Market insight By Theodore Ntalakos SnP/ Newbuildings Broker ECO designs - revisited The ECO vessels are already here but the oil and bunker prices are plum- meng to their cheapest level since 2010. Is this development coming as a verificaon to the shipowners that have been dismissive of the benefits of the new designs? Moreover, are we experiencing the two er market that was discussed a few years ago? On the sale & purchase front, the answer is clearly a yes... and a no... Alt- hough there is nothing new about the preference towards Japanese vessels from both charterers and buyers as they were always a different er from Chinese, there is a substanal price gap of about twenty percent between the modern Chinese vessels and the ones built based on new designs with electronic engines, opmized hulls, energy efficiency devices etc. Further- more, good quality new Chinese ships maintain their values not far from their Japanese piers. We recently compared the consumpon of two kam- sarmax vessels, one was built in Japan in 2007 and one in China in 2013 equipped with electronic engine and fuel efficient propeller (no opmized hull form). The fuel efficiency of the two vessels was very similar. So the new ECO vessels and all the new technologies used on them are already taking their market share, the charterers' preference and one can safely say that are here to stay. With the oil price plummeng however, it's also easy to make the opposite argument. I disnctly remember a discussion I had with a well-known Taiwanese shipowner during a forum; I was (I sll am) defending the new ECO designs and was repeang to him “The oil price will only go up!” to which he replied with his experience from the crises of the previous decades saying “I fully agree with you (and all the energy reports on the planet for that maer) . . . but what if it doesn’t?” Cheaper bunkers clearly favor the owners that bought discounted Chinese ships that few people would consider, mainly because of their higher fuel consumpon. The desired rate of return on an investment can come either from the higher earnings of a highly efficient ECO vessel, but also from the lower inial investment on a less fuel efficient vessel. Fact is that the fuel efficiency benefit disappears as bunker prices drop. It also seems that this trend will probably connue at least in the short term as according to data from the Internaonal Energy Agency, the forecast of global oil demand for 2014 has been revised at lower levels since last month on reduced expecta- ons of economic growth and the weak recent trend. Annual demand growth is now projected to drop in Q1 & Q2 2015 and rise again in Q3 of 2015, as the macroeconomic backdrop improves. On the other hand, while new sources of oil supply have driven the oil price to its current lows, not seen for almost half a decade, demand for oil has actually been on the rise and as more oil is being produced and consumed now than in 2011 it will be interesng to see how the oil price - and the bun- ker prices - will develop in the future. The truth is that irrespecve of bunker prices, a more efficient vessel will always be more compeve and there is no doubt that there are other consideraons when evaluang a new ship- ping investment, such as EEDI and emissions' control imposed by the regula- tory bodies that only new ships can address. And although complying with these regulaons may not have a posive effect in the pockets of shipown- ers like the reduced fuel consumpon does, for a forward looking owner the new designs and the new technologies should be the main part of their strategy. Emission control is also here to stay and the industry must adapt to the new requirements. Chartering (Wet: Firm+ / Dry: Stable+ ) With the excepon of Panamaxes, the rest of the Dry Bulk market was sll struggling for the bigger part of last week, while towards Friday things improved as Capesize rates finally started moving up. The BDI closed today (21/10/2014) at 1,090 points, up by 117 points compared to Monday’s levels (20/10/2014) and an increase of 142 points com- pared to previous Tuesday’s closing (14/10/2014). In the crude carriers market rates benefied further from soſtening bunker prices, while senment is very posive for the upcoming winter season. The BDTI Monday (20/10/2014) was at 702 points, an increase of 19 points and the BCTI at 600, an increase of 26 points compared to previous Mon- day’s (13/10/2014)levels. Sale & Purchase (Wet: Firm+ / Dry: Soſt - ) Acvity on the SnP side has slowed down further this past week, while the uncertainty regarding dry bulk freight rates has taken its toll on secondhand volumes. Buyers seem to have been scared off for now, creang without a doubt opportunies for good bargains for those who are willing to bet on a posive market reversal soon. On the tanker side, we had the sale of the “OTTOMAN NOBILITY” (152,622dwt-blt 05, S. Korea) which was picked up for a price of US$ 45.0m. On the dry bulker side, we had the sale of the “REGINA OLDENDORFF” (37,504dwt-blt 06, Japan), which went for a price of $ 16.7m. Newbuilding (Wet: Stable+ / Dry: Stable- ) Things on the newbuilding front were quieter compared to the week prior, with tanker orders slowing down, while those for dry bulkers re- mained of thin volume. The majority of orders reported most recently were of non convenonal vessels, like offshore, or gas carriers, which sll gather a good share of the investment interest out there. Prices have stalled across the board for now, while everyone’s aenon is mainly on the dry bulker side, where further discounts are currently expected from yards that will have to find new ways to sell the new- building story. The performance of the freight market will certainly be crical of how hard selling that story will be. It seems that even if freights improve soon, owners will not rush back to the yards like they did in 2013 but will rather wait to see solid market performance for a longer period before they do. In terms of recently reported deals, Itochu Corp has placed an order for 2 MR product tankers (35,000dwt) at Kitanihon, in Japan, with delivery set for 2017. Demolion (Wet: Stable- / Dry: Stable- ) As last week progressed, breakers in the Indian sub-Connent were drawn deeper into doubt regarding the fundamentals of the market. From one hand cheap Chinese scrap steel has been pushing prices down and on the other most buyers found themselves commied to excessive levels, following the aggressive demo buying of the past month. Alt- hough prices have overall remained stable, there is a sense that we might soon see discounts bigger than $15/ldt. The further weakening of the Indian Rupee has also added to this environment of insecurity, while at the same me acvity has dropped considerably, with most of the sales that are now reported, involving deals agreed or concluded earlier on. The Diwali holidays are also expected to weigh down on acvity as well, while at the same me breakers in Bangladesh and Pakistan ap- pear to be also losing their mood for now, as senment is starng to soſten across the demo market. Needless to add that prices in China remained soſt, while further declines are also expected before the end of the year. Average prices this week for wet tonnage were at around 300-500$/ldt and dry units received about 280-475$/ldt. Weekly Market Report Issue: Week 42 | Tuesday 21 st October 2014
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Market insight
By Theodore Ntalakos
SnP/ Newbuildings Broker
ECO designs - revisited
The ECO vessels are already here but the oil and bunker prices are plum-meting to their cheapest level since 2010. Is this development coming as a verification to the shipowners that have been dismissive of the benefits of the new designs? Moreover, are we experiencing the two tier market that was discussed a few years ago?
On the sale & purchase front, the answer is clearly a yes... and a no... Alt-hough there is nothing new about the preference towards Japanese vessels from both charterers and buyers as they were always a different tier from Chinese, there is a substantial price gap of about twenty percent between the modern Chinese vessels and the ones built based on new designs with electronic engines, optimized hulls, energy efficiency devices etc. Further-more, good quality new Chinese ships maintain their values not far from their Japanese piers. We recently compared the consumption of two kam-sarmax vessels, one was built in Japan in 2007 and one in China in 2013 equipped with electronic engine and fuel efficient propeller (no optimized hull form). The fuel efficiency of the two vessels was very similar. So the new ECO vessels and all the new technologies used on them are already taking their market share, the charterers' preference and one can safely say that are here to stay. With the oil price plummeting however, it's also easy to make the opposite argument. I distinctly remember a discussion I had with a well-known Taiwanese shipowner during a forum; I was (I still am) defending the new ECO designs and was repeating to him “The oil price will only go up!” to which he replied with his experience from the crises of the previous decades saying “I fully agree with you (and all the energy reports on the planet for that matter) . . . but what if it doesn’t?”
Cheaper bunkers clearly favor the owners that bought discounted Chinese ships that few people would consider, mainly because of their higher fuel consumption. The desired rate of return on an investment can come either from the higher earnings of a highly efficient ECO vessel, but also from the lower initial investment on a less fuel efficient vessel. Fact is that the fuel efficiency benefit disappears as bunker prices drop. It also seems that this trend will probably continue at least in the short term as according to data from the International Energy Agency, the forecast of global oil demand for 2014 has been revised at lower levels since last month on reduced expecta-tions of economic growth and the weak recent trend. Annual demand growth is now projected to drop in Q1 & Q2 2015 and rise again in Q3 of 2015, as the macroeconomic backdrop improves.
