WEEKLY SHIPPING MARKET REPORT WEEK 41 8 th October – to 15 th October 2013 Legal Disclamer The information contained herein has been obtained by various sources. Although every effort has been made to ensure that this information is accurate, complete and up to date, Shiptrade Services S.A. does not accept any responsibility whatsoever for any loss or damage occasioned or claimed, upon reliance on the information, opinions and analysis contained in this report. Researched and compiled by: Shiptrade Services SA, Market Research on behalf of the Sale & Purchase, Dry Cargo Chartering and Tanker Chartering Departments. For any questions please contact: [email protected]Shiptrade Services SA Tel +30 210 4181814 [email protected]1st Floor, 110/112 Notara Street Fax +30 210 4181142 [email protected]185 35 Piraeus, Greece www.shiptrade.gr [email protected]
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WEEKLY SHIPPING
MARKET REPORT WEEK 41
8th October – to 15th October 2013
Legal Disclamer
The information contained herein has been obtained by various sources. Although every effort has been made to ensure that this information is accurate, complete and up to date, Shiptrade Services S.A. does not accept any responsibility whatsoever for any loss or damage occasioned or claimed, upon reliance on the information, opinions and analysis contained in this report.
Researched and compiled by: Shiptrade Services SA, Market Research on behalf of the Sale & Purchase, Dry Cargo Chartering and Tanker Chartering Departments. For any questions please contact: [email protected]
Dry Bulk and VLCC Markets Provide a Conundrum for Shipping Analysts
If you told the world’s container shipping companies that they would be able to increase the average rates they charged customers by 140% in just a year they would be understandably happy, just as their clients, faced with a rate 240% of what it stood at twelve months previously, would doubtless be less than enthusiastic. The increase however represents the performance last year of the Baltic Dry Index and, in the world of bulk freight rates, neither carrier nor customer seems particularly enamoured of the current situation. The figures are not some speculative analyst gazing into the future but the actual record of the Index’s performance, on the 10th October 2012 it was trading at 875 and this week at around 2140. Compare this however to the near 12,000 we saw in 2008 before the great descent into the 660’s just weeks later and you have some idea as to just how long rates have been in the doldrums and the potential uncertainty in that particular market. The problem for the shipowners, as we have pointed out so often, is the continued overcapacity, simply too much available tonnage for the freight available, and recent surveys from the usual analysts take a very different view of the situation as they speculate on a market which, when viewed over time, can be extremely volatile. Bloomberg recently compiled two articles showing differing views when one compared the dry bulk market to the carriage of crude oil. The data for these pieces came from an assortment of the most respected sources, some of whom indicate that the amount of oil tankers which have been scrapped has materially affected the rates payable, resulting in a four year high for the shipping companies. Unfortunately even scrapping at the intended rate is likely to leave rates below the break-even point, and those same analysts believe that will remain out of reach for the VLCC’s for at least another year, although the predictions for refined products are a little brighter. Scrapping ships can be often only a short term cashflow solution and no owner wants to see one of their fleet consigned to the heap just as rates begin to rise, but, after such a long depression, reality means many more are biting the bullet. The big money now is heading toward gas transport and LNG carriers are becoming the vehicle of choice for the bigger fleets which assemble a variety of types, from car carriers to ferries with the largest percentage of tonnage split between container ships and bulk carriers of both types and with some extending their specialist energy research and recovery vessels. The experts which Bloomberg consulted have a different view of the dry bulk market, going as far as to say that the scrappage of this type of vessel is drawing to a halt, prompted by rising iron ore prices. The recent Chinese slow-down in demand is viewed as a blip as the country’s production figures pick up and the thirst for steel recovers. Never forget however those five year BDI figures, the desire of the shipping groups not to get left behind and to profit from the ever rising prices created the biggest shipbuilding programme in a generation and when the market peaked, as it always does, profitable bulk carriers turned instantly into expensive liabilities for their owners. Now the problems of the last few years are making their way along the supply chain with an effect on shipyards as orders drop away and options are not taken up. Over the next couple of years the average age of the world’s bulk fleet is likely to increase, offset somewhat by the boost in LNG, but VLCC’s certainly are likely to decline in number with only around 6.5% of existing capacity on order with the yards as of today and an estimated 10-15% overcapacity with 588 ships currently in service. Once again we would point out that, despite all the analysts expertise, these markets are subject to a myriad of influences which, given the amount of investment required to become a serious player in the transport of such commodities, often make them more a gamble than an investment. Just ask Frontline boss John Fredriksen who has seen the industry leading company’s shares drop from 22 kroner last November to just 10 by May of this, with them now bumping along
