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2012-09-10 10:04:20

ECONOMIC ENVIRONMENT

The  European  Central  Bank left  its  interest  rate  unchanged  at  0.75%  focusing  on  pushing  down borrowing costs in troubled economies, Spain and Italy. Small companies in Spain and Italy are paying more than 2% for loans compared with German counterparties, according to data from European Central Bank.
In the meantime, Moody’s has lowered its triple A rating for European Union to negative citing the weakening creditworthiness of the zone’s biggest
members, Germany, France, UK and Netherlands, after lowering the outlook of financial institutions in Germany, Netherlands and Luxemburg, from stable to negative in July.
One more headwind for eurozone’s revival is the slow of manufacturing activity by staying below 50 for August with Markit’s final Purchasing Managers Index
being at 45.1, above July’s three year low of 44.0, but marks the 13th month in row with EU’s PMI being less than 50. Germany’s PMI reading stood at 44.7 in August, recording a constant fall for six months, while Italy’s and Spain’s PMI are below 50 for more than a year.
In Greece, Prime Minister is in an acceleration process of privatizations within September as troika reviews  government’s  efforts  with  German  Finance 
Minister  Wolfgang  Schaeuble  ruling  out  the possibility of a third aid package on Greece as the costs for Greece are already very high by stressing also that Greece will remain in the eurozone.

SHIPPING MARKET
The worrying downside risks of the dry bulk segment are implied by the constant fall of the BDI, the vigorous slump of iron ore price and the slackening
Chinese economic growth. Australian iron ore mining company Fortescue Metals Group downsized its expansion plans for next year by more than 25% for 2013 against its original plan to extend its production capacity to 155m tones per year by June 2013. In a press release, the company announced that it would cut its capital expenditure by $1.6 billion and reduce its production capacity target to 115m tones per year. In the meantime, vessels ongoing deliveries hunt the healthiness of the market with approximately 243 panamax vessels being delivered so far this year, from 274 panamax vessels delivered for the whole 2011, while for the end of this year panamax deliveries are on pace to a total of 417 vessels, 52% more than they were delivered last year, according to data from Commodore Research. Capesize deliveries are on pace to total 281 vessels, 9% more than they were delivered last year, handymax deliveries are on pace to total 363 vessels, 11% more they were delivered in 2011 and handysize deliveries are on pace to 365 vessels, 26% more than they were delivered in 2011, while panamax orderbook is going to be the most hefty among other vessel categories for 2013.
In the dry market, BDI falls on weaker panamax rates with some signs of short revival in the capesize segment, while the weakening Chinese iron ore demand
pushes the price of iron ore to levels even below $90 per tonne. Benchmark iron ore with 62% iron content fell to $86.7 per tonne on Wednesday, the lowest since October 2009 and less than half of the 2011 peak of $191.90, according to data provider Steel Index. Iron ore fixture volume remains moderate while thermal coal demand from China rebounds with supramax vessels finding a floor from a further slide in freight rates and capesizes showing a steady pace of revival with earnings approaching levels of $3,500/day from the lowest of $2,644/day on August 21st, while panamax vessel earnings are still on decline falling even below $5,000/day from about $9,000/day at the end of July.
BDI plunged to levels below 700 for a second time this year, since the historical bottom low of 647 points on February 3rd, by loosing more than 400 points
from the high levels of 1162 points reached on July 9th, before beginning its freefall. The US drought is still an adverse factor for a firm rebound on supramax and panamax vessel earnings with US Department of Agriculture showing that global grain exports will fall the most in the last 27 years for the period 2012-2013. USDA estimates that global grain trade will decline 9.1% to 289,4 million metric tons in 2012-2013, the biggest retreat since 1985-1986,when it shrank by 18%.
BDI closed this week at 669 points, down by 4.9% from last week’s closing and down by 64% from a similar week closing in 2011, when it was 1,838 points.
Capesize vessels keep a soft improvement in the last two weeks with panamax vessel earnings falling to the lowest levels from 2008, while supramax and handysize units are showing softer declines . The highest decline has been in the panamax segment, BCI up by 1.1% w-o-w, BPI down 18.5% w-o-w, BSI down 2.9% w-o-w, BHSI down by 0.2% w-o-w.
Capesize average time charter earnings showed an increase of 4.3% from last week, panamax are down by 18.5% week-on-week, supramax are down by 2.8% week-on-
week and handysize up by 0.1%.
Capesizes  are  currently  earning  $3,452/day,  an  increase  of  $144/day  from  a  week  ago,  while panamaxes are earning $4,758/day, a decline of
$1082/day. At similar week in 2011, capesizes were earning  $26,463/day,  while  panamaxes  were  earning  $13,534/day.  Supramaxes  are  trading  at $8,703/day, down by $257/day from last week’s closing, 152% and 83% higher than capesize and panamax earnings respectively. At similar week in 2011, supramaxes were getting $14,649/day, hovering at 45% lower levels than capesizes versus 171% today’s higher levels. Handysizes are trading at $ 6,685/day; up $113/day from last week, when at similar week in 2011 were earning $10,139/day.
In the wet market, oversupply and weak activity in AG keep VLCC spot rates below zero levels for nine weeks. In the AG-USG route, WS fell to 22 from WS23
last week with negative time charter equivalent earnings $(12,900/day), when at the end of May was WS40 with time charter equivalent earnings $15,000-$16,000/day. In AG-SPORE and AG-JPN routes, WS fell to 35 from WS36 last week with time charter equivalent earnings $2,300/day and $1,900/day respectively. Rates on WAFR-FEAST are down nearly 1 point with WS36 from WS 37 at $3,500/day time charter equivalent earnings, while in the WAFR-USG WS remains unchanged at WS41.5 with time charter equivalent earnings of $3,500/day.
The Atlantic suezmax market remains quiet with WS unchanged in WAFR-USAC route at 57.5 with time charter equivalent earnings at $7,400/day. In BALTIC SEA-MED
route WS softened by 2.5 points to WS55 and negative time charter equivalent earnings of $(1,200/d), for the first time, when on May 18th 2012, WS was 90 with time charter equivalent earnings of $31,300/day. In the CBS-USG route WS remained at previous weekly levels with WS62.5 at $7,700.day time charter equivalent earnings.
The Caribbean aframax market is stable with rates on CBS-USG route trading at WS92.5, 2.5 points above from last week, despite the passing of Hurricane Irene
through USG as charterers were largely absent from the market.
In the panamax segment, CBS-USAC route gained 10 points above last week’s WS with vessels of 50,000dwt trading at WS120 at time charter equivalent earnings
of $12,100/day. In the AG-JPN route, rates for vessels of 55,000dwt gained two points from last week with WS120 at $13,200/day time charter equivalent earnings, while rates for vessels of 75,000dwt in AG-JPN route lost one point with WS 98 at $14,700/day time charter equivalent earnings.
The brent crude spot price remains high at more than $110/barrel with Fujairah fuel IFO 380 cost reaching $700.50/barrel on September 4th and falling again
to about $680/barrel.
One serious short term negative factor for the crude freight environment is the fall of Chinese crude amount due to accumulation of huge amount of stockpiles
during the first half of the year. Chinese crude imports are estimated to have fallen by 14% to 21.8m tons in July, from a record high of 25.5m tons in May. China, the world’s second largest oil consumer, reduced its strategic services in recent months after stockpiling 90m barrels in the first five months of the year. However, China will still be a positive factor for a future increase in crude ton mile demand as International Energy Agency estimates that China could drive 40-50% of the total global demand growth, approximately 500,000-750,000 of the 1.0-1.5 million barrels per day of annual demand growth forecasted till 2015.
In terms of oil supply, a Bloomberg survey of oil companies, producers and analysts showed that OPEC oil production declined in August as Iranian output
dropped to a 22-year low after new sanctions took effect. According to the survey, production slipped 75,000 barrels, or 0.2 percent, to an average 31.99 million barrels/day in August from a revised 32.06 million in July. Figures from Bloomberg’s Survey comes in contrast with Reuters results last week showing an increase in OPEC crude oil output of August to 31.53 million barrels/day, up from 31.3 million barrels/day in July due to a slight revamp in Iranian exports and higher exports from Angola and Nigeria. Bloomberg’s Survey showed that output in Iran, OPEC’s third largest producer, fell 350,000 barrels to 2.75 million barrels a day, the lowest level since February 1990.
In the gas market, the Japanese Bank for International Cooperation is going to provide a $650mil loan to a partnership between Mitsubishi and Cutbank Dawson
Gas Resources, a Canadian firm in which Mitsubishi has a 40% share, to develop Canadian shale gas for LNG exports. Mitsubishi has previously entered into a project partnership with Shell to build a liquefaction plant on the Canadian west coast near Kitimat. In addition, industry sources suggest that Iran and China have suspended a contract to build a $3,3 billion LNG export facility in Asaluyeh, Iran, due to the inability of the Chinese consortium to finance the project. The Asaluyeh project was singed in 2008 between Iran LNG and an unnamed Chinese firm for completion in 6 years with a capacity of 10.5 mtpa.
In the container market, the Shanghai Container Freight Index keeps week from the end of June by falling to 1249 for the week ending August 31st, down by 3%
week-on-week basis and down by 14.4% from the highest level of the year of 1460 on June 29th. Lower European and US rates depress further the freight market environment as worldwide economic recession leaves less room for expansion in container trade growth. According to Container Trades Statistics, Asia to Europe box volumes slumped to  1.2m  TEU  in  July,  down  from  1.3m  TEU  in  the  same  month  last  year,  while  Asia  to  Europe
containerized trade was down by 3.2% during the second quarter of the year compared with similar quarter of 2011. At a time that is normally a peak season
before Christmas Holidays, liners are facing slowdown in demand with Asia to Europe rates falling to $1,324/TEU, down 7.6% on a weekly basis and down by 31.5% from the peak of $1934/TEU on May 4th, while Asia to Mediterranean rates dropped to $1371/TEU, down by 3.8% on a weekly basis and down by 32.5% from the peak of $2033/TEU on May 4th.
Transpacific routes are showing softer declines with Asia-USWC rates sliding to $2485/FEU, down 3.2% on a weekly basis and 9.2% less than the highest level
of $2739/FEU on June 15th. In Asia-USEC route, rates are now $3741/FEU, down 2.9% on a weekly basis and down by 8.7% from the highest level of
$4098/FEU on August 10th. Stronger growth in US box imports sustained the improvement of rates in
Asia-USWC and Asia-USEC. According to Piers data, strong growth in automotive and furniture sectors contributed to the rise of US containerized imports in
July by 9.7% to just under 1.6m TEU from 2011
July’s levels, while imports are up 6.2% from the previous month in June. In the year to date, US containerized imports are up 3.5% with inbound box volumes
expecting to accelerate during the second half of the year and predictions for a full year rise of 4.6% in imports and 2.3% in exports, according to Journal of Commerce/Piers economist Mario Moreno.
Transpacific Lines of the Westbound Transpacific Stabilization Agreement are planning to raise freight rates from October 1st to intervene in the falling
freight rates and demand from Asia with a General Rate Increase (GRI) of $200 per 40-foot container (FEU) and $160 per TEU for westbound cargoes.
Overall,  the  spot  freight  market  environment  is  still  improved  from  2011  levels,  as  the  Shanghai Container Freight Index is up by 22.5%, with a
58.9% and 21% rise in the rates of Asia to Europe and Asia to Mediterranean respectively, while transpacific routes are showing a 45.8% and 12.7% increase in rates of Asia-USWC and Asia-USEC respectively.
Slow steaming, vessels’ lay ups, suspension of services to reduce vessel’s capacity and rate increases are the main key strategies that industry players
will follow to restore the confidence in the levels of freight rates and impede further slide so as to maintain a positive market momentum and renew hopes for a full turnaround of boxship freight rates in 2013.
Under the current softening freight market environment at a time that is usually a peak season, the G6 Alliance, including APL, Hapag-Lloyd, Hyundai Merchant
Marine, MOL, Nippon Yusen Kaisha and Orient Overseas Container Line, decided to suspend its Loop 3 service, which will reduce its shipping capacity by around 15% on the Asia-Europe lane in an effort to improve pricing and the supply/demand balance.
The laid up fleet has risen to 260 vessels with a total capacity of 546,000 TEU to the end of August 2012, from 215 vessels of 466,720 TEU at the end of
July, according to Alphaliner estimates. Alphaliner expects the laid up fleet to float between 700,000 and 900,000 TEU by the end of the year with the severity dependent on the extent of the capacity cutbacks to be implemented by carriers in the coming months.
Slow steaming is still a remedy to oversupply issue by absorbing 30% of the total capacity added since the start of the year to reach an estimated 930,000
TEU or 5.7% of the cellular fleet, according to Alphaliner Report. It said that carriers have extended the rotations of 35 loops since January absorbing over 230,000 TEU of additional vessel capacity through the extra slow steaming policy.
In the shipbuilding industry, Japanese builders Universal Shipbuilding, a subsidiary of the steel group JFE, and IHI Marine United have completed their
merger with the creation of a new combined company with the name Japan Marine United to operate as of October 1st. In a joint statement, Universal and IHI
said Japan Marine would combine their engineering resources to improve vessel designs and technologies. “Among the various synergies that it will expect to
realise rapidly, the product lineup will be expanded, productivity at each shipyard will be improved by consolidating ship types and product development will be accelerated by bringing together energy-saving and eco-friendly technologies,” said the statement. “In addition, capabilities for responding to large-lot orders and procuring equipment and materials under more competitive terms will be realised through expanded scale, and efficiencies will be improved through the integration of administrative functions.”
In South Korea, 21st Century Shipbuilding yard proceeded with liquidation as it failed to win new orders to generate cash. According to Korean Reports,
liquidation became inevitable as the medium-sized, privately owned yard completed its existing orderbook. Furthermore, a small South Korean yard, Sekwang Shipbuilding is said to be concentrated on ship repairing after failing to secure new orders to run its newbuilding business.
Under the current fall of newbuilding demand distressing shipyards’ revenues, South Korea has expanded financing support for its struggling shipbuilders by
$3,5 billion for this year, according to Seoul’s Yonhap news agency. The additional loans will be available from the two state-run lenders- Korea Finance Corp. and Korea Development Bank-and five commercial banks, including Kookmin Bank, Yonhap said. Furthermore, Korean government allowed Export-Import Bank of Korea to inject more liquidity in South Korean shipbuilding industry by raising its credit ceiling to 60% of borrower’s equity value instead of 40%. Korean government has also requested from Korea Development Bank, Korea Exchange Bank, Woori, Kookmin, Hana and Shinhan to provide credits worth of about $3,5 billion to shipbuilders. According to government data, South Korea’s ships exports amounted to $30,4 billion in the first eight months of this year, down more than 20% compared to 2011.
In the shipping finance, German shipping financier HSH Nordbank announced its results for the first half with losses of EUR 111m ($139.58m) to June 30th,
compared with last year’s gains from provisions of EUR 317mil. Overall net profit estimated to be EUR 70mil, down from EUR 338mil, due to shipping finance. “The further worsening of conditions in the shipping industry in the wake of the global economic downturn and the depreciation of the euro have taken a heavy toll on our figures and will continue to exert pressure on us in the foreseeable future,” said chairman Paul Lerbinger.
In  the capital markets,  South  Korean  yard  Samsung Heavy Industries plans to  raise KRW500bn, $400mil from a bond issue in September, to generate cash to
support the construction of its offshore orders, while its rivals Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering are following the same strategy with HHI having a KRW1trillion bond in the pipeline and DSME securing KRW500bn last month.   Furthermore, Ocean Rig UDW Inc., a global provider of offshore deepwater drilling services, announced that its wholly owned subsidiary, Drill Rigs Holdings Inc. intends to offer, subject to market and other conditions, $750.0 million in aggregate principal amount of senior secured notes due 2017 in a private offering within the United States to qualified institutional buyers Ocean Rig intends to use the net proceeds of this offering, if completed, to fully repay all outstanding indebtedness under its $1.04 billion senior secured credit facility, amounting to approximately $487.5 million as of June 30, 2012, and for the purposes of financing offshore drilling rigs, and to pay all fees and expenses associated therewith.

