Iran has established a joint venture shipping company with Kazakhstan, Tasnim news agency reports citing a statement from the Islamic Republic of Iran Shipping Lines’ (IRISL) managing director Mohammad Saeedi.
According to Saeedi, the new company would be headquartered in Bandar Anzali, Iran.
The move is said to be aimed at boosting bilateral trade in the aftermath of sanctions’ lifting against Iran.
The setting up of the shipping company was announced by IRISL in 2015 and was formalized the year after during Kazakhstani President Nursultan Nazarbayev’s visit to the Tehran.
Specifically, on the sidelines of the presidential visit in 2016, IRISL and Kazakhstan’s KTZ Express – a subsidiary of the country’s national railways company, signed an agreement on establishing the JV.
The agreement also lays the groundwork for facilitating maritime transportation in the Caspian Sea Region, joint cooperation in terminal management, integrated transportation between Iran’s southern ports and CIS countries, building port terminal and investment in the ship repair sector between Iran and Kazakhstan.
As disclosed earlier, the company was born out of the need to create a shipping line with regular voyages to the Caspian Sea ports with a larger capacity for transporting goods.
Previous reports said that the shipping line would have a transporting capability ranging between 18,000 to 36,000 tons of goods per week, and include six sailings a month from Iranian ports to ports in Russia and Kazakhstan.
However, in the latest report, these details have not been confirmed.
IRISL could not be reached for comment at the time of publishing of this article.
Since the beginning of the second half of this year, shipowners have ramped up dry bulk ordering, bringing the newbuild count to 110 new ships in the last three months.
The number has almost doubled when compared to 63 newbuilding orders from the first half of this year, according to the data from VesselsValue.
Interestingly enough, the majority of shipowners contracting newbuilds comes from Japan and they have ordered 41 new dry bulk carriers since July 1, 2017.
The Japanese owners are followed by their Greek counterparts with 25 orders, 13 from Singapore, 8 from Turkey and 7 from China. The remaining 16 orders are split between other countries, including those from Saudi Arabia’s Bahri and Bulgaria’s Navibulgar.
To remind, earlier this month Japanese company Nissen Kaiun placed an order for ten 82,000 DWT bulk carriers at compatriot shipyards.
Furthermore, Japan’s Kambara Kissen has ordered eight Panamaxes and two Ultramaxes at Tsuneishi Cebu Shipbuilding, slated for delivery by 2020.
Big orders also came from Nisshin Shipping and Singapore’s Yangzijiang Shipping Pte that ordered seven bulkers each during the said period.
A new mega-order seems to be in the making, as indicated by brokers, involving Brazilian miner Vale which has been linked to a time charter deal for up to 30 Valemax newbuilds.
Under the long-term contracts of affreightment lasting up to 25 years, Chinese joint venture between ICBC Leasing and China Merchants would be providing ten 400,000 DWT bulkers, while South Korean shipping company Pan Ocean would be providing 4 Valemax newbuilds.
In addition, Pan Ocean’s compatriots Korea Line Corporation, H Line Shipping, and SK Shipping would each contribute two 400,000 DWT bulkers, data from Intermodal Research shows.
Furthermore, Polaris Shipping is reportedly ordering up to ten newbuilds to support the contract.
The orders are said to be spread across several Chinese and South Korean yards, with Hyundai Heavy Industries (HHI) being tied to an order from Polaris, with likely deliveries in 2019-2020.
When asked about the order by World Maritime News, Vale said it could not comment on the reports.
Polaris and HHI are yet to confirm the market reports as well.
Prompted by attractive newbuilding prices the owners are rushing to the yards to secure newbuilding tonnage anent the anticipated market recovery.
Nevertheless, the ordering spree might result in the boomerang effect and delay the much-needed recovery even further amid the threat of tonnage oversupply that is likely to keep freight rates down.
