Tanker Sale & Purchase (S&P) Update

Posted on August 23, 2015 by Karatzas Marine Advisors & Co.

In an effort to be more efficient and focused, from now we will report on this blog only pertinent transactions per market segment and asset class for s&p (sale & purchase market) that have occurred in the last couple of weeks. Transactions and transaction details in shipping are never as transparent and clear-cut as many an analyst or an appraiser may wish to think; having the benefit of time-lapse and fact-checking, we believe that reporting more accurately sales vs reporting them prompter is of greater service to our readership. Also, our reporting will be more structured by market segment and asset class going forward. Transactions will be purely reported herewith; commentary on market conditions and trends, discussion on transactions and developments and their significance will be posted at our sistership blog, Shipping Finance by Karatzas Marine.

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Despite the softening of tanker freight rates in the last two weeks, one has to be humbly impressed by the performance of the tanker sector over the last twelve months, and accept that volatility in the shipping industry is hard to accurately model: VLCC spot rates (the group most volatile but with the easiest-models-to-build of the tanker market) have moved from $33,000 pd this time last year to above the $60,000 pd mark on several occasions in January, March and May this year, flirted teasingly with the $90,000 pd mark three weeks ago, and now have come full circle to appr. $34,000 pd. It has been a great market of sorts, definitely in comparative terms to dry bulk and containership markets, but still, some people have been worrying whether the structural recovery of the sector is still intact: the demolition pace has slowed down, newbuilding activity has increased, but still the time lapse of the deliveries (about a two-year-delay) does not seem to provide much comfort or confidence: tanker stock prices have not outperformed the broad market, to put it liberally, and most of the tanker stocks trade barely at or below NAV at the very best (the implied valuation of their tankers-on-the-water), while tanker IPO hopefuls waiting in the wings, and waiting… and tanker vessel prices really have not justified the buy-low-sell-high asset play strategy of many a shipowner.

The sale and purchase market has quieted down in the last two weeks, partially due to peak vacation season and also due to the chilling effect of a deflating tanker freight market. Besides the rather un-inspiring prices achieved, several of the sales have been controlled by financial investors, including private equity funds. The involvement of private equity funds with shipping has drawn much attention and we have written on the topic in the past; however, seeing York Capital, Wayzata Investments and Apollo, among others, selling vessels – and not shares at IPOs as per original game plan, and sales of vessels in a ‘hot’ market and at prices that do not seem to come remotely close to highly advertised double-digit expected returns of the private equity…but again, barely a week passes with funds folding due to poor performance because of commodities, currencies, emerging markets…at least, shipping has not sunk a fund yet, at least formally.

In the VLCC market, Tufton Oceanic has disposed of MT ‘Sasa’ (300,000 dwt, Hitachi Zosen, 2001) at $40.5 mil to Russian buyers, while Windsor Petroleum has sold to US-based Ridgebury Tankers four sistership vessels at a value-oriented price of $150 mil for the package: MT ‘British Purpose’, MT ‘Progress’, MT ‘Pride’ and MT ‘Pioneer’ (all ca. 305,000 dwt, Samsung Heavy Industries, 2000/2000/2000/1999).

House-flag in the news… Karatzas Photographie Maritime

The Suezmax market has been more active in the last month, reflecting a more fragmented market but also a stronger freight market. The transaction that stood out was the sale of the Veritable fleet by Principal Maritime, which had been sponsored and funded by Apollo; one set of six sisterships built at Samsung Heavy Industries MT ‘Princimar Courage’, MT ‘Princimar Pride’, MT ‘Princimar Integrity’, MT ‘Princimar Grace’, MT ‘Princimar Hope’ and MT ‘Princimar Promise’ (158,000 dwt, Samsung H.I., 2013 / 2012 / 2012 / 2011 / 2011 / 2011, respectively), one set of two-chinese sisterships built in 2010, MT ‘Princimar Joy’ and MT ‘Princimar Strength’ (156,000, Rongsheng, 2010), one set of Japanese built sisterships MT ‘Princimar Confidence’ and MT ‘Princimar Loyalty’ (150,000 dwt, Universal, 2006) and two one-off Korean vessels, MT ‘Princimar Truth’ (160,000 dwt, Hyundai Samho, 2007) and MT ‘Princimar Faith’ (160,000, Daewoo (DSME), 2005) at $662 mil, with payment mostly in cash but also $50 mil in stock. There are several angles to see this transaction since it is estimated that the sellers realized more than $100 mil loss from the sale (estimated cost basis of ca. $770 mil), and also that the sale price was NOT the highest in this auction-like sale transaction. The company has attempted for an IPO late last year but there was not sufficient demand / pricing to proceed then, but it’s to be debated whether demand would had been enough for an IPO now in an allegedly much stronger market, at least as much as freight is concerned. Russian tanker company Sovcomflot has sold their 2003-built Suezmax tanker MT ‘SCF Valdai’ (159,000 dwt, Hyundai Heavy, 2003) to Greek buyers at $35.5 mil. Vintage Suezmax tanker MT ‘Front Glory’ (149,500 dwt, Mitsui Shipbuilding, 1995) was sold by the Fredrisken Group to Far East buyers at $16 mil, almost twice her present scrap value (21,733 ldt). Similarly aged Suezmax tankers (with shuttle-tanker conversion) MT ‘Mattea’ (127,000 dwt, Samsung Heavy, 1997) was sold at $11 mil to undisclosed buyers, rumored Greeks, and MT ‘Kometik’ (126,500 dwt, Samsung Heavy, 1997) was sold at $8 mil to Andromeda Shipping in Monaco. Sisterships MT ‘Cape Bata’ and MT ‘Cape Bowen’ (160,000 dwt, Samsung Heavy, 2003) were sold by KG-funds in Germany to Tufton Oceanic in the UK at appr. $33 mil, each.

