Welcome to our latest newsletter.

Latest Newsletter Dec 2011-February 2012

Summer has arrived the prospects of holidays has brightened everyone’s expectations, and this coupled with New Zealand ’s success at the Rugby World Cup, and a slow but steady economic recovery augers well for a more buoyant 2012.

The political scene which has dominated our news pages has calmed down. The Rena disaster continues, and the economy continues to slowly recover, although latest developments in Europe give cause for concern. Export prices are holding up. Interest rates are holding down, and the cautious conservative approach taken by many New Zealanders as a result of Government’s calls for ’savings - not spending’ has dampened the retail economy. Retail and tourism are still officially in recession, but the RWC improved tourism receipts, with a record 133,000 visitors over the period, so there is hope for retailers as Christmas always brings a boost in retail spending and hospitality.

 We need a good long strong summer of contentment. We need a stable market and we need strong leadership and resolve to get the country out of the doldrums. The signs so far are promising.

Best wishes to all our readers during the Christmas period. Relax and enjoy time with your friends and family. Be safe on the road and in the water, and let’s return after Christmas, refreshed and rejuvenated for the 2012 year and what it may bring.

RENA CARGO OWNERS FACE MASSIVE BILL

The owners of cargo on board the Rena may have to pay as much as 80 per cent of the cargo’s worth just to get it back. It would be the highest charge in history to return shipwrecked goods, eclipsing the 60 per cent charged for cargo retrieved from the Napoli shipwreck off the British coast five years ago.

A number of unnamed media sources have leaked the news that salvors Svitzer plans to charge property owners the 80 per cent fee, but the company would not directly answer questions about the 80 per cent rate, nor confirm or deny the statenment.

Salvage crews working for Svitzer have retrieved 166 of the nearly 1300 containers stuck on the ship since it ran aground off the Tauranga coast on October 5. Under maritime law the company has a right to claim whatever it salvages and can then return the property if the owners guarantee to pay a percentage of its value.

The Mediterranean Shipping Company, which chartered the Rena, will also have to pay to retrieve its empty containers, and says the rate is too high. The claim rate may go to arbitration in London, but it will probably not reduce the rate by much.

Rena savlors update 

 Meanwhile salvors are making the most of good weather to remove more containers from the stricken ship Rena off the coast of Tauranga, but swells are likely to increase with a change in the weather. There has been no change in the state of the vessel but a light sheen of oil extends from the vessel, but no black oil is visible.

The total number of containers removed from the vessel is now 165.

So far, 960 tonnes of waste has been disposed of from shoreline cleanup operations. Another 1,331 tonnes of liquid waste has come from the bird washing process at the wildlife centre where 245 penguins and 43 dotterels are still housed.

So far 7,950 people have registered as volunteers, as well as 154 groups, including corporate groups, which include another 4904 people. Volunteers have so far spent 18,975 hours working on beach clean-ups and 750 hours have been worked under the Adopt-A-Beach programme.

As the volunteer response has begun to drop off, the last planned beach clean for volunteers will take place at Papamoa East opposite Grant Place at 8am each day until Sunday 4 December.  Members of the public are still asked to report any signs of fresh oiling on the beaches.

The whole Rena operations recovery has been run from a central control room, which is shown at below right.

Awanuia and Waka Kume welcomed

Seafuels bunker barge Awanuia and Ports of Auckland tugboat Waka Kume have returned to Auckland after nearly six weeks in the Bay of Plenty assisting in the salvage of the MV Rena. Staff were thanked at a special ceremony at the Cloud on Queens Wharf during which representatives from Ngati Whatua performed a Karanga and Ports of Auckland staff a haka.

Wayne Mills, Chairman of Seafuels and General Manager Multi-Cargo and Marine at Ports of Auckland, said it was great to have the crew and vessels back safe.

Mr Mills said Seafuels and Ports of Auckland had responded quickly to the incident, mobilising vessels and staff as quickly as possible.  The Waka Kume was the first salvage vessel on the scene and the Awanuia arrived at daybreak Sunday 9 October and was on standby until salvors were ready to begin pumping.”

“Particular thanks are due to Z Energy, who agreed to release the Awanuia to facilitate it’s participation in the salvage operation, and to those of our staff who left their families to go to the Bay of Plenty at short notice, to work in incredibly challenging conditions.”

“But for their dedication and skill, the environmental impact of the grounding could have been much worse with significantly more oil spilled.”

“I’d also like to acknowledge the understanding shown by the port’s regular fuel customers, who have had to make alternative arrangements during the absence of the Awanuia, and Waterfront Auckland, who assisted in re-fuelling the cruise ship the Radiance of the Seas at Wynyard Wharf.”

