S&P, Newbuilding and Demolition Update (November 17th, 2013)

Posted on November 17, 2013 by Karatzas Marine Advisors & Co.

A week before Thanksgiving in the US, and with many reasons to give ‘thanks’ for shipping’s performance in the last few months, the week was dominated by news that banks have been selling shipping loans. The Lloyd’s Banking Group sold about $500 mil in shipping loans, which sale seems to be part of their overall, systemic strategy of divesting their shipping portfolio. However, two other transactions for the sale of shipping loans made the headlines, with the Royal Bank of Scotland (RBS) selling their total exposure of about $720 million loans on publicly traded Eagle Bulk (EGLE), and DNB selling also their total exposure of about $750 million loans on publicly traded Genco Shipping and Trading (GNK); the news is really about the pricing of the loans at about 90% of their face value, more or less, perfect pricing in our opinion that would presuppose full market recovery for the buyers of the loans to see impeccable and worry-free performance from the borrowers. Probably there are special factors for such strong pricing, but definitely more banks will have now to ‘sound’ the market for their own portfolios and likely would be more sellers if such strong pricing can be sustained.

MT „SHINYO NAVIGATOR” (1996, HHI, 300K DWT VLCC); Image source: shipspotting.com

In the greater sale & purchase market, there has been strong activity in the VLCC market in addition to last week’s fairly heightened activity. Just as the capesize market popped in September at $40,000 pd, this week VLCC rates reached the same magic number on the back of seasonality, in our opinion, rather than any improvements in fundamentals. However, on the expectations that the worst is behind us, even in the VLCC market, Navios Maritime Acquisition Corp. (NNA) has confirmed the acquisition of three charter-free VLCC tankers for $163 million; the vessels are believed to be HOSCO‘s MT „GRAND CHINA”, MT „PEACE CHINA” (298,000 dwt, Dalian, 2010/2011 respectively) and MT „GREAT CHINA” (298,000 dwt, CSSC Jiangnan, 2009); breakdown in pricing was not provided, but it seems that the vessels collectively obtain several million dollar premium over ‘broker report’ pricing (in full disclosure, getting an en bloc deal of modern, comparable vessels done requires usually a premium over ‘last done’.) It’s also understood that NNA has sold their 1996-built VLCC MT „SHINYO NAVIGATOR” (300,000 dwt, Hyundai HI, 1996) at $20 mil for conversion; ss a reminder, back in August, NNA had acquired the VLCC MT „NAVE CELESTE” (299,000 dwt, Daewoo, 2003) at $35.4 million to substitute for the MT „SHINYO NAVIGATOR” with their Chinese charterers. Despite the conversion subject, the pricing for MT „SHINYO NAVIGATOR” has not been much above scrap levels at $20 mil, but definitely more favorable that the Fredriksen ‘twin sale’ from last week of MT „FRONT CHAMPION” (300,000 dwt, Hyundai Heavy I., 1998) and MT „GOLDEN VICTORY” (300,000 dwt, Hitachi Zosen, 1999), which although much younger fetched $32 mil en bloc for scrap sale; in any event, these three vessels will be leaving the leaving the world VLCC fleet for good, providing a miniscule improvement to tonnage supply-demand dynamics. Also, one more and much newer VLCC vessel is supposed to leave the world fleet for conversion, namely MT „BLUE JADE” (320,000 dwt, Daewoo, 2012) was sold to BW Offshore at $88 million (with seven month long subject) while the MT „BLUE OPAL” (320,000 dwt, Daewoo, 2012) was sold outright at $83 million (some reports have NNA as the buyer.) Both of these ‘Blue’ vessels are of the TMT (TODAY-MEANS-TOMORROW) and the ‘Elephant fame’ when they were built under MT „G ELEPHANT” and MT „H ELEPHANT’, respectively. Again, as a reminder, year-to-date, VLCCs have averaged $12,500 pd, vs $18,500 pd in calendar 2012; often it pays to think and act counter-cyclically, especially when product tankers right now are the flavor of the season and crude tankers are out, but it’s tough to really get excited at $83 million for a two-year old VLCC in this market.

MT „OKHOTSK SEA” (Image source: shipspotting.com)

The product tanker market also has been busy with the sale of the Croatian-built MT „OKHOTSK SEA” (47,000 dwt, Brod. Trogir, 1999) obtaining a very robust $10.5 million from Indonesia buyers on behalf of Sovcomflot, while the shallow draft and good survey position MT „MILLEURA” (40,250 dwt, Hyundai Mipo, IMO II, 2003) got a competitive price at just above $15 million from Italian sellers (Morfini) to Greek buyers (Ancora). The pumproom design MT „MADONNA” (30,500 dwt, Shin Kurushina, 1999) brought a very respectable $8 million by Indonesian buyers. In the stainless steel market, MT „GLOBAL PEACE” and MT „GLOBAL CHALLENGE” (20,000 dwt, Usuki Zosenho, 2009) were sold en bloc at $53 million to Norwegian buyers (Arne Blystad) from Cido Shipping.

The dry bulk market has also been busy but with no firework transactions to report. The activity has been focused on smaller deals, mostly of vessels at 5-15 old and with private, independent buyers behind most transactions. A couple of representative sales has been the change of ownership for MV „AMORITA” (46,750 dwt, Mitsui SB, 4x30T, 1999) at $12 million to Greek buyers, and the sale of similar MV „NESRIN AKSOY” (46,750 dwt, Sanoyas, 4x30T, 1997) at $9.4 million to Danish buyers by Akmar Shipping and Trading based in Turkey.

In the newbuilding market, there are just too many new orders to report, and we would prefer to save the depression and the news for when the vessels get delivered; just briefly, it has been rumored that the Tsakos Group has ordered five (5) aframax tankers in South Korea at about $52 million each against five year charters with Norway’s Statoil at about $22,000 pd. JO Tankers has placed an order for eight (8) 33,000 dwt chemical tankers at New Times SB, while US-based Seabulk International has exercised an option to place an additional order to Gen. Dynamics at NASSCO for a Jones Act product tanker with December 2016 delivery and $125 million expected price.

Who ever said that shipping is a boring industry?

MT „G ELEPHANT” (2012-built at Daewoo VLCC)

IMPORTANT DISCLAIMER: Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website. Thank you for the consideration.

S&P, Newbuilding and Demolition Update (November 10th, 2013)

Posted on November 10, 2013 by Karatzas Marine Advisors & Co.

It has been a week dominated by the news of Twitter’s IPO (Ticker: TWTR) when the stock leaped 73% on its first day of trading on an approximate $18 billion pre-opening valuation; such an eye-popping valuation for a company that lost $130 million so far this year makes anything in shipping imaginable. In Europe, the ECB lowered interest rates by 25 basis points to 0.25% to further stimulate the European economies, while Friday’s job market report showed an unexpectedly stronger economic picture (despite the two-week government shutdown; rumors that there is a direct inverse relationship and should be done more often could not be substantiated), raising the prospects that the Fed may have to start tapering off the QE by probably early next year. Late last week, the Royal Bank of Scotland (Ticker: RBS:LSE) announced that they were to split the bank in a ‘good’ and an ‘internal bad’ bank (NCA); to the extent that the bank has about £28 billion shipping exposure, the news are material to shipping (and the bank). It has been reported this week that RBS has sold approximately $ 777 million of shipping debt with Eagle Bulk Shipping (Ticker: EGLE) (their total present outstanding exposure after last year’s restructuring) to a buyer reported being a US-based bank (rumored Bank of America, ticker: BAC) at a rumored price of 85-89% of face value. In more shipping-related corporate news, Commerzbank AG (Ticker: CBKX:GER) reported earnings that pleased the market as the bank seems to handle risk better than expected by writing down NCAs ahead of target; however, the shipping portfolio has not showed much improvement in performance and the bank remained cautious for the year ahead.

MT „FRONT CHAMPION” (Image Source: Ship Finance International)

In the freight market, the BDI improved by about 3.5% despite the weakness in the panamax bulker market. In the crude tanker market, VLCC rates have showed good improvement for the week and surpassing the $40,000/d market for many MEG-East routes, mostly on lower tonnage availability at load ports. It’s to be seen whether this is the tanker version of the cape-blip we saw two months ago, or a rather more fundamental improvement. Rates for Suez and Aframax tankers were utterly uninspiring for the week, and so were in the product tanker market as well.

