Stronger demand for vessels perks up Baltic sea freight index

In Dry Bulk Market 30/06/2016

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, rose on Wednesday, boosted by demand that is driving rates up across vessel segments.

The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, was up 13 points, or 2.07 percent, at 640 points.

The capesize index climbed 19 points, or 2.03 percent, to 955 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $189 at $6,784.

The panamax index rose 16 points, or 2.59 percent, to 34 points.

Average daily earnings for panamaxes increased $121 to $5,069. Panamax vessels usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes.

Among smaller vessels, the supramax index rose 19 points to 606 points, while the handysize index rose 2 points to 338 points.

Source: Reuters (Reporting by Koustav Samanta in Bengaluru; Editing by Martina D’Couto)

Traders charter ships to store oil as refinery maintenance crimps demand

In International Shipping News 30/06/2016

Two trading houses, including commodities group Glencore, have chartered at least four tankers to store oil off Singapore, taking advantage of cheap freight and crude ahead of the refinery maintenance season that typically crimps demand.

ST Shipping, Glencore’s shipping arm, booked the 300,133 deadweight tonne (dwt) Very Large Crude Carrier (VLCC) Plata Glory for a month at $22,000 per day and has the option to extend at $26,000 and $29,000 per day for the second and third month, ship brokers said.

ST Shipping has also chartered the 161,724 dwt Suezmax tanker, United Emblem, and the 112,777 dwt Aframax ship, United Grace, for 30-90 days, at undisclosed rates, a Singapore-based shipbroker said.

Clearlake, a subsidiary of the oil-trading firm Gunvor , has chartered the 308,596 dwt VLCC Arenza XXVII at $33,000 per day for one to four months, the shipbroker added. VLCCs can hold up to 2 million barrels.

Both companies do not comment on commercial operations.

Traders, however, said a widening contango structure in the oil market – with forward prices trading higher than spot rates – was partly why the firms were planning to store supplies as they hope for better returns when demand perks up in winter.

After months of gains, Brent crude for August delivery fell back below $50 per barrel last week after Britain’s vote to leave the European Union. Prices for delivery towards the end of the year, however, remain above $51.

“Traders are trying to bottom-fish (for crude bargains) and store for one to two months before re-selling,” a trader with a western firm said.

At the same time, it has become cheaper to charter tankers, making it potentially attractive to store oil for a later sale.

Rates for a one-year VLCC charter have fallen by almost $20,000 since January, to between $38,000 and $42,000 a day last week, according to shipping services firm Clarkson. They were $47,500 per day a year ago.

The Plata Glory is anchored off Sungai Linggi, Malaysia, while Arenza XXVII is moored in the Johor anchorage, also Malaysia, according to shipping data on Thomson Reuters Eikon. Both tankers are currently empty.

Traders said that Russian ESPO and Abu Dhabi’s Murban crudes are the most likely fuels to be stored.

The storage play also comes as refiners plan to shut for maintenance, crimping demand, they added.

About 1 million barrels a day of processing capacity in Asia will be shut in October, according to Reuters calculations, leaving crude cargoes for loading in August unsold.

Still, the current contango structure is tight, making it risky to hold oil for long, traders said.

The number of tankers used for oil storage around Singapore fell to 30 this month from 40 in May, data from Thomson Reuters Supply Chain & Commodities Research showed, as price rises between January and June triggered sales of stored oil.

Source: Reuters (Reporting by Keith Wallis, Florence Tan and Roslan Khasawaneh; Editing by Henning Gloystein, Christian Schmollinger and Himani Sarkar)

Caribbean Aframax rates fall to lowest level in more than 5 years

In International Shipping News 30/06/2016

Caribbean Aframax freight rates fell to a level not seen since February 2011 as owners leaped at the chance to get ships fixed Tuesday.

The Caribbean-US Gulf Coast route basis 70,000 mt was assessed at w82.5, or $6.96/mt. The last time that route finished at a $/mt level that low was February 16, 2011, when it also ended the day at $6.96/mt.

The Aframax market has been weak for some time as cargoes were scant and tonnage grew steadily in the region. That all came to a head on Tuesday.

“There were ships waiting and cargoes finally started coming, so owners got all excited,” a shipbroker said.

A pair of deals were done that showed the downward trend of the market. First, an unnamed charterer took the British Robin at w85 for a Puerto La Cruz-USGC journey basis 70,000 mt with a July 5 loading. That was closely followed by ST Shipping taking the Ridgebury Sally B at w82.5 for a Mamonal-USGC trip of the same basis with a July 6 lifting.

Another shipbroker was not surprised at the downward turn.

“There are so many prompt ships down there it had to happen sooner or later,” he said.

There are 21 ships opening in the region through July 17, 14 of which are available for prompt dates.

