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Thursday, 29 November 2012

I am sorry!

If you haven't heard the news yet Deloitte in Brisbane have been appointed by HSBC bank as receivers to my company, Skelton Sherborne. Therefore they are currently in full control of the company not me.

Deloitte have advised they intend to keep the business trading while offering it for sale. An advertising campaign began yesterday in various Australian newspapers.

Skelton Sherborne has truly great people who I can say without reservation are among the shipping  industry's best in the world. I am extremely grateful to every one of them for the incredible professionalism they are displaying right now in very challenging circumstances. I am so proud of them. Most of these people have given the business between 8-15+ years of their lives and I hope they think it has been an interesting, fun and personally rewarding ride with the company so far. I thank them for the dedication to company and I and for their hard work. I am personally doing my best not to let them or their families down.

This team has built the company's systems and procedures from the ground up and they are world class and very innovative. Skelton Sherborne's business model and processes are probably the most copied by competitors in the heavy logistics market. With some amusement, the team and I have always taken this as a compliment. 

The company would make an outstanding acquisition for someone and has a track record of good profitability and growth. If you are interested please contact Deloitte in Brisbane directly.

So what happened at Skelton Sherborne for the company to be currently in receivership?

Clearly we lost the support of our bankers, HSBC. Late on Tuesday the 20th of November without warning or notice they froze Skelton Sherborne's bank accounts. The company was not outside of any bank covenants or limits. Furthermore the company was trading very profitably having just delivered the best four months results in years. The company did not have a single default or judgment against it that would give justification for our banks action. 

Since late September this year HSBC had imposed a rapid step down of credit facilities the company relied upon. They required the business to reduce one of those facilities by $100k every Friday or they threatened receivership. I am proud to say that with the tremendous help and support of my team, long standing clients, suppliers and friends that Skelton Sherborne met this step down as impossible as it initially seemed. We were still trading profitably and I thought the receivership threat from the bank was removed. Increased attention was then given to reducing creditor balances as fast as we could. As a consequence of the rapid step down required by our bank our cashflow was under pressure but recovering.

HSBC's action in freezing our accounts last week paralyzed us to pay customs, shipping lines and other suppliers in order to ensure smooth cargo and service delivery to our valued clients.

The company immediately engaged our lawyers to try and get this freeze lifted, seek our banks justification for this action and to reserve our rights to claim for any losses and damages caused. As we were within all bank limits we had hoped that we could quickly resolve this with them and continue serving our clients and paying suppliers. Unfortunately we were unable to get HSBC to lift the freeze and their lawyers informed us that all of our banking facilities had been cancelled and withdrawn. At the same time we were also given an immediate demand to payout the full balance of the remaining facilities. The company could not meet an "immediate" demand of that magnitude and subsequently HSBC appointed Deloitte as their receivers.

I know this receivership is hurting people. I humbly humbly apologise to my team, our clients and suppliers who have been hurt or affected by what has transpired with Skelton Sherborne over the last 9 days.

I am working very hard to try and somehow regain control of the business and continue on trading after the receivers have done their job for HSBC if I can. This situation is temporary and I am fighting like hell and determined to be one of those many companies who have successfully emerged from a bank receivership. This situation is a massive setback that will slow me down but it will not stop me.

Deloitte are making decisions that they think are in the best interest of the company and no doubt their client, HSBC. Many of the these decisions and actions my team and I do not agree with nor in anyway condone. We are sad to see some of our great clients, who have become friends as well, incurring further expenses that in our view could have and should have been avoided or at least minimised. Client and supplier relationships are being damaged and right now losses are being incurred. I am powerless to stop this at the moment.

For the company's competitors, who are nearly all former employees of mine, this situation presents an amazing opportunity. It's not every day that the biggest player in their market suffers misfortune like this. I don't blame any of them for trying to exploit it. I would seize the opportunity myself and indeed would buy the company from the receivers if I were them. By the way to my former employees...if your non-compete obligations in your contract have not expired then I strongly suggest you think very carefully. You know that we always enforce them and seek our damages. This situation will be no different.

I take my responsibilities as director very seriously and have been at the office every day. I have not run away overseas as some competitors are saying. Everything that I can do to improve the situation is being done and I know and accept the ultimate responsibility rests with me.

My team and I have at times been overwhelmed with calls and emails through this period. I am sorry if we have not been able to get back to you in a timely fashion. We have frequently been reliant on Deloitte for directions on how to respond to people.

