Thursday, June 25, 2009
Expert: China's economy has bottomed out
2009-06-23 20:30:09
BEIJING, June 23 (Xinhua) -- Statistics showed the decline in China's economy has bottomed out, said an article posted on the website of the National Bureau of Statistics (NBS) Tuesday.
A series of macro-control policies launched since the fourth quarter last year helped prevent the economy from slumping and China's economy now showed positive changes with the positive factors accumulating, said the article by Guo Tongxin from the Department of Comprehensive Statistics in the NBS.
The bottom of this round of economic downturn in China should be at the fourth quarter in 2008 and the first quarter this year, based on the year-on-year GDP changes, the article said.
GDP growth was 9 percent in the third quarter in 2008, then slumped to 6.8 percent in the fourth quarter and further down to 6.1 percent in the first quarter in 2009.
GDP in the second quarter this year was expected to be almost 8percent judging from the current GDP growth and main economic indexes in April and May, the article said.
The quarter-on-quarter GDP changes proved the bottom should be at the fourth quarter last year, the article said.
GDP growth was 2 percent up in the third quarter in 2008 from the previous quarter, 0.1 percent up in the fourth quarter, 1.5 percent in the first quarter this year and was expected to be 2 percent in the second quarter, the article said.
Figures on industrial output showed the bottom should be from November in 2008 to February in 2009, the article said.
Industrial output was rebounding since March and the figure in May was almost at the same level as in October last year. Industrial output was 8.3 percent up in March year on year, 7.3 percent up in April and 8.9 percent up in May.
Industrial output in the fourth quarter last year was down 3.4 percent from the previous quarter, but the figure in the first quarter this year was 3.2 percent up quarter on quarter.
Steel production began expanding in December last year and reached 1.85 million tonnes in May, the top level since last year.
Daily power generation began growing from March this year with figures topping 9 billion kilowatt-hours in March, April and May and almost 10 billion kilowatt-hours in the first ten days of June.
Despite these positive indices, China's economy faced obstacles to maintaining a stable economic rebound because of recession in most parts of the world, sluggish demand for Chinese products, production overcapacity in some industries and possible inflation, the article said.
Hanjin’s Jacksonville terminal faces delays
Seoul: Hanjin Shipping’s $208 million terminal at Dames Point in Florida could open two years later than originally planned. Jacksonville Port Authority Executive Director Rick Ferrin said the terminal could open as soon as late 2012 or as late as June 2013. The terminal construction timetable has been pushed back due to a lengthier permitting process and the company’s requirement that the terminal’s design was bid separately from the construction work, which takes longer than the design-build approach. [24/06/09]
CNOOC’s Huizhou refinery running close to full speed
Beijing: CNOOC's first major refinery in southern China aims to operate at near 90 percent of its 240,000 barrels per day capacity in July, rising from close to 80 percent in June, following its start-up in mid-March, company sources told Reuters on Tuesday. The high production target, coming along another two new refineries, would pile up supplies faster than the world's No.2 oil user can consume and force oil firms to extend aggressive fuel exports to thin high fuel stocks, industry officials said.
"So far, market demand looks okay as buyers are still hoping for another fuel price increase," said one official familiar with the plant's operations in the coastal city of Huizhou.
"But if the crude price slips to the $60-level, we will come under big pressure as buyers who earlier hoarded on hopes of price rises would start to release stocks."
China's apparent oil demand -- domestic refinery output plus net fuel imports but excluding inventory changes -- rose 6 percent in May in the quickest growth in 9 months, Reuters calculations from official data showed on Monday, amid more signs of economic recovery.
But part of that demand expansion may still sit in the tanks as wholesalers, rather than end consumers such as factories or truck operators, have stocked up in anticipation the government will again raise pump fuel prices soon after the June 1 hike.
After several delays, No.2 state refiner PetroChina will start up the by end of this month a 200,000-bpd crude unit in Dushanzi in the remote region of Xinjiang, which will effectively disperse more surplus fuel into southern and eastern parts of China.
The expanded 240,000-bpd Fujian refinery on the southeastern coast, a venture owned by Exxon Mobil, Saudi Aramco and top Chinese refiner Sinopec Corp , has started trial operations and aims for full runs in the second half of 2009, the company has said.
CNOOC is the parent of offshore oil and gas producer CNOOC Ltd. [24/06/09]
China Maritime Congress underway
Shanghai: China Maritime Congress, the event to define what Shanghai needs to do to become an international maritime centre as stipulated, is underway. More than 350 delegates are filing through the doors of the Pudong Shangri-La keen to hear the thoughts of the leading lights in Chinese shipping. The two-and-a-half day event will include the Seatrade Asia Awards gala evening tomorrow night where around 500 people will come and see winners of the 21 categories. For more information go to www.chinamaritimecongress.com [24/06/09]
Call for Shanghai tax cuts
Shanghai: If China’s financial metropolis is to become a genuine international maritime centre it must address the current taxation system and give owners in Shanghai special discounts, delegates attending the opening ceremony of the Seatrade-coorganised China Maritime Congress were told. Xu Jianqun, a member of the Shanghai Municipal Construction & Transportation Committee, noted how other shipping clusters around the world had started out by offering tax discounts and this was pivotal for Shanghai too if it wants to achieve the recently stated central government goal of becoming a fully fledged international maritime centre by 2020.
