Maritime Matrix January 2023

Horizon Industrial Parks, a portfolio of Grade-A logistics parks in India owned and managed by Blackstone Real Estate funds, has started construction of a buildto-suit manufacturing facility for Fosroc, a British manufacturer of specialized construction chemicals. The facility will sit within JCK Horizon Industrial Park Kothur, in Hyderabad, which spans 45 acres and has 1.3 million square feet of development potential.

FOSROC will have access to Horizon Industrial Park’s well-established industrial ecosystem and be equipped with modern infrastructure and worldclass amenities tailored to its needs.

R. Sai Krishnan, Regional Vice President, Fosroc Chemicals (India) Pvt Limited, said: “With stateof-the-art manufacturing facilities across the world, Fosroc is a leading manufacturer of highperformance chemicals for the construction industry. Our factories abide by the highest safety standards and comprise best-inclass technologies and quality management systems. We’re excited to partner with Horizon Industrial Parks, a proven owner and operator of high-quality industrial parks. We’re confident that they can deliver exactly what we have envisioned for our facility.”

Rahul Pandit, Chief Executive Officer, Horizon Industrial Parks, said:

“We are proud to bring our logistics expertise and help Fosroc build its first manufacturing facility in Hyderabad and reach more customers. We share the same commitment of creating value for our customers and maximizing operational efficiency. We’ll use our agility, knowledge of the logistics sector, and flexibility to help Fosroc develop a best-in-class manufacturing facility.”

Horizon Industrial Parks has one of the largest portfolios of warehousing and industrial parks in India. The 25 million square feet portfolio is anchored by tenants in fast-growing sectors such as e-commerce, retail, auto (electric vehicles), and logistics

Offering a customercentric approach

Indian Register of Shipping (IRS), the leading international ship classification society, has completed prototype testing of indigenously manufactured containers in accordance with IMO International Convention for Safe Containers (CSC).

Container Corporation of India Ltd (CONCOR), towards promoting Make-in-India and AtmaNirbhar Bharat initiatives, has provided a fillip to container manufacturing by placing orders for domestic production of containers. This aligns with India’s plan to transform the maritime sector over the next 10 years and help ensure a consistent supply of containers while reducing the cost of trade.

IRS had launched the service to provide certification of marine containers in 2021 on being authorised by Director General of Shipping, Government of India to undertake inspection and certification of containers as per the IMO International Convention for Safe Containers (CSC).

IRS is closely working with the indigenous manufacturers at various stages of manufacturing including prototype development through design appraisal, hand-holding and stage inspections and testing as per ISO standards specified in the IMO CSC convention.

IRS Managing Director, Vijay Arora, said: “IRS is now recognised around the world as a leading force in classification services. The containers produced from these approved works are certified and meet the rigorous technical standards of the IMO CSC Convention. IRS is fully committed to supporting and growing the domestic production of containers and offers a customer-centric approach.”

Mr Vijay Arora

All Hands on Deck for decarbonisation

- Delphine Estibeiro

The various sectors have already accelerated their process to shift toward zeroemission, with governments making their carbon emission targets more ambitious and more attention is gained to sustainable finance. It’s time now for the maritime industry to systematically manage the carbon emissions by the introduction of a zero emissions evaluation framework into international shipping. “The shipping industry needs to take collective actions on decarbonisation,” expresses Mr Hirofumi Takano, Senior Executive Vice President of ClassNK.

Is decarbonisation achievable?

As you are aware the International Maritime Organization (IMO) has set an ambition to reduce international shipping carbon emissions per transport work by at least 40 percent by 2030, and 70 percent by 2050, off 2008 baseline, which is indicates that all parties involved need to be prepared. Looking back ten years ago, we didn’t see what we are now observing, maybe ten years later as the technology advances even more, “Yes, I believe so. It is achievable with some slight modification but we can achieve it,” adds Mr Takano.

Emerging Market

India has a vast coastline of approximately 7,517 km, where maritime transport handles around 70% of India’s trading in value terms. Thus, making the Indian market very important to ClassNK. “We have a good rapport with our branch office in Mumbai and branch offices across the Indian cities, mentioned Mr Takano. Furthermore, he informed that ClassNK has developed ClassNK

ZETA (Zero Emission Transition Accelerator) as a tool to enable various customers to efficiently manage GHG emissions from ships. ClassNK ZETA is a tool that links to the ClassNK MRV Portal, a system that stores data such as fuel consumption of ships. It is equipped with features for constantly monitoring CO2 emissions and CII ratings of individual ships and entire fleets, and for simulating how CO2 emissions and CII ratings would change if slow steaming, etc. was implemented.” His visit to Mumbai early last month was to develop more collaboration with the Indian team and their customers.

Promoting Innovation

As companies pursue ESG management and the SDGs to realise a sustainable society, various innovations have been vital to resolve challenges. ClassNK offers its “Innovation Endorsement (IE) Approach” as a framework to support innovative initiatives through third-party certification.

“At ClassNK, we are committed to contributing to the sustainable evolution of maritime and offshore business activities by actively supporting innovative technologies through IE, and monitoring to innovation trends, and continuing its Innovation ecosystem to respond quickly to customers’ advanced initiatives,” concludes Mr Takano.

