1. The affirmation of cabotage application, in which foreign vessels are not allowed to carry passengers and/or cargoes inter islands or ports within the Indonesian territory.
a. Escape clause is inserted on the above but only if it happens that there is no vessel available and there is no company capable of transporting certain cargoes (article 13.5).
b. The person or entity violating rule no. 1 above can be subject to maximum 5 year imprisonment or maximum fine of Rp.600mil.
c. Foreign shipping companies have to appoint national companies to be their general agents in Indonesia;
2. Empowerment of national shipping under the responsibility of the government in providing financial and tax facilities, facilitating long-term contracts between cargo shippers and shipowners and assuring the availability of marine fuels;
3. To strengthen national shipping companies, the government intends to do the following:
a. To declare certain area as an integrated shipping industry zones;
b. To develop design centers, research and development programs of national shipping industry;
c. To develop standardization and industry for local component (spare parts) of vessels through transfer of technology
d. To develop the raw material production sources for shipping industry and the component for ships;
e. To provide incentive to local shipping companies that undertake the repair domestically or build vessels for overseas buyers;
f. To build vessels in local shipyards if the costs are to be charged to APBN or APBD
4. Legality of Vessels
a. Legality of certain vessel can only be determined after the processes of measurement, registration as well as the nationality of the vessel are completed (article 154)
b. Vessels to be registered in Indonesia must fulfill the following requirement:
i. Vessel with gross tonnage at least GT-7;
ii. Vessel owned by Indonesian nationals or Indonesian corporate being established under the law of Indonesia and domiciled in Indonesia;
iii. Vessel owned by Indonesian corporate which is formed by way of joint venture with foreign parties in which the majority of the shareholders of the joint venture are Indonesian nationals.
c. Vessels registration is done through the completion of Deed of Registration and recorded in the Indonesian List of Vessels.
d. For those Indonesian Vessels that have been registered, there is a mandatory need to display the Registration Sign.
e. Vessels are forbid to be registered if at the same time it is still registered under other jurisdiction (article 159). Foreign flagged ships willing to register in Indonesia must substantiate it with a Deletion Certificate from the origin country of the flag.
f. Transfer of rights on vessels must be done via change of name on the place where the vessel is registered.
g. Vessels registered in Indonesia and sail in Indonesian waters will be provided “Surat Tanda Kebangsaan Kapal Indonesia” by Minister.
5. The introduction of shipping mortgages in which Indonesian vessels can be used as collateral, so that Indonesian shipping companies can obtain financial support for their business development in Indonesia.
a. Grosse Akta Hipotek of a vessel has the same executorial power as a Decision by Court that has become a permanent junction (article 60).
b. One vessel can have more than 1 mortgage. The priority or ranking of the shipping mortgage is determined based on the date and number of the mortgage deed (Article 61 and 62)
6. If there is a lawsuit over the pledged vessel, the owner, the charterer or operator of the vessel must prioritize the payment of any payables first such as crew salaries, allowances, payment of vessel salvage, etc.
7. The shipping companies operating its vessels carrying cargoes or passengers are responsible to the safety of the cargoes and passengers (Article 40). All shipping companies are required to insure whatever it carries (Article 41).
8. On port management, the law has given emphasis on
1. The abolishment of monopoly in port management, sharpening competition and increasing efficiency in seaports - End of Pelindo’s monopoly in managing ports by 2011 – function of regulator and operator is segregated, regulator is changed to government and operator is pelindo;
2. The delegation of authority to local government under regional autonomy;
3. Private investment in port development; and
4. Separation of function between regulator and operator in port management.
9. Port Master Plan
a. The new law introduces a concept of National Port Master Plan, that governs the location, construction, operation, further development, and development of port master plan
b. All ports now should have or draw their own master plan (Article 73).
c. A port master plan will be developed by considering the national port master plan, zoning allotment, feasibility of technical, economical, and environmental, as well assafety and security. d. The port master plan will include zoning for land and water areas.
e. For ports that are allowed to deal with overseas or foreign trade are only assigned to the main ports and special terminals and is approved by the minister (Article 111).
f. The determination of the main ports is based on several considerations as prescribed by the government.
g. Port Operators consists of Port Authorities and Port Operating Units. Port Authorities are established for commercial ports, whilst Port Operating Units are established for ports that are not yet commercially operated. Port Authorities are responsible to the Minister of Transportation, and Port Operating Units are responsible to the Minister of Transportation and to the Governor and/or Mayor or Regent.
10. Crewing Matters
a. The mandatory use of Indonesian crews i.e. crews with Indonesian nationality (Article 13 and 136).
b. Case by case exemption is still allowed but subject to provision of approval.
c. All crews must meet national and international qualifications (Article 135).
d. Master of the vessels will not be responsible with the authenticity of the vessels documents (Article 137).
e. Master of the vessels has the right to refuse to sail if he believes the vessels is not fit to sail.
f. Master of the vessels should inform the inspector for vessel safety on any part of the vessel that may compromise the safety standard
11. Arrest of Ships
Port authority (Syahbandar) can arrest any ships with the existence of court injunction order (article 222)
Court injunction order can be issued due to the legal proceedings on the vessels i.e. the vessel is involved in criminal case or civil case
The procedures on the arrest of ships will be regulated in more details under the Ministerial Decree
Tuesday 27 January 2009
Indonesian New Maritime Law - Cabotage
Below is the link to the Indonesian New Maritime Law No. 17 Year 2008
http://www.scribd.com/doc/3176027/UU-17-tahun-2008-PELAYARAN
http://www.scribd.com/doc/3176027/UU-17-tahun-2008-PELAYARAN
Sunday 18 January 2009
Chemical is only a small portion of Brostrom’ operation
With the proposed acquisition of Maersk over Brostrom being approved by the European Community competition authorities and no other approvals are required to complete the offer and therefore all conditions are consequently fulfilled, it paved the way for Maersk, a containership operator to get more involved in the product tanker operation.
Brostrom AB is a Sweden-based company engaged in the provision of marine transportation for the oil product tanker industry. It is listed in Stockholm, Swedia. Its logistics services include product tanker, very small portion of chemical tanker shipping and marine services. The Company's fleet consists of 90 mostly product tankers and only a handful of chemical tankers and are mostly operated under pooling arrangement. The Company has offices in Sweden, Norway, Denmark, France and Singapore. The Company will be acquired for $430million or SEK3.2 billion Swedish crowns. ($1=8.248 Swedish Crown)
The European Commission confirmed such deal even though the two companies’ operations overlap in the liquid bulk tanker sector after some critics comments that the combination of the two companies would create unhealthy competition structure within the sector and disrupt the level playing field as well as reducing competition within the sector thus exposing customers into a less competitive industry.
Following the announcement, Copenhagen-based Maersk announced its 57 crowns-per-share cash offer unconditional. Shareholders holding 55.9 percent of Gothenburg-based Brostrom’s stock have accepted the offer. The price per share of SEK57, was to be increased by an interest rate of 6% per annum, calculated from two months after the announcement of the offer, that is 27th October 2008, until the date when it was declared unconditional - 14th January 2009. Accordingly, the settlement price per share amounted to SEK57.73.
The combination of the two companies will create the world’s biggest oil product tanker company with a total fleet of 270 vessels. The combined company has about 60 ships under construction.
The difficulty of building new oil refineries in the main consuming countries and imbalances in the types of refining capacity between different countries also mean oil products now have to travel longer distances to reach consumers.
Maersk has announced the transaction in late August but has since canceled or postponed all new investment projects to free up cash.
"This is an acquisition that has been triggered by a very weak market," said Johannes Moller, analyst with Danske Markets. "These small product tankers are making almost no profit right now. With this transaction, Maersk will be consolidating this market."
Unlike chemical tankers which carry specialised chemical products, products tankers carry commoditised oil products and therefore is always in a more competitive industry. The volatility of product tanker segment will be even more for the larger players with larger product tankers.
Danish tanker company Torm (nasdaq: TRMD - news - people ) has also been on the hunt for acquisitions recently: it spent $125 million on a 50.0% stake in FR8 Group in January, and struck a similar deal to buy half of OMI in conjunction with Teekay (nyse: TK - news - people ) last year.
