The Alibra blog:


"A weekly snapshot of shipping markets"

  • 16/10/2017 - Alibra Shipping 0 Comments
    Sulphur 2020: Coming, ready or not

    Some 70% of shipping companies surveyed say they do not believe the industry is ready for IMO’s 2020 deadline, when a global limit of 0.5% sulphur will be imposed on marine fuel for vessels trading internationally. That was the headline finding of a new survey conducted by CE Delft on behalf of Exxonmobil. 


    The survey suggests that only 500 ships have been equipped with scrubbers. There has been something of a backlash against scrubber technology, most notably from Maersk and Klaveness, who have said they see the technology as being expensive and immature.

    Lasse Kristoffersen, CEO at Torvald Klaveness, last year said scrubbers are a costly investment, costing between $2.0 and $4.0m, which can sometimes be greater than the value of the vessel itself.

    Other respondents to the ExxonMobil survey said they were concerned that shipping companies would cheat and falsify the sulphur content of their marine fuel. Could this be a tacit admission that port states do not intend to or will not be able to enforce the 0.5% cap in their own waters?

    Time is running out to solve these problems. A little over two years remains before the global cap is imposed and shipping companies have few options with which to comply with the new regulation.

    Maersk has favoured using alternative fuels to installing scrubbers. It is likely that, rather than investing in abatement technologies, carriers will instead make an en-masse switch to 0.5% gasoil (or 0.5% fuel oil) come 2020. The International Energy Agency in 2015 estimated that around 2.2m bpd in maritime fuel demand would switch overnight to 0.5% gasoil. Separately, the International Bunker Industry Association (IBIA) has estimated the figure at 4.0m bpd.

    This poses its own problems: what mix of fuels will be available in 2020 and at what cost for each type? Refiners have not been so forthcoming with information about what new capacity they are adding to deal with the expected rise in demand. If ship operators do switch to gasoil, they will have to compete with truck drivers and SUV owners to buy the fuel, which could drive up prices and possibly lead to shortages in supply.

    Meanwhile, there will be a loophole for shipowners in 2020: vessels will be permitted to sail without compliant fuel if none is available, even if they do not have scrubbers installed.

    On the other hand, perhaps we’re being too pessimistic. It remains possible that early adopters of scrubbers will have recouped all their outlay by 2020 if the retrofitted vessels have traded extensively in emission control areas before the cap enters into force. And if the price of distillate fuels rises significantly over the next 26 months, there could still be time for early adopters to make their money back.

    Any additional costs that are incurred by using ultra-low-sulphur marine fuel (because it certainly won’t be any cheaper than HFO) will need to be shouldered ultimately by the shipper. If significant or volatile price differentials open up between gasoil and crude oil and fuel oil and crude oil, it will be all the more important to use hedging and bunker adjustment factors (BAF) wisely. This will mean that existing freight contracts (like COAs) and new long-term contracts that go beyond 2020 will need to accommodate this.

    Although just over two years remain before the sulphur cap deadline, there are no easy answers as to how best to comply but shipping companies should start planning for tomorrow today.

    Read More
  • 06/10/2017 - Alibra Shipping 0 Comments
    Is the Jones Act nearing its expiration date?

    The US and UK have both seen swings towards political
    populism in the past couple of years, leading to some surprising election results
    on both sides of the pond. In both countries, populist political rhetoric has
    seemed to be increasingly in favour of economic protectionism, particularly in
    terms of trade, although little action has been taken so far.

    Of course, the US already has its flagship protectionist
    policy – the Jones Act – which has been in effect since 1920. Under the
    statute, only vessels that have been built, flagged and crewed in the US can operate
    in cabotage trades, through bareboat charter agreements only.

    Following Hurricane Irma, the Trump administration permitted
    foreign-owned tankers to deliver fuel to Florida ports by issuing a Jones Act
    waiver. After some wrangling, the administration issued another Jones Act
    waiver to allow vessels to bring aid to Puerto Rican ports last month as part
    of the hurricane relief effort.

    Mr Trump has said any further
    waivers will be difficult to issue because of the influence in Congress of
    lobbyists from shipowners and seafarer unions. At the same time, deregulation
    is a hallmark of Trump’s agenda. Given the events of the past month, it would
    seem logical that the Jones Act might be one of the regulations up for repeal,
    but so far the Trump administration has stood firm.

    Senators John McCain and Mike
    Lee have introduced a bill to make the Jones Act waiver permanent for Puerto
    Rico. If passed, the country would be added to the list of exempted countries alongside
    the US Virgin Islands, which were excluded from the Act in a 1936 amendment.

    If McCain’s bill passes, it’s
    possible that Alaska and Hawaii will demand similar waivers, which if effected would
    mean the Jones Act trade, by and large, would cease to exist. However,
    McCain’s earlier attempts to repeal the Act have all failed.

    One argument – from shippers – to axe the Act is cost. It is
    cheaper for Hawaiian cattle ranchers to fly their animals to mainland America
    than transport them by sea on Jones Act vessels. A 2012 New York Fed study
    found it costs twice as much to ship a container from the US East Coast to
    Puerto Rico than to nearby Haiti. These findings were echoed in a recent report
    by the Government Development Bank for Puerto Rico.

    Defenders of the Jones Act, most notably the US military and
    America’s maritime industry, argue that the Act provides jobs for Americans and
    allows the country to expand its naval fleet during war time.

    If the Act were to be axed, US labour laws would cease to
    apply to foreign competitors that start serving those routes, putting US
    companies at a cost disadvantage and forcing them to adapt. On the other hand, as
    crew sizes shrink and as the era of autonomous shipping approaches, perhaps
    labour concerns will take a back seat as time goes on.

    Just 2.0% of America’s domestic freight is carried by sea,
    compared to 40% of Europe’s. Meanwhile, the number of private-sector Jones-Act
    ships has fallen from 193 to 91 between 2000 and 2016. The American fleet
    accounted for 17% of the global total in 1960, compared to just 0.4% today. Britain
    axed its Jones-Act equivalent in 1849. The UK fleet today has over three times
    the tonnage of America’s.

    Countries like China and Australia have already made their
    cabotage laws less stringent in recent years. It remains to be seen whether the
    US will follow suit, but the events of the past month have posed new questions
    for the Jones Act, which could be another thing that did not make it through
    hurricane season 2017.

    Read More
  • 02/10/2017 - Alibra Shipping Limited 0 Comments
    From China to the world: iron ore producers and carriers to benefit from One Belt One Road

    Self-reliance has long been part of Chinese philosophy, culture and policy. But recent moves by Beijing suggest the country is looking to import more iron ore from international producers, rather than use its own reserves.


    China will cancel about one-third of its iron ore mining licenses, mostly belonging to small polluting mines as part of Beijing’s efforts to improve air quality, the Metallurgical Mines’ Association of China said on Wednesday. Over 1,000 mining rights will be eliminated under the plan, according to Reuters reports.

    The number of iron ore mines in China have dropped from more than 3,000 to around 1,900 in recent years and continues to fall, Peter Poppinga, executive director at Vale said this week.

    “Some of the mines are even importing some low-grade seaborne cargoes and upgrading them instead of investing the money in their own mines,” said Poppinga.

    Quality is another issue that is influencing China’s import demand for raw materials. China’s raw iron ore is mostly low grade, with iron content of around 30% or less, compared with more than 60 % for iron ore produced by international miners.

    While the commodities boom of the early to mid-2000s was fuelled by China’s infrastructural build-out at home, the country’s next big wave of construction will happen further afield and will also lend some support to international miners – and shipping.

    China’s Belt and Road plans, in which the country will build roads, railways and ports around the world, could boost steel demand by an additional 150m tonnes and keep Chinese steel mills running for the next decade, BHP Biliton said this week.

    BHP believes Chinese steel demand still has room to grow and won’t peak until the middle of the 2020s.

    The miner has identified 400 core projects that would require $1.3tr of spending under the One Belt, One Road plan. Power, railways, pipelines and other transport projects make up 70% of the total investment, according to the FT. Those projects could lead to an additional 15m tonnes per year of steel over 10 years, boosting demand growth by an extra 3% to 4% on top of the current 1% forecast, BHP said, which would help sustain Chinese steel production rates at high levels over the next decade.

    Analysis by HSBC, however, has urged some caution and says although an uptick in demand seems assured, it won’t be as significant as in the years pre-2009.

    “Quantifying the potential impact on commodity markets of the Belt and Road Initiative is difficult, given the number of variables,” HSBC said this week, quoted by the FT. “On the demand side, how much spending will actually occur, and when, is highly uncertain. Supply is also uncertain, given China’s dominant role in many commodity markets.”

    This is all expected to translate to increase demand for seaborne transport of raw materials, benefiting the capesize market in particular. This trend intersects conveniently with the rise and rise of Chinese ship financing, although it would seem this is more down to opportunity than design.

    ICBC Leasing, Minsheng Financial Leasing and CMB Financial Leasing have all signed collaborations with commodity producers like Vale and Trafigura plus a number of major shipowners. Chinese banks started out by supporting deals involving the domestic shipbuilding industry but since 2015 have increasingly supported deals with no obvious China ties. Leasing deals with Chinese institutions have provided owners with a much-needed source of funding in the absence of bank and private-equity financing. Vale has offloaded a number of its 400,000-dwt Valemax vessels in this way. And the return on investment for China is assured if iron ore carriers benefit from One Belt One Road.

    Read More
  • 19/09/2017 - Alibra Shipping 0 Comments
    ​The end of the affair: Have trade and GDP growth uncoupled for good?

    Being a demand derived of world trade, shipping is more sensitive to economic growth and decline than many other industries. For proof, look no further than how shipping (particularly bulk carriers) thrived during China’s period of rapid economic growth and infrastructural buildout in the years up to 2008. And, as London International Shipping Week (LISW) heard, the kind of rapid economic growth and development seen by China in the boom is unlikely to be seen ever again. What does this mean for shipping?


    We used to say that trade grew two or three times faster than world GDP and for years this was true, but trade growth appears to have slowed and has fallen behind economic growth. Dr Liam Fox, the UK’s secretary of state for international trade and president of the board of trade, stated that the global economy is growing at 2.5% but trade growing at 1.5% in his address to the LISW conference.

    This is a trend that has been seen for the past four consecutive years, and is the first time in half a century that such a pattern has been sustained for so long. The ratio of trade growth to GDP growth fell below 1:1 in 2016, for the first time since 2001, according to the WTO. The question is: is this a new paradigm?

    Jan Hoffmann, chief of UNCTAD’s logistics branch, thinks not. Trade growth fell behind GDP for during the 1980s, he told LISW attendees, but we need more information to explain the recent slowdown.

    The thought (currently) is that the lag in trade growth is due to the rise in service provision’s contribution to the global economy, as opposed to trading goods and commodities. As the world becomes increasingly dependent on technology and digitalisation, its economy is becoming fuelled more and more by the rise of industry that deals in “bits and bytes”. If this is so, then we can expect this trend to become even more long-lived.

