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( LL ) Of the mysriad energy shipping projects threatened by US and European Union sanctions against the Russian energy sector, the groundbreaking and expensive project to export liquefied natural gas on ships from the Yamal Peninsula in the country’s icy Arctic waters is surely among those most at risk of disruption.
The project’s leader, Russian gas producer Novatek, was confident a few days ago that the Yamal project will proceed according to plan, despite sanctions talk.
Now, however, the EU and US have stepped up the rhetoric, saying that imminent energy sanctions will focus on sales to Russia of equipment for deepsea drilling and shale gas development.
Russia’s involvement in Ukraine and the downing of passenger jet MH17 has spurred the EU and US to act.
The EU, dependent on Russian piped gas for about 30% of its supplies, will stop short of widespread sanctions on imports due to the continent’s huge reliance on Moscow’s exports, it has said.
However, LNG supplies from Russia might not be treated so favourably — especially ones that are not yet up and running.
Yamal’s vessels
The 16.5m tonnes of LNG per year Yamal project, one of the world’s largest LNG export projects ever attempted, not to mention the most difficult due to challenges posed by the harsh Arctic environment, is one such LNG project that is not yet established, hoping to export LNG cargoes in around 2017.
However, it is threatened due to its international involvement, size and complexity.
Novatek owns 60% of the $27bn project, with France’s energy major Total owning 20% and China National Petroleum Corp holding another 20%.
If that looks like a delicate balancing act between interested nations, then the shipping element of the project is a wobbly tightrope walk of disparate interests.
Different shipowners will carry cargoes from Yamal, with complex, expensive, ice-class LNG carriers being built at this very moment for the project.
Earlier this month, China Shipping Development said it will provide guarantees of up to $490m to underwrite the construction of three ice-class LNG carriers built at South Korea’s Daewoo Shipbuilding & Marine Engineering for the project.
The total cost of the three ships is an eyewatering $932m, and they will be owned 50-50 by CSD and Japan’s Mitsui OSK Lines, for delivery in 2018-2019.
The vessels will be chartered through a limited liability company in Singapore, called Yamal Trade.
The three ships follow the deal a year ago by Total and Novatek to reserve slots for up to 16 LNG carriers at DSME to carry cargoes from Yamal.
A tender was put out, seeking shipowners to start filling those slots with firm vessel orders, hence CSD and MOL’s partnership.
Then, also this month, US company Teekay LNG Partners said it had signed contracts worth as much as $2.1bn to order six ice-class LNG newbuildings via a 50:50 joint venture with China LNG Shipping.
Earlier this year, in March, Russian shipowner Sovcomflot confirmed the first LNG carrier order in the project for $317.9m.
There is evidently a high degree of international co-operation on the shipping element of the Yamal project that starts to look worryingly reliant on events proceeding smoothly, without a widening of energy sanctions following the latest decision to prohibit equipment sales for exploration activity.
Decisions
Even under sanctions against equipment sales, Yamal looks vulnerable.
According to Total, Yamal will eventually involve the drilling of more than 200 wells in the Russian Arctic to obtain the gas for liquefaction.
Other Russian energy projects that have foreign involvement also start to look riskier under sanctions.
Shell’s stake in the Sakhalin 2 oil and gas production project that will export LNG looks riskier; ExxonMobil’s Sakhalin 1 joint venture with Russia’s Rosneft is another; and BP’s 20% ownership of Rosneft now appears to leave it and its interests in Rosneft projects vulnerable.
But in terms of investment in ships to serve a particular project, Yamal’s 16 new LNG carriers at a total cost of around $5bn is clearly the biggest cause for concern.
“The Yamal LNG plant project could be delayed, should the [European Union] decide to impose Iran-like economic sanctions on Russia,” said Daishin Securities equity analyst Feynman Jeon in March.
If all the vessels are ordered but the project is indefinitely delayed, decisions will have to be made on whether to delay delivery of the vessels or whether to put them into the spot market.
If there is one thing the LNG shipping market does not need right now, 16 additional vessels competing against the other ships in the spot or short-term market.
Earnings are already down to around $40,000 per day from highs of more than $80,000 per day this year due to vessels chasing cargoes.
Much in energy shipping, therefore, hangs on the impact that the energy sanctions will have on the Yamal LNG export project.
HAPAG-Lloyd’s imposing head office overlooking the Alster Lake in central Hamburg is the epitome of traditional values and a proud pedigree.
The prime location on the prestigious Ballindamm, and spacious entrance hall with its marble floors, columns and double-height ceiling, are designed to impress.
But if that impression is of a company locked in the past, then it would be a misleading one.
For behind the classic facade, Hapag-Lloyd is embracing change. Indeed, 2014 is on course to be a landmark year for Germany’s largest container line.
The city of Hamburg and other German interests, including the freight-forwarding entrepreneur and billionaire Klaus-Michael Kühne, may have fought hard to keep Hapag-Lloyd out of foreign hands six years ago, but this is not a company refusing to adapt to a rapidly changing world. Conversely, it is that willingness to be flexible that has enabled the shipowner to survive some tumultuous times.
