Freight Focus - Autumn 2013

Testing Times Coking Coal – The New Iron Ore? safety first interview: Kai Miller at HSH Nordbank

WELCOME facing the challenges Optimism is rising, but the shipping industry is still under strain

Publisher WH Robinson Editor Sandra Speares Tel: +44 (0) 1483 527998 E-mail: sandra.speares@ mar-media.com Project Director Jonathon Ferris E-mail: jonathon.ferris@ mar-media.com Designer Justin Ives

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justindesign.co.uk

Shipping markets are continuing to be a challenge as freight rates alarm shipowners, bunker prices remain high and shipping companies are under pressure financially.

In these challenging times, maintaining business relationships and not walking away from contracts is essential.

With many shipping banks pulling out of the sector, private equity is currently playing an important role in the shipping industry, although given the long term and cyclical nature of the industry, hedge funds’ approach to investments in shipping may not match the longer term involvement that most accept as a key part of the business.

There are also question marks over whether the hedge fund approach to shipping finance actually fits the shipping model, where business relationships between banks and their clients have been an essential part of the mix.

Risk management and transparency are two themes that increasingly dominate. Shipping traditionally has a reputation for being opaque, but in the current financial climate, being up front about problems and financial difficulties is increasingly important.

Hedging risk through the use of FFAs may be one solution, or at least an important part of the risk management tool kit. The other side of the equation is that many risks can be controllable if the correct management practices are in place.

While iron ore is one of the commodities that has taken centre stage, not least because of Chinese demand, other commodities like coking coal are also looking increasingly attractive.

Trade patterns are also changing as the new generation of mega container vessels dominate the East-West trades leading to a cascade effect which means smaller TEU vessels moving towards Africa or South America, where in some cases infrastructure may be lacking.

The heavy lift sector has also been seeing an expansion and Panama has just received the first four lock gates from Trieste for its expansion programme.

In terms of infrastructure, project cargo also provides challenges to infrastructure at project sites, with specialist insurance needed to ensure start up dates are met.

No-one likes to commit to when the business upturn is likely to take place, so it’s likely to continue to be a question of watching this space. n

Being up front about problems and financial difficulties is increasingly important

Maritime Media Ltd Suite 25, Hurlingham Studios, Ranelagh Gardens, London SW6 3PA, UK T: +44 (0) 20 7386 6100 | F: +44 (0) 20 7381 8890 | E: inbox@mar-media.com | www.freightinternational.net

Autumn 2013 

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CONTENTS Welcome

1

insurance

facing the challenges

safety first

Optmism is rising, but the shipping industry is still under strain

The advent of the Maritime Labour Convention has resulted in a

NEWS

5

In Brief...

10

regulation 12

Seafarers in the spotlight has been welcomed by industry leaders

16

Oil on troubled waters

risk management

optimism at a high level for two and a half years in the three months ended May 2013, according to the latest Shipping Confidence survey from international

21

Time to just ‘order, trade or scrap’ in shipping?

accountant and shipping adviser Moore Stephens

shipmanagement

Analysis by Basil M Karatzas, CEO of Karatzas Marine Advisors & Co.

23

Crew travel is an essential component of shipmanagement operations.

Freight Focus talks to Christer Sjödoff, Group Vice President, GAC Solutions, about the issues

India’s ban on iron ore mining may be lifted soon, giving a welcome boost to the country’s mining business

Technology 25

talking Efficiency

solutions and services From apps to inert gas systems: there plenty of

environment 27

US environmental legislation on the use of low sulphur fuels has begun to bite

In the second part of its response to sceptics of automated ship valuation, VesselsValue answers further questions

heavy lift In a major milestone for he Panama Canal extension, the first four gates for the new locks have arrived from Trieste

A new alliance aims to improve and optimise operations and service offerings on East-West trades

ports

Performance, over-capacity and fuel consumption are just some of the issues facing the big carriers at the moment

47

Gateway to success 29

forging links

carrier cares

45

clean living

automated increase

transit

43

new technological developments in the market

Energy efficiency has been high on the agenda as the industry gears up to a new raft of environmental legislation, and the demands of reducing costs in a tight financial environment

trading

40

On the road

A SENSE of ORE

ship values

38

Overall confidence levels in the shipping industry rose to their highest

With recent civil unrest in Turkey and a civil war raging in Syria, how is political discord in the Middle East affecting oil prices?

cost reduction

36

The introduction into force of the Maritime Labour Convention

John Banasziewicz, Managing Director, Freight Investor Services, examines the market

CoMModities

trader exposure the shipping arena may cause difficulties for commodities traders

Coking Coal – The New Iron Ore?

FINANCE

34

Law firm Holman Fenwick Willan warned recently that insolvencies in

Container FFAs can significantly reduce exposure to price risk, says Kai Miller at HSH Nordbank. Sandra Speares reports

Markets

while dangerous cargoes and the threat to seafarers has also been

legal

security system

Industry news

number of new insurance products being offered aimed at seafarers, receiving attention

All the latest news, views, company moves, reports and conference updates

Interview

32

30

49

Growth industry A surge in container demand and in ship sizes are just two challenges facing terminal operators

EVENTS

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.

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NEWS focus

in brief...

The latest industry reports, forecasts and company moves

There has been a distinctly African focus in recent months, with a new Bechtel initiative on port design and warnings from the International Bunker Industry Association about the situation in South Africa.

Global engineering, construction and project management company Bechtel, has created a revolutionary design for ports that could transform shipping in Africa, Bechtel believes.

The Multi-User Offshore Hub is designed for two or more users and consists of an offshore, smart terminal arrangement and docking system that can accommodate oceangoing vessels and barges. It has the potential to open new market opportunities for African ports by significantly increasing capacity and substantially reducing port construction and operation costs.

“As existing African ports become more and more congested, increased capacity is an urgent need for both the import of consumer goods and the export of minerals. Each requires out-of-the-box solutions to handle as many containers as efficiently as possible and to speed the provision of new mineral export facilities to enable the region to develop its economy,” Marco Pluijm, Bechtel’s senior ports specialist told delegates at the African Ports Evolution 2013 Forum in Cape Town.

“This solution could provide a reduction of up to 40% in port infrastructure construction costs compared with building a traditional port and up to 50% in operational cost savings as the hub can handle much larger Capesize and Valemax vessels, which result in economies of scale.”

The Multi-User Offshore Hub concept combines a country’s existing transport modes, such as rail and river barges, to provide the most efficient and sustainable logistics possible. Bechtel is currently identifying suitable sites for a Multi-User Offshore Hub in countries in both East and West Africa.

The company is also leading a three-year joint-industry research project to improve the safety of mooring large cargo ships off the coast of West Africa. Both initiatives are instrumental in upgrading and expanding port infrastructure needs in Africa. The two initiatives are part of Bechtel’s longstanding work in Africa, which spans more than 70 years.

The International Bunker Industry Association has called on the South African government to realise the potential of the ship refuelling market in its ports and the impact this will have in supporting regeneration.

Speaking at the conference, IBIA chief executive Peter Hall told delegates that while more than double the number of vessels move around the Cape of Good Hope than transit the Straits of Gibraltar, the South African bunkering market has declined while Gibraltar’s continues to grow. Last year around 600 ships a day moved around South Africa, while the volume of bunkers sold in Durban hit a 20-year low with 1.1m tonnes traded in 2012. 2013 sales volumes look set to decline further as the area struggles with current market forces.

IBIA has advised the country to open its bunker market to an open economy system; produce fuel in line with global carbon and sulphur restrictions; adjust its fuel pricing structure to be competitive

against South American and Asian port options and create safe offshore refuelling areas.

Partnering with neighbouring countries for crude cargo purchasing and keeping its port tariffs relevant and competitive can also revitalise an industry on the verge of collapse. IBIA believes that these steps would help stem the decline in South African bunker fuel sales. It says the South African government should closely examine the potential impact of a successful bunkering sector on the country’s GDP and develop a strategy in partnership with industry stakeholders, including the oil majors that own the current aging infrastructure.

Hall said:“It is time that that we all awoke to the enormous potential that is currently lying dormant in South African ports. The annual gain of an additional 900 ships a year in Durban for example would contribute an estimated 2.4 trillion rand (USD 126m) a year to the South African economy, excluding the value of bunker sales. A growth in the country’s bunkering market would have a huge benefit to the South African economy specifically in terms of job creation and community regeneration. Competitively priced bunkering facilities in SA ports would also benefit IBIA’s owner and operator members as well as suppliers and the SA economy.

“The country is strategically very well located to handle vessels servicing the predicted increase in South American to Asia dry bulk trades as well as Asia to South America container traffic. Increased bunkering would mean increased business for port operations firms, oil producers, barging companies as well as international bunker trading companies.”

The reasons for South Africa’s decline in the ship refuelling market are numerous, according to IBIA. The availability of South African fuel has historically been termed as “feast or famine” which can be attributed to limited fuel storage facilities and inconstant refinery turnarounds which are unable to give the shipping market sufficient notice of refinery shutdowns. These occur primarily because the aging refineries are constantly being upgraded to produce the more lucrative “white oils” than residual fuel oil. In recent years, residual fuel oil production volumes have remained unchanged with the balance of unsold fuel being exported to eastern markets. It is estimated that around 80,000 tonnes a month is distributed in this manner. These refineries are also unable to produce the low sulphur, low carbon, 380cst fuel which ship operators require. Added to the problem is the fact that port call and bunker costs are high; the supply of fuel from offshore barges is banned and there is little competition in the market with only four suppliers serving the sector.

“Bunker vessels are just too low on South African ports’ list of priorities. There is currently limited port berthing for bunker vessels in all ports with vessels being dealt with on a first come first served basis. And all too often the focus has been on developing container facilities rather than bunkering facilities in recent port upgrades,” said Hall.

IBIA has approached Professor Trevor Jones of the University of Kwa Zulu Natal, Marine Studies to undertake a study of the impact that the loss of bunker fuel sales has on the economy of Southern Africa. n

Autumn 2013

5

NEWS focus Piracy warning Pirates will continue to prey on the lucrative West African oil trade, with more piracy and hijacking incidents expected in the Gulf of Guinea, as long as the political complexities surrounding naval presence in territorial waters continue, says an analyst with research and consulting firm GlobalData.

According to Jeffrey Kerr, GlobalData’s Managing Analyst covering Downstream Oil & Gas, most of the pirates in the West African region are believed to be part of its countries thriving black market for crude oil and refined products.

Kerr says: “The Gulf of Guinea accounts for about 10% of the world’s crude oil exports, as well as many other products such as cocoa and metals, which are highly sought after by the generally armed pirates on West African waters.

“Furthermore, many of the ships in West Africa are too large to move into port and must be moored offshore, making them easy targets for armed pirates, while the region’s shipping rules, which state that crews cannot be armed, making defence even more difficult,” Kerr continues.

A recent study found that in the first half of 2013, there were 31 reported piracy incidents and one hijacking in West Africa, compared to nine incidents and two hijackings offshore Somalia, the former world hotspot for such activities.

Another reason for the decline in piracy in Eastern Africa, according to Kerr, is because of an international naval presence that

has armed crews on the ships offshore Somalia. Other measures, such as trying and convicting pirates in US courts, have also forced them to seek other locations.

In order to counter the problem of piracy on the west coast of Africa, the African Union member countries agreed to set up a regional centre in Cameroon to study the issue and adopt a code of conduct. However, significant hurdles remain regarding naval presence on West African waters.

“Those countries won’t allow each other’s navies into their territorial waters. The pirates are well aware of this and are able to exploit it,” concludes Kerr. n

Iranian position While Iran’s new oil minister, Bijan Zangeneh, may find it difficult to meet his pledge to reinvigorate his nation’s oil sector, he has successfully faced similar challenges before, a former adviser to the National Iranian Oil Company said on the all-energy news and talk program Platts Energy Week.

Sara Vakhshouri, president of Washington-based energy consulting firm SVB Energy International, said Zangeneh’s previous 22 years of service as Iran’s oil minister and energy minister will likely prove helpful to him in his second stint as oil minister, this time under Iran’s new president, Hassan Rowhani.

“He’s a very pragmatic person. He has an engineering background,” Vakhshouri told Platts Energy Week.”Wherever he was

Iran’s new oil minister, Bijan Zangeneh

Autumn 2013

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NEWS focus serving as a minister, in different capacities, he has had a reputation of turning limitation into opportunity.”

His lengthy experience in government has earned him the title “sheikh of ministers” in Iran, she said.

Vakhshouri, who worked for the National Iranian Oil Company from 2004-05, the final two years of Zangeneh’s last stint at Teheran’s oil ministry, said Iran’s oil production reached 4 million b/d in 2005, the highest level since before the nation’s 1979 revolution.

Zangeneh has made restoring Iran’s oil production capacity to 4 million b/d one of his priorities. Iran produced nearly 2.7 million

Peel Ports’ backing Leading worldwide container shipping group CMA CGM has backed Peel Ports’ £300m Liverpool2 development by doubling the frequency of its feeder service to the port.

CMA CGM now offers twice-weekly calls in Liverpool from its hub in Le Havre, France and a new weekly call at Greenock, Scotland and Cork, Ireland. Weekly calls to Dublin and Belfast were already established.

The company’s expansion into Liverpool will take advantage of Peel Ports’ established Green Highway Network, a shuttle service which carries freight 44 miles inland using the Manchester Ship Canal.

Ross Thompson, commercial director of Peel Ports, said: “CMA CGM is a valued partner on vital Irish Sea routes and this expansion demonstrates not only its commitment to Liverpool, but its confidence in the continuing growth in global trade to and from the port.

“Increasing capacity in this way means container carriers unloading at the completed Liverpool2 development from across the globe will benefit from rapid, seamless forwarding of goods to Ireland and Scotland, as well as on to Europe via CMA CGM’s hub in Le Havre.

“This development also shows the combined value of Peel Ports’ assets in Liverpool, Dublin, Belfast and Greenock and how these can serve the market around the Irish Sea Hub as well as providing a low-cost solution for empty containers to be returned by ship and refilled.”

The new route will see deep sea containers – which have been transported to Europe from the Far East – coming in to the Port of Liverpool on a feeder service from Le Havre twice a week. The service will go on to call at Dublin, Belfast, Cork and Greenock once a week.

The service will also allow empty containers that would otherwise be moved to Greenock via road or rail to be transported by sea.

These containers will serve the Scottish drinks export market and be shipped back to the Far East.

Peel Ports owns container terminals in Dublin, Belfast and Greenock. The ports are linked by ships from BG Freight Line and Coastal Container Line, also owned by Peel Ports, making up the company’s Irish Sea Hub network.

Rob Waterman, CMA CGM UK chief executive officer, said: “This development underlines CMA CGM’s commitment to the Port of Liverpool and its desire to improve service levels to customers in the north west.”

The Port of Liverpool carries more than 33m tonnes of cargo every year and is the UK’s leading west coast port.

When completed in 2015, the Port’s deep-water container terminal, to be known as Liverpool2, will accommodate two of the new breed of post Panamax container ships at one time.

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Autumn 2013

b/d in July, according to the Organization of Petroleum Exporting Countries (OPEC).

Vakhshouri also credited Zangeneh with responding effectively to the United States’ Iran-Libya Sanctions of 1996 by attracting $15bn in foreign investment for Iran’s oil sector. Zangeneh used buyback contracts to help attract non-U.S.-based oil companies, such as France’s Total, to Iran’s oil fields, she said.

Buy-back contracts are not profitable enough now to attract major international companies, given the current sanctions on Iran’s oil and banking by the US and European Union, Vakhshouri explained.

The development will attract some of the world’s largest container vessels to a centrally-located UK distribution hub which boasts a population of 35 million consumers within a radius of 150 miles.

Peel Ports’ investment – funded by a £35m UK government Regional Growth Fund grant – will enable container ships from around the world to connect directly with the northern half of the UK and Ireland, and so serve an annual market estimated at around four million TEUs. Work has already started on the Liverpool2 project, with dredging operations to create a 16.5m-deep berthing pocket well underway. n CMA CGM has backed Peel Ports

NEWS focus But, in an article posted on the Atlantic Council’s website, she said another form of investment involving production-sharing agreements could attract investments in Iran’s oil fields if the sanctions are eased.

Vakhshouri said Zangeneh also demonstrated his mettle as Iran’s energy minister from 1983 to 1997, overseeing the reconstruction of electric grids and dams that were destroyed during Iran’s war with Iraq.

But the Washington, DC consultant noted Zangeneh’s goal of 4 million b/d may prove to be “a bit tough” to meet, given the US and EU sanctions. However, she said: “He doesn’t talk about production per se but [rather] about production capacity. . .And that was his plan when he was minister [before].”

While Vakhshouri said the new Iranian government’s approach to the US and other western nations is still difficult to determine, she added that she senses a more moderate approach with the election of Rowhani.

She told Platts that during his campaign for the presidency as well as his appointments “indicate he has a different rhetorical style and

New financial reporting standard

diplomacy and a different approach to negotiations” with the West over Iran’s nuclear program.

Vakhshouri said she also believes that Iran’s supreme leader, Ayatollah Ali Khamenei, is “supportive of Rowhani and his team”.

But claims by some that Rowhani is moderate in comparison with his predecessor, Mahmoud Ahmadinejad, were treated sceptically by US Central Intelligence Agency chief James Woolsey, who also appeared on the programme.

“I don’t know that I’d characterise Rowhani as a moderate,” Woolsey said. “I think he’s shrewd. But I think the chance that he would steer Iran away from its nuclear weapons program is less than zero.”

The US and EU implemented sanctions on Iran’s oil trade last year in an effort to convince Teheran to pull back from its nuclear program, which Western governments believe is aimed at producing nuclear weapons. Iran denies those allegations, saying the nuclear programme is for peaceful purposes. n

Michael Simms

International accountant and shipping adviser Moore Stephens says shipping companies and their financiers could be among those affected by the introduction of the new International Financial Reporting Standard for consolidated financial statements.

The new standard, IFRS 10, which deals with consolidated accounts, comes into force in 2014 in the EU, but is already in force outside the EU. It adopts a new approach to the definition of a parent in consolidated accounts by identifying three key elements of control relating to a subsidiary: (1) who has the power to direct the key activities; (2) who gets a variable return as a result of the activities; and (3) is there a connection between the exercise of power and the variable return. Where a party has all three elements, then it is a parent; where at least one element is missing, then it is not.

Michael Simms, a partner with the shipping team at Moore Stephens, says: “In every case, IFRS 10 looks to the substance of the arrangement and not just to its legal form. So there is no simple answer to the three key questions it poses. Each situation needs to be assessed individually.

“Many shipping groups will find the new standard has minimal impact on them. While it redefines what it means to be – or to have – a subsidiary, the majority of situations will be straightforward. Where a parent has a wholly owned subsidiary under the current rules, and no unusual arrangements with other parties, it will still have a wholly owned subsidiary under the new rules.

“The standard makes changes, however, in the case of more complex arrangements. For example, there have been a number of cases in recent years of shipping companies being unable to meet their debt obligations. If the vessels operated by such companies are then sold, no accounting issues arise and the bank has simply realised its loss. In some cases, though, the bank does not wish to sell the vessel and it is transferred to a new entity in which the bank retains some form of interest. The question is whether, in such cases, that entity is a subsidiary of the bank. The new IFRS10 definition is already raising issues and more are likely to arise with the forthcoming implementation in the EU.” n

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interview

security system Container FFAs can significantly reduce exposure to price risk, says Kai Miller at HSH Nordbank. Sandra Speares reports There have been significant changes in the container shipping industry in recent years, one of which is the demise of the conference system, according to Kai Miller Head of Sales Container Derivatives and Vice President at HSH Nordbank AG. At the same time, the need to hedge risk as much as possible is an ever more important feature of today’s container industry, with high fuel, costs, low freight rates and an over-supply of tonnage.

Under the conference system, shipping lines and forwarding companies essentially set prices with constant prices used by most players in the industry.

