Three new members, Mitsui & Co., Ltd., Novatek Gas & Power, and Sumitomo Corporation, have joined the multi-sector industry coalition SEA\LNG committed to accelerating adoption of LNG as a marine fuel.
The three companies join a growing list of global members working towards breaking down the commercial barriers to the adoption of LNG as a clean and economically viable alternative to traditional bunker fuels.
“Each of the global organisations brings with them a wealth of knowledge and experience that will be invaluable to SEA\LNG as we work to realise our goal of making LNG an important maritime fuel,” Peter Keller, SEA\LNG chairman and executive vice president, Tote, said.
“Our aim since inception was to form a coalition that unites key players from across the entire LNG value chain, and the addition of our three new members further strengthens our organisation,” Keller added.
“As the IMO’s global sulphur cap approaches in 2020, we continue to continuously advocate for cleaner energy, including the promotion of LNG as a marine fuel. We look forward to leveraging our company’s position to work with our fellow members towards promoting sustainable LNG bunkering operations,” Kenichiro Yamaguchi, General Manager of Gas Business Development Division at Mitsui & Co., Ltd., said.
This announcement continues the steady stream of new members to join SEA\LNG, following the recent addition of Yokohama-Kawasaki International Port Corporation (YKIP), Marubeni Corporation, Toyota Tsusho Petroleum, JAX LNG, and Petronet LNG.
Earlier in March, SEA\LNG, which currently has 28 members, signed a memorandum of understanding (MoU) with the Society for Gas as Marine Fuel (SGMF), creating a framework for how the two complementary organisations will work together to achieve their common goal of making LNG the fuel of choice for the shipping industry.
Drewry expects that dry bulk shipping charter rates will continue to recover with firm demand and controlled fleet growth, according to the latest edition of the Dry Bulk Forecaster, published by global shipping consultancy Drewry.
Drewry has revised its charter rates forecast in the short term as the date to implement ballast water management systems (BWMS) has been postponed by two years, bringing down the forecast for demolitions that will eventually support fleet growth. Despite the increased fleet supply, charter rates will strengthen because demand will grow faster. The recovery in rates will become more prominent in 2019 and 2020, when the IMO regulations will be implemented.
Tonne mile demand will grow at a healthy pace of around 3% annually over the next five years while fleet supply is expected to expand at a rate of just 1% a year over the same period. The slowdown in fleet growth can be credited to low deliveries because of a thin orderbook and high demolitions resulting from the upcoming environmental regulations.
Demand will improve with the strengthening of iron ore, coal, grain and minor bulk trades. The rise in infrastructure activities in China will support imports of iron ore and other minor bulk commodities.
Among the major events that will decide the future of the dry bulk market, India’s re-emergence as a significant iron ore exporter stands at the forefront. Indian iron ore exports are making a silent comeback from a mere 4 million tonnes in 2015 to more than 20 million tonnes in 2016 and expected to be more than 30 million tonnes this year.
“We believe India’s return to the seaborne iron ore market will have wide implications for the dry bulk trade in the coming quarters. Iron ore exports from India to China that resumed at a fast pace, could reclaim a part of their lost share from Brazil and Australia,” commented Rahul Sharan, Drewry’s lead analyst for dry bulk shipping.
Drewry believes increased iron ore exports from India will provide additional employment opportunities to Supramax and Panamax fleets, and marginally to the Capesize fleet. “Many Indian ports have been dredged further to accommodate Capesizes, but a large part of the ore will still be carried on smaller vessels, providing employment and higher utilisation to smaller segments,” added Sharan.
