Sunday, November 30, 2008

M/V Faina to be released by pirates

As I mentioned last Wed., Nov. 26, the ransom for the Faina had been dropped to $3 million U.S.

Today it is to be released. No ransom amount given. From the BBC

Gunmen seized the Kenya-bound MV Faina, carrying 33 tanks, grenade launchers and ammunition, on 24 September.

A pirate spokesman said releasing the ship was "a matter of time", but gave no details of a ransom payment.

I think by now the pirates just want to get rid of this ship. Besides, they are catching much bigger fish these days, having recently captured the oil tanker Sirius Star.

Saturday, November 29, 2008

Where is the BBC Box? Is it stuck in Japan?

NYKU8210506 - where are you?

The BBC has either decided the public shouldn't know what's going on with THE BOX, or, whoever was in charge of this project at The BBC got reassigned.

According to the BBC site the box is in Japan, and has been there for more than a week (if I recall correctly).

So to all those folks who were encouraged by the BBC to track this container around the world, well, I don't know what to tell you.

I guess it's time to go back to playing "air guitar", or, whatever.

Friday, November 28, 2008

This looks fishy to me

This morning I made a post about the latest hijacking of a ship by the Somali Pirates. It was hijacked despite having security onboard. However, the security team was not armed, and obviously this is not going to do the trick.

Later in the day, Lloyd's List has an article stating the same things I said (Ok, this is NOT rocket science).
Maritime security sources stressed that while owners should not rush to get trigger happy, they need to be aware that simple three-man squads equipped only with non-lethal equipment were no longer enough to counter increasingly sophisticated and brazen pirate tactics.

But what really caught my eye was this

The commander of French frigate Nivose Jean-Marc Le Quilliec told Agence France Presse that the attack was mounted by five Somalians in a fishing boat. He said the three security guards jumped overboard and were subsequently picked up by a German helicopter.

It just seems fishy to me. Especially in light of recent comment by pirates that they are tipped off.

Onboard security did not stop this piracy

SOMALI pirates have hijacked the chemical tanker Biscaglia, despite the presence of three British guards onboard.

The guards were unarmed. Personally, I don't know what good it does to hire guards, but then not have them armed. I realize British cops don't carry guns, but it's not like these guys are walking a beat in London.

With all the piracy, the insurance rates have gone up dramatically for the ship owners. The international shipping industry will be greatly impacted by this, especially in today's market of falling charter rates.
More carriers are deciding to route their ships around the Capes, to avoid the Gulf of Aden, and the Somalian pirates.

Thursday, November 27, 2008

Hamburg Sued or Hamburg Sud?

Here is a press release from Hamburg Süd. The complete name of this company is Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft, which translates something like Hamburg South American Steamship Company.

As the company is German, it has an umlaut. I don't really know what to do for typing it in English. I always thought it should be spelled Sued to show the phonetic pronunciation, but recently I was corrected and told it should be Sud.

But I have a real problem doing that. I'm not sure we Americans are able to know that Sud should be pronounced as something different that what you get when you use soap, ie: suds.

Hamburg Süd establishes own country organisation in Colombia

Hamburg, 27 November 2008. With effect from 1 January 2009, Hamburg
Süd will establish an own country organisation in Colombia. Hamburg
Süd Colombia Ltda., with head office in Bogota and a branch office in
Cartagena, will be responsible for all the shipping group's container
shipping operations from and to Colombia in the future.

Together with its long-standing partner Messrs Eduardo L. Gerlein
S.A., Hamburg Süd operates further offices in Medellin, Cali,
Baranquilla and Buenaventura.

With the establishment of Hamburg Süd Colombia Ltda., the shipping
group is taking into account the growing importance of the Colombian
market. At the same time it will further improve and strengthen the
relations with Hamburg Süd's Colombian customers.

Wednesday, November 26, 2008

Islamist group threatens Somali pirates

According to an article in, the pirates are now afraid, not because of all of the U.N. warships, but because of an Islamist group, which obviously does not adhere to international standards regarding prisoners.

Al Shabab announced it opposed the taking of ships owned by Muslims and promised to behead those who did.

Al Shabab "made it dead clear that any ransom that is collected they will take it; they will take away their money and kill them," Ballarin said.

There is an American woman involved in the negotiations, Michele Lynn Ballarin.

My goal is to unwind all 17 ships and all 450 people they've been holding," she said.

Ballarin said the involvement of the Somali Islamist group, Al Shabab, had helped turn the tide in her favor by putting the fear of death into the young pirates. She claimed the Islamist group had captured, tortured and killed a young male relative of one of the pirates in the last few days.

Today the pirates lowered their ransom demand for the M/V Faina down to 3 million US. They started out at 35 million, then down to 8, and now 3.

