Category: Shipping News

29-09-2016 Escape for HMM, receivership for Hanjin Shipping, By Xiaolin Zeng, East Asia Correspondent, IHS Maritime

It’s a tale of two corporate responses: Hanjin Shipping’s descent into receivership and Hyundai Merchant Marine’s escape from bankruptcy.

When it became apparent in late 2015 that South Korea’s two largest shipping lines, Hanjin Shipping and Hyundai Merchant Marine (HMM), were struggling with huge debts and weak earnings, HMM was widely expected to go under, a victim of the prolonged shipping market slip. In October 2015, Hanjin Shipping’s revelation that President Park Geun-hye’s government had asked it to review a merger with HMM gave further indications that the latter would not survive.

Moreover, when a line-up for THE Alliance was unveiled on 13 May this year, HMM was noticeably absent, while Hanjin was in the grouping that also listed Mitsui OSK Lines, NYK Line, ‘K’ Line, Hapag-Lloyd, and Yang Ming. HMM admitted that its highly publicised business normalisation efforts had precluded it from being included in THE Alliance’s initial roster but stressed that it expected to join the grouping when it completed restructuringStill, its omission fuelled speculation that HMM could not survive, as it had to be part of a shipping alliance and cut charter costs to enjoy continued support from its banks. However, by September 2016 HMM had staged a remarkable escape from bankruptcy, while Hanjin Shipping entered receivership, causing logistical chaos as the world’s seventh-largest liner operator tried to prevent its creditors from arresting Hanjin ships.

Speaking to IHS Fairplay on condition of anonymity, an executive from Zodiac Maritime, which has ships on lease to both companies, said HMM handled its charter renegotiations better. “HMM continued to honour its obligations even when it was in the midst of discussions with us,” the source explained. “On the other hand, Hanjin Shipping began falling behind on payments at the start of summer. Subsequently, Hanjin Shipping told us it would stop paying until a deal was worked out. That didn’t go down well with the tonnage providers.”

When contacted about these comments, Hanjin declined official reaction, but a source inside the company confirmed that the line had defaulted on charter payments in early summer. “At the time we fell behind on charter payments, we were beginning negotiations with the tonnage providers, and we told them that we would settle the arrears once the charter rates were adjusted,” the insider explained. Seaspan Corporation CEO Gerry Wang’s public declarations that he would not agree to lower Hanjin’s charter rates only compounded the carrier’s predicament. The Zodiac source said, “All the tonnage providers must be on the same wavelength in order for the restructuring to be successful. If Gerry Wang insisted he wouldn’t renegotiate, why should we?

On 13 June, HMM said it had secured a 20% discount off box ship charters and a 25% reduction in bulker charters. The company’s tonnage providers include Zodiac, Eastern Pacific Shipping, Navios Maritime, and Capital Ship Management Corporation. HMM also successfully rescheduled repayments to bond holders and entered into partial debt-for-equity swaps with them. With both companies’ banks making it clear that no cash injections would be imminent, HMM and Hanjin had to sell assets to boost liquidity.

In this respect, the Zodiac executive observed that HMM’s parent, Hyundai Group, was wealthier than Hanjin’s, with subsidiaries such as tour operator Hyundai Asan, financial units Hyundai Securities, Hyundai Savings Bank, and Hyundai Asset Management, as well as Hyundai Logistics on top of vessels and box terminals in South Korea and overseas. Selling all or parts of these subsidiaries – as well as HMM’s dedicated bulk shipping contracts – raised more than USD1 billion. By contrast, Hanjin Shipping raised more than USD250 million from selling ships, overseas terminals and its London office. The amount that HMM’s parent raised gave the company breathing space over the next two years, but Hanjin Shipping’s efforts fell far short of its banks’ expectations.

South Korea’s Financial Services Commission (FSC) assessed that Hanjin Shipping would need at least USD1 billion to survive the next two years, while the liner operator’s main shareholder (Korean Air Lines), chairman Cho Yang-ho and other Hanjin affiliates offered to fork out only about USD450 million. Hanjin Shipping’s local banks, led by state policy lender Korea Development Bank (KDB), withdrew support, forcing the company to seek court protection. Both HMM and Hanjin had earlier sold their dedicated bulk shipping contracts and liquefied natural gas businesses to South Korean private equity investment firms Hahn & Co and IMM, but again it was HMM’s parent that was richer in assets, the Zodiac source noted.

