Cosco Shipping International Posts Lower 2016 Results

In International Shipping News 24/03/2017

The board of directors (“the Board”) of COSCO SHIPPING International (Hong Kong) Limited (“COSCO SHIPPING International” or the “Company”, stock code: 00517.HK) today announced the audited consolidated results of the Company and its subsidiaries (collectively the “Group”) for the year ended 31st December 2016.

In 2016, world economy has experienced deep adjustment, while international trade growth remained subdued. The international shipping market supply and demand remained unbalanced, while dry bulk shipping index and container freight rate index had hit a record low last year. Facing such severe business environment, COSCO SHIPPING International insisted on the working principles of “securing steady growth, ensuring profitability, and enhancing service quality and efficiency”, and coped with the market changes proactively by improving service awareness, seeking new profit drivers and strengthening cost control, so as to maximise the profit.

During the year, profit attributable to equity holders of the Company decreased by 29% YOY to HK$237 million. Basic earnings per share was 15.47 HK cents. The Board proposed a final dividend of 5.5 HK cents per share (2015: 9 HK cents). Together with the interim dividend of 4 HK cents per share, the total dividends are 9.5 HK cents per share, representing a dividend payout ratio of 61.4% (2015: 73.0%). In the meantime, to celebrate the 20th anniversary of COSCO SHIPPING International’s being a listed subsidiary of COSCO SHIPPING (Hong Kong) Co., Limited, the Board proposed the payment of a special dividend of 5HK cents per share. The final dividends for 2016 amounted to 14.5 HK cents per share.

As at the end of 31st December 2016, COSCO SHIPPING International had net cash of HK$6.7 billion, or HK$4.34 per share, which will provide strong capital support for major acquisitions and expansion of existing businesses in future.

Looking ahead, the global economic growth in 2017 is expected to be faster than that in 2016, which will provide a stronger support for the shipping demand. Although the overall imbalance between the supply and demand sides in the shipping sector still exists, it is expected to be relieved to a certain extent. The shipping market is on the rise and will become more rational. The structural recovery of the industry will further enhance market confidence. The further implementation of China’s “Go Global” strategy and “One Belt, One Road” initiative will present enormous opportunities for Chinese shipping enterprises to develop new markets.

COSCO SHIPPING International remains committed to the strategic direction of “Shipping Services Industrial Cluster”, in accordance to the overall strategic plan of COSCO SHIPPING, and strived to achieve intensive marketing and centralised procurement, as well as to gather talents. On the one hand, the Company will run existing businesses with a reforming and innovative mindset, adapt to the changes and timely adjust strategies in response to the market trend, as well as seek development opportunities. On the other hand, the Company will actively prepare to expand the asset size by putting considerable effort on the search of potential acquisition targets and development plan. The Company will capitalise on its listed platform for acquisition and corporate action, to achieve strategic upgrade and transformation and to become a world class and leading shipping services company in China. The Company will develop the “shipping services industrial cluster” which can offer strong supporting services for shipping with independent profit drivers, and to maximise the returns to the shareholders.

Financial Summary

Source: Cosco Shipping International

Tankers: Drawdown of oil product stocks will boost tanker demand – Braemar Shipbroking

In International Shipping News 24/03/2017

The global outlook for crude oil is strong in 2017, but refined oil product stocks need to be drawn down to increase product tanker demand, Braemar ACM Shipbroking’s Global Head of Research Henry Curra said.

Global demand for crude oil will rise by 1.4 million b/d before bottoming out in 2020, he said, as a panel speaker at the Connecticut Maritime Association conference. Refining demand has slowed, however, due to abundant stockpiles of refined products, he added.

“In 2016, refinery runs barely moved at all,” said Curra, a result of stocks that had built up in the preceding two years, leading to less demand for product tankers.

“Over the last few months, we’ve been in a process of drawing down those stocks and as we draw down those stocks they compete with imports and that’s given a slightly bearish tinge to that product carrier market,” he said.

Meanwhile, a big flow of Atlantic Basin crudes were seen moving to Asia, especially in light of the current Brent/WTI spread, he added.

Source: Platts

New fruit shipping route links ASEAN and South China port

In International Shipping News 24/03/2017

A ship loaded with fruit from ASEAN countries arrived at Fangchenggang Port Monday, marking a new shipping route for transporting fruit, local authorities said Wednesday.

The shipping route from Vietnam’s Ho Chi Minh to the port city of Fangchenggang in South China’s Guangxi Zhuang autonomous region is operated by four ships from China COSCO Shipping Corporation.

Each ship can carry 1,100 standard containers with a load of 1,800 metric tons. Currently the service runs once a week, but it is expected to run two to three times a week by the end of 2017, according to sources with the Beibu Gulf port administration.

