Global Economy:
The World in 2050- Will the shift in global economic power continue?
According to PWC projections, world economy is expected to grow by an average of just over 3% per
annum in the period 2014-2050 doubling in size by 2037 and nearly tripling by 2050.
However, there are expectations for a slowdown in global growth after 2020, as the rate of expansion in China and
some other major emerging economies moderates to a more sustainable long-term rate, and as working age
population growth slows in many large economies. The global economic power shift away from the established
advanced economies in North America, Western Europe and Japan will continue over the next 35 years. China has
already overtaken the US in 2014 to become the largest economy in purchasing power parity terms. In market
exchange rate (MER) terms, China is projected to overtake the US in 2028 despite its projected growth slowdown.
India has the potential to become the second largest economy in the world by 2050 in PPP terms (third in MER
terms), although this requires a sustained program of structural reforms3. In addition, new emerging economies
like Mexico and Indonesia are expected to be larger than the UK and France by 2030 (in PPP terms) while Turkey
could become larger than Italy. Nigeria and Vietnam could be the fast growing large economies over the period to
2050. Colombia, Poland and Malaysia all possess great potential for sustainable long-term growth in the coming
decades.
At the same time, recent experience has re-emphasised that relatively rapid growth is not guaranteed for
emerging economies, as indicated by recent problems in Russia and Brazil, for example. It requires sustained and
effective investment in infrastructure and improving political, economic, legal and social institutions. It also
requires remaining open to the free flow of technology, ideas and talented people that are key drivers of economic
catch-up growth.
Eurozone: Greece is seeking for an extension in its loan agreement as Greek bailout deal of $240bn is due to
expire on February 28. Meanwhile, the European Central Bank raised emergency funding for Greek banks only
modestly to 68.3 billion euros, which is a rise of just 3.3 billion euros below what Greece had requested. Today it
seems to be the determined day for Greek economy as Eurozone finance ministers are gathering again in Brussels
for a third time to resolve the issue with the Greek economy. There are hopes that a deal may conclude as
German chancellor seems that is taking a more supportive stance. Germany’s EU commissioner Güenther
Oettinger said Greece and its creditors should be able to reach a deal but may need another meeting of eurozone
leaders next week. “We are working so that Greece stays in the eurozone,” Oettinger told German radio
Deutschlandfunk. “On this basis I think an agreement will still be possible in the next eight days – if necessary via
a further meeting of government leaders,” he said.
Japan: The Gross Domestic Product (GDP) in Japan expanded 0.6% in the fourth quarter of 2014 over the
previous quarter according to data from the Cabinet Office. GDP Growth Rate in Japan averaged 0.49% from 1980
until 2014, reaching an all time high of 3.20% in the second quarter of 1990 and a record low of -4% in the first
quarter of 2009. Meanwhile, Japanese export growth accelerated to the fastest pace is more than a year in
January, due to stronger demand from Asia and US fueling hopes for a firmer recovery in the world’s third biggest
economy. According to data from the finance ministry, the value of overseas shipments jumped by 17% from
previous year, while imports fell by 9% reducing the trade deficit to 1.2 trillion yen ($9.9bn) from a record of 2.8
trillion yen in January last year.
Japanese Imports of liquefied natural gas and thermal coal rose to record levels in January due to a domestic
increasing need for fuel to fire power plants due to extended shutdowns of nuclear reactors from the Fukushima
crisis in 2011. All 48 commercial nuclear reactors in Japan have been shut since September 2013, with no
schedule for restarts According to data from the Ministry of Finance. Japanese LNG imports totaled 8.43 million
tons last month, up 3.1% from a year earlier and imports of thermal coal increased by 10.2% in January to 11.9
million tons. In contrast with the increasing trend of LNG and thermal coal imports, Japanese crude oil imports
dropped by 7.2% on year to 3.55 million barrels/day.
China: China needs to guarantee a “bottom line” of 6.5 percent annual economic growth for its 13th five-year-
plan, a state newspaper quoted the director of the National Development and Reform Commission (NDRC)
Department of Planning, Xu Lin as saying. The target growth is the lowest growth rate recorded since 1990 and it
is a clear indication that China is moving to a more sustainable pace of growth from the double-digit rates of the
past. If this year’s GDP growth is 7%, then the “bottom line” for annual GDP growth in the 13th five-year-plan
needs to be at least 6.5%, Xu Lin said. Beijing is set to unveil China’s 13th five-year-plan after the National
People’s Congress in March. The plan is an important document that outlines national priorities and sets targets
for economic and social development.
