Thursday, 31 December 2009

This will put hair on your chest.

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Seeing it is new year and depending on what part of the world you are in, you are probably either partying hard or nursing a hangover right now.

Have you ever tried a Scandanavian drink called "Aquavit" or otherwise known as "Linie Aquavit"? I remember fondly quite a few nights on board Wallenius vessels in Brisbane docked at Hamilton Wharf with the ships Captain and their local agents serving up shot after shot of this flavoured rocket fuel. Aquavit is distilled from potatoes or grain mash and packs about 45% alcoholic volume punch. In the distilling process different flavours are produced by adding orange peel, lemon, cardamom, cumin seed and various other ingredients.

Every drop makes an interesting journey by sea before it is ultimately sold.

All Aquavit is shipped from Norway across the Equator (hence "Linie") to Australia and back. This tradition started in the 1800's when the owner of a distillery, Jorgen Lysholm, shipped a consignment to Asia that for some reason wasn't accepted and was returned. Upon inspection of the barrels back in Norway he noticed that his Aquavit had developed a richer flavour for it's travels through warmer climates. Hence the tradition was established and continues to this day as a critical part of the process of producing Aquavit. More on Aquavit including a map of it's journey.

So next time you feel like a shot, try some Aquavit. Always a good idea at the time!

Happy new year!

Brad Skelton

The Shipping Bloke

Sunday, 6 December 2009

Where does a shipping container go in a year?

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The BBC undertook a quirky project this past year that I thought you might find interesting.

They tracked a 40' shipping container for a full year on it's journey around the world carrying numerous different types of cargo. During the year it covered about about 50,000 miles by sea, road and rail. It is completing it's final voyage now to South Africa where it will be retired from service and turned into a soup kitchen.

This is fascinating and well worth a look. For more on this project including videos of it's journey and an interactive map of it's travels click here to go to the BBC's "The Box" website.

All for now,
Brad Skelton
The Shipping Bloke

Monday, 30 November 2009

A public "Thank you" to my team.

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Last Thursday night I attended the equivalent of the Academy Awards for the shipping industry in Australia. The Lloyds List Australian Shipping and Transport awards. The aim of the awards is to recognise the achievements of the industry's finest practitioners.

Thanks to the innovative thinking, safe practices and hard work of my team, Skelton Sherborne, was nominated as finalists in two of the fourteen categories. Namley; Freight Forwarder of the Year and the Safe Transport category.

I am very proud we made the final as the competition is fierce and stacked with huge multi-national players and public companies.

While sadly we didn't win either category we did get runner up in the Freight Forwarder of the Year which we are still very pleased about.

So, to my team. Thank you! Your commitment to our customers, the company and I during what has been a challenging year in shipping has been and remains inspiring to me.

We'll hopefully bring it home next year!

All for now,
Brad Skelton
The Shipping Bloke

Sunday, 22 November 2009

Reassuringly Expensive.

I caught up with a few good mates of mine for a few beers recently who all run their own businesses in diverse industries. I consider these blokes very business enlightened and I really enjoy drawing on their collective knowledge and experience.

We were talking about the large number of requests for tender we are getting across our desks lately, particularly since the GFC kicked it, and the pros and cons of tendering for new business versus the business that comes to you through marketing efforts or exisiting customer referrals.

While we agreed we all generally have won more tenders than we have probably lost, the time and effort invested in them is absolutely massive and sometimes makes you question the commercial sensibility of participating in the exhaustive processes that some companies want to run.

My experience suggests that decisions are driven nearly always by three factors. Namely: PRICE, PRICE and PRICE.

Sure the tender always says that quality of service, expertise, safety record blah blah blah will be prime considerations in the decision making process however when we win tenders and sit down with our new client we are usually told "Congratulations. You had the cheapest price".

It's the classic business paradox of price versus service. It is pysically impossible in most industry's to be the cheapest and also the best. The two are diametrically opposed to each other and to delivering your business it's imperative. A profit!

