Tuesday, March 31, 2009
North American waters set to become largest emissions control area
Rajesh Joshi - Tuesday 31 March 2009
US ratified Marpol Annex VI last year, which made the IMO statute the law of the land. pic: AP
NORTH America’s coastal waters are poised to become the world’s biggest ‘Emissions Control Area’.
If approved by the International Maritime Organisation, the bold new plan would require all ships engaged in international trades that either call at ports or transit the designated zone to use very low sulphur fuel oil.
The joint proposal put forward to the IMO by the US and Canada seeks to create a consolidated ECA stretching 200 nautical miles off the coast of either nation.
Establishment of such a consolidated ECA would automatically render state-level pollution controls, such as the 24-mile regime California sought to introduce last year, irrelevant.
“This is huge,” said Dennis Bryant, US maritime regulatory consultant. “This might spark interest from Mexico to join in. Only if the South American bloc were to come up with its own ECA proposal, we might see another ECA of comparable size.
Otherwise, this would be the biggest ECA in the world, by a distance.”
The US ratified Marpol Annex VI last year, which made the IMO statute the law of the land.
A formal US application to designate an ECA was widely expected, with Mr Bryant himself making that prediction at last week’s Green Ship conference organised by Lloyd’s List in Germany.
However, the expectation was that parts of the country, especially California, would be put forth as intended ECAs.
The fact that all seaboards in not just the US but also Canada have emerged as the ECA is impressive, Mr Bryant said.
Adding Canada to the mix is consistent with the IMO’s preference for a more regional rather than national approach to ECAs.
The US-Canadian proposal aims at reducing sulphur in fuel by 98%, particulate matter emissions by 85%, and nitrogen oxide emissions by 80% from the current global requirements.
To achieve these reductions, ships must use fuel with no more than 1,000 parts per million sulphur, or 0.1% beginning in 2015, and new ships must use advanced emission control technologies beginning in 2016.
The proposal does not extend to the US Pacific territories, the western unpopulated Hawaiian Islands, the US territories of Puerto Rico and the US Virgin Islands, the Aleutian Islands, Western Alaska and the Canadian Arctic.
The arrival of the consolidated North American ECA would add to the existing ECAs in Europe, in the Baltic and the North Sea.
These ECAs do not have as wide a reach as the 200-mile reach of the North American ECA.
The US-Canadian proposal has chosen to go with the maximum 200-mile limit because “ship pollution travels great distances, [and] much of the inland population is also affected by ship emissions and will benefit from the cleaner air made possible by ECA fuel and engine controls … for example, pollution from ships travels as far as Dallas, Texas”.
Mr Bryant said a possible complaint on this score is that since prevailing winds in the US blow from West to East, requiring a ship, engaged in an international voyage, say, 190 miles east of New York or Boston to burn cleaner fuel, would be on over-reach.
However, Mr Bryant does not believe many international routes that do not call in North America exist in that corridor east of the US and Canada, so any such complainants might be seen as quibblers.
As established in Marpol Annex VI, an ECA designation is intended to prevent and reduce the adverse impacts on human health and the environment in areas that can demonstrate a need to prevent, reduce, and control emissions of NOX, SOX, and PM.
The US-Canadian proposal goes to great lengths to provide demographic statistics in support of the stated need for a giant North American ECA. Some 93,000 ships call at 100 ports in the two nations, and making them clean up their fuels is paramount in preserving the health of the North American population, the document states.
Somali pirates arrested after failed attack on German tanker
Hamburg: European Union and NATO naval forces teamed up to arrest seven suspected pirates after they attacked a German naval tanker and will decide later today where to send them for trial, Bloomberg writes, quoting an EU statement.
The seven suspects yesterday attacked the FGS Spessart, part of a North Atlantic Treaty Organization fleet, about 85 miles north of the Somali port of Bosaso on the Gulf of Aden, the EU’s Maritime Security Centre said on its Web site. Helicopters from German, Dutch and U.S. warships were all involved in repulsing the attack.
Greek marines from the Psara, the command ship for the EU’s anti-piracy fleet, detained the pirates who were later transferred to German frigate FGS Rheinland Pfalz.
The French and Dutch have brought Somali pirates to Europe to face trial, while German, British and U.S. naval forces have turned them over to Kenya’s justice system.