Having been refused entry into THE Alliance, HMM reached out to the 2M alliance of Maersk Line and Mediterranean Shipping Co. On 14 July, HMM signed a memorandum of understanding to be part of that grouping, beginning in April 2017. HMM’s banks, led by KDB, reacted by executing a debt-for-equity swap in which they took a 40% in stake HMM. This completed HMM’s remarkable escape from bankruptcy. Its debt ratio shrank from 5,307.3% on 31 March to 200% as IHS Fairplay went to press, enabling HMM to tap a fund set up by the state policy banks to invest in ultra-large container ships. Its banks have replaced HMM’s top management and are leading the reorganisation, which is expected to end in June 2021.

But meanwhile, Hanjin Shipping faces an uncertain future. As it scrambled to get South Korean proceedings recognised in courts worldwide, it was scheduled to declare its assets and liabilities and to meet its creditors. By 25 November, Hanjin is obliged to submit a rehabilitation plan that creditors must approve before court-led restructuring can take place. Hanjin, which is returning chartered-in tonnage, is not allowed to spend money or sell assets without the court’s approval. While the Wall Street Journal reported that Hanjin Shipping could reposition itself as an intra-Asia liner operator, a company spokesman declined comment. A merger between HMM and Hanjin Shipping could be possible, as the FSC has asked HMM to acquire its rival’s “valuable assets”. A spokesman for HMM told IHS Fairplay that the company would discuss with the FSC which assets it could acquire, but Hanjin Shipping declined official comment. Nevertheless, the Hanjin insider told IHS Fairplay: “We have been continuously selling whatever is valuable for the past couple of months. We’re very curious as to what is seen as ‘valuable’ among the assets that are left.”

30-09-2016 Waiting for the next shoe to drop, By Lambros Papaeconomou, Lloyd’s List

Gerry Wang’s candid remarks on the precarious state of container shipping have left us wondering whether the Hanjin default marks the industry’s capitulation and turning point, or whether more and potentially graver events are about to happenAfter all, Hanjin’s business model is not unique. Like its competitors, Hanjin engaged in an arms race for bigger ships under the false premise that an ever-growing demand for consumer goods and economies of scale would work to its favor.

Not one of those assumptions was right. Sluggish economic growth has translated to lackluster demand for container trade, and bigger vessels remain under-utilised, despite their cascading effect to the detriment of smaller-size vessels. Operating expensive vessels in a low-rate environment means cash reserves will eventually dwindle. Although state-run liner companies could seek government subsidies, directly or indirectly, the same is not true for private ones. This is bad news for liner companies and bad news for independent containership companies that do business with them.

Indeed, liner companies have increasingly relied on third-party tonnage to meet their fleet growth targets. Today leasing companies own one out of every two containerships. The likes of Seaspan, Danaos, and Costamare, constantly built new ships backed by lucrative long-term charters by liner companies. Until HMM’s near miss and Hanjin’s bankruptcy, these charters provided strong cash flow visibility and the wrong sense that a credit default was unlikely. One can argue that in the eyes of investors all charters were “safe” and the only things that mattered were daily rate and charter length.

We can forgive Costamare, which had no exposure to HMM or Hanjin, for having a strong feeling of schadenfreudeWho is to say however that no other liner company will seek to re-negotiate the terms of its chartered vessels in the near future, or worse seek bankruptcy protection?

Enter the new reality. As Hanjn is redelivering its chartered-in vessels, their employment prospects are grim. The containership sector already has a sizable fleet in lay-up underlying a chronic fleet oversupply that is worse even than the dry cargo sector. Mr Wang admitted that finding employment for redelivered vessels could last six months. Seaspan manages seven vessels that were previously on charter to Hanjin. It owns three of these vessels and GCI owns the remaining four. The prospect of several months without pay, on top of unpaid hire prior to Hanjin’s bankruptcy is a bitter pill to swallow. Seaspan may have the capacity to absorb the hit but the same may not be true for smaller companies with exposure to the troubled liner company.