MT „GOLDEN VICTORY” (Image Source: Ship Finance International)

On pure S&P matters, it has been an interesting, and rather busy week to report. It’s definitely ‘deal peaking’ season, and even people in shipping know to make hay when the sun shines (actually, the proper saying should be to ‘hoist your sail when the wind is fair’.) In the VLCC market, there has been reported the sale of MT „KUMANOGAWA” (300,000 dwt, Kawasaki, 2000) to undisclosed buyers at a price in excess of $30 million, which is relatively strong price in comparison to last week’s sale of MT „ARDENNE VENTURE” (320,000 dwt, Hyundai HI, 2004) at $41.5 million. Still in the VLCC market, there has been the interesting ‘in house’ sale of two older VLCCs: specifically, Ship Finance International (Ticker: SFL) has agreed to sell two VLCC tankers to third parties for an en bloc cash consideration of $32 million, believed to be for demolition purposes. The vessels were MT „FRONT CHAMPION” (300,000 dwt, Hyundai Heavy I., 1998) and MT „GOLDEN VICTORY” (300,000 dwt, Hitachi Zosen, 1999) whose owner has been the affiliated company Frontline (Ticker: FRO) who has terminated the charter in exchange of $90 mil in total compensation ($11 mil in cash and the balance of the cost for terminating the charter $79 mil in 7.5% amortizing Frontline notes.) It’s interesting noting that the vessels are sold for scrap at a relatively young age instead of the owner (FRO) undertaking the costly (and commercially) risky third Special Survey due shortly; also worth noting, the Fredriksen Group has for some time now advocated earlier-than-usual scrapping of vessels in order to partially alleviate tonnage oversupply. It’s nice for once seeing an owner acting upon what they are preaching and showing self-discipline! Further to our reporting last week of the Suezmax tanker MT „OLIVER JACOB” (157,000 dwt, Daewoo, 1999) at reportedly $16.5 mil, this week the similar vessel from Teekay MT „TENERIFE SPIRIT” (150,000 dwt, Daewoo, 2000) was sold to also Greek buyers (Eurotankers) at $16.3 million. We now understand that MT „OLIVER JACOB” possibly has been misreported in reference to the price, as she’s dry dock due by the end of the year and her sale price has to be adjusted downwards by a couple of million to reflect the survey cost (and would make the sale of MT „TENERFIFE SPIRIT” ‘in line’ with the market.)

The dry bulk has had an exceptionally busy week with several transactions to report: Precious Shipping PCL of Thailand (PSL:Bangkok) has agreed to acquire two 2014-resales of ultramax bulkers built at Sainty S.B. Yangzhou at $27.5 million each (rather ‘in line with the market’ transaction at present, but definitely 10% higher over last year’s pricing), while Greek buyers were busy in the hot ultramax market with the acquisition of sisterships MV „SUPRA CHALLENGER 1” and MV „SUPRA CHALLENGER 2” (61,500 dwt, Iwagi Zosen, 2012/2013-built, respectively) at en bloc pricing of $60 mil (rather strong pricing, but again, much desirable Japanese-built tonnage.) There has been the sale of a post-panamax bulker 2013-built vessel of 82,000 dwt at Guangzhou Longxue (Hull No L0027) at a competitive price of $26.5 million. Looking for smaller vessels, there has been the sale of the panamax bulker MV „OCEAN LION” (75,500 dwt, Sanoyas, 2005) at $20 million to Greek buyers (Hellenic Star), the sale of the gearless panamax bulker MV „VOLUMNIA” (76,000 dwt, Tsuneishi Zosen, 2002) to Greek buyers (Rainbow Shipmanagement) at $15.5 million, and the sale of the Italian-built (but no much enamored with when it comes to shipbuilding of commercial vessels) MV „PRIDE OF INDORE” (75,000 dwt, Fincantieri, 1996) at $7.4 million to Chinese buyers. Still, there was the sale of the supramax bulker MV „MEDI CHENNAI” (55,800 dwt, Kawasaki S.B., 2005) at $19 mil to client’s of Hong-Kong traded Pacific Basin Shipping Ltd (2343:HK). Also, it has been rumored that Pacific Basin had been busy acquisring the similar supramax MV „MEDI SHANGHAI” (56,000 dwt, Mitsui, 2005) at also $19 million. Finally, MV „FRONTIER ANGEL” (52,500 dwt, Shin Kurushina, 2001) was sold to Greek buyers at a solid pricing of $14.8 million (similar tonnage MV „OCEAN MORNING” (52,000 dwt, Tsuneishi, 2001) was sold in September at $13.1 million, a definite market improvement over a short window of time.) This has been a busy week in the dry bulk, with a great deal of the modern, quality tonnage going to private, independent Greek buyers.

The demolition market has been rather subdued due to local holidays in India (Diwali), but still the market has been relatively strong with five vessels having been beached in India so far this month (vs. 25 vessels for the month of October.) It’s interesting that the Indian currency (INR) has softened again this week despite the recent interest rate increase by the Reserve Bank of India (RBI). Presuming that freight rates will remain seasonally strong, tonnage availability for crapping will decrease allowing for a chance for good performance for transactions that took earlier on speculator prospects.

IMPORTANT DISCLAIMER: Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website. Thank you for the consideration.

GLOSSARY OF MARITIME COMMERCIAL TERMS

Posted on November 10, 2013 by Karatzas Marine Advisors & Co.

ADR: American Depository Receipts: The exchange system for trading of foreign shares in the USA.

ADR: Alternate Dispute Resolution. Synonym: arbitration.

Aframax: American Freight Rate Association.

Aframax tanker: A (usually crude oil) tanker ranging in size from 85,000 dwt to 120,000 dwt.

Air Draft (or Air Draught): The distance from the waterline to the highest fixed point of a vessel.

American Bureau of Shipping (ABS): the preeminent US-based, established in 1924 classification society, member of IACS (International Association of Classification Societies).

AMVER: A voluntary global vessel reporting system used by search and rescue authorities in their efforts to provide assistance to persons in distress at sea. The system provides information on vessels located near a reported distress. It was originally known as the Atlantic Merchant Vessel Emergency Reporting (AMVER) System.

Arabian Gulf (AG): Synonyms: Middle East Gulf (MEG); Persian Gulf (PG).

ATDNSHINC: Any Time Day or Night Sundays & Holidays Included.

Automatic Identification System (AIS): A system onboard a ship that continuously transmit the vessel’s identification, position, course, speed as well as other data to other ships and relevant authorities. Synonym: universal automatic identification system (UAIS).

Bale Cubic Capacity: A volume capacity of the cargo hold(s) of a dry cargo vessel. It is usually expressed in ft3 or m3, and it is used to estimate the space available for carrying unitized cargoes such as bales, bags and pallets. Any cargo space that is inaccessible to baled cargo, such as space between frames, are excluded from the bale cubic capacity.

Ballast Leg: A voyage with no cargo on board to get a ship in position for the next loading port or docking. A ballast tank is a tank that is filled with seawater when a vessel is in ballast, in order to ensure stability.

Ballast ratio: Time at sea without cargo as a percentage of total time.

Baltic and International Maritime Council (BIMCO): The world’s largest shipping association representing shipowners, shipbrokers, agents and P&I Clubs. Based in Copenhagen, Denmark.

Professor John Houseman

Baltic Capesize Index (BCI): An index of charter rates for capesize vessels published by the Baltic Exchange in London.

Baltic Clean Tanker Index (BCTI): An index of charter rates for product tankers published by the Baltic Exchange in London.

Baltic Dirty Tanker Index (BDTI): An index of charter rates for crude oil tankers published by the Baltic Exchange in London.

Baltic Dry Index (BDI): An index of the price of transporting major dry bulk raw materials (such as iron ore and coal) by sea. The Baltic Dry Index is published by the Baltic Exchange in London. It combines three Baltic Indexes: the Baltic Handymax Index, the Baltic Panamax Index, and the Baltic Capesize Index.

Baltic Exchange: An independent source of maritime market information for the trading and settlement of physical and derivative contracts. Based in London, the Baltic Exchange can trace its history as far back as 1744.

Baltic International Tanker Routes (BITR): A report on 19 international oil tanker routes published by the Baltic Exchange in London. It makes up the Baltic Dirty Tanker Index and the Baltic Clean Tanker Index.

Baltic Panamax Index (BPI): An index of charter rates for panamax vessels published by the Baltic Exchange in London.

Bareboat charter (BBC): the hiring or leasing of a vessel from one company to another (the charterer), which in turn provides crew, bunkers, stores etc. and pays all operating costs. A charter of a vessel under which the vessel-owner is usually paid a fixed daily or monthly rate for a certain period of time during which the charterer is responsible for the ship operating expenses and voyage expenses of the vessel and for the management of the vessel. In this case, all voyage related costs, including vessel fuel, or bunker, and port dues as well as all vessel operating costs, such as day-to-day operations, maintenance, crewing and insurance are paid by the charterer. A bareboat charter is also known as a “demise charter” or a “time charter by demise” and involves the use of a vessel usually over longer periods of time ranging over several years The owner of the vessel receives monthly charterhire payments on a per day basis and is responsible only for the payment of capital costs related to the vessel.

