SHIPBUILDING MARKET MONITORING Year 2013

Transcription

1 SHIPBUILDING MARKET MONITORING Year 2013 Report N 34 March 2014 HEADLINES Shipbuilding Market: - The global orderbook grows in 2013 after 5 years of decline - New orders doubled the demand in vessels accounting 54M CGT were contracted last year. - Demand grows for all types of vessels. Cargo carrier demand grows driven by the historically low newbuilding prices and the shift for more fuel-efficient design. - China was the main contractor with 1343 vessels and 21.4M CGT. - South Korea remains market leader in terms of value, with $ 107bn orderbook and $ 42.5bn contracted last year. - European yards saw the orderbook grow for first time since the crisis started. New orders reached the highest levels since 2008 in number of vessels and CGT terms (230 vessels, 2.5M CGT). News: - The EU leads the efforts for consolidating LNG as a main bunker fuel. Asian countries move forward too (12,13,14) - Chinese ship replacement subsidy to benefit Asian shipbuilders. 27% of 2013 new orders in China came from this scheme (2) - Japanese contracts grow 57%, mainly for eco-bulkers, thanks to the government s action devaluating the Yen, becoming more attractive for the export market (7, 8) - Shipbuilding countries willing to improve their market shares in Offshore (23,24,25,26) - IMO Solas and Marpol amendments into force since 1 st January Emissions control policies under development. New environmental legislations expected to benefit European industry, increasing the demand for new efficient vessels (16,17,18)

2 Restriction of use and Copyright notice This report is intended for internal circulation only within the membership of SEA EUROPE. Due to copyright restrictions from the data sources, please contact SEA EUROPE and ask for prior permission for any use of the information contained in this publication.

3 Summary Statement Global newbuilding activity showed signals of recovery in 2013 for first time since the global financial and economic crisis began in Despite overcapacity in the mass cargo markets, orders for bulkers, tankers and containerships grew in 2013 driven by the historically low newbuilding prices, the fuel-efficient design and speculative elements from private equity funds. Orders for Offshore and other specialized vessels are still an important market segment. European new orders reached the highest levels since 2008 despite the lack of credit. The orderbook, composed mainly by offshore, passenger vessels and other specialized ships, increased. Production volume decreased for the 3 rd year in a row due to some rationalization carried out mainly in China. After this strong decrease by 20% compared to 2012, it is expected that production will stabilize. Scrapping continues at high levels. However, the marine technology industry is still facing the challenges arising from overcapacity. Low freight rates and high oil prices make shipowners struggle to get profit from shipping, while low newbuilding prices lead to a fierce competition amongst shipyards but for low earnings. The new environmental and safety regulations coming from the IMO and the EU are expected to benefit the European maritime technology sector. Newbuilding, repair and retrofit will benefit from the demand for more efficient vessels which comply with the new rules: BWT, NOx and SOx emission regulations, SOLAS, Marpol amendments, etc. At the same time, European companies are pointing at new offshore activities and marine energies as business opportunities for the near future.

4 I. SHIPBUILDING STATISTICS Table 1.1 Summary of activity in different regions EU 28+Norway New Orders Market Share (in % of CGT 1 ) Turkey SEA Europe China Japan S. Korea Vietnam India Brazil Russia Philippines RoW World EU28+ Norway Completions Market Share (in % of CGT) Turkey SEAEurope China Japan S. Korea Vietnam India Brazil Russia Philippines RoW World EU 28+ Norway1 Orderbook Market Share (in % of CGT) Turkey SEA Europe China Japan S. Korea Vietnam India Brazil Russia Philippines RoW World Overview FY has seen a recovery in the demand of new cargo vessels at global level. China and South Korea, have increased their market shares as the main cargo carrier builders, while European and Japanese market shares have decreased compared to previous years. China leads the market shares in new contracts (40%), deliveries (35%) and orderbook (36%) in terms of CGT. South Korea follows with 32.4% of new orders, 31% of the orderbook and 31.6% of the production share in CGT. However, in terms of value, South Korean yards remain leaders. Japan has decreased its market shares in almost 4 points compared to 2012 and has received 14% of the orders in CGT terms. Philippines and Vietnam are considerably increasing their market shares and have the 3.4 and 1.4 % of the new orders market shares. Due to the increase in the demand of cargo carriers to Asian countries during 2013, European yards have seen their shares of new orders reduced in CGT terms. However, SEA Europe member yards have seen their new orders raise for first time since the beginning of the crisis, and the specialization on high value vessels maintains them in the 3 rd position on pair with Japan in terms of orders value. PAGE 4 OF 40 Data source: IHS Fairplay

5 Figure 1.1 Summary of activity in World Shipyards (CGT) Data source: IHS Fairplay Global orderbook shows signs of stabilization after a declining trend of the last 5 years. Demand for new vessels has doubled the new orders in 2012 and constitutes the highest ordering since the beginning of the crisis. By the end of the year 3375 vessels accounting 54M CGT were contracted. Deliveries have slowed down compared to precedent years. Figure 1.2 Summary of activity in Chinese shipyards (CGT) Data source: IHS Fairplay Chinese yards have seen their new contracts increase to 21.4M CGT in 2013, while in 2011 and 2012 they were contracting around 8M CGT per year. It has been the best year for Chinese yards with a high demand for more efficient cargo carriers since the beginning of the crisis and the overcapacity situation. Production has slowed down and the orderbook shows a recovery after 5 years of continuous decrease. PAGE 5 OF 40