After about the fourth or maybe fifth beer, one of the guys said in his own business he always looks for the "Reassuringly Expensive" option ahead of the cheapest option and he would usually go with this as this is where the reliability and professionalism is usually found. I have to agree. You really do get what you pay for.

So for me even in tighter times, like my mate, I will usually go with the "Reassuringly Expensive" supplier who will be there for me in the long run with a consistently good quality product or service. Hence the reassurance I feel in making this decision.

Whether you are a builder, a lawyer or a candlestick maker....nearly all industries have become commoditised in someway so there will always be someone promising to do it cheaper and better and more willing to lose money than you to land the deal. Now with the internet and the plethora of companies trying to get noticed, "FREE" is the catch cry of the net. Where to from there? Well you don't go broke on the deals you miss out on so "Let them go" I say. These companies just won't be there at the finish line.

Do you remember the scene from the movie "Armageddon" with Bruce Willis and Steve Buscemi about the lowest bidder? If you are in the process of sending out a tender for new suppliers then I'll let the boys have the final word.
Check this YouTube clip out!

All for now.
Brad Skelton
The Shipping Bloke

Tuesday, 13 October 2009

Some shipping trivia on plimsoll lines?

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Firstly what is the plimsoll line? It is the horizontal line and marks that you may have seen painted around the hull of the ship near the waterline. It dates back as far as 2500BC in Crete!

Why is it there? It is effectively the safe load line calculated for the ship. As more cargo is loaded on board the weight forces the hull of the vessel deeper underwater. The plimsoll line is therefore effectively the maximum point a vessel may be loaded too to ensure a safe level of buoyancy is maintained for it's voyage. If the plimsoll line can't be seen as it is underwater...then you have an overloaded ship.

There are more than one mark on ships as the depth a hull will float in water will vary depending on a range of factors such as salinity and water temperature.

The letters on the Load line marks have the following meanings:
TF – Tropical Fresh Water
F – Fresh Water
T – Tropical Seawater
S – Summer Temperate Seawater
W – Winter Temperate Seawater
WNA – Winter North Atlantic

The plimsoll line tells the master of the vessel and the vessel underwriters make sure that the ship is operating within safe working limits for seas it will sail through. In fact it is not allowed to sail if the plimsoll line is not visible.

This is why it is so important to have the most accurate cargo weights possible so that the ships planners can keep the vessel inside it's safe working limits and also trim the vessel so it floats evenly in the water.

If there is any other shipping trivia or questions you have, then drop me a note in the comments field and I'll come back to you. Thanks!

All for now,
Brad Skelton
The Shipping Bloke

Tuesday, 29 September 2009

Dial 1800WESUCK at customer service!

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The exasperation of my freight team in dealing with MEGA shipping companies and their so called "customer service" through centralised 1800 numbers and websites is getting overwhelming. It is to the point where we are actually avoiding doing business with them because it's near impossible anyway and it affects our ability to deliver the standard of service our customers are used to from us.

Here's an example from one carrier on a recent import shipment to Australia.

- We receive a computer generated email telling us the freight charges are available online at their website. What the??? If the computer can generate an email to us telling us the charges are available online then why can't the computer just email them to us in the first place? Stupid!

-So we go the website we are directed too from the email. But of course for security reasons you need to register as a user. Fair enough.

-The registration process is completed but the access doesn't come through within a few minutes as promised.

-So we call their 1800 number and say "We received an email directing us to your website but then we had to register and we still don't have access". Then we are told that they have no IT people working in Australia anymore (apparently this is run from overseas now because labor is cheaper) and we are given an email address to send a message to their IT dept to get them to complete the registration process that they should have done by now anyway. Before sending this message we ask the customer service operator on the phone if they have the charges and if they could just give them to us over the phone or email them to us directly. The operator says she does have them but she can't do this anymore and we have to use their website. Arggh!

-So we email IT trying to get the registration to their website through. That was in the morning and by late afternoon we have no reply and still no access to help our client get their cargo tomorrow.

