No credit crunch worries?

Overall confidence in the shipping market for the next 12 months remains unaffected by the global credit crunch, according to the latest Shipping Confidence Survey by Maritime London member Moore Stephens.

On the other hand two-thirds of shipping interests expect finance costs to rise - a 10% increase on levels reported in the last survey, in March 2008 – while there has also been a fall in the number of owners who expect to make a major business investment in the next twelve months.

On a scale of 1 to 10, the overall confidence shown in the market by those who responded to the survey was unchanged at 6.8, with owners and managers expressing the highest levels of confidence at 7.0 (marginally down on the previous survey) against the 6.3 recorded by charterers. Some respondents acknowledged that the current financial crisis could affect world trade. But this was balanced by the expectation that continuing high demand from Asia and the Far East, in particular, would ensure that shipping would ride out the financial slump.

Meanwhile, a shortage of suitably qualified crew – which could ultimately lead to owners being forced to lay up vessels and default on mortgage repayments – and the escalating cost of fuel impacting on the ability to invest in other areas, were recurring themes among respondents.

Demand trends and competition emerged as the factors deemed most likely to influence performance over the next 12 months. Operating costs, which were cited as the most significant factor in this category in the last survey, came in fourth, behind the cost of finance. Comments included doubts about the industry’s ability to build sufficient numbers of new ships to meet demand, and the inability of freight rates to keep pace with the rocketing price of oil.

Owners remained the most likely to make a major investment or significant development during the next twelve months, but their rating of 6.5 out of 10 (against an average overall score of 5.9) was half a point down on the previous survey. Ship managers returned a score of 6.0 in this category, an increase of 0.3 points.

There was a strong message from the survey that finance costs were likely to rise, with 66% of respondents expecting costs to be higher in twelve months’ time than they are at present, as against 56% in the previous survey.

There was a sharp increase – from 47% to 71% – in the number of brokers anticipating a higher cost of borrowing, while 70% of managers, and 59% of owners, shared the same expectation. Europe – the largest group overall - was the most pessimistic in this regard, with 68% of respondents from that region anticipating an increase in finance costs.

Leading London shipbroker Clarksons has settled a court action over its past dealings with Russian tanker operators Sovcomflot and Novoship for GBP27m. The case concerned the broker’s handling of business between 2001 and 2004. According to Clarksons, a settlement had been reached on both actions and the company would be taking a further provision of GBP 13m.

The cost of the settlement has been close to the GBP 31.6m pre-tax profit Clarkson would have made for the year to December 31 without the effect of the litigation provision. It had a GBP 173m turnover.ange

The Chamber of Shipping said it was pleased that that the government accepted its arguments against proposals, introduced in the House of Lords, to amend the Employment Bill to extend the application of the National Minimum Wage to all seafarers on UK-flag ships and on foreign ships in UK territorial waters.

The proposed legislation was in response to a request for 'urgent action' from the National Union of Rail, Maritime and Transport Workers' (RMT). The issue was bought into the limelight by the latest annual national seafarer statistics produced by the Department for Transport.

Tim Springett, the Chamber’s head of labour affairs, said: “The Chamber of Shipping notes with regret the falling numbers of UK ratings in employment and shares the concerns of the RMT that action is needed if the UK’s maritime skills base is not to be threatened further. This is why the Chamber joined with RMT (and Nautilus UK) to call upon the Government to improve the employment environment for UK seafarers and increase the incentives available for their training [since April 2007]. Along with the unions, the Chamber has proffered practical suggestions for encouraging the recruitment and training of UK personnel to work as ratings. The Chamber has also supported the work undertaken in IMO to develop up-to-date competencies and sea time requirements for Able Seafarers that would be of considerable assistance in this regard and is most disappointed that their implementation has been delayed.”

The Chamber said that such initiatives represented “the only realistic means of achieving the increase in UK rating employment that RMT desires”.

Conversely, the Chamber argued, the restrictive legislative measures put forward today by RMT would do nothing to help – instead they would merely discourage operators from flagging their ships in the UK. Ship operators must, the owner's body asserted, compete in international markets and any measures that force UK operators to pay seafarers above market rates will simply play into the hands of their competitors.

As part of events to mark the International Maritime Organization’s (IMO) 60th anniversary Ruth Kelly, Secretary of State for Transport, addressed the IMO where she mapped out the Government and industry’s joint commitment to producing a set of decisive measures to combat climate change.

Reaffirming the industry and Government’s joint pledge to find a global carbon solution, Rob Ashdown, manager of environment affairs, Chamber of Shipping, said: “We welcome the Minister’s statement that the global level is the best place for tackling this international issue. The shipping industry remains fully committed to helping the IMO achieve its goal of reducing carbon emissions from ships.”

He added: “A timeline has been agreed to develop proposals for tackling maritime CO2 emissions for submission to the United Nations Framework Convention on Climate Change meeting in Copenhagen in 2009. Shipping is the most carbon efficient form of transport and is actively working on global solutions to deliver further reductions.”

Indicating the type of measures that could be implemented Mr Ashdown added: “The industry continues to look at proposals to improve the carbon efficiency of ships. A goal-based approach that allows all alternatives to be considered to reduce shipping’s environmental footprint will deliver this objective at the least cost to industry. Depending upon a ship’s trade these may include slowing down ships to maximise fuel efficiency to an optimum level, better weather routing, continuing design improvements and reducing port congestion.”

