S&P, Newbuilding and Demolition Update (April 18th, 2014)

The Baltic Dry Index (BDI), the closely watched proxy for the shipping markets, has been on the cusp of wild crest recently: on December 12, 2013, the index topped at 2,337 points and promptly nose-dived to a bottom of 1,084 points by February 4th, 2014, just to bounce back to 1,621 points on March 20th, and since then, the index has been losing ground every single day to set a new low of 930 points on Thursday, April 17th. As usually, the capesize component of the index, and its most volatile component, has pushed and pulled the overall index around the most, as spot rates for capesize vessels have ranged from $50,000 per diem since December last year to approximately $12,000 per diem at present. So far, so bad.

Asset prices for vessels and the market momentum overall are still very strong; despite all the gyrating and the recent declines, as per the graph herebelow, we should not forget that the present standing of the index is respectable given that the market was used to ‘bounding along the bottom’ of about 700 points for some extended amount of time and that capes (and VLCCs in the tanker market) were lucky to fetch $5,000 per diem for so long, that some people had given up hope that there will ever be a recovery. The fact that the market showed such strength as to bounce several-fold has put lead in the faith of many people, not to mention some extra cash in their pockets and that of shipping banks as they managed to contribute excess earning toward shipping loans in default. Thus, the recent decline in freight rates is not worrisome, at least not yet, and asset prices have been holding strong; usually there is a time lapse for asset prices to follow the dip in freight rates, and given that still there are few quality vessels available for sale, asset prices are nothing short of impressive, in our opinion. Quality vessels that come to the market, especially dry bulk and occasionally tankers, get very strong reception and force potential buyers to bid up the pricing; the bifurcating market is still selective on tonnage, as owners with inferior tonnage – including some newbuildings, are having hard time to get much attention.

Baltic Dry Index (BDI) and Baltic Cape Index (BCI) since January 2013

Baltic Dry Index (BDI) and Baltic Cape Index (BCI) since January 2013

Despite heightened pricing levels, activity has been strong in terms of volume of transactions; in the last couple of weeks, a few noteworthy transactions in a certain market segments have as follows:

MV „SHAGANGFIRST ERA" - 181,500 DWT Capesize built at Koyo Dock K.K.

MV „SHAGANGFIRST ERA” – 181,500 DWT Capesize built at Koyo Dock K.K.

The Daiichi controlled capesize vessel MV „SHAGANGFIRST ERA” (181,000 DWT, 2010 –built at Koyo Dock K.K.) got strong buying interest and went for an impressive price of about $54 million, implying a prompt resale pricing of well in excess of $60 million. Buyers were Golden Union of Greece, an independent Greek owner specializing in such tonnage, and a net buyer of such vessels ever since the market collapsed in 2009. Golden Union has bought in July 2012 MV „CAPE ELEKTRA” (ex- „CHRISTINA BULKER”, 179,500 DWT built in 2011 at Hanjin H.I.) at $38 mil, in September 2012 MV „CIC ROLACO” (ex-„BULK LOYALTY”, 175,500 DWT, 2012 built at Jinhai Heavy Industries) at $34.5 mil, and in August 2013 MV „CAPE PROVIDENCE (ex-„LILAC”, 179,500 DWT built in 2009 at Daewoo) at $36 mil; these acquisitions are in addition to six capesize vessels on order with deliveries 2014-2016, orders believed to be placed at approximately $54-$55 mil per hull. Similarly, Vista Shipping has continued their fleet growth plan with the acquisition of vintage caper MV „LIAN FU STAR” (172,000 DWT, 1997 built at NKK) at $18.5 mil; it’s indicative of the strengthening market place since same buyers acquired from same sellers in September 2013, the slightly newer and larger cape vessel MV „CAPE TORONTO” (ex-„TAI FU STAR”, 178,500 DWT, built in 1998 at Daewoo) at the lower price of $16.5 mil, implying an approximate 30% improvement in asset pricing.

In the panamax market, Polembros Shipping of Greece has continued their acquisition spree in the sector by acquiring sistership vessels MV „ZHUSHUI 3” and MV „ZHUSHUI 5” (79,500 DWT, 2011/2012 built at Jinhai Heavy Industries) at reportedly region of $23.5 mil; about a month ago, same buyers committed to the purchase of sistership vessels from same shipbuilder (and likely seller) Hull Nos J0047 and J0048 (to be named MV „GOLDEN EXCELLENCE” and MV „GOLDEN EXPLORER” respectively, 79,500 DWT, 2014 delivery from Jinhai Heavy Industries) at $24 million.

