Escolar Documentos
Profissional Documentos
Cultura Documentos
AND
SHIPBUILDING
MARKETS
2005
●
1 Foreword
●
3 The shipbuilding market in 2004
●
25 The cruise market in 2004
●
31 The tanker market in 2004
●
45 The offshore market in 2004
●
51 The chemical carrier market in 2004
●
55 The liquefied petroleum gas shipping market in 2004
●
65 The liquefied natural gas shipping market in 2004
●
69 The dry bulk market in 2004
●
75 The containership market in 2004
●
87 The Ro-Ro market in 2004
●
91 The marine insurance markets in 2004
●
95 French shipyards deliveries and orderbook in 2004
●
97 French orders to foreign shipyards in 2004
ANOTHER
POINTOFVIEW
I f we were able to rejoice in 2003 for the excel- companies have moved on average between
lent year that we experienced in shipping, January 2003 and December 2004 from an index
what can be said about 2004 where we went of 100 to nearly 400 and for the container sector
from record to record? from 100 to 250. A number of values have tripled
or even quadrupled in the course of the year,
The healthy state of the industry has had one
taking the financial analysts by surprise, as up till
consequence, which has gone relatively unnoti-
now they have paid little or no attention to ship-
ced, the reconciliation of the shipping world with
ping and maritime activities.
the stock market. Historically the Stock Exchange
had never shown much interest in the shipping This discovery by the financial markets of our sec-
sector, too uncertain, too volatile, too specialised, tor of activity opens up new financing options for
and shares always showing a chaotic tendency owners (in addition to the traditional mortgage
and too low p/e ratios. However, discreetly, the financing) and should also allow for substantial
shipping sector has enjoyed this past year one of merger & acquisition operations, which we have
the best performances amongst all other quoted had a glimpse of in 2004:
industries. The few indexes which comprise the ◆ In April, Teekay Shipping bought Naviera
evolution of shares in shipping show an overall Tapias, who own four gas carriers and nine
progression of nearly 30 % with strong disparities modern Suezmaxes, with the intention of deve-
within the sectors. For example, according to the loping the LNG business and introducing Teekay
“Tradewinds Equity Index”, values of oil tanker LNG partners onto the stock market.
Foreword 1
◆ The oil tanker owner Stelmar, having rejected which owners are resisting, given the inflated
an offer from OMI and Athenian Tankers, is finally values in the short term. Arbitrages between long
on the point of accepting an offer from OSG term/short term and purchase/chartering become
(Overseas Shipholding Group) of $48 per share, more and more strategic, with certain choices
or $1.3 billion. being crucial in case of a brutal change in the
◆ Elsewhere, John Frederiksen, the leading tan- markets.
ker owner, has taken shares in Hyundai Merchant This year has also witnessed the steady decline of
Marine (6%), in P&O Nedlloyd (10%), and in the dollar, concealing to some extent the effects
General Maritime (4.3 %). Nobody expects that of rocketing oil prices and shipping costs as
he will be satisfied with a minority shareholding. expressed in euros, but disastrous for European
◆ At the end of the year, the Greek owner Restis shipyards, wiping out their productivity gains and
managed to lay his hands on the bulk shipping thus accentuating the competitive advantage of
activity of MISC (Malaysian International Shipping the Asian countries with the exception of Japan.
Corp.) namely 32 ships for $740 million. However, if the dollar continues its downward
Some owners, encouraged by the success of trend, a revaluation of some currencies, such as
General Maritime Corp., whose shares more than the Korean won and the Chinese yuan would
doubled in the course of the year, are now loo- become inevitable. Today this is a major concern
king at a quotation on Wall Street, such as the of Chinese and Korean shipyards who already
Stena group with their subsidiary Arlington Tan- suffer from a massive rise in their supply costs,
kers or Greek owners Dynacom, and this trend steel in particular. Asian shipyards certainly have
should be accentuated, unlocking important their orderbooks full, but profits are not yet for-
investment capacities within the shipping com- thcoming despite substantial increases in their
munity. sale prices. A revaluation of their local currencies
could jeopardise, at least temporarily, their
Ironically, the rise in shipping costs has as a expansion.
consequence called into question this service,
We begin this new year with confidence, even if
which is often minimised in the economic chain
we believe that certain excesses will correct
and has made operators reflect more deeply into
themselves, since the growth of the developing
their logistics and operations, but also as to the
countries, and especially that of China, is still very
qualitative differences between owners. All that
much a reality. We remain nonetheless cautious
is expensive is not necessarily good value…
as to the evolution of the dollar which could
Curiously it is in this context of highly priced mar- upset a number of economic calculations and tar-
kets that charterers are seeking long positions to nish the current glitter of the shipping sector. ■
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Jan 00
Apr 00
July 00
Oct 00
Jan 01
Apr 01
July 01
Oct 01
Jan 02
Apr 02
July 02
Oct 02
Jan 03
Apr 03
July 03
Oct 03
Jan 04
Apr 04
July 04
Oct 04
as against 17 % in 2003. The uncertainties sur- ciality (like Shanghai Waigaoqiao Shipyards (SWS)
rounding the future necessity for double-hulled ves- and Bohai for Capesizes, Jiangnan and Hudong-
sels was settled in May 2004 with a decision to Zhonghua for Panamaxes), Chinese shipyards are by
keep the status quo. and large moving to other types of ships. This leaves
predictably Japanese builders with the lion’s share
Owners faced several problems in finding berth
space to order their bulk carriers, ships often judged New orders during the year
to be too simple by builders. Korean shipyards pre-
(million dwt) 1999 2000 2001 2002 2003 2004
fer to build ships with better returns and bulk car-
riers in Korea only represent 5 % of the shipbuilding Tankers > 25,000 dwt 12.7 34.3 25.0 19.9 52.5 43.7
market as compared to 25 % in 2000. Apart from Bulkers > 15,000 dwt 21.9 17.6 7.7 21.6 32.9 36.8
certain shipyards that today are making it their spe- Containerships > 1,000 teu 7.0 13.7 7.1 7.1 26.6 25.4
Oil Tanker
Bulk
50
Containership
40
30
20
10
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
% Korea Others
100
90
80
70
60
50
40
30
20
10
0
Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mar 02 June 02 Sep 02 Dec 02 Mar 03 June 03 Sep 03 Dec 03 Mar 04 June 04 Sep 04 Dec 04
of this sector, with nearly 65 % but they also give offers the highest prices to the builders, other fac-
priority to domestic owners and are saturated. tors being equal. The added value to the shipyards
is also higher as these ships require less steel, less
Owners and operators are looking for economies of
external procurement, are often ordered in series
scale and a number of 200,000 dwt bulk carriers as
and can be easily adapted or modified.
well as 230,000 and 300,000 dwt ore carriers have
been ordered. The latest very large ore carriers were As was the case in 2003, a number of over-Pana-
delivered by Hyundai Heavy Industries in 1992 and max containerships were ordered in 2004. With
Daewoo in 1997. close to 50 units over 7,500 teu in service, 170 units
were on order by the end of 2004. New size records
In sum, demand for bulk carriers remains strong were achieved with the order of container carriers
and has not been totally satisfied yet. of 9,300 teu for the account of AP Moller, whilst
CMA CGM and Hyundai Heavy Industries agreed to
Containerships extend the capacity of ships previously ordered from
With close to 26 million dwt on order, demand for 8,300 teu to 9,300 teu. The 10,000 teu barrier will
containerships has been as sustained as in 2003. shortly be broken, probably bringing about a new
wave of orders, motivated by a race for size bet-
The orderbook has grown at a consistent pace, ween operators. The coming about of a new gene-
going from 35.5 million dwt at the end of 2003 to ration of containerships above 10,000 teu will
54.3 million dwt in 2004. The fleet under construc- nonetheless require to adapt port handling facilities.
tion at year-end 2004 represents a figure of 53 %
of the existing fleet, as against 35 % in 2003 (only In the meantime, demand for smaller container car-
cellular ships), which gives rise to some concerns. riers (1,100, 1,800, 2,700, 3,500, and 4,300 teu),
which are usually employed as feeders for the large
Korean shipyards, which hold nearly 65 % of the mother vessels, has also been very healthy. This
market were unable or did not want to satisfy the trend can be expected to continue. Given that the
totality of this buoyant demand. They have concen- ratio of the fleet on order versus the existing fleet is
trated almost exclusively on very large container- particularly high and that the predictable growth in
ships, leaving opportunities for Chinese, Taiwanese, teu terms is above international trade progression,
Singaporean, German and Polish shipyards to fill the number of new orders might logically slow
the void. down in the coming months.
In a way, containerships have set the pace for the Tankers
newbuilding market in pushing prices higher. It is
indeed the sector which has seen the strongest With some 44 million dwt ordered, demand for tan-
demand. Amongst the main three segments that kers has remained strong, although lower than that
form the core of newbuildings, this is the one that of 2003 with 52 million dwt.
2003
Dwt
30,000,000
509
495
25,000,000
20,000,000
100
57 58
15,000,000
79
106
142
238 228
10,000,000
208 118 200
49 72
85
5,000,000 29 62
0
VLCC Suezmax Aframax Panamax Tankers MR Products Capesize Panamax Handy Containership
(above 1,000 teu)
The orderbook has nonetheless increased and has the oil pollution disasters of the ‘Erika’ in 1999 and
gone from 83.5 million dwt at year-end 2003 to the ‘Prestige’ in 2002. The average volume ordered
102.3 million dwt at year-end 2004. The fleet on each year since 1999 has in fact been 30 million
order at the end of 2004 represented some 31 % of dwt for tankers as against 22 million dwt for bulk
the existing fleet as compared to 26 % a year earlier. carriers and 14 million dwt for containerships. In
addition, the competition with containerships in the
How does one explain this relatively-speaking smal-
shipyards has also played its part.
ler demand this year, especially in comparison to the
progression of containerships and bulk carriers? To Demand for ice-strengthened tankers has remained
understand this, it is important to recognise that the sustained despite a mild winter, essentially respon-
renewal of the tanker fleet, started earlier, following ding to the development of loading of crude or refi-
Stena Polaris
75,000 dwt, ice class 1A
Panamax product tanker,
ordered at Split
by Concordia Maritime
for delivery 2006
and long-term chartered
to Fortum Oil
2003
Number of ships 80
80
77 76
70
60 59 59
50
45
40
30
27
26
20
20
13 13
10
6 7
4
0
Chemical carriers* LPG carriers LNG carriers Ferries Ro-ro Car carriers Cruise vessels
(dwt) (cbm) (cbm) (grt) (dwt) (cars) (grt)
ned products out of the Gulf of Finland, the White ting fleet, against 13.8 % a year earlier. Most of
Sea and from the Sakhalin islands, where Russia these ships have been ordered at Japanese shi-
and the Baltic states are in the process of building pyards. The demand has not even been entirely
new ports and expanding their export capacities. met, given that the price of stainless steel has sud-
Thus there are 72 MR product carriers, 25 Pana- denly become much more expensive and that yards
maxes, 41 Aframaxes, and 17 Suezmaxes which are also suffered from supply disruption.
ice-classed out of respectively 407, 161, 174 and 89
ships on order. LNG carriers
In addition, traffic is considerably increasing in some During the course of the year the number of LNG
tight waters and it is very likely that the strong carriers ordered nearly quadrupled, going from 20
growth in Russian exports out of the Baltic or the to 76. The orderbook has gone from 63 ships at the
Black Sea will result in the enforcement of new end of 2003 to 116 ships, making a total capacity
regulations and security measures from the borde- of 17.1 million cbm, by the end of 2004. The fleet
ring countries to protect their coastlines. There is under construction represents about 80 % of the
regrettably one incident a month in the Baltic. Some existing fleet compared to 48 % a year earlier.
oil companies and European owners, who want to Many ships have been contracted without long-
improve the security of their ships, have jumped the term employment.
gun and ordered ships with double propulsion.
This market, which has been so far very conservative,
is quickly changing. The maximum size of ships, which
Specialised tonnage
was in the past ranging from 125,000 to 130,000
New orders for specialised tonnage have also consi- cbm, has progressively moved up to 140,000 cbm and
derably increased this year with the exception of then 150,000 cbm. In order to meet the requirements
Ro-ro’s, and reefer ships. The number of specialised of the gigantic Qatari LNG export project, a series of
ships remains, however, weak compared to standard LNG carriers of 210,000 cbm has been ordered in
ones. Few sectors have remained inactive, which is Korea. In addition, diesel-electric propulsion seems to
a sign of the vitality of the shipping market in 2004. be progressively more sought after.
The majority of the orders was placed in Korea and
Stainless steel chemical carriers
Japan in 2004. The European shipyards who inven-
The number of stainless steel chemical carriers orde- ted this sophisticated type of transport and banked
red has gone from 59 in 2003 to 77 in 2004. The on a strong future demand, are practically absent
orderbook is growing and has increased from from this market. This year, Hudong-Zhonghua of
1.6 million dwt year-end 2003 to 2.1 million dwt Shanghai joined the “club” of LNG carrier builder
year-end 2004. The fleet under construction at the with the order in August 2004 for two ships of
end of 2004 represented some 16.5 % of the exis- 147,000 cbm.
Ro-ro’s Cruiseships
Only a few Ro-ro’s were ordered in 2004. The few 2004 signalled a comeback of confidence by crui-
European shipyards which possess a real expertise seship operators of with 13 new orders, all signed
in this type of ship are quoting prices in euros, up with the four leading European builders who
which are often prohibitive to charterers, given the are specialised in this sector. It has been the best
freight levels in this sector. Only a handful of pro- year since 2000. (see our article on the cruise mar-
jects actually materialised. ket.)
500
400
300
200
100
0
Jan 01 Apr 01 Jul 01 Oct 01 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04 Jan 05
1,000 won
1.30
1 euro
1.25
1.20
1.15
1.10
1.05
1.00
0.95
0.90
0.85
0.80
Jan 03
Jan 04
Feb 04
Mar 04
Apr 04
May 04
June 04
July 04
Aug 04
Sep 04
Oct 04
Nov 04
Dec 04
Feb 03
Mar 03
Apr 03
May 03
June 03
July 03
Aug 03
Sep 03
Oct 03
Nov 03
Dec 03
Prices neous information. They have thus apprehended
news of the latest deals concluded more rapidly.
Newbuilding prices expressed in dollars have quickly
However, for the moment builders are not getting
progressed in 2004. The increase for all tonnage-
any benefits from this situation. They had to face
types was on average 40 %. By contrast the figure
unprecedented costs increases, as the raw material
was roughly 20 % in 2003. This figure appeared to
market took off in 2004. Steel prices doubled and
be a relatively modest rise given the strong increase
went from $ 300/t to more than $ 600/t; stainless
in the volume of new orders over the year (110 mil-
steel and non-ferrous metal prices have tripled. This
lion dwt in 2003 as against 50 million in 2002).
rising cost movement has affected not only steel
The volume of orders in 2004 remained at the same plates and profiles, but also pipes, cables, bul-
high level as in 2003 (more than 100 million dwt). kheads, machinery, pumps, heat exchangers and so
Nevertheless the situation has been different in forth. It should be remembered, for reference, that
2004 as the production capacities of builders, the main engine onboard a 8,500 teu containership
whose orderbooks in 2004 were spread out over weighs 2,400 tons. Finally, in addition to all this,
three to four years as against roughly two in 2002, energy also became more expensive.
became saturated. This factor militated to push up
Could the shipyards have protected themselves
prices to levels not seen since before the Asian cri-
against such increases? Shipyards traditionally orde-
sis of 1997 / 1998.
red their materials and spare parts, with suppliers
We have seen cascade effects on prices starting and equipment makers, soon after having signed
from the newbuilding market to have then an the newbuilding contracts in order to fix their costs.
impact on newbuilding resales and finally on This was at the time when ships could still be expec-
second-hand tonnage. The demand for tonnage at ted to be delivered within two years’ time. But the
any cost has pushed up the prices of ships with expansion of orderbooks, entailing procurement
prompt delivery dates, as well as the prices of recent exposures much further into the future, no longer
units, to levels above the price being asked by buil- allows for this. As to steel, it is usually payable by
ders for far later deliveries. The latter have been the builder the day of its delivery to the shipyard,
able to use these new benchmarks to increase their which means about twelve months before the deli-
own prices. very of the ship, given effective building delays
which have become shorter. In other words, the
Swift and significant fluctuations in prices help fos-
yard has to pay for its steel requirements nearly two
ter speculation. The behaviour of owners and buil-
years after contract has been signed.
ders alike, has changed over the course of 2004.
