Hamburg Süd to lay up ships

Hamburg Sud will make efforts to reduce costs by laying up ships, cutting work hours of German staff, and attempting to renegotiate contracts with vendors.

They are realistic enough not to mention increasing rates, as the idiots in the TSA keep harping on. Of course it's true it would be nice if the rates went up enough to cover costs. Talk to the airlines about that problem.

The lowest cost operator will be the winner!

This from American Shipper

Hamburg Süd said in the first quarter "average revenues have fallen around 20 percent since the peaks reached in mid-2008. This is due not only to falling bunker surcharges," the company said in a statement Monday. "In some trade lanes freight rates are being quoted which do not even guarantee full coverage of the variables, not to mention making a contribution to fixed costs. The volume- and rate- related drops in revenue are only partly being offset by lower bunker and charter costs."

Hamburg Süd Group said liner volume in 2008 was up 25 percent in
2008 to 2.7 million TEUs. Results also included those of its Brazilian sister company Aliança Navegaçao é Logistica Ltda., the tramp operations of Rudolf A. Oetker and Furness Withy Chartering

The company noted turnover grew 24 percent from 3.6 billion euros in 2007 to just shy of 4.5 billion euros in 2008, It said about 15 percent of that was due to organic growth and 9 percent to the acquisition of Costa Container Lines in late 2007.

To counter a substantial decline in cargo volumes, Hamburg Süd said it has laid up ships and streamlined services

Armada files Chapter 15

Another bulk carrier has been hit by the downturn in the market. International shipping companies are really taking a beating. The bulk carriers are the first to be hit, but before long we will see other types of carriers in the same situation.

Armada, a Singapore based carrier filed for Chapter 15. I had never heard of Chapter 15 until recently. Apparently it allows foreign companies to reorganize outside of the U.S., and protects them from U.S. creditors.

Anyway, what is really interesting about this Armada problem, is they made money in 2008, but hit financial problems due to freight futures (FFA's).

The filing said the carrier's losses from derivatives would hit $375 million this year due to the bottoming out of charter rates. The company is the latest to be impacted by the drop in freight and charter rates for bulk cargo transportation. The benchmark index for the sector, the Baltic Dry Index, plummeted 92 percent from a record high in the summer to a record low in December as demand for raw materials dwindled in North America, Europe and Asia.
Armada actually turned a net profit of $130 million in 2008, according to the filing, but admitted losses on future freight contracts will be steep if rates continue to stay low, as analysts predict they will through at least the first half of 2009.

click here for complete article in American Shipper

Know your customer

Last month I wrote about the need to be sure that a shipper does not pay a broker, and get left holding the bag for freight payment.

On the flip side of the coin is the need for freight brokers to be sure their customers are paying their bills in a timely manner. The American Shipper has an article outlining this problem.

In a follow-up interview with American Shipper, Clark described how Cargo-Master made a deal with the chief financial officer of a customer that owed about $400,000 in back payments. Under the new terms, the customer agreed to pay $25,000 per week of the outstanding debt and pay on time for booked freight going forward. After a couple of weeks the payments dropped to $12,000 per week and Cargo-Master decided to cut off the customer.

It's always hard to turn down a customer. Especially if you are in sales. But, it's a necessary evil, especially in today's environment.

Just sittin' around, waitin' for some cargo

American Shipper article Idle ship capacity thought to be at 150,000-TEU level and growing

Here is the AXS-Alphaliner TOP 100 - existing fleet and orderbook (ships on order) report

What is amazing is the number of ships on order. I expect most of these will be cancelled or delayed.

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 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.

U.S. Customs - 10 + 2

Updated October 30

No starting date as per JOC article

WASHINGTON -- Senior officials at Customs and Border Protection now are declining to predict when the agency's new security filing rule, known as 10+2, will be published.

I kept seeing reference to 10 + 2, but did not pay much attention until I got a notice from the Customs Broker here in Wichita, Kansas, F.H. Kaysing.


"Essential there are 10 data elements which must be filed with U.S. Customs (or now called Customs and Border Protection) 2 days before a shipment departs origin.


