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

Q-Max Floating Dock Launched

On March 21, 2014, senior management from N-KOM and Nakilat attended the launching and naming ceremony of N-KOM’s Q-Max sized floating dock at Hyundai Samho Heavy Industries in South Korea.

US Sens. Kaine and Reed Visit Newport News Shipbuilding

Huntington Ingalls Industries (HII) hosted U.S. Sens. Tim Kaine (D-Va.) and Jack Reed (D-R.I.) Tuesday for a tour of the company's Newport News Shipbuilding division.

Damen Launches Kuwait Oil Company’s New Tug

First of 14 ASD Tugs launched at Damen Shipyards Galati The Kuwait Oil Company’s (KOC) new ASD Tug 3212 was launched end of March at Damen Shipyards Galati, Romania.

Finance

All Items Approved at Stolt-Nielsen Meeting

Stolt-Nielsen Limited announced that all agenda items were approved and all nominated directors were elected at its Annual General Meeting of shareholders held yesterday in Bermuda.

Three European firms win Angola deepwater deals

Three European companies have won contracts for almost half the value of Angola's $16 billion ultra-deepwater Kaombo oil project, confirming a trend toward bigger

Litigation Can Cost Shipbrokers an Arm & a Leg

A survey of London solicitors by specialist intermediaries insurer ITIC has highlighted the high cost of litigation for shipbrokers and others seeking judgment in the English courts,

 
 
Maritime Security Navigation Offshore Oil Pipelines Pod Propulsion Salvage Ship Electronics Shipbuilding / Vessel Construction 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: 0.0957 sec (10 req/sec)