MMT

Mr Hirofumi Takano

Getting a Big Upgrade

The Automated Identification System (AIS) has served the maritime industry for more than 20 years, and it has revolutionized the way that mariners, regulators and industry stakeholders do business. AIS

makes it easy for watchstanders to identify a target and make passing arrangements, and it gives Vessel Traffic Service (VTS) operators the transparency they need to ensure safety on busy waterways.

Thanks to satellite-

It also has new features which AIS lacks. When two ships get close to each other, they will automatically exchange data on their future routes, not just their current positions. This will increase situational awareness and reduce ambiguity in traffic situations. Shoreside authorities can use the same data-transfer capabilities to broadcast digital updates, like safety-related text messages and boundary lines for cautionary areas.

VDES is also purpose-built for communication with low earth orbit (LEO) satellite constellations, ensuring genuine over-thehorizon connectivity from the start. Vessel Traffic Service (VTS) operators will be among the biggest beneficiaries, as satellite functionality will extend the range of reception and enable supervision over a larger area.

However, the industry has gotten bigger and busier over the past two decades, and it’s time for an update. In some coastal areasthe Singapore Strait, China’s megaports, and parts of Japan - there are so many vessels that the performance of AIS has been affected. As traffic density goes up, the system’s range goes down, and the frequency of updates becomes more random. This has the biggest impact on shoreside observers like VTS operators, according to engineers for leading VDES system developer Saab TransponderTech.

The fix is to update classic AIS with a new digital system, something more robust and capable of handling more bandwidth. After years of consultation, maritime technology experts and regulators have come up with a solution: VDES (VHF Data Exchange System), a new system which will give operators higher security and reliability.

VDES will operate on additional new frequencies and will use them more efficiently, enabling 32 times as much bandwidth for secure communications and e-navigation. It will be able to handle higher traffic density and more frequent vessel movement updates, and it is designed to meet the needs of maritime users for the next 20 years.

Cybersecurity is also enhanced thanks to VDES’ ability to send encrypted positions, reducing the chance of spoofing. Onboard position tampering to disguise the ship’s movementsa common technique used by vessel operators for sanctions violations, illegal fishing and smuggling - can be detected and thwarted.

Saab has developed a lineup of dual function AIS and VDES transponders to equip vessels with the next decade’s technology, while keeping compatibility with current-generation AIS. Its R6 Supreme AIS/VDES satellite transponder is already in use with Danish company Sternula, which provides satellite connectivity for VDES and will be trialing the technology with select partners beginning in April. The Saab R60 base station, intended for stationary VTS applications, exceeds AIS transceiver specifications for sensitivity and can interface directly with Saab’s maritime traffic control software platform.

and shore-based AIS reception, commodity traders and researchers can study marine traffic patterns for insight into the movements of global commerce.

Uncertainty Continues

Taking stock of developments in the maritime industry in 2022, one must be content: Every segment experienced a performance ranging from good to outstanding.

From offshore to cruise ships and LNG vessels, shipping markets were overall profitable in 2022, in stark contrast to extremely poor markets of a couple of years earlier.

Everyone’s mind is on what’s “around the bend,” as they say. What will 2023 and the short term bring for shipping?

At the risk of stating the obvious, no one has a crystal ball, especially for an industry such as maritime, which is at the crossroads of international trade, financial markets, energy and commodity markets and, of course geopolitics. And, as Warren Buffett says, a company employing the expertise of an economist has one too many people on its payroll! So, instead of trying to foresee the future via an econometric model — which is easy to upset — we will look in the broader macro trends that have the potential to move the needle in a big way.

Market Fundamentals

For starters, the overall outstanding orderbook for shipping at present is rather subdued, and generally it’s rather favorable. No sector has an outstanding orderbook of more than five percent of the corresponding existing fleet, which broadly stands among the lowest levels in the last decade.

There are certain segments within sectors where the orderbook is as high as 30 percent-plus (e.g., LNG tankers, postNeopanamax containerships, coated long range tankers (LR2s), etc.), but generally the number of existing vessels in those segments is rather small, thus allowing for a high percentage outstanding orderbook. And most orders are set to deliver in late 2024 or later.

Thus, all in all for 2023, it can be said that tonnage supply is not expected to overwhelm tonnage demand as has been the case on several occasions during the past decade. Barring a scenario whereby demand will collapse (e.g., exogenous shock of a pandemic magnitude), the overall tonnage supply equation seems broadly balanced for 2023 and early 2024.

On the demand side, many potential scenarios can potentially play out in 2023, ranging from a mild recession in the U.S.

and other developed countries to a deep recession for certain parts of the world. Inflation is on the rise, and many central banks will be extremely watchful on that and likely to act pre-emptively, dampening any strong recovery prospects rather than risk an out-of-control inflationary environment. Thus, demand seems to come with a “put call,” thereby preventing a scenario of outsized demand, at least structurally.

On balance, looking narrowly at the fundamentals of the maritime industry in 2023, there seems to be a floor for the market — due to a balanced tonnage scenario — while demand comes with a ceiling too, as it will be nipped in the bud to prevent uncontrolled inflation.

So far so good, and if we didn’t know any better, we would have said a boring market for shipping to expect in 2023!

We sense, however, that boredom is not what we will get in shipping.

Polycrisis?

