Mezeron & Steam Packet Master Thread

[Lost Login]

Nice post Barrie, very informative and thought provoking.

 

Your quote: I am advised that the Steampacket must buy and own ships and not charter. has me a little confused? I wouldn't have thought this to be a stipulation in the UA but then again I've not read it.

 

If true, Mezeron must hold a massive cost advantage over the SP in their ability to exploit the cheaper chartered vessels and crews in the current economic market.

 

That in essence does seem a little unfair on the SP as much as I grumble about a £500 round trip by car with 2 passengers at TT week.

 

It is not unfair because in return the SP got sole use of the link spans. That is and was the whole point of the agreement. The SP were tied into doing some things they might nother wise have done and in return they got a near monopoly. It might only be unfair if they got nothing in return. they did.

[Barrie Stevens]

Well Barrie, I guess it makes a change from bombarding that nice Richard Murphy!

 

There are two points I would like to draw your attention to. Three if you count your lack of paragraphs!

 

Mezeron thus has ultimate flexibility but the Steampacket has alleged social obligations. You need a political decision but not subsidies I hope.

 

The SP is a business. As such it has no "social obligations" and their fare structure and passenger "experience" serves to reinforce this. I suspect, because I do not know, that they were creaming it off from the freight and if passengers were a necessary evil in order to do this then so be it. I also can't see a "political decision" being required i.e. what do the worthies in Tynpotwald have to decide about? Exclusivity?

 

With the lack of market research from the SP I have conducted my own. Having consulted my missus I can conclude that passengers want a fast, frequent service that is as cheap as chips and feeds them into the UK transport infrastructure as seamlessly as possible. I would have consulted Robert H Goddard on this thorny and complex issue but alas he died in 1945.

 

 

In the meantime, two (is it?) container feeder ships have full employment - but for how long?

 

Well, essentially for ever! I should imagine the tonnage the island requires is pretty much static. Sure there will be seasonal peaks and troughs but these will be understood and manageable. So your business plan is pretty clear cut. Or rather it was if you are the SP. Mezeron will also have a very clear idea of the SP freight margins which I suspect will give them a great deal of room for manoeuvre.

 

 

The local physical market might be static and support two Mezeron ships on charter but will there always be continuity of supply on the chartering side if the market moves against you and you do not own your own tonnage like the Steampacket? Charters are for a limited time often with options. How will the market look when redelivery is due? This is why shipowning and chartering is so speculative. In fact "Rags to Riches and Riches to rags" is the industry norm. The whole point of the article in fact. The Progressive Action Group website contains alleged details of the User Agreement and of the many millions the Steampacket is obliged to invest in terms of ownership as opposed to charter as their price for the Linkspan Agreement. Freeing up capital may not mean disposal of Ben My Chree but options release and charter out or use elsewhere depending on the market. It is all about the global market once you let operators like Mezeron in and who have no capital tied up long-term.(Folks. I must apologise for multiple postings/Repeats as am still new to this site (Someone throw me a line and tidy it up. Lloyd's Agreement. "No cure no pay".

[Lost Login]

The SP is a business. As such it has no "social obligations" and their fare structure and passenger "experience" serves to reinforce this. I suspect, because I do not know, that they were creaming it off from the freight and if passengers were a necessary evil in order to do this then so be it. I also can't see a "political decision" being required i.e. what do the worthies in Tynpotwald have to decide about? Exclusivity?

 

With the lack of market research from the SP I have conducted my own. Having consulted my missus I can conclude that passengers want a fast, frequent service that is as cheap as chips and feeds them into the UK transport infrastructure as seamlessly as possible. I would have consulted Robert H Goddard on this thorny and complex issue but alas he died in 1945.

It does have "social obligations" if you define those as obligations to provide services it might not do by choice. Are those not the restrictions on price increases and minimum number of sailing obligations that it is required to do.

 

I agree with your research findings however how do we ensure that we can get as close as we can do to that when for whoever operates the route it is probably far away from what they want.

 

I acn see competition may work for freight however as I keep saying i struggle to see it would result in a decent passenger service. Surely that is where a political decision is required and that is how to ensure that such a passenger service is maintained. Previoulsy that has been via the user agreement. If that goes what alternative mechanism should be put in place?

[Barrie Stevens]

Well Barrie, I guess it makes a change from bombarding that nice Richard Murphy!

 

There are two points I would like to draw your attention to. Three if you count your lack of paragraphs!

 

Mezeron thus has ultimate flexibility but the Steampacket has alleged social obligations. You need a political decision but not subsidies I hope.

 

The SP is a business. As such it has no "social obligations" and their fare structure and passenger "experience" serves to reinforce this. I suspect, because I do not know, that they were creaming it off from the freight and if passengers were a necessary evil in order to do this then so be it. I also can't see a "political decision" being required i.e. what do the worthies in Tynpotwald have to decide about? Exclusivity?

