Market insight By Christopher T. Whiy Markeng Manager - Harbour Towage & Port Agency Cotzias Intermodal Shipping Inc. China is the world's largest consumer of coal, using more coal each year than the United States, the European Union, and Japan combined. Coal pow- er has been the dominant source of energy used to fuel the rapid economic development of China in the past two decades, with significant impact on its physical environment and human populaon. China relies on coal power for approximately 70-80% of its energy, with 45% used for the industrial sector and the remainder used to generate electricity. Nevertheless, China has been slowly entering into a new era where clean-fuel policies and new regu- laons are being implemented. China burns half of the world’s coal and has caused more than half of total CO2 growth globally for the past decade, and many believe that the reversal in coal use may represent a significant progress in slowing down climate change. According to the China Electricity Council, ulizaon rates at China’s thermal power plants fired by coal, natural gas and oil, are set to fall further this year. Beijing is aiming to raise the share of non-fossil fuels in primary energy use to 15% in 2020, up from 11.2%last year. Lower coal use is already evident in China with power companies using a greater mix of hydro, nuclear and renewable opons, especially wind. Chi- na’s coal imports fell 11% in 2014 compared to the previous year, the first annual decline in at least a decade. Lignite, thermal and metallurgical coal, hit a 43-month low of 16.78 million mt in January, falling 53.2% year on year – the seventh consecuve year-on-year decline and the biggest decline in the past 15 years. The Australian and Indonesian coal exporters are obviously focusing on the world’s largest consumer of the fuel and they also have to deal with the quality checks under the new ash and Sulphur restricons. As a result of this uncertainty, some are even holding back shipments to China. Australian coal, which is considered the benchmark for Asia, slumped 30% last year and dropped below $60/tonne this month, the lowest level since May 2007. With both imports and prices of the commodity falling further and unless something changes dramacally in the future, it looks like coal will lose its posion in the fossil fuel markets. As a result, freight rates for Panamaxes and Kamsarmaxes will most likely connue to be adversely affected. Some say that the Indian market will sll exhibit wide scale demand for the connued imporng of coal at a large scale but, on the other hand, they will never push up prices. Indian power plants have their own limitaons and they are not free to pass any rise in coal prices through to consumers. Sll, in Indian East Coast ports coal stockpiles are rising up to record levels and the power plants are only buying as much as required from these huge re- serves in major ports. Coal stocks at 16 main Indian ports were at 16.48 million metric tons as of March 20, whereas at the end of March last year, coal stocks were a mere 7.7 million metric tons. From our side we can only hope that Asian countries and mainly China will connue to depend on coal at least for the next couple of years. It should take considerable me for China’s transion to more clean sources of ener- gy to run its power plants. But on top of that we would also like to see the price of the commodity at sustainable levels that can support the industry and consequently demand for seaborne trade. Chartering (Wet: Stable + / Dry: Soſt - ) The Dry Bulk market has faced another week of increasing pressure, with Capesize performance sll weighed down by weak market funda- mentals. The BDI closed today (07/04/2015) at 583 points, down by 5 points compared to Thursday’s levels (02/04/2015) and a decrease of 19 points compared to previous Tuesday’s closing (31/03/2015). Steady Middle East acvity connues to support the crude carriers market to- gether with strong Asian demand. The BDTI Thursday (02/04/2015) was at 795 points, a decrease of 16 points and the BCTI at 665, a decrease of 6 points compared to previous Thursday’s (26/03/2015) levels. Sale & Purchase (Wet: Stable- / Dry: Stable- ) The heavily discounted asset prices over at the Dry Bulk sector connue to aract exceponally high buying interest, while MR tonnage remains popular amongst tanker sales candidates. On the tanker side, we had the sale of the “CLIO” (112,723dwt-blt 08, China), which was sold to German owner, TB Marine-Hamburg for a price in the region of $33.5m. On the dry bulker side we had the sale of the “HOUHENG 2” (179,929dwt-blt 11, Philippines), which was reported being sold to Bel- gian owner, Cobelfret for a price in the region of $30.5m. Newbuilding (Wet: Stable- / Dry: Stable-) Acvity in the newbuilding market sustained its volumes from the week prior, while it remained once again mostly concentrated around tankers where fundamentals remain in favour of those looking to invest in the sector. We reiterate our expectaon that despite the spark of increased ordering acvity for tankers we don’t see newbuilding prices moving up at least unl the spark becomes a full on trend that could allow