Why can't ships stay at dock?

[jan-n-john]

12 minutes ago, chengkp75 said:

The rules are not new, they came into effect back in 2013, and they apply to every ship, not just cruise ships.  Cruise ships account for about 5% of the world's shipping, so they are a minor segment.  The ECA is a part of MARPOL Annex VI, dealing with air pollution, as are the other ECA's in the Baltic, North Sea, and Arctic regions.  The EU also has rules about ships burning low sulfur fuel while in EU ports.  Outside of ECA's ships must comply with MARPOL on worldwide sulfur limits in fuel.  Up until January 1 this year, worldwide sulfur limits for fuel were 3.5%, but are now 0.5% (an 86% reduction in sulfur).  Within ECA's, the sulfur content cannot be more than 0.1%.  Scrubbers can be used to continue to burn higher sulfur fuel, now the 0.5% limit, as long as the resultant emissions are the same as if the ship were burning 0.1% fuel.  So, ships are allowed to switch fuel when entering/leaving ECA's and burn the higher sulfur fuel without a scrubber in most areas of the world.

 

So, the new worldwide rules, as well as the ECA rules reduce sulfur emissions significantly (before January, the ECA lowered sulfur emissions by 97% in ECA's, and the new rules lower worldwide sulfur by 86%).  Scrubbers take the sulfur out of the air, and can discharge it into the open ocean after treatment, and there is some debate as to whether this is just as harmful as the previous air pollution, but at the moment it is legal.  The biggest problem, and one that has not been determined yet, due to the short time since January, and now the world oil glut, is whether the refineries can produce sufficient low sulfur fuel oil (0.5% sulfur) to meet world shipping demand, and whether the resultant drop in price for high sulfur fuel oil (ships can no longer use it), will drive power plants in emerging countries to switch to this cheaper fuel over less environmentally but more costly fuel options and allow this higher sulfur fuel to be burned in a less regulated industry.

Yeah I understood it applied to all ships -- my misstatement. Thanks for the clarity involving the time sequence of the MARPOL rules implementation.

 

So to put it simply and in terms that the average person can grasp, today ship-caused air pollution (sulfur) in North America, most of Europe, and the Arctic is very low and highly controlled, and in the rest of the world is pretty low and highly controlled. 

 

Obviously the shipping industry can't control what power plants in developing countries do in response to market signals, but we can hope that that will soon be taken care of too; in the end, it's up to regulators everywhere to control what refineries produce and consumers buy.

 

[jan-n-john]

40 minutes ago, chengkp75 said:

The vast majority of cargo ships are not "owned" by the line that operates them, they are typically leased, on a "bareboat charter" from a shell corporation that owns only that one ship, and is either wholly owned by the owners of the shipping line, or owned by a combination of the shipping line and the shipyard that built it.  This shifts liability away from the parent shipping company.

 

And, the majority of MSC's cruise ships only run about 3-4 times what the latest container ship has cost.  With only 23 cruise ships and nearly 500 container ships, the cruise line still is only a small part of their assets.

 

That's true of cargo ships generally but far less true of container ships which, by the nature of the business, have a long term relationship with their operators. So the operators (like MSC) certainly "own" them in an economic sense even if their lawyers have structured the legal aspects in ways that help insulate them from legal liability, tax, etc. considerations. Bulk shipping, which accounts for the largest portion of vessels out there, is a whole different world.

 

All that notwithstanding, provided that they are leasing rather than owning, the ships aren't part of their "asset" base for financing purposes at least not in the same way that truly owned ships are, which is more characteristic of cruise ships.

 

The prices you mentioned relate to the latest and largest container ships.  The vast majority of MSC's ships aren't in that mold; they are smaller and older; they have a lot of 20 year old ships, likely mostly on charters, that have little remaining value.  And anyway, no matter how they are financed they are easily marketable unlike big modern cruise ships which are pretty much limited to the service they were designed for.

