Annual Review 2005-A

Shipbrokers since 1856

Existe en version anglaise

SHIPPINGAND

SHIPBUILDINGMARKETS2005

The BRS annual review of world shipping

and shipbuilding developments in 2004

and prospects for the coming months…

●●●●●●●●●●●●●●

SHIPPINGAND

SHIPBUILDINGMARKETS2005

1 Foreword

3 The shipbuilding market in 2004

25 The cruise market in 2004

31 The tanker market in 2004

45 The offshore market in 2004

51 The chemical carrier market in 2004

55 The liquefied petroleum gas shipping market in 2004

65 The liquefied natural gas shipping market in 2004

69 The dry bulk market in 2004

75 The containership market in 2004

87 The Ro-Ro market in 2004

91 The marine insurance markets in 2004

95 French shipyards deliveries and orderbook in 2004

97 French orders to foreign shipyards in 2004

1Foreword

If we were able to rejoice in 2003 for the excel-lent year that we experienced in shipping,what can be said about 2004 where we went

from record to record?

The healthy state of the industry has had oneconsequence, which has gone relatively unnoti-ced, the reconciliation of the shipping world withthe stock market. Historically the Stock Exchangehad never shown much interest in the shippingsector, too uncertain, too volatile, too specialised,and shares always showing a chaotic tendencyand too low p/e ratios. However, discreetly, theshipping sector has enjoyed this past year one ofthe best performances amongst all other quotedindustries. The few indexes which comprise theevolution of shares in shipping show an overallprogression of nearly 30 % with strong disparitieswithin the sectors. For example, according to the“Tradewinds Equity Index”, values of oil tanker

companies have moved on average betweenJanuary 2003 and December 2004 from an indexof 100 to nearly 400 and for the container sectorfrom 100 to 250. A number of values have tripledor even quadrupled in the course of the year,taking the financial analysts by surprise, as up tillnow they have paid little or no attention to ship-ping and maritime activities.

This discovery by the financial markets of our sec-tor of activity opens up new financing options forowners (in addition to the traditional mortgagefinancing) and should also allow for substantialmerger & acquisition operations, which we havehad a glimpse of in 2004:

◆ In April, Teekay Shipping bought NavieraTapias, who own four gas carriers and ninemodern Suezmaxes, with the intention of deve-loping the LNG business and introducing TeekayLNG partners onto the stock market.

ANOTHERPOINTOFVIEW

2 Shipping and Shipbuilding Markets 2005

◆ The oil tanker owner Stelmar, having rejectedan offer from OMI and Athenian Tankers, is finallyon the point of accepting an offer from OSG(Overseas Shipholding Group) of $48 per share,or $1.3 billion.

◆ Elsewhere, John Frederiksen, the leading tan-ker owner, has taken shares in Hyundai MerchantMarine (6%), in P&O Nedlloyd (10%), and inGeneral Maritime (4.3 %). Nobody expects thathe will be satisfied with a minority shareholding.

◆ At the end of the year, the Greek owner Restismanaged to lay his hands on the bulk shippingactivity of MISC (Malaysian International ShippingCorp.) namely 32 ships for $740 million.

Some owners, encouraged by the success ofGeneral Maritime Corp., whose shares more thandoubled in the course of the year, are now loo-king at a quotation on Wall Street, such as theStena group with their subsidiary Arlington Tan-kers or Greek owners Dynacom, and this trendshould be accentuated, unlocking importantinvestment capacities within the shipping com-munity.

Ironically, the rise in shipping costs has as aconsequence called into question this service,which is often minimised in the economic chainand has made operators reflect more deeply intotheir logistics and operations, but also as to thequalitative differences between owners. All thatis expensive is not necessarily good value…

Curiously it is in this context of highly priced mar-kets that charterers are seeking long positions to

which owners are resisting, given the inflatedvalues in the short term. Arbitrages between longterm/short term and purchase/chartering becomemore and more strategic, with certain choicesbeing crucial in case of a brutal change in themarkets.

This year has also witnessed the steady decline ofthe dollar, concealing to some extent the effectsof rocketing oil prices and shipping costs asexpressed in euros, but disastrous for Europeanshipyards, wiping out their productivity gains andthus accentuating the competitive advantage ofthe Asian countries with the exception of Japan.

However, if the dollar continues its downwardtrend, a revaluation of some currencies, such asthe Korean won and the Chinese yuan wouldbecome inevitable. Today this is a major concernof Chinese and Korean shipyards who alreadysuffer from a massive rise in their supply costs,steel in particular. Asian shipyards certainly havetheir orderbooks full, but profits are not yet for-thcoming despite substantial increases in theirsale prices. A revaluation of their local currenciescould jeopardise, at least temporarily, theirexpansion.

We begin this new year with confidence, even ifwe believe that certain excesses will correctthemselves, since the growth of the developingcountries, and especially that of China, is still verymuch a reality. We remain nonetheless cautiousas to the evolution of the dollar which couldupset a number of economic calculations and tar-nish the current glitter of the shipping sector. ■

33The Shipbuilding Market in 2004

For the shipbuilding markets, 2004 can justi-fiably be considered as the year that broke allrecords. This phenomenal upsurge of new-

building activity in 2004, has been characterised bya number of salient factors:

◆ A flood of new orders in the shipyards. This hasbeen equalled only by the record volumes acrosstonnage types achieved in 2003. During the courseof 2004, the world orderbook jumped from125 million gt to nearly 165 million gt, representingmore than 3,700 ships. This figure was only 65 mil-lion gt in mid 2002. Deliveries are spread out toyear-end 2008, and in some cases the shipyards arecommitted through to 2009.

◆ A strong rise in sale prices. The top prices achie-ved for tankers and bulk carriers at the beginningof the 1990’s have been reached again and evenexceeded. The long-standing symbolic barrier of$100 million for VLCCs and very large container-ships has been surpassed; in some cases by as muchas 20 %. Exceptionally high freight rates havebrought on fierce competition between owners.

This has been witnessed in the numerous resales ofships under construction, and in the second-handmarket ships have been purchased at prices abovenewbuilding prices. These factors have conspired tobring about the price hikes we have seen in 2004.At the same time, builders have been facing excep-tional cost increases mainly due to more expensivesupplies and a depreciation of the dollar. Shipyardshave in this respect received only the meagre left-overs of the lucrative financial results being enjoyedin the shipping sector.

◆ An increase of global shipbuilding capacity.Korea has once again consolidated its position asthe world shipbuilding leader with an orderbook ofabout 62 million gt compared with 49 million gt in2003. Japan has reaffirmed its second-place posi-tion with nearly 54 million gt as opposed to 43 mil-lion gt twelve months earlier. China has continuedits inexorable ascent with near to 26 million gtagainst 17 million gt at the end of 2003. Againstthis increase in orders in the Far East, the Asian ship-yards’ saturation has helped to bring about an

THE

SHIPBUILDING MARKET

IN

2004

2004, the year that broke all records!


increase in activity in the West and East Europeanshipyards. Between year-end 2003 and year-end2004, West and East European orderbooks climbedfrom 6 to nearly 8.5 million gt and 5 million tonearly 7.5 million gt, respectively. The desperatesearch for newbuilding berths with early deliverydates has sent owners off to other more remotedestinations (Vietnam, Iran, Russia, India, Brazil,Dubai…) whose figures have gone up from 4 to7 million gt.

◆ An adaptation to the new situation. Builders andowners have been seen to adapt their attitudesfacing this new situation. Builders have becomemore and more discriminatory. They have given pre-ferential treatment to ships of which the valuesmaximise the turnover of each of their berths, orstandard designs. They have also been seen to givepriority to their faithful clients, and clients who aredeemed not too demanding. This behaviour hasbeen brought on in large part due to the worryingcost increases on existing contracts, which haveseriously dented shipyards’ profit margins in 2004,despite the rise in newbuilding prices during theyear. Owners, who are reaping the financial bene-fits due to a freight market, which has been une-qualled in modern times, are visibly more relaxedand even sometimes euphoric. Whereas only ashort time ago, owners used to bitterly discuss tech-nical specifications, prices and payment terms,nowadays they are more pragmatic, acceptingterms and conditions imposed by shipyards, provi-ded that they allow them to place new orders.

The economy and trade

In 2004, the world economy made strong gains withan average GDP growth rate of 5 % per year. Thissignifies the largest increase during the past 30 years.In tandem with world growth, commercial trade hasflourished, increasing almost 9 % compared to agrowth of commercial trade of 5 % in 2003.

This rapid expansion and the increase in the demandof raw material, largely explains the unprecedentedhike in freight rates as well as the large number and

volume of transactions on the second-hand and thenewbuilding markets.

Freight rates

Dry bulk freight rates continued their irresistibleascent and achieved historic levels. This frenzy hasbeen fed by the enormous demand for raw mate-rials generated by China, which has become theworld’s main importer of most raw materials in afew years. This drastic rise in rates has broughtabout a fear of overheating throughout the year.The declarations of the Prime Minister of China atthe end of April certainly set the tune for the seriouscorrection that occurred during the spring. This cor-rection was however short-lived. By the beginningof summer, rates had started to climb again. Despitevery high volatility (the Baltic Dry Index swung bet-ween 2,600 and 6,200 points), these rates, whichhad already doubled on average between 2002 and2003, doubled again between 2003 and 2004.

In 2004, containership rates were bolstered by thegrowth in commercial trade and Chinese exports.The American commercial deficit has reached his-torically high levels at nearly $ 600 billion. By andlarge the containership rates manifested less volati-lity compared to the dry bulk or liquid markets as itis characterised by line operators employing ownedor long-termed chartered ships on their routes.Containership rates, which doubled on averagebetween 2002 and 2003, have tripled between2003 and 2004.

For the first time the price of crude oil broke the$ 55/bbl barrier in 2004, and the oil market hasremained extremely nervous throughout the year.Freight rates for tankers doubled on average bet-ween 2003 and 2004.

Despite relatively high volatility, freight rates thushave achieved record levels in 2004, allowingowners to get substantial investment leverage forordering new ships. It was by no means obvious atthe end of 2003 that owners would be able toorder in 2004 as many ships as the previous year.Yet they did so, and at higher prices and for laterdeliveries.

Orders

Bulk carriers

With nearly 37 million dwt ordered compared with33 million in 2003, orders for bulk carriers and inparticular for Capesizes were numerous in 2004.

The orderbook has increased and gone from53.1 million dwt at year-end 2003 to 71.6 milliondwt year-end 2004. The fleet on order at the end of2004 represented nearly 22 % of the existing fleet,

IMF Forecast (as % of GDP)

World USA Japan Euro zone China

2003 3.9 3.0 2.5 0.5 9.1

2004 5.0 4.3 4.4 2.2 9.0

2005 4.3 3.5 2.3 2.2 7.5

IMF - September 2004

General trends

2002 2003 2004 2005

World GDP 3.0% 3.9% 5.0% 4.3%

World trade 3.3% 5.1% 8.8% 7.2%

IMF - September 2004


as against 17 % in 2003. The uncertainties sur-rounding the future necessity for double-hulled ves-sels was settled in May 2004 with a decision tokeep the status quo.

Owners faced several problems in finding berthspace to order their bulk carriers, ships often judgedto be too simple by builders. Korean shipyards pre-fer to build ships with better returns and bulk car-riers in Korea only represent 5 % of the shipbuildingmarket as compared to 25 % in 2000. Apart fromcertain shipyards that today are making it their spe-

ciality (like Shanghai Waigaoqiao Shipyards (SWS)and Bohai for Capesizes, Jiangnan and Hudong-Zhonghua for Panamaxes), Chinese shipyards are byand large moving to other types of ships. This leavespredictably Japanese builders with the lion’s share

0

6,000

3,000

3,500

4,000

4,500

5,000

5,500

2,500

2,000

1,500

1,000

500

Index 1,000 = January 98

Freight rates evolution since 2000Ja

n 00

Apr

00

July

00

Oct

00

Jan

01

Apr

01

July

01

Oct

01

Jan

03

Apr

03

July

03

Jan

04

Apr

04

July

04

Oct

04

Oct

03

Jan

02

Apr

02

July

02

Oct

02

P/C 1,700 teu

Baltic Dry Index (BDI)

VLCC 250,000 t G.Pers./Japan

0

60

40

50

30

20

10

% dwt of fleet on order

Percentage of the active fleet on order by type

1994

1995

1996

1997

1998

1999

2000

2002

2003

2001

2004

Oil Tanker

Bulk

Containership

New orders during the year

(million dwt) 1999 2000 2001 2002 2003 2004

Tankers > 25,000 dwt 12.7 34.3 25.0 19.9 52.5 43.7

Bulkers > 15,000 dwt 21.9 17.6 7.7 21.6 32.9 36.8

Containerships > 1,000 teu 7.0 13.7 7.1 7.1 26.6 25.4


of this sector, with nearly 65 % but they also givepriority to domestic owners and are saturated.

Owners and operators are looking for economies ofscale and a number of 200,000 dwt bulk carriers aswell as 230,000 and 300,000 dwt ore carriers havebeen ordered. The latest very large ore carriers weredelivered by Hyundai Heavy Industries in 1992 andDaewoo in 1997.

In sum, demand for bulk carriers remains strongand has not been totally satisfied yet.

Containerships

With close to 26 million dwt on order, demand forcontainerships has been as sustained as in 2003.

The orderbook has grown at a consistent pace,going from 35.5 million dwt at the end of 2003 to54.3 million dwt in 2004. The fleet under construc-tion at year-end 2004 represents a figure of 53 %of the existing fleet, as against 35 % in 2003 (onlycellular ships), which gives rise to some concerns.

Korean shipyards, which hold nearly 65 % of themarket were unable or did not want to satisfy thetotality of this buoyant demand. They have concen-trated almost exclusively on very large container-ships, leaving opportunities for Chinese, Taiwanese,Singaporean, German and Polish shipyards to fillthe void.

In a way, containerships have set the pace for thenewbuilding market in pushing prices higher. It isindeed the sector which has seen the strongestdemand. Amongst the main three segments thatform the core of newbuildings, this is the one that

offers the highest prices to the builders, other fac-tors being equal. The added value to the shipyardsis also higher as these ships require less steel, lessexternal procurement, are often ordered in seriesand can be easily adapted or modified.

As was the case in 2003, a number of over-Pana-max containerships were ordered in 2004. Withclose to 50 units over 7,500 teu in service, 170 unitswere on order by the end of 2004. New size recordswere achieved with the order of container carriersof 9,300 teu for the account of AP Moller, whilstCMA CGM and Hyundai Heavy Industries agreed toextend the capacity of ships previously ordered from8,300 teu to 9,300 teu. The 10,000 teu barrier willshortly be broken, probably bringing about a newwave of orders, motivated by a race for size bet-ween operators. The coming about of a new gene-ration of containerships above 10,000 teu willnonetheless require to adapt port handling facilities.

In the meantime, demand for smaller container car-riers (1,100, 1,800, 2,700, 3,500, and 4,300 teu),which are usually employed as feeders for the largemother vessels, has also been very healthy. Thistrend can be expected to continue. Given that theratio of the fleet on order versus the existing fleet isparticularly high and that the predictable growth inteu terms is above international trade progression,the number of new orders might logically slowdown in the coming months.

Tankers

With some 44 million dwt ordered, demand for tan-kers has remained strong, although lower than thatof 2003 with 52 million dwt.

100

90

80

70

60

50

40

30

20

10

%

Shipbuilding countries market shares evolution for containershipsJapan

Korea

Germany

Others

0

Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mar 04 June 04 Sep 04 Dec 04Dec 02Mar 02 June 02 Sep 02 Mar 03 June 03 Dec 03Sep 03


The orderbook has nonetheless increased and hasgone from 83.5 million dwt at year-end 2003 to102.3 million dwt at year-end 2004. The fleet onorder at the end of 2004 represented some 31 % ofthe existing fleet as compared to 26 % a year earlier.

How does one explain this relatively-speaking smal-ler demand this year, especially in comparison to theprogression of containerships and bulk carriers? Tounderstand this, it is important to recognise that therenewal of the tanker fleet, started earlier, following

the oil pollution disasters of the ‘Erika’ in 1999 andthe ‘Prestige’ in 2002. The average volume orderedeach year since 1999 has in fact been 30 milliondwt for tankers as against 22 million dwt for bulkcarriers and 14 million dwt for containerships. Inaddition, the competition with containerships in theshipyards has also played its part.

Demand for ice-strengthened tankers has remainedsustained despite a mild winter, essentially respon-ding to the development of loading of crude or refi-

Stena Polaris75,000 dwt, ice class 1APanamax product tanker,ordered at Split by Concordia Maritime for delivery 2006 and long-term chartered to Fortum Oil

Dwt

New orders of standard vessels 2002, 2003 & 2004 2002

2003

2004

30,000,000

25,000,000

15,000,000

20,000,000

10,000,000

5,000,000

0

VLCC Suezmax Aframax Panamax Tankers MR Products Capesize Panamax Handy Containership(above 1,000 teu)

5857

29

49 72

106

62

85

208

238

100

79

118

142228

200

495509


ned products out of the Gulf of Finland, the WhiteSea and from the Sakhalin islands, where Russiaand the Baltic states are in the process of buildingnew ports and expanding their export capacities.Thus there are 72 MR product carriers, 25 Pana-maxes, 41 Aframaxes, and 17 Suezmaxes which areice-classed out of respectively 407, 161, 174 and 89ships on order.

In addition, traffic is considerably increasing in sometight waters and it is very likely that the stronggrowth in Russian exports out of the Baltic or theBlack Sea will result in the enforcement of newregulations and security measures from the borde-ring countries to protect their coastlines. There isregrettably one incident a month in the Baltic. Someoil companies and European owners, who want toimprove the security of their ships, have jumped thegun and ordered ships with double propulsion.

Specialised tonnage

New orders for specialised tonnage have also consi-derably increased this year with the exception ofRo-ro’s, and reefer ships. The number of specialisedships remains, however, weak compared to standardones. Few sectors have remained inactive, which isa sign of the vitality of the shipping market in 2004.

Stainless steel chemical carriers

The number of stainless steel chemical carriers orde-red has gone from 59 in 2003 to 77 in 2004. Theorderbook is growing and has increased from1.6 million dwt year-end 2003 to 2.1 million dwtyear-end 2004. The fleet under construction at theend of 2004 represented some 16.5 % of the exis-

ting fleet, against 13.8 % a year earlier. Most ofthese ships have been ordered at Japanese shi-pyards. The demand has not even been entirelymet, given that the price of stainless steel has sud-denly become much more expensive and that yardsalso suffered from supply disruption.

LNG carriers

During the course of the year the number of LNGcarriers ordered nearly quadrupled, going from 20to 76. The orderbook has gone from 63 ships at theend of 2003 to 116 ships, making a total capacityof 17.1 million cbm, by the end of 2004. The fleetunder construction represents about 80 % of theexisting fleet compared to 48 % a year earlier.Many ships have been contracted without long-term employment.

This market, which has been so far very conservative,is quickly changing. The maximum size of ships, whichwas in the past ranging from 125,000 to 130,000cbm, has progressively moved up to 140,000 cbm andthen 150,000 cbm. In order to meet the requirementsof the gigantic Qatari LNG export project, a series ofLNG carriers of 210,000 cbm has been ordered inKorea. In addition, diesel-electric propulsion seems tobe progressively more sought after.

The majority of the orders was placed in Korea andJapan in 2004. The European shipyards who inven-ted this sophisticated type of transport and bankedon a strong future demand, are practically absentfrom this market. This year, Hudong-Zhonghua ofShanghai joined the “club” of LNG carrier builderwith the order in August 2004 for two ships of147,000 cbm.

Specialised vessel contracting 2002, 2003 & 2004 2002

2003

2004

80

70

50

60

40

30

20

10

0

Chemical carriers*(dwt)

Cruise vessels(grt)

Car carriers(cars)

Ro-ro(dwt)

Ferries(grt)

LNG carriers(cbm)

LPG carriers(cbm)

77

59

45

26

76

20

27

13

76

80

59

13

4

Number of ships


LPG carriers

The number of new orders for LPG carriers haspractically doubled, going from 26 in 2003 to 45 in2004. The orderbook has also risen, from 1,6 mil-lion cbm at year-end 2003 to 2,6 million cbm atyear-end 2004.

The majority of the orders of small LPG carriers hasbeen placed at Japanese yards, whereas those ofbigger sizes have been placed in Korea, with theexception of some large units contracted with Mit-subishi Heavy Industries and Kasawaki Heavy Indus-tries in Japan and with Gdynia in Poland.

Ferries and Ro-pax

The number of Ferries and Ro-paxes on orders wentfrom 13 to 27. The total orderbook increased from32 ships at year-end 2003 to 46 ships year-end 2004.

With the exception of a Ferry ordered in Japan by adomestic owner and an option to declare by Nor-folk Lines for a newbuilding at Samsung in Korea,the 27 Ferries and Ro-paxes ordered in 2004 havebeen placed at European shipyards, with the Italiansbeing awarded nearly half of this total. This situa-tion is largely due to the concentration of Asianbuilders on more standard ships.

Ro-ro’s

Only a few Ro-ro’s were ordered in 2004. The fewEuropean shipyards which possess a real expertisein this type of ship are quoting prices in euros,which are often prohibitive to charterers, given thefreight levels in this sector. Only a handful of pro-jects actually materialised.

Car-carriers

The number of Car-carriers ordered went from 59 in2003 to 80 in 2004. The orderbook has increasedand reached a capacity of nearly 800,000 vehiclesat year-end 2004, a considerable increase from526,000 vehicles at year-end 2003.

New orders have almost exclusively been placed forlarge PCTC (Pure Car Truck Carriers) with a capacityof 4,300 up to nearly 7,000 cars. These orders havebeen contracted with yards in Japan and Korea, andalso in Croatia and Italy.

This sustained demand is a response to the growthof the world automotive industry. The outsourcingof production and the development of new mar-kets, as in China, have helped increasing thedemand for new vehicles shipments. The latestforecasts indicate an annual traffic of about10 million vehicles by 2008 as compared to8.7 million in 2004.

New requirements could soon come about forintermediate size ships, around 2,000 to 3,000cars, to be used as feeders for large carriers or forregional trades in the intra-European or intra-Asianmarkets.

Cruiseships

2004 signalled a comeback of confidence by crui-seship operators of with 13 new orders, all signedup with the four leading European builders whoare specialised in this sector. It has been the bestyear since 2000. (see our article on the cruise mar-ket.)

0

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Evolution of Steel Prices since 2001(ex-works prices, world average)

Hot Rolled Coil

Hot Rolled Plate

Cold Rolled Coil

$/ton

Jan 01 Apr 01 Jul 01 Oct 01 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Jan 05Oct 04


Prices

Newbuilding prices expressed in dollars have quicklyprogressed in 2004. The increase for all tonnage-types was on average 40 %. By contrast the figurewas roughly 20 % in 2003. This figure appeared tobe a relatively modest rise given the strong increasein the volume of new orders over the year (110 mil-lion dwt in 2003 as against 50 million in 2002).

The volume of orders in 2004 remained at the samehigh level as in 2003 (more than 100 million dwt).Nevertheless the situation has been different in2004 as the production capacities of builders,whose orderbooks in 2004 were spread out overthree to four years as against roughly two in 2002,became saturated. This factor militated to push upprices to levels not seen since before the Asian cri-sis of 1997 / 1998.

We have seen cascade effects on prices startingfrom the newbuilding market to have then animpact on newbuilding resales and finally onsecond-hand tonnage. The demand for tonnage atany cost has pushed up the prices of ships withprompt delivery dates, as well as the prices of recentunits, to levels above the price being asked by buil-ders for far later deliveries. The latter have beenable to use these new benchmarks to increase theirown prices.

Swift and significant fluctuations in prices help fos-ter speculation. The behaviour of owners and buil-ders alike, has changed over the course of 2004.One saw a much greater reactivity on the part ofbuilders, who have become more alert to the out-side world thanks to the availability of instanta-

neous information. They have thus apprehendednews of the latest deals concluded more rapidly.

However, for the moment builders are not gettingany benefits from this situation. They had to faceunprecedented costs increases, as the raw materialmarket took off in 2004. Steel prices doubled andwent from $ 300/t to more than $ 600/t; stainlesssteel and non-ferrous metal prices have tripled. Thisrising cost movement has affected not only steelplates and profiles, but also pipes, cables, bul-kheads, machinery, pumps, heat exchangers and soforth. It should be remembered, for reference, thatthe main engine onboard a 8,500 teu containershipweighs 2,400 tons. Finally, in addition to all this,energy also became more expensive.

Could the shipyards have protected themselvesagainst such increases? Shipyards traditionally orde-red their materials and spare parts, with suppliersand equipment makers, soon after having signedthe newbuilding contracts in order to fix their costs.This was at the time when ships could still be expec-ted to be delivered within two years’ time. But theexpansion of orderbooks, entailing procurementexposures much further into the future, no longerallows for this. As to steel, it is usually payable bythe builder the day of its delivery to the shipyard,which means about twelve months before the deli-very of the ship, given effective building delayswhich have become shorter. In other words, theyard has to pay for its steel requirements nearly twoyears after contract has been signed.

Worst still, shipyards have had to face delays in sup-plies whilst they have nevertheless had to honourfirm commitments with their clients. Steel shortages

$ US

Average exchange rates to the US$

Jan

03

Jan

04

Feb

04

Mar

04

Apr

04

May

04

June

04

July

04

Aug

04

Sep

04

Oct

04

Nov

04

Dec

04

0.80

1.40

1.25

1.30

1.35

1.20

1.15

1.10

1.05

1.00

0.95

0.90

0.85

100 yen

1,000 won

1 euro

Feb

03

Mar

03

Apr

03

May

03

June

03

July

03

Aug

03

Sep

03

Oct

03

Nov

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03


came to public attention when Nissan, the carmaker, announced at the end of November 2004that they had to halt production for at least a week.Korean authorities decided during the year to post-pone all exports of steel. Other sectors were alsohit. It was already by the end of 2004 becoming vir-tually impossible to find slow speed diesel enginesfor delivery in 2007 due to a disruption in the sup-plies of essential parts.

The dollar’s unrepentant decline has been anotherthorn in the pillow of shipyards. Exchanges rates atthe beginning of 2004 were about 1,200 SouthKorean won and 106 Japanese yen for one dollar.By year-end the won stood at 1,050 and the yen at103 to the dollar. This trend has as yet shown nosigns of weakness. Despite a fixed exchange bet-ween the yuan and the dollar, Chinese buildershave had to buy a large quantity of equipmentoverseas (from Europe, Japan, and Korea) and havethereby suffered from a similar exchange rate pres-sures for their supplies. During 2002 in a difficult

market, some builders had accepted delayed pay-ment terms and now face significant currency lossesas a consequence.

Prices for specialised tonnage have also risen, giventhe increases in raw materials costs and a more sus-tained demand compared to 2003. But theseincreases were less significant, as competition bet-ween shipyards remained strong. As an example, thenumber of LNG carriers builders is basically the sameas for VLCCs or Capesizes. Thus the price of LNGships of 145,000 to 150,000 cbm remained at thevery low levels achieved in 1999, in the region of$155 million, until mid 2004, when it graduallyincreased to reach $185 million at the end of the year.

The unprecedented demand, the difficulties shi-pyards face in executing current contracts, thenumerous doubts as to the price of materials andequipment, the continued uncertainty of exchangerates and the recurrent difficulties in obtaining sup-plies without too long delays, should continue topush newbuilding prices higher in 2005. As a saving

70 50

50

60

40

40

30

30

20

20

10

10

million gt percentageSouth Korean Shipyards Orderbook & Market Share

0 0

Market share

OrderbookSource: Lloyd’s Register - BRS

end

1995

end

1996

end

1997

end

1998

end

1999

end

2000

end

2001

Mar

200

3

June

200

3

Sep

2003

Dec

200

3

Mar

200

4

June

200

4

Sep

2004

Dec

200

4

end

2002

Newbuilding prices variations (in million US$)

1993 4Q 2001 4Q 2002 4Q 2003 4Q 2004

Tankers VLCC 100 70 64 76 107

Suezmax 62.5 45 43.5 50 70

Aframax 45 36 34 42 60

MR Product 32.5 26 27 31.5 39

Bulkers Capesize 48 36 36 40 63

Panamax 29 20 21.5 24 35.5

Handymax 25 19 20 21.5 29

Source BRS


grace, we can probably expect a steadier evolutionthan we saw in 2004.

South-Korea

2004 was a new record year for Korea, which onceagain confirmed its role as world leader. The Koreanorderbook went from 49 to 62 million gt betweenthe end of 2003 and year-end 2004. By contrast theKorean orderbook stood at only 27 million gt at theend of 2002.

All the yards are full until the first or second quarterof 2008, with only very limited exceptions. Withinsome yards, certain berths are committed up untilthe end of 2008.

Korean shipbuilding remains very concentrated. TheKorean portfolio, which represents slightly over1,100 ships, is split up between 15 shipyards.

The orderbook of the three largest Korean buildersHyundai Heavy Industries (HHI), Daewoo Shipbuil-ding and Machinery Engineering (DSME) and Sam-sung Heavy Industries (SHI), are largely focused onthe very large containerships, LNG carriers and tan-kers (VLCCs, Suezmax, Aframax). Hanjin exclusivelybuilds very large containerships.

Hyundai Mipo Dockyard and STX, who have pre-viously concentrated on product tankers, have nowconsiderable orders of containerships, of 2,800 teufor the former and from 2,700 to 3,500 teu for thelatter. Shin-A remains concentrated on buildingMedium Range product-chemical carriers.

The smaller Korean shipyards have been ambitiousand have succeeded in making a remarkable pre-sence on the international scene. INP has attracted

the very top names in the shipping industry and byyear-end 2004 could count 20 ships on order.Others like 21st Century, Samho, Nokbong, Kwan-gyang have succeeded in selling extensive series ofproduct tankers of 5,500 dwt, 12,800 dwt, and13,000 dwt to different owners. Daesun continuesto be active in the construction of containerships of900 to 1,100 teu.

How have the Korean shipyards been able toincrease their portfolio from 49 million to 62 milliongt without creating a single new berth?

Above all, by spreading out over time their order-book, and by constantly improving their producti-vity, but also by opening new docks.

HHI has used its dry-land building facility, usuallydedicated to offshore units, to build a series of 16Aframaxes. STX has recovered its old constructionsite in Busan (ex Daedong), now renamed STX-Busan, to build a series of 12 product tankers of10,000 dwt for Clipper. DSME and SHI have inves-ted heavily in floating docks. Recourse to sub-contracting, especially for steel blocks, has grown.SHI, which possesses a steel blocks factory atNingbo in China, intends to increase its productionfrom 60,000 to 200,000 tons as of 2005 (corres-ponding to the equivalent of 5 VLCCs or 8 LNG car-riers). Hyundai Corporation has decided to invest ina Chinese shipyard, Lingshan, near to Qingdao.

The Sun Dong shipyard, which specialises in thebuilding of blocks, has decided to launch itself intonewbuildings and has signed contracts for a seriesof Panamax bulkers which should become effectiveupon receipt of bank refund guarantees.

