MOL to order 10 more large car carriers

MAJOR Japanese shipping group Mitsui OSK Lines (MOL) is to build 10 large car carriers, to be delivered between 2007 and 2009 and built by either Minaminippon Shipbuilding or Shin Kurushima Dockyard.

This latest newbuilding decisions follows on a series of six car carriers delivered in 2003 and a further 12 ships that are being delivered by 2006. By 2009, MOL will have in service 28 sistership car carriers, capable of carrying 6,400 cars at 20 knots. An MOL statement says that the company aims to expand its car carrier fleet to meet increasing demand. The company forecasts steady growth in worldwide trade volume. It expects its current fleet of operated or owned car carriers will increase from 74 now to over 90 in 2009.

At the same time, MOL says, the company will dispose of older vessels or re-deliver them to their owners, while building a succession of new ships. MOL says that it is creating a fleet structure that can precisely meet the market needs, ensuring that appropriate size carriers are available for every trade.

The new vessels incorporate various environmentally friendly features, including, a wind resistance-reducing design patented by MOL and Universal Shipbuilding Corporation that is claimed to save energy and reduce emissions of carbon dioxide and nitrous oxides by about 6 percent.

Emissions are further reduced, by about 30 percent, through use of a new cylinder injection system for main engine lubricating oil.

In addition, to speed up loading and discharging, all the new ships feature movable access ramps for vehicles and improved deck layout.

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Shipping News   November 16, 2004

High steel prices, weak US$ hurting Korean shipyards Daewoo, Samsung among shipbuilders posting fall in Q3 earnings

SEOUL) The impact of the decline of the US dollar and the global shortage of steel have begun to show in the earnings of the world's biggest shipbuilders.

Daewoo Shipbuilding & Marine Engineering and two other South Korean shipbuilders posted declines in third-quarter profits as the rising price of steel boosted their production costs.

These shipbuilders' earnings were also hurt by losses on foreign exchange rates after the won strengthened against the US dollar, analysts said. South Korea's currency has risen 7.9 percent against the US dollar this year, reducing the value of US dollar-denominated orders when they are repatriated.

Net income for Daewoo Shipbuilding, the world's second-largest shipbuilder, fell by two-thirds to 41 billion won (US$62 million), the Seoul-based company said in a statement to the Korea Stock Exchange yesterday.

Samsung Heavy Industries, the world's third-largest, said profit fell 84 percent and Hanjin Heavy Industries & Construction's dropped by half.

Daewoo Heavy, Hyundai Heavy Industries and other shipbuilders are completing orders they received in 2001 and 2002 at record costs for decade-low prices. Steel plate prices have risen by a third since January, boosting production costs.

Shipbuilders are paid as they complete their orders. Hyundai Heavy, the world's largest shipbuilder, said on Friday it had a 33 billion won loss in the third quarter, compared with a profit of 3.8 billion won a year earlier.

The price of a tanker that can carry two million barrels of crude oil - an industry benchmark - fell to a 10-year low of US$62.5 million in 2001. Prices for new vessels have since risen as demand for cargo space surges on expanding trade with China.

South Korean shipbuilders get more than three-quarters of their steel plate from two of the country's steel mills.

Dongkuk Steel Mill Co has raised the prices of its steel plates used in ships five times this year, by a total of 70 percent to 715,000 won a metric ton. Posco, South Korea's largest steel maker, raised prices of its ship steel plates sold in the country four times this year, or by a total of 50 percent, to 600,000 won a metric tonne.

Earnings were also affected by losses on foreign exchange rates. The won reached 1,103.50 on Nov 9, its highest since Nov 24, 1997, when the threat of bankruptcy forced the country to seek a bailout from the International Monetary Fund. That has raised concerns that profits will be undermined further.

Samsung Heavy's net income dropped to 8.5 billion won from 53.3 billion won a year earlier. Sales rose 13 percent to 1.14 trillion won. The Seoul-based company booked a 37.7 billion won loss because of currency fluctuations and a 33.7 billion won cost after paying more than the market price to redeem convertible bonds.

Hanjin Heavy, South Korea's fifth-largest shipbuilder said its net income for the period fell to 3.6 billion won, compared with seven billion won a year ago. Sales rose by half to 477 billion won.

STX Shipbuilding Co, South Korea's seventh-largest shipbuilder, said on Friday it had a 1.8 billion won loss in the period, compared with a profit of 18.9 billion won a year earlier. Its sales rose 27 percent to 198.5 billion won. – Bloomberg

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Nov 15, 2004

Zim in $732 million expansion

The Jerusalem Post reports that Zim Integrated Shipping Services Ltd. and its parent company Israel Corporation have outlined plans for acquisition of 12 cargo vessels in a $732 million deal.

Israel Corp. (controlled by the Ofer brothers) is the purchaser of the ships, and their transfer to Zim's control is subject to approval by its board..

Twelve box ships are involved. Eight 4,250 TEU vessels have been purchased, and are currently under construction in China for delivery between March 2006 and January 2008. Two of the ships will be wholly owned by Zim, while four will be equally owned by Zim and the Ofer group. The additional two vessels have been leased from London-based Zodiac Maritime (an Ofer group subsidiary) for 10 years. Cost of leasing totals $23,000 per day.

The Jerusalem Post says Zim has also acquired four 6.350 TEU postpanamax ships for its Europe Asia routes. They are being built in Japan, and will be delivered between the first half of 2008 and first half of 2009. Two are wholly owned by Zim, and two will be leased from Zodiac.

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Global congestion to slow trade: APL chief

Widdows tells importers that container jam threatens worldwide trade

Thu Nov 18, 2004

By Peter T. Leach
The JOURNAL of COMMERCE ONLINE

NEW YORK -- The chief executive of APL  warned Tuesday that the growth of world trade is threatened by port and rail congestion, not just in the United States, but worldwide.

