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Saturday, November 29, 2008

Weberseas Weekly Report Nov 28th Summary

November 28th, 2008 / Week 48
As the dry freight market continues its fall (not over a cliff - since this has already happened), with the BDI losing 14.5% week to week, everyone now wonders how long this will last and whether the shipping world should gear-up for an "old wild-west" related market environment where owners will be competing for a "fistful of dollars". We have noted a cape getting US$ 1000 per day for a spot trip while all the recent panamax "relative gains" seem to be fading.
The uncertainty still remains at least for the short run or at least until the shipping market sees some light in end of the tunnel as far as the financial crisis is concerned, with letters of credit in particular. It is estimated that 80% of the world trade is based on letter of credits who have been badly hit. We tend to believe that letter of credit is the major cause of this sharp fall in freight rates as a result of the sudden stiffening of cargoes moved world-wide.
However, this is not the only one. Let’s not forget that what we are experiencing now has been the result of a "chain reaction" which started from the US sub-prime crisis and continues to spread to financial markets all over the world. Relatively so, the actual economies seem to be heading for recession, with Japan already leading the way. Of course we expect the impact of this crisis to deepen as more and more economies enter a recession.
So, is there any hope for the market to return at respectable levels in the sort/medium run? All bids in China please!!!
As everyone carefully monitors the stock piles of raw materials in the Chinese ports slowly decreasing, hoping that the pace will become faster and soon demand for re-stocking will occur, the S&P market is getting more and more active every week. We are reporting several and very interesting sales of all types and ages of bulkers the number of which tends to remind us the pre-August 2008 dates. New market levels have now been set although a substantial number of sellers still holding for better prices.

Dry Bulk In Iron Chains

Friday, 28 November 2008

It's hard to fathom how far rates for dry-bulk shipping have plunged in the past few months but easy to see how bleak the future has become. Until the world economy picks up enough to generate interest in shipping iron ore for use in steel, the industry will remain becalmed. On Thursday, the Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, sank 3.9% to 733 points, its seventh straight daily decline and its lowest level since January 1987. The index has plummeted 94.0% from its high in late May, according to TradeTheNews.com.
With day rates on Capesize ships, the largest vessels, tumbling 14.1%, to $2,773 on Wednesday, down from $3,229 on Tuesday, it’s difficult to remain optimistic. One year ago, the day rate was $172,078.
“Too many ships, too few cargoes,” is how Mike Reardon, vice president of research and marketing at Imarex, a shipping-related derivatives exchange, characterizes the dry-bulk market. “Though the increased ore movements from India to China have offered subdued hope, the bigger picture remains bleak.”
Last week, reports circulated that China hired 13 vessels to carry iron ore from India, following a decision by New Delhi to slash export taxes. Jeffrey Landsberg, a freight options broker at Imarex, said there could be several reasons for the increased shipments, none necessarily indicative of rising demand: “China could be showing they have more iron ore and steel demand than most currently believe. Or, they could just be building up stocks to ensure 2009 contract prices are secured at a hefty discount.”
A key part of the reason for the dire outlook for the dry-bulk industry is a slowdown expected in China’s economic growth for 2009. The World Bank this week slashed its estimate to 7.5% from an earlier 9.2%. This year, China is expected to expand at a 9.4% rate, down from 11.9% in 2007.
Major steel producers have been cutting output forecasts as a result. “Given the worldwide steel output contraction, and indications of even less production in the months ahead, the dry bulk market appears unlikely to experience a major positive catalyst until next year, when contracted iron ore is likely to be priced at a substantial discount to 2008 prices,” said Dahlman Rose analyst Omar Nokta.
Oppenheimer analyst Scott Burk said that it appears that DryShips, Eagle Bulk Shipping, Excel Maritime Carriers, and Genco Shipping & Trading have technically breached loan covenants as a result of falling profits and declining ship values. Several companies have slashed their dividends and others have warned they may have to in order to preserve cash.

Baltic Dry Index teeters on record low

Hong Kong: On Thursday, the Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, sank 3.9% to 733 points, its seventh straight daily decline and its lowest level since January 1987. The index has plummeted 94% from its high in late May. Many are anticipating that in the next couple of weeks it could hit a record low.
Putting a brave face on the market, Kenneth Koo, group ceo and chairman of Hong Kong bulk owner Tai Chong Cheang Steamship, told Seatrade at a press conference earlier this week, that he hoped the current plunge would be a 'short and sharp' one. He said the market could be back up to manageable levels by Q2 next year.
Mr Koo, who is also deputy chairman of the Hong Kong Shipowners Association, was speaking at an event in Hong Kong to detail next year's premier shipping event, Sea Asia, to be held in Singapore on April 21 where leading owners will debate the perilous state of the markets. 

