Monday, 6 February 2012
Friday, 3 February 2012
Thursday, 5 January 2012
What’s in Store for 2012?
Leading lights from across the industry share their thoughts on theoutlook for the next 12 months.
SHIPOWNERS
Morten Arntzen, chief executive of Overseas Shipholding Group (OSG):
Arntzen can speak both from the perspective of a shipowner and a ship-finance professional after his earlier career as a banker.
He sounds a little more positive on shipping markets than financial ones for 2012.
On the clean-products front, he said: “I’ve been pretty consistent in saying the products market is on a cyclical upturn, although with some volatility. We expect 2012 to be better than 2011. We’ve invested more in products than in crude in the last four years and we think it’s going to pay off.”
As for crude tankers, Arntzen commented: “We think the crude market will be somewhat better than last year. In 2011, every surprise in the market hurt us: the tsunami in Japan, Libya, the Brent-Dubai spread. And inventories across the globe went to five-year lows. There were a lot of negative factors that are unlikely to repeat themselves, and some surprises might help us. That said, we’re not gambling on a big improvement. We’ll be conservative and run the business as if things are going to stay bad.”
On the outlook for finance, he said: “I think we’ll have the tightest ship-finance market in my lifetime: as bad as the 1980s, if not worse. In the 1980s, banks stayed away because shipping markets were a disaster. Now the banks are introuble themselves. I don’t see capital markets picking up. Junk bonds will be too expensive for all but a handful of owners. The equity markets will be bystanders until they’re convinced that segment in shipping has clearly turned around.
“Private equity will play a role. It’s smart money and buys when things are really crappy, which they are. There will be more bankruptcies. If rates stay as they are— if the FFA [forward-freight-agreement] markets are right — companies can’t sustain themselves for a long period. There are too many strained balancesheets.”
Jan Hammer, chief executive of Odfjell:
The boss of one of the chemical-tanker sector’s leading players says there is no telling which way the market will go but it is aiming to tighten up on fleet efficiency in preparation for a difficult year.
“I can’t remember a year when we have been so uncertain primarily because of the financial unrest and the crisis in Europe,” he commented.
“It could kick both ways. There could be growth that gets us back on track but recession will be very negative for the chemical-tanker industry.”
Hammer says the problem for chemicals players is not only one of freight rates but also one of escalating costs from fuel bills and crewing.
“The chemical-tanker business is not sustainable at the current level of rates. They need to be brought to a new level for us to continue.“
At the moment the returns do not justify investing in the business and building new ships,” he explained.
Hammer says there are limited options open to the company should the recession deepen but it is trying to keep a tight control on growing costs. “We are a global operation and from now on we will be looking even more closely at how we utilise our fleet and allocate ships to try to make a difference.”
Khalid Hashim, managing director of Bangkok-based Precious Shipping:
The Precious chief shares the bleak outlook for 2012, describing it as a year he is looking at with trepidation.
“I fear for 2012. It is going to be much worse than 2011, which was challenging enough for everyone in shipping with maybe the exception of gas-carrier operators,” he said.
Hashim expects market conditions in the dry-bulk sector to worsen as the economies of China and India slow, as will the pace of rebuilding in Japan.
“The macro-economic numbers coming out of these countries are not good for 2012, which is bad for us in the dry-bulk market because we depend on these countries for cargo,” he added.
Hashim predicts there will be many more bankruptcies in 2012 as loss-making companies continue to deplete their cash reserves. “Counterparty risk is going tobe a very important factor,” he said.
Despite his fears, Hashim points out that shipping is, and always will be, a cyclical market, and operators who have been prudent with their cash will find opportunities despite the tough times.
“Shipping prices are back to what they were in 2002, long before the bulk boom. It will be a great year for going out to buy ships so we can be ready for the next upswing,” Hashim concluded.
Benoit Timmermans, chief executive of Bocimar:
Timmermans says there are a number of negative elements right now, such as too many vessels still to be delivered, some shipyards becoming very hungry, a slowdown in the world economy particularly in China, plus a slowdown in the steel market and the influx of very large ore carriers (VLOCs). On the other hand, he says slow steaming has still big potential, scrapping prices remain attractive, more expensive docking and more regulation will lead to scrapping, while restricted access to finance will lead to a slippage and slowdown in ordering.
For Bocimar, he said: “We still have good contract coverage for our fleet. In a very volatile market, timing of “fixing” will be of the essence. Maybe 2012 will provide some buying opportunities. All in all, we do not expect a “Grand Cru” but a positive year nevertheless, with lots of opportunities.
Herman Billung, chief executive of Golden Ocean:
Billung says dry-bulk players have rightly had a focus on the huge orderbook during the last couple of years.