Brostrom AB is a Sweden-based company engaged in the provision of marine transportation for the oil product tanker industry. It is listed in Stockholm, Swedia. Its logistics services include product tanker, very small portion of chemical tanker shipping and marine services. The Company's fleet consists of 90 mostly product tankers and only a handful of chemical tankers and are mostly operated under pooling arrangement. The Company has offices in Sweden, Norway, Denmark, France and Singapore. The Company will be acquired for $430million or SEK3.2 billion Swedish crowns. ($1=8.248 Swedish Crown)
The European Commission confirmed such deal even though the two companies’ operations overlap in the liquid bulk tanker sector after some critics comments that the combination of the two companies would create unhealthy competition structure within the sector and disrupt the level playing field as well as reducing competition within the sector thus exposing customers into a less competitive industry.
Following the announcement, Copenhagen-based Maersk announced its 57 crowns-per-share cash offer unconditional. Shareholders holding 55.9 percent of Gothenburg-based Brostrom’s stock have accepted the offer. The price per share of SEK57, was to be increased by an interest rate of 6% per annum, calculated from two months after the announcement of the offer, that is 27th October 2008, until the date when it was declared unconditional - 14th January 2009. Accordingly, the settlement price per share amounted to SEK57.73.
The combination of the two companies will create the world’s biggest oil product tanker company with a total fleet of 270 vessels. The combined company has about 60 ships under construction.
The difficulty of building new oil refineries in the main consuming countries and imbalances in the types of refining capacity between different countries also mean oil products now have to travel longer distances to reach consumers.
Maersk has announced the transaction in late August but has since canceled or postponed all new investment projects to free up cash.
"This is an acquisition that has been triggered by a very weak market," said Johannes Moller, analyst with Danske Markets. "These small product tankers are making almost no profit right now. With this transaction, Maersk will be consolidating this market."
Unlike chemical tankers which carry specialised chemical products, products tankers carry commoditised oil products and therefore is always in a more competitive industry. The volatility of product tanker segment will be even more for the larger players with larger product tankers.
Danish tanker company Torm (nasdaq: TRMD - news - people ) has also been on the hunt for acquisitions recently: it spent $125 million on a 50.0% stake in FR8 Group in January, and struck a similar deal to buy half of OMI in conjunction with Teekay (nyse: TK - news - people ) last year.
Sunday 11 January 2009
Why Product Tankers Needs to be segregated from Chemical Tankers Order Book
It is widely known that it is difficult to segregate the order book between chemical tankers and product tankers because nowadays there are a lot of product tankers in the market that have the resemblance of chemical tankers and due to the fact that there are a lot of products tankers which have been classified as IMO II/III notation (a characteristic applied only to chemical tankers), it makes the job even more difficult for many analysts. Many analysts have come up with many ways to overcome these overlapping data with no avail as they do not have the grasp of the difference between the two.
The secret to this is simple. To segregate the two types of tankers, it seems one has to dive deeper and do more due diligence than just merely looking at the data of the order book from a piece of paper because it can be really misleading. This is important because one would make a mistake of overestimating the amount of order book of chemical tankers while underreporting the order book of product tankers. The affect is obvious. It can affect the level of tanker rates of both tanker sub-industries whereby it can have an un-necessary negative effect to chemical tanker industry while one can have a mistaken believe of potential tanker rate increase for product tankers taking into account lower order book for this type of tanker worldwide.
This will have a more profound affect if one takes into consideration the shipyards producing chemical tankers and may lead to the assumption that there are more chemical tanker producers than product tankers’. While product tankers are relatively more difficult to build then a dry bulk, shipyards producing chemical tankers arguably tend to be more experience tanker builder than product tankers due to the more complicated nature of chemical ships than product. Some shipyards producing chemical tankers do not produce other type of tankers to maintain their niche and specialty.
This can be a more pressing issue if we look at the type of cargoes carried by each type of tankers. They are quite different in which product tankers tend to carry more general products and therefore commoditized such as gas oil, diesel oil, lube oil etc while chemical tankers tend to carry more specialized products and more value-added products such as petrochemicals, organics, in-organics, vegetable oil etc. The case of Dow sued Odfjell and other chemical carriers in 2003 for oligopoly charges in chemical transportation highlight the specific nature and high barriers to entry for this chemical segment and underlined the very nature of uniqueness of chemical transportation as opposed to product tankers. Such case will never happen in more crowded product tanker segments.
The secret to this is simple. To segregate the two types of tankers, it seems one has to dive deeper and do more due diligence than just merely looking at the data of the order book from a piece of paper because it can be really misleading. This is important because one would make a mistake of overestimating the amount of order book of chemical tankers while underreporting the order book of product tankers. The affect is obvious. It can affect the level of tanker rates of both tanker sub-industries whereby it can have an un-necessary negative effect to chemical tanker industry while one can have a mistaken believe of potential tanker rate increase for product tankers taking into account lower order book for this type of tanker worldwide.
This will have a more profound affect if one takes into consideration the shipyards producing chemical tankers and may lead to the assumption that there are more chemical tanker producers than product tankers’. While product tankers are relatively more difficult to build then a dry bulk, shipyards producing chemical tankers arguably tend to be more experience tanker builder than product tankers due to the more complicated nature of chemical ships than product. Some shipyards producing chemical tankers do not produce other type of tankers to maintain their niche and specialty.
This can be a more pressing issue if we look at the type of cargoes carried by each type of tankers. They are quite different in which product tankers tend to carry more general products and therefore commoditized such as gas oil, diesel oil, lube oil etc while chemical tankers tend to carry more specialized products and more value-added products such as petrochemicals, organics, in-organics, vegetable oil etc. The case of Dow sued Odfjell and other chemical carriers in 2003 for oligopoly charges in chemical transportation highlight the specific nature and high barriers to entry for this chemical segment and underlined the very nature of uniqueness of chemical transportation as opposed to product tankers. Such case will never happen in more crowded product tanker segments.
Chemical Tankers Briefing
This is an old report (2004) but interesting to read.
The anti-trust action currently being taken against the world's four leading chemical parcel tanker operators is likely to have profound long-term effects on the way the business is run.
By Mike Corkhill
The business of moving chemicals by sea over the past 12 months has been overshadowed by accusations that the leading deep-sea parcel tanker operators colluded in the fixing of freight rates.
The EU Commission and the US Department of Justice are both investigating alleged breaches of relevant competition regulations by Stolt-Nielsen, Odfjell, Jo Tankers and Tokyo Marine.
Of the accused, Odfjell has admitted culpability in the US. In a plea bargain the company has agreed to pay a $45.5 million fine while two of its top executives are serving short prison terms.
Stolt is clinging to a conditional amnesty granted by Washington for cooperation in the investigation, but a former executive has been criminally charged.
In addition, a number of chemical company charterers have taken legal action against the same ship operators, seeking damages.
Most notable amongst these is Dow Chemical, the largest user of ocean chemical transport.
Although all four companies have launched their own internal investigations and are cooperating fully with the authorities, the matter could take some time to resolve.
The shipowners are also strengthening their internal competition compliance programmes and providing competition law training to relevant personnel.
Business is continuing as near to normal as possible in the meantime, but until the issue is settled, there will inevitably be some level of uncertainty in the trades.
Profound effects
The effects of this anti-trust action for the chemical tanker trades will not be limited to the short term.
All the deep-sea parcel tanker operators are now distancing themselves from the individual regional and route-specific cooperative service agreements that they had begun to develop amongst themselves towards the end of the 1990s.
"Following a review of our business strategies, we realise that, with the commodity chemical business driven by the spot market, we shall not be so keen on large contract volumes in future," states Dan Odfjell, chairman of Odfjell Tankers, writing in the December 2003 issue of his company's magazine.
"Now, more than ever, we shall target that business that we can service with two or more of our modes - tankers, terminals, coastal tankers and tank containers.
"We shall not offer for just any contract. If we are not willing to lose some business, we shall never achieve a fair price, a price justifying the kind of expensive equipment and organisational structure that we have put in place, and maintain."
High entry barriers
The provision of a deep-sea chemical parcel carrier service is not for the faint-hearted.
The cost of a sophisticated 37,000 dwt stainless steel tanker, able to carry 40 or more separate speciality cargoes in a completely segregated manner, is approximately $70 million, and a number of such vessels are needed to provide the necessary operational scale and global coverage.
The fleet needs to be backed by similarly sophisticated systems, management structure and human resources. Furthermore, customers will only turn to operators
with a proven track record for the movement of their high-value, sensitive and sometimes difficult and aggressive cargoes.