Pirates attacked 165 ships last year, and seized 43 of them for ransom. That spurred European nations and the U.S. to send naval ships to the region. About 20 warships from 15 countries are patrolling the gulf between Yemen and Somalia, the world’s most dangerous waters for pirate attacks on commercial vessels. Seven ships had been seized so far this year. [31/03/09]
Monday, March 30, 2009
The Daily Fixtures Report - 30/03/2009
BDI 1646 DOWN 32
BCI 2078 DOWN 14
BPI 1434 DOWN 58
BSI 1313 DOWN 25
BHSI 696 DOWN 11
TIMECHARTER
'Cape Wisteria' 1997 172846 dwt dely Cape Passero 7/11 Apr trip via Brazil
redel Continent $17000 daily - Swiss Marine -
'Great Luck' 1998 71399 dwt dely Dalian 1/5 Apr trip via Indonesia redel
Philippines $7000 daily - Golden Ocean
'C.Iris' 1996 71393 dwt dely Quanzhou 3/5 Apr trip via EC South America redel
Singapore-Japan rge approx $10500 dail - Louis Dreyfus
'APJ Mahalaxmi' 1985 67359 dwt dely Surabaya ppt trip via WC India redel China
$8000 daily - Uniwell
'Oriental Sun' 1989 65708 dwt dely Haili 31 Mar/3 Apr trip via NoPac & Iraq
redel PMO $12500 daily - Golden Ocean
'Poseidon SW' 2008 55688 dwt dely Magdalla early April trip redel China approx
$13000 daily - Peraco
'Navios Mercator' 2002 53553 dwt dely USGulf mid April trip redel Morocco
$26000 daily - BCM
'Sanko Glory' 2005 52980 dwt dely Canakalle early April trip redel North
Brazil $9500 daily - cnr
'Anastasia S' 2004 52808 dwt dely passing Cape Town early April trip via East
Coast South America and PG redel PMO $17000 daily - cnr
'Oriental' 1997 43917 dwt dely Gibraltar 2/6 April trip via north Spain redel
West Africa $15700 daily - Norden
'Nena J' 1995 43230 dwt dely USGulf spot trip redel Continent $19500 - TST
'Maru D' 1978 34825 dwt dely Canakkale 4/10 April trip redel Nigeria $12000
daily - Nom (UK) Ltd
PERIOD
'SD Progess' 1989 65708 dwt dely Inchon 5/15 Apr 6/8 months trading redel
worldwide $7500 daily - Great Pacific
'Qatar Spirit' 2009 57000 dwt dely ex Yard Shanghai spot 4/7 months trading
redel worldwide approx $11500 daily - Progress Bulkcarriers
ORE
'Noble TBN' 160000/10 Tubarao/Qingdao 18/27 Apr $16.00 fio scale/CQD - Beitai
Steel
'Great Mirsinidi' 1993 / -
$16.00>
GRAIN
'Cemtex Venture' Glencore relet 2006 60000/10 soyabeans Brazil/Continent ppt
$18.00 fio 10 daps - Windrose
Chinese Getting a Bargain on Iron
Monday, 30 March 2009
According to Shan Shanghua, general secretary of the Chinese Iron and Steel Association (CISA), some mining companies reached an agreement with Chinese steel producers to provide a discount of 40% over the prices of iron according to the 2008 contract. The new iron ore price for 2009 remains under negotiation. Mr. Shanghua refused to declare which big mining company accepted the deal; however other CISA source declared that Vale do Rio Doce (RIO) accepted it. The deal is retroactive to January 2009.
We believe the announcement is a good indication of the iron ore definite price that is under negotiation. We continue to expect a price reduction of iron ore for BHP Billiton (BHP) and Rio Tinto (RTP) of around 40% for 2009 and for Vale (RIO) of around 30%, as Vale had a lower price increase in 2008.
Considering that level of price correction, we see no reason to change our current Hold recommendation on Vale.
Source: Zacks
World Trade Volume Will Fall 9% in 2009
Monday, 30 March 2009
2009 proves to be a tough year so far for the shipping industry and especially the dry bulk shippers as the world recession hammered the trade of commodities and exporting goods from Asia and the rest of developing world. At the same time, consumption has been reduced at the developed nations, something that leads to less imports of goods and products. According to the World Trade Organization world merchandise trade is likely to fall some 9% in volume terms in 2009 with developed economy exports falling by some 10% on average and developing country exports shrinking by 2—3%. These are bad news for the world’s shippers, as international shipping transports about 90% of world trade by volume. Without shipping, intercontinental trade, the bulk transport of raw materials and the import/export of affordable food and manufactured goods would simply not be possible, but at the same time the fall of cargoes plagues the industry.
WTO analysts underline that a normal pattern for a recession, where trade falls, remains weak for a time and then resumes its upward trajectory and begins to return to its previous trend. If that scenario is correct, that means we are in the heart of recession, but the future looks more bright.
Trade prospects for 2009 are heavily conditioned by the financial crisis that began almost two years ago in the United States. The crisis intensified dramatically following the collapse of the Wall Street investment bank Lehman Brothers in September of last year, and the government led the rescue of a number of financial institutions in the United States and elsewhere. Turmoil in the financial sector and acute credit shortages spread inexorably to the real sector. Declining asset prices, faltering demand and falling production translated into dramatically reduced and in some cases negative production and trade growth in many countries. Trade has also been affected adversely by a sharp shrinkage in credit to finance imports and exports.
Since the recession began to take hold in the fourth quarter of 2008 there has been little cause for optimism in the outlook for trade in 2009. The financial crisis has disrupted the normal functioning of the banking system and deprived firms and individuals of much-needed credit. Falling stock markets and housing prices have also administered negative shocks to wealth in the United States and elsewhere, making households unwilling to purchase durable goods such as automobiles while they attempt to rebuild their savings. Falling commodity prices, while a boon to consumers in importing countries, have also deprived oil-producing countries of export revenues.