The problems of congestion will become particularly acute in 2005 and 2006 when most of the world's liner companies deploy new 8,000- and 9,000-TEU container ships that are on order, Ron Widdows told the Textile and Apparel Trade and Transportation Conference.

"What is not understood is the impact of congestion on carriers' ability to deploy new capacity in 2005," Widdows said. "The problems of inadequate terminal capabilities are global and will be with us for years. Intermodal capability is stretched at nearly all major load centers worldwide."

Widdows, who heads up the liner division of Singapore's Neptune Orient Lines, has spent much of the year warning of growing congestion in an effort to rally support for infrastructure solutions in the U.S. His speech Tuesday marked the first time he had broadened his warning to include most of the world's ports.

In an interview afterward, Widdows said his speech was aimed at shocking the audience of some 400 textile and apparel importers who gathered to hear experts assess the impact of the Jan. 1 elimination of U.S. quotas on textile imports.

"All of the work of the last 15 years on building global supply chains is beginning to become unwound," Widdows said. "The [ocean] trip from Hong Kong to Los Angeles should take 19 days, but the average is now 24 because of port congestion."

Widdows said that "we're getting very low productivity [at LA-Long Beach] on the part of the ILWU [International Longshore and Warehouse Union]," he said. "The labor management relationship between the Pacific Maritime Association has only made the situation worse. It needs to change."

Widdows said that infrastructure problems are contributing to a deterioration of service reliability and loss of velocity through the transportation chain worldwide. This is impacting purchasing and distribution patterns.

"In the United Kingdom and France the infrastructure is even worse than on the [U.S.] West Coast in some ways," he said. "Asia, India, Singapore and Vietnam are coping better but are having problems.

"Governments in many regions have yet to either develop an understanding of the implications of inadequate infrastructure or move to implement solutions. The U.S. government understands the problems, but can't translate it into action politically," he said.

Widdows' alarm resonated with conference-goers. In an electronic poll taken immediately after, 74 percent of the audience said that congestion in Los Angeles-Long Beach was the most important issue facing them.

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American Shipper Shippers' NewsWire 11/19/04

Analyst expects "major downturn" in container shipping in 2006

   Credit Suisse First Boston warned in a report on Asian container shipping that a "major downturn" in the liner shipping market is probable in 2006, with ship capacity increasing much faster than cargo volumes.

"It's a cyclical business," the investment firm said. "Unless economic growth and global trade is unexpectedly strong going into 2006, and port congestion effectively reduces the growth in global capacity, we believe that 2006 will see a major downturn in container shipping."

 Credit Suisse First Boston's analysis is based partly on forecasts of overall capacity and traffic made by Drewry Shipping Consultants. It predicts the global container fleet will soar about 14 percent in 2006, while traffic will rise only 9 to 10 percent.

 "We forecast that freight rates will fall substantially in 2006, which will mean a sharp earnings decline for the container shipping companies," Hong Kong and Singapore-based analysts wrote in the firm's investment report.

 The analysts therefore urged investors to use conservative valuations of Asian shipping stocks such as China Shipping Container Lines, Evergreen Marine Corp., Yang Ming Marine, Wan Hai, Neptune Orient Lines, Orient Overseas (International) Ltd., Hyundai Merchant Marine and Hanjin Shipping.

On Monday, Ray Miles, chairman of CP Ships, told investment analysts the current bull run of the liner shipping industry could end in 2006 if demand weakens.

He said industry forecasts show "a big gap" between expected supply and demand in 2006, with ship capacity predicted to go up about 14 percent in 2006 and traffic growth forecast to rise about 8 percent. Miles cautioned that the prospect of a downturn in 2006 was still uncertain.

Credit Suisse First Boston also confirmed that 2004 has been strong in terms of profitability for container shipping lines, with freight rates up substantially.

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Bi-Weeky News ~ USA  18 November 2004

TSA Announcement: 2005 Rate Increases

Container shipping lines in the Transpacific Stabilization Agreement (TSA) have completed a detailed assessment of market, operational and infrastructure conditions in the Asia-US container freight market, and finalised pricing plans for 2005 tariffs and service contracts.

The carriers reported that aggregate operating costs in the Pacific continue to rise, and will increase next year by at least 11-12 percent, depending on route and transport mode. Port and inland congestion in the US and Asia, and delays moving through the Panama Canal, have made the situation worse, the group said in a statement.

In response, TSA lines have recommended the following increases in current freight rates, effective in carrier tariffs and upon renewal of service contracts, by no later than May 1, 2005.

A US$285 per FEU increase will be imposed on US west coast and "Group 4" western US shipments. A $350 per FEU for inland point intermodal (IPI) and minilandbridge (MLB) cargo charge will also kick in next year.

In addition, a $430 per FEU rise for all-water shipments to the US east coast and Gulf ports via the Panama and Suez Canals is to be added.

Carriers further recommended retaining a peak season surcharge (PSS) of $400 per FEU, applicable to shipments from June 15, 2005 through November 30, 2005.

The PSS covers higher contingency planning and operating costs during periods of full vessel utilization, such as have been experienced in 2004. It also addresses the structural costs to carriers of maintaining year-round vessel and equipment fleets and schedules. Sustained peak period conditions during 2004 have prompted TSA lines, in a separate action, to recommend extending the current PSS for US-east coast all-water shipments through January 31, 2005.

TSA members include: APL, "K" Line, CMA-CGM, MOL, Cosco, NYK, Evergreen Marine, OOCL, Hanjin Shipping Co., P&O Nedlloyd , Hapag Lloyd, Yangming Marine Transport Corp. and Hyundai Merchant Marine.