“Due to the solid increase in demand for coal and iron ore, and other factors like slow steaming, congestion and large growth in Chinese coastal trade, there has been better balance in the market than most analysts had expected. As regards 2012, we will still have to struggle with a too-large orderbook that will put downward pressure on the spot market, as well as values somewhat. But the market is likely to bottom out soon.”
He says Golden Ocean is well placed to benefit from the opportunities 2012 is likely to offer. “The company has strong liquidity, we are fully financed and have good contract coverage. Personally, I believe 2012 will be an exciting year for our company.”
CK Ong, president of Taiwanese bulker player U-Ming Marine:
Ong is confident that the capesize market will not see the dark days it did in the first half of 2011.
“We won’t see a repeat of the problems we did then,” he said. Nevertheless, he remains pessimistic on the performance of the dry-bulk sector this year. “I doubt there will be any significant improvement. The overcapacity situation will continue to plague us throughout the year,” he explained.
Although he expects 2012 to be a difficult year for dry bulk, Ong reckons owners that have their finances in order will be able to tough it out.
“But there will be problems for owners who have overcommitted with expensive newbuildings. They will continue to face financial issues and may have a hard time surviving,” he concluded.
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong:
Huxley forecasts that the tanker sector will face another challenging year but thinks the shipping industry will have the ability to overcome the problems.
“Shipping always has the ability to ride out tough periods through self-correcting processes. We might see a lot more scrapping this year and will continue to see delays in the delivery of newbuildings, and owners swapping tanker orders into LNG ships.”
On the dry-bulk side, Huxley thinks this year will be slightly better. “The big theme for 2012 will be the availability of credit from shipping banks. Owners will have to come to terms with paying more for credit if they manage to get it.”
Dong Jin Jung, vice-president of South Korea’s Hyundai Merchant Marine (HMM):
The tanker market will continue to experience a tough time due to the large number of newbuildings rolling out of yards, says the HMM executive. “Even if we include some slippages we may still have as many as 60 VLCCs delivered,” he said.
Soren Skou, chief executive of Maersk Line:
According to the Danish liner boss, “2012 will be a hard year for Maersk Line, as it will be for the entire industry”.
“There is likely to be further consolidation in the industry as the need to reduce capacity becomes more urgent. As Maersk Line is the biggest player out there I welcome this.
“It is a year when we will work hard to ensure we retain our position as the undisputed leader in container shipping and come out the other side stronger, leaner and even more customer focussed."
The end of 2011 saw a major partnership emerge between two of our competitors, MSC [Mediterranean Shipping Co] and CMA CGM.
“This partnership agreement actually reduced their combined capacity, giving Maersk Line the opportunity to increase its market share.”Skou adds that the global economy is on a fragile and slightly upward trajectory but even if this is maintained it “will not be enough to allow the container-shipping industry to continue as it is”.
“Most container-shipping companies responded to the economic booms of the recent past by ordering downstream increases in capacity while maintaining a business-as-usual approach. This increased capacity is now coming into play at a time when the global economy is subdued and is likely to remain so.
“There is a huge increase in supply, while demand for containers to be shipped remains stagnant from a global perspective. This has led to a price competition where the rates the industry is charging are unsustainable.”
Jorn Hinge, president and chief executive of pan-Arabian liner company United Arab Shipping Co (UASC):
Hinge says there are no indications that this year will be any better for the container industry.
“The world economy is not hot. I don’t think there is going to be much consumer demand in Europe this year,” he commented.
Hinge adds that the performance of the liner trades in 2012 will depend on whether owners are prepared to scale back their fleets so supply matches demand.
“We need to lay up ships. We ended 2011 with freight rates on the Asia-to-Europe trade at around $500 per box. That doesn’t even cover your bunker costs. Smallerships on the main trades need to either go find a new trade or go into layup,” he said.
But it won’t all be doom and gloom for 2012, notes Hinge. While the east-west trades such as Asia to Europe, transatlantic and transpacific continue to suffer because of overcapacity, he points out that routes to destinations such as SouthAmerica, Africa and Australia continue to perform well.
When asked whether he expects to see any of his competitors collapse in 2012, Hinge declined to comment. “That is not something I’d like to speculate on,” he said.
Captain NV Mudaliar, vice-president at Mumbai-based Five Stars Bulk Carriers:
“Tankers will be affected more than dry bulkers because of the lack of demand in the West due to recessionary pressure,” Mudaliar said.
“Capesize freight rates look set to improve due to the increase in Chinese demand for Brazilian ore as Indian ore exports to China have dropped but smaller bulkers will not see any improvement in rates.”
Similar to other Indian players that are holding on to cash to tide them over and delaying fleet expansion, he is non-committal on his company’s growth plans, saying only that it will watch the market closely.
Captain Sunil Thapar, senior director at state-owned Shipping Corp of India (SCI):
Thapar, along with most Indian shipping players, expects the situation will worsen this year.
“Freight rates do not look as though they will improve nor is the pace of scrapping expected to offset the influx of new tonnage into the international shipping industry,” he said.