If it's true about the Islamists, I think pretty soon these pirates will be walking away, just hoping they escape with their lives.

Are pirates tipped off?

Apparently, the pirates themselves have confirmed they are being tipped off.

From Lloyd's List article (regarding hijacking of the oil tanker Sirius Star)

“We had to bear many expenses to hijack it and $500,000 was paid for information and expenses for the people who hijack ships,” said the 35-year old pirate, who identified himself as Jami Adam.

“We have countries that give us information about the ships in the sea, if there are commercial ships sailing our way,” he told the Arabic newspaper.

Asked how the pirates followed these ships, he replied that they had “collaborators” who provided information on vessel movements.

There is some speculation the pirates were tipped off about the Faina, the ship carrying tanks and arms with the questionable destination.

Personally, I always wondered if someone tipped them off regarding the M/V Faina. There are several parties who would have reason to do so; Russia, the CIA, various factions in Somali and Kenya.

On a lighter note, even the famous Scott Adams (author of the cartoon strip Dilbert) is writing about the pirates capturing the oil tanker.

Tuesday, November 25, 2008

Star Bulk Carriers - read the small print

Star Bulk is upbeat. They have declared a cash dividend of .18 per share. Their stock is trading today slightly above 2.00. Pretty good return.

I guess they passed out rose colored glasses to their management.

They say things are lookin' good, but if you read through their report, personally I wonder what this is based on.

Their average charter rate for 3rd quarter was $62,156 per day, but they adjusted it down to $45,756, which was closer to the market rates at the time.

An average of 12.1 vessels were owned and operated during the third quarter of 2008, earning an average Time Charter Equivalent, or TCE rate of $62,156 per day. Adjusted to exclude the effect of the amortization of time charters attached to vessels acquired at above or below market rates, the TCE rate for the third quarter of 2008 was $45,756. We refer you to the information under the heading "TCE rate and adjusted TCE rate" later in this release for further information regarding our calculation of TCE rate.

Ok, all fair and good. Now, let's look at what they are currently getting for their ships. Approximately $25,000 per day (I'll be generous)

New Charter Party Agreement

The Star Beta has entered into a short term period employment with Brazil's Companhia Vale do Rio Doce (Vale) for a minimum of two and a maximum of four months at the gross daily rate of $15,500 for the first 50 days and $25,000 for the days beyond 50 plus a repositioning ballast bonus of $525,000.

Yeah, sure. Things are really looking up. Actually the rates of $15,000 - $25,000 per day is closer to market reality.

It's almost becoming a penny stock as it is, with a 52 week low at USD 1.99. I guess they think by issuing the dividend it will keep the price up, and no one will read the fine print about all that other stuff, including the issuing of additional stock.

Know your customer

Last month I wrote about the need to be sure that a shipper does not pay a broker, and get left holding the bag for freight payment.

On the flip side of the coin is the need for freight brokers to be sure their customers are paying their bills in a timely manner. The American Shipper has an article outlining this problem.

In a follow-up interview with American Shipper, Clark described how Cargo-Master made a deal with the chief financial officer of a customer that owed about $400,000 in back payments. Under the new terms, the customer agreed to pay $25,000 per week of the outstanding debt and pay on time for booked freight going forward. After a couple of weeks the payments dropped to $12,000 per week and Cargo-Master decided to cut off the customer.

It's always hard to turn down a customer. Especially if you are in sales. But, it's a necessary evil, especially in today's environment.

Wall Street 101

This from the author of "Barbarians at the Gate" (written about the 80's - for you young'uns)

Wall Street is still governed by fear and, especially, greed today in the wake of the collapse of the securities, real estate and automotive industries. "I'll give you my 'Wall Street 101' lecture," Helyar said. "Then, the M&A artists were over-the-top in some cases but were still tethered to real corporate America."

Fast-forward to today: "Wall Street became more of a blue smoke-and mirrors" environment, Helyar said.

Helyar saw the Internet bubble-burst nearly a decade ago as a result of analysts acting as "carnival barkers." He assesses the current crisis as the work of "quants" inventing ways to exploit the financial markets.

Burrough's view is that the chaos and ruin on Wall Street is emblematic of history repeating itself. "It's exactly the same every time," Burrough said animatedly. "Wall Street produces a product that makes money. Then it is overused -- and by the wrong people."

The same thing can be said all over the world. One more thing we Americans have exported.

Monday, November 24, 2008

Korean dry bulk carrier is bankrupt

Lloyds List reports Parkroad Corp. is bankrupt. Parkroad had eight vessels, mainly Panamax and Handysize dry bulk ships.

SOUTH KOREAN dry bulk specialist Parkroad Corp confirmed that it has gone bankrupt and its vessels are being operated by Sinokor Maritime Co Ltd.

