The Financial Times has a great article about how the price of oil is determined.
However, after it became known the Libor interest rate was being manipulated by
the banks, now everyone is wondering if the same thing has been going on
with oil prices.
Apparently there is a a small organization called Platts (part of McGraw-Hill) which monitors bids
Gas prices here jumped 10 cents in one day last week. Of course it was the day I decided to
fill up the gas tank. Luckily I drive a very small car.
This once again made me wonder, "why are oil prices so high".
As I posted previously, I thought the oil prices were being rigged, and the government thought so also.
However, perhaps the oil traders were successful in their bid to stop disclosure of records...
Some of the world’s largest oil
traders including Vitol Group, Morgan Stanley and Royal Dutch
Shell Plc (RDSA) are asking a judge to stop the disclosure of millions
of records gathered by the top U.S. commodity regulator during
its nationwide investigation of the crude markets.
Which, of course, would allow them to cover their tracks, and start a different scheme to
manipulate the price of oil.
There is a very good article in FOREX NEWS questioning the rational of the increase in the
WTI click here for link
...
Fundamentally,
the case for continued bullish push for WTI Crude remains weak. Global
economic recovery may have improved, but production levels are far from
pre financial crisis levels. Even after taking inflation into account,
price should not be anywhere near the 100 USD per barrel level – where
Oil was at before the crisis. Furthermore, oil production levels in US
are hitting record highs after record highs, and current bout of
decreasing inventory may simply be a short-term reprieve, with inventory
expecting to build up strongly once again in 2014. - See more at:
http://www.forexnews.com/blog/2013/12/30/wti-crude-current-bull-run-may-last/#sthash.kA7WX1XO.dpuf
Fundamentally,
the case for continued bullish push for WTI Crude remains weak. Global
economic recovery may have improved, but production levels are far from
pre financial crisis levels. Even after taking inflation into account,
price should not be anywhere near the 100 USD per barrel level – where
Oil was at before the crisis. Furthermore, oil production levels in US
are hitting record highs after record highs, and current bout of
decreasing inventory may simply be a short-term reprieve, with inventory
expecting to build up strongly once again in 2014. - See more at:
http://www.forexnews.com/blog/2013/12/30/wti-crude-current-bull-run-may-last/#sthash.kA7WX1XO.dpuf
The MSC Monterey, which was named in 2007, experienced a crack in the main deck,
which then spread to the outer hull. The article says it was named in 2007, but built in
2008, so I don't really know how old it is, but it's not THAT old.
The vessel was built in Romania. It is now south of Newfoundland, and plans are
to make temporary repairs and go to Boston.
If I were a ship operator, would certainly start checking the steel integrity of any ship built in Romania.
click here for link to article at Maritime Matters
I doubt this will happen...but one can always ask.
(Reuters) - The
chairman of German shipping group Hapag-Lloyd HPLG.UL said rival
Hamburg-Sued should join merger talks between Hapag-Lloyd and Chile's
Vapores VAP.SN.
"The three of us
together would be stronger," Hamburger Abendblatt quoted Juergen Weber
as saying in an excerpt from an article to be published on Friday.
Hapag-Lloyd,
the world's No.5 container shipping company by capacity, earlier this
month said it was in talks to merge with smaller Chilean shipper
Compania Sud Americana de Vapores, adding that no agreement had yet been
reached.
Shipping groups have been struggling through the worst slump on record, with the weak global economy, oversupply of vessels and low freight rates highlighting the benefits of consolidation in the sector.
Hapag-Lloyd,
burdened by 2.35 billion euros ($3.2 billion) of net debt and a
nine-month net loss of 56 million euros, already held talks with
Hamburg-Sued last year, but the parties were unable to agree terms.
The deal would have created the world's No. 4 player behind Maersk Line, part of Danish conglomerate A.P. Moller-Maersk (MAERSKb.CO), Switzerland's Mediterranean Shipping Company and France's CMA CGM CMACG.UL.
Weber
told Hamburger Abendblatt that he hoped Hapag-Lloyd's talks with
Vapores would be a "warning and motivation" for Hamburg Sued's owner,
the Oetker family, to rekindle talks.
He
also said the owners of Hapag-Lloyd still aimed to float shares in the
German shipping company in an initial public offering, though that was
"hardly possible" before the end of 2014, among other because a new
chief executive is due to take the helm next year.
Officials for Hamburg-Sued were not immediately available for comment.
The
city of Hamburg holds 36.9 percent of Hapag-Lloyd, while Klaus Michael
Kuehne, who also controls Swiss logistics group Kuehne & Nagel (KNIN.VX), owns 28.2 percent. German travel group TUI AG (TUIGn.DE) owns a 22 percent stake.
(Reporting by Maria Sheahan; editing by Andrew Hay)
The FMC has fined K-Line and NYK. The press release says they violated 46 U.S.C. 41102 listed below.
My best guess is they were buying space from each other without having a space agreement on file at the FMC, and they were not charging each other as per the tariff.
I recall carriers doing this, thinking there was nothing wrong. It didn't use to be difficult to file these type of agreements (perhaps it is now). Not knowing, or caring, about U.S. law cost each of these carriers over 1 USD million a piece.
(a) Obtaining Transportation at Less Than Applicable Rates.—A
person may not knowingly and willfully, directly or indirectly, by
means of false billing, false classification, false weighing, false
report of weight, false measurement, or any other unjust or unfair
device or means, obtain or attempt to obtain ocean transportation for
property at less than the rates or charges that would otherwise apply.
(b) Operating Contrary to Agreement.—A person may not operate under an agreement required to be filed under section 40302 or 40305 of this title if—
(1) the agreement has not become effective under section 40304 of this title or has been rejected, disapproved, or canceled; or
(2) the operation is not in accordance
with the terms of the agreement or any modifications to the agreement
made by the Federal Maritime Commission.
(c) Practices in Handling Property.—A
common carrier, marine terminal operator, or ocean transportation
intermediary may not fail to establish, observe, and enforce just and
reasonable regulations and practices relating to or connected with
receiving, handling, storing, or delivering property.
And here's the press release from the FMC
December 23, 2013
NR 13-19
Contact: Karen V. Gregory, Secretary (202) 523-5725
The Federal Maritime Commission announced compromise agreements
reached with two common carriers operating pure car carriers (PCCs) and
roll on/roll off (RO/RO) vessels in U.S. inbound and outbound trades.
Under these separate agreements, Kawasaki Kisen Kaisha Ltd. (K Line),
paid $1,100,000 in civil penalties and Nippon Yusen Kaisha (NYK Line),
paid $1,225,000 in penalties. Both carriers are headquartered in Tokyo,
Japan, and operate diverse fleets trading in the U.S.-foreign trades and
globally.
The compromise agreements resolved allegations that K Line and NYK
Line violated provisions of the Shipping Act, including section 10(a) of
the Shipping Act, 46 U.S.C. § 41102(b), by acting in concert with other
ocean common carriers with respect to the shipment of automobiles and
other motorized vehicles by RO/RO or specialized car carrier vessels,
where such agreement(s) had not been filed with the Commission or become
effective under the Shipping Act. The compromise agreements also
addressed related activities and violations. Commission staff alleged
that these practices persisted over a period of several years and
involved numerous U.S. trade lanes, including from and/or to the Far
East, Europe, the Middle East and South America.
Chairman Mario Cordero stated: "These penalties underscore the
seriousness with which the Commission views the carriers’ obligation to
file with the Commission any agreement with other carriers affecting
working relationships in the U.S. trades, both for import and export
traffic. The shipping public has a right to know the subject matter and
scope of any such agreement, and the Commission is charged by Congress
to oversee the parties’ operations and conduct under such agreements.
Investigations by our Bureau of Enforcement as to additional carriers
implicated in similar agreement activities are continuing at this time."
