Container Shipping & Trade 4th Quarter 2016 by rivieramaritimemedia

4th Quarter 2016 www.containerst.com

New alliances to shape Asia-Europe trade Which top 20 industry leaders are forging a path through tumultuous times? The world’s first semi-spherical bow boxship

“It is a happy coincidence that the acquisition by CMA CGM has accelerated APL’s turnaround plan” Calvin Leong, APL chief trade officer, see page 12

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contents

4th Quarter 2016 volume 4 issue 4

10 Regulars 5 COMMENT 6 BEST OF THE WEB 40 LAST WORD

Market updates 8 It seems that there is no longer a place for the Panamax vessel, while the ULCV fleet is set to swell by a massive 85 per cent (VesselsValue.com)

Trade route 10 All eyes are turning to the roll-out of the new alliances’ strings next year, which are expected to shape trade conditions in the Asia–Europe market

Operator profile 12 In an exclusive interview, APL’s chief trade officer Calvin Leong tells Rebecca Moore about the impact of the company’s acquisition by CMA CGM

Customer profile

16 Is Kuehne & Nagel, the world’s largest sea freight buyer, really at fault for rock-bottom freight rates?

Ship description 18 Imoto Lines’ latest container ship Natori is described by the company as ‘an experiment in energy saving’

Regional analysis: Middle East & India 20 With container trades elsewhere showing little growth, carriers are looking to the Middle East as terminals invest in more capacity

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Propulsion and green technology 25 Energy savings, use of alternative fuels and scrubbers are all under the spotlight

Container Shipping & Trade | 4th Quarter 2016

contents Coatings 28 We speak to AkzoNobel about its new biocide-free coating and the use of its carbon credit scheme, and to a Philippines box ship operator planning to use it

Industry leaders 30 In a year of profound transformation, there are some new faces in this year’s industry leaders listing

4th Quarter 2016 volume 4 issue 4 Editor: Rebecca Moore t: +44 20 8370 7797 e: rebecca.moore@rivieramm.com Contributer: 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 Group Production Manager: Mark Lukmanji t: +44 20 8370 7019 e: mark.lukmanji@rivieramm.com

30 Class 36 The PERFECt container ship project has accelerated. We spoke to key partners, including DNV GL, about the design

Fleet stats & analysis 38 A new dawn? There is a more promising outlook for the post Panamax sector

Next issue Main features include: • Trade route analysis: Transatlantic • Regional analysis: Asia • Container shipment monitoring and tracking • Ballast water treatment • Emissions abatement technology • Ship type: ultra large container ships

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

Front cover credit: Westports

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Container Shipping & Trade | 4th Quarter 2016

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.

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COMMENT | 5

Maersk Line boosts market power with Hamburg Süd acquisition

aersk Line’s agreement to acquire Hamburg Sud has cemented its position as the world’s largest container line. The combined fleet will account for 9% of the world live container fleet according to VesselsValue figures. The combined fleet will consist of 268 vessels of a total of 1.82 million TEU. There are a combined 31 vessels on order, a total of 382,666 TEU. The acquisition of Hamburg Sud will shore up Maersk’s number one position, putting it further above second largest container line, MSC, which has 202 ships (VesselsValue). The purchase of Hamburg Sud will beef up the 2M Alliance. If Hyundai Merchant Marine is included in this alliance, 2M will consist of 483 vessels with a total of 3.3 million TEU. Add Hamburg Sud and it will be 527 vessels at 3.6 million TEU, strongly closing the gap on Ocean Alliance with 539 vessels at 4.08 million TEU. (all figures from VesselsValue). Maersk Line’s announcement caps a year of upheaval and consolidation in the container shipping sector, with the merger of Cosco and CSCL, CMA CGM’s acquisition

