Category Archives: Trading

#LegalCorner: The Case of Stolen Containers & Delivery Order Against ‘To Order’ Bill of Lading in Antwerp. MSC-v-Glencore International AG

Worth reading by All Trade & Shipping People:

Highlights of the case: Highlights of Appeal Court Judgment

Full Judgment issued by Appeal Court: MSC-v-Glencore, Full Appeal Judgment

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Logistics: The Project of the Century in South America ?

Dozens of German companies including Siemens attended meetings in Bolivia this week to discuss building a coast-to-coast railway through Brazil, Bolivia and Peru that could speed up the export of corn and soybeans to Asia, German and Bolivian officials said on Wednesday.

The massive, $10 billion project would involve building a 3,700-kilometer (2,299-miles) rail line across the continent, linking the Atlantic and Pacific oceans, through mountains and jungles.

“This is the project of the century,” said Germany’s State Secretary of German Transport, Building and Urban Development Rainer Bomba.

Representatives from Brazil, Peru, Paraguay, Uruguay and Bolivia as well as Germany and Switzerland are still studying the feasibility of the train route, which would drastically shorten shipping routes from Brazil’s coast to Asian markets for key commodities.

Siemens, Europe’s top engineering group, participated in the meetings “to get more information about the project,” spokesman Dennis Hofmann said in an email.

“The project is at an early stage and questions have to be clarified,” he wrote.

The discussions, on Tuesday and Wednesday, come after a similar, Chinese-led project build a trans-South America railway ran into roadblocks late last year due to cost and environmental concerns.

Bolivian and German officials did not name other companies that attended the meetings, but Bomba said: “The presence of 40 German companies here demonstrates that Germany is not only in the planning phase, but also in the realization phase.”

Bolivia’s Public Works Minister Milton Claros told Reuters Bolivia and Germany had signed agreements for technical assistance and financing for the project. The ministry said the project would connect the Brazilian port of Santos to the Peruvian port of Ilo and had a preliminary cost estimate of $10 billion.

Brazil is expected to export 28 million tonnes of corn and 61 million tonnes of soybeans in the 2016/17 crop year according to the USDA. It is the world’s largest soybean exporter and second-largest corn exporter.

China and Peru agreed in 2015 to study a 3,000-mile-long railway through the Andes, but Peru balked when China estimated its cost at $60 billion. Peru’s President Pedro Pablo Kuczynski later said the rail should go through Bolivia.

Land-locked Bolivia has long pined for a corridor to the Pacific, blasting Chile for taking its coastline in a war in the late 19th century and maintaining its Navy on Lake Titicaca.

Brazil had also questioned the Chinese project and would likely back the Bolivian route, a member of the Brazilian delegation said.

“We identified problems in the reports made by the Chinese group. We communicated the points of disagreement to Chinese authorities and we are seeing how we can continue the studies,” said Joao Carlos Parkinson, coordinator of economic affairs at Brazil’s Foreign Ministry, who attended the meetings.

Brazil’s Ambassador to Bolivia Raymundo Santos said talks would continue.

“Our delegation confirmed Brazil’s interest in participating,” he said. “The political side has been resolved, but now the technical work has to move forward.”

Source: Reuters

 

#GrainChartering, #CommodityChartering: Atlantic Dry Bulk Market Report – week 12

All-in-all it was a pretty quiet week. This means there really is not much to talk.

Trade has slowed down in the Supramax/Ultramax segment of the North Atlantic this week. Players report very limited cargo offer for late March-early April. The number of vessels open for spot/prompt dates significantly exceeds demand for fleet. The costs of cargo transportation from the regional ports have sagged. This week, prompt rates for a Supramax vessel chartered for grain shipment bss dely USG redel Spore-Japan are voiced by brokers at $17k daily, those for Ultramax carriers – at $18-19k daily. Earlier this week, the contracts for Supramax transportation of petcoke bss dely USG redel India were concluded at $19-20k daily, while the relevant rates now amount to $18-19k daily. Brokers have not reported any voyage-basis deals for shipments of US grain this week, as the difference in ideas has grown significantly. The charterers are confidently lowering the rates, voicing the ideas of $34.5-35/t for transportation of a Supramax-lot of agricultural products from the Gulf of Mexico ports to northern China, while such shipment is quoted by brokers at $36-37/t.

