Container Shipping and Trade 4th Quarter 2017 by rivieramaritimemedia

4th Quarter 2017 www.containerst.com

Behind the scenes of CMA CGM’s milestone LNG deal

Scrubbers poised to take on box ship industry Middle East focus: DP World unveils its growth strategy

“Because the cost of low sulphur fuel is so high, there is a big potential advantage for an unscrupulous operator not to comply with this” Maersk chairman of China and chief representative of Maersk Group north Asia Tim Smith, see page 5

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contents Regulars 3 COMMENT 32 LAST WORD

Operator profile 5 Maersk China chairman Tim Smith spoke to CST in an exclusive interview about Maersk’s ship strategy, plans for Hamburg Süd and the company’s drive to ensure that there is strict enforcement of the 2020 global sulphur cap

Trade route 10 China's ports and shipping lines have increased their investments in European ports as part of the ‘Belt and Road’ initiative. We investigate their growing dominance of European box port facilities

Regional analysis 12 Middle East ports are ramping up their facilities and boosting growth plans. We speak with DP World and Sohar Ports Hutchison

Top 20 leaders

4th Quarter 2017 volume 5 issue 4 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 9456 3165 e: kym.tan@rivieramm.com Senior Sales Consultant: Ed Andrews t: +44 20 8530 8322 e: ed.andrews@rivieramm.com

17 This year’s line-up of container industry leaders shows the importance of data, while company consolidation puts increasing amounts of influence in the hands of fewer executives

Group Production Manager: Mark Lukmanji t: +44 20 8370 7019 e: mark.lukmanji@rivieramm.com

Alternative means of power

Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com

22 CMA CGM’s ground-breaking announcement that its 22,000 TEU newbuilds will use LNG is paving the way for other operators to follow, while the trend to retrofit smaller box ships with dual-fuel LNG is growing

Scrubbers 26 Suppliers see the container ship sector as where the next surge of orders will come from. We speak to key manufacturers to find out why

VesselsValue data 28 As COSCO Shipping flexes its muscles with the Chinese government’s huge cash injection and aggressive newbuild programme, can it take on Maersk, the world’s biggest container shipping line? We look at the live and on order fleet figures

Fleet stats and analysis 30 CMA CGM and MSC have both placed orders for 22,000 TEU mega-ships. Will this push the container ship market recovery over the edge and will other shipping lines follow their lead?

Next issue Main features include: • Trade route analysis: transatlantic. • Ports’ regional analysis: Asia. • Energy efficiency: class societies. • Ship operations: ballast water treatment. • Ship operations: manoeuvring technology. • Ports: productivity. • Digitisation: big data.

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 Business Development Manager: Steve Edwards Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

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Container Shipping & Trade | 4th Quarter 2017

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COMMENT | 3

CMA CGM’s LNG plan puts focus on 2020 sulphur compliance

A Rebecca Moore, Editor

“THIS HAS BEEN THE BIGGEST NEWS TO DATE – BY FAR – IN THE LNG-AS-FUEL STORY”

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lternative fuels and the looming low sulphur cap regulation are dominating the box ship headlines – from CMA CGM’s LNG announcement to questions over compliance to the 2020 directive. CMA CGM’s announcement in November 2017 that its nine 22,000 TEU newbuilds will be fuelled by LNG is a milestone and will lead to wide-ranging changes in the use of alternative fuel in the container shipping sector. As Bureau Veritas global technology leader for LNG-as-fuel Martial Claudepierre told Container Shipping & Trade “This has been the biggest news to date – by far – in the LNG-asfuel story.” (For more on this and behind-thescenes analysis of CMA CGM’s use of LNG, see pages 22-24.) The scale of CMA CGM’s newbuilds being fuelled by LNG goes beyond the box shipping sector. As cruise operator Carnival Corp senior vice president of maritime affairs Tom Strang said at a recent conference in London that gathered top industry executives to discuss industry issues, this will be a “step change” in world shipping. Its announcement is bound to open the path for other container ship operators to use LNG, primarily because it will boost the LNG bunkering infrastructure. The fact that CMA CGM needs such a lot of LNG – it will need to be able to fuel a round-trip (about 27,000 nautical miles and a voyage duration of about 80 days) on a tank of 18,600 m3 – means that there will be an extra push for ports and LNG providers to rampup provisions. Of course CMA CGM is not the only box ship operator to use LNG: there have been retrofits and newbuilds before that have been using LNG (as our feature on pages 22-24 discusses) but those ships have been either feeder or Jones

Act vessels. The sheer size of CMA CGM’s ships, at 22,000 TEU the largest in the world, means that the French shipping line has the power to single-handedly ensure that the bunkering infrastructure develops. And the fact that CMA CGM is the fifth largest container ship operator in the world is bound to encourage other container shipowners to sit up and take notice. LNG is not the only means of meeting the 2020 sulphur cap and we also put the use of scrubbers under the spotlight in this issue. As our feature on pages 26-27 highlights, container shipping is following the cruise sector as the next large vessel segment expected to experience a significant take-up of scrubbers. However, they are not for everyone. Maersk has decided not to use them (for more about that, see our interview with Maersk Group Asia chairman and chief North Asia representative Tim Smith on pages 5-9). However the 2020 low sulphur cap is met, Mr Smith raised a very valid concern: how will it be enforced? Compliance could cost billions of dollars, which could lead to some unscrupulous operators to try to cheat the system. After all, as Mr Smith pointed out, if a ship is in the middle of the ocean, who is going to check if it is burning clean fuel? Maersk wants to make sure there are clear rules and is advocating a directive stating that operators should only have heavy fuel oil on board if they also have equipment such as a scrubber to burn fuel cleanly. A lot of effort has gone into creating this directive, therefore as much effort needs to go into enforcing it. Otherwise it is conceivable that some operators could get away with not complying. A reason for this is that while some parts of the world will actively enforce this regulation, other port states could be less active. If it is unable to be enforced properly, then there is no point in creating it. CST

Container Shipping & Trade | 4th Quarter 2017

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OPERATOR PROFILE | 5

MAERSK NORTH ASIA BOSS: GLOBAL SULPHUR CAP, MEGA-SHIPS AND M&A Maersk China chairman Tim Smith told Rebecca Moore about Maersk’s ship strategy, its plans for Hamburg Süd and the company’s drive to ensure that there is strict enforcement of the 2020 global sulphur cap

M Tim Smith (Maersk) Since 1 July 2015, Tim Smith has been chief representative of Maersk Group in north Asia and chairman of Maersk China, based in Beijing. Before that, he was chief executive of Maersk Line in north Asia from 2008 until June 2015. He has worked in the container industry for 30 years, with much of that time in Asia. Initially with P&O Containers and then P&O Nedlloyd, Mr Smith has been with Maersk Line since its acquisition of P&O Nedlloyd in 2005. He graduated from the University of Oxford with a BA Hons first class in geography.

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aersk Group is campaigning for strict enforcement of the 2020 global sulphur cap due to concerns that some “unscrupulous” ship operators will not comply, Maersk chairman of China and chief representative of Maersk Group north Asia Tim Smith told Container Shipping & Trade. In a wide-ranging interview, he also covered the company’s mega-ship strategy, its acquisition of Hamburg Süd, digitisation and cyber attacks. A major area that is preoccupying him and other Maersk chiefs is the 2020 global sulphur cap. Maersk intends to meet this by burning low sulphur fuel but is concerned about how the regulation will be enforced. Mr Smith told Container Shipping & Trade “While it is the right thing to do, we are very concerned to make sure that it is fairly enforced. Because the cost of low sulphur fuel is so high, there is a big potential advantage for an unscrupulous operator not to comply with this.” He added that complying could cost billions of dollars, which is “one reason why we are concerned about enforcement. If we are going to pay that cost we want

to make sure that others are not cheating the system”. Responsibility for checking compliance rests with port state control, which is “a concern for us as we guess that while some parts of the world will actively enforce it, others will be less active,” he said. Therefore, the company wants to make sure there are clear rules and is advocating a directive stating that operators should only have heavy fuel oil on board if they also have equipment such as a scrubber to burn fuel cleanly. “If a ship is in the middle of the ocean who is going to check that it is burning clean fuel?” Mr Smith said. Maersk is speaking to IMO about the regulation’s enforcement, he said, and it wants to see “a strong reaction” about enforcement. “It is good to create this regulation, but effort now needs to go into regulating it,” he said.

MAERSK CHOOSES LOW SULPHUR FUEL

Maersk’s decision to use low sulphur fuel contrasts with some other shipping lines, which have decided to use either scrubbers or LNG. “We have ruled out scrubbers,” he

Container Shipping & Trade | 4th Quarter 2017

6 | OPERATOR PROFILE

Maersk key statistics US$220M

Maersk Line Q3 2017 net profit

US$250US$300M

Estimated cost of the cyber attack

7.4%

The percentage of Maersk’s existing fleet that its orderbook accounts for

130

The number of ships Maersk will acquire in its takeover of Hamburg Süd

270,000

The containers that have been implemented with Maersk’s remote monitoring

Container Shipping & Trade | 4th Quarter 2017

Maersk’s E-class ships were the world’s largest but it has no plans to order more ULCSs

said. “They are expensive and sophisticated pieces of equipment that take a lot of work to install and they actually use quite a lot of energy themselves.” He added that Maersk’s experience of scrubbers showed that they did not look like a very cost-effective solution for the shipping line. He said that LNG was an interesting option but Maersk had also decided against this because the bunkering infrastructure was not yet in place and LNG is less energy-dense than fuel oil so takes up more space and requires more infrastructure on board a vessel. As a result, the company has decided on low sulphur fuel. Mr Smith explained “We already know that we can deploy low sulphur fuel as most of our ships use it already as they have to comply with stricter environmental regulations in some parts of the world.”