In its analysis of the product tanker market, the shipowner said that during the second quarter of the year, “product tanker spot rates remained on average close to historically low levels during the second quarter of 2017. On the supply side, increased tonnage availability continued to apply downward pressure on rates, with year on year product tanker fleet growth estimated at 5.2% as of the end of the second quarter. The pressure on rates was further exacerbated by limited arbitrage opportunities, as OECD oil product inventories remained close to historically high levels. In the West, the market was supported by solid exports from the U.S., which reached seasonally new record levels, on the back of increased U.S. refinery throughput and increased demand from Latin America. Nevertheless, this was insufficient to reduce the supply-demand imbalance in the market. In the East, refinery maintenance in the first part of the quarter and decreased Chinese products exports had a negative impact on chartering activity. The market modestly recovered in June on the back of a rebound in Chinese exports and as refineries returned from maintenance, but rates remained overall at subdued levels on most trading routes. In the period market, rates for Medium Range (“MR”) product tankers have seen a modest improvement compared to the previous quarter with the bulk of fixtures currently being short-term, as owners remain reluctant to fix longer period”, Capital Product Partners said.
Meanwhile, on the supply side, despite somewhat increased activity in terms of new orders for product tankers, the MR product tanker orderbook currently stands at 7.1%, the lowest level on record. In addition, product tanker deliveries continued to experience significant slippage during the first half of 2017, as approximately 32% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts estimate that net fleet growth for MR product tankers will amount to 3.0% in 2017, below the 2016 growth rate of 4.9%. On the demand side, analysts expect overall product tanker demand growth of 2.4% in 2017, largely supported by growth in imports into Latin America and Asia and continued growth in U.S. exports”.
In the Suezmax market, Capital Product Partners noted that “Suezmax spot earnings softened in the second quarter of 2017 compared to the preceding quarter. The existing agreement between a joint committee of OPEC and Non-OPEC oil producers to cut oil production continued to limit demand for Suezmaxes, while activity further waned in June as we entered the traditionally weak summer season. In addition, increased Suezmax newbuilding deliveries combined with weak rates across other crude tanker segments added pressure on the market. On the positive side, Chinese crude imports remained at firm levels. The soft spot market had a negative impact on period activity as well as period charter rates, which declined when compared to the previous quarter”.
Similarly, the shipowner said that “on the supply side, the Suezmax orderbook represented, at the end of the second quarter of 2017, approximately 13.1% of the current fleet. Contracting activity continues to be limited, as 14 Suezmax tankers have been ordered since the start of the year. Analysts estimate that slippage for the first half of 2017 amounted to 31% of the expected deliveries. In terms of demand, Suezmax tonne/miles are expected to be supported by rising long-haul exports from the U.S. and growing crude import demand in India. Overall demand for the sector is projected to expand by 5.3% in 2017”, the ship owner concluded.
Spot rates in the Asia to Middle East market are seeing the most traction as container shipments on the route improved by 1.6% year-on-year in May, according to shipping consultancy Drewry.
Although volumes registered in the first five months of 2017 were down by 2.6% to 1.3 million TEU, freight rates were on the up as westbound shipments improve from Asia to the Middle East and in particular to South Asia. Drewry said that prices in both lanes “should at the very least hold firm over the coming months.”
Despite the lacklustre start to the year, annual trade growth could rebound back in 2017, by potentially as much as 3%.
The Asia to South Asia market continues to expand. The latest Container Trades Statistics (CTS) data puts westbound volumes up by 6.4% after five months, following a massive 16% jump in May. It is very possible that demand could rise by as much as 7% this year to surpass the 2016 growth rate of 4.9%.
“There will inevitably be some seasonal drop-off in cargoes in the third quarter in comparison to the second quarter but, with both Ocean and THE now including Asia to Middle East in their vessel-sharing agreements, an opportunity exists for a more co-ordinated approach to balance trade-level supply with demand,” Drewry said.
“Spot rates on the Asia to Middle East trade have been somewhat erratic with large monthly gains quickly snuffed out.”
That was the case in May when Shanghai to Jebel Ali 40ft spot rates shed USD 600 to wipe out most of April’s hike. Spot rates on the same corridor then spiked again in June to reach USD 1,920/40ft. Ignoring the volatility, rates have trended upwards for a year and June’s benchmark was double that of the same month last year.
