Earlier this week, India’s Mangalore Refinery and Petrochemicals (MRPL) opted to purchase Omani and Yemeni crude oil instead while Petral was also heard to have sourced July crude from outside the region.

Traders said only a few Nigerian cargoes from June have yet to clear and spot trade was seen shifting to July on Friday.

Offers for the benchmark Qua Iboe grade were reported at around dated plus $3 a barrel but most market participants assessed the grade at around 50 cents below that level and about 20 cents below levels earlier this week.

West Africa is seen as increasingly reliant on European demand for its oil, given that a more than $1 increase in the Brent/Dubai spread since the start of May has made exports to Asia less attractive.

“This leaves Europe as the core destination for Nigerian barrels, but the region already has plenty of Caspian and North Sea barrels on offer, much of which is available at discounts to Dated Brent,” said JBC Energy analysts.

NIGERIA

* Qua Iboe: Seen at around dated Brent plus $2.50 a barrel.

* Brass River: Nigeria will load an additional two tankers of Brass River oil in July, a revised shipping list showed on Friday, lifting total exports to around 1.79 million bpd.

* One of the two added cargoes – a 350,000 barrel tanker allocated to Eni – was deferred from June. The second was a 180,000 barrel Brass cargo, trading sources said.

* Bonny: A force majeure on exports declared in mid-April remains in place, Shell confirmed on Thursday.

ASIAN TENDERS

* Taiwan’s CPC was heard to have bought two cargoes of Angolan crude oil as part of its July tender. The grades were heard to be Cabinda and Nemba, although the sale prices were not immediately available.

DATABASE

For a database of oil supply and demand fundamentals upstream and downstream, Reuters subscribers can click on:

http://bond.views.session.rservices.com/ce (Reporting by Emma Farge; editing by James Jukwey)

(c) 2013 Thomson Reuters, Click For Restrictions

Featured image (c) Shutterstock/Tanawat Pontchour

On May 18,  TEN’s shuttle tanker Rio 2016 arrived in Brazil and commenced its 15-year charter which is expected to generate approximately $255.0 million in gross revenues. Second shuttle tanker Brasil 2014 is en route to Brazil for delivery to charterers and commencement of similar, in terms of duration and rate. Image: TEN

“We do believe that both product and crude markets have turned the corner,” noted Nikolas P. Tsakos, President & Chief Executive Officer of Tsakos Energy Navigation commented in his company’s 1st quarter report today.

Over the past year, Tsakos has witnessed a near ten-fold increase in his company’s net operating income and a 30.0% increase in EBITDA to $34.1 million as compared to Q1 2012.

“TEN’s return to profitability, is a result of our modern fleet composition, our flexible long-term employment strategy, our cost containment policy and our ability to maintain and build relationships with high quality charterers around the world,” notes Tsakos. “Our fleet is well positioned to take advantage of current and expected market improvements. Also, our exposure in the high-end LNG and shuttle tanker markets provides further growth to our bottom line.”

TEN’s fleet consists of 28 product tankers, 19 crude carriers (1 VLCC, 10 Suezmax, 8 Aframax) and two LNG carriers, which over the past 3 months has seen a 98 percent utilization rate. Since 1 January, nine of their product tankers have been placed on charter with future minimum gross revenues of $117 million over their respective fixtures. Total minimum contracted coverage exceeds $1 billion with average duration 3.2 years.

Time charter equivalent rates have risen to $18,176 per day as compared to $17,129 in the first quarter 2012, while daily operating expenses have been reduced from $7,692 per day to $8,308 over the same period.

Mr. Tsakos further comments that asset growth of his company will come from the “accretive expansion” of LNG and shuttle tankers in the future, while maintaining a “dominant presence in product and crude carriers.”

Shares in the Hamilton, Bermuda-based company climbed as much as 3.7 percent to 5.97 kroner as of 10:45 a.m. That makes Golden Ocean the biggest gainer on the Oslo stock exchange’s benchmark OSEBX index after Renewable Energy Corp., a maker of solar energy products.

