QATAR RECOVERING FROM SLUGGISH GULF SANCTIONS

Sluggish July imports in Qatar show sanctions still hurting economy

Hamad port is pictured in Doha, Qatar, June 14, 2017 (Sources: Reuters)

DUBAI (Reuters) - Qatar's imports recovered only slightly in July after plunging in June, government data released on Thursday showed, suggesting the country's economy is still suffering from sanctions imposed by other Gulf states. Saudi Arabia, the United Arab Emirates and Bahrain cut diplomatic and transport ties with Qatar on June 5, accusing Doha of supporting terrorism, which it denies.

The closure of the Saudi border with Qatar and disruption to shipping routes via the UAE slashed Qatar's imports by 37.9 percent in June compared with May, forcing Doha to scramble to arrange new shipping routes and import some goods by air. Thursday's figures showed Qatar is still far from restoring its imports to normal. Imports recovered by only 6.3 percent month-on-month to 6.24 billion riyals ($1.71 billion) in July; they were 35.0 percent below their level in July 2016.

Much of the disruption appears to be to big-ticket items. Imports of aircraft parts were down 40.5 percent from a year ago at 292 million riyals in July. The diplomatic crisis has deprived Qatar Airways of two of its biggest markets, Saudi Arabia and the UAE.

Incoming shipments of equipment and building materials for Qatar's big infrastructure projects may also have slowed in some cases. Imports of gas turbines dropped 19.8 percent from a year ago to 328 million riyals. Many dairy products and other perishable foods used to be imported across the Saudi border. Although there are no reports of food shortages in Qatar, disruption to imports appears to be pushing up food and drink prices, which rose 4.2 percent in July from June, data released last week showed.

Thursday's trade figures suggested the sanctions are not affecting Qatar's natural gas exports - July exports of petroleum gases and other gaseous hydrocarbons rose 7.8 percent from a year ago - and are no longer slowing other exports much. As a result, Qatar's trade surplus expanded 78.1 percent from a year earlier to 11.91 billion riyals in July, although it edged down 4.8 percent from the previous month.



Analysts think the sanctions damage should ease in coming months as new shipping routes develop. Qatar Navigation launched a direct Qatar-Turkey service this week after starting a container service to Kuwait last week; construction of a food processing and storage facility at Qatar's Hamad Port received $440 million of bank financing this week.

A Reuters poll of analysts published last month found them still expecting the Qatari economy to be one of the region's strongest performers in 2017 and 2018.

MOL, NYK TO JOIN NEW SHIPPING MERGER DESPITE EARLIER BLOW

TOKYO — In a fresh sign of the economic fallout from weaker global trade, Japan’s three largest shipping companies agreed on Monday to merge a major portion of their businesses, saying they needed to join forces to survive.

The president of one of the companies, Nippon Yusen Kabushiki Kaisha, said the groups faced bleak prospects on their own. The shipping industry was shaken in August by the bankruptcy of South Korea’s biggest container shipping line, Hanjin Shipping, while other shipping companies in Asia, Europe and the Middle East have sought to protect themselves through mergers and acquisitions.

“If we don’t want the number of Japanese shipping companies to be zero, we need to create one strong, splendid company,” the president of Nippon Yusen, Tadaaki Naito, said at a news conference.

By combining their container operations in a joint venture, the three companies — the others are Kawasaki Kisen Kaisha and Mitsui O.S.K. — will create a business worth about 300 billion yen, or $2.9 billion, according to a news release. It will operate 256 ships, representing about 7 percent of the global market by container volume. Kawasaki Kisen and Mitsui O.S.K. will each own 31 percent of the new company, while Nippon Yusen will own 38 percent.

They said they expected combining their fleets to save about ¥110 billion per year. The deal is expected to be complete by July 1, with operations beginning in April 2018. The companies’ bulk-shipping lines, which transport cargo like grain and iron ore, will remain independent.

Continue reading the main story
The global shipping industry has struggled with a soft global economy, which has reduced both the amount of consumer goods traded around the world and the prices that shipping companies can charge. The 2008 global financial crisis hit trade volume, and trade flows since then have been weaker than expected as Europe muddles through debt problems, the United States experiences a soft recovery and China’s heady growth rates slow.

A shipbuilding spree that took place before the crisis has exacerbated the problem. Shipping lines set plans a decade ago to buy more ships and expand at a time when trade looked strong, and today they have far more capacity than they can profitably use.

Shipping lines have explored consolidation and alliances as a result. CMA CGM of France is acquiring Neptune Orient Lines of Singapore, the German shipping line Hapag-Lloyd AG agreed this year to merge with United Arab Shipping Company, and several mergers have taken place among state-owned shipping businesses in China.