2012-09-03 10:09:08

August ends with high secondhand purchasing momentum, strong appetite for disposal at improved scrap price levels and weak newbuilding demand with shipyards suffering from the drought of the freight market environment and the lower newbuilding prices imposed to attract new contracts for their orderbook. Comforting factor is the increased bulk carriers’ scrapping activity given vessels’ oversupply and lower commodities’ demand, while in the tanker segment scrapping appetite for crude carrier vessels is still soft against the worried low levels of vessel earnings for more than one year.
Overall, 44 transactions reported worldwide in the secondhand and demolition market, up by 33% week on week with 275% increase in demolition business and 44% lower vessel purchases. At similar week in 2011, the total S&P activity was standing at 34% lower levels, when 29 transactions had been reported and secondhand ship purchasing activity was 59% lower than the ordering business.

SECONDHAND MARKET
The depressed freight market status in the dry bulk and tanker segments continues to lead in a constant decline of asset prices with Baltic Sale & Purchase Assessment recording tremendous downward revisions from last year’s levels. In the tanker segment, a 5yrs old VLCC is now estimated at a price in the region of $56 mil from about $75mil at the end of August 2011, a 5yrs old aframax unit is estimated at about $28,5mil from $37,8mil and a 5yrs old MR unit is estimated at about $22,2mil from $28,6mil. In the bulk carrier segment, a 5yrs old capesize unit is now estimated at a price in the region of $31,5mil from $39mil, a 5yrs old panamax unit is estimated at region $21,8mil from about $30mil and a 5yrs old supramax unit is estimated at about $20,5mil from about $26mil. Large sized vessels in the dry and tanker segments have experienced a sharper downward corrections compared to MR tanker and dry bulk supramax vessels with crude carrier vessel types not being in the frontline of investors’ preference.
In the dry bulk segment, some capesize units of more than 15yrs old seem to be potential sale candidates at excessive discounted sold prices that are nearing to scrap price levels. This week, a unit of 151,439dwt built 1994 China reported sold for a price in the region of $8mil, when in April of 2007 the same vessel had been bought for $63,5mil. In November of 2011, a capesize unit of 151,102dwt built 1994 Japan was reported sold for about $15,5mil.
Overall, 14 vessels reported to have changed hands this week at a total invested capital in the region of US$ 105,85 mil, 2 deals reported at an undisclosed sale price, with bulk carriers and tankers holding 64% of the total S&P activity. In terms of the reported number of transactions, the S&P activity is down by 44% from last week’s activity with 50% lower dry bulk carrier purchases, while is up by 55% comparable with previous year’s weekly S&P activity, when 9 vessels induced buyers’ interest at a total invested capital of about $162 million, with 88% buyers’ interest in bulk carrier and tanker purchases. In terms of invested capital, the bulk segment appears the most overweight by attracting about 52% of the total amount invested through the purchase of 5 vessels, 1 capesize, 1 panamax, 1 supramax and 2 handysizes.

NEWBUILDING MARKET
In the newbuilding market, the ordering activity keeps very soft from last week’s ordering volumes with again less than 20 number of units ordered and a weak sentiment for the newbuilding demand for the rest of the third quarter and the forthcoming fourth quarter of the year. The orders reported in the dry bulk carrier and tanker segments this week is mainly for small sized vessels, handysize dry bulk carriers and MR tankers compared with last week’s orders for bigger sized vessels, capesize unit in the bulk carrier segment and very large crude carriers in the tanker segment. Offshore vessel types are still of utmost importance in the newbuilding market as a vital business for the profitability of shipyards. Notable order of this week has been the confirmed order of Fredriksen’s Seatankers for 16 large platform supply vessels of about $600mil in total to be managed by Deep Sea Supply.
Overall, the week closed with 13 fresh orders reported worldwide at a total deadweight of 603,600 tons, posting no weekly change with bulk carriers’ newbuilding business keeping the lion share 62% of this week’s total volume of newbuilding contracts. At similar week closing in 2011, the newbuilding business was up by 70%, when 22 fresh orders had been reported with 10 contracts in the bulk carrier segment, 4 in the tanker and 8 in the offshore. In terms of invested capital, the total amount of money invested is estimated at region $322 mil with 15% of the total number of orders being reported at an undisclosed contract price. The container segment attracted a firm amount of invested capital of about $160mil for sub-panamax units, while the offshore keeps a steady pace of investments with contracts of a high value per week.
In the bulk carrier segment, Wilmar Holdings of Singapore ordered two handysize units of 35,800dwt for construction in Qingshan Shipyard of China at a price of $22,5mil each for delivery in 2013-2014. In addition, Taiwanese dry bulk player, Wisdom Marine, has placed an order for four 34,000dwt handysize vessels in Namura Shipbuilding for a price in the region of $21mil each with delivery for the first two units in the second half of 2014 and the other pair in the first half of 2015. Wisdom stated that is aware that the same units for construction in a Chinese yard are costing less than $20mil, but they prefer the Japanese yard due to their long- established relationship. In the kamsarmax segment, Chinese shipbuilder Jinhai HI in Zhejiang has won a contract from Japan’s Nisshin Shipping for two 82,000dwt units, with an option for two more, under a new energy efficient eco-friendly design.
In the tanker segment, Pyxis Shipmanagement of Greece has ordered a MR 52,000dwt unit in SPP Shipbuilding of South Korea for a price $33mil with delivery in 2014.
In the container segment, Pacific International Lines of Singapore ordered four boxship units in the small panamax segment of 3,800 TEU in Dalian Shipbuilding for a price in the region of $40mil each with delivery in 2014-2015.
In the offshore segment, Malaysian shipbuilder Nam Cheong has secured three contracts of $43,8mil for one platform supply vessel and two anchor handling towing supply vessels. The two AHTS are from established customers in Norway and Middle East, while the PSV contract is a breakthrough deal for Nam Cheong from a new customer, who is an emerging offshore marine services and construction company based in West Africa. In addition, Floatel has contracted for a fourth accommodation semisubmersible at Keppel FELS for $315m, confirming a letter of intent signed in March. The new generation harsh environment semi-submersible will be built to the Floatel Superior design, a DSS 20NS design developed by GustoMSC and Keppel FELS' Deepwater Technology Group. The platform is set to be delivered in early 2015 and will be able to accommodate 440 in single bed cabins.
Daewoo Shipbuilding & Marine Engineering (DSME) has won a $1.96bn order to build five fixed platforms for a customer in Africa. The units are scheduled for delivery by April 2016. This is the first offshore order since DSME's first contract for a floating LNG plant in June. The shipbuilder has previously said that it expects to boost orders for offshore equipment by 34% this year to $8.5bn.

DEMOLITION MARKET
In the demolition market, demand for disposal remains high with India offering strong competitive levels with steel prices being on rise and Indian Rupee stronger against the dollar. Prices for dry units have reached levels even $430/ldt with Turkey entering the game with firm levels, while China is still out of the scene with prices even below $300/ldt. Some container units have fetched levels of $440-$450/ldt this week for disposal in India. Bangladesh competes with India, while Pakistan is still behind with limited success of getting firm volume of ships in its scrap yards. Gadani buyers are looking to secure some tonnage after the Eid holidays.
The week ended with 30 vessels reported to have been headed to the scrap yards of total deadweight 822,593 tons, 7 demolition transactions have been reported as old sales. In terms of the reported number of transactions, the demolition activity is up by 275% from previous week’s business with 250% rise in bulk carrier scrapping activity. In terms of total deadweight sent for scrap, there has been an increase of 12%, with Bangladesh winning 5 and India 11 of the total 30 demolition transactions, while Pakistan didn’t gain not even a deal and China only two. Notable demolition transaction has been the disposal of panamax bulk carrier M/V “SUBIC STAR” of 11,889 ldt built 1984 for $450/ldt in India, full spares.
At a similar week in 2011, demolition activity was 50% lower than today’s levels, in terms of the reported number of transactions, when 20 vessels had been reported for scrap of total deadweight 825,859 tons with bulk carriers holding 45% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with India and Bangladesh offering $500-$505/ldt for dry and 525/ldt for wet cargo.

