Happy Holidays

I'm taking some time off over the holidays.

That's the one really nice thing about not working in the day to day business of international shipping, which never shuts down for holidays.

It has started to snow here in Kansas, so we will have a white Christmas.

Along with the snow has come the cold. High today of 29 F,( -1.6 C) low 13 F (-10.5 C), with a wind chill factor of -6 F (-21 C). And, it will continue to get colder for the next few days.

I hope to be heading south to Corpus Christ, Texas in Jan. It's about a 800 miles, (1300 kilometers), and takes about 1 1/2 days to drive.

If you are not familiar with the U.S., take a look at a map.

It's a big country.

CMA CGM gets tough with bondholders

From Bloomberg

Dec. 18 (Bloomberg) -- CMA CGM SA, the world’s third- biggest container shipping company, told bondholders it faces bankruptcy unless they approve a plan to raise more debt.

CMA CGM is asking holders of $570 million of senior bonds to change the terms of the notes to allow prospective lenders to have first claim on the company’s assets in the event of a default, said Paris-based spokeswoman Anne-France Malrieu. Otherwise CMA CGM may be “forced to commence bankruptcy proceedings” and the investors may lose their money, the company said in a Dec. 16 notice to bondholders.

Marseille-based CMA CGM is seeking changes to the terms of its bonds in dollars and euros due 2012 and 2013 as part of an effort to restructure $5.6 billion of debt and raise new money, according to the notice, which Malrieu confirmed is authentic. The company is in breach of conditions on most of its debt after suffering from a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM needs a majority of the bondholders to agree to the proposed changes in the terms of the notes by Dec. 22, according to the notice. Otherwise it said it “may be forced to file for bankruptcy proceedings in the near term, in which case there would be no assurance that CMA CGM would be able to repay” the senior notes.

click here for complete article

YRC Worldwide update

The struggle between bondholders and YRC Worldwide continues, and today it appears the bondholders have the upper hand. They may push YRC Worldwide into bankruptcy.

The stock is presently at 95 cents US.

From Bloomberg

Dec. 18 (Bloomberg) -- YRC Worldwide Inc. has less than two weeks to persuade bondholders to accept a debt exchange and prevent a bankruptcy filing that its employees’ union says may force the biggest U.S. trucking company to liquidate.

YRC, which has pushed back the deadline for the swap three times this month, must complete the tender by Dec. 31 to avoid a $19 million payment of interest and fees that would leave the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said yesterday in a regulatory filing.

Bonds and shares fell yesterday as the company, which posted more than $1.7 billion in losses in the past five quarters, said the percentage of creditors who agreed to the exchange fell to 57 percent from 75 percent on Dec. 15. YRC, facing a slump in freight demand, is locked in a struggle with a group of bondholders who own derivatives that would profit if the company defaults, people familiar with the situation say.

“Bondholders are in the driver’s seat,” said David Ross, a Baltimore-based analyst at Stifel Nicolaus & Co. who has a “sell” rating on the stock. “They could force the company to file if they don’t tender enough notes, and then there is a high chance the business is liquidated.”

CMA CGM gets credit line

The bankers for CMA CGM have extended a credit line so operations will not be disrupted, as talks with creditors continue.

Apparently, part of the deal was for the founder and CEO Jacques Saadé, to step down, which he has now done, following two missed deadlines for refinancing agreements.

The French Government said they would assist CMA CGM if necessary, but only if they came to terms with their creditors for refinancing.

The creditors had said part of the requirement for refinancing was for Mr. Saadé to step down. He had resisted doing so, which is certainly understandable as he founded the company.

This paves the way for new investors, which are believed to be

Louis Dreyfus Armateurs, a French bulk ship owner, French private equity group Butler Capital Partners, and Los Angeles-based Apollo Management, the owner of CEVA Logistics of the Netherlands.

click here for article from JOC

YRC receives credit extention

Earlier I posted there were bets out against YRC Worldwide, which would have paid off if they filed for bankruptcy.

Dec. 15 (Bloomberg) -- YRC Worldwide Inc., seeking to avoid bankruptcy by exchanging equity for debt, faces resistance to the swap from investors holding bonds and derivatives that pay out in a default, according to people familiar with the matter.

Now, the banks have come to the rescue of YRC, extending their credit agreement until Jan. 12.

From The Journal of Commerce

YRC Worldwide's banking group came to the troubled carrier's rescue today, extending its credit agreement until Jan. 12 and effectively giving YRC another month to complete a debt-for-equity swap with bondholders key to its plans to avoid bankruptcy.

In their thirteenth amendment to the credit agreement since 2007, the banking group agreed to continue to let YRC draw up to $50 million at any time from its $950 million revolver reserve block, and it suspends a minimum cash requirement through Jan. 11.

That pushes off concern over a near-term bankruptcy filing by the carrier, which has lost more than $2 billion over the past two and a half years. The company detailed the credit amendment in a Dec. 16 filing with the Securities and Exchange Commission.

YRC is wrestling with reluctant bondholders as it struggles to complete a debt-for-equity swap that would wipe $536.8 million in debt from its books.

As of Dec. 15, 75 percent of the bondholders had agreed to the exchange, but the tender offer requires 95 percent of the note holders to swap their bonds for company stock.

YRC also has a problem of getting the Union to take some cuts.

Last I saw, they voted against doing so.

It's going to be tough for YRC Worldwide to stay out of bankruptcy without the support of the Union.

and... this just in

Dec. 16 (Bloomberg) -- The International Brotherhood of Teamsters blamed Goldman Sachs Group Inc. for making derivatives trades that would benefit from the bankruptcy of YRC Worldwide Inc., the biggest U.S. trucker by sales.

Gambling on YRC

This is unbelievable

From Bloomberg

Dec. 15 (Bloomberg) -- YRC Worldwide Inc., seeking to avoid bankruptcy by exchanging equity for debt, faces resistance to the swap from investors holding bonds and derivatives that pay out in a default, according to people familiar with the matter.

Yellow Freight, the largest LTL (less than truckload) carrier purchased Roadway, the 2nd largest LTL carrier several years ago.

It took forever to get the two operations merged. Also, they are union, thus quite high operating costs.

The other day their stock was around 86 cents. They are trying to restructure, but now it appears too many people have "bet" on their default, and are pushing them in that direction.

How sad.

CMA CGM still in talks on debt

CMA CGM has missed, for the second time, their targeted date for refinancing debt.

From Lloyd's List

No debt deal for CMA CGM yet

Andrew Spurrier and Janet Porter - Tuesday 15 December 2009

FRENCH container shipping group CMA CGM has again overshot its target date for completing talks with its banks on a restructuring of its $5.6bn debt.
The group, which had originally signalled a mid-November date, told its employees last month that it needed to get agreement on certain key measures by December 15.
Today, however, the group admitted ...

The rest of the article is available only to subscribers.

Back on Dec. 2nd I said I didn't expect them to meet the deadline (I had calculated mid-Dec to be latest Dec.18)

Now that we are into the Holiday season, it will be more difficult for them to achieve the restructuring. I guess it will have to wait until after Jan 1. I hope they have enough cash to get them through until then.

Rotterdam Rules 2009

What has become known as "Rotterdam Rules" has the official title of:

United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea

This document is 39 pages long.

If you are involved in the actual transport of international shipments, it would be a good idea to read this document. It is not yet in effect, but probably will be in the not too distant future.

It was necessary for this agreement to be updated, to take into consideration the changes in international transportation due to containerization, which allows for, amongst other things, door to door delivery.

There is also a considerably amount of clarification regarding the bills of lading which are transmitted electronically.

Happy reading!

Global Ship Lease regulatory filing Dec. 9, 2009

Here's the regulatory filing referred to in the Fairplay article.

GLOBAL SHIP LEASE, INC. filed this 20-F/A on 12/09/2009

This is the part about conflict of interest.

CMA CGM is Global Ship Lease’s initial sole Charterer and its wholly owned subsidiary, CMA Ships, is Global Ship Lease’s initial Ship Manager. CMA CGM’s ability to continue to pay charterhire and CMA Ships’ ability to render ship management services will depend in part on their own financial strength. CMA CGM has guaranteed the performance of CMA Ships under the ship management agreements. As described above, the container shipping sector is suffering a severe cyclical downturn and has been incurring substantial losses. Furthermore, many containership operators, including CMA CGM, have commitments to purchase newbuildings for delivery over the next three to four years which may not be fully funded with committed financing.

Circumstances beyond their control could impair CMA CGM’s and CMA Ships’ financial strength, and because they are privately held companies, information about their financial strength is not publicly available. As a result, Global Ship Lease and an investor in its securities might have little advance warning of financial or other problems affecting CMA CGM or their wholly owned subsidiaries even though their financial or other problems could have a material adverse effect on Global Ship Lease.

CMA CGM and Global Ship Lease’s Ship Manager have conflicts of interest with Global Ship Lease and limited contractual duties, which may make them favor their own interests to Global Ship Lease’s detriment.