-So back to the "Dial 1800ZEROCAREFACTOR customer service team". We explain that we have done everthing they ask and we still don't have the charges and access to the website and the ship is in tomorrow. We need them now so we can pay them and they can then release the cargo when our truck goes to the wharf.

-That customer service person finds all this too hard and transfers us to another operator who ask's "What port this is for?". "Pt Kembla" we say. "Oh that's not me that someone else...I'll put you through" Arggh!! &^%*%!!!

-We speak to the next person who says "No worries, I'll email them to you now". Simple as that. What the? Why could that person do it and nobody else could or would? Stupid!

-We are still waiting on the IT dept to come back to give us access to the website but the cargo picked up on time. Unbelievable!!

This is a real example and I fail to see how these businesses function at all or have any customers. I am really tempted to name them however then I'll probably hear from their legal dept. Then again, it has probably been sent offshore too and maybe I don't have to worry?

This reminds of an experience a good mate of mine, Troy Hazard, had with a bank in America recently. Troy has recently moved to the States and is on the corporate speaking circuit there. Here is his rant to me by email...

"Troy – I’m here to find out why I have been charged $175 overdraft fee when I don’t have an overdraft?
Bank – Yes?
Troy – I’d like you to refund that please.
Bank – Well, I can’t do that here sir you’ll have to call customer service.
Troy – Call customer service? But I am standing here… In the outlet… At the bank… In person… Talking to you…In your office…With my statements in hand… The branch where I opened the accounts.
Bank – Yes I know Mr Hazard but I don’t have that authority here.
Troy – So you’re saying that someone I don’t know, that’s never spoken to me, and has no idea about my account other than what comes up on their screen has more authority to deal with me than you do, my local banker, at my local branch?
Bank – Yes sir.
Troy – You’re kidding right?
Bank – No sir, I do not have the authority to talk to you about that. (as my card is handed back)
Troy – So I need to go and call this number then.
Bank – Yes sir, that’s what you will have to do.

(Not even, let me call them for you now and tell them what you are seeking to sort out, OR, let me dial the number for you and put it through to that courtesy phone over there so you can talk to them while you are here, OR, let me talk to them first and give you a reference number so you wont have to go through all of the explanation when you do call, OR let me find someone at customer service that can help you so you wont have to waste time on the phone….. nope… here’s your card, go call them, good luck, don’t let the door hit you on the backside on the way out)"

So I sympathise with Troy as we are basically in the same boat with some of the larger shipping lines. Pardon the pun!

All for now,
Brad Skelton
The Shipping Bloke

Thursday, 24 September 2009

Greener shipping.

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NYK is one carrier that is really looking well ahead into the future with it's concept of the NYK Super Eco Ship. This project they hope will be delivered by 2030 and will radically improve carbon emissions by about 69% compared to a cargo ships as we currently know them. The vessel is planned to be able to carry about 8000 TEU's (twenty foot equivalent units).

This bold project and leap into the future will potentially see ships powered by a combination of LNG-based fuel cells, solar cells, and wind power. The main power unit is planned to be a 40,000kw LNG fuel cell.
The hull design also comes in for a major overhaul with reducing friction through the water being the goal followed by weight reduction. The design of hull means it is longer and wider but it has a shallower draft than most vessels currently operating now. This draft will also assist the Eco Ships with getting into ports with draft restrictions.

I'm not sure what happens to those sails when the containers are being loaded and discharged. I know some wharfies would see them as a prime target for the gantry crane.

Full marks to NYK for their investment, innovation and effort to drive change in the industry.

All for now,
Brad Skelton
The Shipping Bloke

Sunday, 13 September 2009

World shipping lines are in emergency mode.

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I read a recent article in Lloyds List which reported that world shipping is in emergency mode at the moment due to the GFC. Something I have eluded too in previous posts.

Governments around the world are being forced to put rescue packages together to save some of the worlds largest shipping lines as they progressively lose support from their bankers. The banks are pushing for greater loan guarantees and securities as the financial performance of many shipping lines wane. France is the latest to put a Euro 1.5 billion lifeline together for the French shipowners. The aim of this funding is to help them meet the demands of their banks. Germany(Hapag Lloyd), Chile(CSAV) and Israel(ZIM Lines) have recently taken other measures to save their carriers.