Freight rates on the Asia to South Asia tradelane are also trending upwards, although they lack the wild swings of the Middle East, Drewry informed. The benchmark rate for Shanghai to Nhava Sheva hit a 30-month high in June, gaining over USD 200 in a month to USD 1,290/40ft. Again, this is more than double the price of the same one year ago.
Japan’s shipping firm Mitsui O.S.K. Lines (MOL) is expecting an improvement in its earnings for the current fiscal year, as it witnessed a stronger first quarter.
MOL said its net income for the first quarter of the fiscal year reached JPY 5.2 billion (USD 47 million), compared to JPY 1.4 billion (USD 12.6 million) seen in the same period a year earlier. The company’s operating profit for the quarter stood at JPY 1.14 billion, representing a turnaround from an operating loss of JPY 3.5 billion reported in the previous year. MOL’s revenues for the period also increased reaching JPY 403.2 billion from JPY 360 billion reported in the first quarter of the previous fiscal year.
For the first six months of the fiscal year from April 1, 2017 to September 30, 2017, the company said it expects its net income to reach JPY 13 billion from JPY 7 billion previously expected. The company’s operating profit is also expected to be at JPY 10 billion, compared to the earlier expected JPY 4 billion, while its revenue outlook was revised to JPY 820 billion from the earlier expected JPY 805 billion.
Although the tanker business is expected to perform below the assumption, the company said that it made the upward revision for the first six months of the fiscal year mainly due to improved profits in the containership business, resulting from strong cargo trades and operational cost reductions.
For the fiscal year from April 1, 2017 to March 31, 2018, the company now expects its net income to reach JPY 12 billion, up from JPY 10 billion announced in its earlier outlook. Operating profit is set to be at JPY 18 billion from the earlier expected JPY 9 billion, while its revenue was revised to JPY 1.615 trillion from JPY 1.610 trillion.
MOL revised its full year outlook as it anticipates that the positive trends will continue throughout the fiscal year.
Hong Kong-based container carrier Orient Overseas Container Line (OOCL) recorded a 15.2% rise in its total revenues for the six-month period ended June 30, 2017.
Compared to the first half of 2016, the company’s revenue increased from USD 2.24 billion to USD 2.59 billion.
Similarly, the shipping firm said that it handled 6.8% more volumes during the first half of the year, reaching 3,086,676 TEUs, up from 2,890,208 TEUs handled in the same period a year earlier.
Loadable capacity increased by 5.3%, while the overall load factor was 1.2% higher than in the same period in 2016. Overall average revenue per TEU increased by 7.8% from 2016.
The company’s Intra-Asia / Australasia was the only underperformer for the period, marking a 5.2% drop in volumes, while the Trans-Pacific, Asia / Europe and Trans-Atlantic services witnessed a 23.1%, 22.2% and 8% increase in volumes during the first half of 2017, respectively.
For the second quarter of 2017, total revenues increased by 23.8% to USD 1.4 billion from USD 1.13 billion. Total volumes were up 6.6%, reaching 1,616,659 TEUs, compared to 1,516,036 TEUs handled in the same quarter in 2016.
Loadable capacity increased by 9.6%, while the overall load factor was 2.3% lower than the same period in 2016. Overall average revenue per TEU increased by 16.2% compared to the second quarter of last year.
Fortunes in the LR2 product tanker market could be better. In its latest weekly report, shipbroker Gibson said that “it’s safe to say that LR2s have had a pretty torrid year to date, with earnings on the benchmark Middle East – Japan route averaging around $8,000/day in the second quarter, barely enough to cover fixed operating expenses. Many point to fleet growth as the primary issue, yet the trading LR2 fleet has remained fairly static, indicating that new deliveries are not the overriding problem. Whilst the overall LR2/Aframax fleet has seen substantial growth, with 53 vessels delivered in 2016 and 40 already for the year to date, the actively clean trading LR2 fleet size has remained stable at just under 200 vessels. Last year we counted at least 25 LR2s migrating into dirty trade, whilst many vessels went dirty on, or straight after their maiden voyage. The situation is of course dynamic, with owners having the option to clean up their tonnage if the LR2 market begins to show signs of sustainable returns. However, right now there appears little impetus to favour one market over the next”.
