China extends global presence with strategic stake in Valencia

HINA continues to extend its international network of port interests, with the acquisition of a stake in Noatum Ports' Valencia terminal finalised on Tuesday that will provide a presence in one of the Mediterranean's key hub ports.

Cosco Shipping Ports is taking a 51% shareholding in JP Morgan-controlled Noatum Ports, which operates facilities in Bilbao as well as Valencia.

The $224m deal had been announced in June, and represents a further step in JP Morgan's withdrawal from port investments. The sale also includes two inland facilities owned by Noatum Ports in Zaragoza and Madrid.

For Hong Kong-listed Cosco Shipping Ports, part of the Cosco Shipping group, the Valencia acquisition will add to a growing portfolio of overseas port interests. The group already owns Piraeus Container Terminal in Greece, and has interests in Euromax Terminal Rotterdam, Antwerp Gateway and APM Terminals Zeebrugge, as well as others in Port Said, Busan and Seattle, in addition to extensive terminal operations throughout China.

In contrast, Noatum Ports is scaling back. Earlier this month, it agreed to sell its 45% shareholding in Grand Canaria's largest container terminal, Operaciones Portuarias Canarias, to Mediterranean Shipping Co's ports division TIL.

A group of institutional investors advised by JP Morgan Asset Management and the Dutch pension fund Dutch Stichting Pensioenfonds acquired the Spanish ports group Dragados in 2010, and renamed it Noatum.

Noatum's Valencia terminal handled 2.5m teu last year, and after a recent expansion with its Muelle de Costa berth, has capacity of 3.5m teu and the ability to work four ultra large containerships at the same time. There is also more land that could be developed.

Both MSC and Maersk also operate terminals in Valencia, which is ranked number 29 in the world in terms of container throughput, and is the second biggest port in the Mediterranean.

Figures out a few days ago show that Cosco Shipping Ports' facilities handled some 65m teu in the first nine months of the year, of which overseas facilities accounted for 13.6m teu.

Parent company Cosco Shipping is expanding rapidly, with a $6.3bn takeover of Orient Overseas (International) Ltd now being finalised, and a huge ship newbuilding programme underway including a series of 20,000 teu-class ships.

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Top stories:

Is the UK Club going to stay in the UK post Brexit?

THE UK P&I Club is to unveil its Brexit plans within the next two months, sparking speculation that it could shift legal domicile away from the country from which it takes its name.

In the final sentence of a four-sentence statement on its financial performance, the International Group affiliate notes: "The board expects to announce its Brexit plans by the end of the year with a view to writing business for members whose base of operations is in a country in the EU, from the 2019 policy year."

At present, UK or Bermuda-domiciled P&I clubs are able to do business on the same terms as local insurers anywhere in the European Economic Area, thanks to so-called 'passporting rights' enjoyed by their London operations.

However, the future of passporting rights for UK financial services concerns is unclear, after the country last year decided in a referendum to quit the European Union.

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Classified military vessel data was leaked from DSME after a 2016 North Korean cyber attack

CLASSIFIED military documents were leaked from South Korea's Daewoo Shipbuilding & Marine Engineering after North Korean hacking activity last year, according to a Seoul-based lawmaker.

The leaked documents contained details of vessels owned by the South Korean government, including a Chang Bogo-class submarine, the Aegis-class vessel Yulgok Yi I and tug and salvage ship Tongyoung, said South Korean politician Kyung Dae-soo at a meeting of the country's National Assembly.

About 40,000 documents were leaked as a result of North Korea's hacking activities, 60 of which were related to military vessels, including drawings, details of shipbuilding techniques and evaluation reports.

The hacks took place in April 2016, with North Korea attempting to access DSME's computer systems again the following August, Mr Kyung added.
The news has once again underlined the maritime sector's vulnerability to cyber attacks.

Shipping companies in particular have been the victims of hostile cyber attacks and the industry remains vulnerable because of its archaic cyber security measures.

