MSC Cruises order two new ships from STX France

msc-meravigliaMSC Cruises confirmed just before Christmas that they have finalised contracts with STX France for two new cruise ships. They will be an extended version of the Meraviglia class, and will enter service in 2019 and 2020 respectively. The first of the Meraviglia class, pictured above, was launched in September 2016 and is scheduled to enter service in June next year. The second of the class is due to enter service in June 2019.

At 177,000grt, the new ships will accommodate 6,300 passengers in 2,450 cabins. MSC Cruises stated that the two new ships are part of a €9 billion investment plan that includes eleven new cruise ships that will come into service in the next ten years, The current plan is to build all of these vessels at STX France.

White Star’s Britannic gains second Atlantic record

britannic-entering-nyWhite Star’s Britannic, Captain Thompson, gained the westbound record for crossing the Atlantic on 24th December 1876. She crossed from Sandy Hook to Queenstown, 2,882 nautical miles, in 7 days 12 hours 41 minutes. Having already gained the westbound record on 4th November, she was the only White Star vessel to hold both records at the same time.

Britannic was built at Harland & Wolff in Belfast, yard number 83, as were almost all White Star’s vessels. She was White Star’s first two-funnelled steamer, and was originally still rigged as  a four-masted barque to carry sails. Laid down as Hellenic, she was launched on 3rd February 1874, and made her maiden voyage from Liverpool to New York via Queenstown on 25th June 1874. She was unusual in that she was built with the propeller only slightly above the keel, and the engines were tilted slightly aft to keep the shaft inline. A universal joint in the propeller shaft meant the propeller could be raised when in shallow water and lowered for greater thrust when in deeper water. The idea was not successful and she was quickly sent back to Belfast for a more traditional arrangement. At this time the square-rigged masts were removed and pole masts fitted. The next sailing in her new rig left Liverpool on 8th June 1876.

britannic-anchored-out-in-merseyIn August 1877 Britannic broke the westbound record again, taking 7 days 10 hours 53 minutes from Queenstown to Sandy Hook.

Always a popular ship, Britannic enjoyed good passenger numbers. Generally she had a good safety record. On 31st March 1881 she sank an Irish schooner, Julia, but the crew was saved. In July 1881 she went aground off Kilmore in Ireland in heavy fog,  but was quickly refloated and repaired. She suffered a minor collision with White Star’s Celtic in May 1887, when both vessels were slightly damaged. Both captains were later censured for excessive speed in dense fog. In August 1899 she was declared surplus to needs and was to be sold for scrap. Instead she was requisitioned by the British government and used as a troop transport during the Boer War in South Africa. She made 11 round voyages, including two trips collecting troops from New Zealand and Australia. She was finally scrapped at Hamburg in August 1903.

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Containers lost at sea –
and typical result

maxresdefault-8-1068x601Recently Hapag-Lloyd’s container ship Bremen Express was forced to stop while eastbound in the Atlantic for undisclosed emergency repairs. While these were being carried out, the ship started rolling, and a number of containers were lost overboard. At the time the vessel was some 1,400 nautical miles off the west coast of Europe. Hapag-Lloyd stated the vessel was not in any danger at the time, and it later continued its journey. It will be inspected once it arrives in the Mediterranean before being allowed to enter the Suez Canal as it heads for Asia. The authorities are said to be conducting an investigation into the incident.

photo-sent-from-the-boat-le-souffle-du-nord-on-december-19th-2016-photo-thomas-ruyantphoto-envoyee-depuis-le-bateau-le-souffle-du-nord-le-19-decembre-2016-photo-thomas-ruyantofni-1-r-1680-1200In an unrelated incident but highlighting the dangers of lost containers, a French sailor, Thomas Ruyant, taking part in the Vendée Round the World yacht race, had to make a distress call. His boat had collided with a floating shipping container while a few hundred miles south of New Zealand. The captain of the yacht reported that his vessel was in danger of splitting in two, after hitting the container while travelling at about 17 knots. Later reports stated that the New Zealand Coast Guard had delivered a pump to the yacht, and the skipper was hoping to make port.

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MSC set to take over Hanjin’s Long Beach terminal

hanjinThe Seoul Central District Court has announced that Hanjin, South Korea’s largest shipping line, has recently signed a provisional contract with Swiss-based MSC. This will allow the company to sell off its stake in the Long Beach container terminal in California.

Hanjin, one of the largest container shipping companies in the world, announced last August that it had multi-million dollar debts. It filed for court receivership at the end of August. Since then it has been selling off its principal assets to avoid complete liquidation.

