S&P, Newbuilding and Demolition Update (October 6th, 2014)

Fall season is here, but the expected seasonal recovery of the shipping market has still to register an impressive presence; dry bulk rates have been moving sideways on rather uninspiring levels, and tanker rates, the star of the summer, have been rather marginally softening instead of seasonally increasing. There are factors that have been affecting the overall market, and shipping rates are just the end result of macro-economic factors. The U.S. economy seems to be growing slightly better than expectations, and the Fed’s statement that interest rates will be increasing sooner than later has moved the dollar higher against most currencies. And, implicitly, higher interest rates make ‘carry’ positions in the commodities market a riskier more expensive proposition, thus pushing down commodities pricing. At the same time, Chinese growth seems to be decelerating, which has recriminations as well on the commodities (and FX) markets worldwide, primarily pushing down iron ore pricing (and the highly correlated Aussie Dollar). In the oil market, Saudi Arabia, the de facto leader of the OPEC sellers’ club, unilaterally and un-expectedly dropped oil pricing to Asian clients by $1 / bbl; this is one of the few times in OPEC’s history that the Saudis go after market share rather than pricing power, and reports from the OPEC’s last meeting in Vienna suggest a highly dis-functional club at this stage, and likely the $1/bbl price reduction will not be the last market-moving news from Vienna. OPEC’s search of a new identity is another side-effect and the U.S. shale oil game changer; till a few years ago, OPEC had a great captive market in America’s SUVs, which now can be filled at US$3.44/gallon for premium gasoline (our sympathies to our European readers and the ca. €1.70 / L gasoline pricing (approximately US$ 8 / gallon)).

The week has been light as China was closed for most of the week for their National Day, Hong Kong too (formally and informally with the ‘Umbrella Revolution’), Islamic countries for Eid Al-Addha, and Germany was celebrating Day of Unity (Tag der Deutschen Einheit) on Friday. Sale & purchase activity has been moving along the recent trends, of modern vessels sought by publicly traded companies and companies with access to the financial markets, while private owners usually are focusing on older and lower-ly priced tonnage, in absolute terms.

MT BW AMAZON 10 w: TORM CARINA

Product Tankers ‘BW Amazon” and ‘Torm Carina’ in New York Harbor. http://www.basil-karatzas.com

In the tanker market, Flagship Marine Ventures (JV between Prime Marine of Greece and U.S.-based fund) sold two LR2 tankers with 2015 delivery to Scorpio in Monaco; Scorpio Tankers (publicly listed) has not issued any required press releases, so the assumption is that Scorpio-privately-held acquired sisterships MT „Flagship Rose” and MT „Flagship Dahlia” (115,900 dwt, Daehan, 2015) for $57-59 million each, depending on the report, a rather strong price nevertheless; in our last report, we identified the vessels as Daewoo Hulls Nos 5402 and 5403. It is understood that the contract price for these vessels was approximately $47 mil each, in July 2013. Based on standard contract terms, sellers likely generated more than 50% return on equity, not often seen in shipping! A lot of discussion has taken place about newbuilding contracts placed in an already well-supplied market, but progress payment structures can basically work as options on hulls to be flipped, and they work beautifully when they do. Great for the sellers, buyers likely a more optimistic view of the future, but the end result is that two more vessels are added to the world fleet. For older LR2 tonnage, there has been an additional sale to report, MT „River Eternity” (105,000 dwt, Sumitomo, 2006) which was sold by K-Line to undisclosed buyers at $30 million. Still in the products tanker market, the LR1 tanker MT „Moray” (76,000 dwt, Daewoo, 2000) was sold at $15 million to undisclosed buyers, a rather soft pricing.

In the MR tanker market, it has been reported that York Capital in the US has disposed of five MR2 tankers (2x SPP Resales, 2016-delivery, 50,500 dwt) at $36.5 million and (3x Hyundai Mipo Resales, Huls Nos 2446, 2447, 2448, 2015-delivery, 50,500 dwt) at $37.0 million each. Buyers have reported to be ‘undisclosed’ Far East-based or Scorpio in Monaco, again, as per a couple of market reports. Still in the MR tanker market, Korean-built tanker MT „Nord Fast” (40,000 dwt, SLS, 2008, IMO III) was reported sold by Norden in Denmark to compatriots Maersk Tankers at $19.5 million, a price seeming slightly below prevailing market.

