Bloomberg news - bulk shipping rates to drop 50%

Lengthy article from Bloomberg, basically stating bulk shipping rates will reduce by 50 percent, due to contraction in China.

Aug. 31 (Bloomberg) -- Just as global trade starts to recover, the shipping market is crashing for the second time in a year as China reduces raw-material imports and record numbers of new vessels set sail.

The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers.

click here for link to complete article

Arctic Sea- carrying missiles to Iran?

Wow, that was first posted here by a commenter a few days ago.

Now, Time Magazine has an article alleging the same thing. (well, actually they are just saying destined for the mid-east)

The highest-ranking official to put forward this version of events is the European Union's rapporteur on piracy and a former commander of the Estonian armed forces, Admiral Tarmo Kouts. In an interview with TIME, he says only a shipment of missiles could account for Russia's bizarre behavior throughout the monthlong saga. "There is the idea that there were missiles aboard, and one can't explain this situation in any other way," he says. "As a sailor with years of experience, I can tell you that the official versions are not realistic."

Kouts says an Israeli interception of the cargo is the most likely explanation. But this theory, which some Russian analysts put forward in the days after the Arctic Sea was rescued and which Kouts agreed with in his interview with TIME, has been vehemently denied by Russia's envoy to NATO, Dmitri Rogozin, who says Kouts should stop "running his mouth."

click here for link to complete article

Staff cuts at container carriers

As anticipated, losses at international container companies will lead to staff reductions.

Hanjin has announced they will try to cut staff by offering early retirement to employees with more than 10 years service.

From Trade Winds

A downturn in profitability has led to top South Korean shipowner, Hanjin, launching its first redundancy programme.

The company is believed to be targeting office staff in its liner shipping operation but the extent of the restructuring is currently unclear.

The container business is the largest in Hanjin Shipping, which operates a diversified fleet of some 200 vessels that also includes bulkers and LNG carriers.

South Korea’s MoneyToday website says Hanjin is seeking volunteers of more than ten years service to go from its domestic administrative staff.

It also describes the programme driven by a downturn in liner revenues as “voluntary retirement” implying older employees are the target.

click here for link

Comments regarding Arctic Sea

This comment was posted regarding Arctic Sea

Quite a few Mossad operations involved recruiting (or posing as) foreigners to do the work.
Case in point, the Cherbourg Project.
The Israeli agents masqueraded as Norwegians to take the boats.

I have no idea regarding this, but it will be interesting to see how this plays out, if, the truth is ever known.

Arctic Sea - saga continues

From Russia Today

“We do not rule out that the ship might have been carrying something other than timber. So we had to detain part of the crew – in order to find out if anyone was involved in the hijacking,” Bastrykin told journalists.

click here for link to article

Hapag-Lloyd financial problems as reported by Spiegel

I found an article originally from Spiegel on-line (part of the German news group Der Spiegel), which has been translated into English and published on the Free Internet Press.

Here is the link

It's really long, but if you are interested in the state of international container shipping, take the time to read it.

Here are some parts which I found interesting.

At current prices, we aren't making money on any route," Ulrich Kranich, the executive board member in charge of global operations, says, summing up the main reason for Hapag-Lloyd's financial woes. Shipping companies currently receive only about $500 to ship one container from Asia to Europe - about $300 less than they need to cover their costs. A year ago, shipping companies were still collecting more than $1,500 per container.
........................
Although Maersk also lost money - $373 million - in the first quarter, the Danish shipping company is owned by an oil and gas company that can more easily shoulder the losses in its shipping division.

None of the world's major shipping companies is currently turning a profit. Singapore-based NOL, for example, posted a $245 million loss, while South Korea's Hanjin lost $110 million.

Like Maersk, though, these companies have the backing of either financially strong corporations or their governments. NOL is owned by the Singapore state investment fund Temasek, which just approved a $1 billion capital increase. The Chinese shipping companies Cosco and China Shipping can rely on the support of their government. The same is true of Japanese shipping line NYK.

But Hapag-Lloyd appears to have been hit by the biggest crisis in shipping at the worst possible time. Because it was forced to transfer its substantial profits from previous years to its ailing parent company TUI, the Hamburg shipping company was barely able to build any reserves. At the end of last year, TUI sold Hapag-Lloyd to a consortium of the City of Hamburg, local businesspeople and banks. At the same time, it burdened the shipping company with €1.3 billion in debt, creating an additional drain on a company already faced with operating losses. The consequences are clear for company management in Hamburg. "Without outside help, we won't make it," says an insider.
................................
Hapag-Lloyd is also getting rid of ships it leases. The company owns only about half of its fleet of 128 container ships. The other half are leased and, for this reason, are to be jettisoned more quickly. Hapag-Lloyd has already returned about 30 ships to their owners. Other shipping companies are pursuing the same strategy. Industry insiders say MSC, a Swiss company, does not plan to renew charters on close to 80 ships, while French company CMA which reportedly has up to 170 charter ships with charters about to expire.

This, in turn, is becoming an existential problem for many other Hamburg shipping companies suddenly faced with the return of ships they had been leasing to other companies.

Container Shipping below break-even

Bloomberg has a lengthy article on the state of the international container shipping industry.

It features the loss at COSCO (The largest Chinese shipping company).

Here are some of the highlights.

China Cosco’s container-shipping business, the nation’s biggest, had a 4.32 billion yuan ($632 million) operating loss as U.S. and European consumers pared spending on Asian-made goods, hammering rates. Its commodity-ship operations, the world’s largest, posted a loss after sales tumbled 72 percent on overcapacity in the global fleet.

