- "Most analysts say that container traffic will probably not recover to prerecession levels until 2012 or later. Drewry Shipping expects a 2.4 percent increase in global trade volume this year, after an estimated 10.3 percent decline last year.
- “On the demand side, we do see some strength; we see continued strength in China,” said Vikrant S. Bhatia, chief executive of KC Maritime, a bulk-carrier shipping line based in Hong Kong. “The problem we see is really on the supply side.”
- Until 2008, the liners were cresting; shipyards were humming, building ever larger ships as ports expanded and new services opened, underpinned by low-cost finance."
- "Chinese toys and sneakers headed to Wal-Mart Stores Inc. and Target Corp. on the U.S. East Coast may bypass Warren Buffett’s $33.8 billion railway as the expansion of the Panama Canal slashes the cost of shipping them by sea.
- The deeper, wider canal will allow A.P. Moeller-Maersk A/S, China Ocean Shipping Group Co. and other lines to ship more cargo directly to New York and Boston instead of unloading it on the West Coast for trains and trucks to finish the journey east. That could save exporters 30 percent, the canal operator said.
- The $5.25 billion Panama Canal project, scheduled for completion during its centennial in 2014, may take business from ports including Los Angeles and Seattle, and railroads including Berkshire Hathaway Inc.’s Burlington Northern Santa Fe Corp. It costs as much as $1,000 more per cargo container to use trains than ships, said Lee Sokje, a shipbuilding analyst at Mirae Asset Securities Co. in Seoul."
Seaspan's business model (from June investor presentation - link here):
Snapshot from the same presentation that shows contracted revenue and cash flow growth:
The growth is expected to occur despite ongoing economic weakness and excess industry capacity, although we can't fully ignore these risks. Market circumstances may impact ship values, debt covenants, and financing needs. Seaspan still needs to raise an additional $180 million to fund remaining "newbuilds", which implies incremental dilution (assuming equity offering at $10 per share = 18 million additional shares). We're including additional dilution in our estimated 3-4x purchase multiple.
- "on December 31, 2009 the CSCL Hamburg, a 4,250 TEU container vessel went aground in the Gulf of Aqaba en route to Singapore. Preliminary reports indicated that there were no personnel injuries or oil pollution as a result of the incident. The Company is coordinating with Egyptian authorities and other parties to inspect and refloat the vessel. Off-hire and repair costs are currently being assessed. Any repair costs are expected to be covered by insurance."
- The Gulf of Aqaba, like the coastal waters of the Red Sea, is one of the world's premier sites for diving. The area is especially rich in coral and other marine biodiversity and contains a number of underwater wrecks, some accidental shipwrecks, others vessels deliberately sunk in an effort to provide a habitat for marine organisms and bolster the local dive tourism industry.
The good news: as of the last week of January, the CSCL Hamburg was moving again and is now out of the Red Sea sailing off the coast of Oman at approximately 10 nm/hour. We know this thanks to Seaspan's GPS tracking on the company's Web site:
Disclosure: long SSW.
© 2010 Jeffrey Walkenhorst
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