Shipping Economist
Shipping Economist
LSE DATE:
1, January,
2009 PAGE:
0 VERSION: 2
LSE
fc jan09
23/12/08
10:58
Page 1
LSE
M A R I T I M E
12/5/08 4:16:32 PM
CONTENTS
LLOYDS
www.shipecon.com
Volume 31
January 2009
A PERFECT STORM
10
14
DOWN TO EARTH
JANUARY 2009
17
20
Sugar trades
24
Cost challenge
MEASURING
PERFORMANCE
26
INVESTING SAFELY
29
STILL OPTIMISTIC
31
33
36
Orderbook analysis
REGULAR SECTIONS
Executive summary
Market commentary
News update
Company news
Data
39
Published by Informa
An Informa Business
69-77 Paul Street, London EC2A 4LQ, UK
Lloyds MIU website: www.informa.com
Printed in Great Britain by Latimer Trend
ISSN 0144-6673
Informa UK Limited 2009
Informa UK Limited does not guarantee the accuracy of the information contained in
Lloyds Shipping Economist nor does it accept responsibility for erros or omissions or
their consequences. Opinions expressed herein are not necessarily those of Informa UK
Limited. This publication is copyright and may not be reproduced in whole or in part
without the express permission of the publisher.
EXECUTIVE
SUMMARY
Currency
US
Sterling
Euro
US$
100 Yen
100 Won
0.67
0.75
1
0.9
13.7
1.5
-5.1
0.0
0.0
-8.7
0.9
1
1.33
1.2
18
Prev % change
Index
0.83
8.4
1
0.0
1.26
5.6
1.2
0.0
19
-5.3
Source: Lloyds List
Nov 08
Nov 07
100
129
127
159
78
117
n/a
1134
1134
16.9
1640
1280
% Change
n/a
-89
-89
-90
-96
-91
Source: LSE
Index (Nov)
Country
Prime
UK
US
Euro
Japan
6mth Libor ($)
2.00%
1.00%
2.50%
0.30%
2.22%
3.65%
2.67%
3.00%
1.37%
67
121
124
175
198
-32
-28
-41
-88
-41
Source: LSE/LMIU ship fixtures
Source: FT
Current month
Prev
Prev -1
UK
US
Euro
Norway
Japan
4.50%
4.40%
5.40%
3.20%
5.50%
5.20%
3.70%
5.60%
3.60%
5.50%
4.70%
4.90%
2.10%
4.00%
4.50%
Source: Economist
Prev
Change
Orderbook (%)
399.52
412.66
397.79
411.21
+1.73
+1.45
44.4
60.2
Teu (,000)
Prev
14,145
14,070
Container
Prev
% Change
42.4
44.4
41.32
49.4
53.62
45.89
-14.2
-17.2
-10.0
Source: LL / OPEC
45.1
Source: LMIU/CI
Capacity
39
226
2.00%
Current month
UK Brent
West Texas
Opec Basket
m dwt
0.33m dwt
1.48m dwt
Source: Lloyds MIU
Prev month
% change
868
-7.5
803
Source: LL
Prev month
501.7
% change
589.2
-14.9
Source: HR
257
459
252
222
220
497
251
205
16.8
-7.6
0.4
8.3
274
231
512
254
MDO
Current Prev
Index (mid-Dec)
Prev month
% change
1232.4
4.1
1283.5
238
15.1
223
3.6
599
-14.5
240
5.8
Source: Bunkerworld
Source: LL
Index
2000
2003
1500
ECONOMIC GROWTH
1000
Country
GDP
Industrial production
Argentina
Brazil
GChile
gdp
7.8Q2
6.1Q2
ind prod
(1.5)Oct
0.8Oct
Source: Economist
2004
2005
500
0
2006
Jan
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2007
2008
Source: LSE
JANUARY 2009
MARKET COMMENTARY
Opec tanker
blow
JANUARY 2009
ORDERS HIT
Crashing shipping markets and lack of
finance have virtually stopped newbuild
orders in their tracks. Shipbuilding orders
will fall by 60% next year and newbuild
prices will drop by 30% from their peak by
2010, according to Bao Zhangjing, chief
researcher at China Shipbuilding Economy
Research Center (CSRC) in Beijing.
Speaking at the Asia Ship Finance and
Leasing Forum in Shanghai, Bao said that
owners will not order as long as they
LINER CUTS
Container operators continue to struggle
with excess capacity as demand slumps.
Most major operators and alliances have
now slashed capacity on the main east-west
trades by a combination of suspending and
adjusting service strings to try and restore
market equilibrium. They hope to see some
signs of recovery in demand by the middle of
2009, though significant new capacity will
be delivered in the meantime.
This is resulting in surplus tonnage with
some ships idling and others going into lay
up, with Singapore in particular proving a
popular resting point as the anchorage fills
up with idle ships of all types. Chartered
vessels are being re-delivered to owners or
made available for sub-lets. This, in turn,
has sent charter rates tumbling. The Howe
Robinson Containership Charter Index had
fallen to just 501.7 by mid-December. This
represented a 62.5% fall since the beginning
of 2008 and a 50% drop in just three
months since mid-September. This means
for example that standard 2,700teu vessel is
unlikely to achieve more than $10,000/day,
if it could find a charterer. These levels are
testing owners decision-making as to
whether to continue to trade vessels or to
idle or put them into lay-up for a period.
German owners are moving to implement a
mutual compensation programme to
support owners with partial cover for loss of
hire when ships are kept idle.
NEWS FOCUS
Confidence still
shaky, survey
finds
While many in the shipping industry expect
the cost of finance to rise, a degree of optimism seems to be returning to the industry,
if the latest shipping confidence survey from
accountant Moore Stephens is anything to
go by. Although the survey says that 60% of
those contacted expect the cost of finance to
rise, this is 6% lower than the previous survey in June. The net fall in the number of
respondents who expected finance costs to
rise over the next 12 months represented a
change in sentiment of 16%, it says. The
net figure (those expecting higher costs
minus those expecting lower costs) for June
was 57 whereas in November, it was 41.
One respondent commented on the likely
effect of persistent higher finance costs on
the market. The optimism surrounding
weaker asset values and the opportunities
they might throw up was tempered by the
fact that higher finance costs will eventually slow this process, according to the
respondent. As well as concerns over the
cost of finance, the likelihood of investment
decisions going ahead has worsened slightly.
The average score from respondents was
5.2 on a scale where one equals low and 10
equals high. This represented a drop of 0.7
against the accountants June and March
surveys. Ship managers emerged as the category most likely to make a major investment or significant development during the
coming 12 months.
A BIT OF SCRAP
SOUND ADVICE
Checking how safe a companys data is can
be a relatively, straightforward process,
according to accountant Moore Stephens.
The accountant suggests that answering
some basic questions based on the published
good practice can quickly indicate to senior
management that there may be a problem
with information security.
IRISH/BALTIC TRADE
Top exports by value from Ireland to the
Baltic States (Latvia, Lithuania and Estonia)
in 2007 were power-generating machinery
Baltics
rather dry...
JANUARY 2009
Bankers Bleak
I am very very pessimistic about shipping
finance in 2009! Most of the banks will
have no room for additional shipping exposure and will even try hard to decrease their
portfolios, said Michel Degermann, head
of shipping at Natexis Banques Populaires.
Degermann cited global balance sheet constraints following the heavy losses suffered
in capital markets, many banks not meeting
the Basle II prudential ratios at the end of
2008 and will have to deleverage their balance sheet. The ones having been recapitalised by governments have been or will be
instructed to focus on their domestic markets to support the local economy and to
forget about overseas clients, pointed out
Degermann.
Weve had ministers on television
explaining that taxpayers money will be
used for housing and small business loans
and not for international lending, which
leaves shipping in a bit of a spot, as outside
Greece and Norway it is really a supranational activity, Peter Illingworth from
DVB told LSE. Theres going to be a
reduction of players in shipping, but we
dont really know which of the big boys
will go yet. DVB will stay in - were still
open for business and as a pure transport
bank, its all we do, emphasized Illingworth.
Bankers believe shipping finance
requires more equity allocation than initially planned in 2008 budgets, which may
not good for the business in todays banking climate. Degemann said, The main
game will be to try to walk away from
existing undrawn commitments for any
good or bad reason and to avoid funding
future loss-making assets.
DISTRESS FUNDS
Dramatic falls in ship values and vessel
earnings, combined with acute finance
problems faced by some shipowners and
shipbuilders, are prompting private shipping fund managers to set up new funds
specifically to take advantage of an
expected increase in distress sales of ships.
Leo Polemis, chief executive of Luxembourg-based Safe Ship Investment Fund
and Jonathan Hill, managing director, shipping funds, at Tufton Oceanic (Middle
East) in Dubai, both told the Asia Ship
JANUARY 2009
Finance and Leasing Conference in Shanghai that their respective organizations plan
to set up new Distressed Funds.
Hill said that Tufton Oceanic plans to
launch the Oceanic Distressed Fund in the
first quarter of 2009, hoping to raise about
$200m from private investors to purchase
distressed vessel sales. Tufton Oceanic is
best known for its Islamic ship investment
funds, but the Distressed Fund would be a
simply structured funding vehicle, Hill
explained.
Polemis said that Safe Ship also aims to
raise about $200m in early 2009 for its new
Distress Fund. Low ship values means distress sales offer the prospect of better
returns and so should be attractive for
investors, even though it is harder to raise
the debt portion, he said.
BRAZILIAN BOOST
Another BRIC (Brazil Russia India China)
country, Brazil is planning to inject
$4.33bn to finance newbuildings to support its shipbuilding industry. Brazilian
Merchant Marine Fund (FMM), which is
run by its national bank, BNDES, will provide part of the funds mainly for constructing offshore platforms and for cabotage
and offshore supply vessels (OSVs).
Separately, FMM will provide a $122m
loan for four MPSV-3,000 multipurpose
platform supply vessels to be built at
Alianca Shipyard in Niteroi. The loan to
Rio de Janeiro based offshore vessel operator, Companhia Brasileira de Offshore
(CBO) has been approved by BNDES.
SHIPOWNERS SELL
Shipowners are trying to offload stock to
create a cash cushion should the going get
rougher. Dryships and Ship Finance
International have filed with the SEC
(Securities and Exchange Commission) in
order to sell stock if needed. Stealth Gas
CEO Harry Vafias told LSE that the group
has sold its remaining shareholding in Brave
Bulk Transport (BBT), a Melbourne-based
operating outfit it set up in 2003 in a joint
venture with Indias Kumar Group. We are
happy to say we got a good deal given the
current markets, Vafias told LSE. He said
the company wanted to reduce exposure to
chartered in tonnage and Forward Freight
Agreements (FFAs).
Nasdaq-listed Euroseas, sold 480
calendar days next year worth $11,300 per
day in FFA contracts. Although the
company has seen strong revenues, it has
exposure to both dry bulk and containers.
For 2010, Euroseas has also got rid of FFAs
for 120 days on the panamax index worth
$13,900 per day. The company has total
charter coverage of about 43% in 2009 and
about 21% for 2010.
Earlier Dryships filed to sell up to 25m of
the companys shares and John Fredriksens
Ship Finance International (SFI) has filed
for an offering, which could net almost
$75m. According to New York-listed SFI,
the filing will permit it to sell about 7m
shares as and when required. SFI enlisted
Mer r ill Lyn ch to se ll the stoc k at a
maximum price of $10.67 per share.
HSH RE-ALIGNMENT
As part of its response to the global banking
crisis, HSH Nordbank plans a major
restructuring. It said this will include
spinning off non-strategic activities and
greater focus on regional core activities.
Our aim is to ensure that the bank once
again has the sufficient flexibility needed in
its regionally anchored core fields, said
HSH Nordbank CEO Dirk Jens
Nonnenmacher. Final decisions will be
made in February.
It stressed that its Shipping and
Transportation units will continue as part
of the banks core business and retain a
global focus. The business units Shipping
and Transportation have their roots in our
North German Corporate Clients business.
