Tax Reform – Trouble for the K/S Market?

On 12 April the Norwegian Ministry of Finance will release a preliminary report on tax reform.  From there it will be taken up by Parliament and the government hopes that it will be passed through in time to go into effect on 1 January 1992.  While the Ministry of Finance is optimistic about the benefits of the changes it is evident that the threat of sweeping change to the tax system has combined with already weak investor confidence to hold the K/S market stagnant through the first quarter of 1991.  In fact some investors have confided that they believe the reform package could be the final blow that drives the smaller individual investors from the market.  A look at the performance of the equity markets around the world confirms the weakness.  In New York shipping stocks have advanced more than 23% since January 1, in Singapore they have moved up 44%, while the Oslo stocks have moved up approximately 20%.

While specific details of the tax reform package have not been released, Marine Money has identified a number of the changes being considered. Continue Reading

Scrapping – Is There a Shortage of Capacity?

As the world fleet ages, and especially as the supertankers built during the 1970′s approach retirement age, some observers of the maritime industry are wondering who’ll scrap them.

While hardly any VLCCs have been scrapped in recent years, some industry experts are anticipating there will be a need to dispose of dozens of them each year by 1994.

The need to scrap ships to keep capacity down will become more urgent as the large number of vessels currently under construction or on order are completed.

The International Maritime Industries Forum, based in London, is concerned enough about the dwindling size of the world’s breaking industry that it is planning a mini-summit conference on the topic in the Far East later this year. Continue Reading

Pertamina in Major Shipping Expansion

State owned energy conglomerate Pertamina is launching a major investment program which will give further stimulus to Indonesia’s shipping industry. The company intends to offer guaranteed 12 year charters to local companies building 12 new tankers. Two of the vessels are around 35,000 dwt, while the remainder are all smaller ships less than 20,000 dwt. Pertamina currently operates a fleet of more than 160 vessels, of which around 65 are owned by the company.   Continue Reading

Ship Scrapping? Not in My Backyard!

The tiny U.S. ship breaking industry could get a boost from a bill currently before Congress.  Herchel Cutler, executive director of the Institute of Scrap Recycling Industries, says bill HR 265 would direct the U.S. Maritime Administration to dispose of over 100 ships in its reserve fleets, and require them to be scrapped in U.S. yards.

Currently, nearly all ships are broken outside of the U.S. Despite the considerable cost of moving them overseas, they can be sold for four times or more than what they will fetch from a U.S. breaker.

Alan Mesh, the president of Transforma Marine Corp. in Brownsville, Texas, says that his company generally pays about $50 a light ton for a barge or oil rig. When the world market was at its peak, paying $260 per ton for tonnage, his yard was paying about $80 per ton. He says his yard hasn’t broken a large ship in several years. Continue Reading

Maintenance Makes a Difference

The advancing age of the world tanker fleet has been the subject of critical analysis over the past two years. A number of environmental disasters have focused attention on the condition of ships currently in service and their ability to meet projected demand over the next decade. The issues are probably most immediate in the top end of the tonnage range, where a very large proportion of ships were built in the early to mid-seventies.

According to statistics published by RS Platou Shipbrokers of Norway, the total tonnage of VLCCs of 200,000 dwt or over, amounted to 119.6m dwt at the end of March 1991. Of this total, 63.7m dwt, or 53.3%, was built during or before 1975.  In view of the age of the world fleet and the possible shortage of suitable tonnage in the mid to late nineties, there have been extravagant claims about the level of new tonnage needed to meet the expected demand.    Continue Reading

Lloyd Brazileiro Receives Fresh Funding;Repays Trade Debts

The acute financial crisis at Lloyd Brazileiro has eased somewhat with a forthcoming injection of state funding. Ivan Barcellos, assistant to new president Walter Graneiro, told Marine Money, “The present fleet consists of 21 ships, but nine will be returned to the Banco do Brazil, in order to clear outstanding debts, leaving the company with a core fleet of 12 vessels.” Mr. Barcellos also said the company is to receive a fresh capital injection through a bank loan from the Banco Nacional de Desenvolumento Social e Economico (BNDSE), although he was unable to provide exact details of the loan.

