Asia-Pacific Shipping 2011/12

Asia-Pacific Shipping

8 Envi

ronmen

t

China Special racy

pi 8 Fighting

8 Markets

8 Classification

2011/12

The Official Magazine of the Baltic Exchange: SPECIAL SUPPLEMENT

2011/12

It’s all about trust

International Focus – Continuous Growth Maersk Broker is one of the leading international shipbroking companies – we are also a company profiled by continuous business growth achieved via a widespread international network and a global organisation, currently comprising 17 Maersk Broker offices employing about 350 shipbrokers and other staff.

Through our offices, Maersk Broker are doing business in the world’s largest shipping centres - Scandinavia/Europe, Africa, the Middle East, India, Asia, the U.S.A. and, as from mid 2011, South America.

• We are active in all shipping markets within chartering, contracting of newbuildings and sale & purchase of secondhand ships; furthermore, rather broadly based activities are being developed in relation to specialised tonnage, among others for the offshore industry • We recognise the necessity of constant and pro-active development of our global organisation in order for us, as shipbrokers, to remain at the forefront of a global shipping market characterised by almost continuous change • We differentiate ourselves by proactively offering our customers innovative business opportunities, while simultaneously carefully indentifying and considering all potential commercial risks of our customers

• We engage with all customers under the headline of “It’s all about trust”, and we continuously grow our business scope in order to offer our individual customers – be it ship owners, operators, cargo owners, shipyards, banks, ship financing companies or others – as comprehensive and well covering services as possible • We continuously expand and optimise our services based on the expertise, competences and know-how of our shipbrokers with the aim to offer ‘intelligent shipbroking’ • We focus on strong and longstanding relationships with customers, as well as our employees, based on mutual trust and respect • The Asian shipping markets are of paramount importance to the global Maersk Broker activities. Through 9 offices employing almost 150 brokers and staff, Maersk Broker Asia is today the largest consolidated shipbroking operation in the region. All major segments of the market are covered in respect of chartering, contracting of newbuildings and sale & purchase based on a dedicated service focused on local presence with a truly global perspective.

Kasper Holm-Hemmingsen

Jocelyn Chen

Kasper Stærk Olesen

Nicole Wang

Gordon Guo

‘As a young sale & purchase broker, you experience business deals of a size which are amazing; they give you the appetite to develop even larger transactions again and again.

At the same time, being part of a truly global broker team assisting and working for each other adds to the excitement, and gradually develops an unbelievably strong platform for business development.”

“In Maersk Broker we work independently, but our global network helps us develop our international shipping business efficiently with customers.

We work closely to achieve each and every goal - turning conflicts into compromise and competition into cooperation, bitter or sweet, as the times goes by, we learn and grow together with an international team of colleagues within the big Maersk Broker family.”

“We grow the Maersk Broker business in a wide spanning international setting. This provides us, as brokers, with a strong and well defined framework for efficient business development in close cooperation with an international team of colleagues, and a joint focus towards customers all around the world.

It is demanding and requires personal adaptability and continuous learning.”

“Maersk Broker is a company with professional and competitive employees. We work together as a team towards a mutual goal.

The best thing about my job is my extensive, global network, through which I have customers, colleagues and friends over the world.”

“We differentiate ourselves from our competition through a seamless synergy of talented individuals at a global scale, and through local presence which enables us to stay as close with clients as possible.

This serves a single purpose, to provide our clients true partnership.

It is no surprise that Maersk Broker is recognized in China as one of the most successful broker firms.”

Kasper Holm-Hemmingsen is a Shipbroker active within sale and purchase of container vessels at Maersk Broker in Copenhagen.

Jocelyn Chen is a Senior Manager in Maersk Broker’s office in Taiwan.

Kasper Stærk Olesen is General Manager of the Maersk Broker Korea office in Seoul, and a member of Maersk Broker’s Global Management Team.

Nicole Wang is a graduate from the Shipbroker Trainee Programme, and is currently Personal Assistant to Maersk Broker’s CEO & Managing Director.

Gordon Guo is the General Manager of Newbuildings in the Maersk Broker office in Beijing.

Read more about us, our career opportunities and education programmes at www.maerskbroker.com

Asia-Pacific Shipping is an official magazine of the Baltic Exchange Tel: +44 (0) 20 7623 5501 E-mail: enquiries@balticexchange.com Website: www.balticexchange.com

Publisher

W H Robinson editor

David Hughes Asia-Pacific Shipping is published for the Baltic Exchange by Maritime Media The Diary House, Rickett Street, London SW6 1RU Tel: +44 (0) 20 7386 6100 Fax: +44 (0) 20 7381 8890 E-mail: inbox@mar-media.com

E-mail: anderimar.news@googlemail.com SALES manager

David Scott DESIGNER

Justin Ives The Baltic annual subscription rates Worldwide £110 ISBN 1-900521-04-0 Asia-Pacific Shipping is published on behalf of the Baltic This publication is printed on PEFC certified paper.

PEFC Council is an independent, non-profit, non-governmental organisation which promotes sustainable forest management through independent third party forest certification.

Exchange and is supplied to members as part of their annual membership package. However, the views expressed in Asia-Pacific Shipping are not those of the Baltic Exchange, its directors, its officers or the publishers unless expressly stated to be such. The Baltic Exchange is the world’s premier and oldest international shipping market. Most of the world’s open market bulk cargo chartering is negotiated at some stage by Baltic members who represent leading international companies. Other activities include the world’s most important market for buying and selling ships, specialist freight by air and commodity dealing. The Baltic Exchange operates a strict code of business ethics encapsulated in its motto ‘Our Word Our Bond’. The Baltic Exchange disclaims any responsibility for the advertisements contained in this magazine and has no legal responsibility to deal with them. The responsibility rests solely with the publisher.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

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Contents 5

The Baltic Exchange in Asia

6 Overview 7 Asian voice 10 Piracy – Asian shipowners urge UN action 7

11 Piracy – India takes firm action 13 Dry market 14 Tanker market 15 Broker’s view

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17 Freight derivatives 20 Supply & demand 21 Environment – Green thinking 22 Environment – Seeking solutions 23 Environment – Strait talking

21

24 Human element – Working in Singapore 25 Human element – Massive task 26 Human element – Preparing for MLC 28 Human element – Waking up to MLC 29 Insurance – Overview

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30 Insurance – Charter 31 Russian – Overview 33 China special report – Government’s link with the market 35 China special report – Traps for the unwary

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36 China special report – Class opportunities 37 China special report – Chinese growth creates opportunities 39 China special report – Gateway to China 41 China special report– Difficult year ahead

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48 Events

Asia-Pacific Shipping 2011/12 www.thebaltic.com

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Foreword The Baltic Exchange in Asia

The Baltic Exchange in Asia Philip Williams explains how the Baltic has met the challenges of Asia’s rapid economic growth over the past five years.

O

pened in 2006, the Baltic Exchange’s Singapore office has given the Baltic a foothold in the region and enabled it to publish Asian dry and tanker market information before the European markets open.

“We’ve increased the number of assessments we offer,” explains the

Baltic’s Singapore based general manager Philip Williams. “In the past 12 months we’ve introduced three new India supramax routes as well as a new naphtha trading route to Japan.”

All the new routes have an India focus covering east coast India coal imports from Indonesia and Australia; iron ore exports to China and naphtha exports from the west coast of India to Japan.

Since the opening of India’s immense iron ore reserves to private exploitation in 1999, India has quickly risen to become the world’s third largest exporter of iron ore, behind Australia and Brazil supplying a steelhungry China.

The TC12 naphtha route is key for traders who use the run as a benchmark for their trades.

Reflecting the rise in the Asian market’s influence on the bulk freight

Philip Williams

markets, not only in terms of volumes, but also where the chartering decisions are made, has been the driving force behind the Baltic

management strategy the Baltic also runs a series of popular in depth

Exchange’s decision to focus its attention more closely on the region in

training courses in Singapore which cover every aspect of derivatives

recent years.

trading in shipping. The next courses take place 16-19 January, with full

From its Clarke Quay base in the heart of Singapore, the Baltic Exchange is able to ensure that its products and services meet the needs of the Asian trading and shipping communities.

According to Mr Williams, Singapore in particular has grown exponentially as a shipping hub in the five years that he has been based here since moving from Perth. “It has reached critical mass here,” he says.

“If you want to be involved in bulk shipping, this is the place to be.”

details available at www.balticexchange.com/training.

The number of Asia based companies joining the Baltic Exchange continues to grow as companies benefit from their association with the Baltic and its emphasis on standards as encapsulated in its motto “our word our bond” as well as access to its wide range of information.

During tough times, it is important that the Baltic Exchange exerts its influence to ensure that contracts are honoured and the spirit of the Baltic

However, Singapore is not the Baltic Exchange’s only focus and its

Code is adhered to. Its stance on this has never wavered for without trust

development strategy involves not only market reporting from the region,

and proper conduct the shipping industry could not function. The Baltic

but greater engagement with both companies and governments across

Exchange has the power to censure, suspend or expel a member if, in

the region. The Baltic employs a China specialist whose role involves

its opinion, the principles set out in the Baltic Code are not met. In these

liaising the Chinese authorities. Recent achievements have included the

rare circumstances the damage done to a company’s reputation in the

incorporation of Baltic Exchange standards of shipbroking practice into an

commercial market is huge and can potentially have a real impact on its

official scheme for accrediting shipbrokers – a profession which up until

ability to do business with shipowners and charterers.

last year had not officially been recognised by the Chinese government.

The Baltic Exchange runs a range of events in the Asia Pacific region, focusing particularly on freight derivatives. The Asia Freight Derivatives

For further details on the range of services offered by the Baltic Exchange contact Mr Williams.

Forum took place in late November in Shanghai, bringing together FFA traders from across the region as well as showcasing how freight

Email: pwilliams@balticexchange.com

derivatives can form part of a shipowner’s or charterer’s freight risk

Tel: +65 6377 0654

Asia-Pacific Shipping 2011/12 www.thebaltic.com

5

Overview Letter from the Editor

Testing times Shipping is, once again, going through difficult times and this special supplement on the Asia Pacific partly reflects that. Throughout the pages of this issue there are references to the problems the industry is facing.

By David Hughes

O

n the other hand it is soon apparent from reading the comments of the many people who have contributed their views

Our China feature also highlights the opportunities afforded by the country’s emergence as a leading maritime nation.

that not only is ours an extraordinarily resilient industry but

It is not only China, of course, that is growing in importance. The

also that long-term prospects continue to be bright, especially

balance of maritime activity is shifting towards Asia as a whole. In an interview Oh Kong-gyun, chairman and CEO of the Korean Register (KR),

in Asia.

It is true, as accountancy firm Moore Stephens’ Richard Greiner says, that: “We are starting to see now what many had predicted

makes the case for the Asian shipping community taking a higher profile on the world stage.

would happen much earlier. Banks are calling in their loans, shipping

The Baltic Exchange itself is closely involved in Asia, with a regional

companies are filing for bankruptcy protection, ships are being arrested

base in Singapore and growing Asian membership. As the Baltic’s

and auctioned around the world, and the courts and arbitration tribunals

Singapore based-general manager Philip Williams explains, the Baltic’s

are starting to see an increase in their workloads.”

presence in Singapore enables it to publish Asian dry and tanker market

None of this comes as a novelty to anybody who has been in this cyclical industry for any length of time. As Mr Greiner also says: “There

information before the European markets open, and the number of assessments offered has increased.

could be some nasty surprises, and some tough decisions, in the

Meanwhile the Baltic Exchange’s electronic marketplace for dry

months ahead for operators and investors alike. But those who are in

freight derivatives, Baltex, is gaining ground. Already it is available to

shipping for the long term will ride it out, and many will have had previous

participants in Singapore, and Hong Kong is expected to follow shortly.

This issue comes out in time for Marintec China 2011, itself an

experience of doing just that.”

When it comes to be being in the business for the long term that is

indication of the tremendous growth in the country’s maritime sector.

certainly true of the big Japanese shipping companies. So it is interesting

This major shipping event in Shanghai will be followed in March 2012 by

to see two senior “K” Line executives, Atsuo Asano and

Tomoyuki

the similarly impressive Asia Pacific Maritime show in Singapore. By then,

Okawa, give what can be described as cautiously optimistic appraisals

perhaps, it may be clearer just how difficult the shipping markets will

of, respectively, the dry and wet markets.

turn out to be. Let us hope the more optimistic forecasts prove correct.

Nevertheless elsewhere we note that well known shipping economist, and managing director of Clarkson Research Services, Martin Stopford has warned that companies will have to focus on controlling costs. Vessel oversupply and, consequently, low freight rates look set to be with us for the foreseeable future.

While the prospects for rates may not look especially rosy, the basic fact remains that goods and commodities will need to be transported by sea to serve a world population that passed the 7bn people mark in October.

Increasingly that cargo is bound to or from Asia and, to a large extent, trade growth is being driven by China’s still fast growing economy. So a considerable portion of this supplement is devoted to China; highlighting its growing influence in all sectors of shipping. This is typified by the Shanghai Shipping Exchange which has clearly found its role as a link between industry and government and an authoritative source of statistical data on the container shipping industry.

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The Baltic Exchange makes good use of its regional base in Singapore

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Asian voice

Taking a more active role The Baltic asked Oh Kong-gyun, chairman of the Korean Register and the Association of Asian Classification Societies for his views on the need for an Asian voice in shipping

Mr Oh: Asian shipowners now control nearly half of the world’s

I believe that the Asian industry – organisations as well as individuals

commercial fleet and the world’s top shipyards in the region are building

– should proactively work together to ensure that the size and scope of

close to 90% of new vessels. This has led to a greater focus on Asia

our marine sector is matched by its influence in international maritime

taking its place on the world’s shipping stage.

affairs.

By saying that we need to raise an “Asian Voice”, I am not suggesting that Asian countries should always speak with a unified voice or promote policy objectives that set the region apart from the rest of the world.

The Baltic: More generally, has Asian shipping lost out in recent

What I’d like to see is Asian countries taking a more active role in the

years because it has not made its voice heard, especially at IMO?

policy and regulatory decision-making process through the IMO in the

Mr Oh: Although not a class issue per se, there have been cases where

same way as Western countries do.

a lack of voice and active participation at the beginning of a rule-making

The inhibitor seems to be that Asia has not really had a mechanism

process has led to a hard fought battle at the end of such a process.

by which to consolidate the different views in the region and to project

An example might be Performance Standards for Protective Coatings

those views globally.

(PSPC) and Permanent Means of Access (PMA), which are deemed by

With the emergence of new organisations within the region, I believe

many in the Asian region as being drafted in accordance with European

that the Asian industry will achieve a greater influence in the global rule-

related standards and interests. I’d like to see the Asian region being

making process. I am referring to the Asian Shipowners’ Forum (ASF),

more pro-active in setting the regulatory and policy-making agenda and

which represents the interests of shipowners in the region, the Asian

involving itself – to the same degree as other regions – in policy creation.

Shipbuilders’ Experts Forum (ASEF), representing the shipbuilders’ interest, and, more recently, the Association of Asian Classification Societies (ACS) which aims to raise the level of technical contribution

The Baltic: On its website and in presentations the Korean

that Asian class societies make to the international maritime community.

Register (KR) stresses the need to go green, but has the

The tripartite meeting between shipbuilders, owners and classification

environmental agenda been driven by the EU and US? What should

societies, which is held in the Far East on an annual basis has also been

the priorities be now? Regarding the greenhouse gas debate, will

a highly successful forum for these important sectors, including those

the imposition of market based measures (MBM) be acceptable to

in the Asian region, to voice opinions on the initiatives that affect global

the majority of Asian countries?

shipping and which are crucial to the production of robust and quality

Mr Oh: To be frank, it is of little relevance where the green agenda drivers

ships.

are coming from as long as regulation and legislation is applied evenly in all jurisdictions. I am a firm believer in furthering the environmental agenda, and developing greener ships is a central challenge and one in which KR is actively engaged. The society is heavily involved in green research and development activities and is working alongside the Korean government on a number of these issues. KR is also involved in wind turbine and ocean energy technology and had published guidelines and undertaken certification activities in both these sectors. In addition, the society is an active contributor on this issue to IMO and the Korean Ministry of Knowledge Economy and the Ministry of Land, Transport and Maritime Affairs.

KR is currently working on designs and guidelines for cleaner ships that involve alternative fuels and power supplies as well as hull designs and various heat and vapour recovery systems.

Oh Kong-gyun is the current chairman of the ACS

Asia-Pacific Shipping 2011/12 www.thebaltic.com

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Asian voice One of the central issues under discussion now is the debate on

The Baltic: What is your view on the EU’s insistence of mutual

carbon tax versus carbon emissions trading. Among the three building

recognition of class approval. Is this an issue for KR, or for the

blocks in the IMO’s greenhouse gases (GHG) work, the technical and

Asian class societies more generally?

operational measures, namely the Energy Efficiency Design Index

Mr Oh: Mutual recognition is not just an issue for KR or for the Asian

(EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) were

class societies for that matter. This issue is a EU-RO related issue and

adopted by the vote of Parties to MARPOL Annex VI in the 62nd Marine

affects the majority of IACS member societies.

Environment Protection Committee. Thus, from now on, the negotiation

Regardless of some concerns that stakeholders have, safety and

of the last building block, market based measures (MBM), will be

sovereignty, for example, the legal basis for mutual recognition of class

accelerated.

certificates is in place with the publication of Regulation EC 391/2009.

The global GHG reduction target to limit the increase in global

All class societies which are ROs of the EU are now discussing and

average temperature below 2°C above pre-industrial levels were agreed

sharing views on the steps to be adopted with a view to meeting the

at the 16th Conference of the Parties (COP) of the United Nations

requirements of Regulation EC 391/2009.

Framework Convention on Climate Change (UNFCCC).

According to the second IMO GHG Study, the GHG emissions from international shipping were calculated to be 2.7% of the global

The Baltic: Several class societies, mainly in Europe are openly

total. With business as usual (BAU), the forecast growth in world trade

advocating the adoption of LNG as the marine fuel of the future.

suggests this share might grow to 12-18% of global emissions by 2050.

Does KR share this view?