Container lines “will still be under pressure in the second half as rates won’t cover costs,” said Johnson Leung, a Hong Kong-based analyst at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund group. “The rate increase for the peak season may only be sustainable for a couple of months.”
..............................
All 10 of the world’s largest listed container-shipping companies have posted losses this year, triggering industrywide efforts to raise rates through coordinated increases and capacity cuts.
................................
Attempts to increase rates have stumbled amid excess capacity caused by plunging demand and the launch of new vessels ordered during a trade boom that ended last year. Maersk, the world’s largest container line, is ready to slash rates if rivals attempt to win market share by undercutting prices, Danish newspaper Dagbladet Borsen said earlier this week, citing Chief Executive Officer Nils Smedegaard Andersen.

UBS expects container rates to get stuck at just above a zero profit margin as anything more than this will persuade shipping lines to return idled vessels into service.

click here for link to complete article

Update - The BBC Box

The box has arrived at it's destination, and is now up for devanning.

From the NYK tracking site

AUG-24-2009 22:00

Devanning for delivery

Laem Chabang, THA

Zim fights back

The Israel Securities Authority yesterday disallowed a vote by a minority shareholder, and today Zim has contacted an attorney to try and get something done to change this.

They desperately need money to avoid bankruptcy.

From Lloyd's List

In a statement released today, Zim said: “It is important to note that Israel Corp’s position differs from the Israel Securities Authority, it believes that the required majority has in fact been achieved and the Board is therefore presently seeking legal council to consider its options.”

The statement goes on to say, “if the controlling shareholders and Bank Leumi votes had been counted, over 90% of the votes would be in favor of the fund injection.”

Zim chief executive Rafi Danieli said: “With the support of Israel Corp, ZIM is continuing with its efforts to formulate a long-term, comprehensive financial restructuring plan for the company.”

Sources in Israel said that a legal dispute with regulators would not typically end up in the court system, but would be solved through direct negotiations. However, analysts noted that Zim’s survival is at risk if the dispute persists.
....................
Virtually no one believes that Zim can survive without infusion from its parent company. Zim employs over 7,000 people and is considered by some to be the national symbol of Israeli shipping.

click here for link

Update-Zim funding blocked

From Lloyd's List

Zim rocked as $100m rescue funding plan hits buffers

Tom Leander - Tuesday 25 August 2009
A VOTE on $100m in rescue funding for troubled Israeli container line Zim Integrated Shipping Services was rejected by the Israel Securities Authority on the grounds that Bank Leumi, which was in favour of the funding, was not eligible to vote.

The Israeli securities authority said there were not enough remaining minority shareholders to pass the vote.

Bank Leumi is a key minority shareholder in Zim’s owner, Israel Corp.

Zim could not be reached for comment at press time.

The drama affecting Zim has dragged on for five days since the Israel SEC ruled previously that the bank was not eligible to vote for bailout package because of its position as a lender to Zim.

The bank is the largest minority shareholder of Israel Corp, holding 18% of the stock, and has loans of $10m outstanding to the container line.
But the bank voted anyway, leading to a debate by remaining minority holders over who would be allowed to decide the vote. A full 54.2% of Israel Corp is owned by vehicles owned by the Ofer family.

The capital injection was part of a broader plan to pump $350m into Zim, a victim of the global downturn in the container market. At least one-third of minority voters are required to vote in favour for the $100m to be released.

Analysts have repeatedly expressed frustration over the lack of information offered by Israel Corp over the Zim restructuring plan, which was announced on August 2.

“I don’t think [Israel Corp] can stick with this situation — not saying anything — for much longer,” said Yoav Burgan, an analyst with Leader, an investment house in Tel Aviv. “It doesn’t make sense.”

At the time, Israel Corp announced a deal that would allow deferrals on ships that Zim had on order and, in some cases, help with financing.

It also outlined a plan to offer convertible shares to shipowners doing business with Zim in an exchange in reduction of charter rates, but the rate of conversion for the shares was not included — making the true value of the offer hard to glean.

Was Israel involved with Arctic Sea?

Oh my, this is sounding like a spy novel.

A comment posted on this blog

Anonymous said...

I've heard rumours that the vessel was carrying weapons from Russia to Iran, and that the 'pirates' were recruited by the Mossad (Israeli secret service) to interrupt the trade.
Source:
http://www.jpost.com/servlet/Satellite?cid=1249418676474&pagename=JPost%2FJPArticle%2FShowFull

Which, sends us here

Did Mossad hijack Russian ship to stop Iran arms shipment?

The Russian newspaper Novaya Gazeta reported over the weekend that the vessel Arctic Sea had been carrying x-55 cruise missiles and S300 anti-aircraft rockets hidden in secret compartments among its cargo of timber and sawdust.

Pravda's Web site reported that the ship had been smuggling cruise missiles to Iran on a well-worn path via Algeria, but a "power that has relations with Ukraine" had prevented this. Novaya Gazeta reported that the hijackers had been operating on behalf of the Mossad. It also reported that President Shimon Peres's visit to Moscow the day after the Russians recaptured the vessel had been motivated by an urgent request to his Russian counterpart, Dmitry Medvedev, to refrain from arming Iran.

Israeli officials dismissed the reports as "classic conspiracy theories," but defense experts noted that Israel has a record of seizing foreign vessels carrying arms to its enemies.

"This appears as the classic conspiracy theory. I didn't see any evidence for it and so we aren't going to comment," said Yigal Palmor, a spokesman for the Foreign Ministry in Jerusalem.

click here for link

Update Hapag-Lloyd cash injection

Bloomberg News has an article today regarding the cash infusion into Hapag-Lloyd.
They state the German government will decide by the end of September whether to provide a bail out.
News earlier this week said by mid-Sept. So, I don't know if the targeted date has been delayed, or is someone has put in a "fudge factor".