at 14.8 whilst the ‘experts’ predict a further fall back before any recovery takes effect. (Handy Shipping Guide)
Why the crude tanker industry remains depressed due to low rates
The single most important indicator that affects tanker companies’ performance is shipping rates. One widely followed index that tracks the price of shipping crude oil (unrefined oil) across the ocean for representative routes is the Baltic Dirty Tanker Index. Compiled daily by the Baltic Exchange for rates settled in the spot market on a time charter equivalent basis, it’s widely considered a leading indicator due to its timeliness. It often has a significant impact on the share prices of tanker stocks.Rates are back down again following a short-term riseOn October 1, the Baltic Dirty Tanker Index stood at 586. Overall, the tanker index remains in a downtrend since late 2009, making new lows on every bounce and trough. But it has been trying to find support on the lower range as ship companies scrap vessels. It’s a slow bleed. The index was climbing higher in July, as demand rose in the United States and shipments to China increased. Fewer new ship deliveries and scrapping activity also helped. However, it was nonetheless a short-term bounce and rates fell in August.A shift from the downtrend appears to be loomingA shift in trend is something to look out for. The lower bound of the chart shown above represents the rates the industry is trying to support. As rates come down, companies will scrap ships, go bankrupt, cancel new deliveries, or delay deliveries. So, as time passes, the industry comprises a fleet portfolio that can do business at cheaper rates.The upper bound is the level that companies will try to take advantage of by receiving new ships. A breakout of the downtrend will mean there aren’t enough new ships to keep rates low anymore. If that happens, expect tanker stocks to rise in share prices—similar to what we’ve seen for dry bulk stocks. Could the worst be over? On a year-over-year basis, the index appears to be showing some positive development—rising from negative to positive territory in August. While it fell recently, it has stayed above figures seen before this summer. This reflects a smaller increase in excess supply growth on a year-to-year basis. If year-over-year change can hold up here, then the worst for the crude tankers may be over. This would be long-term positive for crude stocks such as Frontline Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Teekay Tankers Ltd. (TNK), and Ship Finance International (SFL). While the Guggenheim Shipping ETF (SEA) is also affected by the crude tanker industry’s fundamentals, the ETF also invests in product tankers and other shipping companies that are performing better.( Market Realist)
Oil company: huge quantities of oil derivatives available, more oil tankers
dock at Aden and Houdieda
The Yemen Oil Company has reassured people that derivatives are available to meet the demand of the market during the Eid al-Adha holiday, and that no need to line up at fuel stations. In a statement, a copy of which was obtained by Saba, the company said it has provided the market with huge quantities of fuel that surpasses the quantities allocated to the capital at a 200 per cent of the demand level. Furthermore, several oil tankers carrying diesel and petrol has docked at the Buraiqa oil refinery in Aden. Meanwhile, more oil tankers are expected to arrive to the Houdieda port on Monday. Several committees were set up to monitor fuel stations and report any violations, the company said in its statement. (Saba)
Shipping , Commodities & Financial News
2
Only time will show
For yet another week, quite a lot of scepticism is spread around the market as to whether the capesize rates will stabilize at the recently seen high levels. This has created a reasonable uncertainty among buyers as to whether this is the right time to move, having seen the undoubtedly inflated numbers we have seen in asset values. This week’s salesboard is full in terms of quantity, with the vast majority of sales concerning modern units. We are reporting the 2004 built capesize “Cape Condor” at the price of $24 mill. to Zodiac, as well as the 97 built “Su-oh”, which fetched $16.5 mill. from Korean buyers. Scorpio have acquired two kamsarmax resales ex Imabari for $35.5 mill. each with delivery in 2015, while Greek interests are behind the resale of a kamsarmax ex Tsuneishi with delivery in 2014 for $31 mill. On the panamax front, 6 units changed hands this week, with 4 of them as part of an auction deal, as well as another total of 6 Chinese built Supramaxes. Of great interest was the much anticipated sale of the 1997 built “Juergen Schuelte” for $8.7 mill, with handy bulkers being absent this week. In the wet sector, we are reporting the en-bloc sale of 4 aframax tankers built 2007/8 for a total price of $100 mill. to Scorpio, with MRs represented, as usual, in the salesboard by 1 unit built in 2001 and another one built in 1996.
