Hello, goodbye: Shipping’s latest entries and exits on Wall Street

The lineup of shipping stocks is in flux. There are multiple new listings as well as notable departures.

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Shipping stocks are having a good run, generally outperforming the S&P 500, Dow Jones Industrial Average and NASDAQ 100 during the past three years amid the pandemic and Russia-Ukraine war.

For those looking to place more bets on U.S.-listed shipping stocks, the lineup is in flux. There are new listings on the New York Stock Exchange and NASDAQ. There are also continued departures as more public players go private.

Latest listings and exits

CoolCo (NYSE: CLCO) began trading on NYSE on March 20. The company has a fleet of 12 LNG carriers with multiple charters expiring this year and next, providing exposure to potentially rising rates.

CoolCo CEO Richard Tyrell

“I describe CoolCo as Flex LNG [NYSE: FLNG] with upside,” said CoolCo CEO Richard Tyrrell at the 17th Annual Capital Link International Shipping Forum, held in New York this month.

Himalaya Shipping has filed a registration for a share sale and NYSE listing under the ticker HSHIP. The company owns 12 dual-fuel, 210,000-deadweight-ton dry bulk carriers.

Heidmar — a well-known manager of tanker and dry bulk commercial pools — announced on March 20 that it will list on NASDAQ via a reverse merger with the SPAC Home Plate Acquisition Corp. under the ticker HMAR.

Tanker owner Toro Corp. (NASDAQ: TORO), a spinoff of Castor Maritime (NASDAQ: CTRM), began trading March 8.

Delta Holding Corp., a ship manager and logistics provider for dry bulk, announced plans in late September to merge with Coffee Holding Co. (NASDAQ: JVA), with the combined entity to trade under the ticker DLOG. (The deal was supposed to close in the first quarter but there had been no announcement as of Wednesday.)

On the exits side of the ledger, formerly NYSE-listed Atlas Corp., parent of Seaspan, the world’s largest lessor of container ships, was delisted Tuesday. The company was taken private by a group of insiders including Fairfax Financial Holdings and the Washington family, together with ocean carrier ONE.

Hoegh LNG Partners was delisted from NYSE on Jan. 2 after being purchased by its private sponsor, Morgan Stanley-owned Hoegh LNG.

GasLog LNG Partners (NYSE: GLOP) looks like the next to go. On Jan. 25, it received a take-private offer from its sponsor company, GasLog Ltd., which was itself taken private by insiders and BlackRock in June 2021.

Aggregate loss of market cap due to entry-exit mix

Shipping companies leaving Wall Street over recent years have boasted strong long-term cash flows that attract large institutional buyers.

In contrast, several of the shipping companies arriving on Wall Street have been very small companies with shares that, by the companies’ own admission, pose high risks to investors and traders. 

In addition to the take-private deals for Atlas, Hoegh LNG Partners, GasLog Ltd. and GasLog Partners, Golar LNG (NYSE: GLNG) exited shipping by selling its LNG fleet to CoolCo in December 2021. Container-equipment lessor CAI was bought by Japan’s Mitsubishi in November 2021. Seacor was taken private by American Industrial Partners in April 2021. Teekay LNG was delisted and bought by Stonepeak in January 2021. DryShips was taken private by its founder, George Economy, in October 2019.

The aggregate market caps of all the shipping companies taken private in recent years (or in the process of privatizing), calculated as of the day prior to their take-private offers, was $10.5 billion.

Among the Wall Street arrivals since 2019, the largest was ocean carrier Zim (NYSE: ZIM), which IPO’d in January 2021. The second largest among the newcomers, Flex LNG, listed in June 2019.

The other entrants have had dramatically smaller market caps.

United Maritime (NASDAQ: USEA), a spinoff of Seanergy (NASDAQ: SHIP), began trading last July. Imperial Petroleum (NASDAQ: IMPP), a spinoff of StealthGas (NASDAQ: GASS), began trading in December 2021.