Although safety, quality and reliability represent the bottom line for charterers, they also want on-spec and on-time deliveries from the shipowners they choose. Because so many different bulk liquid cargoes are carried on these ships to a wide range of destinations and end-users, maintaining a cost-efficient, global service poses a real challenge for shipowners in this sector. As an example, the 59 tankers in the Odfjell Seachem deep-sea parcel tanker operation handled 15.8 million deadweight of cargo in 2002. The comprised 548 different products from amongst the wide range of organic and inorganic chemicals, vegetable oils, lube oil additives and speciality petroleum products carried by sea in these ships. It also entailed the loading of 4,881 cargo parcels and 3,586 port calls throughout the year.
Mother ships and feeders
Complementing the parcel tankers in the deep-sea speciality chemical trades are the growing number of chemical/product tankers, able to carry not only simple, commodity chemicals of the type being produced in growing volumes in the Middle East in their coated tanks but also refined petroleum products.
Most such ships are operated in dedicated fleets although the leading parcel tanker operators also charter in a few of these less-sophisticated chemical/product tankers in order to meet the full range of their customers' requirements.
The regional distribution of chemicals is served by fleets of coastal tankers, most of which are relatively sophisticated, scaled-down versions of parcel carriers, featuring stainless steel cargo tanks.
The coastal tankers serving Europe are relatively small, in the 3,500-5,000 dwt range, while those plying the waters of the Gulf of Mexico, the Caribbean and the east and west coasts of South America are marginally larger.
Of the various regional fleets, the primary focus in recent years has been in Asia where the expansion of the fleet of 5,000-12,000 dwt tankers to serve the rapidly growing intra-regional movement of chemicals is proceeding on a fast-track basis.
Consolidation
In general terms a higher degree of consolidation has been achieved in the deep-sea chemical tanker fleet than in the short sea.
While both the deep-sea and the short sea fleets in the various regions remain relatively fragmented, at least there has been a degree of rationalisation in the deep-sea parcel tanker sector, where Stolt, Odfjell, Jo Tankers and Tokyo Marine now account for 58 per cent of total tonnage.
As a result of the wide-ranging merger and acquisition activity that took place within the chemical producer community during the 1990s, the pressure for further rationalisation amongst the various chemical tanker fleets is growing.
However, the sensitivity of the issue as a result of the current anti-trust action means that shipowners are shying away from the less formal, cooperative service agreements amongst themselves and turning to the traditional means of consolidation, including pooling, joint ventures, mergers and takeovers, all sanctioned by the relevant competition authorities.
The European regional trades have been the primary focus of the most recent bout of chemical tanker fleet consolidation.
In October 2003 Vopak agreed to sell the 14 stainless steel chemical tankers it operated in the Vopak Essberger ChemPool fleet to pool partner John T Essberger GmbH & Co of Hamburg, part of the Rantzau Group.
Vopak announced that it was relinquishing the tankers, all in the 2,500-6,200 dwt size range, to concentrate on its core bulk liquid storage activities.
The new Essberger-only fleet comprises 26 ships operating in Europe and carrying approximately 5 million tonnes of cargo per annum on behalf of a range of chemical company shippers.
Earlier negotiations between Vopak Essberger ChemPool and Stolt, which operates its own European regional fleet, with a view to an even greater degree of consolidation, had broken down.
New pools
A month later Seatrans Ermefer Tankers (SET) of Bergen and the United Chemical Transport (UCT) pool of Hamburg agreed to form another European joint pool of chemical tankers.
"Launched on January 1, 2004, the new pool is trading in the core area of North West Europe and the Mediterranean and also includes SET and UCT business from Europe to South America and back," reports SET managing director Jan-H Johansen.
A further aim of the initiative is to streamline the operations side of the joint fleet to make planning more efficient and introduce efficiencies by combining cargoes to similar destinations, making voyages shorter in overall duration and saving time and money lost in calling at extra ports.
In the other major development in the region Odfjell and Ahrenkiel of Hamburg also launched a new inter-Europe coastal chemical tanker pool on January 1.
For Odfjell the venture not only marks a return to European coastal operations after a 20-year absence, but also complements the company's regional fleet operations in Asia and the Americas.
Ahrenkiel is also a participant in UCT and the company's commitment to the new venture with Odfjell is based on the contribution of its eight P-class tankers from the UCT pool.
Built by Viano do Castelo in Portugal in 1996-98, the vessels are each of 5,870 dwt with 20 stainless steel tanks. Odfjell is contributing the same number of similar-sized ships from its Odfjell Asia and Odfjell Americas fleets. These latter operations will be replenished with newbuilding and chartered tonnage.
Between them, the SET-UCT, Essberger and Ahrenkiel-Odfjell operations account for about 40 per cent of the European regional chemship market. Other operators active in the region include the Crystal Pool, Uitkilens-Chemtrans, Broström, Wonsild, Stolt-Nielsen and Naviera Quimica.
"Whether the other operators will consider entering enlarged pools remains to be seen," comments Mr Johansen of SET. "It is always a question of how big a pool you can administer and also how big the authorities will allow you to become.
"We would expect to see the number of participants in the Mediterranean-North European chemical trades reduce over the next few years. Certainly from our vantage point it does not make too much sense to carry on as we are today."
Market and prospects
The operations of the majority of chemical tanker operations are currently in the black, although results are generally sluggish.
This is because the volume of chemicals moved, and the fortunes of ship operators, tend to mirror the performance of the world economy.
The bad news is that the global economy is currently struggling to achieve some momentum as the push for a post-September 11 recovery gains ground.
The good news is that the chemical market expansion has consistently outperformed GDP growth, and the gap is steadily widening.
China, the powerhouse that is driving Asia, is also driving increasing volumes of chemical imports from the US Gulf and the Middle East and growing levels of chemical exports, including to customers throughout the Asian region.
Chemical exports from China in June 2003 were 30 per cent ahead of the level achieved in the same month a year earlier.
The volume of trade available to chemical tankers comprises approximately 150 million tonnes per annum (mta), comprising 75 mta of organic chemicals, 25 mta of inorganic chemicals, 35 mta of vegetable oils and 20 mta of other bulk liquids.
Orderbooks
Another reason for the current stability in the chemical tanker trades is the comparatively modest orderbook.
Shipowners were chastened by the Asian financial crisis of 1998, when 100 expensive stainless steel chemical tankers had been ordered in expectation of a new era of buoyant trade with the region.
Since then, newbuilding has proceeded at a much more sedate pace. At the start of 2003 the chemical tanker orderbook stood at 70 ships of 1.4 million dwt.
Nevertheless, the leading chemical tanker fleets are now of such a size that there is a need to maintain an almost continuous newbuilding programme, however modest, in order to replace older tonnage.
In contrast to the past, when new ships were built in Europe to own account, the Big Four parcel tanker operators are adopting new approaches to vessel ownership in order to minimise their financial exposure and inject a further degree of flexibility into their operations.
An increasingly popular approach is to order vessels in Japanese shipyards in conjunction with local owners.
These arrangements are based on time charters of five-plus years with purchase options. The low interest rates and other attractive repayment terms currently available to Japanese shipowners wishing to have new ships built in domestic yards are influencing factors.
Less sophisticated
The most recently completed newbuilding programmes in European yards involved relatively sophisticated ships in the 37,000 dwt size range with a high degree of cargo-handling flexibility.
As such, shipowners see no immediate need for further ships of such a size and built to such a standard.
The new Japanese ships are thus somewhat smaller and simpler in construction. This suits the Japanese yards as they have yet to build a top-of-the-range chemical parcel tanker.
Nevertheless, the current round of Japanese newbuildings are still being constructed with stainless steel tanks throughout, even though there are relatively fewer cargo tanks per ship.
An example of the new orders being placed in Japan are the three 19,000 dwt chemical tankers to be built at the Usuki and Shin Kurushima yards for Japanese principals.
Odfjell will take the newbuildings on time charters of seven and eight years, while options to extend for another two or three years are part of the deal as is an option to purchase on two of the ships which will continue throughout the charter period.
The ships will delivered in August 2004, October 2004 and December 2005, respectively. Two of the ships will have 22 cargo tanks and the third 36 cargo tanks, all made of stainless steel.
The anti-trust action currently being taken against the world's four leading chemical parcel tanker operators is likely to have profound long-term effects on the way the business is run.
By Mike Corkhill
The business of moving chemicals by sea over the past 12 months has been overshadowed by accusations that the leading deep-sea parcel tanker operators colluded in the fixing of freight rates.
The EU Commission and the US Department of Justice are both investigating alleged breaches of relevant competition regulations by Stolt-Nielsen, Odfjell, Jo Tankers and Tokyo Marine.
