In what can only be seen as a worrying sign of things to come, shipbroker Gibson reports that VLCC orders this year have more than tripled, compared to those of the whole of 2016. The London-based shipbroker said in its latest weekly report that “back at the beginning of May, our weekly report focused on the accelerating pace of orders, in particular demand for VLCC tonnage. Two months later we are reporting 20 more fresh VLCC orders, in addition to those placed between January and April. The total count of VLCC orders placed in the first six months of this year reached 38 compared to just 13 in the whole of 2016. We are also aware of several owners circling around the issue, either to order speculative tonnage or direct replacements for their elder units which will certainly add to the recent melee. The pace of VLCC ordering prompted Bimco last week to warn of a potential “fundamental imbalance that would take years to overcome”. Furthermore, we have seen 16 Suezmaxes ordered this year compared to 18 in the whole of last year”.
According to Gibson, “orders for Aframaxes which are at 35 so far this year (6 in 2016) and LR2s at 12 (2 in 2016) indicate that ordering activity has heated up quickly. Similarly, orders for MRs have already overhauled last year’s total of 30. Almost half of all orders this year have been placed in June alone. Delivery dates for these orders indicate that only a few slots are available for late 2018 delivery, suggesting that shipbuilders are rapidly filling their forward orderbook. Price is still a driver, but the influx of new orders appears to have applied the brakes to the downward spiral of newbuild prices of recent times. Owners may also be betting on the potential recovery of the tanker market by placing orders for 2019/20 delivery in anticipation of a rising freight market. The latest deliberations at the IMO on ballast water is unlikely to have any real impact on newbuilding orders unless you require tonnage for US trade. With the US regulators operating a different regime outside of the IMO coupled with the Tier III requirements, some owners will be paying a higher newbuild price to comply. It appears that the US authorities are beginning to toughen up ballast water waivers since they started approving systems. The IMO has agreed to extend the deadline, this potentially could lead to slower pace of tanker scrapping in years ahead”.
Gibson added that “however, perhaps the most interesting development in June was the announcement by Trafigura to order up to 32 crude and product tankers, with a potential value in excess of $1.35 billion. Contracts were reported to have been placed by China’s Bank of Communications Financial Leasing against bareboat charters to Trafigura who are believed to have purchase options. Official confirmation of the initial 22 (Suezmaxes, Aframaxes & MRs) split between Hyundai and New Times remains sketchy and some of the finer details relating to this order remain unreported. Cido Shipping also seem to favour the products market, having recently announced changing an order for two car carriers in to MR tankers. The two vessels involved were originally ordered in September 2015 and as such are not recorded as fresh orders, adding to a swelling tanker orderbook”.
The shipbroker concluded that “most recent orders placed are for ‘blue chip companies’ who appear to have access to huge lines of credit or have been very creative with their funding. Lack of ‘easy money’ is something which has kept a lid on ordering in the recent past. Referring back to our May report “only those with strong financial muscle are likely to be in a position to capitalise”. There appear to be quite a few out there”.
Meanwhile, in the crude tanker market this week, Gibson said that there was “steady VLCC fixing through the week, but no pinch points in availability to allow Owners to lever the market higher than their previous low ws 50 East, mid ws 20’s West marks. The final phase of the July programme is now being played out and the end month does sometimes provide opportunity, but the odds of anything noticeable developing look poor as things currently stand. Suezmaxes moved through a reasonably active phase and premiums for Kharg loading did stretch to over 10 ws points, though the bulk of enquiry was quite easily satisfied by supply and rates bumped against at ceiling of ws 70 to the East and mid ws 20’s to the West. Aframaxes couldn’t find any relief from downward pressure, but did continue to make a stand at around 80,000mt by ws 90 to Singapore nonetheless. more resistance will be required next week too”, it concluded.
Chinese shipyards have experienced a 31.5 percent decline in newbuilding order intake reaching 9.86 million dwt in the first five months of this year when compared to the corresponding figures from last year, China Association of the National Shipbuilding Industry (CANSI) said.
At the end of May, the orderbook backlog came at 85.15 million dwt, a drop of 30.7 percent year-on-year and down 14.5 percent in comparison to the end of 2016.
However, the completion volume of new ships saw a steep growth. Namely, during the said period, the country's shipbuilders completed 22.93 million dwt of newbuilding tonnage, up by 78.8 percent year-on-year.
According to CANSI, the country's 53 key shipbuilders completed 19.57 million dwt equivalent of new ships, up by 63.5 percent. Nevertheless, when it comes to new orders, the key shipbuilders had secured 8.74 million dwt of new tonnage, which is down by 37 percent year-on-year. At the end of May, the yards' orderbook reached 80.61 million dwt, dwindling by 31.6 percent.
The figures have been announced as the country's shipbuilders launch its largest ship yet – the first 20,000 TEU containership COSCO Shipping Taurus.
