Container Shipping & Trade 1st Quarter 2017 by rivieramaritimemedia

1st Quarter 2017 www.containerst.com

Battle lines are drawn: Singapore, Tanjung Pelepas, Port Klang vie for SE Asia transhipment

Big data boost for boxship sector Game-changing ISO 19030 to save carriers huge cash amounts

“… Our unique ships, ports and cargo will enable us to weather this protracted shipping ‘storm’ that has claimed so many casualties so far” Andrew Abbott, ACL CEO and president, see page 13

contents Regulars 3 COMMENT 31 BEST OF THE WEB 32 LAST WORD

Market updates 4 A third of the box fleet is at scrap value (VesselsValue.com)

Customer profile 6 The way forward for shippers is to turn market challenges into opportunities, argues Vinmar International’s Alessandro Menezes

Operator profile 9 Philippines domestic boxship operator 2GO Group is looking at ship-power options including solar energy and LNG, its head of shipmanagement told CST

Trade route 13 Carriers on the trade noted that it has picked up in the first quarter, but what impact will US President Donald Trump have on it?

Regional analysis: Asia 16 Consolidation may be the only route for terminal operators looking to survive in the new world of mega alliances and mega ships

Coatings 19 The groundbreaking ISO 19030 hull performance standard has been launched. What will it mean for boxship operators?

Ballast water management systems 22 Do not delay installing BWMSs urge industry bosses

LNG retrofits 24 The trend to use dual-fuel propulsion is gaining momentum within the container ship sector

IT & technology 26 The drive to digitise the supply chain has ramped up

1st Quarter 2017 volume 5 issue 1 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 Production Manager: Richard Neighbour t: +44 20 8370 7013 e: richard.neighbour@rivieramm.com Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Editorial Director: Steve Matthews 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

Fleet stats & analysis 28 Feeder investment is booming as a result of various factors, including distress sales

Next issue Main features include: • trade route analysis: Transpacific • regional analysis: Europe • top 20 carriers • Panama Canal – one year on • ship operations: communications • ship operations: propulsion

Front cover: Credit: PSA

Subscribe from just £199 Subscribe now and receive four issues of Container Shipping & Trade every year and get even more: • access the latest issue content via your digital device • access to the www.containerst.com searchable archive. Subscribe online: www.containerst.com

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

Container Shipping & Trade | 1st Quarter 2017

COMMENT | 5

CHANGE IS COMING T

he plug has finally been pulled on Hanjin Shipping Co. after it was declared bankrupt by Seoul Central District Court in February. The demise of Hanjin has sent shockwaves through the container shipping sector. And while no other carriers have gone under, many of them have found themselves affected by the difficult market situation. Japanese shipping lines Nippon Yusen Kaisha (NYK Line), Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (K Line) have seen their container business segments either plunge into or fall even further into the red for the nine months ended 31 December 2016 – highlighting the pressing need for them to start their box ship joint venture. NYK Line’s liner revenue for the nine months only reached 430.4 billion yen, down on the 547 billion achieved in the same period in 2015. It recorded a segment loss of 11.3 billion versus an 850 billion profit for the same period the year before. K Line’s box ship sector revenue dropped by 21 per cent and its segment loss considerably widened from 4.2 billion to 23.9 billion yen. MOL saw its container ship sector revenue slump 20.4 per cent year on year and its segment loss was 26 billion

yen compared to 18.4 billion for the same period in 2015. Among the reasons cited was a widening gap between supply and demand and the impact of stagnant and low freight rates. MOL chief executive Junichiro Ikeda said in his new year message that MOL will become a “leaner, stronger business enterprise” that will be able “to compete with the world’s mega carriers” after the integration of its box business with that of NYK Line and K Line. Hopefully their container ship integration will have a positive effect. Of course, that is not the only big change that the container ship sector will see this year – the launch of the new alliance structure looms large. In this issue’s customer profile, Alessandro Menezes, associate director of transportation sourcing at US petrochemical distribution company Vinmar International, argues that risk should be turned into opportunity. He explains that long-term partnerships could mitigate the risks for shippers that could be brought about by the new alliances. And there are new solutions that carriers have at their fingertips to help them with challenges. Our feature ‘The move to digitise’ shows the recent raft of software and big data solutions that

can help carriers, from DNV GL’s big data solution Veracity and CargoSmart’s VGM software, to Interschalt Maritime Systems’ StowMan stowage planning software which is to be connected to XVELA’s cloud-based vessel stowage collaboration platform, and CargoSphere’s electronic smart upload and diagnostics solution eSUDS. Finally, the new ISO 19030 hull and propeller standard has come into force and looks set to have a huge impact on ship operators’ bottom lines (see pages 19-20). The benefits were unveiled at an open forum in London on the new standard, which was hosted by Jotun, DNV GL and BIMCO, all driving forces behind the launch of the new ISO 19030. It was explained how one ship operator saved US$1.8 million in between two drydocking periods after applying the standard – but it could have saved even more if it had applied the standard earlier. And this is just the start. The standard will be revised and improved every year. It also highlights and boosts the trend towards big data. There will be a lot of change this year – but most of it will be necessary and positive. All eyes will be on the new alliances, to monitor their impact. CST

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Container Shipping & Trade | 1st Quarter 2017

6 | MARKET UPDATE

A third of box ship fleet at scrap value More than a third of the vessels in the global box ship fleet are potential candidates for scrapping – just over seven million teu is currently at scrap value, according to VesselsValue

esselsValue has compared the daily market value of every container vessel against what it could be sold for as scrap (the ldt of the vessel multiplied by the daily steel price), to reveal that a huge number of box ships – 2,018 – are at scrap value, compared to 2,820 vessels with a value above this. The average scrapping age is 17 years. Of all the container ship types, Panamax vessels are the most likely to have a market value that is the same as or below their scrap value. 86 per cent of the Panamax fleet are potential scrap candidates.

Next up is the post Panamax container sector, with 463 ships with the potential to be scrapped, against 662 vessels which are above scrap value. And the gap between those vessels that are at scrap value and those that are above is narrow in the Handy container vessel sector. Here, 295 ships are at scrap value and 452 are priced above it. Meanwhile, 2016 was a record year for container ship demolition. It also saw the lowest numbers of deliveries in the last nine years, as many orders were put on hold. This makes it likely that in 2017 the market will be flooded with new vessels. “Following heavy slippage in the orderbook, more tonnage is set to launch this year than ever before, spelling further trouble for the industry,” VesselsValue has warned. The orderbook stands at about 1.9 million teu. This is a big jump compared with last year, when deliveries totalled under one million teu as tonnage was slipped. Indeed, the orderbook for this year towers over anything since 2008, while last year’s was the lowest since that time. And about 600,000 teu was demolished in 2016 in efforts to balance supply and demand. According to VesselsValue, strong deliveries in the future are bolstered by the ultra large container vessel orderbook, which is currently 91 per cent of the live fleet of 13,000 teu and over. CST

AVERAGE AGE AT SCRAP VALUE 100% 90%

463

155

295

423

2,018

464

452

775

2,820

Sub Panamax

Handy Container

Feedermax

Grand Total

80%

% at scrap value

=17

70% 60% 50%

174

185

682

40%

662

30% 20% 10%

108

0% ULCV

New Panamax

Post Panamax

Panamax

Number of vessels above scrap value

Number of vessels at scrap value

More than a third of the global box ship fleet could be scrapped. Credit: VesselsValue

Container Shipping & Trade | 1st Quarter 2017

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8 | CUSTOMER PROFILE

TURN CONTAINER MARKET RISKS INTO OPPORTUNITY The way forward for shippers is to turn market challenges into opportunities, argues Vinmar International’s Alessandro Menezes

E "Shipping lines need to take advantage of the trade wars to win shippers’ business." Mr Menezes (Vinmar) on the new shipping

alliances

quipment shortages, the new shipping alliances, the bankruptcy of Hanjin Shipping Co and the tough container shipping conditions are all issues that have been preoccupying Alessandro Menezes, associate director of transportation sourcing at US petrochemical distribution company Vinmar International. The outlook for petrochemical growth is extremely strong, which means that there will be opportunities and challenges for Vinmar, which has its global headquarters in Houston, Texas. Mr Menezes said: “The outlook for chemical growth is really amazing. We ship products to customers in more than 100 different countries. We are optimistic about China’s chemical market and are well positioned to capitalise on opportunities throughout the globe. We have a very wide geographical range in key markets.” The company has forecast substantial growth between 2017 and 2020, and it is therefore crucial it can rely on its carrier partners. The boom in US exports of plastic resin, for example, means that the availability of empty containers is essential. Mr Menezes said: “There are over 200 projects related to the US petrochemical boom that are generating exports from the USA. Asia is a market where demand is growing and ships are sailing very full at the moment. There is a danger that cargo will be left at the terminal, which is a nightmare scenario for any company that is shipping in large volumes. We need to look at how to secure allocation in a market that is very reluctant to deploy capacity.” He described some of the potential equipment availability problems. Among these, the expected resin boom in the US Gulf region is forecast to require at least 500,000 teu a year for exports, because of increased polyethylene production. The mergers and bankruptcies that took place in container shipping last year had an

