BC Shipping News - February 2016

International Trade: Opportunities in 2016

Cargo Logistics: Prospects for cold cargo heat up

Ports: High-tech surveillance system for Nanaimo

BC SHIPPING Commercial Marine News for Canada’s West Coast.

Volume 6 Issue 1

www.bcshippingnews.com

Environment

COP21 and shipping emissions

Industry Insight The year ahead with Captain Stephen Brown

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Plus: Bulk carriers: The bulker blues in 2015

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Contents

NEWS

24

February 2016 Volume 6 Issue 1

Cover Story

40 Ports

High-tech surveillance system for Nanaimo creates BC Marine Electronic Highway

7

Editor’s note

8

In brief

14

Industry insight

20

By Jane McIvor

22

Industry traffic and news briefs The year ahead: 2016 Captain Stephen Brown, President, Chamber of Shipping of British Columbia Captain Brown’s annual look at opportunities and challenges for the shipping industry.

History lesson

What shall we do with a drunken sailor? Mayhem, mutiny and attempted murder on board the Don.

By Lea Edgar

International trade

New developments aim to enhance trade opportunities in 2016

By Candace Sider

24 Environment

COP21 and shipping emissions

By Colin Laughlan

GVHA implements transportation improvements in advance of 2016 cruise ship season

44 Ports

PMV study reveals looming shortage of industrial land

45 Terminals

Harsh realities finally catch up with Westshore

By Ray Dykes

29 Environment

Successful 2015 shows increasing momentum for Green Marine

30

34

Cargo logistics

Prospects for Canadian ports’ cold cargo heats up

By Darryl Anderson and James Frost

Bulk carriers

The bulker blues in 2015

By Syd Heal

37 Containers

MSC’s new service into Prince Rupert becoming a popular choice for shippers

14

43 Ports

48

Legal affairs

Canada’s maritime lien for necessary suppliers: The case of the OW Bunker group bankruptcy

By Peter Swanson

51 Resources

NGL feedstock and derivatives: Global supply and dynamics

34

38 Ports

Port development study forecasts thousands of new jobs for Prince Rupert

On the cover: The Westwood Fraser leaving Lynnterm (photo: Dave Roels — www.daveroels.com); above: COP21 Paris Climate Change logo; right: aerial of a bulk carrier at Vancouver Wharves (photo: BC Shipping News); left: Captain Stephen Brown.

February 2016 BC Shipping News 5

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Publisher McIvor Communications Inc. President & Editor Jane McIvor Contributing Writers Darryl Anderson Captain Stephen Brown Ray Dykes Lea Edgar James Frost Syd Heal Colin Laughlan Candace Sider Peter Swanson

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EDITOR’S NOTE

Photos by Dave Roels, www.daveroels.com

Setting the stage for 2016

T

here’s an old saying I always like to remind myself of when times become uncertain: “With challenges come opportunities.” As you read through the articles in our first issue of 2016, you’ll certainly become aware of some challenges facing the global shipping industry — both economical and environmental. From Captain Brown’s look at the year ahead to Syd Heal’s review of the bulk carrier industry to Colin Laughlan’s report

from the COP21 Paris Climate Change Conference, you’ll see that 2016 is set to be, at the least, an interesting year.

However, you’ll also read about some positive prospects that lay ahead, as noted by Candace Sider in her article on international trade and the opportunities that are presenting themselves with free trade deals, like the Canada and European Union Comprehensive Economic and Trade Agreement, as well as the many initiatives focused

on streamlining import and export processes.

Regardless of the challenges or threats to industry, the key is to be prepared.

The articles herein will do just that for you. Understanding the issues means seeing the challenges but also recognizing the opportunties when they present themselves.

And really, isn’t that what business has always been about?

— Jane McIvor

February 2016 BC Shipping News 7

INDUSTRY TRAFFIC Jaya wins Journalist of the Year Award for BCSN article on ferries

J

aya Prakash, Asian maritime correspondent for BC Shipping News, has won the prestigious Seahorse Club’s News Journalist of the Year Award for his article on the Asian ferry industry (“Living dangerously on a Filipino ferry” featured in the October 2015 issue of BC Shipping News). The award was presented to Mr. Jaya in absentia during the Seahorse Club’s annual Christmas dinner and awards ceremony in London on December 8.

As the first Singaporean to win the prestigious award, Mr. Jaya was thrilled to be recognized for his work as an international maritime journalist. “It is an honour to receive this award,” he said. “To be recognized by my peers on an international level is a privilege. But more than that, I hope the article will shine a spotlight on the safety issues that need to be addressed by the Asian ferry industry.”

Dr. Roberta Weisbrod, Executive Director of the Worldwide Ferry Safety Association, who was interviewed by Mr. Jaya on the article, agreed. “Prakash asked all the right questions, clearly understood the underlying issues that face the ferry industries of developing nations, and is an excellent writer,” she said. “This

8 BC Shipping News February 2016

award confirms my own good judgement of Mr. Jaya!”

Publisher of BC Shipping News, Jane McIvor, was very proud to be a part of Mr. Jaya’s celebration. “Prakash’ contributions to BC Shipping News have always been first class,” she said, “but this particular submission went beyond our expectations. We are very pleased to see that he is being recognized for his talent.”

Ms. McIvor had solicited the article from Mr. Jaya as part of a featured theme for the October issue which took an in-depth look at the world’s ferry systems. The magazine was distributed widely at the Canadian Ferry Operators Association conference (held in Vancouver) as well as Interferry (held in Copenhagen). While the main focus of BC Shipping News is on commercial marine activities of Canada’s West Coast, it regularly features articles of international relevance and Ms. McIvor was happy to see the magazine included in a list of high-calibre publications from around the world.

The Seahorse Club News Journalist of the Year Award is considered to be one of the highest honours bestowed upon international maritime and transportation journalists. Founded in 1963,

Jaya Prakash, Asian maritime correspondent for BC Shipping News.

the Seahorse Club has provided a professional forum for public relations, marketing, advertising and journalism professionals within the freight, multimodal transport and logistics sectors to network, share experiences and engage in debate on relevant issues. The Awards ceremony, sponsored by such leading companies in the shipping industry as ABS, DP World and Air Canada Cargo, presented 14 awards overall. Runner-up for the News Journalist category was Jim Wilson for his submission to Lloyd’s List Australia. BCSN

NEWS BRIEFS

Nanaimo Port Authority continues to expand Duke Point operations

N

anaimo Port Authority continues to expand operations at Duke Point to meet growing demand.

The most recent improvement includes a new barge berth, just north of the existing deepsea shipping berth.

The expansion comes on the heals of the acquisition of a Liebherr 104-metric-tonne Mobile Harbour Crane, marking a new era of commerce and growth opportunities for Vancouver Island’s imports and exports. NPA has also implemented a “BC Marine Electronic Highway” maritime domain awareness system which has increased safety, security and environmental stewardship (for more on this, see page 40).

Features of the expansion include: • Simultaneous operations with use of new barge berth and deepsea berth; • Faster processing times due to increased berthing options; • Increased capacity, efficiency and versatility for handling potentially any cargo type; • Maximum use of land capacity with adjacent lay-down area serviced by the Liebherr Mobile Harbour Crane.

The innovative expansion of facilities provides diverse and flexible cargo solutions for short sea shipping links

to Mainland terminals and direct connections to global markets.

True to its tagline, NPA continues to be the “Solutions Port.”

Nanaimo Port Authority has recently completed a new barge berth in addition to other improvements.

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INDUSTRY TRAFFIC

The next generation of MAN inline six-cylinder engines for work boats released

M

AN Engines is set to modernize its range of inline six-cylinder engines for work boats with the launch of the latest generation of engines based on the MAN D2676 with cylinder capacity of 12.4 l. Designed for use in vessels such as passenger ferries, pilot boats, fishing trawlers and lifeboats, the engine provides a range of outputs from 323 kW to 588 kW (440 to 800 hp) for light, medium and heavy operations.

The basic six-cylinder engine has been tried and tested many hundreds of thousands of times in a wide range of on- and off-road machinery since it was first introduced in 2007. Its robustness and reliability in work boats has also been demonstrated in extensive field trials over several thousand hours of use in ferries, pilot boats and high-speed catamarans.

The modern common rail injection system used in the D2676, with fuel pressures up to 1,800 bar, ensures high mean pressures and optimized combustion. This increases on-board comfort due to reduced vibration and noise emissions. The inclusion of a Miller or Atkinson camshaft has

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The MAN D2676, MAN’s latest generation of engines for work boats.

helped to achieve an average 10 per cent reduction in fuel consumption compared to the engine’s predecessors.

As part of this improvement in fuel consumption, all engines also comply with current air emissions legislation.

To achieve this, MAN Engines engages in close exchange of information with all required institutions, including the US Environmental Protection Agency (EPA) and the International Maritime Organization (IMO).

The new D2676 engines also offer the wide torque plateau that is characteristic for MAN marine engines. The 323 kW (440 hp) power unit provides 1,950 Nm of torque between 1,200 and 1,600 rpm for heavy operations, while the 588 kW (800 hp) high-performance model manages to generate 2,700 Nm between 1,200 and 2,100 rpm for light operations. This ensures maximum torque over a broad engine speed range at the lowest specific fuel consumption.

For naval architects, the basic MAN D2676 unit measures a typically compact 1,800 x 922 x 1,103 mm (L x B x H), and this model even has a more streamlined oil sump design.

With a dry weight of 1,200 kg, the new generation of engines also has an improved power to weight ratio.

The following D2676 models are available: For light operations: 537 kW (730 hp), 588 kW (800 hp); for medium operations: 412 kW (560 hp), 478 kW (650 hp); for heavy operations: 323 kW (440 hp), 382 kW (520 hp).

The new MAN D2676 marine diesel engines replace the predecessor models D2866 and D2876 with immediate effect and are already available to order. Optionally, the units can be classified and supplied with a keel cooling system.

For more information, visit RDI Marine, MAN’s West Coast distributor, at www.manengines.com.

NEWS BRIEFS

ClassNK establishes Ship Data Center to accelerate Big Data use

C

lassNK announced that it has established Ship Data Center Co., Ltd. in Tokyo, Japan in December 2015, a wholly owned subsidiary that aims to support the utilization of data gathered from ship operations. The Data Center will be headed by ClassNK Executive Vice President Yasushi Nakamura.

Thanks to rapid advances in the development of information and communication technologies, it is now possible to collect large volumes of data on a diverse range of items related to ship operations. However, the approach to data capture is still very fragmented with similar data being sent to several vendors and analysis still being carried out almost entirely on a ship-by-ship basis.

To make larger gains, an effective platform capable of centralizing and managing such diverse data is essential.

However, creating and maintaining this kind of platform is costly, time-consuming and unrealistic for some organizations. Furthermore, special care needs to be given to the handling of data to ensure confidentiality of information; hence it is also necessary to establish a secure yet effective platform from an impartial perspective.

As an independent, non-profit organization with over a century of experience in ship classification, ClassNK drew on its extensive technical knowledge and expertise to develop Ship Data Center Co., Ltd. The Data Center consists of a secured shipping operations database which will serve as an information hub

to independently manage the utilization of big data in the maritime industry.

Through the Center’s integrated data, the industry can maximize the benefits of big data with minimum cost and burden.

Trials of the Data Center will commence on a container vessel in February 2016 in co-operation with a Japanese shipping company. Full operation of the Data Center is scheduled from April 2016.

Opportunities for future application of the Data Center are infinite. In addition to optimizing ship operations and improving condition-based monitoring of machinery, the Data Center could also be used to help the industry overcome current and emerging challenges.

For more information, please visit www.classnk.com.

February 2016 BC Shipping News 11

INDUSTRY TRAFFIC

Rising Tides and New Horizons: New slogan reflects a new dynamic for Port Alberni

T

he Port Alberni Port Authority has announced a new branding slogan to better define their character, philosophy and opportunities. “Rising Tides and New Horizons” was chosen by the Board of Directors to replace the old slogan, “Canada’s Inlet Port on the Pacific,” following a three-day internal strategic planning exercise. “The old slogan was geographical in nature rather than inspirational,” said David McCormick, PAPA’s Director, Public Relations & Business Development and facilitator of the process. “The new phrase better reflects our approach to new business opportunities and our mandate to provide a vibrant and dynamic port to serve the

12 BC Shipping News February 2016

Port Alberni community and, by extension, the region and Canada.”

McCormick described a process which began as the brainchild of PAPA’s Chair of the Board, Ron Crema. “Both board and staff agreed with Mr. Crema that it was important to develop a statement that better reflected the new attitude of the Port,” continued McCormick.

“This reinvigorated outlook has seen us take advantage of many new opportunities and activities — initiatives as small as working to attract food trucks on Centennial Pier to as large as developing the Port Alberni Transportation Hub (PATH) concept — and we wanted a slogan that better symbolized our approach to economic growth for the region.”

Rising Tides and New Horizons To prepare for the session, McCormick and staff scanned what port stakeholders and the community at large were thinking and saying about the port. Consistently, feedback highlighted the many direct and indirect impacts the Port had on stakeholders across a broad spectrum of industries.

“Given the feedback we were receiving, it was agreed that the new slogan would need to reflect the inclusiveness of the Port’s activities,” McCormick said.

“Themes that were identified included the obvious nautical one as well as recognizing the many opportunities that are presented through the development of the Asia-Pacific Gateway.”

Settling on “Rising Tides and New Horizons,” the Port believes it has struck the right tone to better identify and define their mandate. While both reflecting the nautical theme and the inclusiveness of the Port’s activities, “Rising Tides” is a direct reference to the saying “rising tides float all boats.”

And “New Horizons” connotes the image of the “land of the rising sun” and the opportunities presented by the Asia-Pacific Gateway.

Options for a full rebranding with new graphics are being considered. “We have strong in-house design resources and have challenged staff to graphically interpret the new slogan,” said McCormick. In the meantime, the new wordmark will be incorporated into PAPA’s communications such as advertising, social media, letterhead, etc.

NEWS BRIEFS Seaspan’s Vancouver Shipyards appoints Ian Brennan as VP, Supply Chain Management & Contracts

S

easpan Shipyards President Brian Carter is pleased to announce that Ian Brennan has joined Seaspan’s Vancouver Shipyards (VSY) as Vice President, Supply Chain Management & Contracts.

As part of Seaspan Shipyard’s Executive Team, Ian will provide the strategic leadership and day-to-day oversight and direction of supply chain, warehousing and logistics, procurement, and contracts and subcontracts in support of new vessel construction at VSY. Ian has more than 27 years of experience in the shipbuilding and heavy project construction industries, and has worked on a number of major military procurement programs with Aircraft Carrier Alliance, BAE Systems Surface Fleet Solutions Inc. as well as Saint John Shipbuilding Limited. Prior to this, he

practised law for five years in Toronto, Ontario.

Ian joins the company from General Dynamics Mission Systems - Canada where he served as Chief Counsel and Corporate Secretary. In that role, he was responsible for export/import, antibribery and trade restrictions compliance, intellectual property and licensing matters, design and management of procurement terms and conditions of purchase and sale, and all commercial and legal matters.

