Greek Shipping News Cuts
Week 33 - 2010


A summer of sand, sea and... supramaxes

--- * Thursday 19 August 2010 * by Nigel Lowry
Staying in the capital during this time has its compensations. Chief among these is the pleasure of being able to cruise in your car in about 10 minutes between the centre of town and the northern suburbs, where nowadays nearly 100 shipping companies are based.
Normally, hopping there and back can take half your day.
Another 10 minutes can take you from the centre to the heart of Piraeus. At least this will be true until the hordes finally return. Many are presumed to be on their way back next week.
Often enough in the islands the offering takes the form of a little ship. Metaphorically, as the guidebooks will tell you, this is a prayer for safe passage, but by tradition the Greek islands are seafaring communities and the links are literal and pragmatic, too.
Few outside Greece may have noticed that the current president of the Union of Greek Shipowners, Theodore Veniamis, and the leader of the London-based Greek Shipping Co-operation Committee, Harry Fafalios, both hail from the same island of hardly more than 50,000 inhabitants all-told.
Many, though not all, do spend as much as possible of August on the island, mostly doing the simple things.
One occasionally sees some highly amicable deals between Chiots and Oinoussians cropping up in the market, but the frequency is less than one might suppose might result from such a waterfront information factory.
The conclusion can only be that mostly owners are willing to pass-on tips only on deals they themselves have already passed-over. Maybe there is also an element of recognition that while bargains in life may be rare, they are even rarer gifted by a fellow islander.
But for many of the aforementioned shipowners this has not proved incompatible in the slightest with a fondness for martinis, Manhattan, Chinese newbuildings and the transparency challenges of a public listing.
Nowadays the prophets of doom are beseeching Greeks not to order too many hundreds more. It is not as if the present generation of owners have lost all touch with the culture of their forebears. In many cases, quite the opposite.
While the numbers may not always appear to add up overall, who is to say what mixture of countercyclical thinking, stony realism or bittersweet romantic belief in the sea prompts the individual owner to ink a series of kamsarmaxes in a province of China that perhaps even many Chinese had never heard of a few years ago? Or how it will eventually turn out?
What can be said is that right now many Greek shipowners seem to be having fun. That much is obvious from their absence.
But what is more, many seem to be deriving fun from helming publicly listed companies. Never mind that the publicly quoted crowd have had to interrupt their island stay and flit back to Athens for the results reporting season.

Greek shipping earnings up 28.6%
Source: Fairplay Daily News 19 Aug 2010

The ferry players on borrowed time
---The crunch exposed the weaknesses of some European state-owned operators.
Standing on the deck of a Greek ferry speeding out of Piraeus, with all the expectations of those island beaches ahead, is a great feeling.
I have not been in Piraeus for a decade but it was nice to see the ferry industry in such good health. Ships were packed like sardines next to each other at the quay with passengers and trucks pouring on and off.
It is not like this everywhere. In fact, in both Italy and France, some ferry companies are in crisis.
The state-owned operator, which has been happily plying its trade from the mainland to Sardinia, Sicily and Corsica for almost 75 years, has been ruled insolvent by a court.
Ministers are now running around looking for a potential buyer and are being forced to deny rumours that they are considering whether the company should be broken up.
Also hunting for a purchaser who can take a loss-making business off its hands is the French government.
SeaFrance is a key player on the cross-Channel routes to the UK but its formal owner, French state railway company SNCF, has had enough.
Last month, SeaFrance, which competes with P&O on the key Dover-Calais run, unveiled plans for 725 redundancies.
That is half its staff, although it somehow claimed it would still be able to keep its four passenger vessels and one freight-only ferry in operation.
The company scored a net loss of EUR 52m ($68m) last year on a turnover that was barely three times that level.
A further EUR 15m deficit was run up in the first four months of the current financial year and only a court order has saved SeaFrance from bankruptcy.
Management and unions have now agreed to 550 redundancies and the fleet being cut back to three vessels.
It is expected that the freight-only 13,727-gt Nord Pas de Calais (built 1987) will operate on a reduced schedule for the rest of the year.
So what conclusions can one draw from these events about the state of the ferry sector in Western Europe?
There are different factors at work for a start. The French ferry company faces competition from airlines, trains (Eurostar and the Channel Tunnel) and other rival private-sector ferries.
Tirrenia competes against minimal rival airline services, as do the Greek ferries, and that is all. But both Tirrenia and SeaFrance have been operated under state-owned services where powerful trade unions have been slow to accept the need for change.
Working practices have not kept up with private-sector rivals while trading volumes have been damaged by the credit crunch and economic slowdown.
The austerity measures underway throughout Europe are threatening job security more widely and undermining public-sector labour groups.
Employers realise the workforce is more likely to accept reduced working conditions rather than find themselves unemployed and with little chance of alternative work.
Tirrenia and SeaFrance should have been restructured earlier. It is a pity it took a financial crisis to concentrate minds.
Published: 21:59 GMT, 19 Aug 10 | updated: 20:03 GMT, 18 Aug 10

For a long while, the spot market took a back seat to the time charter market in the dry bulk sector, as banks and investors were more risk averse, and preferred the regular payments of a time charter.
Interest in the spot market has lately revived as the public companies seek to profit from market volatility or, at the least, avoid fixing long in a low market. Today, bulkers are fixed upon indices with floors, ceilings and profit sharing. IPOs have been marketed based upon pool employment and corporate vehicles, old and new, are structured with no debt in order to play the spot market, while keeping the downside protected.
Rates were so low there was little or no time charter market. But even as the markets turned upward there was a predilection for operating spot and keeping all the profit for oneself.
Risk aversion increased over time, or perhaps the expertise waned, and many owners, perhaps incentivized by their bankers, saw the benefits of time chartering. Provided that there was no off-hire, owners received a regular daily charter rate that was effectively discounted off the spot rate. The counterparties were no longer end users, who were not interested in long-term fixtures, but instead were operators, more focused on cargos, and less on ship ownership as it could better manage its liabilities in line with cargo availability by chartering-in spot, short and long-term. The gravy was now left to these operators who played the spot market and earned razor thin margins so long as they got it right. In addition to trading off revenues, owners, unfortunately lost touch with the end user customers.
While the Greeks are the acknowledged experts in voyage chartering, the Norwegians made creative contributions enhancing the concept. It is relatively easy to minimize ballast voyages on ships that handle a multiplicity of cargos, such as the Handysize and Panamax bulkers, but a Capesize generally carries iron ore moving it from the source to the steel manufacturer and returning in ballast. To provide additional opportunities the Norwegians designed and developed the first combination carriers, ore/oilers and O/B/Os, which could deliver an ore cargo and then return with an oil cargo. While the concept worked theoretically, cleaning, hatch cover seals, acceptance by the major oil companies and differing markets conditions proved difficult resulting in the vessels trading mainly in bulk.
The latest iteration of spot employment is the indexed time charter, which we view as a bastardization of the concept. For us, it is simply a mathematical variable rate time charter. Based upon an index, which is itself the sum of weighted voyage indices, there is little resemblance to spot employment. This is nothing but an average of averages for a very specific vessel. In fact we are not sure how much more precise/accurate the result would be versus the simpler oneyear time charter rate?
We are contemplating a blog site on the Marine Money web site to develop a discussion platform. Please let us know if you are interested.