Global Economy:
Eurozone: Preliminary statistics data show that euro growth for the third quarter of the year appears stronger than anticipated. Eurostat data reveal that growth of the 18 countries sharing the euro expanded 0.2% quarter-on-quarter during July-September period, following a 0.1% rise in the previous three months. Compared with previous year, Eurozone growth was 0.8% for the third quarter, the same as in the second quarter, against market expectations for a 0.7% increase. Eurostat also showed that growth for Germany grew by 0.1% and for the second biggest economy, France; GDP grew by 0.3% against market expectations for a 0.2% gain.
Japan: Japanese economy unexpectedly shrank for the second consecutive quarter indicating technical recession for the world’s third largest economy defying expectations for growth and paving the way for Prime Minister to delay a second sale tax hike. Gross Domestic Product fell at an annualized rate 1.6% from July to September, following a revised 7.3% contraction in the second quarter, which was the biggest fall since March 2011. “The Japanese economy is in recession and has now contracted in three of the last four quarters,” said Glenn Levine, senior economist at Moody’s Analytics. “The most likely course is now a snap election in December in which voters choose, naturally enough, to delay the tax increase.”
China: New data emerged this week confirm that the slowdown for the world’s second largest economy deepened. Aggregate financing in October was 662.7 billion yuan ($108 billion), the central bank said in Beijing, down from 1.05 trillion yuan in September and lower than the 887.5 billion yuan median estimate in a Bloomberg survey of analysts. New local-currency loans were 548.3 billion yuan, and M2 money supply grew 12.6% from a year earlier. In addition, statistics data revealed the second-weakest growth in industrial output since 2009 and the slowest investment in fixed assets since 2001. Factory production rose 7.7% from a year earlier, while investment in fixed assets such as machinery expanded the least since 2001 from January through October. Retail sales gains also missed economists’ forecasts last month. The People Bank of China last week confirmed it pumped 769.5 billion yuan into selected banks in the last two months and lowered twice the rate it pays lenders on 14-day repurchase agreements to spur growth.
Chinese President Xi Jinping said that China’s economy will maintain strong, sustainable and balanced growth, state media reported.Xi also said China will provide more demand and investment opportunities for the global economy as it undergoes structural reforms that foster opportunities for growth, according to the official Xinhua news agency.
Shipping:
China is likely to cut the duty on coal exports from 10% currently to 3% as early as January 1, 2015, as it tries to shore up the domestic coal mining sector, industry participants said Friday, November 14. No official government statement has been released so far on the cut. Several of China’s largest mining companies are, however, said to be in talks Friday regarding the potential cut, a source from a coal exporter said.
A meeting of miners and exporters with the National Development and Reform Commission to discuss the cut was scheduled to be held Friday afternoon, the source added. The tax cut will apply to both thermal and metallurgical coal, he said. The government introduced a slew of measures this year including the imposition of an import tariff of 3-6% on coal on October 15 to help the domestic industry.
It also introduced a new tax system, a shift from the present volume-based model to a value-based one, at the end of September to help miners cope with declining prices. Most sources expected such a measure to have a greater impact on metallurgical coal than thermal coal as the material is preferred by Asian countries such as Japan and South Korea, compared to Australian imports. Chinese met coal has a freight advantage when compared to Australia due to geographical proximity. Current thermal and met coal export volumes are quite small, however, at around 7.3 million mt in 2013, due to high taxes that make Chinese coal more expensive than Australian coal. The breakdown is around 3.5 million of thermal, 1.1 million coking and 2.7 million anthracite. About 45% of Chinese exports go to Japan and Korea and 10% to Taiwan, a market source estimated. Sources, however, remained skeptical as to whether a cut in export duty will spur exports. A Japanese trader said that “Australian coals are still cheaper.” (Source: Platts)
Dry Segment: Baltic Dry Index keeps showing a healthier performance from October levels, but distressed market fundamentals on the panamax segment push market sentiment downwards. Despite the peak of grain season in the US, the cost of Panamax shipment from North Amercica to Europe has gone down given the acute shortage of coal supplies. Contrary to the positive signs in early November, the buying interest in U.S. coal remains weak in Europe as for this season. The situation for shipowners also gets worse due to the large number of available ships standing in the south coast of Europe. (ISM news)
Panamax and supramax vessel categories appear to be in a decreasing trend, while capesize segment showed also volatility with positive expectations as Atlantic basin will become tight again and rates will find support. Overall, dry bulk spot chartering activity showed increase last week as 117 vessels were chartered to haul dry bulk commodities in the spot market last week, 10 more than the previous week, according to figures from Commodore Research. In addition, 10 vessels were chartered for period deals, 2 more than the previous week. 1 was for a period of a year or more.