Prior to that, he was Commercial and Procurement Director for Project Management International Limited in the United Kingdom, as well as worked on a number of major projects, including the UK Aircraft Carrier, T45 Destroyer, Brunei Offshore Patrol Vessels, the Hiberia Oil Platform and Canadian Patrol Frigates.

A graduate of the University of Windsor’s Faculty of Law, Ian also holds a Bachelor of Arts (Hons.) in Geography and Economics from York University.

February 2016 BC Shipping News 13

INDUSTRY INSIGHT

The year ahead: 2016 Captain Stephen Brown President, Chamber of Shipping of British Columbia

...local LNG investment decisions will not be made on the basis of the market in 2016 but rather the market from 2020 onwards and for this reason, I remain optimistic...

L

ooking back at the history of this country, the year 1916 did not begin well. War raged in Europe with Canadian troops heavily engaged in support of France in the battle of Verdun in which an estimated one million casualties were sustained over 303 days between February and December.

At home, Canada’s parliament buildings in Ottawa were severely damaged by fire. Original construction (1859-76) had been badly delayed due to cost overruns and then to face the prospect of an expensive refurbishment following the fire was a further set back which could hardly have occurred at a worse time. It was not until 1920 that the newly refurbished House of Commons was ready for use.

As we look ahead to 2016 there are a number of key drivers that will steer the course of events including: • The hugely damaging low level of both container and dry bulk markets.

• Excess vessel capacity in most sectors combined with continued pressure on commodity prices.

• The uncertain price of oil and consequential impacts on the Canadian and global economy.

14 BC Shipping News February 2016

• A new government in Ottawa finding its feet and setting direction on many difficult and controversial issues.

• The uncertain and dangerous geopolitical landscape in which we are operating.

BC energy projects

A year ago I predicted that at least two major energy projects would reach Final Investment Decision (FID) in 2015. Against a background of regulatory delays, First Nations and NGO opposition, uncertain carbon pricing and a significant fall in what LNG importing countries are prepared to pay for product, this has not happened.

The global oil industry has already lost more than 200,000 jobs and in the absence of any recovery, this will be 300,000 jobs by the end of 2016 ranging from offshore service and supply vessels in Norway to pipe-fitters in Edmonton. In October 2015, even Europe’s largest oil exporter, Norway, announced that it would need to eat into that country’s US$830 billion “Sovereign Wealth Fund” for the first time since it was established in 1990 in order to balance that country’s budget.

At least they have been wise enough to accumulate such a fund.

At the same time, spot LNG prices for delivery to Asia have slid 56 per cent over the past year with shipments to Japan averaging US$5.80 per million British Thermal Units (BTU) in 2015, representing a 65 per cent decline from 2013 as world demand for gas expanded by less than one per cent on account of short-term demand decline in Japan, South Korea, China and India.

Even so, local LNG investment decisions will not be made on the basis of the market in 2016 but rather the market from 2020 onwards and for this reason, I remain optimistic that those two illusive LNG FIDs will be made in 2016. I also believe that the Kinder Morgan project to complete the twinning of their pipeline from Edmonton to Burnaby will receive National Energy Board and Cabinet approval to proceed thereby increasing the flow of oil through the Port of Vancouver from 300,000 barrels/day to almost 900,000 barrels/day. Likewise, I would anticipate that efforts to move ahead with the Northern Gateway project to move oil exports through Kitimat will continue, notwithstanding the government’s stated ambition to establish a moratorium on crude oil tanker traffic on B.C.’s north coast, a globally unique prospect for the marine industry to grapple with.

Sadly, but as we predicted, the Energy East project proposal to move 1.1 million barrels of oil per bay from Alberta

INDUSTRY INSIGHT

Markets and shipyards

It is ironic that during a time of depressed oil prices, the only sectors of the marine industry making sensible returns on investment in 2015 were tankers, auto carriers and cruise ships. Most international shipyards are in deep trouble with only the specialty “cruise & ferry” yards carrying enough orders at a price level that provides for any hope of profitability.

Container sector

For most container carriers, 2015 was a year to try to forget and 2016 promises to be a year of a further “battening down of the hatches.” Weak demand growth combined with chronic overcapacity has the industry searching for new strategies and perhaps even divine intervention to bring rates up to anything close to an acceptable level. When the industry finds itself moving containers from Asia to Europe at rates that barely cover terminal handling charges, something has to give. Even here in Vancouver, it is now frequently quoted that it costs more to get a container to and through the port than it costs to get that same container from the port to Shanghai. Things are therefore badly out of whack.

Attempts to fix the woeful economics of the container sector fall into three categories: • Commissioning of larger and more efficient new vessels to replace smaller and older tonnage.

• Further consolidation of ownership and industry alliances.

• Ruthless management of costs.

In 2015, global container ship

Image: Port Metro Vancouver

to Canada’s East Coast through a largely existing pipeline has hit political and environmental headwinds to the point where any attempt to move Alberta’s oil through the St. Lawrence Seaway has been abandoned. The focus now is exclusively on expansion of capacity in St. John N.B., already an established oil handling port and where the prospect of much needed new jobs is being welcomed. We therefore see this project inching steadily, if somewhat painfully, forward.

Artist’s rendering of Roberts Bank Terminal 2.

deliveries resulted in a record 1.67 million TEU of added capacity which was 11 per cent higher than in 2014. At the same time, vessels sold for scrapping were only 210,000 TEU of capacity, the lowest since 2011 and thereby resulting in a net fleet growth of 8.2 per cent. This year (2016), new deliveries are expected to be in the range of 1.2 million TEU of capacity but still a further fleet growth of almost five per cent against the background of continued weak demand growth.

Also worth a mention is that 50 ultralarge container ships (ULCS) were delivered in 2015, far more than the

Asia to Europe trade can absorb, hence the total collapse of rates no matter how many General Rate Increases (GRI) and cancelled sailings were announced.

It is therefore no surprise to see the first 18,000 TEU vessel (CMA CGM Benjamin Franklin) calling on the U.S. West Coast in December, a strong signal for the U.S. and Canada to get its act together to prepare for these vessels. Credit therefore goes to GCT in announcing an order for two ZPMC Megamax Cranes for Deltaport along with a $280-million intermodal yard reconfiguration; to DP world for capacity expansion projects in Vancouver

February 2016 BC Shipping News 15

INDUSTRY INSIGHT

Artist’s rendering of the proposed grain terminal at Lynnterm West Gate.

Image: G3 Terminal Vancouver

and Prince Rupert; and of course to PMV for staying the course on the ambitious Roberts Bank Terminal 2 project.

There can be no doubt that 2016/17 will be an era of immense pressure on North American ports, east and west, to accept Ultra Large Container Ships and to deal with the logistical challenges they represent. In their quest for profitability, ship owners will also push terminals very hard for improved berth productivity and this will translate to pressure on truck and railway intermodal efficiency, the likes of which we have seen nothing yet.

Notwithstanding any of this, the recent purchase of Neptune Orient Lines by CMA CGM and the merger of COSCO and China Shipping signals a new round of container industry consolidation as carriers seek to grow market share and slash operating costs. These moves will upset the balance within the existing Alliances with other loss making Asian carriers almost certainly seeking salvation through consolidation.

Dave aboard the CSL Tecumseh “Action Photography - everywhere!”

“Dave’s not just a photographer, he’s an artist.”

Jane McIvor, Publisher BC Shipping News

16 BC Shipping News February 2016

The Baltic Dry Index showing the 30-year average and 2015 in particular.

Bulk sector

In the dry bulk sector only around 250 bulk carriers were ordered in 2015 representing a 77 per cent decline in the deadweight of new build contracts compared to 2014. Given that the Baltic Dry Index touched a new record low of only 471 points in mid-December, the market for the year was financially crippling for many owners.

Commodities

While commodity markets are certain to remain weak in 2016, Vancouver and Prince Rupert are cushioned in part by the demand for Canadian grain and this will not change. However, despite all manner of investments and improvements, there are continuing problems of supply chain inefficiency to be wrestled to the ground. Despite ongoing concerns over North Shore rail capacity, the emergence of the G3 proposal backed by Bunge Canada and Saudi Agricultural and Livestock Investment Company (SALIC) to build a state-ofthe-art grain load facility on what is now Lynnterm West, seems certain to be approved even though it will put the squeeze on Vancouver’s break bulk handling capacity.

The picture for Vancouver and Prince Rupert’s traditionally largest bulk export, namely coal, seems certain to be difficult, more so given chronic oversupply in world markets, displacement of thermal coal by other fossil fuels and the commitments made at the COP21 Paris Climate Change Conference.

China’s coal imports peaked in 2013 and are now in decline with only the Indian market offering any realistic long-term hope for increased demand.

When combined with the weak demand for iron ore, the demand side offers very little prospect of a recovery in the dry bulk market in 2016, on the contrary, it is certain to be a busy year for Chapter 11 applications.

Tankers & LNG

Nobody would have predicted that the bottom falling out of the oil market would be the savior of the tanker industry after a decade of compounding losses. Two things happened. The February 2016 BC Shipping News 17

INDUSTRY INSIGHT Nobody would have predicted that the bottom falling out of the oil market would be the savior of the tanker industry... lack of profitability over several years resulted in the scaling back of new orders for tankers and the reduction in the price of oil resulted in increased storage along with accelerated consumption. At the time of writing in late December, all sectors of the tanker industry were healthy with VLCCs in particular making well in excess of $100,000 per day in the spot market.

The picture is less spectacular for LNG carriers. Following the Fukushima nuclear disaster in 2011 and the consequent increase in LNG demand, the LNG carrier fleet was operating at a 98-per-cent utilization rate and able to cash in on spot rates of up to $150,000/ day. On the back of this, the years 201315 have seen a steady number of new builds enter service but as we now know, export projects are delayed and prices are down. The fleet is therefore operating at a utilization rate of 90 per cent or less today with spot rates of below $35,000 per day for those speculative owners who chose not or who were unsuccessful in entering long-term supply contracts with consumer utilities. This sector is therefore also heading down the path of consolidation with Golar LNG, Dynagas and GasLog last year launching the brilliantly named “Cool Pool,” a vessel marketing venture having 14 LNG carriers aimed at reducing operating costs and providing support to spot charter rates. Likewise, the $70 billion proposed

acquisition of BG Group by Royal Dutch Shell will result in an influential fleet of 70 LNG carriers.

Cruise industry

Approximately 24 million passengers will take a cruise in 2016 with a growth rate of around 350,000 passengers per year generating approximately $38 billion in revenues. According to the latest numbers, 46 new large cruise ships will enter service between 2016 and 2020.

Of primary interest locally is the Alaska cruise industry which will see the largest ship to date, the 137,000 GRT Explorer of the Seas join the Alaska fleet of Royal Caribbean for the 2016 summer season, unfortunately home-porting with Seattle. The cruise industry is a huge success story allowing travel to almost any part of the world in comfort and safety. Long may it continue.

Outlook

Is there room at all for optimism in 2016? Not much but here are my further thoughts: • This will be another tough year for containers with no grounds for optimism before 2017. Further consolidation is certain and there will be a more controlled capacity growth.

• The dry bulk market will continue to struggle until there is a massive campaign of scrapping of older tonnage or when an increase in oil prices

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renders older tonnage uneconomical to operate. What would trigger an increase in oil prices is hard to see but further escalation of the turmoil in the Middle East may be the trigger, in particular if Israel were to be drawn in.

• As stated above, I am optimistic that two BC LNG FIDs will be announced.

• The IMO Ballast Water Management Convention of 2004 will finally be ratified and take effect.

• The IMO will agree on the time table for some form of mandatory Monitor/Report/Verify mechanism based on bunker consumption for all vessels. This will be a prelude to some form of market-based mechanism designed to curb expansion of GHG emissions from shipping.

• Related to the above, the use of LNG as a source of marine fuel will accelerate as more ports commit to providing LNG bunkering capability.

• Despite the reassuring statements from the Panama Canal Authority, I would predict that the expanded Panama Canal will only be open for commercial business in Q3 or even Q4 2016.

• Finally, there will be a few local surprises. Projects as yet unannounced will generate intense interest thereby further underlining that the marine sector in B.C. has the capacity to invest, innovate and invigorate the economy of this Province and that of Canada if some of the shackles are removed.

On a final note, most of you will be aware that I am taking my leave of the Chamber of Shipping following our Annual General Meeting on February 26. I would like to thank you all for your friendship and support to myself along with your contribution to the important work of the Chamber since I assumed this role in September 2008. Going forward, I encourage you all to be proud of the job we do in enabling global trade and to occasionally stop to consider our unique contribution to making the world a better place for millions who are less fortunate than ourselves.

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HISTORY LESSON

What shall we do with a drunken sailor?

Mayhem, mutiny and attempted murder on board the Don

By Lea Edgar Librarian/Archivist, Vancouver Maritime Museum Photo credit: Dave Roels (www.daveroels.com)

Upon inspection by Captain Roach, it was found that the men had picked the lock of the chain locker and broke open cases of bottled beer.

W

hile perusing old copies of the Victoria Daily Colonist, I discovered a gripping story of a merchant vessel that transpired 110 years ago. While reading about it, I could not help but be amused by the antics of her crew. Since our festive days are now behind us and the business of the year has begun in earnest, I present one final tale of drunken shenanigans that I hope proves entertaining.

On March 13, 1906, the British barque Don set sail from London bound for Vancouver and Victoria. The ship had a general cargo consisting largely of groceries, liquor, cement, rifles and explosives. The Don’s troubles started early in the voyage. Shortly after she left London, the vessel collided with a French ship in the Irish Channel.

Three crew members were injured and her port bulwarks, lower forerigging and topmasts were lost. The Don was towed back to Plymouth, but shortly after this first incident she was again on her way.

The second case of bad luck occurred when Captain Jeffreys became ill and had to be left in Montevideo. The first mate, Captain Roach, took charge of the vessel and Daniel P. Mills was appointed as chief officer. Five days later, the ship once again continued on its voyage.

20 BC Shipping News February 2016

On August 6, while the Don was fighting stormy seas off Cape Horn, it was discovered that nearly the entire crew was drunk. Chief Officer Mills called them to reef the main topsails and prepare to about-ship. They were reluctant and sullen in their work and Mills determined they must be inebriated. Mills’ log reads, “Some of the crew looked intoxicated, especially one whom I presumed to be paralytic drunk....As I only joined the ship at Montevideo I was not aware at this time of the nature of her cargo; but I afterwards found that intoxicating beverages had been stored in the forward part of the lower hold.”

Upon inspection by Captain Roach, it was found that the men had picked the lock of the chain locker and broke open cases of bottled beer.

From that point on, most of the crew were kept busy drunkenly singing songs and making merry in the fo’c’sle. The officers and remaining crew struggled to keep the Don afloat in the rough winter seas off Cape Horn. The rigging and deck fittings were iced over and the sails cracked and swung wildly. Chief Officer Mills became frost bitten and took to his bunk. It was then that the crew truly got out of control.

On August 8, the mate wrote in his log, “Heard a great noise forward. I went and looked and saw three men

dragging one of the sailors along the deck, and someone was shouting ‘I’ll throw the — overboard.’” Apparently, when they broke into the stores, they brought the only sober crewmembers, a Spaniard called Hopio and another sailor called Gray, six bottles of beer.

