October 2014 -Shipbrokers and consultants since 1919- Monthly S&P Report HIGHLIGHTS with a question mark over Chi- (Usuki 2005 blt) saw 6 parties Dry nese domestic tonnage. The Q4 rally has not appeared as predicted. There is strong  Dry: Entering into a buyer’s market pressure on asset prices in all dry sectors especially Handys/ Kamsarmax. Buyers looking for Chinese tonnage will soon turn  Crude: Changing trade patterns ignite interest their attention to Japanese tonnage, adding pressure to asset prices in China. Another factor in this cycle is a strengthening US$  Product/Chemical: Interest high for 19’dwt stst SH which gained 3.21% against the JPY in September (8 -10% since July), leading to more sales candidates from Japanese owners. Unless you are a private equity fund needing to place cash now, we would urge buyers to hold the next month until the market settles. Sellers who over the last months have wanted / needed to sell will today regret Hot Hulls that decision. The hottest phrases we have seen this inspecting, suggesting a tightening market. However few Crude The market seems positive for middle aged VLCCs and Aframaxes going forward, reflected by high interest levels (but few actual transactions thus far). Interest has also been shown in the tanker new building market over the past month, primarily by Greek owners. China Merchants were reported to have ordered two VLCCs for 16/17 delivery, at an estimated cost of US$ 97 per vessel. Interest for Suezmaxes has also been notable, although buyers seem participants seem willing to pay accordingly, believing more vessels will come for sale in the near future. In the small stst tanker market, we saw Stolt disposing of vintage coaster “Stolt Tern” (Aarhus 1992 blt). Competing operators are interested to price the effect of the event that Stolt takes the whole vintage coaster fleet off the menu, as we forecast few surprises on the demand side of the same equation. Gas to be waiting for clearer indica- The second hand market for tions as to where the market is gas carriers remains firm on the moving, and more activity from back of a historically high spot the side of sellers. A forecasted market, and primarily Chinese change in certain trade patterns buyers securing tonnage for is also helping to ignite activity. LPG import to China. There are presently active buyers for any month are ‘Fresh’ and ‘Now Product/Chemical Considering Best Offers’. Wel- fully refrigerated and semi re- frigerated gas carriers from come to the buyers’ market. We see little ordering on Prodhandy size to VLGC. The exWith China now open we ex- uct. Second hand prices are pected rise in new building pricpect more sales candidates moving sideways, the list of rees has not yet materialized and going forward with freight rates sales is still long and buyers see the order book for LPG carriers being so depressed. Many fac- little reason to add further to from Handy size up to VLGC is tors affect how low asset prices the surplus of ships. Several relatively thick. can fall, and we expect to see a buyers are inspecting 19’dwt multi-tiered market on the non- stst second hand tonnage. Lateco vessels moving forward est inspection of Fairchem Colt 1 -Shipbrokers and consultants since 1919- VLGC VLGC 82/84 kcbm VLGC Fleet - Deliveries and Scrapping Baltic VLGC Index is under pressure recently, mainly due to Naphtha backing out Propane from the petrochemical sector and trader relets. Asset values are supported at recent levels. Household demand still moderate due to mild weather. Dry Bulk Capesize Asset Values Dry Bulk Fleet - Deliveries and Scrapping Upside seen in freight rates for Handys and Supramax segments, whilst Capesize and Panamax rates still weak as the expected Q4 increase in activity is yet to materialize. Slight pressure seen on Cape NB values for September, whilst SH 5 year values improved slightly. Chemical Chemical Tanker STST 19,999dwt - SH 5 Year Chemical Fleet - Deliveries and Scrapping Immediate improvement is not expected in the chemical market. Owners seem to be preferring already ordered NB tonnage and SH vessels, bringing the recent order book frenzy to a halt, especially within the MR tanker and Handysize segments. 