International Shipping News

Drewry Forecast

2012-01-04T19:54:00.000-08:00

The Journal of Commerce gives a synopsis of the recent report from Drewry,
giving their forecast of the container industry.

They think that if carriers don't lay up tonnage by the mid of 2012, there will
be severe consequences. I think there is some truth to this, but I also think
the big carriers are going to try and play their hand and force out the smaller ones,
who really should have gone bust in 2009. We shall see

Here's the article from the Journal of Commerce.

Container shipping lines could lose as much as $5.2 billion in 2011 despite a projected growth in global demand of 6.5 percent, according to Drewry’s latest quarterly Container Forecaster.

Drewry based its dismal forecast on carriers’ third-quarter losses and industry fundamentals, which have deteriorated sharply since 2010, when carriers’ earned estimated profits of $20 billion.

Vessel overcapacity, poor headhaul growth on the major east-west routes and the continued fight for market share among the largest carriers caused spot rates to fall by more than 50 percent on the key headhaul routes by the end of 2011.

Even attempts by carriers to cull capacity during November and December did not lift rates by any meaningful margin. Spot rates improved a little as of early January, but this is still likely to be a temporary phenomenon driven by the annual spike before Chinese New Year.

The New Year will be another challenging year for liner operators as delivery of big ships will continue to be a problem and carriers’ future lay-up strategies will dictate if they make money or not. “We believe that at the current burn rate, carriers’ cash reserves will run out during the second half of 2012. If they do not put a substantial amount of tonnage into lay-up by this time, the consequences could be dire,” said Neil Dekker, Drewry’s head of container research.

The industry will continue to change its structure as all stakeholders adapt to the difficult conditions, but Dekker does not foresee any company acquisitions. “Consolidation is more likely to happen through the disappearance of small players,” he said.

Drewry said the current supply/demand fundamentals on the key east-west trades are not strong enough for carriers to push through any sustained revenue increases. Some shipper contracts have been signed on the Asia-Europe trade this year for around $1,100 per 40-foot equivalent container unit including all surcharges, levels that are below break-even.
At the moment, relatively few vessels from suspended services are being laid up or idled, with most being re-chartered or absorbed into other routes. Drewry estimates that idling could reach as much as 8 percent of the global fleet during the second half of 2012, which would be equal to about 1.3 to 1.4 million 20-foot equivalent units.

“Carriers will at some stage in 2012 be forced to idle tonnage, even if the lead players are showing no inclination to do so at the moment,” Dekker said. “This will enable a partial recovery in spot rates during the second half of this year.”

Oil Price History

2012-01-04T07:16:00.000-08:00

In my predictions I said oil will be between $80 and $130 a barrel in 2012.

I disagree with Byron Wien, who predicts oil will drop to $85 a barrel in 2012. He missed his prediction for 2011 when he said oil would climb to $115 a barrel. Unless of course these predictions are based on a one time occurrence, and not a trend or average.

From Bloomberg News

Blackstone Group LP (BX)’s Byron Wien, whose prediction for the U.S. economy and stock market in 2011 proved too optimistic, said oil will slip to $85 a barrel this year and the Standard & Poor’s 500 Index will exceed 1,400.

Here is the oil history for WTI for the last 3 years.
click here for the source, which gives a much longer history.

2009-01-01 41.740
2009-02-01 39.160
2009-03-01 47.980
2009-04-01 49.790
2009-05-01 59.160
2009-06-01 69.680
2009-07-01 64.090
2009-08-01 71.060
2009-09-01 69.460
2009-10-01 75.820
2009-11-01 78.080
2009-12-01 74.300
2010-01-01 78.220
2010-02-01 76.420
2010-03-01 81.240
2010-04-01 84.480
2010-05-01 73.840
2010-06-01 75.350
2010-07-01 76.370
2010-08-01 76.820
2010-09-01 75.310
2010-10-01 81.900
2010-11-01 84.140
2010-12-01 89.040
2011-01-01 89.420
2011-02-01 89.580
2011-03-01 102.940
2011-04-01 110.040
2011-05-01 101.330
2011-06-01 96.290
2011-07-01 97.190
2011-08-01 86.330
2011-09-01 85.610
2011-10-01 86.410
2011-11-01 97.210
2011-12-01 98.570

Zim misses deadline to obtain concessions

2012-01-03T06:44:00.000-08:00

It's difficult to say how much this will impact Zim's future. If they continue
to lose money, they will need to get cash from somewhere. Obviously the banks who lent them money don't want to make the required adjustments at this time.

From The Journal of Commerce

Zim Integrated Shipping Services failed to meet a Dec. 31, 2011 deadline to obtain concessions or amendments to financial covenants with its creditor banks, the Israeli ocean carrier’s parent said.

As a result, Israel Corp. may have to record Zim’s debt on its balance sheet as short term debt for the fourth quarter of 2011, which in theory means the shipping operation could be liable for repayment immediately rather than over the long term.

The change in the status of the debt is technical but it could affect Israel Corp.’s financial ratios and financial covenants with its own banks, according to Israeli reports.

Zim has no financial covenants that are based on classifying debt as short term or long term, Israel Corp. said in a statement to the Tel Aviv stock exchange.

Zim is believed to owe around $2 billion to mainly foreign banks.

Zim swung to a $66 million net loss in the third quarter of 2011 from a year earlier profit of $37 million swelling losses for the first nine months to $245 million compared with a $42 million loss in the 2010 period.

Israel Corp, which owns more than 99 percent of Zim, injected $50 million into the carrier in November and the controlling Ofer family provided an additional $50 million. Israel Corp contributed $450 million to the carrier’s restructuring in 2009

Forecast for 2012

2012-01-02T07:14:00.000-08:00

It's time for the predictions for 2012!

I have done fairly well with my forecasts the last few years.

In 2009 I said we would be in a recession until 2011.

Of course, the word "until" is a bit subjective. 2011 is over.

The U.S. appears it is now starting to come out of the recession,
but things in Europe are looking worse.

I predicted oil prices would be between $50-$100 a barrel. That has
proved to be pretty accurate, although I certainly gave myself a wide
variable!

So, for 2012, what lies ahead?

It's really a tough call. The U.S. no longer is the biggest driver
to the world economy. China is slowing down.

Having said this, this is my best guess.

Shipping companies will continue to struggle. Many of the Greek companies
operating bulk ships will go bust. These are the ones who have their stocks
listed in the U.S., so the investors will get burned.

As for the container companies, that's a difficult call. Everyone has
formed their alliances in an effort to reduce costs. But I don't
think they are managing to control the capacity as will be needed, to get
their rate increases to stick. So, I think these VSA's will allow most
of the carriers to survive 2012

However, I believe ZIM and CSAV might be in jeopardy.
It depends if they can get more money from somewhere. And who
knows the answer to that? There is a lot of cash sitting on the sidelines, looking for a decent investment.

I think the price of oil will be between $80 and $130 a barrel.

I predict the Euro will survive, but the U.S. dollar will once again become stronger. Everyone talks about how bad off the Euro is, but I remember when
it and the dollar were on par.

I think the middle class in China and India will continue
to grow, and living conditions there will improve. So, that at least
is some good news for 2012.

Happy New Year!

Will fewer vessels be scrapped?

2011-12-27T19:09:00.001-08:00

Because of the value of the Indian Rupee, the incentive to scrap ships has declined.

This from Hellenic Shipping News

Oversupply pressures both in the dry bulk and the tanker markets, as well as in the container business are calling for a much slower newbuilding ordering activity during 2012. An additional factor expected to put pressure on shipyards is the lack of financing for many companies, especially those operating from the European continent. Meanwhile, as the year draws to a close, it’s worth noting that during the past week, the newbuilding pace was once again very slow, especially in the dry bulk and tanker markets.
According to the latest report from Piraeus-based shipbroker Golden Destiny, “Hyundai Heavy Industries announced that it signed a $900 million order to provide offshore platforms and other facilities off the coast of Africa. Under the deal, Hyundai Heavy Industries will build two offshore gas platforms in Nigeria by the end of 2014. In addition, Israel Land Development Company Energy is said to have signed an agreement of cooperation and development with DSME E&E, an energy related subsidiary of South Korea’s Daewoo Shipbuilding and Marine Engineering for the construction of a floating LNG facility at the Myra and Sarah has fields’ offshore Israel” said Golden Destiny.
The shipbroker also noted that overall, the week closed with 18 fresh orders reported worldwide at a total deadweight of 454,600 tons, posting a 49 % week-onweek decline, standing at similar weekly levels of 2010, when 17 orders had been reported worldwide with 7 newbuilding transactions in the bulk carrier segment. In terms of invested capital, the total amount of money invested is estimated at region more than $656 mil with 72% of the total number of orders being reported at an undisclosed contract price.
“In the bulk carrier segment, Safe Bulkers of Greece is said to have placed a panamax order of 74,500 dwt in an undisclosed Japanese yard for delivery in 2014. In the handysize segment, Belgian shipowner, Bocimar N.V. has placed an order for six plus 36,000dwt units in Weihai Samjin of China, plus an option for four more units, with delivery in 2013-2014.
In the offshore segment, notable order of this week has been the placement for the construction of an accommodation semisubmersible rig by the world’s largest owner and operator of accommodation and service rigs, Prosafe. The unit will be built by Jurong Shipyard, subsidiary of Singapore rig builder Sembcorp Marine at a cost of $291,6 mil for delivery in 2q 2014, with an option for another two units” concluded the shipbroker’s report.
In a separate note on the demolition market, Golden Destiny said that “the weak Indian rupee against the US dollar has dropped scrap levels at the lowest point for this year. India offers $450/ldt for dry/general cargo, same levels of the end 2010, with Pakistan being in the first rankings and China trying to compete at levels xs $400/ldt. In the wet market, levels remain below $500/ldt with Pakistan paying $480/ldt, but with lack of success as no units were secured. In Bangladesh, the market remains closed till the next court hearing on January 12th with mixed feelings for a reopening of the industry earlier than the end of January. What is noteworthy are market rumors suggesting the disposal of one more double hull VLCC built 1994 from BW group following the example of Mitsui OSK Lines. In the dry market, one more capesize of 173,028dwt built 1984 reported for scrap in India at $475/ldt, bringing the tally of capesize units reported for scrap this year at more than 20 units, whereas in 2010 only 3 capesize vessels had been reported for scrap.

The Fight is On

2011-12-23T06:36:00.001-08:00

All containership carriers are losing money.

Maersk stated they would not lose market share, which we can guess only means
they won't be pushing to raise rates.

So the other carriers are getting together and forming joint services (Vessel Sharing Agreements, VSA's), to at least save some money.

The latest one is Hamburg Süd and MSC

Here is the press release from Hamburg Süd

Hamburg Süd and MSC fuse Mediterranean – South America East Coast Services

Hamburg, 22 December 2011. In view of continuous poor trading conditions and replacing its current service set up, effective from mid January 2012 Hamburg Süd and MSC will restructure their services between the Mediterranean and South America East Coast. The two currently separate services will be fused into one common service that will be operated by eight vessels of 5,900 TEU nominal capacity. Of those, Hamburg Süd is to provide initially one vessel and MSC seven vessels.

The new port rotation will be as follows: Valencia – Gioia Tauro – Livorno – Genoa – Fos – Barcelona – Valencia – Suape – Rio de Janeiro – Santos – Buenos Aires – Montevideo –Rio Grande – Navegantes – Itapoá – Santos – Rio de Janeiro – Suape – Tangier – Valencia.

The new service allows for more comprehensive port coverage in South America and connects to the Hamburg Süd network to Eastern Mediterranean and Middle East destinations via the hub port Tangier.

Moody downgrades Hapag-Lloyd

2011-12-20T16:07:00.000-08:00

Moody's has downgraded the outlook for Hapag-Lloyd. This should come as no
surprise, considering how bad the results have been for all container carriers.

I rather doubt TUI will find anyone to buy the rest of their stake in this
company.

At least, not for what they are asking.

From The Journal of Commerce

Moody’s has changed its outlook for Hapag-Lloyd to “negative” from “stable” after the German carrier had a “weaker than expected performance” during the first three quarters of 2011.

The downgrade of Hapag-Lloyd’s outlook comes as TUI attempts to sell its 49 percent stake in the company. Standard and Poor’s in September downgraded the company’s outlook from “stable to negative,” citing lower than expected first-half year profitability.

Hapag-Lloyd has been one of the few container lines to stay in the black over the last three quarters. A $54.5 million profit total in the last two quarters offset a $31.8 million loss in the first quarter.

Moody’s said the container shipping industry has performed poorly because an oversupply of capacity has forced carriers to pull down rates. The rating’s agency said the highly competitive industry would be further challenged as new capacity is deployed next year.

“These factors have exerted pressure on operators to expand their market shares, making it difficult for the companies in the sector, including HL, to pass on material cost increases, despite good traffic volumes,” Moody’s said.

The ratings agency said Hapag-Llody has a strong business model featuring solid market shares and a flexible cost base. Moody’s said the company’s liquidity profile is adequate, with all of Hagag-Lloyd's new shipbuilding scheduled for delivery over next two years fully financed.

The ratings agency reaffirmed Hapag-Lloyd’s B1 corporate family rating and probability of default rating. Moody’s also reaffirmed the company’s B3 unsecured rating assigned to the $629.7 million and $250 million worth of senior unsecured notes maturing in 2015 and 2017, respectively.

Increased Tonnage Europe/U.S.

2011-12-19T20:40:00.000-08:00

I don't really know why carriers would add tonnage at this time, but they are.

This is a press release.

Hamburg Süd and partners to upgrade Transatlantic Service

Hamburg, 19 December. In collaboration with Hamburg Süd and ZIM, Grand Alliance members Hapag-Lloyd, NYK and OOCL have decided to upgrade their tonnage deployed in the Transatlantic Service between Europe and North America East Coast. As from March 2012 instead of four 3,700 TEU vessels, four 5,400 TEU ships are then to come into operation. As hitherto, Hamburg Süd and ZIM will each provide one vessel and Grand Alliance two.

The weekly fixed-day service continues to have the port rotation: Rotterdam – Hamburg – Le Havre – Southampton – New York – Norfolk – Charleston – Rotterdam

More reports on NY/NJ Waterfront arrests

2011-12-19T08:50:00.000-08:00

Below is from New Jersey Star Ledger. They are doing a great job
covering the arrests related to corruption on the NY/NJ piers.

Ex-longshoremen's union official is indicted on waterfront corruption charges
Published: Thursday, December 16, 2010, 7:40 AM

A new indictment of a once-powerful longshoremen’s union leader was quietly unsealed this week, pointing to a growing offensive by federal prosecutors into corruption on the waterfront.

The charges come less than a week after another member of the same union was charged with collecting "Christmas tribute" money exacted from other dockworkers to kick back to the mob.

Albert Cernadas Sr., who served as both executive vice president of the International Longshoremen’s Association and president of ILA Local 1235 in Newark, was accused of shaking down his members under threats of violence, in what was described as a long-running racketeering operation tied to the Genovese organized crime family.

The charges come nearly five years after Cernadas, 75, of Union Township, was removed from the ILA after pleading guilty to corruption charges involving thousands of dollars in union funds being funneled into a pharmaceutical company controlled by organized crime.

But in the new indictment, the government charges a far larger conspiracy dating back more than two decades — alleging that Cernadas put the screws to force cash payments from his members every year around Christmastime by use of "actual and threatened force, violence and fear."

The 52-page indictment, unsealed in federal court in Newark, does not say where the money went, but prosecutors say Cernadas was a known associate of the Genovese family which controlled the New Jersey waterfront. At the same time, other documents recently filed in several related cases spelled out what appeared to be a lucrative extortion racket known as "Christmas tributes" that preyed on ILA members, forcing them to cede part of their pay each year to crime bosses with hooks into the union.

Cernadas’ attorney, Jack Arseneault, declined comment. The U.S. Attorney’s office in Newark also declined to comment, and would not say what sparked its interest in Cernadas or why it kept the charges low key, opting not to make an announcement as it frequently does in such cases.

However, the indictment and other recent criminal complaints suggest a far larger investigation.

Last week, Robert Ruiz, 51, an international representative and delegate of the ILA, was arrested and charged in New York with extortion conspiracy in connection with similar payments.

According to an affidavit filed in the case by Jonathan Mellone, a special agent for the U.S. Department of Labor, members of the ILA were required to provide payments every December, and the payments were then kicked back to the Genovese family.

In connection with that case, the FBI said it dug up nearly $52,000 in cash buried in the backyard of one unidentified union member from New Jersey who went to authorities and said he and others were threatened with the loss of their jobs or their lives if they did not pay up. The union member told authorities the money was to go to Ruiz and it was their understanding the envelopes ultimately went to members of the Genovese family.

Separately, another reputed mobster, Stephen Depiro, was indicted in New York in April on racketeering charges in connection with the waterfront, with court records similarly documenting the holiday payments to organized crime.

In the criminal complaint filed against Depiro, transcripts of phone calls referred to the annual Christmas payments. Investigators said Edward Aulisi, the son of Vincent Aulisi, who became president of Local 1235 after Cernadas left, was caught on tape assuring reputed mob boss Michael Coppola that the tribute money would continue even after Cernadas left, and in fact had doubled.

The payments were the focus of some attention during a special hearing in October by the Waterfront Commission of New York Harbor. Aulisi, whom officials say held a no-show job at Port Elizabeth, was called as a witness but invoked his Fifth Amendment right against self-incrimination. He has not been charged with any wrongdoing.

The indictment against Cernadas says only that he conspired to extort money from ILA members each December, beginning in 1982. The timing of the charges suggest prosecutors were facing a problem with the statute of limitations had they not filed the when they did.

ILA officials in New York said Wednesday Cernadas was no longer with the union and they were unaware of the indictment.

Cernadas, whose son is Al Cernadas Jr., the first assistant prosecutor of Union County, was arraigned Wednesday before U.S. District Judge Susan D. Wigenton in Newark and released on a $1 million bond.

click here for link

More arrests on the NY/NJ waterfront

2011-12-18T20:26:00.000-08:00

From The NY/NJ Waterfront Commission web-site

Three New Defendants and Multiple Counts Added to Genovese – ILA Racketeering Indictment.

December 15, 2011

NEWARK, N.J. – Three additional defendants were arrested today and charged in a superseding indictment that adds dozens of counts to a previous indictment charging multiple defendants – including an alleged member and associates of the Genovese organized crime family – with racketeering and related offenses, New Jersey U.S. Attorney Paul J. Fishman and Eastern District of New York U.S. Attorney Loretta E. Lynch announced.

A 103-count superseding indictment was unsealed this morning in Newark federal court in which previously-charged defendants Stephen Depiro, a soldier in the Genovese organized crime family of La Cosa Nostra (the “Genovese family”), and three Genovese family associates – Albert Cernadas, former President of International Longshoremen’s Association (“ILA”) Local 1235 and former ILA Executive Vice President; Nunzio LaGrasso, the Vice President of ILA Local 1478 and ILA Representative; and Richard Dehmer – are charged with racketeering conspiracy, including predicate acts of conspiring to extort Christmastime tributes from ILA members on the New Jersey piers. The superseding indictment includes, as part of the racketeering conspiracy charge, 61 additional predicate acts of extortion of various ILA members by Cernadas and 12 additional predicate acts of extortion of ILA members by Nunzio LaGrasso. In addition to the Christmastime extortion scheme, LaGrasso is charged with the extortion of an ILA dock worker so that the worker could retain a supervisory job at the port.

The superseding indictment also charges newly added defendants Michael Nicolosi, Julio Porrao and Rocco Ferrandino – all current or former ILA supervisors – with extortion conspiracy and extortion. Nunzio LaGrasso and five other defendants, including Thomas Leonardis, the President of ILA Local 1235 and ILA Representative; Robert Ruiz, the Delegate of ILA Local 1235 and ILA Representative; and Vincent Aulisi, former President of ILA Local 1235, are charged with additional counts of extortion of ILA members. Ruiz is also charged with obstructing justice by impeding a grand jury investigation. In total, the superseding indictment contains allegations regarding the extortion of 28 victims.

The government is represented by Assistant U.S. Attorneys Jacquelyn M. Kasulis and Jack Dennehy of the U.S. Attorney’s Office, Eastern District of New York, and Assistant U.S. Attorney Anthony Mahajan, of the U.S. Attorney’s Office, District of New Jersey.

And...this one

PNCT General Foreman Suspended by Commission after Arrest and Indictment on Multiple Extortion Charges.

December 15, 2011

PNCT General Foreman Michael Nicolosi was arrested this morning after being indicted federally on extortion conspiracy and multiple counts of extortion involving the forced collection of Christmas tributes from ILA members to the Genovese Family.

His license as a longshoreman was suspended by Commission vote pending an administrative hearing on the charges.

CSAV looking for money, plans to streamline

2011-12-14T08:44:00.000-08:00

News from Chile (click here for link)

As best I can make out, CSAV plans to attempt to raise money from a "road show", I guess trying to get hedge funds and who knows else to either loan them money, or get shares. I can't be certain.

The plan is to actually downsize and streamline the company to make it profitable in 2012, and I guess raise capital to keep it going until the business improves.

Who knows, there is a lot of money out there looking for a decent return. Maybe someone will take a gamble.

I have quoted the spanish article, and below it is an english translation.

Oscar Hasbún: "Este aumento de capital no está dirigido sólo a los accionistas de CSAV"
La empresa realizará un road show en Brasil, EEUU y Europa, asesorada por BTG Pactual.

El ejecutivo asegura que hacia mediados de 2012 ya no serán el peor actor de la industria.
por Sandra Novoa F.

La Compañía SudAmericana de Vapores fijó ayer en US$ 0,2045 ($ 104 al dólar observado del día) el precio de la acción para el aumento de capital por US$ 1.200 millones. Aplicó un descuento de 10% respecto del precio promedio del miércoles y 21% respecto del promedio de octubre-noviembre (la acción ha caído 80% en el año). Este aumento de capital -5.867.970.660 nuevas acciones- es parte de la reestructuración iniciada en mayo, después que ingresara el grupo Luksic a la propiedad -a través de Quiñenco- y tomara las riendas de la administración.

Oscar Hasbún, gerente general Naviero-Contenedores, y quien ha estado a cargo del proceso, afirma que "es un precio atractivo para que los accionistas actuales suscriban lo que sus prorratas les permiten y para cualquier potencial inversionista". Explica que el descuento considera la volatilidad de la Bolsa y del tipo de cambio, y que fijaron el precio en dólares para asegurar la recaudación de los US$ 1.100 millones que gatillan la división de la empresa y la constitución de Sociedad Matriz Saam.

La opción preferente parte el 19 de diciembre y cierra el 17 de enero. Así, el proceso completo debiera concluir a más tardar la primera semana de febrero y la acción de SM Saam estaría flotando en la Bolsa durante febrero.

¿Cómo será la dinámica del road show?

Este aumento de capital no está dirigido sólo a los accionistas de CSAV. Cuando termine la opción preferente ofreceremos el remanente a terceros tanto en mercado nacional, con ayuda de Celfin, como en el internacional, asesorados por BTG Pactual. Contemplamos reunirnos con fondos de inversión en Brasil, Europa y Estados Unidos.

¿Están previendo que en la opción preferente no habrá mucha acogida?

Creemos que dado el tamaño del aumento de capital y lo atractivo de ofrecer dos acciones -Saam y CSAV- es una buena opción abrir la colocación al mercado. Mejora las posibilidades de éxito y permite el ingreso de nuevos accionistas.

¿Tienen una estimación de cuánto se pondría en la opción preferente?

Es difícil predecir. Será muy relevante lo que pase con las AFP. Creemos que es una opción muy atractiva para los inversionistas institucionales en general, por cuanto retirarían acciones de Saam, que tiene un negocio estable, con crecimiento, infraestructura y baja deuda.

¿Han sondeado el interés del mercado?

Al día de hoy, dada la situación de la industria y los resultados a septiembre de CSAV, existe preocupación en el mercado, pero durante el road show explicaremos en detalle por qué ésta es una buena opción, el impacto concreto de la reestructuración, que ésta es una compañía distinta a la que tomamos; explicaremos por qué Saam tiene un valor significativo y un enorme potencial y por qué creemos que la industria tocó fondo y ahora viene una reversión del ciclo naviero.

¿El gran incentivo para ir al aumento de capital es que al menos saldrán ras, porque sus acciones de Saam valen el equivalente al capital desembolsado, e incluso más?

Primero, el aumento de capital es una invitación a una CSAV distinta, más chica, más asociada, líder en sus mercados y con 30% de flota propia, un récord en su historia. Segundo, en un contexto en que la industria tocó fondo, por tanto es una oportunidad para invertir. Tercero, por supuesto que el atractivo tiene que ver con que los accionistas actuales, que concurran en su prorrata, recibirán al final de la operación dos acciones y una parte sustancial de la plata que pongan, si no toda, la recibirán en papeles de Saam, que posee un alto potencial de crecimiento como empresa independiente.

Saam tiene tres áreas: terminales portuarios, remolcadores y logística. Opera en muchos países, pero no en todos ellos con sus tres negocios. Una estrategia de crecimiento evidente es estar con las tres en todos los mercados.

¿Cómo se lee la valorización del área remolcadores de Saam en US$ 520 millones?

Está por sobre el valor que estimábamos para el área y consolida los fundamentos del valor de Saam. Su asociación con la holandesa SMIT fortalece sus operaciones en toda América y presenta oportunidades importantes de crecimiento en mercados como Brasil.

¿Cuán visibles son los frutos de la reformulación de CSAV?

La última línea al tercer trimestre dice poco de lo que está pasando. Nuestro negocio ha estado siempre afectado por el rubro de portacontenedores, el más volátil y más grande. Ahí entre abril y agosto perdimos un promedio de US$ 129 millones, mientras que en septiembre -primer mes donde se puede ver la reestructuración de manera efectiva contablemente- la pérdida cayó 64% respecto del promedio de ese período. Son US$ 800 millones menos al año.

En los resultados hay costos de reestructuración, efectos de tipo de cambio y otros que no son propios de la operación, sino de la solución que hemos implementado: a septiembre pagamos US$ 45 millones en costos de reestructuración y tendremos mucha de esa resaca en el último trimestre y el próximo año. Pero en la operación pura, la mejora es significativa en un mercado que está peor.

A septiembre los resultados de todas las compañías son más malos que los seis meses anteriores. CSAV es la única que tiene una mejora significativa en contenedores. Esto muestra que estamos construyendo una compañía capaz de competir en el negocio. La meta es que la estructura de costos nos permita estar entre los primeros que ganen plata cuando las cosas mejoren.

¿Cuándo estará en régimen la reestructuración?

Full en el segundo trimestre, ahí será visible la empresa nueva. Para tener utilidades dependeremos de que la industria mejore, pero ya no seremos el peor actor de la industria.

¿Qué tanto más chica será CSAV respecto de su peak?

En capacidad de carga será 47% menor respecto del peak de mayo de 2011. La capacidad de venta caerá mucho menos, porque estamos achicando una fábrica con mucha capacidad ociosa. Estimamos que en 2012 venderemos 30% menos de volumen transportado que en 2011; en plata, dependerá del precio.

¿Cuándo la industria permitiría ganar plata?

En este rubro los precios pueden variar hasta 10% a la semana. Nuestra percepción es que el tercer trimestre fue muy malo y el cuarto será peor. La mayoría de las compañías tienen problemas de capitalización, alto endeudamiento y poca caja. No resisten otro semestre malo. Por tanto, creemos que vienen más anuncios de alianzas como la de MSC-CMA en un montón de rutas y eso significa achicarse y sacar barcos. Nosotros ya lo hicimos: paramos 1% de la flota mundial. Maersk, la número 1, también dijo hace unas semanas que reducirá su capacidad. Y los tres actores principales anunciaron alzas de precios de US$ 600, 40%, a partir del 15 de diciembre en casi todos los tráficos, no porque haya más demanda, sino porque no pueden seguir perdiendo.

En enero CSAV tenía 170 barcos y hoy 119, de los cuales operamos 85 y el resto los subarrendamos; eso mismo hará el resto de los actores. Hoy el arriendo vale US$ 8.000 cualquiera sea el tamaño; 5 meses atrás una nave de 5.000 TEU costaba US$ 35.000. Con este escenario, en 2012 vemos un primer trimestre difícil, un segundo algo mejor y un segundo semestre en equilibrio, retornando a niveles normales de rentabilidad.
Recuadro :

"No estamos apostando las fichas al socio estratégico"

-¿Es factible que el socio se incorpore en el aumento de capital?

No. Un socio estratégico, que aporte conocimiento y sinergias, tiene más que ver con una fusión.

-¿Y en qué está la búsqueda del socio estratégico? ¿Se concretará después del aumento de capital?

Hoy nuestro principal foco está en hacer de CSAV una empresa rentable por sí sola. No estamos apostando las fichas al socio estratégico, no es una obsesión, porque tenemos que preocuparnos de la marcha de la compañía.

El socio puede venir o no. Es una opción atractiva que se puede dar en un minuto, pero el foco es consolidar el modelo de negocios de CSAV, y a eso estamos abocados. Y la reestructuración está dando resultado; si bien en términos comparativos hoy estamos muy mal respecto de nuestros competidores, en seis meses estaremos comparativamente mejor. El tiempo nos juega a favor, porque la industria está empeorando.

En la industria habrá consolidación por diversas vías, como acuerdos de operación conjunta de mediano y largo plazo, que es lo que hemos hecho hasta ahora (en cinco meses aumentamos nuestras operaciones conjuntas desde menos del 30% a más de 85%). La semana pasada salió un anuncio de MSC y CMA, segundo y tercer operadores del mundo, declarando su intención de abordar conjuntamente varios mercados; esa es una forma de consolidación en el hecho. En este contexto nosotros tenemos una condición bastante única en el mercado, porque somos fuertes en las rutas Norte-Sur -que crecen a tasas más altas que el resto-, en un mercado que es fuerte en rutas Este-Oeste. Por tanto, somo atractivos, porque ofrecemos complementariedad.

¿En qué plazo definirían el socio?

Hoy la industria está muy complicada, cada empresa tiene que hacer sus ajustes y para nosotros es fundamental mostrar los resultados de la reestructuración, tener una compañía con retornos similares a los de la industria y no peores. Nunca dijimos que incorporar un socio era inminente, sino que había una decisión de trabajar en la búsqueda de un socio estratégico, y eso sigue en pie.

¿Para cuánto les alcanza con este aumento de capital navegando solos?

Con esto la compañía tiene recursos suficientes para desarrollar sus planes. No creemos que vayamos a necesitar capital para financiar pérdidas.

This is translated into english using Google Translate. It does leave something to be desired.

Hasbún Oscar: "This capital increase is intended only for shareholders CSAV"
The company will hold a road show in Brazil, USA and Europe, advised by BTG Pactual.

The executive said that by mid 2012 and will not be the worst actor in the industry.

The South American Steamship Company yesterday set at U.S. $ 0.2045 ($ 104 dollar a day observed) the share price for the capital increase of U.S. $ 1,200 million. He applied a discount of 10% over Wednesday's average price and 21% on average from October to November (the stock has fallen 80% in the year). This increase in capital 5,867,970,660 new shares, is part of the restructuring begun in May, after you enter the Luksic group property Quiñenco-through, and take the reins of government.

Oscar Hasbún, general manager Naviero-Containers, and who has been in charge of the process, says "it is an attractive price to existing shareholders pro rata sign them what their permit and for any potential investor." He explained that the discount considers the volatility of the stock market and exchange rate, and set the price in dollars to ensure the collection of U.S. $ 1,100 million that trigger the division of the company and the parent company constitution Saam.

The preferred option part of the December 19 and closes on 17 January. Thus, the entire process should be concluded by the first week of February and Saam SM action would be floating on the Stock Exchange in February.

How will the dynamics of the road show?

This capital increase is not directed only to the shareholders of CSAV. When you finish the preferred option to offer the remaining third both in domestic market, with the help of Celfin, and internationally, advised by BTG Pactual. We watched together with investment funds in Brazil, Europe and USA.
Are you anticipating that there will be the preferred option well received?

We believe that given the size of the capital increase and the attractiveness of offering two action-Saam and CSAV, is a good choice to open the placing on the market. Improves the chances of success and allows the entry of new shareholders.

Do you have an estimate of how much would the preferred option?

It is difficult to predict. It will be very important what happens to the AFP. We believe it is a very attractive option for institutional investors in general, as Saam withdraw shares, which has a stable business, with growth, infrastructure and low debt.

Have you probed the market's interest?

To date, given the state of the industry and results CSAV September, there is concern in the market, but during the road show will explain in detail why this is a good option, the actual impact of the restructuring, it is a different company that we take, we will explain why Saam has significant value and huge potential and why we believe the industry hit bottom and now comes a reversal of the shipping cycle.

Is the great incentive to go to the capital increase is that at least will flush, because their shares are worth the equivalent Saam invested capital, and even more?

First, the increase of capital is an invitation to a different CSAV, smallest, most associated, the leader in its markets and its own fleet 30%, a record in its history. Second, in a context in which the industry bottomed out, so it is an investment opportunity. Third, assume that the appeal has to do with existing shareholders, who concur in its proportion, received at the end of the operation two actions and a substantial portion of the money they bring, if not all, Saam papers received in , which has a high potential for growth as an independent company.

Saam has three areas: port terminals, tugs and logistics. Operates in many countries, but not all of them with their three businesses. A clear growth strategy is to be with the three in all markets.

How to Read the recovery area Saam tugs at U.S. $ 520 million?

Is above the value we estimated for the area and strengthens the foundations of the value of Saam. His association with the Dutch SMIT strengthens its operations in America and presents significant opportunities for growth in markets like Brazil.

How visible are the fruits of the reformulation of CSAV?

The last line in the third quarter says little about what is happening. Our business has always been affected by the containership category, the most volatile and larger. Between April and August there lost an average of U.S. $ 129 million, while in September, the first month where you can see how effective the restructuring of accounting, the loss fell 64% from the average for that period. Are $ 800 million less per year.
n the results no restructuring costs, exchange rate effects and others that are not part of the operation, but the solution we have implemented: a September pay $ 45 million in restructuring costs and have a lot of that surf on the last quarter and next year. But in the pure operation, the improvement is significant in a market that is worse.

In September the results of all the companies are more evil than the previous six months. CSAV is the only one with a significant improvement in containers. This shows that we are building a company capable of competing in the business. The goal is that the cost structure allows us to be among the first to earn money when things improve.

When the restructuring scheme will be?

Full in the second quarter, there will be visible new company. For profit that the industry will rely on better, but we will not be the worst actor in the industry.

How much smaller will CSAV about their peak?

Cargo capacity is 47% lower than the peak in May 2011. The sales capacity will fall much less, because we are a factory with much shrinking spare capacity. We estimate that in 2012, selling 30% less volume transported in 2011, in silver, depend on the price.
When the industry would save money?

In this area prices can vary up to 10% per week. Our perception is that the third quarter was very bad and the quarter will be worse. Most companies have capitalization problems, high debt and little cash. Do not resist another half bad. Therefore, we believe that partnerships are more ads like MSC, CMA in a lot of routes and that means shrink and make boats. We already did: stop 1% of the world fleet. Maersk, No. 1, also said a few weeks ago to reduce its capacity. And the three major players announced price increases of U.S. $ 600, 40%, from December 15 in almost all traffic, not because there is more demand, but because they can not keep losing.

CSAV in January and now had 170 ships, 119 of which operate 85 and the rest are leased out, that it will do the rest of the actors. Today the rental costs U.S. $ 8,000 regardless of size, 5 months ago a ship of 5,000 TEU cost $ 35,000. With this scenario, in 2012 we see a difficult first quarter, a second and a better second half in balance, returning to normal levels of profitability.
Box:

"We're not betting the chips to the strategic partner"

- Is it possible that the member is incorporated in raising capital?

No. A strategic partner to provide expertise and synergies, has more to do with a merger.

- And what is the search for strategic partner? Do materialize after the capital increase?
Today our main focus is on making a profitable company CSAV alone. We're not betting the chips to the strategic partner, not an obsession, because we have to worry about the running of the company.

The partner can come or not. It is an attractive option that can be given in a minute, but the focus is to strengthen the business model CSAV, and that we are doomed. And the restructuring is paying off, but today we are comparatively very bad about our competitors, in six months we will be comparatively better. The time we play for, because the industry is getting worse.

In the industry will consolidate a number of ways, including joint operating agreements and long term, which is what we've done so far (in five months we increased our joint operations from less than 30% to over 85%). Last week came an announcement of MSC and CMA, second and third operators in the world, declaring their intention to jointly address several markets, that's a form of consolidation in the event. In this context we have a rather unique status in the market, because we are strong in the North-South routes that grow at higher rates than the rest, in a market that is strong in the East-West routes. Therefore, somo attractive, because we offer complementary.

How soon would define the partner?

Today the industry is very complicated, each company has to make adjustments and to us it is essential to show the results of the restructuring, have a company with similar returns to the industry and not worse. We never said to incorporate a partner was imminent, but had a decision to work towards finding a strategic partner, and that still stands.

For how they achieved with this capital increase sailing alone?
With this the company has sufficient resources to develop their plans. We do not believe that we will need capital to finance losses.

On The Waterfront

2011-12-12T11:40:00.000-08:00

Things haven't changed much on the NY/NJ Piers.

The only difference is now the Waterfront Commission is reporting some of
the problems.

Here are the last few press releases.

WCNYH

Pier Superintendant Arrested and Charged with Managing an Illegal Bookmaking Operation.

December 9, 2011

Maher Terminal Pier Superintendant Joseph Joel DiCosta was arrested this morning by Waterfront Commission detectives and agents from the US Department of Labor on a federal complaint charging him with managing an illegal gambling business in violation of Title 18 USC Section 1955. The complaint charges that DiCosta ran the illegal bookmaking operation from January 2003 to January 2011 utilizing both internet sites and 1-800 telephone numbers.

The criminal case is being prosecuted by the United States Attorney's Office for the Eastern District of New York.

DiCosta's license as a Pier Superintendant was suspended by the Commission this afternoon pending an Administrative Hearing on the charges.

WCNYH

Genovese Soldier and Checker Plead Guilty in Port Loan Sharking Case.

October 28, 2011

Genovese Soldier Joseph Queli and Checker Nicholas Bergamotto pleaded guilty today before Superior Court Judge Anthony J. Mellaci, Jr. in Monmouth County, New Jersey.

Queli pleaded guilty to Conspiracy to Commit Criminal Usury (loan sharking) and Money Laundering as well as Filing False Tax Returns. Under the plea agreement, Queli will be sentenced to seven years in state prison.

Bergamotto pleaded guilty to Money Laundering and will be sentenced to a term of probation. Bergamotto has been suspended from the Waterfront since his arrest on April 22, 2010. Both Bergamotto and Queli were highlighted in the Commission’s Public Hearings held last year.

The indictment was the result of an on-going investigation by the Waterfront Commission and the New Jersey Attorney General’s Division of Criminal Justice into organized crime in the Port.

WCNYH

ILA Local 1 Trustee and Shop Steward Removed from Waterfront for Theft, Frauds, and Association with Organized Crime

October 25, 2011

By Commission Order, dated October 25, 2011, William A. Vitale, a suspended shop steward at Maher Terminals and a trustee of ILA Local 1, was removed from working on the Waterfront for the theft of $96,582.75 from Maher Terminals, committing frauds in connection with a sworn interview conducted by the Commission, and associating with an associate of the Genovese Crime Family.

On April 28, 2011, in Union County Superior Court, Vitale pleaded guilty to theft by deception (a crime of the 3rd degree). On September 23, 2011, the Court sentenced Vitale to three (3) years probation and ordered him to pay restitution of $96,582.75 to Maher Terminals, forfeit his Waterfront registration, and resign his position with the ILA. Vitale admitted that he lied and caused false time records to be created which resulted in Maher Terminals paying him for hours that he did not work. He also testified falsely during a sworn Commission interview in response to questions concerning his presence in Florida, California, and Aruba, when he was paid for working at the terminal. Vitale also visited in prison Joseph Lore, an associate of the Genovese Crime Family on the ILA Ethical Practices Counsel’s Barred List, who was convicted of charges pertaining to embezzlement from ILA Local 1588 and using intimidation or force against a witness. Both Vitale and Lore were subjects of testimony during the Commission's 2010 Public Hearings pertaining to "no show" jobs and organized crime associations on the waterfront.

The case was investigated by the Waterfront Commission and prosecuted by the New Jersey Attorney General's Division of Criminal Justice.

WCNYH

Longshoreman suspended by Commission after being arrested for bookmaking on behalf of the Gambino Family

October 20, 2011

Longshoreman Michael Bolger and ten others have been arrested and indicted on charges of Enterprise Corruption, Promoting Gambling in the First Degree, and Conspiracy in the Fifth Degree. The charges allege that Bolger and his co-defendants operated an illegal gambling ring on behalf http://www.blogger.com/img/blank.gifof the Gambino Crime Family in parts of New York and New Jersey from 2010 to 2011. Bolger has been suspended by the Commission pending an administrative hearing to determine whether his registration as a longshoreman should be revoked. The Organized Crime Task Force of the Office of the New York State Attorney General is prosecuting the case.

click here for link to Waterfront Commission web-site

New Vessel Sharing Agreement - Asia/S. Africa/E.Coast S. America

2011-12-08T08:57:00.000-08:00

As can be expected when times get tough, the carriers ban together in Vessel Sharing
Agreements. This allows each to continue service, but with less vessels.

This is what transpired in the 1990's, before there were a bunch of container carriers who finally went bust.

Below is the press release from Hamburg-Sud. There are 5 companies joining together. Hamburg Süd, Maersk, CMA-CGM, CSAV, and CSCL (China Shipping). There is no mention of MSC, who just announced a huge agreement with CMA CGM, so not sure if they will get slots on this service or not.

Dec. 8, 2011

Asia – South Africa/South America East Coast

Hamburg Süd/Maersk Line and CMA-CGM/CSAV/CSCL

Winter Season Restructuring

Hamburg, 8 December 20011. In an effort to balance supply and demand during the forthcoming traditional period of weaker demand, Hamburg Süd and Maersk Line on the one hand and CMA-CGM, CSAV and CSCL on the other, have reached an agreement to combine their services between Asia, South Africa and the East Coast of South America as from December 2011.

Each Group is currently operating two weekly services in the trade. For the period from December 2011 through May 2012, the existing ASAS/NGX Sling 2 service will be merged with the existing ASAX/SEAS Sling 2 service. The current capacity deployed by the carriers in the ASAS/NGX Sling 1 service and ASAX/SEAS Sling 1 service will remain unchanged and independent.

Consequently, the new structure will be as follows:

ASAS/NGX 1: 11 x 7,100 – 7,450 TEU vessels

Participating carriers: Hamburg Süd and Maersk Line

ASAX/SEAS 1: 11 x 6,500 TEU vessels

Participating carriers: CMA-CGM, CSAV, CSCL

New Joint Service: 11 x 4,200 – 4,600 TEU vessels

Participating Carriers: CMA-CGM, CSAV, CSCL, Hamburg Süd, and Maersk Line

Schedule: Shanghai – Ningbo – Nansha – Hong Kong – Chiwan – Tanjung Pelepas – Singapore – Durban – Rio de Janeiro – Santos – Paranagua – Itajai – Santos – Port Elizabeth – Durban – Singapore – Hong Kong – Shanghai

Starting vessel for this New Joint Service will be MV Cap Jackson – Shanghai – December 16th.

The above changes will ensure adequate coverage of- and competitive transit times for the Asia, South Africa and East Coast South America market, both Eastbound and Westbound.

Investor Lawsuit against Dryship

2011-12-04T17:48:00.000-08:00

I haven't followed Dryship for some time. As I wrote previously, in my opinion
this stock was manipulated by the owner(s) and should be avoided.

This last week I saw headlines saying there is a class action lawsuit about to be filed against Dryship. Apparently there was one filed in the Marshall Islands (where Dryship is registered, due to financial advantages for a shipping company), and it
was dismissed. I read the investors were now trying to sue in the U.S., but not
sure if this is accurate.

Anyway, as I went searching around for move info, I found something interesting on
Seeking Alpha, who was all in favor of these stocks a couple of years ago.

Benko Investigated For Money Laundering: What Does This Mean For DryShips And Ocean Rig Investors?

November 29, 2011

The international media is reporting detailed information about George Economou's business interests which are not covered by the U.S. media. In fact, the articles are generally not written in English. Recently, an acquaintance of mine translated some of the latest news media concerning George Economou and his business partners for me. The news was insightful, to say the least.

Rene Benko and George Economou are business partners. Benko is the largest property investor in Europe - founding his company at the age of 22, likely financed from family wealth. Economou owns 50% of a company run by Benko called Signa Holding. The company Economou owns which has this ownership interest is called GlobalBasis Limited. Both Benko and Economou are making plans in a joint venture of sorts to try and purchase Galeria Kaufhof, 134 shopping malls in Germany, for the price of 2.4 billion euros.

The media is also reporting that Rene Benko is in the focus of the Vienna general prosecutor. He is suspected of money laundering, and the prosecutor has a large amount of evidence. This means that George Economou is not only highly suspect of illegal and unethical business activities himself, but his largest and most current business partner is now being formally accused of money laundering in Austria.

Economou and his related parties have been suspected for insider trading on the recent purchase of OceanFreight (OCNF), as illustrated in my prior article.

Economou has led many, many transactions between his private companies (Cardiff Marine, Drytanks) and his publicly traded companies (Dryships (DRYS), OceanRig (ORIG), OceanFreight). On a daily basis, Economou's private companies manage the logistics of Dryships and Ocean Rig. The fees are widely seen as out-of-line with arms-length transactions. Additionally, most every ship Economou has purchased for Dryships can be demonstrated to have been overpaid for by at least a few million dollars when compared to purchases he has made for his privately held companies.

Most Dryships followers are aware of the infamous options Economou sold to himself and then let expire, allowing him to bank millions during the peak of the financial crisis, but even the more recent oil tankers purchase was dramatically out of line with market values. Economou evaded the subject of valuation by talking up a spinoff for the assets, which still has not happened.

All of this information begs the question, who will protect the Dryships and Ocean Rig investors in the United States if all of these allegations prove correct and these companies go bankrupt? It also begs the question, why would bankers be so stupid so as to make exceptions for Dryships' broken loan covenants over and over again? Why would banks trust someone who clearly has such a questionable ability to fairly and competently manage a company? It also begs the question, are the Greek shippers and their related parties somehow partly responsible for the debt problems in Greece?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
This article is tagged with: United States

Will NOL buy Hapag-Lloyd?

2011-12-03T12:10:00.000-08:00

Report in Journal of Commerce says talks are on....

Report in Germany comes as TUI prepares to sell remaining stake

Neptune Orient Lines is back in talks with Hapag-Lloyd about a possible purchase of the German container ship operator, according to a published report in Germany.

Singapore-based NOL broke off acquisition talks in 2008 after failing to agree on a price for Hapag-Lloyd, which is owned by a consortium of Hamburg-based investors and tourism group TUI.

TUI plans to sell its remaining 38.4 percent stake in the German container line by January so it can to focus solely on its tourism business.

The German newspaper Die Welt, in a report Saturday that did not identify sources, said NOL was in contact with TUI management, with more talks planned for January, and a concrete offer is expected early next year.

A TUI spokesman confirmed its intention to divest its stake in Hapag-Lloyd but said he would not comment on market rumors.http://www.blogger.com/img/blank.gif

The Hamburg investors have a right of first refusal to buy TUI's stake, the paper said.

If no such deal emerged by Sept. 30, 2012, TUI could sell its stake to a third party along with enough shares from the Hamburg investors to give the outsider a majority stake.

click here for link

Moody's Downgrades CMA CGM

2011-12-03T11:21:00.000-08:00

Moody's has downgraded CMA CGM. Following is the report from Moody's.

They do not make any mention of the just announced cooperation with MSC.

I don't know if this action was taken before that announcement, or,
more likely, Moody's will just wait to see what the numbers show. Meaning,
what benefit to the bottom line CMA CGM demonstrates from this new cooperation.

Rating Action:
Moody's downgrades CMA CGM to B2 from B1; outlook negative
Global Credit Research - 02 Dec 2011
Approximately USD920 million of rated debt affected

Milan, December 02, 2011 -- Moody's Investors Service has today downgraded CMA CGM's corporate family rating (CFR) and probability of default rating (PDR) to B2 from B1. Concurrently, Moody's has downgraded to Caa1 from B3 CMA CGM's EUR325 million and USD475 million worth of senior unsecured notes maturing in 2019 and 2017, respectively. The outlook is negative.

RATINGS RATIONALE

The downgrade was triggered by CMA CGM's weak performance for the third quarter. As a result 2011 will be significantly weaker than estimated by Moody's last September translating into credit metrics that are likely to be very weak for the category at year end. This is linked to the poor performance of the industry during its peak season (between September and October) caused by the oversupply of vessels on the water that slashed freight rates to a very low level. The agency further commented that the rating still incorporates an assumption that industry conditions would not further worsen and that actually freight rates recover, at least modestly, in the last weeks of the year as well as in 2012, following the withdrawal of capacity currently underway on the main trade lanes.

These developments partly reflect the highly competitive structure of the industry and the concerns over increased capacity coming on stream. This has exerted pressure on operators to expand their market shares, which makes difficult for companies in the sector, including; CMA CGM to pass on the material cost increases acknowledged in the first 9 months of the year, despite good traffic volumes.

Fierce competition exists between the main players in the industry, which remains cyclical and over-reliant on short-term contracts (this, in turn, limits market-revenue visibility). These factors have credit-negative implications for the ratings of container shipping companies, because they have high operating leverage and are therefore highly sensitivity to operating cash-flow shifts.

However, Moody's continues to acknowledge that CMA CGM has a strong business profile with solid market shares globally, as well as a distinctive position in some secondary lanes that are more profitable. CMA-CGM also successfully strengthened its capital base early in 2011 and sold certain assets sold recently. This in particular boosted its liquidity. Moreover, all the major new deliveries of ships that are scheduled before end of 2012 are fully financed.

The negative outlook reflects Moody's concerns that the container market's operating conditions will remain difficult in 2012; CMA CGM's performance will therefore remain under pressure. The material slowdown in the recovery from the 2008-09 global financial crisis and recession has prompted Moody's to revise downwards its growth forecasts for most G-20 economies in November 2011. In addition, it now seems likely that traffic volumes in 2012 will be under pressure compared with both the current trend and Moody's previous expectations. Moody's notes that lower demand could exert both immediate and long-term pressure on CMA CGM and the industry as a whole, given the amount of new deliveries scheduled for the coming years. Moody's acknowledges that CMA CGM has recently obtained approval from its lender to waive the covenant test due at year-end 2011 but the next semi-annual periods could remain challenging if the current market conditions were not to improve substantially; the current B2 rating captures Moody's assumption that CMA CGM's lenders will continue to remain supportive of CMA CGM.

WHAT COULD CHANGE THE RATING UP/DOWN

Downward pressure on the rating could result from lack of short term improvement in market conditions leading to financial leverage failing to decrease below 7x; or (ii) EBIT/interest expense coverage failing to increase materially above 1.0x, both by the end of 2012. Furthere downward pressure on the ratings could result from liquidity pressures and/or failure to restore headroom under covenants.

Conversely, upward pressure could materialise as a result of (i) a reduction in CMA CGM's financial leverage sustainably and materially below 6.x; and (ii) an increase in its EBIT/to interest coverage above 1.5x on sustainable basis.

PRINCIPAL METHODOLOGIES

The principal methodology used in rating CMA CGM S.A. was the Global Shipping Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Marseilles, France, CMA CGM is the third-largest container shipping company in the world (measured in twenty-foot equivalent units, or TEU). CMA CGM recorded last-12-months revenues of USD14.8 billion as of the end of June 2011, and employed approximately 17,500 employees worldwide. As of June 2011, CMA CGM's fleet amounted to 390 container ships (297 chartered-in and 93 owned), with a total capacity of 1.283 million TEU.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
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Will Maersk continue to chase market share?

2011-12-03T09:18:00.000-08:00

Bloomberg News has an article covering the new vessel sharing accord between MSC and CMA CGM. click here for link (also quoted below).

In the article the, this previous comment by Maersk is mentioned.

Maersk has said it is prepared to outlast rivals as the industry faces four years of overcapacity, and will reduce prices to preserve market share.

I wonder if in 6 months time Maersk will still be signing this tune. Furthermore,
if one looks at the history of VSA's, the carriers involved do not generally increase their market shares. That is, until one of them takes over their competitor, and even then, the original combined market share does not generally last.

I hope the management of Maersk thinks about this, before they continue the
drive for market share. How about changing the focus to improve service and performance?

You know, "build it and they will come?"

Offer exceptional service and the customers will come to you?

Just a thought.

By Christian Wienberg - Dec 1, 2011 8:54 AM CT

Mediterranean Shipping Co. and CMA CGM SA, the world’s second- and third-largest container lines, agreed to a vessel-sharing accord meant to fight falling rates as overcapacity makes the industry unprofitable.

The deal includes cooperation on Asia-Northern Europe, Asia-Southern Africa and South American routes, Marseille, France-based CMA CGM said today in a statement.

The partnership will compete with industry leader A.P. Moeller-Maersk A/S, which in September merged some of its Asia to Europe trades into a fixed daily service with a fleet of 70 ships. Maersk has said it is prepared to outlast rivals as the industry faces four years of overcapacity, and will reduce prices to preserve market share.

“The partnership is a result of the incredible tough competition we see in the container market with falling rates and overcapacity,” Janne V. Kjaer, a transport analyst at Silkeborg, Denmark-based Jyske Bank A/S, said by phone. “The industry will have more of these partnerships going forward as the market conditions force container lines into action.”

Maersk’s Copenhagen-based container unit has a global market share of 15.8 percent, according to estimates released today by Alphaliner. MSC, based in Geneva, has 13.2 percent and CMA CGM has 8.5 percent, according to Alphaliner. The smaller rivals are closely held.

“The agreement, which is designed to improve the two partners’ respective performance, will help to drive extensive operating synergies and enhance quality of service,” CMA CGM said. The companies will be able to “deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailing.”
Maersk Prediction

Maersk’s container unit last month lowered its full-year forecast to a net loss from an August prediction of a “modest” profit. The unit lost 1.58 billion kroner ($287 million) in the third quarter versus a 5.9 billion kroner profit a year earlier.

“It’s not unlikely that we will see some container lines going out of business in this unprofitable market,” said Jyske’s Kjaer, who has a “buy” recommendation on Maersk shares.

Maersk declined 580 kroner, or 1.5 percent, to 37,220 kroner at 3:46 p.m. in Copenhagen. The stock has lost 26 percent this year.

Press Release - MSC and CMA CGM agreement

2011-12-01T11:16:00.000-08:00

Here's the press release which is on the MSC web-site (click here for link)

December 1st, 2011

MSC and CMA CGM sign major partnership agreement

The world’s second and third-largest container shipping companies have announced
the signature of a major agreement. The two family-owned companies, the Swiss-
Italian MSC and France’s CMA CGM, today agreed to form a broad-based operating
partnership spanning several trades, including Asia-Northern Europe, Asia-Southern
Africa and all of the South American markets.

The agreement, which is designed to improve the two partners’ respective
performance, will help to drive extensive operating synergies and enhance quality of
service for all of their customers.

On a certain number of trades, the partnership will also enable the Groups to deploy
the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailings.

Diego Aponte, Vice President of MSC, said: “we are very happy to have signed this
broad-based partnership, which will unite our two family-owned companies in the
years ahead. The agreement offers us new opportunities to optimise the use of our
respective fleets, improve our transit times and increase our performance.”

Rodolphe Saadé, Executive Officer of CMA CGM Group, said: “for more than 30
years, our two companies have followed the same trajectory and for a number of
years we’ve cooperated on a few lines. Based on this experience and our shared
vision of the shipping industry, we have decided to step up our partnerships, which
reflect a commitment to long-term cooperation and will enable us to offer customers
improved solutions and services.”

More on CMA CGM agreement with MSC

2011-12-01T11:06:00.000-08:00

The Financial Times has an article about the new announced
partnership between CMA CGM and MSC.

click here for link

They don't really say what the agreement entails...so guess we will have to
wait and see.

Generally these agreements are some sort of Vessel Sharing Agreement. If
they try to do anything beyond that, they will most surely get into trouble
with authorities.

In fact, I wouldn't be surprised if governments aren't looking closely at
all of the containership companies. Tt hasn't been that long ago
that they could legally get together and fix rates, and old habits die hard.

MSC and CMA CGM were 2 of the biggest rate cutters around. But, looks like
this might have come back to bite them.

We shall see.

CMA CGM to partner with MSC

2011-12-01T05:32:00.000-08:00

CMA CGM has stated they will partner with MSC. The official announcement has not yet been made.

This is what is reported in the Journal of Commerce

MSC and CMA CGM, the world’s second and third largest ocean carriers, are joining forces on key trade routes in a game-changing move that is likely to trigger a new round of consolidation in the container shipping industry.

A spokesman for French carrier CMA CGM said the carriers will shortly issue a statement about the alliance, which is expected to involve the Asia-Europe route, the world’s biggest liner trade.

CMA CGM’s partnership with Geneva-based MSC also will cover trades to Latin America and between Asia and South Africa.

The alliance between the two family-owned companies comes at a time of deepening losses in the industry triggered by excess capacity and slowing world trade that has prompted moves by smaller carriers to pursue consolidation.

In the past week, Chile’s CSAV and Zim, the Israeli carrier, have been reported to be seeking partners, while Malaysia’s MISC announced it will exit container shipping because of mounting losses.

The CMA CGM/MSC partnership is also expected to exert fresh pressure on Japan’s top three shipping lines, MOL, NYK and “K” Line, to re-examine plans to spin off their ocean container activities into a single unit.

Global Ship Lease -suspends dividends

2011-11-30T10:02:00.000-08:00

Global Ship Lease announced their lenders have waived the loan-to-value test
for a year, and during this time GSL will not pay dividends.

My question is, who are these "lenders", (although perhaps it is buried in the SEC filing somewhere).

Considering CMA CGM was the one who started this company, selling off ships with lease-back agreements, I would guess they might also be one of the lenders.

If you know, please post a comment.

From Reuters

Wed Nov 30, 2011 10:07am EST

* Says lenders to waive loan-to-value test until Nov 30, 2012

* Says will not pay dividends during the waiver period

* Shares up 12 pct

Nov 30 (Reuters) - Global Ship Lease Inc said its lenders have agreed to extend a key requirement under its credit facility by a year, amid a downturn in containership markets.

Shares of London-based Global Ship Lease, which had touched a year-low of $1.62 on Tuesday, were trading up 12 percent at $1.87 on Wednesday on the New York Stock Exchange.

The company had expected its loan-to-value, a ratio of outstanding borrowings to the aggregate charter-free market value of the secured vessels, would exceed the 75 percent limit.

The company, which charters vessels to shipping companies, said it will not be able to pay dividends during the period of the waiver.

CSAV looks for "strategic partner"

2011-11-29T12:46:00.000-08:00

CSAV continues to deny their container shipping business is for sale.
I'll bet they will keep this standing until the 4th quarter results, which
will most likely be even worse. Then let's see how much good money
they are willing to spend to keep this part of the business alive.

From The Journal of Commerce

Chilean carrier continues to search for "strategic partner"

CSAV posted a net loss of $340.3 million in the third quarter, reversing a $151.8 million profit a year earlier, and the Chilean carrier denied reports that its container shipping business is for sale.

The company said it is continuing to pursue a restructuring that “involves the search for a strategic partner for our container business, but not the finding (of) a buyer for that business unit.”

CSAV posted a third quarter loss from continuing operations of $301.8 million, compared with a profit of $151.9 million a year earlier. Third quarter revenue fell 13.2 percent to $1.4 billion. Through the first nine months of the year, revenue rose 6.3 percent to $4.35 billion.

The latest losses brought the company’s net loss for the first nine months of the year to $859.5 million, compared with a $188.7 million net profit a year earlier.

CSAV has ridden a financial roller coaster in recent years. The line underwent a financial rescue in 2009, and then embarked on a rapid expansion that vaulted it into the top 10 lines in global capacity, only to retrench after heavy lhttp://www.blogger.com/img/blank.gifosses. CSAV has suspended several services and entered joint services with other carriers.

Earlier this year the company received a $1.2 billion capital injection through the issuance of new stock. The carrier also unveiled a new corporate structure that split CSAV’s container shipping line from its ports, tugboat and shipping services unit, SAAM, “with the objective of propelling the growth of the latter.”

CSAV this month announced plans for a joint venture between SAAM and Boskalis, the Dutch dredging and marine services group, for a towage operation in Central and South America.

Will CSAV sell container business?

2011-11-28T21:03:00.000-08:00

I saw an article that CSAV was seeking a buyer, then I saw they claimed they
were not....so I don't know what is going on.

This appeared on the Hellenic Shipping News web-site

Tuesday, 29 November 2011 | 00:00

CSAV seeks buyer for container business after successive quarter losses

Compañía Sud Americana de Vapores (CSAV), the Chilean shipping line, is seeking a buyer for its container business after posting successive quarterly losses.
The struggling South American shipper has brought in financial advisors from Celfin Capital to aid with the sell after the company was unable to reverse the heavy losses experienced in Q2.
During Q3, CSAV posted further losses of US$343 million following Q2’s similar loss of $339 million. CSAV recorded profits of $149 million during Q3 the previous year, according to IFW.
“The decline in freight rates, lower utilisation of vessels and the high cost of fuel continues to negatively impact the margins of the industry and of CSAV,” commented CSAV.
To help reduce even further losses in the final quarter of the year the Chilean firm has taken the action of suspending at least four services and is in discussions with Dutch-based Boskalis to operate a joint towage service, according to Lloyd’s List.
Alliances have also been organized with rival carriers to aid the firm’s Asia-Africa, South America-Europe, Asia-west coast Latin America, Asia-Brazil and India-Europe services next year.
In further bad news for container lines, Zim Integrated Shipping Services, the Israeli shipper, has reported third quarter net losses of $66 million. Zim recorded profits of $37 million earlier in the year.
Source: Port Tecnology

MISC to end container service

2011-11-26T01:05:00.000-08:00

MISC of Malaysia, has decided to end their container operation, due
to losses. This is an indication of how bad it is for container carriers.
In my opinion, there will be more to come.

From Bloomberg News

MISC Bhd. (MISC), Asia’s largest shipping line by market value, said it will stop operating container vessels after the unit lost $789 million in three years.

The move will result in a one-off $400 million charge this year and a full-year loss, Kuala Lumpur-based MISC, controlled by Malaysia’s state oil company Petroliam Nasional Bhd., said in a statement today. Operations will halt by the end of June.

“It’s a good thing for them in the mid-to-long term,” said Firdaus Hisham, a Macquarie Securities Ltd. analyst in Kuala Lumpur. “The margins were never that attractive.”

MISC also said second-quarter net income fell 62 percent from a year earlier to 140.9 million ringgit ($44 million) as losses from carrying containers offset profits at units operating liquefied natural gas tankers and building offshore facilities. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K. have also announced container-shipping capacity cuts this year as tumbling rates cause industrywide losses.

“In view of the expected larger demand of investment in the liner industry, the cost for us to remain relevant in the liner business is untenable,” MISC Chief Executive Officer Nasarudin Md Idris said in an e-mailed statement today.
MISC Fleet

MISC had 30 container ships in its fleet of 173 vessels as of Nov. 1, according to its website. The company also had 29 LNG ships, 83 petroleum tankers and 28 chemical tankers.

The shipping line reorganized its container business in January 2010 by exiting Asia-Europe routes to focus on intra- Asia services.

MISC halted its stock in Kuala Lumpur ahead of the announcement. The shares have fallen 27 percent this year, worse than a 5 percent drop in the benchmark FTSE Bursa Malaysia KLCI Index.

The company’s sales dropped to 2.6 billion ringgit in the three months ended Sept. 30 from 3.1 billion ringgit a year earlier, it said. Its container unit had a 313 million ringgit operating loss compared with a 454.5 million ringgit operating profit in energy-shipping over the past two quarters.

CSAV - in the red

2011-11-25T08:32:00.001-08:00

Article from Mundo Maritimo states CSAV lost $343 million USD in the 3rd quarter of 2011.

Lloyd's List claims CSAV is looking for a buyer for their container shipping business.

This is the spanish version from Mundo Maritimo, there is an english version
further down.

Una pérdida por US$343 millones registró en el tercer trimestre la Compañía Sudamericana de Vapores –controlada por los grupos Luksic y Claro-, la que se compara con la utilidad de US$149,5 millones de igual lapso de 2010. Esta cifra es similar a la del trimestre inmediatamente anterior (-US$ 339 millones), con lo cual a septiembre la naviera acumula un saldo negativo de US$868 millones, frente a una utilidad de US$179,9 millones de similar lapso del año previo.

Las ventas de CSAV al tercer trimestre llegaron a US$4.351 millones, con un incremento de 6,3%, pero los costos crecieron 36%. La empresa detalló que su volumen transportado a septiembre alcanzó a 2.520.549 Teus de arrastre, lo que representa un aumento del 23% respecto de igual período del año anterior (-3% a igual trimestre del 2010), pero las tarifas de flete cayeron en cerca de un 13% en el mismo período (20% con respecto a igual trimestre del año anterior). Es así como en el tercer trimestre las ventas sumaron US$1.401 millones, con una baja de 13,2%.

El importante aumento de los costos de ventas, según Vapores, se explica principalmente por los gastos asociados al aumento en el volumen transportado y por el significativo aumento en el precio promedio de combustible. Esta alza en el valor de combustible consumido durante el período hizo que como porcentaje de los costos de venta consolidados este componente pasara de 23% a septiembre de 2010 a 26% a igual mes de 2011. Sin embargo, cabe destacar que en los Estados Financieros se indica que al 30 de septiembre de 2011 el Grupo CSAV arrienda, en régimen de arrendamiento operativo una cantidad de 147 barcos (174 en diciembre 2010) y 340.242 contenedores (387.669 en diciembre 2010). Esto le implica compromisos totales por US$2.577 millones, de los cuales US$791 millones son a menos de un año, US$973 millones hasta tres años, US$373 millones entre tres y cinco años, y US$439 millones a más de cinco años.

CSAV agrega, en su análisis razonado, que “las condiciones de mercado del cuarto trimestre son, hasta el momento, mucho más negativas que aquellas que se esperaban hace unos meses. Las tarifas de la industria (índice SCFI) no sólo no mostraron las alzas esperadas de la alta temporada, sino que están casi 18% más bajas que en el segundo trimestre, mientras que el combustible (IFO 380, Rotterdam) se ha mantenido en niveles muy altos”. Sin embargo, afirma que las medidas de reestructuración deberían morigerar las pérdidas en el cuarto trimestre, y sentir los beneficios en 2012.

English version from Google translate

A loss of $ 343 million in the third quarter, the South American Steamship Company, controlled by the Luksic group and clearly, which compares with net income of U.S. $ 149.5 million the same period in 2010. This figure is similar to the previous quarter (-US $ 339 million), which accumulates to September shipping a negative balance of U.S. $ 868 million, compared with a profit of $ 179.9 million a year earlier similar .

CSAV sales for the third quarter reached U.S. $ 4,351 million, an increase of 6.3%, but costs increased 36%. The company explained that its volume moved to September reached 2,520,549 TEUs of drag, which represents an increase of 23% over the same period last year (-3% the same quarter of 2010), but the freight rates fell in about 13% over the same period (20% over the same quarter of previous year). Thus, in the third quarter, sales totaled U.S. $ 1,401 million, a decrease of 13.2%.

The significant increase in cost of sales, as steam, mainly due to costs associated with the increase in transport volume and by the significant increase in the average price of fuel. This rise in the value of fuel consumed during the period made as a percentage of consolidated sales costs this component went from 23% to September 2010 to 26% the same month of 2011. However, it is noteworthy that in the financial statements indicates that the September 30, 2011 CSAV Group leases, operating leases on a number of 147 boats (174 in December 2010) and 340 242 containers (387 669 in December 2010). This implies total commitments of U.S. $ 2,577 million, of which U.S. $ 791 million is less than a year, U.S. $ 973 million to three years, U.S. $ 373 million three to five years, and $ 439 million over five years.

CSAV adds, in its rationale that "market conditions in the fourth quarter are far, far more negative than those expected for some months. The industry rates (index SCFI) not only showed the expected increases in the high season, but are almost 18% lower than in the second quarter, while fuel (IFO 380, Rotterdam) has remained too high. " However, claims that the restructuring measures should be moderating the losses in the fourth quarter, and feel the benefits in 2012.

Zim needs cash

2011-11-25T08:14:00.000-08:00

According to an article in Bloomberg News, Zim will need cash unless the business
improves this year. From what I hear from folks in the industry, that is
not likely to happen.

Lloyd's List has a headline saying Zim is looking for a merger.

In any event, looks like something needs to happen to keep Zim afloat (sorry for the pun!)

From Bloomberg News

Israel Corp.’s Zim Unit Posts Quarterly Loss as Costs Rise

By Shoshanna Solomon - Nov 24, 2011 10:04 AM CT

Israel Corp. (ILCO)’s Zim Integrated Shipping Services Ltd. unit reported a third-quarter loss of $66 million after a year-earlier profit of $37 million as transport prices fell and costs increased.

Shares of Israel Corp., the holding company controlled by the Ofer family, slumped 5 percent to 2,110 shekels, the lowest since September 2009.

“It is still early to evaluate the full impact of Zim on Israel Corp.,” Eran Yunger, an analyst at Midgal Capital Markets in Tel Aviv wrote in an e-mailed report today. Zim “will need an additional injection of cash if there is no change to its business environment,” he wrote.

Container lines’ earnings have slumped this year as fuel prices increase, while rates on Asia-West Coast routes decline. Extra trans-Pacific capacity may prevent the lines from pocketing surcharges that usually make the second half their most profitable period.

Standard & Poor’s Maalot cut Zim to “ilBB-” from “ilBBB- ” with a “negative” outlook today, saying the erosion of transport tariffs and an increasing supply of competing ships will lead to “continued deterioration” at the shipping company.

Israel Corp.’s third-quarter profit rose to $156 million from $106 million a year earlier as revenue increased 21 percent to $3.08 billion.

U.S. Thanksgiving Day

2011-11-24T01:01:00.000-08:00

Today is Thanksgiving Day in the U.S.

It's one of our best holidays, as it's all about eating, and just
enjoying getting together.

Well, of course, that is if you enjoy your relatives.

When I was in Spanish school in Chile, one of my teachers
was puzzled by the whole "turkey" thing which is traditional
for U.S. Thanksgiving.

I realized this is portrayed so many times in our U.S. culture.
So, here's the thing.

We only cook turkey once a year, for Thanksgiving. And, because
the bird is so big, it takes a long time to cook. If you don't cook it
long enough, it's not fit to eat. If you cook it too long, it's all
dried out. It takes at least 3-6 hours to cook, depending on the size of
the turkey.

Furthermore, so many people don't cook, they don't even know how to
start.

As for me, I have been through this before. It's no big deal. The
turkey is already cooked, actually, everything is cooked, and it will
just be reheated for dinner.

Thank goodness for microwaves.

Happy Thanksgiving to everyone.

Vale to control shipping of iron ore

2011-11-22T18:47:00.000-08:00

The last couple of years the ships which carry iron ore from Brazil to China
have caused much of the shortage in the break bulk ship availability.

This led to the large swings in the Baltic Freight Index, as well as caused
huge increases in the cost of moving iron ore.

Vale, of Brasil, who is the largest supplier of iron ore to China decided
to take more control of the shipping costs by owning the ships.

But this has also created tensions with their biggest customer, the Chinese.

From Bloomberg News

By Bloomberg News - Nov 22, 2011 6:49 PM CT

The Vale (VALE) Brasil, the biggest commodity ship ever built, was designed to carry iron ore to China from South America. After six months in operation, it hasn’t done that once.

China’s refusal to accept the Brasil has derailed Vale SA (VALE3)’s push to control shipments to its biggest customer by building up a fleet of 35 ships, each almost as large as the Bank of America Tower in New York. Rio de Janeiro-based Vale, the world’s biggest iron ore miner, ships about 45 percent of sales to China, the largest consumer of the steelmaking ingredient.

Vale’s plan, which includes buying 19 vessels for $2.3 billion, has spurred opposition from Chinese shipowners who say it will worsen overcapacity, slumping cargo rates and industrywide losses. Steelmakers are also likely against it as the ships would give Vale more control over pricing and delivery, said Chang Tao, a China Merchants Securities Co. analyst.

“Nobody in China wants Vale’s fleet to come,” he said. “Not shipping lines, not shipowners, not steelmakers.”

The miner may struggle to find alternative uses for all ships as no other markets are as big, he said. Vale also likely can’t cancel vessel orders or quit leasing contracts without paying “very heavy penalties,” said Ralph Leszczynski, the Beijing-based head of research at shipbroker Banchero Costa & Co.

“I’m pretty sure that Vale themselves have by now realized that they made a big mistake,” he said. “I find it really incredible that they committed so much money in this project without first getting written assurances from the Chinese side that they would be able to use the ships.”
Daewoo, Rongsheng

Vale’s press-relations office in Rio de Janeiro declined to comment. The miner is buying vessels from China Rongsheng Heavy Industries Group Holdings Ltd. and Daewoo Shipbuilding & Marine Engineering Co. (042660) It will also lease eight from STX Pan Ocean Co. under a $5.8 billion 25-year deal, according to 2009 statements from the Seoul-based shipping line.

Vale’s then-chief executive officer Roger Agnelli oversaw agreements for the 400,000 deadweight-ton vessels to reduce a reliance on outside shipping lines and risks from changes in freight costs. The Baltic Dry Index, a benchmark for global commodity-shipping rates, fluctuated more than 40 percent on an annual basis every year except one from 2001 to 2010.
130 Million Tons

The Vale vessels are about twice as big as the capesize ships that are now generally used to ferry commodities from Brazil to China. The miner plans to send about 130 million tons of iron ore on the route both this year and next.

The company is also investing $1.37 billion to set up a distribution centre in Malaysia that will be able to handle the very large ore carriers. Transferring cargo there to smaller vessels for shipment to China would likely increase freight costs, eroding at least some of the gains from the larger vessels’ size and fuel efficiency, said China Merchants’ Chang.

Vale has held talks with Chinese shipping lines about selling or leasing the about 360-meter-long vessels, Teddy Tang, the chief financial officer of its China operations, said in September. No deals had been reached.

The China Shipowners Association, whose members hold about 80 percent of the nation’s shipping capacity, has advised lines not to take the vessels, said Executive Vice Chairman Zhang Shouguo.

“The most important thing for Vale is to stop building,” said Zhang, a former deputy director in the transport ministry’s shipping division. “The additional capacity will exacerbate the already bad freight market.”

The China Iron & Steel Association has no position on suppliers’ shipping operations as long as they aren’t used to manipulate iron-ore prices, said General Secretary Zhang Changfu.
Rongsheng Heavy

The Brasil was this week in the Arabian Sea headed for Oman, according to data on the Bloomberg terminal. The ship was handed over to Vale by Daewoo Shipbuilding in May. The Seoul-based shipyard has also delivered two other similar-sized vessels, as it works through orders for seven worth a total of $748 million. More deliveries will follow next year and work is progressing as planned, the shipbuilder said by e-mail.

Vale also ordered 12 of the very large ore carriers from Rongsheng Heavy for $1.6 billion in 2008. The Shanghai-based shipbuilder expects to deliver the first this month, said Chief Executive Officer Chen Qiang. The handover is about two months late because of certification issues, he said. The company has begun building the other 11 on-order ships, with Vale paying in installments as work progresses, he said.

“I am not worried about any possibility of Vale canceling orders,” Chen said. “They need the ships to carry iron ore, and the vessels are greener and more advanced.”
Management Shakeup

Vale CEO Murilo Ferreira, who took on the job in May, this week named a new logistics head, Humberto Freitas, as part of a management reshuffle. The previous operations head, Eduardo Bartolomeo, will run the company’s fertilizers and coal unit.

Ferreira’s new regime may also herald a change in the approach to shipping, which could be announced at an investor day next week, said Rafael Weber, a Porto Alegre, Brazil-based Geracao Futuro Corretora analyst.

“They can’t fight with their main customer,” he said. “The company may decide against going ahead with it to avoid discord with the Chinese government.”

China’s Transport Minister Li Shenglin said earlier this month that the government will strengthen control of vessel deliveries and “guide the orderly arrival” of new ships amid tumbling rates and losses for shipping lines. China Cosco Holdings Co., the nation’s largest sea-cargo carrier, lost 4.8 billion yuan ($755 million) in the first nine months.
China Ports

The Vale Brasil was diverted on its maiden voyage in June from its original destination of Dalian, China to Italy after a request from a European customer and because “draft services” at the Chinese port weren’t ready, Ferreira said in July. The ships will “undoubtedly” go to China when needed, he said.

The ports of Dalian, Qingdao and Majishan near Shanghai are able to handle Brasil-sized vessels, Vale said in June. Qingdao, northeast China, hasn’t opened its facility because of “restrictions,” Li Yuzhai, a spokesman for Qingdao Port (Group) Co., said yesterday.

Calls to Majishan port yesterday went unanswered. Dalian Port PDA Co. (2880)’s press office referred enquiries to the company’s iron-ore handling unit. Calls there weren’t answered. A call to the ministry of transport wasn’t answered.

STX Pan Ocean has begun operating one of its eight VLOCs for Vale. The vessel is awaiting loading in Brazil, the shipping line said by e-mail yesterday. No changes to its agreement with Vale are expected, it said. The shipping line’s vessels are being built by affiliate STX Offshore & Shipbuilding Co. (067250)
BW Group, Oman

BW Group will also operate four vessels for Vale, the miner said in 2007. One, the Berge Everest, was due to be delivered in September by Bohai Shipbuilding Heavy Industry Co., according to a statement on the website of BW affiliate Berge Bulk.

Rongsheng Heavy is also building four VLOCs for Oman Shipping Co., which will be leased to Vale and used to haul commodities to the sultanate. The vessels are all due to be delivered in the second half of 2012, the shipping line said by e-mail yesterday.

Still, Vale needs to use ships on China routes to fully utilize the fleet, and the country’s opposition to the vessels is unlikely to weaken, said Huang Wenlong, a Hong Kong-based analyst with BOC International Holdings Ltd.

“Once Vale moves its own iron ore, its control on the supply of iron ore extends into shipping, further diminishing Chinese steelmakers’ bargaining power,” he said. “That is a situation China doesn’t want to see.”

CMA CGM sells ships

2011-11-21T20:03:00.000-08:00

From Bloomberg News

CMA CGM SA, the world’s third- largest containership line, said it’s selling two so-called post- panamax vessels.

The ships are the CMA CGM Wagner and the CMA CGM Verdi, the Marseille, France-based company confirmed by e-mail today. CMA CGM declined to say whether it had reached agreement on or finalized a sale.

Both vessels, built in 2004, were sold for $45 million to undisclosed Greek interests, Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker, reported Nov. 19. A post-panamax ship is too large to navigate the Panama Canal.

The French company has 408 vessels and nine more on order at shipyards, making it bigger than any competitor except Maersk Line and Mediterranean Shipping Co., according to Clarkson.

CMA CGM sold 25 vessels between March 2010 and Nov. 18 of this year for $627 million, according to London-based Seasure Shipping Ltd. Seasure publishes VesselsValue.com, an assessor and tracker of sales and purchases of container ships, tankers and dry-bulk vessels.

TUI to sell remaining interest in Hapag-Lloyd

2011-11-19T09:23:00.000-08:00

Back when TUI did the deal with a group of investors to buy part of Hapag-Lloyd,
part of the deal was an option for Albert Ballin (the investor group), to
buy the remaining interest of TUI in Jan. 2012.

Albert Ballin probably has second thoughts about this.

I don't know the terms, but guess they will probably have to buy the rest
of the shares at the previously agreed price.

From Bloomberg News

TUI AG (TUI1) plans to sell its remaining stake in the Hapag-Lloyd AG container-shipping business in January and expand further in Russia and China as the German tour operator redefines its business model.

“We looked for ways to exit Hapag-Lloyd such as finding a new investor or doing an initial public offering, but without having the chance to succeed we’re back to our right to tender our stake,” Chief Financial Officer Horst Baier said yesterday in an interview in Frankfurt. “Assuming we get all the approvals, we’ll execute our option on Jan. 2.”

TUI sold a majority stake in Hapag-Lloyd, Germany’s biggest container line, to Hamburg-based investment group Albert Ballin GmbH in March 2009. The travel company still owns 38.4 percent and has the option to sell a stake to Ballin on Jan. 2.

With an exit from shipping, Hannover-based TUI will be better suited to optimize its tourism business with expansion in Russia as well as China and India, the CFO said. In China, TUI plans to boost its trade in sending tourists to Europe.

“We are currently No. 5 in Russia and plan on becoming No. 2 in the next two-to-three years,” Baier said. “In Asia, we are at the very beginning of our journey, but plan to expand in China and India.”

Baier said the company is “pushing” online offerings and already has about 70 percent of destinations online in Scandinavia, while the percentage is “weaker” in Germany. The company also wants to expand market share in the German-speaking market for cruises, the CFO said.

“It’s frustrating to see how Europe’s debt crisis has affected the real economy and investor sentiment, however we had other years where we had some insecurity and where things cooled down,” Baier said. “We should wait a little bit more to see the outcome of the crisis.”

TUI is scheduled to report yearly earnings on Dec. 14.

The shares dropped 3 percent to 3.89 euros at the close of trading in Frankfurt today, the lowest since Oct. 5. They have fallen 63 percent this year.

Update- General Maritime

2011-11-18T08:36:00.000-08:00

General Maritime filed for Chapter 11 this week.

Now creditors are opposing their plans.

Looks like this could get messy. The courts will get to sort it out.

From Bloomberg News

A group of General Maritime Corp. noteholders opposed a request by the second-largest U.S. owner of oil tankers to borrow $75 million in bankruptcy.

General Maritime is scheduled to seek permission from U.S. Bankruptcy Judge Martin Glenn in Manhattan court today to draw $30 million of a $75 million loan to fund operations while it reorganizes. The company, which operates in over 230 ports of call in over 70 countries, filed for bankruptcy protection yesterday after falling oil demand and a surplus of ships led to two years of losses.

The terms of the loan will “serve to prematurely limit or foreclose the rights of unsecured creditors or any official committee appointed to represent their interests,” the noteholder group said in court papers filed today.

The ad-hoc group, which doesn’t have formal standing in the case, owns over $185 million in 12 percent senior notes due 2017. It includes Capital Research and Management Company, J.P. Morgan Investment Management, Inc., J.P. Morgan Securities LLC, Stone Harbor Investment Partners LP and Third Avenue Focused Credit Fund.

General Maritime’s proposed loan is from Nordea Bank Finland Plc and other lenders. The company also has a plan to restructure with certain lenders; negotiations leading up to its bankruptcy led to a “restructuring support agreement” under which lender Oaktree Capital Management LP agreed to make a $175 million equity investment.
New Company

The agreement will convert all of the company’s debt into stock in a newly created company, and lenders would agree to vote in support of a plan of reorganization under certain terms, according to court papers.

The noteholder group said that junior secured lenders to a $200 million loan, which includes an affiliate of Oaktree, shouldn’t benefit from protections given to Nordea Bank and other lenders to the $75 million “debtor-in-possession” financing. Such loans allow companies to keep operating in bankruptcy and give them a higher priority to be repaid.

They also said a $75,000 reserve set aside to fund investigations into any claims the estate might have is too low.

Freight rates for oil carriers have fallen to the lowest in at least 14 years, prompting General Maritime to warn in a Sept. 30 regulatory filing that it might file bankruptcy.

Single-voyage rates for very large crude carriers, hauling about 20 percent of the world’s oil, averaged $7,627 a day this year, compared with $32,006 in 2010, according to the London- based Baltic Exchange, which publishes costs along more than 50 maritime routes.
March Loan

General Maritime has been restructuring its balance sheet since at least March, when it took out a $200 million loan from Oaktree Capital Management to refinance 2005 debt and amend 2010 debt, according to the most recent annual report, filed in March.

Among the largest unsecured creditors listed in court papers were Bank of New York Mellon Corp. (BK), trustee for holders of $300 million in 12 percent callable bonds due in 2017.

The New York-based company listed assets of $1.71 billion and debt of $1.41 billion today in a Chapter 11 petition in U.S. Bankruptcy Court in Manhattan.

The case is In re General Maritime Corp. (GMR), 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Blah, Blah, Blah

2011-11-17T12:40:00.000-08:00

There is a video on the JOC site. This is the by-line

Ron Widdows, senior advisor to Neptune Orient Lines, says container lines will have to reduce capacity to sustain freight rates and get away from the 'destructive behavior' that is feeding steep losses.

I remember when working for a carrier, and my bosses would complain about
"the other carriers which are destroying the marketplace"...
I would retort

"That's competition....it's like K-Mart complaining about Wal-Mart".

For you young'uns, that was about 20 years ago, when Wal-Mart didn't even
have stores in New Jersey (where I lived).

My how times have changed.

Not every carrier can, or should even strive to be, the biggest in the world.

It's not always about price, although carriers are led to believe it is.

You would not believe the mark-up some NVO'S get away with, just because they
offer the service which carriers no longer offer.

I am not sure of the situation today, but use to be, if you were a Maersk customer who shipped less than 1000 TEU's a year, you didn't get to talk to a real person.
You had to use the internet, or have your forwarder or broker get the information.

For anyone who use to work for me, probably some of their memories are
me yelling "ANSWER THE PHONE".

I really can't be sympathetic to all the whining.

CMA CGM - will they survive?

2011-11-17T12:13:00.000-08:00

I was kinda busy earlier this year with "life", so wasn't paying much
attention to the shipping world for some time.

However, recently noticed lots of readers looking for information on CMA CGM.

I found this article from Sept. 2011 in Bloomberg, which was quite disturbing, especially if you are a CMA CGM shareholder or creditor.

Zero Freight Rates Fueling CMA CGM Default Risk to 90%

By Patricia Kuo and David Goodman - Sep 5, 2011 6:12 AM CT

Bonds and derivatives tied to CMA CGM SA, the third-largest container line, are signaling that the company has a nine in 10 chance of defaulting as the slowing global recovery pushes freight rates to about zero.

Penalized by the U.S. last month for breaching trade sanctions with Iran, Cuba and Sudan, CMA CGM has seen the price of its $475 million of 8.5 percent notes due 2017 plunge to 47.25 cents on the dollar since they were sold April 14, Bloomberg Bond Trader prices show. Credit-default swap prices signal a 90 percent probability of the Marseille-based company being unable to meet its obligations within five years.

Freight charges collapsed on the Asia-to-Europe lines, the world’s second-busiest route, as a capacity glut combines with the slowest growth in trade since 2009. Rates excluding fuel surcharges were “practically” zero in July and little changed last month, the worst run ever, according to Menno Sanderse, an analyst at Morgan Stanley in London.

“Shipping and logistics is a pretty beat-up sector,” said Louis Gargour, who owns the bonds as the chief investment officer at LNG Capital LLP, a London-based hedge fund he co- founded in 2006. “The good side is everybody I know is very interested in this company at 50 cents on the dollar, although it’s a gamble.”

CMA CGM was founded by Jacques Saade in 1978 after he fled to France from Lebanon’s civil war. It employs more than 17,200 people and runs a fleet of 394 vessels, according to its website. The company grew from five employees and a rented boat into a global operator, ranking behind Copenhagen-based A.P. Moeller-Maersk A/S and Mediterranean Shipping Co. SA in Geneva.
Debt, Earnings

The company posted an 8 percent increase in first-half sales to $7.3 billion and had $675 million of cash at the end of July, according to a statement on its website. CMA CGM said it had $5.3 billion of net debt at the end of June and recorded $685 million of earnings before interest, tax, depreciation and amortization in the first half of the year.

That means debt is more than three times Ebitda, compared with a ratio of about less than one time at Maersk, according to that company’s earnings report on Aug. 17.

CMA CGM also issued 325 million euros ($459 million) of 8.875 percent bonds maturing in 2019 in April, which were quoted at 49 percent of face value, Bloomberg Bond Trader prices show.

Default swaps on the company’s debt cost 4.8 million euros upfront and 500,000 euros annually to insure 10 million euros of debt for five years, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The contracts have risen from 800,000 euros upfront on June 6.
Bonds ‘Whipsawed’

“We are surprised to see the value of the debt drop so much,” said Michel Sirat, the container line’s chief financial officer based in Marseille. “Our bonds are whipsawed because of prevalent fears in financial markets and questions about our liquidity, but we have a strong cash position and are fully compliant with our debt covenants.”

The drop in its bonds prompted the company to issue a statement on Aug. 3, saying it’s taking the “poor performance very seriously,” and that it doesn’t plan major new investments this year and next.

CMA CGM is rated B+ by Standard & Poor’s, which said in a May report that the company’s rankings are constrained by its “high operating risk in the cyclical, capital-intensive, and competitive container-shipping industry.”
Covenants Breached

The container line has about $4 billion of loans, according to data compiled by Bloomberg. Covenants on most of its borrowings were breached in 2009 after a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM received $500 million from Turkish family-owned company Yildirim in November in return for a 20 percent stake as it sought to restructure about $5 billion of debt. In May, Yildirim agreed to buy 50 percent of Malta Freeport Terminals from CMA CGM for 200 million euros.

Analysts are increasingly bearish on what slowing trade growth means for shipping company earnings. Maersk, the world’s biggest container-shipping line, will report a 25 percent slump in net income to 19.71 billion kroner ($3.8 billion) this year, the mean of 16 estimates compiled by Bloomberg shows.

The industry may lose $2.5 billion to $3 billion this year, said Philip Damas, director of liner shipping and supply chains at Drewry Shipping Consultants Ltd. in London. Owners and operators lost $20 billion in 2009, when the global container trade contracted for the first time ever, he said.
‘Risk of Default’

“A lot of companies run the risk of default if freight rates remain at such a low level,” said Jacob Pedersen, an analyst at Sydbank A/S, Denmark’s third-largest publicly traded lender. “Companies have been taken by surprise this quarter because just a few months ago they were all sure there would be a lack of capacity and that would be positive for freight rates.”

Risk aversion has wiped out $5 trillion of global equity market value since July and brought high-yield bond sales to a halt. A Labor Department report on Sept. 2 showed the world’s largest economy added no jobs last month while a contraction in European manufacturing and plunging business and consumer confidence suggest the slowdown in growth may continue into the third quarter, members of the so-called shadow European Central Bank council said last week.
Sanctions Violated

Confidence in CMA CGM was also dented after the company’s U.S. unit paid a $374,400 settlement to the Department of Treasury’s Office of Foreign Assets Control last month following allegations it violated sanctions in exporting goods to Sudan and accepted payments for shipping services in connection with Cuba and Iran.

The alleged violations of sanction programs took place between December 2004 and April 2008 and there was no finding of fault, according to a company statement.

CMA CGM’S MV Victoria container ship was seized by the Israeli Navy after the shipper of three containers falsely described cargo contents as lentils when in fact they contained weapons, the company said on June 1. An Iranian company used one of its vessels to illegally transport arms to Lagos after labeling them as “packages of glass wool and pallets of stone,” the company said in October.

CMA CGM isn’t alone in dealing with maritime disputes. China Cosco Holdings Co., the state-controlled sea-cargo group, had at least three vessels arrested in the past two months as shipowners sought overdue payments, according to court filings in the U.S. and Singapore.

CMA CGM is counting on routes to emerging markets such as Latin America and Russia to drive growth as Europe stands on the brink of another recession. The company held a conference call with more than 150 bond investors on Aug. 31 to allay their concern about the company’s financial position, Sirat said.

“We see strong trades in Latin America, Russia, the Black Sea region and India, bringing in new avenues for growth besides the traditional routes of Asia to Europe and Asia to the U.S.,” Sirat said. “I hope our bond prices will recover after we explained our position to bondholders, because we intend to continue to access the bond market.”

General Maritime files Chapter 11

2011-11-17T05:38:00.000-08:00

Hum, 2 days in a row announcement of a shipping company filing
Chapter 11.

Does not bode well for the industry.

From Bloomberg News

General Maritime Corp. (GMR), a transporter of crude oil via ocean tankers, filed for bankruptcy court protection from creditors amid low freight rates and a surplus of ships.

The New York-based company listed assets of $1.71 billion and debt of $1.41 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan. General Maritime, which operates mostly between the Caribbean, South and Central America, the U.S., Western Africa and the North Sea, has a fleet of 31 double-hull tankers, according to its website.

“Operations are to continue without interruption” after General Maritime reached agreements with key lenders, the company said in a statement after the bankruptcy filing. “General Maritime expects to substantially reduce its funded indebtedness and enhance its liquidity profile.”

Oaktree Capital Management LP will provide a $175 million equity investment and a group led by Nordea Bank Finland Plc will provide as much as $100 million in financing to help the company through reorganization, General Maritime said.

General Maritime joins other troubled shipping companies in bankruptcy, including Korea Line Corp. (005880), Korea’s second-largest operator of dry-bulk ships which sought U.S. bankruptcy protection in February. Time-chartered operators Britannia Bulk Plc, Armada (Singapore) Pte Ltd. and Transfield ER Cape have also filed for bankruptcy.

Balance Sheets

General Maritime has been restructuring its balance sheets since at least March, when it took out a $200 million loan from Oaktree Capital Management to refinance its 2005 debt and amend its 2010 debt, according to the company’s most recent annual report, filed in March.

Chief Executive Officer John Tavlarios said in July that the company had made transactions to increase its liquidity, as it announced a loss of $36.8 million for the quarter ended June 30, more than double the $14 million lost in the same period a year earlier.

Among the largest unsecured creditors listed in court papers were Bank of New York Mellon Corp. (BK), trustee for holders of $300 million in 12 percent callable bonds due in 2017.
Stock Fell

In August, the company led declines in oil-tanker stocks as analysts predicted a return to recession in the U.S. would delay any rebound in charter rates for tankers until after 2013. On Aug. 22, the company said it had received a delisting notice as its share price failed to meet the New York Stock Exchange’s minimum requirements.

The shares closed yesterday at 16 cents.

Moody’s Investors Service cut its credit grade on the company’s debt to Caa3 in September, citing the increasing likelihood of a restructuring because of “weak sector fundamentals.” The company’s “overreliance” on its cash balance, which was almost $59 million as of June 30, may cause it to fall out of compliance with a minimum liquidity covenant, Moody’s analysts said in the Sept. 1 note.

The company is likely to “have a difficult time achieving positive operating cash flow, which could threaten its ability to make cash interest payments,” the Moody’s analysts wrote. Weak freight rates will also pressure the market value of tanker vessels, cutting another source of liquidity, they wrote.

The company’s bonds steepened their decline in October after the company announced it had agreed to amend its $500 million revolving loan, its $372 million term loan, and its $200 million loan with affiliates of Oaktree. The changes waived General Maritime’s need to maintain a minimum cash balance.

The case is In re General Maritime Corp., 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Trailer Bridge files for Chapter 11 Bankruptcy

2011-11-16T07:24:00.000-08:00

Chapter 11 bankruptcy in the U.S. allows a company to continue operating,
and offers protection from creditors.

Trailer Bridge announced they will continue to operate under Chapter 11

From The Journal of Commerce

Carrier maintains operations, gains DIP financing under Chapter 11

U.S.-Puerto Rico carrier Trailer Bridge filed for Chapter 11 bankruptcy reorganization on Wednesday, a day after failing to refinance $82.5 million in bond debt that became due Tuesday.

The company said it will continue operation and has an agreement for $15 million in debtor-in-possession financing. The financing, worked out with Global Hunter Securities, is subject to approval of the U.S. bankruptcy court in Jacksonville, Fla., where Trailer Bridge is headquartered.

Trailer Bridge told the Securities and Exchange Commission late Tuesday the company expected to file its quarterly report by Nov. 21, a week behind schedule. The company said it needed extra time because the company has been focused on its bond refinancing efforts.

The company said it views the Chapter 11 filing as “the quickest and most efficient way to restructure its balance sheet and ensure the long-term strength of its operations.” Trailer Bridge said it hopes to complete the reorganization by the end of the first quarter of 2012.

The bankruptcy reorganization, “if successfully implemented, will result in a revitalized company with a vastly improved and deleveraged balance sheet, “Co-CEOs William G. Gotimer Jr. and Mark A. Tanner said in a statement

Wells Fargo Bank last month granted any an extension to Nov. 14 on Trailer Bridge’s 9.25 percent senior secured bonds due Nov. 15.

In the carrier’s second quarter report Aug. 15, Trailer Bridge said it was “exploring a number or options that might involve the private or public lending market and may include an equity component, and that might result in a change of control.”

Trailer Bridge operates a container-barge service between Jacksonville, Fla., and Puerto Rico and the Dominican Republic. The company also operates motor carrier service in the 48 contiguous states.

140 Years of Hamburg Süd

2011-11-15T19:27:00.000-08:00

Hamburg Süd has been in existence for 140 years.

That's a long time for any company.

There is a special exhibit going on in honor of this anniversary.

You may look at photos from the exhibition by
clicking on this link

Here's the press release advising of this exhibit.

Special exhibition “140 Years of Hamburg Süd” at the International Maritime Museum in Hamburg

Hamburg 15 November 2011. From 15 November 2011 to 25 March 2012, the special exhibition “140 Years of Hamburg Süd” can be viewed at the International Maritime Museum in Hamburg . It allows a unique glimpse into the history of the shipping group – with a host of historical paintings, posters and model ships. The occasion for the special exhibition is the 140th anniversary of Hamburg Süd, which was founded on 4 November 1871 by eleven eminent Hamburg merchants and ship owners.

The highlights of the show include the original model of the museum freighter “Cap San Diego” from 1961 and a 4.5-metre-long model of the celebrated Hamburg Süd passenger liner “Cap Arcona” from Blohm + Voss. Also on display are oil paintings by the well-known marine painters Hans Ritter von Petersen, Johannes Holst and Leonhard Sandrock, as well as ship posters from the 20s and 30s. The latter convey a unique impression of the glamorous era of Hamburg Süd cruises. Completing the broad sweep of the special exhibition is a film on the history of Hamburg Süd, incorporating numerous historical sequences, and an interactive sea chart showing the current location of all the shipping group’s owned vessels.

“The exhibition is like a living journey through time covering the different epochs of our history,” says Dr Ottmar Gast, Chairman of the Executive Board of Hamburg Süd. “It shows the dynamic development of a shipping company that started out in 1871 with three small steamers sailing to Brazil and La Plata and today links up the continents as one of the world’s 15 largest container lines.”

CSAV - financial information

2011-11-14T18:46:00.000-08:00

Here's the English version of the CSAV news

This was translated by someone who is a professional translator.

If you need something translated from Spanish to English
you may contact her at nllamas@cox.net

translated by Nicolette Llamas
From MundoMaritimo 11-11-11:

CSAV is continuing to navigate turbulent waters given that in the third quarter, additional negative numbers will be added to the US$525 million that it lost in the first half of the year. That is how a recent Corp Research report is determining that the shipping line would report a negative balance of US$315 million in the July through September period, with which it will accumulate a US$840-million loss in the first nine months, estimating on the market that it would rise above US$1.1 billion in 2011.

However, in this case, the scenario is more complex since, unlike the first six months during which the loss was due to a 44.8% rise in costs that counteracted a 19% rise in sales, in the third quarter, revenue would drop 13.2%, totaling US$1.401 billion for the period, within the framework of the reduction in the size of the company that Luksic Group is promoting. In turn, CSAV’s EBITDA would be negative US$277 million as opposed to US$196 million in the black for the same period in 2010.

And for the rest of 2011 and next year, the scenario would not be favorable either, given that the shipping business will continue to have a strong imbalance between supply and demand since, according to the specialized consultant Alphaliner, the world fleet could increase 8.5% this fiscal year and 8.7% in 2012, according to the August order book. In that regard, it is estimated that ocean freight rates will continue to fall since there would continue to be a surplus of transport capacity in the midst of a less dynamic world market, accompanied by high oil prices.

The latest available numbers reveal that in September, CSAV reported a 12.2% decrease in shipped containers relative to the same month in 2010, after adding up the 242,900 TEUs that they moved. Meanwhile, in the third quarter, the company transported 785,100 TEUs, which represented a 3.4% reduction relative to a similar period in 2010.

Leasing factor

CSAV is now much more exposed than the rest to the business’ ups and downs, given that 87.2% of the 90 vessels with which it operates are leased, while the industry average is around 50% owned vessels.

Observing the results from the first two quarters from the shipping lines that report, it stands out that CSAV is by far the one showing the greatest losses, but at the same time, it is second in increasing its sales.

For CSAV, the “leasing factor” is highly significant, first of all because, according to Corp Research, not having its own fleet, it loses the opportunity to participate in the ship-owning business, which implies using the vessels as though they were property assets, and secondly, because leasing them represents around 18% of the company’s total costs. In addition, the investment bank specifies that a disconnect between the leasing price and freight rates has been being generated, “exposing a gap that is damaging to the company’s results.”

Who will merge?

2011-11-12T19:44:00.000-08:00

There were not the anticpated merges and bankruptcies the last couple of years
in the container business. Mostly because governments inter veined.

Let's see what happens in the next year.
Some people think there will be some..

From The Journal of Commerce

Lazard's Stokes says carriers are looking to cuts costs, expand market share

Further consolidation of container shipping lines is likely as carriers seek to cut costs, expand market share and bolster balance sheets, said Peter Stokes, senior analyst and head of shipping at investment bank Lazard.

“I believe that we will finally see a number of non-cash defensive mergers as companies struggle to remain competitive on the major east-west routes or seek to strengthen their position in north-south and intra-regional trades,” Stokes told the Marine Money conference in New York.

Container shipping survived 2009’s market slump, which produced more than $15 billion in losses, without major failures or consolidation. Stokes said, however, that container shipping and certain specialized sectors of shipping may be better candidates for mergers and acquisitions than commoditized bulk shipping companies.

“This is because these are businesses which are much more complex to operate, where greater synergies can be realized and where factors such as market share and long-term customer relationships can be a significant part of value,” Stokes said. “In the current, desperately poor, container shipping market, the arguments for consolidation for purely defensive reasons are hard to refute."

He said that mergers of large container ship lines during the last 15 years have been difficult to pull off but have shaved about 3 percent off the merged companies’ operating costs. “Cost savings alone … provide a compelling case for consolidation,” Stokes said.

Mergers and acquisitions also increase market share and can provide balance sheets with the “size and strength… to support the continued heavy investment needed in the next generation of larger and more fuel-efficient container ships.”

Stokes acknowledged that some mergers of recent years, such as the 1996 union of P&O Containers and Royal Nedlloyd, and A.P. Moller-Maersk’s 2005 acquisition of P&O Nedlloyd, proved more problematic than expected.

But he said the overall experience supports the case for further consolidation of container shipping. Maersk’s purchase of P&O Nedlloyd solidified the Danish company’s dominance in container shipping, and that the acquisitions by Hapag-Lloyd of CP Ships and by Neptune Orient Lines of APL eventually produced benefits that outweighed initial difficulties.

“In all of those cases… the immediate post-deal experience for the acquirers was difficult. And yet, all three companies have survived, and all three would say they are in a better strategic position now than they would have been had they not made those acquisitions.”

Update- CSAV financial situation

2011-11-11T11:16:00.000-08:00

There is a new article today regarding CSAV.

This is the spanish version. I will have an english translation available on
Monday.

From MundoMaritima

Turbulentas son las aguas por las que sigue navegando la CSAV, dado que a los US$525 millones que perdió en la primera mitad del año, se sumarán nuevos números rojos en el tercer trimestre. Es así como un reciente informe de Corp Research establece que en el período julio-septiembre la naviera reportaría un saldo negativo de US$315 millones, con lo cual en los nueve primeros meses acumulará una pérdida de US$840 millones, estimándose en el mercado que en el 2011 se elevaría por sobre los US$1.100 millones.

Pero en esta oportunidad el escenario es más complejo, pues a diferencia del primer semestre, en que la pérdida se dio por un alza de 44,8% en los costos, lo que contrarrestó la subida de 19% en las ventas, en el tercer cuarto se verificaría una caída de 13,2% en los ingresos, sumando en el lapso US$1.401 millones, en el marco de la reducción del tamaño de la empresa que está impulsando el Grupo Luksic. A su vez, el Ebitda de Vapores sería negativo en US$277 millones frente a uno positivo de US$196 millones de igual período de 2010.

Y para lo que resta de 2011 y el próximo año, el escenario tampoco sería favorable, dado que el negocio naviero seguirá presentando un fuerte desequilibrio entre la oferta y demanda, pues según la consultora especializada Alphaliner la flota mundial podría crecer 8,5% este ejercicio y 8,7% en 2012, de acuerdo al libro de órdenes de agosto. Y en ese sentido, se estima que los precios de los fletes navieros seguirán a la baja, debido a que se mantendría una sobreoferta en la capacidad de transporte, en medio de un comercio mundial menos dinámico, acompañado por altos precios del petróleo.

Las últimas cifras disponibles revelan que en septiembre CSAV registró una merma de 12,2% en los contenedores transportados, respecto de igual tramo del 2010, al sumar los 242.900 Teus movilizados. En el tercer trimestre, en tanto, la compañía transportó 785.100 Teus, lo que representó una disminución del 3,4% en relación a similar período del año previo.

Factor Arriendos

Vapores ahora está mucho más expuesta que el resto a los vaivenes del negocio, dado que un 87,2% de los 90 barcos con que opera son arrendados, mientras que el promedio de la industria maneja en torno a un 50% de naves propias.

Al observar los resultados del primer semestre de las navieras que informan, destaca que Vapores es lejos la que arroja mayores pérdidas, pero a la vez es la segunda que más aumentó sus ventas.

Para CSAV el “factor arriendos” es altamente sensible, primero porque –según Corp– al no contar con flota propia, pierde la posibilidad de participar en el negocio armador, el que implica utilizar las naves como si fueran activos inmobiliarios, y segundo porque la renta de éstas representa en torno a un 18% de los costos totales de la compañía. Además, el banco de inversiones detalla que se ha venido produciendo un desacople generado entre el precio de los arriendos y las tarifas de fletes, “revelando una brecha dañina para los resultados de la compañía”.

Es así como a 12 meses las obligaciones de la empresa por concepto de arriendos llegan a US$761 millones, cifra que se eleva a US$2.164 millones a cinco años, y a US$2.621 millones en total. A diciembre de 2010 –según un informe de marzo de Fitch, clasificadora que ya no cubre a Vapores– el arrendamiento consistía a 185 buques y 411.983 contenedores. Y agrega que los arrendamientos operativos tomados por CSAV con sus armadores pueden variar en plazos de entre tres meses a cinco años, mientras que en el caso de los contenedores no supera los ocho años, sin opción de renovar.

De acuerdo a Corp, el costo de arriendo diario por nave de Vapores llegaría a unos US$14.000 para fines de 2011, que crecería en base al incremento en el volumen esperado por la industria de 6% anual en el largo plazo. Y en ese sentido, si se consideran los 185 barcos de 2010, en ese año CSAV habría tenido que desembolsar unos US$945 millones sólo por ese concepto.

