Continental Chartering Bulletin, December 2012 1 News Flash Rating agency Standard & Poor's has upgraded Greece´s creditwor- thiness considerably. The rating was increased by six steps from SD (par- tial credit default) to B-/B. The agen- cy attests a stable outlook and ex- plained it by the fact that the Euro- pean Currency Union (ECU) is de- termined to keep Greece in the Eu- rozone. Hamburg based liner operators Hapag Lloyd and Hamburg Süd confirmed, that they are conducting negotiations on a possible merger. Should the incorporation happen, together one would form the world´s fourth biggest liner opera- tor. CKYH Alliance consisting of COSCO, K Line, Yang Ming and Hanjin Shipping is to reduce its sailing frequency to Europe. This step will be undertaken in order to adjust for the weak winter demand. 2012: Of disappointed hope, overcapacity and weak economy Admittedly the freight market stabilized through massive capacity reductions, but the sustainable charter market recovery expected at the year´s beginning failed to materialize. The year 2012 draws to a close and it is time to draft a résu- mé. Unfortunately there is little delightful to tell about. Even though it is generally known that the one who pre- pares the bitter drink of truth rarely is rewarded with grati- tude, we want to demonstrate as objectively as possible what happened at the container shipping markets during the last twelve months. At the beginning of 2012 the container shipping industry found itself in a critical situa- tion. Liner operators´ predato- ry competition as well as a world trade growth that fell behind the expectations had caused the freight rates to fall continuously during 2011. Contemporarily in the first quarter of 2011 bunker prices had reached a historical high level that only had been reached previously in 2008 during a couple of months before the outburst of the world financial crisis. The combination of low freight rates and high bunker prices increasingly wors- ened liner operators´ in- come situation, which only had recovered a year ago. At the charter market, which had performed a small rally at the beginning of 2011, carriers´ unfortu- nate situation soon became sensible. The closure of liner services and the high influx of new building tonnage caused the charter market to collapse in the second half of 2011. Nevertheless light seemed to appear at the tunnel´s end in the middle of the
Transcript
Continental Chartering Bulletin, December 2012
1
News Flash
Rating agency Standard & Poor's
has upgraded Greece´s creditwor-
thiness considerably. The rating was
increased by six steps from SD (par-
tial credit default) to B-/B. The agen-
cy attests a stable outlook and ex-
plained it by the fact that the Euro-
pean Currency Union (ECU) is de-
termined to keep Greece in the Eu-
rozone.
Hamburg based liner operators
Hapag Lloyd and Hamburg Süd
confirmed, that they are conducting
negotiations on a possible merger.
Should the incorporation happen,
together one would form the
world´s fourth biggest liner opera-
tor.
CKYH Alliance consisting of
COSCO, K Line, Yang Ming and
Hanjin Shipping is to reduce its
sailing frequency to Europe. This
step will be undertaken in order to
adjust for the weak winter demand.
2012: Of disappointed hope, overcapacity
and weak economy
Admittedly the freight market stabilized through massive capacity
reductions, but the sustainable charter market recovery expected
at the year´s beginning failed to materialize.
The year 2012 draws to a close
and it is time to draft a résu-
mé. Unfortunately there is
little delightful to tell about.
Even though it is generally
known that the one who pre-
pares the bitter drink of truth
rarely is rewarded with grati-
tude, we want to demonstrate
as objectively as possible what
happened at the container
shipping markets during the
last twelve months.
At the beginning of 2012 the
container shipping industry
found itself in a critical situa-
tion. Liner operators´ predato-
ry competition as well as a
world trade growth that fell
behind the expectations had
caused the freight rates to fall
continuously during 2011.
Contemporarily in the first
quarter of 2011 bunker prices
had reached a historical high
level that only had been
reached previously in 2008
during a couple of months
before the outburst of the
world financial crisis. The
combination of low freight
rates and high bunker
prices increasingly wors-
ened liner operators´ in-
come situation, which only
had recovered a year ago.
At the charter market,
which had performed a
small rally at the beginning
of 2011, carriers´ unfortu-
nate situation soon became
sensible. The closure of
liner services and the high
influx of new building
tonnage caused the charter
market to collapse in the
second half of 2011.
Nevertheless light seemed
to appear at the tunnel´s
end in the middle of the
Continental Chartering Bulletin, December 2012
2
first quarter 2012. The policy
of tonnage scarcity having
been practiced since some
months proved to be success-
ful. At the beginning of March
freight rates escalated and
soon reached a sufficient level.