Technical and operational measures alone would not be sufficient

Mr Oh: With the steep rise in oil prices recently, the shipping sector is

to reduce shipping’s emissions to contribute to achieving a global

increasingly looking for alternative fuel sources to operate its ships. LNG

stabilisation of the climate to less than 2°C warming.

happens to be the most practical fuel in that sense. Considering that

In addition, MBM would provide an incentive for the efforts of the maritime industry to improve energy efficiency and provide additional

bunkers comprise around 65% of total ship operating costs, the shipping industry has no choice but to consider alternative fuel sources.

and cost-effective options to achieve emissions reduction by purchasing

Other alternative fuel types being considered nowadays are bio-fuel,

UN-approved emissions reduction credits such as Clean Development

new and renewal energy, hydrogen fuel and nuclear power. However,

Mechanism (CDM) credits.

they are considered to be somewhat impractical owing to their cost,

Meanwhile, there might be a more serious conflict between developed and developing countries relating to the fundamental principles, ie “common but differentiated responsibilities (CBDR)” of the Kyoto Protocol and “no more favourable treatment (NMFT)” of IMO.

applicability and safety. For these reasons, LNG is considered to be most practical alternative fuel for shipping industry.

Other factors driving up LNG demand in shipping are its eco-friendly properties. With stricter NOx and SOx (nitrogeon and sulphur oxides

This kind of conflict might be resolved by providing financial support

respectively) emission controls for ships under the MARPOL Convention,

to the developing countries using the part of revenues generated by

combined with regionally enforced Emission Control Areas (ECAs) and

MBM.

GHG emission reduction initiatives at IMO, many consider LNG-fuelled

However, the level of revenues generated by MBM is decided by the

ships to be the best option both from an environmental and an economic

level of auctioning rate to allocate emissions allowances in the Emissions

point of view. In fact, it is estimated that an LNG fuelled ship reduces

Trading System (ETS) or by the level of tax on bunker fuel in Carbon Tax

emissions of NOx by 85-90%, and SOx and particles by close to 100%

(so called GHG Fund). This means that if the auctioning rate or tax rate is

compared to today’s conventional fuel. In addition, LNG fuelled ships

set at a high level, the level of financial burden that shipping companies

emit 15-20% less GHG.

have to bear becomes high also. Therefore, an assessment of revenues generated and the burden on shipping companies need to be made.

Of course there are challenges such as the lack of LNG-bunkering terminals, the need for extra space on board ships to store LNG, etc.

At IMO, an ETS for ships is proposed as an “open system” to land-

But increased demand always brings about market adjustments and

based industries. KR believes that the competitiveness of the shipping

technical ingenuity, so KR believes that these problems will be readily

industry is lower than land-based industries because the shipping

resolved in the future.

industry lacks experience and knowledge of the system. There are

KR has a rich experience in the design, construction and survey of

no CDM projects, which generate emissions reduction in addition to

LNG carriers with a classed fleet of 14 LNGCs in total. In addition, KR

emissions allowances allocated, applicable to the shipping industry.

has been working with the industry and academia on various research

Also the reduction potential of the shipping sector, which is the most

projects encompassing all aspects of LNG transport, such as engineering

energy-efficient transport mode, is less than the land-based sector.

and risk studies on the structure and process reliability, containment and

Consequently, the shipping industry would be likely to be a buyer in

related systems, and marine operation and cargo handling.

the system resulting in a potential outflow of capital from the shipping

KR has also teamed up with major shipyards in Korea such as

sector. In addition, the ETS is an unfavourable scheme for small shipping

Daewoo and Hyundai to develop optimum design for LNG-fuelled ships,

companies in terms of administrative and technical burden.

which would leave a reduced environmental footprint.

Like many shipping companies and organisations, KR is of the view that Carbon Tax ensures a level playing field and prevents market distortion. It is also very simple and transparent system to implement.

The Baltic: What are the main concerns Asian classification societies should be raising on the international stage, at IACS and IMO?

Mr Oh: I am not really in a position to comment on the views of the Asian classification societies as a group. Although I am the current chairman of ACS, the organisation is still very much in its foundation stages and is not yet ready to promote a common viewpoint.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

9

Piracy

Asian shipowners urge UN action Asian Shipowners’ Forum calls for “new and bold anti-piracy measures”

A

nger and frustration at the ever-increasing threat of piracy and

responsibility for ensuring safety of navigation on the high seas should

ship hijacks, particularly in the Somali Basin, Arabian Sea and

rest with Flag States and all governments.

in the West Indian Ocean, is now evident at every shipping

The Committee further urged individual Flag States to offer clear and

industry meeting. This anger certainly surfaced at the 21st

concise guidelines on the use of privately contracted armed security

Interim Meeting of the Asian Shipowners’ Forum (ASF) Safe Navigation

providers which have been duly vetted and accredited by the flag State

and Environment Committee (SNEC) held in Singapore in September.

The meeting criticised the United Nations (UN) and governments for the lack of urgency and political will to suppress this growing problem.

in question. “We emphasise that Governments must have the political will to firmly address this pressing problem”, said Mr Phoon. “The situation as it stands is unsustainable, and places a very serious financial

The Committee expressed concern that, despite the presence of

burden on the shipping industry. If the situation fails to improve, soaring

military and naval forces, Somali pirates attacked 163 ships, hijacked

transportation costs will have a detrimental effect on already fragile

21 of them and took 361 seafarers hostage so far in 2011. Based on

regional and global economies.

UKMTO’s report as at 9 September 2011, 11 merchant vessels with 271 seafarers remained captive under deplorable conditions in Somalia.

“Not only are these dangerous Somali pirates free to roam the Indian Ocean at will attacking and hijacking ships, they have not spared ships anchored in sovereign waters. Also, Somali pirates may serve as a strong inspiration for criminals in other states,” said SNEC chairman Patrick Phoon.

KL centre reports Somali gangs are having fewer successes

“The safety and welfare of our seafarers and their families must

Piracy on the world’s seas has risen to record levels, with Somali pirates

remain of utmost importance. Discounting the economic cost of

behind 56% of the 352 attacks reported this year, the International

anywhere between US$3.5bn and US$8bn a year, we cannot ignore the

Chamber of Commerce (ICC) International Maritime Bureau (IMB) says

lasting physical and psychological trauma suffered by our seafarers at

in its latest global piracy report. However, more Somali hijack attempts

the hands of these merciless outlaws.

are being thwarted by strengthened anti-piracy measures.

The SNEC agreed that the time had come to implement bold

“Figures for piracy and armed robbery at sea in the past nine

measures. In the absence of concrete policy to address the root problem

months are higher than we’ve ever recorded in the same period of any

of Somali piracy, the Committee strongly supported the Round Table of

past year,” said Pottengal Mukundan, director of IMB, whose Kuala

International Shipowners Associations’ call urging the UN to establish

Lumpur-based Piracy Reporting Centre (PRC) has monitored piracy

an Anti-Piracy Military Task Force consisting of Armed Military Guards

worldwide since 1991.

that can be deployed in small detachments onboard merchant ships to protect them during their transits through those treacherous waters.

It urged the UN and all governments to adopt a strong political will and take decisive actions to resolve this problem expeditiously.

The Committee reiterated that, as a bare minimum, ship owners

Somali pirates are initiating more attacks – 199 this year, up from 126 for the first nine months of 2010 – but they are managing to hijack fewer vessels. Only 24 vessels were hijacked this year compared with 35 for the same period in 2010. Hijackings were successful in just 12% of all attempts this year, down from 28% in 2011.

and managers must comply with Best Management practices but the

IMB credits this reduction in hijackings to policing and interventions

Committee also recognised that BMP 4 alone will not guarantee that a

by international naval forces, correct application of the industry’s latest

vessel is safe from being pirated.

Best Management Practice – including the careful consideration of the

Whilst ship owners and managers are doing their utmost to protect

crews’ retreat to a ‘citadel’ – and other onboard security measures.

their seafarers and ships, the Committee stressed that the ultimate

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Asia-Pacific Shipping 2011/12 www.thebaltic.com

Piracy India

India takes firm action The Indian Navy’s determined stance appears to have reimposed an Eastern limit on the range of Somali pirates.

W

hen the International Chamber of Shipping (ICS) Chairman

On the face of it, the response from the international community,

addressed the India Shipping Summit (ISS) held in

thanks to the Shipping Associations and IMO, has been impressive.

Mumbai on 10-12 October piracy was uppermost in eve-

However, the fundamental problem is the relatively small number of navy

rybody’s minds.

ships that are committed to protecting shipping – Mr Polemis likened this

Mr Polemis, who had just been awarded International Maritime

to “a band aid on a gaping wound”.

Leader of the Year Award, forcefully articulated the position of the

He summarised by saying: “The shipping industry and the world

international shipping industry on the issue of piracy, saying they had

community are very concerned about the lack of decisive action by

“reached the end of their tether” over a situation where “the international

governments. I believe the time for talking has passed, we need action

community has ceded control of the Indian Ocean to pirates”.

not words. In calling for the decisive and rapid eradication of piracy I

Focusing on one of the hottest current issues, piracy, Mr Polemis said

am doing no more than supporting what is already contained in the UN

“India and its seafarers have truly been in the firing line”. He went on to

Convention of the Law of the Sea. We need:

state that this is because India is a major maritime labour supply country

• Navies to act robustly against the pirates.

and Indian seafarers are widely dispersed amongst the international fleet,

• All motherships, big and small, to be immobilised.

as well as serving on board Indian flag tonnage. Sadly this means that

• All suspected pirates to be delivered to a court of law and if found

Indian nationals have been especially exposed to the risk of attack and capture for ransom by violent Somali pirates.

guilty to be subject to the full weight of the law.

• Pirate bases ashore to be targeted for action.

© All rights reserved by imo.un

Shipowners want firm action against pirate motherships

Asia-Pacific Shipping 2011/12 www.thebaltic.com

11

Piracy India

• All hostages and their ships currently in Somalia to be freed.

gangs. An Indian warship captured Vega-5 some 600 nautical miles off

• United Nations to arrange to provide armed military guards, either as

Mumbai. The vessel itself had been hijacked by Somali pirates on 28

part of a Blue Beret force or as VPDs (Vessel Protection Detachment

December 2010, and her position and the number of pirates found on

Units), that many independent nations can volunteer to provide.

board suggest that the vessel had been used to stage multiple attacks

• All vulnerable merchant ships transiting the AWRP (Additional War Risk Premium) area, to receive armed military guards.

• All nations in the region to agree and to assist in the embarkation and disembarkation of the AMGs (Armed Military Guards).

on shipping in the Indian Ocean. The captured pirates were taken to Mumbai to face trial. A few weeks earlier the Indian navy had sunk two pirate motherships as part of its ongoing ‘Operation Island Watch’.

The action drew praise from the ICC International Maritime Bureau

The world community cannot tolerate the abuse and the killing of

(IMB) whose director, Pottengal Mukundan, commented: “IMB

seafarers of any nationality. This has to stop now. The pirates must get

congratulates the Indian navy on the firm stance taken by them against

the message that we have reached the end of our tether, and that any

the pirates and particularly the capture of a large number of pirates. This

act of piracy will be severely dealt with.”

instance shows that the pirates were planning attacks against ships on

In many ways, however, Mr Polemis was preaching to the converted.

an industrial scale. This action has prevented many potential attacks

India is one of a handful of states, notably the US, Russia, Malaysia and

against merchant vessels. Similar actions against known pirate action

South Korea, whose navies have taken robust action against pirates.

groups is vital in an area which is simply too vast for close monitoring by

Mr Polemis acknowledged: “We have been particularly impressed by

naval assets. For too long pirate gangs have been operating with relative

the seriousness that the Indian government has afforded this problem

impunity.” Along with the recaptured vessel, 13 hostages were released

and the willingness of the Indian Navy to act robustly against the pirates.”

Urging the Indian Navy to continue its efforts, he called on it to focus

as part of the operation. In January 2011, the Indian navy sank two pirate motherships as part of the ongoing ‘Operation Island Watch’.

on inhibiting the activities of motherships, adding: “In particular, it will be

Mr Mukundan continued: “We urge other states to commit additional

most helpful if the Indian Navy can continue to ensure that within some

resources to help fight this problem and to give naval commanders the

300 nautical miles of the Indian coast they continue to prevent the pirates

rules of engagement which will provide an effective deterrent against

from operating, since this provides a relatively safe route for ships to and

the pirates.”

from the Gulf of Aden to the Arabian Sea and beyond.”

The Indian Navy has conducted numerous operation against pirates but an action taken in March sent a particularly clear signal to the pirate

12

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Dry market

Chinese demand set to drive recovery next year Atsuo Asano, general manager of “K” Line’s Coal & Iron Ore Carrier Group looks at the prospects for the capesize market

D

espite the world economy moving into a difficult period, the capesize market has shown a somewhat stronger tone in the last few weeks, with several new front haul orders and a lack of the right tonnage in both the Atlantic and Pacific basins.

Fundamentally, the demand and supply balance for capesize bulkers

is still in an over-supply situation. However, this recent improvement in the market is evidence that cargo trade volume is increasing and demand for capesize ships is also growing.

From the beginning of this year, Chinese crude oil output has stayed at a high level, close to 60 million tonnes per month. This year’s output is estimated to reach 700 million tonnes, which is a 12% increase year on year.

At the same time, the volume of iron ore imports in the first half of this year has increased by 8% from the same period last year. This indicates that the proportion of domestic iron ore usage has expanded. In fact, output of domestic iron ore production from January to June this year increased by 18% compared to the same period last year.

So, the demand side is growing steadily in China and should be seen in the same light as a Chinese government announcement that the country’s expected annual GDP growth for the next five years is 7%.

Similarly the demand for seaborne transportation from India is also growing, especially from the infrastructure sector, including the steel industries and power generation.

However, looking at recent capesize fleet growth, it is expected that the pressure from the supply side will still be strong and continue to outstrip demand growth, even though the number of ships going for demolition are increasing at historically high rate.

It is reported by sources that 147 new vessels, all of which are at least

Atsuo Asano, general manager “K” Line’s Coal & Iron Ore Carrier Group

100,000 dwt, totalling 26 million tonnes deadweight, have been delivered from January to July this year, while 52 vessels have been demolished in same period. Actually, the deletion of old vessels is closing the gap between demand and supply now, but it seems that the current demolition rate is higher than normal and further downward pressure will be placed on the capesize market, unless the current high demolition rate can be kept up.

The question is when will the capesize market pick up? As demand is there and growing, occasional improvements in the market could be seen at any time. However, full-scale of recovery of the market can be expected from the second half of 2012 onwards.

We may say that the capesize market is still very fragile, despite the growth in demand, in view of the uncertain world economic situation.

While we do not doubt that the stronger capesize market will be back after the gap between demand and supply has been closed by economic growth in developing countries, we feel that we must be prepared for a potentially difficult six months.

“K” lines’ 2009-built Tohoku Maru

Asia-Pacific Shipping 2011/12 www.thebaltic.com

13

Tanker market

Single hull exit set to cut oversupply Tomoyuki Okawa, general manager of “K” Line’s Tanker Group explains why he sees a revival in rates coming soon

T

he tanker market, currently depressed due to fleet over supply, will recover from the end of year 2011. There are several reasons to support this view. One is that VLCC newbuilding supply will be actually only about 70% of expected output from the yards.

That is to say there will be about 60 newbuilds in 2011, as was the case last year. This is due to a weak tanker market as well as difficulties some owners have experienced in funding newbuildings. Also, the phasing out of single-hull VLCCs should remove about 30 such vessels this year.

On the demand side the IEA oil demand forecast shows oil increasing this year by1.4 million bbls/day, of which 70% add to seaborne trade.

Overall, there is likely to be an increase in demand equivalent to about 30 VLCCs and increase in demand is set to continue at least until 2015.

The number of spot VLCC fixtures in the first half of this year increased by about 10% over last year, supporting expectations of demand increase.

Currently VLCC’s demand/supply balance is almost the same as last year, but tonne-mile increases are to be expected due to more crude being transported from the Atlantic basin to Asian countries.

Clean petroleum product (CPP) trading will also increase with more long haul activity than in the first half of this year due to CPP production increases in Asian nations, while CPP production in the Atlantic basin is likely to remain unchanged or maintain a current slight downward trend due to commercial considerations at the refineries.

The number of newbuildings joining the CPP fleet is fixed until 2013 and is much smaller than in the past few years.

However, the above perspective will be threatened if there is a world economic recession due to financial difficulties, especially in US and European nations.

Mr Okawa’s analysis is broadly supported by an assessment by

Tomoyuki Okawa, general manager “K” Line’s Tanker Group

Braemar Shipping Services. It said that, despite record crude oil liftings from the Middle East and anticipated demand growth of around 2% for 2011, there remains a persistent oversupply of VLCC tonnage, according to analysis by Braemar Shipping Services.

However, owners may be relieved to know that the 47 VLCC deliveries scheduled for the first half of 2011 did not all enter the market on time.

In both Q1 and Q2 this year, over 20 VLCC deliveries were inked in at the rate of more than one every week. In the event, Braemar recorded fewer than 20 VLCC deliveries in both quarters of 2011 to date: 19 in Q1 and 15 in Q2.

On 1 July, the VLCC fleet was 559 ships including 22 non-double hull units, with 150 ships in the orderbook.

In deadweight capacity, the VLCC fleet grew by 5.6% this year, from 160.9 million dwt on 1 January 2011, to 169.9 million dwt on 1 July.

According to Braemar, it seems likely that further slippage from delivery schedules will happen in the coming quarters.

A market recovery could be on the way for Tankers like “K” lines’ Rainbow River

14

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Broker’s view

Long-term optimism In charge of Braemar Shipping Services recently expanded Asian headquarters in Singapore, Denis Petropoulos explains how he sees the opportunities and challenges of providing shipping services in the region.

D

enis Petropoulos is an executive director of London-based Braemar Shipping Services but moved out to Singapore nearly a year ago to head up the Group’s expanded Asian headquarters, which now employs more than 120 staff at its

Pickering Street offices.

He says that Singapore is strengthening its position as a technical and commercial maritime super hub, but corporate success cannot be taken for granted and is as dependent on strong and effective relationship-building.

