“K” Line Launches Asia Chennai Express Service (ACE)

In International Shipping News 30/11/2016

KAWASAKI KISEN KAISHA, LTD. (“K” Line) is pleased to announce its enhanced containership service of Asia Chennai Express Services (ACE).

This service will have new port coverage of Korea and China to have various choice of direct service to and from Chennai, India. Competitive transit time linking South East Asia such as Singapore/Port Kelang and Chennai will stay unchanged. On top of these, “K” Line will deploy a vessel by itself on this service, which enables to offer more stable and higher quality service to customers.

“K” Line will keep responding to broad needs of customers and markets including a booming transportation demand to and from India.

Detail of the service is as follows:

【ACE】

Ø Vessel Deployment: Five (5) x 4200 TEU type vessel

Ø Port Rotation:

Pusan – Qingdao – Shanghai – Shekou – Singapore – Port Kelang – Chennai – Port Kelang – Singapore – Manila – Pusan

Ø Commencement Date: December 15, 2016 ETA Pusan

Source: “K” Line

Maersk and CMA CGM frontrunners in race for Hamburg Sϋd, but high asking price could prove to be main stumbling block

In International Shipping News 30/11/2016

The potential sale of Hamburg Sϋd is attracting interest among top-tier ocean carriers, but the high asking price for the German North-South trade specialist remains the largest stumbling block on the way to a potential deal. Hamburg Sϋd’s owners are believed to be asking for close to $5 Bn to sell the company. The Oetker family, which controls 100% of Hamburg Sϋd, had previously been unable to reach a consensus on whether to sell the company or not. However, the increasingly difficult north-south trade conditions and the disappearance of similar mid-sized carriers may have prompted the family members to reconsider their positions, with a decision expected to be made this week.

Hamburg Sϋd’s shipping operations, including its liner and tramp shipping operations, accounted for 49.5% of the Oetker Group’s total turnover in 2015. The privately-held Oetker Group does not publicly report full financial results, apart from overall turnover numbers. Total turnover from liner shipping operations, after adjustment for foreign exchange losses, has been declining since 2013, when it hit a peak of $6.40 Bn. Turnover dropped to $6.32 Bn in 2014 and $6.26 Bn in 2015, despite the inclusion of CCNI’s liner shipping activities since March 2015. The total value of ships and container assets on the Oetker Group’s books is listed at $2.19 Bn as at the end of 2015. The carrier has very little debt on its books and any potential buyer will have to fork out cash to acquire Hamburg Sϋd, as there would be little appetite for a non-cash/share offer for the highly independent Oetker Group.

Source: Alphaliner

China’s coastal coal freights show weekly rise

In Dry Bulk Market,International Shipping News 30/11/2016

Freight rates for shipping coal from northern China’s Qinhuangdao port to the other Chinese ports of Zhangjiagang, Shanghai and Guangzhou in eastern and southern China rose in the week to Tuesday, port operator Qinhuangdao Port said.

The freight rate from Qinhuangdao to Zhangjiagang in eastern China’s Jiangsu province for 20,000-30,000 mt capacity vessels rose by Yuan 1.40/mt on the week to Yuan 49.40/mt ($7.16/mt) November 29, Qinhuangdao Port said.

The rate from Qinhuangdao to Shanghai in eastern China for vessels with a capacity of 40,000-50,000 mt rose by Yuan 2.50/mt on the week to Yuan 39/mt. The rate from Qinhuangdao to Guangzhou in southern China for 50,000-60,000 mt capacity vessels climbed up by Yuan 3.60/mt to Yuan 54.20/mt on November 29.

A pick-up in the purchasing activities by downstream power generators towards the end of November has underpinned the upturn in coastal freights, Qinhuangdao Port said.

Meanwhile, coal stocks at Qinhuangdao port stood at 6.39 million mt November 29, down from 6.58 million mt November 22, port figures showed.

