Samsung won't let CSAV renegotiate ship purchase

Samsung Heavy Industries, which is a shipbuilder, refuses to let CSAV cancel some orders for new ships they placed 2 years ago.

CSAV is in pretty severe financial trouble. They were going to get some concessions from German shipowners with whom they have charters, but now that Samsung is not budging, who knows.

You would think Samsung would look at what happened today with Chrysler. They filed for bankruptcy protection because some of the hedge funds who held their bonds wanted too much money.

I presume Chile (where CSAV is based) offers a company bankruptcy reorganization protection, as we do in the U.S.

If so, I think that is the only hope CSAV has to get out of this mess. Unless someone wants to buy them, which I doubt.

Here's more info from Lloyds List

CSAV in crisis as Samsung rebuffs rescue efforts

Patrick Hagen and Janet Porter - Thursday 30 April 2009

THE survival of embattled Chilean shipping group CSAV could rest with South Korean shipbuilder Samsung Heavy Industries after German owners attending crisis talks in Hamburg in April attached conditions to a rescue plan.

Hamburg Süd to join Grand Alliance

A press release received from Hamburg Süd basically says they are pulling their ships out of the Europe to U.S. trade and will buy slots from other carriers in the Grand Alliance (a group of carriers operating a joint service).

It also gives information regarding a revamping of the service between Europe and South America, which I am quoting, should anyone be interested.

In view of rapidly deteriorating market conditions on the
Transatlantic, Hamburg Süd has decided to indefinitely suspend its
announced standalone service and replace it by participating in the
Atlantic Express Service (ATX) of the Grand Alliance.

Initially chartering slots, Hamburg Süd will be providing a vessel to
the service at a later stage.

The agreement is still subject to FMC approval which is expected to
be received by mid-June at which time the Hamburg Süd stand alone
service will be phased out while the new arrangement will be
implemented.

Hamburg Süd indicated that their decision was triggered by fast
declining volume and revenue levels in the Transatlantic which could
no longer justify adding further tonnage to an already greatly
overtonnaged trade. The shipping group hopes that the capacity
reduction will contribute to improve the balance of supply and demand
in the trade. At the same time, the cooperation with the Grand
Alliance provides Hamburg Süd's customer base with a cost
competitive, proven high quality product.

North Europe - South America East Coast (ECSA)
In the North Europe-ECSA trade, Hapag-Lloyd and Hamburg Süd have
decided to continue their cooperation by operating two complementary
weekly services on a fixed day frequency. Rotations are reconfirmed
to be as follows:

Sling 1: Rotterdam - Tilbury - Hamburg - Antwerp - Le Havre - Santos
- Buenos Aires - Montevideo - Rio Grande - Santos - Sepetiba -
Rotterdam

Sling 2: Rotterdam - Hamburg - Antwerp - Le Havre - Sepetiba -
Paranagua - Navegantes - Santos - Salavador - Rotterdam

The complementation of both slings provides for the most
comprehensive port coverage in the trade.

Maersk will not arm ships

I find this rather surprising, considering the Maersk Alambama espisode.

DANISH shipping giant AP Moller-Maersk is opposed to weapons on board its ships that could be used to fend off piracy attacks.

Have we hit bottom?

Danaos chief detects first signs that worst is over for box trades

PIRAEUS-based containership owner Danaos Corp has said it believes the worst of the container shipping crisis may have passed, although it admitted its perception of a possible nascent recovery “remains to be tested” and might not be evident in new chartering activity for months.

Personally, I find this hard to believe.

I am sure there has been an uptick lately since we are over the Chinese New Year and orders have started for the peak season in the U.S.

However, I doubt carriers are really making any money. Maybe we have hit bottom in terms of drop in cargo, but I don't think that will translate into earnings for a number of years.

Russian Navy captures 29 suspected pirates

MOSCOW (Reuters) – A Russian warship captured a suspected pirate vessel with 29 people on board off the coast of Somalia, Russian news agencies reported on Wednesday, citing defense ministry sources.

Maersk sued by crewman over pirate attack

The carriers have been reluctant to arm their ships against pirate attacks, when sailing close to Somalia.
Maybe this lawsuit will make them reconsider.

Richard Hicks, chief steward of the recently-attacked boxship Maersk Alabama, filed a suit in a Houston court on Monday against Waterman Steamship and Maersk Line Ltd, alleging they knowingly sent him into the piracy-prone Gulf of Aden near Somalia without adequate protection. Mr Hicks is seeking at least $75,000, according to the suit.

BBC container unloads in Yokohama, Japan

The BBC Box discharged in Japan on 28 April 2009

NYKU8210506

APR-28-2009 14:07 Discharged from vessel at last port of discharge Yokohama, JPN NYK CLARA/107

Moves to Date Event Location Mode
APR-28-2009 13:20 Vessel Arrival Yokohama, JPN NYK CLARA/107

Pirates captured - where will they go?

The pirates which attacked the Melody have been captured.


<blockquote>When the Melody made a distress call, the Seychelles Coast Guard says it sent out an aircraft that spent five hours photographing the pirates' skiff and marking its position, before passing it on to a Spanish frigate that was in the area. The Spanish Ministry of Defense said in a statement that the Spanish navy tracked the skiff and apprehended the suspects. They were then turned over to the Seychelles Coast Guard.

Question will be, where will they go? Stay in the Seychelles for prosecution?

We shall have to watch.

MSC Cruise Line on armed guards

MSC Cruise Lines had their ship Melody attacked by pirates.

They did a great job fending off the pirates, at the end getting out the locked up hand guns and firing into the air.

The guards they had onboard was apparently normal procedure and not necessarily due to the risk of piracy.

MSC has not decided to avoid the area totally.

Mr Vago said MSC would pull its vessels out of east African waters immediately. From now on, he said, the company will access South Africa via the Mediterranean and west Africa, calling in Morocco, Senegal and Namibia on its way to Cape Town and Durban.

Smart move. Having a cruise ship hijacked would not be good.

I liked this comment.

We are selling holidays, not adventures.

Which container lines will go bankrupt?

Lloyds List has an article about shippers concerned which lines to use, based on their financial viability.

I agree they should be concerned, but I don't think the criteria given is correct.

If credit agencies such as Fitch or S&P have put a company on creditwatch, then that is a clear indicator of a higher risk.

