newsletter nº 10 · 2020. 3. 3. · chinese steel mills grew production and kept on substituting...

NEWSLETTER Nº 10

XIV Annual Meeting CIANAM

Veracruz – México

The Asociación Mexicana de Agentes Navieros (AMANAC) shall organize the XIV

Annual Meeting of the Cámara Interamericana de Asociaciones Nacionales de

Agentes Marítimos (CIANAM) that will take place in Veracruz, Mexico, on April 27th

and 28th, 2017. The Presidency of this Chamber is in charge of Felipe Bracamontes

Venegas.

During the development of the Meeting, issues related to the institutional activity of

CIANAM, port and maritime transport situations, simplification of the activity and all the

efforts made in training and quality management in order to reach the best goals of

operation and efficiency shall be dealt with.

New President of the Asociación de Agentes

Marítimos del Paraguay (ASAMAR)

At the Annual Meeting of the Asociación de Agentes Marítimos del Paraguay

(ASAMAR) held last March 17th, the new Board of Directors for the period 2017-2018

was formed as follows:

President: Maria Inés Lacout

Vicepresident: Karina Ferreira

Treasurer: Fabian Bagnasco

Secretary: Nilo D`Alessandro

APRIL 2017

Contents

SOCIALS

XIV Annual Meeting – Veracruz-México Pg. 1 New Board–ASAMAR Pg. 1

New Board - APAM Pg. 2 NEWS

What to expect in Shipping Industry this 2017 Pg. 2 Maritime & Trade Perspectives 2017 Pg. 5 BIMCO: Shipping market in

2016 Pg. 6

Top 10 Ship Owning Nations

in 2017 Pg. 8

Illogical port choices by

liner alliances Pg. 9

Top 100 Container Ports:

2016 vs 2015 Pg. 10

Demand will ease over-supply in dry bulk Pg. 11

Liner Service and Port Call Trends Pg. 11

Why Shipping FOB is better than CIF Pg. 15

How to be aware of payment scams Pg. 16

CIANAM www.cianam.org

Secretaría:

Centro de Navegación

TE: (54 11) 4394-0520

[email protected]

http://www.cianam.org/


Member 1: Elsa Gamarra

Member 2: Einar Dominguez

Deputy Member 1: Cherryl Gorostiaga

Deputy member 2: Nery Orue

Trustee: Amancio Bogado

Deputy Trustee: Victor Ferreira

Jorge Acevedo Noriega President of the Peruvian Association of Maritime

Agents - APAM (PERU)

The General Assembly held on Thursday, March 30, Dr. JORGE ACEVEDO NORIEGA was unanimously

appointed as the new President of the Peruvian Association of Maritime Agents APAM for the period 2017-

2019.

The following Directors are conforming the new Board of Directors:

Orietta Gajate Toche

Felipe Romero De La Puente

Augusto Ganoza Heredia

Rocio Ponce Morante

Hector Cardenas Goytizolo

Estenio Pinzas Vidmar

February 3, 2017

Last year was a ride of incredible ups and downs for the global shipping in the industry.

From financial pressures to overcapacity and numerous consolidations, a lot of challenges and shifts has surfaced in the world of global transportation last 2016, which was topped by the bankruptcy of Hanjin Shipping, South Korea’s biggest container carrier, and the world’s seventh-largest.

That said, the financial crisis from the previous years has really impacted the shipping industry in a very big way. Faced with harsh headwinds, many shipping firms are now setting their sails for the incoming shifts and trends in the global shipping industry this year 2017. Check this infographic as we present to you where the shipping industry is heading to this 2017.



Fuente: EXCELSIOR Worldwide Freight Logistics Corp.



The shipping industry has its work cut out going forward in 2017 as the International Monetary Fund (IMF) forecast the lowest level of global GDP growth since 2009. Mr. Peter Sand mentions that 2017 will see another year of die-hard competition, which now includes tankers. In 2016, the container shipping industry bit the bullet in terms of demolition and consolidation to help the market to recover. The dry bulk sector needs to copy that approach.

Global economy: not lending shipping a hand

The longer global economic growth remains weak and lacks investment, the lower future growth potential for shipping.

For eight years, the world has struggled to cope with huge changes and challenges brought around by the crash of the financial market in 2008. The resulting issues have not always been dealt with in the best way, leaving many large economies still in ‘recovery’ mode.