Of the accused, Odfjell has admitted culpability in the US. In a plea bargain the company has agreed to pay a $45.5 million fine while two of its top executives are serving short prison terms.
Stolt is clinging to a conditional amnesty granted by Washington for cooperation in the investigation, but a former executive has been criminally charged.
In addition, a number of chemical company charterers have taken legal action against the same ship operators, seeking damages.
Most notable amongst these is Dow Chemical, the largest user of ocean chemical transport.
Although all four companies have launched their own internal investigations and are cooperating fully with the authorities, the matter could take some time to resolve.
The shipowners are also strengthening their internal competition compliance programmes and providing competition law training to relevant personnel.
Business is continuing as near to normal as possible in the meantime, but until the issue is settled, there will inevitably be some level of uncertainty in the trades.
Profound effects
The effects of this anti-trust action for the chemical tanker trades will not be limited to the short term.
All the deep-sea parcel tanker operators are now distancing themselves from the individual regional and route-specific cooperative service agreements that they had begun to develop amongst themselves towards the end of the 1990s.
"Following a review of our business strategies, we realise that, with the commodity chemical business driven by the spot market, we shall not be so keen on large contract volumes in future," states Dan Odfjell, chairman of Odfjell Tankers, writing in the December 2003 issue of his company's magazine.
"Now, more than ever, we shall target that business that we can service with two or more of our modes - tankers, terminals, coastal tankers and tank containers.
"We shall not offer for just any contract. If we are not willing to lose some business, we shall never achieve a fair price, a price justifying the kind of expensive equipment and organisational structure that we have put in place, and maintain."
High entry barriers
The provision of a deep-sea chemical parcel carrier service is not for the faint-hearted.
The cost of a sophisticated 37,000 dwt stainless steel tanker, able to carry 40 or more separate speciality cargoes in a completely segregated manner, is approximately $70 million, and a number of such vessels are needed to provide the necessary operational scale and global coverage.
The fleet needs to be backed by similarly sophisticated systems, management structure and human resources. Furthermore, customers will only turn to operators
with a proven track record for the movement of their high-value, sensitive and sometimes difficult and aggressive cargoes.
Although safety, quality and reliability represent the bottom line for charterers, they also want on-spec and on-time deliveries from the shipowners they choose. Because so many different bulk liquid cargoes are carried on these ships to a wide range of destinations and end-users, maintaining a cost-efficient, global service poses a real challenge for shipowners in this sector. As an example, the 59 tankers in the Odfjell Seachem deep-sea parcel tanker operation handled 15.8 million deadweight of cargo in 2002. The comprised 548 different products from amongst the wide range of organic and inorganic chemicals, vegetable oils, lube oil additives and speciality petroleum products carried by sea in these ships. It also entailed the loading of 4,881 cargo parcels and 3,586 port calls throughout the year.
Mother ships and feeders
Complementing the parcel tankers in the deep-sea speciality chemical trades are the growing number of chemical/product tankers, able to carry not only simple, commodity chemicals of the type being produced in growing volumes in the Middle East in their coated tanks but also refined petroleum products.
Most such ships are operated in dedicated fleets although the leading parcel tanker operators also charter in a few of these less-sophisticated chemical/product tankers in order to meet the full range of their customers' requirements.
The regional distribution of chemicals is served by fleets of coastal tankers, most of which are relatively sophisticated, scaled-down versions of parcel carriers, featuring stainless steel cargo tanks.
The coastal tankers serving Europe are relatively small, in the 3,500-5,000 dwt range, while those plying the waters of the Gulf of Mexico, the Caribbean and the east and west coasts of South America are marginally larger.
Of the various regional fleets, the primary focus in recent years has been in Asia where the expansion of the fleet of 5,000-12,000 dwt tankers to serve the rapidly growing intra-regional movement of chemicals is proceeding on a fast-track basis.
Consolidation
In general terms a higher degree of consolidation has been achieved in the deep-sea chemical tanker fleet than in the short sea.
While both the deep-sea and the short sea fleets in the various regions remain relatively fragmented, at least there has been a degree of rationalisation in the deep-sea parcel tanker sector, where Stolt, Odfjell, Jo Tankers and Tokyo Marine now account for 58 per cent of total tonnage.
As a result of the wide-ranging merger and acquisition activity that took place within the chemical producer community during the 1990s, the pressure for further rationalisation amongst the various chemical tanker fleets is growing.
However, the sensitivity of the issue as a result of the current anti-trust action means that shipowners are shying away from the less formal, cooperative service agreements amongst themselves and turning to the traditional means of consolidation, including pooling, joint ventures, mergers and takeovers, all sanctioned by the relevant competition authorities.
The European regional trades have been the primary focus of the most recent bout of chemical tanker fleet consolidation.
In October 2003 Vopak agreed to sell the 14 stainless steel chemical tankers it operated in the Vopak Essberger ChemPool fleet to pool partner John T Essberger GmbH & Co of Hamburg, part of the Rantzau Group.
Vopak announced that it was relinquishing the tankers, all in the 2,500-6,200 dwt size range, to concentrate on its core bulk liquid storage activities.
The new Essberger-only fleet comprises 26 ships operating in Europe and carrying approximately 5 million tonnes of cargo per annum on behalf of a range of chemical company shippers.
Earlier negotiations between Vopak Essberger ChemPool and Stolt, which operates its own European regional fleet, with a view to an even greater degree of consolidation, had broken down.
New pools
A month later Seatrans Ermefer Tankers (SET) of Bergen and the United Chemical Transport (UCT) pool of Hamburg agreed to form another European joint pool of chemical tankers.
"Launched on January 1, 2004, the new pool is trading in the core area of North West Europe and the Mediterranean and also includes SET and UCT business from Europe to South America and back," reports SET managing director Jan-H Johansen.
A further aim of the initiative is to streamline the operations side of the joint fleet to make planning more efficient and introduce efficiencies by combining cargoes to similar destinations, making voyages shorter in overall duration and saving time and money lost in calling at extra ports.
In the other major development in the region Odfjell and Ahrenkiel of Hamburg also launched a new inter-Europe coastal chemical tanker pool on January 1.
For Odfjell the venture not only marks a return to European coastal operations after a 20-year absence, but also complements the company's regional fleet operations in Asia and the Americas.
Ahrenkiel is also a participant in UCT and the company's commitment to the new venture with Odfjell is based on the contribution of its eight P-class tankers from the UCT pool.
Built by Viano do Castelo in Portugal in 1996-98, the vessels are each of 5,870 dwt with 20 stainless steel tanks. Odfjell is contributing the same number of similar-sized ships from its Odfjell Asia and Odfjell Americas fleets. These latter operations will be replenished with newbuilding and chartered tonnage.
Between them, the SET-UCT, Essberger and Ahrenkiel-Odfjell operations account for about 40 per cent of the European regional chemship market. Other operators active in the region include the Crystal Pool, Uitkilens-Chemtrans, Broström, Wonsild, Stolt-Nielsen and Naviera Quimica.
"Whether the other operators will consider entering enlarged pools remains to be seen," comments Mr Johansen of SET. "It is always a question of how big a pool you can administer and also how big the authorities will allow you to become.
"We would expect to see the number of participants in the Mediterranean-North European chemical trades reduce over the next few years. Certainly from our vantage point it does not make too much sense to carry on as we are today."
Market and prospects
The operations of the majority of chemical tanker operations are currently in the black, although results are generally sluggish.
This is because the volume of chemicals moved, and the fortunes of ship operators, tend to mirror the performance of the world economy.
The bad news is that the global economy is currently struggling to achieve some momentum as the push for a post-September 11 recovery gains ground.
The good news is that the chemical market expansion has consistently outperformed GDP growth, and the gap is steadily widening.
China, the powerhouse that is driving Asia, is also driving increasing volumes of chemical imports from the US Gulf and the Middle East and growing levels of chemical exports, including to customers throughout the Asian region.
Chemical exports from China in June 2003 were 30 per cent ahead of the level achieved in the same month a year earlier.
The volume of trade available to chemical tankers comprises approximately 150 million tonnes per annum (mta), comprising 75 mta of organic chemicals, 25 mta of inorganic chemicals, 35 mta of vegetable oils and 20 mta of other bulk liquids.
Orderbooks
Another reason for the current stability in the chemical tanker trades is the comparatively modest orderbook.
Shipowners were chastened by the Asian financial crisis of 1998, when 100 expensive stainless steel chemical tankers had been ordered in expectation of a new era of buoyant trade with the region.
