The first week of June ends with low business in the secondhand, intense newbuilding business for offshore vessels and steady scrapping activity with bulk carriers holding the lion share of the scrapping activity. Poseidonia Exhibition attracted the interest of shipping community, while the BDI fell to new lows by closing on Friday at 877 points, down by 24% from the beginning of May, and 230 points above from the 26 year historical low of 647 points on February 3rd.
Shipyards  are  struggling  to  survive  with  South  Korean  shipbuilders  being  in  the  frontline  by  winning  the  biggest  share  of newbuilding activity this year among Japanese and Chinese yards. IHS Fairplay data showed that South Korean shipbuilders won 4,73 million dwt of new orders in the first quarter of 2012, while Chinese builders had 4,35 million dwt and Japanese 2,8 million dwt. In the Europe, Germany’s P+S Werften, one of the big few yards left in the country, is under pressure to agree on EUR 110million ($137,5 million) in cost cuts and debt relief to assure another EUR 182 million from the federal and state budgets in an emergency aid. Furthermore, STX France has extended short time working during summer, as the unit of South Korea’s STX is facing falling volume of business. Union leaders at the French yard said that they have been told that existing short time working will be prolonged this summer with 12,700 days of lay-off planned for July and August.
Overall, 20 transactions reported worldwide in the secondhand and demolition market, down by 20% week on week due to limited sale and purchase transactions in the secondhand market with the newbuilding business keeping the highest activity by recording 14 newbuilding contracts. At similar week in 2011, the total S&P activity was 20% higher, when 24 transactions had been reported and secondhand ship purchasing activity was 30% lower than the ordering business.

SECONDHAND MARKET
Notable sale of this week was in the bulk carrier segment of a capesize vessel of 179,700dwt built 2012, M/V “SAG BULK CHINA”, formerly “ORIENT GWANGYANG 1015” to a South Korean buyer at a price in the region of $44 mil. The vessel is said to have been ordered by German KG financier Salamon AG for $90 mil in June 2006, with a scheduled delivery in October 2009, and it was one of the four capesizes ordered by the German investment group.
The Greenfield South Korean Shipbuilder, Orient Shipyard, was unable to deliver the tonnage and Salamon cancelled the contract with M/V “SAG BULK CHINA” being the only capesize of the contract that was completed, while the other three were scrapped before completion.
In the tanker segment, a suezmax tanker of about 160,000dwt built 1998 South Korea reported to have been sold to Middle East based buyers for employment as floating storage for a price in the region of excess $20 mil. At the beginning of May, two vessels of about 150,000dwt built 1998 Japan were reported sold enbloc for $15,25mil each. In the MR size, a vessel of 51,600dwt built 2013 at Hyundai Mipo reported sold for $33,5mil to Danish buyers.
Overall, 12 vessels reported to have changed hands this week at a total invested capital in the region of US$ 147,51 mil with limited business in the bulk carrier, tanker, liner and container segment. Bulk carriers and tankers held the 42% share of the total S&P activity. In terms of the reported number of transactions, the S&P activity is down by 30% from last week’s activity, with a 72% decline in tanker purchases, and down by 14% comparable with previous year’s weekly S&P activity, when 14 vessels induced buyers’ interest at a total invested capital of about $160,6 million, with bulk carriers and tankers holding 93% of the total volume of S&P activity. In terms of invested capital, the bulk and tanker segment attracted about 88% of the total invested capital with gas tankers to follow by holding 4% share.

