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Drewry: Strong US Dollar Cuts Both Ways

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A rapidly appreciating US dollar is helping exporters in some trading nations but not all, Drewry Maritime Research says. So, who is seeing the biggest lift to their export competitiveness, and who cannot keep up the pace?

The US dollar is currently in hyper drive, appreciating at its fastest rate in decades. The US Federal Reserve’s trade-weighted average of the foreign exchange values of the US dollar against a basket of major currencies shows that the greenback has jumped 9% since the end of 2014 and by 20% since March 2014, says Drewry.

The appreciation has been much steeper against some currencies, most notably the Brazilian Real and Japanese Yen, giving exporters in those countries a significant competitive boost.

But having weaker currencies benefited some countries in the container trade with the US, but not others, says Drewry.

The biggest winners last year were undoubtedly Brazilian exporters. Brazil’s container exports to the US jumped by 25% in 2014, enough to see it jump three places to become the second single largest exporter to America in tonnage terms. The real’s depreciation against the dollar was larger than other major currencies due to falling commodity prices and the recessionary state of the Brazilian economy.

Indian container exports also received a significant leg-up from its currency depreciation with tonnage to the US rising by 23% in 2014. All things are relative and India’s weaker position to Brazil will be of concern for the export of competing commodities such as coffee, according to Drewry.

However, the currency exchange did not negatively impact US exports to the same countries. US to Brazil container tonnage increased by 14%, while Indian imports of US containerised goods rose by 8%. They may struggle to reach such heights in 2015 if the dollar continues its trajectory, Drewry predicts.

The competitive boost handed to Brazilian and Indian exporters did not unduly harm other nations with lower exchange rate movements against the dollar. For example, South Korea’s box exports in tonnes increased by 12% last year even though the won appreciated mildly against the dollar.

China increased its tonnage to the US by a smidgen under the average at 7.5%. This kept China’s market share at around 36% with nine times the size of Brazil’s tonnage. It was a similar story for the Euro area trading bloc. The euro’s depreciation since the start of this year should encourage more westbound Transatlantic container traffic.

Japan stands out as the exception. Despite the yen losing about 15% of its value against the dollar through 2014, Japanese exports to the US fell by 7% in tonnage terms.

It’s difficult to pin down the precise reason why the currency depreciation/higher exports equation has broken in Japan, says Drewry,  but some explanations range from its goods being too pricey as firms look to hold on to profits, acceleration in outsourcing, and its hi-tech products losing their appeal against foreign competitors.

The story is set to continue through 2015 as the dollar is widely expected to strengthen further. The Federal Reserve has ended its quantitative easing (QE) programme (the opposite to the European and Japanese central banks) and has signaled that it will raise interest rates soon, making it even more attractive to investors. Further appreciation of the dollar will undoubtedly boost US imports, with emerging economies and Eurozone countries at the front of the queue, says Drewry.

However, the dollar’s stratospheric rise contains significant risk for emerging nations. Companies that borrowed heavily in dollars – the Bank for International Settlements said there were USD 9.2 trillion of dollar loans outside the US as of September last year, a rise of 50% since 2009 – are now seeing those loans become much more expensive to pay off. Numerous sugar producers in Brazil have already succumbed (also due to low commodity prices) and high profile firms in India and China are also struggling with inflated dollar debts.

Higher exports at the cost of a wave of bankruptcies and job losses is not much of a trade-off for those nations and could well prompt policy measures that would work against exporters.

Drewry believes that emerging nations with goods that America wants will benefit most from the container import drive of the US in 2015. However, US exporters stand to suffer from the rising dollar and potentially weaker trading partners.

World Maritime News

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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