Container Shipping & Trade 2nd Quarter 2018 by rivieramaritimemedia

2nd Quarter 2018 www.containerst.com

EXCLUSIVE: ONE boss unveils strategy for Europe and Africa

Box ship scrubber retrofits set to soar Blockshipping’s Global Shared Container Platform – a new way of managing containers

“Where we need to get to operationally is the 24/7 mindset in the Amazon world that we live in today” Port of Long Beach executive director Mario Cordero, see page 13

contents Regulars 2 COMMENT 40 FLEET STATS AND ANALYSIS 42 MARKET UPDATES 44 LAST WORD

Operator profile 4 ONE Europe and Africa managing director Jotaro Tamura opens up about the goals and major focuses of the shipping line in his first interview with a publication

Shipper profile 6 Hong Kong Shippers’ Council's executive director highlights the main challenges and opportunities for shippers

Regional analysis 8 European ports are focusing on big data to become more efficient

Trade route 11 2018 transpacific demand started strongly, but capacity upgrades are imminent

Panama canal 16 The Panama Canal has seen bigger box ships and high utilisation since the start of this year. Rebecca Moore spoke to one of its senior executives

Top 20 carriers 18 M&A activity in the container shipping sector has allowed regional players and fast-growing new carriers to enter the top 20 biggest box shipping lines

Weather routeing 23 Next-generation weather routeing can help box ship operators save money in the face of dramatically rising fuel costs

Environmental regulation 24 As the 2020 low sulphur deadline closes in, scrubber retrofits on box ships have escalated due to the wide price gap between HFO and MGO

Coatings 27 Industry insiders tell Rebecca Moore about the challenges and achievements of ISO 19030 and how it will be developed

2nd Quarter 2018 volume 6 issue 2 Editor: Rebecca Moore t: +44 20 8370 7797 e: rebecca.moore@rivieramm.com Contributor: Gavin van Marle t: +44 20 7394 7209 e: gavin.vanmarle@rivieramm.com Commercial Portfolio Manager: Bill Cochrane t: +44 20 8370 1719 e: bill.cochrane@rivieramm.com Head of Sales – Asia: Kym Tan t: +65 6809 1278 e: kym.tan@rivieramm.com Senior Sales Consultant: Ed Andrews t: +44 20 8530 8322 e: ed.andrews@rivieramm.com Production Manager: Ram Mahbubani t: +44 20 8370 7010 e: ram.mahbubani@rivieramm.com Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Head of Content: Edwin Lampert Executive Editor: Paul Gunton Head of Production: Hamish Dickie Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

Propulsion 35 MAN Diesel & Turbo has secured a significant order from MSC, further underlining market acceptance of its new-generation container ship engine design

Communications 38 Advances in satellite communications are enabling container ship owners to improve crew welfare and operational efficiency

Next issue Main features include: European short sea shipping; port regional analysis: North America; top 20 container ports; ports: ship to shore processes; reefers; green technology; class society update; digitisation: cyber security

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Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

Container Shipping & Trade | 2nd Quarter 2018

2 | COMMENT

METHANOL: A STRONG CONTENDER FOR CONTAINER SHIPS

T Rebecca Moore, Editor

he 2020 low sulphur directive will lead to a mixed use of marine gas oil (MGO), scrubbers and LNG – and will open the way for methanol to be used within the box shipping sector. There are several reasons why I believe this. Bunker prices are expected to rise, so alternative fuels will become more attractive to shipowners. As an example, a blog by S&P Global Platts said if the global container fleet, which burns around 100M tonnes of fuel annually, was to switch from 3.5% IFO 380 fuel to compliant MGO the extra bunker costs would be US$34Bn a year, based on the current price of gas oil futures in 2020. The high price of MGO has made the scrubber market very confident – scrubber manufacturers say that scrubber retrofits on box ships have escalated due to the wide price gap between heavy fuel oil and MGO (see page 25). While high prices will be an obvious boost for LNG, which has already started to make inroads in the container shipping market, I believe there will be a place for methanol too. The drive for a carbon-free shipping world will create a driver for the use of methanol, as this alternative energy slots into this unlike LNG, which while providing 2020 compliance, is not emissions-free. Methanol Institute chief operating officer Chris Chatterton believes an obvious candidate is the small container ship sector, because it is “far less costly or complex than LNG to install; methanol is liquid at atmospheric pressure so requires less tank space and offers simpler, safer installation and handling.”

Availability of the fuel – which has been an issue with LNG – makes it very attractive as it is available at port locations around the world. Mr Chatterton pointed out “Wherever you see tank farms at port facilities, you are likely to have methanol storage capacity – and that includes most major container ports.” The IGF Code will include interim guidelines for ships using methyl/ethyl alcohol as fuel by the end of this year. RINA executive vice president of marine strategic development Paolo Moretti said “The basic philosophy of such interim guidelines is to provide for the arrangement, installation, control and monitoring of machinery, equipment and systems using methyl/ethyl alcohol as fuel to minimise the risk to the ship, its crew and the environment, having regard to the nature of the fuels involved.” He added that the core discussion focused on the safety concept, applicable standards, operational issues and toxicity relating to the use of methyl/ethyl alcohols as fuel. There are currently no guidelines for the application of methanol as fuel; therefore creating some to give a solid framework will encourage the use of methanol. Equipment using methanol has also been launched. An example is MAN Diesel & Turbo investing substantially in a dual-fuel, main engine capable of burning methanol. While the use of methanol may not become mainstream, there is definitely a place for it in the fuel mix as we approach 2020. I await the first methanol container ship newbuild order or conversion. CST

“Methanol is an obvious candidate for the small container ship sector, because it is far less costly or complex than LNG to install, requires less tank space and offers simpler installation”

Container Shipping & Trade | 2nd Quarter 2018

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4 | OPERATOR PROFILE

EXCLUSIVE: ONE TO BOOST AFRICA BUSINESS, COMPETITIVENESS AND CUSTOMER SERVICE ONE EUROPE AND AFRICA MANAGING DIRECTOR JOTARO TAMURA OPENS UP ABOUT THE GOALS AND MAJOR FOCUSES OF THE SHIPPING LINE

uality of service to customers is a major focus for Ocean Network Express (ONE), its Europe and Africa managing director Jotaro Tamura told Container Shipping & Trade. ONE’s management is split into five key global regions. While Mr Tamura

– who originally came from MOL – heads up Europe and Africa, other senior executives are in charge of east Asia, south Asia, North America and Latin America. “To be a truly global organisation and shipping line, ONE believes its workforce should have

people with international orientation, outlook and background to ensure the service quality that we give is really supporting the global trade and more importantly, to make sure that ONE can really come across as one team globally to service the customers,” said

NYK, K Line and MOL have merged their container businesses to form ONE in order to boost competitiveness

Container Shipping & Trade | 2nd Quarter 2018

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OPERATOR PROFILE | 5

ONE chief executive Jeremy Nixon. “These regional executives bring to us their diverse experience and will significantly contribute to the operations and business growth of ONE globally.” The integration of the container businesses of K Line, NYK and MOL has led to a combined fleet of 1.58M TEU. It offers 85 service loops and links more than 200 of the world’s major ports. In terms of fleet size, both owned and chartered, it is at number six in the Alphaliner top 100 largest ocean carriers. Last year, NYK was at number 10, MOL at 11 and K Line at 14 (see page 19). Explaining the benefits of the new company, Mr Tamura said “The most important point of combining the three lines is that it creates greater scale of merit and competitiveness.” He added “Competition is the key challenge for the global shipping market, which is exactly why the three lines came to the conclusion to form ONE. The competition is not region-specific.” Indeed, he pointed out that there is a “distinct line” between the legacy lines and ONE. “They were competing, and they had their own strategies.” As well as being given the opportunity to be as

“ONE is relatively small in this region and there is room to grow. We think we can target expansion and provide more services to customers” Jotaro Tamura (ONE)

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competitive as possible, the combination of the three shipping lines as ONE provides more opportunities for the shipping line in the European and African markets. It will allow the company to extend its coverage in Africa. Mr Tamura said “The three lines had a presence in each region of Africa, but by combining as ONE, we can offer complete coverage of east, south and west Africa. Complete coverage in this region is a starting point for us. ONE is relatively small in this region and there is room to grow. We think we can target expansion and provide more services to customers.” A benefit of the three Japanese lines combining as ONE is that individually they could not provide such complete coverage. For example, previously west Africa was served by MOL only. Asked where the key opportunities would be for growth in Africa, Mr Tamura said he felt there were equal opportunities in east, south and west Africa. Meanwhile, the opportunities for ONE in Europe are of a different nature to those in Africa. The ONE network is already so extensive in this market that geographical expansion is not a main focus. Rather, competitive advantage is at the fore here. “The combination of three resulting in ONE means that our service is extensive as a main player, and we are really capable of providing service to customers compared to competitors,” commented Mr Tamura. Mr Tamura said “Our three legacy lines are acknowledged for quality of service. We have inherited this strength, which is of value to customers. Our focus is on quality of service.” He singled this out as a major benefit for ONE’s customers, along with the fact

Jotaro Tamura (ONE)

Jotaro Tamura was born in Chiba and grew up in Yokohama, Japan. Keen to work in an international business with opportunities to work overseas, he joined Mitsui OSK Lines (MOL) in 1991 after graduating with a degree in Sociology from Sophia University, Tokyo. Mr Tamura’s first assignment abroad was in London in 1995 where he was chartering manager for MOL Bulk Shipping Europe. This was followed by positions in MOL’s liner division in Tokyo and then Hong Kong where he worked for 14 years and was promoted from senior manager to senior vice president. In 2014 Mr Tamura returned to Tokyo and was appointed general manager within the MOL car carrier division. After the merging of NYK, MOL and K Line’s container businesses to form Ocean Network Express (ONE), Mr Tamura was appointed managing director for ONE Europe and Africa region in April 2018 and is now based in London.

that the three lines are highly financially stable. Indeed, the importance of the focus on customer service is such that when asked what he would like ONE to achieve after its first 12 months of operation in Europe and Africa, Mr Tamura highlighted quality of service. “The three lines’ combination has not been an easy one, and since April we have faced various operational challenges. But these are transitional, and I believe that shortly we will be in a situation to be able to provide the quality of service which we are really focusing upon. We want to deliver customers a stable service.” He added that ONE was focusing on stabilising itself in the early period. Since ONE officially launched at the start of April this year, the company has been “well received” by customers and “we are seeing strong support from our customers.” In terms of its orderbook, ONE announced in June that ONE Stork, the company’s first magenta-coloured newbuild container ship with a capacity of 14,000 TEU, was delivered at Japan Marine United Corporation's Kure Shipyard. The sublet owner is NYK. The ship has a capacity of 18 rows x 11 tiers in the hold, and 20 rows x 9 tiers on deck. ONE said in a statement that it employs a hull form that allows “improved cargo loading efficiency achieved by minimised engineroom space.” The new box ship will be phased into THE Alliance’s Asia-North America east coast EC4 service. ONE chief executive Jeremy Nixon said “The magenta colour shows our intentional drive to do things differently and explore newness in this market. There is no doubt that [it] will be one of our most important core fleet.” CST

Container Shipping & Trade | 2nd Quarter 2018

6 | SHIPPER PROFILE

HONG KONG SHIPPER CHIEF WARNS ON MAIN LINER THREATS TO SHIPPERS A HONG KONG SHIPPERS’ COUNCIL BOSS HIGHLIGHTS THE MAIN CHALLENGES TO SHIPPERS WHEN IT COMES TO CONTAINER SHIPPING LINES AND THE OPPORTUNITIES

ong Kong Shippers’ Council (HKSC) executive director Sunny Ho has applauded the end of the Transpacific Stabilization Agreement – and singled out liner merger and acquisition activity as being a main threat to shippers. Elsewhere, he and the council are working hard to boost Hong Kong Government assistance in using supply chain big data and in

establishing strong relations with ASEAN countries. It has certainly been a tumultuous time in the container shipping market – the demise of Hanjin was followed by a large amount of merger and acquisition activity and consolidation as carriers have struggled to keep their heads above water. This has all had a big impact on shippers too. As Mr Ho commented “I think the main threat comes from merger

and acquisition in the liner market – we have seen major activity here since 2008.” This means, he said, that the top five ocean carriers account for over 70% of the market, while the number of independent operators remaining are limited, with many in weak positions. The dominance of the largest carriers plus the move to form three mega alliances mean that “choice is limited”

for shippers. But Mr Ho pointed out that shippers did understand the need for carriers to work together. “Carriers are working together to limit the damage caused by overcapacity in the market. We do see the reasons for them to work together in alliances to rationalise operations as otherwise many lines would go under, and we do not want bankruptcy as there would be fewer lines.”

Anti-competitive behaviour threat HONG KONG SHIPPERS’ COUNCIL: THREATS AND OPPORTUNITIES

THREATS Lack of supply chain transparency Limited choice for shippers Price collusion worries Liner M&A activity

OPPORTUNITIES African trade links Supply chain and logistics big data ASEAN free trade agreement Regional agreement on low sulphur fuel

Container Shipping & Trade | 2nd Quarter 2018

He added that many customers had suffered when Hanjin had gone bankrupt. Nevertheless, a matter that he and many shippers feel strongly about is any suspicion about collusion on pricing. “They can work co-operatively on trade issues, such as routeing and ship-sharing but there has to be a way to stop them colluding over price.” Asked if he felt there was a chance they discussed price, he said “Who knows whether they talk about pricing – it is so difficult to monitor. We have to rely on the usual competitive practices at the same time as trying to monitor the market.” This brought him to the subject of the Transpacific Stabilization Agreement (TSA),

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SHIPPER PROFILE | 7

which ceased operations in February this year. He said “I certainly think it is a good thing [that it closed].” He said that the TSA had guidelines for freight rates. “Although these were nonobligatory, and members were not forced to stick to guidelines, this action is anticompetitive in nature and an attempt to manipulate pricing in the markets… we see no reason that such organisations should be allowed in today’s competitive market.” Market conditions have also led to the long-running trend to slow steam to save fuel costs. Mr Ho commented that this was challenging for shippers. “The ships used to go at 2024 knots and now they run at 10-12 knots. This means that shippers suffer from long transit times and it is adding pressure to working capital.” Despite a more buoyant market than last year, he commented that while freight rates are more stable than a year ago, they are still “quite low”, and he singled out overcapacity as a large issue. “A substantial oversupply in the market means there is a danger of more exits or mergers and bankruptcies.” While Maersk told the market last year that it was not ordering more ships, “unfortunately for us MSC announced more ships, leading to further uncertainties in the market.”