Transatlantic market has also softened amid sharpening imbalance of cargo offer and tonnage supply. Thus, the charterers are ready to pay only $12-13k daily for a Supramax carrier chartered for petcoke shipment bss dely USG redel EMed with prompt laycan dates and about $11-12k daily bss dely USG redel ECSA. The time-charter for Supramax fleet bss dely USG redel Skaw-Passero is quoted by brokers at $13.5-14.5k daily, that for Ultramax vessels – at $14.5-15.5k daily. The situation remains unfavorable for Handysize owners in the region. Given limited number of relevant cargo offers, they have to make concessions. The deals for Handysize fleet bss dely USG redel Skaw-Passero are negotiated at $9.5-11k daily on average. A Handysize vessel can be chartered at $8.5-9k daily bss dely USG redel ECCA. The time-charter for such carriers bss dely USG redel WCCA/WCSA is quoted at about $12k daily.

By contrast, trade is generally brisk in the South America, though the owners of fleet are not able to raise the rates for fronthaul cargo transportation. Given a balance of cargo offer and tonnage supply, the rates are generally stable. The owners of fleet still want to get $13k daily + $300k bb for a Supramax vessel bss dely ECSA redel Spore-Japan and $14-14.5k daily + $400-450k bb for an Ultramax carrier. However, Supramax fronthaul shipments are quoted by brokers at $12k daily + $200k bb, Ultramax ones – at $13k daily + $300k bb. According to sources, prompt deal for an Ultramax ship bss dely ECSA redel Spore-Japan is negotiated at $12.8k daily + $280k bb. Similar contract is negotiated at $13.25k daily + $325k bb. A Supramax vessel has been chartered at $12.25k daily + $225k bb bss dely ECSA redel Spore-Japan.

The time-charter for Supramax fleet bss dely ECSA redel Skaw-Passero is quoted by brokers at $12-13.5k daily, that for Ultramax carriers – at $14-14.5k daily. The deal for an Ultramax ship bss dely ECSA redel Skaw-Passero has been signed at $14k daily. The time-charter for Supramax carrier bss dely ECSA redel Med is negotiated at $12.5-13k daily. The contract for a similar vessel bss dely ECSA redel Continent has been concluded at $12k daily. A Supramax carrier has been chartered at $12.5k daily bss dely ECSA redel WMed. The rates for a 57,000-dwt ship bss dely ECSA redel Med are negotiated at $14-14.5k daily. Closer to the end of the week, Supramax owners have started to raise their ideas for transatlantic shipments to $15-16k daily bss dely ECSA redel Med and sometimes even managed to reach such level for spot dates. Thus, the deal for a Supramax vessel bss dely ECSA redel Med with late March laycan dates has been signed at $15k daily. Trade has slowed down slightly in the Handysize segment this week, while the relevant rates have largely stabilized after last week’s increase. According to brokers, the time-charter for Handysize fleet bss dely ECSA redel Skaw-Passero is quoted at $10.5-12k daily on average. Such vessel can be chartered at $10-11k daily for cargo transportation within the South American ports. The rates for Handysize carriers bss dely ECSA redel WCSA amount to $14-14.5k daily.

In the short term, negative trends may be preserved in the North Atlantic amid a shortage of new spot/prompt requests. Brokers also report gradually growing number of vessels competing for April shipments; thus, the rates may come under strong pressure unless the corresponding cargo traffic perks up.

Supramax/Ultramax rates may go up in the South Atlantic if the relevant cargo offer grows. Handysize market is also likely to strengthen. Given limited number of vessels open in West Africa, the Shipowners will most likely manage to raise the rates.

Excel Document of Various Fixtures/Freight Rates Attached herewith:  ATLANTIC

 
(*) Our thanks to our Colleagues CCShipbrokers

 

 

Libya: The GAZA Off-shore Floating Storage Loads Its First Crude Oil Vessel

On Saturday 11 February 2017, the first crude oil vessel was loaded at GAZA Floating Storage, Offloading Marine Terminal (FSO) in Bouri Offshore Field, which was launched to replace Sloug Floating Storage Offloading (FSO) and to be included within the oil operations system of Mellitah Oil and Gas Company.

