Weekly Analysis:
– “This Week’s Snapshot on the economic and shipping environment” .
Special Edition: Short Review of Annual Newbuilding Activity 2014/2013 (including Greek and Chinese Presence).
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Please read below in a text format, this Week’s short news:
Global Economy:
India –US in discussions for increasing bilateral trade: Speaking during his visit to India this week, U.S. President Barack Obama said: “We’re advancing the vision that I laid out on my last visit: India and the United States as true global partners. And a core element of this vision is greater trade, investment and economic partnership.”
“In the last few years, we’ve increased trade between our countries by some 60 percent. Today, it’s nearly $100 billion a year which is a record high. And this is a win-win. It’s a win for America and our workers because U.S. exports to India are up nearly 35 percent, and those exports support about 170,000 well-paying American jobs. At the same time, Indian investment in our country is growing, as well. And those Indian investments are supporting jobs across America.”
“Of all America’s imports from the world, about two percent come from India. Of all of America’s exports to the world, just over 1 percent go to India – one percent to over a billion people. “ “We do about $100 billion a year in trade with India, which is a great improvement since I took office. But we do about $560 billion a year with China. That gives you some sense of the potential both for the kind of growth that India might unleash, and the potential for greater trade between our two countries.”
Eurozone: Despite the increased tension in the euro area from the Greek elections, January ended with a positive momentum as flashEurozone PMI Composite Output Index increased at 5-month high of 52.2 from 51.4 in December. In addition, Flash Eurozone Manufacturing PMI ended at 6 month high of 51.0 from 50.6 in December. Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:
“The eurozone enjoyed a positive start to 2015, with the PMI survey signalling a strengthening in the pace of economic growth to the fastest for five months. The rate of expansion remains worryingly weak, however, with the PMI running at a level consistent with GDP rising at a quarterly rate of just 0.2%, and the economy both fragile and susceptible to shocks and further setbacks. That said, there’s good reason to believe the rate of expansion will continue to improve in coming months.
“Business confidence in services has already improved, rising to the highest since March of last year, and the additional stimulus in the form of full-scale quantitative easing by the ECB should help to underpin a further improvement in confidence among households and businesses.
“The recent oil price slump is also already feeding through to reduced prices, with average prices charged by companies dropping at the fastest rate for almost five years. The price falls will be a boon to households, but will inevitably fuel growing concerns about the threat of deflation. However, with the January survey showing the largest rise in new orders for goods and services for five months, it seems that lower prices are resulting in higher consumer spending, rather than encouraging households to defer purchases in the hope of lower prices in the future.”
US: The US Federal Reserve said that it will keep its strategy on increasing short term interest rates despite weaker overseas growth and slowing inflation. The central bank held its interest rate at 0-0.25 points in its first meeting of 2015 and said that the US economy was expanding at a “solid” pace with strong gains in employment. Amid falling energy prices, the Fed expects inflation to fall in the near term and rise back toward 2% as the job market improves. Falling energy prices “have boosted household spending power” it said. The annual rate of inflation recorded 0.8% in December, from 1.3% in November from the sharp decrease in oil prices.
Meanwhile, US jobless claims dropped to the lowest level since 2000 last week. Initial jobless claims decreased by 43,000 to a seasonally adjusted 265,000 in the week ended Jan. 24, the Labor Department said Thursday. That was the lowest level since April 2000. Economists surveyed by The Wall Street Journal had expected 300,000 new claims.
Japan: Japan exports grow most in year, signaling steady recovery from recession helped by a weak yen and a pick-up in overseas demand led by the US, which is an encouraging sign for the recession-hit economy even as doubts persist about the strength of global consumption. The 12.9% year-on-year rise in exports marked a fourth straight month of growth, supported by shipments of cars to the US and of electronics parts to China, according to data by the ministry of finance (MoF). “Exports have bottomed out but I doubt whether they will accelerate from now on due to growing uncertainty over the global economy,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
The MoF data showed Japanese exports to the US rose 23.7% in the year to December, while those to China rose 4.3%. Shipments to Asia, which account for more than half of Japanese shipments, grew 11% year-on-year in December. EU-bound exports rose 6.8%. Overall imports rose 1.9% on the year in December versus a 2.3% gain expected, as sharp falls in crude oil prices cut into the value of purchases. That helped cut the December trade nearly in half from a year ago to ¥660.7 billion ($5.62 billion). For the full-year 2014, however, Japan’s trade deficit hit a record ¥12.78 trillion, largely due to heavy imports of liquefied natural gas as utilities burned more of the fuel to compensate for the shutdown of all nuclear plants for safety checks after the Fukushima disaster of 2011.