A spokesman Mr SK Chung from Sinokor in Seoul also confirmed that they are operating eight vessels owned by Parkroad.

Sinokor isn't a bulk carrier, they are in the liner business. I can only guess that the lender decided it was a good place to put the vessels for the time being. Or, perhaps Sinokor will start picking up dry bulk ships for pennies on the dollars in this down market.

It's not unusual for shipping companies to engage in both liner (with fixed schedules) and tramp (without fixed schedules) services. And, if you have the money, are already in the business of shipping, now is the time to buy some ships.

Sunday, November 23, 2008

Breaking covenants

Forbes had an article last week regarding the dry bulk carriers.

Shippers Breaking Their Covenants
Ruthie Ackerman, 11.20.08, 07:45 PM EST
Falling prices for vessels creates technical defaults for battered dry-bulk industry.

Apparently the author has followed these stocks for some time. The article is worth reading.

At the end, this is how it wraps up.

Burk said that it appears that DryShips, Eagle Bulk Shipping (nasdaq: EGLE - news - people ), Excel Maritime Carriers (nyse: EXM - news - people ), and Genco Shipping & Trading (nyse: GNK - news - people )have technically breached their loan covenants.

Nonetheless Burk points out that all the companies have enough cash flow to cover their interest payments, which mean as long as their charters don’t default the companies themselves will be able to service their actual debt if their lenders aren't too insistent on the technicalities of the borrowing agreements.

The history of the shipping industry has been carriers must operate for some time not being able to cover their costs. This is why only those will very deep pockets survive, unless there are some sort of cartels or pools set up. That is probably no longer possible due to the change in regulations (although the Koreans are considering setting up a pool).

I particularly enjoyed one of the comments posted regarding this article. If anyone knows who "PoorandUnemployed" might be, give him or her my best.

Posted by PoorandUnemployed | 11/21/08 11:33 AM EST

Given the history of shipping finance, in times like these, owners make the interest payments but stop paying the crews, fuel suppliers, port costs and other suppliers. In it's uniqueness, all the debt is always incurred by the vessel regardless and the vessels can be arrested in different jurisdictions world-wide for a five dollar unpaid bill.

Expect banking style collapses, mergers, forced marriages and defaults. Given the past history, it is likely that the Publically held companies would not survive this storm. Once the market players have lost the interest in the sector, many will lose their NYSE or Nasdaq listings. Managements will purchase the stock at very low price (pennies) and eventually take them private in effect buying the underlying assets for pennies on a dollar. Same banks will refinance the assets to new owners at a discounted price with higher percentage ratio of private equity.

At this stage of the game, banks can neither foreclose on the ships and sell them at auction nor they can allow to companies to add on to debt to meet operating expenses. This calls for some ENRON type creative accounting!!!!!!!!!!!

U.S. Rail shipments drop

Traffic World publishes an article tomorrow detailing the big drop in rail shipments.

Bulk commodity and equipment cargoes carried in large-capacity railcars fell 8.4 percent from a year earlier for major U.S. carriers in the week that ended Nov. 8, said the Association of American Railroads.

That is only one week, but it follows a 5.4 percent year-on-year drop the week before and 4.7 percent before that. The carload decline has only escalated since the September financial crisis began rippling through the overall economy.

Bulk cargoes almost always move by rail. That has been the traditional rail cargo.

Railroads also carry trucks, or containers. That is called intermodal. This too has slipped.

A similar trend is at work on the intermodal side, where rail lines handle the long haul for highway trailers or containers that trucks carry from rail terminal to final destination.

The AAR said those U.S. rail lines saw intermodal loadings shrink 6.3 percent in the latest week, 4.9 percent as of Nov. 1 and 4.1 percent for the week ended Oct. 25.

There is no mention if truck traffic dipped during the same period. With the price of gas going down, it's possible some of this business switched back to over the road.

Saturday, November 22, 2008

"Knock-for-knock" is not a joke

Ocean Heavylift has vessel seized.

When I first read this headline, I assumed it was for unpaid debts.

Well, it is in a way. But not so much unpaid, as a legal dispute.

The short version is, the ship lost cargo overboard. A liftboat. The owners of the liftboat believe the ship is responsible for their loss. The owners of the ship say no, because they have a "knock-for-knock" provision in the contract.

I had never heard of knock-for-knock provision before. Basically it says each party insures their goods, and does not claim against the other, even if the other is at fault.

Here is a proper definition of Knock-for-knock

But, back to the ship being arrested. With all the financial turmoil, it is possible that ships will start being arrested for unpaid debts. This is something to always consider when doing business with a carrier. Nothing worse than having your goods on a ship which gets arrested.