2012-08-27 09:19:04

This week continued to present high interest in the secondhand market, with demolition transactions being on the low side and newbuilding activity presenting a considerable decrease from last week. Overall, 33 transactions reported worldwide in the secondhand and demolition market, down by 19.5% week on week. At similar week in 2011, the total S&P activity was standing at similar levels, while the demolition activity was 55% higher levels that the current week and at almost same levels with last week.

SECONDHAND MARKET
The activity in the secondhand market continues to present its dynamism, despite the summer season, with 25 vessels reported to have changed hands and a total invested capital to be in the region of US$ 521.1 mil, 5 deals reported at an undisclosed sale price. Bulkcarriers and Tankers remain the sectors that hold the lion’s share, while the deals in the tanker sector represent 50% of the total invested capital due to the sale of two product tankers that are being constructed under Jones Act while the deal includes also a profit sharing agreement between the yard and the owner.  In terms of the reported number of transactions, the S&P activity is up by 8% from last week’s activity and 38.8% up from previous year’s weekly S&P activity, when 18 vessels induced buyers’ interest at a total invested capital of about $139 million.

NEWBUILDING MARKET
Newbuilding activity posted this week a 67% decrease from last week’s figures. Overall, the week closed with 13 fresh orders reported worldwide at a total deadweight of 346,000,000 tons, and a total invested capital to be in the region of $ 346mil with almost half of the orders being contracted at undisclosed prices. The sectors that were active were the bulkcarrier, the tanker and the offshore sector, with bulkcarriers holding the lion’s share.
In total the condition of the newbuilding market, makes yards willing to accept terms and conditions that were unheard of when the market was booming Chinese yards for example seem to demonstrate their competitiveness in price by offering newbuilding opportunities to prospective investors, while they show willingness to accept a loss in order to keep the production moving.

DEMOLITION MARKET
In the demolition market, the week ended with just 8 vessels reported to have been headed to the scrap yards of total deadweight 733,279 tons. In terms of the reported number of transactions, the demolition activity is down by 56% from previous week’s business with all sectors and markets presenting lower activity, with India being the most active player. In terms of deadweight scrapped the weekly difference is just 8.9% down this week, because half of the vessels sold were above 100,000dwt.
At a similar week in 2011, demolition activity was 27.7% higher than today’s levels, in terms of the reported number of transactions, when 18 vessels had been reported for scrap of total deadweight 740,966 tons with bulk carriers representing the 83.3% of vessels heading the scrapyards with scrap prices as reported also in our previous report to be at stronger levels with India and Bangladesh offering $495-$500/ldt for dry and $520-$525/ldt for wet cargo.

2012-08-20 09:10:32

August continues to be hot in secondhand purchasing activity with a lower pace of demolition transactions, higher scrap prices and dull newbuilding interesting. This week was marked by intense volume of bulk carrier newbuilding contracts, from kamarsarmax to handysize vessels, strong buying appetite in the secondhand market from an ebloc MR tanker deal for nine coated product tankers and spectacular demolition transactions at levels of excess $400/ldt.
Overall, 41 transactions reported worldwide in the secondhand and demolition market, up by 54% week on week with 183% and 160% increase in demolition and newbuilding activity respectively. At similar week in 2011, the total S&P activity was standing at 66% lower levels, when 14 transactions had been reported and secondhand ship purchasing activity was 42% lower than the ordering business.

SECONDHAND MARKET
A strong resale appetite seems that will be the new trend for the rest of the year and the upcoming 2013 as the slump of newbuilding demand creates opportunities for shipowners to proceeded in alluring S&P resale transactions from cancellations in Chinese and Korean yards. Head of China based Yangzijiang Shipbuilding forecasts that the shipbuilding downturn will last for five years from the second half of 2011, unless the overcapacity is filtered out. Owners’ default to honor their newbuilding contracts from failure to meet their financial obligations, under the tight European ship lending and weak levels of earnings from dreadful freight rates, creates investment opportunities for resale transactions at discounted prices. Recently, market sources revealed that Yangzijiang Shipbuilding cancelled eight newbuilding contracts, due to customers’ failure to meet their financial obligations. There were rumors that two 34,000dwt bulkers from Yangzijiang, Hull No.944 & 945, originally ordered by Freeseas, were cancelled and resold to Thailand’s Precious Shipping for $19,4mil each, but Precious managing director Khalid Hashim denied that the sale has been agreed, although he confirmed that there are discussions as they are still negotiating the price.
The secondhand purchasing activity keeps hot amid the lull summer season with an interesting S&P transaction in the tanker segment that pushed the weekly S&P activity above 20 total transactions. U.S investors Blackstone have purchased nine coated product carriers from the Hartman group, with Hartman maintaining 15% equity, no price details have been revealed.
Overall, 23 vessels reported to have changed hands this week at a total invested capital in the region of US$ 189,7 mil, 12 deals reported at an undisclosed sale price, with containers holding 52% of the total S&P activity, and bulk carriers 31%. In terms of the reported number of transactions, the S&P activity is up by 15% from last week’s activity with a 500% rise of purchasing momentum in the tanker segment, while is up by 229% comparable with previous year’s weekly S&P activity, when 7 vessels induced buyers’ interest at a total invested capital of about $294,1 million, with limited buyers’ interest in bulk carrier, tanker and container purchases. In terms of invested capital, the bulk segment appears the most overweight by attracting about 58% of the total amount invested through resale newbuilding transactions in the panamax and supramax segment.

NEWBUILDING MARKET
In the newbuilding market, ordering interest has been picked up this week with newbuilding transactions more than 30 from renewed fresh activity in the bulk carrier segment. Supramax size in the bulk carrier segment and the MR product size in the tanker segment are still the most popular newbuilding investments. Some kamsarmax newbuilding contracts came to light from struggling Japanese yards for the account of trading house in Chinese Tsuneishi Zhoushan, as roduction costs are cheaper, with deliveries in the first half of 2014. Notable order of this week has been in the Ro-Ro segment with the placement of five giant RO-RO containerships from Atlantic Container Line for construction in Chinese shipbuilder Hudong-Zhonghua. In the bulk carrier segment, In the offshore segment, investors are still showing interest for building specialized units with Maersk Drilling planning to invest $5billion in eight new oil rigs over the next five years. Maersk Drilling chief executive Claus Hemmingsen confirmed in Lloyds List that drillships will be an integral part of the investment plan. Maersk Drilling believes that strong demand for deepwater drilling will replace declining activity in shallow waters and will keep its tonnage busy.
Overall, the week closed with 39 fresh orders reported worldwide at a total deadweight of 1,336,091 tons, posting 160% increase on a weekly basis, from a 800% rise in the bulk carrier newbuilding business keeping the lion share 46% of this week’s total volume of newbuilding contracts. At similar week closing in 2011, the newbuilding business was down by 70%, when 12 fresh orders had been reported with 5 newbuilding contracts in the tanker segment, 3 in the bulk carrier and 2 in the gas tanker. In terms of invested capital, the total amount of money invested is estimated at region $429 mil with 74% of the total number of orders being reported at an undisclosed contract price. The offshore segment appears to be the most overweight by holding 71% of this week’s total invested capital, while also a hefty amount of money has invested also in the Ro-Ro segment for giant Ro-Ro container vessels at about $700mil.
In the bulk carrier segment, Laskaridis Shipping of Greece placed a new order for two more ultramax bulkers, dolphin-64 class, 64,000dwt at Chinese shipbuilder Penglai Jinglu, with delivery in 2014, following last week’s order for two 64,000dwt units in Jinhai. In the handymax segment, TMS Ship Management of Germany has ordered six 43,500dwt units in Qingshan Shipyard of China for construction under a new fuel-efficient design for delivery Q2 2014 and Q2 2015. In the handysize segment, Canadian shipowner Fednav has placed a new order for six 35,000dwt ice class bulkers at Japan’s Oshima yard for delivery during 2015 and 2016 under a new fuel efficient design. A Fednav statement said: “The new vessels represent a major step forward in terms of environmental improvements. With their advanced design and more efficient engines, they will consume 20% less fuel and produce 20% less emissions than vessels built by Oshima Shipyard for Fednav 10 years ago, ships already among the most efficient of their time. “The newbuildings will be assigned class society DNV’s clean design notation."
In the tanker segment, Norden, Danish listed dry bulk and product tanker operator, has ordered two handysize fuel-efficient product tankers, with options for four more, for construction in Guangzhou Shipyard international in China, with delivery in 2014 at an undisclosed contract price. In the small chemical segment, Chinese state-owned Chongqing Chuangdong Shipbuilding Heavy Industry Corp has secured four 2,450dwt stainless steel chemical tanker newbuildings from local company Shanghai Sanhan Shipping for delivery in 2013 and 2014. The contract price has not been disclosed, but market sources suggest that the cost is around $12mil each unit.
In the gas tanker segment, LPG owner Navigator Gas has declared an option for two more 21,000 cbm ethylene carriers at Jiangnan Shipyard of China for delivery in 2014 at a price of $50mil each.
In the RO-RO segment, Chinese shipbuilder Hudong-Zhonghua has sealed an anticipated order for five giant ro-ro containerships of 3,800 TEU from New Jersey based Atlantic Container Line for delivery in 2015. ACL’s president and chief executive Andrew Abbot declines to reveal the price paid for newbuildings, but the contract price is well below $140-$150 mil each. The newbuilding contract marks Hudong Zhonghua shipyard’s diversification in a high value added contract and the construction of more specialized units. A Hudong Zhonghua official said: “To stay ahead of the competition, Hudong Zhonghua is expanding its product portfolio and moving towards high value added ships, such as conros and stainless steel chemical tankers”.
In the car carrier segment, market players say that Japanese shipping giants Nippon Yusen Kaisha, Mitsui OSK Lines and Kawasaki Kisen Kasha are seeking to expand their car carrier fleet with newbuildings. The companies are said to be looking at 7,300 car equivalent units (ceu) post panamax vessels. The largest PCTCs they currently operate are up to 6,500 ceu as the length of loading and discharging berths in Japan restricts the size of ships. There are market rumors that NYK has already booked three to five vessels at domestic yards in 2014 and 2015. Shin Kurushima Dockyard and a partnership between Imabari Shipbuilding and Mitsubish Heavy Industries are said to be involved with sources indicating a price of $75mil each.
In the offshore segment, Sembcorp Marine, secured a $135m rig order for its subsidiary Jurong Shipyard from Diamond Offshore. The  rig,  to  be  named  Ocean  Apex,  would  be  delivered  in  2Q14  and  will  be  capable  of  operating  down  to  6,000ft  and accommodating 140 crew. In addition, COSCO Corp (Singapore) said it has won a $170M rig order from Talland Navigation. The Singapore-listed builder and bulk shipping arm of China COSCO said COSCO (Dalian) Shipyard will execute the order. BAE SYSTEMS said has won a new order for two platform supply vessels from US-based GulfMark Offshore. The 88m-long ships will be built to an MMC Ship Design & Marine Consulting design at BAE’s shipyard in Mobile, Alabama, (formerly known as Atlantic Marine) and will be constructed for Jones Act compliance. GulfMark has arranged options for two further ships as part of the contract. Delivery of the firm vessels is booked for 2014 and 2015. According to a BAE Systems statement: “ The contract reflects continued growth in US commercial shipbuilding for BAE Systems and a major step forward in the company’s support to the oil and gas industry.”

