INTERNATIONAL MARITIME

'S

)
CONTAINER SHIP FLEET FORECAST Deliveries of ships, by class, scheduled over nexi three years.*

0 326

0 t,365.)81

0 347

0 1,624,242

0 230

0 1,586,656

0 132

0 984,439

"Based on orderbook as of Oct. I. 2009 Source: AXS-Alpholiner, www.axs-alphaliner.com

By Peter T. Leach lllllllinilMMIIItllllllllhllMIIIIIIMItlllllllllltlMIMIIIMIlllllMDIIII

The five carriers have a lot uf clout becaii.se they charter 478 ships totaling 1.3 miilion TEUs, and their success in cutting payments will stiffen tho resolve of rivals seeking their own deals with owners. Meanwhile, the fleet of idled vessels controlled hy charter owners has reached a record high of more than 6S0,<)00 TEUs and, for [he first lime, has {>\ ertaken the numher of johless carrier-owned ships. Slumping rates, shortening fixtures and rising unemployment have created panic among Germany's KG investment companies that dominate the global charter market. More than 100 KG companies reportedly are seeking fresh funding from mainly small private investors to stave off bankruptcy and to finance payments on the estimated 200 vessels worth more than $10 billion on order. The prosfwctoffurther rate cub;, the growing pool of idle ships currently more than 10 percent of the world Heet and looming distressed sales of ships at bargain-basement prices are spurring attempts to launch new lost-cost services in niche markets where the established carriers can't easily compete. That's thegame plan of The Containership Company, which has attracted Fredriksen's attention. The idea is simple: Charter and/or buy ships at giveaway rates and prices to operate a no-frills point-to-pointser\'icein container shipping's equivalent of Southwest Airlines or Ryanair in Europe.

Fredriksen already has dipped into the container charter market, has a few ships on order and is indirectly involved on the carrier side as the biggest shareholder in TUI, the largest shareholder in Hapag-Lloyd and the top contributor to tlie carrier's rescue package. However Fredriksen's next move plays out. The Containership Company likely will operate on the margins and won't bave a major impact on the mainstream container market, yet still couki giw shippers increased option.s. Charter owners are more interested in Project developers and the prospects for their clients, the bigocean cargo carriers see the carriers. The short-term outlook appears grim. "It is unlikeiy there will he any signifi- country as the next China if cant recovery until the demand side dealer challenges can be overcome cuts a new deck," said Martin Stopford, bead of research at Clarkson. U BS, the Swiss bank. A SPATE OF new orders from one of the expectstheindustrywhich is heading for a world's most rapidly developing markets collective loss of $20 billion this year will promises to sustain project cargo carriers book accounting profits in 2012 and economic just as they near tbe end of orders that have profits n 2015. kept them busy through the recession. Carriers likely will stagger until then Brazilcouldbe the next China if it can thanks to consolidation, financial restruc- surmount the many challenges standturing and. in some cases, government aid. ing in the way of its development poor For scores of charter shipowners, bankruptcy" infrastructure, currency fluctuation, high appears an inevitable outcome of container poverty rates, low I iteracy, red tape and pershipping's deepest recession. vasive corruption. But their ships will remain to haunt an If Brazil can overcome these barriers, overtonnaged market, joc it will fulfill its promise asa member of tbe BRIG eountries Brazil, Russia, India and iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiKiiiiitiiiiiiiiiiiiiiiiiiiiiiiiiiiiiimiiiiiiiiiiiiiiiiii Bruce Barnard can be contacted Cbina that are expected to become drivat brucebarnard47@hotmail.com. ing forces in the world economy, according

BRAZIL:

LAND OF OPPORTUNITY

www(.|oc.com

THE JOURNAL OF COMMERCE 33

kmHrniiii

INTERNATIONAL MARITIME

to a panel at The Journal of Commerce's 20th annual BreakbulkConferences Exhibition in New Orleans on Oct. 14. "Brazil isarisingeconomic star, and the nextfiveyears will prove it," said Ed Bastian, director of global sales for BBC Chartering USA, a Houston-based project carrier that serA'es Brazil. "Its credit ratingis strong, and there isa lot of investment from the rest of tbe world." The huge oil, refining, mining and power-generation projects on the drawing boards already are attracting foreign investment and tbe engineering, procurement and construction (EPC) companies needed to build the projects. Lupercio Torres Neto, director of Mammoet Irga do Brasil, said private and government spending on industrial projects and infrastructure is projected to total S285 billion between 2010 and 2015. Mammoet supplies cranes for overweigbt and oversize cargo. Most of the money will be spent on offshore oil and gas development. Stateowned oil company Petrobras expects to invest about $92 billion to develop tbe 80 billion-barrel Tupi oilfield,wbich lies about 4.5 miles beneath tbe surface of the Atlantic. 50 miles east of Rio de Janeiro. Petrobras also will develop the huge reserves in the .so-called pre-.salt region, 170 miles offshore. Brazil also is investing heavily in building up its refinery capacity. "We don't want tobe just an exporter of crude oil," Torres said. "We want to move up the value chain." A new deep-water multipurpose port at Acu in the state of Sao Joao de Barra north of Rio will be built over the next three years. Private investment totaling $l.f) billion will pay for the project equipment required to supply the drilling rigs and platforms needed to develop the oil fields. Tbe project includes sbipyards to build offshore vessels and rigs. SpLUTL'd by Cbina's ongoing demand for iron ore, Brazilian companies are investing heavily in iron ore mining projects. The country's largest mining company.
34 THE lOURNAL OF COMMERCE www.jot.com

BRAZIL'S PROIECT BOOM Projected investment in Brazilian industrial projects, 2010-I5, in billions of U,S. dollars Offshore oil development New refineries Hydroelectric plants Mining Steel mills Refinery modem ization Power transmission lines Nuclear power plants Chemical/petrochemical plants Thermal power plants Wind farms 0 30 60 90 120 150

Source: Mommoei trga do Brasil, www.mammoetxom

"The World Cup and the Olympics will present the opportunity to Brazil to stay in the spotlight."
Vale do Rio Doce, recently acquired Rio Tinto"s Brazilian iron mine and is investing $2 billion to increase its production. Another Brazilian mining company. MMX Mineracao e Metlicos, is spending $3.6 billion to develop an iron mine in M inas Grais and to build a pipeline to carry tbe ore in slurry form to a new steel mill being built by Cbinese steelmaker Wuban at tbe new port of Acu. Steel would be shipped from Acu to overseas markets. Breakbulk Conference panelists empbasized the hurdles project developers and shippers face in Brazil. Chief atiiong tbese is Brazil's dilapidated road and rail networks, said Gustavo Kolmel, vice president for Latin America of Crane Worldwide Logistics, a Houston-based forwarder tbat handles project cargo shipments. "The country has only 18.000 miles of road, and tberc are places that are in tough sbape." Brazil's railrtiad network is rendered even more inadequate by its tbree different rail gauges, wbicb were huilt by Frencb, Portugitcse and Britisb engineers. "You have to transfer from one system to another." Koltnel said. "We've been trying to change it for 30 years." Despite the challenges, projects in Brazil present irresistible opportunities to EPC companies and project cargo carriers. And if the $285 billion in project investment were not enough, tbo 2014 World Cup Games and tbe 2016 Olympic Games will dangle another pot of gold. The government plans to spend more than $42 billion on infrastructure development to get ready for tbe World Cup Games tbat will be spread among the 12 host cities; almost half will be spent in Sao Paulo. It plans to spend anotber $11 billion on infrastructure to prepare for the Olympics, wbicb are likely to inject $52 billion into tbe economy. "Look at tbe impact of tbe BeijingOlyinpies on China." Kolmel said. "The World Cup and the Olympics will present the opportunity'to Brazil to stay in tbe spotlight." loc
imiiiiiriiiiiiiiiriitiiKiimiiiiiiiiiiiinimiiiiiiiiiiiimimiiiMiiiiiiiiiiiiiiiiDiiiDiiinimi Contact Peter T. Leach at pleach@joc.com.

OCTOBER 26.2009

From JoC Week / http://www.joc.com. 2009 United Business Media Global Trade. All rights reserved. Copyright of Journal of Commerce (15307557) is the property of Commonwealth Business Media, Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.