Friday, February 27, 2015

Höegh LNG Joins First US Deepwater FLNG Project

Delfin LNG has signed a joint development agreement with Höegh LNG for its US-based Delfin Liquefied Natural Gas Deepwater Port Project to be located in the Gulf of Mexico.

Höegh LNG Joins First US Deepwater FLNG Project
The project is a planned floating liquefaction, deepwater port designed to export liquefied natural gas (LNG) from the Gulf of Mexico, and is positioned to be the first floating deepwater liquefaction project in the United States, Delfin says in a release.
Höegh LNG will act as a co-owner, owner’s engineer and operator of the floating liquefaction vessels.
”Floating liquefaction is environmentally friendly, cost competitive, economical with limited scale, moveable in the event of a hurricane, and has a shorter and more efficient schedule relative to an onshore plant,” said Frederick Jones, President of Delfin. 
”Furthermore, in the event global energy markets drastically change in the coming decades a floating liquefaction plant can be deployed in alternate locations, which provides floating liquefaction vessel owners the flexibility to be in a position to serve a more diverse pool of customers with shorter duration contracts.”
The Delfin LNG Deepwater Port is a floating liquefaction and export facility consisting of onshore gas compression facilities, a 42-inch pipeline to transport natural gas offshore, and a deepwater port with four moorings and four floating liquefaction vessels.
Subject to regulatory approval, the port will be constructed in phases and will have an ultimate LNG send out capacity of 13 million metric tonnes per annum.

StealthGas Triples Share Buyback Appetite

LPG owner StealthGas has extended its share buyback program for an additional USD 20,000,000, the company said in its annual results for 2014.

STENA_STEALTH (1)
The company announced a USD 10,000,000 share repurchase program in November 2014 and has up to date purchased 1.500.000 common shares for a total of USD 9 million.
The announcement comes as StealthGas records net income of USD 12.7 million for the twelve months ended December 31, 2014, compared to net income of USD 21.2 million for the same period in 2013.
The company had a net loss for the three months ended December 31, 2014 of USD 1.2 million, compared to net income of USD 5.5 million for the same period in the preceding year.
The latest full year results include a USD 6.2m impairment on older vessels intended for scrap this year coupled with losses on derivatives and hedging instruments.
“Our revenues for the fourth quarter and the year were affected by the continued decline in charter rates that was driven primarily by falling oil prices. Although the charter market was sluggish we managed to improve our operating profitability significantly compared to the previous quarter and slightly over last year,” CEO Harry Vafias commented.
Vafias said that the company is also focused on renewing and diversifying its fleet with 15 newbuildings scheduled for delivery from this year until 2017.
” We have about USD 130 million in cash and cash equivalents at year end. Our strong balance sheet, with a ratio of debt to total assets of 34.4%, puts us in a position to address any investment need that might arise. In addition we are boosting our share repurchase program with another 20 million on top of the 10 million that was announced in November 2014,” he added.
According to Vafias the outlook for 2015 is for LPG charter rates to likely remain at similar levels.

Yangzijiang Posts Double-Digit Profit Growth

Singapore-based Yangzijiang Shipbuilding has reported net profit attributable to shareholders of RMB 3.48 billion (USD 555.2m) for the twelve months ended December 2014, a 13% increase year-on-year spurred on by higher revenue and diversified portfolio, the Chinese shipbuilder said in a stock filing.
Yangzijiang Posts Double-Digit Profit Growth

The revenue increased 7% to RMB 15.4 billion (USD 2.45bn) in 2014, with shipbuilding-related segment as the core revenue driver, contributing to about 89% of the total revenue.
The shipbuilding sector reported a RMB 13.7 billion revenue (USD 2.18bn) in 2014, an increase of 6.5% year-on-year, primarily due to the higher valued 10,000 TEU container ships delivered during the year, according to the filing.
A total of 33 vessels were delivered in 2014 according to schedule, compared to 34 vessels delivered in 2013. Other complimentary businesses such as shipping & logistics and trading also contributed positively to the revenue of the group.
Compared to the construction and delivery of the higher margin shipbuilding contracts secured prior to financial crisis in 2013, vessels delivered in 2014 had relatively lower contract price and resulted in lower margin, the company says, declining from 27% recorded in 2013, to 19% in 2014.
The lower shipbuilding margin also weighed down the overall gross profit for the group, which declined 13% to RMB 4.1 billion (USD 654m).
Yangzijiang received 41 effective shipbuilding contracts in 2014, with a total contract value of USD 1.8 billion.
In addition, six outstanding options including two 10,000 TEU container ships, two 36,500 DWT bulk carriers and two 2,700 TEU container ships were carried forward to year 2015.
As of date of reporting, the company’s outstanding shipbuilding order book stood at 118 vessels with a total value of USD 4.75 billion (USD 757.8m), ranking it No. 9 in terms outstanding order book globally as of end of December 2014.
The company has also recently embarked on the production of liquefied gas carriers, announcing the new orders for two 27,500 cbm LNG carriers with a total contract value of USD 135 million, and its research and product development for LEG vessels are ongoing.
”While there are early signs that the market might have entered an initial stage of recovery, views on the near term outlook are mixed, and the shipbuilding industry in China has shown diverse performances,” Ren Yuanlin, Executive Chairman of Yangzijiang, said.
”With the White List of qualified shipyards that the Chinese government rolled out in September 2014 and several other policies designed to promote the industry upgrading and consolidation, Yangzijiang will be in a favorable position as a distinct leader and outperformer.” 