Strengthening ASEAN links

Despite the challenges, there are plenty of opportunities for shippers based in Hong Kong. HKSC is keen for the Government to boost trade links on the back of the Hong Kong-ASEAN Free Trade Agreement, which will be implemented from 2019 at the earliest. To allow Hong Kong companies to take advantage of the agreement, the council wants the Government to

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set up a dedicated portal to disseminate related information, solicit inputs and establish special funds to assist trade, marketing and promotion in the ASEAN market. HKSC also wants the Government to investigate a mechanism that allows cargo between mainland China and ASEAN countries to be traded and transhipped through Hong Kong. The mechanism should incorporate crossborder physical flow of cargo, customs clearance, information and document flow, trading and payment. Alongside southeast Asia, Mr Ho also singled out Africa as being of interest. “We are looking at African markets as we see a lot of potential there. Chinese manufacturers are being encouraged to start production there and use African countries to support their production.” He said reasons for this include the fact manufacturing costs are competitive, and governments are very eager to attract foreign investment, offering incentives and support. Mr Ho summed up “There are a lot of advantages in the design of the whole supply chain.”

Supply chain big data

Another major theme for HKSC is the big data trend that is gaining everincreasing momentum within the container shipping industry. HKSC is urging the Government to do more in preparing Hong Kong to meet the growth of digital trade, digitalisation of trade, data analytics, artificial intelligence and smart production. The council wants Hong Kong Government to help the industry to develop a strategic roadmap for the adoption and implementation of big data and digital trade. Interestingly, Mr Ho believes that despite this trend, ocean carriers need to do more to digitalise their procedures.

“Overall, in terms of IT, shipping lines are behind.” He gave the example that the supply chain is not transparent enough. “We cannot have too many blanks in the network. Yet the Hong Kong to Europe journey is most of the time blank for shippers – most of the time shippers do not know where ships are, whether they unloaded at terminals and are not sure if cargo is discharged on time.” He said that in peak seasons the volume of cargo meeting schedule deadlines could be as low as 50%, therefore shippers must focus on reliability targets to plan their supply chain. Another major matter for shippers in Hong Kong is creating a sustainable supply chain. “Many shippers have commitments to deal with emissions and show what they have done to help protect the environment, especially if they are part of public companies,” explained Mr Ho, adding that some consumers decided on what products to buy due to environmental considerations. Therefore, the sustainability of the supply chain, including the ocean shipping part, is important. Hong Kong has been working hard on making ships cleaner and more environmentally friendly. Ships now require cleaner fuel when they are at berth in the port. Other initiatives include terminals using electricity to power gantry cranes rather than diesel fuel. This is part of a regional approach including both mainland China and Hong Kong that is now in place. One of its aims is to make it a requirement that only low sulphur fuel is used in the area. “Hong Kong competes with Shenzhen port and so we need a regional approach to competing. We are happy to finally have an agreement in place,” Mr Ho said. CST

Sunny Ho (Hong Kong Shippers’ Council) Sunny Ho is executive director of the Hong Kong Shippers’ Council. He has over 20 years’ experience in the shipping and logistics industry. Mr Ho is a member of the HK Logistics Development Council, Logistics Industry Training Advisory Committee and the Trade Single Window User Consultation Group of the Hong Kong SAR Government.He is also a member of the Shipping & Transport Committee of the Hong Kong General Chamber of Commerce and Logistics Services Advisory Committee of the Hong Kong Trade Development Council. He is current chairman of Hong Kong Logistics Management Staff Association and fellow and immediate past president of the Chartered Institute of Logistics and Transport in Hong Kong. As well as being an advisor to Shenzhen Ports & Harbour Association, Mr Ho holds the position of independent nonexecutive director of Tradelink Electronic Commerce.

Container Shipping & Trade | 2nd Quarter 2018

8 | REGIONAL ANALYSIS Europe

EUROPEAN PORTS – THE ‘SMART’ APPROACH Luc Arnouts (Antwerp Port Authority)

‘

Hamburg Port Authority expects to be given the green light from Government this year to start the process of dredging the River Elbe (pictured)

European ports are focusing on big data to become more efficient. Rebecca Moore spoke to some key players to hear more

mart and big data are key ways in which box ports in Europe are becoming more efficient. Antwerp Port Authority has several smart schemes on the go. It has enjoyed a record Q1 this year – container volumes jumped by 9.5% compared to the same period last year. The big driver behind this growth is the Europe–North America trade lane, which soared year-on-year by 14.5%. Northeast and

Container Shipping & Trade | 2nd Quarter 2018

southeast Asia, Antwerp’s largest market, was stable but grew by a smaller 4.1%. China’s ban on imported plastic waste affected volumes. Port of Antwerp director of international relations Luc Arnouts told Container Shipping & Trade that the port was optimistic about passing 11M containers for 2018, a growth of 6% compared to 2016. He said customer-centricity was at the heart of the port’s strategy, with ‘smartness’ playing a key role. The port currently has two smart pilot schemes on the go. In March, cameras and sensors were installed on Deurganck dock to allow ships and barges to ‘park’ well and make full use of every available metre of quay. “We will maximise the use of berths by better parking and we then might gain more space for barges,” said Mr Arnouts. The other smart scheme is about secure container release. Rather than use a four-digit pin code, blockchain technology is being used

Luc Arnouts obtained a master’s degree in law at the University of Antwerp and a master’s degree in general management at the University of Ghent. He has been active in the port and logistics sector ever since. He started his career and gained operational experience in stevedoring, warehousing and ocean freight forwarding at the logistics company Group Katoen Natie from 1986 until 1992. In 1992, he moved to SGSGroup Belgium as general manager of SGS-Van Bree. Aviapartner became his new employer in 2000, where he held the position of vice president of cargo handling in Europe. In 2007, he took up a new challenge as chief commercial officer at the Antwerp Port Authority.

to spread the risk over different systems. Mr Arnouts said this led to better security as digit codes could potentially be used by people who were not meant to use them. He said “different terminals are seeing the advantages of this pilot scheme.” Another priority for the port is to solve the problem of inland barge congestion. Mr Arnouts said “At the container terminals deepsea container ships get priority as they need to be handled in their windows of time, and barges are often the victim of that.” Therefore in Q2 2017 all port stakeholders joined forces to try and solve this issue. There have been regular workshops and a focus on better planning, such as ensuring information arrives earlier for barge and terminal operators. Barges currently hold 38% of the intermodal split at Antwerp and the port wants to sustain this figure. “We want to avoid a reverse modal shift where more containers go back to truck,”

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Europe REGIONAL ANALYSIS | 9

Mr Arnouts explained. “We are seeing the first results of maximising hinterland and terminal connectivity. All parties better understand each other.” The port is also looking to construct an additional quay. “We are positive about the outcome and hope that the government will give the green light for this,” said Mr Arnouts. “We are under pressure due to the growth in our container volumes.” Other ports are also seeing strong volumes and using digitalisation to enhance efficiency. Hamburg has seen steady and continuous growth of container traffic to its hinterland and to its metropolitan area. While it expects its total container volumes to be the same as last year, it expects its hinterland/metropolitan volumes to continue their growth. This is an important year for the port – it expects to be given the green light from Government to start dredging the River Elbe by 1 m to boost the movement of ultra large container vessels through the port. This is crucial as it will allow more ships to enter and exit the port at the same time. Hamburg Port Authority marketing chief executive Axel Mattern told Container Shipping & Trade that while this was a challenge, it had helped the port develop its smart and digitalisation initiatives because there has been a “necessity to be better, more effective and smarter.” Mr Mattern added “A lot of systems have been established to direct ship traffic, which are very intelligent in terms of how to get ships in and out. This has put us in a very good situation strategically as we have a very sophisticated traffic system.” Like other ports, digitalisation is crucial for Hamburg – but the port is an old hand at this. It established a data communication system 35 years ago on a digital basis. “Digitalisation is in our genes,” said Mr Mattern. It is working on many smart projects at the moment, including merging separate systems to co-ordinate road, rail, vessels, feeders and barges into one port traffic system that will be organised by one port authority office. Over in the south of Europe, Valencia port closed 2017 with record container traffic for the year, handling 4,832,156 TEU, which represents a growth of 2.11% compared to 2016. Valencia port head of communications Vicent Palací explained that a main factor was the growth of international containers, which registered an increase of 6.17% compared to 2016. Exports increased by 4.74% while imports registered an increase of 6.74%. Mr Palací said “For 2018, the forecasts are optimistic. If the trend that began in mid-2017

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continues, we expect to surpass the historic milestone of 5M containers.” The port authority of Valencia is currently working on improving its water depth and is dredging its three container terminals. The objective is that all reach the level of -18 m and are thus able to meet the needs of the latest generation ships. The works, which are being executed in phases, represent an investment of approximately €23M (US$28M).

In addition, work continues on the development project of the northern extension. Consultancy Maritime & Transport Business Solutions is about to finalise the feasibility study and finalise the works to be carried out to develop the container terminal in this area. The port authority of Valencia forecasts that when the northern extension is fully operational, the total capacity of the port will reach 12.5M TEU.

Port of Dunkirk: Latin America, LNG and Brexit

Port of Dunkirk bosses unveil strategies for 2018 (From left to right: Dunkirk port chair of the board of trustees François Soulet de Brugière and chief executive Stéphane Raison)

Port of Dunkirk is targeting the Latin American market and developing LNG bunkering to serve CMA CGM’s gas-fuelled newbuilds. At its annual press conference in Lille at the start of this year, which Container Shipping & Trade attended, bosses unveiled the port’s strategy for 2018 and the coming years. They revealed that the port achieved 374,000 TEU for 2017, a jump of 10% compared to 2016 and up 29% compared with 2014. Work has started to increase the port’s capacity for LNG refuelling following CMA CGM’s announcement that it is building LNG-fuelled ships. The bunkering project will ensure that trucks can load and unload LNG. The port is also targeting the Latin America chilled and frozen product market. “We are targeting this because we have developed expertise in processing chilled and frozen products; we are targeting fruit and vegetables to be imported,” said Port of Dunkirk chief executive Stéphane Raison. The extension work on the Flanders quay in its western port was launched last year, allowing two ultra large container ships to berth at the same time. The port is also preparing for “all kinds of Brexit scenarios”. Mr Raison said “We don’t know what is going to happen between France and the UK, it is fuzzy. The most important element is that we are getting ready for all kinds of scenarios, both for those that are good and [those that are] penalising.” This includes establishing secured car parks and control areas in case trucks and exports from the UK need extra checks at border control. To speed up efficiency, which will help with Brexit scenarios, the port is building transit lanes to segment container and ferry traffic and has launched an invitation to tender so that the transit roads can be completed. CST

Container Shipping & Trade | 2nd Quarter 2018

ACLDrive_In ContainerShip_Trade 2018_Layout 1 5/15/18 10:39 AM Page 1

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TRADE ROUTE | 11

TRANSPACIFIC:

CASCADE IS COMING 2018 DEMAND STARTED STRONGLY ON THE TRANSPACIFIC – BUT VESSEL CAPACITY UPGRADES ARE IMMINENT AND CURRENT SPOT FREIGHT RATES ARE WEAK FOR OCEAN CARRIERS, WRITES DEAN DAVISON

he start of a new year represents a time for replenishing of stock and inventories following the holiday season and Chinese New Year (CNY). Invariably there is also a drop off in demand into North America. This has clearly assisted spot freight rates in headhaul Asia to west coast North America (WCNA) routes, along with pre-CNY volumes and load factors. In early March 2018, the full impact of the Chinese factory closures was felt and falling spot rates were anticipated, especially following an increase in average ship sizes in 2017. The anticipated cascade of vessels from current Asia-North Europe trades was expected as newbuilds from the

orderbook enter service, even allowing for some delays from 2017 to 2018. Despite the ongoing shift of container share of cargo away from the west coast in recent years to the east coast, the situation now looks to be reaching a ‘new normal’ with the west coast stabilising at 50% of total port handling volumes based on port statistics for 2015, 2016 and 2017 and the 1% gain (to 7%) by the US Gulf Coast coming from east coast ports now at 43% for both 2016 and 2017. Using ClipperMaritime’s January 2018 data, the following trends of headhaul loaded units can be identified: • The January 2018 total of almost 1.17M TEU was 9% higher than the December

2017 figure of 1.06M TEU and 7% stronger than the 1.09M TEU reached for January 2017. • Indicative load factors were an estimated 85% in January 2018, so an increase on the December 2017 total, but down on the 88% recorded for the comparable month in 2017 – reflecting the vessel cascade process that occurred during 2017. Headhaul spot freight rates started 2018 strongly, with US$1,523 per FEU. Compared to 2016, average weekly 2017 rates were 20% higher and the position remained positive, as the monthly averages from Shanghai Containerised Freight Index confirmed: • January 2018 four-week average – US$1,468 per FEU.

VOLUMES MOVED BETWEEN ASIA AND US WEST COAST

1,500k

TEU: ’000

1,500

1,000

500

0 2015

Credit: ClipperMaritime

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2016

2017

2018

• February 2018 four-week average – US$1,484 per FEU. As expected, some erosion has taken place leading into March after the CNY holiday season, with mid-March spot rates declining to US$1,016, a 33% erosion since the start of the year and the lowest recorded weekly rate since June 2016. Given the strong overall cargo volume growth, this dynamic must be worrying for ocean carriers, since now they are heading for the dark days of mid 2016 when rates were stuck firmly below US$1,000 per FEU. The annual contracting season could prove challenging for shipping lines if service changes bring too much additional capacity, especially as they will also need to factor in rises in fuel costs and oil in 2018. However, further positive demand growth is projected in this trade route for 2018.

