Archives for posts with tag: market

The container shipping sector derives many of its characteristics from the dual but separate nature of the freight and charter markets, and 2018 so far has seen some distinctly ‘two-tier’ trends in the box shipping space, with freight and charter rates experiencing a clear difference in performance. What has caused that to happen, and how likely is it to be sustained?

For the full version of this article, please go to Shipping Intelligence Network.

In June 2016, the ‘Neo-Panamax’ locks at the Panama Canal opened to commercial traffic, enabling a much larger proportion of the world’s fleet to transit the canal. Nearly two years on, official dimension restrictions at the Neo-Panamax locks are being amended, with an even greater share of the fleet theoretically capable of passing through the canal from 1st June onwards.

For the full version of this article, please go to Shipping Intelligence Network.

The shipping industry is essential to the smooth functioning of the world economy, transporting around 85% of the world’s international trade in tonnage terms. So it comes as no surprise that ships are all over the world at any given time. However, the ability to identify ships’ positions by vessel tracking systems today means that one can be more precise than ever in breaking this down a little further…

For the full version of this article, please go to Shipping Intelligence Network.

In 1896, Wilbur and Orville Wright began to experiment with flight in their bicycle shop in Dayton, Ohio. But it was another seven years until the brothers successfully flew the world’s first powered aeroplane, with the maiden flight lasting just 12 seconds. Today’s bulkcarrier owners, holding out for loftier earnings, would likely empathise; getting airborne, and staying there, is a real challenge.

For the full version of this article, please go to Shipping Intelligence Network.

 

Since the 2H 2014 offshore downturn, when investment in new exploration and development dried up, many offshore vessel owners will have tended to agree with the child heroine of the 1976 musical Annie: “It’s a hard knock life”. However after three years of setbacks and weak markets, some are now starting to see positives, as a few indicators show encouraging signs. But does that mean it’s time to invest?

For the full version of this article, please go to Shipping Intelligence Network.

Following the lowest year of contracting volumes for over thirty years in 2016, newbuilding market observers could have been forgiven for not looking too hard every month for signs of improvements on last year’s figures. In the early part of 2017 they would probably have been justified, but with more positive sentiment building, recent months have seen an increasing degree of upside on last year.

For the full version of this article, please go to Shipping Intelligence Network.

 

It’s a classic movie theme: in order to overcome potential challenges or make the most of upcoming opportunities, the protagonist first has to hit the gym and get bigger, stronger and fitter. Of course, in the movies, this is all shown via montages; in reality, things tend to take a little longer. That being said, the average-sized ship in some fleets has been gaining heft relatively quickly in recent years…

For the full version of this article, please go to Shipping Intelligence Network.

When shipping markets start to move into the next phase of the cycle following a downturn, sometimes the percentage increases in earnings can look very impressive indeed. But of course they’re generally from a low base. With some of the shipping sectors now moving into a new phase, how else might the improvements be put into a helpful context?

For the full version of this article, please go to Shipping Intelligence Network.

Now that half the year has passed, a review of offshore project sanctioning might be timely. Activity has picked up in 2017, especially for larger projects with CAPEX allocations of at least $500m. The uptick in FIDs has coincided with improved E&P budget guidance from many IOCs. So oil price volatility notwithstanding, could this be an sign of generally improving prospects for larger offshore projects?

Large Projects On The Rise

Offshore field project sanctioning reached a peak of 120 FIDs in 2012. Since then, sanctioning activity has been under pressure from a range of factors, most notably the weaker energy price environment that has prevailed since 2H 2014. Indeed, oil company E&P spending cuts induced by the falling oil price in 2015 precipitated a 33% decline in FIDs that year. Larger projects (with an estimated CAPEX of at least $500m) have been hit the worse, with the number of such developments in 2016 to receive an FID down by 60% on 2012. In comparison, the number of smaller projects sanctioned in 2016 was down by a less severe 32% on 2012.

However, 2017 is (so far) looking rather more promising: 31 offshore field projects received FIDs in 1H 2017, of which 48% were larger projects. Among these were Coral FLNG Ph.1 ($7bn), Leviathan Ph.1 ($3.75bn), Liza Ph.1 ($3.2bn) and Njord A Upgrade ($1.6bn). FIDs have been stimulated by the higher (albeit volatile) oil price, as well as by successes in reducing offshore project costs (by around 30-40% on start 2014, on average).

Small Runs Rule

That being said, while it is true that sanctioning of larger projects seems to be on the rise, it is important to note that many such projects (including all those named above bar Liza Ph.1) were conceived pre-downturn and were on the verge of obtaining an FID in 2014. This implies that the recent uptick in large-project activity may not be sustainable, especially as the backlog of such projects continues to fall. Indeed, the history of start-up delays and cost over-runs at mega-projects such as Kashagan Ph.1 ($48bn) and Greater Gorgon Ph.1 ($55bn) had already prompted operators to rethink the viability of larger offshore projects even before the oil price downturn. Onshore US basins are also potentially problematic for offshore projects, insofar as they compete (quite effectively) for scarce investment dollars.

Efficiency Matters

As a result of these considerations, operators have been downsizing many of the other large-scale projects planned prior to the fall in the oil price. Browse is set to use two FPSOs instead of three FLNGs, for example, while Bonga SW “Lite” now entails an FPSO with a processing capacity 33% smaller than before. Many operators are also placing more emphasis on subsea tiebacks to existing facilities, instead of major new offshore hubs (even if this means lower production volumes). Adapting to the potential “lower for longer” oil price outlook thus seems to be a priority for many upstream players.

So although FIDs at larger projects have picked up, looking beyond the backlog of projects from before the downturn, such developments seem to be less in favour. Scratching the surface, small projects are at least an offshore outlet for upstream investment and in the long run, perhaps cost savings cemented post-2014 might make large projects more competitive.

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In the metal and mineral bulk trades, as in the heavy metal music scene, a few very big names often end up dominating the headlines: metal has the likes of Metallica, Rammstein and Judas Priest; mining bulk has iron ore and coal. But in both cases, the triumphs and travails of the smaller names can often be just as riveting and indicative of the broader trends as those of the superstars…

Atlas, Rise!

The ‘mining bulks’ consist of the metallic and mineral outputs of the extractive industries (and substitutes such as scrap metal destined for blast furnaces) typically shipped in bulkcarriers. Seaborne trade in mining bulks is projected to stand at 3,415mt in 2017. Unsurprisingly, the ‘mining’ major bulks of iron ore and coal predominate in the forecast. Even so, ‘mining’ minor bulks (a range of commodities utilised primarily in metallurgy such as bauxite, manganese ore, nickel ore, copper concentrate and coke) still make up a respectable 22% of the projection. As part of the cargo creating demand for a bulker fleet of over 11,000 vessels, the mining minor bulks are no minor matter.

As for demand for the mining minor bulks, while there are numerous importers, China has been the main driver of seaborne trade growth. Since the start of the century, seaborne trade in mining minor bulks has increased at a CAGR of 3.4% whereas imports into China have grown at a CAGR of 16%. The disparities are just as apparent in specific areas such as bauxite/alumina (4.5% versus 21%) and other non-ferrous ores (8.5% versus 20%, with metals like manganese used in steel alloys). Indeed, China accounts for more than 50% of growth in seaborne mining minor bulk imports since 2000. Just as in shipping and seaborne trade generally, China has played a key role in mining minor bulk trade growth.

Reise, Reise

The picture is more complex on the supply side, with mining minor bulks sourced from a range of countries, none accounting for more than 9% of total exports. Developing countries are prominent. For example, the Philippines is projected to account for 75% of nickel ore exports in 2017, Guinea for 45% of bauxite exports and Chile for 38% of copper concentrate exports. Some developed economies like Australia are involved, but on the whole, trends in mining minor bulk further confirm the ongoing diversification of shipping trade networks, particularly between China and other developing economies.

Metal Meltdown

As the Graph of the Month shows, mining minor bulk trade can also be very volatile, another common feature of seaborne trade. Mining minor bulk volatility is in part due to political risk factors such as strikes and government policy. Indonesia accounted for 57% (65mt) of seaborne nickel ore exports in 2013; by 2015, it was exporting no nickel ore at all following the mineral ore export ban introduced to boost the domestic smelting sector.

So the mining minor bulks are in sense akin to more obscure heavy metal bands. They may be complex and often idiosyncratic but certain key themes are apparent: the impact of China, the emergence of new trade patterns and market volatility, each illustrating broader trends in shipping too. Have a nice day.

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