From Bloomberg

Aug. 25 (Bloomberg) -- German shipping line Hapag-Lloyd AG may receive a 923 million-euro ($1.32 billion) cash injection from owners including the city of Hamburg as the company seeks to bolster its chances of receiving a federal loan guarantee.

The capital increase approved today by the city’s government is more than the 750 million euros that had been previously pledged by shareholders and should fulfil requirements for receiving the 1.2 billion-euro government guarantee, Hamburg’s finance department said in a statement.

Chancellor Angela Merkel’s government will decide by the end of next month whether to grant the container line the guarantee its owners say is needed to boost liquidity as the global economic slump hurts world trade. TUI AG, which owns 43 percent of Hamburg-based Hapag, said Aug. 13 that the company needed total financing of at least 1.95 billion euros.

click here for link

The BBC Box onboard M/V Ratana Thida voyage 230

The BBC Box left Yokohama, Japan on Aug. 15.

It's onboard the vessel Ratana Thida voyage230, due into Laem Chabang, Thailand, on Aug. 23rd.

The BBC tracking site is being manually updated, so we can't use it to be certain of the current location of the ship.

I will try and check the NYK vessel schedule, but right now the schedule is unavailable. I often have problems getting to their vessel schedule. Perhaps someone at NYK can look into that.

Berlin to decide by mid-Sept. on Hapag-Lloyd funding

From Lloyd's List

Berlin sets timing for Hapag-Lloyd state aid

Patrick Hagen, Berlin - Friday 21 August 2009
THE Berlin government will decide on Hapag-Lloyd’s application for state guarantees by mid-September, the country’s maritime co-ordinator Dagmar Wöhrl told journalists in Berlin today.

Hapag-Lloyd has asked the government for guarantees totalling €1.2bn ($1.7bn), covering loans provided by banks HSH Nordbank, HVB and KfW.

The request is the biggest application from any maritime company, Mrs Wöhrl said. She did not reveal further names of shipowners asking for help but at least one other German owner has already applied.

click here for link

The art of a press release which says nothing

After posting the notice Hapag-Lloyd sent to customers, I wondered what official notice they might have on their web-site.

They have one. It has words, without really saying anything.

Here is the link (I can't copy it)

They of course want to assure everyone they are OK, they claim their consultants say they are "well positioned in a long-term attractive growth market".

Oh, those wonderful consultants.

Now, after not commenting on the notice from Hapag-Lloyd, I do feel inclined to offer some unsolicited advice to Hapag-Lloyd.

Number 1 - Please start listening to Mr. Kuehne. In fact, you should appoint him as the chairman of the board, and he can clean house.

Number 2 - Fire your consultants. They are empty talking suits who will take as much money from you as possible, without delivering anything of value.

Number 3 - Start downsizing staff as much as you can. I realize Germany has laws, but you need to accept these are desperate times. All executives should be taking massive pay cuts, and there should be pay cuts at every level. Funding for retirement accounts (where legal to do so) should cease.

That "long-term attractive growth market" your consultants speak of? The problem is the growth was already anticipated, the ships ordered. In order to survive until there is an upturn, you will need to get your costs down - getting more loans is not the total solution.



You're welcome.

Global Ship Lease- won't be paying dividends

Global Ship Lease has come to terms with their lenders. Part of the agreement is they won't be paying any dividends, probably until 2011.

They still plan to take on the CMA CGM vessel, as already agreed, which is a huge mistake. There is no mention of the 2 vessels which were ordered for Zim, who will probably cancel, since they have financial problems of their own.

From Lloyd's List

GSL agrees revised terms on $800m facility

Rajesh Joshi, New York - Friday 21 August 2009
GLOBAL Ship Lease has finally stitched together a deal with lenders of its $800m credit facility, which has done away with the loan-to-value covenant of which GSL was in breach until the end of November this year.

Among the concessions made, GSL has suspended dividends and agreed to the cancellation of $200m from the undrawn amount. The company has also issued a transparent hint that it does not expect containership asset values to improve for at least another year-and-a-half. The next loan-to-value “test” has been set for April 30, 2011.

GSL will be able to withdraw money under the facility in the meantime to bankroll its pledged purchase of the 2001-built, 6,627 teu containership CMA CGM Berlioz, which is scheduled to be delivered to GSL next month.

GSL was in discussions with lenders on the covenant breach for several months, but the company had obtained standstill agreements while talks progressed.

While expressing confidence that GSL’s deal would be done, chief executive Ian Webber complained at its quarterly results presentation last week that bankers were getting “tougher” with the shipping industry.

In the amendment agreed, GSL is to pay an amended interest rate of 3.5% over the London interbank offered rate through to November 30, with the margin thereafter fluctuating between 2.5% and 3.5% depending on the prevailing loan-to-value ratio.

GSL has committed to suspending its dividend, since cash flow has been pledged to repay the loan. GSL has also deferred redemption of $48m in preferred shares until the final maturity of the credit facility in 2016.

Dividends may be resumed once GSL’s loan-to-value ratio drops below 75%. From that point, repayment would be fixed at $10m per quarter.

Mr Webber said: “The container shipping industry is facing significant challenges and containership values have experienced substantial declines.

“With this agreement, we have accomplished two important strategic objectives. First, by aggressively paying down debt, we have enhanced our position to emerge from this unprecedented market downturn as a stronger company.

“Second, by waiving the loan-to-value covenant, we have insulated the company through April 2011 against what is likely to be a continuing period of depressed asset prices.”

Arctic Sea mystery continues

This is like something out of a spy novel, from the cold war era.

As mentioned earlier, there is suspicion by some that the Arctic Sea was carrying some illicit cargo - perhaps something nuclear in nature.

After the Russian Navy found the Arctic Sea, and arrested the hijackers and I guess, some of the crew, they are taking the ship to the Russian Black Sea port of Novorossiysk.

