‘Shipshape 10’ News for Week Ending January 14, 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, sometimes humorous, occasionally sarcastic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

While on business traveling to Europe, newsworthy shipping articles fit to print; there are many more business developments and stories that best left untold:

On strategic objectives in shipping:
1. How China rules the waves (from the Financial Times)

On the ongoing Hanjin saga:
2. Sale of Container Terminal Takes Center Stage in Hanjin Bankruptcy (from the Wall Street Journal)

The way of the future?
3. Alibaba will sell you anything, including a spot on a container ship

Taking a minute to contemplate history:                                                                               
4. The simple steel box that transformed global trade (from the BBC)

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Hans Hummel: Hamburg’s last water carrier (Hans Hummel No 114 Statue); image credit: Karatzas Images

Possibly substituting for shipping?
5. ’China freight train’ in first trip to Barking (from the BBC)

Good news, but what’s left for the bottom line?
6. Container Cargo Imports Surged at End of 2016 (from the Wall Street Journal)

Consolidation in the containership liner segment:
7. Why OOCL will tempt many (from Splash)

Good news, bad news:                                                                                                        
8. New Record for Youngest Container Ship Demolition (from the Maritime Executive)

It’s all about money (for shipping) these days:
9. Shadow Bank Stretches Into Loans (from Bloomberg)

But shipping banks have to thin otherwise:
10. Shipping Loans Weigh Down Banks (from Handelsblatt)

Bonus feature: the aftershocks of the Lehman Brothers and changing landscape for investment banks:
11. Morgan Stanley in talks to sell oil tanker stake (from the Financial Times)

And, please make sure to look for news emanating from Naftemporiki’s 3rd Shipping Conference held at the Megaron in Athens this week on January 19th, 2017.

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

‘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)

 

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Shipping is an ancient art… 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.

Tanker Sale & Purchase (S&P) Update

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).

MT PRINCIMAR AMERICAS 10

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.

MT CAPE BRASILIA 4

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.


 

© 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.

 

Dry Bulk Sale & Purchase (S&P) Update

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 summer seasonality in the sale & purchase market, the market overall has been active; in the dry bulk market, there is no humongous volume of vessel sales, but the freight market has been improving ever so slowly since late spring, and many buyers (or at least interested parties) are trying to call the bottom of the market. There is increased buying interest and activity in terms of inquiries and vessel inspections – which does not always translate to transactions; interest nevertheless remains respectable. There have been concerns that some ‘hot’ buyers are outbidding the competition by a few hundred thousand dollars, but overall the market remains very disciplined. There is strong focus on modern and high quality tonnage, and always within certain price discipline; older- or lower- quality tonnage keeps receiving high opportunistic and sporadic attention only.

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May the seas always be calm… (Image credit: Karatzas Photographie Maritime)