 

With the lack of market research from the SP I have conducted my own. Having consulted my missus I can conclude that passengers want a fast, frequent service that is as cheap as chips and feeds them into the UK transport infrastructure as seamlessly as possible. I would have consulted Robert H Goddard on this thorny and complex issue but alas he died in 1945.

 

 

In the meantime, two (is it?) container feeder ships have full employment - but for how long?

 

Well, essentially for ever! I should imagine the tonnage the island requires is pretty much static. Sure there will be seasonal peaks and troughs but these will be understood and manageable. So your business plan is pretty clear cut. Or rather it was if you are the SP. Mezeron will also have a very clear idea of the SP freight margins which I suspect will give them a great deal of room for manoeuvre.

 

 

The local physical market might be static and support two Mezeron ships on charter but will there always be continuity of supply on the chartering side if the market moves against you and you do not own your own tonnage like the Steampacket? Charters are for a limited time often with options. How will the market look when redelivery is due? This is why shipowning and chartering is so speculative. In fact "Rags to Riches and Riches to rags" is the industry norm. The whole point of the article in fact. The Progressive Action Group website contains alleged details of the User Agreement and of the many millions the Steampacket is obliged to invest in terms of ownership as opposed to charter as their price for the Linkspan Agreement. Freeing up capital may not mean disposal of Ben My Chree but options release and charter out or use elsewhere depending on the market. It is all about the global market once you let operators like Mezeron in and who have no capital tied up long-term.(Folks. I must apologise for multiple postings/Repeats as am still new to this site (Someone throw me a line and tidy it up. Lloyd's Agreement. "No cure no pay".

 

 

What has Tynwald to do with it? Well, I am advised that the User Agreement obliges the Steampacket to lay on defined freight and crucially certain passenger services. I am advised that they are not allowed to charter tonnage for the main service such as is operated by Ben My Chree (They charter in for TT at times). Either way they are obliged to make many milliions in capital investment and this was the basis of ordering "the Ben" and the User Agreement extension is the basis for further future capital investment based on profitable freight revenues (now badly hit by Mezeron). It is a political choice as to whether the Steampacket can charter and not be obliged to invest permanent capital purely as a means of competing with competitor's chartered tonnage whereby they (Mezeron)pay monthly hire in advance for a set period (plus the cost of fuel oil and diesel, port charges, freight handling etc.) The Estonian owners merely own the ship and pay their crew and maintain the ship. Shipowning of the Steampacket variety is by nature long-term. They have been committed long-term by the User Agreement. Buying "the Ben" was always a compromise design. I can only guess at the "Steamies" predicament but I think if they are to survive they must at least have the option to charter (if it is currently banned) and possibly be relieved of massive capital obligations. Hence the polital decisions.

[Sean South]

I am a former bulk dry cargo shipbroker and currently a retired member of the Baltic Exchange in the City.....

Thanks for that Barrie. Very interesting to get a Shipping Industry point of view on the current debate albeit not in the exact context of the IoM. I would, maybe, add a few comments:

You refer to Mezeron having access to cheap charters at the moment and may not be willing to keep up the service of/when the value of the charters increases again. Surely them starting with these cheaper charters gives them the chance to test the market and establish a service and, obviously, they are proving now that there is a viable business to be built so are bound to place it on a more solid footing? Or if not, at least they have done the ground work for someone else to realise the viability and take it over were Mezeron to withdraw. Also the SPCo have proved that the island is very lucrative for a Shipping service provider given the ease at which they have been able to borrow up to £200million against the value of it?

 

My only interest is in whoever ends up running the service basically provides a timetable to suit me. i.e. fast craft on the Liverpool route at a reasonable price which I can generally book a car on at fairly short notice. I believe that in essence to have that we need a timetable roughly as of now in terms of frequency and that will only happen long term if basically there is only one operator on the route opertaing under some sort of license or agreement. who that company is I could not really care.

Regarding the Fast Craft issue, I think it is generally accepted that Fast Craft, in their current design, are no longer a viable option for most shipping companies due to their inordinate fuel consumption. They were sexy for a while because they were new technology and fast and the customers embraced them and shipping company CEO's bought/chartered them as a status symbol - the sports car of the sea if you like... Then the reality dawned that they were just not viable. I believe the solution for the SPCo is to dispense with their two as fast as they can while they still have some sale value. Such vessels are advertised for sale around the world currently at way cheaper prices than their value, of say, even last year... They would probably be best served with another vessel similar to the Ben that they could use to service their extra summer routes and charter or indeed use themselves on other Irish Sea routes in the winter such as the UK > Ireland routes. And also able to handle more diverse weather. Trade on those routes for freight are growing all the time and operators such as Stena and Irish Ferries have noted an upturn in passenger numbers since the economic downturn. As I've stated before the SPCo need to get to a situation where, as a company, all their eggs are not in one basket. They need additional routes to ensure survival.