Which begs the bigger question. Are the days of fast growth among independent containership owners over? How many of them will manage to adopt and survive in this new landscape of charter-party risk and long-term employment uncertainty? This is the most appropriate time for the sector to dust off their contingency plans or draw them from scratch if they are unavailable.

27-09-2016 Ballast water treatment systems: invest or scrap? By Will Fray, Maritime Strategies International, Splash247.com

Does the ratification of the Ballast Water Management Convention spell gloom or boom for the dry bulk market? Will Fray from Maritime Strategies International investigates.

After more than 10 years in regulatory limbo, the IMO Ballast Water Management Convention will finally enter into force on September 8, 2017. Despite being beset with technical challenges and owners’ opposition, its implementation might provide the basis for a dry market recovery.

Following entry into force, all affected ships will be required to install a ballast water treatment system by the first renewal of their International Oil Pollution Prevention Certificate (IOPP), which is due at least every five years, during the vessel’s special survey. This effectively means that by 2022 all ships in the fleet must have a ballast water treatment system (BWT) installed.

Ballast water treatment plants and their installation involve a significant amount of CAPEX, with the level varying depending on the type and size, usually based on flow rate of the system and the technology selected, with cost ranging from $0.5 to $2m for a bulker. This is obviously a source of concern for the industry and individual owners alike.

Some vessels requiring a special survey in 2017 will be obliged to fit a BWT system, extending to all vessels with a special survey in 2018 and 2019. With the cost of a capesize third special survey in excess of $1m plus the additional outlay for retrofitting a BWT at around $1.5m, a 15-year-old vessel that is only earning $7,100 a day and worth $8.2m (based on MSI’s Q3 2016 forecast) the alternative of scrapping next year at $6.7m will look appealing to many.

20160927

The chart above highlights exactly how many vessels in the dry bulk fleet will hit special surveys of three or more over the course of 2017 to 2019 based on age profile extrapolation. Of course some of these vessels will be scrapped before they reach these special survey dates but as an indicative position there is just over 100m dwt of dry bulk carriers currently on the water where the owner will soon have to make the call to invest or scrap.

In light of both the prolonged depressed state of the market and the imminent entry into force of the convention, we expect almost 100m dwt of bulkers to be removed over the course of the next four years to 2019. We expect deletions to be frontloaded, because owners will be almost immediately impacted by the parlous state of the market and have one eye on the entry into force timeline.

By the end of 2016 MSI expects 40.1m dwt of bulkers to have been removed from the dry bulk fleet, with scrapping falling to 26.6m dwt in 2017. Scrapping over the course of 2015 to 2017 will exceed all other historical triannual totals not only in dry bulk but also across any individual shipping sector.

This combination of low deliveries and high scrapping will be the driving force that will help pull the sector off the floor and provide a foundation for a recovery that will gain momentum at the start of the next decade.

28-09-2016 South Korean maritime ministry moves to check on welfare of Hanjin’s seafarers, By Xiaolin Zeng, East Asia Correspondent, IHS Maritime

South Korea’s Ministry of Oceans and Fisheries (MOF) is acting to safeguard the welfare of Hanjin Shipping’s seafarers as the bottleneck involving the company’s ships stretches into a fourth week.

Fifty-nine of the 97 container ships operated by Hanjin Shipping are crewed in-house. The company employs 1,238 seafarers, 518 of which are South Koreans and the rest foreigners.

Of the 38 ships that are waiting in the open seas, 22 have discharged their onboard cargoes. Nine others have been loaded and are waiting in overseas ports, while seven vessels are still waiting in open seas outside Busan, Incheon, and Gwangyang, pending berthing.

The ministry’s checks show that of the ships crewed by Hanjin Shipping, six have enough daily necessities for 10 days; 13 have enough for 20 days; 19 have enough for 30 days; and 21 are amply supplied for more than 30 days.

With regard to the ships that have enough supplies for 10 days, Hanjin Shipping is planning to replenish their stocks after 24 other vessels have been restocked. Going forward, the plan is to ensure that the affected ships have sufficient daily necessities for at least 15 days.

In order to provide support to the stranded seafarers, Hanjin Shipping is working with the Korea Shipowners’ Association, and the liner operator’s labour union is working with the Federation of Korea Seafarers’ Union, in collaboration with the Ministry of Foreign Affairs, and various South Korean consulates have set up points of contact.

