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.
Danish shipping giant Maersk Line reported a net profit of USD 584 million in 2017, against a net loss of USD 376 million seen a year earlier.
The company’s revenue for the year increased by 14.9% to USD 23.8 billion, from USD 20.7 billion reported in 2016, driven by an 11.7% increase in the average freight. Underlying profit for the period was at USD 521 million, against a loss of USD 384 million.
The year was challenged by a cyber-attack and bunker price increases, however, Maersk Line returned to profit with a significant improvement compared to the disappointing 2016.
The global container demand was strong in 2017, despite a slowdown in the second half of the year following a strong first half, which resulted in increased freight rates compared to the previous year. Maersk Line grew volumes by 3% to 10,731k FFE, compared to 10,415k FFE, despite the negative impact of the cyber-attack.
The volume increase was driven East-West by 2.4%, North-South by 2.2% and Intra-regional by 7.3%. The rise reflects a strong market demand, with estimated growth of around 5% compared to 2016.
The acquisition of German container shipping line Hamburg Süd and the divestment of Brazil’s container shipping line Mercosul Line were completed in December 2017.
The Maersk Line fleet consisted of 287 owned vessels and 389 chartered vessels with a total capacity of 3,564k TEU by the end of 2017, an increase of 10% compared to the end of 2016. The rise is partly due to more capacity being deployed to accommodate the incoming volumes from the slot purchase agreement signed in Q1 2017 with Hamburg Süd and Hyundai Merchant Marine.
Idle capacity at the end of 2017 was 24.1k TEU (three vessels), which was flat compared to 24.7k TEU of idle capacity at the end of 2016.
South Koran shipbuilder Hyundai Heavy Industries (HHI) ended the fourth quarter of 2017 with a widened net loss.
HHI suffered a net loss of KRW 572.3 billion (USD 524.8 million) in 4Q 2017, compared to a loss of KRW 351.8 billion seen in the corresponding period a year earlier.
The shipbuilder’s operating loss stood at KRW 342.2 billion in the fourth quarter of 2017, against an operating income of KRW 61.2 billion posted in 4Q 2016.
What is more, sales dropped by 33 percent to KRW 3.48 trillion in 4Q 2017 from KRW 5.19 trillion recorded in the same quarter of 2016.
As a result of the company’s worsened earnings and dwindling order backlogs, union members at HHI supported a wage deal with management, Yonhap News Agency reported.
As informed, the deal covers the fiscal years of 2016 and 2017. Under the terms of the deal, each HHI employee will receive a month of extra salary plus KRW 1.5 million (USD 1,380) in bonus. The workers’ basic pay will be frozen for the two years.
HHI is encouraging workers with an additional KRW 1.5 million in cash for 2017 to overcome the current slowdown in the industry.
The shipbuilder has set sights on reaching KRW 7.99 trillion in sales during 2018. HHI’s 2018 sales target represents a 60 percent decline from the one a decade ago. The lower aim was set due to a decline in order backlogs, which is expected to continue this year as well.
Norwegian-based ballast water treatment (BWT) specialist Optimarin delivered more than 60 of its USCG compliant Optimarin Ballast Systems (OBS) during 2017.
With 2017’s orders accounted for, Optimarin has now sold 550 systems, with around 440 delivered worldwide. Backed by a stable group of investors, with ambitious long-term plans, Andersen believes the next few years will see these numbers increase significantly, as shipowners move to comply with the IMO’s Ballast Water Management (BWM) Convention.
“We’ve been exclusively focused on developing BWT solutions for almost 25 years, but we’ve never been as busy as we were in 2017,” Tore Andersen, Optimarin CEO, said.
In November 2017, Optimarin decided to launch the BWT sector’s first five-year guarantee. This means that if a shipowner signs a fleet agreement with Optimarin for installation on multiple vessels, the company will provide them with a five-year guarantee that covers all parts and servicing, worldwide.
OBS is fully approved by both IMO and USCG, with certification through DNV GL, Lloyd’s, RINA, Bureau Veritas, MLIT Japan, and American Bureau of Shipping.