CYBER ATTACK IMPACT

When CST interviewed Mr Smith in November, the group’s Q3 profits had just come out. While Maersk Line reported a net profit of US$220M compared with a loss of US$122M in Q3 2016, this was offset by the huge costs of the cyber attack suffered by Maersk Line in June, which is estimated to have cost the group US$250-

US$300M. “The results were unsatisfactory, with the cyber attack halving the profit that could have been achieved. While the markets are gradually improving, we did not get the ‘slam dunk’ results that we wanted.” Mr Smith added “We are one of the leading proponents for digitisation and we feel that this is something that we do well, so it is more than a bit ironic and disappointing that we seem to have been hit more than our competitors on this, possibly because we are further ahead in digitising our operating processes.” Maersk Group announced in March 2017 that it was working with IBM to implement technology designed to help protect companies against cyber attacks. But Mr Smith explained that even this would not have saved the company from the hacking because it was a “new type of attack not seen before”. The attack happened because software required to be used in Ukraine to file corporate tax returns had been targeted by hackers. “We are using all the latest defences, from what we can see this is a new type of attack that may have come from state-sponsored activities and it was very difficult for us to protect ourselves from that as a commercial business.” But despite the costs and upheaval ›››

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8 | OPERATOR PROFILE

››› for Maersk, Mr Smith said that the

positive was how quickly the company managed to bounce back. “We suffered 11 days of very significant disruption before core systems came back and it took a long time to work through the backlog of data, but we are pleased about how our staff responded,” he commented. For example, despite having no access to email and corporate systems, staff took bookings manually until the issues were resolved. Despite the impact of the hacking, Maersk’s results reflect the fact that the economic conditions of its business have been better in 2017. Mr Smith said that the demand had increased this year by around 5% compared to last year.

ORDERBOOK STRATEGY

Maersk is not following in the footsteps of CMA CGM and MSC with their orders for 22,000 TEU units and ordering more ultra large container ships. “From our perspective we do not see the need for more large ships on our orderbook,” Mr Smith said. Maersk’s

orderbook is 7.4% of its existing fleet and although he thinks this is “relatively modest” he said “it is what we need for our services. We do not build speculatively – if shipyard offers are low, we do not get tempted by that.” Rather, Maersk looks at the age of its fleet and at the amount of cargo it expects to be able to carry. Maersk has no plans to order more ships now and has not ordered new ships since 2015. “There is often a lot of publicity about the largest ships and competition for bragging rights about who has the biggest ships out there, but you cannot run those ships other than on the Asia-Europe trade so, for us, it depends on how demand shapes up on the trade,” Mr Smith said. At some stage the company will need 12,000 TEU or 15,000 TEU vessels for other trades, he added, but “it is about having a balanced fleet at the end of the day, rather than just focusing on larger ships”.

HAMBURG SÜD TAKEOVER

The other issue is that, with Maersk’s takeover of Hamburg Süd, the company

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will be taking over 130 more ships. The acquisition was completed in November this year. Mr Smith said “They are a nice complement to Maersk. Hamburg Süd is very strong in Latin America and the coastal trades there.” In addition, the German carrier has a different customer service approach to Maersk. “We are quite standardised in the way we work and one of the aims is consistency of customer experience.” Hamburg Süd, on the other hand, is a much smaller organisation so has more flexibility, with a very strong customer focus. This is the reason that Maersk has taken a different approach to the acquisition of Hamburg Süd from previous deals. Normally when it acquires a company it is put under the Maersk umbrella (as P&O Nedlloyd was), but Hamburg Süd will retain its own separate sales and customer service teams. “We will aim for economies of scale and create efficiencies by using the same network of ships but they can keep their

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own distinctive customer value proposition,” said Mr Smith. “Personally, I Iike this logic and think it makes sense.” As to whether Maersk would consider more acquisitions, Mr Smith said that the shipping line would do that at the “appropriate time”. He explained that “acquisitions are time consuming and require a big management effort and I think we have probably got our plates full in the short-term to consolidate Hamburg Süd.” Furthermore, the company aims to grow organically and, with the rising trend of digitisation, Mr Smith said that there was plenty of opportunity to grow services and create new business models. “Therefore, there is plenty for us to do – I would be surprised if we acquired short term,” he summed up. Moving on to the subject of wider consolidation within the container ship industry, in terms of both merger and acquisition activity and the formation of the new mega-alliances that launched in April this year, he said “I have 32 years in the liner shipping industry and have never seen anything like the consolidation that [has happened] in the last two years. Coming with that change we have seen the alliances slim down from four to three.” Mr Smith believes that both things are “helpful” for an industry that was “very fragmented for a long time”. Maersk is “cautiously optimistic that the increase in the scale of the alliances means that we can start to build high quality global networks and compete more on quality of service not just on price,” he said, adding that the larger alliances would lead to a wider range of port calls and more stability of service.

container if it is on land. Benefits include preventing the loss of perishable goods in travel, decreasing cargo claims and saving costs. Mr Smith is very focused on China’s ‘Belt and Road’ initiative. He described this as the “biggest opportunity” for Maersk Line within north Asia. “Anything that has one of its goals as generating US$1.5Tn in the next 10 years is going to provide more

cargo opportunities,” Mr Smith said, adding that the infrastructure needed for the project would allow Maersk opportunities spanning investment and development of ports and warehouses. (For more on ‘Belt and Road’, see pages 10-11.) Despite the challenges faced by container shipping lines, there are still plenty of opportunities for Maersk to capitalise on. CST

DIGITISATION FOREFRONT

Apart from consolidation, the other big trend gripping the industry is digitisation, with Maersk leading the pack. Mr Smith singled out one of the areas in this sector that was having a huge impact: this year the company introduced a remote monitoring service for containers. The shipping line has introduced 270,000 refrigerated containers with sensor equipment that transmits real time data via satellite to ports, land stations, Maersk offices and shippers about what is going on in the container. The sensors check temperature and humidity and control the containers remotely. They can change the temperature remotely and, if a more significant problem is flagged up, the service enables Maersk to direct engineers on board or contractors to check the

ContainerShipping_4Q_190mmx124mm.indd 1

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10 | ASIA-EUROPE

CHINA’S CONQUEST OF EUROPEAN BOX PORTS

hina is investing billions of dollars into its Belt and Road initiative, where it is attempting to create better connections to Europe. A significant part of this involves the investment of Chinese port and shipping companies into European container terminals. A Drewry Consultants' webinar in September highlighted the dramatic rise of overseas port investment by Chinese port operators in Q3 this year. Drewry Shipping Consultants director of container research Neil Dekker said that M&A activity this quarter is related to the Belt and Road initiative, adding “Chinese investors are willing and able to pay a premium for port assets.” Chinese overseas container port investments have risen from eight in 2002 to 30 in 2017 (see graph: the rise of Chinese international port investments). It looks as if there will be more international port investments by Chinese players such as COSCO Shipping, as Mr Dekker pointed out that Chinese bank loans to support these initiatives only have 2.53.5% interest rates, meaning these companies have scope for more aggressive bids compared to other players. A majority stake in the Greek Port of Piraeus was

acquired by COSCO Shipping in Q2 2016. COSCO Shipping also announced in June 2017 that it was acquiring a 51% stake in Port of Valencia’s Noatum terminal. In March 2016 China Merchant Group confirmed an investment in Klaipëda port container terminal in Lithuania. The most recent European port investment took place in November 2017, when COSCO Shipping Ports agreed to acquire 100% of APM Terminals’ Zeebrugge shares. Port of Zeebrugge chief executive Joachim Coens told Container Shipping & Trade

China's port and shipping lines have increased their investments in European ports as part of the ‘Belt and Road’ initiative

“The upscaling of vessels and downscaling of the number of shipping lines has led to the slowdown of trade and this has had an impact on Zeebrugge.” He said that this had led to a decrease in the importance of deepsea containers to the port’s disadvantage and to the advantage of nearby hubs such as Rotterdam. But all this changes with COSCO Shipping Ports’ acquisition of APM Terminal’s shares in Zeebrugge, which will lead to a boost in container traffic. COSCO bought 24% of APM Terminals’ shares in 2014, before buying the

The rise of Chinese international port investments

Number of locations (COSCO / China Shipping / SIPG / China Merchants)

No. of international ports

No. of Chinese ports 30

2002

2007

Source: Drewry Maritime Research

Container Shipping & Trade | 4th Quarter 2017

2012

Today

remaining 76% stake in a deal that was completed in early November 2017. Mr Coens said “We have to find reasons for us to be on the map and one of these reasons is the accessibility we have to the UK and our transhipment possibilities. But despite this we needed the interest of a big shipping line.” This of course has been realised by COSCO’s acquirement of APM Terminals’ facility. COSCO is already calling at the terminal and now that it fully owns it, Mr Coens said he expected the shipping line would announce new services to call there by the end of the year. Mr Coens said Zeebrugge was attractive to COSCO due to its transhipment links to Scandinavia and the UK, its capacity for large vessels, good maritime access and a beneficial location toward the markets. He added “This is a very important platform for COSCO and complements its port acquisitions in Spain and Greece, as Zeebrugge gives the shipping line access to the North Sea.” China’s Belt and Road initiative has also benefited Zeebrugge, as a train carrying containerised cars to the port from China was launched in Q2 2017 and runs four times a week. The port is also currently

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Chinese

investments in European ports

in discussions with Chinese logistics companies to establish distribution centres at Zeebrugge. Elsewhere, Antwerp Port Authority is seeking Chinese investment in its container terminals. It was one of the first European ports to actively show interest in the Belt and Road initiative of President Xi three years ago. Working with different stakeholders including Chambers of Commerce and Flanders Investment and Trade, it is jointly looking at opportunities to enhance links and trade between Belgium and China. Antwerp Port Authority director of international relations Luc Arnouts told CST that Chinese port investment would allow it to “anchor container flows” from Chinese shipping lines including COSCO Shipping. He said the port authority was “actively” seeking Chinese investment and speaking to Chinese companies about opportunities. “Our terminal operators would love to see Chinese investment,” he said, explaining that such investment would boost Port of Antwerp’s development and expansion plans, including building a new dock and adding more cranes. Port of Antwerp already has Chinese investment –

COSCO Shipping has a 20% share of Antwerp Gateway, one of the first investments the Chinese shipping conglomerate made in Europe. In Q3 this year the port struck a collaboration agreement with the port of Caofeidian in China as part of the Belt and Road project – and is investigating the possibility of a rail connection between the two to further boost trade. Shipping transport will also be improved thanks to the introduction of a regular liner service. Antwerp Port Authority has also boosted its presence in China by establishing key account manager offices in Shanghai, Beijing and Taipei. Mr Arnouts said he felt the Belt and Road initiative had strengthened in 2016-2017. “This has been talked about since 2014. At first there were just lots of conferences and seminars on the subject. But now we are seeing tangible things like investments taking place, meaning that we are moving from words to deeds.” So what next from Chinese port investors? Drewry’s Mr Dekker said “Chinese players may well seek to acquire part or all of some of the other major global/international terminal operators, in the same way that China Merchants acquired 49% of CMA CGM’s Terminal