In the ultramax market, Hamburg Bulk Carriers have exercised options from Sainty Shipyard in China for four 64,000 DWT vessels, delivery 2014 and 2015 at $29 million, each. Supramax bulker MV „CHANE NAVIGATOR” (55,000 DWT, C4x30T, 2010 built at Jiangsu Qinfeng) at a soft pricing – likely reflecting poor pedigree, at $18 mil., while sisterships MV „TANAGER BULKER” and MV „TESS BULKER” (58,000 DWT, 2011 built at Tsuneishi Cebu) were sold from Lauritzen Bulkers at $29 mil each to ID Shipping in Denmark.

MT „ATLAS VALOR" - Aframax tanker built in 1999 at Koyo Dock K.K.

MT „ATLAS VALOR” – Aframax tanker built in 1999 at Koyo Dock K.K.

In the tanker market, after a couple of ‘corporate transactions’ in the VLCC market at impressive prices that topped $100 mil per hull for the very first time since the market collapse in 2008 (for ‘arm’s length transactions’ it is), aframax tanker MT „FORWARD VENTURE” (115,000 DWT, 2006 built at Sasebo H.I.) was sold at $31 mil. Older tonnage such as MT „ATLAS VALOR” (107,000 DWT, 1999 built at Koyo Dock K.K.) was sold to Tsakos Hellas at $13 mil, while similar pricing was achieved by comparable vessel MT „JAG LAXMI” (105,000 DWT, 1999 built at Samsung) to Indonesian buyers (Waruna Shipping).

In the chemical tanker market, and the sophisticated segment of stainless steel tonnage which seems to be in the news recently – whether with the newbuilding orders by interests of Peter Georgiopoulos or the roadshow of Stalwart Tankers, MISC of Malaysia (a fully owned subsidiary of the national oil company Petronas) has taken a massive divestment of assets in the sector by selling to China’s Sinochem the stainless steel tankers MT „BUNGA KATAN SATU”, MT „BUNGA KANTAN DUA”, MT „BUNGA KATAN TIGA” (19,750 DWT, 2005 built at Fukuoka S.B., IMO II, with 20 segregations / pumps / tanks and 60 ˚C maximum heating capacity) at approximately $20.5 mil each, a rather strong pricing. Also, MISC has sold, to UACC based in UAE, the marineline coated tankers MT „BUNGA BALSAM”, MT„BAKAWALI”, MT „BUNGA BANYAN”, MT „BUNGA BEGONIA” (45,500 DWT, 2010/2011 built at SLS Shipbuilding, IMO II, MarineLine coating, 22 segregations/ pumps / tanks, 70 ˚C maximum heating capacity) at the fair pricing of $36 mil., each.

MT „BUNGA BALSAM" - 45,000 DWT MarineLine Coated Chemical Tanker

MT „BUNGA BALSAM” – 45,000 DWT MarineLine Coated Chemical Tanker

 

© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

 

S&P, Newbuilding and Demolition Update (March 18th, 2014)

Since our last Sale & Purchase report in January, the market has kept an active pace with general all market segments showing signs of life, and certain markets even much more so. The prevailing mode is that the world economy is entering a growth phase and that logically shipping would be the major beneficial of it; actually, a lot of market pundits have come to believe that the worst is behind us in shipping, the bottom of the market behind us as well, and now it’s the last chance to get on the boat before she leaves port.

We have been more skeptical than the average pundit – but we have been known to be of a skeptical nature – and we think that the present wave of enthusiasm may be a tad too much given the overall state of the market, still.  Since our last report, we have had the opportunity to travel extensively and catch up with shipowners, charterers, banks, vessel managers, etc Certain markets such as older containerships remain abysmally bad, and several independent shipowners have been very concerned about the outstanding orderbook in every sector. Yes, indeed, independent shipowners have ordered vessels as well, but the majority of the ordering has taken place from financial players who have been riding fully the ‘eco design’ wave; to a certain extent, some of these financial players are the tail that wags the dog (rather than the charterers and cargoes) since they have been known to be placing orders and chasing markets that have been neglected during the present boom.

