26 May Shipbuilding News. Big3 hunt new orders. Doosan develops low-vibration Eco-engine. Hyundai inks LPG carrier duo

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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. 26 May 2010 Shipbuilding News Big3 hunt new orders Competition among Korea's 'Big 3' shipbuilders for commercial ship newbuilding orders is heating up in earnest. Hyundai Heavy Industries has recently signed a letter of intent to build six 205,000-dwt very large ore carriers reportedly for $66m-$67m apiece. A formal contract is expected to be finalized soon. HHI had been notably silent in merchant ship sector last year, avoiding cut-throat 'low-price' competition for new orders, but since the turn of this year it has been aggressive in winning new orders, already securing about 20-ship orders. Daewoo Shipbuilding & Marine Engineering, which has been steady in commercial ship sector since last year, recently received an order for two 82,000-dwt bulkers from Hong Kong's KC Maritime, winning kamsarmax orders for the first time for the yard. Newbuilding price is said to be $37m to $39m per ship for delivery by Daewoo is also likely to win tanker orders from the same shipowner. Early this month Samsung Heavy Industries won two 160,000-cbm LNG carrier order from Chevron and it is said to be negotiating four additional LNG carrier orders with Greece's GasLog now. ship from Hyundai Mipo Dockyard in Korea for a reported price of $42m on April 23rd. So far, 15 LPG carriers have been ordered this year, just one fewer than the whole of last year, as owners capitalised on cheaper shipyard prices, which have fallen 30% in the last two years. The Pertamina order increases the number of handysize gas carriers under construction to 13, with four due to be delivered this year and six in Doosan develops low-vibration Eco-engine Korea's Doosan Engine has developed an environmentally friendly vibration-controlled ship engine which reduced vibration by more than 50% compared to existing marine engines. On May 26th, the engine maker held a production ceremony for the DOOSAN-MAN B&W 7S80ME-C, which was attended by shipowners, ship classification societies and shipbuilders home and abroad. The 39,800-hp engine with a length of 13 meters and a height of 15 meters is to be installed on the 318,000-dwt very large crude carrier under construction at Daewoo Shipbuilding & Marine Engineering for Kuwait Oil Tanker Company. The ship engine has reduced NOx emission by 16% against existing same-type engines as well as cutting engine vibration drastically. A shipbuilding expert said, "The major yards are seeking to win new orders as their orderbooks have shrunken drastically." "They are also preparing past-recession order intake strategy," he added. Hyundai inks LPG carrier duo Korean shipbuilding major Hyundai Heavy Industries inked two handysize LPG carriers ordered by Indonesia's state energy group Pertamina for a combined value of $86m. Norwegian shipbrokers Lorentzen & Stemoco and Fearnleys reported HHI would build two 22,500 cu m capacity ships for delivery in the first quarter of 2012 at a cost of $43m each. The Pertamina deal is the first involving LPG carriers since German shipowner Sloman Neptun ordered a 20,600 cu m

2 Shipping & Business News Korea launches 2nd ship fund The Ministry of Land, Transport and Maritime Affairs (MLTM) of South Korea said Wednesday that it has approved 'The 2nd Hanbada Ship Investment Co', the second private-sector ship fund for newbuildings. 'The 2nd Hanbada' is the second private newbuilding fund established in the country this year following 'The 14th Badaro' which had been approved in February. The KRW 82.5bn ($65.84m) worth of fund will be entirely used for building a pair of 82,000-dwt bulk carriers to be chartered, upon completion, to SK Shipping for two years. After the charter period ends, investors can sold the vessels and make profit if ship prices rise. An official from the MLTM said, "As shipping market recently enters recovery phase many seek to seize the window of opportunity to buy ships at lower prices." "But for a full-scale recovery of ship financing, it is necessary for commercial banks to resume ship loans in earnest." 30 new ships remain at yards Financial woes are still plaguing containership owners despite continued improvement in the sector. Some 30 completed boxship newbuildings are stacked up at shipyards around the world as struggling owners are unable to pay for them, a new report says. The figure emerged as the staggering reduction in the number of idle containerships continues. According to Alphaliner 263 vessels of a combined 549,000-teu are presently idle, equal to 4.1% of the global fleet. There are, however, some 30 additional newbuildings with total capacity of 270,000-teu which are already completed and ready to be delivered as soon as their owners solve financing issues, Alphaliner says. Some of the distressed vessels are expected to belatedly begin trading during the next couple of weeks, Alphaliner adds. Containership market to revive The global container market will return to normal within one to two years according to Wei Jiafu, group president and chief executive of China Ocean Shipping (Group) Company, the world s second-largest shipping company. In an upbeat assessment months after the sector was devastated by a 10% decline in world trade in 2009, Wei declared not only that all container lines had returned to profit this year, but that demand on the world s premier trading lane, from the Far East to Europe, was now at precrisis levels. The market has come back, and in one to two years time all will be normal, he said, during an interview. Cosco operates the world s seventh-largest container line, Coscon, with a fleet of 147 vessels. The liner division lost $1.5bn in 2009, while collective industry losses from the disastrous 2009 were estimated to have exceeded $20bn. Capt Wei said that the Asia-to-Europe services were the most profitable, and even the US market is coming back as freight rates hit fresh 18-month highs. Economies are coming back, demand is huge, and freight rates are close to normal before the crisis, he added. Idle tonnage at 17-month low Containerships are being pulled out of lay-up at breakneck speed, with the idle fleet down to a 17-month low as services are reactivated on both the transpacific and Asia- Europe trades. Almost 1m teu of unemployed capacity has been put back to work over the past six months, according to latest Alphaliner data. That has reduced the size of the inactive fleet from a peak of 1.5m teu in last December to just 549,000 teu this week. The much faster-than-expected decline reflects the strong rebound in demand on deepsea trades out of Asia, with more ships expected to leave lay-up in the next few weeks ahead of the annual peak season when Christmas merchandise is shipped to the big consumer markets in North America and Europe. Alphaliner expects idle capacity to decline to about 450,000 teu by the end of June before starting to rise again as services are withdrawn during the quieter time of the year. Alphaliner describes the recent drop in idle ships as all the more remarkable as it comes on the back of 1.12m teu of newbuildings delivered over the past 12 months. That excludes another 30 with capacity of 270,000 teu which are completed but not yet handed over because of financing issues. Alphaliner says in its latest weekly newsletter that the amount of idle tonnage is likely to climb back towards 1m teu by the year end as services are suspended around Christmas and the Chinese new year holidays. The euro's decline is also expected to have a negative impact on the Asia-Europe trades. Over the last four weeks, 75 ships of 385,000 teu have been reactivated. Together with 27 units of 125,000 teu that have been delivered so far this month, it marks the highest monthly increase in effective capacity absorbed by the liner trades on record, Alphaliner notes. The carrier-controlled idle fleet has shrunk to just 72 ships of 230,000 teu, while non-operating owners have 191 vessels inactive, amounting to 319,000 teu. Most of these are between 500 teu and 3,000 teu.

3 New VLCC resale price hits $125m A Deal to sell four newbuilding very large crude carriers for $125m each a 30% rise in prices from three months ago is reportedly in the final stages of negotiations. London shipbroker Galbraith s reported news of the VLCC en-bloc deal, for which subjects have yet to be lifted, in its weekly S&P report. The tankers are all due for delivery in 2010 and although Galbraith s did not provide details of the vessel or owners, the timeline narrowed down the list of possible sellers. There are 55 VLCCs scheduled for delivery in 2010, according to Clarkson Research Services. Only three companies own four or more VLCCs being delivered in this time period: Changjiang National Shipping, Korea Line and TMT. This suggests one of these must be the seller. Two newbuilding suezmax tankers have also been sold for $75m, Galbraith s said, with the unidentified owners planning an initial public offering. No further details were provided. Evergreen awaits lowest bid Evergreen is now receiving bids for 12 8,000-teu class containership newbuilding project from shipyards, as part of its massive $5bn worth of 100-ship newbuilding program it announced earlier. Taiwan's CSBC, Japan's Mitsubishi Heavy Industries and Korea's STX Offshore & Shipbuilding are said to be in the driving seat for the Taiwanese liner's first 12-ship order. An industry insider said, "Other Korean shipbuilding companies have also joined the tender but market players expect CSBC and STX O&S would win and split the first orders." STX O&S is said to be offering early delivery condition while its Chinese unit STX Dalian Shipbuilding also could offer competitive newbuilding price. CSBC has already been rebuffed by Evergreen recently as it offered $120m per vessel in cooperation with Japan's Mitsubishi Heavy Industries which was to supply main equipment and ship design. The Taiwanese builder plans to bid again for itself with more competitive price through self-developed ship design. Meanwhile, Korea's other large shipbuilders are not showing aggressive attitude for Evergreen's bid as the liner is famous for requesting for low newbuilding prices. A Korean shipbuilding player pointed out, "If a Korean yard wins the Evergreen newbuilding project, it would likely face 'low-price' order intake controversy." Genmar buys 7 tankers Peter Georgiopoulos and his General Maritime are splashing out more than $600m to buy five VLCCs and two suezmax newbuildings from the fleet of Metrostar of Greece. The deal is the largest expansion of the Genmar fleet in years and is thought to hinge on the New York-listed owner s ability to issue more shares to pay for the acquisition. Some accounts have placed the price tag as high as $700m, but others say the figure is closer to the $600m region. The VLCCs are identified as the 318,000-dwt Crudemed (built 2010), the 306,500-dwt Crudesky and Crudesun (both built 2007), the 318,600-dwt Crudestar (built 2003) and 305,700-dwt Crude Progress (built 2002). The suezmax newbuildings are the 164,900-dwt Crude Ita and Crude Zita, both under construction at Hyundai Samho Heavy Industries. BHP denies VLOC order Mining giant BHP Billiton has denied reports that it has reentered the shipowning arena with a huge VLOC order. Numerous media reports have inaccurately linked the Melbourne-headquartered outfit with a six-ship order at Hyundai Heavy Industries in Korea. A London-based spokesperson for the miner said, We are certainly not interested in shipping assets and certainly have no intention to [order ship]. It was reported earlier that shipping financier Fortis Bank Nederland has acted as the main contractor in a $500m capesize order at the Korean yard. Under the terms of the mooted deal BHP is said to be chartering the 205,000-dwt units for 10 years. The ore-strengthened ships, which are said to be costing between $66m and $67m a piece, are set for delivery between 2012 and The BHP spokesperson could not immediately confirm that the company would be taking up long-term charters on these ships. Diana Shipping 1Q Profit Falls 17% On Lower Rates Diana Shipping Inc.'s (DSX) first-quarter earnings fell 17% as the dry-bulk shipping company was hurt by lower rates, higher vessel-operating expenses and other costs. Still, the results beat analysts' expectations and the company's board reauthorized the company's $100 million share repurchase program initiated in November The company said it didn't buy any stock under the prior authorization. Diana Shipping's market value is about $1 billion and its stock is at roughly the same level as 18 months ago, closing Tuesday at $ Its shares were inactive premarket.

4 Chairman and Chief Executive Simeon Palios said, "We continue to believe, as we have stated in the past, that the most productive use of our capital is to invest in the longterm growth of our fleet. However, we have the capacity to step in with the buyback program for the benefit of our shareholders if we determine that this is the most appropriate action based on market conditions." A host of companies have been restarting or announcing new buyback efforts as the perceived need to keep lots of cash readily available eases. Some have admitted in recent weeks that buying stock is the best current use for their cash. Dry-bulk shippers, which carry large bulk items like iron ore and steel across oceans, are largely seen as being tied to industrial global demand, which began stabilizing late last year. Diana Shipping said in February it thinks that the addition of new vessels in the sector continues to outpace demand, which should allow it to make more strategic purchases. The company reported a first-quarter profit of $28.8 million, or 36 cents a share, down from $34.8 million, or 47 cents a share, a year earlier. Revenue decreased 0.8% to $62.2 million as a drop in rates was partly offset by the addition of two vessels to the company's fleet. Analysts polled by Thomson Reuters most recently forecast earnings of 34 cents on revenue of $58 million. Time-charter-equivalent rates, an important industry measure of profitability, fell 8.4%, while daily vessel operating expenses rose 20%. Fleet utilization rose to 99.7% from 98% a year earlier. Navios Acquisition Shareholders Approve Ship Purchase Shareholders of Navios Maritime Acquisition Corp. approved the SPAC's purchase of 13 tanker ships. The official numbers of shares voted for and against the transaction were not included in a statement Navios issued today announcing approval of the acquisition. Yesterday however, the SPAC had provided preliminary numbers that appeared then to indicate that the deal would not go through. According to Monday's statement, about 9.2 million shares had been voted in favor of the acquisition and investors controlling about 13.6 million shares had elected to get their money back. The SPAC could have a maximum of about 10.1 million shares vote against the acquisition. A Navios spokeswoman declined to elaborate on today's announcement that the deal was approved. Navios Maritime Holdings Inc., the sponsor of Navios Acquisition, and itself a former SPAC, said last week that it made an initial payment of $171.7 million for 11 of the 13 oil and chemical tankers the SPAC is planning to acquire. The shipping SPAC Navios Maritime Acquisition agreed to acquire 13 oil and chemical tanker ships for $457.7 million in cash and assumed debt in April. Despite international efforts, Somalia pirate attacks grow Pirates have stepped up their attacks off the coast of Somalia this year despite a large international naval flotilla designed to protect merchant shipping in the Horn of Africa region. "The pirates are becoming more brazen," said Lt. Cmdr. Corey Barker, a spokesman for the U.S. 5th Fleet, headquartered in Bahrain. Pirates launched 47 attacks in the region off the east coast of Somalia in the first four months of this year, up from 37 during the same period last year, according to U.S. 5th Fleet statistics. Not all of the attempts were successful, but the increase reflects a shift in tactics by pirates. The heavy presence of international forces has forced pirates farther afield. "They're going to greater lengths now," Barker said of the pirates. U.S. officials have said the piracy problem can be solved only by establishing order in Somalia, a lawless country where pirates thrive. "As we work to combat piracy's impact at sea, we are also working to address the conditions in Somalia that (have) allowed piracy to take root," said Robert Maggi, the State Department's counter-piracy coordinator. Somalia, however, remains chaotic and even a large naval flotilla has struggled to provide security over the 1.1 million square miles of ocean they patrol. "The answer is not sending billions of dollars of warships to chase a ship worth $1,000," said James Kraska, a professor at the U.S. Naval War College. "You're not going to win that game." After a rash of pirate attacks in 2008, the international community rushed a flotilla of naval ships into the waters off the Horn of Africa in an effort to protect international shipping passing through the Gulf of Aden. Today, there are an average of about 25 ships patrolling the area. The naval forces have established a 464-mile-long corridor for about 33,000 vessels that use the Gulf of Aden each year. "Within this corridor, the pirates' success rate has fallen to nearly zero," Maggi said. But pirates have moved outside the area to prey on ships, adjusting their tactics to reach farther from the coast. Pirates sometimes use so-called mother ships to launch smaller skiffs once they are in range of their target. "It's just pushed the problem elsewhere," said Peter Chalk, an analyst at RAND Corp., a think tank. Overall, the number of attacks in the Horn of Africa waters has increased, but the ratio of attacks that have been successful has dropped.

5 "We've prevented more," Barker said. Officials attribute the increased success in averting attacks to the naval presence and evasive maneuvers and other tactics used by merchant ships. Merchant ships are using concertina wire and electrical fencing to keep pirates from boarding ships. Some ships carry armed security guards. Using those types of evasive tactics and techniques is a proven deterrent against hijacking, Lt. Matt Alden said. Pirates generally hijack ships and hold the vessels and crews for millions of dollars in ransom. Prosecuting pirates, who work in international waters, has remained a problem. "These guys aren't going to stop anytime soon," Chalk said. "The risk of being caught is low, prosecution is lower." 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.