In concluding the compromise agreements, K Line and NYK Line agreed
to provide ongoing cooperation with other Commission investigations or
enforcement actions with respect to these types of activities. The
carriers did not admit to violations of the Act or the Commission’s
regulations. Staff attorneys with the Commission’s Bureau of
Enforcement negotiated the compromise agreements. The Federal Maritime Commission (FMC) is the independent federal
agency responsible for regulating the nation’s international ocean
transportation for the benefit of exporters, importers, and the American
consumer. The FMC’s mission is to foster a fair, efficient, and
reliable international ocean transportation system while protecting the
public from unfair and deceptive practices.
DA Dan Donovan announces the takedown of an insurance fraud ring involving medical professionals and longshoreman
December 18, 2013
STATEN ISLAND, NY – Richmond County
District Attorney Daniel M. Donovan, Jr., New York City Police
Commissioner
Raymond W. Kelly, Commissioner Ronald Goldstock of the Waterfront
Commission of New York Harbor, Special Agent in
Charge Brian Crowell of the U.S. Drug Enforcement Administration’s New
York Division (DEA), Chairman Robert Beloten of the
New York State Workers’ Compensation Board and Superintendent Benjamin
M. Lawsky of the New York State Department of
Financial Services announced today the arrests and indictments of nine
individuals after a 20-month investigation into insurance
fraud, the fraudulent dispensing of prescriptions for controlled
substances, sale and possession of oxycodone and gambling.
Targets of the investigation, dubbed
“Operation Shore Thing,” include MIHIR BHATT, a pain management doctor;
THOMAS E.
DINARDO, a chiropractor; STEVEN ALCARAS, NICHOLAS TORNABENE, ROSARIO
SAVASTANO and CHRISTOPHER
GALASSO, all longshoreman; CHARLES TORNABENE, a laborer, and RITA PATEL,
a pharmacist. The investigation also
yielded the arrest and indictment of longshoreman JOSEPH FAVUZZA, a
known associate of the Colombo crime family who was
running an organized gambling operation which involved an Internet
gambling site.
“My father worked as a longshoreman, so I grew
up knowing the dangers of the job. I can’t imagine how those risks are
multiplied
when people show up to work high on narcotics. But that is exactly what
happened here, longshoremen abusing painkillers
prescribed to them by a pill peddling doctor and a crooked chiropractor
who conspired to rip off millions from insurance companies
in a complex fraud scam. The number of oxycodone pills prescribed by the
doctor in this case is a staggering 1,775,703 over four
years, enough to cover 7 miles if you placed pill in front of pill. That
distance would stretch from Howland Hook to the foot of my
office,” said Richmond County District Attorney Daniel M. Donovan, Jr.
“This case is a clear example of why we need a national
drug database in this country, so that we can track the pill activity in
other states and know when our borough is being inundated
with over-prescribed painkillers. The one sure result of Operation Shore
Thing is that dangerous amounts of oxycodone are no
longer illegally flowing through Staten Island. I also want to note that
I have the highest regard for the workers who are proud to
call themselves longshoremen, and the defendants in this case are an
exception to that noble profession.”
NYPD Commissioner Raymond W. Kelly said, “This
case is another example of criminals perpetuating and exploiting
addiction, at
great risk to the public’s safety. It is especially despicable when
licensed medical practitioners put profit over others’ welfare. I
commend the members of the NYPD’s Organized Crime Investigations
Division for their work in bringing the principals of this
prescription drug and insurance fraud ring to justice.”
Commissioner Ronald Goldstock of The
Waterfront Commission of New York Harbor stated, “The Port is a
dangerous place in
which to work; those who we register deserve to be protected from
co-workers who make decisions and operate machinery under
the influence of narcotics and opioids. We will continue to use our
investigative, administrative and drug testing authority to
remove drug dealers and users from the docks. These arrests and our
administrative revocations make even more disturbing the
New York Shipping Association and I.L.A.’s unsuccessful attempts to curb
the Commission’s enforcement actions regarding drug
testing in the Port.”
DEA Special Agent in Charge Brian R. Crowell
said, “We allege Dr. Bhatt was a pain pill trafficker who wrote over
11,692
prescriptions for Oxycodone products over a two year period, and through
his illegal activities, Dr. Bhatt netted illicit proceeds in
excess of $12 million at the expense of the pain pill and heroin
epidemic our communities face. More than 52 million Americans
have abused prescription drugs at least once in their life. Visits by
individuals to hospital emergency rooms involving the misuse or
abuse of pharmaceutical drugs have doubled over the past five years and
law enforcement remains vigilant in bringing to justice
those drug traffickers responsible for fueling prescription drug abuse
with no regard to public health. I commend the men and
women from the NYPD, the Waterfront Commission of New York Harbor and
the TDS-NY for their diligent investigation.”
Chairman Robert Beloten of NYS Workers’
Compensation Board stated, “The Workers’ Compensation Board protects
injured
workers against doctors who overprescribe, who don’t provide the
treatment they’re billing for, and who keep their patients in the
system not for health care but to line their own pockets. People hurt at
work deserve the best health care possible, so we’ll continue
fighting health care fraud at all levels with all law enforcement
agencies to ensure the integrity of the system.”
Benjamin M. Lawsky, Superintendent of the
Financial Services, said: “As alleged, this criminal network reaped
millions of dollars
in illicit profits by trafficking in illegal drugs and engaging in
insurance fraud and kickbacks. These arrests help put the brakes on
that scheme. The Department of Financial Services thanks District
Attorney Daniel M. Donovan, Jr. and all the law enforcement
agencies which worked on this investigation.”
“Operation Shore Thing” commenced in March
2012 and included the use of confidential sources, undercover police
officers,
electronic surveillance and physical surveillance. The scam was
perpetrated by defendant BHATT, who engaged in stealing from
insurance companies and fraudulently dispensing narcotic drugs under the
guise of a pain management enterprise.
Patients paid for the alleged pain management
services by using their insurance and received prescriptions for
oxycodone based
upon perfunctory or nonexistent treatment rendered by BHATT at the NYC
Wellness Center at 4870 Hylan Blvd., Staten Island,
New York, which is owned and operated by DINARDO, and other locations.
BHATT billed insurance companies using his own
name and through his business, BMB Medical P.C.
DINARDO would bring patients into his offices,
the NYC Wellness Center, and then he and BHATT would direct them to
make
return office visits, receive chiropractic treatment, magnetic resonance
images, nerve conduction tests, and electromyography
(“EMGs”), to support a long term insurance billing scheme and the
dispensing of oxycodone prescriptions.
These exams, if done at all, were not
conducted properly, and were conducted to give the appearance of an
examination to justify
further billable office visits, dispensing prescriptions for oxycodone,
and lengthy workers compensation claims. Participating
patients would call to get prescriptions for oxycodone and would receive
them in return for billable office visits that did not occur,
or which were perfunctory and lasted only an average 3-5 minutes.
Insurance companies would then be billed for procedures that
took 25, 40, or 60 minutes.
BHATT and DINARDO decided which patients were
too risky to see because of possible law enforcement surveillance and
instructed members of the enterprise on how to avoid detection by law
enforcement. DINARDO employed a lookout to surveil
possible law enforcement activities in the vicinity of the NYC Wellness
Center. He also flagged patients who presented a risk of
exposing his criminal/fraudulent activities due to their age, reputation
for talking too much, and likelihood of getting caught in
illegal pill related activities. BHATT paid DINARDO monetary
compensation, under the guise of rent, for providing the location
and patients for the fraud.
BHATT also dispensed prescriptions from his
Lyle Place home in Edison, New Jersey, which was not a medical office,
while
indicating in insurance claims that the prescriptions were generated
from office visits occurring in Staten Island. In addition to
utilizing NYC Wellness Center, BHATT also perpetrated his fraudulent
activities at medical offices located at 456 Arlene St. and
3733 Richmond Avenue in Staten Island, New York, and a location in
Queens.
As part of the conspiracy, BHATT billed
Connecticut General Life Insurance (“Cigna”) and Empire Blue Cross Blue
Shield for
services that he did not provide. BHATT also issued prescriptions to
ALCARAS, GALASSO, SAVASTANO, NICHOLAS
TORNABENE and CHARLES TORNABENE that were paid for, in part, with CVS
Caremark insurance.
