Global Shipping Markets Review 2008HSBC Shipping Services
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Global Shipping M
arkets Review
2008
Global Shipping MarketsReview 2008
HSBC Shipping Services Limited
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Contents
2 HSBC Shipping Services Limited
Introduction
Issues
Bulk Carriers
Tankers
Containerships
Shipbuilding
Conclusion
Appendix 1: Bulk Carrier Fixtures
Appendix 2: Bulk Carrier Sales
Appendix 3: Tanker Fixtures
Appendix 4: Tanker Sales
Appendix 5: Containerships Fixtures
Appendix 6: Containerships Sales
3Global Shipping Markets Review 2008
4
6
18
41
62
84
98
100
106
110
113
116
120
4
Introduction
HSBC Shipping Services Limited
How the markets can change. This time last year, when
we were writing GSMR 2007, the financial markets of the
previous twelve months were characterised by excessive
liquidity and increasingly large leveraged buy-outs and share
buy-backs fuelling equity market gains in the transatlantic
economies. Now we are faced with the evaporation of
that liquidity, triggered by the unquantifiable scale of the
subprime losses of many global lenders, and paralysis in
the inter-bank loans market. Big corporate takeovers may
no longer be financed and the premier league of investment
banks are recapitalising by issuing equity and selling
convertible bonds to sovereign wealth funds from China,
Asia and the Middle East. The flood of billions of trade and
petro dollars from east to west dwarfs the amount of aid
that has been distributed to the world’s poorer nations over
a much longer period as the roles are being reversed.
Last year we wrote of “strong corporate profits, high oil and
commodity prices, robust equity and housing market gains
and the still low cost of borrowing.” These conditions were
generally beneficial to the whole supply chain from the raw
material supplier at one end, the processing companies
in the middle and the consumer at the other end. Now
most of that has changed. Future corporate profits will be
harder to come by, equity and housing markets are weaker
and consumers and corporates alike are being squeezed
by persistently high energy, food and commodity prices.
Borrowing has become more difficult as credit conditions
have tightened, thus depriving parts of the global economy
the wherewithal to support continued growth. Global
inflation is a real and evident threat although fighting it has
been suspended in the US in favour of monetary and fiscal
stimulus packages aimed at revitalising the economy.
Since August 2007, the Federal Reserve has cut the
overnight federal funds rate by 225bps to 3% and the
futures market is already pricing in a further 75bp cut to
2.25% at its March 18 meeting. This move is primarily
aimed at steepening the forward yield curve to help banks
make money from loans and resurrect the credit markets.
It does nothing to help homeowners, many of whose
mortgage repayments are based around long-dated bonds,
as home loan rates have now returned to September 2007
levels. Their relief comes in the form of the inauguration of
the $168bn stimulus package that returns cash to taxpayers
in the summer. The priority is the banking system first, the
household second. So, consumers are left to suffer higher
gasoline and food prices and lower house and share values.
They will be forced to save even as inflation will erode the
value of their savings.
The pain being inflicted on US homeowners will not
subside quickly as further house price falls are expected.
Neither will the crimp on spending ease anytime soon as
voracious emerging market consumption of energy and hard
and soft commodities will keep gasoline, heating oil, grains
and meat at persistently high and less affordable prices.
Therein lies the big debate for 2008, the extent to which our
increasingly interlinked world is also causing a polarisation
between developed and developing economies. The IMF
rates US economic activity at 21% of the global economy
and, out of that, more than 70% is attributable to the now
struggling consumer. We will examine some of the issues
that affect global demand, which is critical to seaborne
trade, in an effort to gauge whether rising investment and
spending in the emerging world can combine with bank
and home bail out packages in the US to rescue the global
economy, and with it global shipping demand, from
a severe downturn.
The cover design of GSMR 2008 is abstract, as usual, and
this year contains the elements of coal and gold which are
likely to continue featuring prominently in both shipping and
investments in 2008.
5Global Shipping Markets Review 2008
By mid March, estimated writedowns have risen to around $150bn.
Financial Markets – All Change Please
2008 started with a heavy sell-off in the world’s equity
markets as fears of a deepening US recession gained
traction. The decoupling theory, espoused by many
economists in 2007, has been unceremoniously jettisoned
by many of its former proponents. The weakening US
housing market is seen as spreading beyond subprime into
prime and exporting itself to similarly inflated markets in
Europe such as the UK, Ireland and Spain. The expectation
of rising job losses in housing-related, retail and financial
services, combined with falling home equity, is set to
reduce consumer spending which accounts for over 70% of
US and two-thirds of UK economic activity. This traditionally
has a knock-on effect on investment at the corporate level
and shrinking profitability, a reversal of the process that led
to soaring profits in 2006 after five years of balance sheet
rehabilitation from the bursting of the dotcom bubble
in the year of 2000.
The problems in financial markets are far from over,
having come to attention as the US subprime mortgage
crisis in August 2007. Now the problems are spreading
throughout the global financial system. A method of
financial engineeering known as securitisation saw
bundles of mortgages being parcelled together and sold
on in tranches with varying coupon rates according to
the perceived level of underlying risk. The triple-A rated
bonds were supposed to be insulated from any fallout
from the lower-lying credits, but it turned out otherwise.
A collateralised debt obligation (CDOs) is the generic
name for a bond issued by securitising assets such as
mortagages (CMOs), loans (CLOs) and bonds (CBOs).
These instruments gained in popularity with banks as a
means of, theoretically, transferring credit risk and freeing
up balance sheet capacity, thus meeting regulatory capital
management demands. But, in their insuring and reinsuring
a circular risk pattern was created and the returning
boomerang is unreognisable, and much larger, than
the one that was despatched.
Widespread mortgage defaults in the US housing market
have caused these securities to be unwound. There has
been contamination from the lowest to the highest credit
tranches and as investors have rushed to exit their positions
the absence of buyers has made it impossible to value
these instruments. Banks have been forced to take massive
writedowns. After the February G7 meeting in Tokyo, the
German finance minister suggested that the losses on
securities linked to US subprime mortagages could reach
$400bn, much higher than the $120bn that global financial
institutions have written off so far and well above the
Federal Reserve’s estimate of losses of $100-150bn1.
There are two more torpedoes in the water in the form
of credit default swaps (CDSs) and the threat that rating
agencies will downgrade the monoline insurers. These
provide a risk transmission mechanism to the broader
financial and insurance markets spilling problems well
beyond the residential houses where it all started.
Shipping Markets – Fundamentals have not Changed
Shipping has been dragged from the shadows in recent
years, following four years of above trend growth since
2003. During that time, the universe of stock market listed
shipping companies has grown considerably, as has the
number of equity analysts that follow them. The freight
futures market has also blossomed with the traded volumes
rising exponentially in recent years. The three main sectors
of dry bulk, tankers and containers enjoyed a synchronised
boom in 2004 but have since gone their own ways as
their own macro supply and demand forces have asserted
themselves. But, overall, they are all in comparitively good
shape. The trends of globalisation, industrialisation and
outsourcing have inspired a boom in commodity demand
that has quite understandably been matched by increasing
demand for ships to move this diverse range of goods to
end-users.
We may be at the early stage of a super-cycle in
commodities but the extractors and sellers of raw materials,
metals, energy, goods and services, wary of earlier false
starts, have been slow to respond to what has become a
sustained increase in demand. They have been reluctant
to invest adequately in new production for fear that the
necessarily time-lagged response would only introduce
new capacity to coincide with the next cyclical downturn.
This happened to OPEC in 1997 which responded to calls
to increase production only to see prices fall to below
$10 per barrel at the end of 1998 after the Asian financial
crisis, the Russian sovereign debt default and the collapse
of LTCM. New investment in mines, railways and ports
has so far failed to meet accelerating demand for raw
materials and steel. In the energy sector, the same can
be said of investment in upstream oil and gas production
and downstream refining. Similar issues affect container
terminals and landside intermodal infrastructure.
6 HSBC Shipping Services Limited
2The Fed cut rates from 5.25% in Aug07 to 3% in Jan08. 0.5% in Sep07, 0.25% in both Oct07 and Dec07 and then 0.75% on Jan22 and 0.5% on Jan30, 2008.
In contrast, one area that has seen plenty of investment
is the midstream sector: shipping. Bulging orderbooks for
bulk carriers, tankers and containerships stretch all the
way out to 2012 and include new and larger sizes than
anything seen before. Shipbuilders responded to demand by
increasing existing capacity as well as building new facilities
and the fleet is quickly modernising as a result. While rapid
growth in the merchant fleet creates its own pressures (on,
for example, steel and engine supply, skills and manpower)
it also asks important questions of miners and oil producers.
In 2007 and early 2008, shipowners have suffered from
the inability of exporters to supply sufficient cargo for their
ships to meet consumer demand, whether it be crude oil or
products or iron ore or coal. Much of the blame was put on
weather-related and other reasons beyond human control
but, regardless of the reasons, it was sufficient to seriously
undermine sentiment and negatively impact earnings.
Many financial markets commentators interpreted the sharp
fall in the Baltic Dry Index from mid November as a forward
indicator of slowing demand in the world economy. The
drop in the BDI was largely caused by its Baltic Capesize
Index constituent which fell after installation damage at
Itaguai/Sepetiba in Brazil led its operator, Vale, to declare
force majeure and cancel shipments. This injected capesize
vessels onto the spot market and precipitated a scramble
for cargo ahead of the end-year holidays, thus undermining
rates. As Itaguai is the smallest of four export outlets
controlled by Vale, the reaction seemed overdone although
it may have suited Vale’s agenda in bringing freight rates
down. However, in early January, Rio Tinto also declared
force majeure after a cyclone in the Pilbara region of
Western Australia interrupted rail shipments of iron ore to
port. This amplified the problem as the world’s two largest
iron ore exporters suffered simultaneous delivery outages.
These supply interruptions coincided with ongoing price
negotiations between the shippers and China’s leading
steelmakers with the iron ore sellers rumoured to be
wanting a 70% increase on 2007/8 FOB contract prices.
The new price would commence 1st April 2008 and would
still be cheaper than inflated spot market prices which were
double or more the old contract price. With the tolerance
on current contract quantities in sellers’ option, and with
Chinese stocks being drawn down, this certainly applied
pressure on the steelmakers to fix a deal. Meanwhile
capesize freight was being hammered as some big players
in the futures market were believed to be exploiting this
situation by aggressively selling futures, backed by less
than last done fixtures in the physical market, in order to
bring the indices down. The combination of all these factors
succeeded in driving both sentiment and rates down and
weakness in the large ship segment was quickly replicated
in the smaller sizes.
All of this was unfolding against a backdrop of negative
feedback from financial markets as the bad news that was
being transmitted by the shipping indices was regarded
as further proof of impending global economic weakness.
Precipitous falls in the world’s equity markets and, more
importantly, concerns over the viability of the monoline
insurers and the $2.4 trillion of bonds that they guarantee,
led the Federal Reserve to cut rates on 22 January by an
alarming 75 basis points2 , ultimately causing further fear
in the markets. Congress voted to pair monetary easing
with a fiscal stimulus package worth over $150 billion in
2008 alone in an attempt to re-ignite consumer spending.
This series of events, whether actually related or not,
demonstrates the power of sentiment to reinforce negative
impulses and turn them into self-fulfilling prophecies.
The underlying fundamentals in shipping demand had not
changed and, after damaged infrastructure was repaired,
iron ore shippers have been playing catch-up.
Spenders and Savers Change Places
The dynamics of global demand are now in transition
as spenders (for example, in the US, UK and eurozone)
become savers while savers (for example, in China, India
and the Middle East) become spenders. This rebalancing
process has only just started. US households that mobilised
both secured and unsecured credit to binge on goods from
export-driven overseas economies are now having to cut
back spending in order to pay the bills. The subprime crisis
and falling housing equity has brought to an end the use
of houses as secondary ATMs, and unsecured credit in the
form of credit cards and loans is now less widely available
and is also more expensive. In the meantime, the export
economies of Asia that have accumulated huge dollar
trade surpluses are now faced with the task of generating
increased domestic demand (consumer spending and
investment) in order to compensate for this altered state.
Given the severity of recent falls in equity markets, and
the problems that the subprime crisis has caused so
many leading banks, the Federal Reserve has moved to
7Global Shipping Markets Review 2008
slash interest rates and Congress has elected to provide a
massive fiscal stimulus package. It is unclear of the extent
to which the ECB and BoE will also move to ease monetary
policy and whether European governments can temporarily
abandon budget rules in order to head off the ill winds that
are surging across the Atlantic. Their collective propensity to
act is lower than that in the US, in part because of a single
mandate to maintain price stability (with no Fed equivalent
of macro economic oversight) and in part because they are
constrained by EU budget deficit caps and the UK’s ‘golden
rule’ of only borrowing to invest through the cycle. There
is no corresponding mandate in Europe for central banks
and governments to throw lifelines to their economies in
troubled times.
The extraordinary measures being taken in the US to
prevent its economy from stalling invite the question of
what measures are being taken at the other end of the
supply chain. The answer appears to be, not much. Large
export-driven economies, such as China and Germany,
stand to suffer fallout from weakening demand in the
transatlantic economies but both have the capability to
mount a damage limitation exercise by stimulating domestic
demand and increasing investment through a combination
of fiscal and monetary policy measures. During 2007,
China took a sledgehammer to the head of its economy
by restricting money supply growth, raising borrowing
rates and reserve requirements, removing VAT rebates
and imposing export tariffs and closing down small and
inefficient businesses. Given changing circumstances
overseas, now might be a good time to progressively
reverse these strictures.
If part of the accumulated savings in countries such as
Germany, China and the Middle East could be teased out
into the economy then there would be less chance that the
current reflationary actions in the US will simply be delaying
the final point of reckoning. A retooling of global demand
and spending has the potential to iron out the severe trade
imbalances that have built up in recent years. China will
have a forecast current account surplus of about $380
billion in 2007, and foreign exchange reserves of more than
$1.5 trillion, and can thus increase social security payments,
accelerate investment in the rural interior and cajole
corporates into paying higher dividends. Such a sample
of measures would free up money for broader spending.
Equally, Germany’s large trade surplus could allow it to
remove recent tax increases in order to stimulate stagnant
consumption while the Middle Eastern oil economies look
set to continue opportunistic investments in weakened
western financial institutions which serves an important
role in shoring up confidence in an ailing market.
The power of the American consumer is undeniable.
A US investment bank has pointed out that US consumption
reached 72% as a proportion of GDP in 2007, not far short
of $10trn. This compares with about $1trn of consumption
in China and $650bn in India. In 2007, consumer spending
in China rose 17% and is making an increasingly important
contribution to overall growth but compensating for, say,
a 5% (or $500bn) decline in US spending would require a
team damage limitation effort from the wider emerging
markets. Still, in absolute macro terms, an 11.4% rise in
China’s GDP to $3.4trn made a greater contribution to
global growth than did a 2.2% rise in US GDP to $13.8trn in
2007. If adjustments are made for relative prices, in order
to compare relative spending power or purchasing power
parity, then China’s adjusted GDP of $6.2trn is almost half
that of the US and 10% of global output.
Inflation, Exchange Rates and Trade
Inflation is now recognised as a global problem. It puts its
own constraints upon the conduct of monetary policy as a
means of reflating demand as western consumers wake
up to the need to save rather than spend. On 20 February,
WTI crude again hit $100 per barrel on fears that OPEC will
not raise output in the face of persistent high prices, and
rather that it might cut output in order to head off seasonal
demand weakness in the second quarter. Food prices
everywhere are soaring as adverse weather conditions in
major growing areas reduce production, as grain crops are
diverted to ethanol for transportation and as Asian diets
become more grain and meat intensive. The coals and
iron ore raw materials that are needed for steelmaking and
power generation are rising sharply, with iron ore contract
prices up 65% year-on-year in 2008/9 and thermal and
coking coal spot prices at double last year’s contract prices.
Steel prices and base and precious metals are all rising,
nothing is left untouched.
It is countries such as China, India, Russia and the UAE
that are fuelling an emerging markets commodities boom,
forcing up prices in a supply-contrained world. This drives
up prices for everyone. The transatlantic economies, having
outsourced the manufacturing of everything from toys and
shoes to computers and furniture, can no longer exercise
any control over prices. As China raises its factory gate
prices to reflect higher input costs, and as western retailers
8 HSBC Shipping Services Limited
3This rose to 8.7% year-on-year in February, the highest since May 1996, maybe influenced by CNY and the inflationary effects of the winter strorms.
eventually have to pass these on to struggling consumers,
symptons of stagflation are evident: higher prices coinciding
with weakening demand, rising inflation coinciding with
weaker economic growth. The US Federal Reserve has
thrown caution to the wind in cutting interest rates by
225bps since August 2007 to 3% today. Other central banks
are being more cautious, concentrating more on containing
inflation. But lower US rates reverberate around the globe,
not least in China where renminbi rates are moving in the
opposite direction, thus putting pressure on the ‘peg’ and
increasing the costs of currency sterilisation.
Lower US rates are ramping up inflationary pulses in China
where headline inflation crept up to 7.1% annualised in
January3. Its $1.5 trillion of foreign exchange reserves are
earning less even as the total grows in line with the rising
trade surplus. The renminbi has been allowed to rise against
the dollar by about 13% since mid-2005 but this accelerated
to an annualised 19% in January. This has helped to
rebalance trade flows, increasing China’s imports while
reducing China’s exports. The weaker dollar has achieved
the converse for America by increasing its exports at the
expense of its imports. Both developments are welcome
from economic, trade and shipping perspectives. But, a
problem for the People’s Bank of China, the central bank,
is that the stronger RmB/dollar exchange rate is causing
it huge losses. As its exporters accrue trade dollars the
PBoC exchanges these for local currency then, in order
to reduce money supply and contain credit risks, it mops
up this excess liquidity by issuing renminbi-denominated
bonds. The coupon rate of these is rising in line with the
strengthening renminbi just as its earnings on its growing
dollar holdings are falling in line with US rates.
The PBoC is making billions of dollars of losses out of this
sterilisation program but needs to remove excess currency
from the domestic banking system. Failure to do so will
only increase inflationary pressure as well as allowing
local officials to continue funding pet projects that tend to
contribute to fresh non-performing loans. Provincial cadres
are judged on local economic growth which mandates
investment in more factories and business parks and
the creation of more houses, roads and jobs. Some local
banks are said to be inclined to fund these projects almost
regardless of the ability of the projects to repay principal,
or even interest. The system can and does lead to land
seizure for development, thus alienating land occupiers,
while encouraging risky property speculation by the urban
classes in an already hot market. This is seen as a recipe
for alienating both the rural and urban populaces, hence the
need to remove liquidity from provincial lenders before it
has the chance to sow the seeds of social unrest. This is
the greatest fear of the central government.
Curbing the rise of social discontent involves various
measures such as increasing wages and improving welfare
for rural workers, providing jobs and housing for migrants
from the countryside and capping food and energy prices.
For several years now the costs of fuel oil, diesel and
gasoline have been allowed to rise from earlier fixed
levels. This has reduced the losses of state refiners which
have had to buy crude oil at rising market prices only to
sell products domestically at losses, only to be partly
recompensed by government at a later date. If the spread
becomes too wide, then the refiners export products
within the region at market prices causing shortages in the
domestic market, inviting state intervention as lengthening
gas station queues and freezing homes breed discontent.
The early 2008 chill was partly caused by the collision of
free-floating coal prices with state-set electricity prices. As
the miners raised coal prices so the power stations shut
down capacity rather than suffer losses.
Now, in the interests of social harmony, the government
is stepping in to cap food prices as the costs of staple
grains and pork soar on the back of shortages and hoarding
by merchant interlopers. The imposition of price controls
on food and the reimposition of price controls on energy
products are backward steps in China’s economic reform
program. Economic reform will happen but at a pace to
be determined by the government as central planning and
social and political stability must always take precedence
over market economics. Trade issues are closely linked to
the RmB/dollar exchange rate, interest rates and inflation
and the former are collectively central to the shaping of
macro government policy in Beijing. Such linkage seems
lost on several outspoken US senators who have long
been calling for a drastic and immediate rise in the
renminbi at the threat of a US backlash in the form of
punitive trade tariffs.
China has always maintained that its currency will
appreciate at a controlled pace that would avoid any
economic disruption. The appreciation is indeed underway
but some of the adverse ramifications are already plainly
visible, thus supporting the Chinese case for gradual
9Global Shipping Markets Review 2008
over sudden change. A stronger renminbi is needed both
to reduce the trade surplus, by making exports more
expensive, and to reduce the soaring import costs of oil,
coal, iron ore, base metals, timber, grains, foodstuffs and so
on. Reducing these import costs is probably more important
to social stability than maintaining such a high level of
export growth. Without adequate food and housing many
workers would not be fit to toil in the factories that support
China’s exports. Thus, the strengthening renminbi is a
useful but imperfect anti-inflationary device. The renminbi
should continue to strengthen against the dollar and
China’s imports look set to maintain the current four-
month trend and continue to rise faster than its exports.
The Paradox of Decoupling and Globalisation
Last year’s theory that the emerging markets could
decouple from developed markets has lost some of its
credibility in the eyes of many of its former proponents.
Some of these are stock market analysts who interpreted
in recent falls in all the world’s major stock market indices
either a recoupling process or evidence that emerging
markets are now unable to insulate themselves from fallout
in the much larger transatlantic economies. However, stock
market indices, along with the recently adopted freight
market indices, are only an indication of value sentiment
rather than a true reflection of underlying economic
and trade fundamentals. Decoupling is a misnomer as
at its extreme it implies total separation, but the notion
of severance in economic ties between emerging and
developed economies is at odds with the reality of a
globalising world. A powerful block of emerging economies
is increasing its internal trade, generating stronger domestic
demand and growing at a faster rate than the transatlantic
economies and Japan. They are assertive and they are
closing the gap.
Now it is the emerging economies running surpluses and
the developed economies running deficits and it is the
wealth of the former that is recapitalising the financial
institutions of the latter. Leveraged buy-outs may have
come to a standstill but sovereign wealth funds could,
if permitted, selectively step in to fill the void left by the
leveraged finance arms of banks. Global M&A transactions
are not paused just because bulge bracket banks are
bruised. Rather they are making room for much larger
national funds that have far greater firepower and much
longer investment horizons. Their main challenge is to
appear benign, passive and non-strategic and to this end
they may increasingly link up with local buy-in partners
or support private equity firms that have lost their access
to leveraged loans on cov-lite terms. These emerging
economies can mobilise their trade dollars and unlocked
savings in a sensitive, non-threatening way to compensate
for trade deficits and absent savings in the developed world.
They should be allowed to do so; role reversal and dented
pride should not derail the process.
The two-speed development that we see unfolding is more
appropriately one of increasing interlinkage through freer
trade, the freer movement of capital and labour across
borders and increased political and social engagement
between the two in the interests of fighting poverty,
climate change and social injustice. Globalisation is also
a process rather than an achievable objective, as increased
interaction between the developing and developed
world creates frictions that undermine the process itself.
Current account imbalances and accruing trade and
petrodollar surpluses in Asia and the Middle East have
stirred protectionist impulses in the West that could block
freer trade. But, while the accrual of large surpluses can
antagonise debtor nations, it is difficult to see how the
latter can object to those surpluses being used to overcome
recent liquidity problems amongst a handful of American
and European banks. Beggars cannot be choosers, and
not all sovereign investors have ultimate strategic aims.
One could argue that in bailing out the world’s largest
investment banks from their subprime woes, the sovereign
wealth funds have now completed the circle. It started
with the post dotcom recession of 2001, a year in which
the Fed cut interest rates from 6.5% to 1.75% with rates
bottoming out at 1% between mid-2003 and mid-2004.
This pulled the country out of recession but also created
asset bubbles in property and equities fuelled by the
availability of cheap credit. Excessive US consumer
spending helped the export-orientated Asian economies
build ever-larger dollar surpluses which were then recycled
into US treasuries and other dollar assets in attempts to
keep US interest rates down, the current account deficit
well-funded and the consumer in the shopping malls.
The subsequent sequence of seventeen 25bps rises in
rates in the two years between mid-2004 and mid-2006,
needed to sustain adequate capital inflows to finance
the widening deficit, caused inevitable distress to
many homeowners on floating rate mortgages.
The ensuing defaults in the subprime sector soon spread
into the prime sector and the crisis that was expected to
hit borrowers mutated into a problem for lenders as both
10 HSBC Shipping Services Limited
4Based upon Revised Purchasing Power Parity
their forecasting and securitisation models broke down.
The acronyms of CDO, SIV and CDS leaked into the
vernacular as banks began to realise that even the highest
rated tranches in their sliced and diced securities were
being contaminated by the worst. Analysing the extent
of losses and liabilities became difficult as the paper
trails were so complex and intertwined with little clarity
as to who ultimately held the underlying default risk.
Instruments that were designed to limit and isolate risks
actually transmitted and propagated them into the global
financial system. The interbank market broke down and the
credit markets seized up, prompting Fed and ECB liquidity
injections totalling $660 billion. That bought time for the
banks to start identifying their losses and to seek external
funds to recapitalise their battered balance sheets.
The sovereign wealth funds of China, Singapore, other Asia
and the Middle East stepped in to prevent a financial crisis
that began in the US from becoming a global economic
meltdown. They have used dollar gains that have been
accumulated from selling manufactures, services, oil and
gas to the transatlantic economies, to shore up their own
interests as stakeholders in the global trading system in
which each needs the other in an increasingly connected
world. Meanwhile, the paradoxical decoupling process
has really proven to be a link-chain of opposites: saver
and spender, seller and buyer, surplus and deficit, lender
and borrower, rescuer and rescued. They have become
positioned at opposite poles of what appears to be a zero
sum trading game. In order for the game to continue, an
orderly reversal of roles is required to create better balance
and in a more stable and sustainable trading environment.
Decoupling and globalisation are but opposite sides of the
same coin.
How Reliant is China on Exports?
China is credited with having generated as much as
80% of the growth in dry bulk demand over the past five
years. Thus, if China were to be severely impacted by a
US recession then we could expect the dry bulk trades
to suffer in tandem. In attempting to assess the risks to
Chinese growth it is worth remembering that GDP has
expanded at a trend rate of 8% over the last thirty years
since Deng Xiao Peng opened the country up to foreign
trade in 1978. In recent years China has enjoyed accelerated
double-digit growth with an estimated 11.4% in 2007.
Most forecasters do not expect a fall below 10% in 2008 as
the central government is committed to creating jobs and
increasing prosperity or risk serious social unrest. China’s
resilience to external shocks depends upon the extent of
its reliance upon exports and its ability to increase domestic
consumption and spending to compensate for slowing
overseas demand.
On 30 January 2008, US GDP figures were released by
the commerce department showing that the economy
grew by only an annualised 0.6% in the last quarter of
2007 after 4.9% in the third quarter. This suggests that the
$13.8 trillion US economy may already be in the process of
sketching out a recession. Only the day before, the IMF4
forecast that US growth would slow to 1.5% in 2008 from
2.2% in 2007 and that world output would fall from 4.9%
last year to 4.1% this year. It sees the Euro-15 sliding from
2.6% to 1.6% and Japan from 1.9% to 1.5%. Emerging
markets and developing economies are expected to expand
by 6.9% in 2008 after 7.8% in 2007. Developing Asia is
forecast to fall from 9.6% to 8.6% while China will slip from
11.4% to just 10.0%. Africa is predicted to grow from 6.0%
to 7.0% and the Middle East to maintain momentum by
posting 5.9% in 2008 after 6.0% last year.
With slower growth in the developed world economies
the degree of China’s dependence on exports becomes a
relevant debate, although there is no consensus as to its
true extent. In 2007, total exports were about 1.3 times
total imports but in the last quarter imports exceeded
exports by value in each of those three months. It is also
worth bearing in mind that China is a large processing
centre at the heart of an Asian swap-shop that imports,
exports and re-exports raw materials, semi-finished and
finished products. The earliest manifestation of this was
in the 1980s when traders would fund the purchasing of
iron ore for cash-strapped Chinese steel mills and only
get payment, plus margin, some months later when the
exported pigiron or finished steel was paid for by, for
example, the Japanese purchaser. The system is now
much more complicated and the traded goods range
from low-value to high-tech.
Headline figures suggest that China’s exports surged
from 20% of GDP in 2001 to almost 40% in 2007, making
exports a key driver of growth and implying that the country
is vulnerable to a consumer slowdown in the US and
Europe, the main recipients of the finished goods. However,
a recent study by The Economist concluded that the 40%
figure is misleading as it does not compare like with like,
exports being measured as gross revenue while GDP is
measured in value-added terms. If exports are measured in
11Global Shipping Markets Review 2008
purely value-added terms, then the true export share is just
under 10% of GDP making China slightly more exposed to
exports than Japan, but less export-dependent than either
Taiwan or Singapore. In early January, Singapore reported
a contraction in its GDP in the fourth quarter of 2007 which
was partly attributed to weaker exports. Finally, only
6% of China’s total workforce is engaged in export-
orientated manufacturing.
This would indicate that China is far less vulnerable to a US
slowdown or recession than the headline export figures
suggest. This notion is supported by anecdotal evidence
from the 2001 IT market collapse when the annual rate of
growth in China’s exports fell by 35% from peak to trough
in the 2000-2001 period, yet overall GDP growth contracted
by less than 1%. Furthermore, even though the headline
exports-to-GDP ratio has nearly doubled since 2000, the
value-added share of exports in GDP has been quite stable
rising from about 7% to just under 10%. The Economist
explains this by China’s gradual shift in focus from exports
with a high domestic content to new export sectors that
use more imported components. Thus, value-added exports
have risen by far less than gross export revenues meaning
that China is not as exposed as is commonly assumed to
weaker exports to the US.
The Economist tells us that developing countries have seen
their exports as a percentage of GDP rise from just over
25% in 1990 to just under 50% today. Exports to America
have already crumbled. In 2007, growth in China’s exports
to the US slowed to 5% in dollar terms compared to a 60%
rise in its exports to fellow BRIC members (Brazil, Russia
and India) and a 45% rise in its exports to oil producing
nations. Half of China’s exports now go to emerging
economies. South Korea’s exports to the US fell 20% in the
year to February 2008, but total exports rose 20% thanks to
developing country demand. In 2007, emerging economy
exports to the US have now fallen to 13% of the total while
their exports to China have risen to 16% of the whole.
The BRICs, which are the four largest emerging economies,
accounted for 40% of global GDP growth in 2007 and are
the least dependent on the US. Exports to the US account
for just 8% of Chinese GDP, 4% of Indian, 3% of Brazilian
and 1% of Russian.
The aforegoing figures would seem to present a compelling
argument in favour of decoupling, in the sense that the
emerging economies are replacing falling US demand by
trading amongst themselves. This is a tough reality for
America to accept, but it is music to the ears of anyone
involved in shipping and trade. Moving away from exports,
the other plank in global demand is domestic consumption
and investment. Consumer spending rose three times
faster in developing countries in 2007 than it did in the
developed world with HSBC economists observing a 17%
rise in real capital spending in emerging economies in 2007
compared with just 1.2% amongst developed nations.
Furthermore, just 15% of investment in China is linked to
exports whereas over half is pumped into infrastructure and
property. Lastly, over 95% of China’s growth in the year to
Q4 2007 came from domestic demand.
In conclusion, China is a lot less reliant upon exports in
general, and exports to the US in particular, than is often
perceived. Only 7% of total investment is directly linked
to export production, rising to 14% if adding in indirect
domestic inputs. Much further investment is still needed in
residential housing and infrastructure to support 15 million
people a year moving into cities. Central government can
be expected to fast-track such spending if there is any need
to compensate for a slowing export contribution to growth,
as it has both budgetary and monetary tools at its disposal.
Given Beijing’s limited success in slowing the economy via
higher borrowing rates and bank reserve requirements and
tighter money supply, a natural slide from 11.4% to say
around 10.0% GDP growth in 2008 may be just the ticket in
helping to relieve inflationary pressures at home.
An American Obsession with Energy Security
Even if one does not believe in the ‘peak oil’ theory, then
one should at least ackowledge that most of the easily
extractable oil has already been found. The biggest oil fields
in the world such as Saudi’s Ghawar, Kuwait’s Burghan and
Mexico’s Cantarell are all recognised as being in decline.
The biggest find of 2007 was offshore Brazil in the Tupi
field where initial estimates by Petrobras put recoverable
reserves at 5-8 billion barrels, that is between 36% and
58% of Brazil’s proven existing reserves of 13.9bn barrels
at end 2007. 25% minority partner BG puts the figure at 9bn
(about the size of Norway’s reserve base) with the potential
for up to 18bn barrels of oil equivalent. This will eventually
help Brazil to become a major net exporter of crude oil
and products to overseas markets. The trouble is that the
deposit lies beneath 2,000m of water and a further 4,000m
of salt and rock. Total development costs are estimated at
$70-120bn and production start-up would not be
before 2012-2013.
12 HSBC Shipping Services Limited
Tupi is the world’s largest oil find since a 12bn barrel
discovery in Kazakhstan in 2000. Oil production is in decline
in Indonesia, Mexico, Iran and the North Sea with output
from Venezuela and Nigeria well below earlier levels.
Persistently high oil prices and America’s stated ambition
to reduce dependence on overseas energy suppliers are
playing in favour of ethanol in fuel and the exploitation of
Canada’s tar sands. These alternative supplies, native to
North America, respectively rely upon massive subsidies
and high oil prices for their raison d’etre. The destruction of
330 square kilometers of forest around Fort McMurray in
Alberta, the heart of the oil sand operations, is testimony to
the end of the era of easy oil. Daily output is now 1.2m-bpd
which is expected to reach 6m-bpd by 2050 as an area the
size of Florida is laid waste in pursuit of 175bn barrels of
recoverable oil. To put this in context, the world’s largest
producer, Saudi Arabia, is credited with 259bn barrels of
recoverable reserves.
Oil sands are now making up an increasing portion of
Canada’s 3.2m-bpd crude oil output, although at some
cost to the nation’s green credentials having ratified the
Kyoto Protocol in December 2002. A recent Bloomberg
environmental impact study analysed the energy intensive
process of separating bitumen from sand and converting it
into usable oil. Each barrel of crude from oil sands requires
the processing of two tonnes of sand (the weight of a
Toyota Highlander SUV); needs 250 gallons of water (the
daily consumption of a US family of four); consumes 1,400
cubic metres of natural gas (enough to heat an average US
home for 5.6 days) and produces 110 kilograms of carbon
dioxide equivalent (the same as producing three barrels
of light crude). A barrel of this synthetic crude costs $50,
including mining and refining, whereas existing oil fields in
the Middle East have an average cost of $10 per barrel.
The United States is responsible for almost 6 billion tonnes
of carbon dioxide emissions annually, 25% of the world’s
total. However, US emissions rose only 2.3% between
2000 and 2005 compared to Canada’s 13% to over 631
million tonnes, according to the US Department of Energy.
The oil sands industry must be a significant contributor
to this rise as, on a per capita basis, Canada only just lags
behind the US at 19.2 versus 20.1 tonnes. By way of
comparison, Germany is half of the US figure, France one-
third and Brazil is less than one tenth. This illustrates how
desperate the search for new and unconventional sources
of oil has become. The emphasis is now on new finds
regardless of environmental risk or technological challenge
rather than upon conservation and restraint. Maybe North
America is resigned to the IEA forecast of a doubling of
vehicles on roads by 2030 as China and India weigh in.
Food on the Table or Fuel in the Tank?
Everyone, everywhere is aware that food prices are rising
just as they are conscious of high gasoline and heating oil
prices. These volatile food and energy components are
included in headline inflation figures but excluded from
the core inflation figures that most western governments
use to assess price stability. Upward pressure on both raw
material input prices and factory gate output prices are now
commonplace from China and India to the US and UK.
The monetary policy reaction in the US has been to slash
interest rates in order to assist the banking system. This
is being done regardless of the devastating effect this
is having upon the value of the dollar and the collateral
damage that is being inflicted upon consumers and
spenders worldwide as prices inflate. In contrast, the ECB
and BoE are being much more cautious as they focus on
price stability and inflation control while the BoJ has no
monetary weapon with rates already effectively at zero,
a fast rising yen and no room for manoeuvre.
The exploitation of oil sands for fuel is based upon fear
of being cut off by occasionally hostile overseas energy
suppliers. The adoption of corn for ethanol production for
use as a gasoline additive is an extension of the same fear.
If the two together enable people to keep driving their
cars at the same time as providing some sense of energy
security then half the game is won. The fact that these
processes are variously inefficient, pollutive, subsidised
and overpriced is of little consequence if the positives play
well politically to the voting public. One consequence of
increased ethanol and biofuel production is a 24% jump in
UN’s Food and Agricultural Organisation’s food price index.
In 2007, food oils rose 66%, grains 45% and meats 16%.
Last year we wrote about tortilla riots in Mexico City.
This year it could be much worse if governments are
blamed for their inability to feed their own people.
The statistics are quite illuminating. Grain stockpiles are
at thirty year lows and yet drought conditions in Australia
and Brazil are hampering the ability of the biggest global
producers to increase export supplies. Shortages in Russia
and China have led their governments to curtail grain
exports. 2.4 billion people in China and India are seeing food
13Global Shipping Markets Review 2008
prices rise as more agricultural land falls to development
and what is left is so intensively farmed that it is failing to
respond to yet more fertiliser. This coincides with a switch
to more protein-rich diets and increased meat consumption.
Asian countries whose currencies are still pegged in some
way to the dollar are finding that a weak dollar and looser
monetary policy are stoking inflation that was already
being ratcheted up by high energy and food prices.
Tentative moves by governments to remove domestic
price caps on these staples are now being unwound with
negative implications for much-needed reform and a shift
to market-based economics.
In 2007, US ethanol production accounted for about 60%
of the global increase in corn consumption, according to
the IMF. Corn-based ethanol production has been rising
at 20% per annum since 2002 and is pushing up cereals
prices globally. As farmers switch to planting more corn,
at the expense of wheat and soyabeans, so does the price
of the replaced grains and oilseeds rise as shortages are
created. The Energy Independence Act of December 2007
mandated that current corn-based ethanol production of
27bn litres should rise to 136bn litres by 2022, with half of it
made from cellulose, despite the fact that this is years away
from economic production. This still requires a 2.5x increase
in corn use as a fuel additive over the next 15 years so that,
by 2022, ethanol can make up 22% of the US vehicle fuel
mix. One full vehicle tank of 95 litres of ethanol would use
about 254kg of grain, enough to feed an average person for
one year. A tank of fuel does not get you far in America, but
a year of food does.
The ‘Chindia’ effect pits man against machine. Increased
demand for corn and soya-fed livestock and poultry
competes with increased demand for biofuels that already
consumes 20% of the US corn crop for ethanol production.
This in turn puts pressure on land and water resources as
both farming and ethanol production are independently
massive consumers of water. Without the help of vast
subsidies, and punitive tariffs on inbound Brazilian sugar-
based ethanol, the numbers simply do not add up for
ethanol. The pollutive production process, low power
efficiency relative to gasoline, and its impact on water
supplies make ethanol a disastrous and misguided policy.
The intensity of water use in the ethanol, oil and tar sands
extraction processes is increasing demand for water.
One day, seaborne oil tankers will make a living out of
transporting fresh water as the latter becomes increasingly
scarce and as its value rises above oil. We can do without
oil, but we cannot do without water.
Mine Games
In early 2008, the mining world was bracing itself for the
prospect of consolidation between some of its largest
operators. BHP Billiton had tabled a 3-for-1 share offer
for rival Rio Tinto, valuing its target at almost $120 billion,
while Vale was preparing a bid for Xstrata that is estimated
to require in the region of $90-100 billion. Each bid has
complications. On Friday, 1st February, Shining Path (a
combination of China’s Chinalco and America’s Alcoa)
swooped on 12% of Rio’s London-listed shares, acquiring
9% of the whole in the process, at £60 per share in a
total outlay of £7.18 billion ($14.1bn). The dawn raid was
performed only days before expiry of the deadline for
BHP to launch an official bid for Rio. Vale’s complication is
that it has to meet the value expectations of Swiss-based
Glencore, which has a 35% stake in Xstrata. The China
Development Bank, which bankrolled Chinalco’s raid on
Rio, is known to have approached Glencore with a view to
buying its £14bn stake in Xstrata.
At the heart of these prospective takeovers are the
steelmakers in China who eclipsed Japan as the leading
importers of iron ore as recently as 2003. In the 5-year
period between 2002 and 2007, China’s imports grew by
244% to 383mt while Japan’s rose only 9% to 141mt.
The annual FOB contract price of iron ore has been rising
in leaps and bounds over the past ten years as production
has failed to keep pace with demand. For the 2008/9
contract year it is up another 65-71% leaving China’s steel
industry, and the country’s entire modernisation program,
exposed to sharply rising and inflationary cost pressures.
Under such circumstances, China is rightly alarmed at the
prospect of consolidation of the world’s largest suppliers of
iron ore, coal and base metals such as copper, aluminium
and zinc all of which are required inputs for China’s rapid
infrastructure expansion. The stake in Rio and discussions
with Glencore can be interpreted as moves by China Inc,
the ultimate funder, to prevent a reduction in the number of,
and competition between, iron ore suppliers.
A union of BHP and Rio would concentrate in single hands
the lion’s share of iron ore reserves in Western Australia’s
Pilbara region, home to the world’s largest-known iron ore
deposits. This is relevant to Chinese steel mills as Australian
14 HSBC Shipping Services Limited
iron ore, subject to availability in sufficient quantities, is
always the first choice being the most proximate source
of supply. In nineteen weeks during 2007, the freight
differential between Australian and Brazilian iron ore of
equivalent quality exceeded $40 pmt and in six of those
weeks the differential was over $50 pmt. Beyond iron ore
and coal, BHP and Rio have very large mining operations
in alumina and bauxite (the raw materials for making
aluminium), copper, lead, zinc, manganese, nickel and
uranium. Iron ore tends to be the focal point but all the base
metals count as well, added to which is coal as China is fast
becoming a net importer.
A combination of Vale, the global leader in iron ore
production, and Xstrata would also be intimidating to
Chinese importers. Vale has coal, aluminium, copper,
manganese, ferroalloys and nickel assets that complement
those of Xstrata and Glencore which also bring zinc,
vanadium and lead to the table. China needs all these
commodities to support both its domestic and export
growth and can be forgiven for any sense of anxiety. As
China Inc has in excess of $1.5 trillion in foreign exchange
reserves one can expect this firepower to be used in 2008
and beyond to protect its best interests. The move on
Rio’s London share base in conjunction with Alcoa was
designed to head off Australian and American suspicions
as to Chinalco’s final intentions. It represents a more
sophisticated approach than CNOOC’s failed attempt to buy
Unocal in 2005 when protectionism triumphed and Chevron
won the prize.
Further twists in this saga lie ahead. On 5 February, we
heard that Chinalco’s purchase of 9% of Rio may become
the subject of an investigation by Australia’s Foreign
Investment Review Board in case it is deemed to be
counter to Australian national interest. Recent precedent for
government intervention on national interest grounds was
set in the US in the above-mentioned CNOOC/Unocal case.
This was followed by the UAE-controlled DPW being forced
to divest the US-based port content (it went to AIG) after its
purchase of the global ports portfolio of P&O Ports.
An Australian precedent was to block Royal Dutch Shell
from its planned A$10 billion takeover of Woodside
Petroleum, the Australian oil and gas group, in 2001.
Then, in February, Cfius blocked the joint Huawei/Bain bid
for US computer company 3Com. The question remains as
to whether these transactions were really blocked by issues
of national interest or whether they were thwarted by anti-
commercial and protectionist practice.
From an objective point of view, China would seem to
be the aggrieved party. The Australian FIRB is under no
obligation to approve foreign stakes in Australia-listed
companies unless they reach or surpass 15% of market
value. Chinese state-backed value investors have recently
provided important cash liquidity to US and European
investment banks, being minority stakes on arms’ length
terms, and yet this has attracted national scrutiny. Where
else the funds might have come from is not clear, but
maybe not from their own governments as in the case of
the UK’s nationalisation of troubled Northern Rock. It is
forgotten that China has played a pivotal role in increasing
global prosperity in recent years, and yet it is often painted
as the villain in the US imbalance of trade. The real culprit
is the Federal Reserve for keeping interest rates too low
for too long, and the US consumer for spending beyond
its means. It is disingenuous for the latter to now blame
China’s savers for its own state of indebtedness.
Cash is King
Since August 2007, credit has been more difficult to access
in the wake of US subprime mortgage problems and the
ensuing liquidity crunch. Banks became reluctant to lend
to each other and to their retail and corporate customers.
Many companies have built up cash reserves in recent
years in contrast to a swathe of consumers that have
taken advantage of rising house prices to cash in equity.
They have also built up unsecured debt through personal
loans and credit cards and this tendency in the transatlantic
economies to spend at the expense of saving has fuelled an
asset bubble in property and shares. Now that asset prices
are being undermined, the old adage that cash is king is
reasserting itself. This manifests itself via increased savings
and or heavier weightings in investment portfolios towards
cash and bonds and away from equities. Equity markets are
no longer getting the same level of support that they did
previously from M&A activity and share buybacks.
