Ton Mile Trader

IMAREX - ASIAN CLEAN TANKER FFA REPORT   8 Feb, 2010

Imarex Academy – Professional FFA Trading Courses in London and Sydney, March 2010

You are invited to attend the Imarex Academy Professional FFA Trading Courses in London and

Sydney in March 2010. Seize this opportunity to learn how to trade freight futures effectively and

to gain a detailed perspective of the tanker and dry bulk freight derivatives market. For more

information please refer to the Imarex Academy website http://www.exchange.imarex.com/imarex-academy/category488.html .

Clean Tanker FFA Summary:

TC4 (MR SG-JP 30KT) Feb kicked off the day with 135 lifted but ended 133.5 at 135 for a small decrease on the day. Q2 traded 5 points under Jun as a spread indicating a deepening of contango. Q2 closed 140 at 145, Q3 143 at 152 and Q4 155 at 157.5 for little movement on the day.

TC5 (LR1 AG-JP 55KT) Feb paper held fairly flat with 135 and 135.5 done, but the back end was pushed lower. Q3 was given at 139 and Q4 at 147, flattening the forward curve. Q4 was working 144 at 149 at the close and the Feb-Dec strip slipped to 138.5 at 142.

For Platts TC4 & TC5 Spot please refer to the IMAREX trading screen.

Physical market talking levels:

MR: Sing/Jpn estimate W130 The PACIFIC OASIS if true is a full 12 points lower than the RAFFLES PARK reported here on the 29^th.  It often takes some time for lower AG rates to play out into Singapore, but this surely cannot bode well for MRs here.

LR1: Ag/Jpn estimate W145-140 With no immediate long-haul arb in sight, the lack of demand of the last week in doing a job on rates. Expect more of the same until the cargoes start flowing.

LR2: Ag/Jpn estimate W140 We have to look back to the 25^th of Jan for a fronthaul fix rate, last concluded at W145. With the passage of time, the once thin tonnage list is beginning to look amply supplied for Feb and will certainly leave vessels waiting into March.

Reported fixtures:

Worst.  Idea.  Ever.

- Bloomberg Radio:  Today – 3pm EST – I will be on with Jeffrey Pribor of GMR and Akis Tsirigakis of SBLK.

- Tuesday 9^th don’t forget the Hellenic-Norwegian Chamber of Commerce Shipping Event in NYC…and on Wed-Thurs 10^th-11^th BB&T is hosting their annual Transportation Services Conference in Miami.

Capital Link Indices
Maritime:    1808.53   -24.44   -1.33%
Tanker:       2132.17   -40.32   -1.86%
Dry:           889.88       1.75       0.20%

Baltic Indices
BDI 
BCI   
BPI   
BSI  
BHSI 

Martin Korsvold:  Inventories of iron ore at Chinese ports are reported at 68,5 mill tons at the end of last week, up 0,85 mill tons WoW. The iron ore market posted a modest rebound last week with the spot price moving up ~5% to USD 125.9/pmt for 62% FE delivery CFR Tianjin, whilst the 2010 curve appreciated 4-5%. The rebound came on the back of higher activity ahead of the Chinese New Year holiday which starts at the end of this week. In addition there are rumors that the Indian government will increase the royalty on export ore to 15%, up from the 5% set in December. If true this would have a positive impact on the prices.

Dry FFAs  - light volume as prices sell off, though Capes currently have support at these levels

              Spot                               Q2 FFA       
Cape:                                       34750, down 1500
PM:                                          25750, down 750
SM:                                          21750, down 500

Crude
VLCC Ag/East      85     ($49k)     softer
SM Wafr/Usac      87.5  ($16k)     about same, possibly touch softer
Feb AG                 70 
March AG             0      
Feb Wafr bbls       81m  
March Wafr           7m   
Turkish Straits       5n/3s  down 3  
Fujairah bunkers   448      down 2       

Physical:  Limited activity brings softer sentiment and in some cases softer rates.  Some cgos are seeing a large amount of offers come in – thereby allowing Charterers room to leverage rates down.

Crude FFAs:  Trading is off to a slow start and bid/asks provide few clues as to the state of today’s sentiment, though the market seems largely in line with Friday’s closing levels:   TD3 Feb 80, TD3 March 69, TD3 Q4 75.

Clean
37kt Cont/ta        180     ($12k)    about same
38kt Caribs/up     145     ($6k)      about same, soft tone
55kt Ag/East       140     ($13k)      softer

Physical:  Wafr activity has kept regional demand alive, though overall sentiment in the Atlantic basin in somewhat weak.  Eastern rates are showing a soft underbelly as well as rates on a few trade lanes move a touch further to the downside.

FFAs:   Negligible activity thus far.  Bid/asks imply that we remain close to closing levels for time being.  TC2 Feb 178, March 158.  TC4 Feb 135, TC5 Feb 135.

Baltic Dry Index closed @ 2715 down -133 points or -4,67% for the week.  Top/bottom performances

SBLK +5.93%, SB +3.29%, DSX +2.04%// NMM -11.91%, OCNF -9.63%, EXM -8.32%

FIDELITY MARI has chartered the Genco Knight (GNK) a 73,941dwt Panamax built in 1999. Laycan was set for Feb 4-6^th at IMMINGHAM on the Humber Estuary (a large tidal estuary on the east coast of Northern England) >via USG > CHINA at a rate of USD 34,500 daily.  Immingham is the UK’s largest dry bulk-handling port. Cargoes, such as coal, ilmenite, petroleum coke, titanium slag, ferrous alloys, pig iron and pyrites, are regularly handled at the port’s in-dock and deep-water riverside facilities.  I could not find the harbor masters report telling us whether she will be laden departing the UK.

