Thursday, October 29, 2009

Hapag- Lloyd announces pay cuts

My question is, what took them so long?

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

It's almost a month later.

From Lloyd's List

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

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

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

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

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

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

click here for link

CMA CGM chairman living in a dream world

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

From Bloomberg News

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

And this was the response by the chairman

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

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

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

Must be that French math.

Maybe something got lost in the translation.

click here for link to article

Wednesday, October 28, 2009

German Ship Owners looking for government monies

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

From The Journal of Commerce

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

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

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

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

Monday, October 26, 2009

Maersk to issue bonds

Would you buy these bonds?

Maersk bond issue to raise €750m

Richard Meade - Friday 23 October 2009

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

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

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

From Lloyd's List

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sunday, October 25, 2009

What does the future hold?

A comment made on this blog

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

In my humble opinion, the future is China.

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

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

Their population is huge.

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

Solar power. Hybrid cars.

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

But, that is just my opinion.

Friday, October 23, 2009

Recovery in 2012 for container carriers?

That's what Mitsui OSK is predicting.

From Bloomberg News

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

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

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

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

I liked this quote

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

click here for link to article

Thursday, October 22, 2009

The BBC Box returns to the U.K.

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

From The BBC

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

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

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

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

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

click here for link to article

Wednesday, October 21, 2009

CMA CMG delays ship deliveries

CMA CGM is delaying ship deliveries

From the Journal of Commerce

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

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

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

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

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

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

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

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

For anyone holding stock in Global Ship Lease, beware.

Monday, October 19, 2009

Tracking the BBC Box

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

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

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

click here for link to NYK tracking site.

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


Sunday, October 18, 2009

Court Ruling on Rule B attachments

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

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

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

Now, some relief from these attachments.

From Fairplay

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

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

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

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

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

Friday, October 16, 2009

Containership seized by pirates

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

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

From The BBC.

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

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

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

Wednesday, October 14, 2009

Infighting amongst European carriers

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

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

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

Danish owners call for CMA CGM and Hapag Lloyd capacity cuts

Richard Meade - Wednesday 14 October 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, October 13, 2009

KG investors looking for someone to blame

From Fairplay

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

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

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

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

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

Monday, October 12, 2009

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

From The BBC

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

Zim's problem

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

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

From The Journal of Commerce.

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

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

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

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

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

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

Someone has been asleep at the wheel.

Sunday, October 11, 2009

How long is this downturn?

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

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

Except me, of course.

The shipyards are having trouble accepting the idea of cancellations.

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

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

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

The next 6 months will be very interesting.

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

It's going to be a bit bloody.


Wednesday, October 7, 2009

French captures Somali Pirates

From Bloomberg News

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

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

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

Tuesday, October 6, 2009

Maersk Exec with short memory

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

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

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

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

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

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

Oh well.

They have to say something.

Friday, October 2, 2009

Maersk cost cutting includes European officers

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

Now, they will be let go.

From Fairplay

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

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

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

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

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

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

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

Hapag-Lloyd still on track for monies from German government

From Bloomberg News

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

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

Thursday, October 1, 2009

Hapag-Lloyd must cut costs

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

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

From The Journal of Commerce

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

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

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

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

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

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

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

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

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

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

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

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

click here for complete article