Danish Maritime Magazine 02-2012

ERHVERVSMAGASINERNE

DANISH

M ARITIME MAGAZINE 2 - 2012

CLR go for a high standard in ships. Crews tend to treat the ships a bit like their own home.

The banks are the new ship owners The Danish shipping company Scan-Trans Worldwide with Lars Juhl as CEO has just regained its strength after a tough turnaround.

The company experienced as one the first – of few – Danish vessel operators to have a ship hijacked – an event that made a great impression on Lars Juhl, and led to employment of armed guard by every passage through Somali waters – and a true disappointment with the insurance world’s way to value human life.

Today he calls for a pirate-solution involving a UN fee for all vessels passing to pay for a local coast guard service off Somalia.

Scan-Trans Worldwide had a hard time during the crisis for shipping right after the late 2008 breakdown. That was close to a pirate event, where ”Amiya Scan” was hijacked for 31 days and

Lars Juhl and his colleagues had to personally arrange a ransom delivery of 1 million USs weighing 40 kilos to get the crew released. The loss ended up practically being the companies alone.

To add to troubles Lars Juhl last November practically died of a heart arrest surviving only by a rapid resuscitation action from his wife and later the hospital.

Now things are once again moving in the right direction: - We are coming out of 2011 with what right now looks like a very small plus of 200.000 – 300.000 USD, but it is a significant improvement for us compared to the past two years 2009 og 2010,

which have been very challenging. But the turnaround we have been through, has worked. We are back in black. Lars Juhl states.

- So we expect 2012 to be a good and profitable year. We are looking much brighter on the future now. Especially the oil and gas industry in the US is full speed ahead. We see that some of the big engineering houses like Bechel and Flour are extremely busy with their challenge now being able to get enough engineering people to work for them. It’s like Grand Central Station coming into to their offices. For us this is a good sign. Normally there is a delay of about half a year from the projects are started until they physically are being sailed.

- So we are beefing up our organization in preparation for that, Lars Juhl says.

- The good thing about a company like Scan-Trans is that we are asset light. We don’t own any vessel, we are chartering in tonnage, and we have a number of good and loyal customers.

- These costumers generate much more business than we can ever sail, so we feel that our business is very scalable. We could easily go from 30-40 ship now to between 50 and 60 or even more, and then beef up our organization accordingly. That would be no problem for us. The system and the framework are made to do just that. It’s just a question of scaling it in a controlled manner.

SCRAPPING HELPS Lars Juhl is cautiously optimistic in general.

- If you look at the world fleet, there are still a lot of new vessels coming out which were ordered in the good times and have been postponed to come out in 2012, which can upset the recovery in the market that we are seeing right now.

- But we also know that 40 percent of the fleet in the multipurpose sector is more than 20 years old. These ships need to be scraped – many should have been scrapped a long time ago. So when scrapings are catching up the fundamentals are back for an improved market.

Lars Juhl is focusing on the oil and gas market which he expects to boom: The populations in the world are increasing – the middleclass in China, India and other developing countries are growing rapidly and so is their demand for energy and goods.

- This overall increase in demand is combined with a kind of delay. Since late 2008 not many new projects have been started.

Everything was put to a stop because financing was so difficult.

This means a lack in production capacity right now at the same time as oil is taken in much deeper and more remote places.

When you go deeper, the need for safety is much higher and equipment becoming more expensive. The demand for quality and reliable and safe transportation is increasing.

They are drilling in remote areas like the Arctic region which is difficult, and this is good for us as we are specializing in sea transportation to and from difficult places.

And Scan-Trans is not interested in transportation between main ports, this is left to the established liner services.

- Without being Arctic specialists we have – however - had a small number of vessels there, and we are now quoting for a

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The banks are the new ship owners

number of large projects especially in the Russian Arctic region, where we are able to offer our customers transportation via the Northern Searoute, right now with ice class vessels in the three month of summertime - this will cut a significantly amount of time and the energy going from North Europe to the northern part of Asia.

QUALITY FIRST - We see two ways to compete: Price or quality and service.

