News: Steel, Ship Prices Soar as Tankers Stay Firm

Wednesday, May 12, 2004

Soaring steel prices are now a major concern for leading shipbuilders. Uncertainty about spiraling material costs is even causing some yards to defer new orders, market reports indicate. "The lack of steel in some shipyards of the three major shipbuilding nations is causing newbuildings for 2007 and 2008 to be delayed," says New York tanker broker Poten & Partners in a recent market report. "Some shipyards are not accepting any more ship orders beyond late 2007 or 2008 delivery because of the lack of berth availability, insecurity stemming from the dollar's weakness, as well as uncertain steel cost," the broker says.

China may as well build ships, says Poten, as "they're taking all the steel". Steel prices have risen by $140 over the last two years, largely on the back of Chinese demand, Poten declares. And, commenting on current demolition rates, the New York firm explains that "steel needed to build bridges, roads and housing to accommodate the millions of people relocating to China's urban areas from remote rural villages has sent scrap prices above $400 per ldt from the low $100s/ldt approx two years ago".

The fact that sophisticated vessels such as LNG carriers and container ships are in heavy demand is further taxing shipyard capacity and new ship prices are rocketing. By way of comparison, Poten points out that a VLCC cost about $70m to build in 1999. This month, says Poten, the price for a new VLCC has risen to $86m, based on 2007 delivery. However, current VLCC market rates, which averaged W97 last month from the Arabian Gulf to the Far East, equivalent to $61,000 a day, are expected to decline to lower levels, with seasonal change, says Poten. But owners are falling over themselves to get their hands on prompt tonnage. This, says Poten, has meant that modern secondhand VLCCs now cost just about as much as new ones. Owners don't want to wait until 2007/8 - they want new tonnage now. Says Poten: "Suezmaxes, Aframaxes and Panamaxes are seeing the same type of price increases. A Suezmax newbuilding is quoted at just over $57m this month," the broker reports, the highest price in a decade. Meanwhile Aframaxes are being quoted at up to $47m, up from $36m in April 2000 and Panamaxes prices are around $37m, up from $27m two years ago.

In this latest bull market run, tanker companies continue to report record earnings. Most recently Teekay has declared record profits, with first quarter net income of $189m, up 253% from $53.6m in the corresponding period last year. The company explained that high spot rates were partly the reason for the better figures, whilst the integration of Navion was another key factor. Meanwhile a senior executive at tanker company Stelmar declared a bullish view of the future. Peter Goodfellow, chief executive, told Bloomberg news that current strong demand in both the East and West, led by China and the US, is very unusual and provided the company with a good opportunity to reposition ships profitably. Historically, it was not easy to find profitable cargoes to reposition ships for repairs in the east, Goodfellow said, but now Asian growth was far outstripping expansion in the US, he said. OMI meanwhile has reported its best ever quarter and anticipates that the strong tanker market will last for several years.

The first quarter profit of $56.41m was up from $25.73m one year earlier and was not only the company's best ever figure but was actually more than annual income in all but two of the years since 1984. According to OMI figures, the world's tanker fleet comprised 295.3m dwt at the end of March. The orderbook of just over 83m dwt represented 28.1% of the fleet.

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Shipbuilding

RS at SEA JAPAN 2014

Russian Maritime Register of Shipping (RS) was the only Russian company to take part in SEA JAPAN 2014 exhibition and conference – one of the major exhibitions of the maritime industry.

Reports: Brazilian Tycoon Batista Investigated For Financial Crimes

Brazils federal police have opened an investigation into former billionaire Eike Batista for financial crimes, including insider trading, manipulation of markets and money laundering,

Shipping Turns From Banks to Equity Markets for Cash

Shipping companies are turning to equity markets to fill a growing funding gap, betting that investors hungry for decent returns will provide capital to a sector

Finance

Saudi SABIC Q1 Profit Falls 1.8 % On Product Prices

Profit at Saudi Basic Industries Corp (SABIC), one of the world's biggest petrochemical firms, slipped 1.8 percent in the first quarter of this year as lower

India's Reliance Q4 Sales Rise

Indian energy company Reliance Industries Ltd posted nearly flat fourth-quarter profits, in line with estimates, as a slimmer margin in its oilrefining business offset higher revenue.

Schlumberger Announces Q1 Results

Schlumberger Limited (NYSE:SLB) today reported first-quarter 2014 revenue from continuing operations of $11.24 billion versus $11.91 billion in the fourth quarter of 2013, and $10.

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Navigation Pipelines Salvage Ship Repair Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1602 sec (6 req/sec)