BHATT would direct patients to use PATEL,
of the Shayona Pharmacy at 147 Smith St. in Perth Amboy, New Jersey, to
fill their
prescriptions. PATEL, in turn, directed BHATT to issue oxycodone
prescriptions to patients based upon their insurance coverage
so as to maximize the profit of the conspiracy. PATEL also instructed
BHATT how to prescribe oxycodone to avoid detection by
law enforcement. Further, PATEL would charge BHATT’s patients more than
their insurance copayment to fill their oxycodone
prescriptions, yielding herself an ill-gained profit.
ALCARAS, a longshoreman, managed
appointments and the picking up of prescriptions of oxycodone, for the
other, separately
indicted longshoremen, who received prescriptions for oxycodone without
exams by BHATT or after perfunctory visits to his offices. ALCARAS
communicated with both BHATT and DINARDO about the suitability for
inclusion or exclusion of individual
longshoreman as patients. ALCARAS also communicated with BHATT and
DINARDO when longshoreman were needed at one
of BHATT’s offices for fraudulent exams to justify further fraudulent
billing of insurance companies, or to receive fraudulent
doctor’s notes to avoid losing their registration as longshoreman.
From on or about and between Feb. 26, 2013,
and April 26, 2013, GALASSO filed false instruments with the Waterfront
Commission in order to avoid decasualization, which is the process of
removing longshoremen from the register based on failure to
meet the work requirements. Specifically, ALCARAS and GALASSO requested
doctor’s notes from BHATT and DINARDO for
medical treatment of GALASSO that did not occur, and instructed them on
how the notes should be written.
In addition to participating in the
insurance fraud, some of the longshoreman also evaded drug tests at
work, learning about them
beforehand and using devices like prosthetics, cleansing drinks and
synthetic urine to try and pass the test. The investigation also
uncovered that several of the longshoreman also went to work under the
influence of narcotics. NICHOLAS TORNABENE also
engaged in selling drugs.
Recovered during the execution of search
warrants were $3 million in assets, as well as 12 pounds of gold and a
quantity of
oxycodone.
This case is being prosecuted by Assistant District Attorney Gabriel McKeen of the Richmond Country District Attorney’s Office,
under the supervision of Assistant District Attorney Amy Legow, Chief of the Investigations Bureau. Also assisting in the
prosecution is Assistant District Attorney David Frey, Deputy Chief of the Investigations Bureau.
Participating agencies and investigators were:
• Detective Jeffrey Quod and members of the New York Police Department’s Organized Crime Investigation Division,
Major Investigations Section team, acting under the supervision of Captain John Dusanenko and Lieutenant Jack Iacovou.
• Detective Ralph Grasso and members of Waterfront Commission New York Harbor Brooklyn Field Office, acting under
the supervision of Capt. Jeffrey Heinssen. Also, attorney Jeffrey Kwastel of the Waterfront Commission, who was sworn
in as a special ADA to assist in the investigation and indictment.
• Detective Lisa Paskewitz and members of the NYPD Asset Forfeiture Unit and the El Dorado Task Force from
Immigrations and Customs Enforcement, acting under the supervision of Sgt. Gary Galitsky and Lieutenant Charles
Scalzo. Detective Paskewitz also worked on the Asset Forfeiture Task Force for Homeland Security, acting under the
supervision of Shawn Polonet, group supervisor for the Asset Forfeiture Unit, Homeland Security Investigations, New
York.
• The DEA’s Tactical Diversion Squad which is comprised of agents and officers from the DEA, NYPD, Town of
Orangetown, Westchester County Police Department, acting under the direction of DEA Supervisory Special Agent
Special Agent in Charge Brian R. Crowell.
• Inspector General Paul D’Emilia of the New York State Workers’ Compensation Board. Part of the case was also handled
by Pamela Davis and David Regazzi, Office of the Fraud Inspector General, New York State Workers’ Compensation
Board.
• Senior Investigator Ed Miller and Deputy Chief Investigators Joe Edwards and Anthony Gonzalez of the New York State
Department of Financial Services, under the overall supervision of Frauds Bureau Deputy Director Angelo Carbone,
Director Frank Orlando and Executive Deputy Superintendent Joy Feigenbaum.
• Brendan Vallely from the Bureau of Narcotics Enforcement, New York State Department of Health
Also, special thanks to AIG and Emblem
Health insurance companies for their cooperation, as well as Cigna,
Empire Blue Cross
Blue Shield, Aetna and CVS Caremark.
And, credit is to be given to the Middlesex County Prosecutor’s Office for assisting in the investigation.
The charges contained in the indictments
are merely allegations, and the defendants are presumed innocent until
proven guilty. The
defendants are facing various felony counts including enterprise
corruption, scheme to defraud, grand larceny, insurance fraud,
filing false business records and conspiracy. FAVUZZA is facing several
gambling charges.
Mihir Bhatt, 47
Medical Doctor
03/07/1966
22 Lyle Place, Edison, NJ
Arrested 12/17/13 in New Jersey, awaiting extradition
If convicted of the top charge, enterprise corruption, he faces a maximum of 25 years in prison.
Thomas E. Dinardo, 44
Chiropractor
06/16/1969
3755 Amboy Road, SI NY
Arrested and arraigned 12/17/13
Bail set at $90,000
If convicted of the top charge, enterprise corruption, he faces a maximum of 25 years in prison.
Steven John Alcaras, 42
Longshoreman, assigned to the Brooklyn Cruise Terminal
06/24/1971
759 Katan Ave., SI NY
Arrested and arraigned 12/17/13
Bail set at $77,500
If convicted of the top charge, enterprise corruption, he faces a maximum of 25 years in prison.
Nicholas Tornabene, 28
Longshoreman, assigned to the New York Container Terminal at Howland
Hook
08/01/1985
8217 16th Ave., Brooklyn NY
Arrested and arraigned 12/17/13
Bail set at $25,000
If convicted of the top charge, criminal sale of a controlled substance
in the 3rd degree, he faces a maximum of 9 years in prison.
Charles Tornabene, 28
Laborer
08/01/1985
8217 16th Ave., Brooklyn NY
Arrested and arraigned 12/17/13
Bail set at $15,000
If convicted of the top charge, insurance fraud, he faces a maximum of 7 years in prison.
Rosario Savastano, 28
Longshoreman, assigned to the Brooklyn Cruise Terminal
02/27/1985
1777 West 12th St, Brooklyn NY
Arrested and arraigned 12/17/13
Bail set at $15,000
If convicted of the top charge, insurance fraud, he faces a maximum of 7 years in prison.
Christopher Galasso, 29
Longshoreman, assigned to the Brooklyn Cruise Terminal
06/07/1984
456 Fanning St., SI NY
Arrested and arraigned 12/17/13
Bail set at $15,000
If convicted of the top charge, insurance fraud, he faces a maximum of 7 years in prison.
Joseph Favuzza, 29
Longshoreman, assigned to the New York Container Terminal at Howland Hook (suspended since 2012 on separate cases)
10/23/1984
92 Fahy Ave., SI NY
Arrested and arraigned 12/17/13
Bail set at $5,000
If convicted of the top charge, promoting gambling, he faces a maximum of 4 years in prison.
Rita Patel, 48
Pharmacist
06/20/1965
4 Hauser Lane, Matawan NJ
Arrested 12/17/13 in New Jersey, awaiting extradition
If convicted of the top charge, criminal sale of a prescription for a
controlled substance, she faces a maximum of 15 years in prison.
--------------------------------
Counterfeit goods have been available in Chinatown in NYC for a long time. Even John Stewart makes jokes about it on his show. Of course, someone must import these goods.
The FBI has made arrests in one operation of counterfeit imports, plus money laundering.
This is from the FBI web-site. The FBI is really busy, and reading their press releases is
quite an eye opener.