Not even China, with its dynamic economy, can insulate itself from global downturn when most of its main trading partners are in recession. China’s exports to its top six trading partners (treating the EU as a single partner) represented 70% of the country’s total exports in 2007. All of these trading partners are currently experiencing economic contraction or slowdown and are likely to exhibit weak import demand for some time.
Available monthly data for most major traders show large drops in merchandise exports and imports through the first two months of 2009. An exception to this pattern of decline in trade flows is discernible for certain economies in Asia, where positive monthly import growth numbers were recorded for China (17 per cent) and also for Singapore, Chinese Taipei and Vietnam. While this is only a single month of data, and should therefore be interpreted cautiously, it could be evidence of slowing decline and perhaps a “bottoming out” of negative trade growth trends. Future trade growth will, of course, depend on what happens to demand elsewhere in the world economy.
Moreover, the question must be asked as to how far trade could conceivably fall in the months ahead. As an example, consider China’s exports. In February these were down 26% compared with the same month in the previous year and 28% compared with January. If one were to extrapolate this downturn, China’s exports would be approaching zero within ten months to a year. This is obviously a highly implausible scenario and emphasizes the reality that such steep declines as those we have witnessed recently will not persist.
Reasons for trade contraction
Trade growth data show declines that are larger than in past slow-downs. A number of factors may explain this.
One is that the fall-off in demand is more widespread than in the past, as all regions of the world economy are slowing at once.
A second reason for the magnitude of recent declines relates to the increasing presence of global supply chains in total trade. Trade contraction or expansion is no longer simply a question of changes in trade flows between a producing country and a consuming country — goods cross many frontiers during the production process and components in the final product are counted every time they cross a frontier. The only way of avoiding this effect — whose aggregate magnitude can only be guessed at on account of the absence of systematic information — would be to measure trade transactions on the basis of the value added at each stage of the production process. Since value-added, or the return to factors of production, is the real measure of income in the economy, and trade is a gross flow rather than a measure of income, it follows from the reasoning above that strong increases or decreases in trade flow numbers should not be interpreted as an accurate guide to what is actually happening to incomes and employment. A third element in current conditions that is likely to contribute to the contraction of trade is a shortage of trade finance. This has clearly been a problem and it is receiving particular attention from international institutions and governments. The WTO has been playing a role as honest broker by bringing together the key players to work on ensuring the availability and affordability of trade finance.
A fourth factor that could contribute to trade contraction is protection. Any rises in protection will threaten the prospects for recovery and prolong the downturn. The risk of aggravated protectionism is rightly a source of concern going forward.
Gas tanker hijacked by Somali pirates released
Monday, 30 March 2009
A gas tanker that was hijacked by Somali pirates off the Horn of Africa in January was released Saturday with all 13 crew members unharmed, a company that manages the vessel said. The Longchamp was loaded with liquefied petroleum gas when it was hijacked in the Gulf of Aden on Jan. 29. It is registered in the Bahamas and managed by Hamburg-based Bernhard Schulte Shipmanagement.
The company said the ship was released at about 0600 GMT (2 a.m. EDT) on Saturday. It had 12 Filipino crew members and an Indonesian second engineer on board.
Bernhard Schulte spokesman Cor Radings declined to comment on how the release was achieved.
A statement from the company said it "would like to thank the many parties, agencies and professionals involved for their outstanding efforts in achieving the safe release of the crew and vessel."
Radings declined to elaborate, and would not say what happened to the pirates.
The ship was en route from Norway to Vietnam when it was hijacked, and the company said it would now head toward its original destination.
The management company said that it was taken down Somalia's east coast after the hijacking.
Pirate attacks off the Somali coastline hit unprecedented levels in 2008, when pirates made 111 attacks and seized 42 vessels, mostly in the Gulf of Aden — one of the world's busiest shipping lanes.
Seven ships have been seized so far this year, although there were roughly 10 times as many attacks in January and February 2009 as there were over the same period last year. There have been almost daily attacks in March.
Somalia has not had a functioning government since clan-based militias overthrew a socialist dictator in 1991 and then turned on each other.
Source: Associated Press
Dry bulk market still on the losing side
Monday, 30 March 2009
The dry bulk market seems to have lost its momentum during March, as evidenced by the fall from the highs of almost 2,300 points (the best level from the fall of 2008), to just 1,687 points last Friday. During the previous week, the Baltic Dry Index lost another 100 points and more, or a little less than 6% week on week. The main sectors affected were the capesizes and the smaller supramaxes, with the BCI (Baltic Capesize Index) losing more than 100 points or just under 5% on the week, while the BSI (Baltic Supramax Index) shed more than 200 points of just over 13% from the previous week.