Service upgrades and cascade effect

Some of the major operators in the transpacific west coast North America trades continue to revamp and alter service schedules, while a new entrant is also entering the route. South Korea’s SM Line confirmed the launch of its new transpacific PNS service from mid-May 2018, using six relatively small ships of 4,000 TEU – 4,600 TEU. Vancouver and Seattle represent the WCNA port calls, with Yantian, Ningbo, Shanghai, Tokyo, Busan and Gwangyang filling the rotation. The operator is strategically targeting the Pacific northwest rather than the crowded southern Californian gateways of Los Angeles/Long Beach. The largest contributor to additional supply remains the ongoing industry cascade and this trend is expected to continue. In terms of the overall impact of the ongoing operator developments, the March 2018 position is: • Total monthly nominal capacity of 1.23M TEU in

Container Shipping & Trade | 2nd Quarter 2018

12 | TRADE ROUTE

January 2018, a 7% increase on January 2017 and an indication of why spot freight rates have fallen since the beginning of the year. • Average ship sizes reached 7,791 TEU in March 2018, 3% higher than one year earlier, where the average size stood at 7,586 TEU. • The largest ship upgrades occurred in 2017, with the March 2017 figure of 13,568 TEU rising to 14,000 TEU in April 2017, where it remained until March 2018. Maersk redeployed 15,282 TEU Maersk Hanoi to the AE6/ TP6 transpacific/Asia to North Europe pendulum loop, representing a major upgrade from the current 13,500 TEU vessels. Maersk will need to find a trade lane for the replaced 13,500 TEU units.

China is dominant

From February 2017 to January 2018, China remained the dominant origin for containerised goods shipped to

the WCNA area, with 6.8M TEU – a rise of 7.4% year-onyear. By contrast, volumes to Canada fell by 0.5% to 1.39M TEU – a disappointment for the port of Vancouver. To put this dominance into perspective, the next largest country-to-country pairs over this same period were: • Vietnam to US – 661,000 TEU, up by a strong 20%. • China to Mexico – 581,000 TEU, a rise of 9%. • Taiwan to US – 430,000 TEU, an improvement of 5%. The strength of growing demand from Vietnam can clearly be seen. The bilateral trade agreement is clearly influencing products being shipped to the US and Canada and the 19.7% growth that has occurred over the past 12 months is expected to continue, especially as revamped WCNA transpacific services by the 2M Alliance, Ocean Alliance and THE Alliance all schedule calls to Cai Mep port, Ho Chi Minh City. Volumes from Thailand are

growing rapidly (+14%) but are less than half those out of Vietnam. Direct port coverage from Laem Chabang is also strong and, should these trends continue, operators have sound cause to upgrade vessels on current southeast Asian loops. Direct services are a distinct advantage for shippers. This robust growth is reflected in the loaded box volumes handled by the largest container ports on the US/Canada west coast. During February 2017 to January 2018, the following trends include: • Los Angeles – 4.3M TEU, up 3%. • Long Beach – 3.3M TEU, a rise of 8%. • Vancouver – 1.3M TEU, down 4%. • Tacoma – 724,000 TEU, down 17%. • Oakland – 665,000 TEU, an increase of 5%. • Prince Rupert – 597,000 TEU, up 4%. • Seattle – 485,000 TEU, a strong improvement of 23%.

Demand outlook and 2018 forecast

Total volumes on the headhaul trade reached 11.6M TEU in 2017, up 5.6% year-on-year, which was the second successive year of 5% growth. Our statistical analysis of the last five years suggests that positive momentum will continue in 2018 and annual growth will lie within the 3-5% range. Geopolitical tension between China and President Trump could impact trade flows, but it is too early to assess the material impact. Should the contract negotiations between the International Longshoremen’s Association and the United States Maritime Alliance on the US East Coast break down in late September, this could also see a temporary shift of cargo by shippers from the east to west coast. CST * Dean Davison is a consultant at ClipperMaritime. Please see ClipperMaritime Horizons Container March 2018 newsletter, for more on this trade.

Ports of Los Angeles has seen robust container growth this year. It is using GE Transportation’s Port Optimizer (pictured), which will boost efficiencies (credit: Port of Los Angeles)

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TRADE ROUTE | 13

LA AND LONG BEACH: VIEWS FROM THE TOP

ort of Long Beach (POLB) has kicked off 2018 in a position of strength – 2017 was its best year ever in terms of container volumes and looking forward it is focusing on enhancing operational opportunities. The port saw its container volumes soar by 11% in 2017 compared to 2016 – hitting a total of 7.7M containers. This is POLB’s highest annual container volume in its 107year history. Explaining what lay behind it, the port's executive director Mario Cordero told Container Shipping & Trade “Cargo growth and trade overall in the global community have shown positive numbers but our investments in container infrastructure have proven to be a big factor.” He singled out the investments the port had made in its Middle Harbor and Pier T terminals. Indeed, Pier T signifies a turnaround for the port. The terminal used to belong to Hanjin, Mr Cordero pointed out. Hanjin’s bankruptcy had a “significant impact” on the port, he said. But he added “What is great about the year ending 2017 was that we have refounded that terminal with [new owners] TTI and MSC and it is one of our most efficient terminals at POLB.” POLB is so focused on improving the port infrastructure that US$4Bn was committed in a capital improvement project, and due to this investment, the port is

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PORT OF LONG BEACH EXECUTIVE DIRECTOR MARIO CORDERO EXPLAINS HOW THE PORT IS AIMING TO ACHIEVE THE ‘AMAZON 24/7 MINDSET’

‘big-ship ready’ and can receive vessels of 13-14,000 TEU. “Our investment was very prudent and we now have the benefits of this,” he observed. This means that because the port already had the infrastructure in place, the impact of the mega alliances has been minimal. Long Beach Container Terminal is under the last phase of its construction. The terminal, which already has 70 ha operational, will be fully operational in early 2020 with 126 ha. “This state-of-theart electrified terminal, once finished, will be the fourth-

Mario Cordero (Port of Long Beach)

largest port in the country. This shows its magnitude,” Mr Cordero said. Once completed, the terminal will be able to handle 3.3-3.5M TEU. Along with Port of LA, Long Beach has partnered with GE Transportation to launch a port information portal across both ports that will allow all those involved in the supply chain to have better planning capabilities to service ultra large container ships at the port more effectively. “All stakeholders will benefit from this maritime data information that is

key for moving cargo in an efficient manner.” He pointed out an advantage of the system: beneficiary cargo owners currently have two to threedays’ notice of when their container will arrive at the port. But using this portal means they will receive the information 11 days earlier. “This will trigger other arrangements, such as drayage, chassis, intermodal – the long objective is maximum visibility of container movement from point of departure to point of arrival.” Three of the port’s six container terminals are carrying out the pilot project. Mr Cordero said 2018 was also about taking sustainable development at the port to the next level. He said the goal was to have zero-emission trucks by 2035 and zero-emission cargo

Mario Cordero became executive director of the Port of Long Beach on 15 May 2017. Back in 2003, Mr Cordero served as a member, vice president and president of the Long Beach Board of Harbor Commissioners for eight years, before resigning to accept President Barack Obama’s appointment to the Federal Maritime Commission (FMC) in 2011. He served on the FMC until May 2017 and was FMC chairman from April 2013 to January 2017. He was recently appointed as the port’s representative to the Alameda Corridor Transportation Authority governing board and to the governing board of the Intermodal Container Transfer Facility-Joint Powers Authority for a five-year term. Previously, he served as an executive board member on the American Association of Port Authorities’ Latin American delegation and was instrumental in the development of policy urging greater co-operation and trade between North American and Latin American ports.

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14 | TRADE ROUTE

handling equipment by 2030. Mr Cordero summed up the major challenge for the port. “I think where we need to get to operationally is the 24/7 mindset in the Amazon world that we live in today. Our challenge is to make sure we are leaders in reduced truck turn time and extended gate hours. I am pushing the envelope on that.” Port of Los Angeles director of planning and strategy Michael Keenan explained the port’s push to use existing resources more effectively. This stratgey includes launching the use of GE Transportation’s Port Optimizer. The port has carried out a pilot at Pier 400 terminal and will expand its use across more of

its terminals. Port of Long Beach has joined LA in the pilot. Mr Keenan told Container Shipping & Trade “By getting customs data two weeks in advance rather than two days before, we can better plan the schedule of ships and it will make a big difference for railroads.” Speaking of the benefits of both ports using a shared system, he said “It allows greater use of our resources and greater visibility. We share assets with Long Beach in the supply chain – the railroads, trucks, chassis operate at both ports. If there is a surge [in incoming containers] then we can make better allocation of facilities.” Based on the pilot project, he said the port expected the

portal to make efficiency gains of 8-12%. The port is planning to boost its efficiency through optimising land it already owns and to this end the Harbour Performance Enhancement Centre (HPEC), a US$130M public-private partnership dedicated to facilitating sustainable freight movement and supply chain efficiencies throughout the US, has completed a strategic transaction with Macquarie Principal Finance. This is in order to provide capital for the development of the 0.5M m2 container staging hub located at Terminal Island in the Port of Los Angeles. The public-private project will transform 45 ha that is

currently fallow and bring the latest technology and operating capabilities to the land. When complete, the project will take 3,500 truckloads per day from nearby container terminals to the HPEC staging area. Mr Keenan said “Cargo can be speeded away from the terminals and picked up here." This will improve flow, increase velocity and enhance the efficiency of imported containers passing through the 14 marine terminals at the San Pedro Bay complex. Elsewhere, the port is well prepared for the challenges of big ships, and through its infrastructure can handle them. “They have come online much more quickly than anticipated,” Mr Keenan

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TRADE ROUTE | 15

commented. “But this is what we have been planning for and our infrastructures allow us to handle them.” Speaking about the impact of the mega alliances that launched in April last year, he said “One impact is that there is a bit more variance in services.” He explained “LA might see a surge [from them] one month, and Long Beach the next. It is just how the alliance shifts things around.” Asked about the impact of the expanded Panama Canal, Mr Keenan said this had been minimal. Much of the cargo travelling via the Panama Canal is low-cost and was already using it before it was extended, he explained. Whereas most of the cargo moving via Port of

Long Beach is high value. “We have not seen a very big shift,” he said. The future looks bright for the port: it has had two back-to-

back ‘record’ years in 2016 and 2017. It handled 9.3M TEU for the calendar year 2017, up from 8.8M TEU in 2016. Mr Keenan expained that these are the best

volume results since 2006. The Port of Los Angeles’ forecast ahead is for slow but steady annual growth of low singledigit figures. CST

Michael Keenan (Port of Los Angeles) Michael Keenan is the director of planning and strategy at Port of Los Angeles. He joined the port in 2005 as a harbour planning and economic analyst with the port’s Planning and Research Division, where he worked on data analysis and research projects. Before joining the port, he worked as a consultant with the Los Angeles consulting firm Econ One Research for 11 years. He has a bachelor’s degree in economics from Stanford University.

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Container Shipping & Trade | 2nd Quarter 2018

16 | PANAMA CANAL

Panama Canal: going for growth

he widening of the Panama Canal two years ago is yielding good results – larger box ships are using the trade route – and on the back of this the Panama Canal Authority (ACP) is looking to grab more transpacific market share. The Panama Canal hit a milestone in March this year – the container ship MSC Caterina became the 3,000th neopanamax vessel to transit the canal as it travelled northbound from the Pacific to the Atlantic Ocean. The 300 m long vessel has a capacity of 9,000 TEU. “Today's milestone, achieved in less than two years of operation, serves as a proud reminder of the confidence that our customers and the broader maritime industry have placed in our route,” said Panama Canal Authority administrator, Jorge Luis Quijano. Of the 3,000 vessels that have transited since the Panama Canal widened its locks, roughly 53% have been from the container segment. The container segment in fiscal year 2017 (October 2016 – September 2017) continued to serve as the leading market segment of tonnage through the canal, accounting for 35.3% of the total cargo

The Panama Canal has seen bigger box ships and high utilisation since the start of this year. Rebecca Moore spoke to one of its senior executives

received. This equated to a total 143M tonnes, measured in the Panama Canal Universal Measurement System (PC/ UMS), of which 89.1M tonnes transited the expanded canal. This is an increase compared to fiscal year 2016, when container vessels contributed 119.6M PC/ UMS, including 13.4M PC/UMS that passed through the expanded canal. ACP executive manager of the economic analysis and market research division, Silvia de Marucci told Container Shipping & Trade “The Panama Canal has had a very good year so far in line with what the whole industry is experiencing. 2017 was the first full year of the new expanded Panama

Canal, so after that jump the growth will be slightly less steep than from 2016 to 2017. But we think it will be very stable.” She said this year ACP has seen new panamax vessels as some services have been upgraded, from vessels of around 8,000 TEU increasing to 10,000 TEU or 12,000 TEU. She added that there had also been an improvement in container vessel utilisation this year – especially on the Asia to US east coast route – with ships achieving 90% utilisation. “This is high compared to last year and this is why we think that customers are moving upwards in terms of vessel size,” commented Ms de Marucci. Indeed, following the expansion of the canal, Ms de Marucci said its area of influence had widened especially for the US market. “Before, we had a very narrow area on the US east coast in which we were competitive and where we competed with the intermodal system.” But now the canal’s business area goes further west in the US. “We therefore have more opportunities to capture more market share, especially now the east coast ports are ready to receive larger vessels and are working on their own connectivity,” commented Ms de Marucci. ACP hopes to move ahead with plans to build a box ship terminal near Corozal after

MSC Caterina became the 3,000th neopanamax vessel to transit the Panama Canal

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PANAMA CANAL | 17

battling lawsuits – allowing it to become a major transhipment hub. Its plans for the terminal were put on hold due to lawsuits filed against it, as some people believe the ACP does not have the authority to enter into the port business. But Ms de Marucci told Container Shipping & Trade “We have had lawsuits but are clearing these up and are almost at the final stage – we are planning to resume this project as soon as we are cleared [from the lawsuits]. There has been some misunderstanding in terms of what ACP can and cannot do. “We are hoping some time this year to go ahead with this project; it is in our interest to increase port capacity on the Pacific side.” She added “We believe that it is necessary, we see the growth in terminals nearby – shipping companies need to have more transhipment on the Pacific. We believe that in future there will be more traditional transhipment coming our way and we expect to have some market share

PANAMA CANAL BY NUMBERS Container ship market share of 3,000 neopanamax vessels that have transited the canal

