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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 developmentrising 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

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Transcript of ping International Shipping 15 October.pdf · Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Teekay...

  • 15 October 2013

    The Shipping Association of Trinidad & Tobago

    WHY THE CRUDE TANKER INDUSTRY

    REMAINS DEPRESSED DUE TO LOW

    RATES

    In International S

    hipping

    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