Friday, November 21, 2008


I found an article called "The Golden Fleece", written in 2005 regarding the issuing of Dryships stock.

It starts out like this:

Dryships’ Debut Shows Speculation,Liquidity Trumping Experience
“It was surreal. When someone asked why he was doing the deal, here–now, he actually said, basically, ‘Because Americans are the dumbest investors around, and there’s lots of liquidity in this market.’”

If you don't own DryShips stock, read the article. It is quite amusing.
If you do own Dryships, well, you might want to skip it.

When I read the comments posted on Google financial, concerning this stock, I too question the intelligence of American investors.

I have looked at the reports filed with the SEC by Dryships, but honestly, I can't figure much out. I don't know at what values they have the ships declared. If they valued them high, and borrowed against them, then it's going to get pretty bad.

If they valued them pretty much at cost or market when the stock went public, and haven't increased their value on the books, they might be able to stick it out over the next year.

Of course, don't forget, there is always the chance this stock could go down to pennies and someone buy out the company, leaving the shareholders with very little.

Thursday, November 20, 2008

Baltic Dry Index - Nov. 19 report

Here is the report from the Baltic Exchange for Nov. 19 (I am not allowed to publish the ones from the 20th yet).

Baltic Indices 19/11/2008 BDI 859 (-6) BCI 989 (-5) BPI 978 (-34) BSI 606 (+17) BHSI 310 (+4)

So, the rates for Capesize ships went down a little, Panamax are down a lot, but the good news is both the Supramax and HandySize are up.

I don't really know if that is a blip or a trend. Could be the market is hitting it's bottom.

I suppose there is a chance the Capesize ships are not down as much as the Panamax if owners have decided to route their ships via the Capes anyway, due to all the pirate problems. Or,it could be because of insurance. I don't know the rates, but would guess if you are transiting the Gulf of Aden, the insurance costs have gone up considerable.

click here for previous post explaining categories of the Baltic Exchange

Wednesday, November 19, 2008

So much for Baltic Exchange motto "Our word our bond"

I won't say panic is setting in amongst owners of bulk carriers. It's more like they are really, really mad.

They had a cozy little club for a couple of hundred years, everything being done on a handshake. The motto of the Baltic Exchange is "our word our bond", but in today's Lloyds List article it incorrectly (or maybe more correctly) calls it "my word is your bond".

This is my take on this problem.

Companies involved in chartering ships normally acted on behalf of the owners of cargoes, or perhaps a carrier. Generally they would have some cargo in mind to transport. Sometimes they would speculate and take ship on long term charters, depending on if they thought they could make some money. Some companies were in the business of ship management, and maintained owned and chartered ships in their fleet.

Then the freight derivatives and freight forwarding contracts started. The first FFA was established in 1997. I remember at the time these were established I thought it was rather strange. But, it's a bit like someone buying or selling future contracts of commodities. If someone knows they will need a ship at a particular time, it's a good way to guarantee the price.

Then the speculators got involved. I recall one comment by a ship owner. There were something like 20 contracts after the initial one, driving up the price 10 times. The ship owner did not benefit from the price increases, and in the end some of the in between parties defaulted and the ship owner was left holding the bag. Not very fair. Or nice. Certainly not in the spirit of "our word our bond".

Now the ship owners want to put a stop to all this speculation. There is some talk of no longer publishing the index of charter rates for dry bulk ships, the BDI. That would take it back to the owners doing business with only those they trusted, and only those who really were in the business.

The owners blame all the outside speculation for wrecking their market, and I can't say I blame them. Owners needed the huge profits in order to weather the upcoming down years.

I am guessing some hedge funds got involved, looking at this as a quick way to make some money. I do not know this for certain.

And, if you haven't figured it out by now, this market is not regulated.

Pirate mothership sunk

News of the Somali pirates is all over the mainstream media, but thought I would post it here anyway.

The Indian Navy sunk a suspected pirate "mothership".

Good for them.

Understanding the BDI (Baltic Dry Index) Part II

I started working on this project in a blog last week. I'll try to get a bit more done today.

First off, someone pointed out the article I referenced from Slate was from 2003. I thought it was from 2008. Guess it's time to get my eyes checked.

Also, in my last blog I included the BDTI and BCTI as part of the BDI, but as this is the dry index, and BDTI and BCTI covers tankers, they should not be in the mix.

Here is what makes up the BDI - (Baltic Exchange Dry Index)

It's daily assessments from various selected charter brokers of the previous days "fixtures" (chartering contracts), for 4 sizes of dry bulk ships (listed below). Bulk, meaning the cargo is not in containers. Generally it's coal, ores or grains.