Barge Carrier: A ship designed for the transportation of barges. Several different designs exist, among them LASH (lighter aboard ship) and SeaBee.

Barging: The transfer of cargo from a ship to a barge or vice versa.

Barrel (bbl): A trading unit used in connection with the production of oil. One barrel equals 42 US gallons or approximately 159 liters.

Bill of Lading (B/L): A document that serves three main functions: (1) a document of title to the goods described in the Bill of Lading; (2) a receipt for the goods; and (3) as evidence of the terms and conditions agreed upon for the transportation of the goods.

Buoy loader: Tanker specially equipped for loading at sea via buoys.

Bulk: Unpackaged solid cargo such as coal, ore and grain.

Bunkers: Fuel oil used to operate a vessel’s engines, generators and boilers. Heavy Fuel Oil (HFO) used to be the primary source of bunkers but nowadays Intermediate Fuel Oil (IFO) and Marine Diesel Oil (MDO) for generators are more prevalent.

IFO: Intermediate Fuel Oil. A type of bunkers.

IFO 180 (Intermediate Fuel Oil, 180 Centistoke): Bunkers with a viscosity (flowability) of 180 Centistoke. The lower the number, the better the quality of the fuel. Synonym: 180 CST.

IFO 380 (Intermediate Fuel Oil, 380 Centistoke): Bunkers with a viscosity (flowability) of 180 Centistoke. The lower the number, the better the quality of the fuel. Synonym: 380 CST.

Capesize: Dry cargo bulk carrier vessel usually of greater deadweight capacity than 120,000 dwt or larger; typical size around 180,000 dwt. Named so since such a vessel is usually too large for the Suez Canal and has to circumvent the Cape (of Good Hope, in South Africa). Primary trading in iron ore and coal; occasionally grains.

Car Equivalent Unit (CEU): A measure of the cargo carrying capacity of a ro/ro vessel such Pure Car Carrier (PCC) (please see).

Cargo Manifest: A document listing the cargo of a vessel.

Cellular Container Vessel (FCC): A container vessel fitted with cell guides. Synonym: fully cellular containership.

Certificate of Financial Responsibility (COFR): Certificate required by the US Coast Guard for tonnage transporting oil products in the US economic zone (due to OPA90), to confirm the owner’s financial responsibility up to a specified amount for pollution caused in US waters.

CERCLA: Comprehensive Environmental Response, Compensation and Liability Act.

Charter: The hiring of a vessel, or use of its carrying capacity, for either (1) a specified period of time (time charter) or (2) to carry cargo for a fixed fee from a loading port to a discharging port (voyage charter). The contract for a charter is called a charterparty.

Charter broker: A broker / intermediary with the responsibility of chartering (tanker) vessels by representing either shipowners or cargo interests.

Charterer: The entity that hires a vessel pursuant to the charter. Charterer can be cargo owner or any other person / company who hires a ship.

Charterhire: Money paid to a vessel’s owner by the charterer for the use of a vessel under a time charter or bareboat charter. Payments for timecharters are usually made during the course of the charter every 15 or 30 days in advance or in arrears by multiplying the daily charter rate times the number of days and, under a time charter only, subtracting any time the vessel was deemed to be off-hire. Payments for voyage charters are payable upon the discharge of cargo. Under a bareboat charter such payments are usually made monthly and are calculated on a 360 or 365 day calendar year basis.

Charter-party: Transport contract between shipowner and shipper of goods.

Charter rate: The amount of money agreed between the charterer and the vessel-owner accrued on a daily or monthly basis that is used to calculate the vessel’s charterhire.

Classification society: An independent society that certifies that a vessel has been built and maintained according to the society’s rules for that type of vessel and complies with the applicable rules and regulations of the country in which the vessel is registered, as well as the international conventions which that country has ratified. A vessel that receives its certification is referred to as being “in class” as of the date of issuance. Without valid class certificates, vessels deemed unseaworthy and cannot obtain insurance coverage or allowed to sail. Prominent classification societies are the American Bureau of Shipping (ABS), Bureau Veritas (BV), China Classification Society (CCS), Det Norske Veritas’ (DNV) which recently merged with Germanischer Lloyd (GL), Korean Register of Shipping (KR), Lloyd’s Register of Shipping (LR), Nippon Kaiji Kyokai (ClassNK), Registro Italiano Navale (RINA).

Clean Petroleum Products (CPP): Liquid products refined from crude oil, whose color is less than or equal to 2.5 on the National Petroleum Association scale. Clean products include naphtha, jet fuel, gasoline and diesel/gasoil.

Clinker: An intermediate product used to produce cement. It is produced in cement kilns and consists of dark porous nodules. Synonym: cement clinker.

Commercial Management or Commercially Managed: The management of the employment, or chartering, of a vessel and associated functions, including seeking and negotiating employment for vessels, billing and collecting revenues, issuing voyage instructions, purchasing fuel, and appointing port agents.

Commercial Pool: A commercial pool is a group of similar size and quality vessels with different shipowners that are placed under one administrator or manager. Pools offer participants opportunities for scheduling and other operating efficiencies such as multi-legged charters and Contracts of Affreightment and other operating efficiencies.

Condition Assessment Program (CAP): Voluntary rating system for (usually older) vessels describing and quantifying the standards of a vessel and earning designations of CAP 1 or CAP 2.

ConRo (Vessel): Container / roll on-roll off vessel. A vessel designed to carry containers as well as rolling stock such as passenger cars, trucks, buses and trailers that can be driven or towed on to the vessel. Synonym: container/ro-ro (vessel).

Consecutive Voyage Charter: An agreement for a vessel to undertake a series of consecutive voyages between two ports. The shipowner pays for all voyage costs such as bunkers and port charges.

Container Load: A shipment that is large enough, either by volume or weight, to fill an entire container. The opposite of “container load” is LCL (Less than full Container Load). Synonym: full container load (FCL).

Image Source: The New York Times

Contract of Affreightment: A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a period of time possibly even a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and ship owner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the ship owner may use different ships to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators such as pools or ship owners with large fleets of the same vessel type. All of the ship’s operating, voyage and capital costs are borne by the ship owner while the freight rate normally is agreed on a per cargo ton basis.

Combination Carrier: Ship capable of carrying different types of cargo, thereby achieving a more uniform flow of shipments. Typically termed OBO, an abbreviation for oil, bulk, ore, which means that the vessel is designed for cargoes of these and other bulk products. Also, PROBO, Products/Ore/Bulk/Oil carrier, a ship that can carry oil (including petroleum products) or dry bulk cargoes. Combination carriers are almost an obsolete asset class these days as charterers prefer specialization and efficiency (vs. flexibility.)

Crude Oil: Oil in its natural state that has not been refined or altered.

Daily Vessel Operating Expenses (DVOE): The costs of a vessel’s technical operation, crewing and insurance (excluding costs of financing).

Deadweight ton (DWT): A measure expressed in metric tons (1,000 kg) of a ship’s carrying capacity, including bunker oil, fresh water, crew and provisions. A vessel’s dwt or total deadweight is the total weight necessary to submerge the vessel to its maximum permitted draft. This is the most important commercial measure of the capacity.

Demise Charter: An agreement for the hire of a vessel without crew for a period of time. The party that hires the vessel pays for all operating costs like crew, provisions, bunkers, port charges, canal charges and any other costs related to the operation of the vessel. Synonym: Bareboat Charter. In leasing, the equivalent term is the so-called ‘triple net lease’.

Demurrage: Money paid to shipowner by charterer, shipper or receiver for failing to complete loading/discharging within time allowed according to charter-party. Additional revenue paid for delays experienced in loading and/or unloading cargo, which are not deemed to be the responsibility of the shipowner, calculated in accordance with the charterparty.

Dirty Petroleum Products (DPP): Liquid products refined from crude oil, whose color is greater than 2.5 on the National Petroleum Association scale. Dirty products usually require heating during a voyage, because their viscosity or waxiness makes discharge difficult at ambient temperatures.

Dispatch: Remuneration payable by shipowner to charterer, shipper or receiver for loading/discharging in less than the time allowed according to the charter-party.

Double-hull: Hull construction design in which a vessel has an inner and outer side and bottom separated by void space, usually 2 meters in width.

Draft: Vertical distance between the waterline and the bottom of the vessel’s keel, usually the determining factor for entering port by a certain type of vessel.

Dry cargo carrier: A ship carrying general or dry bulk cargo, casually called bulk carrier (BC). Sub-divisions for dry bulk vessels can be Multi-Purpose (MPP), or General Cargo (GC), or Open Hatch or Box Shaped or Log-fitted or Lakers or tween-decker, or heavylift.