“SCI is not looking to rush into any fresh acquisitions but will rather preserve its cash reserves to overcome the crisis.”
AR Ramakrishnan, managing director of Essar Shipping:
Ramakrishnan is pinning his hopes on Europe getting to grips with the Eurozone crisis.
“If the European economy responds postively to the measures taken by European national governments, there is some hope that demand might pick up in the second half of next year,” he said.
SHIPOWNERS
Morten Arntzen, chief executive of Overseas Shipholding Group (OSG):
Arntzen can speak both from the perspective of a shipowner and a ship-finance professional after his earlier career as a banker.
He sounds a little more positive on shipping markets than financial ones for 2012.
On the clean-products front, he said: “I’ve been pretty consistent in saying the products market is on a cyclical upturn, although with some volatility. We expect 2012 to be better than 2011. We’ve invested more in products than in crude in the last four years and we think it’s going to pay off.”
As for crude tankers, Arntzen commented: “We think the crude market will be somewhat better than last year. In 2011, every surprise in the market hurt us: the tsunami in Japan, Libya, the Brent-Dubai spread. And inventories across the globe went to five-year lows. There were a lot of negative factors that are unlikely to repeat themselves, and some surprises might help us. That said, we’re not gambling on a big improvement. We’ll be conservative and run the business as if things are going to stay bad.”
On the outlook for finance, he said: “I think we’ll have the tightest ship-finance market in my lifetime: as bad as the 1980s, if not worse. In the 1980s, banks stayed away because shipping markets were a disaster. Now the banks are introuble themselves. I don’t see capital markets picking up. Junk bonds will be too expensive for all but a handful of owners. The equity markets will be bystanders until they’re convinced that segment in shipping has clearly turned around.
“Private equity will play a role. It’s smart money and buys when things are really crappy, which they are. There will be more bankruptcies. If rates stay as they are— if the FFA [forward-freight-agreement] markets are right — companies can’t sustain themselves for a long period. There are too many strained balancesheets.”
Jan Hammer, chief executive of Odfjell:
The boss of one of the chemical-tanker sector’s leading players says there is no telling which way the market will go but it is aiming to tighten up on fleet efficiency in preparation for a difficult year.
“I can’t remember a year when we have been so uncertain primarily because of the financial unrest and the crisis in Europe,” he commented.
“It could kick both ways. There could be growth that gets us back on track but recession will be very negative for the chemical-tanker industry.”
Hammer says the problem for chemicals players is not only one of freight rates but also one of escalating costs from fuel bills and crewing.
“The chemical-tanker business is not sustainable at the current level of rates. They need to be brought to a new level for us to continue.“
At the moment the returns do not justify investing in the business and building new ships,” he explained.
Hammer says there are limited options open to the company should the recession deepen but it is trying to keep a tight control on growing costs. “We are a global operation and from now on we will be looking even more closely at how we utilise our fleet and allocate ships to try to make a difference.”
Khalid Hashim, managing director of Bangkok-based Precious Shipping:
The Precious chief shares the bleak outlook for 2012, describing it as a year he is looking at with trepidation.
“I fear for 2012. It is going to be much worse than 2011, which was challenging enough for everyone in shipping with maybe the exception of gas-carrier operators,” he said.
Hashim expects market conditions in the dry-bulk sector to worsen as the economies of China and India slow, as will the pace of rebuilding in Japan.
“The macro-economic numbers coming out of these countries are not good for 2012, which is bad for us in the dry-bulk market because we depend on these countries for cargo,” he added.
Hashim predicts there will be many more bankruptcies in 2012 as loss-making companies continue to deplete their cash reserves. “Counterparty risk is going tobe a very important factor,” he said.
Despite his fears, Hashim points out that shipping is, and always will be, a cyclical market, and operators who have been prudent with their cash will find opportunities despite the tough times.
“Shipping prices are back to what they were in 2002, long before the bulk boom. It will be a great year for going out to buy ships so we can be ready for the next upswing,” Hashim concluded.
Benoit Timmermans, chief executive of Bocimar:
Timmermans says there are a number of negative elements right now, such as too many vessels still to be delivered, some shipyards becoming very hungry, a slowdown in the world economy particularly in China, plus a slowdown in the steel market and the influx of very large ore carriers (VLOCs). On the other hand, he says slow steaming has still big potential, scrapping prices remain attractive, more expensive docking and more regulation will lead to scrapping, while restricted access to finance will lead to a slippage and slowdown in ordering.
For Bocimar, he said: “We still have good contract coverage for our fleet. In a very volatile market, timing of “fixing” will be of the essence. Maybe 2012 will provide some buying opportunities. All in all, we do not expect a “Grand Cru” but a positive year nevertheless, with lots of opportunities.
Herman Billung, chief executive of Golden Ocean:
Billung says dry-bulk players have rightly had a focus on the huge orderbook during the last couple of years.
