Freight Focus - Spring 2013 by Maritime Media

freightfocus.org

SpRIng 2013

on the RISe

chInaâ&#x20AC;&#x2122;S ffa maRKet contInueS to develop

envIRonmental RegulatIon on the IncReaSe

StRong gRowth In IRon oRe maRKet

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PRIDE

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WELCOME RISK In adveRSIty FFAs are a means of managing risk during tough times

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

.co.uk

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Welcome to Freight Focus, a new publication that looks at all aspects of the movement of cargo. Over 90% of the worldâ&#x20AC;&#x2122;s goods are carried by sea. The movement of freight around the world is the lifeblood of shipping and, in a time of economic turmoil worldwide, freight rates in the shipping industry have reached new lows. Managing that risk has been a key component for shipping companies and traders alike. In recent years, the traditional physical movement of goods from port to port, with all that entails in terms of insurance, ship operations, manning and crewing, safety and security, has been joined by a new concept, that of the paper trade. Involvement in freight trading is no longer just a physical exercise, but an electronic transaction, which manages and hedges risk through forward freight agreements. At a time of economic uncertainty, risk management and forecasting have become even more important. The key to good risk management is due diligence and knowing your client. Deals in the past may have been done on a handshake, but no company trading in the current climate can afford not to have the most critical and complete financial information available on customers and suppliers. Financial information is key to a successful business, thus ensuring the company is as risk averse as possible in a volatile market. The FFA market has itself evolved over time, with most transactions now being cleared to ensure a greater level of market security. Freight Focus, launched by Maritime Media, examines all areas of cargo movement, particularly from a financial point of view, which includes all participants in the trade that can affect the bottom-line. These include owners, traders, brokers, charterers, port and harbour authorities and, in particular, banks, hedge funds and investors. With banking finance tight, alternative sources of finance for the industry are essential. This publication will also consider on an independent basis the different trading systems that are currently available for users, including their strengths and weaknesses, and will examine the breakthroughs in system software and technique that can place readers ahead of the pack. The seaborne transportation by tanker, bulk carrier, container ship or specialist vessel is covered, as well as multi-modal deliveries and the issues that they raise, not least from a regulatory point of view. We hope you enjoy this first edition â&#x20AC;&#x201C; and please get in touch to tell us what you think. n

With banking finance tight, alternative sources of finance for the industry are essential

Maritime Media Ltd Suite 24/25, 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

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CONTENTS

WELCOME

RISK In adveRSIty

eaSteRn pRomISe

FFAs are a means of managing risk during tough times

NEWS

CHINA FOCUS As the FFA market continues to develop in China, one question is whether Chinese businesses that want to participate in FFAs stay on shore and make their trade with local companies â&#x20AC;&#x201C; or go offshore

In BRIef...

COMMODITIES

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

full Steam ahead

Strong growth in the iron ore market looks set to continue in the Asia Pacific region, with a surge in Chinese imports during the first month of this year

INTERvIEW

foRwaRd thInKIng

Regulation and liquidity are just two of the issues on the agenda for FFA brokers going forward. Sandra Speares talks to GFI senior futures and options broker and FFABA chairman Ed Radcliffe and head of wet freight Will Leslie

INDUSTRy NEWS

Regulation of derivatives trading is becoming increasingly complex and trading platforms have to be up to date on all board moves. However, the key issue is not to be put off by the complexity of this topic and find people who can help keep things simple

caught In a Sea change

Shipping finance is facing turbulent times, says Basil M Karatzas, CEO of Karatzas Marine Advisors. So what is the way ahead for shipowners?

effIcIency In actIon

As new regulations aimed at improving the energy efficiency of international shipping take effect, what steps are shipowners taking to ensure that they are compliant with the rules?

cleaRIng a path

FINANCE

COST REDUCTION

SHIP vALUES

automated ReSponSe

Some may be sceptical about whether automated valuation works or not. Here, vesselvalue answers some of the questions about it

TRADING

allIance In actIon

The G6 Alliance is expanding its co-operation to the Asia-to-North America East Coast trade. Plus: Maersk halts loop; Hanjin expands; Suez tolls cause concern; Jamaica goes for growth

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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CONTENTS

TRANSIT

on couRSe foR SucceSS

With concerns about the quality of crews, several initiatives aim to address the issue of finding and retaining top staff, at sea and on shore

coveRIng all eventualItIeS

33 ENvIRONMENT

Slow steaming, force majeure, sanctions, insolvency and credit risk are some of the legal issues currently under the spotlight in the current market environment

With environmental regulation on the increase, there have been a number of initiatives by companies in recent times that aim to tackle some of the outstanding problems

35 PORTS

Law firms are warning the ship industry to be aware of the effects of EU regulations on sanctions against Iran. Plus: latest UAE law; wind farm consultation

confIdence on the IncReaSe

Despite difficult market conditions and an ever-increasing array of regulations to deal with, the shipping industry is showing a rise in confidence levels for the first time in years

BRImmIng wIth IdeaS

all at Sea wIth SanctIonS

RISK MANAGEMENT

In current market conditions, innovative use of technology could be key to the success or failure of a company as the industry seeks to cut costs. New environmental regulations and the impending Maritime Labour Convention will increase the pressure on owners to make the best use of technology to stay afloat

legal complIcatIonS

REGULATION

TECHNOLOGy

SolutIonS and SeRvIceS

Professional indemnity cover is just one of the issues facing the insurance industry at the moment, which is set to take a hit with claims like that from the Costa Concordia

LEGAL

talent SpottIng

As the demand for cargo shifts, so too have companiesâ&#x20AC;&#x2122; schedules, with the establishment of some new services

INSURANCE

SHIPMANAGEMENT

poRt pRogReSS

In spite of the ongoing depressed economic outlook, there are some large scale investments planned for ports around the world, with a number of ports posting impressive cargo throughput statistics

37 OFFSHORE

BuRSt of eneRgy

Oil, gas and coal are all expecting a surge in growth this year. Plus: mergers, deliveries and wind farm guidance

EvENTS

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NEWS FOCUS

contaIneR conundRum As the shipping slump continues, there are opportunities for those who are lucky to have cash in the bank, but operators are still struggling to cover their costs Shipping is in a fairly unusual state at the moment because there is growth in demand for cargo, but, at the same time there is massive over-tonnaging in the market, according to Quentin Soanes, chairman of the Baltic Exchange. Speaking at the International Salvage Union’s (ISU) associate members day conference, Soanes said that in previous slumps he had experienced, this was not the case and there had been a reduction in demand. Prospects are actually good in terms of cargo, but there has been a complete over-reaction in terms of tonnaging. From record highs in bulk carrier earnings, when Capesize bulk carriers of around 170,000 dwt could earn $200,000 a day, the figure is now closer to $5,000. Tanker owners have tended to operate much more on the spot market with less opportunity for fixing long term charters, which was not the case for dry cargo. For tankers, there has been less opportunity to hedge, whereas dry vessels could look for three to five year charter periods. Soanes expected the tanker market to make an earlier recovery than the dry cargo segment. He said the container market is different from dry cargo and tankers because it is still evolving. It was difficult to forecast how the container market is going to grow in the next 10 years because container lines sometimes displaced to rail or road. He suggested the maximum size of ships had probably been reached for the time being and that the container market had gone through a similar cycle to that of the tanker market, where ships increased in size to the extent that they eventually became untradeable because it was not possible to fill the ships cargo-wise. Ships of 8,000 teu could theoretically move a box more economically than a 12,000 teu ship, he said, and he believed that the container market would settle down in terms of size.

QuentIn SoaneS, chaIRman of the BaltIc exchange

According to Soanes., the container market was going through an evolution that the “more mature wet and dry markets had evolved to already”. As far as asset prices were concerned, he said, when there was a very high freight market, owners of second-hand ships preferred the earnings rather than selling and shipowners were forced to go to shipyards for new tonnage. The damage was not apparent for several years because the ships did not exist. However, they were being delivered into an already over-tonnaged market. At a time when there was a keen sale and purchase Capesize tonnage was changing hands at $150-160m, when a modern newbuilding would cost about $100m, so it was easy to see why owners were attracted to the idea of making a saving of $60m and ordering a new ship. As the ship got closer to delivery the price would go up, so a lot of owners got into the process of ordering ships in the expectation that they would be on-selling them before delivery, Soanes told delegates. As far as tankers were concerned, it was a similar story for vLCCs as for Capesizes, he continued, albeit “maybe not quite as dramatic”. There is a comparatively strong scrap market for vLCCs, he added. In the case of a vLCC worth $25m, he said that was broadly the tipping point to send the ship for scrap as the earning potential was poor at the moment. If the scrap market fell, the picture would change and, in terms of asset values, this was where the exposure lay because the asset value was reliant on a separate market. In terms of demand, the picture “is not that bad”, Soanes said. Bulk carrier fleet growth in any shipping slump was either solved by newbuildings being cancelled or as many as possible being scrapped. In the current dry cargo market, any ship that is 18 to 20 years’ old is probably worth recovering from the scrap value, he said. “Compared to the slumps of the 1970s and 1980s, we have still got some way to go.” At that point, tankers were being scrapped at five or six years’ old with dry cargo vessels a little better. This slump, he told the ISU, was not as dramatic as those seen in the past. Although there are companies in difficulties through financing expensive newbuildings, there are also a lot of opportunities. Compared to dry cargo ships, there is a lot more age prejudice as far as tankers are concerned, he added. In the container segment, growth is closely linked to GDP growth and “as the size of container ships has grown, scrapping cannot solve the same problems and you would need to scrap five 3,000 teu ships for one of the new generation mega container vessels hitting the water”. Freight markets are weak and owners are not making money and living off cash resources from the super cycle. There are very few banks now that are actively involved in ship finance, Soanes said, and in the past two years there have been a lot of cash calls, even for cash rich owners. He expected bankruptcies to peak this year or next, while LNG speculation is being funded by those owners with cash – and those conservative owners who didn’t get carried away in the boom times will be investing again. n

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NEWS

In BRIef... The latest industry reports, forecasts and company moves multIpuRpoSe The Multipurpose sector faces a difficult couple of years, but its longterm prospects are good, according to Drewry Maritime Research’s latest Annual Multipurpose Shipping Market Review and Forecast report. Most owners of Multipurpose ships (MPvs) were fairly upbeat at the start of 2012 and, in spite of weak freight rates, continued to be so well into the first half of the year. However, over the course of the year, the market softened further and by the year end most sectors had lost between 3 and 6% off their value for one-year period hire. Report author Susan Oatway explains: “Competition from the container sector becomes ever more aggressive in the face of their dire market conditions. We continue to see the lines marketing their vessels for project cargo and neo-bulks being stuffed in containers. And we think the situation will get worse before it gets better. However, we also believe there is a ceiling for this activity – it is relatively low – with Drewry’s container analysts forecasting an improvement for this sector in the medium term.”

the rise in general cargo trade. While the total volume predicted to make up the demand for the MPv fleet is expected to rise over the period, during 2013 and 2014 this will be very flat. It is not until after 2014 that this sector can see any real improvement in demand. Oatway adds: “Drewry’s forecast for this sector is still optimistic, for the longer term at least. The usual caveats all apply, principal among them is the global economy – another financial bubble would stop a lot of the EPC investment – and the expectations for demand. The number of new ships due to be delivered over the next few years is manageable with these demand levels, as long as owners do not decide that there is a greater need for new vessels. If shippers are honest, they must recognise that the current market conditions are not a tenable position for anyone. So if owners can weather the next two years, when competition for cargoes will remain fierce, and promote this fleet as the value-added alternative to containers, then there is a real chance that more positive results are in sight.” n

If shippers are honest, they must recognise that current market conditions are not a tenable position for anyone The other main competitor for MPv cargoes is the Handy bulk carrier – particularly Handysizes of 10-30,000 dwt – and they are experiencing something of a comeback. The fleet is well under control and minor bulk demand is growing steadily. As such, the outlook for this sector is very positive in terms of demand for the available vessels, which should keep those same vessels away from the MPv market. The steadily rising demand for minor bulks, plus the low growth in the Handy fleet, also means there should be more of this market available to the multipurpose fleet. Indeed, MPv volumes for this sector are expected to grow at around 7% a year up to 2017. The final bit of the jigsaw is the market share of general and project cargo. At this level the MPv ship faces competition from ro-ro carriers (as well as containers). Market share in this sector has been relatively steady over recent years and, although expected to dip here, too, to 2014, should pick back up relatively quickly to the end of the forecast period. MPv volumes here are expected to grow at an average annual rate of about 3% over the forecasted period to 2017. Drewry’s report states that MPv market share continued to rise over 2012 as non-containerised cargo volumes benefited from

Spring 2013

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THE SHIPPING EVENT IN CHINA IN ITS OWN LEAGUE DON’T TAKE OUR WORD FOR IT “I found it very well organised. Congratulations.” Pietro Allevato, General Manager – Shipping Vale “This was the best conference I’ve been to in a long time.” Tim Huxley, CEO Wah Kwong Maritime Transport “I think the conference has been very interesting, the mix of speakers/panelists absolutely spot-on, and networking extremely productive.” Giosuè Vezzuto, General Manager, Asia RINA

“Congrats on a magnificent job done; your event is in a separate league compared to all the others.” Geir Sviggum, Partner Wikborg Rein “It was a thoroughly enjoyable experience as well as extremely beneficial from a business standpoint.” Martin Rowe, Managing Director Clarksons China

Visit www.tradewindsevents.com to find out what is on the agenda this year. Confirmed sponsors

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NEWS dRy BulK A decline in demand for Capesize vessels has been countered by an improvement in demand for Panamax vessels, according to the latest Drewry Maritime Research’s latest Dry Bulk Insight. This left the Drewry Hire Index unchanged from January’s level. Panamax was the sole segment to record an improvement in earnings in February. Rates for vessels doing round voyages from Far East to East Australia more than doubled, rising from $3,954pd to $6,818. Weather-led disruptions in transport have affected Australian coal exports and there was a 19% decline in coal exports from the four major ports of Queensland in January. n

tanKeRS Drewry’s latest Tanker Insight report saw the Drewry Tanker Earnings Index suffer a further decline in February. Weak demand hammered freight rates on major routes, especially for the larger vessel segments. The impact of weak rates was amplified by high bunker prices, which, for some operators, again translated into negative earnings. Drewry’s Earnings Index for dirty tankers plunged by 66% to 14.2 during the month. This pulled the wider Tanker Earnings Index down by 52%. n

maRIne tRendS RepoRt Lloyd’s Register, Qinetiq and Strathclyde University have released Global Marine Trends 2030, a report based on two years of research into the future of the maritime industries. The report indicates that 2030 could usher in a world where China would own a quarter of the merchant fleet. In addition, almost half of offshore oil will be taken from the deepest waters and there will be100 times as many offshore wind platforms. The tanker fleet will grow the slowest of all the major ship types and the number of containerships with a capacity that exceed 7,600 teu will grow three times faster than those below that threshold. The GMT 2030 team used three scenarios to model the future. These scenarios, using three key drivers – population growth, economic development and demand for resources – describe what maritime trade, sea power and the offshore energy sectors could look like in 2030. The three scenarios are, first, the world will continue its current growth momentum with some booms and busts over the next 20 years. Second, there will be a shift to concern over resource limitation and environmental degradation will see a desire for a more sustainable world being developed and fairness in wealth distribution. Governments will find common ground and accelerated economic growth, within a framework of sustainable development, which will follow.

lng LNG shipping enjoyed a dream run during 2011-12, according to Drewry, owing largely to increasing tonne-mile demand and an almost stagnant fleet. Freight market prospects would be even brighter if fleet supply remains at current levels. “This will not be possible as 81 more vessels could join the fleet during 2013-15, while only 10 vessels could be considered as demolition candidates during the same time period. The fleet could grow to 430 vessels (accounting for projected demolitions) by the end of 2015, representing a rise of 20% from current levels,” says Drewry. The orderbook-to-fleet ratio was 30% at the end of February, while it was just over 8% at the end of 2010. In 26 months, fresh orders for 89 vessels aggregating 14.5 million cbm were placed. Based on liquefaction capacity addition plans in Australia and the US, the LNG shipping industry could need many more vessels in the latter half of the decade than are currently on order. A few positive developments in Africa also indicate that LNG production could rise significantly if everything goes as projected. However, the major concern for the shipowners is that not much liquefaction capacity will be added during 2013-15 when most of the new vessels are delivered, Drewry says. Japan was the single largest factor driving the market in 2012, and Drewry expects the trend to continue in 2013, as re-starting all of the nuclear facilities cannot be a hurried process. “Still, the medium-term outlook for unchartered vessels does not appear bright as approximately 40 million tonnes per annum of additional production would be required to keep these vessels employed. Unfortunately, this is not on the cards and, therefore, it appears the short-term and spot freight markets could start falling soon.” n

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NEWS The third scenario is that of competing nations, where states act in their own national interest. There will be little effort to forge agreement among governments for sustainable development and international norms. “This is a self-interest and zero-sum world with a likely rise in protectionism and slower economic growth”, the report said Richard Sadler, Lloyd’s Register’s CEO, said: “What is striking is that even in the most negative of the scenarios envisaged, maritime growth is strong. For anyone looking for a future in an important sector, they have to consider maritime: whether for employment, investment or an understanding that without seaborne trade, offshore energy and naval power, the geopolitics of tomorrow will be highly fragile and quality of life precarious. The sea and its industries are vital for our global future.” The report team also included disruptive factors that could radically alter the likelihood of the scenario results. But, barring cataclysmic change, the China factor will still be the big story in 2030. China, consuming three times-as-much oil as it does today and 60% of the world’s coal, will be the marketplace for maritime trade.

The US will, however, be the biggest consumer of natural gas and, the report indicates, in a substantial section on naval power, that American military power on the oceans will remain pre-eminent. n

caStRol conceRnS Concerns over corrosive wear risk in cross-head engines have led Castrol Marine to question the rigour of some widely used scavenge drain oil analysis (SDA ) techniques. Factors influencing scavenge drain oil characteristics include fuel sulphur level, cylinder oil BN level, system oil contamination and operating profile. Accuracy is critical in SDA interpretation, not least because it supports feed-rate assumptions that are critical to cylinder oil performance, Castrol says. “It is not possible to analyse results accurately without comprehensive knowledge of the fuel oil, the new and used system oil, feed rates and operational data collected from the engine at the time of sampling,” says Paul Harrold, Castrol Marine Technology Manager. “Our view is that there are potential shortcomings in ship-based

ShIpBuIldIng unceRtaInty Uncertainty still reigns in the global shipbuilding sector with many factors influencing either a return to ordering activity or a continuation of the reduction in interest in newbuildings, according to Mark Williams, Research Director at Braemar Seascope. Addressing delegates attending the Marine Money conference in January , he said: “The best case scenario for shipbuilders is for ship finance liquidity to return and for a cut in Chinese overcapacity. “There needs to be renewed interest in eco-designs and ships with options such as LNG or Ballast Water Treatment Systems and then possibly any increased demand will support pricing from the shipyards’ point of view,” he said. The worst case scenario is for a continuation in the global credit crunch; weak freight markets continuing to suppress newbuilding demand; input costs and forex turning against the builders; the low point in the contracting cycle extending and also more cash flow problems and failures. “Investors are unlikely to invest in new tonnage this year without a fair prospect of economic return, even if there is a short term recovery in freight markets, with many believing more needs to be done to encourage a return in confidence in the newbuilding sector,” Williams told delegates. While higher scrap prices should encourage owners to renew their fleets, the ongoing credit crunch and weak freight markets are reducing the economic life of today’s ships, which are now depreciating to scrap value in their teenage years or early twenties. Williams said that newbuilding prices tended to follow demand with input costs only providing a floor which can be broken through. “When the global shipbuilding backlog is less than about 18 months, yards tend to cut prices for competitive advantage. However, prices appear to be bottoming out. There is far too much shipbuilding capacity out there. 2012 was the peak delivery year since the mid-1970s. So it is a question of who will blink first,” he said. n

maRK wIllIamS, ReSeaRch dIRectoR at BRaemaR SeaScope

Spring 2013

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NEWS magnetic analyser-type SDA approaches because they cannot identify corrosive wear.” Cylinder wear could be assumed to be under control due to a low response on ferro-magnetic analysers where, in fact, corrosion is taking place, Harrold says.“This demands attention as evidence grows supporting our position that corrosive wear risk is going unacknowledged when cylinder oils of insufficient BN are used in slow steaming.” MAN Diesel revised guidance to its customers on mid-range BN cylinder oils at the end of 2012, recommending “cylinder lube oil with 70BN or higher” to customers for its newest Series 9 engines when running on higher sulphur fuel (above 1.5%-2%). The OEM says it “cannot recommend” cylinder oils “with a BN level between 50 and 60” for its latest engines. Suppliers promoting mid-range BNs for slow steaming have argued that Series 9 engines represent only a small part of the current fleet. However, Castrol notes that mid-range cylinder oils were initially claimed as a complete solution for all conditions. “We make no apology for renewing counselling caution on SDA methodology as the full consequences of lubricant selection when slow steaming continue to emerge,” says Harrold. “Onboard SDA does not cover the full picture on cylinder oil feed rate optimisation. Normal corrosive wear patterns generate iron compounds, which are predominantly non-magnetic and are thus not detected by onboard analysers. n

foRwaRd fReIght pRIcIng Clarkson Securities has developed ClarksonBoxClever as a forward freight pricing tool for the container shipping industry ClarksonBoxClever provides users with the following services: l Live price updates for the forward freight market l Charting of the SCFI Index and forward prices l Daily and weekly market reports, including downloadable market report history. ClarksonBoxClever virtual Trader has been developed for users of container freight to better understand the opportunities and benefits afforded to them by implementing a professional risk management strategy. It allows them to explore the tools that are now available for managing the price volatility they are exposed to in their day-today business. n

patRIcK phoon, SIngapoRe ShIppIng aSSocIatIon (SSa) pReSIdent

SIngapoRe dRIve Singapore will continue its drive to be a leading international maritime centre and will work even more closely with countries and shipping associations in the region to realise its goal of creating a unified Asian voice in the shipping industry. This was the message given by Singapore Shipping Association (SSA) President Patrick Phoon at a press conference held at the start of Singapore Maritime Week. “World shipping is moving east, that is clear, so it is important for the SSA to work more closely with other organisations in Asia to ensure the Asian message is heard internationally. The industry is going through difficult times, but we must all ensure that shipping is fit and strong when the crisis ends,” Phoon said. The need for a unified Asian voice was never more important than in the area of shipping regulation, he stressed, where it was essential that the views of Asian shipowners were heard loud and clear on issues such as piracy and armed robbery, as well as greenhouse gas emissions. Shipping’s image in Asia and internationally is crucial, which is why the SSA values its work with the Singapore Maritime Foundation, Asian Shipowners’ Forum, the Federation of ASEAN Shipowners’ Associations, the Association of Asian Class Societies and ASEAN Ports Associations, he said. Patrick Phoon chairs the ASF Safe Navigation and Environment Committee and leads very active discussions on safety, security and environmental issues to safeguard shipowners’ interests, while at the same time ensuring safe navigation of ships and the protection of the marine and atmospheric environments. Phoon added: “We strongly support the education of young people with a potential interest in shipping through a number of initiatives – including our support of the MaritimeONE initiative, the provision of scholarships by both the Association and our members and through our support for our SSA young Executives Group, which is incidentally celebrating its seventh anniversary this year. Encouraging the young to join our industry is absolutely a key objective of the SSA.” He also said: “We are trying very hard to glamourise the shipping industry to make it more ‘sexy’ to attract young people to join our shipping industry. We are achieving success in this. I am pleased to note that even young Singaporean women have taken up a seafaring career with some of them already onboard ships as deck officers and engineers.” Key to Singapore’s continued growth as an international maritime centre is the close co-operation between the SSA and the Maritime and Port Authority of Singapore (MPA). “We will continue to work in tandem with the MPA, with whom we have excellent relations, in our joint efforts to promote Singapore as a leading maritime centre,” he said. Phoon further commented: “For us in Singapore, we are fortunate that we have a government that listens closely to the shipping industry. As an island state without any resources and limited waters, we have nothing to lose but to exploit our advantages – of being blessed with a deep water harbour, strategically located at the crossroads of East and West, and in the fastest growing region in the world. n