“Another indicator is the percentage of what is on order compared with the existing fleet. A company may have an enormous orderbook, and you could conclude that this company is more exposed to the downturn than others.”

I do agree with the comment regarding creditwatch, but ships on order to not have to be delivered.

Most carriers are operating with only about half of their fleet as owned.

The problem will be, do the carriers have enough money to reduce the value of their ships to consider the daily rate in line with current charter rates.

It will come down to deep pockets.

Finally - the officials say ships should be armed

Back in December I said ships should be armed.

Despite all the objections, my guess is we will start seeing armed guards onboard ships.

Finally, Petraeus (the U.S. Military Commander) says the same thing.

Gen. David Petraeus told a congressional committee that ocean cargo carriers should consider putting armed guards on ships traveling through pirate-infested waters off the coast of Africa.

Too bad they didn't listen to me.

How to repel pirates

The BBC has a more in depth article on the pirate attack of the MSC Cruise Line vessel Melody.

I particularly enjoyed the methods used to fend off the pirates

1) Shoot into the air
2) Spray water on the pirates
3) Throw deck chairs at the pirates

I'm not making this up.

click here for the complete article

Armed guards onboard cruise ship fend off pirates

Apparently MSC has hired armed guards for their cruise ships. Israelis.

Cruise line security work is a popular job for young Israelis who have recently been discharged from mandatory army service, as it is a good chance to save money and travel.

It certainly has paid off. Their vessel Melody was attacked. And not in the Gulf of Aden, where they would have been escorted. This attack happened about 500 miles east of Somalia and 200 miles north of the Seychelles.

The Melody was on a 22-day cruise from Durban, South Africa, to Genoa, Italy, when the pirates fired "like crazy" with automatic weapons late Saturday, slightly damaging the liner, Pinto said. The pirates tried to put a ladder on board, but were unable to climb aboard, he said.

The commander said his security forces opened fire with pistols, and the ANSA news agency said the pistols had been kept in a safe under the joint control of the commander and security chief.

"When they saw our fire ... they left us and went away. They followed us for a bit but then stopped," he told Sky TG24.

I wonder if MSC has hired guards for their containerships. If not, they are probably now considering doing so.

Update the BBC Box - left Hong Kong

The BBC Box left Hong Kong on 23 April 2009 onboard the M/V NYK Clara Voyage 107

click here for the NYK tracking site.

Input the container number if you want to check it yourself.

NYKU8210506

The vessel should arrive in Yokohama in a couple of days. The schedule portion of the NYK web-site is down at the moment. I will check it later.

Explanation of container stowage onboard ships

There aren't too many blogs concerning international shipping.

I ran across one entitled "Shipping in South Africa".

One of the posts gives some explanation of terminology, as well as things to be considered when stowing a containership.

These days stowage is all done by computer programs.

I am so old I remember when it was done manually by guys (and only guys) who had lots of colored pencils on their desk, and if you dared touch one you got yelled at. In fact, I usually got yelled at for just entering their hollowed area. Of course I was a woman, and there was probably some superstition (or maybe it's because I was a PITA).

I'll admit they had a very difficult job, especially doing it without computers. And when the ships were full, everyone wanted one more container squeezed onboard. They use to always joke "let's get out the ship stretcher" to make room.

That's not a problem today, with most ships sailing half full.

Friday fun - cartoon South Park goes to Somalia

For anyone not familiar with South Park, although it is cartoon format, it is not for children.

South Park kids go to Somalia

Have some fun - watch it.

Maersk has a negative bunker adjustment factor

Last month I said the carriers should be offering bunker adjustment factor credits if they are truly using the price of bunker fuel as their basis.

Good news. Maersk apparently is.

I input for a container from China to West Coast USA, and these were the bunker adjustment factors for April

Current charges:
(Apr)

20'dry container USD -90
40'dry container USD -120
40'high cube dry container USD -120
45'high cube dry container USD -120


They are scheduled to go up in May to a charge of around 25.00. But this is done only because the FMC (Federal Maritime Commission) requires a carrier file any increases with 30 days notice, but decreases can be done in 1 day. So when May 1st rolls around I expect Maersk will refile their charges in line with their formula.

Good job Maersk.

Dramatic drop in containership charter rates

Lloyds List has a nice article regarding MSC and the ships they have chartered in at rock bottom rates.

There has been much talk about the drop in charter rates for containerships.

This confirms it.

Here are the figures - from $45,000.00 per day,

down to $7,000 - $10,000 per day

In 2004, NYK fixed the Bellavia and Octavia at $37,750 per day, thought to be the most ever paid for that size ship and period, and then re-let the pair to China Shipping for 12 months at an even higher $45,000 per day.


Brokers have now confirmed ...(MSC) has chartered a series of 8,400 teu newbuildings for two years from German shipowner Norddeutsche Vermögensanlage, paying $10,000 a day for the first 12 months, and then $12,000 a day for the balance. Norddeutsche Vermögensanlage declined to comment.

At the same time, MSC has fixed a quartet of 5,000 teu vessels at just $7,000 per day for 12 months, from dates in the second and third quarters, with options for another year at $10,000 a day.

I'll bet the other container carriers, as well as ship owners, are really irritated by this action.

Everyone else is pulling out tonnage to reduce the oversupply, and MSC is using this opportunity to get cheap ships and increase their market share.

MSC is a privately owned company in Switzerland, but with roots in Italy. There isn't much out about their finances. They have always run a pretty low cost operation.

I remember some in the shipping community grumbling that MSC ran old rusty ships.
But how many people see the ships anymore? As long as they are structurally sound, does it matter if they are not all new and shiny?

Baltic Exchanged kicks out a member

The moto of Baltic Exchange is "Our Word, Our Bond".

Apparently Fortescue wasn't keeping their word.

By Alaric Nightingale and Brett Foley

April 23 (Bloomberg) -- Fortescue Metals Group Ltd., Australia’s third-biggest iron-ore exporter, was suspended from being a member of the Baltic Exchange, the world’s largest shipping bourse.

It’s the first suspension since 2005, exchange spokesman Bill Lines said by phone today, declining to comment further. The bourse’s 560 members include ArcelorMittal, the world’s largest steelmaker, and Glencore International AG, the biggest commodities trader.

