Pacific Basin Shipping saw its 2016 net loss widen to $86.5m from $18.5m previously as record low dry bulk market conditions significantly undermined its ability to generate satisfactory results and revenue slid 14% to $1.09bn from $1.26bn previously.

The company’s core dry bulk business generated a net loss of US$87.6m compared to a net loss of $34.7m in 2015. “2016 was an extremely poor year for dry bulk shipping. Average market rates were even weaker than in 2015, dragged down in the first quarter by rates not seen for 45 years,” chairman David Turnbull said in a stock market statement. However it added that “conditions improved over the remainder of the year, and sentiment in the industry is recovering”.

While Pacific Basin again outperformed the market in terms of vessel earnings and generated positive operating cash flow, given the weak market, it still produced a significant net loss.

Pacific Basin ceo Mats Berglund said: “Freight rates were undermined at the start of the year by the general seasonal slowdown in demand, lingering oversupply of dry bulk tonnage and reduced movements of coal.”

He noted that freight earnings then improved over the remainder of the year, benefitting from increased South American grain exports in the second quarter and stronger US grain exports in the second half, as well as growth in trades such as cement into North America.

Berglund said Chinese industrial activity was significantly down at the start of the year, but improvements from March onwards drove a revival in the iron ore and coal trades and minor bulks such as logs, cement and copper concentrates in the remainder of the year.

“In this difficult environment, we generated average handysize and hupramax daily TCE earnings of $6,630 and $6,740 per day net, outperforming the BHSI and BSI indices by 34% and 14% respectively,” Berglund pointed out.

Looking ahead, Berglund said: “2017 has started stronger than last year, and we believe the worst of the current market cycle is behind us and that supply-side corrections have begun to lay the foundations for an eventual market improvement.

“We believe 2017 will be better than 2016,” he said, however Berglund reiterated that the group still expects “continued uncertain markets in 2017 and will continue to conduct our business efficiently and safely while astutely combining ships and cargoes to maximise our margins”.

Berglund continued the usual mantra that market recovery needs lower net growth in the global dry bulk fleet. He noted however that negligible new minor bulk ship ordering and non-delivery of some existing newbuilding orders should help alleviate the situation somewhat in the next few years.

Pacific Basin is also joining other shipping related firms such as maritime law firm Ince & Co in moving out of costly offices in downtown Hong and will be relocating to more cost-effective premises in Wong Chuk Hang outside of the central business district in May.

Posted 28 February 2017

Greek owners have shown a big appetite for resale and secondhand bulkers in the past week, with some analysts saying this may reflect anxiety to act before prices rise to levels no longer considered dirt cheap. A fear of missing out on ultra-low prices seems to be gripping the secondhand market. Even owners inactive for years are taking the plunge, says Intermodal analyst George Iliopoulos in a report to clients. Iliopoulos says potential buyers might see it as “just before the window of opportunity to buy at fairly attractive levels closes”.

It is telling that names such as Diamantis Lemos Ltd, which has not made a dry bulk purchase for at least 15 years, are appearing in brokers’ sale-and-purchase (S&P) reports. Some suspect the London-based owner and its Piraeus affiliate, Diamlemos Shipping, is the buyer of the 75,000-dwt Conti Spinell (built 2011), acquired from Germany’s Conti Group for about $10.5m. It would be the first S&P move by Diamantis Lemos since 2002, when it assembled its current four-ship panamax fleet built at Hudong Zhonghua Shipbuilding. However, Diamlemos spokespersons were unavailable to comment and other brokers suggest that South Korean interests have picked up the Conti Spinell instead.

Vessel prices have already appreciated significantly since the multi-year lows they hit during the freight rate crisis early last year. Adjusting for inflation, secondhand values may even have hit record lows then. Average reference prices cited by Clarksons for 10-year-old capesizes have gained one-third over the past year; the price of 15-year-old panamaxes has almost doubled over the past 10 months; ultramax resale prices gained nearly 30% over the same period; and five-year handysizes climbed by half. Ship values are expected to increase further, Clarksons says.