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INTERvIEW

foRwaRd thInKIng Regulation and liquidity are just two of the issues on the agenda for FFA brokers going forward. Sandra Speares talks to GFI senior futures and options broker and FFABA chairman Ed Radcliffe and head of wet freight Will Leslie “As the implications of the Dodd Frank Act are felt across the global derivatives market, the dry FFA traders continue to seek advice as to how the European legislature will affect their trading activities when it comes into force next year” says Ed Radcliffe. “The assignation of Designated Clearing Organisation (DCO) status for London Clearing House, the introduction of block trades for example at ICE, and fungible futures contracts at SGX have all helped to alleviate concerns of a significant drop in liquidity. The Baltic Exchange has held several regulatory briefings for The Forward Freight Agreement Brokers Association (FFABA) members as well as for the wider market as both brokers and traders need to stay abreast of ongoing developments.” According to Will Leslie, the Dodd Frank Act and the CFTC rules have undoubtedly added an extra layer of complexity to the wet freight market and liquidity in the short term has suffered as a result. Uncertainty over whether certain cleared contracts are “block trades”, ie. compliant with CFTC rules, has caused confusion over clearing and screen trading has noticeably been affected. “Things are starting to settle down but it’s still going to take some time I think before the market becomes comfortable with the new rules.” While liquidity can be patchy, overall dry FFA volumes remain healthy despite the low dollar value of each forward contract. Radcliffe says. “The historically low realised volatilities have precluded some speculators, but opportunities persist for patient traders. At GFI, we focus on a hybrid model of voice and screen trading to provide full market coverage to our freight clients through our dedicated team in London, Singapore and Cape Town and our electronic trading platform EnergyMatch Europe,” Radcliffe adds. “In these times of low volatility and absolute returns, the market lends itself to certain functionalities we have developed on the screen, such as Join-the-Trade, where screen participants can react anonymously to a contract that has just traded and to screen matching where we effectively ‘auction’ specific freight contracts at a given time. Currently, GFI's EnergyMatch functions as a multi lateral trading facility (MTF), but if the regulatory environment were to force the market on to a Regulated Investment Exchange, then we would consider changing our regulatory status so as to be able to provide a ready pool of liquidity. The in-built optionality on physical freight lends itself well to the options market and we have seen decent volumes this year, most notably on the Capesize sector,” he says. “We at GFI, the FFABA and the Baltic will continue to help increase liquidity across the freight complex with ongoing developments to vessel descriptions (ie. size and speed), panellist assessments and, of course, promotion of the industry

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INTERvIEW As many observers of the tanker market will know, the crude sector is in dire straits and returns are extremely poor during the European and Asian forums, the first of which will be held in Geneva in early June.” According to Leslie, apart from the obvious challenges with Dodd Frank Act and CFTC regulations, volatility and the resulting liquidity has been a tale of crude versus clean. “As many observers of the tanker market will know, the crude sector, especially vLCCs, is in dire straits and returns are extremely poor. Liquidity in TD3 has suffered, with little prospect for spec players to make a return and poor conditions for owners and those with exposure to manage risk. The clean sector has been the antithesis with strong volumes from the beginning of the year, with both very strong MR2 and LR1 markets. Liquidity has benefited as a result and it’s encouraging to see this sector growing and new players participating.” So what can market players expect for the future? According to Radcliffe: “It is obvious that the dry freight market continues to feel the effects of the boom years during which the newbuilding orderbook exploded. 2012 was the peak delivery for the Capesize sector, while it is this year that is peak delivery for the Panamax sector. With scrapping on the increase due to the low value of each sector, there are some that see a slight recovery in the Capesize sector towards the end of this year. For Panamax, it will be longer before the supply/demand equation becomes more demand driven and less oversupplied. “The oversupply of Panamax vessels can clearly be seen by the level at which the vessels have been competing with each other to fix grain business ex ECSA at this time of the year – the 2a index only managing to reach $18,000 so far,” Radcliffe says. “With the arrival of vale’s new fleet of valemaxes and the shift in trade patterns over the past five years, the open freight market is increasingly dominated by trans-pacific trade (around 50% of seaborne trade), influenced largely by the 7.5-8.5% annual economic growth of China. It is largely this economic growth that will eventually lift the freight market out of its current gloom in the coming year or so.” According to Leslie: “There is definitely a sense on our desk at ACM/GFI that things are turning a corner in the clean sector. From the S&P market, to projects and time charters, to spot, and also FFAs, there is a new confidence, albeit fragile, that prospects are improving for this sector. The paradigm shift we are seeing in the United States as a result of the shale oil story as well as increased refining capacity in the east undoubtedly points to new and greater product flows. “However, as my research team has pointed out, there could well be some surprises for the crude oil sector as well with greater tonne mile demand being created by flows from the caribs to the east and similar flows of that nature.” n

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INDUSTRy vIEW

cleaRIng a path Regulation of derivatives trading is becoming increasingly complex and trading platforms have to be up to date on all board moves. However, the key issue is not to be put off by the complexity of this topic and find people who can help keep things simple In the aftermath of the credit crisis, regulators in both the US and EU have been pushing through new rules relating to the OTC derivatives market. Cleartrade Exchange is a regulated futures exchange offering owners, charterers, commodity houses, banks and bunker operators the ability to “come under the guise of the regulated market and trade centrally a number of contracts. We RIchaRd BaKeR, set our stall out a couple of years cleaRtRade chIef ago to be in business to offer executIve an electronic execution futures market with the ability for existing brokers in the market to participate in that platform and ultimately continue to execute OTC-cleared commodities and also operate as futures contracts under the guise of the kind of the regulatory regime changes that have been going on around the world, like Dodd Frank,” says Cleartrade chief executive Richard Baker. Cleartrade Exchange first launched a FFA contract, but quickly moved in iron ore, steel swaps, fertiliser contracts and then developed the world container index, as well as launching 11 container swaps. Towards the end of last year, the exchange launched three fuel oil contracts. “The strategy for Cleartrade from the beginning has been a many to many marketplace – the many being multiple asset classes: we have 43 contracts across six asset classes – with the ability to electronically trade those contracts into three clearing houses that are all electronically connected to our trading platform,” says Baker. These include London Clearing House, SGX and NOS. Regulation has happened “a year later than we anticipated” Baker says. From 12 October 2012, rules that were being talked about under Dodd Frank and the CFTC came into force. “Hysteria and panic” reigned, with some US shipping companies ceasing trading certain markets because they could not access fuel oil contracts or tanker FFA and dry bulk contracts because they had not registered themselves as swap participants, or the brokers they were dealing with were not registered, Baker explains. “There was quite a bit of turmoil in the market at the tail end of 2012 and that has continued into this year. Cleartrade is very much at the heart of the global transformation, but equally is very well placed to help those customers, whether they be US, Europe or Asia-based, to get access to many of those contracts that have been previously traded off exchange and have been done OTC cleared”. Cleartrade has also been able to help customers go through the regulatory hoops, Baker says. “We have brought them to regulatory discussions with our own lawyers and helped them navigate the world of the National Futures Association and the CFTC in the US.” From 12 October, swaps were defined under the Dodd Frank legislation and the CFTC is responsible for governance of spot trading. A swap participant, for example a trader or end user, was defined. Governance was also set out regarding introducing brokers and clearing houses. “With that

came a change in structure for general clearing members of the market,” Baker says. London Clearing House is a registered clearing house in the US under Dodd Frank, but NOS Clearing and SGX are not. This has created quite a lot of disruption in the world of tanker freight, container freight, fuel oil trading and dry bulk. Because of liquidity issues, there are certain companies that cannot trade at the moment and that has an impact on clearing houses, Baker explains. There has been a “swing around” as to where volumes and open interests are being cleared, he says. The whole issue of clarity as to who is a ‘US person’ under the rules is a key factor. Baker gives as an example hedge funds in London marketing spot contracts to a US entity. Even the fact that the investment product has been marketed in the US means it falls under the Dodd Frank Act. “No matter where you are in the world, if you are a hedge fund or an investment broker and you are dealing with these instruments as a future or a swap, you are going to get caught under Dodd Frank.” There is also certain governance surrounding transactions involving a counter-party who is a US person. The impact of all of this has been severe, but Baker says that the good news for Cleartrade is it took the time to get registered as a futures exchange and run OTC contracts as futures contracts. “That basically gives participants in the market access to those contracts in a regulated capacity and for ongoing hedging of their risk”. Cleartrade has made the regulatory moves to be able to clear transactions through LCH, NOS and SGX and, in due course, CME. The exchange is also registered with the CFTC and around the world with other regimes. “We are one of the few exchanges that US persons can actually register with.” Many in the market in early 2012 felt that this regulation would not happen, he says. The CFTC had taken on a very high workload, but “like a good old futures instrument, all of a sudden on 12 October it settled”. Many of the rules have come in with exemptions or no action letters, so there are currently no action letters in place giving people coverage until 30 June, 2013. There are various exemptions around who has to report margin rules and limits associated to margins to allow the industry to get itself ready. Baker expects to see a second phase of the process in June this year when the no-action filings disappear and a second set of rules comes into the market. There are still areas like rules around swap execution facilities that have not been fully publicised and will only finally appear in June this year. The role of a compliance officer or head of risk in a business has changed, Baker believes. “They are mission-critical these days as the market evolves forward.” Organisations need to ensure that they have people reading the notices that are put out on a regular basis “and can have some form of road map for the business”. Regulators are aware that not everything has fallen at the right time and are flexible if they see that businesses are taking the right steps, he says. “The role of compliance is a hot area”. US aside, the impact of European regulatory requirements, as outlined in initiatives like the European Markets Infrastructure Regulation and the Markets in Financial Instruments Directive have yet to be felt and are likely to be, at the earliest, around the second half of next year. “Realistically, I think it will be the first half of 2015,” Baker believes. There have been moves to co-ordinate regulatory measures in the US with what is going on in Europe, and co-ordination under the G20 umbrella has helped with this. “We can see a common set of objectives at G20 level.

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INDUSTRy vIEW They are all commonly aligned around mandatory clearing of a derivative and the reporting of all derivatives and the rules associated with margins and risk management in a trade are very similar.” While there may be timing differences as far as trading derivatives is concerned, there are common objectives between the US and EU rules. “Derivatives will come off just being telephone trades – they will have to have some form of price transparency to the market and they will need to be executed on exchange. MiFed uses exactly the same language as Dodd Frank, but you have an unfortunate two year gap as to when those rules will fall.” Regulation aside, there is obviously a commercial business to run, and Baker says that Cleartrade needs to demonstrate that it has invested in building the right instruments and has the right kind of forward contracts and interesting pricing structures. Cleartrade has over 30 members active in the market and this year is about growing the exchanges position, he says. Iron ore, bunker fuel and FFAs are the primary asset classes for the year, he says, being the most volatile and having the most propensity to grow, beside being interlocked with the industry’s need to risk manage and hedge. Expanding the list of instruments is always under consideration although getting approval for a brand new contract could take months to clear with the regulators. Areas to watch include the bunker situation, LNG and the development of hybrid vessels, he says. Although LNG is on the Exchange’s road map, a listing is not urgent. Cleartrade announced the listing of three fuel oil, single swap contracts, which allow bunker traders and users to executive swaps of as little as one tonne of fuel oil via its trading platform last year. The initiative was an immediate success because it meant that operators didn’t have to bulk up orders, Baker says.

The Exchange hopes to double its trading members this year, he adds. There are about 340 companies registered with SGX for clearing iron ore, yet only 16 are actively trading the market at the moment. This means more education and training to get other participants in. Some clients hesitate to come in because they can’t see the actual size of the market because they are going through a number of brokers, he says. “Price discovery is very difficult if you are coming through fragmented channels to one commodity. If one needs to phone five to 10 brokers to see where the market range lies for certain houses that makes it quite a difficult process.” Cleartrade is obviously trying to offer a central market with brokers involved as well as market participants. “you are concentrating liquidity and making price discovery easier. When you hit that tipping point is when you can bring in a broader audience.” Agility is an important factor in these markets, he adds. Talking to some of the very large futures exchanges, Baker says that one challenge they face is that even when they take a brand new instrument to list, their technology infrastructure is very complex and they have many third parties to deal with, so at the moment, if they want to want to launch a new product it could take nine to 12 months to get it deployed properly. One point Baker is keen to stress is that he does not want to see shipping and commodities players in a state of confusion about how to access products and markets. “While all this is happening, we must made it simple and help them navigate doing business. There is far too much rhetoric out there and too many customers are worried about what they do now. Many shipping companies and, for example, mining companies could be worried about the supply chain risk, he says, and don’t naturally think of the futures and derivatives market as a way of managing that risk. With the new regulations coming in, it is a question of embracing the situation, understanding it and finding people who can help you,” he says. n

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FINANCE

caught In a Sea change Shipping finance is facing turbulent times, says Basil M Karatzas, CEO of Karatzas Marine Advisors. So what is the way ahead for shipowners? The traditional form of financing the acquisition of vessels has been through first preferred ship mortgages where the shipowner contributes 20-30% equity and the lender provides the balance of the purchase price in the form of a loan secured with an asset as a collateral. variations on the theme have been utilised for the changing times and accommodating the circumstances, for example the extent of equity required, the “spread” on the interest charged, the strength of the loan covenants demanded and whether fixed contract employment was required as an additional security for the loan. Obviously, a great deal of emphasis was placed on trust and the prior track record on performing on loans by the debtor. At the top of the market in 2007, about $130bn of new loans in shipping and offshore were originated according to Marine Money (see graph 1). It is estimated that by the end of 2007, the bank loans in shipping and offshore were standing at approximately $480bn, implying $120bn invested in the industry in the form of equity, with $25bn of the equity invested in shipping in 2007 though the capital markets. All in all, no small numbers by any measure, but to put it into perspective, in August 2012, Apple, as the most valuable company in the world then, stood at about $630bn, and presently at about $380bn. The maritime market is big business, but it seems Its importance Is never “big enough to matter” – unless there are noticeable shortages of merchandise on supermarket shelves or fuel at the petrol station. Anyone who has even casually been perusing the newspaper headlines since 2007 can attest to the fact that there has been a sea change in many markets and realms, with the banking and the shipping industries not the least affected the course of events. In banking, several of the shipping banks that mattered in 2007 are now owned and controlled by the state and several smaller players have declared bankruptcy or been forced to be absorbed by other financial institutions in order to avoid bankruptcy. In shipping, as a matter of perspective, the Baltic Exchange Dry Index (BDI), the proxy for the shipping market, topped on 20 May 2008 at 11,793 points and bottomed on February 3rd, 2012 at 647 points, with a present value of 760. In more realistic terms, freight rates for vLCCs have collapsed from about $200,000 pd to even negative rates (when properly calculated at cruising speed) and for capesize vessels from $200,000 plus pd to as low as $4,000 pd; vessel

prices have been halved in most cases since the top of the market (see graph 2). The sea change produced by the tectonic shift of market, fiscal, monetary and political shifts has been having a tremendous impact on shipping and shipping finance. Anyone in shipping who has had a casual discussion with a shipping banker recently can attest that banks rarely lend any more and when they do – as infrequent as this may be – the terms of the loans have no relevance to the pre-Lehman days. On average, loan amounts are smaller in absolute terms and lower in relative terms to value of the asset,

covenants are featured prominently and the basic “four Cs of lending” are back in vogue (Capacity to borrow, Credit, Collateral, Character.) In 2013, preliminary tabulation of data suggests that bank loans barely topped $40bn in both shipping and offshore (compared with $130bn in 2007), and about another $40bn in equity was raised in the capital markets (compared with $15bn in 2007), implying a much lower tolerance for financial leverage. For a capital intense industry like shipping, the lack of debt financing poses questions of strategic importance to many a shipowner.

gRaph 1

gRaph 2

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FINANCE Their fleet may be getting depreciated and technologically obsolete and thus in need of replacement sooner or later, while they cannot access financing in order to exploit the present weakness of asset pricing in both the secondhand and newbuilding markets. Given that banks worldwide have been shifting to more risk-averse investments and industries in an even more accommodating monetary environment and also the fact that gradually shipping is perceived as a risky industry that needs to be properly priced, under the impending new rules and regulations, such as Basel III rules, the message in the bottle travelling the ocean is fairly clear: debt finance in the future will be much more limited (as a result of banks shifting away from shipping); it will be more expensive (to compensate for properly priced industry risk or beta); and the borrowers that will have higher priority accessing it will be companies that have their four C’s in straight order, more easily represented in a consolidated corporate balance sheet.

Partners from complementary industries can be a strong arm to hold on to when times are bad and grow with when times get better In our experience as shipping finance advisors, we have seen just too many good, old-fashioned shipowners that founded their shipowning firms several decades ago and presently stand with a strong capital base with excess working capital and cash on the sidelines and modern fleets with reasonable cost bases and sustainable leverage, but in a clear bind in accessing their usual sources of debt financing, including the shipping banks that had been financing their fleets since their corporate inception. As painful and frustrating the experience can be, especially since it is the result of no fault by the owner, it’s a moment of strategic inflection and decision-making about the capital structure of shipowning. Well-informed market players believe that going forward, the traditional model

of 20-30% equity from the private owner and the 70-80% asset-backed lending from the traditional lenders is not a viable model any more, with a strong probability that it may never again be a sustainable model. When shipping bankers, in private admit that their cost of capital has to be in the region of 600 basis points for the banks to justify the new loans under the new regulations, it can logically be assumed that traditional lending in shipping will never be what it used to. The distribution of vessel ownership is heavily skewed with a long tail – meaning that despite the few major shipping tycoons we all have heard about, vessel ownership is dominated by a long list of shipowners with their individual ownership limited to a handful of vessels each. Although small owners have collectively comprise a very competent core of shipping market participants, this may be the type of the owner who is likely to be affected most adversely by the present shifts in shipping financing and in most need of using the present crisis as their inflection point. As the traditional lenders have been walking away from the industry, their limited lending or investing capacity will be reserved for the owners that have critical mass, strong balance sheets and core competencies; shipowners who will be able to sustain more competently strong waves of a bad market and will not be in trouble with the first local storm. And again, it’s never too late to start thinking that shipping financing is not necessarily limited to traditional debt financing that worked well 20 years ago (and conspicuously too well in 2007 and 2008 with 90% leverage and 100 basis points over LIBOR.) While major shipowners

have access to more sophisticated financing and they are on the radar of investment banks and financiers, the present crisis is an optimal time for smaller owners to think outside the box in order to access alternative forms of financing. What the smaller owners lack in shipping finance expertise they can make up on flexibility and agility, possibly at making the right, strategic partnerships with companies in other industries to whom they can offer a solution through their shipping expertise. These partners can optimally be in industries outside shipping, but complementary needs. Despite the weakness of trade, commodities have always been moved around as well as finished products. And, despite the risk aversion of the banks for shipping, there are alternative sources of capital that have a strong interest in entering shipping. Partners from complementary industries cannot offer a panacea to shipping’s present problems and they are likely to want to address their own mandates, whether that’s transport of cargo or elevated returns on investment, but they can be a strong arm to hold on to when times are bad and grow with when times get better. After all, an estimated 4.2 billion tonnes of dry bulk was transported over the oceans in 2012, representing an approximate increase of 6.1% year-over-year, and more than $11bn committed to shipping by private equity funds between 2008 and 2012, despite the 57% drop in the BDI in 2012. As they say, a crisis is a terrible thing to waste. n Tel: +1 713 545 5990 Email: info@BMKaratzas.com

BaSIl m KaRatzaS, ceo of KaRatzaS maRIne advISoRS & co.

