Summer lull wasn’t that quiet after all in the newbuilding and S&P markets

In Dry Bulk Market,Hellenic Shipping News 31/08/2016

Shipowners’ appetite for dry bulk carriers, mainly Japan-built, has continued unabated over the course of the past few weeks of activity. The same can be said in general for the newbuilding ordering market, which appears to have picked up pace as of late. In its latest weekly report, Allied Shipbroking noted that “things have held fairly better then most would have had anticipated for the summer season. There has been a slow but fairly constant trickle these past weeks of new orders being reported and this being despite the fact that there are now few if any market sectors which show any positive sentiment as to their prospects. The new prices have played a fair role in this, though not to the extent that most shipbuilders would have held hopes for. The struggle to retain an feasible orderbook continues for the large majority of shipbuilders and as we move into the final quarter of the year, competition amongst them showed start to intensify further. The next couple of months will likely prove key as to which shipbuilders are able to stay afloat and which will have to make an early exit, in most cases likely being absorbed in some part into larger more competitive and efficient shipbuilding groups”, Allied said.

Meanwhile, in a separate newbuilding report, Clarkson Platou Hellas said that “in Tankers, Japan Maritime United Corporation (JMU) have taken an order for two firm 320,000 DWT VLCCs from JX Ocean. These will be built from JMU’s Ariake facility and delivered in 2018. JMU have also signed a contract with another Japanese owner Kyoei Tanker for a single 311,000 DWT VLCC for delivery within 2018. This vessel will be the 2nd vessel in series. From China, Zhejiang Shenzhou are reported to have received an order from Sinanju Marine Services for two firm 6,000 DWT Product Tankers. The duo are set for delivery in 2017. Whilst there is nothing to report for Dry or Gas previous week, there is one order to report in the container market. Nordic Hamburg Shipping are reported to have placed an order at Huangpu Wenchong for a series of four firm plus two optional LNG dual fuel 1,400 TEU Container Carriers. Although coming to light now, this order is understood to have been placed earlier this year. The vessels will have LNG dual fuel propulsion and will delivery in 2018. This will be a replacement order of the two firm plus two optional 1,400 TEU Container Carriers at Yangzhou Gouyu shipyard Nordic Hamburg had placed previously. In other sectors, Matson Inc have announced an order for two firm 3,500 TEU / 800 car RORO-Container vessels at General Dynamics NASSCO. These vessels will be built to be LNG fuelled and will deliver in 2019 and 2020 respectively. Finally, COSCO Southern Asphalt have announced signing a contract with Chengxi Shipyard for four firm 7,500 DWT Asphalt & Bitumen Carriers for delivery in 2018”, Clarkson Platou Hellas concluded.

In the S&P market, ship valuations specialist VesselsValue noted that “A number of bulker sales have been concluded this week.

Three Capesize sales have been concluded, the Tigerlily (169,200 DWT,2008, Daehan) and the Monegasque Eclat (177,000 DWT,2006, Namura) were sold En Bloc to Sinokor Merchant Marine by Eco Dry Ventures for a firm USD 15.9 million and USD 13.1 million respectively. The Shin Heiryu (203,300 DWT,2003, Universal) was offloaded by NYK Line for USD 10.4 million stabilising early 2000 Capesize values. One Panamax sale was done this week, the Mighty Sky (81,500 DWT, 2010, Universal) was sold by Mitsubishi Corporation to BW Maritime for USD 14 million. Within the Ultramax sector two sales have been concluded, Setaf Saget have sold the JS Rhin and JS Loire (63,500 DWT,2012, Dayang Shipbuilding Co) En Bloc for USD 12.75 million each. Two Supramax sales to report, the Nemtas 1 (50,100 DWT,2001, Mitsui Ichihara) was sold by Nemtas Nemrut Liman for USD 4.4 million. The Temara (53,600 DWT,2007, Chengxi) was offloaded by Ership for USD 5 million. There was minimal handymax activity this week, only the NOSCO Victory (45,600 DWT, 1996, Hashihama Tadotsu) was sold by NOSCO for USD 2.1 million. A Handy bulker the Wan Yang 36 (38,200 DWT,2011, Jiangsu Mingyang) was sold at auction for USD 6.75 million pushing down new handy values slightly.