What’s even more alarming at least for the short-term prospects of the market, is the fact that during the previous week, the global stock markets managed to gain ground. The only index of the shipping market that managed to edge off the downward pressures and end the week in a marginal rise of 1% was the Panamax Index, which though had led the fall in previous weeks.
Meanwhile, experts remained puzzled as to estimate the future course of the market. One voice mention hearing was the one of the head of Chinese shipping giant Cosco Group, Wei Jiafu, who said last week that the dry bulk market will recover by the second half of 2009.
In the sale and purchase markets, things are quite different. The fall of the freight market has depressed ship values, with increasingly more owners been prone to purchase vessels at quite attractive prices, compared to the previous months. As a result, purchase enquiries are abundant and most of them are for older tonnage, which poses less risks at these prices, given that it can always head for demolition leaving hefty profits to ship owners.
As we highlighted in previous top stories, the “war” that has broken out between the Bangladesh Environmental Lawyers Association (BELA) and the Bangladesh Ship Breakers Association (BSBA) may prove to be a serious issue, which may bring disruption to the recycling industry in Bangladesh. According to Weberseas’ latest weekly report “BELA came out with a court ruling last week ordering ship recycling yards that have not obtained environmental clearance to shut down within 2 weeks. This meant that all 36 such yards would need to shut down as none of them hold such clearances as these were not legal requirements in the past. BSBA have reacted and we understand that they have a 3 week period to appeal and industry experts believe a solution will be found. This, however, is an environmental issue that has to be addressed and may be a re-occurring problem”.
That said, ship demolition prices have remained stable, with the highest ones found in Bangladesh, followed by India, Pakistan and China. Weberseas said that the “demo sale of the week is that of the caper DURI (20,000 ldt) sold for what seems to be a very high price of US$ 335 per ldt and heading for Bangladesh. This competes with the prices that are being paid for tankers. We hope that the high prices paid of late in Bangladesh will not be challenged by buyers/end users taking advantage of the instability and uncertainty in the Bangladeshi re-cycling industry” said the broker.
Guangzhou shipyard merger called off
Hong Kong: China's Guangzhou Shipyard International Co said on Friday it will call off a proposed $445 million acquisition of a shipyard from its state-owned parent as its shares have slumped in the global financial crisis.
The company's board also approved dropping a planned rights issue, it said in a statement.
Guangzhou Shipyard, controlled by China State Shipbuilding Corp (CSSC), said in July it was the sole qualified bidder for Guangzhou Wenchong Shipbuilding Ltd, and would pay 3.04 billion yuan ($445 million) for the asset. It planned to fund the acquisition through a rights issue.
Its shares have fallen nearly 60 percent in the past year, underperforming a 28 percent drop on the index for major Chinese companies listed in Hong Kong. [30/03/09]
COSCO's Capt Wei receives CMA's Commodore Award
Stamford: Capt. Wei Jiafu was honoured this year by the Connecticut Maritime Association (CMA), receiving the Commodore Award. The CEO and President of China Ocean Shipping Company (COSCO) joined a long line of influential maritime industry leaders as Commodore. The Commodore Award selection is held annually by the members of the CMA Committee, on the basis of contribution the recipient has made to promote the shipping industry, the welfare of staff members, as well as the growth of international trade. More than 800 delegates from the United States and the world maritime community attended the ceremony in Stamford, Ct, where Capt. Wei was an enthusiastic and entertaining honouree. "It is a great honour", said Capt. Wei. For its part, CMA says that "with over 10 years of seafaring experience and as a well-experienced captain, Capt. Wei has a rich knowledge in international shipping management and operation". [30/03/09]
Chinese iron ore prices back to 2007 levels
Beijing: Iron ore miners have struck deals with Chinese steel mills to temporarily sell shipments at 40% discount to last year's term rates, aiming to secure volume even as the miners' biggest customer continues to demand a slash in prices. The arrangement lets mills pay 60% of last year's contract price from January 1, and settle the difference with the 2009-2010 term rate only after the benchmark price is set later this year, China Iron and Steel Association Secretary-General Shan Shanghua told Dow Jones Newswires. The official iron ore price negotiations continue for another month. However, the reported discount move effectively dials benchmark ore prices back to 2007 levels. "But the talks are not yet done," Shan said. "There will still be repayment of any outstanding amount when the rate is finalized and it doesn't mean they have accepted January 1 as the contract's official start date." The arrangement is a hint of what miners might be able to accept for a final term price, given its correlation to the spot market, analysts said. While Shan declined to elaborate on how far the world's top three miners - Companhia Vale do Rio Doce, Rio Tinto Plc and BHP Billiton Ltd - have each implemented it, or on the progress of the price talks, most analysts said the move is now widespread, and in some cases have been in place as early as January 1. Vale is understood to be hanging out for a better deal, based in parts on lower freight rates. "From what I know, almost everyone involved has begun to do this," said Hu Kai, a steel analyst with metals consultancy and trading firm Umetal.com. "In the past, all benchmark rates have been crafted from spot rates," Hu said. "Now they're already using 2007 prices. I think it's very likely the price will eventually be a 40% cut from last year."
