Katie Dale

In February, the crude tanker orderbook increased to 74.3 million DWT from 73.8 million DWT in January, driven by the rise in VLCC and Suezmax vessels.

Five-year VLCC prices in February increased to $80.9 million from $80.7 million in January. Ten-year VLCC prices fell to $52.2 million from $52.8 million.

Newbuild VLCCs are the largest ship used to transport crude oil long distance. According to Lloyds List, buying a newbuild vessel is better than secondhand.

On a year-to-date basis, the Baltic Dirty Tanker Index declined 13.1% to 769 on March 20. On a year-over-year basis, the index recorded an 8.2% increase.

On a month-over-month basis, iron ore exports to China from Port Hedland increased marginally to 30.25 million tons in February 2015.

In the first two months of 2015, China’s crude steel output dropped 0.21% year-over-year to 130.5 million tons, according to government data.

In 2014, China coal imports dipped year-over-year for the first time in six years. Imports fell 10.9% to 291.6 million tonnes.

China’s iron ore imports declined for the second straight month in February 2015, down 13.5% to 67.94 million tonnes over January 2015.

Just before the release of the official PMI data, the central bank in China cut interest rates by 0.25 percentage points.

Seasonality in Brazilian iron ore exports may improve the pace of shipments for the rest of 2015 and possibly buoy Capesize rates.

Like the cost of newbuilds, secondhand vessel prices are also on the slide. Five-year old Capesize prices dropped to $33.1 million in February 2015.

In this series, we’ll look at some of the important metrics that drive the dry bulk shipping industry such as the price of commodities.

Diana Shipping’s investment strategy is to preserve the strength and integrity of its balance sheet and gradually increase its leverage as asset values weaken.

In 2014, the newbuilding orderbook for dry bulk carriers reported 746 orders—145 Panamax vessels, 132 Capesize vessels, and 19 VLCCs.

Coal stockpiles reached 8 million tons. The continued rise may negatively impact the near-term coal import prospects.

According to Diana Shipping’s (DSX) management, world crude steel production reached 1.66 billion metric tons in 2014. It was up by 1.2% compared to 2013.

Diana Shipping is a global shipping company. It specializes in dry bulk vessel ownership. It reported the results of its 4Q earnings on March 4, 2015.

DryShips (DRYS) commented that its total dry bulk fleet’s compound annual growth rate for 2005 to 2014 stood at 9.1%. Its fleet increased by 4.4% in 2014.

Looking ahead, spot market rates are expected to rise going forward, and this will allow DryShips to improve its revenue and earnings.

World Maritime News comments that it expects a fundamental and sustainable dry bulk market recovery in the second half of 2015 and throughout 2016.

In this series, we’ll discuss DryShips’ fourth-quarter earnings in detail and the company’s 2015 outlook. We’ll also analyze the company’s strategy.

For VLCCs, floating storage was the main theme at the beginning of 2015. Around 40 vessels have been confirmed for time charter.

In 2014, Chinese iron ore imports were up 14% YoY. Domestic iron ore production only increased by 5%. There are planned expansions for global iron ore mines.

In 2015, the net fleet growth is forecast to be below 4%. The forecast is lower than last year. It’s expected to be lower than the demand growth.

History reveals that increases in world GDP growth generally led to increases in marine transportation rates. Since June 2014, crude oil prices fell 50%.

Navios Holdings has a strong balance sheet. It has low leverage levels and a healthy cash balance. As of December 31, 2014, the company recorded $250 million in cash.

Navios Maritime Holdings (NM) is a global seaborne shipping and logistics company. It’s focused on the transport and transshipment of dry bulk commodities.

In 4Q14, LR2 product tanker rates touched their highest levels since 4Q08. Record high levels of Asian naphtha imports from the West supported LR2 rates.

Teekay Tankers’s recent delivery of LR2 vessels were already trading in its Taurus pool. The fleet started generating revenues immediately upon delivery.

The global tanker fleet is forecast to grow by 1.7% in 2015, with higher growth weighted toward the product sectors.

The impact of low prices and development of floating storage in 1Q15 are expected to support positive tanker demand in the first half of 2015.

TNK CEO Kevin Mackay noted that in the past three months, average crude spot tanker rates were at their highest since the strong 2008 winter tanker market .

