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 Rules....click 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 again...as 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