This observation was backed up Richard Greiner, a partner at law firm Moore Stephens, who quoted a British enquiry into the importance of tonnage tax which read: “The modern armoury in the battle for success invariably includes a virtually tax-exempt fiscal regime.”
Distributed at the event is Seatrade’s Shanghai special magazine, in which we interview COSCO president Wei Jiafu (pictured) who concurred with the mood of the opening session, saying Shanghai needs “to import specialized people from overseas and revise the whole tax system.” The conference continues through till Friday afternoon. [24/06/09]
Cloudy outlook for Dapeng Sun
Singapore: She was delivered six months late with reports of certain lingering malfunctions and now they have come home to roost. China’s first domestically built LNG carrier, Dapeng Sun, built at Hudong-Zhonghua to much fanfare for China LNG Shipping Holdings (CLNG), a joint venture company by China National Offshore Oil Corp. (CNOOC), COSCO and China Merchants Holdings Co. (CMHC), has headed to Singapore for urgent repairs just 14 months after she was completed. Classed by ABS, the ship is now at Sembawang Shipyard with reported issues regarding contamination of the bearing oil for the stern tube.
The ship is set to return to normal duties, shifting gas from Australia to southern China, in early July. Hudong-Zhonghua is currently engaged in building a further five similar 147,000 cu m LNG ships for the same owner. The yard, one of China's elite shipbuilding facilities, has been plagued with production issues of late. Last year the collapse of a 600t gantry crane (pictured) killed a number of workers and has nixed the use of a drydock for more than a year. [24/06/09]
No let-up in shipyard cancellations
Craig Eason - Wednesday 24 June 2009
SHIPYARD capacity is lower than originally thought, but the orderbook could still result in twice as many vessels being delivered than is needed over the next five years. However, demand is likely increase after 2013.
A new detailed report from Drewry Shipping Consultants has analysed the current newbuilding orderbook to assess the level of vulnerability and overcapacity.
Drewry has established three stages of shipbuilding demand between now and 2023. The results show that while productivity did not rise from 36m dwt between 2007 and 2008, the orderbook remains double the 97m compensated gross tonnage that will be required up to 2013.
During the subsequent five years, from 2014 to 2018, Drewry estimates that the industry will require 120m cgt new tonnage, and 139 cgt will be needed in the five years after that.
According to Drewy managing director Nigel Gardiner, future newbuilding requirements will be high, as over 60m dwt of older vessels head for scrapping over the next five years.
In the short term, Mr Gardiner suggested that the level of cancellations would remain high, especially in the dry bulk market.
According to Drewry figures, 6,864 dry bulk vessels were on order at the beginning of this year, giving a combined deadweight of 422m tonnes.
If dry bulk trades were to grow at the rates seen in the period 2000-2008, it would generate incremental new ship demand for approximately 100m dwt over a five-year period.
However, the latest projections suggest that over the next five years, trade growth is likely to generate new demand closer to 50m dwt.
“To this figure you must, of course, add demolitions over the period, but even then the combined total will make only a small dent on the 300m dwt that is currently scheduled to be delivered between now and the end of 2013. As such, do not expect trade growth to save the dry bulk market,” said the Drewry report.
“We fully expect the cancellations to to continue as the year progresses and as some of the announcements made several months prior become known,” said Mr Gardiner. He believes there will continue to be increased cancellations across all sectors over the coming two years as well as delays to deliveries.
Up to 30m cgt, representing 14% of the global orderbook, is currently at risk of cancellation, according to Drewry, with 170 cgt-175 cgt scheduled to be delivered up to 2013. The figures were somewhat hazy, said Mr Gardiner, as the future of a number of as-yet unbuilt Chinese yards remained uncertain.
Drewry estimates that the world’s shipyards delivered 2,173 vessels in 2008, equivalent to 36m cgt, which indicated an output only 0.4m cgt higher than 2007.
According to Mr Gardiner, this meant that the increase in shipbuilding capacity had not materialised. “The sheer scale of contracting has led to many builders committing to delivery dates based on wishful thinking,” he said.
In assessing the data, Drewry said it assessed specific criteria to determine the risks associated with the specific order, such as who the owner is, the yard and its location.
“We took the orderbook at the beginning of the year of the 10,000 plus cargo carrying ships on order,” said Mr Gardiner. “We looked at every order line by line and tried to assign some cancellation risk assessment.
Drewry’s also noted pronounced variation of risks on a sector by sector basis. The higher orderbook cancellation was clearly bulk carriers, with 21%, while in the tanker orderbook it was 8%.
U.S. Steel sees order pick-up, blasts China
Wednesday, 24 June 2009
U.S. Steel Corp, which has been operating at less than half its capacity during the economic downturn, is on the verge of ramping-up production as orders improve, its chairman and CEO said Tuesday. John Surma also blasted China for undermining the global steel industry through subsidies and tax benefits and called on the country to play by world trade rules.
"Our general policy is to keep production in line with what our customer demands are," he told Reuters in an interview. "There has been some improvement in order rates and from that you may derive that we are about to make a bit more steel.
