You are on page 1of 128

Global Shipping Markets

Review 2008
HSBC Shipping Services

Global Shipping Markets Review 2008

Issued by HSBC Shipping Services Limited

3rd Floor, 28 Bedford Street


Covent Garden
London
WC2E 9ED
Tel: +44 20 7719 6600
Fax: +44 20 7719 6626
E-mail: research@hsbcshippingservices.com
Global Shipping Markets
Review 2008
HSBC Shipping Services Limited

Copyright © HSBC Shipping Services Limited 2008.

No part of this publication may be reproduced, stored in a retrieval system, be transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of
HSBC Shipping Services Limited.
Produced by Aura Design Limited, London 03/08 AD1015
Contents

 HSBC Shipping Services Limited


Introduction 4

Issues 6

Bulk Carriers 18

Tankers 41

Containerships 62

Shipbuilding 84

Conclusion 98

Appendix 1: Bulk Carrier Fixtures 100

Appendix 2: Bulk Carrier Sales 106

Appendix 3: Tanker Fixtures 110

Appendix 4: Tanker Sales 113

Appendix 5: Containerships Fixtures 116

Appendix 6: Containerships Sales 120

Global Shipping Markets Review 2008 


Introduction

 HSBC Shipping Services Limited


How the markets can change. This time last year, when make money from loans and resurrect the credit markets.
we were writing GSMR 2007, the financial markets of the It does nothing to help homeowners, many of whose
previous twelve months were characterised by excessive mortgage repayments are based around long-dated bonds,
liquidity and increasingly large leveraged buy-outs and share as home loan rates have now returned to September 2007
buy-backs fuelling equity market gains in the transatlantic levels. Their relief comes in the form of the inauguration of
economies. Now we are faced with the evaporation of the $168bn stimulus package that returns cash to taxpayers
that liquidity, triggered by the unquantifiable scale of the in the summer. The priority is the banking system first, the
subprime losses of many global lenders, and paralysis in household second. So, consumers are left to suffer higher
the inter-bank loans market. Big corporate takeovers may gasoline and food prices and lower house and share values.
no longer be financed and the premier league of investment They will be forced to save even as inflation will erode the
banks are recapitalising by issuing equity and selling value of their savings.
convertible bonds to sovereign wealth funds from China,
Asia and the Middle East. The flood of billions of trade and The pain being inflicted on US homeowners will not
petro dollars from east to west dwarfs the amount of aid subside quickly as further house price falls are expected.
that has been distributed to the world’s poorer nations over Neither will the crimp on spending ease anytime soon as
a much longer period as the roles are being reversed. voracious emerging market consumption of energy and hard
and soft commodities will keep gasoline, heating oil, grains
Last year we wrote of “strong corporate profits, high oil and and meat at persistently high and less affordable prices.
commodity prices, robust equity and housing market gains Therein lies the big debate for 2008, the extent to which our
and the still low cost of borrowing.” These conditions were increasingly interlinked world is also causing a polarisation
generally beneficial to the whole supply chain from the raw between developed and developing economies. The IMF
material supplier at one end, the processing companies rates US economic activity at 21% of the global economy
in the middle and the consumer at the other end. Now and, out of that, more than 70% is attributable to the now
most of that has changed. Future corporate profits will be struggling consumer. We will examine some of the issues
harder to come by, equity and housing markets are weaker that affect global demand, which is critical to seaborne
and consumers and corporates alike are being squeezed trade, in an effort to gauge whether rising investment and
by persistently high energy, food and commodity prices. spending in the emerging world can combine with bank
Borrowing has become more difficult as credit conditions and home bail out packages in the US to rescue the global
have tightened, thus depriving parts of the global economy economy, and with it global shipping demand, from
the wherewithal to support continued growth. Global a severe downturn.
inflation is a real and evident threat although fighting it has
been suspended in the US in favour of monetary and fiscal The cover design of GSMR 2008 is abstract, as usual, and
stimulus packages aimed at revitalising the economy. this year contains the elements of coal and gold which are
likely to continue featuring prominently in both shipping and
Since August 2007, the Federal Reserve has cut the investments in 2008.
overnight federal funds rate by 225bps to 3% and the
futures market is already pricing in a further 75bp cut to
2.25% at its March 18 meeting. This move is primarily
aimed at steepening the forward yield curve to help banks

Global Shipping Markets Review 2008 


Financial Markets – All Change Please $400bn, much higher than the $120bn that global financial
institutions have written off so far and well above the
2008 started with a heavy sell-off in the world’s equity
Federal Reserve’s estimate of losses of $100-150bn1.
markets as fears of a deepening US recession gained
There are two more torpedoes in the water in the form
traction. The decoupling theory, espoused by many
of credit default swaps (CDSs) and the threat that rating
economists in 2007, has been unceremoniously jettisoned
agencies will downgrade the monoline insurers. These
by many of its former proponents. The weakening US
provide a risk transmission mechanism to the broader
housing market is seen as spreading beyond subprime into
financial and insurance markets spilling problems well
prime and exporting itself to similarly inflated markets in
beyond the residential houses where it all started.
Europe such as the UK, Ireland and Spain. The expectation
of rising job losses in housing-related, retail and financial Shipping Markets – Fundamentals have
services, combined with falling home equity, is set to not Changed
reduce consumer spending which accounts for over 70% of
US and two-thirds of UK economic activity. This traditionally Shipping has been dragged from the shadows in recent
has a knock-on effect on investment at the corporate level years, following four years of above trend growth since
and shrinking profitability, a reversal of the process that led 2003. During that time, the universe of stock market listed
to soaring profits in 2006 after five years of balance sheet shipping companies has grown considerably, as has the
rehabilitation from the bursting of the dotcom bubble number of equity analysts that follow them. The freight
in the year of 2000. futures market has also blossomed with the traded volumes
rising exponentially in recent years. The three main sectors
The problems in financial markets are far from over, of dry bulk, tankers and containers enjoyed a synchronised
having come to attention as the US subprime mortgage boom in 2004 but have since gone their own ways as
crisis in August 2007. Now the problems are spreading their own macro supply and demand forces have asserted
throughout the global financial system. A method of themselves. But, overall, they are all in comparitively good
financial engineeering known as securitisation saw shape. The trends of globalisation, industrialisation and
bundles of mortgages being parcelled together and sold outsourcing have inspired a boom in commodity demand
on in tranches with varying coupon rates according to that has quite understandably been matched by increasing
the perceived level of underlying risk. The triple-A rated demand for ships to move this diverse range of goods to
bonds were supposed to be insulated from any fallout end-users.
from the lower-lying credits, but it turned out otherwise.
A collateralised debt obligation (CDOs) is the generic We may be at the early stage of a super-cycle in
name for a bond issued by securitising assets such as commodities but the extractors and sellers of raw materials,
mortagages (CMOs), loans (CLOs) and bonds (CBOs). metals, energy, goods and services, wary of earlier false
These instruments gained in popularity with banks as a starts, have been slow to respond to what has become a
means of, theoretically, transferring credit risk and freeing sustained increase in demand. They have been reluctant
up balance sheet capacity, thus meeting regulatory capital to invest adequately in new production for fear that the
management demands. But, in their insuring and reinsuring necessarily time-lagged response would only introduce
a circular risk pattern was created and the returning new capacity to coincide with the next cyclical downturn.
boomerang is unreognisable, and much larger, than This happened to OPEC in 1997 which responded to calls
the one that was despatched. to increase production only to see prices fall to below
$10 per barrel at the end of 1998 after the Asian financial
Widespread mortgage defaults in the US housing market crisis, the Russian sovereign debt default and the collapse
have caused these securities to be unwound. There has of LTCM. New investment in mines, railways and ports
been contamination from the lowest to the highest credit has so far failed to meet accelerating demand for raw
tranches and as investors have rushed to exit their positions materials and steel. In the energy sector, the same can
the absence of buyers has made it impossible to value be said of investment in upstream oil and gas production
these instruments. Banks have been forced to take massive and downstream refining. Similar issues affect container
writedowns. After the February G7 meeting in Tokyo, the terminals and landside intermodal infrastructure.
German finance minister suggested that the losses on
securities linked to US subprime mortagages could reach By mid March, estimated writedowns have risen to around $150bn.

 HSBC Shipping Services Limited


In contrast, one area that has seen plenty of investment than last done fixtures in the physical market, in order to
is the midstream sector: shipping. Bulging orderbooks for bring the indices down. The combination of all these factors
bulk carriers, tankers and containerships stretch all the succeeded in driving both sentiment and rates down and
way out to 2012 and include new and larger sizes than weakness in the large ship segment was quickly replicated
anything seen before. Shipbuilders responded to demand by in the smaller sizes.
increasing existing capacity as well as building new facilities
and the fleet is quickly modernising as a result. While rapid All of this was unfolding against a backdrop of negative
growth in the merchant fleet creates its own pressures (on, feedback from financial markets as the bad news that was
for example, steel and engine supply, skills and manpower) being transmitted by the shipping indices was regarded
it also asks important questions of miners and oil producers. as further proof of impending global economic weakness.
In 2007 and early 2008, shipowners have suffered from Precipitous falls in the world’s equity markets and, more
the inability of exporters to supply sufficient cargo for their importantly, concerns over the viability of the monoline
ships to meet consumer demand, whether it be crude oil or insurers and the $2.4 trillion of bonds that they guarantee,
products or iron ore or coal. Much of the blame was put on led the Federal Reserve to cut rates on 22 January by an
weather-related and other reasons beyond human control alarming 75 basis points2 , ultimately causing further fear
but, regardless of the reasons, it was sufficient to seriously in the markets. Congress voted to pair monetary easing
undermine sentiment and negatively impact earnings. with a fiscal stimulus package worth over $150 billion in
2008 alone in an attempt to re-ignite consumer spending.
Many financial markets commentators interpreted the sharp This series of events, whether actually related or not,
fall in the Baltic Dry Index from mid November as a forward demonstrates the power of sentiment to reinforce negative
indicator of slowing demand in the world economy. The impulses and turn them into self-fulfilling prophecies.
drop in the BDI was largely caused by its Baltic Capesize The underlying fundamentals in shipping demand had not
Index constituent which fell after installation damage at changed and, after damaged infrastructure was repaired,
Itaguai/Sepetiba in Brazil led its operator, Vale, to declare iron ore shippers have been playing catch-up.
force majeure and cancel shipments. This injected capesize
vessels onto the spot market and precipitated a scramble Spenders and Savers Change Places
for cargo ahead of the end-year holidays, thus undermining
The dynamics of global demand are now in transition
rates. As Itaguai is the smallest of four export outlets
as spenders (for example, in the US, UK and eurozone)
controlled by Vale, the reaction seemed overdone although
become savers while savers (for example, in China, India
it may have suited Vale’s agenda in bringing freight rates
and the Middle East) become spenders. This rebalancing
down. However, in early January, Rio Tinto also declared
process has only just started. US households that mobilised
force majeure after a cyclone in the Pilbara region of
both secured and unsecured credit to binge on goods from
Western Australia interrupted rail shipments of iron ore to
export-driven overseas economies are now having to cut
port. This amplified the problem as the world’s two largest
back spending in order to pay the bills. The subprime crisis
iron ore exporters suffered simultaneous delivery outages.
and falling housing equity has brought to an end the use

These supply interruptions coincided with ongoing price of houses as secondary ATMs, and unsecured credit in the

negotiations between the shippers and China’s leading form of credit cards and loans is now less widely available

steelmakers with the iron ore sellers rumoured to be and is also more expensive. In the meantime, the export

wanting a 70% increase on 2007/8 FOB contract prices. economies of Asia that have accumulated huge dollar

The new price would commence 1st April 2008 and would trade surpluses are now faced with the task of generating

still be cheaper than inflated spot market prices which were increased domestic demand (consumer spending and

double or more the old contract price. With the tolerance investment) in order to compensate for this altered state.

on current contract quantities in sellers’ option, and with


Given the severity of recent falls in equity markets, and
Chinese stocks being drawn down, this certainly applied
the problems that the subprime crisis has caused so
pressure on the steelmakers to fix a deal. Meanwhile
many leading banks, the Federal Reserve has moved to
capesize freight was being hammered as some big players
in the futures market were believed to be exploiting this 2
The Fed cut rates from 5.25% in Aug07 to 3% in Jan08. 0.5% in
situation by aggressively selling futures, backed by less Sep07, 0.25% in both Oct07 and Dec07 and then 0.75% on Jan22
and 0.5% on Jan30, 2008.

Global Shipping Markets Review 2008 


slash interest rates and Congress has elected to provide a set to continue opportunistic investments in weakened
massive fiscal stimulus package. It is unclear of the extent western financial institutions which serves an important
to which the ECB and BoE will also move to ease monetary role in shoring up confidence in an ailing market.
policy and whether European governments can temporarily
abandon budget rules in order to head off the ill winds that The power of the American consumer is undeniable.
are surging across the Atlantic. Their collective propensity to A US investment bank has pointed out that US consumption
act is lower than that in the US, in part because of a single reached 72% as a proportion of GDP in 2007, not far short
mandate to maintain price stability (with no Fed equivalent of $10trn. This compares with about $1trn of consumption
of macro economic oversight) and in part because they are in China and $650bn in India. In 2007, consumer spending
constrained by EU budget deficit caps and the UK’s ‘golden in China rose 17% and is making an increasingly important
rule’ of only borrowing to invest through the cycle. There contribution to overall growth but compensating for, say,
is no corresponding mandate in Europe for central banks a 5% (or $500bn) decline in US spending would require a
and governments to throw lifelines to their economies in team damage limitation effort from the wider emerging
troubled times. markets. Still, in absolute macro terms, an 11.4% rise in
China’s GDP to $3.4trn made a greater contribution to
The extraordinary measures being taken in the US to global growth than did a 2.2% rise in US GDP to $13.8trn in
prevent its economy from stalling invite the question of 2007. If adjustments are made for relative prices, in order
what measures are being taken at the other end of the to compare relative spending power or purchasing power
supply chain. The answer appears to be, not much. Large parity, then China’s adjusted GDP of $6.2trn is almost half
export-driven economies, such as China and Germany, that of the US and 10% of global output.
stand to suffer fallout from weakening demand in the
transatlantic economies but both have the capability to Inflation, Exchange Rates and Trade
mount a damage limitation exercise by stimulating domestic
Inflation is now recognised as a global problem. It puts its
demand and increasing investment through a combination
own constraints upon the conduct of monetary policy as a
of fiscal and monetary policy measures. During 2007,
means of reflating demand as western consumers wake
China took a sledgehammer to the head of its economy
up to the need to save rather than spend. On 20 February,
by restricting money supply growth, raising borrowing
WTI crude again hit $100 per barrel on fears that OPEC will
rates and reserve requirements, removing VAT rebates
not raise output in the face of persistent high prices, and
and imposing export tariffs and closing down small and
rather that it might cut output in order to head off seasonal
inefficient businesses. Given changing circumstances
demand weakness in the second quarter. Food prices
overseas, now might be a good time to progressively
everywhere are soaring as adverse weather conditions in
reverse these strictures.
major growing areas reduce production, as grain crops are

If part of the accumulated savings in countries such as diverted to ethanol for transportation and as Asian diets

Germany, China and the Middle East could be teased out become more grain and meat intensive. The coals and

into the economy then there would be less chance that the iron ore raw materials that are needed for steelmaking and

current reflationary actions in the US will simply be delaying power generation are rising sharply, with iron ore contract

the final point of reckoning. A retooling of global demand prices up 65% year-on-year in 2008/9 and thermal and

and spending has the potential to iron out the severe trade coking coal spot prices at double last year’s contract prices.

imbalances that have built up in recent years. China will Steel prices and base and precious metals are all rising,

have a forecast current account surplus of about $380 nothing is left untouched.

billion in 2007, and foreign exchange reserves of more than


It is countries such as China, India, Russia and the UAE
$1.5 trillion, and can thus increase social security payments,
that are fuelling an emerging markets commodities boom,
accelerate investment in the rural interior and cajole
forcing up prices in a supply-contrained world. This drives
corporates into paying higher dividends. Such a sample
up prices for everyone. The transatlantic economies, having
of measures would free up money for broader spending.
outsourced the manufacturing of everything from toys and
Equally, Germany’s large trade surplus could allow it to
shoes to computers and furniture, can no longer exercise
remove recent tax increases in order to stimulate stagnant
any control over prices. As China raises its factory gate
consumption while the Middle Eastern oil economies look
prices to reflect higher input costs, and as western retailers

 HSBC Shipping Services Limited


eventually have to pass these on to struggling consumers, seizure for development, thus alienating land occupiers,
symptons of stagflation are evident: higher prices coinciding while encouraging risky property speculation by the urban
with weakening demand, rising inflation coinciding with classes in an already hot market. This is seen as a recipe
weaker economic growth. The US Federal Reserve has for alienating both the rural and urban populaces, hence the
thrown caution to the wind in cutting interest rates by need to remove liquidity from provincial lenders before it
225bps since August 2007 to 3% today. Other central banks has the chance to sow the seeds of social unrest. This is
are being more cautious, concentrating more on containing the greatest fear of the central government.
inflation. But lower US rates reverberate around the globe,
not least in China where renminbi rates are moving in the Curbing the rise of social discontent involves various
opposite direction, thus putting pressure on the ‘peg’ and measures such as increasing wages and improving welfare
increasing the costs of currency sterilisation. for rural workers, providing jobs and housing for migrants
from the countryside and capping food and energy prices.
Lower US rates are ramping up inflationary pulses in China For several years now the costs of fuel oil, diesel and
where headline inflation crept up to 7.1% annualised in gasoline have been allowed to rise from earlier fixed
January . Its $1.5 trillion of foreign exchange reserves are
3
levels. This has reduced the losses of state refiners which
earning less even as the total grows in line with the rising have had to buy crude oil at rising market prices only to
trade surplus. The renminbi has been allowed to rise against sell products domestically at losses, only to be partly
the dollar by about 13% since mid-2005 but this accelerated recompensed by government at a later date. If the spread
to an annualised 19% in January. This has helped to becomes too wide, then the refiners export products
rebalance trade flows, increasing China’s imports while within the region at market prices causing shortages in the
reducing China’s exports. The weaker dollar has achieved domestic market, inviting state intervention as lengthening
the converse for America by increasing its exports at the gas station queues and freezing homes breed discontent.
expense of its imports. Both developments are welcome The early 2008 chill was partly caused by the collision of
from economic, trade and shipping perspectives. But, a free-floating coal prices with state-set electricity prices. As
problem for the People’s Bank of China, the central bank, the miners raised coal prices so the power stations shut
is that the stronger RmB/dollar exchange rate is causing down capacity rather than suffer losses.
it huge losses. As its exporters accrue trade dollars the
PBoC exchanges these for local currency then, in order Now, in the interests of social harmony, the government
to reduce money supply and contain credit risks, it mops is stepping in to cap food prices as the costs of staple
up this excess liquidity by issuing renminbi-denominated grains and pork soar on the back of shortages and hoarding
bonds. The coupon rate of these is rising in line with the by merchant interlopers. The imposition of price controls
strengthening renminbi just as its earnings on its growing on food and the reimposition of price controls on energy
dollar holdings are falling in line with US rates. products are backward steps in China’s economic reform
program. Economic reform will happen but at a pace to
The PBoC is making billions of dollars of losses out of this be determined by the government as central planning and
sterilisation program but needs to remove excess currency social and political stability must always take precedence
from the domestic banking system. Failure to do so will over market economics. Trade issues are closely linked to
only increase inflationary pressure as well as allowing the RmB/dollar exchange rate, interest rates and inflation
local officials to continue funding pet projects that tend to and the former are collectively central to the shaping of
contribute to fresh non-performing loans. Provincial cadres macro government policy in Beijing. Such linkage seems
are judged on local economic growth which mandates lost on several outspoken US senators who have long
investment in more factories and business parks and been calling for a drastic and immediate rise in the
the creation of more houses, roads and jobs. Some local renminbi at the threat of a US backlash in the form of
banks are said to be inclined to fund these projects almost punitive trade tariffs.
regardless of the ability of the projects to repay principal,
or even interest. The system can and does lead to land China has always maintained that its currency will
appreciate at a controlled pace that would avoid any
3
This rose to 8.7% year-on-year in February, the highest since May economic disruption. The appreciation is indeed underway
1996, maybe influenced by CNY and the inflationary effects of the but some of the adverse ramifications are already plainly
winter strorms.
visible, thus supporting the Chinese case for gradual

Global Shipping Markets Review 2008 


over sudden change. A stronger renminbi is needed both or support private equity firms that have lost their access
to reduce the trade surplus, by making exports more to leveraged loans on cov-lite terms. These emerging
expensive, and to reduce the soaring import costs of oil, economies can mobilise their trade dollars and unlocked
coal, iron ore, base metals, timber, grains, foodstuffs and so savings in a sensitive, non-threatening way to compensate
on. Reducing these import costs is probably more important for trade deficits and absent savings in the developed world.
to social stability than maintaining such a high level of They should be allowed to do so; role reversal and dented
export growth. Without adequate food and housing many pride should not derail the process.
workers would not be fit to toil in the factories that support
China’s exports. Thus, the strengthening renminbi is a The two-speed development that we see unfolding is more
useful but imperfect anti-inflationary device. The renminbi appropriately one of increasing interlinkage through freer
should continue to strengthen against the dollar and trade, the freer movement of capital and labour across
China’s imports look set to maintain the current four- borders and increased political and social engagement
month trend and continue to rise faster than its exports. between the two in the interests of fighting poverty,
climate change and social injustice. Globalisation is also
The Paradox of Decoupling and Globalisation a process rather than an achievable objective, as increased
interaction between the developing and developed
Last year’s theory that the emerging markets could world creates frictions that undermine the process itself.
decouple from developed markets has lost some of its Current account imbalances and accruing trade and
credibility in the eyes of many of its former proponents. petrodollar surpluses in Asia and the Middle East have
Some of these are stock market analysts who interpreted stirred protectionist impulses in the West that could block
in recent falls in all the world’s major stock market indices freer trade. But, while the accrual of large surpluses can
either a recoupling process or evidence that emerging antagonise debtor nations, it is difficult to see how the
markets are now unable to insulate themselves from fallout latter can object to those surpluses being used to overcome
in the much larger transatlantic economies. However, stock recent liquidity problems amongst a handful of American
market indices, along with the recently adopted freight and European banks. Beggars cannot be choosers, and
market indices, are only an indication of value sentiment not all sovereign investors have ultimate strategic aims.
rather than a true reflection of underlying economic
and trade fundamentals. Decoupling is a misnomer as One could argue that in bailing out the world’s largest
at its extreme it implies total separation, but the notion investment banks from their subprime woes, the sovereign
of severance in economic ties between emerging and wealth funds have now completed the circle. It started
developed economies is at odds with the reality of a with the post dotcom recession of 2001, a year in which
globalising world. A powerful block of emerging economies the Fed cut interest rates from 6.5% to 1.75% with rates
is increasing its internal trade, generating stronger domestic bottoming out at 1% between mid-2003 and mid-2004.
demand and growing at a faster rate than the transatlantic This pulled the country out of recession but also created
economies and Japan. They are assertive and they are asset bubbles in property and equities fuelled by the
closing the gap. availability of cheap credit. Excessive US consumer
spending helped the export-orientated Asian economies
Now it is the emerging economies running surpluses and build ever-larger dollar surpluses which were then recycled
the developed economies running deficits and it is the into US treasuries and other dollar assets in attempts to
wealth of the former that is recapitalising the financial keep US interest rates down, the current account deficit
institutions of the latter. Leveraged buy-outs may have well-funded and the consumer in the shopping malls.
come to a standstill but sovereign wealth funds could, The subsequent sequence of seventeen 25bps rises in
if permitted, selectively step in to fill the void left by the rates in the two years between mid-2004 and mid-2006,
leveraged finance arms of banks. Global M&A transactions needed to sustain adequate capital inflows to finance
are not paused just because bulge bracket banks are the widening deficit, caused inevitable distress to
bruised. Rather they are making room for much larger many homeowners on floating rate mortgages.
national funds that have far greater firepower and much
longer investment horizons. Their main challenge is to The ensuing defaults in the subprime sector soon spread
appear benign, passive and non-strategic and to this end into the prime sector and the crisis that was expected to
they may increasingly link up with local buy-in partners hit borrowers mutated into a problem for lenders as both

10 HSBC Shipping Services Limited


their forecasting and securitisation models broke down. the central government is committed to creating jobs and
The acronyms of CDO, SIV and CDS leaked into the increasing prosperity or risk serious social unrest. China’s
vernacular as banks began to realise that even the highest resilience to external shocks depends upon the extent of
rated tranches in their sliced and diced securities were its reliance upon exports and its ability to increase domestic
consumption and spending to compensate for slowing
being contaminated by the worst. Analysing the extent
overseas demand.
of losses and liabilities became difficult as the paper
trails were so complex and intertwined with little clarity On 30 January 2008, US GDP figures were released by
as to who ultimately held the underlying default risk. the commerce department showing that the economy
Instruments that were designed to limit and isolate risks grew by only an annualised 0.6% in the last quarter of
actually transmitted and propagated them into the global 2007 after 4.9% in the third quarter. This suggests that the
financial system. The interbank market broke down and the $13.8 trillion US economy may already be in the process of
credit markets seized up, prompting Fed and ECB liquidity sketching out a recession. Only the day before, the IMF4
injections totalling $660 billion. That bought time for the forecast that US growth would slow to 1.5% in 2008 from
banks to start identifying their losses and to seek external 2.2% in 2007 and that world output would fall from 4.9%
last year to 4.1% this year. It sees the Euro-15 sliding from
funds to recapitalise their battered balance sheets.
2.6% to 1.6% and Japan from 1.9% to 1.5%. Emerging
The sovereign wealth funds of China, Singapore, other Asia markets and developing economies are expected to expand

and the Middle East stepped in to prevent a financial crisis by 6.9% in 2008 after 7.8% in 2007. Developing Asia is
forecast to fall from 9.6% to 8.6% while China will slip from
that began in the US from becoming a global economic
11.4% to just 10.0%. Africa is predicted to grow from 6.0%
meltdown. They have used dollar gains that have been
to 7.0% and the Middle East to maintain momentum by
accumulated from selling manufactures, services, oil and
posting 5.9% in 2008 after 6.0% last year.
gas to the transatlantic economies, to shore up their own
interests as stakeholders in the global trading system in With slower growth in the developed world economies
which each needs the other in an increasingly connected the degree of China’s dependence on exports becomes a
world. Meanwhile, the paradoxical decoupling process relevant debate, although there is no consensus as to its
has really proven to be a link-chain of opposites: saver true extent. In 2007, total exports were about 1.3 times
and spender, seller and buyer, surplus and deficit, lender total imports but in the last quarter imports exceeded
and borrower, rescuer and rescued. They have become exports by value in each of those three months. It is also
worth bearing in mind that China is a large processing
positioned at opposite poles of what appears to be a zero
centre at the heart of an Asian swap-shop that imports,
sum trading game. In order for the game to continue, an
exports and re-exports raw materials, semi-finished and
orderly reversal of roles is required to create better balance
finished products. The earliest manifestation of this was
and in a more stable and sustainable trading environment.
in the 1980s when traders would fund the purchasing of
Decoupling and globalisation are but opposite sides of the
iron ore for cash-strapped Chinese steel mills and only
same coin. get payment, plus margin, some months later when the
exported pigiron or finished steel was paid for by, for
How Reliant is China on Exports? example, the Japanese purchaser. The system is now
much more complicated and the traded goods range
China is credited with having generated as much as
from low-value to high-tech.
80% of the growth in dry bulk demand over the past five
years. Thus, if China were to be severely impacted by a Headline figures suggest that China’s exports surged
US recession then we could expect the dry bulk trades from 20% of GDP in 2001 to almost 40% in 2007, making
to suffer in tandem. In attempting to assess the risks to exports a key driver of growth and implying that the country
Chinese growth it is worth remembering that GDP has is vulnerable to a consumer slowdown in the US and
expanded at a trend rate of 8% over the last thirty years Europe, the main recipients of the finished goods. However,
since Deng Xiao Peng opened the country up to foreign a recent study by The Economist concluded that the 40%
trade in 1978. In recent years China has enjoyed accelerated figure is misleading as it does not compare like with like,
exports being measured as gross revenue while GDP is
double-digit growth with an estimated 11.4% in 2007.
Most forecasters do not expect a fall below 10% in 2008 as measured in value-added terms. If exports are measured in

4
Based upon Revised Purchasing Power Parity

Global Shipping Markets Review 2008 11


purely value-added terms, then the true export share is just involved in shipping and trade. Moving away from exports,
under 10% of GDP making China slightly more exposed to the other plank in global demand is domestic consumption
exports than Japan, but less export-dependent than either and investment. Consumer spending rose three times
Taiwan or Singapore. In early January, Singapore reported faster in developing countries in 2007 than it did in the
a contraction in its GDP in the fourth quarter of 2007 which developed world with HSBC economists observing a 17%
was partly attributed to weaker exports. Finally, only rise in real capital spending in emerging economies in 2007
6% of China’s total workforce is engaged in export- compared with just 1.2% amongst developed nations.
orientated manufacturing. Furthermore, just 15% of investment in China is linked to
exports whereas over half is pumped into infrastructure and
This would indicate that China is far less vulnerable to a US property. Lastly, over 95% of China’s growth in the year to
slowdown or recession than the headline export figures Q4 2007 came from domestic demand.
suggest. This notion is supported by anecdotal evidence
from the 2001 IT market collapse when the annual rate of In conclusion, China is a lot less reliant upon exports in
growth in China’s exports fell by 35% from peak to trough general, and exports to the US in particular, than is often
in the 2000-2001 period, yet overall GDP growth contracted perceived. Only 7% of total investment is directly linked
by less than 1%. Furthermore, even though the headline to export production, rising to 14% if adding in indirect
exports-to-GDP ratio has nearly doubled since 2000, the domestic inputs. Much further investment is still needed in
value-added share of exports in GDP has been quite stable residential housing and infrastructure to support 15 million
rising from about 7% to just under 10%. The Economist people a year moving into cities. Central government can
explains this by China’s gradual shift in focus from exports be expected to fast-track such spending if there is any need
with a high domestic content to new export sectors that to compensate for a slowing export contribution to growth,
use more imported components. Thus, value-added exports as it has both budgetary and monetary tools at its disposal.
have risen by far less than gross export revenues meaning Given Beijing’s limited success in slowing the economy via
that China is not as exposed as is commonly assumed to higher borrowing rates and bank reserve requirements and
weaker exports to the US. tighter money supply, a natural slide from 11.4% to say
around 10.0% GDP growth in 2008 may be just the ticket in
The Economist tells us that developing countries have seen helping to relieve inflationary pressures at home.
their exports as a percentage of GDP rise from just over
25% in 1990 to just under 50% today. Exports to America An American Obsession with
have already crumbled. In 2007, growth in China’s exports Energy Security
to the US slowed to 5% in dollar terms compared to a 60%
rise in its exports to fellow BRIC members (Brazil, Russia Even if one does not believe in the ‘peak oil’ theory, then
and India) and a 45% rise in its exports to oil producing one should at least ackowledge that most of the easily
nations. Half of China’s exports now go to emerging extractable oil has already been found. The biggest oil fields
economies. South Korea’s exports to the US fell 20% in the in the world such as Saudi’s Ghawar, Kuwait’s Burghan and
year to February 2008, but total exports rose 20% thanks to Mexico’s Cantarell are all recognised as being in decline.
developing country demand. In 2007, emerging economy The biggest find of 2007 was offshore Brazil in the Tupi
exports to the US have now fallen to 13% of the total while field where initial estimates by Petrobras put recoverable
their exports to China have risen to 16% of the whole. reserves at 5-8 billion barrels, that is between 36% and
The BRICs, which are the four largest emerging economies, 58% of Brazil’s proven existing reserves of 13.9bn barrels
accounted for 40% of global GDP growth in 2007 and are at end 2007. 25% minority partner BG puts the figure at 9bn
the least dependent on the US. Exports to the US account (about the size of Norway’s reserve base) with the potential
for just 8% of Chinese GDP, 4% of Indian, 3% of Brazilian for up to 18bn barrels of oil equivalent. This will eventually
and 1% of Russian. help Brazil to become a major net exporter of crude oil
and products to overseas markets. The trouble is that the
The aforegoing figures would seem to present a compelling deposit lies beneath 2,000m of water and a further 4,000m
argument in favour of decoupling, in the sense that the of salt and rock. Total development costs are estimated at
emerging economies are replacing falling US demand by $70-120bn and production start-up would not be
trading amongst themselves. This is a tough reality for before 2012-2013.
America to accept, but it is music to the ears of anyone

12 HSBC Shipping Services Limited


Tupi is the world’s largest oil find since a 12bn barrel regardless of environmental risk or technological challenge
discovery in Kazakhstan in 2000. Oil production is in decline rather than upon conservation and restraint. Maybe North
in Indonesia, Mexico, Iran and the North Sea with output America is resigned to the IEA forecast of a doubling of
from Venezuela and Nigeria well below earlier levels. vehicles on roads by 2030 as China and India weigh in.
Persistently high oil prices and America’s stated ambition
to reduce dependence on overseas energy suppliers are Food on the Table or Fuel in the Tank?
playing in favour of ethanol in fuel and the exploitation of
Everyone, everywhere is aware that food prices are rising
Canada’s tar sands. These alternative supplies, native to
just as they are conscious of high gasoline and heating oil
North America, respectively rely upon massive subsidies
prices. These volatile food and energy components are
and high oil prices for their raison d’etre. The destruction of
included in headline inflation figures but excluded from
330 square kilometers of forest around Fort McMurray in
the core inflation figures that most western governments
Alberta, the heart of the oil sand operations, is testimony to
use to assess price stability. Upward pressure on both raw
the end of the era of easy oil. Daily output is now 1.2m-bpd
material input prices and factory gate output prices are now
which is expected to reach 6m-bpd by 2050 as an area the
commonplace from China and India to the US and UK.
size of Florida is laid waste in pursuit of 175bn barrels of
recoverable oil. To put this in context, the world’s largest The monetary policy reaction in the US has been to slash
producer, Saudi Arabia, is credited with 259bn barrels of interest rates in order to assist the banking system. This
recoverable reserves. is being done regardless of the devastating effect this
is having upon the value of the dollar and the collateral
Oil sands are now making up an increasing portion of
damage that is being inflicted upon consumers and
Canada’s 3.2m-bpd crude oil output, although at some
spenders worldwide as prices inflate. In contrast, the ECB
cost to the nation’s green credentials having ratified the
and BoE are being much more cautious as they focus on
Kyoto Protocol in December 2002. A recent Bloomberg
price stability and inflation control while the BoJ has no
environmental impact study analysed the energy intensive
monetary weapon with rates already effectively at zero,
process of separating bitumen from sand and converting it
a fast rising yen and no room for manoeuvre.
into usable oil. Each barrel of crude from oil sands requires
the processing of two tonnes of sand (the weight of a The exploitation of oil sands for fuel is based upon fear
Toyota Highlander SUV); needs 250 gallons of water (the of being cut off by occasionally hostile overseas energy
daily consumption of a US family of four); consumes 1,400 suppliers. The adoption of corn for ethanol production for
cubic metres of natural gas (enough to heat an average US use as a gasoline additive is an extension of the same fear.
home for 5.6 days) and produces 110 kilograms of carbon If the two together enable people to keep driving their
dioxide equivalent (the same as producing three barrels cars at the same time as providing some sense of energy
of light crude). A barrel of this synthetic crude costs $50, security then half the game is won. The fact that these
including mining and refining, whereas existing oil fields in processes are variously inefficient, pollutive, subsidised
the Middle East have an average cost of $10 per barrel. and overpriced is of little consequence if the positives play
well politically to the voting public. One consequence of
The United States is responsible for almost 6 billion tonnes
increased ethanol and biofuel production is a 24% jump in
of carbon dioxide emissions annually, 25% of the world’s
UN’s Food and Agricultural Organisation’s food price index.
total. However, US emissions rose only 2.3% between
In 2007, food oils rose 66%, grains 45% and meats 16%.
2000 and 2005 compared to Canada’s 13% to over 631
Last year we wrote about tortilla riots in Mexico City.
million tonnes, according to the US Department of Energy.
This year it could be much worse if governments are
The oil sands industry must be a significant contributor
blamed for their inability to feed their own people.
to this rise as, on a per capita basis, Canada only just lags
behind the US at 19.2 versus 20.1 tonnes. By way of The statistics are quite illuminating. Grain stockpiles are
comparison, Germany is half of the US figure, France one- at thirty year lows and yet drought conditions in Australia
third and Brazil is less than one tenth. This illustrates how and Brazil are hampering the ability of the biggest global
desperate the search for new and unconventional sources producers to increase export supplies. Shortages in Russia
of oil has become. The emphasis is now on new finds and China have led their governments to curtail grain
exports. 2.4 billion people in China and India are seeing food

Global Shipping Markets Review 2008 13


prices rise as more agricultural land falls to development One day, seaborne oil tankers will make a living out of
and what is left is so intensively farmed that it is failing to transporting fresh water as the latter becomes increasingly
respond to yet more fertiliser. This coincides with a switch scarce and as its value rises above oil. We can do without
to more protein-rich diets and increased meat consumption. oil, but we cannot do without water.
Asian countries whose currencies are still pegged in some
way to the dollar are finding that a weak dollar and looser Mine Games
monetary policy are stoking inflation that was already
In early 2008, the mining world was bracing itself for the
being ratcheted up by high energy and food prices.
prospect of consolidation between some of its largest
Tentative moves by governments to remove domestic
operators. BHP Billiton had tabled a 3-for-1 share offer
price caps on these staples are now being unwound with
for rival Rio Tinto, valuing its target at almost $120 billion,
negative implications for much-needed reform and a shift
while Vale was preparing a bid for Xstrata that is estimated
to market-based economics.
to require in the region of $90-100 billion. Each bid has

In 2007, US ethanol production accounted for about 60% complications. On Friday, 1st February, Shining Path (a

of the global increase in corn consumption, according to combination of China’s Chinalco and America’s Alcoa)

the IMF. Corn-based ethanol production has been rising swooped on 12% of Rio’s London-listed shares, acquiring

at 20% per annum since 2002 and is pushing up cereals 9% of the whole in the process, at £60 per share in a

prices globally. As farmers switch to planting more corn, total outlay of £7.18 billion ($14.1bn). The dawn raid was

at the expense of wheat and soyabeans, so does the price performed only days before expiry of the deadline for

of the replaced grains and oilseeds rise as shortages are BHP to launch an official bid for Rio. Vale’s complication is

created. The Energy Independence Act of December 2007 that it has to meet the value expectations of Swiss-based

mandated that current corn-based ethanol production of Glencore, which has a 35% stake in Xstrata. The China

27bn litres should rise to 136bn litres by 2022, with half of it Development Bank, which bankrolled Chinalco’s raid on

made from cellulose, despite the fact that this is years away Rio, is known to have approached Glencore with a view to

from economic production. This still requires a 2.5x increase buying its £14bn stake in Xstrata.

in corn use as a fuel additive over the next 15 years so that,


At the heart of these prospective takeovers are the
by 2022, ethanol can make up 22% of the US vehicle fuel
steelmakers in China who eclipsed Japan as the leading
mix. One full vehicle tank of 95 litres of ethanol would use
importers of iron ore as recently as 2003. In the 5-year
about 254kg of grain, enough to feed an average person for
period between 2002 and 2007, China’s imports grew by
one year. A tank of fuel does not get you far in America, but
244% to 383mt while Japan’s rose only 9% to 141mt.
a year of food does.
The annual FOB contract price of iron ore has been rising

The ‘Chindia’ effect pits man against machine. Increased in leaps and bounds over the past ten years as production

demand for corn and soya-fed livestock and poultry has failed to keep pace with demand. For the 2008/9

competes with increased demand for biofuels that already contract year it is up another 65-71% leaving China’s steel

consumes 20% of the US corn crop for ethanol production. industry, and the country’s entire modernisation program,

This in turn puts pressure on land and water resources as exposed to sharply rising and inflationary cost pressures.

both farming and ethanol production are independently Under such circumstances, China is rightly alarmed at the

massive consumers of water. Without the help of vast prospect of consolidation of the world’s largest suppliers of

subsidies, and punitive tariffs on inbound Brazilian sugar- iron ore, coal and base metals such as copper, aluminium

based ethanol, the numbers simply do not add up for and zinc all of which are required inputs for China’s rapid

ethanol. The pollutive production process, low power infrastructure expansion. The stake in Rio and discussions

efficiency relative to gasoline, and its impact on water with Glencore can be interpreted as moves by China Inc,

supplies make ethanol a disastrous and misguided policy. the ultimate funder, to prevent a reduction in the number of,

The intensity of water use in the ethanol, oil and tar sands and competition between, iron ore suppliers.

extraction processes is increasing demand for water.


A union of BHP and Rio would concentrate in single hands
the lion’s share of iron ore reserves in Western Australia’s
Pilbara region, home to the world’s largest-known iron ore
deposits. This is relevant to Chinese steel mills as Australian

14 HSBC Shipping Services Limited


iron ore, subject to availability in sufficient quantities, is From an objective point of view, China would seem to
always the first choice being the most proximate source be the aggrieved party. The Australian FIRB is under no
of supply. In nineteen weeks during 2007, the freight obligation to approve foreign stakes in Australia-listed
differential between Australian and Brazilian iron ore of companies unless they reach or surpass 15% of market
equivalent quality exceeded $40 pmt and in six of those value. Chinese state-backed value investors have recently
weeks the differential was over $50 pmt. Beyond iron ore provided important cash liquidity to US and European
and coal, BHP and Rio have very large mining operations investment banks, being minority stakes on arms’ length
in alumina and bauxite (the raw materials for making terms, and yet this has attracted national scrutiny. Where
aluminium), copper, lead, zinc, manganese, nickel and else the funds might have come from is not clear, but
uranium. Iron ore tends to be the focal point but all the base maybe not from their own governments as in the case of
metals count as well, added to which is coal as China is fast the UK’s nationalisation of troubled Northern Rock. It is
becoming a net importer. forgotten that China has played a pivotal role in increasing
global prosperity in recent years, and yet it is often painted
A combination of Vale, the global leader in iron ore as the villain in the US imbalance of trade. The real culprit
production, and Xstrata would also be intimidating to is the Federal Reserve for keeping interest rates too low
Chinese importers. Vale has coal, aluminium, copper, for too long, and the US consumer for spending beyond
manganese, ferroalloys and nickel assets that complement its means. It is disingenuous for the latter to now blame
those of Xstrata and Glencore which also bring zinc, China’s savers for its own state of indebtedness.
vanadium and lead to the table. China needs all these
commodities to support both its domestic and export Cash is King
growth and can be forgiven for any sense of anxiety. As
China Inc has in excess of $1.5 trillion in foreign exchange Since August 2007, credit has been more difficult to access

reserves one can expect this firepower to be used in 2008 in the wake of US subprime mortgage problems and the

and beyond to protect its best interests. The move on ensuing liquidity crunch. Banks became reluctant to lend

Rio’s London share base in conjunction with Alcoa was to each other and to their retail and corporate customers.

designed to head off Australian and American suspicions Many companies have built up cash reserves in recent

as to Chinalco’s final intentions. It represents a more years in contrast to a swathe of consumers that have

sophisticated approach than CNOOC’s failed attempt to buy taken advantage of rising house prices to cash in equity.

