Korean Shipping messenger A collection of articles and daily news for the shipping industry with focus on the Korean shipping and shipbuilding markets. 11 August 2014 fortnight edition (covers 28 July to 11 August) SALE & PURCHASE NEWBUILDINGS PROJECTS DEMOLITION Shipbuilding News SHI tipped to win mega boxship Seeking mega containership market advance, Scorpio Group of Monaco is allegedlynegotiating with Samsung Heavy Industries to order four ultra large containerships of around 20,000 teu range with the same number of options. TradeWinds reported that the newbuilding agreement is imminent to be signed as the group secured participation of China in ship financing.newbuilding price per teu is said to greatly fall short of $10,000, which serves a positive factor to the shipowner.market players indicate that the newbuild boxships are highly likely to go on a long-term charter to Mediterranean Shipping Co (MSC). Meanwhile, some brokers observe that Korean yards tend to seek heavy weight of initial payment currently and the charter contract is uncertain to be fixed. Thus, they say it needs to be watched closely if the maga boxship newbuilding project will be successfully concluded. DSME HHI enter LOI for VLGC Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries signed letter of intents (LOIs) with Chinese shipowners for up to 13 units of Very Large Gas Carrier (VLGC). A total of three shipowners entered into LOIs with Daewoo and Hyundai, according to TradeWinds, and most of the newbuildings will be long-term chartered by China s LPG importer Oriental Energy. Daewoo contracted LOIs with Sino Sea Capital and an unnamed owner, each for fourand three units, while Hyundai is tipped to build up to six VLGCs ordered by Oriental Patron Asset Services of Hong Kong. Meanwhile, Shenzhen-listed Oriental Energy decided to charter four 84,000 cbm VLGC newbuildings from Shandong Shipping for 10 years, which will be delivered by Daewoo in 2016, while fixing another charter of one VLGC from Kumiai Senpaku of Japan, upon delivery by Hyundai in late 2016. Sainty wins hybrid-powered boxship Sainty Marine of China announced through a regulatory filing on July 31 that the Chinese shipbuilder had been awarded a new order to build four 5,000 teu hybridpowered containerships. Sainty added that it had signed a newbuilding agreement worth around CNY 1.73bn with an overseas buyer. The regulatory filing said that the newbuildboxships are scheduled to be listed on Special Purpose Company (SPC) of Germany. With a Germen boxship operator as the actual holding company, it has a whole system covering management of shipowner, ships and crew members, Eworldship reported. Construction of the newbuildings will commence in 2015 for delivery from 2017 in order, expected to positively affect the builder s future performance. Sanfu inks up to six 34K TKs Taizhou Sanfu Ship Engineeringof China has won up to six Product Carrier (PC) newbuildings from Singapore-based Indonesian operator Nova Shipping & Logistics.TradeWinds reported that the shipowner ordered six units of 34,500dwt IMO-II PCs including four options (two+two) from Taizhou Sanfu. The firm two vessels are slated for delivery in the second half of 2016. Newbuilding price is said to be coming at around the mid- $30m apiece but several industry players estimate it to be slightly lower than that at $30m apiece. Nova is a Singaporean shipping arm of RGE Group, established by Indonesian businessman SukantoTanoto Meanwhile, Taizhou Sanfu recently announced that a newbuilding contract for two 34,500 dwt chemical tankers took effect on July 10 officially. YZJ tipped to win 10 Kamsarmaxes Singapore-listed and China s large privately-owned shipbuilder Yangzijiang Shipbuilding (Holdings)is said to be under newbuilding negotiation for up to 10 82,000 dwt Kamsarmax bulkers which are backed by Iranian grain importer Governmental Trading Corp(GTC). TradeWinds reported that newbuilding price is being negotiated as that six geared units out of 10 newbuildings are valued at around $34m apiece while the remainder four non-geared units cost around $32m apiece, amounting to around $332m in total. Meanwhile, industry sources say that the Chinese builder is under discussion with amiddle Eastern shipowner not Iranian and Yangzigiang has no concern in a charter contract of the owner. Recently, some industry players observed that this newbuilding order was backed byislamic Republic of Iran Shipping Lines(IRISL) of Iran.