"We're going to be supplying our customers with what they order and we are getting some better order flows," he said during a steel conference organized by American Metal Market.
Surma did not give an exact time frame or details of an increase in production, but indicated the possible restart of a blast furnace in Granite City, Illinois.
The economic downturn has forced most steelmakers to reduce production in the face of slumping demand and Surma has jokingly referred to the industry as "40-percent land," since U.S. Steel and many producers are at less than 50 percent capacity.
China potentially "destructive" to world steel market
During an address to the Steel Survival Strategies conference, Surma attacked China on the same day U.S. Trade Representative Ron Kirk said the United States had launched a World Trade Organization (WTO) complaint against China over its export restrictions on raw materials.
"We were pleased to see the USTR initiated a WTO case today on certain raw material export restraints," said Surma, who also mentioned a previous complaint involving steel pipes, which are used in the oil and gas industry.
"We believe that activity did damage the OCTG (Oil Country Tubular Goods) market," he said, adding it forced curtailment in production and employee layoffs.
He noted that global economic stress is bound to create tensions within the world trading system, with every company working to improve its own position.
"But in countries and regions that are unconstrained by the due process requirements of the U.S. justice system, we are already seeing signs of trade actions that seriously undermine the global steel market," Surma said. "Nowhere are these destabilizing actions more apparent than in China,"
China is the world's largest steel producer and exporter, and companies like U.S. Steel "are competing with what amounts to a coordinated, national enterprise," he said. "Because of its size, and its system, the Chinese steel industry has the potential to be very disruptive to our global industry."
Monday, China's Ministry of Finance said it would cut taxes on some exported steel products by 5 percent to 10 percent starting July 1, to help domestic producers ease their excess supply.
Surma criticized the move as "an example of the kind of very destabilizing, nontransparent policy changes that can take place at a moment's notice.
"American producers ... stand to be harmed by these trade-distorting actions, which ... China took characteristically without any transparency in process or policy."
He noted China is free to develop its industrial capacity according to its economic plan.
"But when a product of that system enters the global market, we do have a basis to comment or object and we believe China must comply with the rules," he said.
U.S. Steel stock was up 1.7 percent at $34.71 in afternoon trading on the New York Stock Exchange.
Source: Reuters
Steel producers confirm output beginning to rise
Wednesday, 24 June 2009
Global steel producers are cautiously increasing production -- albeit from extremely low levels -- as signs emerge of modestly improving demand and recovering investor confidence, industry leaders said Tuesday. Speaking to participants at American Metal Market's Steel Survival Strategies conference in New York City, ArcelorMittal SA CEO Lakshmi N. Mittal said he has been seeing "green shoots" of stronger demand.
"Chinese steel demand is now forecast to show growth this year compared with a previously expected decline," he said. "The de-stocking period has led to historically low levels of inventory, for example here in the United States, where inventories are at their lowest since 1983."
After Mittal's remarks, John P. Surma, head of Pittsburgh-based United States Steel Corp., indicated the likelihood that at least one blast furnace will be restarted at the company's mill in Granite City, Ill.
"Market conditions have improved a bit lately," he told conference participants, but like Mittal he was not sure if the improvements will last.
Part of the current upturn stems from U.S. carmakers, Surma said. He cited General Motors Corp.'s move to discontinue several unprofitable brands, Chrysler LLC reportedly being near an end of its bankruptcy process, labor concessions for both companies and an expected uptick in sales from the recently passed cash-for-clunkers bill.
"We're encouraged that there is some stability is returning to the domestic auto industry. We're very excited about what's happening with GM," he said.
Both ArcelorMittal and U.S. Steel derive about 15 percent of their revenue from carmakers.
The strengthening demand is returning some pricing power to steel companies. For example, ArcelorMittal has announced August sheet price increases of about $50 per short ton, which follows a smaller price hike for July.
Both Mittal and Surma also noted their companies' recent success in raising funds. Surma said U.S. Steel 's public offering of common stock and senior convertible notes raised nearly $1.5 billion.
"Maybe the capital markets are sensing that the worst is behind us," Surma said.
Mittal said his company has raised several billions of dollars in the last few months.
In afternoon trading, shares of ArcelorMittal rose $1.38, or 4.5 percent, to $31.95. Shares of U.S. Steel gained 44 cents to $34.56.
Source: Associated Press
Pirates free ship for ransom -- but leave body behind
Wednesday, 24 June 2009
A Dutch ship and its Ukrainian crew was Tuesday freed by pirates after a 1.3-million-dollar ransom was paid, but rescuers found a dead sailor aboard the vessel taken six weeks ago off Somalia. The pirates shot dead a Ukrainian sailor when the MV Marathon was taken on May 7, Ukrainian intelligence and Dutch defence officials said, adding that a second member of the the ship's eight-strong crew was also wounded by gunfire.
Dutch defence ministry spokesman Marcel Pullen told AFP: "The crew are all Ukrainian. They are all exhausted."
The Dutch navy found the body when a warship met the vessel after it cleared the Somali coast, and Pullen said the MV Marathon was being escorted to a "safe port" by the Dutch frigate De Zeven Provincien.