There was however a demand for security and the need to know the actual cost of cargo, Miller says. Another point he mentions is that in the past not so much cargo was shipped in containers, but it tended to be high value cargo and therefore a large swing in freight rates didn’t’ have that much impact, he says.

Now margins are going down and the value of the goods tends to be lower, and even traditional bulk cargoes are now being containerised, he says, hence the impact of a large change in freight rate is much greater.

In the case where goods are being bought in the spring for delivery, for example in time for Christmas, a 160% swing in freight rates could have a serious effect on the profit made from a transaction placed early to gain a discount, Miller explains. In the past two years fluctuations between 50 and 300% occurred within a few months only.

HSH Nordbank has been a leading partner to the global maritime industry for decades and is the biggest ship finance bank with close to 2,500 vessels on its books “so we know that business very well and – despite the difficult market environment – we remain strongly committed to the shipping industry”.

The bank has very good contacts with importers as well as with the German Mittelstand, i.e. mid-sized companies.

Manufacturers in Asia are bringing goods over to Europe and distributing them. These market players hedge everything Miller says, both in terms of currency, but also freight. As far as discount retail chains are concerned, it is “all about logistics” he says. Goods have to leave the warehouse and be delivered

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Autumn 2013

in time into the distribution channels of the retail companies. “If you fail, you are out for ever,” he says. “They are doing the volumes which are very tight and they really calculated with a very sharp pen”.

The aim of the bank is to offer a service by which freight rates can be secured up to two years in advance. One of the most important influences governing container shipping at the moment is the tonnage over supply at the moment, and the balance between supply and demand on the tonnage side. The bank has a sophisticated model that incorporates not only the bunker element but also macro-economic data, for example what the purchase manager’s index in China doing. “We take into consideration house sales and car sales around the world.

If housing prices are rising in the US for example, we can expect to see a rise in cargo volumes.” The bank also tracks available import and export data provided by ports and government departments. The bank’s module would incorporate all the factors affecting shipping, be it bunker prices, cargo volumes and where the oil price will be in five years’ time. “How do you price a bunker hedge? We have an opinion in the market”. The bank’s close connection with the container industry also helps it come up with a pricing strategy and that price is then settled against the Shanghai Containerised Freight Index. ”It’s an innovative and pragmatic solution”.

Kai Miller

If you fail, you are out for ever.

The retailers are doing volumes that are very tight and they are calculated with a very sharp pencil

interview How much tonnage is available, how much cargo is available and the bunker price are the key factors affecting East-West trade. Doing a forecast is the more sophisticated element because it is possible to say what will affect the supply side – in the case of shipping the orderbook. It is not a question of counting individual vessels, he says but the individual slots to see what is deployed on the trade routes, Miller explains. “We can hedge the major trade lanes,” he says, offering price security on Asia to North Range, the Mediterranean and US East and West Coast. The AsiaEurope trade is dominated by the ultra large vessels. The benefit for shipping lines is if they have customers who deliver cargo in time, as this allows them to fill the vessels and eliminates the risk that a customer might seek to skip a sailing and wait for the price to drop. The price risk is managed by an FFA contract in the financial market. As far as regulatory issues are concerned, the first one to be tackled was the banning of conferences. The second issue is regulation of the derivatives market. “The FFA market fulfils all the demands of different regulators. The container FFA is a standard financial contract. We use standard documentation and everything is cleared.” The products are listed with London Clearing House and SGX in Singapore and collateral is paid. It is a very transparent market, according to Miller. He doesn’t see any problems arising out of new EU antitrust developments or the US Dodd-Frank regulations. It is a standard product with standard documentation, he says. Furthermore the product was developed when new regulatory requirements were already on the table, which meant there was no need to adapt an old product to meet new rules. Miller sees the FFA as a risk management tool which helps the parties secure cash flows. “There is a strong demand from shipping lines to have secured cash flows nowadays. On the other hand it opens up a lot of opportunities to forwarding and logistics companies because there is risk in the industry. No-one knows what the bunker price will be in two years’ time or how many vessels will actually be delivered or whether there will be a huge rise in transportation demand resulting from an improved economic picture in the US or Europe. Another issue may be whether ships are phased out because of the new low sulphur fuel requirements because it is uneconomic to ensure that they meet the new rules. “We can take the price risk out of the trade, so it is possible to make physical agreements separate from the price, and the price risk is managed by the bank”.

The container FFA delivers security in cash flow but no participation in falling prices, Miller says. “We see a huge demand for stability. People want to order in Asia and they want to use discounts for early ordering of, for example, ski wear”. It is now possible to hedge risks, but there will always be a certain floating element depending on the risk appetite of the business concerned, and the business strategy, Miller says. However the core amount, which will allow a business to pay its expenses, can be hedged “and we as a bank help our clients to achieve this”.

If there are predictable costs, Miller says he believes far more cargo will be shipped by container. At the moment the bank is concentrating on the Asia-European trade lane, the US and Mediterranean markets, which represent more than 50% of container trade, but it may consider going into other trade routes, like Africa in the future. n

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Industry view

Coking Coal – The New Iron Ore? John Banasziewicz, Managing Director, Freight Investor Services, examines the market

Freight Investor Services (FIS) began marketing and broking coking coal derivatives in 2010, having identified a need for risk management tools to hedge and trade this increasingly volatile product.

The changes in the steel complex over the past five years, most notably the end of the price benchmark agreements for iron ore, have fuelled similar changes in the coking coal market.

Producers, traders and consumers are increasingly shifting away from long-term, fixed price contracts and towards spot and indexlinked, short-term contracts.

Just as in the booming spot iron ore trade, increased coking coal demand from China in the past decade has contributed to volatility, making the need for cost-effective hedging more urgent than ever.

Out of the Iron Age

The first iron ore swap transactions were made in early 2009, effectively sponsored by the mining majors and others who provided two-way prices in small quantities across the forward curve.

The spot market emerged in response to pre-2008 physical market conditions, where spot and short term prices had decoupled from the annual agreements that officially set levels between buyers and suppliers.

New tools were seized upon by buyers and sellers anxious to manage their price risk. Even in the changed financial climate of 2013, the demand remains strong. Cleared IOS volumes continue to set records, with approximately 150m tonnes traded so far in 2013.

Since the change in iron ore’s physical price structure took hold, other commodities have swapped inflexible annual agreements for index or spot-based pricing. This fundamental change has affected the steel, coking coal and scrap industries.

Sensing the opportunity, FIS created the Virtual Steel Mill concept. This mirrors similar complexes in energy and agriculture where inputs and outputs of the industrial process can be traded together, managing risk across the supply chain.

The Three Vs

When analysing the potential for coking coal swap markets, we should consider the three Vs, which are the critical ingredients for a successful commodity derivative.

Volume

Seaborne coking (met) coal trade in 2013 is estimated at 290m tonnes, with close to 750m tonnes produced globally, half of this accounted for by Chinese domestic production.

And the appetite for trading coking coal swaps in large volumes certainly exists. The Dalian Futures Exchange has launched two contracts. Coke Futures, available since April 2011, has traded 1,917,467,640 tonnes, equivalent to 191,746,764 lots. Dalian Coking Coal Futures, available since March 2013 has traded 1,081,227,360 tonnes, equivalent to 18,020,456 lots.

Volatility

The chart (right) illustrates the inherent volatility in coking coal prices with highs above $300/tonne and lows below $129/tonne within the last 24 months alone.

With profitability of steel companies so dependent on marginal changes, there is a clear opportunity to manage input costs and improve price risk management. It is sometimes said that a move to index-pricing increases volatility, but we do not agree. Rather, the move to short-term pricing increases price transparency and creates an opportunity to manage price fluctuations far more efficiently than by using long-term contracts.

Value

John Banasziewicz, Managing Director, Freight Investor Services

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Autumn 2013

The value proposition for coking coal swaps is that the changing steel market will encourage more mining, trading and manufacturing entities become involved in managing their costs up and down the supply chain. With physical exposure increasingly index-linked, companies using swaps to hedge and trade on price direction will have a competitive advantage over those that do not.

industry view Risk Management

Increased coking coal demand from China in the past decade has contributed to volatility

As in freight and iron ore swaps, it is important to note that coking coal swap contracts are available with clearing. Clearing can currently be carried out at CME and plans are in place at SGX AsiaClear, NOS, LCH.Clearnet and ICE to add clearing for the major contracts.

Clearing effectively provides counter-party default risk insurance in return for margin payments. So even if your counter-party defaults, you still get paid the value of the contract.

Coking coal swaps also benefit from established indices against which swaps can be traded, with new indices being launched in recent months as interest grows. As during the development of the iron ore swap market, FIS remains openminded as to the market’s preferred choice of index provider and will work to assist the development of alternatives as needed.

The way forward

FIS believes the coking coal swaps market is at a point of change, with a shift away from long-term contracts by producers and a desire for pricing to be index-linked rather than fixed.

FIS has successfully incubated liquid swap markets in freight, iron ore, fertilizers, steel and scrap and bunker fuel, experience we think can be brought to bear in coking coal.

Looking ahead, we think coking coal has the potential to mirror the development of the iron ore swap market, which has quickly evolved to become a highly liquid market attracting players from financial and commodity communities. n

Autumn 2013 

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CORPORATE SuperDerivatives

Providing the widest coverage of commodity and energy derivatives on a real-time basis, SuperDerivatives offers effective management of freight risk Hedging and managing exposure to price fluctuations across commodities, forward freight agreements (FFAs), currencies and interest rates has become one of the greatest challenges facing shipping firms as they adapt to increasing volatility and uncertainty in the freight markets.

It is now essential that these companies take an integrated approach to risk management, where currency hedging is closely linked to the decision to hedge or not to hedge the commodity risk, to ensure the organisation does not run into over- or under-hedging situations.

Managing freight market risk remains a significant issue for the shipping industry, but also for the banks and corporates with an interest in this evolving market.

FFAs were originally used almost exclusively by participants in the shipping industry, such as shipowners and charterers, to hedge against fluctuations in freight rates. Banks stepped in to offer greater intermediation and provide hedging services to the shipping community.

Today, the attractiveness of trading freight has greatly evolved. Clearing has created greater transparency and promoted liquidity, while market volatility has remained very high. These factors have attracted a large number of non-traditional players to this market, including shipowners, refiners, physical traders, banks, brokers, hedge funds and asset managers.

To assist shipping companies in managing an integrated hedging process in volatile markets, SuperDerivatives developed its unique multi-asset platform to provide a comprehensive risk analysis and hedging solution that allows management of the company’s entire exposure.

SuperDerivatives provides the widest coverage of commodity and energy derivatives on a real-time basis, from vanilla to the most advanced structures, across a huge range of underlying assets. This gives shipping companies access to accurate, independent and real-time pricing for almost any commodity, commodity-related product, instrument or structure, allowing participants to more effectively hedge any exposures that may affect their capacity to trade, manage exposures and do business.

Under the guidance of its large corporate clients, SuperDerivatives developed CorporeX to bring clarity and transparency to the corporate risk hedging process, bringing a better view of a company’s total exposure to treasury departments and providing the tools to support more effective hedging, portfolio management and pricing analytics.

Fully integrated with SDX, SuperDerivatives corporate solution provides pre-trade decision support,

pricing, execution, booking, compliance and accurate mark-to-market, bringing the corporate sector the best risk management system for exposure and hedging in all products.

In addition to displaying the real-time mark-tomarket of all trades, CorporeX connects directly to SuperDerivatives’ independent valuation service eValueX to offer a third party independent mark to market of all the corporate trades, the required margin and compliance with all accounting principles, such as hedging effectiveness tests for hedge accounting treatment.

Its unprecedented level of hedge discovery, analysis and trading is further enhanced by its integration with SuperDerivatives’ award-winning market data.

The system provides derivatives-based choices of hedging strategies, taking into consideration the corporation’s exposure, hedging policy and the hedging budget limitations in order to suggest the best hedging strategy. After selecting the preferred hedging strategy, the cost of the hedge can be calculated with accuracy that compares to traders of top tier banks and truly reflects interbank broker market prices.

At the core of all the company’s solutions is SuperDerivatives’ extensively sourced and intelligently amalgamated market data, comprising true live market rates that are battle-tested in real-time in the marketplace by active traders and run through a proven pricing model.

Trading professionals on both the buy and sell side benefit daily from SuperDerivatives’ unique combination of unbiased, aggregated market data and sophisticated modelling techniques.

SuperDerivatives aims to continually develop its presence in the shipping industry through its easily customisable technology offering, which provides additional market transparency while ultimately leading to better information and decision-making.

SuperDerivatives – An Overview Founded in 2000 by Dr David Gershon, SuperDerivatives provides cloud-based, real-time market data, derivatives technology and valuation services for the financial and commodity markets.

Prior to starting SuperDerivatives, Dr Gershon was Global Head of FX Exotic Options for Barclays Capital, based in the bank’s London headquarters. Earlier in his career, he had traded at BZW New York (later to become Barclays Capital), covering emerging markets, and at Deutsche Bank in New York. Dr Gershon’s career

SuperDerivatives 30 St Mary Axe 33rd Floor London EC3A 8EP UK T: +44 (0)20 7648 1050 Support: +44 (0)20 7730 3339 F: +44 (0)20 7648 1051 E-mail: sales@superderivatives.com www.superderivatives.com

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Autumn 2013

CORPORATE

At the core of SuperDerivatives’ offering is its live market data, in real-time and as end-of-day independent market rates

on Wall Street began in 1994 in NationsBank’s mortgage department. It was while he was in his role at BarCap that he realised the need for an options pricing service and it was this that led him to start SuperDerivatives in 2000.

Today, SuperDerivatives has eight offices across Europe, APAC and the Americas and has established itself as a market leader in the provision of market data, independent pricing and risk management services to customers in over 60 countries, including banks, corporates, fund managers, auditors and central banks.

At the core of SuperDerivatives’ offering is its live market data, available both in real-time and as a set of end-of-day independent market rates. It is this market data that fuels its solutions and resulted in the company being voted ‘Best Data Provider for Derivatives’ for the fourth time in 2013.

Since its inception, SuperDerivatives has won a number of accolades in recognition of its work, including Best Data Provider for Derivatives, Best Risk Management and Options Pricing Provider and Best Innovation in Risk Management.

In 2012, founder and CEO Dr David Gershon was inducted into the Inside Market Data Hall of Fame, joining the likes of Michael Bloomberg, Joseph E Kasputys and Clare Hart.

Product overview SuperDerivatives’ range of derivatives solutions are used by traders, structurers, corporate treasurers, asset managers and salespeople.

SDX – cross-asset derivatives pricing and analytics SDX is a real-time front office system that covers cash and derivatives products across a wide range of asset classes, including currencies, interest rates, equities, credit, energy and commodities.

RMX – real-time risk and position management RMX is a real-time risk management system that offers analytics including SuperDerivatives’ model for options pricing, risk and operational tools.

Its calculation engine provides pricing and analytics capabilities for cross-asset post trade position management for a range of option types, structures and hybrids.

RMX also provides a set of risk analysis tools, including risk matrices, sensitivity analysis, transaction event management and reporting. The system is scalable and is delivered as a software as a service solution.

CorporeX – corporate risk management and hedge accounting CorporeX is a corporate exposure management and risk compliance system and is designed specifically for corporations, combining exposure and hedging of currencies, interest rates, commodities and energy in cash and derivative products.

CorporeX is fully integrated with SDX, SuperDerivatives’ multi-asset, real-time, front office platform, and is powered by its OTC implied market data.

DCX – multi-bank trading platform for OTC currency options DCX is a multi-bank trading platform for bespoke OTC derivatives. Developed in partnership with FXCM, it is an anonymous exchange for OTC products. In its first phase it offers bespoke FX options in major and emerging markets currency pairs. eValueX – multi-asset independent valuation services eValueX is an independent portfolio valuation service covering a variety of assets and derivative products.

Powered by SuperDerivatives’ market data and analytics, eValueX has its own dedicated quantitative analysis team that can price and then automate bespoke complex structures in the portfolio. eValueX provides end-of-day valuation any hour of the day using snapshots of real-time data and the SuperDerivatives pricing model.

DGX – Real-time market data, news and commentary service DGX is a free-text, cloud-based real-time market data, news, chat and analysis platform, delivering cash and derivatives market data to desktops, iPads or mobile devices.

Since its launch, the platform has attracted 23,000 registered users and it has also won multiple accolades, including Data Product Launch of the Year, Best New Data Product and Best Real-Time Market Data Initiative.

erivatives Autumn 2013

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markets

Oil on troubled waters With recent civil unrest in Turkey and a civil war raging in Syria, how is political discord in the Middle East affecting oil prices?

Although Turkey does not hold substantial amounts of oil unlike its neighbours, its central location makes it a key chokepoint in the distribution of oil from East to West, comments Global Risk Management in its latest quarterly oil market outlook. “The recent escalation in Turkey’s violent antigovernment protests could thus possibly add to the geopolitical risk premium of oil prices.

Shortly before the publication of this paper, the pipeline carrying Iraqi crude into Turkey was damaged. Although it was quickly online again, the stability of oil export out of Iraq looks be below par for quite some time.”

The risk manager also commented on the fighting in Syria, although the report was produced in July, since when the situation has escalated. “Syria itself is a very small oil producer compared to its neighbours and if the situation remains contained will not move the needle much in terms of global oil price.” However, it warned that in the long term foreign geopolitical interests, in particular the Russian and US relationship, might affect

prospective energy transit routes between the Middle East and North Africa.

Turning its attention to the new Iranian president Hassan Rohani, the former chief nuclear negotiator, he is perceived as a semi-moderate and may be the key to defuse Iran’s tensions with the West. “If he manages to sort out a diplomatic solution for the country’s nuclear ambitions, economic sanctions that have substantially decreased its oil exports might be lifted.

This would drive a marked surplus of oil supply, decreasing oil prices.

“However, we do not see a complete return of the current export loss of 1 mbpd.

The technical difficulties to re-establish the pressure in the shut down oil fields are not easily overcome. Initially, the surplus Iranian inventories (+35m barrels) would, however, put pressure on oil prices. We stress that this is in the most optimistic scenario. A much more plausible outcome is continued sanctions and multiple negotiations between Iran and foreign nations on the former’s nuclear programme,” the report said.” n

The technical difficulties to re-establish the pressure in the shut down oil fields are not easily overcome

recent civil unrest in Turkey

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supertanker

superderivatives.com

markets confidence rises in tanker markets Moore Stephens’ latest survey on business confidence says that as far as freight rates were concerned, it was the tanker markets this time that generated the most positive comments.

The number of respondents overall who expressed an increased expectation of higher rates in the tanker sector over the next 12 months was up by two percentage points to 37% – just one percentage point below the figure recorded when the survey was launched in May 2008, but some way short of the survey high of 50% posted in May 2010.

Owners (up five percentage points to 41%) led the way in terms of increased expectations of better rates, while charterers unsurprisingly set their sights much lower, at an unchanged 29%. The number of managers expecting improved rates was meanwhile down by one percentage point to 31%. Geographically, the prospects for increased tanker rates were deemed lower this time by respondents in Asia (down from 33% to 31%) and in North America (down by 23 percentage points to 24%), but higher in Europe, up from 36% to 40%.

In the dry bulk sector, meanwhile, there was a 10 percentage-point fall, from the highest figure in the life of the survey three months ago to 40% this time, in the overall numbers of those anticipating rate increases. All the indicators were down – in the case of owners from 50% to 43%, managers (52% to 36%), charterers (60% to 48%), and brokers (44% to 32%).

It was the same story from a geographical perspective. In Asia, expectations of higher dry bulk rates fell from 52% to 33%, in Europe from 51% to 44%, and in North America from 65% to 35%. One respondent said: “The dry bulk market is in

crisis and will remain so in the small-to-medium size sectors for at least two more years due to overbuilding.”

Another noted, “The dry bulk market is structurally unhealthy due to the massive overbuilding of vessels.” Others were more optimistic however, with one claiming to be hopeful that dry bulk rates will soon improve due to an improved balance between supply and demand.