The word “polycrisis” keeps popping up with increased frequency lately in economic reports and in the press. The term itself was used in the 1990s when the European Union was stretching and bending with new members and a new currency, but now the term seems to have found new popularity.

Recovery from a once-in-a-century pandemic has not been smooth with supply chains and logistics failing to cope with returning demand and also with shifting consumer patterns. As a result, raw materials and commodity prices spiked in 2022, partially driving structural inflation. Consumers with a newfound YOLO (“you only live once”) attitude and some stimulus money in their pockets were glad to pay up to get stuff now, further driving inflation.

Central banks, first believing in transitory inflation, in the second half of 2022 had to make a hard and highly visible U-turn with interest rates. For now, the jury is still out

on whether inflation is under control and a “mild recession” is the most likely scenario.

Geopolitics

As if fundamental fiscal and monetary concerns weren’t enough, one must also evaluate geopolitical events such as the invasion of Ukraine by Russia (and the ensuing turmoil in energy markets). Further to it, China has chosen its own course of dealing with the Covid pandemic which, at the very least, has put the Chinese economy and society out of sync with the rest of the world.

Whether the dictum, “When China sneezes, the world gets a cold,” still holds true or not, in any event the result of China’s dealing with the Covid pandemic for a billion-plus population may be more than just a cold. For example, when “zero tolerance” was in place last year and Chinese ports were unilaterally closing due to Covid, the impact was immediately reflected in containership rates and vessel activity in U.S. ports. Neither for Russia nor China is there a clear expectation of their economic and social course for 2023, but permutations range from “steady as she goes” to scenarios of economic implosion and social unrest.

Did we mention that there’s a clear and coordinated effort by Western countries to aggressively confront Russia and its czarist aspirations and also China and its expansionary policies? Headwinds in world trade have already started impacting certain maritime markets. And if geopolitical prospects with two critical economies (Russia for energy and raw materials and China for its sheer size) were not enough, the EU — besides the soft prospects for its economy — stands on a delicate political balance; ditto for the U.S., with a sharply divided (and dysfunctional, some might say) Congress.

Thus, global geopolitics appear to resemble a powder keg that can affect markets immensely at a moment’s notice.

There are still more unknowns to ponder for 2023 including weather conditions that get weirder with every passing day with localized flash floods, heat waves, etc., resulting in loss of property, loss of life and further compounding supply chain concerns. Some of these weather events affect food supplies too, building on concerns about the Ukrainian breadbasket that has gone empty for the season.

Lots of Uncertainty

We do not want to appear as pessimists or warmongers, or the people who see the glass half empty. The point is that there is a lot of uncertainty in the world these days, at several levels and stages of causes and outcomes.

None of these are “maritime” variables, strictly speaking, but clearly any of them can move maritime markets. And given that tonnage supply and demand are balanced and supply chains, etc., are already stretched out, we’re afraid it won’t take much to spur maritime markets and cause them to spike.

At one point in 2022 LNG tankers were accepting offers in the magnitude of $500,000 per diem for charter. We think that with the exception of a couple of sectors — e.g., large containerships (ULCVs), offshore drilling, etc. — several types of marine assets stand to have their “fifteen minutes of fame” in 2023 and the associated freight rate spike.

Baltic index down by 47 points

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, extended losses, pulled lower by weaker demand across vessel segments.

The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, was down 47 points, or 5.1%, at 874, its lowest level since June 2020.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $1,105 at $9,182. The panamax index was down 3 points, or about 0.3%, at 1,075.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, fell by $27 to $9,672.

Among smaller vessels, the supramax index which has not seen a single day of gains in over a month, fell by 4 points to 657.

The capesize index lost 133 points, or about 10.7%, to 1,107, a two-month low.

Team Matrix

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SETTING A COURSE FOR THE FUTURE

14001:2015

45001:2018

9001:2015

Maritime cyber resilience needs to grow to prevent widespread disruption

According to maritime expert Cameron Livingstone of The Nautical Institute, “As ships become more technologically sophisticated, methods an attacker could use to disable ship and shore-based technology are widening. GNSS spoofing, radar jamming, AIS interference and shore-based communication shutdowns are increasingly common.

Livingstone cites the 2019 incident involving the British tanker Stena Impero. The vessel was boarded and detained by Iranian forces after she maneuvered suddenly into Iranian waters due to GNSS spoofing, which caused deliberate interference with her positioning.

There are many ways in which ships could be intercepted, especially as they become more autonomous and remotely operated. As humans are removed from technical processes, problems are less likely to be detected quickly. These technologies could be manipulated by attackers to cause collisions and generally disrupt vessels.

The impact is worsened if problems occur on busy trading routes, as with the Suez Canal crisis early in 2021. Just one impacted ship could create a ripple affect across industry and global trade. Such widespread disruption may motivate some attackers.

This increasing cyber threat requires action now. In response, legal requirements are being increased, such as IMO 2021, a resolution requiring ship owners to invest in cybersecurity.

“Potential cost to vessel owners far outweigh the cost of implementing appropriate cybersecurity protocols. Physical and electronic measures should be considered, as well as appropriate cyber insurance (H&M and P&I),” says Livingstone. “Shipowners globally should heed the lessons learnt from corporate cyber-attacks, costing millions of dollars to rectify and wiping billions off company’s share values.”

Given the pace of increased automation, maritime cyber resilience needs to grow in order to prevent widespread disruption.