Belt and Road – an explanation “The ‘Belt and Road’ refers to the land-based ‘Silk Road Economic Belt’ and the seagoing ‘21st Century Maritime Silk Road’. The routes cover more than 60 countries and regions from Asia to Europe via southeast Asia, south Asia, central Asia, west Asia and the Middle East, currently accounting for around 31% of global GDP and around 34% of the world's merchandise trade. To enhance connectivity among and across all the Belt and Road countries, land, air and sea transport are naturally of utmost importance to the success of the initiative. To this end, both dry ports and seaports are crucial elements.” Hong Kong Trade Development Council assistant principal economist Louis Chan

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Port of Zeebrugge (Belgium)

Port of Piraeus (Greece)

Antwerp Gateway (Belgium)

Hutchison Ports Barcelona Europe South Terminal (Barcelona)

Klaipëda port container terminal (Lithuania)

Port of Valencia’s Noatum terminal (Spain)

(Credit: FreeVectorMaps.com)

Link for example.” He added that they can be expected to pursue further Belt and Road asset acquisitions, not just ports and terminals but landside and land transportation assets. Indeed, this is an important factor in European acquisitions. Hong Kong Trade Development Council assistant principal economist Louis Chan told Container Shipping & Trade how one of the ongoing “hallmark” projects is the Budapest-Belgrade rail link, which is scheduled for completion by 2018. “This is designed to improve the overland connection between Asia and major European hubs such as seaports in the Adriatic and Mediterranean Seas, including the Greek Port of Piraeus,” he said. Freight forwarder Damco – part of the APM Møller Mærsk Group – has also launched a block train from China to France, which Maersk chairman and chief representative for north Asia Tim Smith described as an

example of how Belt and Road is starting to bring in more products and services that generate opportunities in transport. “It is an interesting complementary service to sea – a good alternative niche between sea and air,” Mr Smith said. He described Belt and Road as the “biggest opportunity” for Maersk Line within north Asia. “Anything that has one of its goals as generating US$1.5Tn in the next 10 years is going to provide more cargo opportunities,” Mr Smith said, adding that the infrastructure needed for the project would allow Maersk opportunities spanning investment and development of ports and warehouses. “Improved connectivity and infrastructure brings costs down and spurs new trade,” Mr Smith summed up. “In a world of more protectionist sentiments, China is looking to try to stimulate demand which, from our perspective, is an exciting opportunity.” CST

Container Shipping & Trade | 4th Quarter 2017

12 | MIDDLE EAST

Bigger, deeper, longer â&#x20AC;&#x201C; DP World prepares for scaled-up container ships DP World UAE region chief executive and managing director Mohammed Al Muallem outlines the company's UAE growth strategy What is your strategy for DP World this year and in the future? As a global trade enabler, our strategy is to grow complementary sectors in the global supply chain such as industrial parks, free zones and logistics, adding further value for all our stakeholders. We have made acquisitions of port-related

businesses that will enhance our position as a leading trade enabler and we look forward to leveraging our proven track record to accelerate growth.

What is your strategy for Jebel Ali this year and going forward?

Jebel Ali is a trade gateway and business hub. With the integration of the port and free zone, we look to harness synergies and bring increased value and supply-chain efficiency to our customers from shipping lines to cargo owners.

What is driving growth there? What are the market opportunities for the port?

DP World UAE volumes January-September 2017 11.6M TEU

Up 4.6% Container Shipping & Trade | 4th Quarter 2017

Jebel Ali continues to operate at high levels of utilisation (83%) and the medium-term domestic and regional growth outlook is strong. Opportunities include the approach of Expo 2020 and we are developing the port in line with market demand.

Are there any challenges that the port faces and, if so, what are these and how are they being dealt with?

Increasing ship sizes and throughput result in increased infrastructure demand. Ports are expected to have deeper draughts, longer berths, larger yards and bigger and more efficient equipment. We continue to invest to bring the largest seagoing vessels in the world to Jebel Ali.

What investments and upgrades do you plan for Jebel Ali? We have equipment replacement programmes in place for our terminals, with bigger and more efficient cranes and yard equipment. We are continuing to develop our Terminal Four to ensure we are able to provide capacity that the market demands. Our investments go beyond infrastructure into innovative technology to improve operational efficiency and enhance safety at our terminals and gates. We are also automating our processes and engagement across the port community.

What volumes in TEU has the UAE achieved so far this year, and are you able to give a forecast for DP World UAE for the whole year? DP World's UAE operations handled 11.6M TEU in the first nine months of 2017 [calendar year], representing volume growth of 4.6% in nine months and 5.3% in Q3, following 6.6% growth in Q2 and 1.8% growth in Q1 2017. That growth was due to a pick-up in global trade and the new shipping alliances [that were launched in 2017], and came despite uncertainty in the region. Jebel Ali continues to operate at high levels of utilisation (83%) and we remain well placed to meet FY [calendar] 2017 market expectations. CST

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DP World on an expansion drive R

egional port-management heavyweight DP World is investing in improved container-handling productivity at Jebel Ali Port in Dubai, adding 1.5M TEU/yr capacity to the 720,000 m2 Container Terminal Three (T3), which opened in 2014. This expansion responds to emerging-market demand and increases the port’s capacity from 18M TEU/yr to 19.5M TEU/yr. As of October, T3 is able to handle up to 4M TEU/yr, making it the world’s largest semi-automated terminal even before its extra cranes began to come into service. Toward the end of 2017, the first batch of 37 new ship-to-shore (STS) cranes and 47 automated rail mounted gantry (ARMG) cranes was servicing customers. “Increasing the handling capacity at Terminal Three is in response to the high levels of utilisation at the port and, with the recovery in volumes, the medium-term outlook remains positive,” said DP World group chairman and chief executive officer Sultan Ahmed bin Sulayem. “Our priority is to ensure that we can serve our customers efficiently and deliver the benefits of scale that the new fleet of ocean-going mega vessels offer. The new cranes and retrofitting reflect the investments we make in infrastructure, equipment, technology and training of our teams. Today, Jebel Ali has the capability to accommodate 10 mega container ships simultaneously and we are on schedule to increase this number significantly.” The upgrade includes raising the heights of seven existing quay cranes while retrofitting them to handle the new mega container vessels. This refurbishment will improve efficiency and productivity and prolong the cranes’ lifespan. It is not just T3 that will benefit from shore-side expansion work:

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DP World has ordered 84 additional STS automated gantry cranes in its latest expansion drive

all of Jebel Ali’s container terminals are seeing upgrades. Container Terminal One now has 15 Shanghai Zhenhua Heavy Industries Co replacement STS cranes, with 70 tonne twin-lift capability. They are equipped to handle the latest Triple-E mega vessels. Its capability is further strengthened by the craneheightening project, with six cranes refitted to service new container ships. Container Terminal Two will receive three STS and 12 ARMG cranes. The STS cranes are dual-hoist tandem types capable of lifting two 40 TEU containers or four 20 TEU boxes, with a combined weight of 100 tonnes. Three existing cranes will be retrofitted to raise their heights to handle the next-generation vessels. The 12 ARMGs are double cantilever/double truck lane models capable of handling twin-lift containers to a combined weight of 70 tonnes. Meanwhile, in line with market demand, Container Terminal Four will take delivery of 13 STS cranes (dual-hoist tandem that can lift a combined weight of 120 tonnes) and 35 ARMG cranes that are double cantilever/double truck lane types able to handle twinlift containers to a combined weight of 70 tonnes. Jebel Ali is one of the few ports in the Middle East that can berth multiple modern-era megaships that have a carrying capacity of 18,000 TEU and more. The port’s capabilities were highlighted earlier this year when MSC Eloane, one of the world’s largest container ships, berthed there. CST ABOVE: DP World is investing in improved container-handling productivity at Jebel Ali Port, boosting capacity from 18M TEU/yr to 19.5M TEU/yr (credit: DP World)

Container Shipping & Trade | 4th Quarter 2017

14 | MIDDLE EAST

Sohar rising: planning for growth at Oman’s gateway port

“One of the things I like most about my job is the feeling that I am taking part in something meaningful,” writes Hutchison Ports Sohar chief executive Albert Pang Petrochemical products make up onethird of Oman’s economy today and this diversification plan will bring about much greater roles for manufacturing, transport and logistics, tourism, fisheries and agriculture in the local economy. Most of Oman’s target industries yield growth potential for container shipping, either directly, as contributors to connectivity or throughput, or indirectly, as growth engines for the local consumer economy. But some understanding is necessary of another macro-plan, the Sultanate of Oman Logistics Strategy 2040 (SOLS 2040), to recognise the true implications for Sohar Port.

National Logistics Strategy Albert Pang: working to restructure the Omani economy

ost people do not have the chance to play a key role in the restructuring of a national economy. At Hutchison Ports Sohar, we do. When Hutchison Ports gained the exclusive right to operate a container terminal in northern Oman’s Sohar Port in 2005, it was clear that our terminal and the surrounding areas were poised for big growth, although the policy basis for this growth was still under development. Since then, Oman has announced an ambitious National Programme for Enhancing Economic Diversification.

Container Shipping & Trade | 4th Quarter 2017

A significant portion of SOLS 2040 calls for comprehensive development of Oman’s three commercial ports, their surrounding areas and connecting infrastructure. Salalah, in the south, is Oman’s largest port in terms of throughput. The area around it is an important petrochemical centre but Salalah Port itself is mostly a transhipment facility and a the planned port of Duqm, 600 km north of Salalah, will be situated next to a small oil city. While there are big plans for industrial development there, local market demand will be limited. Sohar Port is another story. It is situated just two hours from the capital of Muscat, in the populous region of Al Batinah. Most of Oman’s population lives in this area, situated just on the outside of the Strait of Hormuz. Sohar has been designated the commercial cargo gateway – located

halfway between Muscat and Dubai along the brand-new Al Batinah Expressway, which will soon connect the entire northern coast. Of course, infrastructure connectivity is only part of the story. The Sohar area has enormous potential for industrial development, to serve local and international markets. Al Batinah lies just opposite India and only a few hours over land to the UAE. Right on our doorstep is the Sohar Freezone, a massive investor-friendly development zone, planned to stretch across 5,000 ha, with the even larger South Al Batinah Industrial Area located just two hours away. For these reasons, we are expecting a 30% increase in shipments to and from the local market, with a much greater

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MIDDLE EAST | 15

representation for food and consumer goods in addition to current drivers of growth from the local petrochemical, stone, metal and automotive industries. On top of that, there is potential to receive a greater share of regional transhipment cargo.

