Image courtesy COSCO

SINGAPORE (Dow Jones)–Cosco Corp. (Singapore) Ltd. (F83.SG) said Tuesday its first-quarter net profit fell 25% from a year earlier, mainly due to lower profit contributions from its dry bulk shipping and shipyard operations.

Cosco said in a statement that net profit for the three months ended March 31 fell to S$27.8 million from S$37.1 million a year earlier.

Group revenue fell 3.2% to S$978.7 million from S$1.01 billion a year earlier, with revenue from its core shipyard operations falling 2.5% to S$965.9 million, due mainly to lower contributions from ship repair and ship building projects, the company said in the statement.

The company’s order book stood at US$5.8 billion at the end of March, with deliveries up to 2014.

Cosco said it expects business and operating conditions for the rest of 2012 to remain “difficult and challenging” due to the uncertain global economy.

-By Matthew Allen, Dow Jones Newswires

Winter in the Port of Hamburg, © HHM / Dietmar Hasenpusch

The Port of Hamburg regains market shares and foresees a positive annual balance on total seaborne cargo throughput…

In 2011, Germany’s largest universal port achieved a seaborne cargo throughput totalling 132.2 million tons that represents an increase of 9.1 percent. Container throughput in 2011 totalled 9 million 20-feet standard containers (TEU), or 1.12 million TEU more than in 2010. Of all ports in the North European Range, in 2011 Hamburg therefore achieved the fastest absolute growth in container throughput.

After a successful year in 2011, the Port of Hamburg with throughput 14.2 percent up at altogether 9 million TEU is again Europe’s second largest container port, ahead of Antwerp. The Port of Hamburg’s total throughput was 9.1 percent higher, reaching a volume of 132 million tons that crossed its quays in the past twelve months. In other words, 11 million tons more were handled compared to 2010.

Claudia Roller, CEO of Port of Hamburg Marketing (HHM), presented the 2011 handling figures at the Port of Hamburg’s annual press conference today:

“We are delighted that in 2011 the Port of Hamburg proved able to achieve above-average growth both in total throughput and in container traffic. With the strongest absolute growth in container throughput, Hamburg regained market shares of approximately 1.3 percentage points as against its competing ports.”

The positive trend in 2011 prompted Claudia Roller to forecast growth once again for next year:

“For 2012 we are also reckoning with an increase in throughput figures, although this will slow down compared to 2011, meaning that by year-end we should have achieved a moderate increase on seaborne cargoes. With its existing capacities, well developed infrastructure and highly efficient port service providers, some of whom have recently won international awards, Hamburg is very well equipped to handle growing cargo volumes with its customary reliability, speed and high quality. The forthcoming deepening of the navigation channel on the Lower and Outer Elbe will further boost Hamburg’s attractiveness in competition with North Range ports as a European hub for ultra-large vessels. Nevertheless, as yet not fully implemented changes in major liner services make it difficult to calculate the trend in container throughput at this stage.”

Following 6.9 percent growth in world trade in 2011, for 2012 the IMF (International Monetary Fund) anticipates a renewed slowdown in such growth to 3.8 percent. The IMF assessment of the prospects for world growth also takes into account that in 2012 the repercussions of the debt crisis will cause countries of the Eurozone to slip into a slight recession in the area of the real economy.

An overview of the Port of Hamburg’s gratifying year in 2011

The Port of Hamburg can look back on thoroughly satisfactory results for the year on both imports and exports. On the imports side Port of Hamburg Marketing (HHM), the Port of Hamburg‘s marketing organisation, reports throughput of 76.2 million tons (+ 8.2 percent). Exports via Hamburg at 56 million tons reflected growth of no less than 10.3 percent on the same period of the previous year.