6 Figure 1.3 Summary of activity in South Korean shipyards (CGT) Data source: IHS Fairplay South Korean orderbook is showing a slight recovery after 5 years of downturn. New contracts account for 17.4 M CGT more than twice the contracts in 2012, when they received orders for 7M CGT. Even affected by overcapacity in the cargo markets, owners are placing new orders for more efficient tankers, bulkers and containerships. Figure 1.4 Summary of activity of Japanese shipyards (CGT) Data source: IHS Fairplay Japanese shows a slight increase for first time since Thanks to the devaluation of the Yen, Japanese yards have positioned themselves more competitive at the export market and have secured new orders accounting 7.5M CGT, almost twice the new orders in Japanese production stands at 7CGT, slightly lower than in precedent years. PAGE 6 OF 40

7 Figure 1.5 Summary of activity of EU28+ Norway shipyards Data source: IHS Fairplay The European orderbook seems to stabilize after 5 years in a row dropping down. Contracting activity has increased compared to the precedent years. 230 new vessels have been contracted by European yards accounting 2.5M CGT. Figure 1.7 Evolution of the Orderbook in Number of Vessels by Country Data source: IHS Fairplay Global orderbook stands at 5994 vessels. China leads the orderbook in absolute terms with 2161 vessels, followed by Korea with 890, Japan 825 and Europe 28+Norway 466 ships. Chinese orderbook contains mainly Bulkers and other cargo carriers while Korean orderbook contains offshore and specialized vessels, tankers, LNG carriers and large containerships. PAGE 7 OF 40

8 Figure 1.7 Evolution of the Production in Number of Vessels by Country Data source: IHS Fairplay Global production has slowed down in 2013 compared to previous years. Around 3000 vessels were delivered, 500 less than in previous years. Figure 1.8 Evolution of New Orders in Number of Vessels by Country Data source: IHS Fairplay In the 1-3Q 2013 new contracts have surpassed the total number of contracts in Chinese yards contracted 817 new vessels while Korea secured 366 contracts. European yards have contracted 144 vessels and Japan 378 ships. Figure 1.9 New Orders by Main Shipbuilding Areas Data source: IHS Fairplay The number of new contracts has increased compared to the last 5 years vessels were ordered to 1977 ships ordered in Chinese yards received orders for 1343 vessels, mainly bulk carriers, doubling the number of contracts of the year before. Other countries also have seen the new orders increase. South Korea received orders for 557 vessels, Japan contracted 566 and European yards 303 vessels. PAGE 8 OF 40

9 Figure 1.9 New Orders by Area SEA EUROPE SHIPBUILDING MARKET MONITORING Data source: IHS Fairplay In CGT terms, China and South Korea were the leaders in new contracts. Chinese yards contracted 43.4M CGT, South Korea 36M CGT, Japan 13.7M and SEA Europe members 2.9M CGT. Figure 1.10 New Orders by Main Ship Types Data source: IHS Fairplay Demand for cargo carriers has picked up in crude oil and 333 chemical tankers were ordered. Demand for crude oil tankers was twice higher than in 2012 and demand for chemical tankers tripled the orders in The same happened with the demand of containerships, which was more than doubling the demand in 2012 with 245 new orders. Bulkers are the most demanded of the vessel types. 993 orders were placed in 2013 against 335 in Demand for LPG carriers also peaked with 129 new orders. In the case of the European vessel types, demand also increased compared to passenger ships were ordered, 26 more than in New contracts for offshore and other non-cargo vessels also surpassed the numbers of 2012, standing at 1069 vessels. PAGE 9 OF 40

10 Figure 1.11 Completions by Main Shipbuilding Areas Data source: IHS Fairplay 38M CGT have been delivered at world shipyards. No significant changes can be seen regarding the vessel types or the shipbuilding areas. Bulk carriers and containerships still lead the deliveries. Figure 1.12 Completions by Main Ship Types Data source: IHS Fairplay PAGE 10 OF 40

11 Figure 1.13 World Orderbook by Area Data source: IHS Fairplay The world orderbook has grown compared to the end of China leads the orderbook with 32.6M CGT followed by Korea. Tankers, Offshore and ONCV show a slight increase in compared to December 2012 Figure 1.14 World Orderbook by Ship Types With a slow-down in production and a raise in new orders compared to previous years, the world orderbook shows signs of recovery for first time since the crisis started. China has the largest orderbook in terms of CGT and number of vessels. The orderbook contains mainly cargo carriers, but it has slightly grown in all vessel types. Figure 1.14 World Orderbook by Ship Types Data source: IHS Fairplay PAGE 11 OF 40

12 Figure 1.15 Value of the Orderbook by main Shipbuilding Areas and Ship Types Data Source: Clarkson Global commercial orderbook stood at a total of $292bn. South Korean orderbook is the most valuable with a total of $107bn, 50% of its value corresponding to offshore. European orderbook, composed by passenger ships, offshore vessels and non-cargo carriers is estimated in $29.6bn, and Japanese orderbook in $28bn. Figure 1.16 Value of the New Orders by main Shipbuilding Areas Data Source: Clarkson Korea is the market leader with new contracts accounting for $42.5bn in Europe stands at pair with Japan with $10.4 bn. PAGE 12 OF 40

