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2013-06-25 11:18:08

The quote of the week at Marine Money’s New York event was without doubt from panelist Harald Thorstein from John Frediksen’s Frontline opining bluntly: “It’s insane to be ordering ships, but you need to order ships to stay in shipping.”
On the same panel, Phillips 66’s Michael Reardon also provided some candor, saying “we’d prefer to be paying good money” in chartering tankers, but noted that P-66, and other charterers, did not set market levels; “…the market drives itself down,” he said. In this context, Reardon stressed the importance of vetting, in an environment where market levels may not be providing sufficient owners with sufficient cash flows for maintenance.
The Marine Money experience, centered around the eponymous three day conference held at the Hotel Pierre, needs to be considered holistically- though certain memorable observations become etched in the collective consciousness.
The theme emerged throughout the conference- regulations, along with emission standards qualifying, and ballast water treatment will cost the industry billions of dollars, which may be provided by non-bank sources. A related and widely talked about tangent- the rationale for ordering “Eco-Ships” generally, with some marquee headlines in product tankers, came up in a variety of contexts; with one defense coming from Oceanbulk’s Hamish Norton, an ex-banker at Lazard and then Jefferies, who pointed out the enormous potential savings with fuel prices remaining high.  
Panelist Mike Reardon had made the important point that tanker scrapping, and subsequent waves of new orders, have been driven by regulations- which may inadvertently assist in “solving” oversupply issues.
The mood at the 2013 conference was enormously upbeat when contrasted with the year earlier event. This year, there was much talk about restructuring, included multiple panels on the subject. Unlike 2012, when the bankruptcy of shipping companies loomed large, this year’s restructuring was a segue into the discussions of private equity (PE).
Essentially, the conference offered the venue for a mating dance between shipowners who could work alongside PE players, who saw the bottom of the cycle as an opportune time to help fill the financing void, along with other “alternative capital”, which could be investors or shipping families. An important case study was presented by Navios Holdings’ Ted Petrone, who described a deal with HSH Nordbank, where Navios takes over a group of problem vessels gaining financing while also bringing in a joint venture partner on the equity side, rumoured to be the family from a large Japanese yard.
One speaker on a restructuring panel Jennifer Box, from Oaktree Capital (a leading PE player in shipping) provided insights on secondary trading in shipping debt- mentioning activity in the debt of OSG and Genco, among others. Box suggested that debt trading for shipping, an illiquid market even on a good day, has developed most readily where companies were already followed by bankers and investors (usually due to a public listing), and that banks trading out of debt are interested in selling to investors “…who might be taking a longer term view of the situation.”
Oaktree’s equity investments, described by colleague Mahesh Balakrishnan, have included General Maritime Corp, and, more recently, a deal with Oceanbulk- privately held (at least for now).

2013-05-29 09:55:28

Ship orders can be used to uncover managers’ perspectives of the industry’s long-term demand and supply balance. Dry bulk shipping companies will often place new orders when future demand is expected to increase more than supply, on the condition that they expect to generate profits with new bulk vessels. Since dry bulk ships usually take one to two years to construct, ship orders are most applicable to long-term investment horizons.
Vessel order update
For the week ending May 17th, the number of dry bulk ships on order as a percentage of existing number of ships rose slightly from 9.06% the prior week to 9.09% this week. While the measure has fallen from its recent high of 9.31% on April 19th, it is encouraging to see that the indicator has not fallen below the low of 8.94% this year, suggesting managers are still optimistic in regards to the long-term prospect of the industry.
During the same week, dry bulk order book as a percentage of existing capacity measured in deadweight (dwt), which includes ships under construction, also rose from the prior week’s 16.50% to 16.55%. However, the overall trend remains down. Falling orderbook is a short-term negative for shipping companies because it suggests industry supply grew more than the number of new orders that shipping companies have placed.
Maintained short run negative and long run positive outlook
As recent data shows, capacity has grown at 7.0% year-over-year, outpacing demand growth. According to Eagle Bulk Shipping Inc. (EGLE)’s first quarter earnings call, shipping rates will likely remain low in the short run. This is negative for shipping companies, such as DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (NMM) and Safe Bulkers Inc. (SB). In the long run, however, the industry should emerge from depressed earnings levels. Several managers have begun taking advantage of low vessel prices in anticipation of higher demand in 2014 and onward.
Diana is best positioned to take advantage of an industry recovery because most of its near-term maturing contracts are settled at current market rates. If shipping rates rise, Diana will be able to capitalize on higher contract rates. If shipping rates fall or stay constant, it has less to lose compared to other firms with more valuable contracts, which provides a favorable asymmetric return to risk opportunity . Investors can alternatively invest in the dry bulk shipping industry through the Guggenheim Shipping ETF (SEA). The ETF performs similar to the Dow Jones Global Shipping Index by investing in large shipping companies worldwide. It has also outperformed other industrial sectors, such as coal and steel, this year.