Source: Platts

Bargain prices, rising cargo rates lift second-hand ship sales from the shallows

In Dry Bulk Market,International Shipping News 30/11/2016

Sales of second-hand ships used to haul commodities such as iron ore, coal, grain and fertilizer have hit a seven-year high in 2016 as the industry creeps out of an eight-year downturn that has sunk several fleets of shippers.

Seaborne transport, which accounts for 85 percent of global trade, has seen a tentative recovery in the rates shippers charge to carry dry-bulk cargoes, which has encouraged buyers to jump at the bargain prices for second-hand vessels.

Nearly 560 such dry-cargo ships, which as a class make up half the world’s merchant fleet, have changed hands in deals worth $4.3 billion up to the end of November, data from shipbroker Clarkson showed, the highest number since 2009.

“We’ve seen a lot of interest from Asian buyers in 10-15 year old ships, which is partly due to the surge in rates,” said Ziad Nakhleh, managing director of Greek owner Teo Shipping Corporation.

“Mineral demand from China is one of the bright spots for dry bulk,” he told Reuters.

Teo Shipping has put a 15-year old 74,107 deadweight tonne (DWT) panamax bulk carrier called the Cretan Wave up for sale at a price tag of $4.65 million, according to the nautisnp.com website.

It is one of thousands of dry cargo ships on the market at traditional and online brokers.

“We believe the sector is approaching a turning point after a long period of depressed rates,” said Aristides Pittas, chairman and chief executive of dry bulk owner Euroseas (ESEA.O), which has recently agreed to buy the Capetan Tassos, a 16-year old 75,100 DWT bulk carrier for about $4.4 million.

After crashing to its lowest level on record earlier this year, the Baltic Dry Bulk Index .BADI, a basket of freight rates to transport dry raw materials like iron ore, coal and grain, has soared over 300 percent to 1,257 points, albeit still way off its almost 12,000 point peak from 2008.

“It does make more financial sense to buy second-hand at the moment than order new-builds, given the very attractive prices,” said Ralph Leszczynski, head of research at ship broker Banchero Costa (Bancosta) in Singapore.

A five-year old 180,000 DWT iron ore and coal carrier costs around $24 million now compared with $39 million in 2014. A 10-year-old, 32,000-tonne ship to carry fertilizer, logs or steel products is worth around $6.8 million now against $12.5 million two years ago, according to data from shipping services firm Clarkson.

DEMAND-SUPPLY REBALANCING

The revenues those cheap ships can generate is on the rise. Average rates for large 180,000 DWT ships, known as capesize, had plunged to around $2,800 per day at the end of January, about 60 percent below daily operating costs of $7,200, but have since recovered to around $22,000 per day, ship broker data showed.

While some of the recovery is cyclical – the first quarter is traditionally the weakest for dry bulk cargo, and the fourth quarter the strongest – freight rates have been buoyed by a rebalancing in cargo demand and vessel supply.

The number of new ship orders dropped to its lowest level in more than 35 years in the first eight months of 2016, Clarkson figures show, while the scrapping of older dry cargo ships hit an all-time record in the first half of the year, says Bancosta.

Tougher controls from September 2017 on seawater pumped in and out of ships could see the demolition of up to 2,500 vessels in a global fleet of 9,500 dry bulk ships over 20,000 DWT, according to a report in mid-November by Bancosta.

Brokers and analysts said the cost of upgrading older vessels didn’t make financial sense.

Cargo demand, meanwhile, is set to rise 1 percent this year after zero growth last year, Bancosta said.

“There are people thinking ship prices are cheap, and if they hold the vessel for two or three years they may see a serious return,” said Nick Shaw, head of shipping at law firm Reed Smith in London.

For all that, after a downturn that triggered bankruptcies across the globe, including Korea’s Hanjin Shipping, one of the world’s biggest container shippers, the industry still has some way to go to return to health.

“Dry-bulk may be off the critical list, but it’s still lying on a hospital bed feeling rather sorry for itself,” said Martin Rowe, managing director of shipbroker Clarksons Platou Asia in Hong Kong.