OceanPal (NASDAQ: OP), a spinoff of Diana Shipping (NYSE: DSX), commenced trading in November 2021. Castor Maritime began trading on NASDAQ in February 2019.

As of Wednesday, the aggregate market cap of companies listing since 2019, from Castor to CoolCo, was $5.9 billion. That’s roughly half the pre-take-private-announcement market cap of the companies that have delisted from NYSE or NASDAQ or exited shipping over the same time frame.

What’s driving privatizations

Many of the take-private deals have involved LNG shipping companies with extensive long-term charter coverage. The most recent exit, Atlas Corp., is a container-ship lessor that also has long-term coverage.

During the Capital Link forum, Stifel analyst Ben Nolan explained, “What differentiates the LNG segment relative to tankers and dry bulk is that you can get long-term cash flows. Infrastructure funds — which are by and large the ones buying these companies — are not making spot plays.”

Nolan also pointed out that many of the companies that were privatized were master limited partnerships (MLPs). “The MLPs were structurally a challenge, with valuations struggling to get back to reasonable levels. If there’s a structural reason your stock’s trading [low], going private is a valid way to think about it.”

According to Christian Wetherbee, shipping analyst at Citi, “It’s about duration and cash flow and predictability. That’s the reason we’ve seen private capital come in and withstand the leverage needed for those types of transactions. I don’t know that it lends itself to something closer to spot or shorter durations, like you see in some of the other shipping subsectors.”

What’s driving (some) new listings

Many of the new listings over recent years — as well as their subsequent follow-on offerings —  are being handled by investment bank Maxim. These include Toro, Delta Holding, United Maritime, Imperial Petroleum, OceanPal and Castor.

Larry Glassberg, co-head of investment banking at Maxim, said during the Capital Link event, “IPOs in this market are going to be very challenging. But I think you will see people opportunistically do things, particularly around reverse mergers and utilizing SPACs … as a mechanism to get public and scale post-closing of those transactions.”

Shipping companies working with Maxim have been very active in the follow-on market, raising cash for vessel acquisitions. These Maxim-linked follow-on offerings account for the vast majority of equity capital raised in recent years by U.S.-listed shipping companies.

Maxim’s Larry Glassberg (Photo: Capital Link)

Maxim says it has been involved in $1.2 billion in shipping transactions since 2015. Marine Money has referred to Maxim deals as “the fountain of funding” and “shipping’s answer to Venmo.”

These equity sales feature discounted shares and warrants purchased by hedge fund intermediaries, who then flip those shares to the retail market.

In mid-2020, Top Ships (NASDAQ: TOPS) — a serial issuer of equity in deals handled by Maxim — was by far the most popular shipping equity on retail stock-trading site Robinhood. Top Ships ranked 37th among all stocks traded on Robinhood, ahead of Starbucks, Pfizer, ExxonMobil, GM and Sony.

According to Glassberg, “From a growth point of view, the U.S. capital markets for maritime companies are an incredible facilitator for capital raising.” He advised, “If there’s an opportunity to go out and raise capital, you want to take advantage of that … [to build] a stronger balance sheet.”

Buyers beware

But buyers beware. As reported by Tradewinds, share sales by Maxim-linked microcap shipping companies are highly controversial due to losses suffered by retail investors.

Unlike larger shipping companies that are generally not selling equity now and whose shares go up when market fundamentals improve, shares of microcaps doing follow-on offerings through Maxim are falling over time as a result of continued dilutive equity sales (and the threat of future sales) — a risk that is fully disclosed in prospectuses.

During Imperial Petroleum’s quarterly call last month, CEO Harry Vafias was asked how long equity sales that have “destroyed a lot of capital” would persist. The company’s share price has sunk 89% over the past year.