COMPANY REPORTS
RECORD
EARNINGS
GRIMALDI
IN CONTROL
DAHLMAN
AND
PLATOU
LINK UP
SHIPBUILDER
BANKRUPTCY
Company results
Company
Period
Net profit
% change
Turnover
% change
Vopak
Q308
81.8m
11
n/a
n/a
Hamworthy
1H08
$10.1m
115
$112.7m
6.1
Chemoil
Q308
$10.4m
n/a
$2.72bn
70
VOPAK
Group operating profit for the Dutch storage
operator rose by 11% in the third quarter
compared with the same quarter in 2007.
Taking out exceptional items, the increase
came in higher at 18%. Exceptional items
incurred during the quarter were losses on
currency moves. Looking ahead results
across the whole year, the company expects
group profit excluding exceptional items to
be at least 310m which is up on the previous
years result of 272.9m. Storage capacity
aims to be 29.2m cubic metres by 2011,
which is up from its position in the third
quarter of 26.6m cbm.
HAMWORTHY
Interim results for Hamworthy, the UK-listed
offshore fluid handling systems manufacturer, show a strong performance in turnover
and profits for the first half of its financial
year which runs from April to March. The
company, which is listed in London on AIM,
notes that while its sector is unlikely to be
immune for the global financial crisis, an
increased product range and strong order
book puts it in a good position to address
any adverse impact and exploit future opportunities. Hamworthys biggest market geographically is the Far East followed by
Europe (excluding the UK) and the Middle
East. The third and fourth market areas by
value are the UK and then the rest of the
world. It is active in gas transportation and
production, oil transportation and production, cruise ships and merchant shipping. The
company notes the worsening economic outlook for merchant shipping but adds that its
exposure in this market segment is relatively
low, at less than 10% of its overall activities.
CHEMOIL
The climb in turnover in the third quarter of
last year compared to the same period in
2007 was largely driven by the higher average sales value of marine fuel, reported the
bunker company. In addition, Chemoil,
which is listed on the Singaporean stock
exchange, says that its hedging strategy protected the companys underlying physical
inventory despite intense price volatility.
Gross contribution per metric tonne stood at
$11.1 for the Q308 compared with $3.1 for
Q307.
JANUARY 2009
FINANCE
A perfect storm
The liquidity crisis has
spilled all over the globe
affecting markets across
the board. Ranjeeta D
McGroarty delves into
the impact of the crisis on
investment banks and
funds serving the
shipping industry
CAPITAL MARKETS
Scepticism has led the way to fear with
shipowners and bankers dreading the
worst. Capital markets are dead right now
and clearly debt is at a premium and is
available on a limited and very selective
basis, Peter Shaerf, Nymar chairman and
managing director at New York-based
dedicated shipping merchant bank, AMA
Capital Partners told LSE. Clearly,
REGULATORY IMPACT
In order to combat market volatility,
increase financial transparency, and restore
confidence affecting global capital
markets, measures like the Emergency
Economic Stabilization Act of 2008 (EESA)
were put in place by domestic and foreign
regulatory authorities, including the US
Securities and Exchange Commission
(SEC) and the UK Financial Services
Authority (FSA). The new regulations will
impact investment managers and hedge
funds and private equity funds they
manage, as well as direct effects on their
trading strategies, compensation
arrangements, disclosure requirements,
and compliance obligations.
The SEC has recently adopted a number
of new regulations applicable to the hedge
fund industry, including antifraud rules
FINANCE
designed to limit naked short selling and
prevent deceptive actions, prohibitions
against short selling of publicly traded
common equity securities of an expansive
list of financial services institutions, and
requirements to disclose applicable short
positions on certain securities.
New regulations also indicate that
hedge fund managers may not be allowed
to defer fee income from offshore funds
attributable to services performed after
January 1, 2009. Managers will now have
to consider replacing the incentive fees paid
by their offshore funds with incentive
allocations, which under current law are
not subject to NYC unincorporated
business tax (currently 4%) or Federal
self-employment tax (about 2.9%). The
offshore incentive allocation structure
needs to be implemented in a master
fund (usually offshore) entity taxed as a
partnership. Transferring assets, if needed,
to a master fund may result in
administrative, tax and counterparty
issues, stated law firm Seward & Kissel.
Since managers can no longer defer
compensation from offshore funds, they
may need to restructure their existing
employee deferred compensation plans to
avoid the negative tax result on their own
income without any current deduction for
deferred compensation owed to employees,
and secondly address their inability to
hedge the employee owned investment
returns for deferred compensation.
The FSA recently implemented new
provisions to its Code of Market Conduct,
including prohibiting new short positions
or additions to existing short positions for
securities of certain UK financial sector
companies as well as daily disclosure
requirements for investors with short
positions in excess of 0.25% of the
outstanding share capital of a UK financial
sector company.
Steven Nesmith, Partner, at law firm,
Holland & Knight told LSE, The general
belief is after eight years of deregulation
and the expansion of market freedoms,
democrats and republican in the US
Congress have agreed that there is a need
for reforms and greater cooperation among
the financial regulators of investment
FUND MANAGERS
These regulations have altered the
reporting requirements of hedge fund
managers and certain private equity fund
managers, and may have direct effects on
their investment strategies. Additionally,
private investment funds with restricted
access to available credit will need to seek
alternative sources of leverage or
re-evaluate their future credit demands,
and will continue to adapt their investment
strategies to substantially reduce their
demand for credit. With respect to idle
funds private equity fund managers may be
required to return uninvested capital
contributions to limited partners if not
JANUARY 2009
FINANCE
venture between DVB and Northern
Navigation.
We are looking to invest in shipping
and offshore asset based projects. We are
going to be patient in terms of finding the
right deal, although we have one
commitment in place, Durkin told LSE.
We have a second closing of NSF I in the
first quarter of 2009, which will increase
the fund to about $200m, Durkin added.
The fund is looking at a minimum of 15%
in annualized returns in investment
projects ranging between three and 10
years.
In terms of regulatory impact, I dont
believe we will be directly affected by the
new regulations, but we are more likely to
be affected by prolong periods without
banks, Durkin told LSE.
Similar to NSF I, AMA Capital Partners
fund ACP Fund III is also sitting on cash
ready to be invested. AMA is well poised,
our ACP Fund III is a $100m fund and we
are looking for opportunities. Our earlier
funds ACP Fund I and ACP fund II have
liquidated all their holdings, said Shaerf.
With the financial markets currently being
the way they are, the need for alternative
capital appears to have grown
significantly.
BANKING WOES
Banks are currently in a difficult situation,
facing the potential of additional write-offs
and the need to replenish their capital base.
In addition, they will be subject to
increased regulatory oversight as well to
stricter internal controls. Also, those
banks that got government support of one
kind or another will be expected to focus
more on domestic lending, possibly
making less capital available to
international activities, shipping
included, Karageorgoiu said.
He believes that in shipping, at least five
traditional lenders are now in trouble and
may cease or curtail new financing.
Overall, we believe that bank financing of
shipping assets will be less readily available
and it is expected to be a lot more selective
and with more stringent terms, as banks
will require increased equity or collateral
from the borrowers, Karageorgiou added.
Also, margins will go up, even though this
increase may be partially offset from the
current lower interest rate environment.
Part of the activity in 2009 may also
relate to loan restructurings to
JANUARY 2009
SHIPPING MARKETS
World shipping markets are facing the
perfect storm of a world financial crisis at
the same time as a collapse of historic highs
of rates in many sectors, as well as vessel
values, and a huge newbuilding orderbook.
The storm threatens shipping, as shipping
companies see their equity and cash flows
evaporating, while many financial
institutions feel constrained by their own
financial straits to inject new capital for
new ventures although they may do so for
existing customers or stronger companies,
Jovi Tenev partner at Holland & Knight
told LSE.
Shipowners told LSE that this is perhaps
the first time owners have been impacted
on both the demand side for transportation
OUTLOOK
The investment banks are going to
struggle for some time. These bankers,
though, are creative and I would not count
them out. Once the industry gets past its
current restructuring phase, I am sure
something will come along to keep the
bankers busy, Rutkowski told LSE. Thus,
there clearly are and will be many
opportunities for those with the capacity
and knowledge to act, shipping companies,
hedge funds, and financial institutions.
Overall, we expect 2009 to be a year of
opportunity and challenge both for banks
and shipping companies. Strong companies
can take advantage of weaker markets to
grow and even if credit may be less readily
available, we expect that banks will
continue to finance the right borrowers for
the right opportunities, Karageorgiou
said. There is no doubt there will likely be
a number of bankruptcies in the industry
and it remains to be seen how companies
and banks weather another bad year.
DJIA
2000
0
7 15 20 25 2 7 12 17 21 28 5 12 17 22 27 4 9 14 18
2 3 4 5 7 8 9 10 11 12 2 3 4 5 6 8 9 10 11
07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08
BDI
CHEAP SHARES
By other measures, shipping shares have
become cheap, as they were prior to the big
run-up in 2007. Two ratios widely used to
gauge a shares attractiveness are price to
earnings (P/E) and price to cash flow
(P/CF). For capital intensive companies CF,
which does not include depreciation (which
lowers earnings), is a better measure of
company results. For the broader
marketplace, Barrons calculated the P/E of
the Standard & Poors 500 index to be 19x.
A Jefferies research report in early
December put the average P/E ratio for a
composite of dry bulk stocks at 1.3x, down
from 8x as recently as July, and put the
P/CF ratio at a meager 1x, down from 6.2x
in July, based on likely earnings for 2008.
Tankers were faring slightly better, with a
group of tankers followed by Jefferies
analysts providing a P/E ratio of 3.3x and
P/CF at 2.1x (5x and 3.1x respectively for
full dividend payers. These numbers were
down dramatically from mid-July 2008,
when tanker P/Es were 13.3x and 15.0x
(high yield) and tanker P/CF stood at 6.6 x
and 7.3x (high yield).
In the minds of many investors, shipping
10
SHIPPING SECTORS
When the credit market turbulence of
September 2008 came to the fore and
spread to equities, the ebbing share price
tide did not always distinguish between
JANUARY 2009
IPO CONTRASTS
The second dry bulk peak in May saw two
IPOs as optimism about the sector
brightened. Britannia Bulk raised $125m in
mid June, following Safe Bulkers successful
$190m IPO in late May. The two IPOs
subsequent performances provide a study in
contrasts. Safe Bulkers remained out of the
news, its vessels continuing to earn healthy
charter hire with solid names such as Bunge
Corporation and Daiichi and the
shareholders receiving a targeted quarterly
dividend of $0.475/share for 3Q 2008.
At Britannia Bulk matters quickly moved
out of hand as it filed for receivership a
scant five months after its IPO, at which
time the company was valued at more than
$400m. The catalyst was a crunch in its
time charter business, with vessels exposed
to spot rates in free fall. At mid-year,
Britannia Bulk had 53 vessels on charter,
contrasted with an owned fleet of 22 vessels
(13 of which were bulk carriers). The
crunch was complicated by inopportune
JANUARY 2009
Dry
S
40
20
GMR
0
31 2
1 3
07 07
3
5
07
3
7
07
4
9
07
2
11
07
3
1
08
3
3
08
2
5
08
3
7
08
3
9
08
3
11
08
SSW
Source: Author
11
SHIP
VALUES
DIVIDENDS
Dividends have grown in importance over
the past few years. Many listed shipping
companies, especially those coming on the
scene during 20052006 used high
dividend payouts and distributions to
attract investors. Shipping companies, in a
highly capital intensive business, have
always had an uneasy relationship with
payouts to investors. Cash conservation is
suddenly a priority throughout the
12
DIVIDEND YIELDS
Dividends metrics are now indicative of
their state of flux. The P/E data
demonstrate that full payout companies
achieve higher valuations from investors.
As the market has changed, one feature of
the dramatic decline in the stock price is the
outsized dividend yields on shipping stocks.
In the broader equity market, as proxied by
Standard & Poors 500 index, the dividend
yield for 2008 was expected to be close to
3.4%.