DEMOLITION MARKET
In the demolition market, some firm figures have been witnessed during the last days for well positioned tonnage with prompt delivery at levels xs $400/ldt for dry bulk carriers, while the question is how long these rates could be sustained. The capacity in Bangladesh seems to be fulfilled, while steel markets are not justifying these rates and there are fears that soon will be faded away. Indian ship recyclers remain aggressive with owners seeking firm rates of excess $400/ldt for dry bulk disposals as last concluded deals give them the opportunity to negotiate their vessels disposals at firmer rates than last two weeks’ levels.
Price levels offered in the Indian-subcontinent region have moved $20-$50/ldt higher from the end of June for dry/general units with India offering $400/ldt, while in China levels have fallen to $310/ldt, when at the end of March Chinese ship recyclers were offering even $420/ldt, $35/ldt less than Bangladesh and India. For wet units, India and Pakistan offer $425-$430/ldt from $380/ldt at the end of June, while China offers only $330/ldt from $435/ldt at the end of March.
A notable demo deal of this week was for a RO-RO vessel “MARIENBORG” with 14,120/ldt achieving a firm price of $450/ldt for disposal in India. In the tanker segment, M/T “YAMAMAH” with 9,318/ldt secured $622/ldt in India for a guaranteed green recycling, including 837tons of solid stainless steel on board.
The week ended with 18 vessels reported to have been headed to the scrap yards of total deadweight 805,554 tons. In terms of the reported number of transactions, the demolition activity is up by 200% from previous week’s business with 75% rise in bulk carrier scrapping activity. In terms of total deadweight sent for scrap, there has been an increase of 19%, with Bangladesh winning 5 and India 8 of the total 18 demolition transactions.
At a similar week in 2011, demolition activity was 61% lower than today’s levels, in terms of the reported number of transactions, when 7 vessels had been reported for scrap of total deadweight 194,364 tons with bulk carriers and liners holding 86% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with India and Bangladesh offering $495-$500/ldt for dry and $520-$525/ldt for wet cargo.

2012-08-13 09:15:06

From the beginning of August, the secondhand buying appetite has started to surpass the volume of newbuilding transactions as investors are trying to take advantage the low second secondhand asset prices for buying of modern or resale units. In the demolition market, there has been some light for stronger scrap price levels, at excess $400/ldt, for dry vessels, with owners’ interest being intense for disposal.
Overall, 26 transactions reported worldwide in the secondhand and demolition market, down by 13% week on week with 50% lower secondhand activity in the bulk carrier segment, same levels of newbuilding activity and limited dry bulk carrier disposals. At similar week in 2011, the total S&P activity was standing at the same levels, when 26 transactions had been reported and secondhand ship purchasing activity was 48% lower than the ordering business due to the strong placement of boxship newbuilding contracts.

SECONDHAND MARKET
The secondhand buying appetite keeps its high volume with more than 20 S&P deals reported also this week as asset prices follow their instant fall from the low freight market momentum. Strong appetite in the container segment was the interesting issue of this week with small sized units, from feedermax to sub-panamax units built 90’s, being on the centre of investors’ interest. In the tanker segment, the buying interest is quiet with no deal reported for either crude of product units. Rumors for the sale of a modern VLCC unit of 310,000dwt built 2008 Japan for $67mil, including a one year time charter deal, have been denied. In January 2011, a similar dwt VLCC of 310,000dwt built 2008 in Japan had been reported sold for $100mil on a charter free basis. According to Baltic Exchange’s S&P assessment, the value of 5yrs old VLCC is 33% down from the end of January 2011 by standing in the region of $56 mil from about $84mil.
In the bulk carrier segment, all vessel sizes and ages are on investors’ eye for purchase with no witnessed resale S&P transaction done this week. However, there are some rumors that Daiichi Chuo Kisen has sold a 205,000dwt bulker contracted at a Japanese yard, Mitsui OSK Lines, which was under a long term freight contract to steel maker Sumitomo Metal Industries. The move suggests a profit injection for the beleaguered company with shareholders fighting to resolve its financial troubles. In the panamax segment, a reported sale of a panamax unit 71,393dwt built 1996 Japan M/V “C.IRIS” for $11,6mil comes against the lower price achieved last week by M/V ”GOLDEN GLORY” of 70,296dwt built 1996 Japan for $9,5mil. In September 2011, a panamax unit of 70,153dwt built 1996 Japan had been reported sold for about $15mil.
Overall, 20 vessels reported to have changed hands this week at a total invested capital in the region of US$ 151,75 mil, 4 deals reported at an undisclosed sale price, with containers holding 60% of the total S&P activity, and bulk carriers 25%. In terms of the reported number of transactions, the S&P activity is down by 13% from last week’s activity with a 500% rise of purchasing momentum in the container segment, while is up by 33% comparable with previous year’s weekly S&P activity, when 15 vessels induced buyers’ interest at a total invested capital of about $261,6 million, with bulk carriers holding 60% of the total volume of S&P activity. In terms of invested capital, the offshore segment appears the most overweight by attracting about 36% of the total amount invested through the sale & purchase of a platform supply vessel built 2007, while bulk carrier segment follows with a 29% share invested capital through the sale & purchase of 5 units, 1 capesize, 1 panamax, 1 handymax and 2 handysizes.

NEWBUILDING MARKET
In the newbuilding market, the ordering momentum remains low with dull investors’ interest for all vessel types. Last week’s strong ordering appetite for MR product tanker units continues this week by Scorpio Ship Management of Monaco based with a signed letter of intent for two MR 52,000dwt units, lifting the ordering series up to eight units, for delivery in 2014 at a price in the region of $34mil each. In the offshore segment, there has been a heavy investment of $4 billion for the construction of five drillship units at Sembcorp’s yard Estaleiro Jurong Aracrus Ltda of Brazil from Sete Brazil, which raises the total amount of money invested this week in the newbuilding market, while the total number of units ordered has below 20 newbuilding transactions on a weekly basis  from  the  beginning  of  August.  In  the  container  market,  Seaspan  is  going  to  exercise  its  option  for  18  ultra  large containerships, but it will renegotiate the contract price with Chinese yard, Yangzijiang, under the current market fundamentals with newbuilding prices heading to new lows from a slump in newbuilding demand.
Overall, the week closed with 15 fresh orders reported worldwide at a total deadweight of 232,000 tons, posting no-weekly change, with a 450% rise in the offshore newbuilding business and lower volume of transactions in the tanker/gas tanker segment, while no deals has been reported for a boxship newbuilding contract. At similar week closing in 2011, the newbuilding business was up by 48%, when 29 fresh orders had been reported with containers grasping 48% share of the total ordering activity. In terms of invested capital, the total amount of money invested is estimated at region $4,2 billion with 46% of the total number of orders being reported at an undisclosed contract price. The offshore segment appears to be the most overweight by holding 98% of this week’s total invested capital due to newbuilding contract for the construction of five drillship units in Brazilian yard.
In the bulk carrier segment, Laskaridis Shipping of Greece doubled an existing order for two ultramax bulkers, Dolphin 64-class, at Chinese shipbuilder Jinhai Heavy Industries for delivery in first quarter of 2014. Initial order was in November 2011 for 2 untis at $25 mil each, with option attached for two similar units.
In the tanker segment, Scorpio Tankers signed a letter of intent for two 52,000dwt units for construction in Hyundai Mipo of South Korea at a contract price in the region of $34mil each, to be delivered in 2014. Kuwait Oil Tanker Co is planning its fleet expansion via the ordering of eight more newbuildings, five more product tankers and three LNG carriers, exploiting the opportunity of low newbuilding prices.
In the gas tanker segment, Daewoo Shipbuilding & Marine Engineering confirmed to Fairplay today it has signed an option agreement with LNG transporter Excelerate Energy for up to eight FSRUs. The eight 173,400m³ LNG FSRUs could be delivered from 1Q 2015 to early 2017. The South Korean yard did not disclose the contract value. The order would expand the group’s fleet of nine FSRUs, said Excelerate, which noted that “global demand for LNG import solutions continues to expand rapidly”. “We believe this is the right time to partner with DSME in order to continue to provide LNG import solutions in a timely and efficient manner,” said Excelerate’s development VP Edward Scott.
In the container segment, Yangzijiang Shipbuilding’s boss Ren Yuanlin told Fairplay today Seaspan would exercise options for 18 ULCSs – but at a discount off the original orders. Ren told Fairplay that Seaspan’s options were supposed to have expired in June, but the Gerry Wang-led company sought an extension until December. “We’re confident that Seaspan will exercise its options, but it is likely to seek a discount as it feels $100M is too much to pay in today’s market, considering that newbuilding prices have dropped,” he explained. “It is also likely that Seaspan would have to seek charter hires at lower rates, as fundamentals remain weak in the box market,” added Ren. “I’m not sure how much discount to offer, but the pressure is there, as South Korean yards are also vying for ULCS orders.”

DEMOLITION MARKET
In the demolition market, scrap price levels seem to have been stabilized with Indian breakers being more aggressive by offering levels of excess $400/ldt for some tonnage. The environmental issue in Alang has now been resolved and scrap buyers are eager to find new tonnage with the supply remaining constant. Owners are still more than willing to dispose their vessels, as the freight market remains in doldrums with levels below opex. In Bangladesh, capacity problems may soon be an issue, while Chinese shiprecyclers are fighting to compete with the levels of Indian subcontinent region by still offering rates below $350/ldt, for dry and wet units.
The week ended with 6 vessels reported to have been headed to the scrap yards of total deadweight 674,160 tons. In terms of the reported number of transactions, the demolition activity is down by 14% from previous week’s business with 33% rise in bulk carrier scrapping activity. In terms of total deadweight sent for scrap, there has been an increase of 84%, due to large sized disposals in the bulk carrier and tanker segments, 1 VLCC and one aframax in the tanker segment, and one capesize in the bulk carrier segment. In terms of scrap price levels, notable demo deals in the tanker segment the disposal of M/T “SEA GLORY” of 269,605dwt built 1993 with ldt:41,402 at $435/ldt Bangladesh.
At a similar week in 2011, demolition activity was 83% higher than today’s levels, in terms of the reported number of transactions, when 11 vessels had been reported for scrap of total deadweight 672,538 tons with bulk carriers 36% and tankers 45% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with India and Bangladesh offering $500-$510/ldt for dry and $525/ldt for wet cargo.

2012-08-06 11:08:19

The week ends with firm secondhand buying appetite in the bulk carrier segment, lower momentum of dry bulk carrier disposals amid the new lows of the freight market and strong MR newbuilding appetite. The continuous fall of the secondhand asset prices stimulates the buying interest of investors that still have a higher preference in the secondhand than newbuilding units on the ongoing instability of the freight market.
Overall, 30 transactions reported worldwide in the secondhand and demolition market, down by 16% week on week with a 35% rise of secondhand activity, 38% lower newbuilding transactions and no rise in dry bulk carrier disposals. At similar week in 2011, the total S&P activity was 13% higher than the current levels, when 34 transactions had been reported and secondhand ship purchasing activity was 61% lower than the ordering business.

SECONDHAND MARKET
The bulk carrier’s purchasing activity keeps robust by attracting the lion share of the total S&P transactions reported, as in the previous week with a total of 10 S&P transactions. Investors are eyeing in all vessel sizes at the current alluring prices. Panamax dry bulk carriers to handysizes of all ages were on the spotlight this week with only one handysize resale reported compared with the previous week’s firm resale buying appetite.
Overall, 23 vessels reported to have changed hands this week at a total invested capital in the region of US$ 218,9 mil, 7 deals reported at an undisclosed sale price, with bulk carriers holding 43% of the total S&P activity, and tankers 17%. In terms of the reported number of transactions, the S&P activity is up by 35% from last week’s activity with a 25% rise of purchasing momentum in the bulk carrier segment, while is up by 4.5% comparable with previous year’s weekly S&P activity, when 22 vessels induced buyers’ interest at a total invested capital of about $243 million, with bulk carriers holding 32% and gas tankers 41% of the total volume of S&P activity. In terms of invested capital, the bulk carrier appears the most overweight by attracting about 55% of the total amount invested, while container segment is still the least attractive among tanker and bulk carriers.