China: HSBC Flash China Manufacturing PMI ended at 49.8 in January (49.6 in December). The index stood at two-month high, but it is still below the 50-point level that separates growth from contraction in the sector. The issue of deflation persists strongly with China’s consumer inflation hitting a near five year low of 1.5% in December. Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co- Head of Asian Economic Research at HSBC said:
“The HSBC China Manufacturing PMI rose to 49.8 in the flash reading for January, up from 49.6 in December. Domestic demand improved marginally while external demand remained solid. The labour market weakened and prices fell further. Today’s data suggest that the manufacturing slowdown is still ongoing amidst weak domestic demand. More monetary and fiscal easing measures will be needed to support growth in the coming months.”
Under the current downward sentiment, sources suggest that the growth target, which is set to be announced by Premier Li Keqiang at the annual parliament session in March, will be cut to around 7% for 2015, which is the lowest goal in 11 years, from 7.5% growth target last year. Central Bank Governor Zhou Xiaochuan has acknowledged a lower growth target was on the cards for 2015, saying it would be discussed by the parliament in March. The government is also looking at lowering its forecast for consumer price inflation to around 3 percent, the sources said. Consumer prices rose 2% in 2014, well below a target of 3.5 percent, while producer prices have been falling for almost three years. The last time China set its national growth target at 7% was in 2004, when the economy actually grew 10.1%.
Shipping:
Liberia has become the flag of choice for Greek ship owners and operators, securing the leading position for the first time in more than forty years since the early seventies. Figures produced by the Greek publication Shipping & Finance, which bases its findings on data from the Marine Information Services database for Greek and Cypriot shipping companies, confirm that the Greek merchant fleet now includes 800 Liberian-flag ships, ten more than registered under the Greek flag, and 300 more than are registered under the flag of Panama.
Scott Bergeron, CEO of the Liberian International Ship & Corporate Registry (LISCR), the US-based manager of the Liberian Registry, says, “This news is testament to the strong links which have existed between Greek shipping and the Liberian flag, dating back to the day in 1949 when the Stavros Niarchos-owned oil tanker World Peace became the first ship to be registered under the Liberian flag. From that time until the present day, the Greek shipping community has supported the Liberian Registry, and vice-versa, through good times and bad. “The shipping ties between Greece and Liberia have become even stronger during the extremely difficult economic climate of the past six years, and it is gratifying to see that the Liberian flag is now the number one choice of Greek owners and operators.
Dry Segment: The index remains on record lows, however capesize segment is gradually regaining ground with demand for vessels to ship Brazilian iron ore reached robust levels last week. According to Commodore Research, a total of 11 vessels chartered (10 of the vessels were capesize) to ship Brazilian iron ore, which was the largest level seen since the week ending November 14th. However, overall there was a decrease in dry bulk spot chartering activity last week with 99 dry bulk vessel fixtures, 19 less than the previous week, 1 was for a period of one year or more.
In the iron ore market, there was a large increase in spot chartering activity as 34 spot iron ore cargoes came to the market last week, 14 more than the previous week and 11 more than the trailing four week average. 31 of last week’s spot iron ore cargoes will be shipped on capesize vessels, 12 more than the previous week and 8 more than the trailing four week average. Approximately 94.3 million tons of iron ore is now stockpiled at Chinese ports, 400,000 tons less than a week ago. Stockpiles are now up year-on-year by only 500,000 tons. Against the decrease in Chinese iron ore port stockpiles, coal stockpiles at Qinhuangdao (China’s largest coal port) are on increase at stood at approximately 7.1 million tons, 300,000 tons (4%) more than a week ago.