A recent research report by Morgan
Stanley revealed that a composite of nine
New York listed tanker stocks was yielding
18/4% based on likely 2008 dividends. A
similar sampling of dry bulk issues was
yielding 33.5%. At end March, 2008, the
comparable yields were 6.7% and 8.7%
respectively.
These high yields (annualized dividend
divided by the recent share price) can be
interpreted in multiple ways. Where the
dividend is viewed as sustainable, the high
yield could suggest a potential rise in the
stock price. Given the changed conditions
in shipping markets, a more likely
interpretation is that periodic dividend
payments will not be sustainable.
Genco and Navios Maritime (NM),
illustrating another trend, have both
cancelled unchartered vessels slated for
future deliveries. Genco, stressing potential
opportunities to acquire vessels from
distressed sellers, forfeited a $53m deposit
paid to Turkish sellers on six resales, valued
at $530m. The loss of the deposit makes
good business sense. An initial calculation
by analysts at New York-based Dahlman
Rose put a current value of some $300m on
the three Capesize and three Handysize
ships.
JANUARY 2009
SHARE
BUYBACKS
JANUARY 2009
Yield Comparisons
Stock
Symbol
Dividend* Annual
Price (08-Dec-2008)
Yield
TBSI
6.13
0.0%
Dryships
DRYS
$0.80
7.17
11.2%
NM
$0.27
2.30
11.7%
Safe Bulk
SB
$0.62
4.09
15.2%
Euroseas
ESEA
$0.93
4.52
20.6%
Excel
EXM
$1.20
5.01
24.0%
NMM
$1.26
4.88
25.8%
Star Bulk
SBLK
$0.72
2.12
34.0%
Diana
DSX
$3.31
9.62
34.4%
Genco
GNK
$3.85
9.06
42.5%
Paragon
PRGN
$1.88
4.1099
45.6%
Eagle Bulk
EGLE
$2.00
4.36
45.9%
Seaspan
SSW
$1.90
7.94
23.9%
Danaos
DAC
$1.86
5.20
35.8%
GSL
$1.46
2.50
58.4%
OSG
$1.50
38.43
3.9%
TK
$1.14
15.71
7.3%
TNP
$1.80
19.29
9.3%
GMR
$2.00
13.25
15.1%
Nordic American
NAT
$4.89
32.19
15.2%
TOO
$1.65
9.51
17.4%
TGP
$2.18
9.98
21.8%
DHT
$1.15
5.03
22.9%
Frontline
FRO
$8.25
30.98
26.6%
Teekay Tankers
TNK
$ 2.79
9.12
30.5%
ONAV
$2.00
6.39
31.3%
OSP
$1.31
4.15
31.6%
TK
Omega Navigation
OSG America LP
Dividend source = Morningstar* in Yahoo! Finance
Trailing Annual Dividend
13
THE
FUTURE
CHINA SHIPPING
SUBSTANTIAL
FLEETS
EVOLUTION
Chinas leading shipowners have evolved
from domestically focused state owned
shipping companies into international
14
JANUARY 2009
CHINA SHIPPING
leading shipping group, with substantial
dry bulk and container fleets, operated
under various subsidiaries such as Cosco
Container Lines (Coscon). In the first three
quarters of 2008 the group reported
revenue of some Yuan95.4bn ($13.7bn), a
rise of 40% compared with the same
period in 2007. However, the global
economic slowdown is expected to affect
its revenue growth from container trades in
particular, although most of its dry bulk
cargoes are carried under contracts of
affreightment with Chinese importers. Its
massive controlled dry bulk fleet comprises
some 460 vessels, of which about one-third
are directly owned, with a further 60 on
order, mostly larger post-panamax and
capesize ships. Its proportion of owned
ship is set to rise.
Coscon has a fleet of 150 containerships
and participates in all the major global
liner trades. Another subsidiary Dalian
Ocean Shipping Co operates the groups
tanker fleet building up an operation
including VLCCs with more on order. The
Group also has a Hong Kong-listed
terminal company Cosco Pacific and
shipbuilding and repair interests in China.
Another major bulk shipping group
China Merchants Energy Shipping, part of
the giant China Merchants Group, also
reported a healthy first nine months of
2008, but it too expected to feel the effects
of the global and shipping market
slowdown during the fourth quarter,
especially in the dry bulk market, although
its tanker operations remained in a
healthier environment. Its fleet comprises
21 bulk carriers, with a further seven on
order and 15 tankers with another 12 on
order. It has also ventured into the LNG
market, with China expected to step up
LNG imports in future years, with three
ships in service and another two on order.
State owned Nanjing Tanker Corp is
investing in VLCCs with 16 vessels
contracted at Chinese builders, as part of
the government supported policy for
Chinese owners to take a larger share of its
crude oil imports.
Despite the current setbacks in the dry
bulk and container markets, each of these
DOMESTIC
POTENTIAL
15
DEVELOPMENT
Research into Chinas shipping industry by
Wei Wei, Associate Professor, School of
Economic and Management, and Dongqin
Lu, at Dalian Maritime University
identified some weaknesses in Chinese
shipping companies in an international
context and attempted to offer some
remedies to make Chinese shipping more
CHINA SHIPPING
efficient and competitive, despite recent
rapid growth, commercialisation and
internationalisation. They pinpointed some
specific structural and organisational
weaknesses compared with international
competitors, including the sources of funds
Chinese shipping companies use to finance
their investments, although this was before
the financial crisis took hold.
Their suggested remedies include some
of the approaches already starting to be
adopted by the larger Chinese shipowning
groups (see right). These solutions include
developing integrated logistic services and
investing in ports and terminals.
They pointed out that although Chinas
fleet is large, its structure is still heavily
focused on small older vessels, with
investment in new tonnage only emerging
recently and these are mainly being flagged
in international registers rather than in
China. That Chinese ships massively shift
to overseas countries not only causes bad
influence on national macro-control and
national taxation, but also greatly weakens
the strength of our international transport
fleets.
China offers owners no operating
subsidy or shipbuilding subsidy, nor
favourable shipbuilding loan rates, taxes,
depreciation and other preferential policies.
This increases domestic shipping
enterprises costs significantly, and weakens
their competitiveness. The majority of
Chinese shipping companies are not used to
the challenges of a market economy, and
suffer weak operational management and
lack of awareness of service. Chinese
shipping enterprises, both in financial
strength, market awareness and in
management level, service quality are
always in a disadvantageous position.
However, they acknowledge that as
Chinas international trade has increased
Chinese shipping companies have made
considerable progress and accumulated
experience and advantages by participating
in international competition, but there
remains a considerable gap compared with
the international shipping industry in terms
of being attractive to investors and
responsiveness to market changes. Despite
developing into internationally operating
shipping groups Chinese companies still
lack a clear global strategy with clear
objectives, creating a competitive edge in
the global market.
They propose that current restrictions
on foreign capital should be relaxed to give
16
JANUARY 2009
SUEZMAX TANKERS
Down to earth
As Opec announces
another output cut,
Stephen Matthews
examines how this might
affect prospects for
suezmax tankers in 2009
DEMAND THREAT
As demand continued to falter and the
crude oil price struggled below $50/barrel,
Opec decided in mid-December that it
would implement a further major cut in
output quotas to take effect from the
beginning of 2009. The producers cartel
announced that it would set a new target of
24.845m bpd for its 11 members that are
subject to output quotas with the aim of
bringing supply more closely in line with
reduced demand in order to support the oil
price to a declared target range of
$70-80/barrel. This represented a further
2.2m bpd cut on the existing aggregate
quotas and amounted to a cut of 4.2m bpd
JANUARY 2009
West Africa
111.25
Carib/S.Am
98.67
Mid-east
94.15
65.63
52
CARGO FLOWS
The Opec production cutbacks in late 2008
and into 2009 came too late to have a major
impact before the end of the year, hence
cargo volumes and earnings remained
relatively firm through much of the year.
S tatis tics fr om Llo yd s Mar itime
Intelligence Unit (LMIUs) APEX (Analysis
17
SUEZMAX TANKERS
cargoes loaded there accounting for some
37% of total suezmax tonne-miles. Indeed,
the leading route from West Africa to the US
alone is responsible for 17% of aggregate
tonne-mile demand in this market segment.
US demand and the interaction with the
VLCC market is therefore crucial for
suezmax earnings. This route takes almost
double the tonne-mile demand of each of
the three next highest trades, those from
West Africa to North Europe, Black Sea and
Mediterranean to the US and Middle East
to Far East. High cargo volume but much
shorter routes including intra North Sea,
cross-Mediterranean, Middle East to India
and Caribbean to US generate much lower
shares of tonne-mile demand. On these
routes suezmaxes tend to compete with
smaller aframax vessels.
5 to 9
10 to 14
15 to 19
20 to 24
25+
FLEET DEVELOPMENT
400
350
300
250
200
150
100
50
0
Jan April Jul Oct Jan Apr Jul Oct Jan Apr July Oct Jan Apr Jul Oct Jan Apr Jul Oct
04
05
06
07
08
West Africa
505.29
Carib/S Am
127.63
Mid-east
300.9
54.6
Others
94.5
18
JANUARY 2009
SUEZMAX TANKERS
Leading suezmax routes
by cargo tonnes Jan to
Mid-Dec 2008
Route
m. tonnes
52.3
West Africa US
44.2
29.2
27.9
23.9
Caribbean/S. America US
24.3
bn tonne-miles
West Africa US
229.1
120.8
Black Sea/Med US
119.8
113.4
48.8
Caribbean US
44.2
42.1
40.1
JANUARY 2009
19
VALUES
While tankers have not been affected so far
by anything like the collapse in rates and
values in the dry bulk market, ship values
for large tankers have started to ease and
newbuilding prices are also adjusting to the
new trading climate. However, with a
substantial orderbook running through to
2011, there is not expected to be a rush of
suezmax orders in 2009, but some owners
might seek opportunities to buy up
secondhand tonnage at reduced prices.
With the s&p market subdued there
were few reported deals to assess prices.
OUTLOOK
After what turned out to be an
unexpectedly good year for suezmaxes in
terms of average earnings, 2009 seems set to
be more sobering as market fundamentals
appear more challenging. The best hope is
that global economic recovery starts to kick
in the crude oil market is often one of the
first indicators - and demand for tanker
capacity is boosted sufficiently to meet the
scheduled significant increase in capacity.
SUGAR TRADES
Domestic
demand
5
0
2015/16
2020/21
Exports
Source: Unica
20
JANUARY 2009
SUGAR TRADES
producers will make decisions based on the
product which gives the best return, be it
sugar or ethanol. However, even when the
global oil price makes ethanol less
attractive, the domestic market acts as a
solid foundation for demand. It is this fact
the ability for players to move between the
domestic and international markets that
gives the world market its fragmented
nature. If conditions are adverse, producers
can rely on domestic consumption; if
returns from trade are attractive, they can
make the most of the opportunity. The
conference heard that Brazils sugar
industry has a 5% swing factor on the
domestic/international axis.
The government of Thailand, which says
that the countrys market share of the
ethanol trade is around 10%, wants to
boost sugar production and, in particular,
the petrol substitute, ethanol. To that end,
it aims to boost the efficiency of its own
farmers, focusing on small-scale
agricultural units. Interestingly, a question
from the conference floor prompted the
secretary-generaal to say that the level of
education among this segment of the
agricultural industry was low in
comparison to the countrys bigger farms.
In the US, for example, farmers are
generally educated to degree level.
Having enjoyed a bull run, commodities
are now in bear mode following the onset
of the credit crunch and this change in
market direction is evident for sugar.
Whereas some 35 plants were expected to
come into production during the year in
Brazil, the commoditys main producer, the
actual figure for last year was 23. Similarly,
a prediction (of 43 new plants) for this year
has been scaled down to around the same
number as 2008.