One of the Masters of the Awanuia, Captain Rick Hunter, said, “It was an unimaginable situation, something we didn’t expect to see here in New Zealand. We are glad that the Awanuia was able to be of assistance.

Awanuia Master Captain John Skrine said being helicoptered down in an Army chopper from Auckland to the Bay of Plenty, and winched onto the deck of the Awanuia, was one of the most memorable experiences of his life.

“The salvage operation itself was also extremely challenging, and involved close teamwork and communication betweeen ourselves, the crew on the Waka Kume, the salvors and Maritime New Zealand.”

Mr Mills said the Awanuia, which suffered minor damage during the salvage operation, was fully operational.  Permanent repairs will be completed now that she is back in Auckland.

The Awanuia is owned by Seafuels, a joint venture company between Ports of Auckland and Pacific Basin Shipping of Hong Kong, one of the world’s leading shipping companies.  In normal circumstances the vessel is under time charter to Z Energy to provide a re-fuelling service for cruise ships and commercial vessels calling at the Port of Auckland.

The 80 metre, 3,900 tonne fuel tanker was purchased new by Seafuels in 2009. The tanker, which has a capacity of 25,000 barrels of oil, has state-of-the-art operational and environmental design features, including a double hull construction.

Defence stood down at Bay of Plenty

Defence Force personnel deployed to clean up oil from Bay of Plenty beaches have returned to their bases after helping remove more than 992 tonnes of oily waste. Hundreds of troops have been involved in clean-up efforts since the Rena ran aground on the Astrolabe Reef last month near Tauranga, spilling about 350 tonnes of oil into the sea.

Maritime New Zealand operations manager Scott Read said Defence Force teams had been working tirelessly to clean up the beaches.

“We’ve had around 487 personnel involved since the response began and we’re extremely grateful for their energy and ability to get the job done,” he said.

Troops returned to their respective bases and homes on Thursday. Joint Task Force commander Lieutenant Commander Muzz Kennett said 50 personnel would remain on standby, ready to respond within 24 hours should further help be needed.

The Defence Force has had an average of 120 troops on the ground at any one time and removed around 8.5 tonnes of oily waste in the last 10 days.

Air Force Warrant Officer Steve McCutcheon said it had been messy work but it needed to be done. The public response had been really positive, he said.

“Even if people don’t stop, they yell out ‘thank you’. We’ve had a lot of support from local companies and the community,” he said

The Defence Force also deployed ships and aircraft to the area. A team of navy specialists helped to clear and maintain shipping channels, while the navy supplied imagery and information on the Rena’s condition. Seasprite and Iroquois helicopters supported with aerial observation flights, transporting salvage experts to and from Rena, and night search and rescue response standby.

COSTAMARINE MAKING 32 % YIELD ON USED CONTAINER SHIPS 

Costamare Inc. has told investors it purchased secondhand container ships, including the MV Rena, at a good time and is making a yield of 32 per cent on them, company documents show.

Costamare has apologised for the grounding of the Rena on October 5 off Tauranga, causing an environmental disaster in the Bay of Plenty and to the east. The company, which says it is fully insured, has also thanked those involved in the cleanup “Costamare will be there to do the right thing, as the situation becomes clearer,” the company said.

The company is a charter owner that charters vessels to liner shipping companies. Its largest time charter customers AP Moller-Maersk, Mediterranean Shipping Company and COSCO provide 75 per cent of its revenue.

Rena was one of four secondhand 3,351 TEU container ships built between 1990 and 1992 Costamare contracted to buy on September 23, 2010, for a total US$45 million. The Rena was delivered on November 22, 2010.

The time charter rate for the four ships, including Rena, is US$16,580 per day, according to a presentation to investors in June of this year.

Based on a vessel acquisition price of US$11.25 million per ship and estimate of earnings before interest, tax, depreciation and amortisation of US$3.7 million a year, the company calculated a yield on Rena of 32 per cent.

Costamare said in documents filed to the Securities and Exchange Commission that the container shipping industry experienced weakness from the middle of 2008 through the first half of 2010.

Costamare told investors that its management team had “overcome the worst container shipping crisis in history” and the company was now uniquely positioned for growth. The key to making superior returns was purchasing ships at the right time.

The market for container ship owners improved as global fleet capacity and order books for new ships fell and charter rates rose. Container ship charter rates peaked in 2005 and generally stayed strong until the middle of 2008, when the global financial crisis pushed rates to 10-year lows.

The estimated one-year time charter rate for a 3,500 TEU containership at the end of January 2010 was US$5,500 per day compared to an average of US$26,902 per day in the period 2000-2009. Time charter daily rates improved 99 per cent during the first nine months of 2010. By the end of September 2010 rates had recovered to US$19,000 per day.