“Due to the solid increase in demand for coal and iron ore, and other factors like slow steaming, congestion and large growth in Chinese coastal trade, there has been better balance in the market than most analysts had expected. As regards 2012, we will still have to struggle with a too-large orderbook that will put downward pressure on the spot market, as well as values somewhat. But the market is likely to bottom out soon.”
He says Golden Ocean is well placed to benefit from the opportunities 2012 is likely to offer. “The company has strong liquidity, we are fully financed and have good contract coverage. Personally, I believe 2012 will be an exciting year for our company.”
CK Ong, president of Taiwanese bulker player U-Ming Marine:
Ong is confident that the capesize market will not see the dark days it did in the first half of 2011.
“We won’t see a repeat of the problems we did then,” he said. Nevertheless, he remains pessimistic on the performance of the dry-bulk sector this year. “I doubt there will be any significant improvement. The overcapacity situation will continue to plague us throughout the year,” he explained.
Although he expects 2012 to be a difficult year for dry bulk, Ong reckons owners that have their finances in order will be able to tough it out.
“But there will be problems for owners who have overcommitted with expensive newbuildings. They will continue to face financial issues and may have a hard time surviving,” he concluded.
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong:
Huxley forecasts that the tanker sector will face another challenging year but thinks the shipping industry will have the ability to overcome the problems.
“Shipping always has the ability to ride out tough periods through self-correcting processes. We might see a lot more scrapping this year and will continue to see delays in the delivery of newbuildings, and owners swapping tanker orders into LNG ships.”
On the dry-bulk side, Huxley thinks this year will be slightly better. “The big theme for 2012 will be the availability of credit from shipping banks. Owners will have to come to terms with paying more for credit if they manage to get it.”
Dong Jin Jung, vice-president of South Korea’s Hyundai Merchant Marine (HMM):
The tanker market will continue to experience a tough time due to the large number of newbuildings rolling out of yards, says the HMM executive. “Even if we include some slippages we may still have as many as 60 VLCCs delivered,” he said.
Soren Skou, chief executive of Maersk Line:
According to the Danish liner boss, “2012 will be a hard year for Maersk Line, as it will be for the entire industry”.
“There is likely to be further consolidation in the industry as the need to reduce capacity becomes more urgent. As Maersk Line is the biggest player out there I welcome this.
“It is a year when we will work hard to ensure we retain our position as the undisputed leader in container shipping and come out the other side stronger, leaner and even more customer focussed."
The end of 2011 saw a major partnership emerge between two of our competitors, MSC [Mediterranean Shipping Co] and CMA CGM.
“This partnership agreement actually reduced their combined capacity, giving Maersk Line the opportunity to increase its market share.”Skou adds that the global economy is on a fragile and slightly upward trajectory but even if this is maintained it “will not be enough to allow the container-shipping industry to continue as it is”.
“Most container-shipping companies responded to the economic booms of the recent past by ordering downstream increases in capacity while maintaining a business-as-usual approach. This increased capacity is now coming into play at a time when the global economy is subdued and is likely to remain so.
“There is a huge increase in supply, while demand for containers to be shipped remains stagnant from a global perspective. This has led to a price competition where the rates the industry is charging are unsustainable.”
Jorn Hinge, president and chief executive of pan-Arabian liner company United Arab Shipping Co (UASC):
Hinge says there are no indications that this year will be any better for the container industry.
“The world economy is not hot. I don’t think there is going to be much consumer demand in Europe this year,” he commented.
Hinge adds that the performance of the liner trades in 2012 will depend on whether owners are prepared to scale back their fleets so supply matches demand.
“We need to lay up ships. We ended 2011 with freight rates on the Asia-to-Europe trade at around $500 per box. That doesn’t even cover your bunker costs. Smallerships on the main trades need to either go find a new trade or go into layup,” he said.
But it won’t all be doom and gloom for 2012, notes Hinge. While the east-west trades such as Asia to Europe, transatlantic and transpacific continue to suffer because of overcapacity, he points out that routes to destinations such as SouthAmerica, Africa and Australia continue to perform well.
When asked whether he expects to see any of his competitors collapse in 2012, Hinge declined to comment. “That is not something I’d like to speculate on,” he said.
Captain NV Mudaliar, vice-president at Mumbai-based Five Stars Bulk Carriers:
“Tankers will be affected more than dry bulkers because of the lack of demand in the West due to recessionary pressure,” Mudaliar said.
“Capesize freight rates look set to improve due to the increase in Chinese demand for Brazilian ore as Indian ore exports to China have dropped but smaller bulkers will not see any improvement in rates.”
Similar to other Indian players that are holding on to cash to tide them over and delaying fleet expansion, he is non-committal on his company’s growth plans, saying only that it will watch the market closely.