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5

million gt percentageJapanese Shipyards Orderbook & Market Share

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Market share

Orderbook

Source: Lloyd’s Register - BRS

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4

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4

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Dec

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4

end

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Some Korean shipyards (DSME, STX) have alsoplans to expand in China which remain to be mate-rialised. Others like HHI and HMD could give prio-rity to new developments in North Korea when themoment comes.

South-Korean shipyards are worried about havingfilled their orderbooks too early and at too lowprices. By the end of 2004, it was obvious that seve-ral Korean shipyards were facing difficulties in spiteof higher sale prices.

Japan

2004 was also a new record year for Japan, whichconfirmed its second place among world leadingshipbuilding nations.

Japanese builders’ orderbooks went from 43 up to54 million gt between end 2003 and year-end2004. It was 24 million gt at year-end 2002.

All the yards are generally full until 2008, but cer-tain are committed up to 2009. Contracts for suchlate delivery dates might not be signed before ano-ther year or two, but berths are already booked.

Even more than elsewhere, Japanese shipyards givepriority to their dynamic domestic owners and it hasbecome more and more difficult for a foreignowner to place an order with them. It seems thatJapanese owners are also less demanding and evenmore accommodating than their foreign counter-parts, this has had a visible impact on the numberof hours spent on each ship and on the final netresult of each building contract.

Japanese shipbuilding industry is less concentratedthan in South Korea. The Japanese portfolio, which

has practically an identical number with more than1,100 ships, is spread out between fifty construc-tion sites.

How have Japanese shipyards been able to increasetheir portfolio from 43 million to 54 million gt?

Above all, this has been achieved through exten-ding their orderbook over a longer period of time,up until 2009 for some yards. Additionally, it hasbeen achieved by a constant improvement of theirproductivity. For instance, at the beginning ofFebruary 2004, Mitsubishi announced that theywere planning to reduce the construction time of aVLCC between keel-laying and delivery from 7 to5.5 months.

New production capacity has also been created.Imabari opened a new site specialising in theconstruction of bulkers. Naikai Zosen has absor-bed its affiliate Nichizo IMC to improve producti-vity. Murakami Hide has expanded one dock.Other yards, such as Namura and Kyokuyo, havedecided to invest in new workshops and liftingequipment to increase the size of the berths andthe number of ships they can handle.

Proximity with China, where Japanese owners likeNYK and K Line have already placed orders, couldrepresent a danger for Japanese builders. But ithas also been an opportunity as they can increasetheir purchases of equipment and sub-contractingthere. Tsuneishi has created a production site forsteel blocks in the province of Zhejiang. The suc-cess of NACKS shipyard, opened in 1998 in Nan-tong (China) -a joint venture between the Japa-nese builder Kawasaki Heavy Industries and the

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Shipbuilding countries market shares evolution for bulk carriersJapan

Korea

China

Others

0

Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mars 04 June 04 Sep 04 Dec 04Dec 02Mars 02 June 02 Sep 02 Mars 03 June 03 Dec 03Sep 03


Chinese owner Cosco- is another example of co-operation and possible development.

One has to admire the perseverance and dyna-mism of Japanese shipyards. They reflect theambition of Japan, a developed country with awell-paid workforce, not only to maintain but alsoto develop shipbuilding in a highly industrialisedcountry. Japan demonstrates that it is possible tobuild ships at market prices with a more expensiveworkforce than in Korea and China, thanks to aremarkably high level of organisation and highlyautomated production process.

China

2004 was also once again a record year for China,which confirms its third place in the world ranking.

The orderbook of Chinese builders went from 17to 26 million gt between year-end 2003 and year-end 2004. In 2002, by comparison, the Chineseorderbook stood at 9 million gt. It is a remarkableperformance when we remember that the order-book of Japanese builders was 24 million gt at theend of 2002.

Contrary to their Japanese and Korean counter-parts, Chinese yards still have some berths availablein 2008.

The strength of the Chinese orderbook is not onlyexplained by having been spread out over 3 yearsbut, above all, by the expansion of existing facilitiesand the creation of new shipyards. There are abouttwo hundred shipyards with merchant ship buildingcapability in China and about fifty competing onthe international market.

Signing of newbuilding contracts in China generallytakes a longer time than in Korea and Japan. Whilstthis was a handicap to Chinese yards in the middleof the Asian crisis in 1998, when prices were falling,it was rather to their advantage in 2004 with a risingmarket. They have been able to adjust their pricescloser to the market. One should also be aware ofthe arrival of a new generation of management inthe shipyards, more internationally minded andmuch better informed, thanks largely to the internet,who carry out a close monitoring of the markets.

Nonetheless, this rapid development is not withoutsome hitches, and even some frustration withclients of certain provincial shipyards. Letters ofintent have in some cases not been transformedinto firm contracts at agreed prices, signedcontracts have not been formalised, options havenot been confirmed or at least not on agreed terms,etc. Some yards have encountered real problems inobtaining financial support from their bankers whocriticise them for having signed at too low levelswhich are insufficient to cover their costs. Someeven had to renegotiate contracts with their clients,facing rising costs and weak financial situations.

Chinese shipyards work in a constantly changingenvironment and have to juggle with a number ofdifficulties. They have been affected by energy shor-tages and steel or main equipment supplies, likeengines, which they had to buy abroad at higherprices.

Chinese shipyards should pursue their efforts toproduce quality ships. In the current market, theyhave been able to benefit from the rise in pricesand, above all, to obtain terms and conditions on

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million gt percentageChinese Shipyards Orderbook & Market Share

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4

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Market share

Orderbook Source: Lloyd’s Register - BRS


a par with their Korean and Japanese competitors.The expectations of owners on the quality front arehigh and it is important not to deceive them as thereputation of Chinese yards is at stake. Quality isthe best way to reduce costs. To deliver a good ves-sel, in order to avoid expensive surveys, repairs,waste of materials or even problems that can com-promise ship’s operations once in service, is the bestway to save money.

Expansion projects and creation of new shipyardsare continuing, but some ambitions have beencontained. The central government has put a holdon credit access and some projects have not obtai-ned the necessary government authorisations. Theambitious project of Nantong Rongshen seems tobe one such casualty.

Restructuring is taking place. Shanghai Shipyard hasleft the centre of Shanghai for the island of ChongMing. Chengxi and Shanghai Shipyard are now partof the same group. Jiangdu shipyard has beentaken over by the private group Sinopacific, whichnow controls three yards: Zhejiang, Dayang, andDadong. Dalian (old) and Dalian New have restruc-tured their management.

As with the Japanese yards, Chinese shipyards havealso given priority to domestic owners who haveenormous needs.

Hudong Zhonghua has signed up this year for twoLNG carriers of 147,000 cbm for delivery in 2006and 2007 in the context of the Guangdong project.Negotiations are in process for two supplementaryships linked with the Fujian project. Chantiers del’Atlantique (France) are undertaking the techno-logy transfer.

The yuan vs dollar fixed parity offers an undeniablecompetitive advantage to Chinese builders, even ifthey have to purchase a large share of equipmentin Europe, Korea, or in Japan. There were talks bet-ween governments this year about adjusting thisparity, and even to float the Chinese currency. TheChinese yards have even sometimes used this pos-sibility as a sales pitch.

Chinese shipyards are in an enviable position, sincemost investments are the result, directly or indirectly,of the government. Shipyards in other countries,particularly in Europe, would be delighted to be ableto benefit from such a support to modernise theirproduction base, without bearing the costs.

China is investing in some gigantic shipbuildingsites, capable of competing in the future with thebiggest Japanese or Korean facilities. There are cur-rently 8 docks for building a VLCC in China, com-pared to 14 in Korea and 14 in Japan. By 2008 /2009, China might have no less than 22 VLCCdocks. One can however fear that this expansionplan will come to overturn the existing equilibrium

%

Shipbuilding countries market shares evolution for tankersJapan

Korea

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Others

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Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mar 04 June 04 Sep 04 Dec 04Dec 02Mar 02 June 02 Sep 02 Mar 03 June 03 Dec 03Sep 03

Messidor55,300 dwt, built in 2004 by NACKS, owned by Setaf-Saget(Groupe Bourbon)

16

and destabilise the industry in the coming years. Ina short while, Chinese shipyards will be in directcompetition with Japanese and Korean shipbuildersfor the same types of ships (VLCC, LNG, very largecontainerships).

Taiwan

The orderbook of Taiwanese builders went from 1.9to 3.2 million gt between year-end 2003 and year-end 2004. Taiwan thus occupies the 5th place inthe world ranking.

The state shipyard CSBC gave priority to domesticowners such as Yang Ming, Wan Hai and ChinaSteel Corporation. Their orderbook extends untilend 2008 and comprises essentially containerships:with a capacity of 1,800 teu in Keelung and of4,250, 5,250 and 6,000 teu in Kaohsiung, as wellas a few Capesize bulk carriers of 200,000 tons.

Other countries in the Indo-Asian zone

The search for newbuilding sites has pushed ownersto less traditional destinations.

Ha Long and Nam Trieu shipyards of the Vinashingroup in Vietnam signed up with Craig from theUK, for an important series of Handymax dry bulkcarriers of 53,000 dwt. Danish owner Clipper pla-ced an order for several Handysize bulk carriers of30,000 dwt with Cochin shipyard in India.

Iranian shipyards have signed some noteworthyorders with domestic accounts and are now lookingfor some international clients. Dubai Drydocks hasbooked its first order for bunkers vessels of6,500 dwt. Others should follow.

Europe

The search for construction sites with early deliverydates has also brought owners towards European ship-yards.

The European shipyards have benefited from theoverflow of a saturated Asia. They have been ableto offer earlier deliveries: 2006 as against 2007 or2008, for which owners have been prepared to paya premium. The mainstream of business for Asianshipyards being standard ships, the recovery ofdemand for specialised tonnage has certainly hel-ped the European yards to regain some ground.

It is worth stressing that the West European order-book has progressed this year for the first time forages. They have moves up from 5.9 to 8.4 milliongt between end 2003 and end 2004.

It is of course a pleasure to see this recovery of busi-ness. But the basic handicaps of West European ship-yards in comparison with their Asian competitors stillremain: dispersed production, poor investment,ageing installations and workforce, unfavourable taxregimes, high social security costs, too much bureau-cracy and too few effective working hours.

The drop of the dollar against the euro and theimpending termination of subsidies of up to 6 % onMarch 31st 2005 will not help the European shi-pyards’ task.

It is a pity to see that there is not a more efficientEuropean industrial policy. Too much public money isspent to reduce workforce, to put employees onearly retirement or to close yards. It should be pos-sible to conceive of a more proactive and wilful policy

Shipping and Shipbuilding Markets 2005

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million gt percentageWestern Europe Shipyards Orderbook & Market Share (15 countries)

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17

aimed at using the inherent social funds to help theindustry to adapt, develop and prepare for the futurerather than liquidate the past. Japan has demonstra-ted that this option was not totally illusory.

France

The orderbook of French shipbuilders has gonefrom 380,000 gt at year-end 2003 to 450,000 gtyear-end 2004.

Gaz de France decided to entrust the building ofanother LNG carrier of 153,000 cbm to Chantiers del’Atlantique, which took their total backlog of suchships to three. As with the two preceding ships,signed in 2002 and 2003, this one will be equipped

with a diesel-gas-electric propulsion, the powerbeing provided by gas engines. It is also the methodof propulsion that AP Moller has adopted this yearwith its orders at the Korean shipyard Samsung.

Chantiers de l’Atlantique have taken advantage ofthe revival in the cruise market and signed up twonew ships of 90,000 gt and 3,000 passengers withMediterranean Shipping Cruises who, on their side,have taken delivery of the ‘MSC Opera’, a passen-ger liner of 59,058 gt, with 795 cabins.

But Chantiers de l’Atlantique, faced with a decli-ning demand for cruiseships compared to the gloryyears of the late 1990s, need to adjust their buil-ding capacity, which should be reduced from 5.5 to

The Shipbuilding Market in 2004

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million gt percentageEastern Europe Shipyards Orderbook & Market Share

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Breuil600 dwt, self-propelled barge,delivered in 2004 by De Hoop,operated by Socatra, dedicated to the carriage of blocks of the A380 airplaneon the Gironde estuary

18

2.5 equivalent cruiseships. This reduction in capa-city should be accompanied by a reduction in theworkforce, a drive for further economies of scalewith a more important reliance being placed onsub-contracting and Asian supplies.

The Piriou shipyards delivered two fishing vessels, atug boat and a PSV. They are building 5 trawlers,3 tuna purse seiners -one of which is 83 m in length-and 2 fast intervention aluminium crewboats.

In 2004, Constructions Méchaniques de Normandie(CMN) have delivered a patrol boat to the FrenchMaritime Administration and have under constructiona corvette for the Emirates Navy within a programmeof six boats for the same client, and two motor yachtsof respectively 58 and 42,6 m in length.

Germany

There are some twenty shipyards in Germany ofwhich about fifteen build almost exclusively contai-nerships between 800 and 4,000 teu. Meyer Werft,reputed for its cruiseships, has even filled up itsorderbook with a series of four containerships of1,500 teu. Amongst the major shipyards, onlyFlensburger and Lindenau are specialising in othertypes of ships such as Ro-ros and Ro-paxes on onehand, product tankers on the other.

German builders have naturally benefited from theenormous demand in the containership sector and,above all, from the sustained interest for feeders, asize which the three large South-Korean yards haveabandoned. They have also been able to offerprompt delivery dates which are particularly soughtafter by German investors (KG) whose proximityhelps business relationships.

The orderbook of German shipbuilders has gonefrom 2.3 to 3.1 million gt between year-end 2003and year-end 2004. Germany occupies the 2ndposition in Europe behind Poland and is ranked 6thin the world.

Italy

There are some fifteen shipyards or building sites inItaly. Cruiseships, Ferries, Ro-ros and Car-carriersform the core of Italian production (Fincantieri,Visentini). But there are also some very good specia-list shipyards such as De Poli or Di Pesaro for chemicalcarriers, gas carriers and small bunker tankers.

Italian shipyards have been particularly successful inobtaining over half of the new orders for Ro-ros,Ro-paxes and Ferries. Fincantieri, for its part, suc-ceeded in capturing 6 out of the 13 cruiseshipsordered in 2004 and has confirmed its place as theEuropean leader in the cruise sector.

The orderbook of Italian shipbuilders has gone from1.25 to 1.8 million gt between year-end 2003 andyear-end 2004. Italy holds the 4th position inEurope and the 8th position in the world shipbuil-ding ranking.

Spain

There are still some twenty shipyards or sites inSpain, but the question that has to be asked is forhow much longer?

Spanish shipbuilding is in a crisis and is goingthrough a drastic change, somewhat in the samemould as in other European countries during the1980s and 1990s.

European authorities have told Spanish authoritiesto put an end to certain practices which they consi-der to be contrary to EU regulations. In particular,they have asked Izar to reimburse subsidies receivedin 1999 and 2000. Under these circumstances, Izar,who did not have any new order in 2003, has notbeen authorised to take on any new business in2004. The separation between military and com-mercial sites should be done and be followed withthe privatisation of the latter.

The Spanish shipyards’ situation remains fragile onthe overall. It is a shame that Spain has not beenable to benefit from the revival in the newbuildingmarket. However, this allow them to propose veryprompt delivery dates and would put them in aposition to take advantage from the healthy salesprices in 2005.

The Spanish shipbuilding orderbook has gone from500,000 to 135,000 gt between end 2003 and end2004. It is one of the few countries in the worldwith a shipbuilding tradition that has seen its port-folio decline this year.

Finland

There are three construction sites in Finland, whichhowever work under the single banner of the AkerYards group. In September, the Aker group announ-ced the merger between Kvaerner Masa and Aker


“Catamaran rapide”Artist impression

of a 450 seats fast catamaranordered by Conseil Général

de la Vendée at the Norwegianshipyard Fjellstrand

for a service between Fromentine and Ile d'Yeu

19

Wisby Verity7,600 dwt delivered in July2004 by Ferus Smit, owned by Wisby Tankers of Swedenand on long term charter to Preem Petroleum.

Finnyards, under the combined name of Aker Fin-nyards Inc. This new entity will employ 4,500people of which 1,000 on the Rauma site, 2,000 inTurku and 1,250 in Helsinki.

Cruiseships, Ferries, and Ro-ros are the mainstay ofthe Finnish production. The recovery in these sec-tors has helped them and their orderbook hasmoved from 400,000 to 550,000 gt between year-end 2003 and year-end 2004.

The Turku site (ex Kvaerner-Masa) picked up in2004 the order for a second ‘Ultra Voyager-type’cruiseship, 160,000 gt and 3,600 passengers, forRCCL. The Helsinki shipyard (ex Aker-Finnyards) wasawarded the order for an ice-breaking container-ship for Russian account and has signed a letter ofintent to build a cruiseship for NCL. Finally theRauma site obtained the order for three carriersspecialised in the transport of forest products and a2,800 passenger ferry.

Finnish shipyards have an uncontested know-howin building ships for navigating in polar latitudes,and should therefore benefit from the growth inthis traffic with the Russians.

Denmark

The last major Danish shipyard Odense Lindo keepson building series of over-Panamax containershipsfor the account of its main shareholder, the AP Mol-ler group, which has become the only client of thisyard. In the current context, to be the owner of ashipyard when you are also ship owner is a clearadvantage.

Netherlands

There are still some fifteen Dutch shipyards, whoseproduction is mainly concentrated on building gene-

ral cargo ships, multi-purposes, small containerships,small product tankers and offshore supply vessels.

The Dutch shipyards’ orderbook has gone from280,000 to 490,000 gt between year-end 2003and year-end 2004.

After a difficult year 2003, which saw the closure ofa number of sites, Dutch shipyard workers heldmassive protest meetings at the beginning of 2004to attract the attention of the authorities. Thegovernment, in turn, conceded a form of tempo-rary defence mechanism, while they also benefitedfrom the market upturn.

The Dutch shipyards operate largely by sub-contrac-ting hulls to Romania, Ukraine, Poland and Turkey,without which they could not be competitive todaywith small yards in China, Korea, Turkey, Romania,or Poland. Some shipyards even succeed in havinga full orderbook without doing any construction intheir own sites in the Netherlands, this of course,creating other problems.

Norway

Norway has some fifteen shipyards. Their produc-tion is largely concentrated on offshore units suchas PSV or AHTS. There was also the rare order at theend of the year for an orange juice carrier of40,000 dwt at Kleven Werft.

Norwegian shipyards also sub-contract a lot of hullsin Eastern Europe and have succeeded in 2004 torenew fruitful relationships with some Russian shi-pyards. Thus, Fosen has become associated withBaltiyskiy Zavod for building Ro-ros for the accountof Stena, while Kleven Maritime has joined up withSevmash for a series of coated chemical carriers forthe account of Odfjell.

The Shipbuilding Market in 2004


Portugal

The last large Portuguese shipyard, Viana do Cas-telo, is currently building a product tanker of19,000 dwt for the account of the French ownerFouquet-Sacop and another of 14,000 dwt for theFinnish owner Fortum, as well as two coastal pas-senger vessels for a domestic account. They alsohave an agreement to build a significant series ofvessels for the Portuguese Navy.

Poland

Poland has four main shipyards whose productionis largely geared to build containerships, open-hatch bulk carriers, car-carriers and Ro-ros.

The orderbook of Polish yards has gone from 2.5 to3.3 million gt between year-end 2003 and year-end2004. Poland keeps its 1st place within Europe andthe 4th place in the world ranking.

Poland, now part of the European Union, has toprogressively abide by its regulations. In particular,the shipyards in Gdynia and Gdansk, which havebenefited from state funding, will see their capacitybeing limited to 390,000 cgt over the next ten years.

Polish yards, which have experienced serious finan-cial difficulties, have given priority to their traditio-nal clients and to build series of existing, provendesigns thus reducing their risks.

Croatia

There are five shipyards in Croatia whose orderbookhas gone from 1.5 to 2.7 million gt between year-end 2003 and year-end 2004. Croatia occupies the3rd place in Europe and the 7th place in the world.

Croatian yards have largely benefited from thedemand of product tankers and of car-carriers. Theorderbook of Treci-Maj and Uljanik are full untilmid-2008, Trogir and Split are full until early 2009.

Romania

Romania has six shipyards. The revival of Romanianshipbuilding which was already firmly in place hasbeen consolidated by the strong demand throu-ghout the year 2004, both for complete vessels aswell as sub-contracted hulls from West Europeanshipyards.

The orderbook of Romania yards has gone from230,000 to 550,000 gt between year-end 2003and year-end 2004.

Romanian production is diversified and consists ofoffshore units (PSV), product tankers, Panamax tan-kers, and containerships. German owner Gebab hasordered six containerships of 4,800 teu at DaewooMangalia.

This excellent performance is largely due to the stra-tegic investments made by three foreign groups:

Aker, Daewoo, and Damen. These Norwegian,Korean, and Dutch companies have supplied theirown know-how and the benefit of their reputationto the respective shipyards: Aker Tulcea, Aker Braila,Daewoo Mangalia and Damen Galatz.

Russia

There are ten shipyards in Russia, whose orderbookhas doubled from 350,000 to 615,000 gt betweenyear-end 2003 and year-end 2004.

They have been able to benefit from considerabledomestic orders. Baltiyskiy Zavod has thus beengiven the order for a tanker of 75,000 dwt for Ros-neft. The foreseeable increase in oil exports fromthis country and the need for ice-class ships capableof navigating in polar latitudes should probably helpfeed Russian shipyards with new orders.

Russian shipbuilding has also been able to takeadvantage of the world demand and the pro-grammes of cost-cutting by European yards in theform of sub-contracting. Baltiyskiy Zavod is going tobuild in co-operation with Fosen shipyard two Ro-paxes for the account of the owner Stena. Sevmashin conjunction with Kleven Maritime will build aseries of eight chemical carriers of 40,000 dwt forthe account of Odfjell.

Turkey

Apart from a few sites, Turkish shipbuilders aremainly located in the bay of Tuzla, located somethirty kilometres from the heart of Istanbul, in Ana-tolia. There are about 35 shipyards next to eachother in a semi-circle with a radius of about1,000 m. Currently it is brimming with activity.

Most of the ships under construction are less than10,000 dwt. Between 2003 and 2004, the five big-gest builders in the bay took on orders for ships bet-ween 15,000 and 20,000 dwt. One of them, CelikTekne, is even building a sophisticated product-che-mical tanker of 25,000 dwt for delivery in 2005.

These shipyards display a remarkable dynamism andspecial ingenuity. They seek to increase their buil-ding capacity by constructing new berths, new lif-ting procedures, new workshops and study nume-rous expansion projects.

Current production is mainly concentrated onproduct tankers and chemical carriers (includingsome stainless steel units), but there are alsocement carriers and containerships in the order-book. A number of hulls bought in Romania or inBulgaria have been towed there in order to be fit-ted out and finished.

Most of the Turkish shipyards’ clients are West Euro-pean owners, but also West European shipyardswho sub-contract hulls. Some Turkish owners have


contributed in the form of orders for which theybasically act as shipbuilders: they build their ownships using the yards’ facilities but supplying thedesign, steel and equipment.

The orderbook of Turkish yards has gone from250,000 to 365,000 gt between end-2003 andend-2004

United States

The American shipbuilding industry is concentratedon its national market. Despite a strong rise inconstruction costs and a search for new capacities,American shipyards remain too expensive and havenot been able to take advantage of the currentsituation. As an example, Kvaerner Philadelphia(Aker Yards) have only sold four containerships of2,600 teu since 2002, at a unit price of roughly$ 70 million, namely more than double the priceinked with Asian yards.

Avondale and National Steel (NASSCO) are the twolarge commercial American shipyards where tankersof 140,000 and 185,000 dwt are under construc-tion. They belong to American shipping defencecompanies, respectively Grumman and GeneralDynamics, but have not registered any new mer-chant ship orders this year.

New orders for merchant ships are scarce, exceptfor the offshore industry. Besides, a part of thehomeland security budget is dedicated to the buil-ding of a number of ships for the account of theU.S. Coast Guard, which should keep the civil shi-pyards busy for several years.

Prospects

2004 has been an exceptional year on manyaspects. An unequalled growth, unprecedentedfreight rates, unsurpassed second-hand ships’values, a record world orderbook and raw materials(oil, coal, steel) at historical highs.

Will the orders intake remain as high as over thepast two years? Will the price of ships continue toclimb? Are the markets able to absorb the capacityof such an orderbook?

Numerous factors suggest a continuation of thistrend due to the enormous requirements of China,to which can be added those of India and otheremerging countries. Some believe that the strengthof the freight market could last through 2005 oreven beyond into 2006. Others claim that theengine of the Chinese economy will keep on run-ning at full speed until the Olympics Games of2008, or even the Universal Exhibition in Shanghaiof 2010. Finally, the most optimistic seems todetect economic miracle signs in China of an iden-tical cycle to that of the post World War II in theWestern world.

Whereas more than 110 million dwt of ships wereordered in 2003 and builders’ portfolios werealready spread out for over three years, the conti-nuation of this trend in 2004 was surprising.

With an economic development and a world tradesuperseding the most optimistic forecasts, and asa corollary an unprecedented rise of freight ratesand the improvement of owners’ financial stan-

Huntestern37,179 dwt, built in 2004 by Jinling, owned by Rigel Schiffahrts

22

ding, these are the underlining explanations for thevolumes ordered.

First, shipyards became euphoric with their commer-cial success, but they progressively realised that theincreases in newbuilding prices obtained in 2003were hardly sufficient to cover the rise in their owncosts. They discovered, with dismay, that they hadtaken enormous risks and that in fulfilling existingcontracts they could jeopardise their financial results.

Builders could well exercise additional caution in2005 by not agreeing to take on any new ordersexcept at substantially higher prices, especially asthey have time on their side. This could causeowners to slow down as well, as they have taken oncommitments over the next three years themselves(165 million gt on order).

Shipbuilding prices in 2004 reached new levels,equalling and in some cases surpassing the recordsobtained at the beginning of the 1990s (in actualvalues). Owners can reasonably ask themselves, insuch heady time, if they might not soon encountera decline.

However, one should keep in mind that $ 100 mil-lion in 2005 is worth considerably less than thesame $ 100 million in 1991 (in current values) andmeanwhile the price of steel has risen.

The analysis of the cycle that shipbuilding expe-rienced in the 1980s is instructive. In 1985, aVLCC of 250,000 dwt would have been contrac-ted for around $ 35 million at the Asian shipyards.The upward cycle then followed a six year trajec-tory, into the beginning of the 1990s, to the point

where the same single-hulled VLCC would havecost around $ 90 million. At the same time, theprice of a 300,000 dwt double-hull VLCC reachedthe $ 110 million region.

If we expect the current upward cycle to last aslong as the previous one, there is no doubt thatnewbuilding prices still have some margin to goup. Much will depend on the further developmentand stability of the dollar exchange rate, whichremains a serious issue. We can also draw somecomfort in the extrapolation of most economists,whose sentiments are that the dollar is not aboutto appreciate substantially against the currencies ofthe main shipbuilders.

Of course we would like to be able to predict new-building prices evolution and we would like toknow if an eventual drop could send us againtowards the very low levels seen in mid 2002.

Given the size of shipyards’ orderbooks, the pres-sure placed on an already strained raw materialsmarkets and world growth forecasts, it seems pro-bable that newbuilding prices will continue toclimb during 2005 and 2006 as long as steel pricesdo not drop.

There is nevertheless reasons to be careful aboutthe enormous building capacity that China will puton the market as from 2008 / 2009. This, coupledwith the steady productivity improvement achie-ved by the Chinese shipbuilding industry, may startto break this delicate balance. The outcome willthen depend to a large degree on the capacity ofresistance offered by the Japanese and South-Korean shipbuilders. ■

0

180

160

100

140

120

80

60

40

20

m.gt/m.$

World Orderbook vs Newbuilding Prices since 1991

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2004

2003

2002

2001

VLCC newbuilding price (m.$)

Capesize newbuilding (m.$)

World orderbook (m.gt)


23

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25

If we were able to hand out “Oscars” in the cruisemarket, we would indisputably have two big win-ners this year: the Carnival Cruise Line group, on

one hand, and Fincantieri shipyards, on the other,both having developed a fruitful co-operation.

The Carnival group closed its annual results with aprofit of nearly $ 2 billion for a turnover of roughly$ 10 billion, namely a net margin of 20 %. Thisresult confirms both the success of the mergerbetween the P&O / Princess group and the Carni-val group, as well as the growth of the cruise mar-ket in the US and Europe in 2004.

Fincantieri ended the year with an orderbook often cruise ships, all for the Carnival group, repre-senting 60 % of the world orderbook and slightlyover $ 5 billion in value, guaranteeing full employ-ment for their three cruiseship construction sitesuntil 2008.

The enthusiasm which these magnificent resultsinspire should however be tempered in a globaloutlook of the market. The cruise industry has just

experienced three difficult years since the attack ofSeptember 11th, 2001 and began the year 2004with a new challenge, that of absorbing ten shipsrepresenting about 23,500 lower-berths, or 10 %of the current capacity. Once again, demand wasable to match this new supply thanks to theincrease in the number of cruise passengers whichshould surpass the 13 million mark in 2004.

At the beginning of 2004, there were only threeships to be delivered in 2005 and four in 2006.However, despite the continuing decline of thedollar lifting the cost of construction in Europe,owners could not resist the temptation to consoli-date their commercial position by ordering newships, in this booming market.

Once again, the signal was given by Carnival who asearly as January ordered a ship, the ‘Costa Concor-dia’, 112,000 gt, 1,900 cabins, for delivery in thesummer of 2006, at € 450 million, for its subsidiaryCosta. In October, two ships of 68,000 gt, 1,000cabins, were ordered by another Carnival affiliate,Aida, with Meyer Werft, for delivery in April 2007

The Cruise Market in 2004

THE

CRUISE MARKETIN

2004


and April 2008, for a unit cost of € 315 million. Butabove all, the biggest order ever placed was madewith Fincantieri for a total figure of $ 2.6 billion forfour ships to be delivered in 2007-2008 and theextension of the future ‘Queen Victoria’ by 11 metersfor Cunard, for a complementary cost of $ 95 mil-lion. The four ships are broken down as follows:

◆ one for Carnival, 110,000 gt, at a price of $500million,

◆ one for Princess Cruises, 107,000 gt, at a priceof $ 525 million,

◆ two similar ships for Europe, priced respectivelyat € 475 and € 490 million, with the Carnivalgroup keeping the option to dedicate these twoships to either of its brands during the year 2005.

This order is exceptional in both its size and thefact that Fincantieri agreed to deal both in dollarand in euro, with client and supplier sharing thecurrency risk.

At the end of the year, Carnival thus has 12 shipson order and in January 2005, this owner will adda sistership of the ‘Concordia’ for its subsidiaryCosta, for delivery in 2007 at a price of € 475million.