Capesize owners split by decision to fix or lay-up ships

By Keith Wallis - Friday 28 November 2008

WHILE rates continue to plunge, capesize owners find themselves into two camps.
One group, including a large proportion of Asian owners, is prepared to still play the market, fixing time charter deals that at least pay the cost of vessel insurance. 
Owners in the other group have preferred to park their vessels in an attempt to ride out the worst of the storm. 
“Owners in the first group are prepared to accept lower rates to keep their crews and ships active,” one Hong Kong broker said. “The overriding consideration is to keep vessels operating to provide mental stimulation for the crews by keeping them busy.” 
The broker pointed out that owners in the second camp hoped that by parking vessels it will help rates to rise by creating a psychological shortage of ships. “But at the end of the day there’s still plenty of tonnage out there,” he said. 
Another Hong Kong broker discounted suggestions that owners were offering their ships for free provided charterers pay insurance and crew costs. 
“There are no sophisticated charterers, it’s a straightforward cash transaction based on a daily rate. The fact charter rates only cover insurance or crew costs is incidental,” he said. 
This came in response to this week’s fixing by Cargill of a Mitsui OSK Lines capesize relet at just $1,000 per day. 
At the same time, the average of the four time charter rates remained in freefall, dropping by around $1,000 in a week to close the week at $2,425 per day. 
The one bright spot as rates continued to slump was on the Western Australia to China trade, where charter rates showed a very modest rise on Friday of $0.02 to $3.89 per tonne compared with the day before. 
“We see a little bit of movement. Recent spot and time charter deals have soaked up maybe 10% of the ships that are on the availability list. So it helps, but there is a long way still to go,” said one of the Hong Kong brokers. 
“Traders are fixing some iron ore cargoes into China so they can reduce the average cost of their inventories. But that’s about it.” 
The broker pointed out that there was a surge in paper rates for the fourth quarter 2009 contract last Thursday. 
“The optimists thought it looked like the market was starting to pick up. But to others it looked the work of speculators and the positive sentiment quickly died,” he said. 
Fearnleys said the 176,000 dwt, 2003-built CSK Fortune was fixed by Oldendorff for a fronthaul voyage from Brazil to China at $5,750 per day with a $175,000 ballast bonus, but the broker said the bonus did not cover the ballast costs. 
The Norwegian broker added: “On steam coal, South Korea is the only light we see, with month-on-month volumes up by over 13%, though this only benefits the smaller capesize vessels due to port restrictions at the discharge port.”

Friday, November 28, 2008

Bunker Prices 28th November 2008

Port Notices:
Falmouth - Delivery charge - $8pmt min $4000
Port               IF-380       IF-180          M.D.O.          M.G.O.
Rotterdam    (D)  220-222  +4  250-252  +4     485-490 -15     510-545
Rotterdam LS (D)  270-280  +0   300.00 -10
Antwerp      (D)   230.00 +12   267.00  +9      502.00  +2      547.00
Antwerp LS   (D)   277.00  +2   317.00  -1
Hamburg      (D)   239.00  +9   264.00  +9      499.00  -9      576.00
Hamburg LS   (D)   304.00  -1   329.00  -1
Gt. Belt     (D)   262.00 +10   312.00 +10      555.00  -3      600.00
Gt. Belt LS  (D)   319.00  +3   379.00  +3
Falmouth     (W)  260-265  +5  320-325 +10                     615-620
Falmouth LS  (W)  315-320  +5  340-345 +10
Le Havre     (W)                                                581.00
D: metric ton including delivery costs.
W: metric ton excluding delivery costs.
Port Notices:
Augusta - Prices subject inquiry, expecting replenishment of fuel next
Port               IF-380       IF-180          M.D.O.          M.G.O.
FOS          (W)   232.00       263.00                          556.00
Gibraltar    (D)   250.00  +0   275.00  +0      580.00  +0      610.00
Algeciras    (D)   252.00  +0   277.00  +0      583.00  +0      613.00
Malta        (D)   273.00  -1   298.00 -13                      594.00
Augusta      (W)                                               590-610
Genoa        (W)   245.00 -10  274-276 -20                     601-606
Piraeus      (D)  226-236  +6  254-264  +6                     535-545
Istanbul     (W)   263.00  +1   299.00  +1                      636.00
Las Palmas   (D)   246.00       276.00          560.00          585.00
D: metric ton including delivery costs.
W: metric ton excluding delivery costs.
Middle East & Africa
Port Notices:
Suez - Prices subject inquiry
Jeddah - Prices effective from 27th
Dammam - Prices effective from 27th
Port               IF-380       IF-180          M.D.O.          M.G.O.
Durban       (W)                285.00 +10      570.00  +0      580.00
Cape Town    (W)                326.00 +17                      614.00
Fujairah     (D)   239.00  +6  270-271  +2                     710-750
Jeddah       (D)   241.75  +0   265.50  +0      848.00  +0
WEF 27/11
Damman       (D)   224.75  +0   245.50  +0      706.00  +0
WEF 27/11
Suez         (D)
D: metric ton including delivery costs.
W: metric ton excluding delivery costs.
Far East & South Pacific
Port Notices:
Korea - Tight avails
Singapore - 180cst Tight
Port               IF-380       IF-180          M.D.O.          M.G.O.
Singapore    (D)  240-243  +7  258-263 +10                     510-515
Hong Kong    (D)  258-263  +6  275-279  +6     545-550  +5
Japan        (D)  285-290  +0  295-300  +0     600-610  +0
Korea        (D)  255-260 +14  270-280 +14     560-565 +22
Taiwan       (D)   263.00  +7   277.00  +7      560.00  +0      575.00
D: metric ton including delivery costs.
W: metric ton excluding delivery costs.
Outlook: All nominations made for deliveries at Brazilian Ports in a
period shorter than 72 hours from ETA (GTC minimum) will be subject to
different prices.
The indication for these prices will be available at the Daily Report,
described as "Prices for Prompt Delivery". These informations are only
indications and must be confirmed with the respective trader before
The prices stated for deliveries under this condition does not
guarantee availability nor cancel any "subject" status.
Best regards, Petrobras Bunker
Port               IF-380       IF-180          M.D.O.          M.G.O.
New York     (W)         H         O     L        I      D        A
Philadelphia (W)         H         O     L        I      D        A
Norfolk      (W)         H         O     L        I      D        A
Houston      (W)         H         O     L        I      D        A
New Orleans  (W)         H         O     L        I      D        A
Los Angeles  (W)         H         O     L        I      D        A
San Francisco(W)         H         O     L        I      D        A
Seattle      (W)         H         O     L        I      D        A
Portland     (W)         H         O     L        I      D        A
Panama       (W)         H         O     L        I      D        A
D: metric ton including delivery costs.
W: metric ton excluding delivery costs.
Please note Americas indications are from the previous day close.
CLOSED (27/11/08)  : USD 53.13(-0.79)
OPENED (28/11/08)  : USD 53.10(-0.03)

