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Opec seaborne exports at five-year low
SEABORNE exports of crude oil from the 12-member Organisation of the Petroleum Exporting Countries were 22.44m barrels per day in July, according to data compiled by Lloyd’s List Intelligence.
This was the lowest level of shipments seen for many years and it helps explain the resilience of Brent crude oil prices at well above $100 per barrel.
The main reasons for lower Opec shipments are major political problems in Libya and Iran, plus lesser industry-related shortfalls in Angola, Nigeria and Venezuela.
Prior to the disruption of Libyan exports, which has been ongoing since the rebellion in early 2011 against the Gaddafi regime; and the tightening of sanctions against Iran, which took effect in early 2012, Opec shipments were typically in the range of 23m to 25m bpd. The “missing barrels” from Libya and Iran average about 2m bpd, split roughly equally.
It is difficult to see any possibility of peace and security returning to Libya. A few weeks ago, there were signs of a potential deal between the eastern and western factions that have divided the country, but this turned out to be yet another false dawn.
So bad has the situation become that the British government recently closed its embassy and evacuated any nationals who wanted to leave.
Oil exports from Libya remain at pitifully low levels, with data from Lloyd’s List Intelligence showing shipments in July at 270,000 bpd on 14 vessels.
It must be said that this was an improvement on June, when only 140,000 bpd was exported, but to gain a longer-term perspective on Libya, it should be noted that right up to the ousting of Gaddafi in March 2011, Libya exported 1.52m bpd on 67 ships.
The loss of exports from Iran has also been dramatic but, unlike in Libya, there is no damage to infrastructure or internal political infighting that would make a return to the market very difficult.
In 2011, Iran exported 2.4m bpd of crude oil and in a typical month there were more than 60 shipments. Early in 2012, tighter sanctions were imposed on Iran by the European Union and the US and this caused oil exports to plummet to only 600,000 bpd in July of that year.
Since then, Iran has been able to move more oil to China and India but so far in 2014 exports remain relatively depressed at 1.2m bpd, more than 1m bpd below the “real” figure.
Isis atrocities
Iraq was expected to join the list of Opec’s crisis countries. In political terms, of course, Iraq is a crisis country and the latest Isis atrocities suggest there will be chaos for the foreseeable future. In oil market terms, there has been little meaningful change to Iraq’s export patterns.
Lloyd’s List Intelligence data shows that in July, 2.48m bpd of crude oil left the southern port of Basrah and this number is line with the 2013/2014 average.
Until February, Iraq was also exporting about 200,000 bpd via a long-established pipeline to Ceyhan in Turkey, but this overland route has operated only fitfully since March, when rebels inflicted severe damage on it. About 100,000 bpd of oil is supplied to Ceyhan from some northern fields but workers are being evacuated.
For now, Iraq is not a major supply risk, but at ground level Isis could disrupt power, water and food supplies remote from the southern oil fields and make it difficult for the industry to operate.
On the other hand, at least in the short term, US president Barack Obama’s decision to authorise air strikes could change the dynamics of the Iraq crisis on the ground and provide breathing space for the new government in Baghdad to assert its authority.
Far from increasing speculative frenzy about oil supplies and thus sending prices upwards, President Obama’s decision has actually calmed supply fears and contributed to the recent easing of oil prices.
Lloyd’s List Intelligence’s shipments data shows a steady decline in Opec’s seaborne exports over the past few years.
This would have been a bullish signal for oil prices a few years ago, but lower shipments from Opec have coincided with booming oil production growth in the US and elsewhere. As recently as 2008, crude oil production in the US averaged 5m bpd but in the first half of 2014 this figure had grown to an astonishing 8.1m bpd.
This upsurge of 3m bpd comfortably compensates on a global level for the significant loss of crude oil exports from Libya and Iran, plus lesser shortfalls from Angola, Nigeria and Venezuela.
Crucial role
The role of Opec’s dominant member, Saudi Arabia, as the organisation’s — and the global oil market’s — swing producer remains crucial.
