Berlian Laju said in January its subsidiaries had failed to make debt payments, then in February, the shipper–which has a fleet of oil, gas and chemical tankers–said it had defaulted on six U.S. dollar and local currency instruments. In January the company said that it estimated around $418 million in principal debt payments are due to be made this financial year.

Often seen as a barometer of global economic health, the shipping sector has been hurt by high fuel costs and a slump in trade that has suppressed freight rates. The company said operating in such conditions had “significantly impacted” its fiscal position.

The court order announced Tuesday will prevent any of the company’s assets from being impounded by a “limited number of creditors” for three months, the company said. It said it had obtained the order with the support of the largest group of bank creditors, who are led by Norway’s largest lender, DNB ASA (DNB.OS), according to Cosimo Borrelli, managing director of accountants Borrelli Walsh, which has been appointed by Berlian to help restructure the firm.

“There are a couple of small creditors that tried to arrest two ships overseas and that’s really what prompted taking the steps we did,” said Borrelli. When used in a maritime context, arresting a ship refers to trying to gain jurisdiction over a vessel that is the subject of a law suit.

Borrelli declined to name the creditors that were seeking to impound the vessels, but said that the order was sought with support from the company’s largest group of bank creditors.

Berlian Laju’s latest financial report from November 2011 states that one of the company’s subsidiaries in February 2011 obtained a loan with a maximum credit of $685 million from European banks DNB ASA, BNP Paribas SA (BNP.FR), ING Bank NV, NIBC Bank Ltd, Nordea Bank Finland Plc (NDA.SK) and emerging markets bank Standard Charted Bank PLC (SCZ.ZM). Sweden’s SEB AB (SEB-A.SK) in May 2011 joined the group of lenders, according to the report.

DNB were not immediately available for comment on the court order.

Borrelli said it is “very early days” for the company’s restructuring, and an update on developments should take several weeks. “The focus at the moment is ensuring it’s business as usual and the customers and suppliers are happy, which has been a very successful process so far,” he said.

“We’re not expecting a long-winded restructuring process, it’s quite a committed and planned effort by both the company and us and FTI and the execution so far has been pretty good,” he added.

The company has appointed FTI Consulting to carry out a financial assessment of the company. Trading in the company’s shares in Jakarta and Singapore was suspended in January.

-By Matthew Allen, Dow Jones Newswires; Joanne Chiu in Hong Kong and Gustav Sandstrom in Stockholm contributed to this article

Image courtesy OOCL

HONG KONG (Dow Jones)–Orient Overseas (International) Ltd. (0316.HK) said Monday it expects trading conditions in 2012 to remain tough as high fuel costs and oversupply of capacity continue to weigh on the Hong Kong-based container shipper’s bottom line.

The company–controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa–said net profit in 2011 was US$181.6 million, down sharply from a net profit of US$1.87 billion a year earlier largely due to a one-gain gain that boosted the 2010 figure. Falling freight rates due to weakening demand for international trade also hit its profitability. Still, the result was better than the average US$128.93 million net profit forecast of 13 analysts.

The global shipping industry has been hit by the European debt crisis and the uncertain growth outlook for the U.S., with demand for trade dwindling since the second half of 2011 and freight rates falling as a result.

Orient Overseas Chief Financial Officer Ken Cambie told a news conference that he expects global shipping capacity to grow by around 9% to 10% in 2012, outpacing a 5% to 6% growth in demand for container shipments, which would put further pressure on freight rates.

Cambie noted that despite several rate hikes from the start of this year, many of the company’s routes hadn’t been profitable due to high fuel costs.

However, he expects the shipping industry to “head back to break-even level in 2012,” as industry players have agreed to make a concerted effort to raise shipping rates by May.

Member carriers in the Transpacific Stabilization Agreement (TSA), including Orient Overseas and Denmark’s Maersk Line, plan to raise rates by at least US$500 per 40-foot unit, or FEU, for cargo to the U.S. West Coast and at least US$700 per FEU for all other destinations no later than May 1.

Following a 20% capacity cut on the Asia-Europe route from the fourth quarter 2012, the Hong Kong-listed container shipper announced several rate hikes from February on certain routes, in a bid to restore profitability. Cambie said that the company has no current plan “to idle further vessels” after the previous cut, but will consider adjusting capacity if freight rates aren’t satisfactory.

In 2011, it shipped a total 5.03 million twenty-foot-equivalent units, or TEUs, up 5.6% from 4.77 million TEUs a year earlier, but revenue from its shipping division fell 1.5% to US$5.53 billion from US$5.62 billion a year earlier as overall freight rates fell 6.7% during the same period to US$1,099 per TEU, it said.

The company’s 2011 revenue fell 0.3% to US$6.01 billion from US$6.03 billion. It didn’t pay a final dividend, as the container shipper aims to preserve more cash to weather the downturn.

It paid an ordinary final dividend of 23 US cents and a special dividend of 2.093 US cents for 2010 after the company struck a US$2.2 billion deal in early 2010 to sell its China property business to Singapore’s CapitaLand Ltd.

-By Joanne Chiu, Dow Jones Newswires

Image courtesy Danaos Shipping

We are downgrading Danaos to Neutral from Outperform, and Seaspan to Underperform from Neutral. – Credit Suisse

Despite both Danaos’ (ticker: DAC) and Seaspan’s (SSW) solid contact coverage in 2012, we are downgrading both names under a backdrop of capacity rationalization by their customers. The liner industry (customers) is trying to figure out how to make money and capacity reductions seem to be doing the job.

Idle ship capacity stands at 5% of the fleet, and we expect more not less as new ships are delivered this year. This should keep charter rates (already around cash costs) at depressed levels into 2013 and drag down asset values along the way.

Rationalization and ton-mile contraction is not good for ship owners. Last year was another tough year for the liner industry with the major liner companies returning to their losing ways. This has driven many shippers to rationalize their services, which has included increased vessel-sharing arrangements (think better-utilized vessels but less of them). Additionally, while we expect strength in regional trades such as Intra-Asia and Far East-Middle East, we expect slower growth on the Far East-Europe trade and the transpacific trade to drive ton-mile contraction. In other words we are not expecting the container trade to be a two times multiple of global growth.

Fleet growth is slowing, but still a lot on the way. We expect containership fleet growth of roughly 9% in both 2012 and 2013 versus our containership demand growth estimates of 5% in 2012 and 7% in 2013 — this still points to a supply demand mismatch. Barring a surge in global container trade, we expect charter rates to remain at depressed levels in 2012 and below midcycle levels in 2013.

- Gregory Lewis and Anthony Sibilia, Barrons Online

The Winners. Photo courtesy Lloyd's List

Some of the biggest names in shipping met this week in London for the annual Lloyd’s List Awards, one of the industries most acclaimed events recognizing the years great achievements in shipping.

The focus of this years awards crossed many issues facing the maritime industry − safety, the environment, financing and innovation.

The awards are independently judged and designed to recognize excellence in the shipping industry and acknowledging the successes of top class performance.  The following are the winners from the “Global” category.  Winners from additional categories can be found HERE.

Port Operator Award
Winner: Krishnapatnam Port Company

Ship Operator Award
Winner: APL

Amver Assisted Rescue at Sea Award
Winner: Crystal Pioneer and Hokuetsu Delight. Rescue of 64 students from a Canadian sailing vessel

Safety Award
Winner: APM Terminals

Training Award
Highly Commended: Anglo-Eastern Maritime Training Centre
Winner: Magsaysay Maritime Corporation

Environment Award
Highly Comended: Tsavliris Salvage Group
Winners: Pacific Basin Shipping

Maritime Lawyer of the Year
Highly Commended: Norton Rose
Winner: Frank Dunne, Watson, Farley & Williams

Corporate Social Responsibility Award
Highly Commended: Maersk Line
Winner: DP World

Ship Financier Award
Winner: Standard Chartered Bank

Innovation Award
Highly Commended: Maersk Oil Trading − Flowmeter Project
Winner: DNV − Triality − Tanker Concept Project

Seafarer of the Year
Highly Commended: Captain Keith Pettit, Master of Maersk Beaufort, The Maersk Company
Winner: Captain Zhu Qianchun, Master of Port Pegasus, Pacific Basin Shipping

Company of the Year
Highly Commended: Costamare
Winner: CMA CGM

Newsmaker of the Year
Winner: Gerry Wang, Seaspan

Lifetime Achievement Award (Maritime Hall of Fame)
Winner: Jim Davis CBE K(DK)

"Sealand Florida" taken in Houston's Barbour's Cut Terminal. Photo via Flickr user OneEighteen

Overall confidence levels in the shipping industry fell to their lowest level for three and a half years in the three months ended August 2011, according to the latest shipping confidence survey by leading accountant and shipping adviser Moore Stephens. Fears about overtonnaging, and continuing uncertainty about the global economy, were the main reasons for the decline in confidence. The rising cost of marine fuels was also a cause for concern.

In August 2011, the average confidence level expressed by respondents in the markets in which they operate was 5.3 on a scale of 1 (low) to 10 (high), compared to 5.6 in the previous survey in May 2011. This is the lowest figure recorded since the survey was launched in May 2008 with a confidence rating of 6.8, which remains the highest rating achieved thus far.

Confidence over the three-month period covered by the latest survey fell most noticeably on the part of owners, down from 5.8 to 5.1, the lowest owner rating recorded during the life of the survey to date. Confidence levels among charterers were even lower at 5.0, but the fall in comparison with the previous survey (from 5.4) was less than that for owners. Confidence on the part of managers fell from 5.8 to 5.6, while brokers held on to their already comparatively low rating of 5.1. Geographically, confidence remained lowest in Europe, falling from 5.5 to 5.0, its lowest level since the survey was launched. Asia, meanwhile, held steady at 5.7.

One respondent observed, “Until recently, things looked quite optimistic, but recent doubts over US loan credibility and EU financial worries have severely dented confidence.”  Others referred to “the most unpredictable period since the beginning of the global financial crisis” and suggested that the market was “back to levels last seen in 2001.” Few could see a short-term solution to the difficulties.

Overtonnaging was a recurrent theme throughout the comments. “Markets are at rock-bottom,” said one respondent, “and will stay there for some time because of the large number of new vessels due to come into service. Older vessels and speculative investors, as well as low-grade operators, will have to disappear before the situation can start to improve.” Another respondent noted, “The situation looks pretty grim, given the massive amount of over-ordering.”

Expectations on the part of respondents of making a major investment or significant development over the next twelve months fell, on a scale of 1 to 10, from 5.6 to 5.1 – the lowest level since the same figure was recorded in November 2009. Just one year ago, in August 2010, respondents recorded the highest figure (6.0) in the life of the survey to date. This time, owners recorded the biggest drop in this regard, while managers and charterers were also less confident. Geographically, expectations of making a major investment were down across all the main regions covered by the survey.

Having dropped out of the top three for the first time in the last survey, finance costs returned as one of the top three factors which respondents expected to influence performance most significantly over the coming twelve months. Demand trends and competition, meanwhile, maintained their ever-present record in the top three.

Overall, 22 per cent of respondents (down from 23 per cent last time) cited demand trends as the most significant performance-affecting factor, while 17 per cent (19 per cent) identified competition in this regard. Meanwhile, 16 per cent of respondents, (14 per cent), opted for finance costs. The percentage of respondents overall who identified fuel costs as having a significant effect on performance was down by 4 percentage points to 12 per cent.

For owners, demand trends continued to be the dominating factor, despite a fall from 28 per cent to 24 per cent in the number of owners who put it in first place overall, ahead of finance costs and tonnage supply. The top three performance-influencing factors for managers were competition and demand trends – both cited by 17 per cent of respondents in that category and both up by two percentage points on last time – followed by operating costs. For charterers, meanwhile, demand trends and competition made up the top three, ahead of fuel costs.

Geographically, demand trends emerged as the most significant factor for operators in Asia, Europe and North America (19 per cent, 23 per cent and 30 per cent, respectively), with competition and finance costs making up the remainder of the top three.

Fewer respondents expected an increase in finance costs over the coming year – 52 per cent compared to 59 per cent in the previous survey. This was the case across all categories of respondent and in all geographical areas covered by the survey. Meanwhile, the number of charterers who were anticipating finance costs to fall over the next year was up from 9 per cent to 15 per cent, the highest figure since May 2009.  Geographically, the biggest change was to be found in Asia, where the 50 per cent of respondents anticipating higher finance cost was twelve percentage points down on the 62 per cent recorded in May 2011.

There was a big fall in the numbers of respondents expecting rates in the tanker sector to increase over the next twelve months – down overall from 44 per cent last time to the lowest level since February 2009, at 34 per cent. Just 30 per cent of owners, the lowest total for more than two years, thought that rates were likely to increase, compared to 50 per cent in May 2011. Similarly, the numbers of managers and charterers who were anticipating tanker rate increases were the lowest since February 2009. Meanwhile, the overall number of respondents who thought that tanker rates were likely to fall over the coming year was up by 7 percentage points to 19 per cent. In the case of owners, 23 per cent thought that rates were likely to come down, compared to just 8 per cent last time. For charterers, the figure rose from 20 per cent to 26 per cent.

In the dry bulk sector, the number of respondents expecting rate increases over the next twelve months was down from 37 per cent to 27 per cent, an all-time low in the life of the survey. The number of owners who shared this opinion also hit an all-time low, while the 8 per cent of charterers of like mind was easily the lowest in three-and-a-half years.

The container ship market saw the biggest shift in opinion. In May 2011, there was a 28 percentage-point difference between the numbers anticipating higher rates and those who thought that rates would go down. Now, the gap has closed completely. Just 28 per cent of respondents overall thought that rate increases were likely over the coming year – the lowest figure since November 2009 – and 28 per cent expected rates to come down. Charterers were the only category of respondent recording an increase in expectations of higher rates. Owners and managers recorded the lowest figures in this regard since August 2009. In Asia, expectations of container ship rate increases were down from 41 per cent to 26 per cent, while in Europe the fall was from 44 per cent to 27 per cent.

Moore Stephens shipping partner, Richard Greiner, says, “The drop in shipping confidence to a record low is a disappointment. But it has been coming. Given what has been happening in the world, and in the industry, confidence remained surprisingly high last year, but it has started to slip in 2011. Indeed, in many ways, it is back to the levels of two years ago.

“We are starting to see now what many had predicted would happen much earlier. Banks are calling in their loans, shipping companies are filing for bankruptcy protection, ships are being arrested and auctioned around the world, and the courts and arbitration tribunals are starting to see an increase in their workloads. Financiers wants their money, and are ready to take what they can get now rather than wait in the hope that the markets will recover and enable them to achieve a return on their investment. This results in a situation in which everybody loses something. Financiers need to continue to work together with shipping companies and external financial advisers to find a way forward for viable long-term businesses, perhaps exploring the opportunities offered by independent business reviews.

“Meanwhile, costs are going up all the time. Bunker prices are the big worry. The cost of fuel has to be met and passed down the chain, at a time when money is tight for everybody. After a lull, the indications are that operating costs are once again likely to increase. The cost of raw materials also continues to rise. At the same time, freight rates are tumbling through the floor, stock markets are falling around the world, the US and European economies continue to stutter unsatisfactorily, political unrest in the Middle East shows no sign of abating, and the general economic gloom deepens.

“Our survey revealed, unsurprisingly, that the industry is much less confident now of being in a position to make a major investment over the next twelve months. With access to credit very tight, you cannot spend what you do not have. Most respondents to our survey were adamant that we do not need any more ships, and indeed that we already have too many to carry the level of trade on offer. The survey also showed, however, a fall in the number of respondents who expected finance costs to increase over the coming year. So, despite all the difficulties, now is a good time to buy, for those with access to money and a sound business plan. No industry can grow without continuing investment.

“There could be some nasty surprises, and some tough decisions, in the months ahead for operators and investors alike. But those who are in shipping for the long term will ride it out, and many will have had previous experience of doing just that. The international nature of the industry may be working against shipping at the moment, but it will once again prove to be its strength in less troubled times.”

Photo via DeathValleyMag.com

A “Round Table” of international shipping associations including ICS, BIMCO, INTERTANKO and INTERCARGO has urged the UN to establish a “UN Force of Armed Military Guards” to replace unregulated privately-contracted armed security personnel deployed onboard individual merchant ships traveling in piracy-prone areas of the Gulf of Aden and Indian Ocean.  The plea was made in a “hard hitting” letter sent Sunday to UN Secretary-General, Ban Ki-Moon.

The press release issued by the “Round Table” can be read below:

The global shipping industry has called for the establishment of a United Nations force of armed military guards to tackle the piracy crisis in the Indian Ocean, which it says is spiraling out of control.

In a hard hitting letter to UN Secretary-General Ban Ki-Moon, the International Chamber of Shipping (ICS), BIMCO, INTERTANKO and INTERCARGO demand a “bold new strategy” to curb rising levels of piracy which have resulted in the Indian Ocean resembling “the wild west”.

The letter states: “It is now abundantly clear to shipping companies that the current situation, whereby control of the Indian Ocean has been ceded to pirates, requires a bold new strategy. To be candid, the current approach is not working.”

Regretting the increasing necessity for shipping companies to employ private armed guards to protect crew and ships, the letter continues: “It seems inevitable that lawlessness ashore in Somalia will continue to breed lawlessness at sea.”

The shipping industry organizations – which represent more than 90% of the world merchant fleet – say they fully support the UN’s long-term measures on shore aimed at helping the Somali people but are concerned that these “may take years, if not decades, to have a meaningful impact on piracy.”

Asking the UN to bring the concept of a UN force of armed military guards to the attention of its Security Council, the letter says: “The shipping industry believes that the situation can only be reversed with a bold approach that targets the problem in manageable pieces. We believe that an important element in this approach would be the establishment of a UN Force of Armed Military Guards that can be deployed in small numbers onboard merchant ships. This would be an innovative force in terms of UN peacekeeping activity but it would do much to stabilize the situation, to restrict the growth of unregulated, privately contracted armed security personnel and to allow those UN Member States lacking maritime forces – including those in the region most immediately affected – to make a meaningful contribution in the area of counter-piracy.”

The letter can be downloaded in its entirety HERE.