Both refused to drink them. The ringleader of the group demanded that Hopio drink. He again refused.

Finally, Hopio gave in from the peer pressure and drank the beer. After further name calling and other “indignities,” he drew a knife. The seamen then yelled, “Draw a knife, will you, you blanketedy blank, blank dago!”

With shouts of “Death to the dago!” the crew dragged him along the decks with the intent of throwing him overboard. At that point the captain heard cries of “Murder!” and ran to find the crew lifting Hopio up, about to throw him over. He rushed at the mob and with a struggle managed to get them to drop Hopio, who was now unconscious, onto the deck. The captain stated, “…

I thought they had killed him. We carried him to the cabin, where we worked on him for thirty minutes before he regained consciousness. He was almost gone.”

Unfortunately, the next day the trouble continued. The crew threatened the life of the chief officer. At the same time, the Don was still struggling against the vicious weather and very nearly was blown ashore. It was only a change in wind that saved her. Then, yet another danger became apparent to the captain.

The crew, feeling mutinous, searched amongst the cargo for the rifles and

VANCOUVER MARITIME MUSEUM ammunition. However, with some luck, they did not break into the cases. The crew used matches, later found lying in the straw, to search the holds. The officers “thanked Providence” that a fire or explosion did not occur. They once again secured the cargo and attempted to pacify the crew.

It all started up again on September 16. The crew broke into the liquor once more, this time in the calmer waters of the Pacific. Nine of the crew resumed their drunken festivities in the fo’c’sle.

Captain Roach finally realized he better take action. He took a loaded revolver and set himself up at the fo’c’sle door. He threatened to shoot any man who tried to get out. He remained at his post for 36 hours until the men came out in a fairly sober state and ready to work again.

Thankfully, the crew remained dry until they reached port. Newspapers from Victoria to Los Angeles to New Zealand eagerly reported the enthralling tale. The Don’s story sadly ends with more bad luck. In 1918 she was

Crew attempting to throw a man overboard. Thomas Cottle (1891). Frank Melton’s Luck, Or, Off to New Zealand. Retrieved from http://nzetc.victoria.ac.nz/tm/scholarly/CotFran-fig-CotFranP002a.html.

sunk by German U-boat U-157 with no casualties. Nevertheless, this case of drunken debauchery which led to mayhem, mutiny and attempted murder was certainly the most eventful voyage for

the barque Don. Lea Edgar started her position as Librarian/Archivist for VMM in 2013.

She can be contacted at archives@ vancouvermaritimemuseum.com.

Photo: Dave Roels

Marine paintings, special commissions, talks, reproductions and books...

John M. Horton, Marine Artist

The Franklin Expedition’s HMS Erebus and Terror

Your donation will help us “Save Lives at Sea” Email: info@canadianlifeboatinstitution.org

www. canadianlifeboatinstitution.org Registered Charity #88999 8977 RR0001

A British expedition led by Captain Sir John Franklin departed England in 1845 to explore and chart the last unnavigated part of the North West Passage and were last seen in Victoria Strait. Many expeditions have tried to find these ships, but it was not until fall 2014 that the Victoria Expedition found the wreck of HMS Erebus.

This painting was produced in honour of that discovery and shows the Erebus in the foreground and Terror in the background.

This painting is available for sale. Please contact us to find out which gallery currently has it on display.

(604) 943-4399 john@johnhorton.ca / www.johnhorton.ca February 2016 BC Shipping News 21

INTERNATIONAL TRADE

New developments aim to enhance trade opportunities in 2016

By Candace Sider Vice President, Regulatory Affairs, Canada, Livingston International

Canada’s effort to aggressively seek trade agreements presents opportunities for companies to explore new and emerging markets.

L

ong-anticipated trade agreements and initiatives are expected to be implemented in 2016, creating new and exciting growth opportunities for Canadian companies. To take advantage of these changes, companies must understand how these developments will affect them and adapt quickly. Below is a breakdown of some of the changes and updates as well as tips to ensure companies remain agile enough to take advantage of them.

Trade agreements

Canada’s effort to aggressively seek trade agreements presents opportunities for companies to explore new and emerging markets. This is made possible through several trade agreements on the horizon in 2016.

The Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA), Canada’s most ambitious trade initiative, broader in scope and substance than the North American Free Trade Agreement, is expected to be implemented in 2016.

Signed in the fall of 2014, CETA could provide significant benefits for goods qualifying under the rules of origin.

Once fully implemented, CETA could increase co-operative trade in goods and services between Canada and the EU by 23 per cent, or $36.8 billion, and deliver an anticipated $12 billion annual boost 22 BC Shipping News February 2016

to Canada’s economy. Once enforced, 96 per cent of all tariffs will be duty-free with the remaining to see reductions in duty rates over the next several years. It will also end limitations in access to public contracts, open up services’ market, offer predictable conditions for investors and help prevent illegal copying of EU innovations and traditional products.

The completion of CETA could also help the negotiations between the US-EU Transatlantic Trade and Investment Partnership (T-TIP) agreement. T-TIP is a trade and investment agreement being negotiated between Canada, the U.S. and the 28 European Union member countries. If passed, it would increase access to both European and Canadian markets for goods and services. For example, T-TIP aims to coordinate on product testing, inspection, and certification procedures; resolve pest and pathogen sanitary issues with a single approval process; standardize forms filed at the border; and align fees and charges. Canadian businesses whose products are highly regulated should find navigating EU trade easier and incur lower costs for obtaining approvals and permits. Many of the items proving challenging in the T-TIP could now be resolved with the completion of CETA, because the T-TIP negotiators have the option to follow the wording in the CETA agreement.

The Information Technology Agreement (ITA), the first tariff-cutting agreement in the World Trade Organization (WTO) in 18 years, will eliminate tariffs on roughly 200 IT products, valued at approximately $1.3 trillion in annual trade. More than 80 countries, including Canada, the U.S. and China, representing 97 per cent of world trade in information technology products have agreed to participate in the ITA. The ITA will offer trade opportunities that weren’t originally available and increase competition for Canadian tech manufacturers by opening the Canadian market to similar products from other countries.

Updates to current regulations and initiatives

Major initiatives including the Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) initiative and the Single Window Initiative (SWI) continue to evolve in 2016, changing the way importers, exporters and customs brokers conduct business. All of these updates are part of an overall effort to streamline the trade process and encourage companies to expand their business beyond the border.

CARM — a large, multi-year project that will change the way businesses interact with the CBSA by transforming how it assesses, collects, manages and reports on import revenue and trade information — will implement its first phase, the Accounts Receivable Ledger (ARL), on January 25, 2016. ARL is intended to lower business costs for commercial clients through the use of

INTERNATIONAL TRADE

Capitalizing on 2016 trade developments

These new trade initiatives aim to make it simpler for companies to export goods by reducing cost, barriers and regulatory requirements.

To ensure companies are getting the most out of them, it’s important to assess the impact of the agreements and adapt quickly. Conducting a comparative analysis to evaluate a company’s potential for trade in these emerging markets is the first step. Once completed, a compliance strategy will ensure processes and documentation are in compliance with the trade agreement’s rules and regulations when importing and exporting.

A compliance strategy will also help companies determine how best to work with foreign suppliers; partner with brokers and customs experts; and align their business to their supply chains. It is important to keep in mind that customs authorities in different countries still interpret tariff classifications and valuation issues differently. Understanding the various trade laws and regulations and developing internal processes and

Source: Global Affairs Canada

electronic payment options and retrieval of statements through a secure website.

CARM is expected to be implemented in phases through 2020.

SWI is a joint initiative between the CBSA and other Canadian federal government departments (OGDs) that want to receive shipment release information electronically. It provides commercial traders with a single integrated electronic platform to submit all information required to comply with customs and other government regulations. Nine Participating Government Agencies (PGAs) representing about 40 programs are involved in the initiative. SWI is the Canadian counterpart under the Beyond the Border Action Plan, an agreement between Canada and the U.S. to provide commercial traders with a single window to submit all information required to comply with customs and other government regulations. Once implemented, importers will benefit from decreased wait time and reduction or elimination in examination costs.

An info-graphic showing the extent of free trade agreements currently enjoyed by Canada.

customized standard operating procedures will help companies achieve compliance.

If companies lack the capabilities, time or knowledge to assess new free trade agreements (FTAs), a partnership with a trusted customs broker can help.

In addition to identifying which FTAs to take advantage of, a customs broker can provide assistance with data analytics, classification, rules of origin and other services.

20150813-GillespieMunro-HalfPage-65yrs.pdf

1

2015-10-07

Candace Sider is Vice President, Regulatory Affairs, Canada at Livingston International. Sider is a board member and managing director of the International Federation of Customs Brokers Associations, board member of the Canadian Society of Customs Brokers, Certified Customs Specialist and Certified Trade Compliance Specialist, and a recipient of the 2014 Trade Compliance Leadership CATIE Award for her commitment and innovation in policy and international trade.

12:52 PM

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February 2016 BC Shipping News 23

ENVIRONMENT

COP21 and shipping emissions

By Colin Laughlan President, Laughlan Consulting International Inc. Business Development Advisor, Logico Carbon Solutions Inc.

As a result of the pressure applied, the International Maritime Organization (IMO) is now under a tight timeline to respond.

A

nyone thinking that the global shipping industry’s greenhouse gas emissions would be a minor issue at COP21 was in for a big surprise.

The industry’s fleet of some 85,000 merchant vessels is, after all, the cleanest mode of transport in the world, responsible for a mere 2.2 per cent of global made-made emissions. However, during the two weeks of the 2015 United Nations Framework Convention on Climate Change (UNFCCC) conference, held in Paris in December, the topic of controlling shipping’s emissions shifted dramatically from the periphery of the conference to one of its most

24 BC Shipping News February 2016

prominent debates. The subject commanded attention with a daily spate of ad-hoc panels composed of advocacy groups, industry associations, think tanks, academics, and even national governments. The pivotal point was that, in absolute terms, shipping emissions amount to 800-million tonnes annually — equivalent to an economy of a size between Germany and Japan — and are predicted to increase between 50 per cent and 250 per cent by 2050, depending on future trade growth and energy developments. The Organization of Economic Cooperation and Development (OECD) predicts world trade will quadruple by 2050.

As a result of the pressure applied, the International Maritime Organization (IMO) is now under a tight timeline to respond. It also means that the International Chamber of Shipping (ICS), the voice of the industry at the IMO, will be tasked with generating innovative ideas to meet the challenges ahead.

“It’s clear that the IMO has to move quickly now to meet the aspirations of COP21. ... It’s becoming more and more clear that more needs to be done, and we will be working inside IMO to be sure that we come up with something useful for next year [2016],” ICS Secretary General, Peter Hinchliffe, told BCSN in Paris.

That is not to say that considerable advances have not already been made.

In 2013, two new regulations came into force as part of the International Convention for the Prevention of Pollution from Ships (MARPOL).

The Energy Efficiency Design Index (EEDI) is a legally binding requirement for all ships built after 2025 to be 30 per cent more energy efficient than ships built today. The Ship Energy Efficiency Management Plan (SEEMP) specifies energy-saving operational measures.

Looking to the future for additional improvements, the ICS says it is “genuinely confident” that the industry can, by means of technology and operational measures alone, reduce its CO2 per tonne-kilometre by at least a further 50 per cent by 2025. This will be achieved with “bigger ships, better efficiency, and cleaner fuels.” Some of this mitigation may come from alternative fuels such as Liquid Natural Gas, methane, as well as with possible propulsion assistance from wind and solar technologies now getting close to deployment. On the operational side, it sees other contributions from optimized ship handling, speed and power optimization, improved cargo handling, and better voyage planning.

Spring 2016 meeting of MEPC

When the IMO’s Marine Environmental Protection Committee (MEPC) meets April 18 to 22, 2016, it will turn its attention to a global system of data gathering for monitoring, reporting and verifying (MRV) the shipping industry’s emissions. It might also revisit the contentious issue of market-based-measures (MBM) which could include a possible

ENVIRONMENT bunker fuel levy or even an industry cap-and-trade system. Discussions on MBM related to a price for carbon were suspended by the MEPC in 2013.

“We may include market-based-measures, or other measures, we don’t know — that is what’s still to come,” IMO’s Head of Air Pollution and Energy Efficiency, Dr. Edmund Hughes, told BCSN. “So it might not be to do with market mechanisms, it could be to do with energy efficiency.

“There are several proposals on the table already; one of them includes a fuel levy, and that fund would be used to purchase allowances and offsets. It’s one of several proposals that are being submitted by member states of the IMO,” said Hughes.

“At this stage,” he added, “the key focus is on the data collection system and trying to progress that really.”

A cap-and-trade system would appear to be a last resort, but it will most surely be on the minds of IMO members following the COP21 announcement by the International Civil Aviation Authority (ICAO). As part of a panel shared with the IMO and the ICS, the aviation authority admitted that the air transport industry would not be able to reduce emissions sufficiently through technology innovations, and that it would introduce its own cap-and trade system in 2016. While ICAO provided few details of its scheme, external experts advised it would likely mean a total volume of emissions would be set for the global industry and apportioned to each airline, allowing larger emitting companies to purchase allowances from companies under their allotted limit.

The cap-and trade concept does not sit well with ICS’s Hinchliffe, who said he personally is not in favour of such a scheme. (In this he may be on the side of angels — the Pope has also censured emission trading schemes, although the Vatican’s representative at COP21, Cardinal Peter Turkson, appeared to be confused on the subject when asked.)

“My personal view is that we have a moral responsibility to reduce the CO2 emitted, not pay other people to do it,” said Hinchliffe. “But firstly, we have a responsibility to make shipping

as efficient as possible — we owe that to the world — that every ship should extract the maximum propulsion power out of every litre of fuel it uses.

“Now if governments say that isn’t enough, then they may consider imposing some kind of market-basedmeasure. But the only form of marketbased-measure that we believe can work in a real way is a levy because we do not think emissions trading is simple enough to be effectively implemented within the shipping industry.

“It’s a very complicated thing to do and we’re not confident in the amount of money that might be generated — whereas a levy gives you certainty — it is an amount of money linked to the amount of fuel you’re burning,” said Hinchliffe.

The final decision is up to governments, Hinchliffe emphasized, because if a trading scheme is established, “eventually we will run out of people who want to buy those carbon credits.”

On the other hand, if a fuel levy is enacted by the IMO, several key questions remain to be answered: How much will the levy be, and who will collect the money? How will the funds be used — within the shipping industry or

Peter Hinchcliffe, Secretary General, International Chamber of Shipping

passed on to the UN’s Green Climate Fund?

“We have had lots of thoughts about this, but I can’t go into it for the moment because we’re waiting for direction from IMO to understand whether they want to do it,” replied Hinchliffe.

Nonetheless, there was a suggestion that the events of COP21 may have

maritime and commercial law on canada’s west coast Nevin Fishman David K. Jones Connie Risi Michael M. Soltynski

W. Gary Wharton Catherine A. Hofmann David S. Jarrett Megan Nicholls

Peter Swanson Tom Beasley Russell Robertson

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February 2016 BC Shipping News 25

The Paris Agreement, adopted on December 12 by 195 countries is the first universal climate agreement.

set the stage for the IMO to change its current position. “We’re confident now that the IMO will have an easier path to discussion on very difficult marketbased-measure issues, simply because the countries who have been previously polarized in the IMO debate are not so polarized following the Paris

Agreement — so this should free up the IMO debate,” said Hinchliffe.