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Cosco Energy has approved a 14-tanker order and gas carrier deal

COSCO Shipping Energy Transportation's board of directors has approved a 14-tanker order that the group had been considering earlier in the year.

Four 320,000 dwt crude tankers and three 160,000 dwt crude tankers will be built at Dalian Shipbuilding Heavy Industry. Five 110,000 dwt crude tankers and two 65,000 dwt crude carriers will be constructed by Guangzhou Shipyard International and China Ship International Trade, CSET said in a statement.

In May this year, Lloyd's List reported CSET president Liu Hanbo as saying that the company was studying the feasibility of new orders, with a need to replenish some of the capacities lost due to earlier scrapping.

Market sources back then put the Shanghai- and Hong Kong-listed company's newbuilding project at a compelling size of 18 ships, including very large crude carriers, suezmaxes, aframaxes and medium range tankers.

The deal was said to be in the bidding process, with subsidiary yards of China Shipbuilding Industry Corp and China State Shipbuilding Corp as the front runners.

Additionally, the board has approved a deal for unit Cosco LNG to participate in the Yamal LNG project by acquiring 50% stakes in four entities which own one LNG carrier each from Mitsui OSK Lines. Total investment in the vessels is about ?754.7m ($878.4m) with about 20% of funding coming from shareholders' loans and 80% from bank financing.

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Analysis:

Why Rio Tinto's dwindling African focus is bearish for shipping

RIO Tinto's dwindling African exposure means that potentially huge volumes of dry bulk cargoes are far from being materialised.

This represents a lost opportunity for the bulker trade, where the tonne-miles boost from moving the coal to Asia and the iron ore to China had offered a tantalising prospect for the market.

The dry bulk market had been counting on a potential 25m tonnes per year of coal from the Benga and Zambeze mines in Mozambique and 95m tonnes per year of iron ore from Simandou in Guinea.

But since the Australian mining giant's misadventures on the continent, most recently related to Mozambique, analysts have suggested it will lose its appetite for further investment opportunities.

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Markets:

Caribbean VLCC rates are holding firm on US and Venezuelan exports

SPOT earnings of very large crude carriers in the Caribbean have continued their recent strength on longhaul shipping demand from the US and Venezuela.

Hailed as the star performer in October, the Caribbean VLCC market saw brokers' latest assessments for lumpsum rates for shipments to Singapore at $4.4m-$4.5m, compared with just below $3.9m at the beginning of the month. A VLCC bound for the west coast of India was fixed at $4m last week, 8% higher than previously done.

With a winter demand pickup from Asian refiners, charter activity has been buoyant in the region for the past several weeks.

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Supramax freight rates are dropping but sentiment remains positive

SUPRAMAX bulker freight rates in both the Atlantic and Pacific basins have dropped in the past week as a flood of tonnage and limited inquiry stalled the market.

But recovery might not be far away, with talk of emerging vessel inquiries for the rest of the year.

Aside from the Chinese demand for nickel, brokers noted that Australia also looks active, with plenty of forward grain shipments being quoted by shippers along with alumina and coal stems to the Far East.

Southeast Asia is soft, but a trickle of fresh Indonesian coal shipments and the increasing bunker prices seem to have halted the quick drop in freight rates, at least for now.

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In brief:

MOL is lagging behind Japanese compatriots

JAPAN's three major shipping companies, NYK, K Line and MOL, which are soon to merge their container shipping businesses, have presented a mixed report card in their first-half results, with MOL lagging behind its compatriots.

NYK reported a net profit for the first half of æ6.3bn ($55.7m) and boosted its full-year forecast by 6% to æ11bn from æ5bn previously, mainly on the basis of improved conditions in the container shipping sector.

It remains optimistic that liquid bulks are also on the mend with oil and liquefied natural gas shipment volumes set to increase.

Even in the struggling dry bulk sector, NYK is forecasting a moderate recovery.