In the capesize market, MV ‘Churchill Bulker’ (179,000 dwt, Hyundai Heavy, 2011) was reported sold by Denmark’s Lauritzen Bulkers to Greece’s Marmaras Navigation at region $34 million. A week or so earlier, sistership MV ‘Corona Bulker’ (179,000 dwt, Hyundai Heavy, 2011) was reported sold at same terms from same sellers to same buyers. Lauritzen Bulkers had mentioned in the last year that they would be looking to divesting of their dry bulk assets, and thus they are carrying through with these transactions; on the other hand, Marmaras Navigation had mostly been pre-occupied with their tanker fleet, but since earlier this year they have been buying into the dry bulk downcycle. They have a very good name for timing correctly the market in the past, thus it will be interesting to see whether the recent build-up of their dry bulk fleet would add onto their reputation. Similarly-aged capesize vessel MV ‘Houheng 2’ (179,000 dwt, HHIC-Phil at Subic SY/Philippines, 2011) has been sold at less than $31 mil from her Chinese owners (Henghou Industries (H.K.) Ltd.) to undisclosed European owners; the marked down on pricing is clear compared to the Lauritzen sales, as buyers are extremely preferential for quality tonnage; it’s further understood that despite her age, MV ‘Houheng 2’ had to undergo extensive engine repairs last year, confirming buyers pre-occupation with tonnage with unblemished pedigree. Also similarly aged capesize vessel MV ‘Blue Cho Oyu’ (180,000 dwt, Daehan, 2011) was sold by S. Korean interests to Mano Maritime Ltd. (Israel) at $33.5 million, a strong pricing given the vessel’s pedigree. Resale newbuilding MV ‘Glory Max’ (Hull No Shanghai Waigaoqiao 1335, 180,000 dwt at Shanghai Waigaoqiao with 2016 delivery) was sold by Gleamray Maritime to clients of Coberfelt in Belgium at $44 million. Older sistership capesize tonnage MV ‘Raiju’ and MV ‘Kohju’ (173,000 dwt, NKK SB, 2000/2001, respectively) were sold from the Mitui keiretsu to clients of SwissMarine and Winning Shipping, respectively, at appr. $9.7 million, each; prices achieved represent a precipitous drop from sale prices achieved just nine months ago, and it will be interesting to see how these two last transactions will play out for the buyers, given that pricing are just a premium to scrap but vessels have at least seven more years remaining economic life each.

In the panamax asset class, the post-panamax bulker MV ‘Umberto d’Amato’ (93,000 dwt, Jiangsu Newyangzi/China, 2011) was sold to German interests at just below $15 million. Sistership vessels MV ‘WelHero’ and MV ‘WelSuccess’ (93,500 dwt, Jiangsu, 2010) were sold en bloc by South Far Ocean Group Ltd. to European interests at $28 mil collectively.

Modern panamax bulker tonnage has seen increased buying interest with a series of transactions to report: MV ‘Asita Sun’ (82,000 dwt, Daewoo (DSME), 2012) at $20 mil to Greek buyers (Golden Union or Chandris) via bank sale; MV ‘Orion Pride’ (81,500 dwt, Hyundai Samho, 2011) at $19.7 million by Golden Bridge in S. Korea to undisclosed buyers (reported Golden Union in Greece); Golden Union has also been reported to be the buyer of a similar unit, MV ‘Bergen Trader’ (81,500 dwt, Sundong, 2011) by Nisshin Shpg.Co.Ltd. at appr. $19 mil; MV ‘Rainbow Ace’ (81,500 dwt, Guangzhou, 2012) at $16 million to Norwegian interests (Golden Ocean).

There have been sufficient sales of ‘traditionally’ size panamax dry bulk vessels as well: MV ‘Luyang Rising’ (76,500 dwt, Yangfan, 2012) was sold to German buyers at a relatively soft price of $15.5 mil (but with intermediate survey promptly due). MV ‘Rondeau’ (77,000 dwt, Namura, 2006) was sold to Omicron Ship Management in Greece at $13.8 million. MV ‘Kanishka’ (76,000 dwt, Tsuneishi, 2005) was sold at auction in S. Korea at a low price of $11.5 mil to Greek buyers (Sun Enterprises); the vessel has been at lay-up for some time now, and buyers will have to spend some money to bring the vessel back to a trading condition, which reflects the softness in pricing. By comparison, similar vessel MV ‘Grace Future’ (75,500 dwt, Universal, 2006) was sold to Greek buyers (A.M. Nomikos) at a very respectable $13.3 mil. Moving on to older tonnage, MV ‘Mahitis’ (75,000 dwt, Hyundai, 2001) was sold to Korean buyers (KLC) at a reported price of $8 mil., while 1998-built in Japan MV ‘Star Natalie’ (76,000 dwt, Sumitomo, 1998) achieved scrap-related pricing at ca. $4.2 mil.

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A flower-y market? (Image credit: Karatzas Photographie Maritime)

On to the ultramax / supramax asset class, an interesting sale for M/V ‘Yangzhou Dayang DY216’ (63,500 dwt, Dayang/China, 2015) by Crown Ship Ltd. at ca. $22.5 mil to an institutional investor in the U.S. (Raven Capital); after many funds were burned, there have been no sales to institutional buyers in a long while, thus the transaction stands out; it also stands out for the institutional investors’ preference buying ‘cheap ships cheap’, which it has not been of great investment success strategy, at least so far. MV ‘KT Condor’ (58,5000 dwt, Tsuneishi Zhoushan, 2011) was sold by Kambara Kisen at ca. $14.5 mil to Greek buyers (Kondinave). Similarly aged MV ‘Daxia (57,000 dwt, 2011) was sold at auction in Malta at $11.5 mil (understand that the vessel has been at lay-up for several months now, thus, besides the auction discount, there is also the costs associated with bringing the vessel back to trading condition.) Marmaras Navigation has also been active in the supramax market with the acquisition of two sisterships MV ‘Hanjin Albany’ and MV ‘Hanjin Rostock’ (55,700 dwt, Hyundai-Vinashin/Vietnam, 2011) at a lowly $13 mil each. MV ‘Nord Reliable’ (58,500 dwt, Tsuneishi Cebu, 2008) by P&F Marine achieved $13.8 mil to clients of Sea Globe.

For older tonnage in the sector, MV ‘Medi Osaka’ (53,000 dwt, Oshima, 2003) was sold by Nisshin Shpg.Co.Ltd. at $7.8 mil., while the also Japanese-built supramax MV ‘Olympias’ (53,000 dwt, Onomichi, 2001) was sold at a bank-driven-transaction at $7.2 mil. by Petrofin to other Greek buyers. Similarly, MV ‘Speedwell’ (50,500 dwt, Kawasaki, 2003) was sold by Misuga Kaiun Co. Ltd to Greek buyers (DND) at ca. $7.8 mil.

The transactions reported above have taken place within the month of July, and it seems to be a rather decent volume of business. However, one has to take into consideration that July has been the best month the dry bulk freight market has seen in a while, thus there had been some pent-up interest; also, although there has been certain price improvement since out last report, there is little real news to send home. Besides, several of the transactions mentioned above were for vessels at lay-up, and/or at auction, and/or driven by banks, and several of the Japanese sales were for reasons beyond market considerations, thus not a great deal of ‘voluntary’ trading volume.

As a matter of hopeful thinking, the graph herebelow depicts the Baltic indices since the market bottomed in early spring. Just think positive, enjoy the hopeful chart, and do not let sinister thoughts disturb skin-dipping in your favorite waters in the summer!

Baltic Indices since FEB2015

Baltic Indices since February 2015.


© 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.

S&P, Newbuilding and Demolition Update (March 8th, 2015) – Tanker Market Focus

Unlike the dry bulk market which is experiencing a multi-cycle structural weakness, the tanker market has been behaving much more enthusiastically, at least for time being. Tanker vessels have been trading above operating earnings since early 2014, and on occasion, for spot rates, earnings have been eye-popping – such as when in January 2015 rates for VLCCs flirted with the $100,000 pd mark. The attached graph shows one-year time-charter rates for the major segments in the tanker market, including the capesize market, for purposes of illustration and comparing tanker and dry bulker markets; and an obvious reminder, capesize vessels are the largest commoditized bulker vessels in the business.

2015 03MAR08 Sale&Purchase Tanker Market Update_Graph TC Rates

Crude oil pricing has grossly halved in the last year, and OPEC’s (read, Saudi Arabia’s) decision in November in Vienna to go after market share rather than margins has ensured that at least in the short term, oil will be cheap and likely will be trading heavily. Cheaper crude oil pricing has the potential of contango (buy now in the physical market, store – ideally on tankers – and sell in the futures market at a higher price); cheap oil pricing has the prospect of increasing demand (there are already signs that sales of SUVs and trucks are on the up in the USA) that eventually will mean more movement of cargoes; cheap crude oil has been encouraging build up of strategic petroleum reserves, and there are indications that China is going strong at building up theirs under the weakness of the pricing of the commodity. A brutal winter in the USA has stimulated the use of gasoline which has affected positively the petroleum products trade in the Atlantic. Despite the shutting down of many drills in the US for shale oil production (down by 39% from 1609 to 986 operating drilling rigs between October and end of February, according to Baker Hughes), the US maintains sky high inventories of WTI crude oil (for the week ended on February 27th, US crude oil inventories showed a massive weekly build-up of 10.3 million barrels to a total of 444.4 million barrels); if not for the shale oil production, the seasonal impact of the inhumane winter would have a much pronounced impact on the crude oil tanker market.