Avic Dingheng builds Chem TKs Awarded by AVIC Intl Ship Development (China) and planned to be constructed by Avic Dingheng for Chemical Transportation Group (CTG), 25,000 dwt newbuilding series have been recently taken effect, Avic Dingheng announced on July 31. Eworldship reported that the newbuilding to be built by Avic Dingheng features further improved cargo loading capacity, operating speed and economic feasibility, compared to 19,800 dwt chemical tanker which is positioned in main stream of the current market, backed by lately released advanced design. Meanwhile, CTG is a company established by US shipowner Peter Georgiopoulos andgeorgiopoulos group is operating a fleet involving over 190 vessels. STX scores up to eight chemical TKs STX Offshore & Shipbuilding won up to eight MR chemical tankers from Navig8-Oaktree Joint Venturer (JV).According to TradeWinds, the JV raised new funds of around $110m from Norwegian OTC (over-the-counter) market to build four 49,000 dwt 'IMO type II' chemical tankers including four options. The newbuilding price is around $40m apiece while they are slated for delivery in 2016. Meanwhile, the JV will also utilize the funds to build its vessels, which are secured inorder at Hyundai Mipo Dockyard and two Japanese shipyards. Daehan wins Indian Newcastlemax BCs Daehan Shipbuilding of Korea signed a contract to build up to four Newcastlemax bulkers with Indian mineral company Fomento Resources Group. According to several overseas presses, Fomento awarded two 210,000 dwt bulkers including two options to Daehan as part of entering shipowning business for the firsttime. The two firm vessels (yard no. 1072, 1073) are slated for delivery in September 2016 and January 2017 while their new prices are said to be a little less than $70m apiece. The vessels with dimensions of 299.8m length overall and 50m breadth, will be classified by Lloyd s Register (LR) and registered as Singapore-flagged. DSME inks up to four Suezmax TKs Daewoo Shipbuilding & Marine Engineering turned out to have bagged a newbuilding order from Angolan national oil company Sonangol for up to four Suezmax tankers.tradewinds reported that Sonangol had ordered two 160,000 dwt tankers plus the same number of options. Newbuilding price has not been disclosed but recent Clarksons data show that current newbuilding price of Suezmax tanker stands at around $65m apiece, up by around $5m seen early this year. The 10 tankers among the current Suezmax fleet of Sonangol were all built by Daewoo and the close relationship between the two firms seemed to have been favorableto Daewoo in the tender of Sonangol, broker industry said. Delivery of the newbuildings is scheduled in 2016 and 2017 and the Suezmaxes areto join Stena Sonangol upon delivery, a joint venture with Sweddish operator StenaBulk. HHI bags two more Suezmaxes Hyundai Heavy Industries successfully bagged an order for two more 159,000 dwt Suezmax tankers from Greek shipowner Polembros. IHS reported that newbuilding price is coming around $70m apiece and delivery is scheduled in the first quarter of 2017. Early last month, both companies agreed on 2+2 newbuildings and the options havbeen exercised this time. The two firm units are slated for delivery in January and May 2016. The Suezmax crude oil carrier is 274m in overall length, 48m in breadth, having 23.1m of height. They are planned to be classed by ABS while registered as Panama-flagged vessels. GSI wins FMG VLOC quartet Guangzhou Shipyard International (GSI) announced that the Chinese shipbuilder had entered into a newbuilding agreement with Fortescue Metals Group (FMG) for four 250,000 dwt Very Large Ore Carriers (VLOC) on July 17. The contract is the first cooperation between the Chinese yard and the Australian iron ore producer. After news came that FMG and Yangzijiang Shipbuilding (Holdings) signed a newbuilding contract for four 260,000 dwt VLOCs on June 16, FMG indicated that it would place another four VLOCs at another Chinese yard soon. The yard has turned out to be GSI. According to an announcement made by the Australian company, the additional fournewbuildings are scheduled for delivery in late 2017 and early 2018. Meanwhile, GSI made a public announcement in June that it completed an agreeme nt with CSSC, Baosteel Group and China Shipping (Group) Company(:CIC) and perfectly finished the acquisition of Longxue Shipbuilding. The 250,000 dwt VLOC newbuildings won by GSI are highly likely to be built by Longxue if there is no exception. DSME wins Eco VLCC quartet Daewoo Shipbuilding & Marine Engineering succeeded in winning four Very Large Crude oil Carriers (VLCCs) from the largest shipping company in Greece.Ko Jae-Ho, CEO of Daewoo, and John Angelicoussis, President of Angelicoussis Group, signed an agreement to build four 319,000 dwt VLCCs on July 30 in Athens, Greece. Angelicoussis Group affiliated Maran Tankers Management awarded the vessels and the contract value amounts to $400m in total. According to Daewoo's regulatory filing on July 31, the contract value amounts to KRW 402.5bn (around $392.1m) and term of the contract lasts till September 30, 2014. Dollar-based contract value is around $392.8m (around$98.2m apiece) in total.
The eco-friendly vessel features Daewoo's updated VLCC design including high-sufficiencyengine and several fuel saving technologies. They also agreed to an option for making thenewbuildings 'LNG-propulsion ready' which have superior environmental performance compared to existing same sized vessels. The vessels are slated for delivery in 2016 upon construction at Daewoo's Okpo yard.the contract shows both companies' stable partnership amid tough market condition. The Greek shipping company, which owns around 100 vessels, has awarded over 60 vessels to Daewoo including six newbuildings under construction since their first transaction in 1994. Ko said, "Angelicoussis Group has awarded newbuildings at the proper time with an insight into the future," and, "This contract brought us expectation about possibility of market improvement ahead." With the latest contract, Daewoo's new orders year to date have stood at around $5.8bn. Largest ship repair yard to enter the scene The Korea's largest ship repair yard will be established in Jindo, South Jeolla Province, Korea. According to Korea Heavy Industries on July 29, the yard is scheduled to be built inpremises of 660,000 m2 around Ul-Dok-mok, Nokjin-ri, Gunnae-myeon, Jindo-gun to repair large vessels (600,000 tons). The construction is slated for completion at the end of 2015. Two dry docks are under construction and when the yard is ready, it will be capable of receiving seven ships of 100,000 tons to repair at the same time. An official of Korea Heavy Industries said, "Once the ship repair yard is constructed,ship maintenance and repair industry in Mokpo, Haenam, and Geoje will create a synergy effect while also reviving local economy." It is also expected to create new 7,000 job openings along with annual economic effectiveness worth KRW 350bn (around $341.8m). Meanwhile, Korea Heavy Industries started to build the ship repair yard in 2005, however the construction ceased due to financial difficulty in the meantime. The company has recently signed takeover contract with Golden Rain consortium so that the construction could be resumed. The expense of construction is