S&P, Newbuilding and Demolition Update (October 27th, 2013)

This isn’t the time to be shy!

Another week and another step toward a cyclical recovery in shipping!  No doubt!  At least that’s what the present market activity implies.  A year ago, even six months ago, it seems that there were some doubters about the recovery; for now, if there are any doubters, they are sure very low profile.

Let’s start with the newbuildings: this past week, it has been reported that Maersk Tankers has placed an order for ten (10) product tankers. The order is yet to be confirmed, but this is just another ‘massive’ order in the product tanker sector.  Navig8 Product Tankers also placed an order for four coated aframax tankers (LR2) at Guangzhou S.Y., at $48 mil apiece, and d’Amico another order for four handy products (MR1) at Hyundai Vinashin at a reported $31 mil each.  Approximately seventy (70) MR1 and MR2 tankers were ordered in each calendar 2011 and 2012, but year-to-date about 120 such vessels have been ordered.  As a matter of comparison, the world fleet of MR1 and MR2 tankers stands at approximately 1,425 double-hull vessels with 35,000 to 60,000 dwt and built after 2000 (with the outstanding orderbook at about 250 vessels.)

In the MR2 market still, it has been reported that the good vessel MT „ARISTARCHOS” (52,000 dwt, 2013, HMD) was sold at $38 mil, a definite step up on pricing in this market.  The more interesting point on this sale is that buyer and seller are other than Scorpio Tankers, the prime mover of this market in a while and active player in the resale market (besides their massive newbuilding program); there has been criticism in the past that Scorpio on purpose were paying up for resales to pull up the market, which would reflect favorably on their existing fleet and move (their original cost basis in this market is just below $33 mil per vessel.)  With the sale of MT „ARISTARCHOS” it seems that there is at least another buyer who does have conviction in the market; but again, we suspect that a higher price perhaps was justified for the vessel to be chartered to a premier credit oil company and then sail off to an MLP. In still same asset class, the pump-room design MT „WAWASAN CELESTE” (45,750 dwt, 2006, Minami Nippon) was reported sold to publicly traded Ardmore Shipping at $20.6 mil (vs. sale of sistership vessel in September of MT „TWINKLE EXPRESS” at $20 mil.)

And just to make it clear that asset prices are not just moving higher, but also on en bloc deal basis and on the back of funding form institutional investors and with a focus for the capital markets – whether Oslo or New York, Hafnia Tankers was successful at raising $235 mil from a private placement in Oslo, and promptly confirmed the purchase of ten product tankers from co-patriot J. Lauritzen.  The four LR2 tankers ordered by Navig8 Product Tankers – mentioned earlier, were on the back of a second private placement by the company in Oslo raising an additional $150 mil ($170 mil were raised during the first phase.)  Eletson Holdings (Kertsikoff) created a $700 million JV with Blackstone (Tactical Opportunities fund) and intend to place orders for eight semi-refrigerated gas tankers. And just in case one thinks that the US markets are playing second fiddle to Oslo, American Petroleum Tankers, a Jones Act Blackstone-sponsored tanker company has filed for an IPO with the SEC intending to raise about $170 million for the purpose of repaying debt.

On Sunday, the Financial Times reported on the private equity and institutional investors looking to invest in shipping; the transactions mentioned above are just the top line major transactions that register on the radar; there are several more transactions on smaller scale and on project basis acted upon institutional investors that are purposefully are kept off the radar.

MV „BIG WAVE” - A vessel aptly named for our times

MV „BIG WAVE” – A vessel aptly named for our times

And, not to think that bulkers are falling behind, it has been reported that the capesize vessel MV „ATLANTIC BRIDGE” (177,000 dwt, 2005, Namura) was sold at $27 mil; it’s tough make an assessment on the ‘strength’ of the price as the buyers were also her charterers (Cargill International) where obviously information has been symmetrical, but the vessel was also on charter till 2015 at about $16,000 per diem (Cape FFA curve for CAL14 and CAL15 slightly above $17,000 pd.)  However, the panamax bulker MV „ENERGY ROSE” (70,000 dwt, 1997, Sanoyas) was sold to Greek buyers at just below $10 mil, a definite sign that the market for dry bulk is strengthening as well (please see our previous report for additional sales in this segment.)  There are also rumors that MV „HOUHENG 3” (180,000 dwt, 2012, HHIC-PHIL) is under firm negotiations at $52 mil, a very firm price (despite the continued softening in the cape freight market.)  The handysize bulker MV „VOGE FELIX”  (24,300, 1997, Hakodate) was sold at $6 mil, having failed last month at similar levels.  The bigger handy MV „TREMONIA” (28,100 dwt, 2001, Bohai) was sold at mid $7-mil-range, while her exact sistership MV „HIBERNIA” was sold last month at $7 mil, another solid sign of an improving market. And of course, players in the dry bulk market could not satisfy themselves with secondary market alone!  Alpha Tankers & Freighters of Greece has been rumored to have firmed an order for two high-spec capes at Hyundai Mipo with 2015/2016 deliveries at $56 mil, a definitely gutsy call in the cape market.  [However, this is one of the few Greek owners with really long-term view of the market, and in gesture of getting closer to strategic players in the market, the company established Pantheon Maritime Services in Singapore to commercially manage the fifteen-vessel-strong capesize fleet]. Fredriksen’s Frontline 2012 in the same market and expected delivery proceeded with an order of two capes at New Times at about $50 mil each.

No doubt that our summary report does not imply any signs of market depression, distress or navigating under ‘mackerel skies’.  But, as they say, things are great until they are not.

© 2013 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

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