 

All of which is just saying comparing the number of ships can be very misleading. Based on what I can see, I believe MSC's cruise business constitutes a substantial part of its business base and risk profile. In a stress test situation, I would definitely not assume their container business is capable of keeping their head above water if the cruise business tanks. In the end, it probably would depend on their bankers, and about that only the bankers really know.

Edited April 30, 2020 by jan-n-john

[SRF]

On 4/28/2020 at 8:19 PM, chengkp75 said:

No, they don't plug into a 50 amp shore power, but in California, they are required to plug into shore power.  The ship uses 10,000 volt power, and would be capable of drawing about 8Mw, or 800 amps at 10k volts.

 

Do they take 3 phase power?

[chengkp75]

46 minutes ago, SRF said:

 

Do they take 3 phase power?

Yes.  And that's another headache we have when connecting to shore power, is the phase rotation correct.  Typically, you have a meter to tell you if rotation is correct before you close the breaker.

[bob brown]

On 4/30/2020 at 8:43 AM, jan-n-john said:

All of which is just saying comparing the number of ships can be very misleading. Based on what I can see, I believe MSC's cruise business constitutes a substantial part of its business base and risk profile. In a stress test situation, I would definitely not assume their container business is capable of keeping their head above water if the cruise business tanks. 

I suppose that is why Maersk, the world's largest shipping company, is not in the cruise ship business.  And the only other freight line besides MSC that still is, NYK, has reduced its cruise ship holdings to just one ship.   I believe Hapag Lloyd has divested its cruise ship division...

And the old-timer's, like Cunard, P&O, and HAL, have long been out of the freight business...

[chengkp75]

1 hour ago, bob brown said:

I suppose that is why Maersk, the world's largest shipping company, is not in the cruise ship business.  And the only other freight line besides MSC that still is, NYK, has reduced its cruise ship holdings to just one ship.   I believe Hapag Lloyd has divested its cruise ship division...

And the old-timer's, like Cunard, P&O, and HAL, have long been out of the freight business...

All I can say is that MSC brings in $28 billion in revenue, while MSC Cruises brings in $2.8 billion, so the cruise business accounts for 10% of their business.

Edited May 1, 2020 by chengkp75

[jan-n-john]

7 minutes ago, chengkp75 said:

All I can say is that MSC brings in $28 billion in revenue, while MSC Cruises brings in $2.8 billion, so the cruise business accounts for 10% of their business.

The cruises number is public information (it's EUR by the way).  Where did you get the container number?  I have seen it as speculation, but Maersk (the ocean shipping part) brings in about $28 billion and we know it's bigger than MSC, so I have doubts MSC's container revenue is that large, but don't know of a reliable source. In any case, I am not aware of any source for their container side EBITDA, and that would be more critical in terms of how helpful they could be to the cruise side.  Two other things: the worldwide container business is also under severe stress, and MSC recently appears to have broken off the cruise business into some type of (semi?) autonomous business so that adds further question as to how any assistance would work.  So there are still some unknowns, at least to me.

[bob brown]

3 hours ago, jan-n-john said:

The cruises number is public information (it's EUR by the way).  Where did you get the container number?  I have seen it as speculation, but Maersk (the ocean shipping part) brings in about $28 billion and we know it's bigger than MSC, so I have doubts MSC's container revenue is that large, but don't know of a reliable source. In any case, I am not aware of any source for their container side EBITDA, and that would be more critical in terms of how helpful they could be to the cruise side.  Two other things: the worldwide container business is also under severe stress, and MSC recently appears to have broken off the cruise business into some type of (semi?) autonomous business so that adds further question as to how any assistance would work.  So there are still some unknowns, at least to me.