Currently, spot iron ore prices are trading at their lowest levels since 2009 of less than $70/tonne, due to a time of oversupply and lower steel demand in China’s top consumer. Benchmark 62-percent grade iron ore is estimated to average $68 a tonne this year, sharply down from $97 in 2014 and a previous low of $86 in 2009, based on the median estimate in a Reuters poll of 13 analysts. They forecast a further slip to $65 in 2016.However, a large increase in Chinese iron ore fixture volume was recorded last week, as 26 vessels were chartered to haul iron ore cargoes to Chinese buyers, 8 more than the previous week and 7 more than the trailing four week average. Last week marked the largest amount of vessels chartered in the spot market to haul iron ore cargoes to China since week ending November 28th. During 2014, China imported a record of 932.5 million tons, up 13.8% year-on-year, and Chinese iron ore imports from Australia increased by 31.6% from last year to 548.4 million tons, according to data from the General Administration of Customs.
Although there were some positive signs last week for a gradual recovery in the capesize segment last week, the index slipped yesterday to the weakest levels since August 1986 at 632 points. Chartering market in all vessel categories persist constantly below $8,000/day with the panamax category showing the sharpest downward correction with levels of less than $5,000/day.
On Friday January 30th, BDI closed at 608 points, down by 16% from last week’s closing and down by 45% from a similar week closing in 2014, when it was 1110 points. All dry indices closed in red, with the largest weekly decrease recorded in the panamax segment. BCI is down by 23% week-on-week, BPI is down by 26% week-on-week, BSI is down 10% week-on-week, BHSI is down by 11% week-on-week.
Capesizes are currently earning $5,700/day, down by $1,306/day from last week’s closing and panamaxes are earning $4,060/day, down by $1405/day from last week’s closing. At similar week in 2013, capesizes were earning $8,263/day, while panamaxes were earning $10,663/day. Supramaxes are trading at $6,199/day, down by $675/day from last week’s closing, about 7% higher than capesize and 51% higher than panamax earnings. At similar week in 2014, supramaxes were getting $10,410/day, hovering at 26% higher levels thancapesizes versus 7% today’s higher levels. Handysizes are trading at $5,141/day, down by $591/day from last week’s closing; when at similar week in 2014 were earning $9,804/day.
Wet Segment:
In the VLLC segment, rates in AG-USG moved down by 0.5 points to WS37, up 13 points from the levels of beginning September 2014. In AG-SPORE and AG-JPN routes, rates showed steadiness at the increased levels of the previous two weeks at WS70, up by 27 points from beginning September’s 2014 levels. In WAFR-USG, rates showed no change from previous week at WS80 (up by 30 points from beginning September’s 2014 levels), and in WAFR-China route showed also steadiness at WS8 (20 points above from beginning September’s 2014 levels).
In the suezmax segment, rates in WAFR-USAC showed a soft downward correction of 2.5 points at WS90, up by 30 points from beginning September’s 2014 levels. In the aframax segment, rates in the Caribbean market lost 15 points and decreased to WS137.5 (up by 52.5 points beginning September’s 2014 levels).
