Shipping and Shipbuilding Markets

2 0 0 7 Shipping and Shipbuilding Markets in 2006

THE BRS ANNUAL REVIEW OF WORLD SHIPPING AND SHIPBUILDING DEVELOPMENTS IN 2006 AND PROSPECTS FOR THE COMING MONTHS…

1 Foreword

3 The shipbuilding market in 2006

23 The cruise market in 2006

29 The tanker market in 2006

45 The offshore and specialised ships markets in 2006

51 The chemical carrier market in 2006

57 The liquefied petroleum gas shipping market in 2006

67 The liquefied natural gas shipping market in 2006

73 The dry bulk market in 2006

81 The containership market in 2006

97 The ro-ro market in 2006

101 The marine insurance markets in 2006

107 French shipyards deliveries and orderbook in 2006

110 French orders to foreign shipyards in 2006 Crystal Ball

AFTER FOUR YEARS OF BUOYANT the world’s population, originating from SHIPPING MARKETS, GIVING STATIS- a group of countries known as B.R.I.C. TICS NEVER SEEN BEFORE, THERE (Brazil, Russia, India, China), in the global ARE A NUMBER OF DISQUIETING VOI- economy. CES BEING HEARD PREDICTING A However, recent forecasts published by SEVERE CORRECTION OF THE MARK- the World Bank over the next 25 years ETS OR EVEN A NEW CRISIS RECALL- lead us to believe that a collapse in the ING THE SAD DAYS OF THE 80’S. markets, following the historic increases, It is true that we are in a cyclical industry is neither a necessity nor a compulsory and that the current swelling of the passage. Certainly growth is seldom orderbooks, which equates to an average linear and we should prepare ourselves of 25 % of the existing fleet, and even for market corrections, linked to tempor- close to 50 % in some sectors, gives ary imbalances between supply and cause for concern even to the most demand, especially in the tanker and serene spirits. containership sectors. However, today’s freight rates can endure a correction Financial analysts are asking themselves without necessarily causing panic, since exactly the same questions about the the current opulence is not a written evolution of the stock markets after four rule, and there is plenty of space for years of increases. This seems to suggest some belt-tightening. that the shipping world and the financial The shipping markets can fall back to world are increasingly correlated, wher- levels of returns comparable to shore- eas up till now they were taking totally based industry norms without necessar- different paths. ily going into recession. Is it economically Fundamentally, this rise in the shipping healthy to be able to payback a ship in market is linked to growth in world trade, three years or even less, or to purchase which has been stimulated by the amaz- a five-year old ship at 30 % over its ing development of more than a third of construction cost?

Foreword - BRS 1 The World Bank predicts an average etc. can easily upset the most rational growth for developing countries of over plans and forecasts. In practice, who 6 % (twice as much as developed coun- dared predict that crude oil prices would tries) and a tripling of world trade over be at $50/bbl by the end of 2006, having the next 25 years. The middle classes, reached $70/bbl during the course of the avid consumers of goods and energy, year, with everyone seeming at that time should then number 1.2 billion individuals to agree that we would reach the magi- (15 % of the world population), compared cal $100/bbl mark? Who also could have to 400 million today, whilst they only predicted such a surge in newbuilding increased by a small percentage over the orders this year? We should remain cau- past 25 years. tious and ask ourselves if the informa- tion, which inundates our screens, is Facing such an evolution, we are inclined always sufficiently reliable to allow us to to believe in a “soft landing” scenario, make clear and definitive assumptions permitting the temporary surplus of ton- on what the future will be; the hard rea- nage to be absorbed. In the longer term lity always imposes certain modesty. the world fleet must be able to adapt to this totally unexpected global change, In the redistribution game played on the indeed bringing growth but also ecologi- global scene, it is comforting to note that cal headaches of an unprecedented com- the owners in our “old Europe” are plexity. wishing to keep control of shipping busi- ness by massively investing in the growth In a world which overloads us with infor- of their fleets. We are grateful that ship- mation, we sometimes forget that ele- owning does not seem ready yet to enti- ments over which we have little control, rely expatriate itself. ■ such as the weather, individual or group psychology, currency exchange, politics,

2 BRS - Shipping and Shipbuilding Markets in 2006 The shipbuilding market in 2006

SINCE 2003 SHIPBUILDING HAS HAD well as numerous options liable to be A SUCCESSION OF EXCEPTIONAL exercised in the year, and yet to abide by YEARS, AND 2006 BROKE FURTHER the preceding regulations. However, this NEW RECORDS: movement carried on beyond April 1st 2006. In large part this explains the 1. Demand literally took off, well beyond strength of demand for tankers and bulk the most optimistic forecasts, with more carriers with respectively more than 85 than 169 million dwt of new orders (2,950 million and 45 million dwt ordered, com- ships) compared to 117 million in 2003, 112 pared to 32 and 27 million dwt in 2005. million in 2004 and 94 million in 2005. Deliveries also progressed and broke the 3. Korea maintained its number one barrier of 75 million dwt (1,550 ships) ranking in the world, with an orderbook against 55 million in 2003, 62 million in rising rapidly to achieve 81.3 million gt 2004 and 72 million in 2005. World against 65.6 million gt the previous year. orderbook is increasing inexorably, going The Japanese portfolio also progressed in twelve months from 178 million gt to with close to 62.3 million tons, compared more than 235 million gt, representing to 54.2 million gt in 2005. But it was 345 million dwt. Shipyards are fully book- China that had the biggest growth with ed for three, four, or five years. an orderbook that shot up to nearly 48.7 million gt against 30.6 million gt the year 2. The year was marked by a new and before. Western and Eastern European important regulation which was enforced builders have maintained their volumes, as from April 1st 2006, the CSR rules, with the overall orderbook going from aiming to considerably reinforce the 22.1 million to 22.5 million gt. With capa- structures of tankers and bulk carriers, cities being totally tied up with the esta- with a non negligible increase in the blished shipyards, this has profited the weight of steel hulls and of the cost of other shipbuilding zones (Vietnam, India, construction as a result. Owners and etc.), who have seen their orderbooks builders concerted to conclude as many increase strongly from 7 million to 10 mil- contracts as possible before this date, as lion gt.

The shipbuilding market in 2006 - BRS 3 Stena Primorsk 65,200 dwt and 70,300 cbm, here leaving Stockholm is the third in the Stena P-MAX series of 10 units ordered by Concordia Maritime at Brodosplit in Croatia. As well as on the other Stena Max designs, the P-MAX has independant propulsion systems to achieve maximum redundancy for trading in sensitive waters.

4. This strong demand has pushed The prospects for 2007 and 2008 growth in 2006. Commercial trade newbuilding prices up, with a seem better, but a number of doubts has remained particularly active spread of 10-15 % between the persist as to the evolution of buil- and has grown by nearly 8.9 % lowest and highest levels of the ding costs, due to the extended time compared to 7.4 % in 2005. year. The record prices achieved in frame of their orderbooks. There is Whilst world growth during the 90’s, the middle of 2005 for the three strong pressure on steel prices, and even at the early start of the principal types of ships have been machinery and salary costs. The century, was only in the region of 2 surpassed in the bulk carrier and weakness of the dollar adds to the %, and was reduced to a small num- tanker sectors, and come close for difficulties. Some yards are facing ber of economic players, we have containerships. Massive cash flow supply problems with the supply of now had four years of growth hover- availability and the very good per- main components, which is jeopardi- ing around 5 %, pushed by the deve- formance of freight rates during the sing their planning but also the lopment in the “BRIC” countries year encouraged owners to order continuity of their operations. (Brazil, Russia, India, China). The new ships. Builders were able to get multiplication of economic partners, the best prices due to the healthy the lengthening of voyages and a appetite of the latter for prompt THE ECONOMY AND strong economic growth undoubt- deliveries, made possible by pro- COMMERCIAL TRADE edly are the main reasons for the ductivity increases and the creation The world economy has continued expansion of shipping transport and of new facilities. They were there- to move at full speed with 5.1 % the vigorous investments it calls for. fore able to get premiums on buil- ding prices, which progressively constituted new benchmarks for IMF Forecast (as % of GDP) the next contracts. World USA Japan Euro zone China 2005 4.9 3.2 2.6 1.3 10.2 5. The financial situation of many builders remains fragile even if there 2006 5.1 3.4 2.7 2.4 10.7 has been an improvement this year. 2007 4.9 2.9 2.1 2.0 10.0 IMF - September 2006 except China (NBS)

4 BRS - Shipping and Shipbuilding Markets in 2006 FREIGHT RATES EVOLUTION SINCE 2001

Index 1 000 = Jan. 98 6,000

Containership 1,700 teu 5,000 VLCC 250,000 t MEG / S. Korea FREIGHT RATES Baltic Dry Index (BDI) In the dry bulk market, freight rates 4,000 which were on a downward path in the last quarter of 2005, then sta- 3,000 bilised, turned around in the first half and progressed strongly the- reafter, without however passing 2,000 the peaks achieved in 2004. In 2006 average annual rates are lower compared to 2003, 2004, and 1,000 2005 but continue to ensure an excellent return to owners. 0 In the containership sector, rates 10/01 01/01 07/01 10/03 10/04 10/02 10/05 01/02 01/03 01/05 01/04 01/06 07/03 04/01 07/02 07/04 07/05 04/03 04/02 04/05 04/06 were maintained at levels achieved 04/04 at the end of 2005, up until the end NEW ORDERS FOR STANDARD SHIPS of summer 2006, before dropping, then declining gently in the last in 2004, 2005 & 2006 (dwt) 35,000,000 quarter 2006. Given this declining 108 trend, operators were hesitant to 2004 2005 agree to long-term charters, this in 30,000,000 turn limits the ability of owners to 2006 invest further. In 2006, average 25,000,000 432 annual rates were below those of 493 543 the three preceding years. 129 20,000,000 Tanker rates were characterised by 162 high volatility again this year, even 96 51 15,000,000 327 362 if the spread between the highs and 78 lows was somewhat narrower. In 40 79 2006 averages for the year were 10,000,000 227 practically the same as those of the 76 114 180 172 97 102 previous year, but below those of 152 44 2003 and 2004. 5,000,000 27 59 61 12 30

ORDERS 0 FOR STANDARD SHIPS VLCC Suezmax Aframax Panamax MR Products Capesize Panamax Handy Containership Tankers (above 300 teu) The world portfolio of standard ships on order has reached a new tion of building capacities, the high No-one doubts that the enforce- record in 2006 with 195 million gt. levels in construction costs, a drop This figure has doubled in three ment of the regulation for reinfor- in rates, and the important ratios of years and quadrupled in six. New cing the structure of tankers and renewal of fleets did not take place. st orders have broken another historic bulk carriers on 1 of April 2006 record, with 158 million dwt in 2006 Nobody anticipated such an acti- contributed enormously to speed- compared to 112 million dwt in vity, and it is easier to find reasons ing up investment decisions. This 2003, 101 million in 2004 and 84 for justifying this retrospectively. however did not put a cap on mat- million in 2005. For standard ships of over 3,000 gt this represents New orders during the year nearly 2,300 new orders in 2006, against 1,550 ships in 2005, 1,700 in (million dwt) 2002 2003 2004 2005 2006 2004 and 1,560 in 2003. Tankers > 3,000dwt 17.7 48.4 40.1 28.9 83.4 The lull anticipated for 2006 by Bulk carriers > 3,000dwt 19.3 25.5 34.3 28.2 45.4 many observers, due to the satura- Containerships > 300 teu 5.2 27.0 21.5 20.8 22.0

The shipbuilding market in 2006 - BRS 5 SHIPBUILDING COUNTRIES MARKET SHARES EVOLUTION FOR BULK CARRIERS

% Dwt 100%

80% The orderbook has progressed to Others achieve 93 million dwt at the end of China 2006, against 70.5 million dwt end 60% 2005. The fleet under construction Korea represents 24.9 % of the active Japan fleet, only barely above the maxi- 40% mum over the last ten years which was 22 %, attained end 2004.

20% Several factors explain the growth recorded this year: the changes in regulations, the very good level of

0% rates and their recovery since the middle of 2006. Dec 01 Dec 03 Dec 04 Dec 05 Dec 06 Dec 02 Dec 00 It seems also that the tonnage under construction (25 %) is insufficient to SHIPBUILDING COUNTRIES MARKET SHARES EVOLUTION FOR CONTAINERSHIPS meet demand. Given that deliveries will be extended over four or even % Dwt 100% five years in Japan, the growth of the fleet is about 4-5 % and inferior Others to world economic growth. These 80% past years, with the exception of Germany Japan where some shipyards have China been specialising in bulk carriers 60% generally reserved to local owners Japan and a few traditional clients, builders

Korea have given priority to containerships 40% and tankers. The insufficient renewal of the bulk carrier fleet may push rates further up and lead owners 20% and builders to agree on additional orders in this sector, particularly if at the same time demand for contain- 0% erships and tankers goes down.

Dec 01 Dec The average age of the bulk carrier Dec 03 Dec Dec 04 Dec Dec 05 Dec Dec 02 Dec Dec 06 Dec Dec 00 Dec fleet is about 11 years, with the exception of the Handysize which is ters, and orders continued to flow in accrued from the freight market or close to 18 years, and where nearly two-thirds of the fleet is over this after the first quarter of the year. transactions on the second–hand age and a third is over 25 years. A Many owners who had put off their market. decision to invest, due to the renewal in this sector is awaited. increase in construction costs, and Bulk carriers Containerships were awaiting a drop in prices that did not happen, then took a com- With nearly 45 million dwt ordered, With 22.0 million dwt ordered, and mitment to invest, notably in the against 28 million last year, demand despite the slow-down observed in tanker market where the single- for bulk carriers has risen strongly. the last quarter of 2006, demand hulls are due to be phased out by 2010. Containerships new orders by size since 2004 over 5,500 teu under 5,500 teu Total Finally these past years were rela- 2003 87 406 493 tively propitious and satisfactory for owners, who have reinvested 2004 99 444 543 the enormous liquidity they have 2005 114 318 432 Source: BRS

6 BRS - Shipping and Shipbuilding Markets in 2006 PERCENTAGE OF THE ACTIVE FLEET ON ORDER BY TYPE

% dwt of fleet on order 60%

50% for containerships is strong, at the Oil tankers same tonnage levels than those of Bulk carriers Containerships preceding years. Whilst owners are 40% once again showing some reluc- tance at the beginning of the year, in 30% the face of operators who are hesi- tant to commit to long-term charters and for late deliveries, they quickly 20% come back to the shipyards as soon as construction costs slow down. 10% Activity grew in the second and third quarters, pushing ship prices higher again. In the fourth quarter, a signi- 0% ficant drop in freight rates combined 1997 2001 1999 1995 1998 1996 2003 2002 2006 2005 2000 with the fact that operators ceased 2004 to discuss term business, concentra- ting on shorter periods from twelve to twenty-four months, put a brake has however been the case for the Tankers last twenty years, due to a progres- on owners’ enthusiasm. Majors With more than 83 million dwt orde- sive ever-expanding use of contai- nonetheless pursued their direct red in 2006, demand for tankers ners. The fleet of containerships has investments with the emphasis on has seen an unprecedented growth. continued to grow, offering opera- very big sizes. The orderbook passed from 92 mil- tors modern vessels among which lion dwt end 2005 to 156 million The world orderbook has increased the largest have expanded from dwt, and the proportion of the fleet again to 67.4 million, against 61.4 around 4,500 teu at the beginning under construction went to 41 % of million dwt end 2005, whilst the of the ’90s, to 14,000 teu in less the fleet in service from 26 % the fleet under construction marks, for than twenty years, allowing very previous year. the first time since 2002, a slight substantial economies of scale. In decline going from 56 % end 2005 addition, the diversity of sizes gives Several factors have contributed to to 53 % of the fleet in service. owners a multitude of transport this phenomenal increase. The This sector continues to be domina- solutions in every direction. coming into effect of new regulations ted by the race for ever-larger sizes, with the objective of reducing the SHIPBUILDING COUNTRIES MARKET SHARES EVOLUTION FOR TANKERS cost per slot. With the delivery of the first “11,000 teu” containership, % Dwt 100% AP Moller has finally disclosed the main characteristics of this series of ships, of capacity in practice closer to 14,000 teu, making them for the 80% moment the largest containerships Others in the world. Since then, MSC and China CMA CGM have ordered ships with a 60% nominal capacity of between 13,000 Japan and 14,000 teu at Korean shipyards. Korea 40% This is also the sector where the fleet under construction has the highest proportion compared to the 20% fleet in service, provoking each year new fears of over-capacity. For the coming three years, the annual rate 0% of growth of the fleet will be on ave- rage 14 %, overtaking the forecasted Dec. 2001 Dec. 2004 Dec. 2003 Dec. 2005 Dec. 2002 evolution of international trade. This Dec. 2006

The shipbuilding market in 2006 - BRS 7 was an excellent incitement. But of which about 25% of the fleet is Stainless-steel chemical carriers owners are also aware of the impen- over 20 years and another for tan- The number of stainless steel chemi- ding deadlines, at a time when the kers under 25,000 dwt, whose ave- cal carriers has jumped from 51 in orderbooks are already full up until rage age is 18 years and of which 2005 to 95 in 2006. The orderbook 2010, and when a strict application of about 45% of the fleet is over 20 is very strong with about 3.3 million IMO rules should take out of service years. Renewal of this last category dwt (167 ships), compared to 2.3 mil- more than 60 million dwt of single- is under way. lion dwt end 2005. The fleet under hull ships around the same date. In construction represents 32 % of the particular from now until 2010, 152 ORDERS FOR fleet in service against 17 % the pre- VLCCs, 44 Suezmax ships, 72 Afra- SPECIALISED TONNAGE vious year. Chemical carriers are dif- max ships, 45 Panamax ships should ficult ships to build, not only due to in theory be leaving the fleet. Demand for specialised tonnage has precautions necessary for working Owners therefore made a rush for remained so strong this year that the the stainless steel, but also due to any dock that was still offering 2009 capacities of traditional shipbuilders, the multiplicity of tanks and pipes, and 2010 delivery dates. At the same each with their own specialisation for requiring a delicate coordination. time, new VLCC docks or brand new The price of stainless steel is also gigantic yards were just opening, a particular ship-type, have not been very high and volatile, which adds to offering particularly attractive condi- enough to respond to all of the needs. the builders’ risks. tions. For example Jiangnan has fil- Owners try to convince other inexpe- led its new site at Changxing by quo- rienced yards, but there is a general The main builders are Japanese (106 ting $20 million less than the Korean reluctance to engage in specialised out of the 167 in the portfolio), with or Japanese competitors. The new work, when there is sufficient busi- Fukuoka, Kitanihon, or Shin Kurus- Chinese shipyard of Rong Sheng has ness available with bulk carriers, hima, whose orderbooks extend up signed up some thirty Suezmax containerships, and tankers. Despite until 2011, or even 2012, and Euro- orders out of the 79 registered this these difficulties, the proportion of peans with Aker Florø, Szczecin, Fac- year, at very advantageous terms for ships under construction, compared torias Vulcano, De Poli. In Korea, SLS shipowners. to the fleets in service is massive, shipyard after having taken an order in 2005 for a series of chemical car- The average age of tankers is about with 90 % for LNG carriers, over riers of 43,000 dwt with coated 10 years with very few ships over 20 47% for LPG and ethylene carriers, tanks, has obtained in 2006 an order years. Two exceptions however 32% for stainless steel chemical car- for four stainless steel chemical car- should be noted, one for Panamaxes riers, and 26% for car-carriers. riers of 43,000 dwt, for account of Stolt-Nielsen, an owner who had SPECIALISED VESSELS NEW ORDERS already ordered six identical ships in 2004, 2005 & 2006 with Aker Florø between 2005 and (Nb ships) 120 2006. These ships also have a few 2004 coated tanks so as to reduce the 105 2005 investment costs. 100 95 97 2006 The fleet of stainless steel chemical carriers is relatively young at 11.7 80 80 78 years but roughly a quarter exceed 20 years, and over 10 % exceed 25 66 years. The replacement of these 60 58 ships is becoming necessary. 51 50 45 43 40 LNG carriers 36 32 30 After a three-fold increase in the 27 26 volume of orders between 2003 20 (20), and 2004 (66), 2005 saw a 13 13 11 13 8 drop down to 49 new units, a decline 6 3 2 0 which has continued in 2006 with Chemical LPG carriers LNG carriers Ferries & Ro-ro Car carriers Reefers Cruise only 32 new orders. The orderbook carriers Ropax vessels goes from 140 ships (23 million cbm)

8 BRS - Shipping and Shipbuilding Markets in 2006 end 2005 to 135 ships (23 million cbm) end 2006. This sector has seen a major expan- sion and the fleet under construc- tion represents almost 90 % of the fleet in service (27.3 million cbm for 220 ships). But despite rather favou- rable long term forecasts, it appears that numerous production projects and reception terminals are behind schedule, with some having been cancelled, and that carriers ordered speculatively at very attractive pri- ces have not yet found employment or only at less favourable conditions. The majority of the orderbook today is Korean (about 100 ships) and Japanese (30 ships). No new player Series of six 43,000 dwt stainless steel chemical tankers ordered by Stolt-Nielsen has shown up in 2006 despite a real at Aker Yards (Florø) for delivery between the fourth quarter 2007 and the fourth quarter 2009 desire of builders like STX in Korea, but also Dalian, NACKS and Jian- gnan in China to enter this market. two-thirds of these ships on their the two biggest ro-paxes in the books. world, with a planned capacity of LPG and ethylene carriers 5,500 lane metres. The number of LPG and ethylene Ferries and Ro-Paxes Ro-ros carriers ordered, which more than The number of new orders of fer- doubled going from 45 in 2004 to ries and ro-paxes has dropped in This year, orders for ro-ros were 120 in 2005, come to 89 new ships 2006, going from 34 to 23 units. disappointing, with only about 15 in 2006. The orderbook has once However the orderbook has risen in new units, compared to 30 in 2005. again risen sharply and has passed 2006, moving from 65 up to 73 The ageing of the fleet is obvious. from 5.3 million cbm to 7.3 million ships. The market remains domina- The average age is around 20 years, cbm end 2006, for a total of 226 ted by European builders with 47 near to 60 % is over twenty years ships. The fleet under construction ships out of the 73 in the portfolio. and 43 % has more than 25 years. A represents more than 47 % of the certain renewal is becoming vital. fleet in service compared to only The distance of available delivery 17% two years ago. dates, combined with the jump in But there is little new business, just building prices (between 20-30 % a consolidation of the existing one This market is in full expansion. over the last 18 months), has made and an evolution towards bigger, Nonetheless, the freight rates owners somewhat less bullish. faster ships and more adapted to which started to improve in 2003 Unlike the other sectors, namely various cargoes (lorries, vehicles, and 2004, to rise strongly in 2005, tankers, bulk carriers, and contai- heavy equipment, cassettes…) marked a pause in 2006 and star- nerships, where owners’ revenues ted to drop at the end of the year, As with the ferries and ro-paxes, have kept pace with the cost of except for the small sizes. A rene- distant delivery dates and the investments, ferry and ro-pax ope- wal of the aged fleet (nearly 17 jump in newbuilding prices have rators are struggling to increase years on average), with over a third had a dissuading effect. The mar- their tariffs and are having to over 20 years of age, is becoming ket remains dominated by Euro- absorb the rise in bunker prices. urgent. Whilst most of the orders pean builders with some excep- for LPG carriers of small size (less In this context, some owners prefer tions like the Chinese shipyard than 12,000 cbm) remain Japa- to go into mergers or acquisitions Jinling, which has been success- nese, Korea is now top of the ove- rather than ordering new ships. fully building ro-ros since 2000, rall market thanks to its share in 2006 was marked by the Stena and more recently Singapore the VLGC category, with more than order at Aker Yards of what will be Technology.

The shipbuilding market in 2006 - BRS 9 Gotland Carolina 53,200 dwt and 55,000 cbm, ice Class 1A, Super Product Chemical (IMO II) delivered in December 2006, is the first of 12 units of the “Gotland class” from Guangzhou Shipyard International, ordered jointly by Rederi AB Gotland and Torm to serve in the Torm Pool.

Car carriers capacity of 4,300 to more than Cruiseships 7,000 cars. Owners have managed Although the number of new orders 2006 was a good year, with 13 firm to cultivate the interests of new for car carriers dropped by nearly orders plus one option, all placed half between 2004 and 2005, the participants in China first, with Dae- with the four big European speciali- year 2006 saw a strong revival with woo Weihai and STX Dalian, but also sed builders, and presently reduced 58 new contracts. The orderbook in Vietnam with Vinashin. Others to three since the purchase of continues to climb, going from a might follow. Chantiers de l’Atlantique by the Norwegian group Aker. Our article total of 150 ships (equivalent to a This sustained demand is in keep- on the cruise market lists out the capacity of 830,000 vehicles) end ing, with the growth of the world details of these orders. 2005, to 168 ships (or 943,000 vehi- car market and with the re-location cles) end 2006. of production units. The latest fore- NEWBUILDING PRICES These new orders have been placed casts tabled an annual traffic of by the main operators and nearly over 19 million vehicles between Newbuilding prices expressed in exclusively concern the big PCTCs now and 2015, compared with dollars rose throughout the year (Pure Car Truck Carriers), with a around 15 million in 2006. 2006 for bulk carriers and tankers

Newbuilding price variations (in million US$) 1993 4Q 2002 4Q 2003 4Q 2004 4Q 2005 4Q 2006 Tankers VLCC 100 64 76 107 110/125* 115/128* Suezmax 62.5 43.5 50 70 71 77 Aframax 45 34 42 60 58.5 65 MR Product 32.5 27 31.5 38 43 47

Bulkers Capesize 48 36 40 63 59 67/73** Panamax 29 21.5 24 35.5 34 38 Handymax 25 20 21,5 29 30.5 34 * 115 China / 128 Japan et S. Korea ** 67 China / 73 Korea

10 BRS - Shipping and Shipbuilding Markets in 2006 AVERAGE EXCHANGE RATES WITH THE US$

1.40 100 yen 1.35 1000 won 1.30 1 euro 1.25 10 yuan and until the end of the summer for 1.20 containerships. These increases, 1.15 between 10 to 15 % on average, 1.10 depending on the sectors, often the size remain below those observed 1.05 in 2005 which was over 25 % for 1.00 some categories of ships. The pre- 0.95 vious record prices achieved in mid- 0.90

2005 for the three main types of 0.85 ships were however exceeded for 0.80 bulk carriers and tankers, and came 0.75 close for containerships. Several 0.70 factors contributed to this new Oct. Feb. Oct. May Feb. May July Nov. Dec. Dec. Nov. Aug. Aug. July. April April June June Sept. increase. Sept. March March Jan. 05 Jan. 06 Vigorous demand gives rise to com- petition between owners to obtain the best delivery dates. Whereas deli- to a doubling of newbuilding prices bling in the price of steel since 2003, veries for the year 2006 reached 75 in current dollars. Prices have never a tripling in engine prices, and consi- million dwt, the 169 million dwt of been so high, deliveries have never derable increases on behalf of their new orders stretch out the order- been so extended, and yet there other suppliers. The financial results books of shipyards further out in the has never been so many ships orde- of most builders still show very thin future. Shipyards need to raise prices red as in 2006. margins in 2006. to take into account a certain infla- We can reasonably ask ourselves if If it is not certain that prices will tion in costs, as well as numerous and the newbuilding prices are as high continue to rise, builders have legitimate uncertainties concerning as certain analysts like to say they hardly any margin today to go back- the price of material, equipment, are, still waiting for prices to get ward. Much will depend also on the work force and exchange rates. The level of the dollar, which many regulation changes also justify price back to the levels of 2002. Indeed experts see as remaining weak increases for the new designs, which the extrapolation of newbuilding against the currencies of the main are more costly to build. prices, which prevailed before the Asian financial crisis of 1997 on the shipbuilders (won, yen, yuan, euro). Paradoxically the disclosure of new basis of an industrial inflation bet- slots, steadily showing up on the ween 2-3 % p.a., show that they are ANALYSIS BY COUNTRY market for 2008 or 2009 delivery very close to 2006 prices. dates (following the start-up of new South Korea yards, new docks and simply thanks For example, a Handymax bulk car- rier worth $ 25 million in 1997, is pri- 2006 was again a record year for to productivity gains), has also per- Korean shipbuilding reinforcing its mitted shipyards to obtain higher ced ten years later in China at $ 34 pre-eminent position on the interna- prices. Many owners are in fact pre- million, which is the equivalent to tional scene. The orderbook for pared to pay a premium for prompt the inflation stated above. During Korean builders went from 65.4 to deliveries. There has always been a this period, the specifications of this 85.6 million tons between end 2005 strong link between the shipbuil- type of ship have changed; the maxi- and end 2006. On the other hand, ding market, the resale and the mum size of a Handymax in 1997 Korean builders’ market share has second-hand markets. was 47,000 dwt; that of a Handymax continued a slow decline started in in 2006 is more like 57,000 dwt. The 2000, when it reached a peak of 43 % Hedging opportunities are more cranes which used to handle 25 tons to achieve 36 % at the end of 2006. frequent than before. When during have passed to 30 or 35 tons. The the first quarter of the year steel weight of the hull has increa- There are almost no more berths demand for containerships or LNG sed, not only due to the increase in available keels in the Korean shi- carriers started to stagnate, buil- size, but also because of various pyards before the end of 2009 ders turned to tankers and then to constricting regulations (UR, JBP, whilst a large part of 2010 has bulk carriers. CSR). If the shipyards have deci- already been sold and there are The price rise, which began in the dedly improved their productivity, some deliveries programmed right middle of 2002, has practically led they have had to face up to a dou- through until the middle of 2011.

The shipbuilding market in 2006 - BRS 11 New orders represented 39.4 million tons in 2006 against 24.5 million in 2005 and are mainly spread bet- ween oil tankers for 22.7 million tons, containerships for 10.1 million tons, LNG carriers for 3.6 million tons, LPG carriers for 1.25 million tons, and bulk carriers for 1.3 million tons. If China is often quoted with reason for its rapid development and impor- tant increase in building capacity, Korea is not dormant and has also experienced a strong expansion over the last few years. The orderbook of Korean yards was 42 million tons in end 2003 and has doubled in three years. An important improvement in pro- ductivity was made possible thanks to the groving trend in constructing series, with identical designs, which Eships Cobia 13,000 dwt, product/chemical tanker delivered in 2005 by Hyundai Mipo Dockyard owners accept more easily in a “sel- to Eships Tankers in Abu Dhabi. The Eships Cobia is the third in a series of five sisterships lers” market, by resorting to outsour- ordered by Eships Tankers at Hyundai Mipo Dockyard and on long term charter to Total. cing of sections entirely equipped and increasingly heavier (1,500 to 3,000 tons), assembled in record time thanks to new more powerful lifting methods and a meticulous work sche- dule. Thus a VLCC is put together in dock today in Korea in 26 days. Korean shipyards have also multi- SOUTH KOREAN SHIPYARDS ORDERBOOK & MARKET SHARE plied their production lines by buil- ding on dry land as is the case with Hyundai H.I., STX, Sungdong or in million gt percentage 90 50% floating docks. Samsung owns two and SLS (ex-Shina) has bought one 80 in China for delivery at the begin- 70 40% ning of 2007, to join two existing

60 docks. SLS is counting on delivering Orderbook 30% up to 30 ships as from 2010, compa- 50 red to a little less than 20 in 2006. Market share 40 Old manufacturers of block parts 20% 30 have reconverted two to three years ago into shipbuilders like Sungdong, 20 10% SPP, or more recently in 2006 C &

10 Shipbuilding. Sungdong holds an orderbook which extends up till 2010, 0 0% with some sixty ships including post- Panamax bulk carriers, Capesizes, end 1997 end end 1995 end end 1998 end end 1996 end end 2001 end end 1999 end end 2003 end end 2005 end end 2002 end end 2006 end end 2000 end end 2004 end tankers of the MR type, Panamaxes, Source: Lloyd’s Register-BRS and containerships of 6,500 teu. The first ship built by this yard, a bulk car-

12 BRS - Shipping and Shipbuilding Markets in 2006 rier of 93,000 dwt ordered by a The Korean shipyards are distinc- around 62.7 million tons end 2006. Greek owner Marmaras, should be tive from their competitors, Japan The market share of Japanese buil- delivered at the beginning of 2007. and China, by their remarkable ders, which saw a jump between SPP (ex-Dongyang) has orders for flexibility and responsiveness, 2000 (25.5 %) and 2003 (34.2 %), some sixty ships, exclusively MRs, of which allows them to satisfy a pre- has seen, like their Korean counter- which the first were delivered in dominantly foreign clientele. They parts, a slight drop and has slipped 2006. SPP has invested this year in have adjusted their production, down to 26.2% end 2006. a new building site at Sacheon. C & developed new specialities, and We should be cautious about the Shipbuilding, the latest newcomer, acquired a prominence over their reliability of statistics that we have has recently taken on an order for eternal Japanese rivals in all types today on Japan, which still indicate Panamax bulk carriers. of ships with the exception of bulk available docks in 2010, whereas a carriers. The new Korean builders A new yard like Daehan showed its major part of 2011 seems already like Sungdong, C & Shipbuilding colours in 2006 by offering very sold or reserved and that even deli- have thrown themselves into the prompt deliveries, starting from veries are foreseen during the construction of Panamaxes and 2008, for a series of Capesize bulk course of 2012. Capesizes. STX has started building carriers. Handymax bulk carriers at its new We can report deliveries for 2006 Existing shipyards have expansion Dalian site. In a market where attaining 32.5 million dwt against projects in Korea like SLS and Samho. demand for bulkers is strong and 27.3 million in 2005 and 23.3 million where non-Japanese shipowners in 2004. By comparison, Korea deli- Some Korean shipyards have also are struggling to find shipyards able vered respectively 26.8 million, decided to invest abroad principally to respond to their demand for this 26.5 million, and 24 million dwt. in China. This was the case of Daewoo type of ship, there is a vast poten- (DSME) and Samsung who chose to New orders in Japanese yards tial for development. create block building units at Yantai represented 26.3 million tons in and at Ningbo. Hanjin decided at the 2006 compared to 18.3 million in Japan end of 2005 to open a new shipyard 2005 and are mainly spread bet- in the Philippines with a dock of 450 2006 was also a new record year for ween bulk carriers (11.7 million m x 100 m and took an order for 12 Japan which confirmed its second tons), tankers (9.5 million tons), containerships of 4,400 teu and 2 place in world shipbuilding. Its port- containerships (2.4 million tons), Aframax tankers. STX decided to folio has significantly progressed car carriers (1.4 million tons), and open a new shipyard at Dalian to from 54.4 million tons end 2005 to LNG carriers (0.9 million tons). build ships up to 100,000 tons dwt. JAPANESE SHIPYARDS ORDERBOOK & MARKET SHARE Among the main reasons for this movement outside their natural frontiers, is the saturation of million gt percentage Korean production capacities, a Orderbook 70 40% concern to remain competitive in Market share face of the ambitious Chinese ship- 60 35% yards, less costly investments than 30% 50 in Korea, lack of space, and a cheap 25% work force in abundance. 40 20% The new domestic shipyards are 30 also confronted with the difficulty 15% 20 of recruiting in a local workforce 10% market which is saturated and with 10 5% the bidding up of salaries increa- sing their costs. Some projects have 0% not been able to be completed. end 1997

Thus the promoters of the Koryo end 1996 end 2001 end 1998 end 1999 end 2002 end 2003 end 2005 end 2000 end 2006 end 2004 shipyard had to abandon, just as Source: Lloyd’s Register-BRS the construction of a dry dock had nearly been achieved.

