When the former navy officer Christen Smith established the company in 1918, one of the era’s worst shipping crises was just two years away.
Had Christen Smith known what was coming he probably would have let matters rest. Or perhaps not: it turned out that the man’s ingenuity and abilities were to overcome even the heaviest of seas.
Christen Smith set up his new shipping company in 1918 and immediately ordered two new ships. M/V Belgot went on a 12-month charter party when it was delivered in 1920. At the expiry of the charter party the shipping company did not manage to find employment for the ship and she had to be laid up. The situation was even worse for the sister ship M/V Belfri, which was delivered in 1921.
She had to go directly from the shipyard to the mooring buoys. Christen Smith and the newly established shipping company were hit full on by the international shipping crisis of the beginning of the 1920s.
In 1921 40% of the Norwegian merchant fleet was laid up. At the end of the year the average freight rate had fallen to a quarter of what it had been the year before.
In this difficult situation Christen Smith showed fully what he was made of. Smith was not just a proficient seaman; he also had uncommon technical gifts and a good head for business. In his search for opportunities for the shipping company he combined all these qualities – and found the niche he was looking for.
Smith noticed that railways were growing rapidly in new parts of the world. In South America, Africa as well as in Asia and Australia new railways were being constructed. At the same time the production of locomotives and railway carriages was concentrated in Europe – primarily in England – and in the USA. This created a global transport requirement for railway materials. Until then this requirement had been met by the locomotives being packed into crates and sent all over the world to then be assembled in the receiving country. This was a laborious process, and at the same time it was not always so simple to assemble the locomotives where they were to be used. Christen Smith undertook to transport complete locomotives from the factory to railway companies all over the world. This was something no one had attempted to do before and Smith had to both develop new technology and convince his customers that it was actually possible to transport complete locomotives by sea to India, Argentina, Australia and Egypt.
Towards the end of the 1920s Belships built as many as six ships for the transport of railway materials. The ships were primarily constructed for heavy transport but were nevertheless versatile. These ships were in many ways the precursors of modern bulk ships.
They could take on many different types of dry cargo, they had their own cranes on board and could thus load and unload quickly – also in simple ports without advanced equipment.During the 1930s Belships was the leading shipping company in heavy lift and transport of both railway materials and heavy components for the new oil refineries that were being built at that time in Asia and South America. Christen Smith had established a new sector in the shipping industry – and had shown that he was one of Norwegian shipping’s most important innovators.
For Christen Smith’s shipping company the 1930s were characterised by the development of the heavy lift trade the company itself had created. However, both the economic depression of that decade and the shipping company’s own grand ambitions contributed to the company experiencing a serious financial crisis. Extensive credit negotiations and restructuring of the company in 1935 led to the business being continued under the new company Belships Company Limited Skibs-A/S which two years later became a listed public company.
Vital during the war
When the Second World War came the Belships fleet was naturally vital to the Allies’ transport of heavy military material. Christen Smith himself did not live to see his ships assuming this important role for the Allied forces, he died in the summer of 1940.
The importance of the Belships fleet in heavy lift shipping and in the Allied convoys during the war was such that the designation “belships” was used as a synonym for heavy lift ships. After the war the shipping company had quite a fight with the British shipping authorities to have the company name protected by having the official designation for this type of vessels changed from “belships” to “heavy lift ships”.
The decade after the Second World War was Belships’ golden age as a heavy lift shipping company.
The brothers Jørgen Johannes, Axel and Frithjof Lorentzen had now taken over the management of the shipping company. The Lorentzen family had come in on the ownership side in connection with the restructuring of the company in 1937. Since then the shipping company’s founder had passed away and the company had been under Allied control during the war years. The Lorentzen brothers’ background was in shipbroking and they could also point to a centurylong family tradition in Norwegian shipping. Over the years the family was to change Belships direction away from Christen Smiths’ focus on technology towards a more market-oriented approach.
The new management was now faced with a market with strong demand for heavy lift ships. A whole world was to be rebuilt after six years of war. There was in particular, a great need for new railway materials. Belships ordered a number of new heavy lift ships, and demand was further boosted during the Korean War at the beginning of the fifties.