[P.K.]

The local physical market might be static and support two Mezeron ships on charter but will there always be continuity of supply on the chartering side if the market moves against you and you do not own your own tonnage like the Steampacket?

 

 

So Barrie, just how long is this piece of string I'm holding?

 

You can "what if?" these issues for ever. I understand that owning your carriers protects you from market forces moving chartering costs around. But, let's face it, the industry is on it's arse in the middle of a recession. Sure the UA ties them into infrastructure investment but they wouldn't have signed up to make a loss now would they? And those assets they have to invest in have a value so it's not as though they're having to throw money away now is it? So to me the only political decision Tynpotwald might have to make would be to amend the UA to get the SP's profit margins back up make it easier for the SP to provide a decent level of service.

 

I would still like to see the real SP £numbers. Not to crow about how much in the shit the SP might be but rather to see what they are likely to do next. But with a business rival chipping away at the old stone I would keep my powder well and truly dry as well!

[P.K.]

It does have "social obligations" if you define those as CONTRACTUAL obligations to provide services it might not do by choice. Are those not the CONTRACTUAL restrictions on price increases and minimum number of sailing CONTRACTUAL obligations that it is required to do.

 

Fixed your post!

 

Folks aren't in business to massage a social conscience. They're in business to make as much money as they can...

[Barrie Stevens]

Nice post Barrie, very informative and thought provoking.

 

Your quote: I am advised that the Steampacket must buy and own ships and not charter. has me a little confused? I wouldn't have thought this to be a stipulation in the UA but then again I've not read it.

 

If true, Mezeron must hold a massive cost advantage over the SP in their ability to exploit the cheaper chartered vessels and crews in the current economic market.

 

That in essence does seem a little unfair on the SP as much as I grumble about a £500 round trip by car with 2 passengers at TT week.

 

It is not unfair because in return the SP got sole use of the link spans. That is and was the whole point of the agreement. The SP were tied into doing some things they might nother wise have done and in return they got a near monopoly. It might only be unfair if they got nothing in return. they did.

 

 

It is as if the Island were getting its own little ferry service in that for the modest price of a Linkspan someone else (Steamies) had to invest tens of millions. The balance has been upset by Mezeron being acquired by Dohle and then introducing the global market into a vulnerable backwater.

 

As a charterer, Mezeron, or whatever name they charter under, simply pays the monthly hire in advance plus fuel invoice as submitted by the owner who must pay the crew and maintain the ship. Mezeron must pay for port charges and any costs of loading and discharging under their Bills of Lading. The actual owner has a back seat really!

 

If the Steampacket were released from its obligation to invest it might be allowed to Bareboat or Demise Charrter as a compromise. This is in effect a lease, and although hire is paid for a longer period than in Timecharter, the Steampacket would be practically the owner, employ crew, maintain the ship, insure it and have the right to paint in company colours.

 

Further to this, have you considered that Mezeron might be building up the business so as to sell the operation and name to a bigger more ruthless operator who will care not a fig for the Manx passenger traffic? So taking the Linkspan off the Steampacket could be a disaster as then you might have the worst of all worlds. Alleviating Steampacket capital obligations might just help. We can only guess! I have known rivals like Mezeron be bought out or taken over by the very company they were competing with in order to shut them up - but also to maybe take advantage of a hard lesson. Steampacket takes over Mezeron??

 

It seems to me that political intervention is required if the potential situation is as dire as some say that it is.

[pongo]

So Barrie, just how long is this piece of string I'm holding?

You can "what if?" these issues for ever.

 

Can see his point though no - without necessarily coming down on either side ? He is making an distinction between different established shipping models. IE a more or less liner service (ie typically regular, scheduled, fixed rates, owning or leasing vessels etc) vs chartering to pick up trade to exploit an opportunity.

 

Seems to be a growing consensus that the UA, fast ferries, freight costs vs passenger costs and the huge borrowing are the issues. Which is more or less what lots of people on the IOM have been saying for ages. So if Mezeron forces the issue then that should be for the good.

[Barrie Stevens]

It does have "social obligations" if you define those as CONTRACTUAL obligations to provide services it might not do by choice. Are those not the CONTRACTUAL restrictions on price increases and minimum number of sailing CONTRACTUAL obligations that it is required to do.

 

Fixed your post!

 

Folks aren't in business to massage a social conscience. They're in business to make as much money as they can...