Fortescue had some problems back in December which I posted.

An example is Fortescue Metals, who bought contracts for the future. They quoted including the freight (CFR - cost plus freight), and these orders did not materialize, or were cancelled (I guess). They have orders, but only the ones where they quoted just the cost of the product loaded onboard the ship (FOB - freight on board).

Fortescue is only suspended, so I guess if they come to terms with renegotiating all their contracts they might be let back in.

However, I doubt not being a member of the Baltic Exchange will really have any effect on them doing business. In this day of the internet, one really wonders if such exchanges are necessary.

French capture pirates - turn over to Kenya for prosecution

The other day I wrote about the Canadians who captured pirates, only to turn around and release them. I thought this was rather pointless, but
A commented explained the reason for this

The pirates cannot be prosecuted under Canadian law because they did not attack Canadian citizens or interests and the crime was not committed on Canadian territory.

At least the French don't have this problem.

They captured pirates who were attempting to hijack a Liberian flagged tanker. The pirates (excuse me, accused pirates)are being turned over to Kenya for prosecution.

From the BBC

A French naval frigate has docked in the Kenyan port of Mombasa carrying 11 Somalis accused of piracy.

French commandos captured the men last week after an attempt to hijack a Liberian tanker.

The Somalis will be handed over to Kenyan authorities for prosecution under a special agreement with the EU.

Excess container ships

Last week I mentioned a recent report by Drewry Shipping Consultants stating

FAILURE to take the bold steps required to eliminate unwanted containerships will drive some lines out of business.

That is the verdict of Drewry Shipping Consultants in a report that urges ocean carriers to “act now” in order to survive the crisis which has seen freight rates plunge after a collapse of cargo volumes.

Box lines will have to lay up the biggest ships in their fleet and should be prepared to cancel newbuilding orders even if that means forfeiting downpayments.

The company has a pipeline of 26 vessels scheduled for delivery between 2010 and 2012.

As I mentioned

What Drewry is forgetting is a lot of the tonnage out there is not owned by the carriers. It is owned by companies whose business is just to charter out ships.

And today, we see this example in the press. Quote by Lloyd Fonds, a KG House in Germany.

Germany offers tax incentives for investing in ships. These KG Houses enable individual investors to buy a piece of a ship.

Lloyd Fonds is under pressure to find employment as 14 of the vessels that it has ordered have no charter contracts.

They include four 12,800 teu vessels that the company ordered with shipowner NSC Schifffahrtsgesellschaft from Hanjin’s Subic Bay facility.

So, what will they do with these ships? It will just add capacity in the world, and cause more problems for the international ocean container carriers. The carriers lay up ships, only to see KG house ships being delivered to compete with them.

The BBC explains problems with tracking "The Box"

The BBC explains problems with tracking The BBC Box, NYKU8210506

The short version is the tracker quit working, more than once. They thought they could update the tracking manually if that happened, but turns out it was too much work (ha! Welcome to the world of international shipping!)

Here is some of their long explanation.

As you know we've had some persistent problems with the tracking of the container which have been frustrating for many of you and for which I'd like to apologise.

"We attached a tracking device to the container at the start of the project [an Inmarsat C transceiver kit for those keen to know the technical details].

"Unfortunately the device developed intermittent problems, so when the container arrived in New Jersey late last year we removed the device and it was returned to the UK for repair before being shipped back to Brazil and re-attached to the Box.

It worked for a while but now we have lost the signal again. As part of our planning for this project we had a system in place to switch to the appropriate individual ship's tracking devices in the event of such a fault.

Whilst that has been possible it has required greater resources than we have available to manually carry out this process over such a long period. Our contingency planning allowed only for short periods of a faulty transceiver and not the seemingly intractable problems we have encountered.

But, at least they attempt to give us an idea of the future track of this container.
They say it will go to Russia, so I can only guess that the some of the cargo will be removed in Japan and the box will continue onward. If this is correct then the shipper on the ocean bill of lading is probably a freight forwarder, or consolidator (some thing, different names).

Here's what the BBC has to say, without committing to a time line.

The Box is currently in Hong Kong en route to Japan. From there we expect it to travel to Russia before a final return to the UK in June/July. We hope to bring television, radio and online reports from each of those locations and we will attempt to manually update the position as frequently as we are able.

Tanker operator Euronav gets new loans

Lloyds List reports Euronav has secured loans to finance new ships.

Is this really a good thing? Some are existing ships, and 2 are newbuildings.

They don't give details, but unless they got these ships at "fire sale" prices, I question if this is good investment.

The tanker market has dropped dramatically. This, from yesterday, April 20, 2009

TANKERS are being chartered for voyages at spot rates that fail to cover bunker and port costs, as earnings dramatically plunge across all tanker types in both dirty and clean trades.

Unless oil consumption picks up, there won't be increased business for tanker operators.

EURONAV has accompanied sharply lower first quarter profits with the positive news that Belgium’s leading tanker operator has secured a $300m loan to help finance six vessels.

Net profit dropped to $16.78m from $80.74m in the opening three months of 2008, or to $0.34 per share from $1.56.

Euronav said it remained “cautious” about the outlook for the rest of the year after rates had “softened significantly” in recent weeks to a level lower than expected.

“This is due to a lower demand for transportation caused by a reduced demand for crude oil as part of the global economic recession,” the company said.

Euronav said it had signed a $300m senior secured facility with Nordea, Calyon, Société Générale, Bank of America and Scotiabank acting as lead arrangers, and Nordea, Calyon and Société Générale acting as bookrunners.

The credit facility will finance two very large crude carriers and four suezmaxes.

The VLCCs are the 2008-built, 315,981 dwt Olympia and the 2009-built, 315,981 dwt Antarctica.

The suezmaxes comprise two existing vessels: the 2008-built 158,764 dwt Cap Felix and the 2008-built 158,800 dwt Cap Theodora, and two newbuildings for delivery in June and November of this year.

Hamburg Süd to lay up ships

Hamburg Sud will make efforts to reduce costs by laying up ships, cutting work hours of German staff, and attempting to renegotiate contracts with vendors.

They are realistic enough not to mention increasing rates, as the idiots in the TSA keep harping on. Of course it's true it would be nice if the rates went up enough to cover costs. Talk to the airlines about that problem.

The lowest cost operator will be the winner!