expected to amount to KRW 100bn in total and construction period seems to last for 14-16 months. SHGSIC wins 38K BC duo Shanhaiguan Shipbuilding Industry (SHGSIC), subsidiary of China Shipbuilding IndustryCompany (CSIC), has recently signed an order to build two 38,500 dwt bulkers with a domestic shipowner. It is said that the two bulkers will be built based on a design of CSIC s China Ship Design& Research Center (CSDC) to optimize energy efficiency. The contract value and delivery details for the vessels are not disclosed. They each measure 182m in length, 30m in breadth, with 14.8m of height. Having 9.5mof design draft and 10.5m of structure draft, their design speed is said to be at least 14 knots with a cruising power of 20,000 nautical miles. They are also scheduled to be classified by China Classification Society (CCS) and registered as Hong Kong-flagged. Last April, Dalian Taijia Shipping of China announced that it had signed a contract to declare two options of Handysize bulkers at SHGSIC. Including the two options exercised, both companies turned out to have agreed on a total of 10 newbuildings of the same size. SINOPACIFIC wins its own brand OSV quintet On July 28th, 2014, Sinopacific Shipbuilding Group (SINOPACIFIC) signed a contractwith Shenzhen Huawei Offshore Shipping Transport Co., Ltd. (Huawei Offshore, a subsidiary of Shanghai Salvage Company) for the construction of 5 offshore vessels. All the vessels are designs from the SP brand, which is SINOPACIFIC s own brand; 3of them are AHTS SPA85L design and 2 are PSV SPP35ML design. The vessels will bebuilt in Zhejiang Shipbuilding Co., Ltd. (Zhejiang Shipyard, SINOPACIFIC s ship construct base) and are expected to be delivered from February 2016 until the end of the year. This contract marks the first domestic order for Offshore Vessels for SINOPACIFIC who has been exclusively building vessels for oversea owners and ushers in a first cooperation with China Classification Society (CCS). After delivery, the new vessels willbe used for deepwater oil exploration in the South China Sea. Both ship types ordered are customised versions of SINOPACIFIC s existing ship designs. During the research and development stages, Shanghai Design Associates (SDA), a branch of SINOPACIFIC specializing in OSV design, applied lessons learned from similar ship designs and added innovative technologies in order to create new generation vessels with the most advanced design concepts and technical characteristics. It is worth mentioning that both SPA85L and SPP35ML have adopted AFE propulsion system which further promotes their energy-saving capabilities. With a pull of 85mt, overall length of 70.81m, breadth of 16.00m, deadweight of 2,800mt, maximum service speed of 13kn and accommodation for 48 persons, SPA85Ldesign has been constructed on the basis of the SPA80 design. This base design was shortlisted as one of the best ships of 2013 by OSJ (Offshore Support Journal), a leading revue in the offshore vessel market. The main dimensions of SPA85L have beenoptimized with regard to the complex conditions of the South China Sea, and the moulded depth and freeboard have been increased compared with conventional AHTS. I n the SPA85L design, particular focus has been given to the Supply function of thevessel whereby the deck area has been enlarged. The tailor-made SPP35ML vessel is 81.75m long, 17.20m wide, 7.80m in depth mould and has deadweight of 4,000mt. The deck area covers 809m2 and the vessel offers a maximum service speed of 14kn and accommodation for 41 persons. With its energy-savings,
environmentally friendly features and high levels of automation, this vessel emphasizes comfort and userfriendly design. Its performances in terms of the diversity of cargoes and maximum capacity are especially advantageous, and it is also equipped with a lot of forwardlooking functions. The vessel fully meets the damaged stability requirements of International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk (IBC Code) and Code of Safety for Special Purpose Ships (SPS Code) and its safety indicators are very high. At the signing of the contract, Mr. Simon Liang, Chairman & CEO of SINOPACIFIC, stressed that, as a company driven by technology, we are pleased to witness the success of the strategy that product research and development is driven by market demand. In the future, we will carry on our research and development of forwardlooking products and provide more value-added vessels to the industry. Chinese yards sailed smoothly in 1H According to 1H report released by the China Association of the National Shipbuilding Industry (CANSI), Chinese shipyards fought well in the first half of this year with growing order intake. During the first half, the Chinese government provided full support to shipbuilding industry with helping old fleet renewal and ship upgrading works as well as aggressively promoting ship financing, based on 'Implementation Plan for Accelerating Restructuring of Shipbuilding Industry, Industrial Conversion and Upgrading (2013-2015)' released by the State Council of China. In the first half of this year, newbuilding price continued its uptrend. It had stagnation in May and June while steel material price staying low at CNY 4,000 per ton due to oversupply. From January to June, Chinese shipbuilding industry s new order intake and orderbook kept increasing while ship delivery was estimated to have reduced. During the same period, China started to push ahead in offshore area and was awarded total 81 offshore related orders worth $7.9bn, which includes 11 jackup drilling platforms, three semi-submersible drilling rigs, three drilling rigs, three accommodation platforms, 59 offshore support vessels and so on. It ranked No.1 with 32% global market share but its limited portfolio which is focused on jackup rig was pointed out and competitiveness hardening is addressed to be important. Chinese shipyards successfully won high-tech applied vessels such as LNG carrier, very large commercial vessel, LEG carrier and so on, achieving favorable results during the first half. Early plan to solve the oversupply issue started to show results while financial agencies pushed ahead with provision of financial supports in order for development of maritime industry. Order intake of equipment industry also recovered and started to show uptrend.china is still said to have problems in newbuilding delivery, loans, profit making, structure transforming and so on although it showed favorable results in this year to June. Fundamental solving of oversupply and technical innovation remain as the current issue. Furthermore, operation of companies is pointed out to be in a state of difficulty due to low newbuilding prices and initial payment ratio although Chinese yards filled up its slots till 2016 with growing new orders. Over this, CANSI said through the report that China needs to realize urgent problems in shipbuilding and related industries to respond. Increasing order intakes and delivery are said to be the most critical factors in development of the industry. CANSI suggested through the report that the restructuring and upgrading towards the shipbuilding firms need to accelerate, trying to improve international competitiveness. Chinese new orders up by 78% In this year to June, restructuring has actively been proceeded in global