Ports: We punching above our weight

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Not true in S’pore

“The challenge is, if we want European levels of welfare payments and public spending, you cannot finance that with American levels of tax rates,” said Lord Mervyn King, former governor of the Bank of England, to the BBC recently.

As Chris Kuan, the retired chief economist of GIC and many others have said, we can have our welfare cake and eat it by making our reserves work harder.

How the PAP can help the poor, grow the economy and win votes while being “prudent” with our reserves

Budget: Consistently flawed/ Use more from Reserves meh?

And remember. WE, funded up the reserves not our millionaire ministers:

How we fund our SWFs

Budget: Consistently flawed/ Use more from Reserves meh?

Property sales also fund our SWFs

https://atans1.wordpress.com/2010/11/19/property-sales-also-fund-our-swfs/

End of piece.

——————————————————–

IGNORE the repeats. Bit spastic in editing.

Property sales also fund our SWFs

Property sales also fund our SWFs

Good news on inflation

One aspect, the cost of shipping goods by ship, is coming down

Why are there port delays?

Further to PSA: The Good and the Bad. the u/m explains why there are delays and why there’s a vicious circle.

PSA: The Good and the Bad

Our ports don’t have the problems that some other major ports are facing. Delays here are relatively minor.

But PSA isn’t that efficient. Two of M’sia’s nearby ports are a lot more efficient.

But to be fair, they most probably don’t have much business most of the time. S’pore is bunched together with many other busy ports.

Mkts: A note of caution

It is inching up this week.

Suez Canal disruption costs

Oil is at US$100

No, not fake news

New shipping fuel rules push specialised oil towards $100 a barrel

Regulations are dripping with good intentions but come at a cost

Recent FT headline

 

Changes to shipping fuel rules mean that a few select grades of crude have risen back towards US$100.

Pyrenees, an Australian crude produced by the BHP Group was selling for almost US$95 a barrel, with refiners happy to pay up because its a heavy thick oil that is also low in sulphur. Tackling climate change and pollution are the reasons given for changing fuel roles.

Consumers will ultimately pay because shipping cos will pass on the cost.

 

Akan datang: Drones to supply ships in harbour

Next month, in Singapore, a drone made by Airbus, a European aerospace group, will begin ferrying supplies and spare parts to ships moored offshore. Airbus is working on the project with Wilhelmsen, a marine-services company. Wilhelmsen reckons that using drones will reduce delivery costs to vessels by up to 90%, and will be safer than employing launches to carry those deliveries by sea.

https://www.economist.com/science-and-technology/2018/10/23/fast-food-via-drone-takes-flight

Meritocracy? What meritocracy?

Double confirm: Paper general made Temasek and other NOL shareholders poorer too.

Not that Ho Ho Ho or other S’porean decision makers seem to care. Good luck SPH shareholders.

More evidence that NOL was sold when the cycle was about to turn &Sale completed in mid 2016).

Deutsche Bank is turning positive on Asia Pacific’s shipping sector with the strongest preference for the container sub-segment, followed by tanker and dry bulk.

This comes on the belief that industry conditions have now fundamentally turned, with the peak in deliveries of mega vessels and the recent acceleration of industry consolidation in recent years, which in turn means operators have the potential to achieve stronger price discipline.

https://www.theedgesingapore.com/tide-turning-favour-regions-shipping-sector-says-deutsche

Meritocracy? What meritocracy?

— Why PAP doesn’t do accountability, meritocracy

— Meritocratic hubris/ Who defines “meritocracy”

 

Why S’pore’s growth is so gd this year

And next yr’s should be better.

Nothing to do with the PAP administration.

All down to the recovery in global trade.

Since 2010 global trade has, by and large, shown only lacklustre growth. Once expected to grow regularly at 1.5-2 times global gross domestic product, trade has been growing at, or even below, the rate of broader economic output in recent years, prompting some to proclaim the end of an era of “hyperglobalisation”.

This year is expected to be the best in recent history for global trade. The WTO in September upgraded its forecast for world trade growth, predicting it would expand by 3.6 per cent in 2017. That is largely the result of a better global economy. For the first time since the crisis all of the world’s major economies are in relatively rude health.

FT

Don’t overleverage in property

But the recovery in global trade remains far from a boom and there are still plenty of signs of fragility.

FT again

And yes the scholar and SAF general now running SPH screwed up big time when in ran NOL. selling it when the cycle was turning.

What Mad Dog Chee doesn’t say about S’pore’s major OBOR project

(Yup it’s pak Mad Dog time: fourth Mad Dog piece in a row.)

Mad Dog and other anti-PAP nuts don’t tell us (Because they don’t know? Or they like PAP, like to “hide” inconvenient facts?) that there’s a 2016 Chinese agreeement to invest in three new megaberths here which will ensure S’pore maintains its position as a major port along One Belt One Road and global maritime routes.

Hong Kong-based COSCO Pacific and PSA Singapore have signed a new investment agreement in Shanghai, China today to co-invest in three new mega berths at the Phases 3 and 4 expansion of the Pasir Panjang Terminal which was opened last year.

The investment will be implemented through a joint venture Cosco-PSA Terminal (CPT) and allow for the arrival of mega container ships at the new container berths in anticipation of trade growth and growth in size of boxships plying the international waters.

The new mega berths are slated to begin operations from 2017. According to PSA, they will be fully integrated with PSA’s infrastructure and supported by the automated and intelligent port technologies.

“The co-investment agreement is strategically important to both partners and will help them up their competitive game. It is also a clear demonstration of China COSCO Shipping’s confidence in Singapore as a well-connected transhipment hub. I believe the project will also contribute positively to China’s Maritime Silk Road initiative and “One Belt, One Road” vision,” said Singapore’s Senior Minister of State for Finance and Transport, Josephine Te0.