NEWBUILDING MARKET
In the newbuilding market, firm business for MR tanker vessels has kept a steady pace of fresh orders worldwide at an average 20 units per week, while the offshore segment does not show buoyant volume of new orders. No fresh activity has been reported in the bulk carrier segment, while containership new orders in the sub-panamax segment came to light from Greek owners.
Overall, the week closed with 15 fresh orders reported worldwide at a total deadweight of 452,000 tons, posting a 38% week-on- week decline, with a 100% and 78% decline in bulk carrier and offshore newbuilding business, while tankers grasped the lion share, 53% of this week’s newbuilding business. At similar week closing in 2011, the newbuilding business was up by 73%, when 56 fresh orders had been reported with bulk carriers and tankers grasping 50% share of the total ordering activity. In terms of invested capital, the total amount of money invested is estimated at region $384 mil with 26% of the total number of orders being reported at an undisclosed contract price. The tanker segment appears to be the most overweight by holding 42% of this week’s total invested capital through the placement of eight new MR product tankers.
In the tanker segment, Odfjell, the Bergen chemical carrier and tank terminals group, said it has placed an order with South Korean builder Hyundai Mipo Dockyard for four 46,000dwt chemical carriers valued at about $160M en bloc. According to an Odfjell statement, the contract includes options for a further four ships. Each of the vessels will have 22 coated cargo tanks. The ships  will  have  lower  fuel  consumption  than  conventional  vessels.  Deliveries  would  be  from  January  to  July  2014.  “The newbuildings will replace a number of old vessels the company has recycled during recent years,” Odfjell said in the statement. In addition, Korean shipbuilder Dae Sun has won an order for two MR tankers of 50,000dwt from Greek shipowner Aegean Shipping
Management. The 50,000dwt ships are due for delivery in 1Q 2014 and will be built to Lloyd's Register class.
Norwegian shipowner Stolt Nielsen is preparing to build four to six 38,000dwt stainless steel chemical tanker newbuildings and is in contact with South Korean and Chinese yards to bargain the newbuilding price. Singapore owner Wilmar International has ordered two 52,000dwt product tankers, plus two options, for delivery in 2015. The contract price has not been revealed but it is believed to be in the region of $30mil each.
In the gas tanker segment, Chinese shipyard Nantong Mingde Heavy Industries signed an agreement with Cambridge Energy Group, a newly formed company focusing on US LNG exports to small-mid sized generation markets, to build five 140,000 cbm LNG carriers, plus for options, and 10-12 LNG carriers of 20,000-40,000 cbm. The agreement marks Nantong Mingde Heavy Industries as the second Chinese yard entering in the construction of LNG carriers following Hudong Zhonghua Shipbuilding. Furthermore, Colar LNG is considering the construction of up to six more 160,000cbm LNG units, but the deal has not yet finalized as the owner is negotiating with the yards to achieve the best low newbuilding price.
In the LPG segment, South Korean chemical and LPG shipping specialist KSS Line has ordered an 84,000m³ VLGC at compatriot yard Hyundai HI for delivery in January 2014 at a price of 83.29Bn won ($73.9M). Belgian gas owner Exmar has secured a two month extension for declaring an option of four more 38,000 cbm units from its initial order in March at a price of $50mil each.
In the container segment, Greek owners have shown their presence with Cape Shipping concluding a deal for two 2,200 TEU boxship units for construction in Guangzhou Wenchong Shipyard at $26mil each to be delivered in 2014. In addition, Eastern Mediterranean has ordered two 2,200 TEU boxship units, with an option for two more, at an undisclosed contract price for delivery in 2014.
In  the  Ro-Pax  segment,  Italy’s  Fincantieri  has  sealed  a  $148M order  for  a  dual-fuel  passenger/car  ferry  from  Société  de Traversiers du Québec of Canada. The 130m-long vessel will have capacity for 800 passengers and 180 cars and is due for delivery in 2014. It has been designed by Finland’s Deltamarin in partnership with Quebec-based Navtec. The ship will have cruise ship-style Diesel-electric propulsion, with four generators that can run on marine Diesel fuel oil or LNG. It will be exceptionally manoeuvrable, according to Fincantieri, with electricity-powered Azimuth thrusters equipped with two counter-rotating propellers, as well as transverse propellers. It will have a ‘complex and extensive’ system of ramps and doors at fore and aft for rapid embarkation and disembarkation, the yard said, and would be certified ice class 1A and propulsion class 1AS.

DEMOLITION MARKET
In the demolition market, the price momentum in the Indian subcontinent region has remained flat during the last days of July with levels at $375-$380/ldt for dry/general and $400-$410/ldt for wet cargo and hard competition between Bangladesh and India. The Indian ship-recycling industry will keep its appetite on securing tonnage by trying to offer firm prices as the ruling of Supreme Court did not impose the closure of the scrap yards, but it decided that ships not complying with the Basel convention would not be allowed to clear inwards for recycling in India. In China, price levels fell by $40/ldt for dry vessels to $310-$310/ldt and $20/ldt for wet to $330/ldt, enlarging the gap with the Indian subcontinent region with stiffer efforts for securing further disposals at the current price levels offered.
The week ended with 7 vessels reported to have been headed to the scrap yards of total deadweight 366,304 tons. In terms of the reported number of transactions, the demolition activity is down by 63% from previous week’s business with 67% lower tanker disposals and low pace of bulk carrier scrapping. In terms of total deadweight sent for scrap, there has been a decline of 51%, 3 bulk carrier, 2 tanker and 2 Ro-Ro disposals. In terms of scrap price levels, notable demo deals in the tanker segment the disposal of M/T “UNITED RESOLVE” of 144,100dwt built 1992 with ldt:19,960 at $440/ldt Pakistan.
At a similar week in 2011, demolition activity was 72% higher than today’s levels, in terms of the reported number of transactions, when 12 vessels had been reported for scrap of total deadweight 718,838 tons with bulk carriers 42% and liners 33% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with India and Pakistan offering $500-$520/ldt for dry and $525-$545/ldt for wet cargo, while Bangladesh market was inactive.

2012-08-03 11:43:21

The eurozone debt crisis deepens with Asian and US economies facing severe also slowdown, while fiscal monetary policy is being adjusted to stimulate economic growth and prevent further contagion. A factory slump in Asia’s two biggest exporters, China and Japan, deepened in June, as export orders fell to a seven month low, highlighting increased worries that the health of the global economy is deteriorating. China's manufacturing activity fell to a seven- month low in June, according to official figures, despite government efforts to arrest a slowdown in the world's second largest economy. The official purchasing managers' index (PMI) slipped to 50.2 in June from 50.4 in May, the China Federation of Logistics and Purchasing said in a statement. June’s figure marks the lowest level since November last year, when PMI hit 49, according to previously released data. A PMI value above 50 indicates expansion, while a reading below 50 means contraction. Chinese government, in an effort to prevent further slowdown in its economy, cut interest rates on June 8th, for the first time in more than three years, and also trimmed the amount of cash that banks must keep as reserves for a third time in May, since December. There are hopes that China’s economy slowdown may stabilize in the third quarter and it could meet its target growth of 7.5% for this year.
US manufacturing activity also contracted for the first time in three years reassuring that the global economy is already suffering seriously from  the eurozone debt crisis and China’s economic slowdown.   In a shock to economists, who were  expecting manufacturing growth to slow moderately, the Institute for Supply Management’s survey on the US industrial sector reported a large decline in activity from 53.5 in May to 49.7 in June, its lowest level since the recession ended in mid-2009. The weak ISM data emerges from China’s slow pace of industrial expansion, while eurozone manufacturing activity remains at its weakest level in three year. Eurozone manufacturing activity has contracted each month since August 2011, while, in Germany, the eurozone’s largest economy, the index for June showed manufacturing activity shrinking at its fastest pace since June 2009. It seems that a significant part of the weakness looks to be trade contagion with worldwide economy struggling to find a pace of positive growth since the end of 2008.
The worldwide economic recession and faltering trade growth bring also headwinds in the shipping market, which is still facing the challenge of “oversupply ”. A positive development from the economic contraction on shipping players has been the recent drop of bent crude oil price and the lower cost of bunkering expenses in major ports. Brent crude spot price has slipped to near $100/barrel, from more than $120/barrel during the first quarter of the year with IFO 380 bunker fuel cost floating at less than $600/barrel in Fujairah from the highs of 2011, when IFO 380 prices were more than $700/barrel. The Bank of America Merrill Lynch forecasts a price of $106/bbl for Brent crude and $97/bbl for US WTI crude oil in 2H 2012, while contraction in OECD Europe demand for crude oil on account of Europe debt crisis and excess supplies of crude oil, create downside risks on the oil demand. BofAML also said that the risk of $60/bbl for Brent crude won’t go away soon due to the latest developments in Eurozone debt crisis and its impact on emerging economies. The freight market momentum continues to seem negative in the dry and wet markets, while containers are showing signs of significant improvement from 2011, with investors adjusting their strategy to confront the downward spiral and benefit from the slump in asset prices.