The Baltic Dry Index continues it's downward trend since June and global cargo volumes are still extremely low and falling in many tradelanes and sectors. Not surprising really. With the GFC global consumption overall is still falling so it stands to reason the need to transport goods will keep falling in line with this so talk about a recovery in the shipping industry, particularly with the container, tanker and bulk carriers is overly optimistic and premature in my view.

At least the RoRo and heavy lift operators that I primarily deal with are telling me their cargo volumes are improving in some tradelanes.

By the can the stock market keep rising globally when consumption is falling too? Top line revenue growth isn't really there. And...what are the real unemployment figures if you add back the explosion in casual and part time employment in most countries? Surely the person that has been cut back to three or four days a week isn't able to spend as much and somehow this needs to be taken into account? And...why are property values climbing in some countries at same time unemployment is as well? All doesn't make sense to this humble shipping bloke and I reckon something has to give and this whole crisis is far from over.

One thing is for certain. Unless global cargo volumes start to rebound very soon we are going to start losing some of the biggest names in the shipping industry and alot of competition with them. Bad news for us all.

All for now,
Brad Skelton
The Shipping Bloke

Thursday, 27 August 2009

My home port has lost the plot.

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This week I received an email from the Port of Brisbane Corporation(a Queensland Govt owned entity) advising me that they were increasing port and wharfage charges by 6% on all cargo except for coal which cops an 11.1% hike as of the 1st of December. Supposedly this is to keep pace with capital expenditure on port development. This increase announcement comes at a time when many port users are struggling with the impacts of the GFC and cannot afford any cost increases whatsoever. KPMG has apparently undertaken a study on the impact of the increase. Well...we are probably the largest freight forwarder of heavy equipment through the port and I didn't hear from them.

Can the Port of Brisbane(POB) be serious with this increase?! This directly impacts our exporters and makes them less competitive..and I would have hoped that goverments at all levels would be doing everything in their power to help them. A high school economics student could tell you that exports bring money back into the country. Hold on..don't we have a MASSIVE national debt from stimulus packages of $300bn + and climbing? What the hell is going on and when is the QLD Govt and it's various entities going to stop trying to milk coal dry with charges and royalties?! Enough! Coal is one of our biggest exports!! Supporting trade 100% should be a priority..shouldn't it?

The Port's annual report for 08/09 is yet to be released but I can tell you that 07/08 was a good year delivering a net profit after tax of $438.7m. A dividend was declared and the QLD Govt received $205.7m for this year. Not bad and looking at cargo volumes for 08/09, while smaller, it still should be a decent year.

Coincidentally....perhaps....the QLD government is in the process of selling off the Port of Brisbane. Maybe the real agenda of increasing costs is not to further develop the port but to make the books look as good as possible for the buyers they hope to attract. Sound corporate governance if you are selling a company, however shouldn't a goverment owned entity charged with the responsibility of key port infrastructure have some responsibility and conscience to support shippers by keeping costs to a minimum? I don't care when the last increase was or what the CPI is....a govt owned port entity should be supporting trade as it's primary objective not taking decisions driving a sale outcome. This doesn't mean I think any operation should lose money. A break even with lower port costs for users should be the goal. Over and out!

Some ports around the world recognise the distress the shipping industry is in and are reducing costs. It has been reported by various shipping media outlets that ports such as Singapore, Dubai and Karachi are reducing their costs to help the port users navigate the GFC. Shouldn't we be doing the same at this time?

On top of this my heavy equipment customers and ship operators are frequently frustrated by delays to vessels and increased costs caused by congestion at berths 3 and 4 in particular. Then they are forced to deal with the POB appointed stevedore Australian Amalgamated Terminals Pty Ltd which is a JV between DP World (formerly P&O) and Toll/Patrick. AAT is under investigation by the Australian Competition & Consumer Commission for various issues that may restrict dealings and competition. I fail to see where the competition is in stevedoring with the two big boys of the Australian waterfront in a partnership in AAT. At AAT you basically have to self deliver your own cargo. What happened to having wharfies sort, stack and deliver cargo to road transport companies? It's all gone too far.