In the stainless steel chemical tanker market, there has been an interesting sale of MT „Maemi II” (20,000 dwt, Fukuoka, 2008) to US buyers (Transportation Recovery Fund) at $27.5 million, and MT „Sunny Iris” (7,800 dwt, Fukuoka, 2000) at approximately $8 mil to undisclosed buyers.

In the dry bulk market, there have been few transactions to report, and none for modern tonnage of big-sized vessels (capes and panamax / kamsarmax). Supramax bulker MV „Sea Elegance” (50,000 dwt, Oshima (Japan), 2002) achieved $12.5 mil to Greek buyers (Drastirios Shipmanagement), which seems to be a step down in pricing from the sale of slightly newer / larger MV „Sea Lily” (52,000 dwt, Tsuneishi, 2004) at $15.5 million last month to CosBulk of Greece. This has been the most interesting dry bulk transaction of the week, which may be partially explained by the holiday schedule worldwide, as mentioned earlier.

Tonnage from Japanese sellers has been seen more frequently recently in the market, and the weakening Japanese Yen seems to be the motivating factor of the timing of such tonnage for sale. Presuming that the strength of the US Dollar will be sustainable, and given the so-so success of ‘Abe-nomics’, probably more quality tonnage from Japan will be placed in the market for sale.

MV BULK COLOMBIA 6

Supramax Bulker MV ‘Bulk Colombia’ inbound in Port of Hamburg. http://www.basil-karatzas.com

Finally, while freight rates seem to be moving nowhere, and that the orderbook overall has been strong, there are still few vessels that are getting scrapped / withdrawn from circulation. So much so, that scrap prices have been persistently at or even above the $500/ldt mark, having proved (so far) wrong doomsayers and ‘old timers’ predicting a scrap market at below $300/ldt due to an exit from the market of older / non-economical vessels. There has been increased concern that intermediaries and cash buyers have been ‘forced’ to take speculative positions to get their hands on tonnage, ideally good quality vessels to be forward to end demolition yards at a higher price, and that the market may be due for a correction. The truth of the matter is that vessel demolition has always been a high-risk business, for execution and speculation, and the present environment makes it makes it even more challenging to get vessels scrapped with a high degree of certainty of getting a contract performance, thus counterparty risk becomes of paramount importance.


© 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 (September 27th, 2014) – Dry Bulk Market Focus

It’s hard to believe that the Baltic Dry Index (BDI) started the year above the 2,200 mark given that now is standing at below 1,100, and having spent most of the late spring and summer below 1,000. A seasonal rally had religiously been prayed for and for a few recent weeks capesize rates improved to ‘high teen levels’ (approximately $18,000 pd on average spot market), but then again, the rally seems to have run out of steam a bit too early. A worldwide bumper crop season of grains, primarily in North America, has been holding the hopes for boosting panamax rates especially in the Atlantic, but it seems railroad capacity has preferentially been tied up to shipments of shale oil, leaving inland seaways transport to cope with the movement of the cargo along the Mississippi River to New Orleans for exporting.   China, as this was put into perspective in a recent New York Times op-ed article, has been focusing on clean air and has shut down domestic coal mines of poor calorific quality or high sulphur content, and likewise imposed higher standards of imported coal, which likely would stimulate increased imports and thus help drive higher dry bulk freight rates. There has been speculation that, over the long run, China will be shifting its power generation to natural gas, which is perceived as a negative development for coal miners worldwide, but good for the LNG trade fortunes. In India, there has been noted excessive port congestion with vessels waiting to unload coal, and there is hope that such port congestion could translate to higher rates. The decision by the Supreme Court of India to declare ‘arbitrary and illegal’ the issuing of licenses for more than 200 coal mines issued since 1993 creates further hopes that coal imports would be needed for the country to meet its domestic needs. The decision is not revoking the licenses altogether yet, but taking action on the ‘coal scam’ has created great uncertainty for the approximately 30 operational mines.