Container Shipping & Trade | 1st Quarter 2017

impact on Vinmar across the globe. Mr Menezes said that in 2016, its Saudi Arabia exports had various shipping lines carrying its products to customers in 36 countries. Of those lines, five disappeared as a result of bankruptcy, merged or were acquired. Mr Menezes commented: “The container shipping line sector was transformed in 2016 after several major mergers and the Hanjin collapse was a grave point. It made a lot of supply chain people raise their eyebrows and see the risks that relate to the supply chain. While Hanjin was not a major partner to us, we found we had a lot of headaches because of our carriers’ vessel sharing agreements with Hanjin.” Despite the challenging situation, Mr Menezes identifies positives that can be taken from it. “It is a good wake-up call to shippers. Shippers are being more cautious and understand better the deployment of their shipments – not only directly but looking at which carriers are deploying the ships they are using. So they are taking a better look at risk and I have never seen that before. Some are pushing freight forwarders to disclose what services their containers are on and exactly which ship they are going on.” Mr Menezes made the point that the future situation in terms of mergers and acquisitions was uncertain, and said that Vinmar was therefore mitigating its risks. “We do not know if more carriers will merge. However, niche carriers are finding a market in trading from the US Gulf to Latin America. We are trying to optimise the fleet of carriers dedicated to that trade and take advantage of their services, because of the risk we face here in terms of equipment availability.” Vinmar has contracts with most of the shipping lines that operate in the US Gulf area, which is its main gateway. Mr Menezes explained: “We try to keep very close relationships with most shipping lines and have long-term contracts.

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CUSTOMER PROFILE | 9

We also keep long-term relationships with key freight forwarders in the US Gulf and use local freight forwarders in other markets. We look into the situation of each market, making sure that we have at least one freight forwarder that will add value and fit with our global strategy.” Speaking about the upcoming new alliance structures, he said: “The new alliances will definitely have an impact on our strategies. For example, there are port and terminal concerns. There will be less power to negotiate, from a port’s perspective. For them it is a concern.” He pointed out that alliances could impact terminal investments: “Container terminal operators cannot invest if shipping alliances squeeze prices too tight.” Furthermore, pricing and market allocation are of concern: “We are also very concerned about price fixing, which is not allowed but as you have fewer options, there is also a concern about market allocation from a shipping line.” But despite the challenges, Mr Menezes is focused on turning risk into opportunity, and believes that this is the way forward for shippers. “In 2015, for the first time ever, growth in container demand lagged behind global gross domestic product. This means that carriers in search of double-digit growth markets are running out of opportunities.” He added: “As a result, shipping lines and terminals must map these opportunities by using key drivers – for example, an industrial shipper rather than a consumer shipper, or a regional player rather than a global player. Shipping lines and terminals must secure long-term partnerships that grant a share of growth.” He explained that long-term partnerships could mitigate the risks for shippers that could be brought about by the new alliances. He continued: “Shipping lines need to take advantage of the trade wars to win shippers’ business. They need to lock themselves into a long-term partnership which will enable them to take advantage of growth, without the worry that the shipper will be in a price war. It is of benefit for the shipper to have a long-term freight rate and a benefit to shipping line stability in terms of growth and the deployment of its fleet in coming years.” He sees opportunities for shippers, shipping lines and terminals in thinking about the long term. “Equipment, demand and forecast all go together. It is very hard to predict where containers go in our business. We need more predictable equipment and we need to stop the volatility.” Implementing a communication plan with a focus on forecasts, market trends and compliance will be more important than ever. To do that, a long-term approach is needed by all parties. CST

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VINMAR DEMAND GROWTH Wide geographic diversity in key markets + 100 countries

US Shale Opportunity & optimistic in Asia Strong growth

Steady off-take projects volume Example East Saudi

Well positioned for substantial growth Credit: Alessandro Menezes/Vinmar

Container Shipping & Trade | 1st Quarter 2017

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CARRIER PROFILE | 11

2GO is focusing on ways to boost energy efficiency, including solar panel use and coatings. Credit: AkzoNobel

2GO GROUP EYES UP RENEWABLE ENERGY AND LNG Philippines domestic boxship operator 2GO Group is looking at ship-power options including solar energy and LNG. Rebecca Moore visited the company’s headquarters in Manila to meet its head of shipmanagement

hilippines domestic container ship operator 2GO Group, is busy with a number of projects. It is planning to replace its entire fleet eventually and to use liquefied natural gas (LNG) dual fuel and renewable energy for propulsion. The Manila-headquartered group is the largest domestic ferry operator in the Philippines, but an important part of its business is also the operation of containerships within the Philippines. It operates eight fast ferries through SuperCat Fast Ferry Corp, a subsidiary of 2GO, and 13 ropax vessels, as well as six container vessels and four chartered container ships. Its container ship business also encompasses more than just operating box ships; it is also a supply chain and logistics solutions provider. Speaking about future fleet plans, 2GO head of shipmanagement Eduardo Dela Cruz told Passenger Ship Technology: “The market is growing, the demand for better ships is there, and there is pressure from regulators, class and the Government to modernise and upgrade fleets.” 2GO plans to place another order for a SuperCat next year. The new orders are part of a wider programme to replace the

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entire 2GO fleet, both passenger and container vessels, which is being driven by new Philippines regulations. Speaking about ship operations in general in the Philippines, Mr Dela Cruz said: “We want to modernise the fleet. There are Government incentives to encourage operators to modernise their fleets and add new vessels. “Furthermore, maintenance is lower for a new vessel than for a 25 or 30 year old vessel and there is less fuel consumption. It also enables us to customise our vessels to match the specific requirements of our routes, such as making sure they are customised for Philippines port facilities.” The Philippines Government is due to implement a requirement to replace older passenger vessels, as a means of improving the safety of operations. It is not known when this will be implemented or the exact age of the vessels that will have to be replaced. But its introduction is expected to be soon, and the age of vessels is expected to be 25 to 35 years old and above. Mr Dela Cruz expects that the Government will give ferry operators about three years in which to meet their obligations under the mandate. “We will eventually replace all of the fleet, including the

Container Shipping & Trade | 1st Quarter 2017

12 | CARRIER PROFILE

container vessels,” he commented. “As a company, all the way to the top, safety is our highest priority.” A major focus for 2GO is saving fuel costs. Mr Dela Cruz said: “We are spending US$2 billion a year on fuel across all our vessels. We are trying to cut down these costs in the future. That is why we are open to the idea of using lots of different technologies, such as fuel additives. We are also exploring renewable energy, such as solar power.” Indeed, the company is planning to roll out a solar panel programme across all of its vessels. It is starting with a pilot on two container ships and one ferry. “Solar technology has become cheaper. It has matured and is being used in more marine applications, so we have been having discussions with solar panel companies in South Korea. A couple of vessels have been looked at for proposal purposes. Their roofs have been measured to see how much power can be provided by placing the solar panels there,” explained Mr Dela Cruz. “When the vessels are navigating, we will use the diesel generators. But we are looking at using solar as well as diesel, as a back-up, when they are cruising, as less power is needed then.” The company is looking into the solar option and at suitable capacitors to store the solar power. “We are establishing whether the solar power would be sufficient as a back-up for the engine. If it is not, there are many other electric requirements that it could be used for, such as lighting and sound systems and televisions,” Mr Dela Cruz said. 201703_Container Shipping & Trade_International Paint.pdf 1 2017-03-16

5:53:15

The ferry operator is also planning to use LNG dual-fuel engines in the future, and to this end is conducting studies to see if its vessels can operate on gas engines. Explaining the appeal of using LNG, Mr Dela Cruz said: “In the near future, LNG will be readily available in the market. It is safer and environmentally friendly and although it requires a different way of managing the ventilation system and the vessel’s fuel system, it provides a lot of benefits. It is also cheaper than diesel fuel. It would be a good move if we used hybrid engines, even though they are a little more complex than conventional engines.” He said that LNG was “in the pipeline” for container vessels, but said the fuel would not be used on its current vessels, but rather on new container vessels. “We need to do more studies on this, and check operating costs and crew costs. Crew costs will be higher as the training is different and the job requires more skill,” he said. He explained that the vessels would be fuelled with LNG via truck as there are no barges in the Philippines for this purpose. He expects that eventually, as more shipowners use LNG, suppliers will set one up. As part of its drive to lower costs, 2GO is planning to use AkzoNobel’s Intersleek biocide-free fouling control coating, across the whole fleet. It is also using AkzoNobel’s Intercept 7000. Mr Dela Cruz said: “We are doing the whole fleet with the new coating. Every time we drydock we make sure we use the paint