“One of the issues participants coming to Singapore expect is that the region is going to come to them. But to succeed in Singapore, you have to be prepared to go out and meet the region. South East Asia is a highly competitive region so drawing on the good relationships made is crucial to maximising opportunities that may exist. People also have the wrong impression that you have to undercut your prices in order to compete. I believe that, while the service you provide has to come up to scratch, it is the companies and the individuals who can build on new and historical relationships who will prosper,” he said.

The Group’s five Singapore businesses have been brought under one roof – shipbroking, including offshore, port agency as well as Braemar’s technical services of maritime and offshore surveying, marine warranty and hull and machinery surveying, and loss adjusting. These are all represented through its Braemar Seascope, Cory Brothers and Braemar Falconer and Braemar Steege subsidiaries. The Salvage Association has also been introduced through a recent acquisition.

Braemar has expanded its penetration of the global marine and offshore services sectors by bringing together its technical business units under the umbrella control of the Braemar Technical Services (BTS) division.

The establishment of BTS will, it believes, benefit both customers and shareholders by providing a pool of wider industry expertise;

Denis Petropoulos is an executive director Braemar Shipping Services

encouraging synergy between the business units and forming a wider global network of offices.

Braemar has also expanded its chartering activities in Singapore by

means that geographically, Singapore is very well placed to benefit.

moving into the deep-sea crude and products tanker trades as well as

But you don’t come to Singapore just to do business with Singapore;

sale and purchase, adding to its already established dry cargo, container

you base yourself in the area because you want to do business in the whole region, which inevitably includes China and India. That means

and offshore broking.

“Shipping isn’t necessarily moving east but it is the growth in

networking, visiting clients and clients visiting you. Singapore is a hub of

shipping that is moving east, Denis Petropoulos said. “The geography

cultures as well as of shipping expertise, and the cultures differ in Asia as

of Singapore makes it an ideal location for a maritime cluster as it forms

much as they differ in Europe or the Americas,” he added.

the perfect crossroads from east to west – from Australasia, India and

Braemar also has shipbroking offices in Delhi, Mumbai, Perth,

Japan, Korea and China to Europe and beyond. Regional demand

Melbourne, Shanghai and Beijing. “The region generates good business

in Vietnam, Malaysia and Thailand as well as Indonesia and Australia

for our Indian office in particular, with imports of coal from various

Asia-Pacific Shipping 2011/12 www.thebaltic.com

15

Broker’s view sources, notably Indonesia. With exports of iron ore from Australia and

massive over-ordering following a strong market. The over-ordering

China’s insatiable demand, our offices in Australia and China are in

state continued until the mid-1990s when there was light at the end of

continuous dialogue dealing with Singapore,” says Mr Petropoulos.

the tunnel. I can’t say we have an identical situation to then, but over-

Singapore is growing as a regional hub and as an island it is probably becoming close to capacity, but it has held onto its position as the

ordering is here and one of the solutions to ships running below OPEX is lay-up across sectors.”

regional capital of commerce and, according to Mr Petropoulos, is going

This time though, Mr Petropoulos observes, there is a rather different

to remain that way. “It has managed its finances well in the past three

factor at work. The Chinese shipyards are going to continue in business

years and as a result has come out stronger,” he said.

and will need to maintain a throughput, although not necessarily run to

But while Singapore may have witnessed double-digit GDP growth

full capacity. That, he says, is a given.

over recent years, the shipping industry on the island and elsewhere, is

The Chinese yards’ first preference is to secure orders from foreign

struggling to come to terms with the ravages of the global recession.

owners, but where that is not possible Chinese owners step forward.

Shipowners are finding problems offsetting rising vessel operating

This has the potential effect of keeping prices down in the international

costs against dwindling freight rate revenues. While the environment in

newbuildings market and also increasing the Chinese-owned fleet. As a

Singapore and the rest of South East Asia is vibrant and shows every

result oversupply, with the obvious implications for freight rates, looks set

sign of remaining so, the question on the lips of experts like Denis

to continue for the near-term future.

Petropoulos is to what extent is the depleted freight market sustainable

Nevertheless, Mr Petropoulos points out, there are still massive volumes to be transported, particularly in the Asia Pacific region, and

for business?

Looking at the prospects for shipowners, Mr Petropoulos added:

shipping and ship broking will carry on. He notes wryly that during the

“More owners might start locating in Singapore in search of a growing

30 or so years he has been in the business, rates and markets have

client base and because they want to grow their relationships across

been considered low for about 70% of the time. “I’m still here,” he says,

the board. Today, it is survival of the fittest. Those shipowners who have

“and so is shipping. The owners who survive know how to handle the

made provisions for poorer markets and who have been conservative

lean times.”

in their investments and modest in ordering ships will survive. They will have to spend money earned but they will survive.”

But what about scrapping levels; are they at the levels they need to be at? “Scrap yards do not have the ability to scrap tonnage fast enough

“Some owners who have been somewhat eager in ordering, because

to meet the new supply coming on-stream so lay-up is an agenda item

they were pushed by available money and started to order without giving

that will be talked about more and more over the next few months. Some

real consideration to what actual demand will be over the next two

harsh decisions will be taken. It is not necessarily the owner who will take

years, will suffer and, if they have ordered tonnage at prices that can’t

the decision but the operating company with the debt,” he said.

be sustained over the next two years, then I will say there will be quite a

Shipping does have its cycles, and unpredictable events can change freight market directions, but the fundamental demand for raw materials

lot of tonnage changing hands.

“The ships won’t go away and one factor that can’t be discounted

and energy services is constantly growing in Asia. As Mr Petropoulos

if the market carries on as it has done, is lay-up. Lay-up has been

stressed, he remains upbeat about the medium to long-term future in

present in every market segment since the late 1970s when there was

these regions.

Handling the lean times

16

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Risk management Freight derivatives

Spreading the word David Hughes reports on a Baltic Exchange course on shipping derivatives that is now in its sixth year.

T

he Baltic Exchange runs a series of shipping courses and work-

So how aware of risk management and derivatives trading are Asian

shops on risk management and derivatives on the theme Dealing

based companies? Dr Alizedeh said that in the early days it was mainly

with Unpredictable Change.

traders in Europe who were aware of and used derivatives but that was no

Two courses, Freight Derivatives & Shipping Risk Management

and Advanced Freight Modelling & Trading, are delivered around the world

longer the case. Now Asian-based shipping companies and traders are as likely as the European counterparts to make use of derivatives.

by Professor Nikos Nomikos and Dr Amir Alizadeh of the Centre for

He did say that one thing holding back the the development of physical

Shipping, Trade & Finance at Cass Business School. Singapore is the

trading and futures in Asia was the time zone issue. Many companies in

regular Asian venue for the courses.

Asia waited until Europe had started business before trading. The advent

Dr Alizadeh told The Baltic: “We have been running courses in Asia since 2005, generally in Singapore. Initially we ran them once a year in

of the Baltex screen would, he thought, go some way towards rectifying this situation.

Singapore but this has increased to two a year. We have between 15

Looking ahead Dr Alizedeh saw increased used of shipping derivatives

and 25 participants in each course, many of them coming from outside

in Asia, simply because it now accounted for about 50% of world trade

Singapore.”

and because trade in raw materials was growing strongly. However current

“Feedback has been good and interest in both courses remains high.

There was understandably a falling off of number during the Credit Crunch but interest soon returned to previous levels.” The downturn was not surprising given very difficult market conditions of 2008 and 2009.

A mixture of lectures and workshops is aimed at achieving a high level of practical knowledge within a short period of time.

market conditions could dampen interest in futures, if freight rates and volatility remained low.

A senior executive in a shipping bank who had been on the courses told the Baltic that the course was useful, especially for people working for shipping companies. He added: “I have not really seen a shift towards higher usage of risk management tools by customers.”

Dr Alizedeh said that although a significant number of participants take

The banker pointed out that, for some risk management tools,

both courses, and they are run back to back, the objective and targeted

customers need banking lines noting: “It is questionable whether banks

attendees are rather different. He explained that Freight Derivatives &

will provide these nowadays. Each bank will have a look at customers

Shipping Risk Management is a basic course intended to raise market

individually to see whether the tools are beneficial for the clients.”

awareness of risks involved in shipping businesses and how various

On the other hand a risk management executive in a major dry bulk

physical and derivatives instruments can be used to control such risks

operation in Asia had no doubts both that the course was useful and

efficiently and effectively.

that risk management should play a key role in shipping companies. The

The course is based on the premise that shipping markets are becoming increasingly risky. This calls for prudent control of freight rates,

company concerned runs a large and sophisticated risk management department.

ship values, bunker price, credit, foreign exchange and interest rate risks,

On the courses, and particularly the Advanced, the executive thought

which are all part of the shipping investment and day-to-day operating

that it certainly included enough mathematics to carry out effective

activities.

modelling. “But the important thing with teaching risk management,” he

The module is delivered over two days by experts in the areas of

said, “ is to make it simple. These courses did that. They also made it clear

shipping and commodity risk management and uses a variety of real life

that risk management is much more than just modelling and derivatives. It

examples. It demonstrates how risk can affect cash flows from operating

is about a company’s culture.”

activities along with an in-depth analysis of theoretical and practical aspects of risk management instruments in shipping.

“This course is primarily aimed at those in shipping companies and elsewhere who need to understand the use of derivatives for risk

While this person was was clear on the advantages of using risk management tools many Asian-based companies were “cash sensitive”.

Using derivatives meant real cash exposure and many companies were not prepared to allocate cash for hedging.

Some of these companies had used the over the counter (OTC)

management,” said Dr Alizedeh.

The Advanced Freight Modelling & Trading course, on the other hand is aimed much more at those actively trading freight derivatives.

Initially more participants signed up to the Risk Management course

shipping derivatives market, which meant exposure to credit risk. But over the past two to three years trading had been almost entirely in cleared futures where there was cashflow risk.

but now an equal number attend the advanced course which focuses on

This experienced risk management professional cautioned that while

modelling freight rate dynamics and pricing options on freight. It includes

hedging with FFAs was a very good tool it as also important to be aware of

constructing forward curves on freight, modelling freight rate volatility as

the pitfalls and drawbacks. It is possible to lose significant amounts of real

well as hedging and trading strategies using freight options.

money on futures, as was demonstrated in 2008 and 2009.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

17

Risk management Freight derivatives

Baltex makes good start The dry freight electronic marketplace is being well received, as David Hughes reports.

F

ollowing its successful launch in June, the Baltic Exchange’s electronic marketplace for dry freight derivatives, Baltex, has

launched incentive schemes aimed at increasing the already substantial interest being shown in the system.

The new Initiator Scheme for Principals (ISP) will run for an initial term of six months from 1 October and offers principals the opportunity to receive a 100% rebate of the Baltex Transaction Fee subject to certain terms.

The ISP has been approved by the UK’s Financial Services Authority (FSA) and by Baltic Exchange Derivatives Trading Ltd (BEDT), which runs Baltex.

The second initiative is the Broker Execution Scheme (BES) which will pay brokers up to US$6 per lot traded.

Baltex chief operating officer Paul Stuart-Smith the strategy of using “market-maker” schemes to boost volumes saying: “With a critical mass of companies signed up and at least a further 30 in the pipeline, we have now entered the second phase of the development of this market which is to build up liquidity.” He added that another facet of this strategy was to the increase the number of jurisdictions in which Baltex can be used while continuing to market the system in key trading centres.”

The number of principal and broker members of Baltex is increasing steadily.

The initial 15 principals included Asia’s largest diversified commodities trading company Noble Group and major Hong Kong-based modern handysize and handymax dry bulker owner and operator Pacific Basin Shipping.

As expected, initial trading volumes were light, but Baltex members have

18

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Risk management Freight derivatives been putting competitive prices on the screen and trades are clearing

traders. It incorporates a fully bespoke screen layout, built-in warnings

within 20 minutes and often much more quickly.

and functionality which can be tailored to traders’ needs as well as an

Regulated by the UK’s Financial Services Authority (FSA) as a Multilateral Trading Facility, Baltex provides live FFA prices and on-line

Application Programming Interface (API) which can be used to interface into in-house systems.

execution and supports straight-through processing to the international

Baltex’s chief operating officer Paul Stuart-Smith says that so far

clearing houses LCH and NOS, with SGX and CME expected to be added

the system has been operating well, observing: “All the members seem

shortly. The transaction’s clearing status is displayed in real time.

happy with the way in which it is operating and we’ve received lots

The system is available for trading from 0730 to 1800 UK time and can be made available initially to participants throughout the European

of compliments about how easy it is to use and its straight forward functionality,” he says.

Stuart-Smith admits that it has been a long road to get here and that

Economic Area, Switzerland, Singapore and Monaco. Other jurisdictions

meeting the requirements of both the regulators and Baltic members was

are expected to follow shortly.

Used by both brokers and principals, Baltex has been developed in

at times a difficult balancing act. “I first got involved with the project in

close collaboration with the market. It was designed with the backing

November 2010 and developing a business model which would appeal

of major principals in the FFA market who were looking for a regulated,

to all was a challenge. However, we are now up and running, have a

central screen which would enable them to trade dry freight derivatives in

sustained commitment to Baltex from a range of major FFA traders and

an anonymous, simple way which would also meet the tougher regulatory

although we’re not there yet, we’re growing to plan.”

requirements being imposed by the European and US financial authorities

So far most of the trading activity on Baltex has been on shorter

on derivatives trading. Principals told the Baltic Exchange that they wanted

dated contracts covering capesize, panamax and supramax time-charter

to see more transparency in this market and greater liquidity

averages. Against a backdrop of a market trading around 20,000 lots

All live prices can be seen by Baltex screen members, but the trader’s

per week and a low freight rate environment, Mr Stuart-Smith believes

identity is kept anonymous to all except the nominated broker. As well as

that Baltex offers the FFA market a chance to develop from a niche to a

a live trading screen, a view only option is available to those who simply

mainstream commodity market.

want to see the depth of the market. This view only mode is also be made available through quote vendors.

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19

Supply & demand

Cheap ships, low rates Overcapacity looks set to be the dominant feature of the shipping markets for years to come.

I

n a recent presentation, Martin Stopford, managing director of

Moore Stephens says that overtonnaging was a recurrent theme

Clarkson Research Services and well known shipping economist,

throughout the comments. “Markets are at rock-bottom,” said one

painted a gloomy picture of the market in the coming decade.

respondent, “and will stay there for some time because of the large

Dr Stopford outlined three themes for the 2010s: shipyard

number of new vessels due to come into service. Older vessels and

overcapacity; energy costs; and the environment. All were correlated, he

speculative investors, as well as low-grade operators, will have to

said, and would lead to a renewed focus on costs.

disappear before the situation can start to improve.” Another respondent

He said that shipbuilding overcapacity will mean cheaper ships and greater willingness to do innovative work while lower ship earnings will push the strategic focus towards cost control.

noted: “The situation looks pretty grim, given the massive amount of over-ordering.”

Geographically, demand trends emerged as the most significant

High energy costs will push up the bunker prices. But he cautioned

factor for operators in Asia, Europe and North America (19%, 23% and

that society has only accepted this at a macro level while micro-decision-

30%, respectively), with competition and finance costs making up the

making is only partially committed. He likened the situation to that of

remainder of the top three.

There was a big fall in the numbers of respondents expecting rates

the 1980s.

Environmental pressure will increase because shipping is seen to have an oversized carbon footprint. Heavy fuel oil is seen as ‘super dirty’

in the tanker sector to increase over the next 12 months - down overall from 44% last time to the lowest level since February 2009, at 34%.

and shipping is a growth industry so its emissions are increasing. But,

In the dry bulk sector, the number of respondents expecting rate

again, commitment at a macro level is not reflected in micro-decision-

increases over the next 12 months was down from 37% to 27%, an all-

making.

time low in the life of the survey. The number of owners who shared this

Shipbuilding technology is very mature and so has no magic solutions.

Cutting energy costs and carbon footprint will involve compromise and difficult choices. The options will include lower speed, modified designs

opinion also hit an all-time low, while the 8% of charterers of like mind was easily the lowest in three-and-a-half years.

Moore Stephens shipping partner, Richard Greiner, says: “The drop in shipping confidence to a record low is a disappointment. But it has

and multiple fuel systems (eg oil or LNG).

These factors, Dr Stopford argued, mean that cost management will have a much greater urgency than in the past decade.

The realisation that over capacity is set to be a semi-permanent feature of the shipping markets was a major factor causing overall

been coming. Given what has been happening in the world, and in the industry, confidence remained surprisingly high last year, but it has started to slip in 2011. Indeed, in many ways, it is back to the levels of two years ago.”

confidence levels in the shipping industry to fall to their lowest

He continues: “We are starting to see now what many had predicted

level for three-and-a-half years in the three months ended August

would happen much earlier. Banks are calling in their loans, shipping

2011, according to the latest shipping confidence survey by shipping

companies are filing for bankruptcy protection, ships are being arrested

accountant and adviser, Moore Stephens.

and auctioned around the world, and the courts and arbitration tribunals

Fears about overtonnaging, and continuing uncertainty about the

are starting to see an increase in their workloads. Financiers wants their

global economy, were the main reasons for the decline in confidence.

money, and are ready to take what they can get now rather than wait

The rising cost of bunkers was also a cause for concern.

in the hope that the markets will recover and enable them to achieve a

In August 2011, the average confidence level expressed by

return on their investment. This results in a situation in which everybody

respondents in the markets in which they operate was 5.3 on a scale of

loses something. Financiers need to continue to work together with

1 (low) to 10 (high), compared to 5.6 in the previous survey in May 2011.

shipping companies and external financial advisers to find a way forward

This is the lowest figure recorded since the survey was launched in May

for viable long-term businesses, perhaps exploring the opportunities

2008 with a confidence rating of 6.8, which remains the highest rating

offered by independent business reviews.”

Summing up Mr Greiner says: “There could be some nasty surprises,

achieved thus far.

Perhaps significantly confidence held steady in Asia, at 5.7. On the

and some tough decisions, in the months ahead for operators and

other hand it remained lowest in Europe, falling from 5.5 to 5.0, its lowest

investors alike. But those who are in shipping for the long term will ride

level since the survey was launched.

it out, and many will have had previous experience of doing just that.”

20

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Environment Overview

Green thinking As David Hughes reports, shipowners and maritime authorities in Asia are under much the same environmental pressures as their counterparts elsewhere.