MV BERGE MACCLINTOCK

Capesize vessel ‘Berge McClintock’ (Image source: http://www.shipspotting.com

In terms of sale and purchase in the dry bulk market, Bunge has exercised a purchase option to acquire from Fleet Management MV „C Phoenix” (2011, Jiangsu Rongsheng, 176,000 dwt) at a deep-in-the money price of $40 million. It is understood that the vessel has been already on charter to Bunge until January 2015 at $15,000 pd with Bunge’s option to extend at similar levels for an additional year, which definitely has affected pricing further. Navios has purchased from Berge Bulk MV „Berge McClintock” (2012, Hanjin Heavy, 179,000 dwt) at $52.5 million. MV „Rio Manaus” and MV„Rio Montevideo” (2012, HHIC- Philippines, 180,000 dwt) were sold CarVal Investors at $52 million; certain broker reports have the sale price at $48 mil, which may be better in line with the market given the thin pedigree of the shipbuilder and also the notion that sellers have been the Ahrenkiel Steamship in Germany, knowing to have been in discussions with their banks. CarVal has been active in shipping recently as a couple of week ago has been associated with the purchase of another modern cape MV „Silver Surfer” (2013, Sungdong S.B., 179,000 dwt) from Sinokor at $53.5 million, which would still be considered at a slight discount to the market, placing prompt capesize re-sales below the $60 million market, in order to reflect for the price achived for this 2013 tonnage.

MV JIDAL VADAR

Built at Burmeister & Wain (Denmark), panamax bulker MV ‘Jindal Vadar’ (Image source: http://www.shipspotting.com)

Vintage panamax bulker MV „Castillo de San Petro” (1994, Korea, 73,500 dwt) was sold for further trading at $5.7 million to undisclosed buyers, a price in line with her scrap value (10,624 ldt); vessel is immediately SSDD due. Similarly aged MV „Sinokor Pioneer” (1995, Sumitomo, 70,000 dwt) was sold at $5.95 million to Chinese buyers, with vessel having about a year to trade before her next drydock, while Danish-built MV „Jindal Varad” (1994, Burmeister & Wain, 75,800 dwt) was sold at $5.8 million to Indian interests. In terms of modern panamax bulkers, the most recent transaction of modern tonnage has been almost a month ago when MV „Zhushui 5” (2012, Seroya Zhushui, 79,500 dwt) fetched a discounted $20.5 mil by Greek buyers; the transaction is interesting that a relatively new Chinese shipbuilder built the vessel on their own account (with no independent third-party supervision besides the classification society) and then facing weak demand when attempting selling the vessel, and thus the soft cash price; interestingly, we keep seeing more tonnage of that nature.

MV SEA LILY

Supramax bulker MV ‘Sea Lily’ (Image source: http://www.shipspotting.com)

In the supramax / handymax segment, MV „Emerald Strait” and MV „Endeavour Strait” (2010, Sanfu, 56,800 dwt) were sold by Rehder Carsten in Hamburg to Maritime Opportunities in Norway at $22.5 million, a rather strong price, given the vessels’ un-inspiring shipbuilding pedigree. Norwegian financial buyers were also the buyers of MV „Free Jupiter” (2002, Cosco Nantong, 47,000 dwt) at $12.3 million while sellers Freeseas (Nasdaq: FREE) took the vessel back on bareboat charter for seven years at $5,350 pd. Supramax bulker MV „Sea Lily” (2004, Tsuneishi Zosen, 52,500 dwt) was sold to Greek buyers at $15.5 mil by CosBulk to Greek buyers.