Whatever the debate on market measures might produce, the shipping industry will be focused on two key initiatives that promise to address criticism aimed at the IMO by some environmental advocates during the Paris conference.

PMV emissions inventory underway Port Metro Vancouver (PMV) will used inside port terminals. While the be launching its most comprehensive landside emissions study will resemble emissions inventory ever this year, col- the port’s previous inventories for the lecting data for the year 2015, includ- years 2005 and 2010, the examinaing for the first time data on both land tion of data on ships doing business and marine emissions. with PMV will be the first since a The project, under the direction of marine-side study led by the Chamber Christine Rigby, PMV’s Environmental of Shipping of British Columbia was Specialist, Air Emissions, will be car- conducted for the year 2005. ried out by Bryan McEwen and his “We want to get a better handle team at SCN-Lavalin in Vancouver, on ‘marine’ as it relates to the port,” and is targeted for completion at the Rigby told BCSN. Rigby said the end of 2016. The inventory, which will methodology now being discussed backcast to 2010 and forecast to 2030, could capture data on vessel traffic will allow PMV to do a more detailed outside the port’s jurisdiction as well analysis of emissions impacting the as a possible regional boundary on port than would be possible from the landside, and would include GPS Environment Canada’s national inven- data from trucks. “We try to make the tory for the same period. port inventory as good as possible so Using a port interface model that other jurisdictions will use our developed by McEwan in his work data,” said Rigby. The methodology is at other ports around the world, the expected to be finalized by the end of PMV project will compile data on all the first quarter of this year so BCSN modes of transport on the water and readers will want to watch for a full on the land, as well as on equipment report sometime in the Spring.

26 BC Shipping News February 2016

Photo credit: Arnaud Bouissou

“The IMO has already agreed to discuss [emission reduction] targets, and also to discuss further developments on the MRV system — so those two agenda ideas already exist at IMO,” said Hinchliffe. Bristling slightly he added: “This is where the green groups are being disingenuous, because they are trying to say the IMO has nothing on its agenda.”

But that may be the least of his concerns.

Portside turf wars

Complicating the issue further is the additional pressure brought to bear by the European Commission. In April 2015, the European Parliament created an EU-wide legal framework for its own MRV system for ships calling on European ports beginning in 2018.

The EU strategy progressively integrates maritime emissions into the EU’s policy for reducing domestic greenhouse gas emissions, and aims to cut the EU’s maritime transport CO2 emissions by 40 to 50 per cent from 2005 levels by 2050. It will capture data on the performance of individual ships and their associated operational costs as well as potential resale value. Despite the EU’s claim to have strong preference for a global approach led by the IMO, there is a tacit threat to the primacy of the IMO as the industry’s global regulator if it cannot act quickly enough.

ENVIRONMENT The ICS has taken the position that it supports an MRV system as long as (i) it is developed by the IMO; (ii) it is simple to administer — based primarily on fuel consumption and bunker delivery notes; and (iii) an MRV system must not be used in itself to develop any other MBM or indexing measures for existing ships.

Three days before the end of the Conference, the text of the draft Paris Agreement contained a specific reference to the global shipping industry’s emissions. By the last day it had been deleted, but its initial inclusion prompted cheers from some non-industry quarters and concern from within shipping’s international community.

Had the reference been retained, it would have been part of the legally binding agreement to treat shipping as one of the member states of the UNFCCC. From the perspective of the ICS, that consequence would have been disastrous:

COP21 was as much emotional and exhilarating as it was overwhelming and puzzling. Each of its 12 days was a mixture of imperatives and compromises...

“What concerns us is that IMO has a really full and complete understanding of the conditions which foster good, safe, and environmentally friendly shipping — the concern is that if UNFCCC tried to regulate, then they would miss the market areas and the other areas of safety that IMO’s so good at, and try to drive though something that is totally directed at climate change — in ignorance of these other issues,” Hinchliffe said.

Explaining the removal of the clause, he added: “I think that because there were so many different countries taking different positions, the easiest way to get the agreement through was to delete that paragraph — and that’s okay. The commitment of the IMO to do climate

change work for shipping has existed since the Kyoto Protocol and nothing has changed that, nothing has taken away that requirement.”

COP21 was as much emotional and exhilarating as it was overwhelming and puzzling. Each of its 12 days was a mixture of imperatives and compromises — often unsettling; of politics and commerce — often the dangerous combination of both; of optimism and pathos, sometimes side by side on the same panel; and sometimes a simple human story struggling to be heard within a complex system of global trade, as the two voices here: Dr. Tristan Smith: Director of the Shipping and Changing Climate

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ENVIRONMENT Project and lecturer at University College London, and lead author of the IMO’s 3rd GHG Study (2014): “How do we deal with the emissions issue without penalizing developing countries? This is a really important question. The shipping industry grows because it enables the world trade system. But at a risk of causing serious damage to an industry that brings in food and energy products to countries all over the world and enables them to

export to global markets. I think there’s an important and as yet not very well understood relation between transport costs and trade. If there is an impact on transport costs due to mitigation of CO2 emissions — that needs to be carefully thought about. We should not tritely assume that any mitigation beyond what we have at the moment is just going to increase transport costs; and if there is an impact, that means that we can talk about it, and perhaps

develop solutions which enable any recycling or compensation to impacts that it creates.”

Tony de Brum, Foreign Minister, Republic of the Marshall Islands: “Our culture, our identity, our way of life are tied to the ocean. It feeds us, it cools us, and its evaporation gives us warmth.

The main airport of the capital of the Marshall Islands, the main runway, is a water hazard. Today, the very waters that sustain us are lapping at our heels, and threatening our survival. We are the third largest registry of merchant ships. We need all countries and all sectors to commit to emissions reduction challenge.”

Was COP21 a success? An optimist would say yes; a pessimist, no. The negotiations of 195 national leaders aspired to put the world on a path to limit global temperature increase to under 2o C from the pre-industrial period. The world’s leading climate scientists believe COP21 achieved a path toward 3o or slightly higher.

The International Transport Forum, a think tank of the OECD, claims that if the shipping sector were to follow the 2o C. pathway, it will have to cut CO2 emissions from ships to 0.4 billion tonnes by 2050, and achieve zero carbon emissions by 2080.

The shipping industry is in capable hands with U.K.-headquartered ICS Secretary General Peter Hinchliffe at the helm, but he will have to navigate between the Scylla and Charybdis of national port states wanting more control and myriad non-governmental organizations along with the world public in general, whose simple refrain is an unqualified “Do more!”

The words of the British poet Rudyard Kipling over a hundred years ago seem to sum it up.

The tumult and the shouting dies — The Captains and the Kings depart — But the tumult and shouting will resume. And the Captains and Kings will gather again. COP22 will convene November 7 to 18, 2016 in Marrakesh, Morocco.

Colin Laughlan can be reached at colin@laughlanconsulting.com.

28 BC Shipping News February 2016

ENVIRONMENT

Successful 2015 shows increasing momentum for Green Marine

T

he Green Marine program — North America’s environmental initiative for the shipping industry — saw some stellar successes in 2015, increasing the program’s relevance and credibility on several new fronts.

In addition to winning the 2015 Lloyd’s List North American Maritime Award in the Environment category, Green Marine was nominated for the same category on the world stage. They also signed a contractual agreement with Transport Canada to analyze in detail the underwater noise caused by shipping activities and their impacts on marine life and have just completed a lengthy process that establishes how to recruit, train, assist and test new verifiers who will be responsible for verifying the results of participating companies.

Increased participation

Green Marine welcomed 43 new members in 2015 — 15 participants, nine supporters, three associations and 16 partners.

The most recent participants include: • The Port de Hueneme is the only deep-water harbour between Los Angeles and the San Francisco Bay area and one of the most productive and efficient commercial trade gateways for niche cargo on the West Coast.

• Port Alberni Port Authority on B.C.’s Vancouver Island is one of the finest deepsea inland harbours on the continent and the closest deepsea port to the Pacific Rim. • The Oshawa Port Authority is an Ontario gateway to world markets through the St. Lawrence Seaway.

New supporters include: • The St. Lawrence Global Observatory (SLGO) is a nonprofit organization bringing together a network of scientists, observers, modelers and managers from universities, research organizations, provincial and federal

government agencies, environmental and community groups and the industry.

• INREST is a Nordic institute with a mission to carry out research on environmental and health issues within the workplace in northeastern Quebec.

• Clear Seas is an independent, notfor-profit organization that provides impartial, evidence-based research to inform the public and policymakers about marine shipping in Canada, including risks, mitigation measures and best practices for safe and sustainable marine shipping.

• PortTech Los Angeles is an innovation and commercialization centre dedicated to creating sustainable businesses for ports and the goods movement industry. It brings together entrepreneurs, strategic partners and investors to accelerate innovation, advance clean technologies and create economic opportunities.

Two new partners also joined with Green Marine at the end of 2015: • CR Ocean Engineering LLC (CROE) is a leading air-pollution reduction technology supplier offering a full range of systems customized to a client’s specific needs. With its roots dating back to 1917, CROE is the marine-focused entity of one of the world’s oldest and most reputable air-pollution control companies.

• The DSS Group of Companies is Canadian-owned and involved in the importation, distribution and service of marine, environmental response and military equipment and supplies throughout Canada. The company is headquartered in Dartmouth, Nova Scotia, and also operates regional sales and service facilities in Newfoundland, Quebec and British Columbia.

The 19th association to join the Green Marine program is the American

Society of Naval Engineers (ASNE).

ASNE is a leading professional engineering society for engineers, scientists and allied professionals who conceive, design, develop, test, construct, outfit, operate and maintain complex naval and maritime ships, submarines and aircraft and their associated systems and subsystems.

Going into 2016, Green Marine boasts a growing membership of 27 ship owners, 34 ports (including all B.C. port authorities), 37 terminals, 19 associations, 80 partners (including industry service and product suppliers, class societies, pilotage authorities, etc.), and 56 supporters (including governments, environmental NGOs, and research, education and conservation organizations).

The Green Marine team is currently organizing GreenTech 2016, taking place in Quebec City from May 30 to June 1, 2016. This year’s theme, Mapping the Future of Sustainable Shipping, is garnering great interest as seen by the large number of sponsors and exhibitors already confirmed.

Agenda items and speakers are scheduled to be announced in February.

For more information about attending GreenTech, please visit: www.greenmarine.org/greentech.

February 2016 BC Shipping News 29

CARGO LOGISTICS

Prospects for Canadian ports’ cold cargo heat up

By Darryl Anderson, Managing Director, Wave Point Consulting and James Frost, President, MariNova Consulting ...with a capacity-restricted dedicated fleet, there is no alternative but for cargo to be shipped by reefer container ship — a trend that is accelerating...

A

s a visit to Granville Island Market demonstrates, the world’s hunger for fresh fruit, meat and perishable foods has resulted in complex global supply chains as maritime transport of refrigerated cargoes is increasingly used to satisfy consumer demand.

This article explores the state of the international vessel market and landbased transportation and logistics services that support the flow of refrigerated cargoes in Canada. It will conclude with some observations on the importance of trade agreements impacting the flow of refrigerated cargo in the year ahead.

Canadian ports and cargoes

One feature of global refrigerated shipping over the past 10 years has

been that the fleet of breakbulk reefer vessels continues to shrink and shows no signs of reversing. Conventional refer vessels are still active in South America, Central America, the eastern Mediterranean, New Zealand and parts of Africa. However, the container ship reefer fleet is set to grow 20 per cent by 2018, according to Drewry’s latest Reefer Shipping Market Annual Review & Forecast.

The top five container shipping lines regarding their reefer capacity are Maersk, MSC, CMA CGM, Hamburg Süd, and COSCO. Most of the largest vessels being built (i.e., the 18,000 TEUs) have about 1,000 reefer plugs; some in north-south trades, such as Maersk and Hamburg Süd, have

Darryl Anderson

James Frost

International vessel market

30 BC Shipping News February 2016

specially designed shallow draft 7‑9,000 TEU ships, with large reefer capacity (upwards of 1,600‑1,700 plugs), to reflect the volume of reefer products moving in those trades.

Vancouver, Montreal and Halifax dominate Canada’s marine reefer cargo export market. Regarding imports, Vancouver handles the largest share, followed by Montreal and then Halifax.

The total Canadian seaborne reefer market in 2011 (the last year for which Stats Can data is available) is estimated at 2.2 million tonnes. Exports are estimated at 1.6 million tonnes while imports are almost 700,000 tonnes.

The dominant export cargoes include frozen meat, frozen vegetables, seafood (frozen and live), as well as some fruit. Canadian reefer imports feature fresh fruit, frozen fish, meat and vegetables. A considerable volume of central Canadian reefer imports moves through the ports of New York, Philadelphia and Wilmington, mainly in the north-south trades from South America, Central America, Australia and New Zealand. Cargo, such as bananas, meat, wine and grapes, originates in places like Costa Rica, Guatemala, Ecuador, Argentina, Chile, Australia and New Zealand.

Port Metro Vancouver (PMV) data indicates that meat, fish, poultry and prepared food products account for about 95 per cent of all reefer exports.

Produce, meat, fish and poultry account for 92 per cent of all reefer imports. While the concepts embedded in the 100-mile diet are no doubt worthy, the international trade data suggests a global supply exists regarding the flow of refrigerated cargoes. PMV data indicates that in the course of a

CARGO LOGISTICS single year, their facilities now handle about 537,000 tonnes of meat, fish and poultry exports and 350,000 tonnes of produce imports. Dairy and other prepared food products also use temperature-controlled containers.

Eastern Canada

Two main ports in Atlantic Canada handle reefer cargo: Halifax and Saint John. Argentia handles reefer cargo for Eimskip and so does the terminal in St. John’s for Oceanex. The Atlantic region boasts some of the largest refrigerated cargo shippers in the country, including Clearwater Seafoods, Oxford Frozen Foods and McCain, which allows its ports to “punch above their weight” in attracting carriers. Halifax is served by the G6, O3 and one-half of the 2M alliance (Maersk), as well as Zim, ACL and Eimskip; while Saint John has Tropical Shipping and MSC, all of which offer reefer service.

Major export commodities handled at Halifax are dominated by seafood, frozen vegetables and fruit as well as some poultry. Given the port’s proximity to the natural resource and producers of seafood, blueberries and French fries, this is not surprising.

Reefer cargo handled at Canadian ports, 2011 Handling port Vancouver Halifax Montreal Saint John Others Grand Total

Containerized exports (tonnes)

Market share

Containerized Market imports (tonnes) share

744,390 47% 498,307 71% 397,079 25% 70,587 10% 245,573 16% 119,600 17% 159,320 10% 698 0% 26,676 2% 8,986 1% 1,573,038 100% 698,178 100%

Source: Statistics Canada/MariNova Consulting Ltd.

Regarding destinations, major export markets for Halifax are Jamaica (likely for Caribbean transshipment), Germany, the Netherlands, China and Israel, followed by Singapore, Japan and Hong Kong. Major import commodities handled at Halifax include fish and seafood (for local processing), frozen meat and fresh vegetables.