Captain Sunil Thapar, senior director at state-owned Shipping Corp of India (SCI):
Thapar, along with most Indian shipping players, expects the situation will worsen this year.
“Freight rates do not look as though they will improve nor is the pace of scrapping expected to offset the influx of new tonnage into the international shipping industry,” he said.
“SCI is not looking to rush into any fresh acquisitions but will rather preserve its cash reserves to overcome the crisis.”
AR Ramakrishnan, managing director of Essar Shipping:
Ramakrishnan is pinning his hopes on Europe getting to grips with the Eurozone crisis.
“If the European economy responds postively to the measures taken by European national governments, there is some hope that demand might pick up in the second half of next year,” he said.
Court sells Sejin Maritime Chemical Tanker for $3.7m
Creditors of failed South Korean tanker operator Sejin Maritime have decided to cut their losses and sell after receiving an offer below appraised value for a handysize chemical tanker that received just onelow bid in early December.
The Singaporean courts have approved the sale of the 29,000-dwt chemical/products tanker Chem Orchid (built 1993) to a Panamanian entity called Providence Shipping for SGD 4.8m ($3.7m). The arrested vessel went under the hammer in early December but Providence was the sole bidder. Tanker sources at the time said they were not surprised that the vessel attracted little interest given the poor state of the chemical-tanker trades.
An attempt to auction the ship in mid-November also drew little interest.
The Chem Orchid was on bareboat charter to South Korean tanker operator Sejin Maritime from Han Kook Capital Co when it was arrested because of an unpaid bunker bill in July last year. At the time of its arrest, it was en route from Indonesia to Russia with a cargo of palm oil belonging to Frumentarius of Cyprusand Mercuria Energy Trading of Switzerland.
Panama City-based Providence, which has no connection to a California-based shipmanager of the same name, appears to be a cash buyer in the demolition trades as all vessels purchased by the company over the past year were immediately sold on for scrap.
This could indicate that the Chem Orchid is destined to make one final voyage to the breaker’s beach.
The Singaporean courts have approved the sale of the 29,000-dwt chemical/products tanker Chem Orchid (built 1993) to a Panamanian entity called Providence Shipping for SGD 4.8m ($3.7m). The arrested vessel went under the hammer in early December but Providence was the sole bidder. Tanker sources at the time said they were not surprised that the vessel attracted little interest given the poor state of the chemical-tanker trades.
An attempt to auction the ship in mid-November also drew little interest.
The Chem Orchid was on bareboat charter to South Korean tanker operator Sejin Maritime from Han Kook Capital Co when it was arrested because of an unpaid bunker bill in July last year. At the time of its arrest, it was en route from Indonesia to Russia with a cargo of palm oil belonging to Frumentarius of Cyprusand Mercuria Energy Trading of Switzerland.
Panama City-based Providence, which has no connection to a California-based shipmanager of the same name, appears to be a cash buyer in the demolition trades as all vessels purchased by the company over the past year were immediately sold on for scrap.
This could indicate that the Chem Orchid is destined to make one final voyage to the breaker’s beach.
Thursday, 22 December 2011
Chem-tanker Consolidation Gathers Pace
Consolidation is seen by some as the silver bullet to carry financially stretched shipping companies through tough markets.
Tougher times are creating fresh impetus for a shake-up in the chemicals sector.
The tanker sector is viewed by some as in most distress with Frontline, General Maritime Corp (Genmar) and Torm grabbing the headlines.
But consolidation is also now being widely talked about as the most likely panacea for container shipping and other markets.
Collaboration between CMA CGM and Mediterranean Shipping Co (MSC), the creation of Germany’s largest fleet capacity-wise with the pending Erck Rickmers-Komrowski merger and Peter Dohle taking a sizeable stake in Ernst Russ are all symptomatic of the fragile state of shipping.
Some, like Dohle and Rickmers, see their relative stability as an opportunity to grow, while others believe strength in numbers is the key to safeguarding their future.
One sector where consolidation began some time ago but has not received the same exposure is the chemical-tanker market. Being very much a barometer of the world economy, its fortunes are as much as any other shipping sector closely tied to gross domestic product (GDP).
For example, Germany’s John T Essberger has already taken over Heinrich Schoeller’s United Chemical Transport (UCT) and Denmark’s Erria has merged with compatriot Uni-Tankers.
UK-based private-equity group Triton has swallowed Jutland-based HerningShipping and is open about its ambitions to further consolidate the sector if the right opportunities arise.
The gravity of the situation in the chemical market has been driven home by Eitzen Chemical withdrawing from its pool activities to preserve cash and Japanese parcel-tanker owner and operator Dorval Kaiun recently filing for court protection.
Last month, Copenhagen-based Nordic Tankers — which says it wants to act as a market consolidator — left no doubt that much of 2011 has not been a good yearfor chemical tankers.
