‘Shipshape 10’ News for Week Ending November 20, 2016

Posted on November 18, 2016 by Karatzas Marine Advisors & Co.

‘Shipshape 10 List’, a list of news and articles published in the current week that a senior executive in shipping, shipping finance, commodities, energy, supply chain and infrastructure should had noticed; news and articles that are shaping the agenda and the course of the maritime industry.

Sometimes seemingly tangential, sometimes humorous, occasionally sarcastic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

While most of the past week has been consumed by stipulations on what a Trump administration would mean for the shipping industry,

1. Varsler shippinghavari (from Dagens Næringsliv),

and whether a y-u-g-e infrastructure stimulus package may be what the dry bulk market needed, shipping shares for a couple of days behaved as in the good old days of 2008, almost a lifetime ago:

2. Unmoored From Reality: DryShips Halted After 1,500% Post-Election Rally (from the Wall Street Journal)

and

3. What to Do With a Stock Up 1,000% in One Week? (from Barron’s)

Nothing fundamental actually besides distorted markets and covering ‘short squeeze’, but impressive and nostalgic headlines nevertheless, we have to admit; for real life headlines, another shipping enterprise sponsored by an iconic name of the shipping universe has been making headlines that more accurately reflect reality:

4. Rickmers Maritime says unable to show it will remain in business (from the Straits Times)

Dry bulk freight rates have improved a lot in the last month, and the BDI is up almost four-fold since its bottom in February 2016; really an impressive performance, but is this a sign that the market is turning around and that the present rally is not just another seasonal improvement? Time will tell, but it’s worth mentioning that the Chinese currency is presently at eight-year low, and given than storage costs for commodities such as iron ore and coal is low, probably it makes sense to hold onto commodities than unto fiat money, especially with all the political uncertainty worldwide:

5. Yuan Slides to Lowest Level in Nearly Eight Years (from The Wall Street Journal)

While new trading outposts are established even at remote corners of our planet:

6. As Trump talks wall, China builds bridges to Latin America (from the Associated Press),

and

7. Pakistani PM welcomes first large Chinese shipment to Gwadar port (from Reuters)

If marine engines is a sign for the shipping industry’s direction, Rolls-Royce’s announcement for the week gives additional color on market recovery:

8. Rolls-Royce May Close More Marine Sites as Cost Cuts Deepen (from Bloomberg)

A major piece of news that will be affecting the tanker market (crude and gas) and the Jones Act market for decades to come, there has been another tremendous discovery of another field in Texas, further solidifying the state’s nickname as the ‘Texarabia’ of the US:

9. Vast shale oil field in Texas could yield 20 billion barrels (from the Associated Press)

In the interim, another government is bowing to pressure and committing $1.9 billion dollars to help domestic shipping companies, this time in Taiwan; as a quick reminder for those with short memory, just two weeks ago, the S Korean government had allocated $9.6 billion to assist the local shipping industry (shipbuilders and shipping companies). After almost two decades in the shipping industry, we got to appreciate the industry from a special point of view: most of the vessels in the world fly ‘open registry flags’ and pay tax on tonnage (but not on income); for the few shipping companies that pay tax, it seems they get the extra option of getting bailed out when times are bad.

10. Taiwan Approves $1.9 Billion Aid Package to Troubled Shipping Companies (from the Wall Street Journal Logistics Report)

And, our bonus feature, a few editorial thoughts “What Will Save The Shipping Industry? Nine Industry Thought Leaders Weigh In” (from #Shipping2030)

Shipping is an ancient art… Image credit: Karatzas Images

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.

‘Shipshape 10’ News for Week Ending November 13, 2016

Posted on November 11, 2016 by Karatzas Marine Advisors & Co.

The major event of the week of course has been the election of Donald J Trump as the 45th President of the United States. The event has been surprising as most predictors had this event as the less favorable outcome (“The American Brexit”); also, given that most of the election campaign took place on personal and not on substantive debating terms, there is has been lots of head-scratching since Wednesday morning on what would happen next; the major consensus is that the new Administration is in general in favor of anti-globalization, re-shoring, and higher barriers for trade (tariffs, ‘currency manipulator’ and anti-dumping have been heard with come frequency), the consensus has been that trade and shipping stand to suffer in the next four years:

1. Shipping Industry Feels Shock Waves From Donald Trump Election (The Wall Street Journal, Logistics Report)

2. On trade and expectations, America and the world, The Piecemaker (The Economist)

3. While in the same week, the United Nations Conference on Trade and Development (UNCTAD) published some sobering thoughts on the maritime industry: Review of Maritime Transport 2016 (UNCTAD)