2013-05-20 09:24:29

Hellenic Shipping Minister Kostis Moussouroulis said here Saturday Hellenic shipowners have recently signed contracts to buy 142 new ships from Chinese shipbuilding companies. The orders, which were signed in April, accounted for more than 60 percent of the recent global orders of Greek shipowners, said the Greek official.
The shipping industry, including shipbuilding, is one of the most important sectors for economic and trade cooperation between the two countries.
In the next decade, China will remain an important global exporter and become an increasingly important importer, according to the minister.
The new orders are the investment of Greek shipowners for the future, said Moussouroulis.
Wang Qi, general manager of Shanghai Waigaoqiao Shipbuilding Co.,Ltd, said Greece has become an important client of China's shipbuilding enterprises.
As one of China's major shipbuilding companies, Shanghai Waigaoqiao Shipbuilding Co.,Ltd has built a total of 67 ships for Greek shipowners in recent years, accounting for about 30 percent of the company's output, Wang said.
Greek Prime Minister Antonis Samaras is on an official visit to China from Wednesday to Sunday. Leaders of the two countries have vowed to boost cooperation.

2013-05-08 09:36:59

Tanker orders can be used to reflect oil shipping company managers’ expectations of future supply and demand. Managers often place new orders when future demand is expected to increase more than supply, on the condition that they expect to generate profit with the investment. Since tankers generally take more than two years to construct, and sometimes up to five years, the metric is often more relevant to long-term investment horizons.
Tanker on order falls just slightly
The number of tankers on order saw the largest increase in 2013 during the week ending April 19th, rising from 136  to 146 ships.When such a large increase is reported within a short period of time, it is natural for the figure to cool a bit as managers reassess future expected demand and supply balance, and hold off from adding new orders. Thus, for the week ending April 26th, the number of tankers on order fell by one vessel to 145.
This is an encouraging sign, given that the number of ships on order fell by three vessels the last time the industry reported a drop in the indicator. As it usually takes about two to three years for the ships to be delivered, a rebound in orders for crude tankers is not a quick fix, but a long-term one. In addition to companies such as Teekay Corp. (TK), Nordic American Tanker Ltd. (NAT), Ship Finance International Ltd. (SFL) and Teekay Tankers Ltd. (TNK), the Guggenheim Shipping ETF (SEA), which invests in major shipping companies worldwide, will benefit from this positive trend.
Fewer construct starts suggest short-term weakness
The decline in the number of tankers on order could be attributable to fewer construction starts as the industry continues to grapple with excess supply and delivery dates for new ships are likely farther out into the future. During the week ending April 26th, the number of ships under construction continued to fell further to 41 vessels.  Thus, in the short-term, tanker industry’s fundamentals may remain weak.