The manager of the ship doesn't know what is going on, and has issued an appeal to the Russians to explain.

From Tradewinds

The Russian director of the Helsinki-based company made an impassioned appeal “to all officials powers” on Friday to come clean on the current situation regarding the 4,700-dwt ship and its 15 Russian crew members.

Here is Matveev’s statement in full:

“Appeal of Director of Solchart Victor Matveev to all official powers

Announcement of Director of Solchart Victor Matveev Helsinki, 21st of August.

It has become known on Monday that vessel Arctic Sea has been successfully rescued by the Russian Navy forces.

Despite this fact the company Solchart, under which commercial management the vessel operates, still does not receive any official information about the present situation with the crew and the vessel.

In the course of the last couple of days we have repeatedly requested various instances about condition of the crew and the vessel, trying to find out who is controlling the vessel and why it is heading to Novorossiysk. However we have not received any answers.

Considerable loss, caused by hijackers to us and the owners of the cargo, unstoppably expands every day with the absence of accurate information.

I, as the director of Solchart, would like to highlight my respect and express my gratitude to the crew of Arctic Sea, above all for their top professional qualities, tenacity and selflessness.

Solchart has always complied with the international rules and conventions. Crewing has been performed in full accordance with “Manning Certificate”. I will especially highlight professional qualities of the crew: all specialists on board possess necessary experience to work in a specific rank, and have long worked in order to attain certain position. Our seafarers receive considerable salaries, which comply with the requirements of international trade unions.

Thus, we appeal to all officials with the request to manifest humanity and provide to Solchart any kind of reliable information about the crew and the vessel.”

click here for link

Hapag-Lloyd letter to customers

This was passed to me by one of my readers.

I have no comment.

We are pleased to inform you that the shareholders of Hapag-Lloyd AG agreed today
on their contribution to supporting and strengthening the shipping line in the long
term. This is a prerequisite for being able to apply for government guarantee of €1.2
billion. The application, which covers an overall sum of €1.95 billion, is now being
submitted by the consortium banks to the responsible governmental bodies in Berlin.
The reason for this step is that also Hapag-Lloyd could not avoid the consequences
of the far-reaching crisis affecting the entire shipping sector, even though we already
initiated a comprehensive savings programme last year. Our current concept
envisages long-term cost savings of US$900m. The reports received from our
consultants confirm that we are active in a growth market which is attractive in the
long term and that we have an excellent positioning in our industry.
We would like to thank you for the confidence that you have given us in this difficult
phase for our business. We consider ourselves now well prepared for the future and
are looking forward to a close cooperation with you.
We will keep you informed on further developments.
Yours sincerely,
Hapag-Lloyd

Eimskip saves itself for now

Ever since the financial crisis in Iceland, Eimskip (the Icelandic shipping company founded in 1914) has been trying to stay afloat.

They sold off some of their business in cold storage, some ships, and now they have basically made a deal with their creditors to keep the business running, but the creditors are now, the owners.

• The new business will be owned by the financial creditors of Eimskip which includes The Yucaipa Companies (“Yucaipa”), a US private equity investor as a minority shareholder
• Eimskip sells 49% of Versacold Atlas and gives an option for the remaining 51% to Yucaipa.
• Eimskip sells three reefer vessels in Norway

From Eimskip

17.08.2009
Motion for composition approved by all creditors

-Preserving the company´s operations and safeguarding 1,500 jobs

A meeting of the creditors of Hf. Eimskipafelag Islands (Eimskip) was held today, for the purpose of voting on the Group’s composition proposal.

100% of Eimskip’s unsecured creditors voted in favour of the composition proposal which was therefore approved.

So, who knows what will be the future for Eimskip. Hopefully they will offer their owners enough of a return to keep running as they are.

However, I suspect eventually they will be sold off to some other larger ocean carrier. Perhaps someone specializing in refrigerated transport.

Maersk rumours

The Chief Executive at Maersk spoke with a German newspaper this week... it then got picked up by Reuters (I don't know who handled the translation)

FRANKFURT (Reuters) - Danish shipping and energy group A.P. Moller-Maersk (MAERSKb.CO) would consider takeovers of insolvent competitors or of individual freighters as these are the cheapest options to expand during the economic crisis, its chief executive told a German magazine.

click here for complete article

Apparently this set the rumor machine in motion, which required some clarification.

This from American Shipper

Maersk considers acquisitions, but not now

A.P. Moller - Maersk Group’s chief executive said the company is pondering acquisitions of competitors as a way to capitalize during the economic crisis.
Nils Andersen said the company is investing in its networks to growth markets in Africa and South America, according to an article in the German magazine WirtschaftsWoche, as reported by Reuters.
Andersen
A Maersk spokesman told American Shipper Monday that the quotes from the German magazine were correct, but that Andersen emphasized during the interview that Maersk is not looking for any acquisitions right now.

I am sure they think we have not yet hit bottom. Give it another 6 months.

Update- Arctic Sea saga

This is getting very interesting. I doubt we will ever find out the true story.

From Reuters

The official version of events was questioned by Yulia Latynina, a leading Russian opposition journalist and commentator.

"The Arctic Sea was carrying something, not timber and not from Finland, that necessitated some major work on the ship," she wrote in the Moscow Times newspaper on Wednesday.

During two weeks of repair works in the Russian port of Kaliningrad just before the voyage, the ship's bulkhead was dismantled so something very large could be loaded, she wrote.

"To put it plainly: The Arctic Sea was carrying some sort of anti-aircraft or nuclear contraption intended for a nice, peaceful country like Syria, and they were caught with it," she said.

click here for link

What happened to the Arctic Sea?

I still don't know what really went on...