Shipping:
Two shipping bankruptcies in February: China’s Winland Ocean Shipping Corp filed for Chapter 11 bankruptcy
protection in the United States on Feb. 12, court documents show, the second banruptcy this month. “Due to
current market conditions, the financial position of the company and its subsidiaries has deteriorated, leading to
immediate difficulties,” the document states, adding that it had therefore filed for Chapter 11 protection. Privately
owned Danish firm Copenship filed for bankruptcy earlier in February after losses in the dry bulk market.
“The combination of lower steel demand in China and the huge volume of new tonnage coming on line is what is
causing panic and making this the worst bulk market since the mid-1980s,” said Hsu Chih-chien, chairman of
Hong Kong and Singapore-listed dry bulk shipper Courage Marine.
Dry Segment: Against the historical lows of BDI since 1986 and astonished weakness in all vessel sizes that
seems endless, Chinese iron ore fixture volume shows solid levels. According to Commodore Research, there is an
increase in Chinese iron ore fixture volume with 26 vessels being chartered to haul iron ore to Chinese buyers last
week, 5 more than the previous week and 3 more than the trailing four week average. Fixture volume has
remained moderately above the relatively low volume seen in early January. Meanwhile, Chinese steel production
remains under serious pressure as recently data from the China Iron and Steel Association shows that average
daily crude steel production at China’ key steel mills totaled 1.69 million tons during January 21 to January 31.
This is the same level that was reported by CISA from January 11 to January 20 and the lowest seen since late
November.
In the thermal coal market, Chinese fixture volume is not so strong as in the iron ore market 4 vessels were
chartered to haul spot thermal coal cargoes to Chinese buyers last week, 3 less than was chartered during the
previous week and 1 less the trailing four week average. Overall, demand for imported thermal coal remains well
below the peak level last seen in January 2014. One more negative factor in the coal market with a dismal
influence on the panamax segment is that India’s power plant coal stockpiles have increased further this week and
now exceed the stockpile level seen a year ago. At present, approximately 18.6 million tons of coal is stockpiled
at Indian power plants. This is 100,000 tons more than was stockpiled a year ago.
The levels of BDI could not found support from any vessel size and ultramax newbuilding deliveries have an
intense downward effect on the performance of panamax and handymax markets. The Chinese iron ore fixture
volume fuels some hopes for better returns in the capesize segment after the end of Chinese New Year, but there
is still high uncertainty for the performance till the end of the first quarter of the year. Currently, a positive sign of
these days is that there is a decrease in Chinese iron ore port stockpiles and approximately of 93 mil tons of iron
ore is now stockpiled at Chinese ports, down year-on-year by 5.5 million tons (-6%). Iron ore price persists at
record 6 years’ low of $62/ton as Chinese iron ore appetite is holding back due to Lunar New Year.
On Friday February 20, BDI closed at 513 points, down by 3% from last week’s closing and down by 56% from a
similar week closing in 2014, when it was 1175 points. All dry indices closed in green, apart from the capesize
segment, with the largest weekly increase recorded in the panamax segment. BCI is down 14% week-on-week,
BPI is up by 3% week-on-week, BSI is up 1% week-on-week, BHSI is up by 1% week-on-week.
Summary of Baltic Dry Indices & Average Time Charter Earnings
20/2/2015 13/2/2015 2014 % %
week 7 week 6 w-o-w week 7 w-o-w y-o-y
Dry BDI 513 530 -17 1175 -3% -56%
Capesize BCI 542 630 -88 1701 -14% -68%
Panamax BPI 514 499 15 1244 3% -59%
Supramax BSI 490 486 4 1098 1% -55%
Handy BHSI 270 268 2 677 1% -60%
20/2/2015 13/2/2015 2014 % %
week 7 week 6 w-o-w week 7 w-o-w y-o-y
Capesize Average T/C routes 4410 5117 -707 10144 -14% -57%
Panamax Average T/C routes 4110 3984 126 10000 3% -59%
Supramax Average T/C routes 5119 5077 42 11475 1% -55%
Handy Average T/C routes 4040 4021 19 9805 0% -59%
Capesizes are currently earning $4,110/day, down by $707/day from last week’s closing and panamaxes are
earning the same levels $4,110/day, up by $126/day from last week’s closing. At similar week in 2013, capesizes
were earning $10,144/day, while panamaxes were earning $10,000/day. Supramaxes are trading at
$5,119/day, up by $42/day from last week’s closing, about 16% higher than capesize and 25% higher than
panamax earnings. At similar week in 2014, supramaxes were getting $11,475/day, hovering at 13% higher
levels than capesizes versus16% today’s lower levels. Handysizes are trading at $4,040/day, up by $19/day
from last week’s closing; when at similar week in 2014 were earning $9,805/day.