TNT Dry Freight Review - 28 November 2008

As expected, the Atlantic Panamax market was very dull today as
American traders were still on the Thanksgiving Holiday long weekend.
>From the Continent, there were some ships done, but rates appeared to
sink a little further, with a trip out via the St Lawrence done at
$7,500 daily.  For Pacific business, the Indian Ocean remained the
torch illuminating a dark sea.  There were a number of fixtures
reported from the area and rates held steady. Haldia/China business
made $8,000 daily, while Mundra/China business fixed in the
$6,000-$6,200 range.  
Atlantic Panamax business included word that Armada has the 2001-built
75,323 dwt Nordems with December 01-03 delivery Rotterdam for a trip
via the St Lawrence and redelivery Singapore-Japan range at $7,500
The charterer also took the 1995-built 75,473 dwt Richmond with
November 26th delivery retro-Immingham for a trip via Baltimore and
redelivery Gijon at $4,500 daily.
The 2000-built 76,400 dwt Clipper Emperor went to EDF with December
05-07 delivery dop Rotterdam for a trip via Amsterdam and Poland, with
redelivery Skaw at about $5,100 daily.
The 2006-built 74,500 dwt Evangelia Petrakis reportedly fixed to SK
Shipping with November 27-30 delivery aps Richards Bay for a trip with
redelivery Brindisi at $3,750 daily plus a ballast bonus of  $120,000.
It emerged that Cargill fixed the 1999-built 72,270 dwt Alpha Glory on
Wednesday with November 24 delivery Gibraltar for a trip via Santarem
and redelivery Amsterdam at $5,000 daily.
Out of the Pacific, the 1997-built 75,264 dwt Flippo Lembo has gone to
Jaldhi with spot delivery Haldia for a trip with redelivery China at
$8,000 daily.
SST was the charterer of the 1998-built 72,474 dwt Mar Reina with
December 08-12 delivery Haldia for a trip via Paradip and Haldia with
redelivery China at $7,750 daily.
An unnamed charterer fixed the 1995-built 75,100 dwt Voge Prestige
with December 03-08 delivery Mundra for a trip via Goa and redelivery
China at $6,200 daily.
Noble has the 1993-built 69,255 dwt Energy fixed for prompt delivery
Mundra for a trip via west coast India and redelivery China at $6,000
BHP Billiton reportedly took the 1998-built 74,034 dwt Bahia Blanca
with November 27-29 delivery Guangzhou for a trip via west Australia
and redelivery Richards Bay at $5,500 daily.
The 2004-built 75,611 dwt Star of Nippon fixed to SK Shipping with
November 29-30 delivery Shanghai for a trip via west Australia and
redelivery Jebel Ali at $5,000 daily.
The 1996-built 69,053 dwt Augusta recently went to Noble with prompt
delivery aps Darwin for a trip with redelivery China at $6,100 daily
plus a ballast bonus of $85,000.
It emerged that OBS recently took the 1987-built 64,377 dwt Samsun
Elroy with November 29-30th delivery passing Muscat outbound for a
trip via Goa with redelivery China at $5,500 daily.
Early this week, the 2006-built 76,500 dwt Nord Galaxy fixed to
Oldendorff with end-Nov/early-Dec delivery Gladstone for a trip with
redelivery Taiwan at $5,000 daily plus a ballast bonus of $140,000
It was an extremely limited market for the Capesize sector today.
There were said to have been a few vessels fixed in the Atlantic, but
most remained private.  Traders in the Pacific basin apparently went
home early, with no concluded business heard.  Recent reports have the
sound of a mantra when it comes to describing capsizes."too many
ships, too few cargoes" according to a quote from a Forbes.com article
issued yesterday.  The expected slowdown in economic growth for China
in 2009, newly estimated at 7.5% by the World Bank this week will make
any recovery in this market a long-drawn affair.  The Baltic Capesize
index fell 20 to 838.
The 1991-built 150,108 dwt Go Patoro has reportedly fixed to Samsun
with November 26 delivery Taiwan for a trip via east coast Australia
and redelivery South Korea at $4,000 daily.
Atlantic Handy business was little heard, although scrap cargoes from
the Continent continue to trickle out.  Trans-Atlantic business saw a
1999-built 49,000-tonner fixed at $9,000 daily.  Older tonnage fixed
at $5,500 daily to the Mediterranean east.  No improvement for
Handysize rates in the Pacific today and actual business was extremely
scarce too.  Some slight demand for period tonnage existed and a
supermax fixed at $5,000 daily for the first 50 days, and $11,000
daily for the balance.  The Baltic Supramax index fell 10 to 622,
while the Handysize index was off just 1 at 315.
In the Atlantic, the 1999-built 48,900 dwt Ken Gallant has gone to an
undisclosed charterer with prompt delivery Santos for a trip with
redelivery in the Mediterranean at $9,000 daily.
An unnamed charterer took the 1985-built 38,888 dwt Sea Flourish with
December 07-10 delivery Flushing for a trip via the Continent and
redelivery in the eastern Mediterranean at $5,500 daily.
Island View Shipping has the 1993-built 26,472 dwt Atlantic Acacia
with December 10-15 delivery Richards Bay-Durban range for a trip with
redelivery on the Continent/Mediterranean at $4,900 daily with
optional redelivery in the US Gulf at $4,000 daily.
Pacific business included reports that Uniwell fixed the 1993-built
43,354 dwt Pacific Vigorous with December 05-10 delivery Mumbai for a
trip with redelivery China at $7,000 daily.
The 1996-built 24,280 dwt Seven Seas has gone to an unnamed charterer
with spot delivery Singapore for a trip via south-east Asia and
redelivery in the Far East at $3,000 daily.
Voyage business heard the Clipper took the 1999-built 73,104 dwt Bunga
Saga 9 with December 07-10 loading 58,000 tons 10% bauxite from Kamsar
to San Ciprian at $5.50.
In period business, the 2002-built 52,479 dwt Lowlands Mimosa fixed to
Eitzen Bulk Carriers with prompt delivery Nantong for 11-13 months
trading and redelivery worldwide at $5,000 daily for the first 50 days
and $11,000 daily for the balance.
OceanConnect Daily Bunker Report - 28 November 2008
Northern Europe