On the other hand, while new sources of oil supply have driven the oil price to its current lows, not seen for almost half a decade, demand for oil has actually been on the rise and as more oil is being produced and consumed now than in 2011 it will be interesting to see how the oil price - and the bun-ker prices - will develop in the future. The truth is that irrespective of bunker prices, a more efficient vessel will always be more competitive and there is no doubt that there are other considerations when evaluating a new ship-ping investment, such as EEDI and emissions' control imposed by the regula-tory bodies that only new ships can address. And although complying with these regulations may not have a positive effect in the pockets of shipown-ers like the reduced fuel consumption does, for a forward looking owner the new designs and the new technologies should be the main part of their strategy. Emission control is also here to stay and the industry must adapt to the new requirements.
Chartering (Wet: Firm+ / Dry: Stable+ )
With the exception of Panamaxes, the rest of the Dry Bulk market was still struggling for the bigger part of last week, while towards Friday things improved as Capesize rates finally started moving up. The BDI closed today (21/10/2014) at 1,090 points, up by 117 points compared to Monday’s levels (20/10/2014) and an increase of 142 points com-pared to previous Tuesday’s closing (14/10/2014). In the crude carriers market rates benefitted further from softening bunker prices, while sentiment is very positive for the upcoming winter season. The BDTI Monday (20/10/2014) was at 702 points, an increase of 19 points and the BCTI at 600, an increase of 26 points compared to previous Mon-day’s (13/10/2014)levels.
Sale & Purchase (Wet: Firm+ / Dry: Soft - )
Activity on the SnP side has slowed down further this past week, while the uncertainty regarding dry bulk freight rates has taken its toll on secondhand volumes. Buyers seem to have been scared off for now, creating without a doubt opportunities for good bargains for those who are willing to bet on a positive market reversal soon. On the tanker side, we had the sale of the “OTTOMAN NOBILITY” (152,622dwt-blt 05, S. Korea) which was picked up for a price of US$ 45.0m. On the dry bulker side, we had the sale of the “REGINA OLDENDORFF” (37,504dwt-blt 06, Japan), which went for a price of $ 16.7m.
Newbuilding (Wet: Stable+ / Dry: Stable- )
Things on the newbuilding front were quieter compared to the week prior, with tanker orders slowing down, while those for dry bulkers re-mained of thin volume. The majority of orders reported most recently were of non conventional vessels, like offshore, or gas carriers, which still gather a good share of the investment interest out there. Prices have stalled across the board for now, while everyone’s attention is mainly on the dry bulker side, where further discounts are currently expected from yards that will have to find new ways to sell the new-building story. The performance of the freight market will certainly be critical of how hard selling that story will be. It seems that even if freights improve soon, owners will not rush back to the yards like they did in 2013 but will rather wait to see solid market performance for a longer period before they do. In terms of recently reported deals, Itochu Corp has placed an order for 2 MR product tankers (35,000dwt) at Kitanihon, in Japan, with delivery set for 2017.
Demolition (Wet: Stable- / Dry: Stable- )
As last week progressed, breakers in the Indian sub-Continent were drawn deeper into doubt regarding the fundamentals of the market. From one hand cheap Chinese scrap steel has been pushing prices down and on the other most buyers found themselves committed to excessive levels, following the aggressive demo buying of the past month. Alt-hough prices have overall remained stable, there is a sense that we might soon see discounts bigger than $15/ldt. The further weakening of the Indian Rupee has also added to this environment of insecurity, while at the same time activity has dropped considerably, with most of the sales that are now reported, involving deals agreed or concluded earlier on. The Diwali holidays are also expected to weigh down on activity as well, while at the same time breakers in Bangladesh and Pakistan ap-pear to be also losing their mood for now, as sentiment is starting to soften across the demo market. Needless to add that prices in China remained soft, while further declines are also expected before the end of the year. Average prices this week for wet tonnage were at around 300-500$/ldt and dry units received about 280-475$/ldt.
