Korean Shipping messenger

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1 Korean Shipping messenger A collection of articles and daily news for the shipping industry with focus on the Korean shipping and shipbuilding markets. 09 September 2011 Shipbuilding News Hyundai eyes five 5,000TEU's Hyundai Heavy Industries is in talks with Greek owner for five 5,000TEU newbuildings. Greece's EuroBulk is set to place its first order for boxship newbuildings. The company is said to have approached the South Korean shipyard for a handful of post-panamaxes in a deal that could be worth up to $300m. Market sources say it is holding talks with Hyundai Heavy Industries for five 5,000-teu ships for delivery in Its current fleet comprises 17 ships from 1,170 teu to 2,785 teu. A Hyundai official declines to confirm the enquiry but says a handful of Greek companies are currently keen to order there. Newbuilding experts reckon EuroBulk will have to pay in the mid-$60m each for the 5,000-teu newbuildings. Hyundai nego LNG carrier pair Hyundai Heavy Industries is reportedly in final talks with BW Gas for two LNG carrier newbuildings. The deal is expected to be firmed up this month. The South Korean major shipbuilder is believed to have a few LNG-newbuilding slots available for 2014 with several shipowners competing for their availability. This year, the yard has concluded four LNG carriers for Dynagas and two floating storage and regasification units (FSRUs) for Hoegh LNG with sister facility Hyundai Samho Heavy Industries sitting on a pair of vessels for Maran Gas Maritime. Samsung wins LNG carrier Greek shipowner Thenamaris added another LNG-carrier newbuilding to its orderbook tally at Samsung Heavy Industries in South Korea. Industry sources say the owner is now sitting on three LNG slots at Samsung, where it made its first break into the sector earlier this year. The owner is understood to have declared an option some time ago and there are hints that further vessels may be added. Dinos Martinos-controlled Thenamaris originally concluded two 160,000-cbm ships at the yard. The first is due for delivery in 2013, with the second now to follow in Sungdong gets $233m liquidity South Korea's Sungdong Shipbuilding & Marine Engineering is to have an emergency aid of KRW 250bn ($233m). Export-Import Bank of Korea, a main creditor bank, and other 12 financial institutions announced on Sep 9 that they agreed to support Sungdong and KRW 250m will be transferred before Korean thanksgiving holiday (Sep 10-13) for Sungdong to pay accounts payable in the near future. Finnish STX shipyard in $420 million deal Shipbuilding company STX Finland Oy has signed an agreement to deliver two well intervention vessels to Norway's Eide Marine Semi AS in a contract valued at more than $420 million (euro300 million), officials said Thursday. The 31,000-ton ships, designed to operate in rough seas to service gas and oil fields on the Brazilian continental shelf, will be delivered to the Norwegian company in 2013, STX said. Chengxi inks 35K BCs Canada Steamship Lines (CSL) announced on Wednesday it is exercising its option for the building of two new self-unloading vessels, bringing to four the number of ships on order in its major fleet-renewal program. The Montreal-based Great Lakes-Seaway carrier has two self-unloading Lakers currently under construction at Chengxi Shipyard (CSSC) in Jiangyin, China, scheduled for delivery in the fall of The newly announced vessels will enter service in the spring of CSL has also indicated that it has options for four additional vessels for delivery during the 2013 shipping season. "This is a major investment in our company, in our customers and in Canada," said Tom Brodeur, Vice- President of Marketing at CSL. "These ships will introduce a new level of operational efficiency and environmental performance to the Great Lakes-St. Lawrence Waterway, while providing jobs for Canadian seafarers for the next 25 to 30 years."

