Briefing on Shipping Stocks — Ship Finance, Seaspan, Teekay Tankers, and Safe Bulkers

In International Shipping News 18/07/2017

Moody’s Japan K.K. says that the outlook for the global Shipping industry is stable, underpinned by a moderation in the excess supply in vessels for the dry bulk and containership sectors, while EBITDA for the rated shipping companies, generally, will fall modestly this year on an organic basis, excluding M&A.

Ship Finance

Hamilton, Bermuda-based Ship Finance International Ltd’s stock rose 1.14%, finishing last Friday’s trading session at $13.35. A total volume of 551,344 shares was traded. The Company’s shares have gained 3.09% in the last month. The stock is trading below its 50-day moving average by 0.45%. Additionally, shares of Ship Finance, which owns and operates vessels and offshore related assets primarily in Bermuda, Cyprus, Malta, Liberia, Norway, the UK, and the Marshall Islands, have a Relative Strength Index (RSI) of 52.79.

On July 13th, 2017, Ship Finance announced that its 2017 Annual General Meeting will be held on September 22nd, 2017, in Hamilton, Bermuda. The record date for voting at the Annual General Meeting is July 24th, 2017. The formal Notice of Annual General Meeting and associated information will be distributed prior to the meeting. The Company’s Annual Report on Form 20-F can be found on its website.

Seaspan

Shares in Central, Hong Kong-based Seaspan Corp. ended at $6.74, down 1.17% from the last trading session. The stock recorded a trading volume of 645,388 shares. The Company’s shares have advanced 10.31% in the past month. The stock is trading 10.25% above its 50-day moving average. Moreover, shares of Seaspan, which operates as an independent charter owner and manager of containerships in Hong Kong, have an RSI of 55.95.

On June 30th, 2017, Seaspan announced that it is continuing its discussion of employment agreement modifications with Gerry Wang, its CEO, Co-Chairman, and Co-Founder, and expects to conclude discussions prior to the end of July. There is no assurance that the duo will reach any agreement on Mr. Wang’s employment terms. For now, his existing employment agreement, entered into in May 2016 and amended in April 2017, continues to apply.

Teekay Tankers

On Friday, shares in Hamilton, Bermuda-based Teekay Tankers Ltd recorded a trading volume of 636,947 shares. The stock declined 0.58%, closing the day at $1.72. The Company’s shares are trading 7.76% below their 50-day moving average. Additionally, shares of Teekay Tankers, which engages in the marine transportation of crude oil and refined petroleum products through the operation of its oil and product tankers worldwide, have an RSI of 40.80.

On June 19th, 2017, Teekay Tankers announced that, at its 2017 Annual General Meeting held last June 15th, 2017, Kenneth Hvid, a Director of Teekay Tankers and President and CEO of Teekay Corporation, reviewed key developments since the Company’s last Annual General Meeting in June 2016. Meeting highlights included 2016 GAAP net income and adjusted net income of $62.9 million and $81.2 million, respectively, and free cash flow of $186.7 million.

Safe Bulkers

At the close of trading on Friday, shares in Monaco-based Safe Bulkers Inc. recorded a trading volume of 661,529 shares, which was higher than their three months average volume of 579,660 shares. The stock finished the session flat at $2.70. The Company’s shares have gained 14.89% in the past month, 11.11% in the previous three months, and 134.78% since the start of this year. The stock is trading above its 50-day and 200-day moving averages by 21.84% and 56.09%, respectively. Furthermore, shares of Safe Bulkers, which provides marine drybulk transportation services worldwide, have an RSI of 65.84.

On July 12th, 2017, Safe Bulkers announced that its Board of Directors has declared a cash dividend of $0.50 per share on its 8.00% Series B Cumulative Redeemable Perpetual Preferred Shares for the period of April 30th, 2017, to July 29th, 2017. The dividend will be paid on July 31st, 2017, to all shareholders of record as of July 24th, 2017.

Source: Daily Stock Tracker

CMA CGM and SEATRADE launch a unique cooperation

In International Shipping News 18/07/2017

The CMA CGM Group, a world leader in container shipping, and SEATRADE Group, No. 1 in Specialised Reefer Transport, are pleased to announce their collaboration on the creation of a new vessel sharing agreement incorporating the services known by CMA CGM as PAD and by Seatrade as MERIDIAN. This unique service will link Northern Europe, the East Coast of the United States, Central America, the Pacific Islands, Australia, New Zealand, Peru and the Caribbean on a weekly basis.

This new service brings together CMA CGM, SEATRADE and MARFRET and improves their frequency and port coverage.