Unocal in 2005 when protectionism triumphed and Chevron They have also built up unsecured debt through personal

won the prize. loans and credit cards and this tendency in the transatlantic
economies to spend at the expense of saving has fuelled an
Further twists in this saga lie ahead. On 5 February, we asset bubble in property and shares. Now that asset prices
heard that Chinalco’s purchase of 9% of Rio may become are being undermined, the old adage that cash is king is
the subject of an investigation by Australia’s Foreign reasserting itself. This manifests itself via increased savings
Investment Review Board in case it is deemed to be and or heavier weightings in investment portfolios towards
counter to Australian national interest. Recent precedent for cash and bonds and away from equities. Equity markets are
government intervention on national interest grounds was no longer getting the same level of support that they did
set in the US in the above-mentioned CNOOC/Unocal case. previously from M&A activity and share buybacks.
This was followed by the UAE-controlled DPW being forced
to divest the US-based port content (it went to AIG) after its In the absence of the availability of large leveraged loans,

purchase of the global ports portfolio of P&O Ports. mergers and acquisitions need to be paid for in cash, or

An Australian precedent was to block Royal Dutch Shell shares, or cash and shares. Big deals are still in prospect

from its planned A$10 billion takeover of Woodside with BHP looking at Rio, Vale at Xstrata and Microsoft at

Petroleum, the Australian oil and gas group, in 2001. Yahoo. But, one large US investment bank had to withdraw

Then, in February, Cfius blocked the joint Huawei/Bain bid from leading a syndicate in one of these potential takeovers

for US computer company 3Com. The question remains as because it could no longer justify lending in the context of

to whether these transactions were really blocked by issues its own weakened balance sheet and forecast returns. The

of national interest or whether they were thwarted by anti- shortage of cash on the balance sheets of some banks is

commercial and protectionist practice. contrasted by the availability of cash in the sovereign wealth
funds of Asian, Middle Eastern and other emerging market

Global Shipping Markets Review 2008 15


nations. Funds in China, Singapore and the Middle East have been ploughing funds into municipal bonds that are
have already taken stakes in banks such as UBS, Citigroup, being sold off cheaply. The latter had an offer rejected to
Standard Bank, Morgan Stanley and Barclays. Money that reinsure three struggling bond insurers because he tried
in former years flowed from west to east is now flowing in to separate the safer municipal bonds from the more
reverse, a product of trade and oil surpluses. toxic subprime mortgage-backed securities. Clearly, they
collectively expect a recovery in the municipal bond market
The exposure of banks to subprime losses may not have that has been unfairly tainted by subprime problems.
ended but now attention has turned to two troubled
monoline insurers: Ambac and MBIA. Traditionally they Their advantage is that they have many billions of dollars of
insured portfolios of municipal bonds and took a fee for cash in need of the right home. They can inject liquidity into
conferring their AAA ratings on the underlying securities. the stalled municipal and auction rate bond markets and put
Having been seduced into the higher-paying subprime a floor under price falls. The subprime mortgage problems
market, the rising level of mortgage defaults led Fitch to will be left to the banks to sort out but already we see the
downgrade Ambac to AA. If S&P and Moodys were to Fed helping them by cutting overnight rates to help the yield
follow then this would automatically reduce the credit rating curve. Furthermore, on 11 March 2008, the Fed led a group
of all its underlying bonds triggering those investors that are of the world’s largest central banks in providing $200 billion
only allowed to hold triple-A rated paper to sell, thus further of additional liquidity to the banking system. Share prices
undermining the value of the securities. As the monolines responded positively in the hope that the credit markets
have collectively guaranteed about $2.4 trillion of debt, their will be unglued and banks resume lending again. Taking the
problem could easily become another problem for the banks joint efforts of central banks, value investors and sovereign
that originated those securities as the monolines carry only wealth funds, they have the cash that can rescue the parts
thin capital cushions more suited to guaranteeing much of the global economy that have suffered unfair contagion.
safer municipal bonds. That puts all the onus on those responsible to clear up the
subprime mess.
The situation is made worse by the fact that many of the
banks that used monolines to wrap their bonds also bought In shipping, many private and corporate shipowners are
protection from them in the form of credit-default swaps awash with cash from strong operating earnings and capital
(CDSs). As default ratios in the underlying mortages rose, gains from asset disposals. They are in position to take
so the pressure ratcheted up on the relatively capital- advantage of others that have over-extended themselves,
light monolines. Without bank recapitalisation of these particularly those that have ordered ships which they can no
monolines there follows the risk that the ratings agencies longer finance. But, like the the Buffets of this world, they
will selectively issue downgrades on other large AAA- need to perceive value. The latest March IEA oil demand
rated monolines that have indirect exposure to subprime forecast is surprisingly bullish, even as crude nudges $110,
mortgages and cause a collapse in bond values. As there based upon resilient emerging market demand. The BDI
is a lot of circularity and overlapping of risk, it is not clear continues to recover as spot market rates rise, and tramp
which banks have the greatest exposure and therefore owners in the box markets are benefiting from firmer
which ones might be expected to step up to the plate. charter rates. There is no indication of an imminent decline
The Bank for International Settlements estimates that $95 in asset values but there are eagle-eyed value investors
billion of CDSs were sold to banks as protection and some out there who are ready to exploit weakness when it has
proportion of this is at risk of being written down. become opportunity. This suggests that the next market
fall will, at some point, be rescued by cash.
The lack of consensus over the quantum of possible future
losses and writedowns creates uncertainty for some banks
and monolines and opportunities for others. The amount
at risk from CDSs varies from as little as $15bn according
to the International Swaps and Derivatives Association
to $250bn according to a large US fixed-income money
manager. Vulture and value-driven investors such as
Wilbur Ross and Warren Buffet are looking closely at the
monolines. The former, together with Bill Gross of Pimco,

16 HSBC Shipping Services Limited


Global Shipping Markets Review 2008 17
Bulk Carriers

18 HSBC Shipping Services Limited


Global Shipping Markets Review 2008 19
Introduction As we moved into February, Chinese New Year celebrations
dampened activity but there was no let-up in structural
2007 was the best ever year for the dry bulk market, problems in the mining industry. In the middle of the month
although at the beginning of the year few shipowners BHP Billiton, Rio Tinto, Xstrata and two smaller miners
would have expected it to surpass 2004. In fact, the last all declared force majeure on coal exports from flooded
five years have been the best on record when looking at the swathes of northern Queensland, interrupting exports
weighted average spot market earnings of all bulk carriers. from Haypoint, Dalrymple Bay, Abbot Point and Gladstone.
In descending order of merit: first was 2007 at $42,307 This put further pressure on other suppliers just as South
per day; a long way back in second was 2004 at $27,502: Africa found itself short of coal for electricity generation,
third 2005 at $22,310; fourth 2006 at 19,152 and fifth 2003 insufficient even to keep its own mines operational, and
at $13,948 daily. This bull run has been remarkable and just as China invoked a coal export ban that promises to
unprecedented in terms of both longevity and profitability. last well into the springtime. In the oil industry, rising
The fact that 2007 earnings came in 54% ahead of prices were initially the product of demand-side factors
second-placed 2004 may be warning us that these in contrast to the twin supply-side oil crises of the 1970s.
conditions are unlikely to last forever as there has been More recently, supply-side constraints on global oil
a massive supply-side response in terms of the size and production have served to underpin prices. This process
depth of the orderbook of newbuildings. However, just is now being replicated in the dry bulk markets where
how much of this orderbook makes it to delivery is the we have strong demand but problematic supply.
subject of keen debate.
Now into March, we can see that our faith in the
At the end of 2007 and in early 2008, back-to-back force fundamentals of the dry bulk markets are being rewarded
majeure declarations by Australian and Brazilian iron ore by steady improvements in spot and period rates and a
shippers unexpectedly returned many large bulk carriers recovery in secondhand values as buyers regain confidence.
back onto the spot market, pushing down rates as they But, we should put this in perspective. The BDI topped
competed for replacement cargoes. In January, power out at 11,039 points on 13 November 2007 and then lost
shortages in both South Africa and China led to further force 49% of its value before bottoming out at 5,615 on 29
majeure calls and halted mining activity and mineral exports January 2008 – a big drop in just 6.5 weeks. By the end of
across large areas of each country. This was an unusual the February, the BDI was at 7,613 – up 36% from its end
confluence of events that removed significant volumes of January trough but still 31% down on the mid November
cargo from the market, causing a temporary oversupply peak. The rollercoaster fourth quarter started at around
of tonnage. The last week in January saw some return to 9,500 points and finished at around 9,150 points and we are
normality with the Baltic Capesize Index recovering 25% now faced with the question of whether we should regard
in the week, confounding many financial market observers the mid Q4 spike as random noise and not expect to regain
who had interpreted the 40% fall in the BDI since mid it. The market is still trying to find its appropriate level and it
November as a turning point in the commodity demand probably does lie in the middle of the range between recent
cycle and a lead indicator of slower global economic growth. peak and trough, in the low to mid 8,000s. Many owners
would settle for that.

Figure 1. Average bulker earnings

Shiptype Dwt / year built 2006 2007 change


$ $ %
Capesize 170,000-dwt / 2000 43,178 111,827 159%
Panamax 70,000-dwt / 1998 21,427 49,349 130%
Handymax 52,000 dwt / 2000 22,679 47,582 110%
Handysize 30,000-dwt / 1998 15,720 31,346 99%
Average 25,751 60,026 133%
BDI End-year figure 3,180 9,237 191%

20 HSBC Shipping Services Limited


Bulk Carriers

Turning to the performance of the various bulk carrier The main market driver continued to be China whose
segments in calendar 2007. Spot capesize earnings were economy grew by 11.4% in 2007 following on from 11.1%
159% up on 2006 and 59% up on 2004 at just under in 2006. The strength of Chinese demand growth for raw
$112,000 daily. The equivalent figures for panamax were materials for use in steelmaking and power generation
up 130% on 2006 and 44% on 2004 at nearly $49,500 per is occasionally outstripping the market’s ability to supply
day and handymax came in 110% up on 2006 and 49% up these goods. Infrastructure capacity constraints from mine
on 2004 at just over $47,500 daily. Finally, the handysize to railway to port are causing commodity supply to lag
segment registered a 99% gain on 2006 with average demand. When this leads to port delays, reducing effective
earnings coming in at a little under $31,500 daily. tonnage supply, shipping rates benefit, but when this leads
This was 62% up on the previous cyclical peak in 2004 to shipment cancellation, shipping rates suffer – as became
of just over $19,300 daily. The BDI ended 2007 190% all too obvious in January 2008.
up on 12 months earlier.

Supply
Figure 2. Dry bulk carrier supply

Shiptype 31-Dec-06 31-Dec-07 Orderbook in m-dwt at 31-Dec-07


m-dwt # ships m-dwt # ships as % Delivery Delivery Delivery Delivery
fleet 2008 2009 2010 2011 +
VLBC 200,000+ 17.3 77 21.8 98 131% 4.1 5.0 6.6 12.8
Capesize 100-200,000 102.9 631 109.1 667 79% 5.0 20.4 42.2 18.8
Post-panamax 80-100,000 13.3 158 13.8 159 235% 3.3 6.7 12.1 10.3
Panamax 60-80,000 88.4 1,240 94.5 1,320 15% 4.6 3.5 4.3 2.1
Handymax 40-60,000 71.2 1,492 76.6 1,592 55% 7.8 13.5 13.1 7.4
Handysize 10-40,000 73.3 2,734 75.6 2,833 26% 3.4 6.3 5.9 3.8
Total 366.5 6,255 391.4 6,669 57% 28.2 55.3 84.3 55.3

Our assessment of the dry bulk fleet and orderbook splits The newest and most popular segment is the post-panamax
the segments into sizes that reflect changes in design and 80-100,000-dwt size range where orders account for 235%
a creeping tendency to upsize. The fleet of very large bulk of the end-2007 fleet, massive future expansion from a low
carriers over 200,000-dwt grew by 26%, in deadweight base. The kamsarmaxes within this segment are still within
terms, during 2007 while the orderbook stands at 131% current Panama beam.
of the end-2007 fleet. The delivery schedule is stretched
out over five years and its size reflects the rising The conventional panamax segment of 60-80,000-dwt
importance of longhaul iron ore trades and the pursuit of expanded by almost 7% in 2007 but the orderbook stands
economies of scale. The largest ships on order are four at only 15% making it look relatively neglected. In reality,
388,000-dwt vessels at Bohai for BW Ltd for delivery in many owners now prefer ships larger than 80,000-dwt
2011. They are under contract to Vale for a long-term when imagining what will be the most flexible ship of the
Brazil/China iron ore COA. future as, after 2014, this segment will no longer be able
to call itself panamax. The handysize segment is still the
The conventional capesize segment, falling in the 100- quickest to age and the slowest to grow with the orderbook
200,000-dwt range is most heavily populated by ships in the at only 26% of the fleet and an age profile that offers
170-180,000-dwt size range which still offer the greatest abundant scrapping potential.
flexibility to both shippers and receivers. The fleet grew by
6% in 2007 while the forward orderbook sits at 79%.

Global Shipping Markets Review 2008 21


Figure 3. Dry bulk fleet profile

m-dwt

30
Handysize
Handysize Handymax
25
Handymax Panamax

Panamax Post-Panamax
20
Capesize
Post-Panamax
VLBC
Capesize 15
VLBC
10

5
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
The very large bulk carrier deliveries of recent years are and the 1980s models will soon become marginalised,
sufficient in capacity to replace all the extant ships that especially the less fuel-efficient ones. The handysize fleet
delivered m-dwt
in the 1980s and 1990s, although their owners stands out as having delivered insufficient ships in recent
30
probably have no plans to scrap them any time soon. The
Handysize years to renew the fleet going forward. The relatively light
phased
25
arrival of the orderbook will certainly put the older
Handymax orderbook suggests that some ships will continue to be
ships underPanamax
pressure. The conventional capesize fleet has employed well into their 30s.
Post-Panamax
enjoyed
20 a fairly linear rate of deliveries since the mid-1990s
Capesize
VLBC
15
Figure 4. Dry bulk capacity scrapped, lost or otherwise removed from the fleet

10
m-dwt

14.0
5 Handysize
12.0 Handymax
10.0 Panamax
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Capesize
8.0

6.0

4.0

2.0

0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Strong markets since 2003 have reduced scrapping to a sector were to suffer the equivalent of an Erika, Prestige
bare minimum with 2007 being noteworthy for the high or Hebei Spirit moment then we could expect a swift
proportion of superannuated panamaxes that left the active tightening of qualifying employment parameters and a
fleet. The positive message to be taken from low recent return to the former classification of modern (maximum
levels of scrapping is that it provides the safety valve of 15 years), a definition that has become overlooked in the
increased scrapping in future, and this may be needed handysize segment.
judging by the weight of the orderbook. If the bulk carrier

22 HSBC Shipping Services Limited


Pre-1

2
Bulk Carriers

Figure 5. Dry bulk carrier contracting

number of contracts placed per quarter

600

Handysize
500 Handymax
Panamax
400
Capesize

300

200

100

0
2003-Q2

2003-Q3

2003-Q4

2004-Q1

2004-Q2

2004-Q3

2004-Q4

2005-Q1

2005-Q2

2005-Q3

2005-Q4

2006-Q1

2006-Q2

2006-Q3

2006-Q4

2007-Q1

2007-Q2

2007-Q3

2007-Q4

2008-Q1
The surprising strength of earnings and values in 2007 Figures for the first quarter of 2008 show a distinct
encouraged an avalanche of orders that reached its peak slowdown on a quarter-on-quarter basis with the number
in the second quarter. Such a development could not have of orders placed at a little over one hundred compared
happened without the acquiescence of the shipyards with about 260 in Q1 2007. It could be that owners,
which finally achieved pricing levels that permitted them following recent corrections in spot market earnings and
to dovetail rising bulk carrier demand with easing tanker the indices, have finally decided that enough is enough.
and box ship demand. The paucity of contracting prior to Other considerations could be that financing is no longer
end 2006 is testament both to shipyards’ unwillingness as available on acceptable terms, that deliveries are too
to build bulk carriers and their obsession with the other far out, that yards are reluctant to quote as their input costs
aforementioned sectors. A lot of the most recent bulk keep rising and that there are fears about the deliverability
carrier orders have been placed in China. Not all will deliver of ships from some of those yards that are still willing
on time, or indeed, at all. to quote.

Figure 6. VLBC more popular than standard capesizes

Recent VLBC fleet development


31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
VLBC fleet, m-dwt 17.3 21.8 4.1 0.2 25.8
% change 25.9% 18.0%
Recent Capesize fleet development
31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Capesize fleet, m-dwt 102.9 109.1 5.0 0.3 113.8
% change 6.0% 4.3%

Global Shipping Markets Review 2008 23


A year ago, we forecast VLBC fleet growth of 25.8% and that are scheduled to deliver in 2008, 14 are Japanese, 2
this proved to be correct as ships delivered on time and Chinese and one Turkish. It is likely that all but the Turkish
there was no scrapping. In this segment in 2008 we once ship have long-term contract cover. The conventional
again have modest expectations of scrapping, as the fleet capesize fleet expanded by 6% in 2007, higher than our
is modern, and we forecast net growth of 18% from a low forecast of 4.8%. We anticipate net growth of just over
base to 25.8m-dwt. Of the 17 ships above 200,000-dwt 4% in 2008.

Figure 7. Rise of the post-panamax

Recent Post-Panamax fleet development


31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Post-Panamax fleet, m-dwt 13.3 13.8 3.3 – 17.1
% change 3.4% 23.9%
Recent Panamax fleet development
31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Panamax fleet, m-dwt 88.4 94.5 4.6 0.2 98.9
% change 6.9% 4.7%

The post-panamax fleet grew only marginally in 2007 but Korean, Chinese, Taiwanese, Italian, UK, Croatian and Arab
the order pipeline begins to deliver in 2008 and net fleet interests. In the conventional panamax sizes we forecast
expansion of 24% is anticipated in what is still a small fleet. minimal scrapping and net fleet growth of under 5% in 2008
The new deliveries are dominated by Japanese owners but after almost 7% in 2007, leaving us with quite a benign
overall ownership is quite diverse with it spanning Greek, supply-side outlook for the year ahead.

Figure 8. Handymax fleet now larger than handysize

Recent Handymax fleet development


31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Handymax fleet, m-dwt 71.2 76.6 7.8 0.1 84.2
% change 7.5% 10.0%
Recent Handysize fleet development
31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Handysize fleet, m-dwt 73.3 75.6 3.4 0.1 79.0
% change 3.2% 4.4%

The handymax fleet grew by 7.5% in 2007 which had into insignificance when compared with the 13.4-dwt of
no adverse impact on either earnings or values. With our scheduled deliveries in 2009 and a further 13m-dwt in
expectations of resilient earnings in 2008 we see little 2010. Handysize fleet growth remained slow at just over
scrapping potential and this will give rise to an even larger 3% in 2007 and is forecast to pick up slightly to nearly
net fleet expansion of 10% this year. Anyway, this pales 4.5% in 2008.

24 HSBC Shipping Services Limited


Bulk Carriers

Figure 9. Total fleet growth slightly up on 2006

Recent total dry bulk fleet development


31-Dec-06 31-Dec-07 2008 Scrapping Fleet End
deliveries estimate 2008
Total dry bulk fleet, m-dwt 366.5 391.4 28.2 0.8 418.8
% change 6.8% 7.0%

The total dry bulk fleet expanded by less than 7% in 2007 by returning all-time record earnings and values. We still
and is expected to increase by about 7% in 2008. Dry bulk expect a good performance this year despite the uncertain
shipping demand
m-dwt
growth is likely to be slower this year outlook in the developed world economies and financial
30
as the global economy
Handysize
faces a slowdown. However, the markets which, in any case, often dance to a different
sector coped admirably
Handymax with 7% supply growth in 2007 tune to shipping.
25
Panamax
Post-Panamax
20
Capesize
Demand VLBC
over 5%. This figure does not tell the whole story as tonne-
15 mile demand growth and real tonnage supply, stripping
In 2008, we expect to see continued growth in both major out the limiting factors of port congestion, bad weather
and minor
10 bulk demand, although at a slower pace than and canal transit bottlenecks, all influence the end result.
in recent years. The previous cyclical peak in dry cargo Given our 2008 forecast of cargo demand growth falling to
demand
5 growth was in 2004 when it rose 8% year-on-year.
just under 5%, and net tonnage supply expansion staying
However, 2007 set records in both earnings and values constant at about 7%, those supply-limiting factors will
despite a lower rate of estimated demand growth of just once again play an important role in closing the gap.
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 10. Dry bulk demand growth forecasts for 2008
Estimate of Dry Cargo Demand Growth
change over
previous year

9% m-t
8% 2,300
Major bulks
7% 2,100
6% Minor bulks
1,900
5% 1,700
4% 1,500
3% 1,300
2% 1,100
1% 900
0% 700
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f 2002 2003 2004 2005 2006 2007 2008f

Major bulks 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
Iron Ore 403 449 451 481 516 588 661 721 787 840
Steaming Coal 300 346 383 406 448 483 507 544 563 587
Coking Coal 162 174 169 171 178 179 184 190 202 211
Wheat/ Coarse Grains 205 214 207 214 206 215 208 225 222 222
Soya Beans 42 50 54 57 59 60 64 67 73 77
Bauxite/ Alumina 54 54 52 55 60 68 78 79 84 89
Phospate Rock 33 30 31 30 29 31 31 30 32 33
Total 1199 1317 1347 1414 1496 1624 1733 1856 1963 2059
% change 9.8% 2.3% 5.0% 5.8% 8.6% 6.7% 7.1% 5.8% 4.9%

Global Shipping Markets Review 2008 25


Minor Bulks 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f
Sugar 40 37 41 44 45 46 48 48 48 50
Agribulks 95 87 87 89 90 97 99 106 109 114
Fertiliser 66 67 64 69 75 81 81 80 91 95
Scrap 55 64 70 72 87 98 95 98 105 110
Cement 113 116 118 112 117 125 137 140 142 148
Coke 18 24 23 23 24 24 20 22 25 28
Pig Iron 13 15 12 13 13 18 18 18 19 20
Forest Products 158 161 164 160 163 166 170 174 175 178
Steel Products 174 184 193 198 205 225 226 255 270 283
Others 34 37 37 37 44 48 51 50 50 52
Total 766 792 809 817 863 928 945 991 1034 1077
% change 3.4% 2.1% 1.0% 5.6% 7.5% 1.8% 4.9% 4.3% 4.2%

Grand Total 1,965 2,109 2,156 2,231 2,359 2,552 2,678 2,847 2,997 3,137
% change 7.3% 2.2% 3.5% 5.7% 8.2% 4.9% 6.3% 5.3% 4.7%

We estimate the highest rate of growth will be in the raw annum as the world’s fastest growing fuel. Meanwhile,
materials cargoes of iron ore and coals at 5.5% year-on- the Energy Information Administration (EIA, part of the
year. Iron ore trade growth should increase by another 50mt US Department of Energy) puts global coal consumption
in 2008 after 65mt in 2007. China’s steel industry is still growth at 48% in the 1980-2004 period rising to 72%
expanding but exports may be hampered by rising export between 2005 and 2030.
tariffs, domestic supply could be reined in by the closure of
smaller mills and domestic demand is expected to roll back South Africa suffered power cuts in early 2008 and power
a bit after the Olympic Games. In spite of this, China should rationing as electricity demand now exceeds generating
still account for over 90% of the growth in 2008 iron ore capacity following inadequate past investment. Power
trades. Overall 5.5% growth in the major trades would still supplies to industry, including to its many base minerals and
be more than one percentage point lower than 2007 and precious metals mines, were cut leading to temporary mine
2.5% below the average 8% rate of growth of the past five closures. Eskom, South Africa’s state utility company, needs
years from 2003 to 2007. This weaker rate of annual growth to find an extra 45mt of thermal coal over the next two
factors in an economic slowdown in the US and Chinese years in order to carry adequate stocks to cope with rising
government efforts to restrain steel exports for fear of domestic power demand. On the face of it, this should
provoking a trade backlash. restrict South African coal exports unless existing collieries
can respond with enhanced production. In 2007, South
The above forecasts underplay the potential for significantly Africa exported nearly 68mt of thermal coal but annualised
larger exports of US coking and thermal coals in 2008. figures for coal throughput at Richards Bay in January
Present figures of an aggregate 40mt could end up as 2008 ran at under 43mt, the lowest since 1999. European
high as 80mt according to estimates of the world’s largest buyers may have to look towards the US and Colombia for
private coal producer, Peabody Energy. The USA may replacement supplies in 2008 and beyond.
have to ramp up its exports, which will test its recently
under-utilised coal export infrastructure, to compensate China, like South Africa, also suffered from brownouts
for increased demand elsewhere amidst falling supplies. in early 2008 after freezing weather shut down mines
Peabody forecasts US exports to rise from 49mt in 2006 to and reduced power generation capacity. Scores of bulk
78mt in 2008 and imports to fall from 36mt to 31mt over carriers from Cosco and China Shipping were diverted
the same period. Net exports are set to increase from 13mt from deepsea trades to shuttle coal along the coast and
in 2006 and 20mt in 2007 to 47mt in 2008. The producer a moratorium was imposed on coal exports until the end
estimates that seaborne coal demand will rise by 7% per of the first quarter. Flooding in Queensland in January

26 HSBC Shipping Services Limited


Bulk Carriers

interrupted Australian coal exports at a time of already competition with Japan, South Korea and Taiwan
tight supply. Vietnam, a traditional coal exporter, will cut which sought replacement supplies for their customary
one-third, or about 10mt, of its exports to Japan and Korea Chinese imports. These will probably need to come from
this year in order to satisfy rising power demand at home. Colombia, the USA and Canada. The raw material supply
Russia and Venezuela are also reducing coal exports. All this chain is in turmoil.
is happening at a time of elevated import demand from coal
producers in China, India and Europe. Global coal markets In terms of ship sizes, the panamaxes look well set to
are in a state of flux at present and it is difficult to see how benefit from expected strong growth in steaming coal
the import and export changes will eventually net out. trades that find power utility companies often requiring
smaller ships than can be handled by the steel mills in the
We expect India to increase tonne-mile demand as it coking coal trades. The soya bean, bauxite and alumina
continues to impose export taxes on iron ore in order to trades also offer the prospect of continued meaningful
support its domestic steel-making industry. The largest growth despite gyrating soya bean and aluminium
share of replacement volumes for Far Eastern importers production in Brazil and South Africa because of drought
would most likely come from far-away Brazil as both and other weather related issues. In the handymax and
Australia and South Africa have short-term infrastructure handysize segments steels, cement, agribulks, scrap,
problems that appear even greater than those of Brazil. fertilisers and forestry products are all expected to chip in
China’s early 2008 thermal coal export ban did not stop it with steady year-on-year growth. Overall, the cargoes most
from looking to import extra supplies. Export problems in typical to the handysize segments are forecast to grow by
Australia, Vietnam and South Africa were added to by floods 4.2%, about 0.6% less than the average of the past five
at Indonesian mines reducing choices to various more years from 2003 to 2007.
distant Atlantic-based sources. That put China’s buyers into

Figure 11. Steel production

bn-tonnes 2004 2005 2006 2007 2008f


China 0.27 0.35 0.42 0.48 0.53
RoW 0.76 0.76 0.80 0.82 0.84
% change 2004 2005 2006 2007 2008f
China 29% 20% 13% 11%
1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

RoW -1% 5% 3% 2%

bn-tonnes
production Global steel output is set to continue rising led, as ever, by
1.60 China. In 2008, Chinese production is forecast to increase
RoW
1.40 by 11% year-on-year. This impressive gain risks disguising
China
1.20 the fact that the annual rate of increase has been declining
1.00 each year in recent years, albeit from an ever-larger base.
0.80
After 3% growth in the rest of the world in 2007, this is

0.60
expected to drop to just 2% in 2008 – still better than the
mildly negative growth of 2005. Much of the 2008 reversal
0.40
can be laid at the door of weakened house-building in North
0.20
America and Europe and slower economic growth in the
8f
transatlantic economies.
2004 2005 2006 2007 2008f

Global Shipping Markets Review 2008 27


Figure 12. HSBC Metal and Mining Team’s iron ore trade forecast

Other
m-tonnes Global Seaborne Iron Ore Sources
Venezuela
1200
Canada

1000 Mauritania

Russia
800
Chile

Peru
600
Sweden
400 India

S Africa
200
Brazil

0 Australia
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011
HSBC’s Metals and Mining team forecast seaborne iron ore overcome its own mining and rail issues in order to
trade developing as per the above graph based upon source increase exports over the coming years while India
1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
of production. Australia and Brazil will continue to carve out may struggle to maintain its export volumes should the
the largest share as huge investment in new and expanded government succeed in its stated determination to curb
operations gradually bears fruit. South Africa is expected to exports via export taxes.

Figure 13. IGC grain trade analysis


changing diet of a wealthier consumer class demands more
m-tonnes feed grains for livestock and poultry.
traded
Non Wheat and Maize
Maize Both China and Russia are now imposing price controls
250 Wheat
on grains while Argentina, Kazakhstan and Vietnam are
200
introducing foreign sales taxes or export bans. Egypt has
returned to food rationing and Pakistan has reintroduced
150 a ration card system, both for the first time in 20 years or
more. Iraq, Turkey and maybe even China are expected to
100 enter the market for large-scale wheat imports. Global food
prices are under sharp upward pressure from population
50 growth in developing countries, climate change leading to a
higher incidence of droughts and floods, and the voracious
0
demands of the biofuel industry.
2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

Extreme weather conditions have damaged wheat crops


in Australia, Canada and the European Union putting
great strains upon US grains supplies where inventories
Late January 2008 figures from the International Grains
are forecast to drop to their lowest levels in 60 years.
Council illustrate total past and forecast international trade,
A doubling in rice and wheat prices in 2007 was
not just seaborne trade, in grains to end June 2008. Much
compounded by a doubling in freight costs in 2007.
is made of the depleted nature of China’s grain stocks at
In the first two months of 2008, the price of US spring
a time when domestic production is under pressure from
wheat, used for baking bread, doubled again to around $24
structural issues such as urbanisation and desertification
per bushel by end February. The rising costs of grains and
and topical issues such as drought. This shrinkage in stocks,
foodstuffs, taken together with high energy prices, are
to what are thought to be record lows, and reduction in
feeding global inflation and hurting poor and even middle
arable land coincides with increasing consumption as the
class families world-wide.

28 HSBC Shipping Services Limited


Bulk Carriers

The UN’s World Food Program is talking about a “new purchases are a distant memory. Plentiful stocks have
area of hunger” in which the high price of agricultural been used to smoothen demand and leave the grain
commodities, rather than just shortages, is affecting even futures markets largely unruffled. With global stocks now
the urban middle classes. at dangerously low levels, we suspect that large-scale
grains movements will materialise, just as soon as export
The reality of increasing demand from upwards of 2.4 product is available, in order to replenish depleted stocks
million people in China and India alone exposes the illogical to safe levels.
promotion of ethanol before food and cars before people.
The days when shipping markets were moved by the entry
of the Russians or the Chinese to cover wholesale grain

Figure 14. HSBC Equity Research tonne-mile analysis

CAGR Absolute
bn-tonne-miles 2002 2003 2004 2005 2006 2007 2008 2009 2004- growth
2009 2004-2009
Iron ore 2,694 2,993 3,440 3,867 4,326 4,680 5,155 5,521 10% 61%
Coal 2,568 2,880 3,442 3,662 3,743 3,856 3,988 4,254 4% 24%
Grain 1,287 1,370 1,396 1,395 1,489 1,524 1,571 1,617 3% 16%
Minor Bulks 4,104 4,489 4,736 4,862 5,046 5,377 5,541 5,780 4% 22%
Total 10,653 11,731 13,013 13,786 14,605 15,436 16,255 17,171 6% 32%
m-dwt
Y/y growth 10.1% 10.9% 5.9% 5.9% 5.7% 5.3% 5.6%
30
Handysize
Handymax
Our colleagues
25 in Equity Research have taken a composite slowdown, but to remain above 5%, with a recovery to
Panamax
view of demand from various sources and have used it to nearer the medium-term trend in 2009. Although we
Post-Panamax
create 20
this forecast of tonne-mile demand growth for the experienced double-digit tonne-mile demand growth in
Capesize
main categories VLBC
of dry bulk cargo. It shows the greatest 2003 and 2004 it has been in the following years of annual
growth15in iron ore cargoes over the five years to 2009 5-6% increases that have seen the greatest response in
but steady growth in the other cargo categories. Year-on- earnings and values.
10
year growth is forecast to dip in 2008 due to the global

5
Earnings
Time Charter
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Figure 15. One year time charter earnings for standard-type bulkers

$ pd

200,000
170k-dwt 1yr TC
175,000 70k-dwt 1yr TC
52k-dwt 1yr TC
150,000
30k-dwt 1yr TC
125,000

100,000

75,000

50,000

25,000
2002-01

2002-04

2002-07

2002-10

2003-01

2003-04

2003-07

2003-10

2004-01

2004-04

2004-07

2004-10

2005-01

2005-04

2005-07

2005-10

2006-01

2006-04

2006-07

2006-10

2007-01

2007-04

2007-07

2007-10

2008-01

Global Shipping Markets Review 2008 29


One-year time charter rates quite easily exceeded the levels Meanwhile, certain charterers were notably active on
that were achieved in the last cyclical peak in 2004. By the the period front during the year. Cosco Hong Kong was
time of the most recent market peak in mid November 2007 frequently in the market for longer period. It took Cape
a modern capesize was able to achieve over $160,000 per Kennedy (170,726-dwt 2001) in March for three years at
day for one year and a modern panamax about $80,000 daily $53,500 and Thalassini Niki (174,566-dwt 2005) in April for
for the same period. That equated to about $55 million in five years at $56,000. Cosco Qingdao also went for longer
income after operating costs for a capesize over the course period deals as the year went on, committing China
of the year. In the soft market of 2002 it was possible to Peace (175,000-dwt 2005) for five years at $55,000 in July.
order a new 175,000-dwt capesize for under $35m, so Morgan Stanley concentrated on shorter periods, paying
net earnings of $55m in just one year had a immediate $91,000 in July to fix Bulk Australia (169,770-dwt 2003)
hardening effect on values with a 5-year old vessel being for a year and as much as $125,000 for Xin Fa Hai
worth over $150m in early November, 85% up on the start (174,766-dwt 2004) for a year from the end of September.
of the year.
Just how fast the market moved in the final quarter is well
The sharp rise in spot market earnings in 2007 illustrated by the activity of STX PanOcean. It paid $118,000
supported a regular stream of period chartering interest. in August to fix the larger format Cape Albatross (202,000-
During the course of the year charterers were regularly dwt 2007) for a year. Four months later, in December, the
finding themselves short on availability, especially in the company had to stump up $170,000 to secure the standard
Pacific. Long delays at Australia’s premier coal loading port capesize Mineral Noble (170,649-dwt 2004) for one year.
of Newcastle, and delays at other loading and discharging In the process it recorded the high-water mark in period
ports in Australia, Brazil, South Africa and China, only time charter rates in what was a remarkable year.
exacerbated tight supply. This boosted the term charter The Belgian owner-operator Kleimar took the stablemate
market as controlling ships in-house was often a better way Mineral Hong Kong (175,000-dwt 2006) for the same rate
to service contractual commitments than total reliance upon just a few days beforehand.
the vagaries of the spot market. One spin-off of an active
period charter market was the frequency of relets when Panamax
ships were out of position for own cargoes. As with the capes, Pacific charterers were very much to
the fore in the panamax segment in 2007. Cosco Qingdao
Capesize probably got the bargain of the year right at the start when
The year began with one, two and three year benchmarks it took the IVS Pinotage (76,596-dwt 2005) for five years
set quite closely together. In January, Aquabeauty (171,009- at $21,750 a day – a good rate at the time but it was to
dwt 2003) set the tone for 12 month rates when it was look cheap as the year went on. A short while after taking
fixed for a year to Korea Line with delivery within the the ship in Cosco relet it to d’Amato for 12-14 months at
month at $66,000. For two year period, both Mineral Libin $31,000 netting Cosco over $3 million for not much effort.
(175,000-dwt 2006) and Alpha Century (170,415-dwt 2000)
achieved $57,000 while for three years, the bar was set at At the start of the year, a one-year fixture was concluding in
$50,000 by Lowlands Beilun (170,162-dwt 1999). This last the low $30,000 range, as Happy Clipper (73,414-dwt 2001)
ship was reported in October to have been fixed for a year demonstrated when also taken by Cosco Qingdao for 11
at $146,000 to Oldendorff. to 13 months at $32,500. Two year rates started 2007 not
far behind: Tai Plenty (73,679-dwt, 2000) achieved $28,300
Anyone lucky enough to commit tonnage for medium to from Parkroad in January. Three year rates were at a further
long period in the first half of 2007 could later relet for narrow discount with Audax (75,220-dwt, 2001) fixing for
shorter periods at a tidy profit. Anangel Explorer (171,600- three years time charter at $25,500 to STX PanOcean.
dwt 2007) was reportedly fixed for $58,000 in May by
Cosco for five years with delivery ex-yard in July. In August The upswing in rates was rapid during March and April.
the ship was reported relet to North China Shipping for two Consecutive one-year fixtures each established a new
years at $97,500. This deal may have failed as the ship was benchmark: Cinzia d’Amato (74,716-dwt 2000) went for a
reportedly fixed again shortly afterwards to Crownland for year to Glory Wealth at $33,500, but the same charterers
two years at $115,000. had to pay $34,750 for the larger Te Ho (77,834-dwt 2004)

30 HSBC Shipping Services Limited


Bulk Carriers

just a day later. One week later, Daiichi was reported to Cosbulk paid $25,000 per day for Equinox Voyager (50,832-
have paid $36,000 for Pasha Bulker for a year (before it dwt 2002) for two years in January while Sinotrans paid
grounded off Newcastle in July). $42,500 in August for Ocean Prefect (52,500-dwt, 2003)
also for two years.
By the end of April, Dreyfus was paying $42,500 to take
Ruby Indah (77,755-dwt 1998) for a year. Come the middle Meanwhile, three year rates were flatter still. The peak
of July, the one year rate was up to the high forties: was HMM’s fixture of Innovator (55,435-dwt 2005) in
Transfield paid $49,750 to take Oceanis (75,550-dwt 2001) September for $39,000 which was 62.5% higher than the
for a year with September laycan. By the time Transfield $24,000 that Korea Line paid for Bianco Dan (55,625-dwt
took delivery, it had to pay $66,000 for Yong Huan for a year, 2004) in January. The 3-year market suffered a correction
also with September laycan. in 2008 along with spot rates and shorter period rates. In
late January, Sanko got away with paying a slightly lower
The peak was reached in October when Sinochart fixed $35,350 per day to take Navios Kypros (55,180-dwt 2003).
Yasa Fortune (82,800-dwt 2006) for a year with delivery
in early December for $87,000 daily. By January 2008, Handysize
prevailing rates had eroded significantly as Sealink paid only
The handysize period market remains largely opaque with
$49,000 for the 1995-built Dong Bang (71,747-dwt) for a
few reported deals and even fewer confirmed fixtures.
year. Charterers remained relatively quiet until just before
However, we have enough fixtures to trace out an outline
Chinese New Year when rumours of imminent increases in
of the market in 2007. One-year rates began the year in
the new contract prices of iron ore and coal moved them
the low $20,000s. Pontoklydon (28,450-dwt 1992) was fixed
to take period cover again. Rates duly began to recover lost
in February for one year at $22,000. By August, Odin
ground after a three-month slide.
Pacific (28,381-dwt 1995) achieved $32,000 with Korean
Two year time charter rates also peaked in October when charterers and, at the autumn peak of the market, Korea
Crownland paid $73,500 to take Four Coal (74,020-dwt Line took Eastern Star (28,431-dwt 1997) for one year at
1999) with late November delivery. This was a far cry from $42,000 daily.
February when BHP Billiton had paid only $27,500 for
Also of note were Genco’s twin forays to fix out its
Spartia (75,115-dwt 2000) for two years. The fall from the
handysize bulk carriers for period. The company took
peak was less severe for the longer fixture as the panamax
advantage of firm market conditions to lock in earnings in
beam Bulk Japan (82,800-dwt 2006) fixed to Glory Wealth
March when it fixed five vessels to Lauritzen for two years
for two years in January 2008 at $62,000 daily.
at a reported $19,500 per day. Then in August, Genco fixed
three standard 28,000-dwt units (Genco Charger, Genco
Handymax
Challenger and Genco Champion) to Pacific Basin for three
On a number of occasions in the last few years, modern years at $24,000 a day.
supramaxes have out-earned panamaxes and, from time
to time in 2007, they managed to achieve very similar time Spot Market
charter rates. Our list includes mostly modern ships of
Average weekly earnings are our proxy for spot market
over 50,000-dwt but the strength of the market in the final
performance. Capesize earnings rose steadily throughout
quarter of 2007 is demonstrated by the fact that the biggest
the year, apart from a soft patch in the spring and early
rate reported ($60,000 per day for 11 to 13 months) was
summer period, before peaking in mid November.
for the 43,246-dwt, 1994-built Gulf Globe which Korea
The correction was triggered by a force majeure
Line chartered in the last days of October.
declaration in Brazil after collision damage to a loading
Rates had come a long way since early 2007. Pacific Basin pier at Itaguai/Sepetiba on 12 December that led to
was reported to have fixed Genco Prosperity (47,180-dwt the staggered cancellation of as many as fifty iron ore
1997) for only $26,000 in February 2007 while par for the shipments totalling 8.5 million tonnes. The extent of
year on average was something close to the $37,000 that cancellations and slow timetable for repairs suggests that
Cargill paid for Azzura (52,050-dwt 2004) in April. For longer there may have been some tactical linkage to the 2008/9
period, there was less rate volatility during the year. iron ore contract price negotiations.

Global Shipping Markets Review 2008 31


25,000

Handysize

2002-01

2002-04

2002-07

2002-10

2003-01

2003-04

2003-07

2003-10

2004-01

2004-04

2004-07

2004-10

2005-01

2005-04

2005-07

2005-10

2006-01

2006-04

2006-07

2006-10

2007-01

2007-04

2007-07

2007-10

2008-01
Handymax
Panamax
Post-Panamax
Capesize
Figure 16. Average earnings for standard-type bulk carriers
VLBC

$ per day

180,000 Capesize

160,000 Panamax
Handymax
140,000
Handysize
120,000
100,000
80,000
60,000
m-dwt
40,000 30
Handysize
20,000
Handymax
0 25
Panamax
Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08
Post-Panamax
20
Capesize
VLBC
15

This situation was made worse in early 2008 when sentiment in the larger sizes combined with bad news in
Australian iron10ore shippers declared force majeure after global financial markets and falling share prices. Longer-
Cyclone Melanie interrupted Rio Tinto’s mine and rail term period rates were hardly affected as the market still
operations in 5
the Pilbara. This caused rates to fall off the believed the adverse conditions to be of a temporary nature.
proverbial cliff with spot earnings dropping $100,000
per day from a $180,000 daily peak in mid November to Figure 17. Biggest influence on capesize earnings remains
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
an $80,000 daily trough in late January. Rates bounced Chinese steel industry
back strongly in the last week in January when Chinese
Baltic
operators entered the market for period alerting owners to Capesize
hange over theEstimate
possibilityofthat
Drythe
Cargo Demand
correction Growth
had been overdone and Index
revious year that iron ore shipments were about to pick up again. 16,000 R 2 = 0.64
%
14,000
% Meanwhile, the influence of the capesize segment on
12,000
% the earnings of the smaller ships is evident in the above
% 10,000
chart. The shape of the curve representing spot panamax
%
earnings in 2007 not surprisingly bears a close resemblance 8,000
% 6,000
to capesize, although with much lower volatility. At various
%
times during the year when capesize rates rose too far 4,000
%
above panamax rates then shippers would split stems in 2,000
%
%
two and use panamaxes to leverage down capesize rates. 0
1999 Once2001
2000 the rate
2002differential
2003 2004narrows, shippers
2005 2006 2007 tend
2008fto be - 10 20 30 40
quick to switch back to the larger sizes in the interests of Chinese iron ore imports, m-tonnes

operational simplicity and economies of scale. Handymax


earnings broadly followed the same path as the larger There is still a close correlation between the volume of
panamax, as we have noted above. monthly iron ore imports and average capesize bulk carrier
earnings since inception of the Baltic Capesize Index (BCI)
Short period (6-month) rates for a 30,000-dwt handysize in March 1999. However the correlation was much stronger
improved in a linear trend throughout the year but suffered in the period up to the previous market peak in 2004. It is
some contamination from the woes of the larger ships not because Chinese iron ore imports are less vital to dry
in the spot market at the end of the year. Rates almost bulk demand now than they were then, but rather that
managed to stay ahead of the best that 2004, 2005 and the shortage of vessels was more acute in 2007, so rates
2006 could manage but for a brief period at the beginning were driven much higher than they had been three years
of the year. In contrast to the six-month time charter rates, previously. As a result, variance around the earnings curve is
spot rates fell sharply towards the end of 2007 as bearish much greater as Chinese iron ore imports grow in volume.