The shipbroker added that “on the demand side, getting a complete and truly accurate picture in the short term is challenging, with data sets subject to constant revision and often time lagged. However, export volumes out of the Middle East have been clearly pressured this year. Limited capacity additions have come online, whilst the Ruwais plant has seen at least 127,000 b/d taken offline following a fire, not to mention the Emirate stockpiling product to offer security against a potential interruption to gas supplies from Qatar. Lower export volumes from Saudi Arabia were also observed over the first half of the year. Combined with the UAE, it is possible that regional exports have slipped nearly 300,000 b/d”.
The containership orderbook has diminished by 30% in capacity terms since the start of 2016 and in the first half of 2017 it totalled less than 40,000 TEU, Clarksons Research said.
However, there are several important aspects of the orderbook to consider, including the change in the overall size of the orderbook, the shape of the orderbook schedule and the size of the ordered ships.
With the volume of capacity on order shrinking considerably over recent years, the orderbook stood at 396 units of 2.78 million TEU at the start of July 2017, plunging from 515 units of 3.97 million TEU seen at the start of 2016. While the volume of capacity on order is still not insignificant, as a percentage of fleet capacity, it is the lowest it has been on record, standing at 14% at the start of July.
As a result, boxship fleet growth in the next few years is expected to be relatively moderate, and significantly lower than 8.1% in 2015. In full year 2017, the containership fleet is projected to expand by 3.0% y-o-y in TEU terms, and by 3.7% y-o-y in 2018.
Checking The Schedule
With the vast majority of boxship capacity currently on order scheduled for delivery either in the remainder of this year or next year, the containership orderbook looks very thin after 2018. Basis start July, just 22 boxships of over 12,000 TEU, including mega boxships, are scheduled for delivery from 2019 onwards, out of a total 108 vessels in this size range currently on order.
In reality, some vessels currently expected to be delivered in 2017-18 may slip into 2019-20. Moreover, new orders for containerships of very large capacity could yet still emerge for delivery in that period, although “appetite for boxship ordering in general currently remains very subdued,” Clarksons said.
The orderbook tells a very different story across the boxship sectors, remaining heavily weighted towards the larger sizes. Ships of 15,000+ TEU account for 40% of capacity on order, and represent the equivalent of 73% of 15,000+ TEU fleet capacity.
Meanwhile, sub-3,000 TEU there are currently 213 ships of 0.39 million TEU on order, equivalent to 10% of fleet capacity in this size range, and expectations of limited deliveries mean that the sub-3,000 TEU fleet is expected to shrink in the short-term. Moreover, the orderbook in the 3-7,999 TEU size range is extremely limited, just 2% of fleet capacity.
“The boxship orderbook has dwindled significantly, and against the current backdrop of a diminished appetite for contracting, it looks likely that it will continue to shrink,” Clarksons informed.
The shape and size of the orderbook “does vary significantly across different vessel sizes but overall the schedule looks pretty thin after 2018.”
Samsung Heavy Industries Co., a major shipyard here, said Thursday that it swung to the black in the second quarter of the year from a year earlier on cost-saving measures.
Net profit reached 23 billion won (US$21 million) in the April-June period, compared with a loss of 212 billion won a year earlier, the company said in a regulatory filing.
Operating income reached 21 billion won in the second quarter, also turning around from an operating loss of 284 billion won a year earlier.
Its sales dropped 15.5 percent on-year to 2.29 trillion won over the cited period.
Last year, the shipyard suffered a loss of 139 billion won, compared with a loss of 1.21 trillion won from a year earlier.
The shipbuilding industry, once regarded as the backbone of the country’s economic growth and job creation, has been reeling from mounting losses caused by an industrywide slump and increased costs.
The country’s top three shipyards suffered a combined operating loss of 8.5 trillion won in 2015 due largely to increased costs stemming from a delay in the construction of offshore facilities and the industrywide slump, with Daewoo Shipbuilding alone posting a 5.5 trillion-won loss.