“The IMO continues to make significant strides forward in safety and security standards and the prevention of marine pollution of ships. It remains the undisputed forum to take the environmental debate forward to a positive worldwide conclusion.”

Maritime London member the London P&I Club has recently launched an enhanced charterers liability insurance facility following detailed analysis and consultation with a number of members, operators and brokers. The International Group-member club is managed by A Bilbrough & Co.

Bilbrough underwriter Nigel Martin, says: “A strength of the club’s new combined single-limit cover is that it reflects a great deal of feedback from members and others involved in chartering and trading about their practical insurance needs. This has emphasised that the protection provided by standard P&I - along with cover for liability to hull - remains extremely important, but that charterers also face a range of increasingly varied risks, requiring individually tailored insurance solutions."

He adds: “There may be a need, for example, for cover against loss of bunkers, or for the sort of serious potential exposure that can arise in a number of jurisdictions in connection with the ownership of cargo carried at sea. At the same time, there is an additional need for a top quality and responsive club claims handling service, of the type which the London is renowned for delivering. As a result, the club has developed and upgraded its charterers cover, gearing it towards the provision to members of flexible and appropriate protection against a growing spread of risks.”

Mr Martin's underwriting colleague Reto Toggwiler concludes:

“In addition to its breadth and adaptability, the new cover benefits from the club’s long-standing commitment to developing very high levels of understanding of the operations of all its members. Experience shows that the strengthening of relationships in this fashion supports the club’s ability to respond quickly and efficiently to the needs of its membership, and to uphold the quality of its portfolio of business generally.”

London-based shipbroker and Maritime London member ACM Shipping Group has bought small tanker shipbroker Harris & Dixon Shipbrokers for GBP 2.5m. According to ACM, Harris & Dixon had revenue of GBP2.1 million for the year ended 31 December 2007 and made a profit before interest of GBP0.8 m, before paying out staff and director bonuses.

Johnny Plumbe, chief executive of ACM, said: "This acquisition is an excellent strategic step for ACM as they specialise in the one area of tanker broking that ACM is not currently involved in. Furthermore the deal will quickly become earnings enhancing. Harris & Dixon have an extremely experienced broking team who are committed to the company for the long term; they bring with them a solid forward book and the combined customer bases will provide further exciting trading opportunities for the Group."

Meanwhile ACM has issued provisional results for the year to 31 March. Total revenue was up 54% on 2007 to USD 39.3m while like for like revenue up 22% on 2007. Profit before amortisation and taxation was up 49% to GBP 5.5m .

The company says there was 12% increase in the number of spot fixtures contracted during the year while its time charter forward order book was at the record level of USD24.7m, up 27% on 2007.

The refurbishment of the IMO headquarters, located on London's Albert Embankment on the south bank of the River Thames demonstrated the UK's support for the specialist UN agency, according to the body secretary general Efthimios Mitropoulos.

Speaking at official re-opening of the building by the Duke of Gloucester, Mr Mitropoulos noted that more than 90 per cent of the total project cost of over GBP62m was met by the UK government which leases the building to IMO. He said that the UK had once again demonstrated its strong commitment to IMO through its leadership and funding of the refurbishment.

He also acknowledged contribution made by those governments who hosted IMO meetings during the refurbishment.

The West Africa Business Association, South African Business Forum and African Business Events will host a one-day seminar in London on 8 July looking at trade and transport issues in Africa. Sponsored by Virgin Nigeria, it brings together executives from banking, trade documentation, security, shippers, leading forwarders, sea and air transport operators and consultants.

Speakers include African experienced executives from Standard Bank, Global Strategies Group, KPMG, Unilever, Cotecna Virgin Nigeria and DSV Air and Sea Limited. Discussion topics include: The changing trade routes to Africa and the China effect; Africa’s silk road and the increasing south - south trades; the stimulating effect of rising oil and raw material prices; the latest issues on cargo inspection; trade documentation and security.

For further details contact:

Alexa Korau, African Business Events
T: +44 (0)20 8995 3555
E: research@cmrsupport.com

www.africanbusinessevents.com

Sammy Ofer

Israeli shipowner Sammy Ofer has donated GBP 3.3m towards the restoration of the Cutty Sark. The world famous tea-clipper was badly damaged in a fire last year and is currently being restored. The donation will be added to the £23 million from the Heritage Lottery Fund and should allow the conservation project to be completed by 2010.

Andy Burnham, the UK’s Culture Secretary, said: “Mr Ofer's donation towards the conservation of the Cutty Sark is both extremely generous and enormously appreciated.” Mr Ofer recently gave £20 million to the National Maritime Museum for the creation of a major new wing.

The Cutty Sark Trust’s chief executive Richard Doughty said: “We would like to express our deepest gratitude to Sammy Ofer for his extraordinary donation. His commitment and personal generosity aptly reflect the reputation he has earned for leadership and commercial enterprise within the international maritime trading community and now in preserving our maritime heritage.”

When the project is completed in March 2010, Cutty Sark will ‘float’ suspended three metres above the bottom of her dry berth. This space will become a magnificent gallery and will also give visitors an opportunity to see the shape of the ship’s hull.