The maritime industry is vulnerable to cyber threats. Ships and surrounding infrastructure are becoming increasingly connected and digitalised, which is providing more opportunities for cyber attacks.

Turning threats into Opportunities

Despite 78% of industry professionals agreeing that change and technological innovation is a positive thing for the maritime industry, almost half (45%) admit to having a volatile attitude towards technology and over a third (36%) say they are actively resistant to change.

This is according to the technology group Wärtsilä’s

‘Debunking the Mythical Beasts of Maritime Digital Transformation’ report. The report also reveals that as many as 18% do not think that the industry is unified in its understanding of digitalisation and why it is needed.

Michael Christiansen, Vice President, Smart Vessel, Wärtsilä comments: “This report makes clear that the industry agrees that digitalisation is essential to the future of shipping. But little tangible progress has been made to date because of wildly different and vague interpretations of what digitisation actually means. What’s interesting is that our report draws striking parallels between the fears and misunderstandings that gave rise to vivid stories of famous mythological sea monsters that live on in folklore today and highlights the apprehension that many modern-day maritime professionals feel towards the largely unchartered ocean of digital transformation.”

The research shines a light on these fears and misunderstandings, with over two thirds (68%) of industry professionals believing that the ability to digitalise existing infrastructure and retrofit vessels is challenging, and over half (56%) agreeing that the time and cost implications involved with digital transformation projects are too high. On top of that, 63% believe that there is a lack of skills and knowledge among seafarers to fulfil the requirements of new technologies.

But on the positive side, the research also highlights a clear way forward. It revealed that 70% of industry professionals have a very clear understanding of why digitalisation is needed and its benefits, but 69% believe greater collaboration between industry players could be improved, with 88% agreeing that this will be key to making digital transformation a reality. Significantly, 64% of respondents recognise that people are more crucial to digital transformation than technology, therefore without buy-in from a larger proportion of maritime industry professionals from the outset, successful digital transformation will not be possible.

Michael continues: “Like the sea, digital transformation is a great unifier. We are all in the same boat. Real progress will only happen when we collectively abandon the idea of digital transformation as all or nothing. As each organisation within the maritime industry will be at a different stage of its own journey, we

must appreciate it as an iterative and stepwise process. There is still much work to be done to bridge the gaps – break the silos – between digital systems. To do this, we can and must share and learn from each other’s experiences because digitisation won’t be achieved by any one player alone. We need to work together to build an ecosystem where digital technologies on board a ship talk to those in offices on shore. This is how, as an industry, we can reframe the route to digitalisation and turn threats into opportunities.”

Wärtsilä’s ‘Debunking Maritime Myths of Digital Transformation’ report explores attitudes to digital transformation among maritime professionals across Europe & Middle East, the US, and Asia-Pacific region. It uncovers the surprising misconceptions thwarting progress and outlines how organisations can conquer key challenges to reach a better future for all.

The report outlines a vision for a connected ecosystem from ship to shore – and beyond; a maritime ecosystem that can deliver improved efficiencies, better safety and compliance, and greater sustainability for all.

Howden and Foreship to bring emission savings to marine industry

Howden and Foreship have signed a cooperation agreement focused on streamlining the ship building design process to incorporate Howden’s HV-TURBO compressors in Air Lubrication Systems (ALS), suitable for all types of vessels. The Air Lubrication technology blows micro air bubbles under the hull of the vessel to reduce the resistance generated between the ship’s hull and the water, saving fuel as a result. Distributed across the hull’s surface, the ALS can save up to 8% on fuel consumption, also reducing carbon emissions. This solution can support ship owners and operators in meeting their carbon saving targets, in line with entry into force of the new Carbon Intensity Indicator (CII) and Energy Efficiency eXisting ship Index (EEXI) regulations, from 1 January 2023.

Massimo Bizzi, Chief Operating Officer at Howden, commented: “Howden and Foreship have worked closely together since 2015, when we supplied and installed turbo compressors

for the first Air Lubrication System. Since then, together we have installed several ALS systems with Howden’s KA5 and KA10 turbo compressors on cruise vessels.

“The new partnership solidifies strong synergies coming from Foreship’s many years of experience in ship design and Howden’s position as the market leader in air and gas handling. Together, we will improve the overall efficiency of vessels to support the industry in its drive to reduce its total CO2 emissions by 50% by the end of 2050.”

Jan-Erik Rasanen, Chief Technology Officer at Foreship, commented: “We are excited to build on our extensive experience in ALS technology and formalise our relationship to integrate the renowned quality, reliability and efficiency of Howden compression systems. Together, we offer the expertise, standardisation and scalemanufacturing that the marine industry needs.”

Howden focuses on helping customers increase the energy efficiency and effectiveness of their air and gas handling processes enabling them to make tangible gains in terms of sustainability. Howden designs, manufactures and supplies products, solutions and services to customers around the world across highly diversified end-markets and geographies.

The business recently announced its target to be carbon Net Zero by 2035 through the purchase of renewable energy and carbon free energy; efficiency gains from energy conservation measures; and renewable energy projects at its manufacturing facilities. The largest impact the business will have on global sustainability will be through its partnership with customers to supply equipment that will make a major impact on their carbon emissions and sustainability.