T

here are no Emission Control Areas (ECAs) in Asia and much of

voluntary programmes designed to recognise and provide incentives to

the impetus for increased environmental regulation has come

companies that adopt clean and green shipping practices over and above

from the US and Europe. Nevertheless, Asian shipping is now

the minimum required by IMO Conventions.

The Singapore Green Initiative comprises three programmes: Green

very closely engaged in the environmental debate at all levels.

At September’s 21st Interim Meeting of the Asian Shipowners’ Forum

Ship, Green Port and Green Technology.

(ASF) Safe Navigation & Environment Committee (SNEC) in Singapore,

The Green Ship Programme is targeted at Singapore-flagged ships

the shipowners’ welcomed the International Maritime Organization’s (IMO)

that exceed the IMO’s recently EEDI requirements. Qualifying ships are

adoption of mandatory measures to reduce emissions of greenhouse

eligible for a 50% reduction in Initial Registration Fees payable and a 20%

gases (GHGs) from international shipping.

rebate on their Annual Tonnage Tax.

In a statement ASF said: “The amendments to MARPOL Annex VI

Under the Green Port Programme ships using type-approved

Regulations, which make mandatory the Energy Efficiency Design Index

abatement technology (‘scrubbers’) or that burn clean fuels with sulphur

(EEDI) for new ships, and the Ship Energy Efficiency Management Plan

content lower than MARPOL requirements within Singapore port limits,

(SEEMP) for all ships are pragmatic and goal-based, which adhere to

receive a 15% reduction in port dues.

the IMO’s principles of no more favourable treatment. The Committee

The Green Technology Programme encourages local maritime

hopes that the implementation of these IMO energy efficiency design

companies to develop and adopt green technologies by providing

standards will discourage any individual or regional group of countries from

co-funding for up to half of the qualifying costs. MPA has set aside S$25

introducing unilateral measures to curb GHG emission from international

million (US$19 million) from the Maritime Innovation and Technology Fund

shipping.”

for this programme. If response is good, Mr Lam said, MPA will set aside

Like the rest of the industry, Asian owners are waiting to see what, if

another S$25 million.

anything, comes out of UN Convention on Climate Change (UNFCCC) at

Mr Lam added that commitment and support from the industry

the end of the year. In particular, interest focuses on whether, and how,

towards clean and green shipping was also evident from the Maritime

shipping will be expected to fund action to combat global warming and

Singapore Green Pledge signing ceremony held in conjunction with the

curb GHG emissions. Through membership of the International Chamber

announcement of the Maritime Singapore Green Initiative in April. During

of Shipping, the region’s owners have stated a preference for a bunker levy

the ceremony, 12 organisations from a diverse spectrum of the maritime

scheme rather than emissions trading.

industry, including shipping lines, port operators, shipyards and oil majors,

While shipping still has to find out what will be expected regarding

signed a pledge to support clean and green shipping.

GHGs it is all too aware of the need to reduce emissions of sulphur dioxide (SOX) and nitrous oxides (NOX).

Hong Kong has already initiated a voluntary initiative, the Fair Winds Charter, to reduce pollutants in its waters and in the Pearl River Delta. A number of major shipping lines have undertaken to use marine gas oil with a sulphur content of 0.5% at berth in Hong Kong from 1 January 2011 to 31 December 2012. Members of the initiative say they hope that the voluntary agreement will encourage authorities in Hong Kong and Guangdong province to collaborate in efforts to establish limits on ship emissions in the region in line with international standards.

Meanwhile, the Singapore government has said it is “very encouraged by the good response and participation from the industry we have received so far” to its Maritime Singapore Green Initiative that was launched in July.

Maritime and Port Authority of Singapore’s chief executive Lam Yi Young told delegates at the Green Ship Technology Asia Conference this week: “These are

“Green” ships pay discounted port fees when using Singapore’s busy anchorages

Asia-Pacific Shipping 2011/12 www.thebaltic.com

21

Environment Lloyd’s Register Asia

Seeking solutions John Rowley, regional director of Lloyd’s Register Asia, looks at the alternatives to heavy fuel oil as environmental pressures on shipping continue to grow

L

loyd’s Register is an organisation that exists to deliver public

energy and the need to reduce its

benefit. Our mission is to uphold safety of life, property and

environmental impact.

the environment and in today’s world an important part of this

Shipping still sits behind the

has to be helping all of society to work to combat the effects of

car and aerospace industries,

climate change. With shipping, this means vessels that have better, more

who both have spent decades

environmentally-friendly designs and, of course, more advanced means

optimizing their technology and,

of propulsion.

while tighter regulations have

Last year, Lloyd’s Register celebrated its 250th anniversary. It’s

helped

propel

the

maritime

something we are very proud of. We started life in a Central London coffee

industry into action, the main

shop, serving the city’s thriving shipping industry. The world, of course,

driver has still probably been cost.

has changed a lot since the middle of the 18th century and so has Lloyd’s

The industry has for a long

Register. Then, our ship surveyors, drawn from the ranks of shipwrights

time relied on low-grade bunker

and master mariners, set the first standards of seaworthiness for ships.

fuel that contains sulphur oxide

Today our scope is far wider but our essential mix, of practical experience

(SOx), nitrogen oxide (NOx) and

and technical expertise, remains the same.

other pollutants.

Today we have almost 8,000 employees in 247 locations across

John Rowley

The price of bunker fuel has

the globe. Our people provide independent assurance to companies

tripled in the past three years and for large vessels, fuel can still make

operating capital intensive assets, to help improve the safety, quality and

up more than 50% of the operating costs, therefore efficiency is

performance of their businesses.

paramount to profitability, which in turn is paramount to long-term supply

We work with clients who range from small local businesses to

chain sustainability.

multinational companies managing large-scale, high-value assets, where

But this is not the long term answer. The real challenge here is far

the costs of mistakes can be very high, both financially and in terms of

trickier. The actual question is to what extent shipping can make real

their impact on communities and the environment. And, while we work

efficiency improvements that allow it to move toward genuinely clean fuel

across multiple industrial sectors, we have not forgotten our roots.

sources that will tangibly reduce its greenhouse gas (GHG) emissions?

We are still a leading global provider of marine classification services,

LNG is one of the much talked about options. However, while LNG will

helping to ensure that international recognised standards are maintained

help reduce SOx, NOx and particulate emissions, there is still no hard and

throughout the life of a vessel – from design through to decommissioning.

fast evidence that proves it will help reduce GHG emissions.

Today we also provide sophisticated risk management and support to ship

Putting the practical difficulties momentarily to one side – especially

owners and shop managers. We provide management systems, training,

that of developing a global LNG bunker network with all the corresponding

human factor support, environmental services and fuel oil quality testing.

logistical, commercial and safety issues addressed – for now, at least,

We are also carrying out essential research work in the area of the

LNG can be seen as only part of the solution. There is no solid proof

use of future fuels for the marine industry – including liquefied natural

currently that LNG lowers GHG emissions (LNG is, after all, another fossil

gas (LNG), nuclear, bio-fuels, fuel cells and wind assisted propulsion. The

fuel) and, also, a plentiful supply of cheap gas is far from guaranteed.

shipping industry is approaching a watershed as it looks at how to adopt

Yet our society is dependent on efficient low-cost shipping and this

new technologies in response to environmental issues. Lloyd’s Register,

dependency is only set to increase. World population growth will continue

with its knowledge, expertise and unique global reach has a leading role

to rise and, while the current focus is on renewable technologies and

to play in this process.

nuclear power, fossil fuels are expected to continue to dominate primary

Global shipping has expanded dramatically in recent decades and

energy demand until the middle of this century.

ships now move more than 85% of the world’s trade. That accounts for

When Lloyd’s Register celebrates its 300th anniversary, coal and oil

almost 3% of global carbon emissions – the equivalent of a major national

will still be important, but then so will nuclear and renewable sources.

economy. This cannot be ignored and shipping, like the rest of the world,

The important factors in the coming 50 years will be the three-way

has to act responsibility. Today, Asia is the home of ship building so the

equation between fuel availability, technology efficiency and environmental

solutions have to be implemented in the Asia-Pacific region effectively.

sustainability. The main factors will be how power is made – or converted

But what are the solutions? The shipping industry has been using heavy

from raw fuel to usable energy – and how it is used.

fuel oil (HFO) to power its engines for almost a hundred years. Before that

A change in cultural habits will reduce actual energy demands and this

it used coal and, before that, wind. Today there are many competing

will be as true for shipping as it is for the rest of our world. What we do

approaches and agendas as the world attempts to plan successfully

know however, is that whatever the outcomes here, Lloyd’s Register will

for the future, by charting a course between an increased demand for

be an important part of the solution.

22

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Environment Straits of Malacca

Strait talking The coastal states bordering the Straits of Malacca and Singapore and the international shipping industry organisations are working to improve navigational safety in these busy and important waterways

T

he 4th Co-operation Forum on Safety of Navigation and

are intended to result in agreed proposals to enhance the management

Environmental Protection in the Straits of Malacca and Singapore

of traffic in the Straits.

took place in Malacca, Malaysia, in early October.

The ICS report praises the skill and professionalism of those managing,

The chief executive of the Maritime and Port Authority of

operating and navigating ships in the Malacca and Singapore Straits.

Singapore, Lam Yi Young said that the meeting of the Co-operation

However, ICS suggests that improvements could be made to the location

Forum, under the chairmanship of Malaysia, was a milestone for the

of pilot boarding areas and the timing of pilot departures. There is also

Co-operative Mechanism, kicking off the second cycle of chairmanship

concern about the understanding and use of navigation systems, such as

since the Co-operative Mechanism was launched at an IMO-Singapore

ECDIS, AIS and radar, both at sea and ashore.

meeting in September 2007. He said: “That the Co-operative Mechanism

Of the incidents examined, 68% resulted in collisions and all could have

has come this far suggests that it remains relevant and important for

potentially caused harm or pollution incidents. The incidents involved a

enhancing safety of navigation and environmental protection in the Straits

range of vessels from tugs to tankers.

The report recommends the littoral states consider how to address:

of Malacca and Singapore.”

Mr Lam noted that the littoral states have taken significant technological

• Speed management in the Singapore Straits

and regulatory measures to enhance navigational safety and environmental

• Heavy traffic around pilot boarding areas

protection in the Straits. He said: “For example, we tested the usefulness

• Optimum pilot departure times

of installing AIS-B transponders on vessels under 300 gt and are in the

• Improved VTS/VTIS interaction with shipping

process of setting up a wind, tide and current measurement system in the

• Situational awareness

Straits. We are also considering the feasibility of establishing emergency

• Pilot, tug, berth availability integration.

towage response capabilities along the Straits, and continue to maintain

ICS director marine, John Murray commented: “The littoral states welcomed the report and we were pleased to hear that measures are

the all-important aids to navigation.”

This “good work” had been possible, he noted, only with the support

already being taken to further improve navigational services in the Straits.

of the contributors to the Co-operative Mechanism. Key contributors

Malaysia and Indonesia have agreed to forward additional accident reports

included China, European Union, Germany, Greece, India, Japan, Republic

to further enhance the ICS study’s findings, particularly in relation to the

of Korea, Norway, Saudi Arabia, United Arab Emirates and the US. Mr Lam

Malacca Straits. Singapore will be sending information on measures it has

also mentioned the Nippon Foundation, the Malacca Strait Council, Middle

already taken to improve navigational services in relation to the Singapore

East Navigation Aids Service, “and last but definitely not least, the IMO”.

Straits, which ICS will review by conducting a gap analysis in order to

The Round Table of international shipping associations has also been

identify remaining safety proposals.”

involved in the Forum’s work on navigational safety and environmental

In conjunction with ICS, it is expected that the littoral States will make

protection in the Straits. At the Forum meeting the International Chamber

a joint submission to IMO’s Navigation Sub Committee in July next year,

of Shipping (ICS) presented the results of a survey of incident reports that

advising of the accident survey and its current status.

Speed management needs to be addresssed in the Singapore Strait seen here through the haze caused by rainforest fires, which frequently reduces visability

Asia-Pacific Shipping 2011/12 www.thebaltic.com

23

Human Element Staffing

Working in Singapore The Baltic speaks to recruitment specialist Mark Robertshaw of Faststream Asia about the demand for shipbrokers in the Lion Republic

S

ingapore’s rapid development as Asia’s leading chartering

“Singapore is a place that many shipping professionals see as a good

centre for both the wet and dry markets has seen global ship-

environment in which to further their career,” notes the Faststream Asia

ping recruitment specialist Faststream’s Singapore office grow

managing director. “I’m seeing more graduates with shipping related

equally rapidly to meet this demand. The office reports that

degrees from European universities coming here to start their careers too.”

despite the doom and gloom in the freight markets, companies are con-

Indeed Singapore came out on top and ahead of London as the

tinuing to open new desks, hire shipbrokers and chartering managers in

location in which most candidates would like to work in a Faststream

all areas of the commercial shipping markets.

survey of shipping professionals from around the world conducted at

“Our Singapore office, which opened in 2008 is now 23 strong and

the end of last year.

our services are really in demand,” says Faststream Asia’s managing

Singapore is not, however, the low cost centre it once was. The

director and Baltic Exchange member Mark Robertshaw. “As we’re

strong Singapore dollar, rising office rents and living costs mean that

getting bigger, we’re getting more specialised. The specialists within our

many ship management operations are finding cheaper alternatives in

commercial team are focused particularly on tanker, dry, offshore and

places such as Indonesia, the Philippines and Vietnam. However, from

legal roles.”

a commercial shipping point of view, Singapore remains the location of

Singapore’s Maritime and Port Authority estimates that the Singapore

choice in Asia.

maritime cluster comprises over 5,000 companies, provides employment

The influx of western maritime companies into Singapore has had

for just under 100,000 and contributes around 7% of Singapore’s GDP.

a knock-on effect on their Asian counterparts. Local Singaporean

Whilst much of this activity is of course directly related to the port, the

companies that were traditionally Asia-focused are now adopting more

government’s wooing of shipping, mining and other trading companies

international standards when it comes to the terms and conditions they

over the past few years with attractive tax breaks and relocation

offer their employees.

Mark Robertshaw says that he has seen the amount of holidays

assistance has paid dividends.

In their wake have come the professional service providers –

offered increase from 14 to 21 days. Private medical insurance is

from lawyers to shipbrokers, seeking to be part of the continuing

typically offered on top of the Central Provident Fund Contributions.

success story that is Singapore. Most of the medium and large Baltic

Once a common feature of the Singaporean working week, Saturdays

Exchange shipbrokers now have offices here. What were initially smaller

are now spent shopping and relaxing with friends and family rather than

representative offices have now developed into significant revenue

working. Working alternate Saturdays even five years ago was seen as

generators. Mark Robertshaw reports that Faststream is working with

the norm in shipping circles, but today, as in other international shipping

many of these companies as they seek to strengthen their teams.

centres, most activity takes place between Monday and Friday. Of

“In Singapore, a shipbroker aged between 35 and 45 is very well

course, technical people are usually on call 24/7, but flexi-time working

sought after. They’ve got the experience of different markets and can

practices have been introduced in many companies as employers

bring in business. Without wishing to talk up the market, companies are

recognise the importance of establishing a good work-life balance for

paying very good salaries for the right people.”

their employees.

It is the “growing diversity of the talent pool” which Mark Robertshaw

Companies have become more focused on making the working

believes is making Singapore particularly attractive to shipping service

environment more pleasant and ensuring that the office is located

providers. Companies are able to set up strategic commercial desks

near public transport. They understand that shipping and offshore

here, not just because it puts them in close proximity to their clients and

professionals have many choices when it comes to employment and

markets, they are also able to find the necessary professional staff quickly

that it makes good economic sense to ensure that they are kept happy.

and easily. Ex-pat packages covering employees’ accommodation,

The Singaporean government is well aware too that it is competing for

airfares and boarding schools are not necessary these days, most staff

global talent and that child care and maternity leave are important issues

are employed on a local basis. Whilst many companies will provide initial

for young families. It has accordingly raised child care and maternity

support to staff brought in from overseas, Singapore is not a hardship

allowances to better match those offered in Europe and the USA.

posting for which companies need to pay more to encourage staff

As Mark Robertshaw says: “Singapore will go from strength to

to relocate. People from around the world are putting roots down in

strength as a maritime centre, as long as employment terms match

Singapore, buying property and sending their children to local schools.

international standards and it is seen as good place to work and play.”

24

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Human Element MLC

Massive task Claude Maillot of Bureau Veritas says it is well advanced in MLC certification compliance but warns that shipowners and manning agents need to get ready now

I

t has been estimated that there are roughly 20,000 shipping companies in the Asia-Pacific region, operating something like 29,000 ships which will require certification in connection with the Maritime Labour Convention 2006 (MLC). In addition, there are thousands of man-

ning agencies in the region which may require certification – 850 in the Philippines alone, according to some estimates.

That represents a lot of certification, but international classification society Bureau Veritas (BV) has already completed a considerable amount of work in this and is well advanced in its planning for the task yet to come.

Claude Maillot, BV’s ships in service director, says, “Our internal procedural system, together with inspection checklists and reporting systems, is ready for the start of the certification process for large numbers of ships. In the Asia-Pacific region, BV has 90 MLC inspectors and trainers, which represents 32% of its total number of trained MLC personnel that provide worldwide coverage of those ships which will have to be MLC-inspected.”

Maillot emphasises, “Shipowners need to start work now on MLCrelated issues in order to avoid the final rush when the convention enters into force. This is particularly important for those companies with ships where the MLC-ratifying country – for example, the Marshall Islands, Bahamas, Antigua and Barbuda, Panama and Liberia - have adopted the concept of pre-convention certification of ships.

“As a Recognized Organisation for the Marshall Islands, the Bahamas and Panama (with Antigua and Barbuda and Liberia soon to be signed, also), BV is authorised to perform reviews of DMLC Part II and the preconvention certification of ships. It is also helping owners in connection with GAP analyses, regardless of flag.”