But regulators around the world have heavily scrutinized the industry and its proposed mergers, often asking whether such tie-ups will lead to higher shipping rates for customers.

Perhaps anticipating such scrutiny from Japanese regulators, Eizo Murakami, president of Kawasaki Kisen, acknowledged that the three-way tie-up would reduce competition. But he said consolidation elsewhere in the industry only made it more crucial.

“This is a big decision, since it will create what will be the only container-shipping company in Japan,” he said. “But with the European industry consolidating and the business becoming more of an oligopoly, we need the scale that being a single company would provide.”

COSCON BUYS OOCL IN NEW MERGER

https://www.bloomberg.com/news/videos/2017-07-10/costco-offers-to-buy-orient-overseas-for-6-3b-video

COSCON BUYS OOCL FOR USD 6.3 BILLION & OOCL STILL KEEPS BRAND

Chinese shipping line, unit make offer at HK$78.67 per share
Controlling shareholders Tung family have agreed to sell

Cosco Shipping Holdings plans to buy Orient Overseas Container Line (OOCL) with the help of Shanghai International Port Group (SIPG) for $6.3 billion, in a deal that would maintain the Hong Kong carrier’s brand and marks a new chapter in ongoing industry consolidation.

The deal, subject to regulatory approvals, culminates long-running speculation that Cosco would purchase OOCL, a carrier seen by some analysts as the only attractive takeover target of substantial size remaining in the market following rapid carrier consolidation over the past year and a half.

The combined Cosco Shipping, a subsidiary of Cosco Shipping Holdings, and OOIL would have a fleet of more than 400 ships and a total capacity of 2.9 million TEU including the orderbook. Together, Cosco and OOCL would operate the third-largest mega-ship fleet and be the second-largest mover of US containerized goods would be created, according to an analysis of PIERS data and the IHS Markit orderbook.

Under the deal, OOIL would keep its Hong Kong corporate headquarters and the independent share listing. It would also put off any headcount reductions at OOIL for at least 24 months, Cosco said in a statement. Cosco acknowledged the separate and distinct culture that has led OOCL to become of the industy’s best performing and highest regarded carrier in the eyes of BCOs, and clearly indicated that was an important part of the value it was acquiring.

“We respect OOIL’s management team and its expertise, not to mention its people, brand and culture,” said Wan Min, chairman of Coscol Shipping Holdings.

By leveraging the strengths of each company and achieving synergies, the businesses aim to enhance their operating efficiencies and competitive positions to achieve sustainable growth in the long term. Both companies are members of the Ocean Alliance, and will continue to work together under this framework.

“We are proud of the business we have built and the people who have been building it. This decision has been carefully considered and we believe it helps ensure the future success of OOIL. We are confident that Cosco Shipping Holdings is the right partner for us,” OOCL CEO Andy Tung said Sunday.

It came as little surprise that Cosco would maintain OOCL as a standalone brand. OOCL is known for a high quality of service relative to many of its competitors, as well as strong BCO relationships, and CMA CGM and Maersk Line have maintained the APL and Hamburg Sud brands, respectively, after their acquisitions. Given legacy cultural differences — Cosco being a Beijing state-owned enterprise and OOCL a fully commercial, standalone business — a full integration would be seen as extremely difficult. Even prior to the acquisition, Cosco and OOCL were drawing increasingly closer particularly in their participation in the Ocean Alliance.

The deal continues what has been a breakneck pace of consolidation in container shipping and raises further questions about the surviving carriers’ ability to parlay that concentration into pricing power. Rates overall have been on the upswing this year, but that can be easily attributed to capacity dislocations as the new alliances phased into service in April, as well as accelerating trade growth driven in part by Europe's economic recovery, the sustained US recovery, and economic growth in many developing markets, bolstering the slowing but largely uninterrupted growth in China.

Given carriers’ history of predatory rate wars with the ultimate — in some cases overtly stated — purpose of knocking competitors out of a market or out of business entirely, a cultural shift by carriers into an oligopoly environment will not occur overnight or easily, especially under the harsh gaze of antitrust regulators, principally in the United States and Europe.

In maritime analyst Drewry’s analysis of rates across the first half of the year, it found that its Global Freight Rate Index across a wide spectrum of trades was 36 percent higher after six months of 2017 versus the same period in 2016. However, Drewry did note that last year was exceptionally poor for carriers trying to secure compensatory rates, and when compared with the first half of 2015, spot rates for the first six months of 2017 were still 4 percent lower.