Tanker owners haven’t enjoyed a healthy ride of freight rate increases in the past few months, as the oil market has been experiencing turbulences. However, there are still “pockets” of resilience, which offer room for more optimism moving forward. In its latest report, shipbroker Allied Shipbroking said that “with crude oil prices for both Brent and WTI reaching recent highs it is clear that the recent disruptions caused to the market by the devastation brought about by Hurricane Harvey where not only short lived but there was enough resilience in the market to even drive for a rally in prices as oil product reserves started to retreat on the back of the temporary halt in operations. According to the International Energy Agency’s most recent report, Global oil demand is moving at a significantly faster rate than expectations while the excessive crude oil inventories of the past seem to be retreating now at an ever-higher rate” said the shipbroker.
According to Allied’s, George Lazaridis, Head of Market Research & Asset Valuations, “with both the U.S. and Europe showing ever improving economic figures and likely to continue seeing an upward drive in oil consumption, the market has started to show better signs of life then what we were seeing a year ago. At the same time, the Far East is still showing to have a fair increase in appetite for this vital energy commodity giving the commodity a fair boost in recent months. Yet despite this re-balancing of the market and the strong improvement in global oil consumption (expectations are for the final year growth figure to reach 1.6 million barrels a day or 1.7%) rates in the tanker market continue to lack any positive vibe, while most feel that they will remain under pressure for the near-term at least”.
Lazaridis said that “during the course of the year, the crude oil tanker fleet (VLCCs, Suezmaxes and Aframaxes) has increased by around 3.68%. That is just shy of 2% more then what the current expectation for growth in consumption for the whole of the year, while given that we still have another four months of newbuilding deliveries and subdued scrapping activity, the current anticipation is for this difference to grow further before the year comes to a close. The current orderbook still holds at relatively strong levels compared to the current active fleet, with the orderbook ratio for the aforementioned sizes still holding at above 14% and unwilling to drop significantly as new orders continue to be noted in this sector. The pain of this inbalance has been felt over the past 12 months, with rates having shown only a mere shadow of their previous performance”.
Allied’s analyst says that “these figures however do not paint a complete picture of what’s being going on over the past couple of years. The global trade has seen a major shift. The Far East has undertaken the role as main importer of seaborne crude, now playing a major driver in the freight market as the West started to retreat. At the same time and over the course of the past decade, the oil products market has also taken an ever-bigger chunk out of the total trade, as most of the main producers of crude look to take up for themselves the higher value added from oil products. This has been the main driving boom behind the oil product markets as well as the main argument behind the large level of newbuilding contracting that was undertaken in the MR and LR sizes between 2012 and 2014. Furthermore, it is testament to this the fact that the market for these oil product size segments has performed relatively well, when compared to the rate of growth in the fleet that they have been subjected to during the past 5 years. The question is how well the oil markets will be able to keep things positive in the oil seaborne trade and counter the continued growth in tonnage supply in the mediumterm. At the same time could there be a more bullish possibility in stall for the nearterm and more specifically in the final quarter of the year, as the combination of the winter seasonal spike and the restocking of oil reserves by most of the West could help shift the balance to the ship owners favor once more”, he concluded.
Cascading of larger ships into the Asia-East Coast of South America (ECSA) trade lane has seen spot rates drop from 3,800 USD/TEU to 2,200 USD/TEU in just 11 weeks, data from SeaIntel shows.
As indicated, in April 2017, the weekly capacity on the trade lane reached a low point at 23,500 TEU offered in the market, and shortly thereafter rates spiked at almost 4,000 USD/TEU. Having maintained capacity discipline for a full year, carriers have begun to inject capacity in the trade lane, presumably to take advantage of the high rates, primarily through the deployment of extra loader vessels. Since April 2017, capacity in the trade lane has grown by 30% – in turn driving the sharp rate reductions recently.
The Asia-ECSA trade lane has been subject to extreme swings in spot rates from 2012 onwards, with a very marked rally in rates in spring 2016, even stronger spike in summer 2017. The decline in the trade lane in the period 2013-2016 was triggered by the cascading of larger vessels into the trade. The carriers reduced the capacity in late 2015 through the cancellation of three of the existing six services.
At the height of the overcapacity period, spot rates dropped to as little as 99 USD/TEU in February 2016, on what is arguably one of the longest and costliest trades to service. The restoration of rate levels in the Asia-ECSA trade was due to capacity discipline, where carriers outright canceled services in order to bring supply and demand into better balance. The recent sharp rate decline is due to the opposite effect – a lack of capacity discipline, as the extra loaders have injected significant amounts of capacity.