32 HSBC Shipping Services Limited


5

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Bulk Carriers
Baltic
Figure 18. Chinese iron ore imports and capesize earnings AnotherCapesize
way to show this relationship is to plot the growth
Indexiron ore imports over time against the Baltic
of Chinese
China Iron Ore Imports, m-t (LHS) Capesize Index. This
16,000 R 2 =time series shows a very strong
Baltic Capesize Index (RHS) relationship
14,000between 1999 and 2004 but thereafter there is
50 16,000
45 increasing volatility in capesize earnings. The coincidence
12,000
14,000
40
12,000 of force majeure events in the world’s two largest iron ore
35 10,000
10,000 export regions in Brazil and Australia, in the November 2007
30 8,000
25 8,000 to January 2008 period, was enough to collapse sentiment
20
6,000
6,000 supporting the old adage that freight rates have the
15 4,000
10
4,000 tendency to go up on escalators and down in elevators.
2,000 2,000
5
- 0 0
- 10 20 30 40
Mar-99

Mar-00

Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Chinese iron ore imports, m-tonnes


1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 19. Baltic Dry Index, daily ticks. The Baltic Dry Index pools together all the component ship
size indices except for the handysizes. The BDI lost close
2008 to 20% in value between mid November and the end of
12,000 2007
2006 2007 but then further bad shipping and financial news in the
10,000
2005 new year sent the BDI sharply down in January. The index
2004
lost almost 50% of its value from its late 2007 peak before
8,000 staging a recovery. By early March 2008, the 8,000 level
was breached again – it was at this level in 2007 that the
6,000
index went vertical.
4,000

2,000

Values
Figure 20. Relative values and earnings

Date Period – Rate Cape 170K Pmax 73K Hmax 52K Handy 30K
1st Jan 2007 3 years – $/day 47,500 25,000 23,000 16,750
31St Dec 2007 3 years – $/day 105,000 48,000 43,000 26,500
2007 change 110% 92% 87% 58%
31st Jan 2008 3 years – $/day 100,000 45,000 35,500 23,000
2008 to date -5% -6% -17% -13%
Date Age – Value Cape 170K Pmax 73K Hmax 52K (3yo) Handy 30K
1st Jan 2007 5 yr old – $m 81 45.5 42.5 28.5
31St Dec 2007 5 yr old – $m 150 88.5 75 44
2007 change 85% 95% 76% 54%
31st Jan 2008 5 yr old – $m 143.5 83 70 43
2008 to date -4% -6% -7% -2%

Global Shipping Markets Review 2008 33


The above table gives some idea of how investors might Newbuilding prices rose steadily during 2007 as they 30
look at the relationship between modern secondhand values were fundamentally supported by strong demand, rising
(5-year old) and medium-term (3-year term) time charter input costs, increased foreign exchange risks and the 25
rates. During 2007, capesize 3-year time charter rates rose scarcity of machinery and equipment. The unprecedented
110% while 5-year old values rose only 85%. The increase level of interest in new bulk carriers in 2007 should ease 20
in panamax values and earnings were more in line with one during 2008 as what is on order is sufficient to cover both
another with a 92% increase in 3-year rates against a 95% fleet replacement and near-term future demand growth. 15
increase in values. Uncertain prospects from 2009 and beyond have not yet
impacted on forward prices and will continue to be propped 10
In the handymax segment, rates were up 87% in the up by strengthening commodity and labour costs. New ship
year against a less pronounced 76% increase in modern prices are unlikely to decrease until the huge premium for 5
secondhand (in this case 3-year old) prices. And in the modern secondhand vessels and resales has been eroded.
handysize segment earnings rose 58% just ahead of When premia fall back towards the cost of contracting it
values at 54%. By the end of January, handymax had seen will be an indication of weaker spot and period earnings.
the biggest correction in period rates at 17% down with At such point, owners will ask themselves whether actual
handysize in second place at 13% down. Despite this, and prospective cashflows justify the high prices on offer.
handysize values only dropped a nominal 2%.
Capesize market in 2007
There was plenty of activity in the secondhand market in
2007, ranging across all sizes and vintages. It was actually Figure 22. Benchmark prices for capesize bulkers.
the older ships that enjoyed the greatest percentage $m $m
rises, but also the steepest falls at the turn of the year. 180 Resale
5yr-old 120
The prices of modern ships were often set by pre-IPO 160
10yr-old
140 100
buyers and listed companies ahead of secondary offerings. 15yr-old
120 20yr-old 80
The KG houses continued to attract fresh equity although 100
x 80 60
investment targets became more elusive. From August,
60 40
max
many buyers began to feel the impact of tighter credit 40
20 20
conditions and activity slowed. Finally, modern secondhand
0 0
values eased towards the end of the year, and into 2008,
Nov-05

Jan-06

Mar-06

May-06
Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07
Jul-07

Sep-07

Nov-07

Jan-08
as they were negatively influenced by the severity of
the falls in spot market earnings. For a few owners this
engendered a sense of panic, leading them to discount their Secondhand capesize bulk carriers enjoyed considerable
pricing in order to conclude deals that still guaranteed them gains in value during the course of 2007. In January,
substantial capital gains. Spring Brave (151,066-dwt NKK 1995) was reported sold
to DryShips for $60m. In March, the slightly larger but
1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Figure 21. Newbuilding prices for dry bulk carriers same vintage Martha Verity (157,991-dwt Sasebo 1995)
was said to have fetched $63m to Swiss Marine. In April,
$m
Capesize (170k-dwt)
Formosabulk Allstar (150,393-dwt KHI 1995) was paid in the
100
Panamax (75k-dwt) range of $65-67m and chartered back by Formosa Plastics
90
Handymax (51k-dwt) for ten years on undisclosed terms. By October, DryShips
80 Handysize (23-30k-dwt)
70
was once again linked with a 12-year old vessel Tiger Lily
60 (149,190-dwt CSBC 1995) at $90m, 50% up on what it
50 had paid for a similar-size ship ten months earlier.
40
30 In terms of the more modern ships. In March, Cape Pelican
20 (180,235-dwt Imabari 2005) was reported sold to Diana for
10 $107m and Cape Kassos (170,012-dwt Hyundai Samho
2004) was linked with Alcyon for a comparable $100m.
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Prices had moved up several gears by September when

34 HSBC Shipping Services Limited


5

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991
Bulk Carriers

the en bloc sale of Thalassini Niki (170,800-dwt Daewoo Panamax market in 2007
2005) and Thalassini Kyra (164,218-dwt CSBC 2002) was
Figure 23. Benchmark prices for panamax bulkers
reported to Diana at $275m. The former was said to have
a $m
5-year charter attached at $56,000 daily while the latter $m $m
Resale Resale
was
180 charter-free and was in some reports apportioned
5yr-old 120 5yr-old
90
160 80
$133m
140 of the total
10yr-old proceeds. In November, DryShips was 100
10yr-old
70
15yr-old 15yr-old
stated as the20yr-old
120 buyer of Gran Trader (172,529-dwt NKK 2001) 80 20yr-old 60
100 25yr-old 50
at80
$153m, the highest price of the year, and of that freight 60 40
60 price cycle.
and 40 30
40 20
20 20 10
The0 deal of the year was Genco’s nine-cape purchase 0 0
Nov-05

Jan-06

Mar-06

May-06
Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07
Jul-07

Sep-07

Nov-07

Jan-08

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08
from Metrostar in July. This involved capesizes ranging
from 170,000-dwt to 180,000-dwt, built or delivering from
the Japanese, Chinese and Korean shipyards of Imabari,
The market for what were 5-year old ships in 2007
Universal, SWS and Sungdong between 2007 and 2009, at
developed nicely during the year. In January, Aeolion Spirit
an en bloc price of about $1.1 billion, an average of about
(76,015-dwt Tsuneishi 2002) was reported sold to Tolani for
$122m each. The four 2007-built vessels had attached
$49.25m. In May, Anangel Galini (74,362-dwt Daewoo 2002)
charters of varying periods and rates. The four 170,000-dwt
was said to have gone to Ocean Freighters for an improved
Sungdongs, delivering October 2008 to September 2009,
$56.5m. Within a few months, in the first half of July, Athina
were purchased by Metrostar from Blystad two months
Zafirakis (74,204-dwt Oshima 2002) sold at tender
earlier for $100m each, allegedly giving Blystad a profit of
for a reported $65.0m to DryShips. Later in the month of
$110m. Clearly Metrostar made an even better annualised
July, Theodoros P (73,870-dwt Namura 2002) was first said
return. To put this in perspective, at the end of February
to have gone to Tolani for $70.5m and then later corrected
2008, a 2010-delivery 170,000-dwt Sungdong resale was
to Daebo at $71.2m. In the space of just seven months,
reported sold for $99m.
5-year old panamax values had gone up about 47%.

We can draw attention to two capesize purchases by keen Around the middle of November, Lietta (76,015-dwt

buyers Rizhou Steel. On 30 October 2007, with the BCI at Tsuneishi 2002) was rumoured sold for a relatively low

14,625 points and a few weeks ahead of its correction, the price of $62.25m when the charter-free value should have

steel mill was reported as the buyer of Sumihou (171,071- around $90.0m. The big discount could be explained by an

dwt IHI 1996) for $106m. More recently, on 6 March attached charter for some 12-24 months at the low rate of

2008, with the BCI at 12,285 points, Rizhao was linked about $25,000 per day.

with the purchase of the three years younger Arethousa


After the Lietta sale, modern sales virtually dried up but
(171,779-dwt HHI 1999) for $133m. On a BCI-adjusted
owners of older ships became more eager to sell in order to
basis, Sumihou would be worth $89m today to match the
capture the increased value of their ships. The Vietnamese
16% fall in the BCI between the two purchase dates. On an
seemed happy to oblige as they finally had a choice of
age-adjusted basis, the ship would be worth about $100m
candidates in the vicinity of their budget levels. Back in
today if matching the younger age of Arethousa. This would
February, Peter S (66,764-dwt Sumitomo 1984) sold to
imply that Rizhao Steel has overpaid by $33m or 33% in
Korean buyers for $16.0m followed in April by Liberty
its eagerness to secure Arethousa, following its failure of
Wave (63,330-dwt HHI 1984) at $19.5m to Vietnamese.
two other purchases on subs in the interim period. We can
By August, Amadeus (66,916-dwt MHI 1984) was able to
only assume that there are charters involved that adjust the
command $25.0m and in October Trust Jakarta (64,873-
values and explain the valuation gap.
dwt Hitachi 1984) went for $28.5m before Mastrogiorgis
(69,461-dwt Gdynia 1984) fetched $35.0m. Prices of this
vintage edged higher in November before the market
correction stalled activity. In late January 2008, Astron
Spirit (65,767-dwt Sasebo 1984) finally sold for $25.0m to
Vietnamese having failed at various levels up to $35.0m.

Global Shipping Markets Review 2008 35


A number of resales were concluded during 2007. In May, rates climbed dramatically, taking values with them. In the
Kambara sold a 2008-delivery 82,800-dwt Tsuneishi for a last quarter more older ships came into the market for sale
reported $55.8m to Thenamaris in what was later to look as owners looked to cash in on values that were returning
like an astute purchase. In June, Order Shipping was linked 100% or more of their purchase price in some cases.
with the purchase of CMB Fabienne (76,000-dwt Jiangnan In 2007, a 20-year old handymax could be sold for
2008) for $65.0m. In July, DryShips was associated with double what it cost to build back in the 1980s.
the purchase of two Kambara 2010-delivery 82,800-dwt
Tsuneishi types at $54.25m each. And, in October, Kambara The orderbook for newbuildings, particularly in the second
was reported to have offloaded another pair of 2010- half of the year, grew exponentially. Very little ordering was
delivery 82,800-dwt Tsuneishi types to Neda Maritime for backed by long-term period cover as charterers generally
$58-59m each. In November, Golden Ocean reportedly found the delivery dates too far forward. The ordering
sold six 75,000-dwt vessels under construction at Pipavav frenzy had more of a herd mentality about it, based upon
in India, and scheduled for delivery in 2009 and 2010, to the hope of perpetual rising values and profitable resale
Britannia Bulk for an average price of just under $59.0m opportunities. The turn of the year correction in the
each. Also in November, Torm picked up two 2010/11- charter market was overdone but it was probably enough
delivery 82,800-dwt Tsuneishis for $52.5m each. to cause some owners to curb their speculative instincts.

Handymax market in 2007 Handysize market in 2007

Figure 24. Benchmark prices for handymax bulkers Figure 25. Benchmark prices for handysize bulkers

$m $m

90 Resale 70 Resale
5yr-old 5yr-old
80 60
10yr-old 10yr-old
70
15yr-old 50 15yr-old
60 20yr-old 20yr-old
50 25yr-old 40 25yr-old
40 30
30
20
20
10 10
0 0
Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Jan-08
Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08
The 2007 market started where 2006 left off and was
As is evident from the chart, 2007 was characterised by
characterised by an extreme lack of very modern tonnage
steadily increasing values such that, as the year progressed,
(post-2000) coming for sale; no more than a dozen
buyers became fewer and fewer. At each stage, prices
charterfree ships changed hands during the year.
were set by aggressive IPO buyers who tended to bring
Pacific Basin, Clipper and Evalend – amongst the big guns
other buyers in their wake. Liquidity was quite thin with
in the handysize segment – sold systematically during he
few available sales candidates and relatively few buyers but
course of the year. Pacific Basin was eager to charter its
over the course of the year medium-term period rates rose
ships back in order to preserve its fleet size and no doubt
faster than modern secondhand prices. The price of
protect its dividend payments to shareholders. The other
a 5-year old 52,000-dwt handymax peaked at about $75m
two, as private companies, were probably more keen
in mid November.
simply to cash out at historically high values. The abundant
Demand, especially for more modern vessels, was driven availability of period charters, at levels corresponding to
by keen period interest and on occasions it was hard to prices paid, certainly generated considerable momentum
tell whether the tail was wagging the dog or vice-versa. from the end of the first quarter.
The final big push really began in August when charter

36 HSBC Shipping Services Limited


Bulk Carriers

The entry of active and aggressive Vietnamese and South Outlook


Korean buyers helped propel the secondhand market
in both modern and older ships respectively. By May, The outlook for 2008 remains positive but cargo demand

strong demand had stripped the market of available sales growth across all segments is forecast to be just under 5%

candidates and values began to accelerate with buyers while average tonnage supply growth across all segments is

being forced to look at vessels encumbered with charters. expected to come in at about 7% on the basis of anticipated

The easy availability of period for older units drove prices up minimal scrapping. However, the gap between supply and

prices in that segment. By mid May, the price of a 10-year demand will be narrowed, or even eliminated, by continuing

old handysize exceeded the newbuilding contract price. congestion at major loading and discharging ports and

Frustrated buyers began to spend more time examining the by increasing tonne-mile growth as trade characteristics

shipyards and soon started bidding up prices to levels that change. The dry bulk market underwent a correction in

finally made sense to the builders to provide forward berths. November that became even more severe in January, but
this correction was based upon cargo supply problems
En bloc deals came into vogue – the Sunwise fleet in June in the larger sizes and adverse sentiment feeding in from
and the Evalend fleet in August – attracting big numbers unstable financial markets. At the time, we expected the
from investors. By August, the BDI shot through the 6,000 dry bulk fundamentals to re-assert themselves and for the
barrier and the handysize market moved up another gear. market to recover and this is indeed what it has been doing
Evalend recorded the first handysize sales at above $40 during February and into early March.
million per unit and, in the 2006-built Stentor, recorded the
highest price ever paid. While supramaxes reached the $80 Closer analysis of the tonnage supply side shows the VLBC

million mark, no handysize has yet breached $50 million. segment growing by 18% from a relatively low base of

This was symptomatic of either a very firm psychological just under 22m-dwt and the conventional cape segment

resistance level or simply of a lack of available very modern expanding at a more subdued net rate of 4.3%, after 5m-

candidates for sale. dwt of new deliveries, from a larger 109m-dwt base. We
expect the VLBCs to be generally covered under long-term
By the third and fourth quarters a rising number of COAs but this still removes existing raw material cargoes
newbuilding contracts were being signed, many at yards and incremental demand growth from the spot market.
with weak financial credentials and poor technical and Nonetheless, the conventional sizes still look to be set fair
commercial prospects. Newbuilding contract prices were for 2008 ahead of a much heavier delivery schedule in 2009
bid up beyond $35-37m with deteriorating payment terms at over 20m-dwt followed by more than 42m-dwt in 2010.
and deliveries stretching into 2012 or even 2013 in Japan. Given the sheer weight of future deliveries, 2008 may be
A sudden jump in values for the fourth quarter – Hanjin a good time for owners with ships on the water to lock in
Houston and sister Hanjin Tampa, both 27,209-dwt built 3-5 years time charter to a top-rated charterer and sit the
1995 – were sold for $40 million. This was a remarkable market out.
development to see 12-year old handysize leap-frogging
forward delivery newbuilding contract prices. There is a parallel development in the expanding post-
panamax segment, which is expected to rise almost
At the older end of the scale, the 23-year old Ypermachos 24% from a low base of under 14m-dwt at the end of
and Diasozousa, both 28,000-dwt built 1984, were sold 2007, whereas the conventional panamax sizes will see
for $26 million each in the fourth quarter. This was twice net growth of less than 5% from a higher base of almost
what they might have achieved at the start of 2007 and 95m-dwt at the end of 2007. The outlook in this segment
50% ahead of what they would have got in only the is positive for 2008 with both 2009 and 2010 set to post
previous quarter. December was a quiet finish to the year an even slower rate of deliveries as the focus moves up
as the freight market adjusted downwards in the middle to the post-panamax sizes. Handymaxes are forecast to
of November. This caused s lull in trading activity while the expand by a net 10% in 2008 while the handysize segment
extent of the correction was evaluated. The last concluded gains less than 4.5% and remains favoured for its flexibility.
handysize in 2007 was Seaglass (28,427-dwt built 1992) The handysize orderbook stands at 26% today compared
$38 million; a 15-year old vessel achieving the same level with 8% at the start of 2007. New yards in China feature
as a newbuilding order. This illustrated the strength of
demand for prompt delivery.

Global Shipping Markets Review 2008 37


prominently, using handysize as entry-level ships with
which to gain experience. Some degree of delay, even
non-performance, is expected to retard the delivery
pace in future.

Robust iron ore demand growth in China will support both


the VLBCs and capes on the long-haul routes from Brazil
where available and incremental supply is expected to
continue growing at a faster pace than Australia. India’s
exports are expected to decline by over 2%, or 2-3mt, in
2008 with this shortfall being made up by South Africa. To
put this in context, South Africa’s 2008 exports by weight
are forecast to be 11% of Australia’s and 10.5% of Brazil’s.
India is trying to limit iron ore exports in support of its
domestic steel industry while South Africa’s infrastructure
constraints constantly threaten the prospects for expanding
its iron ore export trade. However, it achieved almost 15%
export growth in 2007 and is forecast to increase a further
9% in 2008 to almost 33mt. At the margin Chile, Canada,
Sweden and Peru will all lift their exports volumes in 2008,
providing ultra long-haul supply to Asia.

Panamax and handymax sizes stand to gain from the


current Chinese thermal coal export ban that is forcing
Japan, Korea and Taiwan to seek long-haul replacement
supplies. Nearby sources include Indonesia and Australia,
although the latter failed to keep up with Chinese
demand in 2007 because of problems associated with
landside mines, rail and ports. Mines in both Indonesia
and Queensland are currently victims of flooding with
consequently reduced output. A more distant source is
Colombia which is increasing its production and may be able
to respond to rising Asian demand at some benefit to tonne-
miles. Meanwhile, the thermal coal imports of India, China
and South Korea are all expected to continue their upward
trajectory in 2008 increasing by about 5mt each. This would
represent year-on-year growth of 17% for India, over 30%
for China and nearly 8% for South Korea.

38 HSBC Shipping Services Limited


Bulk Carriers

Global Shipping Markets Review 2008 39


Tankers

40 HSBC Shipping Services Limited


Global Shipping Markets Review 2008 41
Introduction ensuing months and the final outcome for 2007 was
one-third lower at 1.04m-bpd. Last year we drew attention
A year ago, we drew attention to the fact that many market to the delinkage between earnings and values as they
observers, including some of the world’s largest tanker started off 2007 heading in opposite directions: values up,
owners, were bearish for 2007 prospects. However, we earnings down. This seemed to us either to represent a
wrote that “we are prepared to venture that crude tanker longer term belief in future earnings, thus supporting
earnings could outperform 2006 while product rates will higher valuations, or to indicate that too much money
disappoint.” We were right not to be as pessimistic as was chasing too few opportunities.
the big tanker operators, but they were correct for the
first three quarters of the year during which tanker rates Now, one year on, not much has changed. Tanker
flatlined. Our redemption came in the fourth quarter when newbuilding prices have never been higher and delivery
large crude tanker spot rates went through the roof and leadtimes have never been longer. Secondhand values
revisited the highs of November 2004, something that continued to rise during 2007 even as spot earnings have
no-one expected. This had the effect of raising annual slipped; thus the disparity between values and earnings
average spot earnings so that, year-on-year, VLCC and has widened. The premises are still valid: there is a belief
aframax rates were down only 9%, suezmax 16% and that future earnings can support high valuations and there
panamax just 1%. On the other hand, clean and dirty is still ample liquidity chasing relatively few opportunities.
products did better than we had forecast, falling only The liquidity crunch in financial markets was acknowledged
marginally. (See Figure 26. below). in August and, at that time, affected mostly American and
European banks but has since permeated into the broader
Many of the themes we were writing about twelve months economy. Some big ticket shipping deals got pulled in
ago are still relevant today. The US economy had already the fourth quarter due to inability to source debt finance
started grinding down with a slowdown looking more likely at the right price but, by and large, shipowners are on the
than a recession at that time. After a year of withering side of the sovereign wealth funds and emerging market
growth, a Wall Street Journal poll of economists put governments: they have cash to spend.
recession risk at 50-50 in January 2008 but, by early
March, various investment banks and sages such as The KG funds can still tap into new equity but sourcing debt
Warren Buffet are claiming that the US is already in for a series of new super post-panamax containerships
recession. This time last year, we suggested that other or a fleet of large tankers is no longer a given. With
economies would be unlikely to secure immunity from a US private and institutional investors able to access plentiful
slowdown. Our current position is largely unchanged as we funding we foresaw that any 10-30% correction in asset
never bought into the decoupling theory as enthusiastically values in 2007 would motivate value investors to step in,
as did our own house economists. Hank Paulson, the US effectively putting a floor under price falls. We never saw
Treasury Secretary, is now referring to decoupling as a the correction in tanker values, just continued investment at
myth, almost as if he would actually wish the rest of the firming market prices supported more by robust medium-
world to catch a cold if the US must endure the flu. term period rates1 than by the lacklustre spot market. 2007
was the year of dry bulk, leaving tankers in the shadows.
A year ago, we were already taking note of country-by- The frothiness of the bulk carrier market provided a useful
country forecasts that predicted much slower economic outlet for single-hull tankers with many being lined up for
growth and pondered that such adjustments should conversion into large bulk carriers, FPSOs, FSOs and even
logically lead to slower energy demand. And yet the latest heavy lift. This transfer of assets between shipping sectors
IEA forecasts for oil demand growth at that time were for has made fleet analysis more challenging but, without
a 1.55m-bpd year-on-year increase in 2007, implying only doubt, it has reduced future tanker supply to the benefit
marginal weakness in the global economy last year. of the sector.
The IEA duly revised its forecasts downwards over the

1
Avg. 3-year rates. VLCC up $1,000 daily; suezmax up $500;
aframax up $1,000; panamax flat; MR up $1,000.

42 HSBC Shipping Services Limited


Tankers

Figure 26. Average tanker earnings

Ship Type Dwt/ Year of Build 2006 2007


$ $ % Change
VLCC 300,000-dwt / 2000 63,092 57,147 -9%
Suezmax 150,000-dwt / 1999 53,136 44,825 -16%
Aframax 106,000-dwt / 2000 39,369 35,810 -9%
Panamax 73,000-dwt / 2000 30,882 30,565 -1%
Products 30,000-dwt / 1988 27,187 26,016 -4%
Average 42,733 38,873 -9%
Baltic Dirty Tanker Index 1,287 1,124 -13%
Baltic Clean Tanker Index 1,112 974 -12%

The decline in spot market earnings in 2007 was less it was down only 1%. The small handysize, a proxy for
marked than many had expected, helped by a belated and clean traders, was down 4% year-on-year. The late 2007
exceptionally strong rally in the fourth quarter. Average spot rally in crude rates would have been missed by all but a few
earnings for all tankers slipped 9% compared with 2006 and lucky owners but at least it served as a reminder of what is
the Baltic Dirty Tanker Index was down 13% and the Baltic possible, and of how well balanced is supply and demand.
Clean Tanker Index down 12%. Taking the panamax size as The supply side in 2008 has moderated, given conversions
a proxy for dirty products, although this size will increasingly and regulatory tightening post Hebei Spirit, and emerging
move over to clean trading as new LR1 deliveries escalate, market demand remains robust.

Fleet supply
Figure 27. Tanker fleet supply

Year-end 2006 Year-end 2007 Orderbook in m-dwt at 31-Dec-07


M dwt # ships M dwt # ships as % Delivery Delivery Delivery Delivery
fleet 2008 2009 2010 2011+
VLCC 200,000+ 142.1 485 148.3 504 38% 11.3 20.4 15.0 7.0
Suezmax 120-200,000 52.4 348 54.7 361 42% 3.1 9.3 7.4 2.2
Aframax 80-120,000 71.1 699 75.8 738 44% 7.7 11.5 9.1 3.0
Panamax 60-80,000 21.4 308 23.7 338 44% 2.8 3.6 1.5 1.6
Handy 10-60,0000 32.9 941 34.7 974 42% 4.1 4.7 4.0 1.0
Total Fleet >10,000 320.0 2,781 337.2 2,915 41% 28.9 49.5 37.0 14.8

In GSMR 2007 we separated out the crude oil tankers In 2007, bulk carriers finally took over the limelight at the
from the product tankers. The overlap is most common in shipyards allowing tankers and containerships to pause for
the panamax LR1 and handymax MR sizes but also occurs breath after an earlier period of heavy investment. In the
to a lesser extent in the aframax LR2 segment. In recent process, the bulk carrier orderbook quickly became inflated,
years a higher proportion of tankers in these sizes have although it cut some welcome slack for tankers. At the
been coated as a doubling in newbuilding prices has made close of 2007, the total orderbook of all tankers stood at
the coating option a relatively cheap additional cost for the 41% of the end-2007 fleet with scheduled deliveries spread
extra flexibility that it conveys. Furthermore, modern tank out over four years or more. The workhouse aframax sits
cleaning methods now make it much easier for coated at only 19% of the current fleet by capacity, whereas the
ships to trade dirty products and crude oil cargoes and then larger VLCC and suezmax segments stand at 38% and
return to clean products without much ado. We have thus 42% respectively. Of the 129 panamax tankers of almost
recombined the two categories. 9.5m-dwt on order at the beginning of 2008, 104 or 80%

Global Shipping Markets Review 2008 43


are coated. These tankers are being built as the optimal size Deletions include demolition, losses and removals with the
to move refined products from new refineries in the Middle latter category covering conversions to FPSO, FSO, heavy
East and Asia into the refining-constrained markets of the lift, bulk carrier or other usage. 2007 was the year in which
US and Europe. tanker owners spotted an opportunity to convert single-hull
tankers of all sizes to bulk carriers in order to capture the
Figure 28. Tanker fleet profile at end 2007 enhanced earnings ahead of bespoke newbuilding deliveries

m-dwt
from the shipyards. Single-hull VLCCs were the main
50 targets for conversion into very large ore carriers (VLOC)
Product tankers
45
Crude oil tankers
deemed suitable for long-haul iron ore imports from Brazil
40
35 to China. A VLCC conversion might typically cost about
30
$25m (plus loss of hire) and take six months to complete.
25
20 The quantum and timing of available capacity at conversion
15 yards is unclear but any project looking at completion
10
5 in 2010 would coincide with newbuild VLOC deliveries,
- begging the question of why any steel mill would provide
pre 1978

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

employment for a convert. The suitability of converted


single-hull tankers for the structurally punishing iron ore
trades is both debatable and untested.
The tanker fleet profile shows a modernising fleet
with quite rapid expansion in size after new deliveries In 2007, there were no losses and there was no scrapping
accelerated in the period following the 2001 economic in the VLCC segment. The last loss was in 2001 and the last
recession. The tankers that were the product of the VLCC to be scrapped was the 262,166-dwt Thai Resource
1970s building boom have now all but gone and the pool which was sold for demolition in June 2005. This is a
of tankers that delivered in the 1980s is fast becoming remarkable statistic in itself after a 5-year period between
depleted. This will be the primary source of demolition 1999 and 2003 that witnessed an average of 10m-dwt per
30
candidates
m-dwt over the coming years. The overall proportion of annum of VLCCs exit the trading market. This paved the
crude tankers to product tankers in the fleet remains near
Handysize
way for the exceptional market of 2004 that saw a depleted
Handymax
25 thePanamax
historic ratio of an 80:20 split. But, in terms of recent VLCC fleet coincide with a year of hyperactive global oil
and future deliveries, product tankers are increasing their
Post-Panamax demand growth of 3m-bpd or 3.8% year-on-year (compared
20
relative
Capesize
share on the back of perceived tonne-mile demand with just 1m-bpd in 2007). In 2007, VLCC ‘removals’
VLBC
15 growth in the global product trades in the years ahead. At amounted to 11 units of just under 3m-dwt and there will
the end of 2007, the crude oil tanker fleet by our calculation be much more to come in 2008 which is helping rebalance
10
was 275.7m-dwt, compared to the product tanker fleet fleet supply and demand in favour of the tanker owner. In
5
of 61.5m-dwt, the split now being 77:23 in favour of crude January 2008 alone, 8 units totalling nearly 2.2m-dwt have
tankers. been removed from the active VLCC fleet.
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Figure 29. Tanker deletions have been almost suspended Conversion statistics vary, the above figures being courtesy
despite phase out requirements of Clarkson’s Shipping Intelligence Network, a key source
of our supply-side data. The most recent authoritative
m-dwt
30
Products study of VLCC conversions was published by tanker
Handy COT
broker E.A.Gibson on 18 January. For 2007, it put VLCC
Panamax
25
Aframax conversions at 15 units, ten into VLOC and five into FPSO,
20 Suezmax four units more than SIN. For 2008, it forecasts 26 units
VLCC
being converted to VLOC and three units into FPSO.
15
Assuming that these do go ahead then this will have a
10
more positive impact on VLCC supply in 2008, by reducing
5 it, than we have factored into our estimates that follow. As
these tankers are slated for removal from the VLCC fleet
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 in 2008 then we can safely assume that the owners have

44 HSBC Shipping Services Limited


Tankers

booked the conversion yard, probably fixed subsequent 25th anniversary, whichever comes first. The most modern
employment and are beyond the point of no return when it extant single-hull VLCCs are two that delivered in 1996 and
comes to possible second thoughts. they will hit the beaches by the end of 2015, at the latest,
at the relatively young age of 19 should another purpose
Conversions beyond 2008, which Gibson’s projects as 19 not be found for them. The trend of converting is set to
in 2009 (14 to VLOC and 5 to FPSO) and 10 in 2010 (5 each continue, further depriving the scrap dealers of Bangladesh,
to VLOC and FPSO), may be more vulnerable to change Pakistan and India of their natural feedstock despite
if conversion yard space and or future employment are Bangladesh bidding in excess of $600 per lightweight ton
not yet booked. Then there is the wobble factor. In the for tanker demolition candidates.
three month period between November 2007 and January
2008 the spot capesize market collapsed while the VLCC There is now the prospect of a VLCC being sold for scrap
spot market soared, a dramatic enough seesaw motion within Q1 2008. The single-hull B Elephant (239,351-dwt
to make conversion owners seriously think twice. The Sasebo 1986) is said to have received bids of $630 per ldt
fact remains that the weight of conversions from single- against its owner holding out for a record $700 per ldt. In
hull VLCCs, together conversions from tankers in all the February 2008, five double-sided aframaxes were reported
other size segments, is dramatically improving the tanker sold to Chinese conversion buyers. Frontline sold Sea
market outlook over the next five years. Conversely, it is Leopard (94,993-dwt Koyo 1990) and Sea Panther (97,112-
m-dwt
30 deteriorating the dry bulk outlook over the same period for dwt Imabari 1990) for $40m en bloc while Phoenix sold
Handysize
large bulk carriers, especially in the context of new bespoke Seletar Spirit (98,288-dwt Koyo 1988) for $17.5m, Sentosa
Handymax
25 VLOC and cape deliveries beyond 2009. Spirit (97,161-dwt Imabari 1989) for $19.5m and Seraya
Panamax
Post-Panamax
Spirit (97,019-dwt Imabari 1992) for $23.5m. At the big
20 To summarise, this report envisages 55 out of the fleet end of the business, OSG and Euronav are converting their
Capesize
of 1502 single-hull VLCCs to be removed from oil tanker Daewoo 2002-built 442,500-dwt TI Africa and TI Asia to
VLBC
15 service and converted into bulk carriers in the 2007-2010 FSOs under an 8-year storage contract to Maersk Oil Qatar
period while a further 18 will make it into FPSOs during the running from Q3 2009. That takes two of four of the largest
10 same period. That leaves 77 for further conversion work or tankers in the world out of active service.
demolition between now and the end of 2015 (if they elect
5 for the Condition Assessment Scheme from 2010) or their

2
SIN in mid-Feb 2008 puts the VLCC fleet at 498 units: 358 DH,
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
134 SH, 5 DS, 1 DB i.e. 140 non double-hull.

Figure 30. Conversions – any second thoughts?

$pd

250,000
Cape
200,000 VLCC

150,000

100,000

50,000

0
2/11/07

9/11/07

16/11/07

23/11/07

30/11/07

7/12/07

14/12/07

21/12/07

28/12/07

4/1/08

11/1/08

18/1/08

25/1/08

1/2/08

8/2/08

15/2/08

22/2/08

29/2/08

7/3/08

Global Shipping Markets Review 2008 45


m-dwt

Handysize
Handymax
Panamax
The process of converting away from single-hull VLCCs single hulls trading in their waters from 2015 to 2010.
into very
Post-Panamax large ore carriers gained in popularity as 2007 Korea is the largest user of single-hull VLCCs and this
progressed.
Capesize Two issues would have made conversion accident is another nail in the coffin of these tankers as
VLBC owners pause for thought: the Hebei Spirit oil spill off inspection regimes worldwide will become even more
South Korea on 7 December and the inverted performance intensive. The rate premium for doubles over singles has
of large tankers and bulkers towards the end of the year. widened materially and all of a sudden future supply-side
The oil spill from the single-hull VLCC was one-third the size factors are arguably favouring big tankers over big bulkers.
of the Exxon Valdez in 1989 but more than enough for the
Korean authorities to bring forward the guillotine date for
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 31. Recent oil tanker contracting

m-dwt
Handy types to feed at the trough, before they get pushed aside as
30
Panamax the hunger of the former supplicant returns. As an example
25 Aframax
of this feast and famine tendency, VLCC contracting in Q1
Suezmax
20 2006 was extremely vigorous following many consecutive
VLCC
15 quarters of abstinence. The feasting binge endured all

10
of 2006, albeit at a slower rate of consumption. The
subsequent slimming program in 2007 was assisted by the
5
exercise of shedding pounds to the large bulk carrier and
0
FPSO segments. But, as we all know, these things never
2003-Q2

2003-Q4

2004-Q2

2004-Q4

2005-Q2

2005-Q4

2006-Q2

2006-Q4

2007-Q2

2007-Q4

last and Q4 2007 marked the return of VLCC appetite.

Vessel contracting is a dynamic exercise. Over the past In looking at fleet developments in each segment in
five years of generally strong, but always volatile, shipping the following tables we have, as in the past, taken the
markets we have seen any under-ordered segment gain five-year average of deletions to come up with our
contracting attention until appetite is more than satiated. A deletions estimate.
period of relative famine ensues, allowing other sizes and

Figure 32. Recent VLCC fleet development

End 2006 End 2007 2008 Deletions Fleet End 2008


deliveries estimate
VLCC fleet, m-dwt 142.1 148.3 11.3 4.2 155.5
% change 4.3% 4.4% -- -- 4.8%

In last year’s GSMR we had forecast net VLCC fleet growth converted in 2008, as per earlier estimates, then at 270,000-
of 3.7%; it turned out at 4.4% because our deletions dwt average unit size over 7m-dwt will exit the sector
estimate of 4.4m-dwt was marginally on the high side. For during a year in which 2.2m-dwt already left in January.
2008, we are conservatively expecting a 4.8% capacity gain That would reduce net VLCC fleet growth to just 2.9% in
in the segment to 155.5m-dwt in total. This is not far out of 2008 and this figure gives us confidence that the big ships
line with previous years of 4.3% growth in 2006 and 4.4% will continue to prosper this year on the back of resilient oil
in 2007. However, if 26 single-hull VLCCs do indeed get demand in emerging markets, led by China and India.

46 HSBC Shipping Services Limited


Tankers

Figure 33. Recent suezmax fleet development

End 2006 End 2007 2008 Deletions Fleet End


deliveries estimate 2008
Suezmax fleet m-dwt 52.4 54.7 3.1 1.5 56.3
% change 8.0% 4.3% -- -- 3.0%

We had predicted 5.7% net growth in the suezmax fleet running at just over 4m-dwt per year for the last four years
for 2007 but it came in quite a lot lower at only 4.3%. prior to which deliveries averaged 3.3m-dwt per year during
This is because removals almost tripled over the previous the previous four year period since the end of 1999.
year to eleven units of nearly 1.6m-dwt. Even with what Thus 2008 represents an historically low delivery year and
seems to be a low exit forecast for 2008, we still expect the this should provide some cushion against any possible
suezmax segment to expand by only 3% this year to 56.3m- demand weakness. But beware, as in 2009 deliveries
dwt. This will be more than 3% lower than the average are scheduled to triple to over 9m-dwt which will prove
of the previous three years. Annual deliveries have been testing without a very upbeat demand-side response.

Figure 34. Recent aframax fleet development

End 2006 End 2007 2008 Deletions Fleet End


deliveries estimate 2008
Aframax fleet, m-dwt 71.1 75.8 7.7 2.4 81.1
% change 6.8% 6.6% -- -- 6.9%

Our prediction of aframax fleet growth for 2007 was years between 2003 and 2007, there were 38.5m-dwt of
4.8% but it came in much higher at 6.6% after a pace of aframax deliveries and 26.2m-dwt of removals, making this
demolition and conversions that was broadly in line with a dynamic and modernising segment. Scheduled deliveries
2006 and 2005 (in the range of 1.8 to 1.9m-dwt per year). of 7.7m-dwt in 2008 are coincidentally the same as the
But these figures were well behind the previous cyclical 7.7m-dwt annual average deliveries of the last five years.
peak demolition years of 2004 (2.7m-dwt) and 2003 (4.0m- Our removal estimate of 2.4m-dwt lends itself to 6.9% net
dwt). This skewed our demolition forecasts for 2007 higher, fleet growth in this segment this year, slightly above 2007.
being the average of the preceding five years. In the five

Figure 35. Recent panamax fleet development

End 2006 End 2007 2008 Deletions Fleet End


deliveries estimate 2008
Panamax fleet m-dwt 21.4 23.7 2.8 1.0 25.5
% change 15.1% 10.7% -- -- 7.5%

A year ago we predicted net fleet growth in the panamax and dirty products fleet in this segment is in sharp decline
tanker segment of 1.6% but it came in much higher at whereas the orderbook is 80% inclined towards LR1 clean
7.5%. In 2007 we had allowed for 1.0m-dwt of removals, product tankers. In 2008, only 2.8m-dwt of deliveries are
being the average removal rate of the previous 5 years, scheduled in this size of tanker and, after adjustments for
and it turned out at about half that at a bit over 0.5m-dwt. forecast removals, we expect net fleet growth of 1.8m-dwt
Last year, four units were scrapped and four removed, or 7.5% year-on-year. This will be well below the double-
which usually means converted to other use. The crude oil digit annual expansion of recent years.

Global Shipping Markets Review 2008 47


Figure 36. Recent handysize tanker fleet development

End 2006 End 2007 2008 Deletions Fleet End


deliveries estimate 2008
Handysize fleet, m-dwt 32.9 34.7 4.1 2.1 36.6
% change 5.8% 5.4% -- -- 5.6%

Our handysize tanker fleet excludes more specialist types rise to 33.7m-dwt based upon anticipated heavy scrapping
such as the IMO I/II chemical/oil carriers, bunkering ships, of 3.8m-dwt in the small products segment, fairly evenly
edible oil carriers and combination carriers. This would spread between clean and dirty. In the end, scrapping was
add at least a nominal 50m-dwt to the fleet although not less pronounced. For 2008, deliveries should be about
all of that would be regularly (if at all) available for crude double scrapping levels, so net fleet growth of about 5.6%
oil or oil products trading. Within our narrower definition, will be in the range of the last two years.
our forecast for 2007 net fleet growth had been a 2.4%

Figure 37. Recent tanker fleet development

End 2006 End 2007 2008 Deletions Fleet End


deliveries estimate 2008
Tanker fleet, m-dwt 319.9 337.2 28.9 11.2 354.9
% change 6.2% 5.4% -- -- 5.3%

In summary, the total tanker fleet grew by a net 17.3m-dwt, net fleet growth of 17.8m-dwt to 354.9m-dwt. At 5.3%,
or 5.4% year-on-year, in 2007. Based upon 28.9m-dwt of tanker fleet growth this year will be broadly in line with the
deliveries and 11.2m-dwt of removals in 2008, we forecast last three years.

Figure 38. Hull configuration of the tanker fleet at 31-Dec-07

Hull VLCC Suezmax Aframax Panamax Handy


DH 72.4% 84.2% 84.5% 81.4% 61.2%
DB 0.2% 1.9% 1.1% 1.1% 6.3%
DS 1.0% 3.3% 6.4% 5.1% 4.3%
SH 26.5% 10.6% 8.0% 12.3% 28.2%
Grand Total 100.0% 100.0% 100.0% 100.0% 100.0%

The VLCC fleet was 72% double hull at the end of 2007 seeing that the rationale for conversion to VLOC is being
compared with 69% at the end of 2006 and the single undermined, first, by lack of both conversion yard space and
hull fleet has reduced to 26% from 30% a year ago. bank finance and, second, from the threat of over-tonnaging
The single hull fleet will continue to shrink as VLCCs are as bespoke newbuilding deliveries ramp up in 2009 and
withdrawn from service and converted to other use and peak in 2010.
as charterers increasingly shun them. The Hebei Spirit oil
spill in December 2007 has the potential to cause a domino It surprises us that some steel mills are willing to commit
effect in Asia that leads other crude importers to tighten long-term Brazil/China COAs to these untested conversions
their rules. The widening rate discount and increased when questions are being asked about their structural
waiting time for single hulls are exerting downward suitability for the iron ore trade. It might be better to wait
pressure on returns. These factors are accelerating the rate a while and exploit a looming excess of built-for-purpose
at which these tankers are being lined up for conversion newbuildings delivering in 2010 to nail down long-term
to bulk carriers, FPSOs and heavy lifters. We are already contracts at potentially lower rates on ships that are

48 HSBC Shipping Services Limited


Tankers

designed for the trade. Taking newbuilds of 300,000-dwt Jin Hui 300,000-dwt orders at Dalian have recently been
or above alone, there are 8 scheduled to deliver in 2009, cancelled as the company was unable to get debt finance
13 in 2010, 16 in 2011 and 6 in 2012. These deliver in the on attractive terms despite having 15-year employment
midst of a sea of conventional capes and other vessels for each from a first-class Chinese steel mill. A sign of
between 170,000-dwt and 300,000-dwt. Out of these, two the times.

Oil Demand
Figure 39. Different views of oil demand (all in m-bpd)

Total Demand 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
IEA 77.30 77.67 79.20 82.27 83.90 84.80 85.95 87.62 90.00 91.90
OPEC 75.86 76.55 79.49 81.99 83.30 84.58 85.76 86.97
EIA 77.41 78.04 79.62 82.33 83.66 84.77 85.72 87.04 88.30 90.70
HSBC 82.33 83.68 84.78 85.78 87.68 89.16
Demand Growth
IEA-OMR 0.37 1.53 3.07 1.63 0.90 1.15 1.67 2.38 1.90
OPEC 0.69 2.94 2.50 1.31 1.28 1.18 1.21
EIA 0.64 1.57 2.71 1.33 1.11 0.95 1.32 1.26 2.40
HSBC 82.33 1.35 1.10 1.00 1.90 1.48

We continue to struggle with our three main sources of oil as a result of falling house prices within the transatlantic
demand forecasts: the International Energy Agency (IEA) economies. The revision might have been more severe
representing the OECD nations; the Energy Information but for the fact that 45% of projected oil demand growth
Administration (EIA) of the US Department of Energy; and in 2008 is forecast by the IEA to come from oil-importing
OPEC (the Organisation of Petroleum Exporting Countries). Asia, and a further 12.5% from Europe. This demand is
They never agree with one another and possibly their not considered to be at risk of derailment from a decline in
forecasts are more in tune with their own agendas as either performance from America.
producer or consumer. The IEA and EIA tend to talk up
demand in order to encourage OPEC to increase supply In its 13 February Oil Market Report, the IEA highlights
and thus bring prices down, while OPEC tends to talk down various topical features of today’s energy markets, all of
demand in order to justify restricting supply and thus keep them being familiar themes. Prices are volatile and still
prices high. The IEA predicted 1.80m-bpd demand growth trading above $90 per barrel for WTI. Weaker projections
in 2006, it turned out at 0.90m-bpd or 1.1% year-on-year for global economic growth are offset by low stocks (lower
growth. In 2007, the IEA forecast 1.55m-bpd growth but than the average of the last five years), forecast cold
it turned out at 1.15m-bpd or about 1.4%. These are large weather in the US North East and parts of Asia and supply
margins of error. disruptions in Nigeria, Venezuela and the North Sea. January
world oil supply rose by nearly 750,000-bpd to 87.2m-bpd
On 16 January, the IEA had forecast 2008 global oil demand thanks to increased output from Brazil and other non-OPEC
growth of 1.98m-bpd or 2.3% year-on-year, almost double sources. Non-OPEC producers are expected to increase
its pre-revision growth forecast of 1.05m-bpd for 2007. output by almost 1.0m-bpd in 2008 on rising supply from
Naturally this raises our expectations of a meaningful the FSU, Asia-Pacific and Brazil (part of which is made up
increase in seaborne oil trade. But, come 13 February, the of increased biofuels production). The EIA has lowered its
IEA reduced its forecast by 200,000-bpd to 1.67m-bpd forecast of 2008 demand growth 0.2m to 1.4m-bpd with
bringing total estimated global consumption in 2008 down OPEC predicting a 1.2m-bpd, or 1.4%, rise. The top to
from 87.8m-bpd to 87.6m-bpd. The reasons lie in global bottom range of our forecasters is 1.7 to 1.2, very much a
economic weakness, led by the US, time-lagged demand case of take your pick.
destruction caused by high oil prices and lower spending

Global Shipping Markets Review 2008 49


OPEC crude supply in January remained steady at 32m-bpd On the more macro front, oil shipping demand in 2007
on higher output from Angola, the UAE, Saudi Arabia and was significantly influenced by the term structure of
Kuwait offset by lower output from Iraq, Nigeria and Qatar. WTI futures, and continues to be so in 2008, as this has
ysize
Spare capacity is estimated to have risen to 2.4m-bpd, still assumed even greater relevance in the context of a high oil
ymax
a very thin cushion. On current IEA projections, OPEC will price environment. By early March, WTI had risen to nearly
max
Panamax
be called upon to increase supply by about 700,000-bpd $105 per barrel, crude stocks were rising, the Strategic
size to 31.9m-bpd in 2008. OECD industry stocks fell by 39.5m Petroleum Reserve is being filled despite high prices (an
barrels in December due to constrained crude supplies and indication of anxiety in the White House) and OPEC is
peak seasonal refinery runs. The IEA put the 4Q07 stock refusing to raise output quotas. What exactly one can
draw at 1.15m-bpd, well above the 0.75m-bpd average of learn from all that is anyone’s guess.
the past ten years, reducing forward cover to 50.7 days,
its lowest since December 2004. This large draw can be As we can see in Figure 39 above, the average of the
attributed to backwardated oil futures and high spot prices IEA, EIA, OPEC and HSBC’s 2008 oil demand growth
that combined to discourage imports for anything other forecasts is for a rise of about 1.5m-bpd or 1.8% year-
than immediate consumption in the absence of a on-year. Over the last five years, total seaborne oil trade
1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
premium for storage. has been rising at just over 2.5-times the rate of global oil
demand growth. The current average oil demand growth
Early data from the US, Japan, EU-15 and Norway suggests forecast for 2008 of 1.8% should translate into just under
a stock build in January of just over 22m barrels illustrating 5% total seaborne oil demand growth. That is close to
the effect of increased seaborne oil imports in response matching our forecast of 5.3% net tanker fleet expansion in
to stock drawdowns and a narrowing in the backwardated 2008. Systemic inefficiencies should further narrow the gap.
futures spreads that finally prompted buying activity. Oil demand figures are at risk of being revised downwards
The upward leg in the spike in VLCC rates in December should the US economy sink into recession but, today, the
may be put down to the delayed impact of the 0.5m-bpd consensus is that oil demand will grow by 1.5m-bpd in 2008
plus OPEC output increase from 1st November. after only 1.0m-bpd in 2007, while the total tanker fleet is
The downward leg can be attributed to constrained forecast to expand by 5.3% in 2008 after 5.4% in 2007.
supplies, negative sentiment and positional factors. Based on those statistics, 2008 should trump 2007.

