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2017-04-10 13:19:57

China Merchants Port Holdings has announced that it has reached an agreement to transfer its entire 24.53% equity share in China International Marine Container (CIMC) to China Merchants Industry Holdings for about HK$8.54bn (US$1.1bn).

The move is part of plan to consolidate the two offshore yard businesses, a plan which according to a source close to the matter the two have been working on for a long time.

Splash reported last year that China Merchants Group and CIMC were in talks to merge their offshore businesses.

Li Jianhong, who used to serve as chairman of both China Merchants Group and CIMC, quit CIMC in December 2015 to focus on China Merchants. Li has led a number of mergers and acquisition deals for China Merchants, including the takeover of state-run Sinotrans & CSC.

Li said in a government conference earlier this year that China Merchants Group will accelerate the process of mergers and acquisitions, in a response to the central government’s plan to reform state-owned enterprises.

The merger could create one of the largest offshore yard groups in the world. CIMC operates three offshore bases in Yantai, Longkou, and Haiyang in Shandong and China Merchants Industry runs two offshore yards in Shenzhen and Haimen.

When contacted by Splash, spokespeople at both China Merchants and CIMC declined to comment on the issue.

2017-04-10 13:09:34

The mid-size tanker market is heading toward a potential recovery from 2018 onwards on the back of the next burst of US exports through infrastructure build outs.

"While the increase in US seaborne exports is positive for tankers, the volume of exports isn’t likely to materially move the freight market. For now…," according to tanker shipping firm Teekay.

Given the robust delivery schedule for large tankers in the first half of 2017, which is likely to put downside pressure on freight rates, the positive demand fundamentals resulting from increased US exports could offset some of the burden of fleet growth.

US crude exports out of the US Gulf are set to continue increasing, while the build out of a new export-capable Aframax terminal in the US Gulf will make it easier to ship barrels out, showing positive signs for the mid-sized tanker market.

Prior to lifting the crude oil export ban in 2015, US crude exports went almost entirely to Canada. However, movements to global markets, particularly to Asia and Europe, increased significantly in the second quarter of 2016. Movements to Asia have increased 83 kb/d from the first quarter of 2015, while volumes to Europe have increased 55 kb/d during the same period. These increases have largely offset exports to Canada, which have decreased by 145 kb/d.

2017-04-07 14:27:38

There has been a continued increase in frequency of major vessel casualties, according to the International Union of Marine Insurance (IUMI).

The growth trend of marine risks is exerting a significant pressure on marine insurers, especially as the frequency of major vessel casualties rose again in 2016 for the second consecutive year, the union's statistics released last week show.

As disclosed, the major marine casualties had enjoyed a year-on-year decline until 2015 when they recorded a sharp upturn which was continued in 2016.

Conversely, the trend in total vessel losses (from 2000 onwards) continued its downward trajectory through to 2016 notwithstanding a minor uptick in 2015. In general, many markets were reporting a reduction in frequency of claims but an increase in the average cost of the claim, the union said.

Furthermore, the main causes of the total losses to 2015 were weather related but the frequency of losses caused by grounding or machinery damage were now increasing faster than any other cause. This was followed by fire and explosion which had remained largely constant since 2006.

"It was thought that recent increases in total losses caused by machinery damage may have been a reflection of reduced asset values and the consequent increase in constructive total loss risk following major damage," IUMI added.

In addition, accumulation losses both on board ship and in port continued to cause concern for cargo underwriters.

The increasing risk in this sector is further driven by the emergence of the new generation Ultra Large Container Carriers capable of carrying 20,000 TEU with a potential cargo value estimated at US$985m.

Accumulation risk in ports, particularly Chinese ports, was thought to be even greater, IUMI pointed out. It was estimated that the value of cargo throughput at Shanghai could reach US$1.6bn a day, Shenzhen US$681m and Tianjin US$477m.

The explosion at Tianjin in 2015 also resulted in a significant loss but might have been much worse. The total cargo estimated to be onboard the 754 ships in the port on the day of the incident would have amounted to more than US$53bn.