In the most recent developments, while China still remains that 600-pound gorilla that can move the shipping market with just a thrash of the dragon’s tail, there have been signs that the economy is slowing – despite the recently announced 7.5% official GDP growth for the next year; it’s an absolutely great number, but also absolutely interesting are the news that the Chinese government has been slowly devaluing the Chinese Yuan (CNY), that there has been the first major default of a real estate developer company in China for $500 million un-serviced ‘bond’, and that the shadow banking in China stands at an exorbitant $7.5 trillion dollars or about 85% of Chinese GDP (the numbers from last week’s front page graphic of the Financial Times.)

And just last week, Scorpio executed on a really impressive (risky nevertheless) ‘asset play’ maneuver, flipping their seven VLCC newbuilding orders in Korean yards to a US-based buyer (Genmar and/or Peter G.) for a capital gain of about $50 million for holding the orders for just a few short months; the price per vessel has been $105 million or so, about $7 million higher than the newbuilding orders, and the first time in more than three years that a VLCC changed hands above $100 million (actually more than five years, if one were to count only ‘arm’s length transactions’ where there was no involvement of seller / soft finance.) Believe it or not, there was a bidding war among several buyers for these vessels; all the buyers were sponsored by financial players; we caught several ‘old salt’ shipowners scratching their heads on the acquisition and pricing, and we noticed that although the words ‘VLCCs’ and ‘Fredriksen / Frontline’ are synonymous, ‘Big John’ has been conspicuously absent from all the gerrymandering in the VLCC space; either he knows something that the rest of the market doesn’t or the buyers of the Scorpio VLCCs know something that the market doesn’t know. For sure somebody better know more than the market.

Shipping is beautiful industry, and never boring!

VLCC TANKER MT 'GENMAR ATLAS'

VLCC TANKER MT ‘GENMAR ATLAS’

© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

S&P, Newbuilding and Demolition Update (January 19th, 2014) – Tanker Market Focus

Since our report of last week with its headline news of Euronav acquiring the Maersk Tankers VLCC fleet of fifteen vessels at $980 million, freight rates for tankers, primarily crude oil tankers, have seen levels that were almost forgotten, or even non existent any more. VLCC rates have ranged between $40,000 and $50,000 pd for this past week, while Suezmax and aframax tankers saw even higher rates, exceeding $100,000 pd for certain routes, primarily cross-Med and Baltic Sea, based on heavy delays in Bosporus and Libya having a change of heart in terms of oil exports. Clean tankers in the products trade have been ‘floating’ along with LR2s heading to Japan getting less than $10,000 pd, while dirty tankers whether cross-Med or USG-Caribs are getting better reception.

Enlightened sale of MT ALGECIRAS SPIRIT (Image source: shipspotting.com)

Enlightened sale of MT ALGECIRAS SPIRIT (Image source: shipspotting.com)

While Euronav was in the news last week with their transformative acquisition, this week they have been in the news with exceptional pricing for the sale of the 1999-built VLCC MT „LUXEMOURG” (299,000 DWT, 1999, Daewoo) for FPSO conversion to Modec at $28 million. Probably the price is close to $10 million above salvage value and several million from a hypothetical sale for ‘further trading’, but still meaningfully lower than the $35.8 million that Euronav achieved in 2012 for the sale of sistership vessel MT „ALGRAVE” still to Modec for again conversion purposes. Earlier in January, MT „SATURN GLORY” (299,000 DWT, 1998, Daewoo) was sold in excess of $23 million to clients of Sentek Marine & Trade. In the Suezmax market, Avin Oil of Greece has acquired the good vessel MT „ALGECIRAS SPIRIT” (150,000 DWT, 2000, Daewoo) from publicly listed TK Tankers at about $17.8 million. The pricing is a firm improvement over the sale of sistership tanker MT „TENERIFE SPIRIT” (15,000 DWT, 2000, Daewoo) again from Teekay Tankers to Eurotankers in Greece in early November 2013 at about $16.3 million. Still in the Suezmax market, MT „HERO” (156,500 DWT, 2011, Jiangsu Rongsheng) was sold at auction to Greek buyers (Alma) at $51.5 million.