In the iron ore market, 15 Brazilian iron ore fixtures emerged in the market last week, 10 more than the previous week and up from the trailing four week average. The fixtures were made to ship iron ore to buyers in China and Europe. Overall, 42 iron ore fixtures came to the market last week, 14 more than the previous week and 9 more than the trailing four week average. 40 of last week’s iron ore fixtures were for capesize vessels, 15 more than the previous week and 10 more than the trailing four week average. Chinese iron ore port stockpiles are now standing at approximately 100.5 million tons, up by 18.3 million tons (22%) year-on-year.
Last week marked the ninth week so far this year where 30 or more vessels were chartered to haul spot iron ore cargoes to Chinese buyers. It is encouraging that 2014 has already seen nine weeks of 30+ iron ore fixtures, as during all of 2013 there were only four weeks where this occurred. Chinese iron ore fixture volume is strongest during the second half of each year (particularly September through December) as Brazilian and Australian iron ore production rise sharply during this period each year.
Coal stockpiles at Qinhuangdao (China’s largest coal port) stand at approximately 5.9 million tons, 300,000 tons (5%) more than a week ago. While stockpiles have continued to rise, they still remain relatively low. In the thermal coal market, 7 vessels were chartered to haul spot thermal coal cargoes to Chinese buyers last week. This is 2 less than were chartered during the previous week but 2 more than the trailing four week average.
In the grain segment, the United States Department of Agriculture lowered its trade forecasts and predicted that global grain trade will total 344.1 million tons in 2014-2015, which is a reduction of 1 million tons. A month ago, the USDA projected 2014/15 global grain trade would total 345.1 million tons. The forecast has primarily been lowered due to smaller expectations for Australian wheat exports. supramax and handysize vessel categories have remained under a small amount of pressure and are likely to remain much less volatile than capesize and even panamax rates.
On Friday November 21st, BDI closed at 1324 points, up by 5% from last week’s closing and down by 11% from a similar week closing in 2013, when it was 1483 points. Capesize and panamax closed in red, while the largest weekly increase is recorded in the supramax segment. BCI is down by 31% week-on-week, BPI is down by 3% week-on-week, BSI is up 8% week-on-week, BHSI is up by 3% week-on-week.
Capesizes are currently earning $22,990/day, up by $2,330/day from last week’s closing and panamaxes are earning $8,443/day, down by $275/day from last week’s closing. At similar week in 2013, capesizes were earning $16,554/day, while panamaxes were earning $10,880/day. Supramaxes are trading at $9,848/day, up by $14,570/day from last week’s closing, about 57% lower than capesize and 12% lower than panamax earnings. At similar week in 2013, supramaxes were getting $14,570/day, hovering at 12% lower levels than capesizes versus 57% today’s lower levels. Handysizes are trading at $6,706/day, up by $162/day from last week’s closing; when at similar week in 2013 were earning $10,282/day.
Wet Segment: A soft downward trend is remained in the VLCC segment for November, while the aframax and suezmax segments are showing straightness.
In the VLLC segment, rates in AG-USG showed no change and stayed at WS29 for a second straight week, up by 9 points from the beginning of October. In AG-SPORE and AG-JPN routes, rates lost 3 points from previous week and fell to W 52, 11.5 points above from the beginning of October. In WAFR-USG, rates kept steady at WS65 for three straight weeks (up by 20 points from the beginning of October) and in WAFR-China route, rates lost 2.5 points and concluded at WS55 (up by 10 points from the beginning of October).
In the suezmax segment, rates in WAFR-USAC showed no change and stayed at WS80 for a second week (up by 5 points from the beginning of October), while in B.SEA-Med route, rates increased by 5 points to WS92.5 (up by 17.5 points from the beginning of October). In the aframax segment, rates in the Caribbean market recorded a minor weekly decrease of 5 points and concluded at WS160 (up by 55 points from the beginning of October), while in the Med-Med route, rates increased by 25 points to WS155 (up by 77 points from the beginning of October).