Growth plan

This expected growth might stress other port operators, but at Hutchison Ports Sohar we have long planned for Oman’s evolution into a regional engine of trade. In fact, our adaptability in this context is part of our value proposition. This adaptability lies at the confluence of three different facilitating advantages. The first advantage is the existence of highly supportive and visionary government policy, as the previouslymentioned strategic plans suggest. The second is our ability to expand when needed. Currently, our operations are centred on Terminal C of Sohar Port, but it was not always this way. When we first began operating in Oman, we were at Terminal B, a facility with a 520 m quay and 28 ha of yard space. Since then, Terminal B has been designated for redevelopment as an agroberth with planned facilities for rice, grain and sugar processing. A few years ago, we moved to the current site at Terminal C, which has a 970 m quay with 68 ha of yard. Here, we can service the largest ships afloat along with regional and feeder vessels. This move was planned with long-term growth in mind. Our capacity is 1.6M TEU/ yr, but we still have ample room to handle more containers as Oman’s industrial base evolves and as we continue to attract transhipped cargo. This does not include the contributions of land bands

“MOST OF OMAN’S TARGET INDUSTRIES YIELD GROWTH POTENTIAL FOR CONTAINER SHIPPING”

in the Sohar Port area, or our future development of Terminal D. The third advantage is our operational excellence and access to the most advanced technology through the Hutchison Ports network. This association has supported the roll-out of several key improvements at Hutchison Ports Sohar.

Efficiency boost

At the quayside is our installation of a fleet of remote-controlled super-post-Panamax quay cranes, which handle 70% of our business. These provide a major boost to our efficiency. This equipment contains modifications made by teams from Hutchison Ports and Hutchison Ports Sohar: the installation of an advanced KPI programme and an improved graphic user interface, adjustments to the number of cameras used and modifications to certain technical parameters, such as hoist speed. These have allowed us to quicken the lifting cycle and enhance our ability to increase our own productivity without sacrificing safety. In using these cranes, we have become a trend-setter in the Hutchison Ports group. Based on our crane modification experience, similar changes were made prior to the launch of remote-controlled quay cranes at Hutchison Ports Pakistan in Karachi. The group even included the changes in cranes previously installed at

Sohar has ample room to handle more containers as Oman’s industrial base evolves

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Hutchison Ports Dammam in Saudi Arabia and our experience will likely be useful at other ports in the future. Just as our remote-controlled quay cranes have enhanced the efficiency at the water side, certain land-side changes have greatly sped up the flow of trucks into and out of our facility. One of these is a new truck appointment system that allows drivers to schedule collection and delivery of cargo at the container terminal in advance of their arrival by using a mobile phone app, a dedicated website or an interactive voice response number. This has enhanced our real-time resource-planning capability. When drivers arrive, they pass swiftly through our new automated gate system using machine-readable driver identification cards, while trucks are identified and shipping codes are verified automatically at the gates. Where once it took a full five minutes for a truck to enter the terminal, the entire gate transit time is now just 30 seconds. To tie the land-side and water-side operations together, we rely on the proven performance of Hutchison Ports’ proprietary Next Generation Terminal Management System (nGen). This contains robust platforms for ship planning, yard planning and operations monitoring. Each module is linked together, with the entirety complemented by a trunk radio system. Finally, of great importance to port users, nGen will soon be connected to the Bayan system of the Omani customs authorities. When officials wish to inspect a container, they will be able to submit a request through their system to nGen directly. When that happens, our staff will receive an electronic work report and will move the target container to a designated area for inspection. Once inspection is complete, importers will be notified that the container is ready for delivery. As the Sohar region develops, these enhancements will greatly facilitate our ability to receive, process and discharge containers. In this way, Hutchison Ports Sohar will continue to play an important role in Oman’s economic transition while supporting trade in the Gulf Cooperation Council, the Middle East and the world. CST

Container Shipping & Trade | 4th Quarter 2017

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INDUSTRY LEADERS | 17

Top 20 leaders: knowledge is power

This year’s line-up of container industry leaders shows how data is becoming as important as steel while company consolidation puts increasing amounts of influence in the hands of fewer executives by Gavin van Marle

“

e are no longer a shipping line, but a mobile inventory management company,” one executive recently joked in private. Like many a word said in jest, there was more truth than intended. His job is to integrate a particular shipping line’s terminal and inland operations with its shipping network and his words indicate the growing importance of understanding how the entire container supply chain works. In this respect, executives whose job it is to collect, interpret and transfer data to other parts of supply chain networks are gaining increasing prominence. In this year’s container shipping industry leaders list we have tried to reflect that shift.

SØREN SKOU, MAERSK GROUP CHIEF EXECUTIVE

In Q4 last year the Maersk Group announced one of its most radical managerial changes in its history. The departure of previous group chief executive Nils Anderson made way for company veteran Søren Skou to take the top job, while also retaining his role as chief executive at Maersk Line. It has become increasingly clear that the fortunes of both the terminal operating arm and the logistics and freight forwarding concern Damco will be increasingly subservient to the overall needs of Maersk Line, which obviously dominates the transport and logistics division. But that should not create the

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their role in a port operator has often been to bring sea, quayside and hinterland operations together. And then there is the latest in the big acquisitions to digest – the takeover of Hamburg Süd is expected to be completed in the final quarter of this year and the integration of the German carrier next year will represent Mr Skou’s next considerable challenge.

RODOLPHE SAADÉ, CMA CGM VICE CHAIRMAN

Maersk Group chief executive Søren Skou: the group's innovation department is busier than ever under Mr Skou

impression that Mr Skou is some sort of corporate apparatchik. Far from it. The group’s innovation department appear to be busier than ever – Damco has come to the market with its online Twill freight booking platform; Maersk Line has pressed ahead with its remote container management system for reefer containers and now made it available to shippers (the results of which are keenly awaited) and senior APM Terminals executives are now firmly into the integration project, given

Speaking of considerable challenges, there cannot be many in the container industry who expected CMA CGM to turn around so quickly the fortunes of APL, Singapore’s stricken container carrier that was bought by the French carrier in 2015, with the acquisition completed in September 2016. However, CMA CGM’s most recent results led the liner industry in terms of profitability and included APL posting a US$89.2M net profit after years of stubbornly staying in the red under its previous management. It also propelled CMA CGM to the top of the league in terms of EBIT margin – it posted a margin of 8.9% in the second quarter, compared to the 6.2% margin recorded by Maersk. This illustrated once again the skill that CMA CGM – still controlled by the Saadé family and a close coterie of advisors – has in executing mergers and acquisitions which is probably unmatched in the industry. And it has not stopped with the APL purchase – since then it has also acquired Maersk’s

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18 | INDUSTRY LEADERS

Brazilian cabotage subsidiary Mercosul and New Zealand-based Sofrana Unilines while also launching an incubator for digital start-ups in Marseilles. CMA CGM is also leading the way on LNG, after announcing in November that it was fuelling its new 22,000 TEU newbuilds with this fuel – the largest container ships to be powered by gas.

DIEGO APONTE, MSC CHIEF EXECUTIVE

2017 has been a relatively quiet year – if such a thing exists in liner shipping – for MSC’s chief executive Diego Aponte, son of the company’s legendary founder Gianluigi Aponte. His most important decision this year has probably been signing an order for 11 22,000 TEU vessels that will be built by South Korea’s Daewoo Shipbuilding & Marine Engineering for delivery 2019-2020 and are expected to be deployed on 2M’s Asia-Europe services. After the ruinous rate wars of recent years, there has been considerable concern in the industry that with this order – along with orders for 21 ULCVs for COSCO, 11 for Evergreen and nine for CMA CGM – a new era of overcapacity will occur. Mr Aponte does not appear to share this concern however. “A significant number of 13,000 TEU and 14,000 TEU vessels will come off-hire in the coming years and the new order is expected to effectively replace this fleet, rather than substantially increase MSC’s overall capacity,” the company said.

ENRIQUE RAZON, ICTSI CHAIRMAN

Enrique Razon has been chairman of International Container Terminal Services Inc (ICTSI) since 1995 and is recognised as the chief architect behind the development of one of the Philippines’ few genuinely world-class companies. Until recently, ICTSI was a niche operator, prepared to go into concessions where larger operators would not, but that changed with its stateof-the-art development in Melbourne, Australia, a fully automated terminal that has deployed some of the most advanced technology in the industry. However, ICTSI has also retained its commitment to developing emerging markets by launching the Aguadulce terminal in Colombia with PSA and forming a consortium to dredge the Congo river to enable mainline vessels to begin calling at the Democratic Republic of the Congo, which has remained largely unconnected from global container supply chains.

MONG-JYE LEE, EVERGREEN PRESIDENT

Assuming that the takeover of OOCL by COSCO goes ahead, Taiwanese carrier Evergreen will find itself the junior partner in the Ocean Alliance and will face some increasingly important strategic decisions. The pace of consolidation in the sector has become frantic over the past year and the fiercely-independent Evergreen will undoubtedly be the focus of more takeover talk – either as buyer or target, given its medium size.

JENS MEIER, PORT OF HAMBURG CHIEF EXECUTIVE

Diego Aponte, MSC chief executive

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Hamburg remains the container gateway for the German economy but has become increasingly constrained by the draught of the river Elbe. Currently, the largest ULCVs are only able to reach Hamburg’s terminals at high tide which, given the vast amount of cargo they exchange in a single call, can quickly constrict the port in a surge of congestion and has seen Hamburg lose its place as second-largest port in Europe to Antwerp. While the German courts have finally given the go-ahead for the Elbe fairway to be deepened, the 'stop work order' issued four years ago remains in place, with the port first having to address two major environmental concerns. That has now begun, and the actual work could begin sometime next year.