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CHINA

eaSteRn pRomISe As the FFA market continues to develop in China, one question is whether Chinese businesses that want to participate in FFAs stay on shore and make their trade with local companies or go offshore Where the money will want to go? The problem in dealing in mainland China is changes in the legal process. Some of the Chinese trading houses have had difficulties in this respect. Derivative transactions coming from abroad, preferably from a low tax environment or offshore domicile could prove more attractive. However, the sheer volume of potential trades given the Chinese population has to be taken into consideration, analysts say. The Shanghai Shipping Exchange container contracts trade in huge volumes. China’s foreign trade continues to surge, rising 26.7% year on year to 2.17 trillion yuan in January, according to data from the General Administration of Customs. Exports increased 25% in January, compared to the previous year’s figures, Imports rose 28.8 %.

China has been a very large consumer of many of the underlying commodities that Cleartrade Exchange has been dealing with, according to chief executive Richard Baker, in particular as far as iron ore is concerned. A good many time charter contracts have involved shipments of coal and iron ore to China, he says. The change in government last year is expected to herald broader changes in the coming years, with the broadening of the use of RMB-traded contracts and of derivatives use, he says. “We’ve seen recently Shanghai Shipping Exchange announcing the RMB settled freight index competing with the Baltic Exchange and the emergence of the Shanghai Clearing House offering the Cape 4TC and the Panamax 4TC as an RMB settled cash contract. We can see in the shipping sector there is RMB denominated contract trading and clearing beginning to appear and we want to be an international organisation linked to the development of that liquidity.”

Both iron ore and freight are seeing growth in the Pacific region. New customers are coming on virtually a daily basis

chIna IS a veRy laRge conSumeR of many of the undeRlyIng commodItIeS cleaRtRade exchange dealS wIth

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CHINA Similar developments have been taking place, for example, with the China Beijing International Mining Exchange formation – the first Chinese physical market for iron ore trading. Baker says that the exchange anticipates that there may be a new iron ore spot index that reflects both domestic and international inbound volumes to China “This may lead to the development of a new set of derivatives,” he says. According to China Beijing International Mining Exchange, since the May 8, 2012 opening of the China Iron Ore Spot Trading Platform up to Feb 1, 2013, 1223 orders totalling 102.28 million mt were placed via the Platform, consisting of 290 bid orders of 35.75 million mt and 933 ask orders of 66.53 million mt. a total of 69 transactions of 7.97 million mt were made amounted to USD 974.38 million and CNy 372.56 million. Richard Baker says Cleartrade wants to try to find the right joint venture partner in China. “That ultimately is the ideal model, but in the interim we have been working at developing the right kind of strategic alliances so that when Chinese traders set up offshore entities either in Hong Kong and Singapore they feel comfortable trading through our business when they want to access the cash settled futures contracts. We have seen a good degree of that last year, so we put a partnership in place with a firm called CU Steel and we created the Cleartrade China Steel Index, which is a daily quote on the Chinese rebar HRC contracts. The issue is allowing international clients to access what has been up until now a RMB futures contract settled on the Shanghai futures exchange. These initiatives are part of the opening up of China as derivatives come back into play, new indices appear and clearing and trading materialise, he says. “We can see strong evidence of that, but in the short term it allows external Chinese entities that are registered offshore businesses to be able to trade and access the market. Cleartrade has developed a Chinese language platform so it can intercept some of that liquidity that is appearing.” State-owned enterprises in China are not allowed to touch derivative contracts. Private enterprises or offshore companies can trade. Cleartrade sees a high demand for electronic trading going forward so a Chinese language platform is important. It worked with an individual software vendor partner who already head a Chinese language futures platform connected to the Shanghai Futures Exchange which was giving access to some of the futures contracts being traded. “It made logical sense that we become a second exchange on that technology into an existing customer base where they could trade Singapore iron ore and steel contracts. That immediately created opportunities because it was possible to trade the difference chIna’S foReIgn tRade contInueS to SuRge

between the Shanghai futures contract and the Cleartrade contract in Singapore,” says Baker. This product is still being developed and will go live in the first quarter of this year, Baker says. Duncan Dunn, senior director of freight futures at shipbrokers Simpson Spence and young (SSy) says the company is committed to the continuing development of the FFA market. “We have six brokers in SSy in Singapore and we are seeing busy growth from Chinese-speaking customers particularly in the iron ore market. Iron ore swaps is the growth part of our business at the moment, but both iron ore and freight are seeing growth in the Pacific region. New customers are coming on a daily basis. It is encouraging that as well as smaller traders and other organisations that always tend to be a bit nimble in a growing market, we now have some good large participants coming to us.” China imported 65.5Mt of iron ore in January, which marks a decline of 5.4Mt from December. SSy in Shanghai is one of the local brokers in China working with the Shanghai Clearing House to develop an RMB-denominated domestic FFA market. “We have transacted the first of these late last year and we are working on developing that market. We are very relaxed about which side of this market develops, whether we have a domestic market developing in China in RMB or an international market where we are represented in Singapore. We are excited about both,” he says. He does not anticipate a conflict between domestic and international markets . “If the RMB market does take off, then there will be good opportunities for trading between the two.” The official launch ceremony Forward Freight Agreement (FFA) contracts priced in RMB took place recently. In a ceremony hosted by the Shanghai Clearing House (SCH) and attended by dignitaries from the Shanghai Government, the Baltic Exchange, the People’s Bank of China and Shanghai Pudong Development Bank, the contracts were officially released for full scale trading, opening a new era in freight risk management. Speaking at the ceremony FIS Managing Director John noted the auspicious timing of the contract launch and Shanghai’s unique position in this new market. “This ceremony take place in the Chinese year of the Snake, which is a year that favours earth, metal and water; perfect for dry bulk commodities,” he said. “Shanghai is a major gateway from the rest of the world into China for dry bulk cargo as well as tankers and containers. That makes Shanghai the ideal home for the RMB FFA, which will act as an entry point for China to enter into the global FFA market,” he said. FIS has spent the last 12 months working with SCH to foster the launch of the RMBdenominated dry freight derivatives contract, based on Baltic Exchange indices. With annual imports of dry bulk commodities equivalent to 44% of seaborne trade, Chinese exposure to freight rate volatility makes it ideally placed to hedge risk using cleared cash-settled swaps. However, until recently currency controls have made Chinese participation in dollar-denominated markets almost impossible with privately-held Chinese companies wishing to trade FFAs doing so via overseas offices and foreign currency accounts. With the launch of the RMB contract, the market is set to grow rapidly. n

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COMMODITIES

full Steam ahead Strong growth in the iron ore market looks set to continue in the Asia Pacific region, with a surge in Chinese imports during the first month of this year Iron ore swaps are a seeing a surge, with organisations such as shipbrokers Simpson Spence and young saying that they have 10 people working on this area alone. In announcing its January statistics, the Singapore Exchange said the volume of commodity swaps cleared grew 59% year-on-year and 75% month-on-month to 38,644 contracts. The volume of iron ore swaps cleared quadrupled year-on-year to 33,851 contracts. This was 78% higher month-on-month. According to Rio Tinto, in its fourth quarter results record global iron ore shipments were achieved in 2012, despite disruption due to weather conditions and maintenance shutdowns during the course of the year. Global iron ore production for the full year was 253 million tonnes, of which Rio Tinto’s share was 199 million tonnes, 4% higher than 2011. Pilbara iron ore production of 239 million tonnes with Rio Tinto’s share at 191 million tonnes set another annual record, 4% higher than in 2011, the company said. Meanwhile, Brazilian mining giant vale also announced good figures for the fourth quarter, with iron ore production reaching 85.5 Mt, allowing for a larger exposure to the price rally of the final months of last year, the company said. This was the first time since 2003 that the performance in a fourth quarter was better than in the third quarter, being 1.9% higher. Two factors were instrumental to this achievement, the company said: first, the operation of the N5 South mine in Carajás contributed not only to the output increase, but to better quality and lower costs; second, there was below normal rainfall during the quarter. “2012 was a challenging year in view of the adverse weather conditions that affected iron ore production in Brazil in the first quarter, and the stoppages of Sudbury, Carborough Downs, vNC and Onça Puma caused by safety and operational problems. With the exception of Onça Puma, all of them returned to operation. The second half of this year will see two iron ore projects will come on stream: Carajás Additional 40 Mtpy and Conceição Itabiritos, which will contribute to the enhancement of our iron ore operations, through production increases, higher average Fe grade and lower costs. These effects on our performance will be material from 2014 onwards, the company said. vale also made its first iron ore shipment to ArcelorMittal using a valemax vessel discharged at the port of Rotterdam. The Berge Jaya, chartered by vale, is the world's largest ore carrier, with a capacity to transport up to 400,000 tons of iron ore and allows for 35% less carbon emission per ton of ore transported compared to earlier generation ships. “By the end of 2013, there will be a total of 35 similar vessels available to transport vale's iron ore – 19 owned by vale and 16 chartered from international shipowners, the company said. n

noS cleaRIng NOS Clearing launched clearing for iron ore futures and option contracts last year. The contract launched by NOS for iron ore is CFR

China, 62% Fe Fines, delivered Chinese Port and the contract will be settled against The Steel Index (TSI). The future contract will be monthly cash settled and the option contract will be a monthly cash settled Asian-style option. The expansion of NOS to iron ore will benefit the overall market since all existing NOS direct members and general clearing members will have immediate access to the new products, and the increased number of participants will contribute to the liquidity in the market. The introduction of the option contract will complement the available range of hedging tools for both financials and physical players, NOS said. According to Morten Erichsen, managing director of NOS, the move resulted from demand by members. Steven Randall, managing director of The Steel Index, commented: “We are delighted NOS has selected TSI’s iron ore index for settlement of its contracts. OTC iron ore trading is one of the fastest growing commodity markets and NOS’s entrance helps to meet the growing customer demand. TSI’s iron ore prices have been adopted as the industry standard worldwide, with over US$3bn of financial contracts already cleared against its index. But with around 1 billion tonnes of iron ore shipped this year alone, the potential futures market is many multiples of this.” John Wright, Head of GFI’s London’s iron ore desk, commented: “We expect a growing demand for risk management hedging tools in the iron ore market in the near future. Introduction of cleared cash settled iron ore options will add value and will complement and add liquidity to the existing futures market. We support this development in the market.” David Abzatz, head of freight and iron ore at Macquarie Bank Limited, added: “The introduction of cleared options into the iron ore market is another positive step forward for the development of this new financial product. We are working very closely with a number of market participants who will use the option market to hedge their forward risk.” n

South afRIca ReplaceS IndIa Shipbrokers ICAP Shipping has highlighted the fact that South Africa replaced India as the third largest iron ore exporter to China last year. In 2012, South Africa had a 13% year-on- year increase of its iron ore exports to China, whereas Indian iron ore exports faced a 54% decrease compared to 2011. “India’s iron ore exports to China have been declining from 2010, when its Karnataka State banned the shipments of iron ore due to illegal mining,” ICAP said in its on-line news network. India’s state-owned railways announced a 50% increase in the freight costs for exported iron ore in 2011. In addition, a recent Indian Supreme Court ruling banning exports of iron ore from Goa could result in a massive drop in Indian exports and some commentators suggest the India may be a net iron ore importer this year, with benefits going to other suppliers like Rio Tinto and BHP Billiton. ICAP suggests that while the legal wrangling may be the reason for South Africa overtaking India export-wise, South Africa is continuing to expand mining capacity and exports to China are increasing. This seems

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

noRthland’S KaunISvaaRa tapulI mIne

tata’S IRon oRe ShIpmentS Northland Resources has started shipments of iron ore to Tata Steel UK Limited .The first shipment from the Port of Narvik in Norway was for 40,000 tonnes of highgrade iron ore concentrate for a customer in Europe. FE content is above the expected 69%, Northland said. The cargo was shipped by Star Norita to Tata Steel in the Netherlands where the product will be used in their pellet plant. The first shipment to Tata will be followed by regular shipments to customers in Europe, the Middle East and the Far East. Total shipments in 2013 are expected to amount to 1.5 million tonnes, increasing to a rate of about 4 million tonnes per year, or 350,000 tonnes per month, by the third quarter of 2014. n

chIna Steel SuppoRt China's steel association said it would support Brazil’s vale docking its giant valemax ore carriers at Chinese ports if that would lead to a decrease in iron ore costs for its members, Reuters reported at the end of January. “This is a matter for the transportation authorities, (but) Chinese steel enterprises hope that iron ore prices will fall and that transportation costs will fall, and if this is good for that, then I support it,” Zhang Changfu, secretary-general of the China Iron and Steel Association, said at a press briefing. n

Introduction of cleared cash settled iron ore options will add value and will complement and add liquidity to the existing futures market

waIo on the up According to BHP Billiton, Western Australia Iron Ore (WAIO) delivered a twelfth consecutive December half year production and sales record as the business continued to benefit from the company’s decade- long investment in supply chain capacity. “Our Pilbara operations achieved another significant milestone during the December 2012 quarter with first ore received by the recently installed fifth car dumper at Finucane Island. This car dumper is the last major piece of infrastructure required to increase WAIO port capacity from the December 2012 quarter run-rate of 188 million tonnes per annum to 220 million tonnes per annum (100% basis). “The Jimblebar Mine Expansion, which is on schedule for first production in the March 2014 quarter, will broadly match mine and port capacity at this expanded rate, while the progressive de-bottlenecking of the supply chain is expected to underpin substantial low cost, longer term growth in our WAIO business,” the company said. “The strong outlook for our WAIO business is underpinned by an anticipated 5% increase in production in the 2013 financial year, for unchanged guidance of 183 million tonnes (100% basis). Samarco’s (Brazil) three pellet plants continued to operate at capacity during the period.” n

Bhp BIllIton, weSteRn auStRalIa IRon oRe

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COST REDUCTION

effIcIency In actIon As new regulations aimed at improving the energy efficiency of international shipping take effect, what steps are shipowners taking to ensure that they are compliant with the rules?

New regulations aimed at improving the energy efficiency of international shipping entered into force on 1 January this year, making mandatory the Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. The regulations apply to all ships of 400 gross tonnage and above. However, under regulation 19, the Administration may waive the requirements for new ships up to a maximum of four years. The EEDI is a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry. As long as the required energy-efficiency level is attained, ship designers and builders would be free to use the most cost-efficient solutions for the ship to comply with the regulations. The SEEMP establishes a mechanism for operators to improve the energy efficiency of ships. Ships are required to keep on board a ship specific SEEMP. The demand to improve efficiencies on ships and thus reduce costs has led to the development of cutting-edge technology covering everything from trim adjustment to hull coatings and the use of solar power. ShIppIng emmISSIonS need to Be cut

But the only way ships will get more fuel efficient is if they displace less water, argues Robert Clifford, chairman of Australia Incat. The Incat Wing project, which has been in development for a number of years, involves an innovative ship design, part way between ship and aeroplane, that lifts out of the water on a column of air, although the propulsion and steering of the vessel remains in the water in wave piercing hulls. This process means that the ship’s total resistance can be lowered. As fuel costs remain high and emissions need to be cut, paper logbooks and noon reports are no longer the most effective means of monitoring and communicating fuel consumption and emissions data, according to ship design and operations software house NAPA. Currently, bunker fuel readings for most international vessels are taken as daily noon reports, collected onboard and sent to the shipowner on a daily basis during a vessel’s voyage. However, with bunker fuel costs at sustained record levels and environmental legislation on emissions of Greenhouse Gases (GHGs), Sulphur Oxide (SOx), Nitrogen Oxide (NOx) now in force, many shipowners and management companies have come under more scrutiny from charterers, authorities and other stakeholders, such as investors, to provide more accurate measurement of daily bunker fuel consumption and emissions levels. Esa Henttinen, vice president, operations at NAPA, comments: “Although they have long been the industry standard, 24-hour reports taken at noon from vessels and relayed onshore are starting to have limited use for the owners and operators. As shipowners and managers come under more scrutiny over fuel costs, environmental and safety credentials, more accuracy and ‘real time’ data is being requested from multiple stakeholders, including charterers, insurers, regulators and financiers. The good news is that the ability to collect more accurate data in real time and send it onshore is available.” Moreover, from a safety perspective, noon reports represent an increasingly significant vulnerability as they cannot provide shipowners and managers with real time information, on safety or performance, for example, that can be acted upon immediately, NAPA believes. According to NAPA research, owners, managers and operators with large numbers of vessels under their control, are increasingly turning to electronic operational solutions that automatically communicate with shore-based offices as frequently as every 10 minutes. This gives those with the ultimate responsibility real time awareness of a vessel’s fuel consumption, location, the weather conditions it is facing, the speed it is travelling at and further data that can help to ensure that these vessels are operating to the safety and efficiency standards owners, operators, charterers and other stakeholders expect of them. While there are commercial and safety benefits having more accurate and real time data, the latest condition monitoring software has the potential to enable greater effectiveness in the legislative drive to reduce GHG emissions from shipping.

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COST REDUCTION

Shipowners and managers are coming under more scrutiny over fuel costs, environmental and safety credentials

Papers were presented at both IMO MEPC meetings in 2012 on the subject of monitoring, while the European Commission has declared its intention to pursue mandatory monitoring, reporting and verification of vessel fuel consumption. Industrial installations and the aviation industry already face requirements for measurement and reporting and the technology is available for shipping, too. Meanwhile, Finnish shipping company Bore announced the results of its trial of electronic SEEMP software last year, which has verified a 5.8% reduction in fuel consumption. The company’s 89-day sea trial of the NAPA for Operations SEEMP software, conducted between April and July 2012 along routes between Cadiz and Naples and Cadiz and Pauillac, delivered calculated annual fuel savings of 320 tonnes, equivalent to $210,000 in fuel savings per annum, onboard one of the most efficient ro-ro vessels in its class, the M/v Bore Sea. Through advanced normalisation calculations, the difference in average speed, the effect of wind, and constant rpm mode to combinator mode were factored out of this result. This process showed that speed optimisation alone created a 5% reduction in fuel consumption, with potential from trim optimisation providing another 0.8%. Through this normalisation process and data analysis, NAPA could also verify substantial additional saving of approximately 10% from WE Tech Solutions’ variable Frequency Drive Shaft Generator (vFD SG) application. voyage reporting and electronic logbook systems were installed for a 63-day reference phase to establish the benchmark performance of the vessel before efficiency management processes were enacted for the trial. Fuel consumption and efficiency data continued to be transmitted to shore every 10 minutes during the second stage of the study to give an accurate foundation for analysis. As part of an ongoing co-operation with Onboard NAPA, Knud E Hansen USA has provided CFD analysis covering a large range of trim/draft/speed conditions for numerous ship owners to be used in the Onboard Napa Loading ComputerOptifloat Module. Optifloat is a tool developed by Onboard NAPA that gives the vessel crew a recommended optimal floating position for voyage planning. Optifloat references the vessel’s current floating position, which is retrieved from the loading computer, and compares it with a speed and power set of date of various speed/trim/draft conditions loaded into the software prior to installation. Optifloat can be used in pre-voyage planning to maximise fuel savings by reducing required power through properly planned operations onboard. The software instructs the vessel’s crew to change its trim and draft to floating position, which shows the most favourable resistance based on the desired speed for a given voyage. Optifloat works as an add-on module to the vessel’s existing Onboard NAPA loading computer and automatically monitors the vessel’s floating position throughout the voyage, assuring compliance with all required strength and stability criteria. This allows the user to optimise the floating position throughout the entire voyage based on all required operational practices such as ballast operations, bunkering, waste water management, and cargo operations. KEH USA uses Star-CCM+, a commercial CFD code developed by Cd-Adapco, with a Dell HPC system to produce highly accurate hydrodynamic studies with cutting-edge solutions for the marine industry. Results are calculated values (numerically simulated) based on specific hull, appendage and propeller geometry, and have been delivered in both model and full scale, depending on owners’ requirements. Simulations have covered various applications, including tankers, cruise © All rights reserved by imo.un vessels, ferries and special purpose vessels. n