Although the credit crunch is affecting
production, the global industry has itself
been in transition for some time. Part of
that change is to do with the emergence of
ethanol as a globally tradable commodity
which has brought with it an increased
focus on sugar. According to the US-based
Inter-Continental Exchange (ICE), talks are
under way to get sugar trades cleared. ICEs
chairman, Jeffrey Sprecher, said that they
were 14 months into the negotiations.
Cleared trades, which provide transparency
and better security on a reduced credit risk,
are sign of trade maturity would and their
emergence would be synonymous with
increased activity in the sugar trades.
Sprecher acknowledged that while sugar
JANUARY 2009
Global
20
10
0
2000
Brazilian
2008
2008/09
40
30
20
2009/10
10
0
total production
domestic demand
exports
ethanol
2010/11
Source: Thai Government
21
SUGAR TRADES
sugar imports into the EU will double from
2m to 4m tonnes. Imports of ethanol are
also increasing with much of that increase
57% coming from Brazil.
The conference heard that in 2008/09,
around 10% of agricultural land given
over to farming sugar beet will be
dedicated to producing ethanol. This
amounts to 140,000 hectares, a figure
which could rise to 260,000 hectares by
2015. Certainly, like Brazil and Thailand,
the EU aims to produce more ethanol going
forward.
Chairman of the Dutch company Royal
Cosun, Jos van Campen, said that if oil
remains at $50 a barrel, it will be difficult
to develop our ethanol market from where
we are now. However, he noted that as
technology improves, production costs
should fall. And he added that, in his view,
the connection between crude values and
bio-ethanol prices was overdone because
there are three, national markets [US,
Brazil and EU]. When a global market for
bio-ethanol is established, the connection
between crude, ethanol and sugar should
become stronger.
It is not happening now. It might
happen in the future, but, at the moment, it
is too far away. Maybe in five years time,
its possible, van Campen told the
conference. A further sign of the
under-developed nature of the ethanol
trade is the lack of a common trading
contract.
As the EU is now producing fewer
tonnes, filling the gap should be open to
other players was the view of
Karl-Friedrich Falkenberg, deputy director
g e n e r a l o f t h e c o m m i s s i o n s t r a d e
directorate. Currently, exporting into the
EU presents a complex picture. Potential
sugar exporters to the EU comprise three
groups: EPA, EBA and ACP countries.
These acronyms stand for Economic
Partnership Agreements, Everything But
Arms, and the group of African, Caribbean
and Pacific countries.
Under the sugar protocol, which has
now been superceded, ACP countries had
the most access. That access will be made
available to a wider group of countries.
In a good, sugar protocol year, 1.6m
tonnes of cane sugar was imported, said
the deputy DG. Between 2009 to 2015, this
could double or go even higher. Sugar
prices are no longer guaranteed, he said,
adding that until 2012, a floor price will be
maintained at 90% of the reference price.
%
US
45
Brazil
34
China
India
France
Canada
Germany
ROW
10
Pre-reform
5
0
production
imports
Post-reform
exports
Source: EU
2020/21
Source: Unisa
22
JANUARY 2009
SUGAR TRADES
which means that any ACP country that
can will be able to export ethanol into the
EU market.
Looking ahead, Europe will have to be
green, said Falkenberg, which means a
bigger role for ethanol, and is good news
for sugar and the sugar-producing, ACP
countries. Inevitably, the changes have
increased tension between the EU and
those trading partners which have lost out.
An ACP working group has been
formed which will push hard for the
interests of countries such as Guyana,
where sugar accounts for 10% of gdp, and
Mauritius, where its 6%.
While reform has pushed the sugar trade
into a state of flux, the fundamentals
governing the market are little changed.
One hundred and sixty million tonnes of
sugar are produced annually; of that
number, around 40m tonnes are traded.
The two big players shaping the sugar
trade are Brazil and India. Crucial for
Brazils sugar sector is the real/dollar
exchange rate. Production costs in Brazil
have doubled in recent years, from 6 cents
a lb to around 12c/lb. This makes the
exchange rate that much more important
as the cost of production in Brazil has
moved closer to that of other, global, sugar
producers.
India has a domestic demand of around
22m tonnes a year. Sometimes, India will
produce more than this, say, up to 28m
tonnes, while at other times, fewer tonnes
come out of its farms. The principle reason
for this is to do with price. The global price
of sugar is determined by market forces; in
India, the price of sugar cane is set at the
level of regional government.
If the relationship between these two
prices is uneconomic, that is the global
price falls below the set price, farmers
understandably plant less cane. In times of
surplus, Indian exports can have a major
impact on the global market. Excess Indian
sugar when exported will depress prices.
The situation in the EU is interesting,
f r o m a t r a d i n g p o i n t - o f - v i e w. T h e
community has reformed its sugar
agreements. Before the reform, the EU used
to export 6m tonnes and import about 2
million tonnes. Post-reform, this picture
will be reversed with 4m tonnes imported,
and 2m tonnes of exports. This is quite a
change. Exporting to the EU are a number
of southern African countries, including
Mozambique, Tanzania, Malawi. This
trade would be primarily in raw sugar
JANUARY 2009
23
FUEL COSTS
24
JANUARY 2009
FUEL COSTS
such strong results will run through to the
fourth quarter. However, the long term
view of the market seems to lean towards
seeing falling prices as an aberration rather
than the dominant trend.
Ceo of World Fuels Services Paul
Stebbins expressed as much at the bunker
industrys annual get together, Sibcon, held
in Singapore in October.
In a panel discussion, he told delegates
that in his view, fuel oil would remain a
scarce commodity. Demand is not going to
go away, he said, pointing to the rise of
Chinese urbanisation and the fact that new
sources of supply, such as oil from
Canadian tar sands will not happen
overnight; The supply/demand balance is
very tight, said Stebbins.
The softening of the market is
essentially a short-term thing. Speaking
before the financial crisis had really taken
hold, Stebbins said that it revealed the
vulnerability of the modern, integrated
economy prescient words, indeed.
Another effect of the high summer
prices was to concentrate bunker minds on
the issue of credit. It is common in the
industry for suppliers to grant a 30-day
credit line to pay a bunker stem. And since
bunkers had become, albeit temporarily, so
valuable, the risks around non-payment
had also grown. The concern didnt recede
as prices fell. Suppliers nervously scanned
the market for signs of companies buckling
under tight credit conditions. Of course,
price is a major concern both to buyers and
suppliers in the bunker industry but it
would be wrong to say it is the only big
theme.
Clyde Michael Bandy, Chemoils ceo
and chairman, shared the same Sibcon
panel as Stebbins, and offered similar
views. The cost of fuel will go up, Bandy
told the conference, adding that
de-sulphurisation the great bunker issue
going forward was also part of the rising
price picture.
Bandy argued that the nature of the
industry had changed. Shipping had been
the beneficiary of a disposable product that
has been one of the cheapest on the
planet, he said. But, with the advent of
cleaner fuel, all that would change.
From now on, dealing with distillates
and low sulphur fuel oil (lsfo) should bring
forward a new deal on storage, delivery
and infrastructure as the industry would be
moving a lot more material around the
world to meet demand in different
JANUARY 2009
$/Barrel
800
140
130
700
120
600
110
500
100
400
90
300
80
70
200
60
100
0
50
Mar
08
Apr
08
May
08
Jun
08
Jul
08
Aug
08
Sep
08
Oct
08
Nov
08
Dec
08
40
Singapore
HFO
UK Brent
25
Measuring shipping
performance
Comparing the competitive
performance of different
national fleets is often a
subjective exercise
depending on who is doing
the assessing and for what
purpose. Here Owen
Nguyen* suggests a more
objective approach
COUNTRY-SPECIFIC FACTORS
To date, globalisation, commitment to
bilateral trade agreements among countries
and intense competition have led to the
extensive deregulation and restructuring of
national shipping across countries in the
world. In parallel to this process there has
been a shift in national shipping policies
from protectionism towards promoting
international competition in the shipping
market. Despite this, shipping remains
important to national economies due to its
contributions to national output, export
revenue, employment, national security and
support in cases of emergency and disasters.
These suggest that a maritime policy is still
imperative if shipping is to play a more
SHIP FINANCING
The first factor concerns the relationship
between shipping and ship financing. The
capital-intensive nature of shipping business
necessarily requires a close relationship
between shipping service supply and ship
financing. Shipping has until recently relied
almost exclusively on commercial bank
financing for its external capital needs.
However, regardless of the financing
26
JANUARY 2009
JANUARY 2009
27
Fleet Size
Ranking
Competitiveness
Index
Albania
Algeria
Angola
Argentina
Australia
Azerbaijan
Bahamas
Bahrain
Bangladesh
Belgium
Brazil
Bulgaria
Canada
Chile
China
Colombia
Croatia
Cyprus
Denmark
Ecuador
Egypt
Eritrea
Estonia
Finland
France
Germany
Greece
Guyana
Iceland
India
Indonesia
Iran
Italy
Japan
Jordan
Kazakhstan
Kenya
Korea
Kuwait
Latvia
Lebanon
Lithuania
78
48
52
45
33
54
49
71
53
16
29
37
23
38
4
69
31
34
11
60
43
79
59
39
27
3
1
82
58
14
22
18
13
2
51
73
80
8
25
40
55
57
71
33
66
35
30
51
61
68
56
23
24
36
20
42
6
59
37
49
39
55
43
84
62
29
16
4
10
80
78
14
31
11
8
1
69
74
81
9
21
48
60
47
Country
Madagascar
Malaysia
Malta
Mexico
Morocco
Myanmar
Netherlands
New Zealand
Nigeria
Norway
Oman
Pakistan
Panama
P.N.G
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saudi Arabia
Seychelles
Singapore
South Africa
Spain
Sri Lanka
Sudan
Sweden
Syria
Taiwan (China)
Thailand
Trinidad & Tobago
Tunisia
Turkey
Turkmenistan
Ukraine
UAE
UK
US
Uruguay
Viet Nam
Fleet Size
Ranking
Competitiveness
Index
81
19
75
44
63
62
20
66
41
6
83
46
72
74
61
26
36
47
56
50
12
15
70
10
65
28
64
76
21
42
9
30
84
67
17
77
32
24
7
5
68
35
82
27
57
25
52
64
13
54
41
5
72
50
73
77
65
26
38
44
46
45
3
17
76
7
58
18
63
79
28
53
15
32
75
67
19
83
34
22
12
2
70
40
Source: Author
EVALUATING PERFORMANCE
The shipping competitiveness index could
be used to assess the comparative
advantage of national shipping, and the
comparison of the actual ranking of
28
JANUARY 2009
SHIPPING INVESTMENT
Investing safely
As sources of funds for
shipping investments
become harder to find and
investors are looking for
security, Stephen
Matthews outlines one
shipping fund that is
adopting a different
approach to meeting
investors preferences
INVESTMENT FUND
Safe Ship Investment Fund was first
established in April 2007 and is part of Safe
Ship Capital Partners, which acts as fund
manager. It is registered in Luxembourg as
a SICAR tax efficient structure. This
means that capital gains on asset sales are
exempt from tax in Luxembourg. It is
JANUARY 2009
29
INVESTMENT
In 2007 the fund bought two capesize bulk
carrier newbuilds for $80m each. Later that
year they were sold for close to $100m
each. That represented a significant return.
Arguably, holding on to them a bit longer
could have yielded even bigger returns, but
the risks of values crashing increased, as
eventually happened in late 2008, and
Polemis expressed satisfaction at the profit
made on those vessels as providing an early
boost to a new ship investment fund.
Current investments include two
supramax bulk carriers, two chemical
SHIPPING INVESTMENT
tankers, a small bunkering tanker, a car
carrier and an offshore support vessel,
demonstrating the diversity of its
investments. For the two chemical tankers
the fund has the option to convert its
participation in the Special Purpose
Company into shares in Empire Chemical
Tanker Holdings, another Polemis Group
company with a current fleet of 19 vessels,
where Polemis is CEO. This company is
looking at a possible Nasdaq listing in the
future.
This current fleet of seven ships is set to
expand gradually during the next two to
three years. Polemis indicated that it would
reach 11 ships by 2011 taking a
conservative view. The funds first
offering was in April 2008 and raised some
$40m.
