Panama Unlocks A Fresh Look At The Containership Fleet

In International Shipping News 29/07/2016

The opening of the new, expanded Panama Canal locks in June has ushered in a new era for the containership sector, and is prompting significant changes in asset and deployment trends. With a greater proportion of containership fleet capacity now able to transit the Canal, it is appropriate for the boxship fleet to be considered in a new light, and to be broken down into a new range of more relevant sectors.

Thou Shalt Not Pass

The ability for a containership to transit the Panama Canal has long been a defining vessel characteristic, with the emergence of a distinct ‘Panamax’ sector above 3,000 TEU, comprising vessels with a maximum beam of 32.3m. However, rapid upsizing has meant that the fleet capacity of ships in sizes Panamax and below has been dwarfed by the growing numbers of ‘Post-Panamax’ ships in recent years. By the start of July 2016, 63% of boxship capacity was unable to transit the old locks of the Panama Canal.

A New View Emerges

The recent completion of the canal’s third set of locks now enables many more boxships to transit, with only 15% of fleet capacity unable to pass through according to current official dimension restrictions. This change has led to the need to segment the boxship fleet in a fresh way, as shown on the graph.

At the start of July, the sub-3,000 TEU sector comprised 4.0m TEU, accounting for 20% of total fleet capacity (with 11% of capacity on order accounted for by this size range). In the 3-7,999 TEU ‘Intermediate’ sizes, all ships are now able to transit the canal, up from less than 50% previously, and a significant 36% of fleet capacity (but only 4% of the orderbook) falls into these sectors. The 8-11,999 TEU sector, totalling 5.0m TEU (25% of the fleet) comprises ‘Neo-Panamaxes’ likely to form part of the initial wave of upsizing on routes through the canal. Many ships sized 12-14,999 TEU are also seen as ‘Neo-Panamaxes’. While only 59 ships (of up to 13,500 TEU depending on the specific design) of the 192 ships in this sector are able to transit based on official limits, another 39 fall so close to these limits that they are likely to be able to transit. A further 50 ships in this sector would also be able to pass through if the beam restriction was raised to the already mooted 51m.

Finally, ships sized 15,000+ TEU have notably distinct designs from vessels in the 12-14,999 TEU sector, and are clearly too large to transit the current locks. While there were only 62 ships of this size in the fleet at the start of July (6% of fleet capacity), 40% of capacity on order falls into this size range.

New Sectors Locked In?

So, the recent expansion of the Panama Canal locks and the continued rapid upsizing of the fleet in recent years have both brought about the need for high-level segmentation of the containership fleet to evolve as well. As market dynamics continue to be affected by the recent developments, it’s clear that size matters and that the containership industry has reached a significant milestone. While it will remain important to track trends in the ‘old Panamax’ sector, the new breakdown of the containership fleet should help with keeping track of the fast-moving market developments as they unfold.

Source: Clarkson Research Services Limited

LNG Market Needs More Vessels than Currently on Order

In International Shipping News 29/07/2016

Despite the current weakness in LNG shipping rates, Drewry maintains its bullish long-term outlook for LNG shipping and believes that the market will require more vessels than listed on the current orderbook, according to the latest edition of the LNG Forecaster report published by global shipping consultancy Drewry.

Spot rates for dual fuel diesel electric LNG vessels have been hovering around $30,000 per day since the second quarter of last year, representing a decline of 80% compared to the last market peak in 2012. Strong fleet growth coupled with weak cargo demand has been the principle cause. The impact of weak rates is clearly visible on falling newbuilding activity as only four LNG vessels had been ordered in the first six months of the year. By comparison, an average of 44 vessels per annum were ordered over the prior five-year period. Continuingly weak ordering is expected to slow fleet growth from 2019, exactly at the time by when almost all of the currently under-construction LNG plants will come online.

Drewry reiterates that the long-term outlook for LNG shipping is still strong and the limited new ordering is not based on market fundamentals. “The reason for our optimism is that almost 125 million tonnes of capacity is currently being built and there are plans for more. As a majority of the supply from plants under-construction has been contracted on long term agreements, it is likely that LNG will be traded so requiring more vessels”, said Shresth Sharma, Drewry’s lead LNG shipping analyst.

“Despite a widened Panama Canal, new LNG export capacity due to come online by 2020 will require shipowners to order an additional 65 vessels over this period to meet shipping demand,” added Sharma.

Source: Drewry

Asia Dry Bulk-Capesize Steady as Owners Spurn Low Rates

In Dry Bulk Market 29/07/2016

Owners anchoring ships rather than fix at low rates. W. Australia-China capesize rates hit over two-month low.

Freight rates for large capesize dry cargo ships on key Asian routes are likely to hold steady as ship owners resist charterers’ attempts to push rates lower amid a dearth of cargo, ship brokers said.

“We are reaching a floor, particularly in the Pacific. It’s got to the point where owners just won’t fix their ships,” a Singapore-based capesize broker said on Thursday.

“Charterers are seeing a bit of resistance – owners are anchoring ships,” the broker added.