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SHIP vALUES

automated ReSponSe Some may be sceptical about whether automated valuation works or not. Here, vesselsvalue answers some of the questions about it automated valuatIon – what IS that? In a sentence, automated valuation is the use of software, based on mathematical techniques, to value an asset, such as a house, aeroplane or ship, without human intervention post-initiation. Traditionally, ship brokers have valued a ship by looking at the prices for recent sales of similar ships and then adjusted the figure to account for differences in age, size, other features and market conditions. This sort of value is called market value because it represents the price that the ship would be expected to achieve on the market. A broker experienced in valuation might take an hour to work out the market value of a single ship. Although automated valuation is routinely applied to domestic property, it’s not been used in shipping before. vesselsvalue.com is a unique company offering an online service for the automated valuation of cargo ships. The key components of its system is an extensive database of information on ships and their sales, a mathematical and heuristic model, specialist computer software and a highly interactive website. vesselsvalue.com allows a subscriber to get an instant valuation of a merchant ship at any time of the day or night. It can value a fleet of ships or calculate their historic value at the click of a mouse. n

a computeR pRogRam couldn’t have the SKIll to value a ShIp From the early days of computing, there has been a lot of scepticism about just what a program might be able to do. But, in practice, many fields of human intelligence have proved accessible to the silicon brain. Saturday 10 February 1996 was a fateful day for chess: Gary Kasparov, then world champion and now widely considered to be the strongest player ever, was beaten by a computer under tournament conditions for the first time. Today, the best programs are routinely better than the best grandmasters. Of course, playing chess and valuing ships are not the same thing, but they are both complex tasks requiring a high level of skill. n

SuRely an automated SyStem wouldn’t Be aS accuRate aS an expeRIenced ShIp BRoKeR? To start with, it’s important to be clear what is meant by accuracy. A working definition of the accuracy of a valuation would be that it is the difference between the reported price of a sale and the value of that ship produced just before it was sold: the smaller the difference the more accurate the valuation. If no sale took place, it would be impossible to say conclusively how accurate the valuation was. Before considering automated valuations, let’s look at broker valuations. The ideal would be to carry out a scientific study by comparing a series of broker valuations with the sales that followed. To do this, a sufficiently large number of cases would be needed to

form a reliable conclusion – one or two cases would not prove very much and in each case the broker would have to assess the ship immediately prior to the sale otherwise the valuation would be out of date, but the broker could not be involved in the sale since they would be liable to influence it. Remember, too, that any study has to be conducted without knowing in advance which ships are going to be sold. All in all, to meet these conditions looks almost impossible. Consequently, in practice, any judgement on the accuracy of a broker, a firm of brokers or the profession as a whole cannot be entirely quantified. It has to be ,to some degree at least, a matter of subjective opinion. In contrast, an automated system is ideally suited to evaluate its own accuracy. Every day vesselsvalue.com calculates the market value of each ship in the world fleet of tankers, bulkers and containers. This enables it to compare every sale with the most recent valuation and to publish detailed information on the accuracy of its values (see www.vesselsvalue.com/archive/accuracy.pdf). For instance, as of 1 March 2012, 45.8% the valuations of all ships sold over the past two years were within $1m of their sale price. These values were calculated solely using data that was available the day before the sale took place. To summarise, it’s not possible to be sure how accurate brokers are, but the accuracy of an automated valuation system can be measured. n

I’ve got Someone elSe that doeS what you do vesselsvalue.com is the only company in the world that can instantly value an individual cargo ship on demand. Some large organisations, such as Clarksons’s or the Baltic Exchange, publish on subscription a weekly table of values for ship types of set ages. Many brokers offer something similar in their weekly market reports. But this only values an artificial or abstract ship, such as a generic newly built aframax or 10-year- old panamax – it does not value an actual ship. Furthermore, these tables are time-consuming to produce and are published once a week and, as experts know, a lot can happen in shipping in a week. Indeed, vesselsvalue.com itself provides an automated matrix of values that is more detailed than any other and is updated every day. To get the current market value of a specific ship, the only alternative is to go to a broker. But a broker is only available during office hours and needs to take time out to perform a valuation. So it’s not instantaneous. This makes valuing multiple vessels a significant problem. A well-known firm of shipbrokers recently quoted up four weeks to value a large fleet of ships, by which time the figure would be out of date. Of course, it’s true that there are companies that offer all kinds of other financial services for shipping, such as financial reporting, bespoke research/economic analysis, scenario planning, project consultancy and forecasting. But if you want today’s market value of a single ship or a fleet of ships, on the spot, there’s only one way. n

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SHIP vALUES wheRe doeS veSSelSvalue.com get ItS data fRom? Automated valuation is a data driven process. vesselsvalue.com uses three kinds of data for valuations. Data on vessels covers ship type, cargo capacity, date of build, features (such as yard, engine, hull, gear, and so on), survey status and so on. Data on sales focuses on date and price.Data on the state of the market includes charter rates and scrap metal prices. vesselsvalue. com also records management information, such as owners, operators and ship location. It gets its data from a large number of sources. The starting point for the vesselsvalue.com database was the data collected by Seasure, London, specialist sale and purchase brokers. vesselsvalue.com grew out of Seasure and Seasure has been systematically gathering information on merchant vessels since its establishment in 1993. Public data sources have been used to build on this historic data and develop a comprehensive set of records of ships. vesselsvalue.com has supplemented information obtained from public data sources with subscription based sources. Another very important supply of information is from the press, websites, company publications and other media. This is very wide-ranging and encompasses the shipping press (both printed and online), news websites, owners websites, trade websites, blogs, Facebook and Twitter, shipyard releases, market reports and commercial and academic papers.

youR valueS aRe too low

An automated system is ideally suited to evaluate its own accuracy

vesselsvalue.com aims to match its values as closely as possible with actual sales prices and its analysis shows that overall their values are neither too high nor too low (see www.vesselsvalue.com/archive/accuracy.pdf). There may be a difference between an individual value and the sale price on the following day (this is how it measures its accuracy), but taken as whole these values are not skewed in one direction or another. The mathematical techniques it uses to calculate its values and measure their accuracy enables it to be sure that its values are not too low. So, if its values are not too low, why do some people imagine they are? There are two probable reasons for this. First, there is a time lag between a sale and a typical broker valuation. It’s just not feasible to revalue a ship every day in the period leading up to a sale. Consequently, in a changing market, however realistic the original valuation was you would expect there to be a difference between the valuation figure and the eventual selling price. If markets are falling – and that has been the general trend over the past two years – the eventual price will tend to be lower than the broker’s initial valuation. In contrast,vesselsvalue does value every ship every day. A example from earlier this year illustrates the point. On 10 January 2012 two Sundong 158k dwt Suezmaxs for 2012 delivery sold for $52m each. At the time,Tradewinds (11 January) was reporting leading broker valuations of $58m and $62m. But the day before the sale, vesselsvalue gave a figure of $54m.This valuation may have been more accurate because it was more up-to-date. The other reason why automated values might seem on the low side may well be because brokers are only human – they’re not machines. Most people would like to see a buoyant market, which means higher prices. If you are the owner of a ship, especially if you are thinking of selling it, then you’d like see the highest value. Of course, this can work in the other direction if you are buying a vessel and banks may be keen to discover the real value. But, in the main the tendency is to encourage higher valuations. In contrast, automated valuation is entirely objective. It doesn’t matter one jot who requests the valuation, the answer will be the same. In a nutshell, it appears that some people may find the values from vesselsvalue.com too low because their own values are actually too high! n

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TRADING

allIance In actIon The G6 Alliance is expanding its co-operation to the Asia-to-North America East Coast trade. Plus: Maersk halts loop; Hanjin expands; Suez tolls cause concern; Jamaica goes for growth A year after the G6 Alliance was formed, creating one of the largest vessel networks in the Asia-to-Europe trade lane, the six member lines have agreed to expand their co-operation to the Asia-to-North America East Coast trade. The G6 Alliance will deploy more than 50 ships in the TransPacific trade, calling at almost 30 ports in Asia, North America East Coast, Canada, Central America, Caribbean, Indian Sub-continent, Mediterranean and the Middle East. “Our co-operation in the Asia-to-Europe market has successfully provided customers with comprehensive service coverage, as well as operating efficiencies,” member carriers said in a statement. “This new agreement will bring the same winning formula to the Asia-to-North America East Coast trade and benefit shippers trading in this key trade lane.” The new partnership is scheduled to begin in May 2013, with six co-ordinated services connecting Asian and North America East Coast ports. Three of the services will transit via the Suez Canal while the remaining three via the Panama Canal. Member carriers said the new co-operation will be characterised by competitive transit times, broad port coverage and efficient containerships. The six coordinated services will offer an increased sailing frequency than what is currently offered by both The New World Alliance and the Grand Alliance combined. The G6 Alliance members are: Mitsui O.S.K. Lines, APL, HapagLloyd, Hyundai Merchant Marine, Nippon yusen Kaisha and Orient Overseas Container Line. n

hanjIn SeRvIceS Hanjin Shipping has expanded its service network in West Australia by introducing West Australia Express (WAX) from the middle of January. WAX is currently operated by K-Line, Hanjin Shipping’s partner of the CKyH Alliance, under the name of WASCO (West Australia Container Service), with two of 1,700teu ships sailing between Singapore and Fremantle. Hanjin Shipping will be participating in the service by securing vessel slots while launching a new agency to promote sales in the region. The company says that with the introduction of this new service and an agency they will be able to cover both east and west coasts of Australia, broadening their network in the region. Currently, Hanjin Shipping is operating two services to Australia, AUS (Australia Service) and CKA (China – Korea – Australia). Hanjin has also introduced new services between Japan and Thailand. Named JTE (Japan – Thailand Express), this new service is jointly operated with APL on weekly basis and the partner carriers are deploying three of 1,700TEU class vessels in the service. In addition, Hanjin is expanding its network in the route by participating in the existing JTv (Japan – Thailand – vietnam) service through a space swap programme. JTv is currently operated by APL with three of 2,500 teu class ships. The introduction of these services will enhance its network and market presence in the intra-Asia market. n

Suez Rate IncReaSeS The International Chamber of Shipping (ICS) has voiced serious concerns about toll increases just announced by the Suez Canal Authority to be implemented on 1 May 2013. For all but the smallest ships, the Suez Canal toll increases range from about 3% to 5% according to tonnage and ship type. These follow across-the-board increases of 3%, which were implemented in March last year despite industry protests. Commenting on the increases, ICS Secretary General Peter Hinchliffe said: “Most international ship operators are trading in the

maeRSK SuSpendS ae-9 loop Maersk Line has once again suspended its Asia-north Europe AE-9 loop, suggesting that prospects following the Chinese New year peak may not be as good as hoped. As Drewry Maritime Research Container Forecaster pointed out in January: “The latest indications from the market suggest that load factors from Asia to North Europe and the Med are higher – helped by the usual pre-Chinese New year cargo spike, but the acid test will be how long any carrier rate successes last beyond the middle of February when volumes traditionally weaken. “On a more optimistic level, Drewry is forecasting global demand to increase by 4.6% this year, but there are several caveats attached to this. Considerably faster capacity growth at the trade route level will severely challenge carriers and even the ability of the fast growing north-south trades (such as Asia to Latin America) to prop up the deficiencies elsewhere is now being questioned. It cannot be ignored that the headhaul compound annual growth rate of the three core east-west trade lanes in the 2008-12 period has been only 0.4%.” Hong Kong’s OOCL, Hapag-Llloyd and Cosco have all recently announced general rate increases from March of between $700 and $775 per teu, suggesting they are optimistic about cargo volumes. n

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TRADING worst shipping markets in living memory due to there being too many ships chasing too few cargoes. “This is not the time for the SCA to be announcing increases, which for some trades seem very dramatic indeed, and which many shipowners will find impossible to pass on to their customers.” He added: “We recognise that, with pressure on Egypt’s tourism and its other economic problems, there is increased pressure on the SCA to maintain what is now the country’s biggest source of foreign revenue. “But the effect of these increases will be to give a spur to those owners who may already be considering the Cape route as a serious alternative.” The route via the Cape of Good Hope is already becoming relatively less expensive as many ships resort to slow steaming in an effort to reduce costs and to deliver the reductions in CO2 emissions which are now demanded by their customers. Moreover, the entrance to the Suez Canal, via the Red Sea and the Gulf of Aden, is already unattractive due to the continuing threat of Somali piracy, compounded by instability in the yemen. Recent events in Egypt, including riots in Ismailia and Port Said, are generating some concerns about the security of the Canal itself. “We are also disappointed by the lack of consultation that preceded these increases,” said Hinchliffe. “To the SCA’s credit, the Canal has so far continued to function smoothly. But ICS will be repeating its request for full and proper consultation between the industry and the SCA, particularly whenever toll adjustments are being contemplated.” n

anthony hylton, mInISteR of InduStRy, InveStment and commeRce

jamaIcan expanSIon The Government of Jamaica has unveiled ambitious plans that will create the Caribbean island into a global logistics hub for the Americas and position it as a regional trading rival to Singapore. Projects under discussion with international investors include growth of container throughput at the Port of Kingston ahead of the expansion of the Panama Canal, as well as the development of commodity ports to handle petroleum products, coal, minerals and grain; the development of an air cargo stronghold through the construction of an air cargo airport, as well as the construction of large-scale ship repair dry docks. Once completed, the initiative, which is being spearheaded by the Jamaica Ministry of Industry, Investment and Commerce, will transform Jamaica into the fourth node or pillar in the global supply and logistics chain, alongside Singapore, Dubai and Rotterdam. A critical element in the equation to make the logistics hub successful is the involvement of suitable, long-term investors. The Government of Jamaica is already in discussion with some prospective partners as well as looking for new ones. Anthony Hylton, Minister of Industry, Investment and Commerce, said the vast project contained many opportunities for investors, logistics providers, distributors, manufacturers, and suppliers across many industries around the world. He said the initiative will provide a myriad of opportunities for global and domestic commercial and industry interests. He said the development of Jamaica’s transportation – maritime, aviation, road and rail and logistics infrastructure – will enable Jamaica to be positioned as the logistics hub of the Americas (North and South America). This effort, he said, represents the centrepiece of a sustainable economic growth strategy. “I recently returned with a delegation from Asia as part of advancing the logistics hub initiative and I must tell you that the results of my trip are very reaffirming and instructive.

“The results reaffirmed the soundness of the logistics hub initiative and further clarified the opportunity and the tasks that are before us,” he said. Eric Deans, Chairman of the Logistics Task Force, said a market of 800 million people, including the US and Brazil, can be accessed readily from Jamaica. He said trade opportunities are due to “burst wide open with the expansion of the Panama Canal scheduled to be completed in 2015; the multi- billion stimulus package by Brazil for World Cup 2014 and Olympics 2016; and the growing middle class in Latin America”. Deans said a critical aspect of the global logistics hub initiative is the broadening of bilateral collaborations with Jamaica’s global partners and encouraging private-sector investment and financing through privatepublic partnerships. The commodity port, to be built in eastern Jamaica, will provide crude oil and petroleum product tankage, which, together with blending, natural deep water loading, discharging and transhipment capabilities could guarantee uninterrupted supplies of crude oil, gas and refined products to global market. Other terminals will cater to bulk minerals, grain and other commodities. Other key strategic priority areas within the hub’s development include expansion of the Kingston Container Terminal and airports, logistics planning and warehousing, strategic storage of manufactured merchandise and bulk commodities, ship repair/dry docking and aircraft maintenance, repair and overhaul. A substantial economic stimulus will be created from the construction activities related to the logistics hub. This will be a precursor to major manufacturing and distribution companies establishing offices and/or warehousing facilities as well as a plethora of logistics companies transacting trade related deals globally for goods and services that are either manufactured in Jamaica or elsewhere. The hub will cater for goods assembled in Jamaica or other location, transiting through Jamaican ports or not, warehoused in Jamaica or elsewhere; E-commerce; value-added logistics, import/exportrelated activity; financial activities; free zone activity; cargo hub activity; mail hub activity; passenger hub activity; intermodal transfers of passengers, education and training; cargo security activities; intermodal transport and the transhipment of goods. n

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TRANSIT

on couRSe foR SucceSS As the demand for cargo shifts, so too have companies’ schedules, with the establishment of some new services The G6 Alliance recently announced that it will maintain the current five-loop product structure for its Asia-North Europe service in 2013. “We anticipate the current supply and demand balance will continue and we will not be reinstating the Loop 3 Asia-Europe service,” members of the Alliance said in a joint statement. The Loop 3 service was suspended in October 2012 as part of the Alliance’s winter programme. The G6 Alliance will continue offering a variety of services between the Far East and Europe, covering all major port pairs with weekly sailings. In addition, adjustments have been made to the Alliance’s other services to accommodate port calls from the Loop 3 service to ensure that customers continue to enjoy the full network coverage the alliance provides. In October, the alliance started a feeder shuttle between German ports and Gothenburg. A new call at Jeddah has also been included in the Loop 4 service, as with a new call at Hong Kong in the Loop 7. The G6 Alliance includes APL, HapagLloyd, Hyundai Merchant Marine, Mitsui O.S.K. Lines, Nippon yusen Kaisha and Orient Overseas Container Line. n

venice and Ancona, while the impact on the sailing time to Koper is limited to less than 24 hours. A new service has been agreed for Guaranao and El Guamache ports under a Connecting Carrier Agreement with CFS, offering a bi-weekly connection from the port of Kingston, Jamaica and Caucedo, in the Dominican Republic. n

nyK and thaI oIl NyK and an affiliate of Thai Oil have agreed to terms on a long-term contract for the charter of the 300,000 dwt vLCC Tateyama to shuttle oil primarily from the Arabian Sea to Thailand. The contract, which is for at least three years, will allow for the continued economic growth of Thailand through the long-term, stable transport of this energy resource. Thai Oil operates one of the largest refineries in Thailand, and began its business relationship with NyK in February 2011 with the establishment of a joint venture that purchased the 280,000 dwt VLCC Tenyo from NyK and then chartered it to Thai Oil under a 10-year contract. n

Despite the difficult market situation in both countries, we expect a consolidation of the Spanish and Portuguese market

hapag lloyd upgRaded ItS RotatIon foR the adRIatIc expReSS SeRvIce laSt yeaR

hapag-lloyd Hapag-Lloyd, meanwhile, has recently upgraded its Russia Express Service with added eastbound calls at Gdynia, Poland in response to increase demand. There will be an additional Gdynia call on the eastbound service, with no effect on transit times for cargo destined for St Petersburg and Helsinki, the company says. The company has also launched a new service to and from Gdynia to Hamburg and Bremerhaven – the Poland Express Service (PEX). “Following the increasing demand in the market and in addition to our existing REX service, the PEX service will offer a second dedicated and direct service for your cargo from and to Poland, connecting with our comprehensive and global mainliner service at the ports of Hamburg and Bremerhaven,” the company said. Hapag Lloyd upgraded its rotation for the Adriatic Express service last year, which it says will improve the transit time to Rijeka,

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TRANSIT john good ShIppIng John Good Shipping has completed the acquisition of Manchester-based freight forwarding company CBI Transportation The company specialises in the Turkish market and is a major player in this key trade lane. In addition, CBI is active on a number of other important trade lanes, including the Far East, India and the Black Sea. John Good is UK agent for OPDR and a new service between Casablanca and Felixstowe has recently been announced, which it is estimated will cut transit times from about 16 to 11 days. OODR announced plans to open a string of offices in Spain and Portugal in January and further investment is planned the company says. “It is the right time to invest in our core markets in Spain and Portugal”, explains Till Ole Barrelet, managing director of OPDR. “Despite the current very difficult market situation in both countries we expect a consolidation of the Spanish and Portuguese market in the medium term. The need for logistics solutions will grow further.” Short sea shipping is a reliable, costeffective and non seasonal alternative to trucks, he added. Beside the transport of goods in pallet-wide containers, OPDR sees potential in the transport of temperature-controlled goods in refrigerated containers, which can be shipped within a few days from Spain and Portugal to Northern Europe, Scandinavia and Russia. “Thanks to our new teams in Spain and Portugal, we are now even closer to our customers, which enables us to learn more about their demands and accordingly further develop our logistical products. We will further boost our door-door traffic and also offer local services such as warehousing”, says Simon Uhrlau, drector of business development of OPDR. Reefer containers play a major role in the movement of perishable and frozen foods from supplier to receiver in the European short sea market. As this market continues to grow, particularly from areas such as Southern Spain, transit times have improved significantly, according to OPDR. OPDR operates a fleet of modern reefer equipment loading at ports such

as Cartagena, Motril, Seville and Cadiz in Spain. Short transit times of only six days ensure that a whole range of fresh produce reaches all the major UK supermarkets. UK exports of fresh produce in reefer containers is also an important market. Commodities shipped on a regular basis to the Canary Islands, for example, include potatoes, bacon, pies and confectionery, all of which are intended primarily for the tourist trade. The short sea reefer market is growing, with more than 80,000 reefer containers being built in the first half of 2012, and a total of 100,000 new units entering service during the whole of 2012. n

eveRgReen lIne Evergreen Line launched a new 10-day service linking Greece, Turkey and Malta at the end of January. The new GTM service will provide regional shippers with additional connectivity between the countries and improve feeder links to/from Evergreen Line's global service network via its hub in Piraeus. GTM will be operated by the 600 TEU vessel Kirsten. With a port rotation of Piraeus- Thessaloniki - Gebze - Marsaxlokk - Piraeus, the GTM service will, in particular enhance Evergreen Line's global network connection to Thessaloniki and, with a direct call at Gebze (50 kms east of Istanbul) offer a convenient link for the neighbouring Izmit industrial area. n

QueSt navIgatIon and maRItIme applIed phySIcS coRpoRatIon People and businesses in southwest Nova Scotia are closer to a new ferry service in yarmouth. Two companies, Quest Navigation and Maritime Applied Physics Corporation have submitted proposals to set up and run a commercially viable ferry service between yarmouth and the US. “Many people living in south-west Nova Scotia have told me they want a stable ferry service in yarmouth that they can count on being there for the long-term. This is what we want, too,” said Nova Scotia Fisheries and Aquaculture Minister Sterling Belliveau. “We need to ensure that, if there is a new ferry service, it will be the right

one for Nova Scotia viable and stable in the long term, and in the best interests of taxpayers” The province has said it will provide up to $21m over seven years to a ferry operator with a sound business plan showing a ferry service that will be sustainable within seven years. “The province has taken proactive steps to attract a ferry operator to run a sustainable service,” said Belliveau. “For this to be successful, several factors need to be in place, including timely support from the federal government and a viable plan from an experienced ferry company” n wIlhelmSen ShIpS SeRvIce Wilhelmsen Ships Service (WSS) reports positive uptake of the “your Strait Solution” initiative – an integrated service solution for vessels passing through the Straits of Gibraltar. According to Nicholai Bado, Ships Agency Service Manager, 2012 was an “intensive year”, with the centralisation of one dedicated team and co-ordination of services within the three Strait ports of Algeciras, Ceuta and Gibraltar. “We are on track to exceed all initial expectations of the project, and have made a number of tweaks to the service over the past year based on customer feedback. Many customers are reporting significant cost efficiencies through having just one point of contact. For example, a vessel needing to take on bunkers at Gibraltar and liferaft exchange services at Algeciras will pay just one agency fee – streamlining operations for all involved.” With no signs of rapid improvement in the market, demand for reliable ships agency services is on the rise – coupled with a need to stay competitive on price – and Bado believes that those suppliers that are able to adapt to market challenges will have good potential for growth. Furthermore, he says that centralisation of services has proved to be the way forward. “It is vital that we maintain the quality standards expected of our operations while being able to work within the financial constraints that our clients face. your Strait Solution is just one example of how we are accommodating the needs of our customers n in a turbulent market.”

