Monday, 11 July 2016

INSURANCE; LEAD CONCENTRATES; COPPER AND SILVER REVISITED.

'Unless the policy otherwise provides, the declarations must be made in the order of despatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.'

This extract from period insurance legislation suggests a loophole: 'provided the omission or declaration was made in good faith' opens up a can of worms in terms of true quantity and value of cargo on board. Corrections could be made after the fact and if the vessel should be lost without a trace, the true figures might never come to light.

Period newspaper extract:

'It is roughly estimated the vessel is valued at £175,000, and her cargo at £200,000.'

The Inquiry quoted figures of :

The cost of the ship to her owners was £139,900, the builders' contract price; extras, £390; refrigerating machinery, £7,475; plate, linen, crockery, &., £3,739; incidental and travelling expenses, wages, and supervising during building, £2,352; in round figures, £154,000. 

The insurances were: 

On hull and machinery 

£135,000, 

On disbursements 

£15,000.

£ 150 000.

Note that the newspaper quoted a figure of £ 175 000 for the vessel, an inflation (compared with Inquiry figure) of £ 25 000 !! This, if the newspaper report be accurate, is an area of concern suggesting the Lunds attempted to over-insure Waratah, knowing that she was flawed and gambling on a high payout should she be a total loss at sea. But before we make this harsh, damning judgment let us continue....  

No references were made to the value of the cargo at the Inquiry. This is interesting in itself and perhaps reflects the confusion surrounding the exact nature and weight of cargo - underestimated by Mr Larcombe (based on information at hand). Moreover, there is the intriguing possibility of gold on board Waratah. If this gold shipment fell under the umbrella of Commonwealth relocation to London Banks, I would imagine the insurance would have been separate from overall cargo insurance. It was never raised at the Inquiry which suggests that it was rumoured, but there again in the case of the steamer RMS Republic her gold shipment was kept hush hush and not reflected in overall cargo value / insurance.

The steamer Sumatra, lost in 1923, carried 397 tons of general cargo, insured for £ 5500. If one uses a rough calculation for Waratah, carrying 9000 tons of general cargo we get a figure of £ 124 685, not £ 200 000. Clearly this is a very rough comparison dependent on a number of factors including value of goods. However the former reflects values for 1923 rather than 1909 suggesting that the insurance value of £ 124 685 should be significantly lower. Be this as it may, the shortfall of £ 75 000 is significant. If the cargo was 6250 tons, quoted at the Inquiry, we get a figure of £ 86 586 - considerably less than £ 200 000. Mmmmm?

The following extract puts matters back into perspective: 


THE WARATAH.
UNDERWRITERS PAY INSURANCES.
LONDON, December 16.

The underwriters of the Lund liner
Waratah, which on Wednesday was 
officially posted as missing, are 
paying £220,000 on the vessel 
and her cargo this week.

The underwriters paid out £ 220 000, which if one deducts the value of the vessel, £ 154 000 and taking into account a devaluation figure for the vessel of 2.5% per annum gives us a figure close enough to £ 150 000 for the vessel and £ 70 000 for cargo which equates with 5054 tons - not taking into account 1000 - 1300 tons of lead concentrates (primarily ballast, and not quoted under cargo figures at the Inquiry) nor bullion (including copper ingots). The total figure for cargo weight falls short of the figure quoted at the Inquiry, 6250 tons, by 1195 tons. But the underwriters probably included the value of the lead concentrates to make up this balance - to some extent as we shall see.....

These extracts suggest that owners were between a rock and a hard place. The insurance payout did not equate with the true value of cargo which was considerably more than 6250 tons - at least 
   9 000 tons. Cargo value of £ 200 000 would equate with 14 440 tons, which is outrageous and is at the other end of the spectrum. This raises suspicions of concern regarding over-insuring - gambling on the loss of the steamer. 

If we deduct an exaggeration factor of £ 20 000 (original extract above) we get a figure of £ 180 000 for cargo, which gives us a cargo weight of 13 000 tons, still in excess of the maximum cargo capacity for Waratah of 12 000 tons. 

By a process of deduction, therefore, we can rule out the validity of the press extract quoting £ 175 000 for the vessel and £ 200 000 for the general cargo, unless....read on....

Returning to the Inquiry figures and the press extract quoting that the total payout for both vessel and cargo was £ 220 000 pounds: we get a more realistic figure of 5054 tons of general cargo + 1300 tons of lead concentrates = 6354 tons - according to the rough Sumatra estimations.

Unfortunately for the Lunds (whatever the original insurance amount), the underwriters paid out a figure in keeping with official figures ultimately submitted to the Inquiry. The Lunds were caught between a rock and a hard place and did not receive a payout in keeping with the true general cargo value. This is what probably led to the general comment made in the press that Waratah was under insured.