Another market participant said the slide should be short-lived, with the US Fourth of July holiday coming up.

“Hopefully we will see a lot of this Aframax tonnage taken out,” he said. “A lot of cargoes should be coming out Tuesday and Wednesday because of the long weekend coming. Everybody will want to have things fixed by Thursday.”

If there is a silver lining for shipowners to this five-plus-year low it is that bunker prices are in their favor. On Tuesday, IFO 380 Balboa ex-wharf was assessed at $244.00/mt. On February 16, 2011, it came in at $596.50/mt.

Source: Platts

Tough time to be a shipbuilder as orders dry up

In Hellenic Shipping News 29/06/2016

With the overall trend set from the start of 2016 continuing undeterred into this week as well, i.e. very limited newbuilding ordering activity, it’s a tough time for shipbuilders, who are also actively lowering their price demands. In its latest weekly report, shipbroker Allied Shipbroking noted that “the weight that has gathered on the back of shipbuilders has now grown considerable and it is becoming an ever bigger issue, even for some of the higher tier shipbuilders in countries such as S. Korea. The main clouds gathering are primarily revolved around the excessive debt that most shipbuilders have amassed, while without a sufficient forward orderbook, they lack the required activity cash flow and revenue to be able to slowly manage this debt. At the same time the recent developments have caused further turbulence in the prospects of trade while they have also increased the prevailing issues in the finance markets as well, in effect crippling further the prevailing appetite amongst buyers for new ordering. On top of this there has been major movements since Friday in the exchange markets, with the Japanese shipbuilders feeling the brunt of this force as the Japanese Yen climbs rapidly against their trading interests”, Allied noted.

Meanwhile, in a separate newbuilding report, Clarkson Platou Hellas said that “there are no new orders to report in Tankers or in Gas, but there are several in the container market to report for this week. Wan Hai Lines in Taiwan have ordered eight firm 1,900 TEU Container Carriers at Naikai Zosen. The vessels will deliver throughout 2018 and 2019 from the yard’s Setoda facility in Onomichi, Japan. Fujian Funing Shipbuilding have announced an order from Fujian Lianjiang Hongwei Aquatic Trade for one 160,000 CUFT Reefer Container Carrier for delivery within 2017. In other sectors, Austal have announced winning several orders, starting with signing a contract with Mols-Linien A/S for one firm plus one optional 10,000 GT Fast Pass/Car Catamaran Vessels. Set for delivery in 1Q 2017 for the firm unit, the vessel will be able to carry 1,006 passengers and 425 cars. Austal have also received an order for one firm 1,000 GT Pass Catamaran Vessel which can carry 450 passengers from Seaspovill and two firm 250 GT Pass Catamaran Vessels which can carry 300 passengers from Supercat Fas Ferry Corporation. All vessels will deliver in 2Q 2017. Rauma Marine Constructions have announced an order for one 15,000 GT Pass/Car Ferry from Mols-Linien A/S. This single unit can carry 400 passenger and will deliver in 2Q 2018”.

In another note on S&P deals this week, VesselsValue said this week that “Teekay tankers have offloaded a VLCC, the Shoshone Spirit (314,000 DWT, 2011 Blt, Daewoo), to Pantheon Tankers in what marks the NYSE-listed, tanker giant’s apparent exit from the VLCC sector. The sale, done at USD 62m, pushes up VLCC values marginally. The Akama (48,000 DWT, 2003 Blt, Iwagi Zosen) has been sold by Asahi Marine for USD 11m. Also in the MR2 sector is the sale of the DL Sunflower (47,200 DWT, 1998 Blt, Onomichi Dockyard). The vessel sold for USD 8.5m significantly above market expectations for older tonnage. This pushes up the value of older MR vessels. At the other end of the scale, the en bloc sale of the BLS Liwa and the BLS Ruwais (47,200 DWT, 2008 Blt, Hyundai Mipo), were both done at USD 22m.

