The VLCC tanker market is facing intense headwinds so far in the year. In its latest weekly report, shipbroker Gibson noted that “undoubtedly, the OPEC led production cuts are having negative implications for crude tankers, particularly VLCCs. Although no major changes have been seen in the absolute volume of spot VLCC fixtures out of the Middle East, this coupled with the ongoing rapid expansion of the trading fleet, forced spot earnings down to around $17,500/day in recent months, from over $40,000/day at the start of the year. In contrast to the developments in the crude tanker segment, so far to date the impact of production cuts on oil markets has been rather muted. Although global OECD oil stocks have moved to lower levels relative to the five-year averages, they still remain at highly elevated levels. The biggest challenge to OPEC’s strategy is recovering US crude oil production. According to the EIA, US crude production averaged at 9.2 million b/d in June, up by over 0.65 million b/d from the lows seen in September 2016. Crude output is anticipated to rise by a further 0.55 million b/d by December 2017”.
According to Gibson, “recovering Libyan and Nigerian production are also diluting OPEC’s effort to rebalance the market. Last month Libyan output was assessed by the IEA at 0.82 million b/d, up by nearly 0.55 million b/d from the lows seen in August 2016. The latest indications for the country’s production are around 1 million b/d, while the Libyan National Oil Corporation targets a further 0.25 million b/d gain to 1.25 million b/d by the end of the year. The gains in Nigerian crude output are also impressive. In June production climbed close to 1.6 million b/d, up by around 0.45 million b/d from August 2016 levels. If the relative stability seen in recent months remains in place, further gains could be achieved in the 2nd half of this year. The ongoing rebound in Libyan and Nigerian production has prompted a discussion as to whether supply caps should be introduced for these countries or alternatively whether a flexible approach should be employed by other producers participating in output cuts to accommodate rising production from the exempt countries. However, both Libya and Nigeria indicated their unwillingness to cap, while further cuts would require a great deal of cooperation. Yet, if additional cuts are agreed and implemented, this will serve another blow to crude tanker demand this year”.
The London-based shipbroker added that “an equally important question is what will happen in 2018 when the current deal expires? Will we see a rebound in the Middle East crude exports, so much needed by the weak tanker market? The IEA expects to see a healthy growth in world oil demand at 1.4 million b/d; however, further gains are projected in non-OPEC supply. By far the biggest increase is anticipated in US oil production, which is forecast to rise year-on-year by 1.05 million b/d. Smaller gains are also expected elsewhere, most notably in Brazil, Canada and the UK, together accounting for a further 0.6 million b/d increase. Although output in a number of other countries is expected to see a minor decline, the overall picture is that all of the forecasted increase in demand is likely be met by increases in Non-OPEC supply (crude, NGLs, biofuels, processing gains). If the forecast is correct, this leaves almost no scope for increases in OPEC crude output in 2018 from current levels. If OPEC decides to abandon its restraint, there is likely to be another build in global inventories and further downward pressure on oil prices. The dilemma faced by OPEC does not inspire much optimism for the crude tanker market, hoping to see increases in Middle East crude exports. If production cuts are extended through 2018, the only hope for owners will be continued strong gains in long haul trade, persistent floating storage and slowing fleet growth”.
Meanwhile, in the crude tanker market this week, Gibson said that “very easy looking VLCC lists lended Charterers the necessary comfort to keep the market pace at ‘dead slow’ despite having full August programmes in hand. Owners held the line as best they could, but the bottom of last week’s rate range became the top of this week’s with now lows of ws 45 and highs of ws 50 to the East the new norm and mid ws 20’s available to the West. Perhaps a bit busier next week, but no sea-change likely. Suezmaxes picked up their pace a little, but to no more than a slow trot and rates struggled to break through ws 70 to the Far East with around ws 30 the ceiling to the West, though Kharg liftings still command reasonable premiums. Aframaxes quietened as the week wore on and rates slipped to 80,000mt by ws 87.5 to Singapore with ‘bottom’ still to be found”.
The ports of Los Angeles and Long Beach have set out aggressive near-term and long-term strategies to cut harmful air pollution from all port-related sources to ultimately achieve zero emissions for trucks and terminal equipment.
In a draft document titled 2017 Clean Air Action Plan (CAAP) Update the ports revealed detailed steps to be undertaken.
“These ports are going where no port has gone before,” said Port of Los Angeles Executive Director Gene Seroka.
“Based on what we’ve already accomplished to promote healthy, robust trade through our gateway, we’re ready to make history again, looking at a new array of technologies and strategies to further lower port-related emissions in the decades ahead.”
According to a preliminary analysis the cost of implementing the 2017 CAAP rages between USD 7 billion and USD 14 billion. Given the magnitude of the investment, the draft plan calls for the ports to intensify their funding advocacy and increase collaboration with their partners to finance the new strategies.