CARRIER PROFILE | 13

“We are open to the idea of using lots of different technologies, such as fuel additives. We are also exploring renewable energy, such as solar power.” Eduardo Dela Cruz, 2GO Group

[Intercept 7000]. We will use Intersleek when we carry out full blasting, which is every other drydock. Some of the vessels are due to use this next year.” He added [on the Intersleek series]: “It is more expensive but in the long run it is better, because of the better preservation and anti-corrosive benefits. It preserves the steel longer, so you do not have to do blasting every two and a half years. And you generate a lot of savings – less resistance is needed in water, and there are fewer emissions.” He pointed out the additional benefit that carbon credits can be used. Another attraction is that the ferry and container ship operator has to report to environmental regulatory bodies, as it

operates in a very sensitive environment. Using the biocide-free coating is beneficial in this respect. 2GO’s container shipping segment looks set to expand in the future due the Association of Southeast Asian Nations (ASEAN), which is trying to boost inter-regional trade. “With the ASEAN integration, there will be general agreements on trade and eventually there will be a borderless economy. Therefore the demand for inter-country trade will be higher, which gives us an opportunity to look at the market, including countries such as Vietnam and Indonesia.” Indeed, 2GO is in the “very early stages” of partnering with some Indonesian ship operators as part of its supply chain business. Mr Dela Cruz explained: “We [2GO] might do trade with Indonesia; this is very much a possibility." Therefore, to this end 2GO Group is eying up companies that are interested to partner with them. This would involve 2GO’s container ships covering routes between Indonesia and the Philippines. Chinese companies are also interested in a partnership in terms of moving imports and exports between China and Philippines. Summing up, Mr Dela Cruz said: “They [companies in Indonesia and China] are looking at tying up with us and an integration plan is being worked on now; more and more companies opening up their manufacturing plants and sending in bigger players." He said that in the next three to five years, this would start to seriously develop. CST

TRANSATLANTIC TRADE | 15

Trump to impact transatlantic trade? Transatlantic volumes 2016 Europe to North America: 4.3 million teu. Up 3.4% North America to Europe: 2.6 million teu. Up 0.02%

(Source: Container Trades Statistics)

The stagnant transatlantic has started the year on a stronger footing – but what impact will Trump’s tenure have on the trade?

he outlook for the transatlantic is a mixed bag. Ship operators on the trade argue that carrier consolidation is likely to improve the balance of supply and demand. But the new Trump administration in the USA adds uncertainty, and trade figures for 2016 show growth that was slow and that even ground to a halt. The transatlantic has begun 2017 much stronger than in previous years, with supply and demand expected to improve as a result of the new alliances and mergers and acquisitions activity, Atlantic Container Line (ACL) president and chief

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executive Andrew Abbott told Container Shipping & Trade. “We had expected 2017 to be another difficult year for container shipping on the Atlantic, but the year is starting off much stronger than previous years. January is normally a very slow month, but we have been running close to full capacity each week in January and we have been unable to purchase additional slots, so other carriers must be full as well.” He said that the new alliances, mergers and acquisitions and withdrawals announced over the last few months mean there will

be fewer competitors and an “improved supply and demand picture” on the Atlantic this year. Homing in on ACL, he said the US-headquartered conro operator’s cost profile would improve in 2017 with a homogeneous fleet, an on-time schedule, aleaner organisation, more automated systems, and more synergies with its owner, the Grimaldi Group. “These positive developments, together with our unique ships, ports and cargo, will enable us to weather this protracted shipping ‘storm’ that has claimed so many casualties so far,” Mr Abbott added. 2016 was the year that ACL launched its innovative new G4 (Generation 4) fleet. Mr Abbott commented: “2016 was a difficult transition year for ACL, with new ships coming in and old ships going out. We were still profitable – one of the few carriers who can make that claim

– but it was difficult to achieve.” He added: “Our new ships have a revolutionary new design so we have had our fair share of teething problems during the year. On top of that, having a mix of 1,850 teu G3 vessels and 3,800 teu G4 vessels meant that we had to offer a big shipsmall ship-big ship service. We supplemented the small ship weeks with slots that we purchased as needed. Our customers remained amazingly patient and loyal despite all of those gymnastics.” ACL has gradually built up the liftings on the G4s to a level exceeding 3,000 teu on each sailing westbound, while the G3 weeks are up to 2,350 teu (full utilisation of the G3 vessel plus slot purchases). In the return direction, ACL is running at 2,500 teu on the G4 weeks and 1,850 teu on the G3 weeks. “The good news is that we are finally getting the bugs out of the new ships, so the schedule is returning to the

Container Shipping & Trade | 1st Quarter 2017

16 | TRANSATLANTIC TRADE

reliability for which ACL has always been known. To ensure this, we are keeping an extra G3 in service, operating six ships in our five ship schedule, until September to guarantee on-time departures and to avoid the need to drop ports as we had to do during 2016,” explained Mr Abbott. According to UK consultancy Drewry, annual westbound transatlantic volume growth seemed set to end 2016 at only a little over two per cent year on year, even after a “recovery of sorts” in the second half of the year. Drewry figures show that for the first 11 months, westbound shipments were up 2.5 per cent to 2.9 million teu. “This is a far cry from growth of 8.4 per cent and 6.4 per cent recorded in 2014 and 2015 respectively and is a symptom of plateauing

consumer demand in the USA. Given the rapidly strengthening dollar against the euro and British pound, carriers might well have expected more from this trade,” said Drewry Container Insight Weekly. Meanwhile, the eastbound leg of the trade remains a weak market with yearto-date North American outbound volumes at the end of November “a fraction” below what was carried in the same 11-month period in 2015. “Here, a strong dollar and subdued demand in Europe are not providing any momentum to the trade, which last saw any real annual growth in volumes way back in 2013,” Drewry explained. Drewry forecasts that the total laden volume carried on the combined legs will exceed 5 million teu in 2016, but in the next 12 months the transatlantic

route is likely to be overtaken by the Asia–South Asia market as the fourth largest deepsea trade lane after the transpacific, Asia–North Europe and Asia–Mediterranean. Drewry expects westbound volumes to continue to decelerate in 2017 with growth of 1.8 per cent, while the eastbound market is due to pick up slightly, after three years of decline or zero growth, to 1.4 per cent. Its newsletter says: “One possible growth story lies in the Russian market. A warmer relationship with the Trump administration could result in some of the sanctions being relaxed and kick-start the movement of car parts to American assembly plants in the country. On the flip side, if Donald Trump’s election campaign rhetoric is to be believed the tentative free trade agreement discussions

between the USA and the EU – the so-called Transatlantic Trade and Investment Partnership – are dead in the Atlantic waters.” UK consultancy Container Trades Statistics (CTS), too, shows only a tiny or stagnant amount of growth. Last year, total volumes from Europe to North America were up by just 3.36 per cent year on year, reaching 4.3 million teu. CTS’s figures reveal a rocky road. Quarter one achieved 1.02 million teu, a 4.7 per cent rise compared to the same period the previous year. Then figures slumped for quarter two – the 1.09 million teu achieved then was a mere 0.12 per cent up compared to the same period in 2015. Quarter three totals were 4.3 per cent up year on year, and quarter four was 4.6 per cent up. On the North America to Europe leg, 2016 total volumes were stagnant. The 2.58 million

TRANSATLANTIC TRADE | 17

teu achieved was only 0.02 per cent above 2015’s volumes. And quarterly volumes showed only weak growth compared to 2015 – 5.42 per cent for quarter one compared with quarter one 2015, followed by 3.8 per cent, 3.72 per cent and 2.66 per cent for quarters two, three and four respectively. CTS’s price index paints a negative picture. For both legs, rates show a decline as the year went on. For the Europe to North America leg, last year started strongly, with 91 points in January (CTS’s price index has a base rate of 100). But this declined month on month, reaching 78 in December. For the North America to Europe leg, January 2016 registered 79 points. This fell to 68 in December.

she said: “We believe that our solid reputation as a fluid, reliable, and congestion free port with profitable trade routes contributes, to some degree, to the carriers’ decision to exclude Montreal from the new alliances in the short term. To date, the Port of Montreal has essentially been considered “out of scope” for

carriers serving the Port of Montreal, as they continue to consolidate and finalise the new alliances.” The port is preparing for future growth, in the transatlantic and other trades, with the construction of its new Viau container terminal, which will increase the port’s capacity from 1.5 million teu to 2.1 million

teu. The first of two phases is now complete, adding 350,000 teu to the port’s capacity. In addition, an expansion terminal is in development. It is estimated that the Contrecoeur port terminal expansion could be operational by the middle of the next decade. This terminal would add 1.15 million teu to the port's capacity. CST

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Transatlantic: a port’s perspective