Thursday, February 26, 2015

Offshore downturn unlikely to be prolonged: Pacific Radiance

Offshore downturn unlikely to be prolonged: Pacific Radiance
By  from Singapore
Thursday, 26 February 2015 03:09
The current downturn in the offshore sector is not expected to persist over the long term due to growing global demand for oil and gas, according to offshore services firm Pacific Radiance.
The owner of more than 130 offshore vessels believed that from a marco perspective, expenditure for exploration and production of oil and gas is anticipated to continue to grow in the long run, as demand is also expected to continue to increase globally.
“We remain cautiously optimistic about the long term fundamentals of the oil and gas sector as energy demand is expected to grow with the rise in global population and affluence,” said Pang Yoke Min, executive chairman of Pacific Radiance.
The recent plunge in crude oil prices has resulted in lower charter and utilisation rates for both offshore oil rigs and OSVs, hitting the margins of offshore companies.
Pacific Radiance believed that it is well-positioned to weather the present challenges by expanding into key emerging markets, keeping its fleet relevant, strengthening its operational capabilities, and taking into account the eventuality of the oil and gas cycles.
Meanwhile, the Singapore-listed Pacific Radiance has achieved higher profit for its financial year ended 31 December 2014.
Net profit for the year rose 22% to $69.42m from $56.84m in 2013, supported by charters from its newly delivered OSVs as well as its ongoing fleet rejuvenation program and lower interest costs.
Revenue inched up 2% year-on-year to $172.22m largely due to higher contribution from its offshore support services arm.
Published in Asia, Offshore

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Pacific Basin plunges to $285m 2014 loss on charges, weak revenue

Pacific Basin plunges to $285m 2014 loss on charges, weak revenue
By  from Hong Kong
Thursday, 26 February 2015 08:48

As forecasted, Pacific Basin Shipping posted a $285m 2014 loss on the back of almost flat revenue rises, and charges on chartered-in vessel costs and bunker costs as well as for the disposal of its towage-related business.
This included $130m in non-cash impairments and provisions reflecting significant changes in the dry bulk and bunker fuel markets; and $91m in towage-related impairment and business disposal charges. The sharp turnaround from the $1.5m net profit last year was also blamed on the difficult market conditions with very low dry bulk market rates, Weak revenue barely rose to $1.72bn from $1.71bn the year before.
On its performance, Pacific Basin said in a stock market announcement noted the poor start to the year with the Baltic Dry Index falling to its lowest since indices began in 1985 and a dysfunctional freight market in some regions.Looking ahead it said: "We expect weak market to continue in 2015 and take a cautious view on freight earnings outlook.
"The handysize specialist noted that while net fleet growth has reduced, excessive dry bulk supply is not yet fully absorbed. Meanwhile lit expressed concern that low fuel prices could lead to faster transits and a resulting potential further increase in tonnage supply.
On the market, Pacific Basin said: "Demand growth continues to be threatened by softer outlook for China and most developed economies."
Published in Asia, Dry Cargo, Port & Logistics

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Wednesday, February 25, 2015

Malaysian shipper says global bulk industry suffering badly

In Dry Bulk Market,International Shipping News 25/02/2015

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The global shipping industry is at its lowest point in 30 years, Malaysian Bulk Carriers Bhd chief executive officer Kuok Khoon Kuan said.
Citing overcapacity and slower global demand as one of the main contributors to the poor market, Kuok said: “In January 2010, the Baltic Dry Index (BDI), a reflection of the dry bulk market, was at 2758 points, and as of Feb 20, 2015, the BDI was at 513 points, a 76% drop, which is very significant.”
Kuok says the large drop is the cause of why many of the shipping companies today to be in grave financial straits.
He added that while the oil prices have came down considerably and expectations being that consuming countries will have more money to spend, the effect will not be translated to the market immediately.
“Even the IMF revised its projection for global growth in 2015 to 2016 to 3.5% from 3.7%. The downshift is mainly due to weaker prospects in major economies.”
Malaysian Bulk Carriers’ pretax profit for 2014 suffered a 60% drop to RM18.33 million as compared to RM45.5 million in 2013.
“Dry bulk is a core business of our group, and with the falling BDI in the past few years, our pretax profit has fallen substantially over the 2010 to 2014 period, from RM244 million in 2010 to RM18.3 million in 2014.”
Kuok said the average time charter rates for the firm’s dry bulk fleets fell by 66% over the five year period, from RM26,000 a day in 2010 to about RM8,700 in 2014.
“Although our fleet size has increased, the revenue has dropped purely as a reflection of the very poor shipping market. In the past ships were earning double digit numbers. Due to slower global demand and overcapacity, rates are going to suffer.”
Kuok says that with overcapacity plaguing the shipping market, it is going to impact negatively on shipping income and therefore the outlook for 2015 is very challenging.
“We are not expecting an immediate turnaround, but hopefully the recent troubles of the shipping industry will cause less investment, and as shipyards get less orders, many of them will close and that will help in reducing capacity in the market.