The shipbuilding market in 2006 - BRS 13 CHINESE SHIPYARDS ORDERBOOK & MARKET SHARE

million gt percentage 60 25%

50 space free in 2009 and the majority 20% Orderbook are already fully committed for most Market share 40 of their capacity up until 2010. Market 15% share of Chinese builders has pro-

30 gressed rapidly going from 17.6 % end 2005 to 23.5 % end 2006. 10% 20 New orders represent 31.9 million tons in 2006 against 13.5 million in 5% 10 2005. The 2006 orders are mainly split up between tankers (14.3 million 0 0% tons), bulk carriers (10.5 million tons), containerships (5.3 million end 1997 end end 1995 end end 1998 1998 end end 1996 1996 end end 2001 2001 end end 1999 end end 2003 end

end 2002 end tons), and conventional freighters or end 2005 end end 2000 end end 2004 end end 2006 end Source: Lloyd’s Register - BRS multi-purpose ships (1.5 million tons). Deliveries have also picked up speed and have attained 17.9 million The Japanese shipyards expanded From 2009 onwards, KHI intends to dwt against 10.6 million in 2005. their orderbooks by considerably reactivate one of its docks which spreading out delivery times, someti- went into mothballs in the 80’s. China benefited in 2006 from the mes up to five years. They increased Japan still possesses a number of strong demand for tankers and big their production through productivity docks whose capacity has been fro- sized bulk carriers. The doubling of improvements. And like the Koreans, zen. To bring them back to life in an VLCC docks could not have happe- they are building fully equipped sec- expanding market is tempting. Still ned at a better moment. Despite a tions increasingly heavier. MHI and it is necessary to find and attract very tight market, Chinese builders KHI have increased their lifting capa- the proper skills and work force, were also proposing more competi- cities. They have also standardised competing with other industries tive prices than their Korean or their designs, refusing to take into considered as more attractive and Japanese competitors. account any modifications requested often offering better wages. In addition to the state shipyards, a by clients. The few foreign owners More than ever, Japanese shipyards number of private yards continue to who still have access to Japanese are giving priority to their very be set up and to attract investors yards are invited to delegate any active domestic shipowners. It is despite a multitude of problems: supervision to local companies. becoming harder and harder for refund guarantees, certain signed There has not been any noticeable foreign owners to place orders in contracts not being honoured, cost expansion like in Korea or in China. Japan, which sometimes gives one control and technical controls. Japanese shipyards have hardly the feeling of a certain isolationist Chinese shipyards and especially the invested abroad. Only Kawasaki choice with regard to the interna- big state shipyards often give prio- Heavy Industries (KHI), Tsuneishi tional community. rity to domestic owners. Heavy Industries (THI) and Imabari have adopted this strategy: KHI and China The weakness of the yuan continues Cosco firstly by being joint partners to give an undeniable competitive China has not finished amazing us. in the Chinese shipyard of Nacks, advantage to Chinese products. She continues her inexorable ascen- st which will soon have a new VLCC Nonetheless, since July 21 2005, sion and confirms her third place in dock at their disposal. THI has been the exchange rate with the dollar is the world rankings. The orderbook of implanted in the Philippines for no longer fixed, and has since then Chinese shipbuilders has gone from several years and more recently in gone from 8.28 yuan to 7.90 yuan to 30.6 million to 48.7 million tons bet- China at Shoushan. They build a US dollar end 2006. The streng- ween end 2005 and end 2006. It is there the back and front sections of thening of the Chinese currency is an astonishing performance, close to bulk carriers, which are then worrying builders who predict an the Japanese orderbook a year ear- assembled in Japan. It is more than exchange rate of 7.3 yuan by the end lier which was for 54.4 million tons. likely that complete constructions of 2007. They are trying to obtain will take place there before long. Despite developments under way from their clients more advanta- Imabari has a block factory in North (expansion and creation of new sites), geous conditions for the first down- China too. only a very few yards still have any payments, in order to reduce their

14 BRS - Shipping and Shipbuilding Markets in 2006 exchange risk or to partially fix the MARKET SHARE OF SHIPBUILDING COUNTRIES price in dollars and in euros. Some FOR CAPESIZE VESSELS (as per 1.1.2007) shipyards have tried to introduce clauses with a variable exchange rate against the yuan but with mixed success. 12%

Vietnam 36% China Vietnamese shipyards turned out to be the surprise of the year. We knew Japan that Vietnam had, as was the case South Korea with China, big ambitions in ship- 52% building and this year the orderbook for Vietnamese shipyards registered an incredible leap going from 1.1 mil- lion to 3.0 million tons. For reference (in number of ships) it was only 150,000 tons at end 2003. This has propelled Vietnam MARKET SHARE OF SHIPBUILDING COUNTRIES shipbuilding from 12th to 5th place in the world rankings. FOR VLCC’S (as per 1.1.2007) Vietnam has relied heavily on the state group Vinashin in order to pro- mote its shipbuilding. Its investment programme is impressive, attaining 4 million dollars. Most of the ten 28% China main existing shipyards have seen 44% their capacities increase, while there Japan are eight new yards being built and South Korea will be followed by nine sites of smal- ler dimensions. 28% The main investment in 2006 was the construction of a new yard at (in number of ships) Dung Quat, in the centre of the country. The overall site is 100 hec- tares, with two docks for VLCCs of 380 m x 110 m, and 380 m x 86 m, received permission to invest $500 New orders were for 1.0 million tons and should receive it’s first section, million in central Vietnam in order against 0.84 million tons in 2005. that of an Aframax in May 2007. to build ships of about 100,000 tons Taiwanese shipbuilding is concentra- dwt. New orders represent 2.3 mil- One of the objectives of Vinashin is ted in two of the state group CSBC lion tons in 2006 against 240,000 to cover 60 – 70 % of the cost of sites, Keelung and Kaohsiung, with tons in 2005. The orderbook goes construction of a newbuilding with orders stretching out up until the up to 2010. domestic material and equipment. autumn of 2010. They cover nearly Heavy investments are envisaged exclusively containerships of 1,700 Taiwan including a steel works able to manu- teu and 1,800 teu at Keelung, and facture steel plates for ships. 2006 was a year of consolidation for containers of 4,250, 6,300, and Other companies plan to launch Taiwan, whose orderbook went from 8,200 teu at Kaohsiung. Each of the themselves in shipbuilding, like for 2.4 to 2.6 million tons between end sites delivers roughly one new ship example the biggest building com- 2005 and end 2006, placing it in each month. CSBC has given priority pany in the country Lilama, or the sixth rank worldwide. It recorded these last years to domestic shipow- coal conglomerate Vinacoal and the respectively 1.9 and 2.2 million tons ners like Yang Ming, Wan Hai, and Korean group STX. The latter has end 2003 and end 2004. China Steel Corporation, but also to

The shipbuilding market in 2006 - BRS 15 some traditional foreign clients like per, who also placed an order this year five or six ships per year, contrarily Marubeni, Cido and Peter Döhle. for six bulk carriers of 20,000 tons to their Asiatic competitors. with the Bharati shipyard. Privatisation of CSBC which was dis- Higher market prices and better deli- cussed several years ago no longer very dates have given them the Singapore seems a topic. CSBC is on the look opportunity over the course of the out for additional building capacities There are about a dozen shipyards in past three years to recover clients in low-costs zones, China or Vietnam, Singapore, whose orderbooks that had deserted them in favour of but has not as yet been able to firm approach the 360,000 tons end Asian shipyards. Their goodwill, their up such projects. CSBC farms out the 2006. These yards are mainly expertise, a capacity to understand manufacturing of blocks to China. concentrating on the construction of and take into account the particular small offshore units, PSVs, AHTS, requests of their clients, the quality India and tugs. Some have developed in of the finished product and the res- these last years specialities like pect of contractual undertakings India has very big ambitions and is Jurong with containerships, Labroy remain their strength. Outside big hoping to develop its shipbuilding. It for cement carriers and cattle car- American cruise shipowners, the relies today on some fifteen ship- riers, Singapore Technologies (ST) clientele of European shipyards is yards several of which are spread for construction of small container- essentially European. out over several sites. A large part ships and ro-ros. This last shipyard In contrast to other zones of belong to the Indian Government was awarded in 2006 the order for construction, new orders have decli- like Cochin, Hindustan, Mazagon and two ro-ros which will be handling the ned in 2006, compared to 2005. Mar- even if they have taken orders for transport of the main body parts of ket share of European shipbuilders civilian ships in recent years, they the Airbus A380. should naturally orientate themsel- continues to get smaller and by the end of 2006 was at about 10 %. The ves to building military ships whilst Europe allowing the private sector to deve- weakness of the dollar, the powerful lop with ABG, Bharati, Chowgule, Europe, whose shipyards were surge of small shipyards in China and Alcock. already fairly full, has not been able Korea, the new arrivals showing up in to take advantage of this enormous Vietnam and India, constitute a new The Indian Government also hopes activity and 2006 remains a year of source of concern. These shipyards to promote the development of big consolidation. Orderbooks were could make new inroads into the mar- yards capable of competing with almost stable going from 22.1 to 22.4 ket share in sectors such as contain- their Chinese counterparts. The pri- million tons between end 2005 and erships, dry cargo ships, offshore vate group Skil Infrastructure has end 2006, broken down between construction and the small oil pro- received the authorisation to build a 13.5 million for West European buil- duct tankers. modern shipyard at Pipavav, north- ders (15 countries) and 8.9 million These last years, West European ship- east of Mumbai, disposing of four for East European shipyards (11 yards have managed to attract white VLCC docks and capable of building countries). The total was 10.8 million and blue collars coming from Eastern ships on dry land. The first deliveries tons end 2003 and thus has doubled Europe. The latter have had to resign are planned for 2009. in three years. It is an orderbook themselves to seeing their skilled with a high added value. The orderbooks of Indian builders qualified workers leave home and have gone from 550,000 to 760,000 New orders represent 5.9 million then in addition to cope with an tons between end 2005 and end tons (380 ships) in 2006 against 9.3 increase in their production costs due 2006. As comparison it was less than million (545 ships) in 2005 and are to the proximity of the euro zone. 100,000 tons end 2003. New orders mainly divided between cruiseships, The Aker Yards group which bought represent 260,000 tons in 2006 ferries, passenger ships, ro-ros for 2 the Chantiers de l’Atlantique in 2005, against 170,000 in 2005 and are million tons, containerships for 1 mil- took control of the Norwegian shi- essentially comprised of small offs- lion tons, offshore units (PSVs, pyard Florø, specialised in the hore units and Handysize and Han- AHTS) for 0.7 million tons, dry cargo construction of stainless steel chemi- dymax bulk carriers for the moment. ships for 0.6 million tons, chemical cal carriers and took an important and gas carriers for 1.6 million tons. In 2006 the Cochin shipyard delivered share in the Ukranian shipyard on time and on form the first bulk car- Most European builders are full until Okean with Damen. This European rier in a series of six units of 30,000 2010, but there are only a few ship- group now possesses some 17 ship- tons ordered by the Danish owner Clip- yards which can deliver more than yards in seven countries (Norway,

16 BRS - Shipping and Shipbuilding Markets in 2006 Finland, Germany, France, Romania, EASTERN & WESTERN EUROPE SHIPYARDS ORDERBOOK & MARKET SHARE Ukraine, and Brazil) and has acquisi- tion projects outside of Europe, in China or in Vietnam. million gt percentage 24 35% Orderbook 22 Germany Market share 30% 20

The orderbook of German shipbuild- 18 25% ers barely increased this year 16 moving from 4.7 million tons to 4.9 14 20% million tons end 2006. It had been 12 1.25 million tons in 2003. Germany 15% 10 still occupies the first rank within 8 Europe and the fourth rank in the 10% 6 world behind China. New orders have amounted to 1.5 million tons, of 4 5% which 0.6 million for containerships 2 and 0.5 million tons for cruiseships 0 0% and ferries. end 1997 end end 1996 1996 end end 1998 1998 end end 1999 end end 2001 2001 end end 2002 end end 2003 end end 2006 end end 2000 end end 2004 end German shipyards are organised Source: Lloyd’s Register - BRS end2005 around some twenty shipyards. A large part of the orderbook consists of containerships from 800 teu up to The shipyard Stocznia Szczecinska shipyards in the world specialising in 3,700 teu. Otherwise Meyer Werft, the construction of big cruiseships. specialised in building cruiseships, Nowa holds an orderbook of over 30 It received orders for 3 out of the 13 has also developed a new production ships (of which 23 containerships, 6 placed in 2006 and once again has line of ethylene carriers of 15,000 ro-ros, and one chemical carrier) assured its place as world leader in and 17,000 cbm, while Flensburger is with delivery dates which go up to the cruise sector. specialised in building ferries and ro- early 2010. paxes, and Lindenau in the construc- The shipyard Remontowa made a Croatia tion of oil product tankers of 40,000 name for itself this year by taking on to 45,000 tons. an order for a LNG carrier of 7 500 End 2006 the orderbook of Croatian cbm. Its orderbook is very diverse shipyards was at 2.1 million tons for Poland with amongst others a container- 55 ships a slight decline from the 2.4 million tons at the end of 2005. The The Polish orderbook is slightly ship, four AHTS, three ferries, a sur- four big shipyards Brodosplit, Ulja- down end 2006 to around 2.4 mil- vey ship for fish protection, a heavy nik, 3 Maj and Trogir remain concen- lion tons compared to 2.6 million lift carrier, and two service ships. trated on building product tankers, end 2005. Poland occupies second ro-ros and car carriers. rank in Europe and seventh rank in Italy the world. Italian builders’ orderbook was down The Kraljevica shipyard continues with the construction of series of This evolution is mainly due to the slightly, slipping from 2.5 million sophisticated bitumen carriers at situation in which the shipyards Gdy- tons to 2.3 million tons over end high temperature. The Brodosplit nia and Gdansk who have been 2005 and end 2006. Italy holds third Bso shipyard has focused on buil- trying, now for the past two years, to place in Europe and eighth in the ding a series of passenger ships 60 come up with a financial rescue plan world rankings. metres long, with 25 cabins for Ame- and who have not been able to sign Orders in 2006 were for 350,000 rican clients. up any new contracts during the tons against 1.1 million in 2005 and course of 2006. They delivered 11 Brodosplit, which built a series of P- consist mainly of cruiseships, ferries, ships in 2006 and still have some Max (an innovative design for pro- chemical and ethylene carriers, all thirty ships on order, mainly car car- duct tankers with double propulsion, ships with a very high added value. riers, some VLGCs and dry cargoes. 183 metres long and 40 metres They have docks available starting Fincantieri, together with Aker Yards width) for Stena’s account, is a good from the beginning of 2010. and Meyer Werft, is one of the three example of the capacity of Croatian

The shipbuilding market in 2006 - BRS 17 Recoleta, 74,402 dwt, delivered in July 2005 by the Japanese yard Sasebo, owned by Elcano and on long term charter to Repsol/YPF

Chantaco 19,000 dwt, IMO II, double hull, ordered in 2004 at RMK the Turkish shipyard by Petromarine

builders to construct sophisticated Daewoo Mangalia built in particular Dutch shipbuilding is organised ships tailored-made for demanding a series of containerships of 5,000 around some fifteen shipyards for clients. to 5,500 teu which figure amongst which most of the orders are for the biggest containerships under freighters of 3,000 to 5,000 tons, Denmark order in European shipyards. containerships of 800 – 900 teu, At the end of 2006, Odense Lindo, and product tankers and chemical Norway the only big Danish shipyard, held a carriers of 5,000 to 14,000 tons, portfolio for 12 containerships of over End 2006, the orderbook of Norwe- and tugs. 11,000 teu (the exact size of these gian shipyards was around 1.05 mil- ships is still a matter of considerable lion tons against 580,000 tons end Finland speculation) and two tugs – one for 2005. This increase is due to the The three shipbuilding sites in Fin- account of its mother company A.P. strong demand from the offshore land, all part of the Aker Yards Moller, and the other for the Swedish industry over the last two years and group, have taken in orders this year shipowner Hvide Marine. The Danish with the order of four stainless steel for 240,000 tons. orderbook has thus reached 1.8 mil- chemical carriers of 43,000 tons lion tons end 2006 which places it in dwt for the owner Stolt Nielsen with Cruiseships, ferries, ro-ros continue fifth place in Europe. Aker Florø. to constitute the major part of Fin- nish production. The revival in this Romania The Netherlands sector has profited builders and their orderbook has kept steady with The orderbook of Romanian ship- Shipbuilding in the Netherlands about 850,000 million tons end yards is steady at around 1.5 million took advantage of the increased 2006, against 880,000 tons end tons end 2006, against 1.4 million activity in previous years. The 2005. It was 450,000 end 2003. the previous year. Romanian ship- orderbook of Dutch shipbuilders has building is organised around seven remained stable at around 980,000 France yards of which four are under foreign tons end 2006. It was 280,000 tons control: Daewoo Mangalia, Aker Tul- end 2003. The portfolio consists of In 2006, Aker Yards (Saint-Nazaire) cea, Aker Bralia, Damen Galatz. about 300 ships. delivered the Provalys, an LNG

18 BRS - Shipping and Shipbuilding Markets in 2006 carrier of 153,000 cbm, one of three dry cargoes, containerships, tugs, been able to attract Western owners ships ordered by Gaz de France and and offshore units. like Stena and Odfjell. They also do whose delivery has been put back some outsourcing of hulls with some The state shipyard Izar has been divi- by the need to resolve concerns in Western shipyards, notably Scandi- ded into two parts. One, a state the implementation of the new CS1 navian ones. structure with Navantia has taken countainment system. The delive- the sites of former Bazan as well as ries of the two remaining ships, one Turkey the shipyard Puerto Real. Its main of which is 74,130 cbm, are due in vocation is to build military ships, but Turkish shipyards have shown a January and March 2007. can also take on some civilian work. remarkable dynamism in the course Aker Yards (Saint-Nazaire) has also The other, with the shipyards of Ses- of the last two years. In 2006, delivered in 2006 the MSC Musica tao, Gijon, and Seville has been the 570,000 tons of new orders were and has taken an order for 3 new object of a tender and has been registered and the orderbook has cruiseships. awarded to private interests in 2006. attained 1.5 million tons end 2006, Seville is under the control of Huelva, against 1.25 million tons end 2005, At Lorient, Aker Yards is undertak- Gijon under the control of Vulcano, which puts its in 11th place in the ing the construction of a little ferry, and Sestao under the control of a world. The figure for comparison at having delivered a small tanker, a private group Construction Navale the end of 2004 was 310,000 tons. ferry and a yacht in 2006. del Norte. This success has attracted new The Piriou shipyards have delivered investors who have decided to open six fishing vessels, a barge, a rapid Bulgaria shipyards in the Marmara Sea (Izmit, crew boat, and taken an order for There are two shipyards in Bulgaria: Ielova), but also in the Black Sea eight tug boats and two ships plan- Bulyard ex-Varna, specialises in (Samsun). The bay of Tuzla, where ned for short cruises on the Seine building bulk carriers, and Rousse nearly all the shipyards are concen- for account of the owner Vedettes whose production is centred on trated today (about 38) have become de Paris. This shipyard also has multi-purpose freighters. Their com- too crowded. development projects in Africa and bined orderbook represents 220,000 in Vietnam. Most of the production consists of tons end 2006. ships of less than 25,000 tons dead- The Constructions Mécaniques de weight, mainly product tankers with Normandie delivered a corvette and Portugal some sixty orders in 2006, container- a yacht and has taken orders for The orderbook of Viana Do Castelo, ships, but also dry cargoes and tugs. three other yachts. the only big Portuguese shipyard is The orderbook of French shipbuilders composed of two series of four ships United States has gone from 690,000 tons end transporting heavy lifts respectively American shipbuilders remain at 2005 to 840,000 tons end 2006. It of 7,000 and 10,000 dwt, a contai- arms’ length from the competitive was 380,000 tons and 450,000 tons nership of 8,800 dwt, two patrol international scene. We can cite the end 2003 and end 2004. boats, two anti-pollution ships, and order of shipyard Aker Philadelphia two ferries for the Azores. for 10 product tankers of 47,000 dwt Spain Russia on the back of long term charters During 2006 the orderbook of Span- signed up with the owner OSG, ish shipbuilders has again increased The orderbook of Russian shipyards under American flag. to a total of 730,000 tons compared has progressed going from 860,000 The orderbook of American shipyards with 480,000 tons end 2005. It had tons end 2005 to 970,000 tons end went from 600,000 tons end 2005 to fallen between 2003 (500,000 tons) 2006. It was 350,000 tons end 700,000 tons end 2006, of which and 2004 (135,000 tons), following 2003. in particular an imposed restructu- some 490,000 tons for tankers. The Russian builders benefit from ring of the state group Izar by the the dynamism of domestic shipow- European Union. PROSPECTS ners and in particular from those Spanish shipbuilding is organised specialised in transporting oil pro- 2006 marked the fourth year of a around some fifteen shipyards of ducts. They have an undeniable new cycle in shipbuilding, which which the majority of orders consist know-how in shipbuilding, in particu- started in 2003 and was character- of ferries, ro-ros, chemical carriers, lar for “ice-class” ships, and have ised by a big increase in new orders,

The shipbuilding market in 2006 - BRS 19 an extension of the orderbooks in As with each year at this same time, ed to freight rates. Others consider time to over a three to five year we do our best to try to discern the that if there is to be a correction in period, a continuous increase in the trends for the forthcoming year and the freight market, it could take price of newbuildings, a change in if possible beyond. It is a dangerous place during the time of building a the relationship between buyers exercise. Experience shows that the new ship. Ordering now for delivery and sellers to the advantage of the forecasts of most analysts are often in 2010 or 2011 might therefore be a latter, high freight rates, and very based on a straight extrapolation of good decision. little demolition. previous figures. The reality is gene- Naturally there are also factors rally far more chaotic. This cycle has itself followed ano- which lean in favour of holding back. Some owners might consider that ther cycle which started at the end Volumes of 1997, due to the Asian financial prices are at a historic high in cur- crisis, which came about just as Since 1997, the year on year new rent dollar terms and that given the the Korean builders had finished a orders volume fluctuations have new production capacities in the new phase of expansion. This cycle varied between –35 % and +143 %. world, in China but also in Korea, was characterised by: orderbooks We can reasonably ask ourselves adjustments should follow with the extending over a year and a half to what the figure should be for 2007 rivalry between existing blocks, two and a half years, a volume of and especially what will be the pushing prices lower. In addition, the steady orders, which were however volume of orders. proportion of the fleet on order for continuously being overtaken by A number of factors lean in favour containerships (53 %) and tankers increased production capacities, a of a certain continuity of the current (40 %) is particularly high. A closer fall in prices, which stayed at very trend. First of all the prospects of examination of the various seg- low levels only made possible by world growth at close to 5 % are ments shows that some are particu- the weakness of the currencies of very encouraging. Then most of the larly exposed. Finally certain owners shipbuilding countries against the owners are cash rich. Some of them refuse to pay today’s prices and wait dollar, low and often insufficient consider that the price of newbuild- four years before receiving their freight levels, and a high rate of ings is not that high in absolute newbuildings which also means to demolition. terms and still sustainable compar- put high pre-financing costs on the table. Their visibility and their capa- city to find charterers ready to com- Deliveries, new orders & demolition since 1990 mit themselves over such extended in dwt % New % periods is confined. Deliveries Demolition (year end) yoy orders yoy A number of reasons which contri- 1990 20.7 35.6 buted to the historic level of orders 1991 20.6 0 % 30.2 –15 % 6.1 in 2006 are unlikely to be repeated 1992 24.2 17 % 18.9 –37 % 15.7 in 2007. Whilst we can expect a real 1993 27.5 14 % 36.8 95 % 17.1 pause in the orders for tankers, it is 1994 27.6 0 % 37.5 2 % 24.0 possible that demand for container- ships will also decline in 2007, given 1995 33.0 20 % 37.0 -1 % 17.4 the drop in rates and the losses 1996 37.5 14 % 37.3 1 % 21.4 incurred by the big operators in 1997 36.5 –3 % 53.6 44 % 18.2 2006. This sector can still take us by 1998 34.8 –5 % 38.8 –28 % 27.8 surprise, as it has done for more 1999 41.3 19 % 51.5 33 % 32.8 than 15 years. However it is most 2000 45.4 10 % 64.0 24 % 25.1 probable that demand for bulk car- 2001 45.9 1 % 41.7 –35 % 32.6 riers will continue. With 24 % of the fleet on order, this sector is well out 2002 49.5 8 % 48.5 16 % 33.1 of phase with the containerships and 2003 55.0 11 % 118.0 143 % 25.6 tankers. 2004 62.4 14 % 113.8 –4 % 13.2 2005 71.6 15 % 96.7 –15 % 6.4 So what level for 2007? 2006 75.0 5 % 169.7 76 % 6.7 The ratio of deliveries compared to 2007 P about 80 about 100 10-15 orders since 1990 shows that there P: projection

20 BRS - Shipping and Shipbuilding Markets in 2006 has only been three years, 1992 and End 2006 values comparison for bulk carriers 2001/2002, where the number of $m Handymax Panamax Capesize new orders for the year was less than that of deliveries. These years Prompt resale 45 50 92 were years of weak growth. We esti- Newbuilding 34 38 68 mate that deliveries in 2007 could pass the 80 million dwt mark. main objective today consists in The persistent weakness of the dol- Consequently it is probable that the passing their additional building lar versus the main currencies of number of orders will be close to costs onto their customers. builders is another difficulty. Chi- 100 million dwt. This level might nese shipyards, who are hoping to Shipyards have to face substantial appear very conservative in view of increases from their suppliers and become the world’s leading ship- the historical since 1990, and the engine manufacturers, who are ope- builder as from 2015, are concerned world growth level of 2007, but we rating in a saturated market. The about the appreciation of the RMB, believe 2006 has really been an steel price has shot up and remains which risks compromising their exceptional year. This figure of new volatile as is the case with many results. orders is well below the 169 million non-ferrous metals. Engine prices tons of 2006, and represents a drop Builders are also having great diffi- have doubled even tripled in some of some 40 %. culty in evaluating with any degree segments. Working salaries conti- of accuracy building costs for a ship Prices nue to rise even if they are partly over the next three to four years, compensated by constant gains in which forces them to include a fur- Prices went up by an average of 10 productivity. Production increases ther margin, to which they also need to 15 % in 2006 and between 80 to and the creation of new capacities to add a provision for the exchange 100 % since the beginning of 2003. adds tension to the work force mar- rate exposure. Will they continue to progress or will ket and leads to higher bids bet- they stagnate? Could they decline? ween employers to keep workers Finally the financial situation of With around 100 million dwt of new and to attract the best. most builders remains fragile. orders possible in 2007, shipyards Some of the changes in regulations Naturally, there are differences from should lock up the equivalent of a can also be costly and the prolifera- one sector to the other and much whole year of production and main- tion of new rules is showing no signs will depend on the ability of builders tain the same level of orderbooks, of slowing down. to transfer a part of their production which are full up for three, four, or five years. In these conditions, ship- Recent major statutory changes builders should keep the upper hand in commercial negotiations with ◆ Post Erika packages: quicker phasing-out of single hull tankers since 2003 their clients. This waiting capacity ◆ Permanent means of access - 1st Jan. 2005 was previously reserved to owners, ◆ IACS Common structural rules - 1st April 2006 who could put off their decisions to invest, whilst the shipyards, anxious ◆ Solas Chapt. XII, amendments on bulkers - 1st July 2006 to ensure continuity in their opera- ◆ Performance Standards for Protective Coatings (PSPC) - 8 Dec. 2006 tions, were prone to offer rebates. ◆ Marpol revision concerning the carriage of vegoils - 1st Jan. 2007 The extending of the orderbook over ◆ Marpol amendment concerning the protective location of fuel oil tanks - a long period of time has meanwhile 1st Aug. 2007 or delivery after 1st July 2010 introduced a subtle game between ◆ st the second-hand, the resale and the New probabilistic damage stability requirements - 1 Jan. 2009 newbuilding markets: the difference Future major statutory changes between the price of yard-resales on a prompt basis and that of newbuil- ◆ Ballast water management ding is significant. These differences ◆ Shiprecycling tend to pull the price of newbuild- ◆ Maritime labour convention ings higher. ◆ Green gas emissions There is also a strong upward pres- ◆ Anti-fouling sure on the part of builders whose

The shipbuilding market in 2006 - BRS 21 from a saturated market and sud- A certain optimism If builders are complaining about an denly less remunerative, to another for the coming years excess of regulations increasing more favourable one. Recent expe- their costs, history shows also that rience has shown that some shi- The amazing increase in production it has always been a catalyst, contri- pyards have been able to make capacities in China and Korea and buting to growth in shipbuilding. necessary switches, to profit at each the growing competition between The changing regulations, which are stage by exploiting the latest trend. these two main shipbuilding blocks due to be enforced in the coming In 2004 many shipyards switched a will certainly have consequences on years, should help reinforce this ten- part of their production away from the shipbuilding market at some dency. tankers and bulk carriers to the more point. Nevertheless the market The enlargement of the Panama lucrative containerships, to then retains enough flexibility, which Canal should also constitute a posi- return in 2005 and 2006 to tankers. should allow it to face the coming tive ally to shipbuilders and could years with a certain serenity. In 2007 we could well see a move- have a strong impact. Current ment in favour of bulk carriers and Since 2003, scrapping volumes draught and length limitations in some price rises in this segment. have been particularly low, on ave- the Panama Canal have no reason The lower tonnage expected to be rage 20% of delivered volumes to stay the same. Extending the ordered in 2007 may also alleviate during the period and less than 10% maximum beam beyond the 32.26 m the tendency and pressure on prices in 2005 and 2006, compared to limit, would allow the development and the determination of certain about 70% during the previous of optimised ships with shallower builders, despite not all of them cycle. Any lowering in freight rates draughts. It is true that this opening being in a comparable situation. should be counterbalanced by an is only due to take place as from Shipyards who are looking to secure increase in demolition. 2014, and that there could be some full employment for their docks or delay, however orderbooks are The market has also a need for new increase their production, may well already stretching out as far as designs. In a sellers’ market such as renounce applying new price rises. 2012. It is therefore not impossible we have seen since 2003, builders In such circumstances it is more that the shipowning community will have managed to impose designs than likely, unless there is a further anticipate this opening, and that which might appear to be obsolete weakening of the dollar, that in shipyards will benefit from the today. The introduction of the new 2007 the prices will stop growing. enlargement. ■ IACS regulations in 2006, which They might even decrease in some obliges builders to come up with over-invested sectors, given the new designs, also gives them the accrued competition. possibility to propose new and more Much will depend on the state of the competitive products. Innovation freight market. In theory the fore- always helps stimulate demand. The casted growth in world trade should increase in bunker prices and the benefit shipping and keep demand environmental concern should sustained, but the psychological incite shipyards to innovate towards aspect affecting the evolution of size optimisation and less fuel markets cannot be ignored. consumption.

22 BRS - Shipping and Shipbuilding Markets in 2006 The cruise market in 2006

Cruising Speed

IF 2005 CAN BE CONSIDERED AS A Caribbean Cruise Line) for about 22 %, YEAR OF CONSOLIDATION, WITH and Star Cruises/NCL (Norwegian Cruise ONLY FOUR NEW SHIPS, REPRESEN- Line) for about 10 %. Carnival’s turnover TING A TOTAL CAPACITY OF 9,450 for the last fiscal year ending in Novem- BERTHS DELIVERED, 2006 HAS ber reaches $11.8 billion and the net pro- SEEN A HEALTHIER GROWTH WITH A fit account is $2.28 billion, nearly the TOTAL OF SEVEN SHIPS REPRESEN- same figure as last year. TING NEARLY 19,000 BERTHS. In Europe, the MSC group (Mediterra- Despite some uncertainties at the begin- nean Shipping Company) is progressing ning of the year, based on a drop in book- very rapidly and should, given their new ings, notably in the Caribbean, and a rise orders, control twelve ships in 2009 with in bunker costs, the year quickly reached a total capacity of about 23,000 berths its cruising speed with a very strong and thus pose itself as a challenger to increase in the number of passengers, Costa on the European market. notably in Europe and the United States. In the eastern Mediterranean Louis The UK market has grown by 17 % in Cruise Line, which controls 13 ships repre- 2006, its best year since 2003. senting about 11,000 berths, remains an The cruise market today is dominated by important player, having based its deve- a few big owners, since three companies lopment on the purchase of second-hand by themselves represent nearly 80 % of ships. berths offered on the market. Over fifty The sector continued to consolidate this cruise lines have disappeared in the year with the purchase by Royal Carib- course of the past 25 years, either due to bean International of the Spanish Pull- bankruptcy or being taken over. mantur for a price of e700 million, inclu- The Carnival Group on its own represents ding e270 million of debt, thus permitting nearly 46 %, followed by RCCL (Royal RCI to become the number one Spanish

The cruise market in 2006 - BRS 23 ◆ Carnival Cruise Line ordered two ships of 130,000 tons, 3,608 berths, 1,804 cabins, with Fincantieri (Montfalcone), to be delivered autumn 2009 and spring 2011, at respectively $677 million and $738 million (e565 million). ◆ In the early days of January 2007 a letter of intent was signed for a 116,000 tons ship in the Ven- tura class for account of P&O Crui- Freedom of the Seas, ses, to be delivered in spring 2010 Cruise vessel, 154,400 gt, 1,817 cabins, delivered in April 2006 by Aker Yards Turku, for e535 million. owned by Royal Caribbean Cruise Line ◆ An order for Costa of two ships of 92,700 tons, 2,260 berths, 1,130 cruiseship owner, with five ships and 25 % is due to be sold in 2010 at a cabins, with Fincantieri (Marghera), the possibility of swapping tonnage price which will depend on the per- deliverable in spring 2009 and within the group, notably by trans- formance of the French shipyards spring 2010, at a price of e420 mil- and could be as much as e125 mil- ferring the Blue Dream and the lion each. Blue Moon (both built in 2001 by lion. Aker Yards thus has become Chantiers de l’Atlantique, 698 the largest European entity in ship- ◆ Finally an order for Seabourn berths, 349 cabins) to its affiliate building with 17 shipyards spread Cruise Line of two ships of 32,000 company Celebrity, in order to be over 7 countries and employing tons, 550 berths, 225 suites, with used in the expedition market, whe- 20,000 people. Mariotti, to be delivered in 2009 and 2010, at a price of $250 million reas Pullmantur will take the Zenith Fincantieri is still in the process of each (namely about $550,000 per (built in 1992 by Meyer Werft, 47,255 being privatised and has acquired a berth). This time, the hulls will be tons, 1,378 berths, 689 cabins), thus 21 % share in Lloyd Werft with an built by the newly established San increasing its capacity. option on a further 30 % in 2008, Giorgio shipyard. At the end of the year, the Carnival permitting them to obtain a major- Group announced the creation of a ity share in the yard. At the same This last order demonstrates a time, a significant shareholding joint-venture between the German recovery in the luxury segment, participation is being discussed tour operator TUI and the Aida com- which had particularly suffered in with the present shareholders in pany it controls, in order to manage the wake of the 11th of September the ship repair yard of Grand on one hand the Aida brand name 2001 events. The development of Bahama. Fincantieri is thus the only and, on the other, a new cruise com- large scale cruise ships also creates shipyard able to offer a complete pany under the TUI banner. This the need, for part of the clientele, range of services to cruise lines, joint-venture should take delivery of for a return to ships of more human from building to maintenance, as a ship under construction for the dimensions, in which service is well as conversion works. Carnival Group, for delivery in the more personalised. spring of 2010, with a capacity of THE YEAR HAS BEEN VERY End 2006, the Carnival Group holds 3,000 passengers; TUI initially ACTIVE ON THE NEWBUILDING 13 firm orders and a letter of intent taking a 5 % participation, then up SIDE, with 13 units ordered, plus a with Fincantieri for a total value in to 20 % in 2010. letter of intent, representing a total excess of $8 billion, on a total of 19 ships on order for the group. For Shipyards are also joining forces of 27,400 berths, 13,600 cabins, the first time, 10 out of these new with, in the first instance, the pur- and 1,048,700 gt. ships will be fitted for the European chase of Chantiers de l’Atlantique ◆ Hardly surprisingly, the Carnival market, against 9 for the American from Alstom by the Norwegian Group was the most active with the customers. group Aker Yards. After having order of a fourth vessel for Aida, of injected e350 million, Alstom sold 68,500 tons, 2,030 berths, 1,015 MSC, who finished 2005 with an 75 % of its shipbuilding branch for cabins, placed at Meyer Werft for a order for the two biggest ships des- e50 million, and the remaining price of around e330 million. tined for the European market

24 BRS - Shipping and Shipbuilding Markets in 2006 CRUISESHIPS DELIVERED IN 2006 AND ORDERBOOK AS AT 31ST DECEMBER 2006

Lower berths Mariotti 30,000 Aker Yards France (133,000 tons), ordered this year 9 ships Aker Yards 10 ships with the same Chantiers de l’Atlan- 25,000 8 ships 1 Meyer Werft tique (now Aker Yards France) ano- 1 2 1 Fincantieri 7 ships ther ship in the preceding series of 20,000 2 89,000 tons, 2,250 berths, 1,275 1 1 1 cabins, to be delivered in the third 6 ships 15,000 1 1 quarter 2008 at a price of 2 2 e400 million. MSC has also an 1 2 2 option for a similar ship to be deli- 10,000 vered in 2010. 2

5 4 Royal Caribbean Cruise Line started 5,000 3 3 1 ship the year in style with the largest 2 1 order in the history of cruise ships, the Genesis project at Aker deliv. in 2006 2007 2008 2009 2010 2011 Yards Turku, with impressive dimensions of about 220,000 tons, 5,400 berths, 2,700 cabins, owner and those of the shipyard, exchange rate between the months for delivery in October 2009 at a and its appearance is highly covet- of February and August. price of e900 million. ed, as its size enables passengers to ◆ NCL (Norwegian Cruise Line) has This ship is not far from the gigan- partake in an exceptional range of also ordered two post-Panamax tic project of the World City which services and distractions, allowing ships of 150,000 tons, 4,200 K. Kloster had envisaged in the more than ever for a ship to be a berths, 2,100 cabins, with Aker ’80s, which shows that this owner destination on its own. It is highly Yards Saint-Nazaire, deliverable in was, and remains, a forerunner in probable that this ship will not be October 2009 and May 2010 at a this business. the only one of its kind for long. price of e735 million each. An option for a third ship with a deli- It is 40 % bigger than the Freedom ◆ Celebrity Cruises ordered with very in 2011, and maybe slightly dif- of the Seas, which has just been Meyer Werft two sister ships of ferent characteristics, was also delivered successfully to Royal 117,000 tons, 2,850 berths, 1,425 granted by the builder. Caribbean and has been admired by cabins, for delivery in August 2009 all in the cruising community. The and in spring 2010, at respective ◆ Also to be noted was the order of new dimensions of the Genesis pro- prices of $640 and $698 million, two small ships in the U.S. for the ject represent a considerable step the difference being principally due account of American Cruise Line. forward for the architects of the to the evolution in the dollar/euro One vessel for the start-up of a new

Genesis, Cruise vessel, 220,000 gt, 2,700 cabins ordered in 2006 at Aker Yards Finland by Royal Carribean Cruise Line

The cruise market in 2006 - BRS 25 brand, Pearl Seas Cruises, which ◆ For account of Costa : the Costa parts built for the second ship of can carry 166 passengers, built with Concordia, 112,000 tons, 3,004 the defunct Project America star- Irving Shipbuilding in Canada and berths, 1,502 cabins, delivered in ted at Ingalls shipyard for AMCV. for delivery in July 2008, plus an July 2006, at a price of e450 mil- For the RCCL group : option for a second ship of over lion. At the end of 2010, taking into ◆ the Freedom of the Seas, built 200 passengers, to be delivered in account ships on order, the Costa by Aker Yards and delivered in April 2009. The other for American fleet will comprise 15 ships for 2006, 154,407 tons, 3,634 berths, Cruise Line, the American Star, 30,800 berths. with a capacity of 100 berths and 1,817 cabins, price $720 million. It is ◆ For account of HAL : the Noor- 52 cabins, built by Chesapeake the biggest ship in service, delive- dam, 81,769 tons, 1,918 berths, 924 Shipbuilding and deliverable in red on time at Turku, and whose cabins, delivered in January 2006, June 2007. concept and execution has captu- at a price of $400 million. red the admiration of all those in Outside these two small units, the ◆ For account of Princess Cruises : the profession. orderbook at the end of the year the Crown Princess, 116,000 tons, One ship for MSC: represents 34 ships and close to 3,114 berths, 1,557 cabins, deliver- 90,000 berths. It should be noted ◆ ed in June 2006, at a price of the MSC Musica, delivered in that 18 of these ships are destined $500 million. June by Aker Yards Saint-Nazaire, for the American market, but that 89,600 tons, 2,550 berths, 1,275 the European market has a signifi- Two ships for NCL : cabins, at a price of e400 million. cant share with 15 ships, Fincantieri ◆ the Pride of Hawai’i and the remaining the top European builder Norwegian Pearl, 93,500 tons, both in numbers and in value of 2,466 berths, 1,188 cabins, built by THE SECOND-HAND MARKET has ships. Meyer Werft and delivered in April been somewhat less active than the 2006 and November 2006 at the previous year although there have SEVEN NEW SHIPS HAVE BEEN respective prices of $395 million been several noteworthy sales: DELIVERED THIS YEAR. and $500 million, the difference is ◆ Firstly, the refinancing by the 3 ships for the Carnival group, built partly due to the fact that the Pride owner Oceania Cruises Inc. of three with Fincantieri: of Hawai’i has been built with some ships that they were operating under bare-boat : the Regata (ex. R Two), the Insignia (ex. R One) and the Nautica (ex. R Five), built res- pectively in 1998, 1998, and 2000 by Chantiers de l’Atlantique, 702 passengers, 351 cabins, bought from Cruisinvest, a financial vehicle created by the French banks after the demise of Renaissance Cruises, for a price of $125 million apiece. This sale marks the final chapter in the resale of the eight Renaissance ships, which have today all found new owners. ◆ Minerva II (ex. R Eight): built in 2001 by Chantiers de l’Atlantique, 698 berths, 349 cabins, finally bought by the British charterers Swan Hellenic, of the Carnival Group, from Cruisinvest, at a price of $120 million. This ship will join MSC Musica, the Princess Cruises fleet in 2007, Cruise vessel, 89,600 gt, 1,275 cabins built in June 2006 by Aker Yards Saint-Nazaire, leaving Swan Hellenic without a owned by MSC Cruise ship.