The MOF will pay special attention to vessels that have been waiting for more than 15 days, especially the 19 ships that are waiting in or off South Korean ports. Inspectors from Busan Regional Office of Oceans and Fisheries will check on the crew in those vessels to ensure they have sufficient necessities and relieve psychological stress and anxieties.

The MOF claimed that the seafarers have been paid their salaries and this is a necessary expense approved by the court.

As for seafarers whose employment contracts have expired and who wish to disembark from the ships, such arrangements will be made immediately.

Each ship has an onboard medical inspector, but in an emergency seafarers will be helicoptered to designated hospitals with all expenses to be borne by Korea P&I Club.

Seafarer welfare charity Mission to Seafarers, concerned about the lack of essential supplies for Hanjin Shipping’s crew, has called on the company to allow its volunteers to assist 2,500 seafarers on all of the liner operator’s vessels.

23-09-2016 Precious Shipping to sell Supramaxes, acquire Ultramaxes in 2-5 years, Source: Platts

Thai dry bulk shipowner-cum-operator Precious Shipping plans to sell its Supramaxes and replace them with bigger Ultramax ships, Managing Director Khalid M. Hashim said Wednesday on the sidelines of the Marine Money Asia conference in Singapore. “In the next 2-5 years whenever the shipping cycle goes up and returns are good, we will sell the Supramaxes and replace them with more Ultramaxes,” Hashim said. The company currently controls around nine Supramaxes. This assumes significance because the company has canceled orders for new Ultramaxes due to inordinate delays in construction and delivery by a Chinese shipyard.

Precious also planned to sell for scrap one or two more Handymaxes in the next few months, Hashim said. Explaining the rationale behind plans to rejig its fleet, Hashim said: “Ultramaxes can carry around 15-20% more volume than Supramaxes while they are also fuel efficient, consuming up to 20% less bunker oil.” Precious has Supramaxes in the 53,000-57,000 dwt range while Ultramaxes are of up to 64,000 dwt. With infrastructure upgrade as ports across the world get bigger and deeper, Ultramaxes were the ships of the future, Hashim said.

There are already six Ultramaxes in the Precious Shipping fleet including two that were delivered earlier this year and two last year, he said. One each is lined up for delivery next month, in January next year and in early 2018, he added. After selling off the Supramaxes — all of which were built between 2010 and 2013 — the company plans to buy more Ultramaxes from the second-hand market, Hashim said, adding that there were no plans to venture into the Capesize market.

A five year-old dry bulk carrier was almost 50% cheaper than a new ship, he said. According to industry estimates, five-year-old Handysize ships are quoted at around $11 million, compared with close to $20 million for a newbuild. In the last 12 months, Precious has also canceled close to a dozen new building contracts for Ultramaxes with China’s Sainty Marine Corp. because the shipyard did not deliver the vessels within the contracted time frame and in compliance with the technical specifications, Hashim said.

Last month, Precious Shipping also sold two of its 1997-built handysize ships. “We are getting rid of our smaller and older ships,” Hashim said. The company now has only two pre-2000 built handysize ships in its fleet. Apart from Ultramaxes, Precious will also retain its relatively bigger handysize ships mostly in the 34,000-38,000 dwt range, he said. Disposing off the older ships has ensured that the average age of the company’s fleet has come down to 7.5 years from 21 years in 2008, he said. Having a younger fleet makes it easier for owners to lease their ships on long-term time charter because charterers prefer to hire younger ships for a longer duration. Hashim said currently close to 20% of the company’s fleet was hired out on long-term time charters running into several years. As it weeds out older ships and buys younger ones, it is aiming to increase the share of long-term time charter in its fleet to more than 70%, he said. Its fleet is used to move grains, coal and minerals among other commodities.

He said the time was not opportune for dry bulk operators to venture into LNG bunkering. “Dry bulk shipping industry is struggling for survival and LNG bunkering can be considered 1.5-2 years later when there is an improvement in freight rates,” he said. Until then the freight rates were likely to remain volatile, he said. There have been some increase in rates recently, driven primarily by gains in the Capesize segment, he added. Freight rates may rise in the medium term if China’s proposal for a Maritime Silk Road to boost shipping traffic between South China Sea, South Pacific Ocean and Indian Ocean was implemented, he said.