In the past few years, seaborne crude oil exports from Saudi Arabia have ranged between 5.95m bpd in January 2010 to 8.03m bpd in February 2012, with levels often determined by domestic requirements for oil for power generation but also very frequently determined by a subtle policy of balancing world oil supply and demand to ensure that crude oil prices remain above $100 a barrel.
It is tempting to speculate on how the oil market will look if Iraq continues to be able to export significant quantities of crude oil, Libya’s warring factions settle their differences, and sanctions against Iran are eased or even lifted.
Such a scenario is highly unlikely to play out in a neat, ordered way, but it doesn’t have to. If oil traders decide that normal operations will return to these troubled countries and the leading non-Opec countries continue to see their production grow, we face the prospect of such downward pressure on crude oil prices that even the oldest swinger in town, Saudi Arabia, might be unable to resist the tide.
$100 million a day strike: Tugboat crews warn iron ore
industry
( SMH ) Tugboat crews, including deckhands paid more than some New York bankers, are threatening to disrupt shipments from the world’s biggest iron ore port as they negotiate for increased wages and improved conditions.
Australian iron ore miners may collectively lose about A$100 million ($93 million) a day as a result of stoppages at Port Hedland, according to BHP Billiton ltd. (BHP), the world’s largest mining company.
The port exports about half of the nation’s shipments, forecast to reach A$76.5 billion in the year through June 2015, according to government forecasts.
“Any tightening of supply, particularly at current levels, could see an iron ore price reaction that might offset any short-term revenue losses,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney.
“It’s not an overwhelming negative.”
Iron ore sank last week to the lowest level in almost two months as a credit gauge in China plunged, adding to risks that demand will slow from the world’s biggest buyer of the raw material.
BHP said in May that its mining operations may start winding down after two days of any strike action because stocks at the port were reasonably high.
The deckhands’ union has approval for unlimited stoppages for periods between two hours and 12 hours, while two other unions will ballot engineers and tug masters to enable strikes for as much as two-days and one day respectively.
Unions have discussed possible industrial action since March and, depending on the results of voting, rolling stoppages could stretch to November.
The deckhands earn at least A$137,000 a year, which can rise to about A$211,000 with benefits and allowances, according to BHP. A junior banker on Wall Street typically makes a base salary in a range of $70,000 to $90,000, with bonuses bringing total pay to as much as $140,000, according to New York-based compensation consultant Johnson Associates Inc.
At the top end, Goldman Sachs Group Inc. awarded Chief Executive Officer Lloyd C. Blankfein at least $23 million in 2013 compensation, according to an April filing.
“A threat to strike has been seen by others across the community as extraordinarily unreasonable,” Deidre Willmott, chief executive officer of the Western Australia Chamber of Commerce and Industry said by phone from Perth.
“The fact that most of these disputes are ultimately resolved through negotiations is cold comfort.”
Any strike action would likely have a short-term share market impact, said CMC’s McCarthy, though he rates the chance of a strike as extremely low.
Deckhands typically work for at least 12 hours-a-day and spend four week stretches away from their families, said Will Tracey, the assistant secretary of the Western Australia branch of the Maritime Union of Australia.
“They deserve to be paid well,” Tracey said in a Aug. 14 e-mailed response to questions.
“They also deserve to have annual leave, which they don’t currently receive.”
Iron ore exports from Port Hedland advanced to a record 364.3 million tons in fiscal 2014, according to the Pilbara Ports Authority.
Rio Tinto Group (RIO), the biggest iron-ore exporter after Brazil's Vale SA (VALE), makes shipments through Western Australia’s Cape Lambert and Dampier ports. Rio “may be a potential beneficiary if the strikes concerns were to escalate and have an impact on iron ore pricing” as it isn’t directly affected by the Port Hedland disputes, Michael Bush, Melbourne-based head of credit research at National Australia Bank Ltd., said in an Aug. 7 note.
Fortescue Metals Group Ltd., which also exports from Port Hedland, has said jobs among its 8,000-strong work force could be put in jeopardy as a result of any strikes.
BHP advanced 1.4 percent to A$39.68 at the close of trade in Sydney. Fortescue rose 2.2 percent to A$4.62.