The full restoration of shipping markets will need several years of solid improvements to lift fleet utilisation rates. Sector overcapacity almost everywhere must be reduced. Government support for any industry – including shipping – which is feeling the heat of global competition might seem like a good thing. But direct subsidies from governments in fact have a negative impact on the global shipping industry as they affect free trade and undermine the level playing field for businesses.

In pure economic terms, 2016 has seen Europe improving, the US stagnating and Japan at a standstill. So, we have not seen much global change aside from some interregional trade flows and there has been no real growth of demand on a broader scale.

In shipping, we rely on global imbalances in raw materials, energy and manufacturing facilities. Regardless of reported statistics of economic growth being right or wrong, China remained at the centre of shipping imports and exports in 2016.

Will the world grow its GDP in 2017 in a way that will benefit shipping? Probably not, as global GDP growth is currently driven by service sectors and developing/emerging economies which result in a lower “GDP-to-trade multiplier”, and thus generate a lower level of shipping demand than we have been accustomed to in

the past.

2016 has been a horrible year for the dry bulk shipping industry. After the Baltic Dry Index (BDI) reached an all-time-low of 290 on 10 February, it improved steadily throughout the year to peak in mid-November at 1,261. This was driven by and benefitted mainly the capesize ships as they transported the key commodities of iron ore into China. As the year progressed, the situation eased as demand growth outstripped the impact of the

net supply growth of the fleet.

Dry bulk: worst year on record – heavy demolition activity needed to relieve the pain



Chinese steel mills grew production and kept on substituting domestically mined ore with imported ore. Additionally, the reduction in operational days at Chinese coal mines reversed the declining trend for coal imports, adding much needed tonne-miles to the demand side.

In May, BIMCO provided industry leadership with some new and unique market analysis on the “Road to Recovery” for dry bulk. This analysis identified what the shipowners must do to return to profitability in 2019. Scrapping ships and refraining from building new ships is essential as we can’t expect the same levels of demand growth as we have experienced in the past.

For 2017, it is vitally important that shipowners handle the supply side of the market with great care. A continuance of the alarmingly low level of demolition activity in the second half of 2016 simply will not deliver the needed zero fleet growth. A significant number of new ships are on order for 2017 and 2018. The only way to neutralise the impact of this influx of new ships will be to scrap 30 million DWT annually. This is not a tall order in theory, but the slowdown in scrapping seen since June 2016 causes alarm bells to ring. BIMCO expects the supply-side to grow by around 1.6% in 2017 (2.2% in 2016E).

Tanker: reversal of fortune after a perfect year

In the wake of a very strong 2015, fortune faded as expected for crude oil and oil product tankers. A strong freight market was created by an increased throughput at global refineries causing up-front oil demand to run ahead of end-consumption and a moderate supply side growth for crude oil tankers.

In 2016 the fleet grew by 6% for both tanker segments. This unbalanced the market because demand growth eased off. BIMCO suggests that in coming years the end-consumption of oil will need to catch up – and bloated oil stocks must be drawn on – before the market can be rebalanced.

Global oil supply continued to grow in 2016 despite many disruptions to production in key exporting countries. The re-entry of Iran into international oil stood as the single-most disruptive event to an established oil market and it had a knock-on effect into the tanker market. Whether the changes to trade patterns end up benefitting the tanker market remains to be seen and depends on the West African exporters’ ability to defend their market shares in Asia, particularly in India.

Tanker demand growth in 2017 is expected to come predominantly from the greater Asian region led by China and India.

BIMCO expects the crude oil tanker segment to see a net fleet growth of around 3% in 2017 (6.0% in 2016E). We estimate the supply side growth rate of the oil product tanker fleet to be around 2.5% (6.1% in 2016E). We foresee demolition of tanker capacity to reach a five-year high, but not enough to prevent the onset of a loss-making freight market.

Showing leadership to the global shipping industry, in 2017 BIMCO will continue its unique series of analysis on the “Road to Recovery” for the crude oil tanker market, following the analysis published in 2016 on what is needed for the dry bulk sector to recover.

Container: fundamental market balance improved as demolition went through the roof

After deteriorating market conditions in 2015, with a very high fleet growth and a sensationally high number of new orders for future delivery, 2016 got off to a bad start. The need to match the supply of container shipping capacity with global demand for containerised goods became even more urgent.