“In fact, there are reports that of the 1,600 shipyards or so, possibly about 13 to 15% will close if things remain as it is.
“In the past, when they were not getting new orders from dry bulk, tankers, container ships, they still had a lifeline with the offshore sector, but with offshore also turning sour, they are not finding many options, which means those who are financially stretched will find it more difficult to move forward.”

Source: The Rakyat Post

A word of Caution Before Investing In This Bankruptcy-Ridden Industry

In International Shipping News 25/02/2015

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Few investors have heard about China’s Winland Ocean Shipping Corp. or Denmark’s Copenship A/S. But these firms are the proverbial “canary in the coal mine.”
Both have declared bankruptcy in recent weeks, and they may soon have plenty of company. That’s what happens when heavily-indebted companies square up against deep industry distress.
That industry: dry bulk shipping, which involves everything from iron ore and other commodities to processed industrial materials. The major shippers build massive (and expensive) boats and then hope that those boats can garner sufficiently high daily lease rates.
Those rates, as measured by the Baltic Dry Index, have just moved to levels not seen since the 1980s. The index typically had support in the 650 range during past downturns, but we’ve now shot past that mark. (Remarkably, this index hit almost 12,000 back in 2008.)
Why is this index plumbing fresh lows with each passing week? Demand for dry goods, especially in China, appears to be quickly slowing. Moreover, dry bulk shippers ordered a lot of new ships in 2013, many of which started plying the waters in the past 12 months. Too many ships chasing too little market action has led to price wars. It’s the sort of “beggar thy neighbor” policy that means that all shippers are either operating at a loss, or at greatly reduced levels of profit.
Frankly, a wave of defaults hits this industry every time the BDI stumbles badly. Back in 2012, Overseas Shipholding Group, Inc. (NYSE:OSGB) sought protection from its creditors. The next year, Excel Maritime went belly up. And in 2014, even as the BDI staged a temporary rebound, Genco Shipping had to file papers with the bankruptcy court. And those are just U.S. listed stocks.
The fresh pullback in the BDI makes this a good time to pursue a two-pronged strategy: First, identify the companies with the weakest balance sheets, some of which may represent solid short-selling candidates. Second, identify the industry’s strongest players that will be eventual beneficiaries of an industry shakeout that reduces competition.
The Weak Hands
Investors have already lost considerable sums of money by investing in Eagle Bulk Shipping, Inc. (Nasdaq:EGLE). The shipper announced a massive debt restructuring in August 2014, which left its shares nearly worthless. The company subsequently re-listed its stock, thanks to a cash infusion that was backed by a $225 million term loan and a $50 million credit line.

Trouble is, Eagle Bulk hasn’t generated a quarterly profit since the second quarter of 2013, and thanks to the fresh pullback in the BDI, it will likely bleed cash for the foreseeable future. Securing fresh funds, as Eagle has, makes sense when industry conditions are stable, but that $225 million term loan comes with cash flow covenants that will be hard to meet if the BDI stays below 750.
Another distressed firm: DryShips, Inc (Nasdaq:DRYS), which has seen its stock fall 75% in the past year to around $1. This shipper had historically survived the bad times by relying on its ownership stake in Ocean Rig, UDW, Inc. (Nasdaq:ORIG), which owns and leases offshore oil rigs. That industry is now in distress as well.
In a bid to buy time, DryShips sold 250 million shares four months ago (at $1.40 a share) and is now in the process of burning through that cash. For a company with more than $5 billion in debt, the fresh plunge in the BDI cannot be very reassuring to bondholders — or equity investors.
The Healthy
Yet this cloud also has a silver lining. The healthier operators appear poised to ride out the bad times and should also benefit from the chance to acquire distressed assets as they come through the bankruptcy courts. Take Diana Shipping, Inc. (NYSE:DSX) as an example.

We’re always on the lookout for quality tonnage and the ships we have purchased thus far have proven their superior technical standard,” said company president Stacey Margaronis on the Q3 conference call. Indeed Diana has consistently used its financial strength as a weapon whenever the industry has hit an air pocket.
At the end of the third quarter of 2014, Diana had $200 million in cash, compared to $400 million in long-term debt. None of the debt is due in the next three years. Diana has been using its financial strength to both buy back shares and upgrade its shipping fleet. Buybacks make sense when you consider that shares are currently valued at 68% of tangible book value (of $10.54 a share).
That’s not to say that shares can’t slip further. Diana has eight ships coming off of long-term contracts, and the BDI plunge means that new contracts will be priced much lower. Diana reports results on March 4, 2015, and industry analysts are waiting to see how the company’s 2015 operating outlook has been affected by the BDI pullback. Assuming the firm is in a position to still generate positive free cash flow in 2015, then investors may be greeted with a new share buyback announcement.
Investors may also want to research Navios Maritime Holdings, Inc. (NYSE:NM), which has ample cash, a profitable logistics business and a generally low expense structure. Navios just reported Q4 results, and management provided a solid overview of current industry conditions, which you can listen to by clicking here .
Risks To Consider: If the BDI remains below 600 for all of 2015, then even the stronger industry players will remain out of favor.
Action To Take –> It’s increasingly likely that we’ll see additional bankruptcy filings in this beleaguered industry. That should set the stage for a rationalized global fleet, which should eventually lead to firming lease rates, especially as the global economy picks up steam. The current industry distress gives investors an opportunity to take long or short positions on the stocks mentioned above or any number of other industry players.