Baltic Exchange Daily Summary of Baltic Exchange Dry Indices - 28 November 2008

Baltic Exchange Dry Index          715         (DOWN 18)
Baltic Exchange Capesize Index   838         (DOWN 20)
Baltic Exchange Panamax Index   622         (DOWN 31)
Baltic Exchange Supramax Index  622         (DOWN 10)
Baltic Exchange Handysize Index  315         (DOWN 1)
Daily Summary of the Baltic Exchange Time Charter Routes
                                Rate($/Day) Change
Average of the T/C routes       $2425       (DOWN  123)
Average of the T/C routes       $5021       (DOWN  250)
Average of the T/C routes       $6500       (DOWN  109)
Average of the T/C routes       $4593       (DOWN  11)
Baltic Exchange Capesize Index TM - 28 November 2008
Baltic Exchange Capesize Index     838     (DOWN 20)
Num    Description                                     Weight Avg.
====== =============================================== ====== =====
C2     160000lt Tubarao -Rotterdam                     10     4.285
C3     150000mt Tubarao - Beilun/Baoshan               15     6.845
C4     150000mt Richards Bay - Rotterdam               5      5.105
C5     150000mt W Australia - Beilun/Baoshan           15     3.885
C7     150000mt Bolivar - Rotterdam                    5      4.625
C8_03  172000mt Gibraltar/Hamburg trans Atlantic RV    10     1285
C9_03  172000mt  Continent/Mediterranean trip Far East 5      5133
C10_03 172000mt Pacific RV                             20     1863
C11_03 172000mt China/Japan trip Mediterranean/Cont    5      1418
C12    150000mt Gladstone - Rotterdam                  10     9.406
Average of the T/C Routes                                     2425
Baltic Exchange Panamax Index TM - 28 November 2008
Baltic Exchange Panamax Index     622     (DOWN 31)
Num    Description                    Weight Avg. Move
====== ============================== ====== ==== ====
P1A_03 74000mt Transatlantic RV       25     4282 -193
P2A_03 74000mt SKAW-GIB/FAR EAST      25     7458 -250
P3A_03 74000mt Japan-SK/Pacific/RV    25     4548 -320
P4_03  74000mt FAR EAST/NOPAC/SK-PASS 25     3797 -237
Average of the T/C Routes                    5021 -250
Baltic Exchange Supramax Index TM - 28 November 2008
Baltic Exchange Supramax Index     622     (DOWN 10)
Num Description                        Weight Avg.  Move
=== ================================== ====== ===== ====
S1A Antwerp - Skaw Trip Far East       12.5   7836  -134
S1B Canakkale Trip Far East            12.5   8035  -210
S2  Japan - SK / NOPAC or Australia rv 25     5181  -75
S3  Japan - SK Trip Gib - Skaw range   25     4881  -104
S4A US Gulf - Skaw-Passero             12.5   11344 -96
S4B Skaw-Passero - US Gulf             12.5   4664  -69
Average of the T/C Routes                     6500  -109
The route(s) below do not form part of the index calculation
S5  W.Africa  via ECSA to FarEast      0      6961  -58
S6  Jpn-SK trip via Aus/India          0      5270  -69
S7  EC India - China                   0      9370  105
Baltic Exchange Handysize Index TM - 28 November 2008
Baltic Exchange Handysize Index     315     (DOWN 1)
Num Description                                        Weight Avg.
=== ================================================== ====== ====
HS1 Skaw - Passero trip  Recalada - Rio de Janeiro     12.5   3696 7
HS2 Skaw - Passero trip Boston / Galveston             12.5   3921 -11
HS3 Recalada / Rio de Janeiro trip Skaw / Passero.     12.5   7222 94
HS4 US Gulf trip via US Gulf or NCSA to Skaw / Passero 12.5   6575 2
HS5 SE Asia trip via Australia to S'pore / Japan       25     3800 -36
HS6 S Korea / Japan via NOPAC to  S'pore-Japan         25     3864 -57
Average of the T/C Routes                                     4593 -11
* TIME CHARTER FIXTURES - 28 November 2008 *
GO PATORO 1991                   150,108 DWT TCT
$4,000 DAILY                             SAMSUN
MINERALI 1981                    77677 DWT TCT
$3500 DAILY                              WINDROSE
NORD GALAXY 2006                 76500 DWT TCT
$5000 DAILY + $140000 BB                 OLDENDORFF
FIXED 11/25
DE XIN HAI 2008                  76432 DWT TCT
$5000 DAILY + $170000 BB                 LOUIS DREYFUS
CLIPPER EMPEROR 2000             76400 DWT TCT
APPROX $5100 DAILY                       EDF
STAR OF NIPPON 2004              75611 DWT TCT
$5000 DAILY                              SK SHIPPING
RICHMOND 1995                    75473 DWT TCT
$4500 DAILY                              ARMADA
NORDEMS 2001                     75323 DWT TCT
$7500 DAILY                              ARMADA
FILIPPO LEMBO 1997               75264 DWT TCT
$8000 DAILY                              JALDHI
VOGE PRESTIGE 1995               75100 DWT TCT
$6200 DAILY                              CNR
EVANGELIA PETRAKIS 2006          74500 DWT TCT
$3750 DAILY + $120000 BB                 SK SHIPPING
BAHIA BLANCA 1998                74034 DWT TCT
$5500 DAILY                              BHP BILLITON
GENCO ARCHERON 1999              72495 DWT TCT
$7800 DAILY                              CNR
MAR REINA 1998                   72474 DWT TCT
$7750 DAILY                              SST
ALPHA GLORY 1999                 72270 DWT TCT
$5000 DAILY                              CARGILL
ENERGY 1993                      69255 DWT TCT
$6000 DAILY                              NOBLE
AUGUSTA 1996                     69053 DWT TCT
$6100 DAILY + $85000 BB                  NOBLE
SAMSUN ELROY 1987                64377 DWT TCT
$5500 DAILY                              OBS
YVONNE 2008                      56657 DWT TCT
$5000 DAILY                              MUR
LOWLANDS MIMOSA 2002             52479 DWT TC
$5000 DLY 1ST 50 DAYS, $11,000 DLY       EITZEN BULK CARRIERS
KEN GALLANT 1999                 48,900 DWT   TCT
$9,000 DAILY                             CNR+A2
PACIFIC VIGOROUS 1993            43354 DWT TCT
$7000 DAILY                              UNIWELL
SEA FLOURISH 1985                38888 DWT TCT
$5500 DAILY                              CNR
ATLANTIC ACACIA 1993             26472 DWT TCT
SEVEN SEAS 1996                  24280 DWT TCT
$3000 DAILY                              CNR
** DRY VOYAGE FIXTURES - 28 November 2008 **
=========   ORE                =======
BUNGA SAGA 9 1999               72,000 DWT   ORE
$5.50 FIO 24000SC/15000SC                     CLIPPER