Since then, newbuilding has proceeded at a much more sedate pace. At the start of 2003 the chemical tanker orderbook stood at 70 ships of 1.4 million dwt.
Nevertheless, the leading chemical tanker fleets are now of such a size that there is a need to maintain an almost continuous newbuilding programme, however modest, in order to replace older tonnage.
In contrast to the past, when new ships were built in Europe to own account, the Big Four parcel tanker operators are adopting new approaches to vessel ownership in order to minimise their financial exposure and inject a further degree of flexibility into their operations.
An increasingly popular approach is to order vessels in Japanese shipyards in conjunction with local owners.
These arrangements are based on time charters of five-plus years with purchase options. The low interest rates and other attractive repayment terms currently available to Japanese shipowners wishing to have new ships built in domestic yards are influencing factors.
Less sophisticated
The most recently completed newbuilding programmes in European yards involved relatively sophisticated ships in the 37,000 dwt size range with a high degree of cargo-handling flexibility.
As such, shipowners see no immediate need for further ships of such a size and built to such a standard.
The new Japanese ships are thus somewhat smaller and simpler in construction. This suits the Japanese yards as they have yet to build a top-of-the-range chemical parcel tanker.
Nevertheless, the current round of Japanese newbuildings are still being constructed with stainless steel tanks throughout, even though there are relatively fewer cargo tanks per ship.
An example of the new orders being placed in Japan are the three 19,000 dwt chemical tankers to be built at the Usuki and Shin Kurushima yards for Japanese principals.
Odfjell will take the newbuildings on time charters of seven and eight years, while options to extend for another two or three years are part of the deal as is an option to purchase on two of the ships which will continue throughout the charter period.
The ships will delivered in August 2004, October 2004 and December 2005, respectively. Two of the ships will have 22 cargo tanks and the third 36 cargo tanks, all made of stainless steel.
A Chemical Tanker
A chemical tanker is a type of tanker designed to transport chemicals in bulk.
Ocean-going chemical tankers generally range from 5,000 to 40,000 dwt in size, which is considerably smaller than the average size of other tanker types due to the specialised nature of their cargoes and the size restrictions of the port terminals where they call to load and discharge.
Chemical tankers normally have a series of separate cargo tanks which are either coated with specialised coatings such as phenolic epoxy or zinc paint, or made from stainless steel. The coating or cargo tank material determines what types of cargo a particular tank can carry: stainless steel tanks are required for aggressive acid cargoes such as sulphuric and phosphoric acid, while 'easier' cargoes - e.g. vegetable oil - can be carried in epoxy coated tanks.
Chemical tankers often have a system for tank heating in order to maintain the viscosity of certain cargoes - typically this system consists of a boiler which pumps pressurized steam through so-called 'heating coils' - stainless steel pipes - in the cargo tanks, thus transferring heat into the cargo which circulates in the tank by convection.
Many modern chemical tankers feature double hull construction and have one tank for each pump with separate piping, which means that each tank can load a separate cargo without any mixing. Tank cleaning after discharging cargo is a very important aspect of chemical tanker operations, because tanks which are not properly cleaned of all cargo residue can adversely affect the purity of the next cargo loaded. Before tanks are cleaned, it is very important that they are properly ventilated and checked to be free of potentially explosive gases.
Most new chemical tankers are built by shipbuilders in Japan, Korea or China, with other builders in Turkey, Italy, Germany and Poland.
The chemical tanker market is dominated by the "big 3" chemical shipowners, Stolt-Nielsen, Odfjell and Berlian Laju Tanker. Charterers - the end users of the ships - include oil majors and specialist chemical companies.
To book space with the "big 3" or other smaller owners, most charterers use a Shipbroker in order to obtain the most competitive freight rate.
Source: en.wikipedia.org
Ocean-going chemical tankers generally range from 5,000 to 40,000 dwt in size, which is considerably smaller than the average size of other tanker types due to the specialised nature of their cargoes and the size restrictions of the port terminals where they call to load and discharge.
Chemical tankers normally have a series of separate cargo tanks which are either coated with specialised coatings such as phenolic epoxy or zinc paint, or made from stainless steel. The coating or cargo tank material determines what types of cargo a particular tank can carry: stainless steel tanks are required for aggressive acid cargoes such as sulphuric and phosphoric acid, while 'easier' cargoes - e.g. vegetable oil - can be carried in epoxy coated tanks.
Chemical tankers often have a system for tank heating in order to maintain the viscosity of certain cargoes - typically this system consists of a boiler which pumps pressurized steam through so-called 'heating coils' - stainless steel pipes - in the cargo tanks, thus transferring heat into the cargo which circulates in the tank by convection.
Many modern chemical tankers feature double hull construction and have one tank for each pump with separate piping, which means that each tank can load a separate cargo without any mixing. Tank cleaning after discharging cargo is a very important aspect of chemical tanker operations, because tanks which are not properly cleaned of all cargo residue can adversely affect the purity of the next cargo loaded. Before tanks are cleaned, it is very important that they are properly ventilated and checked to be free of potentially explosive gases.
Most new chemical tankers are built by shipbuilders in Japan, Korea or China, with other builders in Turkey, Italy, Germany and Poland.
The chemical tanker market is dominated by the "big 3" chemical shipowners, Stolt-Nielsen, Odfjell and Berlian Laju Tanker. Charterers - the end users of the ships - include oil majors and specialist chemical companies.
To book space with the "big 3" or other smaller owners, most charterers use a Shipbroker in order to obtain the most competitive freight rate.
Source: en.wikipedia.org
New York-listed owner wants more tankers
NAT says its acquisitions have been accretive for its dividends and earnings. New York-listed Nordic American Tanker Shipping Ltd (NAT) has announced a public offering of three million of its common shares at $32.50 per share to “fund further acquisitions under planning”.
A press release said Morgan Stanley is acting as the book-running manager for the offering, and that NAT expects to close the sale next Tuesday. The underwriters also have a 30-day option to purchase up to 450,000 additional shares to cover over-allotments.
“In our view, the present markets offer attractive opportunities to increase the company's fleet further. Because of the financial turmoil internationally, ship values have been reduced,” said chairman and CEO Herbjørn Hansson in the press release.
“We believe that our past acquisitions have been accretive, that is, after acquisitions our dividend and earnings per share have been higher than under a scenario where such acquisitions had not taken place.
“We announced an agreement to buy a double-hull suezmax tanker earlier this week, which is expected to be financed with funds that were available to the company before this offering,” Hansson added.
NAT earlier this week announced the $56.7-million acquisition of a double-hulled suezmax, slated for delivery no later than March 15. NAT apparently has no net debt at present and an unused credit line of $500 million.
“The acquisition is expected to be financed from out of the company's financial resources,” said a press release regarding the suezmax acquisition. This acquisition ups NAT's fleet to 15 double-hulled suezmaxes, including two previously announced newbuildings the company had agreed to acquire.
These newbuildings are expected to be delivered by the end of 2009 and by the end of April 2010 respectively.
Meanwhile, CEO Hansson has said that NAT expects the offering of three million shares to “strengthen the company's equity base and increase the company's capacity to make further acquisitions.”
Taken from Tanker World
Cowan Thant Zin, 9th January 2009 08:03 GMT
Comments? Email editor@bunkerworld.com.
A press release said Morgan Stanley is acting as the book-running manager for the offering, and that NAT expects to close the sale next Tuesday. The underwriters also have a 30-day option to purchase up to 450,000 additional shares to cover over-allotments.
“In our view, the present markets offer attractive opportunities to increase the company's fleet further. Because of the financial turmoil internationally, ship values have been reduced,” said chairman and CEO Herbjørn Hansson in the press release.
“We believe that our past acquisitions have been accretive, that is, after acquisitions our dividend and earnings per share have been higher than under a scenario where such acquisitions had not taken place.
“We announced an agreement to buy a double-hull suezmax tanker earlier this week, which is expected to be financed with funds that were available to the company before this offering,” Hansson added.
NAT earlier this week announced the $56.7-million acquisition of a double-hulled suezmax, slated for delivery no later than March 15. NAT apparently has no net debt at present and an unused credit line of $500 million.
“The acquisition is expected to be financed from out of the company's financial resources,” said a press release regarding the suezmax acquisition. This acquisition ups NAT's fleet to 15 double-hulled suezmaxes, including two previously announced newbuildings the company had agreed to acquire.
These newbuildings are expected to be delivered by the end of 2009 and by the end of April 2010 respectively.