NEWBUILDING MARKET
From the end of May, newbuilding business keeps its low track with no more than 10 fresh contracts being reported in the last two weeks as the imbalance in the freight markets persists and the oversupply issue hunters the prosperity of investors. In the dry bulk carrier sector, the activity remains subdued as the BDI hovers again below the psychological barrier of 1,000 points mark, while some new deals came to light in the tanker and gas tanker segment. Offshore newbuilding projects are still in the preference of investors with Daewoo Shipbuilding and Marine Engineering of South Korea receiving its first order for LNG FPSO at a value of 909.8Bn won ($777 million). The project will be built for Malaysia’s Petronas for delivery in June 2015 and is about 300m in length,
60m in width and can store up to 180,000 cubic meters of LNG 20,000 cubic meters of liquefied carbonized hydrogen condesates.
Overall, the week closed with 14 fresh orders reported worldwide at a total deadweight of 292,000 tons, posting a 100% week-on- week increase due to a 75% increase in the offshore newbuilding activity. This week’s total newbuilding business is down by 30% from similar week’s closing in 2011, when 20 fresh orders had been reported and containers were grasping the lion share by recording 6 newbuilding contracts. In terms of invested capital, the total amount of money invested is estimated at region $1,255 billion with 57% of the total number of orders being reported at an undisclosed contract price. The offshore segment appears the most overweight by holding 80% of this week’s total amount of money invested due to the high valued LNG FPSO contract won by DSME of South Korea.
In the bulk carrier segment, Taiwan’s CSBC Corp has won an order for two 35,000dwt units from domestic owner China Steel Express Corp, the marine transport arm of China Steel Corp at a price of $25 mil each with delivery in the fourth quarter of 2013.
In  the  tanker  segment,  Norwegian  Frontline  following  its  previous  order  placed  in  the  aframax segment  for  four  units  of 115,000dwt in Chinese yard, Guangzhou Longxue, it has now confirmed a LPG contract for up to six 82,000 cu.m units from Jiangnan Shipyard Group at a price below $70 mil each. Frontline’s newbuilding investments are being justified by its completion of a $210 million private placement with an agreement to acquire a total of 16 firm newbuilding contracts and eight fixed price optional contracts in the crude and product markets. In the MR tanker sector, private equity Alterna Capital of USA has doubled its existing orderbook by exercising its option from an earlier order placed in April for two more 50,000dwt units at STX Jinhae for delivery in 2014.
In the container segment, newbuilding activity has been dwindled significantly from last year’s levels with Japanese shipbuilders facing strong competition from Chinese and South Korean yards. An interesting box ship alliance was disclosed this week among Japanese shipbuilders Mitsubish HI and Imabari Shipbuilding to collaborate on box ship technology. The groups said: “Mitsubish HI and Imabari Shipbuilding will become capable of flexibly accommodating bulk orders, construction of multiple ships of the same design, thus strengthening and expanding their respective business for high value added container carriers.” Both yards believe that their strategy is viable because lines are increasingly moving towards ultra large container ships that offer lower slot costs. The three year collaboration agreement encompasses all box carriers of all sizes and propulsion systems. The yards will consider the appropriate ship type, propulsion system and other technological features.
In the liner segment, state-owned China’s Huanghai Shipbuilding is setting a shipowing arm and sources suggest that is going to order a 30,000dwt multipurpose vessel at a price in the region of $30 mil for its new outfit. Furthermore, China’s Jinhai Heavy Industries is said to have won an order for four 28,000 dwt multipurpose units from a domestic owner for delivery in 2014 at an undisclosed contract price, while the order is at the stage of letter of intent.

DEMOLITION MARKET
The dreadful status of capesize operators with average time charter earnings floating once more within the year below $5,000/day welcomes the opportunity for further vessel removals in the already oversupplied dry bulk market. Bangladesh and Pakistan are offering the best price levels, in the region of excess $400/ldt with India loosing its leading power from historical lows reached last week.
The week ended with 8 vessels reported to have been headed to the scrap yards of total deadweight 598,291 tons. In terms of the reported number of transactions, the demolition activity is at the same levels of previous week’s business with capesize dry bulk carrier disposals being in the frontline, while In terms of total deadweight sent for scrap there has been a fall of 16%. In terms of scrap price levels, notable demolition sale was in the bulk carrier segment of a capesize unit with about 172,428 dwt built 1985 with a lightweight of 22,761 M/V “NIGHTWISPER” heading in Bangladesh for $430/ldt. Bangladesh and India are leading the market by winning 6 of the 8 total demolition transactions.