Dutch news agency ANP said a ransom was dropped to the pirates from the air. Interfax later cited Ukrainian intelligence chief Mykola Malomuj as saying it amounted to 1.3 million dollars in cash (about 930,000 euros).
It said Malomuj told how the last pirate left the ship in the dead of night at 2215 GMT, adding that the freed ship would arrive in "a nearby port" on Friday or Saturday.
The crew's return to Ukraine, however, would possibly take until the start of the week.
A statement from the Ukrainian presidency said that the dead crew member was welder Sergei Vartenkov. The cook Georgi Gussakov was the other man shot and injured.
According to Malomuj, the killing did not emerge until after the ship's release because the pirates had threatened the crew if they managed to speak to family members or the ship's owners.
Ukraine President Viktor Yushchenko offered his condolences to Vartenkov's family while praising the work of state services, his press service said.
A Dutch medical team was with the crew of while the foreign ministry said defence investigators were also on the ship, which was carrying coke, a coal residue used in steelmaking.
"I am shocked by the cowardly murder of a member of the crew," Dutch Foreign Minister Maxime Verhagen said in a statement.
"The Netherlands will do everything to end these practices, by putting Dutch navy ships into operations against piracy and supporting the creation of a regional tribunal so that the criminals do not escape punishment," the minister added.
Five pirates detained by the Dutch navy in January are being held in the Netherlands awaiting trial.
Somali pirates still hold 14 ships carrying more than 200 sailors, nearly a quarter of them Filipinos, according to the latest figures from the International Maritime Bureau.
Western powers, Russia, China and other nations have deployed dozens of warships in an anti-piracy task force off the Somalia coast. Despite the involvement of more than 20 countries attacks are still regularly reported.
A Portuguese frigate foiled a pirate attack on a container vessel in the Gulf of Aden on Monday, capturing eight pirates.
By contrast, seven Seychelles nationals held hostage since late March were released on Monday, said Seychelles President James Michel.
Japan's parliament on Friday voted to increase Tokyo's involvement in the force because of the importance of the shipping lanes around Somalia.
Japan's two destroyers there had no prior mandate to use force except to protect Japanese interests or when acting in self-defence.
The new legal provisions allow the warships to protect any commercial ships threatened by pirates, not just those sailing under the Japanese flag or carrying Japanese nationals or cargo.
Source: AFP
SFL - Appointment of Chief Executive Officer
Wednesday, 24 June 2009
Ship Finance International Limited has employed Ole B. Hjertaker as the new Chief Executive Officer ("CEO") of its management company. He is currently serving as Chief Financial Officer ("CFO") of the Company, and will assume his new role with effect from July 1, 2009. Mr. Hjertaker has been in his current capacity with the Company since 2006. His prior experience includes 12 years as a corporate and investment banker, mainly within the Maritime/Transportation industries, and he holds a Master of Science degree from the Norwegian School of Economics and Business Administration.
Chairman in Ship Finance, Mr. Hans Petter Aas said in a comment: "We are very pleased to announce that Mr. Hjertaker has been appointed CEO for Ship Finance. He has, during the three year period as CFO, demonstrated a strong ability to identify and develop new business opportunities for the Company. Mr. Hjertaker has also taken an active part in developing a very competent management team to run Ship Finance, and we believe the Company is very well positioned with a substantial asset base and strong capital structure."
Source: Ship Finance International
Bill seeks immunity for mariners who wound or kill pirates
Wednesday, 24 June 2009
Rep. Frank LoBiondo (R-NJ) has introduced legislation in the House to provide immunity to U.S. merchant mariners who wound or kill pirates while responding to a pirate attack. Rep. LoBiondo is the Coast Guard and Maritime Transportation Subcommittee Ranking Republican.
"Our merchant marine fleet is increasingly under attack from unlawful individuals and rogue groups that seek to disrupt commerce, seize U.S. and foreign crews, and instill fear on international waters," LoBiondo said. "It is only appropriate that our fleets be legally allowed to defend themselves from these violent encounters. This common-sense legislation is a necessary step in empowering U.S.-flagged vessels to fully protect their crews and cargo."
The United States Mariner and Vessel Protection Act (H.R. 2984) directs the Coast Guard to establish standards for when a merchant mariner on a U.S.-flag merchant vessel can use force against an attacker. Any mariner using force within those standards, and the owner, operator or master of any vessels would be exempt from liability in U.S. courts as a result of that use of force.
The bill also directs the United States to negotiate international agreements through the International Maritime Organization to provide similar exemptions from liability in other countries for the use of force by mariners and vessel owners, operators and masters.
The recent hijacking of the U.S.-flag Maersk Alabama by Somali pirates, during which the pirates kidnapped the ship's captain, highlighted the need for mariners to be able to defend themselves from attack.
The bill is cosponsored by U.S. Rep. John L. Mica (R-FL), U.S. Rep. Don Young (R-AK) and U.S. Rep. Howard Coble (R-NC).
"I commend Congressman LoBiondo for writing this bill to provide the necessary protections for mariners to freely defend their ships from pirates bent on killing, stealing and crippling worldwide commerce," said Mica, who is the Republican Leader of the Transportation and Infrastructure Committee.