RCCL declared in September its option with Kvaer-ner Masa Yard, which has become Aker Finnyards,for a second ‘Ultra Voyager’ of 163,000 gt, 3,600passengers, at a price of € 580 million. RCCLcontinues to invest in these mega-ships with suc-cess, but it is likely that Carnival will start to com-pete in this market of very large carriers, since its

‘Pinnacle’ project of 180,000 gt is already on thedrawing boards.

RCCL has also opted this year for the extension ofthe ship ‘Enchantment of the Seas’ which shouldsee its capacity increased by 150 cabins for a costin the region of $ 55 million. The new section willbe built at Aker Yards and installed in the Nether-lands during the second quarter of 2005.

Norwegian Cruise Line (NCL) began the yearwith some concerns due to the financial losses ofits mother company in Asia and the accident ofthe ‘Pride of America’ under construction atLloyd Werft. Finally, the group has successfullyput in place a financial restructuring, whichallows it to raise $ 1 billion and to order twoships in December:

◆ one of 92,000 gt, 1,200 cabins, for delivery inFebruary 2007 with Meyer Werft, at a price of€ 370 million,

◆ the other of 89,000 gt, 1,000 cabins, with AkerFinnyards, for delivery in the spring of 2007, withan option for another unit to be lifted in August2005 for delivery in the spring of 2008, at a priceof € 385 million per unit.

An agreement was finally signed with Lloyd Werftto take delivery of the ‘Pride of America’ in June2005, whilst the ‘Norway’ has definitively beenstopped, awaiting a sale.

NCL, under the NCL America banner, continues todevelop its cruise business in Hawaii under theAmerican flag, despite some teething problems

30,000

25,000

20,000

15,000

10,000

5,000

Lower berths

Cruiseships delivered in 2004 and scheduled firm to 2009

Lloyd Werft

Meyer Werft

Aker Yards

Mitsubishi H.I.

Fincantieri

Ch. de l'Atlantique

delivered in 2004

10 ships

2009

1 ship

2008

2 ships

2007

9 ships

2006

6 ships

2005

4 ships

0

27The Cruise Market in 2004

linked to restrictions with the American flag. Fourships are still programmed for this market over thenext three years.

In Europe, the year began sadly with the demise ofFestival who should have celebrated ten years ofexistence in 2004, but which allowed MSC toexpand its development policy by taking over the‘European Vision’ and ‘European Stars’ at a priceof some € 215 million per unit.

Mediterranean Shipping Cruises (MSC) hasbecome a main competitor to Costa in Europe andalso plans to consolidate its position as Europeancruise operator in the American market. Comfor-ted by being the second largest owner of contai-nerships in the world, MSC does not hide theirplans to become a prime player in the Europeancruise scene. In September MSC completed sixmonths of negotiations with Chantiers de l’Atlan-tique for the order of two 3,000 passenger ships,for delivery in the summer of 2006 and in thespring of 2007, at a price of € 400 million each,with an option for an additional ship.

The European market should increase from 3.1million lower-berths in 2004 to 3.7 million in 2007,profiting from a potential steady growth andshould continue to absorb a quarter of the worldfleet. It is true that if we apply the American model

to Europe, there could be ten million cruise pas-sengers in ten years time.

Finally 12 ships were ordered in 2004, represen-ting 33,000 lower-berths, plus an additional threeon option.

The orderbook at the end of the year thus com-prises 21 ships firmly booked, for a total of 56,000lower-berths, or an average capacity per ship of2,650 passengers, of which nine ships are of post-panamax size.

Ten new ships representing 23,500 lower-berthswere delivered during the year, of which sevenwent to the Carnival group. These deliveries werebroken down as follows:

For Carnival Cruise Line:

◆ ‘Carnival Miracle’, 85,700 gt, 2,124 lower-berths, 1,057 cabins, delivery February 2004, builtby Aker Finnyards,

◆ ‘Carnival Valor’, 109,500 gt, 2,974 lower-berths, 1,438 cabins, delivery November 2004,built by Fincantieri.

For Princess Cruises:

◆ ‘Caribbean Princess’, 112,894 gt, 2,998 lower-berths, 1,557 cabins, delivery March 2004 built byFincantieri,

Carnival Miracle85,700gt, delivered in 2004 by Aker Yards, operated by Carnival Cruise Line


◆ ‘Diamond Princess’, 115,875 gt, 2,674 lower-berths, 1,337 cabins, delivery March 2004,◆ ‘Sapphire Princess’, 115,875 gt, 2,674 lower-berths, 1,337 cabins, delivery May 2004 built byMitsubishi.

For Costa:◆ ‘Costa Magica’, 102,200 gt, 2,702 lower-berths, 1,358 cabins, delivery November 2004built by Fincantieri.

For Holland America Line:◆ ‘Westerdam’, 81,769 gt, 1,848 lower-berths,924 cabins, delivery April 2004 built by Fincantieri.

For Royal Caribbean Cruise Line:◆ ‘Jewel of the Seas’, 90,090 gt, 2,100 lower-berths, 1,055 cabins, delivery April 2004 built byMeyer Werft.

For Mediterranean Shipping Cruises:◆ ‘MSC Opera’, 59,058 gt, 1,526 lower-berths,795 cabins, delivery in June 2004 built by Chan-tiers de l’Atlantique.

For Birka Line:◆ ‘Birka Paradise’, 33,000 gt, 1,800 lower-berths,728 cabins, delivery November 2004 built by AkerFinnyards.

The revival of the cruise market during the yeargave life to the second-hand market which wasenlivened by the auction sales of vessels owned bycompanies in financial difficulties (notably ROCand Festival), as well as the sale of ships from thegroup My Travel (Sun Cruises) who decided toshutdown their activity as shipowners.

These sales allowed one to gauge the relativelyfirm prices which were established, partly due tothe rise in the cost of construction and to someextent due to the weakness of the dollar.

Amongst the more notable sales were:

◆ ‘Carousel’, 23,000 gt, 1,000 lower-berths, built

1971, ‘Seawing’, 16,700 gt, 754 lower-berths,built 1971 and ‘Sunbird’ 37,773 gt, 1 414 lower-berths, 633 cabins, built in 1982 (chartered byThomson) to the owner Louis Cruises, at respecti-vely $ 14, $ 9 and $ 71 million, whereas the ‘SunDream’ 23,000 gt, 1,000 lower-berths, built 1970was sold to Caspi Shipping.

◆ ‘European Vision’ renamed ‘MSC Harmonica’,and ‘European Stars’ renamed ‘MSC Sinfonia’,58,000 gt, 1,506 lower-berths, 783 cabins, built in2001 and 2002, bought by Mediterranean Ship-ping Cruises at the cost of € 215 million each.

◆ ‘Mistral’, 47,276 gt, 1,196 lower-berths, 598cabins, built in 1999, sold to a Spanish tour opera-tor Viajes Iberojet for a price of about €130 million.

◆ Iberojet also bought the ‘Superstar Capricorn’,23,400 gt, 755 lower-berths, built in 1972, rena-med ‘Grand Latino’ at a price of $ 20 million.

◆ ‘Superstar Aries’, 37,000 gt, 611 lower-berths,built in 1981, renamed ‘Holiday Dream’ was soldto Pullmantur for a price of $ 44 million.

◆ ‘Bolero’, 15,800 gt, 761 lower-berths, built in1968, renamed ‘Orient Queen’ was sold to Leba-nese buyers at the price of $ 9.5 million, whilst the‘Azur’, 9,200 gt, 694 lower-berths, built in 1971was sold to the Israeli owner Mano Maritime(renamed ‘Royal Iris’) at a price around $ 10 mil-lion, and the ‘Flamenco’ bought by Ravenscroft for$ 12.25 million at auction, has been charted byTravelplan in Spain.

◆ The German financial organisation KfW, credi-tor of Royal Olympic Cruise, who had bought the‘Olympia Explorer’ and the ‘Olympia Voyager’,built in 2000 and 2002, 24,500 gt, 840 lower-berths, 27 knots, for respectively $ 82.7 millionand $ 97.2 million, resold the ‘Olympia Explorer’for $ 85 million to a maritime university, whilst the‘Olympia Voyager’ was chartered out for on a longterm period with a purchase option to the SpanishIberojet.

◆ ‘Paul Gauguin’ was sold by the financial ownerCentre Solution to the tour operator GrandCircle/Vantage for a price in the region of $40 mil-lion, but the ship should remain in service in Tahitifor Radisson for the next two years, 2005 and2006.

The project easyCruise, which caused a lot ofcuriosity from all the professionals in the sector,should start in the spring of 2005 following thepurchase and the transformation of ‘RenaissanceTwo’ bought for $ 7 million and transformed inSingapore, doubling its capacity to accommodate180 passengers. This ship, renamed ‘easyCruise 1’will serve as a test to the promoter, Stelios Haji-

Diamond Princess115,875gt, delivered in 2004

by Mitsubishi H.I., operated by Princess Cruises

29The Cruise Market in 2004

Iouannou, to develop on a much larger scale theambitious project of easyCruise, which is planningto expand the range of products offered in thecruising industry in trying to capture a much youn-ger clientele.

◆ The sister ship, ex ‘Renaissance One’ was soldto Singaporeans at a price of $6 million to operatecasino cruises.

◆ Also to be noted was the purchase of the ‘Dis-covery’, 20,186 gt, 472 lower-berths, built in 1972by the tour operator All Leisure Group (Voyages ofDiscovery) which chartered the ship for six monthsof the year, thus becoming an owner.

These sales show the activity of some tour opera-tors, especially Spanish, Spain having become thefourth market in Europe within several years with300,000 cruise passengers, after the United King-dom with over 1 million, Germany with near to600,000 and Italy with more than 350,000 cruiseclients.

We have not seen any new mergers within thecruise companies this year, the sector beingalready concentrated in the hands of a few biggroups, but there was one promising diversifyingoperation with the entry of CMA CGM into 70 %of the capital of the Compagnie des Iles duPonant, who exploit three small cruiseships underFrench flag, and in the tour operator Tapis Rouge.Let us hope that this major containership ownerwill wish to develop rapidly in this new activity.

Whilst we might have imagined that the sectorwould take a pause after the strong growth in thefleet at the beginning of this decade, it appearsthat cruise companies are looking to achieve a

controlled growth of around 5 % per year, whichshould result in some ten ships being ordered eachyear.

Once again, the question is whether there are toomany shipyards in Europe to serve the needs,which overall have become relatively moderate,although owners have no interest in seeing redu-ced competition amongst shipyards as this has hel-ped boost their growth.

The decline in the dollar has of course been aconstraint on the ambitions of American compa-nies, but the growth of the market and a wiserdecision-making process in the annual ordering ofships should permit, as seen this year, an increasein cruise prices compensating the rise in construc-tion costs expressed in dollars, taking into consi-deration that amortisation of the vessel can bespread out over a very long period.

The cruise industry, which in twenty years hasbecome a well-known and appreciated leisureactivity, has no need to be under-priced to surviveand the sector should experience a much morecontrolled development than in the past, particu-larly as only ten ships will be coming out of theyards over the next two years, four in 2005 and sixin 2006, which should allow a better occupancyrate and price optimisation given a demand whichis continuously expanding. ■

MSC Opéra59,058 gt, delivered in 2004by Chantiers de l’Atlantique,operated by MSC Cruises.

30

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31The Tanker Market in 2004

THE

TANKER MARKET

IN

2004

2003was marked by a sharp differencebetween the high freight rates of the

first and fourth quarters and a fairly significantdrop during the second and third quarters.

If 2004 was also characterised by an endemic vola-tility of the markets, with signs of relative weak-ness in the second and third quarters, the short-lived dips never reached the lowest levels of thepreceding years. However, the record levels ofrates registered throughout the second half, withthe exception of the month of December, willremain in the annals, even if one should moderatethis excess somewhat with a particularly unfavou-rable dollar / euro exchange rate.

For more than 20 years and in all categories oftankers, one has not seen freight at such levelswith daily returns surpassing $ 200,000 per dayfor VLCC, flirting with $ 150,000 for the Suezmaxand exceeding the $ 100,000 level for the Afra-max. At the same time, crude oil prices broke thehistoric level of $ 50 per barrel for a brief period.

Such exceptional results, which few could havepredicted with such a sustained strength, requirea detailed analysis permitting on one hand to jus-tify (or not) these record levels, and on the otherhand, to try to predict in the medium term a fore-cast for a realistic evolution of our markets.

Objective factors

World oil consumption has been continuouslyrising for the past four years. Thus in the fourthquarter of 2004 world demand reached 82.5 mil-lion barrels / day, its highest level for over 10 years.Forecasts by the International Energy Agency pre-dict a new probable increase in demand for 2005of 700,000 barrels/day. OPEC production on itsown is nearly 30 million barrels/day, its highestlevel since 1990.

Some countries have registered record increases intheir demand. Compared to 2003, China saw anincrease of over 20 % of its imports (rising from 90to nearly 120 million tons), with Brazil nearly 15 %

Crude oil transport: a year of records

32

While it is true that there is a problem of availabi-lity of sweet crude in the longer term, world pro-ven reserves remain healthy and do not in any wayjustify the pronounced fears.

To illustrate this, the announced drop in Americanstocks, which largely contributed to the rise incrude prices, was only a very short term pheno-menon. After the announcement at the beginningof December of much less alarming figures, oilprices rapidly plunged and went below $ 40 perbarrel in less than a week. However OPEC’s deci-sion to reduce its production quota by 1 millionbarrels/day, has meant that at the end of Decem-ber crude prices were up around $ 45 per barrel.

If numerous psychological factors have had a signi-ficant impact in these last months, one in particu-lar seems important to us: the increasingly impor-tant part played in the market by “derivatives”, inconnection with both the oil and shipping mar-kets. Particularly speculative, this market has cer-tainly had an unforeseen effect not only on crudeprices but also on freight levels.

After this general introduction, we shall try, as wedo each year, to analyse each sector by type oftanker to enable us then to give a realistic synop-sis of the past year and try to draw some conclu-sions and predictions for the short and mediumterms.

VLCC

This sector of the fleet undeniably remains the dri-ving force today in the freight market. If we revert

and India 11 %. By comparison, Europe saw itsneeds increase by 6 % and the U.S. by over 3 %.

In the case of China and India, who played a minorrole in world oil traffic only a few years ago, it isexpected to see the rhythm of growth being main-tained, which, given the size of these countries,will give them a preponderant position in shippingterms in the coming years.

The other objective factor explaining the steadyrise of freight rates during the past two years, hasbeen the selective quality of chartered tonnage. Ithas become more and more rigorous and the pro-gressive elimination of single-hulled tankers is nowa fairly standard generalisation. Parallel to this and,as we shall see later, the situation of the shipyardsup until 2008 and the constantly rising price ofnewbuildings, justifies the attitude of owners andexplains their optimism for at least two to threeyears to come.

Subjective factors

Despite the various objective elements which havejust been cited, this certainly does not justify theextent of the freight increases which we have wit-nessed during the second half of 2004.

Some purely psychological factors, even specula-tive, can only explain the mad rising spiral whichwe have seen.

A fear of insufficient raw material helped fosterthe speculative increase in oil prices, and this psy-chosis pushed the level above $ 50 per barrel.Some even forecast a price of over $ 60 per barrelin the coming months.


0

240,000

200,000

220,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

VLCC tanker freight ratesAverage earnings

250,000 t MEG/Japan - TCE

275,000 t MEG/Continent - TCE

260,000 t Forcados/Loop - TCE

$/day

Jan

02

Mar

02

June

02

Sep

02

Dec

02

Feb

03

May

03

Aug

03

Nov

03

Jan

04

Apr

il 04

July

04

Oct

04

Dec

04

33

110 VLCC currently on order and a progressiveand inevitable elimination of older ships, ownershave good reasons to remain optimistic even if alarge part of single-hull ships now in service werebuilt at the end of the ‘80s or beginning of the‘90s and still have a number of years’ trading left.

With the main traffic bound to the East and Chi-nese and Indian owners up till now being the prin-cipal takers of single-hulls, the analysis of the evo-lution of freight rates is all the more significant.

On the three main routes in our graph, the ave-rage returns of a modern VLCC (on the basis of asimple round-voyage) have not stopped rising,going from $ 22,550 dollars per day in 2002 to$ 52,500 in 2003 and over $ 95,000 in 2004.

Over the past 12 months, the minimum return fora double-hulled VLCC was $ 41,000 per day inApril and the record was achieved in mid-Novem-ber with $ 228,000 per day.

In such a climate it is clear that the number of tan-kers being sent for demolition was low. At the sametime few owners of modern ships were willing to fixtheir ships on long term charters. However, on thebasis of the few transactions concluded, we canestimate a time-charter rate for one year at about$ 80-85,000 per day, and at about $ 57,500 perday on the basis of a three year charter.

Suezmax

Generally speaking, this category experiencedsimilar rate variations to those of VLCC, which ishardly surprising given the direct influence thatone size has on the other.

to the forecasts for growth and production overthe coming years, we note the following main ele-ments: in 2010 the share of production from theArab-Persian Gulf will be about 42 million barrelsper day or 47 % of the estimated world produc-tion of around 89.3 million barrels per day. In 2020the world production will be 107.3 million barrelsper day and it is estimated that the Gulf countrieswill contribute around 58 million barrels per day. Itis calculated that such a figure will require the pre-sence of 27 VLCC per day to cover these exports,equal to an increase in the fleet of nearly 170 unitsin the next 16 years…

Even if these figures should be taken with somecaution, it is nonetheless indisputable that the pre-dominance of this geographical zone and this sizeof ship is here to stay.

As tangible proof : there was a monthly average of91 ships fixed out of the Gulf in 2002, this figurerose to nearly 120 in 2004 (+30 %). At the sametime the fleet only increased by 5 %. This simplestatistic explains already the strong surge in thefreight rates.

As we have already stated, the increasingly pre-ponderant share of exports to China and Indiaplays an essential role in the evolution of theserates. One has seen in the last two years that theratio East / West of exports has gone from 70 / 30to about 75 / 25.

Parallel to this, one observes that in this categoryof size the proportion of single-hulls is the highestwithin crude tankers, namely some 40 % of thecurrent fleet in service (177 ships). With less than

The Tanker Market in 2004

Minerva Eleonora104,875 dwt, delivered in 2004 by Samsung HI, operated by Minerva tankers.

34

As with VLCC, the average daily returns have beenconstantly rising over the past three years. On thebasis of the two routes West Africa / Gulf of Mexicoand cross-Mediterranean, these have moved from$ 20,500 per day in 2002 to $ 42,900 in 2003 andhave slightly surpassed $ 70,000 in 2004.

If the rate movements have often been erratic, thereturns have never been below $ 20,000 per dayin 2004, the record being reached in mid-Novem-ber with over $ 160,000 per day for a cross-Medmovement.

Even though the voyages are short, we can see yetagain that the driving force is the Mediterraneanmarket and especially Russian exports out of theBlack Sea. It should also be observed that this newimprovement in freight rates has come about des-pite exports of Iraqi crude from Ceyhan being par-ticularly weak and erratic following the successivesabotage of the pipeline feeding the terminal.

Exports of Russian crude have not stopped risingand the coming into service of the new pipelinebetween the Caspian Sea and Ceyhan should helpreinforce the role of this zone as a barometer ofthe Suezmax market.

Record delays of over 20 days during the winter of2003 in order to transit the Turkish straits have notbeen repeated. Thanks to new navigational rulesand milder weather, round trip voyages have scar-cely exceeded 10 days.

Despite an increasing share of exports being takenby VLCC out of West Africa (always with a pro-portion of 70 / 30 between East / West destina-

tions), units of one million barrels continue to finda stable market in this zone.

While Nigeria remains the main exporting country,there has been significant and confirmed exportgrowth from other countries, notably Angola,where deep-sea drilling is being pursued at a sus-tained rhythm, justifiable in view of the currentlevel of oil prices.

One has also seen a growing number of fixtures outof the Arabian-Persian Gulf at record freight rates thisyear, following the spectacular highs set by VLCC.Thus on some spot business rates have gone up toover Worldscale (WS) 400 for voyages to China.

As with other sizes, the elimination of old unitshas been particularly quick since for the fleet inservice at the end of the year, there are onlyslightly over 20 % of single-hull ships.

Furthermore in line with the other categories, fewowners were inclined to place their modern shipsout on time charter, but rates can be estimatedbetween $ 55-60,000 per day on the basis of aone year contract.

Aframax

This market has been particularly boosted sincethe accidents of the ‘Erika’ and above all the‘Prestige’. Security measures adopted by the mainplayers and the increase in trade movements hasallowed owners with renewed fleets to obtainfreight rates which give a rapid payback on theirinvestment.


0

180,000

120,000

140,000

160,000

100,000

80,000

60,000

40,000

20,000

Suezmax tanker freight ratesAverage earnings

130,000 t Sidi Kerir/Fos

130,000 t Forcados/Texas City

$/day

Jan

02

Feb

02

Mar

02

May

02

June

02

July

02

Sep

02

Oct

02

Dec

02

Jan

03

Feb

03

Avr

03

May

03

June

03

Aug

03

Sep

03

Nov

03

Dec

03

Jan

04

Mar

04

Avr

04

June

04

July

04

Aug

04

Oct

04

Nov

04

Dec

04

35

As an example and only on the European market,if the average returns were only $ 12,500 per dayin 1999, they jumped to $ 40,000 in 2000 andthen dropped to $ 21,500 in 2002, when the‘Prestige’ accident in November 2002 totally over-turned the supply / demand balance.

This European traffic has been in continual growthsince 2002, as between the Mediterranean andthe North Sea, the level has gone from 45 % to50 % of all spot charters done world-wide.

Despite a more marked volatility compared toother sizes, the average daily returns have movedup from $ 42,500 per day in 2003 to about$ 58,000 per day over the last 12 months.

Proof of the extreme volatility of this market arethe large variations in Mediterranean demandwhich often put freight rates into a roller-coastermovement, difficult to foresee and to control, butwith a strong upward pressure. Returns on cross-Med voyages jumped from about $ 17,000 per dayin April up to $ 110,000 per day at end October!

It should be noted that the record levels reachedat the end of the year were the result of a higherdemand, without any particular influence of delaysdue to bad weather, such as experienced in 2003with the transit of the Turkish straits.

As to the structure of the fleet, today the propor-tion of modern double-hulled units is predominant.The survival of some single-hulled ships is limitedto several Russian traders out of the Black Sea, buttheir days are numbered…

In the North Sea, freight variations and returns clo-sely followed the trends in the Mediterranean withan average yearly rate working out at WS 189 onthe short cross-North Sea voyages. In parallel therewas also a strong progression of Russian exportsout of the Baltic and Murmansk. For such voyages,even though ice-classed ships are now more nume-rous, rates continued to be extremely high sincethe beginning of the winter season (up to WS 440).

In the Caribbean market, with the rise in Americanimports to help reconstitute inventories, we sawan increase in local movements and the averageannual rates were around WS 255 compared toWS 207 in 2003.

In such a situation, there were few time chartertransactions given that the spot market enjoyed asteep rise. Nonetheless, there are a number ofowners who expect downward pressure in themonths to come, which would then be a justifica-tion for some commitments to time chartercontracts.

Prospects

In face of the particularly erratic fluctuations inrates, any realistic prediction either for the mediumor long term is a highly precarious exercise. Theslightest event of either macro-economic or geopo-litical nature will continue to have an impact on thefreight markets.

Nonetheless, as with our preceding report, weconsider that owners can reasonably expect to see


0

140,000

120,000

100,000

80,000

60,000

40,000

20,000

Aframax tanker freight ratesAverage earnings

80,000 t UK/Continent - TCE

80,000 t East Med/West Med - TCE

$/jour

Jan

02

Feb

02

Mar

02

May

02

June

02

July

02

Sep

02

Oct

02

Dec

02

Jan

03

Feb

03

Apr

03

May

03

June

03

Aug

03

Sep

03

Nov

03

Dec

03

Jan

04

Mar

04

Apr

04

June

04

July

04

Aug

04

Oct

04

Nov

04

Dec

04

36

freight rates remaining firm over the next twoyears. Even if on the economic front, various ana-lyses suggest that there will be lull in the growthfor a number of importing countries, the energyneeds of China and India alone will continue tohave a determining influence on the world tankertraffic.

It is however unlikely that we will see in the next12 to 24 months the exceptional levels of freightrates experienced this year. We should witness asteady decline in the average rates and reach alevel probably close to that of 2003, therefore stillconsiderably in favour of owners.

The arrival of new units into the fleet is obviouslya cause of concern, with such imposing numbersas the table above indicates. On the other handwe can expect that deletions will not be sufficientto compensate for the number of new units. Agood number of Asian countries continue to useold single-hull ships and probably do not respectthe letter of the law as laid down by internationalorganisations.

As we did in our previous report, the study of the“eligible fleet” adds a clear indication to the fore-casts, and gives an initial response which coun-terbalances the pessimism of those who only lookat the massive tonnage arriving on the variousmarkets.

This time we only compare the global tonnage atthe end of 1998 (corresponding to the main crite-ria used at this time by the main charterers namelyan age limit of 25 years) with what will be thefigures in the coming years but only taking intoaccount ships with double-hulls.

One observes that despite a constant increase in ton-nage in each of the categories, none of the volumessurpasses the level achieved at the end of 1998.

The cost of new ships should continue to rise,especially with the continuing increase in the costof raw materials from which they are built.

The organisation between owners leading to thecreation of commercial pools should help avoidsudden drops in the market and allow freight ratesto continue for a prolonged period at levels wehave seen recently.

Finally, the drastic safety measures will continue tobe reinforced and the balance between supply anddemand, which determines the rates, will be moreand more linked to the quality of ships effectivelymeeting the requirements imposed by the maincharterers and not just by simple comparing sup-ply and demand figures. ■


140,000,000

120,000,000

80,000,000

100,000,000

60,000,000

40,000,000

20,000,000

end 2007(double-hull)




end 2002(under 15 years)



dwt

Major charterers "eligible" fleet evolution& prospects to 2007

Aframax

Suezmax

VLCC

0

Tankers on order (number of ships)

Aframax Suezmax VLCC

2004 58 29 31

2005 67 29 35

2006 62 24 21

2007 50 29 40

Total 237 111 127

37The Tanker Market in 2004

The crude tanker second-hand market“Quo non ascendent!”: how far up will it keep going!

This motto, which comes from a large Frenchnoble family in the 17th century, seems to beideally suited to the family of tanker owners

if they were wise enough to follow the second-hand market of their ships throughout the courseof the year.

If the price of tankers progressed overall by 20 to35 % between the end of 2002 and the end of2003, they experienced an increase in the order of50 to 60 % between 2003 and 2004 for the moremodern double-hulled tankers and up to 100 %for some of the single-hulls, aged between 15 and20 years old. It has been the explosion in the dailyreturns which quite logically has caused this phe-nomenal appreciation. During the year, ownerswere continuously on the horns of a dilemma bet-ween the desire to profit from these colossalreturns and the desire to make some cash by sel-ling off their assets. This dilemma only got worseduring the months: the more prices and returnsincreased, the less opportunities there were toseek out alternative investments. In fact, the eva-luation of other types of ships followed the sametendency, as was the case with bulk carriers andcontainerships as well as gas carriers and, to a les-ser extent, chemical product carriers.

The rocketing rise of daily returns was thus themain cause for the increase in values but alsocontributing was the demand forecast for Chinaand India which incited a good number of ownersfrom these countries to rush massively into thesecond-hand tanker market. In fact, they werequite aggressive and clearly contributed to the spi-ralling prices. Their thirst for tonnage even allowedsome smart operators to buy and re-sell the sameship in the course of the year, and realise very sub-stantial gains. Chinese and Indian owners havethus gained a foothold in this market and are sho-wing to all that they have no intention to leave thecare and attention of transporting crude and oilproducts, which the economic growth of theircountries requires, to third-party players.

Another factor determining the rise in the price ofsecond-hand tankers this year is the increase in thenewbuilding price of ships, combined with the latedelivery dates being proposed by shipyards (2007and 2008). Consequently a number of modernships with prompt delivery dates have seen their

values increase substantially sometimes over thecontract price for a new vessel.

Two other elements have characterised the year2004. First there has been a noticeable increase inthe number of en-bloc transactions comprising atleast three ships: with only seven transactionssome 32 units changed hands. Teekay and Gen-mar were particularly active in this type of businessas they were involved in five of them. The compa-nies mentioned were in this way able to respondto their shareholders expectations, either by reali-sing short term profits or else by showing theirstrength and their desire to expand. The othersignificant factor was the unexpected effect thatthe explosion of spot freight rates had on GermanKG buyers. The latter have been very active overthe past two years, but have had to abandon theirrole as principal player to others this year due toprices being too high in comparison to the longterm charter rates that the KGs could obtain onthe market. Whilst the spot rates went throughthe ceiling, the long-term charterers (3 years andmore) did not follow the levels being asked byowners. Without a safe charter back, numbers ofKGs were forced to abandon this sector.

The VLCC second-hand market

This segment of the market saw very sustainedactivity, the volumes of transactions exploded asfrom May and prices took off. The volume vir-tually doubled compared to last year. We registe-red no less than 82 sales (for further trading) ofsecond-hand VLCC, which actually only concern76 ships as 6 of them changed hands twiceduring the year. It should be noted that only44 units were sold in 2003, 24 in 2002 and 37in 2001.

Logically in view of their small number, very fewships from the ‘70s changed hands. Only four VLCCof this generation were sold for storage projects,such as the t/t ‘Folk Sun’ of 323,100 dwt, built in1979, for a price in the region of $ 19.5 million.

By contrast, we saw a real plethora of sales ofsingle-hull units built between 1980 and 1995, as51 changed hands this year compared to 18during the previous year. If the buyers of 2003were mostly Greeks, they cleverly came out as dis-crete sellers in the course of 2004, placing their

38

ships with Far Eastern buyers and showing onceagain their astute sense of timing. As an example,we can cite the sale of m/t ‘Progress’ of 238,898dwt, built in 1987, going to buyers in Hong-Kongfor a price of $ 49.7 million in December 2004,whilst its acquisition price in September 2003 wasaround $ 16.5 million. Some operators succeededin buying such ships at the beginning of the year,operating them very successfully for severalmonths on the spot market, to finally sell themseveral months later with a considerable profit.Such was the case of m/t ‘VL Venus‘ of 238,770dwt, built in 1986, bought in January for $ 18.0million and sold in June for $ 24.6 million. Itshould be pointed out that buyers of VLCCs forconversion are increasingly considering this agecategory, given the virtual disappearance of theprevious generation of ships. It is the reason whythree units out of the 51 sales left the fleet tobecome FSO or FPSO, such as m/t ‘Apollo’ of257,882 dwt, built in 1981, sold for conversion ata price of around $ 20 million.