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INSURANCE

coveRIng all eventualItIeS Professional indemnity cover is just one of the issues facing the insurance industry at the moment, which is set to take a hit with claims like that from the Costa Concordia Arrangements for the renewal of the International Group of P& I Clubs general excess of loss reinsurance contract and Hydra reinsurance programme for 2013/14 have recently been finalised. Individual club retention will be increased from US$8m to US$9m for the 2013/14 policy year. “The 2011/12 policy year produced the first and third largest ever claims on the group pool resulting in a very significant exposure to the group's reinsurers,” the international group said when announcing the changes. “This exposure, coupled with general concerns regarding the increased cost of major casualties, and in particular removal of wreck and SCOPIC exposure, has led the group’s reinsurers to seek significant rises in the renewal premium for the 2013/14 policy year. There will, as a result, be rate increases for all vessel categories for the renewal. Costs of wreck removal have been rising steadily with concerns expressed by both insurers and salvors, with the costs of the Costa Concordia wreck removal and the clean up after the Rena incident off the New Zealand coast as just two examples. “In order to mitigate the impact of the increase, the excess point on the GXL contract will be increased from $60m to $70m with the additional $10m retained within the group pool reinsured by the group captive Hydra for $40m excess US$30m. In addition, the Hydra coinsurance share in the first layer of the Group general excess loss (US $500m excess US $70m) will be increased from 25% to 30%. For 2013/14, a three layer pool structure will be introduced with a lower pool layer from US$9m to US$45m, an upper pool layer from US$45m to US$60m (within which as currently there is a claiming club retention of 10%) and an upper upper pool layer from US $6 m to US $70,” the group said.

the Rena IncIdent off the new zealand coaSt

Hugo Wynn-Williams, chairman of the International Group Reinsurance Sub-Committee, commented that the “inevitable consequence of the significant claims on the 2011/12 policy year was a substantial readjustment in reinsurers pricing, but that through the use of the group captive Hydra it has been possible to mitigate the full extent of the increased reinsurance cost to shipowners entered in the group clubs”. For 2013/14, the allocation of the market reinsurance cost between the different vessel categories has been assessed in accordance with the group’s general allocation objectives, principally that of moving towards a claims versus premium balance for each vessel type over the medium to longer term. The vessel type rates applied for 2013/14 reflect the continuing favourable tanker premium/claims record and the on-going objective of bringing the claims versus premium records back towards equilibrium in dry sector which is moving positively, and in particular in the passenger sector where there remains a long-term imbalance to address through the allocation process. n

IndemnIty InSuRance P&I correspondents are under pressure from P&I Clubs and third parties to take out indemnity insurance according to the International Transport Intermediaries Club (ITIC). In the latest issue of its newsletter, The Wire, ITIC says it is aware that at least one International Group P&I club is considering asking all its correspondents to obtain professional indemnity cover and anticipates that a number of other clubs will follow suit. ITIC has recently commented on a proposed P&I club contract for its correspondents, and has highlighted areas where it believes the correspondent should not be held liable. It has also commented on what it considers to be a reasonable limit of liability for a P&I correspondent. To illustrate the importance of adequate insurance cover, ITIC cites the case of a correspondent asked to survey a cargo of 2,000 metric tonnes of bulk fertiliser, which had been contaminated by residues from a previous cargo. The correspondent, having carried out the survey – and following several telephone conversations with the P&I club – obtained verbal agreement to offer the cargo interests a depreciation allowance of $22 per tonne, which was accepted.

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INSURANCE When the cargo interests submitted their claim for $44,000 to the P&I club, the club refused to pay, maintaining that the correspondent had acted without authority in offering settlement. The consignees therefore sued the P&I club and the shipowner. The correspondent was also involved, on the grounds that, if the court found that it had no authority, then it would be liable under the doctrine of breach of warranty of authority. The case went to court in London. As the correspondent had no confirmation in writing, the dispute turned on which witness was believed. On this occasion the court found that the correspondent had been authorised to make the offer. However, if the correspondent had not made a convincing witness and had not kept contemporaneous notes, it would have had to pay the claim, plus interest, plus the costs of some of the other parties involved, and would have faced a liability of more than $100,000. n

lIQuefactIon Cargo liquefaction continues to be a major problem in the industry and one that has resulted in loss of life. North P&I club has warned shipowners carrying bauxite aluminium ore cargoes that they have the potential to liquefy at sea despite being listed in the International Maritime Solid Bulk Cargoes (IMSBC) Code as a low-risk group C cargo. According to North’s risk management executive Colin Gillespie, entered vessels have recently experienced a number of instances where bauxite cargoes from Brazil and Indonesia have exhibited the liquefaction characteristics of group A cargoes. Typically, the cargoes involved contained a large proportion of fines. “Fortunately, none of the incidents have resulted in losses to vessels or crew members. However, as seen in high-profile incidents involving liquefaction of nickel and iron ore cargoes, the resulting loss of vessel stability can be fatal,” he says. While bauxite is listed in the IMSBC Code as a group C cargo, meaning it is not known to liquefy or possess a chemical hazard, this categorisation only applies to cargoes that fall within the very specific description included in the code. According to the code, bauxite must have a moisture content of 0-10% to be classified as group C. It must also consist of 70-90% lumps with a size of 2.5-500 mm and 10-30% powder. Where any of these properties are not met, then the requirements of section 1.3 of the code for cargoes not listed should be followed. “Conditions that take the cargo outside the group C specification, such as excessive moisture due to heavy rainfall allied to a high fines content, may mean the cargo displays the characteristics of a group A cargo,” says Gillespie. “vessels loading bauxite should be aware that the cargo is not always group C and loading should be monitored for conditions such as splattering in the holds and the failure of can tests. These may suggest that the cargo has the propensity to liquefy.” n

Ipad app foR the uK cluB The UK Club has launched its iPANDI iPad-based app to provide up-todate underwriting information for members and their insurance brokers. The iPANDI app downloads underwriting data via the Club’s IT systems and presents it conveniently in both graphic and table formats. The data can be viewed off-line, for example while travelling on aircraft, or away from the office. According to the UK Club’s underwriting director, Christopher Brown: “Our members and brokers have challenged us to find better ways to share information. “We have tested some conventional apps for simple information, but iPandi is the game-changer as it is the first to link directly to the underwriting systems of the club. It feeds the latest record statement data, including underlying claims cost information, to the iPad. “Consequently, members and brokers can choose to view an updated loss record statement at any time.” Brokers have recognised substantial potential benefits in reduced back-office costs, according to the club. Preparation of bulky paper P&I records and review material can be substituted by a simple download to the app. This is particularly meaningful to smaller, independent broking houses that lack the economies of scale of the international broker firms. In the past year, the Club has launched an innovative “BowTie” risk management scheme that shares its extensive claims experience with members to identify areas of risk and minimise the occurrence of claims incidents. n

opRisk According to law firm Holman Fenwick Willan, using insurance to mitigate OpRisk capital charges is now receiving greater recognition from the Bank for International Settlements. “There now appears to be a greater understanding and collaboration between insurers and banks as to the risk mitigation qualities that insurances present. BIS sees this collaboration as ensuring to all the parties benefit –banks can improve the alignment of insurance coverages to their risk profile and insurers can achieve a better understanding of the insured’s risk, pricing their products accordingly, HFW said in an online newsletter. n

contaIneR weIghIng While the weighing of containers has been of much concern to the shipping industry in recent times, with differences of opinion as to whether this is necessary or not, the question of container contents has not gone away. The issue of knowing what is actually being carried in containers was once again highlighted in the case of the MSC Flaminia last year, as was the ability of containerships to deal with fires on board, and that of whether dangerous cargoes are being correctly declared. The places of refuge issue also came to the fore during the incident, with coastal states reluctant to allow the ship to transit their waters. n

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LEGAL

legal complIcatIonS Slow steaming, force majeure, sanctions, insolvency and credit risk are some of the legal issues currently under the spotlight in the current market environment If slow steaming has been one of the ways that owners have sought to cut energy costs at a time when fuel prices are rising, it has not been without complications on the legal front, as owners grapple with the “with utmost despatch” element in charterparty clauses. BIMCO first started work on formulating slow steaming clauses for time and voyage charterparties in 2010 and has now produced clauses for both, which lawyers recommend should be included in owners’ future fixtures. The issue of slow steaming and the legal complications that could arise were outlined in the cast of Bulk Ship Union v Clipper Bulk Shipping (the Pearl C), which was heard in the English Commercial Court last year. Commenting on the case in a joint article, solicitor Tom Burdass of Campbell Johnson

Speed and peRfoRmance Holman Fenwick Willan has highlighted the fact that disputes on speed and performance continue to be common in arbitration in spite of the leading cases of the Didymi and the Gas Enterprise, which were heard over 20 years ago. Key points from the owner’s perspective when fixing a charter include trying to ensure the vessel can perform according to the warranty, defining what is “good weather” and ensuring owners are entitiled to a credit for fuel or hire saved. Prefacing the warranty with “without guarantee” is also recommended, as is prefacing the warranty with “about” as far as speeds are concerned. Charterers are advised not to agree “without guarantee” and “about” prefacing in the charterparty. n

Clark and Neil Henderson, barrister with Stone Chambers, said The Pearl C is a potentially important decision in that it identifies the performance warranty in the vessel’s description as the relevant yardstick against which the slow-steaming can be measured. “In the circumstances where: (i) the absence of a good explanation for poor performance may be sufficient to establish a claim for breach of clause 8 or a claim for off-hire; and (ii) the general prevalence of slow-steaming; the decision of The Pearl C suggests that more claims may soon be on their way. Whereas before an owner who chose to steam more slowly for commercial or other reasons might think he was able to hide behind a performance warranty that applied only upon delivery, The Pearl C suggests that in future this may not protect the slowsteaming owner.” Although slow steaming may not continue if there is a market upturn, they advise owners to protect themselves by using the BIMCO clauses that specifically address the issue of utmost despatch. n

lImItatIon of lIaBIlIty International law firm Holman Fenwick Willan (HFW) points to the recent judgment by the French courts to recognise the shipowner’s right to limit liability as a “landmark decision”. According to a online comment by the law firm: “In an important decision pronounced on 14 January 2013, the Court of Appeal in Bordeaux has finally recognised the right of the owner of the German flagged vessel Heidberg to limit its liability for maritime claims, in what was, when it commenced, the first case in France to examine the right to limit liability under the terms of the 1976 London Convention. “The infamous decision in the case of the Heidberg, cited in legal textbooks and before the courts around the world in support of a ‘claimantfriendly’ approach to the interpretation of the shipowner’s right to limit its liability for maritime claims under the provisions of the 1976 London Convention, has finally been overturned. “The decision, adopting a strict application of the terms of the 1976 London Convention, is likely to be of great significance in the development of the law relating to the limitation of liability for maritime claims, notably in civil law jurisdictions, including in particular in those jurisdictions which look to French law as its source of law. A further appeal still remains possible to the Cour de Cassation,” HFW, who acted for the shipowner, commented. n

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LEGAL StS tRanSfeRS Holman’ s Commodities review highlighted the case of Falkonera Shipping Company v Arcadia Energy, where the Commercial Court was asked to decide whether a shiponwer had acted reasonably in withholding refusal for a transfer of oil from a vLCC to two other tankers by means of a ship-to-ship transfer. The ship was chartered under a modified BPvOy 4 charter form and the parties had agreed that the ship would carry crude from yemen to “1-2 ports far east”. However, the charterers discharged in Malaysia by STS transfer to two vLCCs being used as floating storage units. The owners did not approve the two vLCCs and charterers had to discharge into smaller vessels, resulting in delays and increased costs. The charterers claimed that the owners were in breach of the charterparty. “The owners argued primarily that STS transfers between vLCCs were precluded by the terms of the charter. They also argued the ICS/OCIMF Ship-to-Ship Transfer Guide (Petroleum) did not contain any references or recommendations for STS transfers between vLCCs and therefore implicitly prohibited them,” Holmans says in its briefing. “The court held that the wording of Clause 8 and the STS lightering clause was wide enough to grant the charterers an unqualified right to order the vessel to perform an STS transfer to any oceangoing vessel, including a vLCC. Owners had only a limited right of approval, limited to the right to review the details of the nominated vessel to determine whether or not she was suitable for an STS transfer. “The Court rejected the owners’ argument that the ICS/OCIMF guide implicitly precluded STS transfers between vLCCs. The court took the view that the guide provided general guidance on same size ship operations and this included transfers between vLCCs. The owners were held to have acted unreasonably by withholding approval on this basis.” According to Holmans, the judgment should help oil traders chartering vLCCs who want to make STS transfers, subject to the working of the charterparty. n SpanISh RulIng The Spanish competition authority CNC has imposed fines of over €20m on the associations ALTC and COTRAPORT and on Barcelona Port Authority as a result of their involvement in a cartel at the port of Barcelona concerning the road transport of containers. “In its Resolution of 10 January 2013, the CNC Council considered it proven that between January 2006 and March 2011, an agreement had been in place to fix prices and trading conditions (payment periods and methods), limit or control production and share out the market for the road transport of containers originating from or destined for the port of Barcelona,” the authority said in a statement. n

The conspiracy affected the price of nearly every product shipped to and from Puerto Rico pRIce fIxIng convIctIon Following a two-week trial, a federal jury in Puerto Rico convicted a former executive of a Florida-based coastal water freight transportation company on 29 January for his participation in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico, the Department of Justice announced. Frank Peake, the former president of Sea Star Line, was found guilty in the US District Court for the District of Puerto Rico, of participating in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico from at least as early as late 2005, until at least April 2008. “The coastal shipping price-fixing conspiracy affected the price of nearly every product that was shipped to and from Puerto Rico during the conspiracy,” said Bill Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division. “This successful prosecution shows that the division will hold accountable high-level executives who perpetuate these crimes.” Sea Star pleaded guilty on 20 December, 2011 and was ordered by Judge Daniel Dominguez to pay a $14.2m criminal fine for its role in the conspiracy from as early as May 2002, until at least April 2008. Sea Star transports a variety of cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico. According to evidence presented at trial, Sea Star, Peake and co-conspirators carried out the conspiracy by agreeing during meetings and communications to allocate customers of Puerto Rico freight services and to rig bids and fix the rates and surcharges to be charged to purchasers of water transportation of freight between the continental United States and Puerto Rico. The department said the conspirators also engaged in meetings for the purpose of monitoring and enforcing adherence to the agreed-upon rates and sold Puerto Rico freight services at collusive and non-competitive rates. A a result of the ongoing investigation, three companies and six individuals have pleaded guilty or been convicted at trial. The five individuals and three companies that have been sentenced have been ordered to serve a total of more than 11 years in prison and to pay more than $46m in criminal fines. Peake was convicted of price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1m fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. n

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REGULATION

all at Sea wIth SanctIonS Law firms are warning the ship industry to be aware of the effects of EU regulations on sanctions against Iran. Plus: latest UAE law; wind farm consultation

Commodities traders and other businesses must ensure they have in place robust compliance programmes

Sanctions against Iran have proved a major headache for the shipping industry, with all segments being affected and increasing layers of regulation being introduced by both the EU and the US. The EU issue regulation 1263/2012 came into force on 23 December last year and included a tightening of restrictions on European financial institutions dealing with Iranian counterparts, as well as well as bans on the import of Iranian natural gas and imports of products such as graphite and materials that could be used by the Islamic Revolutionary Guard, or as part of Iran’s nuclear programme. Information security equipment and equipment destined for the oil and gas industry are also covered by the regulations, as are classification, investigation and survey services among others. Classification societies and P&I insurers, among others, have been obliged as a result to stop supplying services to Iranian entities for fear of retaliation from the regulatory authorities. Commenting on the EU developments, law firm Clyde & Co said: “The implementation of 1263/2012 has only served to complicate what was already a remarkably intricate assortment of prohibitions and exemptions. It will be necessary to continue to assess on a case-by-case basis whether an activity with a sanctions touch point will be permitted or prohibited, as this is a fact that will turn on the merits of each case’s individual circumstances. In order to prevent inadvertent breaches of sanctions, adequate due diligence should be carried out on all potential transactions and contracts should contain a sanctions clause. However, neither of these should be relied on alone for protection.” There are limited exceptions in “respect of providing such goods to someone who is not an Iranian person, entity or body where a vessel has been forced into an Iranian port or territorial waters by reason of force majeure. There were exceptions for the provision of these goods and services until 15 February 2013 in respect of contracts concluded before 22 December 2012. Clyde & Co also warns that, among the other segments of the industry that will be affected by sanctions, the effect on ship repair and shipbuilding could be “significant”. According to Holman Fenwick Willan (HFW) “even commodities traders who have terminated all business with Iran are not immune from the effects of the continuous expansion of EU and US sanctions against that country”. The law firm warned on further restrictions on trade with Iran, but also increasing pressure on banks and other financial institutions to carry out ever more due diligence on traders, counterparties and trades before processing any payments. This will have an impact even on commodities traders whose activities do not have any connection with Iran, but which are highlighted as the result of banks’ increased vigilance. The regulatory activity is “a reminder to commodities traders and other businesses to ensure that they have in place robust compliance programmes, first to ensure that they are not inadvertently engaging in prohibited trade with Iran and second, so that they can demonstrate to their bank that payments can be processed without delay.” HFW also warns that the US Office of Foreign Assets Control (OFAC) is targeting exchange houses and trading companies. “It says that, in some cases, these are being used to circumvent sanctions against Iran by concealing or obscuring the identity of persons and entities so that banks process payments that would otherwise be blocked. OFAC is encouraging banks to increase their due diligence, which will result in delay and disruption to some legitimate payments.

