Monday, November 30, 2009

Dryships decides against purchase of vessels

From Reuters

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

It doesn't say who were the sellers.

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

It's a cozy club.

Greek Tanker Hijacked

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

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

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

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

Jiddah is known to us as Jeddah, Saudi Arabia

Thursday, November 26, 2009

Zim drags down parent company

From Israeli paper Globes(online)

Zim troubles drag Israel Corp. down to loss

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

Hillel Koren26 Nov 09 10:07

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

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

click here for link

And from The Journal of Commerce

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

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

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

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

CMA CGM continues search for more money

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

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

What I truly don't understand is this:

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

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

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

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

This is what is being reported

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

Mid-December is just around the corner.

I look for this to be pushed back some more.

click here for link to Journal of Commerce article.

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

Today is our Thanksgiving holiday in the U.S.

It is celebrated on the 4th Thursday of November.

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

I will be doing just that.

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

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

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

Tuesday, November 24, 2009

KG shipowners rethink bailout request

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

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

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

Maybe the shipyards will start financing the sales.

From The Journal of Commerce

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

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

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

click here for link

Monday, November 23, 2009

Hapag-Lloyd expected to post loss in 2010

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

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

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

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

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

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

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

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

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

click here for link to article from The Journal of Commerce

Sunday, November 22, 2009

Comments re Global Ship Lease

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

Here are some of the comments posted.

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

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

and from another

I shake my head reading your blog today.

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

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

November 21, 2009 2:12 PM

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

Ok folks, here's my thinking.

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

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

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

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

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

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

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

Good luck to ya'll.

Friday, November 20, 2009

No Dividends for Global Ship Lease stockholders

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

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

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

From The Journal of Commerce

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

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

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

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

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

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

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

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

Wednesday, November 18, 2009

Arming vessels is the correct deterent to hijackings

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

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

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

From The New York Times

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

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

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

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

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

No injuries or damage were reported, the Navy said.

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

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

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

Tuesday, November 17, 2009

Somali Pirates release Spanish fishing vessel

From The BBC

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

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

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

However, just as this one was released,

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

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

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

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

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

Monday, November 16, 2009

Piracy clauses for charter contracts

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

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

Here are the comments:

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

These clauses can be downloaded free of charge.

Click here for link

Saturday, November 14, 2009

Some think the Euro Zone is out of the recession

From The New York Times

Recession Over in Euro Zone, Report Says

Published: November 13, 2009

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

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

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

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

Tuesday, November 10, 2009

How Boeing survived

Most people in the world know of Boeing Aircraft.

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

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

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

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

The Story of Boeing and Its People Legend & Legacy

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

Here is what Boeing did.

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

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

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

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

I am afraid that has become a lost art.

Sunday, November 1, 2009

On a personal matter.....

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

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

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

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