In the absence of the availability of large leveraged loans,
mergers and acquisitions need to be paid for in cash, or
shares, or cash and shares. Big deals are still in prospect
with BHP looking at Rio, Vale at Xstrata and Microsoft at
Yahoo. But, one large US investment bank had to withdraw
from leading a syndicate in one of these potential takeovers
because it could no longer justify lending in the context of
its own weakened balance sheet and forecast returns. The
shortage of cash on the balance sheets of some banks is
contrasted by the availability of cash in the sovereign wealth
funds of Asian, Middle Eastern and other emerging market
15Global Shipping Markets Review 2008
nations. Funds in China, Singapore and the Middle East
have already taken stakes in banks such as UBS, Citigroup,
Standard Bank, Morgan Stanley and Barclays. Money that
in former years flowed from west to east is now flowing in
reverse, a product of trade and oil surpluses.
The exposure of banks to subprime losses may not have
ended but now attention has turned to two troubled
monoline insurers: Ambac and MBIA. Traditionally they
insured portfolios of municipal bonds and took a fee for
conferring their AAA ratings on the underlying securities.
Having been seduced into the higher-paying subprime
market, the rising level of mortgage defaults led Fitch to
downgrade Ambac to AA. If S&P and Moodys were to
follow then this would automatically reduce the credit rating
of all its underlying bonds triggering those investors that are
only allowed to hold triple-A rated paper to sell, thus further
undermining the value of the securities. As the monolines
have collectively guaranteed about $2.4 trillion of debt, their
problem could easily become another problem for the banks
that originated those securities as the monolines carry only
thin capital cushions more suited to guaranteeing much
safer municipal bonds.
The situation is made worse by the fact that many of the
banks that used monolines to wrap their bonds also bought
protection from them in the form of credit-default swaps
(CDSs). As default ratios in the underlying mortages rose,
so the pressure ratcheted up on the relatively capital-
light monolines. Without bank recapitalisation of these
monolines there follows the risk that the ratings agencies
will selectively issue downgrades on other large AAA-
rated monolines that have indirect exposure to subprime
mortgages and cause a collapse in bond values. As there
is a lot of circularity and overlapping of risk, it is not clear
which banks have the greatest exposure and therefore
which ones might be expected to step up to the plate.
The Bank for International Settlements estimates that $95
billion of CDSs were sold to banks as protection and some
proportion of this is at risk of being written down.
The lack of consensus over the quantum of possible future
losses and writedowns creates uncertainty for some banks
and monolines and opportunities for others. The amount
at risk from CDSs varies from as little as $15bn according
to the International Swaps and Derivatives Association
to $250bn according to a large US fixed-income money
manager. Vulture and value-driven investors such as
Wilbur Ross and Warren Buffet are looking closely at the
monolines. The former, together with Bill Gross of Pimco,
have been ploughing funds into municipal bonds that are
being sold off cheaply. The latter had an offer rejected to
reinsure three struggling bond insurers because he tried
to separate the safer municipal bonds from the more
toxic subprime mortgage-backed securities. Clearly, they
collectively expect a recovery in the municipal bond market
that has been unfairly tainted by subprime problems.
Their advantage is that they have many billions of dollars of
cash in need of the right home. They can inject liquidity into
the stalled municipal and auction rate bond markets and put
a floor under price falls. The subprime mortgage problems
will be left to the banks to sort out but already we see the
Fed helping them by cutting overnight rates to help the yield
curve. Furthermore, on 11 March 2008, the Fed led a group
of the world’s largest central banks in providing $200 billion
of additional liquidity to the banking system. Share prices
responded positively in the hope that the credit markets
will be unglued and banks resume lending again. Taking the
joint efforts of central banks, value investors and sovereign
wealth funds, they have the cash that can rescue the parts
of the global economy that have suffered unfair contagion.
That puts all the onus on those responsible to clear up the
subprime mess.
In shipping, many private and corporate shipowners are
awash with cash from strong operating earnings and capital
gains from asset disposals. They are in position to take
advantage of others that have over-extended themselves,
particularly those that have ordered ships which they can no
longer finance. But, like the the Buffets of this world, they
need to perceive value. The latest March IEA oil demand
forecast is surprisingly bullish, even as crude nudges $110,
based upon resilient emerging market demand. The BDI
continues to recover as spot market rates rise, and tramp
owners in the box markets are benefiting from firmer
charter rates. There is no indication of an imminent decline
in asset values but there are eagle-eyed value investors
out there who are ready to exploit weakness when it has
become opportunity. This suggests that the next market
fall will, at some point, be rescued by cash.
16 HSBC Shipping Services Limited
17Global Shipping Markets Review 2008
18 HSBC Shipping Services Limited
Bulk Carriers
19Global Shipping Markets Review 2008
Introduction
2007 was the best ever year for the dry bulk market,
although at the beginning of the year few shipowners
would have expected it to surpass 2004. In fact, the last
five years have been the best on record when looking at the
weighted average spot market earnings of all bulk carriers.
In descending order of merit: first was 2007 at $42,307
per day; a long way back in second was 2004 at $27,502:
third 2005 at $22,310; fourth 2006 at 19,152 and fifth 2003
at $13,948 daily. This bull run has been remarkable and
unprecedented in terms of both longevity and profitability.
The fact that 2007 earnings came in 54% ahead of
second-placed 2004 may be warning us that these
conditions are unlikely to last forever as there has been
a massive supply-side response in terms of the size and
depth of the orderbook of newbuildings. However, just
how much of this orderbook makes it to delivery is the
subject of keen debate.
At the end of 2007 and in early 2008, back-to-back force
majeure declarations by Australian and Brazilian iron ore
shippers unexpectedly returned many large bulk carriers
back onto the spot market, pushing down rates as they
competed for replacement cargoes. In January, power
shortages in both South Africa and China led to further force
majeure calls and halted mining activity and mineral exports
across large areas of each country. This was an unusual
confluence of events that removed significant volumes of
cargo from the market, causing a temporary oversupply
of tonnage. The last week in January saw some return to
normality with the Baltic Capesize Index recovering 25%
in the week, confounding many financial market observers
who had interpreted the 40% fall in the BDI since mid
November as a turning point in the commodity demand
cycle and a lead indicator of slower global economic growth.
As we moved into February, Chinese New Year celebrations
dampened activity but there was no let-up in structural
problems in the mining industry. In the middle of the month
BHP Billiton, Rio Tinto, Xstrata and two smaller miners
all declared force majeure on coal exports from flooded
swathes of northern Queensland, interrupting exports
from Haypoint, Dalrymple Bay, Abbot Point and Gladstone.
This put further pressure on other suppliers just as South
Africa found itself short of coal for electricity generation,
insufficient even to keep its own mines operational, and
just as China invoked a coal export ban that promises to
last well into the springtime. In the oil industry, rising
prices were initially the product of demand-side factors
in contrast to the twin supply-side oil crises of the 1970s.
More recently, supply-side constraints on global oil
production have served to underpin prices. This process
is now being replicated in the dry bulk markets where
we have strong demand but problematic supply.
Now into March, we can see that our faith in the
fundamentals of the dry bulk markets are being rewarded
by steady improvements in spot and period rates and a
recovery in secondhand values as buyers regain confidence.
But, we should put this in perspective. The BDI topped
out at 11,039 points on 13 November 2007 and then lost
49% of its value before bottoming out at 5,615 on 29
January 2008 – a big drop in just 6.5 weeks. By the end of
the February, the BDI was at 7,613 – up 36% from its end
January trough but still 31% down on the mid November
peak. The rollercoaster fourth quarter started at around
9,500 points and finished at around 9,150 points and we are
now faced with the question of whether we should regard
the mid Q4 spike as random noise and not expect to regain
it. The market is still trying to find its appropriate level and it
probably does lie in the middle of the range between recent
peak and trough, in the low to mid 8,000s. Many owners
would settle for that.
20
Figure 1. Average bulker earnings
Shiptype Dwt / year built 2006 $
2007 $
change %
Capesize 170,000-dwt / 2000 43,178 111,827 159%
Panamax 70,000-dwt / 1998 21,427 49,349 130%
Handymax 52,000 dwt / 2000 22,679 47,582 110%
Handysize 30,000-dwt / 1998 15,720 31,346 99%
Average 25,751 60,026 133%
BDI End-year figure 3,180 9,237 191%
HSBC Shipping Services Limited
Our assessment of the dry bulk fleet and orderbook splits
the segments into sizes that reflect changes in design and
a creeping tendency to upsize. The fleet of very large bulk
carriers over 200,000-dwt grew by 26%, in deadweight
terms, during 2007 while the orderbook stands at 131%
of the end-2007 fleet. The delivery schedule is stretched
out over five years and its size reflects the rising
importance of longhaul iron ore trades and the pursuit of
economies of scale. The largest ships on order are four
388,000-dwt vessels at Bohai for BW Ltd for delivery in
2011. They are under contract to Vale for a long-term
Brazil/China iron ore COA.
The conventional capesize segment, falling in the 100-
200,000-dwt range is most heavily populated by ships in the
170-180,000-dwt size range which still offer the greatest
flexibility to both shippers and receivers. The fleet grew by
6% in 2007 while the forward orderbook sits at 79%.
The newest and most popular segment is the post-panamax
80-100,000-dwt size range where orders account for 235%
of the end-2007 fleet, massive future expansion from a low
base. The kamsarmaxes within this segment are still within
current Panama beam.
The conventional panamax segment of 60-80,000-dwt
expanded by almost 7% in 2007 but the orderbook stands
at only 15% making it look relatively neglected. In reality,
many owners now prefer ships larger than 80,000-dwt
when imagining what will be the most flexible ship of the
future as, after 2014, this segment will no longer be able
to call itself panamax. The handysize segment is still the
quickest to age and the slowest to grow with the orderbook
at only 26% of the fleet and an age profile that offers
abundant scrapping potential.
21Global Shipping Markets Review 2008
Turning to the performance of the various bulk carrier
segments in calendar 2007. Spot capesize earnings were
159% up on 2006 and 59% up on 2004 at just under
$112,000 daily. The equivalent figures for panamax were
up 130% on 2006 and 44% on 2004 at nearly $49,500 per
day and handymax came in 110% up on 2006 and 49% up
on 2004 at just over $47,500 daily. Finally, the handysize
segment registered a 99% gain on 2006 with average
earnings coming in at a little under $31,500 daily.
This was 62% up on the previous cyclical peak in 2004
of just over $19,300 daily. The BDI ended 2007 190%
up on 12 months earlier.
The main market driver continued to be China whose
economy grew by 11.4% in 2007 following on from 11.1%
in 2006. The strength of Chinese demand growth for raw
materials for use in steelmaking and power generation
is occasionally outstripping the market’s ability to supply
these goods. Infrastructure capacity constraints from mine
to railway to port are causing commodity supply to lag
demand. When this leads to port delays, reducing effective
tonnage supply, shipping rates benefit, but when this leads
to shipment cancellation, shipping rates suffer – as became
all too obvious in January 2008.
Supply
Figure 2. Dry bulk carrier supply
Shiptype 31-Dec-06 31-Dec-07 Orderbook in m-dwt at 31-Dec-07
m-dwt # ships m-dwt # ships as % fleet
Delivery 2008
Delivery 2009
Delivery 2010
Delivery 2011 +
VLBC 200,000+ 17.3 77 21.8 98 131% 4.1 5.0 6.6 12.8
Capesize 100-200,000 102.9 631 109.1 667 79% 5.0 20.4 42.2 18.8
Post-panamax 80-100,000 13.3 158 13.8 159 235% 3.3 6.7 12.1 10.3
Panamax 60-80,000 88.4 1,240 94.5 1,320 15% 4.6 3.5 4.3 2.1
Handymax 40-60,000 71.2 1,492 76.6 1,592 55% 7.8 13.5 13.1 7.4
Handysize 10-40,000 73.3 2,734 75.6 2,833 26% 3.4 6.3 5.9 3.8
Total 366.5 6,255 391.4 6,669 57% 28.2 55.3 84.3 55.3
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Figure 3. Dry bulk fleet profile
22
The very large bulk carrier deliveries of recent years are
sufficient in capacity to replace all the extant ships that
delivered in the 1980s and 1990s, although their owners
probably have no plans to scrap them any time soon. The
phased arrival of the orderbook will certainly put the older
ships under pressure. The conventional capesize fleet has
enjoyed a fairly linear rate of deliveries since the mid-1990s
and the 1980s models will soon become marginalised,
especially the less fuel-efficient ones. The handysize fleet
stands out as having delivered insufficient ships in recent
years to renew the fleet going forward. The relatively light
orderbook suggests that some ships will continue to be
employed well into their 30s.
Figure 4. Dry bulk capacity scrapped, lost or otherwise removed from the fleet
Strong markets since 2003 have reduced scrapping to a
bare minimum with 2007 being noteworthy for the high
proportion of superannuated panamaxes that left the active
fleet. The positive message to be taken from low recent
levels of scrapping is that it provides the safety valve of
increased scrapping in future, and this may be needed
judging by the weight of the orderbook. If the bulk carrier
sector were to suffer the equivalent of an Erika, Prestige
or Hebei Spirit moment then we could expect a swift
tightening of qualifying employment parameters and a
return to the former classification of modern (maximum
15 years), a definition that has become overlooked in the
handysize segment.
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23Global Shipping Markets Review 2008
Figure 5. Dry bulk carrier contracting
The surprising strength of earnings and values in 2007
encouraged an avalanche of orders that reached its peak
in the second quarter. Such a development could not have
happened without the acquiescence of the shipyards
which finally achieved pricing levels that permitted them
to dovetail rising bulk carrier demand with easing tanker
and box ship demand. The paucity of contracting prior to
end 2006 is testament both to shipyards’ unwillingness
to build bulk carriers and their obsession with the other
aforementioned sectors. A lot of the most recent bulk
carrier orders have been placed in China. Not all will deliver
on time, or indeed, at all.
Figures for the first quarter of 2008 show a distinct
slowdown on a quarter-on-quarter basis with the number
of orders placed at a little over one hundred compared
with about 260 in Q1 2007. It could be that owners,
following recent corrections in spot market earnings and
the indices, have finally decided that enough is enough.
Other considerations could be that financing is no longer
as available on acceptable terms, that deliveries are too
far out, that yards are reluctant to quote as their input costs
keep rising and that there are fears about the deliverability
of ships from some of those yards that are still willing
to quote.
Figure 6. VLBC more popular than standard capesizes
Recent VLBC fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
VLBC fleet, m-dwt 17.3 21.8 4.1 0.2 25.8
% change 25.9% 18.0%
Recent Capesize fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Capesize fleet, m-dwt 102.9 109.1 5.0 0.3 113.8
% change 6.0% 4.3%
Bulk Carriers
24
A year ago, we forecast VLBC fleet growth of 25.8% and
this proved to be correct as ships delivered on time and
there was no scrapping. In this segment in 2008 we once
again have modest expectations of scrapping, as the fleet
is modern, and we forecast net growth of 18% from a low
base to 25.8m-dwt. Of the 17 ships above 200,000-dwt
that are scheduled to deliver in 2008, 14 are Japanese, 2
Chinese and one Turkish. It is likely that all but the Turkish
ship have long-term contract cover. The conventional
capesize fleet expanded by 6% in 2007, higher than our
forecast of 4.8%. We anticipate net growth of just over
4% in 2008.
Figure 7. Rise of the post-panamax
Recent Post-Panamax fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Post-Panamax fleet, m-dwt 13.3 13.8 3.3 – 17.1
% change 3.4% 23.9%
Recent Panamax fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Panamax fleet, m-dwt 88.4 94.5 4.6 0.2 98.9
% change 6.9% 4.7%
The post-panamax fleet grew only marginally in 2007 but
the order pipeline begins to deliver in 2008 and net fleet
expansion of 24% is anticipated in what is still a small fleet.
The new deliveries are dominated by Japanese owners but
overall ownership is quite diverse with it spanning Greek,
Korean, Chinese, Taiwanese, Italian, UK, Croatian and Arab
interests. In the conventional panamax sizes we forecast
minimal scrapping and net fleet growth of under 5% in 2008
after almost 7% in 2007, leaving us with quite a benign
supply-side outlook for the year ahead.
Figure 8. Handymax fleet now larger than handysize
Recent Handymax fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Handymax fleet, m-dwt 71.2 76.6 7.8 0.1 84.2
% change 7.5% 10.0%
Recent Handysize fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Handysize fleet, m-dwt 73.3 75.6 3.4 0.1 79.0
% change 3.2% 4.4%
The handymax fleet grew by 7.5% in 2007 which had
no adverse impact on either earnings or values. With our
expectations of resilient earnings in 2008 we see little
scrapping potential and this will give rise to an even larger
net fleet expansion of 10% this year. Anyway, this pales
into insignificance when compared with the 13.4-dwt of
scheduled deliveries in 2009 and a further 13m-dwt in
2010. Handysize fleet growth remained slow at just over
3% in 2007 and is forecast to pick up slightly to nearly
4.5% in 2008.
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25Global Shipping Markets Review 2008
Figure 9. Total fleet growth slightly up on 2006
Recent total dry bulk fleet development
31-Dec-06 31-Dec-07 2008 deliveries
Scrapping estimate
Fleet End 2008
Total dry bulk fleet, m-dwt 366.5 391.4 28.2 0.8 418.8
% change 6.8% 7.0%
The total dry bulk fleet expanded by less than 7% in 2007
and is expected to increase by about 7% in 2008. Dry bulk
shipping demand growth is likely to be slower this year
as the global economy faces a slowdown. However, the
sector coped admirably with 7% supply growth in 2007
by returning all-time record earnings and values. We still
expect a good performance this year despite the uncertain
outlook in the developed world economies and financial
markets which, in any case, often dance to a different
tune to shipping.
Demand
In 2008, we expect to see continued growth in both major
and minor bulk demand, although at a slower pace than
in recent years. The previous cyclical peak in dry cargo
demand growth was in 2004 when it rose 8% year-on-year.
However, 2007 set records in both earnings and values
despite a lower rate of estimated demand growth of just
over 5%. This figure does not tell the whole story as tonne-
mile demand growth and real tonnage supply, stripping
out the limiting factors of port congestion, bad weather
and canal transit bottlenecks, all influence the end result.
Given our 2008 forecast of cargo demand growth falling to
just under 5%, and net tonnage supply expansion staying
constant at about 7%, those supply-limiting factors will
once again play an important role in closing the gap.
Figure 10. Dry bulk demand growth forecasts for 2008
Major bulks 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
Iron Ore 403 449 451 481 516 588 661 721 787 840
Steaming Coal 300 346 383 406 448 483 507 544 563 587
Coking Coal 162 174 169 171 178 179 184 190 202 211
Wheat/ Coarse Grains 205 214 207 214 206 215 208 225 222 222
Soya Beans 42 50 54 57 59 60 64 67 73 77
Bauxite/ Alumina 54 54 52 55 60 68 78 79 84 89
Phospate Rock 33 30 31 30 29 31 31 30 32 33
Total 1199 1317 1347 1414 1496 1624 1733 1856 1963 2059
% change 9.8% 2.3% 5.0% 5.8% 8.6% 6.7% 7.1% 5.8% 4.9%
Bulk Carriers
26
Minor Bulks 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
Sugar 40 37 41 44 45 46 48 48 48 50
Agribulks 95 87 87 89 90 97 99 106 109 114
Fertiliser 66 67 64 69 75 81 81 80 91 95
Scrap 55 64 70 72 87 98 95 98 105 110
Cement 113 116 118 112 117 125 137 140 142 148
Coke 18 24 23 23 24 24 20 22 25 28
Pig Iron 13 15 12 13 13 18 18 18 19 20
Forest Products 158 161 164 160 163 166 170 174 175 178
Steel Products 174 184 193 198 205 225 226 255 270 283
Others 34 37 37 37 44 48 51 50 50 52
Total 766 792 809 817 863 928 945 991 1034 1077
% change 3.4% 2.1% 1.0% 5.6% 7.5% 1.8% 4.9% 4.3% 4.2%
Grand Total 1,965 2,109 2,156 2,231 2,359 2,552 2,678 2,847 2,997 3,137
% change 7.3% 2.2% 3.5% 5.7% 8.2% 4.9% 6.3% 5.3% 4.7%
We estimate the highest rate of growth will be in the raw
materials cargoes of iron ore and coals at 5.5% year-on-
year. Iron ore trade growth should increase by another 50mt
in 2008 after 65mt in 2007. China’s steel industry is still
expanding but exports may be hampered by rising export
tariffs, domestic supply could be reined in by the closure of
smaller mills and domestic demand is expected to roll back
a bit after the Olympic Games. In spite of this, China should
still account for over 90% of the growth in 2008 iron ore
trades. Overall 5.5% growth in the major trades would still
be more than one percentage point lower than 2007 and
2.5% below the average 8% rate of growth of the past five
years from 2003 to 2007. This weaker rate of annual growth
factors in an economic slowdown in the US and Chinese
government efforts to restrain steel exports for fear of
provoking a trade backlash.
The above forecasts underplay the potential for significantly
larger exports of US coking and thermal coals in 2008.
Present figures of an aggregate 40mt could end up as
high as 80mt according to estimates of the world’s largest
private coal producer, Peabody Energy. The USA may
have to ramp up its exports, which will test its recently
under-utilised coal export infrastructure, to compensate
for increased demand elsewhere amidst falling supplies.
Peabody forecasts US exports to rise from 49mt in 2006 to
78mt in 2008 and imports to fall from 36mt to 31mt over
the same period. Net exports are set to increase from 13mt
in 2006 and 20mt in 2007 to 47mt in 2008. The producer
estimates that seaborne coal demand will rise by 7% per
annum as the world’s fastest growing fuel. Meanwhile,
the Energy Information Administration (EIA, part of the
US Department of Energy) puts global coal consumption
growth at 48% in the 1980-2004 period rising to 72%
between 2005 and 2030.
South Africa suffered power cuts in early 2008 and power
rationing as electricity demand now exceeds generating
capacity following inadequate past investment. Power
supplies to industry, including to its many base minerals and
precious metals mines, were cut leading to temporary mine
closures. Eskom, South Africa’s state utility company, needs
to find an extra 45mt of thermal coal over the next two
years in order to carry adequate stocks to cope with rising
domestic power demand. On the face of it, this should
restrict South African coal exports unless existing collieries
can respond with enhanced production. In 2007, South
Africa exported nearly 68mt of thermal coal but annualised
figures for coal throughput at Richards Bay in January
2008 ran at under 43mt, the lowest since 1999. European
buyers may have to look towards the US and Colombia for
replacement supplies in 2008 and beyond.
China, like South Africa, also suffered from brownouts
in early 2008 after freezing weather shut down mines
and reduced power generation capacity. Scores of bulk
carriers from Cosco and China Shipping were diverted
from deepsea trades to shuttle coal along the coast and
a moratorium was imposed on coal exports until the end
of the first quarter. Flooding in Queensland in January
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27Global Shipping Markets Review 2008
interrupted Australian coal exports at a time of already
tight supply. Vietnam, a traditional coal exporter, will cut
one-third, or about 10mt, of its exports to Japan and Korea
this year in order to satisfy rising power demand at home.
Russia and Venezuela are also reducing coal exports. All this
is happening at a time of elevated import demand from coal
producers in China, India and Europe. Global coal markets
are in a state of flux at present and it is difficult to see how
the import and export changes will eventually net out.
We expect India to increase tonne-mile demand as it
continues to impose export taxes on iron ore in order to
support its domestic steel-making industry. The largest
share of replacement volumes for Far Eastern importers
would most likely come from far-away Brazil as both
Australia and South Africa have short-term infrastructure
problems that appear even greater than those of Brazil.
China’s early 2008 thermal coal export ban did not stop it
from looking to import extra supplies. Export problems in
Australia, Vietnam and South Africa were added to by floods
at Indonesian mines reducing choices to various more
distant Atlantic-based sources. That put China’s buyers into
competition with Japan, South Korea and Taiwan
which sought replacement supplies for their customary
Chinese imports. These will probably need to come from
Colombia, the USA and Canada. The raw material supply
chain is in turmoil.
In terms of ship sizes, the panamaxes look well set to
benefit from expected strong growth in steaming coal
trades that find power utility companies often requiring
smaller ships than can be handled by the steel mills in the
coking coal trades. The soya bean, bauxite and alumina
trades also offer the prospect of continued meaningful
growth despite gyrating soya bean and aluminium
production in Brazil and South Africa because of drought
and other weather related issues. In the handymax and
handysize segments steels, cement, agribulks, scrap,
fertilisers and forestry products are all expected to chip in
with steady year-on-year growth. Overall, the cargoes most
typical to the handysize segments are forecast to grow by
4.2%, about 0.6% less than the average of the past five
years from 2003 to 2007.
Global steel output is set to continue rising led, as ever, by
China. In 2008, Chinese production is forecast to increase
by 11% year-on-year. This impressive gain risks disguising
the fact that the annual rate of increase has been declining
each year in recent years, albeit from an ever-larger base.
After 3% growth in the rest of the world in 2007, this is
expected to drop to just 2% in 2008 – still better than the
mildly negative growth of 2005. Much of the 2008 reversal
can be laid at the door of weakened house-building in North
America and Europe and slower economic growth in the
transatlantic economies.
Figure 11. Steel production
bn-tonnes 2004 2005 2006 2007 2008f
China 0.27 0.35 0.42 0.48 0.53
RoW 0.76 0.76 0.80 0.82 0.84
% change 2004 2005 2006 2007 2008f
China 29% 20% 13% 11%
RoW -1% 5% 3% 2%
Bulk Carriers
Global Seaborne Iron Ore Sources
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2007
2008
2009
2010
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m-tonnes Other
Venezuela
Canada
Mauritania
Russia
Chile
Peru
Sweden
India
S Africa
Brazil
Australia0
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28
HSBC’s Metals and Mining team forecast seaborne iron ore
trade developing as per the above graph based upon source
of production. Australia and Brazil will continue to carve out
the largest share as huge investment in new and expanded
operations gradually bears fruit. South Africa is expected to
overcome its own mining and rail issues in order to
increase exports over the coming years while India
may struggle to maintain its export volumes should the
government succeed in its stated determination to curb
exports via export taxes.
Figure 12. HSBC Metal and Mining Team’s iron ore trade forecast
changing diet of a wealthier consumer class demands more
feed grains for livestock and poultry.
Both China and Russia are now imposing price controls
on grains while Argentina, Kazakhstan and Vietnam are
introducing foreign sales taxes or export bans. Egypt has
returned to food rationing and Pakistan has reintroduced
a ration card system, both for the first time in 20 years or
more. Iraq, Turkey and maybe even China are expected to
enter the market for large-scale wheat imports. Global food
prices are under sharp upward pressure from population
growth in developing countries, climate change leading to a
higher incidence of droughts and floods, and the voracious
demands of the biofuel industry.
Extreme weather conditions have damaged wheat crops
in Australia, Canada and the European Union putting
great strains upon US grains supplies where inventories
are forecast to drop to their lowest levels in 60 years.
A doubling in rice and wheat prices in 2007 was
compounded by a doubling in freight costs in 2007.
In the first two months of 2008, the price of US spring
wheat, used for baking bread, doubled again to around $24
per bushel by end February. The rising costs of grains and
foodstuffs, taken together with high energy prices, are
feeding global inflation and hurting poor and even middle
class families world-wide.
Figure 13. IGC grain trade analysis
Late January 2008 figures from the International Grains
Council illustrate total past and forecast international trade,
not just seaborne trade, in grains to end June 2008. Much
is made of the depleted nature of China’s grain stocks at
a time when domestic production is under pressure from
structural issues such as urbanisation and desertification
and topical issues such as drought. This shrinkage in stocks,
to what are thought to be record lows, and reduction in
arable land coincides with increasing consumption as the
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29Global Shipping Markets Review 2008
The UN’s World Food Program is talking about a “new
area of hunger” in which the high price of agricultural
commodities, rather than just shortages, is affecting even
the urban middle classes.
The reality of increasing demand from upwards of 2.4
million people in China and India alone exposes the illogical
promotion of ethanol before food and cars before people.
The days when shipping markets were moved by the entry
of the Russians or the Chinese to cover wholesale grain
purchases are a distant memory. Plentiful stocks have
been used to smoothen demand and leave the grain
futures markets largely unruffled. With global stocks now
at dangerously low levels, we suspect that large-scale
grains movements will materialise, just as soon as export
product is available, in order to replenish depleted stocks
to safe levels.
Figure 14. HSBC Equity Research tonne-mile analysis
bn-tonne-miles 2002 2003 2004 2005 2006 2007 2008 2009CAGR 2004-2009
Absolute growth
2004-2009
Iron ore 2,694 2,993 3,440 3,867 4,326 4,680 5,155 5,521 10% 61%
Coal 2,568 2,880 3,442 3,662 3,743 3,856 3,988 4,254 4% 24%
Grain 1,287 1,370 1,396 1,395 1,489 1,524 1,571 1,617 3% 16%
Minor Bulks 4,104 4,489 4,736 4,862 5,046 5,377 5,541 5,780 4% 22%
Total 10,653 11,731 13,013 13,786 14,605 15,436 16,255 17,171 6% 32%
Y/y growth 10.1% 10.9% 5.9% 5.9% 5.7% 5.3% 5.6%
Our colleagues in Equity Research have taken a composite
view of demand from various sources and have used it to
create this forecast of tonne-mile demand growth for the
main categories of dry bulk cargo. It shows the greatest
growth in iron ore cargoes over the five years to 2009
but steady growth in the other cargo categories. Year-on-
year growth is forecast to dip in 2008 due to the global
slowdown, but to remain above 5%, with a recovery to
nearer the medium-term trend in 2009. Although we
experienced double-digit tonne-mile demand growth in
2003 and 2004 it has been in the following years of annual
5-6% increases that have seen the greatest response in
earnings and values.
Earnings
Time Charter
Figure 15. One year time charter earnings for standard-type bulkers
Bulk Carriers
One-year time charter rates quite easily exceeded the levels
that were achieved in the last cyclical peak in 2004. By the
time of the most recent market peak in mid November 2007
a modern capesize was able to achieve over $160,000 per
day for one year and a modern panamax about $80,000 daily
for the same period. That equated to about $55 million in
income after operating costs for a capesize over the course
of the year. In the soft market of 2002 it was possible to
order a new 175,000-dwt capesize for under $35m, so
net earnings of $55m in just one year had a immediate
hardening effect on values with a 5-year old vessel being
worth over $150m in early November, 85% up on the start
of the year.
The sharp rise in spot market earnings in 2007
supported a regular stream of period chartering interest.
During the course of the year charterers were regularly
finding themselves short on availability, especially in the
Pacific. Long delays at Australia’s premier coal loading port
of Newcastle, and delays at other loading and discharging
ports in Australia, Brazil, South Africa and China, only
exacerbated tight supply. This boosted the term charter
market as controlling ships in-house was often a better way
to service contractual commitments than total reliance upon
the vagaries of the spot market. One spin-off of an active
period charter market was the frequency of relets when
ships were out of position for own cargoes.
Capesize
The year began with one, two and three year benchmarks
set quite closely together. In January, Aquabeauty (171,009-
dwt 2003) set the tone for 12 month rates when it was
fixed for a year to Korea Line with delivery within the
month at $66,000. For two year period, both Mineral Libin
(175,000-dwt 2006) and Alpha Century (170,415-dwt 2000)
achieved $57,000 while for three years, the bar was set at
$50,000 by Lowlands Beilun (170,162-dwt 1999). This last
ship was reported in October to have been fixed for a year
at $146,000 to Oldendorff.
Anyone lucky enough to commit tonnage for medium to
long period in the first half of 2007 could later relet for
shorter periods at a tidy profit. Anangel Explorer (171,600-
dwt 2007) was reportedly fixed for $58,000 in May by
Cosco for five years with delivery ex-yard in July. In August
the ship was reported relet to North China Shipping for two
years at $97,500. This deal may have failed as the ship was
reportedly fixed again shortly afterwards to Crownland for
two years at $115,000.
Meanwhile, certain charterers were notably active on
the period front during the year. Cosco Hong Kong was
frequently in the market for longer period. It took Cape
Kennedy (170,726-dwt 2001) in March for three years at
$53,500 and Thalassini Niki (174,566-dwt 2005) in April for
five years at $56,000. Cosco Qingdao also went for longer
period deals as the year went on, committing China
Peace (175,000-dwt 2005) for five years at $55,000 in July.
Morgan Stanley concentrated on shorter periods, paying
$91,000 in July to fix Bulk Australia (169,770-dwt 2003)
for a year and as much as $125,000 for Xin Fa Hai
(174,766-dwt 2004) for a year from the end of September.
Just how fast the market moved in the final quarter is well
illustrated by the activity of STX PanOcean. It paid $118,000
in August to fix the larger format Cape Albatross (202,000-
dwt 2007) for a year. Four months later, in December, the
company had to stump up $170,000 to secure the standard
capesize Mineral Noble (170,649-dwt 2004) for one year.
In the process it recorded the high-water mark in period
time charter rates in what was a remarkable year.
The Belgian owner-operator Kleimar took the stablemate
Mineral Hong Kong (175,000-dwt 2006) for the same rate
just a few days beforehand.
Panamax
As with the capes, Pacific charterers were very much to
the fore in the panamax segment in 2007. Cosco Qingdao
probably got the bargain of the year right at the start when
it took the IVS Pinotage (76,596-dwt 2005) for five years
at $21,750 a day – a good rate at the time but it was to
look cheap as the year went on. A short while after taking
the ship in Cosco relet it to d’Amato for 12-14 months at
$31,000 netting Cosco over $3 million for not much effort.
At the start of the year, a one-year fixture was concluding in
the low $30,000 range, as Happy Clipper (73,414-dwt 2001)
demonstrated when also taken by Cosco Qingdao for 11
to 13 months at $32,500. Two year rates started 2007 not
far behind: Tai Plenty (73,679-dwt, 2000) achieved $28,300
from Parkroad in January. Three year rates were at a further
narrow discount with Audax (75,220-dwt, 2001) fixing for
three years time charter at $25,500 to STX PanOcean.
The upswing in rates was rapid during March and April.
Consecutive one-year fixtures each established a new
benchmark: Cinzia d’Amato (74,716-dwt 2000) went for a
year to Glory Wealth at $33,500, but the same charterers
had to pay $34,750 for the larger Te Ho (77,834-dwt 2004)
30 HSBC Shipping Services Limited
just a day later. One week later, Daiichi was reported to
have paid $36,000 for Pasha Bulker for a year (before it
grounded off Newcastle in July).
By the end of April, Dreyfus was paying $42,500 to take
Ruby Indah (77,755-dwt 1998) for a year. Come the middle
of July, the one year rate was up to the high forties:
Transfield paid $49,750 to take Oceanis (75,550-dwt 2001)
for a year with September laycan. By the time Transfield
took delivery, it had to pay $66,000 for Yong Huan for a year,
also with September laycan.
The peak was reached in October when Sinochart fixed
Yasa Fortune (82,800-dwt 2006) for a year with delivery
in early December for $87,000 daily. By January 2008,
prevailing rates had eroded significantly as Sealink paid only
$49,000 for the 1995-built Dong Bang (71,747-dwt) for a
year. Charterers remained relatively quiet until just before
Chinese New Year when rumours of imminent increases in
the new contract prices of iron ore and coal moved them
to take period cover again. Rates duly began to recover lost
ground after a three-month slide.
Two year time charter rates also peaked in October when
Crownland paid $73,500 to take Four Coal (74,020-dwt
1999) with late November delivery. This was a far cry from
February when BHP Billiton had paid only $27,500 for
Spartia (75,115-dwt 2000) for two years. The fall from the
peak was less severe for the longer fixture as the panamax
beam Bulk Japan (82,800-dwt 2006) fixed to Glory Wealth
for two years in January 2008 at $62,000 daily.
Handymax
On a number of occasions in the last few years, modern
supramaxes have out-earned panamaxes and, from time
to time in 2007, they managed to achieve very similar time
charter rates. Our list includes mostly modern ships of
over 50,000-dwt but the strength of the market in the final
quarter of 2007 is demonstrated by the fact that the biggest
rate reported ($60,000 per day for 11 to 13 months) was
for the 43,246-dwt, 1994-built Gulf Globe which Korea
Line chartered in the last days of October.
Rates had come a long way since early 2007. Pacific Basin
was reported to have fixed Genco Prosperity (47,180-dwt
1997) for only $26,000 in February 2007 while par for the
year on average was something close to the $37,000 that
Cargill paid for Azzura (52,050-dwt 2004) in April. For longer
period, there was less rate volatility during the year.
Cosbulk paid $25,000 per day for Equinox Voyager (50,832-
dwt 2002) for two years in January while Sinotrans paid
$42,500 in August for Ocean Prefect (52,500-dwt, 2003)
also for two years.
Meanwhile, three year rates were flatter still. The peak
was HMM’s fixture of Innovator (55,435-dwt 2005) in
September for $39,000 which was 62.5% higher than the
$24,000 that Korea Line paid for Bianco Dan (55,625-dwt
2004) in January. The 3-year market suffered a correction
in 2008 along with spot rates and shorter period rates. In
late January, Sanko got away with paying a slightly lower
$35,350 per day to take Navios Kypros (55,180-dwt 2003).
Handysize
The handysize period market remains largely opaque with
few reported deals and even fewer confirmed fixtures.
However, we have enough fixtures to trace out an outline
of the market in 2007. One-year rates began the year in
the low $20,000s. Pontoklydon (28,450-dwt 1992) was fixed
in February for one year at $22,000. By August, Odin
Pacific (28,381-dwt 1995) achieved $32,000 with Korean
charterers and, at the autumn peak of the market, Korea
Line took Eastern Star (28,431-dwt 1997) for one year at
$42,000 daily.
Also of note were Genco’s twin forays to fix out its
handysize bulk carriers for period. The company took
advantage of firm market conditions to lock in earnings in
March when it fixed five vessels to Lauritzen for two years
at a reported $19,500 per day. Then in August, Genco fixed
three standard 28,000-dwt units (Genco Charger, Genco
Challenger and Genco Champion) to Pacific Basin for three
years at $24,000 a day.
Spot Market
Average weekly earnings are our proxy for spot market
performance. Capesize earnings rose steadily throughout
the year, apart from a soft patch in the spring and early
summer period, before peaking in mid November.
The correction was triggered by a force majeure
declaration in Brazil after collision damage to a loading
pier at Itaguai/Sepetiba on 12 December that led to
the staggered cancellation of as many as fifty iron ore
shipments totalling 8.5 million tonnes. The extent of
cancellations and slow timetable for repairs suggests that
there may have been some tactical linkage to the 2008/9
iron ore contract price negotiations.
31Global Shipping Markets Review 2008
Bulk Carriers
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
2002
-01
2002
-04
2002
-07
2002
-10
2003
-01
2003
-04
2003
-07
2003
-10
2004
-01
2004
-04
2004
-07
2004
-10
2005
-01
2005
-04
2005
-07
2005
-10
2006
-01
2006
-04
2006
-07
2006
-10
2007
-01
2007
-04
2007
-07
2007
-10
2008
-01
$ pd
170k-dwt 1yr TC
70k-dwt 1yr TC
52k-dwt 1yr TC
30k-dwt 1yr TC
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Jan-
05
Mar
-05
May
-05
Jul-0
5
Sep
-05
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$ per day
Capesize
Panamax
Handymax
Handysize
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
Estimate of Dry Cargo Demand Growth
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
change over previous year
R2 = 0.64
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
- 10 20 30 40
Chinese iron ore imports, m-tonnes
BalticCapesizeIndex
This situation was made worse in early 2008 when
Australian iron ore shippers declared force majeure after
Cyclone Melanie interrupted Rio Tinto’s mine and rail
operations in the Pilbara. This caused rates to fall off the
proverbial cliff with spot earnings dropping $100,000
per day from a $180,000 daily peak in mid November to
an $80,000 daily trough in late January. Rates bounced
back strongly in the last week in January when Chinese
operators entered the market for period alerting owners to
the possibility that the correction had been overdone and
that iron ore shipments were about to pick up again.
Meanwhile, the influence of the capesize segment on
the earnings of the smaller ships is evident in the above
chart. The shape of the curve representing spot panamax
earnings in 2007 not surprisingly bears a close resemblance
to capesize, although with much lower volatility. At various
times during the year when capesize rates rose too far
above panamax rates then shippers would split stems in
two and use panamaxes to leverage down capesize rates.
Once the rate differential narrows, shippers tend to be
quick to switch back to the larger sizes in the interests of
operational simplicity and economies of scale. Handymax
earnings broadly followed the same path as the larger
panamax, as we have noted above.
Short period (6-month) rates for a 30,000-dwt handysize
improved in a linear trend throughout the year but suffered
some contamination from the woes of the larger ships
in the spot market at the end of the year. Rates almost
managed to stay ahead of the best that 2004, 2005 and
2006 could manage but for a brief period at the beginning
of the year. In contrast to the six-month time charter rates,
spot rates fell sharply towards the end of 2007 as bearish
sentiment in the larger sizes combined with bad news in
global financial markets and falling share prices. Longer-
term period rates were hardly affected as the market still
believed the adverse conditions to be of a temporary nature.
Figure 17. Biggest influence on capesize earnings remains
Chinese steel industry
There is still a close correlation between the volume of
monthly iron ore imports and average capesize bulk carrier
earnings since inception of the Baltic Capesize Index (BCI)
in March 1999. However the correlation was much stronger
in the period up to the previous market peak in 2004. It is
not because Chinese iron ore imports are less vital to dry
bulk demand now than they were then, but rather that
the shortage of vessels was more acute in 2007, so rates
were driven much higher than they had been three years
previously. As a result, variance around the earnings curve is
much greater as Chinese iron ore imports grow in volume.
32
Figure 16. Average earnings for standard-type bulk carriers
HSBC Shipping Services Limited
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
R2 =
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
- 10 20 30 40
Chinese iron ore imports, m-tonnes
BalticCapesizeIndex
-
5
10
15
20
25
30
35
40
45
50
Mar
-99
Mar
-00
Mar
-01
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
China Iron Ore Imports, m-t (LHS)
Baltic Capesize Index (RHS)
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
-
2,000
4,000
6,000
8,000
10,000
12,00020082007200620052004
Figure 18. Chinese iron ore imports and capesize earnings Another way to show this relationship is to plot the growth
of Chinese iron ore imports over time against the Baltic
Capesize Index. This time series shows a very strong
relationship between 1999 and 2004 but thereafter there is
increasing volatility in capesize earnings. The coincidence
of force majeure events in the world’s two largest iron ore
export regions in Brazil and Australia, in the November 2007
to January 2008 period, was enough to collapse sentiment
supporting the old adage that freight rates have the
tendency to go up on escalators and down in elevators.
Figure 19. Baltic Dry Index, daily ticks. The Baltic Dry Index pools together all the component ship
size indices except for the handysizes. The BDI lost close
to 20% in value between mid November and the end of
2007 but then further bad shipping and financial news in the
new year sent the BDI sharply down in January. The index
lost almost 50% of its value from its late 2007 peak before
staging a recovery. By early March 2008, the 8,000 level
was breached again – it was at this level in 2007 that the
index went vertical.
33Global Shipping Markets Review 2008
Values
Figure 20. Relative values and earnings
Date Period – Rate Cape 170K Pmax 73K Hmax 52K Handy 30K
1st Jan 2007 3 years – $/day 47,500 25,000 23,000 16,750
31St Dec 2007 3 years – $/day 105,000 48,000 43,000 26,500
2007 change 110% 92% 87% 58%
31st Jan 2008 3 years – $/day 100,000 45,000 35,500 23,000
2008 to date -5% -6% -17% -13%
Date Age – Value Cape 170K Pmax 73K Hmax 52K (3yo) Handy 30K
1st Jan 2007 5 yr old – $m 81 45.5 42.5 28.5
31St Dec 2007 5 yr old – $m 150 88.5 75 44
2007 change 85% 95% 76% 54%
31st Jan 2008 5 yr old – $m 143.5 83 70 43
2008 to date -4% -6% -7% -2%
Bulk Carriers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Capesize (170k-dwt)
Panamax (75k-dwt)
Handymax (51k-dwt)
Handysize (23-30k-dwt)
10
20
30
40
50
60
70
80
90
100
$m
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
020406080
100120140160180
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
0
20
40
60
80
100
120
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
25yr-old 25yr-old 25yr-old
0102030405060708090
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m$m
0
10
20
30
40
50
60
70
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m
The above table gives some idea of how investors might
look at the relationship between modern secondhand values
(5-year old) and medium-term (3-year term) time charter
rates. During 2007, capesize 3-year time charter rates rose
110% while 5-year old values rose only 85%. The increase
in panamax values and earnings were more in line with one
another with a 92% increase in 3-year rates against a 95%
increase in values.
In the handymax segment, rates were up 87% in the
year against a less pronounced 76% increase in modern
secondhand (in this case 3-year old) prices. And in the
handysize segment earnings rose 58% just ahead of
values at 54%. By the end of January, handymax had seen
the biggest correction in period rates at 17% down with
handysize in second place at 13% down. Despite this,
handysize values only dropped a nominal 2%.
There was plenty of activity in the secondhand market in
2007, ranging across all sizes and vintages. It was actually
the older ships that enjoyed the greatest percentage
rises, but also the steepest falls at the turn of the year.
The prices of modern ships were often set by pre-IPO
buyers and listed companies ahead of secondary offerings.