Capesize BCI (Baltic Cape Index)

Vessels which must transit via the Capes. (Time to get out the world map).
Either the Cape of Good Hope, which is at the tip of Africa, or Cape Horn, which is at the tip of South America. These ships are considered too big to fit through the canals. Some may be able to transit the Suez, depending on their draft (meaning, how deep of water they require), which varies depending on how much cargo they have onboard.

Panamax BPI (Baltic Panamax Index)

Vessels which can just fit through the Panama Canal. Actually, I find this term misleading, as it would seem to mean they are too big for the canal.

Supramax BSI (Baltic Supramax Index)

These vessels use to be called Handymax, but for some reason in 2005/2006 the Baltic Exchange changed the term to Supramax (I do not know why). These vessels are smaller
than Panamax, but bigger than Handysize.

Handysize BHSI (Baltic HandySize Index)

These are the smallest of the dry bulk vessels and are very versatile. They are small enough as to be able to get into any port.

Here is a link to Vessel Size Groups which gives more detailed information. However it based on categories from 2000, and therefore does not have the Supramax category.

Tuesday, November 18, 2008

The BBC Box loads onboard vessel- ETA Los Angeles Nov. 28

The BBC box loaded onboard the M/V NYK Starlight in Shanghai. The vessel sailed at 01:00 on Nov. 18th.

The BBC confirms The Box loaded onboard a ship bound for the U.S., but they sure don't give much more than that.

At a large warehouse in Shanghai the BBC Box is being loaded with the cargo from the factory in Ningbo.

It will travel from China to Los Angeles on the west coast of the United States, and from there by rail to Pennsylvania. There the goods will be distributed to a chain of homeware stores across the United States.

According to the NYK tracking site, the container loaded onboard the NYK Starlight, Voyage 65

NYKU8210506 Container Size/Type 40'/DRY

Status As Of Event Location Mode
NOV-18-2008 01:00 Vessel Departure Shanghai, CHN NYK Starlight/065

But, this vessel doesn't show up in their schedule. The master schedule for the U.S. is currently not available on their web-site, so I can't look at it either. I don't know if that is only temporary because they are changing the services (some have been discontinued), or if it is permanent.

Anyway, according to the network map the transit time from Shanghai to Los Angeles is 10 days. I am guessing an ETA of Nov. 28 into Los Angeles, or as early as the 26th of Nov, as the vessel was a day late out of Shanghai. The 27th is Thanksgiving here in the U.S. The terminals will work on that day, but it will be holiday pay, which I think is triple time. So if NYK is watching their pennies, I suspect it will work on the 26th or the 28th of November.

Monday, November 17, 2008

Pirate Update - Faina runs out of food and water, and the pirates take an oil tanker

According to Russia Today, the crew of M/V Faina has sent a letter informing they have run out of food and water.

I suspect the Faina will be sitting there for a long time. No one wants to claim the cargo. Maybe the pirates will eventually give up. Especially since today they managed to hijack a Saudi oil tanker, the Sirius Star

The Sirius Star, which was commissioned in March and is owned by the Saudi oil company Aramco, is classed as a Very Large Crude Carrier, the second-largest classification. It was sailing under a Liberian flag and its crew includes citizens of Croatia, Britain, the Philippines, Poland and Saudi Arabia. A British Foreign Office spokesman said there were at least two British nationals on board.

This really is turning into a David vs Goliath. I think the pirates are now doing it for sport, as much as for the money.

Friday, November 14, 2008

NYKU8210506 The BBC Box - possible vessel

As I mentioned yesterday, the BBC box, NYKU8210506, was moved to the shipper for loading on Nov. 12.

It is back to the terminal as of Nov. 14th. (The BBC site still shows it is loaded with Whisky, which was the cargo it arrived with in China.)

Assuming the container is bound for Los Angles (it is clothing), the next vessel is the OOCL Southampton, Voyage 11, sailing Nov. 16th. According to the NYK schedule, if it is bound for New York it would load on this same vessel, but then travel overland (called intermodal) for final destination New York.

Actually it would arrive in New Jersey at a rail head. All of the port and terminal facilities in Northern New Jersey have been combined with New York for customs purposes.

So, I am guessing by Sunday or Monday we should know if it loaded on this ship or not.

Thursday, November 13, 2008

Pirates killed by Royal Navy

The British Royal Navy shot and killed 2 Somali and 1 Yemeni pirates. These pirates had been involved in an attempted hijack of a Danish cargo ship.

The HMS Cumberland crew fired the shots.

The Russian frigate Neustrashimy joined in the chase.

click here for article from Swiss News

click here for article from the Telegraph UK

NYKU8210506 The BBC Box is on the move

The NYK tracking site indicates the BBC Box was moved on Nov. 12.