“What will happen going forward depends on whether the carriers will cease their extra loader programs, although, with the lag-time previously seen between capacity action and the SCFI on this trade lane, we might see the spot rates decline for a few more weeks even in the absence of further capacity injection,” CEO of SeaIntel, Alan Murphy says.
Chinese banks seem to be the emerging power when it comes to securing capital for the shipping industry.
The market has been dominated by European lenders which are starting to turn to a more localized strategy as they work to trim down their exposure to bad shipping loans.
This is in particular seen in Germany, whose banks have sustained a considerable blow from nonperforming loans from the sector.
For example in June this year, German Commerzbank returned its regulatory licence to conduct business concerning ship Pfandbriefe as part of its plan to dispose of bad shipping loans worth EUR 4.5 billion.
However, Chinese financial institutions might be replacing the German capital on the market.
“Chinese banks are increasingly doing transactions globally, and it has become a trend. When someone leaves the scene, there is a gap, and it will soon be filled with different banks,” Joep Gorgels, Regional Head Scandinavia ECT Energy & Transportation – ABN AMRO Bank said while speaking at Marine Services & Offshore Forum in London.
As explained by Bill Guo, Executive Director of Beijing-based ICBC Leasing, since many ships are being built in China, especially those intended for export, there has been a great demand to push the banks to finance those ships.
The demand also comes from the local shipyards, capable of building massive ships, such as those 22,000 TEU ULCVs recently ordered by CMA CGM at CSSC yards.
According to Guo, both Chinese export and import banks and local leasing companies are interested in providing financing to such projects as the return is stable and the risk is reduced.
In addition, ICBC is looking beyond local boundaries, as 80 % of its business comes outside of China, with the majority of customers from that percentage being from Europe.
The availability of funding for shipowners, which has already been scarce, is becoming ever more restricted and further threatened by the pressure from regulators, in Europe in particular.
As pointed out during the panel, the advantage of the Chinese lessors is that they offer cheaper capital and are more flexible than their European or American counterparts, which is very much appreciated in the industry.
It has taken a whole year for all of the idle ships of South Korean defunct shipping company Hanjin Shipping to be fully removed from the idle fleet following the company's demise, according to Alphaliner.
The former South Korean shipping giant was officially declared bankrupt by the Seoul Central District Court on February 17, less than six months after it first filed for court receivership.
Hanjin's departure from the liner trades in September last year brought the idle fleet to 1.6 million TEU, as 0.6 million TEU was added from Hanjin's ex-tonnage.
As explained by Alphaliner, the majority of these ships were pulled from the idle fleet in April this year when the new East-West Alliance services resulted in a surge in vessel demand.
Six of Hanjin's former ships were sent to scrapyards, while the others were taken over by other carriers, leaving only one ship from the fleet idle-the 1,647 TEU Orion, owned by Alpha Ship.
"However, the capacity discipline and rate stability that followed Hanjin's departure have also been eroded as the container shipping market steps into the post-Hanjin era," Alphaliner said.
Since September 2016, over 1 million TEU has been added to the active fleet amid ramping up of deliveries of ULCVs. Hence, the fleet currently stands at 20.44 million TEU, up by 5.7 percent year-on-year.
Alphaliner believes that the onset of the slack winter season from October will put further pressure on freight rates.
"The rate truce that carriers have largely abided by since Hanjin's sudden exit one year ago, now appears to be crumbling. Rate slashing just ahead of the October holidays in China points to further rate instability as carriers continue to jostle for market share," Alphaliner pointed out.
"The Shanghai Containerised Freight Index (SCFI) has recorded six consecutive weeks of declines and, despite strong peak season demand, carriers in August and early September failed to push rate increases through. This is a clear sign that rate cutting is starting to take hold once again."
A new rate war is being predicted as carriers post black figures for the second quarter of this year heralding fairer winds when compared to the horrendous second quarter of 2016.
Ten carriers posted black figures in the second quarter of 2017, while only two reported losses for the quarter, those being Hyundai Merchant Marine (HMM), which booked a loss of USD 81.8 million, and Mitsui O.S.K Lines (MOL), which recorded a loss of USD 55.1 million.