A calm tanker market… Karatzas Photographie Maritime.

The aframax tanker market has been rather subdued with the exception of a financial transaction for eight coated LR2 tankers by Navig8 to Chinese buyers at $300 mil; given that there is bareboat back for ten years to sellers / Navig8 little can be said for the below-market ‘sale price’ which can be attributed to the Chinese pedigree of the vessels or Navig8’s persisting rumors abut being able to fund their capex gap for their newbuilding program; vessels were: N/B CSSC Offshore Marine Guangzhou H-057 to H-061 and Hulls H-067 and H-068 (112,000 dwt, CSSC Offshore Marine Guangzhou, 2016/2017); vessels names are MT ‘Navig Gallantry’, MT ‘Navig8 Gauntlet’, MT ’Navig8 Goal’, MT ‘Navig8 Grace’, MT ‘Navig8 Gratitude’, MT ‘Navig8 Guard’, MT ‘Navig8 Guide’ and MT ‘Navig8 Gladiator’. Buyers / lessors are affiliated with the shipbuilding group.

In the MR2 tanker market, a couple of interesting transaction with sellers based in the landlocked Upper Midwest in the USA: Wayzata Investment Partners have sold two product tankers MT ‘Halstead Bay’ (51,000 dwt, SLS Shipbuilding, 2007) at $23 million and MT ‘Maxwell Bay’ (51,000, Guangzhou SY Intl, 2013) at $30 mil, to Torm in Denmark. CarVal Investors have sold sisterships MT ‘Harbour Star’ and MT ‘Super Star’ (51,000 dwt, STX SB (Jinhae), 2008) to Target Marine in Greece at $24.5 mil, each. Tankerska Next Generation has sold two 2015 resales at SPP at $38.5 mil, each to Cardiff Marine in Greece (SPP Hull 079/080, SPP, 2015). York Capital in the US has sold their interest in Hyundai Mipo Hull 2473 (51,000 dwt, HMD, 2015) at $37.5 mil to Scorpio Tankers. Finally, Eletson Corporation of Greece has sold vintage tankers MT ‘Kandilousa’ and MT ‘Serifos’ (46,700 dwt, HHI, 1995) at $8.5 mil.

Overall, the market has not been as busy as it seems with most of the transactions being of ‘corporate’ matters instead of the traditional s&p (sale & purchase). Whether there is no strong conviction from operating buyers to step up on buying or lack of capital constrain their buying appetite, financial players seem to be getting ever more obvious; not as much as with buying, but selling is welcome news as well.

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Crude Oil Tanker Sale & Purchase (S&P) Update

Posted on July 5, 2015 by Karatzas Marine Advisors & Co.

Tankers: Think Counter-cyclically!

The tanker market has been positively surprising shipowners and investors so far this year, and 2015 is turning out to be the best year for this segment of shipping in a long while;, since 2008, to be accurate. It’s hard to fathom that just this time last year, VLCCs and Suezmaxes were barely touching $25,000 pd in the spot market, while nowadays these very types of vessels almost reach thricely the levels of last year.