One saw a much greater reactivity on the part of Worst still, shipyards have had to face delays in sup-
builders, who have become more alert to the out- plies whilst they have nevertheless had to honour
side world thanks to the availability of instanta- firm commitments with their clients. Steel shortages
came to public attention when Nissan, the car market, some builders had accepted delayed pay-
maker, announced at the end of November 2004 ment terms and now face significant currency losses
that they had to halt production for at least a week. as a consequence.
Korean authorities decided during the year to post-
Prices for specialised tonnage have also risen, given
pone all exports of steel. Other sectors were also the increases in raw materials costs and a more sus-
hit. It was already by the end of 2004 becoming vir- tained demand compared to 2003. But these
tually impossible to find slow speed diesel engines increases were less significant, as competition bet-
for delivery in 2007 due to a disruption in the sup- ween shipyards remained strong. As an example, the
plies of essential parts. number of LNG carriers builders is basically the same
The dollar’s unrepentant decline has been another as for VLCCs or Capesizes. Thus the price of LNG
thorn in the pillow of shipyards. Exchanges rates at ships of 145,000 to 150,000 cbm remained at the
the beginning of 2004 were about 1,200 South very low levels achieved in 1999, in the region of
Korean won and 106 Japanese yen for one dollar. $155 million, until mid 2004, when it gradually
By year-end the won stood at 1,050 and the yen at increased to reach $185 million at the end of the year.
103 to the dollar. This trend has as yet shown no The unprecedented demand, the difficulties shi-
signs of weakness. Despite a fixed exchange bet- pyards face in executing current contracts, the
ween the yuan and the dollar, Chinese builders numerous doubts as to the price of materials and
have had to buy a large quantity of equipment equipment, the continued uncertainty of exchange
overseas (from Europe, Japan, and Korea) and have rates and the recurrent difficulties in obtaining sup-
thereby suffered from a similar exchange rate pres- plies without too long delays, should continue to
sures for their supplies. During 2002 in a difficult push newbuilding prices higher in 2005. As a saving
50
30
40
30
20
20
10
10
0 0
end 1995
end 1996
end 1997
end 1998
end 1999
end 2000
end 2001
end 2002
Mar 2003
June 2003
Sep 2003
Dec 2003
Mar 2004
June 2004
Sep 2004
Dec 2004
30
40
25
Orderbook
Market share
30 20
15
20
10
10
5
0 0
end 1995
end 1996
end 1997
end 1998
end 1999
end 2000
end 2001
end 2002
Mar 2003
June 2003
Sep 2003
Dec 2003
Mar 2004
June 2004
Sep 2004
Dec 2004
Korea Others
%
100
90
80
70
60
50
40
30
20
10
0
Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mars 02 June 02 Sep 02 Dec 02 Mars 03 June 03 Sep 03 Dec 03 Mars 04 June 04 Sep 04 Dec 04
Some Korean shipyards (DSME, STX) have also has practically an identical number with more than
plans to expand in China which remain to be mate- 1,100 ships, is spread out between fifty construc-
rialised. Others like HHI and HMD could give prio- tion sites.
rity to new developments in North Korea when the
How have Japanese shipyards been able to increase
moment comes.
their portfolio from 43 million to 54 million gt?
South-Korean shipyards are worried about having
filled their orderbooks too early and at too low Above all, this has been achieved through exten-
prices. By the end of 2004, it was obvious that seve- ding their orderbook over a longer period of time,
ral Korean shipyards were facing difficulties in spite up until 2009 for some yards. Additionally, it has
of higher sale prices. been achieved by a constant improvement of their
productivity. For instance, at the beginning of
Japan February 2004, Mitsubishi announced that they
were planning to reduce the construction time of a
2004 was also a new record year for Japan, which VLCC between keel-laying and delivery from 7 to
confirmed its second place among world leading 5.5 months.
shipbuilding nations.
New production capacity has also been created.
Japanese builders’ orderbooks went from 43 up to
Imabari opened a new site specialising in the
54 million gt between end 2003 and year-end
construction of bulkers. Naikai Zosen has absor-
2004. It was 24 million gt at year-end 2002.
bed its affiliate Nichizo IMC to improve producti-
All the yards are generally full until 2008, but cer- vity. Murakami Hide has expanded one dock.
tain are committed up to 2009. Contracts for such Other yards, such as Namura and Kyokuyo, have
late delivery dates might not be signed before ano- decided to invest in new workshops and lifting
ther year or two, but berths are already booked. equipment to increase the size of the berths and
Even more than elsewhere, Japanese shipyards give the number of ships they can handle.
priority to their dynamic domestic owners and it has Proximity with China, where Japanese owners like
become more and more difficult for a foreign NYK and K Line have already placed orders, could
owner to place an order with them. It seems that represent a danger for Japanese builders. But it
Japanese owners are also less demanding and even has also been an opportunity as they can increase
more accommodating than their foreign counter- their purchases of equipment and sub-contracting
parts, this has had a visible impact on the number there. Tsuneishi has created a production site for
of hours spent on each ship and on the final net steel blocks in the province of Zhejiang. The suc-
result of each building contract.
cess of NACKS shipyard, opened in 1998 in Nan-
Japanese shipbuilding industry is less concentrated tong (China) -a joint venture between the Japa-
than in South Korea. The Japanese portfolio, which nese builder Kawasaki Heavy Industries and the
20 12
10
15
8
10 6
5
2
0 0
end 1995
end 1996
end 1997
end 1998
end 1999
end 2000
end 2001
end 2002
Mar 2003
June 2003
Sep 2003
Dec 2003
Mar 2004
June 2004
Sep 2004
Dec 2004
Chinese owner Cosco- is another example of co- Signing of newbuilding contracts in China generally
operation and possible development. takes a longer time than in Korea and Japan. Whilst
this was a handicap to Chinese yards in the middle
One has to admire the perseverance and dyna-
of the Asian crisis in 1998, when prices were falling,
mism of Japanese shipyards. They reflect the
it was rather to their advantage in 2004 with a rising
ambition of Japan, a developed country with a
market. They have been able to adjust their prices
well-paid workforce, not only to maintain but also
closer to the market. One should also be aware of
to develop shipbuilding in a highly industrialised
the arrival of a new generation of management in
country. Japan demonstrates that it is possible to
the shipyards, more internationally minded and
build ships at market prices with a more expensive
much better informed, thanks largely to the internet,
workforce than in Korea and China, thanks to a
who carry out a close monitoring of the markets.
remarkably high level of organisation and highly
automated production process. Nonetheless, this rapid development is not without
some hitches, and even some frustration with
China clients of certain provincial shipyards. Letters of
intent have in some cases not been transformed
2004 was also once again a record year for China,
into firm contracts at agreed prices, signed
which confirms its third place in the world ranking.
contracts have not been formalised, options have
The orderbook of Chinese builders went from 17 not been confirmed or at least not on agreed terms,
to 26 million gt between year-end 2003 and year- etc. Some yards have encountered real problems in
end 2004. In 2002, by comparison, the Chinese obtaining financial support from their bankers who
orderbook stood at 9 million gt. It is a remarkable criticise them for having signed at too low levels
performance when we remember that the order- which are insufficient to cover their costs. Some
book of Japanese builders was 24 million gt at the even had to renegotiate contracts with their clients,
end of 2002. facing rising costs and weak financial situations.
Contrary to their Japanese and Korean counter- Chinese shipyards work in a constantly changing
parts, Chinese yards still have some berths available environment and have to juggle with a number of
in 2008. difficulties. They have been affected by energy shor-
tages and steel or main equipment supplies, like
The strength of the Chinese orderbook is not only
engines, which they had to buy abroad at higher
explained by having been spread out over 3 years
prices.
but, above all, by the expansion of existing facilities
and the creation of new shipyards. There are about Chinese shipyards should pursue their efforts to
two hundred shipyards with merchant ship building produce quality ships. In the current market, they
capability in China and about fifty competing on have been able to benefit from the rise in prices
the international market. and, above all, to obtain terms and conditions on
Korea Others
%
100
90
80
70
60
50
40
30
20
10
0
Mar 00 June 00 Sep 00 Dec 00 Mar 01 June 01 Sep 01 Dec 01 Mar 02 June 02 Sep 02 Dec 02 Mar 03 June 03 Sep 03 Dec 03 Mar 04 June 04 Sep 04 Dec 04
8 16
14
6 12
10
4 8
2 4
0 0
end 1995
end 1996
end 1997
end 1998
end 1999
end 2000
end 2001
end 2002
Mar 2003
June 2003
Sep 2003
Dec 2003
Mar 2004
June 2004
Sep 2004
Dec 2004
and destabilise the industry in the coming years. In Europe
a short while, Chinese shipyards will be in direct
The search for construction sites with early delivery
competition with Japanese and Korean shipbuilders
dates has also brought owners towards European ship-
for the same types of ships (VLCC, LNG, very large
yards.
containerships).
The European shipyards have benefited from the
Taiwan overflow of a saturated Asia. They have been able
The orderbook of Taiwanese builders went from 1.9 to offer earlier deliveries: 2006 as against 2007 or
to 3.2 million gt between year-end 2003 and year- 2008, for which owners have been prepared to pay
end 2004. Taiwan thus occupies the 5th place in a premium. The mainstream of business for Asian
the world ranking. shipyards being standard ships, the recovery of
demand for specialised tonnage has certainly hel-
The state shipyard CSBC gave priority to domestic ped the European yards to regain some ground.
owners such as Yang Ming, Wan Hai and China
Steel Corporation. Their orderbook extends until It is worth stressing that the West European order-
end 2008 and comprises essentially containerships: book has progressed this year for the first time for
with a capacity of 1,800 teu in Keelung and of ages. They have moves up from 5.9 to 8.4 million
4,250, 5,250 and 6,000 teu in Kaohsiung, as well gt between end 2003 and end 2004.
as a few Capesize bulk carriers of 200,000 tons. It is of course a pleasure to see this recovery of busi-
ness. But the basic handicaps of West European ship-
Other countries in the Indo-Asian zone
yards in comparison with their Asian competitors still
The search for newbuilding sites has pushed owners remain: dispersed production, poor investment,
to less traditional destinations. ageing installations and workforce, unfavourable tax
regimes, high social security costs, too much bureau-
Ha Long and Nam Trieu shipyards of the Vinashin
cracy and too few effective working hours.
group in Vietnam signed up with Craig from the
UK, for an important series of Handymax dry bulk The drop of the dollar against the euro and the
carriers of 53,000 dwt. Danish owner Clipper pla- impending termination of subsidies of up to 6 % on
ced an order for several Handysize bulk carriers of March 31st 2005 will not help the European shi-
30,000 dwt with Cochin shipyard in India. pyards’ task.
Iranian shipyards have signed some noteworthy It is a pity to see that there is not a more efficient
orders with domestic accounts and are now looking European industrial policy. Too much public money is
for some international clients. Dubai Drydocks has spent to reduce workforce, to put employees on
booked its first order for bunkers vessels of early retirement or to close yards. It should be pos-
6,500 dwt. Others should follow. sible to conceive of a more proactive and wilful policy
Market share 12
6
10
4
2
0 0
end 1995
end 1996
end 1997
end 1998
end 1999
end 2000
end 2001
end 2002
Mar 2003
June 2003
Sep 2003
Dec 2003
Mar 2004
June 2004
Sep 2004
Dec 2004
aimed at using the inherent social funds to help the with a diesel-gas-electric propulsion, the power
industry to adapt, develop and prepare for the future being provided by gas engines. It is also the method
rather than liquidate the past. Japan has demonstra- of propulsion that AP Moller has adopted this year
ted that this option was not totally illusory. with its orders at the Korean shipyard Samsung.
Breuil
600 dwt, self-propelled barge,
delivered in 2004 by De Hoop,
operated by Socatra,
dedicated to the carriage
of blocks of the A380 airplane
on the Gironde estuary
Wisby Verity
7,600 dwt delivered in July
2004 by Ferus Smit, owned
by Wisby Tankers of Sweden
and on long term charter
to Preem Petroleum.
Huntestern
37,179 dwt, built in
2004 by Jinling, owned
by Rigel Schiffahrts
120
100
80
60
40
20
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
ding, these are the underlining explanations for the where the same single-hulled VLCC would have
volumes ordered. cost around $ 90 million. At the same time, the
price of a 300,000 dwt double-hull VLCC reached
First, shipyards became euphoric with their commer-
cial success, but they progressively realised that the the $ 110 million region.
increases in newbuilding prices obtained in 2003 If we expect the current upward cycle to last as
were hardly sufficient to cover the rise in their own long as the previous one, there is no doubt that
costs. They discovered, with dismay, that they had newbuilding prices still have some margin to go
taken enormous risks and that in fulfilling existing up. Much will depend on the further development
contracts they could jeopardise their financial results. and stability of the dollar exchange rate, which
Builders could well exercise additional caution in remains a serious issue. We can also draw some
2005 by not agreeing to take on any new orders comfort in the extrapolation of most economists,
except at substantially higher prices, especially as whose sentiments are that the dollar is not about
they have time on their side. This could cause to appreciate substantially against the currencies of
owners to slow down as well, as they have taken on the main shipbuilders.
commitments over the next three years themselves
Of course we would like to be able to predict new-
(165 million gt on order).
building prices evolution and we would like to
know if an eventual drop could send us again
towards the very low levels seen in mid 2002.
Shipbuilding prices in 2004 reached new levels,
equalling and in some cases surpassing the records Given the size of shipyards’ orderbooks, the pres-
obtained at the beginning of the 1990s (in actual sure placed on an already strained raw materials
values). Owners can reasonably ask themselves, in markets and world growth forecasts, it seems pro-
such heady time, if they might not soon encounter bable that newbuilding prices will continue to
a decline. climb during 2005 and 2006 as long as steel prices
However, one should keep in mind that $ 100 mil- do not drop.
lion in 2005 is worth considerably less than the There is nevertheless reasons to be careful about
same $ 100 million in 1991 (in current values) and the enormous building capacity that China will put
meanwhile the price of steel has risen. on the market as from 2008 / 2009. This, coupled
The analysis of the cycle that shipbuilding expe- with the steady productivity improvement achie-
rienced in the 1980s is instructive. In 1985, a ved by the Chinese shipbuilding industry, may start
VLCC of 250,000 dwt would have been contrac- to break this delicate balance. The outcome will
ted for around $ 35 million at the Asian shipyards. then depend to a large degree on the capacity of
The upward cycle then followed a six year trajec- resistance offered by the Japanese and South-
tory, into the beginning of the 1990s, to the point Korean shipbuilders. ■
23
BRS Research and
Information Department
research@brs-paris.com
I f we were able to hand out “Oscars” in the cruise experienced three difficult years since the attack of
market, we would indisputably have two big win- September 11th, 2001 and began the year 2004
ners this year: the Carnival Cruise Line group, on with a new challenge, that of absorbing ten ships
one hand, and Fincantieri shipyards, on the other, representing about 23,500 lower-berths, or 10 %
both having developed a fruitful co-operation. of the current capacity. Once again, demand was
able to match this new supply thanks to the
The Carnival group closed its annual results with a increase in the number of cruise passengers which
profit of nearly $ 2 billion for a turnover of roughly should surpass the 13 million mark in 2004.