How did the container shipping industry act in this “self-inflicted” shipping market crisis? By using some tools that had seemingly been forgotten. Many operational tools have been successfully applied in the market already (slow-steaming and idling), leaving the non-operational tools to be put into action in 2016 (limiting new orders, scrapping and consolidation).

2016 stands out in terms of consolidation, both in the form of outright mergers but also in the newer and larger alliances being forged to cut cost. We also saw the unprecedented event of a government-sponsored shipowner filing for court protection.



Additionally, the very low number of newbuilding orders was backed up by an all-time high of demolition capacity reducing the harmful effects of new ships being delivered. Panamax ships went out of fashion, resulting in further value erosion of the ship size that turned out to be the one which was squeezed out between the feeders and the very large ships.

Generally, the container shipping industry has found it difficult to adapt to the new normal where demand grows by a multiple of global GDP growth of one or even below, unlike the multiplier of two or more experienced year on year in the past. Nevertheless, market conditions ended up improving in 2016 as fleet growth was lower than demand growth, the first time since 2010.

BIMCO expects the container shipping segment to see a net fleet growth of around 3.1% in 2017 (1.1% in 2016E). If the multiplier gets back to one, and the IMF forecast of 3.4% becomes reality, the market will neither improve or worsen in 2017.

By Peter Sand Chief Shipping Analyst. BIMCO, Denmark

Here is an infographic provided by the ship valuation experts at VesselsValue.com showing the world’s top ten ship-owning nations in the year 2017.

As you can see Greece is number one on the list despite a 12% dip in fleet value. VesselsValue.com Senior Analyst William Bennett provided the following comments on the new data:

Bulkers

“Bulkers have had a deceptively good 2016 following the record lows at the start of the year. The top three bulk owning nations: Greece, Japan and China, have seen their fleets rise by over USD 4 billion each. This growth has been supported by strong acuisitions following some of the lowest asset prices seen since the 1980s.”

German Fleet


https://www.bimco.org/

https://www.vesselsvalue.com/


“The German container fleet shrunk by nearly USD 11 billion throughout 2016 after large losses in the sector. The largest softening was experienced in the panamax and post-panamax sectors with some vessels losing up to 60% of their value. German losses are fuelled by this as 59% of their fleets consists of panama and post-panamax vessels.”

Shrinking Fleets

“Greek tanker owners started 2016 earning more than USD 100,000/day on their vessels. However, the rest of the year has been predominantly bearish. By the end of 2016 the Greek fleet had shrunk by close to USD 11 billion. Coming in second was the USA whose fleet lost USD 4 billion, less than half of the Greek losses.”

VesselsValue.com tells gCaptain that it is important to note that country totals include offshore vessels as well as ocean-going ship types (i.e. container, tanker, bulker and gas vessels).

London, UK, 28th February 2017 – In a ground-breaking analysis Drewry has examined the correlation between carrier terminal ownership and the choice of port calls by the 2M and upcoming Ocean and THE liner alliances. The results show that the choice of port call is often not in line with carrier terminal ownership interests, according to the recently launched Ports and Terminals Insight report published by global shipping consultancy Drewry.

Drewry analysed the relationship between i) the extent of interests in terminals that carriers have in ports in a selection of gateway and transhipment port markets, and ii) the ports of call in these markets, as selected by the three major alliances that will be in place from second-quarter 2017. Gateway markets included Benelux ports, the Pacific South West and South China/Hong Kong, while transhipment markets covered hubs in Southeast Asia, the Mediterranean, Middle East and Central America/Caribbean.

Drewry’s senior analyst for ports and terminals Neil Davidson said: “Our analysis shows that even when a shipping line has a significant stake in a terminal, this doesn’t necessarily mean that the port is selected for the network schedule. The picture is very varied: in some cases the correlation is tight, in others there is no obvious logic at all. For gateway ports, you can see that carriers have to bear in mind the port preferences of shippers, for example, so the choice of port is influenced by other factors. But what was particularly surprising was that for the choice of transhipment hub, which is entirely within the control of a carrier, the correlation was also weak in a number of cases.”