22-09-2016 K Line dismisses bankruptcy speculation, By Sam Chambers, Splash247.com

Representatives at Japanese shipping major Kawasaki Kisen Kaisha (K Line) have rubbished reports from China that the line will shortly follow Hanjin Shipping into administration. A report carried by Shanghai Metals suggested K Line will file for bankruptcy protection within the next two weeks.

Kiyoshi Tokonami, general manager of K Line’s IR & PR Group, dismissed the report today. Speaking from K Line’s HQ, Tokonami told Splash rumours of them filing bankruptcy are “untrue, completely groundless”.

Adding further fuel to the bankruptcy speculation, Splash has received an image purportedly to be an emergency notice from a Chinese shipper that states K Line will follow Hanjin into court receivership either next week or within two weeks. In May, ratings agency Moody’s downgraded K Line from Ba2 to Ba3. As of the end of its last financial year, March 31 2016, its gearing ratio stood at 1.48:1. K Line, also in the red in the first quarter, warned at the end of July its full year loss will be worse than originally forecast. K Line is now bracing for a full year loss of Y45.5bn, some Y10.5bn worse than originally predicted in April, the start of the Japanese financial year.

Japanese shipping has been rocked by big bankruptcies in recent years – Sanko Steamship and Daiichi Chuo being the two most high profile. A K Line receivership, however, would be on a whole different scale given its scale and diverse business activities.

Earlier this month Splash reported that a Japanese fund run out of Singapore called Effissimo was gearing up to take over K Line. Effissimo has been steadily building its stake in Japan’s third largest line to the point whereby it is now the largest shareholder with a 37% holding as of early August, up from 6.2% a year earlier.

Effissimo Capital Management, established in Singapore by ex-colleagues of activist investor Yoshiaki Murakami, has become the top shareholder in the line as well as in other well known Japanese brands such as office equipment maker Ricoh. Its strategy has been to target Japanese firms it deems undervalued.

However, K Line’s Tokonami today dismissed the takeover talk. “We are having dialogue, explaining our business plans as is usual with any shareholder,” Tokonami said, adding: “Effisimo says their stake is purely for investment purposes.”

K Line shares are trading today at JPY263, up by 2.7%.

22-09-2016 The Hanjin Legacy, Article by Paul Slater, Chairman, First International Corp.

The Hanjin bankruptcy came as no surprise as its attempts to restructure and reduce its commitments to the very large number of chartered-in ships, FAILED. The complexity of the effects of the bankruptcy on its creditors, customers and other shipowners is immense and highlights the weakness of owners chartering ships to companies that don’t own or control the cargoes. Intermediary companies have caused huge problems in the past mainly, in the dry-bulk sector, but have been worsened by the Alliance structures that the container operators have formed and endlessly reformed. Hanjin is the tip of the iceberg for shipping in the container and dry-bulk sectors as they service both ends of the manufacturing chain that is part of the Global Economy which is deeply troubled.

The financial state of the Shipping Industry continues to decline in most sectors as the Global Economy itself is declining. The problems the Industry faces have been created by the shipping companies, both public and private, grossly over-ordering new ships in the false belief that the Global Economy would continue to grow at the rates seen in the last decade. The reality is the opposite and most of the new ships were delivered into a stagnant economy that has continued to decline.

Shipping continues to carry more than 90% of physical World Trade but as this has declined so have the freight rates of the ships that carry the Trade. There is a chronic over-supply of ships in many sectors and the average age is historically low. Most companies, whose ships do not have period charters with cargo owners, are now faced with freight income from the spot markets that barely cover ship operating expenses. Debt service is not being covered and cash reserves for future maintenance and dry docking are also not being funded. Neither are the new requirements including Ballast Water and Cleaner Fuel systems.

Charterers and cargo owners need to respond to these issues and at least pay freight rates enabling shipowners to operate safe ships maintained properly with experienced crew. It is patently ridiculous for cargo owners to charter ships from the spot markets that are creating insolvency and bankruptcy amongst shipowners. It is also absurd that shipowners should accept the low rates that don’t cover the costs of operating the ships when they know from past experience that cargo owners can afford to pay more. Ship managers should not be forced to lower standards or reduce quality or safety and investors are ill-advised to push for cost reductions in these essential areas.