Hapag-Lloyd was formed in 1970 as a result of the merger of Hamburg-Amerikanische Packetfahrt-Actien-Gesellschaft and North German Lloyd. But the origins of those two lines go back much further, with Hapag founded in Hamburg in 1847 by local merchants and NDL set up in Bremen in 1857.
Both lost their fleets twice, after the First and Second World Wars.
In more recent years, Hapag-Lloyd has developed into one of the most successful container lines in the world, with former chairman Hans-Jakob Kruse — who died earlier this year — instrumental in its success.
Yet over the past decade, the Hamburg line has lost ground to three other European carriers: Maersk Line, Mediterranean Shipping Co and CMA CGM. None of those have such a long and illustrious history as Hapag-Lloyd, yet the trio now dominates the global container trades and seems to be pulling ahead of the rest despite being forced to abandon the P3 vessel-sharing agreement after a veto from China.
The acquisition of CP Ships in 2005 pushed Hapag-Lloyd from 13th place to number five in the world, but it has since slipped back to sixth place. Moreover, fleet capacity is only around a third of that of either Maersk or MSC, despite a newbuilding programme with a series of 13,200 teu ships recently delivered.
Yet more than ever, “size matters”, says Michael Behrendt, who stepped down as chief executive at the end of June.
Long gone are the days when a line could be ranked, say, 14th or 15th in the world and still make a very comfortable living as a global operator or large regional player.
With little control over prices, carriers can only improve their bottom line through a tight grip on expenses, and that means the cheapest slot costs possible, best achieved through economies of scale.
Hapag-Lloyd’s financial results have been relatively lacklustre compared with industry leader Maersk, with the line posting a loss in the first quarter of the year. Admittedly, several other carriers were also in the red, but the Danish line is proving that it is possible to make money even in difficult trading conditions.
So can Hapag-Lloyd reverse the trend and close the gap on the industry leaders, both in terms of profitability and fleet size[] ?
Finishing touches
Having made it clear that Hapag-Lloyd had to grow and that he had a hit-list of merger or acquisition targets, Mr Behrendt rounded off his 13 years as head of the line by putting the finishing touches to a merger with the container shipping arm of Chile’s Compañía Sud Americana de Vapores to form what will be the world’s fourth-largest container line in terms of capacity, with some 200 ships totalling 1m teu.
The deal is not expected to be concluded until November, once regulatory clearance is obtained, but the shareholders of each line have already given their consent to the tie-up.
But that is unlikely to be the end of the expansion drive, with Mr Behrendt saying that the line will then turn its attention to the Asia-Pacific region where it sees the need to have a stronger presence.
Once the CSAV deal is completed, Mr Behrendt will join the supervisory board as chairman, replacing Jürgen Weber, who decided to step down early in order to ensure continuity during the integration process.
Although little planning can be done until antitrust authorities have given the green light, the priority is to move as fast as possible, with Mr Behrendt hoping the two businesses will be fully amalgamated within the year.
This will not be a democratic process, with Hapag-Lloyd learning from its takeover of CP Ships — which it feels went well — and less successful industry mergers such as that of P&O Containers and Royal Nedlloyd, that one side has to be in control.
In the case of the CSAV deal, the headquarters will be in Hamburg, with Valparaiso becoming a major regional office, as the German line takes charge and retains its national identity.
CSAV will become a major shareholder in Hapag-Lloyd, with an eventual stake of 34%. That will enable other investors, who have been looking for an exit route since coming to the rescue of Hapag-Lloyd in 2008 after principal shareholder Tui said it wanted to sell, to reduce their interests.
The city of Hamburg, through the Hamburger Gesellschaft für Vermögens und Beteiligungsmanagement consortium, will be able to cut its stake from almost 37% to just over 23%, while Mr Kühne’s interest will go down from 28.2% to 20.8%. Tui will own 14% of the equity at the end of this process, against 22% now.
The goal is to then have an initial public offering within a year of the merger, with a minority stake in the new entity to be sold to new shareholders.
But the basic ownership structure will still be very different from that of the top three, which are each in the control of powerful and hands-on families.
That is particularly the case for MSC and CMA CGM, which are able to benefit from a fast decision-making process. Many in the industry are convinced that the failure of most Asian lines to keep abreast of their European rivals is down to internal bureaucracy that prevents a rapid response to market conditions or investment opportunities.
Mr Behrendt rejects the idea that Hapag-Lloyd’s more splintered ownership, both now and in the future, will be a handicap as it strives to catch up with market leaders.
“I am very happy with the time our decision making process takes — when it was necessary to be fast, we always could be, but some rules and double-checks are needed. I like to be spontaneous, but if I invest billions I like to think twice,” he said in a wide-ranging interview with Containerisation International.
Growth potential
Speaking just days before retiring from the chief executive position and taking a few months’ break, Mr Behrendt considered whether Hapag-Lloyd and Hamburg Süd would ever merge, after two failed attempts, one as recently as last year.
“It could be possible, but it is not a priority on our agenda,” he said, with CSAV now giving greater access to the South American markets, which would have been the main reason for teaming up with Hamburg Süd.
Instead, the merger and acquisition focus is likely to switch to the Asia-Pacific region where Hapag-Lloyd sees growth potential.