At 92.6 million tons, the general cargo throughput predominant in Hamburg achieved 14.4 percent growth. In 2011 the Port of Hamburg‘s container throughput totalled 90.1 million tons (+ 15 percent). At 4.6 million TEU, the Port of Hamburg achieved 13.8 percent growth on imports, while exports at 4.4 million TEU were up by 14.5 percent. The trade routes mainly responsible for growth in container throughput were the Baltic region and East Asia, as well as North and South America. These alone accounted for around 82 percent of the growth in box throughput. In container traffic, in 2011 Asia once again retained top position among the Port of Hamburg’s trade routes. Last year altogether 5.2 million TEU were handled from and for Asia, or around 419,000 TEU (+ 8.8 percent) more than in the previous year. Yet the largest rise in container throughput reported for the Port of Hamburg in 2011 was with the USA. With 81.6 percent growth, the USA advanced from twelfth to sixth place among the Port of Hamburg’s foreign trade partners. On container throughput in the Port of Hamburg, growth was also achieved in 2011 by the other trades, namely America (+ 28 percent), Africa (+ 5.3 percent) and Australia/Pacific (+ 0.1 percent).

Container throughput in the Baltic trade developed equally satisfactorily. Gaining around 27 percent, in 2011 transhipment traffic by feeder grew at an above-average rate. Russia reported enormous, 35.7 percent growth in container throughput via Hamburg and with 596,000 TEU is meanwhile the Port of Hamburg’s second most important trading partner in container traffic. With altogether 238,000 TEU, in 2011 feeder services with Polish portsreported above-average growth of 33.3 percent. Altogether around 3.3 million TEU were handled in transhipment traffic in Hamburg last year. With more than 150 sailings per week, Hamburg remains the most important feeder port in Northern Europe for the whole of the Baltic region. For both Hamburg and Germany’s North Sea ports, the Kiel Canal cuts the distance to be covered and voyage times for traffic with the Baltic. That represents an important locational advantage in competition with ports situated further West.

Port of Hamburg throughput statistics on conventional cargoes, which also cover RoRo cargoes, have been down at 2.5 million tons (- 3.8 percent) in 2011. The decisive factor for the downturn in this segment of throughput was the drop in imports of conventionally stowed citrus fruits, which were 17.8 percent lower at 497,000 tons. The rise in imports of conventionally loaded metals was gratifying, since at 185,000 tons these were handsomely ahead by almost 26 percent. Also very satisfactory were vehicle imports, handled as RoRo cargoes in Hamburg, which at 96,000 tons grew by 12.3 percent. At 133,000 tons (- 4 percent), imports of paper as a conventional cargo were only slightly below the previous year’s level. On the export side, at 1.4 million tons throughput of conventional general cargo was up by 2.5 percent. The main goods exported were heavy cargoes and plant at 543,000 tons (- 8 percent), vehicles with 517,000 tons (+ 9.5 percent) and iron and steel with 281,000 tons (+ 17.1 percent), all handled at the Port of Hamburg’s specialized terminals.

Accounting for around 30 percent of the port’s total throughput, in 2011 bulk cargo throughput in Hamburg at altogether 39.6 million tons remained slightly (- 1.6 percent) below the previous year’s volume. The main categories of bulk cargoes are grab, suction and liquid cargoes, all of which are handled and stored in the universal port of Hamburg. Throughput of grab cargoes at over 19 million tons accounted for 49 percent of total bulk cargo throughput in 2011 and was therefore the dominant category. Grab cargo throughput consists primarily of ores and coal, along with fertilizers and scrap metal. Despite an 8.8 percent downturn, at 8,5 million tons ore imports top the throughput statistics for this segment in Hamburg. Coal imports at around 6 million tons were up by 12.6 percent. On the export side, throughput of fertilizers at 2.3 million tons grew by 2.7 percent. Throughput of scrap exports at 943,000 tons was around 7 percent lower than in the previous year. Following two very strong years, in 2011 throughput of suction cargoes at  6.2 million tons remained 6 percent below the previous year’s level. Despite a very steep increase of 21 percent in imports of oleaginous fruits that reached 3 million tons last year, it proved impossible to stem the decline in exports of suction cargoes (- 24.4 percent). In 2011 a poor grain harvest and its lack of suitability for the world grain market were behind the almost 36 percent drop in grain exports to 1.5 million tons. Throughput of liquid cargoes at altogether 14 million tons in 2011 remained only slightly (- 1.1 percent) below the previous year’s figure. Caused among other factors by lower refinery production here, crude oil imports at 4.1 million tons were 6.2 percent lower. At 4.8 million tons, those of oil products were up by 2.1 percent. On the export side, at 3.8 million tons (+ 0.3 percent) throughput of liquid cargoes was slightly ahead. Exports of biodiesel at 1.3 million tons produced 4.2 percent growth.