Nevertheless, rate increases on the spot market have been more muted in the eastbound trans-Pacific, where spot rates are up 33 percent from last summer, compared to the Asia-Europe trade lane, where the increase is 61 percent. Other, smaller trade lanes such as Asia to Brazil have seen huge increases in recent months.

There is little evidence thus far that industry concentration by itself is has translated into any kind of unspoken truce by carriers in pricing. But that said, carriers’ vessel ordering has slowed significantly and industry analysts are predicting that by 2019 the market could turn decisively in carriers’ favor, again not due to concentration by itself, but rather a slowdown in capacity additions combined with stronger trade growth driven by healthier economies in Europe and North America, and a steadily growing middle class in China.

Cosco, for example, earlier this month told its investors they can expect a $272 million profit for the first half, turning around a $1 billion loss recorded in the first six months of last year as the carrier benefits from rising container volume and freight rates. Cosco said its average freight rates in the container shipping business increased in the first half year over year, with cargo volume growing by 34.72 percent, driving up profitability.

OOCL reported a $273 million loss in 2016 as weak freight rates dragged down the average revenue per TEU by almost 19 percent to just $774 per container. Although it did not disclose earnings for the first quarter, Cosco on April 28 reported volume rose 7 percent year over year, while revenue increased 6.4 percent, to $1.18 billion. Overall revenue per TEU, however, slipped 0.6 percent from first-quarter 2016.

NYK LINE, MOL, K-Line MERGER TO FORM OCEAN NETWORK EXPRESS REJECTED

The South African Competition Commission has rejected the merger of the container divisions of NYK, MOL and K Line to create Ocean Network Express.

In South Africa, NYK operates its shipping business through the Mitchell Cotts Maritime agency; MOL through subsidiaries MOL South Africa and MOL ACE South Africa; and K Line though K Line Shipping South Africa.

The SA commission judged that on the evidence of past collusion between container shipping firms, the merger would have led to an increased likelihood of further anti-competitive behaviour.

“The commission has found that the structure of the container liner shipping market is conducive to coordination, based on previous collusive conduct in the container liner market in other parts of the world.

“The merger increases the likelihood of coordination as it creates further structural linkages in the container liner market,” it said.

While the creation of Ocean Network Express was solely limited to the shipping companies’ container businesses, the commission also looked at whether it would affect the car-carrying business, especially after the car-carrying divisions of all three were found to be part of price-fixing cartel,  which also included Hoegh, Walenius Wilhelmsen, EUKOR and CSAV, in the inbound US trade.

“The commission also found that the proposed transaction creates a platform for coordination in the car carrier market which has a history of collusion involving the merging parties. The parties have been prosecuted in some jurisdictions, while investigations are underway in others. It is the commission’s view that the merging parties may require a formal mechanism for the further collusive conduct in the car carriers market. The joint venture provides such a mechanism.

“The commission is of the view that the proposed transaction is likely to increase the scope for coordination in the container liner shipping market, while creating a platform for coordination in the car carrier market.

“The commission further found that there are no efficiencies that outweigh the anticompetitive effects of this transaction and that there are also no remedies sufficient to address these effects,” it said.

The proposed Ocean Network Express also continues to await a decision from the US. Last month, the Federal Maritime Commission (FMC), to which the lines had submitted their merger proposals, decided it could not rule on mergers, as they are de facto acquisitions.

FMC chairman Michael Khouri said: “The Shipping Act expressly excludes acquisition agreements from the act’s coverage. The cases that address the commission’s authority to review these types of agreements have noted that Congress gave the commission the power to review cooperative agreements that produce efficiencies, in order to prevent consolidation.

“This proposed agreement is not the type of arrangement in which the parties would surrender control over a particular matter for the duration of the agreement but maintain their separate identity and original independence in the same line of business in all other respects. Thus, the commission has determined that the creation of the joint venture, including the pre-consolidation cooperation intended to facilitate and permit its creation, falls outside the commission’s jurisdiction.”

MAERSK IN CYBER ATTACK

“We can confirm that Maersk IT systems are down across multiple sites and business units due to a cyber attack,” it said on its website. “We continue to assess the situation. The safety of our employees, our operations and customer’s business is our top priority. We will update when we have more information.”

Ukraine’s government, its National Bank and large power companies have also been affected, as has Russian oil company Rosneft, and Kiev Airport.

The airport noted: “Our IT services are working together to resolve the situation. There may be delays in flights due to the situation… The official site of the airport and the flight schedules are not working.”

According to media reports, companies are receiving a ransomware note in English, demanding $300 in Bitcoin, similar to the recent WannaCry ransom.

Maersk Line UK informed customers via Twitter in the morning that: “Unfortunately our computer systems here in the U.K. & Ireland are down. Our phone systems are live and we’re on hand to answer any Q’s.” It only admitted to a cyber attack several hours later. Subsidiary Damco’s website appeared to be working normally, however.

MV THERESA ARCTIC SALVAGE UNDERWAY IN KENYAN COAST : KILIFI

Product tanker THERESA ARCTIC ran aground on reefs in the afternoon June 20, in position 03 39S 039 53E, off Kilifi port, Kenya, north of Mombasa Port of Kenya. Vessel loaded with 27500 tons of vegetable oil was en route from Port Klang Malaysia to Mombasa, says Andrew Mwangura, Mombasa.

As of June 26, vessel was still aground, Smith Salvage and local company Alpha Logistics contracted for salvage, four tugs were already deployed, but reportedly, lightering is required. No information on hull breaches and leak, understood no leak yet. Crew remained on board.

Understood on a photo from The Star Kenya grounded THERESA ARCTIC.

Product tanker THERESA ARCTIC, IMO 8715508, dwt 84040, built 1988, flag Tuvalu, manager (according to AIS) RAFFLES SHIPMANAGEMENT SERVICES PRIVATE LTD, Singapore.

NEW SHIPPING CONCEPTS COLLIDE WITH AGING INFRASTRUCTURE

QATAR BEING SERVED BY MAERSK, MSC FEEDER FROM SALALAH (OMAN)

Hundreds of containers on their way to Qatar from Oman

A Qatari food company owner said shipments began arriving on Sunday from Oman, and that about 12 vessels were headed to Qatar from Sohar and Salalah.

"There are around 300 containers of fresh and frozen food coming. Some have arrived and the others are on their way," Ahmed al-Khalaf said.

He said containers at Jebel Ali port of the United Arab Emirates were still stuck, but that others, including from Europe, were being diverted to Oman's ports.

The world's number 1 container line, Maersk of Denmark, said on Monday it would accept new bookings for container shipments to Qatar from Oman.

Swiss-based MSC, the world's number 2 line, said it would deploy a new dedicated shipping service to Qatar from Salalah.
                                                        

Last week, Qatar Ports Management launched a new direct service linking Hamad port in the Qatari capital with Sohar Port in the Sultanate of Oman.

At a press conference held at Hamad Port, Qatar Ports Management said: "In light of the recent developments in the region, Mwani Qatar (Qatar Ports Management) and its partners have ensured the business continuity of its ports and shipping operations in and out of Qatar to mitigate the impact of any action that would affect the imports and exports to and from the country."

The service will operate three times a week and journey's will take up to one and a half days.

In an advisory released Sunday, the UAE’s transport authority suggested that the Emirates no longer bars non-Qatari vessels that are engaged in Qatari trade from entering UAE ports – an important development in the ongoing dispute, as the Emirates’ Port of Fujairah is home to the region’s main bunkering facility.

“This notice differs in substance to notices which have been issued by some of the ports within the UAE during the course of the last week,” commented law firm Ince & Co. in a client advisory. “Of particular relevance is the fact that there is no reference to vessels not being given port clearance if the last port of call or next port of call is Qatar, This could mean that vessels which have loaded in Qatar and wish to bunker in Fujairah may be able to do so.”

The announcement still forbids UAE ports from handling any cargo of Qatari origin, receiving any Qatari-owned or -flagged vessel, or loading any cargo of UAE origin bound for Qatar. The transport authority called on “those concerned to implement strictly .”

Oman emerges as a transshipment alternative

The Qatar Ports Management Company announced Sunday that it has initiated two new container services between the Omani ports of Sohar and Salalah and Hamad Port, Qatar. The UAE’s shipping ban has stranded thousands of Qatari containers in the Emirates, as most normal transshipment services to and from Hamad are routed through Jebel Ali and Khalifa Port. The new substitute feeder routes from Oman will each run three times a week. Maersk Lines, Evergreen, OOCL and COSCO had all announced service suspensions to Qatar and stopped accepting shipments bound for Hamad Port.

With transshipments routed through Oman, Maersk has since resumed all normal operations; in a statement Monday, number two carrier MSC proudly noted that it never stopped accepting consignments, unlike competitors.

The new feeder services will ease pressure on Qatar’s supplies of fresh and frozen food, which the tiny nation of three million obtains through imports. Iran and Turkey have been flying provisions into Doha as an emergency measure, but with a sea route reopened, at least 300 containers of food supplies are now on their way, trader Ahmed al-Khalaf told Reuters.