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Source:Golden Destiny

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.

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.

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.”

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.

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