Grindrod invests close to R2 Billion in fleet expansion

Feb 15, 2005
Author: Grindrod

In a major expansion of its fleet, Grindrod has bought a 605 TEU geared container ship for million, ordered four new 12 800 dwt oil/chemical tankers for million and taken delivery of a 32 000 dwt handysize bulk carrier in which it has a 50% share at a cost of million.

“This follows a 0 million order for seven newbuilding product tankers and will see Grindrod with a substantial fleet of ships by the end of 2007” said Ivan Clark, Grindrod Managing Director.

“These ships have been ordered / purchased at competitive prices and with the strong Rand are good buys in Rand terms, although some have been financed in US Dollars. These good buys will add further to our stated policy of creating sustainability and growth of earnings going into the future”, he said.

In the most recent development Grindrod has bought the 605-TEU geared containership, Range, which is currently on charter to Ocean Africa Container Line (OACL), Grindrod’s partnership with Safmarine for its Southern African feeder service.

Having been employed on the trade for a number of years, the 133-meter vessel will remain on charter to OACL for at least five years.

“This purchase represents a sound investment at a time when larger ships are being deployed on the trans-ocean container trades, increasing the demand for feeder vessels and consequently causing the rates for vessels of this size to firm.”

Of the four new 12 800-dwt oil/chemical tankers, Grindrod expects the first, Cederberg, to be delivered by Samho Shipbuilding Company in Korea during the second half of 2006. Another three – Swartberg, Drakensberg and Langeberg – will follow shortly thereafter.

Built to higher safety specifications than those required by international agreements, these 127-metre tankers will have a scantling draught of 8,7 metres, enabling them to call at smaller ports, giving Grindrod considerable versatility in the charter markets.

This tanker building program is an extension of Grindrod’s earlier initiative in terms of which the seven 37 000-dwt double-skinned, product tankers were ordered from the Shin-A yard in South Korea.

Of the seven 37 000-dwt tankers three are already operating on long-term employment – Southern Unity is moving oil products along the Southern African coast; Nyathi is trading mainly around the Mediterranean and is currently in the Black Sea, while Oliphant, commissioned in December 2004, will trade worldwide within the Dorado products tanker pool that is managed by Heidenreich Marine, based in Darien, Connecticut, USA.

Oliphant entered service amidst a shipping climate that is favourable to owners of double-skinned tankers as earnings and values for this class of vessel are firm and the outlook for this market is encouraging.

With shipping markets having been exceptionally strong resulting in record high ship prices, Grindrod took the opportunity to exercise a well-priced option to sell one of the seven 37 000-dwt tankers under construction in Korea, which will be delivered to her new owners in November this year.

“When Grindrod ordered the 37 000-dwt tankers, average daily earnings on the spot market were around US 000 per day. The current daily rates are in the region of US 000, and even time charter rates are now at similar levels,” said Clark.

“Since placing our order for these tankers it has become mandatory on many important trade routes to move cargo in double-skinned tankers, and over the next few years, all single-skinned vessels will be phased out. This has surged orders for these vessels to the extent that most shipyards capable of building them have full order books well into 2008. It has also increased substantially the value of Unicorn’s tanker fleet,” he said.

Although the tanker market has been bullish for several months – pushed further by the seasonal demand during the Northern hemisphere’s winter - London shipbroker Clarksons believe that the trend will continue well into 2008.

A shortage of refinery capacity in the USA against a growing demand for refined products will not be fulfilled in the medium term as environmental lobbies have succeeded in curtailing the expansion of North American refineries.

China, analysts believe, will continue to absorb huge volumes of imported energy adding substantially to the tonne-mile demand.

The 32 000 dwt handysize bulk carrier The Durban Bulker will be used in the worldwide IVS/Lauritzen handysize joint venture pool which is currently enjoying high rates and in which Grindrod has a substantial number of low cost handysize bulk carriers employed at much higher rates. In addition Grindrod recently took delivery on long-term charter of two newbuilding panamax vessels, the IVS Pinotage and IVS Merlot.

These ships were ordered and chartered in when shipping markets were low and have been chartered out for 3 and 5 years respectively at much higher rates with good counter parties. These are in addition to a number of capesize vessels which have been chartered out at good rates through to the end of 2006. Clark said, “This is another material step to meeting our stated objective of giving shareholders sustainable earnings going into the future”.

He concluded, “We now have delivered or on order or on long term charter a modern fleet of ships at competitive prices on low charter in rates. A fair number of these have been chartered out at good rates for medium to long periods and we would hope to fix out more long-term charters as additional ships deliver.

“Our substantial fleet expansion program is in addition to our stated intention of spending at least R1 billion on growth in our landbased operations and follows the announcement last week regarding the acquisition of controlling interests in coal and bulk terminals at Maputo and Walvis Bay and several other acquisitions in the landbased field”.

According to Clark Grindrod has good cash flows and plans to spend them well growing the Grindrod Group’s operations which are focused on shipping and freight logistics.

Grindrod will be announcing its results for the year to December 2004 on Thursday 24 February and has already put out a trading update which indicates that these results will be between 130% and 140% up on 2003.

Ship specification summaries

Name of ship: Range

Type of Ship: Geared Containership
Year Delivered: 1983
Builders: JJ Sletas KG Schiffswerft GmbH & Co, Hamburg
Classification: Germanischer Lloyd
DWT: 11,754
Length overall: 133.3m
Moulded Breadth: 20.2m
Draught: 8.65m
Speed: 16.5 knots
Main Engine: MaK diesel
Cargo Hatches: 3 Hatches
Cargo Cranes: 2 x 35t SWL/28m
TEU Capacity: 605 TEU

Name of ship: Cederberg, Swartberg, Langeberg, Drakensberg

Type of Ship: Oil/Chemical Tanker
Year Delivered: Delivery due 2006 (Cederberg)
Builders: Samho Shipbuilding Co Ltd, Tongyeong, S Korea
Classification: American Bureau of Shipping
DWT: 12,800 (approximately)
Length overall: 127.2m
Moulded Breadth: 20.4m
Draught: 8.7m
Speed: 13.4 knots
Main Engine: MAN-B&W diesel
Cargo Tanks: 12 Tanks



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