Greek shipowners placed the highest number of newbuilding orders so far this year, as these companies ordered a total of 35 new bulkers and tankers since the start of 2017, according to VesselsValue.
Globally only 119 orders have been placed. Greece leads the way, followed by the US with 14 new contracts and Singapore on the third place with 10 new ships on order. Additionally, Norway has contracted eight and the Netherlands six new ships.
Greek Chartworld Shipping placed the majority of orders with 14 newbuilding contracts, 12 of which are for bulk carriers and two for tankers. The country’s Enesel SA, TMS Tankers, Capital Maritime and Trading each ordered four tankers, followed by Maran Tankers which ordered three ships of the kind.
Additionally, Neda Maritime, and Metrostar Management Corp ordered two tankers each, while M Maritime Corp placed orders for two bulk carriers.
"Many in the shipping industry are worried that there is an imbalance of supply and demand between the number vessels currently on the water and the amount of cargoes. This situation does not look to improve in the near future as there is just under 66 million dwt of tankers and bulkers to be delivered during the rest of 2017, representing 47% of the current bulker and tanker order book," VesselsValue informed.
Over the last five years, a major source of finance and investment in the newbuilding market came from the private equity sector. Today the preference from the private equity sector is to invest in tonnage already delivered and on the water so that an immediate return on their investment can be realised, according to VesselsValue.
This led to a lack of newbuilding finance available and resulted in a gap in deliveries at the major shipyards and therefore increased appetite from them to take orders.
"As we progress through 2017, yard capacity has reduced but continued buying demand from the private sector remains. This is one of the major factors that has led to the increase in newbuilding prices over the past 5 months," VesselsValue said.
Singapore-based owner and operator of pressurized gas carriers Epic Gas has taken delivery of the 11,000cbm LPG carrier Epic Salina.
The final vessel in a series of eight pressurised LPG newbuildings, constructed by Japanese shipbuilder Kyokuyo Shipyard, joined Epic Gas’ fleet on March 29.
In January 2017, the company took delivery of the seventh newbuilding from the series, Epic Sardinia, which is under a long-term bareboat charter with purchase option. According to data provided by VesselsValue, the ship is owned by Japan-based shipping company Kumiai Senpaku.
"Since the first quarter of 2013 we have grown from 22 vessels of total capacity 99,500 cubic metre, to 41 vessels and 268,900 cubic metre today, a 270% increase. Our average vessel size has increased from 4,523 to 6,559 cubic metre," Epic Gas said.
The company added that it remains committed "to providing a high-quality fleet of long term controlled assets across the fully pressurised sector of 3,300 – 11,000 cbm."
Greek owner of drybulk carriers DryShips Inc. has agreed to enter into a "zero cost" option agreement to acquire up to four high specifications very large gas carriers (VLGCs) capable of carrying liquefied petroleum gas (LPG).
Each of the four VLGCs, which are currently under construction at South Korean shipyard Hyundai Heavy Industries (HHI), are going to be employed on long term charters to major oil companies and oil traders. The vessels are scheduled for delivery in June, September, October and December of 2017, respectively.
Under the terms of the LPG option agreement, entered into with companies controlled by DryShips' Chairman and Chief Executive Officer George Economou, the company will have three months to exercise four separate options to purchase up to four VLGCs at a price of US$83.5m per vessel.
If DryShips exercises all four of its options, the total purchase price of the VLGC fleet will be US$334m.
The transaction has been approved by the independent directors of the company based on third party broker valuations.
DryShips said that it intends to finance any acquisition of the vessels by using cash on hand, its undrawn liquidity under the new Sifnos revolver and proceeds from its issuer managed equity transaction.
If acquired, the vessels will be managed by TMS Cardiff Gas on the same terms as the previously announced new TMS agreements.
DryShips currently operates a fleet of 13 Panamax bulk carries with a total size of 972,100 dwt, showed data provided by VesselsValue.
Singapore's gas carrier owner BW LPG Limited has received the final two of four very large gas carriers (VLGCs) in its newbuilding program from South Korea's Shipbuilding and Marine Engineering (DSME).
The two vessels, BW Mindoro and BW Messina, feature 84,000cbm and each have a market value of approximately US$66.9m.
Following delivery, BW LPG said it concluded a sale and leaseback agreement for VLGC BW Messina.
The first two ships from the batch, BW Magellan and BW Malacca, joined the company's fleet in October 2016.
Non-delivery of vessels on the orderbook, which has been a prominent theme in shipbuilding in the last decade, looks set to be increasing again this year amid troubled shipping markets, according to Clarksons Research.
In the year to date, changes to the market environment have been important across all of the major sectors, and this increased market risk looks set to drive non-delivery to record levels in full year 2016.
Based on the difference between scheduled deliveries from the start year orderbook and actual deliveries, Clarksons said that the total non-delivery increased significantly with the onset of the financial crisis, from 8% in dwt terms in 2007 to 33% in 2009. In the year to date this figure has hit 41%, and 2016 seems likely to set a new record.
