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BasilMichael
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Having been active in shipping finance advisory, shipping market advisory, shipbrokerage, restrcuturings for more than ten years. Having experience in shipping operations and logistics, and following shipping-related industries such as energy, industrials, commodities, financials. No exposure... More
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Full Steam Ahead! A Maritime Blog
  • S&P, Newbuilding And Demolition Update (November 3rd, 2013) 0 comments
    Nov 3, 2013 7:10 PM | about stocks: STNG, NAT, BALT

    It has been a busy week in shipping with the Hamburg's Shipbrokers Association celebrating their annual Eisbeinessen while several publicly traded shipping companies reporting earnings, which were more or less lousy, reflecting a lousy underlying freight market, but high on hopes and expectations. The ruling mood is that the worst is behind us in shipping and now that's the time to go long. Trying to capitalize on the window of opportunity, there has been a constant stream of 'corporate level', big transactions (as opposed to piecemeal, time-consuming individual transactions of vessels that were so difficult to come by a few short months ago.)

    The headline news item of the week has been not the uninspiring earnings report by 'bellwether' Scorpio Tankers (ticker: STNG), but their announcement that their affiliated company Scorpio LPG traded their newbuilding contracts of eleven VLGCs for 30% stake in Dorian LPG Ltd., with the expectation that within a year Dorian will be publicly listed on one of the US exchanges (presently on the Oslo OTC) providing liquidity for Scorpio shareholders (Scorpio has already contributed $83.9 mil on newbuilding deposits and will provide $1.9 mil cash contribution to Dorian, while Dorian will take over outstanding progress payments to the shipbuilders for $742 million.) And not to be accused of being a tad too slow or preferential of certain market sectors, by the end of the week, another company affiliated with the Scorpio group, Scorpio Bulkers (ticker: SALT) was raising an additional $300 million on the Oslo OTC (an astronomical $850 mil in total in equity raising since June 2013) for 22 more newbuidings, in addition to the 26 bulkers already on order. Elsewhere, members of the management team associated with Nordic American Tankers (ticker: NAT) have tied up six modern, high spec PSVs, with an estimated pricing of $300 million, for an IPO under the name of Nordic American Offshore. It also has been reported that just this week Hyundai Mipo Dockyards (HMP) has received orders for 16 MR tankers worth just short of $500 mil; buyers are reported to be clients of the oil major Shell and the price per vessel is an exceptionally competitive $31 million per vessel; given the name of the buyer and the magnitude of the deal, it has been estimated that the pricing may be at even below break-even for the shipbuilder. Who said the capital markets gave up on shipping?

    VLCC Tanker MT „ARDENNE VENTURE" (Source: Frontline)

    On the more tedious secondary sale & purchase market, there has been overall robust activity focused around ten-years-old or older tonnage; in the crude tanker market, the sale of the VLCC MT „ARDENNE VENTURE"(318,000 dwt, 2004, HHI) at reportedly $40 mil shows price consolidation over 'last done' sales of MT „BW LUNA" (299,000 dwt, 2003, Daewoo) at $36 mil. and of MT „EAGLE VIENNA" (306,000 dwt, 2004, Hyundai Samho) at $40 mil, each a month ago. The buyers for the MT „ADRIENNE VENTURE" were Sinokor Merchant Marine of South Korea which have proven to be fairly active buyers this year (their seventh acquisition for the year), and for the matter, for the week as well, since they also purchased the aframax tanker MT „CHAMPION PEACE" (106,000 dwt, Namura, 1999) at $11 mil (which seems pricier than their own previous purchase of MT „KWK ESTEEM" (105,000 dwt, Hyundai Samho, 2000) at $12 mil last month, which by itself was a step-up over the sale of MT „HELLESPONT TATINA (106,000 dwt, Sumitomo, 1999) at $9.6 mil.) In the Suezmax tanker market, the much circulated MT „OLIVER JACOB" (157,000 dwt, Daewoo, 1999) finally found home in Greek hands at $16.5 million. There is no recent comparable for this suezmax sale, but this is the fourth asset disposition this year from Salamon AG based in Dortmund, Germany. Whether these sales provide any signs of market improvement is relative in nature as the prices of this vintage vessels has just collapsed; five years ago, all the vessels transacted this week were valued at least twice as much as their current pricing, which itself is no more than 2x their present scrap value (with easily 10+ years remaining economic life.)

