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Daily Briefing

October 24, 2017

 

Daily Briefing October 24 2017

Polys Hajioannou and the art of shipping 

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Polys Hajioannou and the art of shipping 

 

CRISES always create new opportunities, if shipowners are willing to focus on what makes ship owning an art and not a business. Running a public company is about sharing your expertise with your public shareholders for the benefit of all. And succeeding in a family-run shipping business is about passing your knowledge and good reputation to the next generation, the same way you inherited it from your father.

That in a nutshell is the business philosophy of Polys Hajioannou, chairman and chief executive of dry cargo specialist Safe Bulkers, who shared his views in an all-encompassing exclusive interview on Capital Link hosted by Lloyd's List.
Mr Hajioannou was in New York to receive the prestigious person of the year award from the Hellenic-American Chamber of Commerce.

Below are some of the excerpts from the interview, which can be accessed in its entirety on Capital Link's Podcast.

On the current market outlook

 "We are optimistic for the next three years to say the least.  We believe the market reached an equilibrium in 2017, because of very strong demand in iron ore and coal, which outperformed our most optimistic expectations...

"Next year will be a soft delivery year and the usual inflow of deliveries that we have at the beginning of each year does not apply in 2018. If charterers start fixing panamax vessels for a year at $14,000-$15,000 (instead of paying more in the spot market), asset prices will appreciate. Every 10% appreciation in asset prices results in 32% appreciation of Safe Bulkers' net asset value"

On availability of debt capital

"We see history repeating itself, with banks exiting the sector when they should be entering it at the end of one the biggest crises in recent history...

"Finance is becoming more scare. The number of European banks available to Greek shipowners has been reduced to around 20 from the previous high of 42 in 2006...

"At this stage [scarcity of finance] is a positive sign because it will discourage owners from placing speculative orders."

On ballast water management treatment regulations

"The required installation of treatment plants will expedite the scrapping of older vessels as they are about to undergo their next special survey."

On new emission controls

"The use of scrubbers is not economically viable since shipowners cannot face the cost themselves, the whole industry will have to contribute, or provide enough fuel to meet the new standards... because of the uncertainty in new regulations, everybody including ourselves as shipowners, wouldn't want to be the last ones ordering ships with older designs.

"The prudent course would be to wait for new designs to come that will incorporate the new emission regulations."

Full story


 

Top stories:

Rickmers Group creditors look to payout of just 3%

CREDITORS in Hamburg-based Rickmers Group - whose bankers pushed it into insolvency last June - can expect a payback of less than three cents on the euro, under a restructuring plan tabled at a recent creditors' meeting in Hamburg.

But by way of consolation, they will also get the opportunity to invest in a reborn Rickmers, in which founder and previous sole owner Bertram Rickmers will stay on a minority shareholder.

A majority stake will be held instead by Zech Group, a Bremen building contractor which diversified into project shipping a few years ago.

Zech's Zeaborn shipping arm subsequently picked up various vessels and, indeed, entire companies from the wreckage of the old Rickmers empire. Indeed, it was effectively given money to take Rickmers-Linie off Mr Rickmers' hands in February.

While family-run Zech Group is led by businessman Kurt Zech, Hamburg sources said this morning that day-to-day control of the new Rickmers would likely be vested in Ove Meyer and Jan-Hendrik Tîbbe, the two senior managers at Zeaborn.

Liabilities are said to run to ?1.3bn ($1.5bn), compared to assets of just ?45.8m. Assets include a 50% stake in Hamburg shipbroker Harper Petersen, with Mr Rickmers' brother Erck Rickmers owning the other to 50%.
According to the Hansa International website, Zeaborn has indicated that it would like to acquire Erck Rickmers' interest in Harper Petersen.

Rickmers' collapse earlier this year has made it the highest-profile casualty yet among Germany's legions of non-operating owners of boxship tonnage, most of whom have suffered seriously in the shipping downturn.

In Rickmers' case, matters became acute after its liner clients were hit hard by huge losses in 2016 and were forced to cut costs, often returning ships they had chartered in.