shipbuilding and related industry, which gives a chance for shipowners to award vessels aggressively. Newbuilding orders have still maintained somewhat high level while Chinese shipbuilders obtained good results on the basis of capability to build bulkers. According to China Association of the National Shipbuilding Industry (CANSI), Chinese shipbuilders inked new orders of 40.8m dwt during January to June this year, upby 78.2% from the same period last year, while delivery reduced by 15.4% year-on year to 17.43m dwt. As of late June, Chinese builders were seen to stand on orderbook of 152.06m dwt,up by 39.5% from a year ago and 16.1% from late 2013. In the year to June, the complete industrial gross production value of the China s 87shipbuilding and its related companies which are subject to be monitored were seento go upwards by 9% year-on-year to CNY 186bn ($30.09bn). Of which, shipbuilding sector increased by 3% to CNY 74.2bn while ship equipment showed 14.8% growth to CNY 14.3bn and ship repair sector also improved by 17.2%to CNY 6.48bn, according to statistics. Meanwhile, during the first six months of this year, the 87 shipbuilding and its related companies of China posted CNY 134.8bn in operating revenue, up by 7.3% year-onyear, with gross profits decreasing by 40.4% year-on-year to CNY 2.53bn, resulting from increasing losses of several companies. Chinese orders for export ship signed for the first six months of this year came to 38.35m dwt, sharply up by 82.3% from the same period last year while delivery of export ship decreased by 10.8% year-on-year to 15.4m dwt. As of the end of June, the orderbook of export ship was seen at 143.7m dwt, up 51% from a year ago. The export ships were estimated to account for 94% of the whole Chinese orders, 88.4% of delivery, and 94.5% of its orderbook. Chinese ship export, "green light" During last May, Chinese yards experienced a small uptrend in ship exports over the same period a year ago
while global shipbuilding market has recently been changeable. According to data from the General Administration of Customs of China, China s shipexports in this year to May came to $11.29bn, down by 13.4% year-on-year. Of which, ship exports were recorded at $10.721bn, down by 11.2% year-on-year, while posting $2.808bn, up by 2.3% year-onyear in May. In this year to May, Chinese yards exported bulkers worth $3.92bn, which has the highest 37.6% of the whole exported vessels share, however its share decreased more than half than ever before. Of which, exports of bulkers below 150,000 dwt decreased by around 40% while those of 150,000-300,000 dwt bulkers increased by around 40%. After bulkers, containership exports were recorded at $2.089bn, which occupied 19.4% of the whole exported vessel types. Of which, exports of containerships below 6,000 teu posted $1.298bn, up by 123.1% year-on-year with occupying 12% while those of containerships over 6,000 teu posted $791m, down by 17.2% with occupying 7.4%. Tankers were the third highest exported vessels, which showed exports of $827m, with occupying 7.8% of the whole exported vessel types. Exports of special vessels such as light vessel, fire boat, and heavy-lift vessel were recorded at $1.676bn, up by 243.8% over the same period a year ago with occupying 15.6% while those of floating or semi-submersible drilling/production platform were recorded at $387m, up by 37.4% year-on-year with occupying 3.6%. Chinese yards exported vessels to a total of 158 countries and regions among whichare Asia $5.578bn, down by 20.5% year-on-year with occupying 55.8% of the whole exports. China exported newbuildings to total 158 countries or regions, of which the amount of exports to Asia reduced by 20.5% year-on-year to $5.578bn, with 55.8% shares. Meanwhile, in terms of province, Jiangsu Province showed the highest exports of $3.864bn, down by 13% year-onyear with occupying 26.7% of the whole exports, followed by Shanghai City ($2.33bn, up by 38%), Liaoning Province ($1.171bn, down by38.4%), Zhejiang Province ($1.123, down by 33%). Tsuneishi spurs business in Paraguay Japan's ship component manufacturer Tsuneishi Iron Works has recently announcedthat it established a subsidiary in Paraguay. The subsidiary will take charge of manufacturing pipelines which are needed for construction of dormitory or buildings inside a factory as well as design of pusher-barge engine along with manufacturing pipelines for barge. It is the third overseas subsidiary following those in the Philippines and China for thejapanese company which established a Paraguayan local subsidiary Tsuneishi Paraguay Iron Works S.R.L. last June. Earlier, it set up affiliated companies in Cebu, the Philippines, in 1996 and in Zhoushan, Zhejiang, China, in 2005 in line with a strategy of Tsuneishi Group for overseas shipbuilding bases. Meanwhile, Tsuneishi Group-run Paraguayan local shipbuilder Astillero Tsuneishi Paraguay S.A. is scheduled to complete construction of two pusher-barges in 2015. NB price turnover to recover Newbuilding price index has recently showed a turnover of fall but it is suggested tosoon rebound towards the end of this year. Jung Dong-Ik, an analyst from Hanwha Investment & Securities of Korea, said, Clarkson newbuilding price index released on July 25 recorded 139pt, down 0.7%, compared to a week ago, and explained, Considering the last fall seen on June 6, the index showed a turnover of drop in seven weeks. Jung added, Basically, new orders sharply decreased in the second quarter with newbuilding price of each vessel type showing a downtrend, and noted, Secondhandvessel prices, which has preceding, have dropped from April. Jung continued, The latest fall in newbuilding price was anticipated and it might affect negatively on investment sentiment in the short run, and prospected, Towardsthe end of this year, the newbuilding price index is expected to increase 3% to early140pt. Jiangnan bags more VLGC order Jiangnan Shipyard of China has allegedly won another order for two more Very Large Gas Carriers (VLGCs) from compatriot operator Tianjin Southwest Maritime(TSM). An industry watcher said that TSM returned to the Chinese yard for two 83,000 cbmvlgcs at the end of June, TradeWinds reported.the Chinese shipowner placed an order for one VLGC early this year at the same yard, following previous two VLGC orders signed in September last year. Contract value for the latest two newbuildings is said to be higher than the earlier ordered three units. An industry player noted, "TSM looks to have paid over $70m apiece for the VLGC duo," and added, "It was known that the previously signed three VLGCs cost below $70m per unit." Delivery of the five VLGC series will start in late 2015 with the first unit, which will be followed by three units in 2016 with the last one planned in early 2017. Sources say that despite the VLGC ordering boom is coming to an end, Chinese shipowners are expected to place up to 10 more VLGCs ahead. Two unnamed Chines operators are allegedly making newbuilding inquiries to Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering. Pertamina seeks berth space for LNGC As Indonesian state-run energy company Pertamina has been known to be starting a tender for building nextgeneration LNG carriers as early as beginning of September, it is allegedly seeking berth space of yards for the newbuildings.