“What this analysis shows is that individual lines are not entirely in control of their own destinies when it comes to port choices, as partner lines in their alliances may have conflicting port choice preferences and particular idiosyncrasies,” continued Davidson. “Moreover, even if alliance partners have corresponding port preferences, there is still potential for conflict at the terminal level if more than one line in an alliance has interests in different terminals in the same port, as is the case with the Ocean alliance in Rotterdam for example. The horse-trading between alliance members extends beyond port choices and into the choice of specific terminals within any given port. This illustrates the fact that even if a terminal operator brings in a shipping line as a joint venture partner, this is no absolute guarantee of securing an alliance’s volume.”


https://www.drewry.co.uk/maritime-research-products/ports-and-terminals-insight-annual-subscription


Rank Port Nane 2016 2015 %

Rank Port Nane 2016 2015 %

1 Shanghai 37.1 36.5 1.6%

51 Vancouver (BC) 2.9 3.1 -4.1%

2 Singapore 30.9 30.9 -0.1%

52 Balboa 2.8 3.1 -8.0%

3 Shenzhen 24.0 24.2 -0.9%

53 Gioia Tauro 2.8 2.5 9.8%

4 Ningbo 21.6 20.6 4.6%

54 Ambarli 2.8 3.1 -9.2%

5 Hong Kong 19.8 20.1 -1.3%

55 Kobe* 2.7 2.7 1.6%

6 Busan 19.4 19.5 -0.2%

56 Yokohama* 2.7 2.8 -1.5%

7 Guangzhou 18.8 17.6 6.8%

57 Incheon 2.7 2.4 12.6%

8 Qingdao 18.0 17.4 3.3%

58 Melbourne* 2.7 2.6 2.3%

9 LA/LB 15.6 15.4 1.8%

59 Fuzhou 2.7 2.4 10.0%

10 Dubai 14.8 15.6 -5.2%

60 Norfolk 2.7 2.5 4.2%

11 Tianjin 14.5 14.1 2.9%

61 Nagoya 2.7 2.6 1.0%

12 Port Klang 13.2 11.9 10.8%

62 Durban 2.6 2.8 -5.4%

13 Rotterdam 12.4 12.2 1.2%

63 Yantai 2.6 2.5 6.0%

14 Kaohsiung 10.5 10.3 2.0%

64 Manzanillo (Mex) 2.6 2.5 1.6%

15 Antwerp 10.0 9.7 4.0%

65 Le Havre 2.5 2.6 -1.6%

16 Xiamen 9.6 9.2 4.7%

66 Oakland 2.4 2.3 4.0%

17 Dalian 9.6 9.4 1.5%

67 Sydney 2.4 2.3 2.3%

18 Hamburg 8.9 8.9 0.9%

68 Chittagong 2.3 2.0 15.9%

19 Tanjung Pelepas 8.3 9.1 -9.2%

69 Cartagena* 2.3 2.6 -10.6%

20 Laem Chabang 7.2 6.8 6.0%

70 Genoa 2.3 2.2 2.5%

21 NY/NJ 6.3 6.4 -1.9%

71 Barcelona 2.2 2.0 14.5%

22 Yingkou 6.0 5.9 1.6%

72 Kwangyang 2.2 2.3 -4.4%

23 Colombo 5.7 5.2 10.6%

73 Osaka* 2.2 2.2 -0.8%

24 Ho Chi Minh City 5.6 5.4 3.2%

74 Houston 2.2 2.1 2.4%

25 Bremerhaven 5.5 5.5 -1.0%

75 Bandar Abbas 2.1 1.7 23.6%

26 Jakarta 5.5 5.8 -6.1%

76 Callao 2.1 1.9 8.1%

27 Suzhou 5.4 5.2 3.1%

77 Quanzhou* 2.0 2.0 2.3%

28 Algeciras 4.8 4.5 5.4% 78 Charleston 2.0 2.0 1.2%

29 Valencia 4.7 4.6 2.3% 79 Cai Mep 2.0 1.5 35.3%

30 Tokyo* 4.7 4.6 1.6% 80 Guayaquil* 2.0 1.8 11.6%

31 Lianyungang 4.7 5.0 -6.5% 81 Southampton* 2.0 2.0 0.0%

32 Nhava Sheva 4.5 4.5 0.9% 82 Dandong* 1.9 1.8 5.5%

33 Manila 4.4 4.0 11.3% 83 Karachi* 1.9 1.8 2.8%

34 Jeddah 4.2 4.2 0.3% 84 Manzanillo (Pan) 1.8 2.0 -7.3%

35 Haiphong 4.1 3.9 3.4% 85 Dammam 1.8 2.0 -9.6%

36 Khor Fakkan 4.0 3.9 2.4% 86 St Petersburg 1.7 1.7 1.8%

37 Felixstowe* 3.7 4.0 -8.5% 87 Kingston* 1.7 1.7 -0.2%

38 Piraeus* 3.7 3.3 10.4% 88 Abu Dhabi 1.6 1.5 6.4%

39 Savannah 3.6 3.7 -2.5% 89 Taichung 1.5 1.4 6.1%

40 Seattle/Tacoma 3.6 3.5 2.4% 90 Chennai 1.5 1.5 -1.4%

41 Bandar Abbas 3.6 3.8 -5.7% 91 Sines 1.5 1.3 13.6%

42 Mundra* 3.4 2.9 18.7% 92 Bangkok 1.5 1.5 -2.6%

43 Salalah 3.3 2.6 29.4%

93 Taipei 1.5 1.3 10.7%

44 Foshan* 3.2 3.0 6.1%

94 Montreal 1.4 1.4 0.1%

45 Surabaya* 3.1 3.1 0.3%

95 Ashdod* 1.4 1.3 10.2%

46 Marsaxlokk 3.1 3.1 0.5%

96 Penang 1.4 1.3 9.1%

47 Nanjing* 3.1 2.9 4.4%