Tugboat engineers at Port Hedland earn a basic salary of A$220,000 a year, and with allowances can command a total annual package of as much as A$390,000, according to Teekay Shipping (Australia) Pty, which operates 14 tugs crewed by 166 staff under a contract with BHP.
Masters, who pilot the tugs, are paid between A$220,000 and about A$322,000, BHP said.
Talks between Teekay with all three unions over the disputes are progressing,
BHP said today in an e-mailed statement. “We remain hopeful that new agreements will soon be reached,” the producer said in the statement.
Engineers will accept a wage increase in line with the consumer price index and are seeking changes to working patterns they say leave crews dangerously fatigued, said Henning Christiansen, the Australian Institute of Marine and Power Engineers’ federal secretary.
The union’s intention is to “shine a spotlight on the dangerous hours of work that BHP” and Teekay require of tug crews, he said in an e-mail.
The Australian Maritime Officers Union, which represents the tugboat masters, didn’t respond to three phone calls seeking comment. “Labor in that region has been able to price itself, more or less, given tight labor market conditions over the past few years,”
Tim Schroeders, a Melbourne-based portfolio manager who helps manage $1 billion in equities, including BHP shares, at Pengana Capital Ltd., said today in an interview with Angie Lau on Bloomberg Television’s “First Up.”
“It is a difficult environment. There’s room to move for both parties.”
‘Yielding without breaking’
( Commentary by Michael Grey, Lloyd’s List )
IN THE 1980s, the Marine Society published Sea Charmed Voices, a delightful book of verse by merchant seafarers that still cheers me up.
There is one poem titled ‘Ships to Come’, by an able seaman identified only as JFK, that considers the future of ship design in a somewhat irreverent fashion.
Its penultimate verse notes: “Of rust you will not see a bit/ For everything is plastic/ And if by chance a rock is hit/ We bounce off like elastic.”
It would be nice to think that JFK went on to take up naval architecture, or became an expert in structural engineering and the strength of materials. We will never know.
But I thought of this rhyming seafarer just last week, reading about the new MOL capesize in which a considerable amount of the side shell is made of a new “highly ductile steel plate” that will greatly enhance the safety of such a ship.
This, claim the proud owners of the ship, is the world’s first use of the NSafe material, developed by Nippon Steel & Sumitomo Metal, on a merchant vessel.
Some 3,000 tonnes of the special steel forms a wide belt around the side in way of the cargo holds and bunker tanks. It is said that this belt will absorb side impact to the hull three times more effectively than conventional steel plate, reducing risk of cracking after an impact.
It might be asked why it was that MOL’s large bulk carrier was chosen as the pioneer for this new material.
The answer, of course is that such a vessel, down to its marks with a cargo of iron ore, is highly vulnerable, should it be involved in a side-impact collision, particularly if the impact is on a transverse bulkhead.
There have been a number of cases where even very large ships have sunk very rapidly, taking their crews with them, having lost buoyancy with the inrush of water.
It might seem strange that we have waited so long for this important breakthrough, which could also have a role in making many other ship types a good deal safer.
General cargoships, of which there are many hundreds at sea, have a poor record of survivability.
So, unsurprisingly, do one-compartment ships, which will almost certainly be doomed if this single hold is breached, only the permeability of the cargo keeping the ship afloat if they are lucky enough to be carrying, say, wood.
Building ships with the new ductile material in their vulnerable parts could greatly improve their chances in a collision. The definition of “ductile” is a material that yields without breaking, which seems a very useful characteristic.
Bulk carriers have been much improved since the dark days of the 1980s, when far too many sank.
Hatch covers and bulkheads have been reinforced.
But it is still not much help if somebody else’s bow crashes aboard. Navigational accidents are still too prevalent.
It was said that double-hulls would be a useful safety measure, but it is fair to say that they have not greatly penetrated — if you will excuse the word — the market for very large ships, which continue to be designed with a conventional single-sided configuration.
There was perhaps understandable caution about the so-called additional safety of two thinner plates rather than one substantial shell and the integrity and practicability for maintenance of this internal space.