Conflicts of interest may arise between Global Ship Lease, on the one hand, and CMA CGM, Global Ship Lease’s initial Charterer, and CMA Ships, its Ship Manager, on the other hand. As a result of these conflicts, Global Ship Lease’s Ship Manager may favor its own or its parent company’s interests over Global Ship Lease’s interests. These conflicts may have unfavorable consequences for Global Ship Lease. For example, Global Ship Lease’s Ship Manager could be encouraged to incur unnecessary costs, for which it would seek reimbursement from Global Ship Lease. Although Global Ship Lease’s ship management agreements expressly prohibit its Ship Manager from giving preferential treatment when performing any of its ship management services to any other vessel that is affiliated with it, or otherwise controlled by CMA CGM, conflicts of interest may arise between Global Ship Lease, and its Ship Manager and its initial Charterer.

Global Ship Lease’s financial reporting is dependent on CMA CGM.

Under the ship management agreement with CMA Ships, the Ship Manager is obligated to provide Global Ship Lease with requisite financial information on a timely basis so that Global Ship Lease can meet its own reporting obligations under U.S. securities laws. CMA Ships and its parent company CMA CGM are privately held French corporations with financial reporting schedules different from Global Ship Lease. If CMA Ships or any of its affiliates is delayed in providing Global Ship Lease with key financial information, Global Ship Lease could fail to meet its financial reporting deadlines.

CMA CGM could compete with Global Ship Lease.

Along with many other vessel-owning companies, CMA CGM, currently Global Ship Lease’s sole Charterer and largest holder of its common shares, could compete with Global Ship Lease in its search to purchase newbuildings and secondhand vessels. Further, CMA CGM is not precluded from acting as an owner in the direct chartering market. While Global Ship Lease understands that CMA CGM currently has no intention of doing so, competition from CMA CGM may potentially harm Global Ship Lease’s ability to grow the business and may decrease its results of operations.

Certain terms in Global Ship Lease’s agreements with CMA CGM and its affiliates may be the result of negotiations that were not conducted at arms-length and may not reflect market standard terms. In addition, they may include terms that may not be obtained from future negotiations with unaffiliated third parties.

The asset purchase agreement, the charters, the ship management agreements and the other contractual agreements Global Ship Lease entered into with CMA CGM and its wholly owned subsidiaries were made in the context of an affiliated relationship and were negotiated in the overall context of the previously contemplated public offering of its Class A common shares in 2007, the Merger in August 2008 and other related transactions. Global Ship Lease’s agreements with CMA CGM may include terms that could not have been obtained from arms-length negotiations with unaffiliated third parties for similar services and assets. As a result, its future operating results may be negatively affected if Global Ship Lease does not receive terms as favorable in future negotiations with unaffiliated third parties or has to enter into lengthy and costly negotiations with third parties in connection with entering into such agreements.

Global Ship Lease’s growth depends on its ability to purchase further vessels, obtain new charters and maintain and potentially expand its relationship with CMA CGM. Global Ship Lease will require additional financing to be able to grow and will face substantial competition.

One of Global Ship Lease’s objectives is to grow by acquiring additional vessels and chartering them out to container shipping companies including potentially CMA CGM. This will be particularly challenging since Global Ship Lease will need to obtain additional financing in order to acquire vessels. Due to the global banking crisis and the severe cyclical downturn in the containership

So, if you are investing in Global Ship Lease stock (which I am not), please keep this in mind.

Payments to Global Ship Lease delayed

This from Lloyd's List

CMA CGM lagging behind on payments

Rajesh Joshi - Wednesday 9 December 2009

GLOBAL Ship Lease has confirmed “increasing delays” in charterhire payments from CMA CGM, and raised doubts over the troubled French company’s ability to keep up with these payments.
GSL has also warned against the possibility that CMA Ships, which serves as GSL’s ship manager, and the rump CMA CGM have “conflicts of ...

That's all I've got. The rest is for paid subscribers, which I am not.
I presume the last sentence reads "conflicts of interest", which I have mentioned all along.

And from Fairplay

GLOBAL Ship Lease confirmed in a filing today that it faces pressures on multiple fronts, including delayed payments from charterer CMA CGM.

All of GSL’s fleet is on hire to CMA CGM, which is exploring restructuring.

Again, the rest is subscription.

It refers to a filing, so maybe there is something with the SEC.

12 Percent of containership fleet is idle

American Shipper quotes Alphaliner on the delays in orders for new containerships

More than 300 ordered containerships, accounting for 2.4 million TEUs worth of capacity, have seen their delivery dates deferred or delayed since October 2008, according to the maritime news service Alphaliner.

But what I thought was most interesting, was the comment on current idle capacity

...the idle container fleet has hit 1.5 million TEUs, Alphaliner reported. That’s approaching 12 percent of the global fleet, a record high. That the idled fleet is rising during December is unsurprising, given that carriers are rationalizing services during the traditionally weak winter months. Alphaliner projects the idle fleet will keep rising until March.

Until the idle capacity goes away, one would think the newbuildings will just keep getting pushed back.

Of course, there are two ways idle capacity can be decreased. Ships can be chartered or, they can be scrapped.

click here for link to article

Why is the FDA holding up delivery of an Apple computer?

This question was posed on BoingBoing

Why is the FDA holding up delivery of an Apple computer?

The Food and Drug Administration is holding up the delivery of MG Siegler's iMac because they apparently think it is an apple, not an Apple.

In the comments of the tracking report are these notes:

UPS (who is the transportation company, and apparently handling customs clearance) has obtained documentation and submitted to Food and Drug Administration and/or department of AG/PPQ ( which stands for agricultural plant, protection and quarantine).

There were several comments by readers of Boing Boing, wondering if U.S. agriculture/customs thought an Apple computer was in fact an apple, as in fruit.

I thought I should set the record straight. Although U.S. Customs (or now called Department of Homeland Security) does sometimes make mistakes, this was not an error.

The reason for the documentation required by PPQ (who's job it is to protect plant species in the U.S.) is because there was this nasty bug, the Asian Longhorned Beetle, which found it's way into the U.S. in packaging material from Asia. It killed a lot of trees, mainly in the Northeastern U.S.

From USDA

Asian Longhorned Beetle

Background
After the discovery in 1996 of Asian longhorned beetles (ALB, Anoplophora glabripennis) on several hardwood trees in Brooklyn, New York, the Secretary of Agriculture declared an extraordinary emergency in order to combat the infestation with regulatory and control actions. Asian Longhorned Beetles are believed to have been introduced into the United States from wood pallets and other wood packing material accompanying cargo shipments from Asia.

This is the documentation requirement. They don't inspect the shipment. They are trusting that people are not lying.

Documentation requirements

Every shipment which has solid wood packing material must be accompanied by certification from the Chinese government stating that the wood has been heat treated, fumigated, or treated with preservatives. ....

Shipments which do not have solid wood packing material must be accompanied by an exporter statement saying that the shipment contains no solid wood packing material.

I guess it's doing some good

In April 2008, both the Jersey City and Chicago infestations were declared eradicated. Currently, USDA-APHIS' Plant Protection and Quarantine (PPQ) is implementing quarantine and control strategies in New York, New Jersey, and Massachusetts that seek to eradicate this serious pest from the United States.

China Shipbuilding Industry Co. announces IPO

As I have mentioned before, China will become more and more dominant in the world economy. You can whine all you want, but there is no stopping them. They seem to have a fairly solid economic plan, and are rolling it out, little by little.

They have been making steel. Now they will increase production of one of many products made from steel; ships.

From Bloomberg

Dec. 4 (Bloomberg) -- China Shipbuilding Industry Co., the nation’s largest maker of vessel equipment, plans to raise as much as 14.7 billion yuan ($2.15 billion) in Shanghai in the country’s third-largest initial public offering this year.
..............
The Chinese government wants locally made components to account for 80 percent of Chinese-made vessels by 2015, as part of a wider drive to surpass South Korea as the world’s biggest shipbuilding nation.
................
China Shipbuilding will use about 4.3 billion yuan of the proceeds to construct production capacity for ship engines and parts, according to a draft prospectus Nov. 25. Another 1.45 billion yuan will be used for producing additional marine auxiliary machinery, while the remaining 673 million yuan will be to finance an expansion of transportation equipment.

The company plans to offer 45 percent of the shares available to institutional investors through an offline sale, while the remaining 55 percent will be offered to both institutional and individual investors in an online tranche.

click here for link

French Government might help CMA CGM

From The Journal of Commerce

The French government said Dec. 2 it is willing to help CMA CGM, but the troubled ocean container carrier must first sign a debt restructuring deal with its creditors.

The government "does not exclude intervention" in CMA CGM "but it must first resolve its debt problem with the banks," said Transport Secretary Dominique Bussereau.

"We would intervene in a second phase," Bussereau said without giving details.

The government's statement of support for CMA CGM came as the carrier entered a third month of talks with its 63 European and Asian banks over restructuring its $5.6 billion debt, much of which is linked to orders for 60 containerships.

click here for link

CMA CGM said they expect to have the restructuring with the banks accomplished by mid-Dec, a month later than anticipated. I will be surprised if they make that date.
Let's give them until Dec. 18, (the Friday before Christmas week) which is 16 days from now.

I'll keep you posted if I see anything.

