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The first days of April create worries for the stability of eurozone's economic recovery as figures showed that euro inflation hit to the lowest level during March, since November 2009. EU's statistics office Eurostat said that annual consumer inflation in the 18 countries sharing the euro fell to 0.5% in March, from February's 0.7%, which is well bellow the European Central Bank's target of 2%. Ιn the meantime, the European Central Bank held its benchmark interest rate at a record low in March, despite growing concerns over deflationary pressures in the region, The ECB said it was maintaining its benchmark interest rate at a record-low 0.25%, in line with market expectations. The central bank also held its marginal lending at 0.75% and left its deposit facility rate unchanged at 0.0%

In China, financial pressure climbs as economic growth in the world's second largest economy slows to record lows seen since 1990. Chinese biggest financial institutions is said to have more than doubled the level of bad loans they wrote off last year.

The five largest Chinese banks, which account for more than half of all loans in the country, removed Rmb59bn ($9.5bn) from their books in debts that could not be collected, according to their 2013 results. The levels of write-offs are up 127% from 2012, and the highest since the banks were rescued from insolvency, recapitalized and publicly listed over the past decade.

Data also indicate that China's GDP growth would deepen further to 7.5% for the first quarter of the year, from 7.7% in the last three months of 2013. The deterioration has fuelled expectations that Beijing will act soon to shore up the economy. "Increasing downward pressure on the economy should not be neglected," Li Keqiang, China's premier, said last week. "We have policies in store to counter economic volatility." What is noteworthy is that China's official PMI edged up to 50.3 in March from 52.2 in February, indicating a soft expansion coming in contradiction with the decline of Markit/HSBC PMI to an eight month low of 48.0.

China's Premier Li Keqiang confirmed that the government would accelerate construction of railways in the central and western parts of the country to boost growth. Mr. Li said that the target was to build 6,600km of new track this year, 1,000km more than China built last year, in an effort to support employment and help the government to create 10m jobs so as to maintain economic and social stability this year.

In Japan, economy is progressing slowly to a better outlook with signs of rising in consumer prices and improving labor conditions. Japan's consumer prices rose for a ninth straight month providing evidence that Japan is heading against years of deflation and stagnation.

Ministry of Finance data showed household spending and retail sales weakened in February as snowstorms across Japan kept many consumers at home, but there are already signs that sales are accelerating this month as shoppers rush to beat a sales tax hike on April 1. The 1.3 percent annual gain in the core consumer price index followed a 1.3 percent rise in January and December, which was the quickest since the 1.9 percent seen in October 2008.

SHIPPING

2014 keeps high levels of shipping confidence with freight market sentiment supporting upward trend in asset prices and accelerated levels of invested capital in the secondhand and newbuilding market. According to the latest Shipping Confidence Survey from Moore Stephens, overall confidence levels in the shipping industry rose to their highest level for almost six years in the three-month period to February 2014. Freight rates look set to improve or maintain existing levels over the next twelve months, while an increase in private equity funding is expected to have a major impact on the industry. In February 2014, the average confidence level expressed by respondents in the markets in which they operate was 6.5 on a scale of 1 (low) to 10 (high), compared to the 6.1 recorded in the previous survey in November 2013. This is the highest figure since the 6.8 recorded when the survey was launched in May 2008.

In the dry market, Baltic Dry Index follows from the end of March a deceleration with capesize charter rates loosing ground and panamax still look weak. Capesize charter rates are now narrowing on the basis of lower iron ore cargoes from Brazil and coal shipments from Colombia. In the panamax segment, vessels' capacity is building up with rates falling to less than 7,000/day, which are the weakest levels since end August 2013.

In the capesize segment, charter rates have now dropped to less than $18,000/day, but are still excessive compared with the record lows of less than $5,000/day a year ago. However, capesize charter rates were trading at about 53% higher levels than today at the end of September 2013, and the question is whether these levels would be reachable again. Chinese iron port stockpiles are still at historically high levels of more than 100 mil tons and the strength of recovery will be reliant on the levels of Chinese steel restocking.

Supramax rates are still trading at higher levels than panamax of region $11,000/day and handysizes have now also surpassed panamax at levels of more than $9,000/day. Overall, bulk chartering activity showed smaller activity last week with 89 vessels reported to have being chartered in the spot market, according to Commodore Research, from 117 vessels in the previous week. However, Chinese iron ore fixture volume persists healthy with more than 25 vessel fixtures for hauling iron ore cargoes to China, which fuels hopes for BDI sustaining its pace far above the psychological barrier of 1,000 points.