The same broad recovery over the past six months has helped K Line return to the black as well after it reported a profit of æ13.2bn, a strong turnaround from the a æ50.5bn loss it made in the corresponding period last year.

Again, it was box shipping that helped the reversal of fortunes. K Line's box shipping division reported a 23.3% rise in operating revenues with particularly strong demand on the recovering Asia-Europe trades.

But K Line is less optimistic than NYK over the future outlook, and has lowered its expectations for the full year, blaming a potential rise in geopolitical tensions and the rollback of monetary easing policies as central banks wind down measures used to assist economies out of the recession.

Meanwhile, MOL saw a downturn in its profits, which fell by nearly a fifth to æ13.1bn, which it blamed on higher bunker costs and a weak yen.

As with the others, MOL's box line business did the heavy lifting, with revenues up by nearly a third to æ374.2bn.

Nevertheless, the company blamed overcapacity for keeping spot rates low during the peak season, leading to the liner business making an operating loss of æ4.1bn.

Stronger rates in the dry bulk sector helped raise revenues by 6.8% to æ133.5bn, but in its energy shipping sector weak demand for its very large crude carriers and product tankers held back revenues. As a result, MOL is keeping its outlook unchanged for the rest of the financial year, with profits capped at æ12bn.

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Euronav expresses worries over newbuildings after third-quarter loss

EURONAV has taken a cautious tone over the market outlook for crude carriers, having slipped into the red in the third quarter due to weak spot rates. The New York-listed, Belgium-based tanker owner posted a net loss of $28.1m in July-September, compared with a year-ago profit of $100,000. Revenues fell to $104.8m from $133.5m.

The bottom line was better than the street forecast of a net loss of $36.4m on Nasdaq.com, however. Its share price was little changed during Tuesday's early trading.

Chief executive Paddy Rodgers said in a quarterly report: "Whilst there has been an encouraging recent uptick in scrapping activity and crude demand growth continued to see upgrades during the quarter, the delivery schedule of new vessels remains elevated into late 2018."

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HSH bondholders seek equity swap

HSH NORDBANK has received a debt-for-equity swap offer from a group of bondholders that control more than ?700m ($814m) of the state-owned landesbank's notes, as it enters the final stretch of privatisation negotiations.

"A proposal has been presented to the bank and its owners that allows T1 holders to acquire HSH Nordbank by swapping some of their debt claims for equity in the company," the group said in a statement.

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Danaos pessimistic over any recovery in 2018 on tonnage overhang

NEW York-listed Danaos Corporation has given a pessimistic outlook for the containership market in 2018 due to the large number of vessels on course for delivery.

As such, "Danaos continues to have low near-term exposure to the weak spot market as a result of the aforementioned strong charter coverage," said chief executive Dr John Coustas.

"During this extended period of market weakness which has presented many challenges, we remain focused on taking necessary actions to preserve the value of our company by managing our fleet efficiently and taking prudent measures to manage and ultimately deleverage our balance sheet."

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Star Bulk unveils commodities logistics unit

NASDAQ-listed Star Bulk Carriers (news, data) has introduced a new unit as part of its aim to become an integrated logistics player.

Star Logistics will help link up origination and destination of dry bulk commodities, adding to the group's commercial expertise and providing more advanced tools on the kamsarmax and geared bulk carriers.

The venture will also give Star Bulk access to substantial cargo flows and market data.

Based out of Geneva, Switzerland, Star Logistics will give the group a key presence in the commodities trading hub there.

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Precious Shipping to pay arbitration-related costs to Chinese yard

BANGKOK-based Precious Shipping said an arbitration tribunal had ruled against it in a dispute with China's Sanfu shipyard regarding issues related to excessive fuel consumption during the third quarter by panamaxes built at the yard.

Precious Shipping has to repay an outstanding $32m loan to Sanfu plus simple interest at 6% per annum starting from the date of receiving the loan until the date of repayment.

The company has until October 4 next year to make the repayment.

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