Global Crisis Hits Shipping Industry Hard

Shipping benefits from globalization more than almost any other sector. But this has also made it more vulnerable to the global economic crisis.

Freight and charter rates have plunged, jobs at shipping companies are being cut and many ships are being parked for months at a time. The anxiety began in the summer, when the long lines disappeared: the kilometer-long lines of trucks waiting to get into the container terminals outside Los Angeles, one of the most critical bottlenecks of globalization in recent years, or the long queues container ships jostling for spots at the entrance to Hong Kong harbor, often waiting for days for a berth. Instead, what is backed up today is the once hotly sought-after merchandise, as electronic goods and textiles pile up in Chinese factories, now that consumption has declined, first among Americans and now in Europe. Iron ore and other minerals are piling up in South American mines, because the Chinese no longer need as much of the natural resources to produce goods. Many ships are now sailing half-empty, if they are sailing at all. In fact, shipping companies are pulling more and more ships out of circulation, due to a lack of demand, and placing them at anchor indefinitely. Experts estimate that one-fourth of all ships used to transport raw materials in the Pacific are now idle. Until recently, shipping was plainly globalization's booming industry, its hammering pulse, pumping more and more goods around the world at an ever-increasing pace. But the financial crisis has brought this activity to an unexpected halt. Although the pulse is still beating, it is no longer the fast and powerful pulse of a sprinter, instead it resembles that of a coma patient.
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SBM Offshore-owned FSO to be converted into FPSO for Australian oil development project

FSO 'Okha' will be converted into an FPSO, and will replace the current FPSO 'Cossack Pioneer'

An FSO owned by SBM Offshore will be converted into a FPSO with a disconnectable turret. The full scope of this turnkey supply contract for the joint venture between Woodside Energy and Cossack Wanaea Lambert Hermes (SWLH) has been signed. The CWLH project is one of Australia's most productive oil developments and is located 135km northwest of Karratha in Western Australia. The converted FPSO will replace the currently operating FPSO ‘Cossack Pioneer’ in the fourth quarter of 2010. The SBM Offshore-owned ‘Okha’ FSO will be used for conversion into an FPSO with a disconnectable turret. The ‘Okha’ is currently under contract with SEIC for operation in Sakhalin until December this year. It will sail to Keppel shipyard in Singapore for conversion and integration of the process modules and turret.
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China mills seek early end to high-priced iron ore contract

Shanghai: The major iron ore producers could lose a significant chunk of their 2008-09 sales revenues if the China Iron & Steel Association (CISA) is successful in efforts to shift the start of the 2009 benchmark contract period to 1 January from 1 April, writes Steel Business Briefing (SBB).

The commodity newswire has learnt from sources in China that CISA has summoned Vale, BHP Billiton and Rio Tinto to Beijing and told them it wants to terminate the 2008 contract period three months ahead of time. The buyers are paying Vale 65-71% more than last year, and the Australian miners 85% more than last year for their iron ore. A source close to CISA would not explicitly confirm or deny that the association wanted to bring forward the 2009 start date but said “they [the miners] broke the contract first.” “Chinese mills simply can’t afford to take shipments in the first quarter of 2009 under the benchmark price of 2008,” he told SBB. He said there had been “some progress in the negotiations.” A Melbourne-based analyst told SBB that if the 2009 contract price falls by up to 25%, as many anticipate, “it would take a fair slice off their earnings.” “It would result in a very material volume and revenue loss for the big iron ore producers,” he said. A Shanghai-based analyst believed that CISA was “taking its chance” while the market favoured China. “Who knows what might happen in Q1 of 2009? The price might come right back,” he told SBB. Both BHP Billiton and Rio declined to comment on the negotiations.
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Chevron bit bites at Frade

US supermajor Chevron has kicked off a six-well drilling campaign at the Frade field, in the Campos basin, Brazil's hydrocarbons regulator ANP said.

The dynamically-positioned drillship Noble Leo Segerius will drill the wells, which all have target depths of between 2642 metres and 3799 metres. Operator Chevron hopes to pump first oil from Frade, which has estimated reserves of between 200 million to 300 million barrels of oil equivalent, in the second quarter of 2009. Chevron has a 51.7% stake in the field, with partners Petrobras Petrobras (30%) and independent player Frade Japao (18.3%).
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