In the thermal coal market, Qinhuangdao coal port stockpiles have fallen to very low levels of less than 6 million tons and a surge in Chinese thermal coal fixture volume is likely to occur soon that could trigger spike in panamax rates. In addition, encouraging signs for the fortune of panamax rates are Daqin Railway maintenance expected to come under maintenance from April 6th to April 30th, with coal haulage to Qinhuangdao expected to fall by a total of at least 2.5 million tons. Semi-annual maintenance to the railway traditionally results in Qinhuangdao stockpiles coming under pressure and results in a large increase in thermal coal fixtures. Thus, it is believed that a large surge in Chinese thermal coal fixtures will occur within a few weeks.

In last, Colombia's environmental regulator had approved the upgrades that Drummond has made at its Colombian coal terminal and Drummond coal shipments from Colombia are expected to begin this week creating more employment for panamax-supramax vessels. Drummond Colombian coal shipments are expected to average close to 3 million tons per month during the remainder of this year.

In the meantime, Australia's Bureau of Resources and Energy Economics (BREE) released its latest quarterly trade forecast last week which predicts that Australian and Brazilian iron ore exports will rise this year by a total of 139 million tons (15%) from 2013's total. The rise of iron ore production from Australia and Brazil will also support solid utilization rates of capesize vessels and healthy charter rates. According to BREE, Australian iron ore exports will total 687 million tons this year, which would be an increase of 108 million tons (19%) from the 579 million tons exported last year. BREE also predicts that Brazilian iron ore exports this year will total 361 million tons, which would be an increase of 31 million tons (9%) from the 330 million tons exported last year.

On Friday April 4th, BDI closed at 1205 points, down by 12% from last week's closing and up by 40% from a similar week closing in 2013, when it was 861 points. All dry indices closed in red apart. The panamax segment recorded the largest weekly decrease. BCI is down by 10% week-on-week, BPI is down 16% week-on-week, BSI is down 10% week-on-week, BHSI is down 8% week-on-week.
Capesizes are currently earning $16,451/day, down by $2,760/day from last week's closing and panamaxes are earning $6,631/day, the same from last week's closing. At similar week in 2013, capesizes were earning $4,261/day, while panamaxes were earning $8,755/day.

Supramaxes are trading at about $10,492/day, down by $1,167/day from last week's closing, about 36% lower than capesize and 58% higher than panamax earnings. At similar week in 2013, supramaxes were getting $9,533/day, hovering at 124% higher levels than capesizes versus 36% today's lower levels. Handysizes are trading at about $8,909/day, down by $735/day from last week's closing; when at similar week in 2013 were earning $7,797/day.

In the wet market, VLCC spot rates are on a downward pressure with the number of available vessels in the Middle East increasing to 111, while rates are also negatively affected by fewer cargo shipments out of West Africa. In the AG-USG route, rates edged down to WS27, down by 0.5 points week-on-week, and down by 11 points from the highs of WS38 recorded at January 24th. In AG-SPORE and AG-JPN routes, rates decreased to WS37.5-$15,000/day, down by 1 point week-on-week and down by 25 points from the highs of February 14th.

WAFR-USG route is the only route that recorded weekly increase with rates moving up to WS50-$28,800/day, up by 2.5 points week-on-week , but down by 25 points from the highs of January 24th. In WAFR-China route, rates decreased by 1 point to WS41.5-$17,800/day, down by 26 points from the week ending January 24th.

In the suezmax segment, there is a pick up in activity in the West African market with rates in WAFR-USAC staying flat at WS62.5-$14,800/day, down by 67.5 points from the increased levels of week ending January 17th. In B.SEA-Med route, rates gained 10 points and increased to WS72.5-$18,400/day, but down by 115 points from week ending January 17th. In the aframax segment, rates keep solid with rates in CBS-USG route increasing by 1.25 points to WS100-$14,400/day, for the first time since week ending March 7th, while rates are down 205 points from the spectacular levels of week ending January 17th.
In the meantime, oil supply disruptions are causing a high level of spot brent crude prices at an average of more than $107/barrel for the first quarter of the year. Given the distressed oil supply outlook, Deutsche Bank raised its estimate for brent crude prices in 2014 by about 9.2% amid supply losses in countries such as Libya and stronger than anticipated demand in developed nations.

Brent price is now estimated to average $106,5/barrel this year, up from a previous forecast of $97,5 issued in January. Political protests at Libyan ports and international sanctions against Iran have continued to constrain oil supplies from these countries. However, the global ratio of supply and demand currently "feels well balanced," as weakness in Chinese oil demand growth is countered by recovery in the U.S., and surging output from Iraq compensates for production outages in other OPEC members, according to the bank.

In the gas market, LNG rates for modern 160,000 cubic meter tri fuel diesel engine liquefied natural gas carriers continue to decline on softer sentiment by dropping to $70,000/day, from $75,000/day last week. In the near-to-intermediate term, rates are likely to depend on the number of transactions/available cargos, as the supply of LNG vessels is expected to remain high relative to demand.