Most of Saint John’s market has been the Caribbean. However, the port added an MSC feeder service to Freeport and Caucedo in 2012, connecting with its worldwide network of some 315 ports.

Major export commodities handled at Saint John include frozen vegetables (likely McCain and Cavendish Foods

French fries) and fresh potatoes from both New Brunswick and PEI. Imports handled at Saint John include poultry, frozen fish and fruit from Puerto Rico; the US Virgin Islands; the U.S.; and Netherlands Antilles.

Halifax and Saint John have recognized the importance of reefer cargo to shipping lines serving the port and the linkages to the regional economy.

Several key industries and dozens of businesses in the Atlantic region depend on competitive shipping services to access export markets. Since 2008, the Halifax Port Authority has invested $250 million in a variety of projects including additional reefer plugs at

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CARGO LOGISTICS ...if Canada were not part of a major TPP agreement in which the U.S. and Japan were signatories on pork, Canada could lose at least $330 million in export sales. both of its container terminals, bringing the total to the port to 1,000 (500 at each terminal). It has also invested in terminal expansions and deepening berths to 55 feet. Saint John has plans to rebuild the Rodney Container Terminal at a cost of $205 million to enable it to handle larger vessels.

Reefer cargo is a big revenue generator, not only for the shipping lines but also the terminals. The biggest strength of both ports is their proximity to natural resource industries in Atlantic Canada which produce reefer cargo, including seafood, berries and potatoes.

These shippers are located within a one-day drive of each port and there are shipping lines eager to carry the cargo.

There are at least six cold storage facilities that are critical pieces of the Halifax Gateway reefer infrastructure.

These include Nova Cold (three facilities), Versacold (two facilities), and Orion. Cold storage facilities in New Brunswick are located near fish processing facilities on the Northumberland shore and at large potato processing facilities in the St. John River valley.

The newest facility is Nova Cold, a $9.5-million, state-of-the-art, 60,000-

Reefer containers being loaded for transport.

32 BC Shipping News February 2016

square-foot facility which recently opened in September 2013 in the Atlantic Gateway Logistics Park in Halifax and purchased by Brookfield Asset Management. It has enough space to store 5,500 pallets, equivalent to 250 containers. Nova Cold handles higherend products such as lobster, shrimp and crab, and some berries. The facility also handles export transload, as the trailer and container doors can be sealed while this takes place.

Western Canada

The BC Seafood Alliance reports that over 90 per cent of seafood produced in B.C. is exported. British Columbia’s seafood products were shipped to approximately 70 countries.

The report “Reefers in North American Cold Chain Logistics: Evidence from Western Canadian Supply Chains” prepared for the Calgary-based Van Horne Institute in 2014 provides some important insights on how export products move through the supply chain.

There are three export channels for reefers. The first channel comprises a domestic reefer haul that is trucked to a transloading facility in the vicinity of

a port. The contents are then loaded in a maritime reefer container and delivered to the port for export. The second channel involves an empty container that is brought to the exporter to be source loaded and then brought to a port terminal. Trucking dominates this channel. The third channel is the repositioning haul, which is much less common. An import reefer is available locally or regionally and then repositioned to an exporter to be source loaded.

Because Vancouver has a long distance national reefer trade function, about half of all imported reefers are shipped by rail to Eastern Canada (mostly to the Toronto market).

There are two main import channels for reefers. The first involves transloading near the port facility where the contents of refrigerated containers are placed into domestic refrigerated containers and then brought by truck or rail to the inland destination. The second is a direct road or rail transit to the inland destination. Then, the empty reefer will be brought back to the terminal and on some rarer occasions transferred directly to an exporter.

While the two major railways (Canadian National and Canadian Pacific) both handle reefers, CN has a larger market share than CP. On June 1, 2015, CN announced a C$20-million investment in the expansion of its cold supply chain capacity to help producers and distributors of chilled or frozen foods grow their businesses in North American and overseas markets.

JJ Ruest, Executive Vice-President and Chief Marketing Officer, said: “We are now adding capacity to grow and help Canada’s food processing industry gain and maintain access to new domestic and international markets. CN’s cold supply chain service offers producers who are pursuing overseas opportunities a great tool to expand market share. CN is growing with its customers, aiming to help them compete more effectively in their markets.”

To accommodate growth, CN acquired 200 more domestic, 53-foot temperature-controlled containers. CN also purchased 32 electrical generators

CARGO LOGISTICS to move 40-foot international marine reefers to and from CN-served ports on CN intermodal trains. The power packs provide economies of scale by connecting up to 17 international marine reefers at a time.

Trade agreements drive trade volume

The importance of international trade agreements in the cool cargo sector cannot be overstated. On December 31, 2015, Canadian beef products were once again able to flow to South Korea following that country’s lifting of a temporary suspension imposed in February 2015.

Canadian Cattlemen’s Association (CCA) President Dave Solverson said the resumption of access to South Korea was important for Canada’s beef producers. “South Korea holds huge potential for beef and especially cuts and offals that are underutilized here at home.” With the implementation of the Canada-Korea Free Trade Agreement in late 2014, the CCA believes Canadian beef exports to Korea have the potential to exceed $50 million per year.

The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is perceived as having enormous potential for Halifax in particular, as Saint John does not have direct service to Europe (only transshipment via Freeport). At the minimum, CETA will result in significant increases in pork and beef exports to the EU, and dairy imports from the EU. These products will likely originate in western Canada while products like cheese will be destined for Central Canada, where Halifax and Montreal will compete.

The Port of Montreal has also gone on record as eagerly anticipating the ratification of CETA. The port’s CEO, Sylvie Vachon, has been quoted as saying, CETA is “made to measure for the Port of Montreal. We already are the leading port on the North American east coast for trade between Northern Europe and North America’s industrial heartland. With our strategic location between the world’s two largest economic blocs, the EU and NAFTA, the Port of Montreal is the natural gateway to Europe.”

The Canadian Pork Council report, Potential Implications of a Trans-Pacific Partnership for the Canadian Pork Industry, determined that if Canada were not part of a major TPP agreement in which the U.S. and Japan were signatories on pork, Canada could lose at least $330 million in export sales.

The loss of $330 million in sales represents about a billion dollars in total economic activity in Canada and would put about 4,500 jobs in jeopardy. Without the ability to compete in the most lucrative overseas market, Canada’s processors/ exporters would not be able to sustain the competitive pressure from the U.S. and would ultimately face shutdowns. The presence of international trade agreements and the growing reliability of cold chain technology confers opportunities to ship greater volumes of temperature-controlled products and expand markets through economies of scale.

economic activity and many jobs with consumers in Canada living beyond the immediate port area dependent on this trade.

To ensure that container ship operators remain competitive — where super-slow and ultra-slow steaming has become commonplace — many companies are focusing on reefer services. While the Canadian refrigerated cargo marketplace has benefited from this development, there are supply chain consequences. For example, lengthy voyage times and the use of transshipment services. In Western Canada, with longer distances between ports and markets, slow steaming has placed additional pressure on our land-based transportation and logistics service providers for this often-time sensitive cargo.

With cold cargo prospects heating up, due to expanded trade agreements, Canadian port investment will need to keep pace.

Port Metro Vancouver’s Terminal 2 development and Prince Rupert Port Authority’s Fairview Container Terminal expansion, and the start of service by Maersk and MSC (under the 2M Alliance) and CMA CGM at Prince Rupert bode well for the cool cargo sector.

Darryl Anderson is a strategy, trade development, logistics and transportation consultant. His blog Shipper matters focuses exclusively on maritime transportation and policy issues. http:// wavepointconsulting.ca/shipping-matters James Frost is a marketing and business development specialist, experienced in marine transportation, port marketing, container shipping, short sea shipping and ferry operations.

Conclusion

This article demonstrates that the free flow of refrigerated cargoes through Canadian ports accounts for significant February 2016 BC Shipping News 33

BULK CARRIERS

The bulker blues in 2015

By Syd Heal

For many owners, the recession of 2008 has been continuous up to the present time with little relief visible coming over the horizon.

T

o say the least, 2015 was nothing short of horrible for virtually the entire world fleet of dry bulk carriers with probably just a very small minority of ships that were still covered by long-term charters being able to earn enough money to cover their depreciation and expenses and still show a profit. For many owners, the recession of 2008 has been continuous up to the present time with little relief visible coming over the horizon.

These have resulted in the inevitable

34 BC Shipping News February 2016

bankruptcies and others will follow.

Relief would include increased world demand for basic bulk commodities which would help stiffen freight rates, plus a more rapid rate of scrapping old vessels. There are still a few old veterans around built in the 1970s and 1980s although happily they are hardly a factor any more, particularly when under minor flags that do not compete in competitive world trade, but are usually owned to serve the domestic needs of their country of registration.

Among smaller owners there have undoubtedly been many retirements as those frustrated by low spot market rates seem to be caught in a never-ending morass. Small fleets tend to more readily age and deteriorate and cannot easily initiate a replacement plan. Average fleet age is always an important factor in marine insurance, bank financing, private capital and investment decisions and if a fleet cannot renew itself and keep average age down with new ships replacing old, it is clearly on its way out.

Among the smaller owner classes, some are actually publicly quoted companies on the NYSE and NASDAQ exchanges and looking at their figures, some are in dire straits with little future as the big fleets of today grab all the opportunities. Because of exchange rules a number have moved into the over-thecounter market, but their future looks very uncertain short of a miracle.

In this period of 2008-2015 there have been a few very short lived spikes in shipping rates sufficient to influence stock prices sharply upwards with one in particular about two years ago when all the pundits and analysts who purport to follow this sector forecast a coming nirvana and all our troubles would be over. The reality was that most shipping investors took a bath even though most economic pointers were pointing in the right direction for the stronger companies I follow.

The reason for this was that so many new ships were joining the fleets and with the forecasted boom to look forward to, old ships that should have gone for scrap had a life extension which nullified the boom before it started.

BULK CARRIERS What the expert forecasters overlooked was the power of the rapidly growing Chinese economy and how any loss of strength in its growth would inevitably cause major setbacks to bulk carrier shipping and, to a lesser extent, the container trade as demand for Chinese manufactures weakened.

China, since its build-up initially with shipbuilding and heavy industry, has also improved the standard of living of its population and with that has come the development of a consumer economy with an inevitable change in priorities.

The decline in Chinese imports of iron ore from Australia and Brazil were possibly the first sign of deterioration and in broad terms this led to an overall weakening of most other shipping rates with the exception of oil. Here the effect was the opposite as massive purchasing of ultra cheap crude for stockpiling purposes lead to a boom for the tanker trades, particularly in the VLCC and Suezmax classes that was mostly fuelled

by Chinese demand. I mention the oil industries simply as a background to current economic cycles in the affairs of shipping generally, but the truth is that nothing much happens in this world today without oil and its many bi-products being a constant factor. In this case, the glut of oil resulting from Saudi-Arabian overproduction and the growth of American shale oil has hurt everyone else in the production business as they all seek to maintain market share.

None of this good fortune for the tanker business has done much to help the bulk shipping fleets unless they are together in one mixed fleet such as the Danish Norden group. For groups such as the Navios group of four publicly owned companies and three private companies, the earnings of the two tanker companies have offset the losses of the two bulker companies, and in turn this has given them a unique strength in arranging finance on deals which few others would be

able to obtain or even handle. The central holding and operating company is Navios Maritime Holdings (NM), with a large fleet of bulkers to which all others in the group subscribe management fees and dividends on the NM`s large holdings in each of them. NM owns a major interest in its drop down master limited partnership, Navios Maritime Partners (NMM) with a smaller fleet of bulkers and eight container ships. You can see the disparity between bulkers and containers, in that the container ships are currently providing most of the profit earned by NMM. The number two public company is Navios Maritime Acquisitions (NNA), a major tanker owner which in turn has its own master limited partnership in publicly traded Navios Maritime Midstream Partners (MAP) with a fleet of six VLCCs and a further five under option from its parent.

Falling or cancelled dividends are the order of the day and while the two Navios tanker fleets are doing well and Photo credit: Dave Roels (www.daveroels.com)

February 2016 BC Shipping News 35

BULK CARRIERS Shipping has a definite cycle and the only uncertainty is the length...between peak of prosperity and depth of despair... maintaining dividends, NM has cancelled dividends for the time being and NMM has had to make a reduction.

In addition, NM holds a controlling interest in NM South American Logistics, owners of a massive barge and terminal business in Uruguay and neighbouring countries in the Hidrovia region. It’s a fairly complex ownership grouping but so long as at least sufficient parts of it are enjoying prosperity it gives the entire group a degree of financial strength that is beyond that of most of its competitors and that`s what is needed to survive in this difficult market.

Some companies in the bulk shipping sector are taking advantage of the current depressed stock markets and have launched buy back programs for their stock, both common and preference shares, as a means to strengthen their balance sheets and reduce dividend commitments. The logic is very one-sided as they say they are returning capital to shareholders rather than creating income for the shareholder through dividends, but for the shareholder who got in on the original IPO this is very disheartening as they look at the overall steady decline at which they bought in a much more sane market.

On the other hand, this is also a great opportunity to enter the market when the shares of some very sound companies are in the bargain basement, but understanding the business of a shipping company is essential in making a choice.

The other trend is reducing or stopping the dividend, particularly on common stock. The payment of dividends is always at the pleasure of management and the board of

directors and such action can be initiated for any good reason from a loss-making situation to a need to conserve funds to meet future shipbuilding commitments. Just recently there has been a spate of funds being conserved to meet finance obligations on new construction particularly in highly technical specialty ships such as LNG and petrochemical tankers.

None of this gets around the fact that ship owners never seem to learn the lessons of the past. Shipping has a definite cycle and the only thing uncertain is the length in the cycle between peak of prosperity and the depth of despair of each cycle. Shipbuilding enjoys a similar cycle, in that when times are tough the orders for new ships taper off and sometimes put the shipyards into a desperate plight as they go to almost any length to ward off bankruptcy. Pencils become very sharp and the more venturesome owners with cash and unused lines of credit place large orders for new ships, usually on speculation in the hope of catching another upward cycle with ships ordered at the bottom of the cycle.

In the last few years, owners like John Fredriksen and the Scorpio Group have places huge orders for mixed fleets of tankers and bulkers, in Scorpio’s case for some 130 dry cargo bulkers and product tankers. This type of activity must disturb the market and effectively discourage smaller, weaker owners who in current circumstances must now be retiring from the business if they have not already gone bankrupt.

Their last refuge was one of the bulker pools run by a very strong market leader or one of several large management groups such as Anglo-Eastern or V-Ships, but even some of these must have their own major challenges as we have seen over the past several years with the Danish Torm group. Torm had a large tanker fleet of owned and managed, mostly product tankers and a smaller owned bulker fleet, but ever since the 2008 recession it has been struggling to avoid bankruptcy and reorganize. Reorganization of sorts was achieved last year, but control now lays with American interests.