More

Not inviting S’pore to Xi’s big OBOR summit shows up the PAP claim that S’pore’s an old and valued friend of China, but the Cosco deal shows that the Chinese will do business that is mutually benefical, not juz when the other side licks China’s ass.

Got that Mad Dog and other anti-S’pore loonies? Mad Dog and other anti-S’porean S’poreans want S’pore to lick China’s ass to get OBOR biz. S’pore already licks US’s ass, but let’s not make ass licking a habit. It’s unhygenic.

Slow train from UK to China: See who’s running it

I’m surprised the cybernuts are not saying that this shows S’pore is doomed, doomed. They most probably don’t read anything other than “The Idiots — S’pore” and TRE and ST. Even Terry’s Online Channel is too cheem even if it advocates “pak police” (OL OK “Diss police”)

The first rail freight service from the UK to China has departed on its 17-day, 7,500-mile journey.

British goods including soft drinks, vitamins and baby products are in the 30 containers carried by the train, which will be a regular service.

The DP World locomotive left its terminal in Stanford-le-Hope, Essex, for Zhejiang province, eastern China.

http://www.bbc.com/news/uk-39549077

Seriously waz interesting is that the train is run by a port co that is a global rival of PSA: DP World or Dubai World.

HoHoHO got this right

Selling NOL to the French Swiss shipping group Mediterranean Shipping

The gorilla in shipping had a bad time. Remember it had been making money while a scholar, and ex-Temasek MD and SAF general ran NOL aground.

Maersk Line slipped to a loss of US$376m from a profit of US$1.3bn a year earlier due to record low freight rates. It expected improve its result by US$1bn while global container trade should increase by 2-4%. This is well below the double-digit increases before the financial crisis.

Fake news about Chinese port investments here isit?

Recently the anti-PAP cybernuts have been gleefully predicting the economic demise of S’pore what with a recent spate of reports on Chinese initiatives

— China and M’sia to build a major port in Malacca;

—  China was looking to build the Kra Canal; and

— the first freight train to make the journey to the UK.

They are saying part China wants to take business away from our port ha, ha ha.

One Eugene Tavano has been particularly vocal on TRE especially on the freight train service, not realising are already regular train services* to Germany (and Spain I think), which have not affected S’pore’s port. But then cybernuts are like that: blur factually. Think Tan Jee Say (who compares our economy unfavourably with that of PeenoyLand instead of with HK, Taiwan or  South Korea), and Philip Ang and Roy Ngerng (on our reserves etc).

Eugene Tavano (What a Peenoy sounding name: FT here?) is also been very vocal on the M’sian port.

So maybe they know that the u/m is “fake” news? But when another cybernut posted links on Facebook about the M’sian port and Kra canal projects, gleefully predicting gloom for S’pore. I posted the u/m link on Chinese investment here and asked if was fake news? No response.

Most likely then the nuts don’t seem to realise that there’s a 2016 Chinese agreeement to invest in three new megaberths here which will ensure S’pore maintains its global ranking.

Hong Kong-based COSCO Pacific and PSA Singapore have signed a new investment agreement in Shanghai, China today to co-invest in three new mega berths at the Phases 3 and 4 expansion of the Pasir Panjang Terminal which was opened last year.

The investment will be implemented through a joint venture Cosco-PSA Terminal (CPT) and allow for the arrival of mega container ships at the new container berths in anticipation of trade growth and growth in size of boxships plying the international waters.

The new mega berths are slated to begin operations from 2017. According to PSA, they will be fully integrated with PSA’s infrastructure and supported by the automated and intelligent port technologies.

“The co-investment agreement is strategically important to both partners and will help them up their competitive game. It is also a clear demonstration of China COSCO Shipping’s confidence in Singapore as a well-connected transhipment hub. I believe the project will also contribute positively to China’s Maritime Silk Road initiative and “One Belt, One Road” vision,” said Singapore’s Senior Minister of State for Finance and Transport, Josephine Teo.

COSCO Pacific is a subsidiary of China COSCO Shipping, which was formed following the merger of China‬’s two largest shipping companies, COSCO Group and China Shipping Group. The merger created the 4th largest container shipping line in the world.

Cosco Pacific and PSA formed Cosco-PSA Terminal Pte Ltd (CPT) in 2003 to manage and operate two berths at Pasir Panjang Terminal.

http://worldmaritimenews.com/archives/187056/cosco-pacific-psa-to-invest-in-mega-berths-in-singapore/

*Update at 2.00pm: The UK’s biggest supermarket, Tesco, doesn’t have any goods on this particular train but does use rail to carry toys, electrical goods, homeware and clothing from China to European rail hubs such as Bratislava in Slovakia and Krasnaje in Belarus.

BBC report

 

Why NOL was sold/ S’pore missed a bullet

We damned lucky that a 2008 deal to make it bigger failed:

Amid the structural changes in world trade, the driving forces behind industry consolidation have also changed. U.K. maritime and shipping industry research company Drewry said that consolidation before 2008 was driven by “a desire for growth.” But mergers in the past few years have been “more about survival and the need to address structural industry problems.”

The best example is Singapore’s Neptune Orient Lines, which was sold earlier this year to France’s CMA CGM, the world’s third-largest shipping company.

Until 2008, NOL was expanding fast. It acquired American President Lines, the biggest operator in the Pacific container trade, in 1997. In 2008, the Singaporean company made a serious bid for Germany’s Hapag-Lloyd, another major container transporter.