yards to request for significant premiums for their slots.. On the other hand the situaon in the dry bulk sector remains sluggish with only a limited num- ber of orders being concluded for a third consecuve month since the beginning of the year. As we menoned last week orders for the bigger size segments has prey much halted with no signs of a reversal due anyme soon. At the same me the number of containership orders that is coming in light is revealing a much beer environment for the long baered sector, which seems to be slowly achieving a beer mar- ket supported by the normalizaon of the world trade. In terms of re- cently reported deals, Greek owner, Unisea, placed an order for two firm plus two oponal Aframaxes (115,000dwt) at Samsung , in S. Korea, with delivery set in 2017. Demolion (Wet: Firm+ / Dry: Firm+ ) In our previous report we pointed out how things in the demolion mar- ket had finally started to improve and it seems that last week senment managed to remain upbeat. Despite the lower acvity volume, which is greatly aributed to the Easter holidays, demo markets in the currently appear that are due to gain some further ground in the following days as well, albeit this improvement will most probably come at a fairly slow pace rather than in fast price moves. Most of the acon took place in Bangladesh and Pakistan last week, while offerings for wet tonnage managed to surpass $400/ldt following a couple of months of trending below that level. Bids coming out of India also cked up last week and we wait that business will resume at a faster pace in the country in the following days as well. The improved demo prices are also expected to lure to the breaking yards and even greater number of vintage dry bulk vessels, as owners previously contemplang the idea of scrapping due to the plummeng of demo prices, might shortly feel more encouraged at these improved levels. Prices this week for wet tonnage were at around 230-405 $/ldt and dry units received about 215-390 $/ldt. Weekly Market Report Issue: Week 14 | Tuesday 7 th April 2015
Transcript
Market insight By Christopher T. Whitty Marketing Manager - Harbour Towage & Port Agency Cotzias Intermodal Shipping Inc.
China is the world's largest consumer of coal, using more coal each year than the United States, the European Union, and Japan combined. Coal pow-er has been the dominant source of energy used to fuel the rapid economic development of China in the past two decades, with significant impact on its physical environment and human population. China relies on coal power for approximately 70-80% of its energy, with 45% used for the industrial sector and the remainder used to generate electricity. Nevertheless, China has been slowly entering into a new era where clean-fuel policies and new regu-lations are being implemented.
China burns half of the world’s coal and has caused more than half of total CO2 growth globally for the past decade, and many believe that the reversal in coal use may represent a significant progress in slowing down climate change. According to the China Electricity Council, utilization rates at China’s thermal power plants fired by coal, natural gas and oil, are set to fall further this year. Beijing is aiming to raise the share of non-fossil fuels in primary energy use to 15% in 2020, up from 11.2%last year.
Lower coal use is already evident in China with power companies using a greater mix of hydro, nuclear and renewable options, especially wind. Chi-na’s coal imports fell 11% in 2014 compared to the previous year, the first annual decline in at least a decade. Lignite, thermal and metallurgical coal, hit a 43-month low of 16.78 million mt in January, falling 53.2% year on year – the seventh consecutive year-on-year decline and the biggest decline in the past 15 years.
The Australian and Indonesian coal exporters are obviously focusing on the world’s largest consumer of the fuel and they also have to deal with the quality checks under the new ash and Sulphur restrictions. As a result of this uncertainty, some are even holding back shipments to China.
Australian coal, which is considered the benchmark for Asia, slumped 30% last year and dropped below $60/tonne this month, the lowest level since May 2007. With both imports and prices of the commodity falling further and unless something changes dramatically in the future, it looks like coal will lose its position in the fossil fuel markets. As a result, freight rates for Panamaxes and Kamsarmaxes will most likely continue to be adversely affected.
Some say that the Indian market will still exhibit wide scale demand for the continued importing of coal at a large scale but, on the other hand, they will never push up prices. Indian power plants have their own limitations and they are not free to pass any rise in coal prices through to consumers. Still, in Indian East Coast ports coal stockpiles are rising up to record levels and the power plants are only buying as much as required from these huge re-serves in major ports. Coal stocks at 16 main Indian ports were at 16.48 million metric tons as of March 20, whereas at the end of March last year, coal stocks were a mere 7.7 million metric tons.