The Chinese have consistently demanded the 2009-2010 term price be cut 30%-50% from last year's rate. [30/03/09]
Saturday, March 28, 2009
A deluge of new ships pours into a drowning industry
Saturday, 28 March 2009
LIKE unwelcome guests who will not leave, 453 container ships, 11% of global capacity, now float outside the harbours of Hong Kong, Singapore and other South-East Asian ports. They are unwanted by their hosts as well as their customers. In recent days China has quietly let it be known that it wants to rid its territorial waters of these nautical squatters. Only five years ago huge demand from China meant that all these ships, and more, were desperately needed. This had a dramatic impact first on shipping rates, and then on supply (see chart). Between the end of 2006 and July 2008, shipyards received enough commissions to double the world’s fleet. Now these new ships—more than 9,000 vessels—are taking to the water just as demand has collapsed. The world is awash with ships.
To see how the recent boom and bust has affected value, a Hong Kong broker cites a 150-tonne “Cape class” ship that sold in 2003 for $18.5m in the used market. Critical to the price was the prevailing charter rate, then $15,000 a day. By last summer this had risen to $175,000 a day, and an identical ship sold for $85m. Rates peaked shortly thereafter at $300,000. Today rates are back where they were in 2003. Rather than try to find a buyer for another identical ship, albeit one that needed repairs, the owner dumped it for $7m to be used as scrap.
Orders for new ships have, not surprisingly, collapsed and scrutiny has shifted from what can be bought to what can be cancelled: nothing, it turns out, without great effort. South Korea’s shipyards, the global leaders, have learnt from previous busts. They typically demand 20% up front, a further 60% during construction, and the final 20% payment upon delivery. Walk away and you lose a fortune.
These shipyards have good reason to play tough. Along with a loss of revenue, cancellations cause operational chaos. Worse still, orders are booked in dollars, but to cover local production costs shipyards buy forward currency contracts, transforming their obligations into won. The contracts are paid off in dollars by the buyers. But what if the buyer cancels? Analysts are warning that the resulting demand for dollars to unwind currency contracts, estimated at $10 billion-30 billion, will put further pressure on the won.
Buyers, meanwhile, have their own pressing problems. Martin Stopford, managing director of Clarkson Research, a maritime-research firm, estimates the backlog in shipyards at $526 billion. Some of this comes with first-class payment guarantees, but not all. That requires large amounts of credit, largely from banks which are hardly in a generous mood and are fully aware that their collateral, if the buyer stumbles, has just depreciated.
Given mutual interest in survival, yards and ship owners are no doubt discussing delays. These talks are typically kept quiet, but Cosco Singapore, a big shipbuilder, recently said that the construction of 30 bulk carriers had been deferred or cancelled. Steve Man, an analyst at HSBC, says this is the tip of the iceberg. He thinks more than half the deliveries for 2010 will be delayed—and shipyards will agree because the alternative is no work after 2011.
Weaker shipyards are already being weeded out. Two South Korean shipyards that started up in response to the boom have recently collapsed: SNC Shipbuilding defaulted on a key loan on March 17th, and C& Heavy Industry said on March 24th that a Malaysian buyer had emerged to take over its assets. Many new shipyards are thought to have closed in China without so much as a yelp.
Theoretically the fall in prices should trigger a contraction of supply, as older ships are scrapped and new orders are cancelled. In practice, however, shipyards usually complete ships that are under construction, even if the buyer walks, in the hope of selling them to someone else.
And shipbuilders have strong government support: in China they are beneficiaries of the $585 billion stimulus package, and domestic firms are being encouraged to pick up any orders cancelled by foreign buyers. Not to be outdone, India and Vietnam are subsidising the expansion of their own shipbuilding operations. More new vessels will merely widen the circle of losses, extending it from builders to shipping lines themselves, and back to even the strongest builders as competition intensifies. Rather than a bail-out, what the industry really needs is for some participants to sink.
Source: Economist
Owners balk at crew cost increases
Saturday, 28 March 2009
MANY members of the International Maritime Employers’ Committee (IMEC) used the organisations annual general meeting in London on Wednesday to express concerns that negotiations at the International Bargaining Forum could lead to increased crew costs. The AGM followed yesterday's Executive Committee meeting. An IMEC statement says: “The Annual General Meeting brought together a significant gathering of the IMEC membership, which is made up of over 130 maritime employer representatives from all over the world. The discussions during the meeting were wide ranging, covering a number of topics which included debate on the current financial crisis that is heavily affecting world shipping. This topic was of particular relevance given that the IBF will be meeting during this year to discuss the terms and conditions for seafarers sailing aboard members’ ships.”
IMEC says: “Many of the members voiced concerns that in the current financial climate, they would not be able to support discussions at the IBF that could lead to any increased costs in their sea-staff personnel budgets, indeed they were under severe pressure to substantially reduce these costs.”