Calls by ultra-large ships at the Port of Hamburg further increasing

“Following extensive investments in port and infrastructural expansion, as well as state-of-the-art IT systems, today Hamburg is already well equipped for handling growing volumes of seaborne cargoes. We are consequently staying on target for a modern port of the future”, said Jens Meier, CEO of the Hamburg Port Authority (HPA).

Against the background of the 894 ultra-large vessels handled in Hamburg during 2011, the planned deepening of the Lower and Outer Elbe is from the viewpoint of business in the port and its international customers something that must be implemented at all costs. With its dense network of more than one hundred worldwide liner services and its outstanding transport links, the Port of Hamburg performs an essential function in worldwide foreign trade for the German economy and the business abroad done by its European neighbours. On average, over 100 liner services were operating regularly out of Hamburg in 2011. A high proportion of seaports worldwide were served directly, and the remainder indirectly via transhipment.

The East Asia trades constitute one of the Port of Hamburg’s main markets. In 2011 Hamburg was on average receiving 26 weekly calls by fully cellular services on the East Asia trade route. In addition, there were nine liner services to North America, as well as eleven to South America and 20 to Africa. Almost 50 feeder links serve the North Sea and Baltic regions. In 2011 the Port of Hamburg reported altogether 17 new liner services. Four of these were on the East Asia trade route, three to North America, two to West Africa and one each to South America and the Indian sub-continent. An additional six commenced operating on the Baltic trade route.

Various liner shipping companies have announced new joint services and cooperation deals for 2012. For instance, CMA CGM and MSC will be operating joint liner services and so will CHKY – The Green Alliance and Evergreen Line. The Grand Alliance (Hapag-Lloyd, NYK, OOCL) and New World Alliance (APL, MOL, HMM) shipping alliances have also put their cooperation on a new footing with the G6 Alliance. As the first changes to liner services and the plans for new ones indicate, in the current year the Port of Hamburg will retain its role as both a traffic interface for worldwide cargo flows and a European hub.

By Clay Maitland

Shipping, it is often said, is a house of many mansions.  It is characterized by different qualities, and varies according to the nationality of the ships themselves, and their owners.  Here in the United States, however, one thing cuts across all of the niche markets and special interests:  we need leadership.  Nowhere is this more apparent then in the somewhat veiled circumstances of the firing (because that is what it was) of Admiral Philip H. Greene Jr. as Superintendent of the United States Merchant Marine Academy, also known as King’s Point, located on Long Island Sound, within sight of the New York State Maritime Academy, across the water in the Bronx.  This has been followed by an order from the United States Maritime Administration (MARAD), closing down GMATS, a self-funded graduate training program based at the Academy.  Now MARAD is taking away the Academy’s training ship, the KING’S POINTER, transferring it to Galveston, Texas, where it may be refurbished, and could be made available to the Texas Maritime Academy (Texas A&M) for its own training needs.

Admiral Greene’s removal is the third such incident in fairly rapid succession since shortly before the start of the Obama administration.  While various reasons have been given, the fact that the superintendency of King’s Point has become more of a merry-go-round than the presidency of some Central American banana republics in former times has made the job highly unattractive, and the butt of sarcastic remarks.

Significantly, the present Maritime Administrator, David Matsuda, has been the subject of widespread dissatisfaction and, to a degree, open expressions of contempt.  Mr. Matsuda comes from a career as a political staffer on Capitol Hill.  His background lies in railroad regulation, and his lack of knowledge of shipping became apparent even before his appointment at the start of the Obama administration.  It is said that he owes his position very largely to the support of Senator Frank Lautenberg of New Jersey.

In bygone times, MARAD Administrators (as the head of the agency is described) were selected after a careful vetting by U.S. maritime unions, and leading figures in the private sector.  Recently, the same unions issued a blast denouncing MARAD for the production and issuance of a report that graphically described the drawbacks of U.S. flag restrictions, particularly in terms of cost, in comparison with U.S-owned tonnage registered in foreign flags.