Wet Segment:
In the VLLC segment, rates in AG-USG moved up by 0.5 points to WS33.5, 2.5 points from the levels of end
January and up 15 points from the levels of end September 2014. In AG-SPORE and AG-JPN routes, rates showed
a decline of 5 points at levels of WS57.5, up by 23.5 points from end September 2014. In WAFR-USG, rates
showed no change and stayed at WS70 (up by 30 points from end September’s 2014 levels), and in WAFR-China
route showed a soft increase of 2.5 points at WS 60 (18 points above from end September’s 2014 levels).
In the suezmax segment, rates in WAFR-USAC showed a sharp downward correction of 20 points to WS72.5, up
by 7.5 points from end September’s 2014 levels. In the aframax segment, rates in the Caribbean market gained
55 points from end January and increased to WS175 (up by 97.5 points end September’s 2014 levels).
Route Vessel Size
VLCC: AG-USG 280,000t WS 33.5 (last week WS 33) Downward Trend
AG-JPN 265,000t WS 57.5 (last week WS 62.5) Downward Trend
AG-SPORE 270,000t WS 57.5 (last week WS 62.5) Downward Trend
WAFR-USG 260,000t WS 70 (last week WS 70) Steady
WAFR-China 260,000t WS 60 (last week WS 57.5) Upward Trend
Route Vessel Size
Suez: WAFR-USAC 130,000t WS 72.5 (last week WS 92.5) Downward Trend
B.SEA-Med 130,000t WS 87.5 (last week WS 100) Downward Trend
Route Vessel Size
Afram: CBS-USG 70,000t WS 175 (last week WS 147.5) Upward Trend
Route Vessel Size
Clean: AG-JPN 75,000t WS 102 (last week WS 110) Downward Trend
AG-JPN 55,000t WS 110 (last week WS 112.5) Downward Trend
LNG Segment: LNG spot rates remain in the doldrums, while there are market indications about LNG carriers
being laid up around Singapore. According to shipping data on Thomson Reuters, seven tankers have been sitting
idle off the east coast of Johor, Malaysia, for over two weeks, and another two ships have been anchored south of
Batam, Indonesia, for several months. Half a dozen LNG tankers are in Singaporean docks. The 15 ships have a
combined capacity to carry 2.26 million cubic metres of LNG, about two weeks worth of Singapore’s gas demand.
Lng spot rates have now declined to $54,800/day despite roughly 5 fixtures being reported this week.
TCE- Abt ≈$25,000/d
TCE- Abt ≈$51,500/d
TCE- Abt ≈$56,000/d
TCE- Abt ≈$68,000/d
TCE- Abt ≈$53,400/d
TCE- Abt ≈$30,400/d
TCE- Abt ≈$54,100/d
TCE- Abt ≈$58,500/d
TCE- Abt ≈$32,000/d
TCE- Abt ≈$22,000/d
LNG Segment: LPG time charter market keeps showing a solid outlook. VLGC, MGC, and Handysize 1-year time
charter rates currently hover at ~60,750/day (up 88% yr/yr), ~33,600/day (up 21% yr/yr), and ~31,000/day (up
14% yr/yr), respectively. LGC 1-year time charter rates are unchanged over the last four weeks representing a
~2% discount to peak VLGC levels (~$62,500/day).
Container Segment: The Shanghai Container Freight Index continues to gain ground from the significant
increases in Asia-USWC and Asia-USEC routes for a second week in row. Downward inclines are still recording in
Asia-Europe and Asia-med routes with the largest weekly decrease in Asia-Europe.
The index moved up by only 1 point last week and ended at 1088 points last week, down by 107 points from the
levels of beginning August 2014.
In Asia-Europe route, rates decreased to $1003/TEU, down by $54/TEU (5% w-o-w) and in Asia-Med, rates moved
down by $18/TEU (1% w-o-w) and concluded at $1,355/TEU. The levels in Asia-Europe route are now down by
$452/TEU (38%) from the beginning of August 2014 and down by $253/TEU (17%) in Asia-Med route.