The meeting was also updated on the status of the various training initiatives that are being undertaken, in particular the expansion of the IMEC Cadet programme in the Philippines. This programme is increasing during 2009 to allow for a further 50 Cadets to be taken on under full sponsorship at the University of Cebu and, for the first time, 150 Cadets at the Maritime Academy of Asia and the Pacific in a campus for IMEC’s sole use. The training programmes will be administered by IMEC’s dedicated Manila training office. Other key projects that IMEC members were updated on included the provision of free English language training in Novorossiysk and the provision of funding to convert ratings to officers to support the need for future manpower.
IMEC chairman Ian Sherwood said: “The entire maritime industry is facing enormous challenges as a result of the current world financial situation; it is important that we hear and understand the pressures facing every one of our members and ensure that our policies and aims are adjusted by consensus to take account of individual concerns. This I believe we have achieved very successfully during the course of our meetings.”
Source: Maritime Global Net
Five International Firms Advise on $6 Billion Sale of German Shipping Unit
Saturday, 28 March 2009
In the midst of last fall's economic collapse, it appears The Am Law Daily missed a pretty big deal--German tourism giant TUI AG's announcement that it would sell a majority stake in its Hamburg-based shipping unit Hapag-Lloyd to an investor group . The proposed deal was initially valued at roughly $3.3 billion, but the credit crisis threw a monkey wrench into the matter--TUI was forced to keep a 43.33 percent stake (rather than a 33.33 percent stake) in Hapag-Lloyd, the world's fifth-largest maritime transportation company.
TUI also agreed to provide additional credit facilities to prop up Hapag-Lloyd in order to finalize a sale earlier this week to a Hamburg-based consortium. The deal now is valued at $6 billion.
Five international firms--Freshfields Bruckhaus Deringer, Latham & Watkins, Milbank, Tweed, Hadley & McCloy, White & Case, and Wilmer Cutler Pickering Hale and Dorr--advised various parties on the transaction.
Götz Wiese, the managing partner of Latham's Hamburg office, led a team advising the Albert Ballin KG consortium on its acquisition of a 56.67 percent stake in Hapag-Lloyd. M&A partner Stefan Widder in Hamburg and finance partner Andreas Diem in Munich also served as outside counsel to the consortium.
"The volatility of the financial markets has impacted the maritime shipping industry, making this deal particularly challenging," said Wiese in a statement released through the firm. "In light of market conditions, we are pleased that our corporate and tax advice have contributed to the successful completion of this transaction."
The consortium includes the City of Hamburg and its HGV holding company, Hamburg-based HSH Nordbank, Hamburg-based private investment bank M.M. Warburg, and insurance companies Signal-Iduna and HanseMerkur. German shipping magnate Klaus-Michael Kühne--chairman of Swiss freight and logistics firm Kühne + Nagel International--is also part of the acquiring consortium.
Freshfields M&A partner Marius Berenbrok, based in Hamburg, advised the city's HGV holding company on the deal. HSH Nordbank was advised by Hamburg-based White & Case M&A partners Eberhard Meincke and Matthias Stupp and finance partner Kai-Michael Hingst. Frankfurt-based finance partner Thomas Ingenhoven from Milbank also advised HSH Nordbank.
TUI was advised by M&A partners Hans-Jörg Ziegenhain and Daniel Wiegand from the Munich office of German firm Hengeler Mueller. Roland Steinmeyer, chair of the German corporate practice at Wilmer in Berlin, also advised TUI along with M&A counsel Matthias Santelmann.
The sale will help TUI shore up its balance sheet. The Hannover-based company posted a 2008 net loss of $163 million on Wednesday.
Baker & McKenzie and Sullivan & Cromwell had advised Singapore-based shipping container company Neptune Orient Lines in a failed bid for Hapag-Lloyd last fall. With shipping companies increasingly at risk from hostile takeovers, perhaps they'll get another chance sometime soon.
Source: Am Law Daily
Friday, March 27, 2009
Syndicated loans grind to a halt
Michelle Wiese Bockmann - Friday 27 March 2009
SEVERE doubts have been raised about the global shipping industry’s ability to raise large amounts of capital, as shipping banks and owners declared that the syndicated loan market, a major source of funding, had “disappeared”.
There have been just four syndicated deals done so far in 2009, a fraction of the 268 deals completed in the whole of 2008, according to Fortis Bank.
In the first quarter of 2008, transactions worth $15.8bn were recorded, compared with $332m in the first quarter of 2009. For the whole of 2008, deals worth $70bn were concluded.
“The syndicated loan market has disappeared. There are just bilateral and club deals only,” said the bank’s energy, commodities and transportation division chief executive Harris Antoniou.
“Lending capacity is severely restricted on both sides of the Atlantic. This is going to create significant challenges going ahead,” he said.
Syndication activity was “dead right now” as banks were nationalised and suffered “funding gaps to the detriment of shipping’s prospects”, Mr Antoniou told the 3rd Capital Link International Shipping Forum in New York.
Fortis is one of the top five banks offering syndicated shipping loans. Its pessimistic assessment has major implications for the global newbuilding orderbook.