Nine Admit Guilt in Largest Counterfeit Goods Conspiracy Ever Charged
U.S. Attorney’s Office
December 13, 2013
NEWARK, NJ—Nine members of a massive, international counterfeit goods
conspiracy have admitted their roles in the scheme, U.S. Attorney Paul
J. Fishman announced.
Hai Dong Jiang, 37, and Fei Ruo Huang, 37, both of Staten Island, New
York; Hai Yan Jiang, 34, of Richardson, Texas; Xiance Zhou, 39, and
Jian Chun Qu, 33, both of Bayside, New York; and Ming Zheng, 48, of New
York, pleaded guilty today before U.S. District Judge Esther Salas in
Newark federal court. Dong Jiang, Ruo Huang, and Yan Jiang pleaded
guilty to informations charging them each with one count of conspiracy
to traffic in counterfeit goods. Xiance Zhou and Qu pleaded guilty to
informations charging them each with one count of conspiracy to
structure money. Zheng pleaded guilty to an information charging him
with a conspiracy to launder money.
Wei Qiang Zhou, 38, of Brooklyn, New York, pleaded guilty December 3,
2013; Patrick Siu, 41, of Richardson, Texas, pleaded guilty December 4,
2013; and Da Yi Huang, 43, of Staten Island, pleaded guilty December
11, 2013, all before Judge Salas in Newark federal court, to
informations charging them each with one count of conspiracy to traffic
in counterfeit goods.
According to documents filed in this case and statements made in court:
From November 2009 through February 2012, the defendants ran one of
the largest counterfeit goods smuggling and distribution conspiracies
ever charged by the Department of Justice. The defendants and others
conspired to import hundreds of containers of counterfeit
goods—primarily handbags, footwear, and perfume—from China into the
United States in furtherance of the conspiracy. These goods, if
legitimate, would have had a retail value of more than $300 million.
The counterfeit goods were manufactured in China and smuggled into
the United States through containers fraudulently associated with
legitimate importers, with false and fraudulent shipping paperwork
playing a critical role in the smuggling scheme. Some of the
conspirators created and managed the flow of false shipping paperwork
between China and the United States and supervised the importation of
counterfeit goods, and others controlled the importation of the
counterfeit goods into the United States.
Other conspirators managed the distribution of counterfeit goods once
those goods arrived in the United States. After importation, the
counterfeit goods were delivered to warehouses and distributed
throughout New York, New Jersey, and elsewhere. Certain conspirators
paid large amounts of cash to undercover law enforcement officers to
assist in the removal of counterfeit goods from the port.
Some conspirators acted as wholesalers for the counterfeit goods,
supplying retailers who sold counterfeit goods to customers in the
United States. Other conspirators were money structurers who arranged
for cash to be wired to China in amounts small enough to avoid
applicable financial reporting requirements to evade detection of the
smuggling scheme and related proceeds.
Law enforcement introduced several undercover special agents
(collectively, the UCs) to the conspirators. The UCs purported to have
unspecified “connections” at the port, which allowed the UCs to release
containers that were on hold and pass them through to the conspirators.
The conspirators paid the UCs for these “services.” In total, during the
course of this investigation, the conspirators provided the UCs more
than $2 million.
UCs recorded dozens of phone calls and in-person meetings with
various conspirators. The investigation also utilized several
court-authorized wiretaps of telephones and electronic communications.
China Raises Ship-Scrapping Subsidy 50% to Trim Overcapacity
By Jasmine WangDec 10, 2013 3:35 AM ET
Photographer: Qilai Shen/Bloomberg
Shipyard workers sweep the ground at an assembly area at the Dalian shipyard in Dalian,... Read More
China, the world’s biggest
shipbuilding nation, will increase cash subsidies for scrapping
obsolete ships by 50 percent to help cut overcapacity and
emissions.
The government will grant 1,500 yuan ($247) per gross ton
for shipping companies to replace obsolete ships, according to a
statement on the transport ministry website yesterday. The award
applies to vessels scrapped in the years 2013 through 2015.
Chinese shipbuilders also stand to benefit from the
subsidy, half of which is awarded only after replacement orders
are placed. China Rongsheng Heavy Industries Group Holdings (1101), the
nation’s biggest shipyard outside state control, rose 8.9
percent to close at HK$1.22 in Hong Kong. China Shipping
Development Co. (1138), a Shanghai-based commodities shipping company,
gained 0.9 percent to HK$5.35. The city’s benchmark Hang Seng
Index fell 0.3 percent today.
“The program will be positive for the shipbuilding sector
in the long term,” said Lawrence Li, a Shanghai-based analyst
at UOB Kay-Hian Holdings Ltd. “In the near term, it may not be
material for the shipping industry, as the incentive is not
attractive enough and many cash-strapped shipping firms may not
be able to place new orders amid a bad market.”
New Orders
Under the new program, ship operators get half the money
upon completing scrapping and the rest after placing new
building orders, according to the statement. By comparison,
under a 2010 rule, they had to complete scrapping and place new
ship orders before getting any of the subsidy.
The program is “somewhat disappointing” as it didn’t
lower the age requirement for ships that can be scrapped, which
means less tonnage is eligible, according to a note published
today by Credit Suisse Group AG analysts led by Davin Wu.
The Baltic Dry Index (BDIY), the benchmark for commodity-moving
rates, has slumped 41 percent in the past four years. The
monthly index that tracks prices for all types of vessels
dropped 31 percent in November from its peak in September 2008,
when the global financial crisis caused orders to slump,
according to Clarkson Plc, the world’s biggest shipbroker.
To contact the reporter on this story:
Jasmine Wang in Hong Kong at
jwang513@bloomberg.net
To contact the editor responsible for this story:
Vipin V. Nair at
vnair12@bloomberg.net
As has been reported in the last week, Hapag-Lloyd and CSAV are holding talks. Initial reports
said they were planning a merger, but as per Bloomberg News, the talks appear to center more
on a "possible business combination". It's very difficult for two companies to come together, which is
why Hapag-Lloyd and Hamburg Sud did not come to terms during their merger talks.
However, as each company bleeds money, there will be more incentive to come to an agreement.
Not sure of the official forecasts, but my guess is this industry still has a few more bad years before a major turn around. Actually, it could be even worse than that, as the shipyards in China haven't closed down, and those ships have to go somewhere!
Hapag-Lloyd Talks to CSAV About Tie-Up to Fight Industry Slump
By Nicholas BrautlechtDec 5, 2013 2:08 AM ET
Hapag-Lloyd AG is discussing a
possible merger with Cia. Sud Americana de Vapores SA, Latin
America’s biggest container shipping line, as the companies
struggle to overcome a global trade slump that has left the
industry in crisis.
The talks are focused on whether “a possible business
combination or any other form of association would be of mutual
interest,” Hamburg-based Hapag-Lloyd said in a statement today.
Hapag-Lloyd, the biggest German container line with a fleet
of 152 vessels, is still reeling from the slump triggered by the
2008 collapse of Lehman Brothers Holdings Inc., reporting a 64
percent decline in profit for the third quarter, its peak
season. It’s turning its sights to CSAV after talks to merge
with local competitor Hamburg Sued, owned by family-owned German
holding company Oetker-Group, failed in March because
shareholders of both companies couldn’t agree on terms.
The talks with Valparaiso, Chile-based CSAV “have not
resulted in any binding or non-binding agreement between the
parties,” Hapag-Lloyd said in the statement, without
elaborating further.
CSAV surged 13 percent, the most in more than a year, after
Die Welt newspaper reported last night that the Latin American
container shipper is negotiating a merger with its German rival.
CSAV’s 86 percent loss in the past three years is the worst
performance among peers tracked by Bloomberg. In response to a
glut of new vessels, operators such as A.P. Moeller-Maersk A/S
are forming alliances with competitors to lower costs and
eliminate excess capacity on trade routes.
Billionaire Luksics
The billionaire Luksic family controls CSAV with a 46
percent stake. The Luksic’s holding company Quinenco SA (QUINENC) has put
more than $1 billion into CSAV in the past two years after the
company lost a record $1.25 billion in 2011.
