Different Strategies: UK-breaking up and breaking down versus Shipping- bigging up and battening down
( Point of View by Hartland ) We propose to look at two differing responses to globalisation: one in shipping, the other in nationhood.
Both are strongly influenced by the current social and economic environment in which we find ourselves six years after the collapse of Lehman Brothers.
In shipping, one response to globalisation was over-expansion of shipping capacity that is still causing us enormous problems today.
Subsequently, the natural reaction to a tough and oversupplied market and falling freight rates has been the pursuit of greater strength through scale and consolidation. The latest chapter in container shipping is the announcement of Ocean Three, the long anticipated cooperation between CMA CGM, which was jilted when P3 became 2M, and China Shipping (CSCL) and United Arab Shipping (UASC).
O3 will work together on the main east-west trades via vessel-sharing and slot-exchange agreements. Lloyds List analysis suggests that O3 will combine 129
containerships totalling 1.3m-teu on the Transpacific, Transatlantic and Asia-Europe compared with 2M (Maersk and MSC) fielding 185 ships of 2.1m-teu over the same routes. These two alliances will compete with the other two main consortia that have recently expanded into the G6 (former Grand Alliance members Hapag-Lloyd, NYK and OOCL combined with former New World Alliance members APL, HMM and MOL) and CKYHE (Cosco, K-Line, Yang Ming, Hanjin and recently joined Evergreen).
Of the top twenty carriers that leaves only Hamburg Süd and Zim Lines outside these four superalliances.
The key takeaway is that togetherness is better, especially in these challenging times.
Private equity also sees consolidation as an appropriate response to the ongoing crisis as illustrated by the designs of Oaktree in dry bulk and Apollo in cruise.
HIS Fairplay has tracked these developments. Oaktree funded the private Oceanbulk joint venture with Star Bulk founder Petros Pappas in late 2012. It then bought a large stake in listed Star Bulk in July 2013, via a rights issue, just as it faced debt pressures and low capitalisation.
In January 2014 Oaktree acquired a majority stake in bankrupt
Excel. In July 2014 Star Bulk bought the private Oceanbulk fleet and in August it purchased the Excel fleet.
Thus Oaktree used a combination of private and public equity to build a consolidated dry bulk platform of 103 vessels.
Apollo did something similar in cruise by taking a majority stake in Oceania Cruises in February 2007 followed by a 50% share of NCL in August and purchasing Regent in December for a total outlay of $2.85bn. In 2008 it formed Prestige to consolidate Oceania and Regent. NCL, having gone public in January 2013 via a Nasdaq IPO, has just agreed to buy Prestige for over $3bn.
Apollo has shown how to build, step by step, a bigger more competitive market presence.
At the nationhood level, one response to globalisation is becoming apparent.
A backlash rising out of the global financial crisis and its aftershocks: zero interest rates on savings, currency debasement, stagnant wage growth, benefit tourism, the rising cost of living and asset bubbles in property and shares that favour the rich.
One cannot avoid the suspicion that part of the Yes lobby in next Thursday’s Scottish referendum is rooted in a sense of resentment after wealthy bankers ruined the economy only for the rest to pay for the solution via government imposition of bottom-up austerity.
What used to be Scottish adventurism is now yielding to an insular view grounded in protest, retreat and self-pity.
Scots founded some of the greatest companies in Hong Kong, where Hartland started up, such as the Hongkong & Shanghai Banking Corporation (now HSBC) and
Jardine Matheson (owner of Mandarin Oriental Hotels and Hongkong Land).
50 years ago the world map was covered in the pink that represented the vast reach of the British Empire. Now it is all gone as Britain long ago decolonised and devolved self-rule.
Other powerful emerging countries have done the reverse as they colonise, annex and consolidate via economic aid, shared language and culture, and by force. Globalisation and more open markets have been great levellers but, inevitably, high income countries have reacted unfavourably to increased competition from state-sponsored low income countries that build over-capacity, leading to a collapse in prices and lower global wages.
The result is alienation, protectionism and rising nationalism, as demonstrated by the Scottish referendum next week and the Catalan referendum on November 9. Some British people think it sad that the British Empire is already reduced to the United Kingdom of England, Scotland, Wales and Northern Ireland.
To then cannibalise what is left by breaking up the UK is a cause for concern even beyond these shores.
Outsiders look on aghast at the enormous self-harm that may be visited upon the UK by its selfinflicted disintegration.
They generally admire 307 years of successful union as a lesson to others, and so fail to comprehend such destructive separatist tendencies.
If Scotland votes Yes, or even votes No and gets ‘devolution max’ instead, this will raise nationalist fervour in the rest of the UK and be a recipe for total break-up. We would complete the transition from once mighty empire to feeble parish, conjuring weakness from strength.
Shipping shows us another way: consolidation borne out of challenge.
Right now, in such a troubled world, being together will feel better than being alone.
Recent Chinese Tax Changes Affecting The Shipping Industry
( Ince & Co ) On 1 August 2014, the “Provisional Measures on the Collection of Tax on Non-Resident Taxpayers Engaged in International Transportation Business” (2014 No.37 Notice, the “New Regulations”) came into force.
The New Regulations could have a significant impact on owners as they seek to streamline and tighten up the regulations in respect of tax obligations on “non-resident taxpayers” engaged in “international transportation business”.
The main aspects of the New Regulations are summarised briefly below.
Scope of “international transportation business” and “non-resident taxpayers”
Under the New Regulations, “international transportation business” includes the carriage of cargo and passengers in and out of Chinese ports by non-resident companies through vessels, charter slots and aircraft.
The chartering of ships on voyage charters or time charters (and leasing aircraft out on a wet lease basis) for income generation from such activity are now classified as “international transportation business”.
Any non-resident companies that earn income from international transportation business, as defined in the New Regulations, are potentially subject to PRC corporate income tax (“CIT”).
Tax registration
Under the New Regulations, non-resident companies that engage in international transportation business are required to register with one of the PRC local tax authorities within 30 days of the conclusion of the charter and the New Regulations set out detailed rules and procedures regarding tax registration.
Non-resident companies may complete tax registration either by themselves or by their appointed local agents and can choose one tax authority to complete all filings for calls at all PRC ports.
“Appointed” withholding agents
If the non-resident taxpayer fails to register and pay tax voluntarily, the PRC authorities can appoint the Chinese contract counterpart, amongst others, as the withholding agent of the non-resident taxpayer and require such agent to withhold the tax before making payment to the non-resident taxpayer.