The importance of the CanadaEU Comprehensive Economic and Trade Agreement (CETA) is highlighted by Montreal Port Authority. Its vice president for public affairs, Sophie Roux, told Container Shipping & Trade: “Canadian ports are ready for the much-awaited Canada-EU free trade agreement, expected to come into effect this year.” The Port of Montreal is an important player in the transatlantic trade. In 2016 the port handled 13.1 million tonnes of cargo in this sector, a similar volume to 2015. A total of 1,447,566 teu moved through the port in 2016, a growth of nine per cent since 2010. An important driver for the port in the transatlantic sector is emerging markets. Ms Roux explained: “On the container side, Asia and the Middle East, through transshipment with our European services, have been driving much of the growth in the past five years and are likely to continue to do so in the short term.” Asked about the new container shipping alliances,

Baltimore Baton Rouge Bayonne Beaumont Boston Brunswick Camden Charleston Concord, CA Coos Bay Corpus Christi

Crockett Davisville Eureka, CA Freeport Galveston Gulfport Houston Jacksonville Long Beach Longview Los Angeles

www.PortsAmerica.com

Miami New Orleans New York Newark Olympia Philadelphia Port Arthur Port Canaveral Port Everglades Port Hueneme

Portland, ME Providence San Diego Savannah Tacoma Tampa Vancouver, WA Virginia Wilmington, DE Wilmington, NC

18 | REGIONAL FOCUS Asia

Port Klang is set to battle PSA Singapore (pictured) and Tanjung Pelepas for marketshare. (Credit: PSA)

COME TOGETHER NOW Consolidation may be the only route for terminal operators looking to survive in the new world of mega alliances and mega ships by Gavin Van Marle

he world’s deepsea container shipping lines may be on the brink of a recovery following a wide-ranging reduction in capacity, but port operators and terminal owners are having to adapt their strategies to deal with the continued stagnancy of volumes. Container lines have begun the year on a high after returning chartered vessels to owners, which have mostly then gone into lay-up. Terminal operators have no equivalent option. Instead they find themselves under increasing pressure from a customer base that is now largely consolidating into the three main deepsea alliances which will begin operating in April. Nowhere is this more obvious than at the major hubs of Asia, where operators have turned their back on the customary practice of building capacity. Instead they are looking to mergers and acquisitions activity as a way of shoring up declining earnings and thinning margins. Leading this charge has been Cosco Shipping

Container Shipping & Trade | 1st Quarter 2017

Ports, the terminal operating unit of China Cosco Shipping Corp that was known as Cosco Pacific until last year’s merger of the state-owned shipping lines. Recent deals completed by the company include upping its stake in the Chinese port of Qingdao, acquiring a 40 per cent stake in APM Terminals’ reefer and container facilities under construction in the Italian port of Vado and a lesser stake in its Suez Canal Container Terminal facility, and entering into a co-operation agreement with Hutchison Port Holdings to jointly run and manage 16 container berths across the three container terminals in Hong Kong’s Kwai Tsing area. The two firms said the agreement was explicitly in response to the consolidation of shipping alliances in the form of the Ocean Alliance, The Alliance and 2M. “In a response to the changing dynamics of the global shipping industry, which are reflected by the emergence of new strategic alliances

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Asia REGIONAL FOCUS | 19

between shipping lines, the companies believe that the combined terminals collaboration will allow the most effective use of facilities and manpower resources. Efficiency will also be enhanced under the new set-up, as one management team will be responsible for the terminals’ day-to-day operations. “This new strategic arrangement would create additional capacity by increasing flexibility in berth and yard planning among all three terminals. This forward-looking move will help sustain Hong Kong’s position as a leading transshipment hub in the region,” a joint statement said. Neil Davidson, ports and terminals senior analyst at Drewry Maritime Research, has for the past year argued that alliances between terminals could be a key way to respond to the twin challenges of larger alliances and larger vessels – a particular consideration for Chinese and other Asian hubs which have had to handle the majority of the ultra large container vessels that have been deployed on the Asia–Europe trade. “Big ships have led to peaks of cargo in terminals. It is in the yard where it really hits, where it affects the terminal most. You need peak manning to cope with it, which pushes up the operating expenses. “Then there is demand for faster handling. Generally speaking, if you want to handle ships faster there tends to be a cost involved. We are still a long way from the 6,000 moves in 24 hours that Maersk Line called for some time ago. The best is about 3,800 in 24 hours on a consistent basis. So we are still a long way from the productivity that is required, and that has a cost implication. “I think there will certainly be more alliances between terminal operators. Finding ways to work together is a natural response to the way big carriers have come together, and perhaps that might go a step further and result in more mergers and acquisitions between operators. “There will also be more joint ventures between terminal operators and shipping lines. This is a very interesting area, and would be one way of mitigating the risk of bigger alliances. PSA International is a good example of that, and Hutchison’s sale of 35 per cent of Rotterdam’s Euromax terminals to Cosco is another one,” he said.

“The impending realignment in the container shipping industry next year will result in a lesser number of, but significantly larger, alliances.”

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One of the most intriguing battles for market share is set to take place between Singapore, the Port of Tanjung Pelepas and Port Klang, all of which tout themselves to carriers as Southeast Asia’s transshipment hub. “There is much more volatility in market share that port operators have to deal with as a result of the alliances. Look at the transshipment market in Southeast Asia. Singapore’s volumes were down 9 per cent in 2015. The ports of Tanjung Pelepas and Klang were up significantly, almost entirely as a result of alliance reshuffling and then there was the deal that CMA CGM has done with PSA, which is likely to see some volume going back to Singapore. There are huge chunks of volume that can move and millions of teu between ports, which leads to great uncertainty and higher risk,” Mr Davidson adds. CMA CGM returned to Singapore in the middle of last year. The formation of a joint venture company, CMA CGM-PSA Lion Terminal, which operates four ultra large container berths at Pasir Panjang Terminal Phases 3 and 4, was a precondition laid down by the Singapore Government when the French shipping line acquired Neptune Orient Lines. Some speculated that that could spell trouble for Port Klang’s major operator Westports Malaysia, which is listed on the Malaysian stock exchange, but in fact its own volumes have continued to grow since then. By the end of the third quarter of last year, volumes had grown by around 10 per cent and reached 7.5 million teu, despite a 15 per cent handling rate increase imposed at the end of 2015. And it has pressed on with its expansion plans – a new 300m of berth will be completed by the middle of this year, and a further 600m in 2018. “The impending realignment in the container shipping industry next year will result in a lesser number of, but significantly larger, alliances. Westports has always been a supply-driven terminal that accommodates our clients’ requirements. “To service these bigger alliances, we have completed our CT8 phase one expansion, kept on schedule the CT8 phase two construction work, and commenced the latest CT9 phase one container wharf,” said Westports chief executive officer Ruben Emir Gnanalingam. Mr Davidson believes that the terminal industry has come to a point where operators are having to take a decision which goes to the very heart of their businesses. “A very interesting split in the behaviour of terminal operators has been created. Some are showing a much greater degree of caution, but others are becoming more adventurous and saying: If others are unwilling to invest, this is a chance for me to get into the game, particularly if acquisition prices have been pushed down by poor performance and lower expectations. It creates opportunities.”

Singapore port tests driverless trucks Singapore may be coming to terms with the end of an era of runaway container volume growth, but there can be no doubting its commitment to deploying cutting-edge technology after it recently signed a deal with truck manufacturers Toyota and Scania in conjunction with Singapore’s ministry of transport to introduce driverless freight vehicles to the country’s roads. The parties will begin trials of truck platooning, where a human-driven truck leads a convoy of driverless trucks, and next year will trial transporting containers from one container terminal in Singapore to another. Although it is feared by the road freight industry in many countries because of the obvious effect on drivers’ job prospects, truck platooning is thought to be better for the environment and road congestion. Pang Kin Keong, permanent secretary for transport and chairman of the committee on autonomous road transport in Singapore, said: “Trucking is a highly labour-intensive industry. We face a shortage of truck drivers. In this regard, truck platooning technology presents us with an opportunity to boost productivity in both the port sector and the trucking industry. It will also open up opportunities for truck drivers to take on higher-skilled roles as fleet operators and managers.” Ong Kim Pong, regional chief executive of Southeast Asia at PSA International, added: “As PSA prepares for our future terminals at Tuas, it is timely that we move on to the next steps in developing autonomous truck platooning technology. It underlines our joint commitment to being future-ready, while also helping us continue to serve our customers better through fast and efficient inter-terminal container movement.” CST