The present over-supply of ships will continue throughout this decade and into the next one until ship recycling removes the surpluses and shipyards resist the temptation to over-build again. With the demise of most shipping banks, facing huge losses from their careless lending in the recent past, new debt will be very difficult to find. Also the new investors, comprised mostly of Private Equity, Hedge Funds and Venture Capital Funds, now face inevitable losses which cannot be avoided. Wall Street Investment banks continue to prop up struggling shipping companies with expensive debt that takes priority security and further undermines the existing equity and debt, but enables the company to pay the legal and bank fees.

There will be further collapses in the container sector as some companies that falsely believe “bigger is better”, have incurred huge debts and are losing money. The rush to build super-sized container ships is a disaster, as there are not enough cargoes available to fill them and they have even fewer back-haul cargoes. The previously large ships have been cascaded down into the feeder trades, for which they are too large, and numerous smaller ships await the scrapyard.

The depth of the Global Economic slowdown is clearly evident in Asia. From China to Korea, Vietnam into the Philippines and even into Japan the slowdown in the economies of the USA and Europe and the ongoing wars in the Middle East, have reduced the demand for manufactured goods and with it the demand for ships on both sides of the manufacturing chain. Many of the new investors that have come into shipping in recent years had no understanding of the workings of the shipping industry but were simply focused on the false belief that ship values would rise, and they would make large profits quickly. Most of the publicly traded companies they invested in are now barely solvent and have no hope of generating profits from either their operations or the sale of ships. Faced with the inevitability that many of the shipping markets will not improve the struggling companies should sell all their ships and close down their operations.

22-09-2016 Dry bulk shipowner wary about China’s rising coal, ore imports, By Greg Knowler, Senior Editor, IHS Maritime

In an indication of the sorry state of the dry bulk shipping business, even though it is chronically oversupplied, rising demand for iron ore and coal from China could be bad news for the struggling sector. China’s iron ore imports are up 9% in the first eight months of the year and coal imports have grown 12% compared to the same period of 2015, and steel exports have risen 6% year on year. This has raised hopes that the industry is recovering, but there are still too many ships chasing too little cargo.

However, Precious Shipping managing director Khalid Hashim said equilibrium in the dry bulk market depended on the supply side shrinking its numbers. “The orderbook is going to flatten out in 2018 and 2019, but shipowners are like unsupervised children who are already on a candy high being shown more candy from the shipyards and will not be able to resist the temptation,” he warned. “As soon as the market shows additional signs of stabilisation, not only will scrapping be consigned to the dustbin of history, but new orders will be placed galore at the dying/bankrupt shipyards, giving them another lease on their wretched lives.”

In the first quarter, Hashim said about 14 million dwt of dry bulk ships were scrapped. That dropped to 9 million dwt in the second quarter with the third quarter scrapping volume looking to be half that of the second quarter. He said that if shipping pundits are correct in predicting the BDI will remain strong for the rest of this year, that could be a problem. “The shipowners will make sure that the upturn is extremely short-lived by stopping the scrapping of their older ships and ordering new ones from the shipyards, who could only bless their good fortune that there are so many stupid shipowners out there,” he said.

Pacific Basin CEO Mats Berglund said strong grain shipments and a rebound in Chinese coal imports have contributed to stronger rates since the lows in the first quarter, but he pointed out that the rates remain at historically low levels. This dragged the carrier down to a first half loss of USD49.5 million. “There is a high inverse correlation between freight rates and scrapping volumes. Over the last few months, the scrapping rate has slowed down given the higher freight rates that we have seen and also, we have seen less scrapping activities over the last few months because of the monsoon climate in the region,” Berglund said. “We would like to see more scrapping in the industry and owners should take the opportunity to trade up to younger better second-hand ships or re-sales as this can help provide a better supply demand balance.” Berglund urged shipowners to be patient and said Pacific Basin was continuing to manage for a weak market in the medium term.