In the smaller handysize market, the well-built in Japan MV „Kwela” (2002, Kanda, 32,500 dwt) was sold at approximately $10.7 mil to ACT Infraport in China, while MV „Caribbean Frontier” (2002, Minami Nippon, 28,000 dwt) was sold at 9.5 million. MV „Fortune Frontier” (2002, Shikoku, 29,000 dwt) was sold in August at $9.7 million, confirming an asset price stability despite the end of the summer and renewed optimism on improving shipping prospects. MV „Ocean Pearl” (1994, Kanda, 28,000 dwt, 6,352 ldt) built at same shipyard in Japan achieved a very respectable $6.8 million by Chinese buyers. Exact sistership MV „Theomitor” (1994, Kanda, 28,000 dwt) by Anbros Maritime in Greece achieved also same price of $6.8 million in independent sale to also Chinese buyers a week earlier. MV „Silver Star” (1995, Saiki, 22,000 dwt) achieved a strong price of $5.1 mil given her immediate SSDD due position (5,318 ldt). Finally, MV „Lady Anthula H” (1999, 20,700 dwt, 5,300 dwt) was sold in a bank-driven transaction to Turkish buyers at $4.5 million with her SSD immediately due.

In re-capping market activity, the trend of institutional investors or buyers with the access to the capital markets is focusing on modern, expensive tonnage; lack of credit for the traditional, independent shipowner has shifted the market towards small transactions with relatively older tonnage; reflecting the nature of the buyers, there have been a clear bifurcation in the buying interest as well in reference to tonnage quality, with owners putting their own money on the table seeking value deals with quality (read Japanese) tonnage; there is little tolerance for sub-par tonnage; for institutional buyers, shipyard pedigree is a lower priority as this apparent with the capesize transactions reported herewith.


© 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 (September 27th, 2014) – Tanker Market Focus

Since our last week three weeks ago, crude tanker rates have softened with VLCC and Aframax average spot rates at approximately $12,000 pd and Suezmax tankers at approximately $16,000 pd, on the back of weak trading activity. At such levels, crude tanker spot rates stand substantially below the yearly average, and it has to be noted that present VLCC rates are very close to operating break even and far below levels required to pay for the vessel’s financial cost as well. Despite the weakness in freight rates, there has been meaningful activity in the sale & purchase market at strengthening prices, as optimism keeps building that the crude tanker market is well into a structural market recovery, and thus the present weakness in the market is only seasonal. A recent article on Reuters that pressures are building up in the US on allowing crude oil exports can only interpreted as a positive development for the crude tanker markets.

MT SAMCO SUNDARBANS

VLCC Tanker ‘Samco Sundarbans’ sold in en bloc transaction to DHT Holdings (Image source: Samco Shipholding)

Double Hull Tankers DHT Holdings (NYSE: DHT) has finalized the acquisition of Samco Shipholding Pte Ltd in Singapore with ownership of seven VLLC tankers with average age of 4.5 years at approximately $322 million; DHT Holdings also acquired in the same transaction and remuneration Samho’s 50% interest in Goodwood Ship Management.   The vessels are built at Hyundai Samho and they are MT „Samco Sundarbans” and MT „Samco Taiga” (2012, Hyundai Samho, 318,000 dwt), MT „Samco Amazon” and MT „Samco Redwood” (2011, Hyundai Samho, 318,000 dwt), MT „Samco Europe” and MT „Samco China” (2007, Hyundai Samho, 318,000 dwt) and MT „Samco Scandinavia” (2006, Hyundai Samho, 318,000 dwt). This being a corporate transaction rather than a pure asset acquisition, there have been additional considerations, although DHT Holdings appears to be paying approximately $50 mil below the nominal market value of the vessels. On pure asset sales, BW Maritime of Singapore has sold MT „BW Nyssa” (2000, Daewoo, 299,500 dwt) to Smart Tankers in Greece at $29.5 million, probably at a $2 million premium over the market. The price reveals strong buyer’s optimism as the vessel is due drydock and special survey in January 2015 at a cost of several million dollars while she will be turning the dreaded 15th anniversary from delivery that puts her on the second priority list of many charterers. The vessel was reported in January 2014 as tied up to a conversion project at $32 million purchase price which transaction apparently has not materialized.