Teekay has been active also in the buying front as they have acquired in a different transaction four modern sistership aframax tankers owned By Montanari but controlled indirectly from a European bank which had to approve any sale (MT „VALLESINA”, MV „VALBRENTA”, MT „VALFOGLIA”, and MT „VALDARNO” (2009/2009/2009/2010, 109,000 DWT, Hundong Zhonghua)) at about $30 million each. We understand that previous potential buyers were not impressed with the quality of vessels, but the pricing had to be ‘right’ given sellers’ price ideas came down sizably since early 2013 at a time when asset prices, rates and momentum were heading the opposite direction. In a sign that there is a big disconnect with tanker tonnage sold before the turn of the century, MT „NORD” (105,000 DWT, 1998, Halla Eng.) achieved $9.8 million, a price no much higher than scrap, but still strong for what vessels of this vintage have been fetching of recent.

The LR1 tanker MT „ANNA VICTORIA” (75,000 DWT, 2004, HHI) was sold to clients of Eletson at region $22 million. In general, the market for product tankers has been cooling off as many players are trying to stay away – let’s say a ‘hangover’ effect from the massive orders in the sector, while we have seen ever increasing inquiry in the crude tanker market, including purchase inquiries for VLCCs, Suezmax and aframax tankers; sometimes we are confused whether such inquiries are legitimate efforts to enter / expand in these markets or cases ‘the tail wagging the dog’. No doubt however, that there is increased levels of inquiries in the segment which could be a sign of potential ‘break out’ of the market.

OLYMPUS DIGITAL CAMERA

Stainless steel parcel tanker MT CLIPPER MAKISHIO (Image source: Wiki Commons)

In the stainless steel parcel tanker market, there is the interesting sale of MT „CLIPPER MAKISHIO” (19,980 DWT, 2009, Fukuoka SB) to clients of Songa Shipping in Norway at just below $27 million. There are no many sales in this niche market in general, so each one of them is noteworthy; the pricing has been fairly strong for a vessel already five years old.

The demolition market seems to be coming back to market slowly after the holidays, but again, when freight rates are solidly in cash flow positive territory, it’s only logical that owners are given an extension to do the inevitable; maybe another trip, maybe another month, but definitely not now. Tankers coming for their third or fourth special survey are the lowest hanging fruit, and the lower quality vessels with opex. Demolition pricing is solidly in the $400/ldt territory, with tankers getting $450/ldt or even more in subcontinent, with about 20% discount in China, at about $350/ldt.

Our report in the dry bulk market has been posted separately due to volume of reported transactions (please click here to access.) Developments in the financial and capital markets have always been of heightened interest, especially the prospects for a new round of stress tests with the European banks. That will be an interesting development to watch, although it seems ever likely that Basel III will have little chance to get implemented as envisioned originally and on schedule; just more regulatory bodies seem to be getting more receptive to the banks’ points of view and also giving higher priority to stimulating economic growth at the cost of curtailing or penalizing banks just because they stand on the wrong side of a benchmark figure.

© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

S&P, Newbuilding and Demolition Update (January 18th, 2014) – Dry Bulk Focus

By the end of the week, the notable decline of the BDI and dry bulk freight rates since late last year came to a stop with a marginal improvement on Thursday and Friday, mostly on relatively stronger recovery in the cape market; still, it was a down week for the index, with about 0.75% decline. Crude tankers have been the star of the week, with freight rates improving impressively on certain routes; some improvement is due to seasonality – still, winter season in the northern hemisphere, due to bad weather affecting vessel routing – heavy delays due to fogging in the Bosporus affecting Suezmax tonnage trading Black Sea, and due to lower tonnage availability in the AG – owners have been ballasting en masse VLCCs from AG to WAF for better prospects (probably an interesting point for further analysis, ballasting vessels around the Cape and incurring millions of dollars in bunker expenses in the hope of better prospects in another geography; ‘herd mentality’ possibly, but for now, AG tonnage faithful tonnage got the best of it, and their prospects look good for February, too.) The best markets have been Caribs – USG and cross-Med trading for aframaxes, where in the latter market have benefited by association due to Bosporus delays but mostly have benefited from Libya’s crude exports coming to the market again (as a reminder, just last week, rebel forces had threatened to open fire at tankers approaching terminals for loading, but the economics got the better of the threats, since oil exports translate to hard currency in a desperate country.) One of the highest fixtures has been ExxonMobil’s fixture of Thenamaris’ MT SEAOATHat 260 WS, well in excess of $100,000 TCE for cross-Med voyage.