Strong freight rates are always welcoming news, no doubt. On the other hand, an investor has to look forward and trying to decipher present trends that would matter in the future. One of the noticeable things of the present tanker market is that while freight rates are strong, asset prices have not improved correspondingly. Typically when freight rates are very strong, asset prices, with a short lag, typically follow the market higher: everybody wants to buy in a hot market, and the lucky owners for ‘hot’ tonnage are looking for a premium to part company with their vessels. However, in the present market, asset prices – at least for certain segments of the market – have not improved. Is this an omen of changing trends in the market, a new paradigm, or indicative of a market where ‘hotness’ has not been given proper consideration, for the right or wrong reasons.

Owned by a private equity fund, tanker MT ‘Orwell’ Image Credit: Karatzas Photographie Maritime.

In a previous article we mentioned the volatility smile, where ‘middle aged’ tonnage seems to be completely out of favor, and thus comparatively undervalued. And we can ignore the market of 15+ year-old tankers, as this is a market with its own dynamics. However, modern tonnage, allegedly the sexiest tonnage of all, has not behaving too strongly either. Typically, Wall Street analysts love modern tonnage given that vessel daily opex is lower for modern vessels and visibility of earnings are a tad better, and thus the positive bias from financial buyers for modern tonnage; on the other hand, cash-rich buyers of vessels with access to terminals and end users only pay lip service and show incrementally little interest for modern tonnage at full price – they would rather buy into a value proposition rather into sexiness. Accordingly, a great deal of sale and purchase transactions have been concentrated at the opposing ends of the spectrum leaving for a gap in the middle.

The VLCC market has been fairly active with Euronav (ticker: $EURN) acquiring four VLCC resales from Greece’s Metrostar at $98 mil each with options for additional tonnage (N/B Hyundai HI (Gunsan) Hull Nos 2725, 2726, 2727, 2728, 300,000 dwt and deliveries 2015 and 2016). Tsakos Energy Navigation also acquired two resales from US-based private equity fund two VLCCs (300,000 dwt, Hyundai Samho Hull Nos S779 and S780 with 2016 delivery) at $97 mil each. Shinyo International after a long respise has been active again in their favorite sector with the acquisition of three modern VLCC tankers MT ‘New Founder’, MT ‘New Medal’ and MT ‘New Coral’ (297,500 dwt, Shanghai Jiangnan Changxing Sb/China, 2008/2009/2010, respectively) at $245 million. Greek reference account Thenamaris has acquired MT ‘DS Vidonia’ (306,000 dwt, Daewoo, 2006) from DS Shipping at $57.5 million. Ridgebury Tankers based in the USA have acquired four older VLCCs MT ‘Pioneer’, MT ‘Progress’, MT ‘Pride’ and MT ‘British Purpose’ from Windsor Petroleum (1999/2000/2000/2000, 306,000 dwt, Samsung Heavy) at $150 mil, which amount was from equity freshly sourced from the buyers. While the age of the tonnage may rise eyebrows for financial buyers, it’s worth noting that Ridgebury were already the managers of the vessels and the sale of the vessels via the control of the bondholders after Windsor Petroleum went out of business.

In the Suezmax tanker market, AMPTC has reported sold MT ‘Zallaq’ (153,000 dwt, Hyundai Heavy I., 2001) at $23 mil to clients of Avin in Greece; it is understood that the vessel is due drydocking in the second half of this year, which partially explains the softer-than-expected pricing. It is reported that US-based private equity fund CarVal Investors has sold Resale Hull No N/B New Times SB Jingjiang 0315819 (155,000 dwt, New Times, 2016) to clients of Dynacom Tankers in Greece at $59 million; it seems that the sellers have ordered this vessel, alone, in January this year at $65 mil, and less than six months later have sold at almost 10% loss; a change of heart, unless the ordering of a Suezmax tanker was their ‘option’ to enter into this market segment. On older tonnage, Vista Shipping has sold their Suezmax tanker MT ‘Pride’ (150,000 dwt, Mitsui Shipbuilding, 1993) at a scrap related pricing of $12.5 mil.