The weekly service will have the following rotation:

• ZEEBRUGGE, LONDON GATEWAY, ROTTERDAM, DUNKERQUE, LE HAVRE,
• NEW YORK, SAVANNAH,
• KINGSTON, CARTAGENA,
• PAPEETE, NOUMEA
• BRISBANE, SYDNEY, MELBOURNE
• NELSON, NAPIER, TAURANGA
• PISCO, PAITA,
• KINGSTON
• PHILADELPHIA
• ZEEBRUGGE

This new line will be the only one in the market to offer such coverage on a weekly basis. It will:

• Provide a direct and weekly service to Papeete and Noumea from Northern Europe and the East Coast of the United States,
• Provide the only fast, direct, dedicated reefer service from New Zealand to the United States and Europe,
• Improve the supply of transport between Australia and the United States,
• Offer stops in Peru, which will include a very short transit time to supply fruits to the United States and Europe.

13 modern geared ships with a nominal capacity between 2200 and 2500 TEUs will be deployed on this new line (6 CMA CGM, 6 SEATRADE and 1 MARFRET). Each will have minimum 600 Reefers on board necessary to transport refrigerated goods such as fruits or meat.

The launch of the service is scheduled in October 2017, subject to validation by the competent authorities.

Source: CMA CGM

Slum to shipping firm, a leap of hope for Mumbai slum teens

In International Shipping News 18/07/2017

Behind the World Trade Centre towers in Mumbai’s Cuffe Parade, the road narrows into a maze of alleys overrun with garbage and ankle-deep drain water, the smell of sewage hanging thick in the seaside air over the 400 homes packed into the Ambedkar Nagar slum. But when Raghuveer Prasad steps out, in sharply pressed office apparel, he’s unfazed by the surroundings.

About to start his final year in BCom, the 17-year-old is one of five youngsters from Mumbai’s slums selected for a paid internship at J M Baxi and Co, a 100-year-old shipping and logistics firm. The youngsters, put through school and college by NGO Humara Footpath, have completed about 18 months of a two-year internship to give them job and life skills that their background otherwise rules out. The interns earn a stipend of Rs 4,000, but have their meals and travel costs taken care of.

At work, Raghuveer and Ajit Shetty, 19, who live a few doors apart in Ambedkar Nagar, have mostly worked in the travel department. Raghuveer reels off his new skills — send a fax, an email, scan documents, convert files to PDFs, make online bookings, ask for corporate rates at hotels in parts of the world he has never heard of before, make out invoices, purchase foreign exchange. He also knows the capital city of every country in the world and all major airport codes.

Before December 2015, he had never seen an intercom or fax machine. “I now understand what it is to be responsible for something in an office atmosphere, to take up a task and finish it reliably. I also know how to befriend people from other parts of the city,” he says.

Ajit underwent a personality change, says his mother Tamilselvi, 35, a single parent who works as a domestic help. “He was inclined towards some badmaashi,” she says, referring to his use of swear words, the evenings spent leaping into the Arabian sea, the bleached hair and swagger.

Ajit agrees the responsibility of a paid internship straightened him out. “The other boys here don’t care for studies, or jobs. Most of them hang around doing nothing all day. I used to be like that, but once I had the job there was no time for anything. I’d come back from school and go to work, and then back home to finish homework,” he says.

Humara Footpath’s volunteers have taught street children in Mumbai for 17 years and funded the schooling and college education of scores of children. But for its founder, Taha Jodiawalla, the idea of an internship took shape around two years ago when his friends, many with companies of their own, joined him for football with kids from the NGO. One of them saw the kids at play, and things fell in place.

The first batch, comprising Ajit, Raghuveer and a girl, joined on December 1, 2015. At the peak, the programme had eight teens doing internships at various offices of JM Baxi. Three have currently taken a break to focus on board exams. “On-the-job training is much better than rote learning. And sometimes, school curriculum can be quite irrelevant,” says Jodiawalla.

Jodiawalla personally selects those candidates for the internship, boys and girls close to 18 years, who would need to find employment over the next few years. The aim is not a prospective job with JM Baxi, but to make the kids employable. Gunjan Singh, general manager at JM Baxi’s travel department, says the interns she has supervised have grown tremendously, from dress to speech. “They are not at all ashamed of where they come from. And they have confidence in their desire to move up,” says the former teacher.