Asked if Hapag-Lloyd had been invited to team up with the other three European lines to form what would have been the P4 vessel-sharing agreement, Mr Behrendt said there had never been an approach. As a member of the G6 alliance along with five Asian lines, Hapag-Lloyd is fully committed to that consortium, he said.
Hapag-Lloyd is not only about to gain a new major shareholder, but also a different team of senior executives as well, with Mr Behrendt being succeeded by Rolf Habben Jansen, the former head of AP Moller-Maersk’s freight forwarding subsidiary, Damco.
A Dutch national, he will also be the first non-German to run Hapag-Lloyd. He will be supported by Anthony Firmin, who has taken over from Ulrich Kranich as chief operating officer, and who is British.
So Hapag-Lloyd may on the face of it remain a quintessentially German company. But behind the scenes, Ballin House is taking on a very international flavour through its new Chilean shareholder and foreign top management that promise to bring cultural diversity to this pillar of the Hamburg establishment.
THE process of obtaining regulatory clearance for the merger of Hapag-Lloyd and CSAV’s container shipping activities has now begun, with the European Commission receiving formal notification of the proposed concentration a few days ago.
Publication of the planned transaction in the Official Journal of the European Union today marks the start of a 10-day window in which observations can be submitted to the competition directorate.
The European Commission has invited interested third parties to send comments on the deal, which is expected to fall within the scope of its merger regulation.
However, the final decision on this point has not yet been made.
Hapag-Lloyd and CSAV have said they hope to complete the merger by around November.
Strong year anticipated for North European box volumes
NORTHERN Europe’s largest container ports are expected to enjoy a period of steady growth in 2014, say analysts.
According to the latest North Europe Global Port Tracker forecast, the volume of containers handled by the region’s six major box ports, Le Havre, Zeebrugge, Antwerp, Rotterdam, Bremen and Hamburg, is projected to total 42.2m teu, up 5.8% when compared with the 39.9m teu handled in 2013.
Box imports represent 21.7m teu of this total, a rise of 7% year on year, while exports are forecast to climb 3.8% to 20.5m teu.
Last year, Europe’s top ports handled containerised imports of 20.2m teu and 19.7m teu of exports.
Exported laden deepsea containers are expected to rise by 3.8%, while loaded incoming volumes are projected to increase 5.6% to 16.8m teu and exported volumes by 4.2% to 18m teu.
Looking forward, Ben Hackett of Hackett Associates, which publishes the North Europe Global Port Tracker forecast alongside the Institute of Shipping Economics and Logistics, noted the solid expansion within the industrial sectors as output grows with strong demand from Asia and likewise North America.
“This is underpinned by rising consumer demand boosted in confidence with growth in the UK and Germany to levels not seen since 2008,” he said.
When looking at the impact of this across the six-port range, the ISL’s Dr Sönke Maatsch highlights the issue of continued competition between the largest ports and how Rotterdam and Antwerp are looking to both maintain and regain their market share.
“Part of the shift in market shares is due to carrier port call decisions, something which is very evident in Antwerp where growth has been virtually exponential.”
In the first six months of 2014, Antwerp saw traffic grow 2.9% to 4.2m teu, while, despite a strong second quarter, Europe’s largest container port Rotterdam reported moderate growth of 1.9% after handling a shade over 6.3m teu.
Hamburg has yet to publish its half-year figures. However, Containerisation International understands that the German port will see growth similar to the 8% achieved during the first quarter of the year.
Earlier this month, Hackett Associates and ISL released its Global Port Tracker forecast, covering the North European ports, for the second half of 2014. The forecast anticipates box traffic to rise 6.9% in the six-month period from July through to December.
Congestion worsens at Rotterdam, spreads to Antwerp
( JOC ) Worsening congestion at the port of Rotterdam has prompted two short sea and feeder shipping lines to impose surcharges of around $100 per container.
Shippers could also be hit by congestion surcharges at one of Hamburg’s largest terminals, and Antwerp is showing the first signs of cargo bottlenecks as the European vacation season gets into full swing.
Team Lines, a German feeder operator, said the situation in Rotterdam has not shown “any significant improvements” since the end of May, when it was experiencing berthing delays of up to 48 hours at the ECT Delta terminals.
The terminals “are still facing severe congestion and the operational constraints are increasing,” leading to extra costs and disruptions to its schedules at Europe’s largest container port, the company said.
Team Lines said it will impose a surcharge of ?75 ($102) per 20-foot container from August 1 until further notice for all vessels arriving at and departing from the ECT Delta and Euromax terminals to compensate for the extra costs caused by the congestion.
OPDR, a German short sea carrier, said it has no option but to levy a ?75/TEU surcharge on all containers handled at the ECT Delta and Euromax terminals from August 1 in response to the months-long congestion, which has “huge impacts on our schedule integrity and, moreover, causes great costs.”.
Contargo, a leading container barge operator, announced a congestion surcharge of ?15 per container through August for cargoes transported to and from Rotterdam to cover additional costs for unloading at different terminals, trucking within the port, reducing its capacity and chartering additional barges. Contargo said its vessels have faced increasingly long delays at Rotterdam terminals, with “processing times of 50 hours, peaking at up to 90 hours ... no longer unusual.”
Processing times have increased by a third since April, it said.
