Old and still drinking water and eating dry white toast.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Estimated Break-up Value of FREE fleets
(7 vessels) times 13 million = $91 million
Handysize: $13.5 million to $14.5 million (7.4% increase since May)
Source Link
Free Impala: Lay up (Held for Sales)
Ship Owners trading into the perfect shipping season....FREE shipping capacity should be inceasing 300 percent this month.
EPA released the new proposal for advanced biofuels implying a corn ethanol mandate range of 12.7 billion to 13.2 billion gallons.
Based on the 14.4 billion gallons market expectations, the new range proposal will remove between [-10,9 and -15.42] millions metric tons of Corn demand for 2014.
Nitrogen industry? It sounds that if North American Nitrogen is pricing below break-even costs in the short-term but they can still import cheaply from abroad and Chinese Urea is a nice back-haul trade for USGC grain exports this winter.
Source Link
Baltic Handysize Index 715 UP + 7
M/V Free Jupiter Handymax: About 15-25 days time charter trip at $7,750 per day through November 2013
M/V Free Knight Handysize: Idle pending resolution in connection with dispute with creditors
M/V Free Maverick Handysize: Idle pending resolution in connection with dispute with creditors
M/V Free Impala Handysize:Laid-up
M/V Free Neptune Handysize:Pending completion of repairs after collision incident
M/V Free Hero Handysize: About 25-30 days time charter trip at $6,650 per day through November 2013
M/V Free Goddess Handysize: Under repairs after pirate seizure
Baltic Handysize Index Link
SEC MV Vessel Link
Baltic Supramax Index 1371 UP + 8
Baltic Supramax Index
Korea Line Corp KRX:005880 closes 19,100.00 UP 1,100.00 (6.11%)
KLC Chart
From Eagle FORM 10-Q
On May 9, 2013, the 538,751 additional KLC common shares were issued and secured at the Korean Securities Depository. On November 11, 2013, we took possession of the share certificates.These shares replaced the note receivable recorded pursuant to the January 3, 2013, termination agreement. The fair market value of the shares upon issuance was in excess of the fair value of the receivable and resulted in a gain of $32.5 million in the second quarter of 2013.
KLC completed its financial reorganization by the middle of September 2013, and emerged from bankruptcy in October 2013. On October 28, 2013, we received early prepayment of $3.9 million to settle our long term receivable from KLC, which resulted in an additional gain on time charter agreement termination of $3.5 million recognized in the third quarter of 2013 as the carrying value at September 30, 2013 was adjusted to reflect the elimination of credit risk.
As of September 30, 2013, we sold 55,628 shares of KLC for a total consideration of $2.2 million and we realized loss of $0.4 million.
The KLC stock held by the Company is designated as Available for sale and is reported at fair value, with unrealized gains and losses recorded in shareholders’ equity as a component of accumulated other comprehensive income. As of September 30, 2013, the fair value of the remaining 566,529 KLC shares held by the Company was $22.1 million. As of September 30, 2013, the change in the fair value of our KLC investment was considered as other than temporary, and therefore the Company recorded a non-cash impairment loss of $7.3 million in Other expense in the third quarter of 2013.
SEC Eagle FORM 10-Q Link
ECB policy makers would reduce the rate for commercial lenders who park excess cash at the bank to minus 0.1 percent from zero, said the people privy to the discussions.
A negative ECB deposit rate is “one of last quivers they can draw from for weapons to combat sluggish economic growth,” Michael Mullaney, who oversees more than $10 billion as Boston-based chief investment officer for Fiduciary Trust Co., said yesterday by phone. “It is an admission that there’s definitely sluggish economic growth going on in the euro zone.”
Australia’s dollar, known as the Aussie, was steady at 93.29 U.S. cents following yesterday’s 1.1 percent drop. The currency, which has climbed 2.1 percent in the second half, is about 10 percent overvalued and a drag on economic growth, the International Monetary Fund said in a preliminary statement on the nation’s economy. The central bank should maintain loose policy settings, the IMF said.
Rest of the Story
U.S. Shipping Regulators Call Meeting With Europe, China Over P3 Tie-Up
The U.S. Federal Maritime Commission has called for an unusual meeting with its European and Chinese counterparts to scrutinize the proposed alliance of the world's three biggest container-ship operators, amid concerns by global competitors that it might unfairly squeeze smaller shippers.
The proposed tie-up among A.P. Moller-Maersk A/S of Denmark, CMA CGM of France and Mediterranean Shipping Co. of Switzerland would give the three European companies joint control of more than 40% of total sea-cargo capacity in some of the world's busiest trade routes. The three companies announced the tie-up in June, but it must be approved by U.S., European and Chinese regulators.
Rest of the Story
Credit-Driven China Glut Threatens Surge Into Bank Crisis
In China’s “Shipping Valley,” where the Yangtze River empties into the sea north of Shanghai, the once-bustling home of the nation’s biggest private shipbuilder is deadly quiet on a recent morning.
Rows of dilapidated five-story dormitories in the city of Nantong, previously housing China Rongsheng Heavy Industries Group Holdings Ltd.’s 38,000 employees, were abandoned after the shipbuilder teetering on collapse cut almost 80 percent of its workers over the past two years. Most video arcades, restaurants and shops serving them have closed.
A $6.6 trillion credit binge during the past five years, encouraged by Beijing policy makers as stimulus to combat a global economic slowdown, now threatens to stoke a debt crisis. At stake are trillions of yuan in bank loans that companies producing everything from ships to steel to solar power are struggling to repay as the world’s second-largest economy heads for the weakest annual expansion since 1999.
The rest of the Story
I'm not to worry about the currency, the dollar is worthless. Her brother was a land developer, so I do not have worry about land or housing. Raise a few cows and chichens is all I need to survive. I just need a place to park my $800k...
Background Information and charting on the BDI Index from a trader point of view....
charting on BDI Index
EGLE Supramax fleet is newer compared to the FREE Handysize fleet and both are in different shipping markets.
The shipping rates for the Supramax Index have been trending up compared to the Handysize Index.
Baltic Supramax Index
Waiting for FREE to test the lows...
Baltic Supramax Index
90-Day Data and Historical Trends
Baltic Supramax Index
I'm looking at Chile in about 10 years as my retirement location, I'm fully vested after 30 years of marriage to my Chilean wife.
The spot market for the supra-index is going up, which are the ships in our fleet. The Korealine shares prices are causing the problems which have been trading lower....four quarter the company will record a lower price in the KLC shares. The KLC shares value is priced mark to market on the EGLE balance sheet.
Abstract of "Waves in Ship Prices and Investment", while your waiting to jump back into the shipping sector....GL
We study the returns to owning dry bulk cargo ships. Ship earnings exhibit a high degree of mean reversion, driven by industry participants’ competitive investment responses to increases in demand. This mean reversion is not fully reflected in ship prices. We show that high current ship earnings are associated with high secondhand ship prices and heightened industry investment, but forecast low future returns. We suggest and estimate a behavioral model that can account for the evidence. In our model, individual firms overestimate their ability to respond to common shocks and underestimate the ability of the competition, leading to excessive industry investment during booms and low subsequent returns on capital. Our model nests both rational expectations at one extreme and Kaldor’s (1938) cobweb theory at the other, in which producers naively set current production quantities based on lagged prices. Formal estimation of our model suggests significant competition neglect in the shipping industry.
Source Link
Smartest post in last three months
You have to watch the flow of the hot money and host country currency. Central banks have flood the markets to re-inflate the last bubble. The question is will this bubble hold air? The saver have funded this QE bubble market. Being a super saver, I watch with caution.
I will sell you my shares next year when it's safe to enter the waters, I have only a 400 percent holding and transfer fee.
The jump in the baltic index was caused my china restocking which caught the shipping industry off guard. The early restock allow the rails to be able shift from transporting material to people for the yearend chinese holiday. The other problems are India weak currency and the downturn in the emerging markets.....
The shipping industry has been in the shitters for the last five years with over capacity...china destroyed the shipping industry with it created over 1600 shipyards over the next few years this will contract to only a few dozen ship builders over the next few years.
TEU and EGLE shares have been slowly increasing by Funds and Institutions for the 2014 shipping industry turnaround play.
I have all my shares in a 401K account, I do not look at the short-term losses.
Baltic Exchange Supramax Index
Source Link
You can see varies daliy rates of Baltic Exchange Capesize, Baltic Exchange Supramax, Baltic Exchange Handysize, Baltic Exchange Panamax at following site;
I agree both are better shipper play's, I'm a bottom player hopefully my stock picks will switch to a MLP concept to unlock some hidden value.
I would agree with the managed muni-bond fund concept. I'm leasing out my California FREE-HOUSE for three years and the rental income I'm planning on buying tax-free muni-bonds. Moving back to Washington state mid-Dec and looking at the options of renting or selling my other FREE and CLEAR HOUSE.
Drinking free coffee and eating dry white toast allows one to save tons of money over ones lifetime.
One man's trash is another man's treasury.
The Commodities Supercycle and Your Grocery Bill
As you shop for Thanksgiving dinner this year, you may long for the good old days when food was cheaper. This isn’t just your nostalgia speaking. Over the past decade, food prices have increased at a very fast clip. According to the U.N.’s Food and Agriculture Organization, the global food price index has increased by 125 percent since 2000. To understand why, consider the seemingly intractable prices of global commodities markets—your standard agricultural goods like coffee, sugar, and wheat, or resources like crude oil and coal that are used to produce or transport those goods. Not only do these complex commodities markets determine the cost of what we eat, but their high prices can fuel the kind of social unrest that in some countries has toppled governments.
These markets are as volatile and hard to forecast as the effects of their swings are contradictory. Commodities are both the origin of major fortunes as well as the reason behind financial crashes. Their gyrations also drive major shifts in geopolitical power—they can boost the influence of some countries while weakening others. For example, during the commodities boom that took place between 2000 and 2010, exporters of soy, iron, cotton, oil, copper, wheat, petroleum, wood, and other basic goods did exceedingly well. Countries from Brazil to Malaysia used the windfall to improve living standards for millions of their poorest citizens. According to the World Bank, the size of the Latin American middle class grew by 50 percent—from 103 million in 2003 to 152 million in 2009. Since then, despite the global recession, the region’s middle class has continued to grow—to the point where, the World Bank reckons, its members are currently more numerous than the poor for the first time in history.
In these ways, high global commodities prices have been a boon to emerging markets and a source of global economic stability. Economic growth in China and India—whose populations account for 37 percent of the world’s population—has done much to fuel the rise in demand for commodities. In the past five years, agricultural imports to China alone have grown by 23 percent each year. But the spike in demand has also added to the uncertainty that characterizes these markets. The planet is paying dearly too, as rapid growth in consumption—especially of goods like oil, coal, and metals that are non-renewable and highly polluting—has contributed to the dangerously high carbon dioxide levels in our atmosphere.
Now, however, there is a widespread perception that commodity markets are about to hit a wall that, once again, will trigger important shifts in the world economy and international politics. Many experts believe that the current installment of the “commodity supercycle” is winding down. These supercycles are periods of high prices that last for about 15 years on average and that have regularly appeared over the last 150 years. In the past decade, for example, the average price of commodities doubled. This sharp rise contrasts with the fact that, over the course of the 20th century, commodity prices (adjusted for inflation) fell an average of 0.5 percent every year.
To complicate matters, between 2000 and 2013, the price of commodities not only soared, but their variations were three times more extreme than they were in the 1990s. Consistent with this high volatility, prices have now stopped rising—a trend reversal that started two years ago. In the first half of 2013, the world index of commodities prices fell 10.5 percent, and the prices of some metals—copper, aluminum, and nickel—fell a whopping 20 percent. The economic slowdown in China, the anemic situation in Europe, and sluggish growth in the United States have all contributed to a drop in demand and a halt in price increases.
The surprise is that despite the many forces pushing commodities down, prices on average remain roughly at the same level as they were in 2008, when the global economic crisis began. According to a recent study by the McKinsey Global Institute, it is premature to declare this episode of the supercycle over. Prices will remain high—and not for the usual reasons. Prices are pushed up—or kept high—not just because demand is still stronger than it was in the past, but also because these goods have become more expensive to produce. Why is this? The reasons are many and range from climate change—which alters crop cycles and increases the frequency and intensity of droughts and floods—to the restrictive export policies governing agricultural products in some countries. Labor turmoil in producing regions has also become more common. There is increased activism in farm communities, and social protests are more frequent and disruptive. According to McKinsey, producers are now forced to operate in ever more remote and inhospitable places and to use more expensive technologies.
The bad news resulting from these trends is that food prices will not fall significantly in the short term. The good news is that high prices are creating huge incentives to boost production, increase productivity, and invent technologies that will eventually push prices down.
But the inescapable reality is that commodity prices and their variations will continue to surprise us with their volatility and their immense impact on the world’s distribution of power and prosperity. And on our grocery bill.
Source Link
Box Ships Inc(NYSE:TEU)is the merger company that CMA CGM formed with another shipper, CMA CGM is planning on an IPO of its stock at the end of 2014.
TEU and EGLE are my 2014 shipping turnaround plays for emerging markets.
Emerging Stocks Rise Most in Two Months Amid China Pledge
News Link
I think EGLE is planning on the spot market then lock in with a longer term contract.
Many dry shipping companies and experts are forecasting significantly higher shipping rates in 2014 and beyond.
Many dry shipping companies and experts are forecasting significantly higher shipping rates in 2014 and beyond. Now would be a great time to prepare in advance. Double rates affect the valuations of companies such as Genco Shipping & Trading, Baltic Trading Limited and Paragon Shipping much more dramatically than you'd think.
Why third quarter and double rates
For the easiest, quickest way to estimate what double rates would mean for a dry shipper, base your calculations on the most recent third quarter. Trying to predict what higher rates might mean for future performance brings in too many variables to yield a clear picture. Using solid numbers from the past will at least give your calcuations a firmer foundation.
Also, while you can calculate what the impact would have been for any percentage increase in rates, shipping rates for 2010 were more than double the current rates for the majority of 2010. It's not hard to imagine a return to rate levels equal to that of a mere three years ago, especially given the industrywide optimism about the upcoming rate environment.
Genco Shipping & Trading
Genco reported its third-quarter results on Nov. 6. Shipping revenue was $58.6 million. Operating expenses were $72.8 million. Interest expense was $23 million. All of this led to a net loss of $35 million.
Since virtually all of Genco Shipping & Trading's fleet operates based on the daily spot rates, if those rates had doubled, shipping revenue would have nearly followed suit. All things being equal, this would have meant an extra $58.6 million in revenue, all falling straight to the bottom line, and it would have reversed a net loss of $35 million to net income to $23.6 million.
On an annualized basis, that would put Genco's P/E multiple under 2. Based on P/E alone, that is very cheap -- as long as you remember that Genco Shipping also has debt payment concerns coming due early next year.
Baltic Trading Limited
Baltic also reported its third-quarter results on Nov. 6. Similar to Genco Shipping & Trading, Baltic Trading Limited's fleet operates based on the daily spot market. Revenue was $9.1 million, against total operating expenses of $10.2 million and interest expenses of $1.1 million, all of which led to a net loss of $2.2 million.
If rates had been twice as high, revenue would have been $18.2 million, and net income would have been $6.9 million. That comes out to a P/E multiple of around 6. While not as cheap as Genco Shipping & Trading on a P/E basis alone, Baltic Trading Limited is in better financial shape to begin with.
Paragon Shipping,
Paragon reported its third-quarter results on Nov. 7. Net revenue was $13.4 million. Total adjusted operating expenses were $7.8 million. Adjusted net loss was $0.4 million.
If rates had been twice as high -- and again, all other things being equal -- Paragon would have added $13.4 million to its bottom line. This comes out to $13 million in net income. On an annualized basis, the P/E multiple is slightly over 1. On the basis of P/E multiple only, Paragon Shipping would have been the cheapest of the 3.
Final Foolish thoughts
While I am in no way predicting that rates will double, it is a possibility. As an investor, it's wise to prepare for all possibilities, both positive and negative. As this exercise shows, at least for these dry shippers, doubled rates would make these companies' stock prices appear undervalued. Follow the spot rates for all ship sizes -- especially how they've changed relative to any previous quarter. By doing a rough calculation of how a change in rates would have affected an individual company, you can get an early lead on its results ahead of the official report.
Source Link
The company is making money and paying a dividend, better than the other shippers. The company was formed with a major private french shipping company and allowed better capital accessibility.
Turkey's steelmakers book South Africa, Benelux and Baltic scrap cargoes
Turkey's steelmakers booked several deepsea scrap cargoes at the end of the week from Benelux, Baltic and South Africa suppliers as the US East Coast's biggest recyclers continued to hold out for higher prices, market participants said Friday.
One cargo containing 21,000 mt of heavy melting scrap I/II (80/20 blend) and 21,000 mt of bonus grade material was booked at an average price of $394/mt CFR Iskenderun by an electric arc furnace.
A South Africa-based trader moved its third bulk cargo to Turkey in the last few weeks, selling at $388.50/mt CFR Iskenderun for 23,000 mt of HMS I/II (80/20 blend) and 7,000 mt of shred at $393.50/mt CFR. The trader normally sells its material to India, but the South Asia market has been subdued in recent months.
Platts daily assessment reacted to the above trades, slipping $1 to $389/mt CFR Turkish ports for HMS I/II (80/20 blend) on Friday.
US-origin bulk suppliers were still targeting $395/mt CFR for HMS I/II (80/20 blend).
Two Baltic suppliers also were heard selling cargoes at the end of the week, with one Marmara mill purchasing at $389/mt CFR for Scandinavian HMS I/II (80/20 blend) in bulk. At the same time, a Romanian recycler succeeded in selling a bulk shipment of bonus to a large steelworks at $402/mt CFR Eregli towards the end of the week.
Freights have hardened in the Black Sea basin, with shipments to Aliaga costing around $24-25/mt for a small shipment from Romania; a sale was made at $394/mt CFR for a mixed HMS-bonus cargo to a medium-sized EAF mill.
Source Link
Handy-size Baltic-NWE tanker rates jump as fuel oil exports rise: sources
The cost of sending 30,000 of fuel oil from the Baltic to North West Europe rose sharply Wednesday as fuel oil exports climbed ahead of ports in the Baltic region icing up and bringing in loading restrictions, shipping and trading sources said Thursday.
Freight rates on the Baltic-NWE route, basis 30,000 mt, jumped Worldscale 15 over the day to w150, reaching the highest assessed since May 21, 2013 when the rate on the route was w152.
Shipping sources continued the indicate the rate on the route at w150 early on Thursday on the back of a tight tonnage list and more demand for cargoes.
"More stems are in the market and ships were not available, so it got tight on the prompt positions for the ships," a shipowner said.
Trading sources said fuel oil exports have been ramped up, especially from the Baltic ports, as sellers are keen to maximise volumes before the ports freeze.
In the winter, fuel oil requires heating before being loaded on tankers, and ports restrict the number of arriving rail cars they can handle.
Typically this results in mounting delays along the railways. Traders reported delays of rail cars on the approach to St. Petersburg but attributed this to the current increase of exports.
"Everybody tries to get product out before restrictions are enforced," said a source.
This time last year the temperatures were much lower, but this year the autumn has been unusually mild for a longer period, traders said.
Source Link
Soyabeans, corn export premiums steady to firm
Corn and soyabean export premiums at the US Gulf Coast were mostly steady to firm on Friday amid weaker futures and limited available capacity to load export shipments through the end of 2013, traders said. Soyabean futures on the Chicago Board of Trade fell 2.5 percent on softening cash markets and good South American crop weather. Corn slipped as the US government proposed easing ethanol blend requirements.
FOB basis offers were unquoted for November and much of December after heavy forward sales earlier this year for those shipping periods. However, November and December loadings would be available at a hefty premium if a buyer was willing to pay, traders said. US corn prices were competitive on the world market for early 2014 shipments and traditional buyers have been booking their routine purchases to lock in some of the lowest prices in three years.
China will continue buying buy soyabeans and corn for state reserves from farmers this year, a move that is expected to keep domestic prices higher than the global market, triggering more imports. Record-large purchases of US soyabeans by China are on the books. Good growing weather in South America raised the risk that a larger-than-normal share of outstanding sales could be switched to Brazil or Argentina origin beans, traders said. US wheat export premiums at the Gulf Coast held steady in quiet trade.
Source Link
How about a TA on EGLE and TEU, I have about $35K invested so-far waiting for a turnaround play on the shipping sector.
Accounting for owned vessels by shipping companies
Source Link
DD Background Information for reviewing Annual Reports
Panamax coal freight rates in Pacific on downtrend, bearish sentiments prevail
Bearish market sentiments and excess tonnage continued to weigh on Panamax freight rates on established coal-carrying routes from South Africa and Indonesia to India through the week, extending their downtrend Friday.
Platts assessed Panamax coal freight rates from South Africa's Richards Bay to Paradip port on India's east coast at $16.60/mt and to Mundra on the west coast at $16.10/mt, each down 20 cents from Thursday and also down 50 cents over the week.
"The (US) grain season is looming towards an end, and vessels that were previously ballasting from China to the Atlantic or US Gulf are now choosing to remain in the Pacific," a Norway-based industry analyst told Platts Friday. "This is putting a lid on rates in the Pacific," he added.
An India-based shipbroker reported having an offer from a vessel owner at $15/mt in response to a bid from a charterer at $14.75/mt for shipment of 75,000 mt plus/minus 10% of thermal coal from Richards Bay to Navlakhi Anchorage on India's west coast, for 10-24 December laycan.
Market sources however noted the bid-offer levels were "aggressive" and "not repeatable."
Platts also assessed Panamax coal freight rates from Indonesia's Banjarmasin port in South Kalimantan to Paradip at $10.10/mt Friday, down 15 cents from the previous day and also down 30 cents over the week.
From Banjarmasin to Mundra Panamax rates were assessed at $11.65/mt Friday, unchanged from Thursday but down 15 cents over the week.
Charterers' rates were seen at $11-11.50/mt on the South Kalimantan to west coast India route while Panamax vessel owners were seen quoting rates above $12/mt, another India-based shipbroker said.
As reported, demand for gearless Panamax vessels found some support from the continued uptrend in geared Supramax rates, which market participants pegged at $13-14/mt on the Indonesia to east coast India route, about $3-4/mt higher than gearless Panamax freight rates.
Market participants were seen preferring gearless Panamax vessels, with additional costs arising from use of shore-cranes averaging about $2/mt. But the limited availability of shore-cranes at Indonesian ports was proving a hindrance, sources said.
BEARISH SENTIMENTS PREVAIL
Although coal shipments from Indonesia towards China provided some support to freight rates in the region this week, market participants largely expected bearish sentiments to prevail next week.
"It was a quiet day in the freight market," a Singapore-based shipbroker said Friday. "I think owners and charterers are waiting for next week to open the blood bath," he added.
In its weekly chartering report issued late Thursday, Braemar Seascope noted that the Pacific market "has softened further, and number of vessels with prompt dates has been increasing steadily over the past seven days."
Despite "reasonable" coal volumes from Indonesia, "hire rates on this route have eased from recent levels," the report said.
"Negative trends in the paper and physical market, have kept period activity in check, and it is likely to remain at subdued levels for the time being," Braemar added.
Source Link
China's shipbuilding sector must consolidate to stay competitive: official
China's troubled shipbuilding sector must embrace painful measures and cut shipbuilding capacity by at least 30% to remain competitive amid plummeting utilization rates, a shipping industry expert said at the World Shipping Summit in Ningbo Wednesday.
"The growth rate in the demand for new ships is slowing down. This year is really bad, and I can feel the impact. Chinese shipyards have to reduce overcapacity," Bao Zhangjiang, director of the China Shipbuilding Industry Research Center, told the conference, organized by shipowner Cosco.
"Realignment of the Chinese shipbuilding industry is the crucial need of the hour, and we need the courage to eliminate the excess capacity," Bao added. "There should be a competitive transformation of the industry."
Bao said China's shipbuilding industry helped tide over the global market in the mid-2000s when higher oil and dry commodity demand created a shortage of new ships. That translated into huge shipping requirements for China.
Delivered daily direct to your desktop, Bunkerwire focuses on marine fuel prices and supply in major ports worldwide. Bunkerwire is essential reading for those who require accurate and timely data on this market sector.
"During the heydays of the shipping market, there had been an influx of new shipbuilding capacity, which when combined with the severe demand destruction during the global financial crisis, has led to a situation of capacity overhang in the short term," he said.
Bao expects global demand for shipbuilding to be 32 million compensated gross tonnage, or CGT, in the next two years, compared with current world capacity of 61.2 million CGT.
"The current imbalance between supply and demand will last for quite some time," he said.
CGT is an indicator of the amount of work needed to build a given ship. It is calculated by multiplying the ship's tonnage by a coefficient, which is determined according to type and size of the particular vessel.
Bao said one factor that will keep Chinese shipyards competitive is a focus on quality above quantity. He said the Chinese government was reworking the industry structure document to realign the business with that goal in mind.
"We are mainly involved in building dry-bulk ships, which are low-end vessels," he said. "We want to move from being a shipbuilding country to shipbuilding power. We will streamline our capacity, and this will mark the second stage of the Chinese shipbuilding industry."
Bao expects many mergers and acquisitions in the industry.
Chinese shipyards have already started reworking their strategies, with cash-strapped ones already tying up for additional capital.
For instance, China Rongsheng Heavy Industries Group Holdings Ltd. was in talks with two coastal cities and government departments in May to secure financial assistance after the nation's shipowners association forecast a slump in vessel orders through next year. The country's largest independent shipyard was in discussions with the cities of Rugao and Nantong.
COSCO (Lianyungang) Shipyard Co. Ltd. -- a joint venture of Jiangsu Lianyungang Port Corp. Ltd. and COSCO Shipyard Group Co. Ltd. -- was set to be dissolved after steep losses of Yuan 30.28 million ($4.93 million) in 2011 and Yuan 80.98 million in 2012. The joint venture was created in early 2008 with a registered capital of Yuan 180 million.
In May, China Rongsheng Heavy Industries Group Holdings Chairman Chen Qiang doubted whether many among the more than 100 shipbuilders would survive but said the chances were brighter for the top 20 yards. Orders for new ships tumbled 43.6% last year to 20.41 million dmt in China, according to data from the Chinese Ministry of Industry and Information Technology.
Figures released in June by shipbroker Clarkson showed that China's shipyards secured contracts for just 182 ships in the first six months of this year, compared to 561 vessels a year earlier.
Although China saw a 52% drop in orders for new ships in 2011 from levels seen in 2007, it was still the world's largest shipbuilder, accounting for 41% of the global share.
According to a Singapore-based sales and purchase broker, China has some 350 shipyards that are actively in business. An estimated 2,000 yards are currently operational in China. Beijing is targeting the inclusion of five Chinese shipyards among the top 10 in the world by 2015
Source Link
China's Stagnant Shipbuilding Sector Gets New Orders
China's troubled shipbuilding sector is returning to lead global vessel construction again, in front of South Korea and Japan, but the headline numbers hide a concentration of orders at a few big yards that could offer a blueprint for the industry's future.
While Chinese shipbuilders have won more business so far this year than in the whole of 2012, just 4 percent of the country's more than 1,600 yards have scored new contracts.
Most had the backing of two shipping "policy banks", which are responsible for state-directed spending and trade development, leading to a suspicion that Beijing is using the lenders as a tool to force consolidation in the bloated sector.
"We believe that the major yards that have won orders this year will be the ones left in five or 10 years and that they represent the future shape of China's shipbuilding industry," said Dr Gunnar Gerig, executive director of transaction advisory services at Ernst & Young in Hamburg, Germany.
The global shipping industry is emerging from a five-year downturn, the worst in 30 years, as cargo demand rises on the improving global economy and low asset prices lures private equity money into the sector.
At the same time, Chinese policymakers are cracking down on overcapacity-plagued heavy industries such as shipbuilding and steelmaking, as they seek to shift the country away from its old investment-driven economic growth model.
Figures compiled by Reuters and shipbrokers show around 60 state-owned and private shipyards won about $10.5 billion worth of contracts from foreign and domestic shipowners for vessels totalling 21.2 million dead-weight tonnage (dwt) in the first half of this year.
Among the winners were shipyards in Shanghai, Guangzhou and Chengxi controlled by China State Shipbuilding Corporation and private builders such as Yangzijiang Shipbuilding (Holdings) Ltd andZhejiang Yangfan.
REVERSING TREND
The volume of orders was "up significantly" versus 19.2 million dwt in full year 2012, said Stephen Gordon, managing director of Clarkson Research Services, a British shipbroking and shipping services company.
Chinese yards won 39.5 per cent of global orders in the first half compared with 36.5 per cent for South Korea, reversing 2012's trend.
The order tally has continued since July with a raft of deals to China Ocean Shipping (Group) Company (COSCO) shipyards in Dalian, Zhoushan and Guangzhou and other facilities including ShanghaiWaigaoqiao Shipbuilding. But the latest deals have gone only to yards that had already won orders this year.
That means that while state-owned and better quality private shipyards now have enough construction orders to keep busy into 2015 or 2016, the future looks grim for the rest, many of whom have already run out of work.