Great Eastern shipping have acquired a Hyundai built Cape from K line. The Cape Althea (179,300 DWT, 2011 Blt, HHI) has sold for USD 24.5m. This sale is a significant improvement on last done (see Hyundai Trust at USD 22.2m). Panamax values have risen following the sale of the Key Boundary (83,400 DWT, 2010 Blt, Sanoyas) at USD 13.7m and the AMS Pegasus II (81,500 DWT, 2012 Blt, Hyundai Vinashin) at USD 12.5m. Oldendorff have acquired a resale supra from Daelim; the 58,000 DWT, Samjin vessel, due for delivery in 2017 was concluded at USD 13m. This move by Henning Oldendorff will increase his small supramax profile to 4 vessels. LT Ugland have sold their supra, the Molly Manx (58,000 DWT, 2010 Blt, Tsuneishi Zhoushan) at USD 10.7m. Also sold in the supra sector is the Atlas (54,700 DWT, 2002 Blt, New Century) done at USD 3.4m. These sales have pushed post 2000 blt values up. In the Handy sector, values have been heading the other way with the sale of the Bright Life (28,000 DWT, 2011 Blt, I-S) to British Bulkers at USD 7.5m. Also sold is the Goldenstar (28,400 DWT, 2001 Blt, Imabari) for USD 4.1m. There are no second hand sales to report in the container sector this week. Instead Wan Hai lines have booked 8 Handy boxships for construction at Naikai Setoda. The 1,900 TEU vessels, due for delivery over 2018 and 2019, were ordered at USD 28m each”, VesselsValue concluded.

Additionally, Allied Shipbroking commented on the S&P Market that “on the dry bulk side, there was a notable softening in terms of activity. This has also made in turn a follow through effect on prices which we may well see a pause at current levels. This is something that has in part been reflected by most of the buyers in the market, as given the increases in prices seen of late few are feeling that these are well supported by market fundamentals and as such are now feeling that they should be in no rush to make any haste decisions. On the tanker side, activity seemed slightly more alive possibly boosted by the softer price ideas now offered by sellers. This has been greatly reflected by most of the sales that emerged this week, all of which show some degree of price softening compared to the previous comparable sales that had been done in each respective size and age group”.

Meanwhile, in the demolition front, Allied noted that “overall a fairly flat week, with minimal activity, minimal interest from end buyers and a slower flow of demo candidates coming into the market. This leaves the market fairly flat in terms of pricing with marginal shifts being noted. The monsoon season which is expected to be fairly heavy this year in terms of rainfall, something which could bring about an even slower level of breaking activity on the beaches. For the moment this seams to have had little effect these past two weeks, while for the moment we seem to have averted the excess price drop in scrap that had been noted last year during the same period. The slightly better performance in the freight market has assisted in this regard as well, as this has been the primary support for most owners to delay any scrapping decision for the moment. It is important to note however that the risk is still there, especially if late July/early August proves to be a disappointment to most in terms of freight earnings”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

India’s Essar May oil imports from Iran jump 50% y/y

In Freight News 30/06/2016

India’s Essar Oil, the top Indian buyer of Iranian crude, imported 49.7 percent more Iranian oil in May compared with a year ago, according to tanker arrival data obtained from trade sources and ship-tracking services on the Thomson Reuters terminal.

Essar shipped in about 187,300 barrels per day (bpd) of oil from Iran last month, an increase of about 4.6 percent from April, the data showed.

Essar’s oil imports from Iran averaged at about 149,500 bpd in the first five months of 2016 compared with 76,000 bpd of a year ago, when the private refiner had to cut imports under pressure from western sanctions against Iran’s nuclear program, the data showed.

Iran’s share in overall imports by Essar Oil in the January-May period rose to 41 percent from about 23 percent in the year-ago period.

Source: Reuters

EIA says Shah Deniz 2 to more than double Azerbaijan’s natural gas exports

In Freight News 30/06/2016

The U.S. Energy Information Administration (EIA) has once again confirmed Azerbaijan’s importance in ensuring energy security both at regional and international scale.

In its Country Analysis Brief report, EIA said Azerbaijan, one of the oldest oil-producing countries in the world, is an important oil and natural gas supplier in the Caspian Sea region, particularly for European markets.

Although traditionally the country has been a prolific oil producer, EIA expects Azerbaijan’s importance as a natural gas supplier to grow in the future as field development and export infrastructure expand.

Most of Azerbaijan’s natural gas is produced offshore in either the Shah Deniz field or the ACG (Azeri-Chiraq-Guneshli) complex.

“Stage 2 development of the Shah Deniz natural gas and condensate field will more than double Azerbaijan’s natural gas exports by the end of the decade,” the EIA said in a report.

The contract for development of the Shah Deniz offshore field was signed on June 4, 1996. The field’s reserve is estimated at 1.2 trillion cubic meters of gas.

A final investment decision was made on the Shah Deniz 2 field in Baku in 2013, envisaging producing additional 16 billion cubic meters of gas per year at the field. Azerbaijan will export 6 billion cubic meters a year of this gas to Turkey and 10 billion cubic meters – to Europe.

Gas production in Azerbaijan totaled 18.2 billion cubic meters in 2015, which is 3.4 percent more than the volume of production in 2014, according to BP Statistical Review of World Energy 2016.

The proven gas reserves in Azerbaijan as of early 2016 amounted to 1.1 trillion cubic meters, which accounts for 0.6 percent of global proven gas reserves, according to BP’s estimates.

