Hapag-Lloyd Bears Heavy Burden of the Deutsche Mark

Strong Deutsche Mark levels against the dollar depressed earnings in 1995 at Hapag-Lloyd, Germany’s largest shipping company, although the directors announced a profit of DM65 million ($98.8 million). Bernd Wrede, chairman of the company’s executive board, and Guether Casjens, director for liner shipping, told Marine Money in London that the business lost about DM90 million as the Deutsche Mark started its sharp decline in the second quarter last year.

From a level of 1.65 to the dollar, the Deutsche Mark fell to 1.40 within the space of some four to six weeks.  It has now rallied to about 1.52 at the time of writing. “This has a very powerful effect on a company such as Hapag-Lloyd, when preparing its results in Deutsche Mark,” explained Mr. Wrede. “Quite obviously, we have had some quite negative consequences – our better operating performance was set against this currency handicap.” Continue Reading

Gathering the Shipping News

It is old news that the shipping industry suffers from a general lack of sophisticated company specific financial coverage. It sometimes feels as if Marine Money was the only one on the job the past ten years. And, while as a lone voice we have discussed shipping securities and sources of private and public debt with owners, investment bankers and investors daily, it takes more than one to make a market.

Coverage within Norway, where shipping securities make up more than 15% of the stock exchange’s total market cap, coverage is detailed and professional. But, in Norway, if an investor is to have a balanced stock portfolio shipping would have to be included, and so there is considerable company specific coverage. So whether it is Pareto, Fearnleys, Christiania Fonds, DnB Fonds, Platou or one of the other major brokerages there is informed company specific research. Continue Reading

Drytank S.A.: From Acorn to Oak Tree

Within the space of less than 10 years, Drytank S.A. has positioned itself within the top 10 Greek-based ship management companies, with over 1.6 million tonnes presently under its management and a further 140,000 dwt to be added in June 1996.

Drytank S.A. has achieved its place among the top Greek shipping management companies through sound ship management practices, fleet diversification and the flexibility to direct investments into areas that can produce maximum returns. Indeed, Drytank S.A. has never lost sight of its original objectives:
•    To be a provider of high quality service to first class charterers
•    To be a low-cost operator
•    To maintain a low asset cost base
•    To maintain a conservative level of financial gearing
•    To manage risk via fleet diversification. Continue Reading

China’s Role in Container Shipping

China’s expanding role in and emphasis on international and intra-Asian trade may be the key to growth in the container shipping market.

As the Chinese market continues to grow, the world’s large shipping companies may need to fine-tune their strategies for container shipping in the Asian region. How can they best take advantage of China’s growing market and increase their presence in the region? Should they continue to rely on third-party feeder services to deliver goods to ports around the Asian region, or employ their own? What will happen to the companies whose smaller ships have traditionally been employed in feeder services? Continue Reading

A Decade of Debt and Equity in Shipping

As part of a long-term project, Marine Money has been keeping track of equity and debt issues in the shipping industry for almost ten years. By tracking these issues and evaluating the data, we have been able to follow developments in the relationship between capital markets and shipping companies over the past decade.

The maritime industry’s experience with capital markets has changed markedly since the early 80s when very few shipping companies were able to access capital markets. The number of private placements and public equity and debt issues was well below what it is today. Continue Reading

Changes Afoot in Germany

The German government is considering radical changes to the German ship-share system because of increasing anger that vessels financed with the help of German tax breaks are being built in Poland and South Korea.

Buyers of the shares in new ships can use the investment to reduce their income tax bills, and the shares are popular with high earning professionals such as doctors, dentists and lawyers. The tax reductions are aimed at helping investment in German industry.

An agreement with the European Union Commission to permit the scheme being classed as a shipyard subsidy means vessels can be ordered in any country – and Korean and Polish yards are getting the main share of orders. Continue Reading

A Confident Newport News Shipbuilding

Newport News Shipbuilding is the most profitable shipbuilder in the world,” declared Mike Hatfield, Vice President of Communications. “And we’re putting our money where our mouth is to guarantee the quality construction of ships.”

Between diversification into commercial shipbuilding, and the imminent spinoff by parent Tenneco, Newport News Shipbuilding is facing challenge – and opportunity.

Look at the commercial program with their lead product, the Double Eagle. A strategic yet risky move, particularly in light of aggressive foreign competition. “We are expanding our business through the utilization of our inherent skills in new applications,” Mr. Hatfield explained. Continue Reading

Australian Export Finance Bank Support Something to Consider

At a private seminar hosted by Marine Money, Seagos, Inc., Marsoft Capital and Nedship Bank in mid-May in Hong Kong, Graham Perry and Andrew Cooke from Australia’s Export Finance Insurance Corporation spoke to two dozen significant HK, Korean and PRC shipowners about shipbuilding financial aid available wither directly through the Australian government or via commercial banks utilizing credit guarantees.

The presentation was made against the uncertain backdrop of the OECD Treaty discussions currently taking place in Washington DC. While the Treaty’s fate may still be uncertain – the US Congress has effectively 14 more working days until July 4th’s Independence Day celebration in the US – the Australian program offers unqualified support to Australia’s shipbuilders – particularly those in the aluminum fast ferry business where Australia currently captures over 30% of the world market and a handful of Australian builders lead the world. The following is an abbreviated version of their presentation. Continue Reading

Asset Recovery: How It’s Done

Philip Rankin, Maritime Asset Recovery and Protection MARAP Service

The MARAP Service – Maritime Asset Recovery and Protection – has now operated for four years and assisted secured creditors (banks and investors) in maximizing their financial recovery by recovering and securing mortgaged ships, if appropriate moving them to favorable jurisdictions, and assisting in disposal. This work is a delicate operation requiring the utmost tact and diplomacy to be carried through properly.  An example from MARAP’s casebook illustrates what the work sometimes involves.

The ship was monitored by MARAP (who had been appointed by the first mortgagee Bank) from its departure from South Africa on a voyage to Brazil laden with a coal cargo. The ship was sailing on a fifth Class extension and the crew onboard had not been paid for 13 months. In the Brazilian port, the ship was cut off from supplies and credit. Continue Reading

Tanker Markets in the 21st Century: Competitive or Oligopolistic?

by Prof. N. Shashikumar, Ph.D., Master Marine

Introduction
Oil tankers are believed to operate in a market that closely approximates the perfectly competitive model. However, there are increasing concerns about the relevance of this model in contemporary tanker markets. The variety of reasons that have contributed towards this predicament include the descent of oil majors and the ascendancy of OPEC state-owned oil companies in global petroleum trade, and the increasing preponderance of short and medium-haul crude oil movements.

Such developments, along with the endemic overtonnaging in the market, created a prolonged period of low freight rates for all tankers and the larger ones in particular. Simultaneously, the extent of institutional interventions in tanker shipping has exacerbated in the 1990s to the point where the cost of regulatory compliance has become somewhat of a nightmare for entrepreneurial independent shipowners. There is an increasing tendency to fix tankers secretly today. Furthermore, there are ongoing attempts to create pools of tanker owners. These and other developments such as horizontal and vertical mergers are raising barriers to entry in tanker markets. All indications are that independent tanker owners in the 21st century will be of a different breed, and that future tanker markets will exhibit fewer features of the competitive ideal and more those of an oligopoly. Continue Reading