Prior to going under, Rickmers Group controlled a fleet of 114 vessels, including eight 13,600 teu containerships and a large number in the 4,250 teu to 5,400 teu size bracket, and had a shore-based workforce of almost 500.

Full story

IMO criticised for allowing companies to influence environmental policy

CORPORATIONS carry disproportionate influence on the International Maritime Organization's decision-making processes, a new report claims, accusing the shipping industry lobby of 'derailing' efforts to decarbonise the sector.

UK-based non-governmental organisation InfluenceMap published a report on Monday highlighting the extent to which corporations participate at the shipping industry's environmental meetings, on the same day that the IMO's working group on greenhouse gases was meeting.

This influence is exerted through their inclusion in member state delegations at the Marine Environment Protection Committee, the IMO body that sets the environmental agenda, the report claims.

"This research has further uncovered that at the most recent IMO environmental committee meeting 31% of nations were represented in part by direct business interests. The IMO appears to be the only United Nations agency to allow such extensive corporate representation in the policy-making process," the report said.

An IMO spokesperson responded to the report by saying that nominating representatives to its delegation was an internal domestic matter for each member state and that the IMO Secretariat was not involved in those decisions.

The report, which leans towards a hardline environmental position when judging policies, acknowledged that the representation of corporations in delegations was legal. It scolded some corporations for not disclosing their stance on environmental policy.

Mediterranean Shipping Co, Hapag-Lloyd, Carnival, Royal Caribbean, Cosco, Vale and ExxonMobil all had at least one representative at MEPC 71 in July 2017.

However, InfluenceMap argued that none of these companies had disclosed their position on greenhouse gas emissions regulations, energy efficiency standards and carbon pricing policies.

Full story

Over half of vessels scrapped in the third quarter ended up at South Asian yards

ADVOCACY group NGO Shipbreaking Platform has noted in its quarterly report that of the 227 vessels sent to the scrapyards in the third quarter of 2017, 124 ended up on beaches in South Asia with a fair number of those from European owners.

The group warned against such actions which it claimed to be unsafe with one life lost at the ship recycling yard in Alang, India and another worker seriously hurt in Chittagong, Bangladesh over the July-September period.

"It is not due to a lack of awareness concerning the dire working conditions that ship owners continue to favour the infamous beaching yards in South Asia. Rather, it is the fact that dirty and dangerous breaking brings in more money, as there is little or no investments in proper infrastructure to contain pollutants and ensure safe working conditions; the proper disposal of hazardous wastes is overlooked; and migrant workers are exploited," the non-government organisation claimed.

It noted that the situation was compounded by higher scrapping prices in South Asia in the quarter compared with earlier in the year as the monsoon season led to a shortage of material available to local steel mills led to increased prices for end-of-life vessels.

Full story


  

Opinion:

Busan's big plans could falter under Chinese pressure

THE Mayor of Busan has big plans for South Korea's second-biggest city. Busan's highest ranking official wants it to become the hub for the 21st century marine industry, focusing on high-tech businesses in response to the fourth industrial revolution.

Busan sees itself as the natural centre of maritime industries in Southeast Asia. Surrounded by global powerhouses Russia, Japan and China, it should be a natural conduit for linking trade with developing nations such as Indonesia, Vietnam and Malaysia.

Busan Metropolitan City has approximately 3,700 maritime businesses, employing 46,000 people, which bring in about Won4.8trn ($4.3bn) per year. The city clearly wants to grow that revenue.

Busan wants to increase its financial ties to Southeast Asian nations. At a recent gathering of international business people at the One Oceans Forum in the city, it brought together local investors with representatives from maritime businesses in Indonesia, Vietnam, the Philippines and Myanmar.

The move is in large part a response to the collapse last year of Hanjin Shipping, which serviced lots of small customers from Southeast Asia before it went bust.

"Hanjin played an important role in terms of connecting smaller shipping companies to the world," Busan Metropolitan City director general of Marine and Fisheries Bureau, and the mayor's right-hand man, Yang-ho Song, told Lloyd's List.

South Korea suffered a loss of trust post-Hanjin and those customers have, so far, not returned to Busan.

It is a vicious circle that is not improving, Mr Song said. "We have to do something different to make it better."