The two shipping executives also highlighted the IMO’s Ballast Water Management convention that will be enforced from 8 September 2017. Both Hashim and Berglund expect this will have a significant impact on dry bulk capacity. A coalition of maritime groups is trying to convince the IMO to put back deadlines under the convention so owners can install second-generation cleaning systems. The World Shipping Council (WSC) is proposing a filing that it claims will prevent shipowners investing billions on treatment systems that may fail the treaty’s requirements for killing or rendering harmless invasive species. Berglund said the recently ratified IMO rules requiring the installation of the ballast water treatment systems in ships would contribute to higher scrapping levels.

Hashim said, “With the Ballast Water Management convention coming into force on the 8 September 2017, all existing ships will have to retrofit a ballast water system by their next drydock after 8 September 2017. “Any ship that is older than 15 years of age would then become a scrapping candidate when it’s next drydock became due after the effective date, as the cost benefit to retrofit an extremely expensive – and as yet largely untried – system would be too great a risk to run. It will make the ‘to scrap’ decision much easier.”

Axia Capital analyst Robert Perri noted in a sector outlook, “The market remains volatile and we will see pockets of strength, like the one we are currently in, and people will begin to get excited; however, the recovery is not there yet.”

21-09-2016 Shipping danger: The US pivot to Asia, By Katherine Harine, Splash247.com

Clearly the maritime shipping business will begin to pull out of its depression if the world economy begins a strong recovery. And the key growth area is Asia without a doubt. However, the Obama administration has undertaken a series of new policies of dubious merit, often called the Pivot to Asia. Unfortunately most will have a negative impact on the economic development of the region. Two situations which have a military element are important to examine: the Korean peninsula and the South China Sea.

North Korea

The fact that the Korean War has not officially ended and is still under an armistice speaks volumes about the aims of the US over the last 60 years. It has been in the interest of both the US and China for the Korean peninsula to be divided. China does not want a pro-Western country right on its border and the US does not want to lose its client state which can be used as a base for intelligence gathering and political influence in the region. This was especially true during the Cold War. A united Korea would be more neutral and even a South Korea not on a war footing would not be as anxious to support US activities. In addition, US presidents have used North Korea as a punching bag to display their anti-communist bona fides with US voters.

A key aspect of US, North Korea relations is the development by the Democratic People’s Republic of Korea (DPRK) of a nuclear explosive device. US policies have, in fact, pushed the DPRK to establish a program to develop nuclear weapons. One must examine the various reasons that nations develop these weapons. First is to exert hegemony. The Truman administration appears to have had this policy in mind when it built additional nuclear weapons after the wartime detonations on Japan in 1945. Some analysts even believe the actual motivation of the US wartime use was strictly hegemony with respect to the Soviet Union. The second is to deter an adversary from attacking. This was the reason the Soviet Union developed its nuclear weapons. It was concerned with the US monopoly on nuclear weapons. The third is to demand respect from other nations. This was the reason France began its nuclear weapons program. In 1954 the President of France’s Council of Ministers, Pierre Mendès France, attended a meeting in Washington DC. On the return trip he reportedly told an aide, “It’s exactly like a meeting of gangsters. Everyone is putting his gun on the table, if you have no gun you are nobody. So we must have a nuclear program.” That December he ordered France’s nuclear weapons project. A fourth reason to have nuclear weapons is to counter conventional forces. During the Cold War the United States, through NATO, planned to use low-yield battlefield nuclear weapons to slow or halt any invasion of western Europe by the superior ground forces of the Soviet Union.

North Korea has two of these reasons for developing nuclear weapons. First, to achieve respect on the international stage as France did beginning in 1960 with its first detonation. Second, the DPRK can counter the threatening conventional forces of South Korea and the United States. Tactical low-yield nuclear weapons would allow the North Korean government to divert part of its large defense budget to improve the standard of living of its population by eliminating the need for a huge standing army.

The error in US policy over the decades since the armistice was signed is that presidents have used North Korea as a punching bag to puff up their reputation as a tough commander-in-chief with the American public. Action such as the recent flight of a nuclear capable B-1 bombers over South Korea is primarily for US domestic reasons. Unfortunately similar actions over the years have fed into North Korea’s insecurities with the result that the DPRK leaders have countered with their nuclear weapons program and their development of medium and long-range ballistic missiles. The genie cannot be put back in the bottle. The next US president will have to be content with the DPRK as a nuclear weapons state. Much more effective non-proliferation policies should have been pursued over the last 60 years.