Positive expectations for the remainder of the year come on the back of improved forecasts for iron ore and coal demand in 2017. Newbuilding activity in dry bulk remains practically non-existent. This, combined with high levels of dry bulk scrapping that reached a combined 59.4 million dwt over the past couple of years, has brought the dry bulk newbuilding-to-fleet ratio to a 15-year low of about 9%. Intermodal expects that ratio to drop even lower, to a record low of 6% in the second quarter of this year.

“Whoever moves now, moves wisely,” a senior executive of a big dry bulk operator, whose principals purchased a capesize in recent weeks, told TradeWinds. Another Greek owner who dipped into the market is Ismini Panayotides. Her Athens-based company, Pavimar, confirms it has bought the 81,000-dwt Epson Trader II (built 2009). Brokers believe the Nisshin-owned ship changed hands for $12.25m. It was one of several whose purchase had been initially attributed to Greek peer Chartworld. However, Lou Kollakis-led Chartworld is still believed to have purchased the sistership Epson Trader I (built 2009), again from Nisshin, at a higher price of about $13.2m. However, George Economou has also been touted as a possible buyer of that vessel.

Nisshin is said to have sold another two kamsarmaxes – the 82,000-dwt Bergen Trader I (built 2012) and sistership Bergen Trader II (built 2013) – en bloc last week for $32m. Brokers say these ships were sold to Koreans, with the deal being on subjects until the end of February. Unidentified Greek owners have been linked to another two Japanese-held dry bulk vessels: the 60,200-dwt Red Sakura (built 2017), which reportedly changed hands for $23.2m, and the 76,300-dwt Red Gardenia (built 2005), which went for more than $7.5m. Keishin Kaiun, owner of the Red Gardenia, had attempted to sell the ship last July but held back from doing so after failing to secure a sufficiently high price.

In the smaller ship classes, many Greeks are active as sellers, taking advantage of buying appetite from Chinese and Middle Eastern buyers. Madias family interests are said to have offloaded the 53,400-dwt MIM Supramax Vivi (built 2008) to Chinese buyers for $7m. Sources are already listing the ship in the fleet of China’s Nanjing King Ship Management under the name of KSL Deyang. The vessel was last listed under the management of Maria Madias-led Axis Bulk Carriers. It had been previously managed – since its delivery as a newbuilding – by Chian Spirit Maritime, an Athens-based company run by Nicholas and Panayiotis Madias. The sale of the MIM Supramax Vivi leaves Axis Bulk Carriers with two panamaxes in its fleet.

Operators of smaller dry bulk carriers are set to be the biggest winners as the rise in grain shipments is expected to keep handysizes to supramaxes busy, with a large overflow to the panamax sector. A strong demand for wheat in Asia has led to record activity in the global wheat trade, driven by strong demand from China, Vietnam and India.

In a global grain report published this month, the United States Department of Agriculture (USDA) said that wheat imports have more than doubled over the past decade in Southeast Asia alone, to over 25 million tonnes. “Milling-quality wheat demand has grown as diets have shifted towards more wheat products. Furthermore, feed and residual use has more than doubled due to rapidly rising demand from the livestock, poultry and aquaculture sectors,” it said.

The report says that demand in Thailand and Indonesia has recently dropped slightly due to low feedstock requirement. However, this has been more than compensated for by Vietnam, where the USDA predicts wheat imports will surge 67.4% year-on-year to five million tonnes for the 2016-2017 marketing year, which runs from July to June. India has also been importing record amounts of wheat. It has bought more than five million tonnes since mid-2016, its biggest annual purchase in a decade. However, grain traders say India is cutting back on imports ahead of the April harvest, so purchases in the preceding months will depend on the size of the crop.

On the wheat production side, shipbroker Banchero Costa (Bancosta) said in a recent report that Brazil, traditionally a wheat importer, has exported several shipments recently. A large crop and a government subsidy make Brazil’s exports more competitive. Bancosta reported that Brazil exported 338,000 tonnes of wheat in December and January and is expected to ship 244,000 tonnes more during February, with China, South Korea and Vietnam being the main destinations. But Brazil’s wheat exports remain a miniscule amount of the entire global grain trade, which the USDA calculated at 172.1 million tonnes for the 2015-2016 marketing year. The USDA expects total wheat exports will grow to 178.3 million tonnes in 2016-2017.