Top executives of Hapag-Lloyd and CSAV last month met in
Miami to discuss a possible merger, Die Welt reported on its
website, without saying where it got the information.
Hapag-Lloyd is owned by a group of shareholders including
German tourism company TUI AG (TUI1), HSH Nordbank AG and the city of
Hamburg. TUI, which holds a 22 percent stake, has endorsed an
initial public offering of the shipping company. CEO Friedrich Joussen on Nov. 7 said that he doesn’t expect an exit through an
IPO before Hapag-Lloyd’s Rolf Habben-Jansen replaces current CEO
Michael Behrendt next July.
Hapag-Lloyd formed an alliance in Asia-Europe trade, called
G6, in March 2012. The other partners are APL, Hyundai Merchant (011200)
Marine, Mitsui O.S.K. Lines (9104), Nippon Yusen (9101) Kaisha and Orient
Overseas Container Line.
To contact the reporter on this story:
Nicholas Brautlecht in Hamburg at
nbrautlecht@bloomberg.net
To contact the editor responsible for this story:
Angela Cullen at
acullen8@bloomberg.net
Finally, after 60 years the Waterfront Commission is doing their job. It's a bit difficult for the ILA
officials to understand that just because they say something, does not make it true.
Witness this statement (as reported by the Waterfront Commission)
In today’s statement attacking the Commission’s efforts, NYSA President
John Nardi staggeringly asserted that the ILA is “already a diverse
workforce.” This is directly contradicted by the demographics of the
only two ILA locals that have joined in the lawsuit, Local 1804-1 and
Local 1814, whose registrants are less than 2% and 8% African American,
respectively. It is for this very reason that the New York State
Division of Human Rights has filed charges against the NYSA, MMMCA, ILA,
and ILA locals alleging discriminatory hiring.
Seriously John? The ILA is a diverse workforce? I guess you don't know how to read demographic statistics. I highlighted to word "staggeringly", which I am sure was not the first choice of words which came to mind after reading this statement.
Anyway, here is the link to the full report, and the full report
WCNYH Statement of the Waterfront Commission of New York Harbor in Response to Press Release by NYSA and ILA Regarding Lawsuit Filed
November 22, 2013
Today, the New York Shipping Association,
Inc. (NYSA) and International Longshoremen’s Association, AFL-CIO (ILA)
announced the filing of their complaint against the Waterfront
Commission of New York Harbor. That complaint, which alleges
interference in their collective bargaining process, is actually
designed to prevent the Commission from fulfilling its mandate to ensure
the fair hiring of a diverse workforce in the Port.
Those allegations of improper interference
with the collective bargaining process are categorically untrue. Over
the past sixty years, courts have consistently upheld the Commission’s
actions when a collective bargaining agreement has violated the letter
and spirit of the Waterfront Commission Act.
As shown by public hearings, current
provisions in the collective bargaining agreements of the ILA, NYSA and
Metropolitan Marine Maintenance Contractors Association (MMMCA) have
perpetuated disparate hiring practices, resulting in an incredible lack
of diversity in waterfront employment, as well as an income gap among
those minorities that are employed there. Indeed, the hiring, training
and promotion practices of the industry have led to no/low-work,
no/low-show positions generally characterized by outsized salaries
provided to a privileged class. Those with such positions are
overwhelmingly given to white males connected to organized crime figures
or union leadership.
In today’s statement attacking the
Commission’s efforts, NYSA President John Nardi staggeringly asserted
that the ILA is “already a diverse workforce.” This is directly
contradicted by the demographics of the only two ILA locals that have
joined in the lawsuit, Local 1804-1 and Local 1814, whose registrants
are less than 2% and 8% African American, respectively. It is for this
very reason that the New York State Division of Human Rights has filed
charges against the NYSA, MMMCA, ILA, and ILA locals alleging
discriminatory hiring.
To combat such practices, the
Commission has asked that the industry implement a hiring plan that will
result in individuals being hired in a fair and non-discriminatory
basis in accordance with state and federal laws - - as is required of
all other employers. In response, the NYSA and ILA issued a press
release expressing frustration with the Commission’s “bureaucratic
delays,” claiming labor shortages have had a resultant negative economic
impact on cargo flow. During subsequent discussions with The Port
Authority of New York and New Jersey, the NYSA was forced to retract
that statement and publicly agreed that the Commission was, and is not,
delaying hiring, and that applicants were actively processed.
Indeed, the Commission has expeditiously
processed each and every applicant referred, in order to put people to
work in the Port as quickly as possible. Many NYSA and ILA referrals
have been prequalified and are now ready for employment. The Commission
has also offered a diverse prequalified pool of labor assembled from
government employment centers in New York and New Jersey, to alleviate
any immediate labor shortages. Those individuals, once described by ILA
President Harold Daggett as “garbage,” were summarily rejected, with
the NYSA claiming that their employment was prohibited by the provision
of the collective bargaining agreement at issue.
In today’s press release, the NYSA and ILA
indicated that the Commission has obstructed their efforts to achieve
productivity and growth. Over the past several weeks, terminal
operators have indicated that there is a growing need for immediate
labor. As of today, there are 136 individuals – many of whom are
military veterans – prequalified to be put to work in the Port. To
date, the industry has simply chosen not to do so. Instead, they have
responded with a baseless lawsuit.
The NYSA’s last meritless attempt to
challenge the Commission’s authority was summarily dismissed by the
federal court, and its appeal was likewise denied. That litigation
needlessly depleted its members’ resources. Today the NYSA has
definitively demonstrated that it no longer represents the interests of
its terminal operator members but, rather, that of the ILA. This
attempt to institutionalize discrimination through collective bargaining
agreements will not be tolerated. The Waterfront Commission of New
York Harbor will vigorously and successfully defend this lawsuit.
European Union regulators opened an
antitrust investigation into container liner shipping companies,
saying they signaled pricing changes to each other with press
and website statements.
“Since 2009, these companies have been making regular
public announcements of price increase intentions through press
releases on their websites and in the specialized trade press,”
the EU said in an e-mailed statement today. “These
announcements are made several times a year and contain the
amount of increase and the date of implementation, which is
generally similar for all announcing companies.”
The pricing announcements may allow the companies to signal
future pricing plans to each other and could allow them to raise
prices on transport services to and from Europe, regulators
said.
The European Commission didn’t identify the companies in
the probe in today’s statement.
AP Moller-Maersk A/S, owner of the world’s largest
container shipping company, CMA CGM SA and Hapag-Lloyd were
among companies raided by EU officials in 2011 over possible
collusion. EU regulators are also gathering market information
over a pact between Maersk, CMA CGM and Mediterranean Shipping
Co. to create the largest container alliance.
Shipping companies have not yet understood how they should operate without the price collusion they were accustom to in the old days of conferences. It's a new world, but they just don't get it.
It looks good on paper. Note the comment " persistently
volatile environment". Which is true for all companies in international shipping. Rough waters ahead.
2013 third quarter financial results
Improvement in operating margin to 6.6%; Record high
volumes carried; An effective operating model in a persistently
volatile environment
The Board of Directors of CMA
CGM Group, the world’s third largest container shipping group, met under
the chairmanship of Jacques R. Saadé, Chairman and Chief Executive
Officer, to review the financial statements for the third quarter 2013.
During
the period, consolidated revenue amounted to $4.1 billion, up 1.4% over
the second quarter and down 2.1% year-on-year. Volumes carried rose by
11.0% year-on-year to 3.0 million twenty-foot equivalent units (TEUs), a
new historical record for the Group. The average revenue per TEU
declined by 11.8% year on year, when Asia-Northern Europe market rates,
as measured by the SCFI, contracted by more than 45% over the quarter.
This
performance in terms of volumes and price resistance illustrates CMA
CGM’s resilience in a market that remains extremely volatile. The Group
is evidencing the benefits derived from its size and global presence,
which are enabling it to diversify its activities by geography, customer
category and service solution, particularly in its onshore operations.