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COATINGS | 21

Game-changing new ISO 19030 standard is unveiled The new ISO 19030 hull and propeller standard has come into force and looks as if it will have a major impact on ship operators’ balance sheets

he new ISO 19030 hull and propeller standard has come into force and looks as if it will have a major impact on ship operators’ balance sheets. The benefits were unveiled at an open forum on the new standard, held in London, UK. The forum was hosted by leading paints and coatings supplier Jotun, class society DNV GL and the Baltic and International Maritime Council (BIMCO) – all driving forces behind the launch of the new ISO 19030. Stein Kjølberg, Jotun’s global sales director for hull performance solutions, said in an interview: “By applying the standard, ship operators have a tremendous opportunity to have access to more data to analyse performance, both historically and in the future. It enables them to make a decision about the right solution to be applied to a vessel. This does not need to be the most expensive or advanced, but suited to the trade of that vessel. There is a lot of money to be saved by applying this standard.” He explained how one ship

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operator saved US$1.8 million in between two drydocking periods after applying the standard – but it could have saved even more if it had applied the standard earlier. “Within the first period there was a significant drop in performance. If it had carried out initiatives and inspections more quickly, it probably could have saved US$1 million – just by doing that,” Mr Kjølberg said. The standard will bring clarity to the industry, too. “There have been several cases of owners not understanding that the underwater hull is affected if cleaning is delayed, so a lot of fuel is used before they do something about it. By having this standard, a ship operator can analyse and have a better idea of if, and when, it should carry out cleaning and what effect this will have.” And he singled out the container ship sector as “probably most suitable for the standard. These vessels very much depend on reaching port at a certain time, go at a higher speed, have high fuel consumption, and use more powerful engines, as container

ships are being built at a larger scale. So by applying the standard there are significant savings for container vessels.” He said that almost half of all ships for which Jotun has signed contracts are container vessels. The standard is just the beginning. “It is a good start. Ideally you should have a set up that can measure every step of the way – not just hull and propeller monitoring, but also engine management,

The boxship sector is the most suitable application for the ISO Standard 19030. (Credit: AkzoNobel)

Container Shipping & Trade | 1st Quarter 2017

22 | COATINGS

crew management … There should be a chain of different initiatives that identify ship efficiency,” Mr Kjølberg said. Tobias Gröger, DNV GL senior consultant for maritime performance solutions, Western Europe, added: “It is one tiny element of big data.” He said that sensor data could also be connected to other data, including weather and fuel analytics information. “This big data will, in the long run, put shipping companies in a position where they can look at what they can do to increase vessel efficiency.” The standard will be revised and – based on what has been learned – updated every three years. Mr Kjølberg said: “We expect the standard to be refined and revised and made simpler to use and more accurate. More default methods will be put in so there is more variety. But there will be the same KPIs, so it will be open, transparent and equal.” AkzoNobel was also involved in developing the standard. Michael Hindmarsh, business development manager at AkzoNobel’s marine coatings business, hailed the ISO 19030 standard as an “important milestone in the shipping industry’s continued journey towards enhanced monitoring of hull and propeller performance”. He said that as ISO 19030 is still relatively new, AkzoNobel is working with the industry to assess its appetite for the standard. “We believe ISO 19030 represents a solid, initial ‘line in the sand’ in relation to monitoring hull and propeller performance, but there is still further progress that needs to be made,” he said. “That is why participants involved in developing the standard are advocating that the industry – including ship performance monitoring specialists such as BMT Smart, Wärtsilä-owned Eniram, Marorka and NAPA – embrace

ISO 19030 as a minimum requirement and adapt their performance monitoring systems accordingly. In addition, to ensure the continued relevance of the standard, it is essential that ISO 19030 keeps pace with the ongoing development of technology and analysis capabilities that ship performance monitoring specialists are currently developing.” Hull coating predictions from Intertrac Vision – AkzoNobel’s big data consultancy tool for ship

operators that provides predictions about the fuel and CO2 savings potential of fouling control – can be verified and validated against actual performance using monitoring processes that are compliant with ISO 19030. Since the launch of Intertrac Vision in October 2015, its consultants have visited 26 container ship owners and operators. Mr Hindmarsh said that the predictions provided by the technology have so far received positive feedback. He summed up by saying

that new big data technologies such as Intertrac Vision have a role to play in supporting container ship owners and operators “in making the right hull coating selection that will have maximum impact on fuel and emissions savings targets”. He highlighted: “When combined with industry wide initiatives such as ISO 19030, it is possible for the industry to make considerable progress in terms of selecting and measuring the impact of hull coatings on wider sustainability aspirations.” CST

ISO 19030: The countdown. (Credit: AkzoNobel)

Container Shipping & Trade | 1st Quarter 2017

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24 | BALLAST WATER

DO NOT DELAY INSTALLING BWMSs URGE INDUSTRY BOSSES Confusion about the deadline for implementing ballast water management systems has put the brakes on some shipowners ordering the equipment – but they must not delay, say industry experts

MO is not making a decision about the implementation deadline for ballast water management systems (BWMSs) until July this year – and this has slowed down the ordering of these systems as shipowners wait for a decision, says Christopher Todd, executive director at Calgon Carbon UV Technologies and Hyde Marine. July is when the next meeting of IMO’s Marine Environment Protection Committee (MEPC 71) takes place. MEPC was originally due to meet in May but the meeting has been moved to avoid a clash with a United Nations Framework Convention on Climate Change (UNFCCC) meeting that month. Mr Todd urged shipowners not to delay in ordering equipment. “Given that shipowners can purchase equipment today that has United States Coast Guard (USCG) alternative management system (AMS) acceptance and given that market prices are as low as they are going to get, combined with the fact that shipowners can safeguard the USCG AMS compliance by up to 10 years, then they should be installing equipment now. If the vessel is at an age of 10-15 years, then operators can secure compliance to the end of its useful life. There is value in that that is not yet quite understood by the market. The message has not been communicated very well,” he told Container Shipping & Trade. Susanna Wyllie, global proposal manager for De Nora Water Technologies’ Balpure BWMS, has also seen some ship operators delaying. She described the response of owners and operators as a “very split reaction. There is quite a lot of confusion among shipowners about the requirements and whether they need to apply them or not. It is quite a mixed picture. Some people have budgeted for the requirements and are keen to apply them. They know that the regulations are coming and it is obviously sensible to be quick and buy the systems at a cheaper price as well as getting better delivery times.” She continued: “We have had quite a lot of enquiries but not a massive number of conversions. We have not seen the expected uplift in the market after ratification because shipowners still think they have options and do not have to apply the regulations yet. But

Container Shipping & Trade | 1st Quarter 2017

we are getting asked about feedback on operating experience. The market is interested in this.” De Nora’s Balpure is especially relevant for ultra large container ships. Ms Wylie said: “Its footprint is reasonably small and you can locate the system wherever you need to. It uses a slip stream, so it does not need to be directly on a ballast line. It therefore tends to go on larger vessels.” She said that the company had had a few enquiries about installing the system on ultra large container ships. The Balpure system treats a flow rate of 1,000m3 and upwards. A single system can go up to 12,500m3 and the requirement can be doubled up if the vessel is even larger. DNV GL, which is carrying out a great deal of work with BWMSs, has also warned about delaying the decision to install a system. Martin Olofsson, DNV GL senior principal engineer, told a select group of journalists at a press event organised by the class society at the end of last year: “In our scenario, the IOPP [International Oil Pollution Prevention certificate] renewal, which is when the BWMS needs to be installed, should be evenly spread out. What we do not want to happen is for a shipowner to find ways of avoiding installing the treatment system and then having to do a lot of retrofits closer to 2022.” He warned: “Lots of shipowners are talking about rescheduling their IOPP renewal survey. They are asking if they can do it before the entry into force date [of the Ballast Water Management Convention], and moving the IOPP renewal survey date so they get another five years. More and more flag states are accepting the IOPP renewal before the entry into force. This means we will be

Sembcorp Marine's Semb-Eco LUV BWTS is the first in Singapore to be type approved by IMO

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BALLAST WATER | 25

getting everyone at the end of the time frame.” If this happens then DNV GL’s workload will span 1,500 projects a year rather than 450. “So from a class perspective, this is not what we want to see,” Mr Olofsson summed up.