Baltic Dry Index

Following comment was posted today

Question-What was going on with the Baltic Dry Index this summer? It kept rising monthly all the way through to Nov. and is now falling like a rock?

I remember when it went up dramatically. I thought it was a bit crazy, but didn't say anything. It was when China was stocking up on commodities.

Honestly, I am getting a little concerned about the integrity of the BDI in general. It's a bit of an art, getting comparable rates, as there can be so many variables.

Anyway, I started to do some research, and ran across this in the blog section of Lloyd's List (which is free).

A two-day conference on dry bulk shipping was almost entirely dominated the topic of how much iron ore would China import next year. With China’s huge spike in iron ore demand this year seen as almost entirely responsible for the unexpected recovery in dry bulk shipping rates, the hope is the country’s appetite for iron ore will continue to grow to keep the industry buoyant.

click here for link to complete article. It's worth the read.

CMA CGM looks to cancel newbuildings

Well finally, CMA CGM has figured out they really don't need to be spending their money buying new ships.

They need to be saving every penny they can scrape together to survive this long downturn in international container shipping.

I don't subscribe to Lloyd's List, but this is the beginning of their article (the free part)

CMA CGM is seeking the cancellation of 15 small containerships as part of a much wider restructuring of its huge orderbook.
South Korean shipbuilders are now considering a series of proposals from the French line that is stepping up the pressure on yards to delay deliveries of the much bigger ships it has on order.

I'm not sure what they mean by "small containerships". The last vessel CMA CGM took delivery of was 13,300 TEUS. That is huge. I guess "small" is around 6000-8000 TEUS.

From The Journal of Commerce, Nov. 10, 2009

CMA CGM, facing economic troubles that threaten the carrier's financial stability, took delivery Tuesday of one of the world's largest container ships, a 13,300-TEU behemoth that will become the company's flagship.

The CMA CGM Christophe Colomb is an energy-efficient vessel coming in at 1,198 feet long, 168 feet wide, and with a draft of 51 feet, among the largest of a new generation of ships that were ordered in boom times and now are arriving amid steep decline in shipping demand.

I haven't seen any mention recently as to the demand by creditors that the Chairman resign.

Perhaps he got the message.

Dryships decides against purchase of vessels

From Reuters

Nov 30 (Reuters) - DryShips Inc (DRYS.O) said it has terminated an agreement to buy two Panamax vessels as it could not get a period employment contract for the vessels within the agreed timeframe with the sellers.

It doesn't say who were the sellers.

Probably some company connected to George, the Chairman of Dryships, or maybe one of his friends.

It's a cozy club.

Greek Tanker Hijacked

The VLCC (Very Large Crude Carrier) Maran Centaurus was hijacked about 600 nautical miles northeast of the Seychelles.

This is a large tanker. It is operated by Maran Tankers Management (I do not know if it is also owned by them).

EU NAVFOR said in a statement released Nov.30, 2009

On 29 November a Greek Crude Oil Tanker named the M/V Maran Centaurus was hijacked in the Somali Bassin, 600 nautical miles North East of the Seychelles. Maran Centaurus has a deadweight of 300,294 tonnes and a crew of 28, among them 9 Greek, 16 Filipinos, 2 Ukrainian and 1 Romanian. The vessel was heading for New Orleans from Jiddah and has now altered course West towards Harardheere or Hobyo.

Jiddah is known to us as Jeddah, Saudi Arabia

Zim drags down parent company

From Israeli paper Globes(online)

Zim troubles drag Israel Corp. down to loss

Zim's revenue sank nearly 50% to $596 million.

Hillel Koren26 Nov 09 10:07

Israel's largest holding company, Israel Corp. (TASE: ILCO) reported a third quarter net loss of $11 million, compared with profit of $253 million in the corresponding quarter of 2008. The company released its third quarter financial results this morning.

The company's troubled shipping unit, Zim Integrated Shipping Services Ltd., reported a loss attributable to Israel Corp. shareholders of $208 million, compared with a loss of $61 million in the corresponding quarter. Expectations were for Zim's loss to reach $120 million.

click here for link

And from The Journal of Commerce

Zim’s loss helped push parent Israel Corp. into an $11 million third quarter net loss from a year-earlier profit of $253 million.

Israel Corp. shareholders narrowly voted earlier this month for a $450 million capital injection for Zim as well as a $100 million “safety net” as part of a recovery plan for the world’s 17th-largest carrier.

The troubled carrier, which faces a cash flow deficit of $1 billion over the next four years, also will receive more than $500 million in new financing from its banks in 2009-10 to finance the purchase of ships repayable over more than 10 years.

Zim has cut charter payments to ship owners, returned leased ships, trimmed its work force, closed unprofitable services, joined forces with rivals on some routes, and delayed deliveries of new ships as part of the recovery program.

CMA CGM continues search for more money

I don't really know what's going on with CMA CGM. There appears to be some conflicting reports. The Journal of Commerce has an article saying private investors sat in on a meeting, but Lloyd's List reported this was incorrect.

The short story is they need money. Today, the number is $300-$400 Million.
Next month, who knows.

What I truly don't understand is this:

CMA CGM Chairman Jacques Saade said last week he wants outside investors to inject $300 million to $400 million into the carrier and hold stakes for five to seven years. Saade said the company faces a cash crunch because it must find $1.2 billion in upfront payments for container ships it ordered in Asia.

So, what? They sell shares in the company, but with an expiration date?

(** clarification** Yes, I do know this is possible. I just don't think it would be a good investment. Appears the French Government might be the one who will do this deal, which makes sense.)

The next 5-7 years will still be quite tough for the shipping industry. Normally the business cycles are very long, something like 20 years. I don't know what would entice an investor to accept such an arrangement, but then, no details have been made known.



This is what is being reported

CMA CGM, which began talks with its banks and the French finance ministry in late September, said it expects to reach agreement by mid-December, a month later than originally planned.

Mid-December is just around the corner.

I look for this to be pushed back some more.


click here for link to Journal of Commerce article.

Today is Thanksgiving Holiday in the U.S.A.

Today is our Thanksgiving holiday in the U.S.

It is celebrated on the 4th Thursday of November.

Generally people (still mainly the womenfolk), cook a turkey.

I will be doing just that.

When I was in Chile, someone asked me why cooking a turkey was always a problem (as is often shown in American TV and movies).

As I explained, it's because it is a rather large fowl (from around 8 to 20 lbs), and, as we normally only cook it once a year, one always forgets how it's done. There is always the problem of undercooking, or overcooking.

One U.S. company (Butterball, I believe) has a toll free number, staffed with persons, on Thanksgiving Day, able to answer questions about cooking a turkey.

KG shipowners rethink bailout request

Two of the German KG funds have decided against asking for government monies. For now.

It's estimated that KG Funds in Germany control 1/3 of the world's containerships, and 60-70% of the orders for newbuildings.

I don't think the withdrawal of the request is because they couldn't use the money, but rather, they don't think the timing is right. If they don't get money from somewhere, I don't see how they can arrange deliveries of the newbuildings.

Maybe the shipyards will start financing the sales.

From The Journal of Commerce

Two German container shipowners that had previously requested aid from the German state have withdrawn their applications, the Financial Times reported Tuesday.

Jochen Dohle, president of Peter Dohle Schiffahrt, told the Financial Times it had withdrawn its application last week. Another owner, Claus-Peter Offen, had previously announced it no longer planned to rely on state support.
.............
Dohle told the Financial Times it had withdrawn its application after receiving “numerous questions” from officials scrutinizing the request. Dohle confirmed on Oct. 22 that it was seeking help from the German government’s Deutschlandsfonds, for companies hit by the economic crisis, to finance its orders for new ships.

“We’ve simply said: ‘We leave it and we wait until the overall political situation can clarify whether help for shipping is granted or not,’” Dohle said.

click here for link

Hapag-Lloyd expected to post loss in 2010

According to Klaus-Michael Kuehne, the principal of Kuehne & Nagel, who bought shares in Hapag-Lloyd last year.

Hapag-Lloyd is on track for a further loss in 2010, ....

"I don't expect a profit at Hapag next year either," German logistics billionaire Klaus-Michael Kuehne told the German weekly Welt am Sonntag newspaper.

"However, I think the worst is behind us," said Kuehne the biggest investor in the Albert Ballin consortium, which owns a majority stake in the Hamburg-based liner company.

He said that transport volumes and freight rates were rising, while cost-cutting had also benefited the company, Germany's biggest carrier.

"It is astounding all the things you can save money on," the 72-year-old entrepreneur said, adding that he would not expect to receive a dividend from Hapag for years.

He hasn't said if they will make money in 2011.

This man I trust. He speaks his mind, and calls it the way he sees it.

He was very outspoken of the management decisions at Hapag-Lloyd, but apparently with the pressure due to their losses, they have "seen the light".

click here for link to article from The Journal of Commerce

Comments re Global Ship Lease

Apparently I struck a hornets nest amongst investors of Global Ship Lease.

Here are some of the comments posted.

Linda...your post further distributes a mistaken press report as to Global Ship Lease earnings in the current quarter.