The Customs and Border Protection (CBP) will make their decision on the final ruling of 10 + 2. Since this change will be happening, the opportunities and challenges the industry will be faced with need to be addressed immediately. The Customs House Broker will play a leadership role and help to define how to position and implement 10 + 2.

The ruling will require importers to ensure the filing of 10 additional data elements electronically at least 24 hours before the lading of ocean containers at the port of exit. The 10 data elements are known as the 10 + 2 Rule, or more commonly, the Import Security Filing (ISF). The information may be sent via ABI or AMS, and the Customs Broker will gather the information and transmit it on behalf of the Importer via ABI. The 10 required data elements are:


· Manufacturer name and address

· Seller name and address

· Buyer name and address

· Ship to name and address

· Container stuffing location

· Consolidator name and address

· Importer of record number

· Consignee number

· Country of origin of good

· Commodity Harmonized Tariff Schedule (HTS) number


CBP will be requiring the manufacturer name, address and country of origin be linked to each of the commodity HTSUS numbers. This change will most likely impact how suppliers format their commercial invoices.


The Customs Broker will play a large role in getting the security filings completed. Customs Brokers often have close working relationships with freight forwarders and this will aid in accessing the necessary data. It is the Broker’s duty to keep current with changes and help with CBP’s rulings and requirements."


A major concern with this new ruling is the penalty that will be issues by improper filings. The current ruling calls for setting the penalty at the value of the goods. The penalty size has Importers concerned and is hoping CBP will provide some sort of relief. CBP is serious about the penalty and is reiterating how important the ISF will be to this country."

The date of implementation has not yet been announced. American Shipper mentions Customs is looking for recruits to test the system.

Job Opportunities at IRISL (Iran Shipping)

After reading an article in American Shipper how the U.S. Government has determined the Iranian Shipping Company and/or it's subsidiaries are shipping things to Iran (how many government agents does it take...), I decided to check out the web-site.

There's not much out of the ordinary. They have container and break-bulk ships, they actually have a woman as one of the top managers. They had a box on the web-site flashing "job opportunities" which I decided to click on. You know, I'm bored.

Well, as I don't speak or read Farsi, I guess I won't ever know what jobs they have available. But, I just like looking at the symbols.

I remember watching someone write in Farsi - they write right to left. I remember thinking it would be a good language if one were left handed.

This posting will probably get me on some sort of list at the FBI, or CIA, or office of Home Security, or whatever.

Proposed new West Coast Mexican Port

There was an interesting article in the American Shipper last week about a new port planned for Punta Colonet on the Pacific Coast of Mexico. This could be a really big deal considering the costs of discharging containers in the U.S. with Union Labor is probably 3 -5 times more than what can be done in Mexico, not to mention the new restrictions being imposed on the carriers with air quality emissions etc.

The article talks mainly about how it will compete with the Southern California ports as of course most of the cargo discharged in Southern California does not stay there. The big sticking point is getting the rail connections from Mexico to other points in the U.S.


"Regardless of who wins the contracts, any potential bidder will have to negotiate with U.S. rail giants Union Pacific or BNSF, which control the mainline tracks running through the U.S. Southwest. UP had originally been a potential bidder, but pulled out of a proposed partnership with Hutchison last May. On breaking the Hutchison partnership, UP indicated it was still open to bidding with another partner on the Colonet project. U.S. West Coast ports handle more than 60 percent of the Asia-to-Atlantic Coast cargo, with the all-water route through the Panama Canal capturing another 38 percent. Last year, the Canadian port of Prince Rupert also began operations, offering a direct rail connection for cargo from the Canadian Pacific Coast to Chicago in about 100 hours. In addition, the Panama Canal, set to open a new set of larger locks in 2014, expects to capture up to half of the Asia-to-Atlantic Coast traffic by 2025. "

This last comment got me to thinking. Would it be possible for Mexico to build a railroad across THEIR country, to compete with the Panama Canal?

I wonder if "Field of Dreams" was translated into Spanish.