WEEKLY SHIPPING MARKET REPORT WEEK 36 - 3 rd September – to 10 th September 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 36
- 3rd September – to 10th September 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]
Capacity, in a commoditized industry like shipping, is an important metric that directly impacts companies' top line or revenue performance. When capacity grows faster than demand, competition will rise among individual shipping firms as they try to use idle ships and cover fixed costs. This will lower day rates, which will negatively affect bottom-line earnings, free cash flows, and share prices for tanker companies. Companies are scrapping crude tankers amid a depressing market Between August 23 and 30, tanker capacity measured in deadweight tonnage (the weight a ship can safely carry across the ocean), fell by another 0.04% for crude tankers. Product tankers, on the other hand, rose 0.05% % using the last eight weeks to smooth out the data. The recent decline in growth rates appears to reflect lower shipping rates. When shipping rates are at depressing levels and shipping companies can't profit by running the new or existing ships, companies will delay receiving new ships or scrap ships to reduce capacity and support rates. This could act as a short-term support for shipping rates. But this is another indicator that points to the depressed crude tanker market, given that ship orders had slumped over the same period. Annual capacity growth falling While annual capacity growth still remains above 3.5% for crude tankers and even higher for product tankers, it has come down since April, which is a positive sign. Analysts consider year-over-year growth because it adjusts for possible seasonality and short-term noise, and demand figures are often quoted on a year-over-year basis for the same reasons. So this makes comparing supply and demand balance easier Interpretation of higher growth The decline in weekly capacity is a positive sign that incumbent firms are resorting to scrapping and slippage to alleviate issues with excess capacity and support shipping rates for crude tankers. If shipping rates rise further from here, however, as they often do because of seasonal increases in demand for heating oil for the winter, capacity growth will likely rise. For product tankers, the weakness we've seen over the past few weeks appears to be due to a short-term pause in deliveries. This will likely pick up throughout the remainder of this year, as several companies such as Navios Maritime Acquisition Corp. (NNA) and Scorpio Tankers Ltd. (STNG) have been placing large number of orders since last year. Depending on whether demand is expected to meet supply, current capacity growth could be negative or positive for tanker firms such as Frontline Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Navios Maritime Acquisition Corp. (NNA), and Scorpio Tankers Ltd. (STNG). (Market Realist)
The dynamics of the global oil trade and demand for crude tankers
There are two key driving forces of oil shipment demand today, which has been a trend for the past five years: a decrease in oil shipments to the United States and growth in China. In 2010, the largest importers of oil in the world were the United States, China, Japan, and India. The United States imported 9.2 million barrels a day (21% of the total), while China, the second largest importer, imported 4.7 million (11% of the total), according to data from the U.S. Energy Information Administration (EIA). The United States leaves while China picks up The United States has historically been the largest importer of oil. But since horizontal drilling and hydraulic fracturing technologies have made it possible for energy companies to extract oil from areas where oil extraction was initially considered impossible and uneconomical, domestic production started to take off after successful trials, beginning the United States' journey to becoming an energy-independent country. As OPEC (the Organization of Petroleum Exporting Countries—which are primarily situated in Africa and the Middle East) and oil shipment companies continued to lose business from the West, they found a savior in the East: China. Driven by rapid growth, spurred by government stimulus in 2009 and a population that strives to work and earn more to have higher living standards,
demand for oil has grown rapidly in double digits. Imports, as a result, grew ~10% from 2008 to 2012. China's growth isn't enough While China stepped up its oil import, it wasn't enough to fill falling U.S. imports. With the exception of 2010, when the United States imported more oil as its economy recovered, the remaining three years have consistently led to lower imports than China can soak up. The EIA estimates that the country will become the largest producer of crude oil within the next few years, knocking countries such as Russia and Saudi Arabia off the top chart. China's golden age of investment-led economic growth is now history, and as the country opens up to more consumption, how may oil consumption be affected? With tanker stocks falling more than 80% from 2008, and China now a larger player in the world's oil shipment market, will the downtrend reverse or continue? The following indicators will help us understand the demand prospects of companies such as Frontline Ltd. (FRO), Teekay Tankers Ltd. (TNK), Nordic American Tanker Ltd. (NAT), and, to an extent, Tsakos Energy Navigation Ltd. (TNP) and the Guggenheim Shipping ETF (SEA) over the next few months.( Market Realist)