Source: StreetAuthority

Tuesday, February 24, 2015

Shipping cos bank on Brazilian ore exports to up freight rates

In Dry Bulk Market,International Shipping News 25/02/2015

iron_ore_dry_bulk_port
Shipping companies are banking on increased iron ore exports from Brazil to China and India to shore up the dry bulk freight market, after it touched a new low earlier this month.
While the tanker market was relatively buoyant the last few months due to low crude prices and concomitant increase in demand for shipment, the Baltic Dry Index (BDI), which measures the cost of shipping bulk cargoes on key ocean routes, fell to its lifetime low in the first week of this month.
The first week of February saw the BDI slump to 560 — it slid steadily from 1,300 in mid-November to 800-odd in mid-December. Before this, the lowest the index had touched was in February 2012, when it slipped to below 700. At its peak since the index came into existence, it touched close to 11,000 in May 2008.
Ship owners who have put their bulk carriers in the spot market are finding it increasingly difficult to maintain the viability of their operations. At the current levels of the index, bulk carriers such as Capesize and Supramaxes are barely getting a rate of $5,000 a day.
In the current situation, shipowners feel an increased flow of iron ore from Brazil, the world’s second largest producer, could boost the rates, as hauling the ore from there to China cost almost double than that from Australia.
“We hope that they (Brazil) are able to sell their iron ore more competitively than the Australians, because Brazilian iron ore to China is the best possible thing to happen to dry bulk shipping,” Shivakumar, Group CFO of Great Eastern Shipping, told an analysts’ meet earlier this month.
Brazil’s Ministry of Industry, Development and Foreign Trade had, last month, said iron ore exports from the country had increased by over 17 per cent in December to cross 37 million tonnes (mt), compared with the year-ago month, as its chief producer Vale SA cranked up production. China remained the top importer of the ore, with more than 20 mt, with the other importers being South Korea, India and France.
Another hope of the rates picking up is the higher scrapping of old vessels in the last few months — this will keep a leash on the number of ships chasing shrinking cargo volumes. Last year, about 16 million DWT bulk carriers went to scrap yards.
“This year, in the first month, we have seen excess of two million DWT getting scraped, so that is one sign that scrapping is going to pick up,” Shivakumar said.
One fall-out of the crashing bulk shipping rates is the fall in prices of second-hand bulk carriers, which are estimated to have fallen by at least 10 per cent last quarter. Shipowners are weighing the option of buying the cheap assets and waiting for the markets to pick up.

Source: The Hindu Business Line

Freight shipping prices sink on oversupply

In International Shipping News 25/02/2015

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Freight shipping prices have plummeted to a historic low, fuelled by a long-standing problem of too many ships and lower demand from China, but experts caution against seeing it as a warning on the global economy.
The Baltic Dry Index (BDI), which tracks the cost of transporting dry commodities such as coal, iron ore and grain across 20 shipping routes, has dropped to 509 points, its lowest level since the creation of the index in 1985.
There have never been more commodities transported by sea, but the sector has been plagued with a surplus of ships ordered in good times, while China has put further downward pressure on rates.
The index used to be seen as a reliable indicator of global economic health or looming crisis, but the gauge has lost its edge in recent years.
“The BDI adds little to what we already know about global commodity markets from other indicators, and it is a poor guide to the overall health of the world economy,” said Julian Jessop, analyst at Capital Economics.
Marc Pauchet, an analyst at shipbroking company Braemar ACM, said: “The combination of increased speculative investments in the commodities market and an oversupply of ships has thrown the indicator off in recent years”.
The BDI is now simply a reflection of the balance of supply and demand for ships carrying dry bulk.
“The key point is that demand for cargo ships has recovered since 2009, but it has failed to catch up with the growth in supply,” said Jessop.
The shipping industry has long suffered from the blight of ships ordered when times are good and delivered when they are no longer needed.
The BDI peaked at 11,793 in May 2008 and confident owners ordered more ships to cope with robust demand — oblivious of the coming global economic crisis.
Since then, the market has been hoping for a recovery that has been slow to materialise.
And every tentative upturn has led to increased orders from shipyards, mainly in China and Japan, perpetuating the problem.