Vafias openly admitted equity sales will indeed continue. “We are still, in global terms, a very small shipping company. Ten ships is obviously not a big fleet by global standards. We have money to expand. But even with this money, we cannot really double or triple the fleet. For the time being, we will continue with the [equity offerings] until we have enough cash for a fleet that is large enough to be competing with the global players.”

a chart showing shipping microcap stock pricing
Share price performance of four shipping stocks doing equity offerings handled by Maxim: Performance Shipping (NASDAQ: PSHG), Imperial Petroleum, OceanPal and Top Ships. (Chart: Koyfin)

Share price performance of four shipping stocks doing equity sales facilitated by Maxim: Performance Shipping (NASDAQ: PSHG), Imperial Petroleum, OceanPal and Top Ships. (Chart: Koyfin)

Click for more articles by Greg Miller 

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Maersk CEO Clerc Is Bullish On China Despite Weaker Than Expected Rebound

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House panel eyes ending ocean carriers’ antitrust exemption

Members of Congress discussed container carriers’ antitrust exemption, along with how to implement the Ocean Shipping Reform Act, on Tuesday.

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In a subcommittee hearing on Tuesday, members of Congress discussed overturning antitrust immunity that ocean carriers have enjoyed for decades.

The Coast Guard and Maritime Transportation Subcommittee hearing also included discussion on requiring ocean container companies to load more domestic exports, while reconsidering how detention and demurrage charges are applied to U.S. exporters.

“It just turns out that the ocean carriers are exempt from the monopoly and the antitrust laws of the United States, and there ought to be a law that the ocean carriers are subject to antitrust laws, like other parts of our economy,” John Garamendi, D-Calif., said during the hearing.

Last week, Garamendi and several other House members introduced the Ocean Shipping Antitrust Enforcement Act to “address unfair practices that harm American businesses, producers, and consumers,” along with unfair container rate increases and refusals of cargo bookings for American exports.

Garamendi questioned Bud Darr, executive vice president, MSC Group, about ending carriers’ antitrust exemption.

“Don’t you think that’s a good idea?” Garamendi asked.

“I don’t think that’s a good idea, no sir,” said Darr, speaking on behalf of the World Shipping Council.

MSC Group is the largest ocean container carrier company in the world. The Switzerland-based company has more than 700 container ships in its network.

Darr also cautioned against politicizing trade issues in the shipping industry.

“I think it’s fraught with quite a bit of peril and unintended consequences,” he said. “Whether we like it or not, some of the major shipping companies that the world relies upon are state backed or state owned to some degree as well. We face that competition every day. Given the right framework, we will continue to compete and compete successfully. We will continue to serve the commerce needs in the United States, which is my country.”

But William H. “Buddy” Allen, president and CEO of the American Cotton Shippers Association (ACSA), testified that agricultural shippers have had to contend with unfair detention and demurrage charges from ocean carriers and ports. The Ocean Shipping Reform Act (OSRA), which was signed into law last June, aimed to offer certain protections for U.S. exporters. 

OSRA’s implementation and enforcement in the maritime industry are still being reviewed and amended by Congress.

“[ACSA] members want to move cargo fast. We want to take cost off the table. We want certainty. We want choice. We want an open marketplace, in the manner by which we procure and utilize assets so that we can move as fast as possible and reduce cost to our customers as much as possible,” said Allen, whose Memphis-based organization represents merchants of raw cotton in the U.S. and abroad.

“At the same time, we incurred $1.3 billion worth of unbudgeted costs during this time frame [in the pandemic], not all of which were detention or demurrage, but certainly some were,” Allen said. “In addition to the monetary cost, U.S. agriculture lost market share and faces reputational risk, and we simply must do a better job of communicating so we can operate more efficiently together.”

The committee also heard testimony from Matthew Leech, president and CEO, Ports America, and Mario Cordero, executive director, Port of Long Beach.

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Trans-Atlantic container rates still double pre-COVID levels

A fifth of U.S. containerized imports come from Europe. Shipping on this route remains much more expensive than it used to be.

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Container shipping rates are not back to normal quite yet. Trans-Pacific rates have returned to pre-COVID levels, but pricing in trans-Atlantic markets has not.