53%

Container ship market share for canal cargo volumes in fiscal year 2017

35.3%

Size increase up from 8,000 TEU

10-12,000 TEU

Current Panama Canal box ship utilisation

90%

Panama Canal customers that tranship in local ports

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60-70%

on that. The more services we can provide, the stronger our trade route becomes.” She said that currently 60-70% of Panama Canal container ship customers carry out transhipment operations in local ports. “With vessels increasing in size with fewer stops, we hope to be one of main stops to carry out all the transhipment that they need,” said Ms de Marucci, pointing out that it was not just about transiting the Panama Canal, but also offering other services its customers could use, rather than going elsewhere. ACP’s plan now is to review the terminal project. Asked about terminal operator bids to operate the facility, Ms Marucci said “Last time we had a number of companies show interest, but our opinion is that because of the market situation at the time and waiting too long for public tender and because of the lawsuits ..., they were a bit reluctant to participate. So, we need to review the project, see what lessons we have learned in the process and carry out some modifications.” But eventually the plan is to go ahead and call for another public tender. As well as the Corozal container terminal, ACP is looking at building a rollon roll-off terminal on the Pacific side of the canal, and is considering constructing an LNG terminal nearby. Another area in which ACP is investing time is in trying to recapture services that travel one way, from US east coast to northeast Asia ports. ACP launched a lower rate per TEU in October last year to incentivise services to use the Panama Canal on this route. It will shortly be evaluating how effective this has been. “We want to attract services going to northeast Asia via the Suez Canal or the Cape of Good Hope as we believe this is our market due to cost of transit and the space we can provide,” explained Ms de Marucci. Another focus for ACP is to keep in close contact with customers to create more of a “just-in-time” system. This means that “vessels do not have to speed up and burn a lot of fuel if they do not need to transit so fast.” Ms de Marucci added “We have made some progress and worked very closely with customers.” Asked about any challenges since the widening of the locks, Ms Marucci said “Just the normal growing pains to make sure that we handle vessels properly. It has been a learning curve [since the expanded canal] and our pilots and operations have become more efficient. We are also getting a handle on the larger neopanamax vessels.” CST

Silvia de Marucci (Panama Canal Authority)

Silvia de Marucci joined the Panama Canal Authority in 1995 and developed a career in market research, specialising in the liquid bulk trade. In November 2013, she was appointed acting manager of the marketing and forecasting section, which was later renamed the economic analysis and market research division. She is currently responsible for developing tolls policies, evaluating the competitiveness of the route, generating short, medium and long-term forecasts, and evaluating the economic impact of the Panama Canal. Previous experience includes working as operations co-ordinator for South America for Samsung Latin America. From 1992 to 1994 Ms de Marucci was appointed economic advisor to the embassy of Japan in Panama, acting as liaison between Panamanian Government officials and the embassy. In addition, Ms Marucci teaches maritime economics and administration at the University of Panama and at the International Maritime University of Panama, as well as other private universities in the Republic of Panama. She publishes papers in international professional forums such as the International Association of Maritime Economists (IAME) and technical magazines.

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18 | TOP 20 CARRIERS

CONSOLIDATION CAUSES CARRIER TOP 20 RESHUFFLE M&A ACTIVITY IN THE CONTAINER SHIPPING SECTOR HAS ENABLED REGIONAL PLAYERS AND FAST-GROWING NEW CARRIERS TO ENTER THE TOP 20 BIGGEST BOX SHIPPING LINES. CONTRASTS ARE MARKED: SOME OF THE LINES HAVE HUGE ORDERBOOKS, OTHERS HAVE NOTHING

Maersk Line's number one position has been strengthened with the takeover of Hamburg Süd at the end of 2017

1: Maersk Line

Continuing its hold on the number one spot is Maersk. With a current fleet of 4.1M TEU and an 18.7% share of the world’s global container fleet, it does not look as if it is going to relinquish the top spot any time soon. Indeed, its position has strengthened with its takeover of Hamburg Süd at the end of 2017. As of April last year, Hamburg Süd had a fleet of 568,219 TEU (108 ships). Despite its position as top-of- the-league when it comes to tonnage, Maersk is conservative when it comes to newbuild orders. It has 12 ships consisting of 105,288 TEU on its orderbook, only a tiny 2.5% of its total fleet.

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2: MSC

MSC is at number two, with a fleet of 3.3M TEU. The carrier hit the headlines last year when it announced it was building 11 ships of 22,000 TEU. This has pushed its orderbook up to 32,052 TEU, with 18 ships on order, giving its future fleet a 10.2% share of its total fleet. The carrier announced in April this year that it will equip its newbuilds with 11 MAN B&W 11G95ME-C9.5 high-efficiency main engines. There are concerns that this large order – and that of CMA CGM – could unbalance the delicate supply-demand situation, by causing other carriers to follow in their footsteps.

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TOP 20 CARRIERS | 19

3: CMA CGM

French carrier CMA CGM made the ground-breaking move to use dual-fuel LNG for its nine 22,000 TEU mega newbuilds – the first ultra large container ships to be fuelled by LNG. This will have huge ramifications for the container shipping industry. France-based GTT is supplying the 18,600 m3 fuel tanks. These will enable a complete voyage from China to Europe before refuelling. The fact this is possible will surely make other container ship owners mull over the possibility of LNG for ultra large container ships. The vessels will only use a few percent of marine gas oil for ignition in the combustion chamber. CMA CGM is building partnerships with ports and LNG suppliers to create a strong bunkering infrastructure – something that will encourage other box ship operators to choose LNG.

4: COSCO

COSCO will become even more of a super power in 2018. The takeover of OOCL by COSCO, due to take place this year, is an indication of how powerful COSCO is becoming. It has enjoyed a huge cash injection by the Chinese Government to put towards its newbuild programme and it has a major role in China’s Belt and Road initiative, with its port division aggressively buying stakes in Europe and elsewhere. The company has the second-largest orderbook in the top 20 carriers – currently standing at a huge 404,407 TEU. This makes up 20.5% of its whole fleet (newbuild and current combined).

5: Hapag-Lloyd

Hapag-Lloyd’s tonnage has increased due to its acquisition of UASC in May 2017

Hapag-Lloyd is still at number five – but its tonnage has jumped since Alphaliner’s top 20 list (dated April last year) due to its acquisition of UASC, completed in May last year. Then, its current fleet was 1M TEU. Now, it has soared to 1.6M TEU. Its acquisitions of CSAV and UASC have strengthened its hand on the increasingly important north-south trades (in the case of CSAV) and equipped it with 18 ULCVs thanks to UASC. Interestingly, the carrier has no container ships on its orderbook – a contrast to others that have long orderbooks. The firm explained last year that it anticipated no vessel newbuilding investments for several years because its merger with UASC has given it enough additional capacity to meet demand.

6: ONE

The combining of NYK, K Line and MOL’s container ship businesses as Ocean Network Express (ONE) has pushed the Japanese trio to number six in the Alphaliner top 100 largest ocean carriers. Last year, NYK was at number 10, MOL at 11 and K Line at 14. ONE has

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115 vessels at a total of 1.5M TEU. According to VesselsValue, in terms of owned (not chartered) fleet, MOL has provided the largest number and TEU capacity of live ships, with 26 ships at 232,466 TEU, followed by K Line at 23 ships of 162,177 TEU. NYK provided 16 ships at 116,372 TEU (see pages 42-43). The move to form ONE looks positive for both the Japanese carriers and the container ship market. ONE said its focus would be on service quality, while the merger will allow it to strengthen its position in certain trades, such as Africa.

7: Evergreen

The formation of ONE has pushed Evergreen from number six to number seven. The carrier has the largest orderbook in the top 20 carriers, standing at 479,974 TEU, making up 43% of its overall fleet. This figure has jumped since last year, when as of April 2017, Evergreen had 310,000 TEU. It took delivery of its largest ship, Ever Golden, in April this year. It is the first of 11 20,150 TEU ships ordered from Japanese shipyard Imabari Group in October 2015. The vessels, which will be delivered over the next 18 months, were ordered through Shoei Kisen, the ship financing arm of Imabari, which will charter them to Evergreen. Ever Golden joins Ocean Alliance’s NEU3 AsiaEurope sling, which consists of 14,000 TEU box ships.

8: OOCL

OOCL is number eight, with a current fleet of 690,773 TEU. It has nothing on its orderbook – in Alphaliner’s 2017 list, it had 126,600 TEU (six ships) on its orderbook, but these units have since been delivered. During 2017, OOCL took delivery of five of a total of six Giga-class 21,413 TEU vessels ordered from the Samsung Heavy Industries shipyard. The last vessel in the series was delivered in January 2018. Big changes could be afoot for OOCL as it is due to be acquired by COSCO this year. UK’s Drewry Shipping Consultants has dubbed OOCL the ‘perfect bride’ for its good track record for above-average profits in a challenging market and a reputation for being a very well run company – so retaining the management team, processes and systems “is a wise move and could be of enormous value to COSCO,” it said.

9: Yang Ming

Yang Ming has held on to its number nine position, but it has been a rocky road for the carrier. The Taiwan-headquartered carrier lost a massive US$492M in 2016 – double the loss it made in 2015. But the carrier turned things around last year after launching a recapitalisation plan and returned to profitability for 2017. Yang Ming said in a statement “In addition to strengthening its operating strategies such as management centralisation, Yang Ming has over the past year deployed strategies to optimise cargo structure, integrate information technology systems, and continuously train staff to improve knowledge and expertise.” Yang Ming said it will continue to explore and develop new markets, optimise its fleet deployment and take advantage of opportunities to minimise its operating costs and improve profitability.

10: Pacific International Line (PIL)

PIL has leapt up the league – from number 14 as of April last year to number 10 due to the mergers and acquisitions that have taken

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20 | TOP 20 CARRIERS

place in the container ship industry. Last year’s number nine, Hamburg Süd, has joined Maersk; NYK, MOL and K Line (see entry for ONE on previous page) have formed ONE; and UASC (in at 12 last year) has been acquired by Hapag-Lloyd. Only four independent mid-sized carriers remain, said Alphaliner in July last year: PIL, Yang Ming, Hyundai Merchant Marine and Zim. Of these PIL is the only one not government-linked. PIL has embarked on a newbuilding programme that comprises 16 11,800 TEU box ships due for delivery between the end of this year and 2019.

11: Hyundai Merchant Marine (HMM)

HMM stands out as its orderbook of 398,020 TEU is larger than its current fleet (393,292 TEU). It announced in April this year that it will order 12 box ships of 20,000 TEU and eight of 14,000 TEU – and will use LNG or scrubbers on all of these ‘eco-friendly’ mega ships. HMM said the benefits of its shipbuilding programme include being able to secure stronger “fleet competitiveness with the benefit of economies of scale” and helping the carrier to “form a stable basis for making profits”.

12: ZIM

Israeli carrier ZIM is at number 12 with a fleet capacity of 389,667 TEU. It has no ships on its orderbook. The carrier was restructured in 2014 and pulled out of loss-making services, including Asia to Europe, to focus on routes such as Asia to the US east coast. Its financial results for 2017 reveal that it was back to black, with an adjusted net profit of US$50M for 2017, followinga loss of US$150M in 2016. It loaded 8% more containers on its ships to reach 2.6M TEU. There has been speculation that the company could be a target for M&A activity, but the fact it is linked to government makes it seem unlikely it would be a target.

13: Wan Hai Lines

Taiwan’s Wan Hai Lines has 98 vessels at a total of 253,257 TEU. It has nothing on its orderbook. Last year it had eight vessels of 15,200 TEU on its orderbook, which have all been delivered. Wan Hai’s core business has been on the intra Asia trade, where traditionally rates have been far more stable than other trades, as have volumes which have increased steadily. This has allowed Wan Hai to grow its

Wan Hai Lines has expanded its intra Asia services (credit: Kentaro Ohno)

main business before expanding elsewhere. It is still growing its intra Asia business. In July last year it launched a Japan Express service, linking Singapore and Malaysia, and in April this year, it announced it was launching an Indonesia to Malaysia service.

14: X-Press Feeders

The gap created by consolidation means that some regional carriers and feeder operators have been catapulted into the top 20 rankings. The X-Press Feeders group has evolved over the years to become the largest feeder operator in the world, replicating the global networks of its deepsea carrier customers as these have gradually exited from serving second and third tier ports. Its feeder services now cover most of the main markets and it claims to annually carry 5.3M TEU. X-Press Feeders has a very high proportion of chartered-in tonnage – 79.2% of its fleet – which has enabled it to take advantage of some cheap daily hire charter rates and allowed it to be flexible.

15: Korea Marine Transport Co

Korea Marine Transport Co is an intra Asia regional company, deploying regular container liner services to China, southeast Asia, southwest Asia, the Russian Federation, and the Middle East. The company also owns and operates terminals in the port of Ulsan and Busan New Port. This carrier has joined the top 20 due to all the consolidation that has taken place within container shipping lines. Its position in the top 20 reflects the strength of the intra Asia trade which is now similar in size to the Asia–Europe and transpacific deepsea trades. The carrier is benefiting from a mix of newbuilding and newbuilding charter tonnage – on its orderbook it has six ships of a total of 10,800 TEU.

16: Antong Holdings

Quanzhou Ansheng Shipping, a subsidiary of Chinese transportation company Antong Holdings, has risen up the ranks and is now at number 16. Last year it was at 29. This is due to the mergers and acquisitions that have spread through container shipping lines. Aggressive newbuilding plans have also propelled it up the table, pushing its fleet from 67,073 TEU as of April last year to 134,603 TEU this year. It currently has 29,676 TEU on its orderbook. Its latest order was placed in December 2017, for 12 640 TEU box ships, to be built at Fujian Southeast Shipbuilding, Fujian Mawei Shipbuilding and Nantong Xiangyu Marine Equipment. Each of the shipyards will build four vessels. The newbuildings are expected to be delivered in 2019.

17: Zhonggu Logistics Corp

Zhonggu has shot up the rankings – from number 33 in April 2017 to number 17 this year. It has a fleet of 125,566 TEU and 20,556 TEU on its orderbook. This is a huge jump compared to last year, when its fleet comprised just 60,240 TEU, with 20,000 TEU on its orderbook. In January 2017 it announced it was raising US$87M through shares to fund 10 2,500 TEU box ships.