13 Figure Types 1.17 Value of Completions by main Shipbuilding Areas Data Source: Clarkson In 2013 World shipyards have delivered vessels accounting $91bn. Asian yards lead the production in terms of value, followed by European yards. Figure 2.1 Monthly Newbuilding Price Index Clarkson s ship prices index shows an improvement of US $, Won and Yen in 2013 but not in Euro and Yuan. Yards are still facing a complicate situation of low pricing to compete for low incomes. PAGE 13 OF 40

14 Figure 2.2 Evolution of Cargo Carriers Time Charter Rates Data Source: Drewry Cargo carriers charter rates are still at very low levels hardly covering operating costs, despite a slight recovery in 2013 for bulk carriers and tankers compared to Figure 2.3 Bunker Fuel and crude Oil prices Data source: BunkerWorld.com and World Bank Crude oil and bunkering fuel continue at historical high levels, standing at $ per tonne making hard for shipowners efforts to cover shipping costs and influencing the choice of owners for more efficient design vessels and other bunker fuels. PAGE 14 OF 40

15 Figure 2.4 Ship Scrapping Data source: Clarksons Low earnings from shipping and overcapacity have favoured an increase in scrapping over the last years. Almost 30M GT were sold for demolition in Bulk carriers lead the demolition market, followed by containerships. Figure 2.5 Materials Price Data source: MEPS.co.uk Despite slight fluctuations, over the last 2 year prices of the hot rolled plate have decreased. Asian steel stands at $625/ton while European stands at $688/ton. PAGE 15 OF 40

16 Figure Exchange Rates evolution Data source: X-Rates.com Exchange rates against the dollar continue to fluctuate making financial planning difficult in a period already challenging. Japanese Yen was devaluated by the government to help the industry and is now more competitive in the export markets. Korean Wan continues approaching more competitive rates. Figure 2.7 Evolution of Global Investment in Newbuilding Activity: Data source: Clarkson Current financial crisis has lead to a cut of investment in the global newbuilding market. In 2013, global investment increased compared to 2012, standing at 103.6bn $. The shares of investment in specialized vessel types have been increasing over the years due to the overcapacity situation in the cargo markets. Offshore markets increased their shares, passing from 20% in 2008 to 52% in However, 2013, with the increase on demand of cargo carriers, the investment in these vessels has been higher and investment in Offshore has decreased compared to previous years. PAGE 16 OF 40

17 Figure 2.8 Shares of Global Orderbook and New Orders in Offshore Newbuilding: Data source: Clarkson/IHS Fairplay In value terms, South Korea has the 42% of the offshore orderbook. It is the main builder of offshore large production and storage vessels. Brazil is a special case, the limited capacity makes their production slow and therefore the orderbook stands high and the very few new orders are inked. European orderbook of offshore vessels stands at 11bn $, an 11% of the global orderbook value. In 2013 Europe received 18% of the new contracts for offshore vessels II. GENERAL OBSERVATIONS CRISIS EFFECTS AND GOVERNMENTS ACTIONS CHINA 1. Orders help consolidate China s shipbuilding industry Companies won newbuildings totalling 69.8m dwt in 2013, but 90% went to just 30 yards The newbuilding market recovery has helped consolidate China s shipbuilding industry in the past year, a crucial step towards easing the sector s overcapacity woes, according to an annual review by CANSI. Chinese shipyards last year won newbuildings totalling 69.8m dwt, up 242% on-year. Of this, 62.8m dwt, or 90%, was contracted at 30 yards, out of the 1,664 yards monitored by Cansi, a government-affiliated industry group. That high concentration rate, mostly driven by quality shipowners and investors who want to take advantage of historically low newbuilding costs, is a far cry from the boom years, when thousands of shipyards scrambled for low-end orders. The total orderbook stood at 131m dwt, up 22.5%. Total delivery reached 45.3m dwt, down 24.7% from the year-ago level. Some 78.8% of the completed tonnage is for export, with Asia the biggest market, accounting for 61% in total export value. The country s top-tier players also achieved a milestone in the offshore sector, overtaking Singapore as the world s second-largest market for new orders after South Korea, according to Cansi data. Chinese yards fetched $18bn worth of new offshore orders, though most were of low specification, commanding a 29.5% market share, up from 16% in That surge did not immediately amount to a bottom-line boost, however. Between January and November last year, the industry recorded Yuan25.2bn ($4.2bn) profit, down 13.1%, with account receivables up 4% on-year to Yuan10.6bn PAGE 17 OF 40