GSL did not have a LOSS in the recent quarter. GSL generated actual cash after expenses of $15.4 million in the quarter. As a semantic matter of GAAP accounting, GSL also booked a non-cash loss on interest rate swaps which was larger than the cash generated.

and from another

I shake my head reading your blog today.

Of the three publicly traded long term charter companies that offer containerships - Seaspan, Danaos and Global Ship Lease - GSL is the only one with essentially zero financial exposure to future ship orders.

GSL's total orderbook consists of the two ships you mentioned, both ordered to fulfill an existing long term charter with Zim. If GSL chooses to do so, it is free to refuse delivery of those ships and simply forfeit a relatively small deposit ($15 million) as the only consequence. In all likelihood Zim will ask GSL to to exactly that - gladly reimbursing GSL for the forfeiture rather than honoring the charter expense and losing even more money.
................
To my view, GSL's lack of orderbook risk going forward opens the possibility that GSL may partner with one or more shipowner banks in to take on and stretch out delivery of ships ordered by CMA, Zim and possibly others. Indeed, this very crisis may result in GSL's becoming the dominant player in long term containership charter.

November 21, 2009 2:12 PM

There are many more comments, but I didn't want to bore everyone.

Ok folks, here's my thinking.

First of all, yes I understand all the accounting stuff.

Here's what I am looking at in the future.

1) Both CMA CGM are not in a good financial situation. Yes, the chairman of CMA CGM says they will make money in 2010, but then, people say a lot of things. If everything came true that officials said, we would have eradicated cancer by now.

2) GSL is a very, very small player in the world of containership owners. The KG Houses of Germany probably own the most containerships which go to the charter market. Many of these companies are in financial straights, and who knows what the domino effect might be.

3) What if CMA CGM and Zim both file for bankruptcy protection? Where does that leave GSL in the line of creditors? I would guess quite far down the list.

I don't know what is the future of GSL. I am not attempting to affect the price of their stock, I only write comments based on my experience in international shipping.

If I chose to gamble, I would give money to my b/f and send him to Vegas to play poker.

Good luck to ya'll.

No Dividends for Global Ship Lease stockholders

I just shake my head when I read what Global Ship Lease is doing. I don't know who manages this company, but perhaps whoever it is should read a newspaper once in a while.

It's bad enough they continue to buy ships which they then charter to CMA CGM (who is the largest shareholder), but they still plan to buy ships to charter to Zim.

Why would anyone want to do this? Why would Zim want to do this, assuming they are honoring the original contract agreement. There are so many containerships sitting idle they could charter some in at a cheap rate. Furthermore, what does Zim need more ships for? At this time, if you are a container carrier, the more ships you operate, the more money you will lose.

From The Journal of Commerce

Global Ship Lease, a containership charter owner listed on the New York Stock Exchange, posted a net loss of $3.9 million in the third quarter ended Sept. 30, which was more than triple its loss of $1.2 million in the same quarter a year earlier.

The company’s revenue increased by 57 percent to $37.6 million from $23.9 million a year ago, due to the purchase of four additional vessels in December 2008 and one additional vessel in August 2009.

The company said it earned a normalized net profit of $6.2 million in the quarter, excluding an $8.1 million non-cash interest rate derivative mark-to-market charge and $2 million deferred financing costs written off on an accelerated basis. Normalized net earnings are not defined by accounting principles generally accepted in the United States.

And here's the part about the ships...

The company said it was able to borrow sufficient funds under the credit facility to allow the purchase for $82 million in August of the CMA CGM Berlioz, a 2001-built container vessel with 6,627 20-foot equivalent unit capacity chartered to CMA CGM for 12 years.

With that purchase, Global Ship Lease owns 17 container ships that are all on fixed long-term charters with CMA CGM, with an average remaining term of 9.3 years.

The company, which is domiciled in the Marshall Islands, started as a time charter operator in December 2007 when it purchased 10 container vessels from CMA CGM that it leased back to the French liner company.

Global Ship Lease said its has contracts in place to purchase two new 4,250-TEU ships from German interests for approximately $77 million each that are scheduled to be delivered in the fourth quarter of 2010. It said it has agreements to charter out these new ships to Zim Integrated Shipping Services for periods of seven to eight years.

Arming vessels is the correct deterent to hijackings

After the Maersk Alabama was hijacked the first time, 7 months ago, there was disagreement between the sailors, owners, and military regarding the necessity of armed guards onboard vessels sailing off the East Coast of Africa.

If I remember correctly, the U.S. crews were insisting, but the owners and military were reluctant.

Apparently the crews won out, which prevented the Maersk Alabama from being hijacked a second time.

From The New York Times

LONDON — Seaborne raiders in a high-speed skiff tried again on Wednesday to commandeer the Maersk Alabama, the American-flagged ship seized by pirates in April, the United States Navy said.

The United States Navy Central Command said four suspected pirates in a skiff came within 300 yards of the Maersk Alabama at 6.30 a.m. Wednesday about 600 miles off the northeast coast of Somalia as it headed for the Kenyan port of Mombasa.

But a security team on board the Maersk Alabama responded with small-arms fire, long-range acoustical devices painful to the human ear and evasive maneuvers to thwart the attack, the Navy said in a statement.

And of course, now everyone is taking credit for arming ships:

“Due to Maersk Alabama following maritime industry’s best practices such as embarking security teams, the ship was able to prevent being successfully attacked by pirates,” said Vice Adm. Bill Gortney, the commander of the Central Command. “This is a great example of how merchant mariners can take pro-active action to prevent being attacked.”

No injuries or damage were reported, the Navy said.

However, on the flip side, the pirates killed the Captain of a ship they hijacked.

In a separate episode, the captain of a hijacked chemical tanker was reported to have died of gunshot wounds inflicted when pirates seized the MV Theresa with 28 North Korean crew members northwest of the Seychelles on Monday. The spate of attacks reflected the increasing boldness of pirates roaming far from their bases in Somalia to seize vessels and sailors to hold for ransom.

As this is North Korean vessel, we will have to watch the progress of this hijacking. Who knows what North Korea might do.

Somali Pirates release Spanish fishing vessel

From The BBC

Somali pirates have released a Spanish trawler and its crew after holding it for six weeks, Spain's prime minister has confirmed.

Jose Luis Rodriguez Zapatero said the pirates had abandoned the Alakrana tuna boat and that all 36 crew on board were "safe and sound".

The pirates earlier told reporters they were leaving the ship after being promised a ransom of $3.5m (£2.1m).

However, just as this one was released,

• Pirates seized the MV Theresa VIII, a chemical tanker with a crew of 28 North Koreans in waters off Somalia on Monday, Navfor said

What I found most interesting in this article, was this.

• Navfor guards aboard a Ukrainian cargo ship, the MV Lady Juliet, successfully fought off pirates in the Gulf of Aden, also on Monday

There hasn't been much in the press regarding armed guards onboard vessels.

I don't know why this Ukrainian ship had Navfor guards. Perhaps it has something to do with the Russians.

Piracy clauses for charter contracts

The association called BIMCO (Baltic and International Maritime Council) has released newly revised suggested clauses to be used in ship charter contracts.

These clauses relate to the responsibilities and liabilities in the event a ship is hijacked.

Here are the comments:

After many months of careful development work and consultation BIMCO has published three new Piracy Clauses. The suite of clauses consist of a revision of the Piracy Clause for Time Charter Parties, first issued in March 2009, plus two newly developed Piracy Clauses – one for single voyage charter parties and one for consecutive voyage charter parties and contracts of affreightment. The Time Charter Party version of the Piracy Clause has been revised in response to industry comments that the responsibilities and liabilities of the parties in the event of the seizure of the vessel by pirates were perceived as being imbalanced. The two new Clauses provide contractual solutions for short term spot fixtures where the cost and risk remain with the owners, and also for longer term consecutive voyages and COAs where risk and cost is shared between the owners and the charterers.

These clauses can be downloaded free of charge.

Click here for link

Some think the Euro Zone is out of the recession

From The New York Times

Recession Over in Euro Zone, Report Says


By MATTHEW SALTMARSH
Published: November 13, 2009

PARIS — After more than a year in the doldrums, the euro area emerged from recession during the third quarter, helped largely by export growth and improved industrial production in Germany.

The European Union’s statistics agency, Eurostat, reported Friday that gross domestic product for the 16 countries using the euro expanded by 0.4 percent from the second quarter, after five quarters of contraction. G.D.P. was still 4.1 percent lower than it was a year earlier.

I haven't seen the actual report, and this article says it is preliminary, so I don't know if the "officials" are really saying the Eurozone is to be considered out of the recession.
I think the NY Times maybe "jumped the gun" with their headline.
A .4 percent expansion in just one quarter is probably not enough to declare the recession over.

But, I guess journalists want to deliver some good news, for a change.

How Boeing survived

Most people in the world know of Boeing Aircraft.

My father worked for Boeing for 35 years, taking an early retirement package at the age of 55. My parents met there during WWII. My Mother was an inspector (she was always quick to point this out) - she was not Rosie the riveter, but an inspector with a stamp.

Boeing commissioned a book on the history of their company. Every employee of Boeing, as well as every retiree received a copy. Therefore, copies can be found all around this town in the various 2nd hand stores.