Long time ago we have decided that one of our values is to focus on a quality position with safety, reliability certified. We are ISO certified and go by a quality management system enabling us to quote on business with large industries, which are very concerned about safety and reliability – more than just saving a dollar on the cubic meter on the freight rate.

- The shipping industry in general all have P&I insurance of course. The insurance companies are prepared for each 100 dollars ship owners are paying in premium to say it’s fairly OK if they have damages for 40-60 dollars. Ours is below 10 dollars. We have a very good damage statistics, so if a customer is looking at the risk element, he should go for us - the cost of having an oilrig lying idle because a ship lost a big cargo essential to the project, it’s costing so much per day, that it is so much cheaper to pay a quality carrier to ship it.

And talking people: When we had the pirate issue we would have no problems with the insurance companies had it only been a vessel or a cargo. They would have dealt with it and we would have to pay no ransom, he says.

It was a total different matter with the crew. But as it was people, there were no two ways out of it for us. We would absolutely have to deal with that, Lars Juhl underlines.

HIGH STANDARD IN HARD TIMES The focus on high standard is visible on the ships.

- Ships provided by our Dutch partner, CFL Canadian Feeder Lines, are Dutch built ships of high standard. They are more expensive that the Chinese built ships and the crews are treating them like a piece of their own home. They maintain them perfectly, and Nine out of 10 customers who are invited onboard are impressed og tell to their clients how we care about the transportation.

- In project cargo the bulldozer you take onboard and put on the tank top of the ship does not care if it is a Chinese built ship and don’t care I the cargo hold is rusted. But for us we sent the impression to customers that we do care. We don’t put our cargo in a rust box.

- Even in hard times, where everybody has to cut down, CFL don’t cut on maintenance that will affect safety in any way. The same goes for our other Partner, the Buss group, who always care very much for maintenance of their vessels, he says.

NEW TECHNOLOGY Technology slowly develops in our sector, but our CFL vessels for instance has no traditional bulbous bow, they look more like

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Titanic’s front. This is an old design that has got a renaissance, and CFL was among the first to build a modern ship with that.

A bulbous bow have to stay right below the water surface to save fuel. But in project cargo we rarely load the full deadweight capacity – typically 2.500 tons of cargo and 10.000 cbm so we will never have the bulbous bow in the water, and therefore it has a reverse effect. So it makes no sense to build a ship for project cargo with the standard bow.

A GENERAL Lars Juhl has changed his focus a bit as a leader: Initially I was looking for consensus. We had a very flat organization. But when you are going through a crisis you can’t sit down and debate things for a long time. You have to have some sort of a general to take the decisions whether they are well received or not . You must do what you have to do. Still I am not a ruler.

I consider myself at modern and spiritual leader, Lars Juhl says using popcorn in a microwave oven as a metaphor: You put in the corn and turn it on. 20 pct. pop fast – then 60 pct follows after a while, and when you pour them in the bowl to eat the last 20 pct never has popped.

- You should not spend all your energy on those who never pop.

I used to spend 80 pct. of my energy on the 20 pct. of our people who would never change. You should not spend all your energy on those who never pop.

Now I use the 20 pct. who pops first as change ambassadors to drive the change in my organization. And 60 pct will follow more

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The banks are the new ship owners

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- We have a very fine damage statistic. Less the 10 dollars pr. 100 dollars premium compared to a traditional level of 40-60 dollars or less automatically when the first are moving, he says. The last 20 per cent are no longer with Scan-Trans when the cost cut and rightsizing was put into action.

- We have to embrace chance as the change cycle is getting faster. We must act rather than complaining that the world is unfair. Conditions are changing and our focus must be: How do we make a profit in the new situation, he says.

BANKS AS SHIP OWNERS Lars Juhl expects banks to be the new ship owners in the long run.