The crude carriers market seems to be currently enjoying a pre-winter mini rally. With activity overall remaining stable and bunker prices taking a dive, freight rates firmed further this past week. The continuously softening price of oil has sided with owners, boosting TCE rates and being a solid sign of increasing global supply of crude. The next OPEC meeting in about a month’s time will provide a better direction for the price of oil, which is expected to remain under pressure in the short term. VL rates closed on the green for yet another week, despite the fact that activity ex-MEG was slow-er mid-week onwards, while the rate for the WAF/USG voyage is currently estimated at above $40,000/day.
The Suezmax market moved sideways overall, with the exception of the rate for the WAF/USAC voyage that softened on the back of lower volumes of fresh business coming through. Overall stable European demand is still supporting rates for cross-MED and Black Sea/Med voyages, while the seg-ment will most probably enjoy a new round of firming rates as charterers start to move more aggressively into the November program.
Rates for Aframaxes noted the biggest gains across the board, with cross-Med business firming further, while at the same time the Caribs Afra surged on the back of strong demand, with fixtures more than doubling compared to the week prior.
Sale & Purchase
In the Suezmax sector, we had the sale of the “OTTOMAN NOBILI-TY” (152,622dwt-blt 05, S. Korea) which was picked up for a price of US$ 45.0m.
In the Product Chemical tankers sector we had the sale of the “FAIRCHEM COLT” (19,953dwt-blt 05, Japan), which was sold to U.S. based Principal Maritime for a price of US$ 21.0m.
Things on the newbuilding front were quieter compared to the week prior, with tanker orders slowing down, while those for dry bulkers remained of thin volume. The majority of orders reported most recently were of non conventional vessels, like offshore, or gas carriers, which still gather a good share of the investment interest out there. Prices have stalled across the board for now, while everyone’s attention is mainly on the dry bulker side, where further discounts are currently expected from yards that will have to find new ways to sell the newbuilding story. The performance of the freight market will certainly be critical of how hard selling that story will be. It seems that even if freights improve soon, owners will not rush back to the yards like they did in 2013 but will rather wait to see solid market performance for a longer period before they do.
In terms of recently rumored deals, Itochu Corp has placed an order for 2 MR product tankers (35,000dwt) at Kitanihon, in Japan, with delivery set for 2017.
Newbuilding Market
20
60
100
140
180
mil
lion
$
Tankers Newbuilding Prices (m$)
VLCC Suezmax Aframax LR1 MR
Week
42
Week
41±% 2014 2013 2012
Capesize 180k 55.0 55.0 0.0% 56.1 49 47
Kamsarmax 82k 30.5 30.5 0.0% 30.4 27 28
Panamax 77k 29.0 29.0 0.0% 29.2 26 27
Ultramax 63k 27.5 27.5 0.0% 27 25 25
Handysize 38k 23.0 23.0 0.0% 23 21 22
VLCC 300k 98.0 98.0 0.0% 98.8 91 96
Suezmax 160k 66.0 66.0 0.0% 65 56 58
Aframax 115k 54.0 54.0 0.0% 54 48 50
LR1 75k 46.5 46.5 0.0% 45.8 41 42
MR 50k 37.0 37.0 0.0% 36.9 34 34
186.0 186.0 0.0% 185.8 185 186
79.0 79.0 0.0% 78.2 71 71
68.5 68.5 0.0% 66.6 63 62
45.5 45.5 0.0% 44.0 41 44
Vessel
Indicative Newbuilding Prices (million$)
Bu
lke
rsTa
nke
rs
LNG 160k cbm
LGC LPG 80k cbm
MGC LPG 55k cbm
SGC LPG 25k cbm
Gas
10
30
50
70
90
110
mil
lion
$
Bulk Carriers Newbuilding Prices (m$)
Capesize Panamax Supramax Handysize
Units Type Yard Delivery Buyer Price Comments
2 Tanker 35,000 dwt Kitanihon, Japan 2017 Japanese (Itochu Corp.) undisclosed product tankers
As last week progressed, breakers in the Indian sub-Continent were drawn deeper into doubt regarding the fundamentals of the market. From one hand cheap Chinese scrap steel has been pushing prices down and on the other most buyers found themselves committed to excessive levels, following the aggressive demo buying of the past month. Although prices have overall remained stable, there is a sense that we might soon see discounts bigger than $15/ldt. The further weakening of the Indian Rupee has also added to this environment of insecurity, while at the same time activity has dropped considerably, with most of the sales that are now reported, involving deals agreed or concluded earlier on. The Diwali holidays are also expected to weigh down on activity as well, while at the same time breakers in Bangla-desh and Pakistan appear to be also losing their mood for now, as sentiment is starting to soften across the demo market. Needless to add that prices in China remained soft, while further declines are also expected before the end of the year. Average prices this week for wet tonnage were at around 300-500$/ldt and dry units received about 280-475$/ldt.