Fangchenggang Port is a fruit import port in southern China. The new route will help boost fruit imports from ASEAN countries, while marketing Chinese farm produce and fruit to the ASEAN.

Source: Xinhua

Asia Dry Bulk-Capesize rates to remain firm on Australian cargo pick-up

In Dry Bulk Market,International Shipping News 24/03/2017

Freight rates for large capesize dry cargo vessels on key Asian routes, which are close to multi-month highs, are likely to remain firm next week as cargo activity picks up from Australia after bad weather disrupted operations at Dampier this week, brokers said.

“The capesize market is steady. Rates are well above where people expected them to be,” a Singapore capesize broker said on Thursday.

“The market might correct itself slightly, but there’s no need to panic,” the broker added.

Average capesize earnings were around $19,180 per day last Friday, compared with around $2,931 per day a year earlier, according to data from shipping services firm Clarkson.

That came as charter rates from Brazil to China surged to $16.70 per tonne on Monday, the highest since Dec. 3, 2014.

Rates on the route from Australia to China climbed to $6.93 per tonne last Friday, the highest since Nov. 22.

Norwegian ship broker Fearnley said the capesize market is “taking a breather after rallying – but (the) outlook for weeks to come (is) not scary.”

There are “huge iron ore volumes committed on the Brazil/China trade,” but only a limited number of vessels still available for charter to load cargo in April, Fearnley said in a note on Wednesday.

The closure of Dampier port due to bad weather this week dampened chartering activity and freight rates, the Singapore capesize broker said. The port reopened on Thursday, a move which is likely to lead to a pick-up in chartering activity and possibly higher rates, the broker added.

Charter rates from Western Australia to China slipped to $6.59 a tonne on Wednesday from $6.68 a tonne a week earlier.

Freight rates for the route from Brazil to China climbed to $16.24 per tonne on Wednesday from $15.96 per tonne the same day last week.

Charter rates for smaller panamax vessels for a north Pacific round-trip voyage fell to $9,807 per day on Wednesday, down from $10,089 per day last Wednesday.

Peter Sand, chief shipping analyst at industry lobby group BIMCO, said the rise in dry cargo freight rates this year “is certainly positive, but there is still work to be done on the supply side.”

“A significant level of demolition activity must be maintained,” he added.

Rates in the Far East for supramax vessels rose to around $12,500 per day for trips from India and Indonesia to China and North Asia this week compared with $9,000-$11,000 per day last week, brokers said.

The Baltic Exchange’s main sea freight index climbed to 1190 on Wednesday from 1147 last week.

Source: Reuters (Reporting by Keith Wallis; Editing by Sunil Nair)

Dry Bulk Market Fundamentals Point Towards A Viable Recovery

In Dry Bulk Market,Hellenic Shipping News 24/03/2017

The dry bulk market has dug itself out of the hole it’s been for a large part of the past few years. In fact 2017 has started better than most ship owners would have hoped, as over the past couple of months we have seen the emergence of renewed optimism. “Renewed optimism” is but a light way of putting it, as many in the shipping industry will point out. In its latest weekly report, shipbroker Allied Shipbroking noted that “freight rates in the dry bulk market have consistently held above the comparable rates seen during the same time period both in 2016 and 2015, while at the same time we have seen the Dry Bulk Index rise to above 1,200 points and all this before even seeing the strong push from the grain season in the Atlantic.

However, according to Allied’s, George Lazaridis, Head of Market Research & Asset Valuations, “there have been some signs of late that this initial momentum may well have gone as high as it can for the time being, but being on such a remarkable trajectory, it has spurred buyers to rush into the secondhand market, turning it in effect into a seller’s market and boosting prices at an astounding rate in a matter of a couple of weeks. All this positive sentiment goes however well beyond the reach of shipping circles. Over the past seven or so months we have seen a glimmer of positive growth being brewed under the surface”.

Lazaridis added that “what’s more is that unlike other points in time since the financial crisis of 2008 where we had hopes of a recovery in sight, we have never before seen this many positive signs being seen across the rich world and emerging markets alike. Sure there are still a myriad of potential risks and pitfalls that could cause another downward spiral similar to those we have seen over the past couple of years, yet given the extent of which many of the weaknesses in most economies have already been corrected, the current growth sprouts being noted seem to be on more well-structured ground and likely to be less effected by possible shocks that may pop up in the global markets. There has been a great surge in restocking of raw materials as well as a climb in spending of both machinery and equipment, both suggesting that companies worldwide are starting to find a headwind from where they can boost their production levels”, he noted.