The KG houses continued to attract fresh equity although
investment targets became more elusive. From August,
many buyers began to feel the impact of tighter credit
conditions and activity slowed. Finally, modern secondhand
values eased towards the end of the year, and into 2008,
as they were negatively influenced by the severity of
the falls in spot market earnings. For a few owners this
engendered a sense of panic, leading them to discount their
pricing in order to conclude deals that still guaranteed them
substantial capital gains.
Figure 21. Newbuilding prices for dry bulk carriers
34 HSBC Shipping Services Limited
Newbuilding prices rose steadily during 2007 as they
were fundamentally supported by strong demand, rising
input costs, increased foreign exchange risks and the
scarcity of machinery and equipment. The unprecedented
level of interest in new bulk carriers in 2007 should ease
during 2008 as what is on order is sufficient to cover both
fleet replacement and near-term future demand growth.
Uncertain prospects from 2009 and beyond have not yet
impacted on forward prices and will continue to be propped
up by strengthening commodity and labour costs. New ship
prices are unlikely to decrease until the huge premium for
modern secondhand vessels and resales has been eroded.
When premia fall back towards the cost of contracting it
will be an indication of weaker spot and period earnings.
At such point, owners will ask themselves whether actual
and prospective cashflows justify the high prices on offer.
Capesize market in 2007
Figure 22. Benchmark prices for capesize bulkers.
Secondhand capesize bulk carriers enjoyed considerable
gains in value during the course of 2007. In January,
Spring Brave (151,066-dwt NKK 1995) was reported sold
to DryShips for $60m. In March, the slightly larger but
same vintage Martha Verity (157,991-dwt Sasebo 1995)
was said to have fetched $63m to Swiss Marine. In April,
Formosabulk Allstar (150,393-dwt KHI 1995) was paid in the
range of $65-67m and chartered back by Formosa Plastics
for ten years on undisclosed terms. By October, DryShips
was once again linked with a 12-year old vessel Tiger Lily
(149,190-dwt CSBC 1995) at $90m, 50% up on what it
had paid for a similar-size ship ten months earlier.
In terms of the more modern ships. In March, Cape Pelican
(180,235-dwt Imabari 2005) was reported sold to Diana for
$107m and Cape Kassos (170,012-dwt Hyundai Samho
2004) was linked with Alcyon for a comparable $100m.
Prices had moved up several gears by September when
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
020406080
100120140160180
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
Resale5yr-old10yr-old15yr-old20yr-old
0
20
40
60
80
100
120
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
25yr-old 25yr-old 25yr-old
0102030405060708090
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m$m
0
10
20
30
40
50
60
70
Nov
-05
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
$m
the en bloc sale of Thalassini Niki (170,800-dwt Daewoo
2005) and Thalassini Kyra (164,218-dwt CSBC 2002) was
reported to Diana at $275m. The former was said to have
a 5-year charter attached at $56,000 daily while the latter
was charter-free and was in some reports apportioned
$133m of the total proceeds. In November, DryShips was
stated as the buyer of Gran Trader (172,529-dwt NKK 2001)
at $153m, the highest price of the year, and of that freight
and price cycle.
The deal of the year was Genco’s nine-cape purchase
from Metrostar in July. This involved capesizes ranging
from 170,000-dwt to 180,000-dwt, built or delivering from
the Japanese, Chinese and Korean shipyards of Imabari,
Universal, SWS and Sungdong between 2007 and 2009, at
an en bloc price of about $1.1 billion, an average of about
$122m each. The four 2007-built vessels had attached
charters of varying periods and rates. The four 170,000-dwt
Sungdongs, delivering October 2008 to September 2009,
were purchased by Metrostar from Blystad two months
earlier for $100m each, allegedly giving Blystad a profit of
$110m. Clearly Metrostar made an even better annualised
return. To put this in perspective, at the end of February
2008, a 2010-delivery 170,000-dwt Sungdong resale was
reported sold for $99m.
We can draw attention to two capesize purchases by keen
buyers Rizhou Steel. On 30 October 2007, with the BCI at
14,625 points and a few weeks ahead of its correction, the
steel mill was reported as the buyer of Sumihou (171,071-
dwt IHI 1996) for $106m. More recently, on 6 March
2008, with the BCI at 12,285 points, Rizhao was linked
with the purchase of the three years younger Arethousa
(171,779-dwt HHI 1999) for $133m. On a BCI-adjusted
basis, Sumihou would be worth $89m today to match the
16% fall in the BCI between the two purchase dates. On an
age-adjusted basis, the ship would be worth about $100m
today if matching the younger age of Arethousa. This would
imply that Rizhao Steel has overpaid by $33m or 33% in
its eagerness to secure Arethousa, following its failure of
two other purchases on subs in the interim period. We can
only assume that there are charters involved that adjust the
values and explain the valuation gap.
Panamax market in 2007
Figure 23. Benchmark prices for panamax bulkers
The market for what were 5-year old ships in 2007
developed nicely during the year. In January, Aeolion Spirit
(76,015-dwt Tsuneishi 2002) was reported sold to Tolani for
$49.25m. In May, Anangel Galini (74,362-dwt Daewoo 2002)
was said to have gone to Ocean Freighters for an improved
$56.5m. Within a few months, in the first half of July, Athina
Zafirakis (74,204-dwt Oshima 2002) sold at tender
for a reported $65.0m to DryShips. Later in the month of
July, Theodoros P (73,870-dwt Namura 2002) was first said
to have gone to Tolani for $70.5m and then later corrected
to Daebo at $71.2m. In the space of just seven months,
5-year old panamax values had gone up about 47%.
Around the middle of November, Lietta (76,015-dwt
Tsuneishi 2002) was rumoured sold for a relatively low
price of $62.25m when the charter-free value should have
around $90.0m. The big discount could be explained by an
attached charter for some 12-24 months at the low rate of
about $25,000 per day.
After the Lietta sale, modern sales virtually dried up but
owners of older ships became more eager to sell in order to
capture the increased value of their ships. The Vietnamese
seemed happy to oblige as they finally had a choice of
candidates in the vicinity of their budget levels. Back in
February, Peter S (66,764-dwt Sumitomo 1984) sold to
Korean buyers for $16.0m followed in April by Liberty
Wave (63,330-dwt HHI 1984) at $19.5m to Vietnamese.
By August, Amadeus (66,916-dwt MHI 1984) was able to
command $25.0m and in October Trust Jakarta (64,873-
dwt Hitachi 1984) went for $28.5m before Mastrogiorgis
(69,461-dwt Gdynia 1984) fetched $35.0m. Prices of this
vintage edged higher in November before the market
correction stalled activity. In late January 2008, Astron
Spirit (65,767-dwt Sasebo 1984) finally sold for $25.0m to
Vietnamese having failed at various levels up to $35.0m.
35Global Shipping Markets Review 2008
Bulk Carriers
Resale5yr-old10yr-old15yr-old20yr-old25yr-old
0102030405060708090
Nov-
05
Jan-0
6
Mar
-06
May
-06
Jul-0
6
Sep-0
6
Nov-
06
Jan-0
7
Mar
-07
May
-07
Jul-0
7
Sep-0
7
Nov-
07
Jan-0
8
$m
Jan-0
8
Resale5yr-old10yr-old15yr-old20yr-old25yr-old
0
10
20
30
40
50
60
70
$m
Nov-
05
Jan-0
6
Mar
-06
May
-06
Jul-0
6
Sep-0
6
Nov-
06
Jan-0
7
Mar
-07
May
-07
Jul-0
7
Sep-0
7
Nov-
07
Jan-0
8
A number of resales were concluded during 2007. In May,
Kambara sold a 2008-delivery 82,800-dwt Tsuneishi for a
reported $55.8m to Thenamaris in what was later to look
like an astute purchase. In June, Order Shipping was linked
with the purchase of CMB Fabienne (76,000-dwt Jiangnan
2008) for $65.0m. In July, DryShips was associated with
the purchase of two Kambara 2010-delivery 82,800-dwt
Tsuneishi types at $54.25m each. And, in October, Kambara
was reported to have offloaded another pair of 2010-
delivery 82,800-dwt Tsuneishi types to Neda Maritime for
$58-59m each. In November, Golden Ocean reportedly
sold six 75,000-dwt vessels under construction at Pipavav
in India, and scheduled for delivery in 2009 and 2010, to
Britannia Bulk for an average price of just under $59.0m
each. Also in November, Torm picked up two 2010/11-
delivery 82,800-dwt Tsuneishis for $52.5m each.
Handymax market in 2007
Figure 24. Benchmark prices for handymax bulkers
As is evident from the chart, 2007 was characterised by
steadily increasing values such that, as the year progressed,
buyers became fewer and fewer. At each stage, prices
were set by aggressive IPO buyers who tended to bring
other buyers in their wake. Liquidity was quite thin with
few available sales candidates and relatively few buyers but
over the course of the year medium-term period rates rose
faster than modern secondhand prices. The price of
a 5-year old 52,000-dwt handymax peaked at about $75m
in mid November.
Demand, especially for more modern vessels, was driven
by keen period interest and on occasions it was hard to
tell whether the tail was wagging the dog or vice-versa.
The final big push really began in August when charter
rates climbed dramatically, taking values with them. In the
last quarter more older ships came into the market for sale
as owners looked to cash in on values that were returning
100% or more of their purchase price in some cases.
In 2007, a 20-year old handymax could be sold for
double what it cost to build back in the 1980s.
The orderbook for newbuildings, particularly in the second
half of the year, grew exponentially. Very little ordering was
backed by long-term period cover as charterers generally
found the delivery dates too far forward. The ordering
frenzy had more of a herd mentality about it, based upon
the hope of perpetual rising values and profitable resale
opportunities. The turn of the year correction in the
charter market was overdone but it was probably enough
to cause some owners to curb their speculative instincts.
Handysize market in 2007
Figure 25. Benchmark prices for handysize bulkers
The 2007 market started where 2006 left off and was
characterised by an extreme lack of very modern tonnage
(post-2000) coming for sale; no more than a dozen
charterfree ships changed hands during the year.
Pacific Basin, Clipper and Evalend – amongst the big guns
in the handysize segment – sold systematically during he
course of the year. Pacific Basin was eager to charter its
ships back in order to preserve its fleet size and no doubt
protect its dividend payments to shareholders. The other
two, as private companies, were probably more keen
simply to cash out at historically high values. The abundant
availability of period charters, at levels corresponding to
prices paid, certainly generated considerable momentum
from the end of the first quarter.
36 HSBC Shipping Services Limited
The entry of active and aggressive Vietnamese and South
Korean buyers helped propel the secondhand market
in both modern and older ships respectively. By May,
strong demand had stripped the market of available sales
candidates and values began to accelerate with buyers
being forced to look at vessels encumbered with charters.
The easy availability of period for older units drove prices up
prices in that segment. By mid May, the price of a 10-year
old handysize exceeded the newbuilding contract price.
Frustrated buyers began to spend more time examining the
shipyards and soon started bidding up prices to levels that
finally made sense to the builders to provide forward berths.
En bloc deals came into vogue – the Sunwise fleet in June
and the Evalend fleet in August – attracting big numbers
from investors. By August, the BDI shot through the 6,000
barrier and the handysize market moved up another gear.
Evalend recorded the first handysize sales at above $40
million per unit and, in the 2006-built Stentor, recorded the
highest price ever paid. While supramaxes reached the $80
million mark, no handysize has yet breached $50 million.
This was symptomatic of either a very firm psychological
resistance level or simply of a lack of available very modern
candidates for sale.
By the third and fourth quarters a rising number of
newbuilding contracts were being signed, many at yards
with weak financial credentials and poor technical and
commercial prospects. Newbuilding contract prices were
bid up beyond $35-37m with deteriorating payment terms
and deliveries stretching into 2012 or even 2013 in Japan.
A sudden jump in values for the fourth quarter – Hanjin
Houston and sister Hanjin Tampa, both 27,209-dwt built
1995 – were sold for $40 million. This was a remarkable
development to see 12-year old handysize leap-frogging
forward delivery newbuilding contract prices.
At the older end of the scale, the 23-year old Ypermachos
and Diasozousa, both 28,000-dwt built 1984, were sold
for $26 million each in the fourth quarter. This was twice
what they might have achieved at the start of 2007 and
50% ahead of what they would have got in only the
previous quarter. December was a quiet finish to the year
as the freight market adjusted downwards in the middle
of November. This caused s lull in trading activity while the
extent of the correction was evaluated. The last concluded
handysize in 2007 was Seaglass (28,427-dwt built 1992)
$38 million; a 15-year old vessel achieving the same level
as a newbuilding order. This illustrated the strength of
demand for prompt delivery.
Outlook
The outlook for 2008 remains positive but cargo demand
growth across all segments is forecast to be just under 5%
while average tonnage supply growth across all segments is
expected to come in at about 7% on the basis of anticipated
minimal scrapping. However, the gap between supply and
demand will be narrowed, or even eliminated, by continuing
congestion at major loading and discharging ports and
by increasing tonne-mile growth as trade characteristics
change. The dry bulk market underwent a correction in
November that became even more severe in January, but
this correction was based upon cargo supply problems
in the larger sizes and adverse sentiment feeding in from
unstable financial markets. At the time, we expected the
dry bulk fundamentals to re-assert themselves and for the
market to recover and this is indeed what it has been doing
during February and into early March.
Closer analysis of the tonnage supply side shows the VLBC
segment growing by 18% from a relatively low base of
just under 22m-dwt and the conventional cape segment
expanding at a more subdued net rate of 4.3%, after 5m-
dwt of new deliveries, from a larger 109m-dwt base. We
expect the VLBCs to be generally covered under long-term
COAs but this still removes existing raw material cargoes
and incremental demand growth from the spot market.
Nonetheless, the conventional sizes still look to be set fair
for 2008 ahead of a much heavier delivery schedule in 2009
at over 20m-dwt followed by more than 42m-dwt in 2010.
Given the sheer weight of future deliveries, 2008 may be
a good time for owners with ships on the water to lock in
3-5 years time charter to a top-rated charterer and sit the
market out.
There is a parallel development in the expanding post-
panamax segment, which is expected to rise almost
24% from a low base of under 14m-dwt at the end of
2007, whereas the conventional panamax sizes will see
net growth of less than 5% from a higher base of almost
95m-dwt at the end of 2007. The outlook in this segment
is positive for 2008 with both 2009 and 2010 set to post
an even slower rate of deliveries as the focus moves up
to the post-panamax sizes. Handymaxes are forecast to
expand by a net 10% in 2008 while the handysize segment
gains less than 4.5% and remains favoured for its flexibility.
The handysize orderbook stands at 26% today compared
with 8% at the start of 2007. New yards in China feature
37Global Shipping Markets Review 2008
Bulk Carriers
38
prominently, using handysize as entry-level ships with
which to gain experience. Some degree of delay, even
non-performance, is expected to retard the delivery
pace in future.
Robust iron ore demand growth in China will support both
the VLBCs and capes on the long-haul routes from Brazil
where available and incremental supply is expected to
continue growing at a faster pace than Australia. India’s
exports are expected to decline by over 2%, or 2-3mt, in
2008 with this shortfall being made up by South Africa. To
put this in context, South Africa’s 2008 exports by weight
are forecast to be 11% of Australia’s and 10.5% of Brazil’s.
India is trying to limit iron ore exports in support of its
domestic steel industry while South Africa’s infrastructure
constraints constantly threaten the prospects for expanding
its iron ore export trade. However, it achieved almost 15%
export growth in 2007 and is forecast to increase a further
9% in 2008 to almost 33mt. At the margin Chile, Canada,
Sweden and Peru will all lift their exports volumes in 2008,
providing ultra long-haul supply to Asia.
Panamax and handymax sizes stand to gain from the
current Chinese thermal coal export ban that is forcing
Japan, Korea and Taiwan to seek long-haul replacement
supplies. Nearby sources include Indonesia and Australia,
although the latter failed to keep up with Chinese
demand in 2007 because of problems associated with
landside mines, rail and ports. Mines in both Indonesia
and Queensland are currently victims of flooding with
consequently reduced output. A more distant source is
Colombia which is increasing its production and may be able
to respond to rising Asian demand at some benefit to tonne-
miles. Meanwhile, the thermal coal imports of India, China
and South Korea are all expected to continue their upward
trajectory in 2008 increasing by about 5mt each. This would
represent year-on-year growth of 17% for India, over 30%
for China and nearly 8% for South Korea.
HSBC Shipping Services Limited
39Global Shipping Markets Review 2008
Bulk Carriers
40 HSBC Shipping Services Limited
Tankers
41Global Shipping Markets Review 2008
Introduction
A year ago, we drew attention to the fact that many market
observers, including some of the world’s largest tanker
owners, were bearish for 2007 prospects. However, we
wrote that “we are prepared to venture that crude tanker
earnings could outperform 2006 while product rates will
disappoint.” We were right not to be as pessimistic as
the big tanker operators, but they were correct for the
first three quarters of the year during which tanker rates
flatlined. Our redemption came in the fourth quarter when
large crude tanker spot rates went through the roof and
revisited the highs of November 2004, something that
no-one expected. This had the effect of raising annual
average spot earnings so that, year-on-year, VLCC and
aframax rates were down only 9%, suezmax 16% and
panamax just 1%. On the other hand, clean and dirty
products did better than we had forecast, falling only
marginally. (See Figure 26. below).
Many of the themes we were writing about twelve months
ago are still relevant today. The US economy had already
started grinding down with a slowdown looking more likely
than a recession at that time. After a year of withering
growth, a Wall Street Journal poll of economists put
recession risk at 50-50 in January 2008 but, by early
March, various investment banks and sages such as
Warren Buffet are claiming that the US is already in
recession. This time last year, we suggested that other
economies would be unlikely to secure immunity from a US
slowdown. Our current position is largely unchanged as we
never bought into the decoupling theory as enthusiastically
as did our own house economists. Hank Paulson, the US
Treasury Secretary, is now referring to decoupling as a
myth, almost as if he would actually wish the rest of the
world to catch a cold if the US must endure the flu.
A year ago, we were already taking note of country-by-
country forecasts that predicted much slower economic
growth and pondered that such adjustments should
logically lead to slower energy demand. And yet the latest
IEA forecasts for oil demand growth at that time were for
a 1.55m-bpd year-on-year increase in 2007, implying only
marginal weakness in the global economy last year.
The IEA duly revised its forecasts downwards over the
ensuing months and the final outcome for 2007 was
one-third lower at 1.04m-bpd. Last year we drew attention
to the delinkage between earnings and values as they
started off 2007 heading in opposite directions: values up,
earnings down. This seemed to us either to represent a
longer term belief in future earnings, thus supporting
higher valuations, or to indicate that too much money
was chasing too few opportunities.
Now, one year on, not much has changed. Tanker
newbuilding prices have never been higher and delivery
leadtimes have never been longer. Secondhand values
continued to rise during 2007 even as spot earnings have
slipped; thus the disparity between values and earnings
has widened. The premises are still valid: there is a belief
that future earnings can support high valuations and there
is still ample liquidity chasing relatively few opportunities.
The liquidity crunch in financial markets was acknowledged
in August and, at that time, affected mostly American and
European banks but has since permeated into the broader
economy. Some big ticket shipping deals got pulled in
the fourth quarter due to inability to source debt finance
at the right price but, by and large, shipowners are on the
side of the sovereign wealth funds and emerging market
governments: they have cash to spend.
The KG funds can still tap into new equity but sourcing debt
for a series of new super post-panamax containerships
or a fleet of large tankers is no longer a given. With
private and institutional investors able to access plentiful
funding we foresaw that any 10-30% correction in asset
values in 2007 would motivate value investors to step in,
effectively putting a floor under price falls. We never saw
the correction in tanker values, just continued investment at
firming market prices supported more by robust medium-
term period rates1 than by the lacklustre spot market. 2007
was the year of dry bulk, leaving tankers in the shadows.
The frothiness of the bulk carrier market provided a useful
outlet for single-hull tankers with many being lined up for
conversion into large bulk carriers, FPSOs, FSOs and even
heavy lift. This transfer of assets between shipping sectors
has made fleet analysis more challenging but, without
doubt, it has reduced future tanker supply to the benefit
of the sector.
42 HSBC Shipping Services Limited
1Avg. 3-year rates. VLCC up $1,000 daily; suezmax up $500; aframax up $1,000; panamax flat; MR up $1,000.
Figure 26. Average tanker earnings
Ship Type Dwt/ Year of Build 2006 $
2007 $
% Change
VLCC 300,000-dwt / 2000 63,092 57,147 -9%
Suezmax 150,000-dwt / 1999 53,136 44,825 -16%
Aframax 106,000-dwt / 2000 39,369 35,810 -9%
Panamax 73,000-dwt / 2000 30,882 30,565 -1%
Products 30,000-dwt / 1988 27,187 26,016 -4%
Average 42,733 38,873 -9%
Baltic Dirty Tanker Index 1,287 1,124 -13%
Baltic Clean Tanker Index 1,112 974 -12%
The decline in spot market earnings in 2007 was less
marked than many had expected, helped by a belated and
exceptionally strong rally in the fourth quarter. Average spot
earnings for all tankers slipped 9% compared with 2006 and
the Baltic Dirty Tanker Index was down 13% and the Baltic
Clean Tanker Index down 12%. Taking the panamax size as
a proxy for dirty products, although this size will increasingly
move over to clean trading as new LR1 deliveries escalate,
it was down only 1%. The small handysize, a proxy for
clean traders, was down 4% year-on-year. The late 2007
rally in crude rates would have been missed by all but a few
lucky owners but at least it served as a reminder of what is
possible, and of how well balanced is supply and demand.
The supply side in 2008 has moderated, given conversions
and regulatory tightening post Hebei Spirit, and emerging
market demand remains robust.
43Global Shipping Markets Review 2008
Fleet supply
Figure 27. Tanker fleet supply
Year-end 2006 Year-end 2007 Orderbook in m-dwt at 31-Dec-07
M dwt # ships M dwt # ships as % fleet
Delivery 2008
Delivery 2009
Delivery 2010
Delivery 2011+
VLCC 200,000+ 142.1 485 148.3 504 38% 11.3 20.4 15.0 7.0
Suezmax 120-200,000 52.4 348 54.7 361 42% 3.1 9.3 7.4 2.2
Aframax 80-120,000 71.1 699 75.8 738 44% 7.7 11.5 9.1 3.0
Panamax 60-80,000 21.4 308 23.7 338 44% 2.8 3.6 1.5 1.6
Handy 10-60,0000 32.9 941 34.7 974 42% 4.1 4.7 4.0 1.0
Total Fleet >10,000 320.0 2,781 337.2 2,915 41% 28.9 49.5 37.0 14.8
In GSMR 2007 we separated out the crude oil tankers
from the product tankers. The overlap is most common in
the panamax LR1 and handymax MR sizes but also occurs
to a lesser extent in the aframax LR2 segment. In recent
years a higher proportion of tankers in these sizes have
been coated as a doubling in newbuilding prices has made
the coating option a relatively cheap additional cost for the
extra flexibility that it conveys. Furthermore, modern tank
cleaning methods now make it much easier for coated
ships to trade dirty products and crude oil cargoes and then
return to clean products without much ado. We have thus
recombined the two categories.
In 2007, bulk carriers finally took over the limelight at the
shipyards allowing tankers and containerships to pause for
breath after an earlier period of heavy investment. In the
process, the bulk carrier orderbook quickly became inflated,
although it cut some welcome slack for tankers. At the
close of 2007, the total orderbook of all tankers stood at
41% of the end-2007 fleet with scheduled deliveries spread
out over four years or more. The workhouse aframax sits
at only 19% of the current fleet by capacity, whereas the
larger VLCC and suezmax segments stand at 38% and
42% respectively. Of the 129 panamax tankers of almost
9.5m-dwt on order at the beginning of 2008, 104 or 80%
Tankers
1979
1981
1983
1985
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2007
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2011
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Product tankers
Crude oil tankers
pre
1978
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30
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-197
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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
m-dwtProducts
Handy COT
Panamax
Aframax
Suezmax
VLCC
are coated. These tankers are being built as the optimal size
to move refined products from new refineries in the Middle
East and Asia into the refining-constrained markets of the
US and Europe.
Figure 28. Tanker fleet profile at end 2007
The tanker fleet profile shows a modernising fleet
with quite rapid expansion in size after new deliveries
accelerated in the period following the 2001 economic
recession. The tankers that were the product of the
1970s building boom have now all but gone and the pool
of tankers that delivered in the 1980s is fast becoming
depleted. This will be the primary source of demolition
candidates over the coming years. The overall proportion of
crude tankers to product tankers in the fleet remains near
the historic ratio of an 80:20 split. But, in terms of recent
and future deliveries, product tankers are increasing their
relative share on the back of perceived tonne-mile demand
growth in the global product trades in the years ahead. At
the end of 2007, the crude oil tanker fleet by our calculation
was 275.7m-dwt, compared to the product tanker fleet fleet
of 61.5m-dwt, the split now being 77:23 in favour of crude
tankers.
Figure 29. Tanker deletions have been almost suspended
despite phase out requirements
Deletions include demolition, losses and removals with the
latter category covering conversions to FPSO, FSO, heavy
lift, bulk carrier or other usage. 2007 was the year in which
tanker owners spotted an opportunity to convert single-hull
tankers of all sizes to bulk carriers in order to capture the
enhanced earnings ahead of bespoke newbuilding deliveries
from the shipyards. Single-hull VLCCs were the main
targets for conversion into very large ore carriers (VLOC)
deemed suitable for long-haul iron ore imports from Brazil
to China. A VLCC conversion might typically cost about
$25m (plus loss of hire) and take six months to complete.
The quantum and timing of available capacity at conversion
yards is unclear but any project looking at completion
in 2010 would coincide with newbuild VLOC deliveries,
begging the question of why any steel mill would provide
employment for a convert. The suitability of converted
single-hull tankers for the structurally punishing iron ore
trades is both debatable and untested.
In 2007, there were no losses and there was no scrapping
in the VLCC segment. The last loss was in 2001 and the last
VLCC to be scrapped was the 262,166-dwt Thai Resource
which was sold for demolition in June 2005. This is a
remarkable statistic in itself after a 5-year period between
1999 and 2003 that witnessed an average of 10m-dwt per
annum of VLCCs exit the trading market. This paved the
way for the exceptional market of 2004 that saw a depleted
VLCC fleet coincide with a year of hyperactive global oil
demand growth of 3m-bpd or 3.8% year-on-year (compared
with just 1m-bpd in 2007). In 2007, VLCC ‘removals’
amounted to 11 units of just under 3m-dwt and there will
be much more to come in 2008 which is helping rebalance
supply and demand in favour of the tanker owner. In
January 2008 alone, 8 units totalling nearly 2.2m-dwt have
been removed from the active VLCC fleet.
Conversion statistics vary, the above figures being courtesy
of Clarkson’s Shipping Intelligence Network, a key source
of our supply-side data. The most recent authoritative
study of VLCC conversions was published by tanker
broker E.A.Gibson on 18 January. For 2007, it put VLCC
conversions at 15 units, ten into VLOC and five into FPSO,
four units more than SIN. For 2008, it forecasts 26 units
being converted to VLOC and three units into FPSO.
Assuming that these do go ahead then this will have a
more positive impact on VLCC supply in 2008, by reducing
it, than we have factored into our estimates that follow. As
these tankers are slated for removal from the VLCC fleet
in 2008 then we can safely assume that the owners have
44 HSBC Shipping Services Limited
5
10
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30
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$pd
VLCC
Cape
2/11
/07
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23/1
1/07
30/1
1/07
7/12
/07
14/1
2/07
21/1
2/07
28/1
2/07
4/1/
08
11/1
/08
18/1
/08
25/1
/08
1/2/
08
8/2/
08
15/2
/08
22/2
/08
29/2
/08
7/3/
082SIN in mid-Feb 2008 puts the VLCC fleet at 498 units: 358 DH, 134 SH, 5 DS, 1 DB i.e. 140 non double-hull.
booked the conversion yard, probably fixed subsequent
employment and are beyond the point of no return when it
comes to possible second thoughts.
Conversions beyond 2008, which Gibson’s projects as 19
in 2009 (14 to VLOC and 5 to FPSO) and 10 in 2010 (5 each
to VLOC and FPSO), may be more vulnerable to change
if conversion yard space and or future employment are
not yet booked. Then there is the wobble factor. In the
three month period between November 2007 and January
2008 the spot capesize market collapsed while the VLCC
spot market soared, a dramatic enough seesaw motion
to make conversion owners seriously think twice. The
fact remains that the weight of conversions from single-
hull VLCCs, together conversions from tankers in all the
other size segments, is dramatically improving the tanker
market outlook over the next five years. Conversely, it is
deteriorating the dry bulk outlook over the same period for
large bulk carriers, especially in the context of new bespoke
VLOC and cape deliveries beyond 2009.
To summarise, this report envisages 55 out of the fleet
of 1502 single-hull VLCCs to be removed from oil tanker
service and converted into bulk carriers in the 2007-2010
period while a further 18 will make it into FPSOs during the
same period. That leaves 77 for further conversion work or
demolition between now and the end of 2015 (if they elect
for the Condition Assessment Scheme from 2010) or their
25th anniversary, whichever comes first. The most modern
extant single-hull VLCCs are two that delivered in 1996 and
they will hit the beaches by the end of 2015, at the latest,
at the relatively young age of 19 should another purpose
not be found for them. The trend of converting is set to
continue, further depriving the scrap dealers of Bangladesh,
Pakistan and India of their natural feedstock despite
Bangladesh bidding in excess of $600 per lightweight ton
for tanker demolition candidates.
There is now the prospect of a VLCC being sold for scrap
within Q1 2008. The single-hull B Elephant (239,351-dwt
Sasebo 1986) is said to have received bids of $630 per ldt
against its owner holding out for a record $700 per ldt. In
February 2008, five double-sided aframaxes were reported
sold to Chinese conversion buyers. Frontline sold Sea
Leopard (94,993-dwt Koyo 1990) and Sea Panther (97,112-
dwt Imabari 1990) for $40m en bloc while Phoenix sold
Seletar Spirit (98,288-dwt Koyo 1988) for $17.5m, Sentosa
Spirit (97,161-dwt Imabari 1989) for $19.5m and Seraya
Spirit (97,019-dwt Imabari 1992) for $23.5m. At the big
end of the business, OSG and Euronav are converting their
Daewoo 2002-built 442,500-dwt TI Africa and TI Asia to
FSOs under an 8-year storage contract to Maersk Oil Qatar
running from Q3 2009. That takes two of four of the largest
tankers in the world out of active service.
Figure 30. Conversions – any second thoughts?
45Global Shipping Markets Review 2008
Tankers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
0
5
10
15
20
25
30
2003
-Q2
2003
-Q4
2004
-Q2
2004
-Q4
2005
-Q2
2005
-Q4
2006
-Q2
2006
-Q4
2007
-Q2
2007
-Q4
m-dwtHandy
Panamax
Aframax
Suezmax
VLCC
Products
Handy COT
Panamax
Aframax
Suezmax
VLCC
The process of converting away from single-hull VLCCs
into very large ore carriers gained in popularity as 2007
progressed. Two issues would have made conversion
owners pause for thought: the Hebei Spirit oil spill off
South Korea on 7 December and the inverted performance
of large tankers and bulkers towards the end of the year.
The oil spill from the single-hull VLCC was one-third the size
of the Exxon Valdez in 1989 but more than enough for the
Korean authorities to bring forward the guillotine date for
single hulls trading in their waters from 2015 to 2010.
Korea is the largest user of single-hull VLCCs and this
accident is another nail in the coffin of these tankers as
inspection regimes worldwide will become even more
intensive. The rate premium for doubles over singles has
widened materially and all of a sudden future supply-side
factors are arguably favouring big tankers over big bulkers.
Vessel contracting is a dynamic exercise. Over the past
five years of generally strong, but always volatile, shipping
markets we have seen any under-ordered segment gain
contracting attention until appetite is more than satiated. A
period of relative famine ensues, allowing other sizes and
types to feed at the trough, before they get pushed aside as
the hunger of the former supplicant returns. As an example
of this feast and famine tendency, VLCC contracting in Q1
2006 was extremely vigorous following many consecutive
quarters of abstinence. The feasting binge endured all
of 2006, albeit at a slower rate of consumption. The
subsequent slimming program in 2007 was assisted by the
exercise of shedding pounds to the large bulk carrier and
FPSO segments. But, as we all know, these things never
last and Q4 2007 marked the return of VLCC appetite.
In looking at fleet developments in each segment in
the following tables we have, as in the past, taken the
five-year average of deletions to come up with our
deletions estimate.
46
Figure 32. Recent VLCC fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
VLCC fleet, m-dwt 142.1 148.3 11.3 4.2 155.5
% change 4.3% 4.4% -- -- 4.8%
In last year’s GSMR we had forecast net VLCC fleet growth
of 3.7%; it turned out at 4.4% because our deletions
estimate of 4.4m-dwt was marginally on the high side. For
2008, we are conservatively expecting a 4.8% capacity gain
in the segment to 155.5m-dwt in total. This is not far out of
line with previous years of 4.3% growth in 2006 and 4.4%
in 2007. However, if 26 single-hull VLCCs do indeed get
converted in 2008, as per earlier estimates, then at 270,000-
dwt average unit size over 7m-dwt will exit the sector
during a year in which 2.2m-dwt already left in January.
That would reduce net VLCC fleet growth to just 2.9% in
2008 and this figure gives us confidence that the big ships
will continue to prosper this year on the back of resilient oil
demand in emerging markets, led by China and India.
Figure 31. Recent oil tanker contracting
HSBC Shipping Services Limited
47Global Shipping Markets Review 2008
Figure 33. Recent suezmax fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
Suezmax fleet m-dwt 52.4 54.7 3.1 1.5 56.3
% change 8.0% 4.3% -- -- 3.0%
We had predicted 5.7% net growth in the suezmax fleet
for 2007 but it came in quite a lot lower at only 4.3%.
This is because removals almost tripled over the previous
year to eleven units of nearly 1.6m-dwt. Even with what
seems to be a low exit forecast for 2008, we still expect the
suezmax segment to expand by only 3% this year to 56.3m-
dwt. This will be more than 3% lower than the average
of the previous three years. Annual deliveries have been
running at just over 4m-dwt per year for the last four years
prior to which deliveries averaged 3.3m-dwt per year during
the previous four year period since the end of 1999.
Thus 2008 represents an historically low delivery year and
this should provide some cushion against any possible
demand weakness. But beware, as in 2009 deliveries
are scheduled to triple to over 9m-dwt which will prove
testing without a very upbeat demand-side response.
Figure 34. Recent aframax fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
Aframax fleet, m-dwt 71.1 75.8 7.7 2.4 81.1
% change 6.8% 6.6% -- -- 6.9%
Our prediction of aframax fleet growth for 2007 was
4.8% but it came in much higher at 6.6% after a pace of
demolition and conversions that was broadly in line with
2006 and 2005 (in the range of 1.8 to 1.9m-dwt per year).
But these figures were well behind the previous cyclical
peak demolition years of 2004 (2.7m-dwt) and 2003 (4.0m-
dwt). This skewed our demolition forecasts for 2007 higher,
being the average of the preceding five years. In the five
years between 2003 and 2007, there were 38.5m-dwt of
aframax deliveries and 26.2m-dwt of removals, making this
a dynamic and modernising segment. Scheduled deliveries
of 7.7m-dwt in 2008 are coincidentally the same as the
7.7m-dwt annual average deliveries of the last five years.
Our removal estimate of 2.4m-dwt lends itself to 6.9% net
fleet growth in this segment this year, slightly above 2007.
Figure 35. Recent panamax fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
Panamax fleet m-dwt 21.4 23.7 2.8 1.0 25.5
% change 15.1% 10.7% -- -- 7.5%
A year ago we predicted net fleet growth in the panamax
tanker segment of 1.6% but it came in much higher at
7.5%. In 2007 we had allowed for 1.0m-dwt of removals,
being the average removal rate of the previous 5 years,
and it turned out at about half that at a bit over 0.5m-dwt.
Last year, four units were scrapped and four removed,
which usually means converted to other use. The crude oil
and dirty products fleet in this segment is in sharp decline
whereas the orderbook is 80% inclined towards LR1 clean
product tankers. In 2008, only 2.8m-dwt of deliveries are
scheduled in this size of tanker and, after adjustments for
forecast removals, we expect net fleet growth of 1.8m-dwt
or 7.5% year-on-year. This will be well below the double-
digit annual expansion of recent years.
Tankers
Figure 36. Recent handysize tanker fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
Handysize fleet, m-dwt 32.9 34.7 4.1 2.1 36.6
% change 5.8% 5.4% -- -- 5.6%
Figure 37. Recent tanker fleet development
End 2006 End 2007 2008 deliveries
Deletions estimate
Fleet End 2008
Tanker fleet, m-dwt 319.9 337.2 28.9 11.2 354.9
% change 6.2% 5.4% -- -- 5.3%
48
Our handysize tanker fleet excludes more specialist types
such as the IMO I/II chemical/oil carriers, bunkering ships,
edible oil carriers and combination carriers. This would
add at least a nominal 50m-dwt to the fleet although not
all of that would be regularly (if at all) available for crude
oil or oil products trading. Within our narrower definition,
our forecast for 2007 net fleet growth had been a 2.4%
rise to 33.7m-dwt based upon anticipated heavy scrapping
of 3.8m-dwt in the small products segment, fairly evenly
spread between clean and dirty. In the end, scrapping was
less pronounced. For 2008, deliveries should be about
double scrapping levels, so net fleet growth of about 5.6%
will be in the range of the last two years.
In summary, the total tanker fleet grew by a net 17.3m-dwt,
or 5.4% year-on-year, in 2007. Based upon 28.9m-dwt of
deliveries and 11.2m-dwt of removals in 2008, we forecast
net fleet growth of 17.8m-dwt to 354.9m-dwt. At 5.3%,
tanker fleet growth this year will be broadly in line with the
last three years.
Figure 38. Hull configuration of the tanker fleet at 31-Dec-07
Hull VLCC Suezmax Aframax Panamax Handy
DH 72.4% 84.2% 84.5% 81.4% 61.2%
DB 0.2% 1.9% 1.1% 1.1% 6.3%
DS 1.0% 3.3% 6.4% 5.1% 4.3%
SH 26.5% 10.6% 8.0% 12.3% 28.2%
Grand Total 100.0% 100.0% 100.0% 100.0% 100.0%
The VLCC fleet was 72% double hull at the end of 2007
compared with 69% at the end of 2006 and the single
hull fleet has reduced to 26% from 30% a year ago.
The single hull fleet will continue to shrink as VLCCs are
withdrawn from service and converted to other use and
as charterers increasingly shun them. The Hebei Spirit oil
spill in December 2007 has the potential to cause a domino
effect in Asia that leads other crude importers to tighten
their rules. The widening rate discount and increased
waiting time for single hulls are exerting downward
pressure on returns. These factors are accelerating the rate
at which these tankers are being lined up for conversion
to bulk carriers, FPSOs and heavy lifters. We are already
seeing that the rationale for conversion to VLOC is being
undermined, first, by lack of both conversion yard space and
bank finance and, second, from the threat of over-tonnaging
as bespoke newbuilding deliveries ramp up in 2009 and
peak in 2010.
It surprises us that some steel mills are willing to commit
long-term Brazil/China COAs to these untested conversions
when questions are being asked about their structural
suitability for the iron ore trade. It might be better to wait
a while and exploit a looming excess of built-for-purpose
newbuildings delivering in 2010 to nail down long-term
contracts at potentially lower rates on ships that are
HSBC Shipping Services Limited
designed for the trade. Taking newbuilds of 300,000-dwt
or above alone, there are 8 scheduled to deliver in 2009,
13 in 2010, 16 in 2011 and 6 in 2012. These deliver in the
midst of a sea of conventional capes and other vessels
between 170,000-dwt and 300,000-dwt. Out of these, two
Jin Hui 300,000-dwt orders at Dalian have recently been
cancelled as the company was unable to get debt finance
on attractive terms despite having 15-year employment
for each from a first-class Chinese steel mill. A sign of
the times.
Oil Demand
Figure 39. Different views of oil demand (all in m-bpd)
Total Demand 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
IEA 77.30 77.67 79.20 82.27 83.90 84.80 85.95 87.62 90.00 91.90
OPEC 75.86 76.55 79.49 81.99 83.30 84.58 85.76 86.97
EIA 77.41 78.04 79.62 82.33 83.66 84.77 85.72 87.04 88.30 90.70
HSBC 82.33 83.68 84.78 85.78 87.68 89.16
Demand Growth
IEA-OMR 0.37 1.53 3.07 1.63 0.90 1.15 1.67 2.38 1.90
OPEC 0.69 2.94 2.50 1.31 1.28 1.18 1.21
EIA 0.64 1.57 2.71 1.33 1.11 0.95 1.32 1.26 2.40
HSBC 82.33 1.35 1.10 1.00 1.90 1.48
49Global Shipping Markets Review 2008
We continue to struggle with our three main sources of oil
demand forecasts: the International Energy Agency (IEA)
representing the OECD nations; the Energy Information
Administration (EIA) of the US Department of Energy; and
OPEC (the Organisation of Petroleum Exporting Countries).
They never agree with one another and possibly their
forecasts are more in tune with their own agendas as either
producer or consumer. The IEA and EIA tend to talk up
demand in order to encourage OPEC to increase supply
and thus bring prices down, while OPEC tends to talk down
demand in order to justify restricting supply and thus keep
prices high. The IEA predicted 1.80m-bpd demand growth
in 2006, it turned out at 0.90m-bpd or 1.1% year-on-year
growth. In 2007, the IEA forecast 1.55m-bpd growth but
it turned out at 1.15m-bpd or about 1.4%. These are large
margins of error.
On 16 January, the IEA had forecast 2008 global oil demand
growth of 1.98m-bpd or 2.3% year-on-year, almost double
its pre-revision growth forecast of 1.05m-bpd for 2007.
Naturally this raises our expectations of a meaningful
increase in seaborne oil trade. But, come 13 February, the
IEA reduced its forecast by 200,000-bpd to 1.67m-bpd
bringing total estimated global consumption in 2008 down
from 87.8m-bpd to 87.6m-bpd. The reasons lie in global
economic weakness, led by the US, time-lagged demand
destruction caused by high oil prices and lower spending
as a result of falling house prices within the transatlantic
economies. The revision might have been more severe
but for the fact that 45% of projected oil demand growth
in 2008 is forecast by the IEA to come from oil-importing
Asia, and a further 12.5% from Europe. This demand is
not considered to be at risk of derailment from a decline in
performance from America.
In its 13 February Oil Market Report, the IEA highlights
various topical features of today’s energy markets, all of
them being familiar themes. Prices are volatile and still
trading above $90 per barrel for WTI. Weaker projections
for global economic growth are offset by low stocks (lower
than the average of the last five years), forecast cold
weather in the US North East and parts of Asia and supply
disruptions in Nigeria, Venezuela and the North Sea. January
world oil supply rose by nearly 750,000-bpd to 87.2m-bpd
thanks to increased output from Brazil and other non-OPEC
sources. Non-OPEC producers are expected to increase
output by almost 1.0m-bpd in 2008 on rising supply from
the FSU, Asia-Pacific and Brazil (part of which is made up
of increased biofuels production). The EIA has lowered its
forecast of 2008 demand growth 0.2m to 1.4m-bpd with
OPEC predicting a 1.2m-bpd, or 1.4%, rise. The top to
bottom range of our forecasters is 1.7 to 1.2, very much a
case of take your pick.
Tankers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
WTI 3M-futures spread
VLCC Spot
7 - J
an -
07
28 -
Jan
- 07
18 -
Feb
-07
11 -
Mar
- 07
1 - A
pr -
07
22 A
pr -
07
13 -
May
-07
3 Ju
n - 0
7
24 -
Jun
- 07
15 -
Jul -
07
5 - A
ug -
07
26 -A
ug -
07
16 -S
ep-0
7
7 - O
ct -
07
28 -
Oct
- 07
18 -
Nov
- 07
9 - D
ec -0
7
30 -
Dec
- 07
20 -
Jan
- 07
VLCC Spot Earnings v. WTI 3M Futures Spread
OPEC crude supply in January remained steady at 32m-bpd
on higher output from Angola, the UAE, Saudi Arabia and
Kuwait offset by lower output from Iraq, Nigeria and Qatar.
Spare capacity is estimated to have risen to 2.4m-bpd, still
a very thin cushion. On current IEA projections, OPEC will
be called upon to increase supply by about 700,000-bpd
to 31.9m-bpd in 2008. OECD industry stocks fell by 39.5m
barrels in December due to constrained crude supplies and
peak seasonal refinery runs. The IEA put the 4Q07 stock
draw at 1.15m-bpd, well above the 0.75m-bpd average of
the past ten years, reducing forward cover to 50.7 days,
its lowest since December 2004. This large draw can be
attributed to backwardated oil futures and high spot prices
that combined to discourage imports for anything other
than immediate consumption in the absence of a
premium for storage.
Early data from the US, Japan, EU-15 and Norway suggests
a stock build in January of just over 22m barrels illustrating
the effect of increased seaborne oil imports in response
to stock drawdowns and a narrowing in the backwardated
futures spreads that finally prompted buying activity.
The upward leg in the spike in VLCC rates in December
may be put down to the delayed impact of the 0.5m-bpd
plus OPEC output increase from 1st November.
The downward leg can be attributed to constrained
supplies, negative sentiment and positional factors.