The USDA forecasts that the rice trade will rise in 2017 due to larger imports by Asian and Middle Eastern countries, along with Brazil. Global trade in 2016 stood at 40.8 million tonnes and the trade this year is projected to climb 3% to the third-largest level on record. This is said to reverse the recent two-year contraction that occurred as countries sought to increase domestic production and self-sufficiency, sometimes through restrictive-trade measures. Although the global rice trade is predicted to grow, several shifts in trading patterns are underway. Growth in Thai and Vietnamese exports has slowed due to increased competition from India, which exported 10.43 million tonnes in 2016, making it the world leader. Thailand shipped 9.88 million tonnes of rice and Vietnam 4.95 million tonnes. In fourth place was Pakistan at 4.3 million tonnes and the US fifth with rice exports of 3.5 million tonnes.

The Thai Rice Exporters Association said shipments should drop slightly to 9.5 million tonnes for this year, while Vietnam is expected to register a slightly larger decline. Thailand and Vietnam claim that their exports have been affected by India, which has muscled its way into the African markets that have traditionally been major buyers of rice produced by the two Southeast Asian nations.

Over in the Americas, rice producers in the US are getting increasingly concerned that president Trump’s war of words with Mexico could result in the largest foreign buyer of US rice going elsewhere for its supply. Trump has been threatening that Mexico will pay for the construction of a wall along the US-Mexico border and his administration has floated the idea of a 20% to 35% tariff on Mexican imports to foot the bill. In retaliation, Armando Rios Piter, a Mexican senator who leads a foreign-relations committee in the government, said he intends to introduce legislation to shift the country’s grain import supplies elsewhere. Mexico takes one-quarter of the US export crop. Mexico also bought about 23% of the 51.2 million tonnes of corn exported by the US in 2015-2016. If these threats become a reality, Mexico will probably have to source its rice from Asia and its corn from Argentina and Brazil. “That would be very good for the tonne-mile ratios,” said Thailand’s Precious Shipping managing director Khalid Hashim.

Something is not quite adding up in China’s iron and steel markets, with the reasons for the current rally in prices for both commodities jarring uncomfortably with actual data.

Iron ore futures on the Dalian Commodity Exchange on Tuesday hit the highest since the contract was launched in 2013, reaching an intraday peak of 741.5 yuan ($108) a ton, ending 3.2 percent up on the day, taking the gain since the beginning of 2016 to 258 percent.

The simple explanation is that iron ore is merely tracking gains in steel rebar futures, the main Chinese benchmark traded on the Shanghai Futures Exchange.

Steel futures closed on Tuesday at 3,589 yuan a ton, having earlier reached their highest level since February 2014. Their gain since the start of 2016 stands at a fraction over 100 percent.

The main reasons cited for the rally in steel are strong growth in demand because of Chinese infrastructure spending and fears over supply, given Beijing’s plans to cut excess capacity and enforce stricter pollution controls.

While it’s fair to say demand for steel has been boosted by increased spending, and that steel capacity has been cut, there is little evidence that this is creating any shortage of the alloy.

Production is still strong, with China’s crude steel output reaching 67.2 million tonnes in January, up 7.4 percent from the same month a year earlier, the World Steel Association said on Tuesday.

Production for 2016 was 808.4 million tonnes, up 1.2 percent on the prior year, confounding expectations at the start of last year that output would decline as the industry was forced to rationalize capacity.

Some 45 million tonnes of excess capacity was shut in 2016, part of a plan to shutter as much as 150 million tonnes by 2020.
But it’s clear that shutting excess capacity has had zero impact on steel mills’ ability to increase production.

In fact, it may have the opposite effect, as the capacity that has been closed was older, less efficient and generally loss-making, meaning the mills currently operating are more profitable and thus incentivized to boost output.

Certainly, there appears to be no shortage of steel in China, with rebar inventories rising to 8.397 million tonnes in the week to Feb. 17, the highest for almost two years and more than double the recent low of 3.508 million recorded on Nov. 18 last year.