18 and financing costs up 12.8% to Yuan5bn. Even if the industry realised Yuan25.2bn net profit, it mainly came from non-shipbuilding sectors, logistics equipment manufacturing and proceeds from financials. Shipbuilding has been virtually profitless, Cansi said on its website. The Beijingbased industry group expected continued bleak prospects for the sector. Total delivery this year will [remain flat at] last year s level at 40m dwt, new order intake will decline and total orderbook will be around 120m dwt, it said. Lloyd s List 12 March Chinese ship replacement subsidy to benefit Koreans? Chinese ship replacement subsidy announced by the government late last year is suggested to bring benefit to Korean shipyards as well. Analyst Kim Hong-Gyun at Dongbu Securities Korea stated, Chinese ship replacement subsidy carried out from the end of last year is a meaningful policy to lead the rise of newbuilding orders and ship values, and suggested his opinion of Overweigh t towards shipbuilding stocks. Four departments of the Chinese government released a subsidy plan to offer CNY 1500 ($2.44) per GT when a shipowner sends Chineseflagged aged vessels to scrapping facility and order new vessels, this brings at least a total of 11.08m GT, about 27% of newbuilding orders signed by Chinese yards in Thus, Chinese leading yards will see new contracts decrease from foreign shipowners whereas Korean yards might gain a benefit relatively. Kim also said, safety related regulations will be introduced to ships soon, which is expected to firstly affect orders for gas carriers, oil carrier and bulkers. Amongs Korean yards, those with fewer orderbook for commercial ship are forecasted to benefit, and added, in addition, yards having strong newbuilding competition in gas carrier (LNG carrier, LPG carrier) and offshore facility, where new orders have started to show active performance in line with industrial cycle, are prospected to experience a differentiated new order rise as well Asiasis 05 March 2014 EUROPE 3. Finland gives more state aid to its shipowners Move underscores new maritime strategy to 2022 and supports greening of fleets. The Finnish government has announced a second round of financial aid for its shipowners seeking to meet environmental challenges. The country s ministry of transport and communications said it has awarded a total of 12.6m this year to eight Finnish companies for retrofitting emission-saving technologies in a combined fleet of 45 vessels. Last year, the government announced funds totalling 19m although it said shipowners subsequently returned 11.7m. Finland is one of the few, if not only, European countries to take advantages of European state aid guidelines that allow a certain amount of financial support for owners seeking compliance with European environmental regulations and objectives. Under Brussels guidelines, countries are permitted to partly support the installation of emission abatement technology, gas fuel systems, and some fuel-saving ideas, to a certain percentage of the total cost. The level of aid also depends on additional annual costs and additional profits for a five-year period after the investment. No other European Union member state has announced anything similar as a support mechanism for its national shipping industry. Norway, strictly not a member of the EU although it tends to work closely with Brussels, has a NOx fund that supports shipowners wishing to install emission reduction technologies. North European shipping, especially that operating in the ECA of the North and Baltic seas, is subject to stringent sulphur emission regulations, which will force vessels to use expensive distillate fuels as of January next year. The Finnish government said the SOx emissions in the country s territorial waters have fluctuated in recent years from about 30,600 tonnes to about 48,600 tonnes. It said it expected the 2015 sulphur regulations to see this drop to about one tenth of this estimate. PAGE 18 OF 40

19 Lloyd s List 12 March 2014 SEA EUROPE SHIPBUILDING MARKET MONITORING 4. Romania s DMHI ends 2013 on a high Romania s Daewoo-Mangalia Heavy Industries (DMHI) ended 2013 on a high after winning three new shipbuilding projects. In October and December 2013, DMHI signed a contract with Greecebased Capital Ship Management for two 9,100 teu containerships the third and fourth vessels from a series previously ordered. The vessels, which are due for delivery in 2015 and 2016, will have an overall length of m, a beam of 48.4m, a draft of 14.5m and capable of reaching speeds up to 23 knots. Also signed in December 2013 was a contract with Monacobased Scorpio Bulkers for a series of five 180,000 tonne bulk carriers, due for deli-very in 2015 and The vessels, which are to be built under the supervision of American Bureau of Shipping, will have an overall length of 292m, a beam of 45m, and a draft of 18.2m and will reach speeds up to 14.5 knots. The third order made in December came from Tsakos Energy navigation Limited for five 112,000 tonne crude oil tankers. Set for delivery in 2016 and 2017, the 249m vessels will be built under the supervision of Det Norske Veritas (DNV). Norwegian state oil company, Statoil, will charter the five Aframax-tanker new builds. The Motorship 8 January Croatia s Uljanik Jadroplov to build four bulk carriers Croatia s Uljanik shipyard has signed a contract with local shipping company Jadroplov to cooperate on a project to build four bulk carriers, writes Jaroslaw Adamowski. The 37,000dwt vessels are to have a length of 183m and a width of 30m. Launch is scheduled for 2015 with completion by the end of 2017, Ul-janik said in a statement. In addition to bulk carriers, the 3 Maj shipyard has delivered oil and chemical tankers, container ships and other types of vessels. The Motorship 8 January Sietas Shipyards launches the first Jack-Up Vessel Built in Germany for Offshore Wind- Farms Berthold Brinkmann, administrator at Sietas Shipyard thanked the employees for their efforts during the insolvency process and specially to the company Van Oord «for their trust in Sietas shipyard with this order during the ongoing insolvency process. The vessel is proof of the efficiency and internationally competitive expertise in construction and building services at Sietas Shipyard. It is the first time a special-purpose ship such as this has been developed and built at a German shipyard Sietas Shipyard built the ship without any public funding or loans. World Maritime News 18 February 2014 JAPAN 7. Japan shipyard export orders rise 57% Weaker yen lured foreign owners to book eco-efficient dry bulk ships last year Japanese shipyards gained orders for 286 ships of 12.7m gt in 2013, compared with 177 ships totalling 8.1m gt in 2012, according to the Japan Ship Exporters Association. The 57% jump in gross tonnage ordered reflects a year in which foreign owners embraced Japanese shipbuilding expertise, particularly in ordering eco-bulkers, as the weaker yen made the country s yards more attractive. Foreign owners ordered 251 dry bulk vessels at a total 11.1 gt in 2013, up from 147 vessels at 5.8 gt the previous year. However, figures for December indicated that the dry bulk building bonanza may be ebbing. JSEA revealed that nine bulkers worth 496,713 gt were PAGE 19 OF 40