On the more macro front, oil shipping demand in 2007
was significantly influenced by the term structure of
WTI futures, and continues to be so in 2008, as this has
assumed even greater relevance in the context of a high oil
price environment. By early March, WTI had risen to nearly
$105 per barrel, crude stocks were rising, the Strategic
Petroleum Reserve is being filled despite high prices (an
indication of anxiety in the White House) and OPEC is
refusing to raise output quotas. What exactly one can
learn from all that is anyone’s guess.
As we can see in Figure 39 above, the average of the
IEA, EIA, OPEC and HSBC’s 2008 oil demand growth
forecasts is for a rise of about 1.5m-bpd or 1.8% year-
on-year. Over the last five years, total seaborne oil trade
has been rising at just over 2.5-times the rate of global oil
demand growth. The current average oil demand growth
forecast for 2008 of 1.8% should translate into just under
5% total seaborne oil demand growth. That is close to
matching our forecast of 5.3% net tanker fleet expansion in
2008. Systemic inefficiencies should further narrow the gap.
Oil demand figures are at risk of being revised downwards
should the US economy sink into recession but, today, the
consensus is that oil demand will grow by 1.5m-bpd in 2008
after only 1.0m-bpd in 2007, while the total tanker fleet is
forecast to expand by 5.3% in 2008 after 5.4% in 2007.
Based on those statistics, 2008 should trump 2007.
Figure 40. Oil prices and tanker demand
50 HSBC Shipping Services Limited
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
1991
-09
1992
-05
1993
-01
1993
-09
1994
-05
1995
-01
1995
-09
1996
-05
1997
-01
1997
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1998
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1999
-01
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-09
2000
-05
2001
-01
2001
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2002
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2003
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2003
-09
2004
-05
2005
-01
2005
-09
2006
-05
2007
-01
2007
-09
E.Med Exports
Red Sea Exports
Refined Product Exports
AG Crude Exports
0
5
10
15
20
25
1998
-01
1998
-05
1998
-09
1999
-01
1999
-05
1999
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2000
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2000
-05
2000
-09
2001
-01
2001
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2001
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2002
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2002
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2002
-09
2003
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2003
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2003
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2004
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2004
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2004
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2005
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2005
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2005
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2006
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2006
-05
2006
-09
2007
-01
2007
-05
2007
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2008
-01
m-bpd
Figure 40 plots VLCC earnings against the 3-month spread
in WTI futures prices. The price spreads were quite a lot
wider based upon the broader 6-month term structure
but the above still illustrates a point. WTI futures were in
contango up until the end of July meaning that forward
prices were higher than spot prices. This encourages oil
imports as higher future prices pay the cost of storage
and provide a positive ‘carry’ and was supportive of VLCC
earnings in the first six months of 2007. The narrowing of
the spread, and its final move into backwardation in late
July, was disastrous for VLCC rates pushing average weekly
earnings down below $20,000 daily in mid September,
incurring steep losses to a few unlucky owners.
As the spot price of WTI became more expensive than
future prices, all incentive to import crude evaporated,
as there was no payment for storage and it became a
loss-making trade. Also, high imported crude prices were
damaging refining margins. Backwardated prices saw
refiners draw down their stocks which, between August
and November, dipped well below the 5-year average.
As OPEC raised official production quotas by 0.5m-bpd
from November 1st, the WTI spread began moving back
towards par. This was the trigger for US refiners to seize
the opportunity to replenish depleted stocks and it was
done with sufficient gusto to boost VLCC spot rates up to
$240,000 time charter equivalent on AG/far East, bringing
back memories of November 2004 .
Figure 41. MEG crude exports – still behind the September 2005 peak of 23.63m-bpd
51Global Shipping Markets Review 2008
The Middle East remains the export market that exercises
the most influence over the fortunes of the VLCCs. At the
end of 2006 OPEC officially cut 1.2m-bpd of production,
followed by a further 0.5m-bpd in early 2007, in anticipation
of slowing demand from the US that threatened to
destabilise oil prices. OPEC considered that the market
was well supplied, OECD stocks had been rebuilt, long
futures positions were artificially supporting prices and
geopolitical risks were beyond the organisation’s control.
On average, non-compliance reduced actual production
cuts to only about 1.1m-bpd but almost all of this was from
the AG. These production cuts kept a lid on VLCC rates in
the first half, although they remained respectable in the
light of what was to come in the third quarter when the
WTI futures moved from contango to backwardation. The
decision to increase supplies by an official 0.5m-bpd from
1st November had positive repercussions on AG supply,
sentiment and VLCC rates.
Tankers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
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1987
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1991
1993
1995
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1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
North America L America Europe & Eurasia ME Africa China India Other Asia Pacific
Figure 42. Global Refining Capacity (k-bpd)
(Source is a composite of IEA, BP and HSBC Oil and Gas Division Estimates.)
There is good news for Asian oil products throughput this
year. A Reuters survey suggests that Asia-Pacific oil
refiners will shut only 2.7% of refining capacity in the
second quarter for maintenance, roughly half the
capacity shutdowns of a year earlier. An average of about
680,000-bpd of throughput will be shut for maintenance
during the period. This is 470,000-bpd less than in
Q2 2006 when refiners shut down 4.7% of their total
capacity to upgrade for tighter environmental regulations.
The lighter maintenance season coincides with modest
shutdowns in Europe and the US, meaning that there will
be extra seaborne crude movements in Q1 and higher
fuel availability during the second quarter when demand
traditionally slackens. At this time, heating oil requirements
in the northern hemisphere reduce as spring arrives and
gasoline demand remains subdued ahead of the summer
driving season. OPEC is nervous that slower demand may
lead to lower prices and that is why it held quotas steady
at its March 5th meeting in Vienna. The US had argued for
an increase in supply to bring prices back to well below
$100 to a point where they may help rekindle flagging
global demand.
Middle East Refinery Expansion – new product required
in home markets?
Saudi Aramco’s new 400,000-bpd $8bn Ras Tanura refinery
is scheduled for completion in December 2012, some nine
months later than original schedule. Saudi Arabia plans to
raise its domestic crude refining capacity by up to 1.6m-bpd,
or 76%, from the current 2.1m-bpd maximum output with
four new refineries. However, the fast pace of domestic
demand growth may keep all or most of the added output
within the Kingdom rather than available to export markets.
Abu Dhabi National Oil Corporation (ADNOC) plans to more
than double the current 400,000-bpd capacity of its largest
crude refinery at Ruwais. The engineering and design study
for the plan is expected to be completed by the end of 2008
or in early 2009. Kuwait plans to boost the crude processing
capacity of its Mina Abdullah refinery by 104,000-bpd by
June 2012. IEA forecasts of oil demand growth in 2008
put the Middle East second only to Asia at 393,000-bpd
compared with 748,000-bpd respectively. Therefore, at
this stage, it is hard to assess how much product will
become available for seaborne export.
Indian Refinery Expansion – the Holy Grail for
product tankers?
India’s refineries have an estimated current throughput
capacity of 2.98m-bpd, or about 155.4m-tpa, according
to latest figures from Reuters and ONGC. Once existing
refineries are expanded and new planned ones built, this
should increase by 2.14m-bpd or 72% to 5.12m-bpd or
270m-tpa by 2012 (using an average conversion factor
of 7 barrels to every tonne). India has the advantage of
being close to crude oil supply in the Arabian Gulf, is Asia’s
third largest oil consumer and has ambitions to become a
regional refining centre. Central to these plans are meeting
Euro and US fuel standards in order to export the requisite
52 HSBC Shipping Services Limited
gasoline grades direct to distributors in developed markets
in Europe, the US and South East Asia. As a rule of thumb,
state-owned refiners are bound to service domestic before
export demand, thus selling products into the Indian market
at capped prices and receiving partial compensation from
the central government via oil bonds. Privately-owned
refiners, such as Reliance and Essar, are almost entirely
export-focused so as to maximise returns.
Indian Oil Corporation’s ten refineries have a combined
processing capability of 1.2m-bpd, or over 60m-tpa,
according to IOC’s own figures, and have about 40% of the
total Indian market. Its $11.2bn expansion plans are well
underway and it expects to add a new 15m-tpa refinery at
Paradip by end 2011. Another state-owned refiner, Bharat
Petroleum, has three refineries at Mumbai (12m-tpa),
Kochi (7.5m-tpa) and Numaligarh (3m-tpa). Current
throughput is about 480,000-bpd expected to rise by
40,000-bpd as Kochi’s capacity is stretched. Some
$4.2bn is earmarked for two new refineries at Bina
(6m-tpa) and Allahabad (7m-tpa) with the former scheduled
for completion by December 2009 and the latter on hold
until Bina is completed. Hindustan Petroleum, also state-
owned, owns two refineries in Mumbai (7.4m-tpa) and
Visakh (9.2m-tpa) plus a joint venture at Mangalore. It has
allocated the equivalent of $1.15bn for upgrading plans
and is proposing a new 9m-tpa refinery at Bhatinda in joint
venture with LN Mittal for completion within 2010.
The Oil and Natural Gas Corporation (ONGC) has a
9.7m-tpa refinery at Mangalore which is running at 129%
of nameplate capacity with a 2007 throughput of 12.5mt.
This will be expanded to 15m-tpa by 2010 with about $2bn
in funds allegedly allocated for the purpose. On the to do
list is a planned 15m-tpa new refinery at Kakinada. On the
private side, Reliance commissioned a 660,000-bpd facility
at Jamnagar in 1999 which is running at above nameplate
capacity at about 34m-tpa annual throughput. It will be
joined by an adjacent facility by the end of this year with
a targeted capacity of 580,000-bpd. The total cost of both
facilities is estimated to be $12bn, the 1.25m-bpd combined
throughput (at the upper end of a 60m-tpa to 65m-tpa
range) will catapult Reliance to the top of the national
leaderboard. Furthermore, the site, which occupies an
area the size of London, will be the largest single-site
refinery in the world. The government has designated
100% of output as export-orientated and it is this point
that should tickle shipowners.
The other private operator is Essar. It has a single refining
complex at Vadinar, which opened in November 2006,
that has a 10.5m-tpa throughput capacity which is being
expanded to 34m-tpa within 2010. It currently produces
Euro II and III products but specifications will be raised up
to Euro V and US standards within the $6bn expansion
program to meet the requirements of customers in Europe,
the US and Asia, as well as domestic consumers. The
focus is clearly on exports as economics dictate that if
you buy and import crude at market prices then you must
also sell refined products at market prices, not at domestic
capped prices. India is not alone in capping energy prices.
The policy, in some shape or form, is rife throughout the
Middle East, China, other Asia and the Americas. Europe
seems to be virtually alone in setting market prices and
taxes represent about 70% of a gallon of petrol in the
UK. America effectively subsidises motorists by failing to
raise taxes from low levels, as a way of promoting fuel
conservation, and by subsidising the production of ethanol
as a fuel additive.
In early March 2008, Indian refiners are re-assessing their
new projects in the light of the Union Budget. Currently,
new refineries are eligle for 100% income tax exemption
for the first seven years of operation. Under the new
budget, tax holidays for the refining of ‘mineral oil’ are
revoked for new and expanded projects commissioned
after April 2009. This will affect the economic viability of
any facility being built outside a special economic zone.
The future of these massive new refinery projects
now comes down to a matter of definition. In Monty
Pythonesque style, the report seeks to clarify that “for
the purposes of this section, the term ‘mineral oil’ does not
include petroleum and natural gas, unlike in other sections
of the Act.” Shipowners who have contributed to the
build-up of the huge product tanker orderbook will no doubt
await with interest any further linguistic developments that
may influence the future availability of long-haul cargoes
between India and Atlantic-based consumers.
Historic and Projected Seaborne Oil Trade
We have taken some figures courtesy of Clarksons.
Seaborne crude trade grew by 3.6% on a compound
annual growth basis (CAGR) between 1990 and 1999 and
then from 2000 to 2006 it slowed to 2.6%. Meanwhile,
seaborne products trade rose at a CAGR of 1.5% from
1990 to 1999 compared with a faster rate of 5.5% in the
period from 2000 to 2006. There may be a certain logic
in the juxtaposition of seaborne crude trade falling just as
53Global Shipping Markets Review 2008
Tankers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
20,000
30,000
40,000
50,000
60,000
70,000
80,000
$pd
VLCCSuezmaxAframax
Panamax
Handysize
2008
- 06
2005
- 08
2005
- 10
2005
- 12
2006
- 02
2006
- 04
2006
- 06
2006
- 08
2006
- 08
2006
- 10
2006
- 12
2007
- 02
2007
- 04
2007
- 06
2007
- 08
2007
- 10
2007
- 12
2008
- 02
seaborne product trade rises. Some crude oil exporters
want the opportunity to catch some of the (occasional)
added value of selling finished products rather than just
selling the crude oil feedstock to refiners. This is certainly
the case in the Middle East amongst the largest producers
such as Saudi Arabia, Kuwait and the UAE where there is
the intention to export. It is most notably not the case in
Iran and Iraq whose refining infrastructure is inadequate to
the point that Iran has to import refined products despite
having amongst the largest crude oil reserves in the world.
Neither is it the case in Nigeria where not only is a large
proportion of its crude oil production shut in because of
violence in the Niger Delta, but also its refineries are so
dilapidated as to require the import of products. These
systemic inefficiencies are supportive of product trades
in the sense of creating trades where none should really
exist. In the case of India, it is becoming a processing hub,
importing crude oil for processing into products for both
the domestic and the export markets. China is the same
and will undoubtedly build refining capacity beyond rising
domestic requirements and become a swing exporter of
products. This suits the developed Atlantic economies
which have little appetite for anything other than refinery
creep, eeking out extra production rather than building new
and switching a dependence on crude imports to one of
dependence on crude and product imports.
Slower seaborne crude oil trade growth can be attributed
to new oil and gas pipelines that connect the FSU with
western Europe and China, and that connect the Middle
Eastern producers with consumers to their north, east and
west. Furthermore, regional trades have mushroomed
within the Americas, the Baltic Sea, the Black Sea, the
AG-Red Sea, the Indian Ocean and within the Asia-Pacific.
Counterbalancing these are new long-haul trades from the
Russian Atlantic, Latin America and north, west and east
Africa to Asia and the Far East. When it is all netted out, the
new long-haul trades are beginning to add more tonne-miles
than the short and regional trades are taking away. We thus
expect the weaker phase of annual crude oil trade growth
between 2000 and 2006 to give way to a stronger growth
phase from 2007 to 2012 as trading patterns evolve to the
benefit of large tanker owners.
Earnings
Time charter
Figure 43. One-year time charter earnings for nominal standard tankers
54 HSBC Shipping Services Limited
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
750
1,000
1,250
1,500
1,750
2,000
2,250
1 31 61 91 121 151 181 211 241 day
index
BDTIBCTI
One-year rates have remained reasonably stable in the
aframax and smaller sizes over the past few years.
Greater volatility exists in the larger VLCC and suezmax
segments as they are influenced by sharper movements
in the spot market.
For VLCCs, the one-year time charter benchmark was
established at the start of the year by Koch taking Desh
Vaibhav (316,000-dwt 2005) for $50,000 per day. By June,
Koch was still only paying $49,500 per day for one year’s
charter of a VLCC, but this time it was the rather older
Shinyo Navigator (300,509-dwt 1996). Koch had an option
to take the ship for a further year at $51,000. At year’s
end, BP paid $52,500 for a 12 to 15 month charter of Smiti
(281,000-dwt 2005) but the upward pressure on time
charter rates from the spot market surge of 4Q07 finally
came to light in some fixtures reported in January and
February. First the 299,700-dwt, 1995-built La Paz was fixed
for a year by TMT for $65,000 per day from SK Shipping,
who had themselves taken the ship for three years in
May 2007 for $45,000 daily. Finally, in February 2008, two
modern VLCC’s, Crude Progress (300,000-dwt 2002) and
Spyros (319,000-dwt 2007), were reported fixed for one
year each at $70,000 daily.
Longer period fixture rates for VLCCs fizzed along the
same long-burning fuse before exploding in the final
quarter. In January 2007, STX PanOcean took Eagle
Vermont (306,400-dwt 2002) for three years at $45,000
daily, the same rate paid for La Paz by SK Shipping four
months later. In November, CSSSA sneaked ahead of the
market rise and paid only $45,000 for three years for the
2001-vintage Utah (299,498-dwt). But the next month,
TMT had to pay a much higher $52,500 for three years
on Neptune (319,360-dwt 2002) and in January 2008
Wah Kwong paid $47,500 for four years on Venture
Spirit (298,287-dwt 2003).
Suezmax one-year time charter rates were stuck in the
range of $40,000 to $50,000 per day for modern 150,000-
dwt double-hull units. In early 2007, Teekay was reported
to have paid $42,500 for Hellespont Trooper (147,916-dwt
1996) and Mercuria paid a significantly lower $36,000 daily
for the older Tromso Trust (154,970-dwt 1991). One-year
rates stabilised in the low to mid $40,000s by the middle
of the year, as per Repsol’s fixture of SKS Saluda (159,000-
dwt 2003) for $42,000 per day. However, by early 2008,
TNK was reported to have paid only $31,000 to take
Ocean Emerald (152,680-dwt 1991) for a year.
Aframax one-year rates were also range-bound, with
modern vessels fixing between $30,000 and $35,000
per day throughout 2007. Phoenix set the tone for
modern tonnage in February with the fixture of Arafura
Sea (105,856-dwt 2000) for $33,000 daily. In May, Stena
Bulk took the ice-class 1B Nevskiy Prospect (114,597-dwt
2003) for a year at $35,000 daily and the conventional Rich
Queen (105,200-dwt 2007) at the lower rate of $31,750
per day. By the year’s end Shell was fixing Mare Adriacum
(110,500-dwt 2004) at only $31,000 daily. A few three-year
deals as typified by AET’s January fixture of Glenross
(90,679-dwt 1993) and Loch Ness (90,607-dwt 1994) at
$26,000 daily. By the end of the year ExxonMobil was able
to take Pink Sands (98,891-dwt 1993) for three years at the
lower rate of $27,450. Par for the year for more modern
units was probably near to the $27,900 that Chevron
Texaco paid in June for a 3-year commitment on
Ambelos (105,400-dwt 2006).
Further down the size scale the one-year rate band
narrowed even further. The average one-year rate paid
for a panamax tanker in 2007 was around $29,000 per
day. In May, PDVSA paid $30,500 to take Omega Queen
(74,999-dwt 2004) while in October Teekay paid $27,500
to take the smaller deadweight Fedor (70,000-dwt, 2003).
Modern MR tankers were not too far behind in what were
more frequently reported fixtures. In February, Cargill was
reported to have fixed the newbuilding FR8 Spirit (51,000-
dwt 2007) at $25,000 daily and, in March, Mercuria paid the
same rate for Targale (51,800-dwt, 2007). In June, Navig8
succumbed to a firmer $26,000 for Ugale (51,800-dwt,
2007) and, in December, Vitol negotiated a softer $24,500
daily for a third Latvian Shipping sistership Piltene
(51,800-dwt 2007).
Voyage Charter
Figure 44. Average Baltic tanker indices 2002-2008
55Global Shipping Markets Review 2008
Tankers
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
50,000
100,000
150,000
200,000
250,000
$pd
VLCCSuezmaxAframaxPanamaxProducts
Jan
- 05
Feb
- 05
Mar
- 05
Apr
- 05
May
- 05
Jun
- 05
Jul -
05
Aug
- 05
Sep
- 05
Oct
- 05
Nov
- 05
Dec
- 05
Jan
- 06
Feb
- 06
Mar
- 06
Apr
- 06
May
- 06
Jun
- 06
Jul -
06
Aug
- 06
Sep
- 06
Oct
- 06
Nov
- 06
Dec
- 06
Jan
- 07
Feb
- 07
Mar
- 07
Apr
- 07
May
- 07
Jun
- 07
Jul -
07
Aug
- 07
Sep
- 07
Oct
- 07
Nov
- 07
Dec
- 07
Jan
- 08
Feb
- 08
Seasonality still holds sway in the spot market. The
universe of both crude and product tankers still peak at
the end of the calendar year before entering a long slow
decline to, on average, about week 32 before picking up
again towards the next peak. This is clearly demonstrated
in a chart of the all-values average of BDTI and BCTI. It is
much more pronounced in the dirty tanker index. Each point
in the time series is not the value for a particular year but
the average for that day in each year from 2002 onwards.
Note that the Baltic Exchange reports on UK working days
only, not calendar days, so in figure 44 there are never 365
observations per year, but around 250 depending on public
holidays in the UK.
But for the spike in VLCC spot market earnings in the fourth
quarter, 2007 would have been a poor year and very much
worse than 2006. Average spot earnings for the whole year
ended up only 9% down on 2006 although very few owners
would actually have benefited from this brief but sharp
uptick which would have required fortuitous timing and
positioning. Even though oil demand forecasts may decline
as the year progresses, positive supply-side factors suggest
that 2008 should be better than 2007.
Suezmax spot rates largely tracked the larger VLCC
segment but for a dramatic spike in earnings at the end
of March caused by a strike at the French Mediterranean
oil port of Lavera which delayed ships from discharging.
Suezmax spot earnings were down 16% year-on-year. We
forecast net fleet growth of 3.0% in 2008 after 4.3% in
2007 which gives some scope for optimism.
Aframax rates followed a similar pattern in 2007 and spot
earnings ended the year some 9% down on 2006. We
forecast net fleet growth of only 2.2% in 2008 after 6.6%
in 2007. On the basis of such restrained supply growth, and
robust demand, we anticipate that earnings will improve for
the aframax segment this year.
Panamax spot rates in 2007 were only 1% down on the
previous year. Net fleet expansion should come in at
about 7.5% in 2008 after 10.7% in 2007. This segment
is positioning itself to capture rising volumes in the clean
product trades from the Middle East and Asia to the US and
Europe.
Small clean products tankers were insulated from earnings
weakness in 2007 with average rates declining by only 4%
compared with 2006. In the broader 10,000 to 60,000-dwt
product carrier segment we expect net fleet growth of only
1.8% in 2008 after 5.4% in 2007. Rising inter- and intra-
regional trades in 2008 should underpin earnings this year.
56
Figure 45. Average earnings for nominal tanker types
HSBC Shipping Services Limited
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
25
50
75
100
125
150
$m
VLCCSuezmaxAframaxPanamaxProducts40k-dwt
VLCCSuezmaxAframaxPanamaxProducts40k-dwt
0
25
50
75
100
125
150
$m
VLCC
Suezmax
Aframax
Panamax
Products
VLCC
Suezmax
Aframax
Panamax
Products40k-dwt
5
10
15
20
25
30
Pre
-197
2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
25
50
75
100
125
150
$m
VLCCSuezmaxAframaxPanamaxProducts40k-dwt
VLCCSuezmaxAframaxPanamaxProducts40k-dwt
0
25
50
75
100
125
150
$m
VLCC
Suezmax
Aframax
Panamax
Products
VLCC
Suezmax
Aframax
Panamax
Products40k-dwt
Values
Figure 46. Newbuilding prices have never been higher
US$m 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
VLCC 72.5 69.0 76.5 70.0 63.5 77.0 110.0 120.0 129.0 146.0
Suezmax 44.0 42.5 52.5 46.5 43.8 51.5 71.0 71.0 80.5 91.0
Aframax 34.5 33.0 41.5 36.0 34.8 41.5 59.0 58.5 65.5 72.5
Panamax 31.0 31.0 36.0 32.0 31.2 37.5 48.0 50.0 58.5 63.5
Products 26.0 26.0 29.5 26.3 27.0 31.5 40.0 43.0 47.0 52.5
Newbuilding prices for all tankers rose during 2007 with
the largest gains at the top end. VLCC prices were up
13.2% year-on-year, suezmax up 13.0%, aframax up
10.7%, panamax up 8.6% and products up 11.7%.
This development was partly a function of strong demand
for bulk carriers, ultra-large boxships and specialised ships
that reduced future berth availability for tankers. It was
also in some part attributable to the fact that owners have
strong balance sheets and have been happy to continue
reinvesting surplus cash in shipping which has provided
stellar returns. There is something distinctly comforting in
investing in a real asset with a 25-year useful economic
live when exotic paper investments are blowing up all
around. Investment in ships, as with commodities, reflects
an interest in a class of asset that is in great demand and
has a utility value. Should it turn out that ordering has been
overdone, causing earnings and values to decline, then
patience becomes a virtue as one is forced to wait for the
next up-cycle in the life of the asset. Shipowners are used
to doing this, but financial investors may find it challenging.
By March 2008, the nominal price of a VLCC newbuilding
has risen further to close to $150m.
57Global Shipping Markets Review 2008
Figure 47. Secondhand prices are peaky too (annual average 5-year old prices)
US$m 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
VLCC 50.0 53.0 71.0 58.0 54.0 70.0 108.0 117.0 118.0 138.0
Suezmax 36.5 35.0 49.0 39.0 38.0 47.0 75.0 75.0 82.0 96.0
Aframax 23.5 26.0 40.0 30.0 29.0 36.0 57.5 63.0 66.5 73.0
Panamax 25.2 24.5 30.6 23.5 20.0 28.0 42.0 48.0 56.0 60.5
Products 40k-dwt 21.0 20.0 24.5 20.5 19.5 25.4 38.1 45.9 46.4 50.8
The strong rise in modern secondhand (5-year old) values in
2007 was surprising in the context of weaker spot market
earnings. This continued the disconnect that we had noticed
in 2006 when values were strengthening even as earnings
were weakening. Both VLCC and suezmax were up an
astonishing 17% year-on-year, aframax up almost 10%,
panamax up 8% and a 40,000-dwt product tanker almost
10%. Tanker S&P activity was weaker as a result. However,
average annual 3-year period rates (generally the minimum
lock-in requirement for investors) were slightly stronger
Tankers
5
10
15
20
25
30P
re-1
972
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
050
100150200250300350400450500
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
10-60,000
60-120,000
120-160,000
200,000 dwt+
in 2007 compared year-on-year with 2006, but at marginal
levels that do not appear to justify the sharp rise in values.
VLCC 3-year rates were up 2.2% to $48,400; suezmax up
1.2% to $38,600; aframax up 3.5% to $29,600; panamax
flat at $26,900 and MR up 4.4% to 23,300 daily. We can
only explain this development as a combination of plentiful
money chasing investments and a firm belief in the future.
In early March 2008, we can report that values have
continued to rise. SK Shipping is rumoured to have
committed its C Prosperity (318,000-dwt HHI March 2009)
for $163.5m to Minerva. If this sale is factual then it makes
one wonder what a 2008-delivery resale should fetch.
Some indication of the possibilities may be gleaned from
TMT’s marketing of its G Elephant (298,500-dwt Nantong
2006) with an asking price exceeding $180m and with a bid
at $170m allegedly already declined. The prevailing 3-year
time charter rate for a modern VLCC has at least improved
to $55,000 per day, a $2,500 or nearly 5% improvement on
the last week in December 2007. These latest high values
are evidently a response to an improved supply-side outlook
in 2008 and improved medium-term period earnings.
The plunging value of the dollar and the surging price
of crude oil, pushing $105 per barrel and threatening to
destroy marginal demand, have clearly been brushed to
one side.
When all the deals are finally counted, 2007 could have
been a bigger year than the record year of 2004 for
secondhand sale and purchase. Over 40% of the activity
was in the smaller handysizes and over 30% in the
combined panamax and aframax segments. To some
extent, this is reflected by our lists of representative sales
for 2007-2008. Where possible we have concentrated on
sales of modern, standard specification tonnage and on
sales where the price is not distorted by attached charters.
Tanker sales have however frequently been encumbered
with charter options, purchase options, profit sharing and
so on, so where we are confident in the detail, we have
included these as well. Duing 2007, as noted above, a
number of tankers were sold for conversion to bulk carriers,
as well as others which were sold for conversion to
storage units or FPSOs. We have included some of
these sales in our lists, although drawing comparisons
between these older units of variable specification is
not always appropriate.
Throughout 2007, the VLCC secondhand market was
characterised by deals with all manner of riders, such as
drydocking due or long period charters attached. A few
‘clean’ sales did provide occasional signposts through the
haze. In July, Samho bought the VLCC Neptune (319,360-
dwt Hyundai Samho 2002) for $136.5m, a strong price
even in the light of Blystad’s June en bloc purchase of
Venus Glory and Mars Glory (both 299,089-dwt Daewoo
2000) for $237m. When Eastern Mediterranean bought
the Hyundai-built Else Maersk (308,491-dwt HHI 2000)
for $122m in December, it seemed that the secondhand
market would not keep up with the spike in earnings.
Buyers had become used to having to pay up to acquire
modern, double-hulled tonnage but interest would generally
wane as prices rose to new record levels.
Meanwhile, the biggest tanker deal of 2007 was Energy
Infrastructure Acquisition Corporations’s purchase, including
a variety of attached time charters, of nine VLCCs built
between 1988 and 2001 from Vanship Holdings for $778m.
58
Figure 48. INTERTANKO count of tanker sales per year
HSBC Shipping Services Limited
Vanship, a joint venture between Univan and Fred Cheng’s
Shinyo International, sold the ships to the New York listed
EIAC for $643m in cash and $135m of shares in Energy
Infrastructure Merger Corp. This is a new company with
Charles Vanderperre of Univan, Fred Cheng of Shinyo and
George Sagredos of EIAC on its board. The plan is for EIMC
to change its name to Van Asia Tankers Limited, at which
point Mr Sagredos will step down. The deal has in effect
given Cheng and Vanderperre access to the US equity
markets without having to IPO their business.
For suezmaxes, 2007 was punctuated by a few stand-out
modern deals. In January, Knutsen was reported to have
paid $95.5m for the 162,000-dwt, ice-class 1A Windsor, a
newbuilding delivering ex-DSME in May. In June, Palmali
acquired Discovery (164,533-dwt HHI 2003) for $96m and
Unicorn (152,250-dwt HHI 2002) for $94m. In July, the
slightly older Stemnitsa (147,093-dwt SHI 2000) cost Great
Eastern $88.5m, illustrating how firm prices for modern
tonnage had remained despite moribund earnings. Finally,
in November, Nordic American Tankers paid $180m for two
159,000-dwt newbuildings contracted originally by First
Olsen from Bohai shipyard in China with delivery scheduled
for December 2009 and April 2010.
Aframax tonnage appeared to be in demand in 2007
as newbuilding prices rose almost 11%, and 5-year
old secondhand values rose by almost 10%, between
the beginning and end of 2007. These increases were
achieved despite a 9% year-on-year fall in average spot
earnings and a 3.5% year-on-year drop in 3-year time
charter rates. In February, the German KG company Liwa
Mobiliengesellschaft acquired Nordatlantic (105,344-dwt
2001) for $59.5m with an attached 5-year time charter at
$23,500 per day. In April, GNMT of Libya acquired two
modern sisters Celebrity and Serenity (both 105,200-dwt
Sumitomo 2004) for $73m each, a notch higher than Cardiff
Marine reportedly paid for Maersk Pristine (110,000-dwt
Dalian 2004) in June. In December, the spot market rally
caused Minerva to pay $81.5m for Amalthea (107,116-
dwt DSME 2006). In February 2008, Stealth Maritime was
reported to have paid $152m for two New Times 2009
resales, setting the bar for the coming year.
In the panamax and MR segments, multi-ship deals
were common in 2007. Early in 2007, Omega Navigation
purchased two prompt delivery resale 73,673-dwt STX
ice-class 1A panamax tankers, Omega Emmanuel and
Omega Theodore, for $64.5m each. The ships were
placed on a 2-year time charter to ST Shipping with 50/50
profit share above the base charter hire rate of $25,500
daily, with Omega getting 65% of the excess when the
ships trade in ice conditions. At the end of September,
OSG bought the 73,400-dwt newbuildings Cape Taft and
Cape Talara (delivering from New Century in 2008 and
2009 respectively) for $125m on an en bloc charter-free
basis. The biggest deal in this segment in 2007 was BW
Shipping’s purchase of eight 76,565-dwt resales from IMC
for $450m en bloc. The builders are New Century with one
built in 2006, five in 2007 and two to deliver in 2008. In
September, Ocean Tankers purchased five resale 73,400-
dwt New Century resales from Ahrenkiel for $67.5m each
with four built in 2007 and one in 2008.
Picking out comparables from the varied handysize tanker
fleet is not so easy. On a year-on-year average comparison
basis, a 5-year old 40,000-dwt product tanker gained 9.5%
in value in 2007 compared with 2006, rising from $46.4m
to $50.8m. Meanwhile, 3-year time charter rates rose only
4.5% on a year-on-year average basis from about $22,300
to about $23,300 daily. In January, Gonen (47,102-dwt
Onomichi 2000) was sold to Vosco for $47.5m. In May,
Juniper (47,465-dwt Uljanik 2002) and Jasmine (both
47,355-dwt Uljanik 2002) were sold to Stealth for $100m en
bloc, reported with a bareboat charter attached at $13,650
daily of undefined duration. In October, Vinashin was
reported to have paid $60.5m for Lidong (50,530-dwt SPP
2007) and then, in February 2008, a new benchmark was
set for the smaller types when the ice class 1A Jag Payal
and Jag Panna (both 37,400-dwt HMD 2007) were acquired
by Motia for $102m en bloc.
Outlook
At the time of writing the conclusion to this chapter in
early March, spot WTI crude oil is trading at above $105
per barrel, driven up by speculative long positions, static
OPEC quotas and geopolitical tensions. The armed forces
of two OPEC members, Venezuela and Ecuador, have
only just stopped squaring off against the much larger
military forces of neighbouring Colombia, narrowly averting
hostilities. February US non-farm payrolls fell 63,000 in the
largest monthly drop in five years, and January figures were
revised up from 17,000 to 22,000 losses. Jobs are being
lost in manufacturing, construction and retailing bringing
the overall US unemployment rate to 4.8%. The dollar has
fallen to 1.55 to the euro, a record low, and the chorus of
economists now calling the US in recession has got louder.
The economic vibes from America are not at all encouraging
and are, for the time-being at least, quite the reverse of
59Global Shipping Markets Review 2008
Tankers
the bullish atmosphere that is permeating Hong Kong and
China. While slow or declining growth in the US contrasts
sharply with strong growth in Hong Kong and China, both
east and west share the common curse of inflation, which
is rising on the strength of those non-core elements of food
and energy. Until recently Asia was promoting disinflation,
now its dollar pegs and commodity demand are causing it
to export inflation alongside its manufactured goods.
We are left to ponder what impact high oil prices and food
price inflation will have on household budgets and whether
oil consumption and seaborne oil demand may suffer as
a result. We realise that the decoupling theory is now in
the process of being tested and we will soon see which
camp is right. In terms of macro oil demand growth, the
latest projections from the IEA, EIA and OPEC currently
foresee stronger growth in 2008 than in 2007 by quite a
wide margin. However, we expect these forecasts to be
scaled back over the coming months to the point that we
will probably be back to 2007 numbers. Oil consumption is
still rising in China, India, the Middle East and Russia but
only the former two will generate seaborne oil trade. In
terms of micro tanker supply, we predict that year-on-year
net supply growth in 2008 will be similar to 2007. So, if we
do get the higher rate of oil demand growth that is currently
predicted then we should enjoy better average earnings
this year than last. Secondhand values are harder to call as
they have delinked from earnings and are already trading
at a premium. Newbuilding prices are supported by higher
input costs and the decision by some major yards to refrain
from offering forward berths until they have a better idea of
future costs.
The best hopes for the tanker markets in 2008 lie in a
number of areas. One is that the present US slowdown or
recession is both mild and brief; and that the twin monetary
and fiscal packages that are being rolled out are successful
in achieving this outcome. Such a result should resurrect
flagging oil demand in North America and indirectly enhance
energy demand growth in China and India. Domestic price
controls in emerging economies, high taxation rates on
energy in Europe and the strong euro all serve to cushion
the impact of rising dollar prices in many big energy
consumer nations. It must also be hoped that OPEC and
other oil producers are both willing and able to manage
supply so as to foster consumption. In 2007, upstream
production in many parts of the world was constrained by a
variety of issues ranging from declining oil field yields and
shut-in production to weather factors and pipeline politics.
Downstream oil product output was inhibited by creaking
refinery infrastructure and prolonged periods of downtime
for maintenance and repairs. A return to contango in the
term price structure of WTI and Brent futures, and better
and less volatile refining margins, would encourage greater
seaborne crude shipments for both storage and processing.
All told, we need to see a better alignment of these
factors in 2008 than we did in 2007 in order to improve the
prospects for the midstream shipping part of the global oil
supply chain.
60 HSBC Shipping Services Limited
61Global Shipping Markets Review 2008
Tankers
62 HSBC Shipping Services Limited
Containerships
63Global Shipping Markets Review 2008
Containerships
1 Maersk Broker historical and forecast numbers.
Introduction
2007 was a better year for many of the big liner shipping
companies despite significant increases in operating costs,
principally in the form of a near-doubling in bunker prices
during the course of the year. It was also a better year for
the tramp owners who saw steady improvements in term
rates and, as time charter operators, they were passing
fuel price risks onto the end-users. In terms of trade lanes,
Asia-Europe witnessed strong growth as volumes rose
close to 20% year-on-year. Intra-Asia volumes continued
to outperform as these trades link the powerhouse
manufacturing economies of the Far East with vibrant
demand growth in the sub-continent and the construction
and consumption boom that is taking place in the
Middle East. The US-centric transpacific and transatlantic
trades were subject to slower growth with the weaker
dollar creating better balance as US exports rose faster
than imports.
The key themes of 2007 were generally a product of
rising costs, not least bunker prices. The lines have yet to
design bunker adjustment factors that claw back all the
costs of higher fuel as they tend to be reactive rather
than proactive. Higher freight rates, especially on
Asia-Europe, were effectively wiped out by the negative
impact of rising bunker costs. In 2007, Maersk Line
completed its integration of P&ON and Hapag Lloyd
finalised its integration of CP Ships, both mergers having
proved more complicated than expected. The rationale for
consolidation remains, and is only elevated by sharply rising
costs. High oil prices saw some Asia-Europe carriers add a
ninth ship into service loops. Reduced speeds saved on fuel
at no loss of service frequency. In early 2008, PIL and Wan
Hai entered a strategic alliance to achieve synergies across
the board and to better manage entry into the longhaul
trade lanes.
On the tonnage supply side, fully cellular net fleet growth
in the 5-year period between 2005 and 2009 is currently
forecast to average 14.7%1 . This is a high figure but the
largest year-on-year growth in this period has already
happened. In rounded numbers: 2005 13.5%; 2006 17.0%;
2007 15.0%; 2008 14.5% and 2009 13.5%. We are seeing a
declining rate, albeit on a higher base, of net supply growth
in the cellular fleet. As demand growth has averaged 10.2%
per annum over the same period it is surprising how well
the ships have done given the 4.5% supply-demand gap.
Clearly there is something wrong with the way in which
supply is commonly analysed as it overstated for a number
of reasons. We touch upon this subject later in this chapter.
But, it is not just technical ship-side reasons that tend to
overstate supply, there are also the knock-on effects of
inadequate land-side infrastructure to consider.
Onshore, mismatched investment and productivity ratios
between east and west affect the efficiency of ships
and the velocity at which containers move through ports.
According to the Transpacific Stabilization Agreement,
it will be another three years before US terminals raise
their productivity from the current 5,000-teu per acre to
the 10,000-teu plus needed to match current productivity
at Asian ports. In the meantime, US ports are struggling
to cope with current and future anticipated import cargo
growth. This has a genuine arresting effect on effective
vessel supply as ships are left swinging around at
anchorages when they should be working. This deficiency
is amplified by the fact that the Panama Canal is already
operating at or close to full capacity and that privately
owned US railroads will not fund new investments in track,
locomotives and yards without heavy public sector support.
Figure 49. At a glance – 6 to 12 month time charter
rates in 2007
US$ per day 2006 2007 Change
4,400-teu gearless 32,417 34,375 6%
3,500-teu gearless 26,583 29,958 13%
2,750-teu gearless 22,646 26,292 16%
2,000-teu gearless 18,392 19,696 7%
1,700-teu geared 17,079 16,613 -3%
1,000-teu geared 12,350 12,500 1%
725-teu geared 9,817 9,054 -8%
Average 19,898 21,213 7%
Average short-term time charter earnings for all classes of
cellular containerships rose a respectable 7% in 2007 with
most of the positive influence coming from the flexible
mid-size vessels in the 2,500-teu to 3,500-teu range.
This represents a considerable turnaround from 2006
in which the sector suffered a 31% loss in equivalent
average earnings.
64 HSBC Shipping Services Limited
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2009
2011
m-teu
FleetOrderbook
Supply
Figure 50. Containership fleet and orderbook
31-Dec-06 31-Dec-07 Orderbook in teu at 31-Dec-07
Vessel Size, Teu
Teu # ships
Teu # ships
as % fleet
Delivery 2008
Delivery 2009
Delivery 2010
Delivery 2011+
<1000 662,304 1,156 717,928 1,231 17% 91,445 18,970 9,864 1,900
1000-1999 1,472,100 1,044 1,637,603 1,160 26% 182,767 163,102 52,506 29,080
2000-2999 1,582,158 629 1,695,602 672 24% 190,749 104,436 82,540 26,800
3000-3999 1,046,509 307 1,139,074 333 23% 73,757 92,210 90,091 7,200
4000-4999 1,486,819 339 1,682,437 383 58% 272,573 389,576 196,294 120,830
5000-5999 1,230,677 226 1,361,466 251 22% 129,222 68,060 51,600 54,172
6000-6999 674,122 104 796,800 123 94% 208,544 307,168 187,288 46,100
7000+ 1,274,919 154 1,719,542 204 185% 436,582 596,502 1,021,854 1,124,268
Total 9,429,608 3,959 10,750,452 4,357 60% 1,585,639 1,740,024 1,692,037 1,410,350
When we were writing last year’s report a year ago, the
delivery schedule for both 2007 and 2008 was estimated
in rounded numbers at 1.4m-teu, with 2009 at 1.1m-teu.
These figures were large, as never before had 1.4m-teu
delivered within a single year. In the end, the figure for 2007
turned out to be slightly lower at 1.32m-teu. However, the
delivery schedule for 2008 has risen to 1.59m-teu and for
2009 to 1.74m-teu and for 2010 it is currently 1.69m-teu.
The 2007 deliveries appear to have been absorbed with
relative ease and this encourages the industry to keep
raising the bar as it continues its search for that elusive
saturation point.
The swelling of the orderbook has been achieved mainly
by the ordering of very large and ultra large vessels well
above panamax size. 94% of the end 2007 fleet of ships
(by capacity) in the 6,000 to 6,999-teu segment, and 185%
of the end 2007 fleet of ships above 7,000-teu, are now
on order. Bear in mind that none of this ordering is for
replacement purposes as these sizes scarcely existed as
recently as ten years ago, so the fleet of very larger vessels
is very modern and set to expand rapidly. Scheduled
deliveries of boxships of 6,000-teu or more is currently at
645,126-teu in 2008 – 903,670-teu in 2009 – 1,209,142-teu
in 2010 and 1,170,368-teu in 2011 and beyond.
The only other segment that looks to have gained more
than its fair share of attention is the panamax size between
4,000-teu and 4,999-teu. The third set of locks in the
Panama Canal is scheduled to come into service in 2014.
In the meantime, this size is still optimal for all-water
transpacific services linking with the Gulf of Mexico and
65Global Shipping Markets Review 2008
the Atlantic coast. Rising intermodal rail costs, a shortage
of locomotives and truck drivers, congestion at the Los
Angeles and Long Beach gateway and rising environmental
concerns in California make the canal a safer bet than the
land bridge. Competition will come from larger ships leaving
Asia westbound via Suez and terminating in the US on a
draft shallow enough to permit port entry.
Figure 51. Containership fleet profile at end-07
Container fleet growth is unlikely to be moderated by
scrapping. In 2007, well over 1.3m-teu delivered while
only 23,790-teu was removed from the fleet! The tailback
of older ships that delivered in the 1980s or earlier is thin,
meaning a relatively small pool of potential demolition
candidates should the market become obviously over-
supplied. However, as bunker prices are expected to remain
at high levels, the older and less fuel-efficient ships will
become a lot less popular with the lines.
Containerships
5
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Capesize
VLBC
0102030405060708090
100
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
000-teu
Scrapped
Losses
Figure 51 illustrates the size of the newbuilding delivery
pipeline over the coming years. As with the other sectors,
notably bulk carriers, we are not convinced that all these
contracts will become effective. Given the forward nature
of many deliveries, some contracts may not yet have been
financed and could struggle to secure debt funding on
terms and at pricing levels that will make sense to investors
based upon secured employment. Quite how such deals
might unravel remains to be seen, but lawyers will no doubt
be sharpening their pencils.
Some deals, especially forward deliveries that have not yet
secured employment, will simply not achieve financing at
all given how credit markets have become progressively
tighter since August 2007. US rates have fallen by 225bps
since then, and appear to have further to fall, so they are
actually falling faster than banks are raising lending rates.
However, loan-to-value ratios, security covenants and other
features are markedly less attractive than before. The
shipyards may be left with slots that they had assumed to
be filled and some initial down-payments may be put at risk
of being forfeited to builders. Even before 2007 had run its
course, a total of 13 super post-panamaxes of over 13,000-
teu were either cancelled or the options left to expire
as charters, and presumably finance, were allegedly not
available.