- That concerns me. We’ve already seen this when we have ships in commercial management for ship owner who have been used to put the ships out on time charter and then getting T/C hire paid every 15 month. They have never been involved in any cargo operation or not seen the underlying coast structure or the challenges with fluctuating cash flow. So when they are giving ships in commercial management to us and we are running the vessels in the spot market they tend to rise a lot of question like “you calculated with 6 dollars in that port and now it’s 8 dollars, why is that?” We spent a lot of time explaining these details that we paid two more dollars to get the ship out two days faster, actually a saving for the vessel.

- Now we have principals who are ship owners not used to worldwide trading. We always try to optimize. We think it is better to spend our time on optimizing and dealing with the situation as they occur rather than to discuss historic details. It’s about the future.

Since 2008-09 many - especially German - ship owners have only paid interests to the banks, but the Basel II regulation of banks put a three year limit on that - otherwise the bank must take over the asses. Here we can be the interim manager of the ship until it can be sold in a market with decent prices. Fire sale only means competition with the bank’s other ships creating an unlevel playing field, says Lars Juhl, who sees crisis as an opportunity.

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The banks are the new ship owners

TIME FOR ACTION - And right now the opportunities are historically great. It’s now when people can afford to take the opportunities, that we are – as always – on the outlook for strong financial partners. We have the knowhow and the finger on the pulse of the market. We could create miracles, money was not an issue, he says.

He himself is recovering from his heart arrest: - I’m recovered enough to take in the job as CEO of Scan-Trans in a responsible way. It takes time but I am 90 percent recovered and can cope with late meetings and events, but I still get very tired and often have to dig deep to stay on the course. It helps that I have run marathons. I ran with three of my colleagues on the Great Wall of China. That’s giving me mental strength, he tells.

COAST GUARD AGAINST PIRACY The pirate incident in 2008 was a tough experience. And Lars Juhl believes that piracy must be stopped.

- But clearly more on the same is not giving a new result. The navies of various countries have spent millions of dollars and achieved very little progress, he says suggesting a fee for all ships through the Gulf of Aden: - Of course I would prefer not to pay anything, but if that fee – for instance 25.000 dollars pr ship transiting - is paid to the UN who would set up a local coast guard in cooperation with the Somali government, it will be possible to make the pirates unable to go from ship to shore with the ransom. Such Coast Guard could also stop toxic waste dumpers and foreign fishermen from poaching in Somali waters, Lars Juhl states.

- We are competing with companies who do not have armed guards onboard. Our cost for guards is around 65.000 dollars for each transit. So they are competing by gambling with safety.

That’s unfair. We should be playing on a level playground.

- Maybe my suggestion is a bit controversial, but navies can’t patrol so vast areas and so far we are only treating symptoms, we need to find a cure, Lars Juhl says.

By Finn Bruun

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www.emuc.dk

- A lot of our assignments are emergency repairs. This puts our flexibility to the test, says operations manager Visti Abramsson, who is in charge of highly competent staff willing to walk the extra mile in busy periods in order to meet customer needs.

2400 MAN HOURS IN 4 WEEKS As an example, a Norwegian ship owner called five weeks ago with motor problems on a ship harboured in Esbjerg. The crew had noticed discolouring of the crankshaft when a piston was removed, and the owner contacted P&S to get their assessment of the problem.

- The engine has probably suffered an undetected loss of oil pressure. It had developed cracks in the crankshaft, and they were too deep to be machined down. Therefore the 6.5 tonnes crankshaft had to be replaced.

The ship owner accepted P&S’ tender and repair works began immediately. P&S cut a hole in the hull so that loose engine parts could be lifted out and trucked to the shipyard in

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Always ready for an emergency

Svendborg, while six workers stayed on the ship in Esbjerg to prepare for the reinstallation. Next week the job will be completed. P&S has managed to squeeze in 2400 man hours over four weeks without notice.

THE SPARE PART CHALLENGE For P&S the biggest challenge with emergency repairs consists in finding original spare parts. In this case they tracked down a good used crankshaft in Germany, but sometimes it can be difficult to obtain the right components for older engine types.

- We are authorized service center and distributor of spare parts for Volvo Penta. In addition we have a large network of parts suppliers across Europe, so we always manage to find the spares we need. However it may take time to meet some of the more special requirements, says Visti Abramsson.