    But the thing about economists and their rich data sets is that there is room for interpretation and argument. Willem Buiter, Citigroup’s global chief economist, observed that Dr Liam Fox was citing 2016 figures for growth in trade and GDP growth. During the first two quarters of 2017, said Buiter, global growth was 3.1%, which is once again being outpaced by trade growth.

    Looking ahead, the WTO expects trade growth in 2018 should pick up slightly to between 2.1% to 4.0%. The organisation forecasts global GDP growth will rise to 2.7% this year.

    Although export orders and container shipping have been strong in the early months of 2017, trade recovery could be undermined by policy shocks, the WTO has said. Policy uncertainty is the main risk factor, including imposition of trade restrictive measures and monetary tightening.

    There are wider macroeconomic influences at work too. The weak trade growth seen in 2016 was due in part to cyclical factors as economic activity slowed across the world, but the slowdown also reflected deeper structural changes in the relationship between trade and economic output. Investment spending slumped in the United States and as China continued to rebalance its economy away from investment and toward consumption, which weakened import demand from these trade-intensive national economies.

    The nature of trade, it seems, is undergoing a period of adjustment. Just look at how demand on major container lines’ traditional East-West strings has been eroded over the past few years. Instead, the real opportunities for trade and therefore shipping seem to lie increasingly in intra-continental business and providing transport services for non-OECD countries. “The future is 200 small countries around Africa and Asia,” Willem Buiter told the LISW conference. “It needs a different sort of shipping service altogether.”

    Read More
  • 08/09/2017 - Alibra Shipping 0 Comments
    ​Kamsarmaxes are like a fine vintage – they get better every year

    Kamsarmaxes are the gift that keeps on giving for shipowners, who are seeing year-on-year improvements in charter rates and asset values. A six-year-old Japan-built kamsarmax (Harbor Hirose) was sold in mid-August for $19.3m. Twelve months previously, vessels of the same age and build were changing hands for around $14.0m at best.


    Shipowners appear to have been on something of an ordering frenzy so far this year – but all may not be quite as it appears.

    We have tracked firm orders for 86 kamsarmaxes since January 1 this year, plus a further six options. Of these vessels, our research shows 18 have already been assigned IMO numbers. This would seem to confirm research released this week by another shipbroker that says many of these newbuilding are, in fact, resales of keels laid before the IMO’s January 2016 deadline. This has allowed yards to build vessels to the cheaper NOx Tier II emission standard.

    Our research points to a total of 155 firm kamsarmaxes on order for delivery by the end of 2020. This is equivalent to around 18.0% of the live kamsarmax fleet, or 7.5% of the global panamax fleet. These are manageable ratios as long as vessel demand remains on its current trajectory.

    Some 109 panamaxes have changed hands in the S&P market so far this year. Of these vessels, around 50 have been kamsarmaxes. In contrast, at this point last year some 32 kamsars had been sold, plus a further 62 other panamaxes (94 vessels total).

    Owners are choosing to hang on to their tonnage – demolition of panamaxes has more than halved year-on-year. We tracked 88 vessels sold for scrap up to this point in 2016 and only 31 so far in 2017.

    The uptick in kamsarmax interest corresponds with a year-on-year improvement in spot rates (see graph). Period rates have doubled: panamaxes can currently achieve $13,500/day for 12-month charters, compared to around $6,500/day at this point last year. We’ve also noticed about 25% more panamaxes have been fixed on period charters this year (around 192 reported fixtures to date) compared to the same period in 2016.

    The year-on-year improvement can be attributed to a number of factors. Firstly, vessel supply and demand has reached a healthier level, thanks to high levels of scrapping over the past couple of years. A rebound in commodity prices has also added to chartering demand, most recently with coal, for which the expanded Panama Canal has enabled a price arbitrage to open up between the north-west US/Canada and Europe, where prices are rising.

    Read More
  • 01/09/2017 - Alibra Shipping 0 Comments
    Hurricane Harvey in Numbers

    Our thoughts this week lie with the victims of Hurricane Harvey in Texas, where we have many friends. 


    For those of us still trying to get their heads around the level of absolute destruction from Hurricane Harvey, and just how hard Houston got it, we’ve collated some statistics from the Texas Division of Emergency Management. All numbers are correct as of early Thursday, and will likely climb as the assessment and clean-up operation continue in the coming days.

    THE DEVASTATION IN NUMBERS

    51.88 inches of rainfall during Harvey – a new record for rainfall in the continental US
    38 people already confirmed to have died as a result of Harvey (expected to rise)
    6,044 single-family homes destroyed in Texas
    82,422 homes damaged in Texas
    $179.68 million worth of damage to public property
    14,000 Texas National Guard troops deployed
    24,000 additional troops be deployed by late next week
    34,575 evacuees in shelters state-wide (approximately)
    224,127 people without electricity due to the storm
    106,135 people still without power in the Houston area
    5,000 evacuees living in state parks
    9,314 people rescued or evacuated by state game rangers
    210,000 Texas registrations for federal aid
    $37 million in federal assistance already approved
    5 million meals served to evacuees by the Federal Emergency Management Agency

    SHIPPING STATUS UPDATE

    Shipping operations on the Gulf coast are slowing finding their feet again. The US Coast Guard on Thursday said it was reopening the Port of Corpus Christi for vessels with up to 43 feet (13.1 metres) draft and only during daylight hours. The port has also reopened the inner harbour to allow for vessels with up to 20 feet (6.1 metres) draft.

    Corpus Christi said the ship channel was also reopening with certain restrictions. More than 20 vessels are awaiting berth assignments at the port, the Coast Guard said.

    About 80% of US crude oil exports go out of Corpus Christi. Analysts say that any halt in exports, however short-lived, would have a large impact on global energy supply.

    The ports of Houston, Texas City, Galveston and Freeport began reopening with restrictions on vessel traffic from Wednesday night. The Houston Ship Channel remains shut.

    Houston ships more gasoline than any other US port, accounting for some 38% of overall US gasoline exports, with a combined value of over $14 billion during the first half of 2017.

    The Port of Houston said on Thursday there had been “no evidence of flooding on [the] terminal. No visible damage to containers, cranes, or other terminal equipment.”

    Most oil refineries in the Houston area have been shut down amid flooding, accounting for 2.2 million barrels of capacity sitting idle each day.

    Read More
  • 29/08/2017 - Alibra Shipping 0 Comments
    ENTER THE DRAGON: CHINA PACKS A PUNCH IN THE OIL MARKET

    So far the results following OPEC’s output reduction plan have been met with mixed reactions. Analysts expect the market
    to remain between $40-60/bbl for at least 5 years with no significant recovery beyond 2022. Even Shell executive Ben Van
    Beurden stated oil will remain ‘lower forever’ and highlighted the significance of electric  cars in reducing oil demand over
    the coming decades. The International Energy Agency’s (IEA) believes oil demand will  peak in 2040 sustained until then by
    developing economies and over reliant industries such as aviation and shipping. 


    Despite this Shell is spending $1 billion per year investing in the gas markets and its ‘New Energies’ division.
    Despite the fact that electric vehicles do not pose an immediate threat, a recent Morgan Stanley report projected  that 1 in 3
    cars on the road globally will be an electric or non-combustion engine by 2050 and will reduce demand  for up to 8 million
    barrels of oil per day. Additionally electric car sales are expected to represent 10% of the market  by 2025 with a price tag as
    cheap as gasoline vehicles by 2023. Norway (2025), Germany and India (2030), and  France and the U.K. (2040) have already 

    announced an end date to the sale of gasoline and diesel cars in the future.

    However the key factor in determining the price of oil is unlikely to come from OPEC, Elon Musk or the boom in US
    Shale. Much like with the steel and bauxite markets, China has been building the words largest strategic reserve of crude
    oil since the late 2000’s and is now estimated to have stored close to 700 million barrels by the end of 2017. This is due 

    in part to its record breaking daily average consumption of 8 million barrels since January this year. Not only could a fall
    in Chinese demand hurt the market and create a rapid oversupply issue, should the Red Dragon feel the need to offload its
    already bloated crude storage reserves, an increase in supply would itself saturate the market putting downward pressure
    on the price mechanism. Oil is undoubtedly in crisis and some commentators even expect $20/bbl to be the new norm by 2025.  
    Wind and solar are now cheaper than gas, oil and coal depending on which market is importing and exporting which resource.
    Following Trumps departure from the Paris Climate Agreement in 2017 the door is open for China to take the lead on clean energies.
    The biggest threat to an oil recover is therefore likely to come from China. In the motor industry Volvo (Chinese-owned) has
    announced that all its models will have electric motors by 2019 – China is the largest electric vehicle market in the world.
    It seems the fate of yet another market could be in the hands of the Red Dragon and its oil reserves will be a key card
    in that pack.

    Read More
  • 18/08/2017 - Alibra Shipping 0 Comments
    In the Ivy league: Five reasons why supramaxes make sense


    Much has been made in the maritime media of Paris Kassidokostas-Latsis’ new supramax venture, Ivy Shipping. An article in TradeWinds this week notes how the shipping scion has turned his focus away from newbuildings in tankers and gas in favour of secondhand bulk carrier tonnage. There’s nothing new, however, about Ivy’s business strategy – ostensibly, it’s a pure asset play. “Investment in dry bulk for us is not an end to itself but rather a means to an end,” Kassidokostas-Latsis said, quoted by TW. “We believe that once we have reached our target exit prices, it will be prudent to disinvest from the space and turn our attention and our resources elsewhere.”

    Here are five reasons why we think the move makes complete sense:

    1. Depressed asset values
    Ivy has so far invested in four supramaxes with an average age of six years. Of these vessels, two are known to have been built at IHI in Japan – quality tonnage. Supramax asset values have surged over the past year from all-time low levels seen in Q1 2016, but have undergone a correction during the past month or two. A five-year-old supramax (56,000 dwt, built at a "first-class" yard) is this week valued at $15.995m, some $1.25m less than it was in mid-May, according latest assessments by the Baltic Exchange.

    2. Potential for “flipping”

    Asset values are still low historically-speaking – there are still many of us around who (fondly) remember the boom times of pre-2008, when a second-hand supra could go for $75.0m. But a close look at recent market transactions shows owners can still make money by flipping vessels at the right time, thanks to this surging value appreciation. Times Navigation of Greece has reportedly this week sold its supra Elektra to Chinese interests for $7.5m – that’s around $3.0m profit on what it bought the vessel for in 2015 (as part of an en bloc deal). Similarly, if less dramatically, Greece’s Empire Bulkers is reported to have sold its supra Ata M for $8.0m, which (if confirmed) would net a profit of around $200,000 compared to the price paid by the company in 2015 – not a profit to be sniffed at!

    3. Steady grain market
    Supramaxes are often feted as the workhorse of the grains trade. Although markets for commodities like iron ore and oil have taken a blow in recent years, the grain market has been relatively resilient. The Dow Jones Commodity Index for grains shows little volatility in prices over the past year, although the index has fallen by around 50% since 2012. Likewise, supramax period rates have held comparatively flat, compared with other dry segments. What could be better than trading your ships in such a predictable market?