Ship owners are still mostly bullish when it comes to committing future capital for newbuilding investments. In its latest weekly report, Allied Shipbroking said that "we are still seeing a fair amount of activity emerge on the dry bulk side, as buying appetite continues to be firm with most looking to tie up any still available TIER II slots before the window of opportunity is closed shut. In this regard it is already proving difficult with only a hand full of yards still able to offer TIER II designs. At the same time, the rally that has been noted in the secondhand market has also helped boost appetite amongst ship owners, with the price gap between a modern vessel and a newbuilding closing fast and given that newbuilding prices are likely to climb over the next couple of months, many may well be placing these orders on speculation of an opportunity to flip them as resales at a later date and net the positive difference that they feel will be at hand. At the same time, shipbuilders have come out to market with a more aggressive marketing run, now looking to entice any potential buyers, while sentiment is high. This however is still mainly limited to Chinese shipbuilders, with S. Korean yards still out of play due to their requirements for higher prices and Japanese yards seemingly well occupied up until early 2020", Allied said.
In a separate newbuilding note, Clarkson Platou Hellas said that "this week in Tankers, DSD Shipping have extended their series of 50,000 DWT MR Tankers at Hyundai Vinashin by declaring an option for two additional units. Set for delivery in 2020, the duo will be the 3rd and 4th vessels in the series. Whilst there is nothing to report in other sectors, there are a couple in the Passenger / Cruise market. Fincantieri have announced an order for one 40,700 GT Cruise Ship by Silversea Cruises. Delivering in 2020, the vessel will be able to accommodate 596 passengers. VARD have won an order for one approx. 5,000 GT Cruise Ship from Coral Expeditions for delivery in 1Q 2019. This single unit will be built at VARD's Vung Tau facility in Vietnam and will be able to carry 120 passengers".
Meanwhile, in the S&P market, ships' valuations expert VesselsValue noted that it has been a quiet week for bulker sales, with values remaining stable. "Supramax Rak Ana (50,800 DWT, Jun 2000, Oshima) sold for USD 6 mil, VV value USD 6.54 million. Handy Bulker Zenith Explorer (28,300 DWT, Aug 2008, Imabari) sold for USD 8 mil, VV value USD 7.79 million." It added that in the tanker market, "few sales have taken place this week again with all values remaining stable. Isuzugawa (300,000 DWT, Jan 2004, Universal) sold to Eastern Mediterranean for USD 25.8 mil, VV value USD 26.05 million. The MR1 Tanker FD Sea Wish (40,000 DWT, Sep 2002, SLS) sold for USD 7.5 mil, VV value USD 8.82. The vessel sold in a bank sale with SS Due September 2017", VV concluded.
In a separate note, Allied Shipbroking said that "on the dry bulk side, things seemed to have eased slightly though not necessarily due to lack of interest. Activity this week mainly revolved around the Panamax and Supramax sizes, with prices now showing further gains as competition amongst buyers heats up further. Sellers are seemingly a bit reluctant to act quick in this market, feeling that better numbers will be seen in the next couple of months and choosing as such to take a "wait and see" strategy for now. Given that there seems to still be positive wind to be felt in the freight market and with the recent rally in rates only just getting started, things should get more busy over the next couple of weeks. On the tanker side, there was some slight improvement in activity to be seen with deals being noted in the VL and Suezmax space as well. Prices are still lingering at relatively low levels, while the lack of confidence that has been spilling over from the freight market has heavily effected sale & purchase activity for some time now", the shipbroker concluded.
Contract freight rates paid by Beneficial Cargo Owners (BCOs) to move their products by container have increased for a 4th consecutive quarter, shipping consultancy Drewry said.
Average contract rates on two major container trade routes, from Asia to North Europe and North America, have increased by another 4% between the second and the third quarter of this year. This means that the latest Drewry Benchmarking Club Contract Index has increased by 39% in the year to the third quarter, based on USD 2 billion of ocean freight spending.
"The container shipping market has seen a sustained, radical reversal away from the previous, long deflationary trend," Philip Damas, Head of Drewry's logistics practice, said.