The second offering is intended to raise
a further $50m, which it says will be used
for cash reserves, debt repayment and
equity financing. The minimum
subscription price for investors is
$250,000.
According to the funds prospectus the
size of the leveraged fund is between $120
and $400m. Expected annual dividend
return is 7% on paid-in equity with an
expected overall annual return of 15%
after allowing for residual value when
assets are liquidated. A fund management
fee is set at 2% of fund NAV, to be paid
semi-annually and a Success fee is 20%
of profit above the yearly compound rate
of return of capital invested of 12%.
OPPORTUNITIES
Polemis said the fund is actively looking at
opportunities for new investments in 2009
including distressed sales. Indeed, he
confirmed to LSE that Safe Ship plans to
create a new Distressed Fund to raise about
$200m.
Safe Ship has identified opportunities
for distress sales, especially in dry bulk and
chemical tankers, with an estimated return
of 35% based on purchase at devalued
prices and sustainable employment
opportunities. For investments niche
sectors, such as offshore support services,
with credible counterparties returns are
estimated at 15%.
Its declared investment objective is the
provision of capital growth and regular
dividend payout over the long-term
through selective shipping investments.
Focus is on developing a modern high
Type
Capacity (dwt)
Delivery
Employment
Blue Marlin
Blue Cat
Picacho
Malmo
Madeira
Hulls 713-6
ST 254L
Hull 1145
Hull 1146
Supramax
Supramax
Bunker tanker
Chem tanker
Chem tanker
PCTC
CSV
Capesize bulk
Capesize bulk
57,000
57,000
4,500
20,000
20,000
4,900
5,700
177,000
177,000
Nov-08
Mar-09
Jul-08
Aug-08
Nov-08
2009-10
2009-10
Aug-10
Nov-10
3 yr t/c
3 yr t/c
2 yr t/c
7yr t/c
7yr t/c
15yr t/c
Open
Sold
Sold
25%
25%
30%
20%
20%
15%
35%
55%
50%
122.5
Construction in progress
Contract value
Charter adjustment
Total asset value
Cash
Debt
Net debt
NAV
79.8
12.9
34.5
249.7
15.4
212.5
197.1
52.6
UNIQUE
ASPECT
30
2009 2010
2011
Fleet (ships)
7
10
11
Revenue ($m)
5.1 35.9 48.9
Opex ($m)
1.09 6.4 9.05
Ebitda
4.05 29.4 39.9
Net income
2.02 18.9 23.4
Net profit margin (%)
39
52
48
11
58.1
10.9
47.2
26.1
45
JANUARY 2009
JANUARY 2009
31
DONT PANIC
Sadan Kaptanoglu, managing director of
Kaptanoglu group, addressed how Turkish
owners can best weather the economic
storm. Turkish owners face the same
challenges as other owners worldwide. The
financial crisis has affected the backbone of
everything we do. I would describe it as an
earthquake and the ground is still shaking.
But it is important that we do not panic or
else a tsunami may follow.
There are a number of basic things we
as owners can do. Financing will return to
basics with traditional tools and risk
management. Control costs, talk to your
banks, review newbuild orders. The real
problem is how long it will take to recover
and how many owners can hold on until
then, she said.
This is different from previous shipping
crises as the causes are from outside
shipping. We need to look at options but we
must consider carefully with our partners
banks, shipbuilders, charterers etc before
making decisions. Decisions made quickly
in panic are often wrong decisions.
C h a r l i e Ve n n e f r o m s h i p b r o k e r
Galbraiths told the conference that
owners should keep an open dialogue
with banks. Banks future lending will be
affected by how you performed in a poor
market. Owners should avoid over age
tonnage, even at bargain prices, and
diversify their fleet profile.
Jeremy Penn managing director of the
Baltic Exchange outlined the impact of the
dry bulk market collapse on freight
derivatives and the findings of a special
meeting held at the Baltic the day before.
He said that the main message for both
paper and physical trades is that not much
Delegates opinion
The results of the poll of delegates opinion conducted during the LSE Ship Finance and
Investment conference in Istanbul confirmed the generally negative sentiment that is
prevailing widely. However, the findings were slightly different from those in London a
couple of weeks earlier in that the degree of pessimism was less marked.
How do you see the prospects for financial performance of Turkish shipping for the next 12
months compared with the past 12 months?
London 2008
Turkey 2008
Much Better
0%
0%
Better
8%
0%
Same
8%
5%
Worse
64%
50%
Much Worse
20%
45%
Will the availability of funds for shipping investment in the next 12 months be?
London 2008
Turkey 2008
Much Easier
0%
0%
Easier
5%
4%
Same
8%
6%
Tighter
41%
30%
Much Tighter
46%
60%
What are the main constraints on the growth of Turkish shipping?
Lack of Finance 60% Lack of Government Support 22% Shortage of Seafarers 10%
Lack of Competitiveness 4% Regulatory Restrictions 4%
Where will most finance for Turkish owners investing in shipping come from?
Turkish Banks 33% Foreign Banks 41% Private Equity 8%
Public Equity 0% Owners Cash 18%
32
JANUARY 2009
COMPANY ANALYSIS
NOL finance
$m
300
250
200
150
100
3Q08
50
0
JANUARY 2009
Net profit
Ebitda
Ebit
3Q07
Source: NOL
33
REORGANISATION
NOL president and CEO Ron Widdows
only took over the mantle as NOL CEO in
July 2008 when he replaced Thomas Held
who resigned suddenly. In August the new
CEO was joined by another new senior
appointment Eng Aik Meng as president of
its container operation APL, coming from
another Singapore shipping group IMC
Corp. The new senior executive team,
together with cfo Cedric Foo faced
immediate challenges and tough decisions
as the recession took hold.
As part of its cost cutting strategy in the
face of adverse global economic and trade
conditions NOL decided to cut some 1,000
jobs from its global organisation, which
hitherto employed about 11,000 staff. The
majority of these losses will be felt in the US
COMPANY ANALYSIS
where the company is to close its
longstanding headquarters in Oakland,
California and relocate it in a more cost
effective location in the US. Some 340 staff
are employed at its Oakland office, though
some are expected to be re-located to the
new regional headquarters some time in
2009. The companys container terminal in
the port of Oakland is not affected. About
50 jobs will be lost at its Singapore head
office with Europe and other Asian offices
also affected. The company said most of the
job cuts would be in back office functions.
In a statement Widdows said: The negative
conditions we are seeing in the market place
are unprecedented in our industrys history.
This necessitates these difficult decisions.
In December NOL announced that from
January 2009 its Asian operations are being
reorganised to reduce the number of
management regions co-ordinating its
operations from three to two. A new North
Asia region will be created by combining
the previous Greater China with its Japan
and Korea operations, which are currently
part of its Asia-Middle East region.
Widdows said: Despite the current
depressed market environment, Asia will
continue to be a cornerstone of world trade.
The structuring of our Asian operations
around two key regions will support efforts
to place NOLs cost base on a more
sustainable footing, while enabling closer
coordination of activities in adjacent
countries. This will ensure we continue to
provide the highest standards of service to
our many customers whose supply chains
touch Asia.
CAPACITY CUTS
Another part of its strategy is cutting
capacity to match falling demand to
maintain vessel utilisation levels, which is
vital to controlling costs. The scale of
downturn and impact on market
fundamentals with freight rates plunging on
major trades meant that radical measures
were needed. This involves trimming some
services and vessel deployments. Measures
included cutting capacity by 25% in the
Asia-Europe trade and by 20% in the
transpacific as part of a general service
adjustment in the New World Alliance, in
which NOL is a member.
Effective from the beginning of
November APLs CEX (China Europe
Express) service was suspended until
further notice, with a revised schedule for
Container shipping
5891
Logistics
996
Terminals
429
Source: NOL
FINANCES
The company said this would mean NOLs
fourth quarter result would be hit with a
$33m restructuring charge with further
charges likely in subsequent quarters. This
is expected to contribute towards NOL
moving into an operating loss in the fourth
quarter. Even if the cost cutting measures
generate the anticipated savings, it is likely
to be in the red in 2009 unless there is an
unexpected pick up in demand.
The Group reported that in the month to
mid-November APL carried 12% fewer
containers than it did in the same period of
2007. It said the biggest impact was in the
Asia-Europe trade and eastbound
transpacific route. It said that with
YTD08
YTD07
Change %
3Q08
3Q07
6,996
281
232
5,736
385
327
22
-27
-29
2,353
52
35
2,029
209
191
Change % 1H08
16
-75
-82
1H07
4,643 3,707
229
176
196
136
Change %
25
30
45
Source: NOL
34
JANUARY 2009
COMPANY ANALYSIS
JANUARY 2009
Factfile:
Neptune Orient Lines
Address
456 Alexandra Road
NOL Building
Singapore 11962
Tel: +65 6278 9000
Fax: +65 6278 4900
Website: www.nol.com.sg
Executive management
Group president and CEO Ron Widdows
Deputy president and CFO Cedric Foo
President APL Eng Aik Meng
35
ORDERBOOK
South Korea
China
130.4
Japan
148
72.4
Europe
14.34
Others
24.72
Source: LR Fairplay/LSE
Tanker
50
Bulk
0
South Korea
China
Japan
Europe
Others
Container
Source: LR Fairplay/LSE
36
JANUARY 2009
ORDERBOOK
be higher than the reality by a significant
but difficult to quantify proportion. The
scale of cancellations that subsequently
emerges may therefore also be higher than
the reality as many of them will be orders
that were never firm contracts to begin
with. So, until some stability and recovery
is restored, these and other orderbook
statistics need to be treated with even more
caution than normal.
With that health warning the LR
Fairplay new orders statistics for the third
quarter show an apparently strong flow of
orders at some 51m dwt further boosting
the aggregate on order. This appears to
represent a slowing of the reduction in
ordering evident in previous quarters. But,
as mentioned earlier, most of these latest
orders will have been placed earlier in the
year and only officially confirmed in the
third quarter due to the time lag in
reporting. In reality there is little doubt
that the slowdown in ordering continued
as the year has progressed. Nonetheless,
these orders do add to the overall
orderbook before cancellations and the
high volume of deliveries in 2009 take
effect.
The new order statistics show what is
probably the final increase in dry bulk
orders with some 27.8m dwt recorded as
being added to the backlog. A large
proportion of this total is accounted for by
48 Capesize and VLOCs adding 11.8m
dwt to the orderbook. But there were also
substantial additions from smaller sizes,
with almost 7m dwt of other
post-panamax vessels and over 6m dwt of
handysize and supramax capacity. This
brings the recorded orderbook for dry bulk
tonnage to 296m dwt, which is more than
70% of the capacity currently in service.
Even with strong demand growth this
figure looked excessive. Now it looks even
more alarming for dry bulk owners and
will result in many orders not already
under construction being re-assessed even
if they can be financed.