The congestion in Rotterdam, Europe’s largest container port, is blamed on the late arrival of deep-sea container vessels, system outages and labor shortages. The berthing delays at ECT Delta are also related to an upgrade involving the installation of five new quay cranes, automated guided vehicles and automated staking cranes. ECT is owned by Hong Kong-based Hutchison Port Holdings. The logistics software firm CargoSmart reported in June that delays at Northern European ports appear to be associated with larger vessels.
Short sea and feeder carriers, barge operators and truckers are also bracing for delays at Europe’s second- and third-largest container ports, Hamburg and Antwerp, as longshoremen go on vacation at the height of the peak shipping season.
The increasing deployment of mega-ships, particularly on the Asia-Europe route, also is creating greater volume peaks that are straining terminal capacity in the Le Havre-Hamburg port range.
“Now that the holiday season has begun, first signs of bottlenecks are appearing in Antwerp too,” according to Contargo, which said it is keeping a very close eye on the processing situation at the Belgian port “so that counter measures can be taken in good time.”
Team Lines said it is facing continuing operational problems at HHLA’s Hamburg Burchardkai terminal and has received further warnings about delays in the dispatch of vessels at the German port. The company warned in March that it was facing problems at other German hub ports “where the terminals are congested, suffering slower operations and lacking in berth capacity.”
The congestion at Rotterdam and Hamburg is on a scale last witnessed during the global container boom of the early to mid-2000s, according to Drewry Maritime Research.
HHLA last week said it is hiring 50 extra workers at the terminal on top of the 100 hires last year, some of whom are still being trained, as part of a plan to deal with ever-increasing peaks in container shipments.
“Everyone in the logistics chain has to accept that peak loads will occur more regularly than before as we go forward,” said Heinz Brandt, HHLA’s chief human resources officer. “The constantly rising peak loads place serious operational demands on logistics companies and mean significant strain for the [HHLA] staff members. Our employees have met these challenges head on,” he said.
The Burchardkai terminals handled 63 ocean-going vessels with more than 3,000 container moves per vessel in the first of 2014, compared with 29 vessels in the first half of 2008. Peak loads for rail containers have increased by 21 percent since 2008 and those for trucks are up almost 11 percent, HHLA said.
Trucking companies have imposed a traffic congestion surcharge of ?40 per haul within Hamburg city limits and ?80 beyond the city boundary.
HHLA said it denies “all of the talk about go-slows or absenteeism because of the [soccer].
ADVANCES by Greek shipowners into the containership market are far from over. During the last few days, the first flurry of shipping companies’ second-quarter earnings have provided abundant evidence for that.
Bulkers and tankers have always been seen as the backbone of Greek shipping and that is not going to change. But in 2009 to 2012, as vessel prices tanked, there was a surge of interest in boxships among Greek owners, several of which were making their first moves in containers.
Last year and during the early stages of 2014, the rate of secondhand purchases fell and some pundits saw a return to interest in more traditional pastures. Yet, at the same time, Greek companies were racking up containership newbuilding orders.
The onset of the current results reporting season has served to underline the developing Greek presence in the sector and how a number of Greek companies have matched their investments in the sector to the capital markets.
Three US-listed owners that were not active in container shipping just a few years ago all reported new deals or outlined imminent growth in the sector.
Navios Maritime Partners, the master limited partnership of the Angeliki Frangou-led Navios Group, has unveiled the $117.7m acquisition of two 8,200 teu boxships with charters back for at least four years to the selling liner company.
Although the identities of the ships were not disclosed, the deal has apparently been done with Taiwanese government-linked Yang Ming Transport and involves the 2006-built pair YM Utmost and YM Unison……………… .
Capital Product Partners, initially a pure tanker owner, for the past couple of years has been working to introduce container vessels on multi-year charters to strengthen cashflow and confidence in its shareholder distribution.
It has just agreed to acquire from its privately-held sponsor Capital Maritime three 9,160 teu containership newbuildings for delivery next year that will go on five-year charters to CMA CGM at the gross rate of $39,250 per day.
Nasdaq-listed Capital Product will pay $81.5m per vessel, a price said to be below current market value. Third-party appraisals put the amount the partnership would be saving on the trio anywhere between $29m and $43m.
Evangelos Marinakis-led Capital Maritime has several other post-panamax containerships on order that could conceivably be offered to the partnership at a later date, although these are with a private equity partner as majority investor that, presumably, would have the final say
Greece-based dry bulk heavyweight Diana Shipping has been another to target investments in the container shipping sector along with its continuing shopping for bulkers.
The US-listed company has just announced its participation, along with its individual executives and an outside US investment fund, in a $92m capital expansion for affiliate Diana Containerships.
Management described the move as a strategic transformation for Diana Containerships, resulting in a company with greater capital resources and expanded financial stability that can hunt opportunities currently offered by the sector.
Vale sees production surge
( Dry cargo - Eric Martin in Stamford ) Vale, whose output fuels the Brazil-to-China capesize trade, posted the best second-quarter iron ore production totals in its history.
The Brazilian miner, the world’s largest iron ore producer, said today that production of the commodity reached 79.4 million tonnes during the period. That marks a 12.6% increase on the second quarter of 2013 and an 11.8% jump on the first quarter of this year.
