The container shipping industry will be focussed on the deployment of ultra large container vessels (ULCV) during the year as around 40 of such ships are expected to join the fleet in 2018, according to BIMCO.
53 ships larger than 13,500 TEU are scheduled for delivery, however, the number is expected to be slighty less as some owners might opt to push deliveries of their ships. In 2017, 55 ships of the same size were scheduled for delivery, but only 43 were handed over.
During 2017, owners and investors were busy in the second-hand market. The year was in fact the busiest on record as 297 ships changed hands, valued at USD 4,178 million, BIMCO cited data from VesselsValue. Panamax ships were in demand, more due to price than anything else, with 93 ships changing hands in total.
Purchasing prices were equal to the demolition values of many of the ships, meaning there was little downside risk from the purchase. Since mid-2017 both demolition prices and second-hand values have gone up.
A 2009-built, 4,275 TEU panamax ship was valued at USD 13.7 million in July 2016, USD 5.6 million in January 2017 and USD 10.9 million in January 2018. At the same time, the demolition value of the same ship was USD 4.6 million, USD 5.6 million and USD 8.1 million. Meaning that deals done at January 2017 prices were equal to demolition values.
Regarding the overall demand in the container shipping industry, BIMCO said it wxpects the demand to be lower than in 2017, but still high enough to potentially improve the fundamental market balance.
Demand is forecast to grow by 4.0-4.5% against a fleet growth of 3.9% in 2018.
More than 87 pct of the global fleet capacity is controlled by only ten out of 67 shipping lines operating fully cellular containerships, which is less than 7 pct of the total lines, according to the data from MDS Transmodal.
Danish liner major Maersk Line is on the top of the list with an estimated share of over 21 pct of the global market (excluding intra-regional).
Maersk Line is followed by its 2M Alliance partner Mediterranean Shipping Company (MSC) in the second place and CMA CGM in the third place. The remaining top ten players include German liner Hapag-Lloyd, COSCO, Evergreen, OOCL, MOL, Yang Ming and NYK.
Over the last four years, the top 10 shipping lines have seen their combined market share increase from 68 to 83 pct, according to the UK-based consultancy.
During the said period, the top 10 lines have seen their deployed capacity increase from some 55 million TEU to 86.7 million TEU. The increase was mainly driven by consolidation and mergers and acquisitions over the past few years, a process which is far from over.
Namely, Orient Overseas Container Line (OOCL) is to become part of China Ocean Shipping Company (COSCO) sometime this year, bringing the duo’s combined share in the deep sea trades to around 12 pct.
In April 2018 the container divisions of Nippon Yusen Kabushiki Kaisha (NYK), Mitsui O.S.K. Lines (MOL) and Kawasaki Kisen Kaisha (K Line) will merge, forming a joint venture called Ocean Network Express (ONE). MDS estimates that their combined share of the deep sea trades will be 8.7 pct.
With fewer lines dominating the market, smaller lines are facing an ever-increasing pressure.
On the major three East/West routes, the market is dominated by the three alliances- Ocean Alliance, 2M and the Alliance- although at different magnitudes. On the Asia-Europe routes, lines that are not part of alliances account for just 1 pct of the total deployed capacity, whereas on the Transpacific and Transatlantic routes, they account for 11 pct and 17 pct respectively, data from MDS shows.
However, on the individual routes, mergers and acquisitions and consolidations could indirectly offer opportunities for small players.
For instance, the strict conditions imposed by the regulatory authorities on Maersk operations after the acquisition of Hamburg Süd have offered the chance for a small line, in this case, Pacific International Lines (PIL), to launch a service between Asia and South America EC.
Nevertheless, the longevity of this kind of services is far from certain as they will be subject to rates volatility, MDS concludes.
The dry bulk shipping industry, which should be facing another year of improvement to the fundamental balance, is currently in its year of opportunity, according to BIMCO.
The improvement is expected amid the slowest pace in fleet growth since 1999, as well as solid growth in demand.
January saw plenty of ship deliveries coming onto the water as it reached a ten-month high at 4.8 million dwt, while 0.7 million dwt were demolished. Although the fleet growth slowed down, the flip side is that more new orders are being placed at Far Eastern shipyards by global shipowners and investors.
According to BIMCO, the dry bulk shipping market requires careful handling in the first quarter of the year as seasonal cargo demand drops. In terms of freight rates, the positive development that characterised most of the second half of 2017 came to a sudden end on December 12, 2017, once capesize earnings peaked at USD 30,475 per day.