    4. Low orderbook

    There’s little risk that newbuildings will exacerbate vessel oversupply in the supramax segment. The current orderbook stands at just 2.3% of the live fleet – just 50 new vessels are scheduled for delivery by 2019, compared to a live fleet of around 2,190.

    5. Potential for more scrapping

    Scrapping in the supramax segment hasn’t exactly been prolific, compared to the rampant activity in other dry trades in recent years. Only 32 supras have been scrapped since 2012, which has trimmed the fleet by just over 1.0%. However, around 174 vessels (8.0% of the live fleet) are aged 15 and over, making them likely scrapping candidates, especially if owners opt to sell them for demolition, rather than fit them with costly ballast water management systems or exhaust scrubbers to comply with upcoming environmental regulations.

    Read More
  • 14/08/2017 - Alibra Shipping 0 Comments
    ​GREEKS LEAD MARCH TO TANKER DEMOLITION

    More tankers have been sold for demolition this year to date than during 2016 as a whole, according to Alibra data.


    Some 49 tankers have made their way to scrapyards so far this year, with sellers favouring Bangladesh slightly more than India, compared to 41 ships during the full-year 2016.

    Perhaps unsurprisingly, the Greeks have seen the writing on the wall and have been the nation that has this year sent the largest proportion of tanker tonnage for recycling. Greeks have sold 24% of all tanker tonnage for demolition so far this year, compared to 10% in 2016 as a whole. This week saw John Angelicoussis's Maran Tankers sell its first ship for demolition in four years, the 1995-built VLCC Maran Lyra.

    What is more, the average age at which tankers are meeting the welder’s torch appears to be decreasing. In 2017 to date, the average tanker sold for scrap has been 24.5 years old, compared to 27.4 years in 2016 and 27.3 years in 2015.

    So what is it that has spooked shipowners? Firstly, the depressed freight market. Spot rates for both clean and dirty tankers are at some of the lowest levels seen since 2014 – which (not so coincidentally) when tanker demolition peaked in recent years, with 95 ships sold for recycling that year.

    Another factor that is driving tankers on to Bangladeshi beaches are looming environmental regulations with which costly new systems like ballast water management systems or exhaust scrubbers must be fitted to ships to ensure compliance. Installing scrubbers, for example, costs around $6.5m per vessel – which is way above the value of many older and/or smaller vessels – why spend more on retrofitting than your ship is worth? That’s why many owners are opting to scrap ships instead.

    Read More
  • 07/08/2017 - Alibra Shipping 0 Comments
    CRUDE TANKERS IN 2018: A TIDAL WAVE OF NEW TONNAGE


    Last week we took a look at what the orderbook means for the bulk carrier market in 2018. This week we’re doing the same for crude tankers (and product tankers next week). While we found that low fleet growth could mean a bumper 2018 for bulkers, the same cannot necessarily be said for crude tankers. 


    Overall fleet growth
    The world’s tanker fleet (including clean tankers) orderbook is 7.7% (853 ships) of the live fleet in terms of number of vessels and a massive 12.5% (75.9m dwt) in terms of tonnage. This skew hints at the large number of VLCCs and suezmaxes that are on order: 101 and 80 respectively.

    VLCCs
    The VLCC fleet has grown by 4.5% so far this year. Some 33 vessels have been delivered to date and the live fleet stands at 727 ships. Scheduled gross fleet growth is 7.2% for the rest of the year (19 vessels) and 6.0% during 2018 (47 vessels). These are big numbers, owing to en-masse ordering over the past few years and low scrapping rates – only 6 VLCCs have been demolished since January 1, 2016.

    Suezmaxes
    The picture is worse for suezmaxes. The orderbook currently stands at 15.0% – 80 vessels are on order, compared to a live fleet of 530. The suezmax fleet has already grown by 7.7% so far in 2017, thanks to the delivery of 38 new vessels, with a further 28 scheduled to arrive by December 31. Scheduled gross fleet growth is therefore estimated at 12.4% for 2017 as a whole and a further 6.9% during 2018 (41 vessels). Only 6 suezmaxes have been scrapped since January 1, 2016.

    Scrap that
    If demand for seaborne transport of crude remains at the current level, scrapping must increase in order to cut the already oversupplied crude fleet. This will lead to some tankers being demolished prematurely, which would further pressure ship prices in the years ahead. Research says that shortening crude tankers’ life expectancy by four years could lower secondhand prices by between 10 and 15%.

    The average age of both suezmaxes and VLCCs is relatively young at 9 years of age, which again hints that increased vessel demolition would lead to tankers hitting the blowtorch before the end of their expected lifespan.

    Crude picture
    Cancellations and postponements could also help hold back the deluge of new tonnage about to hit the water in 2017 and 2018, but efforts will be futile unless there is a dramatic upturn in global demand for the seaborne transport of crude oil.

    Global crude oil demand has remained healthy over the past few years, but low oil prices have swollen oil inventories across the world, which has limited import demand.

    There has been a small glimmer of hope, however, which has helped boost crude prices this week – Brent is currently trading at just over $51/bbl.

    US crude stocks fell by 7.2m bbl last week, far exceeding the 2.6 million barrel forecast, the US Energy Information Administration (EIA) said. It was the fourth straight weekly decline in America’s crude inventories, bolstering hopes that the long-oversupplied market was moving toward balance. Nevertheless, analysts noted that America’s crude and gasoline stockpiles remain above their five-year averages, which they said would limit price gains.

    Crude supply from around the world looks set to be scaled back, due to planned production cuts, geopolitical or operational factors.

    OPEC has hinted that its production cuts are here for the long term, and on Monday Saudi Arabia said it would limit oil exports to 6.6m bpd in August, down nearly 1.0m bpd from a year earlier.

    Nigeria’s output slipped this week after leaks forced Shell to shut a pipeline that exports some 180,000 bpd of oil.

    Meanwhile, the US is considering financial sanctions to halt dollar payments for oil from Venezuela, which is also experiencing civil unrest. These factors could impair the OPEC member’s 2.0m bpd crude exports.

    If oil prices rise further, this will boost US shale oil production, which is striving to be globally competitive. Increasingly large amounts of light and sweet US crude oil are becoming available for export, much of which will go to Canada and Europe. Asia, however, is expected to take a growing share, which will offset some of the negative effects from lower US seaborne crude imports.

    Yes, it’s a complex and mixed picture, but there are some bright spots. Let’s hope the tanker supply is able to be proportionate to demand, but that could some difficult decisions for shipowners.

    Read More
  • 07/08/2017 - Alibra Shipping 0 Comments
    TRADING UP: Major trading houses investing in ship-owning again

    This week has been marked by Vitol’s order for up to eight 84,000-cbm gas carriers. The two-option-six VLGCs will be built for the trader at HHI at a speculated cost of $75m per vessel.

    The two firm ships will arrive in 2019. Three suezmaxes will also be delivered later this year from Sungdong. The order is part of a wider structural story that has been developing in the last two months or
    so: major trading houses are beginning to invest in shipowning again. Mercuria Energy was perhaps the first to get the ball rolling in February, when it purchased
    a secondhand VLCC from DHT for $19.1m, which marked the energy trader’s first venture into shipowning. Some traders have been more gung-ho than others.

    In early June, Trafigura announced plans to build 32 new crude oil and product tankers as part of a partnership with China’s Bank of Communications.
    The ships will be built in both South Korea and China at an estimated cost of over $1.35bn. The last time Trafigura added to its owned fleet was in 2013, when it acquired three MR tankers.
    Gunvor, via its shipping subsidiary Clearlake, has taken a more conservative approach and in mid-July announced a two-vessel tie-up with TopShips. The two companies will co-own two
    50,000-dwt MR product tankers as part of a joint venture. The ships are currently under construction at Hyundai Vinashin and upon delivery will each be chartered to Clearlake for
    three years, with options for two more. The last time Gunvor bought any new vessels was in 2015, when it purchased four small tankers. So why is now the time for traders to invest?
    Forone thing, commodity prices have rebounded since 2015, when they reached their lowest level since the financial crisis. Traders consequently have more cash to play with.
    Meanwhile, the prices of second-hand vesselsand newbuildings remain low, particularly for tankers. As a very rough estimate, a tanker order placed today would cost around
    20% less than one placed in 2014. The picture is more complex in the dry market, with more divergence in asset values between the different segments, but we’d roughly estimate
    that acapesize ordered today would cost you around 30% less than in 2014.

    Owning – or co-owning – vessels also gives traders an increased ability to predict, plan and manage the cost of their seaborne logistics and gives them a degree of insulation from
    the volatility of freight markets.   

    Read More
  • 24/07/2017 - Alibra Shipping Limited 0 Comments
    DRY BULK IN 2018: MAKE HAY WHILE THE SUN SHINES

    It’s still July but we say it’s time start thinking about your New Year’s resolutions – and we suggest it should be to make the most of the dry bulk market in 2018. It could be a good year and here’s why.

    Scheduled deliveries in 2018

    The overall orderbook for the overall bulk carrier fleet stands at 6.2% in terms of vessel numbers (640 on order) and 7.6% in terms of tonnage (61.2m dwt on order). Net fleet growth of just 2.0% is forecast during 2017.

    Capes
    The average cape is getting bigger and the orderbook comprises vessels that are each around 64,000 dwt heavier than the current average-size cape. The orderbook-to-fleet ratio is also much higher proportionally than for other vessel segments – it stands at 7.5% by number of vessels and 9.9% in terms of tonnage (117 ships under construction, around 30.6m dwt in total). Two-thirds of these capesize vessels will be delivered this year and next.

    There are many large vessels on order, comprising super-capes (each 240,000-399,999 dwt; 15 vessels) and Valemaxes (400,000 dwt each; 32 vessels) under construction, most of which will arrive before 2019.

    Panamaxes
    The panamax orderbook is shows more modest growth of around 6.0% in terms of vessels and tonnage (124 ships on order, 10.1m dwt total). Most are kamsarmaxes.

    But enough about the big ships. The orderbook for smaller bulkers is very slim. Only eight new handymaxes are being built, all scheduled to hit the water by the end of 2018 – which is fleet growth of about 1.0%. Similarly, only 52 supramaxes are on order, the majority of which will arrive within the next two years, which will swell the live fleet by just 2.4%.

    Delays
    That’s what is scheduled, anyway. But if last year is anything to go by, then not all of that tonnage is scheduled to be delivered. Demolition, cancellations and postponements will continue to slow the rate of fleet growth in 2018, but the fairly positive market we’ve had in 2017 so far (and any further upturn) will, of course, disincentivise owners from scrapping more vessels than absolutely necessary.

    One thing that could lend support to markets is the enforcement of new environmental regulations this year, such as the ballast water management convention and the 2020 global sulphur cap. The market has already seen owners opting to scrap older vessels, rather than stump up the money that would be needed to achieve compliance (which can be much more than the vessel itself is worth). This will continue, for a time at least.

    The downside is that it could hit second-hand asset prices by further reducing the average scrapping age of the fleet and therefore the cash-flow period of vessels. In theory. Low second-hand prices also tend to discourage new ordering, which would be an added benefit – but we usually counsel cautious optimism because of…

    China and commodity markets

    Fiscal stimuli were introduced in China in 2016, which boosted demand for dry bulk cargoes but these stimuli were a result of domestic political strategy. Chinese import demand for iron ore and coal have been strong during 2017 in order to fuel infrastructural and economic growth. Analysts forecast that this could come to an end, possibly within the next year or so.