MARIO CORDERO, PORT OF LONG BEACH EXECUTIVE DIRECTOR

Former head of the Federal Maritime Commission Mario Cordero returned to his native Long Beach after leaving the government agency. During his first tenure at Long Beach he helped spearhead the port’s pioneering Green Port Policy in 2005, aimed at reconciling economic growth and environmental stewardship to achieve long-term, sustainable port development. He will now be helping to shape the US port industry’s response to the deployment of ULCVs on the transpacific trade and the consolidation of services into the three alliances.

BENOIT DE LA TOUR, PRESIDENT OF NAVIS

Automation of container handling operations is becoming an increasingly key factor in optimising cargo flows through one of the major bottlenecks in the container supply chain – terminals. As vessels get bigger and the chunks of cargo being transferred from land to ship in a single port call correspondingly larger, the information exchanges needed to monitor containers and the container handling equipment become ever more complex. US-based terminal software developer Navis is in the virtually unassailable position as market leader of terminal software – an estimated 75% of the world’s ports employ a Navis system of some sort. So extensive is its reach that any firm that is developing other terminal technology has to consider how it will link up with Navis.

RYAN PETERSEN, CHIEF EXECUTIVE OF FLEXPORT

It is by no means the largest freight forwarder, but Silicon Valley start-up Flexport has really forced the digital debate right to the fore. That is solely due to the energetic Ryan Petersen, who has built up a company with offices around the world within the space of a few short years. It is still a relatively small operation and in many respects Flexport is no different to any other freight forwarder, but its centrepiece is a user-friendly online dashboard that allows both shippers and shipping lines new levels of business transparency. The fact that the company has effectively been designed by software

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INDUSTRY LEADERS | 19

engineers represents the beginning of a paradigm shift in the industry – accentuated by Mr Petersen’s very visible presence in the media and at industry events and a willingness to talk openly about issues that many other executives have preferred to remain silent about.

SULTAN AHMED BIN SULAYEM, DP WORLD GROUP CHAIRMAN AND CHIEF EXECUTIVE

The container terminal operating sector finds itself entering a new phase, as the world’s shipping lines consolidate into the three mega-alliances. This is creating new challenges in terms of developing and managing terminal capacity for port operators, and particularly terminal investment strategy. A few years ago this was mainly about paying the right amount for development projects and not being surprised in the following years to see operators withdrawing from projects that are deemed to be financially unviable. Mr Bin Sulayem has shown himself to be unafraid to take these hard decisions, as the company’s recent announcement that it is set to quit its operation in the Indonesian port of Surabaya has shown. Over the last year or so it has gone in a markedly different direction to other terminal operators. It has become increasingly involved in operations deep into continental hinterlands, with a series of deals and agreements with national governments to help create new intermodal terminals, free zones and logistics activities.

DP World group chairman and chief executive Sultan Ahmed Bin Sulayem

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DP World has even embraced innovation in a way normally associated with the USA’s Silicon Valley, with a multi-million dollar investment into hyperloop technology, which could eventually see containers transferred from Dubai’s quaysides to inland container terminals on passive magnetic levitation trains.

XU LIRONG, CHINA COSCO SHIPPING CORP CHAIRMAN

A huge amount of industry power is going to end up on the desk of COSCO’s Xu Lirong in the next couple of years. The merger with China Shipping was largely completed during the past 18 months and now it is set to acquire Hong Kong’s famously well-run OOCL for US$6Bn, making it the third-largest shipping line, and giving it the interesting option of being able to offer a two-tier premium or basic shipping service. But the extent of his influence is likely to go far further, given the pivotal role that COSCO will play in the development of China’s Belt and Road initiative. COSCO already operates the Greek hub of Piraeus, which it has begun using as a beachhead for cargo flows into Europe, and its ambition does not stop there. Its ports division has been one of the most aggressively acquisitive in recent months, eagerly buying stakes in ports wherever they are for sale, and not just in Europe. The scale of Belt and Road is colossal and COSCO is a key cog in realising its ambitions.

JOHN FAY, INTTRA CHIEF EXECUTIVE

Around one in every four container shipments booked globally is done over INTTRA’s system so, given that last year the company celebrated its 15th anniversary, it has a well-founded claim to being one of the industry’s true digital innovators. After playing a key role in developing the electronic verified gross mass (VGM) document last year, it has now begun switching its attention to other areas – extending the coverage of its services into the hinterland and developing blockchain solutions for the industry. It has formed a blockchain working group. There are a variety of firms – including leading liner companies, freight forwarders and IT providers – that are working on blockchain solutions, but Container Shipping & Trade’s view is that INTTRA is best placed, given its neutrality, to steer how the technology is ultimately deployed.

Rolf Habben Jansen, Hapag-Lloyd chief executive

ROLF HABBEN JANSEN, HAPAG-LLOYD CHIEF EXECUTIVE

Hapag-Lloyd has been ahead of the curve in terms of the industry consolidation process in recent years, but has simultaneously found itself overshadowed by events elsewhere. Its acquisitions of CSAV and UASC – although they have effectively become mergers given that the owners of those companies are now among the largest Hapag-Lloyd shareholders – have strengthened its hand on the increasingly important northsouth trades (in the case of CSAV) and neatly equipped it with 18 ULCVs thanks to UASC. As a result, it now finds itself as the senior partner in THE Alliance, a position cemented by another recent US$414M capital increase. Chief executive Rolf Habben Jansen has not only been a leading advocate of consolidation in the industry, but is also one its most imaginative thinkers about other challenges it faces. For example, he proposed creating an emergency alliance fund in case one partner faced bankruptcy and expressed the idea that alliances could now begin to extend their joint operations of services into container supply chains’ hinterlands.

ED FEITZINGER, AMAZON VICE PRESIDENT OF GLOBAL LOGISTICS

Ed Feitzinger was the highly respected chief executive of UTi Worldwide before

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20 | INDUSTRY LEADERS

he joined Amazon in June 2016 to spearhead its build-up of logistics and freight forwarding activities. The US Federal Maritime Commission awarded one of Amazon’s Chinese subsidiaries an ocean transportation intermediary licence in January 2016, allowing it to operate as a sea freight forwarder and creating the possibility of delivering products direct from manufacturers to consumers on a global scale. What is evident is that Amazon’s vast power, partially derived from the fact it holds so much data, will inevitably mean that its influence on container supply chains is only just beginning and Mr Feitzinger seems to be in the position to decide how it is to be wielded.

NICK BROWN, LLOYD’S REGISTER MARINE & OFFSHORE DIRECTOR

Along with other class societies, Lloyd’s Register (LR) has been involved in a range of initiatives from alternative fuels to digitisation, but its marine and offshore director Nick Brown should be especially commended for his role in cyber security – something that has shot to prominence this year after Maersk’s cyber attack. LR launched its Cyber Secure programme in March this year, following last year’s launch of guidelines and a notation focusing on this topic. The Cyber Secure programme is a set of services designed to help ship operators understand how cyber secure they are now and what level of security they want to achieve in future. Added to the mix is support for clients to address the changing cyber security regulatory environment. The programme has been launched in partnership with science and engineering company QinetiQ, which brings its cyber security skills and experience to complement LR’s expertise in marine. Mr Brown told Container Shipping & Trade that this would not be the end of the journey. “As connectivity becomes more affordable and commonplace there will always be malicious hackers there, so we are looking at how to build on our current emergency and response service to use it for cyber threats,” he said.

PHILIPPE DONCHE-GAY, BUREAU VERITAS PRESIDENT OF MARINE & OFFSHORE

Bureau Veritas has been involved in a number of important initiatives this year,

Container Shipping & Trade | 4th Quarter 2017

and predictive analysis technology to enable connections between multiple stakeholders and data sets, allowing carriers to integrate their data, assure its quality, secure it and offer controlled access to suppliers to run analytics. The potential for cost savings and operational optimisation for carriers has never been greater.

JEREMY NIXON, ONE CHIEF EXECUTIVE

Bureau Veritas president of marine & offshore Philippe Donche-Gay

including spear-heading some important LNG ‘firsts’ in the container ship industry. One of the most headline-grabbing is that it is classing CMA CGM’s LNG-fuelled 22,000 TEU box ships. It also classed the world’s first conversion of a container ship to dual-fuel LNG – Wessels Reederei’s Wes Amelie. In September 2017 it joined the Global Industry Alliance which will support energy-efficiency measures for ships and shipping. Philippe Donche-Gay highlighted the importance of this, saying “Whether it’s a better understanding of hull structures, digitisation, gas-fuelled and hybrid systems or the many other areas of research and development that are leading to practical solutions, our marine and offshore division … will be able to contribute towards this important initiative.”

KNUT ØRBECK-NILSSEN, DNV GL MARITIME CHIEF EXECUTIVE The employment of digital processes has been wholeheartedly embraced by many classification societies, none more so than DNV GL, which has developed and enthusiastically pushed the use of electronic certificates. Over 45 flag state administrations have granted DNV GL authority to issue electronic statutory certificates and more are expected. Underpinning its services to the wider container shipping industry is DNV GL’s Veracity data platform, which has been developed with Microsoft Azure. This seeks to use emerging big data

The three Japanese carriers MOL, NYK and K Line have not operated large enough fleets to warrant a mention in the list of industry leaders before but with the forthcoming merger of their container operations into the Ocean Network Express (ONE), Mr Nixon, the NYK executive who has been chosen to lead the combined operation, that changes. As a combined force they will be in the top 10 largest container ship operators.

CHRIS WELSH, GLOBAL SHIPPERS FORUM SECRETARY GENERAL

There are plenty of figures in the carrier community who dislike Mr Welsh for what they see as the damage he has inflicted on the industry, as he led the lobbying charge that eventually saw the European Union rescind the block exemption from anti-trust legislation enjoyed by container shipping. While we are likely to continue to see him attack the surcharge system, in addition to his concerns about alliances and ultra large container vessels, his dual role at the UK’s Freight Transport Association means he will also be a key voice in the logistics industry’s response to how the Brexit negotiations shape up.