Spot container rates from Europe to the U.S. — while falling — are still more than twice pre-pandemic rates. U.S. imports from Europe remain strong, with building materials supporting volumes.

Drewry and FBX spot assessments

The Drewry World Container Index (WCI) spot-rate assessment for Rotterdam, Netherlands, to New York was $5,061 per forty-foot equivalent unit in the week ending Thursday. That’s down 32% from last year’s peak but still 2.5 times rates in March 2019.

Asia-West Coast spot rates shot far higher than trans-Atlantic rates during the 2021-2022 shipping boom but came down faster and fell further. The WCI Rotterdam-New York spot-rate assessment was 2.7 times higher than the Shanghai-Los Angeles index assessment last week.

chart showing trans-Atlantic rates vs. trans-Pacific rates
Spot rate assessment in USD per FEU. Blue line: Rotterdam-New York. Orange line: Shanghai-Los Angeles. (Chart: FreightWaves SONAR)

Current import headwinds from bloated inventories are curbing transport demand for manufactured consumer goods, in particular. Europe, which provides about 20% of U.S. containerized imports, is much less exposed to that market than Asia.

Different spot-rate indexes show different numbers but the same trend: trans-Atlantic rates down from the peak and continuing to fall but still well above pre-COVID levels.

The Freightos Baltic Daily Index (FBX) put Europe-East Coast spot rates at $3,891 per FEU on Friday. That’s down 54% from 2022 highs but 2.3 times March 2019 levels.

Spot rate assessment in USD per FEU. Blue line: FBX Europe-East Coast. Green line: WCI Rotterdam-New York. (Chart: FreightWaves SONAR)

Xeneta short-term and long-term assessments

Norway-based Xeneta collects data from shippers on both short-term (spot) and long-term (contract) rates. Xeneta CEO Patrik Berglund told FreightWaves on Monday that the trans-Atlantic westbound market is following the same trajectory as trans-Pacific eastbound markets, only with a time lag.

“It’s coming off quite heavily,” he said.

Xeneta’s data shows average short-term trans-Atlantic westbound rates peaking at $8,660 per FEU last June, with current average rates at $4,131 per FEU. The low end of the range is now at $2,874 per FEU, down from $6,950 per FEU in August.

“The low end is moving quickly downwards, which means that some carriers are bidding lower and lower, dragging the market down,” said Berglund.

Long-term trans-Atlantic westbound rates peaked at $7,700 per FEU last August and are now down to $3,700 per FEU, according to Xeneta data.

Assuming spot rates continue to fall, as Berglund expects they will, “that means those companies that just finalized their RFQs will pay elevated contract prices [versus spot] over the coming 12 months.”

US imports from Europe stay strong

The U.S. Census Bureau publishes statistics on metric tons of containerized imports, derived from Customs data.

U.S. containerized imports from Europe totaled 3.46 million tons this January, up 22% from January 2019 and 42% from January 2018. This January’s imports were higher than in January 2021 and 2022, amid the COVID boom. 

Full-year imports in 2022 were 22% higher than in 2019 and 26% higher than in 2018.

(Chart: FreightWaves based on data from U.S. Census Bureau)

A granular look at the import data, by four-digit Harmonized Tariff Schedule code, shows what’s driving the volumes.

Comparing full-year 2022 numbers to 2019, four of the top five gainers are related to building supplies and home furnishings. The largest volume gainer was bagged Portland cement and other cement, up 644,737 tons or 101%.

The next-largest increase was for gypsum and plaster (up 485,477 tons or 165%), followed by ceramic paving and tiles (rising 466,042 tons or 31%), electric storage batteries (404,244 tons, 376%), and furniture (286,496 tons, 39%).

The biggest decline, by far, was for U.S. imports of European beer. Beer imports plunged 329,052 tons or 22% in 2022 versus 2019. 

Americans have not become teetotalers. They’ve just changed their drinking preferences. Imports of European spirits and wine more than offset beer losses, up a combined 338,518 tons in 2022 versus 2019.