By the end of January, the freight rates for all sizes of dry bulk carriers were at break-even levels – covering both OPEX and CAPEX – but not turning profitable.
Although CRSL data shows that the overall tonne miles demand grew by 5.1% in 2017, powered by a massive lift in Chinese imports once again, BIMCO believes that the strong demand will not be repeated in 2018.
“Our forecast for overall demand growth in 2018 is around 2-3%, with plenty of uncertainty surrounding that. Not just in terms of volume, but most likely also in terms of sailing distances,” BIMCO said, adding that seen against a fleet growth of 1.4%, an improved market is still expected.
Containership owners have broken the ordering silence from December 2015 having made a major comeback to shipbuilding yards this month with orders ranging from feeders to ultra large boxships.
However, the ordering flurry doesn’t seem to be over, according to Alphaliner, since additional orders are expected to be announced in the coming weeks as owners and carriers look to renew their fleets.
The fleet rejuvenation is being pursued ahead of the anticipated impact of the new environmental regulations including the 2020 Sulfur cap and the Ballast Water Management Convention.
Major liners, including Maersk Line, have added newbuilding capacity over the past couple of weeks.
As World Maritime News reported, the Danish container shipping major has exercised an option for the construction of two 15, 200 TEU containerships at Hyundai Heavy Industries (HHI).
Evergreen is investing in 20-strong newbuilding fleet, having booked construction of eight 12,000 TEU ships with Samsung Heavy Industries (SHI) in addition to chartering 12 additional 11,850 TEU ships from Shoei Kisen.
Furthermore, Taiwanese shipping company Yang Ming Marine Transport Corporation is on the brink of bringing 20 new ships to the fleet.
Under the investment plan, Yang Ming will order the construction of ten 2,800 TEU containerships and charter ten 11,000 TEU containerships.
What is more, Korean shipping line Hyundai Merchant Marine is expected to start ordering up to 20 ultra large container vessels (ULCVs) as of next month.
These could eventually push the orderbook-to-fleet ratio to above 15 pct, Alphaliner said.
Vessels with a combined slot capacity of 986,000 TEU have been added to the orderbook since September 2017, compared to only 316,000 TEU between January 2016 and August 2017, Alphaliner’s data shows.
The containership fleet has already expanded by 1.2 pct in the first month of 2018 – equal to the entire fleet expansion of 2016, BIMCO said in its market outlook for 2018.
January was one of the busiest months for boxship deliveries over the past eight years, ushering in 254,173 TEU of new capacity.
On the demolition side, three ships have been removed so far, those being a 320 TEU ship built in 1981, a 976 TEU ship built in 1990 and a 3,802 TEU ship built in 1998, BIMCO said.
2017 saw a total of 398,000 TEU demolished, a level which is bound to decrease in 2018. BIMCO expects that 250,000 TEU will leave the fleet as the year progresses.
The idle containership fleet has almost disappeared with only 65 ships on Alphaliner’s list with a combined capacity of 191,441 TEU as of February 5, 2018.
In real terms, this means that nominal fleet growth will have a bigger effect on the market balance, as the temporary idling and re-activation of ships becomes negligible, BIMCO said.
Overall demand growth is expected to be lower than in 2017, but still high enough to potentially improve the fundamental market balance.
BIMCO forecasts demand to grow by 4.0- 4.5 pct against a fleet growth of 3.9 pct in 2018.
The VLCC tanker market was on a high over the course of the past week, as a result of increased demand for cargoes from the Middle East. In its latest weekly report, shipbroker Charles R. Weber noted that “a strengthening of demand in the Middle East market this week halted the downward rate trend of the second half of January. A total of 35 fixtures were reported there, representing an 82% w/w gain and the highest tally in four weeks. Fixture activity in the West Africa market was less inspiring: there were just four fixtures there – off two from last week’s tally – which reduced the four‐week moving average of regional fixtures to a two‐month low. Meanwhile, a small number of speculative ballasts from Asia to the Atlantic basin have returned amid the sour TCE environment prevailing in the Middle East market. Round‐trip AG‐FEAST TCEs presently yield an average of ~$11,081/day while round‐trip TCEs on the CBS‐SPORE route stand at ~$18,719/day.
