‘Shipshape 10’ News for Week Ending May 28th, 2017

‘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, periodically humorous, occasionally sarcastic, sporadically artistic, inferentially erotic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

While lots of shipping hope has been laid at the feet of a Chinese recovery, China’s sovereign debt has been downgraded mostly on concerns of slowing growth:
1. China’s sovereign debt downgraded by Moody’s (Financial Times)

2. China Moves to Stabilize Currency, Despite Promise to Loosen Control (The New York Times)

A seemingly major investor for shipping, but not clear whether there are string attached; in any event, the funding gap in shipping could suck up Dubai’s billion fund in seconds:
2. Dubai looking into forming $1 billion shipping investment fund (Reuters)

Shipping is a commodity b2b business. Od, isn’t it?
Quoting Basil M Karatzas, at Splash 24/7
3. Has Shipping Become Commoditised? (Splash 24/4)

In a weak overall market, mergers in the commodities trading world, and other news:
4a. Sowing Glencore’s Waves of Grain (Bloomberg)

4b. Huntsman and Clariant unveil $20bn tie-up (Financial Times)

4c. Noble Group, a big Asian commodities trader, is teetering

4d. War on Sugar Turns Years of Growth Into Market Tipping Point (Bloomberg)

OPEC had once promised to do ‘whatever it takes’ to drive oil prices higher. This week’s developments from Vienna show that OPEC may not be in charge of the oil markets as it used to be:                                                                                         5a. OPEC Should Watch Glencore’s Bunge Jump (Bloomberg)

5b. OPEC’s Weakest Link Is Not Who You Think It Is (Bloomberg)

5c. Opec: more of the same (Petroleum Economist)

5d. BP and Glencore warned over bullish fossil fuel forecasts (Financial Times)

5e. Oil market awaits ‘whatever it takes’ details as Opec gathers (Financial Times)

And the reason for OPEC’s dwindling chances controlling the oil markets:
6. New era beckons as Euronav VLCC is first to load US oil (Lloyd’s List)

Soft tanker asset prices have been conducive for M&A activity, with Scorpio Tankers acquiring the Navig8 Products Tankers fleet, creating the biggest player in the sector:                                                                                                                     7a. Scorpio Tankers fleet worth $3 bn after Navig8 Product Tankers takeover (Seatrade Maritime)

7b. Scorpio Announces Merger With Navig8 Product Tankers (The Maritime Executive)

While the world of ‘commodity shipping’ is struggling to recover, the cruiseship market has been strong, and China’s prospects in the sector cannot be ignored: 8a. China Tops Two Million Cruise Passengers (The Maritime Executive)

8b. Princess Tells “Chinese Story” Along Silk Road Route (The Maritime Executive)

8c. Greece To Bolster Cruise Capabilities (The Maritime Executive)

The current issue of the Economist is running a series of articles the oceans:
9a. How to improve the health of the ocean (The Economist)

9b. Getting serious about overfishing (The Economist)

9c. Megaprojects threaten Hong Kong’s iconic dolphins (The Economist)

“I will greatly bless you, and I will greatly multiply your seed as the stars of the heavens and as the sand which is on the seashore.” Genesis 22:15-18, and “like the sand of the sea, which cannot be counted” Genesis 32:12. Apparently, sand is not as plentiful these days:

10a. The World is Running Out of Sand (The New Yorker)

10b. An improbable global shortage: sand (The Economist)

Majestic sunset: Piraeus. Image credit: Karatzas Images

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

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 April 22nd, 2017

‘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, periodically humorous, occasionally sarcastic, sporadically artistic, inferentially erotic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

The dry bulk and commodities market had a difficult week overall; high inventories and weakening demand are the short-term drivers to blame :

1a.Baltic Dry Index Falls Almost 4%, Biggest Loss Since Mid-December (Reuters via gCaptain)

1b. Dry Bulk Freight Market: The Best Is Yet To Come (Seatrade Maritime)

1c. Iron Ore Price Tumbles To A Near Six-Month Low (Financial Times)

In the tanker market, a legal twist to the market consolidating forces; the article in Lloyd’s List quoting Basil Karatzas:

2a. Tanker Wars — The Empire Strikes Back (Lloyds’s List)

2b. Frontline Sues DHT (Splash 24/7)

3c. U.S. Court Rejects Frontline’s Last-Minute Bid To Stop BW-DHT Deal (gCaptain)

An iconic name in the German shipping world is in restructuring while one of their sponsored companies has been on the block; lots of head-scratching for the logic supporting the acquisition and the price paid for it; but shipping is a gutsy industry:

4a. Rickmers Group Reaches Restructuring Agreement (Maritime Executive)

4b. Navios Partners Buys Bankrupt Rickmers Maritime Boxship Fleet For $113m (Seatrade Maritime)

And, speaking of consolidation, a Korean shipbuilder got a new lease on life:

5a. Korea Avoids Daewoo Shipwreck (Bloomberg)

5b. Keeping DSME Afloat Bondholders Enforced To Agree On Reviving Daewoo Shipbuilding (Business Korea)

An interesting in-depth article in the Wall Street Journal on the Port of Lazaro Cardenas on the west coast of Mexico; APM’s ambitious terminal to build a strong base just outside the US to by-pass any Jones Act requirements have been cut short by a possible border import tax:

6. Trump’s Trade Plans Spell Uncertainty For Mexican Port (The Wall Street Journal)

Keeping an eye on a crucial commodity for shipping, grains, still at the intersection of government policy:

7a. U.S. Farmers, Who Once Fed The World, Are Overtaken By New Powers (The Wall Street Journal)

7b. Russian Agriculture Sector Flourishes Amid Sanctions (Financial Times)

7c. American Farm Belt Anxious About Trump Trade Threats (Financial Times)

Keeping an eye on another crucial-to-shipping commodity, oil, where it seems there are diverse opinions on the state of the market; good luck to the tanker owners deciphering the market, while the Eni-Libya article should emanate good news for the aframax tanker market:

8a. Oil’s Slide Towards $50 A Barrel Slows (Financial Times)

8b. Oil Dives Below $50 As Confidence In Opec Wavers (Financial Times)

8c. OPEC Sees A World That Still Has Too Much Oil (Bloomberg)

8d. Eni-Operated Libya Oil Field To Re-Open After Two-Year Halt (Bloomberg)

8e. Saudi Aramco Chief Warns Of Looming Oil Shortage (Financial Times)

And, shipping, besides financial, market and regulatory risks, definitely have to deal with operational risk too; two million barrels of crude oil in a supertanker grounded can easily turn into a nightmare:

9. Salvors Working To Refloat Grounded VLCC In Java Sea (gCaptain)

Taking a looking on the US domestic commodities, energy and shipping markets, some strong headlines point to very diverse directions:

10a. Blackstone To Buy Permian Basin Pipelines For $2 Billion (Bloomberg)

10b. Coal Shipments Lift CSX Earnings In First Report With New CEO (The Wall Street Journal)

10c. Princess Cruises Sentenced To Pay $40 Million Fine For Pollution Scheme (Miami Herald)

And, for those with a literary bone to nourish:
Literature’s Arctic Obsession The Greatest Writers Of The Nineteenth Century Were Drawn To The North Pole. What Did They Hope To Find There? (The New Yorker)

And, for those with travel flexibility, please join us next week at George Town, Grand Cayman, Cayman Islands, for the 2nd Cayman Maritime Week; Basil Karatzas will present at the 5th Mare Forum Cayman Shipping and Yachting Summit on the implications of the Trump Administration to the shipping industry.

A pretty face of the cruising industry. Image credit: Karatzas Images


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

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.

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

Tankers: Think Counter-cyclically!

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

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

MT ORWELL 2

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

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

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

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

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

MT PRINCIMAR AMERICAS 12

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

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

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


© 2013-2015 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

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 (August 29th, 2014) – Tanker Market Focus

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

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

VLCC MT Front Comanche

VLCC Tanker MT„Front Comanche”

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

Suezmax MT Cygnus Voyager

Suezmax Tanker MT „Cygnus Voyager”

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

Aframax MT Maersk Prime

Aframax Tanker MT „Maersk Prime”

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

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

Handy Chemical / Products Tanker MT „Green Stars"

Handy Chemical / Products Tanker MT „Green Stars”

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

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


© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

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 (January 19th, 2014) – Tanker Market Focus

Since our report of last week with its headline news of Euronav acquiring the Maersk Tankers VLCC fleet of fifteen vessels at $980 million, freight rates for tankers, primarily crude oil tankers, have seen levels that were almost forgotten, or even non existent any more. VLCC rates have ranged between $40,000 and $50,000 pd for this past week, while Suezmax and aframax tankers saw even higher rates, exceeding $100,000 pd for certain routes, primarily cross-Med and Baltic Sea, based on heavy delays in Bosporus and Libya having a change of heart in terms of oil exports. Clean tankers in the products trade have been ‘floating’ along with LR2s heading to Japan getting less than $10,000 pd, while dirty tankers whether cross-Med or USG-Caribs are getting better reception.