I won't even open the port motorway discussion except to say there was another fatality on that road a week ago. A road my team travels daily. Much needed upgrades have been deferred and deferred by the QLD Government and it isn't coping. How many more fatalities will it take for work to start?

With the impending sale of the Port of Brisbane I hope that once privatised, we will see a tremendous improvement in the operation of the port. I know that my customers and I and other port users are frustrated and increases in costs during a global credit crunch only add insult to injury and clearly signals to me that urgent change is now a necessity! Bring it on.

All for now and for the international readers of my blog.....forgive me for the local indulgence.

Brad Skelton
The Shipping Bloke.

Wednesday, 19 August 2009

95 years of the Panama Canal.

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The 15th of August saw the Panama Canal hit it's 95th anniversary of operations.

During this time about 983,000 ships have passed through it safely and it has been instrumental in the development of Panama itself.

Tolls are levied on the ships according to their net tonnage and type. So for a RoRo ship like Wallenius Wilhelmsen's, "Tampa", that has a net tonnage of 26,072, the toll applied per transit is about US$99187.00. For containerships the rate applied by the authority is US$72.00 per 20' container the vessel is carrying. See where some of the money goes in the freight rates you pay?

Right now the Panama Canal Authority(ACP) is undertaking a US$5 billion expansion so it can cater for the new larger vessels and increased traffic that cannot currently pass through it.

It's fascinating watching vessels go through the canal. The ACP operates live webcams so you can tune in and see ships transitting through. Check it out. Alternatively for a time lapse ride on a cruise ship please click here.

The Panama Canal is a vital link in global shipping reducing transit times and operating expenses for vessel owners and I am certain will remain as important as ever for another 95 years.

All for now,
Brad Skelton
The Shipping Bloke

Thursday, 13 August 2009

We've got visitors.

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We were loading a ship off the coast of Western Australia last week when these guys swam over to say "G'day".

They didn't seem worried at all about the activity on board the vessel.

If you'd like to see more images, then go to my company's Facebook page.

Have a great weekend.

Brad Skelton

The Shipping Bloke.

Wednesday, 12 August 2009

Shipping capacity will soon exceed demand by 50%!

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The outlook for shipping lines is still extremely grim.

The European Community Shipowners Association has called for an urgent industry wide ship scrappage scheme to shrink the massive surplus of vessels. They have warned of an impending bloodbath as they estimate that shipping capacity will soon exceed market needs by between 50-70% as demand continues to fall in line with global consumption. Chang Yung Fa, the CEO of Evergreen, described the excess as "gruesome".

The quarterly losses** being reported by carriers in the past few weeks are massive. Here are a few:
Neptune Orient Lines-US$146m(last qtr) Forecast loss for the year-US$515.61m
Maersk Lines-US$405m
NYK Lines-US$198m
Mitsui OSK Lines-US$136m
K Line-US$155m
Hapag Lloyd-US$998m(for full year to June 30,2009)

Hapag Lloyd have been thrown a lifeline of US$467m by their shareholders and so has Zim who were struggling to pay for new vessels due out of the shipyards that they ordered well before the GFC gained momentum. Other carriers are trying to do rights issues to get the cash/oxygen they need to survive the downturn while at the same time banks are increasing the loan to valuation ratios they work on with ships.

To reduce costs some carriers are "slow steaming" to conserve fuel and travelling via the Cape of Good Hope rather than pay the expensive Suez Canal fees.

You would think that this carnage would translate into lower freight rates however the opposite is ocurring in the break bulk and container trades as carriers fight for survival. Rates and fuel surcharges are being increased or "restored" to use the shipping lines language.

As you can see I refer to some of the worlds MEGA shipping lines in this blog. What the....? Isn't bigger supposed to be better? So what is the future of the MEGA carrier?

More on that soon in a future blog.