It has been a slow week for Tanker sales. Within the Handy sector, the Maple Express (45,800 DWT,2002, Minami Nippon) was offloaded by Island Navigation for a USD 12.8 million on subs while Norden sold the Nord Thumbelina (38,500 DWT,2006, CSSC OME) for USD 14 million. Both firm prices on the back of a slight uptick in MR charter rates. There was one Aframax sale this week: the CSK Valiant (106,700 DWT,2003, Imabari) was sold to Waruna Nusa Sentana for a firm USD 17.5 million from TCC Group. There are no second-hand sales to report in the container market this week and all values are down as rates continue to fall”, said VesselsValue.

Similarly, Allied Shipbroking noted that “on the dry bulk side, activity continues to hold firm, with a good number of vessels changing hand this week. It seems as though a number of buyers were keen to make some quick purchases before any further price hikes were to be noted. For the time being the market has been holding fairly stable in terms of prices being seen, though if this level of activity continues to hold it shouldn’t be long before we start to note further price hikes in most size and age segments. On the tanker side, things continue to be fairly subdued, with focus again this week circulating around the product tanker ranges. The recent trends in the freight market have played an important role in deterring most buyers from making any haste moves, though with asset prices having seen notable discounts over the past months, it is not as if all buyer interest has completely left the market just yet”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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Papua New Guinea LNG export plant launches cargo tender -traders

In Freight News 31/08/2016

Papua New Guinea’s liquefied natural gas (LNG) export plant is holding a tender to sell a cargo loading in late September, trade sources said.

Bids for the tender, launched on Monday, are due on Wednesday, one source said.

The Exxon Mobil operated project sold a cargo last week to Tokyo Electric Power Company as part of a separate tender, at a price pegged at $5.40 per million British thermal units (mmBtu), sources said.

Source: Reuters (Reporting by Oleg Vukmanovic; editing by David Clarke)

Hanjin Shipping files for receivership, as ports turn away its vessels

In International Shipping News 31/08/2016

South Korea’s Hanjin Shipping Co Ltd (117930.KS) filed for court receivership on Wednesday after losing the support of its banks, setting the stage for its assets to be frozen as ports from China to Spain denied access to its vessels.

Banks led by state-run Korea Development Bank (KDB) withdrew backing for the world’s seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle debt that stood at 5.6 trillion won ($5 billion) at the end of 2015.

Hanjin Shipping, South Korea’s biggest shipping firm, announced the filing for receivership and a request to the court to freeze its assets, which the Seoul Central District Court planned to grant, a judge told Reuters, declining to be named.

The court will now decide whether Hanjin Shipping should remain as a going concern or be dissolved, a process that usually takes one or two months but is expected to be accelerated in Hanjin’s case, the judge said.

A bankruptcy for Hanjin Shipping would be the largest ever for a container shipper in terms of capacity, according to consultancy Alphaliner, exceeding the 1986 collapse of United States Lines.

Global shipping firms have been swamped by overcapacity and sluggish demand, with Hanjin booking a net loss of 473 billion won in the first half of the year.

South Korea’s ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring. The KDB’s decision to stop backing Hanjin Shipping shows the government is taking a tougher stance with troubled corporate groups.

“The government will swiftly push forth corporate restructuring following the rule that companies must figure out how to survive and find competitiveness on their own while taking responsibility,” Finance Minister Yoo Il-ho said.

Hyundai Merchant Marine Co Ltd (011200.KS), the country’s second-largest shipping line, will look to acquire its rival’s healthy assets, including profit-making vessels, overseas business networks and key personnel, South Korea’s Financial Services Commission said.

A Hyundai Merchant Marine spokesman told Reuters nothing had been decided about the potential acquisition of Hanjin assets and that the firm will hold talks with KDB. Hyundai Merchant Marine is also in the process of a voluntary debt restructuring.