In the LPG segment, current spot rates for very large gas carriers follow their upside trend with spot rates on the main trading route Arabian Gulf to Far East floating at around $69,000/day. The outlook for the LPG segment in 2014 seems very positive as US propane export capacity is expected to increase another 60,000 barrels per day in 2014 creating more employment opportunities for very large gas carriers. It is estimated that the current LPG orderbook does not pose any threat to the development of freight rates and the demand growth for the transportation of incremental LPG volumes from the US and Middle East will outpace the supply growth of LPG carriers. In time charter market, VLGC, MGC, and Handysize rates ticked up by 4.2% (to $1,250K/month), 0.6% (to $835k/month), and 1.1% (to $960k/month) wk/wk, respectively, while LGC and SGC time charter rates were flat wk/wk at $1,050k/month and $305k/month, respectively.

In the container market, Shanghai Container Freight Index moved finally to above 1,000 points for the first time since week ending February 21st due to sharp rice in Asia-Europe and Asia-Mediterranean routes. It seems that General Rate Increases applied from the beginning of April buoyed the freight market sentiment and the question is the stability of the rebound. In Asia-Europe route, rates are now gained $371/TEU and increased to $1214/TEU, up by 44% week-on-week and 6.5% year-on-year. In Asia-Mediterranean route, the weekly increase is even higher of $508/TEU with rates moving up to $1401/TEU, up by 57% week-on-week and 24% up year-on-year.

In transpacific routes, there is a soft downward incline with rates in Asia-USWC falling to $1824/FEU, down by 2.2% week-on-week and 19.4% year-on-year. In Asia-USEC route, rates decreased to $3278/FEU, down by 0.5% week-on-week and 3.9% year-on-year. Asia-USWC rates remain below $2000/FEU since week ending February 14th and Asia-USEC rates are above $3000/FEU since week ending December 20th 2013.

Despite the troubled conditions in freight market from overcapacity issues, shipping players do not forego their investment plans and US Seaspan is said to have exercised its option to build four 10,000 TEU boxships at Jiangsu New Yangxi Shipbuilding and Jiangsu Yangxi Xinfu Shipbuilding for delivery in next two years. In addition, China Cosco Holdings, the listed arm of China Ocean Shipping Group is planning to order five 14,000 TEU boxships, but no details are announced for the yard or delivery dates.

CMA CGM France is even more aggressive by upgrading the size of six new containerships under construction at yards in China and South Korea from 12,600 TEU to 17,700 TEU. CMA CGM has also signed a long-term bareboat charter contract last July for three 16,000 TEU containerships ordered by CSSC Shipping Hong Kong, a leasing subsidiary at China State Shipbuilding Corp.
Key factor for the gradual revival of the boxship recession would be the record scrapping capacity already seen this year. According to Alphaliner estimates, new boxship deliveries amounting to a record 1,65mil TEUs and representing 9.6% of the total existing fleet as of January will be offset by the scrapping of 500,000 TEUs and 200,000 TEUs in delivery deferrals. The surge in scrapping capacity and newbuilding delivery postponements would bring the lowest annual fleet growth since 1999 at 5.5%. Increasing trend in scrapping appetite is being triggered by panamax vessels with an average age of 17yeas. The disposal of vintage tonnage will reduce also the idle containership fleet, which is currently at 4.5% of the total fleet.

Despite the upward trend in scrapping capacity, the large imbalance between vessels' available capacity and demand would exist also for this year as estimated projected demand growth of 4.4% will still be insufficient to absorb the revised supply growth of 5.5%. During 2013, vessels' demand rose by 3.7% in 2013 against container capacity supply growth of 5.7%. The pace of laid up fleet is expected to stay on the high side also for this year, especially for vessels below 5,000 TEUs and the weak outlook of spot freight market sentiment would persist. Currently, there are 80 ships totaling 302,000 TEUs scheduled for delivery in 2014 to non operating owners that are without charter employment.

In the shipbuilding industry, China's Yangzijiang Shipbuilding is said to have secured orders for a further 18 newbuildings during March at a total value of $815m. Yangzijiang's executive chairman Ren Yuanlin said the orders comprise converted options for two 82,000-dwt bulkers, one 208,000-dwt bulker and four 10,000-teu containerships, while the other 11 contracts were new orders for 82,000-dwt bulkers. Year-to-date, Yangzijiang said it has secured a total of 26 effective shipbuilding contracts with an aggregate value of $1.07bn.
China Rongsheng Heavy Industries said that said all the offshore orders secured last year were cancelled due to its inability to obtain export credit insurance and bank financing. "It's really unfortunate. That was some great marketing effort. It's not like that we've got some [offshore ] contracts from just Chinese owners. We got contracts from Norwegian, Mexican and Singaporean owners," Rongsheng chief financial officer Sean Wang said in a media briefing. "Prices were also pretty good, higher than what most China's shipyards got in the market. It's too bad we had to cancel the contracts and made some penalty payments," he said.