20 ordered in December, down from 19 bulkers for a total 609,990 gt in 2012 and substantially lower than the figure for November 2013, when foreign owners ordered 19 ships that totalled 941,666 gt. Yearly 2013 figures for tankers ordered for export from Japan amounted to 16 totalling 890,571 gt, down from 21 ships totalling 1.8m gt the year before. However, for general cargoships, the 2013 yearly figure stood at 18 vessels at a total 730,716 gt, up from nine ships totalling 535,148 gt in Lloyd s List 24 January Japan shipyard consolidation pioneer posts strong results in first earnings report Japan Marine United, the poster company for consolidation in the country s shipbuilding industry, has filed strong results in its first earnings report. The company recorded operating profits of 22.9bn ($224.2m) on revenues of 209.5bn during April-December, the first three quarters of its financial year, according to a company report. With lower provisions for shipbuilding-related losses due to a weaker yen, as well as efforts in cost-saving, JMU posted ordinary profits of 17.5bn and net profits of 16.9bn in the period, the report said. However, the company did not provide a full-year forecast, citing uncertainties in foreign exchange and newbuilding markets. JMU, which began operations in 2013, was formed from the merger of IHI Marine United a wholly owned subsidiary of Japanese industrial giant IHI and Universal Shipbuilding. Bringing together the two mid-sized Japanese yards to form the country s second-largest shipbuilder by capacity aimed to improve economies of scale and to position JMU to compete with shipbuilding conglomerates in China and South Korea. JFE, the parent of Universal, and IHI each hold 45.9% of JMU. Universal s minority shareholder Hitachi Zosen holds the remaining 8.2% stake. Shigemi Kurahara, the former president of IHI Marine United, serves as JMU s chairman. Lloyd s List 07 February 2014 SOUTH KOREA 9. Stable exports against weak Yen Despite overseas unfavourable factors like a weak yen, economic crisis in emerging countries and so on, Korea started this year with stable exports of $ 2.07 bn daily average recorded during January, up by 8.9% from a year ago. Exports to EU countries have increased greatly in accordance with the economic recovery, while exports to ASEAN countries and China also grew thanks to solid sales of IT products and so on. Meanwhile, exports to Japan continued to decrease commensurate to the weak yen exports to Latin America also declined. In terms of ships, export value in January was recorded as $2.91bn, decreasing by 1.9% month-on-month. Despite exports of high value vessels like drillships, LNG carriers and so on, the exports are said to have dropped due to delays in delivery and so on. But several indexes like newbuilding index etc are showing that trend recovery is likely amid contracted recession in shipbuilding industry due to oversupply, the report said. Asiasis, 10 February Daehan received $550m R/G South Jeolla Province of Korea announced that the province had decided to support Daehan Shipbuilding which seems to revive with newly inked 14 bulkers, and confirmed Refund Guarantee (R/G) for the yards as medium and small sized builders are having difficulties due to protracted recession in global shipbuilding and shipping industries. According to the province on December 17, the Haenam-based builder has struggled to receive R/G worth around $500m although it had been awarded a contract to build 14 bulkers of dwt range worth $ 800m. Accordingly, South Jeolla made it confirmed to issue R/G worth $550m as its related PAGE 20 OF 40

21 officers had responded rapidly, for instance, aggresively proposing urgency of R/G issue, expected influence on marine equipment makers in the province and so on, to major credit banks. Asiasis 13 March South Korea to introduce electric ships South Korea will roll out its first electric ships this year in a move to slash energy costs and green-house gas emissions of small fishing farms, ac-cording to Yonhap news. The government will fund 1.2 billion won (US$1.13 million) to introduce up to 40 vessels, each costing about 50 million won (US$47,328), according to the report. Each vessel only costs onetenth as much to operate compared with fuel-powered ships, noted the report. The tradeoff is in its speed, where the ship is limited to about 5 knots per hour, much slower than fuel-powered ones. It will also be restricted in operating range, which means they will be mainly only suitable for nearby seas or inland waters. The move is the latest energy saving push by the government, which last June implemented a set of rules for temperature management in buildings. Amongst the temporary moves, buildings must keep indoor temperatures above 26 degrees Celsius and stores are banned from leaving their doors open. This followed the forced shutdown of two nuclear reactors last month. ZD NET 14 January 2014 PRICES, FUEL, FREIGHT & EXCHANGE RATES MARKETS 12. EU funds LNG bunkering study The EU will support with just over 1 million from the TEN-T Programme a series of studies to analyse the potential introduction of liquefied natural gas (LNG) infrastructure in Spain and France. The studies, selected for funding under the 2012 TEN-T Multi-Annual Call, aim at determining the feasibility of implementing LNG bunkering facilities in the Port of Roscoff (northwest France) and the Port of Santander (northern Spain). They take into account the conformity of the infrastructure and equipment with the standards for risk prevention, environmental protection and the eventual constraints, revealed by the impact assessments and the public inquiries. LNG is rapidly emerging as a more environmentally friendly fuel for the maritime sector and its uptake is encouraged by the European Union. The European market for LNG for maritime transport is presently limited and infrastructure to cater for the small-scale supply of LNG is almost nonexistent. The findings of these studies will be an essential decision making tool for: a) the ferry operator, to start the construction and the retrofit of LNG vessels b) port authorities in Roscoff and Santander that will be able to plan the design and the implementation of LNG bunkering stations c) the authorities in charge of the public passenger transport in Cantabria d) helping to contribute to the realisation of the "Motorways of the Sea" (TEN-T Priority Project 21) concept EC press release 9 January 2014 PAGE 21 OF 40