    President Xi is expected to bring in radical economic reforms to rationalise China’s banking, real estate market, state-owned enterprises and industrial sector. Once these reforms get under way, China’s economy will finally make the long-mooted transition to being consumer and service-driven, rather than industrial and production-led, which will mark the end of the country’s glorious (for shipping) era of infrastructural build-out.

    In the meantime, we say make hay while the sun shines. Fleet growth is low, as is the orderbook – especially for smaller vessels like supras and handymaxes, which look like a safer bet for the 2018 market.

    Read More
  • 24/07/2017 - Alibra Shipping Limited 0 Comments
    Naphtha trade gets some summer love

    It hasn’t been such an exciting summer for those in clean tankers – spot rates have stayed low and rela-tively flat across the board. Period rates have been more consistent, although deals have been few.


    One of the bright spots has been the naphtha trade, for which LR2 spot rates have seen a con-sistent rally since June 28.
    On Thursday, the Baltic added an extra $32,143 to its Mediterranean-Far East benchmark rate for 80,000-tonne naphtha car-goes,
    which it assessed at a lump-sum rate of $1,864,286. This is the highest level seen since late March and is due to tight availability
    of vessels in the Med and few cargoes in the region.

    Reports from the spot market said the LR2 Minerva Aries was this week fixed on subjects to Trafigura for a lump sum of $2.0m,
    loading naphtha in Tuapse in late July for discharge in Japan. Tuapse usually commands a $200,000 premium over loading in the Med.

    Western naphtha has been making its way increas-ingly to Asia. Buyers there are building their invento-ries as the price differential widens between Eastern
    naphtha and cheaper product from the West. Ac-cording to Platts, around 1.2m to 1.3m tonnes of Eu-ropean naphtha is expected to arrive in Asia in July –
    around the same level as seen in June, and almost 20% more than the year-to-date monthly average of 1.02m tonnes. This is expected to result in a few less
    cargoes making their way East on the bench-mark Middle East Gulf-Japan route, which could pressure LR tanker rates in the third quarter.

    However (in shipping these days there is always a “however”), while Japan has provided steady de-mand for cheaper Western naphtha, Chinese im-ports are falling
    due to increased domestic production. Chinese imports of the product fell by 22.2% year-on-year to 154,000 bpd between January and May this year, and are likely
    to continue falling dur-ing the third quarter. India has also stepped up its naphtha production, which could displace future cargoes coming from the Med.

    Market Conclusion: Any increase in LR2 rates could push spot charterers to opt for cheaper LR1 vessels, or even MR tankers to pick up prompt cargoes.

    Read More
  • 07/07/2017 - Alibra Shipping Limited 0 Comments
    EVERYONE WANTS A SUPRAMAX

    JP Morgan, Eastern Mediterranean Maritime (EastMed), Unisea, Technomar and Star Bulk are among the companies who have snapped up supramaxes during the past month. What is more, declining asset values mean that now is a good time to buy. As per usual, it's Greek buyers who have their eye on the bargains.


    Two of the supras sold in June were divested by Bariba, a Greek owner of bulkers that has lost its principals Petros Vettas and Andreas Vgenopoulos in recent years. The company has put its fleet up for sale and has so far sold two China-built supras (built in 2010 and 2011 respectively) to Technomar and Star Bulk for $7.1m and $6.1m.

    Bariba has two panamaxes and three more supras to sell. The latter vessels were all built in China and are aged between 4 and 9 years old, but current data suggests that it may be better to sell them sooner rather than later - before prices dip any further.

    A five-year-old supramax (56,000 dwt, built at a "first-class" yard) is this week valued at $1.16m less than it was in mid-May, according latest assessments by the Baltic Exchange. The decline in secondhand values is offsetting some of the rapid appreciation seen over the past 12 months.

    Unlike in other vessel segments, the blame can't be laid on cheap newbuilding contracts. In fact, no new supras have been ordered since December 2016.

    Instead, declining asset values coincide purely with a sudden depression in supramax spot rates seen over the summer so far. Grain exports - the tent pole of the supramax trade - enjoyed a strong first quarter, but since then demand has dropped along with prices, particularly for wheat. Having said that, quite a few period deals have been seen for supras over the past month, all at stable rates - with even a rare 12-month fixture concluded (at a rate of $9,300/day).

    Looking ahead, we can expect more supramax S&P deals. Grain market analysts are already talking positively about the winter harvest (although some rainfall concerns still abound). The buyers who invest now will be well positioned for the upturn.

    Read More
  • 30/06/2017 - Alibra Shipping Limited 0 Comments
    CHOKEPOINT: FEED THE WORLD

    The risk of disruption to trade routes is growing, which could affect global food supply and cause price spikes, according to
    new research.

    Analysts at the Chatham House thinktank have identified 14 “chokepoints” (listed below) including the Suez Canal, Black Sea
    ports and Brazil’s road network, almost all of which are already hit by frequent disruptions. Little is being done to ease these disruptions,
    which leads analysts believe will worsen in years to come. Over half of the world’s staple crop exports – wheat, maize, rice
    and soybeans – have to travel via inland routes to key ports in the US, Brazil and the Black Sea. In addition, more than half of these
    crops – and over half of all fertilisers – transit through at least one of the maritime chokepoints identified.

    One particular threat to global food supplies is extreme weather. Climate change is bringing more storms, droughts and heatwaves,
    which can block chokepoints and damage ageing infrastructure. It is also likely to fuel armed conflicts, which can also shut down trade
    bottlenecks, the report said. “We are talking about a huge share of global supply that could be delayed or stopped for a significant period
    of time,” said Laura Wellesley, one of the authors of the Chatham House report, quoted by The Guardian.
    “What is concerning is that, with climate change, we are very likely to see one or more of these chokepoint disruptions coincide with
    a harvest failure, and that’s when things start to get serious.”

    Extreme weather has already caused disruption on the Panama Canal, which has experienced drought, while the Suez Canal has
    been closed by sandstorms. The Egypt-run waterway has also been threatened by terrorist bomb attacks.

    Inland waterways and railways in the US, which carry 30% of the world’s maize and soy, were hit by flooding in 2016 that halted
    traffic. A heat wave in 2012 kinked rail lines and caused train derailments. The regions most vulnerable to trade disruptions are Middle East
    and North Africa region, the report found. The region has the highest dependency on food imports in the world and is encircled
    by maritime bottlenecks. It also depends heavily on wheat imports from the Black Sea.

    Countries especially at risk from disruption are poorer nations reliant on imports such as Ethiopia, Kenya, Tanzania and Sudan, as
    well as richer nations like Japan and South Korea, according to the report. China is also a major importer but it has done the most to mitigate
    its exposure to chokepoint risk, the report found. It has diversified its supply routes, such as building a railway across South America to decrease
    its reliance on the Panama Canal. Chinese companies also own and operate ports around the world.

    The report is sobering reading and reminder that we should value the food we eat and consider the impact we make on the environment.
    But, for the shipping industry, it also underlines our crucial role in carrying world trade, especially food supplies. National governments
    need to heed this call to upgrade infrastructure and plan for every eventuality.

    Read More
  • PANAMAX PERIOD PERFORMANCE PEAKS
    23/06/2017 - Alibra Shipping 0 Comments
    PANAMAX PERIOD PERFORMANCE PEAKS

    There’s some optimism in the panamax period market as major charterers continue to pick up vessels for charters of up to 12 months. 

    The past week has seen Glencore, Norden and United Bulk Carriers each take a panamax on six-month charters at daily rates of between $8,250 and
    $9,150. Hudson Shipping also booked a Diana-owned panamax for 12 months sat a rate of $7,900 per day (minus 5% commission).

    During the three months since March 23, the market has seen 60 panamax vessels booked on period charters – a little ways behind the 77 fixtures we tracked during the same period last year, according to Alibra research.
    Charterers have this year been a little more inclined to book for periods of 12 months or more, with even a rare two-year fixture being seen. Rates have also improved, compared to last year. Twelve-month and six-month
    rates hit highs of $12,650 per day and $14,000 per day respectively during the past three months. During the same period last year, the respective period rates hit highs of $6,300 and $7,000 daily.

    The period market has, of course, been bolstered by growth in spot rates. The Baltic Panamax Index’s weighted timecharter rate (for voyages on five major cape routes) was assessed on Thursday at $8,888 per day,
    exactly double the level seen 12 months previously.

    Spot rates have advanced on all major benchmark routes during the past few weeks, but especially on Australia-China routes for coal.
    Rates for Trans-Atlantic voyages for short-haul runs and to Europe have done well, as have trips from the Continent to the Far East.

    The increased number of period fixtures reported in June so far (12, compared to just 7 in May) certainly suggests major charterers expect spot rates to rise further during the next six months.
    Generally speaking, commodity markets have come back with a vengeance compared to a year ago, which we hope will continue.

    The panamax market is still being haunted by the spectre of fleet overcapacity, however. Some 142 new panamaxes are awaiting delivery from shipyards this year (of which 66 have already arrived), which is equivalent to
    gross fleet growth of 6.9% in terms of number of vessels or 4% in terms of tonnage. Another 56 panamaxes are scheduled for delivery from 2018 onwards.

    Shipowners have done well to scrap older tonnage over the past few years, which has trimmed the global trading fleet. It certainly wouldn’t hurt to keep scrapping during 2017.
    So far, 16 panamaxes have been sold for demolition this year.

    Read More
  • 16/06/2017 - Alibra Shipping 0 Comments
    Greeks still in the lead at the end of the first half

    Greek companies continue to lead the way in vessel ordering
    this year, followed closely by Chinese firms, according to Alibra data.

    Some 146 firm vessels have been ordered so far this year across
    the bulker, tanker and container segments. Some 26 optional vessels are
    attached, of which all but two are for tankers – showing that shipping
    companies still see some potential upside in the wet trade. Whether these
    options will be exercised is anyone’s guess.

    Internationally, buyer appetite continues to be for tankers.
    Of all 93 firm orders for tankers from buyers around the world, 27 are for
    VLCCs (plus 8 options – the most numerous). Some 23 orders have been placed for
    aframaxes, of which around half will be LR2s. A great deal of orders have been
    seen for small tankers too – we’ve tracked deals for 21 tankers of up to 15,000
    dwt.

    So far this year, Greeks have ordered 40 of these 146 firm
    vessels, while Chinese buyers account for 26. China has exclusively contracted
    tankers across a wide range of tonnages. Only around 65% (26 vessels) of Greek
    orders were for tankers, in which they favoured VLCCs (15 ships). We’ve also
    tracked firm orders from Greeks for 14 bulk carriers, of which 10 will be panamaxes.

    International companies continue to favour China and South
    Korea as the place to build their bulkers, tankers and containerships.
    Respectively, the countries account for 45% and 44% of all the firm orders we’ve
    tracked this year. Japanese yards have so far only snared 7%.