2 The 35,500-DWT self-unloaders will measure a Seaway maximum by 23.8 metres, feature custom hull design for increased cargo lift, EPA Tier II compliant main engines, automated cargo-handling equipment and the latest environmental and safety systems. CSL sister company CSL International (CSLI) also has three Panamax vessels on order at Chengxi. All ships will share similar design and technology, and collectively be known as Trillium Class vessels. Yangfan wins capesize China s Yangfan Group has won an order for up to six capesize bulkers from a Norwegian shipowner. A Yangfan executive confirms it has received an initial order for two capesizes from a company in Norway. He adds that the 205,000-dwt newbuildings are costing in excess of $60m apiece for delivery in A source familiar with the yard says Golden Ocean booked the two ships a few weeks ago, although it has not been finaliased. He adds that the deal includes four options. But Golden Ocean director Herman Billung said that his company is not behind the contract. Yangfan says it will build the capesizes at its new facility, Qingdao Yangfan Shipbuilding Co, in the Shandong province. They will be the largest it has ever built since its formation in SWS soon to sign kamsarmax Greece's Chartworld Shipping confirms it expects to ink a deal with Shanghai Waigaoqiao Shipbuilding for an initial two kamsarmax newbuildings by the end of this week. The contract is thought to be the first for kamsarmaxes at the state-owned Chinese shipbuilder which in the past has concentrated heavily on large bulkers and tankers. The shipowner and yard have been negotiating for some time on the basis of two firm ships followed by two pairs of options, raising the possibility of a series of six going to Chartworld. Although Chartworld executives declined to comment on price, brokers have already publicly attributed a price of about $30m per ship to the project, which is seen as very low. Tuzla yards collapse In the past 15 months, orders to build 200 ships were canceled at Tuzla, a shipbuilding hub in Istanbul, and the number of workers retreated to 8,000 from 38,000, Hurriyet Daily reports. Nearly all subcontracted workers were fired and 60% of regular staff was laid off. Last year, the shipyards, located at the southern tip of Istanbul, saw production plummet by 90% while employment declined 75%. Pre crisis, the Tuzla shipyards were building 150 ships each year but as global trade screeched to a halt the shipyard zone has been pulled towards economic paralysis. The shipyards have received just one order for The government is rumored to be preparing a new stimulus package for the shipbuilding sector, but shipyard owners have lost hope and lay off workers. Shipping & Business News 1,500 BCs should go to breakers London broker Braemar Seascope says 1,500 elderly bulkers would have to be sold for scrap to bring fleet growth into line with demand. It said the worldwide ranks of dry cargoships will swell 12% a year until 2013, excluding demolition figures, as 3,000 new deliveries are added to the 8,100 vessels on the water at the end of But some zealous scrapping would make a big difference to market prospects, it added. If every bulk carrier built before nearly 1,500 ships were torched by the end of 2013, the fleet growth-demand seesaw would be balanced. This would give a fleet expansion figure of 6.3% per year. It said 409 bulk carriers of 20m dwt have been beached at breakers in 2011 already. This amount beats previous highs like 1999 s 11.8m dwt and the 11.2m dwt logged in Shipping Loan Attrition Is Faster Than Anticipated, DnB Says DnB NOR ASA (DNBNOR), the largest lender to the shipping industry, said attrition from its loan book is faster than expected as vessel-owners fail to renew loans and demand for financing wanes amid a market slump. The bank s value of loans to the industry will remain flat through 2011 as more financing is repaid early, including through vessel sales, said Harald Serck-Hanssen, the Oslo-based bank s head of global shipping, offshore and logistics. The attrition rate has been higher than we expected, he said by phone on Sept. 7. We ve done about $4.5 billion of new business on our balance sheet this year. With that number we still have a more or less stable loan book and I would expect the number to remain fairly stable for the rest of the year.

3 DnB NOR, which in April said it expected its shipping loan portfolio to grow by as much as 10 percent in 2011, will keep lending in check in the second half because of a limited number of borrowers with an acceptable risk profile, he said. The market is beset by a glut of ships. Supertankers that carry about a fifth of the world s oil aren t earning enough to cover daily running costs, according to data from the Baltic Exchange in London and Drewry Shipping Consultants Ltd. Vessels that transport manufactured goods to Europe from Asia are earning practically nothing, according to Menno Sanderse, an analyst at Morgan Stanley. Increased Pressure The pressure to write down loans may increase in the second half from the first six months because of the weak outlook, Serck-Hanssen said. The unit didn t write off any loans in the second-quarter, according to the bank s quarterly report. Hans Christian Kjelsrud, head of shipping, offshore and oil services of Nordea Bank AB (NDA), the second-biggest shipping lender, also said capital is becoming more discriminating. You really see the banks focusing on the big names with larger fleets and bigger balance sheets that have better access to capital, he said. You have strong companies and you have weak companies and it all depends on how your portfolio is positioned. Kjelsrud s unit reported a doubling of loan losses to 24 million euros in the second quarter, while DnB NOR said in its second-quarter report that persistent low spot rate for dry bulk carriers and tankers could generate higher risk in the shipping segment. Nordea had 12.8 billion euros ($17.9 billion) in shipping and offshore loans at end of the quarter, down from 14.5 billion euros a year earlier. DnB s portfolio of such loans fell to 130 billion kroner ($24 billion) from 140 billion a year earlier. The executives declined to comment on amounts for loan write downs in the second half. We re going to see continued consolidation in the tanker industry driven by the availability of finance and also driven by continuously tougher compliance rules and so on by the oil companies, Serck-Hanssen said. We have mainly been focusing on large, leading operators within the different segments. STX $510m ship financing STX Pan Ocean of South Korea announced on Sep 9 that there was a signing ceremony of $510m syndication ship financing with nine large creditor banks. This finance is to input in newbuilding 20 open hatch general cargo carriers which will be chartered to Brazilian pulp major, Fibria. STX signed a 25 years of long term contract amounting $5bn with Fibria. Hereby STX has secured newbuilding payment for 16 of 20 pulp carriers, about 70% of a total price and plans to seek further ship finance for the remainder four vessels. The banks, a total of nine, include Export-Import Bank of Korea, China Development Bank, ABN AMRO Bank, DnB NOR Bank, DEUTSCHE SCHIFFS Bank, BNP PARIBAS, etc. The vessels are 199 meters in length, meters in breadth and meters in height. STX O&S' Jinhae Shipyard and STX Dalian will each build ten ships for delivery in 2012, 2013 and K Line to sell vessels Japan's Kawasaki Kisen Kaisha (K Line) is planning to offload vessels. The company will also sell shares to improve its bottom line in tough markets. The moves should add JPY 5bn ($64.67m) in extraordinary gains this year. The Nikkei daily said four vessels could go, including bulkers and LNG carriers. It is also considering laying up ships with high operating costs. New VLCC value cut 10%? VLCC newbuilding prices could fall by up to 10%, top brokers warn. Rumours of a huge order backed by Beijing and a string of second-hand sales at reduced prices will drag the price down from the presently quoted levels. Clarksons presently values a VLCC newbuilding at $101m, down from $108m at the start of Fearnleys has a price tag of $102m and RS Platou a figure of $100m. One leading broker said that given the right bargaining position and the right shipyard, an owner could expect to pay $95m for a VLCC newbuilding in China today. But with some yards under increasing pressure, and if the lack of fresh orders persists, he foresees a price of around $90m. A second source says VLCC newbuilding values are today sitting in the low $90ms. He adds the massive discount mooted to be on offer for an 80-VLCC Chinese order will see levels weaken still further. Vale "No VLOC loss" Brazilian mining giant Vale insists it will not take a loss on the sale of any of its VLOCs. Vale admitted earlier this month it is in talks to sell or charter some of the giant vessels to Chinese owners after feeling the squeeze from Beijing.

4 Vale paid $133m for each of its 12 VLOCs being built in China. But with asset prices under pressure across the industry they are now worth only $87.4m, according to VesselsValue.com. We have no intention to carry a loss on an eventual sale, Vale said in a statement, according to Bloomberg. This is a financial and commercial decision. The China Shipowners Association has called for the government to block the VLOCs from entering the nation s ports if its members were not operating the vessels. Wartsila & Shell promote LNG Wärtsilä and Shell Oil Company have signed a Joint Cooperation Agreement aimed at promoting and accelerating the use of liquefied natural gas (LNG) as a marine fuel. The agreement was signed in August 2011 and will run for several years. Supplies of low cost, low emissions LNG fuel will be made available to Wärtsilä natural gas powered vessel operators, and other customers by Shell. The Joint Cooperation Agreement will focus first on supplies from the US Gulf Coast, and then later expand their efforts to cover a broader geographical range. Gas fuelled marine engines are seen as being a logical means for ship owners and operators to comply with increasingly stringent environmental legislation. This agreement aims at increasing and easing the availability of natural gas for marine engine use, as well as developing the supply chain and infrastructure to facilitate the bunkering of LNG fuel. The two companies will jointly move these developments to marine markets in order to enhance its rapid introduction and use. Warning on delay in LNG projects The LNG shipping market faces carnage in two years because too many vessel orders have been placed this year. The alarming forecast by Flex LNG chief executive Philip Fjeld is underpinned by a conviction that most of the major LNG production projects scheduled to come online by 2014 and 2015 will be severely delayed. As a result, owners who rushed to place orders this year, spurred by today s spot and short-term daily rates of $90,000-$100,000 and the enticing prospect of these projects starting up when their vessels are delivered in 2014, will see rates fall dramatically as the market becomes oversupplied with vessels. Shipowners expecting to reap the rewards offered by LNG production projects such as the Gorgon project in western Australia, scheduled to produce its first LNG in 2014, will be met with disappointment. Some 42 orders have been placed at Asian shipyards so far this year, against an existing fleet of 364 vessels, according to Clarksons. Charities call for carbon tax on global shipping $25 per tonne levy would cost the industry $25bn a year Oxfam and the World Wide Fund for Nature are calling for a carbon tax on international shipping, which they claim accounts for 3% of global emissions. The charities have published a joint report that says a carbon price of $25 per tonne would increase bunker costs by around 10% and cost the shipping industry approximately $25bn a year, equivalent to around 0.2% of the total value of global trade. Their report adds: This is likely to have a marginal impact on global patterns of trade, not least when seen in the context of much larger changes in bunker fuel prices and freight rates over the past two decades. The charities implied that shipping would be a relatively easy source of revenue for the UN GCF, compared with direct budget contributions from governments, which are subject to budget constraints and democratic approval. The most promising option in the near term is to raise finance from international shipping, they said. They said the proposal should be on the agenda at the 17th UN Framework Convention on Climate Change, or COP17, in Durban in November and December. Governments made $100bn worth of commitments to the GCF at COP16 in Cancun last December, without specifying where they would source the funds. Their report does refer to the International Maritime Organisation s adoption of the Energy Efficiency Design Index (EEDI) in July, saying it had been a useful first step, in the process of reducing emissions. However, it said EEDI would only reduce maritime emissions by less than 1% by 2020 and that pricing emissions, or their proxy, fuel, is the next step needed. In contrast, it says, a carbon tax would drive significant maritime emissions cuts, and cited a July report from the International Council on Clean Transportation suggesting these could be up to 33% by 2020, through negative- or low-cost technical measures. Setting a carbon price for ships even one starting at a moderate level sends the clearest signal to shipowners and operators that they must internalise their carbon costs in both the designs and operations of their ships, the report says. It claims a carbon tax on shipping has support from the governments of France, Germany and Mexico and that many players in the shipping industry are calling for a carbon price to be set. It also calls on the IMO, at its assembly in November, to pass a resolution confirming the need for a carbon price for shipping emissions.

5 A report in IFW s sister publication, Lloyd s List, said the proceeds of the tax would be divided between the UN s Green Climate Fund (GCF) and developing countries, to compensate them for the increased costs of imports, based on their share of global imports by sea. Korean Shipping Messenger Daily News Report is released and distributed freely by Mutualmar. The information in this report is derived from a variety of sources, public and private and Mutualmar explicitly does not claim it is the source of this information. While Mutualmar has used reasonable efforts to include accurate and up-to-date information in this report, makes no warranties or representations as to the accuracy of any information contained herein or accuracy or reasonableness of conclusions drawn there from. Mutualmar assumes no liabilities or responsibility for any errors or omissions in the content of this report.