Source: India Express

Upscale or die: from 20 to a handful of global container carriers

In International Shipping News 17/07/2017

Since 2014, the container shipping industry is witnessing a massive wave of carrier consolidation. In mid-2014, Hamburg Süd acquired CCNI (Compañía Chilena de Navegación Interoceánica). In December 2014, the merger between Hapag-Lloyd and CSAV (Companía Sud Americana de Vapores) was completed. In late 2015, NOL/APL and CMA CGM agreed on the sale of APL container division to CMA CGM. Early 2016 brought the merger between China Shipping and Cosco to form China Cosco Shipping Group. Hapag-Lloyd and UASC announce to merge in the same year. In late 2016, NYK line, MOL and K-Line announced to merge their container activities to form ONE (Ocean Express Network). In early 2017, Hanjin was formally declared bankrupt. In April 2017, the European Commission cleared the take-over of Hamburg-Sued by Maersk. In July 2017, COSCO announced it will acquire OOCL. The consolidation wave went hand in hand with a massive reshuffling in alliances. In early 2017, CKYHE, G6, 2M and Ocean Three made room for THE Alliance, Ocean Alliance and 2M.

The latest consolidation wave is having a significant impact on the container carrier ranking. In 2010, the market was still characterised by three mega carriers with fleet capacities above 1 million TEU (i.e. Maersk, MSC and CMA CGM) followed by about 17 global carriers each having a slot capacity between 200,000 and 650,000 TEU. The carriers outside the top 20 were all niche players (regional and feeder operators). The graph shows the effect of recent M&A activity on the container carrier ranking (based on the aggregation of Alphaliner data, situation in July 2017). The group of medium-sized global carriers has virtually been wiped out. Yang Ming and HMM have become outliers in the new global carrier landscape. They are challenged to either join the top league through engaging in M&As or to become niche or regional players. ZIM has opted for the latter path. With a fleet capacity of just over 1 million TEU, even Evergreen Line has become one size too small to challenge the top five carriers who all operate fleets with a slot capacity above 1.4 million TEU.

The latest round in M&A activity and alliance formation not only paves the way for a stronger influence of geopolitical factors in container shipping. It also raises the question whether the strategic alliances still have an added value in a market that is moving towards only six or potentially even less global carriers.

Source: PortEconomics

Azerbaijani Caspian Shipping Company expands its fleet

In International Shipping News 17/07/2017

Azerbaijani Caspian Shipping Company increased the number of vessels sailing in international waters.

The tanker “Professor Aziz Aliyev” belonging to the shipping company will be operated in international waters, the company reported on July 14.

The ship with a carrying capacity of 7,000 tons was built in Nizhny Novgorod. Its length is 141 meters, width is 16.7 meters and the height of the side – six meters.

The vessel will operate in the Black, Azov and Mediterranean seas. The activity of the tanker will be controlled by the company Casptankers, established by the Azerbaijan Shipping Company in Turkey.

The vessel has already launched its first international voyage from the port of Tuapse to Bulgaria. This is the first in a long time the shipping company tanker swimming in the Black Sea. Currently, 10 dry cargo vessels of the company operate outside the Caspian Sea.

The Azerbaijan Caspian Shipping CJSC was established by merging country’s two largest fleets – the Azerbaijan State Caspian Sea Shipping Company and the Caspian Sea Oil Fleet of the State Oil Company of Azerbaijan Republic, on October 22, 2013.

The merchant fleet consists of 98 vessels: 34 tankers, 13 ferries, 14 universal dry-cargo, 2 Ro-Ro ships as well as 35 different auxuliary ships. And the offshore support fleet is comprised of 188 vessels of which 21 crane vessels, 22 supply and tug vessels, 29 passenger ships, 2 pipelay barges, 7 firefighting vessels, 5 geological survey vessels, 11 diving support vessels, and 84 other support vessels.

Source: AzerNews

LNG-fuelled bulk carriers are close to reality

In International Shipping News,Shipping: Emission Possible 17/07/2017

Woodside is hoping to open the marine industry’s eyes to the benefits of liquefied natural gas as a fuel source as the company pushes ahead with plans to power the Pilbara’s iron ore and oil and gas sectors with LNG-fired engines.

Visiting Dampier last week to tour the Siem Thiima LNG-diesel-fuelled supply vessel, Woodside chief operations officer Michael Utsler said LNG had the potential to fuel much larger ships.

“We have been working on a joint industry project with Rio Tinto, BHP, FMG, Mitsubishi shipping and Shanghai Ship Designs to actually develop an LNG-powered dry bulk carrier that could be used for iron ore carrying purposes between the Pilbara and China,” he said.

“(The Newcastle Max) is undergoing class approvals from a design standpoint and we hope to encourage the building of the first of those in the later part of 2017, or early 2018.”