Rising dollar creates fuel cost worries for shipping companies
The falling rupee may bring more export business for the shipping lines, with Indian goods getting a competitive edge in the international market. Shipping companies which are already reeling under subdued freight rates and oversupply of vessels are worried over rising fuel costs as the dollar becomes more expensive. Shipping Corporation of India, for the first time has decided in its board meeting to go for partial bunker hedging. “We will start with a small percentage and then increase the amount we will hedge gradually,” said Sunil Thapar, director- bunker and tanker division, Shipping Corporation of India. While most companies feel that they are hedged against the currency crisis since the sector deals in dollars only. However, because the outgo is also in dollars, the rupee depreciation has not meant huge benefits. The currency depreciation has created woes for coastal shipping, since most of the revenue is incurred in rupees, while the costs are in dollars. “The returns in coastal shipping are suffering. The overall coast of logistics is going up since the port charges are in dollars,” said Anil Devli, president, Indian National Shipowners Association. For coastal shipping, there is an added challenge as far as bunker goes. The increase in price of high speed diesel has made it less competitive to the road transportation which has subsidized diesel. “This has also discouraged new entrants from venturing into coastal shipping. It is not a flourishing business,” a senior port sector analyst said. Last week, rupee plunged to a low of 66 per dollar mark. The rupee has lost more than 16% against the dollar so far in 2013 - making it the worst performer by far among Asian emerging market currencies, according to Reuters.(BusinessStandard)
Suez Canal Project to Attract Foreign Investments
Chairman of the Suez Canal Authority Mohab Memish said that the project of “Suez Canal Axis” will be developed in a way that allows accelerating the growth rate in the region as well as attracting Arab and foreign investments to take part in the implementation of the project. He said that the name of Suez Canal project will be changed to the “Two Poles” referring to Ain Sokhna Port, where the first phase of the project kicks off, and Port Said harbor, where the project ends. Memish added that the next period will witness a major role for the Suez Canal Authority after drafting the required legislations on this score, noting that a legislative amendment is underway to give the Authority a full supervision over the project. (Suez Canal Authority)
Shipping , Commodities & Financial News
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Greek interests still after big and modern tonnage
This week, buying interest and the majority of reported sales are for modern units, especially for the bigger sizes. One 2010
built capesize bulker changed hands this week, with further details on this deal expected to come to light shortly. Other than
that, 2 modern Kamsarmaxes, namely the 2005 built “Ocean Lord” and the 2010 Built “Stefania Lembo” went to Greek
buyers for excess $18 mill and $22.7 mill. respectively, with the second one sold at an auction. Moreover, Greek interests are
behind the sale of the 2004 built Panamax “Belgrano”, which fetched a price of $16.5 mill., while the older “C. Journey” was
reported sold to Chinese buyers for $7.4 mill. What is worth mentioning this week, is the firm price that two 1996 built 4
ho/ha handies fetched this week (both were sold for high $5 mill.), catching the market by surprise, despite last week’s
extremely interesting sale of the “ID Harbour”. In the wet sector, two modern Aframaxes were sold to Greek and Singapore
based buyers, with Greek interests snapping up both the 2006 built MR Tanker “Twinkle Express” for $20 mill., as well as the
1990 built MR Tanker “Champion Pioneer” for $5.4 mill.
Shiptrade’s enquiry index has once again shown a considerable increase, this time of about 25%. In the dry sector, enquiries
for handysize bulkers continued their upward trend, gaining another 30% this week, with those for Handymaxes and
Supramaxes following the same direction. The relevant index for Panamaxes gained almost one third this week, while
interest for capesize bulkers increased by about 22%. Tankers seem to attract additional interest, up by about 22% in total on
a week-to-week basis. MR Tankers’ relevant index is further strengthened compared to last week by about 30%, while in the
Panamax sector, interest continues to be virtually absent. Enquiries for aframaxes have continued their townward trend for
yet another week, still at single-digit levels, while we have nothing to comment on the interest for Suezmaxes and VLCCS,
which remains at very low levels.
NEWBUILDINGS
In the newbuilding market we have seen 16 vessels to have been contracted.