According to the shipbroker, “much of this may well be based on the fact that we have seen increased consumer spending in much of the rich world, while at the same time the slow indications of inflationary pressure may well be helping to move things further, allowing for a lift in manufacturing profits which in turn could lead to greater capital spending through increased earnings rather than debt and a further rival in both production and hopefully consumption at a latter stage. Furthermore, the boost being noted in commodity markets has helped beef up many of the emerging markets that heavily really on raw commodity exports, as such helping them better balance their current account sheets and push for another round of export-oriented growth. This is all fair and well, but these are only growth sprouts for the time being and not fully developed in order to be immune to further shocks in the system. Labour markets could still improve further, with even the increase in employment in America not being followed just yet by a respective increase in wage growth which would help fuel further consumer spending and great a stronger foundation for growth. At the same time if we start to see inflation figures reach too high, growth might be stifled, as consumer spending drops. The risks are still there, however it seems as though we are on better track then we have been over the past couple of years”.

He concluded by noting that “for the moment optimism seems to be driving the market forward, however without this being properly directed towards meaningful steps to further improve markets and in turn global trade, this spark may well end up with yet another fizzle rather than a bang”, Lazaridis said.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Dry Bulk: Higher scrap prices could tempt more ship owners to scrap their older vessels

In Dry Bulk Market,Hellenic Shipping News 23/03/2017

With ship demolition rates picking up considerably over the course of the past few months, this could be a prime time for many ship owners to finally scrap their older bulkers, especially if surveys are on the way for them. Already, Capesizes offered for scrap have diminished to just 13 so far in the year, versus 40 last year, as per data from GMS, the world’s biggest cash buyer of ships. In its latest report, the company noted that “continued (increasing) positivity in prices reflected an increasingly bullish international ship recycling market for yet another week. During the corresponding period last year, there was talk of a potential ship recycling recession as several yards went bankrupt and prices teetered on the precipice in the low USD 200s/LDT. There was also talk of levels possibly declining into the USD 100s/LDT (the first time in nearly two decades). However, what a turnaround we have witnessed in a matter of 12 months as prices now escalate beyond the mid USD 300s/LDT, with anticipation running high that even USD 400s/LDT might appear on the horizon, should the current trend persist. There has certainly been a slowdown in the number of available candidates – 40 capes were sold by this time last year as compared to only 13 so far this year – as charter rates have improved significantly and owners are finally beginning to see better returns on their vessels”.

Nevertheless, as GMS noted “there were sales to report into all sub-continent markets this week, from a variety of different sectors. Containers from the German market especially seem to have slowed and it would certainly seem difficult to replicate the relentless pace with which vessels from this market were being concluded. Steel plate prices from nearly all markets (except Turkey) have once again ended the week on an optimistic note and with currencies settled and demand turning rampant, it should be an extremely busy period until the inevitable monsoon slowdown from May starts to hinder the ongoing pace. While owners may invariably try and eek out the last available income on their older assets after so many loss making and bleak years of earnings. However, for those units with surveys due, now would be an ideal time to cash in on a booming ship recycling market.

In a separate note, Allied Shipbroking said that “the flow of demo candidates continues to be slow, helping push breakers to upkeep their firm offers as they try to attract the few candidates that come to market. The competition is intensifying quickly and at the same time is well supported by the still holding firm local prices of steel plates. Support continues to also be found by the favorable exchange rates, though for the moment the key aspect of the market will continue to be the lack of available units. This means that the increased competition has meant a rise in speculative offering, something that surely brings an element of risk back to the market and in the case that things start to take a corrective turn, we could see a situation were a number of buyers are left once again exposed with tonnage purchased at excessively high levels. For the moment however things seem to be holding and given the trends in the freight market, they should continue to hold at least until the start of the monsoon season”.

Similarly, Clarkson Platou Hellas said that “prices have dramatically improved again previous week and whilst units are being proposed, generally the market remains starved of tonnage with mainly the smaller miscellaneous vessels being circulated. The main continuing factor behind the lack of tonnage supply remains a surprising buoyant freight and secondhand market where sentiment is currently showing positive signs. In particular, the supply of Bulk carriers is on a much smaller scale compared to last year. Further emphasising this is the fact that the number of Capesize bulkers sold at this point last year is considerably down from the same time scape last year ie. a remarkable 40 vessels in 2016 versus just 10 sold so far this year. Even container units are suddenly finding interest for further trading and therefore frustrating the market even more. With increasing second hand values of vessels, Owners eyes are certainly being diverted away from the recycling market which is causing fresh tonnage in the market to find fierce competition amongst the cash buyers as demand intensifies. Recently we have been questioning whether the cash buyer’s speculation is being justified by the numbers on offer from the waterfront. Well, it would seem from reports that the end recyclers are apparently becoming sceptical and concerned with the lack of tonnage availability and this, balanced with the improved domestic steel markets, could see upward movement in rates for the short term future. The ship recycling industry is certainly critical to the ‘supply and demand’ scenario and with demand evident from all the major destinations at this current period, the slow supply could force prices up further”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Dry Bulk Ships: Firm Interest in S&P Market Could Trigger More Newbuilding Orders in the Future