Owners need to raise between $350bn and $500bn to finance vessels ordered at yards in Asia and Europe and due for delivery by 2012, with reports that only half the money has been raised.
Capital markets are also “basically closed right now”, said Seanergy Maritime chief executive Dale Ploughman.
HSH Nordbank deputy global head of shipping Robin Das indicated that his bank’s overall balance sheet “will be cut substantially”.
The cost of finance has risen sharply this year, with spreads up to 300 basis points, from 50 bps-100 bps, the conference heard.
Sliding asset values, which had seen some bulk carrier types fall by as much as 70% over the past six months, meant banks were prepared to finance just 50% of a vessel’s value, down from 80% in 2008.
Even then, finance was only available if there were secure chartering contracts against the ship.
“Shipping bankers say they’re open for business in general settings, but when approached for loans, they indicate they are not lending to new customers and only support the core business needs of their best clients,” said one investment bank analyst.
In 2008, there was a dramatic drop in UK banks funding US syndicated shipping loans. UK banks financed 29% of the $23.3bn of shipping deals done in the US in 2007. This shrank to 10% of $8.2bn in deals done by 2008, as the credit crunch took hold.
“It’s now a very, very illiquid market,” said Daniel Rodgers, a partner with New York-based attorneys Watson, Farley & Williams.
Shipping finance is now looking to private equity as a new funding source. Although as many as 100 private equity companies had contacted banks recently, many investors were “bottom fishing”, the conference heard.
The private investors most likely to invest would be Greek-based shipping families, the conference heard.
Mr Antoniou said that although the vast majority of shipping lending was in US dollars, it was currently difficult to fund a loan book in US dollars
“Maybe we’ll start financing in euros, and see ships traded in euros,” he said
Piracy latest: two European tankers seized off Somalia
Brussels: Two European-owned tankers have been hijacked off the Somali coast, prompting an alert for other vessels to watch for a pick-up in pirate activity, AFP writes, quoting the EU's anti-piracy naval mission.
The Maritime Security Centre run by the EU naval force said that the 9,000-tonne Greek-owned, Panamanian-flagged M.V. Nipayia was seized on Wednesday with its crew of 19. A Greek merchant marine ministry spokesman said the chemical tanker's Russian captain and 18 Filipino crew members were in good health and that the boat's owner, Lotus Shipping, had begun negotiations with the pirates.
The incident was followed early on Thursday with the capture of the 23,000-tonne Norwegian-owned and Bahamian-registered M.V. Bow-Asir with an unspecified number of crew. Salhus Shipping, which owns the tanker, said in a statement from Norway that the crew numbered 27 members of different nationalities and that they had contacted the company after 16 to 18 pirates came aboard with automatic weapons.
"We have no reports of any injuries," said company director Per Hansen. "We are doing our utmost to ensure the safety of the crew, and have established communication lines with naval forces, insurance companies, flag state and charterer."
Meanwhile, authorities in the Seychelles said three sailors from the Indian Ocean archipelago had been held hostage by Somali pirates since their catamaran was hijacked in late February.
"Contact has been established with the kidnappers and discussions to secure the release of the hostages are ongoing. The objective of the negotiating team is for the safe return of all three hostages," Seychelles police chief Ernest Quatre said in a statement.
Ransom-hunting Somali pirates attacked more than 130 merchant ships in the region last year, an increase of more than 200% on 2007, according to the International Maritime Bureau.
The number and success rate of pirate attacks has declined slightly since the start of the year, because of unfavourable sea conditions and an increased foreign naval presence in the Gulf of Aden.
Greece, which is home to the biggest commercial fleet in the world, called on the European Union "to play a more active role" in cracking down on piracy after the latest two boats were captured.
Merchant Marine Minister Anastasis Papaligouras said the EU should "expand the rules of engagement and the area patrolled by the European naval force." He also called on shipping companies "to inform with total accuracy and in good time the competent services" about the movements of boats.
"The pirates are not the only ones with weapons, the international community and Greece have them as well," Papaligouras said. In order to "to protect the present and future of our shipping" all means of intervention would be exhausted," he added.
The rules of engagement of the European Atlanta flotilla charged with protecting shipping off Somalia meant it could use "all means including force".
The EU launched its first-ever naval operation in December with six warships and three surveillance planes to patrol pirate-infested seas in the Horn of Africa. The EU vessels are facing the daunting task of covering an area of around one million square kilometres. Norway, Japan, the United States, China, Russia and other countries also have naval forces also operating in the area. [27/03/09]
QGTC and Damen Shipyards sign shipbuilding mou
Doha: Qatar Gas Transport Company (Nakilat) yesterday signed a Memorandum of Understanding (MoU) for a joint venture with Damen Shipyards Group to construct high-value vessels, such as tugs, coastal patrol boats and luxury yachts at its Ras Laffan shipyard, writes the Peninsula On-Line.
The shipyard, expected to commence operation in early 2010, is expected to roll out roughly 15 vessels a year, ranging from commercial shipping vessels and offshore vessels to naval offerings and luxury yachts. The vessels will be made available to both local and international buyers.