In transpacific routes, rates moved up by $23/FEU (1% w-o-w) in Asia-USWC, and up by $71/FEU (1% w-o-w) in
Asia-USEC route. Rates in Asia-USWC route concluded at $2,265/FEU and $5,049/FEU in Asia-USEC route.
Compared with the beginning of August, rates in Asia-USWC route are up by $67/FEU (4%) and up by $862/FEU
(39%) in Asia-USEC route. Rates in Asia-USWC are now above the barrier of $2000/FEU for two consecutive
weeks, while in Asia-USEC route surpassed the barrier of $5000/FEU for the first time since 2011.
Meanwhile, according to Alphaliner research, container panamax rates’ recovery is gathering pace with only one
such vessel currently unemployed, down from 52 idle units at the beginning of last year. Charter rates for
panamax ships have reached $14,000 per day for round voyages, now that demand and supply for vessels of this
type appear to return to a balance for the first time since 2011. However: The main threat for the panamax will
come in 2016, with the completion of the Panama Canal’s third set of locks. The opening of the upgraded canal
with its larger locks will allow most of the 211 panamax ships currently employed on services (all trades) that
transit the waterway to be replaced by neopanamax ships of up to 13,000 teu.
Shipbuilding: Singapore-listed shipbuilder Yangzijiang Shipbuilding Holdings has expanded into LNG shipbuilding
in a bid to capture stable medium- to long-term demand in the LNG market. Ren Yuanlin, executive chairman of
Yangzijiang, foresees the potential in the global LNG market and expects the business sector to grow from 238
million tonnes per annum (MTPA) in 2014 to 420 MTPA in 2020 and the volumes are expected to increase further
to 500 MTPA in 2025. Recently, Ren welcomed the timely new order of two LNG carriers worth USD135 million,
noting that the order was an endorsement from client on the mature stage of the Yangzijiang’s shipbuilding and
financial capabilities. The two 27,500 m3 LNG carriers are scheduled for delivery in 2017 to JACCAR Holdings’
ethylene and ethane gas transportation company Evergas.
In Japan, shipyards’ orders fell 17% year on year in January, continuing its descent as investment appetite for
newbuildings has been affected by the sluggish dry bulk market. Figures from the Japan Ship Exporters’
Association (JSEA) showed its member yards clinched 12 export orders totaling 1,180,940 gross tons (gt) in
January this year, down from 26 export orders of 1,430,460 gt in January 2014. The orders in January comprised:
two Handysize bulkers; two Handymax bulkers; one Panamax bulker; one Capesize bulker; three LNG carriers;
and three very large crude carriers. JSEA member yards exported 39 ships of 1,699,351 gt last month, up from 30
ships of 1,202,410 gt in January 2014. As of 31 December 2014, Japanese yards’ outstanding orderbook stands at
646 ships of 27,743,710 gt, compared with 621 ships of 26,636,510 gt in December 2013.
Companies’ news: Natural gas supply and trading company LITGAS, part of Lietuvos Energija energy company
group, plans to enter a new field of activity – small scale LNG supply and bunkering. Currently LITGAS together
with Statoil are analysing cooperation opportunities and plan to agree on the form of cooperation within the
second quarter this year. “The Klaipeda LNG terminal is the only LNG terminal of such size in the Baltic Sea
capable to reload LNG to smaller LNG bunkering vessels, such as bunkering ferries, containerships and other LNG
propelled vessels, as well as to supply gas to industrial customers in smaller quantities. As new regulations for
sulphur emissions came in to force, ship owners are increasingly looking to LNG as a cleaner fuel. The Klaipeda
LNG terminal is closer to our potential clients than other terminals with similar capabilities. We have a competitive
advantage from that perspective”, says Dominykas Tuckus, CEO of LITGAS.
In the container segment, Hamburg Südamerikanische Dampfschiff¬fahrts-Gesell¬schaft KG (Hamburg
Süd) with headquarters in Hamburg, Germany, announced that the company has signed a Sale & Purchase
Agreement to acquire the container liner activities of Compañía Chilena de Navegación Interoceánica S.A.
(CCNI) including the related general agency functions of Agunsa Agencias Universales S.A, (Agunsa), with
headquarters in Valparaiso and Santiago de Chile.