Mining Australia: “Rio Tinto is demanding a 40% rise in the benchmark iron ore price following negotiations with Japanese and Korean steel mills.  According to the report, the Chinese are unlikely to accept any raising of the benchmark price above 30%.  Another source was reported as saying that the Korean and Japanese steel companies could be willing to accept up a 40% rise in the benchmark.”  I hope we don’t see any negotiators end up in jail this year.  My first few years in shipping equities I failed to understand the significance of the benchmark.  Now this unfortunate annual reality leaves me glued to the news, fully understanding I cannot believe a word I read. 

Fairplay:  “Russia is being accused of dumping nuclear waste into the Baltic Sea in the early 1990s, the BBC reported today.”  Nowadays in good old Russia, the Mafia gets paid to handle ship scrapping and other tedious environmental concerns.  What a bunch of thugs.  Give a hoot, don’t pollute!!!

Good Fortunes

"On The Rocks”

The ice can normally (each winter) be counted on to provide an effect on rates similar to port congestion.  With more vessels available than cargoes, the only ice discussed recently at a fixture negotiation relates to beverages.    

Fearnleys Weekly

Capesize  “ Market appears generally overtonnaged, and ballasters face a hard time.”

Panamax  “ With a negative amount of spot cargoes compared to number of spot vsls, and the ice in the Baltic didn´t improve the situation.” 

 Turning to the market today I spotted GNK (Genco) @ 18.75 surprising myself as I resisted.  Way  2 much bad karma for this week and next.  In the last four weeks GNK is down 26% and when the sector swings, we all know how well this stock performs.

Reader Comments provided by Brewer;

”NMM is tax advantaged in that a portion of the distribution is treated as a return of capital and the balance is qualified dividends taxed at a max 15%. Plus they do not issue a k-1. Anyone who has wrestled with a k-1 can attest that this is a considerable benefit for an MLP.

And a pont of clarification: I said that NMM is a simple proposition, not that NM was simple. NMM is simple. They own ships that are on long term charter and they pay out all their excess cash. This is what DSX was before Mr. Palios chose to build up a warchest of cash to go bottom fishing with. The Omnibus agreement is lengthy, but most MLPs have big, ugly documents that set the rules of engagement between GP and LP.

NM is indeed a more complicated entity, and very hard to forecast quarterly earnings for. However, it is not hard to see the longer term business sttrategy that Ms. Frangou pursues with NM as the centerpiece (and NMM, NNA and eventually NSALI as offshoots): buy dollars for 50 cents, use a sane amount of leverage to juice returns, and build net worth on a massive scale over the long term without too much worry about how an individual quarter turns out. What is not to like about that?”

"Very much appreciate your blog and enjoy reading it."

Thanks for your informative and well articulated reply.  The exchange of information and opinions that may be of benefit to investors is what this is all about.

Good Fortunes

Crude
VLCC Ag/East      90     ($54k)     down $29k since last week
SM Wafr/Usac      87.5  ($16k)     down another $6k since last week
Feb AG                 70 
March AG             0      
Feb Wafr bbls       81m  
March Wafr           7m   
Turkish Straits       6n/5s  about same  
Fujairah bunkers   450      down 10 from 1 week ago       

Physical:  Activity has slowed a bit, allowing rates and/or sentiment to decline a touch further.  The cgo count is healthy thus far – though with Feb being a short month – it could be considered in line with where we stood last month.  The difference being, the cgo count ely in Jan was light and had to make up ground in a hurry – thereby providing mojo…and boosting rates.  The Feb count is not light – and therefore may not provide the type of upside burst we saw in Jan.

Frode Morkedal:  Frontline buys and sells a VLCC. Today, Frontline announced that it has agreed to acquire the VLCC "Front Vista" (1998 built) from Ship Finance at a purchase price of USD 58.5m. Frontline has furthermore agreed to sell the vessel and the buyer will settle the purchase price through the payment of installments over a 10 year period. The price the buyer pays to Frontline was not given.

Crude FFAs:   TD3 volume has been good/fair.  March trades down 1.5 points to 70 and is offered over at that level.  Q4 trades down 2 points to 75 and is offered over at that level.  TD5 Feb remains priced in the 87/90 range.

Clean
37kt Cont/ta        180+ ??    ($12k)    wide range….ws 200 reported
38kt Caribs/up     145           ($6k)      unchanged, quiet
55kt Ag/East       145            ($14k)      on downtrend


Physical:  Reports of ws 200 for some Cont/ta activity make it difficult to reconcile where rates might stand, but the higher numbers seem to represent outliers rather a consensus market level.  The Bald Viking of Southport reports that Hovensa in St Croix will be down for scheduled maintenance until at least Feb 23 – thereby limiting Caribs activity…but possibly encouraging a few marginal Cont/ta bbls.  Wafr activity is still reported as “unusually” good.  Thank you Trygve.

FFAs:   Good/fair volume on TC2.  Feb and March both trade within a point of their closes at 180 and 160, though the Feb contract is not showing obvious support.  TC6 Q3 trades flat at 145.  Eastern volumes have been light.  TC4 and TC5 trade flat – both at 135.