The aframax tanker market seems to be the market segment in the crude tanker market which has least benefited from the present surge in freight rates, and it has shown the least market activity, comparatively speaking. China seems to be replacing the US as the major, solid buyer of crude oil in the international markets since the emergence of shale oil, and transporting oil to China in Aframax tankers is not as cost efficient as using larger tankers. In the middle of June, Blue Lines Shipping has sold the oddly-sized Aframax tanker MT ‘BLS Advance’ (85,000 dwt, Sasebo, 2002) at appr. $20 mil to clients of Greece-based Avin International. Similarly aged MT ‘Kuban’ (106,000 dwt, NKK Corp, 2002) was sold by Novorossiysk Shpg. to Soechi Lines in Indonesia at just excess of $17 mil. It’s worth noting that Soechi Lines bought a similar vessel in many respects (size, shipbuilder pedigree, etc) MT ‘Hellespont Tatina’ (105,000 dwt, Sumitomo S.B., 1999) in September 2003 at below $10 mil, and less than two years later, asset pricing in the segment has proven many a buyer right. The still Japanese-built aframax tanker MT ‘Texas Star’ (115,000 dwt, Sanoyas, 2003) was sold by Atlas Maritime in Greece to Yinson Holdings in Malaysia at $28 mil; it had been reported at the time that this tanker then named MT ‘Herm’ was bought by Atlas Maritime in November 2012 at just excess $18 mil, representing a nice asset play transaction for the company.

Tanker ‘Princimar Americas’, evocatively named, downstream the Houston Ship Channel. Image credit: Karatzas Photographie Maritime.

The tanker market had been weak for quite a few number of years, with many shipowners trading spot in the sector having reached the limits of their tolerance. Now that the market has turned around, there is renewed interest in the sector; some of such activity was to be anticipated as pent-up ‘demand’. However, while still the interest is mostly centered around modern tonnage and M&A activity, a perfunctory review of the transactions mentioned in this report clearly points for the sectors with greatest potential: ‘sexiest’ segment of the moment doesn’t make most profitable trade.

Probably, ‘think counter-cyclically’ is a good starting point when pondering shipping!

S&P, Newbuilding and Demolition Update (September 27th, 2014) – Tanker Market Focus

Posted on September 27, 2014 by Karatzas Marine Advisors & Co.

Since our last week three weeks ago, crude tanker rates have softened with VLCC and Aframax average spot rates at approximately $12,000 pd and Suezmax tankers at approximately $16,000 pd, on the back of weak trading activity. At such levels, crude tanker spot rates stand substantially below the yearly average, and it has to be noted that present VLCC rates are very close to operating break even and far below levels required to pay for the vessel’s financial cost as well. Despite the weakness in freight rates, there has been meaningful activity in the sale & purchase market at strengthening prices, as optimism keeps building that the crude tanker market is well into a structural market recovery, and thus the present weakness in the market is only seasonal. A recent article on Reuters that pressures are building up in the US on allowing crude oil exports can only interpreted as a positive development for the crude tanker markets.

VLCC Tanker ‘Samco Sundarbans’ sold in en bloc transaction to DHT Holdings (Image source: Samco Shipholding)

Double Hull Tankers DHT Holdings (NYSE: DHT) has finalized the acquisition of Samco Shipholding Pte Ltd in Singapore with ownership of seven VLLC tankers with average age of 4.5 years at approximately $322 million; DHT Holdings also acquired in the same transaction and remuneration Samho’s 50% interest in Goodwood Ship Management. The vessels are built at Hyundai Samho and they are MT „Samco Sundarbans” and MT „Samco Taiga” (2012, Hyundai Samho, 318,000 dwt), MT „Samco Amazon” and MT „Samco Redwood” (2011, Hyundai Samho, 318,000 dwt), MT „Samco Europe” and MT „Samco China” (2007, Hyundai Samho, 318,000 dwt) and MT „Samco Scandinavia” (2006, Hyundai Samho, 318,000 dwt). This being a corporate transaction rather than a pure asset acquisition, there have been additional considerations, although DHT Holdings appears to be paying approximately $50 mil below the nominal market value of the vessels. On pure asset sales, BW Maritime of Singapore has sold MT „BW Nyssa” (2000, Daewoo, 299,500 dwt) to Smart Tankers in Greece at $29.5 million, probably at a $2 million premium over the market. The price reveals strong buyer’s optimism as the vessel is due drydock and special survey in January 2015 at a cost of several million dollars while she will be turning the dreaded 15^th anniversary from delivery that puts her on the second priority list of many charterers. The vessel was reported in January 2014 as tied up to a conversion project at $32 million purchase price which transaction apparently has not materialized.

In the Suezmax tanker market, MT „Aegean Navigator” (2007, Hyundai, 159,000 dwt) has been reported sold at $48 million to undisclosed buyers, while other reports state en bloc deal along with sistership MT „Aegean Horizon” and MT „Aegean Dignity” and MT „Aegean Angel” (2004, Hyundai, 159,000 dwt) to clients of Teekay (likely Tanker Investment Limited) at pricing to be confirmed.