Spot exposure for the Teekay Tankers fleet increased by ~3,900 revenue days for 2015. If the spot market rates rise, TNK can earn higher revenues.

Since October 2014, Teekay Tankers has secured time charter-in contracts for two additional Aframax vessels and one additional LR2 vessel.

TNK’s chartering strategy includes vessel employment via a mix of short- or medium-term fixed-rate time charter contracts and spot tanker market trading.

Led by economies of scale over long distances, crude is more likely to be shipped via very large crude carrier.

A strong increase in tanker rates is allowing Navios Maritime Acquisition to secure attractive contract periods for its fleet of charters.

Navios Acquisition’s product tanker chartering strategy focuses on the upside potential by using profit sharing arrangements on most available days.

For the full-year 2015, Navios Maritime Acquisition expects to pay dividends of $15.7 million. A 4Q 2014 dividend of $0.05 per share will be paid in April.

As current fuel prices fall below log-time inflation, the adjusted average oil price leads to contango, and that drives VLCC rates higher.

Since January 2009, China’s oil imports have more than doubled, at a 16% compounded annual growth rate. It will need ~14 million barrels per day by 2035.

The operations of Navios Maritime Acquisition Corporation (NNA) are managed by Navios Tankers Management, a subsidiary of Navios Maritime Holdings (NM).

In January 2015, five-year VLCCs’ (very large crude carriers) prices increased to $80.7 million—from $77.1 million in December 2014.

On a YTD basis, the Baltic Dirty Tanker Index declined 5% to 841 on February 20, 2015. On a YoY basis, the index recorded a 10.50% increase.

The dry bulk industry is broadly affected by factors like global economic growth, which positively correlates with raw material consumption.

Since its foray into the container sector, Navios Maritime Partners has invested $540.5 million in eight vessels with a total capacity of 63,508 TEU.

In 2014, China’s coal imports recorded their first year-over-year dip in six years. Imports dropped 10.9% to 291.2 million tonnes.

According to customs data, iron ore exports from Brazil accounted for 18% of China’s overseas purchases in 2014 compared to 19% in 2013.

Shipments through Port Hedland represented 55% of Australia’s iron ore exports last year, and more than 80% of cargoes go to China.

China’s official purchasing managers’ index (or PMI) declined to 49.8 in January 2015 from its December 2014 levels of 50.1.

The Baltic Dry Index slid 0.9% to 554 points on February 9, 2015, the same level it fell to in July and August of 1986.

To date in 2015, the Guggenheim Shipping ETF, an index weighted with dry bulk shipping companies, increased 1.3%, while the Baltic Dry Index declined 28.3%.

DHT’s 4Q14 net operating cash was $17.6 million compared to $7.4 million in 4Q13. This quarter’s dividend is 150% higher than the past nine quarters.

DHT’s acquisition of Samco is part of DHT’s growth strategy by acquiring vessels or companies with high-quality vessels.

Stockholders provided the equity through equity offerings, operating cash flows, and long-term borrowings. These funds have been treated as capital expenditures.

For the nine-month period ending on September 30, 2014, voyage revenue increased by $29.9 million, or 34%, to $117.9 million from the same period last year.

An experienced management team strengthens the Tankships’ foundation. George Economou will serve as its chairman, president, and CEO.

Tankships seeks to expand its fleet size through timely and selective acquisitions of additional secondhand modern tankers and the available optional vessels.

Despite a fall in the crude oil prices, tanker firms are looking to raise capital through the US markets. Crude prices recorded a dip of 46.8% in 2014.

Tankships Investment Holdings Inc. (TNKS) is an international shipping company. It provides worldwide seaborne transportation of crude oil petroleum.

Analysts and money managers follow the Baltic Dirty Tanker Index in order to assess the crude oil shipping industry’s revenue and earnings potential.

Angeliki Frangou, head of Navios Group, expects 2015 to be an uncertain period. Factors include anemic growth in Europe and deflationary fears in Japan.

The international LPG shipping market is volatile in profitability, charter rates, and vessel values, adversely affecting businesses during downturns.

Navios Maritime Midstream Partners seeks to continue growing and diversifying its fleet of owned and chartered-in vessels though strategic acquisitions.

Since its listing on November 14, 2014, until January 16, 2015, Navios Maritime Midstream Partners recorded a 4.2% increase in its share price.