Engine repairs and overhauls account for more than half of the activities in P&S, who in addition to the shipyard in Svendborg runs Marstal Shipyard on the island Ærø. Other activities include ship maintenance and shipbuilding. The yard has re-

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ALWAYS READY FOR AN EMERGENCY Petersen & Sørensen (P&S) in Svendborg, Denmark, was founded in 1942, and over the years the company has developed into a state-of-the art shipyard with a capacity to perform repairs on demand. Most repairs cannot be scheduled, so when a ship breaks down P&S works 12 hours a day 7 days a week to solve the problem.

cently built six steel line boats for service in Greenland. Most Greenlandic line boats are lightweight fiberglass vessels, but with the new construction fishermen can remain at sea for longer periods.

of ballast water. In consequence, we expect an increasing demand for overhauling engines and installing new systems to ensure that all ships comply with applicable requirements, Visti Abramsson concludes.

NEW REQUIREMENTS TO EXHAUST GAS CLEANING AND BALLAST WATER HANDLING INCREASE DEMAND A relatively new floating dock measuring 135 x 18.5 meters in Svendborg enables P&S to handle larger tankers, container and general cargo ships of up to 8000 tons. And the shipyard in Marstal has a 106 metre long and 16 metre wide dock, providing plenty of capacity now that the shipping industry is picking up again.

- The maritime industry has been severely affected by the crisis. This has increased competition and many shipyards have closed down. Now we see rising freight rates, and we hope it will eventually lead to improved conditions for the shipyards as well. At the same time many motor classes have to be upgraded to comply with new requirements in terms of environmental impact, exhaust gas cleaning and the handling

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Always ready for an emergency

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MARITIME SPATIAL PLANNING:

EFFICIENT RESOURCE MANAGEMENT FOR SUSTAINABLE GROWTH While the concept Maritime Spatial Planning (MSP) might have a negative limiting sound to some, the energy and input form the participants at the conference in Brussels March 26th 2012 was overwhelmingly positive and constructive.

Invited by Ms Maria Damanaki, the European Commissioner for maritime affairs and fisheries, high level representatives from the European Union and Third countries, public authorities, representatives from maritime industries and NGOs had an opportunity to share and discuss their experiences and thoughts on MSP with the European Union and listen to cases of MSP from around the world, and to reflect on how they want to see it develop in the future.

NEW USERS OF THE OCEANS CHALLENGE THE OLD One of the main issues addressed on the conference, was how new users of the oceans challenge the old. A sustainable strategy that complies with economic growth within both the traditional sectors such as fisheries and new such as wind energy farms is desirable. The question is if and how the various utilizations can be combined? What activities are compatible at the same time at the same place and are there any contradictions?

The message from most presenters was clear: to ensure a sustainable solution, there is a need for cross border initiatives, but no desire to introduce complicated bureaucratic structures.

The commission should only provide a framework and member states should coordinate regionally or nationally.

The conference was moderated by Dr Elliot Norse, President of the Marine Conservation Biology Institute (US) and on the agenda were presentations concerning the future of maritime spatial planning in Europe, what MSP delivers for growth and lastly presentations on how we can develop a common European vision for the future - Maritime Spatial Planning by 2020/2025. Among the speakers were: Ms Assuncão Cristas.

Minister of Agriculture, Sea, Environment and Regional Planning (Portugal), Mr Bernard Vanheule, International Association of Oil and Gas Producers, Mr Juan Riva, European Community Shipowners Association, Mr John Tanzer WWF and many more.

Ms Helle Pilsgaard from Danish Nature Agency spoke about Sea Use Management in Denmark. The presentation focused on the growing wind energy- and shipping activities in Denmark and

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Efficient resource management for sustainable growth

the objectives for Danish Sea Management, which focuses on favorable conditions for development of the maritime sector, decreased emission of greenhouse gases and reduction of air pollution, protection of the marine environment and the coastal zone, increased safety at sea and lastly increased coordination of initiatives and management within the maritime sector.