Route Vessel Size
VLCC: AG-USG 280,000t WS 29 (last week WS 29) Steady
AG-JPN 265,000t WS 52 (last week WS 55) Downward Trend
AG-SPORE 270,000t WS 52 (last week WS 55) Downward Trend
WAFR-USG 260,000t WS 65 (last week WS 65) Steady
WAFR-China 260,000t WS 55 (last week WS 57.5) Downward Trend
Route Vessel Size
Suez: WAFR-USAC 130,000t WS 80 (last week WS 80) Steady
B.SEA-Med 130,000t WS 92.5 (last week WS 87.5) Upward Trend
Route Vessel Size
Afram: CBS-USG 70,000t WS 160 (last week WS 165) Downward Trend
Med-Med 80,000t WS 155 (last week WS 130) Upward Trend
Route Vessel Size
Clean: AG-JPN 75,000t WS 115 (last week WS 131) Downward Trend
AG-JPN 55,000t WS 127.5(last week WS 135) Downward Trend
LPG Segment: Rates for very large LPG carriers are falling further, but remain historically high. On the benchmark route Middle East to Asia, rates are now down at $86/ton, from $97/ton last week with time charter equivalent earnings at around $75,000/day from $86,000/day. Fixture activity in the west of the Suez Canal is said to have dried up, while West Africa is not likely to generate more fixtures for loading this year and Brazilian is entering the summer, which means will become less active in chartering volumes. Underlying demand market fundamentals remain positive, long delayed new export projects in the Middle East, new US exports and booming Asian imports of LPG.
Container Segment: A new freight market recession begun for shipping freight rates from Asia to Europe as European growth is slowing and Japan entered a new downturn. Freight rates in Asia-Europe suffered the biggest weekly decrease falling again below $1,000/TEU and further falls may come as the peak demand season for Asian exports over Christmas holidays is already over. Meanwhile, the percentage of laid up fleet has started to increase as the decline in the seasonal volume has drove players to take vessels out of service. The latest figures from Lloyd’s List Intelligence show that 1.6% of the total container fleet capacity representing 285,689 TEU was inactive this week, from 1.3% in the previous week.
The Shanghai Container Freight Index has stayed above of 1,000 points for three straight weeks, with transpacific routes supporting such levels. The largest weekly decrease is recorded again in Asia-Europe route and the largest increase in Asia-USEC. The index ended at 1051 points last week, 12 points down from previous closing and up by 115 points from the lows of week ending September 26th.
In Asia-Europe route, rates decreased to $934/TEU, down by $241/TEU (21% w-o-w) and in Asia-Med, rates moved down by $178/TEU (14% w-o-w) and concluded at $1127/TEU. The levels in Asia-Europe route are now down by $521/TEU from the beginning of August and down by $481/TEU in Asia-Med route.
In transpacific routes, rates moved up by $163/FEU (8% w-o-w) in Asia-USWC and up by $249/FEU (6% w-o-w) in Asia-USEC route. Rates in Asia-USWC route concluded at $2,090/FEU and $4,190/FEU in Asia-USEC route. Compared with the beginning of August, rates in Asia-USWC route are now down by $108/FEU and up by $3/FEU in Asia-USEC route. Rates in Asia-USWC moved above the barrier of $2000/FEU for the first time since week ending October 24th, while in Asia-USEC route, rates increased again to levels of more than $4,000 following last week’s fall.
Shipbuilding:
The orderbook of shipyards in Jiangsu Province in China stood at 1,189 vessels, or 69.68M dwt, as of the end of October, up 55.4% year on year, showed data released by the provincial authorities on Monday. In the first 10 months of 2014, the output of newbuildings in Jiangsu province reached 197 vessels, or 9.29M dwt, down 5.9% y/y and sharing about 32.6% of China’s shipbuilding output. Up to 84.1% of these ships have been exported. During the same period, shipyards in this province have accepted orders for 344 vessels, or 18.92M dwt, rising by 27.8% y/y and amounting to 18.5% of the world’s total. China witnessed an 18.2% drop in shipbuilding output from January to October, standing at 28.47M dwt, according to data released by the Ministry of Industry and Information Technology, while newbuidling orders climbed up 15.7% y/y to 53.73M dwt and orderbook increased by 30.3% y/y, amounting to 153.55M dwt as of the end of October.
Shipping Finance:
The Indian government is at an “advanced stage” to have a dedicated fund for the shipbuilding industry. This fund of INR150bn ($2.4bn) to assist the ailing sector would be handled by Exim Bank, according to a top bank official. “The fund will be used for financing the construction, and refitting and repair, of ships,” said Yaduvendra Mathur, chairman and managing director of Exim Bank. “The government has decided to set aside INR15bn for the purpose, which will serve as the equity. When combined with Exim Bank’s capability to leverage ten times, it can result in the availability of INR150bn in fresh liquidity to the sector.”