Dry Docking (DD): The removal of a vessel from the water for inspection and/or repair of those parts of a vessel which are below the water line. During drydockings, which are required to be carried out periodically, certain mandatory classification society inspections are carried out and relevant certifications issued. Drydockings are generally required once every 30 to 60 months during Special Survey (SSDD) or Intermediate Survey (ISDD).

Dynamic Positioning System (DPS): A system that will maintain a vessel’s exact position without using conventional moorings. The system is based upon satellite navigation technology and a set of computer-controlled propellers.

Dunnage: Wood or other material used in the stowage of cargo. It serves to secure and protect the cargo.

Easy Chemicals: Chemicals that can be carried in so-called coated tanks. Coated tanks are made of steel, and the inside is layered (coated) by a coating such as zinc silicate or epoxy.

ETA: Estimated Time of Arrival.

ETD: Estimated Time of Departure.

Fairplay: A leading, international shipping trade publication.

Forward Freight Agreement (FFA): A financial instrument used as a hedging tool to manage volatility in freight rates. It is a contract between two parties involving an agreed future price for transporting cargo by sea. No real cargo or ships are involved. Synonym: Freight Derivative.

FHEX: Fridays, Holidays, Excepted.

FHINC: Fridays, Holidays, Included.

FiFi or Fi-Fi: Fire Fighting Equipment.

Flag of Convenience (FOC): A ship register in a country that offers incentives to ship owners from other countries to enter their vessels in that particular register. Some incentives often offered are little or no tax liability, no restrictions on the nationality of crew, and low registration fees. The vessel will fly the flag of the country where it is registered. Examples of open registries are Panama and Liberia. Synonym: Open Registry.

Freight Rate: The agreed freight charge calculated by metric tons of cargo or deadweight ton per month (See Worldscale).

Gearless: A vessel without cranes for handling cargo.

Global Maritime Distress and Safety System (GMDSS): An international system that uses terrestrial and satellite technology to provide automated alerting of shore-based rescue authorities, in addition to ships in the vicinity, in the event of a maritime distress situation.

Global Positioning System (GPS): A navigation system based on radio signal transmitted from satellites.

Greenwich Mean Time (GMT): A global standard for time. Synonyms: Universal Time Coordinated (UTC); Zulu time.

G6 Alliance is a consortium of container lines, consisting of Grand Alliance members (Hapag-Lloyd Container Line, Nippon Yusen Kaisha and Orient Overseas Container Line) and New World Alliance (APL, Hyundai Merchant Marine and Mitsui OSK Lines.)

Gross ton: A unit of weight equal to 2,240 pounds.

Hague Rules: A complete set of rules for the carriage of goods by sea. Included in the rules are responsibilities of the carrier. The Hague Rules were amended in 1968, and the amended rules are known as the Hague-Visby Rules.

Hague-Visby Rules: A complete set of rules for the carriage of goods by sea. Included in the rules are responsibilities of the carrier. The Hague-Visby Rules were published in 1968, amending the Hague Rules.

Hamburg Rules: A United Nations Convention on the carriage of goods by sea. The Hamburg Rules came into force on 1st November 1992 amending the Hague-Visby Rules in their entirety.

Hamburg Shipbrokers’ Association (VHSS): The professional association of shipbrokers in Hamburg.

Handymax tanker: A product tanker in approximately the 25,000 dwt to 40,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

Handysize tanker: A tanker ranging in size from 10,000 dwt to 25,000 dwt.

Hellenic Shipbrokers Association (HSA): The professional association of shipbrokers in Greece.

Hull: Shell or body of a vessel.

Institute of Chartered Shipbrokers (ICS): A London-based professional body of shipbrokers and shipping professionals.

Intermediate survey: The inspection of a vessel by a classification society surveyor which takes place between two and three years before and after each special survey for such vessel pursuant to the rules of international conventions and classification societies.

International Association of Classification Societies (IACS): International association of classification societies whose members are responsible for classifying the world fleet; almost always only IACS classification societies are allowed to classify vessels as per standard industry terms.

International Bulk Chemical Code (IBC Code): A code that is part of the International Convention for the Safety of Life at Sea (SOLAS). It gives standards for the safe transportation of bulk chemicals by sea.

International Maritime Organization (IMO): A United Nations agency that issues international regulations and standards for seaborne transportation.

IMO Type I: A term with basis in the International Bulk Chemical Code (IBC Code). There are three types: IMO Type I, IMO Type II, and IMO Type III. An IMO Type I chemical tanker meets the highest standards and is therefore allowed to transport the most hazardous chemicals.

IMO Type II: A term with basis in the International Bulk Chemical Code (IBC Code). There are three types: IMO Type I, IMO Type II, and IMO Type III. An IMO Type I chemical tanker meets the highest standards and is therefore allowed to transport the most hazardous chemicals.

IMO Type III: A term with basis in the International Bulk Chemical Code (IBC Code). There are three types: IMO Type I, IMO Type II, and IMO Type III. An IMO Type I chemical tanker meets the highest standards and is therefore allowed to transport the most hazardous chemicals.

IMO Number: A unique seven digit number that is assigned to all self propelled, sea-going civilian merchant ships of 100 GT and above.

INTERCARGO (International Association of Dry Cargo Shipowners): A trade association representing the interests of owners, operators and managers of dry cargo vessels.

International Safety Management Code (ISM Code) for the Safe Operation of Ships and for Pollution Prevention, which, among other things, requires vessel-owners to obtain a safety management certification for each vessel they manage.

International Security Code for Ports and Ships (ISPS Code), which enacts measures to detect and prevent security threats to vessels and ports.

INTERTANKO: The International Association of Independent Tanker Owners.

Jones Act: A common name for the United States Merchant Marine Act of 1920. This act requires that all vessels being used to transport cargo and passengers between ports in the United States (US) are registered in the US and fly the American flag, are owned by US citizens, built at US shipyards and manned by crews who are US Citizens.

Knot: A measure of the speed of the vessel. 1 knot = 1 nautical mile per hour, that is 1,85 km/h.

Kommanditgesellschaft (KG): A limited partnership in Germany. Often used for shipping investments.

Kommanditselskap (KS): A limited partnership in Norway. Often used for shipping investments.

Laker: A vessel designed for trading between the lakeside ports on the Great Lakes of North America.

Liquefied Petroleum Gas (LPG): Petroleum gas (mainly propane and butane) in a liquid form. It is obtained by cooling the gas to about minus 48 degrees Celsius at normal atmospheric pressure.

Liquefied Petroleum Gas Carrier (LPGC): The size of a gas carrier is normally quoted in cubic meters (meters) being the nominal cargo carrying capacity of the vessel.

Livestock Carrier: A vessel designed for the transportation of livestock such as sheep and cattle.

Lloyds’s List: International shipping daily newspaper.

Lloyd’s Open Form (LOF): A contract for the salvage of a vessel and her cargo based on the principle of “no cure no pay”.

Long Ton: One long ton is equal to 2,240 lb or 1,016 kg.

LOOP: Louisiana Offshore Oil Port.

Color Chart by Gerhrad RICHTER (1974)

Lloyd’s Register of Shipping (LR): A pre-eminent, UK-based classification society

LR1 Product Tanker – Long Range 1 Tanker (please see under Product Tanker)

LR2 Product Tanker – Long Range 2 Tanker (please see under Product Tanker)

LR3 Product Tanker – Long Range 3 Tanker (please see under Product Tanker)

Maiden Voyage: The first voyage of a new vessel after the owner has taken delivery from the shipyard that built the vessel.

Malcolm McLean: A shipping and transport industry visionary and pioneer who invented containerization in the 1950s.

Maritime Administration, United States (MARAD): MARAD is part of the Department of Transport.

MARPOL: International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, includes regulations aimed at preventing and minimizing pollution from ships by accident and by routine operations.

Master: The Master is in overall command of the ship. He or she is responsible for the safe navigation and operation of the ship at all times. The Master is the ship owner’s representative, and he or she deals with the charterer, port agents and cargo formalities. Synonym: captain.

Memorandum of Agreement (MOA): Agreement for the sale & purchase of a vessel

Metric ton (MT): A unit of weight equal to 1,000 kilograms.

Moonpool: An opening within the hull of a vessel giving access to the water below. A moonpool may be used for many different purposes, depending on vessel type. Some examples are diving, drilling and launching of equipment.

Moss System: LNG containment system based on spherical self-supporting tanks. Today’s market preference has been for GTT’s Mark III Flex System.

Maritime Transportation Security Act (MTSA) of 2002: A set of laws in the United States that are equivalent to the International Ship and Port Facility Security (ISPS) Code. Under the act vessels and port facilities are required to conduct vulnerability assessments and develop security plans.

