Thursday, August 16, 2012

Container Shipping Looks On As Two Bulk Freight Groups Founder

Baltic Dry Index Still in Doldrums
Shipping News Feature

UK- ITALY – WORLDWIDE- The brief respite we witnessed in May, when we were able to report the minor recovery for the Baltic Dry Index proved to be short lived and after another ray of hope in July the freight index has continued to bump along in the lower reaches. Whilst container shipping companies fight to increase rates across the globe the dry bulk sector continue to suffer from the overcapacity produced by the gleeful investment in a bubbling market witnessing the Index peaking at over 11,000. The disparity between how both markets are priced was covered in our article about the World Shipping Council in June.

In February this year when the Index fell into the sub 650 bracket (it closed yesterday at 728 – down almost 3% for the day)the writing was unfortunately on the wall for those who simply failed to compete either through the ownership of an unsuitable fleet, less efficient management or simply regular customers who no longer had sufficient tonnage. As ever, the smaller companies are paying the price first, too many people often have too much staked to allow the giants of the industry to fall at this stage.

Last month we witnessed the looming demise of Deiulemar Shipping following the arrest of several executives of another company in the Italian group Deiulemar Compagnia di Navigazione following its fall into bankruptcy. Prosecutors seized half the Deiulemar Shipping fleet last month after the group was perceived to be short of in excess of a billion euros when bondholders started cashing in their investments due to lack of returns.

Tragically eighty eight year old Michele Iuliano, a co founder of the once successful Deiulemar Compagnia di Navigazione, died of a heart attack during a police raid on his villa. The company is believed to have disposed of much of its own fleet to Deiulemar Shipping in an irregular transaction no doubt desperately trying to restructure debt caused by the severe downturn. Two years ago Deiulemar Shipping became locked in a multi million dollar legal dispute over non payment of forward freight agreements (FFA’s) with Transfield ER Futures, a British Virgin Isles group. The bulk carriers case was finally dismissed in January this year, presumably sounding the death knell.

Just last week, at the height of its Olympic fervour, Britain witnessed what claimed to be its oldest shipping company, Stephenson Clarke Shipping Ltd, fall into liquidation after almost three hundred years. The company operated a fleet of single deck bulk carriers between 1,100 and 12,000 dwt shipping mostly aggregates, alumina, grain, coal, fertilisers and steel mainly within Northern Europe and the Baltic Sea, the Mediterranean and West Africa.

Liquidator’s Tait Walker said in a statement that whilst previous economic downturns had been weathered, the current market is one of the worst experienced for many years with no upturn forecast for at least 12 to 18 months meaning it was impossible for the company to continue.

‘Steve Clarke’ was founded by brothers Ralph and Robert Clarke in 1730 with their purchase of a 300-ton sailing ship trading coal out of North Shields, following their employment as sailors, master mariners and latterly shareholders in other vessels. Although never a large company the sight of such a venerated name sinking beneath the stormy waters of the current world economy will send a chill through many in the bulk shipping sector worldwide as they look for a break in their own financial clouds.