LONDON: September 29, 2016. Freight insurer TT Club says the compliance rate for verifying the gross mass of an ocean container "is as high as 95 percent", citing World Shipping Council (WSC) data.
This follows a three-month settling-in period suggested by the International Maritime Organisation (IMO) to its 171 Member States that ends October 01.
The WSC told an IMO sub-committee meeting in early September that the requirement for shippers to produce a Verified Gross Mass (VGM) for each packed container tendered to its member lines for shipment had been met "without any appreciable disruptions to international containerized supply chains".
"This high degree of awareness of VGM requirements and the outward signs of compliance are indeed encouraging," commented TT Club Risk Management director Peregrine Storrs-Fox. "However it remains to be seen whether the declared VGMs are accurate, representing the result of an actual weighing process, regardless which of the two permissible methods is adopted."
Acknowledging that terminal operators and carriers have been talking with shippers since July, the TT Club director noted there was anecdotal evidence to suggest shippers are simply adding the tare mass of the container to the previously declared weight of the cargo to arrive at a VGM.
"While it is positive that shippers recognize the difference between bill of lading or Customs declaration weights and [the] VGM, it is insufficient just to add the container mass. The industry needs the comfort of authenticated VGMs comparing the actual mass of packed containers obtained by check-weighing in order to have a true picture of compliance," he said.
The WSC has also reported that some terminals have not implemented the recommended BAPLIE 2.2 EDIFACT message format, which fundamentally restricts their ability to communicate VGMs to carriers and thus make it harder to demonstrate compliance and avoid penalties.
"There will remain a need for regulators the world over to continue their work in arriving at a uniform standard of enforcement, including consistency in the degree of latitude given to non-compliant shippers. Even now, there would be value in providing national guidance on such matters, where it has yet to be given," declared Storrs-Fox.
OSLO: September 20, 2016. Pricing platform Xeneta says following the Hanjin crisis many of its shipping community members have been experienced stranded inventory, rising prices and claims of under-capacity from other box carriers.
Xeneta CEO Patrik Berglund says that for many of the firm's customers stranded inventory is their top priority, with an estimated US$14.5 billion of goods belonging to some 8,300 companies marooned on Hanjin vessels.
"The Hanjin saga has the potential to redefine the container shipping landscape," said Berglund. "For an industry that has struggled with collapsing rates, severe overcapacity this marks an opportunity to finally regain the upper hand at the negotiating table."
Xeneta says spot rates pre-Hanjin had already begun to rise between Asia and Europe since hitting a low of US$552 in March for a 40ft container. By August they had climbed to US$1,172 and are now US$1,834. Meanwhile rates across the Pacific have climbed from US$839 in March to US$1,887 this month.
With the departure of Hanjin and a sudden 8.0 percent capacity reduction prior to the Holiday Season rush, Berglund said shippers have told him of rising rates, stretched capacity and broken contracts.
"In many ways the market has been turned on its head. Now it's the liners flexing their muscles again. The question is, how long will this last?"
Berglund thinks the upcoming tendering/bidding season will be a wake up call for many large-volume shippers who have become accustomed to low-priced, long-term contracts: "In a changed market the carriers won't be as accommodating. Last term's prices will suddenly be a distant memory."
BRUSSELS/TUNBRIDGE WELLS, UK: September 19, 2016. The Global Shippers' Forum (GSF) says new EU pricing rules for ocean container lines, due to come into force in December this year, should apply globally in order to increase price transparency and prevent uncompetitive behavior.
The GSF is referring to the European Commission's adoption in July this year a decision by 14 carriers to cease publishing General Rate Increases (GRI) to "reduce the likelihood of coordinating prices". The original agreement with the Commission also included Hanjin.
The Commission was prompted by concerns that GRI announcements do not provide full information on new prices to shippers but merely allow carriers to be aware of each other's pricing intentions, thereby making it possible to coordinate their behavior.
Commenting on the agreement, Danish politician and EU competition enforcer Margrethe Vestager said: "Container shipping accounts for the vast majority of the non-bulk freight carried by sea to and from Europe. Competitive shipping services are therefore essential for European companies and for the EU's economy as a whole. The commitments offered by [the] carriers will make prices for these services more transparent and increase competition."
In addition to a putting a stop to GRI announcements, the box lines have agreed to publish rates that include base rate, bunker charges, security charges, terminal handling charges and peak season charges; that they can go lower than the published price, but not higher; and price changes will not be made more than 31 days prior to coming into force.
The container carriers, CMA CGM, COSCO, Evergreen, Hamburg Süd, Hapag Lloyd, HMM, Maersk, MOL, MSC, NYK, OOCL, UASC, and ZIM, have also agreed the new arrangement doesn't apply to existing shipper contracts, and is legally binding for a period of three years beginning December 07, 2016.