Calculation of taxable income
Non-resident taxpayers that have completed tax registration in China must establish and maintain records and accounts in accordance with PRC tax laws and rules to properly calculate the taxable income.
Taxable international transportation income is calculated by deducting “deductible expenses” from the gross revenue earned from the carriage of cargo and passengers.
Deductible expenses comprise the reasonable expenses actually incurred to earn the revenue received.
For non-resident companies that cannot accurately calculate their taxable income, the tax authority will apply a “deemed profit ratio” to the gross income to calculate the taxable income.
Previously, the “deemed profit ratio” was set at 5% of the total income earned for carrying cargo or passengers from China.
Under the New Regulations, the “deemed profit ratio” shall range from 15% to 50% of the gross income earned carrying cargo or passengers in and out of Chinese ports.
The CIT rate (25%) will then be applied to the taxable income in order to calculate the tax payable.
Double Taxation Agreements (“DTA”) and Shipping Income Agreements (“ISA”)
The New Regulations also set out detailed procedures for non-resident taxpayers to apply to the PRC tax authorities for exemption/benefits under any applicable double taxation treaties between their place of tax residency and China.
A failure to comply with the required registration procedures could result in an owner being denied tax relief under a DTA or ISA.
The requirements include a tax residency certificate issued by the country of which the relevant DTA or ISA is applied.
Our observations
As a result of the clarification that “international transportation business” includes carriage of cargo and passengers both in and out of Chinese ports as explained above, there is the potential for an increase in the tax payable by non-resident owners.
However, it is not clear how the taxable income will be calculated in the complicated context of international shipping.
For freight earned from a single voyage in respect of cargo to/from China, there may be little doubt that the voyage falls within the scope of “international transportation business” under the New Regulations. However, things become complicated with, for example, long term time charters under which the ship occasionally calls at Chinese ports and questions then arise as to whether and to what extent hire earned under the time charter will be considered as income earned from the “international transportation business” and what expenses fall within the scope of “deductible expenses” under the New Regulations.
The New Regulations are in their infancy.
There is at present uncertainty surrounding their scope and the extent to which and manner in which they will be enforced.
There is a risk that different local tax authorities will apply the New Regulations differently.
What does seem clear is that they serve as a signal that the Chinese tax authorities intend to tighten up the regulations regarding income tax payable by non-PRC resident companies that engage in international transportation business that includes the provision of services within Chinese territorial waters.
Consequently, the New Regulations are likely to have a significant potential impact on owners with vessels chartered to Chinese counterparts.
Such owners will need to seek advice quickly on their registration obligations and the extent to which they might be able to avoid or reduce their tax exposure by complying with the registration and documentary requirements to trigger any applicable double-taxation treaties.
For future contracts with Chinese counterparts, owners should carefully review the tax clause to ensure that it adequately protects the owners from being required to pay Chinese corporate income tax and also turnover tax (i.e. VAT).
Significant tax reforms were introduced from 1 August 2013 that added transportation activities into the chargeable scope of VAT at the rate of 11% or 17%, depending upon the type of transportation service performed within China.
Whereas CIT is payable on taxable income, VAT is calculated by reference to the gross revenue.
Is Beijing about to create the world’s largest VLCC operator ?
(( LL ) CHINA Merchants Energy Shipping and Sinotrans & CSC Holdings have established a joint venture that could create the world’s largest very large crude carrier player, as Beijing pursues its plan to import more crude oil on home-owned fleet.
Earlier this month, the two state-owned firms formalised a shareholders’ agreement to form China VLCC as previously announced.
The new venture’s first move will be to take over CMES’ nine VLCCs on the water and 10 on order.
The two sides say further expansion is on the cards: many expect Nanjing Tanker — the Sinotrans & CSC subsidiary that is now under court-ordered restructuring — to be a takeover target.
“We reckon Sinotrans & CSC didn’t directly inject Nanjing Tanker’s VLCC fleet into the new entity because the latter is under restructuring and needs to carry our more negotiation with creditors,” Haitong Securities analyst Jiang Ming said in a note.
“It is highly unlikely that Sinotrans & CSC is seeking to build a new VLCC fleet with CMES via this venture. Instead we think the new entity will acquire Nanjing Tanker’s existing VLCC assets.”
Nanjing Tanker, which became the first state-controlled carrier delisted in Shanghai having posted four consecutive annual losses, operates a fleet of 19 VLCCs that are relatively young, although many are linked to many loss-making charter contracts.
If a full acquisition comes to pass, the new entity will have 26 VLCCs on the water and 12 on order, making it the top player in this sector.
According to Clarksons data, the world’s three largest VLCC owners are NITC with 37 vessels, Mitsui OSK Lines with 32 ships and Nippon Yusen Kaisha with 29. None of the three have outstanding orders.
Beijing’s goal
China’s State-owned Assets Supervision and Administration Commission — the ultimate owner of CMES and Sinotrans & CSC — and Sinopec, CMES’ number two shareholder, both sent representatives to the signing ceremony, underscoring the strategic importance of China VLCC.
According to China Merchants Group, the parent of CMES, the deal supports Beijing’s efforts to develop a national shipping industry by enhancing collaboration between carriers and cargo owners.
“This new venture will help achieve China’s strategic goals in [the] national development of a shipping industry and secure energy imports,” CMG chairman Li Jianhong said in a statement.
“We’ll be able to make greater contributions… as China becomes a stronger, more powerful maritime nation.”
Despite slowly increasingthe proportion of crude imports on Chinese-owned tankers, Beijing is likely to miss its goal to carry 70%-80% of national imports on home-grown tonnage by the end of 2015.
The latest push puts the spotlight on Sinopec, the world’s top VLCC charterer, which is widely expected to be the main income source of China VLCC.
Sinopec, which accounts for nearly 70% of China’s crude imports, could well shift more volume to the new entity at the expense of foreign owners — but it remains to be seen whether this will be the case.
Room for growth
CMES shipped 31.1m tonnes of oil and related products last year, of which China’s crude imports accounted for just 14.3m tonnes, suggesting significant room for growth.
In 2006, Nanjing Tanker signed a 10-year deal to gradually increase Sinopec shipments to 18m tonnes a year, though the carrier’s recent financial woes prevented it fulfilling that promise.
However, shipping more Chinese crude might not always make commercial sense for parties involved.
As a heavyweight charterer, Sinopec has strong bargaining power with carriers at home and overseas.
Meanwhile, CMES and Nanjing Tanker have both expanded their own client bases and might be reluctant to reduce themselves to shipping units of the national energy giant.
Without further intervention from Beijing, most China-based analysts see the merger as the latest stage in industry consolidation rather than a way to carry more China-bound crude.
“The carriers are seeking to further enhance co-operation and control over vessel supply, as the crude transport markets are expected to face weak [supply-demand] balance,” China Galaxy Securities said in a note.
“This is to increase their bargaining power in a weak market as suppliers.”
LNG shipping stuck in no man’s land
( By Hal Brown, LL ) ONE of the more alarming predictions made at the last Informa LNG conference was that an arrest of a ship is likely to happen due to unpaid bills following the fall in daily earnings for the vessels.
As far as we know, this has not happened — yet.
It will be interesting, though, to gauge the sentiment around LNG and LNG shipping at this year’s event on September 17-18, given that earnings have come down somewhat over the last year.
One of the problems for shipowners is that LNG shipping is stuck in a kind of in-between period at the moment, a no man’s land ahead of new cargoes anticipated to arrive from the US, Australia and further down the line, east Africa.
Cargoes from Angola have stalled and won’t be back until mid-2015.
Japan is mulling a return to nuclear, potentially reducing LNG imports, but this is far from certain given the staunch national opposition to nuclear power.
On top of that, there’s the development of the Yamal export plant in the Russian Arctic, and whether this will be affected by sanctions against Russia due to its conflict with Ukraine.
So far, gas is unaffected by the sanctions, but the innovative and complex Yamal project may come under threat if Washington moves to sanction technology exports to the Russian oil and gas industry.
So there are a few pregnant clouds looming over the LNG industry at the moment.
In among all this is a small, uncomplicated, shining gem of success – Papua New Guinea’s impressive start to its export project.
Given the recent track record of the industry, however, we wouldn’t be at all surprised if something came along to rain on PNG’s parade.
Watch this space…
Mexico stops watering down the figures
( LL ) MEXICO’s energy reforms will cut the amount of water that spuriously finds its way into the country’s oil production data, skewing the figures.
Around 160,000 barrels per day of water was included in Mexico’s crude production figures in the first quarter by state company Pemex, according to the International Energy Agency.
During drilling, substantial amounts of water are brought to the surface alongside oil.
Global Water Intelligence has called the oil industry “effectively a water industry, which delivers oil as a byproduct”.
Industry regulatory authority the National Hydrocarbons Commission is in charge of collecting the Mexican data.
“A new issue that has emerged from data collected by industry regulator is that Pemex’s reported production figures include a substantial amount of water,” said the Paris-based IEA in its monthly oil report.
The 160,000 bpd figure given for the first quarter is therefore “the gap between reported Pemex production and the amount of oil processed by Pemex’s distribution system”, the regulator said.
Mexico’s energy reforms, the first in some 75 years, will change this anomaly.
New laws have given the commission stronger regulatory powers as part of the reform process.
The commission should now be in a position to curb a water problem that has existed for several years, the IEA said.
Reforms will have a big impact on production volumes.
According to the US Energy Information Administration, Mexico’s energy reforms could boost long-term crude production by 75%.
Mexico’s production could stabilise at 2.9m bpd to 2020 and then rise to 3.7m bpd by 2040.
However, actual performance could still differ significantly from projections based on the future success of reforms, resource and technology developments, and world oil market prices, the EIA warned in a recent study.
Everyone agrees, however, that production will rise.
Aframax crude tankers should benefit from increased production as these are the vessels mainly used to haul cargoes out of Mexico’s waters.
Most of the cargoes head to the US, and other destinations include Spain, India, France, the Netherlands, and the Dominican Republic, according to Lloyd’s List Intelligence.
Mexico is interested in sending more cargoes long haul to Europe and Asia, which will boost tonne miles for aframax tankers.
Maersk Oil plans to reduce stake in oil block in Angola
( Reuters ) Maersk Oil, a subsidiary of the AP Moller-Maersk A/S group of Denmark, plans to sell a portion of its stake in the Chissonga deepwater oil project in Angola, Danish daily newspaper Jyllands Posten reported.
Chissonga is located in the sea at a depth of 1,500 metres, and Maersk Oil holds a 65 percent stake in the block where estimated reserves of 100 million barrels were discovered in 2009.
“We have a high stake in the block and it’s natural that we should want to reduce it in the long run,” said the CEO of AP Moller-Maersk Group, Nils Andersen in a conference call with analysts to present second quarter results.
Andersen gave assurances that the group remained committed to developing the Chissonga project but added that as the group’s stake was large
“we will consider reducing it when the project is at a more advanced stage and when the moment is right.”
Danish newspaper Jyllands Posten did not mention what share of its 65 percent stake AP Moller-Maersk Group would put up for sale, according to financial news agency.
Tax-Free Vogue Sweeps Shipping as Scorpio Reviews MLP
Master limited partnerships, tax-exempt companies that pay investors most of their income at the cost of added risk, are spreading in the shipping industry. Scorpio Tankers (STNG) Inc., the largest owner of vessels hauling refined fuels, is “seriously” considering starting an MLP, President Robert Bugbee said in an Aug. 26 phone interview.
The Monaco-based company would join GasLog Partners LP and Dynagas LNG Partners LP among shipping companies that recently reorganized as publicly-traded partnerships that pay no corporate income tax.
MLPs trade at a higher multiple of their assets than do corporations, and are popular with investors hunting for better returns in the sixth year of near-zero interest rates, leading them to riskier businesses.
The cash streams from some MLPs may not be reliable because shipping rates, for instance, are volatile.
Scorpio is considering the structure a month after the man who popularized it, Houston billionaire Richard Kinder, said he was dissolving his company’s MLPs.
“It would be appealing because if you have an MLP you can sell assets at a premium,” said Erik Folkeson, an Oslo-based analyst at Swedbank AB.
“The volatility in shipping has discouraged MLPs so far, but if they can line up a series of long-term charters, it should be possible.
Scorpio hired a banker to advise the company on the process, Bugbee said in the interview.
If it decides to form an MLP, Scorpio would be the controlling company, known as the general partner, he said.
At least a dozen shipping and offshore drilling companies have formed MLPs since 1987, with 11 currently trading.
The most recent additions are Hoegh LNG Partners LP (HMLP) on Aug. 7 and Transocean Partners LLC on July 31.
MLPs are attractive because they provide funding to companies with big expansion plans and their shares trade at 1.5 to 2.5 times the value of their assets, compared with 1 to 1.5 times for regular corporations, Michael Webber, an analyst at Wells Fargo Securities LLC, said in an August 7 report.
The partnerships may also pose risks to investors as companies with less stable cash streams adopt the structure, according to Morgan Stanley.
The interest extends beyond shipping. Among energy companies, Hess Corp.’s July 30 announcement that it would form an MLP sent shares to a five-year high. Royal Dutch Shell Plc (RDSA) said a month earlier it would spin off U.S. pipelines into a partnership.
Also in June, Consol Energy Inc. and Noble Energy Inc. said they’d sell stock in a natural gas pipeline.
Torm and Maersk end LR2 Pool partnership
( LL ) TORM and Maersk Tankers are ending their 13-year partnership on the LR2 Pool, which operates 29 aframaxes carrying both clean and dirty oil products.
The two Danish tanker giants believe they can improve earnings by ending the co-operation and going their separate ways.
The pool is made up of 10 Torm tankers, 18 Maersk ships and one vessel from Sanmar Shipping.
Rickmers in talks with banks over debt restructuring
( LL ) eedership and heavylift specialist making payments but wants deadlines extended
RICKMERS Group is seeking to restructure part of its ?1.5bn ($1.9bn) net debt through the extension of repayment deadlines, while simultaneously planning a turn to US and other international capital markets to fund its expansion plans.
But senior executives at the company have insisted that it is not negotiating from a position of weakness and that it is currently making all payments as due
Vessel-sharing agreements offer more than unit-cost savings, say analysts
( LL ) IF THE newly formed Ocean Three alliance and other vessel-sharing agreements are to succeed, it all hinges on carriers’ ability to work together, claim analysts.
According to Drewry Maritime Research, carriers’ individual success will stretch far beyond the unit cost savings associated with alliances but depends on how member lines operate alongside each another, tackling differences of ownership structure, nationality and culture.
Drewry said much will also depend on how each VSA reacts to market developments in the absence of a single leader orchestrating operations, which it believes is essential in making quick decisions to stay ahead of competitors.
The importance of this is evident in how the three lines behind the now-defunct P3 agreement sought to establish an independent operational centre, said Drewry.
It believes that, given that the 2M alliance boasts the fewest carriers and therefore the fewest management heads in the communication chain, it will have a distinct advantage when it comes to taking on-the-spot decisions.
Drewry says Ocean Three leaves little room for independent operators on east-west routes and says that the new shake-up on the major trade lanes will not change significantly for the foreseeable future.
However, the London-based consultant said this does not leave just four competitors on the major trade routes as the individual shipping lines will compete amongst each other as in the past.
Drewry’s research suggests an initial offering from Ocean Three of 15 weekly services using 138 vessels in total. This total is expected to increase following its extension onto the transatlantic trade, for which discussions continue.
If they do join forces on transatlantic, it will mark the entry into this key trade for both China Shipping Container Lines and United Arab Shipping Co, CMA CGM’s Ocean Three partners.
Moreover, each carrier will continue to offer services outside the agreement under existing service agreements with other carriers, said Drewry.
Looking at the carriers’ Asia-Europe offering, Drewry expects no wholesale changes to the four services offered by the three lines, other than vessel upgrades.
Here, the average capacity of ships operating on this route will be a minimum 14,000 teu.
Asia-Mediterranean services follow a similar pattern. Despite being downsized from five weekly offerings to four, the average capacity is expected to be greatly enhanced, said Drewry.
It highlighted the Black Sea BEX service as a particular example, where the average vessels size will increase from 6,500 teu-7,000 teu to 9,400 teu.
Elsewhere on the transpacific trade, the major changes will be witnessed on services between Asia and the US east coast, which will again use bigger vessels and make greater use of the Suez Canal.
Drewry expects CMA CGM to shift its eight 8,500 teu vessels operating on the TP3/TP9/Colombus service it runs with Maersk to its new Colombus Suez offering, to include three ships that Drewry believes new partners CSCL and UASC will provide.
Hapag-Lloyd CEO calls vessel overcapacity ‘exaggerated’
( JOC ) Container freight rates will stabilize and may trend upward over the next few years despite the existing overcapacity of vessel space because of the expansion of existing carrier alliances and the creation of new ones, according to Rolf Habben Jansen, CEO of Hapag-Lloyd.
Hapag-Lloyd informs about schedule deviations on its North Pacific 1 Service due to failure of the Asian Gypsy Moth inspection
( H-L )Tradewind-Hapag-Lloyd informs, that after ZIM Djibouti berthed in Vancouver on Friday September 5, 2014, the vessel failed the Asian Gypsy Moth inspection held by CFIA (Canadian Food Inspection Agency), the company said in its press release.
The vessel was ordered out to international waters as quarantine for cleaning.
The crew commenced cleaning this past weekend and is expected to arrive back in Vancouver on Tuesday September 16, 2014 to be re-inspected.
The OOCL London will pass the ZIM Djibouti and be the next NP1 service vessel to arrive and sail from North America. Alternate arrangements are being made to move all of the cargo expeditiously. Shipment related notification will be communicated in a timely manner.
MSC Mediterranean Shipping Company announces ECA Charge from the 1st of January 2015
( PortNews ) Arising from new rules and regulations affecting the amount of sulphur to be used in fuel which will come into force from 1st January 2015 in the Emission Control Areas (ECA) in North Europe (including the Baltic Sea, North Sea and English Channel) and North America (including 200 nautical miles from the American and Canadian shores), the cost of fuel in these ECA areas will increase significantly, the company said in its press release.
n order to recover this increase in fuel costs, MSC Mediterranean Shipping Company S.A. will be compelled to apply an ECA charge from the 1st of January 2015.
Higher manufacturing, wholesaler sales to spur inventory restocking in US
( JOC ) U.S. inventory and sales data released by the Commerce Department this week point to increased need to restock already lean inventories heading into the fourth quarter.
U.S. container exports sink as worsening trade imbalance looms
( JOC ) Weak global demand is hurting U.S. containerized exports, while a reviving U.S. economy is aiding imports. A larger long-term trade imbalance is the likely result, Cass says
NY-NJ port’s summer was ‘much better’
( JOC ) Congestion and labor shortages remain issues at New York-New Jersey container terminals, but the East Coast’s busiest port made through the summer without the widespread gridlock of the previous summer or last winter.
House bill would test 100 percent container scanning at two US ports
( JOC ) Rep. Janice Hahn, D-Calif., has proposed legislation that would use federal funding to test whether 100 percent container scanning is feasible at two U.S. ports.
View From The Bridge: Robert Yildirim
( By Damian Brett, LL ) IT TAKES a confident person to go on record and state ambitious plans. But Robert Yildirim, president and chief executive of the Yildirim Group — parent company of the fast-growing Yilport Holding — is a confident man.
Speaking to Containerisation International over coffee on the sidelines of a bustling port technology exhibition, Mr Yildirim states that Yilport has the ambition of being one of the world’s top-10 port operators by 2025.
It’s not the first time a target has been set for the Turkish multipurpose port group. Mr Yildirim says that when he unveiled his growth plans for the company five years ago, people laughed, but the business hit those targets and there is a clear plan on how to reach its 2025 goal.
Port consultancy Drewry is obviously taking these ambitious plans seriously — it recently named Yilport as one of the up-and-coming port operators that will challenge the market leaders over the coming years.
Rapid expansion
Those familiar with Yilport will have noted its rapid expansion over the last few years.
The ports group announced two key Turkish deals at year-end 2012. It acquired an 86.6% shareholding in Gemport, the 600,000 teu capacity multipurpose terminal on the south coast of the Sea of Marmara, and purchased RotaPort in the Marmara Sea area, a hub with warehousing capacity linked to its grain and cement terminals.
The Turkish ports group, which holds a 50% stake in transhipment hub Malta Freeport after buying its share from CMA CGM, followed up these two deals with an 80% stake in the Swedish boxport of Gävle in early 2014. Linked to this deal, it is also developing the Stockhom Nord intermodal terminal, due to open in 2015.
In its latest expansion, Yilport also earlier this year won a 20-year concession to become the operator of Sjursøya Container Terminal at the Port of Oslo.
There are currently two container terminals at the port, Sjursøya and Ormsund. Within the next year, the port will expand and move all container traffic at the Sjursøya terminal. By concentrating all the box shipments in one area, the port will increase its capacity from 260,000 to 350,000 containers.
It has also been investing in its internal systems over the last couple of years. In 2013, the company deployed centralised IT, procurement, finance, administration, planning and logistics services across all of its facilities, launching the Yilport Logistics Center and Eti Logistics.
There was also investment in its existing port facilities, with the start of work on the expansion of its Gebze facility’s Berth Two which, with a total length of 450 m, will enable it to take on the largest container vessels. The berth will be equipped with four ship-to-shore quay cranes and will increase the facility’s overall container handling capacity to 1m teu. The expansion is due for completion later this year.
Yilport Gemlik is also being developed, with the quay extended and new cranes purchased. Work here is due for completion this year.
Investing in growth
While investing to enable organic growth will play a role in helping Yilport hit its targets, Mr Yildirim is the first to admit that it must invest in new facilities in order to grow.
He says Yilport needs to acquire an average of two new ports per year if it is to meet its ambitions.
It is therefore identifying targets in emerging economies — he names Africa and Latin America — as well as mature markets such as those in Scandinavia and ports on the Baltic Sea. It also has plans to continue expanding in Turkey.
“We are pretty much excluding Asia because in that region the ports are very competitive,” Mr Yildirim says.
“We want to go where we can develop the value-added services and increase the productivity, efficiency and excellency in the port operation and we can also make improvements on the marketing side.”
He divides the types of ports it will target into two types; established ports that would benefit from an outside team re-invigorating the facility and examining new cargo streams; and developing ports that have lots of potential but lack expertise.
“We bring in our knowhow, equipment and terminal-operating systems,” he explains. “We look at the port and, without even making any investment, we can initially improve the operation and productivity in the port — at the gate, the yard, the berth.
“Once we have that improvement we look at what type of equipment we need to move to the second stage of development of the port.”
Mr Yildirim says that Yildirim Group’s commodities, logistics and vessel-owning interests give Yilport a different perspective to other groups as it can create a wholly integrated logistics chain.
“We are an industrial group,” he says. “We are not only a shipping company, or port operator. We are a mining company, we are a metal producer, fertilisers and a lot of raw material activities, and we do all this business in either bulk or in containers.
“This expertise in trade and manufacturing, on top of logistics, on top of the port, brings together a very strategic advantage over other port operators and that’s why we are saying that we are not going to be a terminal operator, we want to be a multipurpose port operator.”
He says Yilport chief executive Sean Pierce brings his container market expertise while the Yildirim Group brings its knowledge on the bulk and chemical industries. These are blended together to offer a new type of service to exporters, importers, forwarders and carriers.
“We are investing in ports where we can bring our expertise and knowhow,” he says.
“We aren’t interested in going where everything is done and we will just be an operator. Okay, that is also a business, but it does not excite us.
“We want a challenge. There are so many of this type of port operator in the world today, so why would we come to the market to compete with this — it doesn’t make sense for us.”
Funding requirements
Mr Pierce explains further the process that a facility joining the Yilport portfolio will go through.
He says there is an initial 100-day integration plan. Following completion of this process, there are incremental improvement projects that are applied across all ports, with standardised key performance indicators.
“A lot of these places that we see, they lack in a direction and they lack in a strategy and they spend so much time focusing on the things that should just be ordinary,” Mr Pierce says.
“So that’s why we have our standardised platforms, our standardised technology. And our equipment requirements are quite high so we can focus on the other things like the business development.”
So with a clearly defined growth plan and strategy in place, the next question is how will the port operator fund the acquisition of these new ports?
Sister companies have contributed equity so far, while funds have been raised through Turkish banks on a long-term project finance basis.
However, with the company’s portfolio of assets now valued at around $2.5bn, it is looking for new sources of finance in order to speed up the expansion process.
It is currently in the process of raising funds — around $500m-$600m — through a private placement, with introductions taking place between the company and investors, such as pension and infrastructure funds, with minority shares in the company on offer.
Mr Yildrim also speaks of a potential initial public offering when the company reaches a certain size and also the possibility of issuing a eurobond.
The expansion of the company certainly seems to be picking up speed. At the time of speaking to Containerisation International, Mr Yildirim says that Yilport is involved in around 15 tender processes.
So does he think that Yilport will reach its ambitious target?
“Today, being top 10 port operator is a dream, but in 10 years’ time you will see it’s a reality.”
Yidirim’s CMA CGM adventure
While Robert Yildirim may have a passion for ports — he recently told Lloyd’s List that he prefers ports to ships because they offer more opportunities, it is a more steady business and the barriers to entry are higher — he is perhaps equally well known for bailing out CMA CGM in 2011.
However, his foray into box shipping may not last too much longer. His interest in CMA CGM, which amounts to a 24% stake following a 2011 investment of $500m in convertible bonds and an additional $100m injection in 2012, lasts for a period of five years, running until January 2016.
At the moment Mr Yildirim and the Saadé family are still considering their options, which include the Saadés buying Mr Yildirim’s stake, selling it as part of an IPO, or finding a third-party buyer.
But right now, it seems the most likely scenario is for the Saadé family to buy back the stake, Mr Yildirim tells Containerisation International.
Overall, he says he has been happy with his investment in the shipping line.
“The investment is doing very well,” he says. “The company has produced some fantastic results and I am going to stay until the end of my investment period and then we’ll see what will happen.
“The margins are some of the highest in the industry. The restructuring of the company went well and that’s why we are positive and I am happy that I have been part of the company during the restructuring and the growth.
“Both sides will be the winners in the end. The company was struggling and now it is back where it was before and it has gained a lot of value back and I am making money on my investment — that was the whole idea behind the investment.”
Last year, CMA CGM cut its net debt by 20% to $3.7bn and ended 2013 with a strong cash position despite difficult trading conditions that reduced core earnings by almost 27% to $756m.
The French line, for long regarded as vulnerable because of its high debt levels that topped $5bn before the financial restructuring, reported much stronger net profits of $408m, against $332m in 2012. That partly reflected the sale of a 49% stake in its ports business, Terminal Link.
Last year also saw the Moody’s rating agency upgrade CMA CGM to B2 while Standard & Poor’s rated the company at B (positive outlook).
Malaysia’s Westports set to handle 8 million TEU with launch of new terminal
( Asian Shipper )WITH the launch of container terminal 7 (CT&), Westports Holding expects to handle eight million TEU this year now that it has dominated the Port Klang as market leader, handling 7.5 million TEU last year.
Westports CEO Ruben Emir Gnanalingam said Westports is now achieving 22,000 TEU in a day, more than 150,000 TEU per week.
o date, Westports has handled more than 60 million TEU from a wide variety of vessels from very small barges to the biggest ships since it opened in the early '90s, the New Straits Times reported.
"Today we are proud to be the catalyst behind port Klang's growth by holding 78 per cent of Port Klang's container market share."In total, we have grown our volume by 374 per cent from 2001 to 2013 and propelling it to become the 12th largest port in the world," said Mr Gnanalingam during the launch ceremony of container terminal 7 (CT7) and Westport Malaysia Sdn Bhd 20th anniversary celebration.
Portsmouth Marine Terminal to reopen today
( Pilot Online ) Portsmouth Marine Terminal, which shut down container operations more than three years ago, is scheduled to restart them today, the Virginia Port Authority announced Friday. The terminal will begin receiving trucks carrying containers for export at 8 a.m.
"Sustained growth in our container business necessitates PMT's return to service and is a sign of health for the Port of Virginia," said John Reinhart, CEO and executive director of the Port Authority, in a statement.
"Reopening the berth at PMT to container operations is the first phase of a larger plan to establish the terminal as a multi-use facility and improve service to our customers."
The first vessel call is scheduled in early October, after which the facility is projected to handle 75,000 to 100,000 boxes annually.
The revived container operation will occupy 30 of the terminal's 287 acres.
It's expected to relieve some of the pressure on the authority's two big container facilities, Norfolk International Terminals and Virginia International Gateway in Portsmouth, which was known as APM Terminals Virginia until the purchase of the property by an investment group was finalized last month.
For the fiscal year that ended June 30, the port handled more than 2.3 million standard 20-foot containers, and those two complexes accounted for almost all of that total.
The restarted operation will have company on the property: The Midtown Tunnel expansion project will use 45 acres as a short-term staging area; the Portsmouth Container Yard, an empty-container depot, takes up another 44 acres; and 13 acres have been leased to ecoFuels Pellet Storage LLC, for the exporting of wood pellets. That leaves 155 acres - more than half the property - unoccupied.
Portsmouth Marine Terminal opened in 1967 and operated for the next 43 years. In July 2010, the authority signed a 20-year, $1 billion-plus lease on the APM complex, which at the time had been open only three years.
Not long after the signing of the lease, Portsmouth Marine Terminal became largely dormant as container operations were shifted to APM's facility.
At the July meeting of the Port Authority board, Reinhart said resumption of container operations at the terminal were targeted for Oct. 1.
The board signed off on a resolution at the meeting authorizing the use of up to $7 million in Commonwealth Port Fund money to finance any necessary improvements at the facility in preparation for its reopening.
Indonesian govt plans to make Batam newest province
( Jakarta Post )The central government plans to make Batam of the Riau Islands Province a separate province in order to end alleged authority disputes between the Batam city administration and the management of the Batam Free Trade Zone (FTZ).
Within the plan, Batam would become a new province governed by a governor who would also become the head of the Batam FTZ.“Authority disputes between the two parties have not been beneficial for investors or the public.
For instance, in the issue of land allocation, the allocation authority is in the hands of the FTZ, but the land will later be managed by the city administration.
This is one of the reasons why Batam must become a province,” Law and Human Rights Ministry’s litigation and regulation directorate general director Nasrudin told The Jakarta Post in Batam recently.
He said that the central government has already assembled a team to start planning the creation of Batam province.
The province might come into existence five years after the completion of a two-year of feasibility study.
Meanwhile, Deputy Riau Islands Governor Soeryo Respationo said that his administration has yet to receive any information on the plan.
However, Soeryo said that he would support the idea if it would make the Batam region prosper.“If it brings a lot of benefits to the people, I will support it. But they [the central government] have to consider the people’s wishes as well,” he said.
When he was asked about any rifts between the Batam FTZ and city administration, he denied them, saying relations went well.
According to Nasrudin, authority disputes between the two parties stemmed from the formation of the city administration under a new regional autonomy law in 1999. However, since 1971, Batam had been developed as an industrial hub by the Batam Industrial Development Authority (BIDA), which later became the Batam FTZ.
Philippines lifts seven-month truck ban
THE Philippines has lifted a ban on cargo trucks entering the city of Manila during peak working hours, blamed for worsening congestion at the capital’s port.
Manila mayor Joseph Estrada lifted the seven-month ban on Saturday after it led to major losses for both importers and exporters, created widespread food shortages and increased the cost of basic amenities.
Mr Estrada told local media at a televised press conference that he was lifting the ban with immediate effect, allowing trucks to enter Manila at any time of day.
The ban was introduced in February by Mr Estrada following growing complaints from Manila residents about lengthy traffic jams that they blamed on trucks calling at the port. At first, trucks were restricted from entering the city from 0500 hrs to 2100 hrs, and therefore the port, from Monday to Friday.
In response to the congestion that ensued at the port, due to the limited time that trucks could call, the ban was revised to between 0600 hrs and 1000 hrs and from 17oo hrs to 2200 hrs.
However, even with additional measures to smooth the flow of traffic, including cash and other incentives to importers able to withdraw cargo at Manila’s South Harbour on Sunday, the port’s least busy time, from its operator Asian Terminals Inc, congestion at the port if anything has got worse.
Congestion at the Port of Manila has led to hundreds of containers being held at the port’s three box terminals.
According to the Philippine Ports Authority, a number of these containers were due to be sent last week to nearby Laguna.
ATI and International Container Terminal Services Inc, which operate Manila International Container Terminal, were also considering chartering a bigger vessel to haul more containers out of the port.
Owners of overstaying boxes in Manila face hefty storage fees
( JOC ) Cargo owners of customs-cleared containers will be slapped with a $114 storage fee from Oct. 1 by the Philippine Ports Authority (PPA), regardless of whether their boxes are in the port of Manila or have been transferred to terminals in Subic or Batangas
Private terminal status granted to Embraport at Santos
( JOC ) The Embraport container terminal in Santos this week signed a contract with Antaq, the regulatory body for waterways in Brazil, that gives it the status of a Terminal de Uso Privado, or a TUP or Private Use Terminal, making it exempt from certain labor rules.
POSCO backs rail, port plan for Baosteel Australia iron ore project
( Reuters ) In a world awash with iron ore, Asian steel makers are still willing to sink money into new iron ore mines - as long as they are low cost and have their own ports and rail lines - to loosen the grip of the world's giant producers.
China's Baosteel and South Korea's POSCO agreed on Thursday to push ahead with plans to develop a long-delayed $7 billion iron ore project in Western Australia, despite a slump in prices to five-year lows due to a glut of low-cost ore.
While a raft of other iron ore projects have been shelved, billionaire Gina Rinehart, backed by POSCO, is also set to start producing at a $10 billion project in the same region next year, another low-cost mine with its own rail lines and port.
"A long time ago we had joint ventures with BHP and Rio Tinto. Nowadays we are looking for junior miners with built-in infrastructure," said a POSCO representative in Australia."POSCO is an end user, so we like to have a stable source of iron ore," he said. He declined to be named due to company policy.
POSCO and investor American Metals & Coal International (AMCI), 50 percent owners of the West Pilbara Iron Ore project, said they had agreed to back a plan by Baosteel and Australia's Aurizon Holdings Ltd AZJ.AX to build rail lines and a port for the project.
Baosteel and Aurizon recently snared 50 percent of the API joint venture that owns the project following their A$1.4 billion takeover of its operator, Aquila Resources. POSCO said the infrastructure agreement was an important step to kickstart the project, which has been stuck on the drawing board for more than five years, and
expected it to be viable even if prices stayed below $90 a tonne.
A final investment decision will be made some time after January 2016.
The extent and speed of iron ore's price fall caught many by surprise and put smaller miners like Atlas Iron Ltd AGO.AX, Grange Resources Ltd GRR.AX and Gindalbie Metals Ltd GBG.AX in the red.
Iron ore has fallen 39 percent so far this year but the steel makers are undaunted because their focus is on securing supplies to ease their reliance on the world's top producers such as Vale VALE5.SA,
Rio Tinto and BHP Billiton They also believe the project will be commercial.
"Despite the iron ore price fluctuations, the intrinsic competitiveness of the project comes first in Baosteel's consideration," a Baosteel spokesperson said in an email to Reuters this week.
But those who follow Aurizon are not quite as sure the project will start exporting iron ore by 2018, as targeted by Baosteel and Aurizon.
"Investors would be sceptical that this project gets up if iron ore prices stay where they are," said Matthew Spence, a transport and infrastucture analyst at Bank of America Merrill Lynch.
Aurizon spokesman Mark Hairsine acknowledged the project still faced "significant commercial hurdles"."We know it's a tough market, but we've got confidence in the long-term benefits of this project, supported by some very credible global partners," he said.
Baosteel, POSCO and AMCI have given Aurizon exclusive rights to develop a port and rail network for West Pilbara Iron Ore, as long as Aurizon delivers an acceptable tariff by October 2015.
The new agreement is based on the port and rail line handling at least 40 million tonnes a year of iron ore, compared with original plans to produce 30 million tonnes a year.
Steady grain volumes keep USG rates stable
( Platts ) US Gulf Coast shipping rates were stable, but the market remained buoyant on a steady amount of grain coming out of the region, market sources said.
USGC-Far East front-haul Supramax route, basis 50,000 mt was assessed by Platts as unchanged from Wednesday at $22,250/d. According to industry sources, a consistent inflow of grain inquiries and higher petcoke trade to Europe is helping to keep the tonnage list balanced.
World's leading maritime trade fair doesn't disappoi
( MarineLog ) Every two years, the shipping and shipbuilding world descends on Hamburg, Germany, for SMM, a week-long, mind-boggling smorgasbord of marine technology and innovation on display at more than 2,100 booths crammed into—and around—a series of cavernous exhibit halls at the Hamburg Messe trade fair grounds.
SMM is arguably the leading international trade fair for the maritime industry.
This year, roughly 50,000 visitors from around the world flooded into the exhibit halls that featured 90,000 square meters of exhibition space, drawing 2,141 exhibitors from 67 countries.
Indian shipbuilders likely to get government boost
( Financial Express ) In an effort to give a fillip to the Indian shipbuilding industry, the government is said to be looking at several options which could boost building of ships in the country.
According to government officials and industry players, the government could look at assistance to the sector through options like providing interest subventions, giving infrastructure status or even ensuring defence or public sector orders to Indian shipyards. In line with its thinking of giving a boost to the manufacturing sector in India, shipping industry says the government may also incentivise building of those ships, that are made from locally sourced raw material etc.
Apart from this, a fund that could cater to long term fund requirements of Indian shipyards may also be in the works.
If so, this will be in contrast to the subsidy policy that existed for shipbuilding industry till the year 2007. Under this scheme there was a 30% cash subsidy provided to the Indian shipyards.
However now, there maybe no direct subsidy given.
Shipyard diversification a learning process at Drydocks World
( Seatrade Global ) Since the collapse of shipping markets during the financial crisis, many companies in the shipping industry have diversified into the offshore sector and one shipyard which undertook such a transformation shared its experience with attendees at SMM’s Offshore Dialogue.Khamis Buamim, chairman of Drydocks World and Dubai Maritime World, recalled some of the highlights of the yard’s journey from ship repair to pioneering offshore mega-projects.
“We, in an old yard, for a long time, were just performing ship repair. To do a transformation requires different thinking and a different approach and no doubt one of our climaxes of that was successfully obtaining world-first projects. They are all accomplished, two modules to go on the FLNG Shell Prelude and after that we have further mega projects coming in, already on the drawing boards.”
Drydocks world took a “holistic” look at its markets to beyond 2030 and identified energy, including oil and gas and wind power as the most attractive and sustainable for its business. That strategic decision meant a change of direction to generate additional revenues in a slow economic environment, while maintaining its existing ship repair offerings.
In Dubai, the entire yard was completely reconfigured to increase efficiency and allow for the large fabrication projects it was hoping to attract.
The maneuvering of massive fabrication projects presents a complex engineer challenge still, but one that would not have been possible before the changes to the yard.
Similar reconfiguration at Drydocks World’s overseas yards was performed to allow for their growth through joint venture programmes.
As its core business, besides ship repair and newbuildings, the company moved into rig building and refurbishment and started work on offshore modules and structures, as well as conversions.
“That will continue to drive our business as we look ahead,” said Buamim.
The FSRU Toscana, the world’s firs the world’s first permanently moored floating offshore regasification terminal for Saipem, was successfully completed and gave the yard momentum.
The Dolwin Beta, the largest capacity wind power high-voltage direct-current (HVDC) offshore platform ever built, involved a record breaking lift of 10,000 tonnes to a height that enabled coupling with the structure’s base.
“It was one of the greatest learnings of our lives, engineering, procurement, production and commercial, every part of the business worked closely to accomplish the maximum required within the time span.”
“We don’t believe this is the last, it is only the first. Nevertheless it is a massive undertaking for us in Dubai for the transformation psyche… Each individual project has its challenges, but is a valuable learning experience for the yard and its capabilities,” Buamim commented.
“When Dolwin beta left Dubai, the skyline lost something,” said Buamim, adding his personal pride at having the largest capacity wind power high-voltage direct-current (HVDC) offshore platform ever built standing at the yard within view of the Burj Khalifa, the world’s tallest manmade structure.
The 15-member Economic Community of West African States (ECOWAS) set to launch maritime zones to fight piracy
The countries of the sub-region have been grouped into zones for information coordination and action.
The 15-member Economic Community of West African States (ECOWAS) is seeking to launch a pilot project aimed at monitoring and tackling piracy in the Gulf of Guinea
"Over the past years, the ECOWAS region, particularly in the Gulf of Guinea, has seen piracy and various other criminal acts," Salamatu Hussaini Suleiman, ECOWAS commissioner for political affairs, peace and security, told Anadolu Agency
"The heads of states and governments approved a strategy for combatting that menace [i.e., maritime crime] and part of that strategy includes setting up maritime zones," she said.
The countries of the sub-region have been grouped into zones for information coordination and action, Suleiman explained.
"The first one we are piloting in West Africa is the Zone E. This comprises Nigeria, Niger, Benin and Togo," added Suleiman, who is currently attending a three-day meeting of ECOWAS defense chiefs in Ghana.
The meeting, which kicked off Tuesday, is meant to address a host of issues, including anti-piracy efforts and the Ebola outbreak.
"This meeting will discuss the operationalization of this zone and will pave the way for others to come," Suleiman told AA.
"We are collaborating efforts to deal with this issue." She said Benin had offered to host the zone's coordinating center.
"This is part of what the meeting will discuss to see whether the venue provided is adequate," noted Suleiman.
She said the meeting would also discuss coordinating efforts for a maritime zone established by states of the ten-member Economic Community of Central African States (ECCAS) with a view to combating piracy.
"There will be a regional coordinating center and an inter-regional coordinating center," added the ECOWAS official.
She said the inter-regional coordinating center, based in Cameroonian capital Yaounde, would be launched on September 11 in line with decisions taken by ECOWAS and ECCAS heads of state at a joint summit in June of last year.
Piracy has become a growing concern in West Africa.
The International Maritime Bureau (IMB) recently warned of the dangers to ships transiting West African waters, particularly around Nigeria, Benin and Togo.ECOWAS, a regional bloc founded in 1975, seeks to promote economic, social and cultural integration among its 15 member states.
Ghana currently holds the rotating chair of the Authority of ECOWAS Heads of State and Government
Canadian Seafarers protest EU economic trade deal opening cabotage to foreign flags
( Asian Shipper ) A UNION bloc, led by the Seafarers International Union (SIU), which represents Great Lakes and coastal sailors, is protesting the opening up of cabotage to foreign-flag ships with coming of the Canadian-European Comprehensive Economic Trade Agreement (CETA)."The Government of Canada has taken the decision to destroy the Canadian
shipping industry with a trade agreement that will throw thousands out of work. Are we ready to go backwards and promote unregulated shipping?" said the communique.
Container ship freed from reef off Saipan
( Guam PDN ) The container ship MV PAUL RUSS has been freed, two days after it ran aground on the reef off Saipan's Micro Beach, the Coast Guard stated yesterday.
The 526-foot ship was on its weekly trip from Asia to Saipan with various supplies, including food items and other general merchandise, when it hit the reef on Tuesday. The ship reached the Saipan seaport Thursday night, Mariana Express Lines confirmed.
The vessel also had an estimated 400,000 gallons of fuel oil when it ran aground, but none of the fuel leaked into the surrounding water and reef, the Coast Guard on Guam stated.
The mission to pull the ship to safety became complicated when World War II-era bombs were found on the seabed near where the ship was stuck. The U.S. Navy sent a team of bomb disposal experts and divers to conduct a safety inspection before the ship was pulled free.
The ship's crew members were evacuated during the safety evaluation.
A subsurface dive allowed the team to get a closer look at the ordnance, which was found to be in various stages of decay, the Coast Guard stated. As seas were forecast to get rough -- from less than 2 feet, to 7 to 9 feet -- tugboats were dispatched to pull the ship Thursday night.
"The potential damage the vessel could sustain posed a greater risk to the environment and ship compared to that of the suspected ordnance," the Coast Guard stated. "The ordnance was found to be very deteriorated and located in an underwater valley, which would likely prevent direct contact with the vessel if it were to be pulled from the reef.
Registered in Antigua and Barbuda, the container ship was being utilized by Mariana Express Lines to deliver cargo from Asia to parts of the Western Pacific.