The number of double-hull VLCCs built after 1993sold this year was also higher, even though not quiteas dramatic, since we have registered 31 sales in2004 as against 23 in 2003, only 5 in 2002 and 14in 2001. We can easily understand that owners ofthese ships have shown a greater resistance to thetemptation of selling, since the double-hull vesselshave a longer life expectancy, and furthermore thehull configuration meets today’s norm to which themost exposed charterers have to conform. We could

cite as an example the sale of m/t ‘Oriental Topaz’ of319,430 dwt, built in 2002, for a price close to$ 116 million (for prompt delivery), whereas the costof ordering a new ship at the same time is some$ 10 to 15 million less. Amongst the 31 transac-tions, there are 6 contract resales of which in Junethe en-bloc one of the hulls 1,540 and 1,541 of only260,000 dwt being built at Hyundai Heavy, for deli-very at the end of the year for $ 92 million each.

This year, only 5 ULCC / VLCCs went for demolitionagainst 29 newbuildings coming into the fleet.This figure is falling compared to the 27 and36 units demolished respectively in 2003 and2002. The rising freight rates as well as the verysmall number of ships still in service and affectedby the phasing-out of single-hulls explains thisminimalist figure. It should be contrasted with the105 units which are due for delivery between2005 and 2009.

The second-hand Suezmax market

This size category, namely from 120,000 to200,000 dwt, did not benefit from an increasedvolume of transactions comparable to that of theVLCCs. Nonetheless the price increases were simi-lar since, in line with the VLCCs, single-hull unitssaw their values virtually double while those ofdouble-hulls only went up by 55 to 60 %.

While we were able to count 53 sales of Suezmaxin 2003, the year 2004 only saw 43 units changinghands; actually 45 transactions as two ships saw


14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

2004 200320022001

dwt

Tankers - deletions(demolition, conversion, total loss)

Aframax

Suezmax

VLCC

0

39

three different owners in the course of the year.This sector of the market was particularly suscep-tible to en-bloc transactions and was highly favou-red by NYSE listed companies.

For the first time, and quite logically, no ship builtin the ‘70s changed hands (for further trading)since these should be phased-out of the fleet nextyear at the latest. They have not altogether disap-peared however since some are waiting for sto-rage projects.

As to the single-hulls built between 1988 and 1993,we saw 15 transactions concluded in 2004 (for13 ships) which was a similar figure to that of lastyear. There was the noteworthy en-bloc sale of threesingle-hulls, the ‘Genmar Transporter’, ‘GenmarTraveller’ and ‘Genmar Centaur’ of 142,031 dwt,built respectively in 1989, 1990, and 1990 foraround $ 66.3 million. In addition also significantwas the sale of the m/t ‘Sandra Tapias’ of147,253 dwt, built in 1991, which formed part ofan initial en-bloc transaction in March and was thenresold in September for a price around $ 28 million.Finally, as with the VLCCs, nearly all the sales of thesingle-hulls were concentrated in the second half ofthe year when the values were at their highest.

As was the case last year, the majority of the dealsconcerned modern double-hull ships, namely 30compared with 37 in 2003. The unusual aspect forthis type of Suezmax was the high proportion ofthese sales, some 26 out of the 30 units, featuringin en-bloc sales. Is this size category thereforesignalling profound changes in owners’ attitudes?It is not certain, since the reason for this concentra-tion is mainly due to the accessibility of funds withthe New York Stock Exchange rather than a realdesire on the part of owners. The next downwardcycle, which will inevitably arrive sooner or later,could well herald an end to this type of operation.As an example we can cite the sale of the m/t‘Aegean Lady’ and ‘Aegean Eagle’ of 165,000 dwtbuilt in 2003 for a price of $ 70.3 million each.

The number of Suezmax sold for scrap this yearwas identical to that of last year namely 10 units,compared with 15 in 2002. Twenty-six new shipsentered the fleet in 2004, but 86 already figure inthe orderbooks of shipyards over the next 5 years!

The second-hand market for Aframax tankers

The number of second-hand transactions for Afra-max also was significantly higher this year since wehave registered 85 sales in 2004 as against 70

during the previous year (and only 35 in 2002).Ships included in this category are vessels of60,000 to 80,000 dwt with a beam of more than32.2 metres.

As with the Suezmaxes, as we observe that for thefirst time there have been no transactions (for fur-ther trading) of Aframax built in the ‘70s.

The split between sales of single-hull Aframax builtbetween 1980 and 1993 and sales of double-hullsbuilt after 1990 were nearly identical. The firstregistered 45 transactions, whilst the double-hullsreached the figure of 39 sales, including 11 resales.The single-hulls from the early ‘80s found buyersin the Far and the Middle East, where regulationsdo not require double-hulls for transporting dirtyproducts and crude oil yet. The sales of ships inthis generation were concentrated in the first partof the year, even though the prospects of this mar-ket were most encouraging. We can cite the saleof the m/t ‘Montrose’ of 85,619 dwt built in 1981,sold for $ 7.5 million, and the en-bloc sale of them/t ‘Spectrum’ and m/t ‘Solaris’, of 96,000 dwt,built in 1985, for about $ 16.5 million each. Thehuge difference in price between these two sales(not double-hulls) despite a small age difference (4years), can be explained by the fact that the 1981ship, if the latter is not SBT (Category 1 OMI) orSBT but does not conform to the IMO 13-G ternorms, should be phased-out next year, whereasthe 1985 ship which is SBT (Category 2) can navi-gate up until 2010.

The modern, double-hulled Aframax were again instrong demand, since 39 of them changed hands.This figure would have been higher, withoutdoubt, had owners not preferred to employ thistype of ship on the spot market rather than to sellthem, despite the exceptional prices being propo-sed by buyers desperate for tonnage. We can notethe sale of the m/t ‘Seachem’ of 95,621 dwt builtin 1993 for about $ 30.5 million as well as the saleof a ship under construction with Daewoo to bedelivered in January 2005 for a price of $ 62 million.In addition this category of ship was the only onewhich got the attention of the German KGbuyers, since they bought 11 of them of whichthe hulls 1,467 and 1,468 deliverable at the endof 2004 by Samsung, which were sold for a priceof $ 109 million en-bloc.

Thirty Aframaxes as were demolished this year, ascompared to 35 the previous year and only 20 in2002. This is in contrast to the figure of 55 shipsdelivered in 2004 and the current orderbook com-


40

prising to date no less than 182 ships to be delive-red from 2005 to 2008.

The second-hand marketfor Panamax tankers

Panamax ships by comparison witnessed a far moremodest volume of business than larger tankers.Twenty-nine units changed hands against 45 in2003, 11 in 2002 and 22 in 2001. The breakdownby age was about a third for single-hulls built bet-ween 1981 and 1987 (9 sales) and two-thirds fordouble-hulls built from 1985 to 2006 (20 ships ofwhich 8 were resales). The following significant saleswere done this year: the m/t ‘Nile’ 65,755 dwt builtin 1981 sold for $ 5.2 million, the m/t ‘United Will’of 68,961 dwt double-hull, built in 1992, for$ 25.3 million and the m/t ‘Tavropos’ of 70,000 dwt,built in 2004, sold for $ 45 million (compared to asimilar Panamax built in 2003 and sold for $35 mil-lion in 2003!). This category has remained the dar-ling of the German KGs, who showed the sameappetite for this type of tonnage as they did last year.The investment amount, the age of the ships concer-ned and the charter party rates which can be obtai-ned, make Panamax vessels attractive to investors.

With thirty-five ships of this category added to thefleet in 2004 and an orderbook totalling 168 shipsat the end of the year, the market should see anincrease in demolitions in order to remain healthy.Thirteen Panamax were sold for demolition, onlytwo less than the previous year despite the surgein rates. It is difficult to predict whether we shallsee an increase in the Panamax going to the scrap-yards in 2005, as a large number of existing shipsover 20 years are SBT.

The second-hand market of OBO ships.

This market continued its return to fortune startedin 2003 and again benefited from the interests ofboth bulk and tanker owners. The reluctance ofcertain charterers as to the OBO configuration wasgradually discarded with the progressive rise inrates. Thus, the volume of transactions as well astheir values logically increased.

In line with last year’s figures, 23 ships changedhands. We should recall that only 9 and 11 saleswere reported in 2002 and 2001. To illustrate thisrevival, we can mention the sale of the OBO ‘Snap-per’ 135,160 dwt, built in 1982, which changedhands in 2003 at a price of $ 6.1 million and wasresold in 2004 for a price of $ 15 million, with acharter attached for only one year at a rate ofaround $ 27,000 per day.

We must also mention a major transaction in thismarket since the 10 OBOs, ‘SKS Tyne’, ‘SKS Tana’,‘SKS Tweed’, SKS Tugela’, ‘SKS Tagus’, ‘SKS Trent’,‘SKS Torrens’, ‘SKS Tanaro’, ‘SKS Tiete’ and ‘SKSTrinity’, which belong to a joint venture composedof two owners were taken over by one of them foran en-bloc value of $ 150 million (basis 50 %).These ships are 110,000 dwt and built between1996 and 1999.

We have seen 4 OBO sold for demolition this year,as against 5 in 2003. As of now, the orderbook isnon-existent.

Tomorrow’s market

Above all it should be remembered that in 2005tankers, which come under the Category 1 OMI(pre-Marpol and non-SBT) will leave the fleet aswell as those in the Category 2 (post-Marpol SBT)built before 1978. Ships in this second categorybuilt afterwards will leave the fleet progressively asfrom 2010 and/or 2015 based on their classifica-tions and flags.

The lack of demolition observed in 2004 and theincrease in the tanker fleet capacity, due to the mas-sive deliveries of new tonnage, should most proba-bly change the equation in the medium term. Valuesshould logically see the start of a decline during thecourse of 2005, if demand for crude in general andin China in particular does not match the levels of2004. Nonetheless this weakening will take time, ashistory shows us that owners have a capacity toresist selling their assets at reduced levels. This capa-city to resist will be sustained by the vivid memory ofpeak prices obtained in 2004 and the large marginthat owners enjoy at the current spot rates. Thevolatility and the instability of rates seem now to befacts to which owners are getting accustomed andtheir accumulated reserves will allow sellers to takea more relaxed position. Perhaps in 2005 we shallsee some prudent or far-sighted owners disposingof some first generation double-hulled ships thuscashing in on their current valuation.

Europe is looking into the need of penalising moreseverely certain forms of pollution, but a consensusbetween the 25 member states seems a distantprospect. We regret yet again that the discussionon the concept of “place of refuge” is not clearlywritten into the agenda and is not currently beingexamined. At the expense of being simple and effi-cient, it should remain a top priority for each stateand the E.U. if they really want to minimise theconsequences of the perpetual possible future acci-dent of either single or double-hulled ships! ■


41

2004will remain a memorable year forowners for the second year in a row,

since the market for product tankers registered anincreased level of average daily returns. There hasbeen a progress of over 20 % for all size of shipsboth for spot and period business.

As in 2003, the exceptional rise in this market hasbeen due to the high level of growth in the US andthe Far East, even if the development of the“paper” market, aided by some speculation parti-cularly on the TC1 (75,000 mt naphtha MiddleEast Gulf / Japan) and the TC2 (33,000 mt UMSContinent / US Atlantic Coast) routes, helpedcontribute to the strong performance of thefreight market.

The rise in rates, which began in December2003, peaked in February, with daily returnsapproaching $ 40,000 per day. The drop registe-red in the months of March and April correspon-ded to an easing in the fuel oil market, beforerates started to perk up again in May and June ataround $ 25,000 per day. The traditional lowpoint in the summer was around $ 20,000 perday and the expected recovery came at thebeginning of October, which allowed theMedium Range product carriers (MR) to enjoyonce again returns of $ 40,000 per day, whereasthe Long Range (LR) were flirting with the$ 60,000 per day level.

Like last year, the rates paid for period charterswere largely lagging behind the spot market.

Nonetheless, if charterers were reticent aboutcommitting themselves to long term business athigh levels, they accepted to pay record levels forshorter periods and started using floating ratesagreements indexed on the spot market or linkedto a profit sharing scheme.

However, whilst the market was able to absorb thesome 130 MR ships, totalling 5.5 million dwt deli-vered in 2004, there is some doubt as to thechances of repeating this exploit in 2005, 2006,and 2007…

The evolution of product tankerfreight rates in 2004

The Handysize (Handy product tankers)of 30,000 to 39,999 dwt

Yields for Handysize ships surpassed those obtai-ned in 2003 by more than 20 % at nearly$ 25,000 per day, despite the “ice class” premiumbeing virtually non-existent due to the mild winterseason which started in 2004. Whilst these shipswere most frequently employed in the Atlanticzone, some started to find employment aroundthe Far East, especially the “shallow draft” unitswith a capacity of 45,000 cbm.

Within the European zone, both in North Europeas well as in the Mediterranean - Black Sea area,over half of the fleet was used once again in thetransport of fuel oil and crude, with owners nothesitating to switch from clean to dirty and vice-


Bro Etienne37,179 dwt, delivered in 2004 by Jinling, owned by Broström Tankers

The transport of refined oil products

42

versa, based on the rates differentials that couldbe obtained respectively in both sectors.

Charterers were not really keen to commit them-selves to long period business due to the highexpectations of owners, but starting in Octoberand facing a strong surge in spot rates, they finallyhad to accept paying levels above $ 20,000 perday for periods of 12 to 18 months.

The Medium Range (MR product tankers)of 40,000 to 49,999 dwt

Ships operating in the Atlantic benefited from thesustained level of American demand for gasolineand fuel oil. Daily returns for a 33,000 t voyage -UMS - Continent / US, varied between $ 16,250,at the bottom of the market during the summer,to $ 40,000 per day in February and December,with the annual average working out at $ 26,500per day.

Parallel to this, a traffic of gas oil developed bet-ween the US Gulf and Europe. In 2004 Europeimported 11.5 million barrels of gas oil from theUS, which is the equivalent of 13 % of the Ameri-can production.

As in 2003, ships operating in the East of Sueztook advantage of the economic strength of theFar East zone, led by the growth in China, India,and Japan. Despite a seasonal decline in thespring, returns remained comfortably above$ 20,000 per day, notably after the month ofOctober.

Long term period business was scarce, but traderssuch as Vitol, Trafigura, and especially Glencorewere very active in the short period business (3 to12 months) and did not hesitate to pay ratesabove $ 30,000 per day to the extent that theywere able to hedge their positions on the “paper”market.

The Long Range (LR product tankers)from 50,000 to 90,000 dwt

The LR2 and the LR1 were also particularly helpedby the strong demand coming from throughoutthe Far Eastern zone, notably China and Japan. Asfrom mid-September, daily returns went from$ 30,000 to $ 60,000 per day for the LR1, whereasthe LR2 were over $ 70,000 per day.

In this sector of the market, the “paper” businesshas an important role, but if the route TC1 (LR2 -75,000 mt - Middle East Gulf / Japan) was heavily


0

60,000

50,000

40,000

30,000

20,000

10,000

Product tanker freight ratesAverage earnings

Jan 03 Mar 03 May 03 Juil 03 Sep 03 Nov 03 Jan 04 Mar 04 May 04 Juil 04 Sep 04 Dec 04

$/day

55,000 t MEG/Japan

35,000 t Rotterdam/New York

28,500 t Caribs/USAC

Garonne37,178 dwt, delivered in 2004

by Hyundai Mipo, operated by OMI Corp.

43

(1) Condition Assessment Scheme


traded at the beginning of the year, it soonbecame obvious that the market was far moreliquid on the TC5 route (55,000 mt - Middle EastGulf / Japan).

The market was also well supported by the nume-rous movements of kerosene from the Middle EastGulf to Europe and by the European exports of dis-tillate and gasoline to the US.

Some long term period business was concluded onice-class LR2 ships, but it was the LR1 size whichwas being sought after for trading clean products,fuel oil and crude. The majority of these fixtureswere done in the first half of the year, whichexplains why the rates were around the $ 22,000/ 23,000 per day for periods of 3 years.

Despite the large number of new ships being deli-vered, 2005 should again be a year favourable toowners of product tankers. Even with a conside-rable increase in modern tonnage, the completerenewal of the fleet will be far from being accom-plished by the end of 2005.

Delivery of new ships should result in:

◆ ships from 30 to 40,000 dwt: 48 ships totalling1.75 million dwt,



to which will be added some 20 coated Aframaxtankers totalling nearly 2.0 million dwt.

Supply of tonnage will therefore increase signifi-cantly especially since the demolition level is low.At current rates, even the simple decision to put avessel in technical lay-up is to be taken by the topmanagement of the company. Notwithstanding, atthe end of 2005, the Major’s eligible fleet will onlycomprise some 650 ships for a little less than30 million dwt against over 950 ships and35.0 million dwt at the beginning of 1999.

The withdrawal of the older ships has been post-poned due to the fact that certain niche businesscontinues to be very remunerative: gas oil move-ments from the Black Sea, clean products for WestAfrica or even the market for vegoils and molasses.In addition, the high freight levels have convincedseveral owners to undertake necessary refittingwork to obtain the mandatory certificates (C.A.S.(1) /CAP 1 or 2), which will allow them to operate theirships beyond their twentieth anniversary.

Nonetheless the international safety measures andthe vetting services of oil companies continue to putpressure on owners of old vessels, whose days arenumbered. We predict therefore that demolition willgradually increase throughout the coming year.

Demand for shipping of clean and dirty pro-ducts bound to the American zone or the FarEast has been, like in 2003, the main factormaintaining the healthy state of the freightmarket.

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

dwt

Eligible MR product tankers fleet to 2007(30,000 to 53,000 dwt)

End 1998(under 25 years)



End 2004(double-hull)




0

44

The steady rise of product tankers freight ratesduring the year 2004 also had an impact onsecond-hand values. In a higher volume of

transactions (around 150 Medium Range andHandy product tankers built since 1980 have chan-ged hand in the course of the year) prices havedramatically risen.

The value of a five year-old standard double-hull45,000 tonner, which was around $28 million atthe end of 2003, progressed to $32 million by theend of June and up to an average of $39 million inDecember.

This rise also applied to the older units as, for ins-tance, the value of a 20 year-old, single-hull,45,000 dwt ship started at around $5 million inJanuary 2004, to reach $7 million at the end ofJune and ended the year at around $9 million.

Lastly, a single-hull 40,000 dwt product tankerbuilt at the end of the 1980’s, for which one hadto spend $ 11.5 million at the end of 2003, endedthe year at around $16 million. ■


ecological factors are curbing the expansion ofrefinery capacity and that the increase in capaci-ties are not keeping pace with the demand in theFar East.

Under these conditions, the demand for transportof refined oil products should continue to increasein 2005, especially as the trend toward longertrade routes is likely to continue. There are evensome projects being carried out to transport naph-tha and condensate from the Mediterranean toChina!

As we stated last year, “it is unavoidable that thelarge number of vessels being delivered in the next2 to 3 years will affect the product tankers mar-ket”. One can add that there has been somedoubt expressed recently as to the persistence ofthe American growth and the reliability of the Chi-nese expansion (at the current pace of 9.5 % peryear, the Chinese economy will double within 6years)….and finally cannot exclude the risk of afinancial crisis in the Asian zone.

Nonetheless, except a major event, the year 2005gives every sign of being propitious to producttankers owners. The arrival of over a hundred newships should however dampen the volatility of themarket and cause a modest drop in the daily ave-rage returns. ■

Once again, it was the fuel oil market in the Atlan-tic zone which sparked off the rise in rates in mid-September. At the end of November only, ratesobtained by the clean products have catched upwith the levels achieved by fuel oil and crude. Theclean products followed this trend a month laterand they were able to match and then overtake thedirty product rates only by the end of November.

In the Far East, the increase in rates started at thebeginning of September, namely two months ear-lier than usual. Then the very high levels tended totumble, as much due to lack of available tonnageas due to technical shutdowns at several refineriesin the Middle East Gulf.

However, the fundamental explanation is thecontinuing high level of imports, resulting from alack of local refineries able to meet domesticdemand in oil products. It is known that in the US

The product tankers second-hand market

Cape Limboh15,305 dwt, built in 2003

by Okean shipyards for Petromarine

45

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47The Offshore and Specialised Ships Markets in 2004

The year 2004 will remain unique in the historyof the oil and gas industry for two reasons:first, world oil demand (excluding gas) reached

its highest level ever and second, the price of oil alsoregistered a peak at around $ 50 per barrel.

The offshore sector at last is feeling the initial bene-fits of the surge in prices and oil companies are againtargeting to increase their proven reserves of oil andgas. About $ 125 billion was spent on explorationand oil production in 2004. This level, comparable tothat achieved in 2001, should increase to $ 135 bil-lion in 2005. This figure excludes Russian and Chi-nese projects, but includes the Kashagan and Kaza-khstan projects in the Caspian Sea. This drive will bea stimulus in the first instance to the development oftraditional offshore equipment in shallow waters, butalso to very deep-sea offshore equipment, whichcomprise a number of drilling units used at the limitof their capacities. Geophysical offshore explorationwill see a certain stability, even with some expansion

in India. The increase in offshore drilling expenses in2004 illustrates the upward trend and the best indi-cator of this growth being the percentage of jack-uprigs operating, which has gone from 75 % at thebeginning of the year to 90 % at the end.

Offshore Support Vessels

Most of the major companies in this branch of theoffshore market decided this year to order a largenumber of Platform Supply Vessels (PSV) as well asAnchor Handling Tug-Supply (AHTS). The order pat-tern was mainly:

◆ at the beginning of the year, for PSVs in the sizerange of 3 000 tons deadweight or more,

◆ for mid-size AHTS, with 60 to 120 t bollard pull,dynamic positioning and equipped with fire-fightingsystems.

The majority of orders were placed with Far Easternshipyards, currently favoured for their cheap labour

THE

OFFSHOREAND

SPECIALISEDSHIPS MARKETS

IN

2004

48

costs as well as the weakness of the dollar. The othersignificant trend of this market is the halt on the ever-growing size of PSVs and of the engine power ofAHTS.

Our explanation for these phenomena is triple: thereare few orders coming from Norwegian owners as theNorth Sea market has remained flat for most part of2004, oil companies’ needs have been concentratedon production in deep waters and finally, owners arefollowing the general movement towards cost cutting.

It is worth noting an inversion of trend during thecourse of the year for Norwegian shipyards, whichhave filled their orderbooks, even though they were


limited by their Polish or Romanian sub-contractorsproduction capacities to build the hulls.

This general demand from charterers to reduce“logistics” costs in the exploration/production pro-cess, passed onto owners, has resulted in an effort tostandardise ships with more orders for series and theresearch into more optimised designs coming alsofrom the Far East. In this respect, the diesel-electricengine solutions mainly developed by Norwegianmanufacturers incorporate true advantages, particu-larly in relationship with dynamic positioning equip-ment compatibility, which is now a standard featureon most new ships, for a reduced price.

The choice of diesel-electric propulsion, combinedwith the installation of azimutal propulsion sets, hasalso contributed to reduce construction costs by sim-plifying the hull forms.

In 2004 both PSVs and AHTS delivered by the yardsfound employment, even if charter rates were notalways at levels hoped for by the owners.

The North Sea market was the catalyst in the reco-very of the offshore market. As an example, an AHTSof 200 t bollard pull chartered out on the spot mar-ket at the beginning of the year at 15,000 $ per day,obtained 45,000 $ per day in December. It was thesame for the Gulf of Mexico where the employmentrates of vessels finally saw an increase after four verypoor years. Egypt, the Middle and Far East also sawchartering rates on the rise by employing morepowerful AHTS.

Kaori Port tug, delivered by

President Shipyard in 2004, operated by CMC Noumea

(New Caledonia).

0

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Jack-ups utilisation rates

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05

North Sea - NW Europe

West Africa

North America


At the end of 2004 several important owners no lon-ger had any modern units to charter out, which leadsus to be relatively optimistic as to the market’s abilityto absorb the large number of PSVs and AHTS thatare due for delivery in 2005.

There has been a rapid increase in the already sub-stantial fleets operated by Singapore owners. As anexample we can cite Jaya, which had 21 AHTS, 2 PSVsand 6 other ships under construction at the end of2004. Fleets that are in the hands of Middle Eastowners have also seen a significant development with,for instance, Maridive in Egypt which controls nearly50 ships including 7 under construction in India.

Western owners have started or boosted their fleetrenewal programmes.

Groupe Bourbon has ordered 8 PSVs (GPA 670 type)and 4 AHTS (Conan Wu type of 70 and 80 tons bol-lard pull) in China. There are also 4 AHTS (120 t bol-lard pull, Conan Wu design) with Keppel Singmarinein Singapore, as well as 2 fast supply ships in alumi-nium based on an innovative French concept (Mauricdesign) with the Piriou shipyard. The Bourbon Groupis continuing to expand and hopes to conquer newmarkets.

We can mention the example of Tidewater, which hasordered 8 AHTS, 4 PSVs and half a dozen of smallerunits. They have ordered these ships with the intentionof replacing some older units and thus avoid impor-tant expenses to keep them in proper running condi-tion and getting them re-classified.

Edison Chouest Offshore has ordered 7 offshore ves-sels and 4 fast supply ships.

In 2004, Seabulk Offshore contracted with Labroyshipyard of Singapore 8 AHT/AHTS mainly for theWest African market.

Swire Pacific Offshore has 9 AHTS on order in the FarEast, of which 7 of the UT 780 type – 4,800 bhp withLabroy.

Delivery of new units ordered in Asia are spread outuntil 2006.

Beside these PSV and AHTS fleets, we have seen anoticeable increase in the demand for fast craft, over20 knots, built of aluminium, 40 metres long ormore, designed to carry dozens of passengers andsome cargo on deck. In the future, under deck bulkcapacities are also being envisaged. At last a newmarket has emerged concerning small, specific unitsaimed at providing security protection for offshore oilfields capable of carrying armed men aboard.

In addition, several governments, particularly inEurope, have launched programmes to renew or tocomplete their fleets for assistance or intervention aswell as anti-pollution surveillance ships. These buil-ding programmes are benefiting essentially Europeanshipyards.

Ice-breakers

The opening of the Russian market, giving access tothe Arctic, from the Barents Sea to the Bering Straits,has stimulated orders for the offshore markets, but

0

100

90

80

70

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30

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10

Utilisation %

Semi-Submersibles utilisation rates

North Sea - NW Europe

West Africa

North America

Jan

01

Apr

01

July

01

Oct

01

Jan

02

Apr

02

July

02

Oct

02

Jan

03

Apr

03

July

03

Oct

03

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04

Apr

04

July

04

Oct

04

Jan

05


also to serve the exports terminals of the “on-shore”production.

Amongst these we can mention:◆ Swire Pacific / Primorsk with an order for three UT758 of 90 meters, ice-breaker, at Aker Yards for 500million Norwegian kroner.◆ Rieber Shipping / Primorsk with an order for a ice-breaker / tug, at Aker Langsten for 351 million Nor-wegian kroner.◆ Sevmorneftegaz / Fesco with an order for two ice-breakers at the Havyard Leirvik shipyard for 53 mil-lion euros.

Underwater construction and installation – IRM Market

(Inspection Repairs and Maintenance)

The year 2004 was characterised by a marked revivalin the underwater construction activity and also withthe happy resolution of financial crisis of Stolt Off-shore, who managed to transform its debts into capi-tal and was able to win contracts at more favourableconditions. The Stolt Nielsen group sold its interestsin Stolt Offshore thus ending an historic participationin the sector. McDermott has strengthened its pre-sence with an expansion programme.

This industry has continued its consolidation of whichone of the stages was the repurchase by Siem Indus-tries Inc. of the remaining 50 % share of Subsea 7previously controlled by Halliburton. It appears alsothat Torch Offshore is in a particularly precarious

situation and is likely to dispose of a number of shipsespecially the ‘Midnight Express’.

European underwater contractors are in a bettershape than their American rivals, with the exceptionof Cal Dive and Global Industries. The revival of so-called traditional offshore activities in shallow waterin the Gulf of Mexico, should help contribute to theirimproved situation.

The start of large installation projects in West Africa,Egypt, and Brazil is helping to bolster activity, to thepoint that some operators are announcing that theyhave almost none of their main ships available until2008. The Far East, traditionally in low profile, willalso absorb some ships in 2005. Subsea 7 has madea remarkable break-through in West Africa, a marketup until now shared essentially between Technip Off-shore, Saibos and Stolt Offshore.

The possibility to have the right vessel at the righttime is a key to success in the underwater construc-tion market, but it should be appreciated that thefleet is ageing. In practice, with the exception ofseveral units coming into service at the initiative ofowners of supply vessels, such as the ‘Boa Deep C 1’,the ‘Normand Cutter’ (a converted cable-layer char-tered to Sonsub) the barge-laying ‘Jascon 5’ and theconstruction of the future ‘Normand Installer’ (a jointproject between SBM and Solstad), no major projecthas been launched or realised in 2004.

Bourbon Helios Platform supply vessel,

GPA design, 3,300dwt, to be delivered by Zhejiang

in 2005, will be operated by Groupe Bourbon

Offshore division.


Consequently 2005 should see the launching of seve-ral significant projects by the Majors, namely largelaying and installation ships (150 m x 30 m or more)capable of laying pipes of 16 to18 inches at a depth ofover 2,000 metres. The major concern will be the res-ponse capability of the shipbuilding market, which hasnever seen such a level of activity.

The recovery of the underwater construction marketboth in the area of new developments and in thearea of the maintenance of new fields, has logicallyhelped sustain and stimulate the activity of supplyvessels such as the MPSV (Multi-Purpose Supply Ves-sels) fitted with a strong lifting capacity (more than100 tons at sea-level). They are also employed in lightconstruction works and more generally in the IRMmarket of which the main players remain the ownersof supply ships mentioned in the previous chapter.

The seismic market

The four principal operators, WesternGeco, Veritas,Petroleum Geo Service (PGS) and Compagnie Géné-rale de Géophysique (CGG) have also benefited froma surge in activity. Hardened pessimists have beenobliged to revise their opinion about the future ofthis activity, which particularly suffered over the pastfour years. CGG seems to have abandoned its ambi-tion to merge with PGS after its offer was declined bythe latter’s shareholders. Nonetheless, a new conso-lidation would benefit this sector. At the start of2005, operators are working already on the pro-gramme for 2006, which is exceptional given theaverage duration of seismic acquisition contracts.

Technologies continue to improve the quality, but alsothe range of seismic work, since it is now possible todetect oil or gas up to a depth of 6,000 meters. Thesegains will incite operators to improve their marinelogistics globally and probably to charter more speci-fic supply ships for longer periods.

Drilling market

The offshore drilling industry is undergoing a realchange in situation which began at the start of 2004,with an increased level of utilisation of jack-up rigs todrill in shallow waters.

At the end of 2004, few units of the 300 feet jack-up rigs type remained available in the short term.Freight rates for deep-water drilling rigs are headingtoward the $ 300,000 per day level. The second gene-ration semi-submersibles, which drill at 1,500 /2,000 feet depths, are benefiting from the rebound inthe North Sea market and obtain more than $ 100,000per day for short term contracts.