In Dry Bulk Market,Hellenic Shipping News 22/03/2017

Although it’s still very early days, shipbrokers are starting to see potential signs towards more newbuilding activity, which could be triggered as a result of the strong demand for dry bulk carriers in the second hand market. In its latest weekly report, Allied Shipbroking noted that “there continues to be rumors of the market starting to see some sparks of interest and in turn activity. It is still too early to tell to what degree this is actually a revival of demand in the market or just a small temporary blimp of interest and will inevitably fade out once again. There is a sense that things may well be heading more towards the former, especially given the situation being noted in the dry bulk secondhand market, with the fast paced increases being seen likely to push more and more buyers to once again look at the newbuilding option more favorably. There is a long way to go however, and it will be a while before prices reach such levels that they will push another rush to the shipbuilders”.

In a separate note in the newbuilding market, shipbroker Clarkson Platou Hellas said that “in Tankers, Hanjin Heavy Industries and Construction have signed a contract with Clients of Cardiff Marine for four firm 320,000 DWT VLCC Tankers. Delivery for the four units is slated for 2019 from Hanjin’s Subic yard in the Philippines. Hyundai Heavy Industries (HHI) are reported to have won an order for four firm 114,000 DWT Aframax Tankers from Sovcomflot JSC for delivery throughout 2018 and 2019. Being built to be LNG fuelled and Ice Class 1A, the vessels will be delivered from HHI’s Samho facilities and it is understood that Sovcomflot have options for additional units. From Japan, there has been an order placed for two firm 36,000 DWT IMO 2 SUS Tankers by unknown owner against a long time charter to Odfjell. The duo are scheduled for delivery in 4Q 2019 and 2Q 2020, respectively. Dae Sun have received an order for a single 3,500 DWT IMO 2 SUS Tanker from Shokuyu Tanker in Japan for delivery within 2018.

In other sectors, Spliethoffs Bevrachtingskantoor BV in the Netherlands have announced an order for six firm 18,000 DWT Ice Class MPP/Heavy Lift vessels at Zhejiang Ouhua Shipbuilding. The vessels will have container capacity of 1,000 TEU each and will deliver within 2019. Finally, Triyards in Vietnam have signed a contract for one 3,000 GT Passenger/Car Catamaran Vessel which can carry 430 passengers and 98 cars with Pentland Ferries (Scotland) and another contract for one 300 GT Passenger Catamaran Vessel which can accommodate 418 passengers with an unknown Asian owner. Both vessels will be delivered within 1H 2018”, Clarkson Platou Hellas concluded.

Meanwhile, in the S&P market, things are still mainly focused on the dry bulk market, where demand for bulkers is strong. In its latest weekly analysis, ship valuations’ expert, VesselsValue, noted that values across all bulker types and ages have firmed. “Capesize values have firmed significantly this week. The Hanjin Esperance (179,100 DWT, 2012, HHI) was sold to JP Morgan Global Maritime for USD 29.5 mil vs VV value day of sale of USD 27.2 mil. The Hanjin Rizhao (179,200 DWT, 2010, Hyundai Samho Heavy Ind) and Hanjin Dangjin (179,300 DWT, 2010, Hyundai Samho Heavy Ind) sold en bloc to Korea Line Corp for USD 26.5 each vs VV values day of sale USD 23.5 mil respectively. Modern Panamax values have also firmed significantly. The Hanjin Port Kamsar (82,200 DWT, 2012, Tsuneishi Zosen) and Hanjin Hadong (82200 DWT, 2012, Tadotsu Tsuneishi) sold en bloc for USD 21 mil each vs VV value of USD 19 million”, said VesselsValue.

In a similar note, Allied Shipbroking said that “on the dry bulk side, after a temporary pause having been see in the market the week prior, things seemed to have been set alight, with the mass activity being characterized by strong price increases. It seems as though further price increases will be quick to follow, while buyers’ sentiment has taken a bit of an “avalanche” effect. Sellers have now been more willing to act, though we could see another pause in activity as sellers delay decisions in hope of pushing for slightly better levels as the balance in the market starts to shift further onto their side. On the tanker side, things were slight more active, though nothing to write home about. Here we are still seeing a completely opposite picture of what we have been seeing in the dry bulk market, with sellers backing out of the market due to prices being too “soft” for their taste”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

North America Could Play Bigger Role in Future Global Bunker Market

In International Shipping News 22/03/2017

“In light of new marine fuel regulations in 2020, North America has the opportunity to take a much bigger role in the future global bunker market given its capabilities to be a major supplier of ultralow sulfur fuel oil (ULSFO) components and gas oil,” according to Alan Gelder, Vice President, Refining, Chemicals & Oil Markets, EMEARC Research for Wood Mackenzie, speaking today at the American Fuel & Petrochemical Manufacturers (AFPM) annual meeting in San Antonio, TX.