Howden, a leading global provider of mission critical air and gas handling products, has signed a Memorandum of Understanding (MoU) with Foreship, a leader in naval architecture and marine engineering.

Indian Businesses invest to create higher inventory buffers

The latest Trade in Transition study, commissioned by DP World and led by Economist Impact, captured the perspectives of company leaders as they navigate the latest disruptions to global trade – from the conflict in Ukraine to inflation, and extended COVID-lockdowns in some markets.

From a global perspective, the key finding from this study is that 96% companies confirmed making changes to their supply chains due to geopolitical events. Business leaders in India too, resonate with the global sentiment with 58% choosing to diversify their supplier base and 14% shifting manufacturing and suppliers to the local market.

Indian companies building resilience to global disruptions

The recently launched report revealed that 40% of Indian companies preferred increasing the length of supply chains to hedge against risks from current geopolitical events. Further, 47% of respondents from Indian companies found ‘exporting to new markets’ as the most effective means of making their trade operations more resilient as a demand-side strategy. Similarly, from a supply-side strategy, 34% of respondents from Indian companies relied on ‘increasing the use of digital tools for improved inventory management’ to ensure resilience in their trade operations.

While it is evident that businesses in India can capture substantial price benefits by lengthening their supply chains to hedge against geopolitical uncertainties, this approach can also add to production costs, which makes it essential for companies to thoroughly evaluate their needs and options ahead of taking this route.

To ensure supply chain resilience, executives in India are now investing in creating higher inventory buffers with a focus on protecting businesses from external fluctuations. According to latest findings of the study, the average inventory buffer for around 27% of the companies in India is around 2 to 4 weeks, while 20% of companies surveyed have a buffer of around 1 to 3 months. This indicates a shift from the previously followed ‘Just-in-time’ strategy to a more risk assessed strategy. The study further revealed that currently only 16% of the companies surveyed in India are operating on the ‘just-in-time’ model.

Additionally, to reduce supply chain costs and risks posed by disruption of critical production inputs, around 33% of the companies surveyed from India

are strategizing ways to expand into more stable and transparent markets.

India’s outlook optimistic

Between April and September 2022, merchandise exports from India rose by 17%, and imports to India grew by 38.5%, compared to the same period of the previous year. Building on the momentum, over 60% respondents from India are optimistic about the future of global trade over the next few years. Increased support from the Central Government through initiatives like the National Logistics Policy, combined with new technologies aiding the improved ability to monitor the movement of goods in real-time is further driving this trend.

Rizwan Soomar, CEO and Managing Director, DP World Subcontinent commented: “The current edition of the Trade in Transition report accentuates India’s opportunity to transform into a global logistics powerhouse. While geopolitical challenges and other disruptions have placed pressure on advanced as well as growing economies, India’s size, rich demographic proposition, and domestic consumption trends have largely insulated it from global shocks. These characteristics coupled with the country’s focus on enhancing trade efficiencies have cemented its position as a reliable partner to international businesses that are looking to diversify their supplier base while maintaining supply chain resilience.”

Speaking at the launch of the report at the World Economic Forum in Davos, DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem said: “The report is tangible evidence of how globalisation is changing as companies look to meet new challenges. By bringing production closer to the final customer, firms can reduce the number of touch points involved in the supply chain and build greater resilience into the flow of freight cargo around the world. But the trade environment is always changing. The next challenge that will alter these trends is the looming economic slowdown in regional markets. Agility, real-time visibility and end-to-end supply chain capabilities will be critical to ensuring companies can continue to find new efficiencies in an increasingly challenging environment.”

John Ferguson, Practice Lead for New Globalisation at Economist Impact, added: “The shift to regionalisation and reshoring has been sharp but unsurprising given the protectionist measures and diversification of the global trading system since the start of the pandemic. Among the most prominent examples of this is the US-China trade tensions over semiconductors, and although reshoring promises more control over inputs in the short run, it will lead to winners and losers. For example, as the US increases its production of semiconductors, it will increase its reliance on suppliers of mineral raw materials, such as Chile.”

New research has revealed the emergence of major shifts in globalisation, as companies across the world and in India diversify their supplier base and move manufacturing closer to home.

Singapore piracy incidents hit 7 year high

Sea robbery and piracy related incidents in the Singapore Strait rose to a seven-year high in 2022 but in contrast, the possibility of attacks by the Abu Sayyaf Group has

declined considerably in the Sulu-Celebes Seas, prompting a moderation of threat assessment there, an international watchdog monitoring the trend said late Jan 17.

It is an area of concern that around 65% of all incidents in Asia last year were in the Singapore Straits, according to ReCAAP, the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia. Its share was 60% in 2021, the data showed.

ReCAAP’s data is very closely tracked by commercial shipping companies, security officials, maritime analysts and ship and cargo insurance providers because it has a bearing on the overall risk assessment and insurance premium.

The incidents in the Singapore Straits increased to 55 last year from 49 in 2021, a level not seen since 2015, according to ReCAAP’s annual estimates.

Singapore, located along one of the world’s busiest waterways, has close to 1,000 ships anchored there at any given time. A ship calls at Singapore port every 2-3 minutes, bringing the total to around 130,000 ships a year and making it critical for maritime passage in the region to be piracy-free.