26 BRS - Shipping and Shipbuilding Markets in 2006 ◆ Grand Voyager (ex Voyager of Royal Olympic Cruise): built in 2000 by Blohm & Voss, 736 berths, 364 cabins, sold by the financial mort- gage creditors group KfW Bank to Viajes Iberojet in Spain, at a price of around $95 million. ◆ Norwegian Crown: built in 1988 by Meyer Werft, 526 cabins, 1,209 Pride of Hawai’i, berths, bought by the British owner Cruise vessel, 93,000 gt, 1,188 cabins, delivered in April 2006 by Meyer Werft Olsen Cruise Line from NCL for and operated by Norwegian Cruise Line (Star Cruises group) $105 million, with 14 months chart- er back, with the ship due to be deli- vered in 2007. It should be noted construction costs linked essen- land based tourist products and this that 18 years after its delivery, this tially to the rise of prices for sup- competitive advantage is here to stay. ship has reached a sale price in plies and raw materials. Some sup- pliers have been surfing the high excess of its construction cost. At the end of 2006, the core cruise demand and energy price wave and ship fleet consists of around 300 ◆ Orient Queen (ex. Bolero of Festi- doubled their prices in the course of ships with 320,000 berths, giving val): built in 1968 by Weser Seebeck, several months. If one adds to this an average of 1,400 berths per ship. 802 passengers, 401 cabins, resold the devaluation of the dollar and There will be then 31 ships and by Louis Cruise Line to the Lebanese the rise of salaries (more significant nearly 85,000 berths added to this shipowner Abou Mehri, at a price of in Europe), owners are having to fleet by 2010, namely an increase of $22 million, on the basis of a hire- face increases in the price of new over 10 % in the number of ships purchase deal. This proves that some ships of 30 % to 40 %, expressed in and nearly 30 % in the number of cruise ships, if well-conceived, hold dollars. berths, given the size of ships under an attractive value on the second- construction. hand market despite their age. It is therefore very likely that all the existing options at fixed prices will The number of cruise passengers ◆ Walrus: built in 1990 by Union be lifted by owners who hold them exceeds 14 million, of which 10 mil- Naval in Valencia, 556 passengers, (this was the case of Carnival at the lion are Americans, 3,2 million Euro- 265 cabins, sold to the Dutch owner end of the year), but this time to the peans and about a million coming Club Cruise for $21 million, and detriment of the yards. from the rest of the world, with renamed Jules Verne. The current prices proposed by ship- Asians having difficulty as yet in ◆ Enchanted Capri: built in 1975 by yards for new orders have surprised appreciating this kind of leisure. The average age of cruise passen- Wartsila, 635 passengers, 230 owners, who will be forced to take gers is as of now less than 50 years cabins, sold to the Mexican owner into account these new levels in old, and thus has been rejuvenated Demar by International Shipping their financial calculations. Partners, at a price of $10 million. by some ten years in the course of It seems nonetheless, in the present the past fifteen years. ◆ Dalmacija: built in 1965 by Ulja- situation and with no alternative All in all, a good year ends with an nik, 304 passengers, 142 cabins, solution, that the business can sup- orderbook which reflects an overall sold between Croatian owners at a port such increases, but in addition faith in the future of this buoyant price of $2 million, for service on to the rise in bunker costs this will the Adriatic coast. segment of the tourism business. contribute to a search for econo- The cruise industry which as a ◆ mies of scale in the size of ships, Nantucket Clipper and York- whole generates a turnover of $22 and will certainly affect the prices town Clipper: built in 1984 and billion, seems to have still some 1988 in the U.S. – respectively 102 offered to customers in the coming good years ahead. ■ and 138 passengers - were finally years. sold en bloc to Cruise West for a It is true that for the last twenty price of $16 million. years owners have been able to One of the characteristics of this maintain a fairly level fare price, year has been the very sharp rise in extremely competitive compared to

The cruise market in 2006 - BRS 27 28 BRS - Shipping and Shipbuilding Markets in 2006 The tanker market in 2006

Crude oil transport: a year of surprises and uncertainties

WHILST CONCLUDING OUR PRE- and cargo movements for each category VIOUS ANNUAL REPORT WITH MIXED of tankers as is our custom. FEELINGS, WE WERE CONCERNED, To conclude, even if prophecy has WITH SOME JUSTIFICATION, ABOUT become a delicate and dangerous art in THE IMPACT OF THE APPETITE FOR our domain, we shall attempt to evaluate BUILDING NEW UNITS AND THE EVI- the general outlook as to what the future DENT EFFECT THAT THIS WOULD freight market might be in the years to HAVE ON RATES. come. Nonetheless, if we compare (as shown Before starting any detailed analysis of later) the average returns over the past the freight market and its possible evolu- two years in the three principal sizes of tion, let us begin by examining the princi- tankers, once again owners have mana- pal driving force of the tanker shipping ged to maintain successive profits by market: world oil consumption and its avoiding the pitfalls of a potential ton- forecast. Despite a constant rise in oil pri- nage surplus. ces since 2000 and in particular since However, if global demand for transport 2003 (a doubling of prices in three years), remains resolutely steady, the latest ana- demand has not dropped, on the contrary lysis of the orderbooks highlights the fact it has risen. Demand levels have undoub- that the imbalance of supply and demand tedly been contained by certain countries is at our doorstep. looking to find alternative energy sour- ces, but oil remains a vital and undenia- Thus, after a quick study of the macro- ble energy for numerous economies in economic and geopolitical factors, which full expansion. obviously have a fundamental influence on our activity, we will take a closer look Thus, the current forecasts project world at the recent evolution of freight rates consumption of 93.7 million bbls/day in

The tanker market in 2006 - BRS 29 VLCC TANKER FREIGHT RATES Average earnings US$/day 240,000 250,000 t (MT) MEG/Korea - TCE 220,000 260,000 t (MT) Forcados/Loop - TCE 200,000 275,000 t (MT) MEG/Continent - TCE 180,000 The strong volatility of freight rates has become a recurring characteris- 160,000 tic of our market. In preceding years, 140,000 it only took several days or weeks for 120,000 a market to collapse and then nume-

100,000 rous months for a recovery; now we are (at least for the moment) in a 80,000 contrary pattern and this year has 60,000 not been an exception. 40,000 Certain seasonal tendencies within 20,000 these fluctuations took place over the 0 preceding three years, with as princi- pal characteristic, strong freight 11-05 12-06 12-04 01-04 10-06 01-06 07-06 02-05 03-04 05-05 08-05 06-04 09-04 04-06 increases in the first and last quarters of each year, corresponding generally VLCC ELIGIBLE FLEET 1998-2009 to periods of stock-building and high winter demand. However this year, (Dwt) 200,000,000 whilst the first quarter respected this Less than 25 yrs Less than 15 yrs Double Hull only tendency, it was not the case for the 180,000,000 non eligible last quarter (except for the second

160,000,000 non DH eligible half of December) when rates remai- DH ned particularly lethargic. Conse- 140,000,000 quently it was in the summer and par-

120,000,000 ticularly in August, which is normally a calm month, that tension was at its 100,000,000 highest, both in terms of freight and

80,000,000 of crude oil prices, which surpassed $78 per barrel! One explanation of 60,000,000 this phenomenon was based on the

40,000,000 fear of another active hurricane sea- son in the Mexican Gulf, and serious 20,000,000 unrest concerning oil production in certain countries (Nigeria, Iraq). 0 Taking advantage of high quotas from OPEC during this period, consuming End 1999End End 1998End End 2001End End 2007End End 2003End End 2002End End 2005End End 2004End End 2006End End 2009End End 2000End End 2008End countries stockpiled during the sum- mer, thus impacting dramatically oil 2011 compared to 83.3 million in Faced with such changes, transport prices as well as freight rates. 2005, an increase of 12.5 %. This needs are also evolving constantly rate of increase is above that of the and we are seeing a continuous VLCC past ten years, due to the boom in increase in average voyage distances As we have just mentioned, last year the Chinese, Indian and Brazilian (ton-miles). Thus, for example, Chi- was marked by strong variations in economies amongst others. Whereas nese imports from West Africa are freight rates. In this category of tan- consumption in the United States inexorably rising and favour big size kers, the spread in returns varied and Western Europe is growing very ships (VLCCs), which therefore have from $20,000 to over $100,000 per moderately, growth in demand from found a fruitful alternative to the tra- day with peaks right at the beginning China is exponential! The continuous ditional voyages out of the Middle of the year and during the summer, expansion of industrial needs paired East Gulf. and troughs in April and at the end of with a rapidly increasing car popula- the year. tion means that the current Chinese Before looking at a detailed analysis oil consumption of 4.7 million of freight rates over the past year, If we take the Middle East Gulf as the bbls/day in 2001 will reach nearly 10 two particular points are worth reference point of the market, the million by 2011. making: peak returns registered by owners at

30 BRS - Shipping and Shipbuilding Markets in 2006 Monte Granada 150,581 dwt, double hull, built in 2004 by the Japanese shipyard Universal TSU, managed by Ibaizabal the start of the year and during the phasing-out date of single-hulls as to 481 last year. No less than 172 are summer can be largely explained by stipulated by the International Mari- on order (nearly 35 % of the current the volumes of cargoes. With a time Organisation. Whilst there is fleet), of which a majority are for weighted monthly average of 104 some uncertainty as to what position delivery in 2008 and 2009. cargoes, we saw close to 120 fixtures the main importers such as China The table on page 30 shows, that the on the spot market in January and and India will adopt, it is likely that volume of modern double-hulled ton- over 130 in August! the Gulf exporting countries will nage will match that of the world adhere to a strict policy on the res- Despite the constant pressure on fleet existing in 1998 only by the end trictive measures. bunker prices and the arrival of of 2008. However, the addition of numerous newbuildings, returns Again this year, even if a two-tiered “non-eligible” ships in the eyes of remained strong. The weighted ave- market has allowed modern ships to numerous Western charterers, but rage of the two most significant rou- continue to trade without mishap, still acceptable to a number of Eas- tes, Middle East Gulf / Far East and the proportion of demand for them tern charterers, shows a continuous Middle East Gulf / West, remained out of the Middle East Gulf for eas- increase in the world fleet and surprisingly stable at a little over tern destinations has remained slim explains the relative stagnation in $59,000/day. and irregular. They systematically freight rates. suffer from the weight of older ships It is also interesting to note that on on the market. SUEZMAX the West Africa / US Gulf or West Africa / East voyages, which are Currently, cargoes loading out of the Similarly to VLCCs, the freight fluc- both trade routes steadily increa- Middle East Gulf for western destina- tuations have been significant sing in volume, the same average tions, or those West of Suez and par- throughout the whole of last year returns are higher and rising stron- ticularly from West Africa are the with peaks notably in January and gly. Hence we have gone from over only ones allowing owners of double February as well as in the month of $63,000/day in 2005 to $68,000/ hull ships to justify their heavy August. Compared with the two pre- day this year. investments. As indicated above, vious years, although these peaks demand is increasing, notably for This phenomenon is particularly cha- were not as high, the troughs were voyages to the East and particularly racteristic of the VLCC market. The similar, although less frequently to China. Average freight rates resist attained. preponderance of single-hulls in the better and fluctuations upwards are East of Suez market, combined with On the traditional West Africa / US often sudden and significant. a traffic principally with Far Eastern Gulf route, the equivalent time-char- destinations, puts a damper on any For the record, at the end of 2006 ter rates averaged $44,000/day com- increase in freight rates. This situa- there were 502 VLCCs (of which pared to $43,000/day in 2005, and tion will likely continue in the coming nearly 65 % are double-hulled) in this despite a growing tendency years up until 2010, the expected active service worldwide, compared towards VLCC liftings (as we have just

The tanker market in 2006 - BRS 31 seen), and the recurring conflicts in the Black Sea with, nonetheless, an excess of $80,000/day in January, Nigeria which continuously disrupted annual average of about $58,000/ February, August and right at the production. The highest returns were day, compared to $65,000/day in end of the year. 2005 (principally due to the heavy seen at the beginning of February at Contrarily to what we have seen with disruption of traffic in the Turkish close to $67,000/day, and the floor the VLCC’s, single-hull tankers are straits during winter 2005, which was touched briefly during the first less numerous in the Suezmax sector was not the case at the end of 2006). half of April around $21,000/day. and do not usually influence the Wes- The low points were registered in tern markets. However, they remain The graphs are very similar on voya- April and in November around ever present East of Suez market as ges from the Mediterranean or out of $30,000/day and the maximums in reflected in the rates.

SUEZMAX TANKER FREIGHT RATES Thus, despite a constant increase in the available fleet, owners continue to Average earnings US$/day achieve average returns which justify 180,000 their investments. At the end of 2006, 130,000 t (MT) Sidi Kerir / Fos - TCE 160,000 the world Suezmax fleet comprised 130,000 t (MT) Forcados / Texas City - TCE 352 units, of which 78% were double- 140,000 hulled, compared to 335 ships at the end of 2005. 104 new units (a record 120,000 number) were ordered, of which a 100,000 large majority should join the fleet in 2009. 80,000 However, demand for Suezmax ton- 60,000 nage should increase in the coming years in all zones (except the North 40,000 Sea). In West Africa, Angolan product- 20,000 ion continues to increase and if the situation remains stable in Nigeria, 0 they could also see a jump in exports.

11-05 Liftings out of the Black Sea and the 12-06 12-04 01-04 10-06 01-06 07-06 02-05 03-04 05-05 08-05 09-04 04-06 06-04 Mediterranean should also be higher, due to new production sources from SUEZMAX ELIGIBLE FLEET 1998-2009 ex-Soviet bloc countries as well as (Dwt) 80,000,000 pipeline projects aimed to relieve traf-

Less than 25 yrs Less than 15 yrs Double Hull only fic through the Turkish Straits. At the 70,000,000 same time, increased production is expected out of Libya and Algeria. non eligible 60,000,000 Finally, even if the North Sea is decli- non DH eligible ning, exports from the Baltic are more DH 50,000,000 and more regular and will shortly interest Suezmaxes and especially 40,000,000 the “ice-class” ships (today there are fifteen units of Class 1A or 1B.) 30,000,000 The graph on the left shows the large difference which exists bet- 20,000,000 ween the Suezmax size and the VLCC’s. At the end of 2006 the ton- 10,000,000 nage of double-hull Suezmaxes is practically the same global tonnage

0 (all types together) as in 1998 and even 2002. The older ships are End 1999End End 1998End End 2001End End 2007End End 2003End End 2006End End 2009End End 2005End End 2008End End 2002End End 2004End End 2000End mostly dispersed over different geo-

32 BRS - Shipping and Shipbuilding Markets in 2006 AFRAMAX TANKER FREIGHT RATES

US$/day Average earnings 160,000

80,000 (MT) UK/Continent - TCE 140,000 80,000 (MT) East Med/West Med - TCE graphical zones and no longer play 120,000 a major role on the market, in contrast with the VLCC category. 100,000 It is thus evident that the progressive enforcement of international regula- 80,000 tions aiming to eliminate all non dou- ble-hulls by 2010, will have less of an 60,000 impact on Suezmaxes compared to the other sizes. Only a constant 40,000 increase in demand and a lengthening of voyages will be able to compensate 20,000 for the increase in the fleet. Although such a scenario seems probable from 0

now until the end of 2008, one can 11-05 12-04 12-06 01-04 01-06 10-06 07-06 02-05 03-04 04-06 09-04 05-05 08-05 nonetheless fear that the 54 ships on 06-04 order for delivery in 2009 and the 23 AFRAMAX ELIGIBLE FLEET 1998-2009 already signed up for 2010 might cause an imbalance in the long term, (Dwt) 100,000,000 posing a problem for owners. Less than 25 yrs Less than 15 yrs Double Hull only

AFRAMAX non eligible 80,000,000 The popularity for this size of tankers non DH eligible remains particularly strong, since it DH numbers 728 units at the moment, 60,000,000 nearly twice the number of existing Suezmaxes. If one adds the 242 orders already in the books for the 40,000,000 next five years, owners must count on both a market which is continuously growing, but also on the development 20,000,000 of new routes, in order to hope for freight rates to be maintained… For the record, at the same time last year 0 the orderbook only showed around a hundred ships. nd 2005 nd nd 2009 nd nd 2008 nd nd 2004 nd nd 2000 nd End 2001End End 1999End End 1998End End 2002End End 2007End End 2003End End 2006End E E E E E The graph on the right shows that the weighted average returns on the two reference voyage routes have drop- over $80,000/day in North Sea. Only The seasonal impact that we have ped, going from $57,000/day in 2005 in the second half of December were observed in other size categories to $43,450/day in 2006. One sees owners able to rediscover the record this year has not occurred in the also that the magnitude of freight levels of the previous two years, Aframaxes, as was the case in prece- rate changes and their cycles are mainly thanks to temporary “traffic- ding years. Not only is the above always sudden and severe, a special jams” through the Turkish straits. graph something of a permanent characteristic of this category of tan- switchback with spreads in returns However, if the magnitude in the kers. 2005 and 2004 were both doubling in the space of several exceptional years, with rates in 2005 variations has been less significant, weeks, and even days, but the simi- above $80,000/day in the Mediterra- it is worth noting that the floor larity between one geographical nean and $120,000/day in the North returns have never dropped below zone and another, which we find in Sea. Last year levels were far more those of the past two years (around the other size categories, is only modest, although reaching peaks at a $20,000/day) and that the “depres- very occasionally encountered bet- higher frequency, at more than sed” phases in the market rarely last- ween the North Sea and the Medi- $60,000/day in Mediterranean and ed more than a week… terranean.

The tanker market in 2006 - BRS 33 In Europe, two factors, which have CONCLUSION an even larger percentage of world oil been very influential on this market production and anxious to assure the in previous years, have been accen- World oil consumption is clearly security of their exports, will actively tuated in these last months: going to increase over the coming participate in following the regula- years, driven by the rapidly growing tions. The 102 VLCCs which have been In Northern Europe, the progres- economies of certain countries. The ordered for delivery in 2009 and sive decline in production and analysis of the evolution in the order- 2010, apart from the fact that they exports from the older North Sea book, showing the variety of availa- have been signed up at record price terminals is being compensated ble shipyards open for business in levels, indicate that their owners do today by a continuous increase in Asia and the insatiable appetite of not seem to have any doubt as to the Russian exports from the Baltic. owners, is enough to worry any implementation of these rules. The very strong hike in rates obser- expert with regards to future rates. ved over the past two winter The massive arrival of new units The question is quite different when periods has not taken place this from now until 2010 adding to the considering smaller size categories, year, partly because of far more existing fleet can only, on paper, lead in that the older ships no longer clement weather, but also due to a to a considerable imbalance in sup- have a significant effect on freight fairly massive arrival of ice-class ply and demand and an inevitable fall rates. With respect to the Suez- tankers (62 ships either 1A or 1B are in freight rates. maxes, with the exception of an important arrival of new units in currently in operation.) Even if during the next three years 2009 and 2010 with the possible we see the traditional acrobatics and In the Mediterranean, exports from delays from certain shipyards, the wild fluctuations to which we have the Black Sea are the uncontested supply / demand balance should be become accustomed, this will be barometer of the Aframax market maintained at least during the next accompanied almost certainly by a (and also the Suezmaxes). Even two years. The Aframax category is steady but measured decline in ave- though the transit of the Turkish the only one for which we can antici- rage freight rates. Whereas some straits has been far more fluid in 2006 pate a possible drop in rates, unless predict a pure and simple collapse, (apart from right at the end of the there is a very favourable and rapid we remain far more careful. year), any rise or fall in demand in this expansion in demand. The salvation zone has had an immediate reper- The reasons for being optimistic for for this size category could also cussion on the rates of traditional owners are diverse, but rather than come from the gradual elimination cross-Med voyages. giving an exhaustive list, we will pick of the oldest ships which continue to out two aspects which at the Whilst the older single hulls conti- dominate the market East of Suez. moment may potentially counter the nue to weigh heavily on the VLCC The second factor, which could pessimistic omens. market, this is not the case for Afra- enable owners to envisage a more maxes, at least certainly not in West VLCCs, which have played the driving favourable future is a healthy time- of Suez markets. Thus, the analysis force on the overall market for such a charter market. Throughout last of the “eligible” fleet no longer has long time, seem today to be declining. year, negotiations and recorded the same value nor the same signi- As we have seen earlier, the quantity rates demonstrate a strong resis- ficance as was the case three or of old single-hulled ships dictates the tance on the part of owners of four years ago. freight levels of what has become the modern ships among the three main main driver of this market: the exube- categories of tankers. For most With presently nearly 60 million dwt rant demand from Asian countries, in enquiry, the offers were limited and of double-hull tankers in service at particular China and India. Although rates concluded showed that the the end of 2006, we are already freight levels for these big tankers market could remain bullish. As an almost 20 % above the level of the have little chance of improving up illustration of this phenomenon, the fleet in service between 1999 and until 2010, one should expect a dra- rates recorded in the last quarter 2002. On the basis of current orders matic change when the IMO regula- for unusually long three year and, even if some ships are fitted to tions aiming to eliminate single-hull periods were at averages of nearly carry refined products rather than tankers come into effect. It is difficult $50,000/day for a VLCC, near to crude in the long term, the world to know to what extent the applica- $39,000/day for a Suezmax, and fleet of Aframaxes (double-hulled) tion of such a measure will be met $29,000/day for an Aframax. At the will amount to over 80 million dwt at with by the various importing coun- same time, no foreseeable sign of the end of 2009! Will demand be tries, but one can reasonably imagine lower rates is apparent for the there to match this? that the Gulf countries, representing moment. ■

34 BRS - Shipping and Shipbuilding Markets in 2006 The crude tanker second-hand market

“Courage, more courage, forever courage!”

SUCH WERE THE WORDS USED freight rates, offered in 2006 for shed the first quarter with values BY GEORGES JACQUES DANTON, time-charters, did not justify paying even higher for double-hulls. The WHEN MINISTER OF JUSTICE AT “115”, with rates remaining volatile, it second quarter gave evidence of a THE TIME OF THE FRENCH REVO- made more sense to pay “100” now lack of interest for the oldest single- LUTION IN SEPTEMBER 1792, for a ship which would be on the hulls and their prices therefore suf- when concluding his speech before water only in 2009 or 2010 and fered. Once the market started to the legislative assembly, inciting benefit from 8 or 9 years more find its bearings, in the course of the them to take courage in order to be depreciation, compared to a 5 year third quarter, sale prices of very able to face the perils they were old ship. Those who bet otherwise modern tankers surpassed previous about to encounter with the revolu- and preferred taking the risk to pay levels, thus showing that plenty of tion under way. “115” for a prompt ship, or “100” for a buyers were wanting to acquire After two particularly favourable 5 year old one, have also shown modern tonnage available on the years, tanker owners had to have the signs of even greater courage! market. On the other hand, values for the older tankers continued their courage to continue investing in view We should nevertheless pay tribute moderate decline. The last quarter of the already high prices for this to “the last of the Mohicans”, tankers was gloomy and inactive. The market type of ship. If we analyse the that, slowly but surely, are beginning thinned out, but prices of modern volume of second-hand transactions to disappear from our radar screens and double-hull tankers did not drop, for tankers in 2006, we can readily over the past five years. Indeed it even if their daily rates on the spot conclude that owners lacked cou- was in 2006 that the very last ships market were under pressure. It is rage this year. from the 70’s stopped sailing the worth noting that the value of seas. The few remaining Aframaxes As we shall see later on, owners pre- modern single-hulls (built 1990/1991) built in 1979 saw their days end in ferred to wait and be cautious, to finished the year at equal or at 2006 based on the IMO and Euro- avoid paying over the odds for their superior levels to those at the end of pean regulations (whereas they future fleet. Nearly everyone pre- 2005. Finally, as happens every year, could have continued until 2007 dicts that there will be a decline in there was a spurt in activity at the prices in time and prefer to renew according to the OPA 90 regula- end of December for the usual fiscal their fleet under more advantageous tions.) In 2007 tankers in Category 1 reasons. conditions. The reality for 2006 is in (single-hull - non SBT) or in Category 2 and 3 (SBT, double-hull, or double- fact more complex, since although The second-hand market for sided) built in 1980 and 1981 will owners were very reluctant to touch VLCCs the second-hand ships, they none- disappear. With few available candidates, and theless went massively into ordering The trend which began last year, high prices, there was again a very newbuildings and thus showed them- which saw signs of a market division modest volume of business although selves to be courageous. Forever between double-hulls and single- slightly above the 2005 level. Forty- courageous… hulls, was sharply accentuated in the five ships changed hands this year The alternative of newbuildings course of the year and 2007 could compared to 34 the previous year. As struck them as not necessarily being well mark the definitive arrival of a a reminder, there was a record num- a better investment, but simply a “two-tiered market” for these diffe- ber of sales in 2004 with 82 transac- more prudent one, taking into rent types of hull structures. Elsew- tions, whilst 44 units were sold in account the price and age of the here we have witnessed, as in pre- 2003, 24 in 2002 and 37 in 2001. ship. For a good number of tankers of vious years, a remarkable number of this type, and all throughout 2006, en-bloc sales, even if the number of Not one VLCC built in the 70’s chan- pricing (base 100) for a 5 year old tankers and the amounts in question ged hands, even though up till last second-hand ship was “100”, “115” have been less. Generally speaking, year this category constituted the for a ship just coming out of dock, or the year began with firm values for favourite target by buyers for sto- “100” for a new ship for delivery in all tankers (double and single hulls), rage or conversions. Such buyers are two and a half years. Since the daily but activity whilst initially slow, fini- now diverting their attention to the

The tanker market in 2006 - BRS 35 few existing ships from the 80’s, and the previous four years. Spot rates king to acquire tonnage for transport it would appear that the best of which the oldest ships were able to are no longer attracted by single- these have and will continue to have enjoy, remained sufficiently high for hulls, but remain confident over the an ’“assured” future in the storage or owners not to have to contemplate medium term in modern ships retai- conversion field. the option of scrapping, despite the ning their value. These values stayed attractive prices being proposed by firm throughout the year. The natio- Buying and selling activity for single- demolishers (above $400/ton). In nality and structure of buyers were hulls was lively in 2006, since 19 addition these ships, often fully varied. To illustrate this, we can cite units changed hands compared to amortized a long time ago are able the sale in February of two Korean only 9 in the previous year. Out of to accept slightly reduced rates. Like- resales to Greek buyers (the hulls these 19, at least 8 were used in wise, only 18 new VLCCs have come Samho S272 and S276) for $82.5 conversion or storage projects. We into service this year but the order- million each and both to be delivered can cite as an example the sale of the book includes no less than 172 tan- during 2007, whereas at the end of sister ships m/t Al Funtas and m/t kers at the end of December 2006. the year two other resales (the hulls Kazimah, of 290,000 dwt build in Samsung 1684 and 1685) for deli- 1982, at around $25.5 million apiece, The Suezmax very in 2008 and 2009, achieved as well as the bloc sale of m/t Island second-hand market $85.0 million each, despite their Accord and Island Bauhinia, much later delivery date. The most 255,000 dwt built 1988, for around Tankers from 120,000-200,000 dwt significant sale took place in March $41.0 million each. The 11 other units suffered a serious reduction in the when Top Tankers sold en-bloc 8 were acquired by Greek or Far Eas- number of transactions in 2006, units, the m/t Flawless, Limitless, tern buyers. One of these, the m/t compared to previous years, namely Priceless, Faultless, Stainless, Noi- C.Trust bought at a price of around only 38 sales versus 60 which chan- seless, Endless and Stopless built $45.5 million, is due to be converted ged hands in 2005, 43 in 2004 and between 1991 and 1993 with Hyundai, by its buyer to a double-hull. 53 the year before. Prices for this size have been increasing, improving Ishibras and Samsung for a price of The number of double-hull VLCCs by some 10-12 % between January roughly $50 million per ship. Another built from 1993 and sold this year and December, for double and single notable sale was that en-bloc of three amounted to 25 units (resale hulls built in the 90’s. In contrast to Suezmaxes built with Samsung, the contracts included), namely fairly VLCCs, where individual sales were m/t Summer Sky (160,200 dwt – comparable to the 21 transactions in predominant, there were many more 2002), m/t Calm Sea (159,000 dwt – 2005. They numbered 31 in 2004, 23 en-bloc sales in the Suezmax cate- 2003) and the Glyfada Spirit in 2003, 5 in 2002, and 14 in 2001. gory. (159,600 dwt – 2003), for a package Activity was concentrated on the price of around $240.6 million. most modern tankers, those built Of the 38 reported deals, 8 of them after 2000. To illustrate the rise in concerned single hulls built between As for the VLCCs, there was no Suez- values over the year we can quote the 1976 and 1993, of which six were des- max sale for demolition this year, example of a sale in June of a VLCC tined for either storage or conver- whereas 26 new ships entered the built by Hyundai in 1996 for $91.0 mil- sion projects. As an example there fleet. The orderbook for the forthco- lion and resold by its buyer at the end was the sale of the m/t Oriental ming years (up until 2011) identifies of the year for $98.0 million. Tankers Tige, 180,377 dwt built in 1982, at a 124 new units at the end of December. under 5 years and resales took the price of $25.2 million. Two other sin- The Aframax and Panamax lion’s share, since they represent 17 gle-hulls sold for further trading use, second-hand market transactions. Three sellers were par- were bought by the same Greek ticularly noteworthy for having dispo- owner in February and November Although prices remained firm, the sed of 15 tankers: Gulf Marine Mana- 2006, the latter being the m/t Glen volume of activity was again very gement with 4 units, Formosa Plastics Roy, 144,100 dwt built in 1992, for modest and in line with the reduction Marine with 5 units and Frontline with around $29.75 million. already seen last year. In 2006 only 6 units. One of the most impressive of 46 Aframaxes changed hands against Sales of modern double-hulls thus these was that of the m/t Front Bei- 66 in 2005, and 114 in 2004. We have represented 30 transactions. This jing, 299,235 dwt built in 2006, for included ships of 60,000 dwt and number is in line with volumes $142.0 million in September. over 32.3 m in width in these figures. contracted in the preceding years (35 Not one VLCC was scrapped in 2006, end 2005, 30 end 2004, and 37 in Faith in the capability of single-hulls against respectively 1, 5, 27, and 36 in 2003). It is evident that buyers loo- to remain a good investment fell

36 BRS - Shipping and Shipbuilding Markets in 2006 TANKER - DELETIONS

(dwt) (incl. demolition, conversion, total loss) 10,000,000 VLCC Suezmax

Aframax sharply this year, as only 9 units were 8,000,000 sold to continue trading, compared to 40 in 2005 and 45 in 2004. Nonethe- less it should be observed that ins- 6,000,000 tead of selling, many owners decided to convert their single-hulls into dou- ble-hulls. The values of these ships 4,000,000 has remained firm, helped by the demolition price staying over $400 per ton. This can be seen by the sale in July of the m/t Jag Leena, 95,000 2,000,000 dwt built in 1985, for a price in the order of $12.0 million, and in Novem- ber by that of the m/t Quasar, 0 2003 2004 2005 2006 97,000 dwt built in 1989, for $20.0 million.

The modern double-hulled Aframaxes in 2006 and the orderbook at the end for a price of $62.5 million each. The got special attention in this market, of the year gives 261 ships of which most important en bloc transaction and the number of transactions was 62 should enter the fleet in 2007. took place in March 2006 by IMC, up. We have recorded no less than 37 when they sold 8 tankers under The Panamax tankers (with a width compared with only 26 in 2005, and construction with Dalian and delive- less than 32.3 metres) saw a more 39 in 2004. Sales were evenly spread rable between 2007 and 2008 for a modest level of transactions, namely between the different generations of combined price of $450 million. 31 in total for 2006. There were 57 double-hulls, and tankers built bet- the previous year and 29 in 2004. Just as was the case last year the ween 1991 and 1995 were for their part operating fleet increased substan- in particular demand. There was for As with the Aframax, very few sin- tially this year since, on one hand example the sale in the month of gle-hulls changed hands in 2006 only 5 tankers of over 60,000 dwt March of the m/t Fosna, 98,300 dwt and only four units, built between and less than 32.3 m width were built in 1992, for $38.5 million, as well 1981 and 1983 were transacted. demolished (against 15, 13, and 15 as in August that of the m/t Mare Amongst these were the “win-win” again for the three previous years) Dorico, 89,999 dwt built in 1993, for sale scheme by Liquimar for conver- and on the other hand, 42 tankers $39.0 million. At the same time within sion as “dry self unloaders” to Ame- joined the fleet. The order book at the 37 sales, 18 tankers built between rican buyers, carried out on the m/t the end of 2006 comes to 134 tan- 2000 and 2006 were transacted. In Ektoras and Patroklos of 61,400 kers of which 46 are for delivery in particular there was the sale in dwt built in 1981, sold for around $7.0 the course of 2007. February of the m/t Ionian Spirit, million each. The seller optimising 112,000 dwt built in 2002, as well as his sale price compared to demoli- The second-hand market two sister ships, the Aegean Spirit tion value and the buyer optimising of OBO ships and Chios Spirit, sold en bloc for a his purchase price compared to a substantial price of $69 million each. standard bulk-carrier. Supported both by the dry bulk and At the end of the year, the LR2 Sea- liquid bulk markets, these ships have The remaining deals (27) relate to queen, 109,000 dwt built in China in again drawn the attention of some double-hulls, of which no less than 21 1998, was also able to obtain close to owners since no less than 23 sales were built after 2000. It emerges $62 million on behalf of Indian buyers. were achieved in 2006, compared to that the principal concern of buyers only 16 in the previous year. Nine As with the larger size tankers, very is to obtain modern units or “resa- ships sold were built between 1981 few Aframaxes were taken off to the les” in cases of transactions comple- and 1989, whilst the remaining 14 scrapyards in 2006: only 12 ships ted with a period time charter. The units are situated in the narrow were demolished versus respectively latter were done mainly at the begin- period of 1991 and 1993. 16, 30, 35, and 20 for the four last ning of the year. We can give as an years. At the same time as the with- example the sale en bloc of the m/t Amongst ships built in the 80’s, we drawal of these 12 from the fleet, 55 Rudolf Schulte and Everhard saw the biggest deadweight ship ships were delivered by the shipyards Schulte, 74,999 dwt built in 2004, in this category, the OBO Nobel

The tanker market in 2006 - BRS 37 TANKER SECOND-HAND PRICES

130 $m

110 VLCC 305,000 dwt 5 years that, if a drop takes place, it will be Aframax 105,000 dwt 5 years sharp, sudden, and sustained, in par- MR Product 45,000 dwt 5 years 90 ticular for the more modern ships. The “two-tiered market” evoked ear- 70 lier will help absorb the shock of any eventual decline in demand, and it is probable that owners will bend over 50 backwards to maintain the value of any double-hull ship. The trend towards a weakening of single-hull 30 values has already started and should accelerate. The potential of ships sus-

10 ceptible of being scrapped, “without regrets” on the part of their owners, 01-05 10-05 10-04 01-06 10-06 01-04 07-05 07-04 07-06 04-05 04-04 04-06 is considerable since very few ships have been demolished these past Snapper, of 135,160 dwt built in as confined as generally thought, four years. This will help to absorb the 1982, sold for a price in the order of and probably merits more attention. surplus tonnage to be delivered. $14.0 million to Venezuelan buyers Finally, many of the owners have a for conversion. Elsewhere combined TOMORROW’S MARKET foot in the dry bulk and the other in ships were the object of three major the liquid bulk and if rates for dry bulk en bloc transactions, - which inclu- The strength of the orderbook of are maintained or increase in the ded the sale of six ships of 50,000 shipyards leads one to think that course of 2007, owners will benefit dwt built between 1988 and 1989 for there will not be a substantial drop in from a new flow of liquidity which a total price of $125.0 million, as well the price of newbuildings. The should encourage them not to sell as the sale by Genmar of nine sister volume of the existing fleet, together their tankers at rock bottom prices. ships of 100,000 dwt built by Hyun- with the volume on order, should A brief journey back in time allows us dai between 1991 and 1992, for a however bring about a decline in the to remember that the most impor- price of $28 million each to Singapo- prices of second-hand ships in the tant fall in prices took place between rean buyers. The seller was thus able short term, although we doubt that it January 2001 and September 2002. to find a level close to his purchase in will be drastic or sudden. At this time the price of a 5 years old 2001, which came to around $30 mil- The resistance to lower values of VLCC had collapsed from $70 million lion each at the time. The third signi- their assets by owners has always to about $53 million in 21 months, ficant sale in this category happened been stronger than the flexibility equivalent to a drop of around 1.2% at the end of the year when B+H they show with rising values. Owners per month. The value of a 5 year old released on subjects the OBO Sibo- have accepted and understood the VLCC in September 2002 was equi- tura (75,000 dwt built 1992), Sibo- volatility of the freight market and valent to 75.5% of the value it had in nina (83,155 dwt, 1993) and Siboelf no longer fear to be a player or spec- January 2001. The orderbook for (1993) for around $110.0 million. The tator of a disconnection between VLCCs in January 2001 (92 ships) same owners had already bought declining freight returns on one represented 21 % of ships on the earlier in the year the Sibohelle hand and stable, robust ones on the water (440 units). In January 2007, (82,800 dwt built in 1993) for around other hand. The operating of ships the price of a 5 year old VLCC is $36.4 million, as well as the Sibo- these last years has generated a around $118 million, and the order- tessa (75,000 dwt built in 1992) for treasure chest for owners and a book (172 ships) represents 36 % of $30.4 million. considerable liquidity reserve. the existing fleet (502 ships). These This year saw 4 combined ships go to Finally, China but also other Asian figures could lead one to fear, at first scrap, against one in 2005, 4 in countries are proof of economic sight, of a potentially severe and per- 2004 and 5 in 2003. For the record growth which will benefit the activity sisting drop in values. However in rea- the last OBOs that entered the fleet of this sector. All these reasons lead lity we do not subscribe to such a sce- were two ships of 120,000 dwt deli- us to believe that even if the supply nario, as another essential parameter vered in 2003 to Norwegian owners. of tonnage becomes too important needs to be taken into account: the One suspects that this market is not for the demand, it is highly unlikely long, extended delivery period. This

38 BRS - Shipping and Shipbuilding Markets in 2006 parameter, also applicable to Suez- pro-active stand on this theme. (the European Commissioner for maxes and Aframaxes, will signifi- Indeed Shell has been able to obtain the Environment). Transport in all cantly reduce the pressure of the a “Green Passport” with Lloyd’s forms represents 14 % of green- new arrivals into the fleet. Register for its fleet of 25 LNG car- house gas emissions in the world riers, and doubtless is thinking about (20 % in Europe). By comparison, So much for the short term. We will obtaining these for the tanker fleet the production of energy represents not stick our necks out further and that it operates. In simple terms, this 60 % and industry 10 %. Out of the try to predict beyond, but perhaps passport (not obligatory at this 14 % attributed to transport, less this is an opportunity to highlight a stage) consists of drawing up a list, than 2 % comes from shipping and strong but growing sentiment, which, identifying, and analysing waste rail transport combined, which goes while still relatively unformulated at considered dangerous, either for to show that not only is shipping the the moment, nonetheless is beco- people or for the environment, exis- most economical form of transport ming more and more pronounced ting on board a ship, in order to per ton but also the most ecological. each year. ensure a control and eventual dispo- Nonetheless, smart owners can This sentiment is that it will become sal in conformity with international start taking an interest in the Euro- necessary, if not imperative, for regulations in place. Elsewhere, pean mechanism of trading emis- owners to become “environmentally some Italian owners have already sion rights of CO2 (with CO2 causing friendly” in operating ships, in their ordered new units to be in confor- 80 % of the greenhouse gas effect); general attitude to shareholders and mity with the “Green Passport Sta- the Emission Trading Scheme (ETS) within their profession, and even tement of Compliance” (which came into force in January 2005 for more fundamentally in their overall conforms to the guidelines of the two years. Phase 1 mainly concerns approach concerning services ren- IMO recommendations). All of these the production of electricity and dered. First of all in terms of an steps lead one to believe that it is phase 2 will include aviation trans- owner in respect of his clients and, not improbable that such a confor- port starting in 2008. So when is over the longer term, but also being mity will be part of the standard shipping’s turn? “The sooner the concerned about the image of res- “vetting” criteria for oil companies better!” according to Mr Dimas. ponsibility, of himself and his com- before long, under the growing Some free advice to owners! pany, that the owner would like to influence of ecological constraints. Again, it seems reasonable to think project, not only to his own country- The forerunners in this field will that the forerunners in this field men but throughout the world. Too congratulate themselves. will be able to congratulate them- early for such thinking! Far more In a similar vein of thinking, some selves. ■ problems than advantages for the will find it beneficial to follow the moment! We shall see… recommendations of the World Possibly, but there are already clear Bank recently made at the IMO and signs today of some people taking a supported by Mr. Stavros Dimas,

The transport of refined oil products

“Cave ne cadas!” sels have remained at very high res from 1 to 3 years by 5-8 %. As for levels. Contrary to our expectations, Long Range owners, the decline of the market has been able to absorb FOR THE FOURTH CONSECUTIVE 10-15 % on daily rates has not affec- the numerous delivery of new ships. ted the periods which have achieved YEAR, OWNERS OF PRODUCT levels comparable to 2005. TANKERS WILL POST MORE Owners of Handysize and Medium THAN SATISFACTORY RESULTS Range ships have managed to In contrast to the three previous years, since the average daily returns, contain the declining returns on the the high growth levels within the Far both on the spot market, and in spot market to 3–5 %, and have East, and in particular China, have not period business for all size of ves- improved rates paid on period fixtu- been sufficient to compensate for the

The tanker market in 2006 - BRS 39 has declined, and, after the short- lived summer hike, the market took its time to recover. In December freight levels were nearly 25 % below those achieved at the end of 2005. Time charter business remained active with sixty ships chartered for 12 month periods and the rates improved by close to 5 % compared to last year. Charterers willingly paid $21,000–22,000/day for 3 year periods, and $22,000-25,000/day

Castillo de Trujillo for 12 month periods. The relative 30,582 dwt, double hull, IMO III, built in 2004 by the Russian shipyard Khersonskyi, stability of the fleet (116 ships on owned by Elcano order for 95 ships over 25 years old) and the existence of pools (Handy Tankers, Norient) should allow rates drop in average daily rates which was (+30 % compared to 2005 and to be maintained in 2007 as long as close to 20 % on the reference voyage 2004). Over a hundred ships were the level of activity remains steady. route (55,000t naphtha Persian chartered by oil companies who Gulf/Japan). Ships employed in the generally preferred 2-3 year periods. The Medium Range ships from Atlantic zone have seen a decline of Time charters at fixed rates was 40,000 to 53,999 dwt nearly 10 % in their daily returns, des- considerably more frequent compa- The average daily returns on these pite the sudden and unexpected red to “profit sharing” or “market vessels was around $23,000- increases this summer caused by poli- related” formulae, which underlines 24,000/day, a drop of some 10 % tical events (the Lebanese and Iraqi a certain nervousness of charterers over last year, but contrary to the crises) or material ones (problems with concerning the medium term future preceding year, ships operating East the Prudhoe Bay pipeline). of product tanker markets. of Suez were not as well off as those Rates declined slowly from January Although a good half of MRs to be operating in the Atlantic zone. Ave- to May 2006 with the market always delivered in 2007 have already been rage daily returns for ships opera- staying above $17,000/day in the chartered out on periods, and many ting East of Suez came out to Atlantic zone, whilst dipping down are speculating on the repercus- around $21,000-22,000/day whilst to nearly $13,000/day East of Suez. sions that the new IMO rules will average returns for 37,000 t unlead- ed on a Continent/Transatlantic The strong recovery in the summer have on the vegoil market, it is dis- voyage swung between $15,500/day was not enough to see a return to concerting to think that more than in November and $31,000/day in the highs of 2005 and was followed 630 product tankers (of which 320 August, with the yearly average by a severe drop which lasted until MRs) will be joining the fleet, which being $23,500/day. the beginning of November, to counts 320 tankers over 20 years attain $17,000/day for LR1s East of old today. A smaller part of the fleet was Suez and $15,000/day for MRs on employed in dirty products or crude Continent/Transatlantic voyages. THE EVOLUTION OF PRODUCT oil where average returns scarcely This extended decline explains why TANKER FREIGHT RATES IN surpassed those for clean products. the yearly averages were below 2006: A GOOD YEAR DESPITE East of Suez, the market was far less those of 2005, since the improve- A GENERAL DROP IN LEVELS. volatile compared to the two pre- ment which followed in the last six vious years, but opportunities to opti- weeks of the year was limited. The Handysize ships from mise voyages were plentiful thanks to 30,000 to 39,999 dwt Like last year, rates paid for period Indian and Korean exports. In a less business slowly came in line with The average daily returns work out to favourable context for owners, nume- spot returns. The market was parti- about $23,500-24,000/day, a drop of rous periods were fixed with over 80 cularly active, over 200 ships with about 10 % compared to last year, ships in this size being chartered for tonnage over 30,000 dwt were fixed with less variation. The share of the over 12 months, half being for 3 to 7 for minimum 12 month periods fleet carrying dirty products (fuel oil) years.