In the Suezmax tanker market, MT „Aegean Navigator” (2007, Hyundai, 159,000 dwt) has been reported sold at $48 million to undisclosed buyers, while other reports state en bloc deal along with sistership MT „Aegean Horizon” and MT „Aegean Dignity” and MT „Aegean Angel” (2004, Hyundai, 159,000 dwt) to clients of Teekay (likely Tanker Investment Limited) at pricing to be confirmed.

In the Aframax tanker market, there has been the sale of coated tanker (LR2) MT „SC Laura” (2001, Dalian New Yard, 109,000 dwt) at $14.5 mil by KGAL to South East Asian buyers rumored to be Indonesians. The price seems to be softer than average which is mostly attributed to the Chinese-built of the vessel and the nature of the seller / transaction, while a week ago, similar tonnage from the same shipbuilder achieved $23.5 mil collectively for MT „Beach 3” and MT „Beach 4” (2000/1999, Dalian New Yard, 109,000 dwt). The Japanese-built vessel MT „SC Sara” (2001, Sumitomo, 105,500 dwt) was sold at $17 million earlier this month to Singaporean-based buyers (Zodiac Maritime), a noticeable ‘premium’ for the Japanese pedigree of the vessel. The still Japanese built MT „Song Lin Wan” (2002, Namura, 106,000 dwt) has been sold by CSDC at $19.5 million to again Zodiac Maritime. For more modern tonnage, it has been reported the sale of Daewoo Hulls 5402 and 5403 with 2015 delivery for coated tankers (LR2) 115,000 dwt at $57 million each to US-based buyers.

As we have mentioned in the past, despite the increased buying interest in the crude tanker market, buyers keep being very price sensitive with strong preference for Japanese or Korean built tonnage, and usually for vessels built in a year starting with ‘2’ getting more of the attention. Given that most banks would not provide mortgage financing for older than ten-year-old tankers, independent tanker buyers paying cash have been very opportunistic on their approach, and any urgency in the sale or other transaction handling mishaps or limitations from the sellers usually end up costing a lower sale price.

The products and chemical tanker market has been selectively active as well, with focused interest in the coated panamax (LR1) tankers and MR pumproom design tonnage. The LR1 tanker MT „Holy Victoria” (2008, Minami Nippon, 75,000 dwt) has been sold at $29 mil to Greece based Prime Marine; the smaller and older MT „Moonlight Venture” (2006, Sumitomo (Yokosuka), 61,000 dwt) achieved $22.5 million by unnamed Greek interests.

MT BRITISH HARMONY

BP’s MR2 Tanker ‘British Harmony’ at anchor (Image source: shipspotting)

The MR2 tanker MT „St. Nikolai” (2005, Onomichi, 47,000 dwt) achieved $17.5 million by Indonesian buyers (technical details on the vessel are conflicting, but it seems she’s ‘pumproom design’ which would make her price in line with the market). The older but seemingly more sophisticated tanker MT „High Nefeli” (2003, STX, 47,000 dwt) achieved $15 mil by Greek buyers (Benetech Shipping). MT „British Harmony” and MT „British Chivalry” (2005, Hyundai Mipo, 47,000 dwt) were sold by BP at $19 each with bareboat back to the sellers for two years at undisclosed rate ($8,000 pd bareboat rate some wishfully well-placed reports mentioned) on an operating lease basis. MT „Topaz Express” and MT „Diamond Express” (2009, Minami Nippon, 45,700 dwt) were sold at $22 million each by Daichi Chuo to Island Navigation in Hong Kong. The older MR2 tanker MT „Hellas Progress” (1999, Hyundai Heavy, 46,000 dwt) has been reported sold by Latsco (London) Ltd. to West African interest at $10 million. For modern tonnage, publicly traded companies have also been active with acquisitions in the sector with Scorpio Tankers (Nasdaq: STNG) acquiring from Ceres Hellenic SPP Hull No S5126 on resale basis (2014, SPP, 50,000 dwt) at $37.10 million. Aspiring to soon to file for a public listing, Singapore based Navig8 acquired at $41 million each six MR2 tankers from Wilmar MT „Polaris” (2014, Hyundai Vinashin, 49,000 dwt) and sistership Hull Nos S401, S402, S403, S404 and S405 (2014/2015 delivery, Hyundai Vinashin, 49,000 dwt); the Scorpio acquisition seems to be in-line with prevailing market levels while the Navig8 acquisition seems to be a 10% premium to the market, which is especially interesting given that the shipbuilder is not considered top tier name.