It’s much the same story with iron ore, with inventories surging to 127.5 million tonnes in the week ended Feb. 17, the most since at least 2004, according to data compiler SteelHome.

INVENTORIES TO PROMPT CORRECTION?
What has happened in recent months is that China’s output of steel, and its imports of iron ore, have been robust on the back of the rise in steel prices.

Steel production has been incentivized by the solid profits being made by steel mills, and this has led to strong gains in iron ore imports, with January’s 92 million tonnes being the second highest on record.

The question is how long can the current situation be sustained?

It certainly doesn’t seem logical that prices can continue to rally when inventories are reaching uncomfortably high levels.

At some point the volume of steel and iron ore sitting at Chinese ports and warehouses will overwhelm even the most optimistic traders, but picking that point is far from an exact science.

In the past, peaks in inventory cycles have been matched by falling prices, but the last five years are tricky given the market was also suffering from persistent oversupply in iron ore and steel, whereas now it’s more fundamentally balanced.

Certainly, Andrew Mackenzie, chief executive of BHP Billiton, is cautious on iron ore, telling reporters on Tuesday that the world’s No.3 producer of the steelmaking ingredient sees risks to the downside in the short term from moderating Chinese steel demand growth, high port inventories and incremental low cost supply.

So far, the paper markets for iron ore and steel have been happy to forego a cautious approach to the outlook in 2017, but optimism in the face of contradictory data may well lead to a sharp reality check.
Reuters (Editing by Joseph Radford)

CHINA suspended coal imports from North Korea for a year from February 19, 2017 — a development bulker owners hope may translate into more shipments from other producers such as Australia, and help sustain the dry bulk market recovery.

The sanctions may translate to as much as a 20% increase in seaborne coal imports and are beneficial for panamaxes and capes — the larger vessel sizes — bringing this product from Australia to China. Other coal-exporting countries that could benefit are Vietnam and Russia.

However, those benefits for overseas producers are unlikely to materialise any time soon. It will be easier for Chinese steelmakers to source domestic coal to cover near-term requirements. One of the benefits of North Korean coal was its proximity, which made freight cheap.

Most of the North Korean supplies to China consist of anthracite, which is a higher-quality grade mainly used for steelmaking or in higher-value industries such as ceramics and chemical industries. The closest material to anthracite is pulverised coal injection (pci) coal, and Australian companies producing this grade include Macarthur Coal, Wesfarmers and Jellinbah.

Around 22.5m tonnes of anthracite was imported by China from neighbouring North Korea in 2016, up 14.5% year on year. The shipments were worth almost $1.2bn, Chinese customs data shows. This made North Korea the fourth-largest exporter to China after Australia at 70.5m tonnes, Indonesia at 39.1m tonnes, and Mongolia at 26.3m tonnes.

Downplaying the potential for more coal imports from elsewhere, a few analysts even warned the move could hurt the freight market, even though seaborne trade in coal is forecast to improve this year.

“In China, they use North Korean anthracite for steelmaking only because it is cheap. They would not otherwise use anthracite as it is more expensive and therefore more inefficient than using standard coking coal,” said Banchero Costa head of research Ralph Leszczynski.

“If they cannot import North Korean anthracite, for most uses they would just go back to using standard domestic or imported coking coal and thermal coal,” he asserted.

If China adheres to the restriction for the rest of the year, there is a possibility that Chinese importers will face a shortage of about 20m tonnes of coal, assuming demand from the steel and other sectors remains steady. However, with the recent recovery in coal prices, domestic coal production in China is now expected to rebound a little as the New Year holidays are over and winter is coming to an end, Mr Leszczynski added.

China is targeting production of 3.65bn tonnes this year, the National Energy Administration said in a report on Friday. “Therefore, probably the shortfall in Korean coal will simply be replaced by slightly higher domestic Chinese coal production, and the result will be neutral on ‘mainstream’ imports from Australia and Indonesia,” he conceded.