Shiptrade’s enquiry index has slowed down by 8% this week. In the dry sector, Interest for Handysize decreased by 23%,
Handymax Index decreased by about 40%. Interest for Supramax bulkers has decreased by 49%. The only increase is displaid
for buyers of Panamaxes and Capes which increased by 5% and 28% respectively. Tanker demand slowed down as well.
Interest for MR’s was downgraded by 55%. Aframaxes have followed the same direction with a 60% decrease, while the
relevant index for aframaxes and suezmaxes showed an increase of 60% and 40% respectively. Buyers for VLCC’s have also
been minimized by 65%.
NEWBUILDINGS
In the newbuilding market we have seen 40 vessels to have been contracted.
21 Bulk Carriers (Capesize, Kamsamax, Ultramax)
16 Tankers (MR)
3 Container (10.500 teu)
DEMOLITION
The good form of the Indian market remained for yet another week, with stunning levels seen this week and speculation in the foreground, as levels offered by the cash buyers do not seem to reflect the levels the local market can accommodate. In Bangladesh, activity is slowed down in view of the forthcoming Eid holidays, with it being obvious that the local market is not in a position to compete with the Indian one, however demand for containers and tankers gas free for hot works is still there. Pakistan is in an undoubtedly weak position, unable to secure tonnage and with fundamentals such as the local currency and steel prices being volatile, we will have to wait and see how the local buyers will re-emerge after the upcoming Eid holidays. Demand in China has slowed down a bit, following the return from the October holidays, however encouraging are the news that the demand for iron ore amidst an increase on Chinese building projects has pushed on charter rates (particularly in the cape sector), and has slowed the supply of candidates to the market.
Sale & Purchase
3
Indicative Market Values – ( 5 yrs old / Mill $ )
Bulk Carriers
Week 41 Week 40 Change %
Capesize 35 35 0,00
Panamax 22.5 22.5 0,00
Supramax 21.5 21.5 0,00
Handysize 18.5 18.5 0,00
Tankers
VLCC 52 52 0,00
Suezmax 42 42 0,00
Aframax 30 30 0,00
Panamax 27 27 0,00
MR 25 25 0,00
Weekly Purchase Enquiries
SHIPTRADE P/E WEEKLY INDEX
0
50
100
150
200
250
300
350
400
2-8
/5/2
01
29-1
5/5
/20
12
16-2
2/5
/2012
23-2
9/5
/2012
30/5
-5/6
/2012
6-1
2/6
/20
12
13-1
9/6
/2012
20-2
6/6
/2012
27/6
-3/7
/2012
4/7
-10/7
/2012
11/7
-17/7
/2012
18-2
4/7
/2012
25-3
1/7
/2012
1-7
/8/2
01
28-1
4/8
/20
12
15-2
1/8
/2012
22-2
8/8
/2012
29/8
-4/9
/2012
5-1
1/9
/20
12
12-1
9/9
/2012
19-2
5/9
/2012
26/9
-2/1
0/2
012
3-9
/10/2
012
10-1
6/1
0/1
217-2
3/1
0/1
224-3
0/1
0/1
2
31/1
0-6
/11/1
27-1
3/1
1/1
214-2
0/1
1/1
221-2
7/1
1/1
2
28/1
1-4
/12/1
25-1
1/1
2/1
212-1
8/1
2/1
2
19/1
2/1
2-8
/1/1
39-1
5/1
/13
16-2
2/1
/13
23-2
9/1
/13
30/1
-5/2
/13
6-1
2/2
/13
13-1
9/2
/13
20-2
6/2
/13
27/2
-5/3
/13
6-1
2/3
/13
13-1
9/3
/13
20-2
6/3
/13
27/3
-2/4
/13
3-9
/4/1
310-1
6/4
/13
17-2
3/4
/13
24-3
0/4
/13
1-7
/5/2
01
38-1
4/5
/20
13
15-2
1/5
/13
22-2
8/5
/13
29/5
-4/6
/13
5-1
1/6
/13
12-1
8/6
/13
19-2
5/6
/2013
26/6
-2/7
/2013
3-9
/7/2
01
310-1
6/7
/2013
17-2
3/7
/2013
24-3
0/7
/2013
31/7
-6/8
/13
7-1
3/8
/20
13
14-2
0/8
/2013
21-2
7/8
/2013
28/8
-03/9
/2013
04-1
0/9
/2013
11-1
7/9
/2013
18-2
4/9
/2013
25/9
-1/1
0/2
013
2-8
/10/2
013
Korea China Spore KCS
Greece Other SUM
Sale & Purchase
4
Reported Second-hand Sales
Bulk Carriers Name Dwt DoB Yard SS Engine Gear Price Buyer