Container Search Results

Container NYKU8210506 Container Size/Type 40'/DRY

Status As Of Event Location Mode
NOV-12-2008 10:24 Empty container positioned to shipper Shanghai, CHN Truck

The BBC site shows the container still has a load of whiskey. Either no one is minding the store (or site, in this instance), or they want to keep the information confidential.

The vessel information should show up in a few days.

Wednesday, November 12, 2008

Understanding the BDI (Baltic Dry Index)

Recently, Slate had an article entitled The Shipping News, The best economic indicator you've never heard of. It is referring to the Baltic Dry Index.

DryShips always gives the Daily Market Report of the Baltic Exchange indexes.

The origin of the Baltic Exchange can be traced to the Virginia and Baltick coffeehouse in London's financial district in 1744.

The Baltic Market

Baltic Exchange members are at the heart of world trade, arranging for the ocean transportation of industrial bulk commodities from producer to end user. The bulk freight market relies on the co-operation of shipbrokers, shipowners and charterers to ensure the free flow of trade.

Baltic Exchange shipbrokers undertake to abide by a code of business conduct based on the motto “Our Word Our Bond” and those who breach the code are disciplined or expelled.


Each working day the Baltic produces a dry cargo fixture list. Each fixture is carefully checked and verified and our report is regarded as the most comprehensive and independent such list available. This site also contains a database of over 25,000 fixtures.

A fixture is the agreement to charter a ship.

Index Summary
A summary of the Baltic Dry Index (BDI), Baltic Capesize Index (BCI), Baltic Panamax Index (BPI), Baltic Supramax Index (BSI), Baltic Handysize Index (BHSI) and Baltic International Tanker Routes (BITR).

OK, that's enough boring stuff for today. Tomorrow I will (hopefully) make a post regarding what makes up the various indexes.

Tuesday, November 11, 2008

Don't throw good money after bad

According to Lloyds List, companies have decided it's better to cancel orders for new bulk ships, forefeiting their deposits, than to be stuck with new overpriced ships.

The Peter Georgiopoulos-chaired Genco Shipping & Trading last week said it was happy forfeiting a $53m deposit on six bulkers purchased for $530m, as against the current estimated market value of $300m.

Just as Genco’s decision to get out of its deal won praise from analysts, experts believe any cancellation ... would be seriously beneficial for Eagle Bulk.

Some experts have already issued projections of a an immediate doubling of Eagle Bulk’s net asset value if the cancellation reports are true, based on a market price of $375m as against the contracted price of $508m on the newbuildings.

According to Baltic Exchange assessments, the market value of its newbuildings is $32m each. The $42.3m price was seen as a coup when Eagle Bulk assumed ownership of the ships last year, as even secondhand values peaked at $75m.

It's hard to say when there will be any kind of upward correction. A lot depends on China's new stimulus plan.

QE2 hits a sandbank

Last night I posted a blog about the last voyage of the QE2. This morning I get up and read she ran aground.

I hope there aren't any freak icebergs lurking about.

The QE2 retires to become a hotel in Dubai

The QE2 is on her last voyage from Southampton.

Her next life will be as a floating hotel in Dubai, United Arab Emirates.

Bea will have to find a new place to live. She has lived onboard the QE2 for the last 14 years. I had often heard of this person, but always thought it was a joke. At 3500 Euros per month, it really is cheaper than many assisted living apartments.

I suspect many cruise lines will begin to experience a decrease in business. Perhaps this is one market segment they really should pursue. There are lots of widows who, like Bea, are tired of keeping house.

Monday, November 10, 2008

Beware owners giving glowing reports

I haven't really followed DryShips stock. All of the dry bulk companies are having problems with the BDI recently loosing 90%.

This is why it bothers me when an owner/chairman says "everything is OK" in this article from Lloyds List, Economou allays fears as DryShips shares fall.

DRYSHIPS boss George Economou has confirmed that his Nasdaq-listed company is in good health after a warning-laden share prospectus filing spooked the market, already jittery from the dry bulk crash.

This is what he is referring to:

DryShips ... register up to 25m new shares in a prospectus filed with the Securities and Exchange Commission.

Among risk factors included in Thursday’s filing, DryShips said that even with a hefty injection of fresh equity from the sale of the new shares it “cannot be assured” that operating and capital needs would be satisfied, or that it would remain in compliance with debt covenants “if the low charter rates in the dry bulk market continue”.

Conjuring up a possible doomsday scenario, the company said: “If we are not able to comply with our loan covenants and our lenders chose to accelerate our indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to continue to conduct our business would be impaired.”

However, Mr Economou told Lloyd’s List a day later that the grim tone that arguably could be discerned in the filing was a normal one for prospectuses.

“The underwriters put in a lot of risk factors to safeguard our back against litigation,” he said. “We are not breaching any covenants and we are not at risk of breaching covenants. Nor are we planning on breaching them.”