Source: Maine Log
Muhyiddin Wants More Focus Given To Maritime Technology
Wednesday, 24 June 2009
More attention should be given to the role of technology in order to sustain the efforts towards combating security threats in the Strait of Melaka, Deputy Prime Minister Tan Sri Muhyiddin Yassin said. "While we have been clear and unequivocal in our objections to the physical presence of foreign forces patrolling the strait, we welcome the transfer of technology and capacity building to enhance safety and security of the strait," he said in his keynote address at the 6th MIMA Conference on the Strait of Malacca, themed "Charting the Future", here Tuesday.
He said that the Eye-in-the-Sky aerial surveillance had succeeded in reducing piracy cases in the Strait of Melaka, with only two cases reported last year compared to 12 in 2005.
Only one case has been reported so far this year, he said.
He said technology was crucial in helping Malaysia and the littoral states to meet challenges in the strait such as the burgeoning traffic volume.
"This is critical given that vessels traversing the strait were expected to increase to 120,000 by the year 2015 compared to 75,000 last year.
"I would be very interested to see how technology-based projects such as the Marine Electronic Highway can contribute to reducing navigational risks," he said.
He noted that the maritime and aerial surveillance technology was advancing at a rapid pace and might soon be available at a fraction of the cost.
"Perhaps this is an opportune time for us to explore the use of technologies for surveillance such as long distance day and night cameras, unmanned aerial vehicles and satellite imaging," he added.
The Deputy Prime Minister also said that users of the strait comprising flag states, ship owners, masters and crew members had a duty to abide by the international and domestic laws aimed at preventing vessel-based pollution.
He said the regulations, in the form of international conventions and protocols, should be considered by the littoral states and users of the strait in the efforts to ensure safety of navigation and environmental protection in the Strait of Malacca.
"No doubt we have come a long way and achieved substantial progress but there is still a need to forge unanimity among all concerned including among the littoral States on how best to fulfil responsibilities regarding safety and security of navigation and protection of the environment in the strait," he added.
Muhyiddin added that Malaysia would examine the applicability of new conventions and committed to implementing the ones which had been ratified and also considered ratifications of other conventions.
Source: Bernama
Is volatility the name of the game for the dry bulk market?
Wednesday, 24 June 2009
Although latest reports from Hellenic shipbrokers indicate that the Baltic Dry Index should only be seen as a reference point for the industry and nothing more, the index's latest behavior could be regarded as erratic to say the least. Volatility is a major concern among ship owners who find themselves amid an environment where tomorrow could prove totally different from today and even more from yesterday. Yesterday, the BDI was down 3.84 percent from Monday's session, ending at 3,874 from 4,029 the day before. It lost 155 points with the capesize sector proving to be the more vulnerable, as was the opposite case (the main gainer) during the previous rises. The relative capesize index (BCI) lost 468 points yesterday to end at 7,411, which is still enough to see rates of $83,257 on average, despite losing $5,680 on a day-to-day basis. While supramaxes and handysizes remained relatively unchanged, panamaxes followed the fall of the capesizes albeit at a much slower pace, ending down by just 47 points at 3,012 points or $382 on average.
As shipbrokers have pointed out this market, although largely fluctuating and far from being stabilized keeps offering opportunities to reap enough profits to keep companies afloat. What's more important is that owners who have secured financing to invest in expanding their fleet of bulk carriers, will be among the beneficiaries, despite the fact that ship values have been on the rise lately. They are still much lower (more than 50% in most cases) from the highs of 2007-2008, which means that they can provide ground for profits at today's market. It's also important to state that many owners are actively seeking ways to hedge their risks, by adding more of these lower-valued vessels at their fleets, in order to improve their overall profit margins. This tactic can lower capital costs and boost their chances of weathering the crisis, instead of being stuck with a highly expensive fleet, which wouldn't be able to offer a sensible return on investment.
According to brokers Barry Rogliano Salles' latest weekly report on the dry bulk market, the BCI gained nearly 20% last week, while the panamax market was also pulled along by the Capes. “Once again, Chinese ore imports provided the fuel for the fire. With the delivered price of imported ore currently around $70-75 per ton, the argument for imported ore over domestic supplies remains extremely strong. Underlining this trend, UNCTAD this week predicted “a great Chinese shakeout” with a significant shift towards more imports by the country. The agency now estimates 40% of Chinese mines (or 130m – 150m tons of ore capacity) will close between now and 2012, eliminating a large part of the local market. Around half of Chinese ore mines are now operating at a loss due to the effect of lower freight rates and higher production costs, added UNCTAD” the broker said.
If this year's contract price remains in line with, or even below current spot rates, the incentive for importing ore will continue. BRS also noted that “there was little news on the contract front, although the first European deal (ArcelorMittal) was signed at prices in line with Korean and Japanese terms. There are now reports the Chinese could abandon the contract system altogether for 2009/2010, and leap straight to negotiating contract prices for next year”.
