SECONDHAND MARKET
Overall, the week ended with 37 transactions reported in the secondhand and demolition market, while the highest activity has been recorded in the newbuilding market with a record business of 58 fresh new orders worldwide. The S&P activity has been shared almost equally among the bulk carrier, tanker and container segment, standing at similar last week’s levels. In the bulk carrier segment, vintage tonnage induced buyer’s interest, while in the tanker and container segment buyers focus their appetite on more modern units.
In the secondhand market, 20 vessels reported to have changed hands this week at a total invested capital in the region of US$299 million, 5 transactions reported on private terms. In terms of the reported number of transactions, the S&P activity has shown no change in comparison with last week’s activity and is also similar with previous year’s weekly S&P activity when 21 vessels induced buyers’ interest with bulk carriers and containers grasping 80% share of the total volume of S&P activity. In terms of invested capital, the most overweight sector for this week appears to be the bulk carrier and tanker segment, gaining 60% of the total invested capital with larger size units being on the frontline.

NEWBUILDING MARKET
In the newbuilding market, there has been one week more with growth ordering activity in the offshore and container segment. Despite the significant slowdown of business during the last days in the dry bulk sector, this week was one more week with quite high activity, up 80% from last week’s volume of transactions with panamax vessels being on the spotlight. The week ended with 58 orders reported in total, equalling a total deadweight of around 3,5 mil tons at a total invested capital of region $3,5 bn, with containers winning the 50% share of the total ordering activity, while bulk carriers have gained 30% share. In terms of invested capital, the most overweight segment appears to be the offshore and container segment, since the overbooked bulk carrier and tanker segment seem to have faded as fashionable ordering investments. At a similar week in 2010, the newbuilding activity was down by 60% than current levels with 20 new contracts to had been reported worldwide and bulk carriers winning 70% share of the total volume of reported contracts.
In the bulk carrier segment, one order reported to have been placed in the supramax segment by Thoresen Thai Agencies, Thailand in Ha Long, Vietnam for delivery in 2013, one in the kamsarmax segment by Wilmar Holdings and four in the handymax segment by China’s Shanxi Coal Group for coastal trading. In the panamax segment, Greek owner Golden Union has contracted two bulk carriers with option for two more in Jiangsu Rongsheng Chinese yard for delivery in 2012-2013 at a cost of $31,5-$32 mil each. Jiangsu Rongsheng has won one more order from State-backed China Ship Fund for another 10 panamax units with the same delivery.
In the tanker segment, following the order of Scorpio Tankers last week one more order came to light in the MR segment by Greek owner Thenamaris for two product carriers of 51,000 dwt in STX Shipbuilding for delivery in 2012, at an estimated price of $35-$37 mil each with options attached for two more units.
In the gas tanker segment, Hyundai Heavy Industries is said to have won a Pertamina newbuilding tender for an 84,000 cbm VLGC, which is expected to cost around $73-$75 mil.
In the container segment, German owners Peter Dohle and Bernhard Schulte have placed a contract in Hyundai Samho for 10 boxships of 5,600 TEU for delivery in 2013 and 2014, which all have secured employment from Mitsui OSK, Japan for over 10 years at just under $39,000/daily. In addition, Hanjin Shipping is said to have finalized an order for three 4,700 TEU newbuildings at compatriot yard Samsung Heavy Industries, at a cost of around $60 mil each for delivery in late 2012 and early 2013. German owner Reederei Stefan Patjens after many years of absence is in talks with South Korea’s Sungdong Shipbuilding and Marine Engineering for 6 firm ships, of 4,700 TEU, worth $360 mil plus four options.
In the post panamax segment, the ordering spree seems to have no end by major liner operators. The Singapore’s Neptune Orient Lines is planning to book 10 vessels of 13,000 TEU and two of 10,000 TEU at yards in South Korea and it is estimated that the 13,000 TEU vessels will cost to NOL more than $130 mil each, while the smaller ships will cost around $115 mil each. CMA CGM has confirmed that the group is going to enlarge its order in South Korea from 13,000 TEU to 16,000 TEU and said that CMA CGM is not ready to follow the example of Maersk in ordering 18,000 TEU units, unless they do it in partnership. Israel Ofer Global Holdings Group, will build four 9,000 TEU boxships for delivery by the end of 2013, with an additional option for more four units in the Romanian subsidiary of Korea’s Daewoo Shipbd. that is going to build the largest containerships in Europe.
In the offshore segment, business is booming with projects for floating storage, drill ships and platform supply vessels being on the limelight. The market was stunned by news coming to light this week that Shell is going to build the world’s first floating LNG project, which will be located 200 km offshore of Australia. The facility, which is to be constructed at Samsung Heavy Industries, would be the largest offshore facility in the world, displacing 600,000 tons, operating in 250 meters of water and producing 110,000 barrels of oil-equivalent/day and is expected to be moored in the field for 25 years beginning in 2017. According to industry sources, the cost of the project is estimated to be $5bn-$10bn and the Anglo-Dutch owner is planning further investments in FLNG projects as demand for LNG grows in energy-hungry countries such as China and India. In the future, further activity is expected in the offshore / LNG sectors with owners expanding their business to build pipelines of projects and diversify their asset investments. Furthermore, the oversupply in the bulk carrier and tanker segment has led the yards to change their focus to more specialized vessels and as the world energy demand grows substantial number of offshore supply vessels orders will come in the next years.