97 Mersin 1.4 1.4 -1.6%

48 Port Said 3.0 3.4 -11.9%

98 King Abdullah Port 1.4 1.3 7.3%

49 Tangier Med 3.0 3.0 0.1%

99 Zeebrugge 1.4 1.6 -10.8%

50 Rizhao* 3.0 2.8 5.0% 100 Keelung 1.4 1.4 -4.0%

Source: Alphaliner


http://www.alphaliner.com/


With contraction in vessel supply and healthy demand growth, the dry bulk shipping market is expected to recover from 2017 onwards, according to the shipping consultancy Drewry.

An outlook for dry bulk demand coupled with a small orderbook of newbuilds as a percentage of the total fleet capacity will ensure a sustained recovery in the dry bulk market. Earnings in the dry bulk market are expected to improve from 2017 with a narrowing supply-demand gap. Demand is projected to grow at a healthy pace of 3% while supply is expected to grow by about 1% from 2017, making the dry bulk segment an interesting market to invest in.

The growth in demand originates from a rise in iron ore and thermal coal trade. Coal demand is expected to rise mainly from developing Asian countries including Vietnam, South Korea, Taiwan and China. The rise in Chinese domestic steel consumption will provide employment to VLOCs and Capesize vessels carrying iron ore in the market. On the other hand, Vale’s new project S11D has become the most cost effective iron ore mining project and will increase iron ore supply from Brazil increasing total tonne miles; this will help demand for bigger vessels in the long term.

The supply side is projected to grow by just 1% from 2017 because of high scrapping and a thin orderbook. The environmental regulations on Ballast Water Treatment System (BWTS) will become effective in September 2017 and IMO’s regulation on use of low sulphur fuel oil in 2020 which will result in high scrapping of old tonnages. Shipowners will prefer to scrap their old tonnage, with low earnings potential, than incur additional cost on scrubber and Ballast Water Treatment Systems. On the other hand, a contracting orderbook and low future new orderings due to limited financing availability are keeping a check on future deliveries. At this point in time, the orderbook as a percentage of the total fleet, which is a strong indicator of future deliveries currently stands at a decade low.

“The outlook for the dry bulk shipping market continues to be positive as the supply and demand gap continues to narrow. Charter rates are expected to improve for most of the dry bulk segments in 2017 with the steepest recovery expected in Capesize segment. Average charter rates are expected to rise from $8,000 per day in 2016 to $12,800 per day level in 2017 and will further improve from 2018,” commented Rahul Sharan, Drewry’s lead analyst for dry bulk shipping.

Source: Drewry

Significant changes to ECSA services and ports of call

Significant reduction in the frequency of ECSA deep-sea services means fewer port calls and bigger exchanges, indicative of an issue felt globally.


https://www.drewry.co.uk/


For ECSA trades, further reduction in the number of weekly loops is unlikely though. Drewry’s Container Port Connectivity Index allows tracking of the best and least connected ports each quarter.

SPOTLIGHT ANALYSIS OF KEY LINER SERVICE CHANGES

Approach

Each quarter, Drewry scans its proprietary database of liner services and selects a location or trade route that has seen the most significant changes in service patterns, vessel deployments and ports of call.

This quarter the focus is on the East Coast South America (ECSA) trades.