I had read it when it first came out, but my oldest brother had not. He read it over the last couple of weeks, as we had all gathered to be with our Mom.

Here are some comments he made as to how Boeing survived.

The Story of Boeing and Its People Legend & Legacy

On page 334, Boeing found itself over $1 BILLION in debt in 1970 as a result of cost overruns on production of airplanes, and reduced airplane orders. Boeing went to its lenders to try to get more money and was turned down.

Here is what Boeing did.

1. It laid off 5,000 people in single week.
2. engineers and scientists were reduced from 15,000 to 8,000
3. office employees were reduced from 24,000 to 9,000
4. hourly workers went from 45,000 to 15,000
5. management was reduced from 12,700 to 5,400
6. surviving officers had their salaries reduced by as much as 25 percent

Boeing's total payroll had shrunk from 101,000 to 38,000 in the Seattle area alone.

There were times when Boeing was moving large machinery off their factory floor, I guess someone was buying it, or taking it as collateral, and with this money Boeing was making payroll.

The shipping company executives would be well served to read this book. This company was run by people who grew up during the U.S. depression, and knew how to stretch a dollar.

I am afraid that has become a lost art.

On a personal matter.....

I will probably take some time off from writing this blog.

My Mother died yesterday. I had been her primary care giver (24/7) for the last 2 1/2 years, after her first stroke.

One reason I started this blog was to keep my mind active. Although I really enjoy writing this blog, I may or may not continue it.

I suspect I will only take a week off, so please check back in.

Hapag- Lloyd announces pay cuts

My question is, what took them so long?

They were told back on Oct. 1 they needed to do this.

It's almost a month later.


From Lloyd's List

However, Hapag-Lloyd indicated today that its hand has effectively been forced, as taking an axe to payroll and other costs is a condition of the €1.2bn ($1.8bn) in loan guarantees it is getting from the German government.

Today? I read this in the press on Oct. 1. Did they wait until they got the official demand via snail mail or something? Did they think the German government wouldn't notice?

These are the cuts. Very reasonable, in my opinion. I went through the same thing back in the 80's when there was a recession. Does anyone remember there was a recession in the 80's?

HAPAG-LLOYD has announced internally an across the board pay cut of at least 5% for all staff worldwide including seafarers, with senior employees facing a 20% reduction in salary, the company has confirmed.
........................
In Germany, Hapag-Lloyd staff have already agreed to a scheme, which will see salaries cut by 5% for those employed under the collective wage agreement and 7.5%-plus for those on individual contracts.

A spokesman said: “We all have to contribute. It is 20% for the board, 15% for the managing directors, 10% for senior directors, 7.5% for what we call level four, which is middle management, and 5% for the rest of the staff.”

It has already been announced that there will be no end of year bonus this year, and that pay will be frozen in 2010.

click here for link

CMA CGM chairman living in a dream world

Creditors want the CMA CGM chairman out, before they agree to refinancing.

From Bloomberg News

Oct. 29 (Bloomberg) -- CMA CGM SA creditors have told the French container-shipping operator to replace founding Chief Executive Officer Jacques Saade before they restructure its $5.6 billion debt, three people with knowledge of the matter said.

And this was the response by the chairman

In an e-mailed statement to Bloomberg News, Saade said CMA “needs the expertise of its entire management team” to recover from the economic crisis.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” he said, adding that the company expects a return to breakeven “in coming months.”

What's his definition of "coming months". I would like to see those calculations.

Must be that French math.

Maybe something got lost in the translation.

click here for link to article

German Ship Owners looking for government monies

Things are bad for ship owners. They are in more of a difficult position than even containership operators. Containership operators can at least get some cash flow if they run their ships. Ship owners (who only charter out their ships), must pay to have ships idled.


From The Journal of Commerce

German container shipowners, who control a third of the world box ship fleet, are facing increasing financial difficulties and the threat of bankruptcy as charter rates test fresh lows with the end of the peak shipping season.

Seventy percent of laid-up charter vessels are owned by Germans, led by Claus Peter Offen, which has laid up 17 vessels of 37,700 20-foot equivalent units, according to Alphaliner, the Paris-based consultancy.

Around 10.7 percent of the world container fleet is currently laid-up with the majority owned by charter owners as ocean carriers are returning leased tonnage when hire periods expire in order to keep their own vessels employed amid sharply lower cargo volumes.
..................
The depth of the crisis was highlighted by confirmation that Peter Döhle Schiffahrts, one of the world's largest charter shipowners, has applied for loans from a government fund set up to help companies survive the global economic downturn.

Claus Peter Offen also is reported to have applied to the fund for up to $150 million.

Maersk to issue bonds

Would you buy these bonds?

Maersk bond issue to raise €750m

Richard Meade - Friday 23 October 2009

SHIPPING giant AP Moller-Maersk has entered the international capital markets for the first time with a €750m ($1.1bn) bond sale.

The shipping and energy conglomerate, which currently faces an expected full year loss of $2bn and has $19.3bn worth of debt on its books, intends to use the proceeds to refinance its bank debt as well as for “general corporate purposes”

.

Apparently there are those who think this is a good investment.

From Lloyd's List

The five year euro bond issue, which was six and a half times oversubscribed and generated significant demand from investors all over Europe, was the company’s first foray into bond sales.

The move represented a significant shift away from its traditional reliance on bank debt and a bid for independence from banks at a time of potential acquisitions.

“What we have said is that due to the situation in the financial markets we feel it is prudent to broaden our sources of funds,” Maersk’s head of group finance and risk management Jan Kjaervik told Lloyd’s List.

“Historically we have tapped the banks, ship finance institutions and the export credit agencies, but it is prudent to take proactive action,” he said.

With excessive bank debt now a major concern for many analysts the move was welcomed by the market as a positive step forward for Maersk and an opportunity for potential acquisitions.

“Corporate bonds are increasingly being used as an additional funding source for large European corporates, and in the light of that development it is only natural that we look at the funding opportunities in the European capital markets” said Mr Kjærvik.

“If you look at a corporate of our size with a similar debt portfolio, most are already in the capital markets, so from that point of view we have been slower than most,” he continued.

Maersk officials also pointed out that the company’s strategy of diversifying its finances away from over reliance on the banks was based on the realisation that despite continuing good relationships, the traditional finance institutions were increasingly unavailable.

The decision to enter the capital markets has been expected ever since Maersk unveiled its plans to raise nearly $1.8bn through a share offering in September.

While raising the share sale, Maersk was quite clear in that its aim was to “preserve financial flexibility in line with our traditionally conservative capital structure and to provide additional flexibility to pursue strategic opportunities”.

The euro bond was priced to yield 236.8 basis points more than German government debt, according to Bloomberg data, offering investors a coupon of 4.8%. Maersk is understood to have received orders totalling over €5bn for the securities.

Given the success of the issue the sale is unlikely to be last trip Maersk makes to the markets.

“I think this will depend on the terms and conditions in the future in the capital markets, but if it is worth doing you will probably find us doing it again in the future,” said Mr Kjaervik.

The bonds are expected to be dual listed on NASDAQ OMX stock exchange in Copenhagen and the Luxembourg Stock Exchange. The Bonds were placed by Danske Bank, HSBC, ING, JP Morgan Securities Nordea.

What does the future hold?

A comment made on this blog

And after a year or two, what is it that is going to end the recession?
Increased worldwide production? Increased world trade of what kind of goods?
With the real or approaching depletion of most raw materials what is the "new economy" going to be built on?

In my humble opinion, the future is China.

As much as we hate to admit it, they are the future super power.

They have a controlled economy. They are investing in solar power, amongst other things.

Their population is huge.

This recession will end somewhat as it did in the 80's. New technology.

Solar power. Hybrid cars.

The U.S. consumerism will not be the driving factor.

But, that is just my opinion.

Recovery in 2012 for container carriers?

That's what Mitsui OSK is predicting.

From Bloomberg News

Oct. 23 (Bloomberg) -- Mitsui O.S.K. Lines Ltd., the world’s largest shipping line by fleet size, said its container unit may be unprofitable for two more years as rising global capacity and slowing world trade damps rates.

The unit will make a loss in the year ending March 2011, Executive Vice President Masakazu Yakushiji said in an interview in Tokyo yesterday. It may be able to return to profit the following year if rates rise, he added.

Back in January, I predicted the U.S. would be in a recession until 2011.

I think that is still fairly accurate, and apparently the same holds true
for container carriers.

I liked this quote

Shipping lines can only “lose less by doing less,” said Johnson Leung, a Hong Kong-based analyst at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund group. “Oversupply is not something you can solve in a year.”

click here for link to article

The BBC Box returns to the U.K.

"The BBC Box", NYKU8210506 ends it's journey.

From The BBC

The Box has now arrived back in Southampton, just over a year after it left last September.

Since then, the global economy stopped growing for the first time in 60 years, with poor countries particularly severely hit.

Global trade sank like a stone, for periods at least taking our Box with it.

From April until July it sat forlornly (if containers can be forlorn) in Yokohama.