Meanwhile bunker prices fell
at the start of the year´s se-
cond quarter, enabling many
carriers to generate positive
revenue in this quarter.
The freight market events
gave back hope to the suppli-
ers at the charter market. It
was supported additionally
by the high scraping activity
occurring since the end of
2011. In January the charter
market that had fallen very
steeply in the second half of
2011 reached its bottom and
started to rise slightly. Voices
proclaiming a market recov-
ery for the second half of the
year enhanced. And indeed at
first glance it seemed as the
optimists could be proved
right.
In April charter rates of pan-
amax vessels increased con-
siderably and smaller vessel
types could achieve small rate
improvements as well. But
soon it was visible that feeder
vessels and sub-panamaxes
would not be able to reach an
OPEX-covering level and also
the rate increase of panamax
vessels should come to an end
in May. Weak growth of glob-
al cargo volumes caused
among others by the recession
in the Southern European
economies restored pressure
on the freight rates and forced
carriers to expedite their poli-
cy of tonnage scarcity. Increas-
ingly one tried to lower slot
costs by employing the big-
gest possible vessel where
ever it was admitted by physi-
cal setting and cargo volumes.
Simultaneously carriers had to
employ newly delivered con-
tainer vessels.
In the second half of the year
freight rates moved south-
ward again and the charter
market showed a marginal
but continuous downward
trend. Even though the pana-
max segment could maintain
its reasonable level until late
summer, growing rate losses
had to be coped with here as
well. The root of the negative
dynamic in the second half-
year has to be seen in the
weak growth of cargo vol-
umes.
With approximately 160
scrapped container vessels
and a total tonnage of 300.000
TEU 2012 already is the se-
cond most scrapping-
intensive year of this millen-
nium. 2013 demolition activity
should remain on its high lev-
el. While the amount of new
building deliveries was high
in 2012 and will presumably
stay high in 2013, new order
activity appeared to be mod-
est. Poor market environment
and debt sourcing difficulties
can be seen as main reason for
this development. New build-
ing prices fell during the
course of 2012 by 15 to 30 per
cent depending on the vessel
type.
At the end of 2012 the charter
Continental Chartering Bulletin, December 2012
3
rate level has not improved
compared to the end of 2011.
Rates of sub-panamaxes are
even below the rates one year
ago. Though freight rates
stopped their downward
trend in December, it remains
to be seen how rates will de-
velop in the face of the pile of
new building deliveries. The
combination of weak world
trade growth, overcapacity
and a still high tonnage
growth do not permit to con-
jecture anything good for
2013. Many analysts take the
view that beside overcapacity,
forced sales and limited excess
to debt financing will be dom-
inating topics in 2013. It is
established opinion in the
industry that a market recov-
ery will happen in 2014 at the
earliest, maybe not until 2015.
However, one should not for-
get that economic events are
not always influenced by
facts, but rather by the market
participants´ expectations and
by their fact changing behav-
iour which is influenced by
these expectations. Hence, it is
not unlikely that a recovery
will take place earlier. Slip-
page of new building deliver-
ies, an increasing scrapping
rate and an improving econ-
omy could make us witness a
recovery earlier than ex-
pected. After all Roman phi-
losopher Seneca already wrote
2000 years ago: “Nothing
brings us in greater evil as
orientating by the talk of those
people who consider best
what is `generally assumed`.”
Continental Chartering Bulletin, December 2012
4
Continental Chartering Bulletin, December 2012
5
NEW BUILDINGS CONTAINER - Deliveries – December 2012
NAME TEU ORDERED SHIPYARD ORDERING PARTY
HANGZHOU BAY BRIDGE 9,592 Dec 07 IHI Kawasaki Kisen Kaisha
HS PARIS 6,588 Jun 08 Rongsheng Heavy Industries Hansa Shipping GmbH & Co KG (on b/h
of Hansa Treuhand) MCC BENOA 1,732 Feb 11 Guangzhou Wenchong Buss Capital (c/o Reederei Gebrüder
Winter) SITC HOCHIMINH 1,042 Nov 10 Zhejiang Yangfan Shipping Group SITC International Holdings Co. Ltd
2nd-HAND SALES CONTAINER – December 2011
NEW BUILDINGS CONTAINER - New Orders – December 2012
QUANTITY/NAME TEU DELIVERY SHIPYARD ORDERING PARTY
4 x Hull 10,000 2014 Yanzijiang Seaspan 8 x Hull 3,800 2014 Dalian PIL
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