According to TradeWinds, the company signed the second contract to purchase around 80-ton LNG annually for 20 years from Cheniere Energy's 'Corpus Christi' LNG export project in Texas, the US, which is estimated to need around four LNG carriers. However, it is reported that it is unknown if Pertamina would place a direct order ata shipyard as a shipowner or hire the third operator. Shipbuilding industry expects that delivery of LNG carriers whose orders are scheduled to be signed for LNG export project following the US shale boom will be mostly 2018-2019. Demands for berth space are anticipated to surge for the delivery years that Pertamina is also seen to be speeding up to reserve yard slots ahead. Bohai Shipbuilding inks two bulkers Dalian: CSIC-affiliated Bohai Shipbuilding Industry has received an order from Singaporean owner Stella for two 210,000dwt newcastlemax bulkers. Stella is a shipping unit of China s Rizhao Steel. The vessels will be classified by ABS and managed by Cara Shipping, another Rizhao Steel-controlled shipping company, upon delivery in May and September of 2016. Cara Shipping recently ordered two 250,000dwt VLOCs with two options at Bohai Shipbuilding at the end of 2013. GSI makes progress on restructure Guangzhou: Guangzhou Shipyard International (GSI) announced that it is making progress on its ongoing restructure. GSI said it has finished the preliminary restructuring plan, which includes acquiring parent CSSC group s shipbuilding assets in South China and acquiring shipbuilding assets from a third party. Currently GSI is in negotiations with the third party and doing due diligence work on the third party s asset. GSI suspended its stock trading on April 8, and it expects to resume by September 15 at the latest. Hyundai Heavy Posts Worst Quarterly Loss Stronger Won, Discounts for Customers Hurt Shipbuilder South Korea's Hyundai Heavy Industries Co. 009540.SE +1.77% posted its worst quarterly loss ever, hurt by a stronger local currency and discounts it has offered since last year to prop up sales amid a slowdown in the global shipbuilding industry. Hyundai 005380.SE +0.43% Heavy, the world's biggest shipbuilding company by sales, vowed Tuesday to restructure the company and reshuffle personnel as a way to cut costs and improve profitability. The company said it expects business conditions to improve in the coming quarters. "Besides the won's gains, we made huge provisions against potential losses in shipbuilding, plants and offshore platform constructions, hurting the bottom line. We expect to recover part of provisional losses through renegotiation with clients," Hyundai said in a statement. The company earmarked 500 billion won ($488 million) in loss provisions in the second quarter. Slowing demand from weak economies in Europe and growing competition from Chinese rivals have pummeled major shipbuilders in South Korea for years. The Korean companies have also offered deep discounts to clients to secure a steady stream of orders. Hyundai swung to a record 616.6 billion won net loss for the three months ended June 30 from a net profit of 66.8 billion won in the year-earlier period. The shipbuilder also posted its worst ever quarterly operating loss of 1.1 trillion won, swinging from a 289 billion won profit a year ago. Revenue fell 2.1% to 12.81 trillion won. Korea's corporate sector has reported disappointing profits this earnings season due to a strong local currency that is making it harder to compete in overseas markets at a time of lackluster global growth. Hyundai Motor Co., SK Hynix Inc., a chip maker, and steelmaker Posco have all blamed the currency for sizable declines in net profits during the second quarter. The won gained more than 8% against the U.S. dollar in the second quarter, touching a six-year high. Most of Hyundai Heavy's other business divisions including oil refining and construction equipment also suffered declines in industrywide demand amid the global economic slowdown, it said. Analysts said they expect the company's profitability to remain weak for the rest of the year. "The pace of the won's appreciation and oil prices will remain volatile," said Shinhan Investment Corp. analyst Kim Hyun. "Earnings are expected to show meaningful improvement from next year, when vessel-price increases in the second half of 2013 start to be reflected." Hyundai has a revenue target of 26.57 trillion won this year with an expected $29.6 billion in orders, compared with revenue of 24.28 trillion and $27.4 billion in orders in 2013. Sinopacific raids Cosco Wang Xingru has left the top spot at stocklisted Cosco Pacific to join privately-owned Sinopacific Shipbuilding Group as its new chief executive officer. TradeWinds understands that an announcement is set to be made tomorrow in connection with a board meeting of the specialist shipbuilder, which operates under a quasipublic governance system. But sources say the new man has already been active in contract negotiations for Sinopacific.
Sinopacific is best known as a specialist in offshore service vessels (OSVs) and bulkers as well as gas carriers and has announced a series of new orders of late, most recently a five-ship OSV order for state-owned Huawei Offshore. Sinopacific chairman Simon Liang was travelling and could not immediately comment on the hire. His new CEO Wang, 49, has served in a number of positions with Cosco. He has spent the past three years as managing director of Hong Kong-listed Cosco Pacific, which notably includes the terminals and container leasing operations of the state-owned group. Wang's roots are in shipbuilding, however. Before taking the helm at Cosco Pacific, Wang headed Cosco Shipyard Group after stints as managing director of Cosco Dalian Shipyard and Cosco Guangzhou Shipyard. Wang left the Chinese shipping giant not only from a leading position but while his career there appears to have been moving forward. Financial filings show that as recently as May, Wang was appointed a vice president with Cosco Pacific's Shanghai-listed big brother, China Cosco Holdings Co. It is common for high-ranking Cosco executives to hold positions in several entities simultaneously within the complex group structure. Cosco Pacific deputy managing director Wang Haimin is currently serving as acting managing director there while the company looks for a replacement. Wang joins a company that has been active both on the contract front and in hiring. TradeWinds reported in April on Sinopacific's recruitment as head of marketing and sales of shipbuilding veteran Luan Xiaoming (David Luan) from Rongsheng Heavy Industry, where he was chief operating officer. Korean shipbuilders lag behind as China rises Korean shipbuilders are struggling. The world market share held by Korean shipbuilders has fallen to 27 percent this year, a sharp drop from the 40 percent recorded in 2011 according to data from Seoulbased B-S Financial Group. Chinese shipbuilders have filled the gap, benefiting from better price competitiveness. Korea's Hyundai Heavy Industries has been fighting back, trying to boost orders of their so-called "eco-ships" or ships that come equipped with energy-efficient technology. Korea's Daewoo Shipbuilding and Marine Engineering has followed a similar course. They are producing mega-sized container ships that use 20 percent less fuel and emit 30 percent less carbon. But despite these efforts, China has dominated the shipbuilding sector since 2012, leading with a 44 percent world market share. Hyundai Heavy Industries recorded an "earnings shock" in the first quarter of this year with more than 184-million U.S. dollars of operating losses. Both Hyundai and Daewoo are each expected to record operating losses of around 68 million dollars in the second quarter. The Korean shipbuilding industry is now eyeing new opportunities. A Daewoo Shipbuilding official told Seoul-based Yonhap News that it will put more of an emphasis on its defenserelated industries, which include building submarines. Hyundai Heavy completed construction of a new company in the southeastern city of Daegu in May that will begin producing ship engines. Samsung Heavy Industries says it will focus on renewable energy such as building wind power plants. Korea s Status as Strong Shipbuilding Power Shaken The Korean shipbuilding industry, which used to be the world s best, has been shaken. China, once considered far below Korea, is aggressively chasing the country's industries, so Korean shipbuilding companies cannot win orders. The situation is becoming even more serious, as there is a huge loss in the offshore plant areas believed to create high added value. According to the report on the rapid growth of Chinese shipbuilding and offshore industries and its implications by the Korea Institute for Industrial Economics and Trade on July 30, China scored the world s number one in new vessel orders, shipbuilding volume, and remaining order amounts both in 2012 and 2013. Korea is unfortunately lagging behind in all facets. As of last year, the Chinese market share was 35.0 percent in new vessel orders, 30.7 percent in shipbuilding volume, and 33.5 percent in remaining order amounts. Korea accounted for 30.8 percent in new vessel orders, 27.9 percent in shipbuilding volume, and 27.9 percent in remaining order amounts, and ranked number two behind China in all three areas. This is a result of Chinese government efforts to substitute old domestic vessels, meaning that a substantial portion of new vessel orders are from China, and support financing. The domestic market size of the Chinese shipbuilding industry increased to 534.2 billion yuan (US$86 billion) in 2012 from 21.4 billion yuan (US$3.47 billion) in 2000, a growth of 25 times in ten years. What is even worse is that the offshore plant industry, which used to be called the future of the Korean shipbuilding industry, is the main culprit of the huge losses. Samsung Heavy Industries recorded 362.5 billion won (US$352.6 million) of operating losses during the first quarter this year. Hyundai Heavy Industries, the world s number one shipbuilding company, also recorded 188.9 billion won (US$184.0 million) of operating losses during the same period, and a 1.1037 trillion won loss (US$1.0753 billion) during the second quarter. Hong Sungin, a researcher at the Korea Institute for Industrial Economics and Trade, pointed out, After the restructuring of the Chinese shipbuilding and offshore industries, China will become even stronger, and threaten Korea even more.
In order to overcome this situation, new high-quality products, more differentiated and advanced with high value-added technologies, must be developed in shipbuilding, offshore plant, and machinery markets. China s Nantong earmarks $6.5m to subsidise shipbuilders China s Nantong city government has announced subsidies worth RMB40m ($6.5m) for the local shipbuilding sector. Nantong, located in one of China s main shipbuilding provinces Jiangsu, has earmarked the RMB40m to support local shipyards in securing newbuilding orders and in purchasing equipment domestically. Shipbuilders will receive a RMB10,000 subsidy for every 10,000 dwt in capacity of confirmed newbuilding order, local media reported. In addition, shipyards buying marine equipment from the domestic market will receive a 2% rebate each year from the annual purchase amount, with a maximum subsidy of RMB2m a year. In 2013, Nantong government had provided subsidies worth a total of RMB10.27m to 12 shipyards for 21 projects, of which 14 are offshore jobs and seven are shipbuilding contracts. China Shipping acquires additional 20 percent equity in Beihai Shanghai: China Shipping Development announced that its fully controlled subsidiary China Shipping Tanker (CST) is going to acquire 20% equity in Beihai Shipping from Shanghai Shipping Group for RMB830m. CST had already acquired 20% equity of Beihai Shipping from Sinochem International for RMB830m in June. CSD said the other two shareholders in Beihai Shipping are all subsidiaries of CNOOC, and that the deal will further strengthen its strategic ties with CNOOC. China Rongsheng Sees Wider Loss on Sluggish Ship Orders China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country s second-largest private shipbuilder, said it expects losses in the first half to widen after customers canceling orders forced it to cut production. The Shanghai-based company expects a significant increase in the net loss for the six months that ended in June compared with a year earlier, according to a filing to the Hong Kong Exchange yesterday. The shipbuilder cited its conservative operation strategies for the slump after customers changed orders as global demand stayed sluggish. The company is due to announce earnings later this month. Rongsheng s woes illustrate the difficulties private Chinese shipbuilders face competing in an industry dominated by state-owned yards with government backing and easier access to financing. Reviving fortunes at companies like Rongsheng, and the Shipping Valley at the Yangtze River, is key to raising confidence in manufacturing in China after a $6.6 trillion credit binge had threatened to stoke a debt crisis. They will need to find a strategic way out, said Ben Kwong, a director at Hong Kong-based broker KGI Asia Ltd. Many were pinning their hopes on a turnaround, said Kwong, who added the announcement will put some pressure on the shares. Losses last year widened 15 times to 8.7 billion yuan ($1.4 billion) from 573 million yuan after sales plunged 84 percent to 1.3 billion yuan, Rongsheng reported in March. Billionaire Zhang Shares of Rongsheng, controlled by billionaire Zhang Zhirong, fell as much as 5.1 percent in Hong Kong today, poised for a third straight day of decline. The stock traded down 1.3 percent to HK$1.56 as of 9:45 a.m. in the city. Shareholders of the company and investors are advised to exercise caution when dealing in the shares, Rongsheng said in the statement. Rongsheng s fortunes have risen and fallen with the Chinese shipbuilding industry, which became the world s largest during the global economic crisis after hundreds of private shipyards opened to compete for orders. The building spree produced more ships than the world needed amid weak economic growth, putting at risk the yards that expanded using debt. Chinese shipyards saw orders sink to 20.5 million tons in 2012, less than a fifth of their peak five years earlier, prompting companies like Rongsheng to fire staff last year and ask for government support. China Government Sensing danger, the government stepped in. China issued a three-year plan to urge financial institutions to support the troubled industry. The private yards difficulties skewed the industry in favor of government companies. China State Shipbuilding Corp., China Shipbuilding Industry Corp. and other government-backed companies have won more orders at the expense of companies like Rongsheng. Ship orders are down 11 percent globally this year, while those won by Chinese yards increased 4.5 percent, according to Clarkson. Rongsheng has since June last year secured HK$5.4 billion through the sale of convertible bonds, including a proposed HK$1 billion lifeline from a holding company controlled by Shi Yuzhu, the billionaire chairman of New York-listed gaming company Giant Interactive Group Inc. Rongsheng Chief Financial Officer Sean Wang said in May that new orders were starting to improve. The company completed nine ships last year, according to the March earnings report. I believe our finances are more stable now, and new orders are starting to improve, Wang said. This is why our share price has risen lately.
China to build more LNG tankers in high-tech push Global LNG fleet needs to grow by 225 vessels by end- 2020 * About 125 vessels already on order, mostly to S.Korean builders * China builders to grab a fifth of LNG ship orders to 2020 - ABS Chinese shipyards are aiming to take some $10 billion in orders for new LNG tankers over the rest of the decade, part of a plan to restructure the country's ailing shipbuilding sector and secure China's energy supply chain. The push to build its own natural gas delivery vessels will boost China's capability in high-tech ships and pose a challenge to South Korean and Japanese shipyards that have been the main suppliers of large gas tankers for 30 years. Up to 50 liquefied natural gas (LNG) tankers, or more than 20 percent of the 225 LNG vessels expected to be added worldwide by the end of 2020, are set to be built in China to deliver gas to its ports, according to estimates from ship safety agency the American Bureau of Shipping (ABS). Relying on home-built vessels for gas deliveries - which China needs to serve new import terminals coming online - gives it greater control over its supply chain and snags a bigger share of the high-value end of the shipbuilding business. "Regardless of the availability in the market for LNG carriers, China will ship the bulk of its cargoes through its own project dedicated vessels," said Andrew Bridson, business development manager at transport and energy consultant BMT Asia Pacific in Singapore. The global shipping industry is emerging from a five-year downturn, the worst in 30 years, and China - the largest shipbuilding nation and long the leader in basic vessels - sees a growth opportunity in developing the skills and technology to build more sophisticated ships. Beijing last year laid out a plan for domestic shipyards to target a quarter of the global market for high-tech ships, including LNG tankers. "In future, our output is going to outstrip that of Japan and Korea," said Yang Baohe, principal naval architect at the Marine Design & Research Institute of China, a subsidiary of China State Shipbuilding Corporation (CSSC). HOME AND ABROAD More than 70 percent of around 125 LNG carriers and storage vessels currently on order have gone to South Korean shipyards such as Daewoo Shipbuilding and Marine Engineering and Samsung Heavy Industries. But those orders represent only a little more than half of the total investment of nearly $50 billion needed to expand the global LNG fleet of 394 vessels, based on an average gas tanker cost of $200 million and ABS estimates. As more LNG plants start up in the United States, Australia and Russia to feed Asia's voracious gas demand, another 100 ships are expected to be ordered for delivery over 2017-2020, according to shipping analysts and consultants. China - under pressure to switch from coal to cleaner fuels to cut carbon emissions and clean its polluted air - plans to more than double its total gas supply by 2020, and is looking to triple its LNG imports to around 60 million tonnes, or about 82 billion cubic metres. This second wave of gas tanker orders will give relative newcomers - like Shanghai's Hudong-Zhonghua Shipbuilding (Group) and Dalian Shipbuilding Industry Co - a chance to penetrate the LNG sector further by building more vessels for China. Last year, six tankers constructed by Hudong-Zhonghua accounted for half of China's LNG imports, the rest coming on ships chartered to bring gas from producers including Qatar and Indonesia. Hudong-Zhonghua, owned by CSSC, now has in hand contracts to build 14 ships to transport LNG from Papua New Guinea and Australia to China. Dalian Shipbuilding, also part of the CSSC group, is negotiating to build four ships costing up to $230 million each. China alone needs to put about $9 billion-$10 billion into expanding its fleet, said Bill Sember, vice president of global gas development at ABS. Still, Chinese shipyards are not likely to start winning orders for projects outside China anytime soon, according to a South Korean rival, who says the companies still lack the experience to win over international buyers. "Chinese shipbuilders are winning LNG carriers for only local import projects," said Choe Young-keun, an executive on the marketing planning team at Samsung Heavy. "That trend will not be changed, because Hudong- Zhonghua is the only Chinese shipbuilder which has a track record of LNG carrier construction," he said. Yangzijiang Shipbuilding Q2 net profit jumps 52 pct to record high China's Yangzijiang Shipbuilding Holdings Ltd said on Wednesday its net profit for the quarter ended on June 30 rose 52 percent to a record high of 1.24 billion yuan ($201 million) on one-off interest income. One of China's best shipyards, Yangzijiang said its revenue in the second quarter eased 3 percent from a year earlier as fewer vessels were delivered in the quarter compared to the same period in 2013. "The shipbuilding industry continued to exhibit signs of recovery, and the Group continued to witness gradual increase in new shipbuilding prices in tandem with a steady number of vessel newbuild enquires," the company said in a statement.
Shipping & Business News ATLANTIC HANDYSIZE DRY: Influx of cargoes pushing up rates The US Gulf Coast has seen an influx of cargoes in the last two days and rates have been pushed up as a result, sources said Tuesday. The route from the US Gulf Coast to Amsterdam- Rotterdam-Antwerp, basis 50,000 mt, was assessed at $8,750/d, up $250 from Monday. Shipping sources said there is a significant number of fresh grain and petcoke requirements in USGC for mid-late August dates, for both front-haul routes and for delivery to UK Continent. However, there is also a lot of excess tonnage in the USGC, and some owners have stopped marketing their vessels to keep them off the market, sources said. As a result, the tonnage list could be longer than it appears, potentially canceling out any further increase in rates. The tonnage list is much thinner on North Coast South America. Shipbroking sources said a Supramax could get a $1,000/d premium to load a cargo there as a result. Shipping sources said some charterers are already booking forward front-haul cargoes from USGC to China for October. Numbers have been heard at $44/mt, which translates to a time-charter rate of $17,000/d. With current spot rates comparatively low at $12,000/d for a 58,000 dwt Supramax, charterers have been keen to get vessels booked in for later dates now, sources said. ASIA HANDYS DRY: Freight rates heading lower on tonnage build-up Handysize freight rates in Asia Pacific edged down Tuesday with no respite seen in the oversupply of tonnage in Southeast Asia coupled with plummeting cargo volumes, shipping sources said. "The Chinese charterers are chasing $18/mt on the Western Australia to North China route. Nothing much has changed in the Handysize market. I feel the rate is in the $19.25-$1950/mt range," a source with a ship operator said. Weak market sentiment continued to be heard out of Southeast Asia region, with many shipowners unwilling to fix into this market. A source with a shipowner who thought rates have bottomed, said: "There is an expectation that the flow of cargoes has improved. The sentiment is better now. But there are a lot of ships and the tonnage is well supplied. The problem is that the Handysize market reacts very slowly." Tonnage supply in the Far East is rebalanced with clinker, cement and steel cargoes coming out of Japan, the source said. "The coal cargoes out of the CIS countries are pretty regular. But I would say the market is still flat. We still prefer to keep our vessels in the Far East. There is no guarantee that you will land a cargo if your ship opens in Australia [for its next business]." The key Bunbury/Kwinana to Lianyungang 30,000 mt alumina freight was assessed at $19.25/mt, a drop of 25 cents/mt from Monday. PetroChina Inks Venezuela Fuel Oil Deal Under a new contract, PetroChina will buy 100,000 barrels per day (bpd) of fuel oil from Venezuelan energy firm Petróleos de Venezuela, S.A. (PDVSA) for the next three years, Chinese shipping news site SinoShip News reports. PetroChina President Wang Dong said the contract will strengthen the company's oil and gas operations in the Americas and expand its ability to participate in international markets. Wang said PetroChina's oil trading volume with Venezuela will reach 790,000 bpd in 2014. PetroChina has been working to expand its Petrochina International America Inc. business, growing the company's activities in the U.S., Canada, and Latin America which involve a daily trade volume of about 1.5 million bpd of petroleum products, China Daily reported in November India allows local shipping firms to operate ships with foreign flags India has allowed domestic shipping lines to operate foreign flag vessels, shedding a key restriction that would help the sector attract more investment and tap more foreign business. So far, Indian operators weren't allowed to own foreign flag vessels at most, they could charter these for specified periods. Also, they could not employ foreigners on Indian flag-bearing ships.most companies, therefore, floated a foreign subsidiary that had a big downside as the entire benefit of the activity would go to the foreign country. The restriction has been removed. It would be a big boost to the industry," a senior shipping ministry official told ET. The flag signifies that a particular state has exclusive jurisdiction and control over the vessel. However, the ownership can be in a third country. The Indian National Shipowners Association had lobbied the government for easing the rule,highlighting how it was strangulating the sector's growth. A foreign arm essentially means additional cost for Indian operators as they have to comply with regulations in the other country. A number of shipping lines have set up their arms in Singapore to ply vessels with foreign flags. Usually, ships are registered in jurisdictions such as Panama, Singapore, the Marshall Islands and St Kitts, popularly called the 'flags of convenience'. A ship has to follow the rules of the jurisdiction it has registered with. Since some jurisdictions have lax regulations, they are preferred by ship owners. India is known to have stringent regulations for ships registered here. "This will give shipping lines lot of flexibility," the official said.