$ 10 billion, namely a net margin of 20 %. This
result confirms both the success of the merger At the beginning of 2004, there were only three
between the P&O / Princess group and the Carni- ships to be delivered in 2005 and four in 2006.
val group, as well as the growth of the cruise mar- However, despite the continuing decline of the
ket in the US and Europe in 2004. dollar lifting the cost of construction in Europe,
owners could not resist the temptation to consoli-
Fincantieri ended the year with an orderbook of date their commercial position by ordering new
ten cruise ships, all for the Carnival group, repre- ships, in this booming market.
senting 60 % of the world orderbook and slightly
Once again, the signal was given by Carnival who as
over $ 5 billion in value, guaranteeing full employ-
early as January ordered a ship, the ‘Costa Concor-
ment for their three cruiseship construction sites
dia’, 112,000 gt, 1,900 cabins, for delivery in the
until 2008.
summer of 2006, at € 450 million, for its subsidiary
The enthusiasm which these magnificent results Costa. In October, two ships of 68,000 gt, 1,000
inspire should however be tempered in a global cabins, were ordered by another Carnival affiliate,
outlook of the market. The cruise industry has just Aida, with Meyer Werft, for delivery in April 2007
Meyer Werft
Aker Yards
25,000
10 ships 9 ships Mitsubishi H.I.
Fincantieri
Ch. de l'Atlantique
20,000
6 ships
15,000
4 ships
10,000
2 ships
5,000
1 ship
0
delivered in 2004 2005 2006 2007 2008 2009
and April 2008, for a unit cost of € 315 million. But ‘Pinnacle’ project of 180,000 gt is already on the
above all, the biggest order ever placed was made drawing boards.
with Fincantieri for a total figure of $ 2.6 billion for
RCCL has also opted this year for the extension of
four ships to be delivered in 2007-2008 and the
the ship ‘Enchantment of the Seas’ which should
extension of the future ‘Queen Victoria’ by 11 meters
see its capacity increased by 150 cabins for a cost
for Cunard, for a complementary cost of $ 95 mil-
in the region of $ 55 million. The new section will
lion. The four ships are broken down as follows:
be built at Aker Yards and installed in the Nether-
◆ one for Carnival, 110,000 gt, at a price of $ 500 lands during the second quarter of 2005.
million,
Norwegian Cruise Line (NCL) began the year
◆ one for Princess Cruises, 107,000 gt, at a price
with some concerns due to the financial losses of
of $ 525 million, its mother company in Asia and the accident of
◆ two similar ships for Europe, priced respectively the ‘Pride of America’ under construction at
at € 475 and € 490 million, with the Carnival Lloyd Werft. Finally, the group has successfully
group keeping the option to dedicate these two put in place a financial restructuring, which
ships to either of its brands during the year 2005. allows it to raise $ 1 billion and to order two
This order is exceptional in both its size and the ships in December:
fact that Fincantieri agreed to deal both in dollar ◆ one of 92,000 gt, 1,200 cabins, for delivery in
and in euro, with client and supplier sharing the February 2007 with Meyer Werft, at a price of
currency risk. € 370 million,
At the end of the year, Carnival thus has 12 ships ◆ the other of 89,000 gt, 1,000 cabins, with Aker
on order and in January 2005, this owner will add Finnyards, for delivery in the spring of 2007, with
an option for another unit to be lifted in August
a sistership of the ‘Concordia’ for its subsidiary
2005 for delivery in the spring of 2008, at a price
Costa, for delivery in 2007 at a price of € 475
of € 385 million per unit.
million.
An agreement was finally signed with Lloyd Werft
RCCL declared in September its option with Kvaer-
to take delivery of the ‘Pride of America’ in June
ner Masa Yard, which has become Aker Finnyards,
2005, whilst the ‘Norway’ has definitively been
for a second ‘Ultra Voyager’ of 163,000 gt, 3,600
stopped, awaiting a sale.
passengers, at a price of € 580 million. RCCL
continues to invest in these mega-ships with suc- NCL, under the NCL America banner, continues to
cess, but it is likely that Carnival will start to com- develop its cruise business in Hawaii under the
pete in this market of very large carriers, since its American flag, despite some teething problems
Iouannou, to develop on a much larger scale the controlled growth of around 5 % per year, which
ambitious project of easyCruise, which is planning should result in some ten ships being ordered each
to expand the range of products offered in the year.
cruising industry in trying to capture a much youn-
Once again, the question is whether there are too
ger clientele.
many shipyards in Europe to serve the needs,
◆ The sister ship, ex ‘Renaissance One’ was sold which overall have become relatively moderate,
to Singaporeans at a price of $6 million to operate although owners have no interest in seeing redu-
casino cruises. ced competition amongst shipyards as this has hel-
◆ Also to be noted was the purchase of the ‘Dis- ped boost their growth.
covery’, 20,186 gt, 472 lower-berths, built in 1972 The decline in the dollar has of course been a
by the tour operator All Leisure Group (Voyages of constraint on the ambitions of American compa-
Discovery) which chartered the ship for six months nies, but the growth of the market and a wiser
of the year, thus becoming an owner. decision-making process in the annual ordering of
These sales show the activity of some tour opera- ships should permit, as seen this year, an increase
tors, especially Spanish, Spain having become the in cruise prices compensating the rise in construc-
fourth market in Europe within several years with tion costs expressed in dollars, taking into consi-
300,000 cruise passengers, after the United King- deration that amortisation of the vessel can be
dom with over 1 million, Germany with near to spread out over a very long period.
600,000 and Italy with more than 350,000 cruise The cruise industry, which in twenty years has
clients. become a well-known and appreciated leisure
We have not seen any new mergers within the activity, has no need to be under-priced to survive
cruise companies this year, the sector being and the sector should experience a much more
already concentrated in the hands of a few big controlled development than in the past, particu-
groups, but there was one promising diversifying larly as only ten ships will be coming out of the
operation with the entry of CMA CGM into 70 % yards over the next two years, four in 2005 and six
of the capital of the Compagnie des Iles du in 2006, which should allow a better occupancy
Ponant, who exploit three small cruiseships under rate and price optimisation given a demand which
French flag, and in the tour operator Tapis Rouge. is continuously expanding. ■
Let us hope that this major containership owner
will wish to develop rapidly in this new activity.
Whilst we might have imagined that the sector
would take a pause after the strong growth in the
fleet at the beginning of this decade, it appears
that cruise companies are looking to achieve a
www.brs-paris.com
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Jan 02
Mar 02
June 02
Sep 02
Dec 02
Feb 03
May 03
Aug 03
Nov 03
Jan 04
April 04
July 04
Oct 04
Dec 04
to the forecasts for growth and production over 110 VLCC currently on order and a progressive
the coming years, we note the following main ele- and inevitable elimination of older ships, owners
ments: in 2010 the share of production from the have good reasons to remain optimistic even if a
Arab-Persian Gulf will be about 42 million barrels large part of single-hull ships now in service were
per day or 47 % of the estimated world produc- built at the end of the ‘80s or beginning of the
tion of around 89.3 million barrels per day. In 2020 ‘90s and still have a number of years’ trading left.
the world production will be 107.3 million barrels
With the main traffic bound to the East and Chi-
per day and it is estimated that the Gulf countries nese and Indian owners up till now being the prin-
will contribute around 58 million barrels per day. It cipal takers of single-hulls, the analysis of the evo-
is calculated that such a figure will require the pre- lution of freight rates is all the more significant.
sence of 27 VLCC per day to cover these exports,
equal to an increase in the fleet of nearly 170 units On the three main routes in our graph, the ave-
in the next 16 years… rage returns of a modern VLCC (on the basis of a
simple round-voyage) have not stopped rising,
Even if these figures should be taken with some going from $ 22,550 dollars per day in 2002 to
caution, it is nonetheless indisputable that the pre- $ 52,500 in 2003 and over $ 95,000 in 2004.
dominance of this geographical zone and this size
of ship is here to stay. Over the past 12 months, the minimum return for
a double-hulled VLCC was $ 41,000 per day in
As tangible proof : there was a monthly average of April and the record was achieved in mid-Novem-
91 ships fixed out of the Gulf in 2002, this figure ber with $ 228,000 per day.
rose to nearly 120 in 2004 (+30 %). At the same
time the fleet only increased by 5 %. This simple In such a climate it is clear that the number of tan-
statistic explains already the strong surge in the kers being sent for demolition was low. At the same
freight rates. time few owners of modern ships were willing to fix
their ships on long term charters. However, on the
As we have already stated, the increasingly pre- basis of the few transactions concluded, we can
ponderant share of exports to China and India estimate a time-charter rate for one year at about
plays an essential role in the evolution of these $ 80-85,000 per day, and at about $ 57,500 per
rates. One has seen in the last two years that the day on the basis of a three year charter.
ratio East / West of exports has gone from 70 / 30
to about 75 / 25. Suezmax
Parallel to this, one observes that in this category Generally speaking, this category experienced
of size the proportion of single-hulls is the highest similar rate variations to those of VLCC, which is
within crude tankers, namely some 40 % of the hardly surprising given the direct influence that
current fleet in service (177 ships). With less than one size has on the other.
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Jan 02
Feb 02
Mar 02
May 02
June 02
July 02
Sep 02
Oct 02
Dec 02
Jan 03
Feb 03
Avr 03
May 03
June 03
Aug 03
Sep 03
Nov 03
Dec 03
Jan 04
Mar 04
Avr 04
June 04
July 04
Aug 04
Oct 04
Nov 04
Dec 04
As with VLCC, the average daily returns have been tions), units of one million barrels continue to find
constantly rising over the past three years. On the a stable market in this zone.
basis of the two routes West Africa / Gulf of Mexico
While Nigeria remains the main exporting country,
and cross-Mediterranean, these have moved from
there has been significant and confirmed export
$ 20,500 per day in 2002 to $ 42,900 in 2003 and
have slightly surpassed $ 70,000 in 2004. growth from other countries, notably Angola,
where deep-sea drilling is being pursued at a sus-
If the rate movements have often been erratic, the tained rhythm, justifiable in view of the current
returns have never been below $ 20,000 per day level of oil prices.
in 2004, the record being reached in mid-Novem-
ber with over $ 160,000 per day for a cross-Med One has also seen a growing number of fixtures out
movement. of the Arabian-Persian Gulf at record freight rates this
year, following the spectacular highs set by VLCC.
Even though the voyages are short, we can see yet
Thus on some spot business rates have gone up to
again that the driving force is the Mediterranean
over Worldscale (WS) 400 for voyages to China.
market and especially Russian exports out of the
Black Sea. It should also be observed that this new As with other sizes, the elimination of old units
improvement in freight rates has come about des- has been particularly quick since for the fleet in
pite exports of Iraqi crude from Ceyhan being par- service at the end of the year, there are only
ticularly weak and erratic following the successive slightly over 20 % of single-hull ships.
sabotage of the pipeline feeding the terminal.
Furthermore in line with the other categories, few
Exports of Russian crude have not stopped rising owners were inclined to place their modern ships
and the coming into service of the new pipeline out on time charter, but rates can be estimated
between the Caspian Sea and Ceyhan should help between $ 55-60,000 per day on the basis of a
reinforce the role of this zone as a barometer of one year contract.
the Suezmax market.
Record delays of over 20 days during the winter of Aframax
2003 in order to transit the Turkish straits have not This market has been particularly boosted since
been repeated. Thanks to new navigational rules the accidents of the ‘Erika’ and above all the
and milder weather, round trip voyages have scar- ‘Prestige’. Security measures adopted by the main
cely exceeded 10 days. players and the increase in trade movements has
Despite an increasing share of exports being taken allowed owners with renewed fleets to obtain
by VLCC out of West Africa (always with a pro- freight rates which give a rapid payback on their
portion of 70 / 30 between East / West destina- investment.
100,000
80,000
60,000
40,000
20,000
0
Jan 02
Feb 02
Mar 02
May 02
June 02
July 02
Sep 02
Oct 02
Dec 02
Jan 03
Feb 03
Apr 03
May 03
June 03
Aug 03
Sep 03
Nov 03
Dec 03
Jan 04
Mar 04
Apr 04
June 04
July 04
Aug 04
Oct 04
Nov 04
Dec 04
As an example and only on the European market, In the North Sea, freight variations and returns clo-
if the average returns were only $ 12,500 per day sely followed the trends in the Mediterranean with
in 1999, they jumped to $ 40,000 in 2000 and an average yearly rate working out at WS 189 on
then dropped to $ 21,500 in 2002, when the the short cross-North Sea voyages. In parallel there
‘Prestige’ accident in November 2002 totally over- was also a strong progression of Russian exports
turned the supply / demand balance. out of the Baltic and Murmansk. For such voyages,
even though ice-classed ships are now more nume-
This European traffic has been in continual growth
rous, rates continued to be extremely high since
since 2002, as between the Mediterranean and
the beginning of the winter season (up to WS 440).
the North Sea, the level has gone from 45 % to
50 % of all spot charters done world-wide. In the Caribbean market, with the rise in American
imports to help reconstitute inventories, we saw
Despite a more marked volatility compared to
an increase in local movements and the average
other sizes, the average daily returns have moved
annual rates were around WS 255 compared to
up from $ 42,500 per day in 2003 to about
WS 207 in 2003.
$ 58,000 per day over the last 12 months.
In such a situation, there were few time charter
Proof of the extreme volatility of this market are
transactions given that the spot market enjoyed a
the large variations in Mediterranean demand
steep rise. Nonetheless, there are a number of
which often put freight rates into a roller-coaster
owners who expect downward pressure in the
movement, difficult to foresee and to control, but
months to come, which would then be a justifica-
with a strong upward pressure. Returns on cross-
tion for some commitments to time charter
Med voyages jumped from about $ 17,000 per day
contracts.
in April up to $ 110,000 per day at end October!
It should be noted that the record levels reached Prospects
at the end of the year were the result of a higher
demand, without any particular influence of delays In face of the particularly erratic fluctuations in
due to bad weather, such as experienced in 2003 rates, any realistic prediction either for the medium
with the transit of the Turkish straits. or long term is a highly precarious exercise. The
slightest event of either macro-economic or geopo-
As to the structure of the fleet, today the propor-
litical nature will continue to have an impact on the
tion of modern double-hulled units is predominant.
freight markets.