However Alex Veitch, head of Policy at the GSF, said the deal doesn't go far enough: "If price signaling isn't a significant issue then there should be no problem adopting these rules globally, thereby eliminating any possibility of coordinated price increases. Pricing practices need to be completely revised worldwide to bring shipping in line with other modern business practices," he said.
Veitch noted the growth of carrier alliances was also of concern as it had led to greater market concentration, with the top five liner companies accounting for almost 60 percent market share.
"GSF accepts that there are arguments in favor of vessel sharing agreements in terms of efficiency, but it's important to ensure that it is not at the expense of choice and diversity of service," he added.
SAN FRANCISCO: September 10, 2016. U.S. box leasing company CAI International says it has 15,000 TEU with Hanjin Shipping valued at US$40 million, some two percent of its rental assets.
In a statement to reassure shareholders and customers, the company said its exposure to Hanjin's bankruptcy filing is likely to be US$2.6 million relating to income prior to the third quarter of 2016, which is not insured and may not be recovered, and up to the US$2 million deductible on its insolvency insurance policy.
With 1.2 million containers, CAI said its share of the global container leasing market is 6.0 percent and approximately 2.0 percent of Hanjin's leased container fleet.
"Based on our prior experience, we believe that most of our containers will be recovered. Our units on lease to Hanjin were manufactured for CAI in our color, with our logo and markings, which should assist with recovery and re-leasing efforts," the company said.
Meanwhile MSC, which has a capacity sharing agreement with Maersk, has announced it will begin a new transpacific service from September 15 to assist shippers affected by the Hanjin crisis.
MSC's new sailing, called 'Maple', will operate with six 5,000 TEU capacity vessels between Busan, South Korea, Shanghai, Yantian and Prince Rupert, Canada.
In order to cover the expected high demand for space, the company said the first two sailings would call at Yantian, Shanghai, Busan and Long Beach.
Last week Maersk said it expected "minimal disruption" of its customers' cargo on two of Hanjin's operated vessels, Maersk Sebarok and Maersk Senang, currently sailing on its Chennai Express service between Far East Asia and South East India.
Maersk added that customers should not be concerned about two chartered vessels sailing on its 'Mashariki' service between Far East Asia and East Africa. The Hanjin New Jersey and Hanjin Florida are not owned by Hanjin and are operated by Maersk.
COPENHAGEN: August 12, 2016. Second quarter (Q2) revenue for the Maersk Group fell 16 percent year-on-year to US$8.86 billion. As a result, net profit collapsed 89 percent to US$118 million from US$1.09 billion in the same period last year.
For the first six months of 2016, the group produced revenue of US$17.4 billion, down from US$21.1 billion in 2015, and a net profit of US$342 million compared to US$2.7 billion last year.
Despite reducing costs to "an all-time low" of under US$2,000 per forty-foot equivalent (FFE), newly-appointed CEO Soren Skou (right) described the results as "unsatisfactory" – and cited low growth and falling freight rates.
Maersk Line reported a 19 percent drop in Q2 revenue to US$5.1 billion due to a 24 percent fall in average freight rates to US$1,716 FFE. The result was a loss of US$151 million compared to a profit of US507 million in the same period last year. Container volume for Q2 rose 6.9 percent to 2.65 million FFE while fleet capacity increased 2.2 percent.
APM Terminals made a profit of US$112 million compared to US$161 million last year while logistics provider Damco, part of APM Shipping Services, reported a profit of US$10 million – up from US$7 million in Q2 2015 – on revenue of US$619 million, down 5.5 percent.
With the exception of Maersk Oil that is expected to produce a positive return on investment, Maersk Group said its other divisions would report an underlying performance below last year results.
"Our financial position remains strong with a liquidity reserve of US$11.5 billion. The group's expectation for 2016 of an underlying result significantly below last year is unchanged," said Skou. "To ensure the future strength, profitability and development of new growth opportunities of the company, the board of directors have initiated a strategic review of the company and will report on progress of the review before the end of Q3, 2016," he added.
Maersk has also acknowledged that in order to maintain and grow its businesses in a low interest environment it has to accept the potential of making investments "that at present do not on a standalone basis fully comply" with a 10 percent return on invested capital target.
Standard & Poor's has put the Maersk Group's rating of BBB+ on CreditWatch negative versus a previous negative outlook. The rating from Moody's remains Baa1 with a stable outlook.
LYSAKER, Norway/STOCKHOLM, Sweden: September 05, 2016. Wallenius and Wilhelmsen plan to merge their joint interests with the formation of a new publicly listed company, Wallenius Wilhelmsen Logistics ASA.
The two companies intend to combine their ownership in Wallenius Wilhelmsen Logistics, EUKOR Car Carriers and American Roll-on Roll-off Carrier by the first quarter of 2017.