The release of ReCAAP’s annual data comes at a time when Asia’s maritime security is under sharp focus, particularly in the aftermath of the attack on tankers near the Persian Gulf in recent years, where the shipping insurance rates are firm due to an additional war risk premia.

Insurance premiums vary from ship to ship depending on its age and depreciation, but maritime insurance executives said given the prevailing situation, any decline is unlikely.

“The maritime traffic in Straits of Melaka and Singapore is so high that the target is at place and the environment is conducive for those who want to make a quick buck and are willing to risk their lives,” Krishnaswamy Natarajan, ReCAAP’s executive director said. However, if the crew is vigilant and raises the alarm, the incidents are mitigated, he added.

When contacted, tanker brokers in Singapore pointed out that most incidents that occurred at the Straits of Melaka and Singapore were categorized as armed robbery rather than high intensity piracy or terrorism.

Considering the huge volume of sea traffic that is transiting Singapore, the number of incidents is not so large, Natrajan said. The incidents are still much lower than the 2015 high of around 100, according to ReCAAP data.

The overall sea robbery and piracy related incidents across Asia in 2022 were almost unchanged from a year ago at 84, the ReCAAP data showed.

Threat at Sulu Celebes Seas downgraded

There were no reports of crew abductions by the Abu Sayyaf Group in the Sulu-Celebes Seas last year, according to ReCAAP. The Philippine Coast Guard has downgraded the threat assessment of abduction of crew in the area to “moderate” from “potentially high”.

Since threat assessment has a bearing on maritime insurance premia, it has been downgraded but Natarajan cautioned that due to the presence of remnants of the ASG in the area, the threat of abduction of crew for ransom in the region remains.

From industrial raw materials such as coal to essential food items like rice, billions of dollars worth of commodities move on commercial ships near the Sulu Sea and the Celebes Sea, industry estimates showed. Risk premia adds to insurance and therefore cost of commodities and inflation.

Earlier, ReCAAP used to advice ships to consider rerouting and even after the threat was downgraded “ship masters and crew transiting the area are strongly encouraged to exercise extra vigilance”, Natrajan said.

The Philippines and Malaysian authorities continue to conduct coordinated operations to prevent incidents in the Sulu-Celebes Seas but currently, no crew is being held in captivity by perpetrators, according to ReCAAP.

Established in 2006, ReCAAP is the first regional government-to-government agreement to promote and enhance cooperation against piracy and armed robbery against ships in Asia. It has 20 member countries, including all members of ASEAN except Malaysia and Indonesia.

“Efforts are being made to make Malaysia and Indonesia members and at an operational level, information sharing is already taking place,” Natarajan said.

Losing Market Share

After enjoying strong growth during the shipping surge experienced over the past two years, SeaIntelligence reports that

non-alliance carriers are again losing market share. With the current levels of overcapacity rising across most segments of the container

“As the market strengthened after the initial Covid hit, there was a confluence of small carriers that started to deploy capacity, especially on the transpacific trade,” said Alan Murphy, CEO of Sea-Intelligence. He notes major carriers also started to introduce services outside the alliance networks. “The idea was to take advantage of the opportunity provided by the very high freight rate environment.”

Taiwan-based carrier Wan Hai for example in 2020 launched an independent transpacific route after its alliance with Pacific International Lines and COSCO ended. In addition, new specialized carriers emerged seeking to offer niche services and appealing to shippers that found it difficult to place smaller cargoes with the big carriers.

According to Sea-Intelligence’s data, nonalliance carriers were able to increase their share in the three key regions, including Asia to the West and East coasts of North America and Asia to Northern Europe and the Mediterranean.

For the West Coast trade lines, Sea-Intelligence calculates that non-alliance carriers rose from an average of just above 15 percent of capacity before the pandemic to approaching nearly 40 percent of capacity at the end of 2021 and the beginning of 2022. The addition of these nonalliance services Sea-Intelligence says meant that at the peak of the market, the market share of non-alliance carriers had essentially doubled.

“But as the freight rates began to drop in 2022, the share of non-alliance services also began to decline, and looking into 2023-Q1, they are poised to continue to decline,” predicts Murphy. “There is still more relative capacity operated by non-alliance services than before the pandemic, but if the rate of decline continues, this will revert back to pre-Covid levels before the end of 2023.”

On the Asia-North America East Coast routes, Sea-Intelligence reports there was a similar trend of increasing non-alliance capacity as the market initially strengthened. “However, even though there is a distinct decline coming into 2023, there is no sign presently that we are about to go back to pre-pandemic levels,” says Murphy.

On the Asia-Europe trades, the non-alliance capacity has increased, but not materially according to Sea-Intelligence. They calculate that the independent carriers represent between two and five percent of capacity. However, on the Asia-Mediterranean routes, there are no signs of non-alliance services reducing their market share in 2023-Q1.

The domination by the alliances has been a rising concern for regulators in many parts of the world. It was a major issue cited in the U.S. markets by the president and other elected officials driving the passage of the reforms to the Shipping Act in 2022. The World Shipping Council for example argued that the alliances create greater market efficiency while the White House cited the rapid growth in the three alliances. They contended that from 1996 to 2011 the major alliances grew from operating about 30 percent of global container shipping compared to 80 percent of global containership capacity and 95 percent of the east-west trade lines in 2022.

shipping industry and possibly getting worse as more new tonnage enters the market, the analysis firm is predicting that the market share for the independent carriers will continue to decline.