“The market does not learn,” said George Kalogeropoulos, commercial and chartering director at SafBulk — although he said the extent of the BDI decline this time was surprising.
The fourth quarter of 2014 was especially bad for business, a period supposed to be the strongest in the year for the dry bulk sector.

This was compounded by a late Chinese New Year in February, and the traditionally quiet period preceding it.
China is the world’s second biggest economy after the United States and the largest consumer of coal and iron ore, making the shipping industry highly dependent on Chinese demand.
But the Asian powerhouse’s economy is slowing down. In 2014, it grew at 7.4 per cent, the weakest rate for 24 years.

And Beijing’s removal of an export tax rebate in January is likely to continue to depress Chinese demand for iron ore, according to Pauchet.
“Chinese steel mills had been taking advantage of the export tax rebate to sell their production to neighbouring countries,” he said.
“But the re-introduction of the export tax in January weighed on demand for Chinese steel, translating in a drop in iron ore imports.”
Prospects for coal are no better. Chinese imports fell sharply in 2014 owing to the increased use of hydropower, according to Braemar ACM.
And in 2015, the completion of nuclear power plants should further reduce Chinese demand for coal.
Shipowners have begun to react, trying to push back new deliveries.
And since the start of the year, the scrapping of ships is increasing, a change from 2014 when owners were hanging on to their older vessels, anticipating a market recovery.

Some of them, such as Scorpio Bulkers, which went on a buying spree in 2013, have also decided to convert some ships on order into oil tankers.
Kalogeropoulos said he did not think this was enough.
“In my opinion there is only one way for the market to recover and sustain,” he said.
“It’s simple. All the shipowners have to lay up 15 per cent of the entire fleet for good. That’s the only way.”

Source: AAP

Cross-Mediterranean Aframax rates sink to near 5-month low on abundant tonnage

In International Shipping News 25/02/2015

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The cost of sending 80,000 mt crude oil cargoes on the cross-Mediterranean route has dropped to the lowest level in almost five months, with the tonnage versus cargo ratio currently weighted heavily in charterers’ favor.
Rates on the route were assessed 10 points lower at Worldscale 80, which equates to $5.22/mt, the lowest since a $4.99/mt assessment on October 3, 2014.
The primary driver of the dropping rates has been a lengthy Mediterranean position list, which grew last week amid low levels of chartering inquiries. “It looks a very soft market. There is a good supply of ships and delays in the Turkish Straits seem to be coming down,” said a shipbroker. Delays through the Turkish Straits — the Bosporus and the Dardanelles — are common in the winter season, leading to ships sitting idle outside the Straits thus restricting the position list in the region.
There were two separate closures of the Straits last week, due to snow and low visibility, but sources say that delays are easing this week, and that an increasing number of ships are passing through the Straits each day.
This has led to an increase in the number of available ships in the Med, which was in evidence Monday when Petrogal was heard to have received 10 offers for a Sidi Kerir-Portugal 80,000 mt cargo.
There was some potentially encouraging news for shipowners early this week though, as shipping and trading sources said that crude exports were set to resume at the Libyan port of Zueitina after an eight-month hiatus.
Sources also said Marsa al Hariga had reopened after a short closure. This should lead to an increase in Aframax cargoes coming into the Mediterranean market but shipping sources said there would need to be a clearout of tonnage before any positive impact would be felt.
“There are plenty of ships to bounce off,” said a shipbroker.