Chief executive Tommy Thomsen stated in the company’s third-quarter report that the segment was no different from that of products tankers and large tankers (where Nordic Tankers is not a player) in being unprofitable, with very littleactivity and consequently historically low freight rates.
Since then things have improved but for how long? Fears that leading economies are heading into recession again is a shadow hanging over the industry.
Certainly, long-haul voyages from Houston to the Far East have been rising due totight tonnage supply and firm Asian demand. Shipbroker Clarksons reported recently that rates for a 10,000-tonne parcel on the route were, at $118 pertonne, a 38% improvement on the November average.
This has had a knock-on effect, with a 5,000-tonne parcel from Rotterdam to the Far East ahead $28 in just a week to $115 per tonne.“With many owners now involved in long-haul voyages, the tonnage-supply situation could mean a very merry Christmas for owners still looking to fix cargoesin the Atlantic,” said the broker.
But to put in perspective a report by Bloomberg that chemical tankers may earn more in 2012 than for several years, the fact is earnings have hardly been anything to shout about in recent times, even for big players like Stolt-Nielsen whose chief executive Niels Stolt-Nielsen as recently as October was talking about no significant improvement in the parcel-tanker market before 2013.
Asked about the more recently improved market to the Far East, initially from Houston and subsequently drawing in Rotterdam, one analyst cautioned against getting carried away.“Longer term, chemical trades are dependent on world industrial production,” he said, adding that the sector’s fortunes hinge on whether the world falls back into recession.
One owner/operator describes conditions as still “very difficult” and this has been reflected in the collapse of Dorval.“I don’t think I have seen a market as tough as this before and that comes from 30 years of experience,” he said. “That is why it is a good time to consolidate."
“In general, you will find all industrial players are open to discussion about consolidation but that is typical in times of tough markets.
“You only have to look to other shipping segments to see that happening. Take the Maersk VLCC pool, which is one way of consolidating.”
He describes chemicals as a “complicated” sector where a strong industrial player “can make a difference.”
Certainly, there are close relationships between owners and chemical companies, with the market dominated by contracts of affreightment (COAs). A lot of cargoes are arranged on a long-term basis and owners tell TradeWinds that it isencouraging customers are recognising that as COA renewals for 2012 come upfor renewal they must reflect the increase in spot-market activity.
One challenge facing the industry is the number of tankers able to swing between chemicals and products. Many medium-range (MR) tankers have been built in the last few years that are also able to take IMO II cargoes because the yards were willing to do so for just a couple of million dollars more.
According to Clarksons, there are still 277 IMO II tankers to be delivered out of a total chemical-tanker orderbook of 365 vessels.
Early 2007 saw regulatory chemical-classification changes trigger the ordering of many IMO II vessels as owners anticipated steady and strong demand from Asia.
Many newbuildings, however, were delivered ahead of chemical production capacity coming on stream, as well as coinciding with weak demand, which depressed the market through 2010.
On the plus side, owners have been more conservative than some of their peers, particularly bulker owners who, despite already having a massive orderbook, wenton another orders spree to “celebrate” a temporary pick-up in the market a year or so ago, comments one cycnical broker.
He says the chemical sector is currently better positioned in terms of tonnage overhang but another recession in 2012 could easily create another oversupply situation.
Tougher times are creating fresh impetus for a shake-up in the chemicals sector.
The tanker sector is viewed by some as in most distress with Frontline, General Maritime Corp (Genmar) and Torm grabbing the headlines.
But consolidation is also now being widely talked about as the most likely panacea for container shipping and other markets.
Collaboration between CMA CGM and Mediterranean Shipping Co (MSC), the creation of Germany’s largest fleet capacity-wise with the pending Erck Rickmers-Komrowski merger and Peter Dohle taking a sizeable stake in Ernst Russ are all symptomatic of the fragile state of shipping.
Some, like Dohle and Rickmers, see their relative stability as an opportunity to grow, while others believe strength in numbers is the key to safeguarding their future.
One sector where consolidation began some time ago but has not received the same exposure is the chemical-tanker market. Being very much a barometer of the world economy, its fortunes are as much as any other shipping sector closely tied to gross domestic product (GDP).
For example, Germany’s John T Essberger has already taken over Heinrich Schoeller’s United Chemical Transport (UCT) and Denmark’s Erria has merged with compatriot Uni-Tankers.
UK-based private-equity group Triton has swallowed Jutland-based HerningShipping and is open about its ambitions to further consolidate the sector if the right opportunities arise.
The gravity of the situation in the chemical market has been driven home by Eitzen Chemical withdrawing from its pool activities to preserve cash and Japanese parcel-tanker owner and operator Dorval Kaiun recently filing for court protection.
Last month, Copenhagen-based Nordic Tankers — which says it wants to act as a market consolidator — left no doubt that much of 2011 has not been a good yearfor chemical tankers.