During the third quarter, CMA CGM reported:
-
$238 million in consolidated EBIT, versus $541 million in the
third-quarter 2012. Excluding non-recurring items, core EBIT stood at
$271 million for the period.
- A 6.6% EBIT margin before non-recurring items, one of the highest in the industry.
-
$70 million in consolidated net profit for the period, bringing the
total to $434 million for the first nine months of the year.
Business
in the third quarter contributed to maintaining consolidated cash and
cash equivalents at nearly $1.1 billion. Net debt amounted to $3.7
billion as of 30 September, for a gearing ratio of 0.77.
Significant events during the quarter
As
part of their future P3 operational alliance, CMA CGM, Maersk Line and
MSC Mediterranean Shipping Company SA finalized their operating
agreements on the Asia-Europe, Transatlantic and Transpacific trades. As
announced, subject to the approval by the various regulatory
authorities, these services will be deployed in second-quarter 2014.
CMA
CGM has signed a strategic contract with SAP to implement a new
information system dedicated to container shipping that will be deployed
starting late 2015. This investment will enable the Group to improve
its operating performance.
Outlook for 2013
To
further strengthen the Group’s liquidity position, an additional $200
million securitization programme was set up in October 2013.
Lastly, Moody’s has upgraded the Group’s rating to B2 with a stable outlook.
Given
the usual year-end seasonal variations and currently prevailing freight
rates, performance in the final three months of the year will likely
see a decline compared with the third quarter 2013.
Financial Highlights
Q3 2012
Q3 2013
2012 year to date
2013 year to date
Change (%)
Revenue in $ billions
4.2
4.1
11.9
12.0
+0.3%
EBIT in $ billions
+541
+238
+828
+852
+2.9%
Adjusted EBIT* in $ billions
+541
+271
+822
+638
-22.4%
Consolidated net profit in $ millions
+363
+70
+284
+434
+52.6%
Return on invested capital***
8.3%
10.9%
8.3%
10.9%
N/A
Volumes carried in TEU millions**
2.7
3.0
8.0
8.5
+7.0%
Fleet (number of vessels
412
430
412
430
+4,4%
Fleet capacity in TEU thousands*
1,425
1,559
1,425
1,559
+9.4%
* Excluding non-recurring items (asset disposals and impairment losses)
** TEU = twenty-foot equivalent units
*** Calculated over a rolling 12-month period
0537 |
origin_ssl_mode: 0
The other item of interest is the price of oil. It topped $100 the first of the year when everyone thought
the economies were improving (and hedge funds were trading in oil), but then it dropped, and
then came back up. It's in the 90's now. It should really be lower, but there is too much manipulation
in the market.
Just hope this doesn't get thrown out because of the CFTC blunder. If I were a shipping company,
I would start a lawsuit against these folks, because they cost you a lot of money in fuel costs. Well, they cost all of us a lot of money.
Some of the world’s largest oil
traders including Vitol Group, Morgan Stanley and Royal Dutch
Shell Plc (RDSA) are asking a judge to stop the disclosure of millions
of records gathered by the top U.S. commodity regulator during
its nationwide investigation of the crude markets.
The haul includes e-mails, depositions, trading records and
audio files obtained by the U.S. Commodity Futures Trading
Commission since its probe of the oil market began in December
2007. The companies appealed an Oct. 25 order by U.S. District
Judge William H. Pauley that would allow the handover of the
trove to lawyers leading a civil case alleging market
manipulation by firms controlled by Norwegian billionaire John Fredriksen. The U.S. Court of Appeals in New York today ordered
a temporary stay halting the release of the records while it
considers speeding up review of the challenge.
The battle over the records reveals for the first time the
breadth of the CFTC’s investigation. The agency told Pauley in
August that 5.7 million documents and almost 200,000 audio files
had been sent to the defendants in the manipulation case. Many
of the files came from the national probe.
“Society needs more inspection of trading in the crude oil
markets, not less,” said Chris Lovell, an attorney with Lovell
Stewart Halebian Jacobson LLP in New York, who is leading the
case and seeking class action status on behalf of traders who
claim to have lost money because of alleged manipulation.
“These guys should be subject to more transparency. I think
we’d all be better off.”
‘Highly Confidential’
Pauley’s Oct. 25 order sharply restricts access to
materials from the CFTC cache that the companies claim are
“highly confidential.” Circulation of the documents will be
limited, and Lovell and other attorneys involved in the civil
case will have to sign declarations promising to comply with the
confidentiality provisions. Use of the files for any other
business purpose, such as trading strategies or unrelated
lawsuits, is forbidden.
The case stems from the CFTC’s 2011 claims against Nick
Wildgoose and James Dyer, traders at Fredriksen affiliates
Parnon Energy Inc. in Houston and Arcadia Petroleum Ltd. in
London. They are accused of manipulating the oil market in 2008
as prices rocketed toward $147 a barrel. The defendants have
denied the allegations. Some of the companies whose records were
disclosed to Parnon earlier this year weren’t notified until
after the files were sent, court records show.
“We believe the CFTC may have improperly disclosed certain
records,” said Brad Leone, a spokesman for Plains All American
Pipeline LP (PAA), one of the companies appealing Pauley’s order.
Trading Fraternity
The dispute is the latest blow for a trading fraternity
that has long prized secrecy.
In May, the European Commission raided the offices of
Shell, BP Plc and Statoil ASA along with price reporting company
Platts as part of a probe into how benchmark energy prices are
set. The commission hasn’t charged any of the companies with
wrongdoing. Last month, four longtime traders on the New York
Mercantile Exchange filed a lawsuit claiming they can prove that
BP, Statoil and Shell conspired with other firms, including
Morgan Stanley and Vitol, to manipulate Brent crude, a benchmark
used to price more than half the world’s oil.
Shell, Morgan Stanley (MS), Vitol, Plains and Castleton
Commodities International LLC have appealed Pauley’s order.
Spokesmen for Vitol, Shell and Morgan Stanley declined to
comment; an attorney for Castleton didn’t return calls and an e-mail seeking comment.
‘Public Interest’
“These documents obviously have public interest value,”
said Michael Greenberger, a former director of trading and
markets at the CFTC and a law professor at the University of
Maryland. “Within the CFTC papers, there may be evidence of
manipulation of the market that has not been acted upon
aggressively by the CFTC.”
Despite the confidentiality restrictions and the CFTC’s
redactions, the files have already put lawyers for Wildgoose and
Dyer “tantalizingly close” to identifying a confidential
informant whose tip led to the charges, Jonathan P. Robell, a
CFTC attorney, said during an Aug. 29 hearing.
At least one informant told the CFTC about Parnon’s trading
“and essentially said there’s something rotten, if not in
Denmark, in Cushing, Oklahoma,” Pauley said at an Aug. 2
hearing.
Parnon’s lawyers used the CFTC records to find and subpoena
the informant’s attorney and identify the company the whistle-blower worked for, court records show. Documents including the
identity of the informant’s attorney were sealed by the court.
WTI Manipulation
The CFTC in May 2011 accused Parnon of manipulating prices
of West Texas Intermediate crude available at Cushing, the
delivery point for the U.S. benchmark Nymex futures.
Parnon and its affiliates, subsidiaries of Fredriksen’s
Cyprus-based Farahead Holdings Ltd., bought up a large share of
WTI, then exploited its dominant position to create a perception
that supplies were scarce in January 2008 and again March 2008,
the CFTC said. That drove prices higher, allowing them to make
money on a sizable derivatives bet, the CFTC said.
Wildgoose and Dyer then dumped their supplies, sending oil
into a tailspin while profiting on derivatives that rose in
value as prices fell, the CFTC said. The abrupt selloff cost the
firm $15 million, which was more than offset by a $50 million
gain on their paper positions.
Attorneys representing the defendants declined to comment.
Viking King
Fredriksen, a shipping magnate known within the industry as
“The Viking King,” said in May 2011 that the CFTC’s lawsuit
was “rubbish.”
