Monday, 9 November 2015

Businesses sell off oceangoing ships as freight rates fall

Owners cannot pay off bank loans with earnings from the vessels

Declining freight rates and high operating costs are forcing local entrepreneurs to sell off their oceangoing ships, industry insiders said.
Owners sold 40 out of 72 ships registered with Bangladesh Ocean Going Ship Owners' Association in the last two years.
Between 2009 and 2012, local entrepreneurs bought 48 such ships.
“We are going through tough times, especially because of the sliding freight charges,” said Azam J Chowdhury, president of the association.
Chowdhury, who is also the chairman of East Coast Group, said freight rates went down 60 percent in the last few years, mainly due to a slowdown in the world economy.
Owners cannot pay off their bank loans with the freight charges they earn, said Morshed Murad Ibrahim, a former president of Chittagong Chamber of Commerce and Industry.
Ibrahim said he has decided to sell two of his ships and is looking for buyers.
Boston Consulting Group (BCG), a US-based firm, forecast shipping freight rate will decline 1.6-2.6 percent per year over the next four years. BCG's research showed that rates had declined by an average of 2 percent per year for the past 7/8 years.
A decline in China's trade with other countries has also made the ship-owners worried.
“The link between the slowing global economy and the shipping industry is evident,” said Mohammed Mohsin, vice chairman of PHP Family that sold two of its oceangoing ships.
The operating cost for an oceangoing ship hovers between $7,000 and $10,000 per day. A ship has to count huge losses if it sits idle for a day or is used for one-way business.
Another reason why the ships are being sold off is their age -- many are more than 25 years old and need special permission to sail through different routes and ports. Also, their operating costs are high.
Meghna Group of Industries sold one of its three vessels for $11 million (Tk 85 crore), although the conglomerate had bought it at $23.5 million (more than Tk 183 crore).
Meghna runs two short-haul ships on Thailand and Vietnam routes to carry raw materials for cement manufacturing. Yet, the operation is not sustainable as the costs are high.
Former commerce minister Amir Khasru Mahmud Chowdhury, who had three ships, sold all of them.
East Coast Group sold its bulk ship that had a capacity of 100,000 tonnes as scrap metal after just three years of use. PHP Family sold two ships that carried bitumen. Abul Khair Group also sold two of its ships.
Friendly policy decisions, such as the reduction of registration costs and allocation of frequency and ship station licences encouraged local entrepreneurs to buy oceangoing vessels to ply foreign waters.
The registration fee for a 40,000-tonne ship was Tk 10 crore, which was brought down to only Tk 50 lakh by the previous government.
The declining market price of ships since the global financial crisis in 2007 also pushed local businesses to buy ships at lower prices.
Depending on the age, a 40,000-tonne ship could be bought for as low as Tk 70 crore to Tk 100 crore, while the bigger ships cost Tk 150 crore to Tk 200 crore.
Conglomerates such as Abul Khair Group, Bashundhara Group, Akij Group, Meghna Group of Industries, East Coast Group, Desh Bandhu Group, HRC Group, Ratanpur Shipping, Trans Ocean Group and others bought two to three ships or more between 2009 and 2012.
Many of these companies have already sold their ships to avoid further losses. But the trend comes as bad news for prospective mariners, whose job scope had widened when the entrepreneurs started pouring money into the ships.
A ship employs 20-22 crew members, with seven of them being officers who earn up to $12,000 per month as salary, said Habibur Rahman, a former principal officer of Mercantile Marine Department.

Banglalink revenue grows 9pc in nine months

Banglalink's revenue grew 9 percent year-on-year to Tk 3,510 crore in the first nine months of 2015, according to data from its parent company VimpelCom.
The company's revenue stood at Tk 1,190 crore in the July-September quarter.
In a report, VimpelCom praised Banglalink as a company with 'continued strong performance” and said: “Superior customer experience is a result of the strengthened network and attractive data offers.”
VimpelCom did not provide details on the operator's profits. However, earlier last month, Banglalink Chief Executive Officer Ziad Shatara confirmed that they are making profits at the moment.
The operator is progressing in data revenue and data use, according to the report.
Banglalink's revenue from data grew 94 percent year-on-year to Tk 229 crore in the first nine months of 2015.
The operator's data per user stands at 104 MB a month, which was only 41 MB in September 2014, according to the report.
"Our data speed is the highest among other mobile phone operators in the country and so, we will see more users next time and our data performance will be much higher,” said a senior executive.
Banglalink, the second largest operator by subscribers in Bangladesh, has around 1.48 crore data users out of its 3.23 crore active users as of September.
The expansion of its 3G coverage is one of the reasons for the growth; its 3G coverage brings 31 percent of the country's population under its network.
Banglalink customers' use of the voice segment declined. In the last quarter, an average Banglalink customer used 188 voice minutes, while it was 201 minutes in the quarter before that.