Dry bulk shipping rates approach all-time low

Friday, 28 November 2008

The recent months' collapse in dry bulk shipping rates has been unprecedented in its severity, the head of the body that organises the key shipping market said yesterday, as a key market index hit its lowest level since January 1987. Jeremy Penn, chief executive of the Baltic Exchange, told the Financial Times in an interview that the Baltic Dry Index was now close to its all-time low in 1986 and conditions were now more extreme even than then. However, he condemned companies who were trying to escape old contracts struck at the previous higher rates.
The index - which measures average rates in the short-term spot market to charter ships to carry iron ore, coal and other bulk commodities - reached 763 points yesterday, 93.5 per cent down from the all-time record high of 11,793 points hit on May 20. Rates for the largest ships, known as Capesizes, are down 98.8 per cent from the record $233,988 per day set on June 5 to $2,773 yesterday.
The collapse, resulting from the financial crisis, a dispute between Chinese steel mills and Brazilian ore producers and slowing economic demand, has had widespread secondary effects, including bankruptcies among shipowners.
"The violence of the movement, the violence of the correction are unprecedented, particularly in the Capesize market," Mr Penn said. "The sudden and extreme lack of demand for freight has left everybody stunned, I suppose is the best word to use."
The Baltic Exchange hosted an emergency summit last week, attended by 450 people, to address the problems created by the market collapse.
The conference criticised some companies' refusal to honour long-term contracts struck at the old, higher level.
Mr Penn said he had no proof of claims that some charterers, in order to escape contractual obligations, were claiming demand for their products had disappeared then chartering ships at the market's new, much lower, levels. "I would certainly disapprove of anyone who failed to meet their obligations unless they were in dire financial straits," he said.
However, he confirmed the market was considering complaints about some companies that could lead to exchange members being warned about the dangers of dealing with them. He particularly criticised market participants who defaulted, knowing their countries' laws would make them hard to pursue. Many involved in the market believe some Korean and Chinese companies have been the most serious offenders.
"What we regard as unacceptable is simply reneging on contracts and relying on inaccessibility in terms of jurisdiction and geography to protect you," he said.
The market problems are being exacerbated by uncertainty surrounding ships that were the subject of several different charter contracts. Many operators in the boom years chartered ships then chartered them on to other operators for a slightly higher fee, creating chains of agreements as many as 12 long.
Participants in such chains are now nervous they could collapse if just one participant suffers financial problems. Some have already been hit by the collapse of Ukraine's Industrial Carriers and UK-based, New York-listed Britannia Bulk.
Mr Penn said there was little the Baltic could do to clarify the risks with existing contracts. But in future, it might create a link between companies' obligations in the physical shipping market and the freight derivatives market, so they would be better able to hedge their risks.
As Adapted from Financial TImes

