BOW WAVE 329

Bow Wave Issue 329--Container Specialists Edition

news and views on trade, insurance and risk

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Wavy Line	sam@wavyline.com
(c)2006 WavyLine.com	Issue No 329 13 Mar 06
Published free of charge to Readers
Editor: Sam Ignarski
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In this issue:

1. Welcome
2. DWP's P&O Ports Deal
3. World Shipping Council and Proposed EC 24 Hour Rule
4. Dyna Liners Trades Review 2005
5. Rates Comment
6. And Finally...

1. Welcome

Poem of the Week

Comeback

My father loved first light.
He would sit alone
at the yellow formica table
in the kitchen with his coffee cup
and sip and look out
over the strait. Now,
in what could be
the end of my life, or worse,
the life of someone I love, I too
am addicted to slow sweet beginnings.
First bird call. Wings
in silhouette. How the steeples
of the evergreens make a selvage
for the gaunt emerging sky.

My three loves are far away
in other countries,
and one is even under
this dew-bright ground
where the little herds
of jittery quail peck
and scurry for their lives.

My father picks up his
cup. Light is sifting in
like a gloam of certainty
over the water. He knows
something there in the half light
he can't know any other way.

And now I know it with him: so much
is joining us in the dawn
that no one can ever be parted.
It steals over us because we left
the warm beds of our dreams
to sit beside what rises.
I think he wants to stay there
forever, my captain, gazing but not
expecting, while the world
begins, and, in a stark silent calling,
won't tell anyone what it's for.

Tess Gallagher from Dear Ghosts

New Readers this week include:-

Deborah Finch of the IUA in London
Hong Kong broker Geoffrey Cheng
Mr Raffone of the Generali in Argentina
Brian Richardson HSBC broker emiritus
Emiel Paay, ocean marine division of GenRe in London Simon Lang of BP
John Miles of the marine division of Basso London

News of Readers

Archie Smiley is no longer with General Maritime Management. He has moved from Greece and has joined Qatargas Operating Company Limited as Head of Technical Shipping in Ras Laffan. Contact him at:-

asmiley@qatargas.com.qa

Randy Cassingham, who publishes a very widely read e-zine called THIS IS TRUE, was recently asked to write about his Stella Awards, which shed light on the compensation culture of our times. His piece was squeezed out by breaking news so here it is for those who enjoy tales of the law and litigants running amok

http://www.stellaawards.com/sample.html

Readers Write

Mark Hooper from TruckPol at Scotland yard has sent in details of the latest lorry theft alerts:-

http://www.truckpol.com/alerts.htm

Note from the Editor

This week's edition is very container focused. The Germans have a very good word to describe people like your editor who tend to invest a lot in well defined subjects--

Fachidioten (specialised idiots).

Enjoy.

2. DWP's P&O Ports Deal

We have been following the events and furore behind the acquisition of P&O Ports with all due fascination, rather sharpened by the background knowledge we gained over many years' involvement with the liability insurance of the parties.

In some ways history and Australian pioneers were the underpinnings of the P&O Ports group, which really started as a consolidation of the container ports scene in the Antipodes in the 1980s, followed by the expansionary efforts of a group under captain Richard Setchell in the Sydney office in the 1990s. This go-ahead group were prepared to open joint ventures in all sorts of unusual locations like Vostochney, Buenos Aires, Manila, Sheckou, Irian Jaya to name but a few. We recall that these ventures seemed to involve more managerial skill than really heavy financial backing of the type available to the likes of Hutchison Ports Holding. The writing was on the wall once this promising amalgam of new and old business ventures was acclaimed as the core business of P&O and the management control was moved to London. Notwithstanding the levels of investment in China, India and the US, it seemed no time at all before the whole show was on the block, ready to earn the appreciation of shareholders.