22 13. Hong Kong government to mandate low-sulphur fuel switch in 2015; First Asian port to regulate vessel emissions A draft Bill that requires sulphur content be no more than 0.5% will be tabled at the Legislative Council for a vote in mid The Bill, if passed, will establish Hong Kong as Asia s first port to make bunker sulphur content mandatory, following steps by major US and European ports. Hong Kong s shipping industry has been calling on the government to enact such a requirement. For the past three years, some shipowners have pledged to switch to low-sulphur fuel while at berth in Hong Kong through a voluntary scheme named Fair Winds Charter. The scheme was established in January 2011 by the Hong Kong Liner Shipping Association, Hong Kong Shipowners Association and Civic Exchange, initially for two years and drawing in 19 local and international participants. It was renewed in early 2013 for a third year with 17 members; four had dropped out and two more joined. The campaign first bore fruit in September 2013 when the government laid out a three-year programme to cut by half the port and light dues for FWC members, an incentive that would offset 35%-50% of the extra costs on cleaner bunker fuel, according to a consultation paper by a government body, the Advisory Council on the Environment. Low-sulphur fuel is about 40% more expensive than ordinary fuel, or $300 more per tonne. For a 20,000-tonne vessel, the fuelswitching cost in Hong Kong waters will be HK$14,000 ($1,805), according to the ACE paper. Newcomers to low-sulphur bunkers when berthing in the city are also eligible for a 50% credit on port dues expiring September The threshold to be set in Hong Kong 0.5% rather than the stricter 0.1% set by some western ports is not difficult to achieve, according to HKSOA managing director Arthur Bowring. It is difficult to find supply of fuel with 0.1% sulphur content in Asia. So we recommended the government to make 0.5% sulphur content mandatory, instead of 0.1%. The 0.5% wouldn t be a problem to bunker in Asia, he said Fair Winds Charter members : Alianca, APL, China Navigation Co, CMA CGM, Cosco, Crystal Cruises, Evergreen Line, Hamburg Süd, Hanjin Shipping, Hapag-Lloyd, Höegh Autoliners, Hyundai Merchant Marine, Maersk Line, MOL, NYK Line, OOCL, Prestige Cruise Holdings, Wah Kwong, Yang Ming. Fair Winds Charter members 2013: Alianca, APL, China Navigation Co, CMA CGM, Cosco, Hamburg Süd, Hanjiin Shipping, Hapag- Lloyd, Hyundai Merchant Marine, Maersk Line, MOL, NYK Line, OOCL, Pacific Basin, Wah Kwong, Wan Hai Lines, Yang Ming. Lloyd s List 17 January LNG bunkering report predicts Asian focus It is estimated that the global sales of bunker fuels will surpass 350 million tonnes in The prediction was made in the LNG Bunkering report created in collaboration with the LNG Bunkering Summit, taking place January 2014 in Amsterdam. In fiscal terms, global spend on bunkering for 2012 was approximately $2.6 billion with the top 10 bunker ports controlling more than 35 per cent of total global bunkering volume. As of Q4 2013, DNV stated that there were currently 83 LNG-fuelled ships in operation or on the drawing board worldwide. In line with this, growth in LNG-powered vessels is set to skyrocket by 20 more than 3,700 per cent through 2025 with around 3,200 ships set to be commissioned over the next 12 years. This rise in LNG-based marine traffic will entrain a concomitant rise in the need for LNG bunker fuelling stations, prompting a 72 million tonnes rise in LNG usage at an increase of an average of six per PAGE 22 OF 40