The MSC Flavia is docked at Pier T in the Port of Long Beach.

However the deal has not yet been endorsed by either the port authorities or the US court, and is awaiting satisfactory reports before final signing. The Long Beach Board of Harbor Commissioners is currently studying the offer. If approved, it would mean MSC would be the sole holder of the lease at the terminal. This follows the recent sale of Hanjin’s valuable Asia to US shipping route to Korea Line, its biggest rival.

The collapse of Hanjin is having ripple effects throughout the container shipping industry. Danaos, one of the major owners of containerships, had long-term charters with Hanjin on eight of its ships. As rates continue to drop following the collapse and the oversupply, Danaos has admitted to worries about 2017, as 24 of its ships have charters that expire during the year. It may well have to consider scrapping some of its older vessels to remain solvent. It has already had to obtain waivers from some of its lenders on mortgages for current vessels. It has recently submitted a claim to the Seoul bankruptcy court for $598 million for unpaid charter fees, charges and expenses following on from the Hanjin collapse.

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Deteriorating scrap values for containerships

Alang India, may 2016It has been reported by shipbroker Braemar that over 200 containerships have been scrapped so far this year, as overcapacity continues to drive down rates. This amounted to almost 700,000 teu of capacity, compared to just 187,000 last year. In the last 30 days some 32 vessels have been sold for scrapping.

Worst hit were panamax vessels: book values have plunged by over 60%, putting many on a par with their scrap value. However, a recent rise in the number of charters available has meant the number of ships laid-up has dropped from 357 to 336. This still left around 1.4 million teu container slots available worldwide.

The collapse of Hanjin Shipping last August has sent shock waves throughout the industry and made everyone very nervous. 34 ships owned or operated by Hanjin are still idle, including 28 that had been returned to their owners.

Meanwhile charter rates continue at rock-bottom levels: one broker recently claimed he had fixed a panamax charter at $3,900 for a two-month charter with options. However, some companies are profiting from this situation, buying up modern containerships at values said to be equivalent to the steel value.

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Troubles for Maersk continue to deteriorate

Following Moller-Maersk’s recent credit rating being downgraded by Moody from BAA1 to BAA2, with a negative outlook, and by Standard & Poor  to BBB, their problems continued to get worse.

maersk-shipperTwo of their offshore supply vessels, Maersk Searcher and Maersk Shipper, were being towed to a ship recycling yard in Turkey by another Maersk vessel, Maersk Battler. On 22nd December they were en route from Fredericia in Denmark. When they were approximately 60 miles off the French coast both vessels sank: at present no reason has been given for the loss of both vessels.

The vessels had been emptied of oil and fuel oil and flushed through, so Maersk stated that there was no danger to the environment. All crew were rescued and were safely on board the Maersk Battler. The French Coast Guard were notified of the incident and were investigating.

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More cruise lines get approval from Cuba

In early December two more cruise lines announced that they had received permission from the Cuban authorities to include cruises to Cuba in their programmes for 2017. There are now six lines that have received approval: Norwegian and her sister companies Oceania and Regent Seven Seas, Royal Caribbean, Azamara and Pearl Seas. This development followed the announcement earlier this year that the Cuban authorities would be lifting their ban on Cuban-born people entering and leaving the island on commercial vessels.

norwegian-skyNorwegian Cruise Line initially stated that its first cruise would be from Miami to Havana, sailing on 7th March 2017. This has since been modified: Norwegian Sky will operate this 4-day cruise, calling at Havana and then the Bahamas. Five dates are planned, through May 2017, and the first bookings are already being taken.

Royal Caribbean has announced that its inaugural sailing to include Cuba will be on the Empress of the Seas, sailing from Miami in April 2017 on a 5-night cruise.

U.S. Carnival cruise ship Adonia, the first cruise liner to sail between the United States and Cuba since Cuba's 1959 revolution, arrives at the Havana bay Cuba, May 2, 2016. REUTERS/Enrique de la Osa

Currently the only  vessel  sailing to Cuba is Adonia, operated by  Fathom, a subsidiary of Carnival Corp. Adonia was running bi-weekly voyages but has struggled to find enough passengers. Carnival recently announced the trips would stop in Spring 2017.

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Large floating drydock arrives at San Diego

ca-drydockThe largest floating drydock in California recently arrived at the San Diego shipyard of BAE Systems. It is 950 feet long. The company has planned a $100 million investment to develop the yard ahead of the anticipated development of the US Navy along the West Coast of the US.