Figure 52. Containership deletions
Even going back ten years ago to 1998, the level of
scrapping at under 90,000-teu is unremarkable in terms
of volume. This is less than the 91,445-teu that is
scheduled for delivery in 2008 in the smallest sub 1,000-
teu segment alone.
Figure 53. Growth in average containership size
Average TEU per ship
Size band 2006 2007 % change
<1000 573 583 1.8%
1000-1999 1,410 1,412 0.1%
2000-2999 2,515 2,523 0.3%
3000-3999 3,409 3,421 0.3%
4000-4999 4,386 4,393 0.2%
5000-5999 5,446 5,424 -0.4%
6000-6999 6,482 6,478 -0.1%
7000+ 8,279 8,429 1.8%
Total 2,382 2,467 3.6%
The orderbook is staggeringly large. But, as we have said
countless times in the past, once a number of lines take
the lead in ordering larger ships (and Maersk is invariably
the leader, most recently with its huge E-class series)
then it becomes nothing short of imperative for others to
follow suit. Once one carrier has achieved a cost advantage
through economies of scale, a lower per slot cost, then
others will follow. There are two key motivators. The first
is demand growth which needs to be satisfied via the
principle of short-term pain, long-term gain. A boxship
should last 25 years so it needs to be big enough to satisfy
future, not just present, demand. In the early years, there
is the risk that copycat ordering will cause over-supply and
under-utilisation. The second is preparation for a market
downturn, at which time lower per slot costs are a bonus.
This defensive mentality is the product of many years of
poor trading and overlooks the fact that chasing lower
costs, while creating desired efficiencies, also intensifies
the competition that ultimately leads to lower rates.
The trailblazers of scale have been Maersk, CMA CGM
and MSC while the traditional objectors have included
APL, Evergreen and K-Line. Early in the decade, Evergreen
pushed up beyond its preferred 5,500-teu size cap for the
first time in taking delivery of a series of five 6,000-teu
followed by ten 7,000-teu units that are delivering between
2005 and 2008. K-Line, another line traditionally more
comfortable with sub 6,000-teu vessels is taking delivery of
a series of eight 8,000-teu ships between 2006 and 2009.
But, it is APL that stands out for apparently breaking its
former vows regarding optimal size by venturing beyond its
5,500-teu maximum comfort zone to order eight 10,000-
teu units for delivery in 2011. Of course, these ventures
into larger sizes now seem less bold as even a 10,000-teu
vessel is a relative minnow when compared to the armada
of ships on order of over 12,000-teu, 114 at our last count.
66 HSBC Shipping Services Limited
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Post-panamax
Panamax and sub-panamax
Ships on order of 10,000-teu and more number 175 units
of which only four have been contracted outside South
Korea, these being a series of 10,000-teu vessels being
built by Nacks for Cosco. The balance are being built at
Hyundai Heavy, Hyundai Samho, Samsung, Daewoo,
Hanjin and STX. We are confident that these mature yards
will deliver on these contracts. This contrasts with our
lack of confidence in the ability of many new and less
mature yards in wider Asia being able to honour bulk carrier
contracts that they have entered into. But, even if those
Korean yards are ready and able to fulfil their obligations,
we suspect that some of these big series orders will not
get financing either for lack of fixed employment or for
lack of available credit. Ironically, the credit crunch coincides
with the biggest shipping orderbook ever and never before
has there been such an enormous call upon the banks to
provide debt finance.
One estimate is that about one-third of the total container
orderbook is not yet financed and that some portion of this
will not complete, the most vulnerable being those ships
scheduled to deliver in 2010 and beyond. About half of all
boxships on order are for independent owners, most of
them based in Germany. The equity funding is still available
through the KG market but the debt funding component
may be more difficult to access as German banks are forced
to restrict new credit. The total orderbook was about 60%
of the fleet by capacity at March 1st 2008, with deliveries
spread out over five years to 2012. In the worst case of
all the estimated unfinanced ships failing to deliver the
orderbook could fall to 50% of the current fleet. But, it is
unlikely to be that severe as in many cases cash resources
will be used to pay for installments and equity ratios could
be increased in order to attract debt finance for the balance.
Figure 54. Containership contracting trends
67Global Shipping Markets Review 2008
In Q3 2007 we witnessed the contracting of 1.24m-teu of
new containerships, an all-time record. Until 2003, this was
a higher volume than had ever been contracted in a single
year, let alone a single quarter. The next record quarter
was the previous one, Q2 2007, in which 0.99m-teu was
ordered. In the light of such exuberance, we may not see
such a record beaten in quite a while.
Containerships
Figure 55. Top 20 container lines by capacity (current and on order)
Company Ranking Fleet, TEU Fleet, # OB,TEU OB, # Total TEU % share Cum.
Share
Maersk Line 1 1,676,955 448 341,149 70 2,018,104 13% 13%
MSC 2 1,232,335 369 404,110 48 1,636,445 10% 23%
CMA CGM 3 715,801 242 491,796 61 1,207,597 8% 31%
Coscon 4 443,979 148 401,574 59 845,553 5% 36%
Evergreen 5 628,898 180 8,668 2 637,566 4% 40%
Hanjin 6 336,717 77 255,270 31 591,987 4% 44%
CSCL 7 413,886 120 169,022 23 582,908 4% 47%
Hapag-Lloyd 8 490,275 141 87,500 10 577,775 4% 51%
APL 9 400,609 119 172,692 27 573,301 4% 55%
Yang Ming 10 271,888 82 261,412 41 533,300 3% 58%
NYK Line 11 343,670 89 179,000 37 522,670 3% 61%
Zim 12 238,567 82 279,518 37 518,085 3% 65%
MOL 13 323,729 103 181,410 30 505,139 3% 68%
OOCL 14 355,673 87 137,924 22 493,597 3% 71%
K-Line 15 296,420 92 157,618 32 454,038 3% 74%
Hamburg Sud 16 207,359 79 111,240 21 318,599 2% 76%
CSAV / CSAV Norasia 17 230,018 76 78,811 11 308,829 2% 78%
HMM 18 198,299 45 83,700 12 281,999 2% 79%
PIL 19 141,822 75 94,633 31 236,455 2% 81%
Wan Hai 20 133,105 76 51,324 18 184,429 1% 82%
The top 20 owners now control 82% of the global fleet
and orderbook. Consolidation is set to resume after the
tortuous link-ups between Maersk and P&O Nedlloyd and
between TUI (the owner of Hapag Lloyd) and CP Ships.
In 2008, NOL (the owner of APL) and Hapag Lloyd continue
to be strongly touted as merger candidates as there is a
natural fit between the two. The strengths of one appear
to counteract any weaknesses of the other on the main
shipping lanes of the transpacific, transatlantic and Asia-
Europe. A matching of two leading carriers from the
mercantile powerhouses of Singapore and Hamburg
offers considerable appeal.
Mergers and takeovers between others might need to see
a weaker market in order to convince controlling parties of
the benefits of consolidation and assist in smoothing over
any cultural and philosophical differences. Otherwise, we do
not envisage the top 20 ranking changing very much – it is
68
unchanged from last year. Of note are the huge orderbooks
of MSC, CMA CGM and Cosco which now even exceed
that of market leader Maersk Line. MSC and Cosco have
achieved their rapid expansion through organic growth while
CMA CGM and Maersk have used a combination of organic
growth and acquisition.
The bottom two in the list, PIL and Wan Hai, having
embarked upon a 10-year strategic alliance in January
2008, announced on 20 February that the agreement will
be extended into cooperation on terminal operations and
ship repair business and joint coordination of shipbuilding
plans. They already operate joint services in the Asia-Europe
trades since 2004 and in the transpacific and Black Sea
services since last year. Singapore-based PIL and Taipei-
based Wan Hai have been long-time intra-Asian rivals but
saw the benefit of teamwork when it came to entering the
highly competitive longhaul routes.
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For many years now container trade has been growing at
an average annual rate of around 10%. The rate of growth
is now slowing but the underlying base is that much larger.
Demand is forecast to continue rising at an annual rate
of a bit below 10% in both 2008 and 2009. The world is
bracing itself for a slowdown given the weakening US
housing market and deteriorating credit markets. As loans
are cut off to both households and businesses, spending
and investment will obviously suffer as these are the
twin engines of economic growth and employment. The
notoriously unreliable US non-farm payroll reports for
January and February show that employment fell by 22,000
and 63,000 respectively, the latter being the largest month-
on-month fall in five years.
The futures market is now pricing in a further 75bps
interest rate cut to 2.25% at the Federal Reserve’s next
meeting on 18 March. The weakening dollar is helping the
US-outbound export trades but insufficiently to counteract
declining imports. The latest Port Tracker report, compiled
by the National Retail Federation and Global Insight,
observes that container traffic at North American ports fell
4.3% in January 2008, compared with January 2007, and
predicts a 9.6% decline in February 2008. These monthly
year-on-year US traffic declines started in August 2007 and
represent the most protracted period of decline since 1995.
69Global Shipping Markets Review 2008
Demand
Figure 56. Global container trade trends
m-t
eu li
fts
Eu
rop
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Asi
a
N.A
mer
ica
Oth
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Tota
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1999 46 93 28 38 205
2000 50 105 30 40 225
2001 51 115 30 42 238
2002 57 134 33 41 265
2003 62 152 36 53 303
2004 70 175 40 59 344
2005 77 194 43 67 381
2006 83 220 45 73 420
2007 90 250 46 78 465
2008 96 281 49 84 509
2009 101 314 51 91 557
Ports surveyed are LA/LB, Oakland, Tacoma, Seattle and
Vancouver on the west coast; Houston on the Gulf coast;
and NY/NJ, Hampton Roads, Charleston and Savannah on
the east coast.
Weakening traffic growth on the transpacific,compounded
by rising costs, is causing the lines to withdraw or
reposition capacity and enter new alliances. Stagnant trade
growth on eastbound transpacific contrasts starkly with
20% growth on westbound Asia-Europe. The former route
generally chooses to keep maximum ship capacity below
7,000-teu, given poor productivity at west coast North
American ports, whereas most ships above 7,000-teu end
up on Asia-Europe. The withdrawal of capacity from the
transpacific for prolonged maintenance or semi-layup is
one way of keeping utilisation rates high. It also maintains
pressure on shippers to increase freight rates and agree
floating monthly bunker adjustment factors if the ships are
to return and service levels be preserved. If excess capacity
is merely redeployed to Asia-Europe, beyond increasing
loops from eight to nine ships to save on fuel, then at some
point it will have a negative impact on utilisation and rate
prospects on that route.
Containerships
Annual contract negotiations between shippers and carriers
see both sides now digging their trenches ahead of tough
negotiations, despite the fact that the TSA has gone out
of its way to explain its position in a more conciliatory and
informative manner in the recent past. The TSA is looking
at managing minimal or even negative capacity growth on
the Pacific in 2008 in support of its policy of only running
profitable services as costs everywhere spiral out of
control. Independent Maersk Line has withdrawn about
30% capacity in the past twelve months and entered into a
vessel-sharing joint venture with TSA members CMA CGM
and MSC in which they will operate larger 8,000-teu ships
without increasing their overall capacity contribution. The
rationale is that the operational savings of using bigger ships
are estimated to outweigh the added costs of low port
productivity levels on the west coast.
Figure 57. Leading global container ports in 2007
Rank 2007 Rank 2006 Port 2007 traffic, m-teu
2006 traffic, m-teu Growth in 2007
1 1 Singapore 27.93 24.79 13%
2 3 Shanghai 26.15 21.71 21%
3 2 Hong Kong 23.88 23.23 3%
4 4 Shenzhen 21.01 18.47 14%
5 5 Busan 12.14 12.03 1%
6 7 Rotterdam 10.79 9.69 11%
7 8 Dubai 10.65 8.92 19%
8 6 Kaohsiung 10.26 9.77 5%
9 9 Hamburg 9.90 8.86 12%
10 11 Qingdao 9.46 7.70 23%
11 13 Ningbo 9.36 7.07 32%
12 15 Guangzhou 9.20 6.60 39%
13 10 Los Angeles 8.36 8.47 -1%
14 14 Antwerp 8.18 7.02 17%
15 12 Long Beach 7.31 7.29 0%
16 17 Tianjin 7.10 5.90 20%
17 16 Port Klang 6.85 6.32 8%
18 19 Tanjung Pelepas 5.50 4.77 15%
19 20 Bremen/ Bremerhaven 4.89 4.45 10%
20 21 Laem Chabang 4.64 4.43 5%
70
Singapore has retained its 2006 crown but last year’s
second-placed Hong Kong has been relegated to the
number three slot by Shanghai. Rotterdam and Dubai have
each gained a place while Kaohsiung has dropped two
places. The rapidly expanding Chinese ports of Qingdao,
Ningbo and Guangzhou have gained one, two and three
places respectively, underlining the importance of China
as the world’s factory floor. Los Angeles slipped three
places while its Long Beach neighbour gained three places,
demonstrating the relative strengths of their environmental
lobbies. Far Eastern ports occupy seven of the top ten
league places illustrating the imbalance in infrastructure
spending between east and west. Of the other three
places, two are in Europe and one in the Middle East.
The port of New York and New Jersey has slipped
from the table.
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Total N America to NE Asia and SE Asia
Trade Routes
The latest Global Insight data we have dates back to
October 2007. We may review our data source in future
GSMRs as this data is altered significantly from time to
time. For this year we present if for consistency’s sake.
The broad trends are about right even if we may choose to
quibble over the actual numbers.
The overall supply-demand balance is apparently
deteriorating as the spread widens with the steady stream
of new ships rolling out of the shipyards. We base our
numbers on nominal capacity in the wider container capable
fleet rather than in the narrower fully cellular fleet. It is
relevant to mention that at the beginning of 2006 some
80% of the container capable fleet was fully cellular but
by the beginning of 2009, in just three years, this ratio is
forecast to rise to 88%. In 2007 the supply-demand gap
was narrow at about 1.5% after nearly 3% in 2006. But, in
2008 it is expected to go out to the just below 4% before
retracing to around 3% in 2009. As already mentioned,
other factors will help to bridge this gap by reducing
effective tonnage supply gains such as port congestion,
disparities in port throughput capabilities at opposite ends
of the supply chain, land-side rail and road issues, slow
steaming, capacity management, re-positioning for new
services and the cancellation of some old services.
But, the most important single factor in the reduction or
elimination of the gap is the use of nominal capacity as
opposed to laden capacity. No ship ever loads up to its
nominal capacity given operational constraints such as
the mix of box sizes, weight limits and stability, visibility
from the bridge, load and discharge sequences, berth and
channel draft limitations, and so on. Neither would it be
appropriate to use the laden figure, conventionally taken
as an average 14-tonne homogenous load, as weight
loads vary and the vessel’s deadweight capacity would
almost always permit a certain number of empties to
be repositioned. Other factors influencing real container
capacity supply include the declining ratio of part-time
container capable ships in container trades and the fact
that conbulkers and multipurpose types may now be
concentrating their efforts on the better paying dry
bulk trades.
In the fully cellular fleet, the appropriate representation
of a containership’s box capacity might be somewhere in
between the nominal and the laden figures. Re-crunching
all the capacity numbers based upon this adjustment would
certainly alter (i.e. reduce) our impression of available space
and explain how easily so many new ships have been
absorbed by the market in recent years without collapsing
rates. The factors that constrain tonnage supply differ
according to trade lane as there is no hard and fast rule.
All told, we have a modernising fleet, changing trade
dynamics and a string of years of well above trend
demand growth.
71Global Shipping Markets Review 2008
Figure 58. Trans-Pacific container trade volumes
Global Insight’s figures for the transpacific trades in 2007
(based on the first three quarters) estimated 5.9% growth
in total eastbound traffic and a higher 6.8% growth in
westbound trades, no doubt helped a little by the weaker
dollar despite the prevalence of various forms of dollar
currency pegs within Asia. The ratio of all eastbound
headhaul to all westbound backhaul volumes remained in
the region of 3:1. In October 2007, GI forecast over 8%
year-on-year growth in eastbound transpacific volumes in
both 2008 and 2009, but this now appears optimistic.
Containerships
TSA statistics
Membership of the Transpacific Stabilization Agreement
(TSA) expanded to 15 members, effective January 2008,
on the joining of China Shipping. The list of TSA members
is as follows and involves the majority of the world’s
largest container shipping lines.
APL Co Pte Ltd
China Shipping Container Lines Co Ltd
CMA CGM SA
COSCO Container Lines Ltd
Evergreen Line
Hanjin Shipping Co Ltd
Hapag-Lloyd AG
Hyundai Merchant Marine Co Ltd
Kawasaki Kisen Kaisha Ltd
Mitsui OSK Lines Ltd
MSC – Mediterranean Shipping Co SA
Nippon Yusen Kaisha
Orient Overseas Container line
Yangming Marine Transport Corporation
Zim Integrated Shipping Services Ltd
Transpacific trade growth in 2007, now slowing in 2008
According to the TSA’s own figures, Asia-US container
traffic grew 6.9% year-on-year in the first half of 2007
rising to 8% for the first nine months compared to the
same period in 2006. That represents a decline on full
year 2006 which saw eastbound growth of 9.6% to
13-teu equivalents. No figures are yet available from the
TSA for the fourth quarter but we would expect to see a
deterioration in the numbers which will pull down the full
year 2007 performance to less than the 8% growth figure
of the first three quarters.
Anecdotal evidence from the USWC intermodal hub ports
of Los Angeles and Long Beach puts their aggregate loaded
inbound containers declining every month since August
2007, coincidentally the month in which the subprime crisis
blew up. In calendar year 2007, total container throughput
at Los Angeles fell marginally to 8.4m-teu equivalents from
8.5m in 2006 while total container throughput at Long
Beach in 2007 was steady at 7.3m-teu equivalents, only
fractionally up on 2006.
More importantly, Q4 2007 loaded in-bound container
volumes declined 4.6% at Los Angeles and 4.0% at Long
Beach on a year-on-year basis. In January 2008, loaded
in-bound volumes fell 4.6% year-on-year at Los Angeles to
343,529-teu and by a much larger 13.8% at Long Beach
to 261,543-teu. These figures have been warning us since
August 2007 of slowing US consumption and the latest
2008 figures tell us that household and business
consumers are accelerating the rate at which they cut
back on spending.
We know precisely why they are cutting back: falling home
values, declining employment, tighter credit, high gasoline
and heating oil prices, rising food prices and a weaker dollar.
In Q4, the weakening housing market lowered imports of
home furnishings and construction materials. Shipments
of toys were hit by safety concerns (but compensated for
by a switch over to electronic games) while shipments
of apparel, home electronics, computers and health care
products remained robust in the second half of 2007.
Rising costs
TSA members expect to record a 7% increase in
basic operating costs in 2007 on top of a substantially
unrecovered 8% increase in 2006. This excludes a near
doubling in fuel costs during the year with fuel now
accounting for 50-60% of total transpacific sailing costs.
Most long-term 15-25 year intermodal rail contracts have
been coming up for renewal in the 2005-2008 period with
new rail contracts being signed at anything from 25%
to 40% above previous levels. The TSA points out that
intermodal has become the largest and fastest-growing
segment of the rail business, surpassing even coal.
The trucking sector is suffering from driver shortages
and many small owner-operators being squeezed from
the market by rising costs, longer hours and onerous
environmental regulations. As they get to be consolidated
by larger unionised operators, trucking charges have
inflated by 25% or more since 2005. Higher intermodal
freight and trucking charges have raised the cost of
repositioning empties from the American interior back to
Asia. This situation has been compounded by a reduction
in free dwell-time for boxes at terminals and the
additional burden of extra security, cargo scanning
and environmental directives.
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Freight developments
According to Containerisation International’s “Freight
Facts”, the average ‘all-in’ freight rate between Asia and
the West Coast of North America in Q4 2007 remained
unchanged on the previous quarter, at $1,701/teu, but was
2% higher than in Q4 2006. On a weighted basis, the latter
was 1% down and would have disappointed carriers after all
the talk of higher fuel surcharges and capacity withdrawals
in order to recover rising costs and keep vessel utilisation
above 90%. Under the circumstances of flat year-on-year
cargo growth on this trade lane in the second half, it is not
surprising to see freight rates under downward pressure.
TSA members hope to achieve a $200/teu rate increase
from May 1, 2008 plus a lot more via fuel charges, thus
departing from the previous formula of ‘all-in’ rates. On the
westbound leg, the average ‘all-in’ freight rate of $795/teu
in Q4 2007 was 2% up on the previous quarter and 1% up
year-on-year. On a weighted basis, the changes remained
the same. These quoted all-in freight rates in each direction
would have left the carriers exposed as bunker fuel was up
over 20% quarter-on-quarter and over 70% year-on-year.
Westbound trade grew 10% on 2006 but ships remained
half full. Fuel rebates may be easier to achieve than freight
increases in 2008.
Figure 59. Asia-Europe container trade volumes
Global Insight’s figures for the Asia-Europe trades in 2007
(based on the first three quarters) estimated 15.6% year-on-
year growth in the headhaul westbound direction from Asia
to Europe to 14.4m-teu and just over 5% growth on the
weaker eastbound leg to 6.1m-teu. For 2008, GI forecasts
a slower 12.6% expansion to 16.2m-teu and, in 2009, 8.9%
growth to 17.7m-teu. 2008 eastbound growth is put at
5.4% to 6.4m-teu and, in 2009, 7.4% to 6.9m-teu.
These figures fail to capture Q4 2007 movements
which may have altered GI’s full year forecasts.
73Global Shipping Markets Review 2008
FEFC numbers
Membership of the Far East Freight Conference (FEFC)
stands at 17 members. The list of FEFC members
is as follows and includes the world’s largest container
shipping lines.
ANL Container Lines Pty Ltd
APL Co Pte Ltd
CMA CGM SA
CSAV Norasia Liner Services
Egyptian International Shipping Co
Hapag-Lloyd AG
Hyundai Merchant Marine Ltd
Kawasaki Kisen Kaisha Ltd
Maersk Line
MISC Berhad
Mitsui OSK Lines Ltd
MSC – Mediterranean Shipping Co SA
Nippon Yusen Kaisha
Orient Overseas Container line
Safmarine
Yangming Marine Transport Corporation
Zim Integrated Shipping Services Ltd
Booming growth in 2007 – more of the same
expected in 2008
The Far East Freight Conference announced full year 2007
trade growth figures on Asia-Europe of 19% in 2007. Far
East/Med was up 21.8% year-on-year to 3,323,933-teu
while Far East/North Europe was up 17.6% to 6,190,655-
teu. Consolidated Q4 2007 growth came in at 15.9% when
compared with Q4 2006, taking the total westbound annual
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Europe to N. America
N. America to Europe
2FEFC lines recently managed to separate the bunker surcharge from general rate rises ending ‘all in’ prices and paving the way to link fuel surcharges and rebates to market movements in fuel oil prices.
increase to 19%. The FEFC expects to replicate this rate of
growth on Asia-Europe westbound in 2008. However, as
with the TSA, cost concerns were flagged up.
Issues that were raised included the rising costs of
insurance, crewing and above all bunkers plus the frequency
of congestion. An almost doubling of bunkers since January
2007 to $480/tonne was challenging the industry’s ability
to recover accrued losses and one response was to slow
down ships in the interests of fuel economy. Hapag-Lloyd
was looking to reduce speeds by 10% to 20.5 knots on the
basis that a 4-5 knot speed reduction could cut consumption
by 30-40% and given that fuel now accounts for around
60% of voyage costs.
Slow steaming
The operational savings on fuel justify the injection of a
ninth ship in an Asia-Europe loop without increasing capital
costs or reducing service levels. CMA CGM, Maersk Line
and the Grand Alliance have already taken action to slow
steam using extra ships with the emphasis on maintaining
schedule reliability in order not to upset their customers’
landside logistics. Germanischer Lloyd sees this as sensible
response to the reality that an 8,000-teu vessel with a
60,000-kW main engine consumes $121,000 in daily
bunkers at around $490/tonne.
GL has calculated that fuel now accounts for 63% of
all vessels’ operating costs compared to about 33% as
recently as 2004. 8,000-teu vessels that were built to do
25 knots or more are now best operated at 20 knots which
would extend the transit time between Hong Kong and
Hamburg by four days but at some benefit to both the
wallet and the environment. CMA CGM added a ninth ship
to its FAL1 service early in 2007 and is now repeating the
exercise on its FAL3 service which extends transit times in
each direction from 28 to 31.5 days.
Freight developments
According to CI’s “Freight Facts”, the average all-in freight
rate on the Asia-Europe westbound leg rose by 5% in Q4
2007 compared with the previous quarter, to $2,054/teu,
and by 33% on a year-on-year basis. On a weighted basis,
the increases were 3% and 28% respectively. Despite
the generous increase in freight on an annual basis, it is
reckoned that this uplift did little more than cover the rise
in uncovered fuel costs. The FEFC will clearly need to
implement more effective measures to protect itself
from high prices2 .
A major achievement was scored by FEFC members in
increasing the average all-in freight on the backhaul leg from
Europe by 16% in Q4, compared to Q3, despite sub-50%
utilisation. The Q4 rate of $904/teu was 14% above Q4
2006 and on a weighted basis the provisional gains came in
at 20% and 17% respectively. This was a product of FEFC
determination to raise rates even at the expense of losing
cargo. It was a Pyrrhic victory as eastbound traffic declined
by about 5% in Q4 compared with growth of 10% in Q1,
8.5% in Q2 and 6% in Q3.
The prospects for 2008 would appear to be good if the
FEFC enjoys similar levels of cargo growth as it did in 2007
and if it succeeds in better managing to pass through rising
fuel costs to shippers. One potential thorn in the side is
the introduction of new services using ships that have
been transferred from the weakening transpacific routes.
However, even after factoring in vessel transfers from the
transpacific and scheduled new deliveries, the FEFC is
confident that it can average vessel utilisation at well over
90%, thus retaining some bargaining power.
Despite high utilisation rates in January 2008, the rush
before Chinese New Year shuts down factories for several
weeks, some lines active on Asia-Europe saw rates come
under pressure. A $200/teu rise had been sought from
January 1st for cargo starting in the Far East but it seems
that successful implementation was patchy with some
lines even agreeing as much as $100 discount with some
shippers. This may have been a product of general turmoil
in shipping and financial markets around this time and thus
prove to be a temporary blip.
Figure 60. Trans-Atlantic container trade volumes
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NE Asia (China, HK, Japan, S. Korea, Taiwan) to SE Asia
SE Asia (S'pore, Malay., Philip., Indon., Thai., Viet.) to NE Asia
Global Insight’s figures for the transatlantic trades in 2007
(based on the first three quarters) put year-on-year growth
in the headhaul westbound direction from Europe to North
America at just 1.5% to 3.9m-teu. Trade growth was much
stronger in the eastbound direction from North America
to Europe at 8.2%, to 2.4m-teu, as the weak dollar/euro
exchange rate boosted exports from the US and Canada.
Growth in the westbound trades is expected to rebound to
2.8% in 2008 and 2.9% in 2009 while the equivalent figures
for eastbound trades are 6.6% in 2008 and 4.6% in 2009.
TACA numbers
Membership of the Transatlantic Conference Agreement
has dwindled to just five carriers. TACA does not publish
any trade data on its website so we have no figures
against which to benchmark GI’s numbers. The members
of TACA are:
Atlantic Container Line AB
Maersk Line
MSC – Mediterranean Shipping Co SA
Nippon Yusen Kaisha
Orient Overseas Container line
Evidence of US consumer weakness
In the absence of any trade data from TACA we have
some figures from PIERS Maritime Research suggesting
that transatlantic westbound cargo flows actually declined
by 6.5% in the first nine months of 2007, bringing vessel
utilisation down to just over 90%. For full year 2007,
westbound trade fell 5.7%, thus improving upon the
performance of the first three quarters. On the traditionally
weaker eastbound leg to Europe, PIERS registered a
17.1% gain in cargo movements which is helping to iron
out imbalances on the Atlantic despite the challenge of
reconciling the fact that 40’ boxes are preferred westbound
against 20’ eastbound. Total US-inbound box flows from all
directions declined 1.1% in 2007.
Freight developments
According to CI’s “Freight Facts”, the average all-in freight
rate in Q4 2007 on the dominant westbound tradelane,
from northern Europe to the East Coast of North America,
rose by 2% compared to the previous quarter to $1,766/teu,
and almost the same rate as a year earlier in Q4 2006. On
a weighted basis, these figures come out provisionally at
up 3% quarter-on-quarter and down 2% year-on-year. On
the eastbound leg, TACA’s average rate in Q4 rose by 3%
quarter-on-quarter to $1,147/teu which was 8% up on a
year earlier in Q4 2006.
On a weighted basis the eastbound changes were 10%
and 18% respectively as one carrier enjoyed a particularly
large gain in volumes. Unfortunately, uncovered fuel costs
would have worsened the net end result for carriers on the
Atlantic in 2007. TACA has made strenuous efforts to make
shippers aware of the difficulties with which it is faced by
rising fuel costs. However, in spite of this, its members
decided to postpone until further notice the fuel surcharge
of $147/teu that was announced in mid December 2007.
Figure 61. Intra-Asia container trade volumes
Global Insight’s figures for the S.E.Asia to N.E.Asia trades
in 2007 (based on the first three quarters) put year-on-
year growth at a robust 8.3% to 5.07m-teu. In the other
direction, trade between N.E.Asia and S.E.Asia rose by
10.1% to 4.25m-teu. Forecast growth in the dominant
eastbound trades stands at 7.7% for 2008 and 6.6% for
2009 when volumes should reach 5.82m-teu. Westbound
forecasts are for 8.7% growth in 2008 and 7.6% in 2009 to
reach a shade under 5m-teu.
These estimates thus foresee an average of 1% reduction
in the rate of growth in both 2008 and 2009 as slower
economic activity in the US has a knock-on effect in Asia
as many goods are swapped, processed and assembled in
Asia for final export to the US market. In spite of this, cargo
volumes are still expected to rise at respectable absolute
levels. Trade between the Far East and the Middle East is
rising fast with most of these volumes being captured in the
Asia-Europe trade figures.
75Global Shipping Markets Review 2008
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Total N-S trades, m-teu
Total E-W trades, m-teu
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VLBC
500
700
900
1100
1300
1500
1700
1900
2100
2300
1Q 9
4
1Q 9
5
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7
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8
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9
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0
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2
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5
1Q 0
6
1Q 0
7
Asia/US EB
Asia/US EB
Eur/Asia EB
Asia/Eur WB
US/Eur EB
Eur/US WB
$pd
Figure 62. Total container trade volumes
Total North-South trades rose 7.1% in 2007 to 21.93m-
teu. In 2008, growth is forecast to slow to 5.2% to reach
23.07m-teu and, in 2009, accelerate to 7.2% and 24.73m-
teu. Provisional 2007 figures for the Far East to Oceania
trade show a 13% year-on-year increase dominated by
fish, plastics, chemicals and paper. Far East to Africa trade
grew by 24% year-on-year and was dominated by metal
manufactures, plastics, specialised machinery, paper and
textile fibres with small declines in textiles and electrical
machinery. Far East inbound trade from Africa remained low
with declines in oilseeds, nuts and textile fibres balanced to
some extent by growth in chemical manufactures imports
from southern Africa.
Far East exports to Latin America rose 12% in 2007 and
featured increased movements of chemicals, road vehicle
parts and textile fibres which more than compensated for
falls in textiles, plastics and electrical machinery. GI’s macro
forecasts of Far East export trade is for growth to fall to
7% in 2008 after 11% in 2007 and 10% in 2006, reflecting
continued strong growth to Europe, the Middle East and
southern hemisphere but weaker trade expansion into
North America. Far East inbound will rise by 6.4% in 2008
compared with 10% in 2007 and 5.7% in 2006. Much of the
anecdotal evidence is that Asia’s rising export trade to the
southern hemisphere commodity-rich nations and to other
emerging markets will compensate for any weakness in the
US-inbound trades over the next few years.
Total East-West trades rose 8.4% in 2007 to hit 52.42m-
teu and are forecast to rise by 8.3% in 2008 to 56.79m-teu
and 7.2% in 2009 to 60.89m-teu in 2009. We have dealt
with the Asia-Europe, transpacific and transatlantic trades
elsewhere. Within the Asia-Europe segment, trade between
the Far East and the Indian subcontinent and Middle East
Gulf rose 18% in 2007. This growth was led by tobacco,
machinery of most types, rubber, furniture, plastics and
chemicals with some declines in textiles, fibres, telecoms
equipment and specialised machinery. Far East inbound
trade from the Gulf and subcontinent grew 12% dominated
by chemicals, plastics and paper with some small decline in
textiles and non-ferrous metals.
Earnings
Freight Rates
Figure 63. Trends in containership freight rates
76 HSBC Shipping Services Limited
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US$ pd
3,500-teu gearless
2,750-teu gearless
2,000-teu gearless
1999 2001 2003 2005 2007
5,000
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15,000
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y-o-ychange
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2,750-teu gearless
2,000-teu gearless
y-o-ychange
-60%
-40%
-20%
0%
20%
40%
60%
80%
1999 2001 2003 2005 2007
1,700-teu geared
1,000-teu geared
725-teu geared
The earnings cycle is apparent in our chart (based on data
from Containerisation International) of freight rate trends
since the beginning of 1994 on the world’s major container
trade lanes. Asia-Europe westbound stands out as having
been most successful at raising rates in 2007, not least as
it captures cargo movements from the Far East into the
thriving subcontinent, Middle East and Black Sea regions.
Sustained strong growth in the Asia-Europe trades managed
to soak up new capacity, and this challenge will persist
in 2008 as more ships are transferred from the weaker
transpacific routes.
This was in contrast to US-inbound routes which came
under pressure in the second half, even becoming
uneconomic as unrecoverable fuel rises hit the bottom
lines of carriers. However, rates on the US trades are
expected to improve to cover for bunker-related losses in
2007 which may otherwise continue in 2008 as oil prices
are forecast to remain high. Indeed, in Q1 2008, crude oil
is rising as the dollar weakens. The lines are threatening
capacity withdrawals should such conditions persist without
adequate recompense from shippers.
Time Charter
Figure 64. Average earnings change over time – the 2007 recovery
77Global Shipping Markets Review 2008
Containerships
Despite the logistical and fuel-related problems endured by
the lines in 2007, the tramp owners that provide ships on a
charter basis to the carriers enjoyed a recovery in earnings
in 2007– a quite remarkable feat given the shipyards were
turning out nearly 30,000-teu of new capacity every week.
Whether bareboating or time chartering ships into the lines,
these owners are insulated from changes in fuel costs
as these are picked up by the charterers. Brisk demand,
and quite limited available supply, permitted a recovery in
charter rates after they over-corrected to the downside
in 2006, having fallen by as much as 40% year-on-year
compared with 2005.
The Howe Robinson Container Index (HRCI) started 2007 at
1,011 and ended the year up 32% at 1,335 having peaked
at the end of September at 1,406 points. Short-term charter
rates were up a little over 10% for the smallest feeders but
gains exceeded 40% for the popular mid-sizes that were
in short supply. The cellular market for the 1,000 to 2,000-
teu sizes was helped by the booming dry bulk market that
removed the conbulkers and larger multipurpose types from
dedicated box trades as they could command higher charter
rates in the dry bulk trades than in moving containers.
Working up the scale from the handysize ships, we can
trace the development of period rates during the year
from reported fixtures. Wan Hai Lines paid $14,500 for
12 months on the Kyoto Tower (gearless 1,798-teu 2007)
in January to set the tone for the first quarter. The older
but geared Viking Eagle (2x20c 1,740-teu 2005) achieved
$15,500 when it fixed to Wan Hai in February and the
newbuilding GE Lessing (2x40c 1,740-teu 2007) fixed at
$16,150 to CSAV in April. Two year rates at this time were
around the $15,250 mark as per the Hansa Papenberg
(2x40c 1,740-teu 2007) fixture to CLAN. By June, rates had
increased further as NYK took Hansa Augustenburg (2x40c
1,740-teu, 2003) for 12 months at $16,000 per day.
The second half saw confirmation of the firming trend. In
July, Hansa Brandenburg (2x40c 1,740-teu 2003) went to
BTL for two years at $17,250 per day. CMA-CGM fixed
Helene Rickmers (3x40c 1,728-teu, 1998) for two years at
$17,850 in August but managed to secure the sistership
Dorothea Rickmers for a slightly cheaper $17,600 in
October. Period rates did not cool with the autumn weather
in the North however, as NDAL took Hansa Coburg (2x40c
1,740-teu 2007) for a year at $18,000 daily, which proved
to be the high water mark for this type of ship for the year.
As Viking Eagle came up for hire again, it was taken in
January 2008 by K-Line for 12 months at $17,850 per day,
neatly demonstrating that one year rates for handysize
containerships had increased by about 15% in a year.
On to the mid-sizes. In January, CMA-CGM took Pona
(gearless 2,741-teu 2007) for 12 months at $18,750.
Evidence of advancing rates was offered by Cape Mondego
(gearless 2,742-teu 2006) which was fixed for a year to
DAL for $20,750 a day in February. Days later, CMA-CGM
fixed HS Scott (gearless 2,778-teu 2007) for one year at
the same rate. In March, CSAV fixed King Andrew and King
Aaron (both gearless 2,741-teu 2007) for two years each at
$21,700 daily and, by April, IRISL fixed Westermoor (3x45c
2,730-teu 2001) for two years at $23,500 per day. At the
end of a quiet third quarter, CMA CGM fixed Euro Max
(gearless 2,732-teu 2004) for four years at $27,900 daily in
September. In January 2008, a little of the shine came off
when K-Line took Helene C (3x40c 2,450-teu 2006) for two
years at $27,100.
Rates for larger gearless ships also improved during
2007. In January, MSC chartered the 11-year old 4,159-
teu Germany for two years at $24,000 daily. In February,
HLL Pacific (4,701-teu 2002) went for five years to APL at
$27,500. CSAV paid a slightly higher $28,950 per day for
the forward delivery of the newbuildings Rio Cadiz and Rio
Charleston (4,300-teu 2008). In June, four 4,253-teu Schulte
newbuildings delivering in 2009 were fixed for five years
each at $27,000 while, in July, CSAV paid $34,700 for the
larger and prompter delivery Northern Grandeur (4,787-teu
1998), also for five years. Finally, in October, UASC paid a
comparable $30,125 per day for four gearless 4,253-teu CP
Offen newbuildings scheduled for delivery in 2009.
78 HSBC Shipping Services Limited
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Capesize
VLBC
500750
1,0001,2501,5001,7502,0002,2502,500
Maersk Broker Container TC Index
Howe Robinson Container Index
5,000
10,000
15,000
20,000
$pd $pd
$pd$pd
400 grd
650 grd
1000 grd
10,000
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1700 grd
2200 grd
2500 grd
10,000
20,000
30,000
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2700 gls
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Jan
– 05
May
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Jan
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May
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Jan
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May
Sep
Jan
– 08
Jan
– 05
May
Sep
Jan
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May
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Jan
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– 07
May
Sep
Jan
– 08
Jan
– 05
May
Sep
Jan
– 06
May
Sep
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– 07
May
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Figure 65. Recent change in TC rates and indices
Figure 66. Maersk Broker assessment of TC rates, $pd.
$pd 400 grd
650 grd
1000 grd
1700 grd
2200 grd
2500 grd
2700 gls
3500 gls
4000 gls
TC index
Jan-07 6,000 8,100 9,500 13,800 19,250 21,250 20,000 24,500 26,500 850
Feb 6,250 8,250 10,250 14,200 19,500 21,250 20,000 24,500 28,500 913
Mar 6,250 8,250 10,500 14,500 20,500 22,250 21,000 25,000 29,000 967
Apr 6,500 7,750 10,750 14,800 21,500 23,000 22,000 29,000 31,000 938
May 6,300 8,500 11,000 15,250 22,250 24,000 24,000 30,000 32,000 980
Jun 6,300 8,500 11,000 15,750 23,000 25,000 27,500 31,000 33,000 980
Jul 6,300 8,700 10,950 16,900 23,250 25,500 27,700 31,500 33,500 975
Aug 6,800 8,900 10,950 18,000 24,500 26,500 28,000 32,000 34,000 1,083
Sep 6,800 9,500 11,000 18,500 24,500 28,000 30,000 33,000 34,500 966
Oct 6,700 9,400 11,000 18,000 24,000 28,000 30,000 33,000 35,000 1,189
Nov 6,700 9,400 11,250 17,000 22,500 28,400 29,000 31,000 33,000 1,044
Dec 9,400 11,000 16,300 22,500 28,200 28,500 31,000 33,000 1,050 1,050
Jan-08 9,800 11,000 17,500 23,000 28,200 28,500 31,000 33,000 1,113 1,113
79Global Shipping Markets Review 2008
Containerships
According to this data from Maersk Broker, short-term 6-12
month time charter rates rose across the board in 2007.
The biggest rises are visible in the mid-sizes with the 2,700-
teu up 42.5% year-on-year and 2,500-teu up 32.7%. This
was followed by the panamax sizes with the 4,000-teu up
24.5% and the 3,500-teu up 26.5%. The best of the rest
was the flexible 1,700-teu geared size which was up 18.1%
and the worst performer was the smallest 400-teu feeder
at only 11.7%. The larger ships of post-panamax and above
are not included in this study as they tend to be chartered
longer term, often at levels linked to newbuilding prices.
In the larger sizes the lines prefer to either own tonnage
directly or engage them on long-term time or bareboat
charter from investor owners. German KG providers within
the tonnage tax regime would have to retain management,
and thus time charter, whereas a Singapore Business Trust
structure may favour finance leases, and therefore bareboat
charter. About 51% of all cellular capacity in service, and
53% of ships on order, is controlled by non-liner owners,
according to statistics compiled by AXS-Alphaliner.
Of ships in service of 7,500-teu capacity or more, only 37%
are owned by non-liner operators although this rises to 47%
when considering ships on order of this size. Evidently,
the lines would rather keep these increasingly large capital
costs off their balance sheets as newbuilding prices
continue to rise. For example, a 12,500-teu vessel now
costs around $170 million. Containerisation International
statistics confirm these numbers with 38% of ships in
service over 5,000-teu, rising to 51% of ships on order,
being controlled by non-liner operators. German owners
account for 3.4m-teu, or 63%, of total containership
capacity under charter with Greek owners in a distant
second place with 0.62m-teu, or 11.5%, of the
5.4m-teu total.
Recent examples of long-term charter deals on the big
ships include talk of MPC taking over eight to ten slots at
HHI, vacated last November by CP Offen, for 12,500-teu
vessels costing a reported $167m each and delivering
in 2010 and 2011. Some reports put the size as 13,100-
teu and it is suggested that these will be time chartered
to Hanjin for 12 years at $59,950 daily. Hanjin is also
taking three 10,000-teu HHI units from Danaos delivering
mid-2011 for 12 years at $54,000 daily. Meanwhile, Niki
Shipping of Greece is reported to have bareboated nine
13,000-teu STX units delivering in 2011 to Evergreen for
10 years at $51,000 daily.
Values
Figure 67. Clarkson nominal newbuilding and 10 year old prices prices
US$m 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
750-teu newbuild 18.0 17.0 13.5 14.0 14.0 13.0 13.0 17.5 19.5 20.5 20.5 21.0
750-teu 10-yr old 11.0 9.5 8.8 6.5 8.5 5.8 6.0 7.3 11.5 12.5 13.0 13.8
1,600-teu newbuild 27.2 27.2 22.2 23.7 26.9 22.2 21.1 26.5 33.4 34.8 36.6 36.9
1,600-teu 10-yr old 20.0 17.5 11.0 12.0 15.5 10.5 11.0 15.5 28.0 24.5 24.5 26.0
2,750-teu newbuild 38.0 38.0 33.0 37.5 31.0 31.0 29.5 37.0 46.5 48.5 51.0 52.5
2,750-teu 10-yr old 26.5 21.0 15.0 17.5 22.0 17.5 17.0 22.5 37.5 32.5 36.0 41.5
3,500-teu newbuild 52.0 50.0 42.0 38.0 41.5 36.0 33.0 42.5 53.0 52.5 57.0 59.0
3,500-teu 10-yr old 30.0 26.5 23.5 20.0 26.0 20.8 22.5 26.5 41.5 37.0 41.0 48.0
4,600-teu newbuild 52.0 50.0 42.0 38.0 41.5 52.0 45.0 56.5 71.0 67.5 71.0 78.0
6,500-teu newbuild 73.0 72.0 60.0 71.0 91.0 89.0 101.0 106.5
8,200-teu newbuild 125.0 134.0
Average newbuild 37.5 36.5 30.5 30.2 38.0 37.7 33.6 41.8 52.4 52.1 56.2 59.0
Aveerage 10-yr old 21.9 18.6 14.6 14.0 18.0 13.7 14.1 17.9 29.6 26.6 28.6 32.3
80 HSBC Shipping Services Limited
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Figure 68. Ten-year trends in newbuilding and second-hand prices
The above graphs are self-explanatory. The prices of
newbuilding containerships continued to rise in 2007,
particularly in the larger sizes, as they competed with large
bulk carriers for available shipyard space. The greatest
interest was for super post-panamaxes for which there is
no historical data. There was also upward movement in
10-year old secondhand values in the mid-size to panamax
segments as time charter earnings recovered during the
course of the year.