Certainly, China will seek the higher grade of coal from Australia but it is unlikely the nation could fill up the gap in the short term and Indonesia would not be considered because of the high ash content coal it produces.

So it is a worrisome scenario for bulker owners if China is able to substitute North Korean material with imports from neighbouring Mongolia, as the land-locked supplier sells its coal well below the seaborne price.

According to mining.com, China paid $63 per tonne for Mongolian coking coal in December last year as compared with the seaborne price, which was averaging above $230 per tonne.

The Chinese Commerce Ministry suspended coal imports in accordance with the United Nations National Security Council resolution that targets North Korea’s commercial trade to curb the country’s nuclear and ballistic missile programme.

The move was preceded by a North Korean intermediate-range ballistic missile test on February 12 this year and the alleged assassination of Kim Jong-nam, the half-brother of North Korean leader Kim Jong-un.

China’s steel mills and traders were scrambling to find alternative supplies of coking coal for steel making on Monday after Beijing slapped a surprise ban on coal imports from its isolated northern neighbour.

Chinese prices of steel, coking coal and coke all rallied, as traders and analysts said mills will likely be forced to buy more expensive domestic material or seek alternatives further afield from Russia or Australia, driving up costs.

While North Korea accounts for only a small portion of China’s total coal imports, it is the main foreign supplier of high-quality thermal coal, called anthracite, which is used to make coke, a key ingredient in steelmaking.

“This news really took us by surprise. We are looking at a couple of alternative plans,” said a steel mill purchasing manager, based in the northern province of Liaoning.

These included buying anthracite from Shanxi province or buying more coke from local providers, but both were more costly, said the manager, whose firm uses about 10,000 tonnes of North Korean anthracite each month.

Business with North Korea had become increasingly difficult under years of sanctions and the once-bustling trade handling coal from the north had shrunk to just a few private merchants.

Still few mills or traders anticipated the complete suspension of imports, which came a week after Pyongyang tested an intermediate-range ballistic missile, its first direct challenge to the international community since U.S. President Donald Trump took office on Jan. 20.

China bought 22.48 million tonnes of anthracite from North Korea in 2016, 85 percent of its total imports.

PRICES RALLY
Steel mills often blend anthracite with coking coal to make coke, a fuel used in blast furnaces, rather than using only more expensive coking coal.

China’s most-active futures contract for rebar, a steel product used in construction, rose 2.6 percent by 0640 GMT on Monday, while coke and coking coal added 2.6 percent and 2.4 percent respectively.

Shares in Chinese anthracite producer Yangquan Coal Industry rose 2.8 percent.

“Rebar jumped on anticipation that the ban on North Korean anthracite could lead to higher costs for steel mills that will struggle to find cheaper alternatives in the domestic market,” said Zhang Min, a coal analyst based in Zibo, Shandong with Sublime Information Group.

A coke producer said he expected the ban to lead to a rebound in coke prices, which had fallen since late December due to good supply and reduced demand for the Lunar New Year.

“I am not planning to take any new orders from new clients right now, because we believe coke powder prices will rebound sharply this week on the news,” said the manager of a domestic coke plant, based in Shandong province.

Some mills could seek other imports, but producers such as Australia, Russia and Vietnam didn’t produce enough to pick up the slack and shipping it would cost significantly more than from North Korea, traders said.

Reuters (Reporting by Josephine Mason and Meng Meng; Editing by Richard Pullin)

China’s suspension of seaborne coking coal imports from North Korea would be positive for the dry bulk shipping market as more coking coal would have to be sourced from further afield.

On 18 February, China’s Ministry of Commerce announced that the country will suspend North Korean coal imports through year-end, to penalise Pyongyang for the latter’s 12 February missile test.

Speaking to Fairplay, Jeffrey Landsberg, president of dry bulk consultancy Commodore Research, noted that China imported approximately 23 million tonnes of coking coal from North Korea in 2016. This amount would work out to roughly 766 shipments on Handysize bulk carriers.

Landsberg said: “The ban on coking coal imports from North Korea is positive for the dry bulk shipping market. Commodore now expects China to import more coking coal from several countries, including Australia, Russia and Canada.