Claude Maillot

BV has certified 19 ships under the voluntary certification scheme with the Marshall Islands and Bahamas flags. The same number of GAP analyses has also been carried out. Nine seafarers’ manning offices have

company to prepare documentation in line with the flag state requirements

been certified in Greece, the Philippines and the UK.

defined in the Declaration of Maritime Labour Compliance (DMLC) Part

Maillot explains, “With the recent increased demand for GAP analyses

I and the results of GAP analyses. The process also involves shipboard

and voluntary certification by shipowners and seafarers’ manning offices,

inspection and reporting. Companies should start planning as soon as

we are involved in various projects worldwide. This number is likely

possible in order to be able to complete the whole certification process in

to increase in the following period as the convention ratification date

the required time.”

BV holds regular training courses for companies in relation to MLC

draws nearer.

“The certification of manning agencies, of course, will depend also on

compliance. These courses are based on the training material for BV’s

the national legislation that governs implementation of MLC in different

own MLC inspectors. Since 2009, BV has performed 43 external training

countries. Some countries may adopt their own standards and control

sessions related to MLC 2006 worldwide, attended by a total of 522

systems necessary for certification and for the control of manning

participants. In the Asia-Pacific region alone, there have been 15 training

agencies in their own territory.

sessions, attracting 156 participants.

“Certification of manning agencies is performed in accordance with

BV is also currently developing a web-based training program for the

BV’s Rule Note Standard for Quality Management System of Seafarer

education of personnel involved in MLC compliance. This interactive multi-

Manning Offices. The process requires a documentary review and an initial

media e-learning course will be available on BV’s Business School web

audit to be performed for certification purposes.”

page. In addition, a series of web-based seminars (or webinars) on MLC

The duration time for the whole MLC certification process is difficult to estimate. Maillot explains, “It mostly depends on the time required for the

compliance have been prepared and will be delivered by BV tutors on the web. This service is open to anybody interested in the subject.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

25

Human Element Class NK

Preparing for MLC ClassNK’s Executive Vice President, Shosuke Kakubari, explains how the Japanese classification society is getting ready for the Maritime Labour Convention.

I

n recent years the classification societies have increasingly been asked

including conducting gap analyses to identify discrepancies between

to certify areas away from their traditional focus on ship’s structure. The

convention requirements and the owners, labour management system, as

imminent implementation of the Maritime Labour Convention 2006 will

well as advise owners on what procedures they will need to implement in

see the classification societies acting on flag states’ behalf to provide

order to address the convention requirements.

what will soon be crucial certification for the operation of a vessel in international trade.

In an interview with The Baltic Mr Kakubari explained how ClassNK has geared up to meet the demands of MLC 2006.

The Baltic: Are you having to devote additional resources to this, train/recruit more staff?

Mr Kakubari: While we do expect that there will great demand for MLC certification in the coming years, we don’t anticipate the need to greatly The Baltic: Could you outline the extent of ClassNK’s involvement in

increase our staff from external sources. Instead we’ve established an

MLC certification?

internal training system for our surveyors who are already certified to

Mr Kakubari: As a classification society, our main role with regards to

carry out ISM and ISPS surveys, and we expect to be able to meet

MLC certification is to carry out the onboard surveys and issue certificates

demand for surveys entirely with our own expert staff. At present, more

on behalf of the flag administration. We currently have authorisations from

than 260 of our surveyors have completed MLC training, but our goal is

12 of the world’s top flag states to carry out such surveys as an RO, and

to have more than 300 surveyors around the world, or roughly one-third

we hope to receive such authorisation from all major flag states prior to the

of our total surveyors) capable of carrying out MLC certification by the

implementation of the convention.

time the convention is implemented.

In addition to the surveys and certifications themselves, we also offer a consulting service to help shipowners prepare for the certification process,

ClassNK Executive Vice President Shosuke Kakubari (back row third from left) with other members of the classification society’s board including Chairman and President Noboru Ueda (front row, centre).

26

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Human Element Class NK The Baltic: How aware do you think shipowners and manning

With the rush of newbuilding orders for container carriers in the first half

agents, especially in Asia, are of the need to comply with the MLC

of this year, I think we are already starting to see signs of recovery. With

and its certification procedures?

prices for newbuildings still low, I think we will slowly see the market for

Mr Kakubari: We’ve been discussing the MLC with shipowners

tankers and bulk carries return as well, but this may take some time yet.

throughout Asia at technical seminars, meetings of our technical committees, and at one-on-one meetings with shipping companies for some time now, and while some shipowners are more prepared than

The Baltic: More generally, how do you see prospects for the

others, the procedures and requirements for MLC compliance are well

classification sector over the next two or three years?

understood throughout Asia, and a majority of companies are taking the

Mr Kakubari: While we don’t expect the core of our classification

necessary steps to ensure compliance.

activities to change, with the constant pace of new regulation, the number and variety of surveys we carry out is steadily increasing, and we expect this trend to continue.

The Baltic: It is still not clear exactly when the MLC will come into

However, we have always believed that classification’s ultimate

force but, if it is in late 2012 or early 2013, will there be enough time

role is to serve the greater maritime industry, and what downturns like

to get all shipping companies certificated?

this one show is that there is much more that we can do to support

Mr Kakubari: If the convention is adopted in late 2012 or early 2013,

the continued growth and development of the industry as a whole. At

then we still have a year and a half of preparation time. However,

ClassNK, we’re completely dedicated to this task and are working with

the countries which have already ratified the MLC will need to create

partner companies from both inside and outside the maritime industry to

procedures for shipowners to ensure compliance with the convention, as

develop new software systems and IT tools to help reduce the burden

well as incorporate the convention requirements into their own domestic

of convention compliance on shipyards and owners, and hopefully

regulations before the convention is officially adopted. This is likely to

contribute to the resurgence of the maritime industry.

be the most time-consuming part of the entire process. If flag states complete this process quickly, then shipowners will have that much more time available. On the flipside, every extra day that the flag states take to incorporate the requirements is one day less available for shipowners.

Nevertheless, once the MLC enters effect, we expect there to be peak demand for certification, and we’re taking steps to make sure we have the resources on hand to meet that demand.

The Baltic: Are you already issuing pre-Convention certification?

Mr Kakubari: Currently the Marshall Islands is the only flag state to have completely incorporated the requirements of the MLC into its own domestic regulations, and we have already issued statements of compliance to four vessels in line with the Marshall Islands’ instructions.

As these statements of compliance can be easily converted into Maritime Labour Certificates once the convention is enacted, we expect there to be a strong demand for this service in the months ahead.

The Baltic: Can you give an estimate of how much additional cost per vessel complying with the MLC could mean for a typical owner?

Mr Kakubari: As the convention itself has yet to be adopted, and as every shipowner’s labour management system differs, it is hard to say exactly how much compliance with the convention will ultimately cost.

However, based on our experience with pre-convention certification, excluding travel costs, we expect the certification process itself to cost roughly US$3,000 per vessel.

The Baltic: Turning to issues of fleet growth, and demand and supply, are you expecting the current glut of newbuildings to be followed by a prolonged downturn in ordering?

Mr Kakubari: While the market remains difficult for bulkers, tankers and container carriers, the main cause of the current down market is the large number of orders placed during the boom before the economic crisis. However, ordering has been significantly reduced over the past few years, and there are only a small number of newbuildings slated for completion after 2013.

ClassNK says the number and variety of surveys it carries out is increasing

Asia-Pacific Shipping 2011/12 www.thebaltic.com

27

Human Element Supply and demand

Waking up to MLC Now is high time for owners and crewing agencies to pay attention to the Maritime Labour Convention, as David Hughes reports.

T

he Maritime Labour Convention (MLC), adopted by the

Claude Maillot, VP Ships in Service Management, Bureau Veritas,

International Labour Organisation (ILO) in 2006, is often seen as

says: “The readiness of Maryville Manila Inc. to move towards voluntary

simply a bringing together of existing ILO conventions. And that

compliance and certification under MLC 2006 in advance of the

is quite true. However it does much more than bring together

convention coming into force demonstrates both the quality of the

regulations that, in many cases, have been in existence for many years.

organisation and the forward thinking of its management. We have so

Previously, adoption of ILO conventions and their was very patchy.

far certified one seafarer manning office in the UK and its branch office

The MLC is likely to come into force in late 2012. When it does all of

in India, two in Greece and we have published a Guidance Note (NI 563)

the ILO regulations protecting the welfare of seafarers will apply to all

to facilitate the certification process. We expect other manning offices

vessels and will be backed up by a system of flag state certification and

will be looking for certification before the convention enters into force,

enforcement. Perhaps more importantly, inspecting for MLC compliance

probably next year.”

will become a key part of port state control inspections.

In other words ILO regulations will change from being not much more than guidelines for the top end of the industry, and seen as irrelevant to

Unexpected challenges

the bottom, to being a regulatory fact of life for all in the industry.

Some of the implications of enforcing the MLC are only just becoming

Most major open ship registers and the big classification societies

apparent. The MLC requires owners to “ensure that seafarers engaged

have long recognised the importance of the MLC and are well prepared.

as ships’ cooks are trained, qualified and found competent”. The

Whether the same can be said for some other flag sates and for many

Convention’s guidelines state: “Seafarers should only be qualified as

owners and crewing agents is another matter.

ships’ cooks if they have passed an examination prescribed by the

Earlier this year the Liberian Registry carried out the first ship inspection for compliance with the ILO Maritime Labour Convention

competent authority or passed an equivalent examination at an approved training course for cooks.”

2006 (MLC), ahead of its entry into force. The inspection was performed

A new study has, however, highlighted that there is no common

on board the 7,000 TEU containership UASC Yanbu, owned by D

standard for the training and certification of ships’ cooks, something that

Oltmann Reederei of Bremen, Germany, and managed by Hong Kong-

will be required by the impending International Labour Organisation’s MLC

based Anglo Eastern Ship Management.

2006, or Seafarer’s Bill or Rights. The European Union-funded Seachefs

Liberia was the first state to ratify the MLC; its shipping administration

project warns that the situation is made worse by the diminishing number

has trained nearly 100 of its auditors to carry out MLC inspections and

of qualified cooks on the maritime employment market at a time when the

verification of Liberian-flag ships.

fleet is continuing to grow.

Meanwhile, French classification society Bureau Veritas has certified

At the recent International Chamber of Shipping/International Shipping

Philippines-based manning agency Maryville Manila Inc for compliance

Federation conference Professor Ralph Becker-Heins from Bremen

to the Maritime Labour Convention 2006 on a voluntary basis. This

Shipping University said that nearly all flag states have ignored the

was the first manning agency to be certified by Bureau Veritas in the

existing legal basis regarding standards for cooks aboard ships. Now

Philippines.

with the ratification of the MLC likely this year all flag states will have to take action.

Professor Becker-Heins warned that it was totally unclear what certificates were needed. He said: “Flag states urgently need to define regulations for ships’ cooks and put them in force to meet the demands of MLC 2006. The current reality is that owners and managers have little evidence that the cooks they employ really do have cooking and hygiene skills and are not going to poison the crew.”

Professor Becker-Heins says the best way to achieve a common standard in time to comply with MLC 2006 is to make use of the existing, non-marine, International Cooking Certificate (ICC) which, he says, is setting new industry-derived standards for cooking worldwide.

The proposal is for shipping to enrich the ICC syllabus with a maritime module. According to the Seachefs project the ICC already largely covers the core curriculum now used at maritime cooking centres. The

One expected affect of the MLC will be a

key subjects to be added are provisioning, menu planning, hygiene and

renewed focus on cook certificates

ship safety.

28

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Insurance Overview

Region fuels P&I growth The Asia-Pacific region economy is providing business expansion potential that is lacking elsewhere in the world. Yet the economic environment is creating challenges as well as opportunities, says Steven Randall, general manager of The Shipowners’ Club Singapore branch

M

ost economists agree that Asia will be the primary engine

In an attempt to assist vessel owners and operators in addressing this

of global growth in the current decade, with the Asian

sort of challenge, to maintain professional levels of training, safety and

consumer market in particular driving it. This trend has a

security, the Loss Prevention team at the Singapore branch of Shipowners

direct impact on infrastructure needs, energy requirements,

invests a lot of time and effort in risk management advice and loss

demand for raw materials, tourism and of course, consumer goods.

prevention guidance. Operational best practice and awareness of safety

Increased shipping activity in support of these developments is a direct

regulations are paramount within the Club’s communication programmes

result. As well as benefiting international trade from Europe, North America

aimed at members and the brokers who represent them.

and other regions, supported by large vessels, there is significant development in the smaller vessel sector within Asia itself.

Owners operating coastal vessels and those employed in regional trades have not experienced the same recession-driven difficulties as

So, quality of service in terms of underwriting and the provision of relevant insurance cover, rapid and efficient response to claims and the judicious provision of loss prevention advice are the three key components of our offering to our members.

some owners elsewhere in the world. Offshore craft supporting the oil

At Shipowners, we see the chief challenge in the near future is to

and gas sector and the energy industry in general, have seen an increase

maintain this quality of service within an expanding market place. Not only

in employment and will continue to be in demand as energy needs in

that, but as competition in all forms increases, so a closer relationship

the region grow further. Tug and barge operations are primarily used to

between the Club, broker and Member is required.

transport coal throughout Asia and a similar outlook applies to this sector.

The geographical proximity of Shipowners’ Singapore branch is a

Interestingly also, as consumer wealth increases and disposable

great help in nurturing these relationships. In this way we can gain a better

income is expended on leisure pursuits, then the tourism industry is

understanding of the regional needs of our Members and can better

beginning to take off, particularly in parts of Asia previously considered

explain the value of a comprehensive P&I cover provided by a mutual club,

off-limits. This in turn has led to a noticeable increase in sightseeing and

as opposed to the alternative provided by commercial insurers.

passenger craft. In the future, growth will be both organic in nature as

Within this expansionary economic environment, with its variety of

trade continues to rise in volume and via the development of new markets;

specialised tonnage and with the determination to maintain a top-quality

Indonesia, Malaysia and Vietnam in particular.

service in a competitive market, we have decided to increase our staff

The growth in Asian infrastructure, energy demands, consumer

at the Singapore branch which services the Asia-Pacific region. By the

spending and tourism all have a direct relevance to the various vessel

end of 2011 there will be in excess of 20 staff in total in our this office,

operating niches of the Shipowners’ Club due to our unique focus on

our expansion having added more underwriters, claims handlers, and an

smaller vessel activity, and regional trading. These vessel types include:

additional loss prevention executive to the complement.

coastal tankers, including LPG and chemical, as well as bunkering vessels;

We are determined to staff the branch with the relevant skillset to

offshore support craft such as AHTS, PSV, crew boats and seismic survey

improve our service to our Members and their brokers in the Asia-Pacific

vessels; fishing boats ranging from inshore craft, to purse seiners and

region. The region and its growing trade are producing challenges which

large factory vessels; harbour craft and dredgers; coastal cargo ships

we want to ensure that we can meet. The traditional values of a mutual

and container feeder vessels; ferries, comprising conventional, high speed

P&I club will be maintained, but we must adapt to the demands peculiar

and day trip excursion boats; tugs and barges and even super yachts,

to the region and appropriate to a fast-changing economic environment.

increasingly appearing as the accessories of the Asian super-rich.

As business grows in the region however, a critical challenge for us is to ensure the maintenance of high levels of service. There is little purpose in expanding business and venturing into new markets unless the service offered to existing and new members continues to match their expectations in accordance with our reputation. Equally, and of particular importance to our strategy, is the continuing quality of business based on sound and prudent underwriting practices, as this ensures the ongoing underwriting strength of the Club.

A major challenge faced by all owners continues to be the shortage of good-quality crew. For example, in the offshore industry vessels are getting bigger and more sophisticated, yet there remains a lack of good crew to be trained in the safe and efficient operation of these new vessels.

There has been a big increase in passenger craft as tourism grows

Asia-Pacific Shipping 2011/12 www.thebaltic.com

29

Insurance Charterers liability

Charterers take liability cover London P&I Club underwriter Simon King explains why charterer’s liability cover has become a growth area in Asia

R

ecent growth in the take-up of insurance coverage specifically designed to respond to issues involving charterer’s liability has continued in the Far East over the last twelve months, according to Simon King, an underwriter with the London P&I Club.

“One of the reasons for this,” says King, “is the flexibility of the

insurance, which can be tailored to suit individual requirements. Charterers can select the risks they want to insure against from a range of covers.

These include P&I, war risks, liability to hull, liability as a cargo owner and a separate bunkers cover. Furthermore, there is flexibility to select the level of the combined single limit of the cover – in the case of the London Club, up to a maximum of $500 million or €500 million per event. Assistance with additional cover for other risks can also be provided, such as insurance in respect of liabilities as a bailee or for cargo placed in storage.”

Charterer’s risks are a relatively recent addition to the London Club’s coverage, but the business has shown strong growth – of more than 30% in the last year. King adds, “Seventy per cent of our charterers portfolio currently comes from the Far East, which is one of the areas in which the club’s shipowning membership is particularly strong. Some of this growth is through entries from new members of the club, but part of it is also coming from existing members, a number of whom also have owned ships entered with us.

“The progress which the business has made reflects increasing market awareness, particularly in Asia, that we are offering such an additional service set alongside the long-established owners’ P&I and FD&D covers.

Further, in a number of cases, we find that the ability to offer charterers cover can complement owners’ P&I arrangements. For example, we recently had a General Average situation where a ship operated by one of our Far East-based owners was unable to carry the cargo to destination – and a vessel was therefore chartered in for transhipment purposes.

The club was able to provide the owner with cover for the risks it had assumed as charterer, so ensuring that its overall P&I cover for the voyage was seamless.”

King says the club, which has a dedicated office in Hong Kong, is well-placed to engage with members about their needs in respect of cover for chartered tonnage. “One of the day-to-day challenges,” he says, “is to keep up with the frequency with which some of the chartered entries come on and off risk. But there is no doubt that this type of cover is becoming ever more important in an environment where charterers face increasing exposure to ever-evolving liabilities, driven by legal and regulatory developments, claims inflation and landmark court judgments.”

30

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Simon King

Russian Far East

Looking up After suffering during the recession the Russian Far East’s maritime economy appears to be regaining its strength though state policy towards competition remains controversial.

T

he global downturn hit the shipping related industries of the

particularly in the bunkering industry where he predicts there will eventually

Russian Far East (RFE) from early 2009 and it has taken some

be only two or three suppliers left.