In the 1960s it became increasingly apparent to the management of Belships that the shipping company’s golden age as a heavy lift shipping company was drawing to an end. The reconstruction after the Second World War was over, and the market for heavy lift ships was thus smaller. More and more ships were being equipped with powerful cranes and the segment Belships had dominated for so many years had changed character. Furthermore, at the beginning of the sixties there was increasing national protectionism, that had an overall effect on the Norwegian merchant fleet. Belships, therefore chose to get completely out of heavy lift shipping, an area the shipping company had dominated for fifty years. In 1972 the company sold its last heavy lift ship.
The owners’ market orientation meant that the transition had been well prepared. Good earnings from heavy lift operations in the 1950s gave the company the financial capability to gain experience in other areas of shipping. Throughout the 1960s Belships was involved in both tank, dry cargo, refrigerated ships and car transport – in addition to heavy lift. In the 1970s the focus was on dry cargo, in particular timber and large tank. Then came the shipping crisis.
The tank market collapsed first, then the bulk market crashed. Several orders just before the collapse intensified the crisis for Belships. For example, the company had considerable ownership stakes in a new 311 000 tonne turbine tanker. The ship entered into a 5-year charter party at a relatively cheap rate, and was thereafter laid up. After a short period, the ship was sold for scrap. Belships’ owners had two options: either to continue the business with support from the authorities’ newly established emergency aid organisation, the Guarantee Institute for ships and drilling vessels; or to sell the ships and bear the whole loss themselves. The owners chose the latter and sold several ships at a large loss. In a few short years Belships was out of the large tank business.
Towards the end of the 1970s rates and values were on the increase again. Belships’ management saw a need to focus the company’s activity and chose handysize bulk, i.e. dry cargo ships of 35-40 000 dwt.
Western Bulk Carriers was revitalised: it had already been a joint sailing pool for a time in the 1960s. Western Bulk’s task was to build up contracts of affreightment, while Belships also had some activity on the time charter market for large bulk ships and OBO ships.
Special market conditions at the beginning of the 1980s meant that Belships and its partners in a short time acquired a number of handysize bulk ships. This occurred when rates were very low. The transaction had involved considerable risk, and the shipping company’s financial resources were stretched to the limit. Then the market turned around and rates rose again.
However, it became apparent that the shipping company’s currency exposure in connection with the commitments was a good deal larger than either the management or the share market had realised. When this became clear the company’s main shareholders assumed responsibility for this and for Belships’ share being priced on a false basis on the market. An offer purchase their Belships’ shares at the share’s highest price over the previous 12 months. Only 5% of the shareholders chose to take up the offer.
Towards the end of the 1980s the rates for handysize bulk ships were high and both Belships’ and Western Bulk’s commitment to this segment had proved successful. The handysize bulk market, like all other shipping markets, has its fluctuations. However, over the past 10 years the handysize bulk market has been a sensible place for Belships to be. This market experienced its highest level yet in 1995.
During the 1990s Belships has, in addition to handysize bulk, concentrated its activity on product tank and panmax bulk. Through this moderate diversification the shipping company has ensured that risk has been spread – both by participating in diverse shipping segments and by choosing various forms of ownership and operation within the respective segments.
International shipping is an area with large variations both in activity and in earnings. It is thus an area that makes considerable demands on the owners of shipping companies. Farsightedness and an ability to withstand slumps are important. Belships’ management today are the grandchildren of the Lorentzen brothers, who came into the company in 1935, and represent the fifth generation of this family in shipping.
Belships’ history shows main shareholders who want to take responsibility and who support the company in times when this is necessary. Belships is also a listed company, and thus the company’s management and main shareholders are required at all times to look after the interests of all the shareholders. This is demanding both on the shipping company’s management and main shareholders, and this is how we want it to be.
Now that the shipping company can look back on 80 years in business, we are again in a situation with low rates and uncertainty. In many ways today’s situation reflects the history of the company: it is in bad times that stable ownership and farsightedness show their strength.
|(This article is taken from Belships annual report 1997)|