Activity in the sale & purchase market continues robustly, as hopes for a market recovery seem to be getting stronger hold. Late last week, it was reported athat Marmaras Navigation of Greece has acquired Hull No J0021 for 176,000 dwt capesize vessel with 2014 delivery at Jinhai Heavy Industries at approximately $47 million, and also Greek independent owner Transmed has acquired Qingdao Beihai BC180-26 and BC180-30 hulls (MV CENTRANS RYTHMand MV CENTRANS ETERNAL”) for 180,000 dwt capesize vessels with 2014 delivery at about $48 million, each. These transactions stand out for a couple of reasons: despite the overall pessimism in the capesize market, still, these are acquisitions by ‘real’ independent, operating shipowners who put a lot of their own equity at risk (as opposed to ‘OPM’ investments) which indicates real conviction in the market; further to it, the pricing seems extremely competitive as compared to recent ‘OPM’, highly advertised acquisitions of comparable tonnage, and also compared to standard shipbroker tables with ‘Cape Resales’ markedly in the $50+ million territory.

Pretty woman MV GRAND DIVA!

Pretty lady named MV GRAND DIVA! (image source: http://www.shipspotting.com)

The Kamsarmax vessel MV „MINERAL PEARL (81,500 DWT, 2013, Guangzhou Longxue) has achieved $27 million, while almost comparable vessel MV „PRETTY MASTER(82,000 DWT, 2013, Zhejiang Judger S.B.) was sold at the relatively weak $24 million. Possibly the confused identity name of the vessel may explain the price differential? Panamax bulker MV „TRAVE (75,300 DWT, 2001, Hyundai Samho) was sold to Kassian Maritime in Greece at the rather strong $16.1 million, while MV „GRAND DIVA(75,600 DWT, 2007, Imabari SB) was sold at $21.5 million to Italian buyers (Augustea.) Older panamax MV „GLOBAL TRIUMPH (73,000 DWT, 1996, CSBC Kaohsiung) sold to a scrap related $8 million to Chinese buyers (Shandong Shagang.)

MV DIETRICH OLDENDORFF (image source: Oldendorff Carriers)

MV DIETRICH OLDENDORFF (image source: Oldendorff Carriers)

Ultramax vessels have been in high demand recently, and Greek buyers have acquired four SDARI 64 vessels under construction at Jinling Shipyard (Hull Nos: JLZ9120408-11) ordered by Asia Pacific Enterprises; all vessels are due to deliver in 2014 and price consideration has been at about $30.5 million per vessel. We understand also the Oldendorff Carriers has sold a Crown 63 deign ultramax vessel MV „DIETRICH OLDENDORFF” (63,500 DWT, 2013, C4x35T, Dayang S.B.) to Greek buyers at $31 million, with a market-indexed charter back to the sellers.

Supramax tonnage has also been active, with the MV „FAR EASTERN VENUS (53,500 DWT, 2006, C4x30T, Imabari S.B.) fetching $21 million, while also Japanese built MV „IKAN SERONG (56,000 DWT, 2006, C4x35T, Mitsui Ichihara) achieved excess $ 22 million.  Chinese built and with survey due shortly MV „ORIENT RISE (56,500 DWT, 2010, C4x30T, Qinghan Shipyard) achieved a rather weak $21.5 million from German buyers. Handymax vessels have also been active with sistership vessels MV „PACIFIC CHAMP and MV „PACIFIC ROYAL (43,000 DWT, 1996, C4x25T, H.H.I.) achieving $9 million each, while slightly older but comparable Japanese-built vessel MV „AZURE SKY(45,750 DWT, 1995, C4x30T, Imabari S.B.) achieved a shade below $9 million. Slightly newer and larger, still Japanese built MV „EILHARD SCHULTE (49,500 DWT, 1999, C4x25T, IHI) achieved $12.75 million from Greek buyers, while slightly older and smaller Japanese-built MV „TINA A (42,500 DWT, 1999, C4x30T, I.H.I) achieved $10.5 million by Danish buyers.

In the pure handysize market, MV „DANIELA BOLTEN (23,750, 2007, C4x30T, Shin Kochi H.I.) was sold at just below $15 million, while MV „CS SOLARIS (28,500 DWT, 2001, C4x30T, Imabari S.B.) was sold at a shade less $13 million. Large handy MV „CARL OLDENDORFF(31,500 DWT, 2002, C4x30, Saiki) was sold to undisclosed interests at $14.1 million.