Reflecting the views of smaller players in the industry, Mr Us continued

time to recover. The RFE is very dependent on the export of raw materials and a drop in global demand hit the region badly.

“Shipping companies, in the full sense of this word - those involved in

One indicator of just how severe the recession was can be seen from

shipping large cargoes of metal, oil, coal or containers, are practically

the experience of the local bunker industry. Vitaliy Us of Tsetan Co. Ltd,

non-existent in the Russian Far East. Most of these cargoes are shipped

says that volumes plummeted by two thirds as trade dwindled.

by the foreign-flag vessels. Bigger companies which were left without state support after the collapse of the Soviet Union were forced to move to flags

According to Mr Us, the local situation was made far worse by the

of convenience.”

introduction of prohibitive duties on export timber and imports of cars.

The move wiped out what had been the staple trade for smaller RFE

He continued: “This situation has been caused by the bureaucratic

shipping companies, taking timber to Japan and coming back with cars.

approach to business in Russia, an unfavourable taxation system and

Companies folded and ships were scrapped.

all sorts of inspections and impositions at all levels. That is why the local

This year has however seen quite a recovery. In the first half of 2010

companies still operating in the shipping sector are either bunkering and

major RFE-based shipping and transport company FESCO made a net

service companies or fishing vessel owners. In my opinion there is no

loss of US$28 million. This year the company has reported a first-half

reason for optimism in the area. The state gives no support, the fleet is

profit of $45 million.

ageing and the owners are struggling to afford to maintain their vessels.

FESCO chief financial officer Yury Gilts attributed the improvement

Meanwhile the large companies continuously unite in conspiring to force

to increased volumes and prices . He was quoted as saying that there

the competition out of the market. I am personally not too optimistic

had been a “substantial increase of domestic demand for industrial and

about the future. However, I am confident that our company will carry on

consumer goods in 1H 2011 in combination with FESCO’s successful

standing our ground and developing our business.”

development of high value added integrated logistics services enabled us to show good operational and financial performance. We grew not only in terms of

Russia

volumes, but also, in pricing.”

He added: “Given the traditional seasonality of our business we expect even higher numbers in

Ohotsk

the 2nd half of the year, which supports our positive forecast for 2011 full year results.”

Sakhalin

PetropavlovskKamchatskiy

The positive outlook is reflected in the figures Azovof this from the RFE’s ports for the first nine months

Vladivostok

Mongolia

Vostochnyy

year. Overall the region saw the throughput increase

Nakhodka

by 8% to 94.1m tonnes. Dry cargo made up for 53.5

N. Korea

million tonnes of the total, representing a an 11.6% 3.6%. Vostochny Port, which handles the largest volumes and includes Kozmino Oil Terminal, saw throughput rise 11.3%. Only Nakhodka experienced a significant fall in cargoes, down by 7.5% to 11.1

S. Korea

China

increase while liquid cargoes grew at a more modest

intervention remains controversial. Mr Us observed

Japan

Bhutan Bangladesh Burma

India

Laos

Hong Kong

Thailand Cambodia Vietnam

Philippines

While the recovery in demand for raw materials RFE’s shipping-related businesses, government

Sovetskaya Gavan

Nepal

million tonnes. is prompting an upturn in the fortunes of the

Primorsk

Sri Lanka

Palau

Brunei Malaysia Singapore Indonesia

that monopolistic practices were being encouraged,

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Papua New Guinea East Timor

Australia

31

Sakhalin Shipping Company (SASCO) Routing to Russian Far East The Sakhalin Shipping Company (SASCO) was established in 1945. Its main area of activity is in the Russian Far East, which is one of the fastest developing regions of the country, and a key hub for international commercial relations due to the rapid growth of Asia-Pacific and South East Asia economics.

SASCO has a fleet of 21 container, Ro-Ro and general cargo vessels, and a team of around 1,000 employees. The company’s annual revenue is US$ 90 million, with EBITDA at US$ 12 million. Every year it carries 3,000,000 mt of various cargoes, 70,000 teu, as well as about 60,000 passengers. It is a member of the BIMCO, Union of Russian Shipowners, Russian Association of Shipping Companies and International Coordination Council on Trans-Siberian Transportation.

SASCO has been repeatedly awarded as best regional employer for occupational safety and health, and as best regional charity and best regional partner for its pension system by the regional government. Further awards include best federal partner by Russian Railways and best federal customs carrier by the Russian Customs Authorities.

For several decades, SASCO has been the largest Russian domestic sea carrier, with regular container and Ro-Ro carriage being its main strategic activity for over thirty years. SASCO’s network of regular shipping lines now covers main Far Eastern Russian overseas regions such as Sakhalin Island, Kamchatka Peninsula, Chukotka Peninsula (jointly with Trans

Line Logistic Services, Vladivostok) and the Kolyma Area. Eighteen voyages are fulfilled that way weekly from the Russian mainland ports of Vladivostok and Vanino.

SASCO is also operating five own-liner services: SSL (SASCO Sakhalin Line) between Vladivostok and Korsakov, SML (SASCO Magadan Line) between Vladivostok and Magadan, SPL (SASCO Petropavlovsk Line) between Vladivostok and Petropavlovsk-Kamchatsky, SVL (SASCO Vanino Line) between Vanino and Magadan (these four services are both for containers and general cargo) and SFL (SASCO Ferry Line) between Vanino and Kholmsk (Ro-Ro services for railway wagons, trailers, cars and passenger services), and maintains a service to Chukotka between Vladivostok and the ports of Chukotka Peninsula (Anadyr, Egvekinot, etc) during the summer period only due to strong ice in this area from November through to May. The next step of this strategy is to develop regular international feeder lines.

SKL (SASCO Korea Line) has been in operation for the last fifteen years.

This service connects the Russian port of Korsakov (Sakhalin Island) with the South Korean port of Busan (the fifth biggest container port in the world).

It was a major route for materials and equipment being imported into Russia for production-shares projects developing shelf oil and natural gas fields operated by “Exxon Neftegaz Ltd” (affiliated with ExxonMobil, SODECO, ONGC and Rosneft) and “Sakhalin Energy” (affili-

ated with Shell, Mitsui, Mitsubishi and Gazprom).

from USD 300 (SOC) and USD 350 (COC) per teu to China.

But the real star of current business is SCL (SASCO China Line), which opened in late 2010. This service connected Chinese Shanghai (the biggest container port in the world) with the Russian port of Vladivostok (the biggest Russian Far Eastern terminal container port). From day one the line has provoked intense from importers and exporters, not only from the Far East, but also from the whole of Russia. In response to the demands of distant customers, SASCO has quickly extended this service to Vostochny, the biggest Russian Far Eastern transit container port. The first year’s experience showed that most of the cargoes being carried by this line were directed to Russia via Shanghai from Ningbo (the seventh biggest container port in the world).

Therefore, Ningbo has been added to the SCL rotation since October, 2011.

SCL cargoes are handed over in Shanghai at WGQ4 terminal, in Ningbo at MSCT terminal, in Vostochny at VCT terminal, and in Vladivostok at VSCT terminal. The operator of the last terminal, together with Vladivostok Fishing Port, are key partners of SASCO for feeder and liner services. Partners are now developing the hub for uninterrupted operation with foreign and domestic cargoes that arrive, depart and transship. This hub consists of berths, warehouses, connected highways and railways, all the necessary infrastructure for supplying cargoes to and from Korsakov, Magadan, Ningbo, Petropavlovsk-Kamchatsky and Shanghai.

It is very convenient for Russian importers at Kamchatka, Kolyma and Sakhalin that SASCO is the first Russian sea carrier who was attested as Customs Carrier due to the new Customs Code of Customs Union. This status allows SASCO to arrange carriage for the majority of imported cargo from the transshipment port to its final destination before customs clearance and without onerous formalities.

Obviously the carriage of cargo between Shanghai/Ningbo and Vladivostok/ Vostochny is not unique, it’s a standard route for mutual trading between Russia and China, Russia’s biggest foreign commerce partner. But only Sasco arranges the direct carriage without deviation and transshipment in interim ports, thus providing the shortest duration of voyage and offering unmatched flexibility and efficiency for Sino-Russian trading. Only three to five days are necessary to deliver the cargo from the Chinese seller to the Russian buyer, and the cost of carriage is very reasonable: from USD 530 (SOC) and USD 850 (COC) per teu to Russia, and

To allow for flexibility and convenience of services, SASCO is permanently increasing its owned and leased container stock.

Clients can receive and return containers for carriage both in China (Shanghai, Ningbo and Qingdao) and Russia (all the biggest cities such as Moscow, Saint Petersburg, Novosibirsk, Yekaterinburg, Nizhny Novgorod, Samara, Vladivostok and others).

www.sasco.ru SASCO Main Office: 18a, Pobedy Str., Kholmsk, Sakhalin Island, 694620, Russia Tel: +7-42433-66208 Fax +7-42433-66020 E-mail chief@sasco.ru SASCO Intermodal (SASCO Moscow Office): office 7, 44/28, Sivtsev Vrazhek Str., Moscow, 119002, Russia Tel: +7-499-2415125 Fax +7-499-2418069 E-mail ivan@sasco.ru SCL agent at Vladivostok (SASCO Vladivostok): +7-4232-497828 SCL agent at Shanghai (Wallem Shipping (China) Ltd.): +86(21)6330-1041

China special report Shanghai Shipping Exchange

A crucial link with the market The president of the increasingly influential Shanghai Shipping Exchange, Zhang Ye, answers The Baltic’s questions about how the SSE operates now and its role in the future

The Baltic: The SSE has developed a lot in 14 years. What do you now see as the primary role of the SSE?

President Zhang: SSE serves as the tie between government and market. As the institution sponsored by the government, SSE takes missions assigned by the government, for example, accepting freight filing of liner companies and NVOCC, credit assessment, national ship trading information platform, that help government authorities with decision making; meanwhile SSE also collects and distributes information to enterprises, reports their needs to the government, helps them better understand and implement new regulations and policies, and provides members with a series of general and tailor-made services, such as information, trading and consulting.

The Baltic: The Shanghai (Export) Containerised Freight Index (SCFI) has become widely accepted. Do you have an indication of how many companies make practical use of the SCFI and how influential it has become?

President Zhang: SCFI is available free of charge on the second working day after the date of publication and quite a few authorised brokers, exchanges and data providers are allowed to distribute the data. So it is hard to estimate the accurate number of practical users. All SSE members and SSEFC traders are using or looking at the index and the number might be several thousands.

SCFI serves as solid evidence for decision makers of maritime and

Zhang Ye

trade circles and has been the important benchmark of market trend for port and shipping enterprises, trading companies and financial

SCFI is now used as the benchmark for settlement of container

institutions. The Ministry of Transport, Ministry of Commerce and State

freight derivatives. In the past 20 months since January 2010, the SCFI-

Administration of Energy designate officials to track the indices and

linked OTC transaction volume reached 40,000 lots. On June 28, 2011,

report to the State Council of China. World-renowned media groups,

the SSEFC (a centralised platform of electronic derivatives trading) was

such as Bloomberg, Lloyd’s List, JOC and domestic mainstream media

established. The first month saw the transaction volume of over 400,000

like CCTV and people.com also cite the index data in their news stories.

lots and the daily volume is close to 100,000 lots.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

33

China special report Shanghai Shipping Exchange The Baltic: Opinions differ within the liner industry about container

To communicate information on the shipping market: the Ministry

shipping derivatives. How does the SSE see this market developing?

of Transport and Shanghai Municipal Government set up the Shanghai

President Zhang: The development of the container shipping derivatives

International Shipping Information Center at SSE. Now we offer what we

market is inevitable. As with the evolution of other derivatives, like

call “triple Three” all-time information products. This is made up of: three

commodities, the new market will have to go through the same growth

websites, bilingual www.chineseshipping.com.cn for comprehensive

cycle. Large and dominant enterprises will be against this new product

shipping information, www.shippinghr.com for human resource and

and will not be willing to participate. So in the early stage, the backbone

www.cn-eship.com for sale and purchase of vessels; three books,

and force in the market will be the medium and small-sized players.

the Whitepaper Shipping Book on behalf of the Chinese government,

But for the existing box shipping market, the medium and small-sized

weekly journal of Shipping Exchange Bulletin and the most up-to-date

shippers need the risk management tool most because they are weaker

information from the Monthly Shipping Report for the government and

in terms of pricing ability. Only when the market has sufficient liquidity

membership, and three indices (CCFI, SCFI and CBFI). I believe our

can it attract large companies. A derivative product is better than many

information covers the three fundamental elements of the shipping circle:

conventional hedging tools. We are currently in the infant stage and it will

people, ship and cargo.

take three to five years to attract the large global enterprises.

The Baltic: Can you give some indication of how large the SSE is The Baltic: The SSE has three main objectives: “to standardise

now, in terms of membership and/or use of services?

the transactions, to adjust the freight rates, and to

President Zhang: SSE has 80 members of staff at its headquarters

communicate information on the shipping market.” How has the

and about 300 employees in its subsidiaries, such as the magazine,

SSE achieved these?

advertising, customs brokerage, industry, and SSEFC. SSE has set up a

President Zhang: I’ll explain these three main objectives respectively:

contact network covering all major ports in China reporting data of freight

To standardise the transactions: since the founding, SSE persists in

index, and several branch offices. SSE now has around 200 members

the doctrine of “openness, fairness and justice” and tries to standardise

including container lines, shipping agents, freight forwarders, shippers,

the market from many aspects, for example, from freight filing to

financial institutions and brokers.

eliminate any extremes of rates, second-hand ship sale and purchase contract format and NVOCC format B/L. To adjust the freight rates: SSE cannot directly intervene in market

The Baltic: What plans does the SSE have for the future?

pricing but gives guidance by co-ordinating the market participants. The

President Zhang: SSE is dedicated to offering first-class and up-to-

container and dry bulk freight index guides the market tendency.

date shipping information, shipping standards and shipping platforms.

Shanghai Shipping Exchange has a staff of 80 at its impressive headquarters

34

Asia-Pacific Shipping 2011/12 www.thebaltic.com

China special report Law

Traps for the unwary Yafeng Sun and Geir Sviggum of Shanghai law firm Wikborg Rein explain how companies can enforce contractual rights in China

S

In practice, the unique

hipping is no longer sealed with a hand-

enforceability

shake, if indeed it ever

awards makes arbitration the

of

arbitration

was. The strength of

only truly effective dispute

a company’s commercial posi-

resolution

tion normally depends on the

international business.

While

contractual rights it negotiates.

mechanism costs

in

associated

If these are not honoured, then

with international arbitration

it depends on the company’s

can sometimes exceed those

ability to effectively enforce

of an ordinary trial, and a

those rights.

losing party typically cannot appeal an unfavourable award,

In trade involving China, disputes

are

commercial

increasingly

parties

around

bringing parties within the ambit

the world still overwhelmingly

of Chinese law and arbitration.

favour international arbitration simply

Yafeng Sun, a partner with

because

of

its

enforceability.

the Wikborg Rein law offices in Shanghai, says, “Today,

“A number of issues should

Chinese interests are using their

be kept in mind when drafting

Yafeng Sun

Geir Sviggum

an arbitration and choice-of-law

growing international power and influence to insist on contracts governed by Chinese law, and on the

clause,” says Yafeng Sun. Great care should be taken in choosing the

resolution of disputes in China. This can have serious consequences for

location and arbitration venue. Different venues follow different arbitration

the unwary or the unprepared.”

rules, and these can affect the cost and quality of the process. London,

He explains: “Companies invest significant time and effort in negotiating and securing commercially favourable contracts. But these contracts are

Singapore and Hong Kong, for example, are common, well-respected arbitration venues.

only as good as the counterparty’s willingness to perform. The dispute

“The choice of law is also important, because the arbitration tribunal

resolution mechanism is all too often ignored and ends up as a neglected

will interpret the terms of a contract through the lens of a particular

clause at the end of the contract.

country’s law – and some countries’ laws will undoubtedly be more

The moment a problem arises, however, all eyes turn to the dispute

favourable than others. Some arbitration clauses also require an

resolution clause. It is the mechanism for resolving a contractual dispute

escalation provision whereby the parties’ senior decision-makers must

and will govern how and where this happens. Parties often fail to realise

first meet, or the parties must attend mediation, before they can go to

the importance of this clause until they are faced with a potential claim.”

There are a variety of dispute resolution mechanisms available,

arbitration or start litigation. It is wise to involve legal counsel in each of these steps.

including such modern forms as mediation, arbitration and the use

“Many jurisdictions have strict criteria governing the validity of

of binding expert opinions. The two main mechanisms are (i) trial in a

arbitration clauses. In China, for example, an arbitration clause that fails

country’s courts of law; and (ii) dispute resolution by an arbitration tribunal.

to specify a particular arbitration venue (a so-called ‘ad-hoc’ arbitration

Geir Sviggum, head of the Wikborg Rein office in Shanghai, says,

clause) is invalid and will not be enforced. You may then face the spectre

“Most people are familiar with resolving disputes in a courtroom before

of litigation in a Chinese court against a Chinese party.

a judge. Many fail to realise, however, that a judgment issued by, say,

“With their growing power and confidence, many Chinese companies

a Norwegian court is unenforceable almost anywhere outside the EU.

today insist that foreigners accept contracts governed by Chinese

Should your opponent be domiciled in the China, Singapore or the US,

law with dispute resolution within China. This need not be worrying.

for example, you must start the process all over again. This can quickly

The China International Economic and Trade Arbitration Commission

become extremely expensive and time-consuming.

(CIETAC) either in Shanghai or Beijing, is by far the preferred choice.

“An arbitration award, however, can typically be enforced in most foreign

“But, to be on the safe side, it is always wise to secure experienced

jurisdictions. China, Norway, Singapore, the US and approximately 140

legal advice to review the dispute resolution provisions of any contracts

other countries are signatories to the New York Convention of 1958, which

before they are signed.”

provides that these member countries are under an international obligation to enforce arbitration awards rendered in another member country.”

Asia-Pacific Shipping 2011/12 www.thebaltic.com

35

China special report Classification

Class opportunities While many in shipping are hoping for a lull in newbuilding construction the classification societies report a surge in activity driven by demand from Chinese owners, as RINA reports.