It has been heartening to my team and I to receive so many calls and emails of support from clients and suppliers. Thank you! It is nice to know that you believe in us and the brand. Skelton Sherborne is a great company and I am determined that it will keep going somehow and hopefully with me still at helm and the team intact.

Again I am deeply sorry for any hardship, expense or inconvenience this situation is causing anybody associated with Skelton Sherborne. I am sincerely doing everything in my power to make things right.

Please stay tuned to my blog for further updates as this situation is worked through. I might even lift the lid on a few secrets on people in the coming days.

All for now,

Brad Skelton

The Shipping Bloke. 



Tuesday, 13 November 2012

Monday, 5 November 2012

First solar powered boat to circumnavigate the world


Back in September 2009 I posted a blog about NYK working on designing a Super Eco cargo ship to have it in service by 2030 using a combination of renewable energies. Well perhaps this is now a step closer thanks to what has been learned by the PlanetSolar team.

The "Turanor" PlanetSolar catamaran completed the first solar powered circumnavigation of the world in May this year. Take a look at this video to see this amazing vessel.


The round the world trip it has undertaken has made it the symbol of energy efficiency and sustainable energy.  The "Turanor" is 95Tonnes in weight, 35m long, 23m wide and 6.1m high and has 537m2 of solar modules. The boat can propel itself at speeds up to 15knots without adding pollution of any kind as it is completely silent. It cost £10million to build and set many records as it circumnavigated the globe.

Commercialisation of solar powered ships surely is just around the corner. Who would have thought a Toyota Prius' would be commercialised into taxis as fast as they have.

By the way, is it just me or does everyone else seem to end up with a Prius every time you call a taxi these days?!

All for now,

Brad Skelton

The Shipping Bloke






Sunday, 4 November 2012

40' container rates between Shanghai and Rotterdam spike up $788 last week!

Most container lines in the world are still struggling with over-capacity in ships for the current world cargo transportation task and little or no growth is forecast in cargo volumes in the coming year.

A break even result is the best many of these shipping lines can hope for with the prevailing market conditions. Despite over-capacity in ships which usually leads to lower freight rates, last week a huge and key market segment from China to Europe saw a massive increase in rates of $788 per 40' container/FEU(Forty foot Equivalent Unit). That is a 38% increase in a single week taking the average cost to ship a 40' container to US$2865.00.

(source-World Container Index)

As you can see by the rate history over the last year, rates at some stages have tripled and between January and July, effectively quadrupled.

What is causing this upward volatility when the usual rules of supply and demand suggest rates should be going lower?

Carriers are endeavouring to remove tonnage from some trade lanes to address the vessel over-capacity but the delivery of a profitable bottom line for them is the real driver after the terrible losses many of them have suffered the past couple of years. Ship owners are being forced to increase rates to ensure they stay profitable and are here in the long run. Slow steaming is still commonplace to keep fuel and operating costs to a minimum.

In my opinion we are going to see tremendous rationalisation and consolidation with shipping lines in 2013 and continued rate volatility. It just has to happen as charter rates are still low and they just can't keep carrying on with the financial performance of the last two years.

I would suggest that not only for the shipping industry but many other industries, "Volatility" is the new normal business environment that everyone has to get used too. Being lean, debt free, commercially agile and nimble will give operators the best prospects of survival.

All for now,

Brad Skelton

The Shipping Bloke




Friday, 21 September 2012

Shipping Line Fuel Surcharges... Blatant Ripoff?


(You are getting this note because you subscribed to The Shipping Blokes Blog by Brad Skelton)

Fuel for ships is known as "bunker fuel" and since the global financial crisis(GFC) bunkers have fluctuated dramatically with a sharp drop post GFC followed by a dramatic increase.

I am amazed at how different carriers apply or choose not to apply bunker surcharges of one description or another even when they operate in the same markets and source their fuel from the same place. Of course the carrier charging it claims they are bleeding and simply can't afford not too. I always enjoy the the look of terror on the sales reps face when I ask how come their competitor isn't charging it and has nearly identical cost structures. I am yet to ever get a plausible explanation.

The carriers that do apply a surcharge most commonly call it B.A.F. This stands for Bunker Adjustment Factor. Another one used by one RoRo carrier is E.F.A.F which stands for Emergency Fuel Adjustment Factor. The word "Emergency" always puzzles me too. Where is the emergency when bunker prices are falling? It's really just marketing spin to help justify a charge that perhaps isn't fair in the first place both in it's conception and it's application.

Another puzzling aspect is why does the application of BAF or EFAF not follow oil price increases and decreases exactly?

When a carrier prices a shipment the rate is made up of a few components. Vessel cost (whether it be charter fees or repayments to banks), part of the port fees, fuel and administration costs. Why then do carriers apply their BAF of say 55% to the components other than fuel? This is another thing any shipping line sales rep is yet to be able to explain to my customers and I.

By the way, how can you possibly charge 55% anyway? That's enormous and surely far outweighs the actual fuel cost itself.

Where there is confusion in terms, or emergencies, there is scope to squeeze more money out of the shipper in the end. I think it's about time some shipping lines came clean and stop the games and rip off. The market can't afford it any more.

My clients and I would rather see all carriers drop this charge altogether and build their fuel costs into their freight rates like most other transportation operators do whether via road, rail and air.

What could be more transparent than that?

All for now,

Brad Skelton

The Shipping Bloke

Monday, 20 August 2012

No doubt about the Canadians..a FTA with the EU.


(You are getting this note because you subscribed to The Shipping Blokes Blog by Brad Skelton)

It has barely been reported in the media around the world but one of the worlds biggest mining and resource nations, Canada, is hurriedly trying to secure a Free Trade Agreement (FTA) with the European Union. A truly brilliant move in my book.

Mines in Europe are generally all but depleted so the primary resources need to be shipped in from somewhere so Canada is setting about ensuring it becomes the most competitive supplier possible by removing import duty and taxes on it's resources. No mining or carbon taxes being applied there unlike with the Canuk's biggest competitor, Australia.

Canada needs the business as the resources landscape in Canada is changing. Traditionally Canada has been a big energy supplier to it's southern cousin, the USA. However this is changing as the USA is increasingly using fracking technology to get natural gas out of places once thought impossible so the need for Canadian energy is diminishing.

Another reason is that with uncertain global economic conditions and generally slowing GDP growth in most regions of the world, it is only prudent to try and create conditions that lock in one the worlds biggest consumers as a customer, the EU.

On the otherside of the Atlantic with an FTA in place, a debt ridden Europe will no doubt love selling and shipping more BMW's, Gucci and Louis into Canada without import duties as well.

As a proud Aussie I am frustrated that my country isn't doing all it can to beat the Canadians to the punch with the EU. In fact we seem to be doing the opposite which will ultimately be at our peril. I think we have too much reliance on the Chinese buying our natural resources.

By the way, the cost of shipping from Canada to China is not that different from Australia so I think we better watch our backs as the Canadians are proving to be leaner, meaner and more agile and I'm sure are working hard on winning over our biggest customer.

Australia needs to take a leaf out of the Canadian's book with the EU and quickly get FTA's with our biggest trading partners and remove taxes that make us a less competitive supplier.

By the way, a little bit of intervention by the Aussie Reserve Bank to get our dollar down from 1.05 against the USD would help our exporters out a hell of a lot too!

What part of "exports bring money into the country to deal with debt and help us prosper" don't our regulators get?!

All for now,

Brad Skelton
The Shipping Bloke

Wednesday, 15 August 2012

How many containers REALLY get lost at sea?

(You are getting this note because you subscribed to The Shipping Blokes Blog by Brad Skelton)

Frequently in the media I hear statistics quoted that up to 10,000 containers are lost overboard  at sea each year.  In these modern times, why does it happen at all?

A number of factors ranging from severe weather and rough seas to catastrophes like the ships themselves getting lost at sea just like the "Rena" (pictured off the coast of New Zealand) contribute to the losses. Safe stowage can also be compromised by shippers overloading containers although progressively most countries are following the International Maritime Organisations agenda to have the weight of all containers properly verified before loading.




As for the reliability of the data....there is isn't central source keeping track of this nor do the marine underwriters compile or publish any accurate statistics. The World Shipping Council has surveyed it's member shipping lines to try and find out how many containers are actually lost. It was radically different to what media outlets sensationally suggest. 

Not counting catastrophic events the survey revealed a figure of only 350 containers being lost each year. If you include catastrophic losses like the "Rena" then the number only rose to 675. A far cry from 10,000! Considering the millions shipped each year that's not too bad.

So the yachties of the world are safer than they think, my clients can probably sleep tonight and so can their underwriters. I still recommend you get insurance though!!

All for now,
Brad Skelton
The Shipping Bloke