Trans-Atlantic shipping capacity

The trans-Atlantic market not only provides carriers higher rates per FEU. It’s also a shorter route compared to Asia-U.S. and Asia-Europe. Thus, the rate per FEU per mile is much higher than in the other mainline trades. This should increasingly attract more capacity to the trans-Atlantic and bring rates down.

“While the trans-Atlantic run remains the most lucrative of the major east-west trades, the normalization process has begun. Rates are primed to continue easing further,” said S&P Global Commodity Insights.

According to Berglund, “Carriers definitely deploy capacity into the trades where they can make more money, so it’s only a matter of time [before the market falls further].”

Nerijus Poskus, vice president of ocean strategy and carrier development at digital freight forwarder Flexport, believes there’s a structural reason why rates have held up longer than some expected.

In a recent interview with FreightWaves, he said one reason for continued rate strength “may not necessarily be demand driven,” but rather, due to carriers not adding capacity fast enough.

“It is happening but much slower [than people thought] because it’s actually a lot more difficult to do than it seems. The reason is that Europe has a lot of ports,” he explained. In some ports “only a few carriers have services to select areas in the U.S. In some cases, you have only three carriers competing, with a few more buying slots. So, there are fewer players,” said Poskus.

“In order for a carrier to launch a new service, it has to sign new terminal contracts. It’s a lot of work. And carriers are afraid to do that, because they know what happens when you add more capacity. The prices go down very quickly.” This reluctance means “it will just take more time” for the trans-Atlantic to normalize, he said.

Other trans-Atlantic markets also strong

If there is a capacity-related factor involved, other trans-Atlantic trades connecting to European ports should also be holding up longer.

In fact, trades between Europe and South America are following the same pattern. Rates are down from their highs, but the decline began later than in the trans-Pacific and Asia-Europe and rates are still well above pre-COVID levels.

The FBX spot assessment for Europe-South America East Coast was at $2,965 per FEU on Friday, 2.7 times 2019 levels. The FBX Europe-South America West Coast index was at $4,302 per FEU, 2.4 times pre-COVID levels.

chart showing trans-Atlantic rates to South America
Spot rate assessment in USD per FEU. Blue line: Europe-South America East Coast. Green line: Europe-South America West Coast. (Chart: FreightWaves SONAR)

Berglund noted that the rate development in the Europe-South America East Coast market is virtually identical to what is playing out in the Europe-U.S. East Coast market.

Xeneta’s short-term rate assessment for Europe-South America East Coast peaked in May at $4,211 per FEU and is now at $3,070 per FEU. The lower end of rates in this trade peaked at $3,470 per FEU in May and is now at $2,011 per FEU.

The same holds true in the eastbound trades from South America. Xeneta’s data shows “exactly the same pattern, just with different dollar values, for South America East Coast to North Europe,” said Berglund.

Thus, the tail end of the container shipping boom is not quite over. There continue to be pockets of elevated rates in the Atlantic even as the two biggest mainline trades — Asia-Europe and Asia-U.S. — are largely back to square one. 

Click for more articles by Greg Miller 

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Spain Urges LNG Importers To Cut Ties With Russia

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In search of shipping’s next supercycle: Are tankers next?

Container shipping just experienced a record boom. Some believe crude and product tankers are poised to follow suit.

The post In search of shipping’s next supercycle: Are tankers next? appeared first on FreightWaves.

There have been two historic shipping booms since the turn of the century. Could a third be around the corner?

The first, in 2003-2008, was driven by a surge in Chinese demand as that country came onto the world trade stage. All shipping sectors benefited, with dry bulk the big winner, and secondarily, tankers.

Greek dry bulk owner Aristides Pittas said at a ship finance conference in 2013, “If you look at the fantastic times we had in 2003 to 2008 and the money that was made, and you think that this will be happening again, I can tell you: This will not happen again.”