From Tradewinds

Russia has arrested eight people over the alleged hijacking of the timber carrier Arctic Sea which was found off the coast of West Africa on Monday.

Citizens from Russia, Estonia and Latvia were seized from the 4,700-dwt ship when it was intercepted by a Russian warship 300 miles off Cape Verde early on Monday morning, Russia's defence minister Anatoly Serdyukov told state news agencies.

It is not known if any of those arrested were amongst the 15 Russian crew members of the Malta-flagged vessel.

Click here for link

Career advice

Someone posed this question on the blog

I work for Zim in the U.S. how concerned should we be that the doors would close and we would all be out of jobs?

This is my advice

I think anyone working for any shipping company should be concerned at this time.

Not just a matter of the company closing, but those that do survive will most certainly be cutting staff.

If I were working for a container carrier, I would start quietly looking at other types of companies, perhaps someone involved with RFID, which ties in nicely with shipping.

The BBC Box is on the move!

Finally. The BBC box is leaving Japan.

The BBC has an article giving details of some of the problems experienced in Japan.

Japan is a rather difficult country in which to do business. They have very tight import regulations.

From The BBC

...customs staff (in Japan) took a keener interest than anticipated and requested additional duties be paid as a result of the satellite transceiver equipment (a tracking device) inside the Box.

But, it's finally on the move

On Saturday, 15 August it will finally leave Yokohama with a consolidated cargo bound for Thailand, where it is due to arrive the following weekend.

click here for link to complete article

Hapag-Lloyd financial figures

From The Journal of Commerce (regarding Hapag-Lloyd)

The German container line’s cumulative loss for the first six months reached $627.1 million, compared to a profit of $190 million in the first six months of 2008.

First-half revenue totaled $3.14 billion, compared to the previous year’s $4.14 billion.

Average freight rates fell by around 25 percent year-on-year in the second quarter and about 20 percent year-on-year in the first half of 2009.

Container volumes declined by around 17 percent in the second quarter and around 16 percent in the first half of the year as a result of the impact of the global financial and economic crisis.

click here for link

Hapag-Lloyd is looking at further lay-offs and cost reductions in staff. However, it's not so easy under German law.

Perhaps the German Government will give them aide, so they won't go bankrupt, as a way to preserve jobs.

CSAV still losing money

I still doubt that CSAV will survive. I think we can consider them on life-support.

From The Journal of Commerce

As volume falls, glut of container capacity cuts freight rates

Troubled Chilean carrier CSAV reported a loss of $412.6 million in the first half of 2009 compared to an $18.3 million profit in the same period last year on declining volumes and freight rates.

The carrier’s revenue fell 36.7 percent to $1.54 billion from the first half of last year as the global glut of container tonnage ate into freight rates.

The carrier’s operating costs fell 24.8 percent to $1.72 billion in the first six months of the year due to a 40 percent drop in fuel prices on the previous year, the company said.

CSAV has been scrambling to raise fresh capital in recent months so it can continue operating. It raised $145 million of new capital in July, most of it in the form of new equity from existing shareholders.

It also sold its nearly 26.77 percent stake in port services company Agunsa in July in an auction that raised $36.8 million.

More recently, it has exchanged equity stakes with some of the owners of the ships it has chartered in return for lower charter rates.

CSAV approached Seaspan, the Hong Kong-based owner of two 4250-TEU vessels it charters in an effort to renegotiate its charter rates, but Seaspan declined to participate in the restructuring.

Hapag-Lloyd to apply for German Govt help

From The Journal of Commerce

Company to file for German state loan guarantees on Thursday

As Hapag-Lloyd reported a second-quarter loss, the troubled German container line’s owners reportedly reached agreement on a financing package for it.

The agreement is necessary to file an application for $1.7 billion in German state loan guarantees, a person familiar with the matter told Reuters on Thursday. The company plans to file the application before the end of the day.

click here for link

Looking to the future for ocean carriers

Back in March 2009, I said rates won't go up until the supply decreases

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.

So finally, five months later, the container carriers have taken enough tonnage out, they are able to get some rate increases.

Of course, we are also in what was normally the "peak season" in the Transpacific Trade - all the goods coming to the U.S. for Christmas.

I think there has been enough blood spilled by the carriers that no one is out to gain market share. They are all just hoping to survive.

And that's the big question.

Although everyone is saying we have hit bottom, people are only hinting at the fact that there will not be a return to the boom of the last 10 years.

I think we have hit bottom. The big question is, if business continues at this level, or maybe a little bit more, is that enough to keep companies from going out of business?

The problem with the shipping business is all the idle ships. The ship yards are still building ships (although some have stopped), and there are ships in lay-up, which owners will be wanting to get back into service as soon as they can make some money.

For bulk carriers, China is the big player. Their recent surge in iron ore helped the bulk ships. But, these purchases have now slowed, which could cause another drop in the bulk market.

And, the booming tanker market has slowed down, as the speculation in oil has slowed.

It's going to be tough for several more years for international shipping companies.

Report states NY/NJ Watefront Commission is corrupt

The New York Times has an article, with a link to the official document just released, detailing the ongoing problems at the New York Harbor Waterfront Commission.

The Waterfront Commission of New York Harbor, which was created in the 1950s to break the mob’s grip on the docks, became its own bastion of lawlessness, employing the same corrupt, self-serving methods of the pier-based gangsters it was supposed to pursue, investigators said in a scathing report released Tuesday.

Top officials at the $11-million-a-year bistate agency divided spoils, helped cronies evade the law and thwarted security provisions meant to safeguard the port against terrorism, according to the report by the New York State inspector general, which came after a nearly two-year investigation that the commission had vainly sought to block in court.