Another sign of tough times shows up in China and South Korea who have set up leasing facilities to assist their shipbuilders to sell building contracts for ships that will be leased to selected foreign buyers. They have no doubt seen the success of large German leasing companies and the outstanding success of Vancouver and Hong Kong-based Seaspan Corporation with its leasing position as the largest container ship leasing company in the world. Leasing of container ships makes sense because of the way that sector of the international shipping industry is organized with long-term charters from strong counter parties and it may well make progress with tankers so long as the tanker sector stays strong, which at present might be good for a few years before falling shipping rates and over-abundant ship supply takes over in the usual way. So far as bulk shipping is concerned it probably has little future at this point given the state of the bulker market and poor chartering prospects.

Syd Heal, a veteran of the marine indutry and a prolific writer and publisher of marine books, can be contacted at richbook@telus.net.

36 BC Shipping News February 2016

CONTAINER SHIPS MSC’s new service into Prince Rupert becoming a popular choice for shippers

T

he 2M Alliance of Mediterranean Shipping Company (MSC) and Maersk Line is enjoying brisk business for the New Orient Service that began visiting Prince Rupert’s Fairview Terminal last October. As the closest major North American port to Asia with direct access to CN’s Class 1 continental rail network, the short transit times are catching the attention of shippers as noted by Prince Rupert’s enviable position as the port with the fastest pace of growth on the continent.

“MSC’s commitment to the Canadian market, along with the strategic growth plans of customers, is at the core of all our business decisions,” said Sokat Shaikh, President of MSC Canada. “We continue to invest in and expand our services throughout Canada. We are confident that the addition of the Prince Rupert port of call will further enhance our transpacific coverage and strengthen our coast-to-coast portfolio of services.”

“The addition of the 2M Alliance as a dedicated marine carrier service is another milestone in the unprecedented growth we’ve achieved at Fairview Container Terminal since it began operation in 2007,” said Don Krusel, President and CEO of Prince Rupert

Port Authority. In 2015, containerized cargo throughput at Fairview increased about 30 per cent (based on November 2015 year-to-date figures) to a staggering 718,815 TEUs. New terminal operator DP World and CN — two of the Port’s key partners in ensuring efficient and effective service at Fairview — are stepping up to the challenge of managing such growth.

The New Orient Service provides a dedicated and direct westbound service from Prince Rupert to Central and South China, Taiwan, and South East Asia. Eastbound, MSC offers direct service from base ports in China, South Korea and Malaysia and includes quick and competitive outport feedering services from South East Asia and Japan into Prince Rupert and Canadian inland destinations.

The expansion into Prince Rupert solidifies MSC’s growing presence in the container sector on the North American West Coast. While the company’s history dates back over 40 years, their presence on Canada’s West Coast has been steadily growing over the past five years — first with service into Vancouver and now with its New Orient service into Prince Rupert.

The company operates in over 150 countries with over 200 routes, 315 ports of call and more than 465 vessels.

Continuously winning awards for their service (2015 marked the third year in a row they won the prestigious Container Line of the Year award from Lloyd’s Loading List Global Freight Awards), MSC is well known for its company culture that puts customer service as a top priority.

For Prince Rupert Port Authority, the move confirms that the decision to expand Fairview Terminal was a smart one. The increase in capacity from 850,000 TEUs to 1.2 million by 2017, will be able to accommodate the growing container traffic on the Asia/ North American route for many years to come. And the 2M Alliance is further confirmation of the popularity of Prince Rupert as a key to the AsiaPacific Gateway.

“This new service is a validation of the advantages our port has brought to transpacific trade, and we look forward to building relationships with MSC and Maersk — and the many new customers that will benefit from the supply chain solution offered through our gateway,” said Krusel.

Photo credit: Lonnie Wishart (www.lonniewishart.com)

February 2016 BC Shipping News 37

PORTS Port development study forecasts thousands of new jobs for Prince Rupert

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• $310 million annually in additional wages • $59 million annually in additional local municipal taxes for the City of Prince Rupert and the District of Port Edward • $178 million annually in combined taxes to all levels of government • $400 million annually in additional Gross Domestic Product (GDP) for Canada In addition to the sustained economic benefits of planned infrastructure and terminals, their construction could provide as many as 26,000 person years of employment, $1.7 billion in wages and over $2 billion in GDP. “The vision of Prince Rupert as a leading North American trade gateway builds on our strengths and our track record,” said Don Krusel, President & CEO of the Port of Prince Rupert.

“The question is, can we achieve it? We

Photo credit: Lonnie Whishart (www.lonniewishart.com)

he Port of Prince Rupert has released a study projecting that its fully realized development plan could generate almost 5,000 new jobs in northern British Columbia directly related to port activity, with corresponding increases in wages and government tax revenues.

Using a model derived from project proposals and land use plans, the forecast quantifies the potential growth of the port’s economic impact through 2025 and beyond. The model makes assumptions for capital investments, average employment levels and wages.

The full buildout of the Port of Prince Rupert’s planned infrastructure and terminals is predicted potentially to generate the following incremental economic impacts: • an increase of 4,780 full-time equivalent (FTE) jobs directly related to port activity

Initiatives like the Fairview Terminal expansion will generate significant economic benefits for the City of Prince Rupert.

38 BC Shipping News February 2016

believe we can, but it’s going to take a vision that aligns the priorities, efforts and investments of local communities and First Nations with the economic opportunities that are presented.”

The Port of Prince Rupert’s development plan guides its growth into a diversified and sustainable global trade gateway in a manner that minimizes congestion of its operations, limits community conflict with industrial land use, and mitigates marine and environmental impacts.

“The City of Prince Rupert is looking to the future with renewed optimism as we see even greater opportunities to become a truly global port city,” said City of Prince Rupert Mayor Lee Brain.

“Along with protecting our natural environment and improving quality of life for residents, one of the five points of our Hays 2.0 vision is about supporting sustainable economic growth and diversification for Prince Rupert like that planned by the Port. We are pleased to see their plans coming to fruition, and what that will mean for our community.”

Current and proposed developments on port lands at Fairview Container Terminal, the Ridley Island Industrial Site and Lelu Island have the potential to create an integrated platform for shipping with the capacity to transport over 100 million tonnes of cargo annually.

District of Port Edward Mayor Dave MacDonald said, “The potential for our corner of British Columbia to facilitate this level of trade is remarkable, and something we collectively welcome and are actively preparing for. The availability of new jobs close to home will reduce the number of residents who have to leave the region to find work.”

“Our community has seen tremendous benefit from the past and current development of the Port, and we look forward to contributing to the immediate build-out and long-term operation of these important pieces of Canadian infrastructure,” said Harold Leighton, Chief of the Metlakatla Nation.

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PORTS High-tech surveillance system for Nanaimo creates BC Marine Electronic Highway “The system provides for complete coverage of the ships as they move through the waters of B.C. ...[w]ith a 360-degree view of the vessels and their activities...”

W

hen Nanaimo Port Authority began investigating options for an oversight system to manage vessel traffic, little did they realize that their worldwide study of maritime domain awareness systems would lead them back to a North Vancouver company with a reputation for providing one of the most advanced electronic surveillance systems available for domain awareness. Fast forward two years and NPA now has a powerful harbour management system in place that exceeds original expectations.

Nanaimo Port Authority’s new Maritime Domain Awareness (MDA) system from Xanatos Marine highlights a number of factors relevant to B.C.’s shipping industry: First, it demonstrates the degree to which the Port takes their mandate seriously in providing waterside security, safety and environmental stewardship; second, it highlights just how far technology has advanced in vessel traffic management systems; and third, it is a shining example of a B.C.

company that is finding international success for its talent and ingenuity.

Background

In 2011, NPA began working with Port Metro Vancouver to develop a framework that would allow overflow traffic from Vancouver to anchor off Nanaimo’s Protection Island. A memorandum of understanding was struck and, as a result, vessel traffic in the area increased — much to the chagrin of the residents of Protection Island.

Aside from views being obscured, noise and light pollution from the vessels were having an impact on the local neighbourhood.

Following a series of meetings and communications with residents to identify the issues, NPA worked with the Chamber of Shipping of British Columbia and Transport Canada to develop best practices for the vessels that went a long way in mitigating some of the problems. “Things like readjusting the lights or restricting nighttime

Combining AIS, radar, high-speed cameras and weather stations, NPA’s Maritime Domain Awareness system is a powerful tool in harbour management.

40 BC Shipping News February 2016

activities that generated a lot of noise were fairly simple to implement and went a long way in showing residents that we were listening to their concerns,” said Captain Edward Dahlgren, Nanaimo’s Harbourmaster. “However, we knew we needed to do more to gain social licence. We recognized that we would need to take our oversight to a new level of accountability to satisfy concerns.”

At the same time, NPA was chosen to assist Quicksilver LNG with the early stages of a TERMPOL submission and through that exercise, NPA identified additional requirements for pilotage and control and management of vessels. It was at this time that NPA began investigating systems in other ports around the world. And that’s when they discovered Xanatos Marine’s system in the Malacca Straits.

The process begins

With its head office in North Vancouver and regional offices in Thailand and the Phillipines, Xanatos Marine is an award-winning company that provides customized surveillance and security solutions for the maritime industry. They have sold over 20,000 systems and sensors worldwide over the past 10 years and are recognized leaders in the field of maritime domain awareness. Their work in installing a $10-million Marine Electronic Highway in the Malacca Straits, one of the busiest areas in the world for vessel traffic and one of the highest risk areas for piracy, proved the effectiveness of their system.

Xanatos has supplied systems for navies, coast guards and ports around the world. Their unique product and services earned them a Small Business B.C. award for best international trade in 2013 and they were identified as one of the fastest growing companies in B.C.

by Business in Vancouver.

From making the first phone call to implementing an operational and

PORTS Photos: BC Shipping News

functional marine awareness system, Dahlgren describes a process that has taken over two years. Initial steps included defining the goals and mission — i.e., to provide electronic oversight that would satisfy both regulatory and social licence requirements. “Both are equally important,” said Captain Dahlgren. “Residents have had their lives changed and our industry is often viewed, however unfairly, as being arbitrarily capricious and not accountable.

It was important for us to address their concerns.”

NPA’s CEO Bernie Dumas refers to the concept and product created with Xanatos Marine as B.C.’s Marine Electronic Highway. “The system provides for complete coverage of the ships as they move through the waters of B.C.,” he said. “With a 360-degree view of the vessels and their activities, we’re able to bring down risk factors considerably.”

Captain Edward Dahlgren, Nanaimo Port Authority’s Harbourmaster has worked for two years with Xanatos Marine to develop a sophisticated maritime domain awareness system.

The system at work

Xanatos Marine’s system integrates a wide variety of sensors to provide full maritime domain awareness. The combination of radar, AIS (Automatic Identification System), high-speed cameras (including thermal and infrared), and weather stations allows for real-time information about everything on, under, related to, adjacent to, or bordering the sea and B.C.’s coast. By layering the many surveillance, observation and navigation systems into one common operating picture, port staff have access to enhanced real-time maritime domain awareness and are able to make informed decisions.

Within Nanaimo’s scope of operations, the MDA system includes three cameras, two radars, two weather stations, and two AIS receivers, one of which also has a transmit function.

Additional sensor packages installed outside of Nanaimo allows for a full view of B.C.’s Inside Passage, showing everything from Campbell River to North Saanich and into Vancouver Harbour. “We can see conservation areas, ferry routes…anything that’s charted and in the public domain,” said Dahlgren.

Nanaimo’s MDA system provides for safety, security and environmental awareness of B.C.’s coast.

The capabilities of the MDA system don’t just stop at identifying and monitoring vessels. Sensors are able to pick up spills (even very small ones), activities of small craft and deviations in traffic patterns. “We were actually able to identify some illegal activity occurring in the harbour which we would never have found without this system,” said Dahlgren. “The level of surveillance is amazing and we’ve quickly seen that activity diminish given our heightened awareness.”

While undergoing beta testing, NPA staff found the system exceeded their expectations. “As we were activating sensors and looking at what we were getting, we were able to see that what we had was much more than a marine domain awareness system,” said Dahlgren. “It has become more of a holistic harbour management process.

The data mining component is far beyond what we originally thought it would be. We can generate multiple reports and we’re able to gather far more February 2016 BC Shipping News 41

PORTS “It has become more of a holistic harbour management process. The data mining component is far beyond what we originally thought it would be...” information than we ever have in the past. It’s leading us to ask additional questions and look for alternate ways to gather and filter data.”

With the lead designer from Xanatos on site for over a month to capture ideas

and comments from staff, a second version of the software has already been installed and is a complete update from the first version. “It’s far more powerful than we originally understood. We can see dwell times, types of ships, where

New Versatility and Capacity for Canada’s West Coast Port of Nanaimo’s Duke Point Liebherr 500 Mobile Harbour Crane will offer: • Improved efficiencies with greater capacity and outreach • Enhanced versatility with a 360-degree mobility • New opportunities for a variety of cargo types • Provides shippers a variety of vessel options (barges, coasters to Post-Panamax vessels) • Close proximity to Mainland terminals • Direct service to Asian markets

Next steps

• Containers • Project Cargo • Bulk • Break Bulk Duke Point Deep Sea Terminal: • Enhanced Efficiencies • Minimal Congestion • New Load/Discharge Options • Continuous Container Movement

THE SOLUTIONS PORT

@portnanaimo

250-753-4146 ext.229

42 BC Shipping News February 2016

they’ve come from and where they’re going; we can sort the data in a number of ways as well — by tonnage, by destination, by owner, — and we can generate reports and even invoices.”

The system can also provide benefits for NPA partners such as the Pacific Pilotage Authority (PPA) and the Canadian Food Inspection Agency (CFIA) to name just two. “For the CFIA for example, we can determine busy times and are able to create efficiencies for inspections,” notes Dahlgren. “We’re also able to provide real-time information about pilot launches so we reduce wasted time for pilots. Call backs were a huge issue last year and anything that can be done to not have a pilot sitting on a vessel waiting is a bonus.”

www.npa.ca

While the system is undergoing a soft start for beta testing, the operations centre has two staff onsite for 10 hours a day, Monday to Friday, plus events and busy periods outside of those hours. NPA intends to have four fulltime staff and two relief staff in place as soon as round-the-clock operations start this year. In addition to beta testing, NPA is using this time to develop complete training packages and verify the integrity of the systems before a full integration. “We’re hooking up each component independently before we start putting the layers on top of one another,” said Dahlgren.

With the cost of the system pegged at just over $2 million and paid for fully by the Port, future plans include looking at partnerships to share the data and recoup some of the investment dollars.

“We’re working with Transport Canada to see how we can develop partnerships that will allow for the export of data in a format that allows everyone to seamlessly share the information,” said Dahlgren. “We’re considering a model similar to NavCanada where there is a central navigational system that is supported by a number of partners. The funding model will be important to ensure the system is kept up to date and at the leading edge of technology.”

BCSN

PORTS GVHA implements transportation improvements in advance of 2016 cruise ship season

F

2016 Ground Transportation Improvements

Taking into account the Dillon Consulting report and engagement and feedback from all stakeholders, the proposed action items for the 2016 cruise ground transportation operations include: • Improvements around permit requirements and safety & inspection considerations in concert with stakeholders.

• Furthering discussions around designated vehicle routing with the City of Victoria, the residents of James Bay and other stakeholders.

• Evaluating options for improvements to the walkability and way finding measures, in partnership with the City of Victoria and operators, to and from Ogden Point including pedestrian signage, biking and bike rentals, and walking tours.

