Archives for posts with tag: owners

2018 so far has been a year of firming oil prices. Despite continued strong output growth from US shale, the crude price has risen, with Brent even topping $80/bbl, fuelled by political risk: Venezuelan instability, North Korea and sanctions on Iran. Supply outages, plus higher prices muting demand, have hit the tanker market. However, the flip side has been more positive indications (at last) in the offshore sector.

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


Marvel’s Iron Man, as depicted in the 2008 film, features industrialist and genius inventor Tony Stark creating a powered suit, later perfecting its design and fighting evil. While it was a gold titanium alloy rather than iron which was used to make the futuristic armour, iron-based materials such as steel are used incredibly widely in the world’s industries today, with clear implications for shipping too.

Steel At The Heart

The strength of Iron Man’s suit was what helped turn Tony Stark into a superhero. The versatility and strength of steel has made it today’s most important construction material, with 1.6 billion tonnes of steel produced last year. Over recent decades, steel became one of shipping’s superheroes, with the unprecedented growth in Chinese steel production leading to a doubling of global steel output between 2000 and 2014, and helping to underpin the biggest shipping market boom in history. Growth in China’s raw material demand was explosive, and by 2014, global seaborne iron ore and coking coal trade totalled 1.6 billion tonnes, one seventh of total seaborne trade.

A Dangerous Weapon

But even superheroes have weaknesses, and reaching new heights was problematic for Iron Man, when the build-up of ice on his suit at high altitudes brought him back down to earth with a bump. A distinct chill in the air has recently surrounded the steel industry too. Slower economic growth in China, which uses half of the world’s steel, led Chinese steel consumption to drop 5% in 2015, undermining steel prices. Difficult economic conditions elsewhere also limited steel use, with consumption in Latin America and the Middle East declining 7% and 1% respectively last year, and overall, global steel output fell 3%. Weaker demand for steelmaking materials was a key driver of the fall in seaborne dry bulk trade in 2015, despite a 20% surge in Chinese steel exports. The steel market remains challenging with world consumption expected to fall again in 2016, and dry bulk trade still lacks the power to boost the bulker markets back into higher altitudes.

In Need Of A Shield

Of course, steel also impacts the supply side of the shipping industry. In Iron Man’s final showdown with the ‘Iron Monger’, in the end it all comes down to a good design and precise timing, concepts close to any shipowner’s heart. As the very fabric of the ships themselves, steel is a key cost for shipbuilders, but volatile prices have just as big an impact at the older end of the market. With continued exports of surplus steel from China maintaining pressure on steel prices, there is limited light at the end of the tunnel for owners scrapping ships in difficult market conditions for values around 50% lower than just two years ago.

Iron World

So there you have it. An Iron Man with a will of iron can save the world, whilst steel can bring the world’s shipowners fortune and challenges in equal measure. Steel may no longer be the superhero of seaborne trade growth, but it is still the glue that quite literally holds the shipping industry together and keeps 11 billion tonnes a year of cargo afloat. Now that’s a superhuman effort. Have a nice day!

SIW1239 Graph of the Week

A few months ago (see SIW 1,119) we profiled the fascinating growth strategies of the different ship owning nations, concluding that the wily Greeks were winning the latest phase in the game but Asian owners might have the last laugh. In this week’s analysis we take a closer look at the 23,000 active owning companies tracked by Clarkson Research.

A “Model” Company?

Ranging from single ship owners with a 30 year old Handy through to corporates running a diversified fleet with hundreds of vessels, there is no single “model” for owning ships. While the “average” owner has less than four ships, a deeper dig reveals the wide spread in strategies.

Does Size Matter?

Over the years there has been serial discussion regarding consolidation in shipping. As the Graph of the Week shows, the largest proportion of global tonnage is now owned by “Large” companies with 21 to 50 vessels, followed by “Very Large” companies with 51 to 100 vessels. There are also 22 “Extra Large” owners with more than 100 ships (ranked by GT, our analysis suggests that Mitsui OSK (22m GT) is the largest owner and MSC the largest private owner (10m GT)) but there is still nearly a third of the fleet controlled by owners with 10 ships or less.

Trends do suggest a general consolidation – for example on the orderbook where the average number of ships per company increases and finance is generally easier for large “top tier” names – but progress is gradual. Of the major owning nations, Greek companies own an average of 4 vessels and the German owners 8, while there are large variances between shipping sectors (see SIW 1,128).

Public or Private?

A route that has attracted many owners over the years has been the well-trodden path down Wall Street to a public listing. Today over 50% of tonnage is still owned by private companies but around a third is now owned by listed owners (NYSE with 66 owners is the most popular). Following the pick-up in capital market activity in the past twelve months, the share of the orderbook for listed owners increases to nearly 40% (of the companies with the top twenty orderbooks, 12 are public listed including Scorpio, Seaspan and Navig8). Listed owners are, not surprisingly, larger than their private counterparts on average (17 ships on the water versus 3).

Outside of these groups, 8% of tonnage is owned by “State Interests”, 3% by Oil Companies and a further 2% by other “Cargo Interests”. Interestingly oil companies and cargo interests are over-represented on the orderbook relative to their fleet position (perhaps lower prices have been attractive and access to finance easier) while National Oil Companies now own more tonnage than International Oil Companies.

It Takes All Sorts!

So owners come in all shapes and sizes and what works for some is certainly not the model for everyone. The key trends are all important if you are planning a marketing campaign or hoping for consolidation in certain sectors, so it’s well worth crunching the numbers further!


Price indicators can tell market-watchers many things. In the volatile shipping markets they can provide a helpful window on both the health of today’s markets and expectations of future conditions. In the case of the latter, they may not be correct but it’s always interesting to take a look. So, how do price indicators help us gauge the state of play?

The Price Is Right?

In a “normal” market, or at least when owners have the expectation of one, the price of a 5-year-old ship should theoretically be about 75-80% of the price of the newbuilding, reflecting that merchant ships have a 20-25 year economic life and depreciate accordingly, other things being equal. The Graph of the Week shows the 5 year old to newbuild price ratio for a Capesize bulkcarrier, a VLCC tanker and a 2750 TEU containership for the last 10 years.

Bulk Better, Box Bottom

Well, today’s VLCC price ratio is right on the 75% mark, having dropped as low as 58% in late 2011. What does that tell us about expectations? Crude oil trade is a mature business with 1% growth expected in 2014, but VLCC fleet expansion is projected to be sub-2% this year, so that’s a better balance than for a while. On the dry side the Capesize price ratio (which once hit 160% as owners sought to get their hands on tonnage at the height of the boom) is flourishing at 90%. That might be a good representation of expectations, with sentiment seemingly fairly positive, Capesize fleet growth expected to slow to 4% in 2014 and iron ore trade expansion projected to motor on at 10% this year.

The ratio for the 2750 TEU containership is much lower, standing at 51%, almost as low as the 44% seen in 2009 (though it’s higher in some of the larger boxship sizes). Given the size of the surplus generated by the 9% downturn in trade in 2009, the box sector remains a bit further behind the curve than the bulk sectors. And here the difference in potential fuel efficiency between new designs and older ships is starker, pressuring the secondhand asset price further.

Downturn Downtime

So the ratios today seem fairly well aligned with market perceptions. But how have they fared since the onset of the downturn? Since September 2008, the Capesize ratio has spent just 33% of the time below the 75% line. The VLCC ratio has spent 65% of the time below 75% but only 29% of the time below 65%. So, in those sectors the impact on asset pricing could have been worse.

Was It So Bad?

The downturns in the 1970s and 1980s were far harsher on asset prices. In the late 1970s the ratio for both a Panamax bulker and for an Aframax tanker dipped as low as 40%. Interest rates were much higher, and the banks were much quicker to foreclose on “distressed” assets. This time, despite the slump in 2008, the price ratios haven’t suffered so dramatically (in the bulk markets at least) and investor appetite remains. However, part of that is a reflection of today’s expectations and time will tell how well investors have forecast future market developments. Have a nice day.


OIMT03Since the country’s oil reserves were nationalised by Lázaro Cárdenas in 1938, the state ownership of Mexico’s oil production has been an issue of totemic pride for Mexicans. For years, the bounty provided by the Cantarell project minimised the need to think about other options. But as the decline of ageing Bay of Campeche fields accelerates, increasing investment has been needed by Pemex both to shore up existing fields and also to appraise future areas of production.

Exploring Investment Expansion

The Graph of the Month shows the extent of the growth in Pemex’s Exploration and Production budget, as greater focus has come on developing new areas of oil production, some involving deeper waters or more complex development types than the fixed platforms found on Cantarell or Ku-Maloob-Zaap. Pemex’s E&P budget in 2013 was around 74% greater than five years earlier, and its projection for total expenditure is for further growth in its CAPEX budget through to 2018 at a rate of 3.8% per annum. Although this forecast is at an aggregate level, including all business units, the line on the graph shows the level of E&P spending that this implies given the share which the latter has been in recent history.

A Landmark Policy Change

On December 23rd, in the face of not-inconsiderable political opposition, the Mexican president signed a constitutional reform which, will end the 75-year old state monopoly on Mexican production, and allow private investment in Mexican developments. This could add to Pemex’s already substantial $149bn five-year investment plan.

Supporting Structures

This is, of course, all positive news to owners of offshore structures, raising the potential for greater future demand for structures off Mexico. Mexico is already beginning to generate demand for increasing numbers of rigs and OSVs. A number of Mexico-based companies have attracted investment from US and Asian sources of finance looking to gain exposure to the Mexican market (notably the expected need for additional high-specification jack-ups: at least 18% of the current orderbook is for deployment there).

As well as continued work to shore up output on the major fields, plans for new fields are underway. These include the FPSO development on the Ayatsil heavy oil field (targeting 2016 start-up) and Lakach, Pemex’s first deepwater project (2015). This field has been followed by several other finds in the Catemaco fold belt off Veracruz, results of the recent step-up in exploration by Pemex. Hub development may be possible, although falling American gas prices could be an issue. Looking further to the future, potential further deepwater activity could include a SPAR in the Perdido fold belt near US waters.

So, the future for investment offshore Mexico looks relatively bright, with optimistic projections for the levels of state investment. The lack of local experience in deep or more complex fields could be an issue, but as private investment and more third-party offshore contractors get involved, these challenges may be solved. All together, this makes Mexico an attractive prospect, as the drive towards new production stimulates additional demand for offshore units.