Hellenic Shipping News interviews Mr. Bobby Mitropoulos of Weberseas S.A.
Bobby Mitropoulos, Managing Director of ship brokerage firm Weberseas, based in Piraeus, predicts that more cancellations of new building orders are due in the following months, as many of the smaller shipyards of South Korea and China will face
problems, especially when it comes to refund guarantees and lack of supplies, like for instance ship engines. In his interview with Hellenic Shipping News, he says that the cancellation percentage will vary between 10% and 25%. Freight rates are expected to continue their upward trend at least for this year, but the big question regards the years to follow, with the increase of supply being something more than evident. “Demand will have to make significant increases in order to keep up at the same pace” he says.
As for the second hand market, he points out that handymax and supramax tonnage is currently the most popular in the market, also in terms of the number of deals concluded, mainly because of the larger number of ship owners involved in this market segment.
First of all, could you provide us with a brief profile and background of Weberseas, in terms of the services provided?
WeberSeas (Hellas) S.A. is leading ship brokerage firm based in Piraeus, Greece. The company is specializing in sale & purchase of second hand vessels, newbuilding projects, demolition and tanker chartering. Our client base includes ship owners in Greece as well as a large number of shipowners worldwide, including financial institutions and banks.
In addition the company conducts evaluations of ships for many different participants of the shipping industry. Finally the company performs maritime research and industry studies for both dry and wet markets, including specific market segments to accommodate our clients’ needs.
Lately, we’ve been witnessing a tremendous growth of the dry bulk freight market. Could you highlight the reasons for this and give us some details on the current balance between supply of tonnage and cargo demand?
Infrastructure growth in China is maintained at very high levels thus the demand for products such as coal and iron ore have increased, supporting the strong freight rates. Since these cargoes are mostly carried by panamax and capesize bulkers we have seen the freight market and Baltic indices for these vessels types at very high levels.
At the same time, demand for cargoes into India have also shown strong increase which is helping the demand for the smaller sized ships (handysize up to supramax).
Over the last 2 years we have seen an equilibrium of supply and demand perhaps with a slight variation in that demand has always been one step ahead pushing the market to new highs. As we are approaching 2009 and 2010 the n/b orders coming out will almost certainly have an effect in greatly increasing the supply of tonnage (across all sizes). Demand will have to make significant increases in order to keep up at the same pace.
At the same time we have to point out that the supply of dry bulk tonnage will also be affected by the large number of non double hull tankers which are being converted into dry cargo ships. Also in 2007-2008 we have seen various n/b options of tankers being switched to dry bulk vessels.
How is the shipbuilding market shaping up from the beginning of the year, especially in terms of the credit crunch observed in these past few months. Has it affected newbuilding orders in terms of financing? Are Greek ship owners more reluctant to place new orders?
Of course the credit crunch has greatly affected the n/b scene. There are
many owners who are facing problems in financing their n/b orders. This does
not mean that they are not able to obtain finance at all, but at different terms & conditions than when they placed their orders, something affecting their business plan. Financing costs have increased as a result of the banking crisis.
Having said this, most of the Greek owners (and particularly the major owners) are considered “cash rich” hence if they do need to place an order we do not believe they would have a problem in doing so. The issue for them is not financing but the state of the freight market when their new orders will come out in 2010 and the years to follow. This is the one of the concerns.
Do you believe that we shall witness more cancellations of orders, something that some analysts have almost wished, in order to avoid an oversupply of ships after 2009?
We are of the opinion that we will definitely witness cancellation of orders. Following closely the situation in China but also in Korea, we notice that financial problems and issues with refund guarantees in combination with lack of supply of main engines etc will force several smaller and new yards not to deliver all their orders. We expect the percentage of these cancellations to be between 10 and 25 pct.
How can a ship owner protect himself, when dealing with a smaller shipbuilder, for instance in China, who offers better prices and more attractive delivery times, but at a higher risk?
Smaller or newly established yards are very risky and really there is little
protection that the owners can have, other than the contract they agree with the
yard. The issue here is for the owner to do his due diligence and make an accurate evaluation of the yard in question ““ not all small or new yards present the same risk. Special attention is needed as far as the refund guarantee is concerned
and which bank will issue it also important to have is an experienced n/b team to assist with all matters of the n/b process and in particular to have a very good supervision of the vessels ““ supervision is perhaps the most important aspect of a n/b.
What’s the general feeling in the S&P part of the market? Is there bigger demand for second-hand dry bulk vessels, after the latest surge in freight rates?
In general, yes, there is strong demand for 2nd hand vessels in the s&p market. There is a huge volume of p/e’s for all vessels types. It seems that market demand is divided into: a) the modern ships (from 10-13 years old and younger) where the demand is extremely strong ““ primarily due to the buying interest from the various stock listed companies and b) for the older vessels where demand is there but at a much slower pace.
We have noticed in the last 1-2 months or so that demand for 80″²s built bulkers has somewhat slowed down and sales are harder to be completed simply because there is a large gap between sellers and buyers prices (sellers are reluctant to sell at lower levels simply because they are earning large freight levels whereas buyers are reluctant to meet high prices due toΒ uncertainty and because of the rate of return from the various period fixtures which their banks usually demand in order to finance such older vessels).
It is also interesting to note here that there is also strong demand for tanker vessels which is again divided into double hull and non double hull ships. Non double hull ships are in great demand from Far Eastern buyers mostly for conversion into bulkers whereas the double hull units are in great demand due to the improving market prospects from the 2nd half ofΒ 2009.
Which vessel types are proving to be rather attractive in the second-hand market today and why?
Obviously the capesize vessels are in good demand simply because of their great earning capacity, which on many occasions has increased to more than $250,000 per day (assume dely cont for loading Brazil discharging China). However, due to lack of available tonnage in the second hand market there are not many deals concluded.
On the other hands there are many deals concluded in the panamax and supramax
sectors as they seem to have a good balance between the selling price and the earning capacity.
Out of all of the sectors it seems that handymax/supramax tonnage is the most
popular probably due to the larger number of owners involved in this market
Have we seen any substantial price increases in vessel prices and for which types especially?
Price increases have been witnessed on all vessels. Optimism and in some cases luck of tonnage keeps prices firm.
Nikos Roussanoglou, Hellenic Shipping Newsο»Ώ Worldwide