18: IRISL Group

Iran’s national shipping line IRISL Group has leaped into the top 20 from number 24 after UASC, Hamburg Süd, NYK Line, MOL and K line disappeared as separate names. It has been

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TOP 20 CARRIERS | 21

ALPHALINER TOP 20 (APRIL 2018) RANK

OPERATOR

TEU/SHARE

APM-Maersk

4,130,986/18.6%

Mediterranean Shipping Co

3,287,273/14.8%

CMA CGM Group

2,601,123/11.7%

COSCO Shipping Co Ltd

2,002,005/9.0%

Hapag-Lloyd

1,604,999/7.2%

ONE (Ocean Network Express)

1,558,122/7.0%

Evergreen Line

1,090,236/4.9%

OOCL

686,195/3.1%

Yang Ming Marine Transport Corp

642,556/2.9%

PIL (Pacific International Line)

423,094/1.9%

Hyundai Merchant Marine

391,546/1.8%

Zim

387,147/1.7%

Wan Hai Lines

253,257/1.1%

KMTC

138,659/0.6%

X-Press Feeders Group

137,266/0.6%

Antong Holdings

134,603/0.6%

Zhonggu Logistics Corp

125,566/0.6%

IRISL Group

110,859/0.5%

SITC

109,129/0.5%

SM Line Corp

78,599/0.4%

Existing fleet

Orderbook

(Credit: Alphaliner)

affected by political events as it will be subject to US sanctions following the 180-day wind-down period, leaving in doubt a newbuild order it placed with South Korean shipbuilder Hyundai Heavy Industries for four 14,500 TEU container ships in late 2016. Alphaliner reported in May that despite the completion of two of the four ships, they had yet to be delivered to IRISL. It said “The first, Rayen, was completed on 23 April and should have joined Hafez Darya Arya Shipping, part of IRISL Group on 25 April. It was to be followed by the second ship, Radin, on the same service on 6 June. However, the plans appear to have been disrupted by the current diplomatic tensions, with Rayen remaining idle off Ulsan for the past three weeks.”

19: SITC

Chinese carrier SITC has a total fleet of 79 ships at a combined total of 107,995 TEU. Its owned tonnage consists of 70,687 TEU, while its chartered fleet is smaller, at 37,308 TEU. It looks as if it has plans to expand, as its orderbook consists of 10 ships of a total of 15,666 TEU, which is a contrast to last year when it had nothing on its orderbook. SITC sold its 2,496 TEU SITC Makassar box ship to MPC Container Ships in April this year.

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20: SM Line

Fast-growing SM Line has entered the top 20. The South Korean carrier was formed from the now-defunct Hanjin, with five ships coming from that carrier. SM Line’s parent company, Samra Midas Group, acquired the business operations of Hanjin’s Pacific and Asian routes. Many of SM Line’s personnel also come from Hanjin. SM Line carried 187,910 TEU in 2017, making up 1.6% of the 11.9M TEU imported through US west coast ports in 2017, according to PIERS. It has a fleet of 78,599 TEU. Last year Alphaliner labelled the carrier the fastest growing new carrier in container shipping history. It had an initial six services covering northeast Asia-southeast Asia, Far East-India and transpacific routes, with services launching in March and April 2017. SM Line has since launched a new transpacific Pacific northwest service from May 2018, using six ships of 4,000 TEU – 4,600 TEU. CST

“Plans appear to have been disrupted by the current diplomatic tensions, with Rayen remaining idle off Ulsan for the past three weeks”

Container Shipping & Trade | 2nd Quarter 2018

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A WORLD OF SERVICE

WEATHER ROUTEING | 23

Weather routeing: cut cost of compliance Next-generation weather routeing can help box ship operators save money in the face of dramatically rising fuel costs when the 2020 sulphur cap comes into force, says Tidetech managing director Penny Haire

iner operators want to understand how they can combine management of fuel consumption with route efficiency to ensure the best possible environmental profile. This demands data inputs for route planning, voyage optimisation and postmission analysis. Too often there is a lack of data to put fuel consumption and other key parameters into context â&#x20AC;&#x201C; whether before a voyage, during it or afterwards. With the cost of compliance rising and the price of bunker fuel likely to rise dramatically when the 2020 global sulphur cap takes effect, there is an increasing interest in tools that can make a positive contribution to operating margins. Smarter navigation using weather routeing to help operators maintain more consistent vessel speed and schedulekeeping has more than just the potential to save money and reduce fuel consumption and air emissions, it is proven to do so. There has been a tangible growth in interest across the last six to nine months in using metocean data in voyage optimisation, from both the bigger players and smaller operators interested in understanding vessel performance. This is being driven by a combination of regulation and operational demands and is also pushed along by the exponential growth in satellite bandwidth. Another driver is the increased use of management systems that can combine layers of information to display a complete fleet operation on one dashboard. A superintendent who manages 20-30 vessels can easily integrate weather, tides and currents with vessel data. Using enterprise-grade cloud-based servers means tidal models can be produced in minutes which would have previously

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taken a day on a super-computer â&#x20AC;&#x201C; and group files delivered for ingestion into onboard systems.

Benefits not always understood

While it seems obvious that weather can have a big effect on performance, the total benefit that can be derived from this data is not always understood. The confusion stems in part from the misconception that weather services only have a benefit when sailing in blue water. There is an assumption in many operatorsâ&#x20AC;&#x2122; minds that once they are in coastal waters or traffic separation schemes that this part of the voyage cannot be optimised. The data that can now be delivered is high enough resolution to enable operators to optimise the coastal and regional legs of a voyage and gain more

Penny Haire (Tidetech): often the total benefit that can be derived from weather data is not always understood

benefit than in ocean waters, where conditions are more predictable. From our own simulations run for shipowners on their routes we have proven that on the North Atlantic there are more potential cost savings from optimising against currents in UK coastal and northern European waters, than there are across the whole Atlantic. Armed with that information, liner operators can predict ETA more accurately and use vessel speed and power settings to arrive on schedule, even when it changes. This offers them the ability to save a lot of money but too often this opportunity is unrealised because there is a focus on the route rather than the speed of the vessel. Not limiting thinking to the idea that voyage optimisation is only about deepsea shipping means there is a whole different class of vessel that could benefit, and the usefulness could extend to landside operations. We can generate metocean data at any given waypoint to provide weather, wave and current values along the whole voyage track which is ideally suited to commercial post-voyage analysis. Tidetech is seeing an increasing number of requests for local and regional tide and current data, suggesting that more and more operators are beginning to recognise the opportunity of optimisation. And this opportunity exists as much for liner operators sailing the biggest container ships as those who trade intraregional box routes. Even so, the industry is still at the start of what should be much wider adoption and needs to overcome the knowledge gap in the application and value of weather data for the industry to reap the benefits. CST

Container Shipping & Trade | 2nd Quarter 2018

24 | ENVIRONMENTAL REGULATION

Blockshipping’s world-first registry to have ‘huge impact’ on container management The Global Shared Container Platform looks set to save shipping lines money and completely change the way they manage their container fleets, its founder explains

lockshipping has taken a major step towards its Global Shared Container Platform (GSCP) with the launch of an initial coin offering (ICO) in May 2018. And it already has a top-20 container carrier signed up to the world-first registry of the world’s 27M containers – and is in discussions with six other shipping lines. Chief executive and founder of Blockshipping Peter Ludvigsen, who has 39 years of experience in container shipping including lengthy spells at Maersk, has been interested in setting up such a platform since the mid-1990s and told Container Shipping & Trade “It is my life’s dream to make this happen.” The platform promises a lot to cash-strapped carriers – it is set to save the global container shipping industry US$5.7Bn annually through smarter handling and repositioning of containers. Mr Ludvigsen explained “It is a completely new way of managing containers – carriers are spending huge unnecessary costs on repositioning empty containers.” The blockchain register of the world’s container fleet will allow much better transparency, allowing the location of containers to be seen in real-time through sensors. It will be possible to reduce the container fleet by 15%, not only reducing costs but leading to annual CO2 reductions of 4.6M tonnes. It will have a ‘huge impact’ as carriers will no longer need to

Peter Ludvigsen (Blockshipping): Container fleets will be democratised, lowering the costs for carriers to lease them

Container Shipping & Trade | 2nd Quarter 2018

own a fleet of containers as they can simply make a reservation on GSCP. Currently around 50% of containers are owned by leasing companies and 50% by carriers – but GSCP is set to change this. Mr Ludvigsen said “Leasing companies that are savvy and modern and see the benefits of sharing containers will probably embrace this and carriers will see that there is no need for them to have a lot of financial assets tied up in containers when they have that same kind of security and certainty by using our platform.” He said he had a long-term vision for Blockshipping whereby container investment syndicates of ordinary citizens can be set up via the platform to invest in containers. “This means that they are no longer wholly owned by around 12 leasing companies but will democratise containers, lowering the costs for carriers to lease them.”

Carriers join up

He is very pleased with GSCP’s first customer, a carrier ranked in the top 10-20 largest shipping lines. “This carrier has always been interested in shared containers and was the perfect match,” he said. This shipping line will also be Blockshipping’s first member of its customer advisory board, and so will help to shape and develop the products developed by Blockshipping. “I am quite confident that we will get some of the biggest carriers joining, but in the beginning, it will probably be mediumsized carriers that join.” Crucial to the register is that it will use blockchain. “Carriers are fierce competitors but using blockchain makes it easier for them to use a shared platform. They can get comfort from using our platform because all operating rules are built in, so they need not be afraid of one company getting an advantage over another. Carriers can decide who they want to share equipment with.” Crucial to launching GSCP is the ICO, which was open until 14 June this year. The target is to raise US$24.8M. “I am very confident that we will achieve this,” Mr Ludvigsen said. “Our ICO is quite unique. It is built on a sound business case and we have had a lot of interest from the container shipping community.” The ICO also provides credibility to the company, underlining that their outlook is long-term. It is the first shipping ICO in Scandinavia and the first ever in Denmark. “The ICO is the fastest way to get funding in place for the full development of the platform – without it, it would take about five years to develop.” The ICO will cut this down to two and a half years. Product development will start in June this year, with the plan for the first product to be up and running in January next year. When fully developed, the GSCP platform will include more than 34 different products and services related to the global handling of freight containers. CST

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ENVIRONMENTAL REGULATION | 25

Scrubber retrofits soar on back of huge MGO costs

he price difference between diesel and marine gasoil (MGO) has led to a surge in scrubber retrofits within the container market. A blog by S&P Global Platts said if the global container fleet, which burns around 100M tonnes of fuel annually, was to switch from 3.5% IFO 380 fuel to compliant MGO the extra bunker costs would be US$34Bn a year, based on the current price of gasoil futures in 2020. Wärtsilä director of exhaust gas cleaning Sigurd Some Jenssen told Container Shipping & Trade that while work had picked up very rapidly in the newbuild sector within the last few years, since the start of this year there had been a rapid increase in scrubber retrofit orders, particularly on the container side. “The retrofit market is really growing, and there is a lot happening on the container side. This has happened even more strongly than we had anticipated.” He explained the looming 2020 deadline for low sulphur fuel was a main driver. “2020 is moving closer, there is now a common realisation among players that it does take time to install and get systems up and running, there is a lead time on equipment and shipowners need to secure capacity with the shipyard. If there are a lot of ships to retrofit, you cannot expect to do all of them in December 2019.” The gap between the price of diesel and marine gas oil is a huge factor in the push to retrofit box ships with

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As the 2020 low sulphur deadline closes in, scrubber retrofits on box ships have escalated due to the wide price gap between HFO and MGO

scrubber systems. Wärtsilä director Jan Othman told Container Shipping & Trade “Increasingly owners see a very, very strong business case for using scrubber technology rather than switching over to MGO. This is driving a lot of investment across all vessel segments.” He said the driving factor is the spread in price between HFO and MGO. One reason that scrubbers make a strong business case for container ships is that container ship operators pay the fuel bill themselves and hence, they also get the benefit of the reduced fuel bill rather than the charterer, as is the case in some other segments of shipping. Wärtsilä launched a new scrubber design late last year that is suited to large container ships which have big engines and a lot of exhaust that needs to be treated; the scrubbers have up to 70 MW of power and can provide more if needed. He singled out that most scrubber activity tended to be for ships sized 8,000 TEU and upwards, as due to the greater use of fuel, the return on investment was better.

Wärtsilä launched a new scrubber design late last year that is suited to large container ships

Mr Othman warned “Lots of owners are coming to the same realisation at the same point in time [to install scrubbers] and the challenge is to secure yard slots in the not too distant future.”

HFO versus MGO cost

Meanwhile, the president of a scrubber manufacturing business has predicted the differential between the cost per tonne of low-sulphur fuel and high-sulphur fuel in 2020 will be more than many estimated. Citing a Wall Street Journal forecast in his presentation to the Sulphur Cap 2020 Conference in Amsterdam in April, CR Ocean Engineering president Nicholas Confuorto said the current price differential of US$250 would pale in comparison to that of 2020, when IMO regulations limiting sulphur in fuels come into

force in less than two years. “The differential now is about $250. However, that is not even close to what it is going to be in 2020,” he said. He also claimed an estimated price differential of US$420 that he attributed to a Wall Street Journal report was “conservative”. “I think we’re going to be in a $600 differential by 2020,” he said, noting the gap in prices “may only be for a few years, but if you invest [in scrubbers] early enough, you can take advantage … and still have something very valuable going forward.” Mr Confuorto said his family business had been installing scrubbers since the 1950s and the timeframe for installing scrubbers was less critical than his concerns around fuel cost. “There will be fuel,” he said. “It is not an issue of whether there will be, it is an issue of how much it will cost.” CST

Container Shipping & Trade | 2nd Quarter 2018

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COATINGS | 27

ISO 19030 ACHIEVEMENTS – AND WHAT NEXT?

oatings suppliers have been heavily involved in the formation of the ISO 19030 standard. AkzoNobel marine coatings business channel manager Michael Hindmarsh told Container Shipping & Trade “The standard was originally developed to try and harmonise the way ship performance is monitored.” He emphasised that it was important that the standard is split into two parts with part two covering automated systems and part three, alternative methods of monitoring hull and propeller performance such as the analysis of noon reports. “We always advocate that part two is better, as it is much more accurate, but part three is important as it allows everyone to monitor in some shape or form, the performance of their hull,” Mr Hindmarsh commented. Commenting on the value of the standard, he said “The standard draws a very good line in the sand. But it is just a start, and already people are talking about making it more accurate and improving this.” An example is measuring hull and propeller performance – currently the standard does not differentiate between the two. “There is work to be done in developing methodologies to split the effect of just the propeller or just the hull. That is just the kind of work that we (AkzoNobel) would be involved in.” As well as helping to further understand the fuel performance of vessels, such a differentiation would save time and money in investigating what specifically is affecting hull performance. “We sometimes get customers saying that their fuel performance is not as good as usual, and they want us to check if the coating is the problem. We will inspect the vessel and often find the problem is not the coating. Therefore, it is in the interest for everyone to develop the methods to separate out the effects of

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INDUSTRY INSIDERS TELL REBECCA MOORE ABOUT THE CHALLENGES AND ACHIEVEMENTS OF ISO 19030 AND HOW IT WILL BE DEVELOPED

hull or propeller as it will reduce costs and save time,” said Mr Hindmarsh. He singled out how the standard was especially useful for container shipping lines. “Larger container vessels are very fuel thirsty. Even at slow steaming a very small change in hull and propeller performance can make a great difference to their operating expenses and it is critical to be able to monitor the influence of energy efficient technologies employed.”

