Shipping Industry Has Too Many Ships Being Built 8 comments
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Today was the final day of Sea Asia 2009 (Tuesday's and Wednesday's coverage). I have many one-on-one discussions with shipping industry leaders, and I have information in my head that I do not know what to do with (such as German KG's which have added to the oversupply of new vessels)..
This is an industry in crisis due to a recessionary downturn hitting coincident with a massive oversupply of equipment.
I was able to get a copy of the presentation materials of Dagfinn Lunde (Member of the Board of Managing Directors and the Head of Shipping of DVB Bank SE). Toby Ingram of Helix Media kindly provided copies of the presentation materials.
The first chart shows the changes in the lending industry for shipping. Note the presence of Bank of America (BAC) and Wells Fargo (WFC) as the new players in the shipping loan market.
click to enlarge images
The second chart shows the existing Dry Bulk fleet and its age, and the quantity of new vessels in fabrication.
The third chart is the large tankers in fabrication. As you can see, this segment is not in as bad as shape as the Dry Bulk ships or container ships. A large number of the existing containers are single hull which are nearing an international moratorium on their use.
The fourth chart is an update of the container counts through various international ports updated through the first quarter of 2009.
The final chart is comparing the workhorse size 8000 teu size container ships existing and on order. New builds in fabrication exceeds the size of the existing fleet.
Disclosures: None
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This article has 8 comments:
Thank you for sharing these three reports. They have very much appreciated.
The real stories here are the overall decrease in lending and the related issue of European banks that have reduced lending to shipping for the time being. Some will be back soon enough. Others have bigger problems. The question is when will bank financing be available to shipping companies again.
On Apr 23 12:50 PM Oil Bull_1974 wrote:
> B of A and Wells Fargo are not the "new players" in the ship finance
> market. B of A has been in the industry for quite some time and Wells/Wachovia
> is not unfamiliar with the industry. Note also that the two banks
> combined to do 3 deals for a total of $561 mln -- this is insignificant.
>
>
> The real stories here are the overall decrease in lending and the
> related issue of European banks that have reduced lending to shipping
> for the time being. Some will be back soon enough. Others have bigger
> problems. The question is when will bank financing be available to
> shipping companies again.
LEADING CHINESE shipyard Yangzijiang has posted stellar FY08 results – a near doubling in both top and bottom line...
In the bulk carrier sector where supply glut is most severe, Cosco Singapore has announced 4 cancellations of orders to build new bulk carriers while JES International has announced 6.
Cosco had announced this week its FY08 earnings had fallen 10% yoy. Building of new dry bulk carriers and multi-purpose carriers contributed 18.7% of Yangzijiang FY08 revenues. New container ships contributed 81.3%.
Below is a summary of issues addressed by Yangzijiang’s executive chairman, Mr Ren Yuanlin, and its chief financial officer, Ms Liu Hua, at the briefing.
Q: What is the situation for cancellations in the industry?
A: Its frequency is rather high. These occur when deposit was low or when a yard cannot deliver.
(end excerpts)
On Apr 24 08:45 AM Obamitall wrote:
> I Agree with your reply. there were a good number of build cancellations
> starting last October as revenuse dried up and credit tightened.
>
>
> On Apr 23 12:50 PM Oil Bull_1974 wrote:
Hellenic Shipping News
Tonnage supply to be limited further by scrap deals
Nikos Roussanoglou, Hellenic Shipping News -- With the Baltic Dry Index posting a sustainable rise from the first days of the New Year, a restrained optimism has returned in the market, with the influence of various scrap deals not appreciated as much. Owners have returned to scrap yards by the dozens, eager to sell their older dry bulk carriers, now posting losses as opposed to hefty earnings up to six months ago. According to figures compiled by George Moundreas & Co. the average weekly volumes of dry bulk tonnage that left the market for scrap was increased at 600,000 dwt, versus 400,000-500,00 during the previous weeks. Further to that, the broker reports that negotiations are currently taking place for the scrapping of at least 157 vessels with a capacity of a stunning 5.5 million dwt. This could mean that by the end of 2009 a “healthy” 10 percent of the global dry bulk tonnage may have exited the market. At the same time, what’s rather encouraging is that scrap prices remain at a healthy $250-275/ldt.
On Apr 24 08:45 AM Obamitall wrote:
> I Agree with your reply. there were a good number of build cancellations
> starting last October as revenuse dried up and credit tightened.
>
>
> On Apr 23 12:50 PM Oil Bull_1974 wrote:
Fri Apr 24, 2009 10:56am EDT
WASHINGTON, April 24 (Reuters) - U.S. and Chinese companies will sign more than 30 contracts on Monday worth billions of dollars to American businesses, the U.S. Chamber of Commerce said on Friday.
Companies attending the signing ceremony include FedEx Corp (FDX.N), Dell Inc (DELL.O), Lenovo (0992.HK), and China Telecom (0728.HK), the business group said.
The signing ceremony will take place following an annual meeting of the U.S. China Trade and Investment Cooperation Forum, which is being co-hosted by the U.S. Chamber and the China Chamber of Commerce for Import Export of Machinery and Electronic Products.
Chinese Commerce Minister Chen Deming and Acting U.S. Undersecretary for International Trade Michelle O'Neill are scheduled to speak at the event, as well as senior executives from the four companies listed above.
U.S. and Chinese companies often sign contracts when Chinese officials visit the United States, many times for deals that have been long in the works or previously announced.
The forum and signing ceremony underscore the importance of commercial relations between the two countries, the U.S. Chamber said. (Editing by Derek Caney and Matthew Lewis)
The President gives a very comprehensive report of the Dry Bulk Orderbook and the Bankers involved.
He's calling for a drop in demand for worldwide trade as we know, and a 10.5% increase in the Dry Bulk fleet during 2009. That is net of cancellations and scrapping. Dtana is raising money to take advantage of some very cheap ships available later this year.
The optimism in January over scrapping of old ships has waned, there is a lot of pressure on Shipbreakers because of environmental and safety issues. And the price of scrap metal is just too cheap. The tonnage hitting the water is more than the tonnage being broken on the beaches.
Quote from this article:
www.mgn.com/news/daily...
"global shipbuilding capacity was set to eclipse 50 million compensated gross tons next year (2009)"
That's a global shipbuilding capacity of 50M DWT at maximum delivery capacity,and that includes ALL typed of ships, including military ships. Dry bulk ships probably accounts for just 25% of all shipsbeing built. So that's a global building capacity of 12.5M DWT dry bulk ships per year.
So where do you get the predicted 107M DWT new dry bulk ship delivery in 2010, even if all ship builders in the world are working at full capacity now? More over,theglobal ship building industry, in its bad shape as itis now, could in NO WAY be working at full capacity.