Coking coal, along with iron ore, are the key ingredients of the production of crude steel.

Besides seaborne imports, China also imports coking coal from Mongolia via rail and truck across the Gobi Desert.

Coking coal is North Korea’s single biggest export item and source of income, while China is the isolated nation’s largest ally.

While the official announcement stated that China wanted to comply with the UN Security Council’s latest resolution to penalise Pyongyang for its missile test, observers believe that the East Asian power is also retaliating against North Korea for reportedly ordering the assassination of Kim Jong-nam.

Kim Jong-nam, the estranged older half-brother of North Korean leader Kim Jong-un, died after being reportedly accosted and sprayed or injected with a toxic chemical by two women in Kuala Lumpur International Airport on 13 February.

The older Kim had close ties to China and was reportedly under Beijing’s protection.

It has now been over 27 months since the sudden collapse of Denmark’s OW Bunker. For maritime lawyers in the United States, particularly in New York, it has been ‘the gift that keeps on giving’ – and the end is not yet in sight. When OW Bunker failed, it had yet to reimburse millions of dollars to physical bunker suppliers who had provided fuel to shipowners and operators on OW’s behalf. In the hundreds of US legal cases that followed, physical suppliers sought liens against vessel interests, as did OW entities and lender ING – the lead agent for a USD700 million revolver that had an assignment for OW’s receivables.

While district court judges across the country have overwhelmingly sided with OW and ING on the question of who has the right to the lien, a ruling was recently made in favour of a physical bunker supplier in a Florida district court. According to Seward & Kissel partner Bruce Paulsen, who represents ING, “The law is pretty clear, we think, which is why we’ve had so many decisions that have gone contrary to the one outlier decision in Florida. A number of judges have expressed sympathy for the physical suppliers’ situation, but that doesn’t change the statute, which makes clear that for the supplier to have a lien, it has to supply the necessaries on the order of the owner or the person authorised by the owner. The physical suppliers didn’t have relationships with the owners or charterers in these cases. They had relationships with OW. That’s the way they did business,” Paulsen told Fairplay. “If they thought – and I know some of them did – that they could always rely on a lien, well, I am not sure they looked hard at the statute or the case law. The Florida decision flies in the face of the statute and the case law on the lien question, and the judge also ignored the OW bankruptcies,” maintained Paulsen. “The fact is that ‘the music stopped’ and the money didn’t flow through the chain of contracts to the physical supplier as it would have had there been no bankruptcy. This is what happens when companies go insolvent. When the physical suppliers’ contract counterparties [the OW entities] went bankrupt, they went looking for someone else to sue [the vessel interests].”
Ultimately, the Florida decision in favour of the physical supplier is not pivotal to the shipping industry. The central question of whether physical bunker suppliers can have a lien against vessel interests will not be decided at the district court level, but rather, at the appellate court level. Already, there are nine OW-related district court rulings that have been appealed to the appellate court level in four circuits: six cases in the 2nd Circuit, and one each in the 5th, 9th, and 11th Circuits (at press time, ING had yet to decide whether it would appeal the Florida ruling). A ruling on the 5th Circuit case – Valero v M/V Almi Sun – is expected shortly.

“As for the timing of these cases, we’re certainly at the end of the beginning,” said Paulsen. “What was really time-consuming was when many, many of these cases were in discovery and we had depositions and document productions ongoing for months and months. Then there were trials and summary judgement motions, some of which are still pending, and now we’re moving into the appellate phase, and the appellate courts move at different speeds, so we’ve still got a ways to go.”

“I’d say we’re in the middle – about the fourth or fifth inning,” said Holland & Knight’s US maritime practice leader Jim Hohenstein, when asked to judge how far along the overall OW legal process had progressed. “The legal standards are yet to be determined and the appellate courts are really going to set the law,” said Blank Rome partner John Kimball, adding that the decision “will probably remain at that level, but you never know”.
If appeals panels in different circuits reach opposing conclusions, it would set the stage for a possible showdown before the US Supreme Court, assuming the high court opts to take the case. “It’s too early to tell if that’s going to happen,” said Paulsen. According to Hohenstein, “It may well end up in front of the US Supreme Court.”