Big data

Michael Hindmarsh (AkzoNobel): Future standard developments could include differentiating between hull and propeller performance

AkzoNobel sees a huge opportunity in applying big data to fouling control coating selection and using the ISO 19030 standard to prove the benefits. It first launched its Intertrac Vision system in 2015. This is a predictive tool designed to help ship operators assess the return on investment resulting from a particular coating specification. The iPad-based system processes individual vessel data and operational parameters that specially trained personnel enter during a free consultation. Multiple proprietary algorithms and models are then used to provide an accurate assessment of the impact of each potential fouling control coating choice over a ship’s specified inservice period. Outputs include a vessel’s powering requirement, fuel consumption, fuel cost, CO2 emission predictions and a full cost-benefit analysis comparing different coating options and surface preparation options. In May 2017 at Nor-Shipping, the company launched Digital Voyage, a complementary suite of digital tools that includes Intertrac Perform, a tool that measures and monitors hull-performance data and validates this against the predictions made by Intertrac Vision using metrics that comply with the ISO 19030 standard on hull- and propellerperformance monitoring. Part of Digital Voyage, Intertrac Vision

Container Shipping & Trade | 2nd Quarter 2018

28 | COATINGS

Lite has been developed to showcase key features of the full Intertrac Vision tool. Users can input data covering a sample selection of vessel types, fouling routes and generic hull-coating choices to create different coatings scenarios, and then compare variations in the effect on power requirements, fuel costs, and CO2 emissions. It also includes tips and commentary to explain the methodology that underpins Intertrac Vision, which includes the full range of parameters, and can be used to make comprehensive economic and environmental decisions. Hempel was also involved in developing the ISO 19030 standard and its new hull performance system SHAPE (systems for hull and propeller efficiency) is based on the ISO 19030 framework. Hempel group segment manager for marine and drydock Andreas Glud told Container Shipping & Trade “SHAPE combines elements of hull and propeller efficiency optimisation to maximise the performance data. Analysis of this data allows Hempel to provide expert advice on the optimum paint solution to all container ship operators. The aim is to maximise vessel efficiency and further enhance return on investment.” He pointed out that fouling and mechanical damage to the hull will increase the power required from a ship’s engine to maintain a defined speed, which can be as much as 20%. SHAPE monitors long-term trends using in-service key performance indicators (KPIs) to analyse the impact of drydocking and to assess the impact of in-service hull and propeller solutions and associated maintenance on actual performance. “This enables shipowners to make data-driven decisions to improve their operational efficiency,” said Mr Glud. Specifically designed on the principles defined by ISO 19030, SHAPE can monitor the long-term trends via inhouse KPIs but also short-term trends through the maintenance-trigger KPI. Key performance indicators for the system are based on speed-loss measurements to track performance gains over time. Monitored and guaranteed speed loss – directly related to fuel savings – is also applicable for hull coatings specified for up to 60-month drydocking intervals. In addition, transparent cost-effective performance monitoring following the ISO 19030 methodology is available. He highlighted how the standard and its related coatings were of particular importance to the container shipping

Container Shipping & Trade | 2nd Quarter 2018

Hempel’s SHAPE – based on ISO 19030 – being applied

market: while 2017 delivered stronger markets and so far this year, supply and demand seem to be equalising, there is still a large influx of capacity. Mr Glud said “January alone saw an expansion of 1.2% in the container ship fleet – equal to the entire fleet expansion of 2016 – and with new orders being placed at an increasing rate, ship operators must seek innovative solutions to retain optimum efficiency and competitiveness.” He singled out another trend in the industry. “The fight against fouling has developed significantly in recent years and leading manufacturers are evolving into advisors and solutions providers alongside their more traditional role of simply supplying paint.”

ISO 19030 drivers and challenges The standard is moving in the right direction, according to Jotun Hull

Performance Solutions (HPS) global concept director Stein Kjølberg. “More coatings suppliers are using the standard as a means to measure the performance of their coatings, as we have done with HPS. We also see that certain projects have started to specify requirements on speed loss according to the ISO standard.” He added that vessel charterers were now more interested in performance monitoring and were helping to drive this market. “We have seen charterers really see the value in it and in the importance of coatings,” he said. “Increasingly, they are going back to tonnage providers to request coating upgrades in contracts.” However, there have been challenges in the uptake of the standard. Mr Kjølberg said “One challenge is many companies have established their own way of performance monitoring and have shown

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COATINGS | 29

some resistance in applying the standard. Therefore, we try and educate owners on how to utilise it – it is a fantastic tool to measure changes in hull and propeller performance. But to some owners it might be seen as just a means to try and twist it in the way of coating suppliers, but that is not correct.” He explained the various benefits

that shipowners can gain from it. “It gives several options for the owner, not just for service performance over time.” It is a “very good way” to evaluate what has transpired in performance since the last docking. “The performance can be measured for the first 12 months out of dock to set a reference line and that can be set up against recent dockings to see whether

hull and propeller performance is stable, has improved or declined.” He said this allowed owners to link it to the surface preparation performed, whether it was a small touch-up or full docking. “Seeing the difference in performance can justify the cost of a full docking,” Mr Kjølberg said. There are also other performance indicators in the standard, such as the >>>

HullWiper strengthens position in box market HullWiper is a strong player in the container shipping market. Its affordable, eco-friendly and innovative remotely operated vehicle (ROV) is available in port at several locations around the world, and the expansion of its network is continuing to grow through its leasing programme. Since it first launched in 2003 in Dubai, HullWiper has had a fleet agreed contract with Maersk Line. The ROV uses sea water under variably controlled pressure to remove marine fouling from hulls, instead of brushes or harsh abrasives, resulting in minimal damage to expensive anti-fouling coatings. Cleaning can be done day or night, in most weather conditions, whilst cargo operations are underway. The company also has fleet agreements with CMA CGM and other container shipping lines. HullWiper managing director Simon Doran told Container Shipping & Trade “Maersk has been with us since the beginning and ever since.” He explained why the solution was attractive to Maersk. “Container vessels needs to load and unload in port without any interruption. For HullWiper to be able to clean hulls while alongside during cargo operations without delaying the vessel is of considerable benefit to shipowners and operators. If their hulls can’t get cleaned in port, companies need to take vessels off charter for at least one day at anchorage, which means they need to catch up speed after the clean.” HullWiper has a huge advantage compared to companies that use traditional methods. It has permission to operate in ports where other hull cleaning companies cannot, thanks to its integral onboard waste filter that collects and disposes of marine fouling in an ecologically-approved manner. No divers are used, and the entire cleaning process is in compliance with regional and local environmental regulations. HullWiper established operations in the Port of Rotterdam in 2016 and has just launched its pilot scheme in the UK’s DP World Port of Southampton. It also operates in ports in Sweden, Singapore, Spain, Norway, Egypt, United Arab Emirates and – on an ad hoc basis – at key locations in the Middle East. Rotterdam was a triumph as it had banned hull cleaning companies for years. It approved HullWiper because it collects marine fouling in an environmentally friendly and approved way. In contrast, traditional hull cleaning methods discharge removed residues and harmful materials into the sea. Mr Doran said “Rotterdam is one of Europe’s largest ports, with heavy container usage. Our technology offers commercial savings, and environmental rewards, to the global shipping community.” Removed fouling reduces a hull’s resistance, which can improve the vessel’s fuel efficiency. “Even an increase in slime can make a vessel 5-10% less efficient,” Mr Doran noted. “And by not cleaning

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the hull in between coatings, the use of fuel can increase by one to 10 tonnes a day.” HullWiper is working with a shipyard to deliver an ROV that can be installed on board a newbuild for the first time. The shipyard – which cannot be named - builds a variety of vessels including container ships. Such an arrangement could save a container ship upwards of US$500,000 a year, Mr Doran said. He said there were many benefits for container ships and he highlighted the time-saving and flexibility it brings. “It’s a timecritical business,” he said. “Having an ROV permanently on board means that a container ship does not have to wait in port for the solution to arrive – they can clean as and when convenient; starting and stopping when they want.”

HullWiper cleaning the hull of Maersk Ganges

30 | COATINGS

maintenance trigger. Mr Kjølberg said “When we start to see a decline in performance, we have a reference line; if we see things changing, shipowners can carry out inspections to see if cleaning is needed or if there has been any damage. They can take initiatives at a much earlier stage than before and thereby save huge amounts of money in additional fuel cost.” If cleaning has been carried out, Mr Kjølberg pointed out that the improvement made by the cleaning and the length of time the improvement lasts can be measured. “All these factors give owners additional ammunition to make good decisions. They do not need to invest in the most expensive coatings systems. It depends on the docking, age of vessel, trade route and other facts, upon which a proper evaluation can be made.” Jotun and DNV GL have launched a series of ISO Standard 19030 conferences. The latest Hull Performance & Insight Conference was held in the UK in March. It highlighted developments, challenges and advances that could help to further improve vessel performance and looked at the role of the standard and how it can be developed. >>>

Stein Kjølberg (Jotun): box ship charterers are helping to drive the take-up of the ISO 19030 standard

Mr Kjølberg said “The standard is not 100% but is good enough for practical application.” Once the standard is three years old, there will be opportunities for revision. “We will then have the experience

to see where it can be improved.” He highlighted that discussions created by the Hull Performance & Insight Conference would be an important contributor to any developments within the ISO 19030.

ESHARK PROJECT MOVES FORWARD When the Eco-friendly Ship Hull Film System (eSHaRk) project was first announced in 2016, its objective was ambitious but simple: bring to market a fouling protection technology which not only maintains current state-of-the-art protection standards but is superior to existing paint-based solutions in terms of eco friendliness, ease of application, robustness and drag reduction effects. The project took its inspiration in part from recent developments in hi-tech swimsuits which can enhance a swimmer’s performance by reducing drag as they move through the water. Backed by European Union funding, a consortium consisting of some the world’s leading marine experts and engineers are working together to create an innovative new fouling protection system. eSHaRK consists of a self-adhesive and non-toxic fouling release foil, produced by applying PPG Sigmaglide fouling release coating onto a self-adhesive film. Recent developments have seen the eSHaRk project team (PPG, MACtac, Meyer Werft/ND Coatings, VertiDrive and Hamburg Ship Model Basin HSVA) develop and produce a prototype for the embossed fouling release foil, a concept proven by tests performed at HSVA test institute. Progress has also been made towards production of an automated lamination system that will apply the foil to the underwater hull of a vessel. A number of trial applications are underway and the advantages of the system are already being demonstrated. So far, the foil

Container Shipping & Trade | 2nd Quarter 2018

system has been able to offer clear advantages on newbuild projects in terms of productivity improvements and minimised environmental impact. On the smaller vessels that have been selected as testbeds, the foil is applied manually due to hull size and shape. For these vessel types PPG has a concept that consists of a combination of foil and specially-designed hard anticorrosion coating with a guaranteed lifetime of 20–25 years, with the foil removed by hydro-jetting and renewed after a prolonged period. The industrial application process allows an exact and optimally smooth silicone layer produced under controlled application and curing conditions. These two elements are essential in boosting fouling release properties as the optimum surface characteristics of the silicone film are perfectly established. The self-adhesive properties allow efficient application without release of solvents and do not create any problems of silicone spread to the surrounding environment. Application of the foil is a one-coat operation which reduces the application time. Industrial application also allows impression of surface texture, lowering drag resistance. Though the eSHaRk project is far from complete, early results suggest that it will lead to fuel savings and reduction of GHG emissions greater than those of existing paint-based anti-fouling and fouling release technologies. CST Peter Schoneveld is project leader for PPG eSHaRk

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COATINGS | 33

JOTUN LAUNCHES FIRSTOF-ITS-KIND MANAGEMENT MAINTENANCE SOLUTION SHIP OPERATORS WILL BENEFIT FROM A NEW MANAGEMENT SYSTEM THAT CUTS PAINT CONSUMPTION AND OFFERS COST PREDICTABILITY

otun has launched SeaStock Management Solution – which will see the coatings company assume full management of its customers’ onboard maintenance. This solution includes condition surveys, ordering and logistics, direct communication with vessels, business and technical reviews, optimising products for individual requirements and crew education. Jotun claims that it is the first offer of its kind on the market. Commenting on the service launch, Jotun drydock and SeaStock concept manager Habibe Escobar Meléndez explained “Onboard maintenance is an essential but specialised area that requires time, understanding and commitment. Often conducted in difficult conditions, by crew that may lack sufficient training, there is a risk of poor quality application – leading to premature corrosion – and excessive paint consumption. Then of course there is the commitment from management required to order, monitor and optimise the process to achieve the best efficiency, costs and results.” She said that SeaStock takes on board this responsibility and so “reduces hassle, frees up time and resources” and improves the condition of the assets. Ship operators benefit because the solution gives cost predictability and frees up owners to focus on running their businesses. Ms Escobar Meléndez explained “It is a simple way to tackle what can be a complex and costly process.” The solution is tailored to meet individual customer needs. For a set lump sum Jotun said that it will take full control of a company’s ‘paint locker’ and use a mix of the best products, while educating relevant crew members, to achieve the best quality finishes, prolong maintenance intervals and achieve significant cost savings.

Cutting paint consumption

Speaking about the new arrangement, a major ship management company (which did not disclose its name) in Singapore, which has been piloting the concept, commented “We value Jotun’s effort to further strengthen their partnership with us through their SeaStock Management Solution. This programme is helping us optimise the onboard maintenance of our fleet, have better budget control and improve the condition of our vessels.” The company provided a figure to illustrate cost savings: It has reduced consumption by 15% compared to 2016. It said that it has also minimised the number of deliveries and simplified product assortment, resulting in smoother handling from the office and by the crew.