The shipbuilders have drawn up sweeping self-rescue programs worth some 11 trillion won in a desperate bid to overcome a protracted slump and mounting losses.
Things are shaking up in the dry bulk market of late. In its latest weekly report, shipbroker Intermodal said that “after an admittedly challenging 2016, the Dry Bulk market kicked off this year on a much more positive note, with all indices steadily increasing until the end of March market peak. During the second quarter and until the beginning of this month, the freight market witnessed pressure, which was more evident in Capesizes, with the BDI nonetheless resisting to break below 800 points. During the past couple of weeks, we have seen rates across the board steading and the Dry Bulk Index once again moving towards 1,000 points.
According to Intermodal’s SnP Broker, Mr. Konstantinos Kontomichis, “in the SnP market, following the significant premiums asset prices enjoyed during most of H1, the downward correction in freights seemed to be affecting values but not as much as one would expect, fact that evidences the change in both expectations and psychology among dry bulk owners. At the end of March, the ‘DONG-A ARTEMIS (179,213dwt-blt 12, S. Korea), was sold for a price of $33.0m, while a couple of months later the ‘HYUNDAI TALENT’ (178,896dwt-blt 12, S. Korea) was sold for a price of $30.5m, a rather soft decrease given that the correction in Capesize average earnings during this time was around 40%”.
“Moving on to Panamaxes, the ‘BARILOCHE’ (75,395dwt-blt 07, Japan) was sold for a price of $13.8m in March, whereas the ‘BULK MONACO’(76,596dwt-blt 08, Japan) invited best offers in early July and was withdrawn from the market as the best offered received was rumoured to be in the low $11.0m level. Furthermore, during the second and the third week of April the Kamsarmax vessels ‘OSHIMA ISLAND’ (81,364dwt-blt 12, Japan) and ‘UNITED GALAXY’ (82,169dwt-blt 12, Japan) were sold for a price of $20.5m each, while a month later the ‘HANJIN PARADIP’ (82,600dwr-blt 13, Japan) was sold for a price of $21.0million” Kontomichis said.
He went on to note that “Supramax SnP activity also saw resistance as far as asset prices were concerned. The ‘MARITIME EMERALD’ (58,717dwt-blt 09, Philippines) was sold in April for a price of $14.7m, whereas the three years older sister vessel ‘SUNRISE SKY’ (58,100dwt-blt 12, Philippines) was sold in the beginning of July for the same price. With the summer season peak just around the corner, all eyes remain fixed on the reaction of the SnP market in terms of activity and – of course – asset values. Despite the fact that the BDI slipped at the low 800 points level earlier in the summer, we saw second-hand prices resisting a similar drop, while what is even more interesting is that newbuilding appetite is still alive. If earnings extend the positive gains of the past few weeks, we won’t be surprised to see sale candidates being withdrawn if Buyers continue to look for discounts that most probably won’t be achieved”, he said.
Concluding his analysis, Kontomichis said that “after all, for anyone looking to sell it makes much more sense to wait until the traditionally stronger Q4 to do so, especially given the fact that the summer has so far exceeded expectations in terms of freight rates performance. For those who are firm Buyers on the other hand, accepting to increase their budget a bit in order to get closer to current asking levels before Q4 might not be such a bad idea after all. It remains to be seen”.
Meanwhile, in the S&P market this week, Intermodal noted that SnP activity witnessed a significant slowdown last week, with just a few orders being reported across bulkers and tankers, while in the case of the former, the recent positive correction in the freight market seems to have resulted in both Buyers and Sellers taking a step back and reassessing their ideas. On the tanker side we had the sale of the “FRONT ARDENNE” (153,152dwt-blt 97, S. Korea), which was sold to undisclosed buyers, for a price in the region of $8.0m. On the dry bulker side we had the sale of the “NORTH TRADER” (176,955dwt-blt 06, Japan), which was sold to Taiwanese owner, Shinyo International, for a price in the region of $17.2million”.