All for now,
Brad Skelton
The Shipping Bloke

**All amounts converted to US$ at todays exchange rates and rounded to the nearest million dollars.

Thursday, 6 August 2009

So what if deck cargo is cheaper?

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Cargo integrity is my absolute priority. That's why I rarely, if EVER, load heavy machinery on the deck of vessels. It is absolute last resort. There literally has to be no other way to get the cargo to that destination before I will even vaguely consider it. Even then, I do my level best to make my client completely aware of the risks, accept them, notify their underwriters and protect the cargo as much as possible.

I have frequently lost business to competitors who come in cheaper because they are taking that risk with clients cargo. Worse still sometimes they don't even tell the client they are putting the cargo on deck and profiteer. I'd rather not handle the shipment than risk damaging the cargo and my relationship with my customer with it.

It's not that risky you say.... and if you can save a few bucks then....why not? Check these links out and then answer that question.
Strike 1.

Strike 2.

Strike 3.
If waves can come over the deck of the "USS Kitty Hawk" 102 feet from the water line then.... Game over.

All for now,

Brad Skelton

The Shipping Bloke.

Tuesday, 28 July 2009

Bills of lading...history?

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The current liability regimes governing international shipping look set to change to a new convention called the "Rotterdam Rules". The UN General assembly has adopted these and put them up for signing in Rotterdam on the 23rd of September. For these to come into force at least twenty countries must sign the convention and this looks likely to occur.

The Rotterdam Rules are intended to modernise, harmonise and replace a multitude of other liability rules governing shipping globally dating back about century or more. These include the Hamburg, Hague and Hague Visby Rules and other regional rules such as the United States and Australian COGSA, the Nordic States Maritime Code and the Maritime Code of China.

The humble bill of lading looks like being replaced with a "NTD". A Negotiable Transport Document. Controversially and unlike a bill of lading, an NTD enables a shipping line or freight forwarder to release the goods to a third party without that party having to be the holder of the NTD. A bill of lading is a document of title to the goods so without this status, there is a likelihood that NTD's may lead to a lack of security in the global banking system and with letters of credit. We'll see.

The Rotterdam Rules attempt to cover e-commerce far more comprehensively than the current rules. I see this as an imperative although some confusion will no doubt follow for a while.

The good news for shippers and consignees is that the carriers limit of liability will be increased. You'll still need comprehensive marine insurance cover but this is a step in the right direction.

More on the Rotterdam here.

All for now,
Brad Skelton
The Shipping Bloke

Thursday, 23 July 2009

Freight rates are on the up.

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In a previous blog I explained that I didn't believe that the shipping lines low freight rates combined with decreased cargo volumes in many trade lanes were sustainable.

I have been watching with interest the publicly listed shipping lines report their quarterly results to the stock market and it's giving an insight into just how severely some of them have been affected. Some have suffered spectacular record losses and others falls in profit of 80% or more as a result of the downturn. Rates and cargo volumes have been down to such an extent that it has threatened the viability of many carriers. Financial defaults are growing. Last month the "Gem of Madras" was arrested in the USA as her owners had fallen behind in their loan repayments to the Nordea Bank.

"Rate restoration, GRI(general rate increase) and peak season/fuel surcharges" are the language the carriers are using again. The container operators have started lifting rates from between US$100 to US$300 per TEU(twenty foot equivalent unit) as of the 1 July in various trade lanes.

The rules of supply and demand are being leveraged. Higher demand has been created as numerous ships have been taken out of service and are currently idle. The vessels that have remained operating are starting to achieve higher utilisations and thus higher rates can be asked by the lines. Here is a link to a BBC story on ships currently rafted up in the UK.

I think the big question is whether or not there is a second or even third wave of the GFC coming due to decreases in consumption from growing unemployment and continued pressure on credit markets and on top of that, government stimulus actions being wound down.

One thing is for certain. Freight rates are starting to head north they must... if we are going to be left with decent shipping services around the world.

Saturday, 18 July 2009

Salvage of the "Cougar Ace" may become a Spielberg movie.