That came as spot charter freight rates for an 180,000-deadweight tonne capesize vessel slipped below $4 per tonne for a voyage from Western Australia to China on Wednesday. That is the lowest since mid-May.

“Rates are moving down slowly. The market is very quiet and cool,” a Shanghai capesize broker said on Thursday.

“There are very few fixtures – I think it will last the same way for a while,” the broker said.

There were 18 reported capesize spot fixtures in the week to July 26, according to data on the Reuters Eikon terminal, compared with 20-25 in previous weeks.

“There are so many ships and not enough cargo volume,” the Singapore broker said.

Only Rio Tinto was active among the Big Three Australian miners this week, brokers said.

Daily time charter equivalent earnings have fallen to about $3,500 for a voyage from Australia to China and about $5,500 from Brazil to China, brokers said.

That compared with daily operating costs of around $7,300, according to accountancy firm Moore Stephens.

Higher daily earnings from Brazil have encouraged owners to sail vessels empty on the expectation rates with be stronger when ships arrive off the South American coast in August and September, the Singapore broker said.

Capesize charter rates for Western Australia-China fell to $3.95 per tonne on Wednesday, down from $4.20 a tonne a week earlier, the lowest since May 13. Brokers said rates were trending lower at $3.85 per tonne on Thursday.

Freight rates from Brazil to China dropped to $8.73 per tonne on Wednesday against $9.04 per tonne the same day last week.

Charter rates for smaller panamax vessels for a North Pacific round-trip voyage were down to $6,120 per day on Wednesday, from $6,938 per day last Wednesday, the lowest since July 12.

North Pacific panamax rates are set to drop further as charter rates on other panamax routes also slide, Norwegian ship broker Fearnley said in a note on Wednesday.

Charter rates for supramax vessels, which hit $8,000 per day last week for coal cargos to India and China are cooling as owners prefer to keep ships in the Atlantic, brokers Fearnley and Banchero Costa said.

The Baltic Exchange’s main sea freight index fell to 679 on Wednesday, from 736 last week.

Source: Reuters (Reporting by Keith Wallis)

MED AMERICAS – New direct service connecting the Mediterranean to the Caribbean, Mexican Gulf and West Coast South America

In International Shipping News 29/07/2016

In a continuous effort to improve service coverage, frequency and reliability, CMA CGM is pleased to announce the revamping of our MGE service becoming the MED AMERICAS, stand-alone CMA CGM service with dedicated fleet of 11 vessels of 2,500 TEU.

Starting with m/v POMERENIA SKY voy. 067MGW for Mexican/US Gulf/Caribbean/West Coast South America origins and m/v ANGOL voy. 071MGW for Mediterranean origins, MED AMERICAS will have the following features:

• A unique offer, with a special focus on the reefer market from Chile, Peru, Ecuador & Colombia to the Mediterranean area.
• Fast transit times: 15 days from Guayaquil to Algeciras, 19 days to Malta
• Optimized connections to Greece, Turkey and Egypt thanks to the alignment of our feeder berthing windows in Malta
• Five new direct calls to West Coast South America: Balboa, Manzanillo (Panama), San Antonio (Chile), Callao (Peru), Buenaventura (Colombia).

Source: CMA CGM

New direct service connecting Thailand, Singapore and Colombo to USEC and Canada

In International Shipping News 29/07/2016

In a continuous effort to provide its customers with the best quality service, CMA CGM is pleased to introduce its new BENGAL BAY EXPRESS service, operated with 11 vessels of 6,500 TEU on a weekly basis.

BENGAL BAY EXPRESS has the following features:

-New direct Thailand, Singapore and Colombo calls to US East Coast and Canada Fast connection from Chittagong and South East India via Colombo to US East Coast and Canada-Quick transit time from Singapore to New York: 27 days-Direct service and fast transit time ex Halifax to Mediterranean, Middle East and Southeast Asia-Direct service from US East Coast to Jebel Ali and Upper Persian Gulf destinations offering very competitive transit times

-New and direct service from US East Coast to Singapore and Laem Chabang

Rotation is as follows:

Laem Chabang – Singapore – Colombo – Damietta – Cagliari – Halifax – New York – Savannah – Norfolk – Halifax – Cagliari – Damietta – Jebel Ali – Singapore – Laem Chabang

Source: CMA CGM

Tankers: Asia VLCC freight plummets to 7-year low on vessel oversupply

In International Shipping News 29/07/2016

Benchmark Asian VLCC freight rates from the Middle East sank to a seven-year low Thursday, with a build-up of available tonnage following a flurry of newbuild deliveries pushing down on rates, according to market sources.

Platts assessed Thursday the key PG-Japan rate down 4.5 points to Worldscale 35.75, basis 265,000 mt, equivalent to $6.95/mt.

The rate was last below this on May 15, 2009, when the PG-Japan rate was $6.76/mt, basis 250,000 mt.

In 2009, the year’s low for VLCCs on the PG-Japan route was $6.26/mt basis 250,000 mt, seen on May 13, according to Platts data.

This week, three VLCC fixtures were put on subjects at w35 for a PG-South Korea voyage.