In the container ship market, there was an eight percentage-point fall, to 26%, in the overall numbers expecting rates to go up. Indeed, expectation levels in relation to rate increases were down across all categories of respondent, most notably in the case of brokers (by 25 percentage points to 19%).

Meanwhile, 26% of owners (compared to 36% last time), 28% of managers (down 5 percentage points on last time), and 38% of charterers (down from 47% last time) expected container ship rates to rise in the next 12 months.

Geographically, expectations of improved container ship rates were unchanged in Asia at 24%, just one percentage point up on the numbers in that part of the world who are expecting container ship rates to go down over the next 12 months.

The numbers anticipating higher rates were also down in Europe, from 38% to 29%. In North America, meanwhile, the 39% of respondents expecting container ships rates to fall over the coming year was more than double the number (17%) who thought they would increase.

One respondent said, “In the container ship sector, the long-haul market sentiment is very bleak, with continued deliveries of mega tonnage and ongoing weak demand in the main western trades.” Another claimed, “The container ship fleet will grow by 11% this year. Everybody seems to think that ever bigger ships are beautiful.” n

Capesize advice

The Baltic Exchange has provided its shipbroker panel members with further guidance on the way in which they assess the capesize market.

The move has followed extensive market consultation and reflects the need for greater precision on the slow steaming characteristics of the Baltic capesize vessel type.

The Chairman of the Baltic Exchange’s Freight Indices & Futures Committee Guy Campbell said:“This guidance does not imply any change to the index definition. Our time charter rates are assessments of the prevailing market for the Baltic reference vessel on the defined route. Slower speeds are currently the norm, so we are providing panellists with the information they need to allow their assessments to accurately reflect the market.”

Users of Baltic information should note that the Baltic Exchange already expects panellists reporting timecharter routes to consider prevailing market conditions. This includes consideration of comparable fixtures concluded, as well as the likely steaming speed and consumption of the Baltic defined vessel in the prevailing environment for freight rates and bunker costs.

“When considering the prevailing timecharter market rate for the Baltic defined capesize vessel, panellists should assume that if steaming at 12kts laden/13kts ballast, the vessel will consume 44 tonnes per day (NDAS),” the Baltic said. n

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the baltic exchange has provided capesize market guidance

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superderivatives superderivatives pricing | trading | risk | revaluation | market data

markets Asia Spot LNG Prices Monthly average prices of liquefied natural gas (LNG) for September delivery to Asia rose 3.5% from August to $16.005 per million British thermal units (/MMBtu), as production outages supported higher offers and bids, according to the latest monthly Platts Japan/Korea Marker (JKM) for month-ahead delivery.

The monthly average Platts JKM for delivery in September was assessed over the period of 16 July to 15 August.

This marked the second consecutive monthover-month gain in the monthly average JKM. On a year-over-year basis, the average September JKM increased 18.4%.

At the beginning of the assessment period, the JKM prices were supported by short supplies due to production limitations. Nigeria LNG lifted its force majeure only on 26 July, despite production resuming on 13 July, and operations at Australian Woodside Petroleum’s Pluto LNG liquefaction plant also resumed around mid-July.

“But both restarts did little to rein bullish sentiment on near-term prices, given the time needed to ramp up production rates and reschedule affected deliveries,” said Sarah Cottle, editorial director of power at Platts, a leading global energy, petrochemicals and metals information provider and a premier source of benchmark price references.

“However, the spot market became more bearish as supply gradually outstripped demand towards the end of the assessment period, with a series of sell tenders issued in the spot market over the past few weeks.”

Meanwhile, the September spot prices of thermal coal and fuel oil, which are substitute fuels burned by Asian utilities, saw year-on-year gains in prices. However, compared to the previous month, thermal coal prices dropped 1.9%, while fuel oil rose 0.6%, respectively, according to the Platts’ latest data for September.

Drewry’s latest Chemical Forecaster reports an odd occurrence in the spot market. It would have been another dull quarter in terms of the spot market but for the irrational trend on the Transpacific Westbound, which was uncharacteristically busy. A

Asia rose 3.5% from August

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decline in Chinese economic growth clearly indicates that the spurt cannot be attributed to end-user demand, so the sudden surge in the second quarter was attributable to a widening arbitrage spread between US and Asian prices.

The key chemicals were styrene and paraxylene, Drewry said. “The greater tonne-mile demand on this trade had a positive effect of absorbing tonnage into this route. Freight rates on the Atlantic benefited from the absorption of vessels on the Transpacific Westbound towards the end of the quarter. The cyclicality of the freight market points to a hike in freight rates in the last quarter on this route. If the momentum gained in the second quarter is sustained on this route then the surge in the second quarter might not have been an anomaly and would signify the point when the market turned around. But we do not expect a complete turnaround in the sector before 2015.”

Drewry also pointed to the mismatch between spot, which was low, and contracts signed this quarter, which were healthy. “More owners are now depending on time charters to bolster their earnings and stay solvent. The primary reason that owners negotiated hard for period contracts was that operating costs are at a historic high, although a lowering of bunker prices this quarter helped improve earnings. However, owners will continue battling challenging conditions on account of the overall global economic outlook.”

Consolidation of tonnage is beneficial for the sector, it added and news about the formation of a pool between Jo Tankers and Tokyo Marine, which will trade under the name of Milestone Chemical Tankers, is a further indicator of the policies adopted by boards to tide them over the poor market conditions. Subject to anti-trust approval from the EU and US, the pool will consist of 62 vessels: 52 from Tokyo Marine and 11 from Jo Tankers.

Owners remain under duress as operating costs remain at a historic high, which clearly is a strong inducement for owners to seek freight increases. This financial year will remain very challenging for owners, who will have to rely on the support of banks to tide n them through the year, Drewry said.

finance

Time to just ‘order, trade or scrap’ in shipping?

Analysis by Basil M Karatzas, CEO of Karatzas Marine Advisors & Co. Since late Autumn this year, the shipping markets have shown small, but much-needed signs of market recovery, with the Baltic Dry Index (BDI), the presumed proxy for the overall market, surpassing the “psychological” mark of 1,000 points.

There has been rate betterment in a few market sectors based on seasonality, particular trade or geography, but the head wave behind the improvement has been China’s increased steel production and partial restocking of iron ore inventories, which resulted in a rally in the commodities market (iron ore pricing climbed by about 15% from late May till the middle of August) and an associated rally for capesize rates, the market bearing the direct impact of China’s trading patterns.

Based on such trade, the Baltic Capesize Index climbed by an equitable percentage level in the same period, which lifted the whole BDI with it, as per graph 1. In terms of freight rates, however, the extent of improvement has been rather small ‘to move the needle’ in a meaningful way as average capesize earnings increased from approximately $12,000 per diem (pd) to just below $15,000 pd, rates that are well below levels required to cover vessel operating expenses and also service debt.

In a market accustomed to bad news and negative cash flows for some years now, any improvement in rates was well received and there have been a ripple effect in many market segments in terms of momentum, in terms of vessel asset pricing, in terms of elevated future expectations – and why not – a full market recovery. However, one has to wonder though whether any improvements, their goodwill notwithstanding, are transient or worse just wishful thinking.

From data compiled by Karatzas Marine Advisors approximately 2,000 vessels in major, mainstream shipping asset classes were transacted in the first eight months of 2013 in the form of newbuilding orders, second-hand assets or demolition candidates. A quick glance at graph 2 clearly indicates that newbuilding activity has been riding high and dominating all market segments with the exception of containerships and crude tankers.

While the total volume of business is more or less comparable to that from the same period of the year before, newbuilding orders are approximately 50% higher year on year while demolition activity has decreased by 50% in the same interval.

In the first eight months of 2012, about an equal number of demolitions and newbuilding contracts took place for a net zero impact on

the world fleet, as per graph 3; however, for the whole calendar year 2012, on a net basis 300 vessels were removed from the world fleet (1,100 vessels were removed from the world fleet through scrapping with fewer than 800 additions through newbuilding orders.) However, in an ever-rebounding market recovery and optimism, so far this year about more 200 vessels have been contractually added to the world fleet than removed.

To a certain extent, there have been smaller micro-themes within the larger market trend that partially explain the activities in transacting vessels in 2013. First, there has been structural changes in the tanker market trade due to shale oil production in the US that has made product,

chemical and gas carriers tankers a growth business with potential tonnage “undersupply”, and a great deal of the newbuilding orders have been concentrated in these markets.

Second so-called “eco design” vessels with flexible yard payments – potentially including export credit, made newbuildings economically and commercially more attractive than secondhand tonnage.

Third, a sizeable amount of tonnage available for sale in the second-hand market has been “vintage” or “below expectations” in terms of specs or maintenance. Fourth, institutional investors, the newcomers to the market, assign lower risk and higher investment prospects to newbuildings through established publicly-traded

Graph 1

Graph 2

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finance Graph 3

Graph 4

companies, from where numerous newbuilding orders have originated.

Finally, the demolition market has been as idle as painted sea for several months in 2013, partially due to bearable freight rates and market prospects, but mainly due to the “de-coupling” of emerging markets from developed economies and the steep depreciation of local currencies, such as the Indian rupee that is trading at a decade’s low level (India, of course, being the biggest market for demolition.)

Based on representative data compiled by Karatzas Marine Advisors since the beginning of 2012 for newbuilding contracts and second-hand vessel prices for modern tonnage (younger than 10 years old) in the dry bulk, containership (up to panamax size) and product and crude tanker markets, as per graph 4, asset prices have gotten more competitive whether for newbuildings or secondhand tonnage. Based on this re-based scale, asset prices had declined between 15% and almost 20% by the end of 2012, with newbuildings on a weaker trend. However, since then, there has been a constant improvement in pricing momentum, again, with modern second-hand tonnage performing better. It has to be noted that the improvements

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many of the excesses of the market and their ensuing ‘shipwrecks’ have not been accounted for yet. There are many more vessels floating around than the trade can absorb. There has been excessive shipbuilding capacity that, although idle at the moment, can keep building many more vessels.

There has been too much attention on shipping (and some of its related industries such as shipping banks) that has attracted deep pockets such as institutional investors that evaluate the industry under different standards than traditional shipowners and can make the market set sail under their preferred course (such as financing more “eco-design” vessels in an attempt to crowd out older and less efficient tonnage.)

Possibly things are different this time indeed, as the market variables are less predictable and more impactful than previous cycles (who really can predict China’s trajectory or can quantify the impact of institutional investors piling money on shipping?)

On the other hand, the market will always be in need of quality vessels operated by quality and efficient managers. Given the lack of clear course of market direction and until the excesses of the super-cycle get absorbed, possibly the focus will have to be back on the basics with emphasis on quality rather than quantity and care for the business fundamentals. Instead of chasing the next best thing and hot sector, possibly focusing on acquiring quality tonnage at today’s prices in segments that are always engaged (like smaller dry bulk vessels) and improving operational efficiencies may be the best course of action. Whatever the freight or asset improvements in shipping so far this year, we are still a long way from reaching port. n Basil M Karatzas is the CEO of Karatzas Marine in asset pricing have overall underperformed Advisors & Co., a shipping finance advisory and improvements in freight rate increase on a percentship brokerage firm based in Manhattan. The firm age basis. In our opinion, the fact that asset pricing represents financial owners, institutional investors, has underperformed increases in freight rates does lenders and ship owners and managers worldwide. not necessarily translate into a ‘buying opportunity’: Email: Info@BMKaratzas.com improvement of indexed freight rates is heavTel: at +1 713 545 5990. ily skewed due to the cape market and also one has to take into consideration the high probability of a tonnage oversupplied market.

World economic growth is expected to be positive for the foreseeable future, subdued but positive nevertheless. There have been pockets of concern like Europe’s chronic economic malaise and China’s ‘shadow banking’ and ‘credit bubble’ that may burst with catastrophic ripple effects, but an average scenario of improved trade prospects bodes well for shipping. On the other hand, one cannot ignore Basil M Karatzas, that shipping has been through a CEO of Karatzas Marine Advisors & Co “tsunami effect” since 2008 and

commodities

A SENSE of ORE India’s ban on iron ore mining may be lifted soon, giving a welcome boost to the country’s mining business

India’s ministry of mines is understood to be considering lifting the ban on iron ore mining for states including Goa and Karnataka.

The ban has had a drastic effect on iron ore exports from India, which are understood to have declined by more than 70% with an estimated loss of about $10 billion of iron ore exports in the last financial year.

The ban is expected to be considered by the Supreme Court this month. The Goa Mining People’s Front is urging that the ban be lifted, and has warned of unrest if mining is not speedily resumed. Finance Minister P Chidambaram was quoted recently as staying the government was keen to resume iron ore mining.

India, which was until recently the third largest iron ore exporter in the world, is expected to become a net importer of iron ore this fiscal year. There has been a constant decline in iron ore exports since 2009-10, when exports stood at 117.72 mt.

This came down to 97.6 mt in 2010-11.

The Supreme Court banned mining in Karnataka in July 2011 although the ban was partially lifted in April. Mining in Goa was banned in September 2012. The ban on mining had meant that steel imports rose 14.6% in the 2012-13 fiscal year from around 1% in 2011-12.

India’s ban on iron ore mining may be lifted soon

Interest in developing Russia’s enormous tight oil reserves is poised to grow as the government’s long-awaited tax breaks, designed to make crude production from unconventional fields profitable came into effect at the beginning of this month, according to Platts Energy and Metals Review.

“The stimulus gives oil producers a reduction of between 20% and 100% in the mineral extraction tax (MET) rate, depending on reservoir permeability and layer thickness.In particular, crude produced from the most promising Bazhenov oil play in West Siberia will enjoy an MET rate of zero,”the analyst said.

“Other shale and more broadly tight oil reserves will see tax reductions at between 20% and 80% from the standard rate.

The move is aimed at mitigating investment risks and helping compensate for the significant capital expenditure associated with shale oil development, Merrill Lynch said in a research note, adding that it would allow a pilot shale project to generate a “decent” internal return rate (IRR) at a 0% MET rate and oil prices above $90/b.”

The development of shale oil reserves still poses a number of challenges that oil companies will have to overcome, and “Russia may not necessarily see a substantial boost in shale oil production anytime soon,” according to Platts.

Rio Tinto has achieved the significant milestone of loading the first shipment of iron ore from its expanded port, rail and mine operations in Australia. This marks the commencement of commissioning of the expansion programme, which will see overall capacity for Rio Tinto’s iron ore operations in Western Australia increase to 290 million tonnes a year.

Rio Tinto Iron Ore chief executive Andrew Harding said “The 290 project is the largest integrated mining project in Australia. The delivery of 290 ahead of its original schedule and within budget is a testament to our focus on value-driven growth of our low-cost operations.

“Given the demanding operating environment in Western Australia over the recent period, this stands as a noteworthy achievement. I pay credit to the efforts and commitment of our employees, contractors and partners in the Robe River Joint Venture for what has been a genuine team effort.

“Our focus will now be to ensure the ramp-up to full runrate is achieved safely and efficiently. As always, we will continue to seek further productivity improvements from our fullyintegrated Pilbara system, including our industry leading Mine of the Future™ technology programme, in order to maximise the return on our investment.”

The phase two expansion of the port, rail and power infrastructure to 360 Mt/a is underway. A number of options for mine capacity growth are under evaluation including incremental tonnes from further low-cost productivity improvements, expansion of existing mines and the potential development of new mines.

Rio Tinto and Turquoise Hill Resources (Turquoise Hill) have signed an agreement under which Rio Tinto will provide Turquoise

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commodities Hill with a financing package to enable it to fund the continuing development of the Oyu Tolgoi mine in Mongolia and, if necessary, to refinance its existing indebtedness to Rio Tinto by the end of the year.

Rio Tinto has agreed to provide a US$600 million bridge funding facility to Turquoise Hill, maturing 31 December, 2013, subject to certain conditions being satisfied.

The facility will be used initially to refinance all amounts outstanding under an existing US$225 million short term funding facility provided by Rio Tinto in June 2013, and thereafter for the continued ramp up of phase one of the Oyu Tolgoi mine development.

Rio Tinto has agreed to extend the short term funding facility until 28 August, 2013 and to permit funds repaid by Turquoise Hill from the proceeds of the sale of its 50% interest in Altynalmas Gold Ltd. to be redrawn. Rio Tinto has also agreed to waive its option to convert all or part of any amounts outstanding under the short term funding facility into TRQ common shares.

Iron ore imports by China, the world’s biggest buyer of the steelmaking raw material, climbed to a record in July as falling prices spurred mills to stock up, Bloomberg reported. Imports reached 73.14 million metric tons in July, China’s General Administration of Customs said Shipments rose 17 percent from the previous month and 26 percent from a year earlier, according to data compiled by Bloomberg.

Bloomberg quoted Zhang Jiabin, Beijingbased chief iron ore analyst with researcher Custeel.com as saying:“The prices at around $110 levels in June made ore imports cheaper than the ore produced from costlier domestic mines,” said . “A price rebound also boosts steelmakers’ sentiment to stock the raw material amid high steel output.”

China’s crude-steel production gained 7.4 percent to 389.9 million tons in the first half of this year from a year ago, according to the National Bureau of Statistics.

For the first seven months, iron ore imports climbed 8 percent to 457.23 million tons from a year earlier, customs said and steelproduct exports were 5.15 million tons in July, it said.

Vale has obtained the installation environmental license (LI) to the iron ore project Carajás S11D, the highest grade and lowest cost world-class project in the industry.

With the issuance of the LI, Vale’s board of directors approved the complete S11D program, comprised of investments in the mine, processing plant, railway capacity and port.

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The LI was issued by Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis (IBAMA) and is part of the project’s second phase of licensing, which authorises the plant construction.

S11D is the largest project in Vale’s history and also in the iron ore industry, being a major lever for value creation and production capacity growth.

The total capex for S11D is US$ 19.671 billion, estimated at a 2.00 BRL/USD exchange rate, encompassing: the development of mine and processing plant (US$ 8.089 billion) and logistics (US$ 11.582 billion).

The project has a nominal capacity of 90 million metric tons per year of iron ore with proven and proved reserves of 4.240 billion metric tons with an average ferrous content of 66.7%, low impurities and estimated cash cost (mine, plant, railway and port after royalties) of US$ 15.00 per metric ton (at a 2.00 BRL per USD exchange rate). S11D is expected to start-up in 2H16 and to deliver full capacity production in the 2018 calendar year.

Vale had a solid financial performance in the second quarter of 2013 (2Q13) amidst an environment of below-trend global economic growth and declining minerals and metals prices.

Operating revenues were US$ 11.3 billion, operating income, as measured by adjusted EBIT, reached US$ 3.6 billion, adjusted EBITDA US$ 5.0 billion, and underlying earnings US$ 3.3 billion, US$ 0.64 per share.

Copper, gold and coal production achieved all-time high figures, at 91,300 t, 63,000 oz and 2.4 Mt, respectively, while nickel output remained at 65,000 t, its best second quarter since 2Q08. Salobo is ramping up successfully, beginning to generate cash in June, the company said.

Cargill Australia Limited has confirmed that Glencore International has accepted its offer to purchase Joe White Maltings. The sales agreement is subject to certain regulatory approvals and the parties expect to complete the transaction prior to the end of 2013.

According to Philippa Purser, Cargill Australia Managing Director, Joe White Maltings is a strong strategic fit for Cargill Australia and for Cargill’s Global Malt business.

“Through its investments over many years, Cargill continues to demonstrate a longterm commitment to the future and success of Australian agriculture and farmers, and we are delighted with this new opportunity in the malting industry,” said Ms Purser. “We look forward to bringing our malt industry expertise and additional capital to Joe White Maltings to continue to grow the business.” n

India, which was until recently the third largest iron ore exporter in the world, is expected to become a net importer of iron ore this fiscal year.

cost reduction

talking Efficiency Energy efficiency has been high on the agenda as the industry gears up to a new raft of environmental legislation, and the demands of reducing costs in a tight financial environment

At the IMO’s Marine Environment Protection Committee in May, the MEPC adopted a Resolution on Promotion of Technical Co-operation and Transfer of Technology relating to the Improvement of energy efficiency of ships. Among other things, the resolution requested IMO, through its various programmes, to provide technical assistance to member states to enable cooperation in the transfer of energy efficient technologies to developing countries in particular; and further assist in the sourcing of funding for capacity building and support to states, in particular developing states, which have requested technology transfer.