T

he rapid growth of smaller private shipowners in China is creating

Those looking some let up in the stream of bulker newbuildings will

opportunities for classification societies according to Italian-based

dismayed by the continued brisk activity at Chinese yards. TINA notes

RINA. Its general manager (marine) Asia, Michele Francioni, says,

that very recent deliveries in China include the first of a series of specially

“The newbuilding market came alive again last year and we were

designed self-unloading supramax bulk carriers built at Hantong Shipyard

right in the middle of it, with contracts to class newbuildings for Chinese

for Coeclerici, the sixth of twenty-nine 93,500 dwt bulk carriers being built

owners being built at Chinese shipyards. Almost 15 per cent of RINA’s fleet

by New Jiangsu Yangzijiang shipyard for Giuseppe Bottiglieri and the first

is now Chinese-owned and we have strong recognition amongst Chinese

of a series of minicape bulkers to be built at Sinopacific for SNUG.

shipowners as a class society which cares about them and is willing to

RINA says that it is also very active in conversions from tanker to bulker

take the time to work with them. Experience with some big conversions

and container carrier to general cargo. It says that it has successfully

and vessels sold by our European clients to emerging Chinese owners

converted more than 30 vessels in the last three years, in sizes from

helped build those relationships. Now they know our surnames, they know

20,000 dwt to 270,000 dwt.

our first names, they know where we live and they know they can depend

Says Francioni, “We are active in every area of industry, transportation

on us. They know that if they have a problem anywhere in the world they

and environmental protection in China and all over the world, and we

can call us in China and get the help they need. That sort of connection

reach out to help companies which are also globalising, as so many are

is the key to growth in China, and hopefully we will continue to grow more

in China. We help by bridging the gap in competency for newcomers to

in 2011 and 2012.”

boost their competitive capacity on the global market.”

RINA’s marine business in China has expanded dramatically together

RINA’s first China office was opened in late 1997 and RINA currently

with the local shipping community and shipyards. RINA’s classed Chinese

employs over 120 staff in China in the Shanghai head office and in various

fleet has grown to more than 120 ships, and RINA has over 40 new

other key locations all over the country. RINA China is now the largest

building projects in China, totalling over 4m gt. Many of China’s emerging

RINA establishment outside Italy, and includes also a dedicated plan

shipowners are turning to RINA for support, including Jimei Hua Shipping

approval centre dedicated to support our local clients. There are plans for

and Tuofu Ocean Shipping, both having several vessels classed with

further expansion.

RINA, and each also building kansarmax bulk carrier newbuildings to RINA class.

“A lot of the owners who come to RINA in China have small fleets, less than five ships, but are keen to grow internationally,” explains Francioni. “They are used to the idea of service and they want to work with a class society which can transfer expertise and can respond to them as a family company. So in China we span the spectrum from classing very large ships for international owners at big yards, to working with the whole sector of emerging shipowners, hungry for expertise and international markets. It is very exciting.”

RINA is classing ships building at leading Chinese shipbuilding groups CSSC, CSIC, New Yangzijiang, New Time, STX Dalian and Shanghai Waigaoqiao Shipbuilding, including a 300,000 dwt ore carrier and a 206,000 dwt bulk carrier.

36

Michele Francioni

Asia-Pacific Shipping 2011/12 www.thebaltic.com

China special report Ship management

Chinese growth creates opportunities The idea that a UK-based company might supervise newbuildings in a Chinese shipyard for a Chinese owner and then technically manage the vessels would once have seemed far-fetched, but it is happening now says Hugh Williams, ceo of Graig Group

S

ome Western companies see the emergence of new Chinese

“Building ships for ourselves and others in China are first steps,” says

shipowners as a threat. Cardiff-based Graig Group does expect

Williams. “Then we can go on to manage the ships after delivery, and to

China to soon dominate not only shipbuilding, but also ship

use Chinese crews when possible.” The first Chinese owner has already

owning and crew supply. Graig, however, sees only opportuni-

contracted with Graig for ship management. Graig Ship Management Limited (GSM) has taken delivery of the 79,600 dwt bulk-carrier King

ties in that.

“Growth in every area of shipping in China, and continued high growth

Peace, for which it is providing full technical management and crewing

across the Asian economies creates real opportunities at a whole number

on behalf of Shanghai-based Zhong An Shipping. The vessel was built

of levels,” says Hugh Williams, Graig ceo. “It is not just growth, it is the

at China’s Wu Jia Zui Shipyard under the supervision of Graig China Ltd.

way the economies are changing from state control to a fragmented

GSM has expanded its Chinese ship management expertise by

private sector majority. That creates demand for expertise and demand

employing three new staff in the Graig Shanghai office. GSM has also

for service.”

formed an alliance with Beijing-based Sinocrew Maritime Services to

Graig says that it has responded to that demand on different interlinked

employ Chinese crews and has employed its first Chinese officer cadets.

levels. “Like others, we have ordered ships to be built in China,” says Williams. “But we look beyond the newbuilding to a wider Chinese dimension. A key part of that project is working with a high capacity and

In another sign of the scale of orders now with the Chinese yards,

growing Chinese yard that wants to develop into new ship types. We are

Graig has also ordered a series of up to 26 fuel-efficient new

using Chinese bank finance and expect Chinese owner investors to join

generation MARLIN 2000 Blue design container feeders to be built at

us in the project.”

the major Jin Hai shipyard complex. The Bangkok-max vessels have

Knowing which yard to choose comes from Graig’s established

been designed with the Asian feeder trades particularly in mind The

newbuilding supervision business in China. That is also changing, from

first two vessels are scheduled for delivery in August and September

helping Western owners looking for a presence on the ground in Chinese

2013 with subsequent vessels to be delivered in pairs every two and

yards to safeguard their newbuildings, to helping Chinese owners who are

half months.

expanding quickly and need shipbuilding expertise. Shanghai-based Graig

Graig ceo Hugh Williams says, “This series responds to the industry’s

China has recently won a 10-ship order to supervise newbuildings for

needs. There is a gap in the container ship market for quality, fuel

Chinese leasing company Minsheng Financial Leasing Co Ltd, and a four-

efficient, competitively-priced and environmentally-friendly feeder ships

ship order for SITC Development Group Co to supervise the building of a

to service the ultra large containerships now being brought into service

76,000 dwt bulk carrier and three 1,100 teu containership newbuildings

by the major lines. This advanced MARLIN family of designs will fill that

at China Yang Fan shipyard. The supervision contracts bring to 26 the

gap, and we expect this order to be the first of a series of larger capacity

number of Chinese-owned vessels building in Chinese shipyards under

future-proof vessels, backed by the strength of the MARLIN consortia.”

the supervision of Graig.

The Minsheng contract is to supervise the construction of ten 76,000 dwt bulk carriers to be built at Jiangsu Rong Sheng Heavy Industries Co Ltd with delivery of the final vessel scheduled for the first quarter of 2012.

The 10 are in addition to the eight vessels already under construction under Graig supervision for Minsheng at the same yard.

Graig China is also supervising the construction of four 45,000 dwt bulkers for Shanghai Xiang An Electric Power Shipping Co being built at Chengxi Shipyard.

In addition to the 26 ships now under supervision for Chinese owners, Graig China is currently supervising around 50 vessels on behalf of 10 international owners.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

37

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China special report Hong Kong

Gateway to China While other maritime centres are growing in strength, Hong Kong still retains many advantages, not least its status as a Special Administrative Region of China (SAR).

O

ver the past decade or so there has been a perception that

at the Shangri-La Hotel, a Ballast Water Treatment Seminar, and a Marine

other shipping centres, including Singapore, have been grow-

Money Conference.

ing at Hong Kong’s expense. While it is true there were some

Underlining the China dimension of Hong Kong’s continued success

high profile moves away, Hong Kong remains a very large

as a maritime hub, event organiser Kishore Navani noted: “Our first three

shipowning centre which is continuing to attract owners, particularly from

exhibitions evinced little interest and support from Chinese companies

mainland China.

which found Hong Kong too complicated to reach and more expensive

Shipowner members of the Hong Kong Shipowners Association own a

than government supported events on the mainland. I’m delighted to note

total of 1,877 ships of an aggregate 114.3 million dwt. About half of these

a complete change of heart on the part of a large number of Chinese

vessels fly the flag of the Hong Kong SAR while the rest are spread over

companies.”

Nevertheless, there has been a feeling within industry and government

a large number of flags.

Hong Kong is also a major shipmanagement centre and SAR-based companies currently control or manage about 10% of the world fleet by

that action is needed to promote Hong Kong more vigorously as a maritime centre.

Earlier this year 24 industry groups came together to set up the Hong

tonnage.

The chief executive officer of Hong Kong-based shipping company Wah Kwong, Tim Huxley, was quoted earlier this year as saying that Hong

Kong Maritime Forum, which is intended to assist the development of the shipping and logistics sector.

Kong is better placed geographically than Singapore for China and North

Meanwhile the government committed itself to undertake a new study

Asia and that was why Chinese companies were still moving into Hong

on how maintain and enhance Hong Kong’s status as an international

Kong. He added that Hong Kong was a leader in shipping finance and

maritime centre, building on a similar study completed in 2003.

had a recognised legal framework supporting it.

Current concerns include the lack of double taxation agreements with

The HKSOA says that Hong Kong’s SAR status, and its considerable

other jurisdictions, something which is seen as particularly hitting shipping

autonomy, allows the international nature of Hong Kong to develop at the

companies, and the need to compete with other maritime centres such

same time as exploiting its uniquely close links with the mainland and its

as Singapore.

business sectors.

The role of Hong Kong as a maritime centre will be underlined during the SAR’s China Maritime Week, which will run from 28 February to 2 March 2012.

The event will feature a major international maritime exhibition plus a range of conferences covering vessel operations, the marine environment, ship financing, shipbuilding, ballast water treatment, vessel enclosed spaces, and tugs and offshore vessels.

The organisers says China Maritime Week is aimed at developing a broad range of forums and events, and networking opportunities focused on Hong Kong’s role as a maritime gateway to China.

Chairman of China Maritime, Neil Baird, said: “Hong Kong’s global reputation as a shipping hub and its connections to China has positioned the city as one of the world’s leading maritime centres. China Maritime Week will provide an opportunity for the whole maritime community in Hong Kong and China to come together and welcome maritime professionals from around the world.”

Confirmed events during China Maritime week include a Nautical Institute conference, a half-day seminar organised by the Hong Kong Young Shipping Professionals, an Interferry regional conference, an ACI Conference on Tugs and Harbour Craft, Clean Shores, Clean Seas, Clean Ships maritime environment conference, a Sailors Society Charity Dinner

Mainland Chinese companies are still moving to Hong Kong

Asia-Pacific Shipping 2011/12 www.thebaltic.com

39

@

For more information on these companies and to view this publication online using the latest Page-Turning technology, visit:

www.thebaltic.com Chinese Maritime Transport Ltd Clarkson Asia Pte Ltd Class NK Lloyd’s Register Asia Maersk Broke Asia Nanyang Business School Noble Group Parekh Marine Agencies Pvt Ltd. Rightship SASCO

China special report Taipei

Difficult year ahead With a focus of container and dry bulk shipping, Taiwan’s shipping industry can expect testing times ahead.

W

hen the conversation turns to Taiwan-based shipping one

Another well known name is Glory Navigation, which started by

name usually dominates: Evergreen. The giant Taipei-based

transporting logs some 30 years ago. The company has evolved into a

container carrier is as close to being a household name as

specialist in the transport of bulk cargo within Asia, with a 22-ship fleet.

any shipping company is likely to be.

While the emphasis may be on container and dry bulk shipping,

Evergreen Group’s chairman and founder Chang Yung-Fa has been

Formosa Plastics has steadily built up its shipping subsidiary Formosa

widely recognised for his pioneering role in developing containerisation.

Plastics Marine Corp (FPMC) to become a major tanker operator. Recently

Most recently he was presented the honour of Commander in the Order of

FPMC has also diversified into bulk carriers and containerships. It now

Orange-Nassau in recognition of his contribution to the port of Rotterdam

has a fleet of three chemical carriers, seven oil/chemical carriers, four

and the development of the Dutch economy.

VLCCs, five product tankers, two gas carriers, six bulk carriers, seven

Evergreen’s links with Rotterdam date back more than 30 years when

containerships and various harbour craft.

the Group’s shipping division, Evergreen Marine Corp, broke the monopoly

Meanwhile Taiwan-based tanker charterers found out recently that they

of Far Eastern Freight Conference on the Far East - Europe container trade

will not be able to charter foreign single-hull tankers from 2013, two years

and made its first vessel call at the port of Rotterdam; a reminder that Dr

earlier than expected. In October, government transportation officials said

Chang was for many years regarded by many as a controversial figure.

the new policy would be formally announced at the end of the year but

As well as Evergreen, there are a number of other Taiwan-based

there would be a grace period of 12 months.

container shipping companies, notably including Yang Ming. With

Taiwan has until now taken advantage of the concession in International

expectations of continued low freight rates and overcapacity few are

Maritime Organization (IMO) regulations phasing out single-hull tankers,

expecting an easy ride in 2012.

allowing states to extend the deadline for a ban on such vessels from

However, the island is also the base for a large number of other

2010 to 2013.

owners, especially of dry bulk vessels. While the dry bulk market has picked up somewhat recently, one of Taiwan’s major bulk operators recently conceded tough times lay ahead. The president of U-Ming Marine Transport Corp, CK Ong, was quoted as saying: “Next year there will be another wave of big ships coming in.” He added that it was “going to be a difficult year”.

However, U-Ming owns a diverse fleet, including cement carriers, bulk carriers ranging from handysize to capesize vessels and one VLCC. Currently U-Ming owns and operates 29 vessels and has nine bulk carriers under construction.

According to a report by FT.com prospects for another bulk carrier owner, Chinese Maritime Transport (CMT), look good despite worries over capesize freight rates, with investment analysts predicting that the company will outperform the market.

Founded by CY Tung, CMT can trace its beginnings to Shanghai in the 1940s and now, together with its subsidiaries, operates bulk carriers and inland container transportation and terminals. CMT owns and manages four capesize bulk carriers and has four more on order. It also engages in bulk chartering and tanker brokering.

Yang Ming’s bulk carrier subsidiary, Kuang Ming Shipping Corp, is continuing to expand its fleet and is scheduled to have more than 20 vessels by 2013 as part of a strategy to become Taiwan’s specialist panamax bulker fleet.

Taipei is the base for a dynamic and diverse shipping industry

Asia-Pacific Shipping 2011/12 www.thebaltic.com

41

Company profiles

ClassNK Founded in 1899, Tokyo-based classification society ClassNK has grown to become not only Asia’s top classification society, but the world’s largest classification society on a tonnage basis. As the only classification society with more than 190 million gross tons on its register, ClassNK has emerged as a leader in the maritime arena, combining a commitment to serving the maritime industry with a dedication to cutting edge R&D. To learn more about ClassNK’s activities, we sat down with ClassNK Chairman & President Noboru Ueda.

ClassNK is a heavy investor in efficiency research and development, mainly in the Japanese project to cut vessel emissions by 30%. Since the programme is due to report next year, can you advance some conclusions already?

topped 190 million gross tons at the end of September 2011. So we have

ClassNK has committed more than US$28 million to supporting 19 of

the world maritime industry places in ClassNK and our services, as well as

the 22 projects being carried out as part of a Japanese national program

our unmatched commitment to supporting the growth and development

to reduce maritime GHG emissions. As this program is not slated to be

of the maritime industry.

high expectations for this year, as well. As more than 486 newbuildings totalling more than 14.8 million gross tons have already been added to our register in the first nine months of this year alone, we expect that this year’s total additions to our register will to rival last year’s figures.

I think that our consistent growth reflects the great amount of trust that

completed until 2013, many of the projects are still very much ongoing, and therefore the final results have yet to be released.

emissions on the vessels by more than 10% during sea trials. While

ClassNK is working with IBM Japan to develop new cloud-based infrastructure to help the industry meet new requirements included in the International Maritime Organization’s Goal Based Standards. What are the advantages of this partnership and what improvements will the users experience?

further research is necessary, this technology is slated to be installed on

With each new regulation, the paperwork and time required for compliance

three Kamsarmax bulk carriers ordered by grain major ADM at Oshima

continue to grow. In addition to green shipping issues, one of the most

Shipbuilding. We are confident that it can be applied to other vessel

important tasks for classification societies will be helping the maritime

types as well.

industry address the burden of new regulations. Our hope is that we can

Nevertheless, interim results have already been released for some of the projects which we feel have the greatest potential, namely research into the application of air lubrication systems on commercial vessels, and the development of new hybrid energy systems for maritime use.

Air lubrication systems have already been installed on two heavy lift vessels owned by NYK Line, and they were shown to reduce CO2

Another Project showing impressive results is a project to develop

develop IT systems to help reduce the time and expense necessary for

a new hybrid power system using Kawasaki Heavy Industries’ Gigacell

compliance and in so doing, reduce costs for owners and promote the

battery technology. This new hybrid system, being developed jointly by

development of the maritime industry.

NYK Line, MTI, and Kawasaki Heavy Industries, with support from NK,

One area where we hope to make a large contribution is with regards

has been installed on NYK’s eco car carrier the Auriga Leader in order to

to the Ship Construction Files required by the IMO Goal Based Standards.

carry out onboard testing of the system. The system works with the Auriga

As part of the Goal Based Standards, vessels will be required to maintain

Leader’s existing solar power systems to create a stable, safe, and green

a Ship Construction File, including information on how the GBS have

energy source for use by the vessel.

been applied to the vessel. As this file will include ship’s plans and other

We will release further results for all of our GHG related R&D projects as this programme nears completion.

information that will be necessary for ship repair, it is expected that these files will be also maintained at onshore archive centres as well.

As ship’s plans and other data are extremely sensitive intellectual property, these archive centres will need to be both accessible and

Last year, ClassNK had one of its most successful years ever. What are the expectations for 2011?

highly secure. By developing the ClassNK-SCF Archive Centre as a

As 585 newbuildings totaling a record 17.8 million GT joined the ClassNK

encryption technology, but also appropriate restrictions on printing,

register in 2010, last year was one of our most successful years ever.

copying, and other secondary measures for preventing data leaks,

In January 2011, we became the world’s first classification society to

and combine that technology with ClassNK’s extensive experience and

have more than 180 million gross tons on our register, and the register

reliability in protecting client information.