CONCLUSIONS OF THE DAY: WE NEED TO DO THINGS SMARTER! Director General of DG Maritime and Fisheries, EC Ms Lowri Evans concluded that the discussions and presentations of the day, along with the stakeholder survey in 2011, only confirmed the importance of the subject. Ms Evans concluded that we can do things smarter in European sea space, particularly if we learn from Australia and other countries who have successfully introduced MSP and it is about time that we decide on a European discourse. Maritime Spatial Planning (MSP), as promoted by the EU integrated maritime policy, is crucial for creating an environment in which the maritime economy can grow in harmony with the surrounding ecosystem. The following objectives were repeatedly mentioned by speakers and supported by the commission: Transparency, stability, predictability and reduced transaction costs are the factors that encourage and accelerate investments – and are among the benefits that MSP can bring.

The commissioner also supported the desire for a simple nonbureaucratic structure that encourages and supports national/ regional initiatives, but within a common European framework for the European seas.

Presentations and full program for the conference can be found at: http://ec.europa.eu/maritimeaffairs/events/2012/03/ events_20120326_01_en.htm

By Anne Katrine Bjerregaard Project Coordinator, Maritime Development Centre of Europe & the Transport Innovation Network

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”Healthy oceans – healthy economy” became the motto of the day when representatives from the commission, the European Union and Third countries, from maritime industries, government agencies and NGOs gathered to discuss Maritime Spatial Planning in Brussels March 26th 2012.

FACTS ON MARITIME SPATIAL PLANNING EC Definition and scope Maritime spatial planning is planning and regulating all human uses of the sea, while protecting marine ecosystems.

It focuses on marine waters under national jurisdiction and is concerned only with planning activities at sea.

It does not cover management of coastal zones or spatial planning of sea-land interface.

Objectives Maritime spatial planning aims to balance frequently competing sector-based interests, so that: • Marine space and resources are used efficiently and sustainably.

• Decisions can be taken based on sound data and in-depth knowledge of the sea.

• Investors have greater legal certainty, encouraging economic development.

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There is fierce competition for marine space and the interests of different users need to be taken into account. For example, an off-shore wind farm could hamper navigation or fishing, unless its location is well planned.

Common principles approach Maritime spatial planning remains a prerogative of individual EU countries. However, plans for shared seas should be compatible, to avoid conflicts and support cross-border cooperation and investments. Common principles agreed at EU level can ensure that national, regional and local maritime spatial plans are coherent.

(European Commission, Directorate-General for Maritime Affairs and Fisheries, 2012) Relevant papers and description of EC initiatives can be found at: http://ec.europa.eu/maritimeaffairs/policy/maritime_spatial_ planning/index_en.htm

Efficient resource management for sustainable growth

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Green solutions provide an instant effect More than 70 percent of Earth is covered by water. Seagoing transport is by far one of the greenest forms of transportation and the sea is a natural transportation route which offers almost limitless possibilities for environmental and climate friendly transport.

Denmark is a world leader in the development of climate and environmentally friendly maritime products. Across the board, the trade segment cooperates on green projects. Among these is the retrofitting project run by Danish Maritime, a project focusing on green solutions for existing ships, while another is Green Ship of the Future which through a series of projects focuses on green solutions to primarily new ships. It makes perfect sense to invest in green solutions –not just in relation to the climate and environment but also in bringing down the operational costs of ships.

Many of the solutions provided by the Danish maritime producers can be installed on existing ship and will even in the short term reduce negative environmental and climate im-

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Green solutions provide an instant effect

pact. Among such solutions is raising the efficiency of propulsion systems, better control of cooling water, optimizing pumps and adjusting fans. All are solutions with short payback periods and solutions which can be installed relatively easily on existing ships.

If we can widely extend the use of the many already existing Danish green solutions to the global fleet, we can take efficient steps in the work to stem the environmental and climate charges and reduce the operational cost of ships.

The existing solutions are plentiful and the Danish maritime producers continuously develop more and even greener solutions.

By Cecilie Lykkegaard, Danish Maritime

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