8 Bulk Carriers (Ultramax)
8 Tankers (VLCC, MR)
DEMOLITION
The situation in the sub-continent remains to be far from encouraging, despite the appointment of a new Reserve Bank of
India governor, with the purpose of stabilizing the currency, with the Indian Rupee slightly recovering at levels of 66 to the
USD as the week ended. However, with levels for bulkers in India around 360/ldt, it is quite difficult for owners of vintage
units to consider selling. In Bangladesh, no deals were reported this week, reflecting the continuously troubling period the
local market is going through, with tonnage bought by cash buyers either remaining unsold or renegotiated. The Pakistani
market followed the same path, with the Pakistani Rupee continuing to be a source of concern, however, due to the fact that
local steel prices have not faced the volatility of India and Bangladesh, as well as the one of demand still being there, some
expect this market to be increasingly involved in buying units, both in the short as well as the long term. Activity and focus
shifted to the East for yet another week and China in particular, which is nowadays the best paying recycling market, with
Chinese buyers securing tonnage at impressive levels, comparable with, if not in some cases ahead of those offered in the
sub-continent.
Sale & Purchase
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Indicative Market Values – ( 5 yrs old / Mill $ )
Bulk Carriers
Week 36 Week 35 Change %
Capesize 30 30 0.00
Panamax 21.5 21.5 0.00
Supramax 20 20 0.00
Handysize 18 18 0.00
Tankers
VLCC 52 52 0.00
Suezmax 39 39 0.00
Aframax 27 27 0.00
Panamax 25 25 0.00
MR 23 23 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
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: Continuing increase for capes, stability for the rest. Capes: Cape market increased significantly Significant increase for Capes with the BCI closing at 2799 points increased by 556 points. The atlantic market firmed up with the transantlantic round trips fixing at around USD 18,500 notably improved by USD 9,750. Same trend for the fronthaul ex Conti/Med closing at around 38,250 increased by USD 8,250. Tubarao / Qingdao route were fixed at around USD 25.3 pmt. Same positive sentiment on the pacific basin with the Aussie round trips fixing at around 22,000 increased notably compared to last week levels. Waus / Qingdao route were fixed at about10.20 pmt. Period levels at about high teens for one year. Panamax: Positive sentiment in both basins. BPI index at the beginning of the week was at 912 points to finally close up by 108 points at 1020 on Friday. Steady sentiment was seen this week in the Atlantic region and rates were kept at almost same and a tick higher levels. Transantlantic round trips were reported fixing at USD 8000 about. There were also some 2ll requirements via Baltic at USD 9500-10250 levels about basis redelivery Skaw-Passero range. Fronthauls ex US Gulf were reported fixing 15000-15500 aps plus 500-550k ballast bonus whilst those ex ECSA were seen closing at USD 13250 levels plus 350k ballast bonus. There were also rumors for an LME fixing at USD 23000 basis delivery Passero for a trip via Black Sea to PG with grains. In the Pacific basin Aussie rounds remained fairly active with some fixtures reported at USD 8000-9500 dop Mid-South China for trips via N. Australia redelivery China. Nopac also remained fairly active with some fixtures at USD 8000-8500 levels basis delivery dop N. China-Japan range and redelivery Singapore-Japan range. Additionally there were some trips via CJK- N. China range to India with fertilizers reported fixing at USD 7500-8500 dop. Indonesian round trips were reported closing at USD 8000 about basis dop S. China – Hong Kong range redelivery China and abt USD 9000-10000 basis dop Singapore. Finally nice LME’s were reported fixing at USD 9000-9500 levels for 4/6 months or up to 11/13 months. Supramax: Positive sentiment BSI index at the beginning of the week was at 939 and at the end of the week closed at 959,increasing by 20 points. Trips from USEC to Continent have been fixed at USD around 15.800 and from USG to ECSA at USD about 11.500.Faronthaul bss delivery Continent fixed at around USD 17.000.Regarding short period bss delivery BSEA and redel Atlantic we have seen fixtures at USD 13.000-13.500. In the Pacific nickel ore cargoes and bauxite cargoes kept the area active.Trips delivery N.China via INDO to India were fixed at USD 7.500-8.500.Short periods were fixed at USD 9.500-10.000. Handysize: Both basins remained relatively stable with the BHSI closing at 537 points slightly increased by 3 points. In the Atlantic basin, bsea remained strong producing fresh requirements. Short period bss delivery ECSA redelivery Atlantic were fixed at USD 9.000-9500. In Pacific ferts ex N.China to ECI were fixed at USD around 8250. We have seen 1 year period bss delivery Singapore at mid-high 8s
Dry Bulk - Chartering
Dry Bulk - Chartering
Dry Bulk - Chartering
Dry Bulk - Chartering
Dry Bulk - Chartering
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Baltic Indices – Dry Market (*Friday’s closing values)