2013-04-24 14:25:18

During the first three months, a total of 286 newbuildings were ordered in global shipbuilding industry, which showed an increase by 20% comparing with the previous quarter (the fourth quarter of 2012), however total amount of orders were estimated to be $12.8bn, representing a 31% drop year-on-year.  
According to Clarkson, orders contracted in March totaled 94 vessels worth $4.4bn and among them, 51% was ordered for non commercial ships. Followings are offshore vessel, accounting for 16% and gas carrier and Ro-Ro ferry, taking 13% each.
Meanwhile, Clarkson’s newbuilding price index stood at 125.6 points as of the end of March, which represents a record-low since February 2004 and a month-on-month decrease of 0.8p with a year-on-year decline of 8%.
By vessel type, the benchmark newbuilding prices of very large crude oil carrier declined by 1.1% last year to $90.5m, which is the lowest level since June 2004 and the ones of Suezmax tanker also dropped by 1% to $55.75m, showing a record-low since February 2004.  
Meanwhile, 36 vessels were reportedly ordered up to March this year for Capesize bulkers in the range of 176,000-180,000 dwt of which the benchmark newbuilding prices increased by 1% to $46.5m during full March.
As for newbuilding deliveries of global shipbuilding industry, 475 vessels of a combined 31.7m dwt were delivered during the first three months of this year, showing a year-on-year 32% decrease in dwt terms.
Particularly, Korean shipbuilders delivered a total of 11.6m dwt in the first quarter, having accounted for 36.4% of total and outpaced Chinese counterparts for the first time since the third quarter of 2009 in terms of deliveries per quarter.
As of the end of March, global newbuilding orderbook stood at 4,471 vessels of 245.5m dwt (90.5m cgt), which represents a 6% of decline in terms of dwt against the end of last year.  
Among them, offshore related vessels, such as FPSO, drillship, offshore supply vessel and etc., accounted for 41% in value terms with 31 FPSOs and 78 drillships having been contracted.
Orderbook of gas carrier (LNG/LPG carrier) reportedly stood at a total of 119 vessels of 9.3m cgt, a record-high since January 2009, accounting for 10% of total orderbook in cgt terms.
Meanwhile, 64 vessels of a combined 3.12m dwt were sent to scrapping facilities in March 2013, showing a slight decline from a monthly average of 104 vessels of 4.7m dwt in 2012 when the demolition activity posted the largest number (1,337 vessels of 58.3m dwt annually with 27.9-year-old in average).
Lastly, a total of 259 vessels of 11.9m dwt (26.2 years in average) were allegedly demolished in the first quarter of this year.

2013-03-22 09:48:21

Among the most common truths regarding the shipping industry is the precarious trade of investing in ships. It'a market which is in constant shift and is subject to so many different types of risk, most of which are highly difficult to quantify and predict. As a result, ship owners have to be highly adaptable and flexible, in order to swiftly follow or even lead the new trends in the market. According to the latest weekly report from shipbroker Intermodal, "we have already seen many old sea dogs going back to their ''old ways'' and while operating your vessel cost efficiently and competitively is very important, it doesn't mean that you will have also taken a path which ensures your future survival in the industry" it said.
Intermodal's analyst, Mr. George Lazaridis noted that "in terms of trade, things have almost turned on their head. In the oil trade we have seen several fundamental changes, with most prominent of these being that of the U.S's gradual shift from net importer to net exporter of crude oil. The change in location of oil refineries has also started to make its mark on the product and chemical tanker trade. In the Gas sector natural gas and petroleum gases have started to make a name for themselves as ''Green Solutions'',creating an ever more complex and flexible trade matrix" he stated.
Lazaridis added that "similarly strong shifts are taking place in the dry bulk sector, as although iron ore and coal still take up a major part in defining dry bulk seaborne trade, we have already started to see signs of a stronger boom in the minor bulk commodities. Commodities such as bauxite, nickel, zinc, tin and lead (to name a few) had also been riding on the back of China's growth than ever before".
Meanwhile, Intermodal's analyst noted that "this changing nature of things is not just limited to the demand side but is also taking place in the supply side. The new Chinese President has already proven his willingness to put strong priority in supporting his country's maritime interests. A good example of this has been the newly brought about merger of four maritime law-enforcement agencies into the State Oceanic Administration (SOA) so as to better facilitate the goverment's coordination on maritime matters. This particular change may well turn out to be of little consequence to the global maritime industry; however it does show a general commitment by the newly appointed leadership to build the country up as a leading maritime power. This will also likely take effect within the ship finane sector as well, and although Chinese banks are still, in many ways, trailing behind their Western counterparts, the ample lquidity at their disposal could be channeled through to support the local maritime community and provide local ship owners with a possible competitive edge" he said.
The analyst's report also mentioned that "in the West, it is still slim pickings out there in terms of finance. This point is something that has been thoroughly conversed in most forums and conferences lately. Traditional bankers have been subtle in revealing this harsh reality, but almost all will admit to not be willing to increase their exposure to shipping while also leaving hints that some may even exit the industry altogether, as the latest Basel requirements makes any further commitments unbearable. Shipping funds and other private equity sources, have been popping up left, right and center picking-up the slack while also taking advantage of the currently high price of financing. As such, in the new shape of things where financing has taken more complex forms and annual return on capital takes center stage, owners will have to also take up the role of financial engineers as well".
He concluded his argument by saying that "all this aforementioned uncertainty and change makes room for a plethora of opportunities for ship owners to take advantage of. I would like to end as such with a famous quote I recently came across from American Author William Arthur Ward which seems very fitting and maritime in nature- ''The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.''