The spike in average newbuilding prices was at its highest
in November 2007 which coincided with the peak of
the capesize-led dry bulk market. Sharp rises in dry bulk
earnings in the fourth quarter inspired more large bulk
carrier orders at the risk of shutting out new containerships.
The response was to agree more inflated prices of up
to $170m for a 13,000-teu vessel. While some owners
withdrew from this game, either cancelling orders or
vacating options, others seemed willing to step in. The
availability of charters, which generally equated to the
accessibility of finance, played its part. We have no doubt
that some orders will be lost to tighter credit conditions and
resistance from the lines to paying over $60,000 daily.
81Global Shipping Markets Review 2008
Representative Sales
As consolidation continues in the industry, we continue to
see a number of en bloc secondhand sales. They cannot
really be described as representative as they encompass
ships of different ages and sizes and were often
executed for varying reasons including internal corporate
purposes. For instance, in January 2007, OOCL sold eight
containerships averaging about 5,000-teu for $480m in
a sale and leaseback deal. The buyer was reported as
a Luxembourg interest with HSH Nordbank, ING and a
subsidiary of OOCL all providing capital into the lessor.
The ships were bareboat chartered back to OOCL for eight
years with purchase options exercisable yearly from January
2010. The money raised was partly used to finance four
8,063-teu newbuildings that OOCL had ordered in October
2006 from Samsung for $477m. While we have included
this in our list of containership transactions, we have tried
to concentrate on trade sales, but refinancing remains a
characteristic of the industry.
Containerships
In May, CMA-CGM paid $93m each for Cosco Charleston
and Cosco Norfolk (both 5,100-teu Hanjin 2007). A few
months later, in August, the US fund Fortress used its
Singapore affiliate Seacastle to acquire four 5,050-teu
vessels, all built at Hanjin Pusan in 2006, MSC Mara, MSC
Benedetta, MSC Debra and MSC Olga, for $90m each. The
sale came with a 4-year time charter back to MSC at a rate
believed to be in the mid to high $30,000s daily. Market
guidance can be taken from the 5-year charter in August
of Northern Grandeur (4,787-teu 1998) to CSAV at $34,700
per day. Press reports at the time suggested that Seacastle
had already spent $640m on ships during 2007, but this
was their largest secondhand acquisition to date. Seacastle
was also reported to have signed contracts for four 4,000-
teu containerships at DSME with four other secondhand
purchases beefing up its boxship fleet during the year.
The Seacastle purchases illustrate the rising attraction of
shipping to investment funds as it chimes well with the
commodity price boom and the focus on emerging markets
and globalisation. Containerships lend themselves well to
investors as they are more visible, easier to understand,
get less knocked around than bulk carriers and carry less
obvious risks than tankers. It is also possible to lock into
period rates with recognisable names whose tenor can
be struck so as to maximise the twin objectives of, one,
earning sufficient free cash to pay dividends to investors
and, two, reducing the residual value upon charter expiry
to acceptable levels. The German KG system started in the
container sector and has since diversified into tankers and
bulk carriers in search of higher returns, taking on in the
process an even more complex range of variable ownership
costs and exposures.
Outlook
Past scepticism of the durability of earnings in the light of
increasing capacity has been confounded in recent years by
the market’s enduring ability to absorb fresh deliveries. This
has been greatly assisted by several years of 20% demand
growth on the deepwater Asia-Europe trades which link
the world’s factories in the Far East with the globe’s new
consumers in the subcontinent, Middle East, Russia, the
Republics and enlarged Europe. The strength of demand
has been assisted by the braking effects on supply of
congestion in European ports, the Suez and Panama canals
operating at maximum capacity and extra ships being put
onto service loops in order to reduce speeds and conserve
fuel. Environmental and security imperatives, together with
rail and road bottlenecks in North America and Europe, will
continue to slow down the process of moving containers
through ports and onto end-users, and thus constrain
effective shipping supply.
However, since August 2007, we are becoming more
aware of the broader implications of what started as a
US subprime housing crisis but which is now infecting
global financial markets and restricting access to credit.
As households spend less, and businesses defer capital
spending and new hiring, consumption will weaken in the
transatlantic economies. Hoping that rising consumerism
in emerging markets can compensate for spending
cutbacks in the US, after years of excess, is bordering
on wishful thinking given the sheer scale of US retail and
capital spending power, but it should at least provide some
damage limitation. A recession in the US would be harmful
to shipping as declining imports will continue to shift
surplus tonnage capacity onto healthy routes, such as Asia-
Europe, and combine together with new deliveries to cause
oversupply that will be sufficient to undermine freight rates.
The lines are challenged as to how to persuade shippers
that there is a price to be paid to guarantee regular sailings
and timely deliveries, and that shipping is vulnerable to
sharply rising costs.
But, that is very much the conventional view. On the supply
side, we can take positives from the fact that capacity
analysis uses nominal figures that do not represent actual
available space. Also that real tonnage supply is being
constrained by infrastructure limitations and capacity
management as the lines idle ships in order to keep
utilisation ratios up. Further, that some 10-20% of the fully
cellular containership orderbook may be overstated as it is
beyond financing. A more realistic assessment of supply
growth would bring it much more into line with forecast
demand growth, even as the demand structure is changing
with another turn of the kaleidoscope. Trade into America
might be flat or falling, even as its exports are rising, but
the lost exports to the US are being replaced by rising
exports between emerging economies that are riding on
the crest of a wave created by higher commodity prices.
Shuffling strings of ships between routes to best match
them to changing patterns of demand is another arresting
mechanism on real tonnage supply, and a contributor to
better balance.
82 HSBC Shipping Services Limited
83Global Shipping Markets Review 2008
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84 HSBC Shipping Services Limited
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85Global Shipping Markets Review 2008
Shipbuilding
Overview
2007 was a record year for vessel contracting in the three
main sectors. Demand was led by dry bulk where very
high spot earnings were pushing up demand for all sizes
in the secondhand market. Strong medium to long-term
period rates, and the availability of such employment on
a forward delivery basis for larger ships, were pushing up
newbuilding and resale demand. This had a positive impact
on bulk carrier prices that finally rose to levels that appealed
to builders. The switch in focus allowed tankers some
breathing space although the containership sector refused
to stand down and instead stepped up with block orders
for super post-panamax sizes. These giant containerships
are very much the preserve of the world’s biggest yards in
South Korea, which tend to favour large series-built vessels,
and this gave China some elbow-room in which to secure a
large proportion of the bulk carrier orders.
Much has been made of the explosive growth in Chinese
shipyards, some of which are taking orders before the
intended greenfield sites have even been developed. Hefty
down-payments have been used to finance the yards’ real
estate, building and equipment procurement costs. Other
yards that are at more mature stages of development still
need large up-front payments from contracting owners
in order to pay for equipment, labour, steel and general
construction costs. Clearly, this is a risky business model
and it represents a potential minefield for those owners
unfamiliar with business practices in China. There is
no doubt that some shipyards will be unable to secure
refund guarantees from reputable banks while others
are suspected of intentionally not having secured these
guarantees as a device for voiding low-priced contracts.
Most of the new yards are small entry-level businesses,
often with sound provincial government or private
enterprise backing, that aim to cut their teeth on less
complex small bulk carriers as a stepping stone to, well,
LNG carriers and semi-submersibles eventually. Rising cost
pressures impact most heavily upon the lowly capitalised
ventures. They are faced with shortages and increased
costs of skilled labour, main engines, steel, equipment and
insurance and currency risk. Some yards are factoring in a
10% appreciation of the renminbi against the dollar in 2008
on top of the usual hikes in manpower, insurance and steel.
Inadequate provision was made for these factors in the
planning stages and now they are hitting home. Chinese
yards are not alone, as smaller yards across Asia face
similar problems.
Problems related to rising costs, inexperienced labour and
technical difficulties are being felt across Asia and are the
product of a headlong rush into shipbuilding in order to
exploit record high prices and generous up-front payments
– call it opportunism if you will. In the cool light of day, many
of these yards are incapable of delivering the products they
have sold and lack the financial strength to stand the test of
time. This even applies to yards in South Korea, the beating
heart of world shipbuilding, and to builders in Indonesia,
Vietnam and India. Today, the dry bulk and tanker fleets
have become hard to quantify, because of the large number
of big tankers that are slated for conversion. The orderbook,
which is a compilation of guesswork at the best of times,
has now assumed new levels of unreliability.
Highly generalised estimates suggest that anywhere
between 25% and 50% of the entire Chinese dry bulk
orderbook may either never deliver or be seriously
delayed, possibly involving cash calls on owners to secure
completion. It would be prudent to build in a failure rate at
the lower end of that range for other over-stretched Asian
yards. Given that orders are already spread out over the
next five years, delays and non-completions will radically
alter the appearance of the orderbook and its impact on
forward markets. The real orderbook may be watered down
to the extent that it no longer threatens to swamp future
demand. The 1% of GDP US stimulus package and the
Fed’s move towards negative real interest rates may pull
the US out of its current problems in 2009, coinciding with a
reconfigured supply scenario.
86 HSBC Shipping Services Limited
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Containerships (000-teu, RHS)
Delivery Volumes
Figure 69. Three-month moving average of capacity delivered by main shipytypes
In analysing delivery trends, we have taken the three-
month moving average in deliveries in order to eliminate
random spikes and better illustrate the trend. The rising
delivery trend in tankers from mid-2002 was in part related
to the spate of product tanker orders that followed the
Erika sinking in December 1999. Containership deliveries
tailed off in the second half of 2007 reflecting a pause
in ordering some years earlier and, conversely, this gave
way to a higher rate of ordering in this period as if by way
of compensation. After a period of rising delivery growth
between end-2003 and end-2005, there was a cyclical
levelling off in bulk carrier deliveries. The 2007 dip in
deliveries coincided with record earnings and values in the
dry bulk sector. This triggered a wave of ordering that will
reach a delivery crescendo in 2010, according to the current
flawed interpretation of the orderbook.
87Global Shipping Markets Review 2008
Shipbuilding
Prices
Figure 70. Newbuilding prices continue up, up and away
Year-end prices 2003 2004 2005 2006 2007
Ship Type Size $m $m $m $m $m
VLCC 300,000-dwt 77.0 110.0 120.0 129.0 146.0
Suezmax 150,000-dwt 51.5 71.0 71.0 80.5 91.0
Aframax 110,000-dwt 41.5 59.0 58.5 68.5 72.5
Panamax 70,000-dwt 37.5 48.0 50.0 58.5 63.5
MR Products 47,000-dwt 31.5 40.0 43.0 47.0 52.5
Capesize 170,000-dwt 48.0 64.0 59.0 68.0 97.0
Panamax 75,000-dwt 27.0 36.0 36.0 40.0 55.0
Handymax 51,000-dwt 24.0 30.0 30.5 38.5 48.0
Handysize 30,000-dwt 18.0 23.5 25.5 28.0 34.5
Post-Panamax 8,200-teu - - - 125.0 134.0
Post-Panamax 6,500-teu - - - 101.0 106.5
Panamax 3,500-teu 42.5 53.0 52.5 57.0 59.0
Handysize 1,600-teu 26.5 33.4 34.8 36.6 36.9
Healthy price rises across all disciplines were registered
in 2007 as robust demand combined with rising costs and
a weaker dollar. Not surprisingly, the highest gains were
made in the capesize bulk carrier segment where average
prices rose 42.5% during the year from $68.0m to $97.0m.
Next was the panamax bulk carrier, up 37.5% from $40.0m
to $55.0m, and the handymax, up almost 25% from $38.5m
to $48.0m. The price of a newbuilding VLCC rose over 13%
in 2007 from $129.0m to $146.0m despite a 9% fall in
average spot earnings with the only glimmer of excitement
all year being the belated Q4 rate spike. Surprisingly, the
price of a suezmax gained almost 12% despite the fact that
average spot earnings fell 16% during 2007. Containers
enjoyed only minor rises of maximum 7% even though
demand for super post-panamaxes was brisk. Demand
was only a partial factor in price changes in 2007.
Shipyards will claim that they have done their best to keep
newbuilding prices down despite big increases in their own
costs. The correlation between steel plate prices and ship
prices is long-established. In Figure 71 we have compared
the CRU Asian steel price index and the Clarkson’s all-ships
newbuilding price index, both rebased to January 1998 to
give us a ten-year time series. On this evidence, shipyards
would be justified in saying that they have kept their ship
price rises below their steel cost increases. As there is still
no forward market for steel, shipyards have to take a view
on future prices, thus assuming major risks.
In a bull steel market, such as we have witnessed in the
current decade, shipyards can only behave reactively to
changes in steel prices, so the newbuilding price index
would be expected to slightly lag the steel price index.
In the context of recent and anticipated future steel price
increases in 2008, shipbuilders will be subject to a margin
squeeze on the majority of their current backlog of projects
for which steel supply is not yet contracted. This will
encourage them either to lift newbuilding prices for new
orders even further or to hold back from marketing far-
forward berths until their input costs and future demand
are more clear.
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CRS Newbuilding price indexR2 = 0.7511
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Asian steel price index
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All data re-based to 01-Jan-07
The recent agreement between the world’s leading iron ore
suppliers and major steel mills sees FOB iron ore prices
raised a further 65-71% per tonne, the price differential
based upon quality, for the new contract year commencing
April 1st 2008. This is slightly higher than was expected
and was agreed by Japanese and South Korean steel mills
that may have tired of waiting for Chinese steel mills that
originally had the lead in negotiations. One large Korean
shipbuilder estimated that this large increase in raw
material cost will translate into a 10% increase in the cost
of shipbuilding steel plate, and it plans to pass this on to
customers in prices. This could result in a typical 3% price
increase. Japanese builders are known to be pressuring
their steel suppliers to hold prices as it is now becoming
difficult to price forward contracts and we may move
towards a model of variable pricing linked to input costs.
Another problem for Asian shipyards is that they pay
for their steel supplies in the currency of the supplier:
usually the won, yen and renminbi all of which have been
appreciating against the US dollar, the currency in which
they invariably price ship sales. The currency exposure can
be exacerbated by the sourcing of, for example, main and
auxiliary engines and equipment from other Asian countries
and paints and cargo pumps from European suppliers,
introducing euro exchange rate risk. In the last couple of
years, the renminbi and yen have risen steadily relative to
the won. This has conferred an advantage upon Korean
builders who earn relatively more local currency, upon
conversion back from US dollars, than their Chinese and
Japanese competitors. However, some of this advantage
is lost when they import steel plate and machinery from
suppliers in these very same neighbouring countries.
Figure 72. Korean exporters have a FX advantage
The renminbi and the yen appreciated by 10% and 16%
respectively against the dollar between the start of January
2007 and 10 March 2008. In that time the South Korean
won has weakened by about 4% having traded in a
narrower range. In reality, the Japanese builders are largely
insulated from this development by having a huge domestic
customer base and a small overseas clientele that generally
pays in yen. China has an expanding domestic customer
base which may be increasingly willing to make partial
or total payments in renminbi, but the large overseas
customer base has preferred to stick to dollar contracts.
89Global Shipping Markets Review 2008
Figure 71. Steel prices and newbuilding prices (indices rebased to Jan-1998)
Shipbuilding
Taking the list from the top down. It is no surprise to see
a slowdown in orders for gas carriers as LNG liquefaction
plants and petrochemical plants have been faced with
lengthy commissioning delays flowing from manpower
and equipment shortages, technical challenges and
environmental and regulatory obstacles. Simply put, the
market is oversupplied until beyond 2010, so a contracting
sabbatical is in order. Car carriers had no such problems in
2007 as demand for cars amongst the emerging consumer
classes is driving import growth in places such as China and
India. Ironically, those countries will increase their exports
of fuel-efficient compacts and hybrids to European and US
markets as consumers there feel the full impact of high
and unregulated gasoline prices, rising fuel taxes and
‘green’ pressure.
General cargo ships, which includes multi-purpose types,
experienced a slower pace of ordering in 2007 after
heavy contracting in both 2005 and 2006. Amongst other
uses, these types are popular in the project cargo trades
and these are rising around the globe as infrastructure
spending and investment increases in the emerging market
economies. After a very strong year in 2006, tanker ordering
fell 21% in 2007 but was still well ahead of the previous
four years in numerical terms. Containerships remained
broadly in line with the average of the previous four years,
but the deadweight and capacity of individual orders
was definitely much increased. Reefers remained lightly
ordered as the sector attempts to convince its customers of
superior customer handling relative to containers, while the
lines consistently contest such allegations and undercut on
freight in order to increase their cold market share.
The sector that won the Oscar was dry bulk which
registered a numerical year-on-year increase of 162% to
1,630 ships ordered. This was 222 ships more than was
ordered in the previous three years combined. Astonishing
earnings and rising secondhand values have encouraged
the large-scale reinvestment of profits back into the dry bulk
sector. You can cut this in a number of ways. Reinvesting
in shipping probably looks to be a better bet than investing
in equities, government bonds, residential or commercial
real estate and is a proxy for investing in emerging market
growth and hard and soft commodity demand. You get to
cover it all. Also, a ship lasts at least 25 years and, in 2007,
bulkers of that vintage were changing hands for as much as
double what they were originally contracted for, making an
unrivalled return over the life of the asset for that now rare
breed of cradle-to-grave owner.
90
Contracting
Figure 73. Total annual # contracts placed by ship type
# contracts signed 2002 2003 2004 2005 2006 2007
LNG / LPG 33 41 124 151 114 86
Ro-Ro 37 72 111 94 73 120
General Cargo 85 137 185 345 363 290
Tankers 356 661 666 597 1,122 882
Box Ships incl. Reefers 124 488 453 579 492 506
Bulk Carriers 306 467 399 388 621 1,630
Other 102 122 330 605 725 655
Total 941 1,988 2,268 2,759 3,510 4,169
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2007Ro-Ro3%
GeneralCargo7%
Tankers21%
Box Ships incl. Reefers12%
BulkCarriers
39%
Other16%
LNG / LPG2%
2006Ro-Ro2% General
Cargo10%
Tankers32%
Box Ships incl. Reefers14%
BulkCarriers18%
Other21%
LNG / LPG3%
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CGTEurope /
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ROW
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Korea
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China /
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HK
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Figure 74. Contracts placed in 2006 and in 2007
The year-on-year numerical increase in bulk carrier orders
is plain to see as it rose to 39% of total orders in 2007
compared with 18% in 2006. The share of tankers fell
to 21% from 32% while boxships and reefers slipped
to 12% from 14%. Amongst the bulk carriers ordered
were many capesize and very large ore and bulk carriers
that will swell the fleet in capacity terms as this decade
draws to a close. Many of these ships have been ordered
against lifetime contracts or cargo guarantees, an evolution
of the shikumisen deals of old, and will remove a lot of
existing and incremental growth cargo from the spot
market. Investment in these ships is a bet on constant and
elevated steel demand growth as emerging markets, chief
amongst them China, India and the Middle Eastern nations,
industrialise and urbanise. This and the knowledge that,
for the patient owner willing to play the long game, even
ill-timed investments are usually and eventually rescued by
future market cycles.
91Global Shipping Markets Review 2008
Shipyards’ Market Share
Figure 75. Shipbuilding nation market share in CWT and DGT
Shipbuilding
35%
41%
20%
3%1%
China / Taiwan / HK
Korea
Japan
SE Asia / Oceania
Subcontinent
CGT
CGT 21%
16%
13%9%
7%
7%
5%
5%
4%
8%
Germany
Italy
Norway
Romania
Netherlands
Poland
Russia
Croatia
Spain
Finland
Other
5%
In deadweight terms, the collective Chinese and Taiwanese
orderbooks comprise 36% of all ship orders, just ahead
of South Korea with 35%. By this measure, Japan finds
itself in third place with a 21% share. In Compensated
Gross Tonne terms, a uniform measure of man-hours and
value-added, South Korea retains its crown with 35%
of orders, followed by the Chinese builders in second
place with 31% and Japan in third place with 17%. South
Korea’s unchanged percentage of orders is a reflection of
the larger number of more sophisticated ships that it has
captured, such as gas carriers, drillships, FPSOs and semi-
submersible rigs. It is conscious of the need to stay ahead
of China on the technology curve in defence of its title.
China’s apparently large increase in market share in 2007
is a tribute to undimmed ambition and to its ability to
attract inward investment and technology transfer in
pursuit of its goal.
Figure 76. Distribution of Asian orderbook in CGT
Drilling down into the purely Asian shipbuilding market,
South Korea leads with a 41% share, followed by China
with 35% and Japan lagging behind with 20%. Vietnam,
India, Indonesia and others will no doubt increase their
market share in future but their hunger for new orders may
be beyond their ability to digest them in the near term. As
we have already mentioned, the same observation can be
applied to a yet-to-be-quantified number of new Chinese
shipyards. Shipyard delays, non-performance, bankruptcies
and failed renegotiations will serve to reduce the size of the
forward orderbook, particularly in the bulk carrier sector.
Figure 77. Distribution of European orderbook in CGT
The European orderbook is dominated by Germany
and Italy. Germany has a larger number of shipyards
building diversified products ranging from cruiseships
and containerships to bulk carriers and chemical product
tankers. In CGT terms, the labour and value-added content
of cruiseships on order at Meyer Werft would make a
significant contribution to Germany’s leading position. It
has a total of ten cruiseships of over 1m gross tonnes
on order for Carnival’s Aida, Royal Caribbean’s Celebrity
and the Disney brands. Italy is even more beholden to
cruiseships, with Fincantieri being Carnival Corporation’s
favoured shipyard. The group has twelve cruise ships on
order totalling almost 1.3m-gt for its P&O, Princess, Holland
America, Costa, Carnival and Cunard brands. Carnival
has a further five vessels of about 325,000-gt on order at
the other Italian yards of T Mariotti and Sestri-Cantieri for
Carnival, Costa and Seabourn.
Cruise orders are largely responsible for Germany and
Italy’s place at the top of the league table and, along with
other passenger ships such as ferries, are vital to Europe’s
continued presence in shipbuilding. So far, the ambitions
of shipbuilders in Asia to enter the cruise market have
been kept at bay. Only about 10% of the building work
is in the hull form, with the vast majority of the work
being in outfitting. This employs a vast array of specialist
subcontractors that Asian yards lack, thus frustrating
their efforts. Mitsubishi did deliver two ships in 2004 for
Princess, the Sapphire Princess and Diamond Princess,
otherwise Asian builders have been absent. Samsung is
known to be keen to enter the sector while STX has stolen
92 HSBC Shipping Services Limited
a lead in buying 39.3% of Aker Yards via STX Norway. This
could be the vehicle through which the Asian yards will
finally penetrate the cruise market.
Europe is far from ceding its dominant position in passenger
ships and will jealously guard its primacy having lost most
conventional commercial ship types to shipbuilders in
Japan, South Korea and China. Technology, labour and
productivity advantages, anchored to large homegrown
customer bases, have given the Asian shipyards the edge
on most cargo ships although Europe still holds sway in
certain niche sectors, usually for European customers.
These include providing a range of products for the UK and
Norwegian offshore markets, although large rigs, semi-
submersibles, FPSOs and many PSV and AHTS orders have
gone the same way as the cargo ships, to Asia. Smaller
containerships in Germany, product tankers in Croatia and
car carriers in Poland are illustrations of a continuing, albeit
weakening, presence in the commercial ships market.
Figure 78. Global orderbook in dwt by yard nation
Yard nation Delivery in 2008
Delivery in 2009
Delivery in 2010
Delivery in 2011
Delivery in 2012
Delivery in 2013
Grand Total Market Share
China 26,073,913 49,876,882 65,233,054 31,649,424 3,909,764 176,743,037 35.69%
Korea 32,770,877 56,102,671 55,232,770 26,810,300 1,782,700 172,699,318 34.88%
Japan 28,997,055 28,321,592 23,842,168 15,040,690 6,015,900 532,800 102,750,205 20.75%
Vietnam 1,689,855 1,541,020 1,248,820 497,450 6,550 4,983,695 1.01%
Philippines 429,477 411,200 2,392,000 1,372,000 290,000 4,894,677 0.99%
Turkey 1,396,495 848,496 869,978 751,000 211,000 359,000 4,435,969 0.90%
India 467,362 1,027,612 1,489,414 895,000 398,000 96,000 4,373,388 0.88%
Romania 880,644 866,402 936,407 325,000 195,000 3,203,453 0.65%
Germany 1,439,332 1,033,561 452,303 43,702 2,968,898 0.60%
Brazil 92,387 979,600 1,085,000 418,000 2,574,987 0.52%
Denmark 757,000 766,000 383,000 1,906,000 0.38%
Croatia 681,529 787,020 203,851 103,600 1,776,000 0.36%
Poland 1,144,118 207,783 147,101 8,001 1,507,003 0.30%
Iran 792,600 654,000 53,000 1,499,600 0.30%
USA 398,661 351,082 373,900 143,000 1,266,643 0.26%
Russia 646,985 284,370 118,640 71,000 13,000 1,133,995 0.23%
Netherlands 677,759 219,605 41,502 18,600 5,800 963,266 0.19%
Norway 392,740 310,651 124,007 54,100 881,498 0.18%
Unkown 324,968 330,453 86,303 741,724 0.15%
Bulgaria 127,780 161,280 83,970 223,200 55,800 652,030 0.13%
Singapore 235,510 244,982 76,901 7,000 564,393 0.11%
Spain 360,467 100,071 58,323 15,420 534,281 0.11%
Indonesia 337,953 141,300 9,003 4,500 492,756 0.10%
Italy 149,137 111,502 44,546 25,551 10,000 340,736 0.07%
Portugal 170,504 132,453 302,957 0.06%
Argentina 27,001 4,500 141,000 47,000 219,501 0.04%
Dubai 107,402 100,000 207,402 0.04%
India 79,750 25,150 16,200 121,100 0.02%
Hong Kong 17,400 47,800 30,400 95,600 0.02%
Slovenia 55,590 19,500 75,090 0.02%
93Global Shipping Markets Review 2008
Shipbuilding
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$300
$400
$500
$600
$700
$800
$900
Hot Rolled Plate$ per tonneHot Rolled Coil
Jan
– 03 Ju
l
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- 04
Jul
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- 05
Jul
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- 07
Jul
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100
120
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160
180
200
220
240 Global Index
Asia Index
Flats Index
Jan
– 04
May
Sep
Jan
- 05
May Sep
Jan
- 06
May
Sep
Jan
– 07
May
Sep
Jan
- 08
Malaysia 20,046 23,900 43,946 0.01%
Ukraine 18,601 19,065 37,666 0.01%
Bangladesh 11,000 20,500 31,500 0.01%
Chile 13,500 4,400 4,400 22,300 0.00%
Sri Lanka 6,350 2,700 9,000 18,050 0.00%
Israel 4,500 13,500 18,000 0.00%
Finland 17,704 17,704 0.00%
Tunisia 10,400 5,200 15,600 0.00%
Canada 571 13,002 13,573 0.00%
Mexico 13,200 13,200 0.00%
France 10,800 10,800 0.00%
Saudi Arabia 4,800 4,800 9,600 0.00%
Thailand 7,000 1,000 8,000 0.00%
Australia 2,232 2,682 4,914 0.00%
Nigeria 2,900 2,900 0.00%
Greece 1,960 1,960 0.00%
Thailand 1,700 1,700 0.00%
Abu Dhabi 157 157 0.00%
Grand Total 101,748,413 146,119,889 154,907,461 78,523,538 12,893,514 987,800 495,180,615 100.00%
Rising Input Costs
Figure 79. Steel prices heading for records
Steel prices are set to rise further now that the world’s
largest steel mills have agreed to higher 2008/9 FOB
contract prices for iron ore fines commencing 1st April
2008. Nippon Steel, JFE Holdings and POSCO were the
first to strike a deal with Brazil’s Vale with contracted
prices rising 65% above the levels prevailing for the 2007/8
financial year. These higher prices should be viewed in the
context of spot prices that had easily exceeded double
the current year’s contract prices as supply constraints
in Australia, India, South Africa and Brazil have limited
availability of product. German steelmaker ThyssenKrupp
and Italy’s Ilva agreed similar levels and Baosteel finally
struck its own deal with Vale towards the end of February
which will see fines rise 65% to $118.98 per tonne FOB
and higher quality Carajas ore rise 71% to $125.17 from
$72.20 per tonne FOB. Baosteel is expected to raise Q2
prices of its main products, including hot rolled plate, by
about 10% in response to rising input costs.
Figure 80. Asian steel index now running higher
than global index
94 HSBC Shipping Services Limited
1 To qualify, since August 2007 Fed rates have decreased by 225bps, faster than bank loan rates might typically have risen, but reduced tenors and more restrictive loan covenants have generally made borrowing less attractive.
Asian steel prices are now higher than global prices as
demand is focused upon Asian buyers. Shipbuilders in
Japan and Korea are lobbying steelmakers not to raise steel
plate prices but this is likely to be to no avail as the steel
industry is facing minimum 65% increases in contracted
iron ore prices and possibly a doubling of hard coking coal
contract prices. Samsung Heavy Industries has already
made clear that it will pass on the full impact of increased
steel to shipowners suggesting that newbuilding prices
will continue to be well supported in 2008. Only should
shipbuilding capacity get well ahead of newbuilding demand
in coming years will prices come under pressure. Future
shipbuilding capacity has become as murky as forward
demand given the huge size of the orderbook, but average
year-on-year dry bulk rates look certain to fall by latest 2010
and this will impact on demand.
Figure 81. Leading customers of global shipyards by CGT
Owner Dwt # ships CGT
MOL 12,057,240 125 3,834,969
NYK 11,853,400 122 3,544,800
COSCO 12,599,800 141 3,441,345
C P Offen 6,711,000 77 2,986,704
A P Moller 6,173,398 118 2,824,248
Qatar Gas 3,340,000 25 2,651,844
China Shipping 10,708,700 80 2,401,078
K-Line 7,791,243 73 2,349,546
Cido Shipping 6,688,484 108 2,288,387
Carnival 121,912 21 2,108,497
CMA-CGM 4,519,180 46 2,023,436
Peter Dohle 4,404,720 71 2,012,811
MSC 2,614,002 33 1,699,007
John Fredriksen 7,184,802 62 1,548,736
Zodiac 3,039,110 45 1,459,021
Rickmers Reederei 2,760,310 56 1,426,654
Seaspan 3,036,200 39 1,418,186
Danaos 2,894,500 34 1,343,383
Geden Line 5,203,900 53 1,239,077
NSC Schiffahrt 2,529,100 40 1,230,510
It is interesting to see the Japanese powerhouses of MOL
and NYK leading the customer chart as they embark on
a massive fleet renewal program. In third place is Cosco
as it attempts to capture a larger share of China’s import
and export trade, as directed by the central government,
supported by China Shipping in seventh place. Other
owners in the list with multi-discipline orders include K-Line,
95Global Shipping Markets Review 2008
Cido, AP Moller and Geden. Container-orientated owners
include CP Offen, CMA-CGM, Peter Dohle, MSC, Rickmers,
Seaspan, Danaos and NSC and therein lies the roots of the
massive pipeline of large containerships. Specialist owners
include Qatar Gas with its large block of huge LNG carriers
and Carnival with its panoply of cruise ship orders.
Long-term Over-Capacity Looms
It is difficult not to believe that we are faced with the
prospect of significant over-capacity once we enter the new
decade. At the end of 2007, there was minimal available
capacity in 2010, something in the order of only 10m-dwt.
An estimated half of 2011 is still available and the vast
majority of 2012 and 2013 capacity is unspoken for. Unless
demand continues at the supercharged levels of the past
four years, as well it might, then there should be a cyclical
slowdown in fresh ordering as owners absorb and take
stock of their existing commitments. Prices are now at
record highs and, as they are now driven as much by cost
factors as demand, are becoming divorced from earnings.
A capesize ordered today needs to earn more than 40%
greater net profit today in order to break even than it did
one year ago and, by implication, this will be achieved over
a longer period and maybe several or multiple cycles.
We have already drawn attention to widespread suspicions
that many ships, especially bulk carriers, that have been
ordered will never be delivered. This will result from
new shipyards not getting built and others struggling
to secure mandatory refund guarantees and adequate
financing to meet the challenge of rising costs and greater
environmental and regulatory scrutiny. Ships now have
to be built to more exacting rules and some new yards,
particularly in broader Asia, will not be able to cope. Steel
cost pressures have already caused one Korean yard to
switch to building single-hull bulk carriers having agreed
to build double-hulls. Other yards are finding that they
cannot compete with the established majors when it comes
to procuring scarce supplies of engines and equipment
and they will either delay or default. These failures will
considerably ease actual supply to more comfortable levels.
On the buyer’s side, finance is now an issue as we have
gone in one short year from a market awash with bank loan
liquidity to a market starved of debt finance opportunities1.
Shipbuilding
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5
10
15
20
25
30
Pre
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2
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
m-dwt
Handysize
Handymax
Panamax
Post-Panamax
Capesize
VLBC
3 4 10
79
16216
5
165
150
105
165 16
1
152
0
20
40
60
80
100
120
140
160
180
2008 2009 2010 2011 2012 2013
m-dwt Capacity Forecast Available Capacity at end-07
Many owners have accrued huge cash piles in recent years
so they have the means to increase the equity portion
to 100% if necessary. But, this will pay for fewer ships
and most owners, especially the newer breed of investor
owners, need the debt leverage in order to maximise
returns to levels either promised or expected. We know of
blocks of capesize bulk carriers and large boxships that have
no debt finance in place. Failure to secure bank finance may
lead to forced resales and even default. Banks are now very
choosy to whom they lend and it is on the basis of much
higher spreads and must more restrictive covenants. A pair
of VLOCs were recently cancelled on the basis of adverse
banking terms despite having 15-year employment.
Figure 82. Capacity forecast significantly upgraded
We have had to increase our capacity forecast to take
account of the amount of ships on order. However, it seems
likely to us that nominal capacity will be a very poor guide to
shipyard performance in the coming years.
Shipbuilding Outlook
We have a record orderbook which spans all three main
sectors and makes the armada of tanker deliveries of the
1970s look more like a flotilla today. That over-indulgence
gave way to a 15-year bear market for tankers. Today we
are assuring ourselves that this time it is different because
we have a get-out-of-jail-free card in the form of a second
industrial revolution as emerging markets urbanise at an
astonishing pace. There is little doubt as to the validity of
this observation but the process is unlikely to be without
some bumps along the road, and those may prove painful
should the full orderbook deliver and should owners fail to
curb their enthusiasm for new ships. However, there are
real restraints upon the nominal orderbook as shipyards
have promised more than they can actually deliver and
owners have committed to more than they can actually
pay for.
The shipyards that may face difficulties in fulfilling
contracts are not all located in China as has been
commonly assumed, but range from South Korea to
Indonesia and Vietnam to India. The challenges faced
by all shipbuilders are immense given labour, machinery,
steel and equipment shortages, rising input costs,
technical challenges, foreign exchange risks, higher
insurance charges and limited availability of finance. These
are discomforting to the world’s largest shipbuilders but
are greatly amplified when applied to start-ups and smaller
businesses. On the buy side, the risk of fire sales of ships
that can no longer be financed could destabilise the resale
and secondhand markets. Looking beyond 2008, the risks
of a market correction are made all the greater by the sheer
number of ships of all types that are scheduled for delivery.
Weaker earnings would undermine prices until they match
income opportunities.
We take comfort from the fact that the orderbook is
stretched out over an unprecedented five year period,
which reduces the capacity impact as new deliveries are
drip-fed into the market. By the time non-performance and
cancellations are factored in, on top of what are likely to be
more frequent and elongated delays from less experienced
builders, the orderbook is not so much tamed as becoming
less threatening in appearance. The legacy of the Hebei
Spirit will probably be that it has shortened the life of most
single-hull VLCCs, and maybe tankers in general, by up to
five years and it has increased the single-hull discount. 2010
looks to be the peak of the VLOC deliveries and, should
they all deliver on time, then they will likely exert downward
pressure on dry bulk rates from the top end. The wave of
super post-panamax boxships that will deliver over the next
five years will need a good demand-side and infrastructure
response, but should precipitate the long-awaited scrapping
of older ships.
96 HSBC Shipping Services Limited
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97Global Shipping Markets Review 2008
Shipbuilding
98
Conclusion
HSBC Shipping Services Limited
As we arrive at our concluding comments the economic
information emanating from the US gets worse with each
passing day. Oil has passed $110 per barrel and gold broke
through $1,000 per troy ounce. The dollar is sliding against
the world’s major currencies, stock markets are tumbling
and risk aversion is back in fashion. A prominent hedge fund
has gone bankrupt having failed to meet margin calls on
heavily leveraged bets gone wrong. The consensus is that
America is now in recession. We are left to guess how long
and deep it will be and to what extent monetary and fiscal
stimulus packages will be effective. The main concern from
those working in the shipping markets is what contagion
effect this negativity might have upon the emerging
markets that have been driving global growth for five years
now. Estimates of up to a 2% fall in Chinese GDP growth,
into the high single digits percent, will inevitably make their
mark on shipping later on this year if proven correct.
The gloomy mood traces it origins to last August when
problems in the US subprime mortgage market came to
the fore. Since then, the problems have worsened and
filtered through into the prime market and the broader real
economy. What started as a household issue has quickly
become a challenge to global financial institutions that
originate and trade in asset-backed securities. The central
banks have twice intervened to provide extra liquidity to
the banking system in order to revive interbank lending
and resuscitate the credit markets. In the space of twelve
months we have moved from an excess of bank liquidity
to a deficit and it has had an unsettling effect. Elsewhere,
there are still huge reserves of cash that are being
selectively mobilised to invest in opportunities. China has
over $1.5 trillion in foreign exchange reserves and Japan
over $1trn while the oil and commodity exporting countries
have built up huge trading reserves. This suggests that the
economy will not come to a grinding halt.
The chief concern is what impact slowing US household
spending and business capital spending will have on
global demand. The might of the US consumer is hard to
replicate and rising consumption in China, India, the Middle
East and in the commodity exporting nations is unlikely
to compensate for US weakness. But, when combined
with investment and infrastructure spending in emerging
markets, there are grounds for expecting that growth in
the developing world will limit the fallout from stagnant
economic performance in the US, Japan and Germany
during 2008. Governments in all the emergent economies
are pledged to the creation of jobs and this will require
spending accumulated foreign exchange reserves should
external demand fall. Their situation is quite different
from past economic cycles as this time it is the US that is
using debt to reflate its weakening economy and it is the
sovereign wealth funds rather than the World Bank and the
IMF that are stepping in to provide support.
Turning to shipping specifics. US-inbound container trades
are already suffering and will continue to do so. The lines
will adjust capacity accordingly and engage with shippers
to discuss adequate recompense for rising fuel and other
costs. Asia-Europe, intra-Asia and north-south routes will
continue to prosper as emerging economies step up trade
with each other. The dry bulk market looks to do well this
year based upon resilient demand from China but supply-
side issues move to the fore from 2009. Tankers will
benefit from conversions, single-hull phase-out, limited
supply pressures in 2008 and stronger global oil demand
growth compared with 2007. Shipping demand generally
will be driven by the fast-growth new economies which
are showing all the signs of filling the vacuum that the
G7 countries have created. Tonnage supply is generally
constrained in 2008 and confusion reigns as ships are
converted between disciplines and orders for new ships
switched. The orderbook is long and dispersed but needs
to be discounted for future delays and non-performance. In
2008, emerging markets will provide vital support to both
the global trading system and the wider economy.