Ship financing deals:
Russia’s Fesco Transportation Group has secured a new three-year loan with Sberbank to finance its operations. The player said the revolving facility is worth RUB 2.4bn ($50.68m) and was arranged on “market terms.” “The facility will be used to reinforce the strong liquidity position of the group and will be used to finance the current operations,” it added. It said the loan was fully compliant with the terms and conditions of its $550m notes due in 2018 and the $325m issue due in 2020.
Capital Market:
Shanghai-listed China Merchants Energy Shipping (CMES) announced yesterday to raise CNY2Bn ($327M) from its largest shareholder, China Merchants Steam Navigation via private placement for 4+1 VLCCs and six bulk carriers. A total of CNY2.99Bn will be needed for these new VLCCs, and CNY479M has been input, stated the company. Also, CNY200M has been spent for the six bulk carriers while CNY722M is still needed. CSIC Dalian is currently building 2+1 31,900dwt VLCCs while the other two 31,800dwt VLCCs are under construction at Shanghai Waigaoqiao. China’s demand for VLCCs will be 160 vessels, based on its seaborne crude oil imports in 2014, but the number of VLCCs owned and controlled by Chinese companies is less than 100, showed the data from China Shipowner’s Association.
Navios Maritime Midstream Partners L.P, a recently formed subsidiary of Navios Maritime Acquisition Corporation (“Navios Acquisition”) and owner and operator of tanker vessels, announced the pricing of the initial public offering of 8,100,000 common units representing approximately 42.5% of the limited partner interest in Navios Midstream at a price of $15.00 per unit, for aggregate gross proceeds of $121,500,000. Navios Midstream has granted the underwriters a 30-day option to purchase up to an additional 1,215,000 common units. Following the initial public offering, Navios Acquisition expects to own approximately 55.5% of the limited partner interest and the 2.0% general partner interest in Navios Midstream. The common units being offered to the public are expected to begin trading on November 13, 2014, on the New York Stock Exchange under the symbol “NAP.”
Ocean Rig UDW Inc. a global provider of off-shore contract drilling oil services announced the following:
On November 18, 2014, Ocean Rig’s $120 million loan to its majority shareholder, DryShips Inc. was approved by a special committee of Ocean Rig’s Board of Directors which received a fairness opinion from Global Hunter Securities, a division of Seaport Global Securities LLC, and the loan agreement was executed by both companies. This loan is for a period of 18 months, is unsecured and bears interest at LIBOR plus an average of approximately 10% for the first year and 12% for the following six months. Ocean Rig has the option to exchange the loan for Ocean Rig common shares owned by DryShips at a fixed price of $13.50 per share, provided the DryShips ABN AMRO $200 million secured bridge loan facility has been repaid in full. If such exchange occurs, the margin of the Ocean Rig $120 million loan to DryShips will be reduced from inception to LIBOR plus an average of approximately 6.6% for the first year and 8.25% for the following six months.
On November 18, 2014, as required by the DryShips ABN AMRO facility, Ocean Rig filed a prospectus supplement covering up to 78,301,755 of its common shares held by DryShips or its pledgees. Of the shares that have been registered, an estimated 44,000,000 Ocean Rig shares will initially be pledged by DryShips to ABN AMRO under the terms of the DryShips ABN AMRO facility which requires three times collateral coverage based on the prevailing 30-day VWAP at draw down.
Maritime Piracy:
Maritime security guards have successfully thwarted a Somali pirate attack on a Zim transport ship as it sailed back home, according to The Times of Israel. The unidentified Zim container ship was returning from East Asia to Israel when pirates reportedly approached the vessel from two sides in boats and attempted to board the ship. However, the security personnel aboard the ship were able to repel the attack with ‘quick defensive action.’ The suspected pirates eventually gave up and retreated. The attempted attack took place on Wednesday afternoon in the Strait of Bab-el-Mandeb, adjacent to Somalia, according to Israeli media sources. Although it was unclear what action the guards took to discourage the pirates. Somali piracy has dramatically declined in recent years, mainly due to international military cooperation. However, the Strait of Bab-el-Mandeb, which links the Red Sea and the Gulf of Aden in the Indian Ocean, is still considered to be a dangerous area, filled with extensive pirate gangs.