The tanker sector is somewhat different,
even though the orderbook is still
historically large at some 186m dwt, about
45% of the fleet in service. A significant
proportion of the current fleet still has to
be phased out due to single hull regulations
by 2010 or soon after, which will take out
some capacity. While oil demand has been
affected by the economic slowdown, it is
expected to recover quickly once economic
growth resumes and existing trends
JANUARY 2009
Tankers
20
10
Container
0
3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
Bulk
Source: LR Fairplay
Source: LR Fairplay
37
ORDERBOOK
Table 1: World orders by dwt
Type/dwt
5-9,999
10-14,999
15-49,999
50-59,999
Tanker no.
m.dwt
Dry bulk
m. dwt
Container
m. dwt
Combi
m. dwt
Gas
m. dwt
Ro-ro/ferry/pass
m. dwt
Gen cargo
m. dwt
Special gen cargo
m. dwt
Reefer
m. dwt
Total
m. dwt
469
3.28
41
0.31
59
0.48
0
0
45
0.34
89
0.63
447
3.1
36
0.27
0
0
1,186
8.41
211
2.62
19
0.22
143
1.76
0
0
19
0.21
158
1.94
217
2.63
125
1.57
9
0.11
901
11.05
731
24.3
840
27.22
434
12.99
0
0
50
1.28
137
2.91
317
8.34
130
2.62
8
0.12
2,647
79.78
230
11.78
943
53.32
233
12.12
0
0
25
1.31
0
0
30
1.55
2
0.1
0
0
1,463
80.17
60-79,999
80-119,999
120-199,999
200,000+
127
9.32
231
16.46
95
6.58
0
0
38
2.8
0
0
9
0.59
0
0
0
0
500
35.74
283
31.08
629
56.72
234
19.95
0
0
47
4.18
0
0
0
0
0
0
0
0
1,165
111.92
168
26.26
576
101.98
121
21.19
0
0
14
1.79
0
0
0
0
0
0
0
0
907
151.22
251
77.15
146
39.8
0
0
13
4.14
0
0
0
0
0
0
0
0
0
0
410
121.1
Total
2470
185.79
3425
296.02
1319
75.07
13
4.14
238
11.91
384
5.48
1020
16.21
293
4.56
17
0.23
9,179
599.4
Source: LR Fairplay
Europe
China
Japan
Others
Total
126
3.88
46
5.65
147
5.15
0
0
14
0.25
709
51.17
1658
138.42
454
16
0
0
22
0.54
343
28.7
764
67.83
62
3.45
0
0
45
2.15
South Korea
1,012
92.48
662
65.58
508
43.65
13
4.14
149
8.92
280
9.56
295
18.54
148
6.82
0
0
8
0.04
2470
185.79
3425
296.02
1319
75.07
13
4.14
238
11.91
91
1.05
162
1.29
20
0.28
1
0.01
607
17.55
82
1.02
563
8.58
71
1.06
0
0
3,559
216.79
117
1.71
137
4.36
119
1.76
16
0.22
1,603
110.19
73
1.46
44
0.71
53
1.1
0
0
2,514
218.04
21
0.23
114
1.28
30
0.36
0
0
896
36.83
384
5.48
1020
16.21
293
4.56
17
0.23
9,179
599.4
Source: LR Fairplay
m. dwt
m.gt
no. of ships
Dry bulk
Tankers
Container
Gen cargo
Ro-ro/ferry
Gas carrier
Specialised
Reefer
Total
27.77
17.8
3.47
1.21
0.17
0.5
0.08
0.03
50.99
14.87
9.29
2.86
0.88
0.38
0.46
0.16
0.02
28.97
315
112
52
75
20
18
6
2
600
Source: LR Fairplay
Country
m.dwt
m.gt
no. of ships
China
21.77
12.2
229
South Korea
20.39
11.31
187
Japan
4.56
2.9
99
Europe
0.58
0.6
46
Others
3.71
1.96
39
50.99
28.97
600
Total
Source: LR Fairplay
38
JANUARY 2009
DRY BULK
DRY BULK SUPPLY: CURRENT FLEET BY SIZE & AGE (as at 1 DECEMBER 2008)
10-39,999 dwt
(Handysize)
No.
m dwt
12
0.35
320
8.94
256
6.99
337
8.66
129
3.43
505
15.05
1124
29.16
2683
72.59
6
0.13
2689
72.72
31
0.78
2658
71.94
For delivery
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Combis
Total
Idle
Active total
40-59,999 dwt
(Handymax)
No.
m dwt
21
1.14
451
24.35
320
16.05
336
15.33
100
4.51
208
9.20
132
6.16
1568
76.74
18
0.88
1586
77.62
24
1.26
1562
76.36
60-79,999 dwt
(Panamax)
No.
m dwt
6
0.41
297
22.45
301
22.37
292
20.98
115
7.98
137
9.21
240
15.94
1388
99.34
11
0.81
1399
100.15
6
0.42
1393
99.73
80-120,000 dwt
(Mini Capes)
No.
m dwt
4
0.36
141
12.11
26
2.33
11
0.98
7
0.67
7
0.64
20
1.85
216
18.96
31
3.60
247
22.56
7
0.61
240
21.95
>120,000 dwt
Total
(Capesize)
No.
m dwt
No.
m dwt
5
1.03
48
3.29
235
43.79
1444
111.65
134
23.27
1037
71.01
164
26.99
1140
72.94
137
23.96
488
40.56
89
16.37
946
50.48
60
9.16
1576
62.27
824
144.57
6679
412.20
0
0.00
66
5.42
824
142.68
6475
417.62
7
0.61
75
3.68
815
142.68
6668
412.66
Source: Lloyds MIU and Lloyds Register/Fairplay
For delivery
2008
2009
2010
2011
2012/13
Total
% of fleet
40-59,999 dwt
(Handymax)
No.
m dwt
63
3.48
219
12.14
294
16.43
198
11.14
39
2.22
813
45.41
60.40
60-79,999 dwt
(Panamax)
No.
m dwt
15
1.17
59
4.42
56
4.28
56
4.14
16
1.03
202
15.04
15.20
80-120,000 dwt
(Mini Capes)
No.
m dwt
12
1.14
75
6.69
172
14.43
133
13.65
56
5.56
448
41.47
192.00
PRICES ($M)
NEWBUILDING
Dec
Handysize - 45,000
Handymax - 51,000
Panamax - 72,000
Capesize - 170,000
36
42
47
89
RATES ($/tonne)
Nov
VOYAGE ($/T)
36
45
49
90
Source: Market Reports
55,000
150,000
70,000
160,000
160,000
160,000
SECONDHAND
Handysize - 45,000
Handymax - 51,000
Panamax - 72,000
Capesize - 170,000
>120,000 dwt
Total
(Capesize)
No.
m dwt
No.
m dwt
17
3.37
161
10.81
132
24.95
677
54.08
284
51.80
1000
93.36
146
29.93
693
64.19
62
15.02
234
25.96
641
125.07
2765
248.40
88.40
60.20
Source: Lloyds MIU and Lloyds Register/Fairplay
5 yr
Dec
10 yr
Dec
58
25
27
46
16
22
n/a
n/a
Nov
USG-Japan (grain)
S.Af-NWE (coal)
HR-NWE (coal)
Brazil-NWE (iron ore)
Brazil-Far East (iron ore)
Aus-Japan (coal)
15 yr
Dec
n/a
n/a
12
n/a
Source: BRL Consultant
27.6
7.5
8.0
5.0
8.0
4.3
Source: Lloyds MIU Ship Fixtures
5,000
5,500
7,500
17,500
9,000
12,000
12,000
20,000
Source: Market Reports
7000
6000
5000
4000
12-19,999 dwt
20-34,999 dwt
35-49,999 dwt
50-84,999 dwt
85,000+ dwt
Combined
3000
2000
1000
0
2/9/08
2/10/08
3/11/08
2/12/08
Source: Baltic Exchange
JANUARY 2009
39
100
129
127
159
78
117
n/a
292
220
281
280
267
n/a
-56
-43
-43
-72
-56
n/a
1134
1134
1609
1640
1280
-89
-89
-90
-95
-91
Source: LSE
DRY
BULK
SHIP SAILINGS
Coal exports
From
Aug 08
No of
sailings
Total
mdwt
No of
sailings
390
89
68
12
81
40
8
99
52
11
34.59
6.33
6.86
0.95
2.87
3.24
0.38
7.75
3.54
0.62
440
102
104
40
69
17
8
96
41
11
Australia
Canada
China
Colombia
FSU/Baltics
Indonesia
Poland
South Africa
USA
Venezuala
Total
mdwt
No of sailings
500
450
400
350
300
250
200
150
100
50
0
Jan Apr Jul
05
38.64
6.88
9.67
3.03
2.34
1.26
0.26
7.65
2.85
0.50
Source: Lloyds MIU
No of
sailings
Total
mdwt
No of
sailings
210
417
13
232
6
17
1
27
12
34.71
49.93
0.75
11.27
0.45
1.34
0.15
3.54
0.59
178
428
13
300
0
13
2
21
5
Sept 08
No of
Total
sailings
mdwt
Argentina
Australia
Canada
USA
Jul
Jul
Aug 08
Total
mdwt
No of ships
400
29.67
51.84
0.78
14.64
0
1.01
0.33
2.62
0.32
Source: Lloyds MIU
350
300
250
200
150
100
50
0
189
70
42
38
8.89
2.47
1.32
2.23
268
77
50
37
Mar
May
Jul
Sept
Nov
Jan-08
Mar
May
Jul
Sept
Aug 08
No of
sailings
Jan-07
Grain exports
From
Australia
Brazil
Chile
India
Mauritania
Norway
Peru
South Africa
Venezuela
Jul
Total
mdwt
No of sailings
350
13.42
2.88
1.64
2.22
Source: Lloyds MIU
300
250
200
150
100
50
0
Jan-07
Mar
May
Jul
Sept
Nov
Jan-08
Mar
15 Dec
Index
Change
Capesize
Panamax
Supramax
1454
450
486
+438
-403
-70
Sept
$/day
Q1/09
Q2/09
10000
13000
2009
$/day
12000
13000
10000
8000
- 6T/C supramax
9000
10000
6000
2009
11000
4000
16500
20000
2009
22000
Source: FIS
Panamax
4TC
2000
- 4T/C capesize
Q1/09
Q2/09
Jul
Source:Lloyd's MIU/LSE
Baltic Indices
Q1/09
Q2/09
May
Q109 15 Dec
Q209 15 Dec
2009 15 Dec
Suparamax
Source: SSY/FIS/LSE
40
JANUARY 2009
TANKERS
TANKER SUPPLY: CURRENT FLEET (as at December 1 2008)
Crude tankers
Age
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active total
On order
2008
2009
2010/11/12
Total
% of fleet
0
4.72
37.65
79.45
121.82
0.00
2
4
6
Product tankers
Age
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active fleet
On order
2008
2009
2010/11/12
Total
% of fleet
18
18
15
51
0.11
0.25
0.26
0.62
18.00
Chemical/oil tankers
Age
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active total
On order
2008
2009
2010/11/12
Total
% of fleet
44
64
45
153
0.77
0.76
0.73
2.26
29.80
6
0.10
0.15
0.25
12.20
1
2
19
27
12
4
28
44
0.48
0.16
1.21
1.85
19.70
25-39,999
No.
7
134
78
43
10
24
32
328
6
322
2
19
51
72
dwt (MR1)
m dwt
0.23
4.80
2.74
1.47
0.33
0.79
1.13
11.48
0.20
11.28
0.06
0.72
1.63
2.41
23.30
On order
2008
2009
2010/11/12
Total
% of fleet
34
80
43
157
JANUARY 2009
0.59
1.27
0.70
2.56
63.00
75-119,999
No.
14
262
170
86
107
53
11
703
25
678
0.29
0.15
1.24
1.68
19.60
40-59,999
No.
11
190
66
44
55
35
31
432
14
418
57
85
81
223
40-59,999
No.
9
251
64
56
12
35
9
436
10
426
10
86
137
233
dwt (Aframax)
m dwt
1.51
28.25
17.87
8.61
10.40
4.98
0.98
72.60
2.55
70.05
8
72
85
165
dwt (MR2)
m dwt
0.52
9.04
3.00
2.02
2.45
1.58
1.51
20.13
0.67
19.47
2.67
4.12
3.86
10.65
56.30
dwt (MR2)
m dwt
0.44
11.75
2.89
2.49
0.50
1.58
0.41
20.05
0.48
19.57
0.59
4.12
6.44
11.15
60.50
11
24
31
66
0.33
0.76
0.89
1.98
44.40
41
120,199,999
No.
1
116
104
57
67
11
21
377
10
367
0.88
7.80
9.37
18.05
26.60
dwt (Suezmax)
m dwt
0.16
18.37
15.97
8.34
9.87
1.52
3.07
57.29
1.52
55.78
12
58
94
164
1.84
6
1.71
32
9.23
66
20.37 200
15.44
169
50.25 371
26.51
241
72.33 603
46.80
48.40
Source: Lloyds MIU and Lloyds Register/Fairplay
42.30
60-79,999
No.