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An in-house team monitors coatings on vessels as part of Jotun’s SeaStock Management Solution (credit: Jotun)

The company said in a statement “Thanks to the quarterly business and technical reviews provided, and the close follow up from Jotun, we are always informed and in control.” Germany-headquartered DS Tankers has also been using the product on some of its tanker vessels. It said that paint consumption had been reduced by 17% compared to the previous year and by 11% compared to vessels on a conventional SeaStock contract. The company said that it has “more control on our yearly spend and we get much closer follow up.” Therefore, it has decided to continue and add more vessels to the programme. Jotun said it assigns an in-house team to manage each customer and monitor coating condition and quality. “This gives peace of mind in the harshest of environments, both operationally and commercially,” concluded Ms Escobar Meléndez. “It provides a full picture of costs and ensures predictability, while slashing management and administration duties.” CST

Container Shipping & Trade | 2nd Quarter 2018

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PROPULSION | 35

G95 series makes headway in the large box ship space MAN Diesel & Turbo has secured a significant order from MSC, further underlining market acceptance of its new-generation container ship engine design, writes Clive Woodbridge

he news that MAN Diesel & Turbo has won a major order from the Genevabased carrier, Mediterranean Shipping Company (MSC) for a series of 11 23,000 TEU capacity container ships has already been widely reported. Each of these newbuildings, six of which will be built by Samsung Heavy Industries (SHI) and five by Daewoo Shipbuilding & Marine Engineering (DSME), will be powered by MAN B&W 11G95ME main engines. The contract in itself is significant and highlights the tremendous success of this relatively new engine type over the past two years. There are now 44 container ships in service with G95 series engines, all delivered since 2016, and a total of 88 orders placed. MAN Diesel & Turbo has carved out a significant share of the larger container ship market within a remarkably short space of time. MAN vice president, sales and promotions two-stroke business, Bjarne Foldager said “This is an engine that has been developed and built very much with the needs of slow steaming container line operations in mind. The G-type engine’s longer stroke means it offers lower revolutions per minute and combined with an optimised engine design and the use of a larger propeller,

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this means much lower fuel consumption and reduced CO2 emissions.” The MSC ships will be powered by a 95-bore engine, which is the largest available in the G-series programme. Indeed, the 11-cylinder version of this engine type that will feature on these new 23,000 TEU ships will be among the largest marine engines in the world. Only the 12-cylinder, 95bore engine design within the G-series is bigger, and this has

yet to feature within a container ship newbuilding project. Mr Foldager added “These are big, powerful engines that have been optimised to achieve the lowest possible fuel consumption, which is what MSC specified as a priority. The owner wanted a combination of power and efficiency to achieve the minimum unit transport cost per container, and we have been able to deliver an engine design that fully meets that objective.” While MAN Diesel &

Turbo has a long reference list for the G95 series engines, including a number already installed on board MSC ships, the operational experience of this engine type is relatively short, going back only two years. Mr Foldager said “The engines we will be delivering to MSC are based on a proven design and will not feature any major changes from units delivered to date. Based on the operational data we have so far, these engines are performing

The G95 series main engine has proved to be popular with container ship owners, thanks to a design that has been optimised for slow steaming operations

Container Shipping & Trade | 2nd Quarter 2018

36 | PROPULSION

well in the field and are achieving the efficiency levels we anticipated. But, of course, we are continually looking to improve the design and performance of these engines and we will be making some minor adjustments based on operational experience so far.” MAN Diesel & Turbo anticipates no significant complexities in integrating the G95 series engines into the new 23,000 TEU container ships designed for MSC, although installing any engine weighing 3,000 tonnes, as these do, does not come without its challenges. Mr Foldager added “The expertise of the engine builders in South Korea, Hyundai Heavy Industries and Doosan Engine, which will construct engines for SHI and DSME respectively, is critical. Experts from MAN Diesel & Turbo, supported by the engine teams in Copenhagen, will be embedded at their factories during the manufacturing process in South Korea to ensure that the engines produced fully match MSC’s requirements.” MAN Diesel & Turbo is currently working on a number of other large container ship projects. Hyundai Merchant Marine is seeking to build a series of 23,000 TEU and 14,000 TEU vessels, and the Copenhagen-based company is working with South Korean engine builders on proposals for these ships. The G95 series is being suggested for this project and others being worked on for Greek, Taiwanese and Asian shipowners. Enquiries from the container ship market currently include requests for dual-fuel engines that can run on both conventional bunker fuel oils and LNG. MAN Diesel and Turbo can offer a comparable G95ME-GI engine type, that is fully compliant with the global sulphur emissions regulations coming up. Mr Foldager said “Many

Bjarne Foldager (MAN Diesel & Turbo): MSC wanted a combination of power and efficiency to achieve the minimum unit transport cost per container

Container Shipping & Trade | 2nd Quarter 2018

shipowners are evaluating whether they should build ships with dual-fuel ME-GI engines. The advantage of the G95 series option is that the ME-GI version is based on the same combustion technology, so owners can be reassured that if they opt for G95ME-GI engines they will get the same fuel efficiency levels.” MAN Diesel & Turbo will officially launch its LGIP engine range later this year, which will run on propane gas. The company has already received the first order for this engine type, outside the container shipping sector, but the technology is considered well suited for large newgeneration container ships as well. “The advantage of using propane is that it is readily available and the supply chain infrastructure is less complex,” suggested Mr Foldager. The company is also

upgrading its offer for smaller container ship types, including those engaged in feeder trades. The company is rolling out its MK 10 engine range, available in four sizes from 60 to 90 bore, which offers significantly lower fuel consumption levels than the earlier generation MK 9 engines for this market. The new MK 10 engines feature cylinders positioned closer together, allowing the overall size and weight to be reduced, while new types of connecting rods for the pistons introduce greater flexibility into the design. “We are confident that the container shipping market will embrace the benefits of the new MK 10 platform,” said Mr Foldager. “It represents a simpler design with fewer components, lower total weight and reduced fuel consumption. As such it offers a significant improvement for container ship owners.”

Wärtsilä to supply CMA CGM box ships A revolutionary series of nine LNG-powered, 22,000 TEU container vessels ordered by French carrier CMA CGM from China State Shipbuilding Corp will feature new technology from Wärtsilä. The company has recently developed and received orders for LNG-fuelled auxiliary gensets for the new series, which has been designed in house by CMA Ship Solutions. Each of the ships, due for delivery in 2020, will have six W34DF gensets installed on board and the contract is described by Wärtsilä as being a significant step for the container shipping industry. Wärtsilä product director Patrik Wägar said “By running on LNG compared with diesel you can reduce NOx emissions by 85% and CO2 by 25%, significantly reducing the environmental footprint of the operation. The global sulphur cap in 2020 will clearly change things and will lead to a shift to LNG as fuel, but hybrid solutions are also in the spotlight. “For container vessels the W34DF option will create added value with the ability to add gensets as a back-up for hotel loads in combination with single main engines, to reduce both energy consumption and CO2 emissions.” The W34DF engine, based on the well-proven Wärtsilä 32 engine type developed in the 1990s, has already been specified for LNG carriers, offshore support vessels and shuttle tanker newbuildings. This is, however, the first time the technology has been specified within a new container ship project. CST

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Asian Sulphur Cap 2020 Conference 24-25 October 2018, Singapore

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• What is the right fuel choice? • What role can enginebuilders play in aiding compliance and how are their designs and plans affected by the cap? • What are the technological problems posed by new fuels? • Will there be sufficient compliant fuel available? • Will fuel quality be maintained? • Are scrubbers an efficient and cost-effective solution? • How is lube choice affected by the cap? • Will we see large-scale adoption of LNG post-2020? • How will shipowners’ operations and bottom lines be affected? Brought to you by

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38 | COMMUNICATIONS

VSAT enables onboard internet access and multimedia Advances in satellite communications are enabling container ship owners to improve crew welfare and operational efficiency, writes Martyn Wingrove

ontainer ship owners are investing in broadband communications on their ships to improve operations and crew welfare. But, the sector as a whole lags behind tankers, offshore vessels and passenger shipping in providing crew communications and internet connectivity. Investment in VSAT and larger packages of L-band, such as Inmarsat’s FleetBroadband and Iridium’s Certus, has increased the level of ship-to-shore communications for crew. However, only 57% of seafarers working on container ships reported they had any form of onboard communications, according to the Crew Connectivity 2018 Survey, produced by Futurenautics Maritime in March 2018. This compares with 61% of seafarers on tankers, 70% on gas carriers, 72% on passenger ships and 81% on offshore vessels having almost-always access to onboard communications. This survey also highlighted internet access, which is not always available and is often bandwidthcontrolled. More seafarers have some type onboard internet access in 2018 than they did in 2015. On container ships, 65% of seafarers have internet access, compared with just 25% in 2015. However, of those working on tankers, 80% have access to online services in 2018. Report authors estimated the worldwide market value for crew communications as US$94M for container shipping. This is based on the amount seafarers pay monthly for communications, which on average is between US$99 and US$105 for satellite connectivity and between US$75 and US$92 for communications in coastal waters or while ashore. This is based on a global fleet of 5,100 ships and an estimate

Container Shipping & Trade | 2nd Quarter 2018

KVH provides its own 60 cm TracPhone V7 antenna for its VSAT solution

Martin Kits van Heyningen (KVH): “There is momentum for adopting VSAT”

that there are 102,150 seafarers working on container ships. KVH Industries was one of the supporters of this survey and report. Its co-founder and chief executive Martin Kits van Heyningen explained the importance of communications to crew welfare when he spoke to Container Shipping & Trade. Seafarers are requesting more connectivity on ships to access online services, especially social media. “Crew welfare is becoming more important for recruitment and retention because seafarers do not want to go on ships that are without the internet,” he explained. “There is momentum for adopting VSAT and more vessel owners are embracing faster broadband.” Many are replacing their ageing L-band satellite communications equipment – which can be 10-year-old technology – with VSAT hardware and services. Shipmanager ER Schiffahrt chose KVH to upgrade satellite communications on a fleet of 60 container ships and dry bulk carriers to access high-throughput satellites (HTSs) when ships are under the Ku-band spot beams. Upgrading these ships to VSAT involves installing KVH’s 60 cm TracPhone V7-HTS antenna and associated below-deck equipment. ER Schiffahrt has subscribed to KVH’s AgilePlans connectivity-as-a-service package for these ships. Mr Kits van Heyningen said shipowners can benefit from VSAT through greater volumes of data transmissions for analysis to reduce fuel consumption, improve navigational safety and deliver onboard training to crew. This will accelerate in the next five years as more vessel operators adopt internet of things technology. “VSAT

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COMMUNICATIONS | 39

enables applications, such as performance and condition monitoring, and is the conduit for hull performance information during transits and for predicting equipment failure and keeping onboard systems’ software updated,” he said. KVH offers C-band and Ku-band over its mini-VSAT broadband service and provides media content through its IP MobileCast multicasting service over satellites to ships.

Crew retention

Marlink is another provider of VSAT services to container shipping. Its president for maritime, Tore Morten Olsen, believes that crew welfare must be a primary concern for the industry. “Lack of communication with the outside world can contribute significantly to a decline in the mental health of crew members, especially considering that many of them will spend over half the year away from their families in total,” Mr Olsen told Container Shipping & Trade. “Lack of communication with the outside world can contribute significantly to a decline in the mental health of crew members.” Marlink has expanded its crew welfare portfolio by releasing a number

NORDDEUTSCHE REEDEREI UPGRADES SATCOMS Norddeutsche Reederei is upgrading communications on its fleet of container ships to improve operational efficiency and crew welfare services. It is installing VSAT and bandwidth management systems on up to 50 ships, to enable the owner to run business applications to improve its operations and the navigational safety of its ships. It is installing Navarino Infinity Cube communications management units and associated tools across the fleet, which ranges from 1,430 TEU ships to 8,814 TEU vessels. Deployment of VSAT and bandwidth management will allow Norddeutsche Reederei to run applications, such as planned maintenance schemes, equipment purchasing and electronic navigational chart updating.

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of key initiatives using its XChange centralised IT and communications management platform. “We have always focused on making it simpler and more cost-effective for our customers to offer reliable communications for crew on board,” said Mr Olsen. “Our Universal Card makes calling home or accessing the internet easy using a pre-paid approach.” Higher bandwidth enables box ship operators to provide more digital services to seafarers. Markink offers XChange Telemed, XChange Media and XChange BYOD (bring your own device) for ships with wifi “all of which offer new facilities for crews’ physical and mental health, and entertainment during downtime,” said Mr Olsen. XChange Telemed is a fully integrated telemedicine service and a costeffective way for shipping companies to manage regular and emergency medical consultations. It supports the health of seafarers and passengers, and reduces costs incurred by medical emergencies, said Mr Olsen.

Media streaming

XChange Media provides media streaming to crews in local languages. It includes ondemand content for crew to view on their own smartphones, tablets, laptops and communal televisions. NSSLGlobal offers its CrewVision service as a media multicast service. This includes a world news feed refreshed throughout the day, alongside the latest films, documentaries and prime TV shows, said NSSLGlobal marine commercial manager Andrew Sirkett. Delivering such content has become “vital in retaining a happy crew for the essential running of an efficient operation” he said. “While crew demands have been rising, budget conscious shipowners have in the past been reluctant to invest in such technology mainly because of the high up-front cost of additional video streaming hardware on board and the amount of capacity needed for crews’ on-demand video streaming,” he explained. CrewVision is intelligently and efficiently connected to NSSLGlobal’s Satlink VSAT network to provide high definition content over satellite without disrupting operational traffic or the crew’s internet access, thereby optimising onboard user experience. “Even if the satellite airtime package on board is small, there are no limitations to the number of

Cobham Satcom has developed 60 cm antennas for Ku- and Ka-band

crew members viewing different video content simultaneously.” Antennas are a vital hardware aspect of ship communications. Technology advances mean more powerful antenna can be installed without increasing their footprint. Cobham Satcom uses software to automatically calibrate its Sailor range of Ku-band and Ka-band antennas so that the transmit power is set to maximum levels. “Power levels are controlled dynamically, by the VSAT modem or hub, in real-time,” said Cobham Satcom director of maritime broadband Jens Ewerling. “End-users can experience faster, more reliable internet when compared with the same reflector dish size on a non-softwarecontrolled antenna.” Software control means Cobham can offer a Sailor 60 cm VSAT for ship connectivity instead of a 1 m version (Sailor 900 VSAT). “Most people believe they need a bigger antenna to be able to pay less for services, but that model is changing with HTSs,” said Mr Ewerling. Advances in satellite and antenna technology, along with more available bandwidth and flexible pricing, is enabling container ship owners to improve crew welfare so that more seafarers will always have access to communications in the future. CST

Container Shipping & Trade | 2nd Quarter 2018

40 | FLEET STATS AND ANALYSIS

OWNERS ‘RELENTLESSLY PURSUING’ MEGA BOX SHIPS THE BOX SHIP INDUSTRY IS ENTERING A NEW ERA OF ULCS ORDERING, DRIVEN BY HUNGER FOR COMPETITIVE ADVANTAGE, WRITES BARRY LUTHWAITE

fter a pause in ordering, the big owners are now relentlessly pursuing ultra large container ships (ULCSs) in abundance ahead of better prospects on the Asia– Europe routes. There is currently an understandable sense of cautious optimism but how long will it last? Profits are being recorded over a longer period for the first time since ULCSs were introduced. It has proved a long time coming. A recent ordering drought over a year helped ease the situation but cargo demand was still slack. Now orders are again stacking up which could disturb a fragile equilibrium when the new vessels enter service between now and 2021. Looking at the current newbuilding situation the recent plethora of business is starkly illustrated. Seventy ULCSs in excess of 17,000 TEU have been commissioned since 2013 when the Maersk revolution started with delivery of the first four E-class 18,000 TEU ships. The total fleet commissioned currently stands at 1,333,579 TEU but by 2021 this will rise by 64 more units adding 1,320,618 TEU to the global fleet, which will then contribute a total of 134 ULCSs. The hunger for competitive advantage is increasing and more orders will be seen. Japan plays a significant part in construction, especially at Imabari where there are hidden ULCS orders for the shipowning arm Shoei Kisen Kaisha, which will be bare-boated to the major Japanese owners and Evergreen Marine.