As a result of the findings, virtually the entire executive staff has been ousted —

The report does not state there are ties to the Mafia, but quite frankly, it would surprise me if there aren't.

This reads like something out of The Sopranos.

click here for link to article

40% Drop in U.S./South America Trade

CSAV,Hamburg-Sued and Alianca will start a joint service between the U.S. and South America.

They had one several years ago, before the big increase in world trade.

All trade lanes have started this type of rationalization again. It's the best way for them to pull out tonnage, and still offer a decent service.

PRESS RELEASE

Hamburg, 10 August 2009. In response to market conditions that have changed significantly over the past year, Hamburg Süd, Aliança and CSAV have decided to rationalise their services in the trade between South America East Coast and North America East Coast. The market volumes in the trade have dropped by as much as 40 per cent from the prior year period, necessitating these tonnage and system changes.

Subject to Federal Maritime Commission (FMC) approval, the much needed rationalisation will take place through the merger of the CSAV operated USAtlan Service with the Hamburg Süd and Aliança operated Tango service.

The „New Tango” string will be operated with seven ships with a nominal intake of 3,500 TEU each, of which five will be provided by Hamburg Süd / Aliança and two by CSAV with the following rotation:

New York – Philadelphia – Norfolk – Charleston – Jacksonville – Port Everglades – Puerto Cabello – Suape – Santos – Buenos Aires – Rio Grande – Navegantes – Santos – Rio de Janeiro – Salvador – Suape – Pecem – New York

The new service configuration will provide a quality product better matched to market needs, more comprehensive port coverage and competitive transit times in all major lanes.

The first sailings will be performed by the “CSAV Itaim” calling New York on 19 September 2009, subject to FMC approval.

China's lending to slow

Beijing orders state banks to slow loans

By Jamil Anderlini in Beijing

Published: August 7 2009 17:06 | Last updated: August 7 2009 20:14

China’s central bank has told the heads of the largest state-controlled banks to slow the pace of new lending, say people familiar with the matter, after new loan volume in the first half of the year tripled from same period a year earlier.

The pressure from the People’s Bank of China signals an unstated shift in policy and comes as it steps up its open-market operations to control liquidity and slow loan growth.

China is the tiger. Much as we hate to admit it, China will have a huge influence on the world economy in the next few years.

The BBC Box still not moving

It's still sitting empty in Japan.

To check for yourself,

click here for NYK tracking site

Input this number (letter and numbers, no spaces)

NYKU8210506

Banks may begin foreclosing on ship loans

Lloyd's List has a lengthy article regarding banks and ship loans.

Due to the decrease in ship values, apparently all ship loans have broken their covenants, and so far banks have let them.

I always wonder why there was cheering at companies when banks did so. Didn't they realize they were just postponing the inevitable? The banks would agree to these covenant breaches, but only after increasing the interest rate or fees.

Richard Meade - Friday 7 August 2009
BANKS are expected to foreclose on more shipping industry loans towards the end of the year as breaches of loan covenants become ubiquitous across the industry.

While most banks are willing to negotiate covenant waivers rather than pull the carpet from underneath owners in breach of loan agreements, ship financiers have told Lloyd’s List that the prospect of foreclosures and ship arrests will increase significantly as the year progresses.

Loan-to-value covenant breaches are becoming an issue of concern for many shipping banks as asset values plummet and available equity dries up, but according to finance experts this is just one part of a much larger problem.

“The loan-to-value issue is just one of many covenants being breached on a daily basis by a very large number of shipowners,” said Anthony Zolotas, chief executive of specialist finance boutique Eurofin.

“Most shipowners have already had some form of breach of covenant and as we come to the end of the year I believe that we will see more foreclosures.”
.............................
According to one senior Asian broker, banks have insufficient funds to finance the existing orderbook, even on some deals where they have already signed loan agreements, and as a result many are now looking for a way out.

“Of course no financial institution would admit such a thing, it risks another meltdown, so instead they dream up ways to dodge their obligations,” the broker said. “Invoking loan-to-value clauses is a great ruse. The shipowner is then left at the mercy of the yard.”

I particularly liked the last paragraph

“Shipping has always been a deep pockets game,” said one broker. “It is probably unfair to heap too much blame on the banks. Wiser and older shipowners have always known the banks would run for cover when things got tough. To expect otherwise would be like expecting a leopard to turn vegetarian.”

click here for link

Diana Shipping is conservative

There are many Greek bulk shipping companies listed in New York in the last several years.

Diana Shipping is one which paid good dividends, but perhaps they are now being more conservative, realizing they need to save some cash for the downturn.

From Lloyd's List

Diana wary despite strong second quarter

Nigel Lowry, Athens - Thursday 6 August 2009

DIANA Shipping has cautioned against taking recovery in the dry bulk market for granted, despite unveiling sturdy second quarter results.

“We believe that the difficult phase of the cycle is far from over in the dry bulk market,” said Diana’s chairman and chief executive Simeon Palios.

The New York-listed company posted $30.4m in net income for the quarter, substantially down on net income of $65.7m in the same three-month period of 2008.

The lower prevailing market rates, as well increased off-hire time, were blamed for curbing revenues from $86.8m in last year’s second quarter to $59.8m this year.

Mr Palios said management was pleased with the overall picture of profitable operations, a strong cash position and “minimal” leverage.

“The consistent application of our strategies has enabled the company to deliver a predictable revenue stream from relationships with quality charterers,” Mr Palios said.
“The consistent application of our strategies has enabled the company to deliver a predictable revenue stream from relationships with quality charterers,” Mr Palios said.

Diana boosted its cash position to nearly $218m and maintained “one of the lowest debt levels in our industry”.

He added: “We believe that Diana is well-positioned, not only to navigate this turbulent economic cycle, but also to seize upon the opportunities that will be available to strong competitors in the dry bulk sector.”