Maritime Tears

Seafarers survey - The road ahead for wellness of mariners

According to the World Health

Organisation

‘’Mental health refers to our cognitive, behavioural, and emotional wellbeing - it is all about how we think, feel, and behave”. The mental health Bill 2017 now recognizes mental health as a major social issue to be addressed upon. The sustainable development goals which came as an extension of the millennium developmental goals also gave mental health a priority and advocated mental health as a developmental agenda. This was in addition to the World Health organization taking mental health as a public health perspective in 2003. A study by ASSOCHAM in India shows 42% of corporate executives stressed and depressed and having a massive impact on productivity. High incidence of stress, anxiety and depression among the corporate executives have been under study elsewhere but in India the ASSOCHAM study was an eye opener.

The same malaise has affected the sea faring community. Sailors married and having a family away from their loved ones in extreme conditions over sea is indeed a fertile ground for development of mental disorders there by affecting productivity. While many interventionist initiatives have taken place to create an awareness of this, there was always a dearth of data. It was with this intention that Nevoxel which is a specialist HR firm for the maritime sector conducted a sailors survey along with Executive counselling, an independent philanthropist initiative of well ness professionals. The survey points to the intense personal issues faced and a lack of institutional support. Most of the respondents were in the age group of 35 to 55, the prime working age with family and responsibilities at the peak. It seems that the unmarried young mariners where mostly adaptive and did not have any stress related issues, the chief engineers and master mariners was found to be in highly distressed stage in the personal front. On the professional area the issue which we like to highlight is about harassment faced from superiors on board and a lack of employee engagement initiatives which creates boredom.

Today in the age of technology while it is possible for virtual interface, it also give assess to the problems in the family to the sailor and he is physically helpless to respond, creating a upsurge of emotion and resultant stress. In cases where the work pressure and bad employee morale in the ship, this stress will exponentially increase resulting into behavioural and mental disorders which is a virtuous cycle. From the survey few of the recommendations that we make are:

A. The need for a counsellor sailor in the ship. This is a role which an incumbent sailor can take after giving him the necessary training and certification.

B. Continuous employee engagement activities planned onboard the ship

C. Emergency leave facilities in the employment contract

D. Off contract and engagement with seafarers at Shore either working or at home

E. Complain Redressal Mechanism where seafarers can register complain against the superior in case of excessive harassment

While the survey speaks of many such individual cases, the primary judgement that we have is that shipping companies need to develop a mental health policy. A robust mental policy element should address carry the following issues

a) What are mental health issues?

The employees should be given a detailed account of various mental health issues in particularly the stress anxiety depression axis. The policy document should explain in lay man terms the symptoms and types of the illness and its impact to productivity. In doing so there should be sufficient reassurance to open up their issues without any fear of stigma.

b) Factors that cause mental health issues should be highlighted

Job insecurity, Excessive pressure. Worklife imbalance. Lack of appreciation, Hostile workplace conditions, unsatisfactory job or workload, Unpleasant relationships with colleagues or managers are the normal issues at work which creates mental health issues. Sensitising the employees to this and its linkages to what it feels should be effectively spelled out.

c) Action that the company intends to take Against the above background what are the internal policies planned which include developing an employee assistance program, counselling services, mental health awareness workshops and training programs and the opportunity that these efforts have in getting away from the mental health issue should be spelt out clearly

d) Open communication and support. Additionally, how the company will manage communications at various levels

for support of the distressed in terms of confidentiality, job security, sick leaves etc should be addressed encouraging the employee to come out of the dark and see help.

e) Setting up a nodal officer for mental health management

A nodal officer preferably from the HR department should be made a nodal officer who can be contacted by the employee in taking benefits of the policy. He should be an independent officer with knowledge and sensitivity to mental health issues

f) Anti-stigma declarations and making expression of stigma as an act which can attract disciplinary action.

Stigma is the major hurdle in India while addressing mental health issues. Having sensitised the management on mental health issues and of being non stigmatic, it is important that the employee if at all faced with stigma affecting his promotion or job role etc can take up the matter with the nodal officer who can initiate disciplinary action against the concerned

g) The policy document should be approved by the board or management and should be available in company websites for employees to access

With these initiatives we believe that the problem can be addressed to an extent.

www.executivecounseling.in

(Above report been prepared by Executive counselling & Nevoxel Consulting)

Undermining Freight Rates

2023 has marked a change in fortunes for ocean freight rates from North Europe to the US East Coast, with both spot and long-term contracted prices falling by around 10% since the start of the year.

According to the latest data from Oslo’s Xeneta, long-term rates are now under USD 6 000 per FEU, while spot rates are below USD 6 500 per FEU for the first time since December 2021. Prior to the New Year this trade had withstood market forces with only “soft” rates declines, compared to the dramatic falls seen on other key ocean corridors since last summer.

Peter Sand, Chief Analyst at Xeneta, says the reasons behind the current decline are more complex than many may imagine.

A victim of its own success?

“We are all aware of the macroeconomic forces impacting global consumer demand and international freight volumes,” he states. “That, and the easing congestion at ports, is pushing rates down across the board as carriers suddenly compete for business which, this time last year, was flooding through their doors. However, there’s additional forces at play when it comes to this US East Coast fronthaul.