MICHAEL KHOURI, FEDERAL MARITIME COMMISSION ACTING CHAIRMAN

With the continued consolidation of liner shipping companies and alliances, competition regulators are likely to face another busy year. While, in the EU, regulators are competition experts who occasionally train their eye on the maritime sector, the Federal Maritime Commission is tasked by Congress to constantly monitor developments in the sector. As a longstanding FMC commissioner appointed by Donald Trump, Mr Khouri’s approach will likely reflect the way politics is changing in the world’s largest economy. CST

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CMA CGM –

an LNG chain reaction for box ship industry? CMA CGM’s ground-breaking announcement that its 22,000 TEU newbuilds will use LNG has caused waves throughout the industry. Have the floodgates opened? Container Shipping & Trade speaks to major players

MA CGM hit the headlines in November 2017 with its announcement to power its nine 22,000 TEU newbuild vessels with LNG – a groundbreaking move as not only are they the biggest box ships in the world but the largest to use LNG. These mega-box ships could cost as much as US$20M more per unit than MSC’s 22,000 TEU conventionally-fuelled

vessels. BRL Consultants chief executive Barry Luthwaite told Container Shipping & Trade “A major consideration is the price factor which can yield a cost gap of US$20M between a conventionally-fuelled ship with an 11 or 12-cylinder diesel engine of US$140M and an LNG-powered vessel which may cost as high as US$160M.” He said that this was likely to be the price differential over MSC's 11 22,000 TEU units. France-based membrane

tank designer Gaztransport & Technigaz (GTT) is to supply the 18,600 m3 fuel tanks for compatriot CMA CGM’s ultralarge, LNG-powered container ships, which will be able to fuel a whole round trip. GTT LNG-as-fuel vice president Julien Bec told CST that GTT’s technology was suited to large container ships because its membrane-type tank can be built following the shape of the hull, with minimum impact on cargo space. Unnecessary void space can be eliminated, as opposed to a cylindrical tank which leaves un-used space around it. GTT’s Mark III membrane system is a cryogenic containment system directly supported by the ship’s structure. This system is composed of a primary metallic membrane positioned on top of two layers of

prefabricated insulation panel separated by another secondary membrane. Mr Bec elaborated “Because of how compact our tanks are, we can reach more than 10,000 m3 of volume without any, or a very limited, impact on cargo space.” Indeed, less than 200 containers will be sacrificed for the LNG tanks in CMA CGM's 22,000 TEU newbuilds. The large quantity of LNG required will spur on the development of the LNG bunkering infrastructure that is urgently needed. Mr Bec said “This is a milestone as it presents a significant share of worldwide LNG ship fuel; a large amount of LNG is needed so the industry definitely needs to continue developing the bunkering infrastructure for LNG.” Bureau Veritas (BV) –

LNG timeline for box ships Q2 2016

December 2015/ January 2016

February 2017

United Arab Shipping Co (now part of Hapag-Lloyd) starts to deliver its series of 17 LNG-ready ships, comprising six 18,800 TEU vessels and 11 of 15,000 TEU

World-first LNG-fuelled box ships Isla Bella and Perla Del Caribe are delivered to US operator TOTE

Containerships Ltd announced that it is converting four feeder vessels to dual-fuel

LNG specialist Nauticor conducted Wes Amelie’s initial bunkering in the Port of Bremerhaven (credit: Nauticor)

which is classing CMA CGM’s vessels – has also been involved in the bunkering aspect and has been sharing its expertise with CMA CGM. Its maritime technical director Jean-François Segretain told CST “Ultimately the opinion of bunkering ports is effectively the final decider, so working with them is critical. We have spent a lot of time talking to ports around the world.”

Bunkering challenges

Bunkering will be a challenge. Mr Bec explained “The 18,000 m3 required will be more than any bunkering vessel currently on the market can provide.” The largest bunkering vessels can provide 7,500 m3, so Mr

Bec said the solution would consist of either one large vessel or several smaller ones. BV global market leader of container ships and bulk carriers Vasilis Gkikas told CST “...a step-up in scale will now be required to meet demand for stems [supply of fuel to a vessel on any one occasion] of up to 20,000 m3." He added that as a ship burns fuel, LNG tank volumes will decline, potentially from a full to an almost empty tank [known as sloshing]. He explained that this requires optimised management of boiloff gas and attention to ensure that tank arrangements, design and construction can withstand sloshing loads.

Indeed, BV has been deeply involved in this aspect in the feasibility studies undertaken. So, will other major operators follow CMA CGM? BV global technology leader, LNG-as-fuel, Martial Claudepierre highlighted a positive for this scenario “LNG is highly suitable from an operation perspective where you have a regular schedule for these large ships – they know where they are going.” He added that “momentum does seem to be building”. Apart from regulatory requirements there “may be a sense across the supply chain that LNG is attractive for reputational reasons as well”. CMA CGM’s move will,

Mr Bec believes, open the door for the rest of the box ship industry. “Now a major shipowner has announced it will use LNG, I have no doubt that this will show the way to the others.” While Mr Claudepierre added “We have a pretty good view of LNG-fuelled projects to date with the largest share of the LNG-fuelled orderbook but, aside from Jones Act orders and conversions, this is very much a breakthrough in scale and installed power as well as number of ships to one design.”

LNG retrofits

The trend to use LNG in the box ship industry has gained

August 2017

November 2017

Wessels Reederei’s 1,000 TEU Wes Amelie finishes an LNG dual-fuel conversion

CMA CGM orders nine 22,000 TEU newbuilds to run on LNG

Wessels Reederei announces that it will convert three more 1,000 TEU container vessels to dual-fuel LNG

24 | ALTERNATIVE MEANS OF POWER

momentum in 2017. Not only has there been CMA CGM’s order, but the world’s first container ship retrofitted with an LNG engine was successfully launched in August. Wes Amelie – owned by Wessels Reederei – underwent an LNG engine conversion at German Dry Docks in Bremerhaven. MAN Diesel & Turbo supplied the engine conversion. The conversion was classed by BV. Hot on the heels of this came the news in November that MAN Diesel & Turbo has signed a letter of intent with Wessels Reederei to supply the materials to convert three more 1,000 TEU container vessels to operate using LNG fuel. These will also be classed by BV. MAN Diesel & Turbo also announced in November that its after-sales division MAN PrimeServ would convert TOTE Maritime Alaska’s North Star and Midnight Star to dual-fuel – the largest LNG conversion in North America. Meanwhile TOTE’s two 233 m Marlin-class vessels are the world’s first container ships to operate on LNG. Isla Bella and Perla Del Caribe were delivered at the end of 2015 and beginning of 2016 respectively by US shipyard General Dynamics NASSCO. MAN Diesel & Turbo again supplied the engines. MAN PrimeServ head of upgrade and retrofit fourstroke, Thomas Spindler told Container Shipping & Trade about the Wes Amelie conversion. “Wes Amelie was running on a very effective and low-cost state-of-the-art diesel engine, but due to the stricter environmental regulations, we launched an upgrade kit to convert this engine to a dual-fuel type.” Therefore, it converted the original diesel engine 8L48/60B to dual-fuel 8L51/60DF. Dr Spindler explained that the bore

Julien Bec (GTT) Julien Bec graduated in 1999 from Ecole Centrale Paris with a double degree in mechanical engineering and physics. Following this, he started his career in the automotive industry as an engineer. After this technical experience, he spent eight years at one of the leading oil and gas OEMs and was responsible for business development, setting up new partnerships and new production facilities around the world. He joined Gaztransport & Technigaz (GTT) in 2015 as key account manager for Daewoo Shipbuilding & Marine Engineering Industries, taking on the responsibility for all project-related activities with that yard. In November 2016 he was appointed LNG-as-fuel vice president, covering commercial and technical product solutions.

“Now a major shipowner has announced it will use LNG, I have no doubt that this will show the way to the others” Julien Bec (GTT)

Container Shipping & Trade | 4th Quarter 2017

increased by 3 cm for the dual-fuel engine because “gas has less specific energy than liquid fuels and we can compensate these losses with a bigger combustion chamber so that the power output of the engine remains the same and the vessel can be operated in the same mode”. This engine conversion kit is attractive to ship operators because the dual-fuel conversion is carried out as normal engine maintenance would be, the only difference being that instead of new components to replace older ones, the dual-fuel components are added. Mr Spindler believes there are plenty of opportunities for more LNG conversions because there are many 48/60 engines operating in the market, thereby leading to plenty of scope for conversions to the 51/60DF model. The conversions that MAN Diesel & Turbo has carried out and is due to carry out are also a “clear signal to the market that gas suppliers must increase bunkering infrastructure in ports”, MAN PrimeServ strategic marketing manager Denis Pissarski told CST. Wessels Reederei is also helping to spread the message about using LNG. “The owner has been very co-operative and is happy for interested ship operators to go on board Wes Amelie so that they can see for themselves that the conversion is a success,” commented Mr Pissarski. A further incentive for the box ship market is that MAN Diesel & Turbo recently made a pledge offering €2M (US$2.3M) for the conversion of the next 10 HFO engines into dual-fuel engines, meaning there will be a €200,000 (US$235,640) subsidy per project. A boost to MAN Diesel & Turbo's LNG engine business

is that in November 2015 it acquired the marine fuel gas supply system business from Sweden-based Cryo AB, a manufacturer of cryogenic equipment for the storage, distribution and handling of liquefied gases. This has been integrated into the company’s four-stroke marine business. “This means that we can install the engine and fuel gas supply system at the same time, making it easier for the customer as they can deal with just one player for the key issues,” commented Mr Pissarski.