40 BRS - Shipping and Shipbuilding Markets in 2006 Oil companies, including Majors, ducts ($40,000/day for Aframaxes, demand for product tankers. In the were active in this market, ensuring $35,000/day for Panamaxes). light of these conditions, a reduc- half of the charters, and traders tion in freight rates is predictable, Some thirty periods for a minimum such as ST Shipping, Morgan Stan- especially considering that owners of 12 months were fixed for LR1s and ley, Projector and Vitol taking the have benefited from unexpected around ten for LR2s. Most of these other half. external events in 2005 and 2006. charters were concluded in the first At the end of the year, the time-char- 8 months of the year. Charterers However the situation is variable ter value of a modern MR (less than 5 slowly became more circumspect in depending on the size category of years) was comparable to levels of the their analysis of the forward market. the fleet. previous year: $25,000-26,000/day Notwithstanding, the yearly average For Handysizes, some 630 ships are for 1 year, $23,000-23,500/day for for LR1s of under 5 years works out in service and 116 on order, compa- 2 years, $22,000-22,500/day for to $28,000-29,000/day for 1 year, red to 96 units over 25 years old. 3 years, $20,000-21,000/day for $25,000-26,500/day for 3 years, The fleet has stabilized in volume 5 years, on condition of delivery $24,000-25,000/day for 5 years (on around 20 million tons deadweight. before the first quarter 2007. condition, once again, that delivery A considerable part of the fleet is in is by the first quarter 2007), whilst On the other hand, the ice premium the hands of pools. All in all, we LR2s obtained up to $29,000/day was reduced to scarcely $1,000/day, expect a balanced situation which for 3 years, and $27,000/day for 5 with a charterer even fixing a “1a” should only be threatened by com- years. class vessel at a rate of $25,000/day petition from the Medium Range for 12 months. One should observe that for all sizes ships. of product tankers, the rate levels In the MR category, the fleet com- The Long Range ships from obtained on short term periods of prises some 730 ships with an ave- 54,000 to 90,000 dwt 12–24 months are nowadays in line rage age of 8.8 years. More than with daily returns on spot voyages. Despite strong demand for light dis- 300 ships are due to be delivered in This situation leads one to think tillate (naphtha) into China, India, the next 3 years. A significant part that the “bears” will start to take Japan, and Korea and the increase of the fleet is in the hands of tra- the place of the “bulls”. in exports of middle distillate (gas ders (notably ST Shipping), who are oil) into Europe, LR1s and LR2s saw capable of reducing their positions their average daily returns drop by DELIVERIES OF NEW SHIPS by a good third in the space of six nearly 15 % compared to 2005. In 2007, deliveries of new ships months. Conditions are ripe for a LR1s obtained an average of around should reach: substantial correction in short term $28,000/day whereas LR2s did not rates and only the extent of the ◆ ships from 25,000 to 35,000 dwt: go over $35,500/day. correction and how long it will last 12 ships totalling 375,000 dwt, is in doubt. The volatility in the market was rela- ◆ ships from 35,000 to 40,000 dwt: tively low and, as with the smaller 47 ships totalling 1,765,500 dwt, For the LR1s, there are some 330 size ships, the “bull market” which ships in the fleet with an average ◆ ships from 40,000 to 54,000 emerged in July and August pushing age of 11.4 years. This fleet consists dwt: 128 ships totalling 6,047,000 levels to their highs, deflated in Octo- of 3/5ths of coated ships (product dwt, ber and November and the market tankers), but half of the fleet is ◆ only resumed its normal seasonal ships from 54,000 to 90,000 dwt: engaged in crude or fuel oil move- pattern towards mid-December. 48 ships totalling 3,490,000 dwt, ments. 132 ships (nearly all coated) to which should be added 10 Afra- are under construction. Pools and The transatlantic market for refi- maxes totalling 1,086,000 dwt. traders control a significant part of ned products did not offer a valid the fleet operating both in crude alternative to LR1s and LR2s, since To sum up, taken both globally and and products. A drop in rates is pro- the risk linked to trading large-size separated into categories, the pro- bable, but could be tempered by the cargoes was often considered too duct tanker fleet is young and suffi- disappearance of the oldest ships in great compared to the voyage ciently endowed to satisfy demand. the fleet, as well as by the versatility returns. Nonetheless, the average Estimated arrivals into the fleet of these ships. daily returns obtained on crude over the next three years should and fuel oil cargoes were 10–15 % exceed forecasted requirements, Finally in the LR2 category, 105 better than those for clean pro- given the foreseeable increase in ships are in service and 63 on order.

The tanker market in 2006 - BRS 41 PRODUCT TANKER FREIGHT RATES Average earnings

US$/day 70,000 28,500 t Caribs / USAC 55,000 t MEG /Japan 33,000 t Antwerp / New York 60,000 of some forty existing ships by the end of 2007, the demand for new 50,000 IMO3 ships will probably be limited to around a further forty ships. 40,000 The effect of the OPEX increases 30,000 The need for security has a cost: the need for crew, particularly trai- 20,000 ned and experienced officers, has brought about a substantial

10,000 increase in the running costs of tan- kers (40 % to 50 % for crew costs).

0 At the same time, cost of lubricants has gone up by over 100 %. Whilst 11/05 11/06 01/06 01/05 07/05 07/06 03/05 03/06 09/05 09/06 05/06 05/05 the majority of owners (particularly the KGs) took into account an Fifty percent of these ships are the product transport market over increase in these OPEX (Operating Expenses) at a rate of 2-3 % per transporting either crude or fuel oil. the last 4 years. The relative slowing annum, the actual cost increases in The pool “LR2” controls over 20 % down of growth in this zone will ine- 2006 have been between 15-20%. of the existing fleet. These ships vitably have an effect on tonnage Given the competition, notably depend on the state of the Aframax demand in the next 2 to 3 years. from LNG owners who desperately market on one hand, and on the Nonetheless, China’s gasoline need qualified crew, this upward activity in the Far East on the other consumption will be about 52 mil- tendency is likely to continue over hand. The drop in daily rates has lion tons p.a. in 2007, and should the coming years. already begun and looks like it is set reach the 65 million ton p.a. mark in The effect of these increases is to continue, as the 63 ships already 2010. At the same time, China plans made worse, for owners, by the on order exceed known require- to put into service modern refine- weakness of the US dollar. Owners ments. A large part of these ships ries with a capacity of 90 million will be even less inclined to accept operate in crude or fuel oil and will tons p.a. (also in this period de-com- a lowering in freight rates over a be directly in competition with non- missioning some 20 million tons p.a. long period, given their net reve- coated Aframaxes, who themselves of obsolete refining capacity). are in surplus compared to market nues are being squeezed by these demand. This perspective gives hope in the increases. medium term to the majority of pro- Overall, the tonnage supply situa- duct tanker owners, generally resi- CONCLUSION tion does not lend itself to optimism gned to face thin pickings over the at least for the next 2 to 3 years. next few years. The product tanker fleet is going to However one should not be too pes- face a turbulent period in 2007. It The situation is more disconcerting simistic as on one hand the correc- is highly likely that starting from in the Atlantic zone where an tion will be from historically high this year and at least until 2009, increase in traffic is limited by the levels, on the other some owners rates will drop and owners’ returns virtual impossibility to build new have the means of applying the bra- will fade. refining capacity, due to strong envi- kes on too sharp a decline, and ronmental opposition. Nonetheless, However the decline in the market finally the commissioning of new strong demand for gasoline and jet could be tempered by the capacity refinery capacities will provide fuel in the US and for gas oil in of owners to resist (linked to their some relief by 2009/2010. Europe should help in lengthening good financial standing) and to the voyages and increasing cargo sizes. anticipation of a revival with the TRANSPORT DEMAND dawn of 2010. ■ Demand generated by the applica- The increase in transport needs, lin- tion of the IMO regulations for ked to the economic expansion in transporting vegoils will not be suf- the Far East, notably China and ficient in itself to absorb the surplus India, has largely helped to support tonnage. Given the transformation

42 BRS - Shipping and Shipbuilding Markets in 2006 The product tankers second-hand market

THE YEAR 2006 CAN BE SUM- $41m, and the sale of the 29,999 dwt Indian owner Pratibha Shipping at MARISED AS FOLLOWS: a stan- Alexandros, built in Japan in 1987, around $33/35m. dard 35,000 dwt double-hull tanker for $10.25m. ◆ In October the sale of the 37,000 was worth around $21m in January ◆ In July the Seavinha, around dwt Ngol Queve, built in 2003 by and it’s price has risen to reach $31m 40,000 dwt, built in 1987 by Hyundai, Shina, to Ancora for around $44.5m by the end of the year. For similar has found a buyer for $17/17.5m, was reported, while in November the units of only 5 years old, the value while in August the Maersk Regent sale of the two 37,000 dwt Baltic has gone from $40m to $44m. and Maersk Richmond, 35,000 dwt, Ambassador and Baltic Action, A standard 45,000 dwt 5 year old built at Dalian in 2003, were sold to built at Hyundai Mipo in 2005, was double hull tanker was worth a German KG for $80m en-bloc with done to a German buyer for a repor- $45.5m at the end of December a 5 year time-charter back to the sel- ted price of $48,5m apiece. 2005, it’s price then went up to lers at around $17,250/day. ◆ Finally in December the 37,000 $46m in June, to finish the year at ◆ In September the en-bloc sale of dwt Jaladoot, built in 1984 by Hashi- around $47.5m the two 40,000 dwt Crux and Libra, hama, was sold to the Indian owner Some significant transactions must built in Japan respectively in 1987 Varun by its Greek owner for a repor- be reported : and 1988, has been reported to the ted price of $10m. ■ ◆ In January a couple of MR tankers under construction at STX for deli- very 2006 were sold by their Italian owners to German buyers at around $53.5m apiece. ◆ Bergesen Worldwide came back in the product tanker market through the acquisition in February of eight 76,000 dwt coated newbuilding ves- sels under construction at Dalian for delivery between 2006 and 2008, at a reported en-bloc price of $449m. ◆ In March and April, Omega naviga- tion has been under the spotlights with its successful IPO in New York, after having obtained a buying option on 6 ships: two Handies under construction at Hyundai with 2006 delivery dates for around $50m apiece, and 4 x LR 1 built in 2003 and 2004 paid in excess of $60m each. ◆ In May the sale of the 37,000 dwt, Southern Unity, built in 2004 by Tosca Shina and for a delivery to its new 46,764 dwt, double hull, IMO II, built in 2004 by the Croatian shipyard Trogir, owner in June 2007, has been repor- owned by Laurin Maritime ted done at a value in the region of

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44 BRS - Shipping and Shipbuilding Markets in 2006 The offshore and specialised ships markets in 2006

ONE OF THE CONSEQUENCES OF THE beginning to bear fruit in 2006 and WORLD’S STABLE GROWTH SINCE which should have an even more marked 2003 IS A STEADY INCREASE IN OIL impact in 2007/2008. AND GAS DEMAND IN ALL AREAS. THIS RISE IN DEMAND HAS BEEN OFFSHORE SUPPORT VESSELS - ACCOMPANIED BY A CONTINUOUS PLATFORM SUPPLY VESSEL (PSV) INCREASE IN CRUDE OIL PRICES. A AND ANCHOR HANDLING TUG SUP- dip in market rates in the second half of PLY (AHTS) 2006 however shows a slowdown, proba- Activity of PSV and AHTS owners bly temporary, in demand growth. remained very healthy in 2006. Sustai- This rise in demand has highlighted the ned by demand linked to construction inadequate production and refining and production work, owners were able capacities, which has on one hand contri- to charter their vessels at record levels buted to oil prices remaining high (Brent due to lack of availability (record rate in crude oil in excess of $35/bbl since the North Sea: $275,000/day on the spot 2004) and on the other hand economi- market for the AHTS Maersk Advancer cally justifies developing the most diffi- of 23,480 bhp), with committed newbuild- cult offshore oil fields. ing programmes not yet being sufficient to fulfill the needs of contractors and oil In the offshore sector, this limited pro- companies. duction capacity is reflected by a lack of availability in every segment of activity: A direct result of the high utilisation seismic, drilling, installation and field rates and high freight rates is straight- away found in the publication of annual development, support and maintenance reports, which show the very good vessels. results for offshore owners and also in To respond to these needs, operators the orderbooks of shipyards which, des- have launched investment programmes pite the late delivery dates, continue to as from the end of 2004 which are take in orders.

The offshore and specialised ships markets in 2006 - BRS 45 Englishman Motor Tug, 9,000 bhp, built in 1975, towing Bibby Challenge

The most active shipyards involved more modern, sophisticated, and in 2006 to launch programmes spe- in offshore work are mainly in Nor- powerful vessels. cifically dedicated to renewing or way, Spain, China, and Singapore. completing their traditional off- Units which have been “downgrad- India confirms its role as a serious shore fleet. Others are opting for an challenger both in terms of ed” by the first deliveries of recent external growth to allow them to construction with the shipyards ships and remained in offshore ser- offer vessels to charterers on a ABG, Bharati and Cochin Shipyard, vice, have been reallocated to other prompter basis. This new orienta- and in terms of shipowning with less demanding areas of activity tion is partly in line with the object- Great Offshore. thus renewing the fleet in all sectors. ives of contractors and oil compa- nies who are looking to promote Programmes begun in 2004 were However some owners, like Swire safety and thus have more modern mainly concentrated initially in Pacific (Singapore), Tidewater (US), ships at their disposal. These pro- deep-sea offshore which require or Bourbon (France) have decided grammes are different from the very sophisticated ships in that NORTH SEA SUPPLY VESSEL MARKET they suffer intense scrutiny on Average reported rates in £ per day building costs, which translates into 100,000 selecting simple designs for build- AHTS > 12,000 bhp AHTS 7,000 / 12,000 bhp ing numerous ships to the same 90,000 PSV > 3,000 dwt standards, in shipyards offering 80,000 PSV < 3,000 dwt cheaper prices than in Western Europe. 70,000 These programmes contribute to a 60,000 near saturation of shipyards throu-

50,000 ghout the world, but in addition and above all since the beginning of 40,000 2006, to suppliers of machinery

30,000 and equipment also unable to offer prompt delivery dates. For instance, 20,000 it takes more than 24 months to supply main engines over 2,000 kW 10,000 and more than 36 months for a low-

- pressure hydraulic winch of high performance (over 350 t brake 11/01 11/02 11/03 11/06 11/05 11/04 09/01 01/02 01/03 07/02 07/03 01/05 01/06 01/04 07/05 07/06 07/04 03/02 03/03 09/02 09/03 03/05 05/02 05/03 09/05 03/06 09/04 09/06 05/05 03/04 05/06 05/04 power).

46 BRS - Shipping and Shipbuilding Markets in 2006 This saturation causes some Siem - Design VS 491 CD - (6 + 6) - cities. The versatility of these ships owners reluctant to contract with 300 t bp - delivery 2009-2010 carry an added value in a market late delivery dates (in certain cases where construction and installation not before early 2010) to delay Farstad - Design UT 731 CD - (4) - units are also very much in demand. decisions. 230 t bp - delivery 2009-2010 Investments in favour of the PSV Havila - Design Havyard 845 - (2) - Platform Supply Vessel (PSV) and AHTS fleet are therefore car- 275 t bp - delivery 2009 rying on, as the sums spent on The PSV fleet of less than 3,000 Solstad - Design VS - (2) - 300 t bp shipbuilding by Bourbon show, dwt, and particularly for those - delivery 2009 announcing a 1.23 billion euro bud- under 1,500 dwt, has remained get up until 2010. Tidewater are relatively old, despite numerous The high acquisition costs of the pursuing their programme of rene- recent deliveries (half of this part biggest ships and their size have wal and growth, and have already of the fleet is over 20 years on ave- pushed owners and designers to accounted for 131 ships coming rage). Tonnage coming into the conceive very powerful multipur- into the fleet since 2000 and they fleet has barely filled the place of pose ships possessing genuine are continuing in this vein up until those leaving it, and newbuilding construction and installation capa- 2008. orders are continuing to be regis- tered by shipyards. In this sector, Rolls Royce has even celebrated its PSV WORLD FLEET AGE BREAKDOWN hundredth PSV with the UT755 end 2006 design (3,000 dwt).

At the same time owners’ interest 30 years & over 8% for big PSVs over 3,000 dwt has 20 to 30 years been reinforced and 2006 has seen 10 to 20 years the order of nearly 100 ships in this category whilst the average age of 36% Under 10 years the fleet is only about 5 years old. This tendency shows that the deep- 47% Total fleet: 1,619 ships sea offshore market is where the Order book: 290 ships (17.9 % of the fleet) major interest lies within the PSV 9% Av. age: 16.6 years range. with 53 % of the ships over 20 years Anchor Handling Tug Supply (AHTS) (in number of ships) Since the revival of orders in 2005, AHTS WORLD FLEET AGE BREAKDOWN all categories of the AHTS fleet have been registering regular deli- end 2006 veries and numerous new units. Despite a rejuvenated fleet of ships 30 years & over with a bollard pull of less than 150 t, 13% 20 to 30 years orders have been sustained at a 10 to 20 years steady pace. Under 10 years 46% 2006 was noteworthy for the strong development of the upper 35% Total fleet: 562 ships end of the fleet (AHTS with a boll- Order book: 184 ships ard pull over 200 t). Important (32.7% of the fleet) investments have been confirmed Av. age: 14.9 years 6% with 48% of the ships at the end of 2006 for AHTS with a over 20 years bollard pull over 240 t, although shipyards are unable to give prompt (in number of ships) delivery:

The offshore and specialised ships markets in 2006 - BRS 47 DREDGING In order to be able to respond to This lack of means and capacities is clients spread all over the world, obvious, both to offshore contract- The world dredging and land recla- tug boat companies are trying to ors implicated in construction pro- mation market has continued to speed up their international cover- grammes and for oil companies grow strongly, carried by expansion age by setting themselves up in who have to ensure the upkeep and projects and port infrastructure new zones or merging with smaller maintenance programmes for their construction as well as oil and gas players like Switzer Wijsmuller and oil fields. terminals, together with the Adsteam did in the course of the Contractors have for a large part got construction of artificial islands in second half of 2006. the Arab-Persian Gulf, and despite around their need for construction the absence of any big projects in The development of port services and diving tonnage through mid- term or long term charters from the the Singapore region. to accommodate big ships is being accompanied by a considerable owners, mainly Norwegian. The lat- 2006 was also marked by the laun- increase in the bollard pull of tugs, ter have perfectly well foreseen this ching of several emblematic pro- which at the same time are being situation by ordering speculatively jects such as the widening of the built in a more and more compact multi-purpose vessels built for being Panama Canal. format. Damen are proposing tugs able to combine construction, ROV of 24 m in length and with a bollard works and diving support. The four main private companies pull of 68 t (Damen ASD TUG 2411). involved in dredging and reclama- These vessels reach impressive tion have continued to order new This is also the case of terminal sizes, such as the three ships which dredgers. They do not hide their tugs, which can achieve a bollard DOFCON (from the group DOF ASA) ambition to renew and even to pull of nearly 100 t. has ordered from the Aker group in expand their fleet. A record was March 2006: length 155 m, width The concept of “terminal tugs” is established by the Belgian company 27 m, engine power 21 MW, DP III, quickly gaining ground. Recent Jan De Nul, who ordered a dredger accommodation for 145 people. The tenders for terminals, in particular of 46,000 cbm (which is close to first two vessels are already under for LNG, require the availability of the size of an Aframax) from the contract with Technip in DSV/cons- this type of tugs often classified as truction mode, and the other with Sestao Bilbao shipyard in Spain. “escort tug”, which by their power Acergy in construction mode. A true competition for efficiency is and diversified equipment come under way. It is evidenced by the close to being offshore ships, whilst Some contractors such as Subsea 7, increase in the size of dredgers, in at the same time remaining com- Helix Energy, Superior Offshore or order to accomplish the first work- pact enough to work in harbours Island Offshore/FMC have ordered ing phase, which implies the displa- and narrow areas. vessels directly from the shipyards. cement of enormous quantities of Amongst the most active owners in This strong demand in the medium material. However in the shipbuil- the area are Lamnalco, Smit, Swit- term has also given rise to conver- ding market, these projects often zer Wijsmuller, Bourbon/Les Abeil- sion projects, in particular with find themselves competing with les and Boluda who have all partici- cable layers, ships which are easy to more traditional projects less diffi- pated in one way or another in the convert. cult to handle for the yards. Some tenders for the ports of Ras Laffan 2006 saw a sustained activity of companies have developed their (Qatar), Milford Haven (GB), Yemen support vessels and diving ships, in internal engineering upfront thus LNG (Yemen), and Costa Azul particular in the North Sea and the attracting shipyard interest and (Mexico). Gulf of Mexico. This demand pushed enabling them to build such dred- owners to order plenty of ships gers at acceptable costs and CONSTRUCTION giving preference to multi-purpose delays. INSTALLATION ones, even if it meant increasing the size of some DSVs beyond 120 The exponential increase in the TOWAGE m, such as the orders with the IHC number of projects for developing Merwede shipyard. Maritime services and port authori- offshore fields has continued to ties are also experiencing strong trigger a demand in the short and In this respect specialised shipyards pressure to meet the challenges medium term for construction and or those interested in building such linked to the development of these installation ships, diving vessels and ships are unable for the most part infrastructures. other specialised units. to offer any delivery before 2010.

48 BRS - Shipping and Shipbuilding Markets in 2006 Bourbon Rhode Anchor Handling Tug, 100 t bollard pull, delivered in 2006 by Keppel Singmarine in Singapore, owned by Bourbon

Owners of very specialised ships and benefit from better financing Charter rates for floating, semi-sub- such as those capable of laying capabilities. Finally, two other com- mersibles and highly technical ships risers and pipelines or vessels spe- panies have become full time players are frequently quoted at levels cialised in well intervention have in the market, Fugro and Wavefield close to half a million dollars per also benefited from the dynamics in Inseis, whilst the Chinese company day for long term contracts. this sector. BGP has made its entry into the off- During the course of 2006, 55 dril- shore seismic market. Installation and construction of oil ling units were ordered (18 semi- fields will enjoy in the short term Seismic operators have essentially submersibles, 10 drill ships, and 27 (2007/2008) a particularly sustai- taken on long term charter new ships jack-ups). The total number of jack- ned activity in all geographical or converted ships proposed by Nor- up rigs on order has thus reached a areas and at all water depths. wegian owners, who have taken an historic level of 93 units, correspon- Nonetheless the number of cons- interest in these highly specialised ding to 27 % of the existing fleet. units. truction and installation ships on At the same time more than a dozen speculative order and which will Like the construction and installa- units have been or are in the pro- become available as from 2008, as tion sector, cable-laying ships as well cess of being renovated and trans- well as new contractors entering as ro-ros have become the candida- formed although they were conside- into the market should cause cer- tes of choice for fast conversions. red ready for scrapping only three tain players in this sector to be cir- years ago. cumspect and to put back their The oil companies, facing the chal- investments programmes. lenge of renewing their reserves Singapore shipyards have captured and maintaining the production two-thirds of the orders for new units and the majority of the upgra- SEISMIC capacities of fields already in opera- tion, will need to continue to call des and conversions, whilst all the The sector continues to consolidate largely on the expertise of geophy- drilling ships have been ordered and expand. In the spring of 2006, sical companies to identify where with Korean yards. Schlumberger increased its share- they need to work and invest, which The last available slots for delivery holding in Western Geco and took will have a beneficial effect on this in 2010 should be taken up rapidly. control of the Danish Odegaard, whole sector in 2007. whilst in the autumn, a year after the Abundant financial resources, a purchase of the Norwegian company DRILLING persistent high-level know-how, and Geo Explo, Compagnie Générale de a good general appreciation of risk Géophysique (CGG) completed its Following on from 2005, which fini- have made Norway the main parti- participation in Veritas DG, thus shed with a sustained growth in cipant in the boom of newbuildings becoming the largest seismic fleet in demand, 2006 saw the average uti- of drilling platforms since 2004. the world. These entities have now lization rate for offshore drilling 2006 also saw its role more clearly reached an international dimension units of over 90 % this year. defined as to the consolidation of

The offshore and specialised ships markets in 2006 - BRS 49 CONCLUSION

Since the revival in 2004, the mag- nitude of investments in all sectors of the offshore services market ini- tiated by the owners, the contract- ors, but also the investors, has over- loaded the orderbooks resulting in a near saturation of capacities in the main construction, manufactu- ring, and assembling yards. Whilst the short term prospects remain good, the number of delive- ries programmed up until 2010 could create a surplus capacity of ships on the market, which could well produce a lowering of freight rates during the next two years. The Bourbon Hermes extent and duration of this pheno- Platform Supply Vessel, 3 230 dwt, menon will depend finally on the built in 2005 by the Chinese shipyard continuity of exploration and pro- Zhejiang and owned by Bourbon duction programmes of the oil com- panies, as well as the capacity of contractors and owners to lay-up the sector in particular with Seadrill units being built which will be and scrap their oldest units. as a lead player. brought into service by 2010. All the segments of the market will This trend should become more The expansion of the market has probably not be affected simulta- pronounced and concerns also considerably benefited the main neously, which will limit the overca- some of the new players such as contractors but has also allowed pacities to some sectors. Tanker Pacific Offshore (Singapore) the entry of new players such as who have acquired two drill ships Aker Production in the field of mid- In the long term, the multiplication initially ordered by Mosvold with size FPSOs (Suezmax). of new offshore operators and Samsung Heavy Industries. contractors will certainly allow Specialised shipyards in the cons- those with solid financial structures Finally the contracts put out by truction and integration of product- to buy the assets of smaller or Petrobras in 2006 will allow Brazi- ion systems, such as those in Singa- weaker companies. 2007 should be lian operators access into the deep pore, have rapidly filled up their a year in which we will see the first sea drilling market whilst Chinese orderbooks, not only with drilling rigs consequences in the move towards operators are also setting their but also with production systems. consolidation, particularly in the sights on increasing their drilling drilling and production sector. ■ capacities in these water depths. The main yards in South Korea and Singapore have acquired the status of “Main Contractor” with oil companies. PRODUCTION Their direct access to EPCI contracts Oil Majors, the independent oil com- for production systems, as much as panies, and the national oil compa- the increase in construction costs in nies are still increasing their invest- this area, has confirmed the expan- ment budgets. Oil and gas prices sion strategy for production capacity call for the shortest possible time to in China. At the same time the Chi- bring production into service which nese shipyards conscious of the forth- results in using floating production coming overcapacity in the shipbuil- systems such as EPS and FPSO. ding market, are beginning to declare There are more than 110 such sys- their ambitions to build new offshore tems in operation, but also some 49 units with higher added value.

50 BRS - Shipping and Shipbuilding Markets in 2006 The chemical carrier market in 2006

2006 WILL REMAIN A YEAR WHICH demand. As an example, modern stain- PARTICIPANTS INVOLVED IN CHEMI- less steel ships of 19,500 dwt have achie- CAL CARRIERS AND OTHER SPECIA- ved an average of $1/dwt for a 1 year LITY PRODUCTS WILL REMEMBER AS time-charter. BEING ONE WITHOUT ANY SIGNIFI- In addition, the new IMO regulations, CANT CHANGES IN EITHER TRAFFIC which apply as from January 1st 2007, will OR RATES. In fact, overall, freight rates decrease the number of carriers capable were slightly lower, and took a few of transporting vegoils and will compli- knocks during the year, but were on ave- cate the transport of some chemical pro- rage at satisfactory levels. It should be ducts due to changes in category sizes. appreciated that freight rates continued to be beneficial to owners at levels FREIGHT RATES higher than the market had known before 2003, even when taking into European short-sea account the considerable increase in At the start of the year and for all Euro- bunker costs. pean trade, demand for chemical carriers By and large, owners seem to be relati- was very strong, both for contractual and vely optimistic, at least in the short term, spot business. This rosy state of affairs and have good grounds for thinking like was somewhat spoiled in the summer this. In 2006, time-charter rates stayed months to varying degrees according to at high levels and often above the time- different European routes. charter-equivalent rates for spot busi- For inter-North European movements, ness. The increase in contracted tonnage owners enjoyed a euphoric time up until could justify these rates, with owners cal- May, when ships were mainly doing culating their average costs on existing contractual work, while the occasional ships in their fleet, or anticipating even spot business offered a well-remunerated better times ahead. It is worth noting alternative. Thereafter and up until however, that stainless steel ships remain November, the market was fluctuating relatively scarce in view of a sustained more, and it was easier to go on the spot

The chemical carrier market in 2006 - BRS 51 CHEMICAL TANKER SPOT FREIGHT RATES - 2,000T EASY CHEMICAL in East Med where the majority of the fleet consists of old ships. (US$/t) 120 The contract renewals are being

Rotterdam/Taiwan done at very variable rates. Some owners are requesting fairly consi- 100 derable increases, in order to come Rotterdam/US Gulf into line with the much more profit-

80 able levels achieved on the spot Rotterdam/WC Italy market in 2006.

60 Long haul movements After freight rates soared at the

40 end of 2005 for Europe / US move- ments, rates gradually dropped by nearly 40 %, before stabilising and 20 recovering to levels similar to the period preceding the autumn 2005. On average freight rates went from 0 around $80/t to nearly $60/t for 11/03 11/06 12/02 12/05 01/02 01/05 10/05 10/04 03/02 02/03 06/02 07/04 03/06 09/02 05/03 07/05 08/03 02/04 04/04 09/06 06/06 04/05 2,000 ton lots. Big movements of aromatics such as benzene, toluene, and alkylates, which had market at more reasonable rates. At with a bunker price index clause been underpinning a strong mark- the end of the year this tendency should increase by 2 % to 4 %, and et, vanished. Neither the regular was reversed, with owners able to much more without a bunker clause. support of the refined oil products optimise their fleets and spot rates In the Mediterranean, the market market, nor the traditional move- coming under renewed pressure. was quite similar, with however a ments of caustic soda, styrene, or 2006 was therefore generally a good lower level of activity after the sum- sulphuric acid, was able to dissipate year for owners, often superior to mer. This zone suffers from a lack of this decline. 2005, mainly due to the amount of readily available modern and For US trade into Europe, the tend- contractual business which, after approved vessels. The main partici- ency was just the opposite. After a several years of improvement, has pants are not renewing their fleets, drop in the fourth quarter 2005, today now reached profitable levels. which makes it hard to find suitable In this geographical zone, contracts tonnage for charterers, especially the market suddenly took off right at the start of 2006, to finish at the end of the year with freight levels which were the same as those for Europe/US movements. In a market dominated by contractual business, regular movements of cumene, MTBE, and styrene allowed prices to remain high and for the export market to revive. For 5,000 ton lots, the freight graph shows a rise from $35/t to nearly $50/t, namely close to a 40 % hike. Other chemical pro- ducts such as phenol and glycol were exported from the US, not counting “new” products such as Prinkipo, bio-diesel, which is finding increa- 10,501 dwt, built in 1982 by the Swedish shipyard Oskarshamns, sing favour in Europe. It has to be owned by Soysay Shipping Transportation and Trading Ltd, Istanbul said that it was the dramatic exter- nal events such as the hurricanes

52 BRS - Shipping and Shipbuilding Markets in 2006 Katrina and Rita which had contri- FLEET unless there is a rapid catching-up buted to disrupt this traffic, due to of these delays, which were already Deliveries of new stainless steel the massive import of first neces- chemical carriers was slightly taking place end 2005, it is likely to sity goods into the US, but the above that of 2005, with 42 ships see a repeat of these delays at the balance has finally been reinstated. built totalling 795,000 dwt. A non end of 2007. Tonnage of carriers Traffic from Europe to Asia produc- negligible number of delays in deli- with delivery next year should ed a far more regular pattern, caus- veries occurred and they should however be considerably higher ed by a weaker demand than last progressively be coming into ser- than for this year, reaching a total year on behalf of Chinese buyers. vice in the course of 2007. But, of nearly 1 million dwt. After a blossoming of the market in 2005, substantial exports of BTX to Taiwan, Korea, and China gave way CHEMICAL CARRIERS ON ORDER AS AT JANUARY 1ST, 2007 (in deadweight) to specialised chemicals in much (dwt) smaller lots, such as MMA, IPA, 800,000 acetic acid, cyclohexane, but also to over 20,000 dwt regular movements of base oils. 700,000 10,000-20,000 dwt The strengthening of the Euro 3,000-10,000 dwt unfortunately resulted in European 600,000 suppliers being less competitive on the export market. 500,000 This however did not result in Ame- rican exporters taking advantage of 400,000 the situation. Freight rates remain- ed stable, supported by the large 300,000 quantities of MEG, PX, acetic acid and acrylonitrile. Nonetheless, trad- 200,000 itional movements of xylene were visibly absent, making owners 100,000 hesitant about taking up specula- tive positions in the Gulf of Mexico. 0 Jo Tankers took the decision no lon- delivered in 2006 2007 2008 2009 + ger to service movements from US CHEMICAL CARRIERS ON ORDER AS AT JANUARY 1ST, 2007 to Asia. And in the same manner, (in number of ships) Odfjell withdrew from the Carib- 35 (number) bean supplies out of the US West over 20,000 dwt Coast. Once again, we have seen 10,000-20,000 dwt 30 owners taking rapid decisions to re- 3,000-10,000 dwt orientate in line with sudden chan- ges in the market. 25 With the emergence of the South

American market and the applica- 20 tion of new transport regulations of certain products starting from January 2007, owners are revising 15 their strategies in the short and medium term with respect to invest- 10 ments and their involvement in cer- tain captive markets. Time-charters for 3 years or more have become 5 the norm and is witness to a recipro- cal need between owners and char- 0 terers to assure a safe future. delivered in 2006 2007 2008 2009+

The chemical carrier market in 2006 - BRS 53 2006 saw the 10,000-20,000 dwt with coated tanks have also been was minimal with 11 being with- category receive the greatest num- delivered in 2006, and many more drawn against 4 in 2005. The rise in ber of ships with 26 carriers for will be coming into service between steel prices and especially stainless 480,000 dwt. In the category 2007 and 2009. The question is steel has encouraged some owners above 20,000 dwt, 9 carriers were whether these ships will be carrying to take this decision. delivered for 280,000 dwt. chemical products or rather refined At the beginning of the current In the 3,000-10,000 dwt category, oil products as was largely the case year, several uncertainties are cau- less than 10 ships were delivered, this year. The same uncertainty also sing concern in the chemical carrier which is far below the requirements applies to the coated vessels bet- market; on one hand, delivery of currently needed for replacement of ween 37,000-50,000 dwt currently the existing fleet, but the lack of avai- under construction, which should newbuildings at a sustained pace lable docks and the increase in buil- find employment split between with the risks of an oversupply in ding costs has forced owners to wait chemical products, vegoils, and the short term and on the other, the for better times, in the belief that the refined oil products. The answer impact of new IMO rules and their spot trading market is unwilling to will depend to a large extent on consequences. It is likely that ini- accept such high rates. However it is the freight levels within the diffe- tially, freight rates will be put under in this category that we have seen rent sectors. The substantial num- pressure in view of the relative lack the most numerous delays in delive- ber of these ships coming into ser- of available tonnage, but thereafter ries, among some thirty ships in this vice makes the dividing line wide there will be a period of uncertainty size due in 2007, half are back-logs open between the chemical pro- where market levels will depend to from the previous year. duct market and that of oil pro- a large extent on the evolution in duct carriers. Numerous carriers from 12,000 to demand and the fundamentals of 15,000 dwt, IMO II and III, equipped Scrappings of stainless steel ships the world economy. ■

The second-hand market for small tankers and chemical carriers

2006 WITNESSED THE SAME The resale market out of Turkey imports, especially as these salary SCENARIO AS IN PREVIOUS continued to lead the pack, even if costs are themselves getting higher YEARS: AN INCREASE IN SHIP the very strong increase in building and higher. PRICES JUSTIFIED ONLY PAR- costs leads one to fear that prices Logically, the second-hand market TIALLY BY FIRM FREIGHT have now reached saturation point. has followed this very strong surge RATES. Buyers are now only ready to pay in asset values, with a five year old very firm prices for vessels with the ship now worth 30 % more than its The market for coated vessels best specifications and with prompt newbuilding value. delivery. There were no free handouts: for In a market where assets are expen- units of about 7,000 tons and In contrast to bigger size ships, sive, it is therefore not surprising to with an equal level of sophistica- small product-chemical carriers see an important merger and acqui- tion, the price per cubic metre for have a very large proportion of sition activity. 2006 was thus the a newbuilding resale is about their sophisticated equipment year which saw the acquisition of $2,600 per cbm against only conceived and built in the euro entire fleets, with for instance Eit- $1,600 per cbm five years before! zone. Strong demand for such zen who took possession of the tan- At the same time, freight rates equipment has caused a rise in pri- ker fleets of Blystad (Norway) and (on the basis of 12 months t/c) ces, starting with main engines. The Fouquet-Sacop (France). We should have experienced an increase of cost of local labour can only slightly also mention the sale of Brevik to “only” about 35 %! compensate for the competition of Sirius, of Marpetrol to Sovcom-

54 BRS - Shipping and Shipbuilding Markets in 2006 fort/Novovship or again of Jakob- sen to Fabricius. Also noteworthy was the petroche- mical boom in Asia, which saw transactions taking place between European sellers and Asian buyers, including very modern ships (as seen with the resale of the Samho hull n°1083 from Blystad to Japa- nese buyers for a price of $27m). This type of ship of around 12,800 tons (14,000 cbm), built in South Korea, has known a resounding suc- cess to the point that some obser- vers feared that this particular seg- ment of the market would suffer Frosta 5,703 dwt, delivered in 2006 by the Turkish shipyard Celiktekne, from a surfeit of supply (125 ships owned by Mowinckels on order but only a fifth already delivered). However this was without taking into account the latest changes in the Marpol regula- tions concerning vegoils, which favours above all coated ships 8,400 dwt built by Asakawa in inflationary movement. This discre- (either epoxy or Marineline) of 1995) for $15.5 million, as well as pancy opens up a bigger risk 10,000 to 20,000 tons. those of Bow Wave and Bow Wind concerning residual values. The only by Iino Lines in Japan to Stolt-Niel- hope for owners who have commit- This regulation has definitely had sen for $18.5 million each (8,600 ted to these very costly investments an effect on the price of ships, relies on an increase in freight rates. boosting the value of IMO II type dwt, Usuki, six years old). All these In 2007 charterers should not ships available on a prompt deli- sales showed value increases of 25 expect any gifts either! ■ very. to 30 % over the transactions com- pleted during 2005. The market for stainless There is nonetheless realignment in steel tankers the field between coated vessels As for stainless steel ships, a gro- and stainless steel ones: the tradi- wing number of owners are paying tional frontier between coated today the price for having waited ships on one hand and stainless for better times. They now have to steel ships on the other, has been renew or enlarge their fleets at pri- displaced to the detriment of the ces above those they refused to pay latter. They now have to compete out earlier. As the newbuilding mar- with Marineline coated ships on ket has primarily been a sellers’ some of their previously protected market these past three years, markets and are less competitive there have been few shipyards (in than the others on petroleum pro- Asia or Europe) ready to accept duct trades. orders for this type of ship in a This market segment has not been context where demand for coated able to escape the strong tendency ships (whose construction is less shared by other sectors of the ship- risky) was already flourishing. ping market, i.e. the increasing dis- The sale price of stainless steel connection between the ever-rising ships has held up well. We can give asset values and freight rates, which as example the sale of Sutra Lima, are not able to keep up with this

The chemical carrier market in 2006 - BRS 55 Research & Information Departement

THE RESEARCH AND INFORMATION DEPARTMENT maintains a large data basis and information library which covers all sectors of activities handled by BRS, and is available for consultation or advice of clients.

THIS DEPARTMENT handles the information reports, analyses, studies and statistics covered on the company’s internet site. It works in co-operation with the brokers in each departments to meet the needs of clients.

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56 BRS - Shipping and Shipbuilding Markets in 2006 The liquefied petroleum gas shipping market in 2006

Another good vintage with contrasted developments

HIGHLIGHTS ◆ Commercial ventures between owners and operators are occurring as we had At the end of last year, we were wonder- anticipated: the arrival of new actors, ing whether the freight rates had reached who acquired existing vessels or ordered a ceiling or if they could still increase fur- newbuildings deliveries which will accele- ther, considering the strong upsurge the rate during 2007, gradually alters pre- liquefied gas market had gone through vious market structures. Some operators since the end of 2004. prefer to abandon some specific market The evolution of the market during the segments attached to a particular traffic last twelve months shows that both took and size of ship (Maersk / Exmar, AP Mol- place, whether it be in the freight sector, ler / Norgas, etc.), while others prefer to characterised by ample variations, or in join forces through the acquisition of sha- the products sector where price increases res or the setting up of new pooling or were limited and falls were even recorded. commercial agreements. (BW Gas / Yara, The factors which enabled us to anticipate Maran Gas / BW Gas, Eitzen Gas / Norgas, a freight price ceiling evolved differently Unigas / Kosan, A. Veder / De Poli, etc.). within the different ship size segments, ◆ The rhythm of orders and deliveries of while the general slowing down of the gas vessels having been moderate until last products prices (as opposed to crude oil or year, the increase in transport capacity vessel prices!) was also anticipated. was limited. This will be slightly different Both sectors (freight and products) were from 2007 onwards, for all sizes of ships! subject to strong volatility. Let us briefly go Indeed, the few orders placed in 2004 through some fundamentals which will still started to be delivered during 2005- govern the markets in the coming years. 2006, but the far more numerous ones,

The liquefied petroleum gas shipping market in 2006 - BRS 57 of some new LPG production capa- cities in the market. These diverse volatility factors permitted the development of numerous well remunerated transatlantic cargoes. ◆ The revised geography of produc- tion and consumption zones: the new capacities of gas production of which the LPG associated with the LNG productions in West Africa, North Africa, Middle East - Qatar, Abu Dhabi, Oman, Saudi Arabia - Carli Bay 25,000 cbm, delivered in 1998 by Mitsubishi, owned by Exmar Australia, Norway, etc.) globally esti- mated at about 24 / 25 million ton- nes, have partly started and influen- ced prices of products and logistical contracted in 2005 or later, will be quarter, when the prices offered by movements towards the large delivered during the next 3 years! demolition yards were over consumption poles, notably emer- Multiple orders were passed in 2006 $400/ton and the VLGC spot mar- ging countries. Production should with more than 90 firm contracts ket dropped severely. This situation progress regularly in 2007 and throughout all sizes, at ever more should evolve during 2007 as long 2008 and grow more rapidly from expensive prices. In contrast to the as the demolition prices hold firm. 2009 onwards. The development of preceding years, the majority of We should also remember that on new traffic flows from production these orders were booked for ves- top of the natural renewing of the zones to fast consumption zones, for sels exceeding 8,000 cbm, for deli- fleet, the reinforcement of norms instance from Middle East towards very in 2008, 2009 and even 2010. concerning quality constraints, India, has direct repercussions on The increase in construction prices associated with age limits, should the number and the duration of does not seem to have refrained further favour the sale for demoli- voyages for vessels of specific size greatly the market players to tion of the oldest units in the next segments, hence a side effect on lar- contract numerous newbuildings in few years. ger size tonnage! The ammoniac all size segments and mainly larger and chemical gas sectors are also ◆ US imports: Despite the volatility sizes, which might create in the increasingly sensitive to market glo- and the severe drop of natural gas future some pressure on the balisation and intercontinental arbi- prices (Henri Hub price levels going freights until the market has been trage, the ton-mile factor having a from $13.75/mmbtu in November able to absorb these new capacities! direct impact on the available ton- 2005 to $4.50/mmbtu in July 2006 nage (long haul voyages, combina- ◆ As in 2005, the sales for demoli- then to $7.75/mmbtu in November tion of smaller parcels, etc.). tion stagnated: only 5 sales were 2006), US imports of ammonia concluded in 2006, including were irregular and limited and the ◆ The next few years should shed 2 VLGC’s constructed in 1976 and demand for spot voyages decreased some new light as to the impact of 1978, one 31,000 cbm capacity car- all through the year, producing a the additional volumes of product rier built in 1977 and two small units substantial decrease in the rates for and their geographical outlet for of 6,000 and 3,700 cbm of same Atlantic round voyages. Simulta- the demand (consumption) and the age. During the first three quarters neously, the weather recorded offer (production) and their respec- of the year, the strong market condi- excessive heat waves, snow storms, tive weight on transportation logis- tions limited the interest for certain etc. with repercussions on the pro- tics. The development of larger size operators to demolish their oldest duction of energy plants and on segments, mainly that of VLGC’s units, especially those whose poli- stock levels, causing some tempo- (75,000 / 85,000cbm), was till now cies have been to maintain a high rary increase in LPG imports. The largely dependant on the regular standard of quality through high energy prices were already boosted availability (offer) of LPG molecu- maintenance costs. However, it is a by higher crude prices by mid-year. les, while the petrochemicals and little surprising to see that this These increases were however ammoniac markets followed more trend did not reverse during the last somehow mitigated by the impact generally the demand in consump-

58 BRS - Shipping and Shipbuilding Markets in 2006 tion zones. Will this still be the case on the consumption of LPG. The SITUATION BY SHIP SIZE when many more millions of tons increase in underground storage will come to the market? capacities (caverns) had somewhat VLGC (Very Large Gas Carriers) dampened the seasonal character 70,000 / 85,000cbm ◆ The important fluctuations in of the trading, but the unusually crude oil and oil product prices had The spot market was subject to mild periods seem to get longer and repercussions on the bunker prices extreme volatility. However, after longer every year, with immediate among which IFO 380cst basis Fujai- the strong upsurge of rates during consequences on consumption, rah moved from $275/t at the end of the first two quarters and in spite of rotations of stocks, and trading 2005 to more than $350/t at mid a sharp decrease during the last positions. As well as some aware- year, and then decreased to about quarter, owners’ average annual ness of energy wastage, growth of $270/t by end 2006. A variation far incomes ended up still in excess of demand in some large consuming less important than last year those of the preceding year. areas is thereby affected, while few (175%!), but nevertheless not negli- more millions tons of LPG will come The reference spot rate, MEG/Japan, gible when it comes to freight levels! on the market in the next few years. already at a strong level close to ◆ The evolution of climatic condi- Alternative outlets will have to be $45/t at the beginning of the year, tions now has a permanent impact looked at… increased sharply to reach close to

Similarly to the freight market, product prices were also subject to ample variations, stabilising towards the end of the year at similar or inferior levels to those of the beginning of the year (see table). Freight wise, the levels continued to move up during the first half-year, and then the market stabilised and slowed down during the second half-year.

Product prices evolution Products Nov. 2004 Nov. 2005 Nov. 2006 % Crude oil, Middle East Gulf ($/bbl) 35.5 52 56.5 9% Brent crude, North Sea ($/bbl) 45.2 55.2 58 5% Naphtha CIF Rotterdam ($/mt) 365 478.7 510 7% Natural gas ($/mmbtu US Henry Hub) 7.80 (Dec.) 13.75 7.75 –44% Propane CP (contr. price FOB Saudi Arabia) ($/mt) 463 535 450 –16% Butane CP (contr. price FOB Saudi Arabia) ($/mt) 473 555 470 –15% Anhydrous ammonia (FOB Black Sea) ($/mt) 270 295 240 –19% Ethylene (contr. price Europe) (E/mt) 700 825 900 9% Propylene poly gr (contr. price Europe) (E/mt) 620 810 865 7% Butadiene (Europe spot) (E/mt) 627 760 890 17% VCM (CIF Korea/Taiwan) ($/mt) 800 667 630 –6%

Freight rates evolution Ships by size/category (cbm) Nov. 2004 Nov. 2005 Nov. 2006 % VLGC 75/85,000cbm spot MEG/Far East ($/mt) 42 41 30 –27% VLGC 75/85,000cbm 6-12 month t/c ($/mth) 1,050,000 1,080,000 975,000 –10% LGC 52/59,000cbm 6-12 month t/c ($/mth) 800,000 1,100,000 900,000 –18% 24/35,000 cbm 6-12 month t/c ($/mth) 775,000 1,075,000 975,000 –9% 15/24,000cbm 6-12 month t/c ($/mth) 650,000 825,000 750,000 –9% 6/11,000cbm ethyl. 6-12 month t/c ($/mth) 575,000 605,000 625,000 3% 4/8,000cbm semi pres./ref. 6-12 month t/c ($/mth) 425,000 507,000 515,000 2% 4/8,000cbm pres. 6-12 month t/c ($/mth) 325,000 420,000 350,000 –17%

We no longer indicate the average time charter equivalents on spot voyages that exclude any eventual waiting of the vessel by lack of employment between voyages, because the variation in their levels are too strong and not always representative of the market evolu- tion. We will only mention the levels of transactions on mid term on periods lasting from 6 to 12 months.

The liquefied petroleum gas shipping market in 2006 - BRS 59 70,000 TO 84,000 CBM LPG CARRIERS DELIVERED & AVERAGE CAPACITY

No 000 cbm 30 84,000 Average capacity of new delivered VLGC 65 VLGC to be delivered from January 2007 Trend (average capacity of new delivered VLGC) Number of new delivered VLGC 25 82,000 price of near to $60 million. Two units of more than 30years old were 20 80,000 also sold for demolition. At the same time, Maran Gas crea- 15 78,000 28 ted a joint-venture with BW Gas with the sale of a 50 % share in four 84,000 cbm ships ordered at Dae- 10 20 76,000 woo in 2005.

12 5 74,000 Large Gas Carriers 8 8 7 7 66 6 52,000 / 60,000 cbm 5 5 3 3 3 3 1 2 2 2 As usual, this size segment benefit- 0 72,000 ed from the “domino” effect from 1991 1992 1997 1999 1995 1998 1996 1993 2010 2001 1994 1990 2007 2002 2003 2009 2004 2005 2008 2006 2000 the two neighbouring segments, VLGC and Midsize, during the main part of the year, as well as long haul $55/ton by the end of January and asked and unclear prospects for voyages emanating from the LPG came down near to $40/t by the end the next coming years. It was and ammoniac markets. of March. A peak level was then attai- mainly marked by a few long term ned in July at about $65/t but this contracts on behalf of major opera- The rates were subject to a strong record level did not last long as a tors who elected to reinforce their upsurge in the first quarter. How- regular drop was then experienced fleet through time charter tonnage ever the reduction of US ammoniac until the end of the year when rates at competitive conditions rather imports, partly linked to the price close to $25/t were registered. than ordering themselves new drop of natural gas which comes units. Substantial differences in The wide gap between such time into the ammoniac fabrication pro- financing schemes and very com- cess, caused a drop in demand for charter equivalent levels ran- petitive ship management condi- ging from $400,000/month to transportation on the transatlantic tions between Asian and Western $1,600,000/month for a VLGC of route Black Sea / US, while new pro- operators permitted such long 82,000 cbm capacity shows the duction (Australia) was covered by term transactions, often associated magnitude of the variation. The recently delivered units. with purchase options. combination of a limited availability Although the freight rates were main- of product and a weaker demand A few examples of time charter tained at relatively firm levels, wai- explains this evolution. contracts: ting time in between voyages, due to As in the preceding years, new LPG Doun NB a lack of employment, reduced the production, confirmed or projected 78,000cbm - 15 years - del. 09 final income of vessels. This sector is for the coming years (Qatar, Emira- 890,000$/month - APM still dominated by coa’s, and a few tes, Northern and Western Africa…) Gas Capricorn time charter contracts were conclu- contributed to an ever active demand ded for periods ranging from one to for new vessels, in similar propor- 79,000cbm - 3 years - del. 06 1,220,000$/month - Petrobras five years at monthly rates close to $1 tions as last year and at ever higher million for the youngest units. prices, close to $95 million apiece! Cido NB No new order was recorded since Some 28 VLGC new orders were 82,000cbm - 5 years - del. 10 the six 60,000 cbm newbuildings booked in 2006 (26 in 2005). The 890,000$/month - Mitsui OSK contracted at the end of last year total amount of VLGCs in the order- book -64 units at year end– moved The activity on the second hand which are to be delivered during 2008 and 2009. up by nearly 45 % in comparison to market was limited to a few pur- the end of 2005. Those newbuil- chase options exercised by BW Gas We should note the sale to Varun of dings represent 25 % of the VLGC on three units which were already a 57,000 cbm vessel built in 1991, fleet presently in operation for a within their fleet as time chartered the Helice owned by BW Gas, at a total amount of about 110 units and tonnage (Formosa Apollo, Formosa strong price of $60 million for a 15 an average age profile of 15 years. Bright and Berge Trader), and the years old ship! Even though other The time charter activity remained sale of Nordanger, 76,000 cbm built parameters may be attached to limited due to higher levels being in 1992, to Varun for at a reported such a transaction, it still reflects

60 BRS - Shipping and Shipbuilding Markets in 2006 LPG CARRIERS 24,000 - 85,000 CBM Short-term T/C or T/C equivalent to spot voyages (US$ 1,000 pcm) 1,800

24,000 – 43,000 cbm 1,600 52,000 – 60,000 cbm how firm are the second hand mar- 70,000 – 85,000 cbm ket prices in line with those of the 1,400 newbuilding market! 1,200 Let us also mention a triangular ope- ration between Yara, Laeisz and BW 1,000 Gas through which Laeisz bought Yara’s shares in two 60,000cbm ves- 800 sels, Polar Viking (2004) and Paci- fic Viking (2005), reported at $83 600 million a piece. The two units, respec- tively renamed BW Herdis and BW 400 Hesiod, were taken back on long term charter by Yara. 200 10/03

No sales for demolition were repor- 01/03 10/06 07/01 10/00 01/06 01/00 07/04 04/02 04/05 ted. LPG CARRIERS 3,000 - 22,000 CBM Examples of transactions: Medium-term T/C (6-18 months) (US$1,000 pcm) Havfrost 1,100 57,000cbm - 12 months - del. 06 10,000 – 22,000 cbm 1,000 1,005,000$/month - Geogas 6,000 – 8,000 cbm Ethylene 900 Havis 3,000 – 6,000 cbm 57,000cbm - 3/5 years - del. 06 800 925,000$/month - Koch 700 Clipper Posh 600 57,000cbm - 12 months - del. 07 1,000,000$/month - Tomza 500

400 Midsize carriers 300 24,000 / 43,000 cbm 200 As we had anticipated at the end of last year, the activity of the Midsize 100 vessels stayed globally firm although 0 contrasted, sustained by a firm 07/01 01/03 10/03 10/06 01/06 01/00 10/00 07/04 04/02 demand coming from both the 04/05 ammoniac and the LPG sectors on fast growing trades helped by more contrasted, operators of ves- as well as charterers, choosing to increased productions. sels having no choice but to concede secure their shipping logistics at fixed some rebate for spot as well as term The spot rates stayed very firm conditions, often more attractive contracts. during the first quarter of the year than those being subject to annual and reached some record levels - The majority of vessels being revisions and market variations. more than $1.8 million time charter already committed on mid to long At year end, the rates for short equivalent for a 38,000 cbm- on the term charters and coa’s in both time charters of 6/12 months for limited amount of spot voyages which ammoniac and LPG markets, the vessels of 30,000 / 38,000 cbm were still contracted due to the redu- spot market remained limited to capacity were concluded around ced availability of spot tonnage. very specific traffic such as Middle $1million per month, while those of East to India, West Africa to Europe The second quarter was slower and smaller size segment (24,000 / or USA, or inter Asia. waiting times in between voyages 28,000 cbm) were done at between occurred, a problem that this seg- Some longer term transactions ran- $800,000 and $900,000/month, ment had hardly experienced since ging from 7 to 15 years were conclu- depending on technical specifica- some time. The end of the year was ded, the operators, acting as owners tions of the vessels.

The liquefied petroleum gas shipping market in 2006 - BRS 61 LPG FREIGHT RATES (SPOT VOYAGES) VLGC and 2,500/5,000 cbm (US$/ton) 80

VLGC MEG/Japan 70 Small vessels 2,500 - 5,000 cbm European coasting gas still affect the available capacity 60 at one point in time, thereby crea- ting some volatility in freight rates. 50 Following a brief upsurge in activity

40 during the summer in propylene movements from the US to Europe

30 and Asia, a limited slowdown took place during the last quarter, forcing

20 the operators of 15,000 / 22,000 cbm vessels to concede

10 some discount on hires for term contracts of 6 to 24 months.

0 Meanwhile, some new development was registered within the segment 07/01 10/03 01/03 01/00 10/06 10/00 01/06 07/04 04/02 04/05 with several longer term contracts traded for players opting to cover Examples of transactions: 38,000 cbm vessels among which themselves for periods of up to 5 two new Japanese units chartered Maersk Jade years, some of them on newbuilding beforehand. All these units were ships due to be delivered in 2007 38,000cbm - 3 years - del. sept 06 hired back by Yara for various and 2008, and at terms more favou- 945,000 $/month - Petrobras periods ranging from 3 to 15 years. rable to charterers than those obtai- M Krishnatreya Only one sale for demolition took nable for shorter term. 35,000cbm - 12 months - del. sept06 place, in the middle of the year, that Two new units from Formosa Plastic, 990,000$/month - IOC of Luigi Lagrange, a 31,311cbm ves- ethylene carriers of 16,500cbm, deli- sel exclusively employed by in the vered prior to the start of the trade The delivery of 6 new units of 34,000 ammoniac trade since its delivery for which they had been ordered, to 38,000cbm did not really affect from the yard in 1976! found short term employment with the market, most of them being traders in the LPG sector at rates already committed on mid or long Handysize slightly over $600,000$/month, a term ammoniac trade. 12,000 / 23,000 cbm competitive rate level for such size The situation looks quite different for As for larger size ships, this seg- and new units. the 15 vessels due for delivery over ment benefited from a buoyant Examples of transactions: the next three years - 9 units schedu- market during the first half of the led for 2007 – although most of them year, thanks to a multitude of deep Navigator Saturn are also engaged on long term sea transpacific and transatlantic 22,000cbm (00) - 12 months - Oct.06 contracts with ammoniac producers voyages and a strong diversified 850,000$/month - Hydro NGL and traders, or assigned on captive demand emanating from the three Queen Zenobia new trades. segments of ammoniac, LPG and 22,950cbm (02) - 12 months - Nov.06 the chemical markets. A new player, an already established 870,000$/month - Sonatrach Greek ship owner, decided to enter At the beginning of the year, some Polargas the gas market with an order for 4 x spot voyages were concluded at a 15,000cbm (90) - 12 months 35,000 cbm vessels from Hyundai robust level of time charter equiva- Jan.07 - 700,000$/month - Enap Mipo, for delivery in 2009, at a lent close to $1.3 million/month on Johann Schulte reported price of $65 million per unit. 20,000 / 22,000 cbm ships! Then 16,500cbm (98) - 36 months - the market experienced as usually Once again we should note the Sept.06 - 640,000$/month - in spring time some slow down as major partnership concluded bet- Transammonia from May/June and more ships ween BW Gas and Yara in which BW incurred more waiting time in bet- Gas bought Yara’s participations in A substantial number of sales of ween voyages. 7 vessels sized between 6,000 and second hand vessels were conclu- 60,000 cbm, as well as taking over The fluctuations and irregularity of ded. Various owners choosing to existing term charters of three deep sea movements of chemical take advantage of firm prices, resul-

62 BRS - Shipping and Shipbuilding Markets in 2006 ting from the robust construction prices, others buyers eager to secure tonnage without waiting for late delivery of new units and having second thoughts to any com- mitments at strong prices! Within this segment, we have recorded 10 units changing hands, some of those staying under the Coral Palmata, same commercial management, Ethylene carrier, 7,200cbm, built in 1994 by the Italian shipyard Di Pesaro, the owner/seller chartering back owned by Anthony Veder the ship from his new owners/buyer for periods going from 2 to 5 years. Although the petrochemicals cove- The “semi-pressure” or “semi-refri- These transactions were mainly rage experienced less pressure gerated” as well as the ethylene car- conducted by majors like A.P. Mol- during the last quarter, similarly to rier sectors remained bullish, less ler, with the vessels Hans Maersk, larger size ships, vessels employed affected by new unit deliveries (only Niels Maersk and Henriette on those transactions were very 3 units of which 2 ethylene carriers Maersk, and also by members of busy during the larger part of the of 5,600 cbm). However, despite the Skandigas pool on Tycho Brahe year, and the usual ethylene “tem- new production of ethylene being and Immanuel Kant sold to already porary” movements caused by pro- projected over the next few years associated or external operators. grammed or accidental shutdowns and the age replacement factor, the 18 new orders for ships ranging at the production plants proved to orderbook for these vessel types from 17,000 to 22,000 cbm were be so numerous that they progres- amounts to more than 60 units of recorded in 2006 of which 4 ethy- sively turned out to be a market by which 40 are ethylene carriers! lene carriers for Harpain / Hansa itself! Examples of transactions: Hamburg account, and 14 vessels Demand was indeed sustained sizing 20,000 / 22,500 cbm of Betagas thanks to those permanent ethylene 5,500mt - vcm - Houston/Saloniki both refrigerated and semi-pres- voyage inquiries as well as some C4 Dec. 06 - $200/mt - Mitsui sure type for Maersk, Zodiac, movements compensating for the Petredec, Schulte, Geogas and butadiene cargo shortage, and the Norgas Shasta Myawa accounts, all of them for growing demand coming from the 6,000mt - ethy - Houston/Europe delivery between 2008 and 2010. LPG sector. Smaller coasters had Jan. 07 - $215/mt - Mitsubishi These newbuildings were also orde- hardly any waiting time all through Chemtrans Christian red at robust prices in excess the year. 4,500mt - propy - Houston/Europe of $50 million for the standard We however have to make some dif- Jan. 07 - $220/mt - Summit 20,000 / 22,000 cbm and above ference between the “full pressure” Gaschem Snow $60 million for the 17,000cbm ethy- market (consisting of ships sized 10,200cbm - NH3 - 12 months lene carriers. between 2,700 to 11,000 cbm) and Jan. 07 - $675,000/month - Fertiberia the “semi-pressure” or “semi-refri- Small LPG and chemical gas Sigloo Norse gerated” and “ethylene carrier” less than 12,000 cbm 8,300cbm - LPG - 12 months ships as they are being affected by Jan. 07 - $505,000/month - PVDSA This size category differed from the different market parameters. The other segments by staying relatively time charter level for the “pressure” Marte firm all along the year with far less type ship experienced a slight dis- 3,000 cbm - LPG - 12 months volatility than in the other seg- count, mainly due to the numerous Jan. 07 - $315,000/month - Ecofuel ments. The ethylene carriers and newbuildings which were delivered the “semi-pressure/refrigerated” over the year -more than 20– as well Merging and consolidations move- ships benefited from a sustained as to the existing orders –more than ments were still numerous, both on demand during most of the year, 50 units- which are to be delivered behalf of owners having recently whether through coa’s nominations during the next few years and which entered the gas sector and on or spot market inquiries. represent a certain “weight” ! behalf of traditional operators.

The liquefied petroleum gas shipping market in 2006 - BRS 63 various segments of the market thanks to the positive results achie- Gas Oracle, 3,014cbm built in 1990 ved in the sector over the last three by the Japanese shipyard years and further specialisation by Teraoka, owned by Stealth size segment and geographical and trading in Black Sea movements has remained active and should continue, whether by acquisitions on the second hand Several new agreements and ventu- ranging from 1,200 to 12,000 cbm market or through new orders. res were concluded marking a changing hands during the year. redistribution of specialisations by The price value of ships in service Many sales were however so called size and types of ships. Among has reached high levels, allowing “sales en bloc linked with new ton- others let us mention: various actors to consolidate their nage distribution” among existing assets through financial operations ◆ Norgas and Maersk (MNGC pool) partners and expanding fleets. without loosing the commercial separating and Eitzen Gas simulta- control of the ships. This trend Prospects neously entering into a JV with M should also continue as long as the Skaugen/Norgas named ENGC The market stayed globally firm and market offers good second hand which will operate altogether 32 tight during two thirds of the year. prices and time charter levels. ships of capacities ranging from The last quarter registered some 6,000 to 11,000 cbm of which 29 Besides the very specific VLGC seg- pause in the activity and freight are ethylene carriers. ment, which is often considered as levels in the larger size segment but an “extension of the pipeline net- ◆ Exmar finally left the small size the sharp collapse of the VLGC work of major production sites“, segment selling to Lauritzen Kosan ships which had attained peaks a and more sensitive to the product the remaining shares they had in few months earlier came as a little supply/demand than other size four 3,200 / 4,000 cbm vessels, as surprise to many market actors. ships and markets, the overall pros- well as selling to Eitzen Gas the The “redistribution” of ship control pects for the LPG shipping market remaining purchase options they continues in the small size segment, over the next two years remain pro- were still enjoying on 3 ethylene while the market is opening up mising but probably at levels softer carriers of 10,500 cbm built in more in the middle and larger size. than those recently registered, 1990/1992 (Polar ships). Those various developments could mainly generated by a limited ◆ Stealth (Vafias) moving from be anticipated since last year after construction programme when the 27units at the beginning of the year the major consolidation move- market was low! to 41 units twelve months later, 8 of ments. Specific size segments, like those which are new-buildings including Newbuildings are being ordered at of small « pressure » vessels and the 2 recent resale acquisitions of increasingly high prices and recent ethylene carriers could temporary 6,300 and 7,000 cbm which had transactions were concluded at become more sensitive than been ordered by Samos in Japan. levels more than 40 % higher than others to the integration of new ◆ Eitzen Gas acquiring the 50 % the prices registered three years units ordered 2 years ago and soon interest that Lauritzen Kosan held ago! to be delivered. Nevertheless, the in j/v with Sigas Kosan, consisting various gas markets have now Although the value of the dollar has of 8 vessels sized between 1,500 entered a new cycle marked by weakened, such robust prices and 2,600 cbm. higher prices in the hands of a lar- added to the sharp increase in run- ger number of players. Let us hope ◆ The Unigas pool taking the com- ning costs (or operational expen- that new production, globalisation mercial management of three ses) which are heavily affected by of trade, consumption growth and 10,000cbm ethylene carriers which higher crew expenses and the scar- the tonnage renewal ratio will all had been ordered last year by Japa- city of qualified officers, should allow safe and healthy operations nese interests and were taken on have a substantial bearing on to continue. ■ long term time charter by the Nor- freight rates and necessitate tighter wegian operator Ugland. transportation logistics. The sale and purchase segment was Major players have been able to very active with 44 units of size consolidate their presence in the

64 BRS - Shipping and Shipbuilding Markets in 2006 The second-hand market for LPG carriers

VLGC AND LGC MIDSIZE CARRIERS buying 6 pressurized ships bet- ween 3,000 and 7,000 cbm at pri- In this category, Bergesen World- In 2006, outside the sale of the Yara ces comparable to those achieved wide (BW) strengthened its position fleet to BW Gas, this sector of the in 2005. Like last year, it is interes- by declaring options to purchase at market saw the sale to MC Shipping ting to note that the availability of very favourable prices ($42.5 mil- of the Hans Maersk, 20,000 cbm these ships for sale was essentially lion each) two ships of 83,000 cbm built in 1993, for around $40 million, due to the existence of purchase built in 2001, which have been com- against a 5 year time charter back, options exercised by beneficial mercially operating over the last and the sale of the Tycho Brahe and charterers. Price levels were: 3,300 5 years. They have also lifted a pur- Immanuel Kant, 15,000 cbm built in cbm built in 1995 around $9.5 mil- chase option which they held on the 1982 and 1983, to the same buyer lion, 5,000 cbm built in 1996 round Berge Trader, 78,000 cbm built for around $31 million en-bloc with a $11 million, 5,000 cbm built in 2003 2006 for $92.4 million. two-year employment attached. around $16.7 million, 6,300 cbm There was only one demolition sale built in 2007 around $22 million, After having repurchased the Yara reported, that of the Luigi 7,000 cbm built in 2007 for around fleet, which comprised 2 ships of Lagrange, 32,000cbm built in 1976, $24 million. 60,000 cbm built in 2004 and sold in the middle of the year for 2005, BW resold 49 % of these two In this category as well, only one around $360/ldt with delivery in ships on the basis of a unit price of ship was sold for demolition, the Fujairah. Norgas Navigator. ■ $83 million. 2006 also saw the first VLGC sold LESS THAN 15,000 CBM on the Indian market with the Nor- danger, 76,000 cbm built in 1992, The consolidation process in the bought by Varun for $62 million. At small size fleet continued this year the end of the year, this same with the sale by Lauritzen Kosan to Eitzen Gas of 8 semi-refrigerated owner further reinforced his posi- ships of 1,600 – 2,600 cbm built in tion as leader in this market buying the mid-80’s and the early 90’s. the Helice 57,000 cbm built in 1991 for $60 million. After investing in the larger sizes, MC Shipping was able to take As for the Hourai Maru, 75,000cbm advantage of the lack of viable pro- built in 1985, she was sold at the end jects in the containership market in of the year at around $25 million to Germany, to sell their fleet of 6 Petredec, who have been using her pressurized ships ( 3 x 3,200 cbm under time-charter for the last built in 1990, 2 x 3,500 cbm built in 2years. 1995, and 1 x 4,000 cbm built in Surprisingly the owners of the two 1991) to MPC for a total of $52 mil- very oldest carriers, the Gaz Crea- lion. Simultaneously, MC Shipping tion, 79,900 cbm, and the Gas Bau- took these ships back on a 4 year hinia, 77,200 cbm, built respecti- time-charter, brought 25 % of the vely in 1977 and 1976, judged it necessary equity to the new owner profitable to accept the historically to carry out this investment, namely $5.4 million. high levels which the demolition market was giving in 2006 (bet- Throughout the year Stealth conti- ween $400-450/ldt). nued in the same way as last year,

The liquefied petroleum gas shipping market in 2006 - BRS 65 Certified since 1997, BRS quality system has again been successfully renewed in 2006 under the new ISO 9001:2000 rules.

This renewal reflects BRS constant commitment to improve its services to clients since it was founded in 1856.

66 BRS - Shipping and Shipbuilding Markets in 2006 The liquefied natural gas shipping market in 2006

LNG: a market boiling at – 160°C

IN 2005, A LITTLE MORE THAN needs to be examined more closely, as 140 MILLION TONS OF LNG WERE the start-up of new additional LNG pro- TRANSPORTED BY SEA. THE FLEET duction capacities needs to be compared WAS COMPOSED AT THAT TIME OF with the LNG fleet in service, ships to be JUST OVER 190 CARRIERS WITH AN delivered shortly, as well as the state of AVERAGE CAPACITY OF ABOUT the newbuilding orderbook. 125,000 CBM. By the end of 2006, the installed world THE FLEET liquefied gas production capacity was slightly over 170 million mt per year, an At the end of 2006, 135 ships were on increase of about 20 %. In fact, some order, mainly in Korean shipyards, for a liquefied gas trains came into service at total volume of nearly 23 million cbm. By the start of 2006 (Trinidad Train 4, Dar- comparison the 220 ships currently on win LNG), some reached their full capa- the water have a carrying capacity of city in the course of 2006 (Idku Train 2), approximately 27 million cbm. 26 car- and some were announced operationally riers were delivered in 2006 as opposed at the end of the year (Rasgas II Train 5). to some 15 in 2005. 2006 thus saw the At the same time, the fleet of LNG car- first deliveries of ships ordered in 2004, riers in service reached 220 ships, repre- which was a record year in terms of new senting an increase in capacity of 3.7 mil- orders with a total of 66 new contracts. lion cbm over end 2005, an additional There was also a narrowing gap between carrying capacity of about 15 %, in line the number of ships ordered (32) and the with new trains coming into service at ones delivered in 2006 (26). Hence, with the same time. It could be thought that an anticipated 40 deliveries in 2007 this LNG carrying capacity is catching up year could mark the start of a reversal in quickly with the quantities of LNG due to the trend, with fewer orders compared to be shipped. However, this observation the number of deliveries. This phenome-

The liquefied natural gas shipping market in 2006 - BRS 67 LNG CARRIERS DELIVERED AND AVERAGE CAPACITY

cbm 200,000

Number of new delivered LNG carriers 180,000 Average capacity of new delivered LNG carriers in 000 cbm Trend (average capacity of new delivered LNG carriers in 000 cbm) 160,000 ween 50 to 55 ships per year, with an upsurge coming from new coun- 140,000 tries such as China, who are hoping

120,000 to develop their own building facili- ties. A certain number of shipyards 100,000 will probably have to proceed to 135 LNG carriers to be delivered from Jan. 1st 2007 52 80,000 strategic readjustments in the years to come.

60,000 35 40 Looking forward to 2010 (without 40,000 taking into account new orders 23 17 which could be placed in 2007 and 20,000 14 16 26 10 8 8 2008) there will be 332 ships in ser- 2 6 8 115 5 5 5 1 0 vice below the age of 35 years. If 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 one assumes more restrictive crite- ria for the use of LNG carriers to be enforced by the Majors, as they did non will be reinforced in 2008, This statement needs to be taken in their vetting policy with oil tan- which, with the commissioning of into consideration by shipyards, kers, there would be around 290 about 50 carriers, will set a peak who have organised their produc- ships in service in 2010 less than 25 figure in deliveries. It is therefore tion facilities to be able to construct years old. interesting to underline that at the fairly standardised LNG carriers In terms of capacity, 2006 saw the moment there is a 50 % decline in and who have also dimensioned introduction of bigger dimensions the number of orders between their production capacities in order with the order in ownership by 2004 and 2006, a tendency which to meet this growing demand. As of Nakilat (Qatar) of 9 ships with a will have wider repercussions on now, the overall newbuilding capa- capacity of 260,000 cbm (Q-max), the shipbuilding market. city for LNG carriers is ranging bet- and the prospect of additional © Gilles Crampes © Gilles

Gaz de France EnergY, 74,130 cbm, delivered in 2006 by Aker Yards Saint-Nazaire to Gaz de France

68 BRS - Shipping and Shipbuilding Markets in 2006 orders starting in 2007 for up to 8 VARIOUS SCENARIOS OF FLEET AVAILABILITY WITH DIFFERENT AGE CAPS additional Q-max for their Qatargas

IV and Rasgas III (Train 7) require- in cubic meters 60,000,000 ments. These super-carriers will be 330 332 essentially dedicated to Middle East LNG fleet below 25 years LNG fleet below 35 years 299 291 Gulf / US trade, but represent a 50,000,000 284 noteworthy benchmark in that they LNG capacity below 35 years LNG capacity below 25 years will downgrade the traditional 251 253 130,000 / 145,000 cbm to the Mid- 40,000,000 212 size category. This size increase is 204 helped also by the introduction of 188 30,000,000 210,000 cbm Q-flex ships which are 166 currently on order for Qatar. Of the 146

39 carriers currently on order for 20,000,000 Qatar, 36 are 210,000 cbm or 260,000 cbm, amassing between 10 and 15 % of the fleet by 2010. 10,000,000 The immediate effect of this leap in ship size on order is to increase the 0 average carrying capacity of ships 2005 2006 2007 2008 2009 2010 in service. It will be 144,000 cbm in 2010 given current orders and for ships under 35 years old, which arising here and are moving into which indicates tensions and inflexi- represents an 18 % increase of the this new form of “tramping” with bility in a transitional market. The average carrying capacity of ships LNG carriers on time-charter to trend at the end of 2006 is some- compared to 2006, when the ave- relieve the Majors embarrassed with what bearish with the arrival of new rage was 126,000 cbm. ships without dedicated work. This capacities due to be delivered in the opening may be of interest for tem- first quarter of 2007. THE MARKET porary periods and also provides A multitude of projects which com- greater flexibility to the market. A new phenomenon emerged in bine new technologies and new 2006 which might well be a trend Another important phenomenon operating methods was also an for the years to come: the tradition- which occurred in 2006 was the use important aspect of the year 2006: al scheme in the LNG chain, which of LNG carriers as floating storage LNG floating storage, offshore includes the construction of the units for speculative purposes. Fol- discharging buoys, ship to ship ships in the overall scheduling of lowing Excelerate Energy, who did it transfers, are all elements which projects, has been upset by delays first with the flexibility of re-lique- now have to be taken into account in occurring with certain production faction plants on-board their ship, the development of the LNG market facilities. For example in the Snohvit other owners plunged into this new in years to come. For example, dis- project in Norway, where the four possibility, in particular Shell who charging directly in gas form into a ships ordered have been delivered used two LNG carriers as floating land-based pipe network has and find themselves open on the storage during the autumn. In 2006 become possible and the first oper- spot market, or similarly in the eleven ships found such employ- ation of this kind will be tested in the Sakhalin project, for which first pro- ment for periods extending to as beginning of 2007 in Teesside. This duction has been pushed back to much as four months. This option new operating method heralds a 2008 although the five ships order- also provides the possibility to much greater flexibility of LNG use, ed will come onto the market in hedge, optimising on different pri- in line with market expectations. 2007. This produces the double ces notably between Europe and the With this direct unloading, the gas effect of causing “missing” LNG United States, and to wait for more becomes one of the rare commodi- volumes, as well as producing “sup- advantageous market conditions. ties that can be put directly into a plementary” shipping capacities on As for freight rates, 2006 saw levels distribution network and available to the market. Some owners, notably more than doubling, between consumers without intermediary TMT (Taiwan) see an opportunity $40,000 and $90,000 per day, storage or transformation.

The liquefied natural gas shipping market in 2006 - BRS 69 © Philippe Dureuil

Provalys, 153,500 cbm, delivered in 2006 by Aker Yards Saint-Nazaire to Gaz de France

It is also interesting to note that the ket price has gone up twice as fast In France, announcement was made first shipment of LNG into China as that of LNG carriers, whereas in by 4Gas for the building of a termi- from Australia took place in May. terms of work force a LNG repre- nal at Le Verdon with a capacity of 6 There was also in 2006 the first sents 2.5 times that of a VLCC; billion cbm/p.a., followed in Novem- Nigerian LNG imports by Iberdrola, whilst others calculate in terms of ber with a project managed by representing a little more than dock-capacity used in the shipyard, Poweo for a gas terminal at Antifer 30 % of their requirements. where a conventional LNG carrier with a capacity of 8 billion cbm/p.a. of 160,000 cbm occupies half the As for shipyards, we have just gone With the project under construction space of a VLCC and in addition, through a period which has between Total and Gaz de France at thanks to the membrane, the for- witnessed an amazing leap in tech- Fos-Cavaou for a 8 billion cbm/p.a. mer can be put afloat well before a nological innovation: a jump in size terminal, the total capacity for conventional tanker, thus permit- to 260,000 cbm, twin-propulsion regasification in France should dou- ting more ships to be built in the for the big ships, re-liquefaction and ble to achieve 40 billion cbm/ p.a. in same dock. re-gas on-board, a new type of CS1 2012. membrane, dual diesel gas-electric Regarding owners, the purchase by As regards new LNG projects, one propulsion. This should be contras- Golar of 20 % of LNG Limited in should take into account the delays ted with the persistent reputation Australia and also the creation of a encountered by some of them - for of the LNG market until now, its tra- joint venture between Exmar and example the “Gorgon” project in ditional conservatism. Sadra in Iran, shows the need for Australia planned for 2008 and put owners to create new, innovating One has also observed a certain back to 2010, but also in West Africa partnerships in order to take com- hedging of bets, especially on where some projects will be post- petitive advantages within the behalf of the three largest Korean poned due to the size of the invest- scope of new projects. shipyards, as to the choice of build- ment. The uncertainties concerning ing LNG carriers or conventional In respect of gas terminals, the some major LNG projects like the ships; some are giving a preference number of projects in progress in Shtokman project in Russia is like- to conventional ships as their mar- Europe has increased considerably. wise one of the significant events in

70 BRS - Shipping and Shipbuilding Markets in 2006 IMPLEMENTATION OF LNG COMMITED PROJECTS UNTIL 2010

300 million tonnes / year

250 2006. Gas from Shtokman which initially was intended for US desti- 83 MT/year nation will now be sent by pipeline 200 to Europe and will be developed by Gazprom on its own without the 150 help of international companies. ATLANTIC BASIN But this project could see other 93 MT/year 93 political swings in 2007. These ele- 100 ments will naturally have an effect MIDDLE-EAST on world LNG requirements. It is therefore important to realize 50 ASIA-PACIFIC

that numerous projects already 94 MT/year announced will not be keeping to 0 their timetables and that the delays 2006 2007 2008 2009 2010 will have a considerable impact on LNG shipping, since part of the quantities which were anticipated in investment decisions have been 2007 for the Train III of Rasgas III the coming years will now only be made, one can expect from now and then subsequently for Qatargas available as from 2010 / 2012. until 2010 that gas liquefaction IV due to be in service in 2011. capacity will expand to about All these elements obviously pose Given identified projects and the 85 million mt/p.a., taking into problems to owners who have orderbook of shipyards, there will account delays from the drawing- ordered traditional LNG carriers be an existing fleet of a little more board to the construction and the (150,000 cbm, steam propelled) on than 330 LNG carriers under 35 final installation of various projects. a speculative basis, and also to years to carry a shipping require- shipyards which will see a conside- Out of this 85 million mt/p.a. of esti- ment of 270 million mt/p.a., and this rable drop in orders in the coming mated liquefaction capacity, about without any new orders and delive- two years. We are witnessing a noti- 40 million tons will come from the ries before 2010. This orderbook ceable evolution in the concept of various Qatari projects, for which already represents a confirmed ships, both in terms of capacity as an additional dozen Q-max and Q- increase of over 110 LNG carriers to well as in terms of operating flexibi- flex ships should be ordered in cover the additional capacities. If lity with a LNG market in full devel- opment for which we can offer a few reflected observations. LIQUEFACTION CAPACITY VS SHIPPING TRANSPORTATION CAPACITY without Newbuilding “Take a break in the rush” million tonnes / year Cubic meters LNG represents an alternative to 400 60,000,000 the widely pronounced depletion of Liquefaction capacity in MT/year 350 oil resources and is considered as a LNG shipping capacity in cbm 50,000,000 clean energy. In addition, its exports 300 coming from OPEC producers are 40,000,000 not subject to quotas. There is the- 250 refore a strong demand for LNG 30,000,000 with numerous projects either 200 under scrutiny or subject of specu- 150 lation in all gas-rich areas identi- 20,000,000 fied. Between the announcement of 100 a feasibility study and its realisa- 10,000,000 tion, several years can go by, given 50 the importance of the investment in hand and geopolitical considera- 0 0 2005 2006 2007 2008 2009 2010 tions. Just as an illustration, if we take only projects for which final

The liquefied natural gas shipping market in 2006 - BRS 71 is negotiating broad agreements to secure the quantities necessary for its economic growth, in particular with Iran, as its needs could rise to 20 million mt/p.a. before 2015. The US has also an appetite for LNG, and could diversify their supply sources to include the Atlantic basin, after the disruption of the Shtokman project. There are some gigantic projects in hand including Australia, Nigeria (Brass, OK LNG) and Iran (NIOC LNG, Pars LNG, Per- sian LNG and the SKS project with Malaysia), which represent an accu- mulated quantity of 50 million mt/p.a. If some of these projects M-Flex LNG were to get off the ground shortly, Artist impression of the LNG Tanker Carrier project, M-Flex LNG vessel, 90,000 cbm, designed in cooperation the balance between production with the Korean shipyard Samsung Heavy Industries (SHI), utilising the IHI SPB containment system and shipping capacities would be with possible delivery from 2010 onwards. largely modified. The related need for new ships would represent a level of orders which would be com- one allows for the Qatar quantities to the start-up of the projects for parable to that of Qatar over the which they were destined. which are already covered with 39 past three years. The outlook for ships under order, that then leaves We are therefore going to enter an the LNG market in 2007 therefore around 70 carriers for some 45 mil- interesting context in 2007 and shows both promises of a market in lion mt/p.a. 2008, where the evolution of the full boom as well as reasons for The increase in ton-miles due to orderbook will be a good barometer caution given the range of uncer- new trade movements, in particular to judge the surplus capacity loom- tainties. ■ with US destination, will surely not ing in 2010. There is a balance to be be enough to absorb the surplus found between orders due to be shipping capacity coming into ser- placed within this declining trend, vice (made even larger by the which began three years ago, and increase in ship sizes on order). In identifying new niches in the mark- addition, some of the orders which et in particular linked to the deve- will arise in the course of 2007 for lopment of a spot market, but also projects integrating the shipping for a greater demand in terms of leg, will further increase the num- operating flexibility. ber of ships to be delivered before It could well be a case of traditional 2010. The surplus capacity expect- ups and downs with markets in full ed is also due to the arrival on the expansion, as there is clearly a market of ships ordered on specula- strong demand for LNG being voic- tion and ships being delivered prior ed by a number of countries. China

72 BRS - Shipping and Shipbuilding Markets in 2006 The dry bulk market in 2006

2006 SAW A CONTINUATION OF THE flow in their economy. This production DEMAND LED MARKET THAT START- kept on necessitating iron ore imports ED IN 2003, WITH CHINESE IRON from Brazil and Australia, while India also ORE IMPORTS REMAINING THE MAIN offered an option to China which has been MOTOR. developed throughout the year. As for coal, the rising demand enabled Indonesia On the supply side, the aggregated dwt of to significantly increase their market as a the total bulk fleet increased by 8 %, and solid exporter towards the Far East, com- the year came to a close with the equiva- peting with Australia. lent of 24 % of the existing fleet still on order. The fleets are renewing themsel- As 2005 ended with subdued demand ves efficiently, except for the Handysize and significantly lower time charter fleet, 18 years old on average, of which levels than we had experienced during the modern units are under especially the year, many players and analysts felt strong demand. The increase in size of that supply and demand were balancing new ships has again been the norm, with out. The market in the first half of 2006 for instance 22 Capes over 180,000 dwt was comfortable, with Capes asking for delivered in 2006, and the rapidly gro- over $30,000/day, Panamaxes and Han- wing Supramax fleet having an average dymaxes over $20,000/day, but not exci- age of 5 years, while the other sizes ave- ting enough to initiate new orders, in rage around 10 to 12 years. competition with the high flying and heavily sought after tanker and contai- On the demand side, the steel industry ner newbuildings. remained the driving force for bulk sea- borne trade, accounting for nearly half of A sudden swing late January, early the tonnage transported by sea last year. February 2006 is explained retroactively The Chinese steel production saw no signs by the difficult and very late conclusion of slowing growth, despite government of the yearly iron ore pricing negotia- efforts to induce this by reducing cash tions. Suppliers had been holding back

The dry bulk market in 2006 - BRS 73 BULK FLEET AND ORDERS Panamaxes and Supramaxes had been riding the wake of Capes, dwt 140,000,000 moving in a dampened manner in existing fleet 753 No of ships almost total synchronisation. The on order 120,000,000 autumn saw this synchronisation disappear and then inter-Asian 1,467 trades seemed to generate their 100,000,000 own driving force for these ship types. The high volume of activity in 80,000,000 the Pacific was able to absorb the massive Panamax and Handy- 2,142 percent of fleet on order in dwt Supramax newbuilding deliveries. 60,000,000 Consequently owners were reluct-

955 ant to trade their vessels back to 31.0 % 40,000,000 the Atlantic, and thus asked for a 519 premium to deliver these routes. It 21.0 % 20,000,000 62.0 % is remarkable that iron ore exports

12.5 % from India stood at about 96 million 4.5 % tonnes, while coal imports amount- 0 Capesize Panamax & Overpanamax Supramax Handymax Handysize ed to about 40 million tonnes. By 100,000dwt+ 60,000-100,000dwt 50,000-60,000dwt 40,000-50,000dwt 20,000-40,000dwt the same token, cement exports from China to the USA increased to an unexpected level of 40 million stems and receivers using their as he pushed the market even tonnes. Throughout the spring and stocks, both in an effort to influence higher. Most of his paper positions summer, the Pacific and Atlantic in their favour an eventual price were for fourth quarter 2006 deli- basins evolved with little correla- adjustment. The shippers prevailed very, and it is significant to note tion, with a spread of between with a 19 % increase and receivers that there were no defaults on the $5,000 and $10,000/day. built stocks back up, which gave a paper market, which signifies a grow- positive tone to the market before ing maturity within the players. Surprisingly Supramaxes, although the price increase became active. 25 % smaller, were more expensive At year end, with a very tight sup- than Panamaxes during the second Come April things appeared back to ply/demand ratio, rates were strong quarter, underlining the steady, inde- normal, and the markets seemed in all basins and finished the year pendent and increasing demand for set for the summer lull. It wasn’t with time charter levels of around these vessels, which are able to deli- until the autumn that the extent of $70,000/day for Capesizes. ver a wider range of shipments the raid on the Capesize market using their own gear. was evaluated. An Asian owner/ The heavy demand drive of the operator had remarked the tight market in the second half of 2006 The smaller Handysizes are even balance of supply and demand. made it unnecessary for owners to more versatile in their deliveries, Buying derivative Cape time charter accept discounts on routes, who their rates are thus less correlated paper contracts from everyone who instead went to and stayed in the to those of the bigger sizes. Never- would sell them, he simultaneously trades that best suited their availa- theless their global trend in 2006 took on physical time charter most ble tonnage, and this caused an was the same, with time charter available Capesize vessels. As the unusual convergence of all the time rates increasing hesitantly during physical market reacted to less charter rates towards one price. the first half of the year from daily availability, he continued his raid all Indeed the backhaul rate, which is earnings of $13,500/day in January, to $16,000/day in June, and then the way up and the indices conti- historically the lowest rate, increas- moving into a clear bullish trend to nued to increase, making his paper ed significantly relative to the fron- attain $21,000/day at the end of the derivative position very attractive. thaul rate; and the Pacific round, year, this due to a clear lack of With a reported gain on paper of generally slightly cheaper than the modern tonnage. over a billion dollars, there seems Atlantic round, was up to 30 % to have been ample reserves to more expensive than the Atlantic For all these sizes, congestion in absorb waiting time for idle vessels, round. ports affects the market signifi-

74 BRS - Shipping and Shipbuilding Markets in 2006 cantly. The year started with short waiting times at ports, and things were reasonable until mid-year, but thereafter the need for throughput sometimes surpassed the port capacities, which caused increas- ing waiting times, making tonnage unavailable and putting further pressure on supply in an already bullish market. The longest queues occurred in Newcastle, where ships ended the year having to wait approximately a month. For most other ports, as throughput capa- city increased, the congestion pro- blem was no longer. Overall, the volatility was 30 % lower in 2006 than in 2005, with daily volatility averages of $770, $295 and $110, or 1.8 %, 1.5 % and 0.5 % for the Cape, Panamax and Lake Biwa 68,280 dwt, built in 2002 by the Japanese shipyard Iwagi, owned by Bocimar Supramax time charter rates res- pectively, indicating that 2006 saw the market finding a relative form of stability for the first time since the shipping boom of 2003. The larger fluctuations of the Cape rates are partly due to the smaller number of ships and their direct dependence on the dynamics of the steel and thermal coal markets, making their market less liquid than those of smaller sized vessels. They CAPE TIMECHARTER RATES SINCE 2005 are also a consequence of the US$/day greater volume of FFA contracts 110,000 signed against their rates, which C8 - Atlantic round voyage C9 - Atlantic to Pacific create psychologically induced C10 - Pacific round voyage C11 - Pacific to Atlantic swings in the rates. 90,000 Indeed, the number of companies speculating or performing financial 70,000 risk management using shipping derivatives is growing rapidly. This year saw for the first time the appa- 50,000 rition of Shipping Options as well as a Baltic exchange publication of official FFA volume statistics, giving 30,000 an idea of the amounts traded and thus making a step away from the traditional secrecy characteristic of 10,000 this market. 11/2005 11/2006 01/2007 07/2005 07/2006 01/2006 01/2005 03/2005 09/2005 03/2006 05/2005 09/2006 In 2006, FFA trade volume expan- 05/2006 ded, especially in the second half of

The dry bulk market in 2006 - BRS 75 AVERAGE BULK TIMECHARTER RATES & DERIVATIVES

$/day 120,000 Capesize Panamax Supramax 100,000 will attract new players. Banks and Historic since 2004 FFA hedge funds are currently showing 80,000 a clear interest for trading commo- dities and their derivatives, the next logical step appears to be for a 60,000 number of them to become involv- ed in shipping. The 2006 raid by Far

40,000 Eastern operators, representing the most fruitful move of the new mil- lennium to date, should inspire 20,000 others towards trying to master the financial opportunities that lie within the dry bulk shipping market 0 in 2007. 01/07 01/04 01/05 01/06 01/08 07/07 07/05 07/04 07/06 07/08 We expect demand to stay firm in the short term, but there looms a the year, and the total annual growth should continue, as new huge newbuilding capacity coming volume traded is now considered to counterparties enter the market- on stream in the medium term. be approaching parity with physical place, increasing liquidity, transpa- Market balance will depend on volumes of cargo in a 1:1 ratio. This rency and reliability, which in turn owners self control! ■

The dry bulk second-hand market

THE SECOND-HAND CAPESIZE (OBO). The two other vessels that for Capesizes deliverable promptly, BULK CARRIER MARKET came out of the fleet were total los- which can be operated straight (80,000 DWT & OVER) ses due to accidents. away and thus benefit from the strong time charter rates. At the end of 2005, we finished our By the end of December 2005, a 5 article by underlining “China and year old Capesize of 172,000 dwt Similarly, the yard resales and the India’s dynamism, which are still the was estimated at about $57.5 mil- most modern vessels, awake the main growth sources for our mar- lion, beginning of January the appetite of bold buyers, frustrated kets”, and wondering ”whether this value had fallen down to about $57 by the far away delivery dates they dynamism will be sufficient?” million, and by the end of March he can obtain in the construction Looking at the figures, clearly the would have found a buyer at $53.5 yards. We would not be surprised to answer is yes, although a slight million. A slight gain in May see vessels deliverable within a uncertainty was perceptible until enabled the market to come back year’s time, or very shortly, attain around the month of March. to the levels of the beginning of the $100 million level, inconceivable the year, and from the month of not that long ago. We have seen about 80 sales for June onwards we entered a clear As for older units, vessels of further trading during last year, and upward trend which gave, at the remarkably close to twenty of them 165,000 dwt built in 1995, which end of 2006, a market value at concerned Kamsarmaxes. Only were negotiated at $36 million in $80.5 million. three sales for demolition have, to December 2005, and were then our knowledge, been recorded this This enthusiasm is of course reveal- worth $34.5 million in the end of year in the Capesize sector, of ed by the strong number of vessels January 2006, they ended the year which one was a combined vessel sold, as well as by the premium paid at around $62 million!

76 BRS - Shipping and Shipbuilding Markets in 2006 A 15 year old vessel of 150,000 dwt, owners and “would be” owners a still proved to be too few and far which was worth $28.75 million in good reason to ask for and pay for between, causing prices per ton December 2005 saw his price go up more than last done. Most people lightweight to increase to about to around $45 million by the end of decided that values had corrected $390-410 for those destined to be 2006. enough, causing a sharp increase recycled in India or Bangladesh. in potential buyers, becoming In this end of year 2006, owners’ Comparing second-hand values, for more adventurous and willing to spirits are sky high. However, the sizes under consideration, at travel further away to inspect contradicting what some think, the end of 2006 against those at ships offered for sale. A higher “trees never touch the sky”, and a the end of 2005 we note : limit will be reached… one day. number of buyers competing for ships inevitably caused prices to When and at what level? Call us so Panamax increase on a weekly basis. that we can discuss this! (68,000-78,000 dwt) During the third quarter, freight At the end of 2006, a 10 year old THE SECOND-HAND MARKET rates picked up and kept doing so Panamax bulk carrier is worth about FOR PANAMAX, HANDYMAX & right into the middle of the summer, $38.0 million, representing an HANDYSIZE BULK CARRIERS leading prices in all three size seg- increase in value of about 58 % over ments and for all ages to record And one, and two, and three, and the past 12 months, whereas a 5 year healthy gains. August proved to be four! Four successive years of a old Panamax bulk carrier is worth one of the busiest “August months” “phenomenal” dry bulk freight about $46.0-46.5 million, which in sale and purchase history, with market has naturally led to the about 62 sales recorded, of which represents about 59 % appreciation most exciting and profitable period one-third were Panamaxes. when compared to the value of a year in the maritime industry yet… earlier in December 2005. Whilst This continued right up to the end The second-hand bulk carrier mark- these values are those at the end of of the year and even over the et over the last twelve months has 2006, it is worth remembering that Christmas and New Year holidays definitely not been for the faint during the first and second quarters this extra hot second-hand market, hearted. Sentiment which has led to of 2006, Panamax bulk carriers of 5 kept buyers, sellers and their trus- traditionally “low” activity months and 10 years old were “changing ted brokers busy. in July and August, once more had hands” for about $29.0-30.0 million centre stage and has this time led Looking at tonnage removed from and $24.0 million respectively. One of to a high number of transactions, the market, and although the numb- the transactions worth remembering with prices recording new highs er of ships ending their lives increa- in May, was the “en-bloc” purchase of each week during these two sed in comparison with last year (in the Metrostar/Angelopoulos modern months. deadweight terms the figures for Panamax and Kamsarmax fleet (17 2006 are about double those for vessels including 3 x 76,500 dwt and Values which had corrected down- 14 x 82,800 dwt Kamsarmax size) by wards at the end of 2005, kept 2005: about 3.2 million dwt versus the Nasdaq listed owner Quintana their “southern” direction till about about 1.6 million dwt respectively), the end of the first quarter, when the sales of vessels for demolition Maritime. they stabilised. During these first months of the year buyers were mostly cash rich looking to capital- ise in the drop of values of the pre- vious 12 months. The second quart- er prices recorded little movement and all actors were set for a well earned summer vacation, or so they thought. Round about early June, “sentiment”, this wonderful analytical tool which helps all ship- Ponta Da Madeira (Brasil) ping professionals make important Pier III expansion with a new shiploader decisions, struck! A couple 2/3 year which started operations in September period fixtures, gave existing

The dry bulk market in 2006 - BRS 77 DRY BULK CARRIER SECOND-HAND PRICES (5 years old ships - weekly update)

$m 90 Capesize 172,000 dwt Panamax 74,000 dwt 80 HandyMax 52,000 dwt India not far behind. The number of 70 newbuilding orders (all ship types) increased dramatically during 2006 60 (ahead of new rules and regula- tions), giving shipyards full order- 50 books till 2010. The last few years of this “bull” market have created 40 enormous amounts of “cash” and consequently “seriously cash rich” 30 shipping investors. When this cash

20 seeks investment in a shipping pro- ject, it is logical that prices will not 10 ease off their present peaks. Last but not least, we are back into a 11-03 11-04 11-05 11-06 02-05 02-04 02-06 08-03 05-04 05-05 08-04 05-06 08-05 08-06 “seller’s market” as opposed to last year and as such we shall see an ever increasing number of buyers Supra/Handymax dering and trying to answer the competing for the same vessel, thus (42,500-55,500 dwt) questions: “What’s next?” and driving up the eventual sale price. “Where do we go from here?” At the end of 2006 a 10 year old A shipping investor contemplating a Handymax (45,000 dwt) bulk carrier It worth noting that although purchase of a modern vessel, is worth about $31.0-31.5 million, freight rates are below their 2005 should probably finalise it sooner representing an increase in value of record levels, bulk carrier second- rather than later. Older vessels about 48% over a period of 12 hand values for all sizes are at “all should be considered too but months whilst a 5 year old Supra- time highs”, higher than the extreme caution should be exercis- Handymax (52,000 dwt) bulk carrier records set during the last quarter ed with the most important para- is worth about $40.0-41.0 million of 2004 and the first quarter of meter being “condition”. If on the recording a value appreciation of 2005. The Baltic freight indices are other hand a sale is to be conside- 56% compared to the same period at their highest point since Decem- red, prices are at all time highs one year earlier, December 2005. ber 2005 but still much lower than (again, last time end 2004-early the peaks reached at the end of 2005) so maybe now is a good time Handysize 2004 and first quarter of 2005, so to sell. If the asset is “mature” and (21,000-36,500 dwt) can we expect a further increase in it’s owner has been able to use it for a number of years, including the At the end of 2006 a 10 year old values? past four years, there is only one Handysize bulk carrier is worth The agreement of iron ore prices way forward: “sell, sell, sell”. about $23.0 million, representing (between miners and steel mills) an increase in value of about 21% earlier than usual, will most likely To summarise, freight markets over a period of 12 months. During lead to a surge in chartering acti- seemingly keeping their momen- the same period, the value of a vity and a freight rate increase at tum, a growing number of cash rich 5year old Handy bulk carrier recor- least until the new prices take investors seeking to purchase ded an appreciation of about 14 % effect, in the second quarter. We second-hand vessels, Chinese and and, at the end of 2006, stands at would therefore expect owners of Indian economies recording strong about $28.5 million. Looking back second-hand tonnage to adjust annual growth, shipyards with full over the past four years of this their price ideas upwards. orderbooks till 2010 and the stage “bull” market, we note that this size is set for another interesting year For the next 12 months we are cau- group offers steady appreciation in during which we expect prices of tiously optimistic, would expect less value albeit in a less spectacular second-hand bulk carriers to keep volatility, with a tendency for values ■ manner than the fluctuations in their upward trend. to increase across the board, value recorded for the larger sizes. mainly due to the following reasons After the four great years the mari- familiar to all regular readers of time industry has experienced, shipping market reports: China’s every shipping professional is won- continued double-digit growth, with

78 BRS - Shipping and Shipbuilding Markets in 2006 FUTURES LIMITED

BRS Futures Ltd he last few years have seen substantial growth in the use was set up in 2003 Tof derivatives to manage exposure to risk in many markets. and is a subsidiary The international shipping market is no exception, and in response to clients’ needs, BRS has added freight derivatives to the range of one of the of services it provides. most respected and long-established SERVICES PROVIDED international BRS Futures Ltd acts as a broker in principal-to-principal freight shipbroking firms, derivative contracts. The company offers a broking service Barry Rogliano Salles in existing tried and tested contracts for freight swaps and options, of France. and aims to continue developing its range of freight and ship value-based derivative products as appropriate. The parent company The aim of BRS Futures Ltd is to provide existing and prospective has more than clients with the opportunity to use standardised risk management 150 years’ experience tools for hedging and optimisation of shipping/freight portfolios. in providing a range BRS Futures Ltd is a member of the Forward Freight Agreement of services to clients Brokers Association (FFABA), and BRS is a panel-member contributor in the shipping to market data co-ordinated and published by the London-based industry. Baltic Exchange.

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Contacts Chris Reilly Tel.: +44 20 7602 5670 Email : [email protected] Tim Jones Tel.: +33 (0)1 41 92 12 34 Email : [email protected] François Walon Tel.: +33 (0)1 41 92 12 34 Email : [email protected]

BRS Futures Ltd is a wholly-owned subsidiary of Barry Rogliano Salles, registered in the UK (company registration number: 04565913) and is authorised and regulated by the Financial Services Authority of the UK (FSA reference number: 223290)

79 80 BRS - Shipping and Shipbuilding Markets in 2006 The containership market in 2006

2006 WAS A YEAR OF SUSPENSE. riers, MSC and CMA CGM, took advan- TONNAGE HAS POURED IN TO THE tage of the autumn lows to build up mar- MARKET, and the cellular fleet capacity ket shares by taking the ships released has risen by 16 % in twelve months. Fur- by less audacious rivals. thermore, the large ship segment -over So, while some carriers talk of overcapa- 4,000 teu- contributed to 73 % of the city and release the ships they cannot fill, capacity delivered. Such ships are highly others take them to fulfil their increasing efficient, with speeds of 24-25 knots, rea- capacity requirements. This market ching even 27 knots for a few of them. share race also keeps the rates under Filling all that extra capacity first appea- pressure as the temptation is big to offer red as a challenge, with shippers await- competitive rates in order to attract ship- ing signs of overcapacity to exert pres- sure on anxious carriers. But in the end, pers, although it is far from being the this challenge was fulfilled. only factor in the equation. With China continuing to feed norias of Repeated forecasts stating that the offer giant containerships and India exports would outstrip the demand have worked surging, carriers are confident that 2007 to a point, as box rates were driven down will be a good vintage. They have revived by the sentiment that there were too plans to raise rates on most key routes many ships around. It is true that there and hope for better returns. Even the were some breathtaking moments when mixed US economic figures do not bring the transpacific high season ended in the same worries as only two or three October, with ship demand reaching a years ago. Globalisation has rendered low point while Far East yards continued world trade less sensitive to the fluctua- to deliver ships at a pace approaching tions of the US economy. Eastern Europe 4,000 teu per day. economies are developing fast and trade All was right again by December, and the between developing countries has also early weeks of 2007 have confirmed the surged. bullish trend. The rise of the euro against This is well illustrated by increasing volu- the dollar during the last quarter of mes transiting through the Black Sea and 2006 also helped to fill ships, as explai- the Baltic sector, while the China-India- ned later. Actually, two prominent car- Middle East trades are flourishing. This

The containership market in 2006 - BRS 81 CELLULAR SHIPS: DELIVERIES AND ORDERS Quartely teu US$/day 800,000 40,000 has helped to fill the East-West ships Orders while new services targeting these 700,000 sectors have been developed, and

Deliveries have absorbed a lot of tonnage during

600,000 30,000 the past two years. China’s strengthe- Daily rate (1,700 teu) ning economic ties with Africa start to generate a boom on the China-Africa 500,000 trades, absorbing quantities of 1,500- 2,500 teu ships, be it feeders connec- 400,000 20,000 ting to Middle East hubs or deployed on direct services. 300,000 THE EURO

200,000 10,000 US$ PARITY IMPACT

So, the market is still in car- 100,000 riers’hands. The seasonal effect put aside, it is remarkable to see how the huge capacity delivered in 2006 has been absorbed by market 2001-1 1999-1 1998-1 2007-1 2002-1 2003-1 1999-3 2001-3 1998-3 2005-1 2006-1 2004-1 2000-1 2008-1 2007-3 2002-3 2003-3 2005-3 2006-3 2004-3 2008-3 2000-3 growth. However, the US$/euro Source: BRS-Alphaliner parity has helped to maintain ships close to full, especially on East-West Evolution of the cellular fleet 1988-2010 routes. Year Number Teu Progr. The stronger the euro is against the 1988 1,1 56 1,494,766 dollar, the longer the distance run 1989 1,189 1,601,020 7.1% by the average East-West container 1990 1,239 1,707,757 6.7% is. A strong euro gives European 1991 1 ,3 1 1 1,846,893 8.1% buyers a bigger purchasing power, 1992 1,398 2,006,100 8.6% thus creating an incentive to reple- nish stocks in the euro zone. It 1993 1,489 2,202,398 9.8% benefits directly the Asia-Europe 1994 1,592 2,385,927 8.3% lines. On the contrary, the relative 1995 1,739 2,652,421 1 1 .2% weakness of the US$ and lower eco- 1996 1,9 13 2,980,909 12.4% nomic expectations in the US has 1997 2,108 3,359,195 12.7% kept a lid on Far East-US trade (it 1998 2,337 3,866,740 15.1% has moderated the growth). 1999 2,517 4,288,1 2 1 10.9% So, with a strong euro, Chinese and 2000 2,616 4,517,529 5.3% other Asian exports tend to pro- 2001 2,740 4,928,347 9.1 % ceed to Europe instead of the US. 2002 2,897 5,531,695 12.2% As it necessitates on average eight 2003 3,038 6,1 1 5, 165 10.5% ships for a typical Far East-Europe 2004 3,1 79 6,657,430 8.9% loop instead of roughly an average 2005 3,352 7,307,856 9.8% of six ships per loop for the Far 2006 3,6 1 1 8,247, 1 1 2 12.9% East-USWC / Far East-USEC trade (figure weighed for the number of 2007 3,949 9,574,035 16.1% loops), it has helped to maintain 2008 4,448 1 1 ,076,437 15.7% capacity demand at a good level as 2009 4,896 12,699,054 14.6% the euro went stronger against the 2010 5,195 13,992,469 10.2% dollar during the last months of Figures are given at 1st January of each year 2006, and has since stabilized in a Figures for 2007 to 2009 are derived from the orderbook 1.25-1.30 range. Source: BRS-Alphaliner

82 BRS - Shipping and Shipbuilding Markets in 2006 Sustained demand in Eastern Europe has also helped to fill Far East-Europe ships, it is thus not sur- prising that most of the VLCS’s deli- vered have flowed on the Far East- Europe route, and not on the Far East-US route. The filling ratio is alas acceptable in one direction only, and ships have to reposition themselves in Asia with huge quan- tities of empty boxes, alongside with loaded boxes carried at depressed rates.

THE INDIA FACTOR

Another key factor has been the emergence of India as an exporting (and importing) force. It has not only concerned the India-US or India-Europe trade, but also the India-China, India-Korea and India- CMA CGM Iguacu (ex-Rio Adour) Japan trades. India’s GNP growth 2,490 teu, built in 2006 by the German shipyard HDW, owned by MPC Steamship and chartered by CMA CGM rate for 2006 is estimated at 9 % and compares to China’s 10 % GNP progression. Atlantic basin for the first time, inclu- ion costs will follow. It must then be However, India could meet difficul- ding a direct Chennai-US connection. borne in mind that when TV sets -or ties in maintaining such a rate. Fac- anything else- will become competi- So, many positive factors have help- tories are running at near full capa- tive to be produced massively in, ed to absorb a fleet growth of 16 % in city, making it difficult to keep say, eastern Europe (or Africa - who 2006 (in teu terms) and it seems on inflation under control. Basic infra- knows?), against China, it will its way to absorb the 15 % growth structures, a responsibility of the encroach on Chinese exports to expected for 2007. All sounds well, government -such as roads or elec- Europe. Beware for the future trans- tricity production-, are hardly suffi- except that falling profits have been portation demand! cient to cope with developments in experienced by most operators this the private sector. The government year, as they were confronted with a It will not however happen overnight, met success in fostering economic fall in box rates despite good filling and when it will happen, it will have development for the past 15 years, ratios, but also to increases in bunker its positive side, as carriers will be at but it did not itself follow the pace. costs (at least at the beginning of the least in a position to raise profitable The port sector is also under stress, year), to high newbuilding prices and money on return legs from Europe and there is a fear of terminal to charter rates still at a relatively and North America to Asia. The cur- shortage if the Indian trade conti- high level. rent -although moderate- apprecia- nues to grow at its current pace. tion of Asian currencies, with the As for scrappings, the figure will yuan in the forefront, of course plays Whatever the future will be, the remain insignificant, unless a sudden a role in this direction, in helping to booming Indian economy has been a and unexpected slump precipitate re-establish the balance. boon to help fill ships in 2006. Volu- ships to the breakers' yards. Only But too fast a rise of Asian curren- mes shipped justify today more 25,000 teu have been scrapped for direct services, at the expense of cies could trigger a backlash, as the whole of 2006, after an absence feedering through Colombo or the some countries could be tempted to of scrapping in 2005 Middle East and SE Asia hubs. Even take steps to reverse it, in order to Chennai will be inserted in March The longer term (say 10-15 years) is protect their export power, as expe- 2007 in two services which will perhaps less rosy. With Asian export- rienced in Thailand since the last connect the port directly to the ing nations getting richer, product- weeks of 2006.

The containership market in 2006 - BRS 83 Demolition prospects

There has been a modest burst in weighed speed per teu stands at 18.9 ◆ Ratio dwt per teu for ships delivered containership sales for scrap in 2006, knots for an average ships speed of 17 2007-2008: 12.5 tons/teu which lead a few veterans aged 26- knots (note: the speed considered in ◆ Ratio dwt per teu for ships of 23years 30 years to the scrapyards, lifting cellu- these calculations is the contractual and more: 16.0 tons/teu lar ship scrappings to 25,000 teu. commercial speed). In 2004, only five containerships total- Conversely, it must be emphasized that The case of the non-celled ling 2,454 teu were deleted while the the older ships will remove more dead- tonnage year 2005 was marked by the absence weight capacity in comparison with the We are completing these figures with a of containership scrappings. The lower new ones. Ships over 23years offer a dwt case by case analysis of non-celled ton- expectations of today’s market and the per teu ratio of 16 tons, against a ratio of nage deployed on liner trades which will influx of newbuildings at a rate of an 12.5 tons per teu for the ships to be deli- reach the age of 27years by end 2008. average 4,000 teu everyday for the vered in 2007-2008. As a result, taking Some 210ships are concerned, totalling 24months to come, will inevitably lead into account ships over 27 years as an 2.8 million dwt and 120,000teu. to further sales. example, the ratio between newbuilding deliveries and ships delivered to scrap About 100 of them are employed on tra- However, they are not expected to stands at 8 in teu terms but stands only des with a mix of containers, breakbulk reach a significant proportion of the at 6 in dwt terms. It makes a notable dif- and rolling stock. Another 110 of them newbuilding influx. Historical records ference when ships at extreme ends of are identified as operating on pure show that containerships are scrapped the age range are compared. container services (including feeder tra- at an average age of 27years. Assuming des) or at least on services largely domi- all ships reaching 27 years of age and Summary of figures quoted above nated by containers. These 110 ships above at the end of 2008 are scrapped, (cellular tonnage): total 45,000 teu and 1 million dwt, which the figure would reach 360 ships total- is a drop in the ocean of cellular new- ling 380,000 teu. ◆ Ships delivered 2007-2008 => building deliveries. 904 ships / 3,050,000 teu / 38 million Assuming that a slump precipitates dwt These latter ships add to the ships reaching 25 years of age at the 380,000 teu of cellular tonnage which end of 2008 to the scrapyard, the total ◆ Ships of 27 years and above at end will reach the same 27 years of age by figure would then reach 504ships total- 2008 => 360 ships / 380,000 teu / the end of 2008, boosting the total to ling 556,000 teu. 6.3 million dwt 425,000 teu. So, contrary to a general In the unlikely event that ships reaching ◆ Ships of 25 years and above at end belief, the aged multipurpose tonnage 23 years of age at the end of 2008 are 2008 => 504 ships / 556,000 teu / still working on full container trades scrapped, the figure would come at 9.2 million dwt does not weigh much in today’s contai- 683 ships totalling 826,000 teu. ner trades. ◆ Ships of 23 years and above at end As a comparison, newbuilding deliveries 2008 => 683 ships / 826,000 teu / Most of these non-celled full container are expected to reach a total of some 13.4 million dwt veterans are deployed on local feeder 900 ships for 3 milion teu during the loops or regional services in the Indian ◆ Average ship speed for ships delivered years 2006 and 2007. As newcomers Ocean, SE Asia, Med and Caribbean sec- 2007-2008: 21.7knots are faster than their older counterparts, tors, where modern tonnage is often too the imbalance is actually still larger. The ◆ Average teu speed for ships delivered expensive to operate. Ships of some 35 average speed at which each teu will 2007-2008: 23.5knots years old are even still acting as full circulate on ships delivered in 2007- container carriers on these trades. They ◆ Average ship speed for existing ships 2008 stands at 23.5 knots (figure wei- are often former conventional tween- of 23 years and more: 17.0knots ghed with capacity, the average ship deckers, adapted to containers with speed standing at 21.7 knots). For exis- ◆ Average teu speed for existing ships sometimes their gear also adapted or ting ships of 23 years and above, the of 23 years and more: 18.9knots squarely removed.

THE OPERATORS in box rates. The first quarter of control of PONL in August 2005 (it 2006 was marked by the integration was mostly six months notices, with Most large carriers have lost money of the Maersk Sealand and P&O February 2006 being the average during 2006, or at least made much Nedlloyd networks in new sets of date for the effective dissolution). smaller profits than in 2005. The services under the Maersk Line main reasons lie in a fall in box rates Interestingly, in its February 2006 coupled with high bunker costs and label. This has not only concerned service recomposition, Maersk retai- charter hire burdens from costly Maersk, as many joint services invol- ned a mix of relay services and direct charters concluded at the peak of ving P&O Nedlloyd (PONL) have services to cover identical trades. the market in mid-2005. A seasoned been shaken, and agreements were PONL favorised the direct services optimism leads to think that profits dissolved, with Maersk giving notice while Maersk developed its services will be back in 2007 thanks to a rise of its exit as soon as it took full around the hub and spoke system.

84 BRS - Shipping and Shipbuilding Markets in 2006 It is not clear initially if this choice Hamburg-Süd has strengthened its ring this sector. Two national car- was to be a more or less definitive presence on the ANZ trades with the riers have also developed success- one, or if Maersk saw it as a tempo- purchase of the Fesco services cove- fully their network and fleet: S.C. rary choice, perhaps not to overbur- den its East-West arterial services LINER OPERATORS “TOP 25” - AT 1ST JANUARY 2007 with ex-PONL volumes. (Source : BRS-Alphaliner) APM-Maersk Whatever the Maersk strategy was at Mediterranean Shg Co the time, the company has initiated CMA CGM Group again a vast recomposition of its net- Evergreen Group Hapag-Lloyd work during the second half 2006, CSCL and it is not yet finished. Maersk puts COSCO Container L. again the emphasis on its favorite Hanjin / Senator hub and spoke system, dropping one APL after the other the direct services NYK inherited from PONL. MOL OOCL This recomposition of the Maersk Line K Line network may have been accelerated CSAV Group Zim by the loss of customers it experien- Yang Ming Line ced, and hence of volume, with proba- Hamburg-Süd Group Hyundai M.M. Operated fleets bly a serious adverse effect on the fil- Based on existing fleet at January 01 2007 ling ratio of its large ships deployed on PIL (Pacific Int'l Line) teu capacity available on board operated ships - All subsidiaries are consolidated - the arterial East-West routes. It is also Wan Hai Lines UASC probably for this same reason that IRIS Lines www.alphaliner.com Maersk did not renew charters on MISC Berhad several 4,000teu ships and even had Grimaldi (Napoli) + Finnl. to sublet such ships. RCL in '000 teu 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 While the A.P. Moller-Maersk fleet grew by 5.7 % during 2006, its clo- EVOLUTION OF GLOBAL LINER MARKET SHARES 2000 - 2007 sest rival, MSC enjoyed a fleet rise of (selected carriers) (in teu terms) (Source : BRS-Alphaliner) 30 %. It broke the one million teu CMA CGM Group CSCL mark in November 2006 and its fleet MSC reached 1.02 million teu on 1 st Hapag-Lloyd January 2007, against 1.76 million teu CSAV Group IRIS Lines Figures derived from for APM-Maersk. Despite an inces- Hamburg-Süd Group the BRS-Alphaliner TOP 100 A.P. Möller-Maersk at 1st January 2000 and sant flow of newbuildings (including OOCL at 1st January 2007. no less than 15 VLCS), MSC did not Yang Ming Line TOP 10 have enough ships to fulfil its requi- K Line rements. So, it swooped on the ships Pacific Int'l Lines (PIL) Sea Consortium released by Maersk, CSAV or Hanjin. MOL Assessing the evolution of carriers market shares NYK CMA CGM consolidated its third rank COSCO Container L. Between January 2000 and January 2007, with a fleet growth of 35 %, pushing Carriers ranked 11-25 the teu capacity deployed on liner trades has risen Zim from 5,150,000 teu to 10,467,000 teu, i.e. a 103% increase, according to BRS-Alphaliner data. It means that in order its fleet to 685,000 teu. Like MSC, Wan Hai Lines to simply keep their market shares during that period, CMA CGM has taken many ships Regional Container L. carriers had to increase their fleet capacities by 77.4%. Evergreen Group Those which failed to invest, or charter, enough unwanted by others and its network APL to keep the pace have lost market share. Hyundai Merchant Marine continues to develop at an amazing This graph compares the performance of a selection of Grimaldi (Napoli) carriers among the today TOP 30 lines. It is based on the ratio pace, with the launch of new servi- CCNI between market shares at 1st January 2000 and ces focusing on the southern hemis- Hanjin / Senator 1st January 2007. For example, CSCL market share rose UASC from 1.67% to 3.82%, ie an increase of 127.8%. phere. These new services are run Carriers ranked 26-50 by ships ranging from 1,000 to Carriers ranked 51-100 MISC Bhd 3,000 teu, and have been the most -100% -50% 0% 50% 100% 150% 200% prolific charterers in this size range.

The containership market in 2006 - BRS 85 Leading trio controls one-third of the liner market

The collective market share of the three world leading lines, Maersk Line, MSC and CMA CGM, has grown from 32.4 % to 33.1 % in terms of teu capacity during the year 2006, according to figures produced by BRS-Alphaliner. Taking by comparison the figures at 1st January 2000, the three leading lines at the time, Maersk Sealand, Evergreen and P &O Nedlloyd, had a combined market share of 23.7 %. However, the growth in 2006 was far from being equally shared by the three leading lines. Maersk Line still dominated the market with a share of 16.8 % on 1st January 2007 but this was down from 18.2 % a year ago, reflecting the difficulties the company experienced in integrating P&O Nedlloyd. On the contrary, both MSC and CMA CGM have clearly strengthened their positions. MSC has increased its share from 8.6 % to 9.5 %, while CMA CGM logged an increase from 5.6 % to 6.5%. MSC and CMA CGM are even to continue boosting their positions as they are taking the ships that others are discharging -or subletting. It looks like the size and coverage extent of these two carriers give them more confidence in the future than smaller carriers, and they are probably in a better position to sustain lower rates, partly thanks to economies of scale and through distinct commercial flair. It will allow them to drain cargo from smaller competitors and to continue growing faster than the rest.

Consolidation wave in the intra-Europe trades

2006 has been an eventful year in the intra services in the Baltic States, Poland, Russia, container shipping activities between the Europe container trades, with an accelera- United Kingdom and Northern Europe. Continent and Ireland, from Norfolk Hol- tion of the consolidation momentum, which dings B.V., a division of the A.P. Moller- ◆ In September 2006, Eimskip took took off in 2005, with two Icelandic compa- Maersk Group The entity has been control of Finnish carrier Containerships nies, Eimskip and Samskip, and a Belgian renamed DFDS Container Line BV and OY through a joint venture under the one, Delphis, leading the game for door-to- allows DFDS Tor Line to strengthen its name Containerships Group (CS). CS is door container services, while Grimaldi market position within the lo-lo container headquartered in Helsinki and covers tra- became a leader on the pan-European shipping segment, thereby obtaining des between Finland, Germany and the trade running from the upper Baltic to the synergies between the existing DFDS Tor UK. Kursiu Linija has been since integra- eastern Med with its bid on Finnlines Line container activities in DFDS Lys Line ted within CS operations. (against Finnlines wish - Grimaldi could still and DFDS Suardiaz Line, connecting the retract as per situation at time of writing). North Sea, the Irish Sea and Spain. Delphis On the other side, APM-Maersk has ◆ When created in March 2004 (with first Other significant deals offloaded its intra Europe door-to-door services opening in May), Delphis ambi- container businesses Portlink and Norfol- ◆ During 2006, UK-based 3A Marine tioned to become a leading force in intra kline Containers, while Finnlines sold Team Holdings (founded in 2004) has purcha- Europe transport and feedering. It has Lines be to Grimaldi took control of 50 % sed Contaz Line (NW Europe-Greece-Tur- now achieved this with a network stret- of the Finnish company. North Sea roro key), and has set up Europe Line (Rotter- ching from the upper Baltic to Gibraltar operators such as DFDS-Tor Line and Cobel- dam-Ireland – together with Johnson through both organic growth and the fret are also in an acquisitive mood. Stevens Agencies UK) and Balticon Line acquisitions in 2006 of Team Lines and (Antwerp-Baltic). Portlink. Samskip ◆ In September 2006, Tschudi Shipping ◆ Germany-based Team Lines has been ◆ Samskip acquired in March 2005 Dutch Company AS, Norway, has acquired full purchased in July 2006 from Finnlines. intermodal operator Geest North Sea Line ownership of the short sea liner company Team Lines provides transportation and (GNSL) TECO Lines AS through its fully owned feedering services between North Sea subsidiary Estonian Shipping Company ◆ In July 2005, Samskip bought UK-based ports and the Scandinavia and Baltic AS (ESCO). ESCO purchased the remain- shortsea shipping operator Seawheel Ltd. area. ing 50 % of shares in TECO Lines AS ◆ In September 2006, Samskip established ◆ Portlink NV was bought in August from Samskip. TECO Lines offers door to its own organisation in Spain, taking over all 2006 from Safmarine Container Lines door services between the UK-Continent shortsea activities from its existing partner, NV, itself a division of the A.P. Moller- and the Baltic Sea. Odiel Bilbao SA. Maersk Group. Portlink operated regional ◆ In January 2006, Trans-Baltica door-to-door services between the Bene- ◆ In September 2006, Samskip dropped Container Line Limited has launched a lux-UK-Le Havre area and Iberia, a sector the GNSL brand and applied the Samskip weekly container service connecting already covered by Delphis. brand to its European shipping network, Hamburg, Bremerhaven and the Russian which covers all NW Europe, including the ◆ Delphis has since then extended the enclave of Kaliningrad. Trans-Baltica is UK and Baltic. Team Lines brand to its other intra Europe headquartered at Jersey and managed operations, i.e. the former Portlink servi- by Mann & Sons (London) Limited, affilia- Eimskip ces and the Delphis original services. ted to Mann Lines GmbH of Bremen. ◆ Eimskip bought a 50 % equity stake in ◆ In January 2006, Cobelfret (Belgium) DFDS Kursiu Linija (Lithuania) in May 2006 and has bought the cross channel ferry busi- took control of the whole company in Sep- ◆ In August 2006, DFDS A/S has bought ness Dart Line from South Africa-based tember. Kursiu Linija offers door to door Norfolk Line Containers B.V., operating Bidvest Group.

86 BRS - Shipping and Shipbuilding Markets in 2006 India and MISC Berhad, as part of res in 2005, which has dried up the During the fourth quarter of 2006, policies to reaffirm their presence. pool of redelivered ships in 2006. the market was characterised by a unusually high number of sublets A few small to medium size operators Hamburg-Süd has stranthened its of ships of all sizes, including two have logged a remarkable progres- presence on the ANZ trades with the units of 8,500 teu sublet by CMA sion. The most prominent of them is purchase of the Fresco services CGM to MSC. Actually, MSC, CMA Emirates Shipping Line, a new opera- covering this sector. CGM and newcomer Emirates Ship- tor established in early 2006. It has The market remains dominated by a ping Line have been among the built up a fleet of eight chartered few players. In 2007, A.P. Moller- most active charterers, taking the ships totalling 24,600teu within only Maersk, MSC and CMA CGM contri- ships that others were discharging eight months and has launched six buted to 30 % of the chartering acti- -or subletting. long haul services (three as vessel vity for ships larger than 1,000teu. provider + three as slot buyer), in Operators having freed up or sublet partnership with various operators. A few smaller lines took also a fair ships include mostly CSAV, Hanjin- share of the activity, despite their Senator, K Line and Maersk Line Delphis NV and Eimskip have streng- relatively small sizes, as they laun- (although the latter remains the thened their positions through acqui- ched new services or developed most prolific charterer for 2006 and sitions while US Lines, EWL, Nile- their networks. Heading them is Emi- two thirds of its activity was concen- Dutch Shipping, TS Lines and -on a rates Shipping Line, which launched trated in the first half of the year). smaller scale- Fair Wind Shipping several services with 2,000- On their side, the three main part- have siginificantly increased their 3,000teu ships, and S.C. India, which ners of Grand Alliance (Hapag-Lloyd fleets through commercial expan- came back on the market with a + NYK + OOCL) and the members of sion. Vietnam state-owned company strong commitment to participate to the New World Alliance (APL + MOL Vinalines development projects start the booming Indian trade. Some + HMM) have frozen some of their to bear fruit and should be boosted niche carriers have helped to soak capacity during the current winter by the admission of Vietnam in the up the market in the 1,000-1,500 teu season, profiting also from this WTO in January 2007. range to develop their services. This occasion to dry dock ships in prepa- was the case of US Lines, EWL and ration for the next high season. THE CHARTER MARKET TS Lines. Delphis has also taken CKYH has also adjusted capacities The incessant influx of newbuildings several ships of around 1,100teu, but and Maersk Line has reduced its and the end of the high transpacific in most cases with the aim of sublet- transpacific capacity to adjust for season (June-October –a period ting them. the seasonal lows. during which a lot of goods, including toys, are imported in the perspective EVOLUTION OF CHARTER RATES - 2001-2006 of the Christmas and New Year (12 months t/c rates) US$/day source: BRS-Alphaliner period of high consumption) have led 50,000 to a softening in charter rates at the 4,000 teu 45,000 end of the year. Rates remained 2,500 teu however high by historical standards. 1,700 teu 40,000 1,000 teu The rates have begun to rise again in 500 teu 35,000 early 2007. The charter activity pick- ed up strongly in January and the 30,000 feeling is that there will not be enough ships around, despite the 1.5 25,000 million teu which are to enter the 20,000 market in 2007. 15,000 In 2006, we recorded 691 fixtures for ships of more than 1,000 teu. That is 10,000

25 % higher than in 2005, but still 5,000 well under the 1,100 to 1,400fixtures recorded annually in 2002-2004. 0

Part of the explanation lies in the 11-01 11-06 01-01 12-03 06-01 01-06 10-04 07-03 02-03 04-02 09-02 03-05 05-04 06-06 high number of 24-36months fixtu- 08-05

The containership market in 2006 - BRS 87 Duration of charter periods in relation to year of charter contract Number of fixtures reported in 2002 / 2003 / 2004 / 2005 / 2006 and share of total number of fixtures for selected size ranges Duration < 8 months 9-18 months 24-40 months > 40 months No % No % No % No % Total Size 4,000 - 5,000 teu one to think that long periods will make their comeback for medium 2002 827%1137%620%5 17%30 sized ships of 2,000-3,500teu. 2003 5 12% 4 9% 13 30% 21 49% 43 2004 8 11% 0 0% 2 3% 61 86% 71 Although charter rates have softened 2005 25%00%00%3695%38to levels well below the exceptional highs observed in 2005, they remain 2006 4 10% 4 10% 0 0% 34 81% 42 quite remunerative for owners of Size 3,000 - 4,000 teu existing tonnage and for newbuildings 2002 40 44% 38 42% 7 8% 5 6% 90 ordered at cheap prices in 2003 and 2003 15 17% 25 29% 41 48% 5 6% 86 early 2004. They are however compa- 2004 6 15% 0 0% 10 25% 24 60% 40 rably less profitable for newbuildings 2005 4 11% 0 0% 1 3% 32 86% 37 contracted at higher prices since mid- 2006 4 11% 2 5% 23 61% 9 24% 38 2004, which are now starting to flow from the shipyards. Size 2,400 - 3,000 teu 2002 42 48% 40 46% 0 0% 5 6% 87 The opinion remains that rates were 2003 25 19% 35 27% 58 44% 14 11% 132 quite low at the end of 2006. It is true, but it has to be put into an historical 2004 11 8% 6 4% 35 25% 88 63% 140 perspective. For example, when the 2005 17 24% 2 3% 12 17% 39 56% 70 rates for 2,500 teu ships reached their 2006 23 21% 16 15% 49 46% 19 18% 107 lowest point in December 2006, they Size 1,500 - 1,750 teu were a pinch under the highest point 2002 285 77% 80 22% 7 2% 0 0% 372 recorded during the previous peak 2003 190 55% 130 37% 24 7% 4 1% 348 period in 2000. Inflation has of course 2004 52 21% 63 26% 112 46% 16 7% 243 taken its share in six years time and the gap is thus slightly larger than it 2005 45 45% 20 20% 16 16% 19 19% 100 seems, but the recent lows are far 2006 48 33% 67 47% 27 19% 2 1% 144 from dramatic, and rates have even Size 1,000 - 1,250 teu recovered in January 2007. 2002 257 81% 56 18% 5 2% 0 0% 318 “Interestingly, this plunge [end 2003 208 66% 95 30% 6 2% 4 1% 313 2006] concerned ships chartered 2004 54 22% 67 27% 108 43% 20 8% 249 for periods of around 6 months 2005 22 18% 28 22% 27 22% 48 38% 125 while rates remain firm for longer 2006 64 42% 73 47% 11 7% 6 4% 154 periods of 12-24 months. It gave the strange feeling that, contrary to the Note: charters resulting from lifted options are not representative and are ignored Source: BRS-Alphaliner good order, short term fixtures com- mand discounted rates against long With sustained volume growth 48 months in return of a discount term ones! In fact, it reflects the during the first half of 2006 absorb- (from a charterer viewpoint), or to confidence owners have that the ing newbuilding deliveries, charter anticipate a future shortage, marking medium to long term demand will rates remained quite steady during the return of the usual 12 month remain firm, whereas lower rates the first eight months of 2006, and periods for medium-sized ships. were accepted only to cover the started to slip in September to then Owners are also reluctant to commit winter gap. As a result, the market reach a low in December. They began their ships to long periods at the lower has been very confused over the to recover after the New Year 2007. rates observed, as they are betting on last weeks of 2006, with charter The market is to remain on the a tighter market allowing better rates showing large discrepancies”. owners’ side for some time, although returns. The table “Duration of char- We took this assertion in our last they have smaller margins than ter periods” puts this well in evidence, year annual report without chan- during the past two years, which cau- especially for ships of 1,500-1,750teu. ging it a iota, except the reference ses more moderate rates. However, long term deals still remain year. History has simply repeated As the rates have returned to more on the cards for large newbuildings itself in 2006, at least in relative familiar figures, there was less incen- fixed with long term plans in pers- terms as absolute rates are indeed tive to charter ships for periods of 24- pective, and prospects for 2007 lead different year on year.

88 BRS - Shipping and Shipbuilding Markets in 2006 Availability of ships for charter (comparison 12 months) This table provides a comparison between the ships available for charter at 12 months intervals 1st Jan. 2007 2007 2007 Total 2008 2008 Total Existing Charter Exp. Nbdg. Exp. Nbdg. Going on with what we wrote last 4,000-5,000 teu 13 0 13 714 21 346 164 year, “lenders of container tonnage 3,000-4,000 teu 28 13 41 16 16 32 282 129 have been at feast since the 2002 2,500-3,000 teu 39 33 72 45 35 80 333 210 upturn. Charter rates have increa- 2,000-2,500 teu 60 12 72 44 3 47 315 183 sed five fold between early 2002 1,500-2,000 teu 160 30 190 75 38 113 466 302 and mid-2005 as ships went in short st supply, but this bullish trend has 1 Jan. 2006 2006 2006 Total 2007 2007 Total Existing Charter Exp. Nbdg. Exp. Nbdg. now faded away”. We add today that although not as bullish as before, 4,000-5,000 teu 5 1 6 16 2 18 309 142 the chartering activity remains high, 3,000-4,000 teu 25 3 28 28 22 50 266 118 and the market remains buoyant. 2,500-3,000 teu 25 20 45 22 41 63 279 174 2,000-2,500 teu 33 3 36 54 14 68 313 180 Average charter rates recorded in 2006 are in line with average rates 1,500-2,000 teu 105 14 119 80 31 111 444 290 observed during the past five years, 1st Jan. 2005 2005 2005 Total 2006 2006 Total Existing Charter and well above the average rates Exp. Nbdg. Exp. Nbdg. observed during the past ten years, as 4,000-5,000 teu 1 0 1 7411 268 111 demonstrated in the graph “Evolution 3,000-4,000 teu 23 2 25 20 10 30 265 107 of charter rates”. 2,500-3,000 teu 14 5 19 26 26 52 249 145 As far as the supply is concerned, 2,000-2,500 teu 29 2 31 33 2 35 300 172 tonnage left free of employment for 1,500-2,000 teu 65 6 71 81 6 87 425 281 2007 is roughly 70-100 % higher 1st Jan. 2004 2004 2004 Total 2005 2005 Total Existing Charter than 12months ago, as shown in the Exp. Nbdg. Exp. Nbdg. grph “Availability of ships for char- 4,000-5,000 teu 6 1 7 91827 252 n/a ter (as at 01 January 2007)”. The 3,000-4,000 teu 20 7 27 33 3 36 254 n/a situation is thus less favourable 2,500-3,000 teu 25 5 30 n/a 25 n/a 229 n/a than last year, and by definition 2,000-2,500 teu 65 0 65 n/a n/a n/a 287 n/a does not take into account the pos- sible sudden relets of supernume- 1,500-2,000 teu 200 n/a n/a n/a n/a n/a 415 n/a rary ships. However, the exceptional Exp: number of ships for which the charter expires in the reference year (and no options attached) chartering activity observed in Nbdg: newbuildings believed free of charter in the reference year January 2007 has defused risks of Existing: total existing fleet as at 1st Jan 2007 ships left unemployed. Charter: indicates the number of ships on charter from non-operating owners (existing fleet) Note 1: As the duration of charters decreases with size, indication of the number of charters due to expire in 2007 A good index of future market tight- for the small sizes is only given as an indication (roll over from 2006 charters) ness is the ratio of tonnage on Note 2: Optional periods -when known- are assumed as exercised (expiry at end of optional period). order still left unfixed. And this year, Note 3: Availability for 2007 may include ships available in 2006 if chartered for 12 months (for example). the omens are less favourable than last year. We found that -in early These are positive signs against the sublets or as owned ships, becoming January- some 72 % of the total Damocles sword represented by the supernumerary on their networks. capacity on order (4.7 million teu) is forecasted 15.7 % growth in 2007 in MSC and CMA CGM took eleven of assigned to operators (as owners or teu terms. Worth noting, the figure them while UASC and MISC took charterers). When breaking down stands at only +14.5% in dwt terms, one each. The ships were disposed by year of delivery, we observe that and the deadweight is probably a by Maersk, CSAV and K Line. Rates 75 % of the capacity planned for better yardstick to assess future paid were in the region of $ 28- delivery in 2007 is assigned, lea- imbalances. 30,000 for 4,500teu units. ving 25 % of the fleet still without 13ships of 4,000-5,000teu will see employment. Last year, these figu- Ships of over 2,000 teu their charters expire in 2007 (and res were 80 % and 86 %, respecti- free of optional periods) while no vely, with only 14 % left without Last October, 13 ships of 4,000 teu newbuilding in this size range is left employment. However, like last to 6,350 teu were unexpectedly available. year, there are no newbuildings released on the market by their ope- over 4,000 teu left without a com- rators, for periods ranging from 6 In the 3,000-4,000teu size range, mitment for 2007. months to 3.5 years either as 28ships will end their charters

The containership market in 2006 - BRS 89 The fleet

The cellular fleet will grow from 9.6 million teu in January 2007 to 14 million teu in January 2010, taking into account the existing orderbook and without demolition, as per BRS-Alphaliner records. Some reasonable demolition will probably roughly compensate the few more orders that will be concluded for 2009 deliveries. The annual fleet growth will then stand at 13.5 % on average during the three years to come. After the 16 % increase recorded in 2006, the fleet is expected to increase by 15.7 % during 2007 and 14.7 % during 2008. For the year 2009, the figure falls to 10.2 %, but as there is still spare building capacity for medium-size and small-size ships for 2009 deli- very, this latter figure will be higher. In 2006, 401 cellular ships for 1.6 million teu were contacted, at a global value of $24.2 billion. Contracting activity was very timid at the start of 2006, and then surged during the Spring-Summer 2006, before ceasing all of a sudden in October. Only 82 ships for 185,000 teu were ordered during the first quarter 2006, then 117 for 670,000 teu during the second quarter, 146 ships for 573,000 teu during the third quarter, and only 56 ships for 170,000 teu during the fourth quarter. On the 1st January 2007, the orderbook stood at 4.7 million teu, representing 49.5 % of the existing fleet, down from 60 % at its peak, in July 2005. Orders stretch until end 2010 for large ships. The VLCS fleet (ships over 7,500 teu) comprises 147 ships in service and 160 on order. As far as individual ships are concerned, the ship of the year is incontestably the Emma Maersk, with a capacity that Alphaliner has estimated at 14,300 teu, i.e. 50 % more than the largest containerships afloat (she is officially declared as a 11,000 teu ship). This series comprises eight ships, which will all be delivered by January 2008, and will run on a specific loop connecting China to Europe.

during 2007 while a further 13new- The market absorbs swiftly the ships sustained as it is driven by the huge buildings have yet to find a charterer. made available at the end of their feeder volumes generated by inter- charters. There are another 150 units continental services run with VLCS In the 2,000-3,000 teu size range, on order for this size range only. and other large mainline ships. some 100 ships will end their com- Many of these ships are replaced by There is no risk of overcapacity in mitment during 2007, while a further 2,500 teu ships on the services which the medium term in this size range, 45 to come out from the shipyards employ them, but several new servi- especially for ships of 900-1,200teu. had yet to find an employment, ces were launched during 2006 with representing 22 % of the total exis- The demand is to stay strong for ships of 1,700teu or so. ting pool of ships in this size range, such ships as many local terminals based on figures at 1st January. They also remain popular for regional have limitations on draft or length large scale relay services, such as or both, and cannot go beyond them An interesting trend observed between the Caribbean hubs and unless new terminals are built from mostly during the second half of Latin America or between Algeciras scratch. In many cases, terminals 2006 is the increasing rate gap bet- and West Africa, to quote only these are located on rivers or are accessi- ween geared and gearless ships. At examples. ble only through shallow channels. the end of 2006, the gap reached 10 %. Many newbuildings in the But should the market collapse, our For example, the booming Vietnam mid-2,000 teu size are prepared for feeling is that this range could suffer market will continue to be served in cranes, with owners sometimes more than others simply because the foreseeable future with ships opting for cranes only weeks before there are not enough regional niches not exceeding 1,500 teu. Vietnam delivery, sometimes in conjunction to accommodate them while they are generates volumes which could now with a potential charter (with some still too big to flow in large quantities justify direct calls by main line ships, notice as cranes are not available at onto local feeder trades. especially as it benefits from an the nearby supermarket). With such For the still rare ice-strengthened advantageous position, right on the a rate differential, it is worth paying units (1A) in the 1,500-1,750 teu size route of mainline ships. But it relies the extra 2-3 % required to install range, the future is promising as they instead upon feedering over Singa- the cranes. But it must be remem- will become the workhorses for the pore, Port Kelang, Tanjung Pelepas, bered that in depressed times, high volume feeder routes in the Bal- Hong Kong and Kaohsiung due to being geared or gearless does not tic, starting with the St Petersburg- port limitations. make much difference. related ones on which several have Another example concerns Calcutta started to be deployed in 2006. and Chittagong. Although not advan- Ships of 1,500-2,000 teu taged by their geographical positions, Ships of 500-1,500teu The 1,500-2,000 teu range is a popu- far from the East-West routes, they lous one, counting 466 ships, of Smaller ships, under 1,500 teu, are could be served by niche interconti- which 302 are charter market ships. doing well. The demand remains nental services, in the way Thailand is

90 BRS - Shipping and Shipbuilding Markets in 2006 through the Laem Chabang deep Cellular ships: deliveries and orders - year 2006 water port. Coastal shallow waters in Deliveries Orders the northern Bengal Bay are however Size range nb teu US$ M nb teu US$ M a big drawback. Both these ports, and > 7,500 teu 61 54 1,6 16 4,867 62 583,790 7,970 ports in the immediate vicinity, will 6,000 / 7,499 teu 22 146,949 1,550 4 1 263,820 4,070 continue to be served by ships under 1,200 teu for some time. 5,500 / 5,999 teu 12 68,253 681 5,000 / 5,499 teu 13 65,642 684 19 97,670 1,371 Ships of 900-1,100 teu have also star- 4,500 / 4,999 teu 13 61 ,560 614 8 39,128 580 ted in 2006 to replace ships of 700- 800 teu on a few services linking 4,000 / 4,499 teu 24 1 0 1 ,250 1,109 62 264,734 3,826 Benelux and Germany to the Lower 3,500 / 3,999 teu 5 1 7,670 215 16 56,980 824 Baltic and UK-Ireland. This trend will 3,000 / 3,499 teu 1 2 38,950 459 25 83,075 1,255 continue in 2007 and beyond. 2,500 / 2,999 teu 55 149,652 2,052 19 50,706 881 Actually, similar trends are observed 2,000 / 2,499 teu 5 12,430 180 in all regional and feeder markets. 1,750 / 1,999 teu 12 21,942 329 1 1 19,785 375 Besides, there is a fair amount of mul- 1,500 / 1,749 teu 15 25,044 387 31 53,207 1,001 tipurpose (non-celled) ships used as 1,250 / 1,499 teu 10 13,998 233 41 54,656 1,135 pure containerships, which in other 1,000 / 1,249 teu 38 42,135 742 27 29,296 595 times were mostly used on non- 750 / 999 teu 39 34,785 694 35 30,980 657 container trades. It is especially true for the 1,300-1,400 teu range. 500 / 749 teu 17 1 1,386 235 8 5,416 152 350 / 499 teu 3 1,207 25 The eleven ships of the ‘C-box’class TOTAL 261 939,698 9,982 522 1,617,352 27,149 (1,301 teu - built 1998-2000), have been employed throughout 2006 on Prices shown at delivery correspond to contractual prices at the time of order container services (MSC and CMA Source : BRS-Alphaliner CGM) or on liner services with a strong container bias (NileDutch The world liner fleet will reach 11 million teu in April 2007 Shipping). As for smaller modern ships of 500- The world liner fleet (see note) has passed > 10 million teu (143 million dwt => 14.30 the 10 million teu mark in August 2006, for tons per teu) in August 2006 700 teu, they continue to attract a total tonnage of 143 million dwt, accor- > 11 million teu (155 million dwt => 14.10 tons good rates, especially the geared ding to BRS-Alphaliner data. The figure per teu) in April 2007 (forecast) ones. After years of flat rates, this includes all types of ships effectively size range has at last seen a revival deployed on liner trades, in the common Time to reach the “next” Mteu during the first months of 2004 to acceptance of the term (5,626 ships are > 6 million teu to 7 million teu in 21 months reach a climax in May-June 2005. involved). The cellular ships contribute to Rates have since receded, but 90.7 % of this figure. The remaining 9.3 % > 7 million teu to 8 million teu in 18 months remain sustained and have compa- is shared by non-celled container ships, > 8 million teu to 9 million teu in 13 months ratively been less affected than the multipurpose tonnage and roro ships. We larger sizes by the general charter expect that the 11 million teu mark will be > 9 million teu to 10 million teu in 9 months reached in April 2007. rates drop of the late months of > 10 million teu to 11 million teu in 8 months 2006, as clearly shown in the table Previous and forecasted “round” million (expected) “Average rates for 12 months char- teu figures capacities stand as follows: ■ ters 1993-2006”. > 6 million teu (94 million dwt => 15.67 tons per teu) in July 2001 ** Note ** : This count includes all the ships deployed on liner services in the common acceptance of the term. > 7 million teu (106 million dwt => 15.14 tons Given this common acceptance, we exclude a number of specific more or less regular services such as the par- per teu) in April 2003 cel trades (steel and other neo-bulk products), pure forest product trades or pure vehicle carrying services. > 8 million teu (118 million dwt => 14.75 tons Given this, the numerous multipurpose cargo vessels per teu) in October 2004 and conbulkers deployed on non-liner trades or on tramp trades are NOT included in the above figures > 9 million teu (130 million dwt => 14.44 tons (even if container fitted), although they are shown in per teu) in November 2005 the Alphaliner database.

The containership market in 2006 - BRS 91 Operators: transactions and significant moves in 2006

Straight sales & mergers previously run by Sol-Niver Lines ◆ Mega & Forbes, a Pakistani (Niver Lines, Greece, left). agency, launched its own UAE- ◆ Hamburg-Süd (Germany) has Pakistan feeder services with char- purchased the Fesco’s ANZ-related ◆ Clipper Elite Carriers Ltd (a mem- tered tonnage. services from Fesco Ocean Manage- ber of the Clipper Group, Denmark) ment Ltd, a subsidiary of the Far has sold its majority share in CEC ◆ Pan Australia Shipping, a division Eastern Shipping Company PLC Lines Ltd to Oldendorff Carriers of Australia-based Pan Logistics, (Fesco - Russia). (Germany). Belgian company Fla- has launched an Australian coastal service (Boomerang' service). It clo- ◆ Delphis NV (Belgium) has mar has retained its minority share. sed after six months of operation. purchased Team Lines GmbH from Effective August 2006, CEC Lines ceased trading under this name, Finnlines plc (Finland). ◆ The Shannon Foynes Port Co, and was renamed 'Oldendorff which manages the ports in the ◆ Delphis NV (Belgium) has Express Lines' (OXL). purchased Portlink from Safmarine Shannon estuary, Ireland (Limerick Container Lines NV (Belgium). ◆ 3A Marine Holdings (UK - foun- and Foynes), has inaugurated a Rot- ded in 2004) has purchased Contaz terdam-Foynes shuttle. ◆ Grimaldi (Italy) has launched a Holdings (UK), which manages the ◆ C.T. Navigation SA, Taiwan, made bid on Finnlines plc and raised its Contaz Line service (NW Europe- share in the company to 50.7 %. a comeback with the launch of a Greece-Turkey). service linking Taiwan, Hong Kong ◆ Eimskip (Iceland) has purchased ◆ Pacific International Lines (PIL, and Haiphong. C.T. Nav had Kursiu Linija (Lithuania) and has Singapore) has purchased a signifi- suspended its services in November later integrated it within the cant interest in Pacific Direct Line 2004. Containerships Group (see below). (PDL, Wallis & Futuna), which offers ◆ UK-based 3A Marine Holdings ◆ Eimskip (Iceland) and Container services in Oceania. (founded in 2004) has set up Finance Ltd Oy (Finland) have form- ◆ Bore, a member of the Rettig Europe Line (Rotterdam-Ireland – ed a 65 % / 35 % joint venture Group (Finland), has purchased together with Johnson Stevens under the name Containerships Rederi Ab Engship (Finland) from Agencies UK) and Balticon Line Group, with an option enabling the Engblom family. (Antwerp-Baltic). It has also Eimskip to increase its shareholding purchased Contaz Holdings (UK), to 100 % of the j/v. ◆ Cobelfret (Belgium) has bought which manages the Contaz Line the cross channel ferry business ◆ Samskip (Iceland) has establi- (NW Europe-Greece-Turkey). Dart Line from South Africa-based shed its own organisation in Spain, ◆ Bidvest Group. Trans-Baltica Container Line taking over all shortsea activities Limited has launched services from its existing partner, Odiel Bil- New operators of liner services connecting Hamburg, Bremerhaven bao SA. and the Russian enclave of Kalinin- ◆ ◆ Tschudi Shipping Company AS Emirates Shipping Line FZE was grad. Trans-Baltica is headquarter- (Norway) has acquired full owner- formed in April. Registered in ed at Jersey and managed by Mann ship of the short sea liner company Dubai, the company is commercially & Sons (London) Limited, affiliated TECO Lines AS through its subsi- headquartered in Dubai and Hong to Mann Lines GmbH of Bremen. diary Estonian Shipping Company Kong. It launched six services in AS (ESCO). ESCO purchased the partnership with other lines. Cessations of activity remaining 50 % shares in TECO ◆ Formosa Plastics Marine Corp. in liner shipping Lines AS from Samskip. (FPMC), the shipping arm of the Tai- ◆ Great Western Steamship Co ◆ DFDS A/S has purchased Norfolk wan oil and petrochemical company (GWSC - USA) has ceased trading Line Containers BV (Netherlands) Formosa Plastics, has launched its and has been put into liquidation. from Norfolk Holdings B.V., a mem- own container services between GWSC was a partner of the 'Ameri- ber of the A.P. Moller-Maersk Group. Taiwan and China, with its own and cas Alliance' (AA), a Vessel Sharing This company operating container chartered tonnage. Agreement set up in February 2005 door-to-door services between the with U.S. Lines and Maruba to ope- ◆ Singapore-based transport orga- Continent and Ireland has been rate a China-US service. niser Ja Vesta (Pte) Ltd has laun- renamed DFDS Container Line BV. ched its own service on the Singa- ◆ Saturn Container Lines, India, ◆ Swedish Orient Line AB (Sweden) pore-Chittagong feeder route with closed their own Port Kelang-India took over the Baltic-Med service chartered tonnage. service (launched in 2005).

92 BRS - Shipping and Shipbuilding Markets in 2006 ◆ Pan Australia Shipping has closed 'Compania Libra de Navegacion ◆ The organisational consolidation the Australian coastal service Uruguay S.A.' and has been affiliat- of Hapag-Lloyd AG and Hapag- (‘Boomerang' service) it launched in ed to the Brasilian company Com- Lloyd Container Linie GmbH (HLCL) March 2006. pania Libra de Navegaçao, also already realised in 2005 has been controlled by CSAV (The Montemar formalized in 2006 in the context of Significant other moves brand has disappeared). the integration of CP Ships. Besides, all the CP Ships services were inte- ◆ As of 12 February 2006, Maersk ◆ Iceland-based Avion Group, which grated into Hapag-Lloyd’s network Sealand and P&O Nedlloyd started bought Eimskip in 2005, has chang- by September. to trade as Maersk Line. ed its name to 'Hlutafelagid Eimski- pafelag Islands' (Eimskip' in short) ◆ CoMaNav (Compagnie Marocaine ◆ Norasia Container Lines has de Navigation) has laid out plans for changed its name to CSAV Norasia. ◆ Kawasaki Kisen Kaisha Ltd (K Line) its privatization. (Japan) and Hanjin Shipping Co Ltd ◆ The Geest North Sea Line and (South Korea) have swapped shares ◆ Monaco-based SAMAMA, a com- Seawheel brands (operators pur- in a proportion of around 3 %. pany controlled by Israeli shipowner chased in 2005 by Samskip) have Sammy Ofer, has acquired a supple- been dropped. ◆ The Hamburg Süd group has mentary 8.7 % stake in Hanjin Ship- replaced its brand Ybarra y Cía. ◆ The China Navigation Co (CNCO), ping Ltd (South Korea), later partly Sudamérica S.A. (Ybarra Sud) with a Hong Kong-based subsidiary of resold (asset play). the brand Hamburg Süd Iberia S.A., the UK-based Swire Group, has effective 1st January 2007 (Ybarra ◆ Geveran Trading, a Cyprus-based rebranded several of its shipping Sud came under full control of firm which is part of Greenwich services under a new company Hamburg Süd on 31 December Holding Ltd, a company indirectly recently incorporated in the UK : 2005). controlled by Norwegian shipowner ''Swire Shipping Ltd''. The following John Fredriksen, raised its share in brands were consolidated within ◆ Lloyd Triestino di Navigazione Hyundai Merchant Marine (South the new company: Australia Pacific SpA officially became Italia Marit- Korea), triggering a reaction by Islands Line (APIL), Chief Container tima SpA (ITS) in February 2006. HMM main shareholders to counter- Service, Crocodile Line, Indotrans, ◆ Evergreen Group announced that act what was interpreted as a pos- Indotrans Pacific and New Guinea it would unify its three brands Ever- sible attempt by Geveran to take Pacific Line. The Bank Line will also green Marine Corp (Taiwan) Ltd control of the company. later be brought within the new (EMC), Italia Marittima SpA (ITS) and company. Hatsu Marine Ltd (HML) under the ◆ CSAV (Chile) affiliate 'Montemar unified common trade name 'Ever- Maritima S.A.' has been renamed green Line' (effective 1st May 2007).

The containership market in 2006 - BRS 93 The second-hand containership market in 2006

OUT OF BREATH? It would be however unwise to even more pronounced in terms of ignore the containership market’s long term chartering where the pro- The evolution of the second-hand potential to surprise us again and posed rates are even lower and the market for containerships since suddenly bounce back, as it did in return ratios are clearly negative in 2004 can be resumed with some 2004 when an extended crisis the short and medium term. figures, representing respectively seemed on the horizon. the number of effected transac- Containerships less than 900 teu 2006 therefore experienced a cert- tions: ain general gloom and more espe- The drop in activity is situated ◆ in 2004: 265 cellular ships and cially for ships below 2,000 teu, up especially in this category of ships, 40 multipurpose till now extremely popular. It is inte- where freight rates particularly suf- ◆ in 2005: 140 cellular ships and resting to observe in contrast the fered this year. Prices remained, 46 multipurpose relative stability of prices for the nonetheless, relatively high as wit- ‘big carriers’over 2,000 teu. nessed by the 3 containerships of ◆ in 2006: 133 cellular ships and Interorient (737 teu -geared - built 15 multipurpose As was the case last year, the declin- in 1998 by Jinling) sold at a price of ing trend picked up pace after the In view of these figures, three main $14 million each in Germany. There summer. Also, faced with the clear factors explain this trend. The was also the combined sale of the drop in the freight market, owners of emerging Chinese market literally small and medium units finally resi- Perceiver and Conceiver (538 teu - “boosted” the second-hand market gned and adjusted their expecta- non geared – built in 1994 by Sietas) in 2003 and 2004. 2005 was a year tions in terms of their selling prices. belonging to Delphis, at a price of of consolidation where we saw a $10 million each, combined with a loosening of controls in the market. The proportion of German buyers, chart for 3 years at a rate of $9,650 traditionally very important in the per day. Still there were very few Finally, and even though the Chinese category of 2,000 teu ships and speculative buyers in this category, market enjoyed a jump of 11.3 % in bigger, was 25 % this year. Certainly which consequently reflects a fairly the second half of 2006 thanks to a respectable score, but well below solid confidence in the short term the strength of its investments and that of previous years. This evolu- from the buyers. exports, all the experts expect that tion is the result of the poor ratio of we shall see the pace slackening over returns offered by this container Containerships from the next 2 to 3 years to come. For our market. Modern ships were all 900 to 2,000 teu part we believe that a reasonable ordered or bought on the second- rate of growth will be maintained but hand market at prices which are no This size has historically dominated with the accent on consumption longer justified today in view of cur- all others in terms of buying and rather than investment. rent freight rates. This reality is selling activity. It has been surpas- sed today by the category of very big carriers of 3,000 teu or more. Sales of cellular containerships by size The period now seems remote 2004 2005 2006 when CMA CGM, Ofer, MSC or even Less than 900 teu: 82 49 30 Komrovsky were squabbling over the acquisition of such and such a From 900 to 2,000 teu: 83 53 36 ship of 1,200 or 1,700 teu, making From 2,000 to 3,000 teu: 42 22 24 incredible bids and counters, Over 3,000 teu: 58 19 43 although always justified by a relen- Total 265 140 133 tless freight market. The calm

94 BRS - Shipping and Shipbuilding Markets in 2006 Containerships fleet evolution by size Rederei 10 ships of 4,254 teu built by Zhejiang and deliverable bet- in number of ships 1st January 2007 1st January 2011 ween December 2007 and Novem- Under 900teu 1, 109 1,305 ber 2011, for an average sum of 900 to 2,000teu 1,060 1,406 $58 million apiece. It is worth 2,000 to 3,000teu 648 807 noting that the construction price Over 3,000teu 1 , 1 32 1 ,757 for such a ship has increased and is Total 3,949 5,272 in the region of $61/62 million end 2006 for a delivery in 2011. which has returned to the freight 20% during the year, there has There are therefore two distinct rates has considerably slowed down been no real significant decline in trends which correspond to two activity of potential buyers. sale prices. If 12 out of the 22 sales realities. The first concerns ships of were over 15 years old, in this case 2,000-3,000 teu, which correspond It should be noted that a little less it is due more to a lack of offers to the immediate needs of the mar- than half (15) of the ships sold than to any real faith in the future. ket or over the short/medium term. dated from 1990 and before. Should This market closely sticks to cur- we detect a certain sign of frivo- We can note the sale of 3 ships of rent freight levels and the forecasts lousness from buyers who hesitate Tsakos, under construction and for for 2-3 years. This explains why we to invest in the long run in this size delivery in 2006, the Irenes Res- have seen a significant weakening of ship? Whatever the reason, it pect, Irenes Relief, and Irenes of prices and volumes, as a large seems clear that the aspirations of Resolve, in May for the price of part of investors have abandoned $58 million per unit. This price is ‘modern’shipowners are still too far this part of the market. apart from the reality of the market similar to that achieved in 2005, and thus from that of the majority which indicates the good standing The second is relative to the of buyers. Some examples of sales : of the market… impressive cash reserves that owners have put aside over the past The Nordsun – built in 1991 in Ger- …even for the oldest ships, the years and which is waiting to be re- many - geared – 1,158 teu - 17 knots, Trade Mapple and Trade Harvest, injected back into the system. sold in May 2006 at $16 million with built in 1995 by Hyundai – 2,227 teu Investing massively in Panamax and an attached charter up until August (2,010 teu at 14 tons!) – non geared, over-Panamax seems to be far 2007 at a price of $16,000 per day. sold in May 2006 at a price of more reassuring in the long term, The charter rate was about $5,000 $35 million each, against an atta- given the evolution of trade move- above the going market rate. ched charter party at a ‘modest’ ments. Joint-ventures are multi- Meanwhile it is interesting to note $13,250 per day, running through plying, agreements expand, trade that this ship was already proposed till October 2007. Out of interest, develops, and it seems therefore for sale at a price of $22 million in these ships had been bought by the logical that the size of ships will fol- 2005! current seller in August 2003 low suit. “Big” seems to be always slightly below $20 million! ■ The Nordcliff, sister ship to the “Beautiful”! above, built in 1991, sold in Novem- Containerships over 3,000 teu ber 2006 at a price of $14 million with an attached charter up until This segment is on a different level November 2007 at a rate of $14,000 and has literally exploded compar- per day. ed to last year without however attaining the peaks of 2004. If Containerships from there are between 150 and 300 2,000 to 3,000 teu ships which will be delivered bet- ween now and December 2010 for One observes in this size category a each of the previous categories, no certain stability in the number of less than 620 ships of over 3,000 sales and the price levels compared teu are currently on order. to the end of 2005. The scarcity of offers has compensated for the One of the most surprising sales drop in freight rates. Thus, despite was done by the Swiss owner MSC a decrease in profitability of 15 %- who bought from the German Conti

The containership market in 2006 - BRS 95 PORT&SHIPPING CONSULTANTS

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96 BRS - Shipping and Shipbuilding Markets in 2006 The ro-ro market in 2006

IN LINE WITH OUR ANTICIPATIONS, latter are high performance vessels cha- THE RO-RO MARKET IN 2006 PRE- racterized by state-of-the-art fuel effi- SENTED THE SAME STRUCTURAL ciency systems with speeds in excess of FEATURES AS IN 2005, with charter- 20 knots and capacities in excess of ing activity shrinking while at the same 2,000 lane meters (lm). time rates in certain segments continued During this same period, 10 units were their upward trend. sold for scrap, with an average of around New orders for pure ro-ro vessels placed 1,000 lm and 16 knots. throughout the course of the year In comparison, 2005 saw 5 deliveries, of amounted to 13, of which not a single one which 4 were destined for operators, 24 is destined for the tramp market. Among new orders, which all were destined for the specialized vessels, ro-ros are clearly operators, and 7 scrappings. the ones being ordered the least. By comparison, the number of new orders While scrappings appear to be outpacing for PCC/PCTC vessels stood at 58 units. deliveries, available capacity is not being lost but is rather increasing, as overall Of the 9 units delivered throughout the scrappings in 2006 amounted to approxi- year, all were deployed by the same liner mately 10,000 lm, whilst overall deliveries operators that ordered them in the first accounted for more than 20,000 lm (in place, namely the likes of Spliethoff’s / 2005 the figures were approximately Transfennica, DFDS, Cobelfret and UN 2,000 lm and 16,000 lm for scrappings Ro-Ro. This confirms the trend establi- and deliveries respectively). The problem shed over the past few years that sees lies in the fact that the overwhelming liner operators, with a few exceptions, as majority of new ships delivered are the only actors placing new orders. The deployed by operators, which means that

The ro-ro market in 2006 - BRS 97 Timca Ro-ro vessel, 2,963 lm, 192 teu, 22 knots, ice class 1A super, delivered in 2006 by the Polish shipyard SSN, owned by Transfennica (Spliethoff Group)

there are increasingly fewer vessels hungry car-trade operators. The lat- the Ministries of Defence (MODs), available on the tramp market. ter however turned out to be pickier hard-pressed to secure tonnage for 2006 was, therefore, perhaps the than in the past, no longer conten- their military needs. Most of these first year that showed the first real ting themselves with any car- requirements continued to be spot effects of the looming tonnage friendly unit, but seeking tonnage ones, but some, like the French and crunch. endowed with decent speed and the Danish, were for long term consumption as well as more flexi- contracts. Admiral Danish Fleet Indeed, finding suitable ships and, ble deck configurations. (ADF) chartered the Stena For- at times, even ships in general, warder from Stena RoRo for 5 In the second place, the year was became increasingly difficult during years, bringing the number of ves- characterized by a healthy volume 2006. sels under its control to 3. The of sale and purchase deals. While 10 French awarded their latest re-sup- This led in the first place to a struc- ships changed hands in 2005, this ply tender to Compagnie Maritime tural comeback throughout the number more than trebled in 2006, Nantaise (MN) with their freshly year of charter rates in size seg- reaching a staggering 34, with pri- purchased MN Pelican ex-Trans ments from 1,200 lm and above. For ces remaining firm all along. example, we noted the following Botnia, taking the number of units average time charter rates for the On the newbuilding side, the fall in on charter from this owner also to below sizes: orders compared to 2005 can likely three. It is worth mentioning here be attributed to 3 key factors: that the most regular and reliable e 1,400 lm – 15 knots: 8,000 per a) the very limited number of yards tonnage providers to the MODs for day / pro rata (pdpr) circa proficient in ro-ro construction; their spot requirements continue 1,700 lm – 16 knots: e9,200 pdpr b) the reluctance of mainly Far Eas- to be those operators flexible circa tern yards and “virgin” yards to enough to be able to shuffle and accept ro-ro orders - which are seen release their own vessels while 2,000 lm – 19 knots: e11,500 pdpr as costly and not as lucrative or relying on the market to cover circa easy as, for example, bulk carriers their own needs. The most note- 2,500 lm – 21 knots: e16,000 pdpr or containerships; worthy examples are Transprocon and Fastline. circa c) continued high newbuilding pri- ces. Contrary to the expectations of The established two-tier market many, the Lebanon crisis did not Industry consolidation continued became even more entrenched, turn out to be a rate bonanza and unabated, with more “industry with units below 1,200 lm, characte- as such stood out as an exception. veterans” taking a bow whilst the rized by low speeds, high consump- This was due to the following main few large-scale operators bolstered tion, and often obsolete configura- reasons: the conflict itself was their market positions even further. tions, seeing rates stagnate and on short-lived, the volumes of material some occasions even fall. Certain of In addition, 2006 witnessed the shipped comparatively small, and these units had an easier time find- now well-established correlation the location was relatively close ing employment thanks to their car- between global geopolitics and ro- both in terms of proximity to ton- friendly configuration, making them ros. Amongst the most active nage supplies and of duration of the a viable second-choice for the all- players in the tramp market were voyages.

98 BRS - Shipping and Shipbuilding Markets in 2006 To illustrate the above points, we trade with the sale to Tallink of their ◆ Acciona Trasmediterranea’s con- point out the following representa- 3 ferries (Superfast VII, VIII, IX) tinued activity on all fronts: charte- tive developments: and then chartered out their Nor- ring ro-ro and ro-pax tonnage; laun- dia, leaving only the smaller Marin, ching a new ferry route between ◆ Grimaldi Naples’ launch of a also destined to go. Bilbao and Portsmouth; ordering 2 takeover bid for Finnlines. If suc- ro-ro units able 3,500 lm plus 100 cessful it holds the potential to ◆ The award for the management of cars and 26 knots with an option for create interesting synergies bet- Transmanche Ferries Service to the further 2 from Navantia; and taking ween the two groups. Earlier in the Louis Dreyfus Group’s subsidiary, LD over Euroferrys. year, Grimaldi set up Malta Motor- Lines, also still very active on the ways of the Seas (MMOS), following chartering market. In addition, ◆ Stena’s order for 2 large ro-pax the stalemate with the General through its joint venture with Leif vessels, dubbed the “world’s lar- Workers Union during the course of Höegh, Fret Cetam, an order for two gest”, 5,500 lm and 1,200 pax at the acquisition of former Maltese newbuildings with 700 ceu capacity Aker Yards. operator Sea Malta, which in the each was placed with Singapore With large orderbooks and conside- meantime has bowed out. Grimaldi Technologies for the construction of rable deliveries on the horizon, we also purchased numerous second two more dedicated Airbus vessels. could expect some operators to hand units: Towards the end of the year Fret start shedding older tonnage. 1. the sisterships Eurocargo Europa Cetam also chartered-in an additio- However, it remains unclear what ex-Tor Scandia and Eurocargo nal unit, the Nordia, to run alongside the final allocation of these older Africa ex-Tor Flandria (2,874 lm – their Ville de Bordeaux. units will turn out to be and whe- 17 knots – 1981 built) at a reported ◆ Dubai Ports World purchase of ther they will find their way into the price of e23.0 million en bloc P&O for approximately £3.3 billion. tramp market. So far this has not 2. the Commodore (2,180 lm – 13 been the case. ◆ The continued appetite for ton- knots – 1992 built) for approxima- The picture for the near future in tely $12.0 million nage of DFDS, which chartered for 10 years each two newbuildings ordered terms of prospects of tonnage avail- 3. the Maltese Falcon (1,680 lm – 16 by Nordic Holdings (2,681 lm – 20 ability in the tramp market turns knots – 1978 built) for approxima- even bleaker when noting that most knots) to be built at Jinling in China tely $5.0 million players are further investing in the and due for delivery in 2008. One ro-pax concept at the expense of ◆ The purchase of Engship by com- cannot also discount their intense pure ro-ros. It therefore appears patriot Rettig, whose combined activity on the ferry side. fleet counts ten ro-ros, the Garden that the time is not yet ripe for ◆ Celtic Link’s hunger for tonnage. having been sold during the year, all attracting investment in new ton- Established in 2005 to take over of which on long term charters. nage for the tramp market, taking the former P&O freight route bet- into account that newbuilding prices ◆ The acquisition of Dart Line by ween Rosslare and Cherbourg with remain high and that charter rates Cobelfret, making the latter the lar- their owned ferry Diplomat, ex- are still too low in terms of return on gest carrier in the southern North European Diplomat, they have pro- investment. We therefore foresee Sea serving trailers, new vehicles, ceeded to charter 3 more units, so even less activity during 2007 in and containers. Earlier in the year it will be interesting to follow the terms of volume of chartering, as Cobelfret placed an order for 4 evolution of this operator. well as a further widening of the gap units (2,600 lm – 19 knots speed) ■ 1. the Celtic Star ex-Northern in this two-tier market. from Flensburger for deliveries Star (1,200 lm – 20 knots) 2008/2009 with options for 6 more units. Moreover, in line with the ten- 2. the Celtic Mist ex-Klaipeda (ro- dency of operators to hold an ever pax – 1,600 lm– 15 knots – 300 pax) more logistics profile, we point out 3. the Celtic Sun ex-Carmen B the take-over by Cobelfret of the (2,100 lm – 18 knots) Simon Group’s Humber Sea Termi- ◆ Rettig’s decision to proceed with nal, which is also used by Stena and 3 more conversions following the Norfolkline. success of the conversion of the ◆ The retrenchment of Superfast Transgard into a PCC backed by 10 Ferries, which exited the Baltic ferry years t/c from UECC.

The ro-ro market in 2006 - BRS 99 CAP-MARINE ASSURANCES & RÉASSURANCES SAS

A LEADING MARINE AND ◆ Covering more than 1,800 ocean going vessels TRANSPORT INSURANCE including specialized units, ◆ BROKER. Placing and managing cargo insurances of medium to large Companies, trading houses, freight forwarders ACTIVE IN HULL, P&I, and other shippers, CARGO, ENERGY, YACHTS ◆ Based in Rouen, Paris and Nantes, active in all AND SPECIAL RISKS. the main international markets, ◆ With 38 employees all fully dedicated to its clients.

www.cap-marine.com

HEAD OFFICE NEUILLY OFFICE NANTES OFFICE

4 / 12 bd des Belges - BP 10 11 boulevard Jean Mermoz 15 rue Lamoricière - BP 78704 76000 ROUEN CEDEX 92522 NEUILLY SUR SEINE CEDEX 44187 NANTES CEDEX 4 Tel. : +33 (0)2 35 98 26 46 Tel. : +33 (0)1 41 92 54 00 Tel. : +33 (0)2 40 69 31 96 Fax : +33 (0)2 35 98 32 58 Fax : +33 (0)1 41 92 54 10 Fax : +33 (0)2 40 69 29 55 E.mail: [email protected] E.mail: [email protected] E.mail: [email protected]

100 BRS - Shipping and Shipbuilding Markets in 2006 The marine insurance market in 2006

A CAP-MARINE SHORT REVIEW OF changed in the Marine Market. Actually, LATEST STATISTICS ON 2005-2006 whilst most sectors of the insurance MARINE INSURANCE. The report industry are reporting increased income covers trends and developments in the and profits, hull underwriters, as an different marine class of business in industry, are unable to achieve the 2006. This report includes a brief over- necessary balance between exposure, i.e. view of the changes occurring in the P&I potential claims, and actual claims costs Market in response to the escalation of on one side and risk remuneration, i.e. claims and prospective legislative issues. premium, on the other. No significant pricing improvements UNCERTAINTY AND VOLATILITY have been observed in the hull market in Despite no real general increase in pre- 2006. The 2006 hurricane season pro- mium rates and the uncertainties which duced only one storm with catastrophic persist as to the final costs of some major proportions, tropical storm Ernesto, claims, the insurance sector in Europe which caused close to $250 million in should enjoy a good year in 2006. As insured property damages, but had no Insurance brokers we may see some impact on the marine market. divergence in the risk appreciation of However, increased competition from a underwriting policies between insurers, larger number of underwriters in the but the shipowners and traders conti- major market places (UK, Norway, Japan, nued to benefit from competitive rates. France, Italy, USA, Spain) has led to some The world of marine insurance never softening in the year-end results, includ- ceases to amaze and receive tremendous ing sometimes small reductions in rates press coverage with the culminating IUMI for clients with excellent to clean loss conference declaring that nothing has records.

The marine insurance market in 2006 - BRS 101 Marine insurance premiums: worldwide figures (US$ billion - as reported per end of August 2005) Global Hull Transport/Cargo Marine Liability Offshore/Energy Total 2005 4,772 9,279 1,231 1,696 17,260 2004 4,540 9,923 1,145 1,551 17,178 2003 4,026 9,129 1,152 1,753 16,076 Index 2003-2004* 12.8% 8.7% -0.7% -11.5% 6.9% Index 2004-2005* 5.1% -6.5% 7.6% 9.3% 0.5%

*Index based on figures from Associations who have reported in both years. The index reflects changes in country activity, exchange rates in addi- tion to premium increases and is thus not a renewal index! As some countries only report total marine premium without splitting into classes, the sum of these classes might in some cases be slightly less than the ”total” sum. Global premiums 2003-2005 - Source: IUMI, Tokyo Conference 2006

Cargo markets continued to attract WORLDWIDE HULL PREMIUMS capacity and to write huge amounts (Source: IUMI 2006) of business. The delivery of new- buildings such as large container- ships is pushing up the risk profile potentially over $1bn, not including 13% the hull value. Even if “ultra large Lloyd's container ship” (ULCS) should per- haps mean “ultra large claims sce- 13% Norway nario”, (Matthew O’Sullivan Munich Japan Re, speaking at the Tokyo Confe- 57% rence in 2006) the insurance mar- 9% France ket has the capacity to respond to escalating size and value of these RoW types of risks and to support the 8% increase in world trade. Loss ratio, hull & cargo premiums combined, improved by 2 points from 73 % in 2004 to 71 % in 2005; The premium income of the build- Major French hull insurers ing-risk sector has now much improved and has maybe reached a Companies S&P Rating % of French market figure of $300m per year. The intro- AXA Corporate Solutions AA 25% duction of the JH143 shipyard-risk Allianz G.S. & Specilty AA- 20 % warranty, and higher deductibles Groupama Transport A 17 % for cruise vessels as close to Generali BBB ppi 16 % $500,000 and other loss-control (IUMI Ocean Hull Committee 2005 figures) 78 % of the market initiatives have resulted in fewer and less costly claims. French Marine Hull Insurance by strategic continuity based on The fluctuating insurance cycle is a Market in the world successful renewals, operational major uncertainty for both the ship- prudence and accuracy. The French ping and insurance industry. The French marine hull insurance mar- more disciplined underwriters are ket is fourth in the world with an 8 Marine insurance companies conti- still unable to influence the cycle due % share of the world market. nue to be strong and represent a to the market forces, with supply and The underwriting policy of the stable insurance markets for our demand still driving the rates. French market in 2006 was guided clients.

102 BRS - Shipping and Shipbuilding Markets in 2006 French Marine Cargo Insurance Evolution of insurance premiums Market in the world French domestic and cross-border production – including risk acceptance France is a strong marine cargo Millions Euros 2005 2004 Variation market in the European Market Hull 497.3 450.8 +9.35 % scene and is ranked fifth in the Cargo 759.0 733.9 +3.30 % world (2005 figures) coming down Total 1 256.3 1 184.7 +5.60 % from third place in 2004 after Japan and Germany. The substantial cost of the natural disasters including hurricanes that occur- red in the second half of 2005 in the world have not reversed the cargo mar- Despite this drop in ranking, the ket’s downward cycle and as a result this downward trend will probably conti- French Marine Cargo market nue throughout 2007. confirms its dynamism with an 8 % market share in the world, which is the same as the Lloyd’s market. ship repair at yards which is princi- substandard insurers, and substan- This insurance sector, as in previous pally caused by very high new-buil- dard classification societies. ding activity. Finding the time to years, is characterized by periods of According to Equasis [class status carry out repairs is proving intense price competition due to membership at 31-12-2005], only 53 excessive underwriting capacity problematic and more costly thus % of the world fleet - by number– is and more favourable periods when long haul towage to find a suitable classed with an IACS (International shortages of underwriting capacity yard is becoming more common- Association of Classification Socie- permit higher premium levels. In place. This causes hardship for both ties) member. The breakdown of the 2006, overcapacity was the predo- hull and loss of hire claims. There balance being 4 % non IACS ves- minant characteristic. are also delays in obtaining spare sels, 5 % IACS withdrawn and 38% parts, especially for engines. This class not recorded Despite some major losses, the results in greater loss of income for claims experience and the financial shipowners. The P&I market: a significant rise results have been favourable and in the average value of claims many underwriters have been incli- Risk assessment and Loss ned to offer price reductions to prevention: a common goal There has been a large deteriora- maintain their accounts or to gain tion in International Group pool* new business. Unfortunately, quality campaigns claims in 2006. Claims reported to and the regulations enacted by the the pool in the first 10 months of Many were expecting that the European Commission, supported 2006/07 reached $173m, compared booming of the shipping industry by the IMO, are not sufficient to eli- with just $28m in the same period and economic expansion of global minate substandard vessels. During of 2005, $85m in 2004, $66m in trade would produce a substantial the IUMI Conference 2006, under- 2003, $13m in 2002 and $11m in increase in the premium income. writers emphasized that they wish 2001. The recorded results have not really to be an additional force in such a met the expectations and growth in With respect to General Increases, fight and encourage more and more marine cargo premium income market analysts suggest that the loss prevention actions and ships remains moderate [see below the P&I clubs are failing to raise their inspections. On the cargo side, 54% 2004/05 evolution]. premium incomes despite escala- (source UK P&I Club) of the cargo ting claims and hefty general claims resulted from a structural or increases imposed at successive EXAMINING THE KEY ISSUES mechanical defect of the vessel or renewals. An analysis of the clubs to defective equipment. On their shows that in terms of premium per Increased severity for both Hull side the International Group Clubs gross ton (gt) insured the income of and Loss of Hire claims have agreed on a procedure for the clubs fell by 5.4 % through the The increase cost of repairs and its sharing information about the tech- last reported year. The general impact on claims remain a concern nical condition of registered ves- increase for the 2005/2006 year for the hull underwriters and to a sels. Substandard ship problems are averaged 8.8 %, but the report certain extent for the P&I insurers in reality caused by a combination especially where they are covering of substandard ship structures, * Part of the claim exceeding the retention the collision Liability risk. Another substandard shipowners, substan- limit of one Club, then supported by all the concern is the lack of availability for dard crews, substandard charterers, other Clubs.

The marine insurance market in 2006 - BRS 103 Vedettes de Bréhat / Cap Marine with Servane Escofier, 2nd of the Route du Rhum race 2006 on class 50 feet monohull

shows the premium rate achieved rate the 2002 Athens Protocol into In light of this, the shipowners and was maybe minus 3 % in gt terms. EC law and to extend the applica- charterers will probably see pre- tion of this Protocol to domestic sea mium increases in the P&I markets This is certainly attributable, transport and to inland waterways. for the next two renewals up to and among other reasons, to the hard including February 2009. competition the Clubs are facing to The protocol should be in force get new business where the restric- within 2 years time. The immediate effect tions of the International Group The plan to load a much higher pro- on 20th February 2007 Agreement do not apply, and to the portion of the P&I clubs’ collective P&I Mutual renewals “churn” effect: when a ship-owner excess of loss reinsurance costs on ◆ sells an older vessel and replaces it to passenger vessels is already Cover for passenger and crew with a newbuilding of similar size, sparking controversy as the cruise risks combined is reduced to a maxi- the newbuilding will pay a premium and ferry sector’s contribution has mum $3 billion which generally will not compen- more than doubled in the past five ◆ A sub-limit of $2 billion shall sate the premium generated by the years to the current figure of apply to passenger risks, much older vessel. TradeWinds reported $0.8006 per gt, which is 18 % more lower than the limit of P&I cover on Jan.19, 2007 that a European than crude tankers and well over based on 2.50 % of the limitation bulker owner paying about $2.50 double the rate paid by clean tan- value of the world fleet under the per gt was quoted $1.45 per gt for kers or dry-cargo vessels. 1976 limitation convention, i.e. new tonnage, although the claims around $4.25 bn to $5.5 bn cur- records warranted a rise to about Passenger ships reinsurance costs rently available. Large passenger $4 per gt. could rise by between 62.5 % and ship operators may be left with 75 %. uninsured liabilities above $2 bn. Cruises vessels and Greater levels of legislation will passenger ships ◆ An extra $1 bn of overspill reinsu- have the inevitable result of increa- rance The cruise sector may be particu- sing liabilities and therefore the larly affected because of the 2002 potential for claims. ◆ Club retention is increased from Athens Protocol relating to the car- $6 million to $7 million riage of passengers and their lug- POSSIBLE EFFECTS ◆ Retention will double for ships gage by sea, which will push the suspected of being substandard. limit of liability over $2bn for a very More costly claims, more sophisti- large ship. In 2006 the European cated risks, larger vessels, more lia- ◆ Maximum limit for terrorism and Commission proposed to incorpo- bilities, more legislative issues. war cover $500 million

104 BRS - Shipping and Shipbuilding Markets in 2006 The future effect of The impact on the Yemeni economy sel from three canoes and kidnap- the Solvency II Directive was immediate, as maritime insur- ped four crew members. In another, ers tripled their rates. a ship was attacked by 23 pirates The ongoing developments of the armed with knives. These attacks new European solvency regime Nevertheless, the potential pro- are symptomatic of a rise in the (known as Solvency II) will include blems posed by seaborne terrorism number of incidents against foreign fundamental changes in the sol- should not hide the fact that the oil workers in Nigeria. vency margin, i.e. the minimum danger posed by the new genera- amount of extra capital that an tion of pirates is all too real and a The Malacca Straits have been insurance provider must have to fall permanent nuisance. dropped from Lloyd’s of London’s back on in unforeseen circumstan- list of dangerous waterways. This In 2006, there were 239 attacks on ces. Insurers shall have to review decision is thought to be largely the ships, compared to 276 in 2005 and the methodology to align the capi- result of improvements to security 329 in 2004 says the annual IMB tal requirements more closely with implemented by the littoral states report, which is based on statistics risks. bordering the Straits. compiled by the IMB Piracy Repor- ting Centre (PRC) in Kuala Lumpur. Worldwide, there have been more War and terrorism, geopolitical Although the number of attacks attacks on container ships (37/24) uncertainty world-wide has declined, piracy and fishing boats (15/3) in the first Since the events of September 11, continues to plague hotspots such nine months of 2006 compared 2001, it has become apparent that as Bangladesh, Nigeria, Somalia, with the same period last year, the vast maritime transportation and the ports of Chittagong in Ban- while the number of attacks on bulk system is particularly vulnerable gladesh and Santos in Brazil. carriers, general cargo ships and and subject to terrorist attacks from tankers has diminished. Indonesia still accounted for more previously uncontemplated sources. attacks than any other country, In the absence of major events, the However, since the year 2000, the consolidating its position as the war risks insurance markets have sector has recorded only two major world’s top piracy hotspot. Nigerian witnessed in 2006 and already in marine events: Al Qaeda not only waters also remain extremely dan- 2007 a significant drop in premium attacked the USS Cole, but scored a gerous. rates. The main cause has been the grim success on October 6, 2002 continuing downward trend in rating against a French/Belgium tanker, Nigerian attacks have great poten- these risks coupled with improved the 299,364 dwt Limburg, rammed tial for violence, with pirates repor- international market terms. by an explosives-laden boat off the ted as carrying guns, knives or both port of Ash Shihr at Mukallah, 353 in most instances. A growing trend Thus exceptional risks coverage for miles (570 km) east of Aden. A in Nigeria is the large number of war, terrorist acts and seizure, crewman was killed and the double- pirates involved in attacks. In one experienced a cheap protection for hulled tanker was breached. instance, 40 people attacked a ves- shipowners and traders. ■

The marine insurance market in 2006 - BRS 105 Research & Information Departement

THE RESEARCH AND INFORMATION DEPARTMENT maintains a large data basis and information library which covers all sectors of activities handled by BRS, and is available for consultation or advice of clients.

THIS DEPARTMENT handles the information reports, analyses, studies and statistics covered on the company’s internet site. It works in co-operation with the brokers in each departments to meet the needs of clients.

THE RESEARCH AND INFORMATION DEPARTMENT also offers its know-how and the companies’ international network and expertise available to the shipping world to assist and answer any queries.

You can reach this service directly at the following address:

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Or through your broker.

106 BRS - Shipping and Shipbuilding Markets in 2006 French shipyards deliveries and orderbook in 2006

Aker Yards Saint-Nazaire

Ships delivered in 2006 M 32 Gaz de France EnergY 2006 Gaz de France LNG tanker 74,130 cbm 219.5 m x 34.9 m on 9.93 m Diesel gas electric - 18,560 kW 18.2 K.

N 32 Provalys 2006 Gaz de France LNG tanker 153,500 cbm 290.0 m x 43.3 m on 11.75 m Diesel gas electric - 28,000 kW 19.5 K.

Q 32 MSC Musica 2006 MSC Cruise vessel 89,600 gt - 2,550 lower berths 293.8 m x 32.2 m on 7.85 m 1,275 cab Diesel electric - 2 x 17,000 kW 23 K.

Ships on order as at 1/1/2007 A 33 MSC Fantasia 2008 MSC B 33 MSC Serenata 2009 - Cruise vessels 133,500 gt - 3,300 lower berths 333.0 m 1,650 cab

C 33 - 2010 NCL D 33 - 2009 - Cruise vessels 148,000 gt - 4,200 lower berths 325.0 m x 40.0 m 2,100 cab

P 32 Gazelys 2007 Gaz de France LNG tanker 153,500 cbm 290.0 m x 43.3 m on 11.75 m Diesel gas electric - 28,000 kW 19.5 K.

R 32 MSC Orchestra 2007 MSC Cruise vessel 89,600 gt - 2,550 lower berths 293.8 m x 32.2 m on 7.85 m 1,275 cab Diesel electric - 2 x 17,000 kW 23 K.

S 32 MSC Poesia 2008 MSC Cruise vessel 89,600 gt - 2,550 lower berths 293.8 m x 32.2 m on 7.85 m 1,275 cab Diesel electric - 2 x 17,000 kW 23 K.

French shipyards deliveries and orderbook in 2006 - BRS 107 Aker Yards Lorient

Ships delivered in 2006 - Anatife 2006 Départements du Morbihan et de Vendée Product tanker 41.5 m x 7.6 m on 2.45 m 310 cbm

- Bangor 2006 Conseil Général du Morbihan Ferry 350 passengers 46.0 m x 12.0 m on 2.75 m 32 cars 2 x 780 kW - ABC 12.5 K.

829 Kogo 2006 - Yacht 71.7 m x 13.5 m on 3.75 m Diesel electric - 2 x 1,500 kW 16 K.

Ship on order as at 1/1/2007 - - 2008 Conseil Général du Morbihan Ferry 350 passengers 46.0 m x 12.0 m on 2.75 m 32 cars 2 x 780 kW - ABC 12.5 K.

Constructions Mécaniques de Normandie

Ships delivered in 2006 - - 2006 United Arab Emirates Corvette BR 70 68.0 m x 11.0 m MTU V895 TE920 35 K.

- Bermie 2006 Netanya 8 Marine Yacht 58.0 m x 11.2 m 2 x 1,641 kW 15.4 K.

Ships on order as at 1/1/2007 - Netanya 8 2007 Netanya 8 Marine Yacht 58.0 m x 11.2 m 2 x 1,641 kW 15.4 K.

- Project 801 - Slipstream 2008 - - Project 802 2008 - Yachts 58.0 m x 11.2 m 2 x 1,641 kW 15.4 K.

108 BRS - Shipping and Shipbuilding Markets in 2006 Chantiers Piriou

Ships delivered in 2006 C 265 Surfer 323 2006 Compagnie Surf Crew boat 201 ums 34.3 m x 6.7 m on 3 m 91 passengers 3 x 1,455 kW

C 266 Charles Gilberte 2006 Delponte Trawler 154 ums 24.9 m

C 275 Trevignon 2006 Cobrecaf C 276 Drennec 2006 - Tuna boats 2,319 ums 83.2 m x 13.8 m on 6.7 m 4,000 kW - Wartsila 8L32 17.5 K.

C 277 Transud 2006 Transud Barge 235 ums 39.2 m

C 279 War Roag IV 2006 Sas de la Baie - C/O DLM Fish boat 66.86 ums 17.0 m

FC 08 Les Casquets 2006 Armement La Houle FC 09 La Houle 2006 - Trawlers 181 ums 22.8 m

Ships on order as at 1/1/2007 C 280 - 2007 Les Abeilles C 281 - 2007 - C 282 - 2008 - C 283 - 2008 - C 284 - 2008 - C 285 - 2008 - C 286 - 2008 - C 287 - 2008 - Tugs 30.3 m

C 288 Surfer 324 2007 Compagnie Surf C 290 Surfer 325 2007 - Crew boats 201 ums 34.0 m 91 passengers

C 293 - 2007 Vedettes de Paris C 294 - 2007 - Passenger river boats 30.0 m

French shipyards deliveries and orderbook in 2006 - BRS 109 French deliveries and orderbook to foreign shipyards in 2006

Ships delivered in 2006 Yangzhou Dayang (China) DY401 Bourbon Thera 2006 Bourbon AHTS 1,500 dwt CW 80t 4,795 kW

Zhejiang (China) ZJB03-117 Bourbon Hector 2006 Bourbon ZJB03-120 Bourbon Hestia 2006 - ZJB03-121 Bourbon Harmonie 2006 - ZJB03-122 Bourbon Hemera 2006 - ZJB03-123 Bourbon Helene 2006 - ZJB03-133 Bourbon Homere 2006 - PSV 3,230 dwt 73.2 m x 16.5 m on 5.50 m GPA 670 5,475 kW - Cummins 13 K.

Aker Brevik (Norway) 36 Cap Aiguades 2006 Maritima Small product tanker 3,536 dwt - 2,000 gt 89.2 m x 13.8 m on 5 m 2 x 1,080 kW - Warsila 6L20 12 K.

Fjellstrand (Norway) 1674 Le Châtelet 2006 Compagnie Yeu Continent Catamaran 442 pax 45.5 m x 11.2 m on 1.5 m 4 x 1,900 kW - Cummins 32 K.

Ulstein Verft (Norway) 273 Bourbon Orca 2006 Bourbon AHTS 180 t bp - DP2 - SAHS 86.2 x 18.5 m AX104 11,520 kW 17.5 K.

274 Bourbon Dolphin 2006 Bourbon AHTS 200 t bp 75.2 x 17.0 m A102

275 Bourbon Mistral 2006 Bourbon PSV 4,720 dwt 88.8 x 19.0 m on 6.6 m PX105 6,320 kW 16 K.

Keppel (Singapore) 282 Bourbon Artemis 2006 Bourbon 293 Bourbon Astyanax 2006 - AHTS 2,100 dwt - 120 t bp 67.0 m x 15.40 m on 6.10 m CW 120 8,120 kW - Caterpillar 14 K.

110 BRS - Shipping and Shipbuilding Markets in 2006 298 Bourbon Rhode 2006 Bourbon 299 Bourbon Rhesos 2006 - AHTS 650 dwt CW 100 - 100 t bp

Hyundai Mipo (South Korea) 0421 CMA CGM Violet 2006 CMA CGM 0422 CMA CGM Camellia 2006 - 0423 CMA CGM Dahlia 2006 - Container carriers 38,200 dwt - 2,824 teu 222.17 x 30.0 m on 12 m 34,300 kW - B&W 23 K.

Hyundai Samho (South Korea) S-254 CMA CGM Traviata 2006 CMA CGM S-255 CMA CGM Medea 2006 - Container carriers 100,400 dwt - 8,189 teu 334.0 m x 42.8 m on 14.50 m 70,306 kW - B&W 25.4 K.

S-253 CMA CGM Tosca 2006 CMA CGM S-256 CMA CGM Norma 2006 - Container carriers 118,740 dwt - 9,163 teu 350.0 m x 42.8 m on 14.50 m 70,306 kW - B&W 25.4 K.

S-279 CMA CGM Orca 2006 CMA CGM Container carrier 65,890 dwt - 5,060 teu 294.1 m x 32.2 m on 13.50 m 69,840 bhp - B&W 25.1 K.

Hyundai Ulsan (South Korea) 1647 CMA CGM Nabucco 2006 CMA CGM Container carrier 100,400 dwt - 8,189 teu 334.0 m x 42.8 m on 14.50 m 70,306 kW - B&W 25.4 K.

1648 CMA CGM Fidelio 2006 CMA CGM 1649 CMA CGM Rigoletto 2006 - Container carriers 118,740 dwt - 9,163 teu 350 m x 42.80 m on 14.50 m 70,306 kW - B&W 25.4 K.

STX Chinhae (South Korea) 1225 Maohi 2006 Socatra MR product tanker 46,177 dwt 183.0 m x 32.2 m 11,100 bhp - B&W

H.J. Barreras (Spain) 1629 Guyenne 2006 Petromarine Small product tanker 11,345 dwt 119.8 m x 18.8 m double hull - IMO II 4,320 kW 14 K.

1646 Seven Sisters 2006 Transmanche Ferries Passenger ferry 2,800 dwt - 18,564 gt 142.4 x 24.2 m on 5.70 m 600 pax 25,704 bhp - Wartsila 22 K.

Torgem (Turkey) 84 Majorque 2006 Petromarine Product tanker 3,300 dwt 79.90 m x 14.25 m on 5 m 2,560 bhp - Caterpillar 12 K.

Yardimci (Turkey) 40 FS Charlotte 2006 Fouquet Sacop (Eitzen Chemical) Small product tanker 12,790 dwt 129.0 m x 22.0 m 7,341 bhp - MAK

54 FS Camille 2006 Fouquet Sacop (Eitzen Chemical) Small product tanker 3,900 dwt 79.9 m x 15.0 m 3,046 bhp - Wartisla

French shipyards deliveries and orderbook in 2006 - BRS 111 Ships on order as at 1/1/2007 Dalian SIC (China) - - 2008 CMA CGM - - 2008 - Container carriers 50,500 dwt - 4,250 teu 263.2 m x 32.2 m on 12.80 m

FPSO-5 - 2007 Total Offshore production & storage unit 150,000 dwt

Jinling (China) - - 2007 Brostrom MR product tanker 37,500 dwt IMO II - Double hull

Yangzhou Dayang (China) - - 2007 Bourbon -- 2007- -- 2007- -- 2007- -- 2007- - - 2008 - - - 2008 - - - 2008 - - - 2008 - - - 2008 - - - 2008 - - - 2008 - - - 2009 - - - 2009 - - - 2009 - - - 2009 - - - 2009 - - - 2009 - - - 2009 - - - 2010 - - - 2010 - - - 2010 - - - 2010 - - - 2010 - -- 2011- -- 2011- AHTS 1,500 dwt GPA 254 type

DY 402 Lars Grael 2007 Compagnie Surf DY 403 Bourbon Themis 2007 - DY 404 Bourbon Thalie 2007 - AHTS 1,500 dwt 80T bp Conan Wu type 4,795 kW

DY 405 Bourbon Thetys 2007 Bourbon DY 406 Bourbon Theia 2007 - AHTS 1,500 dwt 80T bp Conan Wu type 5,285 kW

DY 609 Bourbon Sirius 2007 Bourbon DY 610 Bourbon Sagitta 2007 - AHTS 1,800 dwt GPA 254 3,960 kW

DY 611 Bourbon Sextans 2007 Bourbon DY 612 Bourbon Syrma 2007 - AHTS 1,800 dwt 70T bp Conan Wu 3,960 kW

112 BRS - Shipping and Shipbuilding Markets in 2006 DY 801 - 2007 Bourbon DY 802 - 2007 - DY 803 - 2007 - DY 804 - 2008 - DY 805 - 2008 - DY 806 - 2008 - DY 807 - 2008 - DY 808 - 2008 - DY 809 - 2009 - DY 810 - 2009 - PSV 1,600 dwt GPA 654 type 2,905 kW

Zhejiang (China) ZJB03-134 Bourbon Himalia 2007 Bourbon PSV 3,230 dwt 73.2 m x 16.5 m on 5.50 m GPA 670 5,475 kW - Cummins 13 K.

ZJB05-145 - 2007 Bourbon ZJB05-146 - 2008 - ZJB05-147 - 2008 - ZJB05-148 - 2008 - PSV 4,847 dwt P 105 design Ulstein type 3,745 kW

ZJB06-155 - 2007 Bourbon ZJB06-156 - 2007 - ZJB06-157 - 2007 - ZJB06-158 - 2007 - ZJB06-159 - 2007 - ZJB06-160 - 2008 - ZJB06-161 - 2008 - ZJB06-162 - 2008 - PSV GPA 670 type 4,002 kW

Grandweld (Dubai) H 033/06 - 2008 Bourbon H 034/06 - 2008 - H 035/06 - 2008 - H 036/06 - 2008 - Crew boats

Aker Finnyards (Finland) 1357 Cotentin 2007 Brittany Ferries 1362 Armorique 2008 - Passenger ferries 6,200 dwt - 2,200 lm 165.0 x 26.8 m on 6.3 m 600 pax - 120 cab 23 K.

Bharati (India) 322 Bourbon Atlas 2007 Bourbon 323 Bourbon Altair 2007 - 348 - 2008 - 349 - 2008 - MPSV 2,000 dwt 60M Conan Wu type

352 - 2008 Bourbon 353 - 2008 - 354 - 2008 - 355 - 2008 - 356 - 2008 - AHTS 2,100 dwt 120T Conan Wu type 8,120 kW

French shipyards deliveries and orderbook in 2006 - BRS 113 Damen Gorinchem (Netherlands) 511519 Abeille Sparten 2007 Les Abeilles 511520 Abeille Malabata 2007 - 511524 Abeille Cires 2007 - 511525 Abeille Dalia 2007 - 511539 - 2007 - 511540 - 2008 - 511541 - 2008 - 511542 - 2008 - Tugs ASD 2810 type

De Hoop Lobith (Netherlands) 422 Bourbon Trieste 2007 Bourbon MPSV 4,300 dwt

Aker Brevik (Norway) hull built by Aker Braila in Romania 60 - 2008 Maritima 61 - 2008 - Small product tankers 3,150 dwt Double hull 1,836 kW

Hanjin Subic bay (Philippines) PN001 - 2008 CMA CGM PN002 - 2008 - PN003 - 2009 - PN004 - 2009 - PN005 - 2009 - PN006 - 2009 - Container carriers 58,213 dwt - 4,389 teu Double hull 36,500 kW

Singapore TS&E (Singapore) 615 - 2008 Cetam 616 - 2008 - Roros 3,500 dwt - 3,120 lm 8,000 kW 19 K.

Daewoo Shipbuilding & Marine Engineering (South Korea) - - 2008 CMA CGM (on charter) - - 2008 - - - 2009 - - - 2009 - Container carriers 120,000 dwt - 9,710 teu 25 K.

4125 - 2008 CMA CGM (on charter) 4126 - 2008 - Container carriers 120,000 dwt - 9,710 teu 25 K.

4127 - 2009 CMA CGM 4128 - 2009 - Container carriers 120,000 dwt - 9,710 teu 25 K.

Hanjin Busan (South Korea) 184 - 2008 CMA CGM 185 - 2008 - Container carriers 58,500 dwt - 4,400 teu 282.1 x 32.2 m on 13.02 m 62,080 bhp - B&W

202 - 2009 CMA CGM 203 - 2009 - 204 - 2009 - 205 - 2009 - Container carriers 85,250 dwt - 6,408 teu 25.6 K.

114 BRS - Shipping and Shipbuilding Markets in 2006 Hyundai Samho (South Korea) S-280 CMA CGM Dolphin 2007 CMA CGM Container carrier 65,990 dwt - 5,060 teu 294.1 m x 32.2 m on 13.50 m 69,840 bhp - B&W 23.5 K.

S-320 - 2007 CMA CGM S-321 - 2007 - Container carriers 21,000 dwt - 1,691 teu

Hyundai Ulsan (South Korea) 1710 CMA CGM Blue Whale 2007 CMA CGM 1711 CMA CGM White Shark 2007 - 1768 CMA CGM Marlin 2007 - 1769 CMA CGM Kingfish 2007 - 1770 CMA CGM Swordfish 2007 - 1771 CMA CGM Tarpon 2007 - 1826 - 2008 - 1827 - 2008 - 1828 - 2008 - 1829 - 2008 - Container carriers 65,990 dwt - 5,078 teu 294.1 m x 32.2 m on 13.50 m 69,840 bhp - B&W 23.5 K.

1870 CMA CGM Herodote 2007 CMA CGM 1871 CMA CGM Homere 2007 - 1872 - 2007 - Container carriers 21,000 dwt - 1,691 teu

1890 - 2008 CMA CGM 1891 - 2008 1892 - 2008 1893 - 2008 Container carriers 120,000 dwt - 9,710 teu 25 K.

1992 - 2009 CMA CGM 1993 - 2009 - 1994 - 2009 - 1995 - 2009 - 1996 - 2009 - 1997 - 2010 - 1998 - 2010 - 1999 - 2010 - Container carriers 130,000 dwt - 11,400 teu 72,079 kW 24.7 K.

- - 2008 Total Offshore production & storage unit 360,000 dwt

JB Heavy (South Korea) - - 2007 CMA CGM -- 2007- -- 2007- -- 2007- Container carriers 13,900 dwt - 1,118 teu 18 K.

Freire (Spain) 644 - 2007 Thomas L 645 - 2007 - Tugs 2,574 kW

French shipyards deliveries and orderbook in 2006 - BRS 115 Anadolu (Turkey) 204 FS Sara 2007 Fouquet Sacop (Eitzen Chemical) Small product tanker 8,125 dwt IMO II - Double hull 3,264 kW - MAK

RMK (Turkey) 65 Chantaco 2007 Petromarine 66 Chiberta 2007 - Small product tankers 19,000 dwt IMO II - Ice 1A 6,800 kW - Wartsila

Tersan (Turkey) 14 Lamentin 2007 Petromarine 15 Lacanau 2007 - 17 Lascaux 2007 - Small product tankers 10,800 dwt IMO II - Double hull 4,800 kW - MAK

116 BRS - Shipping and Shipbuilding Markets in 2006 © BARRY ROGLIANO SALLES 2007 - Cabaret Création 01 47 66 55 34 LONDON – PARIS – DUBAI – ATHENS – MADRID – RIJEKA – MUMBAI – SHANGHAI

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