It was just one tiny part of the statistic that the container business made a collective profit of £3bn in 2008, but is estimated to have lost a cool £20bn in 2009.

click here for link to article

CMA CMG delays ship deliveries

CMA CGM is delaying ship deliveries

From the Journal of Commerce

CMA CGM wants to delay the delivery of 49 ships it has ordered and is scheduled to receive within the next three years, its CEO Rodolphe Saade said Monday.

"Our first objective is to obtain the delay of the delivery of those ships" and an agreement on a payment schedule, Saade said in an interview in Les Echos, according to Agence France Presse.

I don't know why they aren't just trying to cancel them.

After all, there are so many containerships available sitting idle, one would think they should just bite the bullet and cancel the orders.

Of course, the shipyards have not been very easy to deal with, and who knows what it will cost to cancel the orders.

The heavily-indebted French company now owes $5.6 billion. A steering committee including banks and financial institutions is drafting a plan to return the company to profitability next year and secure its long-term future.

The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012. As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of more than 1 billion 20-foot equivalent units.

For anyone holding stock in Global Ship Lease, beware.

Tracking the BBC Box

The BBC Box is onboard NYK Virgo, Voyage 14. It left Singapore on Oct. 5th, and is due in Southampton, UK, Oct. 21st.

It started out in Laem Chabang, Thailand, on Sept. 29th, on the NYK PHOENIX/045, and was transshipped in Singapore.

It is carrying canned dog food (or, as the Brits say, tinned dog food)

click here for link to NYK tracking site.

Input the container number, prefix and number (no spaces).

NYKU8210506

Court Ruling on Rule B attachments

Many shipping companies have had funds held in the U.S. due to a bizarre law called Rule B attachments.

This allowed funds to be attached in the U.S. when they passed through the banking system in the U.S.

As most international shipping is done in U.S. dollars, there was almost always the chance that funds would flow through the U.S.

Now, some relief from these attachments.

From Fairplay

A US appeals court has issued a landmark ruling that electronic funds transfers cannot be attached through maritime law’s Rule B.

In 2002, the same court ruled in Winter Storm v. TPI that EFTs could be attached. Over the past year, the shipping crisis has led to a flood of Rule B EFT attachments in New York, with garnished funds used as security for London arbitration.

In Friday's ruling on the case of Shipping Corporation of India v. Jaldhi Overseas, the 2nd Circuit conceded that it erred in Winter Storm. It now believes EFTs are not attachable properties, while also citing the extreme pressures on the New York banking system caused by maritime EFT attachments.

The Clearing House Association estimated that between 1 October 2008 and 31 January 2009, maritime claimants filed 962 lawsuits seeking to attach $1.35Bn. Such lawsuits comprised a third of all suits filed in the Southern District Court of New York.

It is believed that over $100M in funds previously attached as arbitration security may now have to be relinquished. This could have several effects: first, it could derail arbitrations in London that were only proceeding because EFTs had been attached; second, it could lead to more traditional ship arrests; and third, it could hurt the bottom lines of Manhattan maritime law firms specialising in litigation.

Containership seized by pirates

This is probably the first containership seized by the Somali Pirates since the incident with the Maersk Alabama.

But, it's not a very big containership. 1500 TEUS.
Well, I guess that's not too small. Of course, these days most containerships are over 5000 TEUS.

From The BBC.

The MV Kota Wajar was headed to the Kenyan port of Mombasa when it was commandeered 300 nautical miles north of Seychelles.

Twenty one crew are on board the 24,637-tonne container ship, said an official from the East African Seafarers' Assistance Programme.

At least five vessels are now in the hands of Somali pirates, officials say.

Infighting amongst European carriers

This is quite amusing. Maersk thinks the other European carriers (Hapag-Lloyd and CMA CGM) should be forced to reduce their capacity, because they are receiving government monies.

Well, that's a nice way to try and kill off your competition.

But, what if they just found a way to reduce their expenses, without reducing capacity?
Wouldn't that be a better idea for the monies given to them by the government?
Oh, but then, they might survive?
And, Maersk doesn't want that.
Anyway, here's the article from Lloyd's List.
Judge for yourself.

Danish owners call for CMA CGM and Hapag Lloyd capacity cuts

Richard Meade - Wednesday 14 October 2009

HAPAG Lloyd and CMA CGM should be forced to cut their fleet capacity in return for government financial support, Danish shipowners have told the European Commission.

The suggestion to directly link state support with fleet reductions was put forward during a meeting between Brussels competition officials and the Danish Shipowners’ Association last week.

According to association executive vice president Jan Fritz Hansen, proposed moves by France and Germany to support CMA CGM and Hapag Lloyd risk creating significant market distortions.

“What we said to the commission was that they need to look carefully at these plans,” Mr Hansen told Lloyd’s List. “We want to be the early birds here saying that this should not turn into a subsidy race.”

The Danish Shipowners’ Association, which counts AP Moller-Maersk as its largest member, raised specific concerns during the meeting regarding Germany’s approval of a €1.2bn ($1.8bn) package for Hamburg-based Hapag-Lloyd and a potential French government equity stake in Marseille-based CMA CGM.

While the meeting was said to be informal and no official proposals were put forward, the commission is understood to have taken the association’s comments “on board”.

“If you get that kind of assistance we suggest that it is only fair that you participate in the solution,” Mr Hansen said. “If you get guarantees, or subsidies or if the government buys into the company there should be strings attached. One of these strings should be that the company has to adjust its capacity.”

According to Mr Hansen internal discussions within the association had considered whether a legal case to stop the Hapag Lloyd aid could be launched, however the plans were dismissed because a challenge would be unlikely to solve any wider problems.

Plans to enforce fleet reductions on any owners receiving state support, however, would helpcompanies avoid bankruptcy wile simultaneously addressing the urgent concerns of fleet overcapacity, he said.

“It is not good that one year into the crisis these companies are asking for subsidies,” said Mr Hansen. “What are they going to be asking for in two years time? From our point of view it is worrying.”

Despite forecasting losses of $2bn this year, Denmark’s biggest shipowner AP Moller-Maersk has repeatedly shunned any suggestion that it would look for government support. As Mr Hansen pointed out there is also little chance that the Danish government would be financial able or willing to offer it.

“We are a small country but a big shipping nation and our state finances could never afford to subsidise the industry. For France and Germany as big countries with smaller shipping industries, perhaps it is easier for them,” Mr Hansen said.

“We could never compete on state aid. We want to compete on fair, commercial free competition.”

KG investors looking for someone to blame

From Fairplay

GERMAN KG houses may be facing a flood of lawsuits from angry investors as more one-ship companies head into restructuring. Investors in more than 100 ships have been asked to return payouts or put up additional equity to prevent insolvency this year.

However, many of them have rejected the capital calls, insisting that the plight of their ships has not primarily been caused by bad markets but by bad management and fraudulent investment concepts.

Capital markets lawyer Oliver Rosowski of Bremen law firm Hahn told Fairplay that his company is now representing clients in disputes with more than 40 ship KG funds, and numbers are rising by the day.

The firm is still seeking to settle the cases out of court and in the most cost-efficient way, but lawsuits are bound to become more common as the crisis drags on.

“With no significant improvement in charter rates on the horizon, the number of KG insolvencies will soar to hundreds next year,” Rosowski said. Claims from investors are usually brought against financial intermediaries who are marketing KG shares, and the KG houses that are structuring the funds.

The BBC Box is on it's way to the UK

From The BBC


The Box has left Thailand on its final journey back to Southampton, due to arrive 21 October. Current cargo is tinned dogfood

Zim's problem

Zim's main problem is, it needs $1 Billion dollars between 2009 and 2013.

This is what it plans to do, to get the money.

From The Journal of Commerce.

Israel Corp., which is controlled by the Ofer family, plans to inject $60 million into Zim and reduce by $150 million charter payments for 19 container ships owned by family firms.

Israel Corp. plans to inject a total of $350 million into Zim, the world's seventeenth largest ocean carrier.

Zim's recovery plan also involves cancelling and delaying box ship orders, returning vessels when their charters expire and shrinking its network and payroll.

I'm not really sure that's going to get them the billion they need.

The rescue meeting is set for Oct. 28. The other creditors/owners will get their say at that time, I guess.

I don't know why a lot of these plans haven't already been executed, like the shrinking of payroll and network. Plus, they should have already returned chartered tonnage, and should have already reduced the charter hires.

Someone has been asleep at the wheel.

How long is this downturn?

There has been quite a bit in the news the last week about the downturn. Container carriers in the Pacific to U.S. trade are already looking for an $800 per FEU increase for next year.

Everyone realizes it is really bad. I don't think too many thought it would be this bad for this long.

Except me, of course.

The shipyards are having trouble accepting the idea of cancellations.

But, they need to realize this is what it has come to.

Many of the European yards are already folding. The Asian yards will have to start marking concessions, or end up with ships bought by bankrupt companies.

The "peak season" is over. At least for container carriers.

The next 6 months will be very interesting.

Although, as I have said before, we have probably hit bottom. But, there won't be a big upturn to the "boom boom" of the last decade.

It's going to be a bit bloody.

Cheers.