Meanwhile, CEO Hansson has said that NAT expects the offering of three million shares to “strengthen the company's equity base and increase the company's capacity to make further acquisitions.”
Taken from Tanker World
Cowan Thant Zin, 9th January 2009 08:03 GMT
Comments? Email editor@bunkerworld.com.
OUTLOOK '09: Chemical shipping will continue to forge ahead despite stormy waters
The chemical shipping industry will continue to sail through the difficult period because of falling substantial bunker prices and falling operating costs as well as late delivery of many vessels. Despite these, economic downturn must be watched closely and how it will affect the shipping industry and chemical tanker operators in particular will be interesting to monitor.
Certain issues such crew shortages are a genuine reality which could create stagnate growth for certain players in the chemical tanker industry however while this can be a big issue for some companies, for those companies that have an edge over other companies in sourcing their crews will be getting a strong competitive advantage in few years ahead. This is particularly so because based on Drewry Reports, the shortage of crews would mount to more than 34,500 crews over the next 1 - 2 years against the total requirement of 498,000 and this shortage will increase to 83,900 in 2012. Certainly those shipping companies that have sophisticated and dedicated crew recruitment and retention programs will find its position stronger than ever.
On the outset, the increase of piracy as what continues to happen in the Gulf of Aden meant that the chemical tanker operators such as Odfjell, amongst others, would continue to divert their fleet around the Cape of Good Hope, as opposed to using the Gulf of Aden, Red Sea and Suez Canal and this create increase costs of shipping as well as insurance. However such effects will not be substantial as compared to the fact that the vessels will have to travel farther and therefore impacting on the expansion of tonne miles across the chemical tanker operators in the world. Expansion of ton-miles in turn will affect positively on the tanker rates.
In addition, several of the tankers in recent attempt for hijacking have been foiled as the new EU, NATO as well Chinese naval patrol force seems would have done a better jobs at combating pirates for the sake of the industry.
On issues with regard to poor market conditions, some of the companies within the chemical tanker industry which rely heavily on certain customers for transporting chemical products which have been badly affected with current global slowdown such as in automotive industry will suffer more than others. While those companies which have diversified type of customers and do not have concentration of customers or those companies which continue to transport various type of cargoes will be able to fair well in current crisis.
The most hardly hit chemical tankers operators in this crisis would be those with smaller fleet, a new comer to the market or those which have tankers that are not flexible enough to carry various chemical products i.e. epoxy coated tankers or zinc coated tankers instead of stainless steel.
Now with the production plants coming back on line in October after the damage caused by Hurricane Ike, US Gulf trading has resumed to normal and this will be important for further loading and discharging activities.
Other important elements to watch are the costs for operational activities of chemical tanker operators. Bunker, the main components of the operational costs contributing between 25 – 35% of the total costs and the single largest cost element for a tanker has declined substantially over the past few months. This is coupled with the decline in the overall costs inherent in shipping companies monthly expenses such as maintenance costs, docking costs as well as some other substantial costs.
Fuel costs had dropped 70% from highs of $700/tonne (€518/tonne) FOB (free on board) Rotterdam in July to just over $200/tonne FOB Rotterdam in December. Bunker fuel is directly linked to crude oil and was expected to remain at current price values over the coming months.
The Asia-Pacific region was one area where brokers remained positive as tonnage was seen open in December. Chinese requirements for nitrobenzyl alcohol (NBA), mono ethylene glycol (MEG), paraxylene (PX) and orthoxylene (OX) suggested that demand could return in early 2009, making the route more lucrative, a source said.
However, the International Monetary Fund (IMF) predicted that growth in 2009 in emerging economies such as China was on the decline and would not compensate for recessions in developed countries. All will depend on how other emerging economies fare.
Certain issues such crew shortages are a genuine reality which could create stagnate growth for certain players in the chemical tanker industry however while this can be a big issue for some companies, for those companies that have an edge over other companies in sourcing their crews will be getting a strong competitive advantage in few years ahead. This is particularly so because based on Drewry Reports, the shortage of crews would mount to more than 34,500 crews over the next 1 - 2 years against the total requirement of 498,000 and this shortage will increase to 83,900 in 2012. Certainly those shipping companies that have sophisticated and dedicated crew recruitment and retention programs will find its position stronger than ever.
On the outset, the increase of piracy as what continues to happen in the Gulf of Aden meant that the chemical tanker operators such as Odfjell, amongst others, would continue to divert their fleet around the Cape of Good Hope, as opposed to using the Gulf of Aden, Red Sea and Suez Canal and this create increase costs of shipping as well as insurance. However such effects will not be substantial as compared to the fact that the vessels will have to travel farther and therefore impacting on the expansion of tonne miles across the chemical tanker operators in the world. Expansion of ton-miles in turn will affect positively on the tanker rates.
In addition, several of the tankers in recent attempt for hijacking have been foiled as the new EU, NATO as well Chinese naval patrol force seems would have done a better jobs at combating pirates for the sake of the industry.
On issues with regard to poor market conditions, some of the companies within the chemical tanker industry which rely heavily on certain customers for transporting chemical products which have been badly affected with current global slowdown such as in automotive industry will suffer more than others. While those companies which have diversified type of customers and do not have concentration of customers or those companies which continue to transport various type of cargoes will be able to fair well in current crisis.
The most hardly hit chemical tankers operators in this crisis would be those with smaller fleet, a new comer to the market or those which have tankers that are not flexible enough to carry various chemical products i.e. epoxy coated tankers or zinc coated tankers instead of stainless steel.
Now with the production plants coming back on line in October after the damage caused by Hurricane Ike, US Gulf trading has resumed to normal and this will be important for further loading and discharging activities.
Other important elements to watch are the costs for operational activities of chemical tanker operators. Bunker, the main components of the operational costs contributing between 25 – 35% of the total costs and the single largest cost element for a tanker has declined substantially over the past few months. This is coupled with the decline in the overall costs inherent in shipping companies monthly expenses such as maintenance costs, docking costs as well as some other substantial costs.
Fuel costs had dropped 70% from highs of $700/tonne (€518/tonne) FOB (free on board) Rotterdam in July to just over $200/tonne FOB Rotterdam in December. Bunker fuel is directly linked to crude oil and was expected to remain at current price values over the coming months.
The Asia-Pacific region was one area where brokers remained positive as tonnage was seen open in December. Chinese requirements for nitrobenzyl alcohol (NBA), mono ethylene glycol (MEG), paraxylene (PX) and orthoxylene (OX) suggested that demand could return in early 2009, making the route more lucrative, a source said.
However, the International Monetary Fund (IMF) predicted that growth in 2009 in emerging economies such as China was on the decline and would not compensate for recessions in developed countries. All will depend on how other emerging economies fare.
Korea Ship Exports
Korea Ship Exports to Hit $53b in 2009
According to a report from KBS, Korea's domestic shipbuilding industry
will lead the nation's exports in 2009 as it is expected to exceed the $50b mark in
exports for the first time.
According to a report from KBS, Korea's domestic shipbuilding industry
will lead the nation's exports in 2009 as it is expected to exceed the $50b mark in
exports for the first time.
Aegean Takes Delivery of Bunkering Tanker
Aegean Marine Petroleum Network Inc. (NYSE:ANW) announced on Jan. 7 that it has taken delivery of the Naxos, a 4,600 dwt double-hull bunkering tanker newbuild from Fujian Southeast Shipyard in China. The vessel is expected to be deployed to the Company's Singapore market.
E. Nikolas Tavlarios, President, commented, "We are pleased to take delivery of the Naxos, which represents our eleventh bunkering tanker newbuilding since going public in December 2006. By successfully increasing our delivery capacity, we expect to further strengthen our position to meet the strong demand for marine fuel and continue to grow sales volumes. We remain on track to take delivery of 20 additional bunkering tanker newbuildings over the next two years as we plan to enter new strategic markets in Tangiers, Morocco and the southern Caribbean during the first quarter of 2009."
E. Nikolas Tavlarios, President, commented, "We are pleased to take delivery of the Naxos, which represents our eleventh bunkering tanker newbuilding since going public in December 2006. By successfully increasing our delivery capacity, we expect to further strengthen our position to meet the strong demand for marine fuel and continue to grow sales volumes. We remain on track to take delivery of 20 additional bunkering tanker newbuildings over the next two years as we plan to enter new strategic markets in Tangiers, Morocco and the southern Caribbean during the first quarter of 2009."
Recession 'an act of providence'
'Boom is welcome. Recession is more welcome.'