According to CR Weber, “these ballasts contributed to a modest narrowing of oversupply during the final decade of the February Middle East program to 22 units after reaching a four‐year high of 30 units at the conclusion of the month’s second decade. The reduction of excess supply could help to improve rates during the coming week if sentiment is also influenced by demand strength, but any gains would likely be very modest at best, particularly as recent decline in bunker prices has broadly boosted voyage TCEs. Middle East Rates to the Far East route were unchanged at ws37 while corresponding TCEs were up 18% to ~$11,804/day on a 7% decline in bunker prices. Rates to the USG via the cape rose one point to ws19 to narrow the gap between triangulated TCEs and those on round‐trip voyages from the Caribbean. Triangulated Westbound trade earnings rose 22% to a closing assessment of ~$20,141/day. Atlantic Basin Rates in the West Africa market lagged those in the Middle East and posted fresh losses, accordingly. The WAFR‐FEAST route lost 2 points to conclude at ws42.5. Corresponding TCEs were off 2% to ~$14,479/day. Rates in the Atlantic Americas were stronger on declining regional availability. The CBS‐SPORE route gained $100k to conclude at $3.6m lump sum. Round‐trip TCEs on the route rose 18% to conclude at ~$19,088/day”.
Meanwhile, “Suezmax rates in the West Africa market were up slightly this week as availability levels slipped. The WAFR‐UKC route gained five points to conclude at ws57.5. Waning VLCC demand in the region has been incrementally increasing Suezmax cargo availability since late January loading dates – and as charterers move to work through February program this week, demand is expected to jump in line with a decline in VLCC coverage for late‐February cargoes. This could keep rates on an upward trend during the upcoming week. In the Caribbean market, rates were softer in a lag of regional Aframaxes, despite stronger demand to service US crude export cargoes and the stronger West Africa market. The CBS‐USG route was unchanged at 150 x ws60 while the USG‐UKC route dropped four points to 130 x ws48”, said CR Weber.
Finally, “the Caribbean Aframax market saw rates steady at an affective floor tested last last week. The CBS‐USG route was trading in the low ws80 for most of the week, concluding unchanged w/w at an assessed ws85. Meanwhile, the USG‐UKC route lost 2.5 points to conclude at 70 x ws62.5. Owners are keen to maintain present rates as the floor with some having earlier shown resistant to trades at lower levels. The disappearance of some units late during the week from position lists will likely be pointed to as a basis for modest fresh rate gains, though it remains to be seen if this will be sufficient to add to rates given that TCEs rose 42% this week on lower bunker prices”, the shipbroker concluded.
Due to volatility in the tanker shipping industry, Bermuda-based Nordic American Tankers (NAT) wrapped up 2017 with a net loss of USD 75.5 million, compared to a loss of USD 4.5 million seen a year earlier.
The company’s net loss narrowed to USD 21.9 million in the fourth quarter of 2017 from USD 39.2 million recorded in the corresponding quarter of 2016.
NAT said that 4Q 2017 was “an important quarter” with the first major steps in the recapitalization program having been completed.
During the quarter, NAT agreed with Ocean Yield ASA the full financing of its three newbuilds to be delivered in June, August and October 2018.
In addition, the company raised USD 110 million in new equity in December 2017.
NAT also agreed to establish a new credit facility as part of the plan to replace the original credit facility of 2004.
Earlier, World Maritime News reported that Herbjørn Hansson, CEO of NAT, expects 2018 to be a better year for the company than 2017, bringing higher earnings and dividend.
In its 4Q 2017 report, the company confirmed this view: “We expect the tanker market to turn for the better in 2018.”
Currently, NAT’s fleet comprises 33 Suezmaxes, including the three newbuilds, with an aggregate cargo capacity of 33 million barrels of crude oil.
Greece-based owner DryShips Inc. is looking to spin off of its gas carrier business, Gas Ships Limited, and has filed a F-1 registration statement with the U.S. Securities & Exchange Commission.
In the spin-off, DryShips will distribute to holders of its common stock 49% of the issued and outstanding shares of Gas Ships Limited’s common stock. Following the move, Gas Ships Limited will be a publicly-traded company, and DryShips will retain a 51% ownership interest in the company.
“The filing of the Form F-1 Registration Statement is an important step in the process of establishing Gas Ships Limited as a new, stand-alone company with its own strategic focus, independence and priorities. We believe that this business is well-positioned for success as a separate company,” George Economou, the Company’s Chairman and Chief Executive Officer, said.
The spin-off is subject to certain conditions, including the effectiveness of Gas Ships Limited’s Form F-1 registration statement and final approval and declaration of the distribution by DryShips’ Board of Directors.