The ports claim that the draft 2017 CAAP ushers in a new era of clean air strategies that seek to reduce harmful emissions from port-related sources: ships, trucks, cargo handling equipment, locomotives and harbor craft.
Furthermore, the document is said to be in line with local, regional, state and federal standards and regulations, and anticipates clean air regulations under development by the California Air Resources Board.
The 2017 CAAP sets new clean air goals focused on reducing greenhouse gas emissions 40 percent below 1990 levels by 2030 and 80 percent below 1990 levels by 2050. The plan carries over previous 2023 targets for cutting other primary pollutants aimed at reducing diesel particulate matter (DPM) 77 percent, sulfur oxides (SOx) 93 percent, and nitrogen oxides (NOx) 59 percent below 2005 levels.
The most recent emissions inventories show the ports have surpassed the 2023 DPM and SOx reduction targets and are within striking range of the NOx target. The 2017 CAAP identifies the tougher measures needed to ratchet down harmful emissions to zero or near-zero levels, the statement further adds.
The document’s release kicks off a public review and comment period that extends through Sept. 18.
The Port of Los Angeles and Port of Long Beach handle approximately 40 percent of the nation’s total containerized import traffic and 25 percent of its total exports.
Responding to the latest cyber security queries, Danish shipping conglomerate Maersk reassured that no data had been lost due to the cyber attack.
“While our operations and communications have been significantly affected by this virus attack, no data breach or data loss to third-parties is known to have occurred as of this date,” Maersk said in an update.
Furthermore, the transport major added that customer systems connected to Maersk were not at risk of infection, as confirmed by cyber crime analysts and agencies. As informed, the virus spreads rapidly within a company’s network, but does not spread between networks or across the internet.
Speaking of the virus in question, Maersk added that the virus attack was a previously unseen type of malware, and updates and patches applied to both the Microsoft systems and its antivirus “were not an effective protection in this particular case.”
“Once our service has returned to more normal conditions, we will conduct a full post-mortem,” the update reads.
Maersk continues to work toward full recovery, following the cyber attack on June 27, which resulted in the shutdown of the group’s business units, including APM Terminals.
The fully automated Maasvlakte II terminal in Rotterdam had to suspend vessel operations completely for a full week, with vessels having to reroute to other terminal facilities.
The tanker market, which was counting on the implementation of the IMO Ballast Water Management Convention in September 2017 to raise scrapping levels, could now face a delay in rate recovery, according to Ocean Freight Exchange (OFE).
The recovery could be postponed as the Marine Environment Protection Committee (MEPC) recently decided to push the BWMC implementation by two years.
Demolition activity is now expected to slow down over the next few years, subsequently postponing any substantial recovery in tanker rates which have been heavily pressured by the perennial state of tonnage oversupply.
According to BIMCO, 2.6 million dwt of tanker capacity was sold for demolition in 2016 while 1.3 million dwt was demolished from January to April 2017.
“While overall demolition levels in 2017 are expected to outpace that of last year, the relentless pace of newbuild deliveries and recent uptick in orders still point to weak supply side fundamentals,” OFE said.
At present, vessels older than 15 years account for around 23% of the overall crude tanker fleet. The presence of older tonnage has weighed heavily on freight rates by offering significant discounts, with spot VLCC rates for the benchmark AG/Japan route currently around 48% lower than at the beginning of the year.
“The evident reluctance of ship owners to scrap ageing tankers spells a long way to recovery for the tanker market,” OFE added.
The number of active shipyards on a global scale has dropped by 62 percent since the beginning of 2009, according to Clarksons shipping consultancy.
Specifically, there was a total of 358 active yards, defined as having at least one unit under construction, as of July 2017, a slashed figure when compared to 934 from 2009.
The largest drop has been seen in the bulker sector, which has marked a 67 percent fall over the last eight years, standing now at 97 yards as opposed to 293 yards in 2009.
On a regional basis, the largest drop has been in China, with the number of Chinese yards with a bulker on order declining by 73% to stand at 50 at the start of July. In terms of consolidation, the ‘top 10’ yards (ranked by total dwt on order in the sector) account for 54% of the total bulker orderbook in dwt terms, Clarksons said.
In the tanker sector (10,000+ dwt), the number of active yards on order has decreased by 55% since 2009 to currently stand at 89 shipyards, only 8 yards fewer than in the bulker sector. China, Korea and Japan each have between 10 and 20 fewer active yards in the sector.
In terms of vessel types, the number of yards building crude tankers has remained steady, with the decline mainly accounted for by product and chemical tankers. Similarly to the bulker sector, the ‘top 10’ yards account for 56% of the total tanker orderbook in dwt terms.
