Container Ship Order Book Drops To 20% Of The Trading Fleet As New Deliveries Surge

The ratio of container TEU capacity on-order compared to the trading fleet dropped below 20% in June, reports Braemar Seascope. The broker advises that, as the container industry is expected to take delivery of record volumes of TEU capacity this year, the order book to trading ratio has eroded to approximately 20% in June 2013.

Jonathan Roach, Container Market Analyst at Braemar Seascope, said: “With more than 1.7m TEU expected to be delivered in 2013, the ratio is set to fall to approximately 16% by the end of the year. During the six year ordering boom between 2003 and 2008, in the region of 10.0m TEU of containership capacity was ordered. The order book ratio peaked at approximately 60% in 2007, when in excess of 3.0m TEU was ordered. In the five years since the global financial crisis, vessel ordering has declined; from 2009 to 2013, we estimate that just 4.0m TEU will be added to the order book.”

He added: “Even though ship finance has become more difficult to secure since the 2008 banking crisis, new orders have increased in 2013 and the new building market certainly has not collapsed – rather new building activity is ticking over with selective and niche container ship ordering.

“This year to date, we have noted 80 container ship orders with a combined capacity of 580,000 TEU. In the corresponding period in 2012, only half that number of ships was contracted, with a combined TEU capacity of 230,000 TEU. Even with underwhelming global container demand seen in 2012 and a similar growth pattern expected this year, new orders are still materialising as shipyards reduce new-building prices in a strategy to bolster and maintain their forward cover.

Braemar Seascope Opens New Oslo Office

Braemar Seascope is pleased to announce that it is further strengthening its shipbroking division by opening a new tanker chartering office in Oslo. This follows the recent establishment of a deep sea tanker chartering desk in Houston.

The Oslo office will focus on the specialised tanker sector forming part of Braemar’s existing specialised team of 14 brokers. It will be led by Joachim Hagen-Hansen who will commence broking within the next three months. The office will be opened by Eirik Hagen with effect from 6 May.

James Kidwell, CEO of Braemar Shipping Services Plc, commented: “We are delighted to welcome two brokers of the calibre of Joachim and Eirik and to have the opportunity to extend our commitment in this important sector. They will develop our client services and market coverage in an exciting way.”

Uncertainty Reigns In Newbuilding Sector Says Braemar Seascope

Uncertainty still reigns true in the global shipbuilding sector with many factors influencing either a return to ordering activity or a continuation of the reduction in interest in newbuildings.

“The best case scenario for shipbuilders is for ship finance liquidity to return and for a cut in Chinese overcapacity. There needs to be renewed interest in eco-designs and ships with options such as LNG or Ballast Water Treatment Systems and then possibly any increased demand will support pricing from the shipyards’ point of view,” said Mark Williams, Research Director at Braemar Seascope.

The worst case scenario is for a continuation in the global credit crunch; weak freight markets continuing to suppress newbuilding demand; input costs and forex turning against the builders; the low point in the contracting cycle extending and also more cash flow problems and failures.

“Investors are unlikely to invest in new tonnage this year without a fair prospect of economic return even if there is a short term recovery in freight markets, with many believing more needs to be done to encourage a return in confidence in the newbuilding sector,” Mr Williams told delegates attending the latest Marine Money conference.

While higher scrap prices should encourage owners to renew their fleets, the ongoing credit crunch and weak freight markets are reducing the economic life of today’s ships, which are now depreciating to scrap value in their teenage years or early twenties.

Mark Williams said that newbuilding prices tended to follow demand with input costs only providing a floor which can be broken through. “When the global shipbuilding backlog is less than about 18 months, yards tend to cut prices for competitive advantage, however prices appear to be bottoming out. There is far too much shipbuilding capacity out there. 2012 was the peak delivery year since the mid-1970s. So it is a question of who will blink first.”

Braemar Shipping Services plc: Changes to the Executive Board of Directors of the Company and Interim Management Statement

Changes to the Executive Board
The board of Braemar Shipping Services PLC (“Braemar”, “the Group” or “the Company”) is pleased to announce the appointment of James Kidwell as Chief Executive with effect from today. James Kidwell, age 50, is Group Finance Director and has worked for Braemar in that role since June 2002.

He succeeds Alan Marsh, who will retire as chief executive today and from the board on 31st July 2012. Alan Marsh has, however, agreed to continue to play an active role in the Shipbroking division. In addition, Quentin Soanes, following his appointment as Chairman of the Baltic Exchange, will also retire from the board on 31st July 2012 but will remain responsible for the Group’s Technical, Logistics and Environmental divisions.

Denis Petropoulos continues as group regional director – Singapore, and executive director of Braemar Shipping Services PLC. He is based in Singapore and is also responsible for Braemar’s development and marketing initiatives in the East.

Sebastian Davenport-Thomas becomes managing director of the Shipbroking division, having been head of its sale and purchase department for the past five years.

The Group will appoint a new finance director in due course and in the meantime James Kidwell will retain these responsibilities in addition to his new role.

The Chairman of Braemar, Sir Graham Hearne said: “Alan has led Braemar, as a public company, for 11 years with great distinction and has been a significant force in taking the Group to where it is today. We are indebted to him for his enormous contribution and I am delighted that he will still be actively involved in our Shipbroking division.”

“Quentin will also take this opportunity to retire from the board after more than 30 years service with Braemar. He has been highly instrumental in the development of the marine and energy services businesses in the Group which will continue to be his primary responsibility. We would like to wish him every success in his role as Chairman of the Baltic Exchange.”

“Braemar is doing well in very challenging markets and in James Kidwell we have appointed a top class executive who has over the years developed a deep understanding of all aspects of the business. I have no doubt James will bring the leadership and expertise to maintain our success and manage the next phase of Braemar’s growth.”

Braemar’s outgoing chief executive, Alan Marsh, said: “It is with some sadness that I have decided, as I approach my 63rd birthday, that this is the time to retire from a role that I have much enjoyed. I am confident that James will be an outstanding successor, and I look forward to continuing to contribute to the Group’s success.”

The company’s new chief executive, James Kidwell, added: “I am looking forward to the challenge of building on the Group’s positive momentum. Braemar is a dynamic business, and we have a strong team of people who together offer great potential for the future.”

Interim Management Statement

This Interim Management Statement covers the first quarter of the financial year beginning 1 March 2012.

Tanker chartering and dry bulk freight rates have been relatively weak because of the imbalance in tonnage supply in most markets. However, our transaction volumes have continued to grow steadily and there are some areas – in particular in specialised tankers – where we have developed significant new business. Our offices in Australia and India, which are predominantly dry bulk, have also made a bright start to the year.

The second-hand sale and purchase market has seen higher activity in recent months. After a period of greater price stability there has been more serious buying interest especially from the more traditional family shipowning companies.

The Technical division has made a strong start particularly Braemar Offshore, our surveying and engineering business in the Far East. Braemar Engineering has won some good LNG supervision business which will improve its performance in the second half and Braemar Casbarian is seeing more activity in its prime market – the Gulf of Mexico.

The Logistics division is performing well with both UK and Singapore ship agency business gaining ground.

The Environmental division has had a strong first quarter continuing in the same vein as the final quarter of last year with its clear-up work on the MV RENA off the coast of New Zealand which commenced in October 2011. Activity on the project is likely to slow in the second half as the wreck removal gets underway.

Overall the performance of the Group is in line with the board’s expectations.

ENDS

For further information, contact:
Braemar Shipping Services
Alan Marsh Tel +44 (0) 20 7535 2650
James Kidwell Tel +44 (0) 20 7535 2881

Pelham Bell Pottinger
Damian Beeley
Zoe Pocock Tel +44 (0) 20 7861 3139
Tel +44 (0) 20 7861 3961

Elaborate Communications
Sean Moloney Tel +44 (0) 1296 682356

Westhouse Securities

Dermot McKechnie Tel +44 (0) 20 7601 6115
Henry Willcocks Tel +44 (0) 20 7367 9052

Notes to editors
Braemar Shipping Services plc is a leading international provider of broking, consultancy, technical and other services to the shipping, marine and energy industries. The business is organised into the following segments: Shipbroking, Technical, Logistics and Environmental. It is listed on the Official List of the London Stock Exchange in the Industrial Transport sector.

Principal businesses:

Shipbroking
Braemar Seascope provides chartering, sale and purchase and consulting shipbroking services to international ship owners, charterers and financial institutions operating in the tanker, gas, chemicals, offshore, container and dry bulk markets. There are shipbroking offices in the UK, China, Australia, Singapore, India, Italy and Monaco.
www.braemarseascope.com

Technical
Braemar’s Technical division provides a range of specialist marine services to the maritime sector. The business operates under the brand name Braemar Technical Services and the activities of the division are as follows:

– Braemar Adjusting provides specialist loss adjusting and other expert services to the energy (oil and gas), marine, power and other related industrial sectors. It has offices in London, Houston, Singapore, Calgary, and Rio de Janeiro.

– Braemar Offshore provides specialised marine and offshore services mainly performing pre-risk marine warranty surveys. It has offices in the UK, Australia, China, India, Indonesia, Malaysia, Singapore and Vietnam.

– Braemar incorporating The Salvage Association (“Braemar SA”) provides marine consultancy and surveying services to the shipping, energy, offshore and insurance industries. The Salvage Association was acquired on 9 May 2011 and it has a network of offices in Asia, Europe and the US that undertake marine damage surveys for the insurance industry.

– Braemar Engineering provides consultant marine engineering and naval architecture services to the shipping and offshore markets from offices throughout the Far East and London. Braemar Engineering was expanded with the acquisition of Braemar Casbarian in July 2011 which provides consulting engineering services mainly to the offshore industry in the Gulf of Mexico from offices in New Orleans, Houston and Trinidad.

www.braemar.com

Logistics
Cory Brothers Shipping Agency provides port agency, freight forwarding and logistics services within the UK and Singapore.
www.cory.co.uk

Environmental
Braemar Howells provides pollution response and advisory services primarily in the UK and Africa and is continuing to develop an international presence. It has earned an international reputation for its work for the insurance industry in handling the containers from stricken vessels – the MSC Napoli in 2007 and the RENA which is on-going in New Zealand.
www.braemarhowells.com

Asia-Europe Trade Takes New Boxship Capacity

Asia-Europe trade has soaked up the majority of new boxship capacity over the past two years, according to leading international shipbroker Braemar Seascope, which reports that 56% of new boxship capacity delivered was deployed on Asia – Europe and Asia – Mediterranean trades.

Over the past two years 2.6m teu of fully cellular newbuilding capacity has been delivered.
The vast majority of these newbuildings joined main line Asia – Northern Europe and Asia – Mediterranean trades. During the years 2010 and 2011, Braemar Seascope estimates that in the region of 1.5m teu, accounting for more than half of all newbuilding capacity entering service, was initially deployed on those east-west trade lanes.

During 2011, 59 post panamax containerships, with an average capacity of 11,500 teu, entered Asia-Europe services, adding 680,000 teu of fresh capacity. Additionally, 15 containerships of an average 8,400 teu were delivered and deployed on Asia – Mediterranean and a developing Asia – Middle East trade lane, adding more than 125,000 teu of new capacity.

A trade lane of noticeable deployment growth over the past two years is the Asia- East Coast South America route, which recorded approximately 40 newbuildings enter service, including some comparatively high reefer capacity vessels exceeding 7,000 teu nominal capacity which were introduced by Maersk Line and Hamburg Sued. In 2011, this emerging Latin American container route accounted for more than 10% of all new capacity commissioned.

Another developing container trade lane, Asia – West Africa, witnessed deployment of 11 newbuildings last year, including the first of a newbuilding series of 22 x 4,500 teu geared vessels designed specifically for the growing trade between West Africa and Asia.

Jonathan Roach, Senior Container Analyst at Braemar Seascope, said: “For the next three years going forward we expect another four million teu to hit the water, which includes approximately 150 containerships with a nominal capacity of 10,000 teu or more.”

Braemar Market Insight: Changing Face of VLCC Spot Market

With so much discussion of the poor freight rates available to VLCC owners hiring their ships out for voyages from the Middle East to major consumers east and west, it is informative to see how much the spot market for VLCCs has changed in just a few years.

Since 2005, there has been a 25% reduction in reported AG/West spot VLCC voyages from 291 in 2005 to 216 in 2011. Just 11 AG/West fixtures were recorded in January 2012; if annualised the total would be 180, only 62% of the number recorded in just seven years earlier.

The US, the world’s largest oil consumer and traditionally the major customer for Middle Eastern oil, has diversified its supplies of energy with important effects for the VLCC market. The reasons for this diversification are complex and reflect not only market evolution, but changes to US economic, fiscal, environmental, and foreign policy.

According to the latest US Energy Information Agency (EIA), domestic crude oil production up reversed a long-term decline to grow from 5.18million barrels per day (m bpd) in 2005 to 5.47m bpd in 2010. Meanwhile, oil imports from Canada rose from 1.6m bpd in 2005 to 1.97m bpd in 2010.

More locally-produced oil will replace long-haul oil in a shrinking marketplace: the EIA 2012 Early Release Overview forecasts a 0.5% annual reduction in energy consumption per capita in the US between 2010 and 2035.

Meanwhile, high gasoline prices in the US have led to a reduction in domestic gasoline and diesel demand, with the US becoming a net petroleum products exporter for the first time in 2011 since the late 1940s.
Despite overseas demand for petroleum products refined in the US, a number of East Coast refineries have closed, if they rely on imported crude, as these cannot compete with US Gulf refiners with access to cheaper West Texas Intermediate crude oil.
China meanwhile has become the world’s second largest consumer of oil and, with an extensive refinery building programme underway, is in line to match US oil consumption within the current decade.
Consequently, the VLCC spot market has swung eastwards; in 2005, 20% of VLCC spot fixtures discharged in China; in January 2012, that had increased to 40%. Chinese oil refiners have swept into leading positions in the VLCC charter market. Discharges east of Suez now account for 85% of VLCC voyages out of the AG compared to 71% in 2005.
Mark Williams, Braemar Seascope research director, believes this swing to the East is now firmly entrenched. He says, “As Chinese refiners will probably add over 6m bpd of domestic refinery capacity in the next five years, their presence in the VLCC spot market is likely to increase further as China makes efforts to secure its energy supplies.”

Is Another Demolition Spike Due? Asks Braemar Seascope

As the Baltic
Dry Index plumbs all-time depths, those with long memories are recalling the
dark days of the 1980s for the shipping markets.  However, steel traders can look forward to a
bumper year of supply of vessels for recycling this year, if previous
experience offers a guide for the 2012 outlook. Bets are now being taken about
how many vessels will be forced by the weak freight markets into the arms of
recyclers.

 

Globally, ship
scrapping capacity has very big limits being a simple business of driving ships
onto beaches and cutting them up with oxyacetylene torches. Theoretically,
great numbers of ships could be sold for scrap and held as inventory by the
scrap dealers, to be pushed up the beach as and when required. Scrap prices for
ships of around USD $500 per light displacement tonne (LDT) remain, suggesting
that demand for the steel content in ships remains strong.

 

Meanwhile,
ship recycling capacity could grow further in coming years. The China State
Shipbuilding Corporation President said recently that half of China’s shipyards
could go bust in the next two to three years. Many of these yards could switch
to recycling as, theoretically, could European shipyards, though the economics
of recycling in Europe are currently not encouraging.

 

Braemar
Seascope estimates that,  in 2011, 24.2m
dwt of bulk carriers were sold for scrap, surpassing the 12.0m dwt scrapped in
2009 during the credit crunch, and the 11.5m dwt scrapped in 1998 after the
Asian financial crisis, as well as the 15.0m dwt scrapped in 1986, the year the
BIFFEX bottomed out at 554 points on 31 July. 
2011 was not a record-breaking year for tanker recycling despite the
poor freight markets.  For four years
from 1982 to 1985 over 20m dwt of tankers were recycled while 14m dwt was sold
for demolition in 2010. Last year saw 8.4m dwt of tankers recycled, with the
figure for January 2012 maintaining the trend.

 

Scrapping of
all types reached 41m dwt in 2011, making it the third biggest year for
demolition ever. The second biggest 1986 when 43m dwt was scrapped, and the
biggest ever was 1985 with 44m dwt sent to the beaches. Mark Williams, Braemar
Seascope research director in London, said: “If macro-economic conditions in
2012 continue to underwhelm and if scrap prices stay at their recent high
levels, this year could easily surpass 1985 as a peak year for demolition.”