And though the metrics have improved, the fleet size is still outgrowing the rise in trade, according to Clarkson – a 1.9 percent rise in bulk carrier tonnage versus a 1 percent rise in cargoes this year.

“We need more scrapping, no newbuildings, and expanded trade growth to restore the dry-bulk market to health,” said Rowe.

Source: Reuters (Reporting by Keith Wallis; Editing by Henning Gloystein and Will Waterman)

Slow product exports from S Korea, vessel oversupply dampen North Asia MR rates

In International Shipping News 30/11/2016

North Asian Medium Range tanker rates are near the lowest levels for 2016 due to a fall in South Korean oil product exports, excess vessel supply and limited spot voyages to Japan, shipowners and shipbrokers said.

The key South Korea-Singapore and South Korea-Japan lumpsum MR rates were at their lowest levels for 2016 last week, assessed at $260,000 and $240,000, respectively, on November 14 and remaining unchanged at the same level till November 23, S&P Global Platts data showed.

The weakness was also reflected in the narrowing spread between the two rates. The spread ranged at $15,000-$20,000 for most of this month compared with $50,000-70,000 in March, data showed.

The supply of ships is more compared with the number of cargoes, said a source with an MR owner.

“Apart from the usual cargo movement on these routes, there is no additional or incremental demand,” the source said.

More ships have repositioned themselves in Asia due to poor earnings in the West, the source said.

Worldscale rates for MRs on the UK Continent-US Atlantic Coast routes had slumped to their lowest levels for 2016 at w70 during September 13-16 and October 3-7 period, Platts data showed.

“The North Asian market has weakened since China’s week-long holiday in early October and hasn’t picked up yet,” said a broker in Singapore.

South Korea’s oil product exports have also been on a decline for the last three months now, according to data from Korea National Oil Corp.

They declined 1% year on year in October, while in September they edged down 0.5% year on year. In August, South Korean exports fell 10% year on year, KNOC data showed.

South Korea is a key source of oil products in the region due to its storage and refining facilities. As a result, the South Korea-Japan and South Korea-Singapore routes typically see large volumes of distillate cargoes being moved in MR tankers, which can carry upto 40,000 mt of product.

However, shipping industry officials pointed out that now with China turning into a net exporter of oil products, the trading pattern had changed and more clean MRs were deployed at Chinese ports to load or discharge cargoes.

China exported more than 38 million mt of oil products over January-October, up 37% from the same period last year, according to customs data.

EXCESS VESSELS

Newbuilds entering the global fleet hasn’t helped matters either.

“There is just too much tonnage in the market,” said a clean oil tankers broker in Tokyo.

The orderbook for MRs is equivalent to around 10% of the global fleet of nearly 1,600 MR tankers. More than 100 ships in the category have been either delivered or were scheduled to be delivered this year.

Charterers were spacing out their cargoes and allowing the tonnage to build up, said a broker in Singapore.

“Once this happens, they are able to find owners who are willing to offer their ships at lower rates,” the broker said.

Nevertheless, the narrow spread between South Korea-Japan and South Korea-Singapore rates haven’t translated into more cargoes being moved to Singapore, sources said.

“Freight is only a small element and whether middle distillates get shipped to Singapore in larger volumes will still depend on cargo pricing and storage availability which is the bulk of the cost,” one of brokers doing shipping fixtures on this route said.

Increasing competition among exporting countries such as South Korea, India and China implies that product prices will play a more crucial role in shipments.

Due to increase in refinery run rates amid cheaper crude, China itself is flushed with oil products and looking for export destinations.

“The narrowing freight gap doesn’t make a difference and [only] the cargo that needs to come south will continue to do so,” another broker said.

Owners have now pinned their hopes on upcoming winter demand for kerosene in Japan, and their sentiments were supported as Tokyo saw its first November snow in over five decades.