Golden Ocean bought an 180,000 deadweight-ton Capesize carrier with a partner for a “favorable price,” the company said in a statement last week. The board sees the “risk/reward as attractive from a historical perspective,” it said.

Golden Ocean, in which Fredriksen owns a 41 percent stake, is expanding its fleet to take advantage of historically low values as it bets on a recovery in rates. The Baltic Dry Index, a measure of commodity shipping costs, averaged 920 last year, the lowest level since 1986, according to figures from the Baltic Exchange, the London-based publisher of freight rates.

Fredriksen, who also owns stakes in Frontline Ltd., Golar LNG Ltd. and Seadrill Ltd., will keep investing in the ship industry that helped him build his fortune, he said on Jan. 24.

“Golden Ocean is in the fortunate position of being one of very few dry bulk companies financially able to benefit from historically low vessel values,” Eirik Haavaldsen, an analyst at Pareto Securities ASA, said in a note dated May 23.

Fleet Expansion

“Though the underlying market has been very weak in the year-to-date, we expect the market balance to improve in the latter half of the year and consequently rates will increase.”

Golden Ocean is interested in buying second-hand modern vessels and newbuilds, as well as taking out long-term leases with purchase options, it said Feb. 19. “Such opportunities may also include distressed corporate deals,” it said, and it’s currently in discussions over possible acquisitions.

Shares in the company have gained 36 percent in the past year, giving Golden Ocean a market value of 2.7 billion kroner ($465 million.) The shipping group, which is scheduled to announce first-quarter results on May 28, is expected to report net income of $7.6 million, down from $13 million a year earlier, according to the average of 10 analyst estimates compiled by Bloomberg.

- Alastair Reed, Copyright 2013 Bloomberg.

Nickel ore from Indonesia is loaded in remote ports like Obi Island (in yellow), far from the prying eyes of regulators. The trade is profitable, but is coming at an enormous human cost.

On February 17th of this year, the Harita Bauxite sank off Cape Balinao in the South China Sea. Of the twenty-four men aboard, only nine survived. The sea can be a dangerous place, of course, and things happen out there, but the Harita Bauxite’s sinking is troubling beyond the tragic loss of fifteen men. That’s because the loss wasn’t a huge surprise. Indeed, many in the maritime industry all but knew it would happen.

You see, the 192-meter bulk carrier was bound for China from Indonesia with 47,450 metric tons of nickel ore in her holds. That particular maritime activity – shipping nickel ore from Indonesia to China – has quickly become one of the most dangerous jobs in the world and the deadliest activity in modern shipping.

• On October 27th, 2010, the M/V Jian Fu Star sank while carrying nickel ore from Indonesia to China. (13 fatalities)
• Fourteen days later, on November 10th, the M/V Nasco Diamond sank while carrying nickel ore from Indonesia to China. (21 fatalities)
• Twenty-three days after that, on December 3rd, the M/V Hong Wei sank while carrying nickel ore from Indonesia to China. (10 fatalities)
• The next year, things went well until Christmas Day, when the M/V Vinalines Queen went missing. All twenty-three of her crew were thought to have been lost until six days later when the M/V London Courage happened upon Dau Ngoc Hung, a 31-year-old survivor, in a life raft. The Vinalines Queen had sunk while carrying nickel ore from Indonesia to China. (22 fatalities)

In just under fourteen months, sixty-six mariners died in the Indonesia to China nickel ore trade. By January of 2012, that trade made up only .06% of bulk cargo shipments worldwide, but accounted for 80% of the fatalities in bulk shipping.

An unreasonable hazard.

Put another way, if all bulk trade in the world was as hazardous as the nickel ore trade from Indonesia in those 14 months, there would have been over 100,000 fatalities during the same period. When the Harita Bauxite sank, those numbers worsened. There clearly was a problem and it wasn’t that nickel ore couldn’t be safely shipped, but that it wasn’t being safely shipped.