Under the adverse worldwide economic scene, shipping investments haven’t lost their momentum with owners being eager in the purchase of secondhand vessels, skeptical on the placement of newbuilding contracts and more than willing to dispose their overaged vessels, even at lower scrap price levels.
The first half of the year ended with the demolition activity persisting to be at record high levels, showing significant increases in the bulk carrier and container segments, while overall it has moved 33% hiher from the first half of 2011, and it is expected to continue at a robust pace as the freight market ’s underperformance welcomes a high volume of business during the second half of the year. In the secondhand market, there has been a 9% downfall from the investments of 2011, with dry bulk carriers purchasing activity showing the smallest decline of 6% and containers showing a revival with a 55% increase, in the number of vessels reported to have changed hands. In the newbuilding market, investors seem to follow the newbuilding trends of 2011 with less contracting activity in the bulk carrier and container segment, stronger momentum in the tanker from the placement of MR product units and intense contracting activity in the offshore segment, while LNG carriers are still on their spotlight from the buoyant spot freight market with rates at $164,000/day, the highest since December, from about $60,000/day in January 2006.
In  the dry market,  the second  quarter of  the  year ended  with  a  positive  sense  as  the  Baltic Dry Index finally broke the psychological barrier of 1000 points from its continuous fall during May, by closing on June 29th  at 1004, down by 38% from January 3rd  at 1624 points, with capesize average spot charter earnings showing a fall of more than 80% by reaching levels of $3,988/day, from about $24,000/day at the beginning of the year. On mid June, capesize average spot earnings fell at their lowest point since December 2008, of less than $3,500/day, with panamax vessels showing softness at levels of less than $8,000/day from more than $13,000/day at the beginning of May.
During the Lehman crisis of 2008, capesize average time charter earnings have dipped to $2,318/day on the beginning of December of 2008, from the peak of $233,988/day on June 5th 2008. The levels of 2008 belong in a forgettable past with dry bulk operators finding ways to adjust their operational results in the current weak freight market. The recent slide of bunkering costs, the record scrapping activity of this year and the low ordering activity have eased at some level the pain of the market, but the dry cargo demand is not yet at levels that could remedy the imbalance of the freight markets between vessels’ supply and demand.
During the first days of July, BDI continues its upward trend with capesize average spot earnings surpassing the barrier of $5,000/day and panamax earnings climbing to more than $8,000/day. Smaller vessel categories, supramax and handysize units are showing firmness at levels of more than $13,000/day and $10,000/day respectively. The positive performance of smaller vessel categories has been supported by increased movement of grains and a number of minor bulk cargoes, while the fragile Chinese iron ore and coal demand impaired the demand for capesize and panamax tonnage. Chinese demand for imported iron ore cargo posed  weakness in June due to a tremendous decline in steel production and a large amount of iron ore stockpiled at Chinese ports, despite the rise of Chinese iron ore imports in the first five months of the year to around 300.1mt, up 9% year-on-year.
The recent euphoria in the capesize and panamax segment has pushed BDI above 1,000 points, but the prospects for the second half of the year are not yet promising for the capesize segment and overall the performance of the dry market. Chinese steel production has not yet recovered, port stockpiles are elevated, above 96 million tons of iron ore and 8.7 million tons of coal, while Chinese iron ore demand is expected to show not significant strength in the coming weeks. Chinese demand for imported thermal coal is also poised to remain low on the short term, as power plant and coal stockpiles remain high and hydropower production continues to be on rise. However, peak summer electricity demand season is underway in China and a rebound in thermal coal fixture volume is likely for the second half of the year with stronger panamax earnings.
Despite the recent negative picture of capesize ton mille demand, there is still faith in the segment as Chinese government’s stimulus measures in the industrial sector may bring firmer iron ore demand, but it seems difficult the capesize average spot earning to surpass the levels of $10,000/day as they are struggling to perform in the current vessel’s supply figures, when in December of 2011, they were floating at levels near to $30,000/day. Under the current fundamentals, shipping players prefer to move towards the scrapping of overaged large sized vessels, capesizes and panamaxes, with secondhand investments being on the frontline as more preferable type of investment than the construction of new units. Smaller vessel categories, from handysizes to supramaxes, are in the focus of investors either for purchase of a secondhand unit or the placement of a new contract, due to their resistance in the current slump of freight markets. There is still a strong competition between the low secondhand and newbuilding asset prices, from the highs seen during 2008, while investors are reconsidering their newbuilding plans on the basis of a pessimistic market outlook, with major players that have easy access to shipping finance and capital markets proceeding in firm newbuilding transactions at Korean or Chinese yards.
Secondhand asset prices have plunged from the first half of 2011, especially in the large sized vessel segments, capesize and panamax, with the BDI triggering further falls during the second half of the year. According to the Baltic Exchange’s Sale and Purchase Assessments, the value of a 5yrs old capesize of 172,000dwt has dropped to about $33,4mil from $42,9 at the end of June 2011, while at end of June 2008 was more than $153mil. In the panamax market, the value of a 5yrs old vessel of 74,000dwt is now at near $23mil, from $30,8 at the end of June 2011, while at the end of June 2008 was more than $88mil. In the supramax segment, the value of 5yrs old vessel of 52,000dwt is now in the region of $22mil from $27,5mil at the end of June 2011, while at the end of June 2008 was at more than $75mil.
In  the  newbuilding  market,  similar  sharp  declines  in  prices  offered  by  major  yards  are  viewed  with  investors  being  more conservative in the placement of new contracts as the instability of the freight market and the challenge of oversupply with upcoming deliveries are creating uncertainty for strong newbuilding investments. A capesize unit of 186,300 dwt reported on order in February this year at Shanghai Waigaoqiao of China for a price in the region of $49,8mil, while at the end of May 2008, a capesize unit of 176,000 dwt had been reported on order at Chinese yard, Zhoushan Jinhawaian for a price about $88,5mil.
In the wet market, investors are showing the same buying trends with the dry market by being more eager in the purchase of smaller vessel sizes, MR product units, less than willing in the placement of crude carrier vessels under construction, while there is still slower volume of demolition transactions than in the bulk carrier segment. The crude tanker freight market remains in the doldrums from faltering U.S. and European oil demand, while vessel earnings are not expected to surpass the break even levels during the second half of the year. In the VLCC market, rates from Arabian Gulf to Japan for a 260,000dwt unit is now at WS42 with time charter equivalent earnings at $20,000/day, from WS60 at the end of January with time charter equivalent earnings at $35,500/day, while in 2008 earnings averaged at $96,900/day. In the suezmax market, rates for 135,000dwt unit in WAFR-USAC route is now at WS62.5 with time charter equivalent earnings at $15,700/day, from WS 80 at the end of January with time charter equivalent earnings at $21,100/day, while in 2008 earnings averaged at $60,200/day. In the aframax market, rates in North Sea- Continent are now at WS95 with time charter equivalent earnings at $21,100/day, showing a mild decline from end of January, when rates were at WS100, while in 2008 earnings averaged at $52,400/day.
The falls of the crude freight rates have also added in the downward spiral of secondhand asset prices with investors trying to exploit the price differentials and expand their fleet via modern secondhand units. According to the Baltic Exchange’s Sale and Purchase Assessments, the value of a 5yrs old VLCC of 305,000dwt, is now at $57mil from about $82mil at the end of June 2011, while at the end of June 2008 was at $157 mil. The value a 5yrs old aframax unit of 105,000dwt is now at about $30mil, from $38,9mil at the end of June 2011, when at the end of June 2008 was more than $74mil. In the MR product segment, the downward revision of asset prices is softer than large sized vessel categories, the same with supramax dry bulk carriers. The value of a 5yrs unit of 45,000dwt is now about $22,5mil, from $29 mil at the end of June 2011, while at the end of June 2008 was in the region of $53mil.
The world oil demand is the key factor lying behind the rebound of the crude freight rates combined with intense scrapping activity and low volume of newbuilding activity. According to OPEC’s latest Report of June, world oil demand growth in 2012 is expected at 0.9 mb/d, y-o-y to average 88.7 mb/d, unchanged from the previous report. The first half of this year experienced various economic developments world-wide, which placed a great amount of uncertainty on oil demand. This has been related to two main factors: the turbulence in the world economy and the volatility in oil prices. The effects of these are expected to last until the end of the year and indicators do not point clearly towards a stabilizing of the world economy. The economies of the US, Europe and, to a certain degree China are still slowing down mildly. Hence, world oil demand in the second half of this year will face even greater degree of uncertainty. US and European oil demand will contribute a large share of this uncertainty, while the upcoming driving season in the Northern Hemisphere might be affected by retail gasoline prices and economic development, leading to a further decline in world oil demand.
However, the Paris based International Energy Agency keeps a positive position on the future oil demand. The Eurozone crisis may be worsening and the European refining operations may be constrained by weak margins, but the June Oil Market Report (OMR) of International Energy Agency (IEA) predicts there will be a sharp rise in crude oil demand in the coming months. According to June OMR, summer power generation demand and potential continued non-OECD stockpiling could boost crude demand further.
In the container market, the momentum in the freight market has improved during the second quarter of the year, while there are still concerns on the overcapacity with hopes from an increased demolition activity in the period January-June. The newbuilding activity remains low from the previous high volumes of 2011 and 2010, while the low newbuilding prices still tempt owners for the placement of new boxships in the post panamax segment. June ended with a rise in the Shanghai Container Freight from a remarkable increase in the main trade from Shanghai to base ports of Europe and in the secondary trading route from Shanghai to Australia (Melbourne). The Shanghai Container Freight Index ended on Friday 29th June at 1460, up by 2% from previous week’s closing at 1425, while is up by 54% from the end of December 2011, when it was at 948.
On a weekly basis, rates on Asia-Europe and Asia-Mediterranean routes have shown an increase by 22% and 12% respectively by rising to $1888/TEU and $1892/TEU respectively, from $1549/TEU on Asia – Europe and $1685/TEU on Asia-Mediterranean. Rates on the Asia-Europe route are now 166% higher than this year’s lowest level on February 17th, when they were at $711/TEU and 3% down from this year’s peak of $1934/TEU on May 4th. The same outstanding increases have been also noted in the rates of Asia-Mediterranean by recording a 158% upward movement from this year’s bottom low of $735/TEU on February 17th and 7% down from this year’s peak of $2033/TEU on May 4th.
In transpacific routes, Asia-USWC and Asia-USEC, spot rates plus surcharges have posed softness, but they are still firm by standing 26% and 17% respectively above from the end of the first quarter. On a weekly basis, rates on Asia-USWC are now at $2571/FEU, 4% down from $2678/FEU on Friday 22ND  June, while rates on Asia-USEC are at $3752/FEU, down by 1% from $2678/FEU. On December 9th 2011, rates on Asia-USWC route were 45% lower than today’s levels by standing at $1419/FEU and on Asia-USEC were at $2524/FEU, down by 29%.
The average value of SCFI for the second quarter of the year shows an increase by 35% from the previous quarter with liners’ profitability being restored as demand for containerships reduces the size of the idle fleet. According to Alphaliner figures, the laid up tonnage has fallen to 438,000 TEU or 3% of the total existing fleet, the lowest in seven months, while the containership orderbook has dropped to 23% of the global fleet from 60% in the first quarter of 2008. Only nine boxships of over 5,000 TEU are estimated to be idle, from 50 in March, while there is still a large number of a smaller vessel size that remains laid up, over 100 ships in the range of 1,000TEU-3,000TEU are without employment. Noteworthy is that larger vessels above 7,500 TEU are all employed with only two being idle in this category, which shortly will enter the active fleet.
The recent upward movement of spot market is not yet secured for the long term as the issue of overcapacity seems to have not been resolved despite the slower growth of fleet, as per data from Alphaliner shows the global containership fleet had passed the 16m TEU mark with 772,000 TEU delivered so far in the first six months of the year. The capacity delivered during this semester represents 5.0% of the global cellular fleet at the beginning of the year. Alphaniler also commented that it has taken the fleet 12 months to climb from 15 to 16mTEU, while it took nine months to climb from 14 to 15mTEU and nine months to climb from 13 to 14mTEU. The slower rate of fleet growth could be explained by the increased scrapping activity aggregating 163,000 TEU being delivered so far to breakers or decommissioned during the first six months of the year, compared to total deletions of 107,000TEU for the whole of 2011. Although the high scrapping level, the capacity removed remains only a fraction of the new vessel deliveries with a further 670,000 TEU due to be delivered in the second half of 2012, posing a significant challenge for an industry that is still suffering from excess supply with fears for lower scrapping removals due to the recent drop of scrap price levels.
Under the current market fundamentals, Taiwanese carrier Yang Ming Marine Transport plans to order five ultra large boxships of 14,000 TEU-16,000 TEU by the end of this year. Yang Ming has yet to decide how will finance the order and it plans to raise $T8bn ($267.9m) from sales of convertible bonds to build working capital that could limit its requirement to borrow. On the other hand, Greek shipowner Enesel, part of NS Lemos group of companies, is confirmed to have contracted 10 ultra large containerships of 13,800 TEU under a long term charter to Evergreen Line of Taiwan. The order has been initially rumoured to have been placed by Korea Infrastructure Investments Asset Management Co. to be chartered to Evergreen for 10 years at around $50,000/day with a purchase option on the vessels at the end of the charter, put the deal failed as the contractor was unable to raise the necessary fund and the parties could not reach consensus on some technical issues within a mutually agreed time limit. In the large panamax segment, London based Zodiac Maritime Agencies is said to have finalized a 10 boxships order of 5,000 TEU at STX Offshore & Shipbuilding Chinese facility in Dalian at the price of $40mil each for delivery in early 2014. However, market sources suggest that the contract price may be even lower in the region of $40mil each and Zodiac has penned a letter of intent for five plus five 5,000 TEU boxships.
APL, the container shipping unit of Singapore’s Neptune Orient Lines (NOL), has taken delivery of the 10,700-TEU APL Salalah, built by South Korea’s Daewoo Shipbuilding, and is the second vessel in a series of six ordered in June 2007. In addition, BOX SHIPS, the New York-listed, Athens-based start-up that specialises in container feeder vessels, has taken delivery of its eighth vessel, the 5,344-TEU OOCL Hong Kong under a 36-month charter at US$26,465, daily rate to Hong Kong’s Orient Overseas Shipping Company.