The floating Storage was manufactured by one of the specialized international companies in the Republic of Korea and it is considered one of the major projects that were carried out by Mellitah Oil and Gas to provide with a huge storage capacity of crude oil for Bouri Offshore Field, estimated at 1.5 million barrels of crude oil. GAZA Floating Storage, of 360 meters’ length and 60 meters’ breadth, reached Al Bouri Field at the end of May 2016, after a voyage from the shipyard in Jinhae in South Korea passing from the Indian Ocean to the Mediterranean Sea.

The works of the offshore installations of the pipes, marine cables and optical fibers were completed along with the production platforms at the Field by the end of 2016, and the processed crude oil was pumped at the main installation at the end of January 2017.

Short Presentation: GAZA Floating Storage PDF

Brazil: New Terminal Gives Timely Boost to Brazil’s Soy, Sugar Shipping Capacity

A new terminal near completion in Latin America’s largest port in Santos, Brazil, is expected to add an extra 20 percent to its grains and sugar capacity, boosting shipping services just as the country produces bumper crops.

The 2.2 billion reais ($694 million) Tiplam terminal started operations at a new berth in January and will ramp-up loadings with a second berth at the end of March or early April for a total capacity of 5 million tonnes of grains and 4.5 million tonnes of sugar a year.

The timing could hardly be better as Brazil faces its largest ever crop of soybeans, sugar and corn amid problems with a key road to northern terminals that has forced companies to divert up to 700,000 tonnes of soybeans to southern ports.

Tiplam is managed by logistics operator VLI, a company owned by Brazilian miner Vale SA, Canada’s Brookfield Asset Management Inc, Japan’s Mitsui & Co Ltd and local investment fund FI-FGTS.

“The first new berth is already full and we expect the second one to be full as well very quickly,” Alessandro Gama, Tiplam’s general manager, told Reuters during a tour of the facilities.

Santos shipped around 26.8 million tonnes of soybeans, soybean meal and corn, and 18.4 million tonnes of sugar last year.

Brazil, the world’s largest soybean exporter, is expected to ship a record 59 million tonnes this season, plus 24 million tonnes of corn. The world’s No.1 sugar producer is projected to ship an all-time high of 27.8 million tonnes of the sweetener this year.

All grain and sugar arriving at Tiplam comes by rail, which is unusual in Brazil where more than 75 percent of cargo is transported by truck.

VLI built two transshipment points in Uberaba in Minas Gerais state for grains, and Guará in São Paulo state for sugar, where trucks discharge their cargos into wagons.

Global commodities traders such as Bunge Ltd, Cargill Inc, Louis Dreyfus and Archer Daniels Midland Co already operate terminals in Santos. But Gama is unconcerned by the competition.

“At first we thought our project would be used mainly by traders lacking a physical position in Santos. But surprisingly we are receiving orders from everybody,” he said, adding that large traders were using the new facility to boost their volumes beyond their own terminals.

March 14, 2017 (Reuters)

Container Demurrage: When does The Clock Stops Ticking

A decision of the Court of Appeal in August 2016 has provided clarification on a question which has been troubling carriers and cargo interests alike – when assessing container demurrage claims, is there a cut-off date when the daily demurrage will stop accruing?

Facts

Between April and June 2011, MSC contracted with the shipper to carry 35 containers of raw cotton from Bandar Abbas and Jebel Ali to Chittagong in Bangladesh. The containers were owned by MSC and the bills of lading issued by MSC in respect of the cotton, contained a clause providing for 14 days free time at destination, after which the shipper would become liable for demurrage until the containers had been redelivered to MSC. The market price of raw cotton collapsed during the period in question and the receivers refused to take delivery of the cotton. Proceedings between the shipper and the receivers were pending in the High Court in Dhaka, Bangladesh. Meanwhile the containers remained at Chittagong port and the demurrage clock was ticking.

On 27 September 2011, the shipper sent a message to MSC confirming that they no longer had legal title to the cargo. On 2 February 2012, MSC, whilst maintaining that their claim for demurrage was still accruing, offered to sell the containers to the shipper.

In June 2013, MSC commenced an action against the shipper before the High Court in London, claiming a substantial amount of demurrage (USD 577,184 and accruing at a daily rate of USD 840). MSC asserted that the demurrage would continue to run until the containers were redelivered.