In the shipping finance, HSH Norbank in an attempt to reduce its shipping exposure agreed to restructure 400 million euros ($551 million) in loans made to Ahrenkiel, which will be taken over by MPC and Thien & Heyenga for an undisclosed sum. "The market is difficult for all three of us," said Constantin Baack, managing director of the newly founded Ahrenkiel Steamship, referring to Ahrenkiel, MPC and Thien & Heyenga. "But by merging our operations we will save overhead costs and gain better purchasing terms."
In addition, global private equity firm KRR is said to have bought $150mil worth of shipping loans from two European banks. Trade finance sources suggest that KRR picked up loans taken out by Indonesian oil and gas shipping group PT Berlian Laju Tanker that were sold by Sweden's Nordea Bank and France's BNP Paribas. Furthermore, sources also suggest that Lloyds Banking Group had received multiple expressions of interest for a $500 million tranche of shipping loans and was reviewing the offers.

In terms of ship financing deals, Stealthgas is said to have completed financing for 17 eco newbuilding LPG vessels with traditional bilateral loans from about eight commercial banks. Chief executive officer confirmed the deal in Lloyds List and said that across the orderbook the amount of leverage varied from vessel to vessel but averaged about 65% of the contract price of the ships. "There is a lot of appetite among banks for doing deals in the favored sectors, which are LNG, LPG and I guess offshore too," he said.

In addition, German owners Peter Dohle and Bernard Schulte have signed finance agreements of $1,2bn with Export-Import bank of China (China Exim Bank) for the construction of newbuilding orders at Chinese yards, according to the official Xinhua news agency.

In the capital market, Golar LNG Partners LP announced, further to its announcement on December 5, 2013, that it has completed its acquisition of the company that owns and operates the FSRU Golar Igloo from Golar LNG Limited for a purchase price of approximately $310.0 million. The Partnership financed the purchase price by the assumption of outstanding debt obligations in respect of the Golar Igloo in the sum of $161.3 million with the balance from the cash proceeds of its December 2013 equity offering.

Quintana Shipping, which owns and operates a fleet of nine drybulk vessels, filed this week with the SEC to lift up to $100 million in an initial public offering. The Athens, Greece-based company, which was founded in 2010 and booked $31 million in sales for the year ended December 31, 2013, plans to list on the NYSE under the symbol QSP. Quintana Shipping initially filed confidentially on February 7, 2014. Morgan Stanley, Deutsche Bank and Jefferies are the joint bookrunners on the deal. No pricing terms were disclosed.

NYK announced its new medium-term management plan, "More Than Shipping 2018 -Stage 2 leveraged by Creative Solutions-", which runs from April 2014 for 5 years.
The new medium-term management plan adheres "More Than Shipping 2013" as a basic strategy, and the theme of the plan is "Differentiation from competitors by NYK group's creative solutions". NYK realizes strong business portfolio against changing market conditions by utilizing business chances such as LNG (liquefied natural gas) transportation and offshore business, and strengthens financial ground which enables large-scale investment, and sets out NYK Group's sustainable growth.

Eagle inches closer to restructuring / Chapter 11 agreement. On March 20th, Eagle announced an agreement with lenders on its $1.1B term loan which waived covenant compliance requirements around its leverage and minimum interest coverage ratios until June 30, 2014. Under the terms of the waiver agreement, Eagle has until April 15th to agree to and execute on a restructuring agreement with lenders to prevent a default on the outstanding facility, with those negotiations ongoing.

Hoegh LNG Holdings said it has made a submission to the Securities and Exchanges Commission (SEC) in the US to float its FSRU business in New York. The business, which will be called Hoegh LNG Partners LP, has stakes in three floating storage and regasification units (FSRUs) of 170,000m3. The Oslo-based company has four such units on order, with deliveries ranging from this month to March 2015 "The IPO of the common units is expected to commence after the SEC completes its review process.

Upon completion of the IPO, the MLP is expected to own Hoegh LNG's interests in three floating storage and regasification units," the company said in a statement. Two of the four FSRUs have been committed on long-term charters, the first one in Lithuania and the second one in Indonesia. On 27 January, the company and a syndicate of seven banks agreed on a $400M senior credit facility that provides the company financing to cover the third and fourth 170,000m3 FSRU, which are due for delivery from Hyundai Heavy Industries in June 2014 and March 2015, respectively. The facility has a five-year post-delivery tenure and payment profile of 15 years.