One recent development in this area is that NSC Group has commissioned the voluntary Energy Efficiency Design Index certification of its entire fleet from classification society Germanischer Lloyd . GL verifies the globally valid EEDI environmental and efficiency standard for vessels and is planning the certification of the NSC fleet according to the EEDI Statement of Compliance. A total of 53 ships of the NSC Group – including 31 container ships, four tankers, four bulkers and 14 multi-purpose vessels – are to receive an EEDI SoC from GL within the next few months.

As a result of continuing overcapacity, rising fuel prices and new environmental regulations, shipping companies not only have to maintain the competitiveness of their existing fleets. They also need to significantly improve their efficiency, in order to be able to hold their own against optimised, newly constructed vessels.

Innovative ship design is a key factor for shipping companies when it comes to upgrading their fleet. But they also need proof of the efficiency of these new ship designs from an independent authority. The implementation of the EEDI performance indicator and the voluntary certification of the entire fleet by GL enables the NSC Group to highlight the ultra-modern design of its fleet. shipping emmissions need to be cut

© All rights reserved by imo.un

“The EEDI reflects the energy efficiency of ship design by weighing the environmental effects, i.e. the CO2 emissions, against the commercial benefit. In this way it provides a benchmark against which the efficiency of a ship can be measured,” explains Jörg Lampe, Systems Engineering & Risk Management at GL. Having an EEDI score which can be compared to the existing global fleet, can put a ship in a favourable position on the charter market.

GL has already issued EEDI SoCs for eight of the NSC Group’s container ships. Their EEDI results are very promising: of the EEDI figures verified to date for the eight container ships, all are at least 10% below the average for the global fleet. With the best designs achieving an EEDI figure that is 20% below the reference line.

“We have already scored some very pleasing results in this respect. But we still have not reached the top of the flagpole in terms of the EEDI figures. We are also aiming to achieve additional potential savings in the operation of our vessels through efficiency enhancing measures, such as GL’s trim optimisation software ECOAssistant, which is already installed on our fleet,” says Heiko Meyer, Managing Director of NSC, commenting on the successes of EEDI implementation to date at NSC. n

OceanSaver

The need to fit ballast water treatment equipment on ships will soon become mandatory and for or just 10% of the cost of its market-leading BWT system, OceanSaver has announced that it will configure new ships for the easy installation of a unit at a later date, fitting base components to allow its type-approved system to be simply ‘plugged in’ when required.

Tor Atle Eiken, senior vice president of sales and marketing for OceanSaver, believes the offer is genuinely compelling when set against the current confusion that has seemingly engulfed the entire ballast water treatment issue.

The industry has been concerned that delays in finalising guidelines on ballast water treatment could mean bottlenecks for owners required to fit the new technology.

However, several key territories are yet to ratify these IMO treaties, creating uncertainty – not to mention the potential for major system installation bottlenecks - right across the industry.

“As a result, many shipowners are simply delaying planning for compliance - a dangerous game to play when the future operation of their vessels is at stake, Eiken says,”.

MEPC65 approved a draft IMO Assembly resolution which recommends that ships not be required to install a ballast water management system until its first renewal survey after entry into force of the BWM Convention, the resolution is expected to be adopted by the Assembly in November.

However many are urging the industry not to delay in tackling the issue. Given the cost of installing ballast water treatment systems, which has variously be estimated at between one and five million dollars, reluctance on the part of owners to take the plunge is understandable.

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cost reduction OceanSaver says its 10% deal – which sees essential piping and power supply installed, alongside other key base parts such as system bed plates and connections – gives owners and operators peace of mind, without the need for substantial financial outlay in an increasingly cost conscious sector.

Once configured, ships are essentially future-proofed, the company says. If the conventions are ratified, as expected, systems can be fitted quickly, minimising the downtime of ships that can command day rates of tens of thousands dollars.

The huge demand for BWT systems, upon ratification, will also push up dry docking prices exponentially, meaning lengthy retrofitting operations will cost a premium. OceanSaver’s ‘plug in’ preparations will ensure ships leave the yards in record time, keeping installation costs to an absolute minimum.

“It’s a win-win situation,” Eiken adds. “It gives shipowners a kind of insurance policy, whereby they are prepared for any outcome. If the mandates are ratified the system can be quickly fitted, but if not then the shipowner has only paid a fraction of the price of complete installation. The sense of security that provides is something simply unheard of in the BWT arena.” n

GE Marine

The need to meet new regulation on emissions from ships, coupled with the need to reduce costs is driving some new developments in engine design.

One such is GE Marine’s 12V250 marine diesel engine. The company recently confirmed the 12V250 as its first marine engine meeting both US Environmental Protection Agency Tier 4i and IMO Tier III in-engine emissions requirements without the need for exhaust gas after-treatment. GE is now able to offer its L250 and V250 medium speed marine diesel engines (1,550 – 4,650 kW) without a SCR. “This new technology allows the marine industry to meet the upcoming emission compliance requirements and reduce both capital and operating expenditures.” says John Manison, general manager of GE Marine.

In addition to meeting emissions compliance, the GE 12V250 MDC engine has increased power over the IMO Tier II model. The engine’s new two-stage turbo charging also offers a faster response time, the company says.

GE’s L250 engines rated at less than 2,000 kW will meet EPA Tier III emission levels ahead of the 2016 deadline, the company claims. Depending on duty cycle and application, the L250 engines have greater than 5% improved fuel consumption compared to Tier II standards. In addition, the 8L250 and 12/16V250 engines rated at more than 2,000 kW will meet EPA standard path Tier 4i (interim) requirements in 2014. n

ShipServ

ShipServ, the leading marine and offshore e-marketplace, has built further on its trusted position among European shipmanagers with the signing of Beltship Management Limited to the TradeNet platform.

Beltship currently manages six bulk carrier vessels for mining giant Vale and is also a specialist in the transhipment and self-unloading of bulk cargoes and manages three self-discharging bulk carriers in a major transhipment project in Sierra Leone which it hopes to increase in the near future .

The Monaco-based owner signed with ShipServ on the strength of its pedigree with shipmanagers, its strong supplier base and a need for further transparency in its ship supply process and will connect to ShipServ through its ABS NS5 software suite that it uses for purchasing and planned maintenance.

Lars Bratshaug, VP Sales EMEA for ShipServ said: “We are delighted to welcome Beltship to the ShipServ community. To bring such a highly-respected manager onto TradeNet really demonstrates that ShipServ is the preferred partner for shipmanagers. We look forward to working with Beltship as they continue to grow in future.”

Marjolijn van Tiel, Purchasing Manager at Beltship, said:“Beltship is already using the ABS NS5 software so it was a straightforward decision to use ShipServ to help us with our purchasing activity.” n

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ship values

automated increase In the second part of its response to sceptics of automated ship valuation, VesselsValue answers further questions

Is anyone using it?

Yes, the list is growing and includes: • Commercial banks and regulators who are increasingly concerned about how much ships are actually worth. Before agreeing loans, asset valuations are essential for modelling risk.

The ongoing monitoring of covenants requires information about the value of vessels. Similarly, they have a need for values when reporting portfolios or operating rating systems.

• Investment banks that are especially interested in performance figures over time. The availability of historic along with current values enables them to carry out financial modelling and explore the effects of restructuring.

• Owners and ship funds who are highly active in sale and purchase.

By taking frequent snapshots of individual vessels it’s possible to identify new opportunities without incurring excessive charges.

• Lawyers seeking objectivity. The independence of the calculations, not subject to any influences, produces ideal evidence in valuation disputes.

• Insurers and underwriters who want cost-effective information. An online valuation service provides the basis for competitive policy estimates.

• Accountants looking for an alternative to book values. In turbulent times, fixed depreciation ratios can be seen as less than realistic; automation makes the use of market values for accounting purposes a reality. n

What’s wrong with book values?

Book values are widely used to show how much ships are worth in published accounts. One of their strengths has always been their ease of calculation. To work out the present book value of a vessel, sometimes referred to as the net book value or carrying value, simply take the price originally paid for the ship and deduct the accumulated depreciation (to account for its declining value).

But there are problems with book values. One obvious weakness is consistency: assume a new ship, Aframax says, was bought in 2006 for a particular sum and that two years later, at the height of the boom, its sister ship was bought for a much higher price; the two ships, although worth the same by any other measure, would have very different book values. Another issue is whether book value measures the right thing anyway. After all, ships, unlike buildings or plant, are liquid assets which can be sold at any time and in that case wouldn’t their market value be more relevant? Then again, a ship can be thought of as a means of earning money through charter when its income value or value in use might be what really matters.

Concerns such as these are not merely academic. Where large sums of money have been leant by banks to owners to enable them to buy ships the value of those ships in the current recession and what might be recouped in the event of a loan default becomes critical.

Indeed, some accounting rules require book values to compared with market value and value in use as a test for impairment.

Any alternative or addition to book values has got to confront the questions of whether it is practical, cost efficient, reliable and relevant. Until now, the routine calculation of market values has been rejected as too time consuming, too expensive and too subjective.

But the advent of automated valuation has changed this. n

Will banks accept automated values?

Both banking and shipping are businesses with a very long history.

Not surprisingly the introduction of valuation by computer, something which in the past brokers have always done, will ruffle a few feathers.

But VesselsValue.com has found that forward looking banks are interested in what it can offer. This is particularly true of private equity and investment bankers who are more likely than commercial banks to have new customers. The reasons for this interest are linked to the new ways in which banks are using ship values.

Banks increasingly need to know the value of major capital assets, like ships, far more frequently. In the past, figures produced quarterly or even less often were quite sufficient. Now they can be demanded monthly, weekly or even daily. Why? Because there is heightened concern on the part of banks that market values of ships might fall significantly below the value of the outstanding loans for which they act as surety. To calculate this volume of market values, often for fleets rather than ships, is just not feasible by hand.

It is one the reasons, of course, why in the past book values have been routinely calculated. But when the process is automated any number of market values is straightforward.

Inside banks, the situation is changing too. Busy shipping heads in banks appreciate the email alerts which automated valuation can routinely provide, informing them that values, going up or down, have reached preset limits. The potential to share the extensive range of electronic information which VesselsValue.com offers and the capacity to use it educationally within in banks and to help make appropriate investment decisions are all features they find useful.

Gaining acceptance for ship values, like gaining acceptance for anything, is partly a matter of reputation, which takes time to acquire.

But if it were just a matter of reputation some things might never change. Astute bankers are also interested in concrete evidence.

VesselsValu.com provides a description of the mathematical and computational processes it follows and the data it uses to reach it’s values – something a broker would find hard to do. VesselsValue. com produces the same answer whoever asks – something else that might tax a broker. VesselsValue.com measures its own accuracy – something we think a broker would find impossible. n

How good is your data?

VesselsValue.com believes that it has put together the very best database on merchant ships. This is a serious claim. The evidence is

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ship values based on the processes they use to build and maintain the database and on comparisons with other available sources of data.

The database comprises separate but related records of vessel information and sales information (the sources for this data are described in the answer to an earlier question: “Where do VesselsValue.com get there data from?”). In order to maintain a database of the highest quality, the company formulated a series of rigorous procedures that track each vessel through its lifecycle. Ships are identified when they are a newbuild in the yard, launch dates are monitored and a full specification compiled for each vessel, every potential sale is confirmed or otherwise and key information on this is recorded, finally demolition sales which mark the end of a ship’s life are logged. At each stage of the process, data from multiple sources is compared and evaluated in order to ascertain its veracity.

In the opinion of VesselsValue.com, there are two underlying factors that distinguish it from its competitors and have resulted in better data. First, the staff have expertise not just in data management, but in shipping itself and this means that they are constantly employing sense checks leading to corrections. Second, while some companies collect and manage shipping data for other people to use, VesselsValue itself uses its own data: not only does it have a vested interest in ensuring data quality, but the actual valuation calculations themselves are a very effective means of highlighting outliers in the data which require investigation. n

I value a personal relationship

Our staff are keen to point out that they are not just a website, but a team with expertise in shipping

Potential clients with VesselsValue.com may worry that automated valuation is not for them because the special relationship they have with a shipbroker is essential.

VesselsValue.com understands this and shares their concerns.

Obviously, an online service does enable subscribers to obtain valuations and a host of other shipping information at any time and without any personal contact. For some clients on some occasions this may be a distinct advantage. But VesselsValue.com realises how important it often is to keep in touch and provides a range of ways to do so.

Staff working at VesselsValue.com are very keen to point out that they are not just a website, but a team with expertise in shipping, in mathematics and statistics, and in data analysis. They liaise with customers by phone, by e-mail, by face to face meetings. They provide ongoing technical support. They actively encourage users to respond to feedback requests (on every page of the site). They emphasise that they like to be told when they’ve got something wrong so they can put it right. n

What’s the relationship between VesselsValue.com and the SeaSure brokers?

Richard Rivlin is chief executive of VesselsValue.com, automated valuation providers, and Seasure Shipping, an established firm of London-based brokers. He had the idea that ship valuations could be improved using up-to-date technology. VesselsValue.com was formed in 2009 and the team developed a mathematical model, built up the database of ships and implemented the concept in software. In May 2011 the online valuation service was launched.

Seasure does not influence the valuations that VesselsValue.com produces. These values are the independent outcome of the model and the data that drives it. However, what Seasure does do is provide vital market knowledge through its extensive network of clients and contacts. This is particularly important when it comes to sale and purchase information as Seasure is able to help check the legitimacy and circumstances related to any reported sale. So Seasure’s expertise enhances data quality. n

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trading

forging links The improved network is expected to reduce the disruptions for customers caused by cancelled sailings

Maersk Line

A new alliance aims to improve and optimise operations and service offerings on East-West trades Maersk Line, MSC Mediterranean Shipping Company and CMA CGM have in principle agreed to establish a long-term operational alliance on East-West trades, called the P3 Network. The aim is to improve and optimise operations and service offerings.

The P3 Network will operate a capacity of 2.6 million TEU (initially 255 vessels on 29 loops) on three trade lanes: Asia–Europe, Trans-Pacific and Trans-Atlantic.

While the P3 Network vessels will be operated independently by a joint vessel operating centre, the three lines will continue to have fully independent sales, marketing and customer service functions.

The P3 Network will provide customers with more stable, frequent and flexible services, Maersk said in a statement.

Each of the lines will offer more weekly sailings in their combined network than they do individually. As an example, the P3 Network plans to offer eight weekly sailings between Asia and Northern Europe.

In addition the P3 Network will offer more direct ports of call.

The improved network is expected to reduce the disruptions for customers caused by cancelled sailings.

In order to provide customers with a consistent service offering across the network, the shipping lines will establish an independent joint vessel operating centre.

Declining volume growth and over-capacity in recent years have underlined the need to improve operations and efficiency in the industry. This has prompted the creation of other operational alliances such as G6 and CKYH. Using the P3 Network, the lines expect to be able improve their efficiency through better utilisation of vessel capacity.

The lines intend to start operations in the second quarter of 2014, but the starting date will be subject to obtaining the approval of relevant competition and other regulatory authorities.

In addition, the establishment of the P3 Network is subject to the lines agreeing on definitive contracts. Finalisation and signing of the contracts is planned for the fourth quarter of this year. n

London gateway

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TRANSIT

carrier cares Performance, over-capacity and fuel consumption are just some of the issues facing the big carriers at the moment

Maersk Line dropped from number one to number three among the Top 20 carriers in the second quarter of 2013, with a reliability of 82 % (down from 89.1 percent in Q1) in the Carrier Performance Insight report published by Drewry.

The carriers ahead of Maersk Line in the ranking were Yang Ming (83.7%) and Hanjin Shipping (82.5%) respectively.

Commenting on the performance report Chief Operating Officer of Maersk Line, Morten Engelstoft said, “The result is obviously disappointing to us, but the reason for the drop in the ranking is clear. We have, during Q2, experienced a long strike among port employees in Hong Kong (resulting in port congestion and delays in the handling of containers). The carriers ahead of us in the ranking are using different terminals, and hence they didn’t suffer the full effects of the strike.

Reliability remains important to us, we have the goal of being number 1 in the Drewry measurements and we will work to regain this position.”

Maersk Line’s reliability in Hong Kong dropped from 90% to 46% in Q2. In July, reliability levels had increased to 73% in Hong Kong and there are signs that it is getting better, the company said.

On whether the new P3 alliance would make Maersk Line less reliable, Engelstoft commented: “While our partners in the P3 alliance have different ways of operating their network today, reliability is important to all our customers.

Therefore, the aim is to design and execute the network with this criterion in mind. We will, when the time comes, define what it takes and outline this in the governing documents for operating the P3 network.”

“In the past year we have reduced our fuel consumption by 1 million tonnes, or 18 % per transported container, through changes to our network, Maersk Line dropped from number one to number three among the Top 20 carriers

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Report suggests that carriers’ first half results are unlikely to have pleased shareholders and more cuts will be needed in 2014

TRANSIT reducing the average speed of our vessels by one knot and using more fuel efficient vessels. It is true that our overall reliability has dropped slightly, but we were the most reliable carrier 12 times in 13 quarters, with the last eight being consecutive. So we are convinced we are making the right decisions for our customers and the profitability of Maersk Line”, Engelstoft concluded.

Ocean carriers have been doing a good deal to make cost savings but will need to do more next year, according to Drewry’s Container Insight Weekly.

Given the proportion of costs that bunkers represent – over 60% for some vessels – the report says it is not surprising that carriers have been emphasising fuel savings in their first half financial reports.

“For example, OOCL’s report enthused that its average fuel price in 1H 13 ($626/tonne) was 9% less compared to same period of 2012, and that its overall fuel cost saving was 4.4%.

“Hapag-Lloyd stated that its average fuel price ($624/ tonne) was 8% lower, and that bunker consumption also declined. APL’s bunker consumption is reported to have reduced by 16% (or 228,000 tonnes), whilst its average price fell by 10%, down to $621/tonne.

“Maersk’s performance was the most impressive so far, with its bunker cost in 2Q 13 ($1.3bn, or 23% of all operating costs) being 31% lower than in the same period last year.

This was achieved through reducing bunker consumption by 18%, and a 15% decrease in average bunker price, down to $589/tonne the report says.”

However the report suggests that carriers’ first half results are unlikely to have pleased shareholders and more cuts will be needed in 2014, or alternatively more slow steaming.

The average size of vessel deployed between Asia and Northern Europe in the second quarter of 2013 (just under 10,500 teu) was 14% higher than the average of 9,200 teu in the same period the previous year, according to Drewry.

Assuming that the fuel price in the two periods remained the same for the two sizes of vessel, this would have resulted in an 8% saving alone on a ‘per teu carried’ basis, but as

the fuel price was in fact 6% lower, the total saving was a remarkable 14%.

“Should fuel prices increase, ocean carriers will continue to soften the blow through increased economies of scale right up to the end of 2015, even though it will be achieved by taking delivery of yet more vessel capacity in excess of industry requirements. In this respect, it should be noted that the excess capacity is what has been causing freight rates to collapse in the first place, “Drewry’s container team noted..

The freight rate differential between Asia and the East and West Coasts of North America remains a difficult hurdle for ocean carriers to get over, the consultant says.

“Ocean carriers struggled to increase freight rates from Asia to the East Coast North America between June and August due to the adverse market conditions. Annual renegotiation of the eastbound contracts that took effect on 1 May clearly did not go well, with market share retention appearing the dominant driver, since when mixed results have been achieved.