Source: Platts

Dry bulk market could rebound from historical lows in the coming weeks

In Hellenic Shipping News 25/02/2015

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The dry bulk market could exit from its historical lows in the coming weeks, as Chinese buyers reenter the market after the holiday celebrations. This is already evident from the iron ore fixture activity. According to the latest report from shipbroker Golden Destiny, “Chinese iron ore fixture volume shows solid levels. According to Commodore Research, there is an increase in Chinese iron ore fixture volume with 26 vessels being chartered to haul iron ore to Chinese buyers last week, 5 more than the previous week and 3 more than the trailing four week average”.
The Piraeus-based shipbroker added that “fixture volume has remained moderately above the relatively low volume seen in early January. Meanwhile, Chinese steel production remains under serious pressure as recently data from the China Iron and Steel Association shows that average daily crude steel production at China’ key steel mills totaled 1.69 million tons during January 21 to January 31. This is the same level that was reported by CISA from January 11 to January 20 and the lowest seen since late November. In the thermal coal market, Chinese fixture volume is not so strong as in the iron ore market 4 vessels were chartered to haul spot thermal coal cargoes to Chinese buyers last week, 3 less than was chartered during the previous week and 1 less the trailing four week average. Overall, demand for imported thermal coal remains well below the peak level last seen in January 2014. One more negative factor in the coal market with a dismal influence on the panamax segment is that India’s power plant coal stockpiles have increased further this week and now exceed the stockpile level seen a year ago. At present, approximately 18.6 million tons of coal is stockpiled at Indian power plants. This is 100,000 tons more than was stockpiled a year ago”, said Golden Destiny.
It also mentioned that “the levels of BDI could not found support from any vessel size and ultramax newbuilding deliveries have an intense downward effect on the performance of panamax and handymax markets. The Chinese iron ore fixture volume fuels some hopes for better returns in the capesize segment after the end of Chinese New Year, but there is still high uncertainty for the performance till the end of the first quarter of the year. Currently, a positive sign of these days is that there is a decrease in Chinese iron ore port stockpiles and approximately of 93 mil tons of iron ore is now stockpiled at Chinese ports, down year-on-year by 5.5 million tons (-6%). Iron ore price persists at record 6 years’ low of $62/ton as Chinese iron ore appetite is holding back due to Lunar New Year”.
It’s also noteworthy that the LNG segment is in similar mode. “LNG spot rates remain in the doldrums, while there are market indications about LNG carriers being laid up around Singapore. According to shipping data on Thomson Reuters, seven tankers have been sitting idle off the east coast of Johor, Malaysia, for over two weeks, and another two ships have been anchored south of Batam, Indonesia, for several months. Half a dozen LNG tankers are in Singaporean docks. The 15 ships have a combined capacity to carry 2.26 million cubic metres of LNG, about two weeks worth of Singapore’s gas demand. LNG spot rates have now declined to $54,800/day despite roughly 5 fixtures being reported this week”.
Meanwhile, in shipping finance deals this week as tracked by Golden Destiny, “BW LPG Limited announced that it has signed a Facility Agreement for a debt facility of up to USD400 million for financing seven of its VLGC newbuildings. The financing has been raised from The Export-Import Bank of Korea (“KEXIM”) as Export Credit Agency (ECA) lender, with DNB Asia Limited (“DNB”) and Skandinaviska Enskilda Banken AB (Publ), Singapore Branch, (“SEB”) as Mandated Lead Arrangers and commercial lenders.DNB and HSBC Bank Plc. (“HSBC”) acted as ECA structuring advisors with HSBC also acting as ECA coordinator.
The Facility comprises the following: An ECA tranche of up to USD268 million that is being provided by KEXIM, representing approximately 67% of the facility amount. A Commercial tranche of up to USD133 million, split equally between the two commercial lenders, representing approximately 33% of the facility amount. The debt financing will be secured against seven of the Company’s VLGC newbuildings. The blended margin over LIBOR applicable across all tranches of the financing is 1.70% p.a., and the weighted average amortisation profile will be 18 years”, Golden Destiny concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

Monday, February 23, 2015

Is Really Big Really Beautiful, Or Just Really Big?

In International Shipping News 23/02/2015

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In 1930, the legendary shipowner Erling Dekke Naess bought a 12,417 dwt tanker. 50 years later he reminisced that “Everyone said it was too big, but I went ahead anyway. They were right. I tramped it round the Med but couldn’t get a cargo”. It ended up in lay-up. So even shipping legends have difficulty with ship size decisions (and he was an economist too).
Surging Upwards
Bigger ships play a crucial part in sea transport and over the last 150 years they’ve got much bigger. Many of today’s ships are 10-20 times bigger than a 
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century ago and the economics remain compelling. But unfortunately it’s not just a matter of cost savings. In practice the ship size investment decision has three key dimensions: cost, utilisation and flexibility.

Cost: Bigger Is A Bit Better
“Bigger is better” is the easy part of the investment decision. Bigger ships cost less, use less fuel, and have lower OPEX per unit of capacity. So using the biggest ship possible is ideal if you have a steady trade. But as the ship gets bigger, the relative saving diminishes. For example, a 2750 TEU containership costs around 30% less per TEU than a 1700 TEU vessel. But jumping from 2750 TEU to over 8000 TEU saves only around 12% per TEU. Bigger ships save even less, with fuel and OPEX following a similar pattern.
Utilization: Empty Is Awful
In a tough market every saving is crucial, but if you can’t fill the ship, being cheap does not help and this can be a logistical minefield. For example in the forest products trade, replacing a 3,000 dwt logger with a 10,000 dwt ship cuts cost per dwt dramatically. But if shippers can’t assemble enough cargo to fill the ship, it’s a loser. This is an even bigger issue on the liner trades where ships must sail to schedule. Big ships get filled in the boom, but what happens in recessionary periods?
Flexibility: Way Out Of A Fix
Thirdly, there’s the flexibility of access to cargo and key ports. This is a difficult decision, since it depends on charterers, and it explains why bulk ship sizes tend to creep up very slowly. For example, the standard Capesize bulker has been 170-180,000 dwt for a decade. The trade is easily big enough to use much bigger ships, but is it worth the risk?
VLCCs are the classic case study. Between 1967 and 1979, VLCCs grabbed a 58% market share. It seemed like a no-brainer, but in the 1980s oil traders took over cargo from the oil majors, and long-haul oil from the Middle East to the Atlantic was replaced by short-haul trade. The VLCC share has since fallen to 38%. Today containerships are going through a similar transition, with the Post-Panamax fleet surging from a 5% to a 58% share.
Are Containers Different?
So there you have it. Ship size is difficult and battle-worn bulk investors take small steps. Stepping out of line can be tricky. Of course “this time it’s different” in the container business – but Sir John Templeton famously described those as the four most expensive words in the English language. Have a nice day.