• Exploring new technology in an effort to modernize bus fleets, including the pilot of the all-electric GreenPower bus.

• Introducing new fee structures to encourage modernization of transportation options and analysis of the fee model moving forward.

Victoria’s dynamic cruise tourism industry contributes more than $100 million annually to the regional economy, adding vibrancy and life to Victoria in the summer months along.

GVHA is fully engaged to evaluate and work with partners, stakeholders, and the community to make the necessary short and long term changes that will see this industry and the associated benefits, and transportation challenges, work within the fabric of our city.

April to October, to destinations such as Butchart Gardens and Butterfly Gardens.

The EVC550 all-electric double decker bus has the capacity for 88 seated passengers plus standees; is fully accessible with low-floor design, kneeling capabilities, wheelchair lift and can be configured for one or two wheelchairs or mobility aids; has over 400kWh of batteries with a range of up to 385 kilometers on a single charge depending on the requirements and operating criteria.

The 2016 Cruise Ship Season

The 2016 season kicks off on April 3, with the arrival of the Star Princess and concludes on October 28, welcoming 228 ships. As part of the 2016 season, the largest cruise ship ever on the Alaskan route, Royal Caribbean International’s Explorer of the Seas, will make 21 calls to Ogden Point. The Explorer will be the first Voyager-class cruise ship to make regular stops in Victoria. She replaces the Jewel of the Seas on Royal Caribbean’s weekly Seattle to Alaska route and has a capacity of 3,100 guests.

At more than 1,000 feet long and nearly 158 feet wide, the Explorer of the Seas will make history as the largest cruise ship ever to sail the Alaska cruise theatre, and is the largest cruise ship calling weekly to any Canadian port of call.

Highlights for 2016

As part of the GVHA’s upcoming Ground Transportation Strategy, GVHA and CVS Cruise Victoria Ltd. entered into a lease agreement with GreenPower Motor Company Inc. to pilot a fully electric EVC550 double decker bus for one-year commencing in April 2016.

The pilot program will evaluate the feasibility of electric bus transportation for the cruise tourism industry.

The focus will be on cost of operations compared to conventional diesel buses, emission reduction, noise reduction and charging station requirements.

The bus will be in operation to service shore excursions for cruise ship passengers, for the 2016 cruise season from

Photo credit: Dave Roels (www.daveroels.com)

or the past several months, Greater Victoria Harbour Authority (GVHA) staff have been actively working with key stakeholders to derive a series of initiatives that take into account social, economic, and environmental components surrounding transportation options for cruise ship passengers and crew transiting to and from Ogden Point.

GVHA CEO Ian Robertson, along with management staff, has committed to consistent and constant engagement with provincial government representatives, the City of Victoria, cruise lines, stakeholders and operators, and the residents of James Bay to successfully implement changes for the 2016 year, while working on medium and longterm strategies for further improvements to ground transportation to and from Ogden Point.

In June 2015, GVHA staff hired Dillon Consulting to engage with the board of directors, staff, and key stakeholders to develop a reasonable and achievable strategy for all elements of ground transportation, including motorized and non-motorized transportation.

The resulting report identified a number of ground transportation elements and proposed a set of short, medium, and long-term action items, built around the areas for GVHA to consider along with partners and stakeholders These areas include logistics, way finding, and fee structures for vendors and tour operators who service passengers.

Victoria’s Ogden Point

February 2016 BC Shipping News 43

PORTS

PMV study reveals looming shortage of industrial land

A

44 BC Shipping News February 2016

of factors, including rezonings and encroaching residential development. The re-development of industrial land near critical transportation corridors for uses other than trade is also a reality impacting the supply of land for efficient goods movement.

Source: Port Metro Vancouver

study commissioned by Port Metro Vancouver has found that the current supply of trade-enabling industrial land in the Lower Mainland will likely be exhausted roughly within the next 10 years.

The study, undertaken by Site Economics Ltd., specifically examined the inventory of trade-enabling industrial land, going beyond previous studies that have explored the supply of all general industrial land in the region. Trade-enabling industrial lands are lands required to support goods movement in and out of the region, housing marine terminals and buildings such as distribution centres and warehouses. To facilitate efficient trade, these activities must be in close proximity to major roads and rail lines.

The study found: • There are only roughly 1,000 acres of vacant tradeenabling industrial lands available in the region suitable for logistics and goods movement.

• Based on average annual absorption rates and anticipated demand, the supply of vacant trade-enabling industrial land in the region could be depleted within a decade.

• Roughly 1,500 to 3,000 more acres of trade-enabling industrial lands are required in the next five to 10 years to meet the demands of a growing Canadian economy.

• Trade and logistics businesses account for most of Metro Vancouver’s industrial economy, and generate the demand for well over half of all industrial development in the region.

• The total direct and indirect economic impact of every 100 acres of logistics development is equal to approximately $1.9 billion of economic value.

“Trade and logistics services that support goods movement are critical to the local and national economy, and contribute to our high standard of living,” said Robin Silvester, President and Chief Executive Officer of Port Metro Vancouver.

“Without sufficient trade-enabling industrial land to meet growing demand, we risk hitting an economic brick wall, with serious consequences for our quality of life here in the Lower Mainland.”

The federal port authority is mandated to ensure the port is ready to handle Canada’s future trade demands, in the interests of all Canadians. The demand for Canadian trade is growing, and container traffic through Canada’s Pacific gateway is expected to nearly double over the next 15 years. Trade-enabling industrial land will be required to meet this growing demand.

If the current trend of a shrinking industrial land base continues, Vancouver’s port may be unable to remain competitive with other trade gateways, the region will miss out on economic opportunities and the costs of goods may rise.

According to the new study, the supply of trade-enabling industrial land in the region is being threatened by a number

Port Metro Vancouver has developed info-graphics such as the one above to help the public understand the importance of assuring room for growth.

TERMINALS

Harsh realities finally catch up with Westshore

By Ray Dykes Photo by Dave Roels, www.daveroels.com

A

fter a charmed run in which it seemed oblivious to world coal problems because of its longterm contract arrangements, Westshore Terminals finally joined the industry misery late in 2015.

It didn’t help that its second tier coal suppliers found slumping coal prices too much to bear. Alberta’s Grande Cache Coal closed its doors late last year and was sold for a laughable $2 to the Chinese Up Energy Development Group, leaving a trail of layoffs behind it in Alberta. In itself this wasn’t a bitter pill for Westshore as the two-mine company had already closed one of its operations and was down to less than one train a week.

But, combined with later challenges faced by coal mine customers in the Powder River Basin in Wyoming and Montana, the harsh realities finally

Industry experts continue their glum forecasts for this year, but the slower pace might just prove to be a bonus for Westshore... caught up with Westshore, Canada’s leading coal export terminal, and usually the busiest in all of North America.

Back in October, energy coal producer Cloud Peak Energy Logistics LLC in Wyoming announced it was halting exports through Westshore, preferring instead to pay contract penalties rather than ship at a losing margin.

The news was similar from Montana and the Global Coal Sales Group LLC, another energy coal shipper, which said it would be scaling back its exports at Westshore from 2016 through 2018.

Major customer Teck Resources Ltd., or more simply Teck Coal, put the shutters up at its six coal mines through the summer/autumn of 2015 on a rotating basis for three weeks each so that it could reduce its stockpiles at the mines and the ports.

Below capacity

The bottom line is Westshore slipped to a throughput total of 28.8 million tonnes in 2015, following two stellar years of records over 30 million tonnes in 2014 and 2013. Projections for 2016 have been trimmed and now come in

Long-term contracts kept Westshore Terminals immune to the slump in coal prices and the industry’s slowdown up until late 2015.

Photo credit: Dave Roels (www.daveroels.com)

February 2016 BC Shipping News 45

TERMINALS these big machines on site which add coal to the stockpile and then reclaim it for shiploading when required.

Westshore doesn’t have to exercise its option on building the third replacement stacker-reclaimer until December 31, 2016. By not proceeding with the third stacker-reclaimer, the project cost would drop $45 million to $225 million.

Work is expected to start early this year on the demolition of the centrallysited old office, warehouse and workshop buildings, a move that could add about 200,000 tonnes of stockpile space and improved site efficiencies.

The slumping coal shipments might also impact Port Metro Vancouver, traditionally the leading port by volume on all of the West Coast of North America. Coal is PMV’s largest single commodity and this means the recordsetting total throughput of almost 140 million tonnes of 2014 is under pressure unless other market segments increase.

In the Inner Harbour, Neptune Bulk Terminals is 46 per cent owned by Westshore’s major customer (Teck Coal) who is the sole shipper of coal through the North Vancouver facility. Neptune does have plans to lift its annual capacity from 12.5 million tonnes to 18.5 million tonnes. Any thought of further expansion has been put on hold for now.

“The coal industry has always been cyclical and it will come through this as it always has in the past. Meantime, we have lots to do on site...” at between 24 and 24.5 million tonnes, well below the facility’s 33 milliontonne capacity.

Industry experts continue their glum forecasts for this year, but the slower pace might just prove to be a bonus for Westshore, which is amid a $270 million infrastructure reinvestment project that is seeing the replacement of most of its major coal handling equipment, some of which is up to 40 years old.

Running at or near its capacity, Westshore faces a daunting task of maintaining production while trying to rework its site and vital fibre optic cables to properly connect with its new office, workshop and warehouse complex which is now occupied at the northern end of the site. With not as much capacity pressure, the work should be easier to schedule.

Still optimistic

Westshore Vice President & General Manager, Glenn Dudar, remains optimistic. “The coal industry has always

been cyclical and it will come through this as it always has in the past.

Meantime, we have lots to do on site to be ready for an improvement in the global coal industry and we intend to be ready.”

Sandvik is building a new shiploader and up to three new stacker-reclaimers for the Westshore of the future. The first to arrive will be the shiploader now being completed for shipment

by Rainbow Heavy Machineries at Nantong, China. The huge machine will likely arrive in May along with the first of the stacker-reclaimers. The shiploader is expected to be up and running by the end of June and the stackerreclaimer by the end of the year.

As things stand, the second stackerreclaimer is being built for delivery in the second quarter of 2017 and should be in use by the end of that year.

The dismal world markets and slumping prices have put a possible pause button over the third and final stacker-reclaimer. There are four of

Photo: Dave Roels (www.daveroels.com)

No hurry

Part of Westshore’s $270 million infrastructure reinvestment includes replacing two (with and option for a third) of its stacker-reclaimers.

46 BC Shipping News February 2016

Meanwhile, there’s little talk these days about a proposed coal export terminal in the Pacific Northwest which would have been in direct competition to Westshore and its United States coal shipments, which peaked at 9.6 million tonnes in 2013. At one stage, there was a procession with up to six projects aired, but realistically there are only two still alive and hopeful these days and they don’t seem to be in any hurry to get to market in the prevailing world of highly depressed prices and little optimism ahead.

Environmental opposition to anything coal has hammered these PNW projects which seem destined to be tied up in the courts through civil litigation or simply swamped in the seemingly never-ending gyrations of the

TERMINALS environmental approvals needed to go ahead. The Bellingham sited Gateway Pacific Terminal is the largest survivor and plans to ship 48 million tonnes per year…or at least it did when first outlined several years ago.

Tough year

An outspoken coal industry producer, Robert Murray, founder and CEO of Ohio-based Murray Energy Corp., one of the largest producers in the United States, says things are not going to get any better in 2016.

Cheap natural gas prices and an anticoal bent by U.S. President Barack Obama haven’t helped “a year to forget for North American coal” with some coal miners forced into bankruptcy or restructuring.

And if you want to draw a yawn or two, start asking questions about Ridley Terminals Inc. in the Port of Prince Rupert. Once amid a flurry of expansion as it headed to a shipment capacity target of 30 million tonnes, Ridley has been hit hardest by the closures of northeast coal mines and the drying up of other opportunities from Teck and Grande Cache Coal which both shipped from the terminal when the market was healthier.

Then, of course at the height of a promising market back in 2012, the Federal Government owners put Ridley up for sale, drawing quite a bit of interest, including from another terminal or two. There’s been a great big “no comment” from Ridley since the market turned sour and some of its customers shut down their coal shipments.

Last year, Ridley shipped 4.4 million tonnes of steelmaking and energy coal, plus petroleum coke, but well short of its record 12.1 million tonnes set in 2013.

Coal Valley Resources Inc., owned by Colorado-based Westmoreland Coal, was reported to be the largest shipper through Ridley from its energy coal mine in Alberta last year.

There is no indication yet whether the new Trudeau Government in Ottawa will have second thoughts about that sale with its stance on climate change and a sale price that once was over $1 billion and now is most likely in the

hundreds of thousands of dollars range (and that’s if prices improve).

Conflict

Critics, such as Clark WilliamsDerry, Deputy Director of the Sightline Institute, a Seattle-based environmental think tank, have been quoted about the irony of the Trudeau Government ownership. “The fact that the Canadian Government is in the thermal coal export business clearly comes into conflict with the government’s aspirations toward international climate leadership,” was how he put it recently.

No one seems sure the sale will go ahead at all. The agency in charge of the transaction, the crown corporation Canada Development Investment Corp., has said little if anything recently, sometimes even declining to provide an update.

A frequent attender at Coal Association of Canada conferences in Vancouver in recent years, Wood Mackenzie coal analyst, Joe Aldina, feels Ridley will be a hard sell if coal prices continue in the doldrums. Back in 2011, steelmaking coal sold around the world at U.S.$300 a tonne while recent quotes have seen it at about US$73 a tonne. Energy coal has similarly dropped to around US$55 a tonne over the same period.

Up the Fraser River, one coal project continues to defy the odds and win approvals. Fraser Surrey Docks changed its plan to barge coal to Texada Island for offload to ocean-going ships and won approval through Port Metro Vancouver last November for a revised plan bringing Panamax-sized coal carriers up the river for loading instead of the more environmentally worrying uncovered barges to Texada.

Still facing court challenges and a requirement to get an air emission permit from Metro Vancouver to salve it critics, FSD is pressing on, although CEO Jeff Scott admits the completion date may be fluid.

Ray Dykes is a journalist who has worked his way around the world as a writer / photographer. Ray can be reached at prplus@shaw.ca.

February 2016 BC Shipping News 47

LEGAL AFFAIRS Canada’s maritime lien for necessary suppliers: The case of the OW Bunker group bankruptcy

By Peter Swanson A Partner with the Law Firm of Bernard LLP

The effects of the OW bankruptcy are many and varied, depending on the place of bunker supply, the terms of sale and other unique factors...

T

he OW Bunker group of companies was one of the largest bunker suppliers in the world.

Their bankruptcy in November 2014 created a great deal of uncertainty in the bunker supply market and the shipping industry generally. Accountants, lawyers and the courts have been busy dealing with the aftermath.

The OW Bunker group often acted as the actual supplier of marine fuels in some cases but frequently acted as an intermediary that contracted with local suppliers to supply bunkers to vessels chartered or owned by OW customers.