The yard was towed in by the Polish tug Terasea Eagle. A team from BAE will take two months completing the final assembly and testing of the dock, after which it will be certified as ready for use. It is hoped to be fully operational by early in 2017, and already the first ship, USS New Orleans, is booked in for servicing.

The heavy lift vessel Blue Marlin passes through Astoria, Ore., on its way to Portland, Aug. 24, 2014. Coast Guard and Coast Guard Auxiliary personnel, working with local law enforcement, provided an escort for the ship to ensure the safety of boaters along the Columbia River. (U.S. Coast Guard photo by Petty Officer 3rd Class Jonathan Klingenberg)

Whilst this is big, the largest floating drydock in the United States is the Vigorous, at 960 feet long. This is based at Vigor Industrial’s shipyard at Portland, Oregon, and has an 80,000-ton capacity. It was designed to meet the requirements of the US Navy’s military standards as well as the American Bureau of Shipping. The drydock was delivered aboard the heavy lift vessel Blue Marlin in 2014.

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Carnival reports
strong Q4 for 2016

dsc00679-fill-600x450Carnival Corporation reported on 20th December that the fourth quarter income for 2016 had increased from $270 million to $609 million, year on year. Ticket sales, onboard spending and bookings for shore excursions all rose significantly. Overall the corporation posted a record $2.8 billion profit for the full fiscal year 2016.

Arnold Donald, President and CEO for Carnival, stated that capacity would increase a further 2.6% next year. The CFO, David Bernstein, reported that bookings for 2017 were well ahead of 2016. The fourth quarter saw the introduction of Carnival’s Carnival Vista, Holland America’s Konigsdam and Seabourn’s luxury Seabourn Encore. Also in the quarter three new cruise ships were ordered from Meyer Werft, to be powered by LNG, two for Carnival Cruise and one for P&O.

156925Expenses were up on last year, with increases in payroll, fuel costs, food and overall operating costs affecting final profits. Donald reported: “We are anticipating another solid year in 2017… the underlying strength in out fundamental business leaves us well positioned to achieve sustained double digit return on invested capital”. It was agreed that China was a developing market, with a number of charters and sub-charters to be completed. Carnival was also actively looking to include Cuba in its programme, and had applied for authorisations for at least one of the Carnival brands to be approved by June 2017.

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Maersk announces new strategy to split business

maersk-triple-e-containershipThe CEO of Moller-Maersk, Soren Skou, announced on 12th December that the new strategy for the company would be to separate its energy activities from the transport and logistics operations. His plan is to develop the transport area for containerships. At first glance this seems odd, given the recent rally in oil prices and forthcoming deals with OPEC to control global output.

The container business has seen a serious deterioration in earnings this year, with the slump expected to continue for some time yet. Maersk has introduced a number of cost-cutting measures this year, which have helped reduce its losses significantly, but for the new strategy to work effectively, much more will need to be done. Freight rates have risen slightly recently, which will help, but there’s no guarantee that rates will improve further in the near future.

The purchase of Hamburg-Süd reported here recently should help, too, but it is uncertain how quickly this will show in the books. The principal problem facing all companies in the containership market is that there is excess capacity available, with several new ships on order or nearing completion. Scrapping or mothballing many of the less-efficient vessels would help reduce this, but it seems uncertain which company will blink first and accept their losses are too much. Maersk themselves believe that it will be 2022 before capacity will exceed supply.

Although Skou is slashing capital expenditure it is not clear that this will help long-term. He is expecting the average return on capital to increase from 7% up to 8.5%, but over an extended time scale. This may yet not be enough to reassure investors.

Moller-Maersk’s credit rating was put under review last September by Moody’s, and on 20th December was downgraded from BAA1 to BAA2, with a negative outlook. Last month Standard & Poor downgraded the company’s credit rating to BBB, with a negative outlook. Maersk acknowledged that its debt to operating profit ratio had climbed to 2.5 over the 12 months to the end of September. The company plans to reduce its capital expenditure from $6 billion in 2016 to $4 billion by 2018, and is looking at reducing the annual dividend again.

maersk-responsible-ship-recycling-india-1As part of the company’s planned savings, it is to scrap eight panamax ships in yards at both Alang and in China. Several are already being demolished, with the others to follow by mid-March 2017. They plan to reduce their fleet still further, as ships reach the end of their economic life. However, Maersk is committed to only using yards that meet or exceed the Hong Kong Convention on standards and safety.

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