This from American Shipper

Hamburg Süd said in the first quarter "average revenues have fallen around 20 percent since the peaks reached in mid-2008. This is due not only to falling bunker surcharges," the company said in a statement Monday. "In some trade lanes freight rates are being quoted which do not even guarantee full coverage of the variables, not to mention making a contribution to fixed costs. The volume- and rate- related drops in revenue are only partly being offset by lower bunker and charter costs."

Hamburg Süd Group said liner volume in 2008 was up 25 percent in
2008 to 2.7 million TEUs. Results also included those of its Brazilian sister company Aliança Navegaçao é Logistica Ltda., the tramp operations of Rudolf A. Oetker and Furness Withy Chartering

The company noted turnover grew 24 percent from 3.6 billion euros in 2007 to just shy of 4.5 billion euros in 2008, It said about 15 percent of that was due to organic growth and 9 percent to the acquisition of Costa Container Lines in late 2007.

To counter a substantial decline in cargo volumes, Hamburg Süd said it has laid up ships and streamlined services

Ocean carrier Shipcraft A/S to arm ships in Gulf of Aden

Shipgaz news reports

The Danish coaster operator Shipcraft A/S has decided to hire armed guards for their ships sailing in the Gulf of Aden. The decision comes after an attack on the coaster Puma last week on a voyage in the area. The piracy attack failed as eight non-armed guards (British) on board the Puma managed to ward off the attack.
“We have taken the decision to hire armed guards for the safety of our crews”, says Per Nykjær Jensen, CEO of Shipcraft.
“I can not take the responsibility for not protect my crew in the best possible way. A squad of armed guards cost me an extra DKK 200,000, but still that is a cheap price for the safety of our crews and the ships”, says Per Nykjær Jensen.
“And if the guards kill one of the attackers I will cope much better with that then if I have to inform the relatives of a dead crew member”, says Per Nykjær Jensen.
Puma was on a voyage from Busan, South Korea to Emden (Germany) when the attack occurred.

I believe this is the first company to take this action.

They don't say who they will hire. Back in October 2008 Blackwater was offering their services.

I suspect Shipcraft will hire someone from Denmark. Maersk is also based in Denmark, so protecting vessels might be a good business to get into if one is Danish.

Navies practice capturing pirates

MAYPORT NAVAL STATION, Fla. (AP) -- Navies from the United States and 10 other countries on Monday launched two weeks of war exercises off Florida's Atlantic coast that will include training in combatting piracy and drug smuggling.

If I had read this article last week, I would have complained they should be going after the Somali Pirates, rather than just doing exercises.

However, the Canadians captured pirates yesterday, only to then release them. Therefore, I guess there is no point in really going after the Somali Pirates until NATO, and or individual countries, have a means to actually do something with pirates they capture.

Canadians capture pirates, then release them

Apparently Canada has some laws I don't understand. They capture pirates, but then release them. What's the point?

Seven pirates attempted to attack the Norwegian-flagged MV Front Ardenne late Saturday but fled after crew took evasive maneuvers and alerted warships in the area.

The pirates sailed into the path of the Canadian warship Winnipeg, which was escorting a World Food Program delivery ship through the Gulf of Aden. The American ship USS Halyburton was also in the area and joined the chase.

"There was a lengthy pursuit, over seven hours," Davies said.

Both ships deployed helicopters, and naval officers hailed the pirates over loudspeakers and finally fired warning shots to stop them, Fernandes said, but not before the pirates had dumped most of their weapons overboard. NATO forces boarded the skiff, where they found a rocket-propelled grenade, and interrogated, disarmed and released the pirates.

The pirates cannot be prosecuted under Canadian law because they did not attack Canadian citizens or interests and the crime was not committed on Canadian territory.

Where is the BBC Box?

Where is the BBC Box, NYKU8210506?

Short answer, discharged in Hong Kong APR-17-2009 01:08

See my other blog posts for estimated oncarriage vessel and arrival in Yokohama, Japan.
(click here)

On a lighter note, when I googled "where is the BBC Box" I ran across this tongue in cheek (meaning, not serious) article, which I just had to pass along.


This is how it begins,

BBC Box abandoned, broken up on Bengali beach

By Ryan Skinner (email)

What began as a visionary media stunt to demonstrate the complexity of global trade has ended on the rusty steel-strewn shores of India. After it became lost some time in the second-half of 2008, the BBC Box suffered a short career as contraband mule before it was abandoned and sold for scrap by an unidentified Macau-based party, reports say.

"Could this story have ended differently?", shipping industry sources ask themselves, in resignation.

click here for link to complete article

What's really not so funny is I am afraid this is close to the truth, as it appears (in my opinion) The BBC might abandon this project.

Just goes to show, international shipping really is complicated.

Top 100 international container carriers

AXS-Alphaliner has just released their list of Top 100 international container carriers..

This is a amazing compilation of the top ocean container operators by TEU (twenty foot equivalent units, basically the total capacity of that companies ships) as well as the number of ships operated. They also give the breakdown of number of ships owned, chartered, and what's on the orderbooks.

Here's the link to the complete report. Click here.

These are the top 20.

TEU CAPACITY PERCENTAGE OF MARKET BY CAPACITY

1 APM-Maersk 2,038,183 15.3%
2 Mediterranean Shg Co 1,527,280 11.5%
3 CMA CGM Group 968,524 7.3%
4 Evergreen Line 622,695 4.7%
5 COSCO Container L. 494,726 3.7%
6 Hapag-Lloyd 490,230 3.7%
7 APL (NOL) 486,028 3.7%
8 CSCL 453,579 3.4%
9 NYK 426,315 3.2%
10 Hanjin Shipping 382,951 2.9%
11 MOL 375,917 2.8%
12 OOCL 352,181 2.6%
13 Yang Ming Line 323,816 2.4%
14 K Line 320,190 2.4%
15 Hamburg Süd Group 316,216 2.4%
16 CSAV Group 291,423 2.2%
17 Zim 274,551 2.1%
18 Hyundai M.M. 265,413 2.0%
19 PIL (Pacific Int. Line) 184,528 1.4%
20 UASC 157,107 1.2%

The BBC Box arrived in Hong Kong

Update April 18, 2009 click here

The M/V Aquitania voyage 101 arrived in Hong Kong at 16:42 on 16 April 2009.