Among the deals heard, SK Energy placed the Newton — a modern well-approved VLCC — on subjects for a PG-South Korea voyage loading August 14-16 at w35, basis 270,000 mt.

“There is more competition for a voyage like PG-Singapore than PG-Far East as owners would prefer to take lower earnings per day on shorter voyages,” said a Singapore-based VLCC owner.

Market sources said the premium for shorter voyages had diminished, as owners were keen to take shorter voyages in a weak market, hoping the market dynamic would change after the vessel completes its voyage.

Meanwhile, owners of well-approved modern vessels had been resisting giving into rates below the psychological barrier of w40, but there was stiff competition from the number of handicapped vessels in the market.

Handicapped vessels — defined in the market as those built more than 15 ago or lacking approvals — accept discounted rates.

“If VLCC rates go too low then owners would employ ultra-slow steaming or just wait — waiting is cheap at these bunker levels, about a loss of w0.4 per day,” said a VLCC shipowner. According to industry estimates, there will be about six newbuild VLCCs per month coming for the rest of the year, and in total for 2016 there are 60 such deliveries slated.

The smaller Suezmax segment, a sometime competitor to VLCCs for cargoes, is expected to see a total of 40 newbuild deliveries this year.

Newbuild vessels lack full approvals and typically discount on their first voyage, sources said.

The heavy addition to tonnage coupled with a lack of vessel scrapping saw fleet growth outpace demand, and sources said that demand for VLCCs had been robust.

According to industry estimates, 132 VLCC fixtures were counted for June and 137 for July, compared to April and May which both saw 128 cargoes.

“Charterers are taking advantage of the low rates and rushing through their program as quickly as stem dates are available. About 65 stems in August are covered,” said a broker.

VLCC owners’ earnings on Persian Gulf to North Asia routes are less than $20,000/day, according industry estimates.

A broker said that for a Ras Tanura-Ulsan voyage at w36.5, basis 270,000 mt, the time-charter equivalent earnings would be $18,300/day.

Source: Platts

Global oil glut to shape tanker demand in the coming months

In Hellenic Shipping News 28/07/2016

Everything seems to revolve around the glut in the oil market, when it comes to shaping future tanker demand. In its latest note, Cotzias Intermodal Shipping said that global oil supply is expected to remain higher than global consumption in 2016, keeping oil prices at relatively low levels this summer compared with previous years. According to the shipbroker, “oversupply and growing economic headwinds are weighing down heavily on oil worldwide. According to the U.S. Energy Information Administration (EIA), Brent crude oil prices are forecast to average $35/b in summer 2016, $21/b lower than last summer. The monthly average spot price of Brent crude oil increased by $2/b in June to $48/b, which was actually the highest monthly average for Brent since October 2015. This was the fifth consecutive increase in the monthly average Brent price, the longest such stretch since May through September 2013”, said Cotzias Intermodal Shipping Inc.

Meanwhile, in the US, the shipbroker said that “commercial crude oil weekly inventories have increased by more than 71 million barrels (15%) since the end of September 2015, pushing crude oil storage capacity utilization to a near record high according to EIA. The large increase in crude oil storage capacity in the States between September 2015 and March 2016 was prompted by increased demand for crude oil storage as global supply has outpaced global demand for most of the past two years”.

According to Christopher Whitty, Commercial Manager – Towage & Port Agency with Cotzias Intermodal Shipping Inc., “in S.E. Asia, predominantly Singapore and Malaysia, the volumes of oil stored at sea also appear to have increased significantly. There is still a large fleet of VLCCs off Singapore anchored in nearby areas for storage use. There is a major concern that there is still a considerable quantity of physical crude oil stored in the area especially during the last few months. This is actually the fourth time during the last three decades, that we have a major crash in oil prices. OPEC countries today, refuse to actually cut back or agree to limit production in order to boost prices. In the past, that tactic was a good solution but today OPEC is facing its own challenges. For Saudi Arabia and the remaining Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar and United Arab Emirates), which together account for around 40% of the world’s oil reserves and the lion’s share of OPEC’s collective output, their future oil strategy should be an exclusively GCC affair, away from the stress and dysfunction of OPEC. We see huge developments and the continued existence of OPEC being in peril”.

The shipbroker noted that “the conflict within the OPEC group over a coordinated cut in output has led to intense international pressure on Saudi Arabia. The meeting of oil producers in Doha in April basically led to more claims of Saudi Arabia’s intolerance, despite the fact that Saudi Arabia has the largest excess oil capacity in the world by an enormous degree. We have, in fact, passed the point where OPEC’s key member Saudi Arabia can any longer dictate oil prices. Saudi Arabia might have hinged on the respect it received from OPEC members, which gave it control over OPEC outputs and de-facto control of 40% of world oil output, way more than its share. That status quo guaranteed a steady oil supply which, in turn, fueled economic exchanges and progress during the last half-century with an unprecedented increase in prosperity worldwide. We are now transitioning to a time where open trading on world markets has more impact on oil prices than the attempts of OPEC to establish artificial restricted supply”, Mr. Whitty concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide