‘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 (September 27th, 2014) – Dry Bulk Market Focus

It’s hard to believe that the Baltic Dry Index (BDI) started the year above the 2,200 mark given that now is standing at below 1,100, and having spent most of the late spring and summer below 1,000. A seasonal rally had religiously been prayed for and for a few recent weeks capesize rates improved to ‘high teen levels’ (approximately $18,000 pd on average spot market), but then again, the rally seems to have run out of steam a bit too early. A worldwide bumper crop season of grains, primarily in North America, has been holding the hopes for boosting panamax rates especially in the Atlantic, but it seems railroad capacity has preferentially been tied up to shipments of shale oil, leaving inland seaways transport to cope with the movement of the cargo along the Mississippi River to New Orleans for exporting.   China, as this was put into perspective in a recent New York Times op-ed article, has been focusing on clean air and has shut down domestic coal mines of poor calorific quality or high sulphur content, and likewise imposed higher standards of imported coal, which likely would stimulate increased imports and thus help drive higher dry bulk freight rates. There has been speculation that, over the long run, China will be shifting its power generation to natural gas, which is perceived as a negative development for coal miners worldwide, but good for the LNG trade fortunes. In India, there has been noted excessive port congestion with vessels waiting to unload coal, and there is hope that such port congestion could translate to higher rates. The decision by the Supreme Court of India to declare ‘arbitrary and illegal’ the issuing of licenses for more than 200 coal mines issued since 1993 creates further hopes that coal imports would be needed for the country to meet its domestic needs. The decision is not revoking the licenses altogether yet, but taking action on the ‘coal scam’ has created great uncertainty for the approximately 30 operational mines.

MV BERGE MACCLINTOCK

Capesize vessel ‘Berge McClintock’ (Image source: http://www.shipspotting.com

In terms of sale and purchase in the dry bulk market, Bunge has exercised a purchase option to acquire from Fleet Management MV „C Phoenix” (2011, Jiangsu Rongsheng, 176,000 dwt) at a deep-in-the money price of $40 million. It is understood that the vessel has been already on charter to Bunge until January 2015 at $15,000 pd with Bunge’s option to extend at similar levels for an additional year, which definitely has affected pricing further. Navios has purchased from Berge Bulk MV „Berge McClintock” (2012, Hanjin Heavy, 179,000 dwt) at $52.5 million. MV „Rio Manaus” and MV„Rio Montevideo” (2012, HHIC- Philippines, 180,000 dwt) were sold CarVal Investors at $52 million; certain broker reports have the sale price at $48 mil, which may be better in line with the market given the thin pedigree of the shipbuilder and also the notion that sellers have been the Ahrenkiel Steamship in Germany, knowing to have been in discussions with their banks. CarVal has been active in shipping recently as a couple of week ago has been associated with the purchase of another modern cape MV „Silver Surfer” (2013, Sungdong S.B., 179,000 dwt) from Sinokor at $53.5 million, which would still be considered at a slight discount to the market, placing prompt capesize re-sales below the $60 million market, in order to reflect for the price achived for this 2013 tonnage.

MV JIDAL VADAR

Built at Burmeister & Wain (Denmark), panamax bulker MV ‘Jindal Vadar’ (Image source: http://www.shipspotting.com)

Vintage panamax bulker MV „Castillo de San Petro” (1994, Korea, 73,500 dwt) was sold for further trading at $5.7 million to undisclosed buyers, a price in line with her scrap value (10,624 ldt); vessel is immediately SSDD due. Similarly aged MV „Sinokor Pioneer” (1995, Sumitomo, 70,000 dwt) was sold at $5.95 million to Chinese buyers, with vessel having about a year to trade before her next drydock, while Danish-built MV „Jindal Varad” (1994, Burmeister & Wain, 75,800 dwt) was sold at $5.8 million to Indian interests. In terms of modern panamax bulkers, the most recent transaction of modern tonnage has been almost a month ago when MV „Zhushui 5” (2012, Seroya Zhushui, 79,500 dwt) fetched a discounted $20.5 mil by Greek buyers; the transaction is interesting that a relatively new Chinese shipbuilder built the vessel on their own account (with no independent third-party supervision besides the classification society) and then facing weak demand when attempting selling the vessel, and thus the soft cash price; interestingly, we keep seeing more tonnage of that nature.

MV SEA LILY

Supramax bulker MV ‘Sea Lily’ (Image source: http://www.shipspotting.com)

In the supramax / handymax segment, MV „Emerald Strait” and MV „Endeavour Strait” (2010, Sanfu, 56,800 dwt) were sold by Rehder Carsten in Hamburg to Maritime Opportunities in Norway at $22.5 million, a rather strong price, given the vessels’ un-inspiring shipbuilding pedigree. Norwegian financial buyers were also the buyers of MV „Free Jupiter” (2002, Cosco Nantong, 47,000 dwt) at $12.3 million while sellers Freeseas (Nasdaq: FREE) took the vessel back on bareboat charter for seven years at $5,350 pd. Supramax bulker MV „Sea Lily” (2004, Tsuneishi Zosen, 52,500 dwt) was sold to Greek buyers at $15.5 mil by CosBulk to Greek buyers.

In the smaller handysize market, the well-built in Japan MV „Kwela” (2002, Kanda, 32,500 dwt) was sold at approximately $10.7 mil to ACT Infraport in China, while MV „Caribbean Frontier” (2002, Minami Nippon, 28,000 dwt) was sold at 9.5 million. MV „Fortune Frontier” (2002, Shikoku, 29,000 dwt) was sold in August at $9.7 million, confirming an asset price stability despite the end of the summer and renewed optimism on improving shipping prospects. MV „Ocean Pearl” (1994, Kanda, 28,000 dwt, 6,352 ldt) built at same shipyard in Japan achieved a very respectable $6.8 million by Chinese buyers. Exact sistership MV „Theomitor” (1994, Kanda, 28,000 dwt) by Anbros Maritime in Greece achieved also same price of $6.8 million in independent sale to also Chinese buyers a week earlier. MV „Silver Star” (1995, Saiki, 22,000 dwt) achieved a strong price of $5.1 mil given her immediate SSDD due position (5,318 ldt). Finally, MV „Lady Anthula H” (1999, 20,700 dwt, 5,300 dwt) was sold in a bank-driven transaction to Turkish buyers at $4.5 million with her SSD immediately due.

In re-capping market activity, the trend of institutional investors or buyers with the access to the capital markets is focusing on modern, expensive tonnage; lack of credit for the traditional, independent shipowner has shifted the market towards small transactions with relatively older tonnage; reflecting the nature of the buyers, there have been a clear bifurcation in the buying interest as well in reference to tonnage quality, with owners putting their own money on the table seeking value deals with quality (read Japanese) tonnage; there is little tolerance for sub-par tonnage; for institutional buyers, shipyard pedigree is a lower priority as this apparent with the capesize transactions reported herewith.


© 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.