Then it happened again. In 2021-22, container shipping experienced a historic spike in profits, driven by a surge in consumer-goods buying during the pandemic. COVID played the demand driver role that China did in the prior shipping boom. One shipowner who owned dry bulk vessels in 2003-2008 as well as container vessels in 2021-22 told FreightWaves that the container shipping supercycle was actually the stronger of the two.

The focus now is on crude and product tanker shipping. Optimism is being fueled by an unprecedented shortfall in new capacity coming online, growth in global demand and trade dislocations caused by the Russia-Ukraine war.

The phrase “supercycle” is once again being bandied about. The 2003-2008 and 2021-22 booms were unpredicted and demand driven. The predicted tanker boom, if it happens, would be largely driven by vessel supply constraints.

‘I can’t poke holes in it’

The mood on tankers was ebullient at the 17th Annual Capital Link International Shipping Forum held in New York this week, albeit with an undercurrent of “is this too good to be true?”

Navios vice-chairman Ted Petrone (Photo: Capital Link)

“This happened 15 years ago and was not supposed to happen again but here we are. Everything’s flashing green,” said Ted Petrone, vice chairman of Navios Corp. (NYSE: NMM).

“What happened in the container market completely encapsulates this [tanker] market,” Petrone continued. “Containers didn’t make a dime for 10 years, then in two years they made a decade’s worth of money. That’s shipping. You have to control your risks and control your costs and be in position to make money when you can. That’s where we are now.”

According to Ben Nolan, shipping analyst at Stifel. “With tankers … I can’t poke holes in it. It feels more obvious now than in any of the last 20 years I’ve been trying to do this, which makes me really nervous. It seems too obvious.”

Ridebury Tankers CEO Bob Burke (Photo: Capital Link)

Bob Burke, CEO of Ridgebury Tankers, said, “I’ve been doing this since the ’80s. I have never seen it so strong. I think the next two years are going to be great, just like they are now. But I also think something will happen that is one in a thousand.

“There are a lot of things that are one in a thousand, so the chances are actually more than one in a thousand. So, I would say something will change, nothing that we can predict right now. It could be strongly to the upside or to the downside.”

Anthony Gurnee, CEO of product tanker owner Ardmore Shipping (NYSE: ASC), said, “I think what’s really at play here is recency bias.” Recency bias gives greater importance to more recent memories. “I think we’re all scarred from 10 years of weakness. You can almost hear it in our voices as we’re talking about the market and the outlook. I think there are psychological factors in play.”

According to Clarksons Securities analyst Frode Mørkedal, “When I look around, people don’t seem to be willing to take a bet on next year yet. So, I think there’s a lot of upside potential.”

Look to tanker customers, not tanker execs

What panelists say at shipping conferences is often suspect, because shipping executives generally overemphasize the positives, whether because they believe it’s their job to promote their company’s future profit potential or because — via career “natural selection” — shipping executives are inherently optimistic.

Shipping supercycles are extremely rare; even moderate upturns are uncommon and often fleeting. False starts are frequent. Commodity shipping executives spend most of their careers putting on a brave face amid multiyear cyclical downturns, clinging to whatever crumbs of good news and glimmers of hope they can find.

“I’m permanently optimistic,” said Robert Bugbee, president of Scorpio Tankers (NYSE: STNG), during a luncheon speech in New York in January. “You have to be optimistic in this industry to remain sane and keep going at times.”

All of which leads to many false alarms on impending upturns from shipping executives speaking on conference panels. More important is what tanker customers do, not what tanker owners say.

James Doyle, Scorpio Tankers’ head of corporate development, said at the Capital Link forum, “Rather than all of us up here saying we believe in this market, it’s [more about] when you have Exxon, Shell and BP coming out and saying ‘we agree and we’re willing to put our capital toward it.’”

Spot rates are highly volatile. The big test of whether an upcycle is sustainable is whether charterers bite the bullet and sign multiyear charters to protect themselves from future pain in the spot market, at period rates that are highly profitable to shipowners.

“What drives the period market is pain in the spot market,” said Petrone. “We’re now seeing major oil players talk about doing more longer-term deals, because they see the same numbers we do.”