Chief executive Tommy Thomsen stated in the company’s third-quarter report that the segment was no different from that of products tankers and large tankers (where Nordic Tankers is not a player) in being unprofitable, with very littleactivity and consequently historically low freight rates.
Since then things have improved but for how long? Fears that leading economies are heading into recession again is a shadow hanging over the industry.
Certainly, long-haul voyages from Houston to the Far East have been rising due totight tonnage supply and firm Asian demand. Shipbroker Clarksons reported recently that rates for a 10,000-tonne parcel on the route were, at $118 pertonne, a 38% improvement on the November average.
This has had a knock-on effect, with a 5,000-tonne parcel from Rotterdam to the Far East ahead $28 in just a week to $115 per tonne.“With many owners now involved in long-haul voyages, the tonnage-supply situation could mean a very merry Christmas for owners still looking to fix cargoesin the Atlantic,” said the broker.
But to put in perspective a report by Bloomberg that chemical tankers may earn more in 2012 than for several years, the fact is earnings have hardly been anything to shout about in recent times, even for big players like Stolt-Nielsen whose chief executive Niels Stolt-Nielsen as recently as October was talking about no significant improvement in the parcel-tanker market before 2013.
Asked about the more recently improved market to the Far East, initially from Houston and subsequently drawing in Rotterdam, one analyst cautioned against getting carried away.“Longer term, chemical trades are dependent on world industrial production,” he said, adding that the sector’s fortunes hinge on whether the world falls back into recession.
One owner/operator describes conditions as still “very difficult” and this has been reflected in the collapse of Dorval.“I don’t think I have seen a market as tough as this before and that comes from 30 years of experience,” he said. “That is why it is a good time to consolidate."
“In general, you will find all industrial players are open to discussion about consolidation but that is typical in times of tough markets.
“You only have to look to other shipping segments to see that happening. Take the Maersk VLCC pool, which is one way of consolidating.”
He describes chemicals as a “complicated” sector where a strong industrial player “can make a difference.”
Certainly, there are close relationships between owners and chemical companies, with the market dominated by contracts of affreightment (COAs). A lot of cargoes are arranged on a long-term basis and owners tell TradeWinds that it isencouraging customers are recognising that as COA renewals for 2012 come upfor renewal they must reflect the increase in spot-market activity.
One challenge facing the industry is the number of tankers able to swing between chemicals and products. Many medium-range (MR) tankers have been built in the last few years that are also able to take IMO II cargoes because the yards were willing to do so for just a couple of million dollars more.
According to Clarksons, there are still 277 IMO II tankers to be delivered out of a total chemical-tanker orderbook of 365 vessels.
Early 2007 saw regulatory chemical-classification changes trigger the ordering of many IMO II vessels as owners anticipated steady and strong demand from Asia.
Many newbuildings, however, were delivered ahead of chemical production capacity coming on stream, as well as coinciding with weak demand, which depressed the market through 2010.
On the plus side, owners have been more conservative than some of their peers, particularly bulker owners who, despite already having a massive orderbook, wenton another orders spree to “celebrate” a temporary pick-up in the market a year or so ago, comments one cycnical broker.
He says the chemical sector is currently better positioned in terms of tonnage overhang but another recession in 2012 could easily create another oversupply situation.
Friday, 18 November 2011
Oil & Product Tankers Show Signs of Strain
Lately there has been news about bamkrupties because it has been at least 4 years since the crisis as worse as the great depression has collapsed the economy. since then there has been no sign of recovery for tanker market. Oil tanker market has been the worst hit as we have seen the big boys succumb to market pressures and stain in the industry.
Oil tanker company General Maritime Corp filed for bankruptcy protection and Denmark's Torm said it was in talks with creditors on Thursday as both fell victim to a glut of ships in the world fleet and gathering global economic gloom. Torm's biggest problem is a huge debt, piled up from paying out quite high dividends in the years when things went well -- 2004 to 2007," Sydbank equity analyst Jacob Pedersen said. In June, the company said it had agreed an amendment of its $900 million revolving credit facility with Danske Bank , BNP Paribas, HSH Nordbank AG and SEB. That deal postponed most of a repayment of $630 million due in 2013 to 2015 on condition that it raise $100 million in new capital from shareholders by mid-December. If the debt extension is not carried out as agreed in June, payments of $510 million due in 2015 and $60 million due in 2014 would fall due in 2013 instead.
Bankers expect more bankruptcies and restructuring in the sector as companies struggle with a worsening world economic crisis and lower earnings driven by a build-up of ships ordered when times were good. In a related sign of sector stress, a second major Chinese shipping firm has halted payments to foreign ship owners because of the downturn in the freight market. General Maritime, a leading crude oil tanker company, elected to file for Chapter 11 bankruptcy with a New York court as part of a restructuring agreement that includes a $175 million equity investment from Oaktree Capital management and extensions on debt repayments.
