been named in the port of Callao this week. The Callao Express has set sail in the direction of Puerto Anamos and Valparaiso and will return to Europe after sailing the South American west coast, the company said.

2017-08-29 13:46:45

The Republic of Korea, home to the world’s three largest shipbuilders, is interested in cooperation with Azerbaijan.

Ten major South Korean companies intend to discuss cooperation in shipbuilding industry during the forthcoming visit to Baku in September, the South Korean Embassy in Azerbaijan told Trend.

The talks will be held within the framework of the Azerbaijani-Korean business meeting scheduled for September 13 in Baku.

Representatives of such companies as Yelim Paint Spray, Mattron Corporation, Dongsan Valve, Jin Gu Engineering, Kwangwoon, KEONSAE HIGH PRESSURE, Daedong Marine TECH, MSTECH and others will arrive to participate in the negotiations in Azerbaijan.

The trade turnover with Korea in January-July 2017 amounted to about $38 million, according to the State Customs Committee of Azerbaijan. Almost the entire amount of trade fell on imports of Korean products.

At the time Baku was one of the largest ports of Eastern Europe. Therefore, the city has enterprises involved in all areas of navigation. The only exception was shipbuilding, since the largest and necessary tankers, steamships and much more had to be purchased from abroad. But in 2013 the problem resolved with the inauguration of Baku Shipyard LLC, the most modern shipbuilding and ship-repair facility in the Caspian Sea.

This enterprise is aimed at elimination Azerbaijan’s dependence on imports in shipbuilding and, finally, to modernize the Caspian flotilla.

The yard is capable of constructing various vessels ranging from offshore support vessels, general cargo vessels, tug boats, crane vessels, specialized vessels and passengers vessels to tankers.

It has a capacity to produce 25,000 tons throughput per annum of steel works for new buildings and able to undertake 80 -100 vessels repairs and conversion of various types.

The Korean shipbuilding industry was gearing up for a rebound in 2016 even in the face of difficulties. Last year, Korean shipyards responded effectively to crisis with proper market strategies despite internal and external adversities such as the plunge in global shipbuilding orders, weak order-winning competitiveness, intensive restructuring aiming to normalize corporate management. New orders plunged 71.0percent year-on-year to 11.6 million CGT last year in global shipbuilding and offshore markets.

Despite such unfavorable market conditions, Korean shipyards claimed the top spot in terms of shipbuilding completion, carving out 35.4percent share of global market.

2017-08-29 13:21:18

The Maritime and Port Authority of Singapore (MPA) and the Ports and Harbours Bureau of the Ministry of Land, Infrastructure, Transport, and Tourism of Japan (MLIT) will helm a working group to conduct a feasibility study on LNG bunkering for car carriers plying between Japan and Singapore.

The working group will include Japan’s big three shippers – Kawasaki Kisen Kaisha (K Line), Nippon Yusen Kaisha (NYK) and Mitsui O.S.K. Lines (MOL).

MPA said that the study will focus on the technical details such as fuel tank capacities and refueling requirements to assess the feasibility of running LNG-fuelled car carriers between Japan and Singapore.

The joint feasibility study was announced at the inaugural Singapore and Japan Port Seminar 2017 held in Singapore today.

The study will be one of the activities jointly undertaken by MPA and MLIT under the Memorandum of Cooperation (MOC) signed in April 2017 that aims to bolster cooperation between the duo in areas such as port planning, port management and technological development in the port sector.

“Shipping can be less pollutive and the International Maritime Organization has introduced a 0.5% global sulfur cap by 2020. This is an opportunity for Singapore and Japan to co-lead in a global search for solutions to make shipping greener. In particular, the joint study on the feasibility of LNG bunkering for car carriers between Japan and Singapore offers great promise. It extends bilateral cooperation to shipping and raises bilateral cooperation to a new level,”  Khaw Boon Wan, Minister for Transport of Singapore, said.

“I believe that Singapore, the world’s top bunkering port, and Japan, the world’s top LNG importer, have the responsibility to contribute to the development of global shipping through jointly promoting the use of LNG as marine fuel,” Keiichi Ishii, Minister of Land, Infrastructure, Transport and Tourism, Japan, added.

Today, both countries are ready to provide LNG bunkering operations using trucks and are now looking into the next phase of LNG bunkering for ocean-going vessels.

In October 2016, MPA and MLIT signed a multilateral Memorandum of Understanding, concluded in Singapore, to widen the network of LNG bunker-ready ports in Europe, the US, and Asia. 

2017-08-28 11:24:27

The trend of vessel upsizing in the containership sector has been well reported, but the flexibility of much of the containership fleet has meant that different storylines have evolved across the trade lanes. Larger and larger ships cast an obvious shadow, but a wide range of capacity, in relative terms, isn’t always to be found where it might be most expected…

Big Guns Deployed

Boxships at the very upper end of the size range are generally deployed on the Asia-Europe trade. The average size of ships on this route (the largest across all trade lanes) stood at 13,936 TEU in August 2017. In recent times, the delivery of ‘megaship’ capacity, particularly of ships of 18,000+ TEU, resulting in the ‘cascading’ of smaller ships off this route, has driven an increase in the average size, and today the biggest ship deployed, at 21,413 TEU, is about 1.5 times larger than this average. This indicates a fair degree of clustering of the largest vessel types, gradually filling up the trade with them as far as possible.

Meanwhile, on the Transpacific, the average size of boxships deployed stood at 7,623 TEU in August 2017, with the largest ship deployed at 14,414 TEU, 1.9 times bigger than the average. After the opening of the new locks in Panama, rapid upsizing of services through the canal to the USEC took place, but on the other hand larger ships to the USWC and some Panamaxes remaining on the USEC trade have stretched the ratio.

New Homes

Meanwhile, on the non-mainlane East-West trades, the average size of vessels deployed stood at 6,161 TEU. But, following the introduction of new ships on trades involving the Middle East and ISC, on the back of new larger ships on the mainlanes, the largest ship is now 14,074 TEU (almost as large as on the Transpacific). That’s a ratio of 2.3, with these routes increasingly offering new homes for vessels over 12,000 TEU in size.

Elsewhere, the average size of ships on North-South routes stood at 4,632 TEU, with the largest ship 2.8 times bigger at 13,102 TEU. There aren’t many deployed there that big, but services have upsized rapidly via the stepping stones of around 5,000 TEU and 8,000 TEU.

Stretching Out

And last but definitely not least, in August the average size of boxships deployed on intra-regional trades stood at 1,783 TEU. Though the cascade of larger ships onto these trades can be limited by infrastructure capability, the biggest ship today is 6,250 TEU, generating a ratio of 3.5, the largest featured here. It may be the realm of the small ships, but intra-regional trading shows the widest, perhaps least clustered, range of deployment.

Looking In The Right Places

The ratio of the largest ship deployed compared to the average might not be a perfect metric, and on many trades there is a ‘tail’ of smaller ships, legacy or in niches, to consider too. But what is interesting, is that while upsizing and ultra-large ships capture the headlines, relative to the centre of gravity on each trade, it is the intra-regional arena where the widest spectrum of boxships is to be found.

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