The shipper was placed in a difficult position and asserted that MSC’s right to claim demurrage must come to an end once the contracts of carriage had been repudiated, which the shipper asserted was on 27 September 2011 when they informed MSC they no longer had any legal title to the cargo. The shipper argued that either MSC had no legitimate interest in affirming the contracts thereafter and/or that, from that moment in time, MSC came under an obligation to mitigate their loss by purchasing replacement containers.

High Court 

The trial Judge concluded that the demurrage provision in the MSC bill of lading (tariff schedule) was a genuine pre-estimation of damage and not a penalty clause, which the shipper had contended. The Judge also held that 27 September 2011 was the key date because this was when the shipper confirmed to MSC that it no longer had any title to the goods and would be unable to redeliver the containers within the foreseeable future. It was a repudiation of the contract. In conclusion, demurrage could be recovered from the end of the free period up to 27 September 2011 when the shipper repudiated the contract. It was also held that ordinary principles relating to mitigation of loss do not apply where the parties have agreed a daily rate for demurrage, which was in reality liquidated damages for the detention of the containers.

Court of Appeal

Is the shipper liable to pay demurrage at all?

The Court of Appeal held that a bill of lading claim for demurrage for containers is the same as a claim for liquidated damages under a charterparty for the detention of a carrying vessel beyond the laydays at the port of loading or discharge. Laydays are equivalent to the free time period afforded to cargo interests for container usage after discharge of the containers from the vessel. Therefore, once the free time period has come to an end, demurrage will start to accrue.

When did the commercial purpose of the venture come to an end?

The Court of Appeal then considered whether by 27 September 2011, the commercial purpose of the adventure had been frustrated. The Court concluded that a delay until 27 September 2011 (just 3 months after discharge of the containers) was not sufficient time to frustrate the commercial purpose of the venture. Instead, it held that 2 February 2012 (a further 4 months), when the carrier offered to sell the containers to the shipper to resolve the dispute, was the date at which the commercial purpose of the adventure had become frustrated. By that point, keeping the contract of carriage alive no longer served any legitimate commercial purpose.

The Court of Appeal recognised that a repudiatory breach of contract does not automatically discharge both parties from further performance of the contract: it is left to the innocent party to decide whether to treat the repudiatory breach as ending the contract. However, the Court noted that any proposition that demurrage charges can continue indefinitely until containers are redelivered does not take into account the commercial purpose of the adventure. For this reason, the Court of Appeal found that the option of affirming the contract after a repudiatory breach, no longer remained open to the carrier once the commercial purpose of the venture had been frustrated. Instead, from this point the carrier must accept the shipper’s failure to redeliver the containers as a repudiatory breach of contract, and seek damages for its loss from that point in time.

The Court held that MSC was able to recover demurrage for the detention of the containers up to 1 February 2012 and damages in respect of the loss of the containers calculated by reference to their value on 2 February 2012.

Comment

The crux of the Court of Appeal’s judgment is to place a limitation on a carrier’s right to recover container demurrage in this sort of case, namely up to, but not beyond the date on which the commercial purpose of the venture has been frustrated. After that point, the carrier can still claim damages, but will be subject to the normal obligation to mitigate loss.

The Court of Appeal rejected the application of the “no legitimate interest” doctrine on the facts of this case. The Court concluded that as at 2 February 2012, the commercial purpose of the venture had been frustrated and the carrier no longer had any legitimate commercial interest in keeping the contract alive. The carrier was, therefore, taken to have accepted the repudiation of the contract on that date. This arguably involves something of a departure from the traditional view that repudiation of the contract does not bring the contract to an end, unless the repudiation is accepted by the innocent party.

The Court of Appeal did, however, confirm the first instance Judge’s decision in principle, that the obligation to mitigate loss does not apply to a claim for demurrage because it is a claim for liquidated damages. The obligation to mitigate loss only applied as from 2 February 2012 when the Court decided that MSC should have mitigated their loss by purchasing replacement containers, the cost of replacement containers being the maximum additional loss recoverable by way of damages.

In conclusion, a carrier cannot simply claim demurrage indefinitely until its containers are redelivered, as MSC had argued. There will come a point at which the adventure is frustrated and the contract repudiated, and at this moment the right to claim demurrage will come to an end. The precise moment when a contract is repudiated is very fact specific, so caution should be exercised in every case.
Source: Clyde & Co, with our thanks