Tuesday, December 31, 2013

Reporting the price of oil

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
and offers for oil products.

click here for link to article

Monday, December 30, 2013

Why is the WTI oil price so high?

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
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

MSC Monterey has severe crack in hull

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

Friday, December 27, 2013

Hapag Lloyd courts (or threatens) Hamburg Sud

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)

Tuesday, December 24, 2013

FMC fines NYK and K-Line

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.

Maybe that's not much money to them.

click here for press release (also quoted below)

Here's the section of the law they violated.

§41102. General prohibitions

(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.

Thursday, December 19, 2013

Waterfront Commission is busy

Finally, after 70 years, the Waterfront Commission is doing their job.

Every day there is a new press release.  After all these arrests, there will surely be
lots of openings for ILA jobs.

This is the latest

Click here for link

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.

Monday, December 16, 2013

FBI Arrests Importers of Counterfeit Goods

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.

click here for link to complete news release

Nine Admit Guilt in Largest Counterfeit Goods Conspiracy Ever Charged

U.S. Attorney’s Office December 13, 2013
  • District of New Jersey (973) 645-2888

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.


Tuesday, December 10, 2013

China offers ship scrapping subsidy

China shipyards are facing problems due to the ship overcapacity. 

They have implemented a scrapping subsidy of 50%.   Somewhat like the previous
U.S. "cash for clunkers" program.

From Bloomberg News

China Raises Ship-Scrapping Subsidy 50% to Trim Overcapacity

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

Monday, December 9, 2013

CSAV and Hapag Lloyd in talks

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!

Click here for link to Bloomberg News.

Hapag-Lloyd Talks to CSAV About Tie-Up to Fight Industry Slump

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

Wednesday, December 4, 2013

Say What?? Guess the ILA guys had a liquid lunch.

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

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.

Monday, November 25, 2013

EU Investiages Shipping Companies

From Bloomberg News

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.

Friday, November 22, 2013

CMA CGM posts Third Quarter Financial Results

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 2012Q3 20132012 year to date2013 year to dateChange (%)
Revenue in $ billions4.24.111.912.0+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**
Fleet (number of vessels412430412430+4,4%
Fleet capacity in TEU thousands*1,4251,5591,4251,559+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

Investigation Begun- Oil Price Fixing

In my blog post of Sept. 9, 2012, this is what I wrote.

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.

And...apparently I was correct!

This from Bloomberg News

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).

To contact the reporters on this story: Asjylyn Loder in New York at aloder@bloomberg.net; Bradley Olson in Houston at bradleyolson@bloomberg.net

Friday, November 15, 2013

The Official Report by the Waterfront Commission of New York Harbor

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.

Click here for link to complete report.

Below is how it starts...
To the Honorable Chris Christie, Governor, and the Legislature of the State of New Jersey
and To the Honorable Andrew M. Cuomo, Governor,and Legislature of the State of New York: 
Between October 14, 2010 and December 2, 2010, the Waterfront Commission of New
York Harbor (“Commission”) conducted public hearings concerning unfair employment 
practices within the Port of New York District )"the Port", or "the Port of New York-New Jersey")
The hearings demonstrated and publicized that certain hiring practices, achieved
primarily through calculated provisions of collective bargaining agreements, illogical
interpretations of other provisions, and claims of “custom and practice,” have created within the
Port no/low-work, no/low-show positions generally characterized by outsized salaries. The
privileged few that are given those jobs are overwhelmingly connected to organized crime
figures or union leadership.

Not much has changed since the early days.  The Waterfront Commission is trying.  We shall see.

Thursday, November 14, 2013

Continued Downturn Affects Korean Shipping Companies

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.

From Bloomberg News.

Korean Shipping Lines Face Cash Crunch After Expansion

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

Sunday, November 10, 2013

Hanjin Shipping CEO Resigns

From Bloomberg News

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.

Saturday, November 9, 2013

OSX Brasil S A will file for bankruptcy protection

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.

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.