Some years ago, I attended a lecture by somebody from a US corporation who suggested that the industry should look to entirely new shipbuilding materials and that composites would be a very sensible strategy for the post-steel age.
These materials could be formulated to provide any character that the designer needed and he used as an example some of the things going on in the aerospace sector.
I believe the Boeing Dreamliner is made almost entirely of composite materials, which ought to be a good enough endorsement.
But money, probably more than any conservatism, talks.
The rewards from ship operation have not been sufficient to empower much in the way of pioneering design among bulk carrier owners.
I understand that Intelligent Engineering’s Sandwich Plate System, which has done very well in repairing ro-ro decks damaged by heavy traffic, has also been employed in structural elements incorporated into bulk carriers.
Because of its damage-absorbent characteristics, it has also been used to armour the sides of floating production storage and offloading units, where other vessels are to berth alongside for offloading.
But as the years have passed, it has been designs that are lighter, more economical and greener, rather than those that are intrinsically safer, that have commended themselves to owners.
This makes the MOL bulker stand out rather more as an important breakthrough.
It is perhaps significant that the first customer for this shipbuilding material is one of the big Japanese corporate majors, who have tended to take the lead on issues of corporate social responsibility, aside from developments that merely promise a better return.
Of course we can hope that the ductility of this design will never have cause to be tested in anger.
An approaching ship may well not “bounce off like elastic”, but being on board a less vulnerable hull may well do something for the peace of mind of any capesize crew.
Box alliance bears fruit
( Tradewinds ) Participation in the CKYHE alliance since March has had an immediate positive effect on Evergreen Marine, as shown in its second quarter result.
TradeWinds reported last week that the company returned to profit and managed to cut operating costs.
The Taiwanese carrier posted net income of TWD 150.2m ($5m) while operating costs went down to TWD 33bn, from last year’s TWD 36bn.
An Evergreen spokesman said: “By joining CKYHE alliance in the Far East-Europe trade and enhancing service cooperation in other markets, we are able to increase service frequencies, add more direct service to our network and cut transhipment costs.” When Evergreen joined forces with Cosco, K Line, Yang Ming and Hanjin Shipping, it marked the first radical change in the CKYH alliance in more than a decade.
The Taiwanese liner operator expects that given the more healthy market conditions in the third quarter, the financial outcome will be even better.
Heineken and Bavaria hit by Port of Rotterdam congestion
( Just-Drinks ) Heineken said it is experiencing 'minor challenges' from the situation at the Port of Rotterdam.
Dutch brewers, Heineken and Bavaria, are continuing to see their export traffic delayed as a result of congestion issues at Europe's largest port, the Port of Rotterdam.
The bottlenecks are mainly due to one of the site's main handling terminals undergoing an upgrade, which began around two months ago.
A Heineken spokesperson told just-drinks today: "We're experiencing some minor challenges, but are working with our logistics partners to find alternative options and solutions such as making additional use of the Port of Antwerp."
The spokesperson declined to elaborate on the length of the delays and the volume of shipments that are being held up, or which markets are affected, but added: "The beer we export through Rotterdam and Antwerp is destined for international export markets."
Bavaria revealed that its delays at the port concern deep-sea containers to be shipped to markets outside of Europe. "The delays are mainly three to four days, but with planning in advance from our side we try to decrease them as much as possible," a spokesperson said, adding that until now the impact had been "minimal".
Höegh LNG retains positive outlook despite losses
( LL ) Although Höegh LNG, the Norwegian gas shipping and logistics group, has reported a net loss of $12.8m in the second quarter, compared to a $13.5m loss a year earlier, it retains a positive outlook for its infrastructure businesses.
Revenues for the quarter were $32.3m, down from $42.7m, and an operating loss of $300,000 was an improvement on the $2.4m loss a year earlier.
The improvement in the group’s operating loss was mainly due to a lack of income caused by a vessel being offhire in the second quarter last year and the recent contribution of revenues from studies into floating liquefied natural gas projects.
Höegh LNG has a dwindling fleet of LNG carriers and a growing number of projects in the floating storage regasification unit market. The company has recently seen two FSRU projects begin following the unit’s construction and delivery from South Korea’s Hyundai Heavy Industries.
Lines post more Golden Week service changes
( LL ) CONTAINER shipping lines have announced more service changes to take place during the Golden Week holiday in China. The Danish carrier has cancelled calls at Chinese ports and Tanjung Pelepas in Malaysia on its AE20 service, which is run in co-operation with CMA CGM, to the Mediterranean in week 41 and week 43.
Maersk Line has announced changes to one of its Asia-Mediterranean services, while Hapag-Lloyd has announced a change to a G6 Alliance Asia-North Europe service.
Ningbo port and local government intervene in trucker strike
( LL ) NINGBO’s local government and main port operator have intervened in industrial action launched by truck owners and drivers that has disrupted cargo flows at the world’s sixth-busiest container port.
Ningbo Municipal People’s Government has called on local shipping industry participants to follow the new, higher guideline haulage rates and sent police to remove strikers in several violent clashes.
Asia-Europe rates slide for third consecutive week
( LL ) RATES on the Asia-Europe trade have fallen to their lowest levels since June and with lacklustre general rate increases expected for September, prices are not expected to pick up significantly any time soon. The latest Shanghai Containerised Freight Index shows that freight rates on the key trade route fell for the third consecutive week by 7.7% from $1,198 per teu to $1,106. Services between Shanghai and the Mediterranean, meanwhile, followed a similar pattern, falling $97, or 6.4%, to $1,427
CSC Phoenix posts strong first-half results
( LL ) CSC Phoenix, still completing a court-ordered restructuring, has posted strong results for the first half of this year and is even planning to participate in an auction of its vessel. Net profits of the Shenzhen-listed dry bulk operator, part of state conglomerate Sinotrans & CSC Holdings, reached Yuan186.4m ($30.3m) in the six months compared to the year-ago losses of Yuan343.6m.
CCL acquisition drives up Li & Fung logistics revenue
( JOC ) That Li & Fung, the Asian sourcing giant, is placing a big bet on logistics was evident in its first-half results, which saw logistics revenue up 44 percent and profits up 31 percent, largely the result of its acquisition of a major forwarder and NVOCC.
CCL is the largest NVOCC in China and adds more than 500,000 TEUs to Li & Fung's logistics division's existing roughly 50,000 boxes, transforming the company into one of the largest ocean freight forwarders in Asia.
US footwear imports plunged in first half
( JOC ) Containerized footwear imports into the United States plummeted in the first half of 2014, although the industry is optimistic sales will pick up in the second half of the year.
Ebola fears unfounded, shipping industry says
( JOC ) Carriers and other transport companies are doing their best to dispel fears of spreading the deadly Ebola virus as shipping continues between the virus-stricken countries of Liberia, Nigeria, Sierra Leone and Guinea and the rest of the world.
Cyberattack targeted UPS Store shippers
( JOC ) Hackers may have stolen payment information from an undisclosed number of shipping customers of The UPS Store in a period stretching from January to August, UPS said Aug. 20.
High-profile Shipping executive Richard Hext quits Hong Kong
( LL ) RICHARD Hext, the high-profile executive who has held some of the most senior shipping jobs in Hong Kong, will shortly return to the UK to take up the post of chief executive at the University of Central Lancashire.
However, he will retain his current non-executive positions in the Far East, including the non-executive chairmanship of Univan, and a seat on the board of China Navigation, the university said in a statement.Although famously starting his career as a Clydeside shipyard labourer, Mr Hext won a place at Oxford before joining Swire’s operations in Hong Kong and spent 22 years with that company. In 2000, he was appointed chief executive of Level Seas and three years later, chief executive of the marine services division of V.Ships. From 2005 to 2009, he was chief executive of handysize and handymax specialist Pacific Basin, before switching to Univan the following year.
University of Central Lancashire is a former polytechnic that is now the eighth-largest university in the UK, taking in high numbers of overseas students.
Mr Hext, 56, will officially start in his new role on September 1.
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