"Marine risks continue to grow both in size and complexity and it is vital that underwriters fully understand the potential losses that they are being asked to insure. It is gratifying to see the year-on-year decrease in total losses, but we must take particular notice of the recent increase in major casualties and the reasons for this," said Donald Harrell, Chairman of IUMI's Facts & Figures committee.

In terms of energy sector, a significant drop in offshore activity with very little infrastructure spending and reduced drilling activity had significantly depleted an already limited premium base. The only positive factor in the energy mix was the increase in North American land rig utilisation in the shale basins, the insurer noted.

"The offshore sector continues to face challenges that look likely to get worse before they get better. Energy risks per se have not reduced, but the premium base from which they are settled, or reinsured, has shrunk dramatically," Harrell added.

"As marine underwriters, we must continue to innovate and provide cost-effective insurance solutions to enable seaborne trade to continue without interruption."

2017-04-05 13:31:37

2017 should be a year of small profits for most container carriers but there will be very little room for error, according to shipping consultancy Drewry.

The short-term outlook for the container shipping lines looks good as the worst seems to have passed, Drewry said.

Drewry initially expected industry operating losses to be in the realm of around USD 5 billion in 2016. However, given a better than expected fourth-quarter, when carriers collectively just about broke-even, combined with favourable revisions to both Drewry's loaded container and average revenue per TEU estimates, Drewry believes industry operating losses in 2016 were closer to US$3.5bn.

The freight rates are continuing to slowly climb off the floor and the demand is recovering in 2017.

However, Drewry warns that it would not take too much – say a sudden spike in bunker costs or more rate wars in the key trading corridors – to condemn the carriers to another loss-making year.

Taking a longer view, with fewer competitors thanks to the recent M&A wave and the ability to manipulate the supply and demand balance more in their favour through newbuild delays, there is a big upside there for the taking. Whether they do or not is another matter, Drewry said.

Last year was a bad one for ocean carriers, but as painful as it might have been, it did give the industry the wake-up call it needed to mend some of its ways. The days of propping up failing carriers need to be a thing of the past, Drewry said.

2017-03-30 14:50:43

Rates in the multipurpose shipping sector seem to have bottomed out as signs of market recovery emerge after ten years, with momentum expected to build over the next few years, according to Drewry's latest Multipurpose Shipping Market Annual Review and Forecast 2017.

Dry cargo demand is forecast to grow by around 3% in 2018, but within that figure it is the market share available to multipurpose vessels which is more interesting. Drewry estimates that the multipurpose (MPV) share of bulk trades in the peak year of 2007 was about 17%, while the share of general cargo trades was nearer 20%.

"Over the intervening period, both these shares have eroded and we estimate the bulk cargo share for 2016 to be nearer 14% and 12% for general cargo. However, Drewry believes that this is the bottom of this particular cycle and that the MPV market share in both areas should improve, albeit marginally, over the next five years," Drewry added.

Although MPV demand fell slightly over 2016 compared to 2015, it is expected to grow at an average annual rate of 3.4% to 2021.

On the other side of the equation vessel supply is expected to contract over the same period, albeit by only 0.1%.

Over the last five years the percentage of project carriers being delivered to the fleet has risen to an average 58%. However, in 2016 a staggering 93% of all newbuildings had heavylift capability, sounding a death knell for the simple MPV fleet.

With about 63% of the orderbook declaring heavylift capability, the future decline of the simple MPV section of the fleet is almost assured. There is very little, if any, new investment in this sector with those new orders without lift capacity seen as simple replacements for an aging fleet. According to Drewry, owners are taking significant decisions to build higher specification vessels with bigger lift capacity, in order to give them an advantage in the appalling market.

"Drewry expects to see a decline of almost 4% in the 'simple' MPV fleet to 2018, balanced against growth of 4% in the project carrier fleet," comments Susan Oatway, lead analyst for multipurpose shipping at Drewry.

"Add these two together and you get an improving supply and demand balance. We expect to see only a slight improvement in the market over 2017 with rate rises gathering momentum after 2018. For the larger sectors, which have a bigger correlation to Handysize rates, there could be a more significant uptick in 2017 before rates settle over 2018," added Oatway.