South China Sea

The dispute between China and several other Asian nations concerning sovereignty over areas of the South China Sea has worsened with the Obama administration’s pivot to Asia. Instead of leaving negotiations to the nations involved, the US has stuck its nose into these disputes. The recent decision by the international tribunal in The Hague against China was immediately touted by the US as a rebuke of China, which had not taken part in the case nor recognised the tribunal’s jurisdiction. China and the Philippines had been conducting negotiations concerning this issue; the US should have kept quiet and not taken the position that China should obey the tribunal and cease its occupation of the area. The region is not in the Pacific Ocean. The United States only muddies the water by trying to exert hegemony there. Shipping would be affected very negatively by any military clashes in this area. In fact, considering the wide area involved it is clear that even minor incidents could cause problems for maritime shipping. Flights of B-52 aircraft over disputed islands by the US do not help the situation. The existence of US naval and other military bases in countries, such as the Philippines and Japan, is counterproductive to a peaceful environment for sea trade. There are even rumours the US would like to have a base in Vietnam. Also, joint military exercises in the area should cease.

Conclusions

From the standpoint of international trade and shipping in particular, the US is not contributing to the Asian economic growth with investment in infrastructure as China is with the One Belt, One Road initiative and the Asia Infrastructure Investment Bank (AIIB). In fact the policy was to discourage allies from joining the AIIB. The overall US policy has been negative for Asian economic growth.

If the US continues an adversary position with respect to China, as it has with North Korea for over 60 years, economic development in Asia will be greatly hindered. The idea that a certain style of democracy is some fundamental principle that needs to be exported around the globe will simply cause disharmony and economic problems. In fact too often US policy is no more than neocolonialism. It must be remembered that although the US often states its principles as democracy and human rights, those ideals go by the wayside if the US economic interests are at stake. One bright recent development is that during the presidential primary election race, several candidates demonstrated support by American voters for far less adventurism as an element of US foreign policy.

20-09-2016 China’s One Belt One Road initiative backs shipping growth in longer term, By Lee Hong Liang, SeaTrade Daily News

The overall sluggish shipping market of today can look forward to the One Belt One Road (OBOR) initiative as a long term catalyst for growth, industry players from the financial sector have shared.

The economic development strategy and framework, proposed by China under president Xi Jinping, has gotten countries in the region gearing up to take advantage of the widening trades from China, both inland and at sea, with a particular push to infrastructural developments.

David Mann, chief economist Asia at Standard Chartered Bank, said the OBOR initiative has reinforced and expanded the existing trades between China and Asean in particular, be it on the ‘belt’ side leading to Europe or on the maritime lane.

“China has been finding destinations to invest in, and the OBOR initiative is expected to gain even more traction… give it another year or two,” Mann told delegates at the Marine Money conference held in Singapore on Tuesday.

Over at Hong Kong and Singapore, the two key maritime cities have established their respective OBOR offices to facilitate the expansion of Chinese trade.

“We have (OBOR) office in Singapore under the ministry of trade and industry, looking at how we can bring Chinese investment into Southeast Asia,” said Chay Yiowmin, partner, corporate finance, BDO Advisory.

“Singapore is considered a financial centre of this region, and a lot of money from China are parked here for investment to build up infrastructure in neighbouring countries, for example, Indonesia,” Chay said. He added that funds are also channeled into developing second-tier Asian ports for them to cater to increasing shipments of commodities to energy-starved China.

Hong Kong also has an OBOR office to give suggestions and recommendations on strategic and trade growth to the Hong Kong chief executive, according to Benjamin Wong, head of transport and industrial, InvestHK.

“We are very upbeat on the OBOR initiative. On the finance side, the monetary authority has established the infrastructure financing office as a platform for stakeholders,” Wong said, adding that Hong Kong’s strengths in finance, logistics and trade would play a key role in promoting the OBOR initiative.

In the much longer term say over the next 10-20 years, according to Standard Chartered’s Mann, the OBOR may see linkages to South Asia, primarily to India, to aid infrastructural developments in that region and to promote the establishment of new industries.

Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy
Youtube
Consent to display content from - Youtube
Vimeo
Consent to display content from - Vimeo
Google Maps
Consent to display content from - Google