‘Shipshape 10 List’, a list of news and articles published in the current week that a senior executive in shipping, shipping finance, commodities, energy, supply chain and infrastructure should had noticed; news and articles that are shaping the agenda and the course of the maritime industry.
Sometimes seemingly tangential, sometimes humorous, occasionally sarcastic, but always insightful and topical.
And, this week’s ‘Shipshape 10’:
1. The week started with a blockbuster announcement of the three largest Japanese container line companies (NYK, K Line and Mitsui O.S.K Line) where effectively creating a new, bigger business entity in order to compete in a bigger world of falling rates in the containership line business alone.
Japan’s Largest Shipping Firms to Merge Container Operations (The Wall Street Journal, Logistics Report)
2. The story of consolidation in the containership liner business kept going strong as on Friday, the Wall Street Journal broke the news that Israel’s ZIM has put themselves up for sale. The company really does not have critical mass or competitive advantages or the financial capacity to grow big alone in this now monster market. Zim has been one of the candidates to be absorbed and frequently mentioned in the ever growing game of shipping companies that will not live to see the next business cycle – not at least in their present form.
Israel’s Zim Looking to Sell Most Global Shipping Operations (The Wall Street Journal, Logistics Report)
3. If there’s need for evidence of the bad state of the containership market, this week it was reported that another young panamax containership was sold for scrap. When this class of ships started getting built were costing well in excess of $80 mil; now selling for scrap at $5 mil; even for the lucky vessels that had managed to secure long –term sky-high charter rates in the good days, it’s doubtful whether the investors saw their money back.
The 4,923 teu YM Los Angeles sets new boxship scrapping records (Splash24/7)
4. While demolition represents the strongest hope for a market recovery at present and under current circumstances, there are concerns that the cleansing powers of scrapping for shrinking tonnage often are exaggerated.
Holy scrap! (Splash 24/7)
5. And, as a reminder of the dangers in shipping and also un-predictabilities, a major explosion will scrapping an offshore storage tanker took place in Gadani, Pakistan, where a reported thirty workers lost their lives in the burning inferno that ensued for several days. We mourn the loss of life, even for a country where life seems to have little substance. From a commercial standpoint, the Pakistani scrap market has effectively closed for several months, which will drive prices for scrapping vessels lower and would decelerate the pace of vessel demolitions.
Dire safety conditions revealed in wake of Gadani fire as death toll feared to surpass 100 (Splash 24/7)
6. Speaking of explosions, a Colonial petroleum products pipeline accidental breach in Alabama, the second in two months, has stopped the movement of petroleum products from the US Gulf to the New York area. There had been high hopes that the accident will boost the moribund tanker petroleum trades, both for Jones Act and international flag assets, but the impact from the closing of the pipeline seems to be manageable for now.
What Happens When the Most Important Pipeline in the U.S. Explodes (Bloomberg)
7. Volatility is high in shipping, everybody knows; however, volatility in related industries and markets is not much lower, and as reminder, one of the best investments this year has been the price of coal, whether thermal (mostly) or metallurgical coal. Some think that a bouncing commodities market would bring better fortunes to shipping too.
Coal Surge Leaves China Grappling With Runaway Market It Started (Bloomberg)
8. The Jones Act and offshore market in the US keep deteriorating, and a week after Tidewater formally mentioning the words ‘Chapter 11’ in their latest press release, now Hornbeck announced that they will be idling 80% of their offshore fleet.
Hornbeck to Stack Nearly 80 Percent of OSV Fleet (The Maritime Executive)
9. Reading such news about the state of the market, private equity funds keep moving aggressively in the space, and KKR, one the of the most active investors in shipping this year, have announced bigger plans for growth in the European markets via their Pillarstone platform.
Pillarstone to Snap Up Europe Shipping Loans (The Maritime Executive)
10. And, for those arguing that monetary policy alone is not sufficient for a market recovery and governments worldwide should be more active with investment, mostly in infrastructure, an article from Japan investigates the policy for the Japanese Coast Guard’s aging fleet. Possibly, at a time when ‘Shipshape 10’ News for Week Ending November 6, 2016, possibly a strategy to renew aging vessels could be stimulating in more than one way.
Many coast guard vessels operating past service limit (The Japan Times)
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