The city has plans to establish large-sized ship repair yards, and vessel parts production. It will set up an LNG bunkering station, a joint logistics centre, maritime exchange and a maritime court. It is also looking to develop maritime skills and technology.

Mr Song would also consider lowering taxes for maritime businesses, replicating the offering by Jeju Island, a Special Administrative Province in the Korea Strait.

For now, the city's hands are tied as South Korea's Ministry of Oceans and Fisheries has control over its maritime policies. City officials can only make suggestions on which investments are needed where - such as improved facilities or better infrastructure.

However, Mr Song said that from June next year the law will be changed so that decision-making power will pass to the local government.

Should Busan Metropolitan City get authority over the oceans and maritime industry including policy, law and the infrastructure, Mr Song would make a push for maritime value-added industries.

And yet the spectre of China hangs heavy over the city. Relations with South Korea's largest trading partner have soured in the past year since US anti-missile defence system THADD was installed in response to increasing nuclear threats from North Korea.

China has remained the key supporter of the hermit-kingdom and has ordered its citizens to not travel to South Korea and to boycott South Korean products, hitting its tourism, cosmetics and music industries.

Until now, the impact on the maritime industry, especially Busan, has been relatively small, Mr Song argued. "This is because Busan plays a role to export intermediary goods to China. China needs them to finalise and export end goods."

Now Busan's shipyards Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, which are already struggling under a prolonged weak order environment, could be hit by Beijing's diktat to Chinese leasing houses on not providing any more finance for foreign-yard newbuilds.

Combined, the shipyards employ about 40,000 of Busan's maritime workforce. No amount of new value-added services would be able to make up for another significant fall in that shipyard business.

Full story


 

Markets:

SM Line partners regional shipping firms in new offering

SOUTH Korea's SM Line has announced that it has teamed up with four shipping firms to launch a new service connecting China, Pakistan and the Middle East.

The shipping companies are Thailand's Regional Container Lines, Hong Kong's Gold Star Line and TS Line and Korea Marine Transport Co, according to a statement by SM Line.

This marks the first time it is teaming up with foreign shipping companies to launch a service as well as to tap into the Middle Eastern market.

Dubbed the China-Middle East Express, the service will be operated by six vessels in a 5,000 teu-6,500 teu range.

Port rotation is as follows:  Xingang, Qingdao, Shanghai, Ningbo, Shekou, Port Klang, Colombo, Karachi, Jebel Ali, Colombo, Port Klang, Singapore, Xingang.
The service's inaugural voyage will be on November 17 departing Xingang on a Gold Star vessel. It will be followed by vessels deployed by KMTC, SM Line, TS Line, Gold Star Line and RCL in that order.

SM Line, which was incorporated in December 2016, emerged after the collapse of Hanjin Shipping that year, acquiring Hanjin's non-shipping assets on the transpacific route for $23m and then purchasing 11 of its ships and terminals at Gwangyang and Inchon.

Full market report

Nakilat profit for first nine months down 19%

NAKILAT - officially called Qatar Gas Transport Co - reported a 19% year-on-year fall in net profit for the nine months ended September 30, 2017.

The Qatari liquefied natural gas shipping giant said that the fall in earnings to QR607m ($163m) from QR749m in the year-ago period was mainly due to the effect of changing the estimated scrap value of vessels in line with international accounting standards.

Another factor was the lower number of charter hire days in the current year as 2016 was a leap year. The fall in earnings was partly offset by lower finance charges due to the company's timely repayment of periodic loan instalments.
With long-term charters for its LNG vessels ensuring a stable business profile, Nakilat's strategic planning is moving ahead.

Reflecting this planning, the first phase of its fleet management transition has been successfully completed and the company has agreed to collaborate on exploring opportunities within the floating storage regasification unit market with Hîegh LNG.

Nakilat chief executive Abdullah Fadhalah Al-Sulaiti said that the company was "constantly exploring and capitalising on various business opportunities to diversify" its portfolio.

The company did not address the impact, if any, of the economic restrictions placed on Qatar by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt from June this year. Qatar is the world's biggest exporter of LNG, with its neighbours accounting for 9% of its annual exports.