Fewer services, bigger ships, less ports of call

The cascading of larger vessels into ECSA trades has led to excess capacity and a collapse of freight rates. Belatedly lines have withdrawn capacity in an attempt to stabilise the market and this has had a significant impact on service frequency and calls at individual ports.

Table 3.2 and Figure 3.1 show the number of services on the four main ECSA deepsea trade routes at present versus a year ago, and the total shows a marked reduction from 18 to 14 per week.

The main reduction from six to three loops has occurred in the Far East-ECSA trade as a result of an extensive increase in cooperation between the lines in the trade. Two of the loops are operated by no fewer than 10 carriers (exchanging slots between the two loops), with the third loop operated by three carriers (Maersk, MSC and MOL).

Far East services halved

Of interest is the fact that while the number of Far East services has halved, the average slot capacity per vessel has only increased by 20%, with the average vessel size now 8,851 teu and the maximum vessel size little changed at 10,500 teu (the largest vessels currently operating to ECSA),

As Table 3.1 and Figure 3.2 show. The conclusion is that it has been primarily an exercise in removing excess capacity, rather than pursuing more economies of scale.

By contrast, there has been little change in either the number of services or average slot capacities in the other trades over the last 12 months.

The only material change was the removal of an MSC-Zim US Gulf loop, after MSC formed a new VSA in this trade with Hamburg Süd in mid-2015. This resulted in a reduction from three to two US Gulf loops, with all lines operating in the trade being accommodated on the two remaining loops.

Impact on ECSA port calls:

Far East trade

As shown in Table 3.3, the main ECSA ports of Santos, Paranagua, Buenos Aires and Montevideo have reduced from six or five Far East service calls per week to each having just three services calling in the trade.

This will no doubt have increased significantly the volumes exchanged on each vessel call. Indeed all the three services now serve almost exactly the same ports in ECSA with only Itapoa (one service) and Itajai (two services) not covered on every service.

São Francisco has lost its only call in the trade (with volumes no doubt largely diverted to Itapoa), as in any case it could not handle the vessels now serving this trade. Rio de Janeiro has likewise lost its only service, and there are now no direct calls in the trade north of Santos.INLICES



2Q15 VS 2Q1

While these changes have had little impact on the maximum vessel size of around 10,500 teu in the trade, all direct call ports now have to accommodate this size of vessel. Also, significantly, most ports have seen their average vessel size increase by over 20% in the space of a single year.

What of the future?

With only three loops in the Far East trade, and supply and demand reportedly in better balance, it seems unlikely that there will be a further reduction in the number of services.

If the operating carriers wish to pursue further cost reductions, they could consider not having all three loops covering all the main ECSA ports, instead using slot exchanges to ensure that all lines still have service coverage of all ECSA ports.

While numerically, there might be a case for reducing the six Europe services, these services comprise:

3 North Europe loops

2 Mediterranean loops

1 Ro-ro service (Grimaldi)

Unless lines find it economical to serve the Med by hub and spoke over West Med transhipment ports such as Algeciras or Tanger Med, there is limited scope for further service reductions. Likewise the four North American services are Split between two US Gulf services and two eastern seaboard services, offering limited opportunity for further rationalisation.

Implications for ECSA ports

Increase in size of exchange per vessel call

Further reduction in number of weekly Far East services unlikely

All three Far East loops might not continue to call at all the ECSA ports though

Limited scope to reduce the number of Europe and North American weekly services.



GLOBAL CONTAIN GLOBAL CONTAINER PORT CONNECTIVITY INDEX

Methodology

Drewry has developed a bespoke index of container port connectivity in order to rank and monitor how well connected the world’s ports are. This measure focuses on two simple variables have been: first, the number of mainline services calling at each port per week, and second, the number of regions with which each port is directly connected. This analysis is still being developed, and so dummy data is provided in Table 3.4 to illustrate the methodology.



Choosing the right Incoterms is a vital part of the shipping process. This ensures that both parties – the seller and the buyer – understands their responsibilities, and at the same time, streamlines the whole shipping process so that the freights are delivered efficiently and in a timely manner.

For shipments that are transported through the inland waterway transport, shippers have four Incoterms to choose from: Free Alongside Ship (FAS), Free on Board (FOB), Cost and Freight (CFR), and Cost, Insurance, Freight (CIF). A detailed explanation of these Incoterms is provided in our previous blog Importer Facts: Choosing Your Agreement Between Your Supplier – Incoterms 2010. In this post, we will focus on the advantages of FOB over CIF, and why it is a more convenient option for shippers.