In the containership sector, the number of active yards has declined by 40% since 2009 to 56 at the start of July. The number of active Asian shipyards has dropped from 64 to 46, while the largest decline was at European yards, with only one shipyard in Europe currently building a boxship, down 96% (German yards alone accounted for 17% of the boxship orderbook in 1998 in TEU terms). Consolidation is a little stronger in the boxship sector than in the bulker and tanker sectors, with the ‘top 10’ yards accounting for 61% of the orderbook in TEU, Clarksons further adds.
"Furthermore, 30% of currently active yards are set to complete construction of ships on their orderbook by the end of this year. With these trends in place, it will be no mystery as shipyard capacity continues to slide,” the consultancy further added.
The shipbuilding orderbook value for the first half of this year of South Korean shipbuilding major Hyundai Heavy Industries (HHI) totaled in USD 1.65 billion, up by 67 percent when compared to last year’s figures.
HHI said in its interim report for the first six months of this year that the group’s new orders amounted to USD 2.25 billion, up by 15.9 percent year-on-year.
The company’s offshore and engineering arm saw a 66.6 percent decline in orderbook value reaching USD 139 million.
HHI’s industrial plant branch was hit the hardest with 83 percent decline y-o-y standing at USD 11 million against USD 65 million from the corresponding period last year.
Finally, Hyundai’s engine and machinery business had a similar performance when compared to last year’s figures earning USD 446 million against last year’s USD 470 million, down by 5.1 percent.
SOFTimpact LTD a leading Maritime IT solutions specialist has today signed a strategic partnership agreement with Lemur Maritime based in Pireaus, Greece, to deliver cybersecurity solutions to the Greek shipping sector. SOFTimpact and Lemur will work together with their customers to address the “Cyber Threats” being faced on a daily basis.
Services will include, Risk Assessments, Cyber Defence Planning, Phishing simulation, Penetration testing and Cyber education. Oil tanker managers and owners will be pleased to hear that the partnership will also help them address the newly introduced element 13 and cybersecurity related KPIs.
Markus Schmitz, Managing Director SOFTimpact stated “With Greece being a short hop across the water and having the majority of our workforce being Greek speaking, this partnership will allow those companies in Greece struggling to understand and address the cyber threats access to our services already delivered internationally for some time. We look forward to a positive partnership with Lemur”.
Kostas Sismanidis, Managing Director Lemur stated “ We believe implementing Maritime Cyber Risk Management through ISPS, ISM and TMSA Element 13 requires strategic partnerships, that have contributed to the final text of the recently issued guidelines by BIMCO. SoftImpact is adding value to our Cyber Risk Approach and we are now able to offer a holistic effective and efficient solution to our Greek Customers.
SOFTimpact Ltd. is a leading Maritime IT solutions provider based in Cyprus for over 19 years. The firms CYBERimpact product line helps shipping to secure their data by combining consultancy, technology and education. SOFTimpact is completely dedicated to implementing Innovative IT solutions anywhere in the world. The company specializes in products like Payroll, Crewing, KPI and Cybersecurity for Martime and works with associations such as BIMCO, Intermanager and the Nautical Institute.
Lemur Lemur is a newly established Maritime Management Services Company based in Piraeus. The company specializes in delivering Maritime Educational Modules, Performance Measurement based on Tolerance and Preparedness Indexes, SMS Effectiveness Measurement and Management Audit Services. Our portfolio of services and products is expanding to e-Navigation Products including Chartroom Management, e-Learning, and Email solutions.
The Hound Of The Bulkervilles
As of the start of 2009, there were 293 yards active in the bulkcarrier sector, with almost a third of total active shipyards having a bulker on order, due to the boom in bulker ordering and the relatively lower barriers to entry in the sector. This total has now fallen by 67% to stand at 97 yards. On a regional basis, the largest drop has been in China, with the number of Chinese yards with a bulker on order declining by 73% to stand at 50 at the start of July. In terms of consolidation, the ‘top 10’ yards (ranked by total dwt on order in the sector) account for 54% of the total bulker orderbook in dwt terms.
Tanker Tailor Soldier Spy
The number of active yards in the tanker sector (10,000+ dwt) on order has decreased by 55% since 2009 to currently stand at 89 shipyards, only 8 yards fewer than in the bulker sector. China, Korea and Japan each have between 10 and 20 fewer active yards in the sector. In terms of vessel types, the number of yards building crude tankers has remained steady, with the decline mainly accounted for by product and chemical tankers. Similarly to the bulker sector, the ‘top 10’ yards account for 56% of the total tanker orderbook in dwt terms.