After eight months of talks, NOL walked away from that deal as the economic outlook darkened. But NOL failed to maintain cost competitiveness against other major lines, which reaped economies of scale by investing millions of dollars in huge new containerships. The company’s acquisition by CMA CGM underscores the difficulties facing midsize container lines in the current protracted downturn.

 http://asia.nikkei.com/magazine/20161124-S.O.S/On-the-Cover/Shipping-lines-plunge-into-a-war-of-attrition

Problems at upgraded Panama Canal

From NYT Dealbook:

A RISKY BET ON THE PANAMA CANAL The Panama Canal’s new locks will be on display this weekend, when heads of state congregate to see a Chinese container ship become the first commercial vessel to make the passage from the Atlantic to the Pacific.

But when the celebrations end, the future of the expanded canal will be cloudy at best, its safety, quality of construction and economic viability in doubt, Walt Bogdanich, Jacqueline Williams and Ana Graciela Méndez report in The New York Times.

A new canal needs enough water, durable concrete and locks big enough to safely accommodate larger ships. A Times investigation has found that the Panama Canal fails on all three counts.

The low bid for the project – a billion dollars less than the nearest competitor’s – made it precarious from the outset, according to a confidential analysis commissioned by the insurer for the four-nation consortium that built the new locks. “This is a high-risk situation,”wrote the analysts from Hill International in 2010.

As the project developed, it was mired in infighting, political firestorms and severe concerns about its physical structure.

The canal has made Panama, a country with few natural resources, crucial to global economics. It became a major banking, trading and airline hub, not to mention a transit zone for drug dealing and money laundering.

The consequences will be wide-ranging if the canal does not deliver. American grain and soybean farmers and producers of liquefied natural gas may find it harder to sell to Asian customers. Asian manufacturers may forsake the struggling ports on America’s East Coast, or they, and ultimately consumers, will shoulder the added cost of going the long way round, through the Suez Canal.

The canal’s success may also be undercut by the slowdown in global trade, especially from China.

Read The Times investigation into the problems that struck the $3.1 billion expansion project here.

NOL: The facts in two charts

Or why it was sold

Charts from FT

 

 

 

So what else could Temasek do?

 

Temasek right to sell NOL

FT reported sometime in January

it was widely assumed that global trade would keep expanding. Until recently, this assumption did not seem unreasonable. In the decade before 2008, global trade rose by an average of 7 per cent a year, faster than global GDP growth, because countries such as China were booming and western businesses were creating a web of cross-border supply chains.

History, however, does not unfold in predictable ways. As the World Bank described in a sobering report last week, global trade growth has slowed down sharply in recent years to around 3 per cent, or roughly the pace of global GDP expansion, and it is slowing further now.

How Maersk ate NOL’s lunch

It kept ordering bigger ships. These ships when operated drove down operating costs, allowing Maersk to undercut NOL and orher shipping cos. Bit like employers using FTs.

NOL: Problem for scholar, ex-general

In response to recent news that Neptune Orient Lines Ltd. is in acquisition talks withMaersk Group and CMA CGM SA, Moody’s Investors Service has warned A.P. Moeller-Maersk A/S not to pursue any acquisition, Bloomberg reports.

http://shipandbunker.com/news/world/149384-moodys-warn-maersk-on-nol-acquisition

“Maersk Line could possibly derive some synergies from an acquisition, but Maersk Line is one of the few profitable companies in the sector and it could dilute margins initially,” Marie Fischer-Sabatié, a senior vice president at Moody’s, told BloombergBusiness.

“Real consolidation could be positive for the cost structure of companies involved, but it would likely take more than just one or two mergers to materially improve the overall market conditions in the container market.”

“

It would likely take more than just one or two mergers to materially improve the overall market conditions in the container market

Marie Fischer-Sabatié, senior vice president, Moody’s

Last month, Maersk cut its 2015 forecast underlying profit by 15 percent to $3.4 billion, and as part of a cost-cutting strategy it will also slash up to 4,000 Maersk Line jobs and reduce network capacity.

Although he noted that the group’s base strategy is to grow organically, Nils S. Andersen, chief executive officer for Maersk, said he would “welcome any consolidation – that would only be healthy for the container line industry.”

Fischer-Sabatié believes the group is more likely to pursue acquisitions for its oil unit “because it needs to increase its reserve levels.

“If they find the right acquisition target, it could have a positive impact on Maersk Oil’s business profile.”

Despite Maersk’s challenges, Anderson recently pointed out that the group’s 2015 showing overall “reflects good performance in very challenging oil and container shipping markets.”

Maersk issues profit warning, NOL capsises

Maersk, the Danish shipping and oil firm, said it will probably make $600m (£389m) less profit than previously thought, as global demand dropped. 

The firm’s progress is seen as a good indicator of global trade, as shipping carries about nine tenths of the world’s trade, and Maersk Line is the world’s biggest container carrier.

Maersk will probably book $3.4bn in profit for 2015, it said.

Shipping companies were charging about $233 to move 20-foot containers from Asia to Northern Europe, a loss-making rate according to analysis by Reuters.

Maersk blamed the drop in earnings on slender container shipping margins. It makes about half its profit from running the Maersk Line.

“Maersk Line has been hit harder than expected by low capacity utilisation due to the low volume growth in the global container transportation market,” Sydbank analyst Jacob Pedersen said.

http://www.bbc.com/news/business-34612966

As Maersk Line consistently outperforms NOL (led by scholar, ex-SAF general and ex-Temask MD) does this mean NOL will capsise and sink without a trace when it reports results at the end of October?

Lui not the only ex SAF underperformer

“It’s almost like obituaries and eulogies without the flowers,” Transport Minister Lui Tuck Yew’s response to the flood of e-mail he has received since he said he was leaving politics.

He’s not the only ex-SAFer that consistently outperforms:

In July

Maersk Shares Jump on Strong Results and Share Buy-BackShares in Denmark’s A.P. Moller-Maersk jumped as much as 8.6 percent on Thursday after the shipping and oil group reported second-quarter profits ahead of forecasts and started a $1 billion share buy-back program.