    Read More
  • 09/06/2017 - Alibra Shipping 0 Comments
    QATAR: A GAME OF CHESS

    Arab states this week moved to isolate the government in Doha, which has complicated shipments for Qatar, the world’s biggest exporter of liquefied natural gas. 


    The United Arab Emirates (UAE), Saudi Arabia, Egypt and Bahrain said on Monday they would sever all ties including transport links with Qatar. Ships carrying Qatari cargoes, including those chartered by non-Qatari companies, will be prevented from calling at major ports in the UAE, Bahrain and Saudi Arabia, including Jebel Ali in Dubai. Vessels carrying the Qatari flag and vessels owned or operated by Qatar are also subject to the ban. Qatar has so far not imposed any counter-restrictions.

    Cargoes
    Major traders such as Shell and Trafigura have told press that they are loading LNG in Qatar as normal. Spot LNG prices have so far not reacted to the blockade.

    In the container market, Evergreen and OOCL have suspended shipping services to Qatar in light of the ban. Maersk has also said it is unable to transport goods in or out of Qatar because it cannot tranship cargo through Jebel Ali in Dubai.

    Although Egypt is one of the countries that has isolated Qatar, it looks unlikely that the country will ban access to the Suez Canal for Qatari vessels. However, Egypt could opt to reduce the canal-fee discount offered to LNG carriers, thus making transit for Qatari vessels more expensive, according to research from the Oxford Institute of Energy Studies.

    Crude oil and condensate are reportedly being loaded as normal in the Gulf; however, there have already been some effects on vessel movements. For crude tankers, reports suggest there will no longer be a direct point-to-point voyage between Qatari ports and Fujairah and ports in Bahrain (or any of the other countries that have imposed the ban). However, cargoes can still be carried if the vessel calls at an intermediate port in a “neutral” country. Depending on the wording of the charterparty, shipowners may therefore be able to charge more freight if vessels have to call at additional ports.

    The ban has reportedly led to a flurry of cargo-swapping by oil companies, which can also lead to additional operational expenses. Smaller companies with only a few cargoes to trade cannot swap parcels as flexibly. This too can drive up freight costs.

    Bunkering
    The port ban will, however, leaves Qatari vessels facing higher costs related to bunkering.

    Qatar-owned ships will be forced to find new ports at which to bunker, having been banned by the UAE from refuelling at Fujairah. The UAE has, however, rescinded its original plans to ban ships arriving from or destined to Qatar.

    This lack of ready access to bunkering facilities may turn into a headache for Qatar in the coming months. Vessels could alternatively bunker in Gibraltar, Singapore and Oman, but this would add extra voyage time and costs to vessel operation, depending on the route taken. It could also drive up bunker costs – Fujairah prices are usually cheaper than at other major bunkering hubs and prices could rise further at ports like Singapore.

    AIS data shows 75 Qatar-owned vessels are present in the Middle East Gulf and Gulf of Oman area at the moment, many of which have been repositioned into Qatari waters from UAE, Bahrain and Saudi territory. These vessels include just over half of Qatar’s fleet of Q-Flex LNG carriers (14 out of a total 27 vessels; each around 216,000 cbm capacity) – plus three of Qatar’s 14 QMAX LNG carriers, the world’s largest class of LNG carrier (each around 260,000 cbm).

    A great many Qatar-owned OSVs are present in the area, which looks to be the sector immediately worst affected by lack of access to bunkering at Fujairah.

    Outlook
    US ExxonMobil, a major stakeholder in Qatari gas and LNG projects, has said it does not foresee the blockade having impact on the global LNG market. Nevertheless, it is near impossible to predict the long-term outcome.

    Qatar has big plans to debottleneck its LNG infrastructure, which reports say is a signal that the country intends to compete for global market share as new projects in the US and Australia come onstream.

    Read More
  • 05/06/2017 - Alibra Shipping 0 Comments
    ​MRs reap rewards from ramped-up refining

    The past week has been a good one for owners of MR tankers trading in the spot market. The market driver? American refining. 


    Spot
    Since last Thursday, spot rates have advanced on both the all-important UK Continent to US East Coast (TC2_37) and the US Gulf to Continent (TC14) benchmark routes for MRs carrying clean petroleum products (CPP).

    The TC2 route’s timecharter equivalent (TCE) rate has rallied by around 29% from $7,729/day on May 25 to $10,003/day on May 31, according to Baltic Exchange assessments. Growth in rates on the route levelled off as the week progressed, but it was a different story for MRs hauling CPP back to Europe.

    The TCE spot rate on the TC14 route has grown by 662% over the past week, according to Baltic assessments. On Thursday, the rate was assessed at $4,509/day, compared to $592/day a week earlier.

    A short-term pop in the market

    This sudden rise in rates, however, isn’t destined to last much longer but the long-term outlook for CPP cargo availability from the US Gulf continues to grow brighter.

    CPP exports from refineries on the US Gulf Coast have risen and are expected to rise further due to higher refinery run rates, rising US inventories and weaker import demand from Latin America. Refinery utilisation in the US has hit its highest seasonal level since May 2005 at 95%, according to data from consultancy PJK International.

    Since May 25, Gasoil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) port range declined by 2.6%, PJK data says, which has also helped boost imports from the US Gulf (TC14). Key refineries in northwest Europe and the Mediterranean have been undergoing maintenance, which accounts for the stock draw. Diesel demand in northern Europe, however, remains flat.

    Meanwhile, US distillate stockpiles, which include diesel and heating oil, rose last week by 394,000 bbl, almost half the expected 755,000-barrel drop, according to latest US EIA data.

    Trump and the Saudis: longer term outlook for products

    We might have seen a pop in the market, but CPP exports from the US Gulf Coast will increase dramatically over the next 10 years.

    Last year, Saudi Aramco moved to purchase the remaining 50% it did not already own in US-based refiner Motiva from its joint-venture partner Shell. The deal was completed in March and included distribution operations across seven US states, among other things.

    Motiva's major facility is the 600,000-bpd Port Arthur refinery on the US Gulf Coast, which is America’s largest in terms of capacity.

    During his visit to Riyadh, it was announced

    Saudi Aramco announced it will invest a further $12bn in the Motiva refinery at Port Arthur during US President Donald Trump’s made his first official overseas visit to Riyadh on May 20.

    In addition, Aramco said it will spend $18bn over the next five years on expanding its activities within the Americas, which will include increasing refining capacity, branching into chemicals and expanding its commercial operations. The company said the investments may be made in new sites, not just its current operations, but gave no further details about expansion plans. What is known is that Aramco has looked at buying at least one additional Gulf Coast refinery and certain chemical plants.

    This is in line with plans by other US refiners, who are reportedly looking to increase exports of diesel and jet fuel and expand production of petrochemicals. Domestic gasoline demand is expected peak within 20 to 30 years.

    Saudi remains one of the US’s largest suppliers of crude oil, with supply estimated at around 1.0m bpd. With Saudi Aramco’s huge investments in US refineries, it wouldn’t be surprising if crude supply were to be increased further – which is good news for VLCCs, as well as MRs.

    Read More
  • 26/05/2017 - Alibra Shipping 0 Comments
    ​Is bigger better?

    The past month or so in the tanker market has been all about consolidation – either realised or attempted.


    This week, Scorpio Tankers revealed it is to acquire Navig8 Product Tankers through a merger. The merged entity’s fleet will consist of 105 product tankers, including 38 LR2s, 12 LR1s, 41 MRs and 14 handymax vessels, plus 19 ships on time or bareboat charters. Scorpio Tankers also has six MR tankers on order at Hyundai Mipo that are all scheduled for delivery this year.

    In the VLCC segment, Frontline has hotly pursued a takeover of DHT Holdings, which was finally rejected by the company. A merger of the two companies would have created the world’s biggest listed tanker company. The combined fleet would have comprised 72 tankers, including 40 VLCCs. Frontline also has another 10 vessels on order, including four VLCCs.

    But is it better to be bigger?

    2016
    The rationale behind consolidation and creating an entity with many vessels is to create economies of scale in order to better compete on a cost-plus basis. However, rates continue to be depressed with little prospect of improvement.

    Last year was a tough one for tankers – even for the larger companies. In the crude sector, Frontline and DHT saw their respective daily timecharter equivalent (TCE) rates decline by 46% and 50% over the course of the year, according to public filings. The products trade had it only slightly better: Scorpio Tankers saw its daily TCE rates fall 38.4% over the year.

    The depression in rates was largely due to rising oil prices, limited additions in refinery capacity, high oil inventories and slow economic growth.

    Asset play
    Of course, if things were to really go belly-up in the charter market, then players with large fleets can always count on their residual asset values to shore them up, particularly if they’ve invested in modern quality tonnage. ¬¬That’s the theory anyway.

    The dry bulk market has offered a cautionary tale. Star Bulk bought 34 bulk carriers from Excel Maritime that were valued at around $623m when the time the deal was agreed in August 2014. However , when the ships were delivered in April 2015, their collective market value had fallen to an estimated $351m, according to reports. Bulker asset values have appreciated since then, but still aren’t quite back to 2014 levels.

    The respective values of a five-year-old VLCC (305,000 dwt) and MR product tanker (51,000 dwt) dropped by around 25% over the course of 2016, according to Baltic Exchange assessments. Tanker asset values are expected to remain depressed due to vessel supply growth and low newbuilding prices.

    Buying a large number of ships can to some extent protect a company’s position but it’s still a gamble on future asset values, which remain subject to wider market forces.

    Macro factors
    Being a commoditised market, tanker companies are playing a waiting game for growth in seaborne volumes, which makes them vulnerable to macroeconomic factors. Aging consumers, technological innovation and protectionist trade politics are all big issues that have the potential to slow growth in international trade.

    There are modest expectations for future demand growth for crude tankers, but these are likely to be offset by strong growth in vessel supply. What is more, the global fleets of crude tankers has an average age of just 8 years, and the clean tanker fleet (LR1s, LR2s and MRs) has an average age of around 8.5 years, according to our estimates. The relative youth of the fleets will prevent vessel supply and demand being rebalanced quickly.

    Big players have the ability to throw their weight around and take a big market share, just like the little guy, they remain subject to vessel oversupply and sluggish demand growth.

    Read More
  • 22/05/2017 - Alibra Shipping 0 Comments
    VLCCs: Secondhand values set to hot up

    In February this year, the VLCC orderbook reportedly fell to its lowest level since 12 months earlier, with around 89 VLCCs on order. This is equivalent to around 11% of the VLCC fleet currently on the water (around 725 vessels).


    Firm orders for 22 VLCCs have been reported so far this year, plus a further seven optional vessels. As has been reported in the maritime press, nearly two-thirds of all the firm VLCC contracts came from Greek companies and almost all the newbuildings are to be built at Korean yards.

    In addition, in early May Hyundai Merchant Marine reportedly signed a letter of intent with Daewoo for up to 10 VLCCs, but as yet it’s unclear when this order will be formalised.

    Analysis by BIMCO this month noted that net fleet growth for large crude oil tankers has already increased by 2.4% in the year-to-date. According to Alibra’s own estimates, some 29 new VLCCs have hit the water so far this year, with two reported sold for demolition. A further 23 newbuildings are scheduled for delivery before the end of the year. In 2018, another 41 VLCCs will be delivered.

    In the secondhand market, we have tracked 25 VLCCs changing hands so far this year, of which 11 were acquired en bloc by DHT Holdings from BW Maritime Almost one-third of vessels were resales or recent deliveries, but interestingly another one-third were aged 15 years or older. Buyers have tended to opt for tonnage built at quality yards.

    We wrote a blog earlier this year, discussing how depressed newbuilding prices for VLCCs have been keeping a lid on secondhand values. Despite all the ordering and increased activity in the S&P market (which is by no means a feeding frenzy), newbuilding contract prices for 300,000-dwt vessels have fluctuated between $80m and almost $85m – nothing too exciting.

    This has caused secondhand values to remain pretty flat. The Baltic Exchange has valued a five-year-old, 305,000-dwt VLCC at around $60m, give or take, since September 2016. Despite the increased interest in VLCCs seen in recent months, the valuation of the Baltic’s benchmark vessel only received a boost this week, when it was assessed at $60.984m. This estimate is an increase of just over $1.0m from a week earlier, which is huge compared to how flat the assessments have been since the autumn.

    It wouldn’t surprise us if secondhand VLCC values continue to firm over the coming weeks. We would hope that interest remains in the S&P market and that not too many further newbuildings are ordered – net fleet growth remains at a relatively high level and market fundamentals don’t suggest there will be any sudden spikes in demand. We don’t expect to see many VLCCs sold for demolition either, which will compound the threat of vessel oversupply.

    Read More
  • 12/05/2017 - Alibra Shipping 0 Comments
    OPEC production cuts are here to stay, while America pumps harder

    News broke this week that the Organization of Petroleum Exporting Countries (OPEC) and other oil producers have agreed to extend their cuts to oil production by another six months until the end of the year. 


    OPEC and certain non-member countries like Russia signed an accord in September 2016, in which they agreed to cut their collective crude production by about 1.8m bpd during the first half of 2017. OPEC hopes that production limits will reduce the world’s massive crude stockpiles and re-balance oil markets.

    OPEC will decide formally whether to extend the cuts when its ministers meet in Vienna on May 25th. The decision must be unanimous in order to be effected. Saudi Arabia and Russia have already indicated they are in favour of an extension. Non-OPEC member Turkmenistan may join the accord too.

    However, there have already been hints that the production limits will remain in effect into 2018.

    Saudi Arabia’s energy minister Khalid Al-Falih recently told a conference in Kuala Lumpur he was “confident the agreement will be extended into the second half of the year and possibly beyond,” according to Bloomberg reports.

    OPEC has lifted its 2017 estimate for oil supply growth from non-OPEC members from 600,000 bpd to nearly 950,000 bpd. Most of this will come from the US, where supply will grow by an estimated 820,000 bpd during 2017, according to OPEC. Shale producers in the country have continued to ramp up drilling and have doubled their rig counts in the past year, which has helped drive down crude prices to under $50/bbl again.

    OPEC used its monthly report to make a diplomatically worded plea, likely aimed at America. “Continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability, not only for the benefit of the individual countries, but also for the general prosperity of the world economy,” OPEC’s monthly report for May stated.

    It looks unlikely that the US will pay any heed. Analysts at UBS have estimated that US crude producers can make a profit as long as oil prices remain above $40/bbl. In early 2014, the breakeven level was $65/bbl.

    The OPEC production cuts will not, however, interfere with Iraq’s plan to increase its production capacity to 5m bpd by the end of the year. It pumped 4.4m bpd in April, according Bloomberg data, and is OPEC’s ninth largest producer by volume.

    Read More
  • 24/04/2017 - Alibra Shipping 0 Comments
    India’s growing economy and its increasing energy imports

    By the year 2022, the UK will no longer be one of the

    world’s five largest economies based on GDP in nominal terms, according to
    International Monetary Fund (IMF) estimates published this week.

    The world’s top five countries will include a newcomer –
    India – which the IMF says will overtake Germany to rank fourth globally by
    2022. This will push the UK down to sixth place, behind its European peer.

    India’s economy is expanding at a rate of 9.9% per year,
    according to the IMF projections. In contrast, the IMF expects the UK will grow
    just 2.0% this year and 1.8% in 2018, impeded by the negative effects of
    Brexit.

    Crude

    All this rapid growth will of course require energy. India
    is expected to be the second-largest contributor to the increase in global
    energy demand by 2035, accounting for 18% of the rise in global energy
    consumption.

    As India grows economically, this can only be good news for
    shipping because the country is so dependent on energy imports – particularly of
    crude oil. India ranks third in global oil consumption, after leaders USA and
    China. The country imported 4.3m bpd of oil in 2016, up 7.4% from the previous
    year. Of this figure, a record 473,000 bpd was bought from Iran, which has
    become India’s fourth biggest supplier.

    Indian consumption is expected to rise another 7.0% to 8.0%
    this year, outstripping China's demand growth for the third consecutive year.
    Meanwhile, domestic production of Indian crude remains low – just under 40m tpa
    – in comparison with its imports. Given the millions of tons of refining
    capacity added in recent years, we can expect India to build on its status as a
    major refining centre, which will of course require more crude oil.

    India has said it will decrease its dependence on oil
    imports from OPEC producers. India’s state-owned Oil and Natural Gas
    Corporation (ONGC) for one has acquired shares in oil fields in countries like
    Sudan, Syria, Iran, and Nigeria. ONGC and refiner Reliance are exploring
    domestic reserves, and an Iran-Pakistan-India pipeline has been proposed.

    Coal

    India has already halved its use of crude oil for power
    generation, and is shifting its focus to generating electricity from nuclear
    and renewable sources. That being said, its existing power stations continue to
    use a lot of coal, although its huge
    imports seem to be wavering. Year-on-year imports dropped 25% during December
    2016.

    India surrendered its
    status as the world's top importer of coal back to China during 2016, having
    imported just 194.9m tons
    that year, a level 5.4% lower than in 2015. Despite the decline, India
    is still importing almost four times as much as it did 10 years ago, and nearly
    double the volume imported five years back.

    India still has a little way to go in providing its regions
    with electricity. As of March 31, 2016 (the latest figures available), 20
    states and 6 union territories have reached 100% electrification, but another
    20 regions still have yet to reach this level. Of these, eight areas still have
    less than 95% electrification, the worst affected being Arunachal Pradesh,
    which has just 73%.

    Pollution has caused the Indian
    government to turn away from building new coal-fired power plants.
    Nevertheless, the International Energy Agency has said it expects India's coal
    demand to rise by an annual average 5.0% by 2021. India’s import demand will no
    doubt increase further if coal prices fall again – it’s no coincidence that
    India imported less coal during 2016, a year in which coal prices rose sharply.

    In January, India’s energy minister
    claimed the country aims to “eliminate foreign coal dependency in the next few
    years”. But commentators, such as the Delhi-based Energy and Resources
    Institute, have observed that this pledge does not include imports made by
    private companies. Plus, as we’ve stated, India’s coal consumption is HUGE and domestic production will have
    to be ramped up drastically to reduce this dependence.

    Domestic producer Coal India aims to
    increase production by millions of tons per annum in the years ahead. But even
    if does so, India will still need to buy coking coal overseas to make steel,
    despite having the world’s fourth largest coal reserves.

    Read More
  • 07/04/2017 - Alibra Shipping 0 Comments
    Chinese buyers more active in the S&P market

    An increased number of ships have made their way into the hands of Chinese buyers over the past 12 months, and Chinese companies have greatly reduced their ordering of newbuildings, according to Alibra research. 


    Alibra looked back at the past 12 months to date in order to identify China’s buying patterns. Between April 1, 2016 and March 31, 2017, Alibra tracked 1,620 vessel S&P transactions worldwide, of which 13.6% of vessels were bought by China-based companies.

    The number of overall S&P transactions during the 2016/2017 period is an 18.5% increase compared to during the preceding 12 months, in which 1,367 ships changed hands and of which 12.0% went to Chinese buyers.

    And what have the Chinese been going for more than ever? Perhaps predictably, the answer is bulk carriers. China bought 130 bulkers during the 2016/2017 period, compared to 95 during the 2015/2016 period.

    Panamaxes and handymax/handysize bulk carriers have remained the most commonly acquired during the past couple of years: 41 panamaxes and 46 handys were bought during the 2016/2017 period. These figures are both up by roughly 30% compared to the 2015/2016 period.

    Big changes

    But China’s appetite is changing. Over the past 12 months it has reduced its purchases of tankers (24 vessels in the 2016/2017 period, compared to 45 in the 2015/2016 period). Now, buyers have turned their attention to acquiring containerships – in a big way.

    Over the past 12 months, some 53 containerships have been snapped up by Chinese companies, of which around half have been smaller, coastal/inland vessels, plus 17 panamaxes, 15 post-panamaxes and eight vessels of 10,000+ TEU. In contrast, only eight containerships (of which four were panamaxes) were acquired by Chinese buyers between April 1, 2015 and March 31, 2016.

    Chinese banks make up many of the entities that have invested in containerships, particularly in en bloc deals. During 2016, China Construction Bank entered shipowning by buying and bareboating back (BBB) three containerships from APL. China Merchants Bank did a BBB deal for eight containerships from APL, and completed another BBB deal with Navig8 Product Tankers for two LR1 tankers during 2016. China’s Bank of Communications was another prolific buyer during 2016, picking up 19 vessels in total, of which nine were containerships. It also completed a BBB deal with Navig8 Product Tankers for three LR2s, in addition to eight other product tankers the bank acquired last year.

    Newbuildings

    While China’s purchases of secondhand vessels have seen a slight increase over the past 12 months to date, its vessel ordering activity has become much more conservative. Alibra has tracked orders for just 49 new vessels by Chinese companies between April 1, 2016 and March 31, 2017 – a big reduction on the 175 new vessels ordered during the preceding 12-month period. What is perhaps remarkable is that this reduction has occurred even though the Chinese government’s scrapping subsidy scheme (which offers benefits for Chinese owners replacing old tonnage with new ships built at Chinese shipyards) has been extended until the end of 2017.

    Of the 49 new ships China has ordered in the past 12 months, 14 are small containerships (of around 2,500 TEU) and 14 are Valemaxes. This really illustrates how China’s ordering activity has become much more muted. In contrast, Chinese companies ordered 20 Valemaxes in the 2015/2016 period and some 31 ultra-large containerships of 15,000+ TEU, plus 16 VLCCs, among other vessel types.

    China’s shipping industry has undergone radical consolidation during the past few years in order to trim costs and increase efficiency. For this reason, Chinese shipping is becoming increasingly corporate, which could explain this more conservative attitude to ordering new vessels and instead picking up secondhand vessels (especially while asset prices are low).

    Read More
  • 03/04/2017 - Alibra Shipping 0 Comments
    ​Buy low, sell high: Asset players still on the scene

    A few years ago, we saw a number of private equity firms invest in shipping, only to find it was much more difficult than expected to generate their desired returns. But, undeterred, JP Morgan Global Maritime (JPM GM) has this year so far acquired four bulk carriers, comprising two capesizes and two supramaxes. 