A definitive decision on whether or not a physical bunker supplier can obtain a lien against a vessel interest will have major implications for shipping. “It is a big issue, because there’s a lot of money at stake and a lot of people are affected by it on a daily basis, as fuel suppliers provide the fuel and there are questions about who’s going to pay that bill,” said Kimball. “What this [the OW case] has exposed is the risk between the physical supplier of bunkers and its counterparty, which is typically not the vessel owner,” said Hohenstein. “Everything runs on credit, so it could well be that credit arrangements would tighten considerably, and it wouldn’t surprise me if that hadn’t happened already.”

In addition to the OW Bunker saga, another major case that has generated significant work for New York maritime attorneys is the collapse of South Korea’s Hanjin Shipping. “That has had broad impacts because of how precipitous it was,” said Hohenstein. “There were a myriad of different interests affected, including terminals that we represented, as well as companies that had boxes on the ships, or who had ships chartered to Hanjin, or where Hanjin had slot charters with other carriers.”

Although legal action from Hanjin’s insolvency is not expected to last nearly as long as fallout from OW Bunker’s demise, there will be lasting after-effects. According to Holland & Knight partner Chris Nolan, “Because people thought Hanjin was too big to fail and it did fail, charterers and shipowning interests and everyone in the logistics chain is looking at other carriers and asking themselves, ‘What if this happens again? How can we be ready to move in a fashion that will not be as haphazard?’ They’re being much more proactive when thinking about contractual counterparties.” Beyond work related to Hanjin and OW Bunker, prospects for billable hours in New York are less positive. Although there has been an increase in risk-advisory services following the election of Donald Trump, several of the attorneys speaking to Fairplay acknowledged that the current level of legal activity – excluding OW cases – is relatively modest, if not subdued. In general, legal work surges when markets are booming and when they are crashing, and pulls back when they are neither, as is currently the case.

“As far as maritime litigation in New York, if you took the OW cases away, things would seem quieter than they have been in the past,” said Paulsen. “In my space [securities litigation], share prices have been so low for so long that we’re not seeing a lot of activity with securities cases involving public shipping companies. I haven’t seen a lot of maritime arbitration over the last couple of years either. I think things will have to recover a bit more in the industry before we start seeing more activity. At this point, people are just taking their USD8,500/day, hoping to cover expenses and hoping for better times.”

According to Brad Berman, Americas head of shipping at Norton Rose Fulbright, “I think some of the firms, and I don’t count us as one of them, have been suffering because they over-hired. We haven’t. We’ve been able to be lean and mean when there hasn’t been as much work. “If you’re a shipowner and money is tight, one of the things you cut expenses on is your lawyer,” Berman said in an interview with Fairplay. “If you only have enough money to pay operating expenses and you don’t have any debt service and no capital expenditures and your bank is on top of you because your loan-to-value [ratio] is off, you’re not going to go after a USD100,000 claim to prove you’re right and spend USD50,000 in court, you’ll just try to settle for USD40,000.”

“For smaller claims work, there’s going to be a problem and I think some of the smaller, more boutiquish, old-line firms are really going to start to feel the squeeze,” said Brian Devine, Americas head of transport at Norton Rose Fulbright.

Kimball agreed that the current state of shipping markets is less conducive to a high volume of legal work. “When people are getting out of contracts, we are busy, and when people are getting into contracts, we are also busy,” said Kimball, adding, “There are just not as many cases. There haven’t been significant casualties – which is good for the shipping industry – and the P&I clubs have the lowest claim level they have had in as long as anyone can remember.” Kimball also noted that one of the strengths of New York’s maritime law community is ship finance, “but that is slower because the capital markets have pulled back and there is definitely not the same level of investment we saw before”.

“Our practice is broad enough that we have been busy, just in a different way,” affirmed Kimball, who believes that “all the New York firms are still doing okay. It’s not the boom years, but it’s pretty steady. And we do have a very positive outlook. I think we have probably seen the bottom for the shipping industry and we’re looking at some good years ahead”.