3-year charters: Still a long way to go

If and when the current tanker upcycle reaches a sustainable level, oil companies will book many more charters for three years in duration or longer at high rates.

Listed owners that have had their fleets almost entirely in the spot market over the past decade will evolve into companies with heavier time-charter coverage, supporting hefty dividends, the pattern seen in 2003-2008.

Panelists’ comments on the three-year charter market were mixed. Most of the positive comments focused on product tankers, not crude tankers.

Spot rates for very large crude carriers (VLCCs, tankers that carry 2 million barrels of oil) are hovering around $100,000 per day. But charterers do not yet seem to be worried about being on the losing end of a multiyear spot-rate boom. They’re not yet covering their exposure to future spot exposure in a significant way.

“I don’t believe we have seen real liquidity, particularly for VLCC time charters of three years-plus,” said Lois Zabrocky, CEO of International Seaways (NYSE: INSW). “We haven’t seen that yet. I think it has to continue to build before that market develops and has the liquidity that would be more reliable for owners.”

According to Petrone, “I think going forward that oil companies that have said for the past 10 years, ‘I’m going to put 5% of my portfolio on long-term deals and I’ll probably lose money on those, but I need them just in case something blows up,’ are going to say, ‘I need 20% covered on a long-term basis.’ We’re seeing a lot of calls come in.”

The three-year charter market on the product tanker side sounds further along. According to Doyle, the three-year market for product tankers is “active and liquid.”

Scorpio is in the process of shifting more of its fleet from spot to long-term charters. It now has 15 of its 113 tankers placed on charters of three to five years. The rates it’s getting are rising.

Among its three-year deals, Scorpio chartered the first LR2 (a long-range product tanker with capacity of 80,000-119,999 deadweight tons) at $28,000 per day last summer. It booked another in December for $37,500 per day. It announced a new three-year LR2 contract on Tuesday at $40,000 per day. (In comparison, Clarksons estimates current spot rates for modern-built L2s are $59,500 per day.)

What happened in 2003-2008

The 2000s supercycle generated unprecedented returns for dry bulk shipping. It was more mixed for tankers, with ups and downs.

The years 2004, 2005 and 2008 were exceptionally strong for crude and product tankers. In 2006 and 2007, the Baltic Clean Tanker Index was around the level it is today. The Baltic Dirty Tanker Index was below current levels in 2006 and 2007.  

Analyst reports and financial filings from that earlier era portray a tanker market at a much different stage in the cycle than today’s. Long-term charter coverage was much higher.

Charterers did not move fast enough to protect themselves against the initial spot rate surge in 2004. In January 2005, brokerage and consultancy Poten & Partners published a report on how much more charterers paid as a result of their delay.

(Chart: Poten & Partners weekly report, Jan. 12, 2005)

“As term chartering managers approached the end of 2003, they were facing a three-year term market with rates around $31,000 per day for a VLCC and a spot market at just over $87,000 per day.

“What is amazing is that very few three-year charters were concluded despite numerous owners who expressed interest in doing term business,” said Poten.

Poten estimated that a charterer would have paid $20 million less per VLCC in 2004 if it had signed a three-year charter versus continuing to play the spot market.

“Most charterers were fighting to get the owner to lower the [three-year] charter premium another $500 per day. Rather than paying this additional ‘premium,’ charterers in effect said, ‘We do not want to pay the $182,500 additional charter hire per year — $500 times 365 days. We will face the risk of high [spot] rates.’”

Eventually, charterers capitulated and took cover in the period market. Tanker owner General Maritime had 28% of its ships taken on time charters at the beginning of 2004. By 2007, according to an analyst report from Dahlman Rose, General Maritime had 73% of its operating days covered by time charters.

Dahlman Rose put three-year time charter rates at $70,000 per day in mid-2008, more than double three-year rates at the end of 2003.