He said an analyst who downgraded the company’s stock had over-reacted.

Hum. Over-reacted. Those nasty SEC requirements to protect investors.

I'll keep an eye on this one. But, who knows. Maybe they will be one of the survivors.

Sunday, November 9, 2008

Is the mob involved in the Florida ILA?

It's been well documented the mob has been involved in the business of the longshoremen in New York and New Jersey. I posted about that a couple of days ago.

Now there is a stevedore in Florida who has some disputes with the ILA.

Their creditors are trying to force them into bankruptcy. This is part of their response.

The ILA pension funds for Southeast Florida and Tampa recently sued Eller, seeking what they claim is the company's failure to pay its required contributions to the funds.

In responses to the lawsuits, Eller denied the allegations and said it was the victim of a scam to inflate claims for ILA members' pay.

Eller said in court documents that it believes that current or former Eller employees and union members had schemed "to defraud (Eller Maritime) and certain shipping companies by an apparent ongoing 'kickback' protocol whereby the...employee or employees would intentionally overpay longshoremen and/or other union members for work not undertaken, or generate phantom union employees or categories of employees."

I have no idea if the Feds have been investigating this. But, it's the typical mob scenario. No-show jobs.

It's starting to get cold. I would think some Feds are looking for an excuse to head to Florida. This should do the trick.

Friday, November 7, 2008

National Procurement Fraud Initiative

EGL pays $750,000 to settle overbilling allegations

Eagle Global Logistics, has paid the United States $750,000 to settle allegations that the company, in violation of the False Claims Act and the Anti-Kickback Act, paid gratuities to employees of KBR, the prime contractor for the U.S. Army's LOGCAP III contract for logistical support of military operations overseas.
EGL, a Houston-based company, had a subcontract with KBR to facilitate shipments of military cargo to Iraq and Kuwait. From March 2003 through March 2005, EGL provided various meals, sporting event tickets and other gifts to KBR employees responsible for administering the subcontract.
Previously, EGL paid the United States $4 million to settle False Claims Act allegations that the company inflated invoices for military cargo shipments to Iraq. EGL also paid the government $300,000 to settle allegations that the company's local agent in Kuwait overcharged the military for rental charges on shipping containers to Iraq from January through June 2006.

I do not know why we needed another act to prosecute this type of behavior. Probably The Government wanted to show they were doing something about this waste of taxpayer dollars.

If I remember correctly, this "little problem in Kuwait" cost us several million.

This case is being prosecuted as part of a National Procurement Fraud Initiative. In October 2006, the deputy attorney general announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs.

Call me cynical, but I wonder how many people this "task force" added to the Government payroll.

Thursday, November 6, 2008

German ship banker predicts more bankruptcies around the corner

As per Lloyds List article:

DVD Bank head of shipping, Mr. Dagfinn Lunde, said the downturn in shipping would be “deep and long”.

In two years’ time “we will have a crisis very similar to that of the mid-1980s”, which some experts believed was the worst ever experienced by shipping, he said.

“There will be many more bankruptcies,” Mr Lunde told the Lloyd’s Shipping Economist Ship Finance & Investment Conference in London.

What I found interesting is he believes container operators will go bust, in addition to dry bulk.

“You can see this from the leverage of the companies and the charter rates. It is a question of weeks and months.”

Some bankruptcies were “very close around the corner” and could involve big names in the industry.
Collapses would not only involve dry bulk operators, but also other sectors such as containership operators.

I can't think which container carriers are likely to go bankrupt. I guess some of the smaller ones. We'll have to keep an eye on that.

Wednesday, November 5, 2008

Britannia Bulk is bust

From Lloyds List

ADMINISTRATORS were called in on Friday (Oct 31) to deal with Britannia Bulk Plc, which went into administration under the Insolvency Act 1986 of England and Wales.

In a letter seen by Lloyd’s List, BDO Stoy Hayward advised those who had existing contract or charter obligations with Britannia to take “all necessary steps to mitigate any claims arising under your contract or charter with the company”.

On Friday the New York Stock Exchange said it had agreed that the company be de-listed. The NYSE had already suspended trading of Britannia Bulk Holdings.

Wow. That was fast. The warnings about their financial problems came only last week.

The Mob and the ILA

Oh, here we go again.

From the Journal of Commerce

Mob figure accused of ILA extortion

Updated November 4, 2008 12:19:09 PM

Seriously, when I made my posting yesterday "Tony Soprano would be mad", I did not know about this indictment.


And, the article from yesterday was concerning the local in Bayonne, NJ. This new one is regarding the local in Newark, NJ.