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I read Wired Magazine from time to time and I was enthralled by the story of the “Cougar Ace” they published in March this year.

In February 2008 the “Cougar Ace”, owned by Mitsui OSK Lines, rolled over in Wide Bay, Alaska, with 4703 Mazda cars on board. Titan Salvage were called in to save the ship and it’s cargo. The success fee paid by the underwriters for this risky and dangerous job....US$10 million. The ship and her cargo were ultimately saved however the life of a member of the salvage team was lost in the process.

As for the cars...UKP55m worth... Mazda had them destroyed in a shredder as they couldn’t guarantee that they wouldn’t be without problems due to what they endured.

Rather than retell the whole story, here are the links so you can read the fantastic Wired article or watch a 3min 49 sec video. It's worth the short time investment to take a look.

This is one of the most amazing and thrilling salvages of a vessel at sea that I have ever heard. I can see why Steven Spielberg’s ,Dreamworks, bought the option to turn the story into a movie.

All for now,
Brad Skelton
The Shipping bloke

Sunday, 5 July 2009

Global warming = faster, cheaper shipping? Maybe...

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According to certain climate models the whole Arctic Ocean is said to become progressively ice free by the middle of this century. Some models indicate this will happen even sooner than that. So what will this mean for shipping routes, transit times and freight rates and the Panama and Suez Canals as major passages now?
The Danish Institute of International Studies has recently completed some research on this question and here are some of the findings.
Of 130 shipping companies surveyed most say that these northern sea routes(red line) are too risky for their vessels and insurance premiums are currently very high. Even if the icecaps shrink further the fact is drift ice and icebergs will still be a threat to shipping for many years yet and some types of cargo are not able to go through areas of extreme cold.
Although the distances between some ports is shorter, the ships speeds would have to be reduced. So it is debatable whether this will translate into operational efficiency gains.
Torm Lines calculated in early 2008 that travelling between Europe and Asia by northern sea routes would mean savings to them of about 12 days sailing time and operating costs per voyage of about US$155,000.00. And....they have started investing in more iceclass vessels.
Many shipyards order books for ice strengthened vessels are growing so perhaps some other operators believe this will become commercially feasible for them soon too. Four North American and two European shipping lines are already using Arctic routes so it is clearly possible.
So... is global warming a reality and will this route open up completely to heavy transit shipping or is the icecap shrinkage only temporary? It seems the shipping industry is just as conflicted on this issue as the scientific community. Time will tell.
All for now,
Brad Skelton
The Shipping Bloke

Tuesday, 30 June 2009

Arrrgh me hearties....

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Piracy has been in the news big time lately however a lot of shippers probably don’t realise it is virtually a daily occurrence somewhere in the world and how it can impact them. It is probably one of the oldest industries there is right behind another industry well known to seamen.

This live and interactive piracy map compiled by the International Chamber of Commerce clearly shows Somalian Pirates have been by far the most active and most daring in recent times. It seems every type of vessel is fair game from cargo ships through to luxury cruise liners. They are going further and further offshore in search of their targets to extract ransom money, pillage cargo and rob and threaten passengers. Governments from around the world have deployed their naval fleets to help defend shipping in this region. Despite this, the reality is that ship owners are virtually forced to have to hand over ransom money in return for the safety of their crew, passengers, cargo and vessels. So the pirates get their payoff ranging and live to do it all again. What is a typical pirates opening ask in ransom for a vessel? US$25 million!!!

Piracy occurs frequently in other parts of the world. The Strait of Malacca between Singapore, Malaysia and Indonesia has been notorious. Up until 2005 it was actually classified as a war zone by Lloyds of London. I have been on many ships where the Masters have told me about the night attacks they have endured in this region and still do. Once again a naval response was required to get on top of the situation.