What is happening

In all four sinkings, from October 2010 to December of 2011, it was determined that the vessels had capsized due to liquefaction of their nickel ore cargo. Simply put, the cargo was too wet. When agitated by the motion of the ship, the otherwise sandy ore turned to a flowing mud that sloshed around in the beam-wide holds, causing the giant ships to list and then roll over.

Nickel ore, and other dry-bulk products prone to liquefaction, are moved safely around the world all the time. Shippers simply have to make sure the product is dry enough to ship. “Dry enough” is known as the TML – Transportable Moisture Limit. Making sure nickel ore is dry enough to ship is a simple matter of testing the moisture content prior to loading, and refusing the cargo if it is too wet. This hasn’t been happening consistently in Indonesia.

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That reality caused maritime insurers and the IMO to take note and issue warnings about the hazard. After the Vinalines Queen tragedy, Intercargo – The International Association of Dry Cargo Shipowners – released its Guide for the Safe Loading of Nickel Ore – which warns shippers of the hazard, providing a sort of go/no go chart for the loading of nickel ore that aligned with the IMO’s latest guidance.

The IMO is working on updating the rules again for dry-bulk cargo that may liquefy, but they likely won’t be out until 2015. Even so, rules alone won’t solve the problem. Rules were being broken in late 2010 and new rules were broken and guidelines were ignored in February when the Harita Bauxite loaded her cargo. While regulations may provide more clarity and guidance for lawful bulk carriers, the only paper that can fix the problem in Indonesia is money.

Why it is happening

Nickel pig iron production in China took off in 2006 and so did the demand for nickel ore. The market for nickel ore from Indonesia and the Philippines went from almost zero in 2005 to nearly $5 billion in 2011 according to a report by the International Nickel Study Group. Given the sad state of the bulk cargo market and the sudden realization that their dirt was worth money, the region was thrilled with the new demand. Mining operations sprung up and shippers went to work filling the orders. Some of those mines were legal, and others were, well – less than legal. Either way, business was good and money began flowing into places in the world where there wasn’t much before.

Again, this didn’t automatically make the shipping of nickel ore dangerous, but it may have motivated shippers to bend (or break) rules to ensure that the ore kept moving, and orders got filled. For rules to be enforced (like those for moisture limits), someone has to be enforcing them. In Indonesia, an archipelago of over 17,500 islands, the law doesn’t come around too often to ports where much of the ore is loaded. Given the money involved and the remoteness of the loading, it isn’t hard to imagine that looking the other way and hoping had replaced testing and regulation where the ore was concerned.

These cargoes are stored primarily outdoors and just because the IMO code states that loading is prohibited in the rain (or soon after), that doesn’t actually stop anyone from doing it. There are rumors of false test results, forged documents, and just plain old financial pressure to get vessel captains to accept wet cargo. Well-meaning crews under pressure to make delivery may end up relying on less-than-scientific “drop testing” alone to determine how wet suspect cargo may be, a possibly deadly mistake. While they could insist on an independent lab test (as suggested by Intercargo), in all of Indonesia there is only one lab that sufficiently tests for nickel ore moisture levels. One. In a country of 17,500+ islands covering 1.4 million square miles of ocean, one may not be enough.

Click here to view the embedded video.

An unnamed senior maritime insurance analyst told Singapore’s SeaTrade Asia Week last year that, “We have also heard of surveyors being assaulted or arrested by the police and there seems to be little support from the authorities.” That makes sense. If the rules were properly applied, the shipping of nickel ore from many operations in Indonesia would simply shut down for months due to moisture levels during the rainy season.