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REGULATION While the OFAC publication is primarily aimed at financial institutions and drafted as an advisory for banks, highlighting evasive practices which they should be looking out for, the subtext is clear: OFAC is aware of evasive practices which are being adopted and will scrutinise carefully any transaction which they consider breaches sanctions against Iran, even if an Iranian connection is not clear on the face of the documents.” Commenting on the new EU rules, Ince & Co says that “anyone considering any of the business activities prohibited by EU sanctions against Iran (such as trading restricted metals or chartering an oil tanker, for example) should be aware that they may fall foul of the regulations, even if there is no obvious link to Iran. EU sanctions define the words ‘Iranian person’ very broadly so as to include persons and entities outside of Iran that are owned or controlled, directly or indirectly, from Iran. “Enhanced due diligence should therefore be exercised in relation to any business activity that is restricted by the sanctions even where it does not directly involve Iran.” n

old law, it does not expressly repeal provisions of the law on evidence which deal with the expert stage of proceedings. The new law provides only that any provisions contradicting the new law shall be cancelled. “There is, therefore, potential for debate as to which provisions of the law on evidence are cancelled by the new law (if any) and to which extent provisions of the law on evidence (and potentially other laws) dealing with the expert stage of proceedings contradict the new law in a manner which causes those provision to be cancelled. “Time will tell how these potential issues will unfold, but the efforts reflected in the new law to tighten regulation of the expert assessment stage of court proceedings and to improve the process are a welcome step towards further raising the quality of the state’s judicial process.” n

The new law is a positive development for parties with experts appointed in their cases before the UAE courts

uae expeRt law Clyde & Co has highlighted a new federal law on the regulation of experts in the UAE. Under the new legislation experts are more accountable and there is greater clarity as to the role and the qualifications of the expert, with fines and other penalties for infringements. Clyde & Co says in its on-line newsletter that “The new law is a positive development for litigators and parties with experts appointed in their cases either before the UAE courts and/or arbitral tribunals administered by the UAE courts. “The new law brings about a series of key improvements, including: the requirement that experts personally undertake their tasks; and imposing a minimal degree of independence and impartiality on the expert. “It remains to be seen how smoothly the transition from the old law to new law will be, but one area which may be cause for concern is the likely reduction in the number of experts available for (or willing to take on) appointments. Given the higher qualification requirement, the restriction on delegating and the serious ramifications and criminal sanctions for breaching the new law, we may find that reports (and therefore proceedings) will take longer to prepare and conclude and the time period for appointing an expert may be significantly extended. “Another grey area resides in the fact that while the new law repeals and replaces the

wInd faRm conSultatIon BIMCO’s newly developed WINDTIME offshore wind farm personnel transfer and support vessel time charter party has been open for consideration by the industry. The charter party was reviewed by interested parties so that they could give comments before the draft contract was put forward for adoption in May. According to BIMCO, the WINDTIME draft form is based on SUPPLyTIME 2005, but has been re-drafted to meet the needs of the offshore wind farm sector. n

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RISK MANAGEMENT

confIdence on the IncReaSe Despite difficult market conditions and an ever-increasing array of regulations to deal with, the shipping industry is showing a rise in confidence levels for the first time in years

Legislation coming into force will have a major impact on operating costs for older tonnage

Managing risk in the current market conditions, as the industry struggles with rising fuel costs and low freight rates is placing considerable demands on companies. In addition, regulatory and financial pressures have ensured that they seek to make themselves as risk averse as possible. In a survey produced by accountant Moore Stephens in October last year, several respondents expressed concern about overtonnaging. “The market has been very shaky in 2012 and will continue to be so next year, because of the oversupply of tonnage and the shortage of motivated and qualified crews,” noted one, adding: “Below-break-even voyages are being undertaken in order to avoid sending ships into lay-up or being sold at very low prices.” Another pointed out: “The shipping markets will only get more difficult as a result of overcapacity,” while another still predicted, “Due to the over-supply of ships, we face a major crisis, and an increase in the amount of laid-up tonnage.” The difficulty of obtaining finance, declining freight rates and the cost of increasingly stringent regulatory compliance were among other concerns cited by respondents to the survey. “Legislation

RIchaRd gReIneR, mooRe StephenS ShIppIng paRtneR

coming into force, including that affecting labour conditions and the environment,” said one, “will have a major impact on operating costs for older tonnage”. However, according to a confidence survey Moore Stephens, overall confidence levels in the shipping industry recovered slightly from their lowest level for over four years in the three months ended November 2012. The small upturn in confidence appeared to be related, among other things, to an increase in scrapping and to the start of a gradual improvement in the overtonnaging crisis, which has dogged the industry for several years, according to Moore Stephens. “Improved confidence is also reflected in a marginal increase in planned investments over the coming year.” In November 2012, the average confidence level expressed by respondents in the markets in which they operate was 5.6 on a scale of 1 (low) to 10 (high), compared to the figure of 5.3 recorded in the previous survey in August 2012. The survey was launched in May 2008 with a confidence rating of 6.8. Charterers were the only category of respondent to report a fall in confidence over the three-month period, in direct contrast to the previous survey, when they were alone in expressing increased confidence in the market. Charterers’ confidence rating this time of 5.6 was marginally down on the 5.7 recorded in August 2012. Confidence on the part of owners, meanwhile, was up to 5.5 from 5.1 last time, while managers (up from 5.9 to 6.0) and brokers (up from 5.0 to 5.3) saw more reason to be optimistic this time around. Geographically, confidence in Asia was up to 6.0 from the all-time survey low of 5.4 recorded in August 2012. Confidence was also up in Europe (from 5.2 to 5.3) and in North America (from 5.5 to 6.6). Moore Stephens shipping partner Richard Greiner says: “It is encouraging to see confidence levels once more moving in the right direction. Moreover, as we sit on the cusp of another long, dark northern hemisphere winter, it is very pleasing to see an increased expectation of new investment being made in the industry. This increased willingness to invest is due in part to what many see as the first signs of a correction in the industry’s tonnage overcapacity problems. Scrapping activity has increased, although there is simply not enough demolition capacity in the world for this to be a solution on its own. Some sanity, born of hard experience, has returned to the new-building sector following the pell-mell pursuit of

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RISK MANAGEMENT new tonnage which characterised shipping’s salad days, which now seem so distant. Opportunities are starting to open up for the savvy and the solvent, and now is a good time to invest in the right deal. “Our survey revealed a high level of interest in China, with a number of respondents suggesting that the country is a source of hope for restoring the fortunes of the shipping industry. History suggests that such hopes are not always the most reliable foundation on which to build a future, however, and China has its own economic problems to deal with at present. The economic problems of the eurozone, meanwhile, continue to make themselves felt in the industry, and are balanced only slightly by the perceived beginnings of a recovery in the US economy. “Fewer of our respondents are expecting ship finance to become more costly over the coming year. If that is indeed the case and if such finance also becomes more readily available, this will help to turn investment aspirations into reality. But it would be wrong to think that we have seen the end of corrective action by the banks. Bankruptcies, Chapter 11 and loan loss provisions are likely to be a regular part of the ship finance lexicon for some time to come. “Shipping is an expensive business in which to operate. It is going to become even more expensive, with operating costs expected to continue rising over the next two years. Higher fuel costs and more expensive crews, together with increased expenditure in other categories, will keep shipping honest for the foreseeable future – and that is without the cost of having to comply with the BWM convention and other regulatory requirements. If you add to that the expectation that rates in each of the main tonnage categories are expected to remain depressed throughout 2013, the inescapable conclusion is that those companies that emerge intact and profitable from one of the darkest periods in recent shipping memory will be among the leanest and greenest the industry has ever seen.” As new environmental regulations come into force, and with liquidity extremely tight in the industry, owners and operators need to put in place a risk management strategy that “provides product assurance and locks in costs, as well as maximising cash flow and their levels of profitability, Soren Christian Meyer, global sales director at OW Bunker commented recently. While companies take different approaches depending on their appetite for risk, the difficult market conditions make using hedging instruments an attractive approach for more conservative owners and operators. Meyer has warned that companies should not hedge on a month to month basis, as this smacked of speculation, rather than hedging. Meanwhile, Hans Erik Christensen, managing director of Global Risk Management, said in the introduction to the company’s analysis of the oil market in 2013: “2012 was a year of extremely

fluctuating oil prices – from $128 in February to $88 in June. The present outlook does not give me any reason to believe that oil prices will be less volatile this year. If you wish to be certain your budget is not affected by the fluctuations, I recommend that you lock away your exposure – for instance with a customised hedging solution. Play it safe!” Global expects a slight rise in oil prices during the course of the year, with geopolitical risk – most notably in Iran and Syria – the “wild cards” for the year. According to Moore Stephens, companies operating in the mining industry face a range of sector-specific risks, each of which must be effectively managed and mitigated to prevent interruption to the smooth running of the business. “How would you control the management of a scarce resource such as water? How can you attract and retain skilled employees in an aggressive recruitment market? Identifying risks such as these and setting a framework in which controls can be set and monitored, will benefit your organisation far beyond simply meeting compliance requirements”. A structured approach to monitoring risk is vital, the accountancy company says. Moore Stephens has developed the Rhiza Network risk management software, a secure, encrypted web-based software that can be accessed and updated by authorised users from company headquarters and operational locations, no matter how remote. “Rhiza Network is a practical, low cost, easy to use tool that complies with best practice and avoids unnecessary complications.” n

A number of respondents suggest that China is a source of hope for restoring the fortunes of the shipping industry

hanS eRIK chRIStenSen, managIng dIRectoR of gloBal RISK management

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SHIPMANAGEMENT

talent SpottIng With concerns about the quality of crews, several initiatives aim to address the issue of finding and retaining top staff, at sea and on shore A survey of members of InterManager, the international trade association for the ship and crew management industry, identified the main concerns affecting the industry as it began the New year. In addition to fears about how challenging market conditions impact on operating budgets, ship and crew managers are also concerned at the difficulties of finding and retaining quality staff – both at sea and on shore. Responding to members’ worries, InterManager plans to introduce a number of new initiatives this year to address training and recruitment matters, including a young executives group to encourage and support the industry’s rising stars. According to InterManager president Gerardo Borromeo, who took over last October, said: “Today’s young executives are tomorrow’s leaders and we want to do all we can to support them and help them to develop their leadership qualities.” Bureaucracy remains a problem for the ship management sector, particularly the burdens it places on time and resources. InterManager is supporting a number of projects to help, such as crew payment by “plastic money”, as well as continuing to develop its industry-leading KPI system to streamline and share best practices and improve efficiency – particularly important when budgets are stretched. InterManager will also focus its efforts this year on crew management matters, with a cadet scheme, a worldwide seafarers’ survey and training and education initiatives in the pipeline.

geRaRdo BoRRomeo InteRmanageR pReSIdent

Borromeo said: “The human element is key to successful ship management and we must ensure we work together as an industry to raise standards and to encourage good staff – the best and the brightest – to enter and stay in shipping.” The InterManager survey of ship and crew managers also demonstrated that piracy and the smooth and successful introduction of the Maritime Labour Convention (MLC) are also concerns for ship managers. Eivind Killengreen of Wilhelmsen Insurance Services commented in the Wilhelmsen ship management newsletter W Manager that it is still too early to assess the likely effects of the MLC. “There is no doubt that the Convention erects a new set of duties and liabilities that will impact owners, managers and agents, but first and foremost it is a duty on the individual member states. It will not be until it is seen how the main member states react that it will be possible to gauge what will be accepted under the MLC, he said. “Best advice at present is to stay put and await the decisions made by flag states and the seafarers’ domicile countries.” He expected the first six months of the year to show how individual flag states planned to tackle the issues raised by responsibilities under the new convention. According to a recent survey by accountant Moore Stephens, crew wages are expected to increase 2.4% in 2013, with other crew costs thought likely to increase 2.1%. A number of respondents to the survey cited crew costs as a major cause for concern. One said: “As long as there is stiff competition on crew costs amongst managers, with wages being increased at random, the situation will not settle down.” Another noted: “The volume of new vessel deliveries and short contracts will put pressure on crew supply and crewing costs will go up.” Neither were respondents convinced that more expensive crews would actually mean better crews, the survey suggested. “Crew competence and skill is declining,” said one, “with a trend towards short contracts and fast promotion. This is leading to more accidents and to extraordinary unbudgeted expenses.” Another remarked: “The shortage of qualified crews is steadily getting worse. A lot of the new crews are of a very low standard.” Elsewhere it was noted: “Crews from countries that offer lower wages will play a very important role in the cost of operating vessels. With low freight earnings, owners will try to save on crew wages.” Meanwhile, one respondent claimed: “The biggest single factor in operating cost increases these days is the scarcity of Filipino and Chinese seamen.” n

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TECHNOLOGy

SolutIonS and SeRvIceS In current market conditions, innovative use of technology could be key to the success or failure of a company as the industry seeks to cut costs. New environmental regulations and the impending Maritime Labour Convention will increase the pressure on owners to make the best use of technology to stay afloat Many observers have raised concerns that, despite the existence of software solutions to improve ship efficiency, the shipping industry is backward in exploiting them. Giampiero Soncini, CEO of SpecTec Group, has been quoted in the trade press warning that those companies who do not embrace technology will be a weaker position at a time when freight rates are low and costs, including crew and fuel, are rising. SpecTec’s AMOS Business Suite (below) is an extensive and powerful Windows-based program capable of handling most of the daily ERP functions encountered in organisations that may consist of multiple locations. It is a client/server application, where the client program is run on a Windows PC, and the server program may use one of several different database systems. A standalone configuration on a single PC is also possible. The AMOS Business Suite reduces operational complexity, increases management control and decreases cost of ownership, the company says. Data sharing across departments eliminates re-entry and errors, while the common look and feel increases user-friendliness, the company says. Instant information and integrated reporting allows for fast decision making and replication of best practices across the enterprise. There is only one technical platform to manage and one installation set for the whole suite. License keys can activate the different products separately. SpecTec launched new online product support services for AMOS users in January 2013. “We have looked very carefully into what we provide in terms of Services and Support and how we provide it,” says Soncini, “ We have made some significant improvements to our product support services, in order to ensure that our customers’ experience not only improves service delivery, but also an improvement in the effectiveness of AMOS within their daily business.”

The new services are aimed to increase the knowledge and to optimise the software usage for those who already work with AMOS and the related solutions. n

gloBecomm Globecomm Systems, meanwhile, announced recently that it is providing connectivity services to 3,500 ships globally. Globecomm Maritime provides a wide array of connection platforms, from L-band to GSM and vSAT, as well as a suite of value-added software products. Growth in the maritime market has seen Globecomm connect more than half of its customers over Inmarsat platforms, with the remainder divided between Iridium, vSAT, and GSM technology. According to Dave Hershberg, Globecomm chairman and chief executive, “the growth of our maritime services segment is a core strategy for Globecomm and will continue to be so in coming years. The key to our approach is being ‘agnostic’ about the airtime and letting our customers choose a service that is right for them, all of which can take advantage of a market-leading suite of value-added services.” Malcolm McMaster, Globecomm Maritime president, adds: “2012 has been an excellent year for Globecomm Maritime. We have remained focused on core technologies such as Inmarsat FleetBroadband, but have also expanded our range of services, with emphasis on extended Ku-band coverage and our combined Ku-band/L-band service se@ FLEX. Reaching 1,800 active Inmarsat terminals demonstrates the success of continuing to support core maritime technology while at the same time providing cost-effective services that our customers have come to know and trust.” Milestones for Globecomm Maritime include installing 300 wi-fi networks to enable managed internet access for ships’ crews, combining hybrid vSAT and GSM services, enabling remote access to onboard IT networks and providing firewall and anti-virus products that keep vessels safe and compliant. n

wIlhelmSen developmentS

gIampIeRo SoncInI, ceo of Spectec gRoup

Wilhelmsen Technical Solutions (WTS) and Wilhelmsen Ships Service (WSS) joined forces last year to offer complete lifecycle portfolio of safety solutions for newbuildings and existing vessels. The WTS/WSS safety service provides a complete package of safety solutions based on the renowned Unitor brand to keep vessels, rigs and platforms safe and compliant throughout their working lives. The combination of high-quality products and an extensive service network means WSS and WTS can supply, install,

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TECHNOLOGy inspect and service safety installations to the same high standard across the globe. Together, the two companies offer products and services across a range of applications and vessel types, keeping people and assets safe, including fire and smoke detection, prevention and suppression systems, portable and stored extinguishers, cabinets, consumables and spare parts. Personal safety equipment, such as breathing apparatus, head protection, fire protective clothing, life rafts and lifesaving equipment are also part of the range, as is medical equipment. n

eBIS Simplifying the supply chain is the drive behind Maersk Line’s electronic business integration solutions eBIS and is an endto-end IT solution. What this means is that a customer can submit their booking and shipping instructions electronically or receive schedule and shipment tracking information directly in their systems through these eBIS. “We look at what our customers have today, how we can improve that and what is it that they are trying to accomplish to make sure that in the end, they get the solution they need. We want them to be actively engaged in the process, from the time we take the call and say ‘How can we help you?’ until the solution is delivered,” says Danny Danford from the eBIS team in Maersk. n

ShIpSeRv ShipServ, the leading marine and offshore e-marketplace, has signed up CMA Ships, the wholly owned fleet and crew management subsidiary of the CMA CGM group. CMA Ships signed with ShipServ on the strength of its pedigree in the container market and was attracted by new modules available on TradeNet, which include e-invoicing and e-logistics. The Marseille-based company is currently responsible for the procurement activities of around 100 container vessels. CMA Ships will connect to ShipServ through its current BassNet fleet management software suite, Lars Bratshaug, vP Sales EMEA for ShipServ said: “We are delighted to welcome such a major container company to the ShipServ community. To bring such a highlyrespected operator on to TradeNet really demonstrates that ShipServ is the preferred partner in this sector. We look forward to working with CMA Ships as it uses TradeNet in the future.” ShipServ now has over 15 containership owners and operators trading on ShipServ TradeNet, with close to a 50% share of vessels in the liner sector. As part of the continued drive to roll out its e-invoicing solution, ShipServ has teamed up with Eye-share to allow shipowners and shipmanagers, who use ShipServ TradeNet, the ability to receive, process and approve invoices and ultimately to save both time and money. With the ShipServ e-invoicing service, the invoice document from the supplier is handled just like any other supplier documentation through the ShipServ TradeNet platform and can now be processed directly into the Eyeshare invoice solution in order to speed up the workflow and approval process. n

mlc checKlISt The latest in a series of successful pocket checklists will support masters, officers and managers in preparing for inspections against the requirements of the Maritime Labour Convention (MLC) 2006. Lloyd’s Register and the UK P&I Club have developed the ILO MLC pocket checklist in both a conventional format and, for the first time ever, a smartphone app, to help ship operators comply with the convention’s requirements and reduce the risk of port state control detentions. The International Labour Organisation’s (ILO) MLC was introduced to help ensure that all seafarers, regardless of their nationality and the flag of the ships they work on, can enjoy decent working and living conditions. The MLC was ratified in August 2012 and will enter into force in August 2013. Ship operators, crews and their managers are looking for assistance in ensuring compliance with the new convention. The pocket checklist app serves as an interactive tool that enables ships’ crews and their managers to view the requirements of the ILO MLC and check off required activities as they are completed. The app is free and available for iPhone, iPad, Android devices, Windows phone and BlackBerry. Lloyd’s Register has now produced six pocket checklists in a series that address regulatory compliance requirements. They have been highly popular with the marine industry worldwide. Captain Jim Barclay, Lloyd’s Register’s port state control specialist said: ”The hard copy versions of our PSC pocket guides are seen by the marine industry as extremely useful for crew members to use as an ‘aide memoir’ to help reduce the risk of PSC detention. With advances in technology, it was felt that an electronic version of this pocket guide could be of further help, so we have developed an easy to use app that will benefit both ship- and shore-based personnel in the course of their duties.” The UK P&I Club has been a strong supporter of the Lloyd’s Register pocket checklists. Director Karl Lumbers, commenting on the latest release, says: “The MLC represents a significant change to the regulation of employment terms and working conditions for seafarers. It consolidates and updates more than 65 international labour standards adopted over the past 80 years. For the first time, it creates a system of certification and inspection to enforce those standards. “Masters and senior officers taking steps now to ensure their ship is compliant with MLC will need support. We believe this pocket guide will help those at the sharp end enormously.” In addition to this checklist and app, Lloyd’s Register is providing inspection and certification services to shipowners, shipyards and operating companies that address the five titles of the convention. Training courses to support their needs and help them prepare for the convention’s KaRl lumBeRS, implementation are dIRectoR uK p&I cluB n also available.