The highest price amongst recently reported deals, was that paid by Pakistani breakers for the VLCC Tanker ‘NEW PROGRESS’ (297,237dwt-38,572ldt-blt 94), which received a firm price of $ 514/ldt.
Demolition Market
Week
42
Week
41±% 2013 2012 2011
Bangladesh 490 490 0.0% 422 440 523
India 485 485 0.0% 426 445 511
Pakistan 500 500 0.0% 423 444 504
China 300 300 0.0% 365 384 451
Bangladesh 470 470 0.0% 402 414 498
India 455 455 0.0% 405 419 484
Pakistan 475 475 0.0% 401 416 477
China 280 280 0.0% 350 365 432
Dry
Indicative Demolition Prices ($/ldt)
Markets
We
t
250
300
350
400
450
500
550
$/l
dt
Wet Demolition Prices
Bangladesh India Pakistan China
250
300
350
400
450
500
550
$/l
dt
Dry Demolition Prices
Bangladesh India Pakistan China
Name Size Ldt Built Yard Type $/ldt Breakers Comments
NEW PROGRESS 297,237 38,572 1994NKK CORP - TSU,
JapanTANKER $ 514/Ldt Pakistani
ASTON 94,225 16,111 1995FINCANTIERI
ANCONA, ItalyTANKER $ 512/Ldt Pakistani
DISCOVERY 2,859 12,295 1972
RHEINSTAHL
NORDSEEWERK,
Germany
PAX $ 406/Ldt undisclosed as-is Falmouth
PACIFIC SUCCESS 38,412 8,860 1989HYUNDAI HEAVY
INDS - U, S. KoreaBULKER $ 470/Ldt undisclosed as-is Singapore
The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without mak-ing guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no re-producing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
Compiled by Intermodal Research & Valuations Department | [email protected]
Paddy Rodgers has confirmed tanker giant Euronav retains an appetite for a stock listing in the US when global market conditions become more favourable. Euronav delayed the planned New York initial public offering (IPO) on Wednesday amid volatility in the stock markets that has seen shipping shares suffer across the board in recent weeks. “Fundamentally, we want a New York listing,” Rodgers, the owner's chief executive, told TradeWinds today. “We are not saying we are not listing, we are just saying we are not listing right now.”
Rodgers notes that the red arrows on the global ex-changes are in contrast with the “green” seen in the tanker market, if investors logged onto the Tankers International App.“The main thing is that we had a difficult couple of weeks in the equity and bond mar-kets. It was a very difficult couple of weeks (for the capital markets) with more volatility than we have seen in a few years,” he said. “It’s in contrast to what we see on the shipping side for a number of macro-economic reasons.” Rodgers explains it would have been difficult for would-be Euronav investors to get into a buying mindset at a time when everybody in the capital markets is selling. He is unwilling to say when Euronav will take its fleet of more than 50 tank-ers to Wall Street, but adds the official documents already in place will be kept updated so the company can move when the time is right. “It’s an exciting project and one we just have to get all out ducks in a row,” Rodgers said.
As TradeWinds has reported analysts believe the delay to Euronav’s listing is “no drama” given the turbulence in the stock markets of late” (Trade Winds)