“According to the World Container Index (WCI), the average all-in price from Shanghai to New York (based on forwarder buy rates for spot cargo) jumped from $2,934/40ft at the end of July to an average of $3,332/40ft during the week ending 4 August, where it has more-or-less stayed ever since. It remains to be seen if the small rally since the beginning of August, from $3,279/40ft to $3,401/40ft on 15 August, but falling back slightly to $3,377/40ft during the week ending 22 August, is sustainable.

Drewry estimates that only around 38% of the total transpacific trade is currently controlled by forwarders, compared to approximately 64% between Asia and Europe.

Regardless of whether cargo is shipped under spot or contract terms, importers that have a reasonable choice between North American East and West coast ports are clearly still uncomfortable with the premium to be paid for East Coast ports, Drewry says.

Freight rates from Asia to the East Coast North America will continue to remain under pressure right through to the end of the year unless a significant amount of vessel capacity n is withdrawn in September, according to Drewry.

Canal TollS The Shipping Economics Review Committee of the Asian Shipowners Forum has expressed concern over the toll increase of the Suez Canal implemented on 1 May 2013 and the Panama Canal Authority’s insistence on toll increases from 1 October 2013. Yasumi Kudo, Chairman of the Shipping Economics Review Committee, said “The Canal Authorities, as competent and responsible administrators of public infrastructure of global trade, should seriously listen to the voices of Canal users and governments of interested countries to build up the customer focus, transparent toll structure and predictability amidst a continuous stagnant shipping market.” n

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insurance

safety first The advent of the Maritime Labour Convention has resulted in a number of new insurance products being offered aimed at seafarers, while dangerous cargoes and the threat to seafarers has also been receiving attention Crewsure provides medical and personal accident insurance directly to crew and is underwritten by the Munich Group, one of the world’s leading insurance companies. The benefits provided are tailored to meet the needs of crew and the latest requirements of the Maritime Labour Convention (MLC).

It recently announced that it has appointed G2 Crew Services, the recently formed partnership between Griffin Global Group Limited and Gulf Agency Company Limited to act as its global correspondent.

“Crewsure complements our strategy of assisting clients in both the marine and offshore sectors to set new standards for the duty of care provided to their crew,” says Simon Morse, executive chairman of Griffin. “Historically, the primary focus of marine services’ companies has been the owner, the vessel, or the cargo; and, while contractually Crewsure’s client is the employer, the ‘door-to-deck’ service offered by us in partnership with GAC provides benefits directly to individual members of crew when in need.”

Robert Johnston, managing director of Crewsure, explains: “The aim of Crewsure is to improve the welfare of crew by replicating the same type of health insurance that is provided to key employees based ashore, rather than simply mitigating owners’ risks to large claims.

By extending the breadth of cover, reducing the excess, simplifying the claim process and providing local on-the-ground support in over 1,000 ports we can significantly transform the level of service provided to onboard personnel while containing the cost of cover well within existing levels.

“We are pleased to have appointed G2 Crew Services as our correspondent recognising the potential of Crewsure and its valuable role in handling crew in need of medical support and evacuations around the world.” n

Immigration crew scams ITIC has warned its members about a recent spate of crew scams that threaten to involve unwary ship agents in significant financial loss and exposure to fines and penalties by immigration authorities.

ITIC has issued a number of warnings in the past about ship agents being used by unscrupulous migrant smugglers to move

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illegal immigrants around the world. The basic pattern is for owners and managers to ask the agent to attend a vessel’s call at a port, and to provide assistance with regard to crew changes.

Although the approach is bogus, the agent provides cover for the arrival of the migrants in the country where the ship docks.

The migrants will subsequently disappear and the agent will be left with unpaid hotel bills, as well as the prospect of being asked to pay fines imposed by immigration authorities. In addition, agents may be liable for detention and repatriation costs if the migrants are apprehended.

In a circular to members, ITIC notes that it has recently seen a re-emergence of these immigration crew scams. It reminds all agents to be particularly vigilant when approached by owners or crew managers unknown to them who are requesting a crew change. n

Dangerous cargoes When bulk cargoes shift, liquefy, catch fire or explode as a consequence of poor loading procedures, the consequences can be massive. Ships may capsize, lose stability or sustain severe structural damage.

Such happenings enhance the risks – and the occurrence – of death, injury, insurance claims, operational delay and considerable expense.

This has prompted the UK P&I Club, Lloyd’s Register and Intercargo to produce a pocket guide and checklist for ships’ officers and agents who arrange cargoes for loading.

Carrying solid bulk cargoes safely: Guidance for crews on the International Maritime Solid Bulk Cargoes Code, outlines the precautions to be taken before accepting solid bulk cargoes for shipment; sets out procedures for safe loading and carriage; and details the primary hazards associated with different types of cargoes.

A quick reference checklist and flowchart summarise the steps to be followed.

The guide reflects the compliance requirements of the IMSBC Code, which became mandatory on 1 January 2011 under the SOLAS Convention. It addresses the code’s three key groups: A (which may liquefy), B (chemical hazards) and C (all others). Appendices cover IMO regulations and guidance relating to the transport of solid bulk cargoes and provide an overview of the IMSBC Code. n

insurance Port accidents avoidance Leading transport and logistics insurer TT Club has stressed that accidents in ports can be avoided. Its latest analysis of 9,500 claims over the past seven years, valued at US$400m, confirmed an ongoing trend in avoidable damaging events that resulted in claims.

The club’s regional director for Asia Pacific Phillip Emmanuel showed that the majority (68%) were due to poor operations and processes and a further 14% resulted from maintenance related issues. Only 18% were caused by weather related issues, seemingly out of the control of the operator, but an amount of these could have been avoided through more adequate preparation.

“Effective procedures, training and safety technology will reduce risk and bring other commercial benefits such as lower insurance premiums and higher customer satisfaction,” advised Emmanuel.

The main area of risk, unsurprisingly, was in the operation of mobile equipment such as quay cranes, lift trucks, rubber-tyred gantry cranes and straddle carriers. These make up two-thirds of the operational claims by value.

For example, quay crane boom-to-ship collisions are common at 236 incidents in the past seven years worth US$15m and representing 31% of quay crane claims. TT Club suggests that these accidents could be greatly reduced by fitting boom anti-collision sensors.

Stack collisions are also common and costly, accounting for 19% (US$ 10m) of quay crane and 82% (US$23m) of yard crane claims. This sort of incident can also be minimised through good management practice, often by the use of a stack profiling system.

As regards the enduring problem of theft, Emmanuel suggested: “Prevention is a combination of a physically secure site; rigorous checks and double-checks on paperwork and well-trained and well-motivated staff.”

As Phillip Emmanuel concludes: “In analysing the causes of risk, we aim to promote good risk

TT Club’s Peregrine Storrs-FoX

management practice and continuous improvement in our industry. TT Club is able to assist here given its resources and expertise”.

According to Peregrine Storrs-Fox, risk management director at the TT Club, the club insures about 80% of all maritime containers, 400 ports and terminals and around a 1000 freight forwarder and logistics operators.

When talking about risk, it is easy to focus on accidents he told a recent London Shipping Law Centre seminar. However, as an insurer, risks need to be assessed in the first place. “It isn’t just about looking at losses, but identifying what the management procedures are and the controls that are in place that help and sustain profitability for businesses that we are looking to insure.” Unusually for an insurer, he said, the TT Club is interested in helping insureds to manage their risk more successfully so that they ultimately pay less premium. n

avoiding damage

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Legal

trader exposure Law firm Holman Fenwick Willan warned recently that insolvencies in the shipping arena may cause difficulties for commodities traders

Over recent months, there have been a number of trends developing in the global commodities sector. One in particular is likely to give commodities traders cause for concern, according to HFW partner Brian Perrott. The current market conditions, with high operating costs and low freight rates have put many owners under pressure. A number of companies in recent months sought bankruptcy protection in order to give them an opportunitiy to restructure their business. Names include STX Pan Ocean, Excel Maritime Carriers and Sanko Steamship.

According to Perrott “Against this backdrop, a number of commodities traders have had to deal with the disruption and inconvenience of unpaid suppliers arresting, or threatening to arrest, vessels and/or bunkers of vessels with their cargo on board.”

Writing in HFW’s online commodities newsletter he explains that “In an FOB contract, the buyer must nominate the vessel. FOB sellers should consider including a clause in their contracts permitting them to reject a nominated vessel and nominate an alternative if the first vessel owner enters into bankruptcy, administration or some other form of insolvency proceedings by a specified date prior to loading. This would offer some protection and flexibility to the FOB seller, without being unduly uncertain for the FOB buyer.”

He goes on to say that In a C&F contract, it is the seller’s responsibility to source a vessel.

“C&F buyers should consider protecting their position by including an express clause in their contracts obliging the seller to charter in a vesHFW partner Brian Perrott sel from a solvent owner. An alternative would be to seek an indemnity from the seller against any losses incurred as a result of vessel owner insolvency. These contractual mechanisms pass the risk of owner insolvency from the buyer back to the seller, as the party responsible for chartering in the vessel. They offer the C&F buyer a contractual remedy against the seller should they incur additional costs as a result of vessel owner insolvency. This is an additional, and specific, layer of protection: most sale contract insolvency clauses do not extend to the chartered tonnage and only concern themselves with the parties’ insolvency.”

In charters or COAs which specify that the vessel is “TBN” – to be nominated – there is an added risk, he says. Usually this type of charter will specify the characteristics of the “TBN” vessel, allowing scope for including a specific characteristic that the vessel owner be solvent.

“However, there is a greater likelihood of an owner swapping or subchartering in vessels at a late stage. Charterers and owners should together agree a mechanism to prevent the nomination of unsuitable vessels. This can be achieved by incorporating an obligation on the disponent owner to nominate vessels from solvent owners, coupled with a charterer having a reasonable right of rejection similar to that of an FOB buyer set out above.”

In a C&F contract, or a contract providing that the vessel is “TBN”, there may be scope to specify in the contract either a list of owners from whom a vessel must be chartered, or a list of owners from whom vessels must not be

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A greater likelihood of an owner swapping or subchartering in vessels at a late stage

Haco van der Houven van Oordt

chartered, Perrott says. Whilst such an approach has the benefit of certainty, it does carry the risk of an unsuitable vessel owner being omitted in error. It may also significantly increase the price. C&F sellers, who will obviously want to ensure that their exposure in relation to owner insolvency is kept to a minimum, may prefer this approach because of the certainty it offers, despite the restriction it will place on their choice of vessel, he adds in the bulletin.

The timing associated with any requirement of solvency is likely to require negotiation. For example, C&F buyers and vessel charterers under a COA will ideally want to be able to specify that the owner be solvent at the date of nomination and remain so throughout the duration of the voyage. C&F sellers and vessel owners are unlikely to want to accept a commitment involving future uncertainty.

“The risk of vessel owners becoming insolvent is not, of course, entirely new. However, given that the recent market has brought it to the fore, it is important that commodities traders ensure that their affected contracts, both charterparties and sale contracts, address this risk and allocate it adequately so as to avoid disruption to their business.” n

ARA legal attraction Rotterdam-based law firm AKD says that creditors of ailing shipping groups such as STX Pan Ocean of South Korea, and TMT of Taiwan, could seek to take advantage of prevailing bankruptcy laws to enforce vessel arrests and other attachments in the ARA region.

Haco van der Houven van Oordt, a partner with the shipping and offshore team at AKD in Rotterdam, says, “The recent reports of bankruptcies and voluntary liquidation proceedings involving shipping companies have now reached levels which exceed any in recent memory. STX Pan Ocean, South Korea’s largest dry bulk operator, has obtained bankruptcy protection and sought recognition of protection orders in various international jurisdictions after creditors moved to arrest a significant part of its fleet operating around the world.

“Creditors are looking to protect their assets and limit their losses in the most efficient way possible. And because shipping is such an international industry, those creditors are becoming increasingly keen to understand the legal approach to bankruptcy adopted in different parts of the world. For example, bankruptcy protection does not enjoy worldwide currency. It works in those countries - including the US and the UK - which adopt a universal approach to cross-border insolvencies. But there are a few exceptions to this rule.

“It is reported that several of STX Pan Ocean’s creditors have already arrested vessels in China, and we expect creditors also to turn to the Netherlands, which adopts a territorial approach to bankruptcy.

This means that creditors can still take action against the assets of STX Pan Ocean in the Netherlands despite the existence of bankruptcy proceedings and protection orders.”

In addition to its territorial approach to the law of bankruptcy, the Netherlands is widely recognised as a haven for those looking to attach ships and/or to arrange for their swift judicial auction. There are very few legal hurdles to pass in order to obtain leave for attachment.

And it is not just ships calling at Rotterdam and Amsterdam which are subject to attachment in the Dutch courts. All ships proceeding to Antwerp and Ghent have to transit the River Scheldt, where they are also subject to Netherlands jurisdiction.

“It would be surprising if we did not see creditors looking increasingly to the ARA region in the wake of the continuing fall-out from the bankruptcies of major shipping groups.” n

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regulation

Seafarers in the spotlight The introduction into force of the Maritime Labour Convention has been welcomed by industry leaders “The entry into force of the Maritime Labour Convention (MLC) marks significant progress in the recognition of seafarers’ roles and the need to safeguard their well-being and their working conditions. This is a truly important landmark for seafarers and for shipping, on which the global economy relies,” IMO Secretary-General Koji Sekimizu commented.

The MLC treaty, which has been ratified by 48 countries, aims to achieve decent work for the world’s seafarers and secure economic interests in fair competition for quality shipowners.

The MLC is considered the “fourth pillar” of the most important maritime regulations covering international shipping, complementing three major conventions adopted by IMO: the International Convention for the Safety of Life at Sea; the International Convention for the Prevention of Pollution from Ships; and the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers. These three IMO treaties were first adopted in the 1970s and have each been ratified by more than 150 countries, representing more than 99% of world merchant shipping.

“IMO stands ready to support the implementation of MLC 2006 and looks forward to working with its member states on issues of mutual concern, as we have successfully done in the past,” Sekimizu said.

IMO Secretary-General koji Sekimizu

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Dr Cleopatra Doumbia-Henry, Director, ILO Department, International Labour Organization, who was responsible for the development of the MLC 2006 and remains responsible in respect of it, told a meeting held in Singapore to mark the entry into force that: “ The MLC, 2006 was five years in the making and seven years of concerted effort by the ILO, governments, shipowners’ and seafarers’ organisations, as well as the broader industry and the European Union to get us to this day. With its twin objective of a seafarers’ bill of rights and fair competition for shipowners, it is a win-win for all of the industry. We all now need to continue to work together to make it a success through effective implementation. I want to especially thank the government, the shipowners and seafarers’ organisations of Singapore for the exemplary way in which they have – through tripartite social dialogue – worked to give effect to the convention’s provisions.”

Mary Liew, a nominated Member of Parliament and Executive Secretary of the Singapore Maritime Officers’ Union representing seafaring officers said: “We welcome the implementation of the MLC, 2006 as it imposes a minimum standard of decent work for seafarers all over the world, addressing the issues of employment conditions, work and rest hours, accommodation, food, health protection, medical care, repatriation, welfare and social security protection. The maritime tripartite partners here in Singapore have worked in a concerted effort towards ensuring that our maritime industry is ready for the MLC coming into force. While the MLC, 2006 provides a minimum standard for seafarers, as unions, we will continue to work with shipping employers to offer employment and wage conditions that are above and beyond what the convention offers, for our seafarers and members sailing across the world’s oceans.”

Supporting Dr Doumbia-Henry’s earlier comment, Liew proclaimed: “This is a day of rejoicing because this convention will not only protect our seafarers but it will improve the relationship and communication between the various stakeholders. The whole maritime industry will certainly benefit from this comprehensive convention that has taken many years to implement. This historic moment will be remembered and appreciated by many.”

Representing the shipowning community in Singapore, Daniel JS Tan, Executive Director of the Singapore Shipping Association, commented: “As responsible shipowners, we are strongly committed to safeguarding the fundamental rights of our seafarers. In this regard, we, along with our tripartite partners have been actively involved in the MLC, 2006 since it was first conceived in 2001. In addition to working closely with our tripartite partners, we have also been doing our utmost to ensure personnel at every level are fully familiar with the requirements of this Convention.

He continued: “Today, I am pleased to announce that our seafarers are well-taken care of and our Singapore ships are certified and fully compliant. We cannot afford to be complacent, however – the very flexibility and scope

regulation IMO stands ready to support the implementation of MLC 2006 and looks forward to working with its member states on issues of mutual concern

of the convention, as well as the global nature of the shipping industry means that our shipowners are going to be exposed to states that may have different interpretations of the MLC, 2006, possibly at a very fundamental level.

“Given that there are 185 ILO member states, complications may well arise as the convention enters into force across the globe. Nonetheless, I am confident that as we continue working with our tripartite partners, we will be able to address any unexpected hiccups if they arise.”

Kam Soon Huat, General Secretary of the Singapore Organisation of Seamen, whose Union represents ratings, also showed his support. He commented: “The MLC 2006 ushers in a new era of comprehensive and enlightened work environment for seamen. With the MLC 2006, seafarers will be better informed of and protected by their fundamental rights – the rights to a safe and secure workplace, where the safety standards are complied with, where you have fair terms of employment, decent livings and working conditions.”

Captain Francis Joseph, Chairman of the Singapore Maritime Employers’ Federation added: “SMEF and our general membership is proud to have been part of the works within the Singapore maritime community to

address the different areas of concerns for the continued welfare and protection of the seafarers as embodied within the provisions of the MLC 2006. After years of consultation and constructive dialogue with our tripartite partners, we are pleased to have been part of the process and to witness this historic milestone. I am confident that today, with the maritime communities of nations united behind the implementation of MLC 2006, our seafarers’ welfare can only get better.

This applies not only for the seafarers from Singapore but the world over, whose seafarers continue to provide their expertise and competence in manning the world’s fleet that keeps shipping safe, secure and much more efficient.”

Tan Suan Jow, Director (Shipping) of the Maritime and Port Authority of Singapore (MPA), added: “As a responsible maritime administration, Singapore recognises the essential role that seafarers play in our maritime community. We are glad that seafarers’ welfare and interests will be protected under the MLC. MPA will continue to work closely with our tripartite partners to facilitate the smooth implementation of the MLC and the continued protection of seafarers who provide a service that is essential to world trade and the global economy.” n

Complaints procedure

Scott Bergeron of the liberian registry

The Liberian Registry has launched an online Maritime Labour Complaint Resolution Form for seafarers, ahead of the entry into force of the Maritime Labour Convention .

According to the registry, Liberia is committed to ensuring that seafarers who serve on Liberian-flag ships have decent working and living conditions, a safe and secure workplace and fair employment. Seafarers are encouraged to use the ship’s onboard complaint procedures to resolve complaints at the earliest possible opportunity in accordance with MLC 2006.

However, in the event that a complaint is unable to be resolved on board, Liberia has provided the online Maritime Labour Complaint Resolution Form to help seafarers resolve all genuine and valid complaints.”

Seafarers can utilise the online form to lodge a general complaint affecting specific working or living conditions on board the ship, or a complaint relating to a single seafarer.

The Liberian Administration will take all necessary steps to investigate complaints and ensure that appropriate measures are taken to rectify any deficiencies. All information provided to the Administration will be treated as strictly confidential.

Scott Bergeron, CEO of the Liberian International Ship & Corporate Registry, the US-based manager of the Liberian Registry, says: “Liberia was the first country to ratify MLC 2006 and intends to do everything in its power to ensure that it is properly enforced.

This is not just a tick-box exercise. If effectively implemented, MLC 2006 will improve and standardize working conditions for seafarers and shipowners alike.

“Liberia’s online Maritime Labour Complaints Resolution Form is a way of ensuring that seafarers on Liberian-flag ships have all possible resources available to them for reporting any genuine grievances to those who have the authority to resolve such matters in accordance with the letter and spirit of MLC 2006.”

