Halcyon Launches Its 8th Maritime Employee Survey


The Halcyon / Coracle Online employee survey is now ready to access.

Apparently last year 3,000 people took part in the survey, if you complete the survey, you will receive a free copy of the report.

How are Tankers Valued?


Reprinted from the June issue of Marine Log
JUNE 17, 2016 — In this article we explain how VesselsValue produces tankers valuations, and look at some interesting recent sales. Who were the top sellers of tankers this year? By Craig Jallal, Senior Data Editor, VesselsValue (Extended Coverage from Marine Log’s June 2016 issue).
The birth of VesselsValue was driven by timing and need. In 2008, the crisis in the financial market extended into shipping. The dry bulk sector and the containership sector were hit the hardest, and while tankers remained relatively buoyant, banks needed to assess their capital commitments against the value of the assets being financed and being used as collateral. However, in the depth of the crisis (2010 / 2011), ship brokers were telling clients they could not value the ships as there had been no recent sale or “last done” in ship broker speak. Richard Rivlin, a sale and purchase broker with 30 years’ experience, had long felt that an automatic valuation system could be built, which would produce valuations in any market, at any time. Luckily, his brother is a Professor of Mathematics, and together they designed and built such a system. It quickly became apparent that the highly detailed multi-level regression model was far too complex for normal spreadsheets, and a specialist modelling company was employed to develop the model.

The model is fed by two databases. One contains the features and specification of the ships arranged in a unique structure that allows the computational model high speed access. This database is researched and compiled by VesselsValue own team of 30 researchers and analysts on the Isle of Wight in the UK. The second database consists of sale and purchase transactions and charters. Both feed the mathematic model which is operated by a team of quantitative analysts. The aim was to produce an instant, accurate and always available online ship valuations for the banks and finance houses, that form the main customers of VesselsValue.

Tankers Valuation
According to VesselsValue, five factors make up a valuation:

Type (VLCC, Suexmax and so on)
Features (shipyard, hull, and so on)
Age
Cargo Capacity
Freight Earnings
Each factor is broken down into further elements that are scored. As an asset, tankers are relatively straightforward, being highly commoditized, and standardized in terms of size ranges and specification. In part this is due to the international safety and pollution control legislation that has been forced on the tanker sector. This level of standardization makes VesselsValue task somewhat easier when it comes to scoring the factors, than offshore vessels, which have just been added to the system. In the case of tankers, there are around 140 scores. One of the most important scores is the shipyard. A vessel built in China is less desirable than one built in Japan. A well-published example is the one shown above. In November 2014, the New Century-built Supramax bulker ACS Diamond was sold for $10 million. The previous week, the slightly older Japanese-built pair of Supramaxes were sold for $15.5 million each. This was an implied discount of around 40% between Japan and China. However, the shipyard scoring goes into several levels of sophistication, including many ships the shipyard has built and when the last vessel was constructed.

This model is continually updated and recalibrated overnight to give the closest possible fit to the reported sales prices. It is the analysis of the sales that can produce the weightings required for different shipyards. These are applied to all shipyards, not just Chinese shipyards.

So far VesselsValue have performed over 1,000,000 valuations to date, about 400,000 a year and the number is increasing.

How Accurate is VesselsValue?
The split of VV customers are banks and finance houses, owners and other maritime industries such as lawyers, insurers and charterers – sophisticated market participants who insist on knowing the methodology behind our valuations. But ultimately they want to know how accurate are our valuations because this will affect their bottom line. Valuation accuracy is assessed as the difference between the price a vessel is sold at, and VV valuation on the day before the actual sales date. This is expressed as a % of valuations within a certain band of accuracy and shown in a chart form. The accuracy report is available on the website.

Tanker Valuations Development
According to the VesselsValue transactions database, between the start of 2012 and May 2016, a total value of $143 billion of tankers have been traded on the sale and purchase market. During that period the value of second-hand tankers has steadily increased, as can be seen from figure 1 (“VV Tanker Matrix”) below of the VV Tanker Matrix, expressed as USD / DWT.

During that period, the MR tanker has been the most frequently traded tanker type, both in terms of number of sales, and value (see figure 2 “Total Value by Type of Tankers Sold 2012 to Date”).

So far in 2016 (to 15 May 2016) 83 tankers with a total value of $1.4 billion, have been traded on the second-hand market, and again the MR tanker is the most popular (see figure 3 “Value of Tankers Sales Jan 2016 to YTD).

Interestingly, the average age of MR2 (Chemical / Product) tankers sold in the first five and half months of 2016 is only three years-old. Altogether 17 of these vessels were sold in this period, with eight tankers being sold by owners in the USA (these were not Jones Act vessels).

The majority of tankers and the largest value of tankers sold so far this year (2016) were constructed in South Korea, followed by Japan and China. As far as owners are concerned, the lead seller across all types of tankers was Chembulk Tankers, Scorpio Tankers and companies associated with the Navig8 group (see figure 4 “Top Ten Sellers of Tankers Ranked by Number of Vessels Sold”).

Recent Sales of Interest
The top three sellers have sold tankers for completely different reasons and strategy. In January 2016, Chembulk Tankers was sold by parent company Berlian Laju Tanker (BLT) to private equity investor Kohlberg Kravis Roberts (KKR). Chembulk Tankers is said to have a number of Contracts of Affreightments (CoAs) and the older tankers were surplus to requirement. This is part of the KKR growth strategy to rebuild the Chembulk Tankers fleet. KKR has also invested in a fund to invest in two Greek bank shipping portfolios.

The number two top seller, Scorpio Tankers, was a tactical, opportunistic sale. The purchaser, Bahri (formerly known as National Chemical Carriers of Saudi Arabia) is on something of a buying spree. Bahri has recently purchased two VLCCs from Tanker Investments in December 2015, for a reported $77.5 million. The five 2014-built MR2 tankers were sold en bloc for $167 million are trading in the UAE under Bahri CoAs.

The third most active seller, Navig8 Chemical Tankers, Inc., sold the four resales (the MR2 tankers are due for delivery in 2017) under a ten-year bareboat charter (with purchase option) for a reported $35 million each. This was an internal sale within the group, and part of a longer term strategy.

Cocaine Cargo was 1,700 times the Value of the Tug


Tug crew guilty of UK’s biggest drug bust

Thu 14 Jul 2016 by Martyn Wingrove

Hamal

Royal Navy found 3.2 tonnes of cocaine on 1979-built Hamal

Two men were found guilty of an international drug smuggling ring using an anchor handling tug. Mumin Sahin and Emin Ozmen were found guilty of smuggling £512 million (US$677 million) of cocaine on tug Hamal. This was the UK’s biggest ever drugs bust when made more than a year ago.

When the Royal Navy intercepted the 1979-built anchor handler 100 miles off the coast of Scotland in April 2015, they found 3.2 tonnes of high purity cocaine in the ballast tanks in the bottom of the vessel. The value of the cargo was around 1,700 times higher than the value of the tug. According to VesselsValue, the current market value of Hamal is around US$400,000, assuming it is in good condition.

Prosecutors in the Glasgow High Court said the tug travelled from Istanbul, Turkey, via Tenerife to South America then on to the North Sea. Mr Sahin was the captain of the vessel, with Mr Ozmen second in command. According to the BBC, other seamen on the vessel ‒ Kayacan Dalgakirin, Mustafa Guven, and Umit Colakel, and Ibrahim Dag were cleared of the allegations after the jury returned not proven verdicts.

 

Reprinted from Tug Technology and Business

Brexit and Shipping FAQs


It is no exaggeration to say that in most boardrooms of any major institution in the City of London there will be an ancient lithograph or painting of the River Thames in its heyday as a major shipping port. Commercial shipping was fundamental to the development of the City of London, and while it is rare to see a cargo vessel as far up river as London Bridge anymore, providing services for the global shipping industry is still one of the main activities in the City. Therefore, it is reasonable to expect the vote to leave the EU, known as Brexit, would have an impact on shipping in the UK and beyond.

A week after the Brexit vote to leave, it is still difficult to quantify what Brexit means in the short-term, the medium-term and in the long-term. I have created this Brexit and Shipping Frequently Asked Questions (FAQs) document as a way to try and answer some of the questions.

Brexit and Shipping FAQs:

  • Did you vote Remain or Leave? Sorry, I can’t comment on personal matters. However, the latest polls show that the main reason the vote to leave won was due to the desire for laws applicable to the UK to be made in the UK, and not by the EU. The immigration issue was secondary.
  • What was the immediate impact on shipping? There was not direct impact on shipping. No French warships blockaded English ports. The Honda car factory continued to produce cars in the UK for export, and no shipping company declared it was moving its HQ to inside the EU. One or two shipowners have been quoted as saying that they move headquarters out of London, but no one has physically done so yet.
  • Which sector is likely is gain the most from Brexit? The immediate fall in the value of sterling would have benefitted those who had guessed the correct outcome and had traded cargoes that ultimately would have to be paid from sterling funds. This would have been traders in the oil sector, so probably the tanker sector. The losers are likely to be the liner sector, which has multiple cargoes / boxes sourced in the UK, but pay freight in US dollars. According to a report in Tradewinds, James Frew, senior analyst at MSI, expects worsening consumer sentiment and currency depreciation post-Brexit. This could lower MSI’s container vessel earnings forecast by 20%, according to Tradewinds.
  • Did ship values change? No, there have been no changes in value, as vessels are valued in USD. Of course, converting the value into sterling would produce a significant change. However, most publicly quoted shipping companies operate in US dollars and produce their accounts in US dollars.
  • Was there a short-term impact on shipping companies? Yes, in that there was an immediate worldwide speculation in shares, even though nothing had fundamentally changed. Some shipping companies share prices fell despite the lack of direct link to Brexit. In Europe, Euronav took advantage of the fall in its own share price to buy-back shares.
  • Is there a medium-term impact on shipping companies? In the medium-term, it is likely that Asian shipping companies, and other publically traded shipping companies will return to pre-Brexit levels (unless other factors cause investors to divest shares). Some shipping-related public company CEOs have already announced that Brexit only has a secondary economic impact, and they will not change company strategy. However, according to a report in Tradewinds, one South Korean shipyard executive suggested that the pattern of previous financial crisis was for investors to flee to the Yen. This would push up Japanese ship prices, which would be an advantage for South Korean yards. Of course, given the financial turmoil in South Korean shipbuilding, it is questionable if owners would risk placing orders in South Korea until financial stability returns.
  • Will Brexit trigger a Grexit? At Posidonia earlier this month, Greek ship owners were vocally opposed to the EU plans to tax their offshore earnings. Brexit is a good opportunity for the UK to provide the conditions for Greek shipowners to operate in the UK free of EU laws. Therefore, should Greece not leave the EU, there could be an increase in the London-Greek population, unless a new UK Government chooses to tax non-domicile high net worth individuals.
  • Will London lose its pre-eminent status as a maritime capital? If the Brexit process stalls, then the lack of certainty may cause brokers and shipping companies to switch operations to their overseas offices in the short to medium term. However, Brexit is an opportunity to by-pass restrictive EU laws, and create a special environment for the shipping industry. This could include lower company tax to 10%, government subsidies for a shipping hub including seaman training and incentives for shipping companies to locate in the UK from Singapore.
  • Brexit and shipping inoact analysis from UK-based law firms:
  • What is the worst Brexit scenario moving forward? The worst scenario is the UK failing to form a coherent government and stalling the negotiation process. However, shipping needs to learn from the Brexit situation. There were only two Brexit choices, in or out. The political world, and the financial and shipping markets seemed to have assumed the vote would be to Remain. From the reaction to the vote, there appears to have been no strategic planning for the alternative Leave vote.
  • What is the next big external event that could impact on shipping? Shipping is a US dollar denominated industry, and anything that impacts the US dollar has massive repercussions on shipping. Therefore, shipping companies need to start planning now for the impact of the US elections in November. Again, there are only two alternatives, but at the moment, most commentators feel the country will not choose Trump. But what if Trumps wins? There is always a reaction in the markets to a Presidential election, but a Trump President could cause a run on the US dollar as investors flee the currency, fearing he will invoke some of his wilder vote winning promises. Shipping needs to learn from the unexpected reactions to the Brexit vote, and start planning for a possible crash in the US dollar, if Trump is elected.
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