French captures Somali Pirates

From Bloomberg News

Oct. 7 (Bloomberg) -- The French navy captured five Somali pirates who attacked a naval tanker in the Indian Ocean, the French Defense Ministry said.

The Somme was heading toward a scheduled refueling with ships of the European Union Atalanta anti-piracy mission at 1 a.m. local time today, when two skiffs approached the vessel, Captain Christophe Prazuck, the ministry spokesman, told reporters.

Shots were fired at the French ship, which was about 250 nautical miles from the Somali coast, Prazuck said. The tanker then turned to engage the boats, prompting their crews to attempt to escape, he said. No one was hurt in the incident.

Maersk Exec with short memory

I found this quote in today's Journal of Commerce rather amusing.

(Maersk Executive) Nicolaisen questioned whether all carriers should have global ambitions. “Does it really make sense,” he said, “for everybody trying to become a global player with a small presence in all trade lanes with a very small market share"?

I have worked in at least 3 trade lanes where Maersk was the newcomer. They were determined to be a "global carrier", and horned their way into new tradelanes, trashing the rates as they came. Doing stupid things like pricing 40ft reefers the same as 20ft reefers, only because they didn't have 20ft reefers.

Maybe Nicolaisen was still in short pants when all this went on. Maersk has a habit of changing their trade lane managers every few years, so you always end up with a new one who can say "I wasn't responsible for those stupid decisions".

And this comment is also a complete reversal of Maersk policy, who wanted to offer "totally integrated" transportation services.

Ocean carriers, he said, must focus on their core operations. He said most inland container movements are “probably best left to domestic providers who can mix and match different modes of transportation and know their own markets.”

Oh well.

They have to say something.

Maersk cost cutting includes European officers

Maersk has ships laid up, which also means their crews have been off work.

Now, they will be let go.

From Fairplay

MAERSK’S UK operation will cut 113 officer jobs in the light of vessel lay-ups, the company told Fairplay today.

Lay-ups of 11 UK-flagged Maersk container ships meant the company was carrying “surplus officers for quite a number of months,” said Caroline Wolton, a Maersk Company representative in London.

Maersk Company – part of the AP Møller-Maersk Group – has met Nautilus, the maritime union representing the employees, to prepare a redundancy package, Wolton added.

Volunteers for redundancy will be taken from the pool of officers employed by Maersk Offshore in Guernsey and Bermuda.

And... they won't be taking on any new European crew, instead hiring less expensive crews from Asia.

Also, Maersk Company will no longer automatically employ cadets graduating from its training schemes because “it would be inappropriate to be taking on new employees at this time”, the company said in a release. There are about 560 British officers currently employed by Maersk.

This latest round of redundancies follows APM’s announcement yesterday that its container division Maersk Line will replace 170 Danish seafarers with Asians to save costs.

Hapag-Lloyd still on track for monies from German government

From Bloomberg News

Oct. 2 (Bloomberg) -- Hapag-Lloyd AG was cleared to receive German government loan guarantees as part of a 1.2 billion-euro ($1.7 billion) rescue package to help the country’s biggest container shipper counter the recession.

Federal aid was approved today by a panel of government officials led by the Berlin-based Economy Ministry, a ministry official said. The deal will be formally signed on Oct. 5 after the government answers residual questions raised by parliament’s budget committee about the aid package, the official said.

Hapag-Lloyd must cut costs

The German government is dictating to Hapag-Lloyd that they must drastically cut costs. $1.5 billion. It's a pity they haven't figured that out by now. Just as Obama had to fire some folks at GM, perhaps Merkel will need to do the same at Hapag-Lloyd.

No wonder Kuehne has been so unhappy with the management at Hapag-Lloyd.

From The Journal of Commerce

The shipping line, Germany’s biggest container fleet, filed for aid on Aug. 14. Hapag was advised by the federal government to modify the criteria for gaining aid to include providing more funds from its owners and starting a cost-cutting program to save as much as $1.5 billion.

Chancellor Angela Merkel’s coalition has tied help for banks tapping the country’s $699 billion bank rescue fund to restrictions on top executives’ pay and temporary restrictions on dividends, Bloomberg reported.

Annual pay for board members that exceeds $727,000 is “not appropriate”, according to an ordinance that followed the legislation.

And, what about all those ships on order? Huh?

These folks are going to end up bankrupt, just like GM.

UPDATE
From Bloomberg News

Oct. 1 (Bloomberg) -- German lawmakers suggested to the government to tie aid for shipping company Hapag-Lloyd AG to demands on the owners including TUI AG.

The government should explore if state guarantees for Hapag-Lloyd can be tied to demands such as a cap on executive pay and a dividend ban, according to a draft motion from today. The proposal will probably be decided today and brought in by the Social Democrats and the Christian Democrats, the two largest parties in the Bundestag.

Too many new, big ships

CargonewsAsia.com has a very good article, or perhaps it's a commentary, stating the container carriers were just playing "follow the leader" when deciding to order new, much larger ships.

A disastrous game of follow-the-leader has pitched the container shipping business into a deep hole, says Sea Freight Correspondent Paul Richardson

Right now, container shipping is surrounded by doom and gloom and the chilling thought that as winter in the northern hemisphere approaches, there is little in the business to encourage even the most optimistic of optimists.
The whole idea of a market recovery underway seems as far from the truth now as it was six months ago, with a belief in shipping circles that the downturn still has several years to run.
"There is no doubt that the industry is in a mess," was a comment made over lunch by a prominent shipping executive in a plush London hotel last week. It seemed an understatement, but the executive wasn't finished. "We are like lemmings in this business, all intent in rushing headlong into a drowning sea."

I can't help but wonder, why was the lunch in a plush hotel? Shouldn't these guys be eating at the local pub?

Apparently, they still don't "get it".

click here for complete article

Aid for Hapag-Lloyd delayed

From Reuters

BERLIN, Sept 30 (Reuters) - The German parliament's budget committee is delaying talks on state aid for container shipping company Hapag-Lloyd due to concerns from all parliamentary parties, sources familiar with the matter said on Wednesday.

It's all a big mystery.

Perhaps there is some concern this is not money well invested by the government.

I think there is reason to be concerned. Same as we have concerns in the U.S. about various bail-outs performed by our government.

Update 11:43 PM
Bloomberg has a more detailed article regarding the problem.
Apparently there is some concern exactly how the money will be spent. The term which was used was "opaque", which is of course, the opposite of "transparent", a term often used.

The petition for aid is “raises serious questions on where taxpayers’ money will be spent, and we need answers quick,” Juergen Koppelin, the Free Democrats’ budget spokesman, told reporters after the meeting. “Hapag has commissioned ships to be built in South Korea, there are plans to construct new buildings, and the list goes on.”

Yes, absolutely. Why do they still have those orders for new ships?

Just yesterday, CMA CGM figured out maybe they should be cancelling their orders - of course, this is because they have run out of cash.

Why should Hapag-Lloyd not be in the same position? Just because the government will give them the money?

click here for Bloomberg article

Wake-up call for CMA CGM

I guess CMA CGM has finally figured out things aren't getting better any time soon.

Pity is, they only figured this out when they have almost run out of cash.

Now, they will ask creditors for a moratorium on debt, and consider canceling and/or delaying ship orders. They better do more than just consider.

Note to the Management of CMA CGM -
Wake up! If you don't cancel the ship orders, start cutting costs like crazy, you will be filing for bankruptcy reorganization.

From the Journal of Commerce

Carrier unable to meet payments on $5 billion debt

CMA CGM reached agreement to establish a committee of French, European and international banks that will help it restructure its troubled balance sheet, the company said Tuesday.

The French carrier, the world’s third-largest container line by capacity, met with its creditors in Paris on Sept. 25 to ask for a moratorium on its debt. The group of banks, which includes major financial institutions from Asia and the Republic of Korea, discussed measures that CMA CGM said will ensure its “continuing development.”

The shipping line, which is owned by Jacques Saade and his family, said the bank committee will propose measures to resolve the carrier’s short and medium term financing requirements and strengthen its capital structure.
....................
The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012 and accumulated a debt of $5 billion on which it is no longer able to meet payments, according to the French journalists’ Web site econostrum.info, which said CMA CGM is asking its creditors to freeze the repayments for one year.

As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of 1,024 million 20-foot equivalent units.

click here for link

TUI Travel pays back loans early to TUI parent

TUI will need cash to shore up Hapag-Lloyd, despite the expected bail out from the government.

Apparently, they will get some of this cash quite soon from their other company, TUI Travel.

From Bloomberg News

Sept. 29 (Bloomberg) -- TUI Travel Plc, Europe’s largest tour operator, said it plans to sell 300 million pounds ($477 million) of convertible bonds to start repayment of a loan from controlling shareholder TUI AG and fund acquisitions.

The U.K. holiday company also obtained a new 140 million- pound loan facility from a syndicate of five banks and will repay 92 million pounds of the 900 million pounds it owes TUI tomorrow, Crawley, England-based TUI Travel said today.
.........................
“These actions remove the immediate refinancing risk, but they crystallize an increased financing cost and we will need to adjust forecasts to reflect this,” Evolution analyst Ivor Jones wrote in a note today. He has a “sell” rating on the stock.