QGTC md, Muhammad Ghannam said Nakilat’s main interest is in commercial vessels, such as tug boats and supply vessels for the offshore structures which are in high demand in Qatar and the region. [27/03/09]
15 Korean shipbuilders to face debt reworking programs
Seoul: Creditor banks announced yesterday they are to cease financial support for four builders and one shipyard and will put another 15 firms under debt rescheduling programs, writes the Korea Herald.
The decision is based on the lenders' credit evaluation of 74 small- and medium-sized construction firms and shipbuilders, the Financial Supervisory Service said.
The five that were rated as nonviable are Down Technology Group, Saerom Sungwon Industrial, Dongsan Construction, Kisan Construction and YS Heavy Industries. YS applied for court receivership during the evaluation.
The 13 costruction companies and two shipyards in line for creditor-led debt rescheduling are: Shindo Engineering & Construction, Taewang Construction, SC Hanbo E&C, Songchon E&C, Hankuk Construction, Hwasung Development, Youngdong Construction, Neul Pooleun Oscarville, Daewon Industrial Construction, Le Meilleur, Daea Construction, Jungdo, Saehan Construction, Seko Heavy Industries and TKS.
The number of companies subject to the second-round of restructuring has increased by four from the first round in January, which found two companies nonviable and put 14 others under debt rescheduling programs.
"The increase is due mainly to the deterioration of fourth-quarter sales, on which the evaluation was based," an FSS official told reporters. "Creditor banks have tried to be as objective as possible, bearing in mind criticism they were generous with the first round of evaluations," he said.
Among the 14 companies selected in the previous evaluation, two, Dongmoon Construction and Isu Construction, are currently under bank-led workout programs, while others are still undergoing creditors' examinations of their financial conditions.
"The examination of three shipbuilders that were chosen for restructuring in the first round - Daehan, Jinse and Nokbong - will not end until April because it takes a while to resolve problems related to production orders of the companies. Examination of the other companies will be finalized by the end of this month," said the FSS official.
About the imminent restructuring of maritime logistics industry, he said banks are working out guidelines to evaluate companies. "The evaluation process will begin in April," the official said. [27/03/09]
Hong Kong sends shipping delegation to Shanghai
Hong Kong: A 16-member shipping mission led by by Secretary for Transport and Housing, Ms Eva Hang, left yesterday for Shanghai, reports the Hong Kong Maritime Industry Council. Stated aims of the mission from Hong Kong SAR are to promote the comprehensive shipping services offered by Hong kong as a long-time international maritime centre, and to enhance development of the maritime industries of both cities.
"The State Council yesterday endorsed in principle that Shanghai should speed up its development into an international shipping hub," said Ms Cheng (see previous story). "i am pleased to lead Hong Kong's shipping industry experts to Shanghai at this opportune moment to share with the Shanghai shipping industry our experience as an international maritime centre. and to exchange views on enhancing co-operation and synergy and how best to complement each other's strengths."
Members of the delegation include experts in ship owning, ship brokering, ship finance, maritime insurance, maritime law and ship registration.
Today the mission is attending a seminar on 'Shanghai-Hong Kong Interactive Development in Shipping service Industry' hosted by the shanghai municipal Urban and Rural Construction and Transport Commission and co-organised by the Hong Kong Maritime Industry Council and the Marine Department. Ms Cheng and some members of the delegation will also discuss the development of ship finance with representatives of Shanghai's banking sector at the Honk Kong Economic and Trade office in Shanghai. [27/03/09]
PSA recorded 'Jekkyl and Hyde' 2008, predicts further horrors ahead
Singapore: PSA Group saw volumes grew 7.3% in 2008 from a year earlier to reach 63.2m teu at its 28 port projects in 16 countries worldwide. Group ceo Eddie Teh dubbed it a 'Dr Jekkyl and Mr Hyde' year where strong growth up to July 2008 was rapidly eroded by the collapse in demand on major trade lanes in the last quarter of the year.
PSA’s flagship terminal in Singapore handled 29.0m teu in 2008, growing 7.0% year-on-year, helping Singapore maintain its premier position as the world’s busiest container port for the fourth consecutive year, whilst PSA’s terminals outside Singapore recorded a throughput of 34.2m teu in the same period, 7.7% higher than that in 2007. Overall the 63.2m teu total was a new Group high.
Group revenue increased 5.8% while net profit suffered a decline of 46% largely due to lower yields, higher operating costs, impairment provisions and lower divestment gains. But the Group points out that its balance sheet remains strong with a debt capital ratio of 53.9% at the end of 2008, an improvement over 2007.
“2008 has been a year with a Dr Jekyll and Mr Hyde personality, with most of the Group's terminals across the globe handling record volumes in the first few months of the year," said Teh. "However, by year-end, the financial crisis had reached epic proportions with most economies in recession."
"I see an extremely tough and increasingly challenging year in 2009," he added ominously, "with more and more economies falling prey to the collapse of the financial systems, and global trade almost grinding to a halt." [27/03/09]