The survival of some single-hulled ships is limited
to several Russian traders out of the Black Sea, but Nonetheless, as with our preceding report, we
their days are numbered… consider that owners can reasonably expect to see
Aframax
120,000,000 Suezmax
VLCC
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
end 1998 end 2000 end 2002 end 2004 end 2005 end 2006 end 2007
(under 25 years) (under 15 years) (under 15 years) (double-hull) (double-hull) (double-hull) (double-hull)
freight rates remaining firm over the next two As we did in our previous report, the study of the
years. Even if on the economic front, various ana- “eligible fleet” adds a clear indication to the fore-
lyses suggest that there will be lull in the growth casts, and gives an initial response which coun-
for a number of importing countries, the energy terbalances the pessimism of those who only look
needs of China and India alone will continue to at the massive tonnage arriving on the various
have a determining influence on the world tanker markets.
traffic. This time we only compare the global tonnage at
It is however unlikely that we will see in the next the end of 1998 (corresponding to the main crite-
12 to 24 months the exceptional levels of freight ria used at this time by the main charterers namely
rates experienced this year. We should witness a an age limit of 25 years) with what will be the
figures in the coming years but only taking into
steady decline in the average rates and reach a
account ships with double-hulls.
level probably close to that of 2003, therefore still
considerably in favour of owners. One observes that despite a constant increase in ton-
nage in each of the categories, none of the volumes
Tankers on order (number of ships)
surpasses the level achieved at the end of 1998.
Aframax Suezmax VLCC
2004 58 29 31 The cost of new ships should continue to rise,
2005 67 29 35 especially with the continuing increase in the cost
2006 62 24 21
of raw materials from which they are built.
2007 50 29 40 The organisation between owners leading to the
Total 237 111 127 creation of commercial pools should help avoid
sudden drops in the market and allow freight rates
The arrival of new units into the fleet is obviously to continue for a prolonged period at levels we
a cause of concern, with such imposing numbers have seen recently.
as the table above indicates. On the other hand Finally, the drastic safety measures will continue to
we can expect that deletions will not be sufficient be reinforced and the balance between supply and
to compensate for the number of new units. A demand, which determines the rates, will be more
good number of Asian countries continue to use and more linked to the quality of ships effectively
old single-hull ships and probably do not respect meeting the requirements imposed by the main
the letter of the law as laid down by international charterers and not just by simple comparing sup-
organisations. ply and demand figures. ■
T
his motto, which comes from a large French values increase substantially sometimes over the
noble family in the 17th century, seems to be contract price for a new vessel.
ideally suited to the family of tanker owners
Two other elements have characterised the year
if they were wise enough to follow the second-
2004. First there has been a noticeable increase in
hand market of their ships throughout the course
of the year. the number of en-bloc transactions comprising at
least three ships: with only seven transactions
If the price of tankers progressed overall by 20 to some 32 units changed hands. Teekay and Gen-
35 % between the end of 2002 and the end of mar were particularly active in this type of business
2003, they experienced an increase in the order of as they were involved in five of them. The compa-
50 to 60 % between 2003 and 2004 for the more nies mentioned were in this way able to respond
modern double-hulled tankers and up to 100 % to their shareholders expectations, either by reali-
for some of the single-hulls, aged between 15 and sing short term profits or else by showing their
20 years old. It has been the explosion in the daily strength and their desire to expand. The other
returns which quite logically has caused this phe- significant factor was the unexpected effect that
nomenal appreciation. During the year, owners the explosion of spot freight rates had on German
were continuously on the horns of a dilemma bet- KG buyers. The latter have been very active over
ween the desire to profit from these colossal the past two years, but have had to abandon their
returns and the desire to make some cash by sel- role as principal player to others this year due to
ling off their assets. This dilemma only got worse prices being too high in comparison to the long
during the months: the more prices and returns term charter rates that the KGs could obtain on
increased, the less opportunities there were to the market. Whilst the spot rates went through
seek out alternative investments. In fact, the eva- the ceiling, the long-term charterers (3 years and
luation of other types of ships followed the same more) did not follow the levels being asked by
tendency, as was the case with bulk carriers and owners. Without a safe charter back, numbers of
containerships as well as gas carriers and, to a les- KGs were forced to abandon this sector.
ser extent, chemical product carriers.
The VLCC second-hand market
The rocketing rise of daily returns was thus the
main cause for the increase in values but also This segment of the market saw very sustained
contributing was the demand forecast for China activity, the volumes of transactions exploded as
and India which incited a good number of owners from May and prices took off. The volume vir-
from these countries to rush massively into the tually doubled compared to last year. We registe-
second-hand tanker market. In fact, they were red no less than 82 sales (for further trading) of
quite aggressive and clearly contributed to the spi- second-hand VLCC, which actually only concern
ralling prices. Their thirst for tonnage even allowed 76 ships as 6 of them changed hands twice
some smart operators to buy and re-sell the same during the year. It should be noted that only
ship in the course of the year, and realise very sub- 44 units were sold in 2003, 24 in 2002 and 37
stantial gains. Chinese and Indian owners have in 2001.
thus gained a foothold in this market and are sho- Logically in view of their small number, very few
wing to all that they have no intention to leave the ships from the ‘70s changed hands. Only four VLCC
care and attention of transporting crude and oil of this generation were sold for storage projects,
products, which the economic growth of their such as the t/t ‘Folk Sun’ of 323,100 dwt, built in
countries requires, to third-party players. 1979, for a price in the region of $ 19.5 million.
Another factor determining the rise in the price of By contrast, we saw a real plethora of sales of
second-hand tankers this year is the increase in the single-hull units built between 1980 and 1995, as
newbuilding price of ships, combined with the late 51 changed hands this year compared to 18
delivery dates being proposed by shipyards (2007 during the previous year. If the buyers of 2003
and 2008). Consequently a number of modern were mostly Greeks, they cleverly came out as dis-
ships with prompt delivery dates have seen their crete sellers in the course of 2004, placing their
Aframax
12,000,000 Suezmax
VLCC
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2001 2002 2003 2004
ships with Far Eastern buyers and showing once cite as an example the sale of m/t ‘Oriental Topaz’ of
again their astute sense of timing. As an example, 319,430 dwt, built in 2002, for a price close to
we can cite the sale of m/t ‘Progress’ of 238,898 $ 116 million (for prompt delivery), whereas the cost
dwt, built in 1987, going to buyers in Hong-Kong of ordering a new ship at the same time is some
for a price of $ 49.7 million in December 2004, $ 10 to 15 million less. Amongst the 31 transac-
whilst its acquisition price in September 2003 was tions, there are 6 contract resales of which in June
around $ 16.5 million. Some operators succeeded the en-bloc one of the hulls 1,540 and 1,541 of only
in buying such ships at the beginning of the year, 260,000 dwt being built at Hyundai Heavy, for deli-
operating them very successfully for several very at the end of the year for $ 92 million each.
months on the spot market, to finally sell them
This year, only 5 ULCC / VLCCs went for demolition
several months later with a considerable profit.
against 29 newbuildings coming into the fleet.
Such was the case of m/t ‘VL Venus‘ of 238,770
This figure is falling compared to the 27 and
dwt, built in 1986, bought in January for $ 18.0
36 units demolished respectively in 2003 and
million and sold in June for $ 24.6 million. It
2002. The rising freight rates as well as the very
should be pointed out that buyers of VLCCs for
small number of ships still in service and affected
conversion are increasingly considering this age
by the phasing-out of single-hulls explains this
category, given the virtual disappearance of the
previous generation of ships. It is the reason why minimalist figure. It should be contrasted with the
three units out of the 51 sales left the fleet to 105 units which are due for delivery between
become FSO or FPSO, such as m/t ‘Apollo’ of 2005 and 2009.
257,882 dwt, built in 1981, sold for conversion at
The second-hand Suezmax market
a price of around $ 20 million.
This size category, namely from 120,000 to
The number of double-hull VLCCs built after 1993
200,000 dwt, did not benefit from an increased
sold this year was also higher, even though not quite
volume of transactions comparable to that of the
as dramatic, since we have registered 31 sales in
VLCCs. Nonetheless the price increases were simi-
2004 as against 23 in 2003, only 5 in 2002 and 14
lar since, in line with the VLCCs, single-hull units
in 2001. We can easily understand that owners of
saw their values virtually double while those of
these ships have shown a greater resistance to the
double-hulls only went up by 55 to 60 %.
temptation of selling, since the double-hull vessels
have a longer life expectancy, and furthermore the While we were able to count 53 sales of Suezmax
hull configuration meets today’s norm to which the in 2003, the year 2004 only saw 43 units changing
most exposed charterers have to conform. We could hands; actually 45 transactions as two ships saw
Bro Etienne
37,179 dwt, delivered
in 2004 by Jinling,
owned by Broström Tankers
40,000
30,000
20,000
10,000
0
Jan 03 Mar 03 May 03 Juil 03 Sep 03 Nov 03 Jan 04 Mar 04 May 04 Juil 04 Sep 04 Dec 04
versa, based on the rates differentials that could Parallel to this, a traffic of gas oil developed bet-
be obtained respectively in both sectors. ween the US Gulf and Europe. In 2004 Europe
imported 11.5 million barrels of gas oil from the
Charterers were not really keen to commit them-
US, which is the equivalent of 13 % of the Ameri-
selves to long period business due to the high
can production.
expectations of owners, but starting in October
and facing a strong surge in spot rates, they finally As in 2003, ships operating in the East of Suez
had to accept paying levels above $ 20,000 per took advantage of the economic strength of the
day for periods of 12 to 18 months. Far East zone, led by the growth in China, India,
and Japan. Despite a seasonal decline in the
The Medium Range (MR product tankers) spring, returns remained comfortably above
of 40,000 to 49,999 dwt $ 20,000 per day, notably after the month of
October.
Ships operating in the Atlantic benefited from the
sustained level of American demand for gasoline Long term period business was scarce, but traders
and fuel oil. Daily returns for a 33,000 t voyage - such as Vitol, Trafigura, and especially Glencore
UMS - Continent / US, varied between $ 16,250, were very active in the short period business (3 to
at the bottom of the market during the summer, 12 months) and did not hesitate to pay rates
above $ 30,000 per day to the extent that they
to $ 40,000 per day in February and December,
were able to hedge their positions on the “paper”
with the annual average working out at $ 26,500
market.
per day.
The Long Range (LR product tankers)
Garonne from 50,000 to 90,000 dwt
37,178 dwt, delivered in 2004
by Hyundai Mipo, The LR2 and the LR1 were also particularly helped
operated by OMI Corp.
by the strong demand coming from throughout
the Far Eastern zone, notably China and Japan. As
from mid-September, daily returns went from
$ 30,000 to $ 60,000 per day for the LR1, whereas
the LR2 were over $ 70,000 per day.
In this sector of the market, the “paper” business
has an important role, but if the route TC1 (LR2 -
75,000 mt - Middle East Gulf / Japan) was heavily
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
End 1998 End 2000 End 2002 End 2004 End 2005 End 2006 End 2007
(under 25 years) (under 15 years) (under 15 years) (double-hull) (double-hull) (double-hull) (double-hull)
T
he steady rise of product tankers freight rates This rise also applied to the older units as, for ins-
during the year 2004 also had an impact on tance, the value of a 20 year-old, single-hull,
second-hand values. In a higher volume of 45,000 dwt ship started at around $5 million in
transactions (around 150 Medium Range and January 2004, to reach $7 million at the end of
Handy product tankers built since 1980 have chan- June and ended the year at around $9 million.
ged hand in the course of the year) prices have
dramatically risen. Lastly, a single-hull 40,000 dwt product tanker
built at the end of the 1980’s, for which one had
The value of a five year-old standard double-hull to spend $ 11.5 million at the end of 2003, ended
45,000 tonner, which was around $28 million at the year at around $16 million. ■
the end of 2003, progressed to $32 million by the
end of June and up to an average of $39 million in
December.
Contacts
Chris Reilly or Ramon Muga Tel.: +44 20 7602 5670 Email : trade@brs-futures.com
Tim Jones Tel.: +33 1 41 92 12 34 Email : bulk@brs-paris.com
François Walon Tel.: +33 1 41 92 12 34 Email : tanker@brs-paris.com
45
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T he year 2004 will remain unique in the history in India. The increase in offshore drilling expenses in
of the oil and gas industry for two reasons: 2004 illustrates the upward trend and the best indi-
first, world oil demand (excluding gas) reached cator of this growth being the percentage of jack-up
its highest level ever and second, the price of oil also rigs operating, which has gone from 75 % at the
registered a peak at around $ 50 per barrel. beginning of the year to 90 % at the end.
The offshore sector at last is feeling the initial bene-
fits of the surge in prices and oil companies are again Offshore Support Vessels
targeting to increase their proven reserves of oil and Most of the major companies in this branch of the
gas. About $ 125 billion was spent on exploration offshore market decided this year to order a large
and oil production in 2004. This level, comparable to number of Platform Supply Vessels (PSV) as well as
that achieved in 2001, should increase to $ 135 bil- Anchor Handling Tug-Supply (AHTS). The order pat-
lion in 2005. This figure excludes Russian and Chi- tern was mainly:
nese projects, but includes the Kashagan and Kaza- ◆ at the beginning of the year, for PSVs in the size
khstan projects in the Caspian Sea. This drive will be range of 3 000 tons deadweight or more,
a stimulus in the first instance to the development of
◆ for mid-size AHTS, with 60 to 120 t bollard pull,
traditional offshore equipment in shallow waters, but
dynamic positioning and equipped with fire-fighting
also to very deep-sea offshore equipment, which
systems.
comprise a number of drilling units used at the limit
of their capacities. Geophysical offshore exploration The majority of orders were placed with Far Eastern
will see a certain stability, even with some expansion shipyards, currently favoured for their cheap labour
90
80
70
60
50
West Africa
30 North America
20
10
0
Jan 01
Apr 01
July 01
Oct 01
Jan 02
Apr 02
July 02
Oct 02
Jan 03
Apr 03
July 03
Oct 03
Jan 04
Apr 04
July 04
Oct 04
Jan 05
costs as well as the weakness of the dollar. The other limited by their Polish or Romanian sub-contractors
significant trend of this market is the halt on the ever- production capacities to build the hulls.
growing size of PSVs and of the engine power of
This general demand from charterers to reduce
AHTS.
“logistics” costs in the exploration/production pro-
Our explanation for these phenomena is triple: there cess, passed onto owners, has resulted in an effort to
are few orders coming from Norwegian owners as the standardise ships with more orders for series and the
North Sea market has remained flat for most part of research into more optimised designs coming also
2004, oil companies’ needs have been concentrated from the Far East. In this respect, the diesel-electric
on production in deep waters and finally, owners are engine solutions mainly developed by Norwegian
following the general movement towards cost cutting. manufacturers incorporate true advantages, particu-
Kaori
larly in relationship with dynamic positioning equip-
Port tug, delivered by It is worth noting an inversion of trend during the
President Shipyard in 2004, ment compatibility, which is now a standard feature
operated by CMC Noumea course of the year for Norwegian shipyards, which on most new ships, for a reduced price.
(New Caledonia). have filled their orderbooks, even though they were
The choice of diesel-electric propulsion, combined
with the installation of azimutal propulsion sets, has
also contributed to reduce construction costs by sim-
plifying the hull forms.
In 2004 both PSVs and AHTS delivered by the yards
found employment, even if charter rates were not
always at levels hoped for by the owners.
The North Sea market was the catalyst in the reco-
very of the offshore market. As an example, an AHTS
of 200 t bollard pull chartered out on the spot mar-
ket at the beginning of the year at 15,000 $ per day,
obtained 45,000 $ per day in December. It was the
same for the Gulf of Mexico where the employment
rates of vessels finally saw an increase after four very
poor years. Egypt, the Middle and Far East also saw
chartering rates on the rise by employing more
powerful AHTS.
