Baltic Dirty Tanker Rates Have Staged A Rebound In Recent Months According to AmResearch

I was reading the following article MISC sees demand for its new tankers when the following statement from AmResearch caught my attention.

• AmResearch said the tanker shipping market was improving, with year-on-year growth in charter rates in recent months after 17 months of contraction. “Dirty tanker rates have staged a rebound in recent months. Rates for VLCC, suezmax and aframax vessels are now showing positive growth,” it said.
  
  The brokerage said spot rates seemed to have rebounded much stronger than one-year time charters, with year-on-year growth ranging from 17% to 86% for June.
  
  “The VLCC segment has staged the strongest year-on-year improvement at 34%, supported by usage of VLCCs as storage, which takes out a certain amount of supply in the market,” it said in a report.
  
  In terms of market capacity, AmResearch said that since early 2009, actual tanker deliveries had been slipping behind schedule, which had helped to tone down the supply of vessels into the market.
  
  “We estimate that scheduled deliveries amounting to 17 million dwt had disappeared from order books (accounting for 28% of scheduled deliveries) – either delayed or cancelled altogether last year,” it said, adding that the scrapping of old vessels was also expected to pick up by the year-end.
  
  AmResearch believed that MISC’s suezmax acquisition, at US$67.8mil per vessel, was done at a fair price, considering the current suezmax new-build price was US$67.5mil.
  
  “MISC’s capacity build-up, particularly in the tanker segment, coincides with its recent acquisition of a 50% stake in international tanker terminal operator VTTI BV, which also marks the start of a strategic partnership with VTTI’s parent, Vitol.”

I was baffled! :P

• Dirty tanker rates have staged a rebound in recent months.

Errr... here's the charts... I hope one can understand why I am baffled. :P

YTD chart of Baltic Dirty Tanker Index ( BDTI )

How you want to interpret this?

Start of the year, BDTI was at 1025. Last Friday, BDTI closed at 861.

On the 13 July 2010, BDTI closed at 780.

The six months chart.



The three months chart.



The one month chart.



The one week chart.

Quote again: "Dirty tanker rates have staged a rebound in recent months. "

How?

Typo ah?

:P

Read more...

Baltic Dirty Tanker Index And Baltic Dry Index Plunging.. What Does It Mean?

The Baltic Dry Index has closed at 2127, down another 4%!

Remember it was just 4209 points on 26 May 2010. The Index is now down 2082 points or some 49.4%!!!

Now the Baltic Dirty Tanker Index (BDTI) has not been faring well too. The BDTI measures the oil tankers rates or the shipping costs on 17 crude oil tanker routes have not been doing that well too.

And again reports are saying that there are more very large supertankers (VLCC) for hire than there are for the demand to ship crude oil!

Here's a clip last month.

• There are 5 percent more very large crude carriers, or VLCCs, for hire in the Persian Gulf over the next 30 days than there are cargoes that need shipping, according to the median estimate of three shipbrokers, one freight-derivatives broker and one owner surveyed by Bloomberg News today. (source: here )

And here is how the BDTI is faring the last 3 months.

And here is the comparison of the BDI versus BDTI on a YTD comparison.



Not looking great eh?

So is this an issue of over supply of ships? Or is this an issue of falling demand? Or a combination of both?

But the issue of over supply of ships is incredible, really.

For example: Samsung Heavy wins $1.7 billion shipbuilding deals‎

• Samsung Heavy wins $1.7 billion shipbuilding deals
  (AFP) – 4 days ago
  
  SEOUL — South Korea's Samsung Heavy Industries Co. said Friday it had won deals worth 1.7 billion dollars to build 19 vessels, as global demand for new ships recovers.
  
  The country's second largest shipbuilder after Hyundai Heavy Industries Co. won a 1.03 billion dollar order from Taiwan's Evergreen Marine Corp., under which Samsung Heavy will build and deliver 10 container ships by November 2013.
  
  Samsung Heavy has also clinched another 670 million deal from two unidentified Asian shipping firms to build nine oil tankers.
  
  The two deals, signed on Friday, brought the total orders placed with Samsung Heavy to 51 ships valued at five billion dollars, accounting for 63 percent of the company's yearly target for orders.
  
  In contrast, the company received just one order worth 700 million dollars during the same period last year.
  
  South Korea overtook China to regain its status as the world's top shipbuilder in the first four months of this year thanks to a rise in demand from European shipping lines, the government said on Tuesday.....
  

And on the latest Korean Shipping messenger newsletter dated 6th July...

http://files.irwebpage.com/reports/shipping/V7ZeHnn7IC/SM-06-07-2010.pdf

And on page 3 of the report...

• .... But let's put it in perspective. This is nothing compared to the 95% drop the index saw before and during the financial crisis of 2008.
  
  And by and large, analysts are saying that we don't need to get too worried about this sell off either. Why not?
  
  The BDI measures the cost of shipping raw materials from one place to another. If the price of moving raw materials falls, then you'd assume that people are moving less stuff around the world. Presumably, that's because demand for finished goods is also slowing down. Therefore, a drop in the BDI suggests that the global economy must be slowing down.
  
  That's all very logical. But it misses one point – the supply side. Because it measures the cost of shipping, the BDI might also be saying that there are simply too many ships. The BDI hit a record high in 2008, as demand for shipping rose far ahead of the supply of ships available.
  
  So, as you'd expect, that meant that more ships were built. And fleets are still growing now, even although demand has fallen to more normal levels. More ships and static demand means shipping rates are falling.
  
  As dry bulk researcher Derek Langston of Simpson Spence and Young told the Financial Times last month: "We still anticipate this year we will see a record year in terms of annual growth of trade. However, this is also accompanied by record growth in fleet supply."
  
  So everything's just fine then? Well, we wouldn't go that far. Melissa Kidd at Lombard Street Research is rather less sanguine about the fall in the index. Sure, "the quality of the BDI as a leading indicator has been disrupted by an oversupply of shipping." But "the message of weaker global activity is supported by a range of other indicators."
  
  Chinese growth is slowing
  
  One big factor in the fall has been a drop off in Chinese steel mill demand for iron ore. Iron ore shipments fell year-on-year in both April and May, according to Bloomberg. Iron ore is of course, a key ingredient in steel manufacturing.
  
  But domestic steel prices in China have been falling for the past ten weeks. This is partly down to tighter monetary conditions. The construction industry is the major driver of steel demand. China's attempts to curb the property market have hit steel consumption and therefore prices.
  
  With iron ore prices remaining high, that's pushed steel makers into losses. As Andreas Vergottis at Tufton Oceanic tells Bloomberg, "Profitability of Chinese steel mills is zero now, we think."
  
  The trouble, says Kidd, is that "China has been the world's engine of growth for… commodities over the last 12-18 months. A cooling off in Chinese demand growth – prompted by ongoing monetary tightening – will impact heavily on global price developments" in the commodities market.
  
  And China's not the only one slowing down. "The JP Morgan Global Manufacturing PMI has fallen from a high of 60.9 in April to 57.0 in June." The reading for new orders was particularly hard hit, falling from 60.3 to 55.5 over the same time. "While a PMI of over 50 points to economic expansion rather than contraction, the drop in the index components points to a slowing down in the pace of recovery."
  
  A turning point for the global recovery
  
  What all this boils down to, says Kidd, is that "the global recovery has reached a turning point as the momentum provided by the inventory cycle wears off." In other words, company restocking is now ending, and we're waiting to see what sort of 'real' demand remains to pick up the slack once government stimulus is removed.
  
  Just how bad things get remains to be seen. But even a slowing of demand doesn't bode well for hard commodity prices in the second half of the year
  
  

Read more...

Update On Baltic Dirty Tanker Index

Last posted: Baltic Dirty Tanker Index (BDTI) Does Not Indicate All Is Well

The chart posted back on Aug 10th 2009 did not look too encouraging.

However, as can be seen on the latest chart update, things have indeed turned rather well the past 3 months.



Here's the updated one year chart.

Read more...

Baltic Dirty Tanker Index (BDTI) Does Not Indicate All Is Well

The Baltic Dirty Index measures oil tanker rates and this index has not been doing great. (ps: do you think such an index would be useful? )

The BDTI ended 2008 at 1243 points.

It last closed at 474 points.

No joke.

Here's the one year chart of BDTI.

And of course the collapse in the index has caused havoc for shippers like Overseas Shipholding. On Bloomberg news last week. Overseas Shipholding Has Loss as Spot Rates Decline

• Aug. 5 (Bloomberg) -- Overseas Shipholding Group Inc., the largest U.S.-based oil-tanker owner, reported a smaller-than- expected second-quarter loss as rates to transport oil fell amid a global economic recession.
  
  The loss was $8.79 million, or 33 cents per share, compared with net income of $86.9 million, or $2.81 a share, a year ago, New York-based Overseas Shipholding said in a statement. Revenue declined 34 percent to $282.7 million from $428.2 million. The company was expected to lose 67 cents per share, the average estimate of five analysts surveyed by Bloomberg.
  
  Spot, or one-voyage, rates fell 71 percent from a year earlier as a global economic recession cut fuel demand, according to the Baltic Dirty Tanker Index, a measure of rates for vessels of various sizes on routes around the world.
  
  “They’re still primarily going to be tied to the spot market, and these weak rates are going to be felt by OSG today,” Greg Lewis, a New York-based analyst at Credit Suisse, said. “We’re in a really weak period, and rates are going to continue to bounce around these levels.”
  
  The earnings report was released before the open of regular trading on U.S. stock markets. Overseas Shipholding rose $1.19, or 3.3 percent, to $37.11 in New York Stock Exchange composite trading. The shares have fallen 12 percent so far this year.
  
  Net income included items that totaled $1 million, or 4 cents a share. Year-ago net income included items that totaled $14.7 million, or 36 cents.
  
  ‘Tough Market’
  
  “It was a very tough market for tanker owners,” Chief Executive Officer Morten Arntzen said on a conference call. “Rates were down across the board.”
  
  The loss was the ship owner’s first since 2002, excluding the fourth quarter of 2008 when the company reported 170.6 million in goodwill and asset-impairment charges. Arntzen said another loss was likely in the third quarter.
  
  Jon Chappell, a New York-based analyst at JPMorgan Chase & Co. on July 21 estimated global oil demand would fall 2.1 million barrels a day this year, and the size of the fleet would grow 9.9 percent, exacerbating “the dreaded ‘too-many-ships- for-too-few-cargoes’” market environment.
  
  Rates Fall
  
  Overseas Shipholding said its 17 supertankers were chartered in the spot market at an average rate of $32,020 per day, 68 percent lower than the year-earlier period of $98,747 per day.
  
  The so-called Very Large Crude Carriers can carry 2 million barrels of oil. These ships operate mainly out of the Persian Gulf on routes to Asia and the U.S.
  
  Suezmaxes, which can carry 1 million barrels of oil, earned an average spot rate of $23,847, down 61 percent from last year’s $61,098.
  
  Lewis said revenue beat his estimate due to “better-than- expected performance by the crude VLCC and Panamax fleets and the international product tanker fleet.”
  
  The ship owner said it was paid an average of $16,757 per day for its Aframax tankers in the spot market, where rates vary by voyage, down 70 percent from $55,543 a day a year earlier. Aframaxes can carry about 600,000 barrels of oil.
  
  “The tanker market we’re in today is challenging and will be challenging for the next few quarters,” Lewis said.
  
  Overall, Overseas Shipholding totaled 9,725 revenue days for the quarter, from the year-ago period of 9,648 days.

Read more...