The furore over (Arab) foreign control of US Ports is a curious coda to the convoluted story of P&O Ports. Many of us think of Dubai as a leading city state in the globalised world of international trade and finance, a place where the interests of commerce enjoy a standing unknown in the post-modern world--where shipping, transport, terminals and such things are rarely considered in the plans of politicians and where the law of unintended consequences is especially applicable to legislation.

It is thus unsurprising to learn that President Bush was not even informed of the DWP P&O Ports acquisition and when he did, he was unable to see any grave security implications. Nor to be honest can we given the ownership of terminals all over the country in the hands of Japanese, Koreans, Chinese and Danes. This ownership trend is fully consistent with events of the past 15 years. Like ocean shipping, the operation of terminals is more and more an industry focused on the Pacific and container trades where willing buyers are mostly to be found. Who will be the party determined to acquire the US situs port and terminal operations lately operated by P&O Ports?

3. World Shipping Council and Proposed EC 24 Hour Rule

We regularly receive the reports and presentations made by this industry body in Washington DC which has tended to supply measured guidance (usually by the President Chris Koch) for legislators minded to pass legislation or regulations relating to the international carriage of goods, a growth industry for the past few years. These have tended to relate to the US. However, in March the WSC has submitted views to the European Commission on customs (cargo risk analysis) proposals which remind the drafters that the IT infrastructure necessary for the measure (which the WSC supports) is not yet in place.

Read the representations at:-

http://www.worldshipping.org/reg.html#9

4. Dyna Liners Trades Review 2005

We received recently courtesy of Dirk Visser a copy of this annual review, which is one of the most intelligent documents of its kind. It manages to slice and dice the container industry into many kinds of information with extraordinary economy of phrase and prose. The digest of monthly news is always interesting to reflect upon, as are the lists of trades and routes which are always a fertile source of confusion for most of us. We especially admire the list of container lines which have ceased for one reason or another. The fact of consolidation in container trades means people like marine insurers face demands for higher and higher limits of liability, lower total premiums and higher catastrophic risks.

Altogether one of best annual documents in the industry and all for Euro 85.

http://www.dynamar.com/

5. Rates Comment

Charles de Trenck, the head of regional transport for Citigroup Investment Research writes from Hong Kong:-

We had Seaspan around Hong Kong yesterday (03MAR06), before they head back to the US. Comments further below:-

****

BTW, the NOL downward move 2 days post results shows how fickle share movements can be. Look at how OOIL has traded recently to see an inverse relationship...which is affected by variances in local sentiment.

Over time, until we can get an idea of the cycle bottom, we still see downward moves for the sector over all. Question is will we see a bottom in 2007...and then there is a whole debate on THE STRUCTURE OF THE BOTTOM depending on whether it is just about supply, or if demand also craps out (which depends on interest rates, oil prices, US consumer, US housing, etc).

(personal observation based on research view)

****

Couple of additional points:

1-Got a few queries yesterday regarding the proposed "rate hike" in Asia-Europe. Certainly it appears there was a bit of an effort on the PR side this week.

A) given how low spot rates are, the effort is not surprising, but proof is always in how they stick. One should expect some degree of implementation, though perhaps not 50% of ..."$+200/TEU for 1yr contract $+150/TEU for 6m contract..."
B) Companies implemented capacity controls in Jan w hich took out a substantial chunk...not surprisingly the claim is that utilization has gone up, but who knows...

2-Lease rates still reported in the dumps: for
long-term contracts recent deals...43 cents/day
(NE Asia carrier) 47cents (European carrier). Box prices recently down to $1400/TEU, but belief is that next box pricing will be higher following precipitous falls over recent months...

***

BDI rebounds: Since the big rebound a few weeks ago market has stabilized. Recent requests saw renewed focus on the level of rates and pace of long-term decline against share price performances

Container data: We broke down latest container price data last week. NOL 4Q05 core profits showed that against 4Q04 this was about a -30% performance. This should not have been a surprise (in fact result was about in line)

(Note: look at NOL vs OOIL performance recently...HK in general has been frothy relative to region for many shipping related)

Container capacity impact updates: Downward rates ripple effect: Rates to Australia now down about 50% in last year, with rates in recent weeks moving from US$700/TEU levels to US$500/TEU levels ('05: $1000+/TEU)

Company visits: Seaspan (SSW US; 1H; US$20.11), covered by John Kartsonas, was in Hong Kong and Asia for various events, and took time to meet with investors. Story remains one of seeking predictability in long-term asset financing in volatile industry

Contact Charles at:-

charles.detrenck@citigroup.com

6. And Finally...

Thanks to Paul Dixon's Joke of the Day for these well remembered tips

How To Eat Like A Child

Peas: Mash into thin sheet on a plate. Press back of fork into peas, hold fork vertically, prongs up, and lick off peas.

Mashed Potatoes: Pat mashed potatoes flat on top. Dig several little depressions. Think of them as ponds or pools. Fill pools with gravy. With fork, sculpt rivers between them. Decorate with peas. Do not eat. Alternate method: Make a large hole in center of mashed potatoes. Pour in ketchup. Stir until potatoes turn pink. Eat as you would peas.

Sandwich: Leave the crusts. If your mother says you have to eat them because that's the best part, stuff them into your pocket or between the cushions of the couch.

Spaghetti: Wind too many strands on fork and make sure at least two strands dangle down. Open mouth wide and stuff in spaghetti; suck noisily to inhale dangling strands. Clean plate, ask for seconds, and eat only half. When carrying plate to kitchen, hold tilted so that remaining spaghetti slides onto the floor.

Ice Cream Cone: Ask for double scoop. Knock the top scoop off while walking out the door of the ice cream parlor. Cry. Lick remaining scoop slowly so that ice cream melts down outside of the cone and over your hand. Stop licking when ice cream is even with top of cone. Eat a hole in bottom of cone and suck the rest of ice cream out of the bottom. When only cone remains with ice cream coating inside, leave cone on car dashboard.

Spinach: Divide into little piles. Rearrange into new piles. After five or six maneuvers, sit back and say you are full.

Chocolate Chip Cookies: Half-sit, half-lie on bed, propped up by pillow. Read a book. Place cookies next to you on sheet so that crumbs get in bed.As you eat the cookies, remove each chocolate chip and place it on your stomach. When all cookies are consumed, eat chips one by one, allowing two per page.

Milkshake: Bite off end of paper covering straw. Blow through straw to shoot paper across the table. Place straw in shake and suck. When shake just reaches your mouth, place a finger over top of straw - the pressure will keep the shake in straw. Lift straw out of shake, put bottom end in mouth, release finger, and swallow. Do this until straw is squashed so you can't suck through it. Ask for another straw. This time shoot paper at the waitress or waiter when they aren't looking. Sip your shake casually until there is about an inch of shake remaining. Then blow through straw until bubbles rise to top of glass. When your father says he's had just about enough, get a stomach ache.

PS--Planning and Policy

Thanks to Frazer Hunt and the first Book of Moses for these insights into the ways some organisations are wont to act:-

In the beginning was the plan
And then came the assumptions
And the assumptions were without form
And the plan was completely without substance
And darkness was on the face of the workers
And they spake amongst themselves, saying:
"It is a crock of sh*t and it stinketh!"
And the workers went to their supervisors and sayeth unto them: "It is a container of excrement and it is very strong such as none may abide it!"
And the managers went to their directors and sayeth: "It is a vessel of fertiliser, and none may abide its strength!" And the directors went to their vice-presidents and sayeth: "It contains that which aids plant growth, and is very strong!" the vice-presidents went unto the president and sayeth unto him: "It promoteth growth, and is very powerful!"
And the president went to the board of directors and sayeth: "This powerful new plan will actively promote growth and efficiency of the department, and this area in particular!" And the board looked upon the plan, and saw that it was good. And the plan became policy.

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