• NYT »

But NOL made only a tiny net profit in April-June after six straight quarters of losses.

NOL Group today reported a 2Q 2015 net profit of US$890 million. Excluding the US$887 million gain on the sale of its supply chain management business, NOL achieved a net profit of US$3 million in the second quarter of 2015, compared to a net loss of US$54 million in 2Q 2014.

(Update at 10am) Can we really be a meritocracy if Lui lasted so long in his post as minister of tpt and the CEO of NOL continues to run NOL?

NOL versus Maersk: What can I say?

Maersk Line the world’s largest container shipping business reported a jump in net profit to $714 million from $454 million, due largely to lower bunker fuel prices

http://www.reuters.com/article/2015/05/13/maersk-results-idUSL5N0Y41JZ20150513

Singapore-based container shipping firm Neptune Orient Lines Ltd said on Thursday its first-quarter net loss narrowed to USD$11 million (S$14.5 million) from $89 million a year earlier, aided by cost savings and lower fuel cost.

NOL reported revenue for the three months ended March 31 at $2 billion, down 13 per cent on the year, though it posted $30 million in core earnings before interest, taxes and non-recurring items, compared with a $65 million loss a year earlier.

– See more at: http://business.asiaone.com/news/singapores-nol-q1-net-loss-narrows-cost-savings-lower-fuel-cost#sthash.HFQwt8Y4.dpuf

The performance of NOL’s CEO (scholar, SAF general, Temasek MD) tells the truth about “intelligence” PAP style: it doesn’t work in the real world, only in S’pore.

How bad can MRT get? Juz look at NOL

During the Spring Festival, we had more evidence of how a scholar, army general and ex-Temasek MD is failing to refloat NOL which he steered onto the rocks. He had to sell the crown jewels to try to refloat NOL No need to remind readers that SMRT is run by a scholar and a retired SAF general. NOL today, the MRT ststem tomorrow.

Contrast NOL’s financial performance withwhat’s happening at Maersk Line.

NOL

NOL has suffered three straight years of pre-tax losses in challenging industry conditions.

The buyer, Tokyo-listed Kintetsu World Express (KWE), has said it will keep APL Logistics’ headquarters in Singapore.

“In an increasingly competitive liner shipping sector, NOL believes that it is imperative to strive to have the most cost-competitive position, and the strongest financial position in order to have a better chance to thrive,” NOL said yesterday.

“Accordingly, NOL has decided to dispose of its logistics business and focus on improving its core liner shipping business.”

Mr Ng Yat Chung, NOL’s group president and chief executive, said: “The transaction will also strengthen our balance sheet and unlock value for our shareholders.”

NOL, which posted its fourth-quarter results last Friday, said operational cost efficiencies helped narrow its net losses to US$85.1 million from losses of US$137 million a year earlier.

– See more at: http://business.asiaone.com/news/nol-sells-logistics-business-16-billion#sthash.6NXQ5TVu.dpuf

Even our constructive, nation-building media was forced to show how desperate the CEO had become: he sold the crown jewels, cannabalising NOL

The move sees NOL selling the only profitable part of its business. APL Logistics posted a 5 per cent jump in fourth-quarter revenue to US$458 million and core Ebitda of US$20 million, while APL, NOL’s container shipping business, posted losses.

NOL said the purchase price represents a 15 times multiple to the APL Logistics group’s reported core Ebitda, a measure of profit, for the full year of 2014.

Since August last year, NOL has been mulling over a sale of APL Logistics and undertook a competitive bidding process.

– See more at: http://business.asiaone.com/news/nol-sells-logistics-business-16-billion#sthash.6NXQ5TVu.dpuf

Maersk Line 

Maersk Line, the world’s biggest container shipping line, continued its strong performance by boosting net profit to $2.3bn last year from $1.5bn in 2013.

Seen as a bellwether for global trade as it transports 15 per cent of all seaborne freight, Maersk Line said it expected container demand to grow 3-5 per cent this year, well below the pre-crisis levels of more than 10 per cent but in line with 4 per cent growth last year.

“We basically don’t expect a lot of change. The low oil price should give some changes in patterns,” said Mr Andersen, pointing to growth in Asia-US and Asia-Europe trade but declines in north-south routes to Africa and Latin America.

Maersk Line expects to post a higher underlying profit this year than in 2014. The conglomerate as a whole said it expected an underlying profit this year of slightly below $4bn, compared with $4.1bn in 2014.

 

Scholar, ex-general still cannot stop NOL from sinking

At the end of October, NOL announced: that losses continued in the third quarter with the company $23m in the red compared to a net profit of $20m a year earlier, hit by port congestion in Southern California.

“We see a slowdown in emerging markets, partly driven by a lower need for raw materials from China. Europe – it’s very slow growth, if any, at the moment, and there’s no reason to expect a big change here,” said Nils Andersen,Maersk’s chief executive.

Revenues for the third quarter were flat at $2.06bn. For the first nine months of 2014 NOL lost $174m, compared to a $61m profit in the same period last year that included a one time gain from the sale of its headquarters building.

NOL claimed cost savings of $290m so far this year but these had been “largely offset” by lower rates, lower volumes and increased costs for port congestion.

http://www.seatrade-global.com/news/americas/nol-stays-in-the-red-port-congestion-hits-liner-arm-apl.html

But about a week later, FT carried this report: Denmark’s largest company by sales reported better than expected profits in the third quarter and lifted its profit outlook for Maersk Line, its container shipping business.

Maersk has bucked the trend in a container shipping industry dogged by overcapacity, losses and weak demand. Thanks to aggressive cost cutting and lower use of fuel, Maersk Line is by far the most profitable container group.

Maersk Line estimates its operating margin, which was 8.2 per cent in the second quarter, was 8.5 percentage points higher than the average of its rivals.