“We don’t see LNG as being the only solution, but we see it as being a significant part of the solution in enabling both marine and land transport to meet the increasingly stringent air quality requirements.”

Woodside recently contracted the first LNG-diesel-fuelled supply vessel to operate in the southern hemisphere from Siem Offshore.

The Siem Thiima is contracted to service the North West Shelf precinct for the next seven years.

“We wanted to demonstrate that LNG as a marine fuel was both viable and competitive to the conventional marine fuels in operation in coastal and international waters,” Mr Utsler said.

“The Siem Thiima operating on LNG on an annual basis is the equivalent of removing 20,000 cars running year long on gasoline.

“Its power capabilities are equal to or greater than the existing supply vessels we have and its performance has been exemplary.”

Mr Utsler said Woodside would convert, where practical, all its offshore supply vessels to LNG dual fuel over the next five years.

Siem Offshore technical manager Charlie Baker said LNG offered the most cost-effective solution for green shipping.

“Liquefied natural gas has clearly emerged as the marine fuel of the future,” he said.

“We are very pleased to be working with Woodside to establish an LNG-fuelled industry in the region.”

Source: The West Australian

World’s bunker market in a state of uncertainty

in International Shipping News 17/07/2017

World fuel indexes have demonstrated slight downward evolution during the week with no real firm trend. The prices are still been pressured by evidences of an ongoing fuel glut despite efforts led by OPEC to tighten the market by holding back production. U.S. shale production continues to rise; inventories remain elevated; and the markets are concerned that the OPEC cuts are not doing enough to drain the surplus.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) has been steady in the period of Jul. 06 – Jul. 13:

380 HSFO – down from 287.57 to 286.50 USD/MT (-1.07)

180 HSFO – down from 328.43 to 327.57 USD/MT (-0.86)

MGO – down from 478.50 to 476.79 USD/MT (-1.71)

The group of world leading banks gave rather controversial forecasts of a further trend in oil prices. BNP Paribas slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018. Barclays also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively.

Contrariwise, Citigroup expects crude oil prices could rise to US$60 a barrel by this year’s end supporting by growing demand and lower OPEC supply. The IEA also forecast a rise in oil demand this year: it may grow by an average 1.3 million bpd, accelerating from the 900,000 bpd in the first quarter. Production (the IEA’s estimation) was lagging behind demand at 96.69 million bpd in May. These reports suggest at least partial consensus that global oil demand is growing faster than production.

However, the market still remains doubtful that OPEC-led production cuts will clear a global glut effectively as Russia and Saudi Arabia appear to be less committed than earlier in the year. It seems that Russia may oppose any attempts to deepen the oil production cuts as it may give the impression that OPEC and its partners in the deal are uncertain about its effectiveness in reducing global supplies. In such a case a deeper cut might pressure prices further instead of supporting them. There are some evidences that Russia is also against any further extension of the deal because such an extension will only make oil markets more volatile after it expires, when everyone returns to their normal output rates.

Saudi Arabia in turn plans to export less: it is planned to cut shipments in August by more than 600,000 bpd, taking exports for that month to their lowest level this year, to balance a seasonal rise in domestic use. Besides, Saudi Ara-bia cut exports to the U.S. last month in an attempt to force USA to begin using oil from its large inventories, which prevent large crude orders from international mar-kets. However, the initiative ultimately failed when Iraq, OPEC’s No. 2 oil producer, began selling its heavy crude to American buyers as a substitute for Saudi Arabian grades.

Anyway, no further oil output cuts are expected for the July meeting of the ministerial committee set up to monitor compliance with the OPEC-non-OPEC deal. The meeting will take place on July 24 in Russia.

In this situation OPEC is thinking of putting a ceiling on the crude oil outputs of Libya and Nigeria, as rising production from these two OPEC producers exempt from the cuts is further complicating the cartel’s efforts to draw down oversupply. Nigeria’s crude oil production increased to 1.68 million bpd in May, up by 174,200 bpd over April—the highest level in more than a year—after the restart of Forcados loadings for the first time since October 2016. Libya, for its part, is reaching a 1-million-bpd production—the highest in four years—and in line with its target to have that output reached by the end of July. Militancy, attacks on oil infrastructure, and port terminals blockades have quieted in both African countries, therefore further increases in production are likely. However, the geopolitical uncertainty could quickly cut production levels once again.

The diplomatic crisis in the Middle East continues. The four Arab states that are leading the boycott against Qatar vowed on Jul.07 to take new political, economic and legal measures and procedures after Doha rejected in full the list of ultimatums. The Suez Canal Authority—one of the busiest waterways in the world—said on Jul.07 that the canal authorities cannot ban Qatari ships from passing through the canal because of international treaties. But Qatari ships will be barred from using Egyptian ports and the economic zone in the canal.