So what does it mean for you if your cargo is on board a ship that is pirated? Firstly I hope you ALWAYS have marine insurance cover under Marine Institute Cargo Clauses (A) . This is the maximum level of cover available and includes piracy risks; however it only covers risks to your cargo of physical damage, theft or destruction. Ransom monies are precluded and these are normally the concern of the ship owner. If your cargo is delayed but not damaged, then there is no relief from underwriters and there is no claim possible for damages against the ship owner. Maritime law actually defines you - as a shipper with cargo on board - as a joint venturer with the ship owner. So in other words, you share all the risks of the voyage and also delays with them.

Desperate times are leading to increasingly desperate attacks on shipping around the world, so make sure you are insured and perhaps review your policy to ensure that it reflects Cargo Clauses (A). Do it now!

All for now,

Brad Skelton
The Shipping Bloke.

Thursday, 25 June 2009

Shipping at 1980's freight rates...

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The Baltic Dry Index(BDI) is the exchange that tracks shipping freight rates applying to dry commodities worldwide. In 2008 it peaked at 11793(remember when there was no space and freight rates were skyrocketing?) and then it fell to a low this year of just 772. It has recently risen to about 3750 which is being attributed mainly to imports into China as they stockpile commodities. More on the BDI including a live chart.

The reality for shipping lines right now is that nearly all of them are reporting massive losses, cancelling services and voyages, mothballing fleets and scrapping older ships as world demand for ocean freight is still incredibly low.

One RoRo carrier has so many idle ships that they told me that they are using their ships as floating carparks at sea for some of their car manufacturing customers. This way the shipping line at least gets some revenue on an otherwise idle ship and the automaker finds more storage capacity for the huge inventory they are wrestling with onshore. The container carriers are in a worse situation. Some of them are literally charging only for the fuel they burn just to keep their vessels moving. Anybody that has regularly flown into Singapore knows there are always plenty of ships off the coast. It is one of the largest transhipment and bunkering(refuelling) ports in the world that’s why they gather there. When I flew in there about three weeks ago I was shocked to see more vessels than ever and container ships rafted up, empty, in inlets in groups of four.

Consequently we are seeing desperate freight rates being quoted by many carriers. There is no way that the rate levels in the market right now are sustainable. Many carriers are now dealing with rising fuel prices again and have high debt levels associated with the vessels they own. The new rules of the GFC of “little or no debt” leave them in a vulnerable position with their financiers. Undoubtedly we will see many shipping lines start to falter. I remember too well trying to assist clients with getting their trapped cargo off some Russian ships that had been detained in port due to unpaid port charges back in late 80’s. Sadly I think we will soon see this again.

In the meantime even though the BDI has started to trend up, the freight rates in the market are pretty much at 1980's levels. I think we have recently seen the bottom of the ocean freight market but we are still not far from it. Therefore it’s a good time to look around and make sure that you are getting the benefit of some the lower rates on offer and perhaps explore locking in with a contract if you can.

All for now,
Brad Skelton
The Shipping Bloke

Monday, 22 June 2009

Personal invitation to subscribe to "The Shipping Blokes Blog"

You have received this invitation because you are a personal friend, colleague, client or supplier to my business, Skelton Sherborne - “The Choice of Heavy Industry.”

A major overhaul of Skelton Sherborne’s and my personal website has just been completed. There are numerous new resources that are relevant to heavy equipment shipping decision makers and it’s been re-engineered so it is quicker and more intuitive to navigate than ever before. We also have some new initiatives about the way we communicate with everybody and how we can improve your overall shipping experience.

One of these initiatives is the launch of this Blog. This blog isn’t about Skelton Sherborne or me. It’s about you and making sure you are kept up to date with interesting, informative and thought provoking ideas that are relevant to anybody moving heavy equipment around the world. It also seeks to provide a platform for shippers of heavy machinery to connect and provide comments that our peers can see and increase awareness of issues that are affecting us. I promise to take these comments on board and try and champion whatever change I can to make shipping easier, more cost effective and safer, wherever possible.

If all this sounds interesting to you, then I hope you will
subscribe to The Shipping Bloke's Blog by Email.

The first Shipping Bloke’s Blog will be posted later this week and I hope you will find it interesting reading.

Kind regards
Brad Skelton...The Shipping Bloke.