A switch to the Atlantic with rates firming as charterers seemed keen to fix and tonnage was tight, prompting a recovery in rates. Transatlantic coal runs were paying near the mid-teens for standard capes with rates tipping over US$9.00 for the Colombia/Continent coal run. Charterers with INL breach cargoes had to pay a hefty premium with a cargo booked from Port Cartier to Rotterdam at US$9.30. Brazil/China activity also increased, absorbing the ballasters with a 10-19 March 170,000-tonne 10% cargo fixed from Tubarao to Qingdao at US$16.75. In the east, miners were slow to show their hands but Rio Tinto continued to absorb tonnage fixing in the mid-US$6.00s with rates largely flat but there was talk as the week closed out that an operator fixed an end February cargo at US$6.80 but this was denied. Timecharter rates improved slowly with well-described 180,000 tonners open mid-China fixing around US$14,500 daily. Period interest was maintained with sentiment seemingly still positive going forward.
With limited fresh enquiry in all areas, spot market rates drifted lower throughout the week. Conversely period rates remained strong with a modern kamsarmax open South China fixed for five to seven months at US$14,000, with ongoing interest from charterers to take forward cover despite the nearby market being fragile leaving the gap between spot and period unusually wide. In the Pacific, the smaller sizes came under the most pressure and hopes of a pre Chinese New Year rush failed to materialize with only Indonesia seeing a good volume of fixing. Owners also began to concede lower levels as the east coast South America market looked less attractive, with the large number of ballasters beginning to impact on rates there and fixing now predominantly on an aps basis. The Atlantic market remained relatively slow all week, again early vessels struggled to cover with little fresh business appearing. Last Monday, a modern 78,000-dwt vessel was reported on subjects at US$11,750 for an Atlantic round voyage but subsequently failed, only to re-fix towards the end of the week at around US$9,500 to US$9,750 for similar business.
With the run up to the Chinese New Year celebrations, the past few days have seen routes across the board losing ground. Very little period activity was reported but a 63,300-dwt was fixed basis delivery Singapore four to six months trading redelivery worldwide at US$12,250 daily.
The Atlantic struggled in many areas and brokers advised that a build-up of tonnage from east coast South America and little fresh enquiry from US Gulf lead to a fall in rates. A 58,000-dwt was reported fixed delivery South West Pass for a trip to the Mediterranean at US$18,000 and later in the week an ultramax was reported to have fixed at similar levels again for a trip to the Mediterranean. Very little was seen from the Continent although a 63,000 was fixed for a scrap run to Turkey at US$12,000.
The Asia market also saw a sluggish week. A 52,000-dwt was fixed basis delivery Hibikinada for a trip to west coast India at US$6,500. A 58,000-dwt went for delivery Cebu for a trip via Indonesia redelivery India at US$11,250. A 56,700-dwt open Singapore 10 Feb was booked for a trip via Indonesia redelivery south China US$9,500. It remains to be seen what further impact of the Chinese festivities will have on the market.
In the last week before the Chinese New Year the market tended to slow as expected. Brokers suggested there had been a lack of fresh cargo in both the Atlantic and Pacific market with negative sentiment on both small and large-sized handy vessels. Period fixtures reported from the east remained sketchy, including a two laden leg trip paying US$9,000 daily on a 33,000-dwt basis Zhoushan delivery and worldwide redelivery.
A 32,000-dwt open Rotterdam was booked to move scrap cargo to the east Mediterranean at US$8,000 daily. Another similar-sized open Canakkale was fixed for a trip to the Continent-ARA-Ghent range at approximately UUS$8,000 daily. Steel trips paid US$7,000 to US$8,000 daily on vessels open CJK to redeliver in Southeast Asia.
As tanker freight rates are still reeling under the pressure of oversupply of tonnage, more and more tanker owners are entering consolidation mode, in a bid to improve economies of scale and avoid financial problems. In its latest weekly report, shipbroker Gibson said that “just before Christmas last year, the tanker market was greeted with the announcement of the proposed merger between two NYSE quoted tanker companies, Euronav and Gener8. At the time of writing this merger has still to be approved but, if the green light is given, the joint company will own 40 VLCCs and 28 Suezmaxes (incl. 4 newbuildings). Part of the deal includes the sale of 6 Gener8 VLCCs to International Seaways, another NYSE company which will raise their VLCC profile to 16 vessels. In a separate deal, concluded in March, DHT Holdings announced the acquisition of all 11 VLCCs from the BW Group (incl. 2 newbuildings). The BW Group promptly then placed an order in May for 4 VLCC newbuildings from Samsung HI for 2019 delivery at an attractive price. These were the only major “consolidation” deals concluded in 2017 in the large tanker sector. DHT had rebuffed several takeover proposals by Frontline earlier in the year”.