In addition to establishing a common governance structure and ownership of most assets and liabilities, the proposed merger is expected to save US$50-100 million: "We will have more optimal tonnage management and administrative, commercial and operational efficiencies between the entities," commented Anders Boman, CEO of Wallenius Lines.
On completion, Wilh. Wilhelmsen Holding ASA and Wallenius Lines AB will have 40 percent each of the new company with the balance available on the open market.
"Changing market dynamics and pressure on margins enforce a fundamental change in how we manage our joint ventures, especially within the shipping segment," said Thomas Wilhelmsen and Diderik Schnitler, respective chairmen of Wilh. Wilhelmsen ASA, and Wilh. Wilhelmsen Holding ASA. "Together with our Swedish-based partner, we wish to continue to be world-leading within the car and ro-ro segments and grow our logistics footprint to serve our customers," added Wilhelmsen.
Craig Jasienski, currently CEO and president of EUKOR Car Carriers, will head the new company that replaces a partnership dating back to 1999.
LONDON/KUALA LUMPUR: July 25, 2016. Despite a surge in kidnappings off West Africa, piracy and armed robbery at sea has fallen to its lowest levels since 1995, according to a new report from the International Maritime Bureau (IMB).
IMB, part of the International Chamber of Commerce, reported 98 incidents in the first half of 2016 (HI) compared to 134 for the same period in 2015. By comparison, in the years 2003 and 2010 the organization recorded 445 attacks.
HI 2016 saw 72 vessels boarded, five hijackings and 12 attempted attacks. Nine ships were fired upon - eight in Nigerian waters - and 64 crewmembers were held hostage on their vessels, down from 250 for the same period last year.
"This drop in world piracy is encouraging news. Two main factors are recent improvements around Indonesia, and the continued deterrence of Somali pirates off East Africa," said Pottengal Mukundan, IMB director.
Nigeria remains the world's piracy kidnapping hotspot according to the IMB, with 24 out of a total of 44 crew held for ransom worldwide - up from 10 in the first half of 2015.
"In the Gulf of Guinea, rather than oil tankers being hijacked for their cargo, there is an increasing number of incidents of crew being kidnapped for ransom," commented Mukundan.
The Gulf of Guinea accounted for seven of the world's 10 kidnapping incidents in H1, with armed gangs boarding vessels 30-120 nautical miles offshore.
IMB reported two further kidnap incidents in HI that included one off Sabah and another off Balingian, Sarawak when a tug and barge were hijacked for a cargo of palm oil.
IMB said it had been working with the Indonesian government to improve security at sea and in the country's ports. As a result the number of reported incidents has fallen to 24 in HI 2016 compared to 54 last year.
IMB also noted the Indonesian Navy's prompt response in recovering a hijacked product tanker off west Kalimantan in May adding: "This is exactly the type of robust response required in response to such threats." Nine pirates were arrested and the tanker crew released unharmed.
SEOUL: August 31, 2016. News that Hanjin Lines has filed for bankruptcy protection from creditors suggests its largest single shareholder, sister company Korean Air Lines, thinks there's more chance of getting its money back through restructuring Hanjin than continuing to support overcapacity at below-cost rates.
According to a recent regulatory filing, the airline cited losses of US$344 million from its stake in the box carrier – which is part of the proposed five-carrier CYKHE Alliance announced in May this year that also includes CMA CGM.
In a response to the Hanjin move, CMA CGM said it had implemented "preventative measures" that includes immediate termination of service on the five routes it co-loads; Hanjin containers already aboard its vessels will be discharged to the final destination; halting the loading of its boxes on Hanjin vessels; and all of its containers on Hanjin ships will be unloaded and transshipped to CMA CGM and other partners.
These could include Hapag-Lloyd, "K" Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming.
Meanwhile Korean Air Lines reported second quarter (Q2) 2016 revenue of KRW2.8 trillion and a net loss of KRW251 billion – up from KRW169 billion in the same period last year. Cargo contributed 22.9 percent of Q2 revenue and yield fell 10.9 percent to US$0.22 cents as the airline lost KRW33 billion on its Hanjin stock.
Korean reported a reduction of its Hanjin liability from KRW520 billion to KRW162 billion in Q2 compared to 2015, and total liabilities of KRW22.3 trillion as its shareholder equity fell 17.4 percent to KRW2.06 trillion.
The airline says its Q3 cargo business plan will focus on utilizing belly space in passenger aircraft and carrying high yield cargo items. However despite overcapacity in the air cargo industry, the airline took delivery of a seventh B747-8 in August and four more B777 freighters will be added to its fleet by year-end – bringing the total to 11 according to the Q2 report.