It is interesting to note that the 1000 to 1300 tons of lead concentrates were not reflected in these figures in terms of value and not included under the heading of cargo at the Inquiry.

 http://www.boliden.com/fi/Products/Concentrates/Lead-Concentrate/:

Lead concentrate is the result of a flotation process after the ore has been mined and milled.
Lead concentrate is an intermediate product used as raw material in the production of lead metal. The quality of different lead concentrates can vary but sulphide concentrates typically contain around 70 per cent lead and 15 per cent sulphur. Besides lead and sulphur they generally also contain different impurities that can aggravate the smelting process. Some concentrates also contain large quantities of silver.

https://books.google.com/books?id=a8AKAQAAMAAJ&pg=PA290&lpg=PA290&dq=value+of+lead+concentrates+1909&source=bl&ots=5pgT6hg5pz&sig=8704dWbO0JPPzjbpYh2fJNalrMY&hl=en&sa=X&ved=0ahUKEwiTk-WzkObNAhWBIcAKHSB6BxIQ6AEIGzAA#v=onepage&q=value%20of%20lead%20concentrates%201909&f=false

https://books.google.com/books?id=VpBCAQAAMAAJ&pg=PA13&lpg=PA13&dq=value+of+silver+per+ounce,++1909&source=bl&ots=UK0b5Urynj&sig=-GAH3Rm00n3LTO7zKSa2LX7WjT8&hl=en&sa=X&ved=0ahUKEwiEpsrW8OrNAhUjL8AKHZ9bDgcQ6AEIIjAB#v=onepage&q=value%20of%20silver%20per%20ounce%2C%20%201909&f=false


In 1909 the lead concentrates profile was very different from the above extract. Lead accounted for (roughly) 30.49%, and silver accounted for 43.16 ounces per ton. Therefore, Waratah carried 56 108 ounces of silver  = £ 5990

The value of the lead according to figures for 1909 was a whopping £ 186 136 (396.37 tons £ 4.77 per pound weight) minus processing and purity outcome. 

There is good evidence that there were 10 710 ingots of copper on Waratah equating to at least 95.6 tons = £ 338 430 (£ 1.58 per pound weight) .

This paragraph detailing heavy metals gives us a total of £ 530 562. This figure is astounding and casts an entirely different light on the subject of insurance. Irrespective of the value of Waratah and general cargo, this figure exceeds the 'exaggerated' figure at the top of £ 375 000 by £ 155 562 !!

This was a disaster for the Lunds who, in conclusion, were under-insured and lost a fortune with the Waratah!

Why did the Lunds stick with a general cargo weight of 6 250 tons rather than 9 000 tons?  I believe that they were concerned about the implications of a 'too heavy' Waratah engaging a storm of 'exceptional violence' and opted for the lower cargo figure - quoting the 'off-season' as an explanation. This saved face and possible action from a legal point of view but incurred a massive financial loss. 

This catch 22 situation leads me to believe that the total insurance figure of £ 375 000 quoted in the press above was closer to the true value of Waratah and her burthen, but still significantly short of the mark once the heavy metals were taken into consideration.

The sinking of the RMS Republic, 1909, puts much of this issue into perspective:

http://www.rms-republic.com/exec_sum_pub.html

Means available to establish definitively the cargo of the RMS REPUBLIC, or any other ship of the period, are severely limited.  In many cases, cargo manifests, bills of lading and other shipping documents are no longer available.  The White Star Line's records for the RMS REPUBLIC (and the RMS OCEANIC and RMS BALTIC, see website) have not been found.  While one newspaper account from the time suggested that the RMS REPUBLIC's logbooks and cargo documents were removed prior to the sinking and taken to White Star Line's Liverpool offices, the curator of White Star Line's archives in Liverpool, England believes that such documents were lost or destroyed prior to White Star Line's merger with Cunard Steamship Company in 1934.
Moreover, valuable cargos may not have been either insured or listed on cargo manifests for security of transport or other reasons that are discussed in the Report.  Research into the likely cargo of the RMS REPUBLIC has been based largely on public accounts available in newspapers and deductions based on shipments known to have been leaving New York at about the time of the RMS REPUBLIC's last voyage.  The only direct evidence of the cargo and other property aboard the RMS REPUBLIC are the claims brought by passengers and shippers, including the Navy, against the S. S. FLORIDA seeking compensation for losses caused by the collision and sinking. See website "Other Cargos."  Consequently, no one has yet definitively established that valuable cargo was in fact aboard the RMS REPUBLIC.












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