In the Aframax tanker market, there has been the sale of coated tanker (LR2) MT „SC Laura” (2001, Dalian New Yard, 109,000 dwt) at $14.5 mil by KGAL to South East Asian buyers rumored to be Indonesians. The price seems to be softer than average which is mostly attributed to the Chinese-built of the vessel and the nature of the seller / transaction, while a week ago, similar tonnage from the same shipbuilder achieved $23.5 mil collectively for MT „Beach 3” and MT „Beach 4” (2000/1999, Dalian New Yard, 109,000 dwt). The Japanese-built vessel MT „SC Sara” (2001, Sumitomo, 105,500 dwt) was sold at $17 million earlier this month to Singaporean-based buyers (Zodiac Maritime), a noticeable ‘premium’ for the Japanese pedigree of the vessel. The still Japanese built MT „Song Lin Wan” (2002, Namura, 106,000 dwt) has been sold by CSDC at $19.5 million to again Zodiac Maritime. For more modern tonnage, it has been reported the sale of Daewoo Hulls 5402 and 5403 with 2015 delivery for coated tankers (LR2) 115,000 dwt at $57 million each to US-based buyers.

As we have mentioned in the past, despite the increased buying interest in the crude tanker market, buyers keep being very price sensitive with strong preference for Japanese or Korean built tonnage, and usually for vessels built in a year starting with ‘2’ getting more of the attention. Given that most banks would not provide mortgage financing for older than ten-year-old tankers, independent tanker buyers paying cash have been very opportunistic on their approach, and any urgency in the sale or other transaction handling mishaps or limitations from the sellers usually end up costing a lower sale price.

The products and chemical tanker market has been selectively active as well, with focused interest in the coated panamax (LR1) tankers and MR pumproom design tonnage. The LR1 tanker MT „Holy Victoria” (2008, Minami Nippon, 75,000 dwt) has been sold at $29 mil to Greece based Prime Marine; the smaller and older MT „Moonlight Venture” (2006, Sumitomo (Yokosuka), 61,000 dwt) achieved $22.5 million by unnamed Greek interests.

BP’s MR2 Tanker ‘British Harmony’ at anchor (Image source: shipspotting)

The MR2 tanker MT „St. Nikolai” (2005, Onomichi, 47,000 dwt) achieved $17.5 million by Indonesian buyers (technical details on the vessel are conflicting, but it seems she’s ‘pumproom design’ which would make her price in line with the market). The older but seemingly more sophisticated tanker MT „High Nefeli” (2003, STX, 47,000 dwt) achieved $15 mil by Greek buyers (Benetech Shipping). MT „British Harmony” and MT „British Chivalry” (2005, Hyundai Mipo, 47,000 dwt) were sold by BP at $19 each with bareboat back to the sellers for two years at undisclosed rate ($8,000 pd bareboat rate some wishfully well-placed reports mentioned) on an operating lease basis. MT „Topaz Express” and MT „Diamond Express” (2009, Minami Nippon, 45,700 dwt) were sold at $22 million each by Daichi Chuo to Island Navigation in Hong Kong. The older MR2 tanker MT „Hellas Progress” (1999, Hyundai Heavy, 46,000 dwt) has been reported sold by Latsco (London) Ltd. to West African interest at $10 million. For modern tonnage, publicly traded companies have also been active with acquisitions in the sector with Scorpio Tankers (Nasdaq: STNG) acquiring from Ceres Hellenic SPP Hull No S5126 on resale basis (2014, SPP, 50,000 dwt) at $37.10 million. Aspiring to soon to file for a public listing, Singapore based Navig8 acquired at $41 million each six MR2 tankers from Wilmar MT „Polaris” (2014, Hyundai Vinashin, 49,000 dwt) and sistership Hull Nos S401, S402, S403, S404 and S405 (2014/2015 delivery, Hyundai Vinashin, 49,000 dwt); the Scorpio acquisition seems to be in-line with prevailing market levels while the Navig8 acquisition seems to be a 10% premium to the market, which is especially interesting given that the shipbuilder is not considered top tier name.

Euronav’s ULCC ‘TI Europe’ taken for storage purposes by China’s Unipec at reportedly $25,600 pd for six months. (Image source: Shipspoting)

Crude oil has been trading in contango recently and a number of crude oil tankers have been reported chartered for storage, including Euronav’s 442,000 dwt ULCC MT „TI Europe” taken by China’s Unipec for six months plus options at $25,600 pd. The level of discount for present delivery of the commodity is still weak to justify a massive storage play and absorption of crude oil tanker supply from the market which hopefully would boost freight rates. The recent strength of the US Dollar reflecting the Fed’s statements about increasing interest rates in the US has had a negative impact of commodities, in part causing the contango, but making commodities less attractive as a storage medium, especially in an increasing interest rate (costlier) environment thus putting a limit to the storage play. On the other hand, increased refining capacity by Middle East refineries seems finally to be having a positive impact on larger product tankers (LR1 and LR2), a story hyped to ethereal existence for several years now. There are hopes that finally there will be impact on the market which could improve asset pricing. The waiving of export taxation on certain palm oil gradients by Southeast Asian countries, most notably Indonesia, in an effort to win market share on the world markets in a bumper crop season for palm oil, hopefully will have a positive effect on IMO III / veg oil chemical tankers.

Honestly, shipping can use all the help it can get in improving freight rates by contango and storage, to increasing refining capacity in Middle East, or fiscal strategy to move around record levels of vegetable oils.

S&P, Newbuilding and Demolition Update (August 29th, 2014) – Tanker Market Focus

Posted on August 29, 2014 by Karatzas Marine Advisors & Co.

Since our last report, apologizing-ly more infrequent than we would prefer, the tanker market has been holding fairly well and better in comparison to the dry bulk market. Tanker freight rates have been holding at respectable levels for most of the time year to date, and above operating break-even for most of the sectors and most of the time. Clean product tankers seem to be the weakest link with freight rates well below $10,000 pd (the tremendous ordering and ‘me too’ mentality has finally caught up with the market); on the other hand, gas carriers – especially for long range tonnage, freight rates have been setting new highs on a casual basis – as high as $100,000 pd for certain vessels, on the back of increased trade, increased production and steady demand and constrained tonnage availability, at least at the moment. Mainstream crude tanker vessels have been holding their values surprisingly well, especially for modern tonnage.

China has been increasingly dependent on more crude oil imports: while monthly Chinese crude imports fluctuate based on inventory buildups and refinery expansion, Chinese crude oil imports effectively increased from 4.3 mbpd in October 2013 to 6.1 mbpd in December 2013 to an all-time-high of 6.8 mbpd in April 2014, about 8% growth y/y from 2013Q1. In general, for 2014H1, crude oil tanker rates are at least double the levels from a year ago, with VLCCs and Aframax tankers averaging about $22,000 pd while Suezmax tankers averaging about $25,000 pd in the spot market. Still, these numbers are not terribly healthy and cannot support the cost base of many a modern tanker with high acquisition prices (a VLCC acquired at $100 mil, would need to see close to $50,000 pd in order to support an amortizing mortgage and allow for a single-digit return to investors); again, when these tankers were not making enough money this time last year to pay crewing and insurance, any improvement is godsend. While there are still numerous crude tanker newbuildings on order, in general, the disappointment in the market has spoiled – so far – the appetite for massive orders, and thus the rate of new orders is diminishing at a time when ton mile and demand seems to be holding steady or increasing. The second half of a year is usually more active in movement of crude oil cargoes, thus seasonality is in favor of the market. And looking longer term, crude oil production is projected to increased from about 90 million barrels per diem (mbpd) to 100 mbpd by decade’s end, it has been as reassuring as it can get, given than a couple of years ago nil or ‘negative growth’ was the base-case scenario.

VLCC Tanker MT„Front Comanche”

While in late July 2014, Frontline Ltd (ticker: FRO) opted to compensate Ship Finance International (ticker; SFL) $58.8 million for the early termination of the charter for three VLCCs (MT „Front Opalia”, MT ‘Front Commerce” and MT “Front Comanche” – all built in Japan in 1999) rather than spend more than $10 mil to pass mandatory special survey and drydock (SSDD) for the vessels, and eventually sell the vessels to Sinokor for $23.5 mil per vessel (a slight premium over their scrap value), a still Fredriksen-affiliated tanker company – Independent Tankers Corporation Limited (ticker: VLCCF) has sold the one-year-older VLCC tanker MT „Ulriken” (1998, 310,000 DWT, Samsung Heavy) at $26 million, admittedly a very strong price for her age; the vessel, however, has valid certificates and good survey position till December 2018. Similarly aged VLCC tanker MT „Neptune Glory” (1998, 299,000 DWT, Daewoo) has been sold at a softer price of $24 mil, with class certificates and survey position good till April 2018; this sale allegedly should have been at premium pricing given the ‘subjects’ to conversion to offshore asset for Nigerian tender. Although survey position has been getting to be a crucial factor for pricing crude tanker vessels around their 3^rd Special Survey (15^th anniversary from shipbuilder), pricing seems to be vessel and transaction specific, making vessel valuations a rather customized exercise rather then the output of an algorithm. VLCC tanker MT „DS Victory” (delivered in ‘this part of the century’ 2001, 299,000 DWT, Daewoo) was sold to Greek buyers (NGM Energy / Moundreas) at $33.5 million; vessels built after 2000 are priced and depreciated differently than vessels built prior to the millennium, but the MT „DS Victory” seems to be a very good vessel in terms of cargo capacities, specifications and fuel consumption.