2017-03-29 17:53:22

As liquefied natural gas (LNG) gained momentum over the last decade, becoming an increasingly important form in which gas is traded, the LNG carrier fleet increased from 193 to 479 vessels from start 2006 to start March 2017, according to Clarksons Research.

The LNG fleet, which also tripled in total capacity to 70.2 million cubic metres, could see a further expansion in coming years as natural gas is set to account for an increasing share of the global energy mix in the future.

Namely, energy forecasting agencies expect that gas consumption would grow by an average of around 1.5%-2% a year to 2040. In 2016, global natural gas demand stood at an estimated 347 billion cfd, up by 24% on the 280 billion cfd consumed in 2006.

Additionally, as the growth in the seaborne LNG trade is closely linked with growth in offshore gas production, the floating liquefied natural gas (FLNG) concept has also gained popularity.

Finding, developing and supporting offshore gas fields has created demand for a range of vessels from the offshore fleet of over 13,500 units, Clarksons said.

In 2006, offshore fields accounted for 28% of global gas production and by 2016, 31%. This is set to rise to 32% (119 billion cfd) in 2017, mainly due to field start-ups off Australia that are to feed LNG projects like Wheatstone.

"The LNG markets are clearly challenged at present but in the long term, planned FLNG projects in Australia, Mozambique, Tanzania, Mauritania and other areas could potentially sustain offshore gas production growth," Clarksons said, adding that offshore gas production and US shale gas "can create opportunities for LNG and offshore vessels."

"And if, in line with consensus expectations, gas continues to grow as a share of the energy mix, then these trends may have a long and interesting road ahead," Clarksons said.

2017-03-28 17:47:32

Following the first quarter of 2017 optimism seen in the containership industry, as well as the sentiment shift in the markets, the industry could be heading to healthier rates with earnings following the course, according to Maritime Strategies International (MSI).

Freight rate improvements have recently moved liner operators toward profitability, whilst charter owners are seeing the first meaningful uptick in earnings since mid-2015. Additionally, the scars of disappointing trade growth in 2016 are seemingly healed, while the imposing 2017 delivery schedule is more a hypothetical than an actual barrier to a sustained recovery.

Furthermore, scrapping is set to continue at the same rate as last year, even if charter rates pick up, whilst the 1 million TEU idle fleet is apparently illusory, MSI said.

Although a lot of the optimists are overstating their case and the 2017 delivery schedule could cause considerable concern, MSI said that "the worst has passed for the charter market."

On an annual average basis, 2017 earnings are expected to surpass 2016 for large and midsize tonnage, while smaller tonnage will prove somewhat more disappointing.

However, MSI said that the most significant and least discussed risk remains the idle fleet. A significant recovery in earnings cannot occur until the economically active idle fleet reduces to below 400,000 TEU, as opposed to today's level of 1.2 million TEU.

"The crux of our charter-rate forecast is that idle capacity will trend down over the year, and by Q4 will be below 0.5 million TEU, which will in turn push up earnings," informed MSI.

The reduction in idle capacity is driven by the view of a tightening supply/demand balance, but critically also by liner companies taking a somewhat more proactive stance with respect to the charter market and deployment after the introduction of the new alliance system in April 2017.

2017-03-24 13:16:39

South Korean shipbuilders could see a return to the container crane market, Yonhap News Agency cited industry sources as saying.

The announced move comes as the Busan Port Authority (BPA) is considering plans to order a number of gantry cranes from compatriot shipyards.

The cranes are reportedly intended for BPA's new container terminals. According to Yonhap, the estimated cost for the construction of ten cranes is KRW1tln (US$893m).

Moreover, the demand for replacements of older cranes at several South Korean ports might trigger the decision by the shipbuilders to return to the container crane manufacturing business.

The country's shipyards ceased the construction of cranes in 2006 as a consequence of cheap products from China.

However, the difference in price has changed to less than five percent, Yonhap quoted an official from the port authority.

In late-September 2016, South Korea revealed plans to invest some KRW14.7tln in the expansion of the country's ports.

The investment, scheduled to be undertaken in the period from 2016 until 2020, is aimed at preparing the country's ports for the era of mega ships.