While Rio de Janeiro-based Vale said it experienced production gains across its Brazilian assets thanks in part to improved weather conditions, output improvements ts Carajas Plant 2 and southern Conceicao Itabiritos mines were particularly helpful. So far in the first half,
Vale has produced 151 million tonnes, an 11.1% improvement on the first six months of last year.
The dry-bulk market is licking its lips as it watches Brazil’s iron ore sector, where further production gains expected in the second half of the year are predicted to boost capesize rates.
In addition to being a major charterer, Vale owns a fleet of large bulkers.
Transnet CEO raises alarm on softening coal price
( Miningweekly.com ) Transnet CEO Brian Molefe on Tuesday raised the alarm over the ever-declining coal price.
The company planned to undertake a study on the impact of the lower coal price and said it would make an announcement in
due course.
Molefe, speaking during a conference call with the media, said the price of coal had impacted the State-owned freight company, but the extent had not been determined. The price of coal had dropped drastically over the past few months from a high of $135/t to $75/t and Molefe was “worried” about the possibility of exporters holding back coal exports.
The review would examine what the impact of the lower pricing would be on future coal volumes.
However, despite these concerns, Molefe reassured media that it would maintain its ambitious infrastructure expansion plans, continuing its R307.5-billion Market Demand Strategy programme.
INSTANCES of grain consignments stuck on board ships have prompted calls for a relaxation of rules governing genetically modified grains and pesticides.
Grains are a key segment of the handy, supramax and panamax market, exported from various regions including the US Gulf, the Black Sea and Australia.
However differences in nation states’ standards, coupled with ultra-sensitive detection techniques, have led some otherwise perfectly good cargoes to fail to pass muster. Now, some industry figures are questioning whether it is the rules, rather than the cargoes, that are at fault.
Chief executive of Grain Trade Australia Geoff Honey told the Australian Grains Industry Conference in Melbourne that the so-called “zero tolerance” approach is flawed, whether in regard to GMs, pesticides or organics.
He noted examples of when minute quantities of genetically modified grain dust particles, or a low-level presence, were detected on other consignments, one incident resulting in almost $3bn worth of losses to the US corn, distillers’ grains and soya sectors.
“To give a recent example, there was about 1.2m tonnes of US corn bobbing off the coast of China pre-Christmas 2013,” Mr Honey said.
He added: “The issue was that there was GM grain that was approved in the US but was not approved in China and they detected trace amounts of this grain in the cargo.
“Testing gets down to one seed in 10,000 and so the testing is extremely accurate and [China has] a zero tolerance to unapproved GM events so straight away you have distressed cargoes.”
America’s National Grain and Feed Association has meanwhile predicted heavy losses to US exporters, grain handlers and growers due to Syngenta North America’s decision to launch seed sales of biotech enhanced corn, well before approval has been granted in China and other key markets.
NGFA president Randy Gordon said access to China remains crucial.
“Regaining and maintaining access to the Chinese import market, as well as preserving access to other US export markets, is critically important to the short-term and long-term prospects of US agriculture,” he said in a statement earlier this year.
The NFGA said the corn trade with China had “come to a standstill” and US exporters have reported cases of China detaining and testing shipments of American soya beans.
Mr Honey said such circumstances could affect Australian exporters.
“It’s a bit of a long stretch, but it could be a cargo of conventionally bred Australian wheat in exactly the same circumstances, all dependent upon what the prior cargo was in that bulk hold.”
So-called zero tolerance is an unreasonable standard to uphold, he argued.
“In Australia and internationally, we need to move off this concept of zero tolerance whether it be for a GM event or a particular chemical or whatever it may be.
“Because of shared supply chains and accuracy of testing... it is very difficult, if not impossible, to have a zero-tolerance [approach].
“For heaven’s sake, the European Union has a 0.9% tolerance and yet in Australia and organic standards, the organic industry has a zero-tolerance [approach].”
Managing director for ITS Global, Alan Oxley, who also spoke at the AGIC, noted increased demand for wheat and grains in China and other growing Asian nations, set against increased focus on food safety.
“I was really struck in China with the deep interest, if not obsession, about safety and high food-quality products,” said Mr Oxley, an analyst and former GATT chairman.
“There is a huge market emerging there of people who want reliable and safe food.
“This, I think, has significant implications for the way in which food is actually presented and packaged.”
Thome Ship Management grabs environmental award from Port of Long Beach
( MarineLog ) Thome Ship Management, part of the Thome Group, learned that when it was recently awarded a Green Environmental Achievement Award by the Port of Long Beach, California, for its high performance standards in 2013.
Explains Yatin Gangla, Chief Operating Officer Bulk Division at Thome, “This award is presented to operators whose vessels call at the Port of Long Beach and who have demonstrated that 90% or more of the vessels have complied with the Voluntary Vessel Speed Reduction Program. In recognition of this achievement, Thome has received a green flag and a 25% discount on the dockage dues payable by all our managed vessels to the Port of Long Beach during 2014.”
The Thome Group is based in Singapore and owned by Olav Eek Thorstensen and his family.
SOUTH Korea’s Hyundai shipyards have posted their worst results since the company was founded during the second quarter, weighed down by large provisions of losses due to low-value orders, and construction delays to sophisticated new projects.
Hyundai Heavy Industries, the world’s largest shipbuilder by output, recorded a loss of Won489bn ($477.4m) attributable to the owners of the company in the three-month period, reversing the year-ago profit of Won98.2bn.
Operating losses reached Won1.1trn compared with the year-ago profits of Won289bn. Sales fell 2.1% on year to Won12.8trn.
“We have been in keen competition with Japanese and Chinese yards for ships, offshore and plant orders… for the past one to two years there were some low-value orders,” said a yard official.
HHI booked nearly Won500bn in loss provisions, including Won200bn for shipbuilding, Won70bn for offshore and engineering, and Won210bn for industrial plants.
The offshore division of HHI recorded a loss of Won374bn, weighed down by Won300bn expenses for changed specifications.
“We are a first-timer in some sophisticated projects and experienced difficulties in our operations,” the HHI official said.
“There were delays in some larger offshore projects and plants.”
The yard has vowed to renegotiate with clients to recover some loss provisions, to restructure its business and to reshuffle personnel, although details have yet to follow.
Affiliate Hyundai Mipo Dockyard, which specialises in product tankers, widened its net losses to Won199.2bn from Won121.7bn a year ago.
HMD’s operating losses jumped to Won250.6bn from the year-ago level of Won60.5bn and sales dropped 5.3% to Won899.4bn.
The shipbuilder encountered delays with three medium range and four handysize product tankers in the second quarter, which hurt its financial results.
“Those vessels are of new specification so our lack of capability in basic design resulted in some issues,” said a HMD official.
“The delays resulted in a huge deficit for our operating revenue, but we expect the impact to be one-off… Four of the vessels are already delivered now and three are in quay.”
The official said HMD also booked loss provisions of “a similar amount to the quarterly loss”, due to negative-value orders before the first half of 2013 but did not provide a specific figure.
With a slowdown in newbuilding orders, both HHI and HMD received fewer new orders in January-June, which could hit their results later.
HHI secured orders totalling $11.2bn during the period, down 23.2% on-year, mainly due to a fall in less offshore business.
New orders for HMD amounted to 35 vessels worth $1.4bn, compared with 70 ships worth $2.3bn in the year-ago period.
However, having booked huge provisions, both yards expect better operating results in the coming months.
“I think we hit... rock bottom in the second quarter,” the HMD official said.
D’AMICO International Shipping may have seen profits slide in the second quarter due to a tougher than expected market, but there are enough bright spots out there to keep spirits up, not least the opportunities offered by US exports of oil products.
The rise in cargoes out of the US Gulf to markets such as South America and Europe has been “almost exponential”, d’Amico chief executive Marco Fiori tells Lloyd’s List, speaking from the company’s Milan headquarters.
He highlights a graph put out for the company’s financial results presentation, which shows quite clearly the inexorable rise of US product exports, generated by the country’s extraordinary domestic oil boom.
In the year 2000, US product exports were below 1m barrels per day, rising to around 2m bpd by 2009, 3m bpd by 2013, and now settling at an impressive average of 3.4m bpd for the first half of 2014, the graph shows.
US refineries are processing more oil as the country’s production creates a surplus.
Of course, there is the odd hiccup, such as the second quarter which saw longer than expected closure of several US Gulf refineries for maintenance.
Nevertheless, this is seen as a minor inconvenience, with market fundamental positives easily outweighing negatives.
“You can’t be in this business if you’re not an optimist,” says Mr Fiori.
That optimism is directed towards the development of the US export market, as cargoes increasingly head to South America and Europe.
It’s not just about gasoline and diesel either.
Oil product naphtha is expected to be in surplus, with US net exports forecast to rise by 537,000 bpd between 2012 and 2019, the company says.
Naphtha is increasingly preferred over ethane in Asia as feedstock for the petrochemical industry, and the Asian petrochemical industry accounts for as much as 42% of global naphtha demand, the company points out.
Lower costs mean the US can produce this naphtha and sell it for a higher price, generating further demand for the tankers in which cargoes are carried.
Due to this robust export activity of US, a large part of d’Amico’s spot fleet is located geographically close to the US, enabling it to take full advantage of what the US offers.
“Houston is starting to become the centre of energy again,” observes Mr Fiori, unable to restrain the enthusiasm in his voice.
The company’s newbuilding orders are of the medium range product tanker variety, raising the question of whether it could be missing out on opportunities offered by long range product tankers.
“MRs are more flexible,” says Mr Fiori, ever the optimist.
THE UK has opened half the country to onshore exploration for oil and gas involving fracking, in a move that could eventually reduce the number of shipments of liquefied natural gas arriving by vessel into the country.
Gas is the focus here, due to it being hailed as the fastest growing commodity for the power sector, potentially replacing coal, which emits double the carbon pollution.
Nothing will happen imminently; most experts agree that it will take around five years before test wells are completed and for fracking for shale gas to start in earnest.
However, it is clear that the decision this week to offer licences to energy companies to explore for shale gas makes the future of LNG shipments into the UK vulnerable.
With energy security the phrase du jour in the energy sector, the UK government wants to reduce its reliance on gas imports.
LNG imports are risky because they are far more expensive than piped gas imports.
The process of importing LNG on vessels is also far more energy-intensive that piped imports, due to the liquefaction and regasification process, and the need for complex ships to transport cargoes across oceans.
LNG also largely arrives in the UK from the unstable Middle East, albeit from UK-friendly Qatar.
Piped imports, however, generally come from super-stable Norway.
Therefore, it stands to reason that LNG shipments into the UK are more vulnerable to declines in the event of widespread domestic production of shale gas.
It happened in the US, whose shale revolution the UK is desperately trying to emulate.
As domestic production took off around a decade ago, the US no longer required its LNG import terminals.
Those import terminals are now being turned into export plants, preparing to liquefy and send out the surplus gas being produced in the country.
It is far too early to say whether the UK will ever develop an LNG-export business if onshore gas production takes off.
If it does happen, it will be many years away, and will require significant investment, approvals, decisiveness, and will — factors that are somewhat lacking in the UK energy sector.
With that export possibility a very distant notion, minds should focus on the UK’s robust role as an LNG importer, the demand the country offers the ships and, therefore, what could be affected by the government’s decision to concentrate on domestic production.
The figures speak for themselves, highlighting how important the UK is to global LNG demand.
The UK imported 2m cu m of LNG on eight ships in June, the largest amount in the entire Atlantic Basin, ahead of Spain’s 1.9m cu m, Argentina’s 1.3m cu m, and Brazil’s 1m cu m, according to Lloyd’s List Intelligence data.
There can be no doubt that the government’s decision this week could erode those UK import figures, cutting the number of ships hauling cargoes to the country in future.
CNOOC starts natural gas production from East China Sea field
China National Offshore Oil Corp. Ltd. reported the start of natural gas production from Lishui 36-1 field on Block 25/34 in the East China Sea.
The field has four producing wells, a platform, and a processing terminal. Average water depth is 84 m.
The area is about 150 km from Wenzhou, Zhejiang Province (OGJ Online, Oct. 10, 2013). Development operator CNOOC holds 51% in the field.
CNOOC’s partners include Primeline Energy China Ltd. with 36.75%, and Primeline Petroleum Corp. with 12.25%.
Pirates shoot seafarer in the neck off Malaysia
( Published in Asia, Regulation, Ship Operations, Tankers ) The anchored product tanker Ji Xiang was reported to have been boarded by a group of 10 pirates at 2240 hrs, 2.5 nm northwest of Teluk Ramunia.
However, the pirates took flight when a Malaysian Maritime Enforcement Agency vessel approached. “A maritime patrol boat gave chase but lost them in the waters off a neighbouring country,”
Tanjung Sedili Maritime enforcement chief Captain Amran Daud, was quoted as saying by Malaysian news agency Bernama.
One seafarer was shot in the neck and has been hospitalised. The International Maritime Bureau described the seafarer’s injuries as minor.
The pirates left behind two pistols and machete when they fled the scene.
S. Africa’s largest union, Numsa, agrees to wage deal to end four-week strike
( Reuters ) South African engineering union Numsa has agreed to end a four-week strike after accepting a wage increase offer from employers, union leader Irvin Jim said on Monday.
Numsa, South Africa's largest union, has accepted a 10% annual pay rise fixed for three years for its lowest-paid workers,
Jim said, adding that members are due to return to work on Tuesday. The walkout by engineering and metals workers had halted production at automakers and affected construction at new power plants in a country struggling with electricity supply.
Nigeria: Navy Arrests Two Vessels, 25 Persons for Oil Theft
( Allafrica ) Twenty-five persons and two ocean-going vessels involved in illegal bunkering activities have been arrested by the men of the Nigerian Navy, along the waterways of the Niger Delta in Brass Local Government Area, Bayelsa State.
The two seized vessels identified as MV Hanan, which has nine crew member and MV Alezza Lilah with 14 Nigerians, a Ghanaian and a Camerounian, were arrested with over 300,000 metric tonnes of stolen and illegally refined Automotive Gas Oil (Diesel) on board the vessels.
According to the Commanding Officer of the Naval Forward Operating Base (FOB) NNS Formoso on Brass Island, Navy Capt. Noel Madugu, whose men made the arrest, "the MV HANAN L was intercepted by NNS Obula at 23 nautical miles, South-west of Pennington when their actions became suspicious.
U.N. blacklists operator of North Korean ship seized in Panama
( Reuters ) A U.N. Security Council committee on Monday blacklisted the operator of a North Korean ship, which was
seized near the Panama Canal last year for smuggling Soviet-era arms, including two MiG-21 jet fighters, under thousands
of tonnes of sugar.
The North Korea (DPRK) sanctions committee designated Ocean Maritime Management, which operated the Chong Chon Gang, the ship that was detained a year ago.
The U.N. designation means the company is now subject to an international asset freeze and travel ban.
"Ocean Maritime Management Company, Ltd (OMM), played a key role in arranging the shipment of the concealed cargo
of arms and related materiel," the committee said in an implementation assistance notice, obtained by Reuters.
"The concealment of the aforementioned items demonstrates intent to evade U.N. sanctions, and is consistent with
previous attempts by the DPRK to transfer arms and related materiel through similar tactics in contravention of Security
Council prohibitions," the committee said.
A Panamanian court on Friday ordered the release of the Chong Chon Gang's three North Korean officers.
Thirty-two North Korean sailors and the ship were released by Panama in February. North Korea is under an array of United Nations,
U.S. and other countries' sanctions for repeated nuclear and ballistic missile tests since 2006 in defiance of international demands to stop.
A U.N. report issued in March said North Korea has developed sophisticated ways to circumvent United Nations sanctions, including the suspected use of its embassies abroad to facilitate an illegal trade in weapons.
"The investigation also uncovered information indicating that DPRK Embassy officials in Havana were engaged in making arrangements for the shipment," the Security Council committee said of the Chong Chon Gang shipment.
"The committee encourages states to continue to exercise enhanced vigilance over DPRK diplomatic personnel," it said.
After the weapons were discovered on the Chong Chon Gang, Cuba acknowledged it was sending "obsolete" Soviet-era weapons to be repaired in North Korea and then returned to Cuba.
The Security Council committee said it was concerned that this military-to-military cooperation violated U.N. resolutions, which it said "prohibit the transfer from the DPRK by its nationals or from its territory of advice, services or assistance related to the maintenance or use of prohibited arms and related materiel."
"This prohibition covers many activities including repair, diagnosis, monitoring, physical and chemical tests, and any related services for such items," the committee said.
$112,500 spill penalty follows accidental sinking in US
American Gold Seafoods faces a $112,500 penalty for an oil spill caused by the accidental sinking of its vessel, the Clam Digger, in July 2013 near Anacortes.
The Washington Department of Ecology investigated the cause of the sinking and spill and determined that negligence was a key factor.
When the Clam Digger left Anacortes on July 10, the boat encountered high waves, began taking on water, and eventually sank. AGS immediately initiated appropriate response protocols. Divers recovered the boat six days later, but during the recovery efforts 315 gallons of oil spilled.
"This spill was preventable," said Dale Jensen, who manages the Department of Ecology's Spill Prevention, Preparedness and Response Program. "The Clam Digger was not adequately maintained, and not fit for its intended use that day."
A long-awaited tunnel linking Miami’s port to the interstate highway system will be open for business at the beginning of next week, after months of delays.
Last winter, congestion at Port Metro Vancouver was so bad that it triggered a month-long strike by hundreds of truck drivers. Four months later, turn times are averaging less than an hour.
Facing growing port congestion, the Port of Hamburg is implementing a far-reaching plan to better manage truck traffic of containers moving in and out of its terminals.
An activist group announced plans to block cargo moving off Israel-based Zim ships at Oakland on Aug. 2 to protest the conflict in Gaza.
CMA CGM has warned customers that it will implement a congestion surcharge at US ports if industrial action should break out during negotiations between west coast port workers and employers.
Strong business demand for package and freight transportation drove volumes and revenue higher at UPS in the second quarter.
Maintaining momentum is challenge facing new LA port director
In Gene Seroka's first meeting with Los Angeles Mayor Eric Garcetti after being named executive director of the Port of Los Angeles last month, the mayor told Seroka what is expected of him: "Maintain and grow the nation's number one port."
DORIAN LPG, the very large gas carrier owner, has agreed with Phoenix Tankers, a subsidiary of Mitsui OSK Lines, to create a VLGC pool.
The pool, a significant factor in attempting to consolidate the VLGC market, is scheduled to start operating on January 1 next year.
Manila’s choked container port will finally have some relief as sweeper ships arrive to clear the thousands of empty boxes clogging the city terminals.
Investment bank expects the trend to continue
FREIGHT forwarders DSV and DB Schenker are the latest to post above-market ocean freight volume growth figures.
Japan Airlines Corp.’s group net profit tumbled 19.4 percent in the first quarter of fiscal 2014.
Suez Canal widening to begin this week
The Suez Canal’s major deepening project is just over the horizon as crews will start widening and dredging a 34-kilometer strip in order to improve wait times for vessels using the canal. AsiaCruiseNews.com reported today that the long-awaited widening project could take years to complete, but dredging crews will begin within the next week.
The canal’s website says the dredging will take the canal from 48 feet to 52 feet.
“This project will allow giant container ships heading south to pass through these channels and reduce … total transit time,” the website says.
Currently, on a typical day three convoys transit the canal, usually consisting of two southbound and one northbound trip. It takes between 11 and 16 hours to complete the passage at a speed of eight knots.
The Suez Canal has seen record traffic this year, partially because of delays and construction at the Panama Canal.
For the first time, on all-water services from Asia to the East Coast, a greater percentage of the shipments will move through the Suez Canal than via the Panama Canal, according to Alphaliner.
In May, the Suez Canal Authority reported 526 ships passed through the canal, up 6.9 percent from April’s totals.
The number of container ships passing through the Suez in May was the highest since May 2013, when 533 container vessels transited the canal.
The ships are also larger than the vessels that make their way through the Panama Canal.
Parts of the Suez are 66 feet deep and can accommodate vessels as large as Maersk’s 18,270-TEU Triple E ships.
In 2013, Drewry reported the average size of ships passing through the Suez Canal was 7,756 TEUs; the current maximum for ships using the Panama Canal is about 5,000 TEUs.
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