Tuesday, June 23, 2009
OPEC's Report: Oil Market Have Entered A New Environment
Tuesday, 23 June 2009
As oil prices seem to have stabiles at levels over $70 per barrel optimism has returned to the market. At the same time the need of pumping more oil from OPEC members emerged again as the fear that economic crisis is not yet history still exists. At its last Monthly Oil Market Report, covering the month of May, OPEC underlines that the worst has passed for the world economy, but at the same time, it marks key uncertainty facing the market is the sustainability of the more optimistic sentiment currently in the market. “A key uncertainty is the sustainability of the more optimistic sentiment currently in the market, which will largely depend on improvements in the real economy and in financial markets. While the acute tightness in credit markets has begun to ease and equity markets have staged a steady recovery – although from a low base – economic prospects for the coming quarters remain uncertain. Despite spreading optimism that the deep economic downturn may reach bottom in the coming quarters, the world economy is still facing considerable challenges. In the
OECD region, unemployment is still rising; bank balance sheets remain shaky; and private consumption, investment and exports are expected to remain subdued. These concerns could dampen or delay a global recovery. Moreover, markets are beginning to worry about the consequences of the huge public deficits”.
OPEC’s report acknowledged that the oil market appears to have entered a new environment. At the beginning of the year, most institutions were expecting that a continued deterioration in fundamentals would naturally exert downward pressure on prices, particularly over the seasonally lower-demand second quarter. However, despite continuous downward revisions to economic growth and demand expectations along with a growing supply overhang, such pressures never materialized. Instead, prices have not only remained steady but have even moved higher. Between February and May 2009, inventories and prices switched from the traditional inverse relationship to move in parallel, with higher inventories coinciding with higher prices.
Financial market developments have been an important factor behind this recent divergence between oil market fundamentals and prices. Crude oil prices have shown a strong correlation with developments in the equity markets as well as fluctuations in the US dollar. The rise in equities generally reflects an improving sentiment about the
outlook for the world economy and hence oil demand growth. As a result, crude futures and equities have risen in tandem, on the general perception in the market that the worst is over for the world economy.
The growing imbalance has resulted in a contango market structure which has provided an incentive to build inventories both onshore and in floating storage. This has helped to push OECD commercial crude oil inventories toward maximum operational capacity, last experienced at the time of the Asian crisis in 1998. However, looking at the difference with the five-year average, inventories appear to have peaked. This turnaround is in large part due to OPEC efforts to stabilize the market by reigning in excess supply and is the result of strong compliance of
the OPEC Member Countries with production adjustments. Moreover, seasonal demand changes and the narrowing contango should also support a decline in the overhang in OECD crude stocks and floating storage, although from very high levels of 70 mb and 100 mb respectively.
As for the oil market, demand for gasoline typically surges during the summer driving season and refiners try to increase their throughputs. Over the last few weeks, some positive developments have been seen in the gasoline market.
However, under the current economic situation, gasoline demand is not expected to increase significantly in the coming months and hence would provide only limited support for the oil market. Additionally, ample spare refinery capacity in the Atlantic Basin should ease any risk of gasoline supply shortages during the current driving season.
In light of the considerable challenges the world economy and commodity markets, particularly the oil market, have undergone, the worst appears to be behind us. Providing this more optimistic sentiment holds, ongoing efforts to reduce the excess supply is the key factor in supporting market stability and should help to gradually bring commercial inventories back to more healthy seasonal levels by the end of the year. In line with these efforts, OPEC Member Countries at the recent Meeting of the Conference have reiterated their firm commitment to agreed production levels, as well as their readiness to respond swiftly to any developments which might place oil market stability at risk.
Contango decline hits VLCC market
Tuesday, 23 June 2009
The very large crude carriers (VLCC) market is currently witnessing a slump as selling oil in 'future' becomes less profitable, suggests a monthly report by the Organisation of the Petroleum Exporting Countries (Opec) About 19 VLCCs that had earlier found use as floating storage for oil for the past four months returned to the market in May, the organisation's June report said.
"The weakest sector in May was once again the VLCC sector, which is apparently the sector that suffers most from the continuing global economic crisis and Opec production adjustments. High tonnage availability of the VLCC sector in May was enhanced by the return to the market of as many as 20 vessels that were tied up in storage operations," said the report.
Estimates put the number of VLCCs that were still tied up in storage operations at the end of the month at about 34 vessels, down from 53 at the end of April, representing about seven per cent of the global VLCC fleet.
The report comes close on the heels of a report from Energy Intelligence that has said about 11 million barrels of oil that had been stored in VLCCs has returned to the market. While an estimated 83 million barrels of oil were being stored on VLCCs in the first quarter of this year, the number has come down to 72 million barrels, it said.
Many more millions of barrels are to be released by the end of June, the Energy Intelligence analysts asserted.
In contrast, the clean tanker market that is involved in transfer of crude and refined products instead of storage, witnessed a relatively good month in May compared to the previous four months in 2009, Opec said. "The month ended with gains in all other vessel categories with the clean tanker market performing even better. In May, storing at sea lost momentum towards the end of the month with the narrowing of the contango structure in crude oil futures," said Opec.
A contango, which is the difference between future and spot prices, has sublimed now with the difference in prices of crude meant for delivery now and a few months ahead being reduced to a range of 50 cents and $1. The different had shot up to $8 in February this year.
Taking the top vessel categories into consideration, average spot freight rates for crude oil tankers were five per cent higher in May compared to the previous month, yet 69 per cent lower compared to the same month a year earlier, said Opec. "Once again the VLCC sector was the weakest in May, declining by a further five per cent from already very low rates the previous month," it said.
