FMG sued for $130m over cancelled ship charter

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Such is the current state of affairs in the shipping industry whereby Charterers are basically just refusing to honor the contracts they signed earlier due to market movements.

 

Thursday, 18 December 2008

Fortescue Metals Group is being sued for $130 million by Splendour Special Maritime Enterprise, which claims the mining company cancelled a five-year ship charter. Fortescue refused to accept delivery of the Anangel Splendour earlier this month, Splendour said in a December 11 US District Court, Southern District of New York filing. The East Perth-based miner agreed on July 4 to pay $77,500 a day for the ship, according to the filing.
Armada (Singapore) Pte has also begun legal action against Fortescue for cancelling a shipment. The miner earlier this month said that it wanted to change contracts so that customers arrange more of their own transportation because of a plunge in shipping rates.
“Fortescue took prudent and decisive action to exercise its rights under its shipping contracts,” spokesman Paul Downie said today. “Any disputes are being referred to arbitration in London as per the terms of the contracts.”
The miner is conferring with its British lawyers with the aim of resolving disputes via arbitration, Downie said. Splendour’s New York law suit was “expressly filed without prejudice to the right of London arbitration.”
Armada is seeking $2.5 million from Fortescue, according to a December 4 US District Court, Southern District of New York filing. The miner has failed to deliver a cargo promised for the fourth quarter of year, the shipping line said.
Fortescue said on December 16 it was reviewing the legal status of shipping contracts that have been suspended or delayed.
Bulk-shipping rates have tumbled this year because of waning demand for shipments of iron ore to China, the biggest customer for bulk-shipping lines. The Baltic Dry Index, a measure of commodity-shipping costs, has fallen 93 per cent from a May 20 record.
As adapted from Bloomberg