Too many new, big ships

CargonewsAsia.com has a very good article, or perhaps it's a commentary, stating the container carriers were just playing "follow the leader" when deciding to order new, much larger ships.

A disastrous game of follow-the-leader has pitched the container shipping business into a deep hole, says Sea Freight Correspondent Paul Richardson

Right now, container shipping is surrounded by doom and gloom and the chilling thought that as winter in the northern hemisphere approaches, there is little in the business to encourage even the most optimistic of optimists.
The whole idea of a market recovery underway seems as far from the truth now as it was six months ago, with a belief in shipping circles that the downturn still has several years to run.
"There is no doubt that the industry is in a mess," was a comment made over lunch by a prominent shipping executive in a plush London hotel last week. It seemed an understatement, but the executive wasn't finished. "We are like lemmings in this business, all intent in rushing headlong into a drowning sea."

I can't help but wonder, why was the lunch in a plush hotel? Shouldn't these guys be eating at the local pub?

Apparently, they still don't "get it".

click here for complete article

Wake-up call for CMA CGM

I guess CMA CGM has finally figured out things aren't getting better any time soon.

Pity is, they only figured this out when they have almost run out of cash.

Now, they will ask creditors for a moratorium on debt, and consider canceling and/or delaying ship orders. They better do more than just consider.

Note to the Management of CMA CGM -
Wake up! If you don't cancel the ship orders, start cutting costs like crazy, you will be filing for bankruptcy reorganization.

From the Journal of Commerce

Carrier unable to meet payments on $5 billion debt

CMA CGM reached agreement to establish a committee of French, European and international banks that will help it restructure its troubled balance sheet, the company said Tuesday.

The French carrier, the world’s third-largest container line by capacity, met with its creditors in Paris on Sept. 25 to ask for a moratorium on its debt. The group of banks, which includes major financial institutions from Asia and the Republic of Korea, discussed measures that CMA CGM said will ensure its “continuing development.”

The shipping line, which is owned by Jacques Saade and his family, said the bank committee will propose measures to resolve the carrier’s short and medium term financing requirements and strengthen its capital structure.
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The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012 and accumulated a debt of $5 billion on which it is no longer able to meet payments, according to the French journalists’ Web site econostrum.info, which said CMA CGM is asking its creditors to freeze the repayments for one year.

As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of 1,024 million 20-foot equivalent units.

click here for link

Containership order changed to bulkers

Lloyd's List has a long article regarding the delay of newbuildings.

SOUTH Korean shipbuilder Hanjin Heavy Industries has apparently delayed an order for eight super post-panamax boxships on its own initiative, in an attempt to save the $1.3bn deal from the risk of cancellation.

Initially, the eight 12,800 teu ships ordered in 2007 by German owner NSC and Lloyd Fonds were scheduled for completion between 2010 and the end of 2011. Hanjin Heavy’s website now shows delivery dates of between 2010 and 2014.

What caught my eye was this comment about an order change.

However, Hanjin confirmed that Belgian shipowner Delphis has converted an order for four 3,400 teu vessels into three capesize bulkers.

Looks as if Delphis is betting the capesize bulker market will recover before the containership market.

click here for link to Lloyd's List article

What percentage of new dry bulk ships will be cancelled?

I think the figure will come close to 50%, although some say 10%, others say 30%

DNV has forecast that 30% of bulk carrier and container orders, and 10% of tanker newbuldings will not be built.

Apparently the Chinese are intent on building these ships, even if they have to finance their sale to new owners. Unless the world wide economy really picks up, this could spell trouble for the entire industry. It would mean continued excess capacity, keeping rates down.

This from Lloyds List

Shipping executives who have recently visited yards in China, where half the world’s bulk carriers are on order, reported that yards were keen to build ships, and open to requests for delivery deferrals, also offering to renegotiate prices based on any cost savings.