South Korea’s oceans ministry estimates a two- to three-month delay in the shipping of some Korean goods that were to be transported by Hanjin Shipping, and plans to announce in September cargo-handling measures which could include Hyundai Merchant Marine taking over some routes, a ministry spokesman said on Wednesday.

BLOCKED ACCESS

Ports including those in Shanghai and Xiamen in China, Valencia, Spain, and Savannah in the U.S. state of Georgia had blocked access to Hanjin ships on concerns they would not be able to pay fees, a company spokeswoman told Reuters.

Another vessel, the Hanjin Rome, was seized in Singapore late on Monday by a creditor, according to court information.

“Now Hanjin must do everything it can to protect its clients’ cargoes and make sure they are not delayed to their destination, by filing injunctions to block seizures in all the countries where its ships are located,” said Bongiee Joh, managing director of the Korea Shipowners’ Association.

Shipping industry economics have deteriorated. Charter rates for medium-sized container ships have dropped from around $26,000 a day in 2010 to $13,000 per day now, according to data from shipping consultancy Clarkson.

Container rates from Shanghai to the U.S west coast have more than halved since then, from around $2,000 per 40-foot container in January 2010 to $596 per 40-foot box last week, data from the Shanghai Shipping Exchange shows.

Shares in Hanjin Shipping have been suspended after plunging 24 percent on Tuesday. Korean Air Lines (003490.KS), Hanjin Shipping’s largest shareholder, ended 1.5 percent higher on Wednesday, outperforming a 0.25 percent drop in the broader market .KS11, on investor relief that the flag carrier would not have to support the troubled shipper going forward.

Source: Reuters (Additional reporting by Chang-ho Lee in SEOUL and Keith Wallis in SINGAPORE; Writing by Tony Munroe; Editing by Muralikumar Anantharaman)

Gov’t vows to limit impact from Hanjin Shipping crisis

In International Shipping News 31/08/2016

South Korea’s financial authorities on Wednesday assured the market that they will take timely measures against potential fallout from the crisis surrounding the nation’s largest shipping line.

“(We) will cope comprehensively with the situation to prevent turmoil in the financial market,” Jeong Eun-bo, vice chairman of the Financial Services Commission (FSC), said as he presided over an emergency meeting of related government agencies.

The remark came after Hanjin Shipping Co., the world’s seventh-largest container carrier, decided to file for court receivership later on Wednesday at a board meeting. On Tuesday, its creditors decided not to provide additional support for the troubled firm.

Concerns have grown about possible negative effects on the nation’s financial and shipping industries.

Jeong said the authorities will keep close tabs on changes in the bond market and the related firms’ capital situation, while seeking ways to help contractors of Hanjin Shipping.

In general, however, its fate is likely to have a limited impact on the local financial market, he added.

Source: Yonhap

Frontline warns that second half of 2016 will be significantly weaker for the tanker markets

In International Shipping News 31/08/2016

Frontline Ltd., today reported unaudited results for the three and six months ended June 30, 2016:

Highlights

Achieved net income attributable to the Company of $14.3 million, or $0.09 per share, for the second quarter of 2016 and $93.2 million, or $0.60 per share, for the six months ended June 30, 2016.Achieved net income attributable to the Company adjusted for certain non-cash charges of $48.7 million, or $0.31 per share, for the second quarter of 2016 and $138.1 million, or $0.88 per share, for the six months ended June 30, 2016.Announces a cash dividend of $0.20 per share for the second quarter of 2016.Secured bank financing of up to $548 million and is in the final stages of obtaining approval for further bank financing of up to $325 million to part finance twenty newbuilding contracts.Sold six medium range tankers for an aggregate price of $172.5 million to an unaffiliated third party.

Acquired two VLCC newbuildings for a purchase price of $84 million each.

Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS commented:

“In the second quarter the tanker market experienced a downward pressure on rates which has continued into the third quarter. While these are quarters typically characterized by seasonal weakness, the market was also affected by crude oil supply disruptions in the Atlantic basin, high levels of crude inventories, 13 vessels delivering from the newbuilding fleet and easing congestion in ports around the world. All factors considered, the tanker market has been reasonably well balanced, and we are encouraged by our performance in the second quarter. The spot market is currently at a 24 month low, and although we expect the rate environment to improve from current levels, the second half of 2016 will be significantly weaker than the first half of the year. We remain focused on maintaining our competitive breakeven levels and strong balance sheet. Frontline’s scale, strong shareholder base and cost-effective operations are significant strengths that position us well in the tanker market.”

Inger M. Klemp, Chief Financial Officer of Frontline Management AS, added:

“We are very pleased to have secured bank financing of up to $548 million. We are also in what we expect to be the final stages of obtaining approval for further bank financing of up to $325 million. This new financing will partially finance 20 of our newbuilding contracts at highly attractive terms and we maintain our very low cash breakeven levels. STX recently applied for court receivership, and it is unclear whether the four VLCC newbuildings under contract at this shipyard will be delivered. These vessels have therefore not yet been financed.”

Source: Frontline

EU Dry Bulk Trade: Regional Turmoil?

In Dry Bulk Market,International Shipping News 31/08/2016

The EU is an important region for dry bulk trade, accounting for 9% of global seaborne dry bulk imports and 10% of global grain exports in 2015. Concerns over economic turbulence in Europe have heightened following the ‘Brexit’ referendum result in June 2016. Yet, a close look at recent trends indicates that EU dry bulk imports have already been under pressure for some time.

Thermal Coal Imports Cooling

EU seaborne steam coal imports have been in steady decline in recent years, falling 12% between 2012 and 2015. This accelerated to a 25% y-o-y drop to 52mt in January-May 2016, due to strict environmental policies and competition from gas. Looking forward, European coal-fired power generation is expected to remain under sustained pressure, with steam coal shipments into the EU projected to drop 16% to 108mt in 2016.

Coking Coal Losing Its Fizz

Furthermore, EU coking coal imports have fallen consistently since 2011 and dropped 17% y-o-y to 14mt in January-May 2016, reflecting pressure on steel mills in the region. EU steel output dropped 6% y-o-y in 1H 2016, amidst an influx of Chinese steel products imports and depressed global steel price levels. EU seaborne coking coal imports are projected to drop 12% to 33mt in 2016.

Iron Ore Imports Easing

Meanwhile, EU seaborne iron ore imports have also been hit by the flood of Chinese steel products exports, which triggered several mill closures. Shipments of iron ore into the EU fell 4% to 111mt in 2015, before easing a further 1% y-o-y in January-May 2016. Given the difficult steel market conditions, iron ore shipments into the EU are projected to drop 4% to a seven year low of 106mt in 2016.

Minor Miracle, Or False Friend?

Conversely, estimated EU seaborne minor bulk imports, including cargoes such as steel products and bauxite, have recorded consistent growth in recent years. In 2015, minor bulk imports into the region rose 4% y-o-y to a record 123mt. However, 94% of this growth was driven by steel products imports, which rose 24% y-o-y to 23mt, but also displaced coking coal and iron ore imports into the region. Nevertheless, in its own regard, minor bulk provides a rare source of continuous growth for EU dry bulk trade.

Grain Exports Hampered

Finally, EU grain exports doubled between 2012-15 to reach 46mt, supported by import growth in North Africa and the Middle East. However, poor weather conditions and increasing competition from farmers in the Black Sea region saw EU grain exports drop 5% y-o-y to 22mt in the first five months of 2016.

So, while the ‘Brexit’ result in June 2016 fuelled concerns of economic uncertainty in the EU, seaborne dry bulk trade in the region has already been under pressure for some time. Total seaborne EU dry bulk imports fell 4% in 2015 and at the same rate in January-May 2016, due to a range of market pressures. Overall, given potential additional pressures from ‘Brexit’, the outlook for the region’s dry bulk trade growth appears challenging.

Source: Clarksons