The industry continues to gravitate around the fleetscontrolled by the six American majors, Pride, Dia-mond, Ensco, GlobalSantaFé (GSF), Noble, Transoceanand by four competitors of substantially smaller sizenamely Stena Drilling, Maersk Drilling, Atwood andRowan. By and large, the drilling companies dedica-ted 2004 to consolidating their balance sheets. Prideshould probably sell some supplementary assets, witha view to be in a better position for new investmentsover the coming 2005 / 2006 period. As to GSF, theyanticipated the change in the market and fixed four

0

25,000

20,000

15,000

10,000

5,000

Average reported day rates in £/day

North Sea supply vessel market

AHTS > 10,000 bhp

PSV > 2,000 dwt

Jan

01

Apr

01

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01

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01

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02

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02

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02

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02

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03

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Jan

05


units which are being completed in Singapore (2semi-submersibles and 2 jack-ups).

Opportunities to convert, modernise and build newdrilling rigs will be possible as soon as the oil compa-nies offer long term charter opportunities. It is worthmentioning the order of three jack-up rigs in Singa-pore on a speculative basis by a group of Norwegianinvestors, as well as another unit ordered by the Nor-wegian Odfjell.

In this sector, the Keppel Fels group plays a predomi-nant part, which is based on its world-wide networkof yards for repairs and shipbuilding, on its capacityto offer the market standard jack-up rigs, also adap-table to specific needs for drilling, and finally on itsrole as a speculative investor.

The Sembawang group for its part maintains a shareof the market due to the specific expertise of PPL Shipyard. Finally Chinese builders, such as Dalian,have emerged but remain principally concentratedon their domestic market.

Production market (surface systems)

This year has seen Stolt Offshore shed itself of engi-neering, construction projects and integrated pro-duction systems by the sale of its affiliate Paragon.The leaders, who are Saipem and Technip, obtainedsome prestigious but high resource-consumingcontracts, linked to developments in West Africa butalso in the Persian Gulf (Qatar project) and the Cas-pian Sea (Kashagan phase 1).

Despite the small number of contracts recently awar-ded (of which SBM with Petrobras of Brazil and Ber-gesen with Woodside in Mauritania), the number oftenders open or due to come out in 2005 for leasingFPSOs has considerably increased. These tenders areprimarily related to West Africa, Brazil, South EastAsia and Australia. These projects require storageship hulls of two million barrels, except for the last

two zones, which regularly require Suezmax sizeunits. In the second-hand market, which is some-what overvalued, it is obvious that the number ofavailable ships has become considerably reduced. Inaddition, oil companies are more and more reluctantto accept hulls over 20 years old. As from now, char-terers of FPSOs are proposing either to use modernships or to build new hulls to meet their standards, inline with the order placed by Modec (Mitsui group)and awarded to Samsung.

The dredging market

From the point of view of contractors, the sector hascontinued to consolidate. 2004 saw the final absorp-tion of Ballast-Ham by Van Oord. Despite a difficultcontext due to the halt of the huge Singaporian pro-jects, a revival in world demand in volume is expec-ted for 2005. Current projects in the Persian Gulf,China and the Sakhalin Islands have continued tokeep the contractors busy.

Jan de Nul is pursuing his modernisation programmeand the expansion of his fleet. It’s the only Major thathas built up his investments in an original and auda-cious strategy, by ordering small sized dredgers inChina. These orders have demonstrated Jan de Nul’sknow-how in engineering and project management.

In France, DTM has confirmed the order of a 2,200cbm sand-dredger with the Barkmeijer shipyard in theNetherlands, for delivery in 2005. GIE Dragages-Portshas concentrated on restructuring and rationalising itsfleet. It should confirm in 2005 an order for a 700cbm grab hopper dredger fitted with a dredge pipe.

Finally, there has been the U-turn of the IHC group,which has finally abandoned its shipyards, includingthe famous IHC Holland, designer and builder ofdredgers. The expertise of Dutch dredging specialiststends to be concentrated in the engineering workand the manufacturing of dredging equipment.

Conclusion

A lot of uncertainty has been removed by the out-come of the American elections. In addition the fore-cast is for a new increase in world oil and gasdemand.

Oil companies today possess very important financialcapacities. Exploration has been considerably redu-ced these last few years, whereas the increase in pro-ven reserves is now a strategic target.

These circumstances augur well for the offshoreindustry as a whole for the year 2005 and shouldapply to all geographical zones. ■

Goenisio BarrosoAnchor-handling tug supply,

delivered in 2004 by Fels Setal,operated by Delba Maritima

(Brazil)

53The Chemical Carrier Market in 2004

THE

CHEMICALCARRIER MARKET

IN

2004

Having started in the second half of 2003,the improvement in freight rates of che-mical product carriers reached record

heights this year, which have not been seen sincethe preceding periods of tensions in 1991 and1995. This revival, which lasts for more than ayear, shows no signs of losing pace at the start of2005. It was however paradoxical that the mar-ket was one of the few not to follow the generalrise in the movement earlier, which was set bythe dry bulk shipping market, oil tankers andcontainerships. Sooner or later the chemical pro-ducts should follow this upward spiral of theother shipping sectors.

It was high time for all participants that the mar-ket found its balance, for the last ten years the sur-plus of tonnage kept the level of freight ratesoften below running costs, which resulted in

owners ending up with their balance sheets in thered. In order not to slip further down or go under,the market has seen all over the year the forma-tion of pools or other partnership agreements.

This year again some changes have been carriedout, with the Vopak Essberger pool renamedBroere Essberger Chempool, but with a singleshareholder. Ahrenkiel has left the UCT pool andwith Odfjell they have formed a new pool forinter-European movements: Odfjell AhrenkielEurope GmbH. In response, Schoeller, the otherpartner in UCT, has associated with Seatrans toform United Seatrans Chempool. Too much outon a limb in this market, Naviera Quimica and laNavale Francaise have been bought by CamilloEitzen, who, with his other ships coming out ofCopenhagen Tankers, will operate a fleet of25 chemical carriers.


Freight rates

European short sea

On all European routes, spot freight rates havebeen continuously on the rise with an even moresignificant increase between September andDecember. The North European market has natu-rally profited from this improvement, but veryoften the majority of owners didn’t have theopportunity to take an interest in the spot marketbeing largely covered with contracts.

With few offers, and therefore less competition,freight rates increased by 20 to 30 % on averageover the year. The rise in bunkers costs should betaken into account in the operational results, butwith virtually all transactions being in the Euro-pean currency, this has allowed owners to stay inline with the currency of their fixed costs.

Mediterranean movements are always split intwo, with on one hand the older “unapproved”ships and on the other hand the modern ships.But contrary to previous years all ships benefitedfrom the improved freight rates. Demand for“unapproved” ships, but with stainless steel tankswas very strong in Eastern Mediterranean andnotably in the Black Sea for acid movements.Nonetheless a large number of ships disappearedfrom the fleet, with owners not hesitating bet-ween the high maintenance costs and the veryattractive rates being offered for scrap, but rene-wal of these ships is not taking place in the Medi-

terranean. There are openings in this market forowners in search of new outlets, but rates shouldrise further, or at least stabilise at current levelswhich have followed the same hike as in NorthernEurope.

The strategy of owners for renewing contracts hasconsiderably evolved. Generally speaking, ownerswho have until now not been able to benefit fromthe rise in the spot market (being too committedon their contracts) now ask for a minimum and amaximum on the negotiated quantities, in order tobe able to participate in the spot market when it isattractive. Open contracts are disappearing, asthey allow charterers to play on the spot marketwhen it drops and to take up the 100 % allo-wance with their contractual partner when it rises.

Long haul movements

On movements from the U.S. to Europe, alreadybenefiting from a very strong hike in rates at theend of 2003, the market continued to firmthrough the first quarter and saw a minor slideuntil the end of the summer. From the autumn,activity suddenly rebounded to reach heightswhich had not been attained since the spring of2002 and in 1997.

In a market dominated by contracts, and apartfrom regular movements of cumene and styrene,we have witnessed a more sustained export ofethanol, MTBE and benzene out of South Americaand especially Brazil.

500,000

400,000

300,000

200,000

100,000

2007+20062005delivered in 2004

dwt

Chemical carriers on order as at January 1st, 2005(in deadweight)

3,500-6,000 dwt

6,000-10,000 dwt

10,000-20,000 dwt

over 20,000 dwt

0

55The Chemical Carrier Market in 2004

On the eastbound leg, in a more contrasted man-ner than on the westbound one, freight ratescontinued to rise right until the end of the firstquarter then sharply dropped before settling outduring the summer period and finally increasing bymore than 30 % at the end of the year for lots of2,000 tons. The firmness in the market was muchmore evident in the size lots of 5,000 tons andmore. As in previous years, the main movementsseen coming out of Europe were with cargoes ofcaustic soda, sulphuric acid, base oils, benzeneand pygas.

On average, freight rates increased from about$ 45 per ton up to nearly $ 65 per ton for lots of2,000 tons, and this rise of 40 % was also reflec-ted in the renewal of contracts at the end of theyear.

Movements from Europe to Asia this year saw anexplosion in freight rates which has not been seenfor 25 years. Starting from an extremely firm mar-ket in 2003, Chinese demand for chemical pro-ducts contributed to a jump in rates of over 50 %on average, with a spread of 100 % between thelowest and the highest levels within the year 2004.Rates very quickly took off, in particular for thesmall lots of 1,000 to 2,000 tons and the latterwent from $ 60 to more than $ 100 per ton.

The rise in bunker prices, the lack of modern ton-nage available and the optimisation of charterers’nominations within their contracts, are part of theexplanation towards such a movement in the mar-

ket. This evolution has on the reverse side incitedsome exporters on the spot market to postponetheir shipments, or else to undertake “swaps”with Asian producers and even to export small lotsof 500 to 1,000 tons with ISO containers. This revi-talising of the market should also give the fourmain parcel tanker owners cause to reflect and toreview their strategy in reducing the proportion oftheir fleet dedicated to contract business to takebetter advantage of the very firm spot market andoffer more space to European exporters.

The fleet

Deliveries of new chemical carriers with stainlesssteel tanks reached a record level in 2004 withsome fifty ships for a total of 800,000 dwt, whichbrings the average age of the combined fleet to11.7 years. Sizes of ships are also well distributed,with 16 ships between 5,000 and 10,000 dwt, 15ships between 10,000 and 20,000 dwt and adozen above 20,000 dwt. The orderbook is alsofilled, with more than 60 ships to be delivered in2005 of which half between 15,000 and 20,000dwt. More than 80 % of the ships delivered thisyear were built in Japan and in 2005 we will wit-ness the first deliveries of newbuildings out ofChina (5 units). Deliveries beyond 2005 are for themoment far fewer, with 30 ships expected in 2006and 15 ships in 2007.

Demolition of chemical carriers has doubled thisyear with 21 ships sold for scrap for 220,000 dwt.

30

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2007+20062005delivered in 2004

number

Chemical carriers on order as at January 1st 2005(in number of ships)

3,500-6,000 dwt

6,000-10,000 dwt

10,000-20,000 dwt

over 20,000 dwt

0


This trend should continue as 138 ships of morethan 20 years are still in service, of which 70 aremore than 25 years.

2004 has thus been a good year for owners, but itwill remain above all a year full of promises for thefuture – or at least the next two years. Startingfrom 2005, freight contracts renegotiated athigher levels will begin to generate a supplemen-tary revenue to owners. Delivery of newbuildings,although significant, should only serve to replacethe older ships leaving the fleet.

In effect, the quality measures imposed by charte-rers combined with the new directives set out by

the IMO beginning in 2007 for the transport ofvegoils (imposing IMO III ships but with a double-hull) will mean that a number of large units willdisappear from the market. Modern ships will thusbe greatly solicited. It should be added that shi-pyards are currently fully booked, plus the fact thatthe price of steel is prohibitive for orders of che-mical carriers fitted with stainless steel tanks.

In the past we have experienced peaks in the mar-ket but generally over fairly short periods. The cur-rent situation is new and seems to be solid,without any major accidents or a decline in eco-nomic activity, this should continue to last quitesome time. ■

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Chemical tanker spot freight rates2,000 t easy chemical

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Dec

03

Mar

04

June

04

Sep

04

Dec

04

Rotterdam - WC Italy

Rotterdam - USG

Rotterdam - Taïwan

57

THELIQUEFIED

PETROLEUM GAS SHIPPING MARKET

IN

2004

Significant events

At the same time last year, we drew a com-parison between the different shippingmarkets with the take-off of the oil and

bulk sectors compared to the depressed state ofthe LPG sector over the recent years, marking asignificant break in the respective evolution ofthese markets.

We also evoked the main readjustments, whichwere already taking place, susceptible of causinga reversal of this trend and bringing about a revi-val in this specialised shipping segment.

All these factors became more pronounced throu-ghout the course of 2004 and gave rise as fromMay / June to a sharp jump in freight rates, for allsizes, both on the spot as well as on time chartermarket.

The main evolutions, of which some have been in evi-dence for several years, can be described as follows:

◆ Joint-ventures and pool agreements betweenowners and ship operators, leading to an optimi-sation of operations and a higher specialisation bygroups of operators within the various categoriesof ship sizes and specific trade routes.

◆ The cross-purchases of ships, or even wholefleets, within the smaller sizes.

◆ A slow-down in newbuilding orders over thelast few years, given the poor returns on invest-ments in the gas shipping sector. Even if we haveseen a correction during the last six months withinthe liquefied gas sector, shipyards’ orderbooks arenow sufficiently filled-up with orders of other shiptypes from sectors which have been riding highover the last two to three years (LNG, bulk carriers,and tankers). As of now, the lack slots availability

Out of the doldrums to a sharp and sustained recovery

The Liquefied Petroleum Gas Shipping Market in 2004


rencies, resulting in the necessity to give more dol-lars for the same front values.

Most of these trends have been building up oversome time, but the year 2004 saw the confirma-tion of these expectations at such an acceleratedrhythm that even the most astute forecasters havebeen confounded.

We shall not dwell in detail on the reasons for such amarket correction, largely anticipated, but rather onthe extent of this new situation and the consequencesthat might develop from such a change in situation.

◆ ◆ ◆

In line with the freight market, which saw a steadyrise, but more pronounced as from the third quar-ter, product prices also underwent a very strongappreciation right throughout the year. Thisincrease gathered pace particularly in the secondhalf, with highly volatile variations which allowedarbitrage movements between East and West. Thethreshold of $ 500/t was crossed at the end of theyear for LPG C&F sales into the Far East!

Our annual table showing the evolution of pricelevels for the main oil and gas related productsover the last three years shows:

in the yards does not allow any further deliveriesbefore end 2007 / beginning 2008, thus notbefore another three years!◆ Demolition remained at the same limited paceas last year but with even higher values given theprice of steel. The hurdle of $ 400 per lightweightton has been surpassed, putting the value of a75,000 cbm VLGC of 25 years or more at nearly$ 8 million apiece! Since the beginning of the yearsome 19 units have been sold for demolition for atotal capacity of nearly half a million cbm.◆ A sustained surge of imports to North Americalinked to the constant appreciation of natural gasprices, which have reached a level near to $ 8 permmbtu* last November.◆ An expansion in LPG and ammonia productionand the long-awaited revival in petrochemicals,after the depression of the last few years, linked toan increase in deep-sea trade affecting voyagelengths and demand expressed in tonne-miles.◆ A burst of imports into developing countries,such as China with its enormous population,making it susceptible to an impressive growth ofsuch magnitude that it should spill over in the shortand medium terms to a redistribution of majortrades and economic movements in the world.◆ A depreciation of the dollar against other cur-

Ships by size/category (cbm) Nov 2002 Nov 2003 Nov 2004 %

VLGC 75/85,000 cbm spot MEG/Far East ($/mt) 28 30 42 + 40 %

VLGC 75/85,000 cbm 3-6 months t/c ($/mth) 600,000 650,000 1,050,000 + 62 %

LGC 52/59,000 cbm 2-6 months t/c ($/mth) 575,000 650,000 800,000 + 23 %

Mid-size 24/35,000 cbm equiv. t/c of spot voyage ($/mth) 575,000 575,000 775,000 + 35%

12/22,000 cbm equiv. t/c of spot voyage ($/mth) 405,000 425,000 650,000 + 53 %

6/11,000 cbm ethyl. equiv. t/c of spot voyage ($/mth) 300,000 340,000 575,000 + 69 %

4/8,000 cbm semi ref. 2-3 months t/c or equiv spot 225,000 240,000 425,000 + 77 %

4/8,000 cbm pressurised 2-3 months t/c or equiv. Spot 185,000 180,000 325,000 + 81 %

* Million British thermal units

Products Nov 2002 Nov 2003 Nov 2004 %

Crude oil, Middle East Gulf ($/bbl) 24 28 35.5 + 27 %

Brent crude, North Sea ($/bbl) 24 29.5 45.2 + 53 %

Naphtha CIF Rotterdam ($/mt) 235 285 365 + 28 %

Natural gas ($/mmbtu US Henry Hub) 4.25 (Dec.) 6.75 (Dec.) 7.80 (Dec.) + 15 %

Propane CP (contr. price FOB Saudi Arabia) ($/mt) 327 280 463 + 65 %

Butane CP (contr. price FOB Saudi Arabia) ($/mt) 327 280 473 + 69 %

Anhydrous ammonia (FOB Black Sea) ($/mt) 127 240 270 + 13 %

Ethylene (contr. price Europe) (€/mt) 400 512 700 + 37 %

Propylene poly gr (contr. price Europe) (€/mt) 470 425 620 + 46 %

Butadiene (Europe spot) (€/mt) 520 490 627 + 28 %

VCM (CIF Korea/Taiwan) ($/mt) 460 590 800 + 36 %

Shipping and freight levels in all sizes saw a mar-ked increase as from the middle of the year andespecially towards the end of the year.

We would point out that these average freightrates (in time charter equivalent of spot voyages)exclude any eventual ship’s idle time (awaiting

59

employment between voyages) and are neitherrepresentative of net profit for owners operatingtheir ships on the spot market, nor of the longterm transactions (two years or more).

Situation by vessel size

VLGC (Very Large Gas Carriers) from 70,000 to 80,000 cbm

A strong variation in spot freight rates characteri-sed the first half of the year, leading to tighter andmore stable levels in the second half.

Starting around $ 30/t on the Middle East / Japanroute at the beginning of the year, rates went over$ 40/t and then approached $ 48/t in October,with a critical peak period between June and Sep-tember. A slight easing was felt as from November,but the level remained slightly above $ 40/t at theend of December. These spot rates represent equi-valent monthly time charter rates between$ 700,000 and $ 1,200,000 with a year average ofabout $ 850,000.

The firmness of the naphtha market was again adetermining factor throughout the whole year,with the returns on naphtha voyages substantiallysurpassing those of an LPG equivalent, thus provi-ding 6 to 10 VLGCs being employed in this market.

Four units from the 1970’s were scrapped at twicethe price levels of the preceding year, thanks tosteel prices remaining high.

13 new orders were registered during the year fordelivery between end 2006 and 2008 at pricesover $ 70 million for the latter orders.

The entry of AP Moller into this sector was signal-led with their order of four 82,000 cbm in Koreafor delivery in 2007 and their subsequent commit-ment for a three-year charter of the VLCG ‘OrientalQueen’ -82,000 cbm- delivered to Unique Shippingin September 2004.

Market prospects in this size category remain posi-tive for several years to come, but we cannot avoidto signal the risk of seeing again an imbalance, ifthe pace of new orders were to intensify or evento remain steady at the same rate as the last fewmonths.

The big jump in newbuilding costs and the latedelivery dates might however limit such a deve-lopment or at least give rise to some reconsidera-tion of market assessments.

LGC (Large Gas Carriers) from 52,000 to 60,000 cbm

This segment size which had already fared well lastyear, improved strongly throughout 2004 to reachoccasionally monthly time charter rates of nearlyone million dollars on some voyages, with the ave-rage being around $ 800,000 per month.

These units, mainly employed on the major ammo-nia and LPG trade movements, benefited from thestrong revival of exports of these two products to


Gaschem Baltic8,600 cbm, built in 2004 by Severnav, operated by Gaschem

60

North America: ammonia due to the steady andsharp rise in the price of natural gas, from which itis derived, with a consequent drop in local pro-duction; and butane / propane due to the arbi-trage which the price fluctuations within Europe,the Middle East and the US allowed.

Four newbuildings of 59,000 cbm were deliveredrespectively for Sonatrach, Solvang, and Yara,whilst two more are due to be delivered to Sona-trach and Yara in the course of 2005.

Bergesen sold two 53,000 cbm units, built in 1973and 1979, for demolition.

Whereas the delivery of 10 newbuildings spread outbetween 2003 and 2005 might have led one toexpect an occasional marginal overcapacity, itseems that the scrapping of the older units combi-ned with the recent recovery of the market has allo-wed for a good balance, and even a slight impro-vement in the demand for these ships. All of thiswas supported by the firmness in the VLGC marketand the contribution from the naphtha market.

Midsize carriers 23,000 to 43,000 cbm

A good vintage for this category of vessel confir-ming earlier expectations, with a steady progressand satisfactory results for owners.

It is nonetheless worth underlining that the conse-quences of the market’s recovery as from the sum-

mer was less obvious in this size segment than inthe others. A particularity we can attribute to thefact that this category had already registered farbetter results comparatively to the others sinceseveral years.

From a level of around $ 575,000 in November2003, the monthly time charter rate (equivalent t/cfor spot voyages or short period t/c) for 24,000 to35,000 cbm ships averaged at around $ 775 000in 2004.

The main ammonia trade routes are highly deman-ding this type of ship with a solid growth in trans-atlantic movements, as well as the Black Sea andthe Middle East Gulf to Indian Ocean and inter Asia.

With only 30 %, the share of LPG in this segmentis declining. The average idle time due to non-employment in this sector is now below 6 % whe-reas it was still over 14 % in 2003.

Contrary to what we expected last year, the stabi-lity of the market during the last few years andincreased production forecasts, have triggered amini-explosion in new orders for ships with a35,000 to 38,000 cbm capacity for delivery bet-ween 2006 and 2007 (for account of K Line,Zodiac, Iino, Unique/Itochu, Bakri, and Sovcom-flot). These eleven orders came on top of five38,500 cbm ships ordered since last year fordelivery in 2005 and 2006, which makes a total


US$ 1,000 pcm

Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 040

1,600

1,400

1,200

1,000

800

600

400

200

24-43,000 cbm

52-60,000 cbm

70-85,000 cbm

LPG carrier 24,000 - 85,000 cbmShort-term T/C or T/C equivalent to spot voyages

Jan 05

61

of 16 units coming into service between end 2005and 2007.

It should be noted that the last 35,000 cbm shipswere ordered at over $ 50 million per unit, whe-reas the previous orders inked in 2003 were doneat just over $ 40 million, thus representing anincrease of 20 %. One should however rememberthat the depreciation of the dollar since Septem-ber 2003 has been of around 20 %, a detail whichshould not be ignored in analysing price rise orincrease in freight rates.

Semi-pressurised/refrigerated gas carriers 8,000 to 22,000 cbm

Among all the size segments, this category hasbeen the first to benefit from the market revival.The chemical gas sector, and more particularlyethylene and propylene, were the principal drivingforce of this recovery. There were a few promisingindications at the end of 2003 which were confir-med and then helped transform and amplify thistrend as from July.

Most ethylene carriers which previously were for-ced to find alternative employment in LPG retur-ned to their normal trade where the deep seavoyages have multiplied, giving a substantialincrease in demand expressed in tonne-miles.

We have seen a lively recovery in exports of ethy-lene and propylene out of the US into Europe and

Asia, an increase in movements from the MiddleEast to Asia and more arbitrage positions beingtaken out of Europe to Asia. Additional move-ments from Asia to Europe have been motivatedby the pressure on product prices resulting fromshutdowns of crackers, planned or not, within thedifferent geographical areas.

All these simultaneous movements created a tre-mendous pressure on demand, causing spotfreight rates to hit levels never seen before, withincreases of up to 70 %.◆ about $ 300/t for propylene lots of 6,000 to8,000 mt from the U.S. to Asia◆ up to $ 180/t for ethylene in 2,000 to 4,000 mtlots from the U.S. to Europe◆ up to $ 250/t for ethylene in 4,000 to 5,000 mtlots from S.E. Asia to Europe◆ about $ 350/t for butadiene in 3,000 to 4,000mt lots from Europe to Asia.


US$ 1,000 pcm

LPG carrier 3,000 - 22,000 cbmMedium-term T/C (6-18 months)

Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 040

900

700

800

600

500

400

300

200

100

10-22,000 cbm

6-8,000 cbm Ethylene

3-6,000 cbm

Jan 05

Jessie Maersk35,559 cbm, built 1991by Hyundai H.I., owned by A.P. Moller

62

Most charters were renewed for 2005 at levelsranging from 30 to 50 %, depending on the sizeand trading route. Some owners or operators hadto refuse taking on new contracts due to a lack ofpotential tonnage. A first for several years!

At the same time, the LPG activity was equally wellsupported by the arbitrage movements betweenEurope and the U.S. caused by the huge volatilityof LPG prices in turn affected by the variations inoil prices.

Time charters were also greatly influenced by themarket’s recovery as from the middle of the sum-mer and the majority of renewals for period busi-

ness saw somewhat less pronounced increasesranging between 25 to 30 %.

On the newbuilding front, two orders of 22,000cbm semi-ref were signed by Sonatrach / Hyprocwith Namura for delivery in 2007 / 2008, two16,000 cbm ethylene carriers were ordered by theTaiwanese Formosa Plastics with Jiangnan in Chinafor delivery in 2006, whilst Lauritzen Kosan deci-ded at the end of the year to order four 8,000 cbmethylene carriers with INP in Korea for delivery in2007.

A vessel of 15,000 cbm built in 1976 was sold forscrap at the beginning of 2004.


US$/ton

LPG freight rates (spot voyages)VLGC and 2,500/5,000 cbm

Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 04 July 04Jan 03 July 030

80

70

60

50

40

30

20

10

VLGC: MEG/Japan

Small vessels 2,500-5,000 cbmEuropean coasting

Jan 05

Hermann Schulte5,673 cbm, built in 1980

by Meyer Werft, operatedby Dorchester Marine

63

In the same period, Sigloo (with a majority controlby Camillo Eitzen) purchased seven 8,000 to12,000 cbm ethylene carriers built in the 1980’s,which Bergesen was looking to dispose of for quitesome time, for a total value of around $ 75 million.

Given the general optimism prevalent in the petro-chemical sector (new productions, increase inconsumption and demand in Asia) and the littleaddition of newbuildings tonnage over the nexttwo to three years, the market for this size sectorshould remain very sustained in the coming years.

Gas carriers of 8,000 cbm and less (pressurised and semi-pressurised)

Same causes, same results! Except that the marketlevel for this size range was extremely weak overthe previous two to three years, so that the reco-very has been even more significant, compared tothe other segment.

The increase in demand was felt right at the startof the year and then gradually developed duringthe first half. It was even more noticeable in thesecond half, both for semi-pressurised as well aspressurised ships.

A 3,500 cbm pressurised carrier was being tradedat an equivalent time charter monthly rate of$ 130,000 to $ 140,000 at the beginning of theyear, whereas the same vessel was trading at a levelof $ 250,000 to $ 275,000 at the end of the year.

A 6,000 cbm semi-refigerated vessel would fetchin the same periods a level of $ 250,000 rising up

to nearly $ 450,000 monthly t/c or equivalent spotrate, with an even more pronounced variation forethylene carriers where a 6,000 cbm rose from$ 275,000 up to $ 550,000.

It should also be noted that there has been a cor-rection in the traditional differentials between thelevels of semi-refrigerated and pressurised carriers,with the latter catching up and nearly obtainingthe same returns as the former. Another sign ofthe market’s tendency!

As far as the time charter business is concerned,several contracts spanning up to 5 years, wereprincipally undertaken by some owners-tradersdeciding to fix their position for the future.

A substantial rise in new orders, in particular forpressurised vessels between 3,500 and 9,000 cbm,was registered with Japanese shipyards for domes-tic owners-operators’ account, placing these newunits under long term contracts with Eastern andWestern majors. We have counted currently somefifteen orders placed in 2004 for ships with a capa-city between 3,500 and 9,000 cbm, of which two8,600 cbm semi-refrigerated, for delivery between2006 and 2008, as well as new orders whichshould be confirmed imminently for units of 4,000to 9,000 cbm in Italy.

These past twelve months have also witnessednew merger transactions and fleet purchases bet-ween owners, which were anticipated for severalyears given the poor levels of past results…


18

16

14

12

10

8

6

4

2

number of ships

LPG carriers deliveries shedule of ships on order - end 2004

FH 2005 SH 2005 FH 2006 SH 2006 FH 2007 SH 2007 FH 2008 SH 2008

0

3-11 000 cbm

20-60 000 cbm

> 75 000 cbm


During the second quarter, the Exmar Kosan pooltook control of 12 pressurised carriers of 3,500 to5,000 cbm from Far East Shipping, thus taking anadditional grip on this inter Asian market. Severalmonths later five 3,000 to 6,500 cbm semi-refri-gerated carriers of Gibson Gas Tankers were acqui-red by Camillo Eitzen.

A Greek owner, Stealth Maritime, already well esta-blished in other types of ships, made a noteworthyentry into the gas sector with the acquisition ofsome ten small gas carriers of 3,000 to 5,000 cbmat prices well above those obtained last year.

Prospects

Conditions for a very firm freight market seem tobe in place for the next few years. Although it wasalready fairly clear, all the ingredients are nowsolidly anchored for the trend to pursue in thesame direction.

Arrival of new tonnage over the next two yearsremains very limited and will probably not satisfyeven a marginal growth in demand, whilst nume-rous factors tend to suggest that this is on anupward path, led by the ineluctable advance ofenergy demands from China and the developingcountries. Even if this is likely to slow down oneday, the tendency is still quite sustained.

Despite the high steel prices, which have allowedscrap values to double or even triple, owners willbe tempted to extend the life of their ships in amarket which pays well. But the new safety regu-lations and chartering practices of the Majors, areapplying to more and more geographical areasand can no longer be much too “elastic”. Units

which are over 30 years, or even 28 years, mighthardly find employment and will probably be for-ced to retire in the coming years.

Recent orders for newbuildings have achievedprices which are some 20 to 30 % higher than in2003 and the trend remains on the rise. Eventaking into account the depreciation of the dollar,owners will have to find revenues allowing themto pay back their investment made at higher pricesand over a shorter period.

Intra-Asia trade is to increase with the start up ofnew petrochemical production units at the end of2005, thus absorbing a growing number of shipswith a capacity of 4,000 to 8,000 cbm, which untilnow has been employed on deep-sea routes.

The horizon therefore seems fairly clear and relati-vely predictable for the two or three coming years,excepting a major crisis which would undermineall the fundamentals!

Taking long term shipping decisions has up to nowoften been limited by the important differentialbetween spot freight market levels and the floorprice below which an owner couldn’t commit overa certain period of time.

The current improvement should allow this dispa-rity to be corrected and favour longer term com-mitments by each contract party, be it charterer orowner, for a better control and appreciation of hisshipping needs.

Let us hope however that the market players willremain reasonable and do not go into an over-investing circle with the risk of creating new imba-lances. ■

LPG second-hand market

Ships over 50,000 cbm

Once again the second-hand market has not pro-vided the opportunity to allow the rejuvenation offleets or to invest into new ones, making ownerswho are looking to buy LPG carriers of less than15 years to turn towards the newbuilding market,even if the prices proposed seem apparentlyhigher and higher.

Only Bergesen, by means of a purchase optionattached to long term charter, was able to acquirethe ‘Sunny Hope’, 78,000 cbm, built in 1990, forabout $ 33 million.

Elsewhere we have registered prices close to thoseof scrapping, in the case of the sale of ‘Yuyo’,83,000 cbm, built in 1979, or substantially morefor the ‘Gaz Concord’ built in 1978.

65The Liquefied Petroleum Gas Shipping Market in 2004

While awaiting to take delivery of their newbuil-dings, Sonatrach has combined the sale of the‘Nemja’, 56,000 cbm, built in 1983, at a reportedprice close to $ 15 million, with a one year timecharter of a much more modern carrier.

Ships between 20,000 and 50,000 cbm

Indian buyers, such as Varun, have once moreshown their ability to offer to Bergesen and Exmarattractive prices for carriers of less than 25 years,conditioning the sale to a period charter of at leasttwo or three years back to the sellers’ pool. Thetwo oldest carriers, ‘Hektor’ and ‘Hermion’,24,000 cbm, built in 1982 and 1984, were sold forabout $ 17 million each, whilst the ‘Libin’, 43,000cbm built in 1982, was sold for about $ 20 million.

Ships between 10,000 and 20,000 cbm

At the start of the year, Geogas sold the ‘Victoire’,17,500 cbm, built in 1990, for a price above$ 20 million, while retaining control over the ship forthe next 5 years. Thereafter, the sale by Exmar of herthree ethylene carriers of 10,500 cbm, built at theend of the 1980s and beginning of the 1990s, for aprice above $ 40 million against a 5 year time char-ter, was the only one who livened up the sector.

Ships below 10,000 cbm

It is in this sector that there has been the largestnumber of transactions this year. The rise in freightrates finally allowed sellers to find buyers for theirfleets, and for buyers to be able to justify such invest-ments thanks to the better economic environment.

The strong increase in newbuilding costs for thistype of carrier also played its part in reactivatinginterest in second-hands, but for the momentbuyers can only count on the older units, whichthen logically will push potential buyers of moremodern carriers to newbuildings.

Camillo Eitzen, who took over the Kil fleet severalyears ago, has bought the fleet of his Norwegiancompatriot Igloo for about $ 75 million (7 ethy-lene carriers of 8,000 to 10,000 cbm, built bet-ween 1982 and 1989). This same owner thenbought the Gibson Tankers fleet (3 carriers of6,000 cbm built in 1982 and 2 carriers of 3,500cbm built in 1991).

In the pressurised sector, the sale of the Japaneseowner’s Far East Shipping fleet (9 carriers of 3,500cbm built between 1996 and 2003 and two car-

riers of 5,000 cbm built in 1994 and 1995) toExmar Kosan, for about $ 85 million, caused quitea sensation at the end of the first quarter. Thereported values revealed a price varying from$ 6 million for a carrier of 3,500 cbm built in 1996to $ 9,5 million for one delivered in 2003 on onehand, and on the other hand a price of around$ 7 million for carriers of 5,000 cbm. These valuesshow an increase of 20 % over the lowest levelsachieved for comparable ships in 2002 and 2003.

During the third quarter with freight rates rea-ching more encouraging levels, the market sawthe entrance of a new name in the LPG sector, theGreek Vafias, buyer of 9 pressurised and semi-refLPG carriers of 1,500 to 6,500 cbm. The level ofprices paid put the value for 10 year old pressuri-sed carriers of 5,000 cbm and 3,500 cbm at res-pectively around $ 12 and $ 8,5 million. In thesame way, the purchase of two semi-refs of 3,500cbm built at the beginning of the 1990s, allowedthese ships to obtain in 2004, prices above thosereached in 2000 and above all a 70 % increaseover the prices they got in 2003. As an illustration,it is worth recalling that freight rates for a 12-month period has been following a similar evolu-tion: $ 220,000 in 2000, $ 170,000 in 2003, andabout $ 320,000 at the end of 2004.

If it maintains, the improvement in freight ratesshould encourage a revival of newbuilding ordersalthough construction costs are higher and sincethe second-hand market offers too few opportu-nities for the renewal of fleets. ■

Gas Sriracha3,514 cbm, built in 1996 by Uzuki Zosencho, sold to Centaurus Transport Ltd and now renamed ‘Grampian’

66

LNG SHIPPINGS O L U T I O N S


LNG Shipping Solution is also

able to offer its services on project

management, specific analysis by sectors

for financial institutions or any other

intermediary, wishing to have additional

information on up-to-date dynamics

within the LNG sector.

As a result of the combined LNG activities

of two major international brokers*,

LNG Shipping Solution advises

its clients on chartering, sales and

purchases, newbuildings,

shipmanagement, and all commercial

aspects of LNG trade.

LNG Shipping Solutionspropose a range of specific services

on LNG transport by sea.

* LNG Shipping Solutions is a joint company Barry Rogliano Salles - Clarkson

Tel.: 44 207 283 11 37 - Fax: 44 207 283 11 52 - Email: [email protected]

67The Liquefied Natural Gas Shipping Market in 2004

THELIQUEFIED

NATURAL GAS SHIPPING MARKET

IN

2004

LNGShipping has become one of the mostactive sectors in shipping with unpa-

ralleled new orders, forecast growth expected tocontinue, at least 19 speculative orders, newowners entering the “Club” along with increasedsizes and the possible demise of the steam turbine.And all of this has occurred in 2004!

The fleet

At the end of 2003 there were 152 LNG vessels inservice with a further 34 on order, the largest ofwhich was 153,500 cbm capacity. RasGas II had atender for up to 8 ships with market talk of aboutanother 47 ships needed with the likelihood thatwe would see 200,000 cbm and larger vesselsordered.

At the end of 2004 there were 174 ships in servicewith 113 ships on order, but let us look at thesefigures in more detail:

◆ Korean shipyards control over 75 % of the neworders,◆ GTT membrane designs account for 82 % ofthe orderbook,◆ 16 ships on order are not steam turbine and 2of them are purely speculative,◆ 8 ships are over 209,000 cbm fitted with re-liquefaction plants,◆ China finally signed their long awaited order for2 new ships,◆ 1 new Korean yard (Samho) has gained anorder just a few weeks after a new Japanese yard(Imabari) enters the Club,◆ One recent LNG entrant has been bought outby an even newer entrant,◆ Two new Russian LNG owners have joined,◆ 4 newcomers have won the sought after (butnon lucrative?) Qatar orders,◆ Yard prices have risen as steel prices haveincreased and yard slots have disappeared,


◆ Greek shipowners have 8 ships on order, 4 ofwhich are unfixed,◆ Charter rates and periods are falling: 2 neworders fixed against 10 year charters,◆ 2 new orders have been placed at Universal for75,000 cbm ships for Mediterranean trade.

However we must stress that, among all types ofships, LNG carriers are the ones that have recordedthe smallest rise in newbuilding prices, due to afierce competition among shipyards in this sector.Shipyard’s strategy has also diverged among theLNG builders: Daewoo and Samsung have inves-ted in the construction of series of ships, Hanjinhas decided not to take LNG orders any more andHyundai has chosen to concentrate on “standard”ships as prices for the latter have risen more shar-ply and account for less cgt (compensated grosstons) than their LNG counterparts.

Of the 113 ships on order at end 2004, 69 havebeen placed this year which in some respects fol-lows the old school of LNG (circa early 1980’s)where projects and Japanese buyers prefer toorder rather than charter ships that are available orare already on speculative order – 19 ships onorder are unfixed with 4 existing new ships sittingidle.

Technical Developments

Ever since the company has been involved in LNGshipping, the standard line used by banks and pro-jects has been “No new or unproven technology

and we will not be first of a class”: this probablyaccounts for no new developments in nearly 40years! However, in the space of 12 months wehave seen the size rise from 145,000 cbm inJanuary to 154,000 cbm in August and to 216,000cbm in November.

Likewise, the need for the reliable steam turbineengine was an absolute must, with much scepti-cism voiced at the innovative French companies ofGaz de France and Chantiers de l’Atlantique forbuilding dual fuelled diesel electric (hereafterDFDE) vessels, but that was until November whenit would seem that several parties threw caution tothe wind when first BP ordered 4 DFDE ships,swiftly followed by AP Moller ordering 2 similarvessels. However, these owners were clearly out-done by Qatar, aided by ExxonMobil, who confir-med their long awaited selection by allocating 8new 200,000 cbm plus vessels with slow speeddiesel engines equipped with re-liquefactionplants

Commercial Developments

The year started with almost historically low LNGshipyard prices, but it closed with prices havingrisen by over $ 30 million per unit.

Twenty years charter hire period was the usualduration for the shipping contracts, twenty yearsmatching the SPA (sales and purchase agree-ment). However, the long term would appear tobe stretching out to 25 years with short term

160

140

120

100

80

60

40

20

Under 120,000 cbm 120,000 - 163,000 cbm 163,000 m3 and over

Number of ships

LNG carrier fleet as at January 1, 2005

Existing

On order

0

69The Liquefied Natural Gas Shipping Market in 2004

settling around 3-5 years, with the exception ofthe occasional spot fixture of which the year’slow was reported to be $ 25,000 per day. This isa strange phenomenon when VLCC’s were fixingat $ 260,000 per day, yet there is a rush of tan-ker owners wanting to get into LNG. Does thenew world LNG need some explanation to thenew entrants?

The tonne-miles demand for LNG is increasing asthe Atlantic Basin and West Coast US source thegas from further afield. The increased distanceinflates the transportation costs that would natu-rally reduce the net revenue for the LNG producerif the end market could not absorb a higher pricefor the transportation. The transport costs can bereduced by increasing the amount of cargo car-ried, and hence delivered, on each ship, reducingthe fuel costs and keeping the daily hire rate aslow as possible.

The Qatar projects of RasGas II and Qatargas IIhave clearly been the most successful projects inreducing transport costs, as they have managedto combine all three of the above elements. Newentrants would appear to have been the most co-operative with the Qatar shareholders, as theyhave secured 15 of the 16 contracts awarded in2004. So, was there a price to enter the hallowed“Club”?

And what is there for 2005?

2004 has been a phenomenal year for LNG ship-ping and it would be impossible to repeat this in2005. However the Qatari projects will continue toexpand, likewise Nigeria. New projects will beagreed in Brass River, Angola, Yemen, Iran, Libyaand Australia that should produce in total a requi-rement for about a further 70 ships. If the fashionfor non steam turbine continues, there could besome obsolescence of the older, smaller, thirstytonnage that could promote some more ordersbut only if there are the slots available.

No doubt ever more new entrants will arrive, eventhough Qatar and ExxonMobil continue with theirselection criteria – cheapest wins.

Ship prices may peak but stability in steel pricesand exchange rates will be needed.

Technological innovations have apparently beenaccepted so there may be a new containment sys-tem developed to compete with the membranedesign and perhaps another new propulsion sys-tem will be ordered: Shell is rumoured to beseriously looking at a gas turbine design. The stan-dard ships design should rise to 163,000 cbm asthis is the optimal size to access most of the exis-ting terminals, as opposed to the dedicated termi-nals required for the 216,000 cbm size. ■

70

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71The Dry Bulk Market in 2004

THE

DRY BULKMARKET

IN

2004

Together with all the other sectors of theshipping market, 2004 was an exceptionalyear in the dry bulk. On the back of a very

strong surge at the end of 2003, rates peaked inMarch before taking a plunge until the end ofJune. Then, they rebounded until December toreach and sometimes surpass previously establi-shed records. One only has to look at the figuresof the following daily returns: $ 35,000 per day fora Handymax, $ 50,000 per day for a Panamax, andover $ 100,000 per day for a Capesize.

World demand for industrial dry bulk commoditiesincreased sharply and exerted a strong pressure oncharterers. All raw materials were affected.Demand took off, notably in the coal and ore sec-tors, which represent over half of the totalvolumes. Tonnage transported for iron ore wentfrom roughly 520 million tons in 2003 to about570 million tons in 2004. Coking coal increased

from about 185 million tons to nearly 200 millionand steam coal from over 420 million tons to 440,an overall rise of 7 %.

Depending on sources, the growth in volume in2005 is expected to be around 5.5 to 6 %. Suchfigures make people fill dizzy and cannot be com-pared with what was experienced during the lastfifteen years where we usually saw an averagegrowth of 2 to 4 % depending on the years.

There is one key player who emerges from anyanalysis of the market: namely China. Havingshown its potential over recent years, the rise instrength of the country has never been as clearlydefined as in 2004.

The press has largely been following and reportingthis phenomenon. Carried along by stronggrowth, Chinese demand for steel grew by morethan 13 % in 2004 over the year. According to the


Chinese Association for Ore and Steel (CSIA),domestic production went from 225 million tonsin 2003 to 270 in 2004, with the aim of reaching300 million tons in 2005.

At the same time, imports of iron ore went from110 million tons in 2002 to nearly 200 million tonsin 2004 (of which 80 million tons originating fromAustralia and from Brazil). As a result, there washeavy congestion in loading and discharging portsat the beginning of the year, which inevitably

affected the global supply of available tonnage.This situation improved as from March when theChinese authorities became aware of the extent ofthe problem and decided to implement de-stoc-king measures in the ports. Once begun, freightrates started to drop significantly.

During the month of June demand took off again,thus indicating that the efforts by the Chinesegovernment to slow down economic growth wereinsufficient, precipitating another sharp rise in

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

80,000,000

70,000,000

On order25 years and over 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years

dwt

Dry bulk carriers fleet over 43,000 dwt by age class end 2004

Handymax

Panamax

Capesize

0

US$/ton

Dry cargo freight rates - Capesize

Jan

02

Mar

02

June

02

Sep

02

Dec

02

Mar

03

Mai

03

Aug

03

Nov

03

Feb

04

Mai

04

July

04

Oct

04

Dec

04

0

30

20

15

10

5

Capesize Coal Puerto Bolivar / Rotterdam 150,000 t

Capesize Iron ore Tubarao / Fos 145,000 t

25

Source : Baltic Exchange - BRS

73

contracts of affreightment and period charters, isgrowing.

Simultaneously, and also to reduce their exposureto an increasing volatility of the market, the maincharterers and owners have been putting anemphasis on concluding long term partnerships,giving a long term business flow to the latter anda guarantee of regularity and stability in supplycosts to the former.

However in this euphoric context, there are somesigns that suggest a certain caution, starting withthe rising supply of tonnage.

The Dry Bulk Market in 2004

rates. Swept along by the dynamics of the marketand the anticipation of high freight levels, this inturn provoked a surge in time-charter activity.

At the same time, operators became actively enga-ged on the freight futures market. Encouraged bythe volatility of the physical market, a number ofplayers found an answer to their needs of gettingforward cover with derivatives. In many respects,it could be said that 2004 paved the way towardsa maturing of these markets. It is worth notingthat their influence in the decision making processfor both owners and charterers, especially on

US$/ton

Dry cargo freight rates - Panamax

0

80

70

60

50

40

30

20

10

Jan

02

Mar

02

June

02

Sep

02

Dec

02

Mar

03

May

03

Aug

03

Nov

03

Feb

04

May

04

July

04

Oct

04

Dec

04

Panamax Grain US Gulf / Japan - 54,000 t

Panamax Coal Richards Bay / Le Havre - 70,000 t

Source : Baltic Exchange - BRS

Ingrid Oldendorff75,000 dwt, built in 2005 by Jiangnan, operated byOldendorff Carriers


Numerous orders placed in 2003 and 2004 willstart to be handed over to the market in 2005 and2006. This historically high level of deliveries com-bined with a virtually non-existent volume ofdemolition should eventually start to have conse-quences on the market balance during the nextfew years.

Thus for Capesize, 8 million dwt were delivered in2004, 8.7 are due in 2005 and 9.5 in 2006. ForPanamax, 6 million dwt were delivered in 2004,and in 2005 the figure should be 6.8 million dwt.And for the Handymax, after 4.5 million dwtadded in 2004, 6.2 million dwt can be expected in2005!

Some factors could act in the favour of reducingthe pace of delivery, for instance, the price ofsteel and the difficulties shipyards have in buyingengines. There is a high probability that we shallsee numerous delays in deliveries. On thedemand side, the slightest change in the econo-mic policy of the Chinese government, withimplications on imports and exports, will be mea-sured in the light of the strategic role played byChina today on the international scene. Based onCISA forecasts, the level of ore imports shouldreach 240 million tons in 2005, an increase ofaround 20 % compared to the 40 % witnessedin 2004.

Finally, a serious question mark remains as to thecapacity of the main Australian and Brazilian portsto be able to handle the increase in demand as, atthe same time, their productivity seems to be

unable to improve in the short term. If this conges-tion phenomenon lasts, this will prevent a furthergrowth of the trade flow and consequently newtonnage that will be introduced on the marketwould generate a surplus. Some old ships couldthen find their way to the scrapyards.

2004 will therefore be classified as an outstandingvintage, a historic year that is only seen once in alifetime. This year has signalled the break with thelong decades of cheap or even undervalued trans-port. The importance that China has acquired inworld trade and her appetite for raw materials,has been and will remain the determining factorwithin the market evolution. The imbalance bet-ween supply and demand has led freight rates tolevels never achieved before.

However, one should not underestimate theimpact that the massive deliveries of new shipswill have and although it is difficult to measureprecisely, it will logically push owners to sell someolder ships for scrap. In addition, even if demandis strong, the logistical difficulties encounteredeither with the distribution network or with portinfrastructures, as well as a possible slowing downof China’s imports, could cast a shadow on themarket. ■

4,000

70,000

58,000

64,000

52,000

46,000

40,000

34,000

28,000

22,000

16,000

10,000

Average time-charter rates for bulk carriers

Modern Handymax - 3/5 months t/c (del./redel. Pacific)

Modern Panamax - 3/5 months t/c

Modern Capesize - 12 months t/c

Jan 02 June 02 Nov 02 Apr 03 Sept 03 Feb 04 July 04 Dec 04

$/day

75The Dry Bulk Market in 2004

The second-hand market for Capesize

Unbelievable! Swallowed up like so many othersby the ferocious appetite of China for raw mate-rials, freight rates took off to levels that nobodywould have imagined and even less hoped for. Thescarcity of berths for newbuildings helped feedthis frenzy to purchase second-hand ships or new-building contracts with prompt delivery, the latterbeing able to be quickly repaid given the rates theycan obtain on the market.

When in December 2003, a 5 years old 170,000dwt ship, built in a good shipyard was worthabout $ 48 to 49 million, its value was close to$ 62 million in March 2004!

At the end of June or early July, after a rathersevere correction in the market, brought about bystatements from the Chinese Prime Ministerconcerning necessary measures which were nee-ded to slow down the economy that had becomeoverheated, this same type of ship saw its valuedrop back to a level of around $ 45 million.

However the market did not cool off for long andthe year ended with prices rising again to $ 65 to66 million.

We have been able to record some fifty transac-tions in the course of this extremely active year.

It is surprising to see that the rise in values hasaffected all ships irrespective of age and that anumber of new buyers have emerged, principallyChinese, for whom purchasing has rapidly becomean alternative to chartering at prohibitive rates.

In order to stay in the competition, some transac-tions have often been made without any inspec-tion being carried out on the ship.

At the end of the year a distinct bullish trend wasstill clearly perceptible.

The second-hand market for Panamax,Handymax and Handysize bulk carriers

For all of us in shipping, 2004 will be the year weshall remember for a very long time. We thoughtthat 2003 was THE year but 2004 surpassed allexpectations. We had concluded last year’s reviewby stating: “If the world economic data and indi-cators available can be considered as reliable thenwe would expect the dry bulk freight market toremain at levels considered as very firm and we

would not therefore expect bulk carrier prices toease off any time soon. In fact we would expectprices to firm further, so, for those contemplatingan investment in dry bulk tonnage the sooner thisis undertaken the better it will be” and we added“Today’s extremely firm price becomes tomorrow’snormal market price and a few weeks later it isconsidered as cheap”.

This was exactly what happened and even more,much more…

Prices for second-hand tonnage followed thefreight market increases without a miss. On someoccasions the increase in values was much moreimportant than the equivalent freight rateincrease, as buyers and sellers alike were anticipa-ting further increases.

Comparing second-hand values, for the varioussizes under consideration, at the end of 2004against those at the end of 2003 we’ve noted:◆ an average of 45 % to 65 % increase in thePanamax size,◆ an average of 50 % to 60 % increase in theHandymax size,◆ an average of 40 % to 50 % increase in theHandy size.

Demolition sales remained at an all time low andof course prices achieved by dry bulk tonnage soldfor demolition remained extremely high. Theymoved from $ 270-275 per ldt at the end of 2003to the “astronomical” levels of $ 370-380 for ves-sels sold for demolition to India, whereas the Chi-

The dry bulk second-hand market

Eric LD169,900 dwt, built in 1999 by Daewoo HI, sold at the end of the year by Louis Dreyfus Armateurs to Diana Shipping Agencies


nese were paying about $ 320 per ldt at the endof 2004 compared to about $ 290 about 12months earlier.

2004 was the year of the large “en-bloc” deals, itwas also the year when traditional tanker ownersdiversified in the dry bulk sector, the year duringwhich a 15 to 20 year-old bulk unit was worthmore than ever before, prompting several owners(e.g. Oceanbulk Maritime) to sell a large numberof such vintage ladies and at last the year of somesuccessful Initial Public Offerings (IPO’s) shippingcompanies (mostly Greek controlled) managingand involved in dry bulk vessels, in the U.S. publicequity markets.

Among these “en-bloc” transactions it is worthnoting:◆ The Restis group acquisition for $ 740 million ofthe whole MISC dry bulk fleet consisting of 32bulk carriers (9 Panamaxes, 9 Handymaxes and 14Handies)◆ The General Maritime Group (Peter Georgio-poulos), acquisition for $ 420 million of the TopGlory fleet consisting of 16 bulk carriers (5 Pana-maxes, 6 Handymaxes and 5 Handies)◆ Precious Shipping concluded a number of en-bloc acquisitions in the Handysize segment (allmid/early 1980’s built): 9 Handies from PNSL(Malaysia) in March, 6 Handies from Pacific Basinin February and in addition, there were linked toanother 10 to 12 purchases of Handies over theyear.

Some of the traditional tanker owners have beenactively participating in the dry bulk carrierssecond-hand market, like General Maritime (men-tioned earlier), Frontline (John Fredriksen), andothers.

Ship’s values evolution

At the end of the year a 10 year-old Panamax bulkcarrier was worth about $ 32 to 33 million, repre-senting an increase of about 65 % over the past12 months, a 5 year-old Panamax bulk carrier was

worth about $ 40 million, which represents about48 % appreciation when compared to the valuerecorded one year earlier.

A 10 year-old Handymax bulk carrier was worthabout $ 25 million, representing an increase ofabout 55 % over a period of 12 months, a 5 year-old Handymax bulk carrier was worth about$ 31 million, which represents a 55 % apprecia-tion when compared to the same period one yearearlier in December 2003.

A 10 year-old Handy bulk carrier was worth about$ 16 million, representing an increase of about45 % over a period of 12 months, a 5 year-oldHandy bulk carrier was worth about $ 21.5 mil-lion, which represents a 48 % appreciation whencompared to how much it was worth one year ear-lier in December 2003.

Prospects

Concluding this year’s review of the second-handdry bulk carrier markets, the eternal and unavoi-dable question is still on everyone’s mind “Howlong will this freight market and consequently thesecond-hand market last?” There is no clear ans-wer and as always all involved in shipping will betrying to analyse the world economic data, thesupply and demand situation which is fundamen-tal in all markets, but, more importantly, every-body will be looking closely to the Chinese eco-nomy and the availability or rather thenon-availability of building berths for dry bulk car-riers (in the sizes we have been referring to).

We may therefore witness the second-hand pricesfor Panamax, Handymax and Handy bulkers beha-ving in a much more volatile style than during thepast 12 to 24 months and as such any investmentin this sector should be pursued cautiously. Theother face of the coin, would of course be to capi-talise on the present very high values and sell anytonnage, purchased at much lower levels. ■

77

BRS FUTURES LIMITED10 Napier Place - London W14 8LG - Royaume Uni

BRS Futures Ltd is a wholly-owned subsidiary of Barry Rogliano Salles, registered inthe UK (company registration number: 04565913) and is authorised and regulatedby the Financial Services Authority of the UK (FSA reference number: 223290)

Contacts

Chris Reilly or Ramon Muga Tel.: +44 20 7602 5670 Email : [email protected]

Tim Jones Tel.: +33 1 41 92 12 34 Email : [email protected]

François Walon Tel.: +33 1 41 92 12 34 Email : [email protected]

SERVICES PROVIDED

BRS Futures Ltd acts as a broker in principal-

to-principal freight derivative contracts.

The company offers a broking service

in existing tried and tested contracts for freight

swaps and options, and aims to continue

developing its range of freight and ship value-

based derivative products as appropriate.

The aim of BRS Futures Ltd is to provide

existing and prospective clients

with the opportunity to use standardised risk

management tools for hedging and

optimisation of shipping/freight portfolios.

BRS Futures Ltd is a member of the Forward

Freight Agreement Brokers Association (FFABA),

and BRS is a panel-member contributor

to market data co-ordinated and published

by the London-based Baltic Exchange.

BACKGROUND

BRS Futures Ltd was set up in 2003

and is a subsidiary of one of the

most respected and long-established

international shipbroking firms,

Barry Rogliano Salles of France.

The parent company has more

than 150 years’ experience in providing

a range of services to clients

in the shipping industry.

The last few years have seen substantial

growth in the use of derivatives

to reduce and manage exposure to risk

in many markets.

The international shipping market is no

exception, and in response to clients’

needs, BRS has added freight derivatives

to the range of services it provides.

FUTURESL I M I T E D

7878

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Interactive checking of: ships, owners andoperators as well as services and alliances.

A monthly newsletter presented by ship’ssize and geographical zones which is tailo-red to individual user’s needs.

Daily update of new deliveries, ships onorder and demolitions.

Detailed orderbooks.

An interactive classification of the top 100liner operators world-wide.

Fleet profiles.

A detailed analysis on a particular aspectof the liner shipping sector each month.

Chartered fleet compared to owned vessels.

News update : daily coverage on marketsdevelopments.

Vessels’ casualty records and successiveowners.

The data base holds currently:• over 1,200 services• over 9,000 ships• over 300 operators

The annual subscription for the site :e3,400.

Numerous pages are available for free.

Alphaliner is a Barry Rogliano Salles trademark.

79

After the 2001 traumas, the year 2002 wasa year of convalescence and the full healthwas restored in 2003. As for 2004, it has

been the year of the superlatives. It has witnesseda shipping boom unseen since the early 1970s oil-based boom.

This time, the international trade is sitting on amuch larger base than 35 years ago, both in com-modity variety and in geographical pattern. Onecountry has however become an essential wheel:China. It is estimated that it is at the origin of onethird of the world trade growth last year.

With its economy growing at some 9 % a year andcontainerised exports reaching a 30 % annualincrease, China is itself at the origin of the contai-nership shortage and the concomitant unprece-dented levels of charter rates. But China is notalone to fuel the shipping frenzy. First, and it isimportant, it is inseparable from the purchasingpower of the USA and of Europe. Second, there

are other countries which are also witnessing highlevels of exports, such as India, Thailand, Vietnamand Chile.

The rise of the Euro against the US Dollar andAsian currencies has also implications on thecontainership demand. It makes Asian productsand especially Chinese ones cheaper for Europe.All along the year, volumes have soared on theFar East-Europe route, which needs more shipsthan the Asia-US route because of the longerdistances.

Shipowners, liner operators and port operatorshave been taken by surprise by this surge. Theycan hardly cope with the volumes. Ships are fullto capacity out of Asia and there are not enoughof them to scoop up all the boxes that flow outfrom this continent. The congestion of termi-nals, especially in Europe and the US, com-pounds the problem, as they cause delays tobusy ships and disrupt the tight schedules of

The Containership Market in 2004

THE

CONTAINERSHIPMARKET

IN

2004

80

usually well oiled weekly loops. This is a chal-lenge for 2005.

In order to save ships, liner operators have rear-ranged loops and have cut capacity on the com-paratively stagnant transatlantic trade in order tosend ships on busiest routes. The optimisation ofa number of services has also led to a better ove-rall filling ratio, especially at each end of the loops(even if it means filling with empty boxes, whichcannot be discounted as they have to be reposi-tioned in one way or another).

Owners of hired container tonnage are rewardedabove all expectations, with charter rates whichare 50 % higher than the historical peaks. Leadingliner operators have anticipated a further rise indemand for 2005 and beyond by chartering ships forperiods much longer than usual and have committedthemselves in huge newbuilding programmes.

During the second half 2004, there has beenintense chartering activity for ships to be deliveredin 2005 so that the pool of ships left available hasshrunken fast, which could in turn lead to a fur-ther round of charter rate rises once the ChineseNew Year festivities (February) end.

Huge orderbook matches strong trade growth

In early 2005, the cellular ships orderbook stood at3.9 million teu, representing 53 % of the existingfleet. As big as it is, it does not seem excessive,although it looks like somewhat on the high side,especially for the year 2007. The huge influx ofcapacity could reasonably be absorbed by the bul-lish international trade, itself supported by astrong world economic growth.

The world GNP growth has reached around 4-4.5 % in 2004 (against 2-3 % for the long termhistorical average). Although a slight softening isexpected in 2005, the GNP growth should remainabove the historical average, and this performancecould be repeated in 2006, in the absence ofunpredictable events.

As for the international trade, it is estimated tohave grown by 7 % in US$ terms during 2004(against 4-5 % for the long term average). Alas nofigures are available in volumes, as it is difficult toassess because of the wide variety of goods.

The observation of long term trends shows thatthe cellular fleet has grown, roughly, twice as fastas the trade growth. It means that if the bullishtrade growth of 7 % recorded for 2004 is to beprolonged during the next two or three years,then it will generate containerised volumes nee-ding to be moved by a fleet growing at 14 % perannum. This is precisely the rate at which the fleetis expected to grow during the next three years,according to BRS-Alphaliner forecast.

Even in case of a softening, the supply-demandratio of containerships is to remain on the ownersside, at least in 2005 and 2006, because of thecatch up effect: the shortage which has developedin 2004 must be compensated by deliveries higherthan the natural growth.

Given this, the capacity coming on stream shouldbe swiftly absorbed by the transportation demandduring the coming months, while a return to abalanced supply-demand ratio could occur in2006. This should mark a turning point in boxrates and charter rates.

The situation in 2007 and beyond is another mat-ter. Some forecasters say that the world economicand trade growths are to remain sustained for theremaining years of the decade, although not at2004 levels as a softening is expected. The ques-tion is: what amplitude will take this softening ?The supply-demand balance for 2007 is thus diffi-


Evolution of the cellular fleet 1988 - 2008

Year Number Teu Progr.

1988 1,165 1,498,286

1989 1,198 1,604,192 7.1%

1990 1,248 1,710,233 6.6%

1991 1,320 1,848,223 8.1%

1992 1,407 2,005,566 8.5%

1993 1,498 2,201,172 9.8%

1994 1,596 2,378,918 8.1%

1995 1,743 2,642,853 11.1%

1996 1,918 2,970,868 12.4%

1997 2,113 3,347,946 12.7%

1998 2,343 3,853,767 15.1%

1999 2,524 4,274,538 10.9%

2000 2,623 4,503,004 5.3%

2001 2,746 4,912,346 9.1%

2002 2,905 5,515,713 12.3%

2003 3,046 6,097,445 10.5%

2004 3,187 6,639,276 8.9%

2005 3,362 7,290,305 9.8%

2006 3,672 8,257,000 13.3%

2007 3,970 9,350,000 13.2%

2008 4,252 10,684,000 14.3%

• Figures are given at 1st January of each year.

• Figures for 2006 to 2008 are derived from the orderbook

81

cult to assess. Trade growth should remain howe-ver higher than the historical average and it is areasonable bet.

As for 2008-2009, the orderbook has yet to be filledin. So, orders of containerships for these two yearsmay flow in the coming months. Assuming that a6 % growth in trade is maintained, almost 1.3 mil-lion teu should be delivered in 2008 and 1.45 mil-lion teu in 2009 only to maintain the equilibrium.

If the omens for the second half of the decade aregood, a number of worries must not be overloo-ked, which could affect the container shippingmarket. They are :

◆ the weakness of the US dollar and uncertaintieson exchange rates,

◆ a possible hard landing of the Chinese eco-nomy,

◆ a slowdown in the US consumption of importedproducts due to a weak dollar combined with pos-sible interest rate increases.

More immediate and foreseeable, problems willaffect container shipping in 2005 :

◆ the shortage of cellular ships,

◆ congestion in ports, leading to delays, accen-tuating the ship shortage,

◆ strain on inland transportation networks.

Charter fortunes

Operators are living a strange paradox as they arerivalling to fix ships at peak rates for periods of

three or four years, without knowing what thefuture has in store. Actually, the charter market isnot led by demand alone as far as long termexpectations are concerned. It is also propelled byskilled operators who play the shortage game, loc-king up charterers for years against discounts onrates. These discounts remain somewhat limitedwhen one considers the progression of charterrates over the past two years.

With ships sometimes hired at twice their totaloperating costs (including repayment of capital),owners enjoy an unprecedented situation sincecontainer ships started to be offered for charter,some 35 years ago.

Owners of containerships derive profits which arereminiscent of those accumulated by oil tankerowners in the early 1970s (Onassis, Niarchos, YKPao, CY Tung and a crowd of other more or lessknown names).

Indeed, a B-170 locked for three years at $ 27,000per day will raise enough profit to order a brandnew ship of the same size!

With this in mind, it is not surprising that charte-rers look at buying ships. But with exceptionalreturns expected on hires, sellers’ conditions defygravity and buyers think twice before taking theplunge. Over the last 12 months, prices of second-hand ships have roughly doubled!

Only a few operators have taken steps in order tobe less dependent on chartered ships. It concerned


0

50,000

45,000

30,000

40,000

35,000

25,000

20,000

15,000

10,000

5,000

Evolution of charter rates - 1998-2004(12 months tc rates)

Jan

98

May

98

Sept

98

Jan

99

May

99

Sept

99

Jan

00

May

00

Sept

00

Jan

01

May

01

Sept

01

Jan

02

May

02

Sept

02

Jan

03

May

03

Sept

03

Jan

04

May

04

Sept

04

Jan

05

4,000 teu

2 500 teu

1 700 teu

1,000 teu

USD/day (Source : BRS-Alphaliner)

82

mostly MSC and, to lesser extent, CMA CGM.Both have bought second-hand ships as well asexisting newbuilding contracts. Far behind, PIL andSimatech have also bought second-hand tonnage.In another deal, Zodiac Maritime has bought eightPanamax containership contracts for assignmentto the associated company Zim (which has soldships as well).

Although there is a trend among operators toorder tonnage in their name, they still rely heavilyupon non operating owners, which have relent-lessly continued to book ships all along the year.

There has been indeed a significant regular drop inthe share of chartered ships in the cellular shiporderbook, from 63 % in January 2004 to 52 %January 2005. The lion’s share of this reductionconcerns the VLCS orderbook: their charteredcomponent has shrunk from 58 % to 36 %(thanks, for a great part, to MSC buying or exerci-sing purchase options on chartered units).

Conversely, existing ships have been sold to nonoperating owners. P&O Nedlloyd has sold en bloc14 Panamax, while Zim has sold five 3,000 teuunits and Hanjin five 4,000 teu ones. All theseships were sold with charters back to the sellers.However, these deals have more to do with finan-cial engineering than with market play.

These diverging moves led actually to a slightincrease in the chartered component of the exis-ting cellular fleet, which stands at 47.4 %, against47.0 % one year ago. German owners continuesto dominate the charter scene, as they control63 % of the chartered fleet, dwarfing Greekowners (11.5 %) and Japanese owners (7.2 %).

A few operators are however taking advantage ofpeak charter rates. As strange as it seems, they

have been accepting, if not actually welcoming,ever increasing rates for longer and longer periodsthroughout the year. Maersk Sealand, MSC andCMA CGM have been keen rivals in this race toland as many possible ships, at the expense ofothers, who are either hesitant or simply do nothave a sufficiently strong financial base to follow.

These three carriers have swooped on as muchships as they could (not to mention their uncea-sing order waves of newbuildings) and are thus ina position to strongly improve their market share.

Actually, with these peak charter rates, we are onthe eve of a new era of precipitating the concen-tration of the fleet in a few hands with a new sortof natural selection. This may explain why therehas been no hurry in attempts to take control ofother operators last year.

The charter market

We had speculated in our last annual report thatthe highest rates observed in 2003 could wellrepresent the average rate for 2004. Not only didthey, but they went much higher!

With ships as rare as ever, charter rates have explo-ded to levels which are 50-60 % above the histo-rical highs observed during the summer 2000.Besides record rates, the year 2004 has been cha-racterised by a lengthening of charter periods andby fixing ships six or twelve months in advance.

These two latter trends have dried up the pool oflarge ships (both existing and newbuildings) avai-lable in 2005. Charterers are now eating into the2006 available fleet, and a market for sublets hasstarted to emerge.

The rally on the charter market continues andowners are reaping the benefits of the shortage of


Availability of ships for charter (as at 1st January 2005)

2005 2005Size 2005 2005 2006 2006 2007 2007 Existing Charter

Exp Nbdg Exp Nbdg Exp Nbdg 01/01/05 01/01/05

4,000-5,000 teu 1 0 7 4 12 7 268 111

3,000-4,000 teu 23 2 20 10 26 20 265 107

2,500-3,000 teu 14 5 26 26 n/a n/a 249 145

2,000-2,500 teu 29 2 33 2 n/a n/a 300 172

1,500-2,000 teu 65 6 81 6 n/a n/a 425 281

Exp: number of ships for which the charter expires in the reference year (and no options attached)Nbdg: newbuildings believed free of charter in the reference yearExisting: total existing fleet as at 1st January 2005Charter: indicates the number of ships on charter from non-operating ownersNote: As the duration of charters decreases with size, indication of the number of charters due to expire in 2006 for the small sizes is notrelevant and is therefore not indicated.

83The Containership Market in 2004

tonnage. The lack of adequate tonnage to launchnew intercontinental loops has thwarted the plansof several carriers.

In December 2004-January 2005, 4,000 teu shipswere hired at $ 40-45,000 per day for 12 monthsperiod while 2,500 teu ships were valued at $ 35-37,000. Ships of 1,700 teu peaked at $ 27,000 for4 years periods. 1,000 teu ships were negotiatedat $ 18,000 for 6-12 months.

The tonnage scarcity and the high demand onregional and feeder trades have sent rates soaringfor smaller ships as well. Cellular ships of 800-850teu are not cheap, as they reach now the $ 15,000

mark for 12 months (against $ 8,000 end 2003).Modern ships of 500 teu ended the year at$ 9,000 for 12 months (against $ 4,400-4,800during the three years pre-2004, and for periodsof 3 to 6 months).

If top rates are good news for owners, carriersrelying only upon chartered tonnage do not sharethe same enthusiasm. Among them are severalniche regional carriers and feeder operators. Theyuse small ships (under 1,500 teu), which until early2004 could still be hired at fair rates, but havesince reached such levels that services will have tobe reviewed or cut.

A little spoken aspect of the container tradesconcern slot charter rates. As ship charter rateshave soared, so have slot charters. Some slotchartering agreements are referring to chartermarket conditions, and the slot charter ratesare reviewed at regular intervals. Other onesare fixed for the duration of the agreementwhich is usually not more than two years.

Slot charter rates can be indexed on ship char-ter rates as well as other operational costs,such as voyage costs, including cost of bun-kers, canal tolls or port dues. As the ship char-ter rates item is the heaviest one, it is then notsurprising that slot charter hires have risenstrongly, leading even to the non-renewal ofsome agreements.

In this period of tonnage scarcity, those whorun the ships may find quite profitable to fillthem at full capacity and may not wish to offertheir precious earning space to others (which

are after all rivals), unless they pay the price.

Operators are now very careful when it comesto enter slot exchange agreements with otherlines, as they evaluate risks of failure of part-ners, especially in the case of small operatorswhose financial standing may not be strongenough to survive the high charter hires.

There has been during the past year a numberof changes in partnerships and slot buyer par-ticipation, which may have been caused by ten-sions created by space shortage on a back-ground of ship shortage and of peak charterrates. On the other side, several operators areteaming up to launch new services with char-tered ships, thus sharing the burden of expen-sive charter hires while being able to offer theneeded weekly frequency. Such a way of doingbusiness is of course not new, but it is exacer-bated by current market conditions.

Slot charters follow the trend

Long term charters dominate the market

Periods of four years and more for 4,000-5,000teu ships accounted for 86 % of the reportedfixtures in 2004, against 49 % in 2003 and17 % in 2002, according to a BRS-Alphalineranalysis. Smaller ships have also been fixed formuch longer periods than the usual 12

months. Periods of 24 to 40 months for 1,500-2,000 teu ships accounted for 46 % of thereported fixtures in 2004, against 7 % in 2003and only 2 % in 2002. The accompanying tabledetails how the duration of charter periodsevolved from 2002 to 2004.


Average charter rates for 12 months charters

Size 4,000 teu 2,500 teu 1,700 teu 1,000 teu 500 teu

Average 1998 ns 14,438 10,353 7,476 5,171

Average 1999 24,781 12,342 8,534 5,908 4,423

Average 2000 26,511 18,617 12,731 7,995 4,429

Average 2001 19,259 15,092 9,413 7,365 4,536

Average 2002 18,415 10,600 7,722 6,029 4,181

Average 2003 28,792 20,417 13,311 8,237 4,599

Average 2004 41,994 33,231 22,975 13,574 7,288

Lowest 2004 37,477 27,375 19,653 9,596 5,814

Highest 2004 43,519 37,000 26,379 16,732 8,721

Rise 2003-2004 46% 63% 73% 65% 58%

Average 5 years 26,994 19,591 13,230 8,640 5,006

2004 vs 5 years 56% 70% 74% 57% 46%

ns: not significant (absence of market for large ships)Average 5 years: average rates on last 5 years (2000-2004)2004 vs 5 years: performance of 2004 compared to 5 years average500 teu: charters of 6 months considered

Note : in order to avoid distorsion in the calculations of average rates, only representative modern ships have been selected, as far as pos-sible (old ships, slow ships and ships with unusual characteristics have been excluded).

Duration of charter periods in relation to year of charter contractNumber of fixtures reported in 2002 and 2003 and share of total number of fixtures for each size range

Nb. % Nb. % Nb. % Nb. % Total

Duration < 8 months 9-18 months 24-40 months > 40 months

Size 4,000 - 5,000 teu

2002 8 27% 11 37% 6 20% 5 17% 30

2003 5 12% 4 9% 13 30% 21 49% 43

2004 8 11% 0 0% 2 3% 61 86% 71

Size 3,000 - 4,000 teu

2002 40 44% 38 42% 7 8% 5 6% 90

2003 15 17% 25 29% 41 48% 5 6% 86

2004 6 15% 0 0% 10 25% 24 60% 40

Size 2,400 - 3,000 teu

2002 42 48% 40 46% 0 0% 5 6% 87

2003 25 19% 35 27% 58 44% 14 11% 132

2004 11 8% 6 4% 35 25% 88 63% 140

Size 1,500 - 1,750 teu

2002 285 77% 80 22% 7 2% 0 0% 372

2003 190 55% 130 37% 24 7% 4 1% 348

2004 52 21% 63 26% 112 46% 16 7% 243

Size 1,000 - 1,250 teu

2002 257 81% 86 18% 5 2% 0 0% 318

2003 208 66% 95 30% 6 2% 4 1% 313

2004 54 22% 67 27% 108 43% 20 8% 249

Size B-170

2002 45 71% 18 29% 0 0% 0 0% 63

2003 36 54% 26 39% 5 7% 0 0% 67

2004 2 5% 10 27% 23 62% 2 5% 37

Source : BRS-Alphaliner

85

The fleet

At 1st January 2005, the cellular fleet reached3,362 ships for 7.29 million teu, in progression of9.8 % on 12 months, a relatively modest increaseas the average annual progression during the past10 years has reached 10.7 %. The cellular fleetaccounts for 89 % of the total fleet deployed onliner trades in teu terms.

The containership fleet counts 49 units of morethan 7,500 teu and there are 165 more of thesegiants on order, some of them reaching the10,000 teu mark. By the end of 2007, there will beenough of these leviathans to run 15 Asia-Europeand 15 Asia-US loops.

2004 deliveries stood at 175 ships for 645,000 teu(against 177 ships for 575,000 teu in 2003).Orders stood at 464 ships for 1,692,000 teu,which is significantly less than the record 520 shipsfor 2,123,000 teu ordered in 2003.

The total value of cellular ships ordered in 2004reached almost $ 22.2 billion (using conversionrates at time of order), a figure similar to 2003,reflecting the steep rise in newbuilding prices($ 13,150 per teu instead of $ 10,350 per teu in2003 – raw figures unadjusted for capacity).

The total orderbook reaches 3.9 million teu in early2005, representing 53 % of the existing fleet. It isdominated by large ships, with ships over 4,000teu accounting for 74 % of the total orderbook. As

for deletions, only five ships for 2,450 teu weresold for scrap last year.

The teu capacity which will enter the market duringthe three years 2005, 2006 and 2007 correspondsto 47 % of the existing fleet. In other terms, thefleet is to rise by almost 14 % per year, well abovethe 10 % average observed during the past 15years. The cellular fleet is expected to reach 10.8 mil-lion teu in January 2008 (assuming no scrapping).

The operators

From 1st January 2004 to 1st January 2005, thecombined fleet of the Top 25 carriers has grownfrom 5,955,000 teu to 6,640,000 teu (+11.5 %).Its share of the world fleet deployed on liner tradeshas risen from 79.6 % to 81.3 % in teu terms,confirming the concentration trend.

The five largest carriers alone operate 36 % of thecapacity effectively deployed on liner trades.

The total teu capacity deployed on liner trades hasgrown by 9.1 % in 2004, reaching 8,168,000 teuas at 1st January 2005, against 7,485,000 teu oneyear earlier. In deadweight terms, the figure standsat 7.5 %, with 120 million dwt at 1st January2005 against 111.5 million dwt one year earlier.

These figures take into account all the types ofships deployed on liner trades (cellular, multipur-pose, ro-ro). The cellular fleet itself amounts to7,290,000 teu (it represents 89.2 % of the totalteu figure deployed on liner trades).


CMA CGM Hugo100,400 dwt, delivered in2004 by Hyundai, owned by Conti Reederei, operatedby CMA CGM (copyrightCMA CGM)

86

The two largest carriers, APM-Maersk and MSCcontributed to 29 % of the fleet growth in teuterms, with 197,000 teu out of the 683,000 teuadded (+101,000 teu for MSC and + 96,000 teufor APM-Maersk).

APM-Maersk became last December the first teu mil-lionaire, as its fleet reached 1,016,000 teu on 1st

January 2005. APM-Maersk controls Maersk Sea-land, Safmarine, Norfolkline and APMSS-MCC. MSCcomes at the second position with 637,000 teu.

These two leaders are however not among the topteu gainers in relative terms. MSC grew by 18.9 %and APM-Maersk by 10.4 %. They are distanced byfour carriers (within the Top 25) which have logged


900,000 30,000

800,000

700,000

600,000 20,000

500,000

400,000

300,000 10,000

200,000

100,000

teu USD/day

Cellular ships - Deliveries and ordersquarterly - Source - BRS Alphaliner

1997

-1

1997

-3

1998

-1

1998

-3

1999

-1

1999

-3

2000

-1

2000

-3

2001

-1

2001

-3

2002

-1

2002

-3

2003

-1

2003

-3

2004

-1

2004

-3

2005

-1

2005

-3

2006

-1

2006

-3

2007

-1

2007

-3

0 0

Daily rate (1,700 teu)

Deliveries

Orders

Cellular ships: Deliveries & Orders - Year 2004

DELIVERIES ORDERSSize range nb teu USD M nb teu USD M

> 7,500 teu 20 161,009 1,462 49 438,136 4,9556,000 / 7,499 teu 5 33,214 320 32 201,666 2,5415,500 / 5,999 teu 22 124,542 1,199 4 23,552 2805,000 / 5,499 teu 20 100,742 897 30 151,964 1,8204,500 / 4,999 teu 8 37,932 370 29 138,210 1,8314,000 / 4,499 teu 9 38,002 378 54 228,346 2,8623,500 / 3,999 teu 2 7,060 80 14 49,204 6263,000 / 3,499 teu 3 9,273 99 16 51,378 7242,500 / 2,999 teu 19 49,662 636 63 172,888 2,5872,000 / 2,499 teu 11 26,978 372 15 35,418 5301,750 / 1,999 teu 5 9,270 123 19 34,436 5201,500 / 1,749 teu 5 8,532 120 21 41,730 6781,250 / 1,499 teu 1 1,406 20 16 21,758 3821,000 / 1,249 teu 10 11,442 173 63 70,753 1,285

750 / 999 teu 22 18,182 343 29 25,937 510500 / 749 teu 12 8,049 160 10 6,940 136350 / 499 teu200 / 349 teu 1 240 5100 / 199 teu

TOTAL 175 645,535 6,757 464 1,692,316 22,267

Prices shown at delivery correspond to contractual prices at the time of order


Straight sales & mergers

◆ Temasek Holdings (Singapore) has taken fullcontrol of NOL, parent company of APL.

◆ Royal Nedlloyd B.V. (Netherlands) has taken100 % control of P&O Nedlloyd Containers Ltd (UK)through the purchase of the 50 % stake held bythe Peninsular and Oriental Steam Navigation Co(i.e. P&O Group). The resulting company, Royal P&ONedlloyd Ltd, is listed on the Amsterdam StockExchange.

◆ The Ofer Group (Israel) has taken control of ZimNavigation, since renamed Zim Integrated ShippingServices Ltd.

◆ Costa Container Line took over the deep sealiner trades of Gilnavi srl di Navigazione, the linerarm of the Grimaldi-Genoa branch.

◆ The Carlyle Group has sold Horizon Lines to pri-vate equity firm Castle Harlan.

◆ STX Corp. (Korea) has bought 67 % of PanOcean Shipping Co (Korea).

◆ Neptune Orient Lines (NOL - APL parent com-pany), Singapore, agreed to sell its 28.7 % stake inLorenzo Shipping Corp to National Marine Corp.(both Philippines).

◆ Neptune Orient Lines Ltd (NOL) has sold NeptuneAssociated Shipping Pte Ltd (NAS) (tankers & bun-kering).

◆ Eimskip (Iceland) and Faroe Ship (Faeroe Islands)have merged.

◆ Euro Container Line AS (ECL) (Norwegian com-pany co-owned by Eimskip and Wilson Line) tookover Norwegian operator CoNor Line.

◆ Rickmers Reederei GmbH & Cie KG (BertramRickmers Group), has taken over all of the shares inCCNI GmbH (Deutschland) from Compañía Chilenade Navegación Interoceánica SA (Santiago).

◆ Egyptian company MISR Shipping has beenabsorbed by its compatriot National Navigation Co(NNC).

◆ Trailer Bridge Inc. (USA) bought 100 % ofKadampanattu Corp. (K. Corp.) from the Estate ofMalcom P. McLean (USA)

Transfers and moves within operatinggroups

◆ NYK and its affiliate TSK have decided to spin offtheir respective domestic liner service operationsand related businesses, to set up NYK Line JapanLtd (effective April 2005).

◆ China Shipping Container Lines (CSCL) boostedits share in the Shanghai Puhai Shipping Co, Ltd

(SPS) from 50 % to 90 % held by other China Ship-ping units.

◆ Hamburg-Süd abandoned its trade name Eller-man Line.

New operators of liner services

◆ Manson Shipping (Taiwan) – services Taiwan-Hong Kong-Vietnam-Philippines.

◆ Winland Shipping Co, Ltd (China) – services Wei-hai-Japan.

◆ Dalian Beiliang Logistics Containers (China) - ser-vice Dalian-Weihai-Japan.

◆ HAL Shipping (Halship) (Canada) – service Hali-fax-USEC.

◆ Delphis NV (Belgium) is incorporated (intraEurope services).

◆ AC Forwarding (ACF) and Hudig Veder & Dam-mers (HVD) form AC Ireland Line.

◆ Black Sea Container Shipping Co launches intraBlack Sea service.

Cessations of activity in liner shipping

◆ CT Navigation (Taiwan) closed its services (Tai-wan-Hong Kong-Vietnam-Philippines).

◆ Hong Kong Ming Wah (HKMW) has closed itsonly service (Hong Kong-North China), marketedunder the Chiu Lun Transportation name.

◆ SPM Shipping (St Pierre & Miquelon) ceased itsactivity – service Halifax-USEC.

◆ Armada Line closes its North Europe-Med ser-vice.

◆ Blue Container Line (Greece) closed its services(Intra Med and Black Sea).

Significant other moves

◆ China Shipping Container Lines (CSCL) has beenlisted on Hong Kong Stock Exchange.

◆ Norwegian shipowner John Fredriksen hasbought stakes of 3 to 10 % in Hanjin Shipping,Hyundai Merchant Marine, Royal P&O Nedlloyd andNOL.

◆ EOX Group Bhd has been renamed HubLineBerhad.

◆ The liner division of Unicorn Lines has been rena-med Ocean Africa Container Line (OACL).

◆ TECO Lines is created by Samskip and EstonianShipping Co.

◆ DAL left the West Africa trades.

◆ Steamers Maritime (Singapore - Keppel Group)has sold its whole fleet of ten containerships.

Operators : transactions and significant moves in 2004

88

growths of 28-33 %: CSAV, CSCL, Yang Ming andCMA CGM. Outside the Top 25, the emergence oftwo Chinese regional companies is worth noting:SYMS (+24.4 %) and SITC (+20.2 %).

On the mergers & acquisition side, no large mer-gers or takeovers occurred between rival carriers.The most significant one has been the buying byCosta Container Line of its compatriot Gilnavi. Itappears that aggressive carriers (read: potentialbuyers) have found ways to increase market sharein securing as many ships as they can, leavingconservative ones with what is left, i.e. not muchchoice and pricey.

On the other side, some potential targets haveprotected themselves from raiders, such as NOL-APL or TUI-Hapag-Lloyd, in steering clear of mar-ket listing. Despite this, there is still a choice of firstclass carriers which remain potential targets: CP

Ships, Royal P&O Nedlloyd, Hanjin-Senator andHyundai M.M.

There has been however important initiatives on thecorporate side, such as Temasek Holdings, the Sin-gapore state investment vehicle, taking control ofNOL, parent company of APL, in what can be seenas a move to keep at home the Singapore historicalcarrier, until then listed on the local Stock Exchange.Other large deals concerned the purchase by RoyalNedlloyd of the whole stock of P&O Nedlloyd andthe takeover of Zim by the Ofer Group.

CSCL made the news with its listing on the HongKong Stock Exchange in June, while intentions tolist Hapag-Lloyd faded away as parent companyTUI changed its mind and preferred to keep thefull control of its Hamburg jewel.

There has been numerous smaller deals, which aresummed up in the accompanying table. ■


The containership second-hand market in 2003

200 400 1,000800600 1,200

in '000 teu

(Source : BRS-Alphaliner)

ww

w.a

lpha

liner

.com

Maersk-SL + Safmarine

Mediterranean Shg Co

Evergreen Group

P & O Nedlloyd

CMA CGM Group

APL

Hanjin / Senator

NYK

COSCO Container Lines

China Shg. C.L. (CSCL)

OOCL

K Line

Zim

Mitsui-OSK Lines (MOL)

CSAV Group

CP Ships Group

Hapag-Lloyd

Yang Ming Line

Hamburg-Süd Group

Hyundai M. M.

Pacific Int'l Lines (PIL)

Wan Hai Lines

UASC

Delmas Group

IRIS Lines

Liner operators ‘Top 25’ - at 1st January 2005

Operated fleets

Based on existing fleet at January 01 2005

teu capacity available on board operated ships

- All subsidiaries are consolidated -

0

2004 an exceptional vintage! This is cer-tainly true for almost all shipping

markets. The year 2004, with no less than 265sales of pure containerships (of which 44 resales ofships under construction or ordered) and 126other ro-ro and multipurpose ships, compared torespectively 181 and 104 ships last year. Nonethe-

less this leaves a feeling of frustration for a num-ber of buyers who were not able to achieve alltheir intended investments.

This frustration is caused by the evident lack oftonnage for sale, even at very high prices. Manyowners, due to lack of prompt yard slot availabi-lity, preferred to go on the charter market for per-


iods sometimes as much as 3, 4 or 5 years, butwho can blame them…

A simple example illustrates the mood that reignedthroughout the second half of the year: the ownerof the m/v ‘Lissy Schulte’ (B170 – 1,730 teu, built in1995) refused an offer of no less than $ 30 millionand has finally been fixed firm to P&O for 48months at level of $ 26,500 per day! According toour calculations the result of this charter is equiva-lent to about $ 35 million. We now understand whythis ship has not been sold even at such a price level.

The other specificity of the second-hand marketfor containerships in 2004 is, without any doubt,the number of sales in the 500 to 2,000 teu sizerange, and more precisely from 800 to 1,200 teu.There were no less than 15 to 20 potential buyerswho found themselves chasing the rare unitsbeing put on the market. There was again this yearan outright winner in the person of Mr Aponte(MSC, Geneva), with a total of some thirty shipsbought in 2004, to which should be added thepurchase of some ten newbuilding contracts ini-tially ordered by German owners.

German owners bought some sixty ships. It isinteresting to note in this respect that it is virtuallyimpossible to compete with a German buyer on amodern ship offered on the market when it iscontrolled by German interests. A good lesson inself-protection!

Also, whilst in the past ships already under long-term charter were gaining popularity amongstbuyers, this year ships that were “time-charter free”were by far the most sought after. In the absence ofcharter free tonnage in 2004, a large number ofbuyers went after containerships still employed upuntil the end of 2005.

Despite the high prices paid, buyers had to bepatient for several months before they were ableto benefit from a chartering market for which theyhope it will stay at least as good as today’s levels.As to liner operators, purchases of this kind provedto be essential once they had to ensure operatingthe necessary tonnage on their regular services.

The principal “en-bloc” sales which can be repor-ted this year are:

◆ 5 x 3,500 teu and 9 x 4,200 teu (14 ships) builtin 1991, 92, 93, 94 and 95 from P&O Nedlloyd toMPC Capital for a total of $ 660 million.

◆ 4 x 2,824 teu Hyundai contracts for delivery bet-ween 2005 and 2006 resold by Erck Rickers toCMA CGM for $ 44 million each.

◆ 8 x 4,250 teu Dalian New contracts for deliverybetween 2006 and 2007 resold by Bertram Rick-mers to Zodiac.

◆ 7 x 1,538 / 1,658 teu built between 1998 and2000 by Jiangnan and HDW, from clients of SilverLine (who bought the entire fleet in 2001 for $100million) to MSC for $ 130 million.

◆ 10 ships of 369 to 1,012 teu, sold by KeppelGroup (Steamers) to Interorient for $ 91 million.

◆ 4 x 5,050 teu, Hanjin shipyard contracts for deli-very in 2006, resold by Rickmers to MSC for $ 63.5million each.

◆ 5 x 3,039 teu built between 1990 and 1992 byHDW, sold by Zim to Torvald Klaveness and IconCapital for $ 35 to $ 38 million each, with a bare-boat charter back to Zim.

◆ 4 x 2,394 teu (20 knots) built in 1994 in Spain,sold by Zodiac Maritime to MSC for just over $ 30million each.

◆ 4 x 2,524 teu built by Kvaerner in 2003 and2004, sold by an Andreas Ugland-associated com-pany to the bare-boat charterer of the ships, Ham-burg-Sud, for $ 35 million each.

Number of pure containerships sold by sizeLess than 900 teu 82

From 900 to 2,000 teu 83

From 2,000 to 3,000 teu 42

Over 3,000 teu 58 *

Total number of ships sold in 2004 265

Total capacity of ships sold in 2004 500,145 teu

* of which 28 contract resales

Containerships under 900 teu

Together with the normal flow of activity this year,we have seen a search by certain buyers for shipssmaller than what they originally needed. Pricesfor some ships have occasionally doubled betweenmid-2003 and end 2004. Even ships that canhardly been classified as “suitable” on this market,such as a slow-speed vessels or those with gearsunable to perform a standard loading/unloadingrate, have found buyers at more than favourableconditions for their owners.

Buyers based in the Far East, Germany and Greecewere, in this order, the most active within this sizecategory.

Interorient’s deal of buying the feeder fleet of theKeppel Group for $ 91 million fairly well reflectsthe mood of the market this year. A fleet whichhas been on the market throughout the whole


year 2003 and which was finally sold at the begin-ning of 2004. Since then, one can estimate thetheoretical gain in the value of each ship to be atabout 50 to 60 %.

Containerships of 900 to 2,000 teu

This has been by far the most active sector of thesecond-hand containership market! A cascade ofsales, dozens of buyers, ships sometimes for sale,sometimes withdrawn, escalating negotiationswith the seller rising his price at each stage of thenegotiation….. in short a happy shambles withinthe context of euphoric freight rates and second-hand prices.

This situation is particularly true since the summerof 2004. At that time buyers were struggling withthe steady disappearance of charter-free ships. Thefew units still available in 2004 and 2005 willbecome targets for owners such as MSC, Zim orCMA CGM…

Containerships of 2,000 to 3,000 teu

This sector saw only a small progression this yearwith some fifteen more ships sold compared tolast year. At the end of the year owners of new-building contracts for delivery in 2005 did nothesitate to ask for € 45 million ($ 60 million) for agearless ship of 2,700 teu. In short, the lack oftonnage explains some excess in ship’s valuations.

Containerships of 3,000 teu and more

Fifty percent of the 58 deals done this year werenewbuilding contract resales. This segment of themarket was dominated by Zodiac, MSC and aboveall the German KGs, always very keen about shipsof this size, which combine several favourable fac-tors to investors:

◆ a market predominately stable and secure,

◆ a popular size and already well-known in Ger-many, thus a relatively good market knowledge byinvestors,

◆ a satisfactory “liquidity” of the assets andreliable charterers.

One of the rare pure second-hand operation donethis year was the one involving the 3 ships of3,187 teu controlled by Talcar, Israel, built respec-tively in 1986, 1986, and 1988 at a price of $ 80million en-bloc with delivery in 2005 to MSC.

Demolition

Out of the 52 ships demolished in this category,only 5 were pure containerships, the latter total-ling a mere 2,450 teu. The others were either mul-tipurpose or conventional cargo ships. This lowscrapping level is a direct consequence of the firm-ness in the freight market. Scrap metal price levelshave been hovering in the region of $ 400 perlightweight ton.

Conclusion

The world cellular fleet has increased this year by9.8 % to reach 3,362 ships (7,290,000 teu). Thisevolution is in line with the annual averagegrowth of the past 15 years. However we alreadyknow by now that the shipyards will deliver acapacity of 47 % of the existing fleet in the courseof the next 3 years. This represents a growth ofabout 14 % per year!

The demolition market usually hits ships of 27years or more on average, which in the best casewill only shrink the world fleet by 3.2 % of its cur-rent capacity.

The question is therefore: will Asia, and espe-cially China whose strong export industry hascontinued to expand, be able to absorb thisadditional tonnage? A large number of players,both on the industrial as well as the shippingside, believe that it will. It is however a very com-plex exercise to predict the strength of such amarket. As we all know, to simply maintain it atits present levels, it depends upon China and itsneighbours, whose growth in turn seems to bein their own hands. ■

91The Ro-Ro Market in 2004

THE

RO-ROMARKET

IN

2004

After the continuous ups and downs of2003 due to numerous military fixtures,the year 2004 has seen the market going

back to more basic economic factors, without theprevious excesses caused by military emergencies.

A quick look at the fleet evolution shows that the“pure Ro-Ro” concept is still in fashion in someareas, but by all accounts limited in its capacity tospread further afield. The Ro-Pax concept todayseems to be a more promising direction in terms offleet renewal. Thus there were 6 pure Ro-Ro and18 Ro-Pax ships ordered in 2004, of which noneunfortunately were dedicated to tramping. Thesefigures should be compared with the 78 PCTCships ordered in the same period to emphasize thehuge gap between these two categories of ships,but which could perhaps promote a closer synergyin the not too distant future. This distortion within

the fleet evolution of the deep sea and the shortsea fleets was already largely apparent before, par-ticularly in 2003. In addition we have seen 17 shipssold for scrap whose average age was 33 years foran average capacity of 900 lane meters. At thesame time, 6 new Ro-Ro units were delivered lar-gely compensating the demolitions taking intoaccount the much larger average size of modernships (between 2,000 and 4,000 lane meters).

Thanks to good fundamentals in an admittedly veryrestricted market, freight rates firmed up in a heal-thy and steady trend throughout the year withoutany noticeable seasonal effect. It should be notedthat nearly all business is transacted in euros, whichis fairly unique in shipping circles being the resultof a market concentrated around Europe and fur-ther supported by a strong currency. We are still along way from the rocketing rates which have been

What is really new?

92

experienced by containerships, bulk carriers oreven tankers -all directly dependent on the Chineseeconomic boom- but the freight levels achievedfinally allowed the few owners who ordered shipsduring the last 5 years to obtain good return ontheir investments, and for those who boughtsecond-hand ships 3 to 5 years ago to enjoy todayexcellent profits.

Second-hand activity has been very sustainedthroughout the year 2004 with over thirty pureRo-Ros changing hands as well as a dozen Ro-Paxes. With the majority of ships bought or orde-red having been financed in dollars, owners haveoften been able to appreciate that market valuesin euros were considerably higher than those indollars in their books. In the same way as for new-buildings, the philosophy of second-hand buyersis rarely speculative, they most frequently are ope-rators of lines, or else, owners whose investmentis backed by a decent time charter commitment (3to 5 years). We have seen in particular transactionsof modern units such as the purchase of two shipsfrom the Turkish owner UND (2,700 lane meters,21.5 knots) by Norfolkline, but also 3 ships fromcompatriot EGE (2,500 lane meters, 20 knots) byGrimaldi (Naples). These sales go together with arationalisation of the fleet employed between theAdriatic and Turkey since three of these ships willbe replaced by two bigger units (3,700 lanemeters, 22,5 knots) on order for UND at Flensbur-ger shipyard.

Second-hand car transport and its limitsin supporting the market

The seaborne trade of second-hand cars bound toWest Africa and the Middle East continued on thespurt of the second half of 2003, absorbing almostall ships equipped with at least one car-deck, butalso the smaller car-carriers. During the autumn,Iraq decided to limit car imports to 4 year old unitswith effect from January 2005. If this regulation isto be applied for a long period of time, shipsemployed on this traffic might go through a diffi-cult period and see their rates severely correcteddownwards, since few of these units are able tofind employment in standard short sea trade, asthe majority have deck heights or speeds whichmake them incompatible with the requirements ofliner operators. Consequently, we anticipate a pos-sible two-tiered market with firmer rates for themore modern units employed on mix trailers /containers trade routes and a waker rates for shipsof proven low specifications but to whom theshortage of car-carrying tonnage has given in2004 a second lease of life.

As far as intra-EU seaborne transportation of newcars is concerned, we have seen a reshuffling ofthe game, with Suardiaz, the long-standing privi-leged operator for Gefco, being pushed out oftheir contracts, principally to the benefit of Tras-med and UECC on the Atlantic runs, but also ofGrimaldi Naples and LD Lines in the Mediterra-nean.


Ville de Bordeaux5,200 dwt, built in 2004

by Jinling, owned by Louis Dreyfus / Hoegh,

dedicated to the carriage ofblocks of the A380 airplane

93

The future of short sea trade

For several years, projects for “highways of theseas” have been proliferating in the hopes ofobtaining subsidies from the EU, but as of nownone have really seen the light. We are ratherafraid that these “subsidy hunters” will shortly beseeing the doors to this treasure closing, as the risein freight rates makes these projects even less eco-nomically viable. A very strong rise in oil prices andtherefore bunker prices could proportionally giveback a little competitiveness to the maritimeoption over the road, but the business world byand large is unlikely to get too keen about such ascenario.

It is very likely that the European short sea marketwill see its next boost based on the logistics modelproper to containership trade. In other words,faced with the tremendous growth in the PCTCfleet, the major owners of this sector are seriouslycontemplating a hub and spokes concept, whichwill allow the giant PCTCs (nearly 8,000 cars forthe largest units) to reduce their rotation times,and thereby limiting costly port calls, by being lin-ked to smaller ships which would manage thecargo distribution in combination with other exis-ting trades.

KESS, the short sea trade arm of K-Line has long-term chartered 4 ships of 2,100 cars with collap-sible decks ordered by Ray Shipping in Poland. It islikely that this concept will be repeated in thefuture, possibly with even larger ships. In addition,the outsourcing of production units of the majorcar manufacturers towards Eastern Europe willvery probably transform the Adriatic into a maincrossroads of car trade.

Prospects

We anticipate that hire rates will continue their fir-mer trend for quite a time. This is in fact indispen-sable to enable the few tramp owners to make astep towards ordering new tonnage. However asnewbuilding prices have shot up both in Asia aswell as in Europe, it will be necessary to wait forprices to calm down before we can see this pro-cess getting off the ground. Meanwhile, it is highlyprobable that in the next 2 to 3 years, the rareorders for pure Ro-Ros of even Ro-Paxes will beexclusively limited to owners who will operate theships themselves. On the other hand, a furtherimportant depreciation of the dollar against theeuro is quite likely to be a factor which would setoff speculative orders for newbuildings in shi-pyards outside the euro zone. ■

The Ro-Ro Market in 2004

94

Cap-MarineAssurances & Réassurances S.A.

Shipping and Shipbuilding Markets 2005Shipping and Shipbuilding Markets 2005

Shipping and transport insurance and re-insurance broker

Headquarter 4/12, Bd des Belges - BP n° 10 - 76001 Rouen Cedex - France

Tel : + 33 (0)2 35 98 26 46 - Fax : + 33 (0)2 35 98 32 58 - E.mail : [email protected]

Neuilly office11, bd Jean Mermoz - 92522 Neuilly sur Seine Cedex - France

Tél : + 33 (0)1 41 92 54 00 - Fax : + 33 (0)1 41 92 54 10 - E.mail : [email protected]

Nantes office“Le Beaumanoir” - 15, rue Lamoricière - BP n°78704 - 44187 Nantes Cedex 4 - France

Tél : + 33 (0)2 40 69 31 96 - Fax : + 33 (0)2 40 69 29 55 - E.mail : [email protected]

95The Marine Insurance Markets in 2004

THE

MARINEINSURANCE

MARKETSIN

2004

The reduction in the number of major casual-ties, which characterised 2003, did notrepeat itself in 2004, which saw a significant

increase in the frequency and the average cost ofthe latter. The very healthy standing of the freightmarket and shipping in general led to a conside-rable increase in shipping activity, but also of theaccidents linked to navigation.

A fragile marine insurance market andmore and more concentrated

In this market, particularly favourable to the insu-red parties of the shipping world, the insurersseem forever subject to the erosion of their profitmargins. Apparently the marine insurance marketseems profit averse, since over the last ten years it

2004, a mixed year for marine insurers2005, a year full of dangers!

has caused a number of large bankruptcies. Thenumber of “run off” companies has become soimportant that we can now speak of a real “runoff market”.

The proportion of companies which have stoppedunderwriting between 1997 and 2003 are:

◆ 42 % of the marine syndicates of Lloyds,

◆ 38 % of companies on the London market,

◆ 60 % of companies on the European market,

◆ 67 % of insurers of the American marine market.

However the capacity of the international markethas never been as high as in 2004. Lloyds of Lon-don registered for 2004 a record underwritingcapacity. Nonetheless it should be emphasised that,in an attempt to help stabilise a maritime and ship-


ping insurance market, still looking for a goodbalance and in order to “correct” it, Lloyds is pro-posing to lower the capacity in 2005 by some 9 %.

Hull and Machinery: a steadying of the increases

In our 2003 report, we mentioned a slowing downat the end of the year of the rate increases thathave been prevalent since 2000. In fact, 2004would probably have only allowed insurers tomaintain an upward pressure on their clients whowere showing negative statistical results.

In 2004 competition increased considerably,encouraged by the new capacities notably comingfrom Russia, South Korea, and Poland. A strongflow of new investors, particularly in London andin Scandinavia, combined with these new capaci-ties, helped stabilise the level of premiums.

The insured and their brokers can be pleased withthe stabilisation of premiums for performingowners, but it would be dangerous for the quality ofthe Hull and Machinery market to see it drop againto lower levels, which would discourage some insu-rers who are still trying to balance their results!

For a lot of insurers who have voiced their opinionin the specialised press, as well as at the IUMI in2004, the increases of the last 4 years are stillconsidered inadequate and some see the end ofthe upward cycle as being a critical turning point.The rate increases have been very patchy accor-ding to the companies and despite some impres-sive percentages, the increase in premiums hasbeen restrained and leaves no room for comfort.

The arrival of new capacities could be explained bythe desire of certain re-insurers to push the “regio-nal” insurers and/or the less specialised towardsunderwriting international hulls, in order to avoida too strong concentration of capital in the handsof the “leading underwriters”, who are becomingstronger and less numerous. Specialised insurerbrokers are thus having to question as to whichline of action to follow :

◆ to encourage additional supply by proposingthe new capacities to the detriment or in additionto traditional insurers (the current leading under-writers could then get discouraged and abandonthis sector which is sometimes considered toocyclical)

◆ to concentrate their placings with the traditio-nal markets or insurers taking the risk of losingtheir client who naturally is looking for the mostcompetitive option!

With a world Hull and Machinery premium volumein 2003 of around $3 billion, the main markets arethe following ($1 000):

Ship’s hulls under construction

In general, newbuilding and repair yards havebeen heavily penalised as a result of fires, produ-cing severe losses in this sector: the comparison ofclaims/premiums has resulted in nearly 250 % overthe last three years. The ‘Pride of America’casualty, which occurred on January 13 th 2004while under construction in the Bremenhaven shi-pyard, has been the most important: the claim isestimated at $ 228 million.

In conjunction with the premium increases, pre-vention measures are now imposed systematicallyby insurers.

Cargo market insurance

Competition has remained fierce on the maindomestic markets for the coverage of goods car-ried for the own account of producers. This is alsothe case for large industrial projects. Nonethelessthis sector produces positive results and the mar-ket has kept its tariffs stable.

In this type of risk there has been a diversificationin the insurance offered, with on one hand thedisappearance of traditional players due to effectsof concentration, and on the other hand the arri-val of new solid participants proposing top levelfinancial capacities and technical skills.

With the most speculative risks notably that invol-ving trading, the cargo insurance market is beco-ming more internationalised and some Dutchcompanies are taking a preponderant part of it.

Protection and Indemnity Clubs

Taken altogether, results have been in the red overthe last 6 years and, as a consequence, renewalson February 20th 2004 have been on the increase.As a whole, Clubs have achieved an average riseof about 10 %.

Only five Clubs (American Club, Britannia, theJapan Club, the Shipowners’ Club, and Skuld)have been able to produce a profit in their techni-cal results (before investments) and none of themwere able to achieve anything substantial.

Japan 377,080

UK (Lloyds) 348,140

Norway 337,400

France 333,192

USA 298,987

Italy 258,681

UK (IUA) 194,700

Spain 166,743

97The Marine Insurance Markets in 2004

The pressure to increase premiums continues in2005 but to a lesser extent, especially as a numberof insured parties who have posted profits for theirClub no longer accept the systematic increases(General Increase), even if this is in line with thebasics principles of the P&I Clubs which is to be a“mutual”.

War risks – Political risks

The shipping industry is having to face a growingthreat: piracy. This is developing by 20 % per yearand prospers in under-surveyed territorial waters,where both dangerous as well as high added valuegoods are transported.

However, this threat comes not only from piratesattacking merchant ships, but also from the out-come of a real maritime terrorism whose aims andintentions are far more sinister and whose poten-tial to disrupt and disorganise the flow of interna-tional economic trade seems to have been largelyunderestimated.

Market organisations

The main market places involved in internationalrisks are organising themselves to increase theirproductivity.

In this respect Lloyds has launched the BPR (Busi-ness Process Reform), in order to optimise its out-put (delay and quality of issued papers), claimsprocedures and financial systems.

Through the implementation of “Optiflux”, theFrench marine insurance market is more modestlyseeking to optimise its financial circuits, with theset up of new electronic procedures for co-insu-rance management.

Legal developments

The 1996 protocol has come into force in May2004. Based on this protocol, levels of responsibi-lity have substantially increased, by about 150 %,although for small ships up to 500 tons the figureis close to 500 %. For the moment these limitsonly apply to the ten states that ratified the proto-col in 1996, namely Australia, Denmark, Finland,Germany, Malta, Norway, Russia, Sierra Leone,Tonga and Great Britain.

In June 2004 during the closing session of theVancouver Conference, the Maritime InternationalCommittee (CMI) adopted several amendments tothe York and Antwerp Rules concerning GeneralAverage: salvage costs, crew wages and mainte-nance, for the period when the ship is in a port ofrefuge, will no longer be included under GeneralAverage balance.

With increased liabilities (in value, quantity and inlegislation) will 2005 mark a new turning point inthe maritime insurance market cycle? This is agreat concern and there are already some signs ofreducing premiums while specialised marine insu-rers and P&I Clubs continue to produce weak tech-nical results. ■

98

MARITIME LOGISTICS & TRADE CONSULTING

19, rue d’Anjou - 75008 PARIS - France

Tél. : +33(0)1 43 12 96 70 - Fax : +33 (0)1 47 42 09 72 - Email : [email protected]


TYPES OF MISSIONSStrategic and commercial studies

Financial, commercial and operational audit

Privatisation

Opportunity and feasibility studies

Transport economics

Project development assistance

Marketing studies

Partnerships

Benchmarking

Organisation and staff training

Databases, modelling, forecasting

KNOW HOWPort organisation

Inland logistics

Shipping lines

Container and general cargo

Stevedoring, storage, transit

Transhipment hubs

Short Sea Shipping

Waterways and sea river shipping

Cruise

PORT&SHIPPINGC O N S U L T A N T S

9999

Chantiers de l’Atlantique

I 32 Mistral (front part) 2004 DCNDeployment and command vessel 199 m x 32 m on 6.20 m

Diesel electric - 15,000 kW 19 K.

L 32 MSC Opera 2004 MSCCruise vessel 59,058 gt – 795 cabins 251 m x 28.80 m on 6.60 m

1,526 lower berths 2 x 10,000 kW 21.7 K.

J 32 Tonnerre 2005 DCNDeployment and command vessel 199 m x 32 m on 6.20 m

Diesel electric - 15,000 kW 19 K.

M 32 Gaz de France energY 2005 Gaz de FranceLNG tanker 74,130 cbm 219.50 m x 34.95 m on 9.93 m

Diesel gas electric - 18,560 kW 18.2 K.

N 32 Provalis 2005 Gaz de FranceLNG tanker 153,500 cbm 290 m x 43.35 m on 11.75 m


O 32 Sea France Berlioz 2005 Sea FranceFerry 33,796 gt - 1,900 passengers 186 m x 28 m on 6.50 m

700 cars - 2,000 lm 39,000 kW 25 K.

830 Pourquoi Pas ? 2005 IfremerResearch vessel Accomodations : 40 pers. 107 m x 20 m on 6.80 m

14.5 K.

P 32 Gaselys 2006 Gaz de FranceLNG tanker 153,500 cbm 290 m x 43.35 m on 11.75 m


Q 32 MSC Musica 2006 MSCR 32 MSC Orchestra 2007 -

Cruise vessels 90,000 gt - 2,550 lower berths 294 m x 32.20 m on 7.85 mDiesel electric - 2 x 17,000 kW 23 K.

Alstom Leroux Naval

829 - 2005 -Yacht 71.71 m x 13.5 m on 3.75 m

Diesel electric - 2 x 1,500 kW 16 K.

- - 2006 Conseil Général du MorbihanFerry 450 passengers 46 m x 12 m on 2.75 m

32 cars 2 x 1,000 kW 12.5 K.

French Shipyards Deliveries and Orderbook

FRENCH SHIPYARDS DELIVERIES AND ORDERBOOK

IN 2004

Ships on order as at 1/1/2005


Ships delivered in 2004

100

Constructions Mécaniques de Normandie

PM 41 Thémis 2004 Affaires MaritimesPatrol boat 52.50 m x 9 m on 2.27 m

400 CL 52 Diesel 2 x MTU 16V 4000M 70 21 K.

- - 2005 United Arab EmiratesCorvette 68 m x 11 m

BR 70 35 K.

- - 2006 -Yacht 58 m x 11.20 m

15.5 K.

- - 2005 -Yacht 42.60 m x 8.60 m

13.8 K.

Chantiers Piriou

C 256 Luzolo 2004 Bourbon MaritimeAHTS UT 721 1,500 dwt 69.70 m x 17.20 m on 6.1 m

DP 2 FIFI 1 4 x 3,600 bhp - Bergen BMH8 16 K.

C 257 Saint Antoine Marie II 2004 Thon du Roussillon - PerezTuna boat 43.41 m x 9.50 m

2 x 400 kW - Wartsila

C 258 Capall Oir 2004 O' MalleyLongliner 36 m x 9.80 m

650 kW - ABC

C 261 Le Croisic 2004 Les AbeillesTug 30.30 m x 10.40 m on 4.35 m

2 x 1,800 kW - ABC 12.5 K.

C 262 Mariette Le Roch II 2004 Armement PetrelTrawler 45.80 m x 11.80 m

1,850 kW

C 269 Arundel 2004 Acav - Les Sables d'OlonnesTrawler 18 m

C 254 Bourbon Express 2005 Bourbon MaritimeC 255 Bourbon Oceane 2005 -

FSIV 263 dwt 53.55 m x 10.80 m on 4.4 m50 passengers 5,296 kW 4 KTA 50 20 K.

C 263 Jean Claude Coulon II 2005 Armement PetrelC 264 Jack Abry II 2005 -

Trawlers 45.80 m x 11.80 m1,850 kW

C 267 Roger Christian IV 2005 Delponte SèteTuna boat 36 m

C 268 Eric Marin 2005 Armement Cisberlande / Marin SèteTuna boat 38 m

C 270 Glenan 2005 CobrecafTuna boat 83.20 m x 13.80 m on 6.7 m

4,000 kW 17 K.

C 271 Renaissance II 2005 Acav - Les Sables d'OlonnesTrawler 18 m


Ships delivered in 2005

Ship delivered in 2004



101

Meyer Werft (Germany)650 Pont-Aven 2004 Brittany Ferries

Passenger ferry 41,748 gt – 652 cabins 184.30 m x 30.90 m on 6.60 m2,400 pass. - 650 cars 43,200 kW - MAK 27 K.

Peene Werft (Germany)514 Marfret Douce France 2004 Marfret

Container vessel 17,250 dwt 155 m x 24.50 m1,200 teu 11,060 kW - B&W 19 K.

De Hoop International Lobith (Netherlands)402 Brion403 Breuil 2004 Socatra

Coastal roro vessels 1,300 dwt 75 m x 13.80 m on 2.60 m2 x 735 kW - Caterpillar 11 K.

- Vissolela -Multi functional support vessel 3,320 dwt 77.30 m x 18 m on 6.10 m

4 x 1,800 kW 12 K.

Aker Brattvaag (Norway)104 Antenor 2004 Bourbon Maritime105 Asterie 2004 -

PSV UT 755 L 3,119 dwt 72 m x 16 m on 5.91 m2 x 2,500 kW - Rolls Royce

Yardimci (Turkey)32 FS Clara 2004 Fouquet Sacop

Product and chemical tanker IMO II 5,961 dwt 105.50 m x 16.80 m on 8.22 m2,270 kW - B&W 14 K.

Jinling (China)JLZ020503 Bro Etienne 2004 Broström S.A.S

Product and chemical tanker IMO II 37,179 dwt 185 m x 31m on 10.50 m8,580 kW - B&W 15.2 K.

JLZ020401 Ville de Bordeaux 2004 Louis Dreyfus / Hoegh Roro carrier 5,200 dwt 154.26 m x 24 m on 6.50 m

2 x 8,400 kW - MAK 21 K.

Nacks (China)026 Messidor 2004 Setaf Saget (Bourbon Maritime)

Bulk carrier 55,300 dwt 189.90 m x 32.26 m on 11.10 m11,149 kW - B&W 15.9 K.

Hyundai Mipo (South Korea)0378 Kerlaz 2004 Socatra0379 Kermaria 2004 -

Product and chemical tankers IMO II 36,770 dwt 182.55 m x 27.34 m on 11.20 m12,900 kW - B&W 15.2 K.

1532 CMA CGM Hugo 2004 CMA CGM (Conti)1534 Pacific Link 2004 -1535 CMA CGM Vivaldi 2004 -

Container carriers 100,400 dwt - 8,189 teu 335 m x 42.80 m on 14.50 m70,306 kW - B&W 25.5 K.

French Shipyards Deliveries and Orderbook

FRENCH ORDERS TO FOREIGN SHIPYARDS

IN 2004Ships delivered in 2004

102

Niestern Sander (Netherlands)816 Dupuy de Lome 2004 CNN / Thales

Research vessel Accomodations 110 pers. 101.75 m x 15.88 m2 x 2,970 kW 16 K.

Samsung (South Korea)1457 CMA CGM Bellini 2004 CMA CGM1458 CMA CGM Chopin 2004 -1459 CMA CGM Mozart 2004 -1460 CMA CGM Puccini 2004 -1461 CMA CGM Rossini 2004 -1462 CMA CGM Strauss 2004 -1463 CMA CGM Verdi 2004 -1464 CMA CGM Wagner 2004 -

Container carriers 65,792 dwt - 5,770 teu 277.30 m x 40.20 m on 14.50 m57,891 kW - B&W 26 K.

STX (South Korea)1131 Nizon 2004 Socatra

Product and chemical tanker IMO II 45,779 dwt 183 m x 32.20 m on 12.20 m12,900 kW - B&W 14.5 K.

Austal Ships (Australia)- Aremiti 5 2004 Aremiti Pacific Cruises

Catamaran 700 passengers 56.6 m x 14.5 m30 cars 4 x MTU - 2,320 kW at 2,000 rpm 35 K.

Fjellstrand (Norway)1673 - 2005 Compagnie Yeu Continent- - 2006 -

Catamarans 442 passengers 45.5 m x 11.6 m32 K.

Myklebust Verft AS (Norway)39 Abeille Bourbon 2005 Bourbon Maritime S.A.S40 Abeille Liberté 2005 -

Multi purpose salvage tugs UT 515 80 m x 16.50 m on 5 m4 x 4,000 kW - MAK 8M32C 19.5 K.

E. N. Viana do Castelo (Portugal)227 FS Philippine 2005 Fouquet Sacop

Product and chemical tanker IMO II 19,000 dwt 140 m x 23 m on 8.30 m6,300 kW - MAK 14 K.

H.J. Barreras (Spain)1629 Guyenne 2005 Petromarine

Product and chemical tanker IMO II 11,000 dwt 119.90 m x 18.80 m on 8.10 m4,320 kW 13.5 K.

RMK Marine (Turkey)65 Chantaco 2006 Petromarine66 Chiberta 2006 -

Product and chemical tankers IMO II 19,000 dwt 143 m x 23 m on 8.90 mIce class 1A 2 x 4,000 kW 14 K.

Torgem (Turkey)83 Minorque 2005 Petromarine

Product tanker 1,500 dwt 59.20 m x 10.80 m on 4.50 m1,000 kW - Caterpillar 9 K.

84 Majorque 2005 PetromarineProduct tanker 3,300 dwt 79.90 m x 14.25 m on 5 m

2,560 bhp 12 K.



103

Yardimci (Turkey)35 - 2005 Fouquet Sacop

Product tanker 5,961 dwt 105.50 m x 16.80 m

40 FS Charlotte 2005 Fouquet SacopSulphur and bitumen carrier 11,000 dwt 118.37 m

Jinling (China)JLZ020504 Bro Edward 2005 Broström S.A.SJLZ020506 Bro Elliot 2005 -

Product and chemical tankers IMO II 37,300 dwt 185 m x 31m on 10.50 m8,580 kW - B&W 6S 50ML 15.2 K.

Nacks (China)027 Dalior 2005 Setaf Saget (Bourbon Maritime)

Fructidor 2005 -Bulk carriers 53,500 dwt 189.90 m x 32.26 m on 12.49 m

11,149 kW - B&W 15.9 K.

Daewoo Shipbuilding & Marine Engineering (South Korea)1159 - 2005 Louis Dreyfus Armateurs1160 - 2005 -

Double hull bulk carriers 173,000 dwt 289 m x 45 m on 17.80 m22,920 bhp - B&W

Hyundai Mipo (South Korea)0302 Faouet 2005 Socatra

Product tanker 37,340 dwt 183 m x 27.34 m on 11.20 mIce class 1A 12,900 bhp - B&W

0420 CMA CGM Lilac 2005 CMA CGM0421 CMA CGM Violet 2006 -0422 CMA CGM Camellia 2006 -0423 CMA CGM Dahlia 2006 -

Container carriers 38,200 dwt - 2,824 teu 222 m x 30 m34,300 bhp

Hyundai Samho (South Korea)S-253 CMA CGM Tosca 2006 CMA CGMS-254 CMA CGM Traviata 2006 -


S-255 CMA CGM Medea 2006 CMA CGMS-256 CMA CGM Norma 2006 -


S-279 CMA CGM Orca 2007 CMA CGMS-280 CMA CGM Dolphin 2007 -

Container carriers 65,890 dwt - 5,100 teu 294.1 m x 32.20 m on 13.50 m77,600 bhp - B&W 25.1 K.

Hyundai Ulsan (South Korea)1646 CMA CGM Fidelio 2005 CMA CGM1647 CMA CGM Nabucco 2006 -


1648 CMA CGM Othello 2006 CMA CGM1649 CMA CGM Rigoletto 2006 -


1710 CMA CGM Blue Whale 2007 CMA CGM1711 CMA CGM White Shark 2007 -1768 - 2007 -1769 - 2007 -1770 - 2007 -1771 - 2008 -

Container carriers 65,890 dwt - 5,060 teu 294.1 m x 32.2 m on 13.50 m77,600 bhp - B&W 25.1 K.

French Orders to Foreign Shipyards

104

Keppel (Singapore)279 Bourbon Aladin 2005 Bourbon Maritime280 Bourbon Apsara 2005 -281 Bourbon Alexandre 2005 -282 Bourbon Artemis 2006 -

AHTS 2,000 dwt 67 m x 15.40 m on 6.10 m8,120 kW - Caterpillar 14 K.

Zhejiang (China)ZJB03114 Bourbon Helios 2005 Bourbon MaritimeZJB03115 Bourbon Hermes 2005 -ZJB03116 Bourbon Hera 2005 -ZJB03117 Bourbon Hector 2005 -

PSV - GPA 670 3,300 dwt 73.20 m x 16.50 m on 5.50 m 4,002 kW - Cummings 13 K.

ZJB03118 Bourbon Hestia 2006 Bourbon MaritimeZJB03119 Bourbon Harmonie 2006 -ZJB03120 Bourbon Hemera 2006 -ZJB03121 Bourbon Helene 2006 -

PSV - GPA 670 3,230 dwt 73.20 m x 16.50 m on 5.50 m 5,475 kW - Cummings 13 K.

Austal Ships (Australia)- - 2005 L'Express des Iles- - 2006 -

Ferries 45 m4 x MTU 16 V 396 TE74L 38 K.


Shipbrokers since 1856

11, boulevard Jean Mermoz - 92200 Neuilly-sur-SeinePhone : 33 (0)1 41 92 12 34 - E-mail : [email protected]

Web site : www.brs-paris.com

Fax E-mail

Newbuilding 33 (0) 1 41 92 13 25 [email protected]

Sale & Purchase 33 (0) 1 41 92 15 60 [email protected]

Dry Bulk 33 (0) 1 41 92 14 44 [email protected]

Liner 33 (0) 1 41 92 15 55 [email protected]

Tanker 33 (0) 1 41 92 12 95 [email protected]

Chemical 33 (0) 1 41 92 14 90 [email protected]

Gas 33 (0) 1 41 92 13 44 [email protected]

Offshore 33 (0) 1 41 92 13 25 [email protected]

Research 33 (0) 1 41 92 12 44 [email protected]

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