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ENvIRONMENT

BRImmIng wIth IdeaS With environmental regulation on the increase, there have been a number of initiatives by companies in recent times that aim to tackle some of the outstanding problems ReducIng emISSIonS DNv Research and Innovation has published a new postion paper looking at possible pathways to reduce CO2 emissions from shipping, giving directions for more environmentally friendly seaborne trade. According to DNv, the shipping sector is quickly becoming responsible for an increased part of the world’s carbon dioxide emissions, due to its heavy dependency on fossil fuels combined with growth in international seaborne trade. CO2 emissions from ships could count for at least 10% of global emissions in 2050, as compared to 3% today, if measures are not taken. With rising fuel prices and impending environmental regulations, the pressure is on for more efficient and environmentally friendly ships. DNv’s pathways study shows a doubling of present CO2 emissions by 2050 if nothing is done. It further shows that uptake of operational and technical measures combined with biofuels and LNG give a cost-effective CO2 reduction potential of 50% in 2050. However, if CO2 emissions from shipping are halved by 2050, the relative share of global emissions contributed by shipping would still be double of what it is today, since other industries improve. Hence, more must be done to stay at par. “If shipping should be required to reach emission levels in 2050 consistent with a global 2oC stabilisation target, we need to do more than stabilising emissions at the present level. To achieve the 2oC target, the shipping sector must reduce CO2 emissions by 60% from today’s emission level,” says Magnus Strandmyr Eide, senior researcher at DNv and principal author of the study. It has identified two plausible pathways for the 2oC target for shipping: either allowing for nuclear power; or by providing financial incentives for biofuel. It is realised that other pathways are possible, for example by including technologies currently very costly or immature, or through technological breakthroughs that are not identified, but which should be expected. From the

existing alternatives, the introduction and use of biofuels stands out as the best option, considering the overall environmental, safety and security impacts, DNv says. “Widespread use of biofuel in shipping depends on price, incentives and availability in sufficient volume. To capitalise on the potential, action must be taken by shipowners, technology developers and regulators. This includes development of full scale on board prototyping and testing, as well as infrastructure development for bunkering.” n

Proactive ship owners like Brittany Ferries are voluntarily investing in eco-friendly technologies and operational practices

BallaSt wateR management

While there have been concerns about the time line for the introduction of ballast water management systems on board vessels, leading petroleum tanker operator AET took the plunge recently with delivery of a new 320,000 dwt vLCC from Korean yard Daewoo. Named Eagle Vancouver, the Singapore-flagged vessel is one of the world’s first newbuilds to comply with the Ballast Water Management Convention. Although yet to be ratified, the IMO Convention will require vessels to manage their ballast water on every voyage either by exchanging it or treating it with an approved ballast water treatment system. Pre-empting the ratification, the new AET vessel has been fitted with a BWM system that disinfects ballast water using electrolysis technology. Commenting on the new delivery, AET president & CEO, Hor Weng yew said: “Investing in ballast water treatment technology at this early stage ensures that AET stays ahead of industry requirements and demonstrates our readiness to embrace our environmental responsibilities. This vessel is the first of four newbuild vLCCs to join our fleet in 2013 and all will comply with the BWM Convention. Not only is Eagle Vancouver fitted with this state-of-the-art ballast water management system, but she also features a range of innovations aimed at reducing bunker consumption and associated environmental emissions.” To substantially reduce the amount of fuel used, the new AET vessel incorporates a pre-swirl stator, rudder bulb and propeller boss cap fins. The third and fourth vLCCs to be delivered will be fitted with super long-stroke green engines to deliver more power for less fuel. n

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ENvIRONMENT Seemp notatIonS Classification society Bureau veritas has issued the first of its new voluntary Ship Energy Efficiency Management Plan notations to the 1,500-passenger and 500-car cruise ferry Cap Finistère, operated by France’s Brittany Ferries. Higher efficiency, lower costs and less environmental impact are all benefits for Brittany Ferries and for everyone in the transport chain, the company says. “Proactive ship owners like Brittany Ferries are voluntarily investing in eco-friendly technologies and operational practices,” says Martial Claudepierre, marine environmental leader at Bureau veritas.

waSte management

Amendments to MARPOL Annex v, which came into force on 1 January, have revolutionised the way the industry must look at the issue of waste disposal. In response to this, videotel has extensively updated its garbage management training programme to accommodate the radical shift of emphasis the new legislation entails. “Garbage isn’t high on the agenda for many senior executives in most businesses,” says Nigel Cleave, chief executive of videotel Marine International. ”But for shipowners and shipmanagers, the prevention of pollution and the proper management of waste is a key issue. Annex v will have an enormous impact on the ways ships handle their waste and demands an entirely new approach to waste management. “The whole onus of responsibility has changed. Effectively, the regulations are now about preventing the discharge of waste at sea. Where in the past most categories of garbage could be discharged in limited circumstances, that rule has been reversed and most waste streams may now not be discharged at sea except under certain strict conditions. In addition, written evidence of compliance must be readily available.” Shipowners and operators must now plan their whole garbage management strategy in advance, with the emphasis on minimisation and disposal in port reception facilities. The new garbage management training package from videotel seeks to raise awareness of the challenge and offers practical assistance in managing marine generated waste. It demonstrates how to comply with revised regulations on garbage collection, processing, storage, disposal and recordkeeping using the Garbage Record Book. It also presents good practice guidance contributed by leading members of the shipping industry to assist masters, officers, ship operators and owners to reduce and manage selfgenerated garbage more effectively. n

“Recognising those efforts and investments in the market place is vital to encouraging more widespread adoption of energy saving and CO2 emission reduction practices. “The ability of passengers and freight operators to choose the best environmentally performing ship for any voyage and the ability of owners to operate their ships at the maximum possible environmental efficiency, will redefine the shipping industry’s environmental landscape. From research and development through to procurement and retrofitting, industry experts are focusing their minds on finding the most effective technologies for saving energy, reducing emissions and mitigating fuel bills.” Claudepierre adds: “To help transport operators choose the right ship, and to help owners operate effectively, there has to be a clear standard. That is why we at Bureau veritas have developed a voluntary SEEMP additional notation. It builds on the IMO Ship Energy Efficiency Management Plan. “The SEEMP additional notation provides ship users, charterers and regulators with a tool to optimise and also make visible the environmental performance improvement of ships in terms of emissions of GHG and NOx and SOx, and will help owners to assess the potential impact of environmental investments. In this way, it will be possible to make a clearer estimate of the payback period for green investments such as trim and hull optimisation, new propeller systems, optimised maintenance periods for hull and propeller cleanings, and general fuel consumption reduction measures.” “Realistic goals for energy consumption reduction can be determined or planned using Bv’s SEECAT energy transfer simulation model of the energy usage on board the ship,” explains Claudepierre. n

maeRSK hItS taRget Maersk Line has hit its 2020 target of reducing CO2 emissions by 25% from its benchmark 2007 levels, the company has announced. “We are proud to hit this mark eight years ahead of schedule. It is confirmation we’re on the right track. And to keep that momentum we’re raising the target to a 40% reduction in CO2 by 2020,” says Morten Engelstoft, chief operating officer for the company. “Maersk Line’s focus on energy efficiency has made the company significantly more cost-competitive. And by cutting our CO2 we’ve also lowered the CO2 emissions of our customers, thereby helping them meet their own CO2 targets,” says Engelstoft. “We reached this target largely from a combination of operational efficiency, network and voyage optimisation, slow steaming and technical innovation. We will hit the 40% target with more of the same,” he adds. “Other important factors will be the continued co-operation with our vessel leasing partners to retrofit their ships and the arrival this year and next of the Triple-E vessels, which will be the largest and most energy efficient ships on the water.” n

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PORTS

poRt pRogReSS In spite of the ongoing depressed economic outlook, there are some large scale investments planned for ports around the world, with a number of ports posting impressive cargo throughput statistics Brazil’s president Dilma Rousseff has announced a R$54bn plan to modernise Brazil’s ports, launching the logistics investment programme for ports, aimed a modernising the management and infrastructure of facilities around the country, as well as encouraging private investment. The new programme for ports has already been trialled in the road and railway sectors and the new measures will establish a new regulatory framework within Brazilian ports, including regulating pilotage services, improving port access and encouraging the participation of companies that want to build private-use terminals. Other measures will focus on the improvement of the country’s port planning capacity, including an institutional reorganisation of the port sector and the establishment of logistic integration between transportation sectors. Approximately R$54bn will be invested in new leasing operations and private use terminals, of which R$31 bn will be invested by 2014/2015 and R$23.2bn by 2016/2017. Also earmarked for investment is R$2.6bn for waterway, road and railway access and for the shipyards at Brazil’s 18 main ports. Of this amount, R$1bn will be funded by Brazil’s Ministry of Transport and the rest will be funded mainly by Brazilian states and the private sector. n

hItc’S InauguRatIon Huizhou International Container Terminals (HICT) officially opened in January and the celebrations marked the groundbreaking ceremony for a 50,000 tonne petrochemical terminal, plus the launch of a 30,000 tonne oil terminal expansion project HICT covers 60 hectares and comprises two 50,000 tonne container berths with a quay length of 800 metres and a depth alongside of 15.7 metres. The 50,000 tonne petrochemical terminals project is made up of three petrochemical berths and is scheduled to be operational in mid-2014.

The terminal expansion will upgrade the existing 30,000 tonne oil terminal to a 50,000 tonne LPG berth. The project is scheduled for completion in late-2014 with trial operations to take place in 2015. Meanwhile, HITC parent Hutchinson Whampoa has been awarded a contract worth $130m from Sohar Industrial Port Company for a terminal in the Oman-based port. The 70ha terminal is expected to double the ports capacity to 1.5m teu. The drive behind the project is to ensure that the new terminal will mean Oman will no longer be considered as a feeder destination using local container hubs, but a destination in its own right, which will cut the cost of imports. The port of Sohar posted record volumes during 2012. Total cargo volumes handled by the port were up 51% to reach 43.6m frt in 2012, from 29.1m frt a year earlier. The port handled 198,817 teus in container volume in 2012, up 83% from the previous year. Iron ore ships to vale’s pelletising plant are understood to have driven an increase of 78% in dry bulk volumes. n hong Kong conSIdeRS emISSIonS Controlling emissions looks set to extend to the Far East with comments by Under Secretary for the Environment Christine Loh Kung-wai that Hong Kong port could introduce low sulphur rules as early as next year. Cold ironing at the Kai Tak cruise terminal has been another hot topic in recent times, with cruise companies saying that cold ironing capability may present problems for existing vessels. Onshore electric power may take some time to achieve. n panama canal ReacheS mIleStone The Panama Canal Expansion Program achieved yet another important milestone in January with the arrival of the first shipment of valves that will be used for the operation of the Third Set of Locks. The valves were built in South Korea by Hyundai Samho Heavy Industries.

jadeweSeRpoRt faceS wRangle The new JadeWeserPort in Germany’s Wilhelmshaven is now open for business, although the early days of operation have been marred by terminal operator Eurogate’s decision to take legal action against the port for what it believes are excessive port dues. Delays due to legal action may see Wilhelmshaven lose out to other major German ports, such as Hamburg and Bremerhaven. n

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PORTS cRaneS on Route foR london London Gateway’s colossal quay cranes have arrived at the UK’s new deep-water container port. The first three of the port’s giant quay cranes were manufactured by Shanghai’s Zhenhua Port Machinery Company (ZPMC). The enormous crane’s boom has a reach that will allow it to pick up containers 25 rows across deck, beyond the width of the world’s largest container ship. Tim Halhead, London Gateway Operations Director, said: “The size of the cranes future-proofs the port, allowing London Gateway to handle the next generation of ultra large container ships. These cranes are among the most advanced in the industry, assisting our operatives to deliver a reliable and consistently high level of productivity.” The cranes are semi-automated, which allows quick and efficient handling of containers. They are also connected directly to the Terminal Operating System, which tracks the containers and sends work orders to the crane operator. The port will start operations on the first berth in Q4 of this year with five quay cranes and two rail-mounted gantry cranes provided by ZPMC, while Cargotec will provide 10 automatic stacking cranes and 18 straddle carriers for the first berth. The 3.5 million TEU container port is expected to make significant supply chain savings to importers and exporters. By being located much closer to the vast majority of the UK market, the port will cut delivery costs. Drewry, the independent maritime consultancy, has indicated that shippers will be able to reduce round-trip transport costs by £59 pounds per container to the Midlands and the North-West and £189 per container for London and the South-East, representing about 90% of the UK deep-sea market, according to London Gateway. n

“This marks a new milestone for the Panama Canal expansion works, particularly for the construction of the new locks,” Panama Canal Administrator Jorge Quijano said. According to a report on the US Seaport Outlook in 2012 by Jones Land LaSalle, US ports have been able to benefit from the announcement by Panama that the opening of the new set of locks was put back to 2015. “Revitalisation of the canal and its subsequent delay offers a temporary reprieve for several US East Coast Seaports, many of which are racing to complete modernisation projects of their own to become post-Panamax supply chain contenders as ships from, say, China, transit Panama. Many of these modernisation projects are, in turn, running behind schedule as US seaport competition only intensifies to vie for Panama-based traffic to come,” the report suggests. The new port being constructed at Colon on the Atlantic side of the Panama Canal is “poised to quickly jump into the ranks of the world’s most crucial trans-shipment hubs”, the report adds. n jeBel alI aImS hIgh Work is also continuing on a one million TEU expansion of Jebel Ali Container Terminal 2, which is scheduled to be opened during the second quarter of 2013. Extension of the quay at Jebel Ali will bean that six 15,000 teu ships will be able to be alongside at any one time. Work is also continuing on the new 4 million teu capacity Terminal 3, set to open in 2014, taking Jebel Ali’s total capacity to 19 million teu Commenting on the expansion plans, Sultan Ahmed Bin Sulayem, chairman, of DP World, said: “DP World’s pipeline of expansion projects and new developments are in line with the industry’s emerging horizons both in terms of capacity and technology. “As our flagship facility and the largest port in the Middle East, Jebel Ali has consistently brought efficiency to one of the busiest supply chains in the world. DP World remains committed to supporting Dubai’s unparalleled position as the region’s commercial hub and welcoming the next generation mega container ships.”

Mohammed Al Muallem, Senior vice President and Managing Director, DP World, UAE Region, added: “For well over a year now, DP World, UAE Region has been handling volumes of more than 1 million TEU every month. With our customers now deploying ultra large container ships, Jebel Ali is racing ahead with its capacity expansion to meet their demand. “The expansion of Terminal 2 and the development of Terminal 3 will allow us to offer customers not just greater efficiencies, but also economies of scale to match changing trade patterns.” When the expansion work is complete, Jebel Ali Port will be able to handle 10 of the next generation 18,000 TEU mega vessels at the same time – the only port in the region able to do so. The expansions also will create more than 1,000 jobs directly. n hutchISon holdS off Hutchison Ports (UK) withdrew its latest application for the development of Harwich’s Bathside Bay, following a UK government announcement that it would hold a public enquiry into the scheme. Representatives of the company and Tendring District Council (TDC) are aiming to hold talks to try and resolve the situation. In a letter to TDC, Hutchison Ports said that it had taken the decision to withdraw the application “particularly in light of the anticipated costs and delay associated with a call-in and Public Inquiry”. TDC Leader Neil Stock said that the company’s decision was a blow, but he understood its reasons. “It must have been absolutely gutted when it heard the government had gone for a public inquiry and, quite frankly, I am not surprised it pulled the application,” he said. “We constantly hear that planning should not stifle the country’s economic growth, but then the Secretary of State for the Department of Communities and Local Government seems to go totally against that edict where Bathside Bay is concerned. “I sincerely hope that the delays do not mean that Hutchison Ports feel they would be better off investing elsewhere,” he added. n

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OFFSHORE

BuRSt of eneRgy Oil, gas and coal are all expecting a surge in growth this year. Plus: mergers, deliveries and wind farm guidance Significant growth in the offshore oil and gas industry is expected this year, according to Seismic Shifts, a new survey by GL Nobel Denton. However, if the industry remains confident, the survey also highlighted concerns over an increasing shortage of skilled professions, as well as uncertainty over the economic situation. Giving the views of over 400 industry players, the report suggests that for 2013, nine in 10 respondents remain confident for the outlook for oil and gas industry this year. However, skills shortages have risen sharply to become the number one barrier to sector growth. Merger and acquisition-fuelled expansion is expected to show a year-on-year fall, with oil prices expected to remain stable throughout the year. An upsurge in US projects has made the country the most desirable international oil and gas investment destination, followed closely by Brazil and Australia. The survey suggests that concerns over the eurozone may cause economic uncertainty to affect the sector in 2013. Pekka Paasivaara, executive board member for the GL Group said: “The industry is in a positive mood, according to our research. This is underpinned by the potential for exceptional growth in projects across the US, Brazil and Australia, and signs of a power shift in global energy distribution. “Trends indicate that 2013 could be the year in which we see the beginning of an east-west divide in supply and demand. The US will increasingly fuel its own energy needs, relying less on the Middle East for imports. In turn, the Middle East may be able to refocus supply toward growing energy demands in Asia.” Some 89% of those questioned stated that they were confident for the industry as a whole, an increase from 82% in 2012. This buoyancy translates to expectations of

peKKa paaSIvaaRa, executIve BoaRd memBeR foR the gl gRoup

rising capital expenditure by the global oil and gas industry this year, according to 51% of respondents. The research does suggest, however, that a significant proportion of any predicted rise in spending will be attributed to securing and retaining talent from a dwindling pool of resources. An industry-wide deficit of skilled oil and gas professionals is now seen as the number one barrier to this broadly positive outlook on global growth, up from the second biggest barrier in 2012 and fifth biggest in 2011. It is likely that technology will increasingly be called upon to plug this skills gap, the survey suggests. Some 37% of those surveyed believe research and development spending will increase, while just 6% expect it to fall in 2013. GL Noble Denton expects one likely consequence of this will be greater co-operation between international oil companies and national oil companies as the former are called upon to provide the technologies desperately required to access reserves held by the latter. “Despite the continued emergence of shale gas extraction and concerns over a broader global gas glut, any further worldwide decoupling of oil and prices remains unlikely, with less than half (44%) of respondents believing gas prices will continue to deviate from the oil index,” it says. “According to the research, oil and gas professionals expect oil prices to remain high in 2013, at around US$100 per barrel.“ A degree of stability is also expected in oil and gas companies’ growth strategies. 41% of respondents suggest that organic growth will fuel business expansion this year. Just 14% of respondents expected mergers and acquisitions to provide the majority of their expected growth, representing a major decrease on the 35% who expected this in 2012. The US leads the way for countries highlighted as most favourable for global investment in 2013. Australia and Brazil follow closely, according to the research. Australia has benefited from high capital expenditure mega projects, while Brazil has a number of lucrative ventures coming online in 2013. In contrast, Asian countries have slid down the list of preferred investment destinations, suggesting that broader concerns remain about spending potential in the region, the survey says. According to Paasivaara: “Seismic Shifts clearly reveals that US, Brazilian and Australian growth is likely to drive the oil industry over the coming year, but skills shortages remain very much front of mind, despite robust confidence levels. As advancing technologies continue to offer renewed opportunities for operators in a variety of locations worldwide, the race is on to secure the best talent from a global pool that is widely considered to be declining. “These shortages will most acutely affect mature markets such as Europe and the US, although the research findings suggest that there is potential for an influx of younger specialists from Asia in the long term, where the uptake of engineering as a career path is significantly higher.

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OFFSHORE “The conflicting pressures of talent management, increasingly complex hydrocarbon recovery operations and R&D spend are all likely to drive up overall capital expenditure this year. Companies will have to think smarter to achieve the levels of safety, integrity and performance that will be required to breed success in 2013.” n

coal ShaRe RISeS Meanwhile, coal’s share of the global energy mix continues to rise, and by 2017 coal will come close to surpassing oil as the world’s top energy source, the International Energy Agency (IEA) said in its recent medium-term coal market report. Although the growth rate of coal has slowed from the breakneck pace of the past decade, global coal consumption by 2017 stands at 4.32 billion tonnes of oil equivalent (btoe), versus around 4.40 btoe for oil, based on IEA medium-term projections. The IEA expects that coal demand will increase in every region of the world except in the US, where coal is being pushed out by natural gas. “Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st century,” says IEA executive director Maria van der Hoeven. “This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the US combined. Coal’s share of the global energy mix continues to grow each year and if no changes are made to current policies, coal will catch oil within a decade.” China and India lead the growth in coal consumption over the next five years. The report says China will surpass the rest of the world in coal demand during the outlook period, while India will become the largest seaborne coal importer and second-largest consumer, surpassing the United States. The report notes that in the absence of a high carbon price, only fierce competition from low-priced gas can effectively reduce coal demand. “The US experience suggests that a more efficient gas market, marked by flexible pricing and fuelled by indigenous unconventional resources that are produced sustainably, can reduce coal use, CO2 emissions and consumers’ electricity bills, without harming energy security,” said van der Hoeven. “Europe, China and other regions should take note.” n nyK meRgeR NyK subsidiaries NyK-Hinode Line and NyK Global Bulk Corporation announced plans to merge in December. Hinode transports a variety of cargo, such as plant and heavy equipment, while NGB specialises in handy bulk carriers. “The companies have decided to merge to improve efficiencies and service quality and to make use of the NyK Group’s synergy to grow beyond the bounds of the existing business models for the two companies,” the company said in a statement. The integration of businesses is expected to occur from October 2013. n

KnutSen delIveRy Knutsen NyK Offshore Tankers (KNOT), of which NyK has a 50% share, delivered Carmen Knutsen, a new 157,000 DWT offshore shuttle tanker built by Hyundai Heavy Industries to Repsol, under time-charter contract for five years plus an option for crude oil transport off Brazil. The KNOT Group has entered into a new time-charter contract with Repsol Sinopec Brasil, a joint venture company between Repsol and Sinopec, for 10 years plus an option for a new built dynamic positioning 152,000 DWT offshore shuttle tanker to service RSB for its Santos and Campos basin off Brazil. The vessel will be delivered to RSB in the third quarter of 2014. The vessel will be built at Cosco in Zhoushan. n

wInd faRm guIde Bureau veritas Certification France has released a comprehensive Guide on Offshore Wind Farm Project Certification, which allows industry players and experts to make sense of the complex rules applying to certification processes in the field of offshore wind farms. Offshore wind farm projects pose a number of challenges. Installations are complex and each site is different. Certification by an internationally recognised body ensures each project meets all the regulatory requirements. “Whether your company is a wind farm operator, developer or wind-turbine manufacturer, Bureau veritas offers a wide range of customised services,” said Philippe Lanternier, Bureau veritas Industry & Facilities Division EvP. The Guide on Offshore Wind Farm Project Certification includes information on a range of topics, including normative and informative references; the project-certification process; the approach to certification; site conditions and design evaluations; transportation and installation surveillance; and, finally, the measurement of project characteristics. The guide also covers issues such as mandatory requirements, steps to be taken to obtain certification and the certification methodology. Due diligence is crucial in any project such as setting up a wind farm, says Lanternier. “Companies will receive independent technical expertise for their wind-energy projects with our due diligence,” he explained. n

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CORPORATE FEDnaV: a LinK to thE FutuRE