Figure 40. Oil prices and tanker demand

VLCC Spot Earnings v. WTI 3M Futures Spread


6.0
VLCC Spot
5.0 WTI 3M-futures spread

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

-3.0
7 - Jan - 07

28 - Jan - 07

18 - Feb -07

11 - Mar - 07

1 - Apr - 07

22 Apr - 07

13 - May -07

3 Jun - 07

24 - Jun - 07

15 - Jul - 07

5 - Aug - 07

26 -Aug - 07

16 -Sep-07

7 - Oct - 07

28 - Oct - 07

18 - Nov - 07

9 - Dec -07

30 - Dec - 07

20 - Jan - 07

50 HSBC Shipping Services Limited


20
Capesize
VLBC
15

10
Tankers

Figure 540 plots VLCC earnings against the 3-month spread As the spot price of WTI became more expensive than
in WTI futures prices. The price spreads were quite a lot future prices, all incentive to import crude evaporated,
wider based upon the broader 6-month term structure as there was no payment for storage and it became a
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
but the above still illustrates a point. WTI futures were in loss-making trade. Also, high imported crude prices were
contango up until the end of July meaning that forward damaging refining margins. Backwardated prices saw
prices were higher than spot prices. This encourages oil refiners draw down their stocks which, between August
2005-01
2005-09
2006-05
2007-01
2007-09

imports as higher future prices pay the cost of storage and November, dipped well below the 5-year average.
and provide a positive ‘carry’ and was supportive of VLCC As OPEC raised official production quotas by 0.5m-bpd
earnings in the first six months of 2007. The narrowing of from November 1st, the WTI spread began moving back
the spread, and its final move into backwardation in late towards par. This was the trigger for US refiners to seize
July, was disastrous for VLCC rates pushing average weekly the opportunity to replenish depleted stocks and it was
earnings down below $20,000 daily in mid September, done with sufficient gusto to boost VLCC spot rates up to
incurring steep losses to a few unlucky owners. $240,000 time charter equivalent on AG/far East, bringing
back memories of November 2004 .

Figure 41. MEG crude exports – still behind the September 2005 peak of 23.63m-bpd

E.Med Exports
Red Sea Exports
m-bpd Refined Product Exports
AG Crude Exports
25

20

15

10

0
1998-01

1998-05

1998-09

1999-01

1999-05

1999-09

2000-01

2000-05

2000-09

2001-01

2001-05

2001-09

2002-01

2002-05

2002-09

2003-01

2003-05

2003-09

2004-01

2004-05

2004-09

2005-01

2005-05

2005-09

2006-01

2006-05

2006-09

2007-01

2007-05

2007-09

2008-01

The Middle East remains the export market that exercises On average, non-compliance reduced actual production
the most influence over the fortunes of the VLCCs. At the cuts to only about 1.1m-bpd but almost all of this was from
end of 2006 OPEC officially cut 1.2m-bpd of production, the AG. These production cuts kept a lid on VLCC rates in
followed by a further 0.5m-bpd in early 2007, in anticipation the first half, although they remained respectable in the
of slowing demand from the US that threatened to light of what was to come in the third quarter when the
destabilise oil prices. OPEC considered that the market WTI futures moved from contango to backwardation. The
was well supplied, OECD stocks had been rebuilt, long decision to increase supplies by an official 0.5m-bpd from
futures positions were artificially supporting prices and 1st November had positive repercussions on AG supply,
geopolitical risks were beyond the organisation’s control. sentiment and VLCC rates.

Global Shipping Markets Review 2008 51


5

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005
Figure 42. Global Refining Capacity (k-bpd)

North America L America Europe & Eurasia ME Africa China India Other Asia Pacific
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(Source is a composite of IEA, BP and HSBC Oil and Gas Division Estimates.)

There is good news for Asian oil products throughput this or 76%, from the current 2.1m-bpd maximum output with
year. A Reuters survey suggests that Asia-Pacific oil four new refineries. However, the fast pace of domestic
refiners will shut only 2.7% of refining capacity in the demand growth may keep all or most of the added output
second quarter for maintenance, roughly half the within the Kingdom rather than available to export markets.
capacity shutdowns of a year earlier. An average of about Abu Dhabi National Oil Corporation (ADNOC) plans to more
680,000-bpd of throughput will be shut for maintenance than double the current 400,000-bpd capacity of its largest
during the period. This is 470,000-bpd less than in crude refinery at Ruwais. The engineering and design study
Q2 2006 when refiners shut down 4.7% of their total for the plan is expected to be completed by the end of 2008
capacity to upgrade for tighter environmental regulations. or in early 2009. Kuwait plans to boost the crude processing
The lighter maintenance season coincides with modest capacity of its Mina Abdullah refinery by 104,000-bpd by
shutdowns in Europe and the US, meaning that there will June 2012. IEA forecasts of oil demand growth in 2008
be extra seaborne crude movements in Q1 and higher put the Middle East second only to Asia at 393,000-bpd
fuel availability during the second quarter when demand compared with 748,000-bpd respectively. Therefore, at
traditionally slackens. At this time, heating oil requirements this stage, it is hard to assess how much product will
in the northern hemisphere reduce as spring arrives and become available for seaborne export.
gasoline demand remains subdued ahead of the summer
driving season. OPEC is nervous that slower demand may Indian Refinery Expansion – the Holy Grail for
lead to lower prices and that is why it held quotas steady product tankers?
at its March 5th meeting in Vienna. The US had argued for India’s refineries have an estimated current throughput
an increase in supply to bring prices back to well below capacity of 2.98m-bpd, or about 155.4m-tpa, according
$100 to a point where they may help rekindle flagging to latest figures from Reuters and ONGC. Once existing
global demand. refineries are expanded and new planned ones built, this
should increase by 2.14m-bpd or 72% to 5.12m-bpd or
Middle East Refinery Expansion – new product required 270m-tpa by 2012 (using an average conversion factor
in home markets? of 7 barrels to every tonne). India has the advantage of
Saudi Aramco’s new 400,000-bpd $8bn Ras Tanura refinery being close to crude oil supply in the Arabian Gulf, is Asia’s
is scheduled for completion in December 2012, some nine third largest oil consumer and has ambitions to become a
months later than original schedule. Saudi Arabia plans to regional refining centre. Central to these plans are meeting
raise its domestic crude refining capacity by up to 1.6m-bpd, Euro and US fuel standards in order to export the requisite

52 HSBC Shipping Services Limited


Tankers

gasoline grades direct to distributors in developed markets The other private operator is Essar. It has a single refining
in Europe, the US and South East Asia. As a rule of thumb, complex at Vadinar, which opened in November 2006,
state-owned refiners are bound to service domestic before that has a 10.5m-tpa throughput capacity which is being
export demand, thus selling products into the Indian market expanded to 34m-tpa within 2010. It currently produces
at capped prices and receiving partial compensation from Euro II and III products but specifications will be raised up
the central government via oil bonds. Privately-owned to Euro V and US standards within the $6bn expansion
refiners, such as Reliance and Essar, are almost entirely program to meet the requirements of customers in Europe,
export-focused so as to maximise returns. the US and Asia, as well as domestic consumers. The
focus is clearly on exports as economics dictate that if
Indian Oil Corporation’s ten refineries have a combined you buy and import crude at market prices then you must
processing capability of 1.2m-bpd, or over 60m-tpa, also sell refined products at market prices, not at domestic
according to IOC’s own figures, and have about 40% of the capped prices. India is not alone in capping energy prices.
total Indian market. Its $11.2bn expansion plans are well The policy, in some shape or form, is rife throughout the
underway and it expects to add a new 15m-tpa refinery at Middle East, China, other Asia and the Americas. Europe
Paradip by end 2011. Another state-owned refiner, Bharat seems to be virtually alone in setting market prices and
Petroleum, has three refineries at Mumbai (12m-tpa), taxes represent about 70% of a gallon of petrol in the
Kochi (7.5m-tpa) and Numaligarh (3m-tpa). Current UK. America effectively subsidises motorists by failing to
throughput is about 480,000-bpd expected to rise by raise taxes from low levels, as a way of promoting fuel
40,000-bpd as Kochi’s capacity is stretched. Some conservation, and by subsidising the production of ethanol
$4.2bn is earmarked for two new refineries at Bina as a fuel additive.
(6m-tpa) and Allahabad (7m-tpa) with the former scheduled
for completion by December 2009 and the latter on hold In early March 2008, Indian refiners are re-assessing their
until Bina is completed. Hindustan Petroleum, also state- new projects in the light of the Union Budget. Currently,
owned, owns two refineries in Mumbai (7.4m-tpa) and new refineries are eligle for 100% income tax exemption
Visakh (9.2m-tpa) plus a joint venture at Mangalore. It has for the first seven years of operation. Under the new
allocated the equivalent of $1.15bn for upgrading plans budget, tax holidays for the refining of ‘mineral oil’ are
and is proposing a new 9m-tpa refinery at Bhatinda in joint revoked for new and expanded projects commissioned
venture with LN Mittal for completion within 2010. after April 2009. This will affect the economic viability of
any facility being built outside a special economic zone.
The Oil and Natural Gas Corporation (ONGC) has a The future of these massive new refinery projects
9.7m-tpa refinery at Mangalore which is running at 129% now comes down to a matter of definition. In Monty
of nameplate capacity with a 2007 throughput of 12.5mt. Pythonesque style, the report seeks to clarify that “for
This will be expanded to 15m-tpa by 2010 with about $2bn the purposes of this section, the term ‘mineral oil’ does not
in funds allegedly allocated for the purpose. On the to do include petroleum and natural gas, unlike in other sections
list is a planned 15m-tpa new refinery at Kakinada. On the of the Act.” Shipowners who have contributed to the
private side, Reliance commissioned a 660,000-bpd facility build-up of the huge product tanker orderbook will no doubt
at Jamnagar in 1999 which is running at above nameplate await with interest any further linguistic developments that
capacity at about 34m-tpa annual throughput. It will be may influence the future availability of long-haul cargoes
joined by an adjacent facility by the end of this year with between India and Atlantic-based consumers.
a targeted capacity of 580,000-bpd. The total cost of both
facilities is estimated to be $12bn, the 1.25m-bpd combined Historic and Projected Seaborne Oil Trade
throughput (at the upper end of a 60m-tpa to 65m-tpa
We have taken some figures courtesy of Clarksons.
range) will catapult Reliance to the top of the national
Seaborne crude trade grew by 3.6% on a compound
leaderboard. Furthermore, the site, which occupies an
annual growth basis (CAGR) between 1990 and 1999 and
area the size of London, will be the largest single-site
then from 2000 to 2006 it slowed to 2.6%. Meanwhile,
refinery in the world. The government has designated
seaborne products trade rose at a CAGR of 1.5% from
100% of output as export-orientated and it is this point
1990 to 1999 compared with a faster rate of 5.5% in the
that should tickle shipowners.
period from 2000 to 2006. There may be a certain logic
in the juxtaposition of seaborne crude trade falling just as

Global Shipping Markets Review 2008 53


seaborne product trade rises. Some crude oil exporters products. This suits the developed Atlantic economies
want the opportunity to catch some of the (occasional) which have little appetite for anything other than refinery
added value of selling finished products rather than just creep, eeking out extra production rather than building new
selling the crude oil feedstock to refiners. This is certainly and switching a dependence on crude imports to one of
the case in the Middle East amongst the largest producers dependence on crude and product imports.
such as Saudi Arabia, Kuwait and the UAE where there is
the intention to export. It is most notably not the case in Slower seaborne crude oil trade growth can be attributed
Iran and Iraq whose refining infrastructure is inadequate to to new oil and gas pipelines that connect the FSU with
the point that Iran has to import refined products despite western Europe and China, and that connect the Middle
having amongst the largest crude oil reserves in the world. Eastern producers with consumers to their north, east and
west. Furthermore, regional trades have mushroomed
Neither is it the case in Nigeria where not only is a large within the Americas, the Baltic Sea, the Black Sea, the
proportion of its crude oil production shut in because of AG-Red Sea, the Indian Ocean and within the Asia-Pacific.
violence in the Niger Delta, but also its refineries are so Counterbalancing these are new long-haul trades from the
dilapidated as to require the import of products. These Russian Atlantic, Latin America and north, west and east
systemic inefficiencies are supportive of product trades Africa to Asia and the Far East. When it is all netted out, the
in the sense of creating trades where none should really new long-haul trades are beginning to add more tonne-miles
exist. In the case of India, it is becoming a processing hub, than the short and regional trades are taking away. We thus
importing crude oil for processing into products for both expect the weaker phase of annual crude oil trade growth
the domestic and the export markets. China is the same between 2000 and 2006 to give way to a stronger growth
and will undoubtedly build refining capacity beyond rising phase from 2007 to 2012 as trading patterns evolve to the
domestic requirements and become a swing exporter of benefit of large tanker owners.
1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Earnings
Time charter

Figure 43. One-year time charter earnings for nominal standard tankers

$pd
80,000

70,000

60,000

50,000

40,000

30,000

20,000
2008 - 06

2005 - 08

2005 - 10

2005 - 12

2006 - 02

2006 - 04

2006 - 06

2006 - 08

2006 - 08

2006 - 10

2006 - 12

2007 - 02

2007 - 04

2007 - 06

2007 - 08

2007 - 10

2007 - 12

2008 - 02

VLCC
Suezmax
Aframax
Panamax
Handysize

54 HSBC Shipping Services Limited


Tankers

One-year rates have remained reasonably stable in the Aframax one-year rates were also range-bound, with
aframax and smaller sizes over the past few years. modern vessels fixing between $30,000 and $35,000
Greater volatility exists in the larger VLCC and suezmax per day throughout 2007. Phoenix set the tone for
segments as they are influenced by sharper movements modern tonnage in February with the fixture of Arafura
in the spot market. Sea (105,856-dwt 2000) for $33,000 daily. In May, Stena
Bulk took the ice-class 1B Nevskiy Prospect (114,597-dwt
For VLCCs, the one-year time charter benchmark was 2003) for a year at $35,000 daily and the conventional Rich
established at the start of the year by Koch taking Desh Queen (105,200-dwt 2007) at the lower rate of $31,750
Vaibhav (316,000-dwt 2005) for $50,000 per day. By June, per day. By the year’s end Shell was fixing Mare Adriacum
Koch was still only paying $49,500 per day for one year’s (110,500-dwt 2004) at only $31,000 daily. A few three-year
charter of a VLCC, but this time it was the rather older deals as typified by AET’s January fixture of Glenross
Shinyo Navigator (300,509-dwt 1996). Koch had an option (90,679-dwt 1993) and Loch Ness (90,607-dwt 1994) at
to take the ship for a further year at $51,000. At year’s $26,000 daily. By the end of the year ExxonMobil was able
end, BP paid $52,500 for a 12 to 15 month charter of Smiti to take Pink Sands (98,891-dwt 1993) for three years at the
(281,000-dwt 2005) but the upward pressure on time lower rate of $27,450. Par for the year for more modern
charter rates from the spot market surge of 4Q07 finally units was probably near to the $27,900 that Chevron
came to light in some fixtures reported in January and Texaco paid in June for a 3-year commitment on
February. First the 299,700-dwt, 1995-built La Paz was fixed Ambelos (105,400-dwt 2006).
for a year by TMT for $65,000 per day from SK Shipping,
who had themselves taken the ship for three years in
m-dwt Further down the size scale the one-year rate band
30
May 2007 for $45,000 daily. Finally, in February 2008, two
Handysize narrowed even further. The average one-year rate paid
modern VLCC’s, Crude Progress (300,000-dwt 2002) and
Handymax for a panamax tanker in 2007 was around $29,000 per
25
Spyros (319,000-dwtPanamax
2007), were reported fixed for one day. In May, PDVSA paid $30,500 to take Omega Queen
year each at
20
$70,000Post-Panamax
daily. (74,999-dwt 2004) while in October Teekay paid $27,500
Capesize
to take the smaller deadweight Fedor (70,000-dwt, 2003).
Longer period fixtureVLBC
rates for VLCCs fizzed along the Modern MR tankers were not too far behind in what were
15
same long-burning fuse before exploding in the final more frequently reported fixtures. In February, Cargill was
quarter. In January 2007, STX PanOcean took Eagle reported to have fixed the newbuilding FR8 Spirit (51,000-
10
Vermont (306,400-dwt 2002) for three years at $45,000 dwt 2007) at $25,000 daily and, in March, Mercuria paid the
daily, the same
5
rate paid for La Paz by SK Shipping four same rate for Targale (51,800-dwt, 2007). In June, Navig8
months later. In November, CSSSA sneaked ahead of the succumbed to a firmer $26,000 for Ugale (51,800-dwt,
market rise and paid only $45,000 for three years for the 2007) and, in December, Vitol negotiated a softer $24,500
2001-vintage Utah (299,498-dwt). But the next month,
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
daily for a third Latvian Shipping sistership Piltene
TMT had to pay a much higher $52,500 for three years (51,800-dwt 2007).
on Neptune (319,360-dwt 2002) and in January 2008
Wah Kwong paid $47,500 for four years on Venture Voyage Charter
Spirit (298,287-dwt 2003).
Figure 44. Average Baltic tanker indices 2002-2008
Suezmax one-year time charter rates were stuck in the
index
range of $40,000 to $50,000 per day for modern 150,000-
2,250
dwt double-hull units. In early 2007, Teekay was reported BCTI
2,000 BDTI
to have paid $42,500 for Hellespont Trooper (147,916-dwt
1,750
1996) and Mercuria paid a significantly lower $36,000 daily
for the older Tromso Trust (154,970-dwt 1991). One-year 1,500

rates stabilised in the low to mid $40,000s by the middle 1,250

of the year, as per Repsol’s fixture of SKS Saluda (159,000- 1,000


dwt 2003) for $42,000 per day. However, by early 2008, 750
TNK was reported to have paid only $31,000 to take 1 31 61 91 121 151 181 211 241 day
Ocean Emerald (152,680-dwt 1991) for a year.

Global Shipping Markets Review 2008 55


Seasonality still holds sway in the spot market. The in the time series is not the value for a particular year but
universe of both crude and product tankers still peak at the average for that day in each year from 2002 onwards.
the end of the calendar year before entering a long slow Note that the Baltic Exchange reports on UK working days
decline to, on average, about week 32 before picking up only, not calendar days, so in figure 44 there are never 365
again towards the next peak. This is clearly demonstrated observations per year, but around 250 depending on public
in a chart of the all-values average of BDTI and BCTI. It is holidays in the UK.
1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
much more pronounced in the dirty tanker index. Each point

Figure 45. Average earnings for nominal tanker types

$pd
250,000 VLCC
Suezmax
Aframax
200,000
Panamax
Products

150,000

100,000

50,000
Jan - 05
Feb - 05
Mar - 05
Apr - 05
May - 05
Jun - 05
Jul - 05
Aug - 05
Sep - 05
Oct - 05
Nov - 05
Dec - 05
Jan - 06
Feb - 06
Mar - 06
Apr - 06
May - 06
Jun - 06
Jul - 06
Aug - 06
Sep - 06
Oct - 06
Nov - 06
Dec - 06
Jan - 07
Feb - 07
Mar - 07
Apr - 07
May - 07
Jun - 07
Jul - 07
Aug - 07
Sep - 07
Oct - 07
Nov - 07
Dec - 07
Jan - 08
Feb - 08
But for the spike in VLCC spot market earnings in the fourth Aframax rates followed a similar pattern in 2007 and spot
quarter, 2007 would have been a poor year and very much earnings ended the year some 9% down on 2006. We
worse than 2006. Average spot earnings for the whole year forecast net fleet growth of only 2.2% in 2008 after 6.6%
ended up only 9% down on 2006 although very few owners in 2007. On the basis of such restrained supply growth, and
would actually have benefited from this brief but sharp robust demand, we anticipate that earnings will improve for
uptick which would have required fortuitous timing and the aframax segment this year.
positioning. Even though oil demand forecasts may decline
as the year progresses, positive supply-side factors suggest Panamax spot rates in 2007 were only 1% down on the
that 2008 should be better than 2007. previous year. Net fleet expansion should come in at
about 7.5% in 2008 after 10.7% in 2007. This segment
Suezmax spot rates largely tracked the larger VLCC is positioning itself to capture rising volumes in the clean
segment but for a dramatic spike in earnings at the end product trades from the Middle East and Asia to the US and
of March caused by a strike at the French Mediterranean Europe.
oil port of Lavera which delayed ships from discharging.
Suezmax spot earnings were down 16% year-on-year. We Small clean products tankers were insulated from earnings
forecast net fleet growth of 3.0% in 2008 after 4.3% in weakness in 2007 with average rates declining by only 4%
2007 which gives some scope for optimism. compared with 2006. In the broader 10,000 to 60,000-dwt
product carrier segment we expect net fleet growth of only
1.8% in 2008 after 5.4% in 2007. Rising inter- and intra-
regional trades in 2008 should underpin earnings this year.

56 HSBC Shipping Services Limited


m-dwt
30
Handysize
Handymax
25
Panamax
Tankers
Post-Panamax
20
Capesize
Values
VLBC
15
Figure 46. Newbuilding prices have never been higher

10
US$m 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
VLCC 72.5 69.0 76.5 70.0 63.5 77.0 110.0 120.0 129.0 146.0
5
Suezmax 44.0 42.5 52.5 46.5 43.8 51.5 71.0 71.0 80.5 91.0
Aframax 34.5 33.0 41.5 36.0 34.8 41.5 59.0 58.5 65.5 72.5
Panamax 31.0 31.0 36.0 32.0 31.2 37.5 48.0 50.0 58.5 63.5

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993
m-dwt
30
Products 26.0 26.0 29.5 26.3 27.0
Handysize 31.5 40.0 43.0 47.0 52.5
Handymax
$m 25
Panamax
for bulk carriers, ultra-large boxships and specialised ships
150 VLCC
Post-Panamax VLCC
Suezmax
20 that reduced future berth availability for tankers. It was
125 Aframax Capesize
also in some part attributable to the fact that owners have
Panamax VLBC Suezmax
100 Products
15 strong balance sheets and have been happy to continue
40k-dwt
reinvesting surplus cash in shipping which has provided
Aframax
75
10 stellar returns. There is something distinctly comforting in
50
investing in a real asset with a 25-year useful economic
Panamax

25 5 live when exotic paper investments are blowing up all


around. Investment in ships, as with commodities,Products
reflects
0
an interest in a class of asset that is in great demand and
1998

1999

2000

2001
2002

2003

2004

2005

2006

2007

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993
has a utility value. Should it turn out that ordering has been
overdone, causing earnings and values to decline, then
Newbuilding prices for all tankers rose during 2007 with patience becomes a virtue as one is forced to wait for the
$m largest gains at the top end. VLCC prices were up
the next up-cycle in the life of the asset. Shipowners are used
150
13.2%
$m year-on-year, suezmax up 13.0%, aframax VLCC
up to doing this, but financial investors may find it challenging.
VLCC
Suezmax
150
10.7%, panamax up 8.6% and products up 11.7%. VLCC VLCC
125 Aframax By March 2008, the nominal price of a VLCC newbuilding
Suezmax
This
125 development was partly a function of strong demand
Panamax
Aframax has risen further to close to $150m. Suezmax
100 Products Suezmax
Panamax
40k-dwt
100 Products
75 Aframax
40k-dwt
Figure 47. Secondhand prices are peaky too (annual average 5-year old prices) Aframax
75
50
Panamax
50 Panamax
US$m
25 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
VLCC
25 50.0 53.0 71.0 58.0 54.0 70.0 108.0 117.0 118.0 Products
138.0
0 Products
Suezmax 36.5 35.0 49.0 39.0 38.0 47.0 75.0 75.0 82.0 96.0 40k-dwt
1998

1999

2000

2001
2002

2003

2004

2005

2006

2007

0
Aframax 23.5 26.0 40.0 30.0 29.0 36.0 57.5 63.0 66.5 73.0
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Panamax 25.2 24.5 30.6 23.5 20.0 28.0 42.0 48.0 56.0 60.5
Products 40k-dwt 21.0 20.0 24.5 20.5 19.5 25.4 38.1 45.9 46.4 50.8
$m
150 VLCC The strong rise in modern secondhand (5-year old) values in VLCC
Suezmax
125
2007 was surprising in the context of weaker spot market
Aframax
Panamax earnings. This continued the disconnect that we had noticed Suezmax
100 Products
in 2006 when values were strengthening even as earnings
40k-dwt
Aframax
75 were weakening. Both VLCC and suezmax were up an
astonishing 17% year-on-year, aframax up almost 10%,
50 Panamax
panamax up 8% and a 40,000-dwt product tanker almost
25 10%. Tanker S&P activity was weaker as a result. However, Products
0 average annual 3-year period rates (generally the minimum 40k-dwt

lock-in requirement for investors) were slightly stronger


1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Global Shipping Markets Review 2008 57


namax
st-Panamax
pesize
BC

in 2007 compared year-on-year with 2006, but at marginal Some indication of the possibilities may be gleaned from
levels that do not appear to justify the sharp rise in values. TMT’s marketing of its G Elephant (298,500-dwt Nantong
VLCC 3-year rates were up 2.2% to $48,400; suezmax up 2006) with an asking price exceeding $180m and with a bid
1.2% to $38,600; aframax up 3.5% to $29,600; panamax at $170m allegedly already declined. The prevailing 3-year
flat at $26,900 and MR up 4.4% to 23,300 daily. We can time charter rate for a modern VLCC has at least improved
only explain this development as a combination of plentiful to $55,000 per day, a $2,500 or nearly 5% improvement on
money chasing investments and a firm belief in the future. the last week in December 2007. These latest high values
1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
are evidently a response to an improved supply-side outlook
In early March 2008, we can report that values have in 2008 and improved medium-term period earnings.
continued to rise. SK Shipping is rumoured to have The plunging value of the dollar and the surging price
committed its C Prosperity (318,000-dwt HHI March 2009) of crude oil, pushing $105 per barrel and threatening to
for $163.5m to Minerva. If this sale is factual then it makes destroy marginal demand, have clearly been brushed to
one wonder what a 2008-delivery resale should fetch. one side.

Figure 48. INTERTANKO count of tanker sales per year

500
10-60,000
450
60-120,000
400
350 120-160,000
300 200,000 dwt+
250
200
150
100
50
0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

When all the deals are finally counted, 2007 could have Throughout 2007, the VLCC secondhand market was
been a bigger year than the record year of 2004 for characterised by deals with all manner of riders, such as
secondhand sale and purchase. Over 40% of the activity drydocking due or long period charters attached. A few
was in the smaller handysizes and over 30% in the ‘clean’ sales did provide occasional signposts through the
combined panamax and aframax segments. To some haze. In July, Samho bought the VLCC Neptune (319,360-
extent, this is reflected by our lists of representative sales dwt Hyundai Samho 2002) for $136.5m, a strong price
for 2007-2008. Where possible we have concentrated on even in the light of Blystad’s June en bloc purchase of
sales of modern, standard specification tonnage and on Venus Glory and Mars Glory (both 299,089-dwt Daewoo
sales where the price is not distorted by attached charters. 2000) for $237m. When Eastern Mediterranean bought
Tanker sales have however frequently been encumbered the Hyundai-built Else Maersk (308,491-dwt HHI 2000)
with charter options, purchase options, profit sharing and for $122m in December, it seemed that the secondhand
so on, so where we are confident in the detail, we have market would not keep up with the spike in earnings.
included these as well. Duing 2007, as noted above, a Buyers had become used to having to pay up to acquire
number of tankers were sold for conversion to bulk carriers, modern, double-hulled tonnage but interest would generally
as well as others which were sold for conversion to wane as prices rose to new record levels.
storage units or FPSOs. We have included some of
these sales in our lists, although drawing comparisons Meanwhile, the biggest tanker deal of 2007 was Energy
between these older units of variable specification is Infrastructure Acquisition Corporations’s purchase, including
not always appropriate. a variety of attached time charters, of nine VLCCs built
between 1988 and 2001 from Vanship Holdings for $778m.

58 HSBC Shipping Services Limited


Tankers

Vanship, a joint venture between Univan and Fred Cheng’s profit share above the base charter hire rate of $25,500
Shinyo International, sold the ships to the New York listed daily, with Omega getting 65% of the excess when the
EIAC for $643m in cash and $135m of shares in Energy ships trade in ice conditions. At the end of September,
Infrastructure Merger Corp. This is a new company with OSG bought the 73,400-dwt newbuildings Cape Taft and
Charles Vanderperre of Univan, Fred Cheng of Shinyo and Cape Talara (delivering from New Century in 2008 and
George Sagredos of EIAC on its board. The plan is for EIMC 2009 respectively) for $125m on an en bloc charter-free
to change its name to Van Asia Tankers Limited, at which basis. The biggest deal in this segment in 2007 was BW
point Mr Sagredos will step down. The deal has in effect Shipping’s purchase of eight 76,565-dwt resales from IMC
given Cheng and Vanderperre access to the US equity for $450m en bloc. The builders are New Century with one
markets without having to IPO their business. built in 2006, five in 2007 and two to deliver in 2008. In
September, Ocean Tankers purchased five resale 73,400-
For suezmaxes, 2007 was punctuated by a few stand-out dwt New Century resales from Ahrenkiel for $67.5m each
modern deals. In January, Knutsen was reported to have with four built in 2007 and one in 2008.
paid $95.5m for the 162,000-dwt, ice-class 1A Windsor, a
newbuilding delivering ex-DSME in May. In June, Palmali Picking out comparables from the varied handysize tanker
acquired Discovery (164,533-dwt HHI 2003) for $96m and fleet is not so easy. On a year-on-year average comparison
Unicorn (152,250-dwt HHI 2002) for $94m. In July, the basis, a 5-year old 40,000-dwt product tanker gained 9.5%
slightly older Stemnitsa (147,093-dwt SHI 2000) cost Great in value in 2007 compared with 2006, rising from $46.4m
Eastern $88.5m, illustrating how firm prices for modern to $50.8m. Meanwhile, 3-year time charter rates rose only
tonnage had remained despite moribund earnings. Finally, 4.5% on a year-on-year average basis from about $22,300
in November, Nordic American Tankers paid $180m for two to about $23,300 daily. In January, Gonen (47,102-dwt
159,000-dwt newbuildings contracted originally by First Onomichi 2000) was sold to Vosco for $47.5m. In May,
Olsen from Bohai shipyard in China with delivery scheduled Juniper (47,465-dwt Uljanik 2002) and Jasmine (both
for December 2009 and April 2010. 47,355-dwt Uljanik 2002) were sold to Stealth for $100m en
bloc, reported with a bareboat charter attached at $13,650
Aframax tonnage appeared to be in demand in 2007 daily of undefined duration. In October, Vinashin was
as newbuilding prices rose almost 11%, and 5-year reported to have paid $60.5m for Lidong (50,530-dwt SPP
old secondhand values rose by almost 10%, between 2007) and then, in February 2008, a new benchmark was
the beginning and end of 2007. These increases were set for the smaller types when the ice class 1A Jag Payal
achieved despite a 9% year-on-year fall in average spot and Jag Panna (both 37,400-dwt HMD 2007) were acquired
earnings and a 3.5% year-on-year drop in 3-year time by Motia for $102m en bloc.
charter rates. In February, the German KG company Liwa
Mobiliengesellschaft acquired Nordatlantic (105,344-dwt Outlook
2001) for $59.5m with an attached 5-year time charter at
$23,500 per day. In April, GNMT of Libya acquired two At the time of writing the conclusion to this chapter in

modern sisters Celebrity and Serenity (both 105,200-dwt early March, spot WTI crude oil is trading at above $105

Sumitomo 2004) for $73m each, a notch higher than Cardiff per barrel, driven up by speculative long positions, static

Marine reportedly paid for Maersk Pristine (110,000-dwt OPEC quotas and geopolitical tensions. The armed forces

Dalian 2004) in June. In December, the spot market rally of two OPEC members, Venezuela and Ecuador, have

caused Minerva to pay $81.5m for Amalthea (107,116- only just stopped squaring off against the much larger

dwt DSME 2006). In February 2008, Stealth Maritime was military forces of neighbouring Colombia, narrowly averting

reported to have paid $152m for two New Times 2009 hostilities. February US non-farm payrolls fell 63,000 in the

resales, setting the bar for the coming year. largest monthly drop in five years, and January figures were
revised up from 17,000 to 22,000 losses. Jobs are being
In the panamax and MR segments, multi-ship deals lost in manufacturing, construction and retailing bringing
were common in 2007. Early in 2007, Omega Navigation the overall US unemployment rate to 4.8%. The dollar has
purchased two prompt delivery resale 73,673-dwt STX fallen to 1.55 to the euro, a record low, and the chorus of
ice-class 1A panamax tankers, Omega Emmanuel and economists now calling the US in recession has got louder.
Omega Theodore, for $64.5m each. The ships were The economic vibes from America are not at all encouraging
placed on a 2-year time charter to ST Shipping with 50/50 and are, for the time-being at least, quite the reverse of

Global Shipping Markets Review 2008 59


the bullish atmosphere that is permeating Hong Kong and The best hopes for the tanker markets in 2008 lie in a
China. While slow or declining growth in the US contrasts number of areas. One is that the present US slowdown or
sharply with strong growth in Hong Kong and China, both recession is both mild and brief; and that the twin monetary
east and west share the common curse of inflation, which and fiscal packages that are being rolled out are successful
is rising on the strength of those non-core elements of food in achieving this outcome. Such a result should resurrect
and energy. Until recently Asia was promoting disinflation, flagging oil demand in North America and indirectly enhance
now its dollar pegs and commodity demand are causing it energy demand growth in China and India. Domestic price
to export inflation alongside its manufactured goods. controls in emerging economies, high taxation rates on
energy in Europe and the strong euro all serve to cushion
We are left to ponder what impact high oil prices and food the impact of rising dollar prices in many big energy
price inflation will have on household budgets and whether consumer nations. It must also be hoped that OPEC and
oil consumption and seaborne oil demand may suffer as other oil producers are both willing and able to manage
a result. We realise that the decoupling theory is now in supply so as to foster consumption. In 2007, upstream
the process of being tested and we will soon see which production in many parts of the world was constrained by a
camp is right. In terms of macro oil demand growth, the variety of issues ranging from declining oil field yields and
latest projections from the IEA, EIA and OPEC currently shut-in production to weather factors and pipeline politics.
foresee stronger growth in 2008 than in 2007 by quite a Downstream oil product output was inhibited by creaking
wide margin. However, we expect these forecasts to be refinery infrastructure and prolonged periods of downtime
scaled back over the coming months to the point that we for maintenance and repairs. A return to contango in the
will probably be back to 2007 numbers. Oil consumption is term price structure of WTI and Brent futures, and better
still rising in China, India, the Middle East and Russia but and less volatile refining margins, would encourage greater
only the former two will generate seaborne oil trade. In seaborne crude shipments for both storage and processing.
terms of micro tanker supply, we predict that year-on-year All told, we need to see a better alignment of these
net supply growth in 2008 will be similar to 2007. So, if we factors in 2008 than we did in 2007 in order to improve the
do get the higher rate of oil demand growth that is currently prospects for the midstream shipping part of the global oil
predicted then we should enjoy better average earnings supply chain.
this year than last. Secondhand values are harder to call as
they have delinked from earnings and are already trading
at a premium. Newbuilding prices are supported by higher
input costs and the decision by some major yards to refrain
from offering forward berths until they have a better idea of
future costs.

60 HSBC Shipping Services Limited


Tankers

Global Shipping Markets Review 2008 61


Containerships

62 HSBC Shipping Services Limited


Global Shipping Markets Review 2008 63
Introduction the ships have done given the 4.5% supply-demand gap.
Clearly there is something wrong with the way in which
2007 was a better year for many of the big liner shipping supply is commonly analysed as it overstated for a number
companies despite significant increases in operating costs, of reasons. We touch upon this subject later in this chapter.
principally in the form of a near-doubling in bunker prices But, it is not just technical ship-side reasons that tend to
during the course of the year. It was also a better year for overstate supply, there are also the knock-on effects of
the tramp owners who saw steady improvements in term inadequate land-side infrastructure to consider.
rates and, as time charter operators, they were passing
fuel price risks onto the end-users. In terms of trade lanes, Onshore, mismatched investment and productivity ratios
Asia-Europe witnessed strong growth as volumes rose between east and west affect the efficiency of ships
close to 20% year-on-year. Intra-Asia volumes continued and the velocity at which containers move through ports.
to outperform as these trades link the powerhouse According to the Transpacific Stabilization Agreement,
manufacturing economies of the Far East with vibrant it will be another three years before US terminals raise
demand growth in the sub-continent and the construction their productivity from the current 5,000-teu per acre to
and consumption boom that is taking place in the the 10,000-teu plus needed to match current productivity
Middle East. The US-centric transpacific and transatlantic at Asian ports. In the meantime, US ports are struggling
trades were subject to slower growth with the weaker to cope with current and future anticipated import cargo
dollar creating better balance as US exports rose faster growth. This has a genuine arresting effect on effective
than imports. vessel supply as ships are left swinging around at
anchorages when they should be working. This deficiency
The key themes of 2007 were generally a product of is amplified by the fact that the Panama Canal is already
rising costs, not least bunker prices. The lines have yet to operating at or close to full capacity and that privately
design bunker adjustment factors that claw back all the owned US railroads will not fund new investments in track,
costs of higher fuel as they tend to be reactive rather locomotives and yards without heavy public sector support.
than proactive. Higher freight rates, especially on
Asia-Europe, were effectively wiped out by the negative Figure 49. At a glance – 6 to 12 month time charter
impact of rising bunker costs. In 2007, Maersk Line rates in 2007
completed its integration of P&ON and Hapag Lloyd
finalised its integration of CP Ships, both mergers having US$ per day 2006 2007 Change
proved more complicated than expected. The rationale for 4,400-teu gearless 32,417 34,375 6%
consolidation remains, and is only elevated by sharply rising 3,500-teu gearless 26,583 29,958 13%
costs. High oil prices saw some Asia-Europe carriers add a
2,750-teu gearless 22,646 26,292 16%
ninth ship into service loops. Reduced speeds saved on fuel
2,000-teu gearless 18,392 19,696 7%
at no loss of service frequency. In early 2008, PIL and Wan
1,700-teu geared 17,079 16,613 -3%
Hai entered a strategic alliance to achieve synergies across
the board and to better manage entry into the longhaul 1,000-teu geared 12,350 12,500 1%

trade lanes. 725-teu geared 9,817 9,054 -8%


Average 19,898 21,213 7%
On the tonnage supply side, fully cellular net fleet growth
in the 5-year period between 2005 and 2009 is currently Average short-term time charter earnings for all classes of
forecast to average 14.7% . This is a high figure but the
1 cellular containerships rose a respectable 7% in 2007 with
largest year-on-year growth in this period has already most of the positive influence coming from the flexible
happened. In rounded numbers: 2005 13.5%; 2006 17.0%; mid-size vessels in the 2,500-teu to 3,500-teu range.
2007 15.0%; 2008 14.5% and 2009 13.5%. We are seeing a This represents a considerable turnaround from 2006
declining rate, albeit on a higher base, of net supply growth in which the sector suffered a 31% loss in equivalent
in the cellular fleet. As demand growth has averaged 10.2% average earnings.
per annum over the same period it is surprising how well

1
Maersk Broker historical and forecast numbers.

64 HSBC Shipping Services Limited


Containerships

Supply
Figure 50. Containership fleet and orderbook

31-Dec-06 31-Dec-07 Orderbook in teu at 31-Dec-07


Vessel Teu # Teu # as % Delivery Delivery Delivery Delivery
Size, Teu ships ships fleet 2008 2009 2010 2011+
<1000 662,304 1,156 717,928 1,231 17% 91,445 18,970 9,864 1,900
1000-1999 1,472,100 1,044 1,637,603 1,160 26% 182,767 163,102 52,506 29,080
2000-2999 1,582,158 629 1,695,602 672 24% 190,749 104,436 82,540 26,800
m-dwt
30
3000-3999 1,046,509 307 1,139,074 333 23%
Handysize 73,757 92,210 90,091 7,200
4000-4999 1,486,819 339 1,682,437 383
25 58%
Handymax 272,573 389,576 196,294 120,830
Panamax
5000-5999 1,230,677 226 1,361,466 251 22% 129,222
Post-Panamax
68,060 51,600 54,172
20
6000-6999 674,122 104 796,800 123 94%
Capesize 208,544 307,168 187,288 46,100
VLBC
7000+ 1,274,919 154 1,719,542 204
15 185% 436,582 596,502 1,021,854 1,124,268
Total 9,429,608 3,959 10,750,452 4,357 60% 1,585,639 1,740,024 1,692,037 1,410,350
10

When we were writing last year’s report a year ago, the 5


the Atlantic coast. Rising intermodal rail costs, a shortage
delivery schedule for both 2007 and 2008 was estimated of locomotives and truck drivers, congestion at the Los
in rounded numbers at 1.4m-teu, with 2009 at 1.1m-teu. Angeles and Long Beach gateway and rising environmental
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999
These figures were large, as never before had 1.4m-teu concerns in California make the canal a safer bet than the
delivered within a single year. In the end, the figure for 2007 land bridge. Competition will come from larger ships leaving
turned out to be slightly lower at 1.32m-teu. However, the Asia westbound via Suez and terminating in the US on a
delivery schedule for 2008 has risen to 1.59m-teu and for draft shallow enough to permit port entry.
2009 to 1.74m-teu and for 2010 it is currently 1.69m-teu.
The 2007 deliveries appear to have been absorbed with Figure 51. Containership fleet profile at end-07
relative ease and this encourages the industry to keep
m-teu
raising the bar as it continues its search for that elusive
2.0
saturation point. Fleet
Orderbook
1.5
The swelling of the orderbook has been achieved mainly
by the ordering of very large and ultra large vessels well
1.0
above panamax size. 94% of the end 2007 fleet of ships
(by capacity) in the 6,000 to 6,999-teu segment, and 185% 0.5
of the end 2007 fleet of ships above 7,000-teu, are now
on order. Bear in mind that none of this ordering is for 0.0

replacement purposes as these sizes scarcely existed as


2011
1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009
pre-1978

recently as ten years ago, so the fleet of very larger vessels


is very modern and set to expand rapidly. Scheduled
deliveries of boxships of 6,000-teu or more is currently at Container fleet growth is unlikely to be moderated by
645,126-teu in 2008 – 903,670-teu in 2009 – 1,209,142-teu scrapping. In 2007, well over 1.3m-teu delivered while
in 2010 and 1,170,368-teu in 2011 and beyond. only 23,790-teu was removed from the fleet! The tailback
of older ships that delivered in the 1980s or earlier is thin,
The only other segment that looks to have gained more meaning a relatively small pool of potential demolition
than its fair share of attention is the panamax size between candidates should the market become obviously over-
4,000-teu and 4,999-teu. The third set of locks in the supplied. However, as bunker prices are expected to remain
Panama Canal is scheduled to come into service in 2014. at high levels, the older and less fuel-efficient ships will
In the meantime, this size is still optimal for all-water become a lot less popular with the lines.
transpacific services linking with the Gulf of Mexico and

Global Shipping Markets Review 2008 65


Figure 51 illustrates the size of the newbuilding delivery Figure 53. Growth in average containership size
pipeline over the coming years. As with the other sectors,
notably bulk carriers, we are not convinced that all these Average TEU per ship
contracts will become effective. Given the forward nature Size band 2006 2007 % change
of many deliveries, some contracts may not yet have been <1000 573 583 1.8%
financed and could struggle to secure debt funding on 1000-1999 1,410 1,412 0.1%
terms and at pricing levels that will make sense to investors 2000-2999 2,515 2,523 0.3%
based upon secured employment. Quite how such deals 3000-3999 3,409 3,421 0.3%
might unravel remains to be seen, but lawyers will no doubt
4000-4999 4,386 4,393 0.2%
be sharpening their pencils.
5000-5999 5,446 5,424 -0.4%