90
80
70
60
50
40
North Sea - NW Europe
30 West Africa
North America
20
10
0
Jan 01
Apr 01
July 01
Oct 01
Jan 02
Apr 02
July 02
Oct 02
Jan 03
Apr 03
July 03
Oct 03
Jan 04
Apr 04
July 04
Oct 04
Jan 05
At the end of 2004 several important owners no lon- Edison Chouest Offshore has ordered 7 offshore ves-
ger had any modern units to charter out, which leads sels and 4 fast supply ships.
us to be relatively optimistic as to the market’s ability
In 2004, Seabulk Offshore contracted with Labroy
to absorb the large number of PSVs and AHTS that
shipyard of Singapore 8 AHT/AHTS mainly for the
are due for delivery in 2005. West African market.
There has been a rapid increase in the already sub- Swire Pacific Offshore has 9 AHTS on order in the Far
stantial fleets operated by Singapore owners. As an East, of which 7 of the UT 780 type – 4,800 bhp with
example we can cite Jaya, which had 21 AHTS, 2 PSVs Labroy.
and 6 other ships under construction at the end of
2004. Fleets that are in the hands of Middle East Delivery of new units ordered in Asia are spread out
owners have also seen a significant development with, until 2006.
for instance, Maridive in Egypt which controls nearly Beside these PSV and AHTS fleets, we have seen a
50 ships including 7 under construction in India. noticeable increase in the demand for fast craft, over
20 knots, built of aluminium, 40 metres long or
Western owners have started or boosted their fleet
more, designed to carry dozens of passengers and
renewal programmes.
some cargo on deck. In the future, under deck bulk
Groupe Bourbon has ordered 8 PSVs (GPA 670 type) capacities are also being envisaged. At last a new
and 4 AHTS (Conan Wu type of 70 and 80 tons bol- market has emerged concerning small, specific units
lard pull) in China. There are also 4 AHTS (120 t bol- aimed at providing security protection for offshore oil
lard pull, Conan Wu design) with Keppel Singmarine fields capable of carrying armed men aboard.
in Singapore, as well as 2 fast supply ships in alumi-
In addition, several governments, particularly in
nium based on an innovative French concept (Mauric
Europe, have launched programmes to renew or to
design) with the Piriou shipyard. The Bourbon Group
complete their fleets for assistance or intervention as
is continuing to expand and hopes to conquer new
well as anti-pollution surveillance ships. These buil-
markets. ding programmes are benefiting essentially European
We can mention the example of Tidewater, which has shipyards.
ordered 8 AHTS, 4 PSVs and half a dozen of smaller
Ice-breakers
units. They have ordered these ships with the intention
of replacing some older units and thus avoid impor- The opening of the Russian market, giving access to
tant expenses to keep them in proper running condi- the Arctic, from the Barents Sea to the Bering Straits,
tion and getting them re-classified. has stimulated orders for the offshore markets, but
Bourbon Helios
Platform supply vessel,
GPA design, 3,300 dwt,
to be delivered by Zhejiang
in 2005, will be operated
by Groupe Bourbon
Offshore division.
20,000
15,000
10,000
5,000
0
Jan 01
Apr 01
July 01
Oct 01
Jan 02
Apr 02
July 02
Oct 02
Jan 03
Apr 03
July 03
Oct 03
Jan 04
Apr 04
July 04
Oct 04
Jan 05
Consequently 2005 should see the launching of seve- Technologies continue to improve the quality, but also
ral significant projects by the Majors, namely large the range of seismic work, since it is now possible to
laying and installation ships (150 m x 30 m or more) detect oil or gas up to a depth of 6,000 meters. These
capable of laying pipes of 16 to18 inches at a depth of gains will incite operators to improve their marine
over 2,000 metres. The major concern will be the res- logistics globally and probably to charter more speci-
ponse capability of the shipbuilding market, which has fic supply ships for longer periods.
never seen such a level of activity.
Drilling market
The recovery of the underwater construction market
both in the area of new developments and in the The offshore drilling industry is undergoing a real
area of the maintenance of new fields, has logically change in situation which began at the start of 2004,
helped sustain and stimulate the activity of supply with an increased level of utilisation of jack-up rigs to
vessels such as the MPSV (Multi-Purpose Supply Ves- drill in shallow waters.
sels) fitted with a strong lifting capacity (more than
At the end of 2004, few units of the 300 feet jack-
100 tons at sea-level). They are also employed in light
up rigs type remained available in the short term.
construction works and more generally in the IRM
Freight rates for deep-water drilling rigs are heading
market of which the main players remain the owners
toward the $ 300,000 per day level. The second gene-
of supply ships mentioned in the previous chapter.
ration semi-submersibles, which drill at 1,500 /
The seismic market 2,000 feet depths, are benefiting from the rebound in
the North Sea market and obtain more than $ 100,000
The four principal operators, WesternGeco, Veritas, per day for short term contracts.
Petroleum Geo Service (PGS) and Compagnie Géné-
rale de Géophysique (CGG) have also benefited from The industry continues to gravitate around the fleets
a surge in activity. Hardened pessimists have been controlled by the six American majors, Pride, Dia-
obliged to revise their opinion about the future of mond, Ensco, GlobalSantaFé (GSF), Noble, Transocean
this activity, which particularly suffered over the past and by four competitors of substantially smaller size
four years. CGG seems to have abandoned its ambi- namely Stena Drilling, Maersk Drilling, Atwood and
tion to merge with PGS after its offer was declined by Rowan. By and large, the drilling companies dedica-
the latter’s shareholders. Nonetheless, a new conso- ted 2004 to consolidating their balance sheets. Pride
lidation would benefit this sector. At the start of should probably sell some supplementary assets, with
2005, operators are working already on the pro- a view to be in a better position for new investments
gramme for 2006, which is exceptional given the over the coming 2005 / 2006 period. As to GSF, they
average duration of seismic acquisition contracts. anticipated the change in the market and fixed four
H aving started in the second half of 2003, owners ending up with their balance sheets in the
the improvement in freight rates of che- red. In order not to slip further down or go under,
mical product carriers reached record the market has seen all over the year the forma-
heights this year, which have not been seen since tion of pools or other partnership agreements.
the preceding periods of tensions in 1991 and
This year again some changes have been carried
1995. This revival, which lasts for more than a
out, with the Vopak Essberger pool renamed
year, shows no signs of losing pace at the start of
Broere Essberger Chempool, but with a single
2005. It was however paradoxical that the mar-
shareholder. Ahrenkiel has left the UCT pool and
ket was one of the few not to follow the general
with Odfjell they have formed a new pool for
rise in the movement earlier, which was set by
inter-European movements: Odfjell Ahrenkiel
the dry bulk shipping market, oil tankers and
Europe GmbH. In response, Schoeller, the other
containerships. Sooner or later the chemical pro-
partner in UCT, has associated with Seatrans to
ducts should follow this upward spiral of the
form United Seatrans Chempool. Too much out
other shipping sectors.
on a limb in this market, Naviera Quimica and la
It was high time for all participants that the mar- Navale Francaise have been bought by Camillo
ket found its balance, for the last ten years the sur- Eitzen, who, with his other ships coming out of
plus of tonnage kept the level of freight rates Copenhagen Tankers, will operate a fleet of
often below running costs, which resulted in 25 chemical carriers.
3,500-6,000 dwt
6,000-10,000 dwt
400,000
10,000-20,000 dwt
300,000
200,000
100,000
0
delivered in 2004 2005 2006 2007+
3,500-6,000 dwt
6,000-10,000 dwt
25
10,000-20,000 dwt
20
15
10
0
delivered in 2004 2005 2006 2007+
On the eastbound leg, in a more contrasted man- ket. This evolution has on the reverse side incited
ner than on the westbound one, freight rates some exporters on the spot market to postpone
continued to rise right until the end of the first their shipments, or else to undertake “swaps”
quarter then sharply dropped before settling out with Asian producers and even to export small lots
during the summer period and finally increasing by of 500 to 1,000 tons with ISO containers. This revi-
more than 30 % at the end of the year for lots of talising of the market should also give the four
2,000 tons. The firmness in the market was much main parcel tanker owners cause to reflect and to
more evident in the size lots of 5,000 tons and review their strategy in reducing the proportion of
more. As in previous years, the main movements their fleet dedicated to contract business to take
seen coming out of Europe were with cargoes of better advantage of the very firm spot market and
caustic soda, sulphuric acid, base oils, benzene offer more space to European exporters.
and pygas.
On average, freight rates increased from about The fleet
$ 45 per ton up to nearly $ 65 per ton for lots of
Deliveries of new chemical carriers with stainless
2,000 tons, and this rise of 40 % was also reflec-
steel tanks reached a record level in 2004 with
ted in the renewal of contracts at the end of the
some fifty ships for a total of 800,000 dwt, which
year.
brings the average age of the combined fleet to
Movements from Europe to Asia this year saw an 11.7 years. Sizes of ships are also well distributed,
explosion in freight rates which has not been seen with 16 ships between 5,000 and 10,000 dwt, 15
for 25 years. Starting from an extremely firm mar- ships between 10,000 and 20,000 dwt and a
ket in 2003, Chinese demand for chemical pro- dozen above 20,000 dwt. The orderbook is also
ducts contributed to a jump in rates of over 50 % filled, with more than 60 ships to be delivered in
on average, with a spread of 100 % between the 2005 of which half between 15,000 and 20,000
lowest and the highest levels within the year 2004. dwt. More than 80 % of the ships delivered this
Rates very quickly took off, in particular for the year were built in Japan and in 2005 we will wit-
small lots of 1,000 to 2,000 tons and the latter ness the first deliveries of newbuildings out of
went from $ 60 to more than $ 100 per ton. China (5 units). Deliveries beyond 2005 are for the
moment far fewer, with 30 ships expected in 2006
The rise in bunker prices, the lack of modern ton-
and 15 ships in 2007.
nage available and the optimisation of charterers’
nominations within their contracts, are part of the Demolition of chemical carriers has doubled this
explanation towards such a movement in the mar- year with 21 ships sold for scrap for 220,000 dwt.
110
Rotterdam - WC Italy
100
Rotterdam - USG
90
Rotterdam - Taïwan
80
70
60
50
40
30
20
10
0
Jan 00
Mar 00
June 00
Sep 00
Nov 00
Mar 01
May 01
Aug 01
Nov 01
Feb 02
Avr 02
July 02
Oct 02
Jan 03
Avr 03
July 03
Sep 03
Dec 03
Mar 04
June 04
Sep 04
Dec 04
This trend should continue as 138 ships of more the IMO beginning in 2007 for the transport of
than 20 years are still in service, of which 70 are vegoils (imposing IMO III ships but with a double-
more than 25 years. hull) will mean that a number of large units will
disappear from the market. Modern ships will thus
2004 has thus been a good year for owners, but it
be greatly solicited. It should be added that shi-
will remain above all a year full of promises for the pyards are currently fully booked, plus the fact that
future – or at least the next two years. Starting the price of steel is prohibitive for orders of che-
from 2005, freight contracts renegotiated at mical carriers fitted with stainless steel tanks.
higher levels will begin to generate a supplemen-
tary revenue to owners. Delivery of newbuildings, In the past we have experienced peaks in the mar-
ket but generally over fairly short periods. The cur-
although significant, should only serve to replace
rent situation is new and seems to be solid,
the older ships leaving the fleet.
without any major accidents or a decline in eco-
In effect, the quality measures imposed by charte- nomic activity, this should continue to last quite
rers combined with the new directives set out by some time. ■
Significant events The main evolutions, of which some have been in evi-
dence for several years, can be described as follows:
A
t the same time last year, we drew a com-
◆ Joint-ventures and pool agreements between
parison between the different shipping
owners and ship operators, leading to an optimi-
markets with the take-off of the oil and
sation of operations and a higher specialisation by
bulk sectors compared to the depressed state of
groups of operators within the various categories
the LPG sector over the recent years, marking a
of ship sizes and specific trade routes.
significant break in the respective evolution of
these markets. ◆ The cross-purchases of ships, or even whole
fleets, within the smaller sizes.
We also evoked the main readjustments, which
◆ A slow-down in newbuilding orders over the
were already taking place, susceptible of causing
last few years, given the poor returns on invest-
a reversal of this trend and bringing about a revi-
ments in the gas shipping sector. Even if we have
val in this specialised shipping segment.
seen a correction during the last six months within
All these factors became more pronounced throu- the liquefied gas sector, shipyards’ orderbooks are
ghout the course of 2004 and gave rise as from now sufficiently filled-up with orders of other ship
May / June to a sharp jump in freight rates, for all types from sectors which have been riding high
sizes, both on the spot as well as on time charter over the last two to three years (LNG, bulk carriers,
market. and tankers). As of now, the lack slots availability
Shipping and freight levels in all sizes saw a mar- We would point out that these average freight
ked increase as from the middle of the year and rates (in time charter equivalent of spot voyages)
especially towards the end of the year. exclude any eventual ship’s idle time (awaiting
employment between voyages) and are neither 13 new orders were registered during the year for
representative of net profit for owners operating delivery between end 2006 and 2008 at prices
their ships on the spot market, nor of the long over $ 70 million for the latter orders.
term transactions (two years or more).
The entry of AP Moller into this sector was signal-
led with their order of four 82,000 cbm in Korea
Situation by vessel size for delivery in 2007 and their subsequent commit-
ment for a three-year charter of the VLCG ‘Oriental
VLGC (Very Large Gas Carriers) Queen’ -82,000 cbm- delivered to Unique Shipping
from 70,000 to 80,000 cbm in September 2004.
A strong variation in spot freight rates characteri- Market prospects in this size category remain posi-
sed the first half of the year, leading to tighter and tive for several years to come, but we cannot avoid
more stable levels in the second half. to signal the risk of seeing again an imbalance, if
Starting around $ 30/t on the Middle East / Japan the pace of new orders were to intensify or even
route at the beginning of the year, rates went over to remain steady at the same rate as the last few
$ 40/t and then approached $ 48/t in October, months.
with a critical peak period between June and Sep- The big jump in newbuilding costs and the late
tember. A slight easing was felt as from November, delivery dates might however limit such a deve-
but the level remained slightly above $ 40/t at the lopment or at least give rise to some reconsidera-
end of December. These spot rates represent equi- tion of market assessments.
valent monthly time charter rates between
$ 700,000 and $ 1,200,000 with a year average of LGC (Large Gas Carriers)
about $ 850,000. from 52,000 to 60,000 cbm
The firmness of the naphtha market was again a This segment size which had already fared well last
determining factor throughout the whole year, year, improved strongly throughout 2004 to reach
with the returns on naphtha voyages substantially occasionally monthly time charter rates of nearly
surpassing those of an LPG equivalent, thus provi- one million dollars on some voyages, with the ave-
ding 6 to 10 VLGCs being employed in this market. rage being around $ 800,000 per month.
Four units from the 1970’s were scrapped at twice These units, mainly employed on the major ammo-
the price levels of the preceding year, thanks to nia and LPG trade movements, benefited from the
steel prices remaining high. strong revival of exports of these two products to
24-43,000 cbm
1,400 52-60,000 cbm
70-85,000 cbm
1,200
1,000
800
600
400
200
0
Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 04 Jan 05
North America: ammonia due to the steady and mer was less obvious in this size segment than in
sharp rise in the price of natural gas, from which it the others. A particularity we can attribute to the
is derived, with a consequent drop in local pro- fact that this category had already registered far
duction; and butane / propane due to the arbi- better results comparatively to the others since
trage which the price fluctuations within Europe, several years.
the Middle East and the US allowed.
From a level of around $ 575,000 in November
Four newbuildings of 59,000 cbm were delivered 2003, the monthly time charter rate (equivalent t/c
respectively for Sonatrach, Solvang, and Yara, for spot voyages or short period t/c) for 24,000 to
whilst two more are due to be delivered to Sona- 35,000 cbm ships averaged at around $ 775 000
trach and Yara in the course of 2005. in 2004.
Bergesen sold two 53,000 cbm units, built in 1973 The main ammonia trade routes are highly deman-
and 1979, for demolition. ding this type of ship with a solid growth in trans-
Whereas the delivery of 10 newbuildings spread out atlantic movements, as well as the Black Sea and
between 2003 and 2005 might have led one to the Middle East Gulf to Indian Ocean and inter Asia.
expect an occasional marginal overcapacity, it With only 30 %, the share of LPG in this segment
seems that the scrapping of the older units combi- is declining. The average idle time due to non-
ned with the recent recovery of the market has allo- employment in this sector is now below 6 % whe-
wed for a good balance, and even a slight impro- reas it was still over 14 % in 2003.
vement in the demand for these ships. All of this
Contrary to what we expected last year, the stabi-
was supported by the firmness in the VLGC market
lity of the market during the last few years and
and the contribution from the naphtha market.
increased production forecasts, have triggered a
Midsize carriers 23,000 to 43,000 cbm mini-explosion in new orders for ships with a
35,000 to 38,000 cbm capacity for delivery bet-
A good vintage for this category of vessel confir-
ween 2006 and 2007 (for account of K Line,
ming earlier expectations, with a steady progress
Zodiac, Iino, Unique/Itochu, Bakri, and Sovcom-
and satisfactory results for owners.
flot). These eleven orders came on top of five
It is nonetheless worth underlining that the conse- 38,500 cbm ships ordered since last year for
quences of the market’s recovery as from the sum- delivery in 2005 and 2006, which makes a total
800
10-22,000 cbm
700 6-8,000 cbm Ethylene
3-6,000 cbm
600
500
400
300
200
100
0
Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 04 Jan 05
of 16 units coming into service between end 2005 Asia, an increase in movements from the Middle
and 2007. East to Asia and more arbitrage positions being
taken out of Europe to Asia. Additional move-
It should be noted that the last 35,000 cbm ships
ments from Asia to Europe have been motivated
were ordered at over $ 50 million per unit, whe-
by the pressure on product prices resulting from
reas the previous orders inked in 2003 were done
shutdowns of crackers, planned or not, within the
at just over $ 40 million, thus representing an
different geographical areas.
increase of 20 %. One should however remember
that the depreciation of the dollar since Septem- All these simultaneous movements created a tre-
ber 2003 has been of around 20 %, a detail which mendous pressure on demand, causing spot
should not be ignored in analysing price rise or freight rates to hit levels never seen before, with
increase in freight rates. increases of up to 70 %.
◆ about $ 300/t for propylene lots of 6,000 to
Semi-pressurised/refrigerated 8,000 mt from the U.S. to Asia
gas carriers 8,000 to 22,000 cbm ◆ up to $ 180/t for ethylene in 2,000 to 4,000 mt
Among all the size segments, this category has lots from the U.S. to Europe
been the first to benefit from the market revival. ◆ up to $ 250/t for ethylene in 4,000 to 5,000 mt
The chemical gas sector, and more particularly lots from S.E. Asia to Europe
ethylene and propylene, were the principal driving ◆ about $ 350/t for butadiene in 3,000 to 4,000
force of this recovery. There were a few promising mt lots from Europe to Asia.
indications at the end of 2003 which were confir-
Jessie Maersk
med and then helped transform and amplify this 35,559 cbm, built 1991
trend as from July. by Hyundai H.I.,
owned by A.P. Moller
Most ethylene carriers which previously were for-
ced to find alternative employment in LPG retur-
ned to their normal trade where the deep sea
voyages have multiplied, giving a substantial
increase in demand expressed in tonne-miles.
We have seen a lively recovery in exports of ethy-
lene and propylene out of the US into Europe and
Most charters were renewed for 2005 at levels ness saw somewhat less pronounced increases
ranging from 30 to 50 %, depending on the size ranging between 25 to 30 %.
and trading route. Some owners or operators had
On the newbuilding front, two orders of 22,000
to refuse taking on new contracts due to a lack of
cbm semi-ref were signed by Sonatrach / Hyproc
potential tonnage. A first for several years!
with Namura for delivery in 2007 / 2008, two
At the same time, the LPG activity was equally well 16,000 cbm ethylene carriers were ordered by the
supported by the arbitrage movements between Taiwanese Formosa Plastics with Jiangnan in China
Europe and the U.S. caused by the huge volatility for delivery in 2006, whilst Lauritzen Kosan deci-
of LPG prices in turn affected by the variations in ded at the end of the year to order four 8,000 cbm
oil prices. ethylene carriers with INP in Korea for delivery in
2007.
Time charters were also greatly influenced by the
market’s recovery as from the middle of the sum- A vessel of 15,000 cbm built in 1976 was sold for
mer and the majority of renewals for period busi- scrap at the beginning of 2004.
VLGC: MEG/Japan
60
50
40
30
20
10
0
Jan 98 July 98 Jan 99 July 99 Jan 00 July 00 Jan 01 July 01 Jan 02 July 02 Jan 03 July 03 Jan 04 July 04 Jan 05
number of ships
18
12
10
0
FH 2005 SH 2005 FH 2006 SH 2006 FH 2007 SH 2007 FH 2008 SH 2008
In the same period, Sigloo (with a majority control to nearly $ 450,000 monthly t/c or equivalent spot
by Camillo Eitzen) purchased seven 8,000 to rate, with an even more pronounced variation for
12,000 cbm ethylene carriers built in the 1980’s, ethylene carriers where a 6,000 cbm rose from
which Bergesen was looking to dispose of for quite $ 275,000 up to $ 550,000.
some time, for a total value of around $ 75 million.
It should also be noted that there has been a cor-
Given the general optimism prevalent in the petro- rection in the traditional differentials between the
chemical sector (new productions, increase in levels of semi-refrigerated and pressurised carriers,
consumption and demand in Asia) and the little with the latter catching up and nearly obtaining
addition of newbuildings tonnage over the next the same returns as the former. Another sign of
two to three years, the market for this size sector the market’s tendency!
should remain very sustained in the coming years.
As far as the time charter business is concerned,
Gas carriers of 8,000 cbm and less several contracts spanning up to 5 years, were
(pressurised and semi-pressurised) principally undertaken by some owners-traders
Same causes, same results! Except that the market deciding to fix their position for the future.
level for this size range was extremely weak over A substantial rise in new orders, in particular for
the previous two to three years, so that the reco- pressurised vessels between 3,500 and 9,000 cbm,
very has been even more significant, compared to
was registered with Japanese shipyards for domes-
the other segment.
tic owners-operators’ account, placing these new
The increase in demand was felt right at the start units under long term contracts with Eastern and
of the year and then gradually developed during Western majors. We have counted currently some
the first half. It was even more noticeable in the fifteen orders placed in 2004 for ships with a capa-
second half, both for semi-pressurised as well as city between 3,500 and 9,000 cbm, of which two
pressurised ships. 8,600 cbm semi-refrigerated, for delivery between
A 3,500 cbm pressurised carrier was being traded 2006 and 2008, as well as new orders which
at an equivalent time charter monthly rate of should be confirmed imminently for units of 4,000
$ 130,000 to $ 140,000 at the beginning of the to 9,000 cbm in Italy.
year, whereas the same vessel was trading at a level These past twelve months have also witnessed
of $ 250,000 to $ 275,000 at the end of the year. new merger transactions and fleet purchases bet-
A 6,000 cbm semi-refigerated vessel would fetch ween owners, which were anticipated for several
in the same periods a level of $ 250,000 rising up years given the poor levels of past results…
Number of ships
160
Existing
140
On order
120
100
80
60
40
20
0
Under 120,000 cbm 120,000 - 163,000 cbm 163,000 m3 and over
◆ Greek shipowners have 8 ships on order, 4 of and we will not be first of a class”: this probably
which are unfixed, accounts for no new developments in nearly 40
◆ Charter rates and periods are falling: 2 new years! However, in the space of 12 months we
orders fixed against 10 year charters, have seen the size rise from 145,000 cbm in
◆ 2 new orders have been placed at Universal for January to 154,000 cbm in August and to 216,000
75,000 cbm ships for Mediterranean trade. cbm in November.
However we must stress that, among all types of Likewise, the need for the reliable steam turbine
ships, LNG carriers are the ones that have recorded engine was an absolute must, with much scepti-
the smallest rise in newbuilding prices, due to a cism voiced at the innovative French companies of
fierce competition among shipyards in this sector. Gaz de France and Chantiers de l’Atlantique for
Shipyard’s strategy has also diverged among the building dual fuelled diesel electric (hereafter
LNG builders: Daewoo and Samsung have inves- DFDE) vessels, but that was until November when
ted in the construction of series of ships, Hanjin it would seem that several parties threw caution to
has decided not to take LNG orders any more and the wind when first BP ordered 4 DFDE ships,
Hyundai has chosen to concentrate on “standard” swiftly followed by AP Moller ordering 2 similar
ships as prices for the latter have risen more shar- vessels. However, these owners were clearly out-
ply and account for less cgt (compensated gross done by Qatar, aided by ExxonMobil, who confir-
tons) than their LNG counterparts. med their long awaited selection by allocating 8
new 200,000 cbm plus vessels with slow speed
Of the 113 ships on order at end 2004, 69 have
diesel engines equipped with re-liquefaction
been placed this year which in some respects fol-
plants
lows the old school of LNG (circa early 1980’s)
where projects and Japanese buyers prefer to Commercial Developments
order rather than charter ships that are available or
are already on speculative order – 19 ships on The year started with almost historically low LNG
order are unfixed with 4 existing new ships sitting shipyard prices, but it closed with prices having
idle. risen by over $ 30 million per unit.
Twenty years charter hire period was the usual
Technical Developments
duration for the shipping contracts, twenty years
Ever since the company has been involved in LNG matching the SPA (sales and purchase agree-
shipping, the standard line used by banks and pro- ment). However, the long term would appear to
jects has been “No new or unproven technology be stretching out to 25 years with short term
Tonnage
Calculator
tc/voyage
Market
Cargoes
Fixtures
Report
Contact us :
T
ogether with all the other sectors of the from about 185 million tons to nearly 200 million
shipping market, 2004 was an exceptional and steam coal from over 420 million tons to 440,
year in the dry bulk. On the back of a very an overall rise of 7 %.
strong surge at the end of 2003, rates peaked in
Depending on sources, the growth in volume in
March before taking a plunge until the end of
2005 is expected to be around 5.5 to 6 %. Such
June. Then, they rebounded until December to
figures make people fill dizzy and cannot be com-
reach and sometimes surpass previously establi-
pared with what was experienced during the last
shed records. One only has to look at the figures
fifteen years where we usually saw an average
of the following daily returns: $ 35,000 per day for
a Handymax, $ 50,000 per day for a Panamax, and growth of 2 to 4 % depending on the years.
over $ 100,000 per day for a Capesize. There is one key player who emerges from any
World demand for industrial dry bulk commodities analysis of the market: namely China. Having
increased sharply and exerted a strong pressure on shown its potential over recent years, the rise in
strength of the country has never been as clearly
charterers. All raw materials were affected.
defined as in 2004.
Demand took off, notably in the coal and ore sec-
tors, which represent over half of the total The press has largely been following and reporting
volumes. Tonnage transported for iron ore went this phenomenon. Carried along by strong
from roughly 520 million tons in 2003 to about growth, Chinese demand for steel grew by more
570 million tons in 2004. Coking coal increased than 13 % in 2004 over the year. According to the
dwt
80,000,000
Handymax
70,000,000
Panamax
Capesize
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
25 years and over 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years On order
Chinese Association for Ore and Steel (CSIA), affected the global supply of available tonnage.
domestic production went from 225 million tons This situation improved as from March when the
in 2003 to 270 in 2004, with the aim of reaching Chinese authorities became aware of the extent of
300 million tons in 2005. the problem and decided to implement de-stoc-
king measures in the ports. Once begun, freight
At the same time, imports of iron ore went from
rates started to drop significantly.
110 million tons in 2002 to nearly 200 million tons
in 2004 (of which 80 million tons originating from During the month of June demand took off again,
Australia and from Brazil). As a result, there was thus indicating that the efforts by the Chinese
heavy congestion in loading and discharging ports government to slow down economic growth were
at the beginning of the year, which inevitably insufficient, precipitating another sharp rise in
20
15
10
0
Jan 02
Mar 02
June 02
Sep 02
Dec 02
Mar 03
Mai 03
Aug 03
Nov 03
Feb 04
Mai 04
July 04
Oct 04
Dec 04
rates. Swept along by the dynamics of the market contracts of affreightment and period charters, is
and the anticipation of high freight levels, this in growing.
turn provoked a surge in time-charter activity. Simultaneously, and also to reduce their exposure
At the same time, operators became actively enga- to an increasing volatility of the market, the main
ged on the freight futures market. Encouraged by charterers and owners have been putting an
the volatility of the physical market, a number of emphasis on concluding long term partnerships,
players found an answer to their needs of getting giving a long term business flow to the latter and
forward cover with derivatives. In many respects, a guarantee of regularity and stability in supply
it could be said that 2004 paved the way towards costs to the former.
a maturing of these markets. It is worth noting However in this euphoric context, there are some
that their influence in the decision making process signs that suggest a certain caution, starting with
for both owners and charterers, especially on the rising supply of tonnage.
60
50
40
30
20
10
0
Jan 02
Mar 02
June 02
Sep 02
Dec 02
Mar 03
May 03
Aug 03
Nov 03
Feb 04
May 04
July 04
Oct 04
Dec 04
52,000
46,000
40,000
34,000
28,000
22,000
16,000
10,000
4,000
Jan 02 June 02 Nov 02 Apr 03 Sept 03 Feb 04 July 04 Dec 04
Numerous orders placed in 2003 and 2004 will unable to improve in the short term. If this conges-
start to be handed over to the market in 2005 and tion phenomenon lasts, this will prevent a further
2006. This historically high level of deliveries com- growth of the trade flow and consequently new
bined with a virtually non-existent volume of tonnage that will be introduced on the market
demolition should eventually start to have conse- would generate a surplus. Some old ships could
quences on the market balance during the next then find their way to the scrapyards.
few years.
2004 will therefore be classified as an outstanding
Thus for Capesize, 8 million dwt were delivered in vintage, a historic year that is only seen once in a
2004, 8.7 are due in 2005 and 9.5 in 2006. For lifetime. This year has signalled the break with the
Panamax, 6 million dwt were delivered in 2004, long decades of cheap or even undervalued trans-
and in 2005 the figure should be 6.8 million dwt. port. The importance that China has acquired in
And for the Handymax, after 4.5 million dwt world trade and her appetite for raw materials,
added in 2004, 6.2 million dwt can be expected in has been and will remain the determining factor
2005! within the market evolution. The imbalance bet-
ween supply and demand has led freight rates to
Some factors could act in the favour of reducing
levels never achieved before.
the pace of delivery, for instance, the price of
steel and the difficulties shipyards have in buying However, one should not underestimate the
engines. There is a high probability that we shall impact that the massive deliveries of new ships
see numerous delays in deliveries. On the will have and although it is difficult to measure
demand side, the slightest change in the econo- precisely, it will logically push owners to sell some
mic policy of the Chinese government, with older ships for scrap. In addition, even if demand
implications on imports and exports, will be mea- is strong, the logistical difficulties encountered
sured in the light of the strategic role played by either with the distribution network or with port
China today on the international scene. Based on infrastructures, as well as a possible slowing down
CISA forecasts, the level of ore imports should of China’s imports, could cast a shadow on the
reach 240 million tons in 2005, an increase of market. ■
around 20 % compared to the 40 % witnessed
in 2004.
Finally, a serious question mark remains as to the
capacity of the main Australian and Brazilian ports
to be able to handle the increase in demand as, at
the same time, their productivity seems to be
The second-hand market for Capesize would not therefore expect bulk carrier prices to
ease off any time soon. In fact we would expect
Unbelievable! Swallowed up like so many others
prices to firm further, so, for those contemplating
by the ferocious appetite of China for raw mate-
an investment in dry bulk tonnage the sooner this
rials, freight rates took off to levels that nobody
is undertaken the better it will be” and we added
would have imagined and even less hoped for. The
“Today’s extremely firm price becomes tomorrow’s
scarcity of berths for newbuildings helped feed
normal market price and a few weeks later it is
this frenzy to purchase second-hand ships or new-
building contracts with prompt delivery, the latter considered as cheap”.
being able to be quickly repaid given the rates they This was exactly what happened and even more,
can obtain on the market. much more…
When in December 2003, a 5 years old 170,000 Prices for second-hand tonnage followed the
dwt ship, built in a good shipyard was worth freight market increases without a miss. On some
about $ 48 to 49 million, its value was close to occasions the increase in values was much more
$ 62 million in March 2004! important than the equivalent freight rate
At the end of June or early July, after a rather increase, as buyers and sellers alike were anticipa-
severe correction in the market, brought about by ting further increases.
statements from the Chinese Prime Minister Comparing second-hand values, for the various
concerning necessary measures which were nee- sizes under consideration, at the end of 2004
ded to slow down the economy that had become against those at the end of 2003 we’ve noted:
overheated, this same type of ship saw its value ◆ an average of 45 % to 65 % increase in the
drop back to a level of around $ 45 million. Panamax size,
However the market did not cool off for long and ◆ an average of 50 % to 60 % increase in the
the year ended with prices rising again to $ 65 to Handymax size,
66 million. ◆ an average of 40 % to 50 % increase in the
Handy size.
We have been able to record some fifty transac-
tions in the course of this extremely active year. Demolition sales remained at an all time low and
of course prices achieved by dry bulk tonnage sold
It is surprising to see that the rise in values has
for demolition remained extremely high. They
affected all ships irrespective of age and that a
moved from $ 270-275 per ldt at the end of 2003
number of new buyers have emerged, principally
to the “astronomical” levels of $ 370-380 for ves-
Chinese, for whom purchasing has rapidly become
sels sold for demolition to India, whereas the Chi-
an alternative to chartering at prohibitive rates.
In order to stay in the competition, some transac- Eric LD
169,900 dwt, built in 1999
tions have often been made without any inspec- by Daewoo HI,
tion being carried out on the ship. sold at the end of the year
by Louis Dreyfus Armateurs
At the end of the year a distinct bullish trend was to Diana Shipping Agencies
still clearly perceptible.
Contacts
Chris Reilly or Ramon Muga Tel.: +44 20 7602 5670 Email : trade@brs-futures.com
Tim Jones Tel.: +33 1 41 92 12 34 Email : bulk@brs-paris.com
François Walon Tel.: +33 1 41 92 12 34 Email : tanker@brs-paris.com
77
ALPHALINER ®
News update : daily coverage on markets Numerous pages are available for free.
developments.
Vessels’ casualty records and successive www.alphaliner.com
owners.
A
fter the 2001 traumas, the year 2002 was are other countries which are also witnessing high
a year of convalescence and the full health levels of exports, such as India, Thailand, Vietnam
was restored in 2003. As for 2004, it has and Chile.
been the year of the superlatives. It has witnessed
The rise of the Euro against the US Dollar and
a shipping boom unseen since the early 1970s oil-
Asian currencies has also implications on the
based boom.
containership demand. It makes Asian products
This time, the international trade is sitting on a and especially Chinese ones cheaper for Europe.
much larger base than 35 years ago, both in com- All along the year, volumes have soared on the
modity variety and in geographical pattern. One Far East-Europe route, which needs more ships
country has however become an essential wheel: than the Asia-US route because of the longer
China. It is estimated that it is at the origin of one distances.
third of the world trade growth last year.
Shipowners, liner operators and port operators
With its economy growing at some 9 % a year and have been taken by surprise by this surge. They
containerised exports reaching a 30 % annual can hardly cope with the volumes. Ships are full
increase, China is itself at the origin of the contai- to capacity out of Asia and there are not enough
nership shortage and the concomitant unprece- of them to scoop up all the boxes that flow out
dented levels of charter rates. But China is not from this continent. The congestion of termi-
alone to fuel the shipping frenzy. First, and it is nals, especially in Europe and the US, com-
important, it is inseparable from the purchasing pounds the problem, as they cause delays to
power of the USA and of Europe. Second, there busy ships and disrupt the tight schedules of
In order to save ships, liner operators have rear- In early 2005, the cellular ships orderbook stood at
ranged loops and have cut capacity on the com- 3.9 million teu, representing 53 % of the existing
paratively stagnant transatlantic trade in order to fleet. As big as it is, it does not seem excessive,
although it looks like somewhat on the high side,
send ships on busiest routes. The optimisation of
especially for the year 2007. The huge influx of
a number of services has also led to a better ove-
capacity could reasonably be absorbed by the bul-
rall filling ratio, especially at each end of the loops
lish international trade, itself supported by a
(even if it means filling with empty boxes, which
strong world economic growth.
cannot be discounted as they have to be reposi-
tioned in one way or another). The world GNP growth has reached around 4-
4.5 % in 2004 (against 2-3 % for the long term
Owners of hired container tonnage are rewarded historical average). Although a slight softening is
above all expectations, with charter rates which expected in 2005, the GNP growth should remain
are 50 % higher than the historical peaks. Leading above the historical average, and this performance
liner operators have anticipated a further rise in could be repeated in 2006, in the absence of
demand for 2005 and beyond by chartering ships for unpredictable events.
periods much longer than usual and have committed
As for the international trade, it is estimated to
themselves in huge newbuilding programmes.
have grown by 7 % in US$ terms during 2004
During the second half 2004, there has been (against 4-5 % for the long term average). Alas no
intense chartering activity for ships to be delivered figures are available in volumes, as it is difficult to
in 2005 so that the pool of ships left available has assess because of the wide variety of goods.
shrunken fast, which could in turn lead to a fur- The observation of long term trends shows that
ther round of charter rate rises once the Chinese the cellular fleet has grown, roughly, twice as fast
New Year festivities (February) end. as the trade growth. It means that if the bullish
trade growth of 7 % recorded for 2004 is to be
Evolution of the cellular fleet 1988 - 2008 prolonged during the next two or three years,
Year Number Teu Progr. then it will generate containerised volumes nee-
1988 1,165 1,498,286 ding to be moved by a fleet growing at 14 % per
1989 1,198 1,604,192 7.1% annum. This is precisely the rate at which the fleet
1990 1,248 1,710,233 6.6% is expected to grow during the next three years,
according to BRS-Alphaliner forecast.
1991 1,320 1,848,223 8.1%
1992 1,407 2,005,566 8.5% Even in case of a softening, the supply-demand
1993 1,498 2,201,172 9.8% ratio of containerships is to remain on the owners
1994 1,596 2,378,918 8.1% side, at least in 2005 and 2006, because of the
1995 1,743 2,642,853 11.1% catch up effect: the shortage which has developed
1996 1,918 2,970,868 12.4% in 2004 must be compensated by deliveries higher
1997 2,113 3,347,946 12.7% than the natural growth.
1998 2,343 3,853,767 15.1% Given this, the capacity coming on stream should
1999 2,524 4,274,538 10.9% be swiftly absorbed by the transportation demand
2000 2,623 4,503,004 5.3% during the coming months, while a return to a
2001 2,746 4,912,346 9.1% balanced supply-demand ratio could occur in
2002 2,905 5,515,713 12.3% 2006. This should mark a turning point in box
2003 3,046 6,097,445 10.5% rates and charter rates.
2004 3,187 6,639,276 8.9% The situation in 2007 and beyond is another mat-
2005 3,362 7,290,305 9.8% ter. Some forecasters say that the world economic
2006 3,672 8,257,000 13.3% and trade growths are to remain sustained for the
2007 3,970 9,350,000 13.2% remaining years of the decade, although not at
2008 4,252 10,684,000 14.3% 2004 levels as a softening is expected. The ques-
• Figures are given at 1st January of each year. tion is: what amplitude will take this softening ?
• Figures for 2006 to 2008 are derived from the orderbook The supply-demand balance for 2007 is thus diffi-
2 500 teu
40,000
1 700 teu
30,000
25,000
20,000
15,000
10,000
5,000
0
Jan 98
May 98
Sept 98
Jan 99
May 99
Sept 99
Jan 00
May 00
Sept 00
Jan 01
May 01
Sept 01
Jan 02
May 02
Sept 02
Jan 03
May 03
Sept 03
Jan 04
May 04
Sept 04
Jan 05
cult to assess. Trade growth should remain howe- three or four years, without knowing what the
ver higher than the historical average and it is a future has in store. Actually, the charter market is
reasonable bet. not led by demand alone as far as long term
expectations are concerned. It is also propelled by
As for 2008-2009, the orderbook has yet to be filled
skilled operators who play the shortage game, loc-
in. So, orders of containerships for these two years
king up charterers for years against discounts on
may flow in the coming months. Assuming that a
rates. These discounts remain somewhat limited
6 % growth in trade is maintained, almost 1.3 mil-
when one considers the progression of charter
lion teu should be delivered in 2008 and 1.45 mil-
rates over the past two years.
lion teu in 2009 only to maintain the equilibrium.
With ships sometimes hired at twice their total
If the omens for the second half of the decade are
operating costs (including repayment of capital),
good, a number of worries must not be overloo-
owners enjoy an unprecedented situation since
ked, which could affect the container shipping
container ships started to be offered for charter,
market. They are :
some 35 years ago.
◆ the weakness of the US dollar and uncertainties
on exchange rates, Owners of containerships derive profits which are
◆ a possible hard landing of the Chinese eco- reminiscent of those accumulated by oil tanker
nomy, owners in the early 1970s (Onassis, Niarchos, YK
Pao, CY Tung and a crowd of other more or less
◆ a slowdown in the US consumption of imported
products due to a weak dollar combined with pos- known names).
sible interest rate increases. Indeed, a B-170 locked for three years at $ 27,000
More immediate and foreseeable, problems will per day will raise enough profit to order a brand
affect container shipping in 2005 : new ship of the same size!
◆ the shortage of cellular ships, With this in mind, it is not surprising that charte-
◆ congestion in ports, leading to delays, accen- rers look at buying ships. But with exceptional
tuating the ship shortage, returns expected on hires, sellers’ conditions defy
◆ strain on inland transportation networks. gravity and buyers think twice before taking the
plunge. Over the last 12 months, prices of second-
Charter fortunes hand ships have roughly doubled!
Operators are living a strange paradox as they are Only a few operators have taken steps in order to
rivalling to fix ships at peak rates for periods of be less dependent on chartered ships. It concerned
2005 2005
Size 2005 2005 2006 2006 2007 2007 Existing Charter
Exp Nbdg Exp Nbdg Exp Nbdg 01/01/05 01/01/05
4,000-5,000 teu 1 0 7 4 12 7 268 111
3,000-4,000 teu 23 2 20 10 26 20 265 107
2,500-3,000 teu 14 5 26 26 n/a n/a 249 145
2,000-2,500 teu 29 2 33 2 n/a n/a 300 172
1,500-2,000 teu 65 6 81 6 n/a n/a 425 281
Exp: number of ships for which the charter expires in the reference year (and no options attached)
Nbdg: newbuildings believed free of charter in the reference year
Existing: total existing fleet as at 1st January 2005
Charter: indicates the number of ships on charter from non-operating owners
Note: As the duration of charters decreases with size, indication of the number of charters due to expire in 2006 for the small sizes is not
relevant and is therefore not indicated.
A little spoken aspect of the container trades are after all rivals), unless they pay the price.
concern slot charter rates. As ship charter rates
Operators are now very careful when it comes
have soared, so have slot charters. Some slot
to enter slot exchange agreements with other
chartering agreements are referring to charter
lines, as they evaluate risks of failure of part-
market conditions, and the slot charter rates
ners, especially in the case of small operators
are reviewed at regular intervals. Other ones
whose financial standing may not be strong
are fixed for the duration of the agreement
enough to survive the high charter hires.
which is usually not more than two years.
There has been during the past year a number
Slot charter rates can be indexed on ship char-
of changes in partnerships and slot buyer par-
ter rates as well as other operational costs,
ticipation, which may have been caused by ten-
such as voyage costs, including cost of bun-
sions created by space shortage on a back-
kers, canal tolls or port dues. As the ship char-
ground of ship shortage and of peak charter
ter rates item is the heaviest one, it is then not
rates. On the other side, several operators are
surprising that slot charter hires have risen
teaming up to launch new services with char-
strongly, leading even to the non-renewal of
tered ships, thus sharing the burden of expen-
some agreements.
sive charter hires while being able to offer the
In this period of tonnage scarcity, those who needed weekly frequency. Such a way of doing
run the ships may find quite profitable to fill business is of course not new, but it is exacer-
them at full capacity and may not wish to offer bated by current market conditions.
their precious earning space to others (which
Periods of four years and more for 4,000-5,000 months. Periods of 24 to 40 months for 1,500-
teu ships accounted for 86 % of the reported 2,000 teu ships accounted for 46 % of the
fixtures in 2004, against 49 % in 2003 and reported fixtures in 2004, against 7 % in 2003
17 % in 2002, according to a BRS-Alphaliner and only 2 % in 2002. The accompanying table
analysis. Smaller ships have also been fixed for details how the duration of charter periods
much longer periods than the usual 12 evolved from 2002 to 2004.
The fleet for deletions, only five ships for 2,450 teu were
sold for scrap last year.
At 1st January 2005, the cellular fleet reached
The teu capacity which will enter the market during
3,362 ships for 7.29 million teu, in progression of
the three years 2005, 2006 and 2007 corresponds
9.8 % on 12 months, a relatively modest increase
to 47 % of the existing fleet. In other terms, the
as the average annual progression during the past
fleet is to rise by almost 14 % per year, well above
10 years has reached 10.7 %. The cellular fleet
the 10 % average observed during the past 15
accounts for 89 % of the total fleet deployed on
years. The cellular fleet is expected to reach 10.8 mil-
liner trades in teu terms.
lion teu in January 2008 (assuming no scrapping).
The containership fleet counts 49 units of more
than 7,500 teu and there are 165 more of these The operators
giants on order, some of them reaching the From 1st January 2004 to 1st January 2005, the
10,000 teu mark. By the end of 2007, there will be combined fleet of the Top 25 carriers has grown
enough of these leviathans to run 15 Asia-Europe from 5,955,000 teu to 6,640,000 teu (+11.5 %).
and 15 Asia-US loops. Its share of the world fleet deployed on liner trades
2004 deliveries stood at 175 ships for 645,000 teu has risen from 79.6 % to 81.3 % in teu terms,
(against 177 ships for 575,000 teu in 2003). confirming the concentration trend.
Orders stood at 464 ships for 1,692,000 teu, The five largest carriers alone operate 36 % of the
which is significantly less than the record 520 ships capacity effectively deployed on liner trades.
for 2,123,000 teu ordered in 2003.
The total teu capacity deployed on liner trades has
The total value of cellular ships ordered in 2004 grown by 9.1 % in 2004, reaching 8,168,000 teu
reached almost $ 22.2 billion (using conversion as at 1st January 2005, against 7,485,000 teu one
rates at time of order), a figure similar to 2003, year earlier. In deadweight terms, the figure stands
reflecting the steep rise in newbuilding prices at 7.5 %, with 120 million dwt at 1st January
($ 13,150 per teu instead of $ 10,350 per teu in 2005 against 111.5 million dwt one year earlier.
2003 – raw figures unadjusted for capacity).
These figures take into account all the types of
The total orderbook reaches 3.9 million teu in early ships deployed on liner trades (cellular, multipur-
2005, representing 53 % of the existing fleet. It is pose, ro-ro). The cellular fleet itself amounts to
dominated by large ships, with ships over 4,000 7,290,000 teu (it represents 89.2 % of the total
teu accounting for 74 % of the total orderbook. As teu figure deployed on liner trades).
Deliveries
800,000 Orders
Daily rate (1,700 teu)
700,000
600,000 20,000
500,000
400,000
300,000 10,000
200,000
100,000
0 0
1997-1
1997-3
1998-1
1998-3
1999-1
1999-3
2000-1
2000-3
2001-1
2001-3
2002-1
2002-3
2003-1
2003-3
2004-1
2004-3
2005-1
2005-3
2006-1
2006-3
2007-1
2007-3
The two largest carriers, APM-Maersk and MSC January 2005. APM-Maersk controls Maersk Sea-
contributed to 29 % of the fleet growth in teu land, Safmarine, Norfolkline and APMSS-MCC. MSC
terms, with 197,000 teu out of the 683,000 teu comes at the second position with 637,000 teu.
added (+101,000 teu for MSC and + 96,000 teu
These two leaders are however not among the top
for APM-Maersk).
teu gainers in relative terms. MSC grew by 18.9 %
APM-Maersk became last December the first teu mil- and APM-Maersk by 10.4 %. They are distanced by
lionaire, as its fleet reached 1,016,000 teu on 1st four carriers (within the Top 25) which have logged
Straight sales & mergers (SPS) from 50 % to 90 % held by other China Ship-
◆ Temasek Holdings (Singapore) has taken full ping units.
control of NOL, parent company of APL. ◆ Hamburg-Süd abandoned its trade name Eller-
◆ Royal Nedlloyd B.V. (Netherlands) has taken man Line.
100 % control of P&O Nedlloyd Containers Ltd (UK)
through the purchase of the 50 % stake held by New operators of liner services
the Peninsular and Oriental Steam Navigation Co ◆ Manson Shipping (Taiwan) – services Taiwan-
(i.e. P&O Group). The resulting company, Royal P&O Hong Kong-Vietnam-Philippines.
Nedlloyd Ltd, is listed on the Amsterdam Stock ◆ Winland Shipping Co, Ltd (China) – services Wei-
Exchange. hai-Japan.
◆ The Ofer Group (Israel) has taken control of Zim ◆ Dalian Beiliang Logistics Containers (China) - ser-
Navigation, since renamed Zim Integrated Shipping vice Dalian-Weihai-Japan.
Services Ltd.
◆ HAL Shipping (Halship) (Canada) – service Hali-
◆ Costa Container Line took over the deep sea fax-USEC.
liner trades of Gilnavi srl di Navigazione, the liner
◆ Delphis NV (Belgium) is incorporated (intra
arm of the Grimaldi-Genoa branch.
Europe services).
◆ The Carlyle Group has sold Horizon Lines to pri-
◆ AC Forwarding (ACF) and Hudig Veder & Dam-
vate equity firm Castle Harlan.
mers (HVD) form AC Ireland Line.
◆ STX Corp. (Korea) has bought 67 % of Pan
◆ Black Sea Container Shipping Co launches intra
Ocean Shipping Co (Korea).
Black Sea service.
◆ Neptune Orient Lines (NOL - APL parent com-
pany), Singapore, agreed to sell its 28.7 % stake in Cessations of activity in liner shipping
Lorenzo Shipping Corp to National Marine Corp.
◆ CT Navigation (Taiwan) closed its services (Tai-
(both Philippines).
wan-Hong Kong-Vietnam-Philippines).
◆ Neptune Orient Lines Ltd (NOL) has sold Neptune
◆ Hong Kong Ming Wah (HKMW) has closed its
Associated Shipping Pte Ltd (NAS) (tankers & bun-
only service (Hong Kong-North China), marketed
kering).
under the Chiu Lun Transportation name.
◆ Eimskip (Iceland) and Faroe Ship (Faeroe Islands)
◆ SPM Shipping (St Pierre & Miquelon) ceased its
have merged.
activity – service Halifax-USEC.
◆ Euro Container Line AS (ECL) (Norwegian com-
◆ Armada Line closes its North Europe-Med ser-
pany co-owned by Eimskip and Wilson Line) took
vice.
over Norwegian operator CoNor Line.
◆ Blue Container Line (Greece) closed its services
◆ Rickmers Reederei GmbH & Cie KG (Bertram
(Intra Med and Black Sea).
Rickmers Group), has taken over all of the shares in
CCNI GmbH (Deutschland) from Compañía Chilena
Significant other moves
de Navegación Interoceánica SA (Santiago).
◆ China Shipping Container Lines (CSCL) has been
◆ Egyptian company MISR Shipping has been
listed on Hong Kong Stock Exchange.
absorbed by its compatriot National Navigation Co
(NNC). ◆ Norwegian shipowner John Fredriksen has
bought stakes of 3 to 10 % in Hanjin Shipping,
◆ Trailer Bridge Inc. (USA) bought 100 % of
Hyundai Merchant Marine, Royal P&O Nedlloyd and
Kadampanattu Corp. (K. Corp.) from the Estate of
NOL.
Malcom P. McLean (USA)
◆ EOX Group Bhd has been renamed HubLine
Transfers and moves within operating Berhad.
groups ◆ The liner division of Unicorn Lines has been rena-
◆ NYK and its affiliate TSK have decided to spin off med Ocean Africa Container Line (OACL).
their respective domestic liner service operations ◆ TECO Lines is created by Samskip and Estonian
and related businesses, to set up NYK Line Japan Shipping Co.
Ltd (effective April 2005). ◆ DAL left the West Africa trades.
◆ China Shipping Container Lines (CSCL) boosted ◆ Steamers Maritime (Singapore - Keppel Group)
its share in the Shanghai Puhai Shipping Co, Ltd has sold its whole fleet of ten containerships.
www.alphaliner.com
OOCL
K Line Operated fleets
Zim Based on existing fleet at January 01 2005
Mitsui-OSK Lines (MOL)
teu capacity available on board operated ships
CSAV Group
CP Ships Group - All subsidiaries are consolidated -
Hapag-Lloyd
Yang Ming Line
Hamburg-Süd Group
Hyundai M. M.
Pacific Int'l Lines (PIL)
Wan Hai Lines
UASC
Delmas Group
IRIS Lines in '000 teu
0 200 400 600 800 1,000 1,200
growths of 28-33 %: CSAV, CSCL, Yang Ming and Ships, Royal P&O Nedlloyd, Hanjin-Senator and
CMA CGM. Outside the Top 25, the emergence of Hyundai M.M.
two Chinese regional companies is worth noting:
There has been however important initiatives on the
SYMS (+24.4 %) and SITC (+20.2 %).
corporate side, such as Temasek Holdings, the Sin-
On the mergers & acquisition side, no large mer- gapore state investment vehicle, taking control of
gers or takeovers occurred between rival carriers. NOL, parent company of APL, in what can be seen
The most significant one has been the buying by as a move to keep at home the Singapore historical
Costa Container Line of its compatriot Gilnavi. It carrier, until then listed on the local Stock Exchange.
appears that aggressive carriers (read: potential Other large deals concerned the purchase by Royal
buyers) have found ways to increase market share Nedlloyd of the whole stock of P&O Nedlloyd and
in securing as many ships as they can, leaving the takeover of Zim by the Ofer Group.
conservative ones with what is left, i.e. not much
CSCL made the news with its listing on the Hong
choice and pricey.
Kong Stock Exchange in June, while intentions to
On the other side, some potential targets have list Hapag-Lloyd faded away as parent company
protected themselves from raiders, such as NOL- TUI changed its mind and preferred to keep the
APL or TUI-Hapag-Lloyd, in steering clear of mar- full control of its Hamburg jewel.
ket listing. Despite this, there is still a choice of first
There has been numerous smaller deals, which are
class carriers which remain potential targets: CP
summed up in the accompanying table. ■
A
fter the continuous ups and downs of the fleet evolution of the deep sea and the short
2003 due to numerous military fixtures, sea fleets was already largely apparent before, par-
the year 2004 has seen the market going ticularly in 2003. In addition we have seen 17 ships
back to more basic economic factors, without the sold for scrap whose average age was 33 years for
previous excesses caused by military emergencies. an average capacity of 900 lane meters. At the
same time, 6 new Ro-Ro units were delivered lar-
A quick look at the fleet evolution shows that the
gely compensating the demolitions taking into
“pure Ro-Ro” concept is still in fashion in some
account the much larger average size of modern
areas, but by all accounts limited in its capacity to
ships (between 2,000 and 4,000 lane meters).
spread further afield. The Ro-Pax concept today
seems to be a more promising direction in terms of Thanks to good fundamentals in an admittedly very
fleet renewal. Thus there were 6 pure Ro-Ro and restricted market, freight rates firmed up in a heal-
18 Ro-Pax ships ordered in 2004, of which none thy and steady trend throughout the year without
unfortunately were dedicated to tramping. These any noticeable seasonal effect. It should be noted
figures should be compared with the 78 PCTC that nearly all business is transacted in euros, which
ships ordered in the same period to emphasize the is fairly unique in shipping circles being the result
huge gap between these two categories of ships, of a market concentrated around Europe and fur-
but which could perhaps promote a closer synergy ther supported by a strong currency. We are still a
in the not too distant future. This distortion within long way from the rocketing rates which have been
Ville de Bordeaux
5,200 dwt, built in 2004
by Jinling, owned by
Louis Dreyfus / Hoegh,
dedicated to the carriage of
blocks of the A380 airplane
Headquarter
4/12, Bd des Belges - BP n° 10 - 76001 Rouen Cedex - France
Tel : + 33 (0)2 35 98 26 46 - Fax : + 33 (0)2 35 98 32 58 - E.mail : rouen@cap-marine.com
Neuilly office
11, bd Jean Mermoz - 92522 Neuilly sur Seine Cedex - France
Tél : + 33 (0)1 41 92 54 00 - Fax : + 33 (0)1 41 92 54 10 - E.mail : paris@cap-marine.com
Nantes office
“Le Beaumanoir” - 15, rue Lamoricière - BP n°78704 - 44187 Nantes Cedex 4 - France
Tél : + 33 (0)2 40 69 31 96 - Fax : + 33 (0)2 40 69 29 55 - E.mail : nantes@cap-marine.com
T he reduction in the number of major casual- has caused a number of large bankruptcies. The
ties, which characterised 2003, did not number of “run off” companies has become so
repeat itself in 2004, which saw a significant important that we can now speak of a real “run
increase in the frequency and the average cost of off market”.
the latter. The very healthy standing of the freight The proportion of companies which have stopped
market and shipping in general led to a conside- underwriting between 1997 and 2003 are:
rable increase in shipping activity, but also of the
◆ 42 % of the marine syndicates of Lloyds,
accidents linked to navigation.
◆ 38 % of companies on the London market,
A fragile marine insurance market and ◆ 60 % of companies on the European market,
more and more concentrated ◆ 67 % of insurers of the American marine market.
In this market, particularly favourable to the insu- However the capacity of the international market
red parties of the shipping world, the insurers has never been as high as in 2004. Lloyds of Lon-
seem forever subject to the erosion of their profit don registered for 2004 a record underwriting
margins. Apparently the marine insurance market capacity. Nonetheless it should be emphasised that,
seems profit averse, since over the last ten years it in an attempt to help stabilise a maritime and ship-
TYPES OF MISSIONS
Strategic and commercial studies
Financial, commercial and operational audit KNOW HOW
Privatisation Port organisation
Opportunity and feasibility studies Inland logistics
Transport economics Shipping lines
Project development assistance Container and general cargo
Marketing studies Stevedoring, storage, transit
Partnerships Transhipment hubs
Benchmarking Short Sea Shipping
Organisation and staff training Waterways and sea river shipping
Databases, modelling, forecasting Cruise
Chantiers de l’Atlantique
- - 2006 -
Yacht 58 m x 11.20 m
15.5 K.
- - 2005 -
Yacht 42.60 m x 8.60 m
13.8 K.
Chantiers Piriou
- Vissolela -
Multi functional support vessel 3,320 dwt 77.30 m x 18 m on 6.10 m
4 x 1,800 kW 12 K.
Yardimci (Turkey)
32 FS Clara 2004 Fouquet Sacop
Product and chemical tanker IMO II 5,961 dwt 105.50 m x 16.80 m on 8.22 m
2,270 kW - B&W 14 K.
Jinling (China)
JLZ020503 Bro Etienne 2004 Broström S.A.S
Product and chemical tanker IMO II 37,179 dwt 185 m x 31m on 10.50 m
8,580 kW - B&W 15.2 K.
Nacks (China)
026 Messidor 2004 Setaf Saget (Bourbon Maritime)
Bulk carrier 55,300 dwt 189.90 m x 32.26 m on 11.10 m
11,149 kW - B&W 15.9 K.
Torgem (Turkey)
83 Minorque 2005 Petromarine
Product tanker 1,500 dwt 59.20 m x 10.80 m on 4.50 m
1,000 kW - Caterpillar 9 K.
Jinling (China)
JLZ020504 Bro Edward 2005 Broström S.A.S
JLZ020506 Bro Elliot 2005 -
Product and chemical tankers IMO II 37,300 dwt 185 m x 31m on 10.50 m
8,580 kW - B&W 6S 50ML 15.2 K.
Nacks (China)
027 Dalior 2005 Setaf Saget (Bourbon Maritime)
Fructidor 2005 -
Bulk carriers 53,500 dwt 189.90 m x 32.26 m on 12.49 m
11,149 kW - B&W 15.9 K.
Zhejiang (China)
ZJB03114 Bourbon Helios 2005 Bourbon Maritime
ZJB03115 Bourbon Hermes 2005 -
ZJB03116 Bourbon Hera 2005 -
ZJB03117 Bourbon Hector 2005 -
PSV - GPA 670 3,300 dwt 73.20 m x 16.50 m on 5.50 m
4,002 kW - Cummings 13 K.
Fax E-mail
Newbuilding 33 (0) 1 41 92 13 25 newbuilding@brs-paris.com
Sale & Purchase 33 (0) 1 41 92 15 60 snp@brs-paris.com
Cabaret Création 01 47 66 55 34