MR 1 Product Tanker: Medium Range 1 Product Tanker (please see under Product Tanker)

MR 2 Product Tanker: Medium Range 2 Product Tanker (please see under Product Tanker)

Multi-Purpose Container Vessel (MPC): A vessel that can carry containers as well as general cargo.

NAABSA – Not Always Afloat but Safe Aground: A term used to describe the situation at berths where a vessel may touch the bottom of the sea at low tide.

Natural Gas Liquids (NGLs): Liquids obtained during the production of natural gas. These include ethane, propane, butane, and condensate.

Net Revenue / Time Charter (t/c) equivalent – Gross freight income less voyage costs (bunker costs, port duties etc.).

Newbuilding: A new vessel under construction or just completed.

New World Alliance, The (TNWA): A consortium of three container lines: APL, Mitsui O.S.K. Lines (MOL), and Hyundai Merchant Marine Co., Ltd (HMM).

NVO (Non Vessel Owner).

Non-Vessel Operating Common Carrier (NVOCC): A company who buys space from shipping lines and sells it to smaller shippers. The NVOCC issues bills of lading.

Norwegian Sale Form (NSF): Form utilized for the sale & purchase of a vessel; usually NSF 93 is the primary template although NSF 2012 has been introduced. Alternate forms are Nippon Sale Form and Singapore Ship Sale Form 2011.

Norwegian Shipbrokers’ Association, The: The professional association of shipbrokers in Germany.

OBO: Oil/Bulk/Ore carrier (please see Combination Carrier).

Oil Companies International Marine Forum (OCIMF): A voluntary association of oil companies having an interest in the shipment and terminalling of crude oil and oil products.

Off-hire: The period a vessel is unable to perform the services for which it is required under a time charter. Off-hire periods typically include days spent undergoing repairs and drydocking, whether or not scheduled.

Offshore Support Vessel (OSV): A particular group of vessels designed tosupport the offshore oil and gas industry. Specific vessels in this group includes anchor handling tug supply vessel (AHTS), anchor handling tugs (AHT), crew boats and platform supply vessels (PSV).

Oil Pollution Act of 1990 (OPA 90) of the United States (as amended). Federal law imposing regulations on shipowners trading in US waters.

Oil Tanker: Tanker vessel carrying crude oil or refined products. If a ship is equipped to carry several types of cargo simultaneously the ship is called a parcel tanker and usually has cargo tanks lined with special coatings, including possibly cargo tank walls made of stainless steel. A Shuttle Tanker is a tanker carrying oil from offshore fields to terminals. An oil tanker especially built for the transportation of refined oil products, often with inside painted/coated tanks, is called a Product Tanker.

Open Hatch Vessel: A vessel with hatches without overhang, thereby providing better access to the cargo hold.

P3 Network Alliance: A strategic alliance to share east-west routes by Maersk Line, Mediterranean Shipping Company (MSC) and CMA CGM.

Panamax size: Ship between 55,000 dwt and 80,000 dwt, the largest ship capable of navigating in the Panama Canal. The canal is about 80 km (50 miles) long and is made up of three sets of locks and two lakes. The maximum dimensions of a vessel navigating the Panama Canal are: length 294.13 m (965 ft), beam 32.31 m (106 ft), draft 12.04 m (39.5 ft).The term is derived from the maximum breadth capable of passing fully loaded through the Panama Canal. ‘Panamax’ could refer to a dry bulk vessel, a crude oil or product tanker or containership vessel, thus one has to be careful in defining such vessel; when panamax is applied to tankers, usually means crude oil tanker. A ‘panamax containerhip’ is usually of about 4,800 – 5,500 TEU carrying capacity.

Paris MOU: Paris Memorandum of Understanding. An international agreement on port state control (PSC). The Paris MOU consists of 20 participating maritime administrations and covers the waters of the European coastal states and the North Atlantic basin from North America to Europe.

Period charter: A period charter is an industry term referring to both time and bareboat charters. These charters are referred to as period charters or period market charters due to use of the vessel by the charterer over a specific period of time.

Plimsoll Mark: A series of horizontal lines welded on the hull on both sides of a vessel. The lines indicate the limit to which the vessel can safely be loaded, depending on the seasons of the year and whether the vessel is in saltwater or freshwater. Letters indicating the name of the vessel’s classification society are also incorporated into the plimsoll mark. Synonym: load lines.

Port State Control (PSC): The inspection of foreign vessels in national ports to verify that the condition of the vessel complies with the requirements of international regulations and that the vessel is manned and operated in compliance with these rules.

Posidonia: Industry leading international shipping exhibition and conference taking place in Piraeus and Athens, Greece in June on even-numbered years (next Posidonia is in June 2014.)

Post Panamax (Vessel): A ship that is too large to navigate the Panama Canal.

Product tanker: A tanker designed for the carriage of refined petroleum products whose cargo tanks are usually coated with epoxy based paint to facilitate the cleaning of the tanker between the carriage of different cargoes and to prevent product contamination and hull corrosion. A product tanker typically has multiple cargo tanks capable of handling different cargoes simultaneously. The vessel may have equipment designed for the loading and unloading of cargoes with a high viscosity. Typical product tanker sizes:

MR1 (Medium Range 1 Product Tanker): A product tanker in approximately the 20,000 dwt to 40,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

MR2 (Medium Range 2 Product Tanker): A product tanker in approximately the 40,000 dwt to 55,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

LR1 (Long Range 1 Product Carrier): A product tanker in approximately the 55,000 dwt to 80,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

LR2 (Long Range 2 Product Carrier): A product tanker in approximately the 80,000 dwt to 120,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

LR3 (Long Range 3 Product Carrier): A product tanker in approximately the 120,000 dwt to 150,000 dwt size range with internally coated tanks to prevent corrosion and facilitate cleaning when switching between cargoes.

Protection and indemnity (or P&I) insurance: Insurance obtained through mutual associations (called “Clubs”) formed by vessel owners to provide liability insurance protection against a large financial loss by one member by contribution towards that loss by all members. To a great extent, the risks are reinsured.

Pure Car Carrier (PCC): A ro/ro vessel designed for transporting standard passenger cars.

Pure Car Truck Carrier (PCTC): A ro/ro vessel designed for transporting standard passenger cars, buses and trucks.

Refined Petroleum Products: Refined crude oil products, such as fuel oils, gasoline and jet fuel. Refined petroleum products whose color is less or equal to 2.5 on the National Petroleum Association scale are classified as Clean Petroleum Products and include naphtha, jet fuel, gasoline and diesel / gasoil. Refined petroleum products whose color is greater than 2.5 on the National Petroleum Association scale are defined as Dirty Petroleum Products and usually require heating during their transport due to their viscosity and waxiness that make their discharge difficult at ambient/ temperatures.

Refined oil products can broadly be classified as light distillates, middle distillates, fuel oils or other products:

“Light Distillates” consist of aviation and motor gasoline, and light distillate feedstock;

“Middle Distillates” consist of jet and heating kerosene, and gas and diesel oils;

“Fuel Oils” include marine bunkers and crude oil used directly as fuel; and

“Other Products” include of refinery gas, LPG, solvents, petroleum coke, lubricants etc.

Reefer (Vessel): A vessel designed to carry refrigerated cargo. The vessel’s cargo holds are refrigerated and primary cargoes are meat, fish, vegetable or any other perishable cargo.

SART: Search And Rescue (Radar) Transponder.

SAS: Safety At Sea.

SATPMSHEX: Saturday Afternoons, Sundays, Holidays Excepted.

SATSHEX: Saturdays, Sundays, Holidays Excepted.

SECA — SOx Emission Control Area: A geographical area designated by the IMO as an area where strict controls on sulphur emissions from vessels are required. Specifically, the sulphur content of fuel oil used on board ships must not exceed 1.5%. Alternatively, ships can be fitted with an exhaust gas cleaning system, or use any other technological method to limit Sox emissions. The rules are set out in Marpol Annex VI.

Self-unloader: A bulk carrier that has its own equipment, such as cranes, for unloading of cargo.

Semi-Submersible Rig: A mobile offshore drilling rig consisting of an upper working platform supported by vertical columns connected to lower hull pontoons. The rig can be raised or lowered in the water by altering the amount of water in the pontoons. It is kept in position either by large anchors or by a dynamic positioning system. Abbreviation: SS.

Seismic (Survey) Vessel: A vessel designed for conducting seismic surveys, in search of oil and gas, at sea. The vessel will tow several long cables, called streamers, behind it during a survey.

SHEX: Sundays, Holidays Excepted.

SHINC: Sundays, Holidays Included.

Ship Inspection Report Programme (SIRE Programme): A tanker risk assessment tool introduced by the Oil Companies International Marine Forum (OCIMF). A central part of the tool is a very large database of up-to-date information about tankers.