The Athens-based company is often cited by analysts as among the strongest publicly listed companies in its sector and a likely buyer of bulker bargains.

But Diana appeared to downplay any expectations of immediate fireworks.

“Over time, we plan to take advantage of these opportunities to expand our fleet and enhance our cash generation potential for the benefit of our shareholders,” Mr Palios said.

Given the company’s projection of further difficulties ahead in the market, Diana would be “patient and disciplined”.

It intended to gradually deploy resources as it invested in future opportunities, he said.

Second quarter earnings took net income for the first six months ended to $65.2m, compared with $109.9m for the same period of 2008.

Voyage and time charter revenues were $122.5m for the six months ended June 30, compared with $165.6m for the same period of 2008.

Diana owns and operates 19 panamax and capesizes, with a further two capsizes due for delivery this year and in 2010, both of which are due to go on five-year charter to strong Asian counterparties.

But alas, the market does not reward honesty. Their stock dropped more than 6 percent today.

Seaspan refuses to reduce charter rates

Seaspan has refused to reduce charter hire on current vessels to Hapag-Lloyd and CSAV, despite the fact other shipowners have.

I can't say I blame them, a contract is a contract. But, the shipping community is pretty small. If they want to keep these companies as long term customers, that might not be a good move.

Of course, maybe they are thinking CSAV and Hapag-Lloyd won't be around long term, and best to get what they can now.

Interesting note that Seaspan is still making money.

From Lloyd's List

Seaspan rebuffs Hapag-Lloyd, CSAV charter rate reduction

Janet Porter - Thursday 6 August 2009
CONTAINERSHIP owner Seaspan is refusing to bow to pressure from either Hapag-Lloyd or CSAV to renegotiate charter rates.

The New York-listed company confirmed Wednesday that it did not participate in a rescue plan for CSAV, despite requests and concessions granted by most other owners with ships on charter to the Chilean line.

Seaspan, which has nine 4,250 teu ships on charter to Hapag-Lloyd, also disclosed that it had been asked by the cash-strapped German line to discuss amendments to contract terms.

“At this time, we do not intend to renegotiate the main terms of our charter parties with Hapag-Lloyd,” said chief executive Gerry Wang.

“If any of our charterers are unable to make charter payments to us in the future and are in default of their respective charter parties, we may not be able to recharter the relevant vessels at rates equal to the rates in our current charters or at all,” he elaborated.
................
(Seaspan reported)Normalised net earnings for the second quarter of $18.7m, down from $19.3m, included a $1.1m expense related to exercising a vessel delivery deferral.

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NYK to raise money through bonds

The Journal of Commerce reports

NYK Line said today it will issue two sets of unsecured $315 million bonds in a public offering on Aug. 11 to raise cash for its operations.

The first bond issue, which is named Unsecured Straight Bond No.28, has a five-year maturity and an annual coupon of 0.968 percent.

The second, Unsecured Straight Bond No. 29, has a 10-year maturity and bears an annual coupon of 1.782 percent.

NYK said both bond offerings have been rated AA by two Japanese rating agencies, the Japan Credit Rating Agency and Rating and Investment Information.

These are not paying that much interest, especially for something which is unsecured.
However, they will be sold in the Japanese market, so perhaps there are some tax advantages.

I'm a little surprised by the rating, since they lost so much money recently, are projecting a loss for the full year, and probably next year too.

NYK lost $262.7 million for the first quarter of its fiscal year ended June 30, compared with a profit of $610 million a year earlier. Group revenue for the three-month period fell by 41 per cent during the quarter, down to $4 billion from $7.1 billion a year earlier, as the financial crisis cut into volumes and freight rates.

The largest Japanese shipping line revised its forecast for the full year to a loss of $52.5 million, from an earlier forecast of a $190 million profit, with total revenue of $17.9 billion.

click here for link

Containerships in lay up

I don't know how many of these ships are in "cold" lay-up, or "hot" lay-up. I suspect they are all in "hot" lay-up, meaning they could be redeployed very quickly.

Anyway, Tradewinds reports over 10% of the global fleet of containerships is still in lay-up.

Non-operating owners’ share of the idle fleet has reached 601,000-teu, which at 4.7% of the global total is a new record, Alphaliner’s latest report says.

The non-operating owners are shipowners who charter out vessels, but do not operate as a carrier. This means either they have decided to wait until the market improves, not wanting to accept the current offered charter hire. Or, they can't find deployment for these ships, at any price.

Carriers have 713,000-teu of capacity in lay-up, equal to 5.6% of the global fleet.

So that puts the idle capacity at around 10.3% on a TEU basis.

click here for link to complete article

German shipping KG funds in crisis

I am not sure what the KG stands for, something in German I suppose, unless it stands for Kilogram. Anyway, it is a type of investment fund set up in Germany about 20 or 30 years ago. It was done as an incentive to keep ships flagged and managed in Germany. I think there might be some tax advantages to owning these funds, if you are a German taxpayer, but I'm not sure.

From Ship Chartering

Under German KG rules, ships must be flagged and managed in Germany, while the owner must establish an operations office in the country.

They were touted as a safe investment, but alas, not so.

From Tradewinds

More than 20 of Germany’s 1,600 KG Funds have been forced in to insolvency or other restructuring, the Financial Times reports.

Up to 100 more could be forced to ask investors for fresh capital if the crisis persists beyond, the newspaper claimed.

About 40 funds have already asked investors for more capital the paper said, quoting Deutsche Zweitmarkt, which runs a secondary market in KG fund shares.

Tobias Konig, managing partner of Knoig & Cie, was quoted as saying that this was the first time a sector crisis had coincided with a banking crisis.