Feeder market eyes LNG

Finland-based shortsea operator Containerships is adding four LNG-powered newbuild feeder vessels to its fleet. The vessels are under construction at Wenchong Shipyard in China. Building of the first two vessels is underway; steel cutting for the third vessel started in May 2017 and steel cutting for the fourth ship started in August. All four vessels are scheduled to enter service in 2018. The engine design chosen was a 6-cylinder inline Wärtsilä 20DF dual-fuel solution. Wärtsilä Marine Solutions merchant vessels sales general manager Kirill Bolotov told CST that the engine was selected due to its “very compact” design. He believes the container feeder segment is an attractive sector for LNG. “There is a future for LNG in the container segment. A lot of container cargo is distributed by feeder vessels operating in the existing and future emission controlled areas.” Mr Bolotov highlighted the benefits of Wärtsilä's W20DF and W34DF dualfuel auxiliary engines for box ships: proven technology, excellent power-to-weight and space ratio and fuel flexibility. CST

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26 | SCRUBBERS

Box ship charterers and 2020 sulphur cap drive scrubber surge Suppliers see the container ship sector as where the next surge of orders will come from. Rebecca Moore speaks to key manufacturers to find out why

ontainer shipping is the next large vessel segment expected to experience a large take-up of scrubbers (following the cruise sector), Yara Marine Technologies chief sales and marketing officer Kai Latun told Container Shipping & Trade. He said the drivers for this include IMO’s confirmation last October to implement 2020 as the date for its 0.5% global sulphur cap as well as a desire to be environmentally friendly. “Some container ship operators are really willing and have the ability to look at quite significant investments in the interest of the environment,” he said. In particular, several of the larger container owners “are not just driven by IMO [requirements] but by a genuine interest in

The large size of scrubber needed for a box ship makes the installation more complex (credit: CR Ocean Engineering)

Container Shipping & Trade | 4th Quarter 2017

protecting the environment.” Mr Latun said that competition was tough in the industry and that many shipowners have a challenge in funding a scrubber investment. “However at some point soon the charterers will realise the fuel cost savings scrubber systems generate and start giving preference to vessels with scrubbers. This will be a market driver and can also generate new funding models for shipowners.” Yara Marine is working on projects for several ultra large container owners but at the time of writing in late September was unable to give names. In November 2016 it announced that it had scooped a contract for the supply of scrubber systems on four container feeder vessels that will be operated by German ship manager Jüngerhans Maritime Services. Those four newbuilds, currently under construction at Zhoushan Changhong International Shipyard in Zhoushan China, will have scrubber systems installed in full compliance with IMO’s new SOx regulation that will be implemented from 2020. With Yara Marine scrubber systems installed, the container feeders can operate on heavy fuel oil with a sulphur content up to 3.5%. They will be delivered from Q4 this year. Mr Latun said that the smaller container feeder vessel segment was a good fit for scrubbers as in many cases they are “small vessels that are running fast with large engines”. He commented that this made a “good business case”. CR Ocean Engineering (CROE) is also targeting the container sector. CROE president and chief operating officer Nicholas Confuorto told Container Shipping & Trade “Last year was very quiet in terms of scrubber orders. But once the IMO decision was made, people started to take action.” He warned that operators need to act now if they want a scrubber installed in time for January 2020 “If they don’t have a shipyard visit booked before then, they need to act fast.”

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SCRUBBERS | 27

Yara Marine Technologies chief executive Peter Strandberg (left) and Jüngerhans fleet engineering manager Olrik Wöhlert announce a scrubber contract for four feeder vessels

He said that the company was seeing a number of proposals to combine a scrubber retrofit into already-planned work to complete all the work in a single drydocking. He said that it made “all the sense in the world” for container ships to deploy scrubbers due to the economics of their size, but there are some challenges. “The size of the scrubber is very large because the engines are very large, so there is more complexity in terms of installation and how to get them on board.” For the past few years, CROE has dedicated a team to focus on its scrubbing system’s automating and controls. “It is already significantly automated but we are looking at making it even more automated. We want to make it simpler for operators” explained Mr Confuorto. He singled out one example: the company is considering a request from a vessel operator to connect the scrubbers’ start-up and shutdown directly to the main engines’ operation so that operators do not have to initiate its start/ stop routine by pressing additional buttons. Mr Confuorto commented “This is doable, the automation already exists in our system and registers the engine signals, we just have to make the connection active so that the scrubbers start and stop based on these signals.” This will take away the risk of someone forgetting to turn on the scrubber (leading to illegal exhaust gas emissions) that could lead to wasted energy by continuing to pump water through a scrubber that should have been turned off. “It takes the decision from a person’s hands and means that it will run at optimal performance,” Mr Confuorto said.

Nick Confuorto (CROE) Nicholas Confuorto is the president and chief operations officer for CR Ocean Engineering. He is also a founding member and the chairman of the Exhaust Gas Cleaning Systems Association. Since receiving his engineering degree from Columbia University in 1976, Mr Confuorto has focused his career in the field of environmental controls and has held high level positions at some of the most respected corporate names in the global air pollution controls industry.

Wärtsilä responds to Maersk scrubber comments Wärtsilä has responded following Maersk Group's comments about how scrubbers are not the right solution for them. Wärtsilä director of exhaust gas cleaning Sigurd Some Jenssen told Container Shipping & Trade “Maersk has been quite prominent in the press stating that it doesn’t think scrubbers are the solutions for them. That is fair enough but what we see in the newbuilding sector shows that actually the majority of contracts are vessels being built with scrubbers – contrary to the message Maersk is giving out.” (For more see pages 5-9). Homing in on the container sector, Mr Jenssen said current Wärtsilä contracts include the delivery of scrubbers to two 11,000 TEU box ships to Hyundai Merchant Marine. Mr Jenssen emphasised the benefits of using scrubbers. “The advantage with scrubbers is

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that the cost of heavy diesel oil is much lower than low sulphur fuel and it allows the same fuel infrastructure both on shore and on board the vessel to continue to be used.” He also pointed out that scrubbers were an easier retrofit option than LNG. “I believe that scrubbers are the best way of complying for existing ships. They are an easy and low-cost solution to the challenge.” But he said that there is no “single right solution” but rather a mix of solutions, with some like Maersk going for compliant fuel. “There is a place for both this and for scrubbers.” Mr Jenssen believes that a trend will be for shipowners to use a variety of different methods to comply with the 2020 sulphur cap in a single fleet, with a mixture of compliant fuel, scrubbers and LNG being deployed. CST

For Maersk’s scrubber comments See pages 5-6

Container Shipping & Trade | 4th Quarter 2017

28 | VESSELSVALUE

Could COSCO’s huge growth C plans see it catch up with Maersk? As COSCO Shipping flexes its muscles with the Chinese government’s huge cash injection and aggressive newbuild programme, can it take on Maersk, the world’s biggest container shipping line?

Top 10 container owners/groups Maersk Group & Hamburg Süd China COSCO Shipping Corp MSC Hapag Lloyd CMA CGM Evergreen Group Seaspan Corporation Shoei Kisen OOCL PIL

Container Shipping & Trade | 4th Quarter 2017

OSCO Shipping Holdings’ huge growth plans have been revealed, thanks to its announcement in November that new funds will be raised to finance a massive newbuild programme. It covers 20 box ships spanning 13,800 to 21,237 TEU in size and follows aggressive port investment by its port subsidiary in container terminals outside China. COSCO Shipping Holdings will issue new shares to raise up to CNY12.9Bn (US$1.95Bn) of funds. Specialist container information service Alphaliner has reported that state-owned COSCO Shipping, which currently owns 45.47% of COSCO Shipping Holdings’ shares, will conditionally subscribe to 50% of the new shares, meaning its shares will increase to 46.22%. The remaining 50% will be offered to a maximum of nine investors that have not been named. It clearly shows that the government has flung its weight behind the company’s growth – Alphaliner said that the move amounts to a “direct cash injection by the Chinese government to support COSCO Shipping Holdings’ expansion”. The shipping group clearly has big plans. Could it take on the world’s number one container shipping line, Maersk? As our VesselsValue data shows, COSCO is close – the second-largest container shipping line in the world after Maersk. But Maersk is still some way ahead in terms of live fleet, as – swelled by its recentlyacquired Hamburg Süd fleet – it has 303 ships totalling 2.1M TEU versus COSCO’s 156 vessels totalling 1.06M TEU. But the companies’ orderbooks show a different picture, with Maersk’s (including Hamburg Süd) 20 ships of 227,158 TEU dwarfed by COSCO’s 511,000 TEU over 29 ships (20 of which are to be financed by the new funds described above). While total fleets (live and on order) show that Maersk is still the leader, with 323 ships of a total of 2.3M TEU versus COSCO’s 185 vessels of 1.58M TEU, the latter’s large newbuild plans have narrowed the gap compared to the current live fleet orders. • Maersk’s takeover of Hamburg Süd was completed in November 2017 (see pie chart for their combined fleet).

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Top 10 container owners/groups Company

Live (Total capacity TEU)

On order (Total capacity TEU)

Total (Total capacity TEU)

Maersk & Hamburg S端d

2,112,793

227,158

2,339,951

China COSCO Shipping Corp

1,069,200

511,000

1,580,200

MSC

1,215,609

242,000

1,457,609

Hapag Lloyd

1,073,157

CMA CGM

691,816

294,914

986,730

Evergreen Group

548,768

152,110

700,878

Seaspan Corporation

631,590

42,000

673,590

Shoei Kisen

225,572

240,000

465,572

OOCL

500,993

42,826

543,819

PIL

295,336

165,200

460,536

Maersk and COSCO focus Total

Live

(Total capacity TEU)

Maersk Line and Hamburg S端d combined fleet (Total capacity TEU)

2,339,951

2,112,793

322,802 On order (Total capacity TEU)

227,158

Maersk Line & Hamburg S端d

Total Live

(Total capacity TEU)

1,069,200

On order

1,580,200

(Total capacity TEU)

511,000

China COSCO Shipping Corp

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2,017,149

(Total capacity TEU)

Maersk Line Hamburg S端d

TOTAL: 2,339,951 Container Shipping & Trade | 4th Quarter 2017

30 | FLEET STATS AND ANALYSIS

Race to be king of the ULCS R

ecent evidence suggests that the container trades may have turned the corner in terms of earnings but will any recovery be sustained? Revival has been assisted by a general upturn in trade and profits finally accumulating on the lucrative Asia-Europe route. This was boosted by a drought in ordering of ultra large container ships (ULCSs) for over a year but all this is about change dramatically as the ULCS fleet will increase in the coming months with more giants hitting the water. Once again the market is witnessing a race to be king of the capacity stakes. Shipyards are keeping pace as ULCS orders in multiple units yield high cgt figures. Prices remain between US$150M-165M apiece but owners are leasing more units or operating on a joint basis with a partner. Is the resumption of ULCS ordering good or bad for future trade? Next to the latest behemoths, other owners have stepped up interest in larger intermediate vessels of 14-16,000 TEU to serve ports that cannot receive ULCSs yet but have

beat off strong competition from South Korea to land a big order from CMA CGM and a commitment to nine 22,000 TEU container ships from the French giant from two shipyards in China was a notable success for hugely ambitious China. Shanghai Waigaoqiao (SWS) and Hudong-Zhonghua share the order with five and four units respectively. The ships will eventually take the prestigious title of the world’s largest behind a recently commissioned newbuilding series of 21,410 TEU vessels for OOCL (now merged with COSCO group).