It is not clear why American maritime unions were willing to accept Mr. Matsuda’s appointment in the first place, particularly as they have now turned on him.  It is also unclear why the U.S.-flag maritime industry, which is heavily staffed by alumni of King’s Point, is so docile in face of the steady amputation of essential parts of the Academy itself.

King’s Point is largely a product of the Second World War, at a time when mariners were desperately needed to crew the gray-hulled Liberty and Victory ships and tankers that, produced in huge numbers, made a major contribution to Allied victory.  Today, it and the other American maritime academies maintained as state-chartered institutions, still produce large numbers of well-trained merchant mariners.  But if the U.S. government is seemingly oblivious to the importance of the shipping sector, there is no sign that the maritime industry itself is willing to step forward in defense of its vital educational institution on the north shore of Long Island.  It has been observed that the industry’s lack of leadership, and indeed lack of concern, resembles its response – or lack there of – on many other issues.  The industry, in the United States and indeed overseas, is very short of individuals willing to take the risk of speaking out, and perhaps of being unpopular.  This has sometimes been called “middle-managementitis”.  As the world economic recession threatens the survival of many shipping companies regardless of the flag that they fly, there is a sense that much of the maritime industry here in the United States is running out of time.

In the United States, we need a strong and focused government maritime policy.  This policy should contain the following elements:

1. Education and training must be more strongly supported by the private sector.  It is unlikely that there will be much federal funding available in the near future, so let’s roll up our sleeves.
2. The politicization of the Maritime Administration (MARAD) is in many ways detrimental to the development of a strong U.S. maritime policy.  When it does get things right, it is often undercut by special interests and short-termers within the maritime sector and the U.S. government.  This is an agency in need of a good sweeping out, and a solid policy direction.
3. “Maritime policy” must mean (as it doesn’t, at present) one that covers the entire U.S. based industry, regardless of flag.  The emphasis must be on jobs for American seafarers, and on training policies that make sense.
4. About 95% of all American freight is hauled on our interstate highways.  The levels of congestion, and the social and environmental costs, keep growing.  The failure to develop short-sea shipping is largely due to the remarkably high cost of building tugs, barges, and other ships in U.S. shipyards.   The legal requirement that all such ships must be “built American” has supposedly destroyed the possibility of a successful coastwise shipping program.
5. But has it?  The industry is waiting for a new Henry J. Kaiser, who built so many of the ships that braved the Battle of the Atlantic.  Is it absolutely certain that an American yard or yards cannot turn out ships, tugs and barges at a competitive price?  For that matter, is it certain that it is impossible to profitably run a U.S. coastwise operation with U.S. crews, if we do manage to get rid of the “build American” requirement?
6. It has long been clear that if a new generation of Americans is to be recruited to careers in the shipping industry, with seagoing experience leading into numerous shoreside opportunities, serious support for training must be provided.  It is generally agreed by our maritime unions, as well as private-sector companies, and within MARAD itself, that the decline of the U.S. flag has been caused by uncompetitive practices, taxation, over-regulation and the failure to develop a coherent maritime policy.  The United States has some of the best maritime training schools in the world, with cadets that are among the most highly motivated that can be found anywhere.  But a real commitment by the U.S. government is not evident.
7. Shipping is still an excellent industry with pride in its achievements and the capacity to expand to meet the needs of a growing nation, and indeed the world.  The tone, however, must be set by government, and that is what is presently missing.  The industry, and the nation, deserves a Maritime Administration, and a maritime policy, that is worthy of national support and international respect.

M/V Industrial Dream, image courtesy Intermarine USA

Part 2 of an exclusive gCaptain interview with Intermarine’s CEO, Andre Grikitis, and CFO, Michael Dumas.

By Jack Mylott, Partner, Flagship Management

JM: With the growth of the heavy lift and project cargo industry over the past decade, we’ve also encountered the global debt crisis, the Eurozone crisis, and China contracting, constricting, or otherwise limiting their trade.  From an infrastructure development standpoint, what has been the impact of these issues on the projects you have been involved with?  What has been the impact to Intermarine?

AG:  When there is a crisis, project movement lags, whereas the bulk industry reacts almost immediately.  Projects can’t stop immediately and they don’t start immediately.  Essentially, there is a lag-effect in our industry and it can vary depending on the region, so it could be 8 months or longer, and that’s both in the up and down cycles.