The Liberian Registry’s Maritime Labour Complaint Resolution Form can be accessed from the homepage of its website . n

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risk management

optimism at a high Overall confidence levels in the shipping industry rose to their highest level for two and a half years in the three months ended May 2013, according to the latest Shipping Confidence survey from international accountant and shipping adviser Moore Stephens The Shipping Confidence survey produced evidence of increased enthusiasm for new investment, although doubts persisted about the availability of bank finance. Fuelled by ongoing concern about a surfeit of tonnage on the market, freight rates in the dry bulk sector in particular were expected to come under more pressure over the next twelve months, although the outlook for the tanker markets looked more encouraging.

In May 2013, the average confidence level expressed by respondents in the markets in which they operate was 5.9 on a scale of 1 (low) to 10 (high), compared to the figure of 5.8 recorded in the previous survey in February 2013. This is the highest figure since the 6.0 recorded in November 2010. The survey was launched in May 2008 with a confidence rating of 6.8. The confidence rating for owners was unchanged at 5.7, while that for brokers was up from 5.6 to 5.9, the highest figure since November 2010. Confidence on the part of managers and charterers, however, was down to 6.0 and 5.5 respectively, from 6.2 and 6.0 in February 2013. Geographically, confidence in Asia was up (from 5.6 to 5.8), unchanged in Europe at 5.8, and down in North America from 6.1 to 6.0 A number of respondents felt that there were positive signs that a recovery was under way. One said: “The shipping market is dynamic in nature and we are starting to see signs of exponential growth,” while another predicted with great confidence: “The shipping markets will continue growing over the next 15 years.” Elsewhere, the predictions were less expansive, ranging from, “The market will recover in 2014” to “Overall, we believe that 2013 will end up better than last year and 2014 will show further improvement, even if some niche markets may not be able to maintain their current rate of growth.”

Other respondents, meanwhile, continued to express concern about a surfeit of tonnage in the market. One said: “As soon as there is any hint of a sector with positive potential, owners run to the yards and start ordering” while another noted: “New orders need to be halted for two years in order to correct the over-supply situation.”

Elsewhere, it was noted: “There are still too many owners ordering new vessels that will hit the water in the next two years. If we are to believe estimates that the world’s shipyards turned out five times as much tonnage in 2012 as they did in 2005, it is clear that the problems are far from being solved.”

Another respondent commented: “Newbuildings

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from China are still being delivered and that will doubtless continue because the yards are major employers of local labour and huge consumers of indigenous steel and other raw materials.” And it was not just China that was referenced in this context, with one respondent pointing out: “There are competitive prices on offer for newbuilding orders, even from Japanese shipyards.” Another respondent predicted a continuing over-supply of tonnage in all sectors except those below 20,000 dwt, adding, “Too many larger ships continue to be ordered and delivered due to perceived low newbuilding costs, but these deals do not come close to making sense based on current market returns.”

Despite significant increases in scrapping levels in the past 18 months, a number of respondents felt that much more still needed to be done. “The level of new ordering is alarming,” said one, “particularly as some reports suggest that rates of scrapping may now be slowing down again. At current levels, the fleet will continue expanding into 2014 and 2015.”

Another respondent said: “The industry faces significant increased costs in terms of meeting new regulations over the next few years and, given the lack of available finance, this may accelerate the scrapping of older vessels, particularly those coming up for their fourth survey, but this is unlikely to be despite significant increases in sufficient to get the industry scrapping, respondents found the out of the over-supply hole level of new ordering alarming it finds itself in.”

One respondent said: “We are pessimistic about the ability of smaller, privately owned Europeanbased shipowners to compete in the main non-niche markets due to lack of scale and financial muscle, as well as evidence of protectionist practices that render certain trades inaccessible.” Elsewhere, it was noted: “We have some way to go before we can expect to see any improvement in freight rates, especially if a new wave of cheap, fuelefficient ships is ordered for 2015 onwards.”

risk management Despite increased scrapping, it is clear there are still too many ships on the market

Regulatory demands featured in the responses from a number of respondents, with one commenting, “The increasing burden of regulation and the desire on the part of Brussels to be more proactive in its control of what is a global business, is likely to lead to a large number of marginal players exiting the market completely.

Whether this will be sufficient to accelerate a return to a better supply/demand balance remains to be seen.”

The cost and availability of bank finance was uppermost in the minds of a number of respondents. “If the banks do not improve their funding resources,” said one, “shipping will remain depressed for years to come.” Another commented, “The banks are not willing to invest in older ships.” This was a view echoed by the respondent who remarked: “We have looked at several secondhand ship purchase deals which appear to be good enough to replace older tonnage, but our main lending bank is still not willing to finance them, even with high un-mortgaged equity values within our business able to back the loans.” Elsewhere it was noted: “The banks are behaving illogically and their lack of support frustrates the shipping industry.”

Demand trends, competition and finance costs once again featured as the top three factors cited by respondents overall as those likely to influence performance most significantly over the coming 12 months. The overall numbers for demand trends were down one percentage point to 22%, static for competition at 20%, and unchanged also in the case of finance costs at 16%. Tonnage supply (down one percentage point to 12%) featured in fourth place, ahead of operating costs (up two percentage points to 11%), and fuel costs, which were one percentage point down on last time at 10%.

While the majority of respondents bemoaned the lack of available, affordable finance, one respondent noted: “Shipowners appear to be resorting more frequently to bond financing, and it seems that these investors are looking through rose-tinted spectacles when it comes to assessing the future and are prepared to support owners in this respect.”

Moore Stephens shipping partner, Richard Greiner, says: “For the third successive quarter, we have seen a small increase in confidence. This encourages the belief that we are witnessing the start of a

sustainable recovery, although some difficult issues remain to be resolved.

“Despite increased scrapping, it is clear that there are still too many ships on the market. For as long as that situation persists, the freight markets will struggle to bounce back. Although the tanker market is looking healthier than it has for some time, the dry bulk trades in particular seem to be suffering from an over-supply of tonnage.

“Owners’ appetite for new vessels has not, it seems, been terminally affected by five very difficult years for the shipping industry. Some reports suggest that current newbuilding business is almost 1,000% up on last year, with Greek owners alone having reportedly ordered almost twice as many ships in the first four months of 2013 as they did in the corresponding period last year. This is not a complete surprise.

“Our survey revealed evidence of an increased enthusiasm for investment, and the history of shipping confirms that it is an industry which is not reluctant to spend money.

“Increased newbuilding activity is also somewhat inevitable, not least because of the strong state support which governments in the Far East are providing to their strategically important shipbuilding industries. Neither is it a bad thing. Every industry needs new investment to survive, and if that is coupled with regulatory and environmental compliance – for example, in the shape of ecofriendly ships – then so much the better.

“If pulling the plug on newbuilding activity is not the way to resolve shipping’s problems, the answer must lie with addressing the issues which seem to militate against solutions built on new investment.

We need more scrapping, for example, and fewer proposals such as the one currently before the European Parliament to ban the beaching of vessels for demolition. We need a more innovative approach to securing finance, embracing everything from bond financing to leasing, as well as the ability to convince potential investors of the credibility of business plans. We need a more concerted focus on risk management, which is not as well developed in shipping as it is in many other industries. And we need early identification of the need for restructuring, and awareness of the options available in that connection.

“Shipping is in reasonably good shape, given the problems it is facing. Indeed, it is difficult to think of another industry which is so capital-intensive in nature, so reliant on skilled personnel, and so heavily impacted by competition, politics, risk, protectionism, and regulation, yet able to remain optimistic in the teeth of a global financial downturn.

Three months is a long time in shipping, but it is to be hoped that our next survey will complete a full 12 months of improving confidence. Shipping is an industry in which long-term investments have tended to bring long-term rewards. As such, it is worthy of a long-term outlook.” n

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shipmanagement

On the road Crew travel is an essential component of shipmanagement operations. Freight Focus talks to Christer Sjödoff, Group Vice President, GAC Solutions, about the issues Tell us about G2 Crew Services.

“G2 Crew Services is a joint venture between global shipping, logistics and marine services provider GAC and marine & offshore travel specialists Griffin. Through G2 Crew Services, we co-ordinate the on-time arrival of more than 750,000 crew each year, supported by Griffin’s network of 750 people located in over 20 countries and GAC’s physical presence at over 1,000 ports worldwide.”

“Through our crew rotation management offering, we are able to provide flights and last mile services from airport to deck. Our crew handling services include everything from ‘meet and greet’, provision of shore passes and creating hotel bookings to arranging medical assistance, mail handling or money exchange for crew wherever they are in

the world. This means that crew have all of their requirements handled by one contact. For manning departments and ship managers, there are also significant cost savings across the board, all of which can be billed under a single invoice, including other GAC services, such as husbandry, bunker supply and clearing of ships.” n

What are the prime considerations in providing travel services for serving vessel crew?

“The critical requirement is making sure that the crew gets to the right place at the right time. There needs to be a very good understanding and a close working relationship between the travel agent and shipping agent in order to avoid lost time and additional costs, as comprehensive planning is absolutely essential. As G2 Crew Services is a joint venture between a well-established shipping agent and a leading crew travel agent, working in partnership is fundamental to our business, to provide a best in class integrated service.”

“Another key consideration in providing crew travel services for the shipping and offshore industries, is the ability to adapt to changes quickly, as the need to change flights and onward transportation requirements at the last minute is a common occurrence in this industry. Experienced staff who understand their customers, know the best routings, how to find the lowest fares and have a conclusive understanding of visa requirements are critical.”

“As changes to itineraries are inevitable, it is important that crew have access to marine & offshore fares wherever they are in the world. These are refundable tickets with additional baggage allowances that cater specifically to travelling crew, and which provides the most cost effective travel solution on the market.

“But it’s not just about booking tickets for customers. Crew travel agents need to be able to provide timely Christer Sjödoff, Group Vice President responses to customer requests and queries, twenty-four hours a day, 365

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shipmanagement days a year. They also have to be there on the ground in their key operational areas to give local servicing and handson support. This is critical to providing competitive solutions for the shipping and offshore industries, as customers simply cannot spare lost time in making additional travel arrangements in an industry where time is money.

“Duty of care to travellers has also moved up the agenda over recent years. Advancement in technologies mean that as agents, we can be much more proactive, tracking travelers to ensure we make necessary changes if, for example, flights are delayed, and identifying travellers affected by events such as natural disasters or industrial strikes.

“G2 Crew Services ensures that not only can crew and personnel travel safely between countries, but that they have all of their additional requirements provided at the same time – everything from health insurance to marine SIM cards and low cost top-up vouchers. Recently, G2 Crew Services teamed up with iVittamobile to form G2 Mobile, combining iVittamobile’s single SIM technology supported by 650 local providers. This means that crews no longer have to carry a bag full of SIM cards around and have a reliable and low cost means for communicating with family, friends and colleagues. It is also important for us as an agent so that we can contact individual crew if required.”

n

How has the crew travel market developed in recent years?

“The crew travel market has been affected by the global economic crisis in the last few years, primarily as the pressures placed on vessel owners and operators have forced them to operate longer crew rotations and in a number of cases, has even pushed them to lay-up ships, reducing travel requirements.

“Customers are much more focused now on driving down costs and we have worked with a number of ship operators and crew management companies to introduce and integrate tailored travel policies and work processes designed to lower costs without jeopardising their operational efficiency. But this is not without its challenges as just when customers are looking to pay less, airlines have increased their costs with additional fuel surcharges, taxes, and ancillary costs. Airlines are also continuously improving their yield management, using complex calculations and real-time monitoring to manage their offering.

Working with a reputable and trusted travel agent can help customers to get the best deal in what is a fluctuating and very complex market.

“The airlines have also become more rigid, bringing in ticketing time limits, which has created some additional complications. Previously, you could just not show up at the airport and get a full refund, which worked well for the crew travel market, whereas now the agent has to ticket in advance, which creates additional work due to frequent changes and results in an adverse cash flow impact.

“As a result of the increased cost of travel and the need for shipping and offshore companies to lower their operating expenditure, travel and ship agents have to go the extra mile to find lower-cost routing arrangements, which is why experience is so critical in this industry. It is also the reason that we continually review our service offering and innovate to help clients to reduce direct and indirect costs. This has been the driver behind our integrated product, a complete ‘door to deck’ solution, allowing us to provide a seamless end-to-end service.

“Technology has also started to play a key role in delivering efficiencies. For example, we now have direct feeds from HR and crew management systems into the travel agent’s system, which then feeds back into our customer’s back office system.” n

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shipmanagement What are the common issues and challenges in providing crew travel services?

“The key challenge is making sure that our customers are seeing the bigger picture. Pre-planning, schedule changes and coordination with agents to ensure that ships spares and supplies as well as crew and personnel travel on the same launches to and from a vessel and use the same transport to port, can create significant cost savings across the board.

“From a pure travel perspective, the airlines are now keener on inventory control and so it is becoming a science to balance the point at which the booking is made to minimise ticket price while avoiding additional costs such as amendment and cancellation fees or additional administration charges. It is very important to work closely with customers to tailor solutions to meet their needs.

Each of our customers’ business is structured differently and has different priorities – some want the cheapest routing and don’t worry about the number of legs or waiting times, others want the fastest routing.” n

What are the challenges and where are the opportunities for “last-mile” travel services?

“The fragmented nature of traditional crew travel services is particularly apparent in port, hence the need for a unified single travel solution catering specifically to the maritime and offshore sectors with the ability to handle other husbandry matters – cash to master deliveries, ship spares and local service provider coordination, for example, as G2 Crew provides. This is something that other standalone travel agents cannot do.

“The opportunity is to significantly reduce time and administration costs for clients since having travel and last mile services (airport-deckairport) handled by one contact is far more efficient. Add ships spares logistics from origin to deck and deck to origin and you will have an even more unique and cost effective service with G2 Crew. The best part is that the manning department will get only one invoice, have one contact and have complete transparency through our upcoming Homeport concierge software that is unparalleled in the industry. This is effective ship and travel agency simplified.

“Many seaports also have poor connections to local and regional airports and onward travel can be unpredictable. It is therefore essential that owners and operators can monitor their crew movements against their planned rotation; from the moment that they leave home to the minute they step on deck. Crew safety is also paramount – both on board, ashore and in transit – so having a trusted partner on the ground is a must.” n

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technology

solutions and services From apps to inert gas systems: there plenty of new technological developments in the market

Freight Investor Services has launched a mobile App that puts the freight and commodity swaps market in the hands of users, wherever they are.

The App combines indicative market prices across the main freight and commodity groups with powerful graphing to display forward curves and historical spot prices. Also included are FIS daily reports for all markets, including closing curves, commentaries, spreads and ratios.

The App is available in both English and Mandarin language versions and users can customise the App to deliver the prices, reports and chart data for the commodities and contracts that are of most relevance to them.

FIS Managing Director John Banaszkiewicz said: “Today’s freight and commodity swap markets are unrecognisable from when FIS was founded 10 years ago. We have seen the development of new liquidity, new products, new services like clearing and new entrants who want to access information on the move. The FIS App enables these players to keep up to speed with the market, putting our prices, daily reports and forward curves on a mobile platform for the first time.”

App data includes all the major markets covered by FIS, including dry freight, iron ore, steel and scrap, coking coal, fertilizers and fuel oil. Also included are FIS news updates and full contact details for FIS’ global network. n

Chart management NGM Energy of Greece has selected Thomas Gunn’s Voyager Chart Management Service to manage paper and digital chart updating on all 16 vessels in its fleet. It is also taking advantage of Thomas Gunn’s outfit management service (OMS) for the automated supply of paper charts.

The Voyager Series from Thomas Gunn Navigation Service has earned a reputation for innovation, reliability and responsiveness to customers’ needs, offering the mariner an easy to use, cost effective and high quality database of navigational data neatly displayed.

“NGM Energy is committed to improving efficiency on board”, said Captain Sergey Martynenko of NGM Energy. “Our business prides itself on offering the industry a highly professional service, and we are confident that our decision to roll out Voyager across the fleet will enable us to maintain this commitment in the future.”

Voyager is a fully automated onboard chart management system which provides the mariner with a personalised database of charts, publications and Notices to Mariners (NMs) organised in a convenient folio system. New Voyager 4 enables bridge personnel to manage all their navigational information through a single service that, for the first time, includes NAVAREA warnings as well as new route planning functionality that makes identification of the charts, publications and updates required for a voyage even easier and more efficient.

Voyager 4 was released into the market in May 2013 following worldwide sea trials and is available now to trial and buy from Global Navigation Solutions companies and distributors worldwide. n

Inert gas Wilhelmsen Technical Solutions has recently launched upgraded Unitor-Generon inert gas system to fulfil increased demand from shipping and offshore customers for a highefficiency, low energy purging and padding system for liquid cargo safety.

The updated Unitor-Generon system features modern membrane technology developed by Generon which enables the complete system to produce required

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technology levels of nitrogen using smaller compressors and other components, reducing the overall environmental footprint and lowering onboard energy consumption.

With shipowners and operators increasingly focused on optimising energy management to meet with voluntary standards and comply with regulatory requirements, the new system will be offered to both newbuilding and retrofit applications as a means of delivering measurable operational efficiencies.

According to George Dicker, commercial director for safety at Wilhelmsen Technical Solutions:“The Unitor-Generon system is the smallest, most efficient inert gas generator available, producing twice the volume of nitrogen as larger units but with far lower energy consumption.

It is the first to provide this level of efficiency at this low operating pressure, making it the ideal solution for chemical tankers, gas and product carriers.”

Wilhelmsen Technical Solutions has secured multiple orders to supply its Maritime Protection inert gas generator systems for installation on vessels working offshore Brazil.

The company will deliver a total of eight dual-fuel Maritime Protection systems via contracting partner EEP to Brazil’s national oil company Petrobras for installation onboard a quartet of VLCCs being converted to Floating Production, Storage and Offloading (FPSO) vessels.

The conversion of the VLCC hulls is scheduled take place in the Estaleiro Inhauma dry-dock where the IGG equipment, capable of operation both on marinediesel oil/gas oil and natural gas, will be installed.

Once completed, the FPSOs will operate in the deepwater ‘pre-salt’ Santos Basin fields, 200km south of Rio de Janeiro.

This order is in addition to two similar systems delivered last year, and makes Brazil an increasingly important market for WTS, which will deliver the eight dual-fuel units between December 2013 and September 2014.

Maritime Protection Managing Director, Steinar Andersen commented: “We are delighted to be working with EEP/Petrobras on this order, which confirm Wilhelmsen Technical Solutions among the leaders in the supply of inert gas generator systems to the offshore sector.

For Petrobras, the equipment is designed to last for the lifetime of these vessels and makes extensive use of stainless steel to ensure durability.”

Acquired by Wilhelmsen Technical Solutions in April 2013, Maritime Protection has over 40 years’ experience supplying inert gas systems to the maritime and offshore industries, with applications including oil n tankers, LNG/LPG carriers, product tankers and rigs.

Imtech Imtech Marine has upgraded and extended the coverage of its Global VSAT Network. In addition to its wide network, Imtech Marine can now offer VSAT coverage in the Indian Ocean, roughly between Tanzania, Ethiopia, Madagascar, India and Indonesia, which is an important and busy area for the international maritime industry. Imtech Marine offers a reliable, cost effective and always-on broadband communication solution that utilizes the iDirect Evolution platform. This global solution covers all major shipping routes and provides guaranteed quality of service of 99,5%, Service Level Agreements, 24/7 support and worldwide VSAT coverage, including automatic beam switching.

Rob Verkuil, Imtech Marine General Manager Connectivity: “By extending our Global VSAT coverage map we can offer our customers economical and effective broadband connectivity in an area where a lot of vessels are sailing.

The VSAT network of Imtech Marine provides reliable communication connections for crew, captain and other users on board. The extension of our VSAT coverage in combination with the recently introduced Imtech Marine portfolio of unique value added services offers our customers the possibility for a total connectivity solution.” n

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Autumn 2013

environment

clean living US environmental legislation on the use of low sulphur fuels has begun to bite Emission control area compliance is not up for grabs and while there have been suggestions that those who cannot meet requirements when entering the North America ECA will not be turned back at the 200 mile limit, there have also been a couple of prosecutions while regional variations on the rules also apply.