You can check the status on the NYK web-site.

click here for the web-site

Go to the box middle of the page left, Container Tracking

Input the container prefix and number below, no spaces

NYKU8210506

Once again folks, it's survival of the fittest

Today Drewry Consultants has announced almost the same thing I stated back on March 20th, 2009.

This is what I said

Various CEO's of international container companies keep saying there is a need to "restore market discipline", meaning they need to quit cutting rates.

... the 14 TSA carrier CEOs expressed their intention to avoid any further erosion of existing rate structures that have been undercut by deteriorating demand and bids by carriers to fill gaping capacity.

What these guys don't understand is, you can't restore market discipline by saying "don't do that". You restore market discipline by getting the supply more closely matched with demand.

This is what Drewry says

FAILURE to take the bold steps required to eliminate unwanted containerships will drive some lines out of business.

That is the verdict of Drewry Shipping Consultants in a report that urges ocean carriers to “act now” in order to survive the crisis which has seen freight rates plunge after a collapse of cargo volumes.

Box lines will have to lay up the biggest ships in their fleet and should be prepared to cancel newbuilding orders even if that means forfeiting downpayments.

“Operators who move fastest and are the most radical will be best placed for recovery in the long-term,” Drewry predicts.

Even so “we still expect some major operators to fail this year”, the firm warned after analysing how the industry has reacted to global recession.

What Drewry is forgetting is a lot of the tonnage out there is not owned by the carriers. It is owned by companies whose business is just to charter out ships. For them, something is better than nothing. Container carriers are off-hiring chartered tonnage, quite possibly to see it return and compete with them.

It will come down to survival of the fittest. I still predict 10% of the container carriers in international liner shipping, will go out of business in the next 2 years.

If you are a carrier and you want to survive, start working on your computer systems. Everyone's computer systems are outdated. Don't you folks every buy anything on Amazon?

A good computer system will reduce the cost of producing all that documentation, and will also allow your pricing staff to make intelligent pricing decisions.

You also need to be looking at companies like Fed Ex and UPS as examples of how to run a shipping company, not Maersk or Cosco.

U.S. Flag Ships cost vs benefit

Cost

You pay more in taxes and employee costs.

Benefits

1) You get an English speaking well trained staff.
2) Your ship is eligible to carry USAID cargo
3) If you get hijacked, the U.S. Navy comes to your rescue.

Most ships fly what is called a "flag of convenience" from some country which doesn't have a Navy, but basically only an office to issue documentation for the ships.

As I mentioned back in December - pay attention people!

Most ships sail under a "flag of convenience", countries where it is cheap to form a corporation, but which of course do not have a Navy. Generally Marshall Islands, Panama, (use to be Liberia but I think that has changed)

You would think people would research these things before they open their mouths.

This today in a CNN article.

In our view, what France and the U.S. has done is exactly the right thing for a flag state to do, and if all flag states were to take that kind of robust action against the pirates we would not have the problems of Somali piracy to the extent that we have today," said Capt. Pottengal Mukundan, director of the piracy reporting center at the International Maritime Bureau.

Right. How many warships ships from Liberia, Panama, or even Greece for that matter are patrolling the oceans?

And this guy is the director of the piracy reporting center?

Must have been a politician before this job.

You would think someone involved in international shipping would know better.

Why pay ransoms to Pirates?

This says it all

Shipping companies are unlikely to deter the pirates themselves, partly because of the financial burden. Last year, about 30,000 ships passed through the Gulf of Aden -- and there were 42 successful hijackings. In some situations, just paying ransom is still cheaper than outfitting ships with a private armed security team.

U.S. Flag vessels required for USAID shipments

USAID issued a press release informing what cargo was onboard the hijacked Maersk Alabama.

It also mentions the reason the Maersk Alabama was re flagged to be a U.S. Flag vessel (even though it was built in Taiwan), was to be eligible to carry what we always referred to as "Cargo Preference" shipments.

Per the Cargo Preference Act of 1954, as amended, generally seventy-five percent of all USAID food aid shipments must be transported on U.S. flagged carriers.

And, from the Marad web-site

Cargoes procured, furnished, or financed by the United States Government requires that at least 50 percent of the gross tonnage of all Government-generated cargo be transported on privately owned, U.S.-flag commercial vessels to the extent such vessels are available at fair and reasonable rates. In 1985, the Merchant Marine Act of 1936 was amended to require that the percentage of certain agricultural cargoes to be carried on U.S.-flag vessels be increased from 50 to 75 percent. (See Food Security Act)

USAID Food Aid Aboard Maersk Alabama

FOR IMMEDIATE RELEASE
April 09, 2009

* The MV Maersk Alabama is transporting nearly 8,150 MT of USAID P.L. 480 Title II food aid commodities.
* These commodities are valued at approximately $5.3 million and freight valued at $2.1 million. USAID is providing the transportation funding through grants to implementing partners.
* This food aid shipment from the United States contains vegetable oil, corn soy blend, wheat and dehydrated vegetables and will be distributed in Kenya, Somalia, and Uganda by USAID's implementing partners including the World Food Program and Private Voluntary Organizations.
* USAID currently provides life-sustaining food aid to 3.2 million Kenyans, 3 million Somalians and 1.2 million Ugandans.
* The United States is the largest provider of food aid worldwide. In fiscal year (FY) 2008 alone, USAID provided more than 2.6 million metric tons of food, valued at more than $2.6 billion, benefiting people in 49 countries on four continents.
* Per the Cargo Preference Act of 1954, as amended, generally seventy-five percent of all USAID food aid shipments must be transported on U.S. flagged carriers.

Pirates attempt to hijack another U.S. Flag vessel

It's all over the news that the pirates tried to hijack another U.S. Flag vessel.
It's not a Maersk ship. It was the M/V Liberty Sun, owned by Liberty Maritime.

Just a few comments regarding the report from CNN.

"The pirates fired rocket-propelled grenades and automatic weapons at the vessel, which sustained damage,"

The pirates never made it onto the ship and the vessel is now being escorted by a coalition ship, still bound for Mombasa, officials said.

No mention of why the Pirates were not able to board the vessel. This will be interesting to know for other vessels to deter attacks.

We have had several drills to prepare ourselves to secure ourselves in the engine room. [W]e can do it pretty quick by now."