SHIPMAN 98: A standard agreement for third-party ship management published by BIMCO.

Single Buoy Mooring (SBM): A mooring structure used by tankers to load and unload cargo. Synonym: single point mooring (SPM).

Segregated Ballast Tanks (SBT): Tanks that are only used for ballast with independent pumping and piping systems.

Scrapping: The disposal of old or damaged vessel tonnage by way of sale as scrap metal.

Single-hull: A hull construction design in which a vessel has only one hull.

Sister Ship: Vessels of the same type and specification built by the same shipbuilder in sequence or relative close time proximity.

SOLAS: The International Convention for the Safety of Life at Sea 1974, as amended, adopted under the auspices of the IMO.

Special Survey: An extensive inspection of a vessel by classification society surveyors that must be completed within five years. Special surveys require a vessel to be drydocked.

Spot Charter: A spot charter is an industry term referring to both voyage and trip time charters. These charters are referred to as spot charters or spot market charters due to their short term duration, consisting mostly of a single voyage between one load port and one discharge port.

Spot Market: The market for the immediate chartering of a vessel, usually for single voyages.

Stainless Steel Grade Chemicals: Chemicals that have to be transported in tanks made of stainless steel.

Standards of Training, Certification and Watch-keeping for Seafarers (STCW): A set of conventions developed by the IMO establishing basic requirements on training, certification and watch-keeping for seafarers on an international level.

Strict liability: Liability that is imposed without regard to fault.

Suez Canal: Man-made, navigable waterway, completed in 1869, connecting the Red Sea with the Mediterranean Sea. Vessels up to 164 ft beam and 66 ft draft are allowed to pass through the Canal. Draft usually is the determining factor for allowing passage.

Suezmax tanker: Tanker ranging in size from 120,000 dwt to 200,000 dwt, most usually about 150,000 dwt. The term is derived from the maximum draft capable of passing fully loaded through the Suez Canal.

Shipbroker: A person/company who on behalf of shipowner/shipper negotiates a deal for the transportation of cargo at an agreed price. Shipbrokers are also active when shipping companies negotiate the purchasing and selling of ships, both second-hand tonnage and newbuilding contracts.

Ship Management: The technical administration of a ship, including services like technical operation, maintenance, repair, crewing and insurance.

Spot Market: Short term contracts, normally not longer than three months in duration.

Time Charter (TC): An arrangement whereby a shipowner places a crewed ship at a charterer’s disposal for a certain period. Freight is customarily paid in advance. The charterer also pays for bunker charges, port duties etc.

Tanker: Vessel designed for the carriage of liquid cargoes in bulk with cargo space consisting of many tanks. Tankers carry a variety of liquid cargoes including crude oil, refined petroleum products, liquid chemicals and liquid gases.

Technical Management: The management of the operation of a vessel, including physically maintaining the vessels, maintaining necessary certifications, and supplying necessary stores, spares, and lubricating oils. Responsibilities also generally include selecting, engaging and training crew, and arranging necessary insurance coverage.

Time charter: A time charter is a contract under which a charterer pays a fixed daily hire rate on a semi-monthly or monthly basis for a fixed period of time for use of the vessel. Subject to any restrictions in the charter, the charterer decides the type and quantity of cargo to be carried and the ports of loading and unloading. The charterer pays the voyage related expenses such as fuel, canal tolls, and port charges. The vessel-owner pays all vessel operating costs such as the management expenses and crew costs as well as for the capital costs of the vessel. Any delays at port or during the voyages are the responsibility of the charterer, except for certain specific exceptions such as loss of time arising from vessel breakdown and routine maintenance.

Time Charter Equivalent (TCE) rates: Time charter equivalent, or TCE, rates, are a standard industry measure of the average daily revenue performance of a vessel. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by subtracting voyage expenses, including bunkers and port charges, from voyage revenue and dividing the net amount (time charter equivalent revenues) by the number of days in the period.

Ton-Mile Demand: The calculation of the average distance of each trading route multiplied by the volumes moving on that route. A greater increase in long haul movements compared to short haul movements, the higher increase in ton-mile demand.

Ton: 1,000 kilos (metric ton = 2,204 lb).

Trip Time Charter: A trip time charter is a short term time charter where the vessel performs a single voyage between load port(s) and discharge port(s) and the charterer pays a fixed daily hire rate on a semi-monthly basis for use of the vessel. The difference between a trip time charter and a voyage charter is only in the form of payment for use of the vessel and the respective financial responsibilities of the charterer and vessel-owner as described under time charter and voyage charter.

Twenty Foot Equivalent Unit (TEU): A unit of measurement of the cargo carrying capacity of a containership. A standard shipping container is 20 ft long, and therefore equal to one TEU. A 40 ft long shipping container is equal to two TEUs.

Tokyo Memorandum of Understanding (Tokyo MOU): An international agreement on port state control (PSC) in the Asia-Pacific region.

Tonnage Tax: An alternative method of corporate taxation where tax is calculated based on the net tonnage of ships operated rather than on financial profit.

Tramp (Vessel): A vessel operating without a regular schedule. The opposite of tramp is liner.

Ultra Large Crude Carrier (ULCC): A (usually crude oil) tanker whose size is above 320,000 dwt.

Voyage charter: The transportation of cargo from port(s) of loading to port(s) of discharge. Payment is normally per ton of cargo, and the ship owner pays for bunker, port and canal charges etc.

Very Large Crude Carrier (VLCC): A (usually crude oil) tanker whose size is above 200,000 dwt and has a typical cargo capacity of about 320,000 dwt.

Vessel Operating Costs: The costs of operating a vessel that is incurred during a charter, primarily consisting of crew wages and associated costs, insurance premiums, lubricants and spare parts, and repair and maintenance costs. Vessel operating costs exclude fuel and port charges, which are known as “voyage expenses.” For a time charter, the vessel owner pays vessel operating costs. For a bareboat charter, the charterer pays vessel operating costs.

Vessel Response Plan (VRP): A detailed plan of action for responding to a potential oil spill from a vessel in United States waters. The plan has to be submitted to the United States Coast Guard as set out under OPA ’90.

Voyage Charter: A voyage charter involves the carriage of a specific amount and type of cargo from specific load port(s) to specific discharge port(s), subject to various cargo handling terms. Most of these charters are of a single voyage nature between two specific ports, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded on board by the cost per cargo ton, as agreed to transport that cargo between the specific ports. The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel. The charterer is typically responsible for any delay at the loading or discharging ports.

Voyage expenses: Expenses incurred due to a vessel’s traveling from a loading port to a discharging port, such as fuel (bunker) cost, port expenses, agent’s fees, canal dues and extra war risk insurance, as well as commissions.

Worldscale: Industry name for the Worldwide Tanker Nominal Freight Scale published annually by the Worldscale Association as a rate reference for shipping companies, brokers, and their customers engaged in the bulk shipping of oil in the international markets. Worldscale is a list of calculated rates for specific voyage itineraries for a standard vessel, as defined, using defined voyage cost assumptions such as vessel speed, fuel consumption, and port costs. Actual market rates for voyage charters are usually quoted in terms of a percentage of Worldscale. Worldscale is a table giving the amount of USD per ton oil for a number of standard routes. The rates listed in the table – so called flat rates termed W100 – are revised annually.

IMPORTANT DISCLAIMER: Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website. Thank you for the consideration.

S&P, Newbuilding and Demolition Update (November 3rd, 2013)

Posted on November 2, 2013 by Karatzas Marine Advisors & Co.

It has been a busy week in shipping with the Hamburg’s Shipbrokers Association celebrating their annual Eisbeinessen while several publicly traded shipping companies reporting earnings, which were more or less lousy, reflecting a lousy underlying freight market, but high on hopes and expectations. The ruling mood is that the worst is behind us in shipping and now that’s the time to go long. Trying to capitalize on the window of opportunity, there has been a constant stream of ‘corporate level’, big transactions (as opposed to piecemeal, time-consuming individual transactions of vessels that were so difficult to come by a few short months ago.)