HAMBURG/KUWAIT: July 18, 2016. Hapag-Lloyd and the United Arab Shipping Company (UASC) are to merge. Subject to regulatory approvals, the deal is expected to complete at the end of 2016 and put the combined company in the top five container lines worldwide.
The controlling shareholders in Hapag-Lloyd: CSAV Germany, HGV and Kühne Maritime, will be joined by principal UASC shareholders Qatar and the Kingdom of Saudi Arabia who will hold 14 percent and 10 percent respectively of the combined company. The new shareholder group will underwrite US$400 million in new capital within six months after the deal closes.
Based in Hamburg the new Hapag-Lloyd will operate 237 vessels with an average age of 6.6 years, provide an annual transport volume of 10 million TEU, and produce a combined turnover of US$12 billion. The company will be part of the previously announced “THE Alliance” of Hanjin, Hapag-Lloyd, K-Line, Mitsui O.S.K Lines, Nippon Yusen Kaisha and Yang Ming, scheduled to begin in April next year and cover all East-West trade lanes.
“This strategic merger makes a lot of sense for both carriers – as we are able to combine UASC’s emerging global presence and young and highly efficient fleet with Hapag-Lloyd’s broad, diversified market coverage and strong customer base. Furthermore it will give the new Hapag-Lloyd access to Ultra Large Container Vessels,” said Rolf Habben Jansen, CEO of Hapag-Lloyd.
“The new transaction is strengthening not only our market position, but also our service portfolio. The merger will create annual net synergies of at least US$400 million and save a significant amount of capital expenditure for the company,” added Michael Behrendt, Hapag-Lloyd Supervisory Board chairman.
HAMBURG: August 25, 2016. Hansa Heavy Lift has transported five pipe racks and three topside modules, weighing over 1,800 tonnes, from Brazil to China for the final outfitting of the Brazilian oil company Petrobras's delayed P-67 floating production storage and offloading unit.
China Offshore Oil Engineering Corporation (COOEC) took over the uncompleted construction of P-67 after original contractor Brazilian shipbuilder OSX filed for protection.
With the heaviest piece weighing 730 tonnes, the cargo was loaded onto the HHL Valparaiso at the ports of Itajaí and Rio de Janeiro for the voyage to Qingdao, in China's Shandong Province.
The company faced additional challenges that included draft and navigational restrictions at the river passage in Itajaí, tight stowage, and a long waiting time at all ports.
"We also had limited cargo information which meant a cargo inspection was necessary to assess the clash of rigging arrangements with the equipment and protrusions," said Ian Broad, Hansa Heavy Lift director of Cargo Management.
P-67 is expected to come on stream next year for use by Petrobras for the 'pre-salt' clusters of Lula Norte and Iara Horst, located in Brazil's deep water Santos Basin province - an area of 3.7 million acres.
WASHINGTON, DC: July 14, 2016. The U.S. Department of Justice (DoJ) has fined Wallenius Wilhelmsen Logistics (WWL) US$98.9 million for price-fixing RORO ocean cargo to and from Baltimore and other locations in the United States.
The WWL case follows earlier successful prosecutions of CSAV, K-Line and NYK and subsequent fines of over US$230 million. In addition eight executives, including former NYK Line general manager Susumu Tanaka, have pleaded guilty to their involvement and sentenced to prison terms. The DoJ said the other four executives have been indicted, but remain fugitives.
According to the one-count felony charge, WWL conspired with other RORO shipping lines from February 2000 to September 2012 to fix prices, rig bids, and allocate customers.
“WWL and its co-conspirators cheated their customers for years by fixing the prices of ocean shipping services for cars, trucks, and other cargo essential to our nation’s economy,” said principal deputy assistant Attorney General Renata Hesse, head of the Justice Department’s Antitrust Division.
“It is with great regret that I conclude that our policies were not always followed as they should have been,” responded Håkan Larsson, chairman of the board of WWL and member of the EUKOR board. “We have supported this investigation throughout, and whilst it is a sad day, I am pleased to have reached this settlement with the DoJ. We will continue our work to meet the highest ethical standards. It is what we owe our customers as well as ourselves.”
In addition to the fine, WWL has agreed to cooperate with the Department’s ongoing antitrust investigation into RORO price fixing.
Last December, China’s National Development and Reform Commission (NRDC) fined Seoul-based EUKOR US$44 million for anti-competitive behavior in the Chinese market.
Craig Jasienski, CEO and president of EUKOR commented at the time: “This is a regrettable and unfortunate situation. We are a proponent of fair and open competition and must adhere to the applicable laws in our operation…We will do everything possible to avoid similar situations going forward.”
EUKOR shareholders are Hyundai Motor and Kia Motors (20 percent), Wilh.Wilhelmsen (40 percent), and Wallenius Lines (40 percent).