Mitsui OSK Lines (MOL) president Akimitsu Ashida says that although the current downturn in the shipping industry could go on for another two years aspects of it will be beneficial.
“We need to be ready for the difficult time(s) for about two years before the recovery of a healthy market level,” said Ashida in a New Year address to his company, which has been ranked as the third largest tanker company in the world.
Ashida quoted Panasonic Group founder Konosuke Matsushita: “Boom is welcome. Recession is more welcome.” According to Ashida, recession could be seen as a process to adjust current and future over-tonnage concerns. “And, for a respective company, recession makes its weakness apparent, which is invisible under normal circumstance, and leads to the next rapid progress if proper efforts [are] rendered to overcome such weakness,” said Ashida.
According to him, worries of an over-supply of tonnage would be quelled as yards that had planned for rapid expansion were now being squeezed for funding and an increasing numbers of orders were being cancelled before delivery.
“If the market had dropped one or two years later, the massive volume of new vessels would have been delivered. It is not too much to say that this is an act of providence,” he said.
Ashida added that the scrapping of aged vessels, which have been used longer than their original schedules under very strong market conditions, would be accelerated due to recent market deterioration.
“These movements will reasonably and favourably contribute to adjust demand and supply balance of world tonnage,” he said.
“What's more, we will have more possibility in reducing overall costs especially in maintenance and repairs, bunkers and lubricants, the price of which went up sharply due to the hike of material and crude oil prices for some years.”
According to one source, Singapore-based MOL Tankship Management Asia handles some 19 VLCCs along with a few chemical tankers.
London-based MOL Tankship Management Europe handles three VLCCs, two suezmaxes, four aframaxes and 16 chemical and product carriers.
Tokyo-based MOL Tankship Japan has 14 VLCCs on its books.
In addition, its Singapore unit handles nine LPG carriers.
Cowan Thant Zin, 6th January 2009 04:09 GMT
Comments? Email editor@bunkerworld.com.
Mitsui OSK Lines (MOL) president Akimitsu Ashida says that although the current downturn in the shipping industry could go on for another two years aspects of it will be beneficial.
“We need to be ready for the difficult time(s) for about two years before the recovery of a healthy market level,” said Ashida in a New Year address to his company, which has been ranked as the third largest tanker company in the world.
Ashida quoted Panasonic Group founder Konosuke Matsushita: “Boom is welcome. Recession is more welcome.” According to Ashida, recession could be seen as a process to adjust current and future over-tonnage concerns. “And, for a respective company, recession makes its weakness apparent, which is invisible under normal circumstance, and leads to the next rapid progress if proper efforts [are] rendered to overcome such weakness,” said Ashida.
According to him, worries of an over-supply of tonnage would be quelled as yards that had planned for rapid expansion were now being squeezed for funding and an increasing numbers of orders were being cancelled before delivery.
“If the market had dropped one or two years later, the massive volume of new vessels would have been delivered. It is not too much to say that this is an act of providence,” he said.
Ashida added that the scrapping of aged vessels, which have been used longer than their original schedules under very strong market conditions, would be accelerated due to recent market deterioration.
“These movements will reasonably and favourably contribute to adjust demand and supply balance of world tonnage,” he said.
“What's more, we will have more possibility in reducing overall costs especially in maintenance and repairs, bunkers and lubricants, the price of which went up sharply due to the hike of material and crude oil prices for some years.”
According to one source, Singapore-based MOL Tankship Management Asia handles some 19 VLCCs along with a few chemical tankers.
London-based MOL Tankship Management Europe handles three VLCCs, two suezmaxes, four aframaxes and 16 chemical and product carriers.
Tokyo-based MOL Tankship Japan has 14 VLCCs on its books.
In addition, its Singapore unit handles nine LPG carriers.
Cowan Thant Zin, 6th January 2009 04:09 GMT
Comments? Email editor@bunkerworld.com.
Financial crisis not stopping Saudi plans
Saudi Arabia's state tanker firm The National Shipping Company of Saudi Arabia (NSCSA) is sticking to plans to double its fleet by 2011 despite the ongoing economic downturn. Previous reports said NSCSA's VLCC fleet would swell to 20 by 2010 although that figure dropped to 17 on record newbuilding prices, while its chemical fleet was slated to expand to 32 vessels by 2011.
Recent reports have quoted NSCSA president, Saleh A Al-Shamekh, confirming that his firm will have 50 VLCCs and chemical tankers by 2011.
“We are shipowners who have embarked upon an ambitious plan, which called for doubling our fleet in 2006,” Al-Shamekh said. “We didn't know that the financial crisis would hit everybody. But we are still continuing with our strategic plan.” Al-Shamekh said that NSCSA has been affected by the financial crisis “but is still optimistic the waves will turn for better in the mid-term.”
“Earnings for VLCCs have held up despite the downturn in shipping at large. Revenue-wise, this year has been good. I can say this is a record year and it will surpass our growth last year.”
According to Al-Shamekh, lower crude output and forecasts of a demand slowdown have ''adversely affected'' tanker operators, but he also added that lower bunker costs had been cutting the cost of operations.
Another cause for optimism was the increasing number of tankers being used for storag, he said.
NSCSA is scheduled to take delivery of four VLCCs in 2009.
From Tanker World
Cowan Thant Zin, 29th December 2008 04:20 GMT
Recent reports have quoted NSCSA president, Saleh A Al-Shamekh, confirming that his firm will have 50 VLCCs and chemical tankers by 2011.
“We are shipowners who have embarked upon an ambitious plan, which called for doubling our fleet in 2006,” Al-Shamekh said. “We didn't know that the financial crisis would hit everybody. But we are still continuing with our strategic plan.” Al-Shamekh said that NSCSA has been affected by the financial crisis “but is still optimistic the waves will turn for better in the mid-term.”
“Earnings for VLCCs have held up despite the downturn in shipping at large. Revenue-wise, this year has been good. I can say this is a record year and it will surpass our growth last year.”
According to Al-Shamekh, lower crude output and forecasts of a demand slowdown have ''adversely affected'' tanker operators, but he also added that lower bunker costs had been cutting the cost of operations.
Another cause for optimism was the increasing number of tankers being used for storag, he said.
NSCSA is scheduled to take delivery of four VLCCs in 2009.
From Tanker World
Cowan Thant Zin, 29th December 2008 04:20 GMT
Eitzen Chemical ASA to acquire chemical tankers owner Mosvold Chemical KS
Norwegian chemicals transporting group Eitzen Chemical ASA said that it has signed a preliminary agreement to acquire chemical tankers owner Mosvold Chemical KS.
Eitzen Chemical said that it has entered into an agreement on main terms for the acquisition of Mosvold Chemical for USD12m in cash and shares.
Mosvold Chemical comprises a fleet of four stainless steel chemical tankers of 5,400 to 7,600 dwt. The vessels are currently on time charter to Italian company Marnavi SpA.
The final purchase agreement is expected to be signed during March. Eitzen Chemical on Wednesday also published its fourth quarter report, posting an operating profit of USD12,54m, as compared to pro forma USD20.29m in the third quarter. Total revenues for the quarter amounted to USD76.97m, up from pro forma USD77.73m in the previous quarter.
Eitzen Chemical, headquartered in Lysaker in Norway, is one of the world's largest regional chemical transportation companies, controlling a fleet of 118 vessels. The company is part of Eitzen Group. Eitzen Chemical was listed on the Oslo Stock Exchange in November 2006, and is traded under the ticker ECHEM.
Eitzen Chemical said that it has entered into an agreement on main terms for the acquisition of Mosvold Chemical for USD12m in cash and shares.
Mosvold Chemical comprises a fleet of four stainless steel chemical tankers of 5,400 to 7,600 dwt. The vessels are currently on time charter to Italian company Marnavi SpA.
The final purchase agreement is expected to be signed during March. Eitzen Chemical on Wednesday also published its fourth quarter report, posting an operating profit of USD12,54m, as compared to pro forma USD20.29m in the third quarter. Total revenues for the quarter amounted to USD76.97m, up from pro forma USD77.73m in the previous quarter.
Eitzen Chemical, headquartered in Lysaker in Norway, is one of the world's largest regional chemical transportation companies, controlling a fleet of 118 vessels. The company is part of Eitzen Group. Eitzen Chemical was listed on the Oslo Stock Exchange in November 2006, and is traded under the ticker ECHEM.
Dow Chemical: Lenders Stand by CEO Liveris
Dow Chemical has one thing on its side: Lenders who are actually willing to lend.