U.S. drillers went back to adding rigs last week: plus 7, marking a 24th week of increases out of the last 25 and bringing the total count up to 763, the most since April 2015. Although the EIA reported drawdowns in inventories, it also reported a rebound in production figures, dashing hopes that output was on the decline. As of today, U.S. oil production has risen over 10 percent since mid-2016 to 9.34 million barrels per day (bpd).

PIRA Energy has predicted that U.S. crude oil exports will top 2 million barrels by 2020, reaching 2.25 million bpd. That’s more than what most OPEC members export. As of 2016, the U.S. average daily export rate was just 520,000 bpd, although in May, the average daily was 1.02 million barrels. Canada was the biggest market of U.S. crude exports, taking in 372,000 bpd, oil exports to China stood at 147,000 bpd, and U.S. crude exports to the Netherlands (number 3 in a line) came in at 108,000 bpd.

All in all market conditions remain weak. While further upside could be expected in the short term amid the speculations of a cut in U.S production, gains may still be limited by the firm oversupply dynamics. We do not expect any drastic changes next week: bunker prices may continue swinging with no firm trend.

* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)

Source: Marine Bunker Exchange

Europe’s smooth transition from single to double hull barges in 2018

In International Shipping News 17/07/2017

Heightened safety standards that will mean an end to single hull barges in Europe from 2018 has left barge operators with little to no choice but to upgrade or reinvest in a fleet with double hulls.

The swift uptake of double hull barges, gearing up toward the 2018 deadline, has been an effort led by the oil majors that have ruled out single hulls altogether when trading in and around the Amsterdam-Rotterdam-Antwerp barge market. Restrictions on single hulls calling at certain major refiners’ ports and terminals have also played a role in pressuring a market-wide shift to double hulls in advance of the official deadline.

Single hulls in the market make around 28% of the market share, with double hulls accounting for the remainder, figures sourced by Edwin van Hassel at the University of Antwerp from the European Barge Inspection Scheme showed.

“The majors have a lot of power. By [the oil majors] not accepting single hull barges a lot of new [double hulls were built]. Capacity grew a lot,” van Hassel said.

Exceptions remain as certain market conditions may limit operations with double hulls and favor those with single hulls. Charterers will also exercise their freedoms to charter single hulls up until 2018, where freight rates are more favorable.

SEGMENTS OF THE MARKET SLOWER TO SWITCH

The reality of switching to the double hull standard is widely accepted, but there are certain waterways where stricter restrictive drafts and low-level bridges makes the use of double hull barges a little more cumbersome.

Single hulls predominantly fall under the smaller draft category, making them more convenient for tougher barging conditions.

EBIS data showed most single hulls mostly fall within the smaller vessel size categories, where approximately 64% of single hulls have a Length Overall (LOA) measure of less than 86 meters, while only 36% of double hulls fall within this small vessel size grouping. LOA is a key measure that helps to express the overall size of the ship.

The use of a smaller vessel, in particular single hulls, may be warranted when water levels reach extreme levels, as they are better suited to operating under these conditions and could carry a larger load, thus being more cost effective.

“Problem will be low water situations, like we have seen in the last two years,” a barge trader said. “Then, with only double hull barges [in 2018], the point where you cannot ship anymore, will be there much more often due to draft [issues].” “With Kaub [water levels] at 40 cm, like we have seen in the last two years…a handful [of] single hull barges were still in operation to supply the Swiss [market…] whereas double hull barges were not running anymore.

Operations were better [with single hulls],” the trader said.

Another trader in Northwest Europe said “for me, the issue isn’t subject to the single and double hulls [when Rhine levels are low], it’s more about the size of the vessel.”

SCRAPPING SINGLE HULLS

As part of the double hull standardization, the likely fate of the leftover single hull fleet will depend on certain factors.

Certain charterers have strict age restrictions, and since the average age of single hulls is higher, with most built in the 1970s, this limits the benefits of upgrading these single hulls to double hulls.

Therefore in many cases, it would warrant scrapping single hull barges instead, and building double hulls from scratch.

“It [does not make sense] to upgrade the old barges to double hull because of the financial input,” a third barge trader said.

Double hulls, in comparison, were mostly built in the last two decades.

Furthermore, they are better built and more compact than the older single hulls, the third trader added.

Fully replacing single hulls with double hulls will take time, and many expect a slight shortfall in operational barges come 2018.

Since the transition to double hulls is already underway, any supply pressures will be evident during period of stronger demand.