The headline news item of the week has been not the uninspiring earnings report by ‘bellwether’ Scorpio Tankers (ticker: STNG), but their announcement that their affiliated company Scorpio LPG traded their newbuilding contracts of eleven VLGCs for 30% stake in Dorian LPG Ltd., with the expectation that within a year Dorian will be publicly listed on one of the US exchanges (presently on the Oslo OTC) providing liquidity for Scorpio shareholders (Scorpio has already contributed $83.9 mil on newbuilding deposits and will provide $1.9 mil cash contribution to Dorian, while Dorian will take over outstanding progress payments to the shipbuilders for $742 million.) And not to be accused of being a tad too slow or preferential of certain market sectors, by the end of the week, another company affiliated with the Scorpio group, Scorpio Bulkers (ticker: SALT) was raising an additional $300 million on the Oslo OTC (an astronomical $850 mil in total in equity raising since June 2013) for 22 more newbuidings, in addition to the 26 bulkers already on order. Elsewhere, members of the management team associated with Nordic American Tankers (ticker: NAT) have tied up six modern, high spec PSVs, with an estimated pricing of $300 million, for an IPO under the name of Nordic American Offshore. It also has been reported that just this week Hyundai Mipo Dockyards (HMP) has received orders for 16 MR tankers worth just short of $500 mil; buyers are reported to be clients of the oil major Shell and the price per vessel is an exceptionally competitive $31 million per vessel; given the name of the buyer and the magnitude of the deal, it has been estimated that the pricing may be at even below break-even for the shipbuilder.

Who said the capital markets gave up on shipping and there is no appetite for big deals?

VLCC Tanker MT „ARDENNE VENTURE” (Source: Frontline)

On the more tedious secondary sale & purchase market, there has been overall robust activity focused around ten-years-old or older tonnage; in the crude tanker market, the sale of the VLCC MT „ARDENNE VENTURE” (318,000 dwt, 2004, HHI) at reportedly $40 mil shows price consolidation over ‘last done’ sales of MT „BW LUNA” (299,000 dwt, 2003, Daewoo) at $36 mil. and of MT „EAGLE VIENNA” (306,000 dwt, 2004, Hyundai Samho) at $40 mil, each a month ago. The buyers for the MT „ADRIENNE VENTURE” were Sinokor Merchant Marine of South Korea which have proven to be fairly active buyers this year (their seventh acquisition for the year), and for the matter, for the week as well, since they also purchased the aframax tanker MT „CHAMPION PEACE” (106,000 dwt, Namura, 1999) at $11 mil (which seems pricier than their own previous purchase of MT „KWK ESTEEM” (105,000 dwt, Hyundai Samho, 2000) at $12 mil last month, which by itself was a step-up over the sale of MT „HELLESPONT TATINA (106,000 dwt, Sumitomo, 1999) at $9.6 mil.) In the Suezmax tanker market, the much circulated MT „OLIVER JACOB” (157,000 dwt, Daewoo, 1999) finally found a home in Greek hands at $16.5 million. There is no recent comparable for this suezmax sale, but this is the fourth asset disposition this year from Salamon AG based in Dortmund, Germany. Whether these sales provide any signs of market improvement is relative in nature as the prices of this vintage vessels has just collapsed; five years ago, all the vessels transacted this week were valued at least twice as much as their current pricing, which itself is no more than 2x their present scrap value (with easily 10+ years remaining economic life.)

MT „SICHEM PACE” (Source: http://www.shipspotting.com/)

The product tanker market has been rather quiet this week with no further news after the fleet sale of J Lauritzen to Hafnia Tankers reported last week, and another exhibit under their observation of corporate transactions at this phase of the cycle. There has been an interesting sale of the stainless steel tanker MT „SICHEM PACE” (20,000 dwt, IMO II, 20 segs, 22,200 cbm, heating capacity 65 °C, Uzuki Zosensho, 2006) at $21.5 mil. Stainless steel tankers has been one of the few markets that has managed to stay off the shipping radar for a long while, and it’s interesting to see future developments in this sector. The current sale is in line with the sale about a month ago of the MT „BOW PLATA” (19,980 dwt, IMO II, 22 segs, 21,700 cbm, heating capacity 70 °C, Kitanihon Zosen, 2006) to financial buyers Breakwater Capital in London. Previous comparable sale was of sisterships MT „BOW LIMA” and MT „BOW CAPE (19,980 dwt, IMO, 20 segs, 20,500 cbm, heating capacity 80 °C, Fukuoka S.B, 2007/2008 respectively) at $23 mil each, indicating that the market has been flat vis-à-vis asset pricing improvement in almost any other market segment for market competitive tonnage. That’s an interesting observation.

Moving on to the dry bulk market, Baltic Trading Limited (ticker: BALT) acquired en bloc two sistership capesize vessels MV „K. HAPPINESS” and MV „K. GLOBAL PRIDE” (179,000 dwt, HHI, 2011/2012 respectively) at $103 mil, which is another recent improvement over the current going rate of $52-53 mil for 2013 cape tonnage. Vista Shipping of Ukraine acquired the MV „GRAND CLIPPER” (168,000 dwt, Halla Engineering, 1996) at $15.5 mil which is the fifth cape acquisition for the Ukranian owner / commercial manager year-to-date, bring their fleet count to eleven vessels. The Japanese built panamax bulker MV „BOTAFOGO” (76,000 dwt, Imabari, 2001) was sold at $14.6 mil, in line with recent transactions. In the handysize market, the Japanese-built MV „SOUTHERN FIGHTER” (29,500 dwt, 4x30T, Shin Kurushina, 1998) was sold at $8.7 mil to Korean buyers, while the much modern MV „CIELO DI SAVONA” (33,000 dwt, 4x30T, Shin Kochi, 2008) was sold at $20 mil to Greek buyers. The evocatively named MV „LITTLE MANATEE” (38,000 dwt, 4x30T, Nakai SB, 2012) – this is sized-up ‘handysize’ and a bit too big for her size, and probably that’s why the playful name, was sold at $23.5 mil, showing again in yet another asset class, the great divide between the young and the ‘teenagers’ of the world fleet.

Nothing newsworthy to report in the secondary containership market, while the demolition market has been bouncing along with relatively few sales reported (inverse correlation with freight and remaining markets, in general.) Prices have been about $430 / ldt and $400 / ldt for tanker and bulkers, respectively, in the sub-continent. Still there have been worries that previously done sales may not live up to their expectations in terms of performance despite the lack of tonnage heading to the scrapyards. With India heading to the Diwali holidays there will be some time for the market ‘to settle’ and also to see the impact from the Reserve Bank of India (RBI) increase this week of interest rates by 25 bps (the second such move in two months, under the new leadership of Gov. Raghuram Rajan), in an effort to stabilize the Indian Rupee (INR) and the impact thereof on future demo pricing.

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How to Buy a Ship – Getting the MOA Penned

Posted on November 1, 2013 by Karatzas Marine Advisors & Co.

In a previous posting, we reviewed a typical Sale & Purchase (S&P) transaction assuming that once the Memorandum of Agreement (MOA) has been signed by both parties, all is smooth sailing afterwards, figuratively-speaking and, hopefully, realistically-speaking for the vessel herself.

From the moment there is an ‘agreement on main terms’ and a ‘recap’, lots of things could go wrong until the time of the actual delivery of the vessel to her new owners and the legal change of ownership. In everyday life, when one buys a can of Coke at a convenience store, timing, payment and change of ownership of the property (can of Coke) are evident and self-explanatory; for a vessel, where there is a present agreement on terms for the asset to be exchanged in the future, many things can go wrong until that point in the future; and that point is almost always in the future (and rarely immediately like with the sale of a can of Coke) since irrespective of how fast and efficient the sale, several weeks of lead time is required for an S&P transaction; or, that still there is some contractual timecharter employment remaining (several days to possibly year) for the vessel to be delivered charter-free or that the vessel has another port call in order to discharge her cargo and finish her voyage charter. Things that could change between signing an delivery can vary from the least expected such as the ship to sink or to be declared Total Constructive Loss (TCL) due to an accident, collision, allission, act of God, etc, or that the market has skyrocketed or plummeted and now buyer and seller either get to leave money on the table or get stuck with an asset (investment) that’s already several million dollars in the hole from day one, respectively. Although not every eventuality can be expected or planned for, shrewd and experienced buyers and sellers and their brokers ensure for a language that expects the unexpected and minimizes the risk from changing conditions and a possible fall-out.

NSF 93 – Sample First Page

The terms of the sale of the vessel are determined by the MOA which most likely is based on the Norwegian Sale Form of 1993 (Saleform 1993 or plainly NSF 93). The NSF 93 has sixteen main clauses and special or additional terms are incorporated in the addenda. In the preamble, there is introduction and definition of sellers, buyers and the vessel, of banking days and classification society. Since sellers and buyers can be special purpose companies (SPC), usually there is a need for a guarantee for the performance by the parent companies.

Clause 1 deals with the Purchase Price, which is the gross price for the selling the vessel; usually ship brokerage commissions are not mentioned here and are dealt privately between the sellers and the brokers (and possibly buyers.)

