A newly set-up BIMCO drafting team involving a cross-section of shipowners, charterers, financing and leasing institutions and private practice lawyers from Asia, Europe and the US began work this week to develop a standard letter of quiet enjoyment (LQE) for use in long term charter and leasing structure financings.

There is currently no standard form of LQE available in the market and while LQEs have long been a feature of ship financing transactions, the lack of a standard form means that the wording of an LQE may often vary significantly from one transaction to another. In most cases, an LQE will be beneficial to all parties involved, namely by preserving the charterers’ uninterrupted use and enjoyment of a ship – and thereby ensuring a regular income for the owner – and an opportunity for the lenders to secure rights of their own, e.g. in relation to appointing a replacement owner.

“By bringing together all the relevant stakeholders, we are planning to develop a balanced standard that can be used in various types of structures, as always with the possibility of the parties tailoring it to their specific needs,” says Catherine Smith of Hong Kong based Wah Kwong, who is chairing the drafting team.

The LQE will complement BIMCO’s existing suite of ship financing and leasing standards, SHIPTERM and SHIPTERM S (for bilateral and syndicated term loan facilities) and SHIPLEASE (for ship sale and leasebacks). A standard Shipmanagers’ Letter of Undertaking is also available from BIMCO.

At its first meeting on 7-8 September, the drafting team in charge of the project discussed the scope and objectives of the project. The overall aim is to develop a standard that is workable both for time and bareboat charter contexts as well as leasing. Several versions might be developed, namely in the form of unilateral and multilateral party LQEs. The standard will not cater for more complex project financings and similar structures as these will typically be very deal specific and therefore have to be tailormade.

The team also includes Sarah Jane Thompson of BHP in Singapore, Gitte Vannus Kragelund of Danish Ship Finance in Copenhagen, Jay Shi of CMB Financial Leasing Co., Ltd. in Shanghai, Olga Petrovic of Linklaters in London and Gerald Morrisey of Holland & Knight in New York.

The drafting team will continue its work on 24-25 October.
Source: BIMCO

• Shipping executives and industry watchers say contract prices for 40-TEU containers are headed for a dip following the trend in spot prices, despite rates still creeping up on some routes

• Drewry’s WCI composite index says spot prices fell for the 27^th consecutive week particularly on the Shanghai-Los Angeles corridor, indicating weak US demand

• Xeneta and CMA CGM chief executives say long-term rates are now under pressure from slowing demand in the West due to inflation

Long-term container rates have begun dropping, as they track the direction of global spot rates for 40-foot boxes, according to a shipping executive and industry watchers, as soft demand due to high inflation in the United States and Europe is putting pressure on box prices.

Drewry Supply Chain Advisors said on September 1 its World Container Index composite index declined 5% from a week ago to US$5,661.69 per forty-foot equivalent units (FEU), its 27th consecutive week of contraction. The index has dropped 43% from a year ago.

Data from online platform Xeneta shows that long-term rates for FEU containers rose 4.1% in August, taking rates 121.2% higher year on year on August 31, but shipping executives admit rates are reversing.

“[D]espite softening spot rates, uneven demand and ongoing supply chain issues, the world’s leading carriers remain on course for another bumper year of profits,” an update from Oslo-based Xeneta was quoted by Splash as saying.

Signs are appearing that new long-term contracted rates, which have trended upwards since the disruptions and port congestions began in the 2021 peak season, are actually starting to drop on key trading corridors.

Xeneta said, however, since carriers are replacing expiring contracts with considerably lower rates, the average paid by all shippers is still climbing.

“There’s no doubt the major carriers have had it their way in negotiations for some time,” said Xeneta chief executive Patrik Berglund.

“The spectacular results they saw in 2021 will no doubt be repeated, and even bettered, this year, as seen by the huge profits that defined many Q2 financial reports. But there is a sense that change is in the air.”

After a long spell of container rates rising to abnormally high levels that drove up liner profits to record highs lately, rates are now expected to inevitably go the direction of declining spot markets. Liner top executives agree.

“What we’ve been seeing now for many weeks is a decrease of freight rates in almost all sectors. We expect that decrease to continue. I don’t think we’ll see a strong drop but rather a soft landing,” CMA CGM chairman and CEO Rodolphe Saadé told Bloomberg a week ago.

Saadé reiterated that view in CMA CGM’s results briefing on September 2. He said inflationary pressures have caused a slowdown in consumer spending and therefore a softening in demand for maritime shipping in recent weeks.

“In some regions, these developments have led to a decline in spot freight rates,” Saade  said. His view was echoed by Berglund.

“Volumes are dropping and, as expected, long-term rates are beginning to follow the trend set by the spot market,” the Xeneta CEO said.

A slowdown is expected in China’s exports to the United States and Europe this peak season as its manufacturing sector has been affected by anti-pandemic restrictions and industries face water shortage due to drought.

A lockdown in Chengdu city was imposed on September 1 on its 21 million population after 157 new COVID-19 cases were detected, raising  the number of infections to over 600. Observers said the lockdown could affect its export industries icluding electronics, information technology, food processing, machinery and automobiles, as happened in Shanghai earlier.

Drewry’s WCI composite index rate of $5,662 per FEU container is now 45% below the $10,377 peak in September 2021, but remains 55% above the $3,664 5-year average. The average WCI for the year to date is $7,928 per FEU , still $4,265 above the five-year average.

Spot rates on the Shanghai-Los Angeles route fell 9%, or $565, to $5,562 per FEU. Spot rates on Shanghai-Rotterdam and Shanghai-Genoa routes fell 5% each to $7,583 and $7,971 per FEU.

Shanghai-New York rates decreased 3%, or $265, to $9,304 per FEU. Similarly, Rotterdam-New York rates eased 1% to $6,839 per FEU.

Los Angeles-Shanghai rates gained 1% to $1,262 per FEU box, while Rotterdam-Shanghai and New York-Rotterdam rates hovered around the previous week’s level.

Source: https://www.portcalls.com/long-term-container-rates-track-spot-market-dip/

Three new cruise lines are set to be unveiled this September as new investors and new money enter the business.

A combination of available ships, funding and fear of missing out is the driving force behind these three projects.

Major Hotel Chain: According to multiple sources speaking to Cruise Industry News, a well-known hotel brand will announce its intention to start a cruise line with new, (comma) small luxury ships sometime in September.

French Start Up: A French start up has acquired the former Maasdam from the laid up Seajets cruise fleet and will be announcing more details shortly. Seajets has yet to put any of its cruise vessels into service, having already sent ships to be recycled. If the deal works out, look for the more of the Seajets fleet to find new homes. Seller financing is said to be playing a key role.

Exploris: The Silver Explorer will be heading to a new home in late 2023 at Exploris, which is targeting the high-end expedition market with a small ship. A press conference is scheduled for early September with more details set to be announced then.

Source: https://www.cruiseindustrynews.com/cruise-news/28123-three-new-cruise-lines-set-to-reveal-themselves-in-september.html