The country holds over three trillion cubic meters of gas reserves which help develop the country’s export potential. The Shah Deniz natural gas and condensate field started producing in late 2006, making Azerbaijan a net gas exporter.

While the main focus is on the Shah-Deniz field with estimated gas reserves at 1.2 trillion cubic meters, Azerbaijan possesses additional significant gas fields such as Absheron, Umid, Babek and Nakhchivan, of which Absheron field is projected to be commenced in 2021. The cited indicators ensure future development of the gas industry in Azerbaijan for a period exceeding 100 years.

These reserves are expected to allow Azerbaijan to focus on expanding its energy industry and broader supply routes ensuring a stable economic growth.

The second-largest oil producer in the former Soviet Union, Azerbijan enjoys a potential to produce oil and gas from shale. Shale gas fields are located at the territory of Gobustan, Shemakhi and other regions. Earlier, ConocoPhilips conducted geological survey at Azerbaijani foothills in accordance with the agreement with SOCAR.

Meanwhile, the country recently announced that for the first time it hit a record in commercial gas production level in 2015.

Source: AzerNews

Buying interest for dry bulk ships unaffected by Brexit aftermath

In Hellenic Shipping News 30/06/2016

Shipping will definitely be affected by the aftermath of the “Leave” vote win, during the referendum conducted in the UK last week. However, few analysts attempt to decode the exact consequences of such an event, just yet. In its latest weekly report, shipbroker Intermodal noted that “we will have to wait much longer to fully see the impact of this rather unexpected divorce between Britain and the E.U. on our industry, while the fact that all dry bulk indices, opposite to most global market indices, rose on Friday, is strong evidence of how hard this correlation is at the moment. If anything buying interest for bulkers appears to be unaffected for now. Kamsarmaxes, Panamaxes and Supramaxes built during the last decade are currently the most popular, with Japanese built tonnage naturally gathering most inspections. Despite the undoubtedly firm activity though, there is still a lot of insecurity among owners who remain sceptic in regards to how long it will take before a meaningful recovery takes place. As for those owners who are currently contemplating to buy, this feeling of insecurity is additionally also fed by the recent firming of prices which definitely makes the decision to invest costlier and consequently riskier. Saying that and despite this recent firming in dry bulk asset values, prices are still low. Last week we saw the M/V KEY BOUNDARY (83kdwt, blt 2010, Sanoyas) being committed in the region of USD 13.7m, while about a year ago a similar vessel was marketed at around $ 21.5m.

According to Intermodal’s, Giannis Andritsopoulos, SnP Broker, “last week closed off with a massive shockwave for markets across the world following the British referendum, the result of which will mark the beginning of the process for the country’s exit from the European Union. Despite the fact that the medium and long term effects of this historical decision are hard to assess at the moment, the shockwaves from Thursday’s result were felt by nearly everyone in the investing community. Wiped out stock values, a plunge in oil prices and of course a shaky sterling were some of the immediate referendum effects, while the shipping industry, already fundamentally challenged in many ways is still trying to figure out what to expect by this new development. Brexit will introduce a new reality for the British people that will bring along massive challenges for the country’s economy but will also result in a stronger effort by the Britons in order to become more competitive, with newly formed or altered trade agreements with other countries that are bound to impact the shipping industry as well”.

Andritsopoulos added that “as far as tankers are concerned, the second hand market still remains on a downward path. The M/T SIGNAL MAYA (46kdwt, blt 2005, Naikai Zosen) was sold in the region of $ 15.5m and the M/T STAVANGER EAGLE (45kdwt, blt 2004, Shin Kurushima) was sold in the region of $ 16.0m. Owners’ ideas for ten year old vessels were in the high $ 18.0m some time ago but have now come down to $ 16.0m and it looks very possible that they will keep going lower. As far as bigger vessels are concerned things are similar, the M/T E ELEPHANT (317kdwt, blt 2011, Hyundai) which was sold in the region of $ 55.6m, while the similar vessel M/T HANJIN RAS TANURA (309kdwt, blt 2011, Hyundai) was sold in the region of $ 75.0m back in February”.

Concluding his analysis, Intermodal’s broker said that “as a general observation, we are seeing two broad categories of buyers. Big shipowners who have been inspecting, offering -even low – and end up buying. These owners believe that this is the right time to renew their fleet and hope to also benefit from the eventual recovery of the market, which will result in the increase in value of an asset bought at low levels that should compensate them for the time they will have to financially support their investment. On the other hand, there are these owners who keep inspecting but do not offer, waiting to do so only when a clear sign of recovery is visible even if this means that they will have to face higher asset values when the time comes. Either or we don’t see the Brexit seriously affecting the logic of any of these two categories of Buyers for now”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide