American President Line (APL) parent company confirms takeover talks

NOL, the parent company of APL has confirmed they are in take over talks with

Maersk and CMA CGM.  I presume they are in separate talks with each company,
however the combination of these 3 companies would certainly be interesting.

From World Maritime News

Singapore-based container shipping company Neptune Orient Lines Limited (NOL) is in preliminary discussions with French CMA CGM SA and Danish A.P. Moeller-Maersk A/S with respect to a potential acquisition of NOL, the company said, thus confirming recent media reports.
“NOL has a duty to assess all options to maximise shareholder value and improve its competitiveness. From time to time, NOL enters into discussions on possible combinations involving NOL, while remaining focused on returning its core liner business to sustainable growth and profitability,” NOL added.
However, the company stressed that there is no assurance that any such discussions will result in any definitive agreement or transaction, or that any offer for NOL will be made.
“NOL will make an appropriate announcement in the event that there are any material developments. Shareholders of NOL and investors are therefore advised to exercise caution when dealing in shares in and other securities of NOL,” the company concluded.
The confirmation comes on the back of an announcement dating back to July, in which NOL said that the investment company Temasek Holdings Pte. Ltd, NOL’s majority stake owner, was in talks with an undisclosed buyer to sell its stake in NOL, but that there was still no definitive deal yet.
Previously, NOL had been linked to a potential merger with German carrier Hapag-Loyd and subsequently Hong Kong’s Orient Overseas (International) Ltd, nevertheless none of them were realized.Tamasek holds 65% stake in the company whereas the remaining 35% is traded on the Singapore Stock Exchange. NOL, which operates through the APL brand, has 92 vessels in its fleet.

TSA should be closed down

I've said it before, and I'll say it again.

The carriers which are members of the TSA (Transpacific Stabilization Agreement) should disband, close down, the TSA.

It's not just because the TSA has outlived it's usefulness. It's also because the carriers need to be looking at every dime they spend. And, this organization costs money to run. Probably quite a lot.

NOL/APL has today stated they can't get the rate increases announced by the group.
So, that means the drive for the rate increase has fallen apart.

From Lloyd's List (click here for link)

HOPES that freight rates for containerised cargo had stabilised appear to have been dashed after Neptune Orient Lines disclosed another considerable lurch downwards.

The latest decline reflects both cheaper core rates and lower bunker recovery.
..................
In the year to date, average revenue per feu has fallen 20% to $2,375 compared with $2,972 in the corresponding period of 2008, while cargo volumes were 24% less at 970,600 feu.

I'll stand by my previous forecast of a decline of 20 percent for 2009 vs 2008.
I don't know why everyone thinks this is so outrageous. Considering there have been 10% increases every year for about the past 5, this only erases 2 years of gains.

And, I think it will probably stay at that level for 2010 also.

The only good news for the carriers is the price of oil is coming down. But, if they really hold to their "bunker adjustment factors" that would mean they will be giving bunker credits.

I would not want to be an owner in an international shipping company right now.

Double Handling

I hope this article is incorrect.

They say goods will be shipped by vendors to consolidation centers in Atlanta, So. Calif, and North NJ.

Then, they will be resorted, and delivered to distribution centers in Atlanta, Dallas, and So. Calif.

That seems like a lot of rehandling to me. Can't they make them consolidation/distribution centers?

Probably someone decided to build the warehouse in Dallas, and now they have to justify a way to use it.

Vendors have traditionally delivered product directly to each Stein Mart store, but with APL Logistics’ help, the fashion discounter is scrapping that system in favor of a layered distribution system, where vendors will deliver product to Stein Mart consolidation centers being established in Atlanta; Compton, Calif.; and Secaucus, N.J.
The consolidation centers will re-sort shipments for delivery to distribution centers in Atlanta, Dallas and Compton. At distribution centers, merchandise will be checked to ensure it’s floor ready and if not, problems will be corrected. Merchandise will then be sorted for delivery to Stein Mart stores.

Hapag Lloyd sale in jeopardy

Lloyd's List reports the sale of Hapag-Lloyd has hit some problems. This is not unexpected as the sale was renegotiated just prior to the major downturn in international shipping. The only other bidder, NOL (APL) already saw this, and withdrew their bid.

The Hamburg-based Albert Ballin consortium, which bought Hapag-Lloyd, is seeking to renegotiate the terms of sale. At the same time, one of the banks supporting the action, Royal Bank of Scotland, is understood to be in the process of pulling out of the deal.

“The transaction changed and it no longer suited RBS to participate,” a source close to the deal told Lloyd’s List.

The container line was granted a $750 loan from an international banking consortium led by German banks HSH Nordbank and Hypovereinsbank to buy 29 container vessels from Tui, the parent of Hapag-Lloyd.

Hapag-Lloyd was valued at €4.5bn under the deal, including debt and the acquisition price for the vessels. Industry observers regarded the price as extraordinarily high, given the fact that the industry is in a major crisis.

Albert Ballin shareholders are due to €1.4bn as part of the transaction. Tui will continue to be a shareholder, with a stake of €700m. In addition, €2.4bn of debt was transferred to Hapag-Lloyd.

What to do with excess ships

APL has confirmed they are laying up vessels. Actually taking them out of service and parking them.

The downturn in shipping has been fast. Only a little over a month ago one of the execs at APL was saying the lines needed to reverse the current market downturn (ha).

From the Sept. 25th blog "Ocean Shipping Downturn.. duh"

"A senior executive of APL has called on individual container lines to take decisive action to reverse the current market downturn.

Dan Ryan, APL’s Greater China president, speaking at the second Containerization and Liner Shipping China conference in Tianjin, said that a negative scenario of financial market turmoil, low consumer confidence as well as rising inflation and commodity prices, compounded by historically high fuel prices, requires lines’ urgent attention.

Suggested solutions included carriers moderating growth aspirations, returning excess tonnage to the charter market, rationalizing and even suspending some services, and having stronger resolve to pass along bunker costs to customers.

“If we fail to take action, the industry could see a more significant downturn than we have seen in many years,” he said."

I have never worked for a carrier which actually laid up vessels. Sometimes we would dry dock them early. Normally if a trade got really bad we would try to start another service, or increase frequency in an existing service.

Looks like MOL has decided to take their excess tonnage and start an Asia / East Coast South America service.

The move follows the termination of the carrier's existing joint service on the route, operated with Singapore's Pacific International Lines.

The company said it will deploy five 3,000-TEU and six 4,250-TEU vessels on the new weekly service.

"By replacing some of current 3,000-TEU class vessels with larger and faster ships, MOL will provide stable cargo capacity and higher schedule integrity to meet customer demand in this growing market," the carrier stated.

Well, the problem with that is this market probably isn't really growing, with Brazil and Argentina facing the same problems as the rest of the world.

But, it's probably a better solution for MOL than just parking their ships.

I can't really think of too many trade lanes where it would be a good idea to put in ships.

Maybe Africa.

But you would probably need ships with onboard cranes to service a lot of those ports, and those ships are fairly rare.

Updated 10/10 - Will Hapag-Lloyd be sold anytime soon?

Updated Oct. 10

NOL (Neptune Orient Line)/APL announces they no longer want to buy Hapag-Lloyd


In my blog of Sept. 30, I stated that the owner of Hapag-Lloyd probably had wished they sold it last summer.

Appears John Fredricksen,a major shareholder of TUI (the parent company) had these exact thoughts.

He reportedly told Die Welt, a German publication, that he doubts a good price will be fetched for Hapag-Lloyd in the current economic environment.

click here for more from American Shipper.

Ocean Carriers Reducing Capacity

Five Ocean Carriers are joining together in a Vessel Sharing Agreement which will reduce the capacity between Asia and Australia.

As reported in the Journal of Commerce

"(This) cooperation will result in a net capacity reduction equivalent to 800 TEUs per week, or 3.2 percent of total trade capacity. Significant cost increases and poor freight rates both south- and northbound have made this step necessary."

Click here for complete article.

Evergreen will be joining the already existing VSA as report in the Hamburg-Sued press release.

"Hamburg, 1 October 2008. APL, Hamburg Süd, Hapag-Lloyd and Hyundai
Merchant Marine have decided to team up with Evergreen in the trade
between North East Asia and Australia. With this cooperation the four
AAS partners (Asia Australia Services) together with Evergreen will
jointly provide one of the most comprehensive service networks in the
trade with two fixed-day weekly service loops with the following
ports of call:

Northern Loop: Yokohama - Osaka - Pusan - Qingdao - Shanghai - Ningbo
- Melbourne - Sydney - Brisbane - Yokohama
Southern Loop: Kaohsiung - Yantian - Hong Kong - Melbourne - Sydney -
Brisbane - Kaohsiung"

Expect to see more of this type of rationalization in all trades as business slows.

Ocean Shipping Market Downturn... duh!

Maybe I am just too old. Someone is SHOCKED that the shipping industry is seeing a dramatic downturn. SHOCKED I tell you.

I remember when I worked for a carrier, there was a proposal to do a big marketing campaign. After all, the guys on Madison Ave. know advertising increases business.

I laughed, and reminding folks that we were in the shipping business. We didn't make the cargo move. All we could do was try to be in the right position when trade patterns changed.

Now I don't want to pick on this guy at APL, but if he knows how to push back market forces, maybe he can help out some of those folks on Wall Street.

This from the article in American Shipper, 24 Sept. (click here for complete article)

"A senior executive of APL has called on individual container lines to take decisive action to reverse the current market downturn.

Dan Ryan, APL’s Greater China president, speaking at the second Containerization and Liner Shipping China conference in Tianjin, said that a negative scenario of financial market turmoil, low consumer confidence as well as rising inflation and commodity prices, compounded by historically high fuel prices, requires lines’ urgent attention.

Suggested solutions included carriers moderating growth aspirations, returning excess tonnage to the charter market, rationalizing and even suspending some services, and having stronger resolve to pass along bunker costs to customers.

“If we fail to take action, the industry could see a more significant downturn than we have seen in many years,” he said."

Now, some of what he says is valid. Individual carriers can reduce supply. But the days of shipping cartels are fast disappearing, so carriers doing a lot collectively will be a problem.

And that bit about returning excess tonnage to the charter market? What then? You just gave someone cheaper ships to go after your cargo.

Each carrier must make these decisions on their own, and may the best one survive.

I will put in my 2 cents.

The carriers can slow down their vessels, thereby reducing bunker consumption. Assuming they wish to maintain the same frequency, this would also require additional ships, which would absorb some of the excess capacity.

They can use this time to put their ships in dry-dock for maintenance.

They can take out piracy insurance and start sailing past Somalia.
(this is a joke)

Anyway, this will be the shake out time in the industry.

As I use to say "it's kinda like K-Mart complaining about Wal-Mart".

Oops. I am old.