Comment by one of the crewmen in e-mail home.
Just goes to show, some preparation can pay off.

Pirates on Monday hijacked two Egyptian fishing boats carrying a total of between 18 and 24 people, the Egyptian Information Ministry told CNN.

The comment regarding this is straight from the same article.

Egyptian boats are known to use Somali waters illegally for fishing, taking advantage of the lawless state of the country and the lack of enforcement of its maritime boundaries.

Those who have tracked pirate activity in Somalia say it started in the 1980s, when the pirates claimed they were trying to stop the rampant illegal fishing and dumping that continues to this day off the Somali coast.

The BBC Box tracking device not working

One of my alert readers advised there has not been an update to the BBC Box tracking since April 4.

I e-mailed the BBC a few weeks ago reading this project, and they advised the GPS tracking device was not working and was returned for repairs. This was their response on April 13, 2009.

Hi Lynda


Thanks for your e-mail. We apologise but we have had some gremlins with the project. We had to return the GPS tracking device to the UK for repairs and several of the key people on the project were unavoidably distracted by other major stories in the business and economics world which meant we couldn't give the project as much attention as we had hoped for a couple of months.

The tracking is now working again and the we hope to report when the Box arrives in Japan and during the final stages of the journey until we close the project in the UK this summer. There is also a new piece by Adam Mynott about the state of the global shipping trade on the site at the moment.

Thank you for your interest in the project,

Kind regards

The Box Team

I guess this is now the 2nd time the GPS system quit working, so The BBC might just throw up their hands by now.

I will keep tracking this container on the NYK web-site which can give the locations of actual land movement (on/off ships, inland movements). It's the way carriers keep track of their containers. If it's onboard a ship, they know it's not going to get lost.

It's called inventory control, ya' know.

I'll bet Maersk vessels won't be hijacked anymore

Eventhough very few of Maersk vessels are U.S. Flag, I doubt any pirates will be going after any ship with the Maersk name on it after last week's foiled hijacking.

In fact, if I were in charge of insurance at Maersk Line, I would be asking for a discount.

There are very few U.S. Flag ships.

It's good to know that when a company does change the flag to U.S. they are afforded the protection of the flag.

Perhaps this will be a reason for more international shipping companies to think about reflagging to U.S., no matter the expense.

This is what I said, back in Dec. 2008.

Despite all the objections, my guess is we will start seeing armed guards onboard ships, hopefully from one of the Navies. I suspect the "flag" countries have already started discussions with countries with Navies to offer protection to their flagged ships - I trust for a fee.

Let's see if the U.S. Navy starts putting guards onboard U.S. Flag vessels.

The Anti-Pirate Manual

This was posted by a reader of the New York Times, as a comment to the story "How to Catch A Pirate: Readers' Ideas".

It's the most common sense thing I have read in quite some time.

Maybe ships need to bring back the "crows nest" for look-outs.

The Anti-Pirate Manual

I have organized and conducted anti-piracy operations in the Strait of Molucca, between Malaysia and Indonesia. We found that the best tactic was to let the pirates know you were alert and watching for them. I was working with oil rigs being towed at 5 knots, a much easier target than a tanker or a freighter.

Guns are frankly unnecessary, and add risk of fire, explosion and accidental shooting. It will also make the pirates more likely to use deadly force.

Pirates have difficulty boarding larger vessels under way, so they rely on surprise. Usually, the first that a crew knows that there are pirates on board is when they show up in the bridge. Constant deck watches, bright spotlights, radar surveillance, and fire hoses streaming water over the side are all tools that have proven very effective. Guns are frankly unnecessary, and add risk of fire, explosion and accidental shooting. It will also make the pirates more likely to use deadly force — right now they know that most commercial vessels are unarmed, and to change that presumption will have unintended consequences.

Maritime law requires that ships under way do so under running lights only — they cannot light up the decks unless they are at anchor. This law favors the pirates, as it makes it easier for them to hide. A change or suspension of this law might be something to consider.

There is a vast body of recent experience dealing with pirates. What is happening off of Somalia is not new — the Bay of Bengal, Strait of Molucca, Singapore Strait and South China Sea have been piracy hot spots for many years. The regional governments have had great success against pirates by coordinating military response.

Commercial and private vessels should stick to anti-piracy measures (passive measures designed to deter attack) while leaving the counter-piracy (seek and destroy) operations to the various navies of the world.

— Ross Johnson

More on reasons behind Somali piracy

To add to what I stated last Thursday


as to what created the piracy problem in the first place...

Jeremy Scahill of the Huffington Post had this to say

Take this fact: Over $300 million worth of tuna, shrimp, and lobster are "being stolen every year by illegal trawlers" off Somalia's coast, forcing the fishing industry there into a state of virtual non-existence.

But it isn't just the theft of seafood. Nuclear dumping has polluted the environment. "In 1991, the government of Somalia collapsed," wrote Johann Hari in The Independent. "Its nine million people have been teetering on starvation ever since - and the ugliest forces in the Western world have seen this as a great opportunity to steal the country's food supply and dump our nuclear waste in their seas."

According to Hari:

As soon as the [Somali] government was gone, mysterious European ships started appearing off the coast of Somalia, dumping vast barrels into the ocean. The coastal population began to sicken. At first they suffered strange rashes, nausea and malformed babies. Then, after the 2005 tsunami, hundreds of the dumped and leaking barrels washed up on shore. People began to suffer from radiation sickness, and more than 300 died.
...

This is the context in which the "pirates" have emerged. Somalian fishermen took speedboats to try to dissuade the dumpers and trawlers, or at least levy a "tax" on them. They call themselves the Volunteer Coastguard of Somalia - and ordinary Somalis agree. The independent Somalian news site WardheerNews found 70 per cent "strongly supported the piracy as a form of national defence."

Update on The BBC Box

Update April 14, 2009. The tracking device used by the BBC is not working, again.
See new blog post

The BBC Box is onboard the vessel Aquitania.

The Aquitania is east of Madagascar. I trust the pirates are not going after ships that far south.

The BBC Box is scheduled to arrive in Hong Kong on April 16, and then transhipped onto the NYK Estrela to arrive in Yokohama on April 21.

NYKU8210506

Hong Kong APR-16 Aquitania/101

NYK ESTRELA/105 Yokohama APR-21

It is carrying goods for both Japan and Russia.

