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Wednesday 12 August 2009

Shipping capacity will soon exceed demand by 50%!

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

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.


Shipping capacity will soon exceed demand by 50%!

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

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?

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

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.

So what if deck cargo is cheaper?

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

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?

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

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



Bills of lading...history?

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

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.

(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.