The take-over of the CCNI / Agunsa business is, subject to appro¬val by the competent antitrust authorities,
scheduled to become effective at the end of March 2015. Hamburg Süd will operate the CCNI container liner
business under this well established brand name in the main trades between the West Coast of South America,
Asia, Europe and North America respectively. Merging the experienced workforces of CCNI and Hamburg Süd will
help to create an even stronger orga¬ni¬zation that will provide a first class service to the customers of both
companies. CCNI will discontinue their container liner services and will only be using the CCNI name for the Car
Carrier activities which they will retain. Agunsa will continue representing other shipping lines as agent and will
also further develop its port and logistics services business in South America.
In addition, Neptune Orient Lines Limited and Kintetsu World Express, Inc. (“KWE”), jointly announced this
week that they have entered into a sale and purchase agreement for NOL’s logistics business, APL Logistics, for
US$1.2 billion. “This is a strategic move that will allow us to focus on improving our liner shipping business, while
at the same time enabling APL Logistics to grow. The transaction will also strengthen our balance sheet and unlock
value for our shareholders,” said Ng Yat Chung, Group President and CEO of NOL. “The proposed transaction with
KWE is expected to provide APL Logistics with the opportunity to expand its business with the backing of a
company with strong fundamentals and a commitment to grow in the logistics space. We believe that KWE has the
ability and the ambition to continue APL Logistics’ growth strategy,” continued Mr Ng. The transaction is subject to
NOL shareholder and relevant regulatory approvals. Citi and HSBC acted as financial advisors to NOL during the
transaction.
Shipping Finance: BW LPG Limited announced that it has signed a Facility Agreement for a debt facility of up
to USD400 million for financing seven of its VLGC newbuildings. The financing has been raised from The Export-
Import Bank of Korea (“KEXIM”) as Export Credit Agency (ECA) lender, with DNB Asia Limited (“DNB”) and
Skandinaviska Enskilda Banken AB (Publ), Singapore Branch, (“SEB”) as Mandated Lead Arrangers and
commercial lenders.DNB and HSBC Bank Plc. (“HSBC”) acted as ECA structuring advisors with HSBC also acting as
ECA coordinator.
BW LPG Chief Executive Officer, Nicholas Gleeson, commenting on the financing said, “We are very pleased with
this financing, which leverages the well-priced Korean ECA lending to provide an exceptional all-in cost and
structure.” The full completion of this transaction remains subject to customary closing conditions. The Company
expects to close the first drawdown under the transaction in February.
The Facility comprises the following: An ECA tranche of up to USD268 million that is being provided by KEXIM,
representing approximately 67% of the facility amount. A Commercial tranche of up to USD133 million, split
equally between the two commercial lenders, representing approximately 33% of the facility amount. The debt
financing will be secured against seven of the Company’s VLGC newbuildings. The blended margin over LIBOR
applicable across all tranches of the financing is 1.70% p.a., and the weighted average amortisation profile will be
18 years.
Capital Market: Navios Maritime Partners L.P. announced the successful completion of its follow-on public
offering of 4.6 million common units at $13.09/unit, raising gross proceeds of $60.2 million, including the full
exercise of the underwriters’ over-allotment option of 600,000 units. The units were priced at a discount of 4.5%
from the closing price prior to the announcement of the offering and closed that day at $12.95. Proceeds from the
offering will be used to fund its fleet expansion and/or for general partnership purposes. The joint bookrunning
managers were BofA Merrill Lynch, Citigroup, J.P. Morgan, Deutsche Bank and Credit Suisse, who were joined by
S. Goldman Capital, RS Platou Markets AS, ABN AMRO and Crédit Agricole as co-managers.
Maritime Piracy: A homemade bomb was left on the Thai product tanker captured by pirates last Friday. Up to
eight armed pirates stole around 2,000 tons of bunker and five tons of diesel from the vessel Lapin in the Strait of
Malacca. The pirates are believed to be Indonesian nationals, reports the Bangkok Post, and they were armed with
guns and swords. The tanker had just left Singapore at the time of the attack. The crew were held hostage while
another vessel came alongside and stole the fuel. There are no reports of injuries, but the master requested the
assistance of navy and maritime police to diffuse the bomb after the pirates left.
GOLDEN DESTINY Research & Valuations Department
This Week’s News snapshot on the economic and Shipping envrironment, Week ending Feb 20, 2015 (Week 07, Report No 07.15) Special Edition Weekly S&P Market Trends, Week ending February 20, 2015 (Week 07, Report No 07.15) Weekly S&P Market Report, Week ending February 20, 2015 (Week 07, Report No 07.15)