“It depends on the market situation. I guess in the middle of the year [2017] with higher demand, we will see a first indication for next year regarding the usable numbers of barges. But I have already heard that some shipowners already see some shortages on barges for next year,” a third trader said.

Gasoline already trades selectively on double hulls in the ARA region, but distillates will be the one to follow once the regulations are enforced.

While traders force some market tightness initially due to the lack of available double hulls, the general consensus is that barge operators have received fair warning and the timeline has been sufficient for the shipping industry to respond in time.

Source: Platts

GOGL – Delivery of dry bulk vessel

In International Shipping News 17/07/2017

Reference is made to the stock exchange notice dated March 14, 2017 where Golden Ocean Group Limited (NASDAQ and OSE: GOGL) (“Golden Ocean” or the “Company”) announced that it has entered into agreements to acquire 16 modern dry bulk vessels in an all-share transaction where the Company will issue in aggregate 17.8 million consideration shares.

The Company is pleased to announce that it has taken delivery of one vessel, Q Deb (to be renamed Golden Deb). Golden Ocean has issued 1,300,000 consideration shares to Quintana Shipping Ltd. and associated companies in exchange for the vessel. Following this transaction, the Company’s issued share capital is USD 6,566,149.60 divided into 131,322,992 issued shares, each with a nominal value of USD 0.05.

Source: Golden Ocean Group

Everyone wants a supramax

In International Shipping News 11/07/2017

JP Morgan, Eastern Mediterranean Maritime (EastMed), Unisea, Technomar and Star Bulk are among the companies who have snapped up supramaxes during the past month. What is more, declining asset values mean that now is a good time to buy. As per usual, it’s Greek buyers who have their eye on the bargains.

Two of the supras sold in June were divested by Bariba, a Greek owner of bulkers that has lost its principals Petros Vettas and Andreas Vgenopoulos in recent years. The company has put its fleet up for sale and has so far sold two China-built supras (built in 2010 and 2011 respectively) to Technomar and Star Bulk for $7.1m and $6.1m.

Bariba has two panamaxes and three more supras to sell. The latter vessels were all built in China and are aged between 4 and 9 years old, but current data suggests that it may be better to sell them sooner rather than later – before prices dip any further.

A five-year-old supramax (56,000 dwt, built at a “first-class” yard) is this week valued at $1.16m less than it was in mid-May, according latest assessments by the Baltic Exchange. The decline in secondhand values is offsetting some of the rapid appreciation seen over the past 12 months.

Unlike in other vessel segments, the blame can’t be laid on cheap newbuilding contracts. In fact, no new supras have been ordered since December 2016.

Instead, declining asset values coincide purely with a sudden depression in supramax spot rates seen over the summer so far. Grain exports – the tent pole of the supramax trade – enjoyed a strong first quarter, but since then demand has dropped along with prices, particularly for wheat. Having said that, quite a few period deals have been seen for supras over the past month, all at stable rates – with even a rare 12-month fixture concluded (at a rate of $9,300/day).

Looking ahead, we can expect more supramax S&P deals. Grain market analysts are already talking positively about the winter harvest (although some rainfall concerns still abound). The buyers who invest now will be well positioned for the upturn.

Source: Alibra Shipping

VLCC plagued with oversupply despite strong fixture activity

In Hellenic Shipping News 11/07/2017

Despite 29 fixtures for VLCCs being reported last week, a notable week-on-week increase and a further 30 Middle East cargoes expected to materialize in the coming weeks, shipbroker Charles R. Weber expects that they won’t be enough to cater for all the ships available, with 44 VLCCs ready to take on cargo. According to the shipbroker’s latest weekly report, “rates in the VLCC market continued to hover in the same range that has prevailed over the past month with participants unable to make a sufficiently strong argument to move rates concertedly in either direction. Supply/demand fundamentals, however, appear to have tightened following robust spot cargo coverage during the July Middle East program’s first two decades and a reduction of overall supply from floating storage, STS activities and units in dry dock – as well as sustained draws on Middle East availability to service West Africa demand”.

According to CR Weber, “the tightening is illustrated by a likely decline in surplus tonnage. With 98 Middle East cargoes covered to date, we anticipate a further 30 will materialize. Against this, there are 44 units available, from which draws for West Africa demand should account for six, implying an end‐ month surplus of just 8 units. This compares with 19 surplus units at mid‐July, illustrating the tighter fundamentals and suggesting forward rate strength. Complicating positive rate progression on this basis has been uncertainty over the precise number of remaining cargoes, with some participants suggesting a steep drop off in demand during July’s final decade – as well as the fact that disadvantaged units currently account for nearly a third of the total position list. However, small gains were realized at the close of the week and possibly reflect the reality of a tighter market, if still somewhat tenuous”.