MT TI EUROPE

Euronav’s ULCC ‘TI Europe’ taken for storage purposes by China’s Unipec at reportedly $25,600 pd for six months. (Image source: Shipspoting)

Crude oil has been trading in contango recently and a number of crude oil tankers have been reported chartered for storage, including Euronav’s 442,000 dwt ULCC MT „TI Europe” taken by China’s Unipec for six months plus options at $25,600 pd. The level of discount for present delivery of the commodity is still weak to justify a massive storage play and absorption of crude oil tanker supply from the market which hopefully would boost freight rates. The recent strength of the US Dollar reflecting the Fed’s statements about increasing interest rates in the US has had a negative impact of commodities, in part causing the contango, but making commodities less attractive as a storage medium, especially in an increasing interest rate (costlier) environment thus putting a limit to the storage play. On the other hand, increased refining capacity by Middle East refineries seems finally to be having a positive impact on larger product tankers (LR1 and LR2), a story hyped to ethereal existence for several years now. There are hopes that finally there will be impact on the market which could improve asset pricing. The waiving of export taxation on certain palm oil gradients by Southeast Asian countries, most notably Indonesia, in an effort to win market share on the world markets in a bumper crop season for palm oil, hopefully will have a positive effect on IMO III / veg oil chemical tankers.

Honestly, shipping can use all the help it can get in improving freight rates by contango and storage, to increasing refining capacity in Middle East, or fiscal strategy to move around record levels of vegetable oils.


© 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 (August 29th, 2014) – Tanker Market Focus

Since our last report, apologizing-ly more infrequent than we would prefer, the tanker market has been holding fairly well and better in comparison to the dry bulk market. Tanker freight rates have been holding at respectable levels for most of the time year to date, and above operating break-even for most of the sectors and most of the time. Clean product tankers seem to be the weakest link with freight rates well below $10,000 pd (the tremendous ordering and ‘me too’ mentality has finally caught up with the market); on the other hand, gas carriers – especially for long range tonnage, freight rates have been setting new highs on a casual basis – as high as $100,000 pd for certain vessels, on the back of increased trade, increased production and steady demand and constrained tonnage availability, at least at the moment. Mainstream crude tanker vessels have been holding their values surprisingly well, especially for modern tonnage.

China has been increasingly dependent on more crude oil imports: while monthly Chinese crude imports fluctuate based on inventory buildups and refinery expansion, Chinese crude oil imports effectively increased from 4.3 mbpd in October 2013 to 6.1 mbpd in December 2013 to an all-time-high of 6.8 mbpd in April 2014, about 8% growth y/y from 2013Q1. In general, for 2014H1, crude oil tanker rates are at least double the levels from a year ago, with VLCCs and Aframax tankers averaging about $22,000 pd while Suezmax tankers averaging about $25,000 pd in the spot market. Still, these numbers are not terribly healthy and cannot support the cost base of many a modern tanker with high acquisition prices (a VLCC acquired at $100 mil, would need to see close to $50,000 pd in order to support an amortizing mortgage and allow for a single-digit return to investors); again, when these tankers were not making enough money this time last year to pay crewing and insurance, any improvement is godsend. While there are still numerous crude tanker newbuildings on order, in general, the disappointment in the market has spoiled – so far – the appetite for massive orders, and thus the rate of new orders is diminishing at a time when ton mile and demand seems to be holding steady or increasing. The second half of a year is usually more active in movement of crude oil cargoes, thus seasonality is in favor of the market. And looking longer term, crude oil production is projected to increased from about 90 million barrels per diem (mbpd) to 100 mbpd by decade’s end, it has been as reassuring as it can get, given than a couple of years ago nil or ‘negative growth’ was the base-case scenario.

