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Thursday, 23 July 2009

Freight rates are on the up.

(You are getting this note because you subscribed to Brad Skelton's Blog-The Shipping Bloke)

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.

Freight rates are on the up.

(You are getting this note because you subscribed to Brad Skelton's Blog-The Shipping Bloke)

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.

(You are getting this note because you subscribed to Brad Skelton's Blog-The Shipping Bloke)

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

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

(You are getting this note because you subscribed to Brad Skelton's Blog-The Shipping Bloke)
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...

(You are receiving this note because you subscribed to Brad Skelton's blog-The Shipping Bloke)

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


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

(You are receiving this note because you subscribed to Brad Skelton's blog-The Shipping Bloke)
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....

(You are getting this note because you subscribed to Brad Skelton’s blog-The Shipping Bloke)

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.