Gelder explained that the global total demand for fuel oil and gasoil bunkers has changed little since 2010. However, Asia Pacific’s market share of the global bunker market has continued to grow, now representing almost half of all bunker volumes sold. North America is a distant third in terms of market share behind Asia Pacific and Greater Europe. North America is hence underweight in terms of bunker supply, as it has a greater share of global trade.

Gelder noted: “North America currently has a lower share of the global bunker market than its share of global trade.” This is a reflection of the current global bunker fuel market being dominated by high sulphur fuel oil (HSFO), which is more costly in the United States than in Europe, as the US Gulf Coast (USGC) has more sophisticated deep conversion refining capacity that can process heavy residue feedstocks. However, Gelder emphasized that North America has a high global share of the global gasoil bunker market, due to it being an Emissions Control Area and a low cost source of middle distillates.

“Any switch in bunker fuel towards distillate could hence increase North America’s bunker market, as it is one of the lowest cost providers of such fuel. The forthcoming International Maritime Organisation’s (IMO) legislation on ship emissions under MARPOL Annex VI could provide such an opportunity,” Gelder said.

In October 2016, The IMO Marine Environmental Protection Committee agreed to implement the 0.5% sulphur limit for marine fuels in 2020, rather than defer enforcement to 2025. According to a separate study by Wood Mackenzie, ‘IMO’s bunker sulphur changes: smooth sailing or rough seas?’, ULSFO could emerge as the lowest cost compliance option, but sufficient volumes of ULSFO are not expected to be available at current fuel oil price levels, with volumes limited to less than 1.0 million b/d in 2020. Nevertheless, there is considerable uncertainty regarding availability and this is likely to evolve during the initial years of implementation.

Gelder’s technical paper affirms there are various options for compliance, with the lowest cost option of continued use of HSFO requiring ship owners to invest in on-board scrubbing, as Wood Mackenzie does not expect sufficient volumes of ULSFO to be available at current fuel oil price levels.

“Considering these factors, the market outlook is uncertain, but there will be a shift away from HSFO to gasoil by the shipping sector,” noted Gelder. This will have implications on the global refining system such as:

• Fuel oil demand falls, resulting in lower prices, as it needs to be converted to more valuable fuels by existing spare residue upgrading capacity
• Gasoil demand rises, resulting in higher prices as refining margins need to rise to increase supply whilst fuel oil prices fall

Aside from the improvements associated with the shifting market dynamics, North American refiners have the opportunity to take a larger share of the global bunker market through their advantaged supply of ULSFO components and gas oil, reiterated Gelder. “This will require development of the necessary port and bunkering infrastructure, with the expectation that North America can punch above its weight in global bunker supplies post 2019 if it focuses on capturing the forthcoming opportunity.”

In conclusion, Gelder stated “There is hence a risk that this fuel specification change could be disruptive, but the anticipated market reaction could benefit USGC refiners that have deep conversion/distillate oriented configurations.”

Source: Wood Mackenzie

Product Tankers: Higher Tonne Mile Demand will come from Asia says shipbroker

In Hellenic Shipping News 21/03/2017

The growth prospects of the product tanker market have been in debate over the past few months, after the subdued performance of the clean tanker segment during 2016. As such, the latest IEA medium term oil market report, which was released earlier this months could provide cause for at least some degree of optimism. Shipbroker Gibson noted in its latest weekly report that “most relevant to the product tanker market, was the IEA’s analysis of product balances, broken down into light (gasoline/naphtha), middle (gasoil/kerosene) and heavy distillates (fuel oil). Interestingly, product balances in Europe are expected to see little change between 2016 and 2022. Europe will remain short on middle distillates, and long on lighter distillates. This signals limited prospects for European imports generating increased tonne mile demand, given the product is likely to remain primarily supplied by the US, Former Soviet Union (FSU) and Middle East/India. The good news for Europe is that there are sufficient outlets for its surplus light ends. The US will have a shortage of about 0.5 million b/d of gasoline, similar to the current picture, whilst other regions such as Africa and Latin America post small deficits for the lighter ends. Evidently there is a reasonable selection of export destinations within the Atlantic for European gasoline”.