How it might end

Keenly aware of its new export value (perhaps because of the attention to the maritime tragedies it caused), the Indonesian government promulgated Regulation Number 7 of 2012 on the 6th of February. The rule made it illegal to ship unrefined ore from Indonesia, instead requiring it to be refined and purified first. This had less to do with the danger of shipping the ore and more to do with raising the value of the export, all part of Indonesia’s plans for growth. But the rule was deferred until 2014 and the export of the precious dirt continues.

Some worry that the delay of the rule will make things much worse – in fact, the Harita Bauxite may have been the first casualty of that delay. Now working to beat the new deadline for the unrefined ore trade, shippers and miners alike are moving all they can before the party is shut down, and another rainy season is fast approaching. The new rules won’t begin until after the rain stops, so if we lose yet another bulk ship and more lives this coming year, none of us are allowed to act surprised.

The total transaction, consisting of the combined value of the vessels and the charter parties, has a total gross value of approximately USD $2.4 billion according to the company’s statement.

SinOceanic notes that they will outsource all operational and technical management of the vessels upon their delivery. The first vessel is expected in mid-2015 and long-term charter contracts will be sought for all vessels.

According to their Q1 report dated 15 May 2013, SinOceanic has ambitions “to reach a container fleet of 100,000-120,000 TEU lifting capacity within 24 months,” via acquisitions of “modern and standard vessels with charters attached and with appreciation potential.”

SinOceanic’s management consists entirely of former executives from BW Gas and majority owned by Cyprus-based Sinindo Holding Ltd.

The award marks the third consecutive time the organization has received the designation of leading classification society in the UAE. ABS won recognition in 2010, 2011 and 2013 (the event was not held in 2012). Bureau Veritas, ClassNK and Registro Italiano Navale also were nominated for the award.

“ABS maintains a strong presence in this significant shipping and offshore hub,” ABS Vice President, Middle East Region, Joseph Brincat said. “This award is an acknowledgement of the outstanding contributions by a classification society to the marine industry in the Middle East and reflects the hard work and dedication of our surveyors, engineers and supporting staff who contribute to regulatory and technology developments in the region.”

ABS continues to enhance its technical offerings in the UAE as well as class services that promote the highest safety and quality standards in the Middle East marine sector, Brincat added.

“Our standards of excellence in the Middle East and our international contributions toward the development of a more efficient marine and offshore industry distinguish ABS as a leader in class services for this crucial energy market,” ABS Chairman, President and CEO Christopher J. Wiernicki said. “We are honored to serve as the region’s top classification society.”

With a 150-year tradition of safety, ABS continues to be a leading global classification society, executing its mission to promote the security of life, property and the marine environment through development and verification of standards for the design, construction and operational maintenance of marine-related facilities.

Rickmers Shanghai, image: Rickmers

(Bloomberg) — Rickmers Group is breaking with tradition as it seeks to become the first German charter shipping company to raise money in the bond market.

The family-owned company, which traces its roots back 179 years to a shipyard in the port town of Bremerhaven near its headquarters in Hamburg, is meeting investors this week before a potential sale of as much as 200 million euros ($258 million) of five-year notes, said chief executive Ronald D. Widdows in an interview.

Europe’s shipping industry has been hurt by falling demand for seaborne goods and overcapacity amid the region’s debt crisis, prompting banks such as Commerzbank AG and HSH Nordbank AG, the world’s biggest shipping lender, to reduce or stop funding to the sector. Operators in Germany, as home to the world’s largest container shipping fleet, are among the worst affected.

Rickmers used to borrow from limited partnerships known as Kommanditgesellschaften, which offered certain tax breaks, said Widdows. That market closed as the shipping industry slumped, forcing the company and its German peers to find new sources of financing, he said.

“Rickmers is a very traditional German ship-owning company like many in this sector,” said Widdows. “We are the first ones to enter the public arena so the transparency that we now provide not just to investors but to customers and the investment community as a whole, is unique.”

Small Investors

The company, which is rated BB, or two levels below investment grade, by Creditreform Rating AG, plans to pay an annual coupon of 8.5 percent to 9.125 percent on the bonds, which it will begin marketing on May 27 for a minimum 1,000 euros each. Rickmers will use the proceeds to refinance debt and modernize its fleet, the company said.