Sverre Bjorn Svenning, director of Fearnley Consultants, an offshoot of Norwegian shipbroker Fearnleys, said the firm has tracked 128 shipyards established during the 2003-2008 boom.
Of those, 57 have not delivered a ship since 2011 and another 18 have delivered three ships or fewer. "In my view, all the 75 yards have in practice ceased operations," Svenning said.
The China Association for National Shipbuilding estimated there were around 1,650 shipyards inChina. Between a third and 50 per cent of them are set to collapse in the next few years according to the lobby group and other sources.
"There are only about 80-90 yards Chinese that we would recommend to our clients presently," said Martin Rowe, managing director of shipbroking firm Clarkson Asia, based in Hong Kong.
POLICY BANKS
The Export-Import Bank of China (Cexim) and the China Development Bank are the country's two policy banks focused on the shipping industry.
A Cexim senior executive told Reuters that around two-thirds of the shipyards that won orders this year were supported with a mix of financial instruments that benefited individual shipyards or ship owners.
These included shipyards controlled by state-owned groups China State Shipbuilding Corporation(CSSC) and China Shipbuilding Industry Corporation (CSIC), COSCO and private yards such as Sinopacific Shipbuilding, said Chen Bin, deputy general manager at Cexim's transport finance department.
Financial support has also come from China Development Bank and domestic and foreign lenders including the Bank of China Ltd and Standard Chartered Plc.
Cexim said it aimed to lend about $3 billion to the shipping industry this year.
Chen said typically about 30 percent would go to Chinese shipyards. The remaining 70 percent would be advanced in the form of buyer's credits and loan guarantees to support foreign and domestic shipowners ordering ships at Chinese shipyards.
Graham Porter, co-founder of Canada's Seaspan Corp, one of the world's largest container ship operators with about 100 large vessels, said shipowners look to order at shipyards backed by state lenders or well-funded provincial or private yards, which represent a low risk.
PREFERRED LIST?
Chen said Cexim backs each deal on its own merit. "Right now we don't have a clearly defined shipyard list. It changes year by year," Chen added.
But Shipping experts told Reuters they thought Beijing was intervening to support favoured shipyards either with a list of yards it wanted to see survive or by directing policy support to the most successful.
"(I) believe the list actually exists," said Tom Behrens-Sørensen, co-founder of strategic advisory and corporate finance firm Navisino (Beijing) Partners and a former chairman in North Asia for shipping and oil services group A P Møller-Maersk A/S.
Shipowners contacted by Reuters, including commodities group Noble, Taiwan's U-Ming MarineTransport and Singapore's Pacific International Lines, acknowledged a "flight to quality" of more financially secure yards and those that have upgraded and can build higher specification ships.
Ravindranath Raghunath, senior vice president at Noble Chartering, said the company preferred state-owned shipyards.
"With the three-year lead time to delivery, (I) am not convinced the private yards will be around at that time," he said, adding that loan guarantees were easier to obtain from banks such as Bank of China if state-owned yards were used.
China's two big East Asian shipbuilding rivals have already seen significant consolidation.
Japanese shipyards went through two such phases during the 1970s and 1980s that were partly government sponsored and reduced shipbuilding capacity by around 50 per cent.
In South Korea, debt problems in the late 1980s also led to a wave of consolidation that shrunk the industry from 11 large and medium sized shipbuilders in the early 1990s to around seven major shipbuilders now, including cash-strapped STX Offshore & Shipbuilding.
Ernst & Young's Gerig said in the long-run the number of surviving shipyards was likely to be larger inChina than South Korea or Japan because labour costs were lower and automation was less of a feature in China's shipbuilding industry.
But, along with other industry experts, he predicted that many smaller yards, and even some major ones, would collapse over the coming years.
"It is quite obvious that the Chinese shipbuilding industry is in a painful transition phase towards an industry that will continue to shrink and the ambitions and goals presented a few years ago will never be fulfilled," said Svenning of Fearnleys.
"I think if the Chinese yards shall succeed they must have a good home market and cannot rely on copying the Korean success of exports."
Souce Link
I joined the 21st century and bought a smart phone, now I-hub is a mobile event. Seems that my only investments are in trainwrecks and shipwrecks.
I became a steer after 30 years of marriage