Estaba Escrito

Entonces, ¿cómo se explica que la Sudamericana haya tomado estos importantes compromisos, considerando el complicado escenario que venía mostrando desde hace tres años la industria naviera mundial? De hecho, el 17 de marzo de 2009 Fitch había bajado la clasificación de los bonos de Vapores a categoría BBB desde A, asignando un Rating Watch Negativo, argumentando en uno de sus puntos que “CSAV ha visto empeorar sus resultados operacionales producto de la combinación entre la caída del precio del flete naviero, la existencia de contratos de arriendo de naves a tarifas pre-crisis, y un aumento del costo del combustible”.

Cifras

13,2% bajarían los ingresos de Vapores en el tercer trimestre, sumando en el período US$1.401 millones.
US$14.000 sería la tarifa que pagaría CSAV por cada día de arriendo de los buques que opera.
US$2.621 millones son las obligaciones totales que tiene la Sudamericana por concepto de arriendo de naves.
A comienzos de 2009 se estimaba que en 2011 la flota de portacontenedores sería hasta un 60% más grande, provocando sobreoferta.

Future of CSAV

2011-11-10T10:51:00.000-08:00

I have a site meter on this blog, where I can see what readers are searching for.

Recently, there have been a lot of people searching for "CSAV Bankrupt",
or something to that effect.

There hasn't been anything in the English news, but I found in Mundo Maritimo,
this article from September.

I am not going to translate it. If you can't figure it out, try some of
the translation programs.

However, it essentially questions the future of CSAV.

Here's the link

CSAV lanza nuevo plan de rescate por US$1.200 millones
Firma creará nueva sociedad que controlará SAAM y la podría abrir a la bolsa
Edición del 05 de Septiembre de 2011

Tras registrar pérdidas por US$525 millones en el primer semestre de este año -a causa de las negativas condiciones de precios de venta y alzas de costos-, en la Compañía Sudamericana de Vapores (CSAV) ya saben que 2011 terminará con resultados en rojo.

Para asegurar la estabilidad económica de la empresa, la mayor naviera del país anunció un nuevo plan de fortalecimiento financiero que involucra recursos por US$ 1.200 millones, monto que se basa principalmente en un aumento de capital.

Esto, porque la propuesta involucra también líneas de crédito de sus mayores accionistas, Quiñenco de los Luksic (18%) y Marinsa (20,2%, ligada a los Claro), por US$350 millones que se pagarán con dicha capitalización. En paralelo, Vapores negocia alianzas con las principales navieras del mundo y prevé crear una nueva sociedad que controlará su filial Sudamericana Agencias Aéreas Marítimas (SAAM) y que saldría a bolsa.

En un hecho esencial enviado ayer a la Superintendencia de Valores y Seguros, CSAV indicó que en la próxima junta extraordinaria de accionistas -el 5 de octubre- se votará el mencionado aumento de capital. Quiñenco se comprometió a ejercer su opción preferente y a extender su suscripción hasta los US$ 1.000 millones. Mientras, el acuerdo de Marinsa es suscribir US$ 100 millones.

Quiñenco suscribirá los US$ 1.000 millones sólo en el escenario de que no exista interés del mercado en la operación. Fuentes ligadas a ese grupo señalan que si esa situación ocurre, quedarían con un porcentaje superior a Marinsa en la propiedad de CSAV. Pero precisan que es imposible determinar hoy alguna cifra, pues aún no se determina el precio de la colocación y tampoco si habrá o no excedentes del aumento.

En dicha junta de accionistas, asimismo, se dejará sin efecto la parte pendiente del aumento de capital acordado el 8 de abril: US$ 500 millones. Ese monto era parte del plan de rescate por US$ 1.000 millones anunciado a inicios de año por la naviera.

De los US$350 millones que recibirá como préstamo Vapores, Quiñenco aportará US$250 millones y Marinsa los otros US$100 millones.

Vapores indicó que una vez que se suscriba y pague al menos US$1.100 millones del aumento de capital, dividirá CSAV con la creación de una nueva sociedad que controlará a SAAM. Los accionistas de esa nueva empresa serán los mismos dueños de Vapores. Esta modificación posibilitaría la apertura en bolsa de SAAM, indicaron fuentes ligadas a la naviera.

Dicha filial es uno de los activos más atractivos de Vapores y tiene participaciones en puertos.

¿Alianza, fusión o absorción?

Junto con las medidas para darle más estabilidad financiera y mayor caja a la compañía, en Vapores indicaron que están en la búsqueda de un socio estratégico en el negocio de portacontenedores. Fuentes conocedoras del proceso señalaron que CSAV está conversando con las principales diez navieras del mundo. Las opciones que se barajan van desde la incorporación de algunas de estas navieras extranjeras a la propiedad de Vapores o que esta última entre en alguna de sus competidoras. También se estudia una fusión, indicaron las fuentes.

Entre esas firmas podría estar Mediterranean Shipping Company (MSC), la segunda mayor naviera del mundo, y la francesa CMA CGM, la tercera del planeta. La primera del ranking es APM-Maersk.

Este año, Vapores ya logró acuerdos con MSC y CMA CGM para transportar cargas de forma conjunta, lo que les permite ahorros de costos en un mercado donde el alza del petróleo afecta fuertemente el resultado de las firmas.

Maersk losing money...

2011-11-09T07:31:00.000-08:00

Two months ago this is what I blogged

Wednesday, September 14, 2011
Maersk struggles to raise rates

Maersk is having difficulty to raise rates because of all of the new
ships coming in, increasing capacity.

They don't mention where all these new big vessels are coming
from, but at least some of them belong to Maersk.

And today Maerk reports they lost $297 million in the 3rd quarter.

The fact that the CEO is blaming excess ship capacity on slumping cargo,
and not all the big new vessels they put into the trade, is no surprise.
What CEO ever says "we screwed up"?

From The Journal of Commerce

Carrier forecasts full-year loss as pricing slides despite volume gains

Maersk Line said Friday it lost $297 million on shipping in the third quarter amid collapsing freight rates on the key Asia-Europe trade lane, and the world’s largest ocean container carrier said it would close the year in the red.

The loss, following a $1 billion profit in the third quarter a year ago, came as average freight rates, including bunker surcharges, across Maersk’s global system declined 12 percent to $2,860 per 40 foot container from $3,251 in the third quarter of 2010.

Traffic grew 2 percent on the trans-Pacific while rates were down 16 percent. Latin American shipments grew 18 percent as rates dropped 13 percent.

”We see a couple of tough years ahead,” for the industry, Anderson said, marked by continued overcapacity and very unstable earnings.

“It’s not an environment for small players and those without strong balance sheets,” he said.
The Copenhagen-based line lost $124 on every 40-foot container it transported compared with a “close to a record” $616 per-box profit in 2010.

This eroded the impact of a 16 percent increase in traffic to 4.2 million 20-foot equivalent units from 3.6 million TEUs, leaving revenue up a modest 4 percent to $7.23 billion.

Nils Andersen, CEO of parent company A.P. Moller-Maersk, blamed excess ship capacity for the “dramatic” and “highly unusual” slump in ocean freight rates in the peak shipping season to levels last seen in the 2009 container shipping slump.

“Everybody was gearing up for the peak season in the third quarter and the peak season didn’t occur,” Anderson said.

The underperforming container business was largely responsible for A.P. Moller-Maersk reporting a bigger-than-expected 78 percent drop in net profit to $371 million, from $1.67 billion in the third quarter of 2010.

The company forecast a full-year net profit of $3.1 billion to $3.5 billion compared with $5.02 billion in 2010 of which Maersk Line contributed $2.64 billion.

Maersk Line’s Asia-Europe traffic soared 24 percent in the third quarter while rates plunged 26 percent. But Anderson denied the carrier is waging a war of attrition on its largest trade lane. “We are not leading a price war … but we are determined to stand firm,” he said.

They just don't get it....

2011-11-06T19:39:00.000-08:00

Ocean carriers lost their anti-trust immunity a few years ago.

But, I guess they didn't think the U.S. Government would bother checking
into their activities.

Guess the executives aren't aware that the U.S. Government sent people
to jail a few years ago for collusion.
Anyone remember this?

Tuesday, February 3, 2009
Pleading Stupidity

Back in October, I posted about some people going to jail for anti-trust violations.

This week the first one was sentenced to jail time. In his defense, he pleaded he was only following orders.

Former Sea Star Line executive Peter Baci, the first person sentenced in a federal antitrust investigation of Puerto Rico carriers, claims that he participated in a price-fixing scheme under orders from an official at Saltchuk Resources, a part-owner of Sea Star.

Baci was senior vice president, yield management, at Sea Star until he was fired last year after the federal investigation became public. He was sentenced today to four years in prison, a $20,000 fine and two years of supervised release after pleading guilty to antitrust conspiracy.

The FMC is warning folks...

From The Journal of Commerce

Federal Maritime Commission Chairman Richard Lidinksy says the container shipping industry's trans-Pacific discussion groups are showing "near outright defiance” of a commission's oversight order and warned he'll take action unless he gets timely responses to questions.

Lidinsky's broadside Thursday against the Transpacific Stabilization Agreement and the Westbound Transpacific Stabilization Agreement came after they have “stiff-armed” the commission with “shockingly tardy” responses.

The FMC in September 2010 ordered transcripts of all TSA and WTSA meetings following an investigation of charges the carriers manipulated container and vessel capacity to raise rates in late 2009 and early 2010. The order stands until April 2012.

“We have a situation where a group of shipping lines have been given antitrust immunity to collude to raise the rates that American shippers and consumers pay. ... All we ask in return are some transcripts and minutes – something just about any lawyer gets for simple depositions or proceedings as a routine matter,” Lidinsky said

The groups were given 21 days after a meeting to file a transcript, but FMC General Counsel Rebecca Fenneman said some groups didn’t file transcripts until as much as 28 days after the meeting. Out of 83 transcripts of live TSA meetings or conference calls, 18 were late. Out of 121 meetings by the WTSA, 24 transcripts were late.

The commission also required copies of email exchanges among TSA and WTSA members, and one was a year late. The discussion agreements notified the FMC only once that a transcript would be late.

Fenneman said the late filings appeared to be due to clerical difficulties. Lidinsky agreed, noting some carriers in the agreements individually were “excellent regulatory citizens.”

Ha Ha.

More on oversupply of containerships

2011-10-18T19:37:00.000-07:00

To continue on the reporting of oversupply of containerships,

Bloomberg published an article regarding same. I am quoting in it's
entirety, as a link might expire.

Maersk Shareholders Suffering With Overwhelming Container Supply: Freight

By Christian Wienberg and Marianne Stigset - Oct 18, 2011 5:00 PM CT

The container operations of Maersk, which carries 15.7 percent of the world’s container capacity, according to Alphaliner, lost $45 million in the second quarter.
The container industry may be facing half a decade of oversupply that will curb freight rates as shipping lines launch vessels into a global trade slowdown.

The rise in container capacity will exceed demand by as much as 10 percentage points over the next three years, according to Drewry Shipping Consultants Ltd. That gap won’t substantially improve for five years, Neil Dekker, head of container research at Drewry, said in an Oct. 11 interview. Those estimates assume no slump in world economic output.

Global growth will slow this year as “crisis-hit” advanced economies struggle and Europe’s debt woes prove “tenacious,” the International Monetary Fund said last month. An increase in vessels from shipping lines like Copenhagen-based A.P. Moeller-Maersk A/S has helped send freight rates plunging 70 percent since a 2010 peak. On its current course the industry will struggle to turn profitable, said Ross Porter, a Stavanger, Norway-based fund manager at Skagen A/S.

“The market outlook is pretty bleak,” Porter said in an interview. The fund, which has $18 billion under management, owns about 10,000 Maersk shares after cutting its holdings by 20 percent last month. “Given the overcapacity that’s built up in the market, a few years will be required to consolidate the situation.”

Capacity in the container market will rise 29 percent in the three years ending in 2013, according to data from London- based Drewry’s quarterly Container Forecaster report. Demand will grow by as little as 19 percent in the period, it said.
No Layups

There won’t be a “major” improvement in the balance between supply and demand for five years, Dekker said. Ships on the world’s two busiest trade routes, Asia to Northern Europe and Asia to the Americas, are only about 85 percent full at the moment, he said.

“Freight rates are very low,” Dekker said. “It would be logical to lay up vessels, but that’s not really happening.”

The price to transport a full 20-foot container from the biggest Asian ports to European ones fell to $650 in the first week of this month, according to Danske Market’s container index published Oct. 7. That was the lowest spot price in at least two years and compares with a peak of about $2,100 18 months ago.

The fallout from Europe’s deepening debt crisis is showing signs of spreading as far as Asia as policy makers in the euro area fail to persuade investors they can avert a Greek default. Asia faces “severe macroeconomic and financial spillovers” from deteriorating economic outlooks in Europe and the U.S., the IMF said Oct. 13.
Shipping Demand

That means container shipping demand could grow even less than Drewry estimates, Dan Togo Jensen, a transport analyst at Svenska Handelsbanken AB in Copenhagen, said in an Oct. 13 interview. He has a “reduce” recommendation on Maersk shares. Jensen is the top-ranking analyst of the 25 covering the company, according to Bloomberg data.

“Box rates will be under pressure” because the imbalance between supply and demand will persist “for quite some time,” he said.

Container lines have booked orders for new ships for a combined $57 billion, according to an Oct. 11 estimate by Paris- based industry consultant Alphaliner. Over the next four years, new ships will add capacity equivalent to 4.5 million standard 20-foot containers, or TEU, versus today’s 15.2 million TEU, according to Alphaliner.

More Room

Vessels that can haul the equivalent of about 1 million TEU will need to be idled or laid up, the Baltic and International Maritime Council, a Bagsvaerd, Denmark-based shipping trade group, said in an Oct. 13 report.

Ships are being built larger as well. The size of container ships has more than doubled over the past decade. New deliveries this year on average carry 6,100 TEU, compared with 2,900 TEU in the year 2000, Alphaliner said in a Sept. 29 report. The size of the world’s fleet of ships with capacity larger than 8,000 TEU will increase by more than 20 percent annually over the next years, outpacing overall supply growth, Drewry says.

The container operations of Maersk, which carries 15.7 percent of the world’s container capacity according to Alphaliner, more than any other, lost $45 million in the second quarter. It earned $1.1 billion a year earlier, Bloomberg calculations show. The unit may lose money in the rest of the year if freight rates don’t recover, the company said Aug. 17.
Dropping Shares

Maersk shares have lost 31 percent this year. The world’s second and third-largest lines, Geneva-based Mediterranean Shipping Co. and France’s CMA CGM SA, aren’t listed.

CMA CGM has seen the price of its $475 million of 8.5 percent notes due 2017 plunge to 45.567 cents on the dollar since they were sold April 14, according to prices compiled by Bloomberg.

There are some signs shipping lines may reduce capacity by canceling or postponing orders for new vessels, Martin Bo Hansen, a corporate bond analyst at Jyske Bank A/S, said in an Oct. 11 note. Hansen, who’s based in Silkeborg, Denmark, has a “hold” rating on Maersk’s debt.

CMA CGM has no plans to order any new container vessels before next year at the earliest, Chief Executive Officer Rodolphe Saade said Oct. 11. The line was approached by two Chinese shipyards about possible orders for vessels larger than 9,000 containers and declined, Saade said.

Shipping lines are betting demand will catch up with supply sooner than Drewry’s analysis shows. Eivind Kolding, CEO of Maersk Line, said Oct. 5 in an interview broadcast by Danish TV2 News that overcapacity probably will last a year at most. That will still be long enough to put some smaller container lines out of business, he said. Maersk hasn’t announced any plans to cut capacity.

The company declined to comment for this story, in compliance with a self-imposed silent period ahead of third- quarter earnings, due to be published on Nov. 9.

Overcapacity may thin out the industry, with only the biggest companies surviving the pressure on freight rates, Skagen’s Porter said.

“In the long-term I see Maersk coming out as the relative winner,” he said. “They have the financial strength to weather this cycle, which a lot of their competitors don’t.”

To contact the reporters on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net; Marianne Stigset in Oslo at mstigset@bloomberg.net

This is just crazy..

2011-10-11T20:46:00.000-07:00

From the Journal of Commerce

More big ships coming in...there will be too much capacity for demand.

Well, it will be interesting. There will be a fall out. The ones with
deep pockets will survive.

Alphaliner says about half of orders made as industry emerged from deep slump in 2009

Ocean carriers and charter shipowners have placed orders worth $57 billion for new container vessels over the next four years, with about half of the value of orders made as the industry emerged from a slump in 2009, said Alphaliner.

The carriers' and shipowners’ ordering spree of $27 billion for new container vessels prior to the collapse of Lehman Bros. added to $30 billion of contracts already in the pipeline, the container market analyst said. Of the orders for new ships through 2015, ocean carriers account for $35 billion and charter owners $22 billion.

“The carriers’ first action after emerging from the worst recession in container shipping history ever, was to order even more capacity,” Alphaliner said. “New orders were placed in an already over-supplied market.”

The capital commitment on new vessels by 19 of the largest ocean carriers exceeds $33 billion.

MOL and NYK are the only top 20 carriers without outstanding new vessel commitments on their own account. But the Japanese lines have signed charter deals for 13,000-14,000 20-foot equivalent container units newbuildings with their alliance partners “to not be left out of the expected capacity growth.”

As ships ordered in 2010 and 2011 are between 25 percent and 30 percent cheaper than vessels contracted before the crisis, their owners will benefit from a significant cost advantage to ships ordered in 2006-2008.

Maersk Line is the biggest spender with new ship commitments estimated at $6.5 billion, largely accounted for by its 20 Triple-E class 18,000 TEUs ships costing $190 million each.

The Danish carrier’s order book also includes 24 ships of 4,500-7,500 TEUs valued at $2.6 billion. Singapore-based Neptune Orient Lines/APL ranks second with orders worth close to $4 billion, followed by Taiwan’s Evergreen at a little over $3 billion.

What lies ahead?

2011-09-30T23:12:00.000-07:00

It does not appear we are out of the woods yet. Too many people forget
that these recession last longer than just a couple of years.

I just bought another house, but I don't expect to be able to sell
it for another 10 years. Yes, that is correct, in my opinion things will
be bad for another 8-10 years.

From the Journal of Commerce

Forecasting firm says all signs point to weakening economy

The U.S. is headed into new recession, Lakshman Achuthan of the Economic Cycle Research Institute, a forecasting firm known for accurately predicting turns in the business cycle, warned on Friday.

Achuthan sounded the warning in interviews on Bloomberg Radio and CNBC. He said ECRI’s forward-looking indicators provide an “overwhelming message” that an economic downturn is on the way.

"There is virtually nothing that can be done to avert what is going to happen," he said.

ECRI’s U.S. Long Leading Index, which forecasts economic shifts several months in advance, turned downward earlier this year, leading Achuthan to warn the mid-year downturn was more than a temporary blip.

That warning was confirmed by recent weakness in ECRI’s Weekly Leading Index, which signals shorter-term economic trends, fell to 121.9 this week, its lowest level since Sept. 3, 2010. The weekly index’s growth rate declined for the ninth straight week, falling to negative 7.2 percent.

One component of the Weekly Leading index is The Journal of Commerce-ECRI Industrial Price Index, which gauges industrial demand by measuring prices of 18 industrial commodities, some of which aren’t traded on exchanges.

The JOC-ECRI IPI has been on a steady decline since mid-April and fallen into negative territory over the last eight weeks, including an 8.5 percent slide last week.

“The vicious cycle is starting where lower sales, lower production, lower employment and lower income (leads) back to lower sales,” Achuthan told CNBC. He said "contagion in what is going on among those leading indicators. It's wildfire, it's recessionary, it is not reversible."

He said the best-case scenario is for a short recession, lasting about six months but ECRI has seen no indicators pointing to a turnaround yet.

He said the slowdown could affect exports, which have been a rare bright spot in the U.S. economy.

New Supertanker Mothballed

2011-09-23T08:51:00.000-07:00

From Bloomberg News

A shipowner will mothball a newly built supertanker for the first time since the 1980s as a glut of the ships erodes earnings to an unprofitable $1,000 a day.

The tanker, capable of carrying 2 million barrels of crude, will be sent to a natural harbor in Malaysia, Arild Johannessen, an Oslo-based spokesman for Wilhelmsen Ship Management, which will oversee the deactivation, said by phone today. He declined to identify the ship because the details are private.

Earnings from this class of vessel, which carry about a fifth of the world’s oil, last week averaged $1,000 a day, according to Braemar Shipping Services Plc (BMS) in London, the U.K.’s second-largest publicly traded shipbroker. Some tankers were contracted speculatively and not secured against long-term charters, according to Holger Romer, spokesman for Hamburg, Germany-based Dr. Peters Group, owner of 19 supertankers.

“If you have a new ship that was ordered in ‘07 and ‘08, it was at a high price and now if you don’t have a charterer, it’s a big problem,” Romer said by phone. Dr. Peters Group owns 19 supertankers, he said.

The largest supertanker fleet in 29 years has cut earnings from the vessels by 96 percent since 2007 when they rose to a record $229,000 a day, according to data from Clarkson Research Services Ltd., a unit of Clarkson Plc, the world’s largest shipbroker.
Orders Surged

Owners ordered the most tankers in about three decades in 2007 and 2008, depressing freight rates to a 14-year low, as the fleet swelled almost three times faster than demand, Clarkson data show.

The last time new tankers were delivered straight from shipyards to anchorages, a process known in the industry as lay up, was in the 1980s, with owners sending the vessels to fjords in Norway, Eleusis Bay in Greece and the waters off Malaysia and Sri Lanka, Hong Kong-based Charles de Trenck at Transport Trackers, an adviser on shipping and trade flows, said today by e-mail.

Prices for new tankers have fallen 35 percent to about $100 million, according to EA Gibson, a London-based tanker broker. Those ordered in 2007 and 2008 require daily earnings of $55,000 to break even, the broker estimated in November.

Running costs, excluding fuel, are $10,645 a day, according to Moore Stephens International, a London accounting firm.
Cold Lay-Up

The mothballing is probably the first time in at least three decades that a new supertanker has been deactivated before trading, according to Halvor Ellefsen, a shipbroker at Galbraith’s Ltd. in London.

“More than anything else, it just shows how many ships there are,” said Ellefsen, who has been a broker since 1987. “Even if this happens on a meaningful scale, it’s hard to see it saving the tanker industry as ships that get laid up will just come back into the market when freight rates jump.”

The particular kind of mothballing for this ship is called cold lay-up, which involves anchoring the vessel in a protected area for a “long period of time,” and shutting all systems, with a minimum crew on board, according to Johannessen.

Warm lay-up means the ship can return to trading more quickly.

The supertanker, along with another of the same type already trading, will join another 15 ships already managed at anchor at Labuan, Malaysia, Johannessen said.

There are 152 supertankers contracted to be built at Asian shipyards, and 570 in the fleet trading today, according to Clarkson. A record 55 of the tankers, also known as very large crude carriers, began trading in 2010, and 41 have joined so far in 2011, Clarkson data show.

There was an overhang of 50 VLCCs, Jens Martin Jensen, chief executive officer of the management unit at Frontline Ltd., the largest supertanker operator, said on a conference call Aug. 26.

Fed Ex as "bellweather"

2011-09-23T08:09:00.001-07:00

FedEx is considered a good indicator of how the economy is doing. It use
to be just the U.S. economy, but because they have become so big in the
global market, it appears they are also a good indicator for the entire
global economy.

This just reported.

"The U.S. and global economy grew at a slower rate than we anticipated during the quarter," said Chief Financial Officer Alan B. Graf. "While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs."

Click here for rest of story from Journal of Commerce

Who will own Hapag-Lloyd?

2011-09-16T06:31:00.001-07:00

TUI would really like to sell the rest of their stake in Hapag-Lloyd.

Problem is, once again the economy is not favorable, and their talks
with investors have gone nowhere.

I suspect that in Jan. 2012 the Albert Ballin consortium will end up with the rest of TUI's shares.

From The Journal Of Commerce

Report quotes majority shareholder saying clarity on ownership structure needed

Hapag-Lloyd is ruling out an initial public offering in the next 12 to 15 months, according to the German ocean carrier’s majority shareholder.

“As long as we don’t have clarity about the final ownership structure, an IPO is not going to come. I don’t see it in the next 12-15 months,” Karl Gernandt, CEO of Kuehne Holding, told the Financial Times. Kuehne is member of the Albert Ballin consortium that controls 61.6 percent of container ship operator.

German tourism group TUI holds the remaining 38 percent stake in Hapag-Lloyd, which it wants eventually to divest. It sold an 11.3 percent stake to the Albert Ballin investors in May.

Gernandt, chairman of Kuehne+Nagel, the Swiss global logistics group, said talks with Oman and Chinese investors about acquiring TUI’s remaining stake have fallen through. But there have been talks with several US private equity companies.

“Our discussions with potential investors are very difficult as there have been different interests … TUI wants to sell and some investors presented their ideas, but unfortunately it was not possible to realize a deal.”

TUI likely will exit Hapag-Llloyd through a private deal rather than an IPO, Gernandt said. TUI says it has three options for its stake: a trade sale, share floatation or exercising a put option to sell it to the Albert Ballin consortium in January 2012.

Hapag-Llody scrapped plans for an initial public offering in 2004, saying it coudn't get "fair value" for Germany's biggest container shipping line.

Maersk struggles to raise rates

2011-09-14T12:53:00.000-07:00

Maersk is having difficulty to raise rates because of all of the new
ships coming in, increasing capacity.

They don't mention where all these new big vessels are coming
from, but at least some of them belong to Maersk.

This is their web-site about the new Triple E vessels.

From 27 June 2011

Today, at a signing ceremony in Tokyo, Japan, Maersk Line exercised its option with Korea’s Daewoo Shipbuilding & Marine Engineering Co., Ltd. to build an additional 10 Triple-E ships, the world’s largest and most efficient container vessels.

The event follows Maersk Line's order in February this year for 10 Triple-E vessels with two options - each for an additional 10 ships.

“I am very excited to have signed a contract with Daewoo for 10 more Triple-E ships. We now have twenty Triple-E on order. They underline our strong commitment to the Asia-Europe trade and fit well with our current ambitions and expectations for the future development of the trade. We believe the Triple-E ships with their record capacity and energy efficiency will enable us to deliver on the commercial and environmental expectations of our customers and also give us a significant competitive advantage in the market,” says Eivind Kolding, CEO of Maersk Line.

Maersk Line expects demand on the Asia to Europe trade to increase 5-8% per year during 2011-2015. By introducing the Triple-E vessels from 2013, Maersk Line will be able to meet the increasing demand as well as maintain its market share. The first 10 vessels will be delivered 2013 and 2014; the second 10 vessels are scheduled for delivery in 2014 and 2015.

And now, less than 3 months later, this appears in Bloomberg News

A.P. Moeller-Maersk A/S, the No. 1 container line, said it’s struggling to raise peak-season rates on the Asia-Europe shipping route, the world’s second-busiest, as an influx of new vessels leads to a glut in capacity.

The Danish company’s Maersk Line unit imposed a “pretty ok dividend” on most other routes, with the exception of Asia-North America, the busiest global flow, where expansion has been “very modest,” Chief Executive Officer Eivind Kolding said in London.

“Most of the new big ships actually go to northern Europe, so this is where you have the bigger problem,” the CEO said in an interview. “It’s difficult to make a decision to pull a lot of capacity, especially if hypothetically one line should decide to do it, then actually the rest of the market will benefit.”

Maersk has implemented rate increases on some Mediterranean routes since the start of the peak season, which began on Aug. 15 and runs until Nov. 30, Kolding said, and trade in emerging markets and some regional routes is showing “double digit” growth. Still, the CEO said he’s concerned that “nervousness” in financial markets could spill over into the wider economy.

“We have a much more mixed picture than in 2009, where we saw a collapse basically across the board,” he said. “We’re slightly concerned because we did see a good momentum of recovery, not a fast, but a fairly fast, recovery.”

Holiday Stockpiles

Europe usually imports more goods in the third quarter as shops stockpile for the Christmas and New Year holidays, a gain that may be curbed as retailers anticipate that concern about economies and jobs will hurt consumer spending.

For the moment, fleet utilization remains at more than 90 percent on Asia-Europe routes, matching the global average, Kolding said, giving shipping lines little incentive to slash capacity, especially with new vessels arriving later this year.

While growth in container volumes has slowed for four consecutive quarters, declines are nowhere near the 22 percent contractions seen in the first half of 2009. Only a drop of a similar magnitude will force all container lines to conclude that pulling capacity is the right strategy, he said.

The industry may lose $2.5 billion to $3 billion this year, according to Philip Damas, director of liner shipping and supply chains at Drewry Shipping Consultants Ltd. in London. Owners and operators lost $20 billion in 2009, when the global container trade contracted for the first time ever, Drewry says.

“People are definitely more concerned today than they were, say, around the end of June,” Kolding said. “We definitely hear some concerns from our retail customers as well. It’s Europe, North America and Japan that are negative. The rest of the world is doing very much more nicely.”

Kolding spoke Sept. 12 after Maersk said it will deploy 70 ships on the first guaranteed daily sailings between Europe and Asia in a bid to win market share as demand stutters. The Copenhagen-based company will also offer fixed cut-off times and a discount of at least $100 for delayed containers.

Maersk has deep pockets, and maybe the new "guaranteed daily sailings" will be
the trick that will put them at the top of the heap. Also, their new
ships are energy efficient, which certainly helps.

Ship Hijacking Continues

2011-09-12T08:59:00.000-07:00

The hijacking of ships by Somalian pirates has become old news.

But that doesn't mean it's no longer a problem. In fact, it
is worse than ever.

Shipping companies finally gave up on expecting to be protected
by the various Navies, and put armed guards on their ships. Now
they are asking the UN to provide the armed guards. I doubt the
UN will do this, and shipping companies will just have to accept
that putting armed guards on their ships is required for sailing
in the Indian Ocean.

From the Journal of Commerce

Associations liken the Indian Ocean to the Wild West

Four international shipping associations, representing most of the world's maritime industry, called for the creation of a United Nation armed force to tackle the worsening piracy crisis in the Indian Ocean.

The Indian Ocean resembles "the Wild West,”  stated a letter to UN Secretary-General Ban Ki-moon from the International Chamber of Shipping, the Baltic and International Maritime Council, INTERTANKO and INTERCARGO.

“It has become abundantly clear to shipping companies that the current situation, whereby control of the Indian Ocean has been ceded to pirates, requires a bold new strategy. To be candid, the current approach is not working,” the letter stated.

There were 36 percent more international pirate attacks in the first half of 2011 compared to the same period in 2010, but Somali pirates’ hijacking success has fallen, according to the International Maritime Bureau’s Piracy Reporting Centre. Somali pirates currently hold 16 vessels and 301 hostages.

The four shipping industry organizations, which together represent more than 90 percent of the world merchant fleet, say they support the UN's long-term measures on shore aimed at helping the Somali people but are concerned that these "may take years, if not decades, to have a meaningful impact on piracy."  

While they expressed regret about the need to post armed guards aboard ships, the four organizations asked the UN to bring the concept of a UN force of armed military guards to the attention of its Security Council.

“We believe that an important element in this approach would be the establishment of a UN force of armed military guards that can be deployed in small numbers onboard merchant ships,” the letter said.

The associations said such a UN force would help stabilize the situation and restrict the growth of unregulated, privately contracted armed security personnel. The force would also allow those UN member states lacking maritime forces, including those in the region most immediately affected, to make a meaningful contribution in the area of counter-piracy. 

Bad News for CMA CGM

2011-09-07T06:48:00.000-07:00

I saw a headline the other day touting how well CMA CGM is doing...but I
thought that might just be a P.R. move.

It probably was.

This is what Bloomberhttp://www.blogger.com/img/blank.gifg News reports

Bonds and derivatives tied to CMA CGM SA, the third-largest container line, are signaling that the company has a nine in 10 chance of defaulting as the slowing global recovery pushes freight rates to about zero.

Penalized by the U.S. last month for breaching trade sanctions with Iran, Cuba and Sudan, CMA CGM has seen the price of its $475 million of 8.5 percent notes due 2017 plunge to 47.25 cents on the dollar since they were sold April 14, Bloomberg Bond Trader prices show. Credit-default swap prices signal a 90 percent probability of the Marseille-based company being unable to meet its obligations within five years.

Freight charges collapsed on the Asia-to-Europe lines, the world’s second-busiest route, as a capacity glut combines with the slowest growth in trade since 2009. Rates excluding fuel surcharges were “practically” zero in July and little changed last month, the worst run ever, according to Menno Sanderse, an analyst at Morgan Stanley in London.

“Shipping and logistics is a pretty beat-up sector,” said Louis Gargour, who owns the bonds as the chief investment officer at LNG Capital LLP, a London-based hedge fund he co- founded in 2006. “The good side is everybody I know is very interested in this company at 50 cents on the dollar, although it’s a gamble.”

CMA CGM was founded by Jacques Saade in 1978 after he fled to France from Lebanon’s civil war. It employs more than 17,200 people and runs a fleet of 394 vessels, according to its website. The company grew from five employees and a rented boat into a global operator, ranking behind Copenhagen-based A.P. Moeller-Maersk A/S and Mediterranean Shipping Co. SA in Geneva.

Debt, Earnings

The company posted an 8 percent increase in first-half sales to $7.3 billion and had $675 million of cash at the end of July, according to a statement on its website. CMA CGM said it had $5.3 billion of net debt at the end of June and recorded $685 million of earnings before interest, tax, depreciation and amortization in the first half of the year.

That means debt is more than three times Ebitda, compared with a ratio of about less than one time at Maersk, according to that company’s earnings report on Aug. 17.

CMA CGM also issued 325 million euros ($459 million) of 8.875 percent bonds maturing in 2019 in April, which were quoted at 49 percent of face value, Bloomberg Bond Trader prices show.

Default swaps on the company’s debt cost 4.8 million euros upfront and 500,000 euros annually to insure 10 million euros of debt for five years, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The contracts have risen from 800,000 euros upfront on June 6.

Bonds ‘Whipsawed’

“We are surprised to see the value of the debt drop so much,” said Michel Sirat, the container line’s chief financial officer based in Marseille. “Our bonds are whipsawed because of prevalent fears in financial markets and questions about our liquidity, but we have a strong cash position and are fully compliant with our debt covenants.”

The drop in its bonds prompted the company to issue a statement on Aug. 3, saying it’s taking the “poor performance very seriously,” and that it doesn’t plan major new investments this year and next.

CMA CGM is rated B+ by Standard & Poor’s, which said in a May report that the company’s rankings are constrained by its “high operating risk in the cyclical, capital-intensive, and competitive container-shipping industry.”
Covenants Breached

The container line has about $4 billion of loans, according to data compiled by Bloomberg. Covenants on most of its borrowings were breached in 2009 after a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM received $500 million from Turkish family-owned company Yildirim in November in return for a 20 percent stake as it sought to restructure about $5 billion of debt. In May, Yildirim agreed to buy 50 percent of Malta Freeport Terminals from CMA CGM for 200 million euros.

Analysts are increasingly bearish on what slowing trade growth means for shipping company earnings. Maersk, the world’s biggest container-shipping line, will report a 25 percent slump in net income to 19.71 billion kroner ($3.8 billion) this year, the mean of 16 estimates compiled by Bloomberg shows.

The industry may lose $2.5 billion to $3 billion this year, said Philip Damas, director of liner shipping and supply chains at Drewry Shipping Consultants Ltd. in London. Owners and operators lost $20 billion in 2009, when the global container trade contracted for the first time ever, he said.

‘Risk of Default’

“A lot of companies run the risk of default if freight rates remain at such a low level,” said Jacob Pedersen, an analyst at Sydbank A/S, Denmark’s third-largest publicly traded lender. “Companies have been taken by surprise this quarter because just a few months ago they were all sure there would be a lack of capacity and that would be positive for freight rates.”

Risk aversion has wiped out $5 trillion of global equity market value since July and brought high-yield bond sales to a halt. A Labor Department report on Sept. 2 showed the world’s largest economy added no jobs last month while a contraction in European manufacturing and plunging business and consumer confidence suggest the slowdown in growth may continue into the third quarter, members of the so-called shadow European Central Bank council said last week.

Sanctions Violated

Confidence in CMA CGM was also dented after the company’s U.S. unit paid a $374,400 settlement to the Department of Treasury’s Office of Foreign Assets Control last month following allegations it violated sanctions in exporting goods to Sudan and accepted payments for shipping services in connection with Cuba and Iran.

The alleged violations of sanction programs took place between December 2004 and April 2008 and there was no finding of fault, according to a company statement.

CMA CGM’S MV Victoria container ship was seized by the Israeli Navy after the shipper of three containers falsely described cargo contents as lentils when in fact they contained weapons, the company said on June 1. An Iranian company used one of its vessels to illegally transport arms to Lagos after labeling them as “packages of glass wool and pallets of stone,” the company said in October.

CMA CGM isn’t alone in dealing with maritime disputes. China Cosco Holdings Co., the state-controlled sea-cargo group, had at least three vessels arrested in the past two months as shipowners sought overdue payments, according to court filings in the U.S. and Singapore.

CMA CGM is counting on routes to emerging markets such as Latin America and Russia to drive growth as Europe stands on the brink of another recession. The company held a conference call with more than 150 bond investors on Aug. 31 to allay their concern about the company’s financial position, Sirat said.

“We see strong trades in Latin America, Russia, the Black Sea region and India, bringing in new avenues for growth besides the traditional routes of Asia to Europe and Asia to the U.S.,” Sirat said. “I hope our bond prices will recover after we explained our position to bondholders, because we intend to continue to access the bond market.”

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net David Goodman in London at dgoodman28@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net; Faris Khan at fkhan33@bloomberg.net

CSAV looking for money

2011-09-06T17:29:00.000-07:00

The Journal of Commerce details some of the problems
CSAV is experiencing.

This is one of the carriers I thought would go under a couple
of years ago. I don't want to say now if they will or won't.

Time will tell.

From the JOC

Financially ailing CSAV says it will seek a $1.2 billion capital injection in October after the Chilean ocean carrier sank deeper into the red in the second quarter.

CSAV blamed lower freight rates on most routes and high oil prices as it swung to a $333 million second quarter loss from a $69 million profit a year earlier. This bloated the first half loss to $525 million against a $30.4 million profit in 2010's first half. Revenue in the first six months rose to $2.95 billion from $2.48 billion.

CSAV, which forecast a “very significant” full-year loss, also is seeking a strategic ocean carrier partner.

The carrier will seek approval for a $1.2 billion share issue at an extraordinary shareholders meeting in Santiago on Oct. 5. Two large shareholders, Quinenco de los Luksic (18 percent) and Marinsa (20.2 percent) agreed to provide additional credit of $350 million through the end of the year. Quinenco will subscribe to $1 billion of new stock and Marinsa will buy another $100 million.

CSAV has been pruning its services in recent months to stem mounting losses and has struck vessel-sharing agreement with rival carriers including Geneva-based Mediterranean Shipping Co. and France’s CMA CGM.

The carrier cut its charter fleet by 100,000 20-foot equivalent units up to the end of August, according to industry analyst Alphaliner.

CSAV received a cash bailout of $770 million in 2009 from German shipowners that acquired a minority stake in the company in exchange for lower charter rates.

Carriers in financial trouble

2011-09-05T07:34:00.000-07:00

When the global recession hit a couple of years ago I predicted a lot
of carriers would go out of business.

I was wrong. Some of them were saved by government intervention,
as was Hapag-Lloyd by the German government. Others were saved
by banks or various investors.

Once again shipping companies are in trouble. I hesitate to make
predictions this time around, but here is a little bit of
what is going on.

From Lloyd's List

CSAV seeks partner as losses soar

Monday 05 September 2011, 13:36

STRUGGLING Chilean container line CSAV is actively looking for a strategic partner and has already held talks with other leading carriers as it takes action to stem mounting losses.

The rest is available to paid subscribers.

As for Hapag-Lloyd, this was published in the Journal of Commerce on Aug. 11

Weak rates, fuel costs hit German carrier's second quarter results

Hapag-Lloyd’s second quarter profit tumbled to 26 million euros ($37 million) from $294 million in the second quarter of 2010 as declining rates and higher fuel costs offset a 3.3 percent increase in container volume.

The German container line said its results also were affected by soft demand for transport services in Japan following the March earthquake and tsunami, and the dollar’s weakness against the euro. Revenue for the quarter totaled $2.1 billion, down 9 percent after conversion into euros.

Hapag-Lloyd said it expects continued growth for container shipping in the medium to long term but “short-term results will be influenced by high crude oil prices and pressure on freight rates as a result of tougher competition, particularly in the Asia-related trades.”

Hapag-Lloyd’s average freight rate fell to $1,531 per 20-foot-equivalent unit from $1,563 in the first quarter. For the year’s first half, a 4.4 percent increase in average rates to $1,546 was offset by bunker costs that surged from $480 per metric ton in January to more than $630 in June.

Container volume rose 3.3 percent to 2.5 million TEUs. Regional totals included the North Atlantic, 582,000 TEUs, up 1.5 percent; Latin America, 559,000 TEUs, up 7 percent; the Far East, 549,000 TEUs, down 2.6 percent; the trans-Pacific, 560,000 TEUs, up 8.3 percent; and Australasia, 284,000 TEUs, up 2.9 percent.

For the first half of the year, earnings before interest and tax totaled $60 million, down 80 percent from $310 million in the first half of 2010.

TUI, the German tourism group that is Hapag-Lloyd’s largest shareholder, said its quarterly loss widened to $56.4 million from a loss from $17 million a year earlier because of unrest in North Africa, foreign exchange effects and high fuel prices.

TUI has been trying to sell its stake in Hapag-Loyd. A plan for a public listing of the container line was postponed earlier this year.

There are mixed reports as to the strength of international container transport.

The next 6 months will be very crucial for many companies in this business.

Know the Regulations

2011-09-02T08:26:00.000-07:00

Gibson Guitar, a U.S. maker of famous guitars, has been raided twice.
The U.S. government thinks Gibson has broken laws meant to
protect endangered woods.

My first reaction as a U.S. taxpayer is, "is this any way to spend
our tax dollars"?

My second response is "as either an importer or an exporter, be sure
you know all of the regulations, and follow them closely, checking
and rechecking. Be sure to double check the paperwork BEFORE
a shipment is made."

From Wallstreet News

Gibson Guitar Corp., a big user of ebony and other scarce woods, for years has allied itself with Greenpeace and other environmental groups to show it was serious about preserving forests.

That didn't stop the Nashville-based company, whose guitars are used by such musicians as B.B. King and Angus Young of AC/DC, from running afoul of U.S. authorities over allegedly illegal imports of wood. Though no charges have been filed, Gibson factories have been raided twice, most recently last week, by federal agents who say ebony exported from India to Gibson was "fraudulently" labeled to conceal a contravention of Indian export law.

Federal agents with the U.S. Fish & Wildlife Service shut down the Gibson Guitar factory in Memphis Aug. 24 to serve search warrants.

Henry Juszkiewicz, chief executive officer of the closely held company, said in an interview that a broker probably made a mistake in labeling the goods but that the sale was legal and approved by Indian authorities.

Gibson's predicament, which raises concerns for musical instrument makers and other importers of wood, illustrates the pitfalls of complying with U.S. law while dealing with middlemen in faraway countries whose legal systems can be murky.

The law ensnaring Gibson is the Lacey Act of 1900, originally passed to regulate trade in bird feathers used for hats and amended in 2008 to cover wood and other plant products. It requires companies to make detailed disclosures about wood imports and bars the purchase of goods exported in violation of a foreign country's laws.

Leonard Krause, a consultant in Eugene, Ore., who advises companies on complying with the Lacey Act, is telling clients they should hire lawyers in countries where they obtain products. "How many people know the statutes in India?" Mr. Krause said. "The net effect is that it raises everybody's cost of doing business."

Federal agents first raided Gibson factories in November 2009 and were back again Aug. 24, seizing guitars, wood and electronic records. Gene Nix, a wood product engineer at Gibson, was questioned by agents after the first raid and told he could face five years in jail.

"Can you imagine a federal agent saying, 'You're going to jail for five years' and what you do is sort wood in the factory?" said Mr. Juszkiewicz, recounting the incident. "I think that's way over the top." Gibson employees, he said, are being "treated like drug criminals."

Mr. Nix hasn't been accused of any wrongdoing. He couldn't be reached for comment.

Gibson models include Les Paul and the Flying V. Above, testing and tuning in the Memphis, Tenn., factory.

A Justice Department spokesman declined comment. While Justice Department officials pursue what they say is a possible criminal case against Gibson, they and the company are battling in federal district court in Nashville over whether materials seized in the 2009 raid should be returned to Gibson. That civil fight provides indications of the case the government is trying to make against Gibson.

Mr. Nix went to Madagascar in June 2008 on a trip organized by environmental groups to talk to local officials about selling responsibly harvested wood to makers of musical instruments. Afterward, in emails later seized by the government, he referred to "widespread corruption and theft of valuable woods" and the possibility of buying ebony and rosewood from Madagascar on "the grey market."

In a June 4 court filing, Jerry Martin, U.S. Attorney for central Tennessee, quoted the emails, and said "Nix knew that the grey market meant purchasing contraband."

Gibson has denied the allegation and said Mr. Nix's emails were quoted out of context.

The government has focused on a March 2009 shipment of ebony from Madagascar intended for guitar fingerboards. Madagascar law bars the export of certain unfinished wood products, according to both Gibson and the government. Gibson says the ebony had been cut into pieces and that local officials approved the export as a legal sale of finished goods.

U.S. officials described the wood as "sawn timber" and said Madagascar officials were "defrauded" by a local exporter about the nature of the product.

Gibson says the government is trying to "second guess" the Madagascar government. "The U.S. government's startling position smacks of something from an Orwell novel," Gibson said in a July 15 court filing in federal district court in Nashville.

After the 2009 raid, Gibson stopped buying wood from Madagascar. Gibson continued to use suppliers in India for ebony and rosewood.

As for last week's raid, the government said it had evidence that Indian ebony was "fraudulently" labeled in an attempt to evade an Indian ban on exports of unfinished wood.

"It is very possible that a broker made the mistake in filling out a form," Mr. Juszkiewicz said. Gibson says the ebony was partially finished for use as fingerboards and that Indian officials have endorsed such exports as legal. A spokesman for India's commerce ministry had no immediate comment.

After the 2009 raid, Mr. Juszkiewicz resigned from the board of the Rainforest Alliance, which seeks to preserve tropical forests. He said he didn't want to tar the nonprofit with bad publicity. A Rainforest Alliance spokeswoman said he wasn't pressured to step down, and the group continues to praise Gibson's efforts to promote responsible harvesting of wood.

Scott Paul, a Greenpeace official in New York responsible for forestry issues, said Gibson for years has done "great work" to promote better forestry practices. The question, he said, is whether Gibson did everything possible to avoid buying wood from dubious sources. "We have no idea," he said.
—

Hamburg Süd: mobility at sea and on the Web

2011-08-30T07:52:00.000-07:00

I received a press released from Hamburg Sud regarding a new mobile website.
Rather than downloading an app on your smartphone, one can just
access this "streamlined" version of their web-site.

Not sure what other carriers have done, but this makes a lot of sense.

Here's the press release.

Hamburg Süd: mobility at sea and on the Web

Since the beginning of August 2011 Hamburg Süd has offered its customers and others interested in its portfolio of products and services a mobile website for smartphones. Under the domain m.hamburgsud-line.com users can now also very easily access all the important information about the shipping group in German and English when outside the office – without having to install an app.

The resolution of the mobile site has been especially adapted for smartphones and the layout based on the style of the normal website. In addition, the new mobile domain contains detailed information on the “Track & Trace”, “Schedules” as well as “Offices” sections. This enables the user to navigate rapidly and easily in the familiar environment and, for example, find out the current location of his container, the shipping group’s liner service network and the relevant contact person for him.

With the domain m.hamburgsud-line.com Hamburg Süd meets the constantly growing demand for mobile contents while at the same time the new functions expand the range of services offered in the eCommerce segment, supplementing its Web presence, which was relaunched at the beginning of 2011.

--------------------------------------------------

For further information:

Hamburg Süd | Corporate Communications

Eva Graumann
Willy-Brandt-Straße 59-61
20457 Hamburg / Germany
Phone: +49 40 3705-2627
Fax +49 40 3705-2649
eva.graumann@ham.hamburgsud.com
www.hamburgsud.com
www.hamburgsud-line.com

U.S. Sanction List

2011-08-26T08:14:00.000-07:00

If anyone wants to read the sanctions the U.S. has imposed regarding
doing business with other countries, you can find it on the U.S. Treasury web-site.

Here's the link

Sanctions program

Illegal loans to Iran shipping line

2011-08-26T07:54:00.000-07:00

The U.S. Government still has restrictions on doing business with certain countries.
Cuba, Iran, and Sudan are some of them.

Somehow the folks at JP Morgan Chase didn't know this, but probably more
likely, just didn't care.

It's costing them $88.3 million, but I guess that's just pennies to them.

From the NY Times Dealbook

JPMorgan Chase has agreed to pay $88.3 million as part of a settlement with the Treasury Department over a series of transactions involving Cuba, Iran and Sudan, the agency said on Thursday.

The Treasury Department’s Office of Foreign Assets Control said in a news release that JPMorgan processed wire transfers totaling around $178.5 million for Cuban nationals in late 2005 and early 2006, violating United States embargo laws. The bank’s officers discovered the transfers in 2005, after they were tipped off by another financial institution, but failed to report them and did not take adequate steps to prevent more transfers, according to the statement. The release did not say which institution made the initial discovery.

The bank was also fined for a 2009 incident in which it made a $2.9 million loan to a bank that had ties to Iran’s government-owned shipping line, a violation of United States sanctions against the Middle Eastern nation. Again, JPMorgan Chase learned of the apparent violation early on but did not disclose it to regulators until March 2010, three days before it was repaid for the loan.

A third violation occurred in 2010 and 2011, when the bank failed to give up documents about a wire transfer that referred to Khartoum, the capital of Sudan. According to the release, the agency gave JPMorgan a list of documents believed to be possessed by JPMorgan. In response, JPMorgan, which previously said it had no such documents, produced more than 20 of the items in question.

Treasury officials called the bank’s actions “egregious” and said that JPMorgan’s “managers and supervisors acted with knowledge of the conduct constituting the apparent violations and recklessly failed to exercise a minimal degree of caution or care.”

JPMorgan said that it never dealt directly with institutions in the embargoed countries and that it had merely acted as a middleman.

The penalty, the government said, had been reduced because JPMorgan cooperated substantially with the investigation.

“The civil settlement resolves a number of OFAC allegations dating back to 2005, none of which involved any intent to violate OFAC regulations. These rare incidents were unrelated and isolated from each other,” said Jennifer Zuccarelli, a spokeswoman for JPMorgan. “We are pleased to have resolved these matters and to move forward with enhancements to our global OFAC compliance program.”

Ocean Container Business to remain in slump

2011-08-25T06:40:00.000-07:00

I know all the carriers have been keeping their fingers crossed, hoping
they were wrong, that things will get better soon. The analysts
are saying it's going to be a while.

Sorry folks.

From The Journal of Commerce

Research analyst says slump could last longer than the 2009 downturn

Container shipping is heading toward a prolonged slump that could last longer than the 2009 downturn, research analyst Alphaliner warns.

Unlike the 2009 recession, which was by triggered by the first fall in demand for container shipping, the current slump results from an oversupply of capacity and weak demand growth in Europe and the U.S., according to Alphaliner.

“The main carriers’ operating margins have slipped this year and the poor operating conditions experienced these days could well last for two more years, given the prevailing oversupply situation.”
Ocean carriers suffered aggregate losses of $19 billion in 2009, according to Drewry’s, a London-based consultant, as container traffic declined 9 percent from the previous year.

The lull in container ship orders between the fourth quarter of 2008 and the first quarter of 2010 reduced the order book from 60 percent to 26 percent of the existing fleet, but did not solve the overcapacity problem, Alphaliner said in its latest weekly report.

Record earnings in 2010 — an aggregate $17 billion according to Drewry’s — helped many carriers to restore balance sheets battered in the 2009 slump while additional capital was raised in the hope of a sustained recovery.

This triggered a rush of orders totaling 2.3 million 20-foot equivalent units since June 2010, which boosted the order book 4.5 million TEUs, or 30 percent of the existing fleet. Overcapacity in the shipbuilding industry is aggravating the problem with carriers attracted by low new building prices, especially in China, Alphaliner said.

The reduction in the idle fleet to just one percent of total capacity masks weak utilization rates through most of 2011. Some industry analysts underestimate container ship overcapacity, based “misleading” supply growth figures of seven percent for 2011 and 2012 and a capacity shortage in 2013, Alphaliner said.

Trailer Bridge receives delisting warning from NASDAQ

2011-08-23T12:32:00.000-07:00

From the SEC filing of Trailer Bridge

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On August 18, 2011, Trailer Bridge, Inc. (the “Company”) received a letter from The Nasdaq Stock Market (“Nasdaq”) stating that for the last 30 consecutive business days, the Company’s market value of publicly held shares was below the minimum $15,000,000 requirement for continued inclusion on The Nasdaq Global Market under Listing Rule 5450(b)(3)(C) (the “Rule”). This notification has no immediate effect on the listing of the Company’s common stock. The Rule defines “publicly held shares” as total shares outstanding, less any shares held directly or indirectly by officers, directors or a beneficial owner of more than 10% of the total outstanding shares.

In accordance with Listing Rule 5810(c)(3)(D), the Company has 180 calendar days, or until February 14, 2012, to regain compliance with the Rule. The Company will regain compliance if, at any time before February 14, 2012, the Company’s market value of publicly held shares is $15,000,000 or more for a minimum of 10 consecutive business days.

If the Company does not regain compliance with the Rule by February 14, 2012, Nasdaq will provide the Company with written notification that the Company’s common stock will be delisted from The Nasdaq Global Market. At that time, the Company may appeal the delisting determination to a Nasdaq Listings Qualifications Panel. Alternatively, Nasdaq may permit the Company to transfer its common stock to The Nasdaq Capital Market if it satisfies the requirements for continued listing on that market.

The Company will continue to monitor the market value of its publicly held common stock and consider various options available to it if its common stock does not trade at a level that is likely to regain compliance.

ANOTHER dockworker killed

2011-08-22T16:27:00.000-07:00

I find it difficult to believe everyone is just accepting
that these are "accidents".

From The Journal of Commerce

Saturday accident marks the second death on the Philadelphia waterfront in eight days

A longshoreman fell to his death in a breakbulk ship Saturday in the second fatal accident in eight days on the Philadelphia waterfront.

Vernon Knight, 54, a member of International Longshoremen’s Association Local 1291, fell from a tween deck into a ship’s hold, said Robert Palaima, president of Delaware River Stevedores.

The ship, the Rickmers New Orleans, was handling project cargo at Tioga Marine Terminal. Palaima said the accident is under investigation.

The fatal accident followed the unrelated deaths of two dockworkers Aug. 12 at Philadelphia and Newark, N.J. In those accidents, Carmen “Chuckie” Dirago, a member of Local 1291, was killed at Philadelphia’s Packer Avenue Marine Terminal and Don Denia, a member of Local 1804-1, was killed at Maher Terminals at Elizabeth, N.J.

Knight was the 15th ILA dockworker killed in a work accident in the last four years.

Cosco Bulk Vessels Arrested

2011-08-22T00:19:00.000-07:00

I know Cosco would never play this kind of game with their containerships,
but it appears they are playing "hard ball" regarding charter hires
on some of their bulk ships.

From Bloomberg News

A China Cosco Holdings Co. vessel was arrested at the request of Bunge SA, at least the third attachment against China’s largest shipping company in two months as owners seek late charter payments.

The Yu Lan Hai was detained as Geneva-based Bunge sought $294,252 in fees plus costs from Cosco unit Cosco Bulk Carrier Co., according to court documents. The ruling was granted by Judge Helen G. Berrigan of the U.S. District Court, Eastern District of Louisiana on Aug. 18.

The arrest followed another attachment in Louisiana earlier this month and one in Singapore in July because of disputes involving late payments. In each case, Tianjin, China-based Cosco was locked into long-term contracts at rates higher than market prices following a collapse in spot rates.

Bunge was owed money from Cosco’s use of another ship, the Coal Gypsy, which was hired out in 2008 at rates of as much as $67,000 a day uhttp://www.blogger.com/img/blank.gifntil as late as Dec. 30, 2010, according to the filings. The Coal Gypsy is an 82,295 deadweight-ton bulk carrier, according to data compiled by Bloomberg.

China Cosco said last week in an e-mail to Bloomberg News that the disputes were part of “normal operations.” It didn’t elaborate further. A spokesman, who declined to be named, citing company policy, referred back to that statement when called today.

click here for link

Open Letter from New York Shipping Association

2011-08-17T07:34:00.000-07:00

I have not followed what happened with this pending legislation, which would
allow ease of hiring of dock workers. This open letter supporting legislation
was written in April of 2011. If anyone can give an update on this, please
leave a comment.

New York Shipping Association Inc.
333 Thornall Street, Suite 3A
Edison, New Jersey 08837
Telephone: 732-452-7800
Fax: 732-452-6315
www.nysanet.org

.
The Honorable Brian M. Kolb
NYS Assembly Minority Leader
933 Legislative Office Building
Albany, NY 12248

The Honorable Andrew M. Cuomo
Governor of New York State
NYS State Capitol Building
Albany, NY 12224

The Honorable Dean G. Skelos
NYS Senate Majority Leader
909 Legislative Office Building
Albany, NY 12247

The Honorable Sheldon Silver
NYS Assembly Speaker
932 Legislative Office Building
Albany, NY 12248

The Honorable John Sampson
NYS Senate Minority Leader
409 Legislative Office Building
Albany, NY 1224

April 2011

Dear Governor Cuomo and New York State Senate and Assembly Members:
You will soon have before you for consideration Bills S-4668 (Lanza/Hassell-Thompson) and A-7155 (Cusick/Farrell) which seek to cure a serious flaw in the Waterfront
Commission Act. This flaw impedes the ability of employers to recruit and hire new employees who are necessary to sustain and grow the business of cargo handling, which
is so vital to the economic well-being of our region.
This legislation is NOT an attempt to eliminate the role or necessity of the Waterfront Commission; but it is a rather prudent and responsible action which ensures port
employers will have a sufficient number of employees when they need them – not when an agency which has no economic investment in the management of the port or its
activities decides they are warranted.
S-4668 and A-7155 are intended to repeal Section 5-p of the Waterfront Commission Act, N.Y. Unconsol. Laws § 9920 (McKinney 2002), in the New York State legislature.
Section 5-p was enacted in 1966 in response to a provision in the Collective Bargaining Agreement between the New York Shipping Association and the ILA which provided
a Guaranteed Annual Income to workers displaced due to the introduction of new technology into the marine terminal environment. At that time, management and labor
agreed that keeping the register open did nothing to further our competitive position, and agreed that the “controlled register statute” made sense. Today, the Guaranteed
Annual Income program no longer exists and ironically, it is now the constraints placed on employers by the Waterfront Commission pursuant to Section 5-p that threatens
the competitiveness of the Port.
There are 361 ports in the United States and the Port of New York and New Jersey is the only port in the Nation where employers are denied their prerogative to determine
when to add skilled workers to their payrolls and when to replace workers lost through attrition, retirement, or illness. Currently the Commission must approve how many
workers can be hired and from where they must be recruited.
New York Shipping Association, Inc., on behalf of the port employers has repeatedly stated both privately and publicly that we strongly support the law enforcement, crime
fighting and licensing roles of the Commission. However, we who responsibly oversee the business of maritime commerce are better suited to determine the manpower level
necessary to maximize the economic contribution of the Port to the quality of life of the tens of millions of people who reside within our service area.
With the impending completion of the Panama Canal Expansion and the reconfiguration of the Bayonne Bridge, the Port of New York and New Jersey will be uniquely
positioned to handle significantly more import and export cargo. Ports all along the East Coast are preparing to compete for the increase in cargo coming directly to the East
Coast. We are hampered by an antiquated process for hiring longshore workers and are put in a competitive disadvantage. This antiquated process must be changed.
The State of New Jersey took legislative action in 2007 to amend Section 5-p, recognizing that the Waterfront Commission should not maintain a role as a commercial
market regulator long after the guaranteed annual income program has ended. The Port of New York and New Jersey is the largest and most productive port complex on the
East Coast and supports more than 270,000 port related jobs in the northeast. The greater New York and New Jersey region must be permitted to reap the full benefit of
the economic engine that is the Port of New York and New Jersey. Amending Section 5-p will not alter the law enforcement, investigatory or licensing functions of the
Waterfront Commission.
We urge you to support the repeal of Section 5-p by voting in the affirmative on S-4668 and A-7155. More information about Section 5-p is available and we would be happy
to discuss this further with you in greater detail. Your support for this measure will demonstrate a commitment to a stronger economy for the State of New York.
Sincerely,
Joseph C. Curto
President

Two Longshore Workers Killed last Friday

2011-08-16T06:09:00.001-07:00

Call me cynical, but I find it strange there were 2 longshore workers
killed in "accidents" on the same day, one in NJ, and one in Phili.

Looks to me like there is something behind this besides just bad
workplace practices.

I hope I am wrong, but I trust the FBI or someone is looking into
these deaths.

From The Journal of Commerce, Aug. 15, 2011

Two longshore workers were killed in work accidents at Packer Avenue Marine Terminal in Philadelphia and Maher Terminals in Port Newark, N.J.

Carmen “Chuckie” Dirago, a member of International Longshoremen’s Association Local 1291, was killed in Philadelphia when a tractor-trailer backed into him, according to the Philadelphia Inquirer.

Don Delia, a member of ILA Local 1804-1, died in the Newark accident. Details of the accident were not available.

ILA President Harold Daggett extended condolences to the victims’ families and directed George Lynch, an ILA safety director, to investigate. Friday’s deaths raise the number of ILA members killed in work accidents in the last four years to 14.

“These deaths of our two ILA beloved brothers demonstrates why we must be vigilant with safety and put it at the top of priority list,” Daggett said. “It’s why the ILA wants top-level training, why we want accurate container weight measurements. Brother Dirago and Brother Delia’s deaths will not be in vain and, in their memory and inspired by them, we will work to make certain these accidents don’t happen again.”

Private Equity Funds Invest In Ships

2011-08-16T05:48:00.000-07:00

Up until now, those involved in owning ships have been individuals or families,
mainly in Europe.

The world is changing, and private equity funds in the U.S. have decided
now is a good time to start buying ships, especially tankers.

There is a lengthy article in Bloomberg, highlighting this, as well
as how the demand for oil and oil products will change, due to
refineries being built in China, and the waning of the European and
U.S. economies.

As I have stated before, the U.S. economy will soon be overtaken (if not
already) by China and India.

From Bloomberg
Billionaire Wilbur Ross is betting that the slump in shipping which drove oil-tanker returns to a 14-year low and rates for commodity carriers to the cheapest in a decade is ending.

The 73-year-old, whose New York-based WL Ross & Co. manages about $10 billion in assets, is part of a group spending $900 million on 30 ships hauling gasoline, diesel and other refined products. It is Ross’s first shipping investment and deploying “another few hundred million” in the industry “is certainly easy to do,” he said in interviews on Aug. 5 and Aug. 12.

That outlook contrasts with the pessimism of John Fredriksen, the founder of Frontline Ltd., the biggest operator of the largest crude carriers. The 67-year-old billionaire said in May it would probably be another year or two before ship values collapse and he can start adding to his fleet.

“The history of the industry is one that goes from immense prosperity to immense poverty and back again, and we think that’s going to continue,” Ross said by telephone. “We’re not necessarily at the exact bottom of the cycle, but we think we are relatively close to it.

Demand for shipping will strengthen because new refineries are being built in China and India, increasing the distance that vessels have to travel to deliver crude and pick up refined-oil products, Ross said. That will compensate for a “lackluster” U.S. economy, Europe “in much the same condition” and “very modest” growth in Japan, he said.

click here for link to article

What Now?

2011-08-07T15:25:00.000-07:00

WOW

Who would have guessed what happened this last week in the U.S., which of course will rattle the world wide markets.

The stocks of shipping companies of course have dropped, along with all stocks.

And now everyone is jittery, so once again shipping will be in a turmoil.

The U.S. is still a big player in the world economy, but becoming less and less, with China now becoming a dominant player.

I guess stocks will drop more in the next week.

Personally I thought the market was a bit too optimistic, but now as usual, there has probably been an overreaction.

Forecast Container Shipping

2011-07-21T13:54:00.000-07:00

Sometimes I amaze myself. I am just now catching up on what is going on
in the world of container shipping, and in particular, the forecast
for this year.

This is what I wrote in my blog post of July 23, 2010

Ocean container space is tight coming out of Asia, as the carriers had been smart enough to not add too much capacity. This will last another year, then all the carriers will have short term memory loss, and add too much capacity.

Some things never change.

Like the weather. It's summertime in the U.S., and yet some people are shocked to see the temps in the triple digits

.

And now, this article from the Journal of Commerce today, one year later

Alphaliner says growth through 2012 will become “more alarming” with 2013 orders

Four hundred and forty-eight container ships with a combined capacity of 2.78 million 20-foot equivalent units are scheduled for delivery in 2011 and 2012, adding enormous capacity well ahead of growth in demand, according to market analysts Alphaliner.

“The market fundamentals are looking less favorable compared to last year, as an overhang of surplus capacity will continue to plague the industry,” the container industry analysts said.

Deliveries will total 213 ships of 1.34 million TEUs in 2011, and 235 vessels of 1.44 million TEUs in 2012, equating to annual fleet growth of 8.7 percent in each year, Alphaliner said in a report on ship orders.

“More alarming,” the firm said, is the large capacity scheduled for delivery in 2013, which so far has reached a record high of 1.73 million TEUs compared with the previous record of 1.57 million TEUs delivered in 2008.

The figure could rise even higher in the new few months as some yards continue to offer container building slots for 2013 deliveries.

“Most carriers continue to pile up new vessel orders and the order wave does not appear to be coming to an end any time soon,” according to Alphaliner.

Carriers already are bracing for a weak peak season this year as demand growth has slowed since the third quarter of 2010 while the supply of ships has surged over the same period due to the delivery of new-built vessels and the re-activation of idle tonnage.

Yes, and people are surprised it is 105 degrees today in Kansas.

Celsius is cooler

2011-07-13T11:15:00.000-07:00

This is not really about international shipping, but those of us involved in international shipping must always contend with temperatures if both Celsius and Fahrenheit.

In Kansas we are experiencing a heat wave which may rival the dust bowl era of the 1930's, reaching 111 degrees Fahrenheit the other day.

This quote in today's local paper (The Wichita Eagle) made me smile.

From John Pilla of Spirit AeroSystems at a Tuesday news conference

"We decided to change to Celsius reading here because 40 degrees sounds a lot better than 104."

Charging for no-show bookings

2011-07-11T08:29:00.000-07:00

Maersk announced last month their intention to start charging for containers which are booked but are not delivered in time for the sailing.

From The Journal of Commerce

Carrier also plans to pay for rolled boxes

Maersk Line is planning to charge its customers a fee for booked containers that fail to appear at the port of departure, and plans to compensate customers for booked containers that it fails to load on departing ships, the carrier said.

Maersk Line CEO Eivind Kolding addressed the issue of fees for no-show and rolled containers in a speech he gave at the time he presented his manifesto on June 7 calling for radical changes in the way the container industry conducts business.

“Right now we know that 30 percent of the containers that are booked with us do not turn up. That’s 30 percent no-shows,” he said in an interview with the Journal of Commerce on June 13. “That’s the average. So there is something for us to do in the industry to take the waste out.”

Kolding said Maersk will start to try to alter no-show behavior by charging what it calls a “load protection fee.”
“If we do not get the container on board, we will pay the customer. If the customer does not show up with the container, they will pay us, so we can get a behavioral discipline in the industry,” Kolding said.

We all know forwarders (mostly) make bookings based on what space they "think" they might need. Often this is because they are moving consolidated loads, and they don't know how much cargo they will received to consolidate.

Or, they might have customers who don't know if they will have a container to ship in the next week. Most companies are still unorganized enough to not plan ahead to make space for their cargo. There were never penalties, they probably always managed to get space (thanks to their forwarder making phantom bookings).

It appears this will be changing. It will take some time, because of the culture of doing business, because of they way companies are organized,, or more correctly, not organized.

I recall hearing back in the 60's when exports were booming, that export clerks in some steamship lines were taking bribes to ensure cargo got loaded. Of course, this was back in the era of legal price fixing.

Now carriers will start putting requirements in their contracts and tariffs. And, there is nothing wrong with this. It took the airlines at least 10 years after they were deregulated to start imposing penalties for changes.

The good news is Maersk says they will also pay if they do not load containers which are booked.

I have a feeling the era of "wait listing" will also return.

Catching Up

2011-07-05T08:06:00.000-07:00

These last few months I noticed companies are FINALLY putting armed guards on the vessels to combat piracy.

I suggested this be done 2 years ago, but it's only now companies have decided to do so. Wallenius was the most recent carrier.

From The Journal of Commerce

"Swedish shipowner Wallenius Wilhelmsen Lines is placing armed guards to protect its vessels from attack by Somalia-based pirates in the Gulf of Aden.

The decision following an investigation by Sweden’s government puts Wallenius, which transports cars and trucks on worldwide routes, firmly if reluctantly on one side of an issue that has divided the shipping world as pirate attacks on international ships off the East Africa coast have grown increasingly frequent, bold and deadly.

Wallenius said the guards are equipped with sniper rifles and assault rifles."

And, on the financial side of container shipping, I noticed carriers backed off on their huge "peak season" surcharges. The carriers are going to be once again in tough times, with supply exceeding demand.

China's economy has started to slow. News reports here in the U.S. claim many companies have started to move production from China to the U.S., which will mean less goods for carriers to haul.

Of course, the U.S. is becoming a smaller player in the world, and the growing middle classes of India, China, and other countries will outstrip the demand of the U.S. for consumer goods.

I'm Back

2011-07-05T07:55:00.000-07:00

Dear Readers,

I apologize for not posting these last many months.

I am taking care of loved ones who are ill, which has consumed my time.

Hope to start writing again about international shipping in the coming days and weeks.

Piracy by Somalians appears to escalate

2011-02-01T17:45:00.000-08:00

The piracy by Somalians continues at a brisk pace. It seems to have fallen from the front pages, but it is getting deadlier.

A German vessel owned by Beluga Shipping was hijacked, and one of their crew killed after a botched attempt to retake the ship.

This from AFP

BERLIN — An anti-piracy protection vessel fired on a hijacked German ship during a botched rescue attempt, panicking Somali pirates on board who shot dead one of the crew, the shipowner said Tuesday.

The head of Bremen-based Beluga shipping company blasted the navies for an "uncoordinated" rescue attempt and said the international community's anti-piracy mission in the Indian Ocean had failed his crew.

Its cargo ship Beluga Nomination was boarded by Somali pirates January 24 around 390 miles north of the Seychelles.

The crew of 12 Polish, Filipino, Russian and Ukranian sailors immediately locked themselves into a secure cabin on the Antigua and Barbuda-flagged ship.

Two anti-piracy patrol vessels from Denmark and the Seychelles shadowed the captured ship for the next couple of days.

Beluga's director Niels Stolberg told the Frankfurter Allgemeine Zeitung that what happened next was "a disaster".
The Seychelles ship suddenly opened fire, setting the Beluga Nomination's engine room ablaze in a bid to disable it and prevent the pirates bringing it closer to the Somali coast.

In retaliation, "the pirates killed one of our men, probably in a rage," he said. "The pirates obviously became extremely nervous and lost control."

One of the pirates was also killed in the exchange, said an angry Stolberg who blasted the navies' role.

"The crew spent two and a half days locked in the secure room but nobody came to their aid. The international community has failed. An absolutely uncoordinated intervention like that is totally incomprehensible," he said.

He did not provide details of the dead crew member, or his nationality, and said the condition of the remainder of the crew was unknown.

Two of those on board had managed to escape, he said.

"There was a big ruckus on board. Two of our colleagues used the confusion to escape. The second officer jumped into the free-fall lifeboat and catapulted himself into the sea. The second sailor dived into the water and managed to climb into the lifeboat. The two men were picked up by a Danish frigate.

Despite the rescue effort, the pirates still managed to bring the disabled ship to the Somali coast by using another pirated vessel, the York, to tow it.

Korea Line future in doubt

2011-01-26T20:38:00.000-08:00

From Reuters

SEOUL, Jan 26 (Reuters) - A court could decide whether to restructure or liquidate Korea Line Corp. within a month, a company official said on Wednesday, a day after the South Korean company filed for bankruptcy protection. The country's second-biggest dry bulk shipping line filed for receivership with the Seoul Central District Court on Tuesday after struggling to stay afloat amid a sharp drop in freight rates.

"We are seeking all ways to normalise operations through additional borrowings and debenture issues but we have no choice but to file for receivership on persistent pressure from bad loans in the past and high-cost charter contracts," Korea Line said in a statement on Tuesday.

click here for link to complete article

Chinese (or Lunar) New Year is Feb. 3, 2011

2011-01-24T07:49:00.000-08:00

The Chinese (Lunar) New Year falls on Feb. 3rd this year.

Because it is based on a lunar calendar, it's always a different date.

Anyone who works in the international shipping business from Asia, knows the impact of this holiday.

Basically all the factories shut down for at least a week, generally more. Everyone goes home (which is often a small village in China) to celebrate the holiday with their family.

And because the business of the country is shut down, nothing ships out, or in.

There could also be some major shifts in the Chinese economy.

From Bloomberg

China may raise the reserve requirement ratio for banks this year, the People’s Daily said, citing Bank of Beijing Co. Chairman Yan Bingzhu. The country may also use “other tools” to reduce liquidity, the report said, citing Yan.

The nation may raise interest rates around the Chinese New Year, the China Securities Journal said in a Jan. 21 front-page editorial.

As I have said before, China's economy will be driving the rest of the world in the next decade, so it's important to notice what's going on in China.

Government Documents regarding Mafia arrests

2011-01-20T21:25:00.000-08:00

I haven't yet started reading this, but on the USDOJ (U.S. Department of Justice) web-site is available details of charges against those arrested today.

Here's the link

USDOJ:OPA: Documents and Resources from the January 20, 2011 "La Cosa Nostra" press conference

More on the Mob arrests on the waterfront

2011-01-20T16:54:00.000-08:00

This from The Wall Street Journal

The indictment filed against more than 100 alleged mobsters arrested in a three-state sweep Thursday morning describes a scam used on the New York and New Jersey waterfront.

Three accused Cosa Nostra members would turn up before Christmas, when workers from the International Longshoreman’s Association receive a check from the “container royalty fund”–a sort of year-end bonus for union members. According to the indictment, workers’ payments to the alleged mobster were “induced by wrongful use of actual and threatened force, violence and fear.”

In other words: extortion. The indictment cites incidents going back to 1982, making this scheme a holiday fixture over nearly three decades.

“It’s tradition on the waterfront,” said Ronald Goldstock, a member of the Waterfront Commission of New York Harbor, which is tasked with countering the influence of organized crime on the docks. “If you want to work there — if you want the good assignments or overtime — you kick back the Christmas check to the people who allow you to work there.”

click here for link to article

Arrests made in extortion of dockworkers in New Jersey

2011-01-20T10:05:00.000-08:00

Today, more than 100 persons were arrested in a round-up of Mob types in New York, New Jersey and Rhode Island.

From the NY Times

An indictment handed up in Newark charges 14 people with racketeering and extortion of Local 1235 of the International Longshoremen’s Association and other dockworkers locals, including several current and former union officials who are said to be affiliated with the Genovese family. The indictment alleges a conspiracy over the course of many years to extort union members around Christmas, when they receive an annual bonus based on the number of cargo containers that move through the port.

And, from Bloomberg News

“It means that actual longshoremen in this case, with real mortgages and real families, were forced to kick back to corrupt officials of ILA Local 1235 between $500 and $5,000 each from their annual Christmas bonus if they hoped to rise above entry level jobs on the docks. Eventually those kickbacks helped line the pockets of the Genovese crime family.

“Organized crime means what it has always meant on the waterfront: mobsters getting rich on the backs of dock workers. This case helps put an end to it.”

It will be interesting to see the list of those arrested.

Stay tuned.

Update- Shipcraft vessel Leopard

2011-01-15T08:22:00.000-08:00

Nothing new to report today.

Shipcraft is not saying if the pirates have made contact with them.

This report from IC Publications gives a very good account of the incident.

A Danish shipping company said Friday it was searching for six crew members who have been missing since their cargo ship was attacked by pirates two days ago in the Gulf of Aden off Oman.

"We do not know where the crew is and we are concentrating on locating them and bringing them home to safety," Shipcraft chief executive Claus Bech said in a statement.

He confirmed a report late Thursday that the pirates had taken the six crew members -- two Danes including the captain, and four Filipinos -- and abandoned the cargo ship, The Leopard.

He did not reveal if the kidnappers had demanded a ransom.

A search onboard the boat Thursday by Turkish soldiers, who are part of an international NATO-led force in the Gulf of Aden, turned up "neither pirates nor crew members," Bech said.

The shipping company last had contact with The Leopard crew on Wednesday at 1300 GMT, when the captain sent a distress signal indicating that the cargo ship had been "attacked by pirates who were boarding from two speed boats," the statement said.

After receiving the alert, NATO sent the Turkish warship Gaziantep to the scene, a spokesman for the alliance's anti-piracy mission, Jacqui Sheriff, told the Politiken daily's website.

Shipcraft, which has not provided information on what the cargo ship had been carrying, is known as a specialist in shipping explosives and ammunition, the paper reported, adding that The Leopard was transporting weapons.

All the company's ships have traveled in the area with armed guards since pirates attempted to capture another of its cargo ships, The Puma, in mid-2009.

However, Politiken.dk reported that The Leopard had let off its armed guards at the Oman port of Salalah before sailing into a zone considered "safe" where it was attacked.

Location unknown of Leopard crew

2011-01-14T07:57:00.000-08:00

Yesterday the speculation was the crew of the Leopard was taken, as the vessel was found with (apparently) all cargo intact.

Today however, there has been speculation the crew was killed.

This is what the BBC is reporting.

The two Danes and four Filipinos are now thought to be held on a captured Taiwanese fishing boat, the Shiuh Fu No.1, an EU naval official said.

Pirates in two skiffs attacked the Danish-flagged M/V Leopard on Wednesday but later took the crew off the ship.

Nato sailors searched the abandoned vessel. Its cargo is said to be intact.

The Nato sailors from a Turkish warship, the Gaziantep, boarded the M/V Leopard on Thursday, when it was found to be drifting.

It is not clear why the ship was immobilised, said a spokesman for the EU's Navfor anti-piracy mission.

"We believe the ship was carrying arms, ammunition and explosives, and we believe the cargo is still intact," said the spokesman, Wing Commander Paddy O'Kennedy.

The international naval forces refrained from attempting a rescue as a radio message picked up while the pirates were on board warned them to stay away, he said.

The M/V Leopard is reported to be about 810km (500 miles) from Oman's port of Salalah.

The ship's owner, Shipcraft, says "our main focus is now on the safe return of our crew; however, at present we do not hold any reliable information as to their whereabouts".

Update-crew of Leopard taken by pirates

2011-01-13T20:00:00.000-08:00

Apparently the pirates decided to hold the crew of the Leopard ( the Shipcraft vessel) instead of hijacking the ship.

Shipcraft transports arms and military equipment, and I guess the pirates realized taking such cargo would give them a lot of problems.

Best to just hold the crew for ransom (or so I presume).

This from AFP

Pirates kidnap Danish ship crew but leave vessel: report

(AFP) – 6 hours ago

COPENHAGEN — The crew of a Danish weapons ship have been kidnapped by pirates in the Gulf of Aden off Oman, but in an unusual departure from normal practice, the vessel was not seized, a report said Thursday.

Sources told the TradeWinds shipping publication that the 2,000-tonne ship, The Leopard, was carrying "sensitive" cargo, believed to include weapons.

Vessels operated by the Leopard's Danish operator, Shipcraft, routinely carried nuclear items, although none were believed to have been on board this vessel, it said.

The six crew -- two Danes including the captain, and four Filipinos -- had been taken to a seized Taiwanese fishing vessel being operated as a mothership, the report added.

The ship had meanwhile been located and searched by the Turkish navy and no trace of any pirates or pirate skiffs had been found.