In the containership sector, the number of active yards has declined by 40% since 2009 to 56 at the start of July. The number of active Asian shipyards has dropped from 64 to 46, while the largest decline was at European yards, with only one shipyard in Europe currently building a boxship, down 96% (German yards alone accounted for 17% of the boxship orderbook in 1998 in TEU terms). Consolidation is a little stronger in the boxship sector than in the bulker and tanker sectors, with the ‘top 10’ yards accounting for 61% of the orderbook in TEU.
So, in total, there are currently 62% fewer yards ‘active’ than at the start of 2009. The largest drop has been in the bulker sector, but the number of active yards has also declined significantly elsewhere. Furthermore, 30% of currently active yards are set to complete construction of ships on their orderbook by the end of this year. With these trends in place, it will be no mystery as shipyard capacity continues to slide.
At the beginning of 2009, close to the peak of the current shipbuilding cycle, there were a total of 934 ‘active’ shipyards globally. This number has now dropped by 62% to stand at 358 yards as of start July 2017, the lowest number of active yards for many years. With a significant number of yards exiting the market, this month’s Shipbuilding Focus investigates the nature of the these changes.
Searching For Clues
An ‘active’ yard is defined here as one with at least one unit (1,000+ GT) on order, and a yard is active in a specific sector if it has a ship of that type on order. The number of ‘active’ yards can be a useful indicator of shipyard capacity, with the falling number of active yards contributing to the recent decline in capacity. It should be noted that many yards are active in multiple sectors, so the total number of active yards is not equal to the sum of the yards active in each sector.
The westbound Asia-Mediterranean trade will witness firm prices until the fourth quarter of the year when the anticipated phasing in of larger ships will pressurise spot rates, according to shipping consultancy Drewry.
Headhaul traffic in the first quarter 2017 was revised upwards so that it now shows growth of 5.6%, up from the original 3% assessment. New Container Trade Statistics data for April and May shows the growth story has got even better with year-to-date volumes up by 6.9% to 2.3 million TEU.
Exports out of Asia have been evenly distributed so far this year to the Western and Eastern regions of the Mediterranean, with the latter shading it by a mere 30,000 TEU. The growth rates to the two regions were more distinct with the East Med taking the spoils again with a rise of 8.9% after five months, versus 4.9% to the West Med.
Carriers have slightly reduced the available capacity on the Asia-Mediterranean route since the April start of the new alliances, primarily through void sailings, of which there were three in May and two in June, Drewry informed. For July and August capacity will again be trimmed slightly and will be down by around 1% on the same months one year ago.
Further ahead, Drewry estimates that 10 ships in the range of 5,000-9,000 TEU will be phased out to other trades, after cascading in of six 14,000 TEU ships and four 8,000 TEU ships from Asia-North Europe by the start of the fourth quarter.
“As a result, we expect net capacity on the Asia-Mediterranean route to increase by around 1% westbound in the fourth quarter over the third, which might reduce load factors and freight rates in the traditionally slower quarter,” Drewry said.
Very large gas carriers (VLGC) have seen their earnings dwindle 42 percent below trend, as the tanker market moved into negative territory in the first half of this year, Clarksons Research reported in a half-year review.
“The larger ships are feeling the biggest correction as fleet growth, particularly on the crude side, remains rapid and oil trade growth slows. Aside from a small pickup in the LNG market in recent weeks, the gas markets remain weak,” Clarksons claims.
"Some increased activity, project sanctioning and investor interest has not yet taken offshore off the ‘naughty step.'"
Ro-Ro seems to be the only sector above trend earning USD 18,458/day for a 3,500 lm vessel, 42 percent above trend.
Interest in ferry and cruise ship construction, including expedition ships, remains firm, with a record orderbook of USD 44.2bn.
Bulker earnings remain below trend, defined as the average since the financial crisis, but are showing signs of improvement. Capesize spot earnings moved from an average of USD 4,972/day in 1H 2016 to USD 13,086/day (75 percent below trend versus 33 percent below trend), Clarksons’ data shows.
“Indeed, based on the first quarter alone, Panamax earnings moved above trend for the first time since 2014 and we have certainly seen lots of S&P activity,” the review further adds.
“The containership sector has responded to the Hanjin bankruptcy with another wave of consolidation (the top ten liner companies now operate 75 percent of capacity) and some improvements, albeit with lots of volatility, in freight rates. Improved volumes, demolition and the re-alignment of liner networks, helped improve charter rates and indeed feeder containerships rates have moved above trend for the first time since 2011. Although some gains have been eroded moving into the summer, fundamentals for both these sectors suggest improvements in coming years but it may be a bumpy road!”
Clarksons is projecting full year growth of 3.4 percent (to 11.5bn tonnes and 57,000bn tonne-miles), with overall fleet growth of 2.3 percent still below trend but an increase on 1H 2016 (1.6%). Despite a pick-up in newbuild ordering to 24m dwt (up 27 percent y-o-y), this remains 52 percent below trend.