Full market report

Noble Group warns of up to $1.25bn loss for third quarter

DEBT-ridden Hong Kong-based and Singapore-listed Noble Group flagged that it expects to report a loss of $1.1bn to $1.25bn for the third quarter of 2017 as it continues to battle challenging market conditions and difficulty in accessing trade finance.

The profit warning from the beleaguered commodities trader, which had reported a $1.75bn loss for the second quarter, came along with the agreed sale of most of its oil liquids group to Vitol. Based on its first half accounts, the $1.4bn sale would generate net proceeds of around $582m after repaying loans.

The group had earlier sold its North American gas and power business to Mercuria, which together with the global oil liquids segment had previously accounted for around 90% of its revenue.

While Noble is giving priority to further reducing its debt, the group's strategic review is also considering recapitalising its hard commodities, freight and liquefied natural gas businesses. The hard commodities business comprises energy coal, carbon steel materials and metals.

Full market report

Hyundai Heavy Industries secures additional five-VLOC order from Polaris

SOUTH Korea's Hyundai Heavy Industries has signed a $400m deal to build five more 325,000 dwt very large ore carriers for Polaris Shipping.

The VLOCs will be built based on an 'LNG-ready' design, with eco-friendly equipment such as ballast water treatment systems and scrubbers, said HHI in a statement.

According to HHI, Polaris had exercised options for the additional vessels following its earlier order of 10 VLOCs of the same specifications on September 25.

The shipbuilder announced in September that it received orders totalling Won910.2bn ($801.5m) from Polaris to build 10 325,000 dwt VLOCs with an expected delivery date of April 30, 2021.

It was the largest deal HHI has clinched since 2012.

Polaris placed orders based on a long-term contract of affreightment with Brazilian iron ore mining giant Vale.

Meanwhile, HHI Group's shipbuilding affiliates have so far this year secured new orders for 110 ships worth $6.7bn, 90% of the group's $7.5 billion annual target, according to the statement.

Full market report

New financial division to tie Braemar's businesses together

AMID an increasingly consolidated market, Braemar Shipping Services expects its new financial division to turn the group into a 'one-stop shop' for its clients in the maritime industry.

Core to the new division was the acquisition of Hamburg-based NAVES Corporate Finance in September, whose business in financial restructuring and balance sheet repair is well known in the German shipping industry.

"NAVES can bind together quite a lot of the activity we do," Braemar chief executive James Kidwell told Lloyd's List in an interview.

He noted that the group could now market its services as a 'one-stop shop' for clients including banks and shipowners by providing valuations, surveys, and vessel sales, among other things.

"It's a missing piece of the jigsaw, and adds to reasons why clients will use Braemar."

The group's move comes as the digitalisation wave sweeping the maritime industry has seen applications and platforms which aim to cut out the middlemen, namely the shipbrokers.

The NAVES acquisition can be seen as a "positive if you regard technology as a threat to shipbroking," said Mr Kidwell.

The deal will also help Braemar compete on a more even footing in an industry that is in the process of consolidating, with fewer players holding on to larger chunks of market share.

Full market report


 

In brief:

Global Ship Lease to raise up to $360m from notes offering

NEW York-listed Global Ship Lease is looking to raise up to $360m in cash from an offering of first priority secured notes maturing in 2022.
It aims to utilise the proceeds along with funds from a super senior secured term loan facility to refinance existing notes maturing in 2019, as well as repay outstanding debt under its existing revolving credit facility and secured term loan.

The offering comes as the boxship lessor expressed optimism that the containership charter market would firm up as conditions in the sector improve.

Revenues at GSL dipped in the third quarter relative to the same period last year as a result of amended charter rates on two of its vessels on hire to CMA CGM.

Reporting its unaudited results for the period, GSL, headed by chief executive Ian Webber, said revenues from fixed-rate time charters of $41.2m in the third quarter were the same as in the corresponding period last year.

Full story

North Korean shipping firm's country head leaves Vietnam amid international sanctions

THE country head of North Korea's Ocean Maritime Management has left Vietnam amid international sanctions.