Free on Board

The seller fulfills their obligation when the goods have been delivered on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. This Incoterms indicates that the seller has to shoulder all the costs and risks of loss and damage to the goods until the goods have finally arrived on board the vessel, and the buyer will bear all costs from that moment onwards.

Cost, Insurance, Freight

The seller fulfills their obligation to deliver when the goods are already placed on board the vessel nominated by the seller or procure the goods already so delivered. The risks of loss and damage pass when the goods are on board the vessel. Aside from freight and clearance cost, the seller needs to procure and pay for a marine insurance against the buyer’s risks of loss of or damage to the goods while in transit.



Advantages of FOB

One of the main reason why many shippers choose FOB than CIF as the term of sale is because it allows for greater control over the freight and the freight expenses. This greater control can help you have an upper hand in minimizing the overall import cost while providing you with maximum convenience as possible.

Most first-time importers usually use CIF to transport small quantities of goods because it also offers convenience by having the seller deal with all the shipping and freight details. However, choosing this agreement can only lead to higher freight cost at the end. This is because the seller can collaborate with their forwarder to increase the markup of the freight cost, allowing them to make a profit. As an importer, you can’t do anything to affect the invoice given to you by the forwarder.

When shipping FOB, you have the power to control the overall shipping process, allowing to make significant cost savings. You can select your own freight carrier, you can choose which route has to be taken, select your own agents to handle the shipments when it arrives, organize an insurance policy as well as set your own transit time.

Another benefit that FOB provides is the convenience and transparency of working with only one contact agency throughout the process. This means that whenever you have questions or issues regarding your freight, you don’t have to meddle with different entities just to get a clear answer and feedbacks. This also ensures that the carrier will be working with only your best interest in mind because their sole purpose is to deliver your goods to its destination.

Shipping CIF on the other hand, is more disadvantageous, especially if your goal is to save money from your shipping cost. It relinquishes you with any control over your shipments while also passing more responsibilities and risks to your part. The seller can use their preferred shipper and their own transit times. Delayed shipments are also harder to resolve since transportation is beyond your control, and there are other parties that may be involved in different stages which make it harder to obtain information about the cargo. Another factor to consider is that since it was the seller who paid the carrier, there is no obligation to fulfill your needs.

From the buyer’s perspective, FOB offers greater control over the shipping process compared to what CIF does. Not only it provides greater flexibility, but also gives you control over the shipping cost, and subsequently, the overall cost of the cargos.

Contact Excelsior Worldwide Freight Logistics Corp. now and let us help you in your journey in the international trade this 2017 and beyond. Call us at (+632) 525-9775 or email us at [email protected].

Source: Posted in Standard Post, UncategorizedTagged Shipping FOB

The North of England P&I Club refers to a recent case in which the hacker used a very similar email to a known contact and asked for a payment to be diverted to a different account to that normally used and highlights lessons learned to enhance cyber security.

The Club says that the email had seemingly come from the account of the Owners, Charterers duly made payment of two hire payments into, what they believed


https://excelsior.ph/category/standard-post/

https://excelsior.ph/category/uncategorized/

https://excelsior.ph/tag/shipping-fob/


to be, Owners’ alternative bank account and evidenced, via swift confirmations, that this had been done. It soon became evident that Charterers had fallen victim to a fraudulent diversion of hire payment.

Lessons learned

The email received, purportedly from Owners, originated from an account very similar to the Owners’ legitimate accounts department. Always check the email address carefully – any changes to the normal address should be treated as suspicious.

In all prior correspondence originating from Owners’ accounts department, the email was personally signed off. In the email received from the fraudsters the email was simply signed off as ‘Accounts Department’. This is a clue that something is different – be suspicious in these circumstances.

In circumstances where a bank account has been provided for in the charterparty/fixture recap, treat this as the main account into which payment of hire/freight should be made.

Do not reply to the email account from which the instruction to make payment into a different account was received. Always use an email address that has been verified as legitimate.

Never call the telephone numbers provided for in the suspicious email. Always use a telephone number that has been verified as legitimate.

The Club warns that in case you receive an email asking you to pay funds due to a different account telephone your counterpart DO NOT email them – the malware viruses will create automatic email responses that will appear genuine.

Source: The North of England P&I Club


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newsletter nº 10 · 2020. 3. 3. · chinese steel mills grew production and kept on substituting...

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