Rebecca Moore

Editor Container Shipping & Trade

of NOL, and the merger of Hapag-Lloyd with UASC, as well as the agreed merger of Japanese trio NYK, MOL and K Line. Indeed, Maersk’s announcement comes on the back of the news that the three Japanese carriers will establish a new joint venture company to integrate their box shipping businesses. This joint venture – due to be established on 1 July next year and to start business on 1 April 2018 – has been launched to combat factors that include a decline in the container growth rate and a rapid influx of newly built vessels, which has led to an imbalance in supply and demand. A statement from the companies said this has “destabilised the industry and has created an environment that is adverse to container line profitability.” The news that has arguably sent the most shockwaves through the container ship industry is Hanjin’s collapse. Indeed, the havoc that the collapse of Hanjin Shipping Co has caused throughout the supply chain has been laid bare. More than 3,000 parties have claims against Hanjin, and cargo and shipowners, bunker suppliers and insurers have all been impacted, the international law firm Clyde & Co has told

Container Shipping & Trade. Clyde & Co is acting on behalf of parties affected by the bankruptcy. Indeed, in an exclusive interview with the firm’s Singapore office, legal director Leon Alexander told Container Shipping & Trade: “An extremely widespread part of the industry has been affected by Hanjin, and we are dealing with this globally as a firm, including Asia, Australia, the Middle East, the USA and London. “The nature of the people affected goes across the supply chain, from container and cargo owners to shipowners who have sub-chartered tonnage to Hanjin, insurers, and bunkers and other suppliers.” He said: “We have had other very large collapses, but this in my view has had a more significant impact than others. It is not just the size of Hanjin; there has also been a diversification in the international carriage of goods, as a result of freight rates. Historically a lot of my clients have shipped in bunkers, but the changing nature of the trade means that so much more is containerised, as the lower freight rates makes the market more accessible to them. So there are clients affected who would not normally be affected. It is a much wider group.” The consolidation and insolvency trends looks set to grow. In the words of Ince &Co managing partner of its Singapore arm, Edgar Chin: “With tough market conditions still probable for much of 2017, the consolidation and – in worst cases – insolvency trend is likely to continue into the early part of next year.” CST

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Container Shipping & Trade | 4th Quarter 2016

6 | BEST OF THE WEB

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

Damen launches new container ship feeder designs Damen Shipyards has launched new feeder container ship designs that include an LNG-fuelled option. The series of new designs – the first container ship feeder designs from the shipyard for over six years – cover 1,100, 1,400, 1,700 and 2,500 teu capacity box ships. They include the option to use dual-fuel LNG or scrubbers. Damen manager cargo vessels, Richard Nugteren told Container Shipping & Trade: “The existing series of feederships is getting old...Also, the use of ultra large container ships has meant there is a need for feeder ships in areas such as the Baltic, where the large ships coming to Rotterdam port are not able to go.” He said that there was the possibility to build these designs as dual-fuel LNG powered. The designs can also accommodate scrubbers, which are very compact and designed by Damen. “We have looked at low fuel consumption, used CFD testing and improvements in the bow design are possible, and there is an increase in the hull efficiency,” said Mr Nugteren. http://bit.ly/2hscy0c

Japanese liners to merge box businesses and create shipping giant Japanese trio MOL, NYK and K Line have announced they are establishing a new joint-venture company to integrate their box shipping business that will catapult them to number six in the market with roughly 7 per cent marketshare and create a fleet of 1.4 million teu. The shareholder ratio will be 31 per cent each to MOL and K Line and 38 per cent to NYK. The approximate total contribution will be ¥300 billion (US$2.96 billion). As well as the container shipping business, the joint venture will cover terminal operating business (excluding Japan). The merge of the three businesses will make the Japanese trio the sixth largest carrier. http://bit.ly/2fJ6sMM

Korea Line Corp beats HMM to win Hanjin transpac business Korea Line Corp has beat Hyundai Merchant Marine (HMM) to win the right to Hanjin Shipping’s transpacific business – marking the South Korean bulk carrier

company’s first entry into the boxship sector. According to media reports, bankrupt Hanjin Shipping has agreed to sell its Asia-US operation for Won37 billion (US$31.45 million) to Korea Line Corp. A Seoul bankruptcy court chose Korea Line Corp over HMM as the preferred buyer. Korea Line has the option to buy Hanjin’s 54 per cent stake in Total Terminals International LLC, which runs Long Beach Terminal in California and five 6,500 teu container vessels from Hanjin Shipping. http://bit.ly/2gPraqg

