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