Some deals, especially forward deliveries that have not yet 6000-6999 6,482 6,478 -0.1%
secured employment, will simply not achieve financing at 7000+ 8,279 8,429 1.8%
all given how credit markets have become progressively Total 2,382 2,467 3.6%
tighter since August 2007. US rates have fallen by 225bps
since then, and appear to have further to fall, so they are The orderbook is staggeringly large. But, as we have said
actually falling faster than banks are raising lending rates. countless times in the past, once a number of lines take
However, loan-to-value ratios, security covenants and other the lead in ordering larger ships (and Maersk is invariably
features are markedly less attractive than before. The the leader, most recently with its huge E-class series)
shipyards may be left with slots that they had assumed to then it becomes nothing short of imperative for others to
be filled and some initial down-payments may be put at risk follow suit. Once one carrier has achieved a cost advantage
of being forfeited to builders. Even before 2007 had run its through economies of scale, a lower per slot cost, then
1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

course, a total of 13 super post-panamaxes of over 13,000- others will follow. There are two key motivators. The first
teu were either cancelled or the options left to expire is demand growth which needs to be satisfied via the
as charters, and presumably finance, were allegedly not principle of short-term pain, long-term gain. A boxship
available. should last 25 years so it needs to be big enough to satisfy
future, not just present, demand. In the early years, there
Figure 52. Containership deletions is the risk that copycat ordering will cause over-supply and
under-utilisation. The second is preparation for a market
downturn, at which time lower per slot costs are a bonus.
000-teu
Losses
100 This defensive mentality is the product of many years of
Scrapped
90 poor trading and overlooks the fact that chasing lower
80
costs, while creating desired efficiencies, also intensifies
70
60 the competition that ultimately leads to lower rates.
50
40 The trailblazers of scale have been Maersk, CMA CGM
30
and MSC while the traditional objectors have included
20
10 APL, Evergreen and K-Line. Early in the decade, Evergreen
0 pushed up beyond its preferred 5,500-teu size cap for the
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
first time in taking delivery of a series of five 6,000-teu
Even going back ten years ago to 1998, the level of followed by ten 7,000-teu units that are delivering between
scrapping at under 90,000-teu is unremarkable in terms 2005 and 2008. K-Line, another line traditionally more
of volume. This is less than the 91,445-teu that is comfortable with sub 6,000-teu vessels is taking delivery of
scheduled for delivery in 2008 in the smallest sub 1,000- a series of eight 8,000-teu ships between 2006 and 2009.
teu segment alone. But, it is APL that stands out for apparently breaking its
former vows regarding optimal size by venturing beyond its
5,500-teu maximum comfort zone to order eight 10,000-
teu units for delivery in 2011. Of course, these ventures
into larger sizes now seem less bold as even a 10,000-teu
vessel is a relative minnow when compared to the armada
of ships on order of over 12,000-teu, 114 at our last count.
66 HSBC Shipping Services Limited
Containerships

Ships on order of 10,000-teu and more number 175 units One estimate is that about one-third of the total container
of which only four have been contracted outside South orderbook is not yet financed and that some portion of this
Korea, these being a series of 10,000-teu vessels being will not complete, the most vulnerable being those ships
built by
m-dwt Nacks for Cosco. The balance are being built at scheduled to deliver in 2010 and beyond. About half of all
30
Hyundai
HandysizeHeavy, Hyundai Samho, Samsung, Daewoo, boxships on order are for independent owners, most of
Hanjin and STX. We are confident that these mature yards
Handymax them based in Germany. The equity funding is still available
25
will deliver on these contracts. This contrasts with our
Panamax through the KG market but the debt funding component
lack of confidence in the ability of many new and less
Post-Panamax may be more difficult to access as German banks are forced
20
mature
Capesizeyards in wider Asia being able to honour bulk carrier to restrict new credit. The total orderbook was about 60%
VLBC
contracts that they have entered into. But, even if those of the fleet by capacity at March 1st 2008, with deliveries
15
Korean yards are ready and able to fulfil their obligations, spread out over five years to 2012. In the worst case of
we suspect that some of these big series orders will not all the estimated unfinanced ships failing to deliver the
10
get financing either for lack of fixed employment or for orderbook could fall to 50% of the current fleet. But, it is
lack of available credit. Ironically, the credit crunch coincides unlikely to be that severe as in many cases cash resources
5
with the biggest shipping orderbook ever and never before will be used to pay for installments and equity ratios could
has there been such an enormous call upon the banks to be increased in order to attract debt finance for the balance.
provide debt finance.
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 54. Containership contracting trends

TEU
1,400,000
Post-panamax
1,200,000
Panamax and sub-panamax
1,000,000

800,000

600,000

400,000

200,000

0
1996-Q1

1996-Q3

1997-Q1

1997-Q3

1998-Q1

1998-Q3

1999-Q1

1999-Q3

2000-Q1

2000-Q3

2001-Q1

2001-Q3

2002-Q1

2002-Q3

2003-Q1

2003-Q3

2004-Q1

2004-Q3

2005-Q1

2005-Q3

2006-Q1

2006-Q3

2007-Q1

2007-Q3

In Q3 2007 we witnessed the contracting of 1.24m-teu of was the previous one, Q2 2007, in which 0.99m-teu was
new containerships, an all-time record. Until 2003, this was ordered. In the light of such exuberance, we may not see
a higher volume than had ever been contracted in a single such a record beaten in quite a while.
year, let alone a single quarter. The next record quarter

Global Shipping Markets Review 2008 67


Figure 55. Top 20 container lines by capacity (current and on order)

Fleet, Cum.
Company Ranking Fleet, # OB,TEU OB, # Total TEU % share
TEU Share
Maersk Line 1 1,676,955 448 341,149 70 2,018,104 13% 13%
MSC 2 1,232,335 369 404,110 48 1,636,445 10% 23%
CMA CGM 3 715,801 242 491,796 61 1,207,597 8% 31%
Coscon 4 443,979 148 401,574 59 845,553 5% 36%
Evergreen 5 628,898 180 8,668 2 637,566 4% 40%
Hanjin 6 336,717 77 255,270 31 591,987 4% 44%
CSCL 7 413,886 120 169,022 23 582,908 4% 47%
Hapag-Lloyd 8 490,275 141 87,500 10 577,775 4% 51%
APL 9 400,609 119 172,692 27 573,301 4% 55%
Yang Ming 10 271,888 82 261,412 41 533,300 3% 58%
NYK Line 11 343,670 89 179,000 37 522,670 3% 61%
Zim 12 238,567 82 279,518 37 518,085 3% 65%
MOL 13 323,729 103 181,410 30 505,139 3% 68%
OOCL 14 355,673 87 137,924 22 493,597 3% 71%
K-Line 15 296,420 92 157,618 32 454,038 3% 74%
Hamburg Sud 16 207,359 79 111,240 21 318,599 2% 76%
CSAV / CSAV Norasia 17 230,018 76 78,811 11 308,829 2% 78%
HMM 18 198,299 45 83,700 12 281,999 2% 79%
PIL 19 141,822 75 94,633 31 236,455 2% 81%
Wan Hai 20 133,105 76 51,324 18 184,429 1% 82%

The top 20 owners now control 82% of the global fleet unchanged from last year. Of note are the huge orderbooks
and orderbook. Consolidation is set to resume after the of MSC, CMA CGM and Cosco which now even exceed
tortuous link-ups between Maersk and P&O Nedlloyd and that of market leader Maersk Line. MSC and Cosco have
between TUI (the owner of Hapag Lloyd) and CP Ships. achieved their rapid expansion through organic growth while
In 2008, NOL (the owner of APL) and Hapag Lloyd continue CMA CGM and Maersk have used a combination of organic
to be strongly touted as merger candidates as there is a growth and acquisition.
natural fit between the two. The strengths of one appear
to counteract any weaknesses of the other on the main The bottom two in the list, PIL and Wan Hai, having
shipping lanes of the transpacific, transatlantic and Asia- embarked upon a 10-year strategic alliance in January
Europe. A matching of two leading carriers from the 2008, announced on 20 February that the agreement will
mercantile powerhouses of Singapore and Hamburg be extended into cooperation on terminal operations and
offers considerable appeal. ship repair business and joint coordination of shipbuilding
plans. They already operate joint services in the Asia-Europe
Mergers and takeovers between others might need to see trades since 2004 and in the transpacific and Black Sea
a weaker market in order to convince controlling parties of services since last year. Singapore-based PIL and Taipei-
the benefits of consolidation and assist in smoothing over based Wan Hai have been long-time intra-Asian rivals but
any cultural and philosophical differences. Otherwise, we do saw the benefit of teamwork when it came to entering the
not envisage the top 20 ranking changing very much – it is highly competitive longhaul routes.

68 HSBC Shipping Services Limited


Capesize
VLBC
15

10
Containerships

5 Demand

Figure 56. Global container trade trends


Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005
N.America
m-teu lifts

Europe

Others

Total
Asia

1999 46 93 28 38 205 m-teu lifts (LH scale)


2000 50 105 30 40 225 % change y/y (RH scale)
2001 51 115 30 42 238 600 18%
2002 57 134 33 41 265 500 15%
2003 62 152 36 53 303 400 12%

2004 70 175 40 59 344 300 9%


200 6%
2005 77 194 43 67 381
100 3%
2006 83 220 45 73 420
- 0%
2007 90 250 46 78 465
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
2008 96 281 49 84 509
2009 101 314 51 91 557

For many years now container trade has been growing at Ports surveyed are LA/LB, Oakland, Tacoma, Seattle and
an average annual rate of around 10%. The rate of growth Vancouver on the west coast; Houston on the Gulf coast;
is now slowing but the underlying base is that much larger. and NY/NJ, Hampton Roads, Charleston and Savannah on
Demand is forecast to continue rising at an annual rate the east coast.
of a bit below 10% in both 2008 and 2009. The world is
bracing itself for a slowdown given the weakening US Weakening traffic growth on the transpacific,compounded
housing market and deteriorating credit markets. As loans by rising costs, is causing the lines to withdraw or
are cut off to both households and businesses, spending reposition capacity and enter new alliances. Stagnant trade
and investment will obviously suffer as these are the growth on eastbound transpacific contrasts starkly with
twin engines of economic growth and employment. The 20% growth on westbound Asia-Europe. The former route
notoriously unreliable US non-farm payroll reports for generally chooses to keep maximum ship capacity below
January and February show that employment fell by 22,000 7,000-teu, given poor productivity at west coast North
and 63,000 respectively, the latter being the largest month- American ports, whereas most ships above 7,000-teu end
on-month fall in five years. up on Asia-Europe. The withdrawal of capacity from the
transpacific for prolonged maintenance or semi-layup is
The futures market is now pricing in a further 75bps one way of keeping utilisation rates high. It also maintains
interest rate cut to 2.25% at the Federal Reserve’s next pressure on shippers to increase freight rates and agree
meeting on 18 March. The weakening dollar is helping the floating monthly bunker adjustment factors if the ships are
US-outbound export trades but insufficiently to counteract to return and service levels be preserved. If excess capacity
declining imports. The latest Port Tracker report, compiled is merely redeployed to Asia-Europe, beyond increasing
by the National Retail Federation and Global Insight, loops from eight to nine ships to save on fuel, then at some
observes that container traffic at North American ports fell point it will have a negative impact on utilisation and rate
4.3% in January 2008, compared with January 2007, and prospects on that route.
predicts a 9.6% decline in February 2008. These monthly
year-on-year US traffic declines started in August 2007 and
represent the most protracted period of decline since 1995.

Global Shipping Markets Review 2008 69


Annual contract negotiations between shippers and carriers control. Independent Maersk Line has withdrawn about
see both sides now digging their trenches ahead of tough 30% capacity in the past twelve months and entered into a
negotiations, despite the fact that the TSA has gone out vessel-sharing joint venture with TSA members CMA CGM
of its way to explain its position in a more conciliatory and and MSC in which they will operate larger 8,000-teu ships
informative manner in the recent past. The TSA is looking without increasing their overall capacity contribution. The
at managing minimal or even negative capacity growth on rationale is that the operational savings of using bigger ships
the Pacific in 2008 in support of its policy of only running are estimated to outweigh the added costs of low port
profitable services as costs everywhere spiral out of productivity levels on the west coast.

Figure 57. Leading global container ports in 2007

2007 traffic, 2006 traffic,


Rank 2007 Rank 2006 Port Growth in 2007
m-teu m-teu
1 1 Singapore 27.93 24.79 13%
2 3 Shanghai 26.15 21.71 21%
3 2 Hong Kong 23.88 23.23 3%
4 4 Shenzhen 21.01 18.47 14%
5 5 Busan 12.14 12.03 1%
6 7 Rotterdam 10.79 9.69 11%
7 8 Dubai 10.65 8.92 19%
8 6 Kaohsiung 10.26 9.77 5%
9 9 Hamburg 9.90 8.86 12%
10 11 Qingdao 9.46 7.70 23%
11 13 Ningbo 9.36 7.07 32%
12 15 Guangzhou 9.20 6.60 39%
13 10 Los Angeles 8.36 8.47 -1%
14 14 Antwerp 8.18 7.02 17%
15 12 Long Beach 7.31 7.29 0%
16 17 Tianjin 7.10 5.90 20%
17 16 Port Klang 6.85 6.32 8%
18 19 Tanjung Pelepas 5.50 4.77 15%
19 20 Bremen/ Bremerhaven 4.89 4.45 10%
20 21 Laem Chabang 4.64 4.43 5%

Singapore has retained its 2006 crown but last year’s places while its Long Beach neighbour gained three places,
second-placed Hong Kong has been relegated to the demonstrating the relative strengths of their environmental
number three slot by Shanghai. Rotterdam and Dubai have lobbies. Far Eastern ports occupy seven of the top ten
each gained a place while Kaohsiung has dropped two league places illustrating the imbalance in infrastructure
places. The rapidly expanding Chinese ports of Qingdao, spending between east and west. Of the other three
Ningbo and Guangzhou have gained one, two and three places, two are in Europe and one in the Middle East.
places respectively, underlining the importance of China The port of New York and New Jersey has slipped
as the world’s factory floor. Los Angeles slipped three from the table.

70 HSBC Shipping Services Limited


Containerships

Trade Routes nominal capacity given operational constraints such as

The latest Global Insight data we have dates back to the mix of box sizes, weight limits and stability, visibility

October 2007. We may review our data source in future from the bridge, load and discharge sequences, berth and

GSMRs as this data is altered significantly from time to channel draft limitations, and so on. Neither would it be

time. For this year we present if for consistency’s sake. appropriate to use the laden figure, conventionally taken

The broad trends are about right even if we may choose to as an average 14-tonne homogenous load, as weight

quibble over the actual numbers. loads vary and the vessel’s deadweight capacity would
almost always permit a certain number of empties to
The overall supply-demand balance is apparently be repositioned. Other factors influencing real container
deteriorating as the spread widens with the steady stream capacity supply include the declining ratio of part-time
of new ships rolling out of the shipyards. We base our container capable ships in container trades and the fact
numbers on nominal capacity in the wider container capable that conbulkers and multipurpose types may now be
fleet rather than in the narrower fully cellular fleet. It is concentrating their efforts on the better paying dry
relevant to mention that at the beginning of 2006 some bulk trades.
80% of the container capable fleet was fully cellular but
by the beginning of 2009, in just three years, this ratio is In the fully cellular fleet, the appropriate representation

forecast to rise to 88%. In 2007 the supply-demand gap of a containership’s box capacity might be somewhere in

was narrow at about 1.5% after nearly 3% in 2006. But, in between the nominal and the laden figures. Re-crunching

2008 it is expected to go out to the just below 4% before all the capacity numbers based upon this adjustment would

retracing to around 3% in 2009. As already mentioned, certainly alter (i.e. reduce) our impression of available space

other factors will help to bridge this gap by reducing and explain how easily so many new ships have been

effective tonnage supply gains such as port congestion, absorbed by the market in recent years without collapsing

disparities in port throughput capabilities at opposite ends rates. The factors that constrain tonnage supply differ

of the supply chain, land-side rail and road issues, slow according to trade lane as there is no hard and fast rule.

steaming, capacity management, re-positioning for new All told, we have a modernising fleet, changing trade

services and the cancellation of some old services. dynamics and a string of years of well above trend
demand growth.
But, the most important single factor in the reduction or
elimination of the gap is the use of nominal capacity as
opposed to laden capacity. No ship ever loads up to its
1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Figure 58. Trans-Pacific container trade volumes

m-teu Global Insight’s figures for the transpacific trades in 2007


Global Insight forecast
20.0 (based on the first three quarters) estimated 5.9% growth
18.0
in total eastbound traffic and a higher 6.8% growth in
16.0
14.0 westbound trades, no doubt helped a little by the weaker
12.0 dollar despite the prevalence of various forms of dollar
10.0
currency pegs within Asia. The ratio of all eastbound
8.0
6.0 headhaul to all westbound backhaul volumes remained in
4.0 the region of 3:1. In October 2007, GI forecast over 8%
2.0
0.0
year-on-year growth in eastbound transpacific volumes in
2005 2006 2007 2008 2009 both 2008 and 2009, but this now appears optimistic.
Total NE Asia and SE Asia to N America

Total N America to NE Asia and SE Asia

Global Shipping Markets Review 2008 71


TSA statistics More importantly, Q4 2007 loaded in-bound container

Membership of the Transpacific Stabilization Agreement volumes declined 4.6% at Los Angeles and 4.0% at Long

(TSA) expanded to 15 members, effective January 2008, Beach on a year-on-year basis. In January 2008, loaded

on the joining of China Shipping. The list of TSA members in-bound volumes fell 4.6% year-on-year at Los Angeles to

is as follows and involves the majority of the world’s 343,529-teu and by a much larger 13.8% at Long Beach

largest container shipping lines. to 261,543-teu. These figures have been warning us since
August 2007 of slowing US consumption and the latest
APL Co Pte Ltd 2008 figures tell us that household and business
consumers are accelerating the rate at which they cut
China Shipping Container Lines Co Ltd
back on spending.
CMA CGM SA
We know precisely why they are cutting back: falling home
COSCO Container Lines Ltd
values, declining employment, tighter credit, high gasoline
Evergreen Line and heating oil prices, rising food prices and a weaker dollar.
Hanjin Shipping Co Ltd In Q4, the weakening housing market lowered imports of
home furnishings and construction materials. Shipments
Hapag-Lloyd AG
of toys were hit by safety concerns (but compensated for
Hyundai Merchant Marine Co Ltd by a switch over to electronic games) while shipments
of apparel, home electronics, computers and health care
Kawasaki Kisen Kaisha Ltd
products remained robust in the second half of 2007.
Mitsui OSK Lines Ltd

MSC – Mediterranean Shipping Co SA Rising costs

TSA members expect to record a 7% increase in


Nippon Yusen Kaisha
basic operating costs in 2007 on top of a substantially
Orient Overseas Container line unrecovered 8% increase in 2006. This excludes a near
Yangming Marine Transport Corporation doubling in fuel costs during the year with fuel now
accounting for 50-60% of total transpacific sailing costs.
Zim Integrated Shipping Services Ltd
Most long-term 15-25 year intermodal rail contracts have
Transpacific trade growth in 2007, now slowing in 2008 been coming up for renewal in the 2005-2008 period with
new rail contracts being signed at anything from 25%
According to the TSA’s own figures, Asia-US container to 40% above previous levels. The TSA points out that
traffic grew 6.9% year-on-year in the first half of 2007 intermodal has become the largest and fastest-growing
rising to 8% for the first nine months compared to the segment of the rail business, surpassing even coal.
same period in 2006. That represents a decline on full
year 2006 which saw eastbound growth of 9.6% to The trucking sector is suffering from driver shortages
13-teu equivalents. No figures are yet available from the and many small owner-operators being squeezed from
TSA for the fourth quarter but we would expect to see a the market by rising costs, longer hours and onerous
deterioration in the numbers which will pull down the full environmental regulations. As they get to be consolidated
year 2007 performance to less than the 8% growth figure by larger unionised operators, trucking charges have
of the first three quarters. inflated by 25% or more since 2005. Higher intermodal
freight and trucking charges have raised the cost of
Anecdotal evidence from the USWC intermodal hub ports repositioning empties from the American interior back to
of Los Angeles and Long Beach puts their aggregate loaded Asia. This situation has been compounded by a reduction
inbound containers declining every month since August in free dwell-time for boxes at terminals and the
2007, coincidentally the month in which the subprime crisis additional burden of extra security, cargo scanning
blew up. In calendar year 2007, total container throughput and environmental directives.
at Los Angeles fell marginally to 8.4m-teu equivalents from
8.5m in 2006 while total container throughput at Long
Beach in 2007 was steady at 7.3m-teu equivalents, only
fractionally up on 2006.

72 HSBC Shipping Services Limited


Containerships

Freight developments TSA members hope to achieve a $200/teu rate increase

According to Containerisation International’s “Freight from May 1, 2008 plus a lot more via fuel charges, thus

Facts”, the average ‘all-in’ freight rate between Asia and departing from the previous formula of ‘all-in’ rates. On the

the West Coast of North America in Q4 2007 remained westbound leg, the average ‘all-in’ freight rate of $795/teu

unchanged on the previous quarter, at $1,701/teu, but was in Q4 2007 was 2% up on the previous quarter and 1% up

2% higher than in Q4 2006. On a weighted basis, the latter year-on-year. On a weighted basis, the changes remained

was 1% down and would have disappointed carriers after all the same. These quoted all-in freight rates in each direction

the talk of higher fuel surcharges and capacity withdrawals would have left the carriers exposed as bunker fuel was up

in order to recover rising costs and keep vessel utilisation over 20% quarter-on-quarter and over 70% year-on-year.

above 90%. Under the circumstances of flat year-on-year Westbound trade grew 10% on 2006 but ships remained

cargo growth on this trade lane in the second half, it is not half full. Fuel rebates may be easier to achieve than freight

surprising to see freight rates under downward pressure. increases in 2008.


1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 59. Asia-Europe container trade volumes

Global Insight forecast Global Insight’s figures for the Asia-Europe trades in 2007
m-teu
20.0 (based on the first three quarters) estimated 15.6% year-on-
18.0 year growth in the headhaul westbound direction from Asia
16.0
to Europe to 14.4m-teu and just over 5% growth on the
14.0
12.0 weaker eastbound leg to 6.1m-teu. For 2008, GI forecasts
10.0 a slower 12.6% expansion to 16.2m-teu and, in 2009, 8.9%
8.0
growth to 17.7m-teu. 2008 eastbound growth is put at
6.0
4.0 5.4% to 6.4m-teu and, in 2009, 7.4% to 6.9m-teu.
2.0 These figures fail to capture Q4 2007 movements
0.0
which may have altered GI’s full year forecasts.
2005 2006 2007 2008 2009

Total Europe to Asia


Total Asia to Europe

FEFC numbers Mitsui OSK Lines Ltd

Membership of the Far East Freight Conference (FEFC) MSC – Mediterranean Shipping Co SA
stands at 17 members. The list of FEFC members
Nippon Yusen Kaisha
is as follows and includes the world’s largest container
shipping lines. Orient Overseas Container line

Safmarine
ANL Container Lines Pty Ltd
Yangming Marine Transport Corporation
APL Co Pte Ltd
Zim Integrated Shipping Services Ltd
CMA CGM SA

CSAV Norasia Liner Services Booming growth in 2007 – more of the same
expected in 2008
Egyptian International Shipping Co
The Far East Freight Conference announced full year 2007
Hapag-Lloyd AG
trade growth figures on Asia-Europe of 19% in 2007. Far
Hyundai Merchant Marine Ltd East/Med was up 21.8% year-on-year to 3,323,933-teu
Kawasaki Kisen Kaisha Ltd while Far East/North Europe was up 17.6% to 6,190,655-
teu. Consolidated Q4 2007 growth came in at 15.9% when
Maersk Line
compared with Q4 2006, taking the total westbound annual
MISC Berhad

Global Shipping Markets Review 2008 73


increase to 19%. The FEFC expects to replicate this rate of A major achievement was scored by FEFC members in
growth on Asia-Europe westbound in 2008. However, as increasing the average all-in freight on the backhaul leg from
with the TSA, cost concerns were flagged up. Europe by 16% in Q4, compared to Q3, despite sub-50%
utilisation. The Q4 rate of $904/teu was 14% above Q4
Issues that were raised included the rising costs of 2006 and on a weighted basis the provisional gains came in
insurance, crewing and above all bunkers plus the frequency at 20% and 17% respectively. This was a product of FEFC
of congestion. An almost doubling of bunkers since January determination to raise rates even at the expense of losing
2007 to $480/tonne was challenging the industry’s ability cargo. It was a Pyrrhic victory as eastbound traffic declined
to recover accrued losses and one response was to slow by about 5% in Q4 compared with growth of 10% in Q1,
down ships in the interests of fuel economy. Hapag-Lloyd 8.5% in Q2 and 6% in Q3.
was looking to reduce speeds by 10% to 20.5 knots on the
basis that a 4-5 knot speed reduction could cut consumption The prospects for 2008 would appear to be good if the
by 30-40% and given that fuel now accounts for around FEFC enjoys similar levels of cargo growth as it did in 2007
60% of voyage costs. and if it succeeds in better managing to pass through rising
fuel costs to shippers. One potential thorn in the side is
Slow steaming the introduction of new services using ships that have
The operational savings on fuel justify the injection of a been transferred from the weakening transpacific routes.
ninth ship in an Asia-Europe loop without increasing capital However, even after factoring in vessel transfers from the
costs or reducing service levels. CMA CGM, Maersk Line transpacific and scheduled new deliveries, the FEFC is
and the Grand Alliance have already taken action to slow confident that it can average vessel utilisation at well over
steam
m-dwt using extra ships with the emphasis on maintaining 90%, thus retaining some bargaining power.
30
schedule
Handysize reliability in order not to upset their customers’
Despite high utilisation rates in January 2008, the rush
landside
Handymax logistics. Germanischer Lloyd sees this as sensible
25 before Chinese New Year shuts down factories for several
Panamax
response to the reality that an 8,000-teu vessel with a
Post-Panamax weeks, some lines active on Asia-Europe saw rates come
20 60,000-kW main engine consumes $121,000 in daily
Capesize under pressure. A $200/teu rise had been sought from
bunkers at around $490/tonne.
VLBC January 1st for cargo starting in the Far East but it seems
15
GL has calculated that fuel now accounts for 63% of that successful implementation was patchy with some
all vessels’ operating costs compared to about 33% as lines even agreeing as much as $100 discount with some
10
recently as 2004. 8,000-teu vessels that were built to do shippers. This may have been a product of general turmoil
25 knots or more are now best operated at 20 knots which in shipping and financial markets around this time and thus
5
would extend the transit time between Hong Kong and prove to be a temporary blip.
Hamburg by four days but at some benefit to both the
Figure 60. Trans-Atlantic container trade volumes
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

wallet and the environment. CMA CGM added a ninth ship


to its FAL1 service early in 2007 and is now repeating the
exercise on its FAL3 service which extends transit times in m-teu
Global Insight forecast
each direction from 28 to 31.5 days. 4.5
4.0
3.5
Freight developments 3.0
2.5
According to CI’s “Freight Facts”, the average all-in freight
2.0
rate on the Asia-Europe westbound leg rose by 5% in Q4 1.5
2007 compared with the previous quarter, to $2,054/teu, 1.0
and by 33% on a year-on-year basis. On a weighted basis, 0.5
0.0
the increases were 3% and 28% respectively. Despite 2005 2006 2007 2008 2009
the generous increase in freight on an annual basis, it is
Europe to N. America
reckoned that this uplift did little more than cover the rise N. America to Europe
in uncovered fuel costs. The FEFC will clearly need to
implement more effective measures to protect itself
from high prices2 .

2
FEFC lines recently managed to separate the bunker surcharge
from general rate rises ending ‘all in’ prices and paving the way HSBC Shipping Services Limited
to link fuel surcharges and rebates to market movements in fuel
oil prices.
Containerships

Global Insight’s figures for the transatlantic trades in 2007 up 3% quarter-on-quarter and down 2% year-on-year. On
(based on the first three quarters) put year-on-year growth the eastbound leg, TACA’s average rate in Q4 rose by 3%
in the headhaul westbound direction
m-dwt
from Europe to North quarter-on-quarter to $1,147/teu which was 8% up on a
America at just 1.5% 30
to 3.9m-teu. Trade growth was much
Handysize
year earlier in Q4 2006.
stronger in the eastbound direction from North America
Handymax
25
to Europe at 8.2%, to 2.4m-teu, as the weak dollar/euro
Panamax On a weighted basis the eastbound changes were 10%
exchange rate boosted Post-Panamax and 18% respectively as one carrier enjoyed a particularly
20 exports from the US and Canada.
Capesize
Growth in the westbound trades is expected to rebound to large gain in volumes. Unfortunately, uncovered fuel costs
VLBC
2.8% in 2008 and 2.9%
15 in 2009 while the equivalent figures would have worsened the net end result for carriers on the
for eastbound trades are 6.6% in 2008 and 4.6% in 2009. Atlantic in 2007. TACA has made strenuous efforts to make
10 shippers aware of the difficulties with which it is faced by
TACA numbers rising fuel costs. However, in spite of this, its members
5
decided to postpone until further notice the fuel surcharge
Membership of the Transatlantic Conference Agreement
of $147/teu that was announced in mid December 2007.
has dwindled to just five carriers. TACA does not publish
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
any trade data on its website so we have no figures
Figure 61. Intra-Asia container trade volumes
against which to benchmark GI’s numbers. The members
of TACA are:
m-teu
Global Insight forecast
7.0
Atlantic Container Line AB
6.0
Maersk Line 5.0

MSC – Mediterranean Shipping Co SA 4.0

3.0
Nippon Yusen Kaisha
2.0
Orient Overseas Container line 1.0

0.0
Evidence of US consumer weakness
2005 2006 2007 2008 2009

NE Asia (China, HK, Japan, S. Korea, Taiwan) to SE Asia


In the absence of any trade data from TACA we have
SE Asia (S'pore, Malay., Philip., Indon., Thai., Viet.) to NE Asia
some figures from PIERS Maritime Research suggesting
that transatlantic westbound cargo flows actually declined
Global Insight’s figures for the S.E.Asia to N.E.Asia trades
by 6.5% in the first nine months of 2007, bringing vessel
in 2007 (based on the first three quarters) put year-on-
utilisation down to just over 90%. For full year 2007,
year growth at a robust 8.3% to 5.07m-teu. In the other
westbound trade fell 5.7%, thus improving upon the
direction, trade between N.E.Asia and S.E.Asia rose by
performance of the first three quarters. On the traditionally
10.1% to 4.25m-teu. Forecast growth in the dominant
weaker eastbound leg to Europe, PIERS registered a
eastbound trades stands at 7.7% for 2008 and 6.6% for
17.1% gain in cargo movements which is helping to iron
2009 when volumes should reach 5.82m-teu. Westbound
out imbalances on the Atlantic despite the challenge of
forecasts are for 8.7% growth in 2008 and 7.6% in 2009 to
reconciling the fact that 40’ boxes are preferred westbound
reach a shade under 5m-teu.
against 20’ eastbound. Total US-inbound box flows from all
directions declined 1.1% in 2007.
These estimates thus foresee an average of 1% reduction
in the rate of growth in both 2008 and 2009 as slower
Freight developments
economic activity in the US has a knock-on effect in Asia
According to CI’s “Freight Facts”, the average all-in freight as many goods are swapped, processed and assembled in
rate in Q4 2007 on the dominant westbound tradelane, Asia for final export to the US market. In spite of this, cargo
from northern Europe to the East Coast of North America, volumes are still expected to rise at respectable absolute
rose by 2% compared to the previous quarter to $1,766/teu, levels. Trade between the Far East and the Middle East is
and almost the same rate as a year earlier in Q4 2006. On rising fast with most of these volumes being captured in the
a weighted basis, these figures come out provisionally at Asia-Europe trade figures.

Global Shipping Markets Review 2008 75


1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 62. Total container trade volumes Far East exports to Latin America rose 12% in 2007 and
featured increased movements of chemicals, road vehicle
Global Insight forecast parts and textile fibres which more than compensated for
12% 75

10%
65 falls in textiles, plastics and electrical machinery. GI’s macro
55 forecasts of Far East export trade is for growth to fall to
8%
45
7% in 2008 after 11% in 2007 and 10% in 2006, reflecting
6% 35
continued strong growth to Europe, the Middle East and
25
4%
15 southern hemisphere but weaker trade expansion into
2%
5 North America. Far East inbound will rise by 6.4% in 2008
0% -5 compared with 10% in 2007 and 5.7% in 2006. Much of the
2005 2006 2007 2008 2009
anecdotal evidence is that Asia’s rising export trade to the
Growth N-S southern hemisphere commodity-rich nations and to other
Growth E-W
emerging markets will compensate for any weakness in the
Total N-S trades, m-teu
Total E-W trades, m-teu US-inbound trades over the next few years.

Total East-West trades rose 8.4% in 2007 to hit 52.42m-


Total North-South trades rose 7.1% in 2007 to 21.93m- teu and are forecast to rise by 8.3% in 2008 to 56.79m-teu
teu. In 2008, growth is forecast to slow to 5.2% to reach and 7.2% in 2009 to 60.89m-teu in 2009. We have dealt
23.07m-teu and, in 2009, accelerate to 7.2% and 24.73m- with the Asia-Europe, transpacific and transatlantic trades
teu. Provisional 2007 figures for the Far East to Oceania elsewhere. Within the Asia-Europe segment, trade between
trade show a 13% year-on-year increase dominated by the Far East and the Indian subcontinent and Middle East
fish, plastics, chemicals and paper. Far East to Africa trade Gulf rose 18% in 2007. This growth was led by tobacco,
grew by 24% year-on-year and was dominated by metal machinery of most types, rubber, furniture, plastics and
manufactures, plastics, specialised machinery, paper and chemicals with some declines in textiles, fibres, telecoms
textile fibres with small declines in textiles and electrical equipment and specialised machinery. Far East inbound
machinery. Far East inbound trade from Africa remained low trade from the Gulf and subcontinent grew 12% dominated
with declines in oilseeds, nuts and textile fibres balanced to by chemicals, plastics and paper with some small decline in
some extent by growth in chemical manufactures imports textiles and non-ferrous metals.
from southern Africa.
1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Earnings
Freight Rates

Figure 63. Trends in containership freight rates

$pd

2300

2100
Asia/US EB
1900
Asia/US EB
1700

1500 Eur/Asia EB

1300 Asia/Eur WB
1100 US/Eur EB
900
Eur/US WB
700

500
1Q 94

1Q 95

1Q 96

1Q 97

1Q 98

1Q 99

1Q 00

1Q 01

1Q 02

1Q 03

1Q 04

1Q 05

1Q 06

1Q 07

76 HSBC Shipping Services Limited


Containerships
m-dwt
The
30 earnings cycle is apparent in our chart (based on data This was in contrast to US-inbound routes which came
from Containerisation
Handysize International) of freight rate trends under pressure in the second half, even becoming
since the Handymax
beginning of 1994 on the world’s major container uneconomic as unrecoverable fuel rises hit the bottom
25
Panamax
trade lanes. Asia-Europe westbound stands out as having lines of carriers. However, rates on the US trades are
Post-Panamax
been
20 most successful at raising rates in 2007, not least as expected to improve to cover for bunker-related losses in
Capesize
it captures cargo movements from the Far East into the 2007 which may otherwise continue in 2008 as oil prices
VLBC
thriving
15 subcontinent, Middle East and Black Sea regions. are forecast to remain high. Indeed, in Q1 2008, crude oil
Sustained strong growth in the Asia-Europe trades managed is rising as the dollar weakens. The lines are threatening
to
10 soak up new capacity, and this challenge will persist capacity withdrawals should such conditions persist without
in 2008 as more ships are transferred from the weaker adequate recompense from shippers.
transpacific
5 routes.

Time Charter
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 64. Average earnings change over time – the 2007 recovery

US$ pd US$ pd

40,000 30,000

35,000
25,000
30,000
20,000
25,000

20,000 15,000

15,000
10,000
10,000

5,000 5,000
1999 2001 2003 2005 2007 1999 2001 2003 2005 2007

3,500-teu gearless 1,700-teu geared


2,750-teu gearless 1,000-teu geared
2,000-teu gearless 725-teu geared

y-o-y y-o-y
change change
120% 80%
100%
60%
80%
40%
60%
40% 20%
20%
0%
0%
-20%
-20%
-40% -40%
-60% -60%
1999 2001 2003 2005 2007 1999 2001 2003 2005 2007

3,500-teu gearless 1,700-teu geared

2,750-teu gearless 1,000-teu geared


2,000-teu gearless 725-teu geared

Global Shipping Markets Review 2008 77


Despite the logistical and fuel-related problems endured by The second half saw confirmation of the firming trend. In
the lines in 2007, the tramp owners that provide ships on a July, Hansa Brandenburg (2x40c 1,740-teu 2003) went to
charter basis to the carriers enjoyed a recovery in earnings BTL for two years at $17,250 per day. CMA-CGM fixed
in 2007– a quite remarkable feat given the shipyards were Helene Rickmers (3x40c 1,728-teu, 1998) for two years at
turning out nearly 30,000-teu of new capacity every week. $17,850 in August but managed to secure the sistership
Whether bareboating or time chartering ships into the lines, Dorothea Rickmers for a slightly cheaper $17,600 in
these owners are insulated from changes in fuel costs October. Period rates did not cool with the autumn weather
as these are picked up by the charterers. Brisk demand, in the North however, as NDAL took Hansa Coburg (2x40c
and quite limited available supply, permitted a recovery in 1,740-teu 2007) for a year at $18,000 daily, which proved
charter rates after they over-corrected to the downside to be the high water mark for this type of ship for the year.
in 2006, having fallen by as much as 40% year-on-year As Viking Eagle came up for hire again, it was taken in
compared with 2005. January 2008 by K-Line for 12 months at $17,850 per day,
neatly demonstrating that one year rates for handysize
The Howe Robinson Container Index (HRCI) started 2007 at containerships had increased by about 15% in a year.
1,011 and ended the year up 32% at 1,335 having peaked
at the end of September at 1,406 points. Short-term charter On to the mid-sizes. In January, CMA-CGM took Pona
rates were up a little over 10% for the smallest feeders but (gearless 2,741-teu 2007) for 12 months at $18,750.
gains exceeded 40% for the popular mid-sizes that were Evidence of advancing rates was offered by Cape Mondego
in short supply. The cellular market for the 1,000 to 2,000- (gearless 2,742-teu 2006) which was fixed for a year to
teu sizes was helped by the booming dry bulk market that DAL for $20,750 a day in February. Days later, CMA-CGM
removed the conbulkers and larger multipurpose types from fixed HS Scott (gearless 2,778-teu 2007) for one year at
dedicated box trades as they could command higher charter the same rate. In March, CSAV fixed King Andrew and King
rates in the dry bulk trades than in moving containers. Aaron (both gearless 2,741-teu 2007) for two years each at
$21,700 daily and, by April, IRISL fixed Westermoor (3x45c
Working up the scale from the handysize ships, we can 2,730-teu 2001) for two years at $23,500 per day. At the
trace the development of period rates during the year end of a quiet third quarter, CMA CGM fixed Euro Max
from reported fixtures. Wan Hai Lines paid $14,500 for (gearless 2,732-teu 2004) for four years at $27,900 daily in
12 months on the Kyoto Tower (gearless 1,798-teu 2007) September. In January 2008, a little of the shine came off
in January to set the tone for the first quarter. The older when K-Line took Helene C (3x40c 2,450-teu 2006) for two
but geared Viking Eagle (2x20c 1,740-teu 2005) achieved years at $27,100.
$15,500 when it fixed to Wan Hai in February and the
newbuilding GE Lessing (2x40c 1,740-teu 2007) fixed at Rates for larger gearless ships also improved during
$16,150 to CSAV in April. Two year rates at this time were 2007. In January, MSC chartered the 11-year old 4,159-
around the $15,250 mark as per the Hansa Papenberg teu Germany for two years at $24,000 daily. In February,
(2x40c 1,740-teu 2007) fixture to CLAN. By June, rates had HLL Pacific (4,701-teu 2002) went for five years to APL at
increased further as NYK took Hansa Augustenburg (2x40c $27,500. CSAV paid a slightly higher $28,950 per day for
1,740-teu, 2003) for 12 months at $16,000 per day. the forward delivery of the newbuildings Rio Cadiz and Rio
Charleston (4,300-teu 2008). In June, four 4,253-teu Schulte
newbuildings delivering in 2009 were fixed for five years
each at $27,000 while, in July, CSAV paid $34,700 for the
larger and prompter delivery Northern Grandeur (4,787-teu
1998), also for five years. Finally, in October, UASC paid a
comparable $30,125 per day for four gearless 4,253-teu CP
Offen newbuildings scheduled for delivery in 2009.

78 HSBC Shipping Services Limited


Pre-19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
Containerships

Figure 65. Recent change in TC rates and indices

400 grd Howe Robinson Container Index


650 grd Maersk Broker Container TC Index
$pd $pd
1000 grd
2,500
20,000
2,250
2,000
15,000 1,750
1,500
1,250
10,000
1,000
750
5,000 500
Jan – 05

May

Sep

Jan – 06

May

Sep

Jan – 07

May

Sep

Jan – 08

Jan – 05

May

Sep

Jan – 06

May

Sep

Jan – 07

May

Sep

Jan – 08
2700 gls
1700 grd 3500 gls
2200 grd $pd 4000 gls
$pd 2500 grd 50,000
50,000
40,000
40,000
30,000
30,000

20,000 20,000

10,000 10,000
Jan – 05

May

Sep

Jan – 06

May

Sep

Jan – 07

May

Sep

Jan – 08

Jan – 05

May

Sep

Jan – 06

May

Sep

Jan – 07

May

Sep

Jan – 08
Figure 66. Maersk Broker assessment of TC rates, $pd.

400 650 1000 1700 2200 2500 2700 3500 4000 TC


$pd
grd grd grd grd grd grd gls gls gls index
Jan-07 6,000 8,100 9,500 13,800 19,250 21,250 20,000 24,500 26,500 850
Feb 6,250 8,250 10,250 14,200 19,500 21,250 20,000 24,500 28,500 913
Mar 6,250 8,250 10,500 14,500 20,500 22,250 21,000 25,000 29,000 967
Apr 6,500 7,750 10,750 14,800 21,500 23,000 22,000 29,000 31,000 938
May 6,300 8,500 11,000 15,250 22,250 24,000 24,000 30,000 32,000 980
Jun 6,300 8,500 11,000 15,750 23,000 25,000 27,500 31,000 33,000 980
Jul 6,300 8,700 10,950 16,900 23,250 25,500 27,700 31,500 33,500 975
Aug 6,800 8,900 10,950 18,000 24,500 26,500 28,000 32,000 34,000 1,083
Sep 6,800 9,500 11,000 18,500 24,500 28,000 30,000 33,000 34,500 966
Oct 6,700 9,400 11,000 18,000 24,000 28,000 30,000 33,000 35,000 1,189
Nov 6,700 9,400 11,250 17,000 22,500 28,400 29,000 31,000 33,000 1,044
Dec 9,400 11,000 16,300 22,500 28,200 28,500 31,000 33,000 1,050 1,050
Jan-08 9,800 11,000 17,500 23,000 28,200 28,500 31,000 33,000 1,113 1,113

Global Shipping Markets Review 2008 79


According to this data from Maersk Broker, short-term 6-12 the lines would rather keep these increasingly large capital
month time charter rates rose across the board in 2007. costs off their balance sheets as newbuilding prices
The biggest rises are visible in the mid-sizes with the 2,700- continue to rise. For example, a 12,500-teu vessel now
teu up 42.5% year-on-year and 2,500-teu up 32.7%. This costs around $170 million. Containerisation International
was followed by the panamax sizes with the 4,000-teu up statistics confirm these numbers with 38% of ships in
24.5% and the 3,500-teu up 26.5%. The best of the rest service over 5,000-teu, rising to 51% of ships on order,
was the flexible 1,700-teu geared size which was up 18.1% being controlled by non-liner operators. German owners
and the worst performer was the smallest 400-teu feeder account for 3.4m-teu, or 63%, of total containership
at only 11.7%. The larger ships of post-panamax and above capacity under charter with Greek owners in a distant
are not included in this study as they tend to be chartered second place with 0.62m-teu, or 11.5%, of the
longer term, often at levels linked to newbuilding prices. 5.4m-teu total.

In the larger sizes the lines prefer to either own tonnage Recent examples of long-term charter deals on the big
directly or engage them on long-term time or bareboat ships include talk of MPC taking over eight to ten slots at
charter from investor owners. German KG providers within HHI, vacated last November by CP Offen, for 12,500-teu
the tonnage tax regime would have to retain management, vessels costing a reported $167m each and delivering
and thus time charter, whereas a Singapore Business Trust in 2010 and 2011. Some reports put the size as 13,100-
structure may favour finance leases, and therefore bareboat teu and it is suggested that these will be time chartered
charter. About 51% of all cellular capacity in service, and to Hanjin for 12 years at $59,950 daily. Hanjin is also
53% of ships on order, is controlled by non-liner owners, taking three 10,000-teu HHI units from Danaos delivering
according to statistics compiled by AXS-Alphaliner. mid-2011 for 12 years at $54,000 daily. Meanwhile, Niki
Shipping of Greece is reported to have bareboated nine
Of ships in service of 7,500-teu capacity or more, only 37% 13,000-teu STX units delivering in 2011 to Evergreen for
are owned by non-liner operators although this rises to 47% 10 years at $51,000 daily.
when considering ships on order of this size. Evidently,

Values
Figure 67. Clarkson nominal newbuilding and 10 year old prices prices

US$m 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

750-teu newbuild 18.0 17.0 13.5 14.0 14.0 13.0 13.0 17.5 19.5 20.5 20.5 21.0
750-teu 10-yr old 11.0 9.5 8.8 6.5 8.5 5.8 6.0 7.3 11.5 12.5 13.0 13.8
1,600-teu newbuild 27.2 27.2 22.2 23.7 26.9 22.2 21.1 26.5 33.4 34.8 36.6 36.9
1,600-teu 10-yr old 20.0 17.5 11.0 12.0 15.5 10.5 11.0 15.5 28.0 24.5 24.5 26.0
2,750-teu newbuild 38.0 38.0 33.0 37.5 31.0 31.0 29.5 37.0 46.5 48.5 51.0 52.5
2,750-teu 10-yr old 26.5 21.0 15.0 17.5 22.0 17.5 17.0 22.5 37.5 32.5 36.0 41.5
3,500-teu newbuild 52.0 50.0 42.0 38.0 41.5 36.0 33.0 42.5 53.0 52.5 57.0 59.0
3,500-teu 10-yr old 30.0 26.5 23.5 20.0 26.0 20.8 22.5 26.5 41.5 37.0 41.0 48.0
4,600-teu newbuild 52.0 50.0 42.0 38.0 41.5 52.0 45.0 56.5 71.0 67.5 71.0 78.0
6,500-teu newbuild 73.0 72.0 60.0 71.0 91.0 89.0 101.0 106.5
8,200-teu newbuild 125.0 134.0
Average newbuild 37.5 36.5 30.5 30.2 38.0 37.7 33.6 41.8 52.4 52.1 56.2 59.0
Aveerage 10-yr old 21.9 18.6 14.6 14.0 18.0 13.7 14.1 17.9 29.6 26.6 28.6 32.3

80 HSBC Shipping Services Limited


Containerships

Figure 68. Ten-year trends in newbuilding and second-hand prices

4,600-teu newbuild 3,500-teu newbuild


6,500-teu newbuild 3,500-teu 10-yr old
120 65
100 55
80
45
60
35
40
25
20
0 15
1998 2000 2002 2004 2006 1998 2000 2002 2004 2006

2,750-teu newbuild 1,600-teu newbuild


2,750-teu 10-yr old 1,600-teu 10-yr old
60 40
35
50
30
40 25
30 20
15
20
10
10 5
1998 2000 2002 2004 2006 1998 2000 2002 2004 2006

The above graphs are self-explanatory. The prices of Representative Sales


newbuilding containerships continued to rise in 2007,
As consolidation continues in the industry, we continue to
particularly in the larger sizes, as they competed with large
see a number of en bloc secondhand sales. They cannot
bulk carriers for available shipyard space. The greatest
really be described as representative as they encompass
interest was for super post-panamaxes for which there is
ships of different ages and sizes and were often
no historical data. There was also upward movement in
executed for varying reasons including internal corporate
10-year old secondhand values in the mid-size to panamax
purposes. For instance, in January 2007, OOCL sold eight
segments as time charter earnings recovered during the
containerships averaging about 5,000-teu for $480m in
course of the year.
a sale and leaseback deal. The buyer was reported as
The spike in average newbuilding prices was at its highest a Luxembourg interest with HSH Nordbank, ING and a
in November 2007 which coincided with the peak of subsidiary of OOCL all providing capital into the lessor.
the capesize-led dry bulk market. Sharp rises in dry bulk The ships were bareboat chartered back to OOCL for eight
earnings in the fourth quarter inspired more large bulk years with purchase options exercisable yearly from January
carrier orders at the risk of shutting out new containerships. 2010. The money raised was partly used to finance four
The response was to agree more inflated prices of up 8,063-teu newbuildings that OOCL had ordered in October
to $170m for a 13,000-teu vessel. While some owners 2006 from Samsung for $477m. While we have included
withdrew from this game, either cancelling orders or this in our list of containership transactions, we have tried
vacating options, others seemed willing to step in. The to concentrate on trade sales, but refinancing remains a
availability of charters, which generally equated to the characteristic of the industry.
accessibility of finance, played its part. We have no doubt
that some orders will be lost to tighter credit conditions and
resistance from the lines to paying over $60,000 daily.