I presume either the steamship line (NYK) or the freight forwarder/consolidator will unload the container in Yokohama and then forward the goods destined for Russia by another container, and of course, another ship.

How will it end with the Pirates?

This is how the Pirates want the situation to end. They want something in exchange for the Captain of the Maersk Alabama, plus safe passage home.

Other pirates want to come and help their friends,” Andrew Mwangura, coordinator of the East African Seafarers' Assistance Program that monitors the region's seas, told Reuters.

"They will release the captain, I think, maybe today or tomorrow, but in exchange for something. Maybe some payment or compensation, and definitely free passage back home," he said.

Phillips is one of about 270 hostages being held at the moment by Somali pirates, who have been plying the busy sea-lanes of the Gulf of Aden and Indian Ocean for years.

They are keeping 18 captured vessels at or near lairs on the Somali coast — five of them taken since the weekend alone.

What should the U.S. do?

In my opinion it's the proper time to address this piracy problem as a whole.

The problem begins, of course, in Somalia and the lack of a government. The little government there is can't handle the problem. They say they have asked for help, but I don't really think just giving them money will solve the problem.
Here's what one person stated.

"This problem of the piracy in Somali sea waters is a problem and a very difficult thing for everybody. But for us it is not a difficult thing because we as Somalis have to show our experience of how we can handle and tackle these kinds of problems. But we are deeply sorry and it is regrettable all these expenses that the international community is spending towards addressing this piracy issue sending all their naval vessels to Somali sea waters without doing anything at all," Haji Ibbi said.

He said several requests by the Somali government to help solve the piracy problem have fallen on deaf ears.

He has a point about all the wasted money sending Naval vessels to the area, without doing anything.

The UN needs to step in and help the Government learn how to first of all, get control of the country. They need to get back control of the fishing rights which are probably being sold under the table. They need more attention to the dumping of illegal hazardous waste in their waters. I have no idea how this could be cleaned up.

It's a big job. I always find it so sad that so many countries never seem to "get it together". Take Haiti for example. The U.N. has been there for a number of years, and I don't think it's improved all that much.

But that doesn't mean we shouldn't try.

Why did Somalis' turn to piracy?

Back in Dec. 2008 I wrote about the piracy problem in Somalia

The Somali Pirates are really getting bold.

I have a few theories why

They really (well, some of them) want to draw attention to the illegal fishing and dumping along their shores, which turned them to piracy.

I was alerted to the illegal dumping by someone who posted a comment on this blog.

After some research, I found this article, dated July 2008.

UNITED NATIONS - The UN special envoy for Somalia on Friday sounded the alarm about rampant illegal fishing and the dumping of toxic waste off the coast of the lawless African nation.

“Because there is no (effective) government, there is so much irregular fishing from European and Asian countries,” Ahmedou Ould Abdallah told reporters.

He said he had asked several international non-governmental organizations, including Global Witness, which works to break the links between natural resource exploitation, conflict, corruption, and human rights abuses worldwide, “to trace this illegal fishing, illegal dumping of waste.”

“It is a disaster off the Somali coast, a disaster (for) the Somali environment, the Somali population,” he added.

Allegations of waste dumping off Somalia by European companies have been heard for years, according to Somalia watchers. The problem was highlighted in the wake of the 2004 Indian Ocean tsunami when broken hazardous waste containers washed up on Somali shores.

Take the time to read the entire article. It's worth it.

How is Maersk Alabama a U.S. Flag ship?

The vessel Maersk Alabama, hijacked yesterday, was built in Taiwan. However, it has a U.S. crew. It is owned by a Danish company, but was "reflagged" as a U.S. Ship, by a special program of Marad (Maritime Administration).

Here is the fact sheet from Maersk for the Alabama

Maersk Alabama fact sheet

Owned and operated by Maersk Line, Limited (http://www.maersklinelimited.com)
Capacity: 1,100 TEU (twenty-foot equivalent unit)
Geared: Yes, two cranes
Length: 155 meters
Width: 25 meters
Deadweight: 17,525 tonnes
Service speed: +18 knots
Build year: 1998
Built in: Taiwan
Flag: US
Home port: Norfolk, VA.

Maersk Alabama is deployed in Maersk Line’s EAF4 (East Africa 4) service. The rotation is Salalah, Djibouti, Mombasa.

Maersk Alabama is carrying 400 twenty-foot containers of food aid for amongst others WFP (World Food Programme).

Maersk Alabama hijacked

The 17,000-ton Maersk Alabama was carrying emergency relief to Mombasa, Kenya, when it was hijacked, said Peter Beck-Bang, spokesman for the Copenhagen-based container shipping group A.P. Moller-Maersk. It was the sixth ship seized within a week, a rise that analysts attribute to a new strategy by Somali pirates who are operating far from the warships patrolling the Gulf of Aden.

Eventhough the ship is owned by Maersk, a Danish company, it is operating under U.S. Flag.

EU to scrutinize bunker adjustment factors

No sooner than I wrote these words in my post regarding the average price of bunker

I think it's a little hard to justify a bunker surcharge based on these figures

Lloyds List advised

Brussels to police liner sector's bunker adjustment factors

Watchdogs will “vigorously enforce the competition rules in order to prevent any attempt to compensate the fall in base rates by increasing BAFs and other surcharges and ancillary charges via anti-competitive practices”, the minutes show.

However, I think the guy at Nestle has a better idea of the problem

A prominent shipper last week called for greater transparency in the assessment of fuel levies and other surcharges.

Nestlé head of global ocean transport Brett Whitfield told an industry audience that many lines were unable to explain how their BAFs were calculated.

That reflected a wider problem among box lines of failing to understand their cost base, he claimed.

Carriers have been exempt from anti-trust regulations for so long, they don't know how it works in a competitive world.

Mr Whitfield also said carriers had not taken advantage of the opportunities available under the new legal environment, with “a lot of confusion” about how best to respond to customer requirements.

If international containership lines were smart, they would try to hire people from the airline industry, who have gone through the deregulation and pains of operating in a competitive environment.

Although, 30 years after deregulation of the airlines, they are still having lots of problems.

Average Bunker Price 2007-2009

According to the Bunkerworld Prices web-page, designed to track bunker prices for the TSA, below are the following average bunker prices from the second quarter of 2007, until first quarter of 2009.