Braemar Seascope says the tanker markets should not be surprised that the strategists who plan China’s energy requirements prioritise their national interest over the global shipping industry

The tanker markets are reported to have been spooked by the rumour that Chinese oil companies may order up to 80 VLCC newbuildings from Chinese yards. But should anyone really be overly surprised?

China’s priority throughout its urbanisation and industrialisation process has been to secure reliable, consistent and affordable supplies of raw materials and energy. To meet this end, it has developed trading companies, mining and resource companies, shipping and shipbuilding companies. This is a country run by a strategically minded government with their engineers holding detailed plans for development.

China has a stated policy that fifty per cent of its oil imports should arrive on Chinese controlled tonnage. According to Braemar Seascope analysis, almost 50 per cent of spot VLCCs discharging in China in H1 2011 were Chinese controlled (that also includes time chartered tonnage). But this does not mean that China will stop building VLCCs, after all its oil import requirements are undoubtedly going to grow.

China currently refines about 8.5m bpd of crude oil, at least 7.5m bpd of which is imported by sea. Braemar Seascope estimates that China is likely to increase refinery throughput to 11m bpd by 2015 and that around 15m bpd is achievable by 2018, which would put China on a roughly equal footing with the US for daily refinery throughput.

An extra 6.5m bpd of imports by 2018, depending on its source, would require about three modern VLCCs a day to meet seaborne import requirements, or about 1,100 VLCC shipments a year. If each VLCC can make nine round trips a year from the AG to the Chinese coast, about 120 VLCCs will be required between now and then. Merely to meet its 50 per cent Chinese-controlled imports target, Chinese ship owners will have to contract 60 new VLCCs for delivery in those coming years.

To ensure that there is sufficient supply of VLCC tonnage to maintain reliable, consistent and affordable supplies of crude oil, China may wish to have a surplus of tonnage, particularly if also incentivised to maintain its growing skilled workforce at the shipyards. So 80 VLCC contracts, although a little excessive, are feasible.

The Chinese shipbuilding industry has been upgrading its VLCC building capability with a view to competing with others and no doubt also in order to meet China’s own requirements. According to Braemar Seascope research, mainland Chinese companies own 39 VLCCS and currently have just eight on order. These can be supplemented in part by 24 Hong Kong–owned VLCCs, with another 17 on order. These combined fleets and orderbooks comprise only 13% of the global VLCC fleet and orderbook so there is clearly room for more Chinese-controlled tonnage.

Chinese shipyards delivered 21 VLCCs in 2010 and have delivered another 21 in 2011 to 1st September, with a further 10 due for delivery this year. In 2012, 29 are expected, followed by 23 slots currently filled for 2013. If China is capable of delivering 30 newbuilding VLCCs a year with current shipyard capacity, and if 20 a year of these are for Chinese buyers (who currently only have 8 VLCCs on order, remember), then realistically it will be 2014 before Chinese companies start to take delivery of the extra VLCCs required to maintain the 50 per cent policy, and 2017 or 2018 when the programme completes, which fits in with anticipated refinery development plans.

Scrapping Growth Could Be Good News

Braemar Seascope’s demolition brokers are working extra hard this year, which may be good news for everyone.

Dry cargo demand growth is running at strong levels due to the twin processes of industrialisation and urbanisation in emerging markets. Annual average demand growth between 2011 and 2015 is likely to match and may even exceed the annual 5.2% growth witnessed between 2004 and 2008 – the years of the superboom in dry cargo vessel earnings.

However, the massive amount of vessel ordering during and after the boom has led to the currently depressed freight market for dry bulk carriers. Bulker fleet gross growth (i.e. counting new deliveries but not scrapping) is likely to be in the order of 12% a year until 2013 as we add more than 3,000 newbuildings to the circa 8,100 ships that existed at the end of 2010.

But scrapping can make a difference in these markets. In order to bring net fleet growth (i.e. deliveries minus deletions) into line with demand growth expectations, every bulk carrier built before 1985 – nearly 1,500 ships – would have to be scrapped by the end of 2013. This would bring fleet growth down to an average 6.3% a year.

In other words, to return supply and demand growth to balance, the industry must scrap 12 bulk carriers every week for the next two years and four months without ordering any further bulkers for delivery before 2014.

The good news is that demolition at these levels is less outlandish than it may seem. According to the Braemar Seascope Demometer, 395 bulk carriers totalling 19.2 million dwt have been sold for demolition in 2011 up to 26th August, at a rate of 11.6 a week.

This amount of scrapping far exceeds previous records of 11.8m dwt in 1999 and 11.2m dwt in 2009. If scrapping continues at this rate for the balance of 2011, some 29.5m dwt will be removed from the bulk carrier fleet, offsetting the 85m dwt Braemar Seascope expects to be delivered in 2011.

Braemar Seascope Research Manager Mark Williams, says: “There’s a good chance that bulk carrier fleet growth can be kept down to 9% this year if these levels of scrapping keep up. We just have to hope that the global economy pulls out of the doldrums and that demand keeps up with expectations.”

Braemar Market Insight: Container Fleet Supply

[download id=”314″]2012 looks set to be the biggest year for containership newbuilding deliveries in history, in terms of TEU capacity entering the cellular fleet. According to Braemar Seascope’s latest Containership Fleet Statistics, boxship deliveries in 2012 are expected to reach 1.55m TEU – beating the previous record of 1.52m TEU achieved during 2007. Braemar Seascope expects a cellular fleet expansion in the region of 9.5% for 2012, increasing the available capacity to 16.8m TEU.

Of the 230 ships due for delivery next year, 59 have a nominal container capacity of 10,000 TEU or more. This will introduce an additional 0.8m TEU to this segment. Fleet growth for the 10,000 TEU plus size bracket is expected to reach 70% year on year for 2011 and a further 57% in 2012. Bearing in mind that the vast majority of ultra-large containerships are currently deployed on Asia – Europe services, next year’s delivery influx would be sufficient tonnage to create another five loops deploying ten x 13,000 TEU vessels.

For vessels up to and including 5,100 TEU capacity, it is a very different story: the lower level of investment in newbuilding projects is apparent as growth is expected to reach only 2.9% this year before hitting 3.0% in 2012.

Since January 2010, owners have ordered 1.7m TEU capacity of boxships with a capacity of 5,100 TEU or more compared with 0.4m TEU of smaller ships (below 5,100 TEU).
Containerships of 10,000 TEU or more comprise 49% of the global orderbook by capacity whereas containerships up to 5,100 TEU represent only 20% of the global orderbook. Since the KG market has largely exited the newbuilding arena, investment in smaller containerships has been lacklustre. However, Braemar expects renewed interested in feedermax tonnage once the current cycle of investment in post panamax ships has waned.icon-pdf

BRAEMAR MARKET INSIGHT: TANKER FLEET SUPPLY

PRESS RELEASE

For Immediate Release 7 July 2011
Ref: 1050

Despite record crude oil liftings from the Middle East and anticipated demand growth of around 2% for 2011, there remains a persistent oversupply of VLCC tonnage, according to analysis by Braemar Shipping Services.

However, it may come as some relief to know that the 47 VLCC deliveries scheduled for the first half of 2011 did not all enter the market on time.

In both Q1 and Q2 this year, over 20 VLCC deliveries were inked in at the rate of more than one every week. In the event, Braemar recorded fewer than 20 VLCC deliveries in both quarters of 2011 to date: 19 in Q1 and 15 in Q2.

On 1st July, the VLCC fleet was 559 ships including 22 non-double hull units, with 150 ships in the orderbook.

In deadweight capacity, the VLCC fleet has grown by 5.6% this year, from 160.9m dwt on 1st January 2011, to 169.9m dwt on 1st July. According to Braemar, it seems likely that further slippage from delivery schedules will happen in the coming quarters, even from its revised delivery view as per the table.

—ends—

For Further Information Please Contact:
Elaborate Communications
Sean Moloney
Debra Munford Tel: +44 (0)1296 682051/Mob: +44 (0)7711 142439
Tel +44 (0) 1296 682356

icon-pdf [download id=”311″]