VLCC MT Front Comanche

VLCC Tanker MT„Front Comanche”

While in late July 2014, Frontline Ltd (ticker: FRO) opted to compensate Ship Finance International (ticker; SFL) $58.8 million for the early termination of the charter for three VLCCs (MT „Front Opalia”, MT ‘Front Commerce” and MT “Front Comanche” – all built in Japan in 1999) rather than spend more than $10 mil to pass mandatory special survey and drydock (SSDD) for the vessels, and eventually sell the vessels to Sinokor for $23.5 mil per vessel (a slight premium over their scrap value), a still Fredriksen-affiliated tanker company – Independent Tankers Corporation Limited (ticker: VLCCF) has sold the one-year-older VLCC tanker MT „Ulriken” (1998, 310,000 DWT, Samsung Heavy) at $26 million, admittedly a very strong price for her age; the vessel, however, has valid certificates and good survey position till December 2018. Similarly aged VLCC tanker MT „Neptune Glory” (1998, 299,000 DWT, Daewoo) has been sold at a softer price of $24 mil, with class certificates and survey position good till April 2018; this sale allegedly should have been at premium pricing given the ‘subjects’ to conversion to offshore asset for Nigerian tender. Although survey position has been getting to be a crucial factor for pricing crude tanker vessels around their 3rd Special Survey (15th anniversary from shipbuilder), pricing seems to be vessel and transaction specific, making vessel valuations a rather customized exercise rather then the output of an algorithm. VLCC tanker MT „DS Victory” (delivered in ‘this part of the century’ 2001, 299,000 DWT, Daewoo) was sold to Greek buyers (NGM Energy / Moundreas) at $33.5 million; vessels built after 2000 are priced and depreciated differently than vessels built prior to the millennium, but the MT „DS Victory” seems to be a very good vessel in terms of cargo capacities, specifications and fuel consumption.

Suezmax MT Cygnus Voyager

Suezmax Tanker MT „Cygnus Voyager”

In the Suezmax tanker market, Chevron Shipping has exercised the option to acquire three Suezmax tankers already under their long-term bareboat charter for an undisclosed remuneration; vessels were owned by Independent Tankers Corporation Limited (ticker: VLCCF) and were MT „Cygnus Voyager” (1993, 157,000 DWT, IHI (Japan)), MT „Sirius Voyager” (156,500 DWT, 1994, Ishibras (Brazil)) and MT „Altair Voyager” (135,000 DWT, 1993, Ishibras (Brazil)); these are 20+ year old crude oil tankers and it’s extremely interesting seeing a major-oil-company-affiliated shipping company ‘coming close’ to such old tonnage, whether chartering or ownership. It’s even more interesting seeing Brazilian-built tankers acquired by a major-oil-affiliated shipping company given than Brazilian-built vessel do not exactly enjoy high reputational respect, primarily in terms of quality of steel plate. Recent Suezmax tanker sales have been the sale of MT „Huelva Spirit” (160,000 DWT, 2001, Daewoo) to Middle-eastern buyers at excess of $18 mil, and the very strong price of MT „Cape Balder” (160,000 DWT, 2000, Hyundai Heavy) from German KG-house for conversion at a very strong pricing in excess of $18 mil. A very interesting sale at the very strong price of $65 mil has been reported in early August of MT „Cap Isabella” (158,000 DWT, 2013, Samsung Heavy); publicly listed Euronav, as the bareboat charterer of the vessel with profit sharing in a potential sale, has confirmed the sale in a press release and their book profit of $4.3 mil but not the actual sale price; as buyer for the vessel has been reported Polembros Shipping of Greece who are known to be opportunistic buyers and very much price conscious, this sale deserves special consideration especially given that the vessel is not ‘eco design’.