In general, the uptick in non-delivery over the past two years has been driven by an increase in market risk across the major sectors amid depressed markets.
In the bulk carrier sector weak earnings have persisted through 2016, causing non-delivery to rise to 50% in dwt terms in the year to date, up from 42% in 2015. Although tanker non-delivery has fallen from 32% last year to 23% in 2016 so far, due in part to firm earnings in the first half of the year, the biggest change has been in the boxship sector, where non-delivery has risen from 13% in 2015 to 39%, following a sharp decline in rates across most ship sizes.
Weak markets have also added to owner risk, with many owners negotiating delays to the delivery of vessels, particularly bulk carriers.
Singapore's gas carrier owner BW LPG has further expanded its fleet as it took delivery of the first of four Very Large Gas Carriers (VLGCs) in its newbuilding program from Daewoo Shipbuilding and Marine Engineering (DSME).
Named BW Magellan, the new VLGC measures a length of 226 meters and a width of 36.6 meters.
With a capacity of 84,000 m3, the 51,600 dwt ship has a market value of US$66.2m, according to data provided by VesselsValue.
With the latest addition, BW LPG owns and operates a fleet of 42 vessels with a total carrying capacity of over 3.1 million cbm.
The fleet comprises 37 VLGCs and five owned LGCs.
What's more, the company has five VLGC newbuildings under construction.
A double naming ceremony for Pomor and Normann, the two icebreaking offshore vessels built for the Russian shipping company Femco, will take place at Havyard Ship Technology in Norway on Oct. 15, 2016.
According to the shipbuilder, the two vessels will operate under a contract with Exxon Neftegas on the oilfields outside of Sakhalin, Russia. In order to get there, the vessels will embark on a voyage through The Northeast Passage.
Both ships, featuring a length of 86.7 meters and a width of 19.5 meters each, are constructed according to DNVs ice class notation Icebreaker Ice-10 , with classifications demanding capabilities of breaking up to one-meter-thick, one-year-old ice.
The two icebreakers are constructed with class notation Winterized Cold (-30). As such, these vessels are constructed for work in temperatures as low as minus 30 degrees Celsius without freezing up. The icebreakers' safety equipment and environment are protected against ice and frost at shielding, incorporation and electric heating or melting.
Additionally, ships are fitted with engine power effective enough to go full out winterization and anchor handling operations at the same time, according to Havyard Ship Technology.
Each of the two icebreakers will be able to accommodate up to 53 persons.
Aleut, the first ship in a series of three icebreaking offshore vessels, was delivered last autumn.
Due to depressed dry bulk market conditions, which triggered a slump in bulk carrier contracting and in turn led to the newly slim orderbook, which hit a nine-year low at the start of September, the bulk carrier fleet expansion is expected to ease in the coming years, according to Clarksons' Shipping Intelligence Network.
A dearth in ordering has seen the bulk carrier orderbook shrink fairly consistently since mid-2014.
By September 2016, the bulker orderbook had shrunk to 108.4 million dwt, down 19% since the start of the year. This was equivalent to 13.8% of the fleet, down from 17.2% at the start of 2016.
Overall, the bulker orderbook is at its slimmest for almost a decade, despite a 'non-delivery' rate of over 50% in the year to date, according to Clarksons.
Capesize contracting had been in fairly steady decline since the start of 2014, until 30 Valemax 400,000dwt orders were placed in early 2016, which units currently account for 11% of the total bulker orderbook in terms of capacity. Nevertheless, by the start of September 2016 the Capesize orderbook had contracted to a three-year low of 47.1 million dwt, also supported by a 10% YoY rise in Capesize deliveries in January-August 2016.
Meanwhile, by the start of September, the Panamax orderbook shrank to a nine-year low of 21.4 million dwt, driven by the consistent slide in contracting activity in the sector, including for Kamsarmax designs, in recent years.
In 2015, Panamax ordering totalled 6.6 million dwt, down 49% on an annual basis. This was followed by a near total collapse in reported Panamax orders in the first eight months of 2016.
Similarly, newbuild contracting activity has slumped in the smaller Handymax and Handysize sectors, in recent years, before dropping to an almost standstill in January-August 2016. This saw the Handymax and Handysize orderbooks shrink to 28.4 million and 11.5 million dwt respectively by the start of September 2016, representing a 10-year low in both cases.
Clarksons added that, at the start of September, only 60 million dwt, or 55% of the bulk carrier orderbook, was scheduled to be delivered after the close of the current calendar year. This compares to 67% in September 2015.
"The slim orderbook is currently expected to contribute to bulker fleet growth of 2% in full year 2016 followed by around 0.8% in 2017; this compares to average annual growth of around 9% in the period 2010-15," said Clarksons.