Tricked and Indebted on Land, Abused or Abandoned at Sea

Thousands of maritime employment agencies around the world provide a vital service, supplying crew members for ships, from small trawlers to giant container carriers, and handling everything from paychecks to plane tickets. While many companies operate responsibly, over all the industry, which has drawn little attention, is poorly regulated. The few rules on the books do not even apply to fishing ships, where the worst abuses tend to happen, and enforcement is lax.
Illegal agencies operate with even greater impunity, sending men to ships notorious for poor safety and labor records; instructing them to travel on tourist or transit visas, which exempt them from the protections of many labor and anti-trafficking laws; and disavowing them if they are denied pay, injured, killed, abandoned or arrested at sea.
“It’s lies and cheating on land, then beatings and death at sea, then shame and debt when these men get home,” said Shelley Thio, a board member of Transient Workers Count Too, a migrant workers’ advocacy group in Singapore. “And the manning agencies are what make it all possible.”
Step Up Marine Enterprise, the Singapore-based company that recruited Mr. Andrade and the other villagers, has a well-documented record of trouble, according to an examination of court records, police reports and case files in Singapore and the Philippines. In episodes dating back two decades, the company has been tied to trafficking, severe physical abuse, neglect, deceptive recruitment and failure to pay hundreds of seafarers in India, Indonesia, Mauritius, the Philippines and Tanzania.
Still, its owners have largely escaped accountability. Last year, for example, prosecutors opened the biggest trafficking case in Cambodian history, involving more than 1,000 fishermen, but had no jurisdiction to charge Step Up for recruiting them. In 2001, the Supreme Court of the Philippines harshly reprimanded Step Up and a partner company in Manila for systematically duping men, knowingly sending them to abusive employers and cheating them, but Step Up’s owners faced no penalties.
The Philippine authorities have charged 11 people tied to Step Up with trafficking and illegal recruitment of Mr. Andrade and others from the Philippines. But only one person, allegedly a low-level culprit, has been arrested and is likely to be tried: Celia Robelo, 46, who faces a potential life sentence for what prosecutors say was a recruiting effort that earned her at most $20 in commissions.
Mr. Andrade’s story was pieced together from interviews with his family, other seamen recruited in or near his village, police officers, lawyers and aid workers in Jakarta, Manila and Singapore. It highlights the tools — debt, trickery, fear, violence, shame and family ties — used to recruit men, entrap them and leave them at sea, sometimes for years under harsh conditions.
No country exports more seafarers than the Philippines, which provides roughly a quarter of them globally. More than 400,000 Filipinos sought work last year as officers, deckhands, fishermen, cargo handlers and cruise workers. Mr. Andrade’s death shows that governments are sometimes unable or unwilling to protect the rights of citizens far from home.
The abuse of Filipino seamen has increased in recent years, labor officials in the Philippines say, because the country’s maritime trade schools produce, on average, 20,000 graduates a year for fewer than 5,000 openings. As men grow desperate for work, they take greater risks. Roughly a third of them now use agencies that are illegal — unregistered and willing to break rules, the officials said.
Such agencies, favored by ship operators and workers looking to shave costs, compound the problem of lawlessness on the high seas. Scofflaw ships cast off stowaways and deplete fishing stocks. Violence is rampant, and few nations patrol the waters, much less enforce violations of maritime laws or international pacts.
Photo
Men on Kalaw Avenue in Manila advertised seafaring jobs in September. Credit Hannah Reyes for The New York Times
In Manila, in late September, along a densely packed two-block stretch of sidewalk on Kalaw Avenue near the bay, hundreds of seafarers looked for work. Recruiters from manning agencies — some legal, many not — carried signs around their necks listing job openings or pointed to brochures arrayed on tables. Fixers sold fake accreditation papers while a popular Tagalog rap song, “Seaman Lolo Ko” (“My Grandpa Is a Seaman”), boomed in the background.

“These days,” the singer, known as Yongas, rapped, “it’s the seaman getting duped.” Mariners, who used to be the cheaters (on their spouses), he warned, are now the ones cheated (by everyone else).

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