Definitely lots of activity to report, and this is only in the dry bulk market. We understand that most of these sales, primarily of ‘older’ tonnage, are individual sales (as compared to en bloc ‘corporate’ sales reported in our previous report) by independent owners, signifying still strong activity in the market and expectations for a recovery. And, as not to be any doubts about the strong market recovery expected – sometime, somehow – about eighty-five (85) were ordered so far in 2014, about four (4) vessels per diem, which, surprisingly, is well below 2013 activity when on average, seven (7) vessels were getting ordered each and every single day of the year, Saturdays, Sundays and holidays included.

Long live the market recovery!

© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

S&P, Newbuilding and Demolition Update (December 15th, 2013)

Since our last market review two weeks ago, Nelson Mandela, a great human being and a great leader passed away in South Africa, but ‘selfie pictures’ by dignitaries attending the memorial service got as much attention as the man himself. In North Korea, a 67-year old ossified mummy was summarily executed on charges (among others) of ‘alcohol abuse’ and ‘womanizing’  (no wonder N Korea is not a shipping hub), while on reflection of a bull market in equities, MasterCard International (ticker: MA) has announced a 10-for-1 stock split.  Despite the bull market in equities (and commodities, and …), many companies are still hesitant to initiate stock splits – possibly reflecting on the QE-propelled bull market rather than consumption and confidence driven earnings, and thus, MasterCard’s split of about $800-share got attention; for shipping equities, reverse-stock-splits in order to meet the regulatory $1/share threshold are still more common than normal stock splits.

However, shipping’s proxy index, the Baltic Dry Index (BDI), has been having an exceptional time and closing at 2,330 on Friday, up approximately 28% in December, and 230% up year-to-date (BDI stood at 698 at the close of 2012.) The proverbial cat is out of the bag now, and more analysts are calling for a market recovery, basically on the main thesis that things are not as bad as they seem and the outstanding world orderbook has been declining over the last year as a percentage of the existing world fleet.  That may be the case, but institutional investors keep ordering (or supporting companies to order) more newbuildings; and the Chinese have announced these week some meaningful subsidies for still more newbuildings for Chinese-flagged tonnage.  Despite any doubting, we should be as festive as the season we are heading to, and note that presently, crude tanker spot freight rates – for ALL asset classes are higher than $30,000 pd, capesize vessels are making more than $40,000 pd, and in general most vessels – outside smaller containerships – trade on a cash positive basis; no a small achievement, especially having all markets moving higher on sync.

MV „CAPE PROVENCE” in laden condition (Image source: www.shipspotting.com)

MV „CAPE PROVENCE” in laden condition (Image source: http://www.shipspotting.com)

Cargill International has sold three capesize newbuilding contracts to the Scorpio Group (180,000 dwt, 2015, SWS) at a robust $57 million each, while simultaneously acquiring slightly older but much more competitively priced comparable tonnage: MV „SCOPE” (174,000 dwt, 2006, SWS) at $33 million, MV „PROUD” (178,000 dwt, 2009, SWS) at $42.5 million, and MV „CAPE PROVENCE” (177,000 dwt, 2005, Namura Shipbuilding) at $34 million, basically saving them $3 million per vessel per annum in depreciation.  We understand that the vessels acquired have short-term charter attached at below present market levels. The modern capesize MV „HOUHENG 3” (180,000 dwt, 2012, HHIC-Phil) was sold at about $50 million to Chinese interests, a rather soft price (compared to Cargill’s vessels), but the shipbuilder for the MV „HOUHENG 3” is not on the preferred list of many buyers. The older and out-of-class MV „GLORY ADVANCE” (171,000 dwt, IHI, 1996) was sold at auction at a scrap related price of $10 million to Chinese buyers, while the smaller and slightly older MV „PACIFIC CHALLENGER” (149,000 dwt, Dalian, 1995) managed a better pricing at $12 million with six-month forward delivery to her buyers, Winning Shipping in China.