Most recently, the California Air Resources Board has fined three international shipping companies a combined $440,250 for failure to switch to lowsulphur marine distillate fuel upon entering regulated California waters, as required by state law.

“Ships en route to California ports emit thousands of tons of diesel exhaust each year,” said ARB Enforcement Chief Jim Ryden. “Our regulation requiring ocean-going vessels to switch to cleaner fuel within 24 nautical miles of our shoreline protects all California residents, especially those in port communities, from this air pollution.”

An ARB investigation showed that on 17 visits to California ports between 6 November, 2009 and 18 July, 2011, the vessel Hoegh Inchon operated its main engines within Regulated California Waters on bunker fuel. The parent company, Hoegh Autoliners Shipping of Oslo, was fined $299,500.

In February 2013, prior to docking at the Ports of Stockton and Long Beach, the Ikan Bawal was cited for failing to switch its engines over to the required cleaner fuel while operating within Regulated California Waters. Its owner, NCN Corporation Panama was fined $87,750.

In August 2012, after it docked at the Port of Los Angeles, the vessel K-Pluto was also cited for failing to switch to the required cleaner fuel while operating within Regulated California Waters. Its parent company, Twin Phoenix Shipping of Singapore, was fined $53,000.

All three companies complied with ARB’s investigation and agreed to abide by all pertinent ARB regulations, follow fuel switchover requirements and keep accurate records. The fines go to the California Air Pollution Control Fund to support air quality research, The ARB conducts over 500 ship inspections each year, checking for proper fuel usage, record-keeping and other compliance requirements, and takes marine gas oil or marine diesel oil samples for submission to the ARB laboratory to ensure they meet California standards for sulphur. n

LA emissions New data from the port of Los Angeles is at its lowest level since the port adopted a formal plan to reduce harmful emissions nearly seven years’ ago.

The port’s 2012 Inventory of Air Emissions shows aggressive clean air strategies – launched in 2006 and expanded over time – have set new records. The results include an unprecedented 79% drop in diesel particulate matter (DPM) over a seven-year period that began in 2005.

Removing cargo volume fluctuations from the equation, the 2012 Inventory shows that the amount of DPM emissions related to moving 10,000 20-foot containers through the port in 2012 was 81% lower than the emissions output related to moving the same number of containers through the port in 2005.

“Every year really does count and our systematic approach has accelerated our progress,” said Los Angeles Harbour Commission president Cindy Miscikowski. “Much of the credit is shared by our industry partners who have invested in technology that in some cases surpass government regulations.”

The port’s Inventory of Air Emissions tracks the progress of a comprehensive suite of clean air measures, requirements and incentives to reduce harmful emissions from all sources associated with port operations: ships, trucks, trains, cargo-handling equipment and smaller harbor craft. The latest findings are based on data from the 2012 calendar year and compared with data collected annually since the baseline year of 2005.

In addition to exceeding the port’s 2014 goal for DPM, the latest data shows a record plunge in emissions of nitrogen oxides and sulphur oxides , which have fallen 56% and 88% respectively since 2005. The results exceed the port’s 2014 goal for NOx and put

Autumn 2013

45

environment the port within striking distance of its goal to cut SOx emissions 93% by 2014.

For SOx alone, 2012 marked the greatest reduction in a single year since 2005, said port executive director Geraldine Knatz. “This past year, SOx emissions were cut in half,” said Knatz. “That doesn’t happen without teamwork, which shows how far we’ve come and what ports, ocean carriers, regulatory agencies and others can do together.”

To verify its progress, the port does a separate calculation that accounts for fluctuations in cargo activity. Container volumes have increased 8% since 2005, even with the recent global recession.

Based on that calculation, the clean air gains the port achieved in 2012 are even greater. On a ton per 10,000 TEU basis, the Port slashed DPM emissions 81%, NOx emissions 59%, and SOx emissions 89%. n

Rubbish regulation Oregon’s Senator Jeff Merkley has announced plans to introduce the Marine Debris Emergency Act, a bill to help communities affected by marine debris emergencies. The bill would expedite the current grant award process made through the National Oceanic and Atmospheric Administration’s (NOAA) Marine Debris program and give preference in these grants to communities facing severe debris events.

“With debris from Japan’s tsunami washing up on Oregon beaches regularly, it’s clear we need an urgent response to extraordinary events like these,” Merkley said. “While some initial funds have been allocated, much more is needed. Moreover, my bill would cut through the red tape to get funds to communities more quickly. I am proud to work with Congresswoman Suzanne Bonamici to make these much-needed changes to the Marine Debris program to serve our coastal communities better.”

The arrival of this debris on the coast of the US resulting from the tsunami that struck Japan in March 2011 continues to stretch the resources of state and local governments along with community groups that are assisting with response and removal. NOAA has existing grant programmes available to assist with debris removal, but the process for awarding these grants is slow and does not account for extreme circumstances. The Marine Debris Emergency Act would speed the grant award process and give preference to applicants who are facing a severe marine debris event.

Earlier this year, Congresswoman Bonamici introduced a companion bill, also called the Marine Debris Emergency Act. n

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Autumn 2013

Ballast water Shipowners will soon be obliged to address new and expensive regulations to deal with ballast water. The Ballast Water Management Convention 2004 will require them to understand compliance standards, develop a ballast water management plan, select and install a treatment system and train personnel to operate the system.

Their ships will be subject to surveys and inspection to maintain certification.

The International Maritime Organization’s Marine Environment Protection Committee has issued guidelines to facilitate implementation and uniform interpretation Jacqueline Tan, of the Convention by all countries. The Senior Claims Executive convention takes a comprehensive overview of ballast water management, including reception facilities, water exchange, sampling, sediment reception, treatment technology and risk management. The latest developments are summarised in a Legal Briefing on environmental law, recently issued by the UK P&I Club.

There is strong support for the Ballast Water Management Convention, given the damage caused to the environment by invasive alien species, depletion of fish stocks and the high cost of controlling these effects. However, ballast water management systems must avoid harming ship, crew, environment and public health and gain formal approval, in the UK from classification societies, the club explains.

The cost of compliance to shipowners will be very high. A ballast water treatment system can cost from half a million to four million dollars. There will be ancillary costs, including developing a ballast water management plan, dry docking and installation.

There are two standards of compliance. The ballast water exchange standard (BWE) does not require the ship to install a treatment system, but will be phased out by 2019.

The ballast water performance standard (BWP) does require such a system.

Alternatives to the BWE and BWP methods must ensure at least the same level of protection to the environment, human health, property and resources.

Parties to the convention can impose additional measures on ships to prevent, reduce or eliminate the transfer of harmful aquatic organisms and pathogens through ships’ ballast water and sediments. Ballast water management systems complying with the convention standards may still fall foul of more stringent standards set in the US and other countries.

Shipowners who trade to these jurisdictions must, therefore, install systems that meet these more stringent standards.

Party states will be responsible for enforcing the convention in respect to ships registered under their flags and ships entering their jurisdictional waters. The convention provides for ratifying states to establish sanctions which should be sufficiently strong to discourage violations. There is concern that the application, interpretation and enforcement of the convention requirements and sanctions imposed by the States will differ.

The MEPC 65th session in May tried to address some of owners’ concerns by rescheduling the convention implementation, installing a trial period for port state control to try out sampling and testing techniques, and making BWMS type approvals more transparent. The revised schedule should be adopted at the IMO’s assembly in November 2013.

Jacqueline Tan, Senior Claims Executive at Thomas Miller P&I, appreciates owners’ concerns. “The high economic costs to ship owners, introduced by the convention, coupled with a lack of confidence that the proposed equipment and procedures can effectively tackle the adverse effects, probably explains why the rush to ratify the convention has slowed down.

“While MEPC 65 and the revised implementation schedule have given owners breathing space, it would still be prudent for them to get to grips with the convention’s requirements.” n

heavy lift

Gateway to success In a major milestone for he Panama Canal extension, the first four gates for the new locks have arrived from Trieste One of the most high profile heavy lift projects in recent weeks has been the arrival of four lock gates for the Panama Canal extension. In a major milestone for the Panama Canal expansion, the first four gates for the new locks have arrived from the port of Trieste, Italy to the waterway’s Atlantic side on board the semi-submersible vessel STX Sun Rise.

“This is an exciting moment for the Panama Canal – the arrival of the new gates marks a great progress for this engineering project,” Panama Canal Administrator Jorge Quijano said. “With the expansion, we will further reinforce our position as the maritime and logistics hub of the Americas.”

Built by Italian subcontractor Cimolai SpA, the first four gates are 57.6m long, 10m wide and 30.19m high, and weigh an average of 3,100 tons. They will be installed in the middle chamber of the new locks in the Atlantic side.

The steel gates will be transported to their final position using the same self-propelled motorised wheel transporters (SPMTs) that are used to load and unload from the ship.

The new locks of the expanded Panama Canal have a total of 16 rolling gates (eight for each new lock complex). The gates are being shipped four at a time from Italy. They will be unloaded on to a temporary dock until ready for installation. Unlike the current canal, which uses miter gates, the expanded canal will have steel rolling gates.

The Panama Canal Expansion is 62% complete. It involves the construction of a third lane of traffic allowing the passage of Post-Panamax vessels, which will double the canal’s capacity and have an important impact in world maritime trade. n

Seaway links with shell Seaway Heavy Lifting has signed an Enterprise Framework Agreement with Shell Global Solutions, in the category of offshore installation. The contract duration is five years and covers the engineering, project management and offshore installation of fixed and floating facilities. The agreement may be used globally, but will initially focus on Shell projects in the North Sea, US Gulf of Mexico, West Africa and Brazil (the Atlantic Basin).

Koen van der Perk, Senior VP Commercial of Seaway Heavy Lifting, says; “This Enterprise Framework Agreement is an excellent opportunity for us to further develop our relationship with Shell. We appreciate the opportunity to provide to Shell safely executed projects and we are looking forward to working with them.”

Seaway Heavy Lifting has been awarded a heavy lift contract from Subsea 7. This contract is part of Subsea 7’s main contract with Statoil for the Gullfaks Subsea Compression Project in Norway. Seaway Heavy Lifting’s scope includes transport & installation of a 500t wet gas compression station and its 300t protection structure. The project will be executed in 2015. The location is 15km South of the GullfaksC platform.

CEO Jan Willem van der Graaf says: “The crane vessel Oleg Strashnov is highly qualified for this job making optimum use of large deck space to transport the compression station and the protection structure.

“Installation will be done using dynamic positioning in water depth of 140m. Seaway Heavy Lifting is proud to have been awarded this contract and is looking forward to working with one of its parent companies, Subsea 7”. n

Autumn 2013

47

heavy lift oaktree announces ceo

on a roll

Hansa Heavy Lift board member Roger Iliffe has been appointed by Oaktree Capital, 100% shareholder of the shipping company, as interim CEO, and replaces Tomas Dyrbye whilst the company searches for a replacement.

Oaktree’s plan is to continue significant investment into the project heavy lift market and further expand Hansa Heavy Lift through fleet growth and further consolidation. The focus will be on the oil and gas sector, EPCs, and other demanding engineering sectors.

One of Hansa Heavy Lift’s P2-class vessels recently lifted the heaviest cargo since the foundation of the company in June 2011. A reactor with a weight of 1283 tonnes was loaded in Higashi Harima, Japan in June. When the P2-1400 type HHL Valparaiso arrived she was scheduled to load four reactors under deck. Three reactors had a weight between 350 and 568tonnes and one had a weight of 1283 tonnes.

The discharge of the heaviest piece took place on 24 June, 2013 in Sovetskaya Gavan, Russia. HHL Valparaiso used its on-board cranes in tandem to provide a lifting capacity of 1400 tonnes. The discharge of the remaining reactors was successfully completed within the next two days.

Any lifting of heavy cargoes close to the maximum lifting capacity is always exceptionally challenging.

Additionally in this case, the crew faced bad weather conditions in Russia and had to discharge the reactors on to barges, complicating the already difficult operation. n

Global heavy lift and transportation providers BigLift Shipping and RollDock Shipping have announced they are forming a joint company, BigRoll, which will operate two newbuild MC-Class module carriers for the transportation of ultra large and heavy modular cargoes by sea. The module carriers will be available end of 2014 / beginning of 2015.

BigRoll will build two module carriers, designed with a focus on short loading and discharging times, high service speed and low accelerations. The vessels will have DP2 and Finnish Swedish 1A ice class notations. The overall length of the MC-Class is 169m, beam is 42m, providing the vessels with a deck space of 42 by 125m. Maximum deadweight of the MC-Class is 22,500 tonnes.

Loading and discharging can be done over vessels’ stern or side by ro-ro or skidding. To minimize loading and discharging time the ballast capacity of the vessel is 12,000 m3/hr. The module carriers are not semi-submersible.

BigRoll will concentrate on the offshore and onshore oil and gas and renewables markets, power generation, container cranes and shipyard industries. The vessels’ high ice class notation will make them ideal to operate in the Arctic regions and the DP2 notation will enable direct offshore delivery of modules.

Arne Hubregtse, managing director of BigLift says: “I am very excited about the co-operation. Not only in designing, managing and operating the vessels, but also in BigLift, RollDock and BigRoll working together on special projects worldwide. As partners in BigRoll and having the innovative MC class available, we can make a difference and add value.”

Wout van der Zwan, CEO at RollDock says: “As a modern company we understand the importance of being ahead of the developments in the market. Our philosophy of not believing in limitations is highlighted in the decision to join forces with BigLift in this new venture to offer clients the ultimate in heavylift and transportation solutions worldwide.”

BigLift Shipping owns and operates 14 heavy lift vessels, with lifting capacities up to 1800 mt, in the worldwide project and heavy lift market.

RollDock Shipping presently owns and operates two semi-submersible/heavy lift/ro-ro vessels trading worldwide with two more sister vessels to be delivered – one vessel by the end of this year and the other in April next year.

BigLift Shipping’s Happy Sky made her maiden voyage from Shanghai to Cape Lambert, Australia in July . transporting three large modules to be installed as part of the Port B, Phase B project in Cape Lambert.

This voyage is the first of four consecutive shipments.

Happy Sky is the latest addition to BigLift Shipping’s fleet of heavy lift vessels. She was built by Larsen & Toubro in India and features two 900 mt, Huisman-built heavy lift mast cranes. With a lifting height of 40,9 m above the main deck, the vessel has a lifting height unmatched in the world fleet of heavy lift vessels. n

BigLift Shipping’s Happy Sky made her maiden voyage

48

Autumn 2013

Lifting of heavy cargoes close to the maximum lifting capacity is always exceptionally challenging

PORTS

Growth industry A surge in container demand and in ship sizes are just two challenges facing terminal operators Shipping consultant Drewry’s latest annual report on global and international container terminal operators shows that the sector remains dynamic and profitable, but that numerous changes are also taking place. All terminal operators face the challenge of growth on two fronts – growth in container demand and growth in ship sizes.

“While it is generally agreed that future container demand growth will not be as strong as the boom periods of the 1990s and 2000s, global container port demand is still forecast to exceed 800 million teu per annum by 2017, growing by just over 5% per annum. To put this growth into context, the 186 million teu which this growth represents is the equivalent of the entire throughput of all Chinese ports in 2012,” the report suggests.

This is more than the entire 2012 throughput of North America, Europe and the Middle East combined and illustrates what a huge industry the container port business has become – something that is often overlooked because it is geographically fragmented across nearly 1,300 terminals across the world and so the collective industry is somewhat under the radar, according to Drewry. Even modest demand growth now generates huge absolute increases in volumes therefore.

At the same time, container ship sizes are increasing dramatically. The largest container ship in the world fleet has quadrupled in size since 1992 and in the Asia-Europe trade lane it has doubled in the last 10 years. This in turn has triggered the formation of ever larger operational alliances, most notably the P3 alliance between Maersk, MSC and CMA CGM. The resultant rampant and rapid cascading of larger ships into secondary trade lanes is likely to create more port problems and challenges than the 18,000 teu monsters destined for the Asia-Europe trade lane.

Drewry’s Neil Davidson, Senior Analyst – Ports and Terminals, comments: “Container terminal operators remain successful and highly active, but there are many changes coming: “Changes in ownership as cash-strapped shipping lines are forced to sell more stakes in their terminals and aggressive terminal buyers chase expansion opportunities. Changes in operations and infrastructure as ever larger container ships have to be accommodated not just in Europe and Asia, but around the world. Changes in demand as modest growth still

generates large absolute volume increases. For example, even if they only perform at the world average, Shanghai or Singapore will add almost 10 million teu to their total throughput by 2017.

A figure of 10 million teu is more than the entire container port throughput of the UK, India or Brazil.” n

Timblo signs bangladesh contract Timblo Drydocks, part of the Panduranga Timblo Group, has secured a contract to construct a complete set of dredging facilities for the Mongla Port Authority, Bangladesh.

The project includes the construction of five vessels, comprising one 18-inch cutter suction dredger and four support vessels, including accommodation craft.

The contract, worth a total of $8.5m, was signed at the Mongla Port Authority headquarters in Mongla, Bangladesh, in August by Executive Director of Timblo Drydocks Sarvesh Pramod Timblo and Chairman of Mongla Port Authority, Commodore MH Bhuiyan.

The project is being financed under a soft loan finance scheme sanctioned by the Indian Government to Bangladesh through the EXIM Bank of India and designed to foster close trade links between India and Bangladesh.

Speaking at the contract signing, Timblo Drydocks Executive Director Sarvesh Pramod Timblo said:“Timblo is proud to have been awarded this project and we look forward to working with our partners to deliver a world class set of dredging equipment to Mongla Port Authority. Timblo has a long history of designing and building innovative vessels and this contract continues this tradition and positions us to attract further contracts in the dredging market in Asia and further abroad.”

The supply of dredging equipment to Mongla Port Authority will be made in support of the port’s development programme which includes maintenance dredging, improvement of aids to navigation, the development of two additional cargo berths and procurement of container handling equipment.

Timblo Drydocks will work closely with Western Marine Shipyard of Chittagong, Bangladesh, on the project, which will see the vessels and equipment delivered within a timeframe of 18 months. n

Port of Los Angeles cargo down The Port of Los Angeles has released its July 2013 cargo volumes.

July overall volumes totalled 715,640 TEU , the busiest cargo month of 2013. Compared to July 2012, volumes slipped 1.48%.

Imports edged downward by 0.3%, from 371,859 TEU in July 2012 to 370,745 TEUs in 2013. Exports decreased 4.83% , from 165,581 TEUs in July 2012 to 157,585 TEUs in July 2013.

Combined, total loaded imports and exports for July decreased 1.69%, from 537,440 TEUs last July to 528,331 TEUs in July 2013. Factoring in empties, which decreased. 86% year over year, overall July 2013 volumes (715,640 TEUs) dropped 1.48% compared to July 2012 (715,640 TEUs). n

Autumn 2013

49

PORTS APM makes African investment Senior APM Terminals officials have been holding talks with the Nigerian Federal Minister of Industry, Trade & Investment, Olusegun Aganga, and a delegation of government officials and advisors in The Hague as part of ongoing discussions on port infrastructure investment to promote Nigerian economic development through access to world-class logistics capabilities.

Overall African port utilisation currently exceeds 70% and is expected to reach 80% over the next decade, resulting in worsening port congestion and constrained economic growth.

The IMF has projected Nigerian GDP growth rates of 7.2% in 2013 and 7% in 2014, with Africa overall forecasted to see economic growth of 5.5% this year, according to APM. In recognition of increasing pressure on trade and economic performance, governments are partnering with private terminal operators to accelerate infrastructure development, create new jobs and attract more investment from world markets through a competitive port system, such as the proposed new megaport at Badagry, Nigeria. The New Partnership for Africa’s Development (NEPAD) has estimated Africa’s infrastructure spending gap at $48bn.