I think that’s one feature of our industry if you relate it to the bulk industry.  The demand for projects, or our type of cargo, is very difficult to forecast, because there aren’t many people following it and many people don’t report what’s on their books.  Our view of the market has to be developed from what our clients tell us what’s coming.  However, I think the complication for our market is that, like other parts of shipping, during the last decade or more our industry was really over-built, so the oversupply of tonnage is outstripping the forecasted demand, and has done so consistently since 2009 through 2013, from what we can see of newbuildings.

This overbuilding has had a few driving factors.  The major factor is the KG system in Europe which has made Germany the largest ship-financing region.  Many ships were built on speculation, and by people who didn’t operate them themselves, they did it because the money was available, and what you have now is equivalent to a sub-prime condition.  Equity was available from private investors who got tax deductions, these funds were created and promoted by the financial community, and this really led to a boom in building of multi-purpose, heavy lift, and container vessels as well.  It was completely overbuilt without any real notion of what the demand cycle was, and it far outstripped what many of the traditional carriers in this segment themselves had forecasted.  The market became distorted, and that distortion is a bubble that will continue here until supply and demand comes into sync.

One of the difficulties in our industry, and I’m guessing some others, is that having the equipment, and having the ships is one thing, but having the personnel that are competent and capable of operating them, is in fact, in short supply.  So, many of these ships are out on the market providing “space”, but they are effectively bringing down the industry.  I would say the problem has been pushed down the road by the German banks with moratoriums etc etc and they anticipate of the market recovering, but that hasn’t happened.  So, I think we’re expecting some redistribution of control, but that redistribution of control won’t necessarily improve the market if the ships don’t get into the proper hands in terms of how they can be used and managed.

JM: Regarding personnel competency and capability and some of the extended services you offer beyond A-to-B ocean-going service, where do you extend your logistics management expertise?  How far into the supply chain to you go?

AG:  Essentially, we go as far as our clients have wanted us to go.

One of our difficulties is that the freight-forwarding community is often involved in this as well, and in many cases, they arrange the ocean transportation. So, they are in fact our customers.  We cannot, and do not, compete with them on a direct basis, however on certain projects, we have quotes on cargos that have included services including road building, believe it or not, we’ve participated in barging, we have a barge in Venezuela that has brought the equipment alongside the Jose Refinery, and was the only barge available that had the capability to do that.  We’ve certainly done trucking, collaborated with heavy haul folks, all the way up to quoting on some erection.  We offer packing at the terminal for people who want to consolidate their cargos in a single location from multiple suppliers.  Clearly we do whatever is required on the documentation front, and I think that all these services, we can either do them in-house, or we collaborate with others in the industry, so it can all be done with the shipper going to a sole-source.

We’ve made arrangements, for example, for folks to be able to transport cargos from ship-side to their final destination by using berths where rail is available.  So, essentially, we are flexible in our approach to how we handle transportation solutions, and even if we are not the party who does the direct contracting, we try to involve ourselves as early as possible into the lifecycle of a project, so that the proper pre-planning can be done.  I suppose it’s no different in most businesses, but if you’re involved early enough in project cargos, quite often, you can achieve a much more effective and efficient operation in the end, and it puts people on the same page.  We try to avoid surprises.

M/V Industrial Freedom, Image courtesy Intermarine USA

JM: I’ve seen on your website that you have a couple of images of ships carrying wind turbine blades which falls outside of heavy lift, and moreso into the project cargo domain.  Do you see a difference with your services as they relate to the wind turbine industry?

AG: Let me make our position on heavy lift and project cargo clear.    Our formula is that our business needs to run on a combination of cargos.  Essentially, almost anything up to and including containers in some cases, in our view, qualifies as project cargo because a combination of cargos is necessary to make a successful voyage.  Irrespective of how much cargo there is, if you don’t have it in the right combination on a vessel, then you cannot produce a successful and profitable voyage.  So, with the number of ships in the world today, and the way cargo flows go, we certainly do not build our business around heavy lift cargoes.  Heavy lift cargoes are not that large of a percentage of our overall cargo mix.  Cargo mix is really what’s key in being successful in this industry in an ongoing basis.  I think that essentially is how we’ve always treated voyages.  We’re always combining various commodities in the best possible combination for a good outcome.