Following an initial public offering on November 4, 2010, Costamare began trading on the New York Stock Exchange. Its shares last traded at US$12.10, which is near the offer price of $12 a share. The offer price was below from the US$15 to US$17 a share range in the prospectus, indicating poor demand for the shares.

Costamare purchased the 53 ship-owning companies held by the Konstantakopoulos family from Greece, comprising Captain Vasileios Konstantakopoulos and three sons Konstantinos Konstantakopoulos, Achillefs Konstantakopoulos and Christos Konstantakopoulos. The sons owned 77.1 per cent of Costamare after its listing. (Konstantinos is shown at left in the photograph, with his wife Rena at right. They are shown with John Samartzis, and Frans Malmros, of The Swedish Club.)

When it began the company owned and operated drybulk carrier vessels but since 1992 it has focused exclusively on container ships. Since assuming management of the company in 1998, Konstantinos Konstantakopoulos has founded the management companies CIEL and Shanghai Costamare, and a manning agency C-Man Maritime. CIEL is the technical manager of Rena.

The vessel owners are wholly-owned subsidiaries incorporated in the Republic of Liberia and each vessel is managed by at least one of the three management companies. Rena is owned by Daina Shipping Co.

The company argues that by providing container ships to shipping lines under multi-year time charters it is not subject to seasonal variations in demand. There are over 200 shipping liner companies, but the top 10 have 56 per cent of the market. AP Moller-Maersk’s deployed fleet accounted for approximately 13 per cent of the global fleet liner capacity.

The Rena is a relatively small containership as Costamare has new vessels on order capable of carrying 9,000 containers. 

FONTERRA PLAN CONDEMNED AS ‘CENTRAL PLANNING ALLIANCE’ 

By Pam Graham

Fonterra’s plan to form an alliance of container freight users to counter the power of shipping lines is being condemned as an attempt at central planning bound to fail, and an example of poor business leadership, importers say.

Fonterra is combining with other exporters, led by Silver Fern Farms, in a limited partnership called Kotahi Logistics to be a “mechanism for the demand” to do business with shipping lines, the suppliers of services.

The Importers’ Institute is urging the Commerce Commission to turn down the plan.

“Without exception, every economy that has ever attempted to replace markets with central plans devised by experts has ended up in total failure,” a statement from The Importers’ Institute said. “Fonterra is New Zealand’s biggest exporter. Can’t they just use their muscle to achieve those objectives?”

The institute said “obvious” efficiencies from central planning never materialise. “As someone said, if you introduce central planning to the desert, nothing much will happen at first, but after a while there will be a shortage of sand,” the Institute said.

It urges the government to take steps to free up the economy, including the break-up of export monopolies.

“We would expect our largest corporation to share these aims. Sadly, Fonterra has failed to exercise business leadership, in this case,” the Institute said.

Fonterra’s competitor Synlait’s submission argues that the selection of additional partners to the alliance should be on a non-discretionary open-access basis. The scope for authorisation should be clearly defined, Synlait said.

“We are not suggesting that Kotahi must offer common pricing for all,” Synlait said.

But the proposal must not result in other exporters and importers subsidising better prices and a negotiating vehicle for Fonterra.

Fonterra says shipping capacity to New Zealand has reduced because of a proliferation of vessel-sharing agreements, which are effectively code-sharing arrangements on ships. MSC maintains the only single-carrier service of any scale to this country.

CBAFF WARNS INDUSTRIAL ACTION WILL BE DISRUPTIVE

The Customs Brokers & Freight Forwarders Federation of New Zealand (CBAFF) has called for a “common sense approach” in the dispute between the Maritime Union and Ports of Auckland. CBAFF vice president Trevor Duxfield said that the industrial action will have significant impact on CBAFF members, their importer and exporter clients and Auckland road carriers.

“There have been some statements made in the media that suggest the port ‘will still be working during the industrial action,’ said Mr Duxfield. “However, that is misleading and the reality is that this industrial action will cause very significant disruption.

“We call for both parties to have a common sense approach to this situation with consideration to maintaining a sustainable and efficient supply chain for Auckland and the greater region.”

Mr Duxfield said that the majority of import and export cargo moving to Australia and beyond is on cellular container vessels which are handled at the Bledisloe and Fergusson container terminals that will be closed from 22.30 on Dec 1 to 22.30 on Dec 5, and from 22.30 on December 8 to 22.30 on December 12.

“There will be a compounding effect with only three days between the two periods of industrial action and we expect a rush to get containers processed and off the wharf,” he said. “The general wharves, which are handled by independent stevedoring companies rather than Port of Auckland employees, will still be operating but these process the self-loading vessels, which mainly only serve the Pacific Islands.”

