Shipowners on verge of a buying frenzy, insiders say

PUBLISHED : Monday, 23 April, 2012, 12:00am
UPDATED : Monday, 23 April, 2012, 12:00am


Hong Kong shipowners could be poised to invest heavily in new fuel-efficient ships at rock-bottom prices, despite ongoing concerns about overcapacity and uncertain cargo growth, according to industry insiders.

'By the second half of this year you will see Hong Kong owners seriously looking at acquiring tonnage,' said Kenneth Koo Chee-kong, head of tanker and dry cargo operator Tai Chong Cheang Steamship.

The comments were echoed by shipping brokers and lawyers who said there was evidence of renewed interest being shown by Hong Kong owners in replenishing their fleets.

'According to owners we've talked to, everything is on the table. This includes new and secondhand ship purchases,' said a shipping lawyer. Hong Kong owners were looking at the possibility of ordering on their own account or as joint ventures with other companies, he added.

Shipbrokers said owners were particularly interested in acquiring more fuel-efficient ships that were 'lighter and greener', and shipowners including Chellaram Shipping and Pacific Basin Shipping had expressed a desire to expand their fleets if the right deal was available. Pacific Basin bought a 37,000 deadweight tonne (dwt) 'Handysize' ship in the first quarter of this year for US$22.5 million on a resale of a previously defaulted order from a Japanese shipyard. Typically sized between 15,000 and 35,000 dwt, such vessels are often craned and their size means they can be used to offload their cargo in smaller ports.

The acquisition, confirmed by the shipper's chief financial officer Andrew Broomhead, took the firm's total fleet to 104 Handysize ships to make it one of the world's largest operators.

Einar Straume of Rodskog Shipbrokers described the purchase as a 'brilliant deal' and said Pacific Basin would earn a lot of money from operating the ship over its 25- to 27-year lifespan. Ship prices were presently at the bottom of their price cycle, he added - a view echoed by other shipbrokers.

'There is a limited downside on price. We are back to levels we haven't seen for 10 years,' said Straume.

Many Hong Kong shipowners held back from ordering new ships as prices surged in line with a rapid rise in charter and freight rates up to early 2008. But since then prices have slumped.

A 180,000 deadweight tonne Capesize dry-cargo ship used to haul iron ore would have cost nearly US$100 million from a South Korean shipyard at the height of the boom. But prices have since fallen to around US$45 million to US$50 million for a similar-sized ship.

Peter Cremers, chief executive of Anglo-Eastern Ship Management, was unaware of specific orders from Hong Kong shipowners, but said it was clear they were becoming rightfully concerned about replenishing their fleets with the newer and more economical vessels that were becoming available on the market.

Martin Rowe, managing director of shipping services provider Clarkson Asia, said new fuel-efficient ships were attracting a lot of interest among fleet operators.

A Japanese-designed and built 82,000 dwt dry cargo ship could be 3,000 tonnes lighter than a vessel with a similar cargo capacity built in China, he pointed out, and the lighter vessel would consume less fuel, making it more attractive to charterers who leased the vessel to haul cargo.

Shipowners and shipyards had also worked together to enhance ship designs to improve the shape of hulls and propulsion systems to reduce friction through the water - improvements which can cut fuel consumption by 15 per cent according to ship safety organisations.

Rowe said charterers, who pay for the fuel when they lease ships from owners, have been willing to pay slightly more to charter such fuel-efficient and lighter ships. In one case he knew of a charterer who had agreed to pay around US$500 per day extra on a three-year charter for a 92,000 dwt dry cargo ship.

Pacific Basin's Broomhead agreed that a two-tier chartering market appeared to be opening up between fuel-efficient and fuel-guzzling vessels, and vessels that consumed less fuel were being more quickly chartered than less fuel-efficient ships.