1
VLCC chartering activity is good,
though charter rates are a little
down. Market fundamentals
seem to support optimism for
rate upturn within the next
month. The Suezmax charter-
market is going strong, and
Aframaxes are gaining on
weather related delays. This
continues to feed the positive
S&P sentiment, and there is
little trouble finding buyers for
crude tankers nowadays, willing
(and realistic) sellers however
are rather thin on the
ground. China has witnessed
much of the S&P action with GC
Tankers (HNA) offloading four
VLCCs this month and
Rongsheng associate Roxen
Shipping selling two Suezmaxes
in an uncharacteristic second
hand swoop by Fredriksen.
Since it began 30 years ago, the
BDI has never been this
low. Whilst the composition of
the index may well have
changed somewhat since the
last record low in 1986, this is
cold comfort to owners having
to face the daily reality of this
market with no obvious end in
sight. So are there any reasons
to be cheerful amidst all this
charter market gloom? Well,
more Capes have been
scrapped in the last month than
in the whole of last year, and
we may finally be starting to
see a healthier rate of scrap-
ping despite lower demolition
prices. In S&P asset prices are
falling gradually, more pro-
nouncedly on distressed
units. Accordingly, there has
been a noticeable increase in
the number of failing deals.
We have completed quite a few
2nd hand transactions of both
13dwt IMO2 coated tankers,
19stst IMO2 tankers, and
smaller stst specialized tankers
since the new year. While we
cannot comment on specific
details of in house transactions,
we can confirm that the last
deals in all these segments of
the chemical tanker fleet reflect
a market where asset values
remain under pressure, and
positive notes (from a sellers
perspective) are limited to con-
tinued low bunker prices which
move some buyers focus off
new buildings and on to second
hand ships, along with the
weak JPY against USD where
applicable. However, from a
buyers perspective; at time of
writing the market does sup-
port schemes where obtainable
2-3 year TC rates justify pur-
chases at market levels, and as
such investors entering now
should be in good shape to ride
out the storm on the back of
longer time charter commit-
ments, before assets again start
to pick up value.
More S&P activity has been
seen for LPG ships. Contracting
activity was limited to one fully
ref. MGC of 38,000cbm ordered
by KSS Line at Hyundai Mipo at
US$ 52 million. Two VLGCs
were reported sold, the Hellas
Argosy (80530cbm, 2013 built)
realized US$ 66 million and the
Gas Sapphire (75358cbm, 1993
built) US$40 million. Levels
were below expectations for
the modern ship and above
expectations for the oldest
ship. The smaller gas vessel, the
Gas Pacu, was sold from Prime
to Asian buyers for US$ 5.8
million. Demolition of smaller
gas carriers has been more ac-
tive lately with three sales con-
cluded over the past month,
the ethylene carriers Gas Coral,
East Med Gas and Capricorn
Gas. No new activity was rec-
orded in LNG.
HIGHLIGHTS
Crude: High
activity in VLCC
second hand
market
Dry: BDI at all-time
low cutting
expectations for
recovery
Product/Chemical:
2-3 year TC rates
justifying current
asset values
February 2015
Dry
Crude
Product/Chemical
Gas
Monthly S&P Report
-Shipbrokers and consultants since 1919-
Hot Hulls
2
-Shipbrokers and consultants since 1919-
With TC earnings in the spot market above US$ 90 000/day and 1yr TC levels around US$ 1.9 mill/month the VLGC market is the
best performer by far in the current shipping market. During the past month, rates have increased further on the back of new
export capacity coming online in the US.
VLGC
Dry Bulk
Crude oil and storage development
The beginning of 2015 has seen increasingly disapointing macroeconomic numbers from China, having a further detrimental effect
on dry bulk demand which is already weighing heavy. High levels of scrapping seem to be a small highlight in this market. Asset
values are expected to fall further going ahead.