By mid-2008, Frontline (NYSE: FRO) had 43% of its capacity on long-term charters, with Teekay Tankers (NYSE: TNK) at 44%. As of last month, Teekay Tankers had only one of its 45 ships on time charter. Frontline had only seven of its 70 ships on time charter.

Despite ups and downs in freight rates during the 2000s supercycle, tanker values continue to rise. According to Dahlman Rose, the value of a 5-year-old VLCC rose from $60 million in late 2003 to $165 million in mid-2008, a surge of 175%.

And then, everything collapsed. By mid-2009, 5-year-old VLCCs had shed half their value. One of those one-in-a-thousand events that Burke warned about had happened — the global financial crisis — and the supercycle was over.

(Charts: Dahlman Rose Marine Transport Weekly, Dec. 7, 2009. Chart data: Clarksons)

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Houston, New Orleans ports see container volumes rise

Ports in Houston and New Orleans reported strong cargo container flows during February, boosted by exports of plastics and chemicals.

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Gulf Coast ports in Houston and New Orleans reported strong cargo volumes in February as plastics and resins helped drive exports of loaded containers.

Port Houston sees import growth slowing but exports rising

Port Houston container volume in February rose 15% compared to the same month last year to 313,452 twenty-foot equivalent units.

“Our cargo activities continue to remain solid for the first two months of the year versus 2022,” Roger Guenther, Port Houston’s executive director, said during the port’s monthly meeting Monday. “Our overall tonnage is up 7% today compared to last year; that’s collectively for all of our terminals.”

Import containers were up 20% year over year (y/y) in February to 159,787 TEUs. Imports were down 7% compared to January. 

Imports of steel, which helped carry Port Houston to some record-breaking months during 2022, were down 30% y/y in February to 327,655 tons.

Export containers were up 11% y/y to 153,665 TEUs. Total export tonnage was up 9% y/y to 2.2 million tons. 

Guenther said ports across the country are seeing “softening” import demand as retailers try to get rid of inventory sitting in their distribution centers nationwide.

Total imports, including empty import containers, were down 4% y/y in February to 2.3 million tons.

“For the U.S. overall, we are now seeing some considerable softening of demand at our container terminals as well, especially in the import of containers in Houston,” Guenther said. “Retailers in our country, and regionally and across the country, have a very high level of inventory in their distribution centers. It’s likely imports will continue to trend down during the first half of the year as retailers are selling off these goods that they have in these distribution centers. We believe the recovery of the volume will start in the second half of the year.”

Jeff Davis, Port Houston’s chief operations officer, also said imports are “dropping off” with less cargo from Asia.  

“As we look at this month, it is up, but compared to the last six months of [2022], it’s starting to drop off,” Davis said. “We’re not seeing empties go back to Asia and come back as full containers.”

Davis also said there are no container ships waiting to get into the port as the ship queue has gone to zero.

“You might recall for the past two years we’ve had a few ships waiting to get into our facility, and it peaked at about 30 ships at the container facilities about six months ago,” Davis said.

During February, ship calls were down 6% y/y to 581 vessels, while barges calling at the port fell 29% to 262.

Port of New Orleans records jump in container cargo

The Port of New Orleans reported total TEUs in February of 38,456 TEUs, a 33% increase compared to the same period last year.

Top containerized commodities that passed through the port in February were plastics, resins and chemicals.

“Overall container figures are up compared to February 2022,” Kimberly Curth, the port’s spokeswoman, told FreightWaves. “This is an encouraging sign as export demand is strengthening.”

Breakbulk cargo totaled 125,580 short tons in February, a 35% y/y decline compared to the same month in 2022.

Steel and rubber cargo were the top breakbulk commodities during the month.

The port handled 12,723 Class I rail car switches in February, a 22% y/y increase. The port handles switching operations for the six Class I railroads that operate in New Orleans: BNSF Railway, CN, CSX, Kansas City Southern, Norfolk Southern and Union Pacific.

Watch: Will there be more major trucking mergers?

Click for more FreightWaves articles by Noi Mahoney.

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