99Global Shipping Markets Review 2008
100
Appendix 1:Representative Bulk Carrier Fixtures
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Jan-07 China Progress 2006 175,000 35-37 50,000 Cosco Hong Kong World-wide Jul-Aug
Jan-07 Mineral Libin 2006 175,000 22-24 57,000 Transfield Beilun 25/30 Jan
Jan-07 Aquabeauty 2003 171,009 11-13 66,000 Korea Line Flushing 25/26 Jan
Jan-07 Alpha Century 2000 170,415 23-25 57,000 Cosco Bulk Caofeidian 10/12 Feb
Jan-07 Lowlands Beilun 1999 170,162 35-37 50,000 Sinochart World-wide Apr
Jan-07 Maribella 2004 76,629 35-37 25,000 Cargill Amsterdam 05/10 Feb
Jan-07 IVS Pinotage 2005 76,596 59-61 21,750 Cosco Qingdao World-wide Jan-Feb
Jan-07 Bergen Trader 2000 75,933 11-13 31,000 Goldbeam Taiwan 19/22 Jan
Jan-07 Peppino D’Amato 2005 75,698 11-13 32,000 PCL Indonesia 15/30 Jan
Jan-07 Audax 2001 75,220 35-37 25,500 STX PanOcean Shanghai 14/16 Jan
Jan-07 Coronis 2006 74,381 23-25 27,500 Bottiglieri di Navi. World-wide 15/28 Feb
Jan-07 Tai Plenty 2000 73,679 23-25 28,300 Parkroad Piombino 02/05 Feb
Jan-07 Happy Clipper 2001 73,414 11-13 32,500 Cosco Qingdao Rotterdam 20/22 Jan
Jan-07 Bianco Dan 2004 55,628 35-37 24,000 Korea Line Far East Feb
Jan-07 Lissa Topic 2003 52,038 11-13 27,750 Cargill World-wide Prompt
Jan-07 Equinox Voyager 2002 50,832 23-25 25,000 Cosbulk Chittagong 05/07 Jan
Jan-07 Jin Li 2001 50,777 23-25 25,500 N. China Shipping Kandla 26/29 Jan
Jan-07 Krikelo 1985 39,670 16-18 19,500 SK Shipping Rotterdam 13 Jan
Feb-07 Mineral Beijing 2004 176,000 23-25 55,500 STX PanOcean World-wide 01/30 Mar
Feb-07 KWK Providence 2004 175,531 11-13 63,750 Transfield Shanghai 15/30 Apr
Feb-07 Pantelis SP 1999 169,883 47-49 50,000 Glory Wealth Far East 01/28 Feb
Feb-07 Oceanic Breeze 2005 77,075 11-13 34,250 Deiulemar N China 10/20 Mar
Feb-07 Maritime Suzana 2005 76,619 11-13 31,200 Klaveness China 20/22 Feb
Feb-07 IVS Pinotage 2005 76,596 12-14 31,000 d’Amato Skaw 20 Feb / 10Mar
Feb-07 Spartia 2000 75,115 23-25 27,500 BHP Billiton Zhangjiagang 23/28 Feb
Feb-07 Nord Luna 2000 73,288 11-13 31,500 Glory Wealth Bremen 15/17 Feb
Feb-07 Fassa 2006 55,447 11-13 31,000 Western Bulk Kohsichang 14/18 Mar
Feb-07 Ken Sirius 2003 50,337 11-13 27,350 Daeyang Haldia 20/25 Feb
Feb-07 Pilion 1994 48,218 11-13 27,000 Korea Line Kandla 05/15 Mar
Feb-07 Genco Prosperity 1997 47,180 11-13 26,000 Pacific Basin World-wide Mar-Apr
Feb-07 Aquadance 1984 37,705 15-17 20,000 Daeyang Shanghai 05/10 Mar
Feb-07 Silverstar 1999 31,762 11-13 20,450 Cargill Fujairah 01/02 Mar
Feb-07 Pontoklydon 1992 28,450 11-13 22,000 CNR Niihama 02/08 Mar
Feb-07 Anax 1981 22,560 11-13 12,500 Korean Algeria 01/10 Mar
Mar-07 Sideris G.S. 2006 174,186 11-13 65,000 Transfield China 15/30 Mar
Mar-07 Cape Kennedy 2001 170,726 35-37 53,500 Cosco Hong Kong China 11Apr / 11May
Mar-07 Alameda 2001 170,662 10-12 73,000 Morgan Stanley China 15/30 Apr
Mar-07 Tai Shan 1999 169,159 23-25 60,000 Glory Wealth Carboneras 11/13 Mar
HSBC Shipping Services Limited
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
101 101Global Shipping Markets Review 2008
Mar-07 Aquahope 1997 167,102 11-13 64,000 Transfield China 20/31 Mar
Mar-07 Te Ho 2004 77,834 11-13 34,750 Glory Wealth Taiwan 15/30 Apr
Mar-07 Pasha Bulker 2006 76,600 11-13 35,660 Daiichi Kawasaki 08/10 Apr
Mar-07 Kalliopi L 2001 76,529 59-61 25,250 Deiulemar Far East 25May / 15Jul
Mar-07 Amalia 2000 75,100 35-37 27,500 Cosco Europe Piombino 20/30 Mar
Mar-07 Cinzia D’Amato 2000 74,716 11-13 33,500 Glory Wealth Hong Kong 27/30 Mar
Mar-07 Amira 2001 74,400 23-25 30,000 Golden Ocean Far East 01/30 May
Mar-07 Atlantic Eagle 2001 74,085 11-13 36,000 STX PanOcean WC India 06/07 Apr
Mar-07 Genco Vigour 1999 73,941 23-25 29,000 STX PanOcean Atlantic 20/30 Apr
Mar-07 Oinoussian Lion 1996 71,685 23-25 28,000 Transfield Inchon 18/28 Mar
Mar-07 Pos Harmony 2005 55,695 11-13 31,000 Transfield Inchon 15/25 Mar
Mar-07 Ocean Prince 2002 52,475 12-14 30,000 SK Shipping Thailand 05/12 Apr
Mar-07 Tai Chung 1982 37,611 11-13 17,000 CNR EC India Prompt
Mar-07 Kee Lung 1985 37,389 23-25 16,500 Korean Continent 10/12 Apr
Mar-07 Addu Comet 1999 35,362 36-39 20,500 Korea Line China 05/10 Apr
Mar-07 Genco Reliance +4 1999 29,952 23-25 19,500 Lauritzen World-wide Sep
Mar-07 Opal Naree 1982 28,780 11-13 18,000 CNR Zhoushan 20/23 Mar
Apr-07 Chou Shan 2005 175,882 11-13 80,000 Shagang Japan 01May-05May
Apr-07 Diana newbuild 2007 175,000 47-49 52,500 BHP Billiton Ex-yard SWS 01 Nov
Apr-07 Thalassini Niki 2005 174,566 59-61 56,000 Cosco Hong Kong World-wide 01 Sep
Apr-07 Cyclades 2004 171,480 11-13 92,500 STX PanOcean Continent 01 May
Apr-07 Glorius 2004 171,314 11-13 75,000 BHP Billiton China 20/30 Apr
Apr-07 Iron Kalypso 2006 82,224 11-13 41,500 Cosco Bulk Cape Passero 11/13 Apr
Apr-07 Ruby Indah 1998 77,755 11-13 42,500 Louis Dreyfus Taiwan 01/10 May
Apr-07 Pantazis L. 2003 76,629 11-13 41,000 Shagang Cape Passero 20/22 Apr
Apr-07 Orsolina Bottiglieri 2001 75,410 11-13 39,500 Daiichi Hibikinada 21/22 Apr
Apr-07 Samjohn Amity 1998 74,761 11-13 36,500 STX PanOcean Taiwan 25/30 Apr
Apr-07 Amira 2001 74,400 11-13 34,250 Glory Wealth Far East Prompt
Apr-07 Anangel Galini 2002 74,362 23-25 37,500 Bunge Zhoushan 05/07 May
Apr-07 Genco Beauty 1999 73,941 23-25 31,500 Cargill Dammam 10/20 Jun
Apr-07 Global Harmony 1997 73,763 11-13 37,000 CTP S’pore-Japan 1-May
Apr-07 Dimitris L 2001 73,193 11-13 42,000 STX PanOcean PMO 22/24 May]
Apr-07 Aquitania 2006 55,932 11-13 39,000 Sinochart Aden 15/25 May
Apr-07 Jin Yi 2007 55,300 23-25 32,000 Korea Line Oshima July
Apr-07 Filia Gem 2005 53,702 35-37 26,850 Korea Line Far East 10/30 May
Apr-07 Spar Canis 2006 53,565 11-13 32,000 Farenco Fangcheng 15/25 Apr
Apr-07 J Duckling 2003 52,425 23-25 32,500 HMM China May
Apr-07 Azzura 2004 52,050 11-13 37,000 Cargill WC India 08/10 May
Apr-07 Pratchara Naree 1984 25,000 11-13 20,000 Joen Ship India 03/15 May
May-07 Mineral Shikoku 2006 206,312 11-13 101,500 SK Shipping Qingdao 01/31 May
May-07 Chandris NB 2009 180,000 59-61 43,000 K-Line Ex-yard DSME 01/31 Jul
May-07 Gran Trader 2001 172,530 11-13 100,000 N. China Shipping Xingang 26/30 May
May-07 Anangel Explorer 2007 171,600 59-61 58,000 Cosco Hong Kong Okpo 01 Jul
May-07 Iron Brooke 2007 82,800 35-37 37,000 Augustea Brazil 25/30 May
May-07 Rule 1999 73,744 11-13 44,250 R Bottiglieri San Nicolas 01 Jul
May-07 Endless 1999 73,427 23-25 38,000 Transfield World-wide 01/30 Nov
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
May-07 Vogevoyager 1996 72,171 23-25 35,000 Daeyang World-wide Oct/Nov
May-07 JOSCO Taizhou 2005 55,561 11-13 43,000 Transfield Ravenna 25/31 May
May-07 Shamrock 2006 52,385 11-13 39,000 Transfield China 20/30 May
May-07 Nicolaos A. 2003 52,110 12-14 44,000 SK Shipping N China 22 May/ 02 Jun
May-07 Great Dream 2004 33,745 23-25 25,500 IHC Far East Jul
Jun-07 Samjohn Liberty 1998 74,761 11-13 44,000 Cargill Far East 20Jul / 05Aug
Jun-07 Evanthia 2001 74,350 11-13 45,000 Cargill Far East 25 Jul
Jun-07 Tai Profit 2001 73,679 11-13 43,500 HMM Hong Kong 03/07 Jul
Jun-07 Volme 2004 52,949 11-13 33,000 Navios World-wide Jan/Mar-08
Jun-07 Jaeger 2004 52,483 11-13 39,500 HMM S’pore-Japan 10/30 Jul
Jun-07 BMS Tourloti 1984 37,662 10-12 34,000 Probulk Florida 01/10 Jul
Jul-07 Cape Condor 2004 180,181 11-13 95,000 Cosco Qingdao China 25 Jul
Jul-07 Shining Star 2004 177,662 10-12 92,000 Cargill Far East 25 Jul
Jul-07 Anangel Sailor 2006 172,000 11-13 90,000 Oldendorff Dunkirk 15/20 Jul
Jul-07 Obeliks 2000 170,454 10-12 92,800 Cosco Bulk Japan 25Jul / 05Aug
Jul-07 Anangel Vision 2007 170,000 23-25 80,000 Transfield World-wide 01 Feb
Jul-07 Bulk Australia 2003 169,770 11-13 91,000 Morgan Stanley Xingang 25 Jul
Jul-07 Orange Truth 2006 82,800 23-25 44,000 NCS World-wide 01/30 Dec
Jul-07 Tai Prosperity 2006 77,747 23-25 51,000 Cosco Bulk World-wide 25 Jul
Jul-07 Centurion 2005 76,838 11-13 54,500 Cosco Europe Cape Passero 20/22 Aug
Jul-07 Panstar 2005 76,629 23-25 39,500 Glory Wealth World-wide 01/31 Mar
Jul-07 Double Happiness 2005 76,602 23-25 43,000 Cosco Qingdao Imabari 01 Oct
Jul-07 Oceanis 2001 75,220 23-25 40,000 Hanjin Far East 01 Sep
Jul-07 Oceanis 2001 75,220 11-13 49,750 Transfield Far East 01 Seop
Jul-07 Gianfranca D’Amato 2000 74,716 23-25 43,000 STX PanOcean World-wide 01/31 Aug
Jul-07 Marigo P 2002 73,810 11-13 48,500 NYK Kagoshima 12/14 Jul
Jul-07 Ever Blossom 1997 72,517 23-25 38,000 Pioneer Navi. World-wide 01/30 Sep
Jul-07 Navios Astra 2006 53,350 23-25 36,000 Dreyfus China 01/10 Aug
Jul-07 Athos 2004 52,248 11-13 45,000 Ocean Glory N China 20/25 Jul
Jul-07 Rubin Stellar 1995 28,379 35-37 21,000 Europeans Far East Aug/Sep
Aug-07 Cape Albatross 2007 202,000 11-13 118,000 STX PanOcean Kwangyang 17 Aug
Aug-07 Jean LD 2005 171,908 11-13 101,000 Morgan Stanley Far East 01 Oct
Aug-07 Anangel Explorer 2007 171,600 23-25 97,500 N. China Shipping Far East 01 Oct
Aug-07 Ocean Queen 2004 171,015 11-13 110,000 Morgan Stanley Far East 01 Sep
Aug-07 Red Jasmine 2006 76,596 11-13 60,800 Michele d’Amato World-wide Jan-08
Aug-07 Osmarine 2006 76,596 11-13 55,000 Transfield Kobe 14/16 Aug
Aug-07 Red Seto 2002 75,957 23-25 45,000 Perseveranza World-wide 01 Aug
Aug-07 Star of Nippon 2004 75,845 23-25 47,500 Sunwoo World-wide 01/31 Dec
Aug-07 Ever Mighty 1996 75,265 23-25 47,250 Cosco Americas World-wide 01/30 Nov
Aug-07 Topeka 2000 74,716 11-13 60,000 Atlas Bulk S. Korea 16/30 Sep
Aug-07 Primrose 2001 74,716 23-25 48,500 Daebo World-wide 01 Feb
Aug-07 Yong Jia 2001 74,500 11-13 61,500 Navios Cape Passero 05/10 Sep
Aug-07 Yuan Zhi Hai 2005 74,272 11-13 62,750 Mittal Bilbao 14/20 Sep
Aug-07 Ming May 1997 74,005 11-13 58,000 BHP Billiton Shanghai 30/31 Aug
Aug-07 Marietta 2004 73,880 23-25 50,000 Cargill Syria 25 Sep
102 HSBC Shipping Services Limited
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Aug-07 Daebo Trader 2002 73,810 23-25 49,000 Sunwoo World-wide 15Nov / 15Jan
Aug-07 Anangel Omonia 1996 73,519 35-37 44,500 Atlas Bulk Japan 10/15 Sep
Aug-07 Island Globe 1995 73,119 11-13 60,000 GMI Jorf Lasfar 25 Aug
Aug-07 Fu Man 1997 70,850 11-13 59,000 Skaarup Zhoushan 06/09 Sep
Aug-07 Skua 2003 53,350 11-13 50,000 Cosbulk N China 28Aug / 06Sep
Aug-07 Ocean Prefect 2003 52,500 23-25 42,500 Sinotrans Chennai 07/12 Aug
Aug-07 Odin Pacific 1995 28,381 11-13 32,000 Korean Indonesia 04-06 Sep
Aug-07 Genco Charger 2005 28,000 35-37 24,000 Pacific Basin World-wide Q407
Aug-07 Genco Challenger 2003 28,000 35-37 24,000 Pacific Basin World-wide Q407
Aug-07 Genco Champion 2006 28,000 35-37 24,000 Pacific Basin World-wide Q407
Sep-07 Cape Saturn 2003 175,773 12-14 130,000 Armada China 25Sep / 05Oct
Sep-07 Xin Fa Hai 2004 174,766 11-13 125,500 Morgan Stanley Qingdao 30Sep / 05Oct
Sep-07 Zorbas 1996 174,690 35-37 75,000 STX PanOcean Qingdao 01/15 Oct
Sep-07 Tian Lu Hai 2005 174,398 11-13 125,000 Crownland World-wide Jan/Feb-08
Sep-07 Mineral London 2006 173,949 11-13 115,000 Morgan Stanley Qingdao 05/12 Oct
Sep-07 CSK Beilun 1999 172,561 11-13 110,000 Norden World-wide Jan/Feb-08
Sep-07 Channel Alliance 1996 171,978 11-13 130,000 Shagang Far East 01 Oct
Sep-07 Anangel Explorer 2007 171,600 23-25 115,000 Crownland China Jan/Feb-08
Sep-07 Cape Pioneer 2005 170,012 11-13 135,000 Cosco Qingdao Japan 15/31 Oct
Sep-07 Apollo 2006 77,326 11-13 69,000 Kleimar Skaw-Passero 20/30 Sep
Sep-07 Oinoussian Lady 2004 76,704 11-13 68,000 Navios Japan 15 Sep
Sep-07 Maritime Bagui 2006 76,453 23-25 55,000 Transfield World-wide 01 Oct
Sep-07 Angelic Glory 2002 75,007 23-25 55,000 Glory Wealth World-wide 01/31 Dec
Sep-07 Yong Huan 2000 74,500 11-13 66,000 Transfield Hong Kong 15 Sep
Sep-07 Lilian Z 1999 74,461 11-13 65,000 Norden World-wide 01 Dec
Sep-07 Aspendos 2003 74,380 23-25 53,000 Bunge World-wide Nov/Dec
Sep-07 Elinakos 1997 73,751 23-25 58,000 MBC Shipping Huangpu 16Sep-18Sep
Sep-07 Thetis 2004 73,583 11-13 60,250 Sinochart Far East 01 Oct
Sep-07 Great Glory 1997 73,000 11-13 68,000 OBS China 26Sep / 16Oct
Sep-07 Innovator 2005 55,435 35-37 39,000 HMM Far East Oct
Sep-07 Jin Ying 2007 53,000 11-13 55,000 Transfield Japan Nov
Sep-07 C Duckling 2002 52,500 11-13 51,000 Wylex Far East Oct
Sep-07 Medi Cebu 2002 52,464 12-14 55,500 Oldendorff Singapore 28Sep / 07Oct
Sep-07 Captain George II 1994 52,370 23-25 40,000 Dooyang Qingdao 18/22 Sep
Sep-07 Manora M 1984 29,159 11-14 32,500 Toepfer Santa Marta 22/26 Sep
Sep-07 Gourniati 1996 28,387 35-37 26,000 Global Logistics World-wide Jan/Feb 08
Oct-07 Great Navigator 2006 176,279 23-25 150,000 Daebo Mizushima 15/16 Nov
Oct-07 Anangel Fortune 2005 175,500 22-24 140,000 Samsun Japan 25/30 Oct
Oct-07 Heng Shan 2006 175,000 23-25 140,000 Hanjin Pohang 15 Oct
Oct-07 Jin Tai 2004 173,880 11-13 155,000 Cosco Qingdao Far East 15/20 Nov
Oct-07 Lowlands Beilun 1999 170,162 11-13 146,000 Oldendorff China 25 Nov
Oct-07 Yasa Fortune 2006 82,800 11-13 87,000 Sinochart Far East 01 Dec
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Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Oct-07 Tai Promotion 2004 77,834 23-25 65,000 STX PanOcean World-wide 01/30 Nov
Oct-07 Anthemis 2004 76,200 11-13 80,000 Pioneer Nav. Hong Kong 01/05 Nov
Oct-07 Coronado 2000 75,706 11-13 82,750 Cargill Liverpool 01/02 Nov
Oct-07 Nordems 2001 75,253 11-13 78,500 Cosco Qingdao World-wide 01 Feb
Oct-07 Medi Tokyo 1999 74,356 11-13 81,000 SK Shipping World-wide 15Nov / 15Dec
Oct-07 Four Coal 1999 74,020 23-25 73,500 Crownland China 25/30 Nov
Oct-07 Carl Mesem 1999 73,965 12-13 78,000 Safe Fixing Corp. Far East 01 Nov
Oct-07 Hai Huang Xing 2005 73,581 11-13 81,000 Parkroad World-wide 25Dec / 10Feb
Oct-07 Waimea 1997 73,048 11-13 80,000 Seallink World-wide 01/31 Jan
Oct-07 Alpha Glory 1999 72,270 11-13 82,000 Atlas Bulk Setubal 15 Oct
Oct-07 Great Luck 1998 71,339 11-13 72,000 Armada World-wide 01/30 Apr
Oct-07 Maratha Messenger 1995 71,252 11-13 70,500 STX PanOcean China 15Nov / 31Dec
Oct-07 Iguana 1996 70,349 11-13 78,750 Sinochart Taiwan 11/13 Nov
Oct-07 Nord Brave 2007 53,500 11-13 59,000 PCL Aden 01/15 Dec
Oct-07 Merlin 2001 50,296 24-26 53,000 Wylex World-wide Nov 07/ Jan08
Oct-07 Gulf Globe 1994 43,246 11-13 60,000 Korea Line South China 08/15 Nov
Oct-07 Eastern Star 1997 28,437 11-13 42,000 Korea Line World-wide Nov 07/ Jan 08
Oct-07 African Grace 1995 24,306 23-25 25,000 MUR World-wide 09 Jan
Nov-07 Mariana 1998 186,001 59-61 67,500 N. China Shipping Rizal 20/30 Nov
Nov-07 Madeira 2007 177,000 11-13 165,000 STX PanOcean PMO 15/20 Nov
Nov-07 Mineral Hong Kong 2006 175,000 11-13 170,000 Kleimar Passero 24/27 Nov
Nov-07 Pierre LD 2005 171,876 22-24 130,000 N. China Shipping China 20/30 Jan
Nov-07 Navios Cello 2003 75,829 11-13 74,000 Choking Marvels 09/10 Dec
Nov-07 Nord Orion 2006 75,318 11-13 76,250 Navios Beilun 20/30 Dec
Nov-07 Dionne 2001 75,172 11-13 82,000 Shagang Skaw-Passero 01 Jan
Nov-07 Thaliana 2001 75,115 59-61 31,500 MOSK World-wide Jan/Mar-08
Nov-07 Filippo Lembo 1997 74,500 11-13 79,000 Eylex Shanghai 15/24 Nov
Nov-07 Ocean Dragon 1994 12,419 12-14 14,000 SK Shipping World-wide 20/22 Nov
Dec-07 Mineral Noble 2004 170,649 11-13 170,000 STX PanOcean Rotterdam 25 Dec
Dec-07 Mulberry Paris 2004 76,492 47-49 51,250 Komrowski World-wide Jan/Feb-08
Dec-07 Riruccia 1997 74,002 11-13 71,000 Constellation World-wide 01/29 Feb
Jan-08 Channel Navigator 1997 172,058 59-61 53,500 Shagang World-wide 31 Mar
Jan-08 North King 1981 127,907 11-13 29,000 Winning N China 15 Mar
Jan-08 Pole 1997 73,049 59-61 67,000 Cosco Bulk World-wide 01 Feb
Jan-08 Giovanni 1996 72,394 23-25 54,000 Cosco Americas A-R-A 15/20 Feb
Jan-08 Dong Bang 1995 71,747 11-13 49,000 Sealink Jintang 28/30 Jan
Jan-08 Darya Brahma 2006 56,056 11-13 50,000 MUR Nemrut Bay 01/02 Feb
Jan-08 Navios Kypros 2003 55,180 35-37 35,350 Sanko Shanghai 27/30 Jan
Jan-08 Lepta Galaxy 2002 52,378 11-13 47,500 Cetragpa Greece 04/08 Feb
Feb-08 Private 2007 177,000 18-21 121,000 Chinese Far East 05 Mar
Feb-08 Cape Jupiter 1997 172,480 11-13 132,000 Cosco Bulk World-wide 01/29 Feb
Feb-08 Anangel Eternity 1999 171,176 59-61 70,000 Cosco Far East 01/31 Jul
Feb-08 Vogebulker 1999 169,168 11-13 132,000 Cosco Bulk Far East 01 Apr
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Feb-08 Star Beta 1993 165,133 11-13 130,000 Oldendorff Zhoushan 21/24 Feb
Feb-08 Jag Arjun 1996 164,796 11-13 130,000 Oldendorff Far East 01/05 Apr
Feb-08 Oceanic Breeze 2005 77,075 23-25 61,000 Cosco Bulk PMO 25Mar / 05Apr
Feb-08 Nicole 2007 77,000 35-37 50,000 Hanjin World-wide 01/31 Mar
Feb-08 CMB Florentina 2005 76,838 11-13 64,500 STX Panocean Japan 20/22 Feb
Feb-08 Arabella 2001 75,563 11-13 66,500 Golden Ocean Guangzhou 15/17 Mar
Feb-08 Danae 2005 75,349 35-37 52,000 Cosco Europe Tobata 03/05 Mar
Feb-08 Nirefs 2001 75,311 23-25 60,500 Cosco Bulk Cape Passero 05/15 Mar
Feb-08 Maria Bottiglieri 1995 75,265 11-13 72,000 Skaarup Amsterdam 25/26 Mar
Feb-08 Alcyon 2001 75,247 57-60 34,500 Cargill Kemann 20/29 Feb
Feb-08 Roger M Jones 1992 74,868 11-13 59,500 Transfield Piraeus 27/29 Feb
Feb-08 Calipso 2005 73,691 11-13 64,000 Rizhao Steel Taiwan Prompt
Feb-08 Hua Shan Hai 1998 72,769 23-25 61,000 Deiulemar S’pore-Japan 11/20 Apr
Feb-08 Fu Min 1997 72,437 11-13 66,000 Armada Toyohashi 25/28 Feb
Feb-08 JOSCO Yangzhou 2005 55,621 11-13 48,000 Oldendorff WC India 01/29 Feb
Feb-08 Yasa Unsal Sunar 2007 55,526 11-13 57,500 Glory Wealth Far East 10/25 Mar
Feb-08 Serenity I 2006 53,580 11-13 59,250 Korean Surubaya 06/17 Mar
Feb-08 Apageon 2005 52,438 11-13 58,000 Oldendorff Thailand 25/28 Feb
Feb-08 Hawk I 2001 50,296 11-13 58,000 Chinese S’pore-Japan 01Mar / 01Apr
Feb-08 Orchid Ocean 1994 45,262 11-13 51,000 Eitzen Bulk PMO 04/06 Mar
Mar-08 Manasota 2004 171,061 23-25 115,000 NSS World-wide 01/31 Mar
Mar-08 Anangel Enosis 1995 75,464 11-13 73,500 COSCO Tarragona 25Mar / 03Apr
Mar-08 Nordrhine 2001 75,253 11-13 72,000 Glory Wealth Cape Passero 03/06 Mar
Mar-08 Anna Smile 2004 74,823 11-13 75,000 STX Panocean N China 01/31 Mar
Mar-08 Anangel Omonia 1996 73,519 23-25 58,600 Daeyang Egypt 15/20 Mar
Mar-08 Christina IV 2000 72,493 35-37 68,000 Korea Line World-wide 01Apr / 10Jun
Mar-08 Stella Maris 2007 52,500 11-13 63,000 Eitzen Bulk Cristobal 07/10 Mar
Mar-08 Sea Lantana 2005 52,471 35-37 41,500 Armada Jintang 10/12 Mar
Mar-08 Victoria 2005 52,200 35-37 41,900 Korea Line Marmara 15/25Mar
Mar-08 Jin An 2000 50,786 11-13 61,000 Oldendorff Port Harcourt Prompt
Mar-08 Honesty Ocean 1997 47,240 11-13 55,000 Ocean Glory Haldia 06/10 Mar
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106
Appendix 2: Representative Bulk Carrier Sales
Reported Vessel Dwt Built Yard Price $m Buyer
Jan-07 Lowlands Beilun 170,162 1999 Halla Samho 71.50 Quintana
Jan-07 Spring Brave 151,066 1995 Nippon Kokan Tsu 60.00 Dryships
Jan-07 CHS Moon 151,040 1990 Sumitomo Oppama 45.00 Transfield
Jan-07 Aeolian Spirit 76,015 2002 Tsuneishi 49.25 Tolani
Jan-07 Iolcos Grace 71,749 1990 Hitachi Maizuru 25.80 Odysea Carriers
Jan-07 Delray 70,029 1994 Hudong 37.00 Britannia Bulk
Jan-07 Mandarin Glory 49,400 2003 Nantong Ocean 39.50 COSCO
Jan-07 Desert Sky 48,320 1990 Split 24.25 CITIC
Jan-07 Flores 46,609 1997 Mitsui Tamano 32.50 Akmar Deniz
Jan-07 Future Confidence 42,055 1986 Nipponkai 16.00 Sunwoo
Jan-07 Vamand Wave 28,303 1985 Mitsubishi Kobe 10.60 Eastwind Hellas
Jan-07 George 26,589 1987 Sasebo 13.00 J&J Trust Ship
Jan-07 Grand Slam 24,112 1999 Saiki Jukogyo 24.00 Sider Navigation
Jan-07 Delos 24,000 1997 Shanghai SY 21.00 Lamda Maritime
Feb-07 Pantelis Sp 169,883 1999 Daewoo HI 81.00 Chang Myung
Feb-07 Amazon 149,495 1990 China SB Kaohsiung 48.00 Dryships
Feb-07 Thios Costas 145,229 1982 Nippon Kokan Tsu 18.00 STX Panocean
Feb-07 Dynasty 133,082 1982 Hitachi Nagasu 15.00 Panocean
Feb-07 Fortune Glory 53,350 2003 Toyohashi 46.50 Eagle Bulk
Feb-07 Fortune Bright 53,343 2003 Toyohashi 46.50 Eagle Bulk
Feb-07 Highgate 46,650 1985 Sunderland 15.00 Bogazzi
Feb-07 J. Lucky 28,460 1994 Imabari 22.60 ID Shipping
Feb-07 Lark 23,723 1996 Shin Kurushima 21.75 Navibulgar
Feb-07 Clipper Range 20,200 2002 INP HI 21.70 Massoel Gestion
Mar-07 Cape Pelican 180,235 2005 Imabari 107.00 Diana
Mar-07 Johnny K 175,048 1994 Gdynia 64.00 Essar
Mar-07 Winner 174,004 1985 Hitachi Nagasu 30.00 COSCO
Mar-07 Cape Kassos 170,012 2004 Hyundai Samho 100.00 Alcyon Shipping
Mar-07 Martha Verity 157,991 1995 Sasebo 63.00 Swiss Marine
Mar-07 Americana 148,982 1987 Astano El Ferrol 33.00 COSCO
Mar-07 Ullswater 123,503 1990 Daewoo 45.00 COSCO
Mar-07 Raffaele Iuliano 75,473 1995 Fincantieri Stabia 40.50 Dryships
Mar-07 Restless 72,561 2000 Sasebo 46.20 Topships
Mar-07 Oinoussian Legend 71,662 1997 Hitachi Maizuru 41.00 Dryships
Mar-07 Gladstone 64,951 1986 Hitachi Maizuru 22.00 Samsun
Mar-07 Hille Oldendorff 55,566 2005 Nantong Ocean 50.25 Primera
Mar-07 Halo Friends 47,240 1997 Oshima 35.20 Great Eastern
Mar-07 Lily 47,043 1984 Caneco SA 9.00 Kristen Marine
Mar-07 Mount Baker 32,600 2007 Kanda Kawajiri 38.50 Ocean Longevity
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Mar-07 Ambassador 26,465 1993 Hakodate 22.90 VinaLines
Mar-07 Cynthia Harmony 23,724 1994 Shin Kurushima 20.50 Northern Shipping
Apr-07 Winner 174,004 1985 Hitachi Nagasu 37.50 COSCO
Apr-07 Nautical Dream 151,439 1994 China SB Kaohsiung 63.50 Dong-A-Tankers
Apr-07 Arimathian 149,782 1994 Dalian New 26.00 Blumenthal
Apr-07 Boss 139,816 1985 Namura Imari 31.00 SMI Shipping
Apr-07 Global Peace 132,049 1982 Mitsui Tamano 19.50 Intrepid
Apr-07 Rule 73,744 1999 Sumitomo HI 48.50 Dryships
Apr-07 Salmas 73,506 1995 Hyundai HI 42.00 Topships
Apr-07 Quint Star 72,413 1998 Imabari Marugame 47.00 Dryships
Apr-07 Anangel Loyalty 71,550 1995 Hitachi Maizuru 41.50 Bright Navigation
Apr-07 Kerasia S 52,808 2004 Onomichi 53.00 Seastar
Apr-07 Prabhu Yuvika 43,648 1994 Tsuneishi 33.50 Middle Eastern
Apr-07 Marina Gr 43,214 1984 Sanoyas 16.00 Ikarus Marine
Apr-07 Wave Bulker 27,308 1994 Mitsubishi Shimonoseki 24.25 Franca Naviero
Apr-07 Anne Bulker 26,455 1991 Hakodate 21.00 ID Shipping
Apr-07 Eco Chaser 21,538 1985 Watanabe Hakata 11.50 S Korean
Apr-07 Sider Green 18,800 2007 Yamanishi 24.60 G Bros Maritime
May-07 Zorbas 174,505 1996 Gdynia 86.00 Pacific King
May-07 Fertilia 172,632 1997 Constantza 50.50 Samsun (Charterers)
May-07 Ingenious 169,962 1999 Daewoo HI 64.20 Bocimar
May-07 Anangel Dawn 149,321 1994 Hyundai HI 67.00 Chang Myung Shipping
May-07 Australian Fame 1 145,500 1982 Hyundai HI 21.00 Parkroad Corp
May-07 Marijeannie 74,540 2001 Daewoo HI 55.60 Seajustice
May-07 Anangel Galini 74,362 2002 Daewoo HI 56.50 Ocean Freighters
May-07 Jin Kang 50,212 2001 Mitsui Chiba Ichihara 53.72 Mistral
May-07 Grand Festival 43,620 1993 Tsuneishi 33.50 Odysea Carriers
May-07 Magic Triangle 42,512 1985 Mitsui Chiba Ichihara 19.50 STX PanOcean
May-07 Pioneer 28,399 1997 Hakodate 32.25 Sammok Shipping
May-07 Jupiter Charm 26,587 1985 Kurushima Onishi 11.80 STX Panocean
Jun-07 Orient Fortune 160,993 1984 Mitsubishi Nagasaki 28.00 COSCO
Jun-07 Patya Bulker 75,926 2004 Tsuneishi 67.00 Tolani
Jun-07 H Duckling 74,000 2001 Sasebo 55.00 Order Shipping
Jun-07 Leda 69,235 1987 Imabari Marugame 27.00 Samsun
Jun-07 Santa Maria 1 67,296 1984 Imabari Marugame 21.00 Jin Ocean
Jun-07 Nord Mariner 53,000 2006 Shanghai Chengxi 52.70 Akmar Deniz
Jun-07 Crystal Lily 48,913 1999 Ishikawajima Tokyo 39.00 Koreans
Jun-07 Rubin Stella 28,379 1995 Imabari 30.50 Franco Naviera
Jun-07 Aonoble 27,308 1994 Mitsubishi Shimonoseki 27.50 Korean
Jul-07 Ferro Fos 176,000 2006 Universal 550.00 Quintana
Jul-07 Great Moon 145,967 1984 Nippon Kokan 30.00 SMI Shipping
Jul-07 Sundance 74,274 2001 Namura 59.80 Allseas
Jul-07 Athina Zafirakis 74,204 2002 Oshima 65.00 Dryships
Jul-07 Theodoros P 73,870 2002 Namura 70.50 Tolani
Jul-07 Edelweiss 73,624 2004 Jiangnan Group 64.00 Transmed
Jul-07 Star Phoenix 56,042 2004 Mitsui Tamano 61.00 Uljanik Plovidba
Jul-07 ABG Madhava 44,875 1994 Halla Inchon 37.00 Go Shipping
Reported Vessel Dwt Built Yard Price $m Buyer
108
Jul-07 Ocean Eagle 42,972 1984 Hashihama Zosen 23.50 Hannah Maritime
Jul-07 Island Gem 28,005 1984 Hitachi Maizuru 14.00 Armada
Jul-07 BBC Barranquilla 22,051 1995 Saiki Jukogyo 24.70 Free Bulkers
Aug-07 Ce-Mikela 82,329 2006 Tsuneishi 85.00 Lykiardopolu
Aug-07 Nord Mercury 76,629 2004 Imabari Marugame 69.50 Dryships
Aug-07 Formentera 70,002 1996 Hudong 63.00 Pareto
Aug-07 Chios Gem 65,298 1985 Nippon Kokan Tsurumi 30.00 Fujian Guohong
Aug-07 Voc Gallant 51,215 2002 New Century 65.60 Top Tankers
Aug-07 Orchid Sky 43,609 1985 Tsuneishi 22.00 Empremar
Aug-07 Dimitra 41,455 1995 Varna 38.50 Lydiamar
Aug-07 Castle Peak 28,545 1997 Imabari Marugame 31.60 ID Shipping
Aug-07 Stentor 28,445 2006 Imabari 46.00 Genco
Aug-07 Lake Joy 28,251 1996 Kanasashi Toyohashi 304.00 ID Shipping
Aug-07 Protagonist 23,581 1996 Saiki Jukogyo 30.50 VOSCO
Sep-07 Cape Maria 177,754 1982 Mitsui Chiba Ichihara 43.00 Sealink
Sep-07 Thalassini Niki 170,800 2005 Daewoo 275.00 en bloc
Diana Shipping
Sep-07 Thalassini Kyra 164,218 2002 Kaohsiung
Sep-07 Carol 75,608 1999 Mitsui Chiba Ichihara 73.00 NYK
Sep-07 Yarrow 70,653 1986 Shin Kurushima 36.00 Koreans
Sep-07 Genco Trader 69,338 1990 Imabari Marugame 44.00 SW Shipping
Sep-07 CMB Talent 52,403 2001 Tsuneishi 53.53 Third Millenium
Sep-07 Giorgos 47,893 1984 Namura 25.00 China Shipping
Sep-07 Genco Commander 45,518 1994 Tsuneishi 44.75 Dan Sung Shipping
Sep-07 Archimidis SB 45,320 1995 Oshima 43.00 Kassia Maritime
Sep-07 Ocean Leader 28,097 1984 Hitachi HI 16.50 KS syndicated by
Sep-07 Gold Carrier 27,601 1985 Mitsui Tamano 16.50 Korean
Sep-07 Gebe Oldendorff 23,398 1998 Tsuneishi Balamban 32.00 TBS
Oct-07 Peace Glory 166,058 1984 Astano El Ferrol 57.00 Ravenscroft Shipping
Oct-07 Marine Hunter 164,891 1984 Boelwerf Vlaan 45.00 WEM Lines
Oct-07 Tiger Lily 149,190 1995 Kaohsiung 90.00 Dryships
Oct-07 Loch Maree 75,798 2004 Sanoyas 85.00 Pacific Carriers
Oct-07 Countess 1 70,280 1986 Sanoyas Corp 40.00 Samsun Logix
Oct-07 Golden Bridge 69,050 1995 Imabari Marugame 68.00 Rizhao Steel
Oct-07 Aegean Hawk 50,326 2000 Mitsui Tamano 63.40 Dryships
Oct-07 Nord Viking 45,208 1994 Kanasashi Toyohashi 55.00 Chinese
Oct-07 African Shark 32,772 1985 Minami-Nippon Usuki 23.22 Thai Pacific
Oct-07 Hanjin Tampa 27,209 1995 Hanjin 40.00 Ocean Longevity
Oct-07 DS Splendour 19,167 1999 Keppel 32.00 Greek
Nov-07 Gran Trader 172,529 2001 Nippon Kokan 153.00 Dryships
Nov-07 Sumihou 171,071 1996 Ishikawajima Kure 106.00 Rizhao Steel
Nov-07 Netadola 149,475 1993 Keelung 97.00 Far Eastern buyers
Nov-07 Captain Vangelis 145,856 1992 Fincantieri 87.50 Dong-A-Tankers
Nov-07 Nicole 77,000 2007 Namura 103.50 Daebo
Nov-07 Anna 72,516 1995 Daewoo HI 72.00 Alexandria
Nov-07 President G 69,344 1988 Hashihama Zosen Tad 50.00 First Shipping
Nov-07 Soyang 66,822 1984 Sumitomo Oppama 36.00 Boo Kwang
Nov-07 Lake Maine 53,531 2001 Imabari Marugame 71.50 Louis Dreyfus
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109Global Shipping Markets Review 2008
Nov-07 Ioannis Theo 45,320 1995 Oshima 61.00 Koreans
Nov-07 Silver Star 42,838 1984 Mitsubishi Nagasaki 31.00 Tradeline
Nov-07 Ypermachos 28,166 1984 Hitachi HI 26.00 TBS
Nov-07 African Cobra 26,648 1986 Kurushima Onishi 26.60 Pelias Maritime
Nov-07 Sifnos Bay 26,591 1985 Hakodate 24.50 Greek
Nov-07 Changi Hope 18,320 2000 Shikoku 29.00 Greek
Dec-07 Anangel Enosis 75,464 1995 Hyundai HI 75.00 Undisclosed
Dec-07 Angele N 69,315 1990 Imabari Marugame 60.00 Undisclosed
Dec-07 Lowlands Saguenay 66,995 1985 Nippon Kokan Tsurumi 38.00 Vietnamese
Dec-07 Minoan Flame 65,960 1982 Namura 35.10 Falcon
Dec-07 Shikra 41,096 1984 Oshima 30.00 Undisclosed
Dec-07 Sea Diamond 28,467 1992 Imabari 38.40 Altanska Plovidba
Jan-08 Nord Wave 53,489 2005 Iwagi Zosen 71.00 Vietnamese
Jan-08 Pinar K 52,455 2002 Tsuneishi Cebu 75.00 Nemtas
Jan-08 Tango Glory 48,193 2001 TaiheIyo Kisen 70.00 Undisclosed
Jan-08 Fortune Pearl 45,585 1996 Hashihama Zosen 58.00 Vietnamese
Jan-08 2x Blystad newbld 32,800 2009 Jinse 50.00 Safety Mgmnt
Feb-08 Athinoula 42,842 1985 Mitsubishi Nagasaki 30.30 TBS
Feb-08 Tzini 42,004 1991 Oshima 44.00 Romeo
Feb-08 Amanda C 41,373 1984 Nipponkai 28.00 Samsun Logix
Feb-08 Victory 34,676 2002 Xingang 80.00 German KG
Feb-08 Milena Star 22,056 1995 Saiki Jukogyo 35.50 Korean
Mar-08 Arethousa 171,779 1999 Hyundai HI 133.00 Rizhao Steel
Mar-08 Nord Luna 73,288 2000 Sumitomo HI 72.50 Undisclosed
Mar-08 Lanzarote 73,008 1996 Hudong 65.00 Undisclosed
Mar-08 Snow Falcon 50,246 2003 Mitsui 67.40 Undisclosed
Mar-08 Tango Glory 48,193 2001 Oshima 65.00 Transmar
Mar-08 Ansac Orient 28,399 1995 Imabari 39.35 Korean
Reported Vessel Dwt Built Yard Price $m Buyer
110110
Appendix 3:Representative Tanker Fixtures
Reported Vessel Hull Dwt Built Period (months)
Rate, $pd Charterer Comment
Jan-07 Universal Queen DH 309,375 2005 35-37 48,000 Mercuria
Jan-07 Eagle Vermont DH 306,400 2002 35-37 45,000 STX PanOcean
Jan-07 Hellespont Trooper DH 147,916 1996 11-13 42,500 Teekay
Jan-07 Ocean Amber SH 147,500 1989 23-25 24,000 BPCL
Jan-07 Glenross DH 90,679 1993 35-37 26,000 AET part of en bloc sale
Jan-07 Loch Ness DH 90,607 1994 35-37 26,000 AET part of en bloc sale
Jan-07 Ratna Shalini DH 89,960 1987 23-25 17,800 BPCL
Jan-07 Freja Dania DH 53,000 2007 59-61 20,750 STX PanOcean
Jan-07 Torm Cecilie DH 46,946 2001 12-18 23,000 Trafigura
Jan-07 Stavanger Eagle DH 45,898 2004 23-25 21,000 Navion
Jan-07 Sanmar Serenade DH 45,696 1992 23-25 22,500 Trafigura IMO 2/3 stainless
Jan-07 Jag Pradip DH 45,683 1996 23-25 24,000 ST Shipping
Jan-07 Jag Pratap DH 45,683 1995 11-13 24,000 ST Shipping
Jan-07 Torm Gunhild DH 45,457 1999 23-25 22,500 Trafigura
Jan-07 Cape Beira DH 40,000 2005 17-19 22,500 WECO
Feb-07 Eagle Vienna DH 318,000 2004 35-37 45,000 TMT
Feb-07 Desh Vaibhav DH 316,000 2005 11-13 50,000 Koch
Feb-07 Eagle Valencia DH 306,999 2005 35-37 45,000 TMT
Feb-07 Tromso Trust DH 154,970 1991 11-13 36,000 Mercuria
Feb-07 Naviga DH 150,841 1998 11-13 39,500 Great Eastern
Feb-07 Stena Atlantica DH 113,500 2006 23-25 35,000 Eiger Ice class 1A
Feb-07 Arafura Sea DH 105,856 2000 11-13 33,000 Phoenix
Feb-07 Young Lady DH 105,250 2000 11-13 32,000 Shell
Feb-07 FR8 Spirit DH 51,000 2007 11-13 25,000 Cargill
Feb-07 Nord Observer DH 47,000 2007 23-25 22,500 Trafigura
Feb-07 STX Ace 7 DH 45,800 2007 35-37 21,000 ExxonMobil
Feb-07 Futura DH 40,085 2006 11-13 22,750 Motia
Feb-07 Port Louis DH 38,000 2002 16-18 21,500 Ravennavi
Feb-07 Port Russel DH 38,000 2002 16-18 21,500 Ravennavi
Feb-07 Kerel DH 37,297 2002 35-37 21,500 Total
Feb-07 Kuldiga DH 37,000 2003 11-13 24,750 PDVSA
Feb-07 FR8 Pride DH 23,400 2006 17-19 28,500 Scorpio
Mar-07 Maersk Navarin DH 300,000 2007 59-61 46,000 Sinochem
Mar-07 Mayfair +2 DH 298,400 1995 35-37 45,000 Great Elephant
Mar-07 Formosapetro Empire DH 298,300 2004 35-37 45,000 Samsun
Mar-07 Genmar Orion DH 159,992 2002 35-38 38,000 Litasco
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Mar-07 Cerigo SH 95,987 1989 11-13 19,500 Mercator
Mar-07 Targale DH 51,800 2007 11-13 25,000 Mercuria
Mar-07 Jutul DH 37,000 2004 23-25 22,000 Palmyra
Mar-07 Peterpaul DH 35,994 1998 11-13 19,000 Trafigura IMO 2/3
Apr-07 SKS Saluda DH 159,000 2003 11-13 42,000 Repsol
Apr-07 Mare Tirrenum DH 110,000 2004 17-19 31,800 Teekay
Apr-07 Ocean Lady DH 105,250 2002 23-25 27,500 ExxonMobil
Apr-07 Torm Emilie DH 74,999 2004 23-25 28,000 Vitol
Apr-07 Overseas Sextans DH 51,000 2007 35-37 22,500 Vitol
Apr-07 Trogir DH 40,727 1995 11-13 22,500 ST Shipping
Apr-07 Fresia DH 37,230 2003 23-25 22,000 Palmyra IMO 2/3
Apr-07 Dukhan DH 37,000 2003 35-37 21,500 Heidmar
May-07 Maersk Nautilus DH 300,000 2006 59-61 46,000 Sinochem
May-07 La Paz DH 299,700 1995 35-37 45,000 SK Shipping
May-07 Flawless DH 154,970 1991 11-13 44,500 PDVSA Opt 11-13
May-07 Nevskiy Prospect DH 114,597 2003 11-13 35,000 Stena Bulk Ice class 1A
May-07 Rich Queen DH 105,000 2007 11-13 31,750 Stena Bulk
May-07 Omega Queen DH 72,000 2004 11-13 30,500 PDVSA Epoxy
May-07 FR8 Endeavour DH 50,529 2006 35-37 22,000 Stena Bulk
May-07 Skylark DH 34,620 2004 11-13 25,250 PDVSA
Jun-07 Shinyo Navigator DH 300,549 1996 11-13 49,500 Koch Opt 11-13 at $51,000
Jun-07 Safaniyah DH 300,361 1997 47-49 48,750 Hanjin
Jun-07 2x Genmar newbuild DH 155,000 2008 35-37 38,500 Litasco
Jun-07 Desh Shakti DH 146,840 2004 12-16 43,750 ST Shipping
Jun-07 Krasnodar DH 114,800 2003 11-13 33,000 Palmyra
Jun-07 Mare Italicum DH 110,000 2007 23-25 32,500 Teekay
Jun-07 Ambelos DH 105,400 2006 35-37 27,900 ChevronTexaco
Jun-07 Ambrosia DH 105,363 2006 35-37 29,750 Trafigura
Jun-07 Senatore DH 72,514 2004 35-37 26,000 BP Shipping
Jun-07 Ugale DH 51,800 2007 11-13 26,000 Navig8
Jun-07 Northern Dawn DH 47,950 2003 11-13 25,500 AP Moller
Jun-07 Navig8 Stealth DH 47,465 2002 23-25 24,250 Teekay
Jun-07 Evros DH 45,300 2005 47-49 21,700 Petrobras
Jun-07 Santa Ana DH 39,768 2002 12-14 21,450 Highlander
Jun-07 Nordic Ruth DH 35,820 2000 59-61 20,250 ST Shipping IMO 2/3
Jul-07 Gulf Sheba DH 299,000 2007 35-37 52,000 TMT
Jul-07 Sparto DH 114,550 2004 11-13 34,000 Stena Bulk
Jul-07 Altius DH 73,400 2004 11-13 29,500 Stena Bulk
Jul-07 Nord Observer DH 47,371 2007 11-13 26,150 Petrobras
Jul-07 Okhotsk Sea DH 47,363 1999 59-61 21,750 ChevronTexaco
Jul-07 Ivory Point DH 47,300 2004 35-37 24,750 AET
Jul-07 Lofoten DH 97,078 1991 11-13 23,000 PTT
Jul-07 Seaexpress DH 45,800 2007 23-25 24,450 Petrobras
Jul-07 Chang Hang Tan Suo DH 45,719 2006 59-61 22,200 Westport
Jul-07 Bosporos DH 37,000 2007 35-37 20,000 Scorpio
Jul-07 Sable DH 40,000 2008 35-37 21,750 BP
Reported Vessel Hull Dwt Built Period (months)
Rate, $pd Charterer Comment
Reported Vessel Hull Dwt Built Period (months)
Rate, $pd Charterer Comment
Aug-07 SCF Caucasus DH 159,173 2002 35-37 38,500 BP
Aug-07 Intisar DH 102,850 2002 11-13 34,000 Teekay
Aug-07 Zaliv Amerika DH 102,357 2008 35-37 29,500 Tesoro
Aug-07 General Zamora DH 68,198 1993 11-13 30,750 PDVSA
Aug-07 Ioannis P DH 46,349 2003 23-25 24,000 Petrobras
Aug-07 Silvia DH 35,841 2000 11-13 22,500 Navig8
Sep-07 Millennium DH 301,171 1998 59-61 45,000 STX PanOcean
Sep-07 Sks Skeena DB 159,000 2006 18-24 39,000 Shell
Sep-07 Nassau Spirit DH 107,181 1998 35-37 29,000 ConocoPhilips
Sep-07 NS Commander DH 105,000 2006 23-25 29,000 Trafigura
Sep-07 Eagle Hope DH 73,800 2008 35-37 28,000 Norden
Sep-07 Gulf Progress DH 64,959 2000 11-13 27,500 Vitol
Sep-07 Silver Lining DH 45,800 2003 35-37 22,700 Petrobras
Oct-07 Crudesun DH 306,000 2007 35-37 51,500 TMT
Oct-07 Crudesky DH 306,000 2007 35-37 51,500 TMT
Oct-07 Althea DH 84,992 1999 11-13 32,000 Teekay
Oct-07 Fedor DH 70,000 2003 11-13 27,500 Teekay
Oct-07 St. Michaelis DH 51,000 2005 11-13 23,300 PTT IMO 2
Oct-07 St. Pauli DH 47,149 2003 23-25 22,500 ST Shipping
Oct-07 St. Georg DH 47,141 2002 23-25 22,500 ST Shipping
Nov-07 Utah DH 299,498 2001 35-37 45,000 CSSSA
Nov-07 Matterhorn Spirit DH 114,980 2005 23-25 32,000 Eiger
Nov-07 Mare Adriacum DH 110,500 2004 11-13 31,000 Shell
Nov-07 High Venture DH 51,087 2006 17-19 24,000 Cargill
Nov-07 Chemtrans Petri DH 47,228 2000 11-13 22,500 Trafigura
Nov-07 Pro Giant DH 46,732 2004 23-25 23,000 FR8
Nov-07 Torm Ragnhild DH 46,186 2005 35-37 22,500 Vela
Dec-07 Neptune DH 319,360 2002 35-37 52,500 TMT
Dec-07 Smiti DH 281,000 2005 12-15 52,500 BP
Dec-07 Nataly DH 142,498 1993 11-13 36,000 Russian
Dec-07 Pink Sands DH 93,891 1993 35-37 27,450 ExxonMobil
Dec-07 Piltene DH 51,800 2007 11-13 24,500 Vitol
Jan-08 La Paz DH 299,700 1995 11-13 65,000 TMT
Jan-08 Venture Spirit DH 298,287 2003 47-49 47,500 Wah Kwong
Jan-08 Ocean Emerald DH 152,680 1991 11-13 31,000 TNK
Jan-08 Maria M DH 40,000 2006 11-13 22,750 Not reported
Feb-08 Spyros DH 319,000 2007 11-13 70,000 TMT
Feb-08 Crude Progress DH 300,000 2002 11-13 70,000 Not reported
Mar-08 Kaspar Schulte DH 72,650 2004 Nov-13 29,750 Vela
112 HSBC Shipping Services Limited
113Global Shipping Markets Review 2008
Appendix 4: Representative Tanker Sales
Reported Vessel Hull Dwt Built Yard Price, $m
Buyer Comment
Jan-07 Windsor DH 162,000 2007 DSME 95.50 Knutsen Dely May-07
Jan-07 Knock Stocks SH 138,105 1993 Harland & Wolff 32.75 Perenco Dely May-07, for conversion
Jan-07 Olympia DH 107,181 1999 Koyo Mihara 31.10 T.E.N. Purchase option from Oct-06
Jan-07 Archon DS 105,896 1985 Hyundai HI 16.80 PetroProd En bloc, price each, for conversion to FPSOJan-07 Archimidis DS 105,896 1985 Hyundai HI 16.80
Jan-07 Gonen DH 47,102 2000 Onomichi 47.50 Vosco
Jan-07 Seapurha DS 39,672 1987 Hyundai HI 16.00 Warm Seas For conversion
Jan-07 Active SH 22,291 1983 Verolme Heusden 6.70 MSI Ship Mgmnt Shuttle tanker
Feb-07 Nuri SH 285,933 1992 Daewoo HI 39.00 Transmed SS/DD due jul-07
Feb-07 Nordatlantic DH 105,344 2001 Sumitomo HI 59.50 Liwa Mobilien. Incl. TC to 2Q-2012at $23,500
Feb-07 Omega Theodore DH 73,672 2006 STX 64.50 Omega Navigation
En bloc, price each. Ice class 1A. Incl. 2y TC to ST Shipping at $25,500 pd with p/s
Feb-07 Omega Emmanuel DH 73,672 2006 STX 64.50
Feb-07 Chang Han Feng Jin DH 46,346 2007 Bohai 48.25 Formosa Plastics
Mar-07 Suzuka SH 269,581 1992 Kawasaki HI 39.00 TMT
Mar-07 Eliomar DH 149,999 2002 Nippon Kokan 85.50 Dr Peters Incl. 5y TC to Seearland at $35,000
Mar-07 Errorless DH 147,048 1993 Harland & Wolff 52.50 Ever Energy
Mar-07 Ocean Pride DS 62,482 1990 Hudong 18.00 Modec For storage
Mar-07 Ganmur DH 47,034 2001 Onomichi 47.50 Bien Dong Shipping
Apr-07 Nordasia DH 105,994 1998 Hyundai HI 59.00 Neunte Schiffahrts.