Suezmax Tanker MT „Cygnus Voyager”

In the Suezmax tanker market, Chevron Shipping has exercised the option to acquire three Suezmax tankers already under their long-term bareboat charter for an undisclosed remuneration; vessels were owned by Independent Tankers Corporation Limited (ticker: VLCCF) and were MT „Cygnus Voyager” (1993, 157,000 DWT, IHI (Japan)), MT „Sirius Voyager” (156,500 DWT, 1994, Ishibras (Brazil)) and MT „Altair Voyager” (135,000 DWT, 1993, Ishibras (Brazil)); these are 20+ year old crude oil tankers and it’s extremely interesting seeing a major-oil-company-affiliated shipping company ‘coming close’ to such old tonnage, whether chartering or ownership. It’s even more interesting seeing Brazilian-built tankers acquired by a major-oil-affiliated shipping company given than Brazilian-built vessel do not exactly enjoy high reputational respect, primarily in terms of quality of steel plate. Recent Suezmax tanker sales have been the sale of MT „Huelva Spirit” (160,000 DWT, 2001, Daewoo) to Middle-eastern buyers at excess of $18 mil, and the very strong price of MT „Cape Balder” (160,000 DWT, 2000, Hyundai Heavy) from German KG-house for conversion at a very strong pricing in excess of $18 mil. A very interesting sale at the very strong price of $65 mil has been reported in early August of MT „Cap Isabella” (158,000 DWT, 2013, Samsung Heavy); publicly listed Euronav, as the bareboat charterer of the vessel with profit sharing in a potential sale, has confirmed the sale in a press release and their book profit of $4.3 mil but not the actual sale price; as buyer for the vessel has been reported Polembros Shipping of Greece who are known to be opportunistic buyers and very much price conscious, this sale deserves special consideration especially given that the vessel is not ‘eco design’.

Aframax Tanker MT „Maersk Prime”

In the Aframax tanker market, earlier in August, the Chinese-built in 1998 LR2 tanker MT „DL Iris” (100,000 DWT, 1998, Dalian) was sold at the reflectively very strong price of $10.5 mil. However, the vessel has been sold ‘on subjects’ which demand a premium on pricing; further to it, the vessel had underwent her 3^rd SSDD last year at a cost of $4.5 mil with extensive steel place replacing and installation of heating coils, thus the pricing at $10.5 mil is not much flattering or of excess of scrap value (estimated in the $7 mil range) despite vessel certification validity till 2018. Earlier in the year, MT „Maersk Prime” (110,000 DWT, 1999, Dalian) was sold at $12 mil, thus the sale of MT „DL Iris” is not as appealing as it appears on surface; this market is heavily biased against tonnage built in 1998 and earlier. Two weeks ago, Chinese-built modern aframax tankers MT „DT Providence” and MT „Enrica Lexie” (104,000 DWT, 2008, Shanghai Waigaoquiao (SWS, China)) were sold from Italy’s Fratelli Armatori D’Amato Group to two Greek buyers in individual transactions at $33.5 mil each, which appears to be slightly higher than market levels and implying some market optimism. The easiest found comparable sale of Chinese-built aframax tonnage has been the sale of MT „Valdarno”, MT „Vallesina”, MT „Valbrenta” and MT „Valfoglia” (104,000 DWT, 2009, Hudong Zhonghua) which were sold in January this year at $30 mil each from Montanari to affiliates of Teekay (Teekay Investment Limited, ticker: TIL); it would look that the market has been looking up since January for modern aframax tonnage, although the Montanari tonnage was not well marketed for sale or perceived by buyers in January. The slightly older aframax tanker MT „Ambelos” (105,000 DWT, 2006, Sumitomo) was sold by Greek owners (Samos Shipping) to Pakistan National Shipping Corporation (PNSC) at $33 million, a strong pricing, again from quality Japanese-built tonnage. Just a week earlier, still Japanese-built tonnage MT „Morning Express” (105,000 DWT, 2000, Sumitomo) had achieved the rather anemic price of $11.5 mil from Japanese sellers, but again, more often than not, the way a vessel is marketed for sale affects the sale price indeed, irrespective of market conditions or tonnage quality.