Route Vessel Size
VLCC: AG-USG 280,000t WS 37 (last week WS 37.5) Downward Trend
TCE- Abt ≈$32,646/d
AG-JPN 265,000t WS 70 (last week WS 70) Steady
TCE- Abt ≈$72,300/d
AG-SPORE 270,000t WS 70 (last week WS 70) Steady
TCE- Abt ≈$77,400/d
WAFR-USG 260,000t WS 80 (last week WS 80) Steady
TCE- Abt ≈$83,500/d
WAFR-China 260,000t WS 68 (last week WS 68) Steady
TCE- Abt ≈$70,000/d
Route Vessel Size
Suez: WAFR-USAC 130,000t WS 90 (last week WS 92.5) Downward Trend
TCE- Abt ≈$44,000/d
B.SEA-Med 130,000t WS 85 (last week WS 100) Downward Trend
TCE- Abt ≈$51,500/d
Route Vessel Size
Afram: CBS-USG 70,000t WS 137.5 (last week WS 152.5) Downward Trend
TCE- Abt ≈$41,500/d
Route Vessel Size
Clean: AG-JPN 75,000t WS 85 (last week WS 87.25) Downward Trend
TCE- Abt ≈$29,900/d
AG-JPN 55,000t WS 111 (last week WS 120) Downward Trend
TCE- Abt ≈$25,000/d
LNG Segment: Egypt’s state gas board has awarded a $2.2 billion tender to import 75 cargoes of liquefied natural gas (LNG) to four international firms, its chairman said on Sunday, as the country seeks new energy sources. Declining production and increasing consumption has turned the Arab world’s most populous country from an energy exporter to a net importer, prompting a flurry of activity in past months to boost foreign supplies. The four companies will supply four cargoes a month over about two years, Khaled Abdel Badie of state-run Egyptian Natural Gas Holding Company (EGAS) told Reuters.
The country of about 90 million relies heavily on gas to generate power for households and industry, but has had difficulty securing imports because it lacks a terminal to process LNG. But after two years of delays, Egypt contracted Norway’s Hoegh LNG for a floating storage and regasification unit, opening the door to LNG imports once the terminal is operational by the end of March. Since the deal with Hoegh was finalized, Egypt has signed a deal with Algeria for six LNG cargoes and expects to complete an agreement with Russia’s Gazprom later this month.
Meanwhile, Asian spot LNG prices for March delivery fell sharply for a second week to $8 per million British thermal units from $9.00 last week.Traders said falling oil prices were encouraging some utilities to switch away from LNG to fuel oil for power generation, given the time lag of around six to nine months for lower oil prices to filter through to oil-linked LNG contracts. Oil demand in Japan, the world’s top LNG importer, grew in December, as it became increasingly competitive for power generation, Macquarie Bank said. Japan’s Tokyo Electric Power Co and Chubu Electric Power Co, are expected to buy a six cargoes from Vitol and GDF Suez in their first joint tender.
Container Segment: The Shanghai Container Freight Index recorded more gains last week from a surge in Asia-Europe rates with players announcing General Rate Increase ahead of the Chinese New Year. Maersk and Evergreen are targeting at $400 per TEU more from February 1 along with Hanjin wanting an extra $300 while Hamburg Sud demanded $300 per TEU more in a surcharge from February 2.
Last week closed with upward momentum in Asia-Europe and Asia-Med routes, while a soft declining trend is seen in transpacific routes. The index ended at 1091 points last week, 36 points above from previous week (up by 3% w-o-w) and down by 104 points from the levels of beginning August 2014.
In Asia-Europe route, rates increased to $1256/TEU, up by $248/TEU (25% w-o-w) and in Asia-Med, rates moved up by $100/TEU (7% w-o-w) and concluded at $1,460/TEU. The levels in Asia-Europe route are now down by $199/TEU from the beginning of August 2014 and down by $148/TEU in Asia-Med route.
In transpacific routes, rates moved down by $26/FEU (1% w-o-w) in Asia-USWC, while the levels showed a trivial increase of only $1/FEU. Rates in Asia-USWC route concluded at $2,063/FEU and $4,748/FEU in Asia-USEC route. Compared with the beginning of August, rates in Asia-USWC route are down by $135/FEU and up by $561/FEU in Asia-USEC route. Rates in Asia-USWC are above the barrier of $2000/FEU for a second week in row, while in Asia-USEC route keep levels above the barrier of $4000/FEU from November 2014.
Shipbuilding: Hyundai Heavy Industries has revealed that its 2014 orders fell 27% year on year to just over $19.8Bn, compared to over $27.3Bn in 2013. The world’s biggest shipbuilder has embarked on cost-cutting measures to restore profitability after suffering record losses of KRW616.6Bn ($569Bn) and KRW1.175Trn in 2Q14 and 3Q14 respectively. Orders for merchant ships decreased 34.9% y/y with $6.19Bn worth of orders clinched last year. Machinery orders dropped by 17.7% year-on-year with about $2Bn worth of orders last year. Amid a surge in demand for new drilling vessels, HHI’s orders peaked at $25.3Bn in 2011 but since then, orders have been declining in subsequent years.