2013-03-18 11:47:17

In the first two months of this year, Greek shipowners turned out to have invested in a total of 20 newbuildings worth $2.186bn.
According to a latest report from Golden Destiny, Greek owners newly ordered six bulkers totalling 790,000 dwt, $141m, and 356,800 dwt of seven tankers worth $204m, two gas carriers amounting to $415m, one liner and two boxships totalling 168,000 dwt, $126m, during January-February period this year.
In January alone, Greek players booked a total of $1.504bn, which includes 307,800-dwt six tankers worth $204m, one 82,000-dwt bulker and one liner.
Meanwhile, total value of newbuilding orders contracted in the world during the first two months of this year is said to be $17.418bn.
As for vessel types, 69 bulkers totalling $1.1bn, 58 tankers worth $2.1bn in total, 25 gas carriers totalling $1.4bn, 23 boxships worth $2.1bn, three car carriers totalling $2bn, etc., have been ordered, Golden Destiny reported.

2013-03-11 13:17:39

Global newbuilding order in February, 2013, was reported to be a combined 1.946mCGT (88 vessels) showing a slight decrease from the previous month.
Accumulated orders up to February were a combined 4.138CGT (190 vessels), which represents an increase by a small margin from 3.936mCGT (232 vessels) compared to the same period last year, in terms of cgt, according to Clarkson.
Korean shipbuilding industry won $1.222bn worth of new orders, a combined 843,000CGT (33 vessels), while China was awarded a total of 28 vessels of 580,000CGT worth $868m.
New orders contracted in February, 2013, by Korea and China, showed a decreasing trend in value terms against January’s 1.876bn and 2.132bn, respectively.
During last month, Korea won orders for MR PC, Handymax PC, LNG carrier, LPG carrier and offshore construction supply vessel while China was placed orders for bulker, VLCC, LR PC, VLGC, AHTS (Anchor Handling Tug Supply), PSV (Platform Supply Vessel) and DSV (Diving Support Vessel).
Both countries were placed orders for PC, gas carrier, offshore supply vessel, however, China won orders also in bulker and VLCC sectors.
Meanwhile, global newbuilding orderbook is said to be a total of 4,499 vessels of a combined 91.194mCGT, showing the lowest level since February, 2005.
Korean shipbuilding industry is standing on 777 vessels of a combined 28.347mCGT which represents an increase from 775 vessels of 28.251mCGT while China is on a decline with 1,827 vessels of a combined 33.134mCGT.