7
139
32
6
12
26
7
229
10
219
23
72
55
150
dwt (LR1)
m dwt
0.51
9.99
2.24
0.42
0.82
1.74
0.45
16.16
0.69
15.47
1.40
1
0.11
111
4.77
5.06
28
3.15
207 12.74
3.75
53
5.96
232 15.04
10.21
82
9.22
550 32.55
67.80
108.00
57.10
Source: Lloyds MIU and Lloyds Register/Fairplay
60-79,999
No.
0
0
2
0
1
1
0
4
0
4
0
0
2
2
dwt (LR1
m dwt
0.00
0.00
0.13
0.00
0.07
0.07
0.00
0.28
0.00
0.28
0.00
0
0.00
56
1.42
0.00
4
0.42
173
6.02
0.16
1
0.11
236
9.07
0.16
5
0.53
465 16.51
57.10
27.30
39.60
Source: Lloyds MIU and Lloyds Register/Fairplay
No.
0
38
35
3
3
3
7
89
0
89
4
10
33
47
Total
No.
m dwt
14
0.25
199
5.09
131
3.94
38
0.84
29
0.70
29
0.64
49
1.37
494
13.01
16
0.29
473
12.54
Source: Lloyds MIU
0.18
49
1.12
0.43
114
2.46
1.44
107
3.03
2.05
270
6.61
50.50
52.70
Source: Lloyds MIU and Lloyds Register/Fairplay
TANKERS
RATES ($m)
PRICES ($m)
Newbuilding prices ($m)
Dec
Handymax (clean)
Panamax
Aframax
Suezmax
VLCC
45,000 dwt
72,000 dwt
110,000 dwt
160,000 dwt
3000,000 dwt
Dirty
48
60
76
92
151
dwt
Gulf-Far East
Gulf-NWE
Gulf-US
W. Af-US
W. Af-US
N Sea-US
Med-UK/cont
Baltic-UK/cont
N Sea-UK/cont
Black Sea-Med
Cross Med
Carribean-US Gulf
Source: LSE
mid-Dec
5 years
Handysize (clean)
Handymax
Panamax
Aframax
Suezmax
VLCC
10 years
43
47
57
77
83
140
15 yrs
22
20
41
25
41
33
55
34
70
40
100
47
Source: BRL Consultants
Nov
260
260
260
260
130
130
130
100
80
80
80
70
Carribean-USEC
Gulf-Far East
UK/cont-USEC
mid-Dec
253
267
255
232
90
85
85
105
145
120
180
150
150
170
150
180
MIU Fixtures
Clean
dwt
Demolition prices
Oct
68
65
50
80
125
120
90
115
130
125
115
135
Source: Lloyds
Nov
38
55
37
Oct
165
240
185
Source: Lloyds
Nov
5
10
15
180
330
220
MIU Fixtures
Oct
46
56
47
57
54
65
Source: Lloyds MIU Fixtures
20000
21000
29000
29000
42000
55000
Combis.deployment - Nov
No. of Ships
20000
21000
26000
27000
39000
47000
Source: BRL Consultants
Index
36
months
Dry
Oil
Idle / Unknown
FFA prices
As at 15 Dec
Change
1312
842
TD3 (VLCC)
TD5 (Suezmax)
TD7 (Aframax
-292
-109
Source: Baltic Exchange
Q1/09
Q2/09
52
81
108
42
71
99
2009
46
73
103
Source: Imarex
WS
500
450
400
350
300
250
200
150
100
50
0
120
100
80
60
TD7
40
20
0
dwt
52
4.31
11
1.04
1
0.05
Source: Lloyds MIU Ship Movements
TD5
Q109 15 Dec
Q209 15 Dec
2009 15 Dec
TD3
Carib-US 38k
Jan May- Sep
05 05 05
Gulf FE 55k
Source: Imarex/LSE
Eur-US 37k
42
JANUARY 2009
TANKER CARGOES
TANKER CARGO MOVEMENTS BY SHIP TYPE SEPTEMBER 2008
Panamax
Total exports - Last 13 months (tonnes)
14000000
10
13000000
0
-10
12000000
-20
11000000
-30
-40
10000000
-50
9000000
-60
-70
OTH
NSE
CAR
BAL
NAF
WAF
ME
SEA
-80
Total
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
8000000
ME 4%
NAF 9%
BAL 2%
CAR 45%
SEA 16%
WAF 1%
NSE 4%
OTH 19%
Aframax
Total exports - Last 13 months (tonnes)
80000000
60
50
40
30
70000000
20
10
0
-10
OTH
NSE
CAR
BAL
WAF
NAF
ME
SEA
-20
Total
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
60000000
ME 15%
NAF 20%
BAL 11%
CAR 18%
SEA 15%
WAF 2%
NSE 12%
OTH 7%
Suezmax
Total exports - Last 13 months (tonnes)
55000000
20
10
50000000
0
-10
-20
45000000
-30
-40
40000000
-50
-60
-70
OTH
NSE
CAR
BAL
WAF
NAF
ME
SEA
-80
Total
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
35000000
ME 18%
NAF 16%
BAL 1%
CAR 22%
SEA 0%
WAF 24%
NSE 11%
OTH 8%
VLCC
Total exports - Last 13 months (tonnes)
%
90000000
0
-10
85000000
-20
-30
80000000
-40
-50
75000000
-60
-70
70000000
JANUARY 2009
43
OTH
NSE
CAR
BAL
WAF
NAF
ME
SEA
Total
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
-80
ME 83%
NAF 1%
BAL 1%
CAR 3%
SEA 0%
WAF 12%
NSE 0%
OTH 0%
GAS
CARRIERS
LPG CARRIER SUPPLY - CURRENT FLEET
(December 2008)
Age
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active fleet
Capacity (m cu m)
>100,000 cu m
No. Capacity
<100,000 cu m
No. Capacity
1
7
2
5
3
0
16
34
2
32
0.00
0.25
0.03
0.18
0.20
0.00
0.98
1.64
0.00
1.63
29
136
46
26
10
4
33
284
30
254
5.71
21.27
6.33
3.48
1.27
0.51
4.21
42.79
5.87
36.93
Total
No. Capacity
<20,000
30
5.72
143
21.52
48
6.35
31
3.66
13
1.47
4
0.51
49
5.20
318
44.43
32
5.87
286
38.56
Source: Lloyds MIU
40-60,000
<100,000 cu m >100,000 cu m
No. Capacity
No. Capacity
Unclassified
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active fleet
5
101
104
141
148
81
290
870
71
799
0.02
0.56
0.55
0.61
0.61
0.30
0.83
3.48
0.11
3.38
6
27
14
14
14
4
10
89
7
82
0
1
0
2
3
<20,000
Total
No. Capacity
0.17
0.87
0.38
0.42
0.40
0.12
0.26
2.62
0.20
2.41
0
4
4
0
4
0
10
22
0
22
2008
2009
2010
2011/12
Total
% of fleet
0.00
8
1.13
8
1.13
0.09
50
8.44
51
8.53
0.00
22
3.67
22
3.67
0.18
20
3.05
22
3.23
0.27
100
16.29
103
16.56
Source: Lloyds MIU and Lloyds Register/Fairplay
20-40,000
40-60,000
245
8
23
18
12
61
0.23
0.28
0.18
0.19
0.88
25.4
7
23
21
3
54
0.23
0
0
8
0.88
0.82
0
0
26
1.94
0.7
0
0
7
0.58
0.06
0
0
8
0.69
1.81
0
0
49
4.09
72.9
0
35.4
Source: Lloyds MIU and Lloyds Register/Fairplay
8,000 cu m
24,000 cu m
52,000 cu m
78,000 cu m
LNG sailings
41
52
77
90
Source: Market Reports
>60,000
Dec
150,000 cu m
Persian Gulf
Australia
Carribean
North Africa
SE Asia
West Africa
0.00
12 0.94
0.24
51 4.08
0.24
26 2.09
0.00
8 0.63
0.23
27 2.10
0.00
7 0.56
0.54
15 1.16
1.25
146 11.56
0.00
12 0.94
1.25
134 10.62
Source: Lloyds MIU
From
>60,000
Orderbook
Orderbook
2008
2009
2010
Total
% of fleet
20-40,000
Age
7.34
1.60
3.65
2.90
7.03
3.07
Aug 08
No. cu m (million)
54
15
20
28
50
22
7.65
1.99
2.83
2.42
5.32
3.07
Source: Lloyds MIU
5yrs
8,000 cu m
24,000 cu m
52,000 cu m
78,000 cu m
Sept 08
No. cu m (million)
Aug 08
No. cu m (million)
India
Japan
China
S Korea
Taiwan
Asia
10
103
4
24
12
153
1.44
12.29
0.59
3.45
1366
19.42
11
114
2
24
14
165
1.55
13.66
0.29
3.65
1.93
21.07
Belguim
France
Italy
Spain
Turkey
UK
Europe
4
13
4
24
2
0
47
0.66
1.12
0.24
2.57
0.26
0
5.16
7
15
2
15
4
1
44
0.86
1.31
0.13
1.92
0.53
0.14
4.89
40
52
70
80
8,000 cu m
24,000 cu m
52,000 cu m
78,000 cu m
20000
23000
16000
21000
21000
24000
17000
23000
Source: Market Reports
Asia
Puerto Rico
US
N America
0
7
7
0
0.05
2
0.28
7
0.97
9
1.24
0.05Source: Lloyds MIU
0
Jan-07 Mar
May
Jul
Sept
May
JUl
Sept
Europe
44
JANUARY 2009
LINER TRADES
CONTAINERSHIP SUPPLY (as at 1 December 2008)
Current fleet (teu)
Age
0-4
5-9
10-14
15-19
20-24
25+
Total
<1,000
1-1,999
2-2,999
3-3,999
4-4,999
5-5,999
6-7,999
8,000+
390,628
295,067
386,594
225,233
270,993
584,357
2,152,872
562,773
408,301
550,635
246,916
231,366
329,889
2,329,880
646,448
450,281
345,123
164,906
180,889
167,686
1,955,333
266,575
130,478
304,661
177,877
240,805
24,603
1,144,999
934,018
433,648
392,168
172,155
37,956
737,943
571,483
253,624
5,980
659,952
558,884
112,949
1,674,772
16,126
1,969,945
1,569,030
1,331,785
Total
5,873,109
2,864,268
2,345,754
993,067
962,009
1,106,535
1,690,898 14,144,742
Source: CI
Orderbook
2008
2009
2010
2011/12
Total
% of fleet
<1,000
1-1,999
2-2,999
3-3,999
4-4,999
5-5,999
6-7,999
8,000+
47,568
71,152
33,970
225,233
3,859
166,159
46,721
172,641
120,580
246,916
12,346
392,994
28,784
118,910
131,108
164,906
29,006
352,183
12,824
85,332
122,827
177,877
260,897
30,503
422,853
267,102
172,155
117,750
1,076,126
22,913
88,735
40,824
5,980
16,650
212,622
25,800
243,327
247,968
49,142
568,671
1,142,506
50,450
672,933
374,320
3,250,413
Total
264,255
1,771,621
2,106,885
993,067
604,381
6,384,327
Source: CI
CHARTER RATES
1,000 teu
4,000 teu
8,000 teu
12,500 teu
28
70
130
165
26-Nov 08
3 Dec 08
10 Dec 08
17 Dec 08
S1
510 teu
S2
520 teu
S3
650 teu
S4
1000 teu
15.6
15.6
15.6
14.7
18.3
17.6
16.3
15.6
39.5
36.1
36.1
34.4
14.2
12.9
12.9
12.5
S5
1100 teu
S6
1100 teu
S7
1200 teu
S8
1600 teu
S9
1700 teu
S10
2080 teu
S11
2500 teu
S12
2800 teu
S13
3500 teu
S14
4300 teu
1,000
2,500
4,000
5,500
teu
teu
teu
teu
5yr
10yr
33
58
65
85
20
32
39
n/a
28 Nov 08
3 Dec 08
10 Dec 08
17 Dec 08
15yr
15
28
43
n/a
Source: BRL Consultants
28 Nov 08
3 Dec 08
10 Dec 08
17 Dec 08
39.7
38.6
35.3
35.3
68.0
68.0
65.9
60.1
41.1
40.4
38.6
36.7
44.1
41.5
38.9
36.3
53.5
53.5
51.7
49.1
54.6
51.7
54.6
42.8
66.9
66.9
64.7
61.3
55.9
53.1
57.4
53.1
Route
US-Asia
Asia-US
3Q08
2Q08
3Q07
1170
1934
987
1844
780
1707
% change
12 month
28 Nov 08
3 Dec 08
10 Dec 08
17 Dec 08
+50
+13
Source: CI
22.1
21.1
21.1
21.1
30.7
28.8
28.8
28.8
Index
564.2
545.7
537.7
501.7
HRCI Index
2500
$/teu
2500
2000
2000
1500
1500
500
0
1000
Asia-US
1000
500
Asia-Eur
1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08
0
7 Jul 97
Eur-US
Source: CI
JANUARY 2009
17 Dec 08
Source: Howe Robinson
45
UNITISED
RO RO: SUPPLY (as at December 1, 2008)
Current fleet
Age
No.