"The Daily Fixtures Report" - 27/11/2008

BDI   733 DOWN 30
BCI   858 DOWN 25
BPI   653 DOWN 66
BSI   632 DOWN  5
BHSI  316 DOWN  2
'Aquacharm' Constellation relet  2003 171009 dwt  dely aps Brazil end Dec 2/4
months trading redel worldwide $9000 daily + approx $200000 bb - Vale
'Marvellous' 2000 169150 dwt  dely Cape Passero in d/c mid Dec 12 months trading
redely worldwide $17500 daily basis 2.5% - Coscobulk
'Minerali' 1981 77677 dwt  dely aps SW Pass 10/15 Dec  trip redel UAE $3500
daily + $100000 bb - Windrose
'De Xin Hai' 2008 76432 dwt  dely Zhanjiagang ppt  trip via NoPac redel Far East
$5000 daily - Louis Dreyfus
'Red Iris' 2003 75730 dwt  dely Kaohsiung 28 Nov/2 Dec  trip via Koolan Island
redel China $5000 daily - Brownstone
'Yasa Team' 2006 75261 dwt      - 
'Avra' 2001 75169 dwt  dely Dunkirk 8/12 Dec  trip via US Gulf redel China $7750
daily - Louis Dreyfus
'Clipper Monarch' 2000 74381 dwt  dely Rotterdam 4/7 Dec 2 laden legs plus
option 3rd leg redel Skaw-Cape Passero $6000 daily option $6300 daily if 3rd leg
used - Navios
'Boreal' 2002 74181 dwt  dely Sri Lanka spot  trip via WC India redel China
$8250 daily - cnr
'Hua Shan Hai' 1998 72731 dwt  dely psg Canakkale ppt  trip via Black Sea redel
China $8000 daily - Richstone
'Fu Man' Cosco Hong Kong relet 1997 71369 dwt  dely psg Gibraltar 26 Nov  trip
via US Gulf redel Skaw-Cape Passero $4600 daily - Cargill
'Irini' 1988 69734 dwt  dely aps Norfolk 11/18 Dec  trip redel Egyptian Med int
grain $3500 daily + $130000 bb - PCL
'Yvonne' 2008 56657 dwt  dely Belawan 2/5 December  trip via Australia redel
Continent $4500 daily - MUR
'Malathi' 2005 55707 dwt  dely Haldia 7/15 December  trip redel China $8200
daily - Jaldhi
'Bianco Dan' 2004 55628 dwt  dely Kakinada 3/8 December  trip redel China approx
$11000 daily - MMS
'Dubai Jewel' 2004 52951 dwt  dely West Coast India 3/10 December  trip redel
China $11000 daily - Cargill
'Sophia' 2004 45758 dwt  dely Jeddah mid December trip via Aqaba redel WCIndia
$7000 daily - Korean chrtr
'Shining Star' 2004  /    - 
Port Hedland/Qingdao at $4.00>
'Pacific Enterprise' 1995  /    - 
'China Venture' 2005 160000/10 Richards Bay/Rotterdam 14/28 Dec $5.25 fio
scale/25000sc - Oldendorff
'Sanko Spark' 1996 150000/10 Richards Bay/Rotterdam 14/28 Dec $5.00 fio
scale/25000sc - Cargill - 
'HMM TBN' 150000/10 Gladstone/Hadong 10/19 Dec $3.66 fio scale/35000sc - KEPCO
'Cymbeline' 2001 70000/10 Pulau Laut/Bridgeport 30 Nov/2 Dec $10.10 fio
35000sc/20000sc - Louis Dreyfus
TBN 25000/10 SBM Up River/Spanish Med early Dec $18.00 fio 10000 sc/7000 sc -

Shipping outlook bleak

Friday, 28 November 2008

Global shipping demand is shrinking, as evidenced by the fact that the London Baltic Dry Index is trading at its lowest levels in years. Closer to home, October throughput at the Hong Kong port was down after posting strong gains through the summer. The decline in shipping traffic has been sudden and dramatic. “Quite frankly, no one’s ever seen anything like this,” says Standard Chartered managing director and head of shipping finance Nigel Anton. “It’s been quite incredible across all the sectors, but particularly in the dry bulk and the container market. There has been some weakening on the tanker market but nothing like what we’ve seen on the dry and container markets.”
The Baltic Dry Index, a measure of global dry bulk freight rates, closed at 804 points on November 25, down 93% from the high of 11,793 points in May.
In Hong Kong, the Transport and Housing Bureau reported that October throughput was down 2.9% to 2 million TEU (twenty-foot equivalent units or one standard container). This comes after the bureau posted a 7.8% increase in port throughput in July.
The outlook for shipping companies has weakened amid the bleak global economic outlook. Last week, Moody’s Investors Service released a report downgrading the outlook for the Asia-Pacific shipping industry across all sectors – dry bulk, container and tanker – to negative for the next 12 to 18 months. The report cited slack global growth, unstable operating costs and volatile shipping rates as reasons for the downgrade.
The frozen credit markets are seen as at least partially responsible for the negative outlook. "A freezing of trade credit has exacerbated a slowdown in demand for commodities and contributed to the recent, unprecedented plunge in the sector's Baltic Dry Index," says Moody’s senior credit officer, Peter Choy.
Moody’s maintains stable ratings for most of the region’s shipping companies including MISC Berhad, Nippon Yusen Kabushiki Kaisha (NYK), Mitsui O.S.K. Lines (MOL), BW Group and Humpuss Intermoda Transportasi (HIT).
One impending challenge for the industry is the burgeoning order books at the shipyards. “While existing owners are laying up ships we have this massive order book and a lot of those ships will clearly not be delivered,” says Standard Chartered’s Anton. “People will begin to walk away from orders, they already have, because they have generally paid very little in deposit and just say: ‘Fair enough, I’ll leave the deposit on the table and just walk away.’”
Moody’s reports that current orders for dry bulk and container lines is equal to roughly half of current capacity. For tankers, orders are equal to the current capacity.
Anton predicts that a large number of regional shipyards, especially the newer players and those not yet open, will either close or never come to fruition.
While shippers and shipyards are dealing with overcapacity, the value of current assets continues to decrease. “I was just chatting to a broker who is trying to circulate a ship. This is a new ship that six months ago was valued at $80 million and now they are looking at offers of about $35 million,” says Anton. “Six-months ago the chartered rate was about $45,000 a day but now you’d be lucky to get about $15,000.”
The decline in ship values is in no small way influenced by the credit crunch. The value of ships is determined by the forecasted charter rate for different types of vessels, for example the Baltic Dry Index determines the market rate for dry bulk carriers. As charter rates fall, the value of ships declines and forces shippers and banks to revalue their assets.
When the shipping market will turn around is anyone’s guess. “A volatile and extraordinarily challenging dry bulk market is anticipated to continue through Q4 2008 and beyond,” Hong Kong-listed Pacific Basin Shipping notes in a third quarter market update.
Both Standard Chartered’s Anton and Moody’s reiterate the sentiment that a volatile and unpredictable sea freight market will continue for an indeterminate period into the future.
“The current crisis started with the banks, then you could see it in the consumers and now the car makers in the States may go into bankruptcy – it is one thing knocking after the other,” says Anton. “We’ll have to see how it pans out.”
As adapted from Finance Asia