Optimarin’s fellow BWT system developers, namely Finnish engineering company Wärtsilä and Swedish Alfa Laval AB, also saw stable increases in demand during the year.
Wärtsilä said that its order intake increased 14% to EUR 1,514 million during the fourth quarter of the year, while order intake grew 15% to EUR 5,644 million for the year ended December 31, 2017.
The company said that the demand for its services and solutions in 2018 “is expected to improve somewhat from the previous year.” Demand in Marine Solutions is expected to be solid, as the marine market environment remains challenging due to overcapacity and lack of financing, despite improving sentiment.
Furthermore, Alfa Laval said that 2017 has been a year marked by a broad economic upswing and a stable increase in demand within most sectors. Order intake was at SEK 9,780 million, up by 16%, in the fourth quarter of the year, “which was somewhat higher than expected.”
However, the company said it expects that demand during the first quarter of 2018 “will be somewhat lower than in the fourth quarter.”
The contracting for new ships at the ship yards increased by about 50 percent compared to 2016, resulting in a significant effect on the order intake in the Marine Division during the year as well as in the fourth quarter, when a sequential upturn of 27 percent was reported. The company said that the increase was slightly higher for the full year.
2018 is not likely to bring much relief for tanker owners as both supply and demand continue to exert pressure on earnings.
“We are currently being hit from both sides,” Trygve Munthe, Co-CEO of DHT Holdings, said in a conference call on Tuesday.
“Demand for tanker transportation is hit by inventory drawdowns and on the supply side we are hit by deliveries of newbuildings exceeding retirements of older ships.”
As explained by Munthe, the main headache in the near-term continues to be the oil inventory cycle, mainly driven by OPEC cuts.
“But the good news is that we’re making meaningful progress towards the alleged goal of getting inventories back to five years historic averages. It has certainly been a tough period for tanker owners and we eye an end into the inventory drawdown phase in the not too distant future.”
The global demand for oil is robust and growing, Munthe added, noting that the main engines of growth are China, India, and Southeast Asia.
“Further, the increased export of U.S crude is becoming an important factor in the tanker market.”
On the supply side, there are some signs of encouragement, as more VLCCs are being sent to scrap yards. Just in January this year five VLCCs were sent for demolition.
In addition, the number of likely candidates which are turning 20 in the next couple of years will reach 37 in 2020.
DHT expects that many of these, if not the majority, will be retired from the trading fleet.
On the newbuilding front, the leading shipyards are now fully committed for 2019 and have consequently revised their prices upwards.
Speaking on the acquisition opportunities in 2018, Svein Moxnes Harfjeld, Co-Chief Executive Officer of DHT, explained that from an asset price perspective, “it has moved sideways. It’s not marginally upward.”
The company availed of the asset prices last year and acquired BW Group’s 11 strong VLCC fleet.
According to Harfjeld, there seems to be no room for such acquisitions this year.
“I think from a DHT standpoint, our balance sheet does not allow us to really make any growth efforts this year,” he noted.
“We take the liberty to suggest that you should expect a continued disciplined execution as the market evolves over time. “
DHT Holdings reported a net loss of USD 7.5 million in the fourth quarter of 2017, against a net income of USD 17.8 million seen a year earlier. For the full year, the company’s net income reached USD 6.6 million.
Increasing confidence in the dry bulk market’s long term recovery has triggered an increasing number of newbuilding orders over the course of the past week. In its latest weekly report, shipbroker Allied Shipbroking said that it was “an interesting week for the Newbuilding market was due, mostly attributable to the Dry Bulk sector, which pulled in its weight this week dominating the reported activity tables this past week. Despite the fact that freight market is showing some slight softening, with the BDI having eased back from its early January levels, fresh interest seems ample at this point, a mere reflection of the strong forward outlook being shared right now by most in the market. Moreover, despite overall activity being still relatively slow for the time being, we have been seeing a considerable amount of options being declared. At the same time it looks as though traders are starting to get into the game, providing ample backing for further ordering to take place. On the tanker side, things are still lacking confidence with the bearish attitude in the freight market still leaving for minimal appetite to emerge in realized new orders”.