SECONDHAND MARKET
Overall, in terms of shipping investments, the second quarter of the year ended with secondhand buying momentum showing a 24% increase from the previous quarter and a soft decline of 9% from the first half of 2011. During January-June 2012, 555 vessels reported to have changed hands at a total invested capital of more than $6,1bn, 94 sale and purchase transactions reported at an undisclosed sale price, with dry bulk carriers and tankers holding 33% and 26% respectively of investors’ interest, while containers and liners follow with a 14% and 11% share respectively of the total S&P activity. The bulk carrier, gas tanker and container segments have shown a sharp revival in the volume of vessels reported to have changed hands from the previous quarter with a 31%, 44% and 39% increase respectively. The total amount of money invested for secondhand units this year is lower than the first half of 2011, 43% down, when 610 vessels had been reported to have changed hands at more than $10,7bn, with 103 sale and purchase transactions at an undisclosed sale price.
The bulk carrier segment has shown a 31% increase with a total 105 vessels reported to have changed hands during April-June 2012 from 80 vessels in the first three months of the year, while a total of 185 vessels reported sold during the first half of the year at a total invested capital of more than $2,5bn, 11 sale and purchase transactions reported at an undisclosed contract price. Amid the severe freight market status with capesizes struggling to cover their operating expenses and BDI crawling to remain above 1,000 points, investors haven’t lost their buying appetite by slowing their secondhand purchases only 6% down from the first half of 2011, when 196 bulk carriers changed hands at a total invested capital of more than $3,4billlion. The bulk carrier segment is the segment that posed the least downfall among other vessel categories in the purchase of secondhand units compared with the first half of 2011.
In the tanker segment, secondhand purchasing activity is standing only 10% higher from the first quarter of the year, with investors showing less faith in the purchase of tanker vessels than dry bulk carriers. The first half of the year ended with 145 tankers in total reported to have changed hands at a total invested capital of more than $1,8 bn, 12 sale and purchase transactions reported at an undisclosed sale price, posing a 12% downfall from January-June 2011, when 165 tankers reported on sold at a total invested capital of more than $4billion. The container segment appears to be the only segment showing a remarkable increase of 55% in the secondhand buying momentum from the first half of 2011. It seems that the revival of the spot container freight market in the main line haul trading routes and the appealing low asset prices stimulated bigger confidence in the purchase of secondhand boxships than the first half of 2011. During January-June 2012, 79 boxships reported sold at a total invested capital of more than $740mil, when in the first half of 2011, 51 containers had been reported sold at a total invested capital of more than $1,474bn.

The secondhand buying interest of Greek owners has also improved from the first quarter of the year by showing an 18% increase in the number of units reported sold, with bulk carriers and tankers continue to be on their spotlight, by holding 42% and 33% share of their total S&P activity, while there has been a remarkable 333% in their purchases of boxships from the first quarter. Their appetite remains more intense, from the first quarter of the year, in the purchase of secondhand units rather than in the placement of new contracts. During January-June 2012, 83 vessels reported to have sold to Greek interest at a total invested capital of more than $1,7billion, 3 sale and purchase transactions reported at an undisclosed contract price, compared with 70 newbuilding units reported on order by Greek owners at more than $3,6billion. Their total amount of money invested in the secondhand and newbuilding market is more than $5,3billion with Greek investors showing their strength under the adverse economic and freight market fundamentals in comparison with their Chinese rivals, who have invested more than $1,75billion in both markets. Greek secondhand buying momentum grasps 15% of the total S&P activity compared with 9% of Chinese.
In comparison with the volume of activity during the first half of 2011, there has been 24% decline in the total amount of money invested by Greek owners and a 13% retreat of their secondhand buying appetite, when 95 vessels went to Greek hands at more than $2,2billion, with bulk carriers and tankers capturing 67% of their buying appetite. Chinese secondhand buying momentum has shown a sharper contraction with a 41% downfall in the total amount of money invested and 33% slower purchasing activity.

NEWBUILDING MARKET
In the newbuilding market, the offshore and gas tanker segments continue to keep alive the shipyards’ activity as the main conventional vessel segments still follow declining volumes of business with bulk carriers and container segments showing a downward revision of 38% and 80% respectively, in terms of the number of units ordered, from the first half of 2011. Overall, 729 vessels reported on order at a total invested capital of more than $54,4bn, 368 contracts reported at an undisclosed contract price, with Greek owners placing 70 new orders at a total invested capital of more than $3,6bn, 15 contracts reported at an undisclosed contract price. Greek investors have shown strong ordering interest in all main conventional vessel segments, bulk carriers, tankers and containers, but they have shown a 21% retreat in their newbuilding plans from the first half of 2011 and a 26% increase from the first quarter of 2012, due to a 600% increase in the volume of containership ordering activity. Chinese players are showing biggest falls with a 54% less volume of newbuilding transactions by posing a 61% decline in the volume of bulk carrier orders, but they have also stimulated their business in the second quarter of 2012 with an 84% increase in the volume of new orders, due to 143% stronger bulk carriers’ newbuilding transactions.
Overall, the bulk carrier and container segments are facing slower pace of newbuilding activity with a 38% and 80% decline, in the number of units ordered, from the first half of 2011, but bulk carriers with special projects are still grasping the lion share of this year’s total number of units ordered, 30%-31% share each. The newbuilding activity is 42% higher in the offshore segment, with 227 specialized units reported on order, from 160 in the first half of 2011, while a similar increase has been viewed in the gas tanker segment due to more intense LPG activity from last year and a sustained LNG ordering interest, 41 new LPG contracts and 27 new LNG contracts. In the tanker segment, there has been also an outstanding increase of 58% with a total of 68 units reported on order from 48 in the first half of 2011, due to eager volume of business in the MR handymax and panamax segment, with the size of 50,000dwt being very popular.
In the bulk carrier segment, the handysize, surpamax and kamsarmax size are on investors focus, with 43, 64 and 50 new contracts reported on order respectively, of the total 220 bulk carrier transactions, while the post panamax and capesize sizes attract the least interest, with 8 and 12 new contracts on order respectively. In the tanker segment, the crude carrier vessel sizes are not on the centre of investors’ interest by concentrating only 17% share of the total tankers’ ordering activity compared with 59% share holding by MR/handymax and panamax product segments. In the container segment, the post panamax size still attracts significant volume of business as major liner players are exploiting the low newbuilding prices for the expansion of their fleet ignoring the overcapacity issue and the slack of consumer demand trade growth from US and European economies.

The second quarter of the year ends with a 21% increase in the volume of newbuilding business from the previous quarter with 399 contracts reported on order from 330, while there is a 42% and 240% remarkable increase in the bulk carrier and container contracting activity. However, this year’s contracting activity represents a 20% decline from the first half of 2011, when 912 vessels reported to have been ordered compared with 729 today’s levels. The total amount of money invested in the newbuilding market is 16% lower than the first half of 2011 with the offshore segment being the most overweight as more than $40 billion have been invested in the construction of offshore support vessels. The ordering bonanza of offshore activity is expected to continue in the second half of the year as the freight market of the main conventional vessel segments has not yet fully recovered and the oversupply issue averts strong placements of dry bulk carrier and tanker new units for constructions, especially large sized vessels, dry bulk capesizes or very large ore capes and crude carrier vessels.

DEMOLITION MARKET
In the demolition market, there has been a declining trend in scrap price levels offered in the Indian subcontinent region from May with signs for this trend to persist in the third quarter of the year. Owners are still offering a high supply of vessels for disposal under the dire freight market conditions with bulk carriers attracting the lion share of the total demolition activity during the first half of the year, 41% share, and liners with tankers to follow by holding 17.4% and 16% share respectively.
Overall, the first half of the year ended with a total of 534 vessels reported to have been headed in the scrap yards at a total deadweight of about 27mil tons, up by 33% from the first half of 2011, when 402 vessels scrapped for a total deadweight of about 18mil tons. In the bulk carrier segment, there has been a 48% increase from the first half of 2011, in the number of vessels reported for disposal, with 217 bulk carriers reported on scrap at a total deadweight of about 15mil tons, from 147 units at a total deadweight of about 11mil tons in January-June 2011. In the container segment, there has been an outstanding increase of 256% with 64 boxships going to the scrap yards of a total deadweight 1,8mil tons, from only 18 boxships in January-June 2011. A remarkable volume of scrapping business has been also viewed in the reefer segment with 39 vessels reported for scrap at a total deadweight of 355,818 tons, 44% up from January-June 2011, when 27 reefers were scrapped.
As we have entered the second half of the year, bulk carriers’ demolition activity will continue to be at record high with scrap price levels showing a decline of more than $100/ldt from the end of June 2011, with levels for dry/general cargo units ranging $350-$370/ldt in the Indian subcontinent region, from $480-$495/ldt at the end of June 2011, while Bangladesh is offering the most competitive prices and India’s levels standing similar with the prices offered by Chinese shiprecycling industry. The weak Indian rupee against dollar has triggered the recent falls of scrap prices levels offered by Indian shiprecyclers, who have lost their leading power by Bangladesh that appears more dynamic in the second half of the year. Scrap prices offered for wet cargo are also below $400/ldt, $380-$390/ld in the Indian subcontinent region with China offering $360/ldt for wet and $340/ldt for dry/general cargo.

As the first half of the year has ended, the trend towards more secondhand purchasing activity, less volume of newbuilding transactions and eager appetite for demolition transactions may also continue in the second half of the year. The current freight market fundamentals underline a continued record high volume of scrapping business in the bulk carriers’ segment, while owners in the tanker segment seem not yet enough willing to be more aggressive in the scrapping of their overaged tonnage. The plunge of the secondhand asset prices will persist, with bulk carriers and tankers being on the spotlight of investors for purchase with limited volume of newbuilding contracts, especially in large sized vessels, from the threat of oversupply. Offshore and LNG segments will continue to be the most beneficiaries segments in terms of vessels’ supply and demand balance with vigorous newbuilding appetite, while China ’s economic growth will determine the future of dry bulk growth and worldwide oil demand will stimulate the prompt recovery of the crude tanker freight market.

2012-07-23 09:36:54

This week closed with the BDI flirting again the 1,000points barrier at 1037 and with 53 transactions in total reported worldwide in the secondhand and demolition market, up by 26% week on week with secondhand activity being in similar levels, an 88% increase of newbuilding activity and 163% increase in the scrapping volume. At similar week in 2011, the total S&P and demolition activity was around 34% lower levels, when 35 transactions had been reported, while the newbuilding activity was almost 22% less active.

SECONDHAND MARKET
Overall, 32 vessels reported to have changed hands at a total invested capital in the region of US$ 95.4 mil & Euro 70.95mil, with
14 deals reported sold on private terms. Although deals were reported in almost all sectors, most active has been the tanker sector.

NEWBUILDING MARKET
The week ended with a 88% recorded increase in the newbuilding market, with 32 orders in total of a total invested capital to be in the region of $ 647 mil, however we should take under consideration that for a 18.75% of the orders the contracted price hasn’t been revealed. The increased activity of the week is a result of the 20 coastal ethanol tankers that have been ordered from Transpetro in Brazil, at Rio Tete shipyard, a shipyard which is scheduled to open in a months’ time. Contrary to previous weeks, in the special project sector it has been recorded limited activity with just one Platform supply vessel to be reported, while the demand in the car carrier sector appears strong with Eukor Car Carriers of Korea to have exercised their options for two more. The original order of Eukor was reported in May for two 6,600vehicles capacity vessels, while these options have been upgraded and will have a carrying capacity of 7400 vehicles.
Additionally, to the reported orders there are investors that are searching their options on where to invest by putting the yards into strong competition or are just in the original stage of LOIS. Hyundai HI has been awarded to build the “world’s largest” spar platform hull in a deal worth usd $ 700mil but for now the shipyard has been awarded the letter of intent. The deal is expected to been firmed up by Statoil SA early September. The construction will be with Technip and the delivery is said to be by 2015. BG Group is in talks to proceed with its LNG newbuilding project and is in discussions with Chinese yards, in order to evaluate the best option. The project refers to two 170,000cbm LNG carriers, and the company is said to be flexible in delivery dates, therefore not in a rush to order. Furthermore, Petrobras might soon proceed with ordering semi-submersibles and drill ships from Keppel and Sembcorp Marine, since Petrobras has approved the construction of six semi-submersibles for its oil rig provider Sete Brasil.
Overall, the shipbuilding market is facing difficult times with many shipyards experiencing a loss in their records. CSSC Jiangnan has reported that its profits are on a freefall, with the expected first half profit is calculated to fall 80%, comparing to the similar period of last year. Their reported profit however is said to be just enough to make the shipyard have a profit. Similarly, COSCO Shipping has reported that despite the difficult market has maintained to perform with profits for the first half of 0.7m yuan ($0.1m). On the other hand, there are yards as Onomichi in Japan that claim to has filled in their orderbook until 2016, taking advantage of its specialisation in product tankers and the mini boom that was recorded in the sector.

