The Billion Dollar Question… Dry Bulk Orderbook: What Does it Mean?

Nedship Bank recently hosted a very interesting gathering of shipowners, operators and brokers in New York to look at the question: “What does the dry bulk order book mean?”  Analyst Cor Wooning, in from Nedship Rotterdam, gave a presentation showing that shipping banks – at least those committed to the shipping industry – are as committed to finding an answer to the question as their clients are.

Discussion following the presentation showed that there are almost as many opinions and additional questions on the subject as owners, or at least market segments. The real answer, as practiced by Nedship and articulated once by Marsoft President Arlie Sterling is, “to shine the bright light of knowledge on the many dark corners of the industry, world economy, and trade data, wherein answers to great questions may be found.”  Some of the light, questions and opinions follow. Continue Reading

US Coast Guard Gives Opportunistic Owners Early Christmas Present

In early October, I enjoyed dinner with a member of management of one of the world’s largest VLCC owners. We discussed COFRs and, while we both agreed that unlimited liability had to be dealt with and that the COFR deadline with the prospect of a “train wreck” presented an opportunity for the industry to stick together – and perhaps force the US into a rational reexamination of both unlimited liability and the foolish COFR rule – I argued that, as a public company, they had an obligation to their investors to obtain a COFR.  Further, as the largest VLCC owner, they not only had the chance to reap the benefits of any COFR rate spike but, arguably, to monopolize the PG-to-US carriage of oil.  It was, in fact, just an idle dinner table debate as we both sincerely hoped that the industry threat of oil shortages would mix with Coast Guard, owner, and P&I Club genius to produce a sane answer. In fact, the industry “coalition” has all but crumbled, replaced by that opportunistic trait the industry is so well known for. Continue Reading

UK Bank Begins Lending to India and Italy

by Paul Richardson

The Royal Bank of Scotland (RBS), generally regarded as one of the largest independent lenders toward newbuilding and secondhand shipping acquisitions, is cautiously breaking into the shipowning communities of India and Italy.  Currently, Greek shipowners comprise the lion’s share of the bank’s shipping business. Up to 70-75% of the Bank’s entire portfolio involves the London-based Greeks, Rex Harrington, RBS’s director of shipping, said. And the majority of RBS newbuilding projects have been agreed in London.

But RBS is constantly looking for new financing business, and is dedicated to expanding on its Greek success. Through extended negotiations and talks with partly-privatized Indian shipowner, the Shipping Corporation of India (SCI), a financing deal worth US$52m has been put together for the purchase of a new 140,000 dwt Aframax tanker just completed at the Samsung Shipyard on Koje Island.  The order to build the vessel was placed January 1993, and was one of four sisterships booked at Samsung and Hyundai for SCI.  It is understood that RBS financing for the other three vessels is also being discussed at this stage.

Says Harrington on the deal, “We have been interested in expanding on the Greek market for some considerable time; and we looked at the SCI in detail as a beginning.  The company is substantially government-owned, although it is in the process of being privatized.  The balances were strong and the potential was there.  It took many months of hard talking to firm up the deal, but we did and it has opened the door on other projects.”  Harrington continues, “India is a new market for us, but we expect the possibilities of more deals being put together in the future.” Continue Reading

‘Tis the Season to be Jolly

Ask an owner how he’s doing today and you will most frequently be rewarded with a smile. Even our most gloomy broker friends are modestly optimistic the markets will continue bullishly.  Looking back over the past four years of Marine Money year end wrapups, this is the first time we have left one year and started another on such a pleasant note.

The effects of a synchronized global recovery are being felt in virtually every market segment. Commodity prices continue to improve – a good indicator of freight market rates and activity.  Further, market mechanics will propel smaller, time specific submarkets that are sold against dated letters of credit or against “just in time” inventory schedules.

The tanker market, disrupted by US COFR requirements which have created a “have” and “have not” class structure, is nonetheless ahead of where it was earlier this year. And, for those few owners fortunate or skillful enough to be positioned to trade with the US with COFRs, we saw 100% increases in rates in the last week. Continue Reading

The Spirit of Giving

December is here, and with that comes the chaos of the year end – reconciling our 1994 accounts and budgets, making 1995 projections, signing bonus checks (hopefully) for our employees.  And then there is the hustle and bustle of holiday cocktail parties and gift giving, the Christmas cards and fancy feasts.  But, as we revel in our profits for the year with a cup of wassail in hand, do we ever stop to think about those who are less fortunate than ourselves? This is the time of year to remember that money isn’t everything and that we should give something back to the industry in which we made our fortunes (or, at least for some of us, our livelihoods).

Many would ask, “What can I possibly do for the maritime industry?”  Here are several opportunities for giving which we hope you will consider.  Some require your time or talent, while others ask that you dig into your treasury.

•    Donate free shipping to international charitable organizations
Many international charities depend on the kindness of shipowners to get their relief supply commodities to those in need throughout the world.  Americares is one such charity.  Providing emergency medical and other disaster relief aid to over 80 countries, Americares relies on containership owners and operators to donate free or reduced-rate ocean freight for their shipments, and on local agents to forego port handling charges.  President Stephen M. Johnson explained that the retail dollar value of in-kind donations to Americares has increased exponentially in the past five years from $74m to $290m.  “For every extra box of supplies donated,” he said, “we require extra shipping.” Continue Reading

Shipping Executives Look Ahead to 1995

Marine Money polled a number of senior industry executives on a variety of the finance and shipping issues of 1994 and forecasts for 1995. Because we believe that, to some extent, their opinions and predictions govern the future, their comments are illuminating. To keep the forecasting aspect of this industry opinion poll vital and crisp, we’ve repeated only the vital and crisp.

Interestingly, reefers came up on both the “best” and the “worst” market lists; shipowners are unanimously against port state control; and interest rates were considered too high for more than short, two-year finance. Growth estimates tended to be optimistic; but anticipated charter rates seemed realistic, judging from factors making up the macroeconomic milieu. Continue Reading

Marine Money Results & Picks

Of the fortunes to be made in shipping securities, very nearly none were made in 1994. However, the few who prospered included some of last December’s Marine Money picks. International Shipholding, for example, did remarkably well. Its stock price skyrocketed 75% and earnings estimates are up (40% for 1994), according to investment broker Furman Selz Inc. Other picks like Carnival Cruise, Actinor and Kvaerner struggled through, adding vessels, contracts, or increasing ownership, perhaps.

But, 1994 was not a banner year for investing in shipping stocks – certainly nothing like 1993′s investment fury. Nevertheless, the future is looking bright in 1995 with the expectation that those which have been stalled, like Western Bulk Shipping, will log in a stellar year in 1995. Western Bulk stock fell 17.4% between 1992 and 1993, and stayed there for most of 1994. But Western Bulk, with its fleet of modern Handymax vessels, is well positioned to take advantage of growth in the Far East economies, and its vessels are currently operating with 13-14% return on dayrates. The Handysize markets have shown stability not witnessed in other shipping segments; and, we think Western Bulk always deserves attention.   Continue Reading

Missing the Spike: Downside of Forward Cover

In the past five to six months, a steady rise in dry cargo freight rates, marked by Capesize rates exceeding even the most optimistic expectations, has created quite a stir in time charter and spot markets. The increase, while leveling off somewhat in the last three weeks, gives no indication of subsiding. Raw materials are in demand, industrialized countries’ stocks are low, and economic growth continues.  For some, turnover in the last quarter is enough to cancel out loss-making that may have been suffered in the difficult first half.

Nevertheless, the question comes to mind: to what extent have some shipping companies, inclined toward more continuous rates of return and longer charters, been left out in the cold? For example, Anangel American Shipping Ltd., a shipping wonder dedicated solely to dry cargo (with the exception of a single tanker out of a fleet of 21 vessels) maintained forward cover on 97.5% of its fleet this year. That means it cannot take advantage of higher rates until April 1995 when the first of its four Capesize charters expires.

That’s why, despite higher rates, Anangel’s profits, in its most recently reported quarter, fell by 50% compared to the corresponding period in 1993, and its equity stocks continue to sell at a 10% discount to net asset value ($15.00/share on December 2). Continue Reading

Leasing Arm of Chinese Shipping Company Floats Shares

by K.K. Chadwa in Hong Kong

The Florens Group, wholly owned container leasing subsidiary of China Ocean Shipping Co. (Cosco), plans to float 25% of its existing shares this month to raise HK$600m to retire debt and expand operations. Managing Director Luk Chiwing said one-third, or HK$200m, will be used to retire high-interest rate bank loans. The remainder will be used to buy more containers and to expand into container manufacturing and port operations.

Currently, Florens owns more than 260,000 TEUs, ranking it among the ten largest container leasing companies in the world. Recently, orders were placed for 3,000 refrigerated TEUs from South Korea and Japan, costing about $320m. Dry containers are bought from China; and Florens was looking for partners outside the Cosco Group to set up joint ventures in Hong Kong or China. Continue Reading

Diogenes – Soft Circled

The tanker glut and the charter rate recession are finally near their end!  Or so Lehman Brothers Inc. apparently thinks. The New York-based investment bank expects the growth rate in tanker demand to exceed the growth rate in tanker capacity. It believes that, as supply and demand factors exert upward pressure on tanker utilization, charter rates and tanker prices will follow. Lehman has backed its beliefs by putting up $10 million in a private shipping mutual type fund. It also acts without a fee as the Exclusive Placement Agency and Advisor for a $150 million private placement  by Diogenes Investments Ltd. (Diogenes).  It has “put their money where their mouth is,” to coin an old phrase.

This offering is for “qualified institutional buyers” under Rule 144A of the US Securities Act, or qualified accredited investors. There is an extensive listing of what it takes to be a qualified accredited investor. An individual must have income in excess of $200, 000 currently as well as in the past two years. If he or she has a spouse and invests jointly, then it must be $300,000. An institution must be a bank, an insurance company, an investment company, a broker-dealer, a retirement plan, etc. The offering is for 150,000 preference shares at a price of $1,000 a pop. In addition to Lehman’s $10 million subscription, Diogenes anticipates receiving a subscription from Harvard Private Capital Group for $25 million. The fund’s other Managers – in the persons of Karl Meyer, former chairman of Marine Transport Lines, and Dr. Paul Eckbo, head of Marsoft, the macroeconomic shipping advisory firm – have also contributed $2 million.  A minimum subscription of $75 million is required for its first closing.  The minimum investment per investor is  $5 million.  So, with Lehman and Harvard, Diogenes is almost halfway there. Continue Reading