Shipping companies bleed, ship-breaking booms!

Friday, 28 November 2008

Even as shipping companies world-wide are facing rough weather on account of recessionary trends, India’s ship-breaking business is all set to flourish. Ship-breaking is a process of dismantling a vessel’s structure for scrapping and disposal whether conducted at a breach, pier, dry dock or dismantling slip. It includes a wide range of activities, from removing all gears and equipments to cutting down and recycling the ships’ infrastructure. Ship-breaking is a challenging process, due to structural complexity of the ships and many environmental, safety and health issues involved. While ship scrapping in dry docks of industrialized countries is regulated, ship-breaking on beaches, alongside piers is less subject to control and inspection.
Breaking old or redundant ships rather than scuttling or using them as artificial riffs, enables steel and other parts of the ships to be recycled at a much lower cost than importing and processing iron ore. Less energy is also needed. It also provides for timely removing of outdated tonnage from international waters. Hundreds of vessels are scrapped each year, a trend which will continue with the phasing out of single hull vessels.
Problems of industry
Ship-breaking is one of the most hazardous occupations. This over the last decade, has been concentrated in a few developing Asian countries- India, Bangladesh, China, Pakistan and Turkey on account of low wages and a lower level of compliance with international standards on safety, health and poor working and environmental conditions.
Although many of the hazardous material used to build a ship-asbestos, polychlorinated biphenyls, toxic paint such as tri-butylitin and heavy metals are mostly restricted or banned today. But a ship built 20-30 years ago still contains these materials. It also carries hazardous and flammable chemicals used for paints, repairs and maintenance etc. Electrical cables and other control systems contain hazardous material. The paint coat can contaminate soil and water when torched or scrapped. This is hazardous for human beings and the environment. The protection and safety and health of workers handling the hazardous waste is of crucial importance.
The issue of ship recycling is being deliberated for the past several years at International fora namely International Labour Organisation, Maritime Organisation & the Basel Convention on the Control of Trans Boundary Movement of Hazardous Wastes and their Disposal.
Under the Basel Convention, till date there is no consensus on the question of treating ships destined for scrapping as hazardous wastes. The issue of legal aspects of ships breaking was first discussed in Conference of the Parties of the Convention (COP-5) in December 1989. In spite of a number of meetings of technical and legal working groups, several issues are still pending on dismantling and recycling within the framework of the Basel Convention. The Convention has developed technical guidelines for the partial and full dismantling of ships.
Many European countries and NGOs like Basel Action Network and Green Peace advocate that the PIC procedure followed under the Basel Convention for Tran-boundary movement of hazardous wastes must be applied to ships destined for breaking. However, under Maritime Law, a ship is a separate entity and has several financial and other claims due to which it can not be classified as a hazardous waste even when it is destined for scrapping. IMO has accepted that a ship that can propel under its own powers is not a waste. The issues relating to ship breaking are still under consideration of the joint working group of IMO, ILO and Basel Convention.
Alang Ship Breaking Yard
Recognizing ship breaking as a potential source of raw material for the re-rolling mills in early 80’s, import of ships for breaking was accelerated. Prior to 1979 the Ship Breaking activity in India was limited to breaking of barges, small sized ships and casualty ships. It was concentrated in two major ports namely Mumbai and Calcutta. Every year 600-700 sea vessels are brought to the once pristine beaches of Asia for scrapping.
At Alang in Gujarat, ships are beached up to the yard because of its peculiar marine conditions and high tide. In other ship breaking countries, the ship does not come up to the yard, but is tightened on the sea bed and the pieces are pulled to the yard. Lightening of the ship on the sea bed is dangerous as far as oil pollution is concerned in case of tankers.
Beaching method in ship breaking has to be continued as it is most economical and practical. All the major ship breaking countries presently follow this method.
The beaching method depends on skilful harnessing of zero cost tidal energy at sheltered coastal locations and warrants the least capital investment. Considering the favorable parameters for beaching method like high tidal range, firm seabed, gentle seaward slope etc., it was decided to set-up a ship breaking yard on the western coast of Gulf of Cambay near Alang village.
The first vessel – MV KOTA TENJONG was beached at Alang on February 13, 1983. Since then, the yard has witnessed spectacular growth and has emerged as a leading ship breaking yard in the world. This once beautiful beach has emerged as one of the choicest ship-scrapping destinations for the ship owners around the world.
There are 173 plots to carry out the ship-recycling activities. This activity forms an industry by itself, as it provides around 30,000 jobs in Alang itself and generates steel totaling to millions of tons every year. That too, with minimum consumption of electricity. It amounts to saving of huge amount of non-cyclic and precious mineral reserves like coal, petroleum etc. Ship breaking activities are also undertaken in the States of West Bengal, Andhra Pradesh, Tamil Nadu, Kerala and Maharashtra.
Ships are mobile structures of comprehensive size and consist mostly of steel. At the end of their active life, they become a sought-after source of ferrous scrap. This acts as an alternative to the non-renewable resource of ore and is particularly suited for the production of simple steel products. Obsolete vessels available for scrapping may also represent a useful source of supply for second hand equipment and components.
Breaking of ships on such a large scale necessitate extensive care on issues like physical and social infrastructure, worker safety and welfare, environment management, establishment of down stream and ancillary industries etc. These involve not only the financial resources but also many others influencing factors viz. proper knowledge base, compatibility of mindset between workers and the ship recyclers, availability of land and negotiation skills for legal issues.
Gujarat Maritime Board
Gujarat Maritime Board (GMB) as a regulator has put in sincere efforts to accelerate the growth of this industry. The procedure presently being followed is cutting the pipes from the engine section on which Asbetstos Containing Materials (ACMs) are present and bringing the same to the yard, where it is removed by wetting with water and scrapped to remove ACMs. The ACMs are then solidified by mixing with cement which are subsequently disposed of in Treatment, Storage and Disposal Facility (TSDF).
This method ensures safe removal of ACMs from the workers health point of view and also environment protection. GMB has developed a TSDF for treatment and disposal of hazardous wastes. The TSDF has 50,000 tonnes capacity for disposal of hazardous waste.
Millions of tonnes of steel is recycled by re-rolling mills. Many mechanical spares find their applications in one-way or other. Various electrical components hold special value for fixed set of customers. A truly strong platform to promote re-usability of products, which are otherwise considered to be scrap.
The present recycling facilities in the world are sufficient to take care of the world recycling requirements today. The capacity available for breaking ships in the world was estimated in 2005 at around 12 m.ldt (million light displacement tonnes) whereas ships coming to the ship demolition market have drastically come down to around 2 m.ldt. Since 2002, the availability of ships for demolition reduced from the level of 28.0 m.dwt (million dead weight tonnes) to 4.5 m.dwt.
Ship-breaking Business Booming
India’s share which slipped from 10.8 m.dwt in 2002 to about 1.0 m.dwt is having boom time at present though shipping companies world wide are bleeding due to present trends of the market. Prices of ships coming for demolition at about US$350/ldt, as against the melting steel scrap price of about US$230/tonne have been lowered by 40 to 50% today. In terms of weight in Light Displacement Tonnage (ldt), India’s share of 7 m.ldt during 2002 is expected to help in crossing its capacity to sell 4 million tones of steel by the year 2009.
The 1992 Basel Convention on the control of trans-boundary movements of hazardous wastes and their disposal, controls and regulates the import of hazardous wastes into the country. India is a party to the Basel Convention. It signed the Convention on 15.3.1990, ratified it on 24.6.1992, and acceded to the Convention on 22.9.1992. Import of such wastes may be allowed for processing or re-use as raw material, after each case has been examined on merit by the State Pollution Control Board.
As adapted from PIB