DEMOLITION MARKET
With the anticipation of the results for India’s scrapping future, the activity this week was by 163% higher than last week. In total the week ended with 21 vessels reported for demolition, while in terms of deadweight the figure this week is 105.7% more, at 1,440,159tons. Although all demolition countries were active, for 47.6% of the deals that were reported to be heading to the destinations remain undisclosed. At the similar week of last year in total 24vessels were sold for scrap of a total deadweight of 707,646tons.

2012-07-16 10:13:37

This week closed with 42 transactions in total reported worldwide in the secondhand and demolition market, up by 17% week on week with a 42% increase of newbuilding activity and 43% decline in the scrapping volume. At similar week in 2011, the total S&P and demolition activity was around 17% lower levels, when 36 transactions had been reported.

SECONDHAND MARKET
Overall, 34 vessels reported to have changed hands at a total invested capital in the region of US$ 430.8 mil, while 4 deals reported sold in private terms.
Bulkcarriers and tankers were the most active sectors representing 35% and 41% in terms of number of deals from the total figure reported. In the bulkcarrier sector, the sales reported are from all sizes, from handysize to very large capesizes, while in terms of age the majority are built from 1996 onwards.

NEWBUILDING MARKET
In the newbuilding market, there has been a 42% increase in the volume of new contracts from last week’s activity; however the market remains in low levels.
The most active segments were the bulkcarrier and the special projects representing around 41% each. Overall the week ended with 17 fresh orders reported worldwide at a total deadweight of 945,100 tons,  with the size in terms of deadweight of some orders remains undisclosed. This week’s total newbuilding business is down by 64% from similar week’s closing in 2011, when 47 fresh orders had been reported with bulk carriers and containers grasping the lion share. In terms of invested capital, the total amount of money invested is estimated at region $620 mil with 47% of the total number of orders being reported at an undisclosed contract price.

DEMOLITION MARKET
The scrapping activity remains at low levels with India to be facing challenging days due to the issue of safety which will affect the future of the
activity. In total the week ended with just 8 vessels reported for demolition, 43% lower than last week, while in terms of deadweight the figure this week is 15.6% more, due to the bigger size of vessels headed the scrapyards. All demolition players appeared active while the prices reported are in the range from $ 325-around 400/ldt.

2012-07-09 10:46:40

The first week of July ended with strong secondhand buying momentum in the main conventional vessel segments, bulk carriers, tankers and containers, significant slow down of newbuilding business from weak volume of offshore ordering activity and quite firm demolition business, following last week’s high record of disposals.
Overall, 36 transactions reported worldwide in the secondhand and demolition market, down by 22% week on week with a 67% downfall of newbuilding activity and 52% decline in the scrapping volume from 50% lower dry bulk carrier demolition transactions. At similar week in 2011, the total S&P activity was 33% lower, when 24 transactions had been reported and secondhand ship purchasing activity was 61% lower than the ordering business.

SECONDHAND MARKET
Dry bulk carriers of all vessel sizes are on the spotlight from the severe plunge of secondhand prices with capesize vessels being not so attractive as supramax and handyzises to handymaxes. Notable dry bulk carrier sales has been in the supramax segment with Chinese resales from STX Dalian of 57,000dwt at a price of $26mil each, while a Japanese resale from Kawasaki of 58,000dwt has been reported at $27 mil. On March 2011, a Chinese supramax resale of 57,700dwt had been reported for a price in the region of excess $30mil. In the wet market, strong buying momentum has been viewed this week in the purchase of small tankers, below 10,000dwt, while one more sale has been reported in the crude tanker freight market for an aframax vessel of 104,403dwt built 2002 Japan at an undisclosed sale price. In the container segment, there has been a strong buying momentum this week in the feeder-handy segment with a total of 6 sale and purchase transactions.
Overall, 22 vessels reported to have changed hands this week at a total invested capital in the region of US$ 216,85 mil with bulk carriers holding the lion’s share, 41% of S&P activity, and tankers 23%. In terms of the reported number of transactions, the S&P activity is up by 29% from last week’s activity due to stronger purchasing momentum in the container and tanker segments, while is up by 69% comparable with previous year’s weekly S&P activity, when 13 vessels induced buyers’ interest at a total invested capital of about $144,35 million, with bulk carriers holding 46% of the total volume of S&P activity and tankers to follow with a 30% share. In terms of invested capital, the bulk carrier appears the most overweight by attracting about 80% of the total amount invested from firm buying appetite in all vessel sizes and ages, from handysizes to capesizes.

NEWBUILDING MARKET
In the newbuilding market, there has been a 67% decline in the volume of new contracts from last week’s activity from 53% slower business in the offshore segment and 71% less contracting activity in the bulk carrier segment. The week ended with 12 fresh orders reported worldwide at a total deadweight of 350,400 tons, with negative volume of business in all main vessel types. This week’s total newbuilding business is down by 64% from similar week’s closing in 2011, when 33 fresh orders had been reported with bulk carriers grasping again the lion share, 47% of the total newbuilding business compared with 17% today’s levels. In terms of invested capital, the total amount of money invested is estimated at region $172,2 mil with 66% of the total number of orders being reported at an undisclosed contract price. The offshore segment is the most overweight by holding 68% of this week’s total amount of money invested, while there has been no fresh contracting activity revealed in the tanker segment for a second consecutive week and only one fresh contract of two kamsarmax units in the dry bulk carrier segment at Chinese yard by Taiwanese owner, Sincere Navigation, at a price in the region of $27,5mil each. At the end of June 2008, a kamsarmax newbuilding order at Chinese yard was costing around $57mil.
In the container segment, Greek shipowner Enesel, part of the NS Lemos group of companies, is confirmed to have contracted 10 ultra-large container ships for long-term charter to Evergreen Line of Taiwan. The deal was confirmed to Fairplay by Evergreen: "Based on the tonnage demand needed to launch joint services with vessels of similar sizes, Evergreen Line decided to charter the gigantic vessels. “With the delivery of these new ships, Evergreen Line will concurrently return chartered vessels upon their expiration dates," an Evergreen statement said. The 13,800teu ships are due for delivery from 3Q 2013 to 4Q 2014, with the order having been placed with South Korean builder Hyundai HI. Evergreen would not comment on the financing arrangements or the charter rates. Rumours regarding this order were initially reported in Daily Newbuilding News on 16 April, with finance between Evergreen and Korea Infrastructure Investments Asset Management. However, this deal was not finalised as Korea Infrastructure Investments Asset Management was unable secure the necessary fund and parties could not reach consensus on some technical issues within a mutually agreed time limit.
In the gas tanker segment, Mitsui O.S.K. Lines, Ltd. announced the signing of a long-term contract for two new liquefied natural gas (LNG) carriers with Kansai Electric Power Inc. At the same time, MOL concluded contracts to build the ships in Kawasaki Heavy Industries, Ltd. and Mitsubishi Heavy Industries, Ltd. The ships are slated for launching in 2016 and 2017. MOL will manage and operate the vessels, with which transport LNG for Kansai Electric Power. The first vessel is a Moss-type carrier with a 164,700m3 cargo tank capacity, based on a new design from Kawasaki Heavy Industries. It will be the largest ship in its class that can pass through the expanded Panama Canal which is scheduled for completion in 2014, while maintaining a hull size allowing it to call at major LNG terminals around the world. The second vessel has a 155,300m3-class cargo tank capacity, and is one of the Sayaendo series carriers developed by Mitsubishi Heavy Industries, featuring a continuous cover over its four Moss-type spherical tanks. The peapod-shaped continuous cover is integrated with the ship's hull, achieving weight reduction while maintaining overall hull rigidity. This will increase fuel efficiency. Both vessels adopt a new steam turbine engine that reuses steam for heating. This will also reduce fuel consumption. They also feature an advanced heat insulation system that offers the lowest LNG vaporization rate – 0.08% – of any LNG carrier in the world. Its environment-friendly, economically-advanced design also effectively controls surplus boil-off gas.
Furthermore, China Shipping LNG is planning the construction of eight LNG carriers in Chinese yard, to be delivered over 2015-17, as a company source stated in Fairplay. The LNG shipping arm of the China Shipping Group said the ships would each have capacity of 175,000m³ and would be timechartered out to China’s SINOPEC oil company, which has a 25% stake in the Australia- Pacific LNG project in Queensland.
In the LPG segment, Frontline confirmed to have contracted the largest LPG carriers ever to be ordered in China. The John Fredriksen-controlled shipowner has initially ordered two 82,000m³ vessels at the CSSC-controlled Jiangnan Changxing HI, with delivery due in June and September 2014. However, the order could ultimately total six ships should all options be taken up. The Lloyd’s Register-classed ships will feature a length overall of 226m, a beam of 36.60m and a hull depth of 22.20m.
In the offshore segment, Japan’s’ Universal Shipbuilding confirmed that it secured orders for six platform support vessels from Singapore offshore player Swire Pacific Offshore. The high-specification 3,700dwt PSVs, which come with options for four more vessels, will be built in USC’s Keihin Shipyard and will be delivered “progressively” from the third quarter of 2014.

DEMOLITION MARKET
In the demolition market, there has been a declining trend in scrap price levels offered in the Indian subcontinent region from May with signs for this trend to persist in the third quarter of the year. Owners are still offering a high supply of vessels for disposal under the dire freight market conditions with bulk carriers attracting the lion share of the total demolition activity during the first half of the year, 41% share, and liners with tankers to follow by holding 17.4% and 16% share respectively.
Overall, the first half of the year ended with a total of 534 vessels reported to have been headed in the scrap yards at a total deadweight of about 27mil tons, up by 33% from the first half of 2011, when 402 vessels scrapped for a total deadweight of about
18mil tons. In the bulk carrier segment, there has been a 48% increase from the first half of 2011, in the number of vessels reported for disposal, with 217 bulk carriers reported on scrap at a total deadweight of about 15mil tons, from 147 units at a total deadweight of about 11mil tons in January-June 2011. As we have entered the second half of the year, bulk carriers’ demolition activity will continue to be at record high with scrap price levels showing a decline of more than $100/ldt from the end of June 2011, with levels for dry/general cargo units ranging $350-$370/ldt in the Indian subcontinent region, from $480-$495/ldt at the end of June 2011, while Bangladesh is offering the most competitive prices and India’s levels standing similar with the prices offered by Chinese shiprecycling industry. Scrap prices offered for wet cargo are also below $400/ldt, $380-$390/ld in the Indian subcontinent region with China offering $360/ldt for wet and $340/ldt for dry/general cargo.
The week ended with 14 vessels reported to have been headed to the scrap yards of total deadweight 605,434 tons. In terms of the reported number of transactions, the demolition activity is down by 52% from previous week’s business with dry bulk carrier disposals attracting 36% of scrapping business, while In terms of total deadweight sent for scrap, there has been a decline of 99% due to 50% lower dry bulk carrier disposals . China and Bangladesh are on the frontline by winning each 4 of the 14 total demolition transactions. In terms of scrap price levels, notable demo deal in the wet market, the disposal of M/T “BONITO” of 83,987dwt built 1988 ldt 14,898 for $403ldt Bangladesh.
At a similar week in 2011, demolition activity was 21% lower than today’s levels, in terms of the reported number of transactions, when 11 vessels had been reported for scrap of total deadweight 850,332 tons with bulk carriers and tankers grasping 54.5% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with Bangladesh and India offering $480-$490/ldt for dry and $510-$515/ldt for wet cargo.

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