“This came as a surprise to me, I wasn’t aware of it,”
Fredriksen said in an interview outside Oslo at the time.
“Those who work with buying and selling oil, that’s how they
operate all of them. It’s completely normal.”
Plains told the court that the company provided more than 1
million pages to the CFTC, including transcripts of confidential
depositions of Plains employees. Court records show the CFTC in
2010 deposed John von Berg, a senior vice president with Plains,
and Hugo Zagaria, a director with the company.
Plains provided its records to the CFTC “in response to an
unsolicited subpoena associated with a proceeding for which
Plains was not a target,” Leone said.
Parnon has also subpoenaed Zagaria and von Berg, and Plains
tried to quash the subpoena, court records show. The company
also asked Parnon to provide declarations saying Zagaria and von
Berg hadn’t participated in any manipulation with the
defendants, according to an Oct. 11 e-mail from Elizabeth
Bradshaw, an attorney at Winston & Strawn LLP representing
Parnon.
Plains Strategies
“Plains’s documents, even though several years old,
provide a road map for Plains’s business strategies,” the
company said in its Nov. 13 request that the U.S. Court of
Appeals stay Pauley’s order. “They demonstrate how Plains makes
pricing decisions, its profit margins, and its hedging and risk-management strategies.”
Shell said the records the company turned over to the CFTC
included details of its “refining operations, pipeline
capacity, storage capacity and trading of crude oil,” court
records show
Morgan Stanley gave the CFTC “detailed and highly
confidential records pertaining to its commodity trading
business,” according to a June court filing. The records, if
released, “would potentially reveal strategies employed by
Morgan Stanley traders.”
Vitol gave 1.4 million pages to the CFTC between 2008 and
2010 pursuant to requests from the agency and “in response to
investigative subpoenas.”
“We’ve argued to the court that the deliverable supply and
how the crude oil markets work and the communication among those
trading in the market, are all pertinent to the case,” Lovell
said.
U.S. oil stockpiles expanded last week by 375,000 barrels
to 388.5 million, the Energy Information Administration said
today. Supplies at Cushing climbed to 39.9 million.
The case is In Re: Crude Oil Commodity Futures Litigation,
11-cv-03600. The CFTC case is U.S. Commodity Futures Trading
Commission v. Parnon Energy Inc., 11-cv-3543, U.S. District
Court, Southern District of New York (Manhattan). The appeal is
U.S. Commodity Futures Trading Commission v. Parnon Energy Inc.,
13-04206, Second U.S. Circuit Court of Appeals (Manhattan).
The Waterfront Commission of New York/New Jersey posted on their web-site the official report submitted to the Governors of New Jersey and New York. This report was issued in March 2012, but references public hearings conducted in 2010. Not sure what took them so long to issue the report. The wheels of government turn slowly.
I remember after the economic collapse, many shipping companies thought it was the right time
to invest. Cheap ships, cheap money. Just wait it out, things will improve.
It's not that easy. Prime example of the long, long, business cycles of the shipping business.
Korean Shipping Lines Face Cash Crunch After Expansion
By Kyunghee Park -
Nov 14, 2013 4:40 AM ET
South Korea’s three biggest shipping
companies face a cash crunch as 3 trillion won ($2.8 billion) of
bonds are due for repayment in the next two years amid mounting
losses from a global slump in rates to carry cargo. Hanjin Shipping Co. (117930), Hyundai Merchant Marine Co. (011200) and STX
Pan Ocean Co. (028670) are all forecast to post losses in 2013 for a
third consecutive year, further denting the combined 1.3
trillion won of cash and near cash items they had as of the end
of September. The companies need to repay 1.4 trillion won of
bonds next year and 1.6 trillion won the year after.
A debt-fueled expansion after the 2008 Lehman Brothers
Holdings Inc. bankruptcy filing pushed the carriers into losses
so deep they may need financial assistance to repay loans taken
to buy new vessels, said Kim Ik Sang, a credit analyst at HI
Investment & Securities Co. As China’s economy cools and weak
consumer spending persists in the U.S. and Europe, the companies
are unlikely to turn around to improve their ability to repay
loans, said Um Kyung A, an analyst at Shinyoung Securities Co.
“It’s pretty much out of their control,” said Seoul-based
Um. “Cash is depleting quite fast while the shipping industry
isn’t showing any signs of a recovery. I don’t think we can
completely forgo the possibility of things turning worse next
year.”
Hanjin, South Korea’s largest shipping company, and Hyundai
Merchant are expected to post losses next year as well,
according to analyst estimates compiled by Bloomberg. STX, the
largest commodity-mover and under court receivership since June,
may post its first profit in four years in 2014.
Wider Losses
The three shipping lines widened their losses in the third
quarter from a year earlier because of an increase in interest
payments while demand to move cargo remained weak, according to
separate statements filed by the companies today.
Shares of Hanjin Shipping dropped 1.3 percent to close at
6,990 won in Seoul. STX Pan Ocean fell 3.9 percent to 1,115 won.
Hyundai Merchant advanced 2.3 percent after it teamed up with
Posco and Korea Railroad Corp. to develop a rail project linking
Khasan on Russian border and North Korean port of Rajin.
Hanjin Shipping’s Chief Executive Officer Kim Young Min
resigned Nov. 11 to take responsibility for the company’s losses
and a delay in receiving financing from creditors. The company
has 1.1 trillion won of bonds due in the next two years,
compared with cash and near-cash items of 382 billion won at the
end of September.
Perpetual Bonds
Hanjin has been selling assets and has sufficient cash for
payments, said Kim Young Tae, a spokesman at the shipping
company. The carrier will continue to look at financing options,
including a perpetual bond sale, he said.
Hyundai Merchant has 1 trillion won to pay in the same two
years, compared with 678 billion won in cash. STX owes 900
billion won with a cash pile of 237 billion won in that period,
according to data compiled by Bloomberg. STX is in talks with
its main creditors on maturing debt, according to an e-mailed
response to Bloomberg News.
Hyundai Merchant has secured funds to meet payments until
the first half of next year, said Lee Jun Ki, a spokesman.
Hyundai will look at “various options,” if the shipping
industry doesn’t improve, he said.
“The amount coming due may not seem big, but it’s a
problem if you have a similar size of loan maturing for three
straight years and you are not making enough money,” said HI
Investment’s Kim. “Of all the industries, shipping is having
the biggest problems because of the liquidity issues they
face.”
Temporary Plan
The government holds one of the keys to easing the debt
crisis for companies through its Korea Development Bank.
To help troubled shippers and other companies pay down the
bonds, the government in July put forward a temporary plan in
which KDB will help raise 80 percent of funds needed for
repayment. The companies need to bring the rest. That enabled
Hyundai Merchant refinance 280 billion won of maturing bonds
last month.
“We prepared corporate bond market stabilization steps in
July preemptively,” Shin Je Yoon, chairman of South Korea’s
regulator Financial Services Commission, said Oct. 24. “I don’t
have immediate concerns about the debt market, but we can review
easing the July measure to provide help to a broader range of
companies if needed.”
KDB’s Role
KDB declined to comment, it said in an e-mail response.
The state-owned bank has played a key role in helping
distressed companies restructure in the past. It’s taking the
lead role in rescheduling debt for STX Offshore (067250) & Shipbuilding
Co. and one of its funds became the biggest shareholder of
Daewoo Engineering & Construction Co. (047040) by swapping debt for
equity.
“KDB is very important,” HI Investment’s Kim said. “If
not for them, the circumstances in the shipping industry could
be far worse than what they are now.”
Hanjin, which has reported a loss in each of the past 10
quarters, got a loan from affiliate Korean Air Lines Co. (003490) in
October while Hyundai Merchant sold shares this month.
Hanjin is considering selling stakes in port terminals, it
said in a regulatory filing Nov. 12.
A glut of vessels has contributed to the slump in the
Baltic Dry Index. (BDIY) The most popular global measure of commodity-shipping rates plunged 90 percent from its peak to a record low
of 647 in February last year. The gauge has since more than
doubled.