2013-02-27 09:23:06

With most Asian Holidays now a thing of the past, it was only natural that activity in the newbuilding ordering market returned back to normal levels. According to the latest report from Clarkson Hellas, there further reports of business this week and the market continues to deliver a steady stream of enquiry and concluded business. The shipbroker said that "there remains a continued drive of investment into Dry, with speculators taking advantage of a relative stability in values over the last 12 months or so ‐adding credibility to current market levels and a view that we are firmly at the bottom of the market. With berths now being absorbed through 2014 and into 2015, capacity is not as abundant as buyers would like and consequently we are starting to see certain sectors of the market starting to edge pricing up.
In wet, the products story remains resilient, and the MR and LR2 sectors of the market continue to demonstrate good levels of enquiry. Certainly a more active opening to the year than 2012 ‐ how sustainable this will be remains to be seen and no doubt that whatever business is being concluded continues to be at challenging levels for shipyards to accommodate" said Clarkson Hellas.
Meanwhile, in a separate report, shipbroker Golden Destiny said that "in the newbuilding market, the alluring newbuilding prices stimulate investors’ decision for placing new contracts with January ending at higher volume of new orders than January in previous year. Overall, 160 newbuilding orders estimated to have been ordered during January 2013 totalling about 7,5mil dwt, representing a 9% increase from December’s 2012 levels and a remarkable 176% increase from January 2012 levels, when 58 new orders had been ordered with a total deadweight of about 3,5mil tons. In the bulk carrier segment, 35 new orders reported totalling 1,87mil tons, up by 40% from December 2012 and up by 119% year-on-year. In the tanker segment, 24 new orders reported totalling 2,7mil tons, down by 57% from December 2012 and up by 72% year-on-year. In the gas tanker segment, 17 new orders reported, which is up by 70% from December 2012 and up by 240% year-on-year, when 5 new orders had been reported. In the container segment, 14 new orders reported totalling 1,3mil tons, down by 13% from December 2012 levels, when in January last year, no new orders had been reported. Overall, the week closed with 30 fresh orders reported worldwide at a total deadweight of 775,200 tons, posting 67% week-on-week increase from previous week with significant volume of business in the bulk carriers and special projects, with incremental increases from last week’s business, up by 1100% in the bulk carrier and up by 300% in the offshore segment. This week’s total newbuilding business is down by 42% from similar week’s closing in 2012, when 52 fresh orders had been reported, 8 for bulkers, 8 for tankers, 3 for gas tankers, 9 for liners and 24 for special projects. In terms of invested capital, the total amount of money invested is estimated in the region of more than $609,65mil, 23 newbuidling deals reported at an undisclosed contract price" Golden Destiny said.
It added that "in the bulk carrier segment, Belgium’s Bocimar exercised its option for the construction of four more 36,000dwt bulkers at Samjin Shipyard with delivery in 2015. In the supramax segment, Malaysian Bulk Carriers said it has ordered a 56,000dwt bulker as a part of its fleet renewal through its subsidiary Ambi Shipping. The vessel will be built at Mitsui & Co, Japan at a newbuilding cost in the region of $26mil for delivery from 1 January to 30 June 2015.In the ultramax segment, Sinotrans of China placed an order for four 64,000dwt bulkers for the construction of two units in Chengxi Shipyard of China and the other two in Guangzhou Huangpu of China. The contract includes an option for four more vessels, but it still has not finalized. In the capesize segment, Norwegian owner, John Fredriksen is said to be in talks with Dalian Shipbuilding Industry of China for the construction of up to eight capesize newbuildings including options. In addition, industry sources suggest that Greek owner, Marmaras Navigation is said to place an order for the construction of three 180,000dwt vessels, plus an option for three more, with delivery between late 2014 and 2015" Golden Destiny said.
It concluded by mentioning that "in the tanker segment, Central Mare of Greece placed an order for the construction of a product tanker 49,000dwt at Hyundai Vinashin with delivery in 2014.
In the gas tanker segment, Malaysia's state-owned shipowner MISC has issued a tender to shipbuilders for the construction of a minimum of four LNG carrier newbuildings with a possibility of ordering up to eight. MISC, whose parent company Petronas, added that one of the LNG carriers will be used to serve Petronas future requirements for its new LNG production projects at Kanowit gas fields off Bintulu. It is widely believed that the acquisition of these new LNG carriers is to support Petronas future project requirements.

2013-02-20 09:25:33

“Regarding new order and orderbook, Chinese shipbuilders are placed at a competitive disadvantage compared to Korean and Japanese builders,” said Park Mu-Hyun, an analyst at E*Trade Securities of Korea.
He said that in terms of orderbook by country, China exceeds its rivals, Korea and Japan, however, as for  orderbook by shipyard, Korea secures 34 vessels of a combined 2.82mDWT, Japan stands on 13 vessels of 980,000DWT and China has 12 vessels of 700,000DWT. According to Park, there are 23 shipyards in Korea, while 56 in Japan and 157 in China.    

Considering orderbook by each shipyard, Park said that Hyundai Mipo Dockyard of Korea secured the largest orderbook of 128 vessels and also stressed that a shipyard with bigger orderbook is more excellent one.

The analyst also pointed out that for the past three years, Japan has moved further ahead of China in terms of new order record by shipyard.

He added that, “New order perspective is the most important factor in shipbuilding industry.” “China, especially, has shown to leave behind Korea and Japan in competition for commercial ship. Also, serious delivery delays seen from Chinese shipyards lead us to a conclusion that Korean shipbuilding industry is the most positive in gaining new orders."

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