Meanwhile, two officials from the Brazilian Ministry for Infrastructure, which is responsible for Lloyd Brazileiro, visited Hamburg recently on a debt repayment mission and to salvage something of the company’s tarnished reputation. Jose Marcello Mollo and Darso Ferreira Lima are reported to have have paid around $34m in trade debts to around 200 creditors, about 90 of them in the US. The sum is part of $60m advanced by the Government for debt repayment purposes. In return, the officials are aiming to secure the release of all of the company’s vessels currently under arrest. Arrests of four vessels in the US and one in Italy are known to have been lifted, but six ships are still being detained in the US and Europe.    Continue Reading

Bringing an Innovative Product to Market

What do you get when you couple a Liberian tug and an American barge?  An innovative, low cost way to move forest and building products between Canada and the United States.

For the past two years, McAllister Towing and Transportation Co., an affiliate of the New York-based towing company McAllister Bros. Inc., has been moving pulp from a mill in Nova Scotia to a Scott Paper Co. plant that makes tissue paper in Chester, Pa.  The company uses a Liberian-flag tug and three large US-flag deck barges with houses – essentially large floating warehouses – to move the pulp.

Now Louisiana-Pacific Corp. has signed a long-term contract with McAllister to move a new type of gypsum wallboard being manufactured at a new plant in Port Hawkesbury, Nova Scotia to US ports on the East Coast.  The plant, which has been in a start-up mode for several months, is beginning full production and McAllister expects to begin hauling wallboard for Louisiana-Pacific in May.  Continue Reading

Will Dead Cargo Kill Fearnley and Eger?

Damage to cargo in transit is an occupational hazard for shipowners and charterers alike, but the problems reached nightmare proportions in the recent case of the Yeoman Brook. In February, the 75,000 dwt self- discharging bulk carrier shipped a cargo of fines – a form of powdered iron ore aggregate – from Dampier in Australia to Port Talbot in the UK. During the course of the voyage, the cargo solidified to such an extent that it was “welded” to the hold by the time the vessel reached its destination, threatening the commercial viability of the ship, which had only recently been delivered from the Daewoo yard in South Korea. The sub-charter to British Steel, from time charterers Foster Yeomans, was fixed to ensure that the vessel did not travel back in ballast to the UK. Despite its size, Foster Yeomans intends to use the vessel in UK coastal waters.

It appears that the damage to the vessel could be much less than originally feared. Indeed, it may come out of the incident unscathed if Foster Yeomans’ determined efforts to rid the holds of the offending material are successful. Foster Yeomans chartering manager Mike Magnus told Marine Money, “The cargo went dead on us. We believe that this was because it lost air during the course of the voyage, and consequently solidified. We are using back-hoes to remove the cargo.” Back hoes are a type of mechanical digger used in civil engineering and road construction.   Continue Reading

Christiania Heads Consortium to Finance Soviet Deal

A consortium of international banks has arranged a $482m syndicated loan for Soviet interests in one of the largest ship finance transactions recorded. The architect of the deal and one of the lead banks is Christiania Bank of Norway, which is acting as agent for one of the central companies in the project, Fiona Trust and Holding Corp., a Liberian subsidiary of AKP Sovcomflot. Co-leaders in bank syndicate are Bankers Trust, Societe Generale and Banque Indosuez, while some 25 other banks are also involved.

The huge financial package is primarily being used to fund newbuilding installments on eight of ten 146,000 dwt Suezmax tankers currently under construction at Hyundai Heavy Industries in South Korea, although there is an element of refinancing involved. The vessels are each double bottom, double skin and comply with the US Oil Pollution Act of 1990. The Soviets are paying cash to the shipyard for the construction of the ships.   Continue Reading

Big Jump in First Quarter Sale and Purchase Activity

Sale and purchase business in secondhand vessels showed a 40% jump in volume in the first quarter of 1991, over the average of the last half of 1990, according to  the latest half yearly “World Trade Review” produced by Wescol International Marine Services. The review notes that, after slipping by 6% in the first half of 1990, dollar turnover in the global secondhand cargo ship market sustained a further massive 50% contraction in the second six months, falling to $3.8bn from $7.7bn in 1989. Hardest hit were large tankers and small “Handy size” bulk carriers and ships in the 10 to 14 year old category.

Early in 1991, the fall in ship prices leveled out and sales volume was up by an average of 40% from the previous six months.  However, Wescol counsels caution against excessive optimism, warning that the recovery has been lacking depth. Greek owners are admittedly in good financial shape, but they are held back by uncertainties about the timing and strength of the coming economic and trade recovery and by lending banks’ newly found prudence.   Continue Reading