In Brief: Market still improving… Capes: Cape market although rised on the beginning , slowed down towards the end of the week with the BCI reporting a decrease of 416 points. In the Atlantic basin, week began with a positive trend, cooling off thereafter with the Tubarao / Qingdao route fixing at about USD 26.50 pmt and the transantlantic round trips at around USD 33,000/33,500 declined by around USD 8,000. As for fronthauls ex Conti/Med were fixed at about USD 52,750/53,000 decreased by about USD 8,000. Same feeling in the pacific market which closed with downward trend after a positive beginning of the week. In this respect, the round trips closed at about USD 28,700 and Port Hedland / Qingdao route were fixed at around mid – high USD 12’s pmt. Panamax: Steady positive sentiment in both hemispheres. BPI index at the beginning of the week was at 1947 points to finally close up by 77 points at 2024 on Friday. Having China back from holidays, we faced quite movement in the Atlantic. However there were some fresh requirements and lack of spot tonnage pushed rates moving further up. Transatlantic round trips were seen fixing at around USD 17000-17500 levels about whilst there were some quick Baltic rounds and 2 laden legs requirements reported at USD 18000-19000 about basis delivery Continent and redelivery Skaw-Gibraltar range. Fronthauls ex US Gulf were reported fixing at USD 19000-19500 levels aps plus about 900-950k ballast bonus whilst there were some fixtures basis delivery Continent reportd at USD mid-high 20’s dop . In the Pacific basin more activity was seen and rates also climbed up further at almost every direction. Aussie rounds were reported fixing at USD 18000-19000 levels basis dop North-Mid China redelivery India. Nopac round trips were reported fixing at USD 18500-19000 levels basis dop S. Korea-Japan range. Indonesian round trips were seen closing at USD 16000levels dop S.China-Taiwan range and redelivery Singapore-Japan range. Finally short period fixtures were reported at USD 13000-14000 levels for 4/6,5/7 months and around USD 12000-12500 daily for 11/13 months. Supramax: Market remains strong and showing signs that the positive sentiment will stay on. In the Supramax market the positive sentiment stayed on this week too. In the Atlantic Basin the fronthaul rates stayed close to 20,000 per day basis delivery at loadports i.e. Black Sea or Continent or USG. The transatlantic round voyage rates also remained at more or less the same levels like last week. From West Africa we saw vessel reportedly fixed usd 16,500 dop for trip via ECSA to Singapore-Japan although the relevant index was showing only 8,000 per day for this route.. In the Pacific market the coal requirements paid mid 11 ‘s basis delivery South China , redelivery East Coast India and the Indo rounds closed at 8,000 basis delivery mid-North China , redelivery South China. The backhaul rates remained close to mid 6’s basis redely West Africa and sub 6 basis redelivery East Med. The short period rates closed at 11,000 basis delivery Far East and around 10,000 basis delivery PG – India range. Handysize: Positive sentiment in both basins BHI index at the beginning of the week was at 622 points and at the end of the week closed at 632 increasing by 10 points. In the Atlantic basin trips from USG to WAF has been fixed at USD 17.000-17.500 and to Continent at USD 15.000-16.000.We have seen fixtures from USEC to ECSA at USD about 15.000. Regarding short period basis delivery Atlantic redelivery Atlantic Tonnage fixed at USD high 11s.thousands. In the pacific the activity was slower than previous week due to several holidays. Trips from PG to China has been fixed at USD 9.000-.9500.Regarding 10/13 months basis delivery Pacific redelivery WWIDE we have seen fixtures at USD 8500-9000.
Dry Bulk - Chartering
Dry Bulk - Chartering
Dry Bulk - Chartering
Dry Bulk - Chartering
8
Baltic Indices – Dry Market (*Friday’s closing values)