TUI Travel fell less than 1 percent in London trading, while shares of parent company TUI gained as much as 8.5 percent in Frankfurt. TUI, which owns a 51 percent stake in the tour operator, needs funding to support the unprofitable Hapag-Lloyd container line, in which it holds the biggest stake.

One smart move on the part of TUI Travel is to cancel orders for new planes.

The tour operator said today it has canceled 10 of the 23 787 Dreamliner aircraft ordered from Boeing Co., while adding no-obligation purchase rights to buy a further 13 of the planes.

Container carriers need to be doing this. They just keep thinking by the time the new ships come out of the yard, business will have picked up.
They need to just keep their old ships running, and maybe try to negotiate a similar no-obligation purchase with shipyards.

I realize this is a new idea for shipyards. Boeing has been through the ups and downs many times, so by now they know how to handle these drops.

Shipyards will need to learn how to handle the downturn. Most of the ones around today haven't been through such lean years.

Hapag-Lloyd on track for government monies

Looks like things are falling in place for Hapag-Lloyd to get some money from the government.

They sure will need it.

From The Wall Street Journal (who picked this up from Dow Jones)

FRANKFURT (Dow Jones)--The German government's steering committee Monday signaled there will likely be a positive vote on state-backed guarantees for struggling shipping company Hapag-Lloyd AG (GD-HPL) of a total of EUR1.2 billion.

The German budget committee is still set to discuss the matter Wednesday.

Hapag-Lloyd is set to get 90% of the guarantees from the government's special Germany fund, the German economics ministry said in a statement.

The German federal and Hamburg governments will each provide half of the guarantees.

Hapag-Lloyd, which is 43.3% owned by TUI AG (TUI1.XE) and 56.7% by consortium Albert Ballin GmbH & Co. KG, applied for the state-backed guarantees in August.

The company's owners Monday declined to comment on the subject in detail.

The state guarantees must be examined by the European Union Commission, which said two weeks ago it is "in informal contact" with Germany about the issue.

-By Frankfurt Bureau, Dow Jones Newswires; +49 69 29725 500; djnews.frankfurt@dowjones.com

Offer to Zim bondholders

From Israeli newspaper Globes

Sep 09 16:57

The shipping company has deferred $2 billion in payments to shipbuilders.

Israel Corporation (TASE: ILCO) told bondholders of wholly-owned subsidiary Zim Integrated Shipping Services Ltd. that it is not asking them to forego part of the debt, but only to delay payments on the bonds. Israel Corp. added that it transferred $100 million to Zim during August, and that it will transfer an additional $250 million as part of a Zim recovery plan, if the bondholders approve the debt settlement next month.

Israel Corp. will include in the Zim recovery plan a $150 million discount over four years on the leasing fees that Zim pays Ofer Shipping Holdings Ltd.

I don't know what these payments from Zim to Ofer are for, but I suspect it's a better deal for Ofer than for Zim.

click here for link to article

Mitsui OSK share price falls

From Bloomberg

Sept. 28 (Bloomberg) -- Mitsui O.S.K. Lines Ltd., operator of the world’s largest merchant fleet, fell the most in five months in Tokyo trading after doubling its first-half operating loss forecast.

The company dropped 5.4 percent to 521 yen at the close. Nippon Yusen K.K., Japan’s largest shipping line by sales, fell 3.3 percent and third-ranked Kawasaki Kisen Kaisha Ltd. slumped 7.3 percent.

Mitsui expects an operating loss of 13 billion yen ($146 million) in the six months ended September, it said after the market closed on Sept. 25. The company widened its loss forecast after higher-than-expected fuel and container-terminal costs outweighed a rebound in freight rates.

I guess a lot of the carriers didn't think it would really get this bad when making their projections for the first half of 2009.

It's not going to be any better for the 2nd half of 2009, and perhaps even 2010.

It will stabilize, but not get better.

Did Israel and Russia have secret meeting?

When looking for information on the Arctic Sea saga, I ran across an article claiming that on Sept. 10, 2009, the Prime Minister of Israel made a secret trip to Russia.

From Russia Today

10 September, 2009, 13:16

Russia’s Kommersant business daily has shared insider information from an unnamed source in the Kremlin that Israeli PM Benjamin Netanyahu visited Moscow incognito to talk on Russia’s arms contracts with Iran and Syria.

....several media sources referred to a high-ranking official of the Israeli government who claimed that Netanyahu really did visit Moscow. The source, though, refused to tell whom exactly Israeli PM met in Russia.

Israeli media was quick to expose that the Israeli PM was on a secret mission to Moscow to talk about Russia’s arms contracts with Iran and Syria or, more specifically, the possible delivery of air defense S-300 missile infrastructure to Iran.

The recent saga of the Arctic Sea bulk carrier, a vessel with a Russian crew, hijacked in the Baltic Sea, has sparked a conspiracy theory about Russia covertly delivering S-300 missile infrastructure to Iran.

And then, two weeks later Iran (From the New York Times)

.....sends a cryptic letter describing a small “pilot” nuclear facility that the country had never before declared.

The Americans were surprised by the letter, but they were angry about what it did not say. American intelligence had come across the hidden tunnel complex years earlier, and the advisers believed the situation was far more ominous than the Iranians were letting on.

The timing is such that I really think the two must be somehow linked.

Vessel Arctic Sea still held by Russians

The Arctic Sea saga is not over. It hasn't been in the press much, but Tradewinds has an update today.

Russian authorities had apparently planned to hand the ship back to its owner in Las Palmas last week but have not done so. The Spanish port’s captain has also refused permission for the ship to berth saying the presence of Russian military personnel onboard compromised its existence as a merchant vessel.

The Solchart representative who had flown to Las Palmas with a view to once again assuming control of the ship arrived back in Helsinki on Thursday night after a second fruitless journey within the last few weeks.

The developments led Matveev to cry foul over the tactics of the Russian Investigative Committee (RIC) which has been conducting an investigation into the ship’s true cargo and events surrounding its apparent hijacking.

“Russia has stolen the ship from us and stolen the cargo from the timber industry.” The cargo of sawn timber was due to be discharged at an Algerian port in early August.

“And now they are towing it again to nowhere,” said Matveev who has been tracking the ship and contends it is on the move northwards from the Canary Islands.

Matveev said he has asked the RIC why they continue to occupy the ship and described their response as laughable.

“They told me they are there to secure the ship again from further hijackings from Spain and Africa.

“I told them we have seven other ships; would you like to secure them as well?” he mocked.

The Arctic Sea's series of misadventures and the heavy-handed nature of Russia’s ‘rescue’ mission have sparked theories that it may in fact have been ferrying a weapons cargo, possibly to Iran or Syria.

Eight suspects apparently detained onboard have been charged in Moscow with piracy and armed hijacking.

There is something really fishy about this whole thing, and I would not be surprised if the recent decree against Iran is somehow mixed up in all this.

I hope Tom Clancy is tracking this story, as if someone can get to the true story behind this, it would be a good read.

click here for link to article

Is CMA CGM looking for a bailout?

Could be.

From The Journal of Commerce

French ocean carrier CMA CGM is meeting with creditor banks and French finance ministry officials in Paris Sept. 25 to discuss its financial situation.

The talks will focus on how CMA CGM can tap the government’s strategic investment fund which aims to help strategically important French companies through the global economic downturn, according to French press reports.

CMA CGM, the world’s third largest ocean carrier, declined to confirm or deny the reports.

I don't blame them for trying to tap some of the government monies. They will need to raise some cash to survive the next few years, so why not try to get it from the government?

Of course, they really need to be cutting costs and getting efficient, so they can compete with all the asian carriers, who will dominate the industry over the next decade.

But, looks as if they are trying to hold the "Old Europe" together.

Earlier this month, CMA CGM founder and Chairman Jacques Saade urged European governments and banks to act to ensure Europe’s top carriers Maersk, MSC and CMA CGM survive container shipping’s deepest slump.

“I call on the competent authorities, banks and public bodies to protect the three big European maritime companies and ensure the survival of the maritime sector in Europe,” Saade said at a meeting of Medef, the French employers’ federation.

The French ship-owners association has lobbied the government to establish a $1.8 billion fund to help carriers meet banks’ demands for extra collateral to cover the fall in value of ships on order.

What they need to do is bite the bullet, and just cancel the orders for new ships.

Should shipyards quit building ships?

I find it a little strange that shipyards continue to build ships.

I live in the "air capital of the world", and all of the aircraft companies have slowed their production. They have laid off workers, and are shutting down the factories for a week, whenever there is a holiday. Some are considering shutting down from Thanksgiving (late Nov. in the U.S.) until after New Years (Jan. 1).
Why should ship yards be any different. Don't they get it? The demand is just not there.

Apparently not. From Lloyd's List

Keith Wallis - Wednesday 23 September 2009

Reinhard Lüken

EUROPEAN shipyards will start to run out of work in 2011 if the newbuildng ordering drought continues, a top executive at the Community of European Shipyards’ Associations warned today.
Cesa secretary general Dr Reinhard Lüken said the backlog of orders at European yards was fundamentally healthy compared with the rest of the world.

I don't think so.

Wake up and smell the coffee.