Despite such a gloom, we have seen the results of chemical tanker players (a niche market in the tanker industry) continue to be resilient as the market expect a recovery next year and there has been sign of recovery. Take for example the results of Stolt Nielsen, Odfjell and to some extent Berlian Laju Tanker have seen the strength of chemical business by showing relatively strong results. market has predicted the recovery in chemical tanker business within 3-12 months down the road given the level of supply being subdued given the limited orders in 2009 and the cancellations coupled with scrapping of chemical tankers.
Hope this gives a sign of hope for chemical business.
SS
Oil tanker company General Maritime Corp filed for bankruptcy protection and Denmark's Torm said it was in talks with creditors on Thursday as both fell victim to a glut of ships in the world fleet and gathering global economic gloom. Torm's biggest problem is a huge debt, piled up from paying out quite high dividends in the years when things went well -- 2004 to 2007," Sydbank equity analyst Jacob Pedersen said. In June, the company said it had agreed an amendment of its $900 million revolving credit facility with Danske Bank , BNP Paribas, HSH Nordbank AG and SEB. That deal postponed most of a repayment of $630 million due in 2013 to 2015 on condition that it raise $100 million in new capital from shareholders by mid-December. If the debt extension is not carried out as agreed in June, payments of $510 million due in 2015 and $60 million due in 2014 would fall due in 2013 instead.
Bankers expect more bankruptcies and restructuring in the sector as companies struggle with a worsening world economic crisis and lower earnings driven by a build-up of ships ordered when times were good. In a related sign of sector stress, a second major Chinese shipping firm has halted payments to foreign ship owners because of the downturn in the freight market. General Maritime, a leading crude oil tanker company, elected to file for Chapter 11 bankruptcy with a New York court as part of a restructuring agreement that includes a $175 million equity investment from Oaktree Capital management and extensions on debt repayments.
Despite such a gloom, we have seen the results of chemical tanker players (a niche market in the tanker industry) continue to be resilient as the market expect a recovery next year and there has been sign of recovery. Take for example the results of Stolt Nielsen, Odfjell and to some extent Berlian Laju Tanker have seen the strength of chemical business by showing relatively strong results. market has predicted the recovery in chemical tanker business within 3-12 months down the road given the level of supply being subdued given the limited orders in 2009 and the cancellations coupled with scrapping of chemical tankers.
Hope this gives a sign of hope for chemical business.
SS
Tuesday, 1 November 2011
Change on Law Regarding Material Transaction
1 Nov 2011
am back again folks! Just to report that I have just noticed from the Capital market supervisory agency portal and learned that there is a new draft law being processed right now. The draft regulation will superseed the existing rule IX.E.2 on material transaction. Took a quick look at the new draft rule and it seems an improvement from the existing one - although i think the wording of the draft rule must need to be refined as some of the sections especially on the para 4 (e) and (f) regarding the details of the disclosure was not very clear.
Some of the improvement that can be reported here is taht existing rule on material transaction requires listed companies intending to issue securities to conduct EGM with detailed disclosures including the name of the underwriters, selling price, size, the object and parties involved in the deal. The problem with this is that in many cases, at the point of the EGM many corporates may not know exactly some of this information including the name of the underwriters and the terms of the transaction yet. This renders some difficulties to the corporate that intend to issue such securities.
This draft regulation if published as it is will allow the corporates to conduct the EGM without first knowing all the specifics or details of the transaction including the name of the standby buyer(s) or the size of the deal. New information can be added or revised after the EGM is conducted.
The draft regulation also allows for non-disclosure of certain information if the issuance of the securities is related to debt securities offered to the QIBs via public offering in the international market. The non-disclosure items include the parties involved in the securities, the size of the deal, coupon rate and the requirement to have third party appraiser of the transaction.
Another thing that is made clear on this new piece of rule is that direct lending to corporates from local or foreign banks or financial institutions will be exempted from being considered as material transaction. Exemption from the rule is also given to those companies conducting material transaction under a restructuring process so long as those company suffers from negative working capital or negative equity. Banks which are currently being assisted or under a lending program by central bank or other government owned financial institutions which lending amount exceeds 100% of the equity of the corresponding bank or in any event that such a bank is currently under certain restructuring process will also be exempted from this rule.
there are some other changes include the definition of sale of shares that can be classified as material transaction. The type of sale of shares that falls under this category is the sale of shares due to a divestment process and not other type of sale of shares. The definition of main busiiness activity of a company has also been subject to many interpretation and corporates tries to link whatever businesses they have as their main business activity and thus avoid the rule. In this new regulation, the authority tries to define it further by stating that the MAIN businesses are only those businesses that are DIRECTLY operated by the company. Am not sure whether it makes things clearer on this one. Anyway, at least we have some clarity on other matters.
So, thats all for now. hope the above makes sense. Anyway, lets discuss if there is any concern.
Always
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