it has gained type approval, he said: “We are very careful about product changes, to ensure that any changes can be retrofitted to existing equipment in the field. We have tried to be as alert to this as possible in order to minimise the difficulty of doing upgrades on systems that are currently fitted in ships.” The battle for USCG type approval Hyde Marine’s current system has AMS acceptance from the USCG. Hyde Marine is preparing to retest its system in order to receive Alfa Laval reached a milestone on 23 December last year when USCG type approval, after its request was rejected for its most it received USCG type approval for the third generation of its probable number (MPN) technique to be recognised as an PureBallast BWMS. alternative test method. The USCG The USCG based its type requires organisms to be killed, and approval of PureBallast on CMFDA/ many manufacturers of ultra violet FDA testing conducted at DHI in (UV) based systems rely on an MPN Denmark. This testing method uses “The impact will only be nominal technique to confirm whether their a combination of two fluoresceinsystems comply. But in December based stains (FDA and CMFDA) in terms of capital cost for the 2015 the USCG decided that MPN to evaluate the status of organisms shipowner, but there will be a was not an acceptable testing method in ballast water samples. The testing reasonably sizeable increase in its because it believed that it does not was carried out using the same measure the efficacy of a BWMS to hardware, power consumption and power consumption in order to kill organisms. Hyde Marine filed an flow as the IMO-certified version of meet the USCG testing regime.” appeal that was denied by the USCG the PureBallast 3 family. Outside the in July last year. USA, where PureBallast has been type Mr Todd said: “We are preparing to approved using the MPN method, the retest our system in accordance with the USCG-certified system will operate USCG’s preferred testing methodology. We disagree [with its decision] in IMO mode and be able to treat water with UV transmittance as but the USCG made it clear that that is its approach, so we are going low as 42 per cent. to do what we have to do to get certification.” PureBallast has a flexible construction based on four different In order to achieve compliance, Hyde Marine is aiming to increase UV reactor sizes. This permits optimised sizing and competitive its system’s UV dose capability. “The impact will only be nominal in solutions over a wide flow range. The current type approval covers terms of capital cost for the shipowner, but there will be a reasonably flows of 150m3-3,000m3 per hour based on the 300m3 and 1,000m3 sizeable increase in its power consumption in order to meet the USCG per hour reactor sizes, while type approval for systems based on testing regime.” Hyde Marine is looking to introduce two operating 170m3 and 600m3 per hour reactors is expected soon. modes, one for shipowners operating in US waters (whereby the power is increased) and one for when in IMO waters (less power used). Shipyards get in on act Mr Todd said that Hyde Marine was going to carry out its It is not just manufacturers but shipyards, too, which are involved in land based testing again, at the beginning of March. This will take providing BWMSs. Singapore’s Sembcorp Marine provides turnkey 4-6 months, and will be followed by shipboard testing. The target solutions for ballast water management retrofit installations. But was to submit the type approval application by the end of the year. as well as working with owner-furnished equipment specifications, Mr Todd said that the company hoped that it would obtain type Sembcorp Marine can provide alternative equipment supply approval in the first quarter of next year. solutions which integrate the Semb-Eco LUV BWMS, the first in Speaking about the changes to be made to the system, once Singapore to be type approved by IMO. Lee Lin Wong, Sembcorp Marine Executive Vice President and Head of Repairs & Upgrades, explained: “The Semb-Eco LUV BWMS is a non-chemical system with low power requirements, currently undergoing further testing to verify its USCG compliance. For ships with ballast pump flow rates of 500m3 per hour, the SembEco system needs less than 30kW of power, while conventional UV systems require more than 100kW for the same treatment capacity.” She also pointed out the division between those shipowners who are looking to install the system as soon as possible, and those wanting to delay. “Some shipowners have decided to make their vessels compliant and are now actively working on the selection and procurement of the appropriate BWMS equipment as well as on preparation for retrofit installations – either at sea or in shipyards. “Conversely, there are also shipowners who have taken the approach of docking their vessels early, before entry into force of the regulations, to avoid having to install the BWMS on the ships till the next IOPP certification survey. Hyde Marine is changing and retesting its system in order to “Sembcorp Marine sees good opportunities in working with both receive USCG type approval groups.” CST

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Container Shipping & Trade | 1st Quarter 2017

26 | BOXSHIPS

Gas dual-fuel boxships on the rise The trend to use dual fuel propulsion is gaining momentum within the container ship sector

he adoption of dualfuel engines has gained momentum and it is now possible to retrofit diesel engines to gas dual fuel, says Ole Grøne, MAN Diesel & Turbo’s senior vice president of low speed sales and promotions Indeed, the existing MAN B&W 8L48/60B engine on Wessels Reederei’s 1,036 teu Wes Amelie is being converted into a 8L51/60 dual fuel engine in what is the world’s first conversion of a container feeder ship to dual

fuel propulsion. The trend for using dualfuel engines is particularly evident in the USA. MAN Diesel & Turbo has won a clutch of orders from ship operators based there, including TOTE’s two new container ships that are already in service with 8L70ME-GI engines, two being built for Crowley Maritime with 8S70ME-GI engines, and two plus two 3,600 teu vessels being built for Matson Navigation Co. The first two for Matson will use MAN B&W

Milestone for MAN engine set for OOCL newbuild MAN Diesel & Turbo licensee Doosan Engine Co held a ceremony in Changwon, South Korea to celebrate the production of 100 million two-stroke brake horsepower. The milestone was achieved with the successful test operation of an MAN B&W 11G95ME-C (103,000hp) engine, the world’s most powerful engine type per cylinder and the most powerful engine in MAN Diesel & Turbo’s engine manufacturing portfolio. The engine is bound for installation aboard a 21,000 teu container ship being built for Orient Overseas Container Line (OOCL) by Samsung Heavy Industries. Ole Grøne, MAN Diesel & Turbo’s senior vice president of low speed sales and promotions, commented: “100 million horsepower is an achievement that until now, has only been reached by Hyundai.” Speaking of its suitability for the OOCL newbuild, he said: “The bigger the container ship, the bigger the engine needed. Using an engine of this kind is the best choice, for the combination of power and propeller revolutions that it offers, which provide the most economical system at the lowest possible fuel consumption.” He said the engine had been used in a number of ultra large container ships. The first to deploy it was Mediterranean Shipping Co (MSC), in a ship of a similar size to OOCL’s.

Container Shipping & Trade | 1st Quarter 2017

7S90ME-GI dual-fuel engines with seven cylinders and the next two will use 6G90ME-GIEGR engines, each with six cylinders and exhaust gas recirculation for the control of NOx emissions. Mr Grøne said: “Our solution was chosen because of the high efficiency and reliability of the two-stroke engine, combined with the fact that North America was the first area to introduce low sulphur restrictions and that gas is relatively low cost there. The option to operate on gas with high efficiency was a perfect match for our ME-GI engine.” “In the coming years we may see more retrofits, as a result of stricter restrictions on emissions, including the 2020 sulphur limit. All engines in our contemporary ME engine programme can be ordered as a dual-fuel engine from the outset or be converted to burn gas dual fuel at a later stage without any special preparation,” Mr Grøne said. With regard to retrofitting dual-fuel engines in place of conventional engines, he said: “We have been advising shipowners not to make any hasty decisions. If they do want to reserve the option to retrofit their engines, they need to consider the space that is needed for the gas tanks and establish the best time to carry this out. This

The MAN B&W 7S90ME-GI is being used in Matson’s newbuilds

might be at the time of the first docking, as it is a relatively big and, because of the cost of the tanks, an expensive job.” With regard to the conversion of dual-fuel engines, he commented: “We have had discussions about vessels of all sizes, all the way down to 1,000 teu container ships.” He said that some projects were in the pipeline but had not yet been confirmed. “Some ship operators are waiting to see the outcome of the 2020 global cap on the sulphur content of fuel. It all boils down to the price difference between gas, marine gas oil, heavy fuel oil and SOx scrubbers, as well as fuel and gas availability.” CST

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28 | TECHNOLOGY

THE MOVE TO DIGITISE DIGITALISATION IS AFFECTING ALL ASPECTS OF CONTAINER SHIPPING

he importance of digitisation and automation will continue to gather momentum and will have a considerable impact on container shipping according to a new book, Liner Shipping 2025 – How to survive and thrive, by Lars Jensen, chief executive and founder of SeaIntelligence Consulting. Dr Jensen’s book says: “Essentially, digitisation is not about IT. It is about fundamental business processes and models. Without this baseline, IT projects will yield

sub-standard results at best, and fail at worst. “Digitisation and automation will further drive commoditisation on many trade lanes, shifting the competitive differentiator away from being able to ship cargo and onto being able to help customers when exceptions occur.” The recent raft of software and big data solutions shows the importance of the digitalisation trend. Class society DNV GL has launched Veracity – a digital platform that promises to

unlock the potential of big data. Knut Ørbeck-Nilssen, chief executive of DNV GL’s maritime business, told a select group of journalists at a London media briefing that this was part of DNV GL’s efforts to modernise class. “We are entering a new and accelerated phase, and launching data platform Veracity, to unlock the potential of big data,” he said. DNV GL’s “digital roadmap to modernise class” also includes pilot schemes for drone surveys and remote inspections,

CargoSphere has launched its electronic smart upload and diagnostics solution, eSUDS