As a result of the OW bankruptcy, litigation has been commenced in multiple jurisdictions for unpaid bunkers. Local bunker suppliers that actually delivered bunkers to vessels sought, in many instances, to obtain payment or security for payment by way of ship arrest, as they recognized that pursuing payment from the OW group would likely be pointless. Charterers who contracted with an OW company to supply bunkers to vessels prior to the bankruptcy, but before payment was made, sought in some instances to interplead money into court fearing that if they paid the OW receiver, they would also be required to eventually pay the actual bunker supplier too. In other words, they wanted to avoid the risk of having to pay twice.

48 BC Shipping News February 2016

The effects of the OW bankruptcy are many and varied, depending on the place of bunker supply, the terms of sale and other unique factors to each of the transactions involved. One such series of transactions occurred in Vancouver and is the subject of a Federal Court judgment (currently under appeal) in the case of Canpotex Shipping Services Limited, et. al v. Marine Petrobulk Ltd., OW Supply &Trading A/S et al., 2015 FC 1108.

On September 23, 2015, the Federal Court (Canada’s admiralty court) issued a judgment addressing the propriety of a charterer interpleading funds into court in the context of two competing claims following the supply of bunkers to two ships in the Port of Vancouver by a Vancouver-based bunker supplier, but with OW acting as the middleman.

The facts of the case are fairly typical in the context of the OW bankruptcy. A Canadian-based charterer (the “Charterer”) of two foreign vessels ordered bunkers through an OW subsidiary for delivery in Vancouver, Canada. The bunkers were actually supplied by a Canadian bunker supplier (the “Canadian supplier”), not an OW-related company. The OW subsidiary arranged for the Canadian supplier to deliver the bunkers in Vancouver.

Given non-payment by the OW group

to the Canadian supplier, the Charterer was facing claims for payment from both the OW subsidiary (through their receiver) and the Canadian supplier. A claim was being advanced on behalf of OW against the Charterer for the supply of bunkers. Another claim was being advanced by the Canadian supplier against the Charterer (and potentially the vessel owners), also for the supply of bunkers. Importantly, OW had not paid the Canadian supplier for the bunkers.

Given the competing claims the Charterer sought to interplead funds into court, rather than run the risk of paying the wrong party. By interpleading funds into court, the Charterer hoped to avoid the risk of double payment. Various issues arose, including whether it was proper to interplead funds in the circumstances, and ultimately whether the OW receiver or the Canadian supplier was entitled to the funds.

The OW group’s interests were represented by receivers appointed by OW’s bank. They argued the Charterer could not legally interplead the funds into court as the demand of OW and the demand of the Vancouver supplier were different. The difference was essentially the mark-up applied by OW on the sale of bunkers to the Charterer. The receiver further argued that OW was entitled to payment, in any event, as they were the party that contracted directly with the Charterer to supply the bunkers, and were the party that contracted directly with the Canadian supplier to deliver the bunkers in Vancouver.

LEGAL AFFAIRS The Canadian supplier argued, on the other hand, that they were entitled to direct payment from the Charterer (or alternatively the vessel owners) on a number of grounds including: • They had a direct contractual link with OW, the Charterer and the vessel owners by reason of their specific terms of sale which provided, in essence, that each was contractually liable for the cost of the bunkers; • Their terms and conditions created a contractual lien; • Because they are a Canadian-based supplier and delivered necessaries (i.e. bunkers) to foreign vessels in Canada, they are entitled to a maritime lien in accordance with s. 139 of Canada’s Marine Liability Act; • OW did not pay for the bunkers and therefore had no right to claim for the cost of the bunkers.

The case was argued under the summary judgment rules of the court.

Justice Russell, in a detailed and comprehensive set of reasons, concluded that the Charterer had properly interpleaded the funds despite the fact that the claims being pursued were not for the exact same amounts. As mentioned above, the OW receiver tried to argue that because the Canadian suppliers claim was for slightly less (i.e., by the OW mark up on the sale), interpleading was not proper. Justice Russell rejected OW’s argument concluding that the claims were based on the same transaction (i.e. the supply of bunkers to two vessels) and the slight difference in the claim amounts was, effectively, legally immaterial.

Justice Russell further held that the Canadian supplier was entitled to payment of the funds, based in large measure on a direct contractual link created by the contract documents used in the transaction. The OW subsidiary was only entitled to payment of the markup on the sale of the bunkers, after payment to the Canadian supplier and after deducting costs of the proceeding.

Justice Russell made some significant findings including the following: • The OW subsidiary did not have a maritime lien under Canadian law.

...the Canadian supplier was entitled to payment of the funds, based in large measure on a direct contractual link created by the contract documents used...

• The OW subsidiary did not have a statutory right of ship arrest, as it had not paid the Canadian supplier for the bunkers.

• The terms of sale for the bunkers were the Canadian supplier’s terms, not the OW terms.

• The Canadian supplier had both a contractual and maritime lien against the vessels in issue under Canadian law. This would necessarily include a right to arrest the subject vessels.

• The Canadian supplier had a direct contractual link with the Charterer as “customer” under the Canadian supplier’s terms of sale. As such, given the specific terms of sale, both OW and the Charterer were jointly and severally liable to the Canadian supplier for the price of the bunkers as delivered.

• Once payment is made out of the interpleaded funds to the Canadian

supplier, any liability the Charterer had to OW will be extinguished at least to the amount of the payment.

• Until payment is made to the Canadian supplier, their maritime lien will not be extinguished.

This is the first reported case in which a Canadian necessary supplier has successfully asserted a maritime lien created in 2009 by s. 139 of the Marine Liability Act. It is also one of the first cases in the OW bankruptcy to decide in the context of interpleaded funds whether payment should be to OW or the actual supplier.

The receivers have filed a Notice of Appeal so the Federal Court of Appeal will have the next word on these issues.

The Reasons for Judgment are available on-line at: http://canlii.ca/t/glcxf.

Peter Swanson is a partner with Bernard LLP. He can be reached at swanson@bernardllp.ca.

Photo by Dave Roels

Located at Vancouver Waterfront and Roberts Bank

www.flyingangel.ca February 2016 BC Shipping News 49

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To Capitalize TheThe ExportCompetitiveness Market Potential In Comparing Of NGL The US, Asia, Europe And Other Global Markets Feedstocks And Derivatives

To• Capitalize Market In Treatment & Disposal Multi-Well Pad Facilities The Export • Production Facilities Potential • Water • Gathering Condensate StabilizationGlobal Markets • Pressurized Tanks The US,Facilities Asia, Europe• And Other

• Gas Processing • Vapour Recovery

Preview Of 20+ Leading Industry Speakers Including:

Led

By USPad And Global NGLs Producers, Petrochemical • Water Treatment & Disposal • Multi-Well Facilities • Production Facilities Companies, Midstream Companies AndStabilization Plastics And • Gathering Facilities • Condensate • Pressurized Tanks Resins Producers including key Insights and Debate on: • EVALUATE THE RISING COMPETITIVENESS OF NAPHTHA OVER ETHANE: How Is

LedThe Drop

By USInAnd Global NGLs Global Producers, Petrochemical Crude Prices Affecting Ethane Supply & Demand Dynamics?

Companies, Midstream Companies And Plastics And • QUANTIFY US NGL FEEDSTOCKS IN CHINA, and EUROPE AND MEXICO: Resins Producers includingDEMAND key Insights Debate on: Hearing

Updates On Cracking Capacity From Leading Petrochemical Companies From These Countries • EVALUATE THE RISING COMPETITIVENESS OF NAPHTHA OVER ETHANE: How Is The Drop Crude Prices CASE Affecting Ethane Supply Assess & Demand • DEFINEIn THE BUSINESS FOR Global FLEXIBLE CRACKERS: The Dynamics?

ROI For Flexible Cracking Units In Volatile Oil & Gas Price Markets • QUANTIFY US NGL FEEDSTOCKS DEMAND IN CHINA, EUROPE AND MEXICO: Hearing Updates On Cracking From Leading Petrochemical Companies From • IDENTIFY THE MOSTCapacity COMPETITIVE NGL FEEDSTOCK: Comparing Cracking And These Countries Logistical Costs For Ethane, Naphtha, Propane And Butane

• DEFINE THE BUSINESS CASE FOR FLEXIBLE CRACKERS: Assess The ROI For Flexible • DETERMINE GLOBAL MARKET OPPORTUNITIES FOR US DERIVATIVES: Measure The Cracking Units In Volatile Oil & Gas Price Business Potential For Polyethylene AndMarkets Polypropylene In China And Europe Based On Local Demand Projections From Plastics And Resins Producers • IDENTIFY THE MOST COMPETITIVE NGL FEEDSTOCK: Comparing Cracking And Logistical Costs For Ethane, Naphtha, Propane And Butane Organized By:

• DETERMINE GLOBAL MARKET OPPORTUNITIES FOR US DERIVATIVES: Measure The Business Potential For Polyethylene And Polypropylene In China And Europe Based On Local Demand Projections From Plastics And Resins Producers

• Gas Processing • Vapour Recovery Mathew George

Chief Manager Petrochemical Exports

Indian Oil

Preview Of 20+ Leading Industry Speakers Including:

Manav Lahoti

Director of Olefins

Dow Chemical Mathew George Chief Manager Petrochemical Exports Stephen Hanan Indian Oil SVP, NGL Business Development BP Manav Lahoti Director of Olefins Mathew Curry Dow Chemical Directory Business Development Range Resources Stephen Hanan SVP,Schuck NGL Business Development Hardi BP Supply Chain Director Braskem

Mathew Curry William Jeffrey Gilliam Directory Business Development CEO Range Resources Badlands NGL’s Hardi Schuck David Stowe, Director Supply Chain Director NGL Origination Braskem Phillips 66 William Jeffrey Gilliam Steve Woodward CEO VP Badlands NGL’s Antero Resources David Stowe,

Organized By:

www.ngl-supply-demand-dynamics.com

Director NGL Origination

Phillips 66

Steve Woodward VP

Antero Resources

www.ngl-supply-demand-dynamics.com 50 BC Shipping News February 2016

RESOURCES

NGL feedstock and derivatives: Global supply & dynamics

E

xploration and production companies, NGL trading firms and petrochemical companies across the globe, and particularly in the U.S. are responding to the shifting supply and demand dynamics for ethane and naphtha. The rising competitiveness of naphtha is threatening ethane’s privileged position as the key NGL feedstock in the U.S. But: What is the NGL landscape going to look like in 2016 and 2017? How will ethane and naphtha supply & demand dynamics evolve in the upcoming years?

As the price of crude has dramatically decreased, ethane is increasingly losing its competitive advantage over naphtha. For this reason, NGL producers and petrochemical companies are currently evaluating the supply and demand dynamics, and cracking and logistical costs for key NGL feedstocks such as ethane, naphtha, propane and butane in both the United States and key global markets. And one meeting that has the industry talking is the NGL Feedstock And Derivatives Global Supply And Demand Dynamics 2016, set to take place on February 23 and 24 in Houston.

The conference is paving the way for U.S. operators, refiners and petrochemicals to capitalize on global market opportunities in Asia, Europe and Latin America, with the most senior strategically placed decision makers attending from BP, Range Resources, Antero Resources, Braskem, Phillips 66, Indian Oil to name a few.

North America has always had greater access to natural gas reserves than Europe, providing its industry with cost-competitive ethane. Natural gas in the U.S. has become increasingly available, which is why the U.S. was, at one point, exporting roughly 10 per cent of ethylene derivatives to Europe. With the ongoing oversupply of natural gas in the U.S., Europe still remains one of

North America has always had greater access to natural gas reserves than Europe, providing its industry with costcompetitive ethane. the most lucrative markets for potential U.S. exporters.

‘Naphtha use in the Asia-Pacific region is expected to grow by 22 per cent to 4.4 million bpd, with China accounting for more than a third of the increase (OPEC). That’s double the expected growth in demand for natural gas liquids, including ethane and propane, to 3.2 million bpd.

Other major petrochemical consumer markets include Brazil, Argentina, Mexico and Colombia. For the next five years, there is expected demand growth for most olefins with investments in green fields and plant expansions, and natural gas has increased its energy matrix participation in the region. In Brazil, demand will grow from 2.4 to 3.3 billion cubic feet per day by 2020.

Further investments planned include; expansions in Argentina (a new LAB plant), in Peru (an ethylene and polyethylene plant), and in Mexico (ethyl

benzene plant); and this reinforces the regional focus on investment to support domestic growth demand.

Walt Teter, Chief Commercial Officer, American Ethane, interviewed with the ABC team ahead of the NGL Feedstock And Derivatives Global Supply And Demand Dynamics 2016: Walt explained that “The decline in crude oil pricing has put substantial pressure on ethane as a replacement feedstock. The decline has enabled naphtha-based producers to remain competitive during a challenging market environment. The decline in propane and butane prices has likewise impacted the competitive position of ethane in the feedstock market place.”

Since founding Featherwood Capital in 2003, Mr Teter has focused on development of energy-related projects with a specific focus on LNGs. In addition he has been an investor, advisor and negotiator for the development and utilization

Rising global demand for natural gas liquids is creating additional opportunities for the shipping industry.

February 2016 BC Shipping News 51

RESOURCES of nearly a dozen LNG receiving and liquefaction terminals.

“I am looking forward to discussing the global pricing environment relative to the feedstock slate in the geographical regions, the changes over the previous 18 months and the impacts of new production capacity, particularly in China.” Mr Teter is currently responsible for all marketing and shipping activities, including contract negotiation, and American Ethane is focused on the export of domestically produced ethane to fuel and chemical consumers globally.

and unprecedented economic growth — among other factors — are providing strong supporting tailwinds. The opportunity to seek a growing and diversified consumer base in foreign markets has never been better or more attainable for small to middle market U.S.-based companies.

This growth within emerging markets will create opportunities for U.S. companies of all sizes to enter new markets with their products and services, and will be in need for businesses and entrepreneurs already on the ground with local knowledge and distribution channels to transport their goods.

U.S.-based companies expandNew opportunities for shipping The global shipping industry has seen ing domestically or internationally many changes in recent years, espe- will need critical guidance in idencially in terms of technology. And with tifying the best avenues to transport increasing industrialization, the import- their product to the relevant markets. ance of seaborne trade has increased. Establishing the right relationships For U.S. companies looking to expand from the beginning, especially when around the world, a prospering global they are half-way around the world, sometimes make all the difference. middle class,Page7_875x5_438.pdf large-scale 1 12/07/2013 urbanizaBCShipping_Half 12:23:23 can PM tion, a proliferation of technology The NGL Feedstock and Derivatives

52 BC Shipping News February 2016

Congress provides a golden opportunity for shipping companies to do just this, encouraging long-lasting business relationships with prospective clients.

Given the changing pace of the industry, and the greater need now for U.S. stakeholders to look beyond their borders, ABC’s NGL Feedstocks and Derivatives Global Supply & Demand Dynamics 2016 Congress is serving as a well-timed, well-thought-out platform to understand the global supply and demand dynamics for Ethane, Naphtha, Propane and Butane. The conference will be investigating the logistical challenges facing U.S. E&Ps and how growing demand from areas such as the U.S., Asia, Europe and other global markets has launched new opportunities for shipping.

The NGL Feedstocks and Derivatives: Global Supply & Demand Dynamics 2016 Congress will be taking place in Houston on February 23-24 in Houston, Texas. For more information, visit www. ngl-supply-demand-dynamics.com.

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February 2016 BC Shipping News 53

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