5-9,999 dwt
No.
10-14,999 dwt
Unclassified
0-4
5-9
10-14
15-19
20-25
25+
Total
Idle
Active fleet
8
24
79
91
145
146
732
1225
151
1074
8
29
63
55
36
54
99
344
31
313
0.05
0.21
0.46
0.40
0.25
0.39
0.73
2.50
0.20
2.30
0
24
31
18
10
16
65
164
2
162
0.00
0.30
0.37
0.22
0.12
0.19
0.81
2.00
0.03
1.97
No.
5-9,999 dwt
No.
10-14,999 dwt
0.02
0.02
0.09
0.13
0.21
0.25
1.10
1.81
0.13
1.68
No.
Total m.dwt
0
26
19
4
20
41
105
215
23
192
16
103
192
168
211
257
1001
1948
207
1741
0.07
1.01
1.41
0.85
0.99
1.83
5.21
11.37
0.89
10.48
Source: Lloyds MIU
0.00
0.48
0.49
0.10
0.41
1.01
2.57
5.06
0.53
4.53
Orderbook
No. <5,000 dwt
2008
2009
2010
2011/12
Total
% of fleet
5
4
2
0
11
0.02
0.05
0.02
0
0.09
5.3
2
4
2
4
12
0.01
0.03
0.02
0.03
0.09
3.9
4
9
4
8
25
0.04
0.11
0.05
0.1
0.3
15.2
No.
Total
1
5
9
8
23
0.02
12
0.09
0.1
22
0.29
0.18
17
0.27
0.19
20
0.32
0.49
71
0.97
9.9
9.3
Source: Lloyds MIU and Lloyds Register/Fairplay
Unclassified
0-4
5-9
10-14
15-19
20-25
25+
Total
Idle
Active fleet
1
2
16
16
26
24
37
122
8
114
0.00
0.01
0.05
0.04
0.08
0.06
0.09
0.33
0.02
0.31
No.
5-9,999 dwt
No.
10-14,999 dwt
2
14
14
10
6
12
19
77
4
73
0.01
0.10
0.09
0.07
0.05
0.10
0.16
0.58
0.02
0.55
3
37
12
20
9
50
64
195
2
193
0.04
0.48
0.15
0.27
0.12
0.66
0.78
2.49
0.03
2.46
No.
5-9,999 dwt
No.
10-14,999 dwt
No.
Total m.dwt
6
139
74
38
10
59
56
382
7
375
12
192
116
84
51
145
176
776
21
755
0.19
3.29
1.89
1.20
0.43
2.03
2.23
11.27
0.24
11.03
Source: Lloyds MIU
0.14
2.71
1.59
0.82
0.19
1.21
1.21
7.88
0.17
7.71
Orderbook
No. <5,000 dwt
2008
2009
2010
2011/12
Total
% of fleet
0
1
0
0
1
0
0
0
0
0
0
1
5
8
10
24
0.01
0.04
0.06
0.07
0.18
32.7
7
34
28
10
79
0.08
0.43
0.35
0.12
0.98
40
No.
Total
14
46
54
30
144
0.23
22
0.32
0.98
86
1.45
1.25
90
1.66
0.75
50
0.94
3.21
248
4.37
41.6
39.6
Source: Lloyds MIU and Lloyds Register Fairplay
No of sailings
No of ships
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
250
200
150
100
50
0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
05
06
07
08
Source: Lloyds MIU
0 to 4
5 to 9
10 to14
15 to 19
20 to 24
25+
46
JANUARY 2009
UNITISED
SHIP SAILINGS
Containerships - Sept 08
Area
Ro-Ro - Sept 08
1-2,999 teu
No.
000 teu
3,000 teu +
No.
000 teu
122
52
24
189
247.2
106.5
50.9
384.9
186
218
31
402
799
1186.5
129.4
1977.8
North Europe
Baltic
South Europe
Black Sea
Total Europe
250
91
388
72
359
479.6
133.5
685.8
113.9
687.1
263
5
255
37
408
1567.8
33.9
1422.5
171.5
2303.1
Japan
South Korea
China
Hong Kong
Taiwan
Singapore
Other SE Asia
Indian Subcontinent
Total Asia
292
298
576
622
334
763
753
269
710
449.4
516.1
1052.5
1126.6
547
1313.4
1237.1
491.5
1239.9
212
300
779
578
230
475
302
151
732
1050.8
1547.3
4372.7
3171.1
1279.9
2525.7
1698.1
726.6
3933.8
Arabian Gulf
176
333.9
119
615
221
100
290
418.5
197.5
556.9
84
16
98
343.6
53.2
390.3
North Africa
East Africa
West Africa
South Africa
Total Africa
156
77
107
101
339
252
131
198.3
193.9
606.4
117
19
6
41
163
611
76.3
20.9
170.5
797.1
86
50
79
182.6
102.9
167.3
Australia
New Zealand
Total Australasia
Area
No.
m dwt
US Atlantic
US Gulf
US Pacific
Great Lakes
N Cont Europe
Scandanavia/Baltic
UK/Eire
E Mediteranean
Iberian Atlantic
S Europe (W.Med)
Black Sea
China
Japan
SE Asia (Asean)
Indian Sub Continent
Arabian Gulf
Red Sea
S & E Africa
N Africa
W Africa
Central America
Caribbean
S America - Atlantic
S America - Pacific
Australasia
126
13
37
30
924
1471
946
185
158
893
113
293
239
218
20
175
48
39
139
46
184
178
139
41
156
1.14
0.24
0.74
0.35
7.79
11.55
7.39
1.17
1.28
6.93
0.9
2.64
2.05
1.25
0.17
1.33
0.49
0.23
0.78
0.9
1.44
0.84
1.83
0.23
1.18
Source: Lloyds MIU
1500
46
177.9
8
29.6
46
178.9
Source: Lloyds MIU
1000
500
0
0 to 4
5 to 9
10 to 14
15 to 19
20 to 24
25+
Area
East Coast US
West Coast US
Gulf Coast US
Total North America
0-9,999 dwt
No.
m dwt
10-14,999 dwt
No.
m dwt
15,000 dwt+
No.
m dwt
Total
No
m dwt
0
0
0
0
0
0
0
0
4
1
0
5
0.04
0.01
0
0.05
24
22
7
50
0.32
0.29
0.10
0.67
47
34
7
79
0.98
0.69
0.14
1.63
North Europe
South Europe
Black Sea
Total Europe
23
37
8
10
0.08
0.12
0.02
0.03
28
55
14
15
0.20
0.37
0.09
0.09
34
36
13
34
0.44
0.45
0.16
0.44
64
64
4
75
1.35
1.27
0.09
1.55
Japan
South Korea
Malaysia
China
Total Asia
25
2
2
12
19
0.09
0.01
0.01
0.05
0.07
28
8
5
12
31
0.21
0.06
0.04
0.09
0.23
64
21
6
20
81
0.82
0.26
0.07
0.24
1.02
126
48
3
26
127
2.48
1.03
0.05
0.53
2.45
Source: Lloyds MIU
JANUARY 2009
47
GENERAL
Age
Unclass
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active fleet
5-10,000 dwt
No. m dwt
31
412
227
324
226
296
1067
2583
53
2530
0.22
2.82
1.68
2.33
1.56
2.04
7.25
17.91
0.38
17.53
10-14,999
No. dwt
>15,000
No. dwt
9
185
52
37
23
41
308
655
24
631
4
0.08
44
0.41
51
1.54
648
6.60
73
1.77
352
4.06
74
2.22
435
4.98
45
1.11
294
2.96
129
3.07
466
5.66
441
8.73 1816 19.88
817 18.53 4055 44.54
16
0.30
93
0.97
801 18.23 3962 43.57
Source: Lloyds MIU
0.11
2.23
0.61
0.43
0.28
0.55
3.91
8.11
0.30
7.81
Total
No. m dwt
5-10,000 dwt
No. m dwt
Age
Unclass
0-4
5-9
10-14
15-19
20-24
25+
Total
Idle
Active fleet
0
1
17
39
132
100
97
386
4
382
0.00
0.01
0.13
0.28
0.92
0.72
0.71
2.76
0.03
2.73
10-14,999
No. dwt
0
8
19
35
69
49
43
223
2
221
>15,000
No. dwt
0.00
0.10
0.23
0.37
0.81
0.57
0.51
2.60
0.02
2.58
0
0
1
0
4
1
11
17
0
17
Total
No. m dwt
0.00
0
0.00
0.00
9
0.11
0.02
37
0.38
0.00
74
0.65
0.07
205
1.80
0.02
150
1.31
0.17
151
1.38
0.27
626
5.63
0.00
6
0.05
0.27
620
5.58
Source: Lloyds MIU
Orderbook
5-10,000 dwt
No. m dwt
2008
2009
2010
2011/12
Total
% of fleet
41
69
52
37
199
10-14,999
>15,000
No. dwt No. dwt
Total
No.m dwt
Orderbook
5-10,000 dwt
No. m dwt
0.31
0.48
0.37
0.25
1.41
9
0.1
24
0.69
74
1.1
50
0.61
66
2
185
3.09
51
0.6
61
1.98
164
2.95
24
0.28
54
1.63
115
2.16
134
1.59 205
6.3
538
9.3
8.5
20.6
35.1
Source: Lloyds MIU and Lloyds Register/Fairplay
21.3
2008
2009
2010
2011/12
Total
% of fleet
0
0
0
0
0
0
0
0
0
0
0
10-14,999
>15,000
No. dwt No. dwt
1
4
4
0
9
0.02
0.05
0.05
0
0.12
4.5
1
0
1
6
8
Total
No.m dwt
0.02
2
0.04
0
4
0.05
0.02
5
0.07
0.11
6
0.11
0.15
17
0.27
55.5
4.8
Source: Lloyds MIU
Dec
10,000 dwt
20,000 dwt
22
40
23
38
118
111
56
54
594
599
238
260
309
660
725
2157
945
1206
307
243
69
123
411
97
84
139
397
84
193
10yr old
10,000 dwt
15yr old
n/a
21
11
25
15
Source: BRL Consultants
200,000
450,000
600,000
750,000
cu
cu
cu
cu
ft
ft
ft
ft
m dwt
1.56
1.86
1.39
0.67
5.67
4.53
2.06
2.11
2.97
6.21
5.88
21.88
10.13
11.94
4.08
3.45
1.08
1.91
3.41
1.32
0.93
1.41
7.15
1.50
3.75
Source: Lloyds MIU
7.5
32
26
17
10yr old
15yr old
9.5
7.5
15
9.1
28
25
12.5
10
Source: BRL Consultants
No. of departures
16
72
130
0
7
23
Source: Lloyds MIU
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July
05
06
07
08
Source: Lloyds MIU
48
JANUARY 2009
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