DEMOLITION MARKET

In the demolition market, scrap prices are still holding firm despite signs of possible softness in the future as the monsoon period approaches and the oversupply of ships available for scrapping threaten today’s levels. The current status of the freight market either in the dry or in the wet support owner’s decision for sending their vessels to the scrap yards as week by week we see even more deals coming in the market for larger size vessels, capesizes and VLCCs. However, the upcoming budget in Pakistan with new taxes being imported on vessels after the budget date on June 3rd along with the monsoon period, which is expected that will pull prices lower in India and Bangladesh, may impede owner’s decision for scrapping by waiting higher rates at the end of monsoon season.
In the meantime, demolition transactions are still concluding at very high levels with a capesize vessel of 23,425/ldt built 1982 fetching $545/ldt, including 1,600 tons IFO remaining on board, for India. India is still leading the market even though some signs of downwards price correction, while in Bangladesh the certified copy of the court order granting extension to market’s operation till July is not yet in hand. In Pakistan no fresh activity has been reported, whereas China won a capesize bulker of 24,184/ldt built 1982 for $455/ldt. Overall, scrap prices have revised downwards in India, Pakistan and Bangladesh, around $10/ldt for dry and wet cargo by paying $490-$500/ldt and $510-$525/ldt respectively. In China, there is still a significant price gap of $60-$65/ldt from its rivals with hopes for better return in the market during the monsoon period in Indian subcontinent region.
The week ended with 17 vessels reported to have been headed to the scrap yards of total deadweight 1,221,749 tons. In terms of the reported number of transactions, the demolition activity has been marked with a no weekly change and regarding the total deadweight sent for scrap there has been a 30% increase. In terms of scrap rates, the highest scrap rate has been achieved this week in the bulk carrier segment by India for a capesize of 18,382 dwt “GLORY SHENZHEN” at 550/ldt incl 2000tons of stainless bunkers. Capesize demolition transactions are still hot with five more vessels headed to the scrap yards this week, while bulk carriers are the most popular vessel for scrap with 50% of this week’s total demolition activity being centred on bulk carriers. India along with Bangladesh has attracted 60% of the total demolition activity with China making small steps to gain ground by winning new four demolition transactions. At a similar week in 2010, demolition activity was down by 30%, in terms of the reported number of transactions, when 11 vessels had been reported for scrap of total deadweight 162 mil tons with bulk carriers being out of the scene. Scrap prices were almost $100-150/ldt less than today’s levels for dry and wet cargo with India and Pakistan offering the best levels and Bangladesh being out of operation.

GREEK PRESENCE
In the newbuilding market, Greek players estimated to have invested region $136 mil for two panamax units of 76,000 dwt placed by Golden Union in the bulk carrier segment and two MR units of 51,000 dwt in the tanker segment by Thenamaris. In the secondhand market, there has been also a strong activity by Greek owners with 5 units reported to have been acquired in the bulk carrier segment at a total invested capital of region $108,5 mil, one modern aframax tanker at $31 mil and one modern container at $24,5 mil. Overall, this week’s investment of Greek investors in the secondhand and newbuilding market is estimated to be at $300 mil, 10% more invested capital than last week.