The strength of the tanker freight market has stimulated increased dealing in the sale & purchase market, but mostly it has encouraged several ‘corporate’ transactions whether on the M&A front (Euronav acquiring the Maersk VLCC fleet, the ‘merger’ of the Navig8 VLCC fleet with General Maritime to create Gener8, DHT’s acquisition of Samco Shipholding’s VLCC fleet) and on the IPO front (earlier this year Euronav was successful finally obtaining a public listing in the US). While more M&A in the tanker market may be expected, IPOs can be a trickier market, as investor appetite can gyrate faster than the fortunes for freight for big tankers. There is increased interest to see how a few of PE-sponsored tanker shipping companies will proceed in this environment, which while promising, it does not allow for these companies to float at a profit – indicatively, both Diamond S. sponsored by Wilbur Ross and Principal Maritime sponsored by Apollo – have relatively high cost basis and a floating at NAV will result in realizing losses, at least in the short term. Investor interest, and also charterer interest, in the tanker market – despite the market’s strength – have been of concern to many a shipowner. For instance, while the spot market is very respectable, there is no period market – in general – as charterers prefer to pay up spot prices now but not willing to commit for a two-year charter. This observation does not bode well for the future of the market, when charterers do not have the conviction to commit for two years of rates – in hot markets or markets expected to break out, charterers want to act and cap their exposure.

Likewise, the activity in the secondary market has not been as active as the freight market would suggest; of course, banks do not lend easily these days, thus this is a dislocation affecting overall activity in the market. And the freight market is not as strong to support modern tonnage for operating expenses (OpEx) and a fully amortizing loans; by revisiting out graph at the top of the page, one-year TC for a modern VLCC is appr. $45,000 pd; given a nominal price of a VLCC tanker of approx. $100 mil. and approx. $9,000 pd OpEx, the earnings barely cover a fully amortizing ship mortgage. And, sale and purchase activity has overall been anemic – despite the strength of the market; and it’s clear that the focus of the transactions has been concentrated on modern vessels [typically vessels newer than five years old – suitable for publicly traded companies that are ‘hot’ for deals in this market and pay with equity (thus low leverage / more flexibility with cash flows), and vessels older than twelve years old at often prices at a multiple of scrap – by Asian buyers or buyers with access to cargoes]; these typically are not signs of a very liquid, solid market that has consolidated and about to break out; not to mention, that now that the freight market has improved, there have been packages of very modern tanker tonnage discreetly mentioned for sale, primarily from ‘OK’ owners or ‘OK’ / Chinese yards who are testing the market to offload positions at a small loss or at a break-even; once again, an indication of little faith in the prospects of the market, albeit from ‘weak hands’ or ‘OK’ quality tonnage with little prospects to be much sought after in the future.

On indicative purposes, since the beginning of the year, the following representative transactions have taken place: in the VLCC market, MT „Patris” (298,500 DWT, Daewoo, 2000) was sold by Chandris (Hellas) in the UK to clients for Modec for FPSO conversion at the relatively very strong price of $38 million; similar vessel, MT „GC Haiku” (299,000 DWT, Hitachi Zosen, 2000) was sold at $31 million by GC Tankers to New Shipping; the three-year newer MT „DS Voyager” (309,000 DWT, Samsung HI, 2003) was sold by DS Tankers to NG Moundreas in Greece at $42 million.

In the Suezmax tanker market, in 2015 so far, there has been only the sale of two sistership vessels MT „Chapter Genta” (156,000 DWT, Jiangsu Rongsheng, 2010) and MT „Roxen Star” (156,000 DWT, Jiangsu Rongsheng, 2009) at $96 mil from Roxen Shipping to interests controlled by Frontline / Fredriksen Group.

Likewise in the aframax tankers, Teekay Offshore has disposed of the shuttle tanker MT „Navion Svenita” (106,500 DWT, Koyo Dock, 1997) at an undisclosed price; MT „Sark” (113,000 DWT, New Times SB, 2009) has been sold by Sark Shipping to EA Technique at $40 million.

In the LR1 tanker market, Prime Marine of Greece has sold four LR1 tankers to Hafnia Tankers in Denmark at an undisclosed consideration; the vessels were MT „Arctic Char” (75,000 DWT, Brodosplit, 2010) and the sisterships MT „Karei”, MT „Kihada” and MT „Maguro” (74,250 DWT, STX SC (Jinhue) 2010).

The MR2 product tanker market has been more active with the sale of sistership tankers MT „Caletta” and MT „Calafuria” (51,500 DWT, Hyundai Mipo, 2011 / 2010, respectively) by G. D’Alesio in Italy to interests at $30 mil each. For pumproom design vessels, Minerva Marine of Greece acquired MT „Nord Obtainer” (47,500 DWT, Onomichi Dockyard, 2008) at $19.50 mil, while similar tonnage vessel was sold to clients of Benetech in Greece at the comparatively high price of $23 mil for MT „Nord Star” (45,900 DWT, Shin Kurushima, 2009) from Saito Kisen. MT „Hellas Symphony” (46,200 DWT, Hyundai Heavy, 2000) was sold by clients of Latsco in the UK at $10.5 million, while similar tonnage MT „Tosca” (47,500 DWT, Brod. Trogir, 2004) was sold at $18 million. The 1997-built tanker MT „Midnight Sun” (45,000 DWT, Minami Nippon, 1997) was sold from Mitsui OSK Lines in Japan at $8.0 million to Far Eastern interests.

There has been an interesting sale of an MR1 tanker, MT „HC Elida” (37,500 DWT, Hyundai, 2001) at $11.5 million by Marlink Shif. in Germany to Far Eastern interests, showing relative strength for this under-the-radar tanker segment.

There have also been a few transactions in the usually quiet market for stainless steel tankers, such as the sale of MT „HF Pioneer” (19,900 DWT, Fukuoka SB, 2010) by Fairfield Chemical in the US to clients of Heung-A at $25.25 million. The also stainless steel tanker MT „Fairchem Colt” (19,900 DWT, Usuki Zosensho, 2005) by Tanba Kisen to S. Korean interests at $19 million. The older stainless steel tanker MT „ST Dawn” (19,900 DWT, Shin Kurushima, 2000) was sold by Stalwart Tankers at $14.5 mil to clients of TPL Shipping. The IMO II/III epoxy-coated tanker MT „Sichem Onomichi” (13,000 DWT, Sekwang, 2008) was sold at $11 million by Hisafuku Kisen K.K to S. Korean interests.

Once again, despite the fairly encouraging freight market, rather few transactions have taken place in the secondary market for tankers, and mostly for tonnage either newer than five years or older than twelve years.

And keeping accounts for newbuildings, eleven VLCC tankers have been ordered in 2015, twelve orders for Suezmax tankers and fifteen orders for Aframax tankers, and four MR tankers have been placed. All in all, TWO WHOLE VLCCs were scrapped so far this year, and zero scrappings in the rest of the tanker segments mentioned in this report, for a NET GROWTH of the world tanker fleet. It seems that staying away from NBs and more orders for tonnage is hard to do… And, a quick remark on the demolition market that has dropped by 20-25% since the beginning of the year, given the weakness of the dry bulk market and plenty of vessels offered, thus driving supply up and prices lower, admittedly from speculative rates well in excess of $500/ldt at the beginning of this year.


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