2 -Shipbrokers and consultants since 1919- Special report - Panama Canal Expansion and New Trade Flows A century after first opening, the Panama Canal is again in the by 22 days, significantly reducing costs. This is good news for spotlight. With the planned expansion set to open in 2016, we Columbian exporters of coal with low sulfur content, who look look at some possible implications for trade flows. Originally planned to be completed in 2014, the expansion will add an extra transit lane for vessels, and incorporate two new sets of locks on the Atlantic and Pacific sides of the canal. When finished, the US$ 5.25bn project will be able to accommodate vessels with a beam of up to 46.76m, 365.76m LOA and a maximum draft of 15.24m, meaning reduced sailing distance and set to take a larger share of Chinese imports as Beijing regulations banning coal with high-sulfur content come into force in 2015. Australian miners, today one of the major suppliers of coal to China, are likely to be heavily affected by a ban on high sulfur coal. Although estimates vary, as much as 50% of Australian coal might be unfit for export to China under the new restrictions from Beijing. transit of larger ships as well as roughly doubling current capac- With a conservative estimate where 30% of Australia’s current ity. The expansion mainly targets high value goods and commodities like containers and the LPG/LNG trade, but also raises the opportunity for economies of scale which could change today’s ton-mile situation in the dry bulk segment. In terms of how current dry bulk trade flows might change post-expansion, certain issues feature more prominent than others. At first glance, the grain trade from the US Gulf to Asia seems unlikely to shift dras- exports to China shift to Columbia, the Latin American country would export a total of 18.76 million MT p.a. to China. To service this trade, there would be a need for around 36 vessels (calculating with 100 000 dwt carrying capacity) each year. This constitutes an increase of 25 vessels compared to current trade levels from Colombia to Asia, at the same time reflecting a significant increase in ton miles compared to current coal trade from Australia. tically away from current volumes, unless we see a growth in US All in all, it seems the dry bulk industry can expect little extra grain export to Asia, and substantially higher grain prices. Clear- volatility solely on the back of the opening of the new canal, ly, numerous variables play into this estimate, but by looking at apart from a reduction in freight costs. Whether the canal will a sensitivity analysis based on export volumes between the US be used by the dry bulk industry at all, is dependent on the deand Japan for the last grain season (Sept. ’13 to June ‘14) and mand from higher value cargoes such as container trades and the assumption that carrying capacity of vessels able to transit LNG exports (see table) and whether they will crowd out the the canal would increase by around 30 000 dwt, it seems that dry bulk trade. What remains true however is that the expanthe impact on the grain trade would be minimal. Scenarios sion seems likely to facilitate new trades between Asia and show that the demand for vessels on the US Gulf-Japan route is South America, which is an issue worthy of watching in its own likely to see very little change. right. A trade more likely to benefit from the canal expansion is the Typical value of cargo 10 000 TEU 160 000 LNG 45 000 LPG Grain coal trade from Columbia to China. In 2012, Columbia exported only 5 per cent of its coal to China, around 4.15 million MT. The traditional route around the Cape of Good Hope (a round trip of approximately 90 days at slow steaming) would be shortened 3 US$ 108-150 million US$ 20-25 million US$ 25-30 million US$ 17-21 million -Shipbrokers