2017-03-23 11:07:17

Shipowners' interest is being diverted away from the recycling market with secondhand vessel values rising, according to Clarksons.

This causes new tonnage in the market to generate firm competition between cash buyers.

The number of Capesize bulk carriers sold for demolition in the year to date is down by around 66% compared to the same period in 2016.

A total of 40 Capesize bulkers were sold for demolition by this time in 2016, compared to only 13 so far this year, cash buyer GMS said in its weekly report. The reason for this is that charter values have improved significantly and owners are beginning to see better returns on their ships.

Additionally, the flow of containerships to the recycling market has also been slowed by opportunities for further trading.

"Containers from the German market especially seem to have slowed and it would certainly seem difficult to replicate the relentless pace with which vessels from this market were being concluded," GMS said.

Owners may try to get the last available income from their older vessels. However, it would be ideal time now to send those units to scrapping yards, according to GMS.

The ratification of the Ballast Water Management Convention is expected to have significant implications for the shipping industry. Thousands of ships will require costly technology and high levels of demolition are expected as compliance dates approach.

"With a rough assumption that ships of 20+ years will be recycled rather than retrofitted, BWMS retrofit demand falls to c.31,000 ships," Clarksons said.

Shipping consultant Moore Stephens presented in 2016 results of its survey where respondents forecast that "operating costs will rise for technical expenses such as maintenance and repair held over from previous years, while the cost of ballast water treatment plant will have to be taken into consideration in 2017 drydocking budgets."

Even with increased demolition, thousands of existing ships are still estimated to require ballast water management systems (BWMSs) and meeting this requirement will be challenging, Clarksons pointed out.

Excluding some 5,300 ships estimated to have BWMSs and around 43,000 ships engaged in "domestic" trading, as these are likely to be exempted from the convention because they operate within one body of water, approximately 46,000 ships require a BWMS, Clarkson's data shows.

2017-03-23 10:36:04

The Australian Government is proposing a reform of the country's coastal shipping sector with the aim of reducing regulatory burden imposed on the sector.

The proposals were released in a discussion paper titled Coastal Shipping Reforms Discussion Paper and the government is seeking comment from ship operators, shipping companies, and other relevant stakeholders on proposed changes.

As disclosed, the Federal Government is proposing "greater flexibility for coastal shipping and new training opportunities…aimed at boosting coastal shipping activity."

"Currently, 15 per cent of Australia's domestic freight is moved by ship, but with Australia's extensive coastline and broad network of ports, there is the potential for shipping to play a larger role in the national freight task," said Minister for Infrastructure and Transport Darren Chester.

"However, it has become clear that limitations in the current regulatory system are working against that potential being realised.

"We need to address a range of administrative issues in the Coastal Trading (Revitalising Australian Shipping) Act 2012, which place unnecessary burdens on shipping companies and the Australian businesses that rely on coastal shipping.

"The intention of this discussion paper is to elicit views about how modifying the Act could help to redress this situation, without changing the basic structure of the current coastal trading regulatory regime," Chester said.

Written submissions to the discussion paper should be sent by Friday, 28 April 2017.

Earlier in February, the country's industry body Shipping Australia Limited called for unleashing of the the country's coastal shipping's potential.

"It's now time for some sensible bi-partisan changes that will allow international shipping to carry coastal cargo efficiently and sustainably for the benefit of Australian manufacturers, primary producers, and consumers," said Shipping Australia's CEO Rod Nairn.

"Efficient coastal shipping will create jobs in Australia by reducing import substitution. It will reduce the amount of greenhouse gas produced by inefficient overland transport. It will reduce the demand for road infrastructure spending and reduce road congestion and accidents."

Among the changes to current regime offered by Nairn are: getting rid of the "five-voyage" requirement and the volume variation restrictions from the temporary licensing regime, providing a blanket exemption under Ministerial determination (like for cruise ships greater than 5,000 GT) for non-competitive cargoes on the coast, such as break bulk, heavy lift, and container ships with TEU capacity exceeding 2,500, and removing the application of the Fair Work Act to coastal freight.

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