“Half the funds will be used to do some work on existing debt and restructuring, the other half is to strengthen our heavy lift and break bulk business and potentially also new ship buildings, but large new building projects are for the future,” said Widdows.

Rickmers charters vessels to large container shipping lines such as Hapag-Lloyd AG and AP Moeller-Maersk A/S. It also operates a specialized liner service transporting heavy cargo such as locomotives, wind turbines and parts for the chemicals industry.

“We have seen a lot of interest from small investors,” said deputy chief financial officer Mark-Ken Erdmann in the same interview.

“We need to engage with different investors, investors that look at counterparty risk differently, banks that aren’t traditional ship finance banks,” said Widdows. Interested parties also include “some very large funds” as well as private banks, he said.

Christof Lauer, a spokesman for German shipowners’ association VDR, confirmed that Rickmers will be the first German charter company to sell bonds. The group expects more companies to enter the market as the Kommanditgesellschaft model disappears, he said.

Rickmers will market its bonds until June 7 and Frankfurt- based Close Brothers Seydler Bank AG will be the sole global coordinator and bookrunner for the sale.

- Angela Cullen and Nicholas Brautlecht, Copyright 2013 Bloomberg.

Maersk post-panamax container ship heads for the berth at Pier 400 Los Angeles.  Image (c) APM Terminals

(Bloomberg) — A.P. Moeller-Maersk A/S Chief Executive Officer Nils Smedegaard Andersen said he’ll be forced to prolong cost cuts at the world’s biggest container line as a policy of capacity restraint fails to lift shipping rates.

The company’s Maersk Line unit is seeking new ways to slim expenses even after a 7.1 percent reduction in the first quarter put the Copenhagen-based company on a more competitive footing than most of its rivals, Andersen said in an interview.

While resurgent U.S. demand should buoy volumes on North Pacific sailings, Andersen said there’s little sign of a revival on key routes transporting Asian-made consumer goods to markets in Europe. That makes cost cuts vital if Maersk is to deliver on its target of boosting net income this year even after last week halving its estimate for global container-volume growth.

“We will have to accept that for as long as there’s overcapacity, there will be price wars,” Andersen said in an interview in Copenhagen. “All we can do is shrug our shoulders and focus on making Maersk Line as competitive as possible, on cutting costs and on nurturing customer relations.”

The Shanghai Containerized Freight Index, which measures the cost of shipping boxes from China, the No. 1 export nation, has fallen for nine consecutive weeks as companies cut rates.

Trading Lower

Shares of A.P. Moeller-Maersk, which controls 15 percent of the container-market by capacity via Maersk Line, fell as much as 3.4 percent today, the most since April 12, and were trading 2.9 percent lower at 41,240 kroner as of 10:01 a.m. local time.

The stock has lost 24 percent since the end of 2007, valuing the company at 177 billion kroner ($31 billion), during which time the Stoxx Europe 600 Index has declined 16 percent.

Industry No. 2 Mediterranean Shipping Co. of Geneva, with a 13.5 percent market share, and No. 3 Marseille-based CMA CGM SA, with 8.5 percent, based on Alphaliner data, are closely held.

Maersk Line’s parent was yesterday downgraded to hold from buy by analyst Robin Byde at Cantor Fitzgerald in London. Byde said that as rates fall the shipping unit’s cost advantage won’t be enough to sustain gains that saw it post first-quarter net income of $204 million even as most peers lost money.

Drewry Maritime Equity Research said last week that rate volatility “will be a defining feature of the decade.”

Supply is exceeding demand for a fifth straight year, and the consultant forecasts the global container fleet will expand a further 7.5 percent in 2013, far exceeding demand growth of 4.5 percent and putting renewed downward pressure on prices.