4. In the short term however, the dry bulk market has had a great week, especially for the capesize market on behalf of coal trades to China:
Dry Bulk FFA: Market Explodes as Atlantic Cargoes Offer Ample Support (FIS)

5. An interesting reading on China and ‘One Belt, One Road’ from the respected Week in China:
All at Sea (Week in China)

6. Another week, and another shipping bank wish ‘Bon voyage’ to the shipping industry: Bank of Ireland joins other banks in shipping loan wind down (Reuters)

7. while, another shipping bank is looking to raise more capital; one gets the picture, with the shipping banks: Shipping Bank DVB Prepares Capital Increase (Reuters, via the Maritime Executive)

8. The Singapore Exchange (SGX) has formally closed on the acquisition of the legendary Baltic Exchange, producer of the well-known Baltic Exchange Dry Bulk Index (BDI); the transaction is indicative of a changing world, where shipping cannot be considered a stand-alone industry any more, while at the same time it seems that the center of gravity has been shifting eastwards: Baltic Exchange Takeover Complete (The Maritime Executive)

9. For some interesting reading on how shipping has been evolving, an article from BBC and Remote Container Management (RCM) technology:
How do you keep bananas fresh as they cross the oceans?

10. And, for those who wish to take a minute and smell the roses, actually feel nostalgic about the past and the times past, an interesting piece on lighthouses in Ireland:
Keeping the Fire of Irish Lighthouses Alive (The New York Times)

‘Shipshape 10’ News for Week Ending November 6, 2016

Posted on November 5, 2016 by Karatzas Marine Advisors & Co.

Sometimes seemingly tangential, sometimes humorous, occasionally sarcastic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

1. The week started with a blockbuster announcement of the three largest Japanese container line companies (NYK, K Line and Mitsui O.S.K Line) where effectively creating a new, bigger business entity in order to compete in a bigger world of falling rates in the containership line business alone.
Japan’s Largest Shipping Firms to Merge Container Operations (The Wall Street Journal, Logistics Report)

2. The story of consolidation in the containership liner business kept going strong as on Friday, the Wall Street Journal broke the news that Israel’s ZIM has put themselves up for sale. The company really does not have critical mass or competitive advantages or the financial capacity to grow big alone in this now monster market. Zim has been one of the candidates to be absorbed and frequently mentioned in the ever growing game of shipping companies that will not live to see the next business cycle – not at least in their present form.
Israel’s Zim Looking to Sell Most Global Shipping Operations (The Wall Street Journal, Logistics Report)

3. If there’s need for evidence of the bad state of the containership market, this week it was reported that another young panamax containership was sold for scrap. When this class of ships started getting built were costing well in excess of $80 mil; now selling for scrap at $5 mil; even for the lucky vessels that had managed to secure long –term sky-high charter rates in the good days, it’s doubtful whether the investors saw their money back.
The 4,923 teu YM Los Angeles sets new boxship scrapping records (Splash24/7)

4. While demolition represents the strongest hope for a market recovery at present and under current circumstances, there are concerns that the cleansing powers of scrapping for shrinking tonnage often are exaggerated.
Holy scrap! (Splash 24/7)

5. And, as a reminder of the dangers in shipping and also un-predictabilities, a major explosion will scrapping an offshore storage tanker took place in Gadani, Pakistan, where a reported thirty workers lost their lives in the burning inferno that ensued for several days. We mourn the loss of life, even for a country where life seems to have little substance. From a commercial standpoint, the Pakistani scrap market has effectively closed for several months, which will drive prices for scrapping vessels lower and would decelerate the pace of vessel demolitions.
Dire safety conditions revealed in wake of Gadani fire as death toll feared to surpass 100 (Splash 24/7)
6. Speaking of explosions, a Colonial petroleum products pipeline accidental breach in Alabama, the second in two months, has stopped the movement of petroleum products from the US Gulf to the New York area. There had been high hopes that the accident will boost the moribund tanker petroleum trades, both for Jones Act and international flag assets, but the impact from the closing of the pipeline seems to be manageable for now.
What Happens When the Most Important Pipeline in the U.S. Explodes (Bloomberg)

7. Volatility is high in shipping, everybody knows; however, volatility in related industries and markets is not much lower, and as reminder, one of the best investments this year has been the price of coal, whether thermal (mostly) or metallurgical coal. Some think that a bouncing commodities market would bring better fortunes to shipping too.
Coal Surge Leaves China Grappling With Runaway Market It Started (Bloomberg)