“There are some [kerosene] cargoes for end-November and early December loading,” said a broker in South Kora. “Several ships have been placed on subjects but there is not much movement on rates,” another broker in Seoul said.

This is because there are several cargoes being taken on ships that are under contracts of affreightment for multiple back-to-back voyages.

As a result, the charterers don’t have to tap the spot market for ships.

Also, the kerosene movement from South Korea to Japan is mainly done on Small Range tankers in 10,000-20,000 mt parcels.

On an average around five to 10 MR distillate cargoes are moved every month on the South Korea-Japan route by Japanese charterers and Saudi Arabia’s ATC, and incremental demand will be required to shore up the rates, sources said.

Source: Platts

Dry Bulk Market: Orderbook to fleet ratio drops to lowest level of the past 14 years, below 10%

In Hellenic Shipping News 29/11/2016

Ship owners have halted the demolition of older dry bulk vessels during the second half of the year, as freight rates improved. It’s a pattern noted every time a similar occurrence transpires. However, this time around fleet growth could actually be curbed, thanks in part to the fact that no newbuilding orders have been placed for dry bulk carriers this year, while slippage and cancellations of existing orders still hover close to 40%. “The oversupply issue in the dry bulk market has been over discussed during the years and especially so during the past 12 months, and as the industry starts to better manage further excess in the tonnage supply all eyes are focused on the rate of scrapping being noted as well as the orderbook to ratio. In terms of the former we have had quite the disappointment over the past 4-5 months, as the number of vessels being recycled has diminished considerably compared to the monthly levels we were seeing in the first half of the year”, said Allied Shipbroking in its latest weekly report.

According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations, “being that the freight market has improved considerably and most owners of older tonnage are now looking to recover some of their losses they were noting earlier in the year, it is hard to see that we would see a quick rise in the number of vessels being sent to the beaches of the Indian Sub-Continent. As such the focus has primarily turned to the orderbook and delivery schedule at hand. With hardly any new orders having been placed during the course of the year and with newbuilding deliveries coming in quick in numbers during the same period (despite the significant amount of slippages and cancellations which is still hovering at a rate of around 40%), the orderbook to fleet ratio has made one of its fastest drops in recent history. At the very start of the year we were looking at an orderbook to fleet ratio of roughly 15.92% for all dry bulkers above 20,000 dwt”.

Based on Allied’s data, “at the start of November this ratio had dropped to 9.79%, while it’s important to note that it did so with an almost negligible change to the number of vessels in the “active” fleet. Beyond the fact that it has now broken through the psychological point of 10%, what makes this figure even more noteworthy is that it the lowest it’s been in over 14 years. The last point in time when we had a ratio at similar levels was in 2002, after which point it quickly climbed at an extraordinary rate to reach its peak in September of 2008”.

“All this however should be taken cautiously. Just because we have managed to reach an orderbook to fleet ratio that was last noted back in 2002 (a point in time which most owners see as having been one of the few perfect entry point in recent history), nor by the fact that it’s gone below 10% of the current fleet does it create a good enough argument to restart another ordering spree. In any case the secondhand market offers considerably better opportunities out there in terms of pricing compared to what you could possibly find being offered by shipbuilders at the moment”, said Lazaridis.

According to Allied’a analyst, “the positive point to take is that it will become ever easier to manage the oversupply issue moving forward and given that a lot of the orders currently set for 2017 and 2018 delivery will likely face delays and cancellations of their own, while at the same time the new regulations coming into force will likely continue to push older vessels to exit the market at even younger ages then would have otherwise been anticipated, there is a real opportunity that we may reach the tipping point much sooner than we would have otherwise believed. Sure you may say that trade demand is still fairly shaky, unstable, and uncertain as to its potential moving forward, but if we manage to keep the fleet growth to only marginally positive levels or even negative, rates should surely start to reflect this to some degree (even if it may be at a gradual pace with its seasonal ups and downs) within 2017”, concluded Lazaridis.

Nikos Roussanoglou, Hellenic Shipping News Worldwide