CMA CGM and MSC have both placed orders for 22,000 TEU behemoths. Will this push the container ship market recovery over the edge and will other shipping lines follow their lead? Barry Luthwaite takes a look

The bigger the better

improved infrastructure to receive bigger TEU loads. Such factors bring economy of scale and reduced costs longer term. With the recent collapse of the bulk carrier market in particular, traditional builders of Capesize bulk carriers are now turning attention to lucrative series construction of ULCSs. China recently

The hunger to be the best and the biggest knows no bounds. Soon after the CMA CGM order it was confirmed that rival MSC had committed to 11 units of 22,000 TEU; the owners are members of rival alliances on the Asia/Europe services. These orders have been placed with South Korea’s Samsung (six) and Daewoo (five), although all the orders were originally due to go to Daewoo. Only three years ago, CMA CGM was in a precarious financial position but has since turned this right around. The owner already has three 20,600 TEU units on order – contracted in April 2015 – from Hanjin’s Philippines yard in Subic Bay; at the time of writing in mid-October, the first is imminently due for delivery. The trio were originally intended for the P3 alliance on Asia-Europe service but CMA CGM was later dropped and Maersk and MSC went into a two-company partnership now known as the 2M alliance.

Container ships on order (in excess of 18,000 TEU) 18

348,350 TEU

321,408 TEU

259,800 TEU

242,000 TEU

137,410 TEU

80,600 TEU

3 2

63,300 TEU 41,000 TEU

20,500 TEU

20,100 TEU

Container Shipping & Trade | 4th Quarter 2017

Shoei Kisen Kaisha

Kyosei Kisen

COSCO Shipping Lines

OOCL

CMA CGM

Doun Kisen

MSC

Mitsui Soko

Maersk

Mitsui O.S.K.

(Based on BRL Consultants’ data)

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FLEET STATS AND ANALYSIS | 31

The French owner is now spearheading Ocean Alliance with partners COSCO and Evergreen Marine to provide strong competition to 2M. A little-known detail is that the French owner holds options for three more ULCS from SWS (one) and Hudong Zhonghua (two) giving a possible total order of 12 vessels at the two yards. So will these two tranches of orders from the competing majors trigger a new rush of ULCS business? Originally, shipbuilders confirmed their absolute capacity for these giants was 26,000 TEU each but most observers feel this will not happen due to lack of infrastructure in many global ports. But who knows? The current 22,000 TEU was a distant dream not so long ago. One of the key aims was to eliminate smaller traders for recycling but this is not working to date owing to derisory scrapping figures. Instead, 2020 is now seen as the action year when compulsory legislation kicks in on even tighter emission controls and other environmental measures. More vessels will be forced into redundancy rather than risk increased expenditure on vessel improvements in a volatile market.

ULCS numbers countdown

Statistically there are currently 57 ULCSs in excess of 18,000 TEU in service aggregating 1,081,581 TEU with a further 75 behemoths due to add 1,534,738 TEU between now and 2020. Some of the big names missing from the complement of fleets are in the ULC race but have opted to charter vessels from Japanese trading

houses, builders or leasing companies with purchase options. The first overseas orders in South Korea from MSC are likely to use a Chinese leasing company due to the sheer cost of the vessels. These loan deals are an inducement to order more vessels than originally planned but banks have taken fright and investors do not see shipping as a safe long-term bet any more. There are now some impressive order backlogs to support continuing ULCS box growth, almost evenly spread among the leading countries of Japan (27), China (25) and South Korea (23). Until recently, Japan was handicapped in its ability to accept orders but in October Imabari opened its new large building dock in Marugame which now enables it to compete for big vessels of the highest capacity. The new dock took two years to build and will deliver its first vessel in February 2018, to Doun Kisen. Its employment now stretches into 2020 and it will propel Japanese owners back to where they belong – in the premier league of box ship owners. All orders so far taken for ULCSs are for around 20,000 TEU vessels for Japanese account for charter to major operators. Among owners who will take Imabari newbuildings on charter are Evergreen Marine (seven), Yang Ming (one), MOL (two) and K-Line (one). Other charters are under negotiation from Imabari’s shipowning wing – Shoei Kisen Kaisha. Ship orders are spread among its two shipbuilding sites of Marugame and Saijo. China, of course, is building 16 ULCS for COSCO Shipping Lines following the

COSCO merger with China Shipping Container Lines (CSCL). Experience in China and cost swayed CMA CGM’s decision to prefer China over South Korea, but the latter has its share of success, holding 22 orders all for export clients. Pricing varies between US$133.5M-163M apiece. Only seven ULCSs will deliver before the end of 2017 but then the floodgates will open. The questions are: can the market absorb all these giants and will more be ordered? There is a division of opinion. Some experts warn the current revival will be killed off by next year on the Asia-Europe route while others argue that alleged over-capacity has been exaggerated. When the 75 ships on order are commissioned, it will result in a 23% capacity rise and, of course, none of the 57 currently in service will be withdrawn or switched because they are too young and big. Will anybody now order new ULCSs or will they leave the present situation untouched? Certainly, all the majors would appear to have had their fill by now so more orders on the scale of CMA CGM and MSC appear inconceivable. However, you can rarely guess reaction in the newbuilding market but the fact that such vessels can only trade between Asia and Europe surely rules out more orders. All 18,000+ TEU units need a utilisation capacity of 91% to be profitable, which is a tall order even with the current improvement. The future battle is likely to be for 14,000-16,000 TEU vessels, which will seek to eradicate 8,000-13,000 TEU range units purely on economy of scale. CST

Container ships trading (in excess of 18,000 TEU) 23

426,376 TEU

115,200 TEU

112,255 TEU

96,012 TEU

92,700 TEU

3 3 3 2 1

63,926 TEU 60,440 TEU 57,672 TEU 38,000 TEU 19,000 TEU

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Maersk

OOCL

Quantum Scorpio Box

Mitsui O.S.K.

United Arab Shipping

Hong Kong Asset Mgmt

Minsheng Financial Leasing

MSC

China Shpg. Container

Zodiac Maritime

(Based on BRL Consultants’ data)

Container Shipping & Trade | 4th Quarter 2017

32 | LAST WORD

Integration goes hand-in-hand with digitisation

can’t think of a single container ship operator that has not embraced the digital world. Without a solid digital platform supported by intelligent software, it is simply impossible to operate effectively and to compete in the modern day. But there are many degrees of digitisation and many carriers are missing a trick; particularly those that are embracing more advanced digital technologies and tools but failing to integrate and connect each disparate function into a unified system. All container carriers use an accounting package and almost all operate systems to manage their many commercial and operational requirements, but most of these systems will not communicate with each other. Many carriers will say – rightly – that they are digitised, but few are integrated. They have a phone, but no data or access to wifi. In a fully integrated shipping company, however, the rating system captures all the complex information relating to individual customers and suppliers including ports, terminals and 3PL providers – which can be a hugely complicated matrix of individual prices, restrictions, discounts and incentives. When a customer requests a rate, the rating system will automatically look up the relevant tariff to create a bespoke and accurate quotation and calculate the profit margin. If the quotation turns into a sale, the system will automatically create the required documentation, bills of lading, manifests and more. And once the vessel has sailed, an invoice will be generated from the data and instructions provided previously and that information will be posted automatically to the accounts package. There is no interference from separate parties having to laboriously input data by hand, and – thanks to the integration of systems and functions – the routine administration of what is a very complex set of services provided in port is made straightforward, reliable and consistent. During this process, if changes need to be made to a port call, a fully integrated system will automatically create amended bills of lading, invoices and other documents at the press of a button; while alerting all of the relevant parties of alternative arrangements and requirements, and provide amended documentation such as manifest correctors, revised invoices and so forth. In other words, information will flow seamlessly from one activity to another without the need to re-enter data. Retyping leads to errors, errors lead to delays and delays disrupt cash flow and cost money. To many readers, that will all sound very obvious yet I’m told

Container Shipping & Trade | 4th Quarter 2017

Carriers are missing a trick: while they have embraced digitisation, their systems are not integrated. Managing director of Softship Data Processing Lars Fischer explains why the two must be combined

that 10% of all outgoing ocean freight invoices raised by the global container sector are wrong and that the errors are caused by staff having to retype data from one system into another. Even a small container carrier will turnover more than US$100M so having US$10M in dispute at any one time creates a significant hole in the cash flow. It is a big issue to solve, as there are still many carriers running exceptionally fragmented systems that are not integrated. I recently visited a container ship operator that was running 195 different applications on every conceivable hardware platform – and not one of those applications could communicate with another. I found that astonishing. In the very near future, they will inevitably reach a tipping point when all of their systems are unable to function properly, leaving them wide open to digital threats, and burdened under the weight of unnecessarily complex administration. But this is not an insurmountable problem. I firmly believe that digitisation without integration should be a thing of the past. In days gone by, IT support was, proportionately, much more expensive than it is today – and much less effective. Modern solutions are more readily available, are cheaper to buy and less labour-intensive to support. And what’s more, they are fully integrated. Container shipping should get up-to-date as failing to integrate is missing the most important trick in the book of modern IT. CST

Lars Fischer (Softship): Digitisation is not enough – systems need to be integrated too

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Valenciaport

where everything is connected

Valenciaport has an unrivalled strategic location and is well equipped to handle the latest generation of containerships. It is the Mediterraneanâ&#x20AC;&#x2122;s leading port for a variety of reasons. It is connected to over 1,000 ports, has a competitive and efficient workforce, promotes innovative management, provides excellent service quality and prides it self on its environmental commitment.

Knowledge grows

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Yara Marine Technologies’ SOx scrubber: • Can clean the exhaust gas down to strictest ECA 0,1% requirements - handling fuel Sulphur content up to 3,5% • Has a very small footprint with flexible and adjustable design to accommodate for your ship’s specific space availability • Is the only scrubber that can operate on both harmless Magnesium Oxide and Caustic Soda as alkali in closed loop