Apr-07 Celebrity DH 105,200 2004 Sumitomo HI 73.00 GNMT Libya
Apr-07 Serenity DH 105,200 2004 Sumitomo HI 73.00 GNMT Libya
Apr-07 South View SH 64,035 1983 Hitachi Nagasu 6.50 Pacific Blue Shipping
For conversion
Apr-07 Alam Cantik DH 35,000 2006 Dalian 85.00 KGAL En bloc, price both, incl. 5y TC to Handytankers.Apr-07 Alam Cepat DH 34,671 2007 Dalian
May-07 Savoie DH 306,430 1993 Nippon Kokan Tsu 82.20 CS&P Skibe
May-07 Eagle DH 301,690 1993 Sumitomo Oppama 75.00 Kolsten Navigation
May-07 Eastern Fortune SH 277,020 1989 Hyundai HI 40.00 Neu Seeschiff. For conversion
May-07 Georgios S DH 159,981 2001 DSME 178.00 Capital Ship Mgmnt
En bloc, price both
May-07 Yannis P DH 159,924 2002 DSME
May-07 Tromso Trust DH 154,970 1991 Hyundai HI 48.00 BLT En bloc, price each, incl. TC to Feb-08 at $33,500
May-07 Tromso Reliance DH 154,970 1991 Hyundai HI 48.00
May-07 Star Ohio DH 149,562 1992 Samsung HI 50.00 Marine Management
Reported Vessel Hull Dwt Built Yard Price, $m
Buyer Comment
May-07 Arteaga SH 147,067 1990 Esp. Puerto Real 54.00 Arpeni En bloc, price both, for conversion to bulkerMay-07 Butron SH 147,067 1991 Esp. Puerto Real
May-07 Juniper DH 47,465 2002 Uljanik 100.00 Stealth Maritime En bloc, price both, IMO 2/3, epoxyMay-07 Jasmine DH 47,355 2002 Uljanik
May-07 British Endeavour DH 37,224 2002 Hyundai Mipo 85.00 Ocean Tankers En bloc, price both, IMO 2/3May-07 British Endurance DH 32,967 2002 Hyundai Mipo
Jun-07 Venus Glory DH 299,089 2000 Daewoo HI 237.00 Blystad En bloc, price both
Jun-07 Mars Glory DH 299,089 2000 Daewoo HI
Jun-07 Discovery DH 164,533 2003 Hyundai HI 96.00 Palmali
Jun-07 Unicorn DH 152,250 2002 Hyundai HI 94.00 Palmali
Jun-07 Front Horizon SH 149,500 1988 Daewoo HI 28.00 Thistle Marine
Jun-07 Stemnitsa DH 147,093 2000 Samsung HI 88.50 Great Eastern
Jun-07 Maersk Pristine DH 110,000 2004 Dalian New 71.00 Cardiff Marine
Jun-07 Athens 2004 DH 107,181 1998 Koyo Mihara 184.00 Atlas Maritime En bloc, price all
Jun-07 Maria Tsakos DH 107,181 1998 Koyo Mihara
Jun-07 Olympia DH 107,181 1999 Koyo Mihara
Jun-07 Maersk Rye DH 35,000 2004 Dalian 86.00 Libyan Sea Carrier
En bloc, price both
Jun-07 Maersk Ramsey DH 35,000 2004 Dalian
Jul-07 Neptune DH 319,360 2002 Hyundai Samho 136.50 Samho Dely Mar-08
Jul-07 Sunrise SH 264,165 1993 Mitsubishi Nagasaki
48.00 KDB Capital Corp. For conversion
Jul-07 Minerva Nounou DH 147,450 2000 Samsung HI 88.50 Great Eastern
Jul-07 LMZ Nafsika DH 69,431 2006 Daewoo-Mangalia 260.00 Eletson En bloc, price all
Jul-07 LMZ Artemis DH 69,250 2004 Daewoo-Mangalia
Jul-07 LMZ Nefeli DH 69,180 2005 Daewoo-Mangalia
Jul-07 LMZ Afroditi DH 69,180 2005 Daewoo-Mangalia
Jul-07 Glenross DH 90,607 1993 Gdynia 42.00 Groton Pacific En bloc, price each, incl. 3y TC to AET at $26,000
Jul-07 Lochness DH 90,607 1993 Gdynia
Jul-07 Valle Azurra DH 50,100 2007 SPP 58.00 Navi. Montanari
Jul-07 Morning DH 50,530 2006 SPP 53.75 Vinalines IMO 2/3
Aug-07 Han-Ei SH 259,999 1994 Ishikawajima Kure 49.00 Tanker Pacific For conversion
Sep-07 Titan Virgo DH 299,999 1993 Daewoo HI 91.00 Emarat Maritime
Sep-07 Ottoman Dignity DH 152,923 2000 Hyundai HI 90.30 Double Hull Tankers
Incl. 10y BB to OSG at $26,600
Sep-07 Lucky Sailor SH 146,387 1989 Kawasaki HI 30.00 Chinese
Sep-07 Cape Taft DH 73,000 2008 New Century 125.00 OSG En bloc, price both
Sep-07 Cape Talara DH 73,000 2009 New Century
Sep-07 Emerald Hill DS 70,887 1991 Tsuneishi 52.80 Chinese En bloc, price both
Sep-07 Emerald Bay DS 69,999 1990 Hashihama Zosen
Sep-07 Nord Sound DH 45,975 2003 Shin Kurushima 51.00 Koenig En bloc, price each
Sep-07 Nord Strait DH 45,800 2004 Shin Kurushima 51.00
Aug-07 Merlion Park DH 41,354 1993 Minami-Nippon 33.00 Greek IMO 2/3
Sep-07 Seadevil DH 32,250 1996 Lindenau 37.00 Thai Oil
Oct-07 Arietis SH 91,717 1989 Sumitomo Oppama 30.00 TMT For conversion to bulker
Oct-07 Lidong DH 50,530 2007 SPP 60.50 Vinashin
Oct-07 Stena Conqueror DH 47,000 2003 Uljanik 150.00 Gest. Armatoriali En bloc, price all
Oct-07 Stena Italica DH 47,000 2004 Uljanik
Oct-07 Stena Conquest DH 47,000 2003 Uljanik
Oct-07 Formosa Fourteen DH 45,400 2005 Shin Kurushima 56.00 Blystad IMO 2/3
114 HSBC Shipping Services Limited
Reported Vessel Hull Dwt Built Yard Price, $m
Buyer Comment
Oct-07 British Engineer DH 37,343 2003 Hyundai Mipo 46.25 Interorient En bloc, price each, IMO 2/3Oct-07 British Experience DH 37,343 2003 Hyundai Mipo 46.25
Nov-07 Younara Glory DH 300,000 2004 DSME 132.00 Dr Peters Incl. 11y TCB at $53,400 + p/s + $71m p/o
Nov-07 First Olsen NB x2 DH 159,000 2010 Bohai 180.00 Nordic American Price both. Dely Dec-09 & Apr-10
Nov-07 Sarla DS 105,896 1986 Hyundai HI 16.30 Undisclosed For conversion to bulker
Nov-07 Verona I DH 46,980 2006 Hyundai Mipo 113.00 FSL En bloc, price both
Nov-07 Nika I DH 46,980 2006 Hyundai Mipo
Nov-07 Alam Cergas DH 34,671 2007 Dalian 45.00 Middle Eastern
Dec-07 Else Maersk DH 308,491 2000 Hyundai HI 122.00 Eastern Med
Dec-07 Chelsea DH 298,432 1995 Daewoo HI 101.00 Blystad
Dec-07 Shinyo Splendor DH 306,474 1993 Nippon Kokan Tsu 778.00 EIAC DH ships incl. avg. 9.24 yrs TC at $37,940. SH ships incl. avg.2.77 yrs TC at $33,422
Dec-07 Shinyo Navigator DH 300,549 1996 Hyundai HI
Dec-07 C. Dream DH 298,570 2000 Hitachi HI
Dec-07 Shinyo Ocean DH 281,395 2001 IHI
Dec-07 Shinyo Kannika DH 281,395 2001 Ishikawajima Kure
Dec-07 Shinyo Sawako SH 275,616 1995 Hitachi Nagasu
Dec-07 Shinyo Mariner SH 271,208 1991 Nippon Kokan
Dec-07 Shinyo Alliance SH 248,034 1991 Mitsubishi Nagasaki
Dec-07 Shinyo Jubilee SH 240,401 1988 Ishikawajima Kure
Dec-07 Yangtze Star SH 265,995 1994 Mitsubishi Nagasaki
58.10 Platon Shipping
Dec-07 Noiseless DH 143,750 1992 Samsung HI 48.00 Vinashin
Dec-07 Neverland Soul DH 115,000 2004 Samsung HI 72.00 Thenamaris En bloc, price each
Dec-07 Hulls 1658 &1659 DH 114,800 2008 Samsung HI 76.00
Dec-07 Amalthea DH 107,116 2006 DSME 81.50 Minerva
Dec-07 Young Lady DH 105,528 2000 Sumitomo HI 62.00 Eastern Med
Dec-07 Polar DH 72,825 2005 Hudong 62.00 Paradise Navigation
Dec-07 Overseas Aquamar DH 47,236 1998 Onomichi 43.00 Polyar SS due Mar-08
Dec-07 Kerlaz DH 37,000 2004 Hyundai Mipo 42.00 Difko IMO 2/3. Incl. 3y BBB at $11,000
Jan-08 Diamond Hope DH 264,340 1995 Mitsubishi Nagasaki
52.00 Chinese
Jan-08 Ishwari DH 145,200 1991 Hyundai HI 51.50 Nexus Energy For conversion to FPSO
Jan-08 Minerva Libra DH 105,364 1999 Samsung HI 62.00 AET En bloc, price each
Jan-08 Minerva Emma DH 105,364 1999 Samsung HI 62.00
Jan-08 Jag Arpan DS 66,183 1986 Hyundai HI 15.00 Undisclosed En bloc, price each
Jan-08 Jag Anjali DS 64,000 1986 Hyundai HI 15.00
Feb-08 TBN newbuilding DH 310,000 2009 Hyundai HI 163.00 Minerva Dely Mar-09
Feb-08 Olinda DH 149,258 1996 Fincantieri Breda 65.00 Oceanfreight
Feb-08 2x Schoeller newbuilds
DH 114,000 2009 New Times 152.00 Stealth Maritime En bloc, price both. Incl. 5y BB at c.$20,500
Feb-08 Meribel DH 95,773 1990 MisubishI HI 38.00 Chandris
Feb-08 Minerva Alice DH 46,408 1999 Daedong 89.00 Ancora Investments
En bloc, price both. IMO 3Feb-08 Minerva Zen DH 46,344 1999 Daedong
Feb-08 Jag Payal DH 37,400 2007 Hyundai Mipo 102.00 Motia En bloc, price both. Ice class 1AFeb-08 Jag Panna DH 37,400 2007 Hyundai Mipo
Mar-08 Sea Runner DH 47,070 1992 Halla Inchon 28.50 Greek Ice class C, epoxy
115Global Shipping Markets Review 2008
116
Appendix 5: Representative Containership Fixtures
Reported Name Dwt Nominal TEU
Laden TEU
Blt Gear Rate Period Charterer Speed Consumptn
Jan-07 Germany 60,200 4,158 3,124 1996 0 24,000 24 MSC 23.0 150.0
Jan-07 Maersk Tampa 53,310 3,466 2,723 1984 0 19,100 36 MSC 23.0 160.0
Jan-07 Najade 37,900 2,702 2,095 2007 0 19,300 24 K-Line 221.8 88.0
Jan-07 Pona 37,570 2,741 2,116 2007 0 18,750 12 CMA-CGM 22.0 80.0
Jan-07 Leda Trader 34,000 2,442 1,886 2000 3x40 19,250 24 MOL 21.8 75.0
Jan-07 Kyoto Tower 21,900 1,798 1,260 2007 0 14,500 12 WHL 19.7 60.4
Jan-07 August Schulte 34,622 2,566 1,853 2001 4x45 19,850 24 NYK 20.5 80.0
Jan-07 Paris 1,743 1,310 11,650 1990 3x40 11,650 24 PIL 18.8 48.0
Feb-07 HLL Baltic 65,734 4,306 3,046 1995 0 29,000 48 APL 24.2 160.0
Feb-07 Conti Cartagena 33,000 2,456 1,780 1997 3x40 20,000 24 MOL 21.0 69.0
Feb-07 Baltrum Trader 34,017 2,472 1,851 1999 3x45 19,000 24 CLAN 21.0 67.0
Feb-07 HLL Pacific 58,200 4,701 3,270 2002 0 27,500 60 APL 25.0 144.0
Feb-07 San Antonio 30,538 1,829 1,350 2002 2x40 19,400 24 HMM 19.4 61.0
Feb-07 Viking Eagle 23,579 1,740 1,295 2005 2x20 15,500 12 Wan Hai 20.5 58.0
Feb-07 Cape Mondego 37,800 2,742 2,116 2006 0 20,750 12 DAL 21.8 93.0
Feb-07 Cape Fulmar 20,250 1,440 1,050 2007 0 12,500 12 CMA-CGM 19.8 52.8
Feb-07 HS Scott 38,250 2,778 2,005 2007 0 20,750 12 CMA-CGM 23.0 110.6
Feb-07 Olivia 27,950 2,690 2,080 2007 0 19,300 24 K-Line 21.8 88.0
Feb-07 Nordspring 44,985 3,586 2,501 2007 0 24,500 36 CMA-CGM 23.4 121.0
Feb-07 Stadt Koeln 23,850 3,388 2,425 2007 0 28,350 36 Cosco 22.4 106.0
Feb-07 Northern Dedication 41,500 3,534 2,353 2007 0 25,000 60 PIL 23.5 122.0
Feb-07 Christina A 22,100 1,604 1,163 2007 3x45 15,000 12 K-Line 19.0 49.0
Feb-07 Arelia 39,200 2,732 2,150 2007 3x45 22,000 24 CLAN 22.2 99.0
Feb-07 Conti Salome 31,200 2,122 1,530 2007 3x45 18,500 24 CMA-CGM 21.8 65.0
Mar-07 Fabian Schulte 22,250 1,608 1,086 1997 3x45 14,200 24 CMA-CGM 21.0 60.5
Mar-07 Buxhansa 33,300 2,460 1,828 1998 3x40 20,500 24 CMA-CGM 21.0 69.0
Mar-07 Francisca Schulte 22,250 1,608 1,086 1998 3x45 15,000 12 CMA-CGM 21.0 60.5
Mar-07 Otto Schulte 25,685 1,702 1,330 1999 0 15,100 12 UASC 20.0 66.0
Mar-07 Jupiter 34,000 2,452 1,881 2001 0 21,500 36 Hamburg Sued 21.0 75.0
Mar-07 CSCL Yantai 33,900 2,452 1,886 2001 3x45 21,500 36 Hamburg Sued 21.8 75.0
Mar-07 Juturna 33,917 2,452 1,886 2001 3x45 21,000 38 Hamburg Sued 21.8 75.0
Mar-07 ER Bremerhaven 33,800 2,496 1,810 2002 3x45 18,500 12 MSL 22.1 88.0
Mar-07 ER Bremen 33,800 2,496 1,810 2003 3x45 21,000 24 CCNI 22.1 88.0
Mar-07 Flottbek 16,000 1,600 1,090 2005 0 16,600 12 Hapag Lloyd 20.0 49.5
Mar-07 Cape Flint 20,250 1,440 1,050 2006 0 13,150 12 MCC 19.7 5.7
Mar-07 Ava 20,600 1,578 1,065 2007 0 14,500 12 TSL 20.0 47.0
Mar-07 King Andrew 37,800 2,741 2,116 2007 0 21,700 24 CSAV 22.0 79.0
Mar-07 King Aaron 37,800 2,741 2,116 2007 0 21,700 24 CSAV 21.8 88.0
HSBC Shipping Services Limited
Reported Name Dwt Nominal TEU
Laden TEU
Blt Gear Rate Period Charterer Speed Consumptn
117Global Shipping Markets Review 2008
Mar-07 HS Bach 44,985 3,586 2,501 2007 0 26,750 48 CMA-CGM 23.4 130.0
Mar-07 Nordsummer 44,985 3,586 2,501 2007 0 26,950 48 K-Line 23.4 121.0
Apr-07 Asian Trader 20,794 1,404 1,186 1991 0 13,500 12 Zim 19.0 41.0
Apr-07 Marcrotone 23,456 1,687 1,180 1994 0 14,600 12 STX PanOcean 19.0 48.5
Apr-07 Westerhever 22,340 1,572 1,100 1994 3x40 14,400 24 APL 19.5 53.0
Apr-07 Buxmoon 23,150 1,687 1,191 1995 0 14,600 12 STX PanOcean 19.0 48.0
Apr-07 Sofia Russ 22,984 1,728 1,115 1996 3x40 15,250 12 CCNI 19.5 51.5
Apr-07 Conti Bilbao 33,300 2,460 1,810 1997 3x40 20,500 36 APL 21.0 69.0
Apr-07 Helene J 26,260 1,900 1,330 1997 3x45 15,900 12 CMA-CGM 20.0 60.0
Apr-07 Westermoor 35,600 2,730 2,000 2001 3x45 23,500 24 IRISL 23.0 99.0
Apr-07 Janus 34,000 2,452 1,886 2001 3x45 21,000 38 Hamburg Sued 21.0 75.0
Apr-07 ER Wilhelmshaven 34,859 2,496 1,780 2002 3x45 22,000 24 Hapag Lloyd 22.1 88.0
Apr-07 HS Chopin 44,985 3,586 2,501 2007 0 27,250 48 Zim 23.4 130.0
Apr-07 GE Lessing 23,400 1,740 1,330 2007 2x40 16,150 12 CSAV 21.0 64.0
Apr-07 Hansa Papenberg 23,579 1,740 1,295 2007 2x40 15,250 24 CLAN 21.0 64.0
Apr-07 Leopold Schulte 23,579 1,740 1,330 2007 2x40 15,000 24 Hamburg Sued 21.0 64.0
May-07 Cape Race 35,071 2,259 1,920 1993 4x40 21,000 36 MSC 20.0 67.5
May-07 ER Hobart 33,523 2,004 1,552 1994 0 15,500 36 MSC 19.0 63.0
May-07 London Tower 23,884 1,525 1,250 1994 2x40 15,250 12 PIL 19.0 43.0
May-07 Elbe Trader 22,525 1,600 1,090 1994 3x40 15,450 12 TS Lines 21.0 59.0
May-07 Amasis 35,020 2,908 2,090 1995 0 22,500 36 CMA-CGM 22.0 90.0
May-07 Cap Colville 23,083 1,510 1,200 1997 0 14,250 12 PIL 19.0 44.0
May-07 Vancouver 27,100 2,113 1,514 1997 4x40 18,100 24 CMA-CGM 20.0 51.0
May-07 Contship Rome 30,781 2,171 1,748 1998 3x45 21,500 23 Hapag Lloyd 20.5 86.0
May-07 Weserwolf 39,300 2,732 2,267 1999 0 25,000 42 UASC 22.5 85.5
May-07 Santa Felicita 30,200 2,169 1,668 1999 2x45 20,750 12 CCNI 19.7 50.7
May-07 Hansa Kristiansand 20,630 1,550 1,029 2002 2x20 14,995 12 MOL 20.5 55.0
May-07 Hermann Wulff 39,300 2,732 2,267 2006 0 25,000 42 UASC 22.2 89.0
May-07 Buxharmony 37,900 2,702 2,095 2007 0 22,900 36 CLAN 21.8 88.0
May-07 Northern General + 4 newbuilds
53,480 4,294 2,820 2008 0 27,000 60 Hamburg Sued 24.0 134.0
May-07 Rio Cadiz 55,400 4,300 2,900 2008 0 28,950 60 CSAV 24.0 140.0
May-07 Rio Charleston 55,400 4,300 2,900 2008 0 28,950 60 CSAV 24.0 140.0
May-07 4x Schulte newbuilds
85,000 7,000 4,912 2009 0 37,250 60 APL 25.0 220.0
Jun-07 Buxlagoon 23,456 1,687 1,180 1994 0 15,850 12 CMA-CGM 19.0 48.5
Jun-07 Marcampania 23,150 1,684 1,152 1994 3x40 15,600 24 NDAL 19.0 48.0
Jun-07 Zrin 35,100 2,275 1,908 1994 4x40 21,900 24 Hapag Lloyd 19.6 64.0
Jun-07 Mare Caspium 34,600 2,959 2,018 1995 0 25,000 48 CMA-CGM 22.0 85.0
Jun-07 Magnavia 30,300 2,078 1,705 1996 0 20,150 12 KMTC 21.5 68.0
Jun-07 Merkur Cloud 22,026 1,584 1,086 1996 3x40 15,500 24 Hanjin 21.0 60.5
Jun-07 Hanse India 43,368 3,424 2,411 1997 0 29,000 36 IRISL 22.5 100.0
Jun-07 Nordriver 22,420 1,684 1,100 1997 3x45 15,700 12 CMA-CGM 20.0 49.5
Jun-07 Champion 30,450 2,080 1,670 1998 3x40 20,000 12 MOL 21.0 72.0
Jun-07 ER Hamburg + ER Santiago
30,705 2,074 1,744 1998 3x40 22,250 36 Maersk 21.0 86.0
Jun-07 CSAV Peru 33,568 2,474 1,950 1998 3x45 21,900 24 Hapag Lloyd 21.0 66.5
Jun-07 Wehr Flottbeck 23,040 1,730 1,120 1999 3x40 15,500 12 CCNI 20.0 54.5
Reported Name Dwt Nominal TEU
Laden TEU
Blt Gear Rate Period Charterer Speed Consumptn
118
Jun-07 Hansa Augustenburg 23,508 1,740 1,295 2003 2x40 16,000 12 NYK 20.5 58.0
Jun-07 Cosco Boston & Cosco New York
67,410 5,100 3,350 2007 0 38,000 24 CMA-CGM 24.3 164.5
Jun-07 Posen 37,570 2,741 2,116 2007 0 26,950 24 OOCL 22.0 80.0
Jun-07 Northern Debonair + Northern Defender
42,318 3,524 2,353 2007 0 28,000 66 CSAV 23.5 122.0
Jun-07 Hansa Cloppenburg 23,500 1,740 1,330 2007 2x40 15,500 24 NDAL 21.0 64.0
Jun-07 Santa Brunella + Santa Bianca
38,200 2,824 2,030 2008 0 21,500 36 Hamburg Sued 24.0 95.0
Jun-07 4x Schulte newbuilds
50,500 4,253 2,805 2009 0 27,000 60 UASC 24.5 133.0
Jul-07 Conti La Spezia 23,300 1,597 1,148 1990 0 15,850 12 Seacon 18.0 45.0
Jul-07 Libra Australia II 24,444 1,432 1,212 1994 0 14,950 12 OOCL 18.7 42.3
Jul-07 Santiago 32,380 2,000 1,600 1996 3x40 22,500 32 WSL 20.0 65.5
Jul-07 Northern Grandeur 61,100 4,787 3,355 1998 0 34,700 60 CSAV 24.5 164.0
Jul-07 Fei Yun He 25,723 1,702 1,305 2000 0 17,250 24 Wan Hai 20.0 101.0
Jul-07 Marchicora 20,501 1,300 1,000 2000 2x60 13,500 36 NDAL 16.7 30.0
Jul-07 Hansa Oldenburg 23,508 1,740 1,330 2002 3x40 18,650 12 Seacon 20.5 58.0
Jul-07 Hansa Brandenburg 23,579 1,740 1,330 2003 2x40 17,250 24 BTL 20.5 58.0
Jul-07 Wilhelm Busch 23,400 1,740 1,275 2007 2x40 17,000 12 Hapag Lloyd 21.0 55.0
Jul-07 Quadriga 42,250 3,414 2,410 2008 0 28,500 60 CSAV 23.2 105.0
Aug-07 Helene Rickmers 23,106 1,728 1,120 1998 3x40 17,850 24 CMA-CGM 20.0 54.5
Aug-07 Oder Trader 30,300 2,008 1,628 1998 3x45 22,750 30 Safmarine 20.8 73.0
Aug-07 Viona 22,200 1,875 1,285 2006 3x45 19,250 24 Safmarine 21.0 67.0
Sep-07 Northern Fortune 30,685 1,899 1,600 1991 0 21,000 24 Hanjin 19.2 65.0
Sep-07 Jolly 29,693 2,098 1,700 1992 0 22,500 12 Hanjin 18.0 47.0
Sep-07 Cap Colorado 24,066 1,510 1,200 1997 0 17,500 12 Seacon 19.0 44.0
Sep-07 Cape Negro 24,133 1,510 1,249 1998 0 18,000 12 Seacon 20.0 44.0
Sep-07 Euro Max 29,300 2,732 2,267 2004 0 27,900 48 CMA-CGM 22.5 80.0
Sep-07 Sima Sadaf 20,250 1,440 1,050 2007 0 16,150 12 STX PanOcean 19.6 45.0
Sep-07 Madison Strait 25,899 1,795 1,312 2007 2x40 15,000 60 MOL 20.5 60.0
Sep-07 Mario A 22,100 1,604 1,163 2007 3x45 18,000 12 Hapag Lloyd 19.0 49.0
Sep-07 Northern Dexterity + N. Dependent
53,350 3,534 2,353 2008 0 28,000 60 APL 23.5 122.0
Oct-07 Independent Action 20,455 1,388 1,030 1992 0 15,250 12 IRISL 17.0 39.0
Oct-07 Lal Bahadur Shastri 18,966 1,869 1,534 1993 0 17,800 12 OOCL 17.5 43.0
Oct-07 San Fernando 20,050 1,512 1,188 1996 2x40 17,250 12 MSC 19.7 47.0
Oct-07 Dorothea Rickmers 23,027 1,728 1,120 1998 2x40 17,600 24 CMA-CGM 20.0 54.5
Oct-07 Violetta 22,200 1,856 1,285 2007 3x45 18,500 12 CMA-CGM 21.0 67.0
Oct-07 Haugsburg 23,579 1,740 1,330 2008 2x45 18,000 24 Wan Hai 21.0 64.5
Oct-07 2x Doehle newbuilds 52,300 4,200 2,875 2009 0 30,125 60 UASC 24.2 133.0
Oct-07 4x Offen newbuilds 50,500 4,253 2,805 2009 0 30,125 60 UASC 24.5 133.0
Nov-07 Hansa Africa 43,600 3,424 2,411 1997 0 31,400 36 CLAN 23.5 115.0
Nov-07 Wehr Altona 23,051 1,730 1,120 1997 3x45 16,800 21 CCNI 19.6 54.5
Nov-07 Wehr Koblenz 23,001 1,730 1,120 1998 3x45 16,800 21 CCNI 19.6 54.5
Nov-07 Wehr Rissen 23,190 1,730 1,120 1999 3x45 16,500 12 MOL 19.6 54.5
Nov-07 Mi Yun He 24,259 1,432 1,200 2000 0 17,400 17 Simatech 19.0 38.0
Nov-07 Hansa Liberty 33,899 2,478 1,898 2000 3x45 27,500 24 STX PanOcean 22.0 78.0
HSBC Shipping Services Limited
Reported Name Dwt Nominal TEU
Laden TEU
Blt Gear Rate Period Charterer Speed Consumptn
119Global Shipping Markets Review 2008
Nov-07 Torge S 33,216 2,450 1,896 2003 3x40 27,000 28 Hapag Lloyd 22.5 79.8
Nov-07 Hansa Coburg 23,579 1,740 1,330 2007 2x40 18,000 24 NDAL 21.0 64.0
Dec-07 Wilhelm E 20,406 1,452 1,034 1995 0 14,500 15 Yang Ming 18.0 45.3
Dec-07 Corelli 15,475 1,445 1,119 1997 0 15,475 12 GSL 18.0 35.0
Dec-07 Sevilla 25,900 1,812 1,312 2008 2x40 17,800 17 Westwood 50.2 45.0
Jan-08 Zenit 21,500 1,617 1,203 1998 3x45 15,500 45 MOL 20.5 70.0
Jan-08 Marcalabria 23,150 1,684 1,152 1993 3x40 17,800 30 CCNI 19.0 45.8
Jan-08 Cape Magnus 37,800 2,742 2,115 2008 0 27,250 18 UASC 22.0 85.0
Jan-08 King Brian 24,200 1,706 1,250 2008 0 17,000 12 OOCL 19.5 50.0
Jan-08 Helene C 32,800 2,450 1,820 2006 3x40 27,100 24 K-Line 22.5 80.0
Jan-08 San Adriano 28,324 1,819 1,300 2008 3x45 19,500 18 UASC 21.8 82.6
Jan-08 Viking Eagle 23,579 1,740 1,295 2006 2x40 17,850 24 K-Line 20.5 58.0
Feb-08 Just Trader 20,250 2,462 1,851 1998 3x45 20,250 24 Maruba 21.0 67.0
Feb-08 Conti Lissabon 39,000 5,744 4,172 2000 0 33,500 96 Hanjin 26.0 210.0
Feb-08 El Zorro 13,769 1,118 700 2006 0 12,300 12 GSL 19.5 36.0
Feb-08 Sinotrans Tianjin 37,856 2,742 2,126 2005 0 28,300 18 RCL 22.5 80.5
Feb-08 Scotia 25,360 1,716 1,295 2000 3x45 19,500 12 Hapag Lloyd 21.0 64.0
Feb-08 Wehr Blankanese 23,021 1,726 1,210 1999 2x40 17,750 22 K-Line 19.6 54.0
Mar-08 Pontresina 32,900 2,700 2,010 2008 0 26,000 48 PIL 23.0 93.0
Mar-08 Samaria 25,414 2,000 1,714 2000 3x40 18,500 12 ZIM 21.0 64.0
Mar-08 Hansa Aalesund 20,461 1,550 1,029 2001 2x40 17,400 12 K-Line 20.0 50.0
120
Appendix 6:Representative Containership Sales
Reported Vessel Nominal TEU
Dwt Blt Yard Price $m
Buyer Comment
Jan-07 OOCL Belgium 2,808 40,972 1998 Daewoo HI 480.0 Luxembourg buyer
En bloc, price all
Jan-07 OOCL Britain 5,344 67,958 1996 Mitsubishi Kobe
Jan-07 OOCL California 5,344 67,765 1995 Mitsubishi Nagasaki
Jan-07 OOCL America 5,344 67,741 1995 Mitsubishi Nagasaki
Jan-07 OOCL Japan 5,344 67,752 1996 Mitsubishi Nagasaki
Jan-07 OOCL Rotterdam 8,063 99,518 2004 Mitsubishi Nagasaki
Jan-07 OOCL Hong Kong 5,344 67,637 1995 Samsung HI
Jan-07 OOCL China 5,344 67,625 1996 Samsung HI
Feb-07 APL Holland 5,510 67,500 2001 Samsung HI 88.0 APL En bloc, price each, p.opt.Feb-07 APL Scotland 5,510 67,500 2001 Samsung HI
Feb-07 Maersk Rimini 1,048 15,174 1990 J J Sietas 10.9 Dania Marine
Feb-07 Providence 1,684 22,420 1995 Szczecin 21.2 Komrowski
Feb-07 Maersk Vancouver 1,678 22,308 2001 J J Sietas 123.0 IMTC En bloc, price all
Feb-07 Maersk Valletta 1,678 22,300 2002 J J Sietas
Feb-07 Maersk Vigo 1,678 22,200 2002 J J Sietas
Feb-07 Maersk Venice 1,678 22,308 2002 J J Sietas
Feb-07 CMA-CGM Lilac 2,824 39,295 2005 Hyundai Mipo 47.0 Papathomas En bloc, price eachFeb-07 CMA-CGM Violet 2,824 39,200 2006 Hyundai Mipo
Feb-07 CMA-CGM Camellia 2,824 39,200 2006 Hyundai Mipo
Feb-07 CMA-CGM Dahlia 2,824 39,200 2006 Hyundai Mipo
Mar-07 Kestrel 1 1,939 25,684 1988 Gdansk Lenina 14.0 Cosmoship En bloc, price eachMar-07 White Swan 1,939 26,132 1989 Gdansk Lenina
Mar-07 Birte Ritscher 1,452 20,346 1995 Kvaerner Warnow 19.5 Euroseas
Mar-07 West Gate Bridge 2,878 40,928 1986 Kawasaki HI 17.2 Goldenport
Mar-07 CSAV Peru 2,478 33,914 1998 Volkswerft 40.0 Seacastle
Mar-07 Libra Brasil 1,742 30,078 1992 Thyssen 21.2 Virginia Key
Apr-07 Cala Pinar Del Rio 1,354 20,275 1994 Szczecin 27.0 Hansen & Lange
May-07 YM Victory 1,110 19,325 1997 China Shipbuilding 89.0 Arkas Deniz. En bloc, price all
May-07 YM Champion 1,119 19,332 1997 China Shipbuilding
May-07 YM Container 1,119 19,353 1997 China Shipbuilding
May-07 YM Union 1,119 19,338 1997 China Shipbuilding
May-07 Dal East London 2,420 33,745 1994 Gdansk Lenina 36.0 Goldenport
May-07 Mukaddes Kalkavan 1,145 12,123 1997 Sedef Tuzla 20.0 JR Ship Mgmt En bloc, price eachMay-07 Selma Kalkavan 1,145 12,310 1999 Sedef Tuzla 20.0
May-07 Bunga Pelangi Dua 4,469 61,428 1995 Hyundai HI 50.0 MSC
Jun-07 Cosco Charleston 5,100 67,600 2007 Hanjin Pusan 93.0 CMA-CGM En bloc, price eachJun-07 Cosco Norfolk 5,100 67,600 2007 Hanjin Pusan 93.0
HSBC Shipping Services Limited
Reported Vessel Nominal TEU
Dwt Blt Yard Price $m
Buyer Comment
121Global Shipping Markets Review 2008
Jun-07 Beauty River 1,923 33,667 1990 Halla Inchon 18.0 Eurobulk En bloc, price each. Dely Sep-07
Jun-07 Honor River 1,923 33,668 1990 Halla Inchon 18.0
Jun-07 Montemar Europa 1,730 22,900 2003 Szczecinska Nowa 31.0 Ship Finance Intl
Jun-07 Nedlloyd Juliana 2,556 34,273 2003 Hyundai HI 44.0 Blue Star Reederei
En bloc, price eachJun-07 Nedlloyd Adriana 2,556 34,567 2003 Hyundai HI 44.0
Jun-07 Nedlloyd Marita 2,556 32,000 2003 Hyundai HI 44.0
Jun-07 Nedlloyd Valentina 2,556 34,315 2004 Hyundai HI 45.0
Jul-07 Hyundai Sprinter 2,181 24,767 1997 Hyundai HI 150.0 Danaos En bloc, price all
Jul-07 Hyundai Stride 2,181 24,777 1997 Hyundai HI
Jul-07 Wan Hai 251 2,181 24,777 1997 Hyundai HI
Jul-07 Hyundai Future 2,181 24,799 1997 Hyundai HI
Aug-07 Steindeich 1,205 18,355 1996 Stocz. Gdynia 21.5 Marconsult Schiff.
Aug-07 City of Hamburg 2,228 30,400 1990 Hyundai HI 24.0 Marconsult Schiff.
Aug-07 MSC Mara 5,050 68,121 2006 Hanjin Pusan 90.0 Seacastle En bloc, price each, incl. 4y TC back
Aug-07 MSC Benedetta 5,050 67,600 2006 Hanjin Pusan 90.0
Aug-07 MSC Debra 5,050 67,600 2006 Hanjin Pusan 90.0
Aug-07 MSC Olga 5,050 67,600 2006 Hanjin Pusan 90.0
Aug-07 Sinar Lombok 1,057 23,724 1989 Naikai Setoda 10.0 Virginia Key
Sep-07 Cap Bonavista 2,442 33,917 1999 Thyssen 64.0 Allseas
Sep-07 Thorkil Maersk 1,106 21,238 1990 Tsuneishi 16.5 Eastwind En bloc, price eachSep-07 Torben Maersk 1,106 21,238 1990 Tsuneishi 16.5
Sep-07 Trein Maersk 1,106 21,229 1990 Tsuneishi 16.5
Sep-07 Tobias Maersk 1,106 21,229 1990 Tsuneishi 16.5
Nov-07 Mare Hibernum 1,016 12,571 1995 Szczecin 20.0 Danish KS Inc. TC to May-10 at $15,000
Nov-07 Emirates Jumeirah 1,048 15,162 1990 J J Sietas 13.5 Phoenix KS
Nov-07 ARA J 1,122 16,833 1998 Peene-Werft 20.4 Scott Shipping
Dec-07 Maersk Rades 1,118 13,760 2005 Jingjiang Traffic 29.2 Asian owner
Dec-07 Fa Mei Shan 1,118 13,760 2005 Jingjiang Traffic 28.5 Hasco
Jan-08 APL Jebel Ali 2,470 33,817 2002 Aker MTW 57.0 All Ocean
Jan-08 Regina Maersk 6,000 84,900 1996 Odense 280.0 Costamare En bloc, price all, incl. 10y-TCB at $35,000
Jan-08 Kirsten Maersk 6,418 90,456 1997 Odense
Jan-08 Katrine Maersk 6,418 84,900 1997 Odense
Jan-08 Hyundai Highway 2,181 24,757 1998 Hyundai HI 90.0 Danaos En bloc, price all, incl. 10y TCBJan-08 Hyundai Bridge 2,181 24,772 1998 Hyundai HI
Jan-08 Hyundai Progress 2,181 24,766 1998 Hyundai HI
Jan-08 Vento Di Meltemi 1,022 13,333 1985 Bremer Vulkan 21.2 Dutch
Jan-08 ACX Mimosa 1,551 24,497 1992 Kanasashi Toyo. 21.5 American
Jan-08 CMA-CGM Ipanema 1,730 23,051 2001 Szczecin 33.8 Varship Incl. TC to DAL to Apr-08 at $13,000
Feb-08 CMA-CGM Copernic 2,741 37,570 2007 Aker MTW 67.0 Unknown
Feb-08 Cala Palmira 1,132 14,717 1995 Volkswerft 19.5 Unknown Incl. 13m TC
Feb-08 King Anton 2,741 37,800 2008 Aker Ostsee 68.1 STX PanOcean En bloc, price eachFeb-08 King Attila 2,741 37,570 2007 Aker MTW 68.1
122
A Note on Sources
This report necessarily draws on a wide range of sources,
including our own research and network of contacts
and correspondents on a worldwide basis. A number of
third-party sources have also been consulted, including:
the Baltic Exchange, the BBC, Bloomberg, BP, Clarkson
Research Studies, Containerisation International, CRU Steel
Monitor, E.A.Gibson Weekly Tanker Report, the Economist,
Eurostat, Factiva, Fearnley’s Weekly, the Financial Times,
Global Insight Inc, Howe Robinson & Company Container
Research, HSBC Bank Plc, the International Energy
Agency, the International Grains Council, the International
Iron and Steel Institute, the Journal of Commerce, Lloyds
List, Lloyd’s Shipping Economist, Lloyds Register-Fairplay,
Maersk Broker Container Charter Market Monthly, Maritime
Strategies International Ltd, Meps (International) Ltd., the
Metal Bulletin, Mitsui O.S.K. Lines Container Shipping
Research, MoneyWeek, National Bureau of Statistics of
China, Odin Marine Inc, PIERS, Poten and Partners, South
China Morning Post, US Department of Energy (Energy
Information Administration), the Wall Street Journal, Xinhua
News Agency. We gratefully acknowledge all of these.
Should you wish to commission any specific reports then
please contact Nigel Prentis or Mark Williams at +44 20
7719 6605 / 6606.
All information supplied in this report is supplied in good
faith. HSBC Shipping Services Limited does not accept
responsibility for any errors and omissions arising from this
report, and cannot be held responsible for any action taken,
or losses incurred, as a result of the details in this report.
This report is distributed to the primary user of the delivery
e-mail account and may NOT be redistributed without the
express written agreement of HSBC Shipping Services
Limited. The primary user may make copies for his or her
exclusive use.
HSBC Shipping Services Limited London
Research & Consultancy Division
13/3/08
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