Winner of the 2012 IBJ Bulk Ship Operator of the year award, Fednav leads the way by reducing its environmental footprint FiRMLy anchoRED For nearly 70 years, Fednav Group, a privately owned company, has been delivering practical, innovative maritime transportation solutions as an important part of the international shipping industry. Founded in 1944, the group has continually expanded both its growing team of experts in offices located around the world and its modern fleet of owned fuel-efficient ships in order to accommodate increased trades and tonnage handled. Today, the group’s reputation as the largest operator of ice-class, ice-strengthened dry bulk carriers in the world, as well as the largest ocean-going, dry bulk ship-owning and chartering group in Canada, is firmly anchored in the international shipping industry. With an unwavering commitment to quality and customer service, Fednav Group is charting a course for a bright future in maritime trade. chaRting a couRSE FoR thE FutuRE The Fednav group currently has on order 10 bulk carriers. The list includes three supramaxes for delivery in 20132014 and six handysizes expected in 2015-2016, ordered through partners Sumitomo Corporation and Oshima Shipyard to be built in Japan, and one ice-breaking bulk carrier under construction at Universal shipyard of Japan to be launched at the end of 2013. These new ships will increase the group’s already impressive fleet of 40 owned carriers and some 20-25 other vessels on long-term charter to Fednav International Ltd. (FIL), the Group’s freight arm. The total fleet of 80-85 vessels includes a significant number of St Lawrence Seaway max-size bulk carriers, a growing number of handymax/supramax bulk carriers, and several panamaxes and multipurpose tween-deck ships. With one of the most modern fleets in the world, these new additions mean safer, cleaner, more fuelefficient ships with larger cargo-carrying capacity, stronger cranes, and reinforced decks, thus confirming Fednav Group’s leadership role in global trade. DEPth oF ExPERtiSE Fednav Group has been a pioneering presence in Canada’s far north since the 1950s, where it has been instrumental in performing Arctic community resupply and servicing DEW Line sites. With extensive experience navigating in ice-covered waters, Fednav Group has played a key role in all major tidewater mining projects in Canada’s Arctic including nickel, copper, and lead mines in Deception Bay, Little Cornwallis, Nanisivik, and voisey’s Bay, as well as in Alaska. In an effort to facilitate navigation particularly in polar environments, Fednav Group relies on its IceNav proprietary software. In partnership with veson, a marine software company, Fednav

Group also developed an Integrated Maritime Operations System that fully integrates communications and operating procedure for its global Operations and Chartering Departments. The result is more time for operators to focus on vital value-added tasks, from voyage planning to safety and environmental awareness. gREEn SaiLing ahEaD On the environmental front, Fednav Group once again met or surpassed environmental regulatory requirements: since 1990, Fednav has reduced greenhouse gas (GHG) emissions by 48.5%, and in just the past 3 years, they were reduced by over 17%; in 2011, the cargo transported increased 8% while GHG emissions were reduced by 1%; sulphur emissions have decreased by 29% between 2008 and 2011–preventing nearly 5,000 tonnes of sulphur to be released into the atmosphere; Fednav is the only company to prohibit the disposal of cargo residues in the Great Lakes, the St. Lawrence River, and Gulf of St. Lawrence; and, finally, its fleet renewal includes a shipbuilding policy for designing ships that substantially reduce its environmental footprint. In 2012, Fednav Group and World Wildlife Fund Canada endorsed a new partnership agreement, consisting of a comparison study of operational best practices in the Arctic, support for the WWF Arctic conservation campaign and support for the mandatory application of the Polar Code of the IMO. The WWF Arctic programme’s goal is to protect the habitat of polar species and to preserve its ecosystem. aLL hanDS on DEcK For many years, Fednav Group has been awarding various scholarships to deserving students. In 2012, the Fednav Scholarship was awarded to two business students from the Great Lakes region; one from Rotman Commerce, University of Toronto, the other from the Ross School of Business, University of Michigan. The two recipients completed an internship in Montreal this past summer, allowing them to familiarise themselves with the world of shipping and international trade. One mandate of the internship included submitting a report on new developments in the Great Lakes. n

the Fednav group 1000 de La Gauchetière West Suite 3500 Montreal, QC H3B 4W5 Canada 514.878.6500 info@fednav.com www.fednav.com

A strong shipping legacy supporting tomorrow’s business needs

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CORPORATE BBc chaRtERing RaiSES thE BaR

Freight Focus talks to Svend Anderson, CEO at BBC Chartering, about how the group intends to maintain its ever-increasing success

For more information, visit: www.bbc-chartering.com

As a global shipping group, BBC Chartering offers maritime transport for project cargo, break bulk, bulk, or any other non-standardised cargo. Established in 1997 in Germany, the company today is known for marketing the largest multipurpose and heavy-lift fleet globally. In peak times during 2012, BBC Chartering operated over 150 vessels, ranging from 3,500 to 37,300dwt and managed an average fleet capacity of almost 1,6mln dwt. The company’s current fleet averages below five years of age and assures charterers that safe and economic ships with up-to-date technical characteristics are employed for their projects. Freight Focus talks to Svend Andersen, Chief Executive Officer of BBC Chartering, about current trends in the project shipping business and how the company seeks to create value, especially for the offshore and energy sector in the future. FF: Welcome to Freight Focus. We were not spoiled by positive news from the shipping sector lately. Can you tell us how BBC Chartering has been faring in the past few years? Sa: Indeed, the market has been very difficult and still today it is very challenging. Many shipping companies struggle in one way or another trying to make the best out of the situation while they adapt to competitive pressure on freight and capital markets. We at BBC Chartering believe that the project shipping industry has marched through the deepest vale of the crisis and, at least speaking for our sector, we see promising developments. Here, we look confidently into the future again as demand development for shipping capacity and supply of tonnage slowly comes back to a more balanced ratio. FF: BBC Chartering is currently rolling out one of the largest fleet renewal and modernisation programmes in the industry and does this in tough economic times. What can you tell us about this strategy and the current status? Sa: BBC Chartering’s general strategy always was to grow the business and improve market access to vessels and services in the multipurpose and heavy lift segment. Of course, the dramatically changed economic situation in 2009 and onwards required all parties

involved to reassess their involvement in the new building programme (which was decided in boom days) and come up with a solution that would still allow for its execution. This required many compromises, as you can imagine. Today, we are proud that we stuck to this decision and now the market experiences the value of our new vessels and how they increase the quality of a global MPv/HL fleet. Our programme consists of 22 heavy lift vessels in two vessel series and an additional series of eight compact multipurpose vessels. To date, we operate six of the eight multipurpose vessels and 14 of the 22 heavy lifters. Through this, we increased our maximum lifting capacities from previously 500mt to 800mt. FF: In 2010, BBC Chartering introduced the “project division”. What is the strategy behind this and how are things going there? Sa: Despite our commitment to the fleet renewal programme, we always have to match commitments on chartered in vessels with market opportunities. This requires us to think about new service channels as well. The project division was introduced back in 2010 to especially address the offshore, oil & gas heavy lift and project cargo market with our new vessels, but also to leverage its capabilities into our existing fleet. We realised that this business needs to be tackled differently compared to our traditional shipping business. Especially longer lead sales cycles have to be managed and transport engineering capabilities need to be provided to meet the quality demands of our clients in this sector. Today, the project division is swamped. I think it is a good sign, although we have to improve in winning more tenders. I believe this step was inevitable for us if we want to market vessels with high lifting capacities and also strengthen our focus on the offshore, oil and gas business. FF: What recent project has BBC Chartering been involved in with the project division? Sa: Oil field services firm McDermott International won the subsea contract from Technip for deepwater offshore engineering, construction and installation on the Macedon LNG project back in 2011. This SURF (Subsea, Umbilical, Riser and Flowlines) contract was McDermott’s first in Australia. BBC Chartering was awarded the sub-contract from McDermott for transporting the subsea umbilicals and flexible flowlines. Our team enjoyed this challenge and succeeded executing it in 2012. Following a turnkey approach, we co-ordinated all aspects of planning, engineering, manufacturing sea-fastenings, and executing the transport for one of the single longest offshore umbilicals to-date with a length of 65 km and a diameter of about 20cm. This is just one of the many projects the division is involved in. I am very proud of the division’s development and this success. n

Svend Andersen, Chief Executive Officer of BBC Chartering

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CORPORATE a DEcaDE oF FiRStS Freight Investor Services puts innovation at the forefront

Tel: +44 (0) 207 090 1120 E-mail: info@freightinvestor.com Web: www.freightinvestorservices.com Twitter: @freightinvestor

would change. We were among the first brokers to establish an independent marketplace, The Cleartrade Exchange, which lists swaps contracts ahead of regulatory changes that will make trade reporting mandatory. This innovation also enabled us to build the world’s first real-time swaps trading platform for fuel oil, creating another new trading opportunity. The continued evolution of the market has enabled us to maintain our level of innovation. FIS was the first broker to trade an RMB-denominated FFA, a new product aimed at tapping further into the huge liquidity pool in China in local currency. To maintain this leading position has meant being prepared to go where the market is. In addition to operations in London, the US, India, South Korea, Singapore and Shanghai, we recently transferred our main centre of FFA broking from London to a new office in Dubai in order to be closer to the Asia market and to tap new liquidity across the Middle East. So what’s next? Commodity exploration in Africa is booming so perhaps soon we will be broking iron ore, coal, fuel oil and freight from Africa to the world. Whatever happens, FIS will be there right at the start. n

Freight Investor Services (FIS) is a company with a reputation for innovation. We have spent the past 10 years working closely with principals in freight and commodities, helping to make freight derivatives a mature and liquid market. FIS was among the first to realise that cash-settled swaps were the ideal tool for hedging freight risk in an increasingly volatile market. As volatility grew, we encouraged the development of clearing and were instrumental in creating the mechanism to manage exposure after the financial crisis of 2008. Our vision extended from swaps into freight options and from there into a group of related commodities. As risk has increased, more and more commodities moved from annual contract agreements to short term, indexed pricing, creating a huge opportunity to use swaps to manage price exposure. FIS was the first brokerage to trade the cleared iron ore swap, an instrument that has since become the standard hedging tool in the steel raw materials market. We were the first to recognise the same opportunity existed along the whole steel supply chain, creating swaps in coking coal, steel and scrap. We also recognised that after 2008, the market

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Vessel protection in the or illegal weapons. Gulf of Guinea standards A market shakeup In response to the almost daily, A proven inevitable to up areis springing concept provide tremendous level editor While new security firmsquality the highest of ISN’s concept demand, ISN recently service to ship owners. of operations Sandra Speares announced that left for it protecting cargo will also offer vessel leaving one to wonder if there are any personnel 1483 ships tel: +44 (0) protection in the is 527998 based on Individual here ‘flag service the following: Gulf of Guinea. Despite the prevalence e-mail: all moved into have shoul ifoffthey » A prerequisite in UK Special Forces orISN of maritime piracy develops follow the Horn safetyd and of physical and sandra.speares@mar-media.com off the Nigerian tradeconsecurity ofofAfrica ’, the that trade cepts coast and in the technical for equation. shippart the instab owners only wider Gulf of Guinea, these worldwide. (HOA) Our recent spate security measures, can the private sector, ility are has shatte piracy in this region including razor and the of piracy servicescontin safeguardindividual uefrom wire, range mAnAger irresp physical tends to receive intern red SAleS merely and maritime ective protection hijack consulting sea lanes statesationa any less public attention flag via on-board of sensitive belief of a coastdavid Owners, managers, insurers, Scott areas andings. this l up than in the Horn audits . comm to the of clear cause compaand the Africa unity physical al state’ nowhere operative deployment of armed barriers red to Gulf of Aden. tosprevent access has strug e-mail: for conce escorts. The grow25 incide mix. thesecurity isOur all part of the ing through charities arepreval frequency gled rn. lack of personnel, being gangways. nts for of attacks and to david.scott@mar-media.com ent than any the the former higher Ship-o members » The number of whole insurance premiums in the of specialcoher provide wners ent security personnel of 2011 police gulf for shipping in the highly military the “smas are Gulf under me securideployed on guinea ormariti units, gives prized have manyof years ofstanda a clear Guinea led us to any given ship depends (gog) resour h deSigner of ty extend professional needexperience bly and strate and our traumatic.t anxiou offer ces running of for a region to formu ofgrab” on the ship’s gy more services the to the counte is vital for late andsafe s, their to vessels calling robbe are especially size and ivescrimin Maritime security intern Justin r the rise obstacles here are ry and at crews trained continuing ational for maritime obstructing Niger Delta. is violent, ports infar more of maritisecurityagree al activit the many Comm viewtofrom the bridge uponthat assignments. contributory justindesign.co.uk pernic me crimin unity, there a compr to ensure years, and to y in the ious and so, where installations, We can provide Meeting it is curiou ports, offshore its origin gulf, but ehensensure that, at any al activit factors our clients’ needs the following: is given ive appro extrem s lie by providand time, just like y s »that affecting the free acces Highlystate ingonsho piracy the highest experienced, shipach occurr the affecting theentire the mariti ely re wherestandards against off east area protected trained and of equilib ences area. andtoits surroundings vessels are s to weapo main seafarers me povert is our Africa areaand ships in full view of the of piracy offshore. tasks as rium has ns one y, unem Germany’s giveofcause security team. 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(alex.corboude@mar-media.com) Designer: Justin Ives (www.justindesign.co.uk)

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producing magazines under organisations as well as it’s own

unqualified quatio debit, personnel” quisit,

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2012 RISk MA

REPORTS

APP ON Publisher: W H Robinson ANDROID Editor: David Hughes (editor@mar-media.com) Deputy Editor: Sandra Speares (sandra.speares@mar-media.com) Project Manager: Dawn Barley (dawn.barley@mar-media.com) Project Consultant: Alex Corboude

Maritime Media specialises in contract for major shipping

» Crew

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Wor N 2012

» Early warning systems and prevention of unauthorised the through the communication boarding of warnings, evasive manoeuvres and the use of firearms when necessary. » Use of a safe room capable of housing ship personnel for up to 96 hours. The safe room also serves as a control centre capable of controlling the ship’s course, monitoring activity on board the ship and communicating with emergency responders and rescue teams. » Procedures for security personnel to respond to a violent attack on board, aimed at preventing unauthorised boarding and repelling an attack on board the ship.

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the difference a Newport butis as of the utmost importance Piracy is by no means a new concept – something ISN fully understands. it in 1997 As a securityout services provider News symposium on the topic pointed based in Germany, ISN has beentrade. for an old providing armed Picture a question of new methods security services was more to

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Spring 2013

FF Spring 2013 book.indb 50

19/04/2013 16:31

14-16 MAY 2013

The Antwerp Expo, Antwerp, Belgium Attend and exhibit at Breakbulk Europe - Europe’s largest gathering for heavy-lift, project cargo and breakbulk cargo transportation. During this two-day conference, industry leaders will discuss today’s most pressing transportation issues, while a packed exhibition floor will offer a premier networking opportunity with the world’s leading specialized carriers, forwarders, ports, and terminals and service providers. More than 5000 breakbulk & project cargo shippers, forwarders and service providers will attend Breakbulk Europe. What do they know that you don’t?

ATTEND The Breakbulk Europe Conference is the largest conference in Europe focused on traditional breakbulk and project cargo trade and transportation issues. This conference has nearly doubled in size each year since its inception, an indication that there is a great need for education and networking in this market. During this conference, shippers have the opportunity to learn about breakbulk and project cargo issues as they relate to European trade and to meet with specialized carriers, ports, terminals, freight forwarders, equipment companies and packers. Conference program includes education sessions as well as networking functions and an exhibit hall.

EXHIBIT If you market to a highly targeted audience of senior transportation managers, you’ll want to explore the range of opportunities and benefits available at this in-demand Breakbulk event. Becoming a highly visible exhibitor at Breakbulk Europe is a prime opportunity to: · Elevate your company above the competition · Heighten your global brand recognition · Remind your customers of your market presence · Generate sales · Introduce new company officials · Announce a new product or service · Have face-to-face contact with potential customers · Entertain clients

TO ATTEND: Visit www.breakbulk.com for additional information and to register. TO EXHIBIT OR SPONSOR: EUROPE: Contact Adrian van Beuningen at +32-2-808-4355 or avanbeuningen@breakbulk.com NORTH & SOUTH AMERICA: Contact Christian Thompson at +1-281-416-4672 or cthompson@breakbulk.com ASIA: Contact Gary Tang at +852.2585 6199 or gtang@breakbulk.com

FF Spring 2013 book.indb 51

SPONSOR Sponsoring at the Breakbulk Europe Conference & Exhibition provides a strong in-person connection for companies who are interested in aggressively marketing their services to European Project, HeavyLift, RoRo and/or Traditional Breakbulk decision makers in 2013. Sponsorships range in pricing and are customized to meet the needs of companies who are looking for lead generation and/or brand awareness. Sponsorship opportunities include: · Metal Sponsorships · Welcome Reception/ Luncheons · Golf or Bike · Equipment or Product Promotion · Registration Area · Hospitality Suites · Live Webcast on the Show Floor · Educational Sessions · Marketing Material Distribution · Program Guide & Breakbulk Magazine Advertising

Official Publication:

19/04/2013 16:31

EvENTS 6-10 may 2013 28th World Ports conference Los angeles The 28th World Ports Conference is a must-attend event, if you wish to update yourself on what is currently happening in the world maritime scene and their implications to your port. www.iaphworldports.org

09-11 may 2013 china international Logistics Expo 2013, Beijing Learning from the successful experience of previous sessions, the 6th China International Logistics Expo 2013 (CILE 2013), taken by Jinzhenfa (Beijing) Consultation Planning Inc., will be held at China International Exhibition Center (CIEC) from May 9 to May 11, 2013. www.china exhibition.org

15-17 may 2013 cScMP 2013 Europe conference, amsterdam CSCMP’s 2013 Europe Conference, How to Cut Supply Chain Costs without Paying the Price, will take place at the Park Plaza Hotel, Amsterdam Airport. This 3-day event features a seminar, networking opportunities with peers from around the world, a Supply Chain Game teaching supply chain management in changing markets; and presentations, case studies and break-out sessions led by expert supply chain leaders from major blue-chip corporations including Unilever, Dow Chemical Co, Johnson & Johnson, Procter & Gamble, Siemens and PwC. Learn from the experiences of the world’s leading supply chain professionals: for full conference details and bookings, visit http://cscmp.org/annual-conferences/europeCSCMP membership information available from http://cscmp.org/membership/membership-types

4-7 june 2013 nor-Shipping 2013, olso Nor-Shipping is the leading maritime event week with its top quality exhibition and conferences attracting shipping industry players from around the globe. www.messe.no/en/nor-shipping

20-23 june 2013 Sino-European Freight Forwarders conference, Barcelona Jointly organised by WCA and the China International Freight Forwarders Association (CIFA), the Sino-European Freight Forwarders Conference presents a golden opportunity for all independent freight forwarders to network and develop new business with likeminded companies from around the world. Sponsored by the Port of Barcelona, the Sino-European Conference will see hundreds of top independent logistics companies from all corners of the globe gather for three days of intensive pre-arranged One-on-One business meetings and social networking events. There is simply no better platform for agents to explore opportunities for growth, cement existing partnerships and build new and rewarding business relationships. www.sinoeuropean2013.com

9-13 September London international Shipping Week, London Organised by Shipping Innovation in association with Maritime UK partners The Baltic Exchange, Maritime London, and the UK Chamber of Shipping, and with TheCityUK, the independent promotional body for UK financial and professional services. This new and important industry event will focus on London’s vital role in the positive development of global shipping. www.londoninternationalshippingweek.com

Spring 2013

FF Spring 2013 book.indb 52

19/04/2013 16:31

15 Bird to Fe rat day br es ! ua ex ry pir e

Ac t ly Ea r

Move the gears of Africa’s big business. 15-18 April 2013 • Southern Sun Cape Sun Hotel, Cape Town South Africa Workshops: 15-16 April • Executive Congress & Networking: 17-18 April

Attend the Breakbulk Africa Congress to learn and network with cargo owners, carriers and forwarders that have a vested interest in building more cargo and stronger business relationships in Africa. Large energy and infrastructure projects, a wealth of natural resources and a rising wave of foreign investment are adding to Africa’s emergence as one of the world’s top breakbulk, project cargo and heavy-lift cargo markets. The attendees at the Breakbulk Africa Congress 2013 will include logistics procurement titles from engineering & procurement companies, oil & gas companies, traditional and renewable energy companies as well as important vendors to the project cargo and breakbulk shipper community including freight forwarders, carriers, ports/terminals, ground transport, heavy air, packing and equipment companies.

Program topics that will help you move your business forward include: • Breakbulk Education Day - Entry Level • Krabbendam Heavy Lift MasterClass - Advanced Level Executive Congress: • Update on Capital Projects in West Africa • Project Cargo Case Studies • Africa’s Steel & Lumber Outlook • African Port Productivity & Infrastructure Solutions • Compliance, Piracy and more… View event information and register now at www.breakbulkevents.com For information about sponsoring this event, please contact Alli McEntyre at amcentyre@breakbulk.com

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GFI FREIGHT BROAD COVERAGE. TAILORED SOLUTIONS. SEE MORE. KNOw MORE. DO MORE.

GFI’s commitment to freight markets keeps us at the forefront of the freight broking community, with services that cover wet and dry FFAs, dry cargo and container derivatives. Together with ACM Shipping, its joint venture partner in wet freight, GFI is renowned for providing excellence in freight brokerage, regularly featuring highly in industry surveys and awards. GFI’s wet and dry freight derivatives clients benefit from a hybrid broking strategy, where experienced voice brokers assist users in executing large or bespoke orders on EnergyMatch Europe, its electronic energy trading platform.

wET FREIGHT LoNdoN +44 20 7422 1180 NEw YoRK +1 212 968 2050 SINGApoRE +65 6820 2980 futures@acmshipping.co.uk

DRY FREIGHT LoNdoN +44 20 7877 8090 SINGApoRE +65 6535 0469 CApE TowN +27 21 410 8876 dryfreight@GFIgroup.co.uk

DRY CARGO LoNdoN +44 20 7877 8151 ShANGhAI +86 21685 96721 SINGApoRE +65 6435 0470 drycargo@GFIgroup.co.uk

www.GFIgroup.com/freight

©GFI Group Inc. 2013. This advertisement has been approved by GFI Securities Ltd, which is regulated by the FSA in the UK. GFI Securities LLC, a FINRA and NFA regulated firm.

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