    (click to enlarge)

    MT „SICHEM PACE" (Source: http://www.shipspotting.com/)

    The product tanker market has been rather quiet this week with no further news after the fleet sale of J Lauritzen to Hafnia Tankers reported last week, and another exhibit under their observation of corporate transactions at this phase of the cycle. There has been an interesting sale of the stainless steel tanker MT „SICHEM PACE" (20,000 dwt, IMO II, 20 segs, 22,200 cbm, heating capacity 65 °C, Uzuki Zosensho, 2006) at $21.5 mil. Stainless steel tankers has been one of the few markets that has been managed to stay off the shipping radar for a long while, and it's interesting to see future developments in this sector. The current sale is in line with the sale about a month ago of the MT „BOW PLATA" (19,980 dwt, IMO II, 22 segs, 21,700 cbm, heating capacity 70 °C, Kitanihon Zosen, 2006) to financial buyers Breakwater Capital in London. Previous comparable sale was of sisterships MT „BOW LIMA" and MT „BOW CAPE (19,980 dwt, IMO, 20 segs, 20,500 cbm, heating capacity 80 °C, Fukuoka S.B, 2007/2008 respectively) at $23 mil each, indicating that the market has been flat vis-à-vis asset pricing improvement in almost any other market segment for market competitive tonnage. That's an interesting observation.

    Moving on to the dry bulk market, Baltic Trading Limited (ticker: BALT) acquired en bloc two sistership capesize vessels MV „K. HAPPINESS" and MV „K. GLOBAL PRIDE" (179,000 dwt, HHI, 2011/2012 respectively) at $103 mil, which is another recent improvement over the current going rate of $52-53 mil for 2013 cape tonnage. Vista Shipping of Ukraineacquired the MV „GRAND CLIPPER" (168,000 dwt, Halla Engineering, 1996) at $15.5 mil which is the fifth cape acquisition for the Ukranian owner / commercial manager year-to-date, bring their fleet count to eleven vessels. The Japanese built panamax bulker MV „BOTAFOGO" (76,000 dwt, Imabari, 2001) was sold at $14.6 mil, in line with recent transactions. In the handysize market, the Japanese-built MV „SOUTHERN FIGHTER"(29,500 dwt, 4x30T, Shin Kurushina, 1998) was sold at $8.7 mil to Korean buyers, while the much modern MV „CIELO DI SAVONA" (33,000 dwt, 4x30T, Shin Kochi, 2008) was sold at $20 mil to Greek buyers. The evocatively named MV „LITTLE MANATEE" (38,000 dwt, 4x30T, Nakai SB, 2012) - this is sized-up 'handysize' and a bit too big for her size, and probably that's why the playful name, was sold at $23.5 mil, showing again in yet another asset class, the great divide between the young and the 'teenagers' of the world fleet.

    Nothing newsworthy to report in the secondary containership market, while the demolition market has been bouncing along with relatively few sales reported (inverse correlation with freight and remaining markets, in general.) Prices have been about $430 / ldt and $400 / ldt for tanker and bulkers, respectively, in the sub-continent. Still there have been worries that previously done sales may not live up to their expectations in terms of performance despite the lack of tonnage heading to the scrapyards. With India heading to the Diwali holidays there will be some time for the market 'to settle' and also to see the impact from the Reserve Bank of India (RBI) increase this week of interest rates by 25 bps (the second such move in two months, under the new leadership of Gov. Raghuram Rajan), in an effort to stabilize the Indian Rupee (INR) and the impact thereof on future demo pricing.

    © 2013 Basil M Karatzas & Karatzas Marine Advisors & Co. All Rights Reserved.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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