Wind blade equipment today, probably constitutes roughly 20% of ocean-borne multi-purpose heavy lift cargo today.  It has become extremely important for a number of reason.  For one, it moves almost from everywhere to everywhere these days, and producers are both importing and exporting from the same locations sometimes, which is not so easy to understand in some cases, but it’s become a commoditized business in many ways.  It has produced a large volume of cargo.  These cargos require specialized vessels due to their dimension, not because they are heavy.  They need to stow on vessels in a way that makes them more economically viable to transport because they are not that highly valued.  So, as part of the project multi-purpose heavy lift cocktail, they are a vital ingredient today.  Some of the turbines, and the other structures such as the towers, can of course get quite heavy, and they move as well.  The blades are a very important part of the global cargo movement.

Thinking about project and heavy-lift cargo, I would not make the distinction that only heavy pieces are project cargo.  There exists the Heavy-Lift Club, which was modeled after the Container Box Club where many of the world’s heavy lift carriers get together twice a year on the CEO-level.  The qualification to “join” the club is to have vessels of 150-ton lifting capacity continuously employed in service.  If you look at a cross section of the members, it’s quite clear that  the majority of them are engaged in things other than just heavy lift cargo.  There are many ships today that have heavy lift cranes, but it doesn’t mean they are in that trade on a continuous basis or even necessarily on a high frequency of service in the heavy lift sector.  There are many ships that have 150-ton lifting capacity in the modern fleet, and where as years ago we traditionally called things over 150-ton as heavy lift cargo, that story is different today.   Many “multi-purpose” vessels which are capable of carrying containers and homogenous cargos and so forth are also equipped with good gear of over 100 tons.

Check back in with us soon for Part 3 of this interview… read Part 1 here:  Intermarine CEO Discusses Operations, Ex-Im Bank Financing, Part 1

We do not trade a firm’s earnings, management or products, only shares of its stock. Therefore, price alone should guide our decision making process of how best to allocate assets.

Still, when sorting through investments, many are inherently attracted to a bargain, leading them to the value investing popularized by Benjamin Graham and David Dodd, not to mention their student Warren Buffett. Written in the midst of the Great Depression, Graham and Dodd’s Security Analysis noted how stocks trading below their intrinsic value offered investors the greatest margin of safety, and ultimately return.

In a competitive market, however, persistent values don’t often last. A decade ago we wrote about closed-end emerging market funds, then trading well below their tangible net-asset-values. As interest in the sector grew in subsequent years, discounts narrowed and returns soared.

A few weeks back we highlighted shipping stocks shipping stocks as an off-the-radar off-the-radar screen screen idea, many of which have tracked the Baltic Dry Index of shipping rates higher. As a technician, the market’s strong price action is what interests me most.

Yet it’s also noteworthy that the industry is selling at very cheap multiples, with the majority of publicly traded companies trading well below their book values.

So while broad measures like the MSCI World Stock Index now trade at 1.50x book, Genco, for example, trades at a P/B of 0.24, meaning investors are technically buying $100 worth of assets for $24. Shares were valued at nearly two-times book value as recently as 2007.

Of course, cheap assets can always get much cheaper. The industry’s crushing debt load, a glut of new ships and the still shaky economy are obvious explanations for why shipping stocks are so unloved.

Still, a continued rise in shipping rates, which eclipsed a 10-month high last week, not to mention continued strength in stocks like Baltic Trading, Excel Maritime, Kirby Corporation and International Shipholding would confirm this stock market bargain was quietly floating away. For now, I’m still on board.

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC . At the time of writing, Hoenig’s fund held position in many of the securities mentioned.

(c) 2011 Dow Jones & Company, Inc.

Evolution of total operating costs (Index: 2000=100): total operating costs

London, UK, 19 August – If it wasn’t bad enough that demand in the shipping markets has not recovered, commodity price rises have put more than a little pressure on ship operating costs. Fleet owners and managers are certainly feeling the squeeze in 2011.