Mr Duxfield said it was currently estimated that the number of containers affected by vessels diverting from Auckland port due to the action was about 6,500 TEU (Twenty-foot equivalent unit, a measure used for capacity in container transportation).

“Due to the industrial action four vessels are diverting from Auckland port with three going to Tauranga and one to Wellington to discharge their containers, which will be railed to Auckland,” he said. “We also expect significant delays in the import containers moving to Auckland simply due to the number of containers.

“Our members are already seeing significant disruption to normal container cartage service around Auckland as carriers concentrate resources on moving containers off the Auckland port prior to the strike coming into effect on Thursday night. Exporters are now having difficulty utilising the rail service from Auckland to Tauranga to meet these diverted vessels as the rail service is at capacity. One shipping line has issued a release advising customers that if they need to make their vessel they will have to ‘make their own arrangements to deliver the containers directly to Tauranga Terminal’.”

Mr Duxfield said that CBAFF would also like to acknowledge the support Port of Tauranga is providing to this situation by accepting the vessels into their schedule and offering extra rail capacity with support from Kiwirail.

EXPORT NZ SUPPORTS SHARED EXPORTS CONCEPT

ExportNZ is calling for the Government to encourage more collaboration between export-focused, small-to-medium-sized firms. The statement was part the Wellington-based lobby group’s Exporters Manifesto, released last month.

ExportNZ executive director Catherine Beard said a new generation of managers were more open to collaborative exporting than their predecessors.

“You start off with the question of how do you grow bigger companies - is there any shortcut to that?” she said. “Maybe a shortcut is companies actually leveraging off each other.”

Ms Beard said small firms often struggled to get noticed overseas. Wine exporters, for example, could band together to have a bigger presence on retail shelves and save on shipping costs in the process, she said.

New Zealand Trade and Enterprise chief executive Peter Chrisp has indicated he would like to see more firms collaborating in export markets.

“I think more and more companies are realising that to successfully go to market you have to [collaborate], but I don’t think it’s deep in our DNA to do it,” he said. He said that Pure New Zealand Greenshell Mussels - a joint venture of New Zealand seafood firms exporting shellfish to China - was a good example of firms working together to gain access to a booming marketplace.

ExportNZ’s manifesto made little mention of the impact the strong New Zealand dollar was having on exporters. The lobby group only called for “continued reduction in Government spending”, which it said would reduce inflation and keep interest rates and the kiwi lower.

Ms Beard said the strong dollar was a big issue for exporters.

“But I think we take the view that it’s a very difficult issue for New Zealand to control,” she said.

ExportNZ believed there was a lot of “poor government spending”, such as interest-free student loans and Working for Families, which would be better addressed through more appropriate tax rates. But while the group wanted spending cuts in social areas, the manifesto recommended that the Government boost its research and development funding to get this country’s total R&D spend closer to the OECD average, which was 2.33 per cent of gross domestic product in 2008.

Total R&D spending in New Zealand was 1.3 per cent of GDP last year, ExportNZ said.

The group also recommended that the Government investigate new policies that would help increase the access firms have to both domestic and international sources of venture capital funding.

“There are lessons to be learned from other successful exporting countries that use the tax system to incentivise investment in innovative export-focused companies,” the manifesto said.

It also said competitive transport was crucial for keeping exporters’ costs down. ExportNZ also said it hoped to see free trade negotiations successfully concluded with India and Russia. It would also welcome the Government exploring FTA linkages with the European Union and Mercosur - a political and economic agreement between a number of South American nations.

THANKS FOR YOUR SUPPORT 

We continue to get good “traffic statistics” from NZMS Alumni members for this website. Consistently, since May last year we have been receiving over 20,000 hits per month. Our record month of useage is still June 2010, when we achieved iover 30,000 hits but traffic of over 20,000 hits shows good use and support. For last month, November 2011, we achieved 20,488 hits, with over 5000 pages downloaded, but perhaps the rugby world cup games keept people away from their normal weubsite surfing. We watch those “stats” closely.  Google Analytics gives us very good data about site patronage, and this helps us plan the website to the best benefit of members.

The support shown by students and graduates from the NZMS courses give us a lot of confidence in building the Alumni, and we are delighted with the positive feedback we have received.  We are still pushing ahead to build membership too, so please keep telling your friends and colleagues about the NZMS Alumni website, and encourage them to join up…..And keep the feedback coming in. We appreciate each and every email we receive from members. We hope this newsletter keeps you up with the play….

KEEP CHECKING BACK AT OUR WHAT’S NEW PAGE LINK!

We hope you enjoyed this newsletter.  Our Archive newsletter page holds all the previous newsleters from  2011. For the latest though, click on our “The latest” link on the home page masthead… This is updated at least weekly with industry related news items and commentary on current issues.