Shipping Finance: Overall bank ship finance debt is still falling but is expected to stabilise in 2015 and begin to climb in 2016, said Ted Petropoulos, head of Greece-based Petrofin Research. “Global banking conditions, especially in the West, are still unsupportive for ship finance,” he said. But a shipping recovery in 2016 appeared “quite probable” and favorable terms and conditions had brought forward a number of new players in the sector, he said. Mr Petropoulos said the decrease in the overall ship finance portfolio — estimated at $475bn two months ago — stemmed from continued deleveraging by banks and an increasing influx of other forms of capital and financing. This was against a background of an increase in the size of the world fleet, he said. Petrofin focused primarily on the top 40 banks in shipping, which represented $391bn of lending, or 82.2% of all bank finance to the industry — a drop from their 86% share of the market in 2013.
Capital Market:
Shipping Finance Deals: Eitzen Chemical announced that it has entered into the New Credit Facility with Skandinaviska Enskilda Banken AB and NIBC Bank N.V. in an aggregate principal amount of USD 100,000,000.
In Asia region, China Exim Bank inked a deal this week to provide state-owned Bangladesh Shipping Corporation (BSC) a loan worth $184M for six newbuildings. The loan will fund the construction of three bulk carriers and three tankers, local media reported. The newbuildings would be bought under the ‘direct purchase system’, said Bangladesh’s cabinet division joint secretary Mostafizur Rahman at a press conference. Recently, China Exim Bank also signed a $312M financing deal with CSSC Shipping (Hong Kong) to support the construction of three 18,000teu box ships it ordered at Shanghai Waigaoqiao Shipbuilding. China’s COSCO Group secured $1.75Bn credit line from China Exim Bank two weeks ago for its newbuilding programme.
Scorpio Bulkers Inc. announced that it has closed two previously announced credit facilities, taken delivery of three newbuilding vessels, and agreed to time charter-out a Capesize newbuilding that is currently under construction in China. $411.3 Million Loan Facility: On January 15, 2015, the Company closed a previously announced $411,264,000 senior secured credit facility with a group of financial institutions to finance a portion of the purchase price of 12 Capesize vessels (of which the Company has agreed to convert two Capesize vessels into the two LR2 product tankers that are held for sale) under construction at Sungdong Shipbuilding & Marine Engineering Co., Ltd. The facility matures six years, and in certain circumstances up to 12 years, from the delivery of the final vessel securing the facility. $409.0 Million Loan Facility:On December 30, 2014, the Company closed a $408,976,447 senior secured credit facility arranged by two leading European financial institutions to finance a portion of the purchase price of 20 vessels (six Ultramax, nine Kamsarmax, and five Capesize vessels) with expected deliveries in 2015 and 2016. The facility was previously announced as a $540,000,000 loan, which has now been reduced to a size of $408,976,447 due to the removal of the financing on the four Capesize vessels that the Company has agreed to convert into four LR2 product tankers and sell to Scorpio Tankers Inc., a related party. The facility has a final maturity of six years from the date of signing.
Maritime Piracy: There was a 22% year-on-year increase to 183 pirate attacks in Asian waters last year, 75% of the global total, according to an intergovernmental anti-piracy group. The International Maritime Bureau (IMB) released its global report for 2014 showing there were 245 actual and attempted acts of piracy worldwide last year. In 2013, piracy in Asia accounted for less than 60% of the total. However, attacks in Asia are mainly low-level theft compared with kidnappings and more violent hijackings off West Africa and Somalia. The number of attacks in Asia last year is the highest since 2006, when the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), a co-ordinating body with 20 government members, started compiling incident reports.
wk 4 wk 4.This week’s snapshot ending Jan 30th ANNUAL SHORT REVIEW OF NEWBUILDING ACTIVITY 2014_2013