From our side we can only hope that Asian countries and mainly China will continue to depend on coal at least for the next couple of years. It should take considerable time for China’s transition to more clean sources of ener-gy to run its power plants. But on top of that we would also like to see the price of the commodity at sustainable levels that can support the industry and consequently demand for seaborne trade.
Chartering (Wet: Stable + / Dry: Soft - )
The Dry Bulk market has faced another week of increasing pressure, with Capesize performance still weighed down by weak market funda-mentals. The BDI closed today (07/04/2015) at 583 points, down by 5 points compared to Thursday’s levels (02/04/2015) and a decrease of 19 points compared to previous Tuesday’s closing (31/03/2015). Steady Middle East activity continues to support the crude carriers market to-gether with strong Asian demand. The BDTI Thursday (02/04/2015) was at 795 points, a decrease of 16 points and the BCTI at 665, a decrease of 6 points compared to previous Thursday’s (26/03/2015) levels.
Sale & Purchase (Wet: Stable- / Dry: Stable- )
The heavily discounted asset prices over at the Dry Bulk sector continue to attract exceptionally high buying interest, while MR tonnage remains popular amongst tanker sales candidates. On the tanker side, we had the sale of the “CLIO” (112,723dwt-blt 08, China), which was sold to German owner, TB Marine-Hamburg for a price in the region of $33.5m. On the dry bulker side we had the sale of the “HOUHENG 2” (179,929dwt-blt 11, Philippines), which was reported being sold to Bel-gian owner, Cobelfret for a price in the region of $30.5m.
Newbuilding (Wet: Stable- / Dry: Stable-)
Activity in the newbuilding market sustained its volumes from the week prior, while it remained once again mostly concentrated around tankers where fundamentals remain in favour of those looking to invest in the sector. We reiterate our expectation that despite the spark of increased ordering activity for tankers we don’t see newbuilding prices moving up at least until the spark becomes a full on trend that could allow yards to request for significant premiums for their slots.. On the other hand the situation in the dry bulk sector remains sluggish with only a limited num-ber of orders being concluded for a third consecutive month since the beginning of the year. As we mentioned last week orders for the bigger size segments has pretty much halted with no signs of a reversal due anytime soon. At the same time the number of containership orders that is coming in light is revealing a much better environment for the long battered sector, which seems to be slowly achieving a better mar-ket supported by the normalization of the world trade. In terms of re-cently reported deals, Greek owner, Unisea, placed an order for two firm plus two optional Aframaxes (115,000dwt) at Samsung , in S. Korea, with delivery set in 2017.
Demolition (Wet: Firm+ / Dry: Firm+ )
In our previous report we pointed out how things in the demolition mar-ket had finally started to improve and it seems that last week sentiment managed to remain upbeat. Despite the lower activity volume, which is greatly attributed to the Easter holidays, demo markets in the currently appear that are due to gain some further ground in the following days as well, albeit this improvement will most probably come at a fairly slow pace rather than in fast price moves. Most of the action took place in Bangladesh and Pakistan last week, while offerings for wet tonnage managed to surpass $400/ldt following a couple of months of trending below that level. Bids coming out of India also ticked up last week and we wait that business will resume at a faster pace in the country in the following days as well. The improved demo prices are also expected to lure to the breaking yards and even greater number of vintage dry bulk vessels, as owners previously contemplating the idea of scrapping due to the plummeting of demo prices, might shortly feel more encouraged at these improved levels. Prices this week for wet tonnage were at around 230-405 $/ldt and dry units received about 215-390 $/ldt.
As the price of oil moved back down last week, the crude carriers market partly found support on cheaper bunkers in a week that was expected to be quieter but has nonetheless finished off with fairly steady activity in the Middle East region. Asian demand seems to be currently the backbone be-hind strong the strong business volumes we have been witnessing since the beginning of the year, and despite any demand volatility witnessed in the second half of March, Eastbound demand has overall remained strong and is expected to remain such at least until the end of the month.
Rates for VLs closed off the week on a positive tone, with steady demand in both the W. Africa and MEG regions, while ideas for period activity revived a bit at the end of the week.
The positive sentiment in which the week prior ended for Suezmaxes, man-aged to feed through last week as well, although the second half of the week saw things slowing down a bit as holidays in Europe and the US got in the way, while this current week has also kicked off on a lightly negative tone.
Rates for Aframaxes were also pointing up on Friday, with those for cross-Med voyages being the only negative exception in an otherwise firming market, while both North Sea and Caribs continued to witnessed increased enquiry throughout the week.