Source: Clarksons

Shipping is ready for a technological revolution

In International Shipping News 23/02/2015

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The ocean is the highway of international trade. With more than 90 percent of the world’s goods transported across waters, the global shipping industry helps you turn on your lights, cook your favorite meal, and even put petrol in your car. But that’s not the only contribution the industry makes.
It is also the lifeblood of many local economies. In Singapore, the industry employs around 170,000 people and contributes around 7 percent to the country’s GDP. In Hong Kong, the industry accounts for more than 25 percent of the country’s GDP. In the Philippines, the maritime industry contributes over $5.2 billion annually to the country’s foreign exchange remittance, and employs more than half a million Filipino seafarers .
Shipping is one of the world’s most important industries and, as projections suggest, global seaborne trade could double by 2030. Its role in driving local, regional and global economic growth will continue to increase.
But it’s not all smooth sailing. All eyes are on the environmental performance of the industry, which is facing stricter regulation in two key areas—emissions that are directly harmful to society and greenhouse gas (GHG) emissions that threaten the balance of our planet’s ecosystems.
Reducing harmful emissions, such as Sox, Nox and particulates, is being addressed through new regulation which will see a global reduction in the sulphur content permitted in ship bunker fuel from the current 3.5 percent to 0.5 percent by 2020. In emission-controlled areas, such as Northern Europe and North America, the lower cap of 0.1 percent has been enforced since Jan. 1.
The shipping industry is also the only sector with a binding global agreement to reduce GHG emissions. Under the agreement, which came into force in January 2013, the shipping industry has to reduce the amount of GHG emitted per ton of cargo transported per kilometer (ton/km) by 20 percent by 2020 and 30 percent by 2025.
These measures are incredibly important for the overall wellbeing of our planet, but they’re no small task. Ship owners will need to significantly invest in new technologies, fuels and approaches to meet the standards that are being set.
And the industry is taking action. From the development of emissions abatement technology, the adoption of greener fuel options such as liquefied natural gas and ethanol, through to the reduction of ship power, there are a number of options being explored. The question is: Does this go far enough?
With trade forecast to continue expanding in the coming decades, more and more ships will be required. This poses a bigger question for shipping, and society: Can we keep growing world trade while improving our overall environmental performance?
I believe the answer is yes—but it will require a radical rethink and a collaborative approach.
Exploring fuel options is key to developing a solution to this challenge, but it will not be enough on its own. It’s time for a full technological revolution which will require us to look at what’s already out there and investigate a completely fresh approach.
This will not only allow the shipping industry to reduce its environmental footprint but also create overall efficiencies which are good for ship owners’ bottom lines. Larger containerships are creating scale efficiencies requiring specialized understanding of hull structures but, so far, we have yet to see real technological change in shipping.
Looking ahead, we should be looking to a world where voyage information, data from ship structures, components and machinery are centrally collected and used to enhance performance.
It’s also about looking at what technology is already out there. Nanotechnology could allow paints, coatings and materials to give signals of performance, enabling us to hear the hull “talking” in the same way that we hear pumps and engines “talking” through sensors today. Acoustic fibers can detect minute changes in vibrations, meaning that we will be able to sense engine rooms in different ways. We need to be leveraging these existing technologies to their full potential.
These are exciting options to explore but to make them reality, the industry needs to be able to implement them in a way that’s economically sustainable—and we need everyone to work together to find the right balance.
This will require a change in mindset and may require people to work in different partnerships and using different skills than those that dominate shipping today. All this could ultimately lead to a fundamental change in the skill sets required by ship builders and class societies, like Lloyd’s Register. Will the next generation of ship “designers” be made up of mathematicians and chemists, as well as naval architects, engineers and metallurgists? At our new Global Technology Centres in Southampton and Singapore, we are addressing the questions raised by a need to change.
These questions and challenges are what make events like Sea Asia 2015 so important. The event, to be held during Singapore Maritime Week in April, will bring together leaders from across the industry and around the globe to look at, debate, analyze and argue these critical issues in hope of developing effective solutions.
I look forward to continuing this discussion with my colleagues at the event in April.

Source: Inquirer

Investment firm – JS Capital Power – Joins World Ocean Council

In International Shipping News 23/02/2015

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The World Ocean Council is delighted to announce the first WOC Member from the finance sector – JS Capital Power – a firm specializing in providing financial consulting services for investment in Offshore Mining.
Peter Jantzen, Partner, said, “JS Capital Power is pleased to become a member of the World Ocean Council. This international industry leadership alliance creates a unique opportunity for investment firms to better understand the risks and opportunities of ocean development by engaging directly with responsible ocean industry operators who are concerned about the long term health of both their business and the ocean.”
WOC Chief Executive Officer, Paul Holthus, added, “The WOC is increasingly interacting with the investment community on the environment and sustainability issues associated with ocean economic activity, such as identifying best practices and developing sustainability criteria. We encourage the finance sector to work with and through the WOC to engage and support responsible, leadership companies who are working to address the sustainability challenges affecting the future of the ocean and its use.”