Vale confirms cancellation of 12 VLOC at Rongsheng yard, China

Brazilian iron ore giant has definitely scrapped an order for 12 very large ore carriers at Jiangsu Rongsheng taking the number of cancelled bulk carrier orders this year to around 250. The $1.6bn order, China's largest ever, is part of a general belt tightening for the Brazilian firm ahead of an expected tough 2009. The 400,000 dwt design would have been the largest ships ever built in the People's Republic. The order cancellation was confirmed by a senior official from Japanese trading house  Mitsui & Co while speaking at a conference in Singapore this week.


As adapted from Singapore Business Times

Shipping Industry Heading for Dry-Dock


More evidence that the downturn is here to stay for good! With the amount of trade going on, it is no wonder the Baltic has dropped to the current levels. It might take a few years before we see such rates again.

Friday, 28 November 2008

Has world trade ground to a halt? Has the world's shipping fleet been mothballed? The Baltic Dry Index, which measures the cost of shipping bulk commodities from iron ore to rice around the world and is often used as a proxy for international trade, has fallen 94% from its high last May to its lowest level since 1987. But while that may look alarming, the reality isn't so bad. Goods are still being transported, albeit at a falling rate. Shipping, which accounts for about 90% of world trade is likely to decline by just 0.5% next year, according to the Economist Intelligence Unit. The cost of shipping, as measured by the BDI, may have plummeted -- shipping a ton of dry bulk between Australia and China cost less than $4 a day Wednesday compared to almost $45 in May -- but ship operators still prefer running vessels at a loss than leave them idling. But not many will be able to sustain this level of losses for long.
The dramatic collapse in shipping prices is down to a number of factors. First, the economic downturn has led to a big slump in demand for commodities. The recent boom in dry bulk ended when the underpinning Chinese demand for iron ore began to wane, thanks to local stockpiling and the economic downturn. U.S. grain exports fell by a third, or 3 million tons, month-on-month in September, and Japan's coal imports halved to just 9 million tons. Hardly any iron ore has shipped in the last couple of months. Meanwhile, exporters have been pushing for cheaper shipping rates as their own margins were squeezed by the collapse in commodity prices.
Second, the industry suffers from chronic overcapacity. Over the last two years around 50 million tons have been added to a global fleet capacity of close to 420 million tons. But in 2009 and 2010, over 175 million tons is due to come into service. Some of these orders will need to be cancelled if shipping rates are to rise.
But the most pressing issue is the scarcity of letters of credit, the notes banks provide exporters to finance the goods being transported and guarantee payment on them. Banks' heightened risk-aversion means letter prices have soared, if they're issued at all, and that hits demand as exporters are less willing to ship goods. Addressing this lack of finance should be a priority: without it, world trade could grind to a halt.
As Adapted from Wall Street Journal