Enlightened sale of MT ALGECIRAS SPIRIT (Image source: shipspotting.com)

Enlightened sale of MT ALGECIRAS SPIRIT (Image source: shipspotting.com)

While Euronav was in the news last week with their transformative acquisition, this week they have been in the news with exceptional pricing for the sale of the 1999-built VLCC MT „LUXEMOURG” (299,000 DWT, 1999, Daewoo) for FPSO conversion to Modec at $28 million. Probably the price is close to $10 million above salvage value and several million from a hypothetical sale for ‘further trading’, but still meaningfully lower than the $35.8 million that Euronav achieved in 2012 for the sale of sistership vessel MT „ALGRAVE” still to Modec for again conversion purposes. Earlier in January, MT „SATURN GLORY” (299,000 DWT, 1998, Daewoo) was sold in excess of $23 million to clients of Sentek Marine & Trade. In the Suezmax market, Avin Oil of Greece has acquired the good vessel MT „ALGECIRAS SPIRIT” (150,000 DWT, 2000, Daewoo) from publicly listed TK Tankers at about $17.8 million. The pricing is a firm improvement over the sale of sistership tanker MT „TENERIFE SPIRIT” (15,000 DWT, 2000, Daewoo) again from Teekay Tankers to Eurotankers in Greece in early November 2013 at about $16.3 million. Still in the Suezmax market, MT „HERO” (156,500 DWT, 2011, Jiangsu Rongsheng) was sold at auction to Greek buyers (Alma) at $51.5 million.

Teekay has been active also in the buying front as they have acquired in a different transaction four modern sistership aframax tankers owned By Montanari but controlled indirectly from a European bank which had to approve any sale (MT „VALLESINA”, MV „VALBRENTA”, MT „VALFOGLIA”, and MT „VALDARNO” (2009/2009/2009/2010, 109,000 DWT, Hundong Zhonghua)) at about $30 million each. We understand that previous potential buyers were not impressed with the quality of vessels, but the pricing had to be ‘right’ given sellers’ price ideas came down sizably since early 2013 at a time when asset prices, rates and momentum were heading the opposite direction. In a sign that there is a big disconnect with tanker tonnage sold before the turn of the century, MT „NORD” (105,000 DWT, 1998, Halla Eng.) achieved $9.8 million, a price no much higher than scrap, but still strong for what vessels of this vintage have been fetching of recent.

The LR1 tanker MT „ANNA VICTORIA” (75,000 DWT, 2004, HHI) was sold to clients of Eletson at region $22 million. In general, the market for product tankers has been cooling off as many players are trying to stay away – let’s say a ‘hangover’ effect from the massive orders in the sector, while we have seen ever increasing inquiry in the crude tanker market, including purchase inquiries for VLCCs, Suezmax and aframax tankers; sometimes we are confused whether such inquiries are legitimate efforts to enter / expand in these markets or cases ‘the tail wagging the dog’. No doubt however, that there is increased levels of inquiries in the segment which could be a sign of potential ‘break out’ of the market.

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Stainless steel parcel tanker MT CLIPPER MAKISHIO (Image source: Wiki Commons)

In the stainless steel parcel tanker market, there is the interesting sale of MT „CLIPPER MAKISHIO” (19,980 DWT, 2009, Fukuoka SB) to clients of Songa Shipping in Norway at just below $27 million. There are no many sales in this niche market in general, so each one of them is noteworthy; the pricing has been fairly strong for a vessel already five years old.

The demolition market seems to be coming back to market slowly after the holidays, but again, when freight rates are solidly in cash flow positive territory, it’s only logical that owners are given an extension to do the inevitable; maybe another trip, maybe another month, but definitely not now. Tankers coming for their third or fourth special survey are the lowest hanging fruit, and the lower quality vessels with opex. Demolition pricing is solidly in the $400/ldt territory, with tankers getting $450/ldt or even more in subcontinent, with about 20% discount in China, at about $350/ldt.

Our report in the dry bulk market has been posted separately due to volume of reported transactions (please click here to access.) Developments in the financial and capital markets have always been of heightened interest, especially the prospects for a new round of stress tests with the European banks. That will be an interesting development to watch, although it seems ever likely that Basel III will have little chance to get implemented as envisioned originally and on schedule; just more regulatory bodies seem to be getting more receptive to the banks’ points of view and also giving higher priority to stimulating economic growth at the cost of curtailing or penalizing banks just because they stand on the wrong side of a benchmark figure.

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