"Not only are freight costs increasing, but rapid consolidation in the supplier base, changes in supplier behaviour and new developments in tender technology will bring real change and uncertainty to the ocean transport procurement environment," he added.
Drewry reiterates its previous warning to BCOs that they need to re-think their contract negotiation strategy and that, by incorporating benchmarking and e-sourcing best practices, they can mitigate rate increases.
South Korean big three shipbuilders Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI) and Daewoo Shipbuilding and Marine Engineering (DSME) are likely to miss their earnings forecast amid increased costs and depleting order intake.
HHI's is projected to post an operating income of KRW 106 billion (USD 93.6 million) during the July-September period, slashed from last year's operating earnings of KRW 322 billion won, Based on Yonhap Infomax data.
In its interim business performance for August, HHI said that sales were 36.13 percent down year-on-year as the company racked up KRW 6.9 trillion against KRW 10.5 trillion in sales reported in August 2016.
Shipbuilding orders constituted the bulk of new orders for the period that stood at USD 2.7 bn, out of which USD 2.02 bn was booked from the shipbuilding sector. However, offshore and engineering saw a 66.8 pct decline with USD 165 million worth of orders.
Due to low order intake, HHI agreed with its workers to implement a paid leave rotation scheme as a way of coping with work shortage.
The five-week program rotation, starting on September 11, would help resolve the issue of the idle workforce, HHI said, enabling the employees to keep their jobs.
Furthermore, SHI's perating income is expected to reach KRW 39 billion for the third quarter, also considerably down from KRW 84 billion booked a year earlier, the data from Yonhap Infomax shows.
According to Yonhap, Daewoo Shipbuilding & Marine Engineering Co. is also projected to chalk up a profit under the current quarter, building upon its operating income from the second quarter of KRW 665 billion.
Earlier this year, the trio saw their ratings lowered amid the protracted industry slump, with HHI being downgraded to A- and SHI to BBB+.
The three shipbuilders have been busy with cost-cutting measures and restructuring activities as they work to combat industry downturn.
Namely, the Big three saw their joint orderbook decline from USD 24.3 billion to USD 10 billion in 2016.
The fate of their Chinese counterparts doesn't seem to be much better as they witness an 11.3 percent year-on-year drop in newbuilding order intake pushing the order backlog at Chinese yards to 81.11 million DWT at the end of August 2017.
This is a 29 percent drop year-on-year and 18.6 percent decrease when compared to end-2016, according to the China Association of the National Shipbuilding Industry.
Very large crude carrier (VLCC) floating storage has witnessed a substantial drop impacted by an agreement on Iranian nuclear developments and OPEC production cuts.
While Iranian nuclear sanctions were in place, a significant portion of National Iranian Tanker Company's (NITC) VLCC fleet was used for storage of Iranian crude and condensate, according to a report from Gibson Shipbrokers.
From early 2015, the tanker industry also witnessed a gradual increase in VLCCs employed for non-Iranian floating storage. The number of VLCCs absent from the trading market was further boosted by tonnage in other non-trading activities, primarily fuel oil storage around the Singapore area.
Hence, the number of tankers absent from trading operations peaked in 2016, fluctuating between 50 to 60 units for most of the year.
However, with the international agreement reached about the Iranian nuclear developments, the floating storage saw a rapid release of the NITC tankers in late 2016/early 2017. This was to a large extent offset by robust demand for non-Iranian storage, aided by declining freight rates and persistently high land based oil inventories through the first half of 2017.
A further drop in floating storage was seen last month, as the OPEC led production cuts have finally started to bite. The total number of non-trading units fell to just 34 by the end of August, the lowest level since December 2014.
The number of VLCCs in non-Iranian floating storage declined by 10, while a further 2 VLCCs were released from the Iranian floating storage.
Inevitably, the decline in VLCC floating storage is a bearish development from an owners' perspective as it boosts the trading fleet.
However, many units that have been recently released from floating storage, or are still on storage, are of vintage age and it may prove difficult for them to find trading opportunities.
"Whether they will find further storage employment, resume trading or simply leave the market for good – that remains to be seen," Gibson concluded.