and consultants since 1919- Scrapping Scrap Price Developments Panamax and Capesize Scrapping Source: MSI Newbuilding Prices (China) Dry Bulk Newcastlemax Capesize Kamsarmax Panamax Handysize Tanker VLCC Suezmax LR2 LR1 MR NB Prices Trend Y-O-Y Sep-14 57.2 54.0 29.9 28.7 23.6 Aug-14 57.3 54.2 30.0 28.8 23.7 Sep-13 50.4 47.9 27.5 26.7 22.3 Firming Firming Firming Firming Firming 94.5 60.2 51.0 40.1 35.1 94.7 60.4 52.0 40.3 34.9 87.8 57.1 46.8 37.8 32.9 Firming Firming Firming Firming Firming Tanker NB Prices Dry Bulk NB Prices Bunker Prices (Monthly avrg US$/mt) Rotterdam IFO 380 Rotterdam MGO Singapore IFO 380 Singapore MGO September 549.7 819 576 843.5 4 August 564.6 851.1 592.7 875.4 Trend Softening Softening Softening Softening -Shipbrokers and consultants since 1919- Interest rates, currencies, PMI Exchange Rates US$ LIBOR Interest Rate - Maturity 3 Months Manufacturing PMI US/China/EU Office Oslo USD/CNY 100 Address Lorentzen & Stemoco AS Munkedamsveien 45, 0250 Oslo P.O. Box 2029 Vika, 0125 Oslo Norway +47 2252 7700 Athens Lorentzen & Stemoco (Athens) Ltd Leof. Karamanli 25 Voula 166 73 Athens, Greece Singapore +30 210 89 000 59 Lorentzen & Stemoco Singapore Pte Ltd. 8 Eu Tong Sen Street, #21-98 Office 1 The Central 059818 Singapore +65 6349 8400 Shanghai Lorentzen & Stemoco Shanghai Representative Office Room 2701, Shanghai Central Plaza 381 Huai Hai Zhong Road, 200020 Shanghai China +86 21 6391 5880 New York Lorentzen & Stemoco AS (New York City) 8 East 41st St 8th Floor New York, NY 10017 United States of America +1(212) 684 2503 5 -Shipbrokers and consultants since 1919- Transactions list - Wet 6 -Shipbrokers and consultants since 1919- Transactions list - Dry Price US$m Name Cape 25.50 Kohju Size Built Yard 172,500 DWT 2001 NKK 52.50 Berge McClintock 179,500 DWT 2012 Hanjin Heavy Ind 40.00 C Phoenix 48.50 Rio Montevideo 48.50 Rio Manaus 176,000 DWT 2012 Jiangsu Rongsheng 180,000 DWT 2012 Hanjin Heavy Ind 180,000 DWT 2012 Hanjin Heavy Ind Buyer Seller CarVal Investors Navios Maritime Holdings Bunge Ltd CarVal Investors CarVal Investors Seno Kisen Bulk Seas Arendals Dampskibsselskab AS K Line Notes Berge Bulk Fleet Management Ltd P/Option Ahrenkiel Steamship En Bloc Ahrenkiel Stea En Bloc Panamax-Post PMX 12.50 Mishima 76,600 DWT 2002 Imabari 18.50 Belmonte 75,400 DWT 2007 Universal 70,200 DWT 1995 Sumitomo Unknown Chinese 5.80 Jindal Varad 75,500 DWT 7.30 Soma Maru 90,800 DWT 17.70 Michele D'Amato 76,400 DWT 1994 B and W 1995 Koyo Dock 2005 Tsuneishi Zosen Unknown Indian Unknown Chinese Unknown Greek 31.00 Min Sheng 1 82,000 DWT 2012 Longxue SFL 31.00 Sinochart Beijing 82,000 DWT 2012 Longxue SFL 56,000 DWT 42,800 DWT 56,800 DWT 57,000 DWT 47,800 DWT 42,200 DWT 2008 1985 2010 2010 2002 1991 Mitsui Tamano Mitsubishi HI Sanfu Shipbuilding Sanfu Shipbuilding Nantong COSCO KHI Oshima Greek Elmira Tankers Unknown Unknown Unknown Unknown Kyowa Sansho Chahaya Shipping Rehder carsten Rehder carsten FreeSeas Inc Portunato 24,200 DWT 22,000 DWT 32,600 DWT 20,700 DWT 1997 1995 2002 1999 Kanda Saiki Kanda Keppel Shipyard Unknown Unknown Chinese Unknown Indian Unknown Turkish Derna Carriers VOSCO Santoku Senpaku Derna Carriers 5.90 Sinokor Pioneer Handymax-Supramax 20.50 Bulk leo 4.00 Lea 22.50 Emerald Strait 22.50 Endeavour Strait 12.30 Free Jupiter 5.89 Happy Success Handy 4.50 Nikol H 5.10 Silver Star 10.70 Kwela 4.50 Lady Anthula H Nitta Kisen Kaisha Sinokor Merchant Marine Jindal Waterwa MOL D'Amato Fortune Ocean Shipping Fortune Ocean Shipping SS Due *TC attached, sale is from April *TC attached, sale is from April En Bloc En Bloc BBB Open Hatch, Bank Sale SS Due Open Hatch Disclaimer: The information contained within this report has been collected from a number of market sources and is given in good faith without guarantee, for information purposes only. Lorentzen & Stemoco and its affiliates, directors and employees are not liable or responsible for any consequences whatsoever occurring from errors or inaccuracy of the information contained within this report. 7