MV „DYNA CRANE” (Image source: www.shipspotting)

MV „DYNA CRANE” (Image source: http://www.shipspotting)

On the panamax dry bulk front, the vessel MV „MARINE PROSPERITY” (73,500 dwt, Sumitomo, 2001) achieved a very respectable $16.5 million from buyers of Swiss Marine, while the NYK-controlled, gearless MV „SHIRANE” (77,500 dwt, Mitsui SB, 2000) obtained a solid $15.5 million from Indonesian interests. [This is the second dry bulk vessel disposed by NYK of late, as we recently reported the sale of MV „HOKURIKU MARU” (94,250 dwt, Mitsubishi HI, 1995) at $8.9 million to Chinese buyers]. As a general comment, panamax bulkers are not behaving greatly as an asset class in the last year, as their market seems to get cannibalized from bigger vessels (kamsarmax, post-panamax, etc) and smaller vessels (ultramax, etc) and there is the general belief that once the expanded Panama Canal opens, ‘panamaxes’ will be one of the worst hit asset classes. The Supramax market has been more active in general, with MV „DYNA CRANE” (55,750 dwt, Mitsui SB, 2006) achieving a solid price of $21.5 million to Olympic Shipping, which sale compares well with the sale in last month of MV „MEDI SHANGHAI” (56,000 dwt, Mitsui SB, C4x30T, 2005) at $19.5 million. The slightly older MV „ACS DIAMOND” (53,250 dwt, New Century, C4x35T, 2005) achieved a lowly $15 million. Lauritzen Bulkers has also disposed of MV „TOUCAN BULKER” and sistership vessel MV „THUNDERBIRD BULKER” (58,000 dwt, Tsuneishi Cebu, C4x30T, 2011) at about $30 million each to Swiss Atlantique.

MV „TOUCAN BULKER” (Image source: www.shipspotting.com)

MV „TOUCAN BULKER” (Image source: http://www.shipspotting.com)

The handysize / ‘handymax’ markets have also been busy, with MV „NEW RAINBOW” (42,740 dwt, IHI, C4x30T, 1998) achieving about $11.25 million, while MV „AZURE SKY” (45,750 dwt, Hashihama, 1995) a comparable price of about $8.5 million. In the handysize proper market, MV „TUNA 7” (32,250 dwt, Saiki HI, C4x30T, 1999) obtained a very respectable price in excess of $11 million, while same-builder but smaller vessel MV „TAO TRIUMPH” (23,750 dwt, Saiki HI, C4x30T, 1997) obtained $7 million. It was a better deal for the buyers of MV „SUPER ADVENTURE” (28,750 dwt, Tsuneishi Zosen, C4x30T, 1996) at $8.2 million, while the Turkish controlled MV „HANJI INSTANBUL” (27,500 dwt, Hanjin HI, C4x30T, 1997) obtained $9 million. MV „RABEE” (28,750, C4x30T, 1998) was sold to Russian buyers at slightly less than $10 million. Wisdom Marine has allegedly flipping two handysize newbuilding contracts (34,000 dwt, Namura, C4x30T, 2016) at $25 million each to unidentified buyers, while two prompt resales from Jiangmen Nanyang (39,000 dwt, Jiangmen Nanyang, C4x30T) to European buyers fetched $23 million each. One can tell right away that this market appreciates quality, which is reflected in pricing.

The tanker market overall has been fairly calm on the sale & purchase front, as people are still looking at charter rates in disbelief: while VLCC rates have been improving for more than a month now, since our last weekly update Suezmax and Aframax rates jumped from less than $10,000 per diem (which has been more or less the year average) to above $30,000 per diem. Oh, the miracles of the season! Ridgbury Tankers in the US have confirmed the acquisition of MV „RIO GENOA” (160,000 dwt, Universal SB, 2005) at $35.5 million, and Indonesian owners disposed of MT „GAS BALI” (5,000 cbm, Shitanoe Zosen, Pressurized/Butane, 2007) to clients of Epic Gas at $13.5 million.

The demolition market has been rather subdued (inversely correlated to freight rates,) however, recently announced subsidies in China this past week may have greater implication for the market overall than so far noted. You can read our commentary on the announcement by following this link!

The markets definitely have been busy, no doubt, for freight and sale & purchase; one has to make hay while the sun shines as they say, or ‘hoist one’s sails when the wind is fair’ as we people in shipping ought to say. Market activity is good and always welcome, but one also has to take into consideration that in about a week, the market will be ‘closed’ for a month; thus, charterers and everyone else are trying to clear their desks before go on leave, and some of this activity may very well end up being just seasonal.

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