It is estimated that about 28 new VLCCs entered the market since the beginning of the year with very few getting out, said Opec.
Dry bulk shipping finances are through the worst: bank
Tuesday, 23 June 2009
Commodity-shipping lines are "through the worst" after last year's market collapse hurt companies' finances, Nordea Bank AB said. The Baltic Dry Index, a measure of shipping costs for commodities, plunged a record 92 percent last year as steel demand and the global economy slumped. That cut vessel values and prompted companies including Hellenic Carriers Ltd. to get waivers on loan rules, or covenants. At least five shippers including Armada (Singapore) Pte have sought bankruptcy protection because of the market's plunge.
"There has been a lot of renegotiations and restructuring of many loan facilities," Carl Steen, head of the shipping, oil services and international division at Nordea Bank Norge ASA, said in an interview at a TradeWinds conference in Oslo today. "We have been through the worst period."
Steen told the conference he "would not be surprised" if more than 30 percent of the new ships on order were canceled over the next three years. That would affect commodity ships "to a great extent" and tankers "to a limited extent," he said. Cancellations across all fleets are currently in the mid- 20 percent, Steen added.
The world's fleet of dry-bulk vessels will expand 42 percent this year and next, according to estimates from London- based Drewry Shipping Consultants Ltd. The figure from Drewry's May monthly report is based on current order books and doesn't include scrapping, delays and cancellations.
Equity over debt
Shipping companies will have to finance new vessel deliveries by selling equity rather than taking on debt "because there is not sufficient banking capacity in the market," Steen said.
Credit has been tougher to get since Lehman Brothers Holdings Inc. failed last September, sparking a financial sector crisis and forcing governments around the world to inject funds and take over banks. Lloyds Banking Group, Britain's biggest mortgage lender, is now 43 percent state-owned.
DryShips Inc. raised US$475 million last month from a share sale and yesterday announced an agreement with a Deutsche Bank AG-led syndicate to waive terms on a US$1.125 billion credit line.
Operators of tankers carrying loads such as crude oil may face a "difficult period" this year and in early 2010 but on "long-term it is not looking that bad," Steen said.
Tankers with one layer of steel separating their cargoes from the ocean will be outlawed under international rules coming into force next year and taking full effect five years later.
Source: Bloomberg
Three SOE giants jointly build South China's biggest shipyard
Tuesday, 23 June 2009
Three major central state-owned enterprises (SOEs), hina State Shipbuilding Corporation (CSSC), Baosteel Group Corporation and China Shipping (Group) Company, have joined hands to establish CSSC Guangzhou Longxue Shipbuilding Company (CSSC-GLS), creating the largest shipbuilding enterprise in South China.
On June 19, an inauguration ceremony for CSSC-GLS and a ceremony to mark the undocking of new ships were simultaneously held at the Longxue shipbuilding base, where the Pearl River joins the sea in Nansha District of Guangzhou.
CSSC's General Manager Tan Zuojun said that despite the international financial crisis, Baosteel has continued to invest in the Longxue shipbuilding base having already injected capital into Shanghai Waigaoqiao Shipbuilding Company and the Changxing shipbuilding base.
Not only has China Shipping placed the first order to Longxue shipbuilding base, but the company has also firmly invested in the shipbuilding project. This has fully demonstrated the confidence of Baosteel and China Shipping in the Chinese shipbuilding industry's long-term development.
The three central SOEs collaborated to invest in the shipbuilding project, fully developing their respective advantages in upstream and downstream industries such as steel, shipbuilding and shipping to realize a connection between different industries.
As a result, a new industry development structure is taking shape with mutually beneficial interaction and advantages complementing each other among different industries. This has a profound significance in strengthening the Guangdong area's vitality in economic development.
The Longxue shipbuilding base is one of three major shipbuilding bases planned by the state. Located in the northeast of Longxue Island of Nansha District in Guangzhou City, it covers an area of 437 hectares, excluding the 72-hectare inner basin.
The shoreline of the base is 4,500 meters long, with a depth of 1,300 meters. CSSC-GLS is the core enterprise in the Longxue shipbuilding base. With a registered capital of 2.72 billion yuan, it is jointly funded by CSSC, Baosteel and China Shipping with their investment accounting for 60, 30 and 10 percent respectively.
The company occupies an area of 2.53 million square meters with a depth of 1.3 kilometers in its center. It has two extra large docks to construct vessels over 300,000 tons, four 600-ton gantry cranes and the world's most advanced production and processing equipment.
Its target products include various kinds of civilian ships such as very large crude carriers (VLCC), Suezmax tankers, Aframax tankers, very large ore carriers (VLOC), bulk carriers and large container ships.
Its first phase shipbuilding capacity is designed to deliver 20 vessels or 2.12 million DWT (deadweight tons) per year. After the capacity expansion project is completed, shipbuilding capacity will reach 3.5 million DWT per year.
The company has currently secured orders for 18 vessels with a total of 4.16 million DWT. Delivery is scheduled for the end of 2011. By the end of May 2009, construction of a total of seven ships of VLCC of 308,000 DWT and VLOC of 230,000 DWT had already started. Four vessels have been dry-docked.
