At the recent annual Maritime Law Conference (MLA) held at Arabella in the Western Cape, various prominent government and international speakers took to the floor to debate and discuss national global maritime phenomena including inter alia; the progress in handling international oil spillages, port congestion, salvage and vessel arrests. Progress and unity was evident amongst the highly respected panel of speakers including Captain Rufus Lekala (TNPA Chief Harbour Master), Captain Alan Reid, representing P&I interests, Sobantu Tilayi (South African Maritime Safety Authority) and Dumisani Ntuli (Department of Transport) who spoke of enhanced engagement amongst each department and coordinated efforts to increase efficiencies.
As the dramatic liquidation of the 7th largest shipping company in the world Hanjin unfolds, with 141 vessels up for grabs (97 container ships, 44 bulk carriers) and a further estimated value of US$14bn of cargo tied up globally as Hanjin ships remain idle, the audience turned its attention to speaker Ariella Kuper, MD of Clear Asset Pty Ltd. The company specializes in maritime auctions, principally judicial arrests and the discussion focused on economic factors that are dominating the international maritime scene. The overall sentiment is that we are seeing more pressure in the market as docking fees, crew repatriation and tail contracts are not being settled and more vessels are being taken to judicial auctions.
The container vessel market remains under immense pressure with a record approximated 352 500 TEU ships currently sitting idle around the world. An estimated 25% of the world’s container capacity sits empty (according to recent statistics), whilst the Tanker market is estimated at 20% oversupplied and Dry Bulk 50% oversupplied. In early September, 7 large container ships were sent for demolition, bringing the total scrapped so far in 2016 to 83 container vessels of 30,000 deadweight or larger (roughly 2,500+ TEU's*).
Contributing market movements include major mines entering Care & Maintenance, influenced by weak commodity prices. Major players prefer to leave the resource below ground than trade it at a significant loss. This is exacerbated by low freight rates. In South Korea, debts owed have doubled in the last 5 years (2010 – 2015) with 3 major players suffering as a result of failed payments through ‘tail contracts’, i.e. majority of the payment gets delayed to the end. This was a mechanism to attract and secure new orders but retrospectively has been damaging to likes of Samsung (SHI), Daewoo (DSM) and Hyundai (HHI) as buyers fail to honour their payment commitments.
In Europe, banks have taken draconian steps and are now looking to rather recover what they can than previous actions which helped to prop up clients with extended debt restructuring terms. HSH Nordbank alone plans to cap its shipping loan book at US$9 billion (previously they had in excess of US$30bn in ship loans), and they recently offloaded 250 vessels (equivalent to US$5.5bn sold of their distressed shipping portfolio). Commerzbank has stopped shipping loans altogether.
African auction house, Clear Asset, exhibited strong results in the earlier sale of the arrested mv Sadan K and mv Zeynep K by Unicredit Bank - both 80,000 DWT container ships located in Durban. The ships were sold for a combined US$20m to a Greek buyer, after attracting global bidding interest from the likes of Singapore, Liberia and India.
The company has again been nominated, this time by The High Court in Namibia, to dispose of the container vessel mv Maverick Guardian. The bank involved in this matter is Credit Suisse. Commenta Ariella Kuper, MD of Clear Asset, ‘’What is fast becoming evident is that due to South Africa’s Maritime Act, the specialist legal skills exhibited by likes of Bowmans, ENS, Webber Wentzel, Norton Rose, Shepstone & Wylie amongst others in this sphere and demonstrated capabilities to reach global players, Africa is quickly becoming a preferred destination for judicial arrests. The auction of the mv Maverick Guardian will take place on 10 Nov 2016 at 09h30 in Cape Town at Bowmans.