According to the London-based shipbroker, “on the subject of Africa, closer analysis of the IEA’s report reveals some background behind the data. The IEA suggests that Africa’s shortage of lighter distillates will be the same in 2022 as it is today, which is surprising considering demand growth in the region. However, there is a significant assumption: the Lekki refinery in Nigeria, which is slated for start up sometime next year. However, the IEA are cautious, and do not factor this refinery as impacting the market until 2022. On the face of it, no change in African import demand is bearish for product tankers, however as this key refinery is not expected until 2022, we can expect African import demand to continue rising until the refinery is brought online. Furthermore, given the track record of refining in Nigeria, one must be cautious as to whether this plant can (a) be built within the next 5 years, and (b) run consistently near design capacity. Any setbacks here will provide upside support for the tanker markets. In terms of middle distillates, Africa and Latin America will see their import requirements shrink marginally to a combined 1.5 million b/d with the primary sources of supply likely to be the US, Middle East (inc. India) and Russia”.

Gibson added that “globally, the Middle East will continue to be the primary source of export growth over the forecast period. The regions surplus of gasoil will grow by approximately 70% over the next five years, whilst the light distillates surplus will post growth of 85% over the same period. All of this bodes well for exports from the region. In Asia, 2016 saw a gasoil surplus, forcing traders to push export barrels long haul, primarily driven by the emergence of the teapot refiners in China. However, by 2022, this surplus will flip to a deficit. In one sense, this is bearish as outbound product flows fall away. However, increased import demand will partially offset these declines. Additionally, Asia’s shortage of gasoline/naphtha will grow by over 0.5 million b/d by 2022. Whilst this growth is positive, it does mark a significant downwards revision from the IEA’s 2016 report which projected light distillates import growth of 1.6 million b/d by 2021. Despite this downwards revision, Asia’s growing product deficits will support long haul imports from both the Middle East and Atlantic basin, generating incremental tonne mile demand, in spite of declining exports from the region”, it concluded.

Meanwhile, in the crude tanker markets this week, in the Middle East, Gibson noted that “March VLCC fixing closed out and Charterers took an easy start to the new April programme. Overall, volumes were reasonable, but the weight of availability limited rates to within their previous flat range. Lows slid into the high ws 40’s to the East with little better than ws 55 for more restricted runs and rates to the West down to ws 27 via Cape. Busy, perhaps, next week, but Owners will find little leverage. Suezmaxes started in reasonable form, but enquiry thinned as the week progressed and rates slid off to 87.5 to the East and ws 42.5 to the West with little early change likely. Aframaxes pushed on as supportive inter Far East action escalated. Rates moved to 80,000 by ws 130 to Singapore and could even add to that next week”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Is the dry bulk industry still on track for profitability in 2019?

In Dry Bulk Market,International Shipping News 18/03/2017

The industry remains well on target for profitable freight rates in 2019! This relies however, on the projected fleet supply growth rate of 0% in 2017 continuing. The handymax segment may even see profits in 2018 as demand may go beyond 2% in 2017 – before reverting to 2% in 2018 onwards. In 2016, the supply side grew by 3.0% and the demand side grew by 2.4% – measured on a tonnemile basis.

This resulted in a worsening of the fundamental market balance. However, as the original “Road to Recovery” in May 2016 projected an even worse fundamental deterioration in 2016 – we are today, in a relatively better position than anticipated nine months ago.

BIMCO’s Chief Shipping Analyst Peter Sand comments:

“Estimating a return to profitability in the dry bulk industry remains a moving target, and one that differs from one company to the next. But by projecting a course for profitability, everyone in the industry can use it as a reference.

The fact that the first half of February 2017 was a troublesome period came as no surprise and it makes the strong comeback in the following month stand out as even more remarkable. During that time, the BDI went from 688 to 1,147.

This lift in freight rates is certainly positive, but there is still work to be done on the supply side. A significant level of demolition activity must be maintained, and increasing focus must also be on keeping slow steaming around”.

Source: BIMCO estimates (2017-), BIMCO utilisation est. (2007-2023), Clarksons demand growth rates (2007-2017) 

Note: Net supply growth of 0 million DWT in 2017. Demand growth rate of 2.2% in 2017. Note: The years circled are where demand growth outstrips supply growth = improving the market.

What has changed? Besides a relatively better fundamental balance, mostly the daily running costs! The drop in OPEX more than makes up for the fundamental deterioration of the freight market. Speed may also be a factor coming into play as renewed optimism and upwardly moving freight rates are often followed by a less intense focus on maintaining slow steaming.