23 cent per annum. In the same time period, the European Commission will make major investments into LNG-fuelling infrastructure to be installed in all 139 major EU maritime and inland ports. Although the EU is leading the way with regards to funding and affirmative action in the LNG bunkering story, positive moves in the rest of the world are changing the tide with regards to the speed of adoption of LNG as a primary bunker fuel. As the main bunkering port for the Asia Pacific region, the Maritime and Port Authority (MPA) of Singapore accounts for almost one fifth of the world s bunkering demand and fulfils 38 per cent of the market share of the top 10 bunkering ports combined. In November 2013, the MPA signed a Memorandum of Understanding with two Belgian ports, Antwerp and Zeebrugge, to work together on re-search, regulations, and other frameworks for LNG bunkering. The announcement follows the commissioning of the island city-state s first LNG terminal on Jurong Island in Q2 2013, at a cost of $1.38 billion USD. MPA is in direct competition with two of its main rivals in the bunkering world to introduce LNG solutions - the Port of Rotterdam in the Netherlands and the Port Of Fujairah on the United Arab Emi-rate's Indian Ocean coast. In October 2013, Rotterdam was awarded 74 million-worth of subsidies by the European Union to fully develop the market for LNG as a fuel and to open an LNG hub in Rotterdam before the end of In the UAE, the first land-based LNG regasification facility received government approval in November The terminal will have a projected throughput capacity of 1.2 billion cubic feet (34 million m³) of natural gas per day, and will be constructed and operated by EmiratesLNG. Another factor in the global move towards LNG bunkering is China. In a statement released in 2013 by China s Ministry of Transport (MOT), the Chinese Government stated its intention to have two per cent of the domestic Chinese inland fleet operating on LNG dual fuel vessels by 2015, doubling that number fivefold to ten per cent by The MOT has targeted the construction of between 200 and 500 vessels solely fuelled by LNG by The gasification of the Yangtze, the third longest river in the world is also of great import to the LNG bunkering story in the East. The Maritime Executive 16 January Asia-Europe freight rates drift lower SCFI shows transpacific trades are holding steady. Container freight rates in the Asia to Europe trades have lost further ground over the past week after the rally at the start of the year. Transpacific rates are remaining steady, however. The latest Shanghai Containerised Freight Index was down points to today as the China to north Europe element shed $43 per teu, or 2.6%, to $1,598. Spot rates moved up to $1,765 at the beginning of January as lines brought in general rate increases, but the market has since drifted back ahead of the Chinese new year slowdown. Rates to Mediterranean destinations eased $36, or 2.2%, to $1,634 per teu. On the Pacific, eastbound spot rates to the US west coast were more or less unchanged at $2,110 per feu, and those to the east coast were just $3 weaker at $3,427 per feu. Lloyd s List 24 January 2014 III. DEVELOPMENTS BY SEGMENTS EQUIPMENT AND SUPPLIERS 16. IMO Solas and Marpol amendments come into force Changes establish safe crewing levels on passengerships Amendments to key IMO conventions are now in force that mark important changes in passengership safety and prohibit blending bulk liquid cargoes on board. PAGE 23 OF 40

24 A number of amendments to SOLAS, MARPOL and the 1988 Load Lines Protocol have entered into force or taken effect from January 1, Solas now includes a mandatory requirement for new passengerships to have either on-board stability computers or shore-based support to provide operational information to the master for safe return to port after a flooding casualty. It also requires operational testing of free-fall lifeboat-release systems to be performed either by free-fall launch with only the operating crew on board or by a simulated launch. Every passengership now has to establish appropriate minimum safe crewing levels following a transparent procedure, taking into account the guidance adopted by the IMO on principles of minimum safe crewing and issue an appropriate minimum safecrewing document or equivalent as evidence of the minimum safe crewing considered necessary. The Solas amendments also prohibit blending of bulk liquid cargoes during the sea voyage and production processes on board ships. The International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers has also become mandatory. The amendments also include revised Marpol Annex III regulations for the prevention of pollution by harmful substances carried by sea in packaged form, to include changes to the Annex that coincide with the next update of the mandatory International Maritime Dangerous Goods Code, specifying that goods should be shipped in accordance with relevant provisions. The US Caribbean Sea Emission Control Area has also come into effect under Marpol Annex VI, bringing in stricter controls on emissions of sulphur oxide, nitrogen oxide and particulate matter for ships trading in waters adjacent to the coasts of Puerto Rico and the US Virgin Islands. The emission control area was designated under Marpol amendments adopted in July There are now three designated ECAs in effect globally: the US Caribbean Sea ECA and the North American ECA, and the sulphur oxide ECAs in the Baltic Sea and the North Sea. Amendments also came into effect on January 1 to the International Convention on Load Lines 1966 to shift the Winter Seasonal Zone off the southern tip of Africa 50 miles further south. Lloyd s List 01 January MEPs press for reporting of ships NOx emissions Greens want to expand CO2 MRV proposals to include more emissions and smaller ships European parliamentarians are seeking to include more of shipping s emissions in proposals for an industry monitoring reporting and verification system. At least two of the EP committees have been debating proposals drafted by the EC to get ships entering or in European waters to record and report their CO2 emissions. The goal is part of Europe s commitment to tackling climate change, but also of a direct drive to push IMO member states to work harder to find an international market solution in addition to the design and operational measures that have already been introduced. Parliamentary debate has mostly been within the environment committee, but with the transport and tourism committee adding opinions. Debate in January included calls for ships visiting European ports to monitor, report and verify NOx emissions as well as CO2, given that NOx is also a greenhouse gas, as well as being detrimental to human health. Some politicians are also seeking to lower the tonnage threshold for the proposed reporting scheme. Although the original proposal calls for vessels of 5,000 gt and larger to monitor and report CO2 emissions, there is a push to lower this to 400 gt, and bring it in line with some of the environmental requirement limitations at the IMO. The commission has reported that up to 90% of the region s maritime emissions will be included if vessels of 5,000 gt and over are included in an PAGE 24 OF 40