‘New era’ for Port of Liverpool as Peel Ports’ £400m terminal opens Peel Ports’ new £400 million UK terminal Liverpool2 was recently officially opened at the Port of Liverpool by the Secretary of State for International Trade, Rt Hon Dr Liam Fox MP. The terminal will provide a ‘state-ofthe-art ocean gateway’, a statement said, for UK importers and exporters with road, rail and canal connections linking directly to the heart of the UK mainland, accessing a catchment of over 35 million people, almost 58% of the UK’s population. The new deep water facility will complement the existing Royal Seaforth Container Terminal at the Port of Liverpool, with each terminal having capacity to handle around one million containers per annum. http://bit.ly/2fVy13I

Maersk Line to acquire Hamburg Süd Confirming recent speculation, Maersk Line and the Oetker Group have reached an agreement for Maersk Line to acquire Hamburg Süd, the German container shipping line, subject to final agreement and regulatory approvals. Hamburg Süd operates 130 container vessels with a container capacity of 625,000 teu and is a market leader in trades to South America. The move ends an 80-year history of Hamburg Süd as an independent liner operator. Maersk Group and Maersk Line chief executive Søren Skou said: “Today is a new milestone in Maersk Line's history.”

To view more whitepapers visit the Knowledge Bank at www.containerst.com

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To upload a whitepaper to the Knowledge Bank, please email Steve Edwards at steve.edwards@rivieramm.com

Editor’s selection:

Editor’s comment:

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Container Shipping & Trade | 4th Quarter 2016

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8 | MARKET UPDATES

Plight of the Panamax versus mammoth ULCV surge It seems that there is no longer a place for the Panamax vessel, while the ULCV fleet is set to swell by a massive 85 per cent

he Panamax container vessel is being squeezed, pushed out of its normal routes as a result of the cascading of larger vessels appropriating its normal work. But as a size, these vessels are too big to work the Handy and Feedermax trades. Data specialist VesselsValue said that it has recorded discounts of nearly 50 per cent in values for older Panamax vessels, while scrapping has shot up. In September Wulf Hermann went as far as to scrap a 2006-built Panamax container ship. According to VesselsValue data, the average age of container ships sent

to scrap has dropped from 22.2 years in 2015 to 18.2 years in 2016, year to date. There are only 13 more of these vessels on order, in sharp contrast with the 140 ultra large container vessels (ULCVs) on order. The dramatic decline in the fortunes of the Panamax ship type can be seen by comparing the number of vessels delivered in 2006 with 2016. In 2006, 66 vessels were delivered, representing 18 per cent of the delivered container fleet, and making it the third largest container ship type. This was only beaten by Feedermax types, which made up 27 per cent of the delivered container ship fleet,

TOP 5 PANAMAX OWNERS COUNTRIES

and the post Panamax container ship, which accounted for 26 per cent. Looking at 2011, the decline is evident. Just eight vessels were delivered, making the ship type a mere four per cent of the delivered container fleet. This year, the Panama is almost extinct in terms of deliveries. Only one vessel has been delivered, representing a tiny one per cent of the delivered container fleet for 2016. This makes it by far the smallest ship type by delivery, the next smallest being Feedermax and new Panamax container ships, at a joint 13 per cent. In contrast, the rise of the ULCV has been meteoric. Just two vessels were delivered in 2006, making up one per cent of the delivered container fleet. This jumped to 26 this year, making it the largest ship type at 26 per cent. As the VesselsValue infographic on page 9 shows, Panama container scrapping this year has almost exceeded the high of 2013. This is expected to be a record year in terms of scrapping vessels of this type. Demolition soared by an enormous 289 per cent over last year. The total scrapping of Panamax container ships

COMPANIES

NO. OF VESSELS

TOTAL TEU

TOTAL USDm

NO. OF VESSELS

TOTAL TEU

TOTAL USDm

GERMANY

224

924,178

$1,434

COSCO

272,213

$477

CHINA

110

471,396

$798

MSC

236,973

$347

GREECE

330,452

$476

MAERSK

156,880

$219

SINGAPORE

260,955

$386

SEASPAN

145,886

$209

SWITZERLAND

236,973

$347

NORDDEUTSCHE

123,726

$179

Source vesselsvalue.com

Container Shipping & Trade | 4th Quarter 2016

VesselsValue

â&#x20AC;&