For 2014, the total coal imports were 291.22 million tonnes—compared to 327.1 million tonnes in 2013. This was after many years of double-digit growth.

The National Bureau of Statistics revealed that the December crude steel output in China increased 7.6% to 68.09 million tonnes. Steel output was up 1.5% YoY.

On a weekly basis, vessel prices indicate the current trading prices of Capesize, Panamax, Supramax, and Handymax vessels. They also indicate the weekly changes.

The Baltic Dry Index, or BDI, measures the price of transporting dry bulk. It’s a combination of rates for different ship sizes.

China accounts for a major share of dry bulk commodities’ imports and exports. In the past three months, the Guggenheim Shipping ETF (SEA) dropped 6.1%.

As of September 30, 2014, DHT Holdings (DHT)—including Samco—had interest-bearing debt totalling to $519.9 million.

For the third quarter of 2014, DHT Holdings’ earnings estimates per share are at $0.071. Meanwhile, sales are estimated at $47.6 million.

Most of the vessels in DHT Holdings’ fleet portfolio were built in the year 2000 and onwards. The exception is one vessel that was built in 1999.

DHT Holdings is an independent crude oil tanker company whose fleet consists mostly of VLCCs and a few Suezmax and Aframax vessels trading internationally.

As the supply of vessels increases in the shipping market, the newbuilds entering the markets affect the tanker market rates.

In December 2014, Nordic announced that it had entered into a preliminary agreement to build two Suezmax tankers of 158,000 deadweight tons.

In its recent press release to shareholders, Nordic American Tankers (NAT) commented that low oil price is good for crude tanker companies.

Nordic American Tankers has an operating model that is sustainable in both a weak and a strong tanker market.

The drastic drop in crude oil prices created a situation in which the price of near-term crude is cheaper than the price of long-term crude.

Weekly vessel values have been on the rise, with positive week-over-week and significant year-over-year growth.

Depending on its size, a tanker takes two to three-plus years to build, with each tanker costing upward of ~$60 million.

The US has produced more oil than Saudi Arabia since the fourth quarter of 2012, and the country’s oil production surpassed Russia’s output in 2011.

Increased crude supply should affect the shipping industry in the days to come, which may put freight rates under pressure.

Navios Maritime Partners has a modern, diverse fleet of 32 vessels with 3.3 million DWT and an average age of 7.5 years for its combined fleet.

Dividend yield for Navios Maritime Partners currently stands at 15.8% with the company recently paying a dividend of $0.4425 per common unit.

Since its IPO in May 2007, Navios has grown its distribution by 26.4% and its fleet capacity by over 400%.

Since Navios Maritime Partners (NMM) reported its earnings, the stock has dipped 28.3%, touching its 52-week low of $9.67 on December 15.

Contango allows traders to lock in profits by buying oil now and selling it forward for later delivery. In July, the oil market flipped into prolonged contango for the first time since 2010.

With faster deliveries and employment of vessels, secondhand vessels tend to reflect industry participants’ expectations for medium-term fundamentals.

Newbuild VLCC (very large crude carrier) prices for the month of November 2014 decreased to $97.7 million compared to $98.1 million in October 2014.

With product supplied rising on a year-over-year comparison, crude tanker companies are likely to be in the positive.

India’s overall imports for the month of November totaled 3.86 million barrels per day (or bpd), a growth of about 6.8% from a year ago.

For the last four-weeks as of December 12, 2014, US crude oil imports were 1.9% lower than the same period in 2013 due to high domestically produced oil.

The Baltic Dirty Tanker Index widened to 862 on December 24, 2014, from 639 on October 1. It recorded a 34.9% increase as China increased imports of raw goods.

Energy transport is driven by global economic growth and dislocation of consumption and production, reflected in cyclical freight rates that vary according to vessel supply and demand.

Vessel prices are very close to bottom levels that occurred back in the period from December 2012 to January 2013.

For bulk carriers, Capesize vessel prices stood at $54.2 million in November as compared to $54.8 million in October.

China imports almost 60% of the world’s seaborne iron ore while its coal trade accounts for almost a quarter of the global trade.

Accounting for almost 20% of gross domestic product (or GDP), China’s real estate sector plays a major role in the country’s economic activity.

Brazil is the second largest iron ore exporting country, accounting for almost 25% of market share.