25 MRV scheme and eventual market-based measure. If all vessels over 400 gt are included, a further 8% will be covered. The requirement remains for vessels to record emissions from the last non-european port until arrival at the next non-european port. All vessels in inter-european trade would have to monitor and report continuously. It remains unclear how far these ideas will develop. As well as the debate within the EP being split down political lines, representatives from the commission have pointed out the difficulties in monitoring NOx emissions given that the technology is generally not considered robust enough. Some experts who have spoken to Lloyd s List are convinced that the proposals for including NOx and smaller vessels in the MRV will not pass through the plenary vote of the European Parliament in April. Lloyd s List 27 January BWT manufacturing market is big enough Acording to Wendy Laursen, the number of system manufacturers is growing to meet demand. The industry is warming to the idea of the implementation of the ballast water management convention after IMO has agreed to adjust the implementation schedule. All vessels constructed before the entry into force date are now considered existing vessels and allowed to install a treatment system at the first renewal survey following entry into force. This raises the question of whether there will be enough systems available if the tonnage requirements are met soon. Dr Robert Hilliard, managing principal at Intermarine Consulting in Australia, points out that when Lloyd s Register released its first technology guide in 2008, the lclass society identified 28 vendors. This increased to 41 in 2010 and 67 in I haven t seen anything radically new in the market, but there have been advances in vendor understanding of the operational limitations of their particular units. This has driven incremental improvements in unit efficiency, serviceability and performance envelope. Apart from their efforts to get units onto new or existing ships, most vendors have been focussed on making step-change upgrades to their original units and getting USCG certification as alternative systems. More challenging testing has been undertaken to help widen the original IMO test regime regarding salinity range, plankton/suspended solid load and time that treated water is stored. Improving the range, quality and transparency of the tests and results helps satisfy market concerns, says Dr Hilliard. Jad Mouawad, owner of Mouawad Consulting, was contracted by the Canadian Government to look into technologies suitable for the fresh, cold water of the Great Lakes. His study did not consider energy consumption, footprint, etc, but just physics and chemistry and whether the systems had appropriate approvals. He concluded that there were 16 type approved UV systems and 12 side stream electrolysis systems that would be suitable. Globally, the market is meeting supply and demand of treatment systems for newbuilding, says Mr Mouawad. In China, we see a rise in the number of systems. They are usually very similar to other systems in the market and amazingly cheap in price. The manufacturers seem to have understood the rules of the game though, so they go for the highest type approval quality they can get with DNV. I believe the makers will now be able to supply the market with the numbers needed. Recent Chinese entrants to the market include Jiujiang Precision Measuring Technology Research Institute and Elite Marine Equipment & Engineering. Andrea Gao, manager of Ballast Water Treatment System Intelligence, a dedicated consultancy in China, says there is no clear connection between suitable treatment system type and vessel type. Ballast water characteristics such as turbidity, salinity and silt content can impact the efficacy, maintenance or reliability of some ballast water treatment technologies, says Mr Gao. Systems PAGE 25 OF 40

26 using filtration, separation and UV radiation are sized for the maximum flow rate in the ballast system. The efficacies of chemical biocides and deoxygenation systems, however, do not depend so much on the flow rate of the pumps because a certain concentration in the water in the ballast tanks is more important. Therefore, it is more pertinent to distinguish between high and low ballast ships. Mr Gao provides recommendations to shipowners on the most suitable system for a targeted business environment. The Motorship - 28 February 2014 NEWBUILDINGS 19. Consolidation is on the cards for shipbuilders 2013 upturn in orders has failed to boost yards balance sheets Although shipbuilders have enjoyed an upturn in newbuilding orders and prices over the past year, excess capacity will probably continue to curb their margins. The newbuilding recovery, which began with bulk carriers then spread to oil tankers, has been obvious to most first-tier and some second-tier yards in China, South Korea and Japan, the world s three largest shipbuilding nations. According to Clarksons data, new orders amounted to 120.8m dwt in the first 11 months of last year, nearly tripling the year-ago level of 39.9m dwt. Shipbuilders in China, the world s leading shipbuilding nation, received orders totalling 55.4m dwt during the period, up from 16.7m dwt a year ago. South Korean shipyards secured orders totalling 35.3m dwt, up from the year-ago level of 11.9m dwt. Yards in Japan won orders totalling 21.5m dwt, up from 9m dwt a year ago. Prices for the main types of commercial vessels have also bottomed out, apart from those for containerships. According to VesselsValue.com, newbuilding prices of bulk carriers for delivery in 2015 have risen by more than 20% over the past year, with gains for capesize ships outpacing other sizes at 55.9% as of early January. Prices for oil tankers have increased more than 10% in a year and long range one product carriers enjoyed the strongest gain, at 52.4%. However, it generally takes about two years for increases in orders and newbuilding prices to be reflected in earnings in the shipbuilding industry, especially in the down cycle, when downpayments are low. That left most yards struggling to maintain their profitability last year. The 80 Chinese yards surveyed by CANSI recorded revenues of Yuan217.4bn ($35.9bn) in their main business during January-November 2013, down 15.8% year on year. The yards pre-tax income showed an even sharper fall, dropping 63.5% on-year to Yuan4.7bn. South Korea s Hyundai Heavy Industries, the world s largest manufacturer of commercial vessels, did not have a good year either in It is estimated to have made operating profits of Won800bn ($750.6m) last year, down 37.7% on-year, according to a note from Daishin Securities. Looking to the year ahead, there are few signs of optimism for global shipbuilding. Newbuilding prices are still at least 20%-30% lower than the peak levels reported in the previous boom and volatile freight markets could curb demand from owners. Although many industry officials have called for consolidation among yards to reduce excess capacity, little has happened in South Korea and Japan. However, many small and medium-sized shipbuilders have gone out of business in China. Against that backdrop, it is little wonder that yards will continue to develop nonshipping and energy-related business to diversify their business risks. Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, two South Korean giants renowned for building offshore facilities and LNG carriers, have emerged from the downturn rather quickly. PAGE 26 OF 40