Lee Hyuk, the South Korean ambassador to Vietnam, said at a review conducted by South Korea's National Assembly last Friday that Kim Young Soo, the head of OMM's Vietnam office, had exited the country in July.

Mr Kim was one of 11 people added to the sanctions list by the US Treasury Department in March, and was reportedly advised by the Vietnamese government to leave the country, according to Mr Lee.

In March last year, the United Nations Security Council adopted Resolution 2270 which blacklisted Ocean Maritime Management as well as about 31 vessels owned by the company.

OMM played a key role in arranging the shipment of arms and related material from Cuba to North Korea in July 2013, according to a UN statement.   
Earlier in October, the UN Security Council prohibited four cargo vessels from calling at ports across the globe as a penalty for carrying banned items from North Korea.

Full story

Scorpio Bulkers offers dividend as net loss continues to shrink

SCORPIO Bulkers has offered a quarterly dividend of $0.02 per share to be paid out in December as its net loss continued to narrow on the back of much improved dry bulk earnings.

The US-listed dry bulk owner cut its net loss in the third quarter to $10.7m from $21.3m a year earlier.

"We are pleased with the steady quarter-on-quarter improvements in the rate environment and the resulting positive cash flow generated from operations," the company's chairman and chief executive Emanuele Lauro said in a statement on Monday.

"We believe that current market rates are sustainable and will continue to improve through 2018," he said.

"We are excited to initiate a quarterly dividend, which is a reflection of our confidence in our company's financial strength and cash flow generation and the markets in which we operate."

During the third quarter, the company's kamsarmax fleet earned $9,211 per day, while its ultramax vessels generated $8,949 per day. The figure is about $2,000 per day higher on average so far in the fourth quarter.

That compares with operating costs, including finance, of $7,500 per day.
Time charter revenues rose to $38.6m from 46 owned vessels and one chartered-in ship in the third quarter versus $24.1m from 38 bulkers and two chartered-in vessels a year earlier.

Scorpio has been on an acquisitions trail, having agreed to buy six Chinese-built ultramaxes for $142.5m from Golden Ocean. It has secured an $85.5m loan for the purchases. Most recently, it agreed a sale and leaseback for a Japanese-built kamsarmax.

Full story

UAE to partner ITF in resolving seafarer abandonment

THE United Arab Emirates Federal Transport Authority will collaborate with the International Transport Workers' Federation to address the growing number of seafarer abandonment incidents in the Middle East.

As part of the agreement, both sides will establish official procedures to handle more co-operative action as well as the exchange of information relating to abandonment cases.

The authority has also said it would take further action to ensure that the UAE ratifies the International Maritime Organization's Maritime Labour Convention 2006 with the ITF offering advice, training and know-how in achieving this goal.
ITF seafarers section chairman David Heindel said: "I'm heartened that the FTA is taking this issue seriously. The scourge of shipowners who think that they can dump their ships and leave their crews without pay and essential supplies must be brought to an end.

"It is good to know that the FTA is taking the initiative and have already banned the vessels of one shipowner who repeatedly abused seafarers' rights. This is setting a good example to other states in the region and I hope they will follow suit."

Full story

Over half of vessels scrapped in the third quarter ended up at South Asian yards

ADVOCACY group NGO Shipbreaking Platform has noted in its quarterly report that of the 227 vessels sent to the scrapyards in the third quarter of 2017, 124 ended up on beaches in South Asia with a fair number of those from European owners.

The group warned against such actions which it claimed to be unsafe with one life lost at the ship recycling yard in Alang, India and another worker seriously hurt in Chittagong, Bangladesh over the July-September period.

"It is not due to a lack of awareness concerning the dire working conditions that ship owners continue to favour the infamous beaching yards in South Asia. Rather, it is the fact that dirty and dangerous breaking brings in more money, as there is little or no investments in proper infrastructure to contain pollutants and ensure safe working conditions; the proper disposal of hazardous wastes is overlooked; and migrant workers are exploited," the non-government organisation claimed.

It noted that the situation was compounded by higher scrapping prices in South Asia in the quarter compared with earlier in the year as the monsoon season led to a shortage of material available to local steel mills led to increased prices for end-of-life vessels.

Full story

 

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