    JPM GM’s latest acquisition has been the capesize Hanjin Esperance, acquired in mid-March for $29.5m from bankrupt Hanjin Shipping. The private equity firm bought another capesize, since renamed True Frontier, from a unit of Hanjin for $20.5m at the end of January. Similarly, the firm bought a supramax, now known as Sage Caledonia, for $14.9m from Japan’s Daiichi Chuo, which filed for bankruptcy in September 2015.

    So it seems JPM GM continues to follow a private-equity firm’s conventional investment strategy: buy distressed assets on the cheap and sell them at a higher price once the market recovers.

    JPM GM hasn’t stated publicly what its business strategy is, so let’s look at the acquisitions as if they’re a pure asset play. The investment bank’s shipping arm has spent a combined $75.4m on the four vessels it has acquired so far this year, three of which were purchased in bank sales or at auction. Based on our estimates, the fleet currently has a market value of around $89m. That's a potential 18% profit, if the company were to sell these vessels tomorrow.

    So if the investment bank wanted to sell, should it do so now or wait for asset values to rise further?

    March has been a helluva month for the capesize market, thanks to China’s voracious appetite for iron ore imports. Spot rates have surged, particularly on runs from Western Australia (C5) and Brazil (C3) to China, which have seen 12-month and 24-month highs respectively. As a result of this optimism, and frantic fixing in both the spot and period markets, a five-year-old, 180,000-dwt capesize vessel is this week valued at almost $5.0m more than it was when March began, according to assessments from the Baltic Exchange.

    Where capes are concerned, the key is China. Shipping is an industry that surprises the pessimist and punishes the optimist, so a market correction could be on the cards. Iron ore inventories at Chinese ports have already risen 18% since 2017 began. Port inventories stood at 134m tons on March 24, the highest level since 2004, which will suppress China’s import demand at some point in the near future.

    Analysts estimate China currently has a 2.0x inventory-to-steel production ratio. The average for this ratio over the past five years is near 1.5x, which would imply a growing supply glut. Added to this, China is expected to cut its domestic steel production capacity in the coming years. Hebei, China’s main steel-producing province, has increased its capacity-cutting target for 2017 and will this year aim to cut its steelmaking capacity by 32.0m tons.
    In early February, JPM GM fixed its cape True Frontier on a 12-month period charter to Rio Tinto at a daily rate of $11,450. Since then, one-year rates have advanced by almost $4,000 per day by our estimates. But with some uncertainty as to the future of Chinese import demand for iron ore, locking in a healthy rate on period charter is a sensible move that will provide JPM GM with predictable cashflows during the year ahead. Plus it has its supramaxes to fall back on, a segment that suffers less volatility in rates than for vessels with larger tonnages.

    During their time in shipping, private-equity firms have learned to be cautious and it will be interesting to see JPM GM’s next moves to see how the firm has adapted.

    Read More
  • 24/03/2017 - Alibra Shipping Limited 0 Comments
    Panamaxes on the up?

    The values of secondhand panamax bulkers appear to have received a sudden shot in the arm. 


    Indeed, a recent series of en-bloc acquisitions by big owners seem to show that panamaxes are back in vogue. Last week, Pan Ocean picked up two kamsarmaxes from bankrupt Hanjin; Golden Ocean bought five panamaxes as part of its acquisition of Quintana’s 14-vessel dry fleet; and at the end of February, Star Bulk picked up four kamsars from Nisshin.

    Secondhand value surge

    Perhaps this week’s most interesting deal was the reported sale of Jiangsu Huaxi Ship Management’s 2006-built panamax Grand Legend to a Greek buyer for $8.5m. The price is more than double what the Chinese owner paid for the vessel at auction in September, when it bought the ship from Mercator. Indeed, China-built panamaxes aged 10+ years have struggled to achieve more than $5m over the past 12 months. Buyer demand has helped boost Jiangsu Huaxi’s sale price.

    This upturn has been reflected in S&P assessments by the Baltic Exchange, which has added more than $3.0m in value to its benchmark panamax vessel over the past two months. On Monday, the Baltic assessed the value of a five-year-old, 74,000-dwt panamax (built at a “first-class” yard) at $17.3m – almost 23% above its January 31 assessment of $14.1m. Indeed, Baltic estimates stagnated around the $14.0m mark for much of 2016. What’s going on?

    What newbuildings?

    In other shipping segments, attractive contract prices for newbuildings are driving down secondhand asset values (we wrote about the effect on the VLCC market earlier this year). This isn’t a problem for panamax bulkers, however, as there have been no reported orders for newbuildings since the end of May 2016. In fact, only four new panamaxes were ordered last year in total.

    So while only four new vessels have been ordered, some 108 panamaxes have been sold for demolition since January 1, 2016 to date. This is equivalent to around a 5% net fleet contraction, taking into account the 46 vessels delivered new from shipyards so far this year.

    There are currently around 2,028 panamaxes on the water, of which an estimated 455 are aged 15 years or older, which – in theory – could make them scrapping candidates. But don’t count on it just yet…

    Market upswing

    Spot rates are doing well, so owners are going to want to keep hold of their panamaxes for now (only seven have been reported sold for demolition since 2017 began). Rates have doubled since the end of January on round-trips from southern China via Indonesia. Things have been a little more volatile in the Atlantic, peaking in the first week of March, but are gaining ground again this week. The upturn is due to robust Chinese demand for Brazilian soybeans, which has particularly improved rates for panamax runs from Brazil to China.

    This enthusiasm can also be seen in the period market, where fixtures have been coming thick and fast since the year began. Six-month fixtures keep flirting with the $11,000-per-day level, and this week saw a one-year fixture booked at this price too. By way of comparison, six-month periods were fixing at between $5,000 and $6,000 daily at this point last year; 12-month deals were struggling to top $5,000 per day.

    The rest of the year

    Excluding the 46 panamaxes already delivered, another 107 are scheduled for delivery this year, which will grow the fleet by a gross 5.3% in terms of vessel numbers by the end of 2017. Fleet growth will slow again in 2018, when only 23 vessels are expected to hit the water, all of which will be kamsarmaxes.

    This year’s good soybean season should hopefully bode well for cargo availability and demand growth. Nevertheless, the shipping press has been full of comment advising against overoptimism in the dry market as a whole.

    “With 2017 starting at a high level, consecutive quarterly developments may disappoint in the second half of the year,” Ultrabulk said in its annual report for 2016, quoted in TW. "It is not certain yet, as crop forecasts, house prices and Chinese finance can only guide us six months ahead.”

    Ultrabulk projects demand growth of 3.3% this year, which it said should exceed supply growth of around 2.0% in the dry market as a whole.

    Read More
  • SULPHUR: COUNTDOWN TO COMPLIANCE
    20/03/2017 - Alibra Shipping 0 Comments
    SULPHUR: COUNTDOWN TO COMPLIANCE

    2020 will see the beginning of the IMO’s worldwide 0.5% limit on the sulphur content of marine fuel. This will be a huge step change for how the world’s merchant fleet sources its fuel: in 2016, global demand for high-sulphur fuel oil accounted for almost 70% of all bunker fuels sold.


    But this poses a problem: producers and refiners now have less than three years to assure a supply of ultra-low-sulphur marine fuel that will satisfy demand from the world’s merchant fleet. A similar supply squeeze arose two years ago, when the IMO instated its 0.1% sulphur content limit within emission control areas (ECAs). And if we’ve learned anything from the past few years, satisfying demand will be expensive.

    Shipowners have two options: switch to alternative fuels, such as marine gas oil (MGO); or install scrubbers, which remove sulphur from exhaust emissions.

    Research firm Wood Mackenzie has estimated that a switch to MGO fuel would be the more costly option. A combination of higher crude prices and tight availability of MGO could take the price of MGO up to almost four times that of fuel oil in 2016, and eventually cost the entire industry additional $60bn annually, the consultancy said in a recent report.

    “In full compliance, we expect [carriers] to try to pass the cost to consumers and freight rates from the Middle East to Singapore could increase by up to US$1 a barrel,” Wood Mac said in a recent report.

    Installing scrubbers, on the other hand, may be expensive as an initial investment but Wood Mac estimates a high rate of return, ranging between 20% and 50% depending on investment cost, MGO-fuel oil price spread and ships’ fuel consumption.

    That being said, the initial investment in scrubbers is high. Khalid Hashim, MD of Precious Shipping, said in a recent article he almost fell off his chair upon reading a quote of $91.5m for 14 ships to be fitted with scrubbers. This price – $6.54m per vessel – is way above the value of many older and/or smaller vessels – why spend more on retrofitting than your ship is worth? Added to this, many still regard scrubbers as a commercially unproven technology.

    Chinese refiners like Sinopec and PetroChina, and Indian refiners such as Reliance and Essar will be the ones who benefit from higher MGO fuel prices. The firms are already “deep conversion” refiners with the capability to produce more MGO on demand. This means that after 2020 we could likely see many more vessels opting to bunker in China or India, rather than Singapore, which has been the world’s largest bunkering hub.

    Singaporean bunker suppliers currently don't have the capability to keep up with incremental demand for MGO, unless drastic changes are made. Indeed, Singapore has been focusing increasing its LNG bunkering facilities during the past few years, supported by generous grants from the city-state’s Maritime & Port Authority.

    Complying with sulphur limits on marine fuel will be a massive headache for the shipping industry in the coming years. But looking at the (much much) bigger picture, making shipping emissions “cleaner” won’t just be beneficial for the environment but for human health too. Around 60,000 lives are lost every year to lung cancer and cardiovascular diseases caused by emissions from shipping, according to 2015 research by Germany’s University of Rostock and Helmholzzentrum München. Researchers found that emissions from diesel fuel were even more harmful than those from heavy fuel oil, due to its higher soot content. The researchers recommended scrubbers as a solution to reduce the harmful particulate matter released in emissions. Might scrubbers be the world’s most expensive life-saving technology?

    Read More
  • 28/02/2017 - Alibra Shipping 0 Comments
    THE IRON ORE MARKET CONTINUES TO SURPRISE

    Iron ore continues its impressive rally moving into March with the North China 62% Fe content reaching a 30-month high compared to August of 2014. Whilst prices for other key commodities remain lackluster, particularly for crude following OPECs continued commitment to curb supply with little impact to the price per barrel, iron ore is trading at around $94 per metric tonne. Since the start of 2017 the iron ore price has risen 16% following its stratospheric 86% rise in 2016. The main driver is the global demand for crude steel production which has risen 7%on February 2016 numbers due in part to rising raw material prices according to the World Steel Association. 


    As the price threatens to touch $100/mt it is hardly surprising why such increases are confounding the market. 2017 has seen record inventory levels at ports across Asia as Brazilian and Australian miners maintain their high output levels. Global seaborne trade currently sits at around 1.4 billion tons with China alone importing 92 million tonnes of iron ore in January. Despite these record imports China’s appetite for consuming ‘dirty’ energy remains uncertain as the PRC’s commitment to close coal power stations and embrace alternative wind and water sources, notably the Three Gorges Dam project, continues. Indian iron ore shipments are also forecast to rise by two-thirds this year following Delhi’s lifting of mining bans across the nation. With operators such as Vedanta and Essar further supplying the market, India is forecast to export 40 million metric tonnes in 2017.