Weekly average price IFO380 Hong Kong/Los Angeles

Quarter Average $/MT
Q1 2009 262.00
Q4 2008 297.50
Q3 2008 667.50
Q2 2008 586.50
Q1 2008 483.50
Q4 2007 474.00
Q3 2007 390.00
Q2 2007 361.50

Weekly average price IFO380 Hong Kong/New York

Quarter Average $/MT
Q1 2009 262.00
Q4 2008 297.50
Q3 2008 667.50
Q2 2008 586.50
Q1 2008 483.50
Q4 2007 474.00
Q3 2007 390.00
Q2 2007 361.50

I think it's a little hard to justify a bunker surcharge based on these figures.

Especially as the TSA started out with this assumption

TSA developed the following sample calculation of the new bunker charge in late 2008, from posted Hong Kong, Los Angeles and New York bunker fuel prices for July 18, 2008. These averaged $740.65 per ton to the U.S. West Coast, and $735 per ton to the U.S. East Coast.

I just realized the figures the TSA used are not supported by the Bunkerworld figures.

What idiot is running the show at TSA?

The carriers could save some money by getting rid of TSA and it's staff.

I don't think they need all these folks just to run the vessel sharing agreements.

Brisk Business - tending to laid up ships

One area of business is busy during this downturn, ship managers and agencies who tend to laid up vessels.

As locations such as Subic Bay, the Philippines, and Singapore’s outer port limits’ anchorages rapidly fill up with empty vessels, agents and ships managers are jumping on the bandwagon to manage laid-up vessels and offer new locations.

At present there are reported to be around 30 vessels on hot lay-up in Subic Bay and space for further ships is becoming limited.

“Subic is getting quite full,” said Raul Matovic, general manager of Thome Marine Consultants, an offshoot of Thome Ship Management, which is offering lay-up services.

One consideration for lay-up is warm waters, but also in an area where charter hires will more likely commence when business picks up, which is Asia.

The Singapore-based company is looking to secure an exclusive anchorage in Batam, Indonesia on the southern side of the Singapore Strait. This, Mr Matovic said, was so it “could get easy access to the vessel”.

“So far we’ve had quite a few enquiries for big boxships and car carriers,” he said.
The company also expects to see newbuildings being delivered and going straight into lay-up.

While the warm climes of Southeast Asia are proving attractive for lay-up, Mr Matovic believes that owners are choosing to lay-up vessels in the region primarily due to connections to patterns rather than climate.

The thought of new vessels going straight to lay-up up is frightening. Especially for anyone invested in international shipping company stocks.

Containership hijacked by Somali pirates

Hansa Stavanger, (Ex Lykes Trader), a 1550 TEU Containership was seized about 750 kilometres off the southern Somali port of Kismayo, between the Seychelles and Kenya, on April 5, 2009.

The vessel is owned by Leonhardt and Blumberg.

Details as to it's origin and/or destination are not yet known.

How will China spend their U.S. Dollars?

Paul Krugman writes in the New York Times

In the early years of this decade, China began running large trade surpluses and also began attracting substantial inflows of foreign capital. If China had had a floating exchange rate — like, say, Canada — this would have led to a rise in the value of its currency, which, in turn, would have slowed the growth of China’s exports.

But China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets.

It's an interesting article. He doesn't give any suggestions for China to get out of this mess. This is how he concludes the article:

The bottom line is that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis. The same could, of course, be said of the Japanese, the Europeans — and us.

And that failure to face up to new realities is the main reason that, despite some glimmers of good news — the G-20 summit accomplished more than I thought it would — this crisis probably still has years to run.

I have seen elsewhere that China is expected to start buying commodities with all of their excess Dollars. I don't know if they are expected to just speculate, or if they will actually start buying and receiving commodities. If they start on their campaign for electric car production, maybe they will again start importing lots of iron ore.

That would certainly be welcome news for international shipping, especially dry bulk carriers.

When will we see an upturn?

This is what I said on Jan. 1, 2009

So, just for fun, here are my guesses

1) U.S. will be in a recession until 2011
2) Unemployment will hit 10%
3) Stock market? Maybe a bottom around 7500-8000

As for international shipping, I guess 10% of the carriers in existence today will be gone. Probably bought by someone else, but in several instances (especially in bulk and tankers) bankrupt.

The U.S. Stock market went lower than 7500. It has rebounded now, but for how long?

The chairman of Hamburg Sud, Dr. Gast, says we won't hit bottom in container shipping in 2010.

“Even if the economy will come back it will take some time before the balance between supply and demand is in order again,” he said. Anyone forecasting a revival by the end of this year or in 2010 was merely speculating.

He also says

“The worldwide economy is in a situation that we have never had since the Second World War and it is no surprise that the most global industry is suffering so much,” he told Lloyd’s List.

However, he wasn't around in the 1960's (neither was I), when I understand Hamburg Sud almost went belly up. And, things were pretty bad in the U.S. in the 1970's, but most people don't remember that either.

Some people in dry bulk shipping say we have seen the bottom,

THE worst is over for the dry bulk shipping sector according to Asian-based owner and operator Nobu Su, who has rebuilt his fleet to capitalise from any upswing by chartering more than 50 bulk carriers.

But, a lot of the turn around will be based on China. This reminds us that we certainly have a world-wide economy. Especially when it comes to international shipping.

The honeymoon is over at Hapag-Lloyd

Back in Feb. 2009 this is what I said about the sale of Hapag-Lloyd

The parent company TUI is bound and determined to get rid of Hapag-Lloyd, even if they have to pull off a shot-gun wedding.

Well, it appears the honeymoon was short lived, which would be expected given the nature of this marriage.

THE new majority owner of German container line Hapag-Lloyd, the Albert Ballin consortium, has entered into a massive internal row over the purchase price and the extent of cuts necessary to survive the financial crisis.

The argument is being fought out in public interviews and statements.

Klaus-Michael Kühne, the second largest shareholder of Albert Ballin, openly criticised the other members for not having reacted to his call for cuts at Hapag-Lloyd. Mr Kühne said that the purchase price for Hapag-Lloyd had been too high and that chances to renegotiate a lower price with Tui had not been taken up.

click here for Lloyds List article