The chemical and product tanker markets have been experiencing a rather calm summer; the freight market has been just acceptable and the orderbook has been a concern for many market players, especially for institutional investors who have had been dominating the market spirits of these sectors in a while. An interesting transaction has been the sale of Hull No 5126 (TBN MT „Amethyst” (50,000 DWT, 2014, SPP Shipbuilding) at SPP Shipbuilding in S Korea from Greece’s Ceres Hellenic Group (Peter Livanos) to Scorpio Tankers (ticker: STNG) at $37.1 million. The price seems to be approximately $2 mil above prevailing market levels, but again, in a becalmed market of freight rates un-expectedly low, one needs a transaction that originates waves or even maintaining the status quo that projections had been built upon.

Handy Chemical / Products Tanker MT „Green Stars”

For smaller chemical tankers, the sale of MT „Green Stars” (36,000 DWT, 2001, Daedong S.B., / IMO III tanker) at $12.5 million has taken place into this rather quiet segment of the market; however, the sale seems to indicate a rather strong market for smaller chemical and product tankers; after all, this market has been under the radar as most emphasis on chemical and product tankers has been for tonnage newer than five-years old and mostly for MR2 tanker of about 50,000 dwt.

Given that summer is seasonally the weakest period of the year for tankers and that this time last year (and the summers before) tankers – especially crude oil tankers – were happy to keep busy at any rate, this summer has been encouragingly robust, so much so as to make many investors believe that tankers are long due their place in the sun, especially since this summer sun has been unduly unkind to the dry bulk market, making any comparisons between market sectors much more favorable.

S&P, Newbuilding and Demolition Update (March 18th, 2014)

Posted on March 18, 2014 by Karatzas Marine Advisors & Co.

Since our last Sale & Purchase report in January, the market has kept an active pace with general all market segments showing signs of life, and certain markets even much more so. The prevailing mode is that the world economy is entering a growth phase and that logically shipping would be the major beneficial of it; actually, a lot of market pundits have come to believe that the worst is behind us in shipping, the bottom of the market behind us as well, and now it’s the last chance to get on the boat before she leaves port.

We have been more skeptical than the average pundit – but we have been known to be of a skeptical nature – and we think that the present wave of enthusiasm may be a tad too much given the overall state of the market, still. Since our last report, we have had the opportunity to travel extensively and catch up with shipowners, charterers, banks, vessel managers, etc Certain markets such as older containerships remain abysmally bad, and several independent shipowners have been very concerned about the outstanding orderbook in every sector. Yes, indeed, independent shipowners have ordered vessels as well, but the majority of the ordering has taken place from financial players who have been riding fully the ‘eco design’ wave; to a certain extent, some of these financial players are the tail that wags the dog (rather than the charterers and cargoes) since they have been known to be placing orders and chasing markets that have been neglected during the present boom.

In the most recent developments, while China still remains that 600-pound gorilla that can move the shipping market with just a thrash of the dragon’s tail, there have been signs that the economy is slowing – despite the recently announced 7.5% official GDP growth for the next year; it’s an absolutely great number, but also absolutely interesting are the news that the Chinese government has been slowly devaluing the Chinese Yuan (CNY), that there has been the first major default of a real estate developer company in China for $500 million un-serviced ‘bond’, and that the shadow banking in China stands at an exorbitant $7.5 trillion dollars or about 85% of Chinese GDP (the numbers from last week’s front page graphic of the Financial Times.)

And just last week, Scorpio executed on a really impressive (risky nevertheless) ‘asset play’ maneuver, flipping their seven VLCC newbuilding orders in Korean yards to a US-based buyer (Genmar and/or Peter G.) for a capital gain of about $50 million for holding the orders for just a few short months; the price per vessel has been $105 million or so, about $7 million higher than the newbuilding orders, and the first time in more than three years that a VLCC changed hands above $100 million (actually more than five years, if one were to count only ‘arm’s length transactions’ where there was no involvement of seller / soft finance.) Believe it or not, there was a bidding war among several buyers for these vessels; all the buyers were sponsored by financial players; we caught several ‘old salt’ shipowners scratching their heads on the acquisition and pricing, and we noticed that although the words ‘VLCCs’ and ‘Fredriksen / Frontline’ are synonymous, ‘Big John’ has been conspicuously absent from all the gerrymandering in the VLCC space; either he knows something that the rest of the market doesn’t or the buyers of the Scorpio VLCCs know something that the market doesn’t know. For sure somebody better know more than the market.

Shipping is beautiful industry, and never boring!

VLCC TANKER MT ‘GENMAR ATLAS’

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