The London-based shipbroker added that “the beauty of the agreed deals is that both parties would grow their fleets without adding to the existing orderbook and as a result of clever acquisitions, bring down the age profile of their respective fleets. Euronav has a good track record of smart acquisitions without adding to the orderbook. In March 2015 the company purchased 4 brand new VLCCs from Metrostar. At the same time selling off the older units at good prices to keep the fleet modern. DHT has also been very active in this area too, selling off 5 units in November (all over 17 years of age) to reduce bank debt. Based on the VLCC fleet today (excluding VLCCs on order) and assuming the Euronav/Gener8 deal is ratified, Euronav will own 5.5% of the fleet, while DHT Holdings will own 3.2%. With the recent delivery of two units, Frontline now owns 3.0%, while International Seaways ownership could rise to 2.2%. Of course, consolidation has several strategic benefits for listed companies, as size does matter, making shares more liquid and more attractive to investors. Euronav’s acquisition of the Gener8 fleet will of course swell the Tankers International Pool at the expense of the VL8 pool, providing a stronger platform to counter the charterers”.
Meanwhile, “the VLCC supply is still dominated by the Asian giants such as China VLCC, Bahri and Cosco Shipping (CSET), with NITC’s share slipping. Apart from Euronav and NITC, all of the top ten owners have tonnage on order, which will swell the ranks by another 44 units. Maran, steadfastly remaining independent, will take delivery of 9 more VLCCs before the end of 2019. However, both China VLCC and CSET have substantial orderbooks, which will eventually give them an even more dominant position. The domination of the big fleets and the diverse ownership of the remainder of the VLCC fleet, most 10 units or less, is likely to limit any further consolidation in the short term”, Gibson said.
“The volatility experienced in the US stock market this week, pinned partly by concerns over the prospect of higher interest rates coupled with the current malaise across the tanker markets, heaps more pressure on beleaguered CEOs to keep the shareholders happy. With the prognosis of a tough year ahead for the crude sector, almost certainly, owners in the large tanker sector are unlikely to have further consolidation as a priority”, the shipbroker concluded.
Meanwhile, in the crude tanker market this week, Gibson said that it was“a much busier week for VLCCs…but that’s where the good news ended as the fresh demand was easily met by a solid wall of availability that remains standing as the very last of the February programme shakes out. Rates remained stuck within their lowest range of the year at down to ws 34 East for older units, and at no better than ws 40 for the most modern vessels with straight runs to the West at under the ws 20 mark. Chinese New Year commences later next week, and Owners will be hopeful of concentrated preholiday attention, though with March stem confirmations still to be awaited, there is no guarantee of that. Suezmaxes bumbled along with ballasting from the area not an economic option and a consequent easy tonnage list kept rates at down to 130,000mt by ws 62.5 to the East and to ws 26 West. No early change likely. Aframaxes trod water over the period with little/no support from the inter Far Eastern market either. 80,000mt by ws 85 still to Singapore, and nothing likely to shift that over the near term, at least”, the shipbroker concluded.
A total of seven incidents of piracy and armed robbery against ships were reported in Asia in January 2018, according to regional piracy watchdog ReCAAP ISC.
Compared to December 2017, when a total of 16 incidents were reported, the situation in January 2018 improved. Year-on-year numbers were also down from 10 incidents reported in January 2017, data from ReCAAP shows.
Out of the seven reported, five were actual and two were attempted incidents. One of these was a piracy incident and six were armed robberies against ships.
Five incidents occurred on board ships while at anchor/berth, specifically at Muara Berau (East Kalimantan, Indonesia), Manila (Philippines), Cam Pha (Vietnam) and the South China Sea.
The two incidents on board ships while underway occurred off Alang, Gujarat (India) and off Pulau Karimun (Straits of Malacca and Singapore).
There was no actual or attempted incident involving the abduction of crew from ships in the Sulu-Celebes Sea and waters off Eastern Sabah; and no incident involving the hijacking of ships for theft of oil cargo in January 2018, ReCAAP said.
As of January 2018, nine crew is still being held in captivity. The Philippine authorities continued to conduct pursuit operations and intensify its military operations to rescue the abducted crew and neutralise the militant group.