Spot rates to haul container cargo from Asia to Europe, the
world’s busiest trading lane, have dropped 12 percent from this
year’s high, according to the Shanghai Shipping Exchange.
Two Victims
The global downturn has already claimed two victims in
Japan. Last year, Sanko Steamship Co., a Japanese operator of
185 ships, went into bankruptcy protection after failing to
reach agreement with creditors on an out-of-court turnaround.
Daiichi Chuo Kisen Kaisha, based in Tokyo, received a
bailout from its lead shareholder Mitsui O.S.K. Lines Ltd.
earlier this year.
Unlike Denmark’s A.P. Moeller-Maersk A/S, operator of the
world’s largest sea box carrier, and Hong Kong-based Orient
Overseas (316) (International) Ltd., South Korean shipping lines have
been burdened by higher financing costs since the 1997-1998
Asian financial crisis, according to Shinyoung’s Um.
The Korean shipping lines had the worst timing for
investment,” Um said. “While their competitors were able to
order ships when prices were low, Korean companies ended up
buying at a high.”
While the global container cargo market and commodity
shipping rates have improved, South Korean shipping companies
will still be at a disadvantage, said Kang Seong Jin, an analyst
at Tongyang Securities Inc. in Seoul.
“Koreans are losing competitiveness,” he said. “While
the bigger players have been investing to grow their economy of
scale, Koreans have been busy trying to repay debt.”
To contact the reporter on this story:
Kyunghee Park in Singapore at
kpark3@bloomberg.net
To contact the editor responsible for this story:
Anand Krishnamoorthy at
anandk@bloomberg.net
Hanjin Shipping Co. (117930)’s Chief
Executive Officer Kim Young Min resigned, taking responsibility
for two successive years of losses at South Korea’s largest
shipper and a delay in getting financial support from creditors.
Kim, 58, will stay until a replacement is found, the Seoul-based company said in an e-mailed statement today. Kim was
appointed as CEO in January 2009 after 20 years with Citigroup
Inc. Hanjin posted a loss in each of the past 10 quarters.
Shares of the container-to-commodity shipper, which last
month received a loan from its group affiliate Korean Air Lines
Co. to ease a “temporary” liquidity shortage, fell in Seoul
trading. Laden with debt, Hanjin is among liners trying to
overcome a global overcapacity and a slump in shipping rates,
factors that pushed rival STX Pan Ocean Co. to file for a court
receivership in June.
“There’s no good news for Hanjin right now,” said Yun Hee
Do, an analyst at Korea Investment & Securities Co. in Seoul.
“The company hasn’t been able to make money recently and its
interest payment has been increasing. There’s quite a sizable
amount of debt coming due next year for Hanjin.”
Korean Air said last month it will provide 150 billion won
($142 million) to Hanjin to help ease the company’s liquidity
shortage. The shipping line has 736.4 billion won of debt and
loans maturing next year, compared with 58 billion won in 2013,
according to data compiled by Bloomberg. Its cash and cash
equivalent was 506.6 billion won at the end of June.
Korean Air, the nation’s biggest airline, is the largest
shareholder of Hanjin’s parent Hanjin Shipping Holdings Co. They
are both part of Hanjin Group.
Hanjin fell as much as 1.4 percent to 7,000 won before
trading at 7,060 won as of 11:32 in Seoul. The stock was up by
much as 3 percent earlier today. Hanjin has slumped 41 percent
this year, compared with a 0.6 percent decline in the benchmark
Kospi index.
Hanjin Shipping narrowed losses to 121.8 billion won in the
first half, from 346.6 billion won loss a year earlier.
To contact the reporter on this story:
Kyunghee Park in Singapore at
kpark3@bloomberg.net
It's not good news for most shipping companies these days. Will still be a tough few years, and still waiting to see if more consolidation in the industry.
The "boom" has gone "bust" in Brasil. This from Reuters.
By Sabrina Lorenzi
Nov 8 (Reuters) - Brazilian shipbuilder OSX
Brasil SA said on Friday it will file for bankruptcy
protection, another step in the decline of former billionaire
Eike Batista's empire.
The company said in a securities filing its shareholders
approved the bankruptcy filing, which is expected to take place
next week in a Rio de Janeiro court. The company also announced
the ouster of Chief Executive Marcelo Gomes.
OSX has 5.34 billion reais ($2.29 billion) in debt and could
seek to restructure part or all of that, becoming the second
company of Batista's to file for bankruptcy. Batista's oil
producer company, OGX Petróleo e Gas Participações SA
, sought protection from creditors on Oct. 30.
The OGX petition, citing 11.2 billion reais in debt, was the
largest corporate bankruptcy filing in Latin America.
The OSX bankruptcy decision follows more than a year during
which Batista's EBX Group - a sprawling empire of energy,
minerals and logistics companies, including OGX and OSX -
collapsed under a mountain of debt after missing production
targets.
EBX was once valued at more than $60 billion, and Batista
was a swaggering symbol of Brazil's rise as an emerging-market
powerhouse over the past decade.
Yet, as problems mounted, they fulfilled predictions made by
skeptics of Batista's breakneck expansion in recent years.
Critics warned that interdependence between EBX companies would
make them vulnerable to each other's problems, the opposite of
Batista's contention that the links would generate business
helping the companies flourish.
Once OGX filed for court protection, an OSX filing became
more likely and thus did not come as a surprise. The shipbuilder
depends on its sister company, to which it leases oil production
vessels, for all its revenue.
OSX depends on OGX, to which it leases oil production ships,
for all its revenue. OSX is 10 percent owned by South Korea's
Hyundai Heavy Industry.
Parent company OSX and two subsidiaries OSX Construção Naval
S.A. and OSX Serviços Operacionais Ltda. will jointly file for
protection from creditors, the filing said.
The company did not mention a third unit, OSX Leasing, which
owns three platforms that are leased for oil exploration
purposes. OSX's $500 million in secured dollar-denominated bonds
have rallied in recent days on speculation that OSX Brasil would
keep OSX Leasing off the filing so that the company can freely
decide what to do with the leasing company's assets.
If the court approves the bankruptcy request OSX plans to
file, the company will have 60 days to present a restructuring
plan. OSX creditors will then have 30 days to endorse or reject
the plan, though legal experts warn the proceedings could drag
on for much longer than that.
Brazilian Development Bank BNDES said in a statement that it
granted OSX a $228 million bridge loan, but added that the loan
is backed by bank guarantees and presents no risk to the BNDES.
UNFINISHED SHIPYARD
OSX, whose assets include an unfinished shipyard on the
northern coast of Rio de Janeiro state, is also one of OGX's
biggest creditors. OGX owes OSX at least 2.45 billion reais,
according to documents filed with the bankruptcy court.
Before the OGX and OSX filings, Batista had already agreed
to sell stakes and assets of the other four publicly traded
companies in the ailing EBX conglomerate.
Like other Batista companies, OSX's troubles stem from the
failure of OGX to meet any of its ambitious oil production
targets. After starting output at its first field in early 2012,
OGX repeatedly missed goals despite reassuring investors that
copious amounts of oil would soon flow.
Having once said OGX would produce 1.4 million barrels of
oil and natural gas equivalent a day by 2018, or more than half
Brazil's current output, the company never produced more than 1
percent of that.
According to Batista's plan, the oil was supposed to have
provided tens of billions of dollars to build several dozen oil
platforms and other vessels at the OSX shipyard. The facility
was modeled on shipyards operated by Hyundai Heavy Industry
and was designed to be the largest shipyard in the
Southern Hemisphere.
Bankruptcy protection could help OSX salvage its shipyard
unit, part of which is almost ready to begin operations at the
port of Açu complex on the Rio de Janeiro coast.
The port's operator LLX Logística SA, another
company founded by Batista, has agreed to renegotiate its
contracts with OSX for the use of the port, reducing OSX's
investment obligations, Friday's filing said.