NEWARK, N.J. -- A Mafia figure in prison for avoiding prosecution in a 1977 mob murder has been charged in a federal indictment that accuses him of extortion and conspiracy to extort members of International Longshoremen's Association Local 1235 in Newark, N.J.

Prosecutors said that three days before his arrest, Coppola was intercepted in a telephone conversation admitting organized-crime control over the leadership of Local 1235, one of the ILA's largest units, since the Seventies. The U.S. attorney's office said that during the call, Eddie Aulisi, son of the local's then-president, Vincent Aulisi, told Coppola that tribute payments to the Genovese family had recently "almost doubled."

I had always wondered what happened after this murder (mentioned below). From what I recall, the trial basically just stopped. I am pretty sure everyone who was scheduled to testify, suddenly decided not to, or, their memory went fuzzy.

In a detention memo filed with the court after Coppola's arrest last year, prosecutors alleged that Coppola and his stepson were involved in the murder of Larry Ricci, a mobster who disappeared in the middle of a 2005 ILA racketeering trial where he was a defendant along with three of the union's top leaders.

Ricci was found shot to death in a car trunk outside a Union, N.J., diner shortly after he and two of his co-defendants, ILA officials Harold Daggett and Arthur Coffey, were acquitted of racketeering charges. No charges have been filed in that murder.

I'm pretty sure I know where that diner is located. Don't think I'll be going there again.

Tuesday, November 4, 2008

Just sittin' around, waitin' for some cargo

American Shipper article Idle ship capacity thought to be at 150,000-TEU level and growing

Here is the AXS-Alphaliner TOP 100 - existing fleet and orderbook (ships on order) report

What is amazing is the number of ships on order. I expect most of these will be cancelled or delayed.

Tony Soprano would be mad

From the Journal of Commerce

Federal judge extends ILA local oversight

Updated November 4, 2008 8:37:44 AM

Former New York City Police Commissioner Robert McGuire has overseen the affairs of ILA Local 1588 since 2003, when he was appointed to end what prosecutors said was decades of organized-crime control of the local.

A federal judge has extended by 18 months the government supervision of a formerly mobbed-up International Longshoremen's Association local in Bayonne, N.J.

I am not so sure they should be saying "formerly mobbed-up", based on the following excerpt.

...the administrator said more time was needed to complete disciplinary action against local members who have continued to associate with organized crime figures, and that he had become aware of "intensified efforts in recent weeks and months by elements associated with organized crime figures to reassert their influence in the local."

"These concerns are sufficiently serious that the parent union, the ILA, as well as Milton Mollen, the ethical practice counsel for the ILA, support this motion," McGuire's statement said.

McGuire said extending government oversight will thwart efforts by mobsters to undermine reform efforts, and will provide government supervision of the local's next election of officers in 18 months.

I don't really want to say too much more, considering I use to live in Sopranoland.

Monday, November 3, 2008

What to do with excess ships

APL has confirmed they are laying up vessels. Actually taking them out of service and parking them.

The downturn in shipping has been fast. Only a little over a month ago one of the execs at APL was saying the lines needed to reverse the current market downturn (ha).

From the Sept. 25th blog "Ocean Shipping Downturn.. duh"

"A senior executive of APL has called on individual container lines to take decisive action to reverse the current market downturn.

Dan Ryan, APL’s Greater China president, speaking at the second Containerization and Liner Shipping China conference in Tianjin, said that a negative scenario of financial market turmoil, low consumer confidence as well as rising inflation and commodity prices, compounded by historically high fuel prices, requires lines’ urgent attention.

Suggested solutions included carriers moderating growth aspirations, returning excess tonnage to the charter market, rationalizing and even suspending some services, and having stronger resolve to pass along bunker costs to customers.

“If we fail to take action, the industry could see a more significant downturn than we have seen in many years,” he said."

I have never worked for a carrier which actually laid up vessels. Sometimes we would dry dock them early. Normally if a trade got really bad we would try to start another service, or increase frequency in an existing service.

Looks like MOL has decided to take their excess tonnage and start an Asia / East Coast South America service.

The move follows the termination of the carrier's existing joint service on the route, operated with Singapore's Pacific International Lines.

The company said it will deploy five 3,000-TEU and six 4,250-TEU vessels on the new weekly service.

"By replacing some of current 3,000-TEU class vessels with larger and faster ships, MOL will provide stable cargo capacity and higher schedule integrity to meet customer demand in this growing market," the carrier stated.

Well, the problem with that is this market probably isn't really growing, with Brazil and Argentina facing the same problems as the rest of the world.

But, it's probably a better solution for MOL than just parking their ships.

I can't really think of too many trade lanes where it would be a good idea to put in ships.

Maybe Africa.

But you would probably need ships with onboard cranes to service a lot of those ports, and those ships are fairly rare.