Meanwhile, CR Weber noted that “this week’s demand was relatively strong with 29 fixtures representing a 53% w/w gain and 9% more than the YTD average. In the West Africa market, the weekly tally rose by two to eight fixtures, or 19% more than the YTD average. During the upcoming week, the pace of demand in the Middle East should sustain as charterers cover remaining July cargoes, which could further expose the tighter fundamentals – provided the remaining cargo tally hold up to expectations – with the combination of tighter fundamentals and an active pace finally allowing owners to make command more meaningful rate gains. Rates on the AG‐JPN route gained one point to conclude at ws51. Corresponding TCEs rose by 6% to ~$21,657/day. Rates to the USG rose by one point to ws25. Triangulated Westbound trade earnings rose by 4% to ~$25,698/day”.

In the Atlantic Basin, rates in the West Africa market led those in the Middle East with the WAFR‐FEAST route gaining five points to conclude at ws60. “Corresponding TCEs jumped 18% to ~$27,116/day. Demand in the Caribbean market remained slow for a second consecutive week, leading rates to further modest erosion before overall VLCC market sentiment saw the losses regained. The CBS‐SPORE concluded unchanged, accordingly, at $3.50m lump sum”, said the shipbroker.

In the Suezmax market, CR Weber said that “the West Africa Suezmax market was modestly stronger this week thanks to rising West Africa crude exports that have sustained elevated demand. A total of 17 fixtures were reported this week, representing a 13% w/w gain. Meanwhile, the four‐week moving average of regional fixtures jumped to its highest level since 1Q16. Stronger rate gains, however, were complicated by ongoing high availability levels created by a 13% expansion of the global fleet since the start of 2016. Rates on the WAFR‐UKC route added five points to conclude at ws65 with corresponding TCEs rising by 42% w/w to ~$7,258/day. Though forward West Africa demand appears positive in light of strong West Africa exports and a Saudi OSP cut for Asian buyers which could keep VLCC demand in the West Africa market from rising, substantial rate gains could remain elusive. Seaborne crude exports from Russia have continued to decline, with those in the key Suezmax Black Sea market impacted by declining exports and pipeline maintenance at Primorsk. Thus, we see limited further rate upside potential in the near‐term”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

VLCC Newbuilding Orders During 2017 Already Triple Those of the Whole of 2016

In Hellenic Shipping News 10/07/2017

In what can only be seen as a worrying sign of things to come, shipbroker Gibson reports that VLCC orders this year have more than tripled, compared to those of the whole of 2016. The London-based shipbroker said in its latest weekly report that “back at the beginning of May, our weekly report focused on the accelerating pace of orders, in particular demand for VLCC tonnage. Two months later we are reporting 20 more fresh VLCC orders, in addition to those placed between January and April. The total count of VLCC orders placed in the first six months of this year reached 38 compared to just 13 in the whole of 2016. We are also aware of several owners circling around the issue, either to order speculative tonnage or direct replacements for their elder units which will certainly add to the recent melee. The pace of VLCC ordering prompted Bimco last week to warn of a potential “fundamental imbalance that would take years to overcome”. Furthermore, we have seen 16 Suezmaxes ordered this year compared to 18 in the whole of last year”.

According to Gibson, “orders for Aframaxes which are at 35 so far this year (6 in 2016) and LR2s at 12 (2 in 2016) indicate that ordering activity has heated up quickly. Similarly, orders for MRs have already overhauled last year’s total of 30. Almost half of all orders this year have been placed in June alone. Delivery dates for these orders indicate that only a few slots are available for late 2018 delivery, suggesting that shipbuilders are rapidly filling their forward orderbook. Price is still a driver, but the influx of new orders appears to have applied the brakes to the downward spiral of newbuild prices of recent times. Owners may also be betting on the potential recovery of the tanker market by placing orders for 2019/20 delivery in anticipation of a rising freight market. The latest deliberations at the IMO on ballast water is unlikely to have any real impact on newbuilding orders unless you require tonnage for US trade. With the US regulators operating a different regime outside of the IMO coupled with the Tier III requirements, some owners will be paying a higher newbuild price to comply. It appears that the US authorities are beginning to toughen up ballast water waivers since they started approving systems. The IMO has agreed to extend the deadline, this potentially could lead to slower pace of tanker scrapping in years ahead”.

