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| Lauritzen Kosan President Jan Kastrup-Nielsen
The result is unsatisfactory and lower than expected due to weak market conditions and restructuring costs. In August 2003, Lauritzen Kosan and Tsakos Energy Navigation (TEN) mutually agreed to dissolve their 50:50 joint venture, LauriTen. The four semi-refrigerated vessels owned by LauriTen have been acquired by Lauritzen Kosan. During 2003 Lauritzen Kosan changed five vessels from DIS (Danish International Ship register) to IOM (Isle of Man register) as part of a continuous process of adapting costs to a changing marketplace. Four vessels will leave the DIS register in 2004. Pool company Exmar Kosan Ltd. Hong Kong, a 50:50 joint venture between Lauritzen Kosan and the Belgian shipping company Exmar NV, increased its fleet from 8 to 11 vessels in 2003. One vessel from a third party joined the pool and two vessels have been taken on long term time charter with purchase options. Lauritzen Kosan will continue to seek ways of further developing the pressure vessel activities of Exmar Kosan Ltd. 2003 saw a modest beginning to the process of consolidation within the segment of pressure vessels. It is expected that 2004 will bring further opportunities to strengthen this trend, one in which Lauritzen Kosan is determined to play an active part. Market development Demand for short-sea transportation of liquid, chemical gases is driven by the general global economic activity, which includes such factors as construction, automobile production, demand for packaging and the disparity in the global prices of petrochemical gases. The energy gas market (LPG), which primarily is driven by weather conditions, will continue to have less impact on the general employment possibilities for Lauritzen Kosan's fleet. The lack of any significant growth in the European economies continued to affect the petrochemical industry. Demand for petrochemical products remained flat in 2003 and demand for sea transportation of petrochemical gases within Europe over the year as a whole was still not sufficient to provide acceptable earnings for the short sea gas carrier fleet. The European short sea market is also still suffering from an oversupply of vessels and some fragmentation amongst owners leading to competition for market share. The general trading conditions noted in 2003 may, however, be considered as better than 2002 and with the current order book, only a very limited number of vessels will be delivered during the next two-three years. Lauritzen Kosan expects that 2004 will gradually show improved conditions for the petrochemical industry and that demand for regional sea transportation will increase during the year. Increased economic activity in the Eastern hemisphere during 2003 led to improved demand for petrochemical products there. Chinese imports especially provided some support to the gas shipping market. Larger vessels have been employed in longer haul movements of petrochemical gases from west to east but short sea petrochemical movements in the Far East also increased. The fleet
Exmar Kosan Ltd Hong Kong, a 50:50 joint venture pool company with Belgian shipowner Exmar managed nine vessels and had two vessels on long-term time charter. The capacity of the fleet was 43,000 cbm. Lauritzen Kosan directly controls 18 vessels of about 80,000 cbm managed from the Copenhagen office. Three of these vessels are on time charter. In August 2003, the Selma Kosan (6,619 cbm built 1978) was sold for scrap. Lauritzen Kosan remains firmly focused on maintaining a high level of operational quality. The 146 customer and national regulatory inspections made in 2003 all went satisfactorily, resulting in only a few very minor delays. The average age of the company's own fleet was 13.4 years, well below the international fleet average for the 1,600-7,000 cbm segment of 15 years but up 0.5 year on 2002. Fleet management is carried out from Copenhagen and Bilbao, Spain through wholly-owned subsidiary Gasnaval S.A. Technical operation of the fleet was satisfactory in 2003, with seven dry-dockings being completed during the year (11 dockings in 2002). Lauritzen Kosan continues to seek competitive running costs, but crew safety, environmental protection, operational quality and the avoidance of downtime are of paramount importance. The Lauritzen Kosan fleet operates under Danish, British, Portuguese, Hong Kong and Spanish flags. Prospects for 2004 Lauritzen Kosan earnings are expected to improve in 2004, not only due to better general trading conditions but also due to an improved cost structure. The number of dockings will be up on 2003. Overall, 2004 earnings are expected to be significantly up on 2003, although likely to remain unsatisfactory while awaiting further improvement in the market for sea transport of LPG and petrochemical gases. |
