Wednesday, February 18, 2009
Korean shipyards refuse to cancel or postpone Zim orders
Wednesday, 18 February 2009
The timing of the Zim shipping company's orders of new volume may be unfortunate. That is, evidently, too bad. "South Korean shipyards are refusing to bow to pressure from big shipping companies to cancel or reduce prices," the British maritime transport news portal Lloyd's List reported last Friday, "and are only very reluctantly agreeing to postpone some deliveries."
That report was based on a South Korean source, following weeks of hectic negotiations between the shipyards (apparently Hyundai and Samsung) and shipping company owners.
Early last week the Israel Corporation reported changes in the strategic plans of its subsidiary, Zim Integrated Shipping Services, due to the company's financial situation. Those changes have resulted in negotiations with the shipyards for the cancellation or delayed delivery of new ships, and the rescheduling of payments.
In a recent newspaper interview, Israel Corp. controlling shareholder Idan Ofer said the company's acquisitions for 2010 will probably be postponed by two years. Even so, the industry source quoted by Lloyd's specifically stated that not all requests for postponements will be accepted, "despite public statements from companies such as Israel Corp." That source also noted that the shipyards are prepared to postpone the delivery of some ships by a year at most, and to reschedule payments, but not for all customers. Another source said some owners were finding it hard to arrange meetings to even begin negotiating changes to their orders.
Most cancellations focus on orders for the largest container ships, which can carry up to 12,000 TEU (20-foot long shipping containers) and cost over $170 million. Zim has accumulated orders for 41 new ships, with a total capacity of 290,000 TEU.
Zim's plans for its fleet over the next 4 years include 23 new ships worth a total of $3.2 billion. Nine of these ships are due for delivery in 2009, at a combined cost of $1.16 billion, with half the cost of each ship due when it is delivered.
Zim officials have announced negotiations with banks for loans totaling $1.35 billion to cover the cost of the new ships, prompting Israel credit security rating company Maalot S&P to lower the rating on Zim's bonds one level, to -AA. Maalot analysts also predicted that the Israel Corp. will have to provide its subsidiary with additional support in 2009, beyond the $150 million mentioned in August 2008, when Israel Corp. gave Zim an $246 million cash infusion.
Local shipping industry sources say Zim incurred losses of some $200 million in 2008, due to the financial crisis and the collapse of marine transportation prices. The company, which has debts totaling $1.8 billion, has announced a series of steps aimed at coping with this situation, including the return of leased ships, fewer trips on certain routes, the temporary decommissioning of 20 ships (20% of the company's shipping fleet), 100 layoffs (almost 15% of the company's 700 employees), and a 10% cut in executives' salaries.
Zim's belt-tightening measures also include a temporary cutback on its Asia-U.S. route, following a decline in demand during the winter months. Instead of daily service from Asia to Tampa, Florida, two ships currently on that route will travel between Kingston, Jamaica, and three ports in Florida and Texas. Traffic will be increased on one of Zim's other routes - from Pusan, Korea, to the U.S., via Osaka and Yokohama, Japan.
In the third quarter of 2008, Zim lost $61 million on revenues of $1.2 billion, down from $18 million in profits on $1.1 billion in revenues in the third quarter of 2007.
Zim plans to anchor 10 ships in the Philippine port of Davao. Three of Zim's ships are already laid up in Malalag Bay, near Davao, along with 17 other ships from other companies, and there are no more berths there. The ships are expected to spend up to six months at anchor, by which time the world trade picture should be clearer.
The Philippine port authorities charge $91 per day for small container ships and $104 per day for the huge ships.
Source: Haaretz
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