BOW WAVE 233

Something for Everyone Edition

news and views on trade, insurance and risk

Bow Wave homepage
Previous issue (232) / Current issue / Next issue (234)

Wavy Line	sam@wavyline.com
(c)2004 WavyLine.com	Issue No 233 09 May 04
Published free of charge to Readers
Editor: Sam Ignarski
Subscribe	Unsubscribe

In this issue:

1. Welcome
2. In The Wake - The View of Gray Page
3. AAA Annual Meeting
4. The Art of Underwriting
5. Higher Oil Pollution Fines In Canada in Prospect?
6. And Finally...

1. Welcome

A lie gets halfway around the world before the truth has a chance to get its pants on.

(Sir Winston Churchill)

New Readers this week include:

Anthony Warren of the Steamship Mutual
Kevin Morrin of Consultants C-Mar
Nick Trott of Ellermans in London

News of Readers

Jonathan L Jones is working with the shipping services firm of Topmar Shipping Corporation in Pireaus where he is spending about 90 per cent of his time. It is early days but he says:

"I believe that it really does make sense for both Assureds and Underwriters to be nearer to each other. Over the years the maritime "cluster" has developed here and the missing part of the Jig-saw is a local insurance market. Can you imagine that banks would not meet their clients and fully research them until there was a default?"

Readers Write:

From Maria Dixon:-

WISTA International Conference 2004

In 2004 (6-7-8 September) WISTA in The Netherlands is hosting the annual three day international conference held Rotterdam. The title of the Conference is: "WISTA: Innovation & Sustainability, Tomorrows Assets?". The conference will be opened by Dutch Minister of Transport, Public Works and Water Management Mrs. Karla Peijs.

For further details go to:-

http://www.wista.nl/

From the May instalment of the regular letter
from analysts Gray Page in Oxford to the Art of
Marine Underwriting we hope there is something for everyone in this Issue.

Enjoy.

2. In The Wake - The View of Gray Page

Bow Wave's "In The Wake" - You Read It Here First!

In the April 27th issue, Lloyds List quoted the Singapore Minister of Defense, Rear Admiral Teo Chee Hean, as saying "The task of securing the Malacca Strait against the maritime terror threat is too great for the coastal states to handle alone and requires the input of all stakeholders". The Minister went on to say that "All stakeholders - the interested countries and their military enforcement agencies and port authorities, the shipping community, and multilateral bodies such as the International Maritime Organization - should be prepared to play a part in the security efforts".

In Bow Wave Issue 229 of the 11th April, Gray Page expounded the view that the offer from US Admiral Thomas Fargo to provide US forces to help in the fight against piracy was in fact a good thing, and should be encouraged and explored, perhaps via the involvement of the UN. Unfortunately, not all the littoral states of the Malacca Straits seem inclined to take up Admiral Fargo's apparent offer. That was at least until Rear Admiral Teo Chee Hean made the above comments. We can only applaud Admiral Teo Chee Hean's statements on this political hot potato, although it would continue to appear extremely unlikely that Malaysia and Indonesia will agree, at the very least in the short term.

From BOOM to BANG?

Since the third quarter of 2003 freight rates in both tanker and bulk carrier markets have been booming. The start of 2004 saw record earnings for bulk carriers, predominantly as a result of the huge demand for steel, and its component raw materials in China. This caused the number of sea miles traveled during laden voyages to increase dramatically, resulting in a shortage of tonnage. In the true blinkered fashion of owners to such huge growths in demand (and therefore profit), orders flooded in for new tonnage with over 100 more bulk carriers being ordered in 2003 compared to the level in the previous years (which itself was over 100 higher than the 150 or so ordered in 2001). Once these vessels start come off the blocks in 2005 we can assuredly expect a swift return to the more usual pattern of owners complaining about low rates and poor returns, with the possibility of vessels going into lay up and being scrapped early.

This pattern of massive ordering following a boom has been repeated time after time, and always results in bust. The current boom peaked in mid January. Since then rates for both bulk carriers and tankers have been falling, with modern Panamax bulker trip charter earnings in the Atlantic fixed at US$32,000 per day this week, down 20% from around US$40,000 in January. This still leaves rates over US$20,000 per day higher than the average rates for a similar vessel in 2002, but the fact that rates have been declining for four months suggests that the boom is coming to an end. The question remains how long it will be before rates return to the more usual US$11-12,000 per day for a Panamax? It would be wise to remember that the previous booms of 1995 and 1979/80 (albeit on a much smaller scale to the current) only lasted around six months and were followed by years of weak freight rates. To quote a schoolroom classic that everyone has likely heardy action has an equal and opposite reaction". How very true! Crunch times are coming, and likely much sooner than some would like.

Blacklisting - For Better or Worse?

Speaking of "equal and opposite reactions", we wonder what the reaction may ultimately be to Syria's recent increase in vessels banned from its ports, banned because of having previously called to Israel? In Lloyds List of the 6th May 2004, Syria are reported to have added four new vessels - one Greek, one Danish and two Maltese to a list of those banned from their ports, but perhaps that may not be a bad thing for those owners.

Why not a bad thing? Well, we do wonder what the US and European governments may think of the security risks involved with Syrian ports after July 1st 2004. It may be that not calling to Syria is, in the eyes of the US in particular, going to be a positive issue on the risk profile for those owners (who have to declare the last 10 ports of call). A US ban, or at least more rigorous security checks that may end up being above and beyond the normal, will likely be considerably more potent than the bar from Syria, whatever the justification, right or wrong.

Sovereign Immunity. Or Perhaps Not

Recent court cases, first in Canada and now in Turkey, have likely made for unsettling reading for Ukraine's state-controlled shipowners, as well as of Azerbaijan.

In Canada in April 2003, an Antonov Airlines AN 124-100 aircraft was arrested in Goose Bay, Newfoundland, not for the apparent debts of Antonov Airlines, but for those of the Ukrainian State Property Fund, which reportedly owes money to Cyprus-based TMR Energy Limited. The decision to permit the arrest, whilst still under appeal at this time, is apparently based on an earlier decision from the Stockholm Court of Arbitration in the same case. It is reported that France and Belgium would also permit the arrest of Ukrainian state-owned assets under this same arbitration decision.

In similar vein, Caspian Shipping Company saw the arrest of its 1985-built ro/ro Fikret Emirov in Turkey on the 23rd April. The vessel was apparently arrested as security against the debts of the Azerbaijan Ministry of Agriculture that is alleged to owe a Turkish company named Saka Gorhmaz some US$8 million for produce imported to Azerbaijan between 1992 and 1993. A report from TradeWinds on the 6th May says that the Fikret Emirov was released following the discovery ofrrors in the documentation from the Turkish side@, but indications remain that property of the Azerbaijan state may still be at risk on this same case.

The old consideration of sovereign immunity seems not to be holding water as well as it did. In the days of the USSR, state-owned tonnage was largely immune from the threat of arrest, and was certainly immune where a debt of the state was concerned. These recent court cases indicate that those days may well be over. With the Ukrainian government suggesting in January this year that they are seeking to re-build Black Sea Shipping Co. (Blasco) to its former glory, having previously seen the Blasco fleet shrink due to ship arrests, it might be best to bear the above in mind, just in case.

Contact GrayPage Limited at:

enquiries@graypagelimited.com

http://www.graypagelimited.com

3. AAA Annual Meeting

Bridget Hogan has passed on word the Annual General Meeting of the Average Adjuster's Association will be held in The Lloyd's Old Library on Thursday, 13th May at 10:30 and is open to any Bow Wave Readers who would like to attend.

The Order of Business:-

1 Confirmation of the Minutes of the last General Meeting Instead of calling on the Secretary to read the minutes, the Chairman will move:-

"That in accordance with custom, the Minutes of the last Meeting having been examined, agreed and certified by the Committee of Management, the same be now confirmed."

2 Report by the Chairman, David Taylor, on the past year of the Association.

3 A dissertation "from the Chair"--The Chairman

"Reflections on the role and future of the Average Adjuster"

Debate from the floor will be welcome.

RSVP if you are not a Lloyd's Pass Holder in order to obtain admission to the Old Lloyd's Library it is necessary to notify Willem van der Pol with your name and company, to comply with security. Please note venue will be The Lloyd's Old Library, entrance via Main Reception, 1 Lime Street, London EC3M 7DQ

Further enquiries to:-

bridget_hogan@btinternet.com

4. The Art of Underwriting

We have run recently across the engaging booklet written by Swiss Re's Walter Mellert called Pen or the Art of Marine Underwriting which in a few pages says much about the profession of underwriter and how underwriters need to think. The central theme of the booklet is sense, intuition and imagination. We especially enjoyed the frank admission of how slippery is the evaluation of reality for the marine insurer, the role that emotion and misgivings should play and ultimately how when making defensible financial decisions based on risk factors, a good nose is a priceless instrument.

To ask for a copy send an e-mail to:-

publications@swissre.com

5. Higher Oil Pollution Fines In Canada in Prospect?

Jeremy Bollger in Montreal has sent in word that the Canadian Environment Minister David Anderson has announced that he intends to introduce legislation to allow Environment Canada officials to penalise foreign ships and crews for dumping at sea. The Minister has expressed dissatisfaction with the existing regime and its enforcement. Two cases in 2002 off the coast of Newfoundland appear to be the prompt for this. The alleged dumping of oily bilge water by the Russian fishing trawler "FV Olga", where no enforcement of the court fines proved possible and the alleged pollution by the Bahamian flagged bulker Tecam Sea which went unprosecuted after doubts were
expressed whether environmental officials had the jurisdiction to prosecute a ship for offences outside the twelve mile limit.

Discussions between the various federal departments are underway in Ottowa. But progress may be strongly influenced by the possibility of a spring election call.

Contact him at:-

JBolger@blgcanada.com

6. And Finally...

Many thanks to Robert Goodwin of Cargo Express for this:-.

The Night Owl

A woman awakes during the night to find that her husband was not in bed

She puts on her robe and goes downstairs to look for him. She finds him sitting at the kitchen table with a cup of coffee in front of him. He appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of his coffee.

"What's the matter,dear?", she whispers as she steps into the room "Why are you down here at this time of night?" The husband looks up from his coffee, "Do you remember 20 years ago when were dating, and you were only 16?" he asks solemnly.

"Yes I do" she replies. The husband paused, the words were not coming easily. "Do you remember when your father caught us in the back seat of my car?"

"Yes, I remember" said the wife, lowering herself into a chair beside him.The husband continued "Do you remember when he shoved the shot gun in my face and said", "Either you marry my daughter, or I'll send you to jail for 20 years."

"I remember that too" she replied softly.

He wiped another tear from his cheek and said

"I would have gotten out today".

BOW WAVE is published each week to around 9700 Readers in the transport,insurance,shipping and finance industries.

Thanks for reading BOW WAVE