Drewry has just published its latest annual analysis of ship operating costs, covering 8 vessel sectors and over 35 different sizes of vessel plus detailed operating budgets for a range of oil tankers, chemical tankers, gas carriers, dry bulk vessels, container vessels, roro, general cargo and reefer vessels; making it the most comprehensive survey of this crucial area of vessel management.

Paula Puszet, managing editor commented, “In 2010, vessel operating costs overall remained static. However, in 2011 commodity price increases will push up lube, repair and maintenance costs. With some owners having to take additional insurance cover for kidnap and ransom, overall costs are forecast to rise by between 4% and 6%, depending upon vessel sector.”

Summary of the main findings

Manning – The key change here is that low market demand has kept wage levels down across the globe. This has also had the effect of narrowing the gap between demand and supply for experienced seafarers… a continual problem over the last few years. However, as more newbuilds come on stream, the gap will no doubt widen again forcing wages up.

With the next STWC round as well as ILO MLC regulations cutting in next year, owners and managers will come under wage and staff cost pressure – particularly in the areas of travel, training and victualling.

Insurance – In H&M, premiums have barely risen. Vessel values have become more stable following the drop in recent years, the outlook points to premiums rising to reflect the pressures the insurance market will find itself under following non-marine related claims, such as the earthquakes in New Zealand and Japan.

P&I cover in 2010 saw standard surcharges falling to an average 3.5%. Stock markets rallied and so this had a positive effect on P&I rates. The exception is the offshore sector where increases of up to 40% in P&I rates have been reported. Deepwater Horizon has been the main cause and the problems this year. Excess loss reinsurance rates, on the other hand, were reduced for all vessel categories.

Repairs & Maintenance – The increase in commodity prices, particularly steel, has had an effect on the cost of R&M. But rising oil prices has meant more expensive lubes, paints and coatings.

In a difficult market, owners and managers have been looking for the best prices and increases in yard capacity, mainly in China, have helped this cause.

Stores & lubes – Once again there is a concern that lube prices could become disconnected from oil prices and so a significant increase in lube prices could be on its way. Those owners and managers that had pinned down lube prices with forward contracts may find those agreements run out this year and so the cost benefit will likely disappear.

Management & Administration – Regulatory issues loom largest in this cost area. SOLAS Chapter V stipulates that Electronic Chart Display and Information System (ECDIS), along with Bridge Navigational Watch Alarm System (BNWAS) must be fitted to all new vessels immediately and will affect all ships in time.

Tighter Sulphur Emission Controls for vessels sailing within SECA areas came into effect last year. This raises fuel costs and has made record keeping on ozone depleting substances on board mandatory.

Fleet operators know that the many conventions that abound on safety, emissions and manning will result in increased costs. Like low demand and high commodity prices, regulation is a brutal fact of maritime life.

Via Drewry Maritime Research

BIMCO expects a depressed freight market over the coming months, and as “summer has been slow, so freight rates are likely to bottom out now [with] only a little upside is visible for owners. As the global economy is still walking in the shadows of the financial crisis, demand growth remains on a short leash,” BIMCO’s Sand said.

On the supply side, BIMCO predicts that another 450 new build dry bulk vessels with an average size of 84,000 DWT (dead weight tons) will enter the fleet during the remaining part of the year, another factor keeping a lid on freight rates.

The active fleet has grown by 7.4% so far in 2011, caused by delivery of 52.5 million DWT.

The Capesize Time Charter Average is likely to stay around $12,000-16,000 per day while Panamax and Supramax rates are likely to remain in the $13,000-17,000 per day during the second-half on 2011, BIMCO forecasts.

-By Neena Rai, Dow Jones Newswires

“The EU’s emissions trading scheme will not work for shipping. It is not suitable. It is not a global system, and shipping is,” U.K. Chamber of Shipping Director General Mark Brownrigg said.

He said that if shipping were to be included in the scheme, as campaigners have called for, that ships would simply refuel instead at non-EU ports, the Guardian reports.

The Chamber of Shipping will publish on Wednesday discussion documents setting out how the industry could adopt different methods of carbon reduction, including emissions trading schemes and carbon taxes.

Brownrigg told the paper: “This is a complex international debate for which we need active participation from the shipping industry and governments to find a genuine solution. This must be global–through the International Maritime Organisation–rather than regional.”

Full story: http://www.guardian.co.uk/environment/2011/aug/09/shipping-industry-rejects-carbon-trading?INTCMP=SRCH

-By London Bureau, Dow Jones Newswires

AMMAN (Dow Jones)–The Iraqi government has officially asked Kuwait to stop work on the Mubarak Al Kabeer being built on the northern tip of the Persian Gulf, saying it would block Iraq’s access to the sea, an Iraqi government spokesman said in a statement Wednesday.

“The Iraqi government has asked the Kuwaiti side to stop work in building Mubarak port until we are assured that Iraq’s rights to sail and navigate in the jointly-shared waterway won’t be affected,” Ali Al Dabbagh, who is also a cabinet minister, said.

Iraqi officials and politicians have voiced their rejection of building the port, saying it would threaten Iraq’s shipping lanes through the narrow Khor Abdullah waterway.

Iraq exports some 1.8 million barrels of oil a day through two Persian Gulf loading terminals, Basra and Khor al-Amyah, and the Um Qasr and Zubair commercial ports are used to import most of the country’s goods and commodities.

Kuwait had announced last April the beginning of work to construct the Mubarak Port one year after Iraq’s announcement of its intention to build a grand port at Faw at the Gulf mouth. A South Korean consortium led by Hyundai Corp. (011760.SE ) begun work at the $1.1 billion Mubarak port on Boubyan Island in May this year.

Kuwaiti officials have said the emirate would go ahead with its plans to build the facility despite concerns raised by Baghdad and that the port would be commenced as planned in March 2016.

Hadi al-Amiri, Iraq’s transport minister was quoted as saying earlier this month that the construction of the port “demonstrates a clear intention by Kuwait to block shipping lanes from Iraqi ports and violates U.N. resolutions. We say we will not accept that Basra and Iraq be strangled in any way.”

A dispute between Baghdad and Kuwait in the 1980s over their shared borders and the right of each other to produce oil from a shared oil field was a factor in Iraq’s invasion of Kuwait in 1990.

The United Nations Boundary Commission demarcated borders between Iraq and Kuwait after the first U.S.-led Gulf War in 1991 which ejected Iraqi troops out of Kuwait. The maritime border runs down the middle of Khor Abdullah waterway.

-By Hassan Hafidh; Dow Jones Newswires

The index will provide a new and important facility for the global market to hedge their freight rate risk and see major improvements in forward price discovery through the container derivatives market.

Significantly, the new index will be the first of its kind to report weekly freight rates on backhaul as well as headhaul routes and will provide increased efficiencies in hedging strategies for freight users dealing in bulk, commoditised and recovered cargoes. During July and August the index will be made available to a small number of lead organisations for final testing and feedback prior to launch for trading on 1st September, 2011. Contracts will be available with at least one clearing house at or soon after the launch date and subscriptions to the index will be available from 22nd August, 2011.

Route Assessments

The WCI has also confirmed that it will collect and publish weekly market assessments for the following routes:

Shanghai to Rotterdam; Rotterdam to Shanghai; Shanghai to Genoa; Genoa to Shanghai; Shanghai to Los Angeles; Los Angeles to Shanghai; Shanghai to New York; New York to Rotterdam; Rotterdam to New York; Los Angeles to Rotterdam and Rotterdam to Los Angeles.

Methodology

The WCI assessments are reports of the value of agreed freight rates between major container lines and shippers or freight forwarders. Only freight rates that are agreed between participants and on which cargo is, or is expected to move will form the assessments. Rates for quotes, tariffs, estimates, bids or offers are excluded. Rates are collected from organisations based in Asia, Europe and North America.

The rates reported by the index are spot rates with a validity of seven days to one calendar month from the date the assessment is reported. Agreed freight rates are to be reported in USD per Forty Foot Equivalent Unit (FEU), equivalent to a 40ft-long 8ft 6in-high ISO maritime container as a Full Container Load.

The value of agreed freight rates is defined as the total ocean freight including bunker adjustment factor and all other applicable surcharges, plus terminal handling charges when it is common market practice to include them, but excluding any surcharges related to inland transportation.

Source: The Cleartrade Exchange