Source: People's Daily Online
National port regulator in the offing
New Delhi: The Union Ministry of Shipping has decided to set up an authority to regulate the functioning of major ports along the coastline of the country.
The department on Monday circulated the draft of the new law it proposes to enact to set up the authority under the Major Ports Regulatory Authority Act, 2009.
The regulatory authority would comprise a chairman and four members with a five-year term and would have the liberty to set up regional offices as well.
The authority would decide on the rates for the facilities and services provided at the major ports and to monitor the performance standards of the port authorities and private operators providing such facilities and services.
The authority would also be vested with powers to arbiter specific disputes between port authorities and private players and groups of users. [23/06/09]
Monday, June 22, 2009
Safe Bulkers, Inc. Announces the Sale of Panamax Class Vessel
Monday, 22 June 2009
Safe Bulkers, Inc., an international provider of marine drybulk transportation services, announced the sale of a Panamax Class Vessel. Fleet Update. The Company announced today that it has entered an agreement to sell a 76,000 dwt Panamax class vessel built in 2003 for $33 million, excluding commissions to brokers. The vessel will be delivered to its new owners in December 2009. The extended delivery period, which exceeds the market standard of three months, will permit the Company to employ the vessel in the spot market through December 2009. Proceeds from the sale of the vessel will strengthen the Company's balance sheet.
The Company also provided additional details regarding its entry into a resale agreement to acquire a Capesize class newbuild vessel to be delivered in April 2010, which had been previously announced in a press release dated June 8, 2009. The acquisition price for the 177,000 dwt newbuild is $63 million, including commissions, and the vessel will be delivered by the Shanghai Jiangnan Changxing Shipbuilding Co., part of the SWS group.
Management Commentary
Polys Hajioannou, Chairman of the Board of Directors and Chief Executive Officer of the Company, said: "The sale of one of our older vessels for $33 million, excluding commissions to brokers, is consistent with our business strategy of operating a young, high quality fleet while taking advantage of attractive opportunities to make vessel sales and acquisitions. One such recent opportunity involved a previously-announced acquisition of a Capesize vessel for $63 million, including commissions, from a well-regarded shipyard. We continue to actively manage our fleet during this global economic downturn."
Source: Safe Bulkers Inc.
Shipping companies still face uncertainties for rest of year
Monday, 22 June 2009
The possibility of container shipping companies returning to a sustainable business environment in the near term is still uncertain although there are some positive developments regarding term freight rates.
Freight rates, usually determined by demand for goods from Asia to the West, have dropped 50% to 80% since the last quarter of last year due to the global economic crisis.
In an effort to mitigate the fall, large shipping companies have come out with several rate restorations and increases after the first quarter this year.
AmResearch investment analyst Hafriz Hezry said only about 30% of customers actually paid the full amount of the increase in container shipping freight rates announced in April by major companies.
“It’s a good effort by shipping companies, but under the prevailing market condition, importers and exporters can still go for cheaper spot rates,” he told StarBiz, adding that the increase in rates might see more supportive results just before Christmas and the Chinese New Year.
He said the bearish outlook for container shipping was also partly contributed by oversupply of vessels.
Hafriz said only 4% of the total global container fleet was over 25 years that could be scrapped. “And the demand for container shipping is also quite fragmented as it differs from country to country. This is also a factor delaying the recovery of the sector.”
CMA CGM, one of the top three global shipping giants, announced rate restoration on the Asia-Europe trades that would see an increase of US$300 per 20ft equivalent units effective July 1.
Similarly, Singapore-based Neptune Orient Lines has raised its freight rates for its Asia-Europe trade.
AP Moller-Maersk, the world’s largest container shipping company, said the outlook for the rest of the year would be subject to considerable uncertainty, especially due to the development in the global economy.
“Specific uncertainties that are related to the development in container freight rates are transported volumes, the US dollar exchange rate and oil prices,” it said in a recent interim management statement.
Compared with the first quarter, it said crude oil prices for the remainder of the year were assumed to be slightly higher, just as the diminishing decline in freight volumes in the container trade was expected to reduce the fall in freight rates.
“These conditions, combined with an increased effect from cost savings, are expected to improve the group’s earnings in the second half his year.
“A continued loss is expected in the second quarter and it cannot be ruled out that the total result for this year could be negative,” it said.
MISC Bhd, despite the earnings drag from its loss-making container division, would still enjoy positive bottom line as its earnings would be buffered by a stable revenue stream from liquefied natural gas and its offshore and heavy engineering division, which made up almost 100% of the group’s earnings, according to AmResearch in its latest sector update.
The bigger casualties of the fall in container freight rates are Halim Mazmin Bhd, which will be going private later this year, and Nepline Bhd, which posted a net loss of RM2.9mil for its first quarter ended March 31.
On the dry-bulk segment, which has seen a significant improvement to 3,763 points on June 15 from its lowest level last year at 663 points on Dec 5, Hafriz is confident it would be quite stable this year due to the concentration of iron ore exports to China, the world’s biggest iron ore consumer.
“This is due to China’s stimulus package, which focuses on the construction sector that uses a lot of steel,” he said, adding that China consumed about half of the sea-borne iron ore trade last year.
Source: The Star Malaysia