“In short, it’s a very commercially attractive route right now. When you take freight rates and average transit times into account it offers far greater revenue and thus profitability for the carriers than competing corridors. So, with the increase in blanked sailings from the Far East, and general easing of congestion, carriers have moved available capacity to this trade to take advantage. That, as we can see, is now undermining the high rates that attracted the vessels in the first place.”

Follow the money

Sand points out that the North Europe to US East Coast trade continued to deliver exceptional profitability for carriers through to the end of last year. At a time when rates were nosediving elsewhere. He explains: “In Q4 the average transit time here was just over 20 days, delivering an average revenue per TEU per day of USD 360 per FEU for carriers. In contrast, the revenue per TEU per day from the Far East to the US West Coast was only USD 160 per FEU. So, if you have available capacity where would you look to deploy it? It’s a no-brainer: You follow the money.”

Falling from on high

Despite the downward pressure on rates, Sand says the market needs to keep a broader sense of perspective. He notes: “We shouldn’t lose sight of how historically strong prices are at present. If we look back to January 2021 rates for both spot and long-term agreements for the trans-Atlantic fronthaul averaged around USD 2 000 per FEU, roughly a third of today’s prices. That demonstrates just how high this trade has been flying… but also how much room there is for further falls.”

Interestingly, Xeneta’s data also illustrates that this trade is one of very few where spot prices are still above long-term rates. An important distinction for shippers that, on competing trades, may be tendering for longterm contracts at or around today’s spot rates.

“That’s not a strategy to utilise here,” Sand concludes, “as you’ll most likely end up paying over the odds in the long-term.”

Peter Sand Chief Analyst, Xeneta

New Enterprise-grade Cybersecurity and Email Services for Mariners Introduced

KVH Industries,

Inc., (Nasdaq: KVHI), introduces two new value-added services for commercial vessels and fleets: KVH Managed Firewall, providing an added level of protection against cyber threats; and KVH Cloud Email, a reliable, secure email solution allowing commercial seafarers to send and retrieve email over any available data connection. Both services are compatible with KVH’s TracNet™ hybrid terminals and TracPhone® VSATonly terminals.

“The introduction of these two value-added services, KVH Managed Firewall and Cloud Email, reflect KVH’s ongoing commitment to bringing new features and options to our customers. Integrated seamlessly with our innovative TracNet and TracPhone systems, these services offer new benefits and expanded capabilities to improve shipboard operations, fleet efficiency, and crew wellbeing,” says Mark Woodhead, KVH’s Executive Vice President of Sales and Marketing.

The KVH Managed Firewall Service provides industry-leading Fortinet® cybersecurity to vessels requiring an enhanced level of protection

against cyber threats. Designed to complement the terminal-level security found in every TracNet hybrid terminal and TracPhone VSATonly antenna, the service provides an advanced array of cybersecurity services for a single, allinclusive monthly subscription per vessel. Services include advanced firewall, basic routing, SD-WAN functionality, application-level controls, IPSEC/ SSL VPN capabilities, intrusion detection and prevention, advanced malware protection, web and application filtering, and antispam capabilities. The AC-powered belowdecks unit is compact and designed for easy installation and integration with KVH TracNet and TracPhone terminals.

Fleets seeking to offer secure email access to vessels can quickly deploy the KVH Cloud Email Service to provide vital connectivity, allowing users to stay in touch with loved ones on shore, receive business communications, and manage personal affairs both at sea and in port. The service stores emails in a secure cloud-based mailbox (10 GB storage per user) and automatically blocks spam and malware. The KVH Manager website offers fleet ICT departments secure tools to set up user accounts for each vessel and crew member, manage user access, and monitor data usage. Mariners can use computers, tablets, or smartphones to receive, read, send, and delete emails, and the service supports major email clients including IMAP, POP, and SMTP. The service is available for a single monthly subscription per fleet.

KVH Managed Firewall and KVH Cloud Email are the latest additions to KVH’s growing suite of valueadded services for maritime communications, joining popular options such as KVH Elite™ unlimited streaming, and KVH Link, a leading digital news and entertainment experience for crew wellbeing.

MMT

Chinese holidays to impact supply chain

Chinese New Year is an important event in the supply chain. It marks factory holidays in China and this year it starts earlier from 22 January and goes on till the 5th of February.

The Hamburg-based ‘Container xChange’, a leading online logistics platform, conducted their annual Chinese New Year survey which witnessed some 2,300 respondents this year from the supply chain industry sharing their opinions and views about how they view Chinese New Year and COVID outbreaks in China to have an impact on global supply chains.

Here are a few interesting insights from the results -

• As compared to some 66% in 2022, there was an increase in the percentage (73%) of supply chain professionals expecting Chinese New Year to further disrupt the shipping industry this year.

• This comes in contrast to industry reports where a lot of analysts talk about lessening of the impact of disruptions in China on the global supply chains.

• Out of the 73% saying that they do foresee an impact, 65% were freight forwarders and the rest were supply chain professionals in general.

• ‘Ordering inventories in advance’ is still the timetested strategy to future-proof disruptions caused by Chinese New Year shutdowns

• 2023 Chinese New Year to have a different set of challenges for supply chain professionals; Technology to be a key differentiator for ensuring visibility and reliability

For enquiries, contact us at india@gac.com

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