Aframax MT Maersk Prime

Aframax Tanker MT „Maersk Prime”

In the Aframax tanker market, earlier in August, the Chinese-built in 1998 LR2 tanker MT „DL Iris” (100,000 DWT, 1998, Dalian) was sold at the reflectively very strong price of $10.5 mil. However, the vessel has been sold ‘on subjects’ which demand a premium on pricing; further to it, the vessel had underwent her 3rd SSDD last year at a cost of $4.5 mil with extensive steel place replacing and installation of heating coils, thus the pricing at $10.5 mil is not much flattering or of excess of scrap value (estimated in the $7 mil range) despite vessel certification validity till 2018. Earlier in the year, MT „Maersk Prime” (110,000 DWT, 1999, Dalian) was sold at $12 mil, thus the sale of MT „DL Iris” is not as appealing as it appears on surface; this market is heavily biased against tonnage built in 1998 and earlier. Two weeks ago, Chinese-built modern aframax tankers MT „DT Providence” and MT „Enrica Lexie” (104,000 DWT, 2008, Shanghai Waigaoquiao (SWS, China)) were sold from Italy’s Fratelli Armatori D’Amato Group to two Greek buyers in individual transactions at $33.5 mil each, which appears to be slightly higher than market levels and implying some market optimism. The easiest found comparable sale of Chinese-built aframax tonnage has been the sale of MT „Valdarno”, MT „Vallesina”, MT „Valbrenta” and MT „Valfoglia” (104,000 DWT, 2009, Hudong Zhonghua) which were sold in January this year at $30 mil each from Montanari to affiliates of Teekay (Teekay Investment Limited, ticker: TIL); it would look that the market has been looking up since January for modern aframax tonnage, although the Montanari tonnage was not well marketed for sale or perceived by buyers in January. The slightly older aframax tanker MT „Ambelos” (105,000 DWT, 2006, Sumitomo) was sold by Greek owners (Samos Shipping) to Pakistan National Shipping Corporation (PNSC) at $33 million, a strong pricing, again from quality Japanese-built tonnage. Just a week earlier, still Japanese-built tonnage MT „Morning Express” (105,000 DWT, 2000, Sumitomo) had achieved the rather anemic price of $11.5 mil from Japanese sellers, but again, more often than not, the way a vessel is marketed for sale affects the sale price indeed, irrespective of market conditions or tonnage quality.

The chemical and product tanker markets have been experiencing a rather calm summer; the freight market has been just acceptable and the orderbook has been a concern for many market players, especially for institutional investors who have had been dominating the market spirits of these sectors in a while. An interesting transaction has been the sale of Hull No 5126 (TBN MT „Amethyst” (50,000 DWT, 2014, SPP Shipbuilding) at SPP Shipbuilding in S Korea from Greece’s Ceres Hellenic Group (Peter Livanos) to Scorpio Tankers (ticker: STNG) at $37.1 million. The price seems to be approximately $2 mil above prevailing market levels, but again, in a becalmed market of freight rates un-expectedly low, one needs a transaction that originates waves or even maintaining the status quo that projections had been built upon.

Handy Chemical / Products Tanker MT „Green Stars"

Handy Chemical / Products Tanker MT „Green Stars”

For smaller chemical tankers, the sale of MT „Green Stars” (36,000 DWT, 2001, Daedong S.B., / IMO III tanker) at $12.5 million has taken place into this rather quiet segment of the market; however, the sale seems to indicate a rather strong market for smaller chemical and product tankers; after all, this market has been under the radar as most emphasis on chemical and product tankers has been for tonnage newer than five-years old and mostly for MR2 tanker of about 50,000 dwt.

Given that summer is seasonally the weakest period of the year for tankers and that this time last year (and the summers before) tankers – especially crude oil tankers – were happy to keep busy at any rate, this summer has been encouragingly robust, so much so as to make many investors believe that tankers are long due their place in the sun, especially since this summer sun has been unduly unkind to the dry bulk market, making any comparisons between market sectors much more favorable.


© 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 (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.