It lifted it again in the third quarter, posting an operating margin of 10.5 per cent, and leading Maersk Line to boost its guidance for the year for net profits to more than $2bn compared with $1.5bn previously. Net profit in the third quarter rose by a quarter to $685m.

“The days of rapid growth in containerised trade are over. We have to be happy as an industry that we are still growing . . . But we can still make good business,” said Mr Andersen.

But Maersk is more than just a container shipping group as the conglomerate has sought to emphasise its other businesses in recent years including oil exploration and production, port terminals and drilling rigs.

….

AP Møller-Maersk lowered its forecast for growth in global trade as the owner of the world’s largest container shipping line said a slowdown in emerging markets and Europe was weighing on demand.

The Danish group, seen as a bellwether for global trade as it carries 15 per cent of all seaborne freight, said demand had slipped in the third quarter compared with the start of the year and was now expected to increase by 3-5 per cent this year, down from 4-5 per cent.

So having a scholar, ex-SAF general and ex Temasek MD hasn’t done any favours for NOL, or S’pore Inc. On his watch (to be fair in really bad weather, he crashed NOL onto the rocks. Still in charge despite that , he has repeadely failed to stop the water from coming in.

The red ink continues to flow with plans to sell its APL Logistics unit in a sale that could fetch at least US$1 billion (S$1.27 billion).

Btw, local broker calls NOL a buy: http://www.ihsmaritime360.com/article/15494/neptune-orient-lines-gets-buy-rating-on-cheap-valuation.

Below shows trade flows across the Pacific. Maersk btw is based in Denmark and its traditional strength is the Asia, Europe trade. But it still dominates global shipping.

 

http://www.economist.com/blogs/graphicdetail/2014/11/daily-chart-9

Scholar can’t repair NOL; Maersk steams ahead

The continuing contrasting tale of two shipping lines, one led by a scholar who attended elite ang moh uni ( also an ex-SAF chief and ex-Temask MD with a Stamford postgrad biz degree thrown in); and the other led by a graduate from Copenhagen University, who has an an MBA from IMD, Switzerland, who has only worked with one co. all his life.

NOL is still stuck on a reef, with water pouring in. Neptune Orient Lines Ltd said on 30th October that its net profit fell sharply in the third quarter as the container shipper battled weak demand.

Net profit fell to US$20 million in the three months ended Sept. 30, compared with US$50 million in the same period last year, Neptune Orient said in a statement to the Singapore Exchange.

Revenue fell 10% to US$2.06 billion, it said.

“This is one of the weakest peak seasons we have seen in recent years, characterized by depressed freight rates and industry overcapacity,” the statement quoted group chief executive Ng Yat Chung as saying.

It said general market conditions had not improved in the third quarter, resulting in a muted peak season, adding that the company expects volatile freight rates and overcapacity in the industry to continue.

On 13 November, A.P. Moeller-Maersk A/S’s container-shipping line, the world’s largest, reported an 11 percent increase in third-quarter profit after cost cuts countered a decline in freight rates.

Maersk Line’s third-quarter net income rose to $554 million from $498 million a year earlier, the Copenhagen-based company said today in a statement. Its parent, A.P. Moeller-Maersk, raised its full-year forecast and said net income rose 23 percent to 6.36 billion kroner ($1.14 billion), beating the 6.14 billion-krone average estimate in a Bloomberg survey of nine analysts. (http://www.bloomberg.com/news/2013-11-13/maersk-line-profit-advances-as-cost-cuts-counter-rate-decline.html)

True  most shipping lines are struggling to reach break-even amid volatile freight rates, and even Maersk has warned of a much weaker fourth quarter, following a 12% drop in container cargo rates in recent weeks. Freight rates “deteriorated significantly during the quarter and hence the seasonally low fourth quarter 2013 has started with low freight rates, which will result in a significantly lower fourth quarter result” than in the third quarter, Maersk Line said. Still, the result for 2013 will be “significantly above” the $461 million profit in 2012, it said.

But hey tot scholars and ex-SAF chiefs are paid serious money because they are S’pore’s finest? Juz like ministers like Raymond Lim, Mak Bow Tan and Yaacob. Remember ex-SAF chief Kee Chui said juz like XO carrot cake is more expensive ’cause of the taste, scholars and ministers deserve higher pay ’cause they better?

(Related posts:https://atans1.wordpress.com/2013/07/22/why-nol-has-problems/

https://atans1.wordpress.com/2013/08/19/nol-underperforms-maersk-again-as-predicted/)

BTW, our constructive, nation-building media have failed to report Maesrk’s gd results, even though BT reported that NOL’s CEO grumbled that giant ships are undercutting NOL’s freight rates. Maersk owns these ships.

This NOL CEO gives scholars like TRE’s Richard and NSP’s Hazel and Tony a bad name. But then VivianB is a scholar.

NOL underperforms Maersk again, as predicted

(Or “Food for tot for PM as scholar, ex-SAF chief, & ex-Temasek MD again under-performs a shipping man?”)

Skip right to the end if you want to read the political and financial implications of this performance in relation to PM’s rally speech . No it’s not a rant against scholars.

According to DBS in early August, NOL reported a net loss of US$34.6m in 2Q13, and after adjusting for gains on sale of assets and realized gains on financial hedging instruments, results were largely in line with expectations of a US$64m net loss in 2Q13. – See more at: http://sbr.com.sg/shipping-marine/news/nol-suffered-us346m-losses-in-2q13#sthash.VZFIoR8g.dpuf. If truth be told, DBS, like other brokers got it dead wrong: NOL’s losses were 46% lower than expected. Only in stockbroking is such a discrepancy in line with expectations.

On 16th August, Maersk Line, the world’s biggest container shipper, reported a US$439m profit for the second quarter of the year, up from US$227m million a year earlier. Again this was unexpected by analysts, who tot it would only make half the amount. “Maersk Line has made strong and consistent progress and is now an industry leader in terms of profitability,” its CEO said.

It now expects earnings to be “significantly” more than last year’s US$461m rather than simply “above” them as it had stated before. NOL posted a half year net profit of US$41 million compared to a loss of US$371 million last year, and its CEO says  “The Group’s results demonstrate that we are on target in our strategy to deliver a better performance through cost management. We will continue in our efforts to strengthen the company’s competitiveness for the long term.”

Analysts say the volumes of goods being shipped around the world is continuing to rise following the recessions that affected many of the world’s big importers. http://www.bbc.co.uk/news/business-23722423

(FT)

Note Maersk Line is run by a true blue shipping man*, while NOL is run by a scholar, and former defence chief, and ex-MD at Temasek. But Maersk is the largest container shipping co, while NOL is a distant 8th. It (and the Taiwanese) shippers decided in the late 1990s and early noughties not to fight Maesk for market share, instead focusing on profits. But profits were elusive for all because of overcapacity.

Related post: https://atans1.wordpress.com/2013/07/22/why-nol-has-problems/

In yesterday’s rally speech, PM rightly warned that the increase in welfare and social spending has to be met by cuts in other bits of the Budget or by increased taxes. Defence is a Budget sacred cow, taking about 25% of the budget or 4ish% of S’pore’s GDP. Given NOL’s relative unperformance under the tenure of an-ex-defence chief, PM should direct Ng Eng Hen to look at the operational cost effectiveness of the SAF. Could S’pore more bang for a smaller buck?

—

*Another characteristic of any good CEO, is their ability to understand fully the often complex scope of their company’s operations.

It is a challenge which can be made easier by a manager gaining as much experience as possible while climbing the promotion ladder. http://www.bbc.co.uk/news/business-23681605

According to DBS, NOL reported a net loss of US$34.6m in 2Q13, and after adjusting for gains on sale of assets and realized gains on financial hedging instruments, results were largely in line with expectations of a US$64m net loss in 2Q13. – See more at: http://sbr.com.sg/shipping-marine/news/nol-suffered-us346m-losses-in-2q13#sthash.VZFIoR8g.dpuf

Why NOL has problems

It’s only number 8 (middle chart) in an industry where size matters (APL is NOL) and where there is serious overcapacity. It’s way behind the top 3 (all ang mohs). At one time, Evergreen (Taiwan) and NOL were right up there, challenging Maersk.

Another problem is the drop (and volatility) in freight rates.

Then there is slowing growth rates in shipping. Maersk’s CEO said in FT recently that Maersk will to adapt to annual growth seaborne container trade of 4 to 5% in the years ahead, compared with levels close to 10%.. For 2013, Maersk expects 0nly 2-4% growth. Maersk’s CEO says he is not going for market share but focusing on costs, something NOL has been doing for yonks.

With the fundamentals of the industry against it, having a CEO who is ex-scholar, ex-SAF chief, and ex-Temasek MD doesn’t help esp since NOL is a very efficient company.

Related post https://atans1.wordpress.com/2012/08/16/maersk-sails-to-profit-while-nol-loses-another-mast/. If you’ve wondering why no 2013 update, it’s the same old story. Maersk keeps doing better.

What NOL has in its favour is that it is not heavily geared.

(From FT)

Why S’pore wants to be Arctic Council Observer

And it’s not because of the polar bears, or Santa and his elves (FTs?) or reindeer.

It’s the new sea route: the NE passage. It’s nothing for the “We love to rubbish S’pore” readers of TRE and TOC to get worked up about. Very few ships use this route (I think 40 this year). And while this number will increase, most ships will sail the traditional route via the Malacca Straits. For one, ships have to be specially built for this route. First gas tanker crosses the Arctic to Japan.

Waz pt of scholar, ex-general, ex-Temasek MD as NOL’s CEO?

When NOL is listed as the least preferred Asian container line?

When NOL annced its turnaround last week and a sale of its building, I tot “Waz wrong?”: boast turnaround yet indulge in financial engr for short term gain. Didn’t have to wait long to find out.

This is what BT, part of the constructive nation-building, 30-pieces-of -silver(?) SPH wrote earlier this week 

NEPTUNE Orient Lines has disappointed some analysts with its third-quarter numbers even though it fought its way into the black with US$50 million in net profit, its first after six consecutive quarters of losses.

NOL, which owns the world’s seventh largest container line APL, fell 2.5 cents yesterday to end at $1.145.

“It underperformed just about everyone’s expectations. I’m not sure if people were expecting profit of that magnitude when the street’s view was about US$150 million,” said Timothy Ross, Credit Suisse head of transport research, Asia-Pacific. NOL is now among the least-preferred counters among Credit Suisse’s basket of seven Asian container companies.

Joining Credit Suisse in a dimmer view of NOL was CIMB, which downgraded NOL to “underperform” from “neutral”.

The problem with comparisons as distinct from Hard Truths (like Scholar is “betterest” for anything) is that they are so inconvenient that shumetimes the constructive, nation-building media must report them. Even thouh, ST has made him out to be a genius on par with the North Korean leaders who advise experts on how to do their work, BT had to report the facts saw them.

Hope this ex-general and Temasek MD doesn’t run NOL aground! The gd thing abt NOL is that it is lightly ge as the analysts sred, unlike other container lines. FTR, I got few lots. Better yield than FD.

But there are times when having scholars in senior posts helps. NSP used to hibernate between general elections. With two scholars on the executive commitee (Hazel and hubbie), NSP has decided not to indulge in its usual hibernation. It is actively walking the ground, and is finally planning a mone online. More next week.  

Related post

https://atans1.wordpress.com/2012/08/16/maersk-sails-to-profit-while-nol-loses-another-mast/

Maersk sails to profit while NOL loses another mast

(Or “Scholar, & ex SAF chief & Temasek MD runs Temasek aground”)

No need to try to do detailed study of Maersk line’s results vis-a-vis NOL.

Maersk Line, operator of the world’s largest container ship fleet, steamed to a profit of US$227m after losses of US$95m a year earlier and US$599m in the previous quarter. NOL “on underlying earnings” made US$7m. Actually “Net loss for the three months ended June 29, 2012, stood at US$118 million, which widened from a net loss of US$57 million for the same period a year ago. This result – which marks the sixth straight quarter of losses – missed market expectations of a net loss of US$67.6 million, a Bloomberg poll of six analysts showed: by 76%,” earlier post .

And Maersk Line is expecting to be profitable this financial year, while NOL says “outlook is uncertain”. And our guy’s a scholar, general, ex SAF chief and ex Temasek MD. Interestingly Maersk turned around despite the problems in Europe. For historical reasons, most of its revenue comes from ships sailing to Europe, unlike NOL which depends on revenue from ships sailing to the US, which is in better shape than NOL.

Sure hope this CEO is not from RI.

Scholar, ex-SAF chief & Temasek MD fails to turnaround NOL

Last week, NOL posted a larger than anticipated bigger net loss (by 76%) for the second quarter compared to a year earlier, dragged down by one-off expenses linked to impairment losses and restructuring charges, it said.

Net loss for the three months ended June 29, 2012, stood at US$118 million, which widened from a net loss of US$57 million for the same period a year ago. This result – which marks the sixth straight quarter of losses – missed market expectations of a net loss of US$67.6 million, a Bloomberg poll of six analysts showed: by 76%. Loss per share for the second quarter stood at 4.57 US cents, against a loss per share of 2.21 US cents.

Excluding these charges, NOL would have registered a turnaround for its core earnings before interest and taxes (Ebit) over the year on higher freight rates and cost savings, NOL claims. It said that market conditions remain uncertain.

Funnily our constructive, nation-building media didn’t remind us of its CEO’s credentials for becoming CEO: great experience except in shipping, a specialist industry. He ain’t even a navy man.

When, Maesk’s container division reports its latest results, I’ll compare its performance (boss is a true blue shipping man) to scholar’s performance at NOL. Last time, he did badly https://atans1.wordpress.com/2012/05/25/with-ex-general-scholar-at-helm-nol-still-underperforms-maersk/.

Wonder how the soldier boy going to be SMRT’s CEO will perform? As a ex-SAF chief, the trains should run on time, and safely: unlike when a retailer ran it. Also train depots would be secured against vandals and terrorists.  But can he improve its financial numbers, something the NOL CEO (another ex-general) failed to do at NOL.

Update on 16 August at 1.06pm: How the constructive, nation-building BT on 14 August reports CEO’s achievement of making US$7m on its core earnings. Sounds a story from a celebrity magazine or from the North Korean media on its new leader.

With ex-general, scholar at helm, NOL still underperforms Maersk

I was looking forward to comparing the 1Q results of NOL (world’s 6th largest container shipping co) and Maersk’s container division (largest in the world) because as a holder of a few NOL shares (“peanuts” but gd yield) I was interested in seeing how ex-defence chief Ng Yat Chung (and ex-Temasek senior MD) would perform. Mr Ng took over as CEO on I January 2012. He was made made executive director in April 2011. The retired CEO, a shipping man thru and thru, is now an adviser to the CEO.

At the time I asked, “Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.”

Well NOL, and Maersk’s container division both came out with unexpectedly very bad sets of results, showing that the container shipping industry is in worse shape than expected with a weak global economy, expensive fuel and plenty of capacity coming on-line.

But NOL’s numbers were still worse than Maersk despite its focus on moving stuff between East Asia and the the US. Maersk also moves a lot of stuff to from East Asia Europe, in addition to the US.  As readers will know, the US economy has performed better than the European economies in 1Q 2012.

Maesrk’s revenue was up 7% to US$6.31bn, while NOL’s revenue fell 3% to US$2.38bn. As to losses, NOL lost US$254m, while Maersk lost US$537m. Simplisticly, if Maersk had NOL’s revenue, it would have lost US$203m, i.e. 20% lower. But then along the same lines, NOL shld have made money, not lose money (US$10m) in 1Q2011.

Whatever it is, having a scholar, ex-senior MD from Temasek, and retired general as CEO of NOL, is of no benefit whatsoever when it comes to shareholder value. SIGH.

Let’s hope it’s different in the cabinet, where we have as newbies one ex-admiral and one ex-general, both of whom are scholars.

Maybe relevant, related post?

https://atans1.wordpress.com/2012/05/11/smrt-mgt-failures-what-does-it-say-abt-saf/

A worrying economic signal?

Investors are in the mood to take more risk in return for higher rewards. They are in “risk on” mode.

Recently, the Baltic Dry Index has fallen to a 25-year-low (since then it has risen by 1.9%) prompting concern that history is about to repeat itself. In the past, say 2008, a weak index foretold a recession, or at least an economic slowdown.But this time there been some special factors at play, according to conventional wisdom. The boom in the Baltic Dry seen before the financial crash and recession was in large part the result of a shortage of ships, which pushed up the cost of carrying freight. There are now far more ships with greater capacity and, because it has taken time for the vessels to be built, the extra capacity has become available when ship owners least want it. A, short-term factor, has been that the Chinese New Year holidays fell early this year, depressing trade in Asia.

Still a 2.9% fall in German industrial production in December suggests that the index might have collapsed due to both increased supply of shipping and weak demand. Germany is the world’s biggest exporter and the hefty slump in output at the tail end of 2011 coincided with the intensification of the crisis in the euro zone. Remember, too, that Germany exports machines to make goods to China.

Update on !0 februart 2012 at 7.05am:

Imports into China fell by 15.3% In January, and this cannot be all due to the Chinese New Year holiday factor. Exports dipped 0.5% from a year earlier hurt by sluggish demand and factories being shut during the Lunar New Year.

This resulted in a trade surplus of $27.3bn which was a six-month high.

More

First Ship Lease Trust looks interesting

Billionaire Wilbur Ross is betting that the slump in shipping which drove oil-tanker returns to a 14-year low is ending.

Ross & Co manages about US$10bn in assets, is part of a group (including China Investment Corp, China’s SWF) spending US$900 million on 30 ships hauling gasoline, diesel and other refined products. It is Mr Ross’s first shipping investment and deploying ‘another few hundred million’ in the industry ‘is certainly easy to do,’ he said in interviews in August.

That outlook contrasts with the pessimism of John Fredriksen, founder of Frontline Ltd, the biggest operator of the largest crude carriers. The 67-year-old billionaire said in May that it would probably be another year or two before ship values collapse and he can start adding to his fleet.

So can we imitate Ross by buying SGX counters? NOL and Samudera have container fleets. So do Pacific Trust and Rickers Maritime. BerlianLaju has the world’s 3rd largest chemical tanker fleet, more than 93 of them, but they are not the ships Ross and friends are buying.

But there is FSL. It has a fleet of 16 tankers and seven container vessels. Of the 16, 11 are product tankers (what Ross is buying), two crude tankers and three chemical tankers (presentation August 2011). But this is a tricky company to analyse, so do yr homework. It is also a shipping trust and such trusts are yield plays.

NOL: Underperformer says CLSA

CLSA initiates coverage with a S$1.70 target price, calling the stock “Underperform”.

CLSA says, trading at 1X P/B, “NOL is neither expensive with an average 2012 to 14 ROE of 10.3 per cent nor compelling with past earnings slumps offering investors trough-0.4X P/B as a cyclical entry point.” Earnings forecasts remain materially below consensus in 2011 to 2012, “so until expectations are reset, NOL will underperform.” On NOL’s recent vessel purchase, it says “the fleet renewal provides NOL with an opportunity to remain relevant on European trade, as well as significantly reduce its unit costs”.

For the record, there have been mgt changes over the last few months with experienced mgrs leaving and an ex-general from Temasek joining.

In June NOL had its third executive resignation in less than two months, when Eng Aik Meng, president of APL – NOL’s liner arm – resigned. He will leave APL on Sept 1 and take a new position “outside the transportation industry”. Mr Eng will be replaced by Kenneth Glenn, who is currently based in Shanghai as president of APL’s North Asia region. Mr Glenn has been in the industry for 32 years and joined APL in 2000.

This change comes days after the stepping down of Bob Sappio – head of the shipping line’s Pan- American Trades It is also the second leadership change following news of the replacement of Mr Widdows, with Temasek executive Mr Ng, in April.

NOL executive director Ng Yat Chung will become chief executive officer of NOL when Mr Widdows retires at the end of the year. He is a ex-general, not admiral, from the SAF.

NOL’s next CEO is a retired general

Ron Widdows, a shipping veteran, who is the CEO of Neptune Orient Lines Group, will be replaced by ex-defence chief Ng Yat Chung when the former retires at the end of this year. Mr Widdows will stay on as senior adviser and Mr Ng will take over as CEO on I January 2012.

Ng is presently a senior MD at Temasek.

Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.

Why you may want to buy NOL

A leading global private equity firm has a venture with a leading owner of container ships  to buy container ships. They must believe that rates will rise. The brave hearts may want to try their luck with Samudera and those shipping trusts that have fleets of container vessels.

Carlyle Group formed a joint venture with Seaspan Corp, the Washington Family and the Tiger Group to buy more than US$5 billion worth of vessels with. Seaspan and Washingtonwould invest solely in container vessels purchased by the newly formed firm. Seaspan charters container ships to shipping lines and is one of the biggest players in this market segment.

“We believe there is a compelling opportunity to serve Asia’s continuing growth in demand for shipping capacity.” The joint venture will invest equity capital of US$900 mill ion in the next five years, buying container, dry bulk, tanker vessels and other shipping assets.

When buying distressed reits or shipping trusts

Don’t focus on rising NAVs.

Focus on their ability to service their debts and the options they have to refinance. The improvement in NAVs is a subset of these issues.

FSLP: For the brave heart

First Ship Lease Trust offers a  gd yield (a shade under 11%%) and trades (46.5cents) at a respectable discount below last reported RNAV of 57cents.

But as DBS Sec which calls it “Hold” says

While the distribution per unit (DPU) payout was maintained at 0.95 US cents for the quarter, the trust had to draw down US$0.7 million of working capital to distribute the US$5.7 million to unitholders, after the usual quarterly loan repayment of US$8 million.

The product tankers continue to be deployed in the spot voyage markets, but utilisation rates and net bareboat equivalent income remain below expectations. While freight income was higher q-o-q in Q4 2010, expenses were higher as well and the two tankers generated bareboat charter equivalent revenue of US$0.2 million in Q4 2010, compared to the US$3.8 million revenue per quarter applicable during the original charter. With tanker rates unlikely to perform in the near term, we choose to remain conservative on our earnings assumptions from these vessels in FY2011.

While the trust did not provide an update on fleet valuation of US$700 million as at end-Q3 2010, a big change is unlikely. This puts the current value- to-loan ratio at 154 per cent, and implies about 160 per cent coverage at the end of the waiver period in June 2011, above the requirement of 145 per cent. We expect DPU payouts to remain at the current level in the near term, and given that we have not yet seen any acquisition funded by the US$28 million placement proceeds raised in FY2009, we maintain our ‘hold’ call at an unchanged target price of $0.45.