In total, freight rates will be slightly higher than originally projected for the coming years. Combining the relatively better freight market, with a 10-year-low OPEX level in 2016 – the dry bulk industry remains on the road to recovery.

Even small changes matter

Using the assumptions already mentioned above for the supply and demand side, a further drop in OPEX of 5% will also bring profits for the handysize sector in 2018. This will then mean a justprofitable industry in 2018 overall. However, not profitable for all the sub-sectors, as the panamax and capesize sectors are estimated to remain in the red.

Moreover, a higher supply side growth rate than 0% in 2017, which BIMCO expect to be the case, may not completely wipe out recovery in 2019. As demand is expected above 2% as a target growth in 2017, ‘damage’ from a slip on the supply side is reduced by a stronger demand side.

Source: Peter Sand, Chief Shipping Analyst; BIMCO

Strong capesize rates keep Baltic index at over 3-month high

In Dry Bulk Market,International Shipping News 18/03/2017

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, rose to a fresh over three-month peak on Friday as capezise rates rallied.

The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, rose 24 points, or 2.05 percent, to 1,196 points – its best since early December.

The index, which has risen for the 13th straight session, was up about 40 percent since its previous fall on Feb. 28, when it broke a nine-session winning streak.

The capesize index rose for the 12th straight session. It jumped 148 points, or 6.53 percent, to 2,413 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were $1,006 higher at $17,763, the highest level since Nov. 22.

The panamax index was down 21 points, or 1.86 percent, at 1,108 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, dropped $167 to $8,914.

Among smaller vessels, the supramax index rose 2 points to 879 points, while the handysize index was flat at 508 points.

Source: Reuters (Reporting by Swati Verma in Bengaluru; Editing by Maju Samuel)

Asia Tankers-VLCC rates to remain under pressure on excess tonnage

In International Shipping News 18/03/2017

Freight rates for very large crude carriers (VLCCs) are likely to remain under pressure with hire rates from the Middle East to Asia tracking lower in the face of excess tonnage in the market, brokers said.

Cuts in the output from Iraq and West Africa this month as part of an agreement between oil producers to curb crude production to bolster oil prices are also expected to weigh on the tanker market as the number of voyages are curtailed, brokers said.

“Older, cheaper ships are workable out of the Middle East rather than West Africa, that’s why we see slightly higher rates from West Africa,” said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.

Typically, shipowners discount rates for older vessels, while oil majors in West Africa limit charters to more modern ships.

Supertanker charter rates have diverged over the last week with prices from the Middle East to Asia nudging lower while freight rates from West Africa climbed to their highest since Feb. 28.

“The disparity in rates between modern and old ships remains while rates for the longer voyages like West Africa/East have been better maintained,” said Norwegian ship broker Fearnley in a note on Wednesday.

“Elsewhere, it’s subdued with ample tonnage and rates are likely to remain under pressure for the time being,” the Fearnley note added.

That came as loading schedules from Basra suggested that crude exports from the Iraq port could fall by more than 600,000 barrels per day in March, BMI Research said in a note on Wednesday.

Coincidentally, traders are shipping competitively priced crudes such as Russian Urals, Kazakhstan’s CPC Blend, North Sea Forties and U.S. West Texas Intermediate to replace Middle East staples.

“There is a fair amount of oil from the North Sea to Asia,” Sharma said.

Crude volumes loaded from Angola in March could also fall to around 1.5 million barrels per day, against 1.6 million barrels per day in January, the BMI note added.

“However, initial loading data for April suggest that this will reverse with crude loading rising back up to 1.7 mbd,” BMI said.

VLCC rates on the Middle East-to-Japan route dropped to around 54.74 on the Worldscale measure on Thursday, from W56 last week. Time charter earnings are around $21,935 per day, virtually flat from last week.

Rates on the West Africa-to-China route rose to around W62.75 on Thursday from W59.50 on the same day last week. Rates hit W63.25 on Wednesday, the highest since Feb. 28.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia surged to W138.75 on Thursday from last week’s W113.75 on tighter tonnage supply, a Singapore clean tanker broker said.

Rates are equivalent to $19,903 per day, the highest since Dec. 15.

Source: Reuters (Reporting by Keith Wallis; Editing by Sherry Jacob-Phillips)

Shipping Stocks Encounter Volatility

In International Shipping News 18/03/2017

When President Donald Trump was elected in November, share prices of shipping companies soared by more than 1,000 percent. Investors hoped the new president’s campaign pledges, including corporate tax cuts and interest rate rises, would reverse low shipping rates and spark a rise in the lucrative transportation of various materials by sea.