Global Shipping Markets Review 2008 81


In May, CMA-CGM paid $93m each for Cosco Charleston The Seacastle purchases illustrate the rising attraction of
and Cosco Norfolk (both 5,100-teu Hanjin 2007). A few shipping to investment funds as it chimes well with the
months later, in August, the US fund Fortress used its commodity price boom and the focus on emerging markets
Singapore affiliate Seacastle to acquire four 5,050-teu and globalisation. Containerships lend themselves well to
vessels, all built at Hanjin Pusan in 2006, MSC Mara, MSC investors as they are more visible, easier to understand,
Benedetta, MSC Debra and MSC Olga, for $90m each. The get less knocked around than bulk carriers and carry less
sale came with a 4-year time charter back to MSC at a rate obvious risks than tankers. It is also possible to lock into
believed to be in the mid to high $30,000s daily. Market period rates with recognisable names whose tenor can
guidance can be taken from the 5-year charter in August be struck so as to maximise the twin objectives of, one,
of Northern Grandeur (4,787-teu 1998) to CSAV at $34,700 earning sufficient free cash to pay dividends to investors
per day. Press reports at the time suggested that Seacastle and, two, reducing the residual value upon charter expiry
had already spent $640m on ships during 2007, but this to acceptable levels. The German KG system started in the
was their largest secondhand acquisition to date. Seacastle container sector and has since diversified into tankers and
was also reported to have signed contracts for four 4,000- bulk carriers in search of higher returns, taking on in the
teu containerships at DSME with four other secondhand process an even more complex range of variable ownership
purchases beefing up its boxship fleet during the year. costs and exposures.

Outlook damage limitation. A recession in the US would be harmful


to shipping as declining imports will continue to shift
Past scepticism of the durability of earnings in the light of surplus tonnage capacity onto healthy routes, such as Asia-
increasing capacity has been confounded in recent years by Europe, and combine together with new deliveries to cause
the market’s enduring ability to absorb fresh deliveries. This oversupply that will be sufficient to undermine freight rates.
has been greatly assisted by several years of 20% demand The lines are challenged as to how to persuade shippers
growth on the deepwater Asia-Europe trades which link that there is a price to be paid to guarantee regular sailings
the world’s factories in the Far East with the globe’s new and timely deliveries, and that shipping is vulnerable to
consumers in the subcontinent, Middle East, Russia, the sharply rising costs.
Republics and enlarged Europe. The strength of demand
has been assisted by the braking effects on supply of But, that is very much the conventional view. On the supply
congestion in European ports, the Suez and Panama canals side, we can take positives from the fact that capacity
operating at maximum capacity and extra ships being put analysis uses nominal figures that do not represent actual
onto service loops in order to reduce speeds and conserve available space. Also that real tonnage supply is being
fuel. Environmental and security imperatives, together with constrained by infrastructure limitations and capacity
rail and road bottlenecks in North America and Europe, will management as the lines idle ships in order to keep
continue to slow down the process of moving containers utilisation ratios up. Further, that some 10-20% of the fully
through ports and onto end-users, and thus constrain cellular containership orderbook may be overstated as it is
effective shipping supply. beyond financing. A more realistic assessment of supply
growth would bring it much more into line with forecast
However, since August 2007, we are becoming more demand growth, even as the demand structure is changing
aware of the broader implications of what started as a with another turn of the kaleidoscope. Trade into America
US subprime housing crisis but which is now infecting might be flat or falling, even as its exports are rising, but
global financial markets and restricting access to credit. the lost exports to the US are being replaced by rising
As households spend less, and businesses defer capital exports between emerging economies that are riding on
spending and new hiring, consumption will weaken in the the crest of a wave created by higher commodity prices.
transatlantic economies. Hoping that rising consumerism Shuffling strings of ships between routes to best match
in emerging markets can compensate for spending them to changing patterns of demand is another arresting
cutbacks in the US, after years of excess, is bordering mechanism on real tonnage supply, and a contributor to
on wishful thinking given the sheer scale of US retail and better balance.
capital spending power, but it should at least provide some

82 HSBC Shipping Services Limited


Containerships

Global Shipping Markets Review 2008 83


-----
----
----
---
Shipbuilding

---
---
---
---
--
--
--
--
--
--
--

-
--

84 HSBC Shipping Services Limited


--
- - - ---
---- -
----
----- ------
- - - -- - -
-- ---------
--
- --
--
---
---
---------------

Global Shipping Markets Review 2008 85


Overview ventures. They are faced with shortages and increased
costs of skilled labour, main engines, steel, equipment and
2007 was a record year for vessel contracting in the three insurance and currency risk. Some yards are factoring in a
main sectors. Demand was led by dry bulk where very 10% appreciation of the renminbi against the dollar in 2008
high spot earnings were pushing up demand for all sizes on top of the usual hikes in manpower, insurance and steel.
in the secondhand market. Strong medium to long-term Inadequate provision was made for these factors in the
period rates, and the availability of such employment on planning stages and now they are hitting home. Chinese
a forward delivery basis for larger ships, were pushing up yards are not alone, as smaller yards across Asia face
newbuilding and resale demand. This had a positive impact similar problems.
on bulk carrier prices that finally rose to levels that appealed
to builders. The switch in focus allowed tankers some Problems related to rising costs, inexperienced labour and
breathing space although the containership sector refused technical difficulties are being felt across Asia and are the
to stand down and instead stepped up with block orders product of a headlong rush into shipbuilding in order to
for super post-panamax sizes. These giant containerships exploit record high prices and generous up-front payments
are very much the preserve of the world’s biggest yards in – call it opportunism if you will. In the cool light of day, many
South Korea, which tend to favour large series-built vessels, of these yards are incapable of delivering the products they
and this gave China some elbow-room in which to secure a have sold and lack the financial strength to stand the test of
large proportion of the bulk carrier orders. time. This even applies to yards in South Korea, the beating
heart of world shipbuilding, and to builders in Indonesia,
Much has been made of the explosive growth in Chinese Vietnam and India. Today, the dry bulk and tanker fleets
shipyards, some of which are taking orders before the have become hard to quantify, because of the large number
intended greenfield sites have even been developed. Hefty of big tankers that are slated for conversion. The orderbook,
down-payments have been used to finance the yards’ real which is a compilation of guesswork at the best of times,
estate, building and equipment procurement costs. Other has now assumed new levels of unreliability.
yards that are at more mature stages of development still
need large up-front payments from contracting owners Highly generalised estimates suggest that anywhere
in order to pay for equipment, labour, steel and general between 25% and 50% of the entire Chinese dry bulk
construction costs. Clearly, this is a risky business model orderbook may either never deliver or be seriously
and it represents a potential minefield for those owners delayed, possibly involving cash calls on owners to secure
unfamiliar with business practices in China. There is completion. It would be prudent to build in a failure rate at
no doubt that some shipyards will be unable to secure the lower end of that range for other over-stretched Asian
refund guarantees from reputable banks while others yards. Given that orders are already spread out over the
are suspected of intentionally not having secured these next five years, delays and non-completions will radically
guarantees as a device for voiding low-priced contracts. alter the appearance of the orderbook and its impact on
forward markets. The real orderbook may be watered down
Most of the new yards are small entry-level businesses, to the extent that it no longer threatens to swamp future
often with sound provincial government or private demand. The 1% of GDP US stimulus package and the
enterprise backing, that aim to cut their teeth on less Fed’s move towards negative real interest rates may pull
complex small bulk carriers as a stepping stone to, well, the US out of its current problems in 2009, coinciding with a
LNG carriers and semi-submersibles eventually. Rising cost reconfigured supply scenario.
pressures impact most heavily upon the lowly capitalised

86 HSBC Shipping Services Limited


Shipbuilding

Delivery Volumes
1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Figure 69. Three-month moving average of capacity delivered by main shipytypes

Containerships (000-teu, RHS)


Dry Bulkers (m-dwt)
3.0 Tankers (m-dwt) 140

120
2.5

100
2.0

80

1.5

60

1.0
40

0.5
20

- -
2002 - 01

2002 - 04

2002 - 07

2002 - 10

2003 - 01

2003 - 04

2003 - 07

2003 - 10

2004 -01

2004 - 04

2004 - 07

2004 - 10

2005 - 01

2005 - 04

2005 - 07

2005 - 10

2006 - 01

2006 - 04

2006 - 07

2006 - 10

2007 - 01

2007 - 04

2007 - 07

2007 - 10

2008 - 01
In analysing delivery trends, we have taken the three- way to a higher rate of ordering in this period as if by way
month moving average in deliveries in order to eliminate of compensation. After a period of rising delivery growth
random spikes and better illustrate the trend. The rising between end-2003 and end-2005, there was a cyclical
delivery trend in tankers from mid-2002 was in part related levelling off in bulk carrier deliveries. The 2007 dip in
to the spate of product tanker orders that followed the deliveries coincided with record earnings and values in the
Erika sinking in December 1999. Containership deliveries dry bulk sector. This triggered a wave of ordering that will
tailed off in the second half of 2007 reflecting a pause reach a delivery crescendo in 2010, according to the current
in ordering some years earlier and, conversely, this gave flawed interpretation of the orderbook.

Global Shipping Markets Review 2008 87


Prices
Figure 70. Newbuilding prices continue up, up and away

Year-end prices 2003 2004 2005 2006 2007


Ship Type Size $m $m $m $m $m
VLCC 300,000-dwt 77.0 110.0 120.0 129.0 146.0
Suezmax 150,000-dwt 51.5 71.0 71.0 80.5 91.0
Aframax 110,000-dwt 41.5 59.0 58.5 68.5 72.5
Panamax 70,000-dwt 37.5 48.0 50.0 58.5 63.5
MR Products 47,000-dwt 31.5 40.0 43.0 47.0 52.5
Capesize 170,000-dwt 48.0 64.0 59.0 68.0 97.0
Panamax 75,000-dwt 27.0 36.0 36.0 40.0 55.0
Handymax 51,000-dwt 24.0 30.0 30.5 38.5 48.0
Handysize 30,000-dwt 18.0 23.5 25.5 28.0 34.5
Post-Panamax 8,200-teu - - - 125.0 134.0
Post-Panamax 6,500-teu - - - 101.0 106.5
Panamax 3,500-teu 42.5 53.0 52.5 57.0 59.0
Handysize 1,600-teu 26.5 33.4 34.8 36.6 36.9

Healthy price rises across all disciplines were registered the CRU Asian steel price index and the Clarkson’s all-ships
in 2007 as robust demand combined with rising costs and newbuilding price index, both rebased to January 1998 to
a weaker dollar. Not surprisingly, the highest gains were give us a ten-year time series. On this evidence, shipyards
made in the capesize bulk carrier segment where average would be justified in saying that they have kept their ship
prices rose 42.5% during the year from $68.0m to $97.0m. price rises below their steel cost increases. As there is still
Next was the panamax bulk carrier, up 37.5% from $40.0m no forward market for steel, shipyards have to take a view
to $55.0m, and the handymax, up almost 25% from $38.5m on future prices, thus assuming major risks.
to $48.0m. The price of a newbuilding VLCC rose over 13%
in 2007 from $129.0m to $146.0m despite a 9% fall in In a bull steel market, such as we have witnessed in the
average spot earnings with the only glimmer of excitement current decade, shipyards can only behave reactively to
all year being the belated Q4 rate spike. Surprisingly, the changes in steel prices, so the newbuilding price index
price of a suezmax gained almost 12% despite the fact that would be expected to slightly lag the steel price index.
average spot earnings fell 16% during 2007. Containers In the context of recent and anticipated future steel price
enjoyed only minor rises of maximum 7% even though increases in 2008, shipbuilders will be subject to a margin
demand for super post-panamaxes was brisk. Demand squeeze on the majority of their current backlog of projects
was only a partial factor in price changes in 2007. for which steel supply is not yet contracted. This will
encourage them either to lift newbuilding prices for new
Shipyards will claim that they have done their best to keep orders even further or to hold back from marketing far-
newbuilding prices down despite big increases in their own forward berths until their input costs and future demand
costs. The correlation between steel plate prices and ship are more clear.
prices is long-established. In Figure 71 we have compared

88 HSBC Shipping Services Limited


5

Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Shipbuilding

Figure 71. Steel prices and newbuilding prices (indices rebased to Jan-1998)

2
2.5 R = 0.7511
2.5 CRS Newbuilding price index
CRU Asian steel price Index 2.0
2.0

CRS Newbuilding
price index
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
0.5 1.0 1.5 2.0
Jan - 98

Jan - 99

Jan - 00

Jan - 01

Jan - 02

Jan - 03

Jan - 04

Jan - 05

Jan - 06

Jan - 07
Asian steel price index

The recent agreement between the world’s leading iron ore Another problem for Asian shipyards is that they pay
suppliers and major steel mills sees FOB iron ore prices for their steel supplies in the currency of the supplier:
raised a further 65-71% per tonne, the price differential usually the won, yen and renminbi all of which have been
m-dwt
based upon quality, for the new contract year commencing appreciating against the US dollar, the currency in which
Handysize
April 1st 2008. This is slightly higher than was expected they invariably price ship sales. The currency exposure can
Handymax
and was agreed by Japanese and South Korean steel mills be exacerbated by the sourcing of, for example, main and
Panamax
that may have tired of waiting for Chinese steel mills that auxiliary engines and equipment from other Asian countries
Post-Panamax
Capesize
originally had the lead in negotiations. One large Korean and paints and cargo pumps from European suppliers,
VLBC shipbuilder estimated that this large increase in raw introducing euro exchange rate risk. In the last couple of
material cost will translate into a 10% increase in the cost years, the renminbi and yen have risen steadily relative to
of shipbuilding steel plate, and it plans to pass this on to the won. This has conferred an advantage upon Korean
customers in prices. This could result in a typical 3% price builders who earn relatively more local currency, upon
increase. Japanese builders are known to be pressuring conversion back from US dollars, than their Chinese and
their steel suppliers to hold prices as it is now becoming Japanese competitors. However, some of this advantage
difficult to price forward contracts and we may move is lost when they import steel plate and machinery from
towards a model of variable pricing linked to input costs. suppliers in these very same neighbouring countries.
1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Figure 72. Korean exporters have a FX advantage

All data re-based to 01-Jan-07 The renminbi and the yen appreciated by 10% and 16%

1.20
respectively against the dollar between the start of January
dollar-won 2007 and 10 March 2008. In that time the South Korean
dollar-yen
1.15 dollar-RMB won has weakened by about 4% having traded in a
narrower range. In reality, the Japanese builders are largely
1.10
insulated from this development by having a huge domestic
1.05 customer base and a small overseas clientele that generally
pays in yen. China has an expanding domestic customer
1.00
base which may be increasingly willing to make partial
0.95 or total payments in renminbi, but the large overseas
customer base has preferred to stick to dollar contracts.
0.90
01.01.2007
02.02.2007
06.03.2007
07.04.2007
09.05.2007
10.06.2007
12.07.2007
13.08.2007
14.09.2007
16.10.2007
17.11.2007
19.12.2007
20.01.2008
21.02.2008

Global Shipping Markets Review 2008 89


Contracting
Figure 73. Total annual # contracts placed by ship type

# contracts signed 2002 2003 2004 2005 2006 2007


LNG / LPG 33 41 124 151 114 86
Ro-Ro 37 72 111 94 73 120
General Cargo 85 137 185 345 363 290
Tankers 356 661 666 597 1,122 882
Box Ships incl. Reefers 124 488 453 579 492 506
Bulk Carriers 306 467 399 388 621 1,630
Other 102 122 330 605 725 655
Total 941 1,988 2,268 2,759 3,510 4,169

Taking the list from the top down. It is no surprise to see but the deadweight and capacity of individual orders
a slowdown in orders for gas carriers as LNG liquefaction was definitely much increased. Reefers remained lightly
plants and petrochemical plants have been faced with ordered as the sector attempts to convince its customers of
lengthy commissioning delays flowing from manpower superior customer handling relative to containers, while the
and equipment shortages, technical challenges and lines consistently contest such allegations and undercut on
environmental and regulatory obstacles. Simply put, the freight in order to increase their cold market share.
market is oversupplied until beyond 2010, so a contracting
sabbatical is in order. Car carriers had no such problems in The sector that won the Oscar was dry bulk which
2007 as demand for cars amongst the emerging consumer registered a numerical year-on-year increase of 162% to
classes is driving import growth in places such as China and 1,630 ships ordered. This was 222 ships more than was
India. Ironically, those countries will increase their exports ordered in the previous three years combined. Astonishing
of fuel-efficient compacts and hybrids to European and US earnings and rising secondhand values have encouraged
markets as consumers there feel the full impact of high the large-scale reinvestment of profits back into the dry bulk
and unregulated gasoline prices, rising fuel taxes and sector. You can cut this in a number of ways. Reinvesting
‘green’ pressure. in shipping probably looks to be a better bet than investing
in equities, government bonds, residential or commercial
General cargo ships, which includes multi-purpose types, real estate and is a proxy for investing in emerging market
experienced a slower pace of ordering in 2007 after growth and hard and soft commodity demand. You get to
heavy contracting in both 2005 and 2006. Amongst other cover it all. Also, a ship lasts at least 25 years and, in 2007,
uses, these types are popular in the project cargo trades bulkers of that vintage were changing hands for as much as
and these are rising around the globe as infrastructure double what they were originally contracted for, making an
spending and investment increases in the emerging market unrivalled return over the life of the asset for that now rare
economies. After a very strong year in 2006, tanker ordering breed of cradle-to-grave owner.
fell 21% in 2007 but was still well ahead of the previous
four years in numerical terms. Containerships remained
broadly in line with the average of the previous four years,

90 HSBC Shipping Services Limited


Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005
Shipbuilding

Figure 74. Contracts placed in 2006 and in 2007

2006 LNG / 2007 LNG /


LPG Ro-Ro LPG Ro-Ro General
3% 2% General Other 2% 3%
Cargo
Other Cargo 16% 7%
21% 10%

Tankers
21%

Bulk
Carriers
18% Tankers
32% Bulk
Carriers
39% Box Ships
incl. Reefers
m-dwt
Box Ships 12%
30
incl. Reefers
Handysize
14%
Handymax
25
The year-on-year numerical increase in bulk carrier orders
Panamax of the shikumisen deals of old, and will remove a lot of
is plain to see Post-Panamax
as it rose to 39% of total orders in 2007 existing and incremental growth cargo from the spot
20
Capesize
compared with 18% in 2006. The share of tankers fell market. Investment in these ships is a bet on constant and
VLBC
to 21%
15 from 32% while boxships and reefers slipped elevated steel demand growth as emerging markets, chief
to 12% from 14%. Amongst the bulk carriers ordered amongst them China, India and the Middle Eastern nations,
were10many capesize and very large ore and bulk carriers industrialise and urbanise. This and the knowledge that,
that will swell the fleet in capacity terms as this decade for the patient owner willing to play the long game, even
draws5to a close. Many of these ships have been ordered ill-timed investments are usually and eventually rescued by
against lifetime contracts or cargo guarantees, an evolution future market cycles.
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Shipyards’ Market Share
Figure 75. Shipbuilding nation market share in CWT and DGT

CGT DWT Europe /


Europe / ROW
CIS 3%
Japan CIS 9% 5%
Japan
17% ROW 21%
8%

China /
Taiwan /
HK
36%
China /
Taiwan /
Korea HK
35% 31% Korea
35%

Global Shipping Markets Review 2008 91


In deadweight terms, the collective Chinese and Taiwanese Figure 77. Distribution of European orderbook in CGT
orderbooks comprise 36% of all ship orders, just ahead
of South Korea with 35%. By this measure, Japan finds
itself in third place with a 21% share. In Compensated 8%

Gross Tonne terms, a uniform measure of man-hours and CGT 4% 21%

value-added, South Korea retains its crown with 35% Germany 5%

of orders, followed by the Chinese builders in second Italy


Norway
5%
place with 31% and Japan in third place with 17%. South
Romania
Korea’s unchanged percentage of orders is a reflection of Netherlands 5%
the larger number of more sophisticated ships that it has Poland
16%
captured, such as gas carriers, drillships, FPSOs and semi- Russia
7%
Croatia
submersible rigs. It is conscious of the need to stay ahead
Spain
of China on the technology curve in defence of its title. Finland 7%
China’s apparently large increase in market share in 2007 Other 13%
9%
is a tribute to undimmed ambition and to its ability to
attract inward investment and technology transfer in
pursuit of its goal.

The European orderbook is dominated by Germany


Figure 76. Distribution of Asian orderbook in CGT
and Italy. Germany has a larger number of shipyards
building diversified products ranging from cruiseships
and containerships to bulk carriers and chemical product
CGT
tankers. In CGT terms, the labour and value-added content
China / Taiwan / HK
of cruiseships on order at Meyer Werft would make a
Korea
1% significant contribution to Germany’s leading position. It
Japan 3%
SE Asia / Oceania
has a total of ten cruiseships of over 1m gross tonnes
Subcontinent on order for Carnival’s Aida, Royal Caribbean’s Celebrity
20%
35%
and the Disney brands. Italy is even more beholden to
cruiseships, with Fincantieri being Carnival Corporation’s
favoured shipyard. The group has twelve cruise ships on
order totalling almost 1.3m-gt for its P&O, Princess, Holland
America, Costa, Carnival and Cunard brands. Carnival
has a further five vessels of about 325,000-gt on order at
the other Italian yards of T Mariotti and Sestri-Cantieri for
Carnival, Costa and Seabourn.

41%
Cruise orders are largely responsible for Germany and
Italy’s place at the top of the league table and, along with
Drilling down into the purely Asian shipbuilding market, other passenger ships such as ferries, are vital to Europe’s
South Korea leads with a 41% share, followed by China continued presence in shipbuilding. So far, the ambitions
with 35% and Japan lagging behind with 20%. Vietnam, of shipbuilders in Asia to enter the cruise market have
India, Indonesia and others will no doubt increase their been kept at bay. Only about 10% of the building work
market share in future but their hunger for new orders may is in the hull form, with the vast majority of the work
be beyond their ability to digest them in the near term. As being in outfitting. This employs a vast array of specialist
we have already mentioned, the same observation can be subcontractors that Asian yards lack, thus frustrating
applied to a yet-to-be-quantified number of new Chinese their efforts. Mitsubishi did deliver two ships in 2004 for
shipyards. Shipyard delays, non-performance, bankruptcies Princess, the Sapphire Princess and Diamond Princess,
and failed renegotiations will serve to reduce the size of the otherwise Asian builders have been absent. Samsung is
forward orderbook, particularly in the bulk carrier sector. known to be keen to enter the sector while STX has stolen

92 HSBC Shipping Services Limited


Shipbuilding

a lead in buying 39.3% of Aker Yards via STX Norway. This on most cargo ships although Europe still holds sway in
could be the vehicle through which the Asian yards will certain niche sectors, usually for European customers.
finally penetrate the cruise market. These include providing a range of products for the UK and
Norwegian offshore markets, although large rigs, semi-
Europe is far from ceding its dominant position in passenger submersibles, FPSOs and many PSV and AHTS orders have
ships and will jealously guard its primacy having lost most gone the same way as the cargo ships, to Asia. Smaller
conventional commercial ship types to shipbuilders in containerships in Germany, product tankers in Croatia and
Japan, South Korea and China. Technology, labour and car carriers in Poland are illustrations of a continuing, albeit
productivity advantages, anchored to large homegrown weakening, presence in the commercial ships market.
customer bases, have given the Asian shipyards the edge

Figure 78. Global orderbook in dwt by yard nation

Yard nation Delivery in Delivery in Delivery in Delivery in Delivery in Delivery in Grand Total Market
2008 2009 2010 2011 2012 2013 Share

China 26,073,913 49,876,882 65,233,054 31,649,424 3,909,764 176,743,037 35.69%


Korea 32,770,877 56,102,671 55,232,770 26,810,300 1,782,700 172,699,318 34.88%
Japan 28,997,055 28,321,592 23,842,168 15,040,690 6,015,900 532,800 102,750,205 20.75%
Vietnam 1,689,855 1,541,020 1,248,820 497,450 6,550 4,983,695 1.01%
Philippines 429,477 411,200 2,392,000 1,372,000 290,000 4,894,677 0.99%
Turkey 1,396,495 848,496 869,978 751,000 211,000 359,000 4,435,969 0.90%
India 467,362 1,027,612 1,489,414 895,000 398,000 96,000 4,373,388 0.88%
Romania 880,644 866,402 936,407 325,000 195,000 3,203,453 0.65%
Germany 1,439,332 1,033,561 452,303 43,702 2,968,898 0.60%
Brazil 92,387 979,600 1,085,000 418,000 2,574,987 0.52%
Denmark 757,000 766,000 383,000 1,906,000 0.38%
Croatia 681,529 787,020 203,851 103,600 1,776,000 0.36%
Poland 1,144,118 207,783 147,101 8,001 1,507,003 0.30%
Iran 792,600 654,000 53,000 1,499,600 0.30%
USA 398,661 351,082 373,900 143,000 1,266,643 0.26%
Russia 646,985 284,370 118,640 71,000 13,000 1,133,995 0.23%
Netherlands 677,759 219,605 41,502 18,600 5,800 963,266 0.19%
Norway 392,740 310,651 124,007 54,100 881,498 0.18%
Unkown 324,968 330,453 86,303 741,724 0.15%
Bulgaria 127,780 161,280 83,970 223,200 55,800 652,030 0.13%
Singapore 235,510 244,982 76,901 7,000 564,393 0.11%
Spain 360,467 100,071 58,323 15,420 534,281 0.11%
Indonesia 337,953 141,300 9,003 4,500 492,756 0.10%
Italy 149,137 111,502 44,546 25,551 10,000 340,736 0.07%
Portugal 170,504 132,453 302,957 0.06%
Argentina 27,001 4,500 141,000 47,000 219,501 0.04%
Dubai 107,402 100,000 207,402 0.04%
India 79,750 25,150 16,200 121,100 0.02%
Hong Kong 17,400 47,800 30,400 95,600 0.02%
Slovenia 55,590 19,500 75,090 0.02%

Global Shipping Markets Review 2008 93


Malaysia 20,046 23,900 43,946 0.01%
Ukraine 18,601 19,065 37,666 0.01%
Bangladesh 11,000 20,500 31,500 0.01%
Chile 13,500 4,400 4,400 22,300 0.00%
Sri Lanka 6,350 2,700 9,000 18,050 0.00%
Israel 4,500 13,500 18,000 0.00%
Finland 17,704 17,704 0.00%
m-dwt
30 Tunisia 10,400 5,200 15,600 0.00%
Handysize
Canada 571 13,002 13,573 0.00%
Handymax
25 Mexico 13,200 13,200 0.00%
Panamax
FrancePost-Panamax 10,800 10,800 0.00%
20
Saudi Capesize
Arabia 4,800 4,800 9,600 0.00%
VLBC
15
Thailand 7,000 1,000 8,000 0.00%
Australia 2,232 2,682 4,914 0.00%
10 Nigeria 2,900 2,900 0.00%
Greece 1,960 1,960 0.00%
5
Thailand 1,700 1,700 0.00%
m-dwt
30
Abu Dhabi 157 157 0.00%
Handysize
Grand Total 101,748,413 146,119,889 154,907,461 78,523,538 12,893,514 987,800 495,180,615 100.00%
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
Handymax
25
Panamax
Post-Panamax
Rising Input Costs 20 availability of product. German steelmaker ThyssenKrupp
Capesize
and Italy’s
VLBC
Ilva agreed similar levels and Baosteel finally
Figure 79. Steel prices heading for records
15 struck its own deal with Vale towards the end of February
which will see fines rise 65% to $118.98 per tonne FOB
Hot Rolled Plate 10
$ per tonne and higher quality Carajas ore rise 71% to $125.17 from
Hot Rolled Coil
$900 $72.20 per tonne FOB. Baosteel is expected to raise Q2
5
$800 prices of its main products, including hot rolled plate, by
$700 about 10% in response to rising input costs.
$600
Pre-1972

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993
$500 Figure 80. Asian steel index now running higher
$400 than global index
$300
Jan – 03

Jul

Jan - 04

Jul

Jan - 05

Jul

Jan - 06

Jul

Jan - 07

Jul

240 Global Index


Asia Index
220
Flats Index
200
Steel prices are set to rise further now that the world’s
largest steel mills have agreed to higher 2008/9 FOB 180

contract prices for iron ore fines commencing 1st April 160

2008. Nippon Steel, JFE Holdings and POSCO were the 140

first to strike a deal with Brazil’s Vale with contracted 120

prices rising 65% above the levels prevailing for the 2007/8 100
financial year. These higher prices should be viewed in the
Jan – 04

May

Sep

Jan - 05

Sep

Jan - 06

May

Sep

Jan – 07

May

Sep

Jan - 08
May

context of spot prices that had easily exceeded double


the current year’s contract prices as supply constraints
in Australia, India, South Africa and Brazil have limited

94 HSBC Shipping Services Limited


Shipbuilding

Asian steel prices are now higher than global prices as Cido, AP Moller and Geden. Container-orientated owners
demand is focused upon Asian buyers. Shipbuilders in include CP Offen, CMA-CGM, Peter Dohle, MSC, Rickmers,
Japan and Korea are lobbying steelmakers not to raise steel Seaspan, Danaos and NSC and therein lies the roots of the
plate prices but this is likely to be to no avail as the steel massive pipeline of large containerships. Specialist owners
industry is facing minimum 65% increases in contracted include Qatar Gas with its large block of huge LNG carriers
iron ore prices and possibly a doubling of hard coking coal and Carnival with its panoply of cruise ship orders.
contract prices. Samsung Heavy Industries has already
made clear that it will pass on the full impact of increased Long-term Over-Capacity Looms
steel to shipowners suggesting that newbuilding prices It is difficult not to believe that we are faced with the
will continue to be well supported in 2008. Only should prospect of significant over-capacity once we enter the new
shipbuilding capacity get well ahead of newbuilding demand decade. At the end of 2007, there was minimal available
in coming years will prices come under pressure. Future capacity in 2010, something in the order of only 10m-dwt.
shipbuilding capacity has become as murky as forward An estimated half of 2011 is still available and the vast
demand given the huge size of the orderbook, but average majority of 2012 and 2013 capacity is unspoken for. Unless
year-on-year dry bulk rates look certain to fall by latest 2010 demand continues at the supercharged levels of the past
and this will impact on demand. four years, as well it might, then there should be a cyclical
slowdown in fresh ordering as owners absorb and take
Figure 81. Leading customers of global shipyards by CGT stock of their existing commitments. Prices are now at
record highs and, as they are now driven as much by cost
Owner Dwt # ships CGT
factors as demand, are becoming divorced from earnings.
MOL 12,057,240 125 3,834,969
A capesize ordered today needs to earn more than 40%
NYK 11,853,400 122 3,544,800 greater net profit today in order to break even than it did
COSCO 12,599,800 141 3,441,345 one year ago and, by implication, this will be achieved over
C P Offen 6,711,000 77 2,986,704 a longer period and maybe several or multiple cycles.
A P Moller 6,173,398 118 2,824,248
Qatar Gas 3,340,000 25 2,651,844 We have already drawn attention to widespread suspicions
that many ships, especially bulk carriers, that have been
China Shipping 10,708,700 80 2,401,078
ordered will never be delivered. This will result from
K-Line 7,791,243 73 2,349,546
new shipyards not getting built and others struggling
Cido Shipping 6,688,484 108 2,288,387
to secure mandatory refund guarantees and adequate
Carnival 121,912 21 2,108,497
financing to meet the challenge of rising costs and greater
CMA-CGM 4,519,180 46 2,023,436 environmental and regulatory scrutiny. Ships now have
Peter Dohle 4,404,720 71 2,012,811 to be built to more exacting rules and some new yards,
MSC 2,614,002 33 1,699,007 particularly in broader Asia, will not be able to cope. Steel
John Fredriksen 7,184,802 62 1,548,736 cost pressures have already caused one Korean yard to
Zodiac 3,039,110 45 1,459,021 switch to building single-hull bulk carriers having agreed
Rickmers Reederei 2,760,310 56 1,426,654 to build double-hulls. Other yards are finding that they

Seaspan 3,036,200 39 1,418,186 cannot compete with the established majors when it comes
to procuring scarce supplies of engines and equipment
Danaos 2,894,500 34 1,343,383
and they will either delay or default. These failures will
Geden Line 5,203,900 53 1,239,077
considerably ease actual supply to more comfortable levels.
NSC Schiffahrt 2,529,100 40 1,230,510
On the buyer’s side, finance is now an issue as we have
It is interesting to see the Japanese powerhouses of MOL
gone in one short year from a market awash with bank loan
and NYK leading the customer chart as they embark on
liquidity to a market starved of debt finance opportunities1.
a massive fleet renewal program. In third place is Cosco
as it attempts to capture a larger share of China’s import 1
To qualify, since August 2007 Fed rates have decreased by
and export trade, as directed by the central government, 225bps, faster than bank loan rates might typically have risen, but
supported by China Shipping in seventh place. Other reduced tenors and more restrictive loan covenants have generally
made borrowing less attractive.
owners in the list with multi-discipline orders include K-Line,

Global Shipping Markets Review 2008 95


-----
----
Many owners have accrued huge cash piles in recent years The shipyards that may face difficulties in fulfilling

----
so they have the means to increase the equity portion contracts are not all located in China as has been
to 100% if necessary. But, this will pay for fewer ships commonly assumed, but range from South Korea to

---
and most owners, especially the newer breed of investor Indonesia and Vietnam to India. The challenges faced
owners, need the debt leverage in order to maximise by all shipbuilders are immense given labour, machinery,

---
returns to levels either promised or expected. We know of steel and equipment shortages, rising input costs,

---
blocks of capesize bulk carriers and large boxships that have technical challenges, foreign exchange risks, higher
no debt finance in place. Failure to secure bank finance may insurance charges and limited availability of finance. These

---
lead to forced resales and even default. Banks are now very are discomforting to the world’s largest shipbuilders but

---
choosy to whom they lend and it is on the basis of much are greatly amplified when applied to start-ups and smaller

--
higher spreads and must more restrictive covenants. A pair businesses. On the buy side, the risk of fire sales of ships

--
of VLOCs were recently cancelled on the basis of adverse that can no longer be financed could destabilise the resale

--
banking terms despite having 15-year employment. and secondhand markets. Looking beyond 2008, the risks
1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007
--
of a market correction are made all the greater by the sheer

--
Figure 82. Capacity forecast significantly upgraded number of ships of all types that are scheduled for delivery.

--
- --
Weaker earnings would undermine prices until they match
m-dwt Capacity Forecast Available Capacity at end-07 - -income opportunities.
180
160 We take comfort from the fact that the orderbook is
140
stretched out over an unprecedented five year period,
161
152
165
165

165

120
162
150

100
which reduces the capacity impact as new deliveries are
79

80 drip-fed into the market. By the time non-performance and


105

60 cancellations are factored in, on top of what are likely to be


40
more frequent and elongated delays from less experienced
10

20
builders, the orderbook is not so much tamed as becoming
4
3

0
2008 2009 2010 2011 2012 2013 less threatening in appearance. The legacy of the Hebei
Spirit will probably be that it has shortened the life of most
We have had to increase our capacity forecast to take single-hull VLCCs, and maybe tankers in general, by up to
account of the amount of ships on order. However, it seems five years and it has increased the single-hull discount. 2010
likely to us that nominal capacity will be a very poor guide to looks to be the peak of the VLOC deliveries and, should
shipyard performance in the coming years. they all deliver on time, then they will likely exert downward
pressure on dry bulk rates from the top end. The wave of
Shipbuilding Outlook super post-panamax boxships that will deliver over the next
five years will need a good demand-side and infrastructure
We have a record orderbook which spans all three main
response, but should precipitate the long-awaited scrapping
sectors and makes the armada of tanker deliveries of the
of older ships.
1970s look more like a flotilla today. That over-indulgence
gave way to a 15-year bear market for tankers. Today we
are assuring ourselves that this time it is different because
we have a get-out-of-jail-free card in the form of a second
industrial revolution as emerging markets urbanise at an
astonishing pace. There is little doubt as to the validity of
this observation but the process is unlikely to be without
some bumps along the road, and those may prove painful
should the full orderbook deliver and should owners fail to
curb their enthusiasm for new ships. However, there are
real restraints upon the nominal orderbook as shipyards
have promised more than they can actually deliver and
owners have committed to more than they can actually
pay for.

96 HSBC Shipping Services Limited


Shipbuilding

--
---
---- ----
-----
------ ------
- - - - --
- ---------
--
- --
--
---
---
---------------

Global Shipping Markets Review 2008 97


Conclusion

98 HSBC Shipping Services Limited


As we arrive at our concluding comments the economic The chief concern is what impact slowing US household
information emanating from the US gets worse with each spending and business capital spending will have on
passing day. Oil has passed $110 per barrel and gold broke global demand. The might of the US consumer is hard to
through $1,000 per troy ounce. The dollar is sliding against replicate and rising consumption in China, India, the Middle
the world’s major currencies, stock markets are tumbling East and in the commodity exporting nations is unlikely
and risk aversion is back in fashion. A prominent hedge fund to compensate for US weakness. But, when combined
has gone bankrupt having failed to meet margin calls on with investment and infrastructure spending in emerging
heavily leveraged bets gone wrong. The consensus is that markets, there are grounds for expecting that growth in
America is now in recession. We are left to guess how long the developing world will limit the fallout from stagnant
and deep it will be and to what extent monetary and fiscal economic performance in the US, Japan and Germany
stimulus packages will be effective. The main concern from during 2008. Governments in all the emergent economies
those working in the shipping markets is what contagion are pledged to the creation of jobs and this will require
effect this negativity might have upon the emerging spending accumulated foreign exchange reserves should
markets that have been driving global growth for five years external demand fall. Their situation is quite different
now. Estimates of up to a 2% fall in Chinese GDP growth, from past economic cycles as this time it is the US that is
into the high single digits percent, will inevitably make their using debt to reflate its weakening economy and it is the
mark on shipping later on this year if proven correct. sovereign wealth funds rather than the World Bank and the
IMF that are stepping in to provide support.
The gloomy mood traces it origins to last August when
problems in the US subprime mortgage market came to Turning to shipping specifics. US-inbound container trades
the fore. Since then, the problems have worsened and are already suffering and will continue to do so. The lines
filtered through into the prime market and the broader real will adjust capacity accordingly and engage with shippers
economy. What started as a household issue has quickly to discuss adequate recompense for rising fuel and other
become a challenge to global financial institutions that costs. Asia-Europe, intra-Asia and north-south routes will
originate and trade in asset-backed securities. The central continue to prosper as emerging economies step up trade
banks have twice intervened to provide extra liquidity to with each other. The dry bulk market looks to do well this
the banking system in order to revive interbank lending year based upon resilient demand from China but supply-
and resuscitate the credit markets. In the space of twelve side issues move to the fore from 2009. Tankers will
months we have moved from an excess of bank liquidity benefit from conversions, single-hull phase-out, limited
to a deficit and it has had an unsettling effect. Elsewhere, supply pressures in 2008 and stronger global oil demand
there are still huge reserves of cash that are being growth compared with 2007. Shipping demand generally
selectively mobilised to invest in opportunities. China has will be driven by the fast-growth new economies which
over $1.5 trillion in foreign exchange reserves and Japan are showing all the signs of filling the vacuum that the
over $1trn while the oil and commodity exporting countries G7 countries have created. Tonnage supply is generally
have built up huge trading reserves. This suggests that the constrained in 2008 and confusion reigns as ships are
economy will not come to a grinding halt. converted between disciplines and orders for new ships
switched. The orderbook is long and dispersed but needs
to be discounted for future delays and non-performance. In
2008, emerging markets will provide vital support to both
the global trading system and the wider economy.