Container Shipping & Trade | 1st Quarter 2017

including smart phone based solutions and a wearable camera system that is tailor-made for inspection tanks. Mr Ørbeck-Nilssen said: “We see digitalisation as fulfilling our purpose to safeguard life, property and the environment.” He explained that the major aims of Veracity include helping the maritime industry to improve its profitability and to explore new business models through digitalisation. The Veracity industry data platform is designed to help companies improve data quality and manage the ownership, security, sharing and use of data. DNV GL said: “By creating frictionless connections between data owners and users, the platform will create new opportunities for improving ship performance and safety, while at the same time reducing operational costs.” Mr Ørbeck-Nilssen told journalists at the briefing that the digital platform will lead to a host of benefits, including • predictive maintenance, • performance forecasting, • energy efficiency, • bunker optimisation, • real-time strategy performance, and • optimised chartering decisions. Veracity has been built in collaboration with Microsoft Azure. In another development,

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TECHNOLOGY | 29

Interschalt Maritime Systems’ StowMan stowage planning software is to be connected to XVELA’s cloud-based vessel stowage collaboration platform for ocean carriers and terminal operators. This is expected to lead to a host of advantages. Scott Holland, product management vice president for Navis, which now owns the StowMan brand, told Container Shipping & Trade: “StowMan, together with the XVELA collaboration platform, provides a unique value proposition to carriers and terminals. While StowMan provides the most accurate stability results and lashings calculations, as well as the most advanced stowage planning optimisation features for the carrier, XVELA now connected to StowMan offers a comprehensive, cloud-based collaboration platform and network for ocean carriers and terminals to share information, and provides a new level of efficiency for our customers.” The Navis-Interschalt ‘ecosystem’ is particularly important given the growing use of ultra large container vessels (ULCVs). “ULCVs add a huge amount of data on the carrier side, and operational pressure on the terminal side. Manually planning thousands of containers for a single port of call would take many hours for a single solution alone – never mind multiple replans and the need to optimise vessel utilisation. With a world-class stowage planning solution set from Navis, this drops to a matter of a few hours for the whole process. As we complete our roadmap for stowage optimisation it could be measured in minutes,” Mr Holland said. And for terminals, the benefits of the system will help with the increased complexity of berth and yard planning that ULCVs bring. Homing in on the cost

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Navis/Interschalt Maritime Systems’ StowMan stowage planning software is to be connected to XVELA’s cloud-based vessel stowage collaboration platform

benefits, he said: “Consider the increase in revenue for one of the top three carriers, if they are able to load even 1 per cent more cargo twice a year for every vessel managed. When you think about it in those terms, having the best stowage planning system on the market and the opportunity to engage in collaborative stowage planning with the terminals at which you call is an absolute must.” XVELA, which is backed by Navis, has been tried out in 17 pilots with five top carriers and 12 terminal partners, covering around 50 vessels and 50 terminal locations for approximately 2.5 million containers. Elsewhere, carrier and shipper compliance with the new verified gross mass (VGM) regulations that came into effect last year has been assisted by electronic VGM solutions, such as that launched by CargoSmart. Its platform offers shippers and their designated submission parties multiple channels to submit the VGM to their carriers. “By offering free VGM solutions with multiple submission channels and a dashboard,

CargoSmart helps shippers and other shipment parties minimise changes to their existing shipping execution processes, control costs for complying with the new requirements, and provide clear visibility of submission status,” a company spokesperson told Container Shipping & Trade. “CargoSmart’s VGM solution is free of charge to both carriers and shippers, which helps them to control the cost of complying with the new VGM requirements. Our solutions let shippers submit the VGM information to ocean carriers flexibly and on time to comply with the new requirements. Our solution helps shippers and logistics service providers manage their multiple-carrier shipments through multiple channels flexibly, including on line, EDI [electronic data interchange], and mobile platforms. Shippers can self-file or designate a third party to provide the VGM or to submit the VGM on their behalf. They can also monitor VGM submission status through online dashboard and email notifications.” CargoSphere has launched its electronic smart upload and diagnostics solution, eSUDS,

that enables ocean carriers, through an automated, digital framework, to distribute freight rates to their freight forwarder customers online in real-time. CargoSphere executive vice president Harry Sangree said: “Ocean carriers traditionally input rates in their own internal systems and then e-mail their freight forwarders these rates. But forwarders use multiple carriers for each trade and have rates from all these carriers in different layouts. How can they compare rates when all the rate formats are different and not comparable?” Forwarders will not receive these rates for between 24 and 48 hours. “It is a highly volatile market, so the rates are obsolete when the forwarder gets them,” Mr Sangree added. ESUDS solves these issues with its single digital platform for the distribution of ocean rates and tariffs. This confidential, collaborative process immediately provides customers with visibility of new or amended rates. United Arab Shipping Co (UASC) piloted the system in 2016 with SEKO and was able to reduce processing time from between 48 and 96 hours down to foursix hours. CST

Container Shipping & Trade | 1st Quarter 2017

30 | FLEET STATS

FEEDERS GOING FROM STRENGTH TO STRENGTH Feeder investment is booming as a result of various factors, including distress sales by Barry Luthwaite

here is a growing sense that the container industry could turn the corner in 2017 and a cautious optimism prevails. However, optimism has been misplaced before. A combination of mergers, scrapping and economies of scale have resulted in a closer balance between supply and demand, but there are worries about the 25 ultra large container vessels (ULCVs) due to come into commission in 2017. These are among a total of 72 on order that are above 18,000 teu capacity. While smaller deepsea operators are being forced out of business because they cannot compete against ULCVs, the prospects for feeders of up to 5,000 teu go from strength to strength. Statistically 508 container ships are on order globally which

will commission 3,982,900 teu of capacity into the world fleet by 2020. When brokers and market observers talk of a dearth in newbuilding orders they refer to deepsea tonnage, which accounted for only 27 additions in 2016. However a closer look reveals that within the overall total of 508 units, 276 are feeders, underlining the investment growth in this sector. In 2016 and the early part of 2017 alone, this was dramatically emphasised, with orders for 103 feeders being placed. On the global orderbook there are 127 units in the 1,000-1,999 teu range and 120 units in the 2,000-3,999 teu range. So why is there suddenly demand for feeder tonnage? Forward thinking owners see a niche growth area. KG-funded tonnage continues to blight German fleets, forcing distress sales by banks at short notice. These vessels are sold at prices that are often well below their book value and are snapped up by owners who were once the competitors of those whose business they inherit. In some cases German owners are simply walking away from traditional feeder business which was once such a staple of earnings. With low pricing in second-hand transactions and newbuilding contracts, it is not difficult to persuade investors to seek a future in feeder trades.

Other factors are also driving the boom. Deepsea owners are seeing the prospect on some routes of demand outstripping supply for the first time in years, with the exception of seasonal business. This optimistic forecast comes from none other than the worldâ&#x20AC;&#x2122;s largest owner and operator Maersk

CONTAINER SHIPS ORDERBOOK BY EXPECTED DELIVERY YEAR teu range

total

2017

2018

teu

below 1,000

8,870

7,670

1,200

2019 no

teu

1,000-1,999

127

187,676

111,087

63,847

12,742

2,000-3,999

120

336,812

160,940

147,072

21,900

4,000-5,999

57,834

47,200

128,300

90,000

6,000-7,999

20,500

8,000-9,999

187,200

2020 no

teu

6,900

70,500

10,000-10,999

41,000

11,000-11,999

533,160

311,760

174,200

13,000-13,999

246,560

55,340

191,220

14,000-14,999

835,480

424,380

212,300

15,000-15,999

107,100

18,000-18,999

216,400

18,400

108,000

19,000-19,999

482,630

194,180

288,450

721,678

289,300

288,878

82,000

61,500

184 1,582,267

382,142

138,900

20,000+ total

508 3,982,900

276 1,879,591

Source: BRL Consultants

Container Shipping & Trade | 1st Quarter 2017

www.containerst.com

FLEET STATS | 31

Line. The forecast does not venture beyond 2017, but any turnaround for a sustained period will auger well. ULCV owners with a heavy financial outlay on newbuildings and existing vessels are facing increasing costs from emissions control legislation and higher oil prices, which are driving up bunker charges. Economy of scale is being practised and, where fast turn-around time is essential to running costs, ports that are not up to the required standards because of lack of investment are being dropped from deepsea calls. Economy of scale is also dictating the cancellation of a few voyages and inducing less frequent or no calls at all to destinations previously on itineraries. These moves are very welcome to feeder operators who are taking on business on a period and spot basis at very satisfactory rates. Feeder owners with Ice class 1A classification for harsh weather conditions are particularly well positioned in the winter. The prospect of too many feeders is not a concern at the moment, due to the fact that demand and availability temper freight rates. Indeed, it is very much a win-win situation for shortsea and deepsea operators, with stable rates. The economic problems faced by China’s shipbuilding industry have been well documented. An ambitious plan to be more self-sufficient in feedering the hinterland appears to have run into problems. Small and medium sized yards with contracts for series orders have been faced with cancellations or delays as a result of the tight financial situation and lack of cash availability. There is a suspicion that the larger state owned builders are favoured over small and medium sized builders when it comes to leasing or financial loans. Having said that, the country still holds a newbuilding backlog of 202 vessels aggregating 405,717 teu. Many of these are larger-capacity vessels of 3,000-4,999 teu, however, and ordered from yards which are “white listed” as being financially healthy. The difficulty in being self sufficient in building feeders has boosted prospects for shortsea operators based elsewhere. With so many distress sales occurring, 2016 was a very busy year for further trading deals. What particularly stood out were moves by Greek owners to snap up tonnage. Vessels serving Greek cabotage under the home flag are a rare sight and the shortsea industry has not followed the same path as Greek ocean traders, where numbers and standards have risen to be among the best in the world. There are now signs that this is changing but progress could be held back as a result of the nation’s huge debt with the EU. Already, with longer haul fleets, there have been moves to set up offices outside Greece and employ overseas registries. Portugal and Cyprus are two favoured destinations.