Well, Tobias, not the first time. Just the first time since the KG funds were established.

The problem is these models were set up to just pay out all of the income of the ships, with no thought for a possible downturn, or a possible reduction in the value of the asset.

Peter Dohle Schiffahrts president Jochen Dohle told the newspaper that the experience will “fundamentally change” how KG funds are run in the future.

“We will certainly be going back to the good old times 20 years ago, 25 years ago when things were done far more conservatively,” he said.

click here for link to article

Zim rescued for now

The headline from Lloyd's List reads

Zim rescued from collapse with $350m lifeline

Someone e-mailed me recently, asking what basis I had for saying certain shipping companies are in danger of collapsing.

The truth of the matter is all container carriers are losing money. The big question is, how much cash is available to the company to weather this downturn, and, are the owners willing to use their cash resources to keep a company running.

The shipping business has long business cycles, and it generally comes down to "deep pockets". According to this report, Zim will have a negative cash from of $1 Billion until 2013. That's a lot of money.

From Lloyd's List

Janet Porter - Monday 3 August 2009
ISRAELI container line Zim has been hauled back from the brink of collapse by its parent company as an emergency restructuring plan is put together.

Israel Corp has asked shareholders to approve a $350m loan for Zim Integrated Shipping Services, in which it has a 99% stake.

The money, which would be paid in instalments and comes on top of $100m already provided, “is required and essential to the continuation of Zim’s operations,” Israel Corp said in a filing to the Tel Aviv stock exchange.

Zim estimates that it will have a negative cash flow of around $1bn between now and 2013, and is engaged in negotiations with financial creditors to reschedule debts, and to defer the repayment of principal.

In a move reminiscent of the deal struck by Chile’s CSAV, Zim is also in discussion with shipowners about reduced charter rates for a number of years in exchange for convertible notes.

An understanding has already been reached with shipowners that are related to Israel Corp to reduce charter fees by $150m over the next few years, also in exchange for other paper securities.

Israel Corp has close links with members of the Ofer family which has extensive shipping interests. Millenium Investments, which holds 47% of Israel Corp stock, is in 20% owned by Ofer Investment Group. This company also owns 2.9% of Israel Corp directly,

The statement, issued in Hebrew at the weekend and in English a day later, also discloses that Zim has reached “understandings and integrated arrangements” with shipyards about vessels on order, including delivery delays and new financing arrangements. This includes the sum of $155m to finance payment of the outstanding amount due on vessels under construction.

Zim has already received $129m of that money in order to take delivery of two ships last month, the 8,400 teu Zim Los Angeles and 10,000 teu Zim Djibouti.

Also agreed is deferment on the receipt of 14 ships due for completion over the next two to three years. The orderbook includes eight 12,600 teu ships costing $170 each, plus another seven 10,000 teu vessels.

An order for a series of six 1,700 teu ships has already been cancelled. The total value of payments whose dates have ben changed or deferred comes to around $1.5bn.

The $350m that Israel Corp is proposing to lend Zim comes on top of $100m that it as already loaned to the line that lost $119m in the first three months of the year. Second quarter results have not yet been published, but the container trades showed no sign of recovery in that period and only now are seeing some stability in freight rates.

The $100m that Zim has received from its parent company was part of $150m worth of support that Israel Corp said last year it would be willing to provide in 2009, if circumstances required.

U.S. Postal Service to lose $7 Billion in 2009

No one is talking about how much money the U.S. Postal Service (called USPS for short) continues to drain from the taxpayers.

No one, except the Journal of Commerce (good job folks).

The decline of 9.5 billion pieces in the USPS’ last fiscal year and 28 billion pieces in the current 2009 fiscal year will leave the USPS with a net loss of $7 billion this year, the GAO said, pushing the Postal Service’s outstanding debt to $10 billion. The USPS faces a $1 billion shortfall in cash that likely will grow next year as it faces another net loss.

click here for link

I doubt Congress has the stomach to face a major overhaul of the postal service at this moment.

However, they really need to do a pay scale review. My secretary's husband was working for the FBI in New Jersey. However, he applied for a job as a postal inspector because he could make $100,000.00 per year doing that, versus probably about 50,000 as a newbie FBI agent.

No wonder they are bleeding red ink.

Update Eastwind Bankruptcy

Tradewinds reports the details of the Eastwind Bankruptcy, as well as what took place 2 days prior.

... Nordea, Bank of Scotland and DnB NOR took over and sold several Eastwind Maritime ships as the New York owner spiralled toward bankruptcy, court documents show.

The just-filed documents show that two days before Eastwind filed for liquidation in a New York court, the banks declared the company in default and exercised share pledges giving them control of a number of Eastwind subsidiaries.

They sold the ships to two companies set up to buy them, Queensland Shipping and Fingal Shipping.

This was actually good management by the banks. There were companies already set up to buy and manage the ships. They took the ships, moved them into the new company, without (apparently) any disruption to the charterers. If this wasn't accomplished, they might have been subject to arrest, just as one of the remaining Eastwind ships is facing.

In separate development in the Eastwind case, LaMonica is asking Gropper to surrender the 470,000-cbf reefer fish carrier Anapa (built 1991) to its mortgage holder to prevent the cost of an impending arrest in Lagos, Nigeria.

click here for link to article

The BBC Box to be on the move

The BBC has an update on the BBC Box

"Although we've had a longer than anticipated layover in Japan, we think the Box will be on the move shortly, probably to Thailand.

Included in the article is the sad state of the container industry.

The figures are quite sobering.

The container business made a collective profit of $5 billion (£3bn) in 2008. It is likely to make a loss of up to $20 billion this year," according to Richard Meade, news editor of the industry bible Lloyd's List.

All I have to say is "wow".

click here for link to BBC article