Sale & Purchase
In the Aframax sector we had the sale of the “CLIO” (112,723dwt-blt 08, China), which was sold to German owner, TB Marine-Hamburg for a price in the region of $33.5m.
In the MR sector we had the sale of the “ALGA” (37,538dwt-blt 12, S.Korea), which was sold to Maersk for $27.3m.
The Dry Bulk market seems unable to catch a break these days. Following
the market stabilization that preceded last week, lack of fundamentals to
push the market forward was once more evident across the board, while
despite the fact that the days leading to the Eastern holidays boosted rates
in some cases, it seems that the negative sentiment remains too strong to
shake off. Period enquiry remained healthy last week, but in most cases
charterers ideas were at a discount compared to last dones, with owners
seeming ready to accept these new lower levels even for longer term con-
tracts.
The Capesize segment remains the weakest link in the market, while de-
spite the slight increase in activity that was noted last week, this hardly
changed sentiment, with owners in search of cover before the holidays
accepting further discounted levels, while period ideas were also under
pressure.
Despite the negative week on week closing, the Panamax market was quite
busier towards the end of the week as charterers and owners sought to
conclude business before the start of the Easter long weekend. Activity in
East Coast South America also started to pick up once again, which eventu-
ally led to improved numbers, while period activity also remained healthy in
volumes .
Rates for the smaller size segments, aligned with the overall market senti-
ment, but have once more managed to hold much better off compared to
the non-geared sizes, with a slight optimistic feeling persisting until Friday
and despite the slow start to the week.
Sale & Purchase
In the Capesize sector, we had the sale of the “HOUHENG 2” (179,929dwt-
blt 11, Philippines), which was reported being sold to Belgian owner, Cobel-
fret for a price in the region of $30.5m.
In the Kamsarmax sector we had the sale of the “PRABHU MOHINI” (81,340dwt-blt 11, S.Korea), which was sold to Greek owner, Chartworld Shipping, for a price in the region of $17.2m.
Activity in the newbuilding market sustained its volumes from the week pri-or, while it remained once again mostly concentrated around tankers where fundamentals remain in favour of those looking to invest in the sector. We reiterate our expectation that despite the spark of increased ordering activity for tankers we don’t see newbuilding prices moving up at least until the spark becomes a full on trend that could allow yards to request for signifi-cant premiums for their slots.. On the other hand the situation in the dry bulk sector remains sluggish with only a limited number of orders being con-cluded for a third consecutive month since the beginning of the year. As we mentioned last week orders for the bigger size segments has pretty much halted with no signs of a reversal due anytime soon. At the same time the number of containership orders that is coming in light is revealing a much better environment for the long battered sector, which seems to be slowly achieving a better market supported by the normalization of the world trade.
In terms of recently reported deals, Greek owner, Unisea, placed an order for two firm plus two optional Aframaxes (115,000dwt) at Samsung , in S. Korea, with delivery set in 2017.
Newbuilding Market
20
60
100
140
180
mil
lion
$
Tankers Newbuilding Prices (m$)
VLCC Suezmax Aframax LR1 MR
Week
14
Week
13±% 2014 2013 2012
Capesize 180k 52.5 52.5 0.0% 55.8 49 47
Kamsarmax 82k 29.0 29.0 0.0% 30.4 27 28
Panamax 77k 28.5 28.5 0.0% 29.2 26 27
Ultramax 63k 26.0 26.0 0.0% 27 25 25
Handysize 38k 22.0 22.0 0.0% 23 21 22
VLCC 300k 96.5 96.5 0.0% 98.6 91 96
Suezmax 160k 65.0 65.0 0.0% 65 56 58
Aframax 115k 53.5 53.5 0.0% 54 48 50
LR1 75k 46.0 46.0 0.0% 45.9 41 42
MR 50k 36.5 36.5 0.0% 36.9 34 34
190.0 190.0 0.0% 186.0 185 186
78.0 78.0 0.0% 78.4 71 71
68.5 68.0 0.7% 66.9 63 62
46.5 46.0 1.1% 44.3 41 44
LNG 160k cbm
LGC LPG 80k cbm
MGC LPG 55k cbm
SGC LPG 25k cbm
Gas
Bu
lke
rsTa
nke
rs
Vessel
Indicative Newbuilding Prices (million$)
10
30
50
70
90
110
mil
lion
$Bulk Carriers Newbuilding Prices (m$)
Capesize Panamax Supramax Handysize
Units Type Yard Delivery Buyer Price Comments