42

cloud-based system, we are able to take advantage of IBM’s latest developments in IT security systems, including not only the latest data

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Company profiles You stepped down as the International Association of Classification Societies Chairman, at the end June. Did you accomplish your main goals and what are IACS’ plans for the future?

When I became IACS Chairman in July of 2010, I set out three main goals

As for the challenges that remain, one of the most important is the harmonised Common Structural Rules. We have made tremendous progress on harmonising the bulk carrier and tanker CSR this year. Yet while I am confident we will be able to submit the completed, goal-based standards compliant rules to the IMO prior to the end of 2013, there is still much work to be done.

for my term: • Faithfully enacting the IACS commitments to the EC and completing

Polish Register of Shipping (PRS) we have now welcomed our 12th and

Do you really believe that the Energy Efficiency Design Index (EEDI), as it stands today, will lead to better ships in the future?

Aren’t you concerned that it may lead to underpowered ships because the easiest way to have a low EEDI is to reduce design speed?

13th members to IACS, and are a stronger and more robust organization

I’m a firm believer in the EEDI, and I think it will have a tremendously

than ever.

positive effect on our industry. The beauty of the EEDI is that it mandates

the transition to a more open and transparent IACS. • Positively contributing to technical discussions at the IMO. • Better reflecting the needs of the global maritime industry.

I am proud to say we made incredible progress on each of those goals. With the addition of the Croatian Register of Shipping (CRS) and the

With each such new addition to our membership, IACS proves its

improvements in efficiency, while leaving room for innovation. As a result

commitment to openness and transparency, and I am proud to have been

I think we will see a revolution in new green maritime technology over the

part of this transition.

coming years.

We have also made excellent progress addressing issues related to

As you mention, however, very valid concerns have been raised about

the IMO’s EEDI scheme. As one of the ways of improving the EEDI score

the potential to build underpowered vessels. Our role as classification

of vessels is to reduce design speed, IACS’ environmental expert group

societies is to address just such technical complications, and the IACS

has been working to develop a minimum speed requirement to ensure

Expert Group on Environment has been hard at work to develop minimum

that EEDI implementation doesn’t affect ship safety. Finally, in order to

power requirements for inclusion in the final EEDI. Furthermore, in order

better include the opinions and insights of the wider maritime industry

to make sure that concerns like this are given a proper hearing, as well

in the development of the EEDI new regulations, IACS helped establish

to ensure the smooth and balanced implementation of the EEDI system,

a new Joint Working Group, including representatives of class societies,

IACS established a new EEDI Joint Working Group (JWG) with leading

shipyards, and shipowners to establish joint industry guidelines for EEDI

maritime organisations from throughout the industry. I have made it my

interpretation. The EEDI will have a tremendous impact on the design of

mission as IACS Chairman to improve the communication and cooperation

new vessels, and by bringing this group together we can make sure that

between IACS and the wider industry, and the establishment of this JWG

these new regulations can be implemented quickly and effectively.

and our work on the EEDI are some of my proudest achievements as IACS Chairman.

Asia-Pacific Shipping 2011/12 www.thebaltic.com

43

Global Reach with Local Expertise Whilst Maersk Broker believe the Asian influence on the global shipping markets will continue to increase, other geographical areas are simultaneously showing accelerating developments.

Volatile and at the same time changing global markets will require expansion and further diversification within the global shipbroking industry.

In terms of business volume and global market coverage, Maersk Broker have come a long way since 1914, when the company was founded by Mr. A.P. Møller as a small, independent Danish Shipbroking operation. Today Maersk Broker’s proactive approach to the market is demonstrated by having offices in all relevant geographical locations including growth areas like Vietnam, India, the Middle East and very shortly South America.

representation in South America.

The ability to be at the forefront when it comes to market intelligence, delivering business relevant information of high quality combined with direct access to local business is of paramount import-ance to our clients world-wide. In terms of shipbroking we now have 17 offices around the world and thereby have an unparalleled information and business development network.”

globally and the overall income thereby generated; based on these measurements it seems we are doing something very right…”

Local market presence is key Entry into new and potential markets or business segments remains an integral part of the global Maersk Broker business

Anders Hald also admits that this is obviously not the cheapest way to run a shipbroking operation, but the advantages are very clear and the benefits for the clients obvious.

philosophy, also when it comes to future business development.

Anders Hald, Chief Executive of Maersk Broker Asia, explains: ”Last year we opened an office in South Africa and shortly we will open our first Maersk Broker

”Our strong market presence has enabled Maersk Broker to develop a very active broking network servicing all segmenets of the global shipping market. Maersk Broker’s emphasis on establishing close working relationships with our customers locally enable us to better understand their needs and preferences, whilst simultaneously being able to share our views, analyses and interpretation of global trends and developments as applicable in specific business contexts. We have for many years opted for a different business development philosophy compared to our competitors. The level of success can obviously only be judged from the amount of business Maersk Broker conclude

At present, considerable resources are being invested within project development which includes ”tailor-made” combination transactions comprising newbuildings and/or second-hand tonnage, their financing and employment.

By combining all services of the global Maersk Broker organisation, the aim is, according to Anders Hald, to develop innovative consolidated business opportunities.

Business development In terms of business activities, Maersk Broker are today involved in all major market segments providing a full range of services within chartering, contracting of newbuilding and sale & purchase of second hand vessels.

”Our services in relation to all main tonnage segments include development of attractive ship financing models for newbuilding projects and second-hand tonnage, as well as long term employment structures.”

Research adds value As an integrated part of the associated services available to clients, Research is considered amongst the most important.

This is done differently than most

other major broking houses, as Maersk Broker does not consider research and market intelligence something they wish to sell. ”By providing our clients and our global organisation with high quality market information, analyses and tailor-made business studies, Maersk Broker Research is an active partner in our – and thereby our clients – day-to-day business development.” explains Anders Hald.

“We now have 17 offices around the world and thereby have an unparalleled information and business development network” Internal Shipbroker education As with most other shipbroking companies, the employees are the most valuable asset to Maersk Broker. To attract and retain the right individuals in a dynamic and changing shipping world, the continuous training and personal development of all staff within the global organisation is considered essential. In addition to this, Maersk Broker have since 2005 conducted its own 2-year international trainee programme for aspiring shipbrokers world-wide.

”The programme aims to educate future world-class shipbrokers with a truly global perspective on the business.” explains Anders Hald. ”The last couple of years the majority of our trainee graduates were from Asia, and we are now very pleased to have a number of our Asian brokers actually perusing a career within our offices in Europe, representing Asia in the global Maersk Broker equation. We need to develop the talent, but also potential leaders of the future within our organisation.”

Maersk Broker Asia Looking at Maersk Broker Asia specifically, the operation is the largest integrated shipbroker in the region, with nine offices employing close to 150 brokers and staff. In the past decade more than 700 newbuilding orders have been placed through Maersk Broker Asia with yards in China, Korea, Japan, Singapore, Vietnam and the Philippines and in addition hereto, the company enjoys a very solid position within regional dry cargo and container vessels chartering.

According to Anders Hald additional resources have lately been invested into a more focused approach to second-hand sale & purchase and tanker chartering, resulting in improved results and a continuously expanding market position. In addition, effort has

Photo: Anders Hald.

also been put into catering for the increasing local demand for more specialized tonnage including PCTC, heavy lift and offshore support vessels, as well as dedicated tonnage for the installation of windmills at sea. ”The future will undoubtedly offer many opportunities across the various market segments – we have to ensure that we are prepared and ready to efficiently and professionally engage for the benefit of our clients.” finishes Anders Hald.

Maersk Broker offices worldwide City: Copenhagen London Tokyo Taipei Hong Kong Seoul

Opened in: 1914 1951 1963 1980 1983 1986

Singapore Beijing Shanghai Athens New York Hanoi

1995 1996 2001 2001 2005 2006

Hamburg Mumbai Dubai CapeTown Buenos Aires

It’s all about trust

2007 2008 2008 2010 2011

Company profiles

Clarkson Asia Pte Ltd F

EW national anthems can have more appropriate titles than “Onward

position at the centre of the world’s major trade routes. Alongside the

Singapore”, which truly encapsulates the economic momentum and

ships, the maritime community in the region has established a thriving

vitality of this city state. One of the Asian Tigers, Singapore has a history of

home base as global operations seek the most suitable location to

sustained and exemplary growth plus a proud maritime heritage, so it was

represent their interests within the world’s fastest growing region.

the natural choice for Clarksons when we established our Asian presence there 30 years ago.

In 1981 Clarksons berthed in the Asian market in a joint venture with two other brokers - Aall & Co of Tokyo and Charles R Weber of New York.

Together with a local trading company, Seadragon Maritime Inc Pty Ltd was founded, which focused on the fledgling tanker sector in Singapore.

The company then employed between 5 and 10 brokers throughout the 1980s.

Our long-established position in Singapore, and the experience of developing our offer in response to the growth of the region, means that Clarksons is uniquely placed to help clients. By combining local and global knowledge and employing many different nationalities on our broking desks we are able to offer clients the expertise and experience that they require to advise and support their shipping exposure in this exciting region.

That small foundation has borne significant fruit and today in the region Clarksons has three offices in Eastern Asia, one in India, and a further four in Australia. From the handful of brokers 30 years ago we now employ 110 within the region and our expertise has been extended from the initial specialisation in tankers to focusing on all the major facets of shipping.

In line with the culture of Clarksons, the clear remit for each office is to understand the needs of its local shipping community and to provide it with the group’s renowned quality and depth of service.

Underpinning this is the Clarksons Research resource, which is recognised throughout the maritime world as the most comprehensive

We are able to deliver this service thanks to the unrivalled support

and reliable provider of intelligence on the shipping and offshore industries.

base of Clarksons’ 18 global offices and nearly 600 brokers, all backed

Used by shipping, shipbuilding, insurance, banking and investment

by the group’s unparalleled shipping research business. Thirty years ago

interests across the globe it is produced by our in-house team of

world seaborne trade was estimated to be about 3,700,000,000 million

researchers and analysts at offices in the UK and Shanghai. The Shanghai

tonnes per annum, but powered by the rise of importing and exporting

office is part of the formidable team that we have built up in the Asia region

economies, such as China, this year it is estimated to reach 9,005,000,000

and our fully integrated approach has enabled us to deliver a best-in-class

million tonnes. This huge bottom line growth, with an estimated 90% of

service offer to our clients.

world trade now transported by sea, has fuelled demand for our services.

In the same 30-year timeframe, Asia’s position in the global economic order has shifted dramatically and, as volumes have grown, so has the diversity in the types of ships needed to meet this demand. As a result both the capacity and depth of services needed to support the shipping businesses of Asia have similarly changed and we have risen to the challenge with the breadth and scope of our offer.

In recent years, Singapore has established itself as the primary hub centre for shipping in Asia, in part due to its favourable geographical

We were delighted earlier this year to be awarded Best Maritime Service Provider at the 2011 Singapore Maritime Awards, organised by the Maritime and Port Authority of Singapore.

Asia today is home to more than 60% of the world’s population and, despite the immediate global economic outlook, we are confident that it will continue to build on its position as the primary global manufacturing centre, while at the same time growing its already substantial consumer base.

Both shipping in the region and Clarksons involvement at a local level have come a long way in the last 30 years, and the wind looks set fair for a vibrant future.

46

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Company profiles

Parekh Marine Agencies Pvt. Ltd. P

arekh Group of Companies, wholly owned by the Parekh Family, was

Indian representative member of the prestigious worldwide Multiport Ship

founded in 1951 to diversify the activities of the family from trading to

Agencies Network. This association with Multiport Network provides

shipping and related activities. Over the years, the Group has evolved into

Parekh Group with an international outreach and an enhanced opportunity

a multifaceted service provider actively involved in all aspects of shipping

to serve a larger client base.

and logistics in India. With the changing face of the business environ-

In the current business scenario of rapidly advancing India, the Parekh

ment in India since 1980, the Group has now emerged as an established

Group today is well poised to take the tide at upswing, ready to contribute

integrated service provider to domestic as well as international shipping

to and participate in the progress.

interests, with services ranging from handling a small LCL parcel to a heavy over-dimensional single-piece machinery or a full shipload of cargo.

Over five decades of experience in the shipping field, gained through a mix of hands-on approach combined with technological advances and continuous inputs from professionals, has today brought the Group to a commendable stature within the Indian shipping and logistics industry.

Today the Group is proud to be associated with some leading names in the international shipping and logistics field.

With operations spread over 17 cities and all major and minor ports and

Parekh Group

ICDs of India, the Group has a truly national presence and infrastructural set-up to effectively service any client. Well-networked offices in all

Parekh Marine Agencies Pvt. Ltd.

locations enable the Group to provide real-time information and value-

Wakefield House, 1st Floor

added services to its customers. Some of the services provided by

Sprott Road, Ballard Estate

Parekh Group are shipping agency, multimodal transportation, chartering

Mumbai – 400001, India

& brokering, freight forwarding, off-shore services, CFS and warehousing,

Tel: +91 22 66344444

and supply chain management.

Fax: +91 22 22652003

From 1 April 2008, the agency division of the Group, Parekh Marine Agencies Pvt. Ltd., has had the distinction of representing India as the

E-mail: agency@pmapl.com Website: wwwparekhgroup.in

Noble Group (SGX: N21) N

oble Group (SGX: N21) is a leading, diversified natural resources sup-

a leading player in linking low cost origination markets, in locations such as

ply chain group with worldwide activities in mining, farming, process-

South America and the Ukraine, to emerging markets with high demand

ing, ports, shipping and marketing of metals and minerals, energy and

growth.

This segment’s integrated pipelines store, handle and process the

agricultural products.

We manage a diversified portfolio of essential raw materials and

spectrum of key agricultural products from oilseeds and grains, palm oil,

also transport these commodities through our own extensive chartering

cotton, coffee to cocoa, while Noble has also emerged to become a top

operations. By owning and operating key assets, we manage integrated

tier operator of modern sugar and ethanol mills in Brazil.

supply chains from origination to final delivery to our industrial and commercial clients.

Metals, minerals and ores As one of the world’s top suppliers, Noble has operations stretching from

Energy

India to the United States, Australia to Europe ­ giving us critical mass at

As one of Noble’s fastest-growing and most dynamic pipelines, the natural

key origination and delivery points. Products include iron ore, ferro alloys

resources handled by this segment encompass the spectrum of energy

and aluminium.

inputs, right through to the distribution of electricity. Our products include the entire range of thermal coals, gas and ethanol. We are also leaders in clean fuels initiatives and we are a major producer of ethanol and electricity from bio-mass in Brazil.

Agriculture This business unit, accounting for the majority of the Group¹s self-owned assets is a little over 10 years old. It has emerged over that time to become

Asia-Pacific Shipping 2011/12 www.thebaltic.com

47

Events

What’s on where A round-up of conferences, exhibitions and events in the shipping world

24 November Singapore

08–11 February

Tradewinds Offshore Marine

Shipping, Marine & Port World Expo 2012

Following the success of the TradeWinds Offshore Marine conference held in Oslo during Nor-Shipping 2011, this high-level event comes to the Asia-Pacific, and will be held in the maritime hub city of Singapore. www.nhstevents.com/events

6 December Beijing, China

Mumbai, India

Shipping, Marine & Port World Expo 2012 is an international exhibition and conference shipping, maritime and port industry. The event will gather together leading marine, shipping, ports and logistics service providers and manufacturers from across the country and overseas. http://events.hellotrade.com/tradeshows/shipping-marine-portsworld-expo/

Oil Spill Response Workshop OSRW

The workshop features discussions on innovations and best practices across oil spill response strategies and brings to the audience the most update technology and cost-efficient solutions to contain oil spill.

The course directors, panelists and audiences will be inter-reactive in their discussions so as to drive home the smart resolution to oil spill beyond its causes. www.topcoevents.com

14–16 March 2012 Asia Pacific Maritime 2012, Singapore

APM is the one-stop market for the region’s maritime community, showcasing the latest in marine engineering and port technology. This 12th APM will be featuring shipbuilding and marine, workboat and offshore segments. www.apmaritime.com

16-17 January, Singapore Freight Derivatives & Shipping Risk Management Course www.balticexchange.com See page 17 for more information

18-19 January, Singapore Advanced Freight Modelling & Trading Course www.balticexchange.com See page 17 for more information

04-06 April SMM India, Mumbai, India

The SMM India exhibition covers includes Shipbuilding / Shipyard industry, Maritime services, Ship sections, Ports / Port technology, Shipyard installations and equipment, Offshore technology, Prime movers / Propulsion systems, Cargo handling & logistics, Dredging, Maritime and training institutes, Ship operation equipment, Information technology / Software, Electronics / Communications, Research organizations, Marine technology, Marine equipment, Navigational equipment & aids. www.biztradeshows.com/trade-events/smm-india.html

18-20 April 28 February – 2 March 2012, Hong Kong China Maritime Week

The event will feature a major international maritime exhibition plus a range of conferences covering vessel operations, the marine environment, ship financing, shipbuilding, ballast water treatment, vessel enclosed spaces, and tugs and offshore vessels. www.bairdmaritime.com

48

Sea Japan 2012, Tokyo, Japan

Sea Japan is the biggest event of the Japanese maritime industry calendar. Shipbuilders, shipowners, marine equipment suppliers and providers of financial, technical and operational services gather to exchange information and do business. www.seajapan.ne.jp

Asia-Pacific Shipping 2011/12 www.thebaltic.com

Clarksons The heart of global shipping

Celebrating 30 Years of Clarksons in Asia Clarkson Asia +(65) 6339 0036 Best Maritime Service Provider, Singapore, 2011

www.clarksons.com Africa . Asia . Australasia . Europe . Middle East . North America

Closer relationships for a safer world.

We have an international network of more than 7,000 experts the marketplace and the technical developments shaping today’s marine industry. It also ensures that, wherever you are, we will be nearby and able to apply a genuine understanding of local issues and help you operate more safely and sustainably.

Learn more about our global network – go to www.lr.org/marine

Services are provided by members of the Lloyd’s Register Group.