With contraction in vessel supply and healthy demand growth, the dry bulk shipping market is expected to recover from 2017 onwards, according to the latest edition of the Dry Bulk Forecaster, published by global shipping consultancy Drewry.

An impressive outlook for dry bulk demand coupled with a small orderbook of newbuilds as a percentage of the total fleet capacity will ensure a sustained recovery in the dry bulk market. Earnings in the dry bulk market are expected to improve from 2017 with a narrowing supply-demand gap. Demand is projected to grow at a healthy pace of 3% while supply is expected to grow by about 1% from 2017, making the dry bulk segment an interesting market to invest in.

The growth in demand originates from a rise in iron ore and thermal coal trade. Coal demand is expected to rise mainly from developing Asian countries including Vietnam, South Korea, Taiwan and China. The rise in Chinese domestic steel consumption will provide employment to VLOCs and Capesize vessels carrying iron ore in the market. On the other hand, Vale’s new project S11D has become the most cost effective iron ore mining project and will increase iron ore supply from Brazil increasing total tonne miles; this will help demand for bigger vessels in the long term.

The supply side is projected to grow by just 1% from 2017 because of high scrapping and a thin orderbook. The environmental regulations on Ballast Water Treatment System (BWTS) will become effective in September 2017 and IMO’s regulation on use of low sulphur fuel oil in 2020 which will result in high scrapping of old tonnages. Shipowners will prefer to scrap their old tonnage, with low earnings potential, than incur additional cost on scrubber and Ballast Water Treatment Systems. On the other hand, a contracting orderbook and low future new orderings due to limited financing availability are keeping a check on future deliveries. At this point in time, the orderbook as a percentage of the total fleet, which is a strong indicator of future deliveries currently stands at a decade low.

“The outlook for the dry bulk shipping market continues to be positive as the supply and demand gap continues to narrow. Charter rates are expected to improve for most of the dry bulk segments in 2017 with the steepest recovery expected in Capesize segment. Average charter rates are expected to rise from $8,000 per day in 2016 to $12,800 per day level in 2017 and will further improve from 2018,” commented Rahul Sharan, Drewry’s lead analyst for dry bulk shipping.

Clarksons expects dry bulk trade to increase by 3.8% year on year in 2017, building on the sector recovery from late last year amid an unexpected rise in Chinese demand for coal and iron ore. However, the trade growth projection was tempered by expectations for fleet growth of about 2.7% to 3.8% this year, which signals that scrapping will have to kick in to aid the recovery.

A relative recovery is expected in the dry bulk market, said Clarksons dry cargo analyst John d’Ancona while addressing the Mare forum in Singapore on Wednesday, but he cautioned that “this is still a difficult market. The forward freight curve has started to gain confidence but it is still very cautious. This gives us a message that the dry bulk market is still going to struggle for a while.”

Despite the caution, he noted that quite a few positive factors had emerged in the market in 2017. He highlighted the improved sentiment as reflected in the macro economy, in terms of freight rates and in the supply-demand balance in general, which is coming back in line. Another factor was the improvement in commodity prices and higher bunker prices, which are likely to keep freight supported as well. Mr d’Ancona said that demand worldwide was improving, which would focus on big infrastructure, boosting minor bulk demand.

Iron ore expansions from Brazil and Australia, and the rocketing coal trade in Southeast Asia, made dry bulk trade a safe bet, he said, adding that people tended to look to China and India for coal trades, but he believed the requirement for coal comes from many other countries in Southeast Asia, such as the Philippines, Malaysia and Vietnam.

On a less optimistic note, one of the major concerns remains the fleet growth in the first half of 2017. Mr d’Ancona said: “This is not just normal slippage into the beginning part of the year, but ships that were completed a year or two ago but were never delivered [as they were deferred].”

He said that scrapping seemed to have reduced from January last year, but added: “Interestingly, more vessels were sent for recycling in January 2017 as compared to the rate of scrapping in the second half of last year.”

A more immediate worry was the growing number of open shipments that have just completed their voyages in the fourth quarter. Also, there was a possibility for coal trade to wane on the back of the slowdown in Chinese enquiries as domestic production increased, he said.