CPLP has agreed to enter into new charters with OSG on substantially the same terms as the prior charters but at a bareboat rate of $6,250 per day. OSG has the option of extending the employment of each vessel following the completion of the bareboat charters for an additional two years on a time chartered basis at a rate of $16,500 per day. The new charters were approved by the Bankruptcy Court on March 21, 2013. The new charters are effective as of March 1, 2013 (provided that in the case of the M/T Alexandros II, which was delivered back to CPLP on January 22, 2013, no payment and guarantee obligations shall arise prior to the completion of its dry docking and re-delivery to OSG, which is expected to take place between March 1 and May 15, 2013). On the same date, the Bankruptcy Court also rejected the previous charters as of March 1, 2013. Rejection of each charter constitutes a material breach of such charter, and CPLP is reserving its rights to make claims as a result of this breach for the difference between the reduced amount of the new charters and the amount due under each of the rejected charters. No assurance can be given that we will be successful in pursuing our claims in the bankruptcy proceedings.
Overall, product tanker spot earnings in the first quarter of 2013 continued their positive momentum as average earnings in the first quarter of 2013 reached the highest level since the fourth quarter of 2008. Demand for product tankers was particularly strong in the transatlantic market, due to increased arbitrage opportunities in the Atlantic basin as well as stronger demand from South America and West Africa.
The product tanker period market remained active during the course of the first quarter of 2013, as more charterers sought to take period coverage and at slightly higher time charter rates compared to the previous quarter.
On the supply side, the product tanker order book experienced substantial slippage during 2012, as approximately 57% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Slippage continued into the first quarter of 2013 at approximately 33%. Analysts expect that net fleet growth for product tankers for 2013 will be in the region of 3.3%, while overall demand for product tankers for the year is estimated at 4.6 %. We believe the improving demand and supply balance of the product tanker market should continue to positively affect spot and period charter rates going forward.
The Suezmax spot market remained at seasonally low levels as increased vessel supply continued to put downward pressure on rates, despite increased cargo activity towards the end of this quarter.
Slippage for the Suezmax tanker order book as of the end of December 2012 continued to affect tonnage supply as approximately 34% of the expected crude newbuildings were not delivered on schedule. Slippage year to date decreased to 16%, as certain owners might have postponed deliveries for the beginning of 2013. However industry analysts expect the crude tanker order book slippage and cancellations to increase going forward due to the historically weak spot market, the soft shipping finance environment and downward pressure on asset values. Suezmax tanker demand is expected to grow by 4.3% in the full year 2013 with net fleet growth projected at 7.4%.
Quarterly Common and Class B Unit Cash Distribution
Most Popular Stories
- Hispanics Seek to Grow School Board Members
- Slow Week Ahead of December FOMC Meeting
- 'Knockout Game': Myth or Menace?
- U.S. Companies Eager for Iranian Business
- Questions Remain in Jenni Rivera's Death
- GM Bailout Saved 1.2 Million U.S. Jobs, Report Says
- Banks Fret as Volcker Vote Approaches
- Bitcoin Used to Buy Tesla Car
- Paul Walker Fans Pay Respects
- Yellen Set to Become One of World's Most Powerful Women