 

 

Which is why they charge to satisfy political requirements and also to cover heavy capital obligations. The social side is part of the Island's political motivation to charter the Linkspan to the Steampacket.

[Barrie Stevens]

So Barrie, just how long is this piece of string I'm holding?

You can "what if?" these issues for ever.

 

Can see his point though no - without necessarily coming down on either side ? He is making an distinction between different established shipping models. IE a more or less liner service (ie typically regular, scheduled, fixed rates, owning or leasing vessels etc) vs chartering to pick up trade to exploit an opportunity.

 

Seems to be a growing consensus that the UA, fast ferries, freight costs vs passenger costs and the huge borrowing are the issues. Which is more or less what lots of people on the IOM have been saying for ages. So if Mezeron forces the issue then that should be for the good.

 

 

I am not "what-iffing" I am simply informing people of how the shipping business operates. If the Steampacket is emasculated and the Linkspan freed up you might see Mezeron expand but I can tell you that operators often build up a business and sell it on to a bigger/more ruthless operator. I have exposed some ideas in order that people may be briefed as much of this is a closed book and I at least have done it "hands on" which few posters have!

[P.K.]

Seems to be a growing consensus that the UA, fast ferries, freight costs vs passenger costs and the huge borrowing are the issues. Which is more or less what lots of people on the IOM have been saying for ages. So if Mezeron forces the issue then that should be for the good.

 

I was under the impression that the UA had a further 10 years to run? I'm also not so sure that forcing issues is necessarily a good thing.

[Barrie Stevens]

Nice post Barrie, very informative and thought provoking.

 

Your quote: I am advised that the Steampacket must buy and own ships and not charter. has me a little confused? I wouldn't have thought this to be a stipulation in the UA but then again I've not read it.

 

If true, Mezeron must hold a massive cost advantage over the SP in their ability to exploit the cheaper chartered vessels and crews in the current economic market.

 

That in essence does seem a little unfair on the SP as much as I grumble about a £500 round trip by car with 2 passengers at TT week.

 

According to the Progressive Action Group website the Steampacket committed to multi millions investment when acquiring "the Ben" and then even more over a period of time for the extensions to the Linkspan Agreement.I have not been able to get hold of the actual text. I am advised that they must invest and not charter in tonnage like Mezeron.

 

It is not unfair because in return the SP got sole use of the link spans. That is and was the whole point of the agreement. The SP were tied into doing some things they might nother wise have done and in return they got a near monopoly. It might only be unfair if they got nothing in return. they did.

 

 

It is as if the Island were getting its own little ferry service in that for the modest price of a Linkspan someone else (Steamies) had to invest tens of millions. The balance has been upset by Mezeron being acquired by Dohle and then introducing the global market into a vulnerable backwater.

 

As a charterer, Mezeron, or whatever name they charter under, simply pays the monthly hire in advance plus fuel invoice as submitted by the owner who must pay the crew and maintain the ship. Mezeron must pay for port charges and any costs of loading and discharging under their Bills of Lading. The actual owner has a back seat really!

 

If the Steampacket were released from its obligation to invest it might be allowed to Bareboat or Demise Charrter as a compromise. This is in effect a lease, and although hire is paid for a longer period than in Timecharter, the Steampacket would be practically the owner, employ crew, maintain the ship, insure it and have the right to paint in company colours.

 

Further to this, have you considered that Mezeron might be building up the business so as to sell the operation and name to a bigger more ruthless operator who will care not a fig for the Manx passenger traffic? So taking the Linkspan off the Steampacket could be a disaster as then you might have the worst of all worlds. Alleviating Steampacket capital obligations might just help. We can only guess! I have known rivals like Mezeron be bought out or taken over by the very company they were competing with in order to shut them up - but also to maybe take advantage of a hard lesson. Steampacket takes over Mezeron??

 

It seems to me that political intervention is required if the potential situation is as dire as some say that it is.

[pongo]

Barrie - care to address the issue of the huge SPCo borrowing - which seems to be way out of line with the cost of owning vessels? According to the media this borrowing is not about funding investment - but seems instead to be about the SPCo itself being traded as an asset to borrow against - because the UA seemed to guarantee income to service that given level of huge borrowing.

 

Almost as if the company ends up being used as a financial instrument itself - sort of one removed from its actual business. The real business being trading companies which have captive revenue streams which can be squeezed.

 

IMO that skews any traditional liner vs charter debate because the cost of servicing debt is equally as volatile and uncertain as any shipping industry index.

[Tugger]

I knew that there would be dire consequences to the end of "Your Shout" on iomtoday.co.im, and here is the living embodiment of those consequences, Barrie Stevens. Finally, P.K. has someone who will give him a run for his money in talking unadulterated shite with absolute self-confidence.