    The market therefore has its sceptics. Financial institutions such as BMO Capital Markets along with producers themselves such as NMDC Ltd expect the rally to end by November with prices correcting at around $45/mt. Indeed Vedanta has already claimed to have exhausted its annual mining cap for Goa in January. Analysts are quick to highlight that after the Asia Lunar New Year production and consumption soars before the market readjusts once again. This week the spot price benchmark already suffered the heaviest fall recorded for one day since January 6th dropping by 3.14% to $91.34/mt. Chinese invetories are at the highest level since 2004 at 127.5 million tonnes and such a surplus is likely to weigh on the iron ore price as demand fluctuates.

    Alongside the iron ore rally seaborne trade has enjoyed a minor renaissance. BHP Billiton and Rio Tinto have been busy booking Capesize vessels for trips from West Australia to Bohai Bay with rates hitting $6.00. The FFA market continues to reflect strong period fixing. Cape 1 year TC rates can achieve $12,000 for Pacific delivery. Supramax bulk carries have achieved as much as $12,000 (or even higher) for single trips on the familiar coal runs from Indonesia/Australia to China. Supra short period rates can achieve around $9,000 with Pacific delivery. Operators appear bullish on trading the spot market with chartered-in tonnage with hope the market can rise to around $15,000 for single trips, although this remains an optimistic sentiment.

    So where is the iron ore market heading? As usual for the commodity market and shipping, fortunes over the last decade or more have relied, perhaps too heavily, on China’s economic performance. As Beijing continues its supposed commitment to ‘Green Alternatives’ and general unpredictability in policy formulation, much will hinge on the Asian giants direction of travel. As a Trumpist-Protectionist sentiment seems to be sweeping through the Western economies global geo-politics will also cause uncertainty. Dry bulk ship owners are at least enjoying a period of improved TC and Voyage rates across the market, for now.

    Read More
  • exports, us, oil, crude, refineries, tankers, shipbrokers, alibra, production, domestic, trump, products, petroleum, shipping, maritime
    17/02/2017 - Alibra Shipping 0 Comments
    AMERICAN OIL: MORE DOMESTIC PRODUCTION, MORE EXPORTS

    US President Trump may be divisive but (as he noted during Thursday’s press conference) he is honouring his campaign promises, which lent optimism to US stock markets.


    Trump has already indicated (like many presidents before him) that he aims to curb America’s dependence on foreign crude imports. On January 20, Trump stated he is “committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests,” by exploiting “vast untapped domestic energy reserves”. The US imported about 3m bpd a day from OPEC last year, of which around 1m bpd came from Saudi Arabia, Bloomberg reports.
    The US saw nearly 10% more waterborne imports in 2016 than the year before, due to US refiners taking advantage of ultra-low crude prices, according to commodity research firm ClipperData. Tankers carrying crude to the US are likely to reduce this year as OPEC imports decrease, and US production is expected to make up the shortfall, the consultancy said.

    US crude imports for last week averaged 8.5m bbl, down 881,000 bpd from a week earlier, US EIA data says. However, over the past four weeks, imports have climbed 9.9% compared to the same period last year.

    Investors remain optimistic about the Trump presidency, as demonstrated by surging stock market indices. The Dow Jones Industrial Average (DJIA) scored its sixth consecutive record high yesterday. The gains have been spurred by the improving US economy, a strong fourth-quarter earnings season and Trump’s promises to cut corporate taxes and reduce financial regulations. To sustain this upturn, Trump needs to demonstrate he’s making progress in keeping these promises. In spite of the general verve of US stock markets, energy stocks are wavering due to record-high US crude stockpiles. Yesterday, the S&P 500 index edged slightly lower, having risen 5% since 2017 began. The DJIA has risen 4% since January 1.

    Oil prices have seen a slight fall over the past week as US crude inventories reached their highest ever level of 518m bbl, according to data from the US Energy Information Administration (EIA). Stockpiles have risen due to a number of factors, including strong oil imports, higher production from US shale plays and reduced demand from refiners.

    Nevertheless, crude prices are a lot healthier than they were a year ago, which is helping boost US crude exports. January’s exports averaged 630,000 bpd, up 7% from a month earlier, according to the US EIA. Exports could reach 900,000 bpd during February, due to larger cargoes and reduced crude demand from domestic refiners ahead of their maintenance season.

    Thursday saw Phillips 66 book two suezmaxes in the spot market for trips from the US Gulf heading east. Last week, BP reportedly fixed the VLCC Olympic Luck for a voyage from the US Gulf to Singapore, following another VLCC booked by Trafigura on January 25 for the same trip.

    Usually one VLCC per month has made it way from America to Asia since Obama repealed the ban on US crude exports. Around one-third of American crude exports are bound for Canada, with the rest (usually) heading to Asia.

    Charterers exporting US oil, however, are still restricted by draft at American ports and usually have to opt for aframax-size vessels. President Trump has promised to upgrade America’s aging infrastructure, but this promise does not seem to have extended to the nation’s ports (yet?). Given that vessels larger than suezmax size have an extremely limited number of ports at which to load and discharge, infrastructural constraints will hold back US crude exports in the short to medium term, especially during these relatively early days of the market.

    Read More
  • cape capesize drybulk shipping maritime sea market freight rate period report alibra shipping limited dry bulk bulkers snp period shipbroking shipbrokers
    10/02/2017 - Alibra Shipping Limited 0 Comments
    CAPESIZE TIMECHARTER MARKET TAKES OFF

    There’s optimism in the capesize period market as major

    charterers continue to pick up cape vessels for charters of at least one year.

    The past week has seen Rio Tinto and an unnamed charterer
    each take a capesize vessel on 12-month charters at daily rates of $11,450 and
    $12,500 respectively. SwissMarine also reportedly booked a cape for 15 months
    at a rate of $10,100 per day.

    During the three months since November 10, the market has
    seen 36 capesize vessels booked on period charters – exactly twice as many as
    during the same period last year, according to Alibra research. Almost all of the recent fixtures have been for
    12-month periods, plus seven 15-month fixtures. Rates are the same across both
    the Atlantic and Pacific basins.

    Charterers’ enthusiasm for longer period charters is helping
    support rates, although the short-term peak may already have been seen last
    week, when Oldendorff reportedly booked a cape for 12 months at $15,500 daily. Nevertheless,
    current one-year rates show marked progress compared to levels a year ago when
    they stood at just over $5,000 per day.

    The period market has, of course, been bolstered by
    volatility and growth in spot rates. The Baltic Capesize Index’s weighted
    timecharter rate (for voyages on five major cape routes) was assessed on
    Thursday at $5,625 per day, around double the level seen 12 months previously.

    Spot rates have fallen during the past few weeks, especially
    on the Australia-China route due to bad weather Down Under, which temporarily
    closed the Australian ports of Port Hedland and Dampier at the end of
    January. Spot rates are expected to rebound on the major route once weather
    improves. The Chinese New Year holiday
    also paused chartering activity. Vale ordered a lot of tonnage in the spot
    market for February loading on the Brazil-China route, which appears to have
    satisfied its spot chartering appetite for now, which has depressed rates on
    the route for now, but an upturn is inevitable. The number of period rates
    certainly suggests major charterers expect spot rates to rise further this
    year. Generally speaking, commodity markets have come back with a
    vengeance compared to a year ago, which we hope will continue.

    The capesize market is still being haunted by the spectre of
    fleet overcapacity, however. Some 86 new capesizes are scheduled to arrive this
    year, which is equivalent to gross fleet growth of 5.6% in terms of number of
    vessels. Perhaps worryingly, the tonnage of the average capesize newbuilding is
    growing – some 50 of the new vessels that will hit the water this year are over
    200,000 dwt. This means the global capesize fleet will increase 6% in tonnage
    during 2017. Shipowners have done well to scrap older tonnage, which has
    trimmed the global trading fleet. It certainly wouldn’t hurt to keep scrapping
    during 2017.

    This super-vessel trend will become more pronounced in 2018,
    when 16 Valemax vessels of 400,000 dwt will hit the water, plus 15 other capes
    of 200k-300k dwt, and two 180,000 dwt vessels (33 new ships in total). In spite
    of this, the deliveries will only increase the global cape fleet’s tonnage by
    around 3%, which is manageable. The Valemaxes will be employed on contracts
    with Vale and do not usually enter into the spot trading fleet and so will have
    little effect on the spot market.

    Read More
  • 08/02/2017 - Alibra Shipping 0 Comments
    THRIFTY SHOPPERS PICK UP BARGAIN VLCCS

    This week, DHT Holdings ordered two VLCCs at Hyundai Heavy Industries at what is rumoured to be the cheapest

    contract price recorded in 14 years. The company has so far declined to release official prices for the two newbuildings,
    but talk in the market suggests around $81m per vessel. 2016 saw values for secondhand VLCCs fall off a cliff and
    DHT’s rumoured low contract price will further pressure asset values. Twelve months ago, the Baltic Exchange valued
    a five-year-old, 305,000-dwt VLCC at $79.4m. On Monday, the benchmark vessel was assessed at $59.23m,
    a 25% decline.
    But, as we have seen with bulk carriers, the secondhand market has come alive with buyers snapping up VLCCs at
    bargain-basement prices. This week, Greece’s Olympic Shipping reportedly picked up two VLCC resales from
    Metrostar at a price of $81m per ship – around the same price as DHT’s newbuildings, but without the waiting time!
    In 2017 so far, we’ve tracked the sale of 7 VLCCs (including 3 deals still on subs). This is a huge proportion
    compared to the 24 VLCC sales transactions we logged during 2016.
    Some institutions consider that depressed asset values are a good thing for the VLCC market because they disincentivise
    new ordering. Indeed, during 2016 we logged orders for just 17 firm VLCCs, compared to 57 in 2015.
    DHT is the only firm to have ordered new VLCCs this year. Trygve Munthe, the company’s co-chief executive, this
    week commented that his company “would not expect a large flurry of similar orders to be placed”, despite the
    apparently attractive contract prices.
    Looking at market data, it might be prudent for owners to hold off ordering new VLCCs for a little while longer. Although
    the VLCC charter market had its highlights during 2016, its potential could be dulled this year. Fleet utilisation
    is expected take a big hit this year as many new VLCCs hit the water. Some 52 vessels are scheduled for delivery in
    2017 – equivalent to 7.3% of the global fleet in terms of number of vessels. Thirteen new VLCCs have already
    been delivered.
    We’ve seen a few VLCCs sold for conversion into floating storage and offloading (FSO) units over the past couple of
    years and we expect to see a few more such deals, but it remains unlikely this will affect utilisation of the global trading
    fleet. Only four VLCCs have been sold for demolition during the past two years. We’ll probably see a few more
    this year, but for the most part scrapping won’t be part of the VLCC conversation because net fleet growth is still
    relatively low.

    Read More