‘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.

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

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

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

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

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

Shipping is beautiful industry, and never boring!

VLCC TANKER MT 'GENMAR ATLAS'

VLCC TANKER MT ‘GENMAR ATLAS’

© 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 (September 30th, 2013)

Cape Asset Pricing Improvement, for now
The capesize market had a terrific last two months with freight rates briefly passing $40,000 pd recently for an eye-catching improvement of almost 300%.  As phenomenal such rates as they may be, one may even call them a ‘fantastic object’ as legendary investor George Soros would say, unreal but immensely attractive; besides the obvious question on whether the freight rally is sustainable, there have been anxious inquiries on the impact of the rally on asset pricing, especially for modern capesize vessels.We understand that the 2013-built at IHI (now called Japan Marine United after the recent merger with Universal Shipbuilding Corporation) 180,000 DWT capesize vessel MV „CAPE CHALLENGER 1” was sold last week at about $51 million. Although the owner of the vessel was a Japanese local company, we understand that the sale was controlled by Mitsubishi Corp as the Sogo Shosha. There are conflicting reports on the buyers, ranging from private Greek owners (Carras Hellas) to the publicly traded Navios Group (if the buyer is a publicly traded company we are sure to have the obligatory PR in due course.)  Also this week, the 2013-built at Hyundai Heavy (HHI) 173,000 DWT capesize vessel MV „JK PIONEER” has been reported sold, possibly to clients of Diana Shipping (DSX) at a reported price of $52-53 million. Sellers are Korean-based JK Maritime, and the solid price is partially attributable to ‘eco design’ of the vessel and very good ‘spec’ despite the below market charter-attached of about $11,500 pd for six more months (which, if true, would impacted negatively the price.)

Big Cape Docking (Image Source: Vale)

Big Cape Docking (Image Source: Vale)

These two sales indicate substantial improvement for modern cape pricing over the last few months based on a market comparison analysis. About a month ago, Belgium-based Bocimar (Compagnie Maritime Belge) sold their 2012-built by Hanjin Subic in the Philippines MV „BULK CANADA” at $41.5 million to Norway’s Berge Bulk; given the perceived ‘weak’ name of the shipbuilder in the marketplace, some discount is attributable to such fact. Shortly before that, in late July, Jinhai Heavy Industries-built / controlled 179,000-dwt Hull No J0021 with 2013 expected delivery was sold at a reported price of $38 million to reportedly Greek interests (possibly, Marmaras Navigation.) This vessel had been ordered in 2010, based on information from market reports at the time, on behalf of Fredriksen’s Golden Ocean concern with an expected April 2012 delivery, but accurate details of full-fledged newbuilding contract details, such as refund guarantees, down payment, etc are thin at least. In any event, both these older sales deserve a downward adjustment of a couple of millions due to their shipbuilding pedigree and the potential lack of any extra TLC provided during their construction; and, both of the current sales came from high quality yards and seem to be of good specification, at least of specification not seeing in the market that often from sale candidates.

Based on these sales, there has been an asset appreciation in play to the tune of probably more than 25% over the last two months (when adjusting for age, spec, quality of parties involved, reputation of shipbuilders, etc)  No bad for two months’ time, especially after the misery of the markets in 1H2013; and, again, freight improved by ten times as much in almost the same interval.  Based on our discussions with market players, we understand that several modern capesize owners were approached about the possibility of selling vessels, providing another sign that the sentiment, at least temporarily, has improved and underlying the ever stated argument that there are no good vessels for sale.

It will be interesting seeing how the market will develop, and whether the present developments in the cape S&P market are indeed signs of a cyclical recovery or just another ‘false positive’ temporary peak.  At least for the immediate future, the market is widely expected to take a breather with Golden Week underway in China – the mother of the cape market; also, the paper market (FFAs) have not softened in the last two weeks despite the improvement of the spot market (CAL 14, CAL 15 and CAL 16 trade at about $17,000 pd,) well below the spot market, although the paper markets in shipping often trade in backwardation.  And the drop over the last two weeks for HRC steel has dropped by $20/ton squeezing the margins for the steel mills.

© 2013 Basil M Karatzas & Karatzas Marine Advisors & Co.

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.