Surprisingly, even while Dow’s $15.3 billion agreement to take over Rohm & Haas is teetering, the chemicals giant so far appears to have the full support of the 18 lenders who agreed to provide Dow with a $13 billion bridge loan. “We stand ready and willing to fund,” said one person close to the financing, in an idea echoed by several of his compatriots.
Deal Journal spoke to people at several of Dow’s lenders, all of whom said that they stand by the $13 billion bridge loan and are ready to fund. That is all the more remarkable because the banks have been largely in the dark about the deal’s fate: as of last night, Dow Chemical had not contacted the banks to discuss the Rohm & Haas deal or the lending terms as of last night, according to several people familiar with the situation.
Lenders before have promised to fund, only to pull away their commitments or start hardball negotiations over terms. That was the case with the buyout of Clear Channel Communications, which eventually closed after a brief scrimmage in court, as well as the busted buyout of Bell Canada. Of course, that could always happen with the Dow Chemical deal as well as the lenders speak with the company.
In this case, however, the banks have far less to lose. In both the Clear Channel and BCE deals, some banks held more than $10 billion of lending commitments. In the Dow deal, in contrast, the $13 billion, one-year bridge loan was very cleverly structured, leaving no bank with more than $1.3 billion to fund. Most of the banks in the 18-bank syndicate for Dow, hold chunks of under $900 million each. No bank, then, has much incentive to rock the boat.
There could be several reasons other why the banks are standing by their commitments. The primary one is that Dow Chemical is a highly valued investment-grade corporate client that taps the financing markets often and works closely with Wall Street firms. And lastly, Dow Chemical’s acquisition of Rohm & Haas is one of the last large sources of investment banking and financing fees for beleaguered Wall Street banks who have seen deal flow dry up in the past few months.
Dow’s credit rating was cut last week cut to within two notches of rating that would allow trip a covenant and allow the lenders to renegotiate the terms of the loan. Still, none of the banks we talked with believed Dow would be cut to junk or that the covenant would be tripped.
The lenders’ blind faith in Dow and willingness to stand by their commitments stand in marked counterpoint to a yearful of deals in which bank lending commitments were weak links that threatened the survival of some deals. Several proposed mergers faced intense concerns about the soundness and availability of their funding, including the buyouts of Clear Channel Communications, Bell Canada, Huntsman Corp., Alliance Data Systems and BHP Billiton’s proposed acquisition of Rio Tinto.
Dow was planning to use $7.5 billion of the money it would have gotten from Kuwait to finance Dow’s own proposed acquisition of Rohm & Haas. There are precious few options for Liveris to find an equal amount of money elsewhere, since he is already cutting nearly one-third of Dow’s production capacity and has sworn not to eliminate the company’s stock dividend. As Deal Journal wrote last week, Liveris is facing a bit of a funding crunch and could use the $2.5 billion breakup fee from Kuwait to help finance the acquisition of Rohm.
Today, Liveris told our colleague Ana Campoy about the Kuwait deal, “We have not shut the door to doing the deal. If the deal was to be done tomorrow on the terms that were agreed, we would go ahead and do it….We will seek remedy for the damage done to Dow and we will seek it until we get remedy. That could be multiple billions of dollars and that could be any time frame this year or beyond.”
Update: Perhaps the lenders have not rebelled yet because assured everyone that he will find the $7.5 billion elsewhere. In an interview with Bloomberg today, Liveris said that he expected six “firm” offers from companies eager to take Kuwait’s place in the joint venture. Liveris also said that Warren Buffett and the Kuwaiti government remain committed to the $3 billion financing they have already promised. He also said he plans asset sales to get the $7.5 billion:
The $7.5 billion number, we would seek to get that number again. We would fill that hole not just with this property but with other properties we would divest. Some of those properties are in the [sales] process right now, it’s just a matter of restructuring it. It’s about putting a capital structure in place that replaces the Kuwait money. That $7.5 billion number is a realistic number given our size.
Liveris added:
“Warren [Buffett] is a big supporter of maintaining his interest in what Dow is doing despite the fact that his convertible preferred [holding in Dow] is underwater.”
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Read more: Deal Makers, Dow Chemical-Rohm, Funding, Investment Banks
Posted by Heidi N. Moore (Wall Street Journal)
Surprisingly, even while Dow’s $15.3 billion agreement to take over Rohm & Haas is teetering, the chemicals giant so far appears to have the full support of the 18 lenders who agreed to provide Dow with a $13 billion bridge loan. “We stand ready and willing to fund,” said one person close to the financing, in an idea echoed by several of his compatriots.
Deal Journal spoke to people at several of Dow’s lenders, all of whom said that they stand by the $13 billion bridge loan and are ready to fund. That is all the more remarkable because the banks have been largely in the dark about the deal’s fate: as of last night, Dow Chemical had not contacted the banks to discuss the Rohm & Haas deal or the lending terms as of last night, according to several people familiar with the situation.
Lenders before have promised to fund, only to pull away their commitments or start hardball negotiations over terms. That was the case with the buyout of Clear Channel Communications, which eventually closed after a brief scrimmage in court, as well as the busted buyout of Bell Canada. Of course, that could always happen with the Dow Chemical deal as well as the lenders speak with the company.
In this case, however, the banks have far less to lose. In both the Clear Channel and BCE deals, some banks held more than $10 billion of lending commitments. In the Dow deal, in contrast, the $13 billion, one-year bridge loan was very cleverly structured, leaving no bank with more than $1.3 billion to fund. Most of the banks in the 18-bank syndicate for Dow, hold chunks of under $900 million each. No bank, then, has much incentive to rock the boat.
There could be several reasons other why the banks are standing by their commitments. The primary one is that Dow Chemical is a highly valued investment-grade corporate client that taps the financing markets often and works closely with Wall Street firms. And lastly, Dow Chemical’s acquisition of Rohm & Haas is one of the last large sources of investment banking and financing fees for beleaguered Wall Street banks who have seen deal flow dry up in the past few months.
Dow’s credit rating was cut last week cut to within two notches of rating that would allow trip a covenant and allow the lenders to renegotiate the terms of the loan. Still, none of the banks we talked with believed Dow would be cut to junk or that the covenant would be tripped.
The lenders’ blind faith in Dow and willingness to stand by their commitments stand in marked counterpoint to a yearful of deals in which bank lending commitments were weak links that threatened the survival of some deals. Several proposed mergers faced intense concerns about the soundness and availability of their funding, including the buyouts of Clear Channel Communications, Bell Canada, Huntsman Corp., Alliance Data Systems and BHP Billiton’s proposed acquisition of Rio Tinto.
Dow was planning to use $7.5 billion of the money it would have gotten from Kuwait to finance Dow’s own proposed acquisition of Rohm & Haas. There are precious few options for Liveris to find an equal amount of money elsewhere, since he is already cutting nearly one-third of Dow’s production capacity and has sworn not to eliminate the company’s stock dividend. As Deal Journal wrote last week, Liveris is facing a bit of a funding crunch and could use the $2.5 billion breakup fee from Kuwait to help finance the acquisition of Rohm.
Today, Liveris told our colleague Ana Campoy about the Kuwait deal, “We have not shut the door to doing the deal. If the deal was to be done tomorrow on the terms that were agreed, we would go ahead and do it….We will seek remedy for the damage done to Dow and we will seek it until we get remedy. That could be multiple billions of dollars and that could be any time frame this year or beyond.”
Update: Perhaps the lenders have not rebelled yet because assured everyone that he will find the $7.5 billion elsewhere. In an interview with Bloomberg today, Liveris said that he expected six “firm” offers from companies eager to take Kuwait’s place in the joint venture. Liveris also said that Warren Buffett and the Kuwaiti government remain committed to the $3 billion financing they have already promised. He also said he plans asset sales to get the $7.5 billion:
The $7.5 billion number, we would seek to get that number again. We would fill that hole not just with this property but with other properties we would divest. Some of those properties are in the [sales] process right now, it’s just a matter of restructuring it. It’s about putting a capital structure in place that replaces the Kuwait money. That $7.5 billion number is a realistic number given our size.
Liveris added:
“Warren [Buffett] is a big supporter of maintaining his interest in what Dow is doing despite the fact that his convertible preferred [holding in Dow] is underwater.”
Permalink Trackback URL: http://blogs.wsj.com/deals/2009/01/06/dow-chemical-lenders-stand-by-ceo-liveris/trackback/
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Read more: Deal Makers, Dow Chemical-Rohm, Funding, Investment Banks
Posted by Heidi N. Moore (Wall Street Journal)
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