Gibson added that “however, perhaps the most interesting development in June was the announcement by Trafigura to order up to 32 crude and product tankers, with a potential value in excess of $1.35 billion. Contracts were reported to have been placed by China’s Bank of Communications Financial Leasing against bareboat charters to Trafigura who are believed to have purchase options. Official confirmation of the initial 22 (Suezmaxes, Aframaxes & MRs) split between Hyundai and New Times remains sketchy and some of the finer details relating to this order remain unreported. Cido Shipping also seem to favour the products market, having recently announced changing an order for two car carriers in to MR tankers. The two vessels involved were originally ordered in September 2015 and as such are not recorded as fresh orders, adding to a swelling tanker orderbook”.

The shipbroker concluded that “most recent orders placed are for ‘blue chip companies’ who appear to have access to huge lines of credit or have been very creative with their funding. Lack of ‘easy money’ is something which has kept a lid on ordering in the recent past. Referring back to our May report “only those with strong financial muscle are likely to be in a position to capitalise”. There appear to be quite a few out there”.

Meanwhile, in the crude tanker market this week, Gibson said that there was “steady VLCC fixing through the week, but no pinch points in availability to allow Owners to lever the market higher than their previous low ws 50 East, mid ws 20’s West marks. The final phase of the July programme is now being played out and the end month does sometimes provide opportunity, but the odds of anything noticeable developing look poor as things currently stand. Suezmaxes moved through a reasonably active phase and premiums for Kharg loading did stretch to over 10 ws points, though the bulk of enquiry was quite easily satisfied by supply and rates bumped against at ceiling of ws 70 to the East and mid ws 20’s to the West. Aframaxes couldn’t find any relief from downward pressure, but did continue to make a stand at around 80,000mt by ws 90 to Singapore nonetheless. more resistance will be required next week too”, it concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Dry Bulk FFA: Supramax Market Edging Closer to $9,000 daily rate

In Dry Bulk Market,International Shipping News 10/07/2017

Supramax Index Weekly

Support –7,412 6,934, 6,680, 5,769

Resistance – 8,950, 9,794, 10,034

The 200 period moving average at USD 8,271 is currently acting as a resistance within the technical range for the Supramax index.

Failure to trade close above last week’s high at USD 8,282 would suggest market weakness targeting USD 7,412 and potentially USD 6,934. Likewise a close above the USD 8,282 high would suggest market continuation to the USD 8,950 low.

Momentum remains oversold on the weekly chart, however there is still room for some downside movement at this point, though it seem we could stay within the range for a few more weeks yet.

Supramax Q4 17 Daily

Support – 8,686, 8,395, 8,030

Resistance- 9,375, 9,720, 10,230

The Q4 futures are currently the middle of a range between USD 9,720 and USD 8,395. Technically a dangerous area to enter fresh positions. Downside moves that fail to close below the USD 8,395 support should attract technical buyers targeting the range resistance at USD 9,720.

However a close below the support level would suggest downside continuation. Upside moves that fail at the USD 9,720 resistance would confirm the range to technical sellers, targeting support at USD 8,395. Likewise a close above the resistance would suggest upside continuation.

The stochastic is in oversold territory but the price is in the middle of the range, indicating better entry levels could be achieved near the support and resistance highlighted.

Supramax Cal 18 Daily

Support –, 8,420, 8,070, 7,800

Resistance – 8,940, 9150, 9,610

Price action remains below the 50 period MA (USD 8,596) on an oversold stochastic. The recent higher low has resulted in bullish price action, with buyers looking for an upside target of USD 8,940.

A close above the resistance would imply upside continuation in the form of a higher low and higher high. Upside moves that fail to close above USD 8,940 would be considered as bearish for the Cal 18. A close below USD 8,420 would confirm market weakness, targeting USD 8,070.

The higher low would suggest upside continuation, however the stochastic remains in oversold territory, which would indicate price momentum remains weak at this point. Market longs should remain cautious due to the current weakness in buying pressure.

Supramax Q4 V Cal 18

Daily Support – 225, 90, (-40)

Resistance- 593, 715, 920

The recent pullback has resulted in the spread closing below its moving averages, but it remains above the previous low of USD 225, keeping it in bullish territory.

The stochastic is oversold and showing a bullish cross, however it remains below the 30 level, suggesting momentum remains weak at this point. Market longs should remain cautious due to the severity of the recent pullback as this highlights the current weakness we are seeing in the stochastic.

If price action can get above the moving averages with a stochastic above 30, it would suggest buying pressure is gaining in momentum. Technically bullish due to holding above its support, there remains some weakness in the spread at this point, and needs to do more to convince market buyers.

Source: FIS