Aside from a characteristic lull in February, the Baltic Dry Index (BDI) — a measure of the price of shipping major raw materials such as iron ore, grains and fossil fuels by sea — has advanced strongly in recent months, lifting stock prices across a number of shipping companies such as Scorpio Bulkers‌ (SALT), Diana Shipping (DSX) and Knightsbridge Tankers (VLCCF).

China Iron Ore Demand Lifts the BDI

However, there are also concerns about the factors supporting the BDI’s recent impressive performance. Chief among them is the record amount of iron ore arriving at Chinese ports which some analysts, including Andrew Keen at Haitong, believe is unsustainable.

The recent surge in Chinese steel production means that Capesize vessels currently make up a substantial portion of dry bulk traffic. Unusually high demand for these larger cargo ships has led to big fluctuations in the BDI and helps to explains why shares in companies that do not operate Capesize vessels, such as DryShips (DRYS), have been on the wrong end of market sentiment.

Barclays Bullish on the Shipping Sector

Analysts at Barclays are confident that the majority of the shipping sector will continue to live up to its post-election promise. Despite vast advances in most transport company share prices, Barclays notes that the stocks still trade below historical PE ratio multiples relative to the S&P 500.

Most of Barclays’s optimism is based on improving global trade, particularly between Asian and U.S. ports, President Trump’s pledge to reduce tax rates for exporters and also higher interest rates and inflation. The Federal Reserve recently raised its borrowing rate by 25 points, representing the second hike in three months. Barclays said this offers encouraging signs for the sector, because higher interest rates have historically enabled shipping companies to achieve much-needed price increases.

Source: Investopedia

Galician shipowners express uncertainty over Brexit talks

In International Shipping News 18/03/2017

Shipowners from Galicia warn that 140 ships will be affected by the departure of the United Kingdom from the European Union (EU).

“Galicia is playing it in the Brexit negotiations,” said the president of the Shipowners’ Cooperative, Javier Touza, due to the uncertainty faced by the sector, La Voz de Galicia reported.

Touza said the affected ships are 140, of which 40 usually operate in the Falkland Islands, “a difficult-to-replace fishing ground”.

The leader was one of the participants in the conference on the challenges and opportunities of the Brexit for the fishing sector held in Vigo by the auditor KPMG.

In his speech, he recalled that the lack of precedents of a decision of this kind does not even make it clear which model must be followed. In any case, he said, the “legal security of our companies” is at stake.

In his opinion, it can also have a significant impact on employment, as he said 1,800 Galician crew members work onboard the 140 ships.

Another industry related to fishing that will be affected is the canning industry.

In this sense, the association general secretary, Juan Vieites, stressed that Britain is the fourth country to which Galicia exports its products.

Vieites agreed with Touza that “the worst thing on the market is uncertainty,” and called for turning the challenges into opportunities.

In this regard, he recalled that Britain is an importing country and its dependence on the EU is greater than on the rest of the world.

Finally, Manuel Gil, head of customs and taxation at KPMG, was convinced that “negotiation is going to be difficult” in fisheries issues, especially since the associations that group British fishing communities have great expectations of improvement with the disconnection of the country from the EU.

Source: FIS

GE Shipping adds new vessel to its fleet, stock tanks over 2%

In International Shipping News 18/03/2017

GE Shipping on Friday announced that the company has signed a contract to buy a Supramax Dry Bulk Carrier of about 52,450 dwt.

The vessel is a 2006 build and is expected to join the company’s fleet in Q1FY18.

GE Shipping on the NSE is trading at Rs 384 per share, down by 2.2%. The stocks hit an intraday high of Rs 393 per share and a intraday low of Rs 383 per share in Friday’s trade.

In a period of one year the stock had delivered 24% returns, underperforming the BSE Mid-cap and Nifty Service Sector indices over the same time span.

The Great Eastern Shipping Company Limited is engaged in the business of providing shipping services. The shipping business is involved in transportation of crude oil, petroleum products, gas and dry bulk commodities. Its offshore business services the oil companies in carrying out offshore exploration and production activities.

Stock view:-

Great Eastern Shipping Company Ltd is currently trading at Rs 385.95, down by Rs 7.75 or 1.97% from its previous closing of Rs 393.7 on the BSE.

The scrip opened at Rs 393.7 and has touched a high and low of Rs 394 and Rs 383.9 respectively. So far 72578(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs 5936.09 crore.

The BSE group ‘A’ stock of face value Rs 10 has touched a 52 week high of Rs 410.4 on 20-Jan-2017 and a 52 week low of Rs 296.6 on 24-Jun-2016. Last one week high and low of the scrip stood at Rs 397 and Rs 367 respectively.

The promoters holding in the company stood at 30.41 % while Institutions and Non-Institutions held 42.54 % and 26.77 % respectively.

Source: IIFL