“Ports are linked to the industrial development of the country and we welcome more port investment. We are excited about the Badagry port project and how this multi-purpose facility aligns with our industrial development plans for the nation,” said Aganga.

APM Terminals’ proposed Badagry mega-port project is one of many initiatives by APM Terminals designed to modernise Africa’s infrastructure through aggressive investment in transportation infrastructure upgrades.

“Last year, APM Terminals committed more than $175m in investments across our African portfolio. We want to continue this pace to serve the ambitions of Africa’s countries and people”, commented APM Terminals Africa-Middle East Regional CEO Peder Sondergaard.

The new Badagry port promises to transform Nigeria’s global trade access by creating the most modern multi-purpose port on the African continent, with container, bulk, petrochemical and ro-ro cargo-handling capability just 34 miles from the City of Lagos, Nigeria’s commercial and financial hub and fastest growing city, with population estimated as high as 20 million people.

APM Terminals has interests in nine facilities in Africa with

a robust pace of investments and improvements in progress and scheduled. In Monrovia, Liberia a $145m investment has rebuilt the quay wall, and will create a new container yard and gate complex, including lighting and new terminal handling equipment, the company says.

In Abidjan, Ivory Coast, APM APM Terminals AfricaTerminals is invest- Middle East Regional CEO ing $40m in port Peder Sondergaard upgrades to boost capacity, and an APM Terminals-led consortium has been chosen as the preferred bidder to build and operate a second container facility which will double current capacity by adding another 1.5 million TEU annual capacity, and will be able to accommodate vessels of 8,000 TEU capacity at one of West Africa’s busiest port hubs.

In Tema, Ghana, the company is investing $100m in the local terminal operating company Meridian Port Services to expand annual throughput capacity to 1 million TEU and introduce new container handling equipment.

In Apapa, Nigeria, APM Terminals has invested $200m since 2006, creating West Africa’s busiest container terminal, with throughput of 618,000 TEU in 2012, and Africa’s largest mobile harbor crane port. An additional $135m now is being invested to expand annual capacity at the facility to 1.2 million TEU by early 2014.

In Onne, Nigeria, the company is investing $30m in upgrades, yard expansion, paving, new equipment and safety improvements to double the capacity of the West African Container Terminal.

“We see our African investment initiatives not only as an attractive business strategy, but also as a responsibility in promoting economic growth and social progress in underserved emerging markets” said Sondergaard. n

New tariffs at Houston Inchcape Shipping Services has given notice of a new schedule of dock services and charges at the Kinder Morgan Galena Park and Pasadena terminals in Houston from September 1 2013. The new schedule includes a Maritime Safety and Security Fee of $2,500 per ship, per call, for all ships berthing at the terminals.

Primarily used by tanker operators and shipowners, Kinder Morgan has given notice to all agents and shipowner representatives using the Galena Park and Pasadena terminals that it has assumed all of the costs associated with the Maritime Security System regulations to ensure secure facilities for a number of years, but costs have continued to increase and it will now assess the ship owner a portion of the expenses directly related to providing a safe and secure dockside through the Maritime Safety and Security Fee, ISS says. n

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Autumn 2013

Corporate Orient Project Shipping Orient Shipping may be a new name, but the company is an old friend accommodate the large or heavy components that such capital investment involves.

We are a local project shipping expert backed by a wealth of knowledge covering Asia, Australia and beyond and offer project and heavy lift shipbroking and associated services – viz commercial and technical advice, pre-emptive operational support – which is based on years of experience.

We’re also a shipowner’s agent, commercially representing Dutch heavy lift ship owner Biglift in ASEAN and the multipurpose fleet of Hamburg ship owner Peter Doehle in ASEAN/ Australia-New Zealand.

In addition we are an experienced broker for ocean transport of preassembled modules by self-propelled deck ship as well as float-on/float-off operations both by submersible vessel and barge.

Orient Project Shipping is strategically located to be your service provider of heavy lift shipping expertise. n

The name may have changed at the end 2011 but the Company has steadfastly maintained its commitment to quality, reliability and accessibility which has been an indelible trademark throughout the twenty three years of operation in Singapore. We are immersed in the economics of development and wherever infrastructural projects are undertaken, we are on hand to meet the need for specialised shipping services that can 51 Anson Road #04-51 Anson Centre Singapore 079904 Tel: +65 6227-2026 E-mail: shipping@orientproject.sg Website: www.orientproject.sg

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Open-loop systems have been s that isCSL hasVesse the stack, house 11:45 installed 07/03/2013 a CSNOx the existin accessible Gas one system l Susta Spruceglen rendering their operational using natural alkalinity to neutralise sulphur simply g data. The ofions its bulk carriers, first series inability onEmiss within Carbo of testsncarried out oxides, reliability vulnerable Ratin RightS Ratin optimising last foot year content, then filter it to changes in salinity g Syste weregsaimed primarily the efficiency of Third hip’s printi for oil and particulates sulphur at m oxide (SOx)ng tool for party system has been running the before pumping it back and water Closed-loop systems verifie reductions.

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strong with both owne The According to BHP has Billiton, Western very strongvolumes from clean sector rs and Australia Ironbenef (WAIO) delivered MR2 and the begin has been growi Ore ited as a a twelfth consecutive year production Decembernghalfand new result and it’s LR1 marke ning of the and sales record encou players So as the business continued ts. Liquid to benefit from participating raging to Accordingwhat can marke the company’s 26see this sectoity decade- long investment in supply chain capacity. to Radcl t player .”

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significant milestone obvio feel the t the IN ACTION newb AllIANCE during effect to theus that the for the future the December with first ore received 2012uilding its co-operation delive expanding is ry CAuGHT IN A SEA CHANGE quarter ? the boom dry freigh orderbooks of Alliance byThe theG6 for recently Basil M Karatzas, says theCoast installed fifth delive exploded. years duringt market Capetrade.

Shipping finance is facing turbulent times, car dumper at Finucane Island. Asia-to-North ry forEast size ahead This car dumperAmerica the way what ismajor 2012 which expands;sector, while piece of infrastructure Plus: is the Hanjin loop; duehalts CEO of Karatzas Marine Advisors. So lastthe Panam to required Maersk the lowJamaica goes ax for growth it is this was the peak to slight port capacity from concern; for shipowners?

WAIO cause recov r. With value of secto Suez tollsincrease the December scrapp year that is peak 2012 quarter run-rate each of 188 million tonnes ery in the Cape sector, there ing on the per annum to 220 year. For Panam increase per annum (100% million tonnes size secto are equat basis). ion becom ax, it will be r towar some that see “The Jimblebar longe ds the es more a “The Mine Expansion, end demand r before the schedule for thewhich isoversupply supply of this driven

first production level at on the March 2014 is an independent, non-profit,innon-governmental which paper. PEFC Council will broadly other quarter, party forest certification. match third This publication is printed on PEFC certified mine through independent and port capacityto fix grain forest management expanded rate, organisation which promotes sustainable the at this

of Panam /dem and less the vesse ax vessels oversupplieand can clearly ls have d.

busine while the progressive 2a index been comp be seen ss ex de-bottlenecki of the supply chain only by eting is expected to says. “With ng managing ECSA at this underpin the arriva low cost, longer to time of with each shift in substantial term growth in l of vale’s reach $18,0 trade patter the ourmarke WAIO business,” the company said. new fleet 00 so far,” year – ns over “The t is Radcliffe business is underpinned strong outlook 50%for ourincrea WAIOsingly dominthe past five of valemaxes by an anticipated of seabo years, and the in production in rne trade) ated by increase the the 2013 financial annua5% l econo , influen trans-pacific open freigh year, mic guidance of 183 growtforh unchanged t trade million tonnes (100% that will growth of Chinaced largely basis). Samarco’s (Brazil) three curre by the (around eventually pellet plants continued nt gloom . It lift the is largely this 7.5-8.5% capacity during to operateinatthe Accor the period.” comin BHP BIllITON, freight econo mic marke AuSTRAlIA desk at ding ton Leslie g year or so.” wESTERN t out ACM/ IRON : “Ther of its GFI sector.

From the that things e is definitely spot, and a sense S&P marke are turnin on our t, to projec g a corner that prosp also FFAs, in there shift we ects are impro is a new ts and time the clean ving for confidence, charters, to shale oil are seeing albeit fragile this secto in undou story as well the United btedly States r. The parad , as increa igm sed refinin as a result “However,points to new of the and greate g capac could as my ity in well with greate be some research team r product flows. the east surprises has pointe caribs to r tonne mile for d out, demand the crude the east there oil sector being and similar flows of created by flows as well that nature from the .” n

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Spring 2013

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China's steel association said it would support vale docking its Brazil’s giant valemax ore during carriers at Chinese ports if that would the Europ lead to a decrease ean and in iron ore held for its members, costsin Geneva Reuters reported in early Asian forum at the end of January.Accor s, the first “This is a matter with Doddding to Leslie June.” of which 14 for the transportation authorities, 24 (but) Chinese steel will be Frank Act , apart from INDUSTRy NEWS enterprises vALUES SHIP hope that iron oreresult will fall and that and the obvio pricesing liquidity transportation costs many RESPONSE ClEARING A PATH ZAS has beenCFTC regula us challe AuTOMATED will fall, and good for complex and if this isobservers KARAT increasingly tions, volatil that, then OF nges a tale I support whether automated about Regulation of derivatives trading is becoming of the sceptical be Changfu, it,”may espec Zhang of ORStor, tary-general ity and moves. of the CEOSome tanke board all on ially vLCC some date secre- vesselvalue to up answers be to have r marke crude versu China Iron Here, E ADVIS poor. or not. trading platforms works valuation and Steel s, is of this MARIN Liquidity s clean. the t will know Association,CE a press briefing. off by theatcomplexity it said about However, the key issue is not to be put player in TD3 in dire straits “As ING FINAN of the questions s to and return , the crude things simple has suffer ON SHIPP topic and find people who can help keep secthose n make a ed, s

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COMMODITIES NORTHlAND

Northland Resources AHEAD FullhasSTEAM started shipments looks set to continue in the iron oreofmarket to Tata Steel UK growth in the iron ore Strong Limited firstwith in Chinese imports during the first a surgefrom shipment Port of Narvik in Asia Pacific .The region, the Norway year40,000 tonnes of highthis for grade iron ore month ofwas concentrate for a customer in FE content is above Europe. the expected 69%, The cargo was Northland said. shipped by Star Norita to Tata the Netherlands Steel in where the product will be used in their pellet plant.

The first shipment to Tata will be followed lar shipments 12 to customers by reguin Europe, the INTERvIEW and the Far East.

Middle East 16 Total shipments COST REDUCTION in 2013 are expected to FORwARD THINKING amount to for 1.5 agenda the on million tonnes, the issues ACTION increasing IN to Regulation and liquidity are just two of about million EFFICIENCy a rate of tonnes talks to GFI senior4futures per regulations at improving the energy efficiency of aimedtonnes or 350,000 FFA brokers going forward. Sandra Speares month, As newyear, of the third quarter head by per taking Ed Radcliffe and of 2014. and options broker and FFABA chairman shipping take effect, what steps are shipowners international n the rules? wet freight Will Leslie to ensure that they are compliant with CHINA

All the latest news, views, company moves, conference updates

file

(editor@mar-media.com) Deputy editor: John Rickards

ORE

SHIPMENTS COMMODITIES

NEWS

Publisher: W H Robinson Editor: David Hughes

recent maritime appear sec ed sea tra a lack of stra urity semina ding lan r teg es writes y to the ma in the UK, it ritime was not Paul Gib security ed that bins there of key interna tional

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to be the major reason that South Africa overtook as the third largest India iron ore supplier to China. n

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Vessel protection in the Gulf of Guinea ports, offshore up is inevitable A proven concept In response to the to provide the highest tremendous level of quality service toagainst the ISN’s concept demand, ISN recently ship owners. of operations announced that seafarers and ships are protected for it protecting cargo will also offer vessel ships is based protection in the issues as drug on that suchservice the following: Gulf of Guinea. dangers and difficultiesIndividual Despite the prevalence ISN develops safety of maritime piracy As » A prerequisite of physical and represent. off the Nigerian security constowaways and of for cepts smuggling and carriage coast and in the technical security ship owners worldwide. wider Gulf of Guinea, measures, individual services piracy in this region including razor by: isolatedOur Published morefrom wire, physical move into ever range tends to receive offshore installationsconsulting merely less protection public attention via on-board audits of sensitive areas than in the Horn up and to the the physical barriers and of operative installations Africa and the Gulf of those deployment environments, security to prevent access of armed escorts. of Aden. The growOur security personnel, ing frequency of through gangways. attacks and the being consideration, prime former a is higher them of special » The number of insurance premiums personnel that man members security personnel police or military for shipping units, have many rigorous. deployed on any given ship depends Gulf of Guinea led us to extend ourin the yearsmore ever of professional is becoming while port security experience offer of services to vessels on the ship’smaritime media ltd and are especially size and calling at ports in obstacles trained for maritime security the Niger Delta. obstructing view diary house thefrom assignments. the bridge to We can provide ensure Meeting our clients’ Street the any given following: needs by providInternational entire that, atrickett time, the Security Maritime » Highly ing the highest SW6 1ru In this new publication experienced, trained ship andlondon its surroundings standards is our and are main tasks as one of uK security Germany’s pioneers some of these issues andin full view of the further team. be looking to explore weForwill in maritime security. tel: +44 (0) 20 7386 6100 here ‘flag information visit: shoulend of ensuring the Fax: +44 (0) 20 7381 8890 the sharp d follow www.isn.eu.c that areoffat the talk to people om Horn of Africa trade’, the e-mail: inbox@mar-media.com that trade instab a physical,recent spate www.maritimesecurityinternational. from(HOA) whether can contin ilityplayers, industry safety of all safeg and of piracy ue irresp has shatte uard sea the intern red net ective hijackings. ationa lanes. of a coastany belief l comm legal or technical perspective. clear cause this compa unity al nowhere has strug state’s for conce red to 25 incide is the gled rn. prevalent lack of nts for to any coher the whole than in Ship-o provide wners the gulf ent mariti of 2011 highly of guine the “smas are under gives prized a clear security standa Security a (gog) meInternational Maritime resour h Summer need2012 bly anxiou strategy and for traumatic.t and grab” ces to formu counte a region s, their more robbery late and to the intern here are r the rise crews continuing crimin ational agree far more many 15:41 is violent, Contact details of mariti al activit Picture 21/08/2012 to contributory pernic me crimin upon a compr Community, y in the years, ious and so, where there it is curiou its gulf, ehensive al activit factors extrem and free origins lie onsho but just like y affect s that affecting approach is piracy a state ing the occurr access the mariti ely to re where off of equilib ences area. vessels to me povert area and east Africa. of piracy offshore. weapons give rium has y, unem Attack in over cause come was stated a recent report s for 2012 to launch ployment, corrup the Logo are down about in counte As witnes attack reporting that “overall, by the intern s on comm tion in the ring ationa 177 incide indian consensus sed in the indian ercial incidents Centre (PrC) nts were l maritime burea ocean in the ocean betwe for appro reported en affect first six , it is the corres u (imb) the direct ach in a supre month maint ed pondin or navies s of 2012, to the imb Piracyit me challe g period in frustra for the imb have made aining mariti nations towar nge to compa in 2011. said, “the ting the Caption area the ds a red to gain an impac me security. presen compr pirates.

266 naval action ” Potengal size of to ce. t, but ehensive challenge there the mukun they can’t their credit s play hardening the effective is no dan, of maint indian ocean an essen deploy be everyw , internationa alternative and, short. , aining ment of Maritime tial role in partic Security Armed Conve l here and maritime the private to their bestInternation Secur ular, the sector to enforc rsely, across manag continued security numbers.” ity Person al Summer has risen in an the gulf e some where 2012 nel (PCAS increased use ement Practi waters to 4 ces, of P), has with varyin maritime securi of guinea, there the public sector the also contri Privately Contra ship nigerian g are 10 ty of their falls the shippi cted buted maritime public sector nation to the s trying ng indust with the capability. economic Admin ocean falling and territo istration ry is enjoyi statutory whilst coasta and SafetyFor example, experi respon rial ng some side of l water sibility 21/08/2012 in nigeri the contin encing the Agenc semblance s, is nudgin y (nimA15:41 a, the surge on the g the proble working reasonof providing of norma of a simila SA), tasked increase, ent.maritim securi nation lity in e crimin m furthe ably well ty on with 32 ’s water one al activit r problem on the nation r offsho in the incidents s, such maintain re and y in the the other littora ’s as benin reported safe sea . the internin some cases l, but simply so far for gulf of guine capacity lanes a is 2012, into buildin has ationa borde including provided g projec vessels, l comm ring ts such but until five unity, welcome keen to offshore as the the incent force gener assistance is puniti towards ve at best. ives to put to ation of Maritim MSI book.ind sea is addressed, coast guard b 8 e Security any measu Internatio re .co.uk

in China, one question is As the FFA market continues to develop to participate in FFAs stay on whether Chinese businesses that want companies – or go offshore shore and make their trade with local

Our new publication gives you the latest information on movement of cargo

IN BRIEF...

ent

EASTERN PROMISE

STAy AHEAD OF THE PACK

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Corpor ate Pro

Comm

18

CHINA FOCUS

1

WELCOME

spring

gal internation Scrappin

of security

selected (European) personnel » Regular intelligence and piracy reports » Vessel hardening to prevent hostile boarding

Flag fo

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.

2013

Emissions

4

poster of a Since that symposium, with its memorable things have pirate brandishing an AK 47, took place, activity moved on and the recent upsurge of pirate signs of off the coast of Africa, which is showing no n a divided market, vessels andmaking the difabating, ensuring the safety of crews, ference is of the utmost importance – something ISN fully understands. cargo has never been so important.

2013

al

on internati

2013

13

11:46

15:41

www.mar-media.com Autumn 2013

51

EVENTS 30 September – 2 October 2013

Seatrade Middle East Workboats & Offshore Marines, Abu Dhabi www.middleeastworkboats.com

1 - 2 October 2013

The 8th Annual EU Iron Ore Conference, Paris www.informa.com.au

Event date 2-3 October 2013

Offshore Patrol and Security Asia PacificKuala Lumpur www.ops-asia-pacific.com

8-9 October 2013

Shortsea-Euro, Hamburg www.navigateevents.com

8-10 October 2013 INMEX India 2013 www.inmexindia.com

28-29 October

ME Ship Tech 2013, Dubai www.iirme.com

28-31 October 2013 LNG Bunkering Korea www.lngbunkeringkorea.com

5 – 8 November 2013

Europort 2013, Rotterdam www.europort.nl

11 - 12 November 2013

Americas Iron Ore Conference, Windsor Atlantica

www.immevents.com/mining-conference/americas-iron-ore-conference

11-12 November 2013

Offshore Security – Oil and Gas - Nigeria Summit Please contact at enquiries@nispana.com for more enquiries

11-13 November 2013

Bunker Management School seminar 2013, Bonhill House, London, UK www.lloydsmaritimeacademy.com

13-14 November 2013

Transport Security Expo, London Olympia www.transec.com

14-15 November 2013

Management of Air Emissions from Shipping Seminar, London www.lloydsmaritimeacademy.com

18-21 November 2013

Offshore Marine Indonesia 2013, Jakarta, Indonesia www.offshoremarineindonesia.com

26 November 2013

TURKISH MARITIME FORUM 2013 www.turkishmaritimeforum.com

26-29 November 2013 LNG Shipping, Singapore www.lngshippingasia.com

27-28 November 2013 FSRU, Singapore

www.fsruconference.com

3-4 December 2013

Management of Ships’ Waste Seminar, London /www.lloydsmaritimeacademy.com

3-6 December 2013

Marintec China 2013, Shanghai www.marintecchina.com

11 - 12 March 2014

Global Iron Ore, Pan Pacific Perth

www.immevents.com/mining-conference/global-iron-ore

52

Autumn 2013

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