15 October 2013

The Shipping Association of Trinidad & Tobago

WHY THE CRUDE TANKER INDUSTRY

REMAINS DEPRESSED DUE TO LOW

RATES

In International Shipping

Why the crude tanker industry

remains low

1

Inventory restocking to

boost imports

2

Owner/Manager partnerships on

the rise

3

National Energy request for

proposals

4

Inside This Issue:

Overall, the tanker index remains in a downtrend since late 2009, making new

lows on every bounce and trough. But it has been trying to find support on the

lower range as ship companies scrap vessels. The index was climbing higher in

July, as demand rose in the United States and shipments to China increased.

Fewer new ship deliveries and scrapping activity also helped. However, it was

nonetheless a short-term bounce and rates fell in August.

A shift from the downtrend appears to be looming. As rates come down,

companies will scrap ships, go bankrupt, cancel new deliveries, or delay deliveries.

So, as time passes, the industry comprises a fleet portfolio that can do business

at cheaper rates. The upper bound is the level that companies will try to take

advantage of by receiving new ships. A breakout of the downtrend will mean there

aren’t enough new ships to keep rates low anymore. If that happens, expect

tanker stocks to rise in share prices—similar to what we’ve seen for dry bulk

stocks.

On a year-over-year basis, the index appears to be showing some positive

development—rising from negative to positive territory in August. While it fell

recently, it has stayed above figures seen before this summer. This reflects a

smaller increase in excess supply growth on a year-to-year basis.

If year-over-year change can hold up here, then the worst for the crude tankers

may be over. This would be long-term positive for crude stocks such as Frontline

Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Teekay Tankers Ltd. (TNK), and

Ship Finance International (SFL). While the Guggenheim Shipping ETF (SEA) is also

affected by the crude tanker industry’s fundamentals, the ETF also invests in

product tankers and other shipping companies that are performing better.

Source: Market Realist

I n I n t e r n a t i o n a l S h i p p i n g P a g e 2

INVENTORY RESTOCKING TO HELP BOOST US

IMPORTS Journal of Commerce Economist

Mario O. Moreno forecasts that

U.S. containerized imports will

rise 4 percent this year.

After growth of 3.5 percent in

the first quarter and 1.2

percent in the second, he

expects third quarter volume to

increase 4.5 percent. He

expects fourth quarter volume

to rise 6.5 percent, aided by

easy comparisons with last year.

Inventory restocking will help

boost imports in the second half

of 2013, Moreno said. Retailers

over-ordered in the first quarter

and thinned their inventory

levels in the second quarter.

Now they’re forced to rebuild

stockpiles to meet demand.

Current economic data will

have little influence on the pre-

holiday import peak season,

which is well under way. With

most peak-season shipments

already shipped or booked,

companies are looking ahead to

2014.

Moreno forecasts containerized

imports will increase 4.7

percent in 2014. He predicts

exports to finish the year with

a gain of 2.6 percent after

rising only 0.3 percent in the

first half. He looks for exports

to increase 3.4 percent in

2014.

The economy’s future trajec-

tory will hinge largely on

government monetary policy,

and on how Washington deals

with partisan bickering over

spending and taxes and the

possibility of a renewed

budget sequester next year.

There’s also the specter of

Middle East unrest and its

effect on oil prices.

A rise in U.S. interest rates

would affect exports by

increasing the dollar’s value and

making U.S. goods more

expensive in overseas markets.

Walter Kemmsies, chief econo-

mist at port engineering firm

Moffatt & Nichol, said weaker

currencies in Brazil and

Argentina are likely to hurt U.S.

containerized agriculture

exports, but for now, the

export outlook is good. He said

bulk agricultural exports in

containers should increase

about 5 percent over last year,

and that capital goods will

benefit from what appear to be

signs of recovery from China.

Source: Journal of Commerce

I n I n t e r n a t i o n a l S h i p p i n g P a g e 3

MORE OWNER/MANAGER PARTNERSHIPS ON

THE HORIZON Third party ship managers will become more in

demand in the offshore sector as the health and

safety and regulatory environment toughens up,

according to one of the U.K.’s leading ship

owners and ship managers.

“Like a lot of maritime sectors, it comes down

to size and scale but if the regulatory situation

becomes even more intensive then it will make

sense for an owner to look to third party

managers,” said Chris Stone, Chief Operating

Officer of Bibby Ship Management.

Mr. Stone said that ship owners were

increasingly looking to work in partnership with

their managers but they were also demanding

quality as well as cost control. “The offshore

sector is not unique in that managers need to

work hard to ensure the managed vessels are in

a strong position to benefit from any potential

upturn in the market,” he said.

Ship managers need to be able to make a profit

for the work they undertake, he stressed, if

they are to provide a continuity of service and

invest in people and the services they provide.

The business of ship management is all about

partnership; by working together owners and

managers can operate the vessels in the most

cost-effective and efficient manner whilst also

ensuring that the vessel meets all the demand-

ing needs of the charterer and the regulator, he

added.

Is the industry moving towards greater partner-

ship and is ship management consolidation back

on the horizon? Mr. Stone said, “Times are

tough for the owner and for the ship manager

and it just makes sense to have a strategic part-

nership or partnerships. I don’t think it has to be

a single partnership but it is the way forward

and the manager can become an integral part of

the ship owners’ business. Industry consolida-

tion is unlikely in the short term as the market is

quite fragmented and there will always be niche

or boutique managers who concentrate on their

areas of expertise whilst others will use their

strength in depth to drive home the cost

efficiencies that owners demand,” he said.

Source: Marine Link

I n I n t e r n a t i o n a l S h i p p i n g P a g e 4

CHINA CABOTAGE RULES BENEFIT HONG KONG