Source: World Ocean Council

Friday, February 20, 2015

South Korean Technology Likely for LNG Ships

In Shipbuilding News 20/02/2015

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If everything goes well, efforts to build liquefied natural gas (LNG) ships in the country is likely to be fulfilled with South Korean technology.
At present, a government-backed plan to build locally at least three of the nine new LNG carriers, which will be hired by GAIL (India) Ltd from fleet owners to bring gas from the US by 2017, is in motion.Each carrier would cost around `1,250 crore. Cochin Shipyard Ltd, L&T Shipbuilding and Pipavav Defence and Offshore Engineering Company are the three shipyards which will be utilised for LNG ship building.
South Korean companies such as Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering and STX Offshore and Shipbuilding are in talks with Indian shipbuilding firms for a possible technology collaboration. Cochin Shipyard is also in talks with companies in South Korea for sharing LNG shipbuilding technology.
“As talks are at a very nascent stage, we cannot comment on the development now. We are on a wait and watch mode. If all goes well, we hope to get a favourable outcome in one month,” said Cmde K Subramaniam, Chairman and Managing Director, Cochin Shipyard Ltd.
“US, France, Japan, Korea and China are the frontrunners in building LNG carriers. But unfortunately they are not willing to share the technology with us. Reports that companies in South Korea are willing to share technology with us is a very positive development. Building of LNG carriers will bring in a sea of change in the crisis-hit industry, especially for entities like Cochin Shipyard,” said Antony Prince, president, Smart Engineering and Design Solutions Ltd. Even though GAIL had pushed the tender timeline further to hire the nine LNG carriers, it is pointed out that disagreement with conditions stipulated in the tender is the major road block. India would require about 40 LNG carriers by 2025 to transport the fuel. LNG ships built locally are expected to be priced less as it is a profitable sector for yards.
Queries for comment on this development to L&T Shipbuilding and Pipavav Defence and Offshore Engineering remain unanswered.

Source: New Indian Express

Private equity funds in shipping are facing some tough decisions moving forward

In Hellenic Shipping News 20/02/2015

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Private equity funds which moved into shipping over the past couple of years in order to exploit the market’s bottom and more particularly the low asset values, are finding, the hard way, of just how volatile the shipping markets can be. In its latest report, shipbroker Intermodal noted that “moments away before our friends in China enter the lullaby period of the New Year festivities, Europe is still struggling with adjusting to the new definitions of old concepts when it comes to social and economic reforms, Russia and Ukraine have signed a ceasefire agreement propelling oil prices to a U-shaped recovery and all of this at the back of the worst ever dry bulk market… Could anyone draw a vaguer picture for what lies ahead?”
SnP broker, Mr. George Dermatis, said that “looking at the low asset values, dry bulk fundamentals looking bleak whilst the sector is becoming more and more transparent, consolidated and world trade/growth look positive in the years ahead, one cannot help but wonder what happened to the shipping pundit everyone loves to hate; Private Equity (PE)”.
He noted that “under normal conditions this would be the “perfect storm” that PE would be looking to position itself or increase its exposure in any industry. But shipping is not an industry where “normal conditions” apply and truth be told, PE has realized in the hardest of ways that the shipping industry is a very volatile sector and when you really want to get out during its bad days, the market is very illiquid. The second hand market is flooded with top quality tonnage that receives little to zero interest from the scarce buyers out there. Any outsider observing the market fundamentals would enquire who in their right mind is even inspecting vessels these days in a market which suffers from negative ROE. The answer would be simple; small to medium sized family companies with a conservative, long-term view of the market… are these not the people whose lead PE usually follows or partners up with?”.
Intermodal’s broker added that “the biggest sceptics would argue that the investment horizon that most PE funds have is not enough to support the commitment that shipping requires to bring in noteworthy ROE’s. I find that hard to accept since the biggest part of their investments went to loan portfolios and surely they didn’t expect the finance market to be more liquid when no one was foreseeing a pick up on lending anytime soon and especially since the funding gap was only rising…”
Dermatis stated that “there is a general consensus in the industry that PE –of any form and origin- besides largely supporting the shipping finance market, it has played a major part in significantly increasing an already oversized orderbook during 2013 and 2014. Some people argue that they are the only ones to blame for the extremely low markets we are facing today and they had no right to be involved/altering the supply side. Maybe so, but if that was indeed their intention –to kill the market- then surely we would see more of them these days on the buying side of SnP reports. If, on the other hand, a BDI of 530 points is the collateral damage of their learning curve and they are heavily suffering as well then what better timing for PE to show its long term commitment in the sector and raise its exposure whilst improving its average acquisition values?
He concluded his argument by noting that “banks -the traditional supporter of SME’s in Shipping- are coming back to the market and their experience/know-how in how counter-cyclical our industry is, could pave the way for increased activity on the second hand market. PE only has to follow their lead, steer clear of the temptation to order more ships – a temptation admittedly smaller these days compared to the previous trough- stay close to its partners with market experience and focus on the opportunities that comes its way”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide