November 9, 2015
In August 2009, we stated in a letter to Shareholders and have commented on since, “We believe the [dry bulk] shipping markets represent a disaster in the making and if the ship has a propeller, it should be sold.” Long-term the dry bulk market is still in trouble, with few solutions for shipowners – and solutions available, shipowners are loath to enact. [“Suicide is Painless” is a line from the movie MASH. the dentist “Painless” recovers by morning. Dry bulk shipping’s survival will not be so quick or easy.]
Ten more Valemaxes are on the way. China Ore Shipping (“COS”) recently ordered 7 x 400,000 deadweight (“dwt.”) newbuilding Valemaxes. These seven of these vessels are being built at Shanghai Waigaoqiao Shipbuilding (“SWS”) for delivery 2017-2018. COS is a joint venture between China Shipping Group (“CSG”) and China Ocean Shipping Group (“COSCO”). The balance of the order is expected to be ordered from a yard controlled by China Shipbuilding Industry Company (“CISC”). The ships will be chartered to Vale in Brazil as part of a 25 year contract of affreightment (“COA”). As of the end of September 2015, by the end of 2017 nearly 50 million dwt. of Capesize vessels were due for delivery (i.e., approximately 16.0% of the Capesize fleet). An additional 4 million dwt. on the orderbook is not the solution for the dry bulk market and additional orders that may be forthcoming will not improve the dry bulk market.
August 11, 2015
Corn and Soybean Pro Farmer Crop Condition Index (“CCI”) post modest gains…
When U.S. Department of Agriculture’s (“USDA”) weekly crop condition ratings are plugged into the weighted CCI’s (0 to 500 point scale, with 500 being perfect), the corn crop ticked another 0.59 points higher to 376.17. The soybean crop rose 1.3 points to 355.90 over the past week. Both of these ratings are down from year-ago levels when the corn crop had a 386.08 CCI rating and the soybean crop stood at 373.84.
With rates up over the past seven/eight weeks, dry bulk owners, particularly Capesize, are breathing easier. Daily earnings increased by an average 45% month-over-month in July 2015. Dry bulk rates are exceed operating costs for the first time this year. In July, Capesize spot rates nearly doubled and approaching $20,000 per day (“p/d”) in early August. Panamax spot rates increased to an average $8,400 p/d (up 45% month-over-month), peaking at $9,400 p/d during mid-July.
August 9, 2015
Clearly since the financial crisis of 2008 the U.S. Government, the Federal Reserve, social activists and pundits have been preoccupied with the idea of “Too Big to Fail”. The U.S. government enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act on July 10, 2010. As described by President Obama, this Act to change the U.S. financial regulatory system (and impact the global financial system) would be a “sweeping overhaul of the United States financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression”.
The greatest impact of Dodd-Frank on the marketplace has been the destruction/elimination of entrepreneurial. Instead of controlling those financial entities that are “too big to fail”, Dodd-Frank has enhanced their size, power and market competitiveness as compared to smaller entities. The regulatory framework which Dodd-Frank has put in place has all but limited entrepreneurial development of financial institutions, such as start up hedge funds or new start-up banking/financial institutions, The Dodd-Frank Act has not only increased the likelihood that a large entity will need to be protected from failing, but also that its failure will have a significant and systemic impact as these entities have become even more pervasive throughout American society and the economy.
July 19, 2015
The tanker market concluded the first half of 2015 successfully. Across all size ranges, spanning both crude and products the tanker market experienced strong earnings.
Oil demand is strong. Globally, it is likely to grow at or above 1.5% this year, resulting from growth in the OECD, The U.S. is particularly experiencing strong gasoline demand as we have seen refinery runs are close to record levels,
OPEC output is surging, In June, OPEC produced 31.7 million barrels per day (“b/d”) (Source: International Energy Agency (“IEA”)), This was led by Iraqi production, following by increased production in Saudi Arabia and the UAE. OPEC production was as the highest level in the past three years and well above the nominal quota of 30 million b/d. In its June report, the IEA also noted the market was massively oversupplied and stocks have been building at an “astonishing” 3.3 million b/d in the second quarter of 2015.