According to some "chatter" I read, it was thought the vessel had armed guards onboard the ship, which disembarked shortly before the encounter with the pirates. So, presumably this attack occurred outside of what would be considered the danger zone.

Guess the danger zone just got bigger.

Shipcraft Vessel Hi- Jacked

2011-01-13T08:11:00.001-08:00

I haven't mentioned all the ships which continue to be hijacked. This one was hijacked off the coast of Oman, so I am not sure it's the Somali Pirates, but I suspect so.

From Shipgaz news

The fate of the Danish coaster Leopard is still uncertain after a pirate attack yesterday in the Indian Ocean off the coast of Oman. The crew of Leopard reported an attack from two pirate boats at 2 pm on Wednesday. The crew of six (two Danish and four Filipinos) closed down the engine and rushed to the ship’s safe room, and there has been no contact with Leopard since then. This morning there is still no report from the ship, which is drifting at sea. The pirates are unable to enter the vessel as Leopard is secured with barbed wires and steel doors.

click here for link

Hamburg Süd has a new web-site

2011-01-12T09:56:00.000-08:00

Hamburg Süd is a German shipping company. The 2 little dots over the U is called an umlaut, which means one does not pronounce the Süd as Sud (as in rhyming with mud), but as Sued, or really more germanic the S is pronounced as a Z, so it's Zood. I know any German reading this is having a heart attack, but I think it will help my fellow Americans.

Anyway, they have a new web-site. You can find it by googling hamburg sud.

Or, click here for the link to hamburgsud.com

They now have different links to their various divisions, and also to their parent company.

I haven't used the new site too much, but I did look up a sailing schedule from New York to Santos, Brazil. The only thing that baffled me was the date. It said 12.01.2001, and I am like "December is a long way away", and then I realize it's formatted in the European (and South American) style of date first, then month, and then year. They really should change it to use Jan for the month.

If anyone else has tried out this new site and has comments, I would enjoy hearing from you.

Too many bulk ships

2011-01-11T01:11:00.000-08:00

Bloomberg published an article yesterday, stating there are too many new bulk ships coming out of yards, which has already caused charter rates to drop.

Leasing costs for capesizes, 1,000-foot-long ships hauling iron ore and coal, will drop 34 percent to average $22,000 a day this year, according to the median in a Bloomberg survey of eight fund managers and analysts. The last time that happened, China’s economy, the biggest consumer of the minerals used in steel and power, was 75 percent smaller and the benchmark Standard & Poor’s GSCI commodity index 67 percent lower.

While Clarkson Plc, the world’s biggest shipbroker, expects seaborne trade in the two cargoes to exceed 2 billion metric tons for the first time this year, the 7 percent increase won’t be enough to eliminate a glut. About 200 capesizes, spanning some 35 miles end-to-end, will leave shipyards this year, expanding the fleet by 18 percent, the Bloomberg survey showed.

Of course, the Chinese could surprise everyone, and stock up on commodities when the shipping is cheap. They did that last year.

Later in the article they quote folks in the containership business as saying "things are pretty good".

Let's see if they stay that way, after more containership newbuildings come into service.

click here for link to article

Forecast for 2011

2011-01-10T11:24:00.000-08:00

I guess it's time to talk about what lies ahead in 2011.

This is what I said in previous years.

In 2009 I said we would be in a recession until 2011.

I think that was probably pretty accurate.

We are definitely changing into a world economy.

Still valid, and becoming more evident.

China is very quickly emerging as the dominant economy in the world.

China has already surpassed Greece in purchases of bulk carriers, and now China will build more ships, knocking out Korea who until now was the largest shipbuilder.

I think in the next decade, China will become more important than the U.S., from an economic standpoint. India, Indonesia, and Africa will also become more important.
Africa will expand due to influence from China and India, but with it will probably come exploitation, displacement of peoples, and turmoil.

As for ocean transport, carriers will need to restrain from adding too much capacity. If they forget what happened the last few years, they will throw themselves back into an overcapacity situation, and see rates plummet again.

Oil prices. Last year the best guess was somewhere between 50 and 100 dollars a barrel. Pretty close.

In 2011 I think we will see some wide swings in the price of oil. As soon as there is money to be made, the speculators are back in action.

OPEC is not so stupid as to let the oil prices get so high, that everyone converts to alternative energy sources.

Once again, China will be a dominate factor. They are pushing towards alternative energies, but their demand will grow so fast, I am not sure how much it will offset the increased demand for fossil fuels.

Probably at the best, it will be a wash.

So, that's my best guess for 2011. It won't be a great year, but it won't be horrible.

And if you are still out of work, I suggest you take any job you can find.

The Somali Pirates told the truth

2010-12-09T08:44:00.000-08:00

The New York Times is now reporting the Somali Pirates were telling the truth about tanks which were destined for Southern Sudan onboard the MV/Faina which they hijacked.

This from my blog in Feb. 2009

Thursday, February 5, 2009
Pirates release M/V Faina

Finally, after 5 months, the ship carrying tanks and arms will be released.
Kenya says the cargo is theirs. I am sure there will be intense interest as to where this armament ends up.

And this from the New York Times, Dec. 8, 2010

KHARTOUM, Sudan — It was September 2008 and a band of Somali pirates made a startling discovery.

Kenyan security officers guarded T-72 tanks that were offloaded in Mombasa from the Faina. The ship was also found to be carrying 150 grenade launchers and 6 antiaircraft guns.

The Ukrainian freighter they had just commandeered in the Gulf of Aden was packed with weapons, including 32 Soviet-era battle tanks, and the entire arsenal was headed for the regional government in southern Sudan. The Ukrainian and Kenyan governments vigorously denied that, insisting that the tanks were intended for the Kenyan military.

But it turns out the pirates were telling the truth — and the Kenyans and Ukrainians were not, at least publicly. According to several secret State Department cables made public by WikiLeaks, the tanks not only were headed to southern Sudan, but they were the latest installment of several underground arms shipments. By the time the freighter was seized, 67 T-72 tanks had already been delivered to bolster southern Sudan’s armed forces against the government in Khartoum, an international pariah for its human rights abuses in Darfur.

Hapag-Lloyd plans to sell stock

2010-12-08T08:03:00.000-08:00

Hapag-Lloyd has contacted some investment banks, with the idea to do an IPO (Initial Public Offering) to sell stock.

At the moment it is owned by TUI (which is involved primarily in group travel), and after the financial problems last year, Klaus-Michael Kuehne, the principal of Kuehne & Nagel, took a major financial stake in Hapag-Lloyd, as part of an investor group.

From The Journal of Commerce

TUI has repeatedly said it wants to dispose of its stake in Hapag-Lloyd to focus on tourism. The company, based in Hanover, Germany, hasn’t been able to find a buyer. The increase of its stake is the result of the conversion of a hybrid loan for Hapag-Lloyd into equity, according to the company’s statement in September.

A spokesman for TUI didn’t immediately respond to a phone call seeking comment.

A Hamburg-based investor group, including German billionaire Klaus Michael Keuhne, M.M. Warburg, HSH Nordbank and Hamburg’s state government, bought a majority stake in Hapag-Lloyd.

click here for link to article

ILA admits Mob still a problem on NY/NJ docks

2010-12-06T18:23:00.000-08:00

From the Journal of Commerce, who has covered the Waterfront Commission hearings.

Mob ‘Schemes’ Persist on Docks, Monitor Says
Joseph Bonney | Dec 2, 2010 10:24PM GMT

............

“The schemes are still there. … If you eliminate that, you’re going to bring the costs down,” said Robert C. Stewart, deputy administrator of International Longshoremen’s Association Local 1588, which has been under a court-appointed monitor since 2003.

Stewart testified in the last of six hearings the Waterfront Commission of New York Harbor held to highlight no-show jobs and other practices it says drive up costs and invite Mafia influence at the port.

I guess the Waterfront commission hearings are over. This is how it wrapped up.

The hearings ended with the display of several complex charts detailing family and other connections between Genovese crime family members and ILA officials and members that Commissioner Ron Goldstock said included a “privileged few” who received high pay for relatively little work.

Stewart testified that the court-appointed administrators at Local 1588 struggled to break a “culture of corruption” reinforced by decades of Genovese crime family control. He said the mob used its influence over company hiring agents to demand payoffs for jobs and training and relief assignments that led to higher-paying jobs.

He said Local 1588 members used to have to buy tickets to an annual Christmas party of Nicholas Furina, a hiring agent who was banned from the docks after pleading guilty to extorting union members for jobs. He said that practice was banned after the monitors took over.

“People think that if there’s not gunplay down on the piers and people getting beat up and thrown in the river, things must be OK. That’s not the case,” Stewart said.

So, it's improved a little from the days of "On The Waterfront", but not by much.

click here for link to article

Need a job? Apply to be an independent inspector

2010-12-05T18:32:00.000-08:00

The Waterfront Commission of New York Harbor (as they call themselves) is taking applications for;

"expressions of interest and statements of qualifications in being considered for appointment as independent private sectors inspector general"

click here for link to explanation and application form

Deadline is Dec. 31, 2010

I suppose that should be enough time for any established company to apply.

These "independent inspectors" will be hired by a stevedore company, who has in the past, had some "questionable" owners. It's the Waterfront Commissions idea of the way to keep organized crime off the Waterfront. Apparently all of the stevedores companies currently licensed are operating under temporary licenses. (as mentioned in my post of Nov. 15

all (stevedoring) companies doing business in the Port were operating on short-term temporary licenses, which were intended to be used only in special circumstances.

I just don't know any companies who would really be in this business, but maybe there are some law firms who might be interested.

I especially like the list of "area of expertise" one can choose from.

Here's the first few

-Accounting/Audits/Financial Review

-Shipping

-Organized Crime

-Unions

-Construction

I guess they listed them in order of most important. I'm not sure.

Don't believe everything you hear

2010-11-20T10:12:00.000-08:00

I don't known what to say. The Transpacific Rate Agreement has told it's members how much they should increase their rates. All this does is give ammunition to all the carriers to say " look, I will give you less than the other guys".

Moeller Maersk A/S, the world’s largest container line, and 14 other shipping companies agreed to seek rate increases of $400 per 40-foot box on Asia-U.S. west coast routes next year as the rebounding global economy revives cargo demand.

The planned increase is part of voluntarily guidelines covering talks for contracts generally starting around May 1, the Transpacific Stabililzation Agreement said in a statement on its website yesterday. The shipping group, which has limited antitrust immunity, also recommended a peak-season surcharge of $400 per box.

from bloomberg

Waterfront Commission Hearings Continue

2010-11-18T14:06:00.000-08:00

The hearings held by the Waterfront Commission continue.

The Journal of Commerce is reporting. I haven't yet found another source.

Here is what the JOC reports occurred today.

International Longshoremen’s Association official Harold Daggett said there’s nothing wrong with off-contract deals that the Waterfront Commission of New York Harbor says provide favored dockworkers with high pay for relatively little work as ILA shop stewards and timekeepers.

“I wish all the members earned more than $400,000,” Daggett testified in a Waterfront Commission hearing. “These guys work their asses off out there.”

Ok, so I think "well, he's just blowing smoke, wanting to look like he is speaking up for the Union workers.

But then there is this.....

At the start of Thursday’s hearing, Daggett insisted on reading a 10-minute statement criticizing the agency, created in 1954 to combat waterfront crime. “The Waterfront Commission treats us all like we are criminals,” he said. “Their main focus is on harassing our membership and beefing up their numbers. … This is the closest thing to communism that you will see in the United States of America.” At another point he likened commission practices to “McCarthyism or SS all over again.”

Commissioner Ron Goldstock said previous hearings documented non-contract pay agreements that “funnel huge amounts of money to a privileged few and as a consequence adversely affect the ability of the port to be competitive.” Goldstock noted that about a dozen relatives of the late Genovese crime boss Vincent “Chin” Gigante hold lucrative jobs on the waterfront, including ILA shop steward positions at the port’s three largest terminals.

Daggett defended Ralph Gigante, a nephew of the late crime boss. Ralph Gigante, a Local 1804-1 shop steward at Port Newark Maintenance & Repair, testified at a previous hearing that he is paid for 168 hours a week, mostly at overtime rates, and expects to collect about $400,000 this year.

So, I don't know if this guy was drunk, or smokin' something, or maybe just not taking his meds. But, it certainly appears he is livin' in a fantasy world.

click here for link to article

No Stevedore Company in NY/NJ properly licensed

2010-11-15T07:26:00.000-08:00

A year later, the Waterfront Commission is getting around to addressing problems outlined in a report by the New York State Inspector General Joseph Fisch, issued in August 2009. Click here for link to the report.

In the letter dated Sept. 29, 2010 from the Waterfront Commission (their letterhead says of New York Harbor, LOL, considering the majority of the terminals are in New Jersey), they mention the little problem with the Stevedore Companies.

all (stevedoring) companies doing business in the Port were operating on short-term temporary licenses, which were intended to be used only in special circumstances.

I'm not really clear on how they will handle this. It appears that initially they thought they would start running the necessary background checks to get the stevedores properly licensed.

Then, it appears (although this is not clear), that they found out there are too many who won't pass the test.

So now it looks like they will maybe let the stevedore companies who have problems which would keep them from passing the background check, you know, things like "exhibited criminal influence, improper accounting and/or hiring practices," they would let these companies hire IPSIG (Independent Private Sector Inspector General).

Oh my. Has no one learned a thing?

But, I can see the problem. Who are you going to get to act as a Stevedore?

I think the Port is taking applications.

Maybe someone reading this will put together a company and apply.

Waterfront Commission initiates arrests

2010-11-14T19:25:00.000-08:00

If you have been reading this blog, you know the NY/NJ Waterfront Commission has been holding hearings this month.

Apparently, when they were preparing for the hearings, they decided they had enough evidence to arrest a couple of guys.

This from The Waterfront Commission web-site

October 13, 2010

Lasher Arrested for Conspiracy to Commit Wire Fraud

Waterfront Commission Detectives and Special Agents from the United States Department of Labor today arrested Pedro Del Valle, Jr., an employee of Island Securing and Maintenance Inc, on a charge of Conspiracy to Commit Wire Fraud. The Complaint alleges that between September 2008 and February 2010, Pedro Del Valle, Jr. was a full-time employee of both Island Securing and Verizon, Inc. and that on numerous occasions Del Valle knowingly and intentionally indicated on sign in sheets that he was working at New York Container Terminal during the same periods of time when records maintained by Verizon indicate that he was working there. The Complaint also alleges that on numerous occasions, Del Valle called in sick, took disability leave, or took family leave from his job at Verizon when in fact he was working at New York Container Terminal on those days. Defendant, together with others, caused direct deposit payments to be wired, in interstate commerce, from a Verizon account in Pittsburgh, Pennsylvania to defendant’s account in New York for the purpose of executing the above scheme.

The case is prosecuted by the United States Attorney’s Office for the Eastern District of New York.

And....

October 19, 2010

ILA Local 1 Trustee and Shop Steward charged with Theft
in the Second Degree and Falsifying Records.

On October 19, 2010, William A. Vitale, a shop steward at Maher Terminals and Trustee for ILA Local 1, was charged with theft of over $75,000 by deception, a crime of the 2nd degree, and falsifying records, a crime of the 4th degree.

The complaint alleges that Vitale created a false impression that he was working at Maher Terminals, and he was paid for such work when, in fact, he was not working. Vitale was also alleged to have intentionally deceived Maher Terminals, by causing false payroll records to be submitted.

The case is being prosecuted by the New Jersey Attorney General’s Division of Criminal Justice.

Containers Overboard

2010-11-13T09:33:00.000-08:00

From The Journal of Commerce

Storm knocks 26 containers overboard en route from Asia to UK

A Maersk container ship was waiting in the French Port of Le Havre Friday to have its cargo secured after it lost 26 containers overboard on Tuesday in a powerful storm in the Bay of Biscay.

The maritime prefecture in Cherbourg said the Maersk Sembawang lost the containers overboard from the last row of boxes stacked at its stern and suffered damage to 49 more when it ran into the storm.

Be sure to click here for the article, and then click on the link to the French Language news which has a picture of the ship and the containers which tumbled.

Of course, hoping yours was not one of them.

I wonder if Maersk will declare General Average? I doubt it, no one does these days.

Air Cargo carriers fined by EU

2010-11-12T10:38:00.000-08:00

The list of the aircargo carriers fined for price fixing has been made known.

They are; Air France-KLM, British Airways, Cargolux, SAS, Singapore Airlines, Air Canada, Quantas, LAN Chile, Martinair, and Japan Airlines.

From DW World

The European Union's competition watchdog issued fines Tuesday to 11 airlines totaling 799.4 million euros ($1.1 billion) for running a global cargo cartel.

The cargo carriers were found to have coordinated their action on surcharges for fuel and security over a six-year period, between 1999 and 2006.

Air France-KLM was hit with the largest fine of 310 million euros. British Airways came in second, having to pay a 104-million-euro penalty. Luxembourg's Cargolux will have to pay 79.9 million euros, while Scandinavian carrier SAS was ordered to pay 70.2 million euros.

Other airlines involved in the cartel and slapped with fines were Singapore Airlines, Air Canada, Quantas, LAN Chile, Martinair and Japan Airlines.

The Commission said it dropped charges against eleven other airlines, including German carrier Lufthansa and its subsidiary Swiss Air, because it was the first to provide information about the cartel.

ILA makes threats to keep jobs

2010-11-12T09:11:00.000-08:00

The ocean carriers have made moves to get rid of providing chassis in the U.S., as this is the only country in the world (that I know of), where the carrier supplies the chassis.

This has upset the ILA in NY/NJ as it will move the responsibility of the chassis maintenance (I guess) from the carrier to the truckers, or another company, which is not obligated to use the ILA.

Kinda like what happened when the ILA lost the business of loading cargo into containers. The ILA is not competitive, and if someone can find a cheaper way to do it, the business goes elsewhere.

From The Journal of Commerce.

International Longshoremen’s Association official Harold Daggett said he’s ready for “war” with container lines transferring intermodal chassis service to companies outside the union’s coastwide master contract.

“They’ve declared war with me and I’m going after all of them,” Daggett said in an interview Tuesday.

“There’s going to be a war here. I’m going to take on all of these lines that say they’re getting rid of the chassis,” he said. “If they think they’re going to create a European situation where they’re getting out of the chassis business, it’s not going to happen, not on my watch.”

He said the ILA may seek fines of $2,000 per container against carriers it claims are violating the union contract. He said the ILA also may conduct “thorough, thorough inspections” of boxes placed on chassis of companies that haven’t signed the contract.

So, he makes his threats, known and also implied (if anyone with experience working in NY/NJ, you know what an "implied" threat is from the ILA.... you might be wearing concrete shoes very soon).

And more from Daggett

“This is not a slowdown I’m talking about. We’re just going to show them we have the right to inspect these containers so that they’re safe for the highways,” Daggett told The Journal of Commerce.

“I’m not threatening anybody but this is our work and our jobs, this is our livelihood and I will fight for every member of the ILA to protect our jobs. That’s what they elected me for.”

So, if this isn't a threat, what is it?

This is who is will be coming after.

Daggett said any ILA action would be aimed only at carriers that have shifted chassis maintenance and repair to companies that haven’t signed the ILA contract. Leasing companies and chassis pool operators use ILA labor in New York-New Jersey and other ports but can hire non-ILA labor elsewhere because they aren’t part of the coastwide contract signed by carriers.

Maybe the Waterfront Commission will look into this.

Someone needs to inform the ILA that the way to keep jobs is by learning be do it better, and cheaper, than someone else.

And more from the NY/NJ Waterfront

2010-11-11T08:25:00.001-08:00

Oh, this is just so funny. Tony Soprano would be smacking them up the side of the head.

More from the Waterfront Commission hearings, as reported in the Journal of Commerce.

"I don't like the idea that the Waterfront Commission wants to run my business. That's what you guys want to do," American Stevedoring CEO Sabato Catucci told a commission hearing. "If you want to run my business, buy me out and take me over and you try to get more productivity out of the port."

Catucci testified in the fourth in a series of hearings the agency has held to highlight what Commissioner Ron Goldstock said was "literally alarming" evidence of no-show jobs, favoritism in hiring and organized crime influence that "adversely affects the ability of the port to be competitive." ILA officials are scheduled to testify Nov. 18.

Catucci and Jim Devine, chief executive of GCT USA, which owns Global Terminal and New York Container Terminal, took issue with what they saw as suggestions that mobsters dominate the port.

and here's the clincher

"There is no goddamn organized crime influence on the day-to-day decisions we make, in any way, shape or form," Devine said.

Oh, so not the "day-to-day", but just the monthly stuff?

NY/NJ Terminal Operators and the ILA

2010-11-11T08:13:00.000-08:00

You just can't make this stuff up!

The Waterfront Commission is now trying to do it's job (since they have been threatened with being made extinct), and have started questioning the employment practices on the waterfront.

The most recent abuse which came to light are the timekeepers, which are generally paid for more than 24 hours a day, as they are apparently doing the job of 3 people.

When questioning the terminal operator why this can't job can't be computerized to save money, here was the discussion, are report in the Journal of Commerce.

Terminal executives disputed Goldstock's (from the Waterfront Commission) suggestion that ILA timekeepers and shop stewards have undemanding jobs that allow them to collect pay of up to $464,000 for working only a few hours a day at jobs they got through inside connections. Devine said NYCT once tried to hire fill-in timekeepers and "burned through about a half-dozen people that couldn't do the job."

Couldn't the work of a timekeeper with six-figure pay be done by a skilled data entry worker making $20 or $25 an hour? Goldstock asked.

"Those people don't have an ILA contract," Curto replied.

HA HA HA

I guess that just gives an indication of what caliber of people belong to the ILA.

click here for link to article

Airlines facing fine for price fixing

2010-11-08T08:20:00.000-08:00

Apparently several airlines were operating an illegal cartel from 2001 until 2006.

None of the airlines mentioned are U.S. owned.

Lufthansa will escape fines, as they are the one who informed the authorities of the cartel.

From The Journal of Commerce

Air France KLM and British Airways, which were fined $350 million and $300 million respectively in the U.S., are among airlines facing substantial fines from the EU.

Cathay Pacific, Japan Airlines, Alitalia and All Nippon Airways have confirmed they have been investigated.

Lufthansa, Europe's largest cargo carrier, is not facing a fine as it informed the Commission about the cartel's activities.

NY/NJ Port Time Keepers paid for 25 hours a day

2010-10-29T08:14:00.000-07:00

In case you didn't really notice from previous articles, the no show jobs at the NY/NJ Ports are sanctioned in the contract between the ILA and the Port Operators.

Now, something equally strange is sanctioned in these contracts.

Paying Timekeepers for more than 24 hours in one day.

From The Journal of Commerce

Paul Buglioli, head timekeeper at Ports America’s terminals in the port, testified he’s paid for 25 hours a day and earned $462,685 last year. Babchik identified 10 other timekeepers in the port who were paid over $200,000 last year, including hours they don’t work.

Buglioli said he and other timekeepers at Ports America terminals log in dockworkers for several shift starts per day, including weekends and holidays, and input their names and work codes for nearly 100 pay categories. “We only have four timekeepers … We should have about 10 timekeepers to do the work we’re doing,” he said.
...............
Commission attorney Paul Babchik testified that timekeepers – International Longshoremen’s Association clerks who tally and report dockworkers’ hours for companies’ payrolls – are paid under arrangements that vary among terminals. Timekeepers typically are paid whenever workers are on the job at a terminal.

click here for link to complete article

Ripped from the headlines...the mob and the waterfront

2010-10-21T20:00:00.000-07:00

The from the Newark (New Jersey) Star Ledger

The Waterfront Commission held a hearing into mob influence along the docks today. But some of the scenes could have ripped from newsreel footage of the commission’s 1950’s heyday, right up to that old standard: "On advice from my counsel, I hereby assert my privilege against self-incrimination under the 5th Amendment of the United States Constitution."

It was among the highlights of the first day of public hearings following a scathing Inspector General’s report last year finding that the commission’s former leadership was "a sanctuary of political favoritism, corruption and abuse."
.................
Aulisi is the son of a former International Longshoreman’s Association Local 1235 president, Vincent Aulisi, who commission officials say installed his son in a no-show job as a checker, or dockside clerk, at the APM terminal in Elizabeth. On a projection screen in the crowded hearing room, commission officials showed photographs of the son barbecuing and riding a lawnmower while he was scheduled to work. The commission eventually barred Aulisi from working on the waterfront for associating with Coppola.

"Isn’t it true that you had a no-show job at APM?" Demeri asked Aulisi.

""On advice from my counsel, I hereby assert my privilege against self-incrimination," he replied, repeating that same response, word-for-word a half dozen times in response to a half-dozen questions.

Testimony from Joseph Curto, president of the New York Shipping Association, a trade group, detailed labor practices codified in bargaining agreements between stevedoring companies and the longshoremen’s union. The commission officials say the practices allow for and even encourage excessive pay for little or no work, depending on the position.
lesniak-waterfront-commission.jpgNoah K. Murray/The Star-LedgerN.J. State Sen. Ray Lesniak seen on the floor of the Senate session before a vote is cast for his affordable housing bill in June.

For example, a relief checker, Eddie Aulisi’s typical job title, is paid whether or not he is providing relief, and is not required to be on-site even during the loading or unloading job he is assigned to.

Another industry official, Richard Carthas, senior director of terminal operations for APM, Aulisi’s former employer, acknowledged that he had fired other longshoremen for infractions like excessive sick days or attitude problems yet kept Aulisi on his payroll despite knowing he rarely, if ever, worked.

And people wonder why it's so expensive to work a ship in New York/NJ ports?

click here for link to article

Waterfront Commission gets to work..finally

2010-10-21T19:28:00.000-07:00

A couple of weeks ago, as reported in The Journal of Commerce

(New Jersey)State Sen. Raymond Lesniak, a Democrat, said he will introduce a bill Thursday to dissolve the watchdog agency and transfer its powers to the Port Authority of New York and New Jersey.

Apparently the Waterfront Commission has decided they better get to work to save their jobs.

ILA shop steward's work week: 168 hours

A nephew of the late boss of the Genovese crime family testified that he receives hourly pay for 168 hours a week, even when he's home sleeping, while collecting $400,000 a year as an International Longshoremen's Association shop steward at the Port of New York and New Jersey.

Ralph Gigante Jr., a shop steward at the maintenance unit at Port Newark Container Terminal, said he's paid whenever ILA workers are on the job. He said he gets the regular $33 an hour for 40 hours, double pay for three hours a day of meal breaks, and time-and-a-half for each week's remaining hours, plus two yearly bonuses, including one for 16 paid holidays. He said he doesn't claim pay for the 10 to 12 times a year when he plays golf.

Gigante testified Thursday in the second of a series of hearings by Waterfront Commission of New York Harbor to highlight what commission officials say are no-show jobs, favoritism in hiring and organized-crime influence at the East Coast's busiest port.

Oh, so the Waterfront Commission just now came across this bit of information?

This is just too depressing and ludicrous to even discuss.

click here for link to complete article