Declining Workforce

Maersk’s view is even bleaker, with the company forecasting growth as low as 2 percent for the year in its latest results presentation on May 17, down from 4 percent previously.

While Andersen cites Europe as “dragging down the global economy,” he said the widening gulf between supply and demand reflects a failure to curb capacity that will prompt a further fall in container rates that are already below break-even for the industry as a whole.

“Cost improvements will compensate for the setback everyone will suffer during a price war,” Andersen added, declining to say whether Maersk will fire workers. “Cutting costs and making costs stay low is an ongoing exercise that isn’t stopping.”

Maersk Line scrapped about 3,000 jobs under the Streamline restructuring plan introduced in 2008 after the credit crunch and global recession sent demand tumbling. More posts have gone since, including 400 last year, 250 of them in Copenhagen, and it now employs about 25,000 people, 7,000 of them seafarers.

Triple-E

Maersk has also pared expenses by operating ships at lower, more fuel-efficient speeds, known as slow-steaming. Its vessels typically sail at 16-18 knots, compared with 20 knots in 2008, and the practice has become standard across the industry.

Parent A.P. Moeller-Maersk, which also owns an oil exploration unit and a drilling division, has additionally used its financial strength to invest in more cost-efficient ships.
The 20 Triple-E vessels, the first of which will be handed over next month, will be the biggest afloat and carry 18,000 containers while consuming about 35 percent less fuel per box than the 13,100-capacity ships operated by rivals, Maersk says.

The 400-meter (1,312-foot) craft able to carry 18 million flat-screen televisions were ordered at a cost of $3.8 billion in 2011, marking Maersk’s first ship purchase since 2008, as double-digit growth in container volumes the previous year seemed to indicate the end of the cargo slump.

Replacement Plan

Maersk says it’s happy to be taking the ships from South Korea’s Daewoo Shipbuilding & Marine Engineering Co., but has abandoned plans to establish two fleets of 10 Triple-Es to lift capacity and will instead use the first 12 to replace older vessels on an existing service linking Shanghai and Rotterdam.

While Andersen said that the U.S. economy is “moving in the right direction,” the Triple-E is too large to navigate the Panama Canal and therefore ill-suited to trans-Pacific use, and the last eight are also likely to displace older craft in the absence of a strong rebound in Asia-Europe traffic.

Andersen said cost cuts can only take companies so far, and that Maersk itself won’t be able sustain the pace of its first- quarter reduction, meaning capacity discipline remains the only step able to delivery enduring stability in the current climate.

“In the past, price wars only reduced profits,” he said. “Now they are causing losses. There has to be a strong push from the industry to restore rates.”

- Christian Wienberg, Copyright 2013 Bloomberg.

“From 2011 to 2012 the number of calls handled by our team in Japan grew by 10% and our SARD offer made up much of that development.”

“Japanese vessel operators and owners are positive about SARD because it guarantees efficient operation and fast turnaround. We ensure that our service experts make visits to customers on a timely basis to run evaluations on their time spent at each port. This enables us to improve our port operations in order to optimize the way we service our customers. In some cases, we have been able to save customers up to three hours per port call.”

Mr Iizuka continues:

“SARD is different to any other ships agency offer in the market right now, because it offers global, world-class services at a local level. Our team works in the same time zone and speaks the same language as our customers. What’s more, Japanese owners can take advantage of the scheme globally, not just in the home islands.”

WSS is investing in resources and expertise across North Asia to meet the increasing demands of this growing maritime hub. Specifically, it now covers 180 ports in Japan with four main service centres and offices located in Tokyo, Yokohama, Kobe and Moji.

Launched in 2010, SARD allows customers to deal with all their ships agency requirements from one central point, with improved communications between the agency and the operator, resulting in efficiency savings, predictable pricing and a single bank account for all payments, facilitating easy access to online job and tracking information.

Visit Wilhelmsen Ships Service on stand B25 at Bariship 2013.

- via Wilhelmsen Ship Service