Kalimbassieris says cargo claims for some items are set to soar - 02/02/2009

As the global economic slump has hit shipping, with much of the debate having centred on the impact of falling freight rates, one consultant believes it will also impact on cargo claims.

As the global economic slump has hit shipping, with much of the debate having centred on the impact of falling freight rates, one consultant believes it will also impact on cargo claims.

The industry’s focus has been on the fall in rates and revenue with the knock-on effect it will have on the new tonnage on order. However, the recession has also seen a drop in freight rates — prompting one leading consultant to warn that cargo claims in certain commodities are now set to increase.

At the heart of the issue is the credit crunch which is affecting companies which have ordered the cargo but are now no longer confident they can find buyers; and if they can, find buyers at the right price. Therefore, they are becoming increasingly sensitive to cargo conditions looking at it as a way in which to reject what has become an uneconomic cargo.

It has prompted the warning from marine consultancy Kalimbassieris Maritime that the reality is that ship operators should expect an increase in cargo claims for particular commodities with steel a particular problem. “Commodity prices overall have fallen sharply” said Christina Kalimbassieris, managing director of Kalimbassieris Maritime. “But our offices in Romania, Bulgaria and Turkey are reporting that steel products from the Black Sea have been particularly badly hit.
“The booming economies of Asia, which had been driving the global demand for steel, have begun to feel the current economic realities and reports are that the demand for steel in those areas has started to diminish.

“Turkey — Europe’s third largest producer of steel — has seen demand for steel deteriorate even faster than expected and prices have plummeted. For example, several months ago steel coils were about $1,200 per tonne; the price has now almost halved to approximately $670. The result is that leading Turkish steel producers have reduced production to minimise losses and volumes are subsequently at their lowest levels since 2006.

“The result is that we expect this to lead to an increase in the number of steel cargo claims. When the economy is weak, buyers of steel tend to turn away more cargo than usual — a phenomenon known as ‘market rejection’. With steel prices dropping between the time of purchase and delivery, there is now a heightened risk of receivers rejecting cargo.”

The issues for ship operators are not restricted to the markets for new steel. Indeed, it has been exacerbated by the weakness of the secondary scrap market.
“By nature steel is a cargo that is susceptible to damages,” said Ms Kalimbassieris. “In the current world economic circumstance, receivers unsurprisingly become more sensitive to this and look to make claims over steel shipments. Owners should be aware of this increased risk and take appropriate steps to try to mitigate the problem by ensuring that cargo documents accurately reflect the cargo condition prior to and at the time of shipment.”