If MSC (all sides of it) are family owned privately, isn't that just "different pockets in the same pair of pants", so-to-speak?🙂

[jan-n-john]

1 hour ago, bob brown said:

If MSC (all sides of it) are family owned privately, isn't that just "different pockets in the same pair of pants", so-to-speak?🙂

 

That's what one would think but for some reason (and I don't for a fact know the reason) the cruise part is publishing its financials, while the rest of MSC as far as I can see is not. They talk about having somehow taken on a separate identity, and having taken control of "the brand" as it pertains to cruises.  So it appears there has been some change in the previous simple "one family ownership", although the cruise subsidiary is still 100% by MSC which is still "ultimately controlled" by the Aponte family.  So I don't really know what it all means.

 

https://www.msccruises.com/en-gl/Assets/MSC Cruises Annual report 2019.pdf

 

See the para at the top of page 7 in the linked report. Also the top of page 28. Maybe there's somebody around here who knows what it all really means. 

Edited May 1, 2020 by jan-n-john

[bob brown]

Maybe they are preparing (or were), to take it public?   Or, perhaps the heirs are getting separate parts?

All just my speculation, I have no clue...

[rkacruiser]

23 hours ago, jan-n-john said:

 

That's what one would think but for some reason (and I don't for a fact know the reason) the cruise part is publishing its financials, while the rest of MSC as far as I can see is not. They talk about having somehow taken on a separate identity, and having taken control of "the brand" as it pertains to cruises.  So it appears there has been some change in the previous simple "one family ownership", although the cruise subsidiary is still 100% by MSC which is still "ultimately controlled" by the Aponte family.  So I don't really know what it all means.

 

https://www.msccruises.com/en-gl/Assets/MSC Cruises Annual report 2019.pdf

 

See the para at the top of page 7 in the linked report. Also the top of page 28. Maybe there's somebody around here who knows what it all really means. 

 

This Annual Report is interesting.  It makes the Company sound like a publicly owned Company which it is not.  The top Management has not changed (from what I have learned in the past) and there is a Board of Directors (which I never knew, but is what a publicly owned Company would have).  If I read correctly, there are only 250 registered shares.  Not clear, at least to me, as to who/what entity holds those shares.  

 

So, to me, question #1 is:  why would a privately held Company issue an Annual Report?

Question #2:  No indication of any shareholder meeting time/place?

Question #3:  Was the Parent Company preparing to spin-off its cruise division and, if so, why? 

 

When I was aboard MSC Meraviglia at a CC Meet n' Greet Meeting, the CD made it quite clear in his remarks that MSC was VERY interested increasing their foothold in the North American cruise market.  Perhaps the thinking might be to allow its cruise division to become more "nimble" and be able to adjust to North American marketing situations without the need to "get approval" from the Parent Company.   

 

I'd appreciate learning what others think.

[SRF]

On 4/30/2020 at 12:25 PM, chengkp75 said:

Yes.  And that's another headache we have when connecting to shore power, is the phase rotation correct.  Typically, you have a meter to tell you if rotation is correct before you close the breaker.

 

I had not thought of phase rotation.

 

Most of my experience is with city and generator power.  So gen system is designed for the same phase rotation. 

[chengkp75]

7 minutes ago, SRF said:

 

I had not thought of phase rotation.

 

Most of my experience is with city and generator power.  So gen system is designed for the same phase rotation. 

Yes, but my "L1", "L2", "L3" may not be connected in the same sequence as yours.  After verifying with a phase rotation meter before closing the shore power breaker, I frequently use the "bench grinder" test.  I will normally power the whole ship's bus down to bring load onto the shore power slowly, so I will close the shore power breaker, then power up the machine shop, turn on the bench grinder and see if it is rotating the correct direction.  Then proceed to power up the ship.

[slidergirl]

It is interesting to see the cruise ships sitting offshore of Cocoa Beach (Port Canaveral).  Any given day, there are from one to 7 ships out there.  I believe what they are doing there is rotating who gets to dock at PC to do whatever they need to do at the port, then goes back out.  There are definitely more ships than docking facilities right now at PC.  Hanging offshore and rotating is one way to save on the docking/port fees.