Owners are under pressure to catch up and other factors are playing their part. Obviously for any ULCS newcomers, the track record with smaller sizes and their own customers will demand due diligence before being accepted by the two big Asia–Europe consortiums as mitigating factors. Is there room for even more ULCSs and will it eventually depress freight rates? The original Maersk 18,000 TEU pioneering E-series were originally costed at around US$160M each, but later reduced to US$140M apiece as a crisis hit shipbuilding and there was a global downturn in the box trades, especially between Asia and Europe.

Upcoming orders

The next order to be officially confirmed in July will cover a requirement by Hyundai Merchant Marine (HMM) for 12 ULCSs of 23,000 teu. They will earn the latest prestigeous distinction of the world's largest and will be employed in Asia Europe services. Vessel construction will be shared between Daewoo (7) and Samsung (5) with deliveries in 2020/2021. Power selection is still under review but the new behemoths will be LNG ready and employ the latest exhaust emission scrubbers. HMM added eight 14,000 teu vessels which will be built by Hyundai and form the largest ships on routes served by the owner. ULCSs orders have now moved the big three builders into quarterly operating profits for the first time in many months. HMM

ULCSs IN SERVICE TEU range

Total count vessels

Total sum of TEU

71,299

18,000-18,999

551,465

19,000-19,999

442,194

20,000-20,999

183,282

21,000+

85,339

1,333,579

17,000-17,999

Total Credit: BRL Consultants

Container Shipping & Trade | 2nd Quarter 2018

www.containerst.com

FLEET STATS AND ANALYSIS | 41

itself has fallen behind its competitors through a severe cash crisis taking the container division to near bankruptcy. Efforts to achieve a sale of the division did not induce sufficient interest, which disappointed the key stakeholder in HMM which is state-owned Korea Development Bank (KDB). Now the attitude has changed and with KDB offering financial assistance, rehabilitation is underway beginning with the newbuildings and self-owned leap into the ULCS age. Another key reason is an ageing fleet which means that with tougher legislation on compulsory environmental measures from the start of 2020 necessary upgrades will cost between US$1-3M per ship. The surprise is that HMM has specified vessels that would currently reach the world’s largest capacity at 23,000 TEU.

Looking at LNG

Only recently rivals CMA CGM and MSC placed newbuilding ULCSs at new record capacities of over 22,000 TEU as the two do battle in rival consortiums in Asia–Europe trades. Although there has been a slow and considered reaction to the use of LNG fuel from Asian owners it is likely that state-sponsored HMM has included LNG fuelling as an option in the tender. This would draw a price of around US$150M per ship with an increase of US$10M more for adopting full LNG fuel. Dual fuelling is still the preferred choice among owners because LNG infrastructure is still poorly served. In the case of dual fuel, scrubbers will be utilised. This has been adopted by Evergreen and Yang Ming on recently placed ULCS orders nominated with dual fuel. Owners are looking more and more at niche areas, but these are increasingly harder to find, and rival owners soon follow suit. But how and where can owners change this? ULCSs are only associated with Asia–Europe but this is about to change. Essentially, lack of port infrastructure and water depths prevent ULCSs callings elsewhere. If global trade continues to grow for the big boys there will be a clamour for ULCSs to absorb more business.

ULCS conversions

However, with deliveries stretching into 2021 underlining the lack of building space, owners have returned to a tried and trusted formula unused for around a decade. Conversion has returned

as an acceptable option offering the inducement of increased capacity and a redelivery span of three months to undergo work. The majors have already seized this opportunity, but it remains to be seen how far this choice will go. MSC and CMA CGM have slated 21 ships for lengthening, converting neopanamax recentlybuilt ships of 14,000 TEU into 17,000 TEU units, thus placing them on the bottom rung of the ULCS ladder. Most importantly this will open the way to more port calls, though many have already argued they will be loss makers and will further add to the threat of overcapacity and threaten freight rates once again. The moves by both MSC and CMA CGM confirm the faith in ULCSs but are also a 'throw of the dice' to penetrate other destinations from Asia to other European destinations where previously there has been a limit on size. Although not always fully loaded, 14,000 TEU vessels have successfully been transiting a faster route from Asia to US East Coast via the widened and deepened Panama Canal, which has proved a great success with increased traffic in the last two years. Unfortunately, any TEU increase in these conversions will result in a potential loss of 21 ships from Panama Canal transit, hitting the authority’s revenue streams. If all 21 conversions go ahead around 60,000 TEU will be added to the global fleet. The enlarging exercise will see the vessels increase in length from 365.5 m to slightly under 400 m, raising TEU capacity by 20% on a nominal intake basis. The actual additional mid-body will raise intake to 15,496 TEU, while the additional deck tier will nudge this to 16,996 TEU, on the fringe of ULCS status. The orders concerned involve one shipyard – Qingdao Beihai Shipbuilding Heavy Industry – giving a significant boost to Chinese industry. MSC has signed for the retrofitting of nine firm vessels with two additional options while the French major has opted for five plus optional five similar retrofits. All the work is scheduled for completion by the end of 2019. Longer voyages to the USA will eventually be cancelled out by the larger capacity. The 21 vessels were built between 2008 and 2010. Maersk, which is the joint partner with MSC in the 2M alliance has shunned ULCS conversion upgrades but will convert eight E-series 15,500 TEU vessels to 16,300 TEU, filling a possible void in capacity availability in this range. Other owners are already tweaking newbuildings if construction has not yet started. CST

ULCSs ON ORDER TEU range

Total count vessels

Total sum of TEU

18,000-18,999

126,000

19,000-19,999

135,490

20,000-20,999

611,628

22,000-22,999

330,000

23,000+

361,339

Total

1,609,579

www.containerst.com

Container Shipping & Trade | 2nd Quarter 2018

42 | MARKET UPDATES VesselsValue

ONE CATAPULTS JAPANESE TRIO INTO STRONG POSITION ONE is a boost to the trio of Japanese carriers and the container shipping market

he launch of Ocean Network Express (ONE) has created one of the top 10 most valuable container ship fleets on the water and boosted the position of its three Japanese carriers in terms of TEU volume. By basing its headquarters in Singapore, it has also moved Singapore-based container ship ownership up two spots in the top 10 container owner nations by value (VesselsValue). ONE (MOL, NYK and K Line) has 65 owned vessels (not including chartered) at a total of 511,015 TEU and at a value of US$2.25Bn according to VesselsValue (see page 43). When chartered vessels are included, the figure stands at 115 vessels at a total of 1.5M TEU (according to Alphaliner figures. See page 19). Before the formation of ONE, NYK had 60 box ships at a total of 408,677 TEU, MOL had 28 at 243,145 TEU and K Line had 190,949 TEU (owned not chartered). MOL has provided the largest number of ships and TEU capacity of live ships, with 26 ships at 232,466 TEU, followed by K Line at 23 ships of 162,177 TEU. NYK provided 16 ships at 116,372 TEU. The three have not placed all of their owned vessels into ONE, according to figures from VesselsValue. NYK will retain ownership of 45 vessels outside the partnership at a combined 306,304 TEU. By contrast K Line and MOL have plunged nearly their entire owned container ship fleets into ONE, with the former leaving just three ships out of the fleet and the latter, two vessels. The company has been restrained in terms of ordering in capacity, as its combined orderbook shows. According to VesselsValue data, it only has 125,610 TEU on its orderbook, including one 14,000 TEU vessel being built by NYK, five vessels

consisting of a combined 70,000 TEU for MOL and 41,610 (three vessels) for K Line. However, the focus is on the ultra large container ship (ULCS). The new fleet is composed of a mix of container ships, with most capacity being in the post Panamax size, said VesselsValue. VesselsValue analyst Court Smith told Container Shipping & Trade “The alliance does include some ULCSs and the fleet operates across most key markets in Asia and in the transatlantic trade, a network that spans 200 ports.” He said it remains to be seen what impact the merger will have on asset values in the short and medium term, which have been improving over the past several months. However, he noted that the value of the ships included in the fleet have increased by 26.9% from their lowest point seen in early 2017. Furthermore, “the diversification of the fleet size across various market segments should create a more stable cash flow for the new entity”. The creation of ONE should be positive for the container shipping market too. Mr Smith said “The consolidation of commercial control of these new ships should help rates in a market that is plagued by overcapacity.” He added “We expect to see more interest in opportunistic mergers and acquisitions ahead as asset values remain cheap despite their recent gains and low earnings will encourage those with a weaker balance sheet to become willing sellers.” Singapore is now at number six in the top 10 league table for container owner nations by value. It has 272 vessels at a value of US$9.3Bn. It is above Switzerland, France, Taiwan and the United Kingdom. China comfortably tops the table, with a total vessel value of US$21.4Bn. CST

NYK has added 16 owned ships of a combined total of 116,372 TEU to Ocean Network Express (ONE)

Container Shipping & Trade | 2nd Quarter 2018

www.containerst.com

VesselsValue MARKET UPDATES | 43

FLEET VALUES SINCE FORMATION OF OCEAN NETWORK EXPRESS*

OCEAN NETWORK EXPRESS (LIVE FLEET) NUMBER OF VESSELS

TOTAL TEU

TOTAL VALUE $USM

511,015

$2,251

FLEET VALUES BEFORE FORMATION OF OCEAN NETWORK EXPRESS (LIVE AND UNDER ORDER COMBINED)

NYK LINE NUMBER OF VESSELS

TOTAL TEU

TOTAL VALUE $USM

436,676 $1,899

MOL NUMBER OF VESSELS

TOTAL TEU

TOTAL VALUE $USM

313,145 $1,683

K LINE * owned vessels (does not include chartered) Research: VesselsValue Infographic: Ram Mahbubani

NUMBER OF VESSELS

TOTAL TEU

TOTAL VALUE $USM

232,559 $1,203

44 | LAST WORD

The scientific approach to hazardous goods transportation Data is crucial for protecting against the increasing complexity of shipping hazardous goods

s a forensic investigator and consulting scientist, I often reflect that while core chemical and physical principles have remained unchanged since the start of my career, new material challenges continue to impact the safe movement of goods by sea. Chapter VII of the SOLAS Convention, Carriage of dangerous goods, makes mandatory the International Maritime Dangerous Goods (IMDG) Code, which covers the carriage of hazardous goods in packaged form and is broken down into nine classes. As a hazardous goods consultant, I advise on dangerous goods in containers but also on materials carried in containers that do not fall within the IMDG Code. At the core of this task is the Material Safety Data Sheet (MSDS) provided by the shipper on the material to be carried. The regulations are complex and updated every two years. Some aspects need detailed consideration to determine the correct information is entered. Material properties must be checked to ensure they have been correctly declared and the declared data is not at variance with other published sources. I also check whether the material is a mixture of hazardous and non-hazardous parts and explore what it might do in the event of spillage, such as causing an accident. I make a point of advising if a product is persistent in odour or taint, which in the event of spillage could make the container useless for carrying anything else, which is very important to carriers. I also advise if there is an immediate tendency of material to cause an incident if spilt.

Container Shipping & Trade | 2nd Quarter 2018

Given the complexity, it is perhaps unsurprising that one in four has some aspect that needs addressing; this is not necessarily misrepresentation but some aspects may not be fully evident from the paperwork. One of the biggest issues relates to toxicity (danger to humans) and environmental toxicity (danger to the marine environment). Some data sheets say, no data available, which could mean data has not been found or material has not been tested. Data must be sourced or established to determine whether it merits a hazardous goods declaration. Identifying whether a material is an environmentally hazardous substance or marine pollutant is critical, especially in cases involving spillage into seas, ports or beaches. Any substance needs to have an investigation into its properties to see how it affects marine organisms, how it affects crustacea or types of fish and how it accumulates in the environment. A common issue is to find the MSDS has no information declared on aquatic toxicity,

Daniel Sheard (Brookes Bell): checking the material declaration against data is fundamental to protecting the safety and security of a vessel

which I will then source. There has also been an increase in electronic products enquiries, particularly the different types of batteries and hazardous goods advice. Rules around the declaration of batteries are complex and a new Class 9 label for lithium batteries has been introduced in Amendments 38-16 in the IMDG Code which came into effect on 1 January this year. Despite the increasing complexity, carriers and shipping agents seek a prompt response to avoid any delay to vessel loading. I have access to substantial databases, and the accumulated knowledge of my colleagues which is available 24 hours a day through a global network of offices. Those same databases prove equally essential when assisting clients whose vessels have been involved in an incident. I can also call upon the expertise of other specialist colleagues such as fire investigators, master mariners or engineers to determine the cause, remediation strategy and repair costs, or give evidence in court and arbitration. This pool of expertise can benefit even those shippers with inhouse capabilities who may not have the indepth experience to assess contentious cargoes. So despite the variety of cargo, the increasing complexity of legislation and the demands for a swift response, the scientific approach remains as true and reliable as it has always been; checking on the chemical properties of material and how it might behave, and the physics of how it impacts on nearby things in the event of a problem. Material Safety Data Sheets are an essential part of moving goods in todayâ&#x20AC;&#x2122;s maritime world. But they are not infallible and should not be treated as such. Checking and assessing the material declaration against known data is fundamental to protecting the safety and security of a vessel and preserving the marine environment in the event of an incident. CST Daniel Sheard is partner and consulting scientist at Brookes Bell

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where everything is connected

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