Global Shipping Markets Review 2008 99


Appendix 1:
Representative Bulk Carrier Fixtures
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Jan-07 China Progress 2006 175,000 35-37 50,000 Cosco Hong Kong World-wide Jul-Aug
Jan-07 Mineral Libin 2006 175,000 22-24 57,000 Transfield Beilun 25/30 Jan
Jan-07 Aquabeauty 2003 171,009 11-13 66,000 Korea Line Flushing 25/26 Jan
Jan-07 Alpha Century 2000 170,415 23-25 57,000 Cosco Bulk Caofeidian 10/12 Feb
Jan-07 Lowlands Beilun 1999 170,162 35-37 50,000 Sinochart World-wide Apr
Jan-07 Maribella 2004 76,629 35-37 25,000 Cargill Amsterdam 05/10 Feb
Jan-07 IVS Pinotage 2005 76,596 59-61 21,750 Cosco Qingdao World-wide Jan-Feb
Jan-07 Bergen Trader 2000 75,933 11-13 31,000 Goldbeam Taiwan 19/22 Jan
Jan-07 Peppino D’Amato 2005 75,698 11-13 32,000 PCL Indonesia 15/30 Jan
Jan-07 Audax 2001 75,220 35-37 25,500 STX PanOcean Shanghai 14/16 Jan
Jan-07 Coronis 2006 74,381 23-25 27,500 Bottiglieri di Navi. World-wide 15/28 Feb
Jan-07 Tai Plenty 2000 73,679 23-25 28,300 Parkroad Piombino 02/05 Feb
Jan-07 Happy Clipper 2001 73,414 11-13 32,500 Cosco Qingdao Rotterdam 20/22 Jan
Jan-07 Bianco Dan 2004 55,628 35-37 24,000 Korea Line Far East Feb
Jan-07 Lissa Topic 2003 52,038 11-13 27,750 Cargill World-wide Prompt
Jan-07 Equinox Voyager 2002 50,832 23-25 25,000 Cosbulk Chittagong 05/07 Jan
Jan-07 Jin Li 2001 50,777 23-25 25,500 N. China Shipping Kandla 26/29 Jan
Jan-07 Krikelo 1985 39,670 16-18 19,500 SK Shipping Rotterdam 13 Jan
Feb-07 Mineral Beijing 2004 176,000 23-25 55,500 STX PanOcean World-wide 01/30 Mar
Feb-07 KWK Providence 2004 175,531 11-13 63,750 Transfield Shanghai 15/30 Apr
Feb-07 Pantelis SP 1999 169,883 47-49 50,000 Glory Wealth Far East 01/28 Feb
Feb-07 Oceanic Breeze 2005 77,075 11-13 34,250 Deiulemar N China 10/20 Mar
Feb-07 Maritime Suzana 2005 76,619 11-13 31,200 Klaveness China 20/22 Feb
Feb-07 IVS Pinotage 2005 76,596 12-14 31,000 d’Amato Skaw 20 Feb /
10Mar
Feb-07 Spartia 2000 75,115 23-25 27,500 BHP Billiton Zhangjiagang 23/28 Feb
Feb-07 Nord Luna 2000 73,288 11-13 31,500 Glory Wealth Bremen 15/17 Feb
Feb-07 Fassa 2006 55,447 11-13 31,000 Western Bulk Kohsichang 14/18 Mar
Feb-07 Ken Sirius 2003 50,337 11-13 27,350 Daeyang Haldia 20/25 Feb
Feb-07 Pilion 1994 48,218 11-13 27,000 Korea Line Kandla 05/15 Mar
Feb-07 Genco Prosperity 1997 47,180 11-13 26,000 Pacific Basin World-wide Mar-Apr
Feb-07 Aquadance 1984 37,705 15-17 20,000 Daeyang Shanghai 05/10 Mar
Feb-07 Silverstar 1999 31,762 11-13 20,450 Cargill Fujairah 01/02 Mar
Feb-07 Pontoklydon 1992 28,450 11-13 22,000 CNR Niihama 02/08 Mar
Feb-07 Anax 1981 22,560 11-13 12,500 Korean Algeria 01/10 Mar
Mar-07 Sideris G.S. 2006 174,186 11-13 65,000 Transfield China 15/30 Mar
Mar-07 Cape Kennedy 2001 170,726 35-37 53,500 Cosco Hong Kong China 11Apr /
11May
Mar-07 Alameda 2001 170,662 10-12 73,000 Morgan Stanley China 15/30 Apr
Mar-07 Tai Shan 1999 169,159 23-25 60,000 Glory Wealth Carboneras 11/13 Mar

100 HSBC Shipping Services Limited


Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Mar-07 Aquahope 1997 167,102 11-13 64,000 Transfield China 20/31 Mar
Mar-07 Te Ho 2004 77,834 11-13 34,750 Glory Wealth Taiwan 15/30 Apr
Mar-07 Pasha Bulker 2006 76,600 11-13 35,660 Daiichi Kawasaki 08/10 Apr
Mar-07 Kalliopi L 2001 76,529 59-61 25,250 Deiulemar Far East 25May /
15Jul
Mar-07 Amalia 2000 75,100 35-37 27,500 Cosco Europe Piombino 20/30 Mar
Mar-07 Cinzia D’Amato 2000 74,716 11-13 33,500 Glory Wealth Hong Kong 27/30 Mar
Mar-07 Amira 2001 74,400 23-25 30,000 Golden Ocean Far East 01/30 May
Mar-07 Atlantic Eagle 2001 74,085 11-13 36,000 STX PanOcean WC India 06/07 Apr
Mar-07 Genco Vigour 1999 73,941 23-25 29,000 STX PanOcean Atlantic 20/30 Apr
Mar-07 Oinoussian Lion 1996 71,685 23-25 28,000 Transfield Inchon 18/28 Mar
Mar-07 Pos Harmony 2005 55,695 11-13 31,000 Transfield Inchon 15/25 Mar
Mar-07 Ocean Prince 2002 52,475 12-14 30,000 SK Shipping Thailand 05/12 Apr
Mar-07 Tai Chung 1982 37,611 11-13 17,000 CNR EC India Prompt
Mar-07 Kee Lung 1985 37,389 23-25 16,500 Korean Continent 10/12 Apr
Mar-07 Addu Comet 1999 35,362 36-39 20,500 Korea Line China 05/10 Apr
Mar-07 Genco Reliance +4 1999 29,952 23-25 19,500 Lauritzen World-wide Sep
Mar-07 Opal Naree 1982 28,780 11-13 18,000 CNR Zhoushan 20/23 Mar
Apr-07 Chou Shan 2005 175,882 11-13 80,000 Shagang Japan 01May-
05May
Apr-07 Diana newbuild 2007 175,000 47-49 52,500 BHP Billiton Ex-yard SWS 01 Nov
Apr-07 Thalassini Niki 2005 174,566 59-61 56,000 Cosco Hong Kong World-wide 01 Sep
Apr-07 Cyclades 2004 171,480 11-13 92,500 STX PanOcean Continent 01 May
Apr-07 Glorius 2004 171,314 11-13 75,000 BHP Billiton China 20/30 Apr
Apr-07 Iron Kalypso 2006 82,224 11-13 41,500 Cosco Bulk Cape Passero 11/13 Apr
Apr-07 Ruby Indah 1998 77,755 11-13 42,500 Louis Dreyfus Taiwan 01/10 May
Apr-07 Pantazis L. 2003 76,629 11-13 41,000 Shagang Cape Passero 20/22 Apr
Apr-07 Orsolina Bottiglieri 2001 75,410 11-13 39,500 Daiichi Hibikinada 21/22 Apr
Apr-07 Samjohn Amity 1998 74,761 11-13 36,500 STX PanOcean Taiwan 25/30 Apr
Apr-07 Amira 2001 74,400 11-13 34,250 Glory Wealth Far East Prompt
Apr-07 Anangel Galini 2002 74,362 23-25 37,500 Bunge Zhoushan 05/07 May
Apr-07 Genco Beauty 1999 73,941 23-25 31,500 Cargill Dammam 10/20 Jun
Apr-07 Global Harmony 1997 73,763 11-13 37,000 CTP S’pore-Japan 1-May
Apr-07 Dimitris L 2001 73,193 11-13 42,000 STX PanOcean PMO 22/24 May]
Apr-07 Aquitania 2006 55,932 11-13 39,000 Sinochart Aden 15/25 May
Apr-07 Jin Yi 2007 55,300 23-25 32,000 Korea Line Oshima July
Apr-07 Filia Gem 2005 53,702 35-37 26,850 Korea Line Far East 10/30 May
Apr-07 Spar Canis 2006 53,565 11-13 32,000 Farenco Fangcheng 15/25 Apr
Apr-07 J Duckling 2003 52,425 23-25 32,500 HMM China May
Apr-07 Azzura 2004 52,050 11-13 37,000 Cargill WC India 08/10 May
Apr-07 Pratchara Naree 1984 25,000 11-13 20,000 Joen Ship India 03/15 May
May-07 Mineral Shikoku 2006 206,312 11-13 101,500 SK Shipping Qingdao 01/31 May
May-07 Chandris NB 2009 180,000 59-61 43,000 K-Line Ex-yard DSME 01/31 Jul
May-07 Gran Trader 2001 172,530 11-13 100,000 N. China Shipping Xingang 26/30 May
May-07 Anangel Explorer 2007 171,600 59-61 58,000 Cosco Hong Kong Okpo 01 Jul
May-07 Iron Brooke 2007 82,800 35-37 37,000 Augustea Brazil 25/30 May
May-07 Rule 1999 73,744 11-13 44,250 R Bottiglieri San Nicolas 01 Jul
May-07 Endless 1999 73,427 23-25 38,000 Transfield World-wide 01/30 Nov

101 Shipping Markets Review 2008


Global 101
Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
May-07 Vogevoyager 1996 72,171 23-25 35,000 Daeyang World-wide Oct/Nov
May-07 JOSCO Taizhou 2005 55,561 11-13 43,000 Transfield Ravenna 25/31 May
May-07 Shamrock 2006 52,385 11-13 39,000 Transfield China 20/30 May
May-07 Nicolaos A. 2003 52,110 12-14 44,000 SK Shipping N China 22 May/ 02
Jun
May-07 Great Dream 2004 33,745 23-25 25,500 IHC Far East Jul
Jun-07 Samjohn Liberty 1998 74,761 11-13 44,000 Cargill Far East 20Jul /
05Aug
Jun-07 Evanthia 2001 74,350 11-13 45,000 Cargill Far East 25 Jul
Jun-07 Tai Profit 2001 73,679 11-13 43,500 HMM Hong Kong 03/07 Jul
Jun-07 Volme 2004 52,949 11-13 33,000 Navios World-wide Jan/Mar-08
Jun-07 Jaeger 2004 52,483 11-13 39,500 HMM S’pore-Japan 10/30 Jul
Jun-07 BMS Tourloti 1984 37,662 10-12 34,000 Probulk Florida 01/10 Jul
Jul-07 Cape Condor 2004 180,181 11-13 95,000 Cosco Qingdao China 25 Jul
Jul-07 Shining Star 2004 177,662 10-12 92,000 Cargill Far East 25 Jul
Jul-07 Anangel Sailor 2006 172,000 11-13 90,000 Oldendorff Dunkirk 15/20 Jul
Jul-07 Obeliks 2000 170,454 10-12 92,800 Cosco Bulk Japan 25Jul /
05Aug
Jul-07 Anangel Vision 2007 170,000 23-25 80,000 Transfield World-wide 01 Feb
Jul-07 Bulk Australia 2003 169,770 11-13 91,000 Morgan Stanley Xingang 25 Jul
Jul-07 Orange Truth 2006 82,800 23-25 44,000 NCS World-wide 01/30 Dec
Jul-07 Tai Prosperity 2006 77,747 23-25 51,000 Cosco Bulk World-wide 25 Jul
Jul-07 Centurion 2005 76,838 11-13 54,500 Cosco Europe Cape Passero 20/22 Aug
Jul-07 Panstar 2005 76,629 23-25 39,500 Glory Wealth World-wide 01/31 Mar
Jul-07 Double Happiness 2005 76,602 23-25 43,000 Cosco Qingdao Imabari 01 Oct
Jul-07 Oceanis 2001 75,220 23-25 40,000 Hanjin Far East 01 Sep
Jul-07 Oceanis 2001 75,220 11-13 49,750 Transfield Far East 01 Seop
Jul-07 Gianfranca D’Amato 2000 74,716 23-25 43,000 STX PanOcean World-wide 01/31 Aug
Jul-07 Marigo P 2002 73,810 11-13 48,500 NYK Kagoshima 12/14 Jul
Jul-07 Ever Blossom 1997 72,517 23-25 38,000 Pioneer Navi. World-wide 01/30 Sep
Jul-07 Navios Astra 2006 53,350 23-25 36,000 Dreyfus China 01/10 Aug
Jul-07 Athos 2004 52,248 11-13 45,000 Ocean Glory N China 20/25 Jul
Jul-07 Rubin Stellar 1995 28,379 35-37 21,000 Europeans Far East Aug/Sep
Aug-07 Cape Albatross 2007 202,000 11-13 118,000 STX PanOcean Kwangyang 17 Aug
Aug-07 Jean LD 2005 171,908 11-13 101,000 Morgan Stanley Far East 01 Oct
Aug-07 Anangel Explorer 2007 171,600 23-25 97,500 N. China Shipping Far East 01 Oct
Aug-07 Ocean Queen 2004 171,015 11-13 110,000 Morgan Stanley Far East 01 Sep
Aug-07 Red Jasmine 2006 76,596 11-13 60,800 Michele d’Amato World-wide Jan-08
Aug-07 Osmarine 2006 76,596 11-13 55,000 Transfield Kobe 14/16 Aug
Aug-07 Red Seto 2002 75,957 23-25 45,000 Perseveranza World-wide 01 Aug
Aug-07 Star of Nippon 2004 75,845 23-25 47,500 Sunwoo World-wide 01/31 Dec
Aug-07 Ever Mighty 1996 75,265 23-25 47,250 Cosco Americas World-wide 01/30 Nov
Aug-07 Topeka 2000 74,716 11-13 60,000 Atlas Bulk S. Korea 16/30 Sep
Aug-07 Primrose 2001 74,716 23-25 48,500 Daebo World-wide 01 Feb
Aug-07 Yong Jia 2001 74,500 11-13 61,500 Navios Cape Passero 05/10 Sep
Aug-07 Yuan Zhi Hai 2005 74,272 11-13 62,750 Mittal Bilbao 14/20 Sep
Aug-07 Ming May 1997 74,005 11-13 58,000 BHP Billiton Shanghai 30/31 Aug
Aug-07 Marietta 2004 73,880 23-25 50,000 Cargill Syria 25 Sep

102 HSBC Shipping Services Limited


Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Aug-07 Daebo Trader 2002 73,810 23-25 49,000 Sunwoo World-wide 15Nov /
15Jan
Aug-07 Anangel Omonia 1996 73,519 35-37 44,500 Atlas Bulk Japan 10/15 Sep
Aug-07 Island Globe 1995 73,119 11-13 60,000 GMI Jorf Lasfar 25 Aug
Aug-07 Fu Man 1997 70,850 11-13 59,000 Skaarup Zhoushan 06/09 Sep
Aug-07 Skua 2003 53,350 11-13 50,000 Cosbulk N China 28Aug /
06Sep
Aug-07 Ocean Prefect 2003 52,500 23-25 42,500 Sinotrans Chennai 07/12 Aug
Aug-07 Odin Pacific 1995 28,381 11-13 32,000 Korean Indonesia 04-06 Sep
Aug-07 Genco Charger 2005 28,000 35-37 24,000 Pacific Basin World-wide Q407
Aug-07 Genco Challenger 2003 28,000 35-37 24,000 Pacific Basin World-wide Q407
Aug-07 Genco Champion 2006 28,000 35-37 24,000 Pacific Basin World-wide Q407
Sep-07 Cape Saturn 2003 175,773 12-14 130,000 Armada China 25Sep /
05Oct
Sep-07 Xin Fa Hai 2004 174,766 11-13 125,500 Morgan Stanley Qingdao 30Sep /
05Oct
Sep-07 Zorbas 1996 174,690 35-37 75,000 STX PanOcean Qingdao 01/15 Oct
Sep-07 Tian Lu Hai 2005 174,398 11-13 125,000 Crownland World-wide Jan/Feb-08
Sep-07 Mineral London 2006 173,949 11-13 115,000 Morgan Stanley Qingdao 05/12 Oct
Sep-07 CSK Beilun 1999 172,561 11-13 110,000 Norden World-wide Jan/Feb-08
Sep-07 Channel Alliance 1996 171,978 11-13 130,000 Shagang Far East 01 Oct
Sep-07 Anangel Explorer 2007 171,600 23-25 115,000 Crownland China Jan/Feb-08
Sep-07 Cape Pioneer 2005 170,012 11-13 135,000 Cosco Qingdao Japan 15/31 Oct
Sep-07 Apollo 2006 77,326 11-13 69,000 Kleimar Skaw-Passero 20/30 Sep
Sep-07 Oinoussian Lady 2004 76,704 11-13 68,000 Navios Japan 15 Sep
Sep-07 Maritime Bagui 2006 76,453 23-25 55,000 Transfield World-wide 01 Oct
Sep-07 Angelic Glory 2002 75,007 23-25 55,000 Glory Wealth World-wide 01/31 Dec
Sep-07 Yong Huan 2000 74,500 11-13 66,000 Transfield Hong Kong 15 Sep
Sep-07 Lilian Z 1999 74,461 11-13 65,000 Norden World-wide 01 Dec
Sep-07 Aspendos 2003 74,380 23-25 53,000 Bunge World-wide Nov/Dec
Sep-07 Elinakos 1997 73,751 23-25 58,000 MBC Shipping Huangpu 16Sep-
18Sep
Sep-07 Thetis 2004 73,583 11-13 60,250 Sinochart Far East 01 Oct
Sep-07 Great Glory 1997 73,000 11-13 68,000 OBS China 26Sep /
16Oct
Sep-07 Innovator 2005 55,435 35-37 39,000 HMM Far East Oct
Sep-07 Jin Ying 2007 53,000 11-13 55,000 Transfield Japan Nov
Sep-07 C Duckling 2002 52,500 11-13 51,000 Wylex Far East Oct
Sep-07 Medi Cebu 2002 52,464 12-14 55,500 Oldendorff Singapore 28Sep /
07Oct
Sep-07 Captain George II 1994 52,370 23-25 40,000 Dooyang Qingdao 18/22 Sep
Sep-07 Manora M 1984 29,159 11-14 32,500 Toepfer Santa Marta 22/26 Sep
Sep-07 Gourniati 1996 28,387 35-37 26,000 Global Logistics World-wide Jan/Feb 08
Oct-07 Great Navigator 2006 176,279 23-25 150,000 Daebo Mizushima 15/16 Nov
Oct-07 Anangel Fortune 2005 175,500 22-24 140,000 Samsun Japan 25/30 Oct
Oct-07 Heng Shan 2006 175,000 23-25 140,000 Hanjin Pohang 15 Oct
Oct-07 Jin Tai 2004 173,880 11-13 155,000 Cosco Qingdao Far East 15/20 Nov
Oct-07 Lowlands Beilun 1999 170,162 11-13 146,000 Oldendorff China 25 Nov
Oct-07 Yasa Fortune 2006 82,800 11-13 87,000 Sinochart Far East 01 Dec

Global Shipping Markets Review 2008 103


Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Oct-07 Tai Promotion 2004 77,834 23-25 65,000 STX PanOcean World-wide 01/30 Nov
Oct-07 Anthemis 2004 76,200 11-13 80,000 Pioneer Nav. Hong Kong 01/05 Nov
Oct-07 Coronado 2000 75,706 11-13 82,750 Cargill Liverpool 01/02 Nov
Oct-07 Nordems 2001 75,253 11-13 78,500 Cosco Qingdao World-wide 01 Feb
Oct-07 Medi Tokyo 1999 74,356 11-13 81,000 SK Shipping World-wide 15Nov /
15Dec
Oct-07 Four Coal 1999 74,020 23-25 73,500 Crownland China 25/30 Nov
Oct-07 Carl Mesem 1999 73,965 12-13 78,000 Safe Fixing Corp. Far East 01 Nov
Oct-07 Hai Huang Xing 2005 73,581 11-13 81,000 Parkroad World-wide 25Dec /
10Feb
Oct-07 Waimea 1997 73,048 11-13 80,000 Seallink World-wide 01/31 Jan
Oct-07 Alpha Glory 1999 72,270 11-13 82,000 Atlas Bulk Setubal 15 Oct
Oct-07 Great Luck 1998 71,339 11-13 72,000 Armada World-wide 01/30 Apr
Oct-07 Maratha Messenger 1995 71,252 11-13 70,500 STX PanOcean China 15Nov /
31Dec
Oct-07 Iguana 1996 70,349 11-13 78,750 Sinochart Taiwan 11/13 Nov
Oct-07 Nord Brave 2007 53,500 11-13 59,000 PCL Aden 01/15 Dec
Oct-07 Merlin 2001 50,296 24-26 53,000 Wylex World-wide Nov 07/
Jan08
Oct-07 Gulf Globe 1994 43,246 11-13 60,000 Korea Line South China 08/15 Nov
Oct-07 Eastern Star 1997 28,437 11-13 42,000 Korea Line World-wide Nov 07/ Jan
08
Oct-07 African Grace 1995 24,306 23-25 25,000 MUR World-wide 09 Jan
Nov-07 Mariana 1998 186,001 59-61 67,500 N. China Shipping Rizal 20/30 Nov
Nov-07 Madeira 2007 177,000 11-13 165,000 STX PanOcean PMO 15/20 Nov
Nov-07 Mineral Hong Kong 2006 175,000 11-13 170,000 Kleimar Passero 24/27 Nov
Nov-07 Pierre LD 2005 171,876 22-24 130,000 N. China Shipping China 20/30 Jan
Nov-07 Navios Cello 2003 75,829 11-13 74,000 Choking Marvels 09/10 Dec
Nov-07 Nord Orion 2006 75,318 11-13 76,250 Navios Beilun 20/30 Dec
Nov-07 Dionne 2001 75,172 11-13 82,000 Shagang Skaw-Passero 01 Jan
Nov-07 Thaliana 2001 75,115 59-61 31,500 MOSK World-wide Jan/Mar-08
Nov-07 Filippo Lembo 1997 74,500 11-13 79,000 Eylex Shanghai 15/24 Nov
Nov-07 Ocean Dragon 1994 12,419 12-14 14,000 SK Shipping World-wide 20/22 Nov
Dec-07 Mineral Noble 2004 170,649 11-13 170,000 STX PanOcean Rotterdam 25 Dec
Dec-07 Mulberry Paris 2004 76,492 47-49 51,250 Komrowski World-wide Jan/Feb-08
Dec-07 Riruccia 1997 74,002 11-13 71,000 Constellation World-wide 01/29 Feb
Jan-08 Channel Navigator 1997 172,058 59-61 53,500 Shagang World-wide 31 Mar
Jan-08 North King 1981 127,907 11-13 29,000 Winning N China 15 Mar
Jan-08 Pole 1997 73,049 59-61 67,000 Cosco Bulk World-wide 01 Feb
Jan-08 Giovanni 1996 72,394 23-25 54,000 Cosco Americas A-R-A 15/20 Feb
Jan-08 Dong Bang 1995 71,747 11-13 49,000 Sealink Jintang 28/30 Jan
Jan-08 Darya Brahma 2006 56,056 11-13 50,000 MUR Nemrut Bay 01/02 Feb
Jan-08 Navios Kypros 2003 55,180 35-37 35,350 Sanko Shanghai 27/30 Jan
Jan-08 Lepta Galaxy 2002 52,378 11-13 47,500 Cetragpa Greece 04/08 Feb
Feb-08 Private 2007 177,000 18-21 121,000 Chinese Far East 05 Mar
Feb-08 Cape Jupiter 1997 172,480 11-13 132,000 Cosco Bulk World-wide 01/29 Feb
Feb-08 Anangel Eternity 1999 171,176 59-61 70,000 Cosco Far East 01/31 Jul
Feb-08 Vogebulker 1999 169,168 11-13 132,000 Cosco Bulk Far East 01 Apr

104 HSBC Shipping Services Limited


Reported Vessel Built Dwt Period Rate $ Charterer Delivery Laycan
Feb-08 Star Beta 1993 165,133 11-13 130,000 Oldendorff Zhoushan 21/24 Feb
Feb-08 Jag Arjun 1996 164,796 11-13 130,000 Oldendorff Far East 01/05 Apr
Feb-08 Oceanic Breeze 2005 77,075 23-25 61,000 Cosco Bulk PMO 25Mar /
05Apr
Feb-08 Nicole 2007 77,000 35-37 50,000 Hanjin World-wide 01/31 Mar
Feb-08 CMB Florentina 2005 76,838 11-13 64,500 STX Panocean Japan 20/22 Feb
Feb-08 Arabella 2001 75,563 11-13 66,500 Golden Ocean Guangzhou 15/17 Mar
Feb-08 Danae 2005 75,349 35-37 52,000 Cosco Europe Tobata 03/05 Mar
Feb-08 Nirefs 2001 75,311 23-25 60,500 Cosco Bulk Cape Passero 05/15 Mar
Feb-08 Maria Bottiglieri 1995 75,265 11-13 72,000 Skaarup Amsterdam 25/26 Mar
Feb-08 Alcyon 2001 75,247 57-60 34,500 Cargill Kemann 20/29 Feb
Feb-08 Roger M Jones 1992 74,868 11-13 59,500 Transfield Piraeus 27/29 Feb
Feb-08 Calipso 2005 73,691 11-13 64,000 Rizhao Steel Taiwan Prompt
Feb-08 Hua Shan Hai 1998 72,769 23-25 61,000 Deiulemar S’pore-Japan 11/20 Apr
Feb-08 Fu Min 1997 72,437 11-13 66,000 Armada Toyohashi 25/28 Feb
Feb-08 JOSCO Yangzhou 2005 55,621 11-13 48,000 Oldendorff WC India 01/29 Feb
Feb-08 Yasa Unsal Sunar 2007 55,526 11-13 57,500 Glory Wealth Far East 10/25 Mar
Feb-08 Serenity I 2006 53,580 11-13 59,250 Korean Surubaya 06/17 Mar
Feb-08 Apageon 2005 52,438 11-13 58,000 Oldendorff Thailand 25/28 Feb
Feb-08 Hawk I 2001 50,296 11-13 58,000 Chinese S’pore-Japan 01Mar /
01Apr
Feb-08 Orchid Ocean 1994 45,262 11-13 51,000 Eitzen Bulk PMO 04/06 Mar
Mar-08 Manasota 2004 171,061 23-25 115,000 NSS World-wide 01/31 Mar
Mar-08 Anangel Enosis 1995 75,464 11-13 73,500 COSCO Tarragona 25Mar /
03Apr
Mar-08 Nordrhine 2001 75,253 11-13 72,000 Glory Wealth Cape Passero 03/06 Mar
Mar-08 Anna Smile 2004 74,823 11-13 75,000 STX Panocean N China 01/31 Mar
Mar-08 Anangel Omonia 1996 73,519 23-25 58,600 Daeyang Egypt 15/20 Mar
Mar-08 Christina IV 2000 72,493 35-37 68,000 Korea Line World-wide 01Apr /
10Jun
Mar-08 Stella Maris 2007 52,500 11-13 63,000 Eitzen Bulk Cristobal 07/10 Mar
Mar-08 Sea Lantana 2005 52,471 35-37 41,500 Armada Jintang 10/12 Mar
Mar-08 Victoria 2005 52,200 35-37 41,900 Korea Line Marmara 15/25Mar
Mar-08 Jin An 2000 50,786 11-13 61,000 Oldendorff Port Harcourt Prompt
Mar-08 Honesty Ocean 1997 47,240 11-13 55,000 Ocean Glory Haldia 06/10 Mar

Global Shipping Markets Review 2008 105


Appendix 2:
Representative Bulk Carrier Sales
Reported Vessel Dwt Built Yard Price $m Buyer
Jan-07 Lowlands Beilun 170,162 1999 Halla Samho 71.50 Quintana
Jan-07 Spring Brave 151,066 1995 Nippon Kokan Tsu 60.00 Dryships
Jan-07 CHS Moon 151,040 1990 Sumitomo Oppama 45.00 Transfield
Jan-07 Aeolian Spirit 76,015 2002 Tsuneishi 49.25 Tolani
Jan-07 Iolcos Grace 71,749 1990 Hitachi Maizuru 25.80 Odysea Carriers
Jan-07 Delray 70,029 1994 Hudong 37.00 Britannia Bulk
Jan-07 Mandarin Glory 49,400 2003 Nantong Ocean 39.50 COSCO
Jan-07 Desert Sky 48,320 1990 Split 24.25 CITIC
Jan-07 Flores 46,609 1997 Mitsui Tamano 32.50 Akmar Deniz
Jan-07 Future Confidence 42,055 1986 Nipponkai 16.00 Sunwoo
Jan-07 Vamand Wave 28,303 1985 Mitsubishi Kobe 10.60 Eastwind Hellas
Jan-07 George 26,589 1987 Sasebo 13.00 J&J Trust Ship
Jan-07 Grand Slam 24,112 1999 Saiki Jukogyo 24.00 Sider Navigation
Jan-07 Delos 24,000 1997 Shanghai SY 21.00 Lamda Maritime
Feb-07 Pantelis Sp 169,883 1999 Daewoo HI 81.00 Chang Myung
Feb-07 Amazon 149,495 1990 China SB Kaohsiung 48.00 Dryships
Feb-07 Thios Costas 145,229 1982 Nippon Kokan Tsu 18.00 STX Panocean
Feb-07 Dynasty 133,082 1982 Hitachi Nagasu 15.00 Panocean
Feb-07 Fortune Glory 53,350 2003 Toyohashi 46.50 Eagle Bulk
Feb-07 Fortune Bright 53,343 2003 Toyohashi 46.50 Eagle Bulk
Feb-07 Highgate 46,650 1985 Sunderland 15.00 Bogazzi
Feb-07 J. Lucky 28,460 1994 Imabari 22.60 ID Shipping
Feb-07 Lark 23,723 1996 Shin Kurushima 21.75 Navibulgar
Feb-07 Clipper Range 20,200 2002 INP HI 21.70 Massoel Gestion
Mar-07 Cape Pelican 180,235 2005 Imabari 107.00 Diana
Mar-07 Johnny K 175,048 1994 Gdynia 64.00 Essar
Mar-07 Winner 174,004 1985 Hitachi Nagasu 30.00 COSCO
Mar-07 Cape Kassos 170,012 2004 Hyundai Samho 100.00 Alcyon Shipping
Mar-07 Martha Verity 157,991 1995 Sasebo 63.00 Swiss Marine
Mar-07 Americana 148,982 1987 Astano El Ferrol 33.00 COSCO
Mar-07 Ullswater 123,503 1990 Daewoo 45.00 COSCO
Mar-07 Raffaele Iuliano 75,473 1995 Fincantieri Stabia 40.50 Dryships
Mar-07 Restless 72,561 2000 Sasebo 46.20 Topships
Mar-07 Oinoussian Legend 71,662 1997 Hitachi Maizuru 41.00 Dryships
Mar-07 Gladstone 64,951 1986 Hitachi Maizuru 22.00 Samsun
Mar-07 Hille Oldendorff 55,566 2005 Nantong Ocean 50.25 Primera
Mar-07 Halo Friends 47,240 1997 Oshima 35.20 Great Eastern
Mar-07 Lily 47,043 1984 Caneco SA 9.00 Kristen Marine
Mar-07 Mount Baker 32,600 2007 Kanda Kawajiri 38.50 Ocean Longevity

106 HSBC Shipping Services Limited


Reported Vessel Dwt Built Yard Price $m Buyer
Mar-07 Ambassador 26,465 1993 Hakodate 22.90 VinaLines
Mar-07 Cynthia Harmony 23,724 1994 Shin Kurushima 20.50 Northern Shipping
Apr-07 Winner 174,004 1985 Hitachi Nagasu 37.50 COSCO
Apr-07 Nautical Dream 151,439 1994 China SB Kaohsiung 63.50 Dong-A-Tankers
Apr-07 Arimathian 149,782 1994 Dalian New 26.00 Blumenthal
Apr-07 Boss 139,816 1985 Namura Imari 31.00 SMI Shipping
Apr-07 Global Peace 132,049 1982 Mitsui Tamano 19.50 Intrepid
Apr-07 Rule 73,744 1999 Sumitomo HI 48.50 Dryships
Apr-07 Salmas 73,506 1995 Hyundai HI 42.00 Topships
Apr-07 Quint Star 72,413 1998 Imabari Marugame 47.00 Dryships
Apr-07 Anangel Loyalty 71,550 1995 Hitachi Maizuru 41.50 Bright Navigation
Apr-07 Kerasia S 52,808 2004 Onomichi 53.00 Seastar
Apr-07 Prabhu Yuvika 43,648 1994 Tsuneishi 33.50 Middle Eastern
Apr-07 Marina Gr 43,214 1984 Sanoyas 16.00 Ikarus Marine
Apr-07 Wave Bulker 27,308 1994 Mitsubishi Shimonoseki 24.25 Franca Naviero
Apr-07 Anne Bulker 26,455 1991 Hakodate 21.00 ID Shipping
Apr-07 Eco Chaser 21,538 1985 Watanabe Hakata 11.50 S Korean
Apr-07 Sider Green 18,800 2007 Yamanishi 24.60 G Bros Maritime
May-07 Zorbas 174,505 1996 Gdynia 86.00 Pacific King
May-07 Fertilia 172,632 1997 Constantza 50.50 Samsun (Charterers)
May-07 Ingenious 169,962 1999 Daewoo HI 64.20 Bocimar
May-07 Anangel Dawn 149,321 1994 Hyundai HI 67.00 Chang Myung Shipping
May-07 Australian Fame 1 145,500 1982 Hyundai HI 21.00 Parkroad Corp
May-07 Marijeannie 74,540 2001 Daewoo HI 55.60 Seajustice
May-07 Anangel Galini 74,362 2002 Daewoo HI 56.50 Ocean Freighters
May-07 Jin Kang 50,212 2001 Mitsui Chiba Ichihara 53.72 Mistral
May-07 Grand Festival 43,620 1993 Tsuneishi 33.50 Odysea Carriers
May-07 Magic Triangle 42,512 1985 Mitsui Chiba Ichihara 19.50 STX PanOcean
May-07 Pioneer 28,399 1997 Hakodate 32.25 Sammok Shipping
May-07 Jupiter Charm 26,587 1985 Kurushima Onishi 11.80 STX Panocean
Jun-07 Orient Fortune 160,993 1984 Mitsubishi Nagasaki 28.00 COSCO
Jun-07 Patya Bulker 75,926 2004 Tsuneishi 67.00 Tolani
Jun-07 H Duckling 74,000 2001 Sasebo 55.00 Order Shipping
Jun-07 Leda 69,235 1987 Imabari Marugame 27.00 Samsun
Jun-07 Santa Maria 1 67,296 1984 Imabari Marugame 21.00 Jin Ocean
Jun-07 Nord Mariner 53,000 2006 Shanghai Chengxi 52.70 Akmar Deniz
Jun-07 Crystal Lily 48,913 1999 Ishikawajima Tokyo 39.00 Koreans
Jun-07 Rubin Stella 28,379 1995 Imabari 30.50 Franco Naviera
Jun-07 Aonoble 27,308 1994 Mitsubishi Shimonoseki 27.50 Korean
Jul-07 Ferro Fos 176,000 2006 Universal 550.00 Quintana
Jul-07 Great Moon 145,967 1984 Nippon Kokan 30.00 SMI Shipping
Jul-07 Sundance 74,274 2001 Namura 59.80 Allseas
Jul-07 Athina Zafirakis 74,204 2002 Oshima 65.00 Dryships
Jul-07 Theodoros P 73,870 2002 Namura 70.50 Tolani
Jul-07 Edelweiss 73,624 2004 Jiangnan Group 64.00 Transmed
Jul-07 Star Phoenix 56,042 2004 Mitsui Tamano 61.00 Uljanik Plovidba
Jul-07 ABG Madhava 44,875 1994 Halla Inchon 37.00 Go Shipping

Global Shipping Markets Review 2008 107


Reported Vessel Dwt Built Yard Price $m Buyer
Jul-07 Ocean Eagle 42,972 1984 Hashihama Zosen 23.50 Hannah Maritime
Jul-07 Island Gem 28,005 1984 Hitachi Maizuru 14.00 Armada
Jul-07 BBC Barranquilla 22,051 1995 Saiki Jukogyo 24.70 Free Bulkers
Aug-07 Ce-Mikela 82,329 2006 Tsuneishi 85.00 Lykiardopolu
Aug-07 Nord Mercury 76,629 2004 Imabari Marugame 69.50 Dryships
Aug-07 Formentera 70,002 1996 Hudong 63.00 Pareto
Aug-07 Chios Gem 65,298 1985 Nippon Kokan Tsurumi 30.00 Fujian Guohong
Aug-07 Voc Gallant 51,215 2002 New Century 65.60 Top Tankers
Aug-07 Orchid Sky 43,609 1985 Tsuneishi 22.00 Empremar
Aug-07 Dimitra 41,455 1995 Varna 38.50 Lydiamar
Aug-07 Castle Peak 28,545 1997 Imabari Marugame 31.60 ID Shipping
Aug-07 Stentor 28,445 2006 Imabari 46.00 Genco
Aug-07 Lake Joy 28,251 1996 Kanasashi Toyohashi 304.00 ID Shipping
Aug-07 Protagonist 23,581 1996 Saiki Jukogyo 30.50 VOSCO
Sep-07 Cape Maria 177,754 1982 Mitsui Chiba Ichihara 43.00 Sealink
Sep-07 Thalassini Niki 170,800 2005 Daewoo 275.00 en Diana Shipping
bloc
Sep-07 Thalassini Kyra 164,218 2002 Kaohsiung
Sep-07 Carol 75,608 1999 Mitsui Chiba Ichihara 73.00 NYK
Sep-07 Yarrow 70,653 1986 Shin Kurushima 36.00 Koreans
Sep-07 Genco Trader 69,338 1990 Imabari Marugame 44.00 SW Shipping
Sep-07 CMB Talent 52,403 2001 Tsuneishi 53.53 Third Millenium
Sep-07 Giorgos 47,893 1984 Namura 25.00 China Shipping
Sep-07 Genco Commander 45,518 1994 Tsuneishi 44.75 Dan Sung Shipping
Sep-07 Archimidis SB 45,320 1995 Oshima 43.00 Kassia Maritime
Sep-07 Ocean Leader 28,097 1984 Hitachi HI 16.50 KS syndicated by
Sep-07 Gold Carrier 27,601 1985 Mitsui Tamano 16.50 Korean
Sep-07 Gebe Oldendorff 23,398 1998 Tsuneishi Balamban 32.00 TBS
Oct-07 Peace Glory 166,058 1984 Astano El Ferrol 57.00 Ravenscroft Shipping
Oct-07 Marine Hunter 164,891 1984 Boelwerf Vlaan 45.00 WEM Lines
Oct-07 Tiger Lily 149,190 1995 Kaohsiung 90.00 Dryships
Oct-07 Loch Maree 75,798 2004 Sanoyas 85.00 Pacific Carriers
Oct-07 Countess 1 70,280 1986 Sanoyas Corp 40.00 Samsun Logix
Oct-07 Golden Bridge 69,050 1995 Imabari Marugame 68.00 Rizhao Steel
Oct-07 Aegean Hawk 50,326 2000 Mitsui Tamano 63.40 Dryships
Oct-07 Nord Viking 45,208 1994 Kanasashi Toyohashi 55.00 Chinese
Oct-07 African Shark 32,772 1985 Minami-Nippon Usuki 23.22 Thai Pacific
Oct-07 Hanjin Tampa 27,209 1995 Hanjin 40.00 Ocean Longevity
Oct-07 DS Splendour 19,167 1999 Keppel 32.00 Greek
Nov-07 Gran Trader 172,529 2001 Nippon Kokan 153.00 Dryships
Nov-07 Sumihou 171,071 1996 Ishikawajima Kure 106.00 Rizhao Steel
Nov-07 Netadola 149,475 1993 Keelung 97.00 Far Eastern buyers
Nov-07 Captain Vangelis 145,856 1992 Fincantieri 87.50 Dong-A-Tankers
Nov-07 Nicole 77,000 2007 Namura 103.50 Daebo
Nov-07 Anna 72,516 1995 Daewoo HI 72.00 Alexandria
Nov-07 President G 69,344 1988 Hashihama Zosen Tad 50.00 First Shipping
Nov-07 Soyang 66,822 1984 Sumitomo Oppama 36.00 Boo Kwang
Nov-07 Lake Maine 53,531 2001 Imabari Marugame 71.50 Louis Dreyfus

108 HSBC Shipping Services Limited


Reported Vessel Dwt Built Yard Price $m Buyer
Nov-07 Ioannis Theo 45,320 1995 Oshima 61.00 Koreans
Nov-07 Silver Star 42,838 1984 Mitsubishi Nagasaki 31.00 Tradeline
Nov-07 Ypermachos 28,166 1984 Hitachi HI 26.00 TBS
Nov-07 African Cobra 26,648 1986 Kurushima Onishi 26.60 Pelias Maritime
Nov-07 Sifnos Bay 26,591 1985 Hakodate 24.50 Greek
Nov-07 Changi Hope 18,320 2000 Shikoku 29.00 Greek
Dec-07 Anangel Enosis 75,464 1995 Hyundai HI 75.00 Undisclosed
Dec-07 Angele N 69,315 1990 Imabari Marugame 60.00 Undisclosed
Dec-07 Lowlands Saguenay 66,995 1985 Nippon Kokan Tsurumi 38.00 Vietnamese
Dec-07 Minoan Flame 65,960 1982 Namura 35.10 Falcon
Dec-07 Shikra 41,096 1984 Oshima 30.00 Undisclosed
Dec-07 Sea Diamond 28,467 1992 Imabari 38.40 Altanska Plovidba
Jan-08 Nord Wave 53,489 2005 Iwagi Zosen 71.00 Vietnamese
Jan-08 Pinar K 52,455 2002 Tsuneishi Cebu 75.00 Nemtas
Jan-08 Tango Glory 48,193 2001 TaiheIyo Kisen 70.00 Undisclosed
Jan-08 Fortune Pearl 45,585 1996 Hashihama Zosen 58.00 Vietnamese
Jan-08 2x Blystad newbld 32,800 2009 Jinse 50.00 Safety Mgmnt
Feb-08 Athinoula 42,842 1985 Mitsubishi Nagasaki 30.30 TBS
Feb-08 Tzini 42,004 1991 Oshima 44.00 Romeo
Feb-08 Amanda C 41,373 1984 Nipponkai 28.00 Samsun Logix
Feb-08 Victory 34,676 2002 Xingang 80.00 German KG
Feb-08 Milena Star 22,056 1995 Saiki Jukogyo 35.50 Korean
Mar-08 Arethousa 171,779 1999 Hyundai HI 133.00 Rizhao Steel
Mar-08 Nord Luna 73,288 2000 Sumitomo HI 72.50 Undisclosed
Mar-08 Lanzarote 73,008 1996 Hudong 65.00 Undisclosed
Mar-08 Snow Falcon 50,246 2003 Mitsui 67.40 Undisclosed
Mar-08 Tango Glory 48,193 2001 Oshima 65.00 Transmar
Mar-08 Ansac Orient 28,399 1995 Imabari 39.35 Korean

Global Shipping Markets Review 2008 109


Appendix 3:
Representative Tanker Fixtures
Reported Vessel Hull Dwt Built Period Rate, $pd Charterer Comment
(months)
Jan-07 Universal Queen DH 309,375 2005 35-37 48,000 Mercuria
Jan-07 Eagle Vermont DH 306,400 2002 35-37 45,000 STX PanOcean
Jan-07 Hellespont Trooper DH 147,916 1996 11-13 42,500 Teekay
Jan-07 Ocean Amber SH 147,500 1989 23-25 24,000 BPCL
Jan-07 Glenross DH 90,679 1993 35-37 26,000 AET part of en bloc
sale
Jan-07 Loch Ness DH 90,607 1994 35-37 26,000 AET part of en bloc
sale
Jan-07 Ratna Shalini DH 89,960 1987 23-25 17,800 BPCL
Jan-07 Freja Dania DH 53,000 2007 59-61 20,750 STX PanOcean
Jan-07 Torm Cecilie DH 46,946 2001 12-18 23,000 Trafigura
Jan-07 Stavanger Eagle DH 45,898 2004 23-25 21,000 Navion
Jan-07 Sanmar Serenade DH 45,696 1992 23-25 22,500 Trafigura IMO 2/3
stainless
Jan-07 Jag Pradip DH 45,683 1996 23-25 24,000 ST Shipping
Jan-07 Jag Pratap DH 45,683 1995 11-13 24,000 ST Shipping
Jan-07 Torm Gunhild DH 45,457 1999 23-25 22,500 Trafigura
Jan-07 Cape Beira DH 40,000 2005 17-19 22,500 WECO
Feb-07 Eagle Vienna DH 318,000 2004 35-37 45,000 TMT
Feb-07 Desh Vaibhav DH 316,000 2005 11-13 50,000 Koch
Feb-07 Eagle Valencia DH 306,999 2005 35-37 45,000 TMT
Feb-07 Tromso Trust DH 154,970 1991 11-13 36,000 Mercuria
Feb-07 Naviga DH 150,841 1998 11-13 39,500 Great Eastern
Feb-07 Stena Atlantica DH 113,500 2006 23-25 35,000 Eiger Ice class 1A
Feb-07 Arafura Sea DH 105,856 2000 11-13 33,000 Phoenix
Feb-07 Young Lady DH 105,250 2000 11-13 32,000 Shell
Feb-07 FR8 Spirit DH 51,000 2007 11-13 25,000 Cargill
Feb-07 Nord Observer DH 47,000 2007 23-25 22,500 Trafigura
Feb-07 STX Ace 7 DH 45,800 2007 35-37 21,000 ExxonMobil
Feb-07 Futura DH 40,085 2006 11-13 22,750 Motia
Feb-07 Port Louis DH 38,000 2002 16-18 21,500 Ravennavi
Feb-07 Port Russel DH 38,000 2002 16-18 21,500 Ravennavi
Feb-07 Kerel DH 37,297 2002 35-37 21,500 Total
Feb-07 Kuldiga DH 37,000 2003 11-13 24,750 PDVSA
Feb-07 FR8 Pride DH 23,400 2006 17-19 28,500 Scorpio
Mar-07 Maersk Navarin DH 300,000 2007 59-61 46,000 Sinochem
Mar-07 Mayfair +2 DH 298,400 1995 35-37 45,000 Great Elephant
Mar-07 Formosapetro Empire DH 298,300 2004 35-37 45,000 Samsun
Mar-07 Genmar Orion DH 159,992 2002 35-38 38,000 Litasco

110 HSBC Shipping Services Limited


Reported Vessel Hull Dwt Built Period Rate, $pd Charterer Comment
(months)
Mar-07 Cerigo SH 95,987 1989 11-13 19,500 Mercator
Mar-07 Targale DH 51,800 2007 11-13 25,000 Mercuria
Mar-07 Jutul DH 37,000 2004 23-25 22,000 Palmyra
Mar-07 Peterpaul DH 35,994 1998 11-13 19,000 Trafigura IMO 2/3
Apr-07 SKS Saluda DH 159,000 2003 11-13 42,000 Repsol
Apr-07 Mare Tirrenum DH 110,000 2004 17-19 31,800 Teekay
Apr-07 Ocean Lady DH 105,250 2002 23-25 27,500 ExxonMobil
Apr-07 Torm Emilie DH 74,999 2004 23-25 28,000 Vitol
Apr-07 Overseas Sextans DH 51,000 2007 35-37 22,500 Vitol
Apr-07 Trogir DH 40,727 1995 11-13 22,500 ST Shipping
Apr-07 Fresia DH 37,230 2003 23-25 22,000 Palmyra IMO 2/3
Apr-07 Dukhan DH 37,000 2003 35-37 21,500 Heidmar
May-07 Maersk Nautilus DH 300,000 2006 59-61 46,000 Sinochem
May-07 La Paz DH 299,700 1995 35-37 45,000 SK Shipping
May-07 Flawless DH 154,970 1991 11-13 44,500 PDVSA Opt 11-13
May-07 Nevskiy Prospect DH 114,597 2003 11-13 35,000 Stena Bulk Ice class 1A
May-07 Rich Queen DH 105,000 2007 11-13 31,750 Stena Bulk
May-07 Omega Queen DH 72,000 2004 11-13 30,500 PDVSA Epoxy
May-07 FR8 Endeavour DH 50,529 2006 35-37 22,000 Stena Bulk
May-07 Skylark DH 34,620 2004 11-13 25,250 PDVSA
Jun-07 Shinyo Navigator DH 300,549 1996 11-13 49,500 Koch Opt 11-13 at
$51,000
Jun-07 Safaniyah DH 300,361 1997 47-49 48,750 Hanjin
Jun-07 2x Genmar newbuild DH 155,000 2008 35-37 38,500 Litasco
Jun-07 Desh Shakti DH 146,840 2004 12-16 43,750 ST Shipping
Jun-07 Krasnodar DH 114,800 2003 11-13 33,000 Palmyra
Jun-07 Mare Italicum DH 110,000 2007 23-25 32,500 Teekay
Jun-07 Ambelos DH 105,400 2006 35-37 27,900 ChevronTexaco
Jun-07 Ambrosia DH 105,363 2006 35-37 29,750 Trafigura
Jun-07 Senatore DH 72,514 2004 35-37 26,000 BP Shipping
Jun-07 Ugale DH 51,800 2007 11-13 26,000 Navig8
Jun-07 Northern Dawn DH 47,950 2003 11-13 25,500 AP Moller
Jun-07 Navig8 Stealth DH 47,465 2002 23-25 24,250 Teekay
Jun-07 Evros DH 45,300 2005 47-49 21,700 Petrobras
Jun-07 Santa Ana DH 39,768 2002 12-14 21,450 Highlander
Jun-07 Nordic Ruth DH 35,820 2000 59-61 20,250 ST Shipping IMO 2/3
Jul-07 Gulf Sheba DH 299,000 2007 35-37 52,000 TMT
Jul-07 Sparto DH 114,550 2004 11-13 34,000 Stena Bulk
Jul-07 Altius DH 73,400 2004 11-13 29,500 Stena Bulk
Jul-07 Nord Observer DH 47,371 2007 11-13 26,150 Petrobras
Jul-07 Okhotsk Sea DH 47,363 1999 59-61 21,750 ChevronTexaco
Jul-07 Ivory Point DH 47,300 2004 35-37 24,750 AET
Jul-07 Lofoten DH 97,078 1991 11-13 23,000 PTT
Jul-07 Seaexpress DH 45,800 2007 23-25 24,450 Petrobras
Jul-07 Chang Hang Tan Suo DH 45,719 2006 59-61 22,200 Westport
Jul-07 Bosporos DH 37,000 2007 35-37 20,000 Scorpio
Jul-07 Sable DH 40,000 2008 35-37 21,750 BP

Global
Global Shipping
Shipping Markets
Markets Review
Review 2008
2008 111
Reported Vessel Hull Dwt Built Period Rate, $pd Charterer Comment
(months)
Aug-07 SCF Caucasus DH 159,173 2002 35-37 38,500 BP
Aug-07 Intisar DH 102,850 2002 11-13 34,000 Teekay
Aug-07 Zaliv Amerika DH 102,357 2008 35-37 29,500 Tesoro
Aug-07 General Zamora DH 68,198 1993 11-13 30,750 PDVSA
Aug-07 Ioannis P DH 46,349 2003 23-25 24,000 Petrobras
Aug-07 Silvia DH 35,841 2000 11-13 22,500 Navig8
Sep-07 Millennium DH 301,171 1998 59-61 45,000 STX PanOcean
Sep-07 Sks Skeena DB 159,000 2006 18-24 39,000 Shell
Sep-07 Nassau Spirit DH 107,181 1998 35-37 29,000 ConocoPhilips
Sep-07 NS Commander DH 105,000 2006 23-25 29,000 Trafigura
Sep-07 Eagle Hope DH 73,800 2008 35-37 28,000 Norden
Sep-07 Gulf Progress DH 64,959 2000 11-13 27,500 Vitol
Sep-07 Silver Lining DH 45,800 2003 35-37 22,700 Petrobras
Oct-07 Crudesun DH 306,000 2007 35-37 51,500 TMT
Oct-07 Crudesky DH 306,000 2007 35-37 51,500 TMT
Oct-07 Althea DH 84,992 1999 11-13 32,000 Teekay
Oct-07 Fedor DH 70,000 2003 11-13 27,500 Teekay
Oct-07 St. Michaelis DH 51,000 2005 11-13 23,300 PTT IMO 2
Oct-07 St. Pauli DH 47,149 2003 23-25 22,500 ST Shipping
Oct-07 St. Georg DH 47,141 2002 23-25 22,500 ST Shipping
Nov-07 Utah DH 299,498 2001 35-37 45,000 CSSSA
Nov-07 Matterhorn Spirit DH 114,980 2005 23-25 32,000 Eiger
Nov-07 Mare Adriacum DH 110,500 2004 11-13 31,000 Shell
Nov-07 High Venture DH 51,087 2006 17-19 24,000 Cargill
Nov-07 Chemtrans Petri DH 47,228 2000 11-13 22,500 Trafigura
Nov-07 Pro Giant DH 46,732 2004 23-25 23,000 FR8
Nov-07 Torm Ragnhild DH 46,186 2005 35-37 22,500 Vela
Dec-07 Neptune DH 319,360 2002 35-37 52,500 TMT
Dec-07 Smiti DH 281,000 2005 12-15 52,500 BP
Dec-07 Nataly DH 142,498 1993 11-13 36,000 Russian
Dec-07 Pink Sands DH 93,891 1993 35-37 27,450 ExxonMobil
Dec-07 Piltene DH 51,800 2007 11-13 24,500 Vitol
Jan-08 La Paz DH 299,700 1995 11-13 65,000 TMT
Jan-08 Venture Spirit DH 298,287 2003 47-49 47,500 Wah Kwong
Jan-08 Ocean Emerald DH 152,680 1991 11-13 31,000 TNK
Jan-08 Maria M DH 40,000 2006 11-13 22,750 Not reported
Feb-08 Spyros DH 319,000 2007 11-13 70,000 TMT
Feb-08 Crude Progress DH 300,000 2002 11-13 70,000 Not reported
Mar-08 Kaspar Schulte DH 72,650 2004 Nov-13 29,750 Vela

112 HSBC Shipping Services Limited


Appendix 4:
Representative Tanker Sales
Reported Vessel Hull Dwt Built Yard Price, Buyer Comment
$m
Jan-07 Windsor DH 162,000 2007 DSME 95.50 Knutsen Dely May-07
Jan-07 Knock Stocks SH 138,105 1993 Harland & Wolff 32.75 Perenco Dely May-07, for
conversion
Jan-07 Olympia DH 107,181 1999 Koyo Mihara 31.10 T.E.N. Purchase option from
Oct-06
Jan-07 Archon DS 105,896 1985 Hyundai HI 16.80 PetroProd En bloc, price each, for
conversion to FPSO
Jan-07 Archimidis DS 105,896 1985 Hyundai HI 16.80
Jan-07 Gonen DH 47,102 2000 Onomichi 47.50 Vosco
Jan-07 Seapurha DS 39,672 1987 Hyundai HI 16.00 Warm Seas For conversion
Jan-07 Active SH 22,291 1983 Verolme Heusden 6.70 MSI Ship Mgmnt Shuttle tanker
Feb-07 Nuri SH 285,933 1992 Daewoo HI 39.00 Transmed SS/DD due jul-07
Feb-07 Nordatlantic DH 105,344 2001 Sumitomo HI 59.50 Liwa Mobilien. Incl. TC to 2Q-2012at
$23,500
Feb-07 Omega Theodore DH 73,672 2006 STX 64.50 Omega En bloc, price each. Ice
Navigation class 1A. Incl. 2y TC to
Feb-07 Omega Emmanuel DH 73,672 2006 STX 64.50
ST Shipping at $25,500
pd with p/s
Feb-07 Chang Han Feng Jin DH 46,346 2007 Bohai 48.25 Formosa Plastics
Mar-07 Suzuka SH 269,581 1992 Kawasaki HI 39.00 TMT
Mar-07 Eliomar DH 149,999 2002 Nippon Kokan 85.50 Dr Peters Incl. 5y TC to Seearland
at $35,000
Mar-07 Errorless DH 147,048 1993 Harland & Wolff 52.50 Ever Energy
Mar-07 Ocean Pride DS 62,482 1990 Hudong 18.00 Modec For storage
Mar-07 Ganmur DH 47,034 2001 Onomichi 47.50 Bien Dong
Shipping
Apr-07 Nordasia DH 105,994 1998 Hyundai HI 59.00 Neunte
Schiffahrts.
Apr-07 Celebrity DH 105,200 2004 Sumitomo HI 73.00 GNMT Libya
Apr-07 Serenity DH 105,200 2004 Sumitomo HI 73.00 GNMT Libya
Apr-07 South View SH 64,035 1983 Hitachi Nagasu 6.50 Pacific Blue For conversion
Shipping
Apr-07 Alam Cantik DH 35,000 2006 Dalian 85.00 KGAL En bloc, price both, incl.
5y TC to Handytankers.
Apr-07 Alam Cepat DH 34,671 2007 Dalian
May-07 Savoie DH 306,430 1993 Nippon Kokan Tsu 82.20 CS&P Skibe
May-07 Eagle DH 301,690 1993 Sumitomo Oppama 75.00 Kolsten
Navigation
May-07 Eastern Fortune SH 277,020 1989 Hyundai HI 40.00 Neu Seeschiff. For conversion
May-07 Georgios S DH 159,981 2001 DSME 178.00 Capital Ship En bloc, price both
Mgmnt
May-07 Yannis P DH 159,924 2002 DSME
May-07 Tromso Trust DH 154,970 1991 Hyundai HI 48.00 BLT En bloc, price each,
incl. TC to Feb-08 at
May-07 Tromso Reliance DH 154,970 1991 Hyundai HI 48.00
$33,500
May-07 Star Ohio DH 149,562 1992 Samsung HI 50.00 Marine
Management

Global Shipping Markets Review 2008 113


Reported Vessel Hull Dwt Built Yard Price, Buyer Comment
$m
May-07 Arteaga SH 147,067 1990 Esp. Puerto Real 54.00 Arpeni En bloc, price both, for
conversion to bulker
May-07 Butron SH 147,067 1991 Esp. Puerto Real
May-07 Juniper DH 47,465 2002 Uljanik 100.00 Stealth Maritime En bloc, price both,
IMO 2/3, epoxy
May-07 Jasmine DH 47,355 2002 Uljanik
May-07 British Endeavour DH 37,224 2002 Hyundai Mipo 85.00 Ocean Tankers En bloc, price both,
IMO 2/3
May-07 British Endurance DH 32,967 2002 Hyundai Mipo
Jun-07 Venus Glory DH 299,089 2000 Daewoo HI 237.00 Blystad En bloc, price both
Jun-07 Mars Glory DH 299,089 2000 Daewoo HI
Jun-07 Discovery DH 164,533 2003 Hyundai HI 96.00 Palmali
Jun-07 Unicorn DH 152,250 2002 Hyundai HI 94.00 Palmali
Jun-07 Front Horizon SH 149,500 1988 Daewoo HI 28.00 Thistle Marine
Jun-07 Stemnitsa DH 147,093 2000 Samsung HI 88.50 Great Eastern
Jun-07 Maersk Pristine DH 110,000 2004 Dalian New 71.00 Cardiff Marine
Jun-07 Athens 2004 DH 107,181 1998 Koyo Mihara 184.00 Atlas Maritime En bloc, price all
Jun-07 Maria Tsakos DH 107,181 1998 Koyo Mihara
Jun-07 Olympia DH 107,181 1999 Koyo Mihara
Jun-07 Maersk Rye DH 35,000 2004 Dalian 86.00 Libyan Sea En bloc, price both
Carrier
Jun-07 Maersk Ramsey DH 35,000 2004 Dalian
Jul-07 Neptune DH 319,360 2002 Hyundai Samho 136.50 Samho Dely Mar-08
Jul-07 Sunrise SH 264,165 1993 Mitsubishi 48.00 KDB Capital Corp. For conversion
Nagasaki
Jul-07 Minerva Nounou DH 147,450 2000 Samsung HI 88.50 Great Eastern
Jul-07 LMZ Nafsika DH 69,431 2006 Daewoo-Mangalia 260.00 Eletson En bloc, price all
Jul-07 LMZ Artemis DH 69,250 2004 Daewoo-Mangalia
Jul-07 LMZ Nefeli DH 69,180 2005 Daewoo-Mangalia
Jul-07 LMZ Afroditi DH 69,180 2005 Daewoo-Mangalia
Jul-07 Glenross DH 90,607 1993 Gdynia 42.00 Groton Pacific En bloc, price each,
incl. 3y TC to AET at
Jul-07 Lochness DH 90,607 1993 Gdynia
$26,000
Jul-07 Valle Azurra DH 50,100 2007 SPP 58.00 Navi. Montanari
Jul-07 Morning DH 50,530 2006 SPP 53.75 Vinalines IMO 2/3
Aug-07 Han-Ei SH 259,999 1994 Ishikawajima Kure 49.00 Tanker Pacific For conversion
Sep-07 Titan Virgo DH 299,999 1993 Daewoo HI 91.00 Emarat Maritime
Sep-07 Ottoman Dignity DH 152,923 2000 Hyundai HI 90.30 Double Hull Incl. 10y BB to OSG at
Tankers $26,600
Sep-07 Lucky Sailor SH 146,387 1989 Kawasaki HI 30.00 Chinese
Sep-07 Cape Taft DH 73,000 2008 New Century 125.00 OSG En bloc, price both
Sep-07 Cape Talara DH 73,000 2009 New Century
Sep-07 Emerald Hill DS 70,887 1991 Tsuneishi 52.80 Chinese En bloc, price both
Sep-07 Emerald Bay DS 69,999 1990 Hashihama Zosen
Sep-07 Nord Sound DH 45,975 2003 Shin Kurushima 51.00 Koenig En bloc, price each
Sep-07 Nord Strait DH 45,800 2004 Shin Kurushima 51.00
Aug-07 Merlion Park DH 41,354 1993 Minami-Nippon 33.00 Greek IMO 2/3
Sep-07 Seadevil DH 32,250 1996 Lindenau 37.00 Thai Oil
Oct-07 Arietis SH 91,717 1989 Sumitomo Oppama 30.00 TMT For conversion to bulker
Oct-07 Lidong DH 50,530 2007 SPP 60.50 Vinashin
Oct-07 Stena Conqueror DH 47,000 2003 Uljanik 150.00 Gest. Armatoriali En bloc, price all
Oct-07 Stena Italica DH 47,000 2004 Uljanik
Oct-07 Stena Conquest DH 47,000 2003 Uljanik
Oct-07 Formosa Fourteen DH 45,400 2005 Shin Kurushima 56.00 Blystad IMO 2/3

114 HSBC Shipping Services Limited


Reported Vessel Hull Dwt Built Yard Price, Buyer Comment
$m
Oct-07 British Engineer DH 37,343 2003 Hyundai Mipo 46.25 Interorient En bloc, price each,
IMO 2/3
Oct-07 British Experience DH 37,343 2003 Hyundai Mipo 46.25
Nov-07 Younara Glory DH 300,000 2004 DSME 132.00 Dr Peters Incl. 11y TCB at
$53,400 + p/s + $71m
p/o
Nov-07 First Olsen NB x2 DH 159,000 2010 Bohai 180.00 Nordic American Price both. Dely Dec-09
& Apr-10
Nov-07 Sarla DS 105,896 1986 Hyundai HI 16.30 Undisclosed For conversion to bulker
Nov-07 Verona I DH 46,980 2006 Hyundai Mipo 113.00 FSL En bloc, price both
Nov-07 Nika I DH 46,980 2006 Hyundai Mipo
Nov-07 Alam Cergas DH 34,671 2007 Dalian 45.00 Middle Eastern
Dec-07 Else Maersk DH 308,491 2000 Hyundai HI 122.00 Eastern Med
Dec-07 Chelsea DH 298,432 1995 Daewoo HI 101.00 Blystad
Dec-07 Shinyo Splendor DH 306,474 1993 Nippon Kokan Tsu 778.00 EIAC DH ships incl. avg. 9.24
yrs TC at $37,940. SH
Dec-07 Shinyo Navigator DH 300,549 1996 Hyundai HI
ships incl. avg.2.77 yrs
Dec-07 C. Dream DH 298,570 2000 Hitachi HI TC at $33,422
Dec-07 Shinyo Ocean DH 281,395 2001 IHI
Dec-07 Shinyo Kannika DH 281,395 2001 Ishikawajima Kure
Dec-07 Shinyo Sawako SH 275,616 1995 Hitachi Nagasu
Dec-07 Shinyo Mariner SH 271,208 1991 Nippon Kokan
Dec-07 Shinyo Alliance SH 248,034 1991 Mitsubishi
Nagasaki
Dec-07 Shinyo Jubilee SH 240,401 1988 Ishikawajima Kure
Dec-07 Yangtze Star SH 265,995 1994 Mitsubishi 58.10 Platon Shipping
Nagasaki
Dec-07 Noiseless DH 143,750 1992 Samsung HI 48.00 Vinashin
Dec-07 Neverland Soul DH 115,000 2004 Samsung HI 72.00 Thenamaris En bloc, price each
Dec-07 Hulls 1658 &1659 DH 114,800 2008 Samsung HI 76.00
Dec-07 Amalthea DH 107,116 2006 DSME 81.50 Minerva
Dec-07 Young Lady DH 105,528 2000 Sumitomo HI 62.00 Eastern Med
Dec-07 Polar DH 72,825 2005 Hudong 62.00 Paradise
Navigation
Dec-07 Overseas Aquamar DH 47,236 1998 Onomichi 43.00 Polyar SS due Mar-08
Dec-07 Kerlaz DH 37,000 2004 Hyundai Mipo 42.00 Difko IMO 2/3. Incl. 3y BBB
at $11,000
Jan-08 Diamond Hope DH 264,340 1995 Mitsubishi 52.00 Chinese
Nagasaki
Jan-08 Ishwari DH 145,200 1991 Hyundai HI 51.50 Nexus Energy For conversion to FPSO
Jan-08 Minerva Libra DH 105,364 1999 Samsung HI 62.00 AET En bloc, price each
Jan-08 Minerva Emma DH 105,364 1999 Samsung HI 62.00
Jan-08 Jag Arpan DS 66,183 1986 Hyundai HI 15.00 Undisclosed En bloc, price each
Jan-08 Jag Anjali DS 64,000 1986 Hyundai HI 15.00
Feb-08 TBN newbuilding DH 310,000 2009 Hyundai HI 163.00 Minerva Dely Mar-09
Feb-08 Olinda DH 149,258 1996 Fincantieri Breda 65.00 Oceanfreight
Feb-08 2x Schoeller DH 114,000 2009 New Times 152.00 Stealth Maritime En bloc, price both. Incl.
newbuilds 5y BB at c.$20,500
Feb-08 Meribel DH 95,773 1990 MisubishI HI 38.00 Chandris
Feb-08 Minerva Alice DH 46,408 1999 Daedong 89.00 Ancora En bloc, price both.
Investments IMO 3
Feb-08 Minerva Zen DH 46,344 1999 Daedong
Feb-08 Jag Payal DH 37,400 2007 Hyundai Mipo 102.00 Motia En bloc, price both. Ice
class 1A
Feb-08 Jag Panna DH 37,400 2007 Hyundai Mipo
Mar-08 Sea Runner DH 47,070 1992 Halla Inchon 28.50 Greek Ice class C, epoxy

Global Shipping Markets Review 2008 115


Appendix 5:
Representative Containership
Fixtures
Reported Name Dwt Nominal Laden Blt Gear Rate Period Charterer Speed Consumptn
TEU TEU

Jan-07 Germany 60,200 4,158 3,124 1996 0 24,000 24 MSC 23.0 150.0
Jan-07 Maersk Tampa 53,310 3,466 2,723 1984 0 19,100 36 MSC 23.0 160.0
Jan-07 Najade 37,900 2,702 2,095 2007 0 19,300 24 K-Line 221.8 88.0
Jan-07 Pona 37,570 2,741 2,116 2007 0 18,750 12 CMA-CGM 22.0 80.0
Jan-07 Leda Trader 34,000 2,442 1,886 2000 3x40 19,250 24 MOL 21.8 75.0
Jan-07 Kyoto Tower 21,900 1,798 1,260 2007 0 14,500 12 WHL 19.7 60.4
Jan-07 August Schulte 34,622 2,566 1,853 2001 4x45 19,850 24 NYK 20.5 80.0
Jan-07 Paris 1,743 1,310 11,650 1990 3x40 11,650 24 PIL 18.8 48.0
Feb-07 HLL Baltic 65,734 4,306 3,046 1995 0 29,000 48 APL 24.2 160.0
Feb-07 Conti Cartagena 33,000 2,456 1,780 1997 3x40 20,000 24 MOL 21.0 69.0
Feb-07 Baltrum Trader 34,017 2,472 1,851 1999 3x45 19,000 24 CLAN 21.0 67.0
Feb-07 HLL Pacific 58,200 4,701 3,270 2002 0 27,500 60 APL 25.0 144.0
Feb-07 San Antonio 30,538 1,829 1,350 2002 2x40 19,400 24 HMM 19.4 61.0
Feb-07 Viking Eagle 23,579 1,740 1,295 2005 2x20 15,500 12 Wan Hai 20.5 58.0
Feb-07 Cape Mondego 37,800 2,742 2,116 2006 0 20,750 12 DAL 21.8 93.0
Feb-07 Cape Fulmar 20,250 1,440 1,050 2007 0 12,500 12 CMA-CGM 19.8 52.8
Feb-07 HS Scott 38,250 2,778 2,005 2007 0 20,750 12 CMA-CGM 23.0 110.6
Feb-07 Olivia 27,950 2,690 2,080 2007 0 19,300 24 K-Line 21.8 88.0
Feb-07 Nordspring 44,985 3,586 2,501 2007 0 24,500 36 CMA-CGM 23.4 121.0
Feb-07 Stadt Koeln 23,850 3,388 2,425 2007 0 28,350 36 Cosco 22.4 106.0
Feb-07 Northern Dedication 41,500 3,534 2,353 2007 0 25,000 60 PIL 23.5 122.0
Feb-07 Christina A 22,100 1,604 1,163 2007 3x45 15,000 12 K-Line 19.0 49.0
Feb-07 Arelia 39,200 2,732 2,150 2007 3x45 22,000 24 CLAN 22.2 99.0
Feb-07 Conti Salome 31,200 2,122 1,530 2007 3x45 18,500 24 CMA-CGM 21.8 65.0
Mar-07 Fabian Schulte 22,250 1,608 1,086 1997 3x45 14,200 24 CMA-CGM 21.0 60.5
Mar-07 Buxhansa 33,300 2,460 1,828 1998 3x40 20,500 24 CMA-CGM 21.0 69.0
Mar-07 Francisca Schulte 22,250 1,608 1,086 1998 3x45 15,000 12 CMA-CGM 21.0 60.5
Mar-07 Otto Schulte 25,685 1,702 1,330 1999 0 15,100 12 UASC 20.0 66.0
Mar-07 Jupiter 34,000 2,452 1,881 2001 0 21,500 36 Hamburg Sued 21.0 75.0
Mar-07 CSCL Yantai 33,900 2,452 1,886 2001 3x45 21,500 36 Hamburg Sued 21.8 75.0
Mar-07 Juturna 33,917 2,452 1,886 2001 3x45 21,000 38 Hamburg Sued 21.8 75.0
Mar-07 ER Bremerhaven 33,800 2,496 1,810 2002 3x45 18,500 12 MSL 22.1 88.0
Mar-07 ER Bremen 33,800 2,496 1,810 2003 3x45 21,000 24 CCNI 22.1 88.0
Mar-07 Flottbek 16,000 1,600 1,090 2005 0 16,600 12 Hapag Lloyd 20.0 49.5
Mar-07 Cape Flint 20,250 1,440 1,050 2006 0 13,150 12 MCC 19.7 5.7
Mar-07 Ava 20,600 1,578 1,065 2007 0 14,500 12 TSL 20.0 47.0
Mar-07 King Andrew 37,800 2,741 2,116 2007 0 21,700 24 CSAV 22.0 79.0
Mar-07 King Aaron 37,800 2,741 2,116 2007 0 21,700 24 CSAV 21.8 88.0

116 HSBC Shipping Services Limited


Reported Name Dwt Nominal Laden Blt Gear Rate Period Charterer Speed Consumptn
TEU TEU

Mar-07 HS Bach 44,985 3,586 2,501 2007 0 26,750 48 CMA-CGM 23.4 130.0
Mar-07 Nordsummer 44,985 3,586 2,501 2007 0 26,950 48 K-Line 23.4 121.0
Apr-07 Asian Trader 20,794 1,404 1,186 1991 0 13,500 12 Zim 19.0 41.0
Apr-07 Marcrotone 23,456 1,687 1,180 1994 0 14,600 12 STX PanOcean 19.0 48.5
Apr-07 Westerhever 22,340 1,572 1,100 1994 3x40 14,400 24 APL 19.5 53.0
Apr-07 Buxmoon 23,150 1,687 1,191 1995 0 14,600 12 STX PanOcean 19.0 48.0
Apr-07 Sofia Russ 22,984 1,728 1,115 1996 3x40 15,250 12 CCNI 19.5 51.5
Apr-07 Conti Bilbao 33,300 2,460 1,810 1997 3x40 20,500 36 APL 21.0 69.0
Apr-07 Helene J 26,260 1,900 1,330 1997 3x45 15,900 12 CMA-CGM 20.0 60.0
Apr-07 Westermoor 35,600 2,730 2,000 2001 3x45 23,500 24 IRISL 23.0 99.0
Apr-07 Janus 34,000 2,452 1,886 2001 3x45 21,000 38 Hamburg Sued 21.0 75.0
Apr-07 ER Wilhelmshaven 34,859 2,496 1,780 2002 3x45 22,000 24 Hapag Lloyd 22.1 88.0
Apr-07 HS Chopin 44,985 3,586 2,501 2007 0 27,250 48 Zim 23.4 130.0
Apr-07 GE Lessing 23,400 1,740 1,330 2007 2x40 16,150 12 CSAV 21.0 64.0
Apr-07 Hansa Papenberg 23,579 1,740 1,295 2007 2x40 15,250 24 CLAN 21.0 64.0
Apr-07 Leopold Schulte 23,579 1,740 1,330 2007 2x40 15,000 24 Hamburg Sued 21.0 64.0
May-07 Cape Race 35,071 2,259 1,920 1993 4x40 21,000 36 MSC 20.0 67.5
May-07 ER Hobart 33,523 2,004 1,552 1994 0 15,500 36 MSC 19.0 63.0
May-07 London Tower 23,884 1,525 1,250 1994 2x40 15,250 12 PIL 19.0 43.0
May-07 Elbe Trader 22,525 1,600 1,090 1994 3x40 15,450 12 TS Lines 21.0 59.0
May-07 Amasis 35,020 2,908 2,090 1995 0 22,500 36 CMA-CGM 22.0 90.0
May-07 Cap Colville 23,083 1,510 1,200 1997 0 14,250 12 PIL 19.0 44.0
May-07 Vancouver 27,100 2,113 1,514 1997 4x40 18,100 24 CMA-CGM 20.0 51.0
May-07 Contship Rome 30,781 2,171 1,748 1998 3x45 21,500 23 Hapag Lloyd 20.5 86.0
May-07 Weserwolf 39,300 2,732 2,267 1999 0 25,000 42 UASC 22.5 85.5
May-07 Santa Felicita 30,200 2,169 1,668 1999 2x45 20,750 12 CCNI 19.7 50.7
May-07 Hansa Kristiansand 20,630 1,550 1,029 2002 2x20 14,995 12 MOL 20.5 55.0
May-07 Hermann Wulff 39,300 2,732 2,267 2006 0 25,000 42 UASC 22.2 89.0
May-07 Buxharmony 37,900 2,702 2,095 2007 0 22,900 36 CLAN 21.8 88.0
May-07 Northern General + 53,480 4,294 2,820 2008 0 27,000 60 Hamburg Sued 24.0 134.0
4 newbuilds
May-07 Rio Cadiz 55,400 4,300 2,900 2008 0 28,950 60 CSAV 24.0 140.0
May-07 Rio Charleston 55,400 4,300 2,900 2008 0 28,950 60 CSAV 24.0 140.0
May-07 4x Schulte 85,000 7,000 4,912 2009 0 37,250 60 APL 25.0 220.0
newbuilds
Jun-07 Buxlagoon 23,456 1,687 1,180 1994 0 15,850 12 CMA-CGM 19.0 48.5
Jun-07 Marcampania 23,150 1,684 1,152 1994 3x40 15,600 24 NDAL 19.0 48.0
Jun-07 Zrin 35,100 2,275 1,908 1994 4x40 21,900 24 Hapag Lloyd 19.6 64.0
Jun-07 Mare Caspium 34,600 2,959 2,018 1995 0 25,000 48 CMA-CGM 22.0 85.0
Jun-07 Magnavia 30,300 2,078 1,705 1996 0 20,150 12 KMTC 21.5 68.0
Jun-07 Merkur Cloud 22,026 1,584 1,086 1996 3x40 15,500 24 Hanjin 21.0 60.5
Jun-07 Hanse India 43,368 3,424 2,411 1997 0 29,000 36 IRISL 22.5 100.0
Jun-07 Nordriver 22,420 1,684 1,100 1997 3x45 15,700 12 CMA-CGM 20.0 49.5
Jun-07 Champion 30,450 2,080 1,670 1998 3x40 20,000 12 MOL 21.0 72.0
Jun-07 ER Hamburg + ER 30,705 2,074 1,744 1998 3x40 22,250 36 Maersk 21.0 86.0
Santiago
Jun-07 CSAV Peru 33,568 2,474 1,950 1998 3x45 21,900 24 Hapag Lloyd 21.0 66.5
Jun-07 Wehr Flottbeck 23,040 1,730 1,120 1999 3x40 15,500 12 CCNI 20.0 54.5

Global Shipping Markets Review 2008 117


Reported Name Dwt Nominal Laden Blt Gear Rate Period Charterer Speed Consumptn
TEU TEU

Jun-07 Hansa Augustenburg 23,508 1,740 1,295 2003 2x40 16,000 12 NYK 20.5 58.0
Jun-07 Cosco Boston & 67,410 5,100 3,350 2007 0 38,000 24 CMA-CGM 24.3 164.5
Cosco New York
Jun-07 Posen 37,570 2,741 2,116 2007 0 26,950 24 OOCL 22.0 80.0
Jun-07 Northern Debonair + 42,318 3,524 2,353 2007 0 28,000 66 CSAV 23.5 122.0
Northern Defender
Jun-07 Hansa Cloppenburg 23,500 1,740 1,330 2007 2x40 15,500 24 NDAL 21.0 64.0
Jun-07 Santa Brunella + 38,200 2,824 2,030 2008 0 21,500 36 Hamburg Sued 24.0 95.0
Santa Bianca
Jun-07 4x Schulte 50,500 4,253 2,805 2009 0 27,000 60 UASC 24.5 133.0
newbuilds
Jul-07 Conti La Spezia 23,300 1,597 1,148 1990 0 15,850 12 Seacon 18.0 45.0
Jul-07 Libra Australia II 24,444 1,432 1,212 1994 0 14,950 12 OOCL 18.7 42.3
Jul-07 Santiago 32,380 2,000 1,600 1996 3x40 22,500 32 WSL 20.0 65.5
Jul-07 Northern Grandeur 61,100 4,787 3,355 1998 0 34,700 60 CSAV 24.5 164.0
Jul-07 Fei Yun He 25,723 1,702 1,305 2000 0 17,250 24 Wan Hai 20.0 101.0
Jul-07 Marchicora 20,501 1,300 1,000 2000 2x60 13,500 36 NDAL 16.7 30.0
Jul-07 Hansa Oldenburg 23,508 1,740 1,330 2002 3x40 18,650 12 Seacon 20.5 58.0
Jul-07 Hansa Brandenburg 23,579 1,740 1,330 2003 2x40 17,250 24 BTL 20.5 58.0
Jul-07 Wilhelm Busch 23,400 1,740 1,275 2007 2x40 17,000 12 Hapag Lloyd 21.0 55.0
Jul-07 Quadriga 42,250 3,414 2,410 2008 0 28,500 60 CSAV 23.2 105.0
Aug-07 Helene Rickmers 23,106 1,728 1,120 1998 3x40 17,850 24 CMA-CGM 20.0 54.5
Aug-07 Oder Trader 30,300 2,008 1,628 1998 3x45 22,750 30 Safmarine 20.8 73.0
Aug-07 Viona 22,200 1,875 1,285 2006 3x45 19,250 24 Safmarine 21.0 67.0
Sep-07 Northern Fortune 30,685 1,899 1,600 1991 0 21,000 24 Hanjin 19.2 65.0
Sep-07 Jolly 29,693 2,098 1,700 1992 0 22,500 12 Hanjin 18.0 47.0
Sep-07 Cap Colorado 24,066 1,510 1,200 1997 0 17,500 12 Seacon 19.0 44.0
Sep-07 Cape Negro 24,133 1,510 1,249 1998 0 18,000 12 Seacon 20.0 44.0
Sep-07 Euro Max 29,300 2,732 2,267 2004 0 27,900 48 CMA-CGM 22.5 80.0
Sep-07 Sima Sadaf 20,250 1,440 1,050 2007 0 16,150 12 STX PanOcean 19.6 45.0
Sep-07 Madison Strait 25,899 1,795 1,312 2007 2x40 15,000 60 MOL 20.5 60.0
Sep-07 Mario A 22,100 1,604 1,163 2007 3x45 18,000 12 Hapag Lloyd 19.0 49.0
Sep-07 Northern Dexterity + 53,350 3,534 2,353 2008 0 28,000 60 APL 23.5 122.0
N. Dependent
Oct-07 Independent Action 20,455 1,388 1,030 1992 0 15,250 12 IRISL 17.0 39.0
Oct-07 Lal Bahadur Shastri 18,966 1,869 1,534 1993 0 17,800 12 OOCL 17.5 43.0
Oct-07 San Fernando 20,050 1,512 1,188 1996 2x40 17,250 12 MSC 19.7 47.0
Oct-07 Dorothea Rickmers 23,027 1,728 1,120 1998 2x40 17,600 24 CMA-CGM 20.0 54.5
Oct-07 Violetta 22,200 1,856 1,285 2007 3x45 18,500 12 CMA-CGM 21.0 67.0
Oct-07 Haugsburg 23,579 1,740 1,330 2008 2x45 18,000 24 Wan Hai 21.0 64.5
Oct-07 2x Doehle newbuilds 52,300 4,200 2,875 2009 0 30,125 60 UASC 24.2 133.0
Oct-07 4x Offen newbuilds 50,500 4,253 2,805 2009 0 30,125 60 UASC 24.5 133.0
Nov-07 Hansa Africa 43,600 3,424 2,411 1997 0 31,400 36 CLAN 23.5 115.0
Nov-07 Wehr Altona 23,051 1,730 1,120 1997 3x45 16,800 21 CCNI 19.6 54.5
Nov-07 Wehr Koblenz 23,001 1,730 1,120 1998 3x45 16,800 21 CCNI 19.6 54.5
Nov-07 Wehr Rissen 23,190 1,730 1,120 1999 3x45 16,500 12 MOL 19.6 54.5
Nov-07 Mi Yun He 24,259 1,432 1,200 2000 0 17,400 17 Simatech 19.0 38.0
Nov-07 Hansa Liberty 33,899 2,478 1,898 2000 3x45 27,500 24 STX PanOcean 22.0 78.0

118 HSBC Shipping Services Limited


Reported Name Dwt Nominal Laden Blt Gear Rate Period Charterer Speed Consumptn
TEU TEU

Nov-07 Torge S 33,216 2,450 1,896 2003 3x40 27,000 28 Hapag Lloyd 22.5 79.8
Nov-07 Hansa Coburg 23,579 1,740 1,330 2007 2x40 18,000 24 NDAL 21.0 64.0
Dec-07 Wilhelm E 20,406 1,452 1,034 1995 0 14,500 15 Yang Ming 18.0 45.3
Dec-07 Corelli 15,475 1,445 1,119 1997 0 15,475 12 GSL 18.0 35.0
Dec-07 Sevilla 25,900 1,812 1,312 2008 2x40 17,800 17 Westwood 50.2 45.0
Jan-08 Zenit 21,500 1,617 1,203 1998 3x45 15,500 45 MOL 20.5 70.0
Jan-08 Marcalabria 23,150 1,684 1,152 1993 3x40 17,800 30 CCNI 19.0 45.8
Jan-08 Cape Magnus 37,800 2,742 2,115 2008 0 27,250 18 UASC 22.0 85.0
Jan-08 King Brian 24,200 1,706 1,250 2008 0 17,000 12 OOCL 19.5 50.0
Jan-08 Helene C 32,800 2,450 1,820 2006 3x40 27,100 24 K-Line 22.5 80.0
Jan-08 San Adriano 28,324 1,819 1,300 2008 3x45 19,500 18 UASC 21.8 82.6
Jan-08 Viking Eagle 23,579 1,740 1,295 2006 2x40 17,850 24 K-Line 20.5 58.0
Feb-08 Just Trader 20,250 2,462 1,851 1998 3x45 20,250 24 Maruba 21.0 67.0
Feb-08 Conti Lissabon 39,000 5,744 4,172 2000 0 33,500 96 Hanjin 26.0 210.0
Feb-08 El Zorro 13,769 1,118 700 2006 0 12,300 12 GSL 19.5 36.0
Feb-08 Sinotrans Tianjin 37,856 2,742 2,126 2005 0 28,300 18 RCL 22.5 80.5
Feb-08 Scotia 25,360 1,716 1,295 2000 3x45 19,500 12 Hapag Lloyd 21.0 64.0
Feb-08 Wehr Blankanese 23,021 1,726 1,210 1999 2x40 17,750 22 K-Line 19.6 54.0
Mar-08 Pontresina 32,900 2,700 2,010 2008 0 26,000 48 PIL 23.0 93.0
Mar-08 Samaria 25,414 2,000 1,714 2000 3x40 18,500 12 ZIM 21.0 64.0
Mar-08 Hansa Aalesund 20,461 1,550 1,029 2001 2x40 17,400 12 K-Line 20.0 50.0

Global Shipping Markets Review 2008 119


Appendix 6:
Representative Containership Sales
Reported Vessel Nominal Dwt Blt Yard Price Buyer Comment
TEU $m

Jan-07 OOCL Belgium 2,808 40,972 1998 Daewoo HI 480.0 Luxembourg En bloc, price all
buyer
Jan-07 OOCL Britain 5,344 67,958 1996 Mitsubishi Kobe
Jan-07 OOCL California 5,344 67,765 1995 Mitsubishi Nagasaki
Jan-07 OOCL America 5,344 67,741 1995 Mitsubishi Nagasaki
Jan-07 OOCL Japan 5,344 67,752 1996 Mitsubishi Nagasaki
Jan-07 OOCL Rotterdam 8,063 99,518 2004 Mitsubishi Nagasaki
Jan-07 OOCL Hong Kong 5,344 67,637 1995 Samsung HI
Jan-07 OOCL China 5,344 67,625 1996 Samsung HI
Feb-07 APL Holland 5,510 67,500 2001 Samsung HI 88.0 APL En bloc, price
each, p.opt.
Feb-07 APL Scotland 5,510 67,500 2001 Samsung HI
Feb-07 Maersk Rimini 1,048 15,174 1990 J J Sietas 10.9 Dania Marine
Feb-07 Providence 1,684 22,420 1995 Szczecin 21.2 Komrowski
Feb-07 Maersk Vancouver 1,678 22,308 2001 J J Sietas 123.0 IMTC En bloc, price all
Feb-07 Maersk Valletta 1,678 22,300 2002 J J Sietas
Feb-07 Maersk Vigo 1,678 22,200 2002 J J Sietas
Feb-07 Maersk Venice 1,678 22,308 2002 J J Sietas
Feb-07 CMA-CGM Lilac 2,824 39,295 2005 Hyundai Mipo 47.0 Papathomas En bloc, price
each
Feb-07 CMA-CGM Violet 2,824 39,200 2006 Hyundai Mipo
Feb-07 CMA-CGM Camellia 2,824 39,200 2006 Hyundai Mipo
Feb-07 CMA-CGM Dahlia 2,824 39,200 2006 Hyundai Mipo
Mar-07 Kestrel 1 1,939 25,684 1988 Gdansk Lenina 14.0 Cosmoship En bloc, price
each
Mar-07 White Swan 1,939 26,132 1989 Gdansk Lenina
Mar-07 Birte Ritscher 1,452 20,346 1995 Kvaerner Warnow 19.5 Euroseas
Mar-07 West Gate Bridge 2,878 40,928 1986 Kawasaki HI 17.2 Goldenport
Mar-07 CSAV Peru 2,478 33,914 1998 Volkswerft 40.0 Seacastle
Mar-07 Libra Brasil 1,742 30,078 1992 Thyssen 21.2 Virginia Key
Apr-07 Cala Pinar Del Rio 1,354 20,275 1994 Szczecin 27.0 Hansen & Lange
May-07 YM Victory 1,110 19,325 1997 China Shipbuilding 89.0 Arkas Deniz. En bloc, price all
May-07 YM Champion 1,119 19,332 1997 China Shipbuilding
May-07 YM Container 1,119 19,353 1997 China Shipbuilding
May-07 YM Union 1,119 19,338 1997 China Shipbuilding
May-07 Dal East London 2,420 33,745 1994 Gdansk Lenina 36.0 Goldenport
May-07 Mukaddes Kalkavan 1,145 12,123 1997 Sedef Tuzla 20.0 JR Ship Mgmt En bloc, price
each
May-07 Selma Kalkavan 1,145 12,310 1999 Sedef Tuzla 20.0
May-07 Bunga Pelangi Dua 4,469 61,428 1995 Hyundai HI 50.0 MSC
Jun-07 Cosco Charleston 5,100 67,600 2007 Hanjin Pusan 93.0 CMA-CGM En bloc, price
each
Jun-07 Cosco Norfolk 5,100 67,600 2007 Hanjin Pusan 93.0

120 HSBC Shipping Services Limited


Reported Vessel Nominal Dwt Blt Yard Price Buyer Comment
TEU $m

Jun-07 Beauty River 1,923 33,667 1990 Halla Inchon 18.0 Eurobulk En bloc, price
each. Dely Sep-
Jun-07 Honor River 1,923 33,668 1990 Halla Inchon 18.0
07
Jun-07 Montemar Europa 1,730 22,900 2003 Szczecinska Nowa 31.0 Ship Finance Intl
Jun-07 Nedlloyd Juliana 2,556 34,273 2003 Hyundai HI 44.0 Blue Star En bloc, price
Reederei each
Jun-07 Nedlloyd Adriana 2,556 34,567 2003 Hyundai HI 44.0
Jun-07 Nedlloyd Marita 2,556 32,000 2003 Hyundai HI 44.0
Jun-07 Nedlloyd Valentina 2,556 34,315 2004 Hyundai HI 45.0
Jul-07 Hyundai Sprinter 2,181 24,767 1997 Hyundai HI 150.0 Danaos En bloc, price all
Jul-07 Hyundai Stride 2,181 24,777 1997 Hyundai HI
Jul-07 Wan Hai 251 2,181 24,777 1997 Hyundai HI
Jul-07 Hyundai Future 2,181 24,799 1997 Hyundai HI
Aug-07 Steindeich 1,205 18,355 1996 Stocz. Gdynia 21.5 Marconsult Schiff.
Aug-07 City of Hamburg 2,228 30,400 1990 Hyundai HI 24.0 Marconsult Schiff.
Aug-07 MSC Mara 5,050 68,121 2006 Hanjin Pusan 90.0 Seacastle En bloc, price
each, incl. 4y TC
Aug-07 MSC Benedetta 5,050 67,600 2006 Hanjin Pusan 90.0
back
Aug-07 MSC Debra 5,050 67,600 2006 Hanjin Pusan 90.0
Aug-07 MSC Olga 5,050 67,600 2006 Hanjin Pusan 90.0
Aug-07 Sinar Lombok 1,057 23,724 1989 Naikai Setoda 10.0 Virginia Key
Sep-07 Cap Bonavista 2,442 33,917 1999 Thyssen 64.0 Allseas
Sep-07 Thorkil Maersk 1,106 21,238 1990 Tsuneishi 16.5 Eastwind En bloc, price
each
Sep-07 Torben Maersk 1,106 21,238 1990 Tsuneishi 16.5
Sep-07 Trein Maersk 1,106 21,229 1990 Tsuneishi 16.5
Sep-07 Tobias Maersk 1,106 21,229 1990 Tsuneishi 16.5
Nov-07 Mare Hibernum 1,016 12,571 1995 Szczecin 20.0 Danish KS Inc. TC to May-
10 at $15,000
Nov-07 Emirates Jumeirah 1,048 15,162 1990 J J Sietas 13.5 Phoenix KS
Nov-07 ARA J 1,122 16,833 1998 Peene-Werft 20.4 Scott Shipping
Dec-07 Maersk Rades 1,118 13,760 2005 Jingjiang Traffic 29.2 Asian owner
Dec-07 Fa Mei Shan 1,118 13,760 2005 Jingjiang Traffic 28.5 Hasco
Jan-08 APL Jebel Ali 2,470 33,817 2002 Aker MTW 57.0 All Ocean
Jan-08 Regina Maersk 6,000 84,900 1996 Odense 280.0 Costamare En bloc, price all,
incl. 10y-TCB at
Jan-08 Kirsten Maersk 6,418 90,456 1997 Odense
$35,000
Jan-08 Katrine Maersk 6,418 84,900 1997 Odense
Jan-08 Hyundai Highway 2,181 24,757 1998 Hyundai HI 90.0 Danaos En bloc, price all,
incl. 10y TCB
Jan-08 Hyundai Bridge 2,181 24,772 1998 Hyundai HI
Jan-08 Hyundai Progress 2,181 24,766 1998 Hyundai HI
Jan-08 Vento Di Meltemi 1,022 13,333 1985 Bremer Vulkan 21.2 Dutch
Jan-08 ACX Mimosa 1,551 24,497 1992 Kanasashi Toyo. 21.5 American
Jan-08 CMA-CGM Ipanema 1,730 23,051 2001 Szczecin 33.8 Varship Incl. TC to DAL
to Apr-08 at
$13,000
Feb-08 CMA-CGM Copernic 2,741 37,570 2007 Aker MTW 67.0 Unknown
Feb-08 Cala Palmira 1,132 14,717 1995 Volkswerft 19.5 Unknown Incl. 13m TC
Feb-08 King Anton 2,741 37,800 2008 Aker Ostsee 68.1 STX PanOcean En bloc, price