Contships Management has so far invested US$100 million in the acquisition of 19 container ships of between 700 and 1,100 teu. Ten of these were acquired in the last year and a further two have been bought recently which will commission into the fleet by March 2017. The company has been sure of its own long-term vision of fleet dynamics. For example, it forecast that the feeder sector would be a key game changer from 2010 when, at that time, few vessels of this capacity were being ordered. Other companies are now catching up with the Contships vision, as evidenced by the large orderbook. Like others, Contships took full advantage of the distress sale markets, especially for ex German KG tonnage. There is, however, close co-operation with German expertise in tapping markets, which is bringing rich dividends. The German presence may be diminished in terms of ownership, but demand for German expertise and experience is undiminished. More partnerships are being formed with overseas owners. Nikolas D Pateras, who established Contships Management, is one of those Greek owners who sold a whole fleet of 50 bulk carriers and dry cargo units at premium prices before the great financial crash at the end of 2008, and then waited for prices to crash. Greek-German co-operation was taken a stage further last year when Contships teamed up with Germany’s Conmar Shipping in a joint partnership for sharing technical and commercial expertise. More purchases are planned as a joint operation. Contships’ fleet is in the 700-1,100 teu range, in which there are still few other vessels able to compete. In recent years this was seen as a niche area served by mainly German multipurpose units. Most of these have been sold off or scrapped leaving potential new business to be exploited in smaller ports. These days it is easy to plot a map of the global ports that need to change to containers in order to achieve economy of scale. Mr Pateras has exploited this to perfection, with charter contracts from the majors such as Maersk Line, Mediterranean Shipping Co (MSC), CMA CGM, COSCO and others, to serve water depth restricted ports. Services are offered within Asia, the Mediterranean, West Africa, the Caribbean, Latin America and northern Europe. The fleet offers a mix of gearless and geared tonnage. With COSCO taking control of Piraeus container port there is hope of more home-based feeders operating out of there. For the moment, it is a case of opportunities being exploited in partnerships with newcomers that are nevertheless established shipowning names. Among these, the Greeks have a reputation for taking calculated risks and knowing when is the right time to move. CST

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BEST OF THE WEB | 33

BEST OF THE WEB

containerst.com

Container Shipping & Trade’s website covers the latest technology and market developments within the containership sector. Our news coverage is now exclusively online and free to read. Here are some of the most popular stories covered over the last few months

Maersk and IBM launch digital solution to transform global supply chain IBM and Maersk have announced a new collaboration to use blockchain technology to help transform the global, cross-border supply chain – which has the potential to save billions of dollars, a statement said. The blockchain solution based on the Hyperledger Fabric and built by IBM and Maersk, the global leader in transport and logistics, will be made available to the shipping and logistics industry. The solution will help manage and track the paper trail of tens of millions of shipping containers across the world by digitising the supply chain process from end-to-end to enhance transparency and the highly secure sharing of information among trading partners. “When adopted at scale, the solution has the potential to save the industry billions of dollars,” said the statement. IBM and Maersk will work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities to build the new global trade digitisation solution, which is expected to go into production later this year. “As a global integrator of container logistics with the ambition to digitise global trade, we are excited about this co-operation and its potential to bring substantial efficiency and productivity gains

to global supply chains, while decreasing fraud and increasing security,” said Maersk chief digital officer Ibrahim Gokcen.

Rolls-Royce reveals flexible shape of future shipping

APL has boosted its presence in US tradelanes since it was acquired by CMA CGM with plans to further increase capacity in the transatlantic and in US/ Latin America trades. An APL spokesperson told Container Shipping & Trade: “In the transpacific market where APL took over the US Lines business, we have been able to offer added solutions and strengthened our book of business in the US.” At the same time, tapping on the CMA CGM Group’s network, APL will continue to expand its market presence in other US trades such as the transatlantic and northsouth routes connecting the US and Latin America. When APL joins the Ocean Alliance in April, its network coverage of over 70 services will be further enlarged with 38 additional services.

Rolls-Royce Marine has unveiled a new modular concept in ship design to provide smart future shipping. Speaking at the company’s London offices, Oskar Levander, vice president concepts and innovation, showed its concept design for a future-proof container-carrying ship featuring modular components that can be swapped out or renewed to adapt to changing requirements. Called Electric Blue, the proposed vessel is based on a 1,000 teu feeder vessel and represents Rolls-Royce’s response to the challenges of low charter rates, changing environmental regulations, fuel diversity and emerging technologies. This is achieved by offering a flexible design based on the concept of ‘everything in a container’, whereby alternative gensets, batteries, accommodation areas, fuel tanks, etc, are containerised and can simply be swapped out as required. The design of Electric Blue can be scaled down or up and Rolls-Royce is already considering a 4,000 teu version.

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Container Shipping & Trade | 1st Quarter 2017

34 | LAST WORD

‘VIRTUAL LNG PIPELINE’ TO BOOST GAS FUEL USE BY BOXSHIPS The growth of small scale LNG infrastructure and the launch of a bunker barge for boxships will boost the use of gas in the container ship sector, says AG&P’s head of advanced research

T Derek Thomas (AG&P): The use of LNG among Jones Act shipping lines could develop as it has done among ships in the Baltic

he use of liquefied natural gas (LNG) by container ships will be facilitated by AG&P’s plans to make the fuel more widely available via small scale infrastructure – and in addition the LNG bunkering barge to be used by US-based carrier TOTE’s new gas dual-fueled boxships is expected to help boost the use of LNG in this sector. The barge is the first of its kind in the world and the first LNG bunkering barge in the US. AG&P subsidiary GAS Entec carried out the gas handling and design of the 4,000m³ barge. It will help container ships [in North America], especially those in the Jones Act trades; LNG use is expected to expand quite significantly. Indeed, the use of LNG among Jones Act shipping lines could develop as it has done among ships in the Baltic. The barge is expected to be delivered soon. The TOTE Marlin-class vessels are being fueled by trucks while waiting for the barge. Fuel by LNG truck is not adequate for larger vessels; as a short-term solution it is ok, but you do not want trucks with LNG driving in and out of port, it is impractical. Shipowners prefer a bunkering barge as while they are loading and unloading they can be refuelled; they do not want to have to go to a separate facility [for the LNG]. AG&P is also building its first small scale LNG carrier at its facility in Batangas in the Philippines. The vessel design has been finalised with a 16-month time-line to delivery. It will revolutionise the delivery of LNG in Southeast Asian island nations as well as having the potential to be used in India, China and the Caribbean, and on European waterways. One of the market drivers is a recognition of the need to break away from major, large scale terminals and deliver LNG to a broader market in a cost effective manner.

Container Shipping & Trade | 1st Quarter 2017

LNG is now at a viable price in Southeast Asia, but what is lacking is the availability of mechanisms to deliver the fuel to non-traditional users. Large scale infrastructure costs so much that LNG is priced out of the market. So simple, economic solutions are going to be key. AG&P’s 4,000m³ workhorse LNG carrier is targeting locations which require shallow draught and do not have tugs and sophisticated dockside facilities. The aim is to extend the vessel’s capability by using different equipment packages added to the base platform. We are also looking at building multiple units in parallel and making them available on a leased basis. This innovative commercial approach is equally as important as the technology in opening these new markets. The planned vessel is part of AG&P’s ‘virtual pipeline’ concept. There is a demand for LNG but the infrastructure is not in place to deliver it, and in many locations it is physically and economically unfeasible to construct gas pipelines. As part of this concept the company is developing a range of smaller vessels and terminals to deliver LNG to locations without direct access to pipeline gas, thereby developing a virtual pipeline. This strategy will support the take up of LNG by container ships. There is also a need in the USA for small scale liquefaction facilities that can serve as peak shaving plants as well as being a local source of LNG for marine fuel. AG&P is exploring the idea of deploying facilities of this kind on floating platforms using pipeline gas as feedstock. The targets are major port locations serving Jones Act trade and cruise ships, particularly in the Pacific Northwest, such as Tacoma in the USA and Vancouver, Canada. CST

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