8. The Jones Act and offshore market in the US keep deteriorating, and a week after Tidewater formally mentioning the words ‘Chapter 11’ in their latest press release, now Hornbeck announced that they will be idling 80% of their offshore fleet.
Hornbeck to Stack Nearly 80 Percent of OSV Fleet (The Maritime Executive)

9. Reading such news about the state of the market, private equity funds keep moving aggressively in the space, and KKR, one the of the most active investors in shipping this year, have announced bigger plans for growth in the European markets via their Pillarstone platform.
Pillarstone to Snap Up Europe Shipping Loans (The Maritime Executive)
10. And, for those arguing that monetary policy alone is not sufficient for a market recovery and governments worldwide should be more active with investment, mostly in infrastructure, an article from Japan investigates the policy for the Japanese Coast Guard’s aging fleet. Possibly, at a time when ‘Shipshape 10’ News for Week Ending November 6, 2016, possibly a strategy to renew aging vessels could be stimulating in more than one way.
Many coast guard vessels operating past service limit (The Japan Times)

Containership MV ‘Zim Piraeus’ entering majestically the New York Harbor with the World Trade Center in the background. Image credit: Karatzas Images

‘Shipshape 10’ News for Week Ending October 30, 2016

Posted on October 29, 2016 by Karatzas Marine Advisors & Co.

After some long absence, we return to our blog and hereby we are establishing Shipping’s ‘Shipshape 10 List’, a list of links to news and articles that were published in the current week that encompass all the information a top executive in shipping, shipping finance, commodities, energy, supply chain and infrastructure should had read in the week.

Sometimes tangential, sometimes humorous, sometimes sarcastic, but always insightful and topical.

Hope you enjoy it!
1. Reuters Exclusive: Deutsche Bank among bidders for HSH Nordbank’s debt portfolio (Reuters) Another week, another shipping bank transaction

2. Wall Street Journal: Maritime Nations Agree to Cut Pollution From Ships in 2020 (Wall Street Journal Logistics Report) Forcing lower emissions with the shipping industry, this IMO regulation can act as a catalyst for developments that should had happened sometime ago

3. IMO: No Final Climate Plan Until 2023 (The Maritime Executive)
Fast, but not so fast. SOx bad, COx can take longer… Go figure!

4. IMF Estimates Restructuring Cost at W31 trillion (US$ 27 billion) for S. Korea’s shipping and shipbuilding industries (Korea Times) S. Korea’s aggressive strategy in shipping and shipbuilding industries will need major resources to weather a bad cycle after developments with Hanjin Shipping, Hyundai Merchant Marine, Daewoo Shipbuilding and Marine Engineering, …

5. Blystad readies $100 million dry bulk bing with OTC filing at Oslo Bors (Splash 24/7)
Trying to crack open the capital markets in this weak market; hoping that more will emerge, successfully.

6. The Tale of Two Canals – Game Theory in Action (Splash 24/7) The Suez Canal announced a new payment structure for canal dues, trying to position more competitively against the new Panama Canal locks and capacity.

7. Maersk, MSC to Charter Nine Former Hanjin Ships (The Wall Street Journal Logistics Report)
Looking for solutions and cashflows in the wake of Hanjin’s receivership filing with strategically placed charterers; but at what price?

8. Hyundai Merchant Marine Bids for Hanjin (The Maritime Executive)
Hanjin assets and routes and business up for sale; co-patriot Hyundai Merchant Marine should logically be the strongest contestant in this weak market

9. Wind and solar advance in the power war against coal (The Economist)

10. Titanic locker key sold for £85,000 at auction (BBC News)
More than a century later, the ’unsinkable ship’ keeps captivating

Bonus Feature: Two Offen-linked MR Tankers on the Sales Block (Lloyd’s List) Karatzas Marine Advisors & Co and Toepfer Transport GmbH have been given joint-exclusive mandate by the Insolvency Administrator in Germany for the sale of MT ‘CPO Japan’ and MT ‘CPO Korea’

All the SOx and Nox and COx of the world… Not a day too soon for the IMO to act. Image credit: Karatzas Images

Save

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.

Please feel free to subscribe!

As always, shipbrokerage and shipping finance advisory is provide by our sponsor company, Karatzas Marine Advisors & Co.

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.

Karatzas Shipbrokers Register

The Shipping Sale and Purchase (S&P) Worldwide Report