Clause 2 deals with the Deposit, which typically is 10% of the Purchase Price to be lodged to an escrow account within three banking days from the day of the MOA having signed by both parties. As volatility and prices change, deposit can vary and get more substantial; after the market collapse in 2008 and several defaults, it turned out that 10% was just too low hurdle to jump in such a volatile market. Also, for demolition sales, the standard deposit is 20% to reflect more ‘skin’ for a low Purchase Price (in absolute terms) and also the higher risk for the transaction.

Clause 3 deals with the Payment at the time of the closing, which has to be effected no later than three banking days once the Captain (and sellers) have provided Notice of Readiness (NOR) to buyers hat the vessel is ready in every respect for delivery under the terms of the MOA. At such time, the Deposit from Clause 1 is released in favor of the seller, as well as additional monies due to the sellers from the sale (there is additional payments for bunker onboard, lubes, oils, etc which have already been mutually accounted for and priced in advance of the sale.)

Clause 4 refers to (vessel) Inspections, that the buyers have the right to inspect or inspected or waived such right, or in any event, the vessel was made available for inspection, and buyers have approved the vessel. Most of the time Clause 4 is a formality, as already significant time and effort and resources have been dedicated to inspections and approval of the vessel well before any agreement was made, so, by the time of the closing, Clause 4 is one of the least concerning clauses.

Clause 5 is titled ‘Notices, Time and Place of Delivery’ and states the time and place of the delivery; as the vessel had been trading since the main terms were agreed upon, as the day of the delivery is approaching, the sellers are obligated to keep the buyers apprised of the vessel’s itinerary and her expected delivery time. Usually delivery time is a time window, when buyers cannot deliver before a certain date and buyers are not obligated to take delivery after a certain deadline (Date of Cancelling.) Likewise, place of delivery is usually expressed as a geographic region, between certain ports, where both parties agree to effect the transaction. Obviously, delivery time has to be within certain banking days (defined in the preamble) since purchase money has to change hands, but also delivery place has to be convenient, minimizing bureaucracy and tax matters, which could affect the price (a delivery port closer to a loading port is favorable to buyers, ceteris paribus, as it minimizes the ‘ballast leg’ for the vessel to reach her next cargo (freight)).

Drydock – Getting Wet

Clause 6 deals with Drydocking and Divers Inspection and reflects the possibility of the vessel getting inspected or delivered in drydock. In reality, vessels are getting delivered while afloat, having undergone ‘superficial inspection’ and not an inspection while in drydock. However, at time of delivery, the buyers have the right to undertake underwater inspection of the vessel and her hull by a qualified diver with a closed-caption camera and with a representative of the classification society present. The cost for such inspection is for buyers’ account, unless there is fault found that has to be addressed before the delivery of the vessel; the definition of fault is interpreted strictly by the classification representative’s judgment (it ‘affects class’ or warrants ‘class condition / recommendation’); if the fault affects the seaworthiness of the vessel, the cost of the underwater survey is payable by the sellers, who, in addition, will have to either compensate monetarily the buyers for expected rectification of the fault or rectify the fault and deliver the vessel without ‘class condition / recommendation’.) Buyers also have the right to have the tailshaft pulled out and inspected at their expense, and again, if repairs are required, then sellers have to pay for the inspection related costs and repairs; typically such provision of this clause is almost never exercised given the time required and the tediousness of such inspection. In general Clause 6 can be problematic as, if there is fault, then a whole new discussion has to commence on the expected costs for repairs, easiness of access for ship repair yards, the significance of the damage (structural impact?), loss of hire, etc. This is a discussion that commences un-predictably once main terms have already been agreed, and if there is no much goodwill left between buyers and sellers till now, then, it may very well turn out to be a deal breaking point.

Clause 7 refers to ‘Spares and Bunkers’ onboard and are passed on to buyers. All spare parts onboard the vessel or parts in the possession of the seller ashore at the time of the vessel delivery that were stored / ordered on behalf of the vessel now become property of the buyers along with the vessel; although there is no additional, itemized pricing for the spares, collectively they have been incorporated in the price of the vessel (vessels coming from ‘good stables’ – owners with ample spare inventory onboard and high maintenance standards) routinely command premium pricing in the secondary market, to the tune of millions of dollars on occasion (which is a point not regularly addressed in vessel valuation discussions.) Bunkers onboard, especially at present with high oil prices, can be worth several hundred thousand dollars and therefore fuel tanks having been sounded by mutual survey of buyers and sellers for their quantity and compensation is calculated and effected with Payment under Clause 3; likewise, oils and lubes onboard are passed free of charge to the buyers, but there is additional compensation for ‘sealed’ drums and other such containers. In general, all items onboard the vessel at delivery time become the property of the buyer at no extra cost. There is a list of items explicitly to be excluded from the sale, which is usually stipulated under one of the addenda, and typically includes items proprietary to the sellers / owners / managers, items that bear their logos, stationary, etc items that are onboard at the discretion of the sellers (additional radio / navigational equipment not required by the classification society), and leased / rented items onboard like nitrogen or acetylene bottles.

Under Clause 8, there are provisions on Documentation, the documents that will be produced at the time of the closing by the buyer and the seller. Here, the burden in general is on the seller who have to produce much more paperwork proving proper ownership, certifications, documentation, etc that also has to be proper for the buyers needs in order to properly register the vessel under their chosen jurisdiction. Usually, preparation of documentation is a formality, but it can get very tedious when the vessel is to enter / leave cabotage markets, the ownership structure is more complicated and spread-out, etc

In Clause 9, under Encumbrances, the sellers warrant that the vessel is to be delivered to the buyers free of any and all encumbrances, mortgages, liens, debts, etc. Usually such close is not a brainer, but when the vessel is in bankruptcy proceedings or the owner is passive owner in no position to be aware of any trade debt, this clause can be more critical, and sometimes a judicial sale provides a clean slate.

Clause 10 under the heading of ‘Taxes’ is provided for entertainments purposes (probably shipping is one of the few industries that taxes and entertainment can be used in the same sentence) ensuring that each side will be responsible for their own tax liabilities. However, given shipping is an international industry, the place of delivery (Clause 5) and also the vessel’s registry have already been chosen to be of favorable tax regime and minimal government interference.

Clause 11, headed ‘Condition on Delivery’, partially reflecting Clause 6, stipulates about the condition of the vessel at the time of her delivery, her seaworthiness, which defects have to be addressed before the delivery and how. This could be a tricky clause that has led many a buyer and seller into arbitration and litigation. Again, for clarity, the classification society is the ultimate interpreter of any technical defaults and the repair-related remedies thereof. However, the devil is in the detail, as they say, and not only the cost of repairs can be open to interpretation, but also more subjective factors like loss of hire, cost of repositioning the vessel, third-party contractual liabilities, etc

In Clause 12 under ‘Name / Markings’, the buyers undertake to change the name of the vessel and replace the seller’s house flag / house colors on the chimney stack with their own shortly after the vessel delivery.

Clauses 13 and 14 under ‘Buyers’ Default’ and ‘Sellers’ Default’, respectively, it is stipulated that should either party fail to live up to their obligations under the MOA, buyers may lose their deposit or may have the option the walk away from the sale, etc Further, additional compensation may be warranted depending on the extent of the default.

Under Clause 15, ‘Buyers’ Representatives’, the buyers of the vessels, from the time they lodge their deposit under the MOA, they are entitled to place (usually) two of their representatives (usually chief officer and engineer) onboard the vessel for purposes of getting familiar with the vessel; they are not regular crew and cannot interfere with vessel operations; they are learning the ‘ropes’ of the vessel and her equipment, etc with the rest of the buyer’s incoming crew to join the vessel at the time of the delivery (and at the place of the delivery.)

Lutine Bell – Day of Judgement!

Finally, under the last standard clause of an MOA based on NSF 93 template, Clause 16 stipulates for ‘Arbitration’ in the event of disputes, and typically English Law or United States Law and the Law of the State of New York are the standard language, with London Arbitration (Arbitration Acts 1950 and 1979) the preferred venues.

For additional terms for the sale of a vessel, there may be a list of clauses that are attached to the MOA in the form a addenda and could cover from small formalities / requests from each side to major points such as that sometimes the sale maybe conditional on the buyer’s winning a tender business where the vessel is intended to be employed, and thus, the terms of such addendum have to be clearly stated that the sale is still conditional but only on one very specific condition, which by itself can be dependent on many other events beyond anyone’s control (if the tender is to be awarded by a government and it’s delayed, postponed, canceled or the government has changed or …

Despite all its criticisms and calls for improvements, NSF 93 in its six-page simplicity has managed to condense a complicated transaction on many levels to a transaction that even a ship broker can do! But again, as they say, the devil is in the details, and good, experienced shipbrokers worth their salt who have been through many closings fully know that although an MOA is six-pages long, proper attention to detail can make or cost millions in dollars in arbitration awards, litigation or plain old good will and reputational damage.

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