2+2 Tanker 115,000 dwt Samsung, S. Korea 2017 Greek (Unisea) undisclosed
2 Tanker 20,000 dwt Kitanihon, Japan 2016Singaporean (Eastern
Pacific)undisclosed chemical
2 Tanker 13,000 dwt Wuchang S. B., China 2016 Chinese (COSCOL) $ 26.3masphalt/bitumen
carriers
2 Bulker 38,000 dwt AVIC Weihai, China 2016 German (MST - Mineralien) $ 22.0m Ice 1 C
6+6 Container 21,100 teu Samsung, S. Korea 2017 Hong Kong based (OOCL) $ 158.6m
3 Container 20,600 teu Hanjin, Philippines Q32017 French (CMA CGM) $ 145.0m
4 Container 20,150 teu Samsung, S. Korea 2017 Japanese (Mitsui OSK) $ 155.0molder deal surfacing
In our previous report we pointed out how things in the demolition market had finally started to improve and it seems that last week sentiment man-aged to remain upbeat. Despite the lower activity volume, which is greatly attributed to the Easter holidays, demo markets in the currently appear that are due to gain some further ground in the following days as well, albeit this improvement will most probably come at a fairly slow pace rather than in fast price moves. Most of the action took place in Bangladesh and Pakistan last week, while offerings for wet tonnage managed to surpass $400/ldt fol-lowing a couple of months of trending below that level. Bids coming out of India also ticked up last week and we wait that business will resume at a faster pace in the country in the following days as well. The improved demo prices are also expected to lure to the breaking yards and even greater num-ber of vintage dry bulk vessels, as owners previously contemplating the idea of scrapping due to the plummeting of demo prices, might shortly feel more encouraged at these improved levels. Prices this week for wet tonnage were at around 230-405 $/ldt and dry units received about 215-390 $/ldt.
The highest price amongst recently reported deals, was that paid by Bangla-deshi breakers for the Capesize “OCEAN DRAGON” (151,049dwt-17,987ldt-blt 95) that received a price of $425/ldt.
Demolition Market
Week
14
Week
13±% 2014 2013 2012
Bangladesh 400 395 1.3% 469 422 440
India 400 395 1.3% 478 426 445
Pakistan 405 405 0.0% 471 423 444
China 230 230 0.0% 313 365 384
Bangladesh 390 380 2.6% 451 402 414
India 380 375 1.3% 459 405 419
Pakistan 380 380 0.0% 449 401 416
China 215 215 0.0% 297 350 365
Dry
Indicative Demolition Prices ($/ldt)
Markets
We
t
200
250
300
350
400
450
500
550
$/l
dt
Wet Demolition Prices
Bangladesh India Pakistan China
200
250
300
350
400
450
500
550
$/ld
t
Dry Demolition Prices
Bangladesh India Pakistan China
Name Size Ldt Built Yard Type $/ldt Breakers Comments
The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without mak-ing guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no re-producing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
Private equity firm BDT Capital Partners has acquired a majority stake in US tug operator Marquette Trans-portation Co. The stake was acquired from fellow private equity firm KRG Capital Partners for an undis-closed amount. However, earlier this year Reuters had reported that Marquette had been exploring a sale worth a potential $1bn. Minority shares in the company include chief executive John Eckstein, other members of the Eckstein family and Marquette man-agement.
“Marquette has built its industry-leading position by investing in a world class fleet and providing excellent customer service,” said John Eckstein. “Our long-term capital will provide a solid foundation and long run-way to pursue a number of exciting growth initia-tives.”
“We met the BDT team as we were beginning to think about a capital partner for the next 10+ years. “We were attracted to their long investment horizon and their strategic approach to partnering with me and the Marquette management team.”
BDT chief executive Byron Trott commented: “Our long-term capital will provide a solid foundation and long runway to pursue a number of exciting growth initiatives.” Virginia-based investment bank Harris Williams & Co acted as the exclusive financial advisor to Marquette Transportation.
Bank of America Merrill Lynch, PNC Bank National Association, and Wells Fargo Capital Finance acted as joint lead arrangers for a senior secured credit facili-ty; Bank of America Merrill Lynch also acted as ad-ministrative agent for the facility.” (Dale Wainwright, Trade Winds)