VLGC Fleet -Ordering and Scrapping
Capesize Asset Values Dry Bulk Fleet - Ordering
Values VLGC 82/84 kcbm
Price development Brent spot/futures As the market saw a recent uptick in crude oil prices,
the spread between Brent spot prices and 1 year
futures contracts somewhat narrowed, reducing the
contango effect which up to now has provided an
incentive for a number of traders to charter crude oil
tankers for use as floating storage. Storage chartering
has seen a slight reduction recently, and numbers
have so far failed to pick up again after the increase
in prices dampened demand.
3
Special Report - In a sea of QE -Shipbrokers and consultants since 1919-
A massive economic experiment is underway as cen-
tral banks are getting into the groove of quantitative
easing (QE), in a bid to stimulate the economy and
boost competitiveness. This is the last in a line of poli-
cy strategies attempting to increase spending and in-
flationary pressure, as currencies keep depreciating
and growth slows in Asia and Europe.
Leading the charge is the Japanese Yen, which has
been in a race to the bottom for the past few months,
deprecating almost 10% relative to the US dollar
since November last year (and by around 40% over
the past two years with Abenomics) when the Japa-
nese Government announced the addition of further
measures to its QE program in an attempt to increase
spending and support economic growth.
With the view to offset deflationary trends in the
global economy, more and more central banks are
employing similar stimulus strategies, lastly the Euro-
pean Central Bank, announcing a massive 1 trillion
Euro asset buying program last month. The result is
what seems to be an ever more aggressive currency
war concealed behind altruistic growth policies. For
any company with receivables in US$ and payables in
Euro, the current situation is a welcome one.
With the Euro expected to depreciate further relative
to other currencies as the ECBs program comes under
way, the Eurobond market is increasingly becoming
an interesting bet, also for the shipping industry. The
China State Shipbuilding Corporation (CSSC) recently
joined other Chinese shipping interests who have
been raising euro-denominated funds, and thereby
taking advantage of a very low coupon rate of 1.7%.
The recent flight to bonds as a safe haven compared
to other securities has been pushing rates lower. Eu-
ros should be looking attractive for Chinese players at
the moment, as the comparable rate from Bank of
China is standing at 3.125% for January 2019 maturi-
ty. Of course there is a currency risk involved here,
but the bet nonetheless seems an attractive one for
some.
The shipping market is seeing various dynamics com-
ing forward as a result of currency depreciation, and
especially so in ship building. Some talk has been
heard of Japanese yards making their way back into
segments long dominated by Korean yards, and due
to the lack of other alternatives this trend does not
seem to be abating.
As stimulus programs continue on their way, central
banks are keeping interest rates low (only the US FED
has signaled a possible hike in rates within the end of
the year) meaning capital comes cheap for those with
access to it. The question remains whether we need
more new buildings in all segments, or whether some
markets are increasingly saturated as ordering has
been high on the back of expected growth that has
failed to materialize, such as in dry bulk.
In the second hand market however, the next few
months look set to offer some very interesting oppor-
tunities as the bid-ask spread in various segments
narrows, especially for those thinking about fleet re-
newals and who are able to take advantage of incen-
tives presented by the effects of QE.
4
-Shipbrokers and consultants since 1919-
Scrapping
Newbuilding Prices (China)
Bunker Prices
Panamax and Capesize Scrapping Scrap Price Developments
Dry Bulk NB Prices (China) Tanker NB Prices (China)
Source: AXS/L&S Research
(US$/mt) February to date January Trend
Rotterdam IFO 380 291.2 254.1 Firming
Rotterdam MGO 528.9 483.4 Firming
Singapore IFO 380 335.2 284.8 Firming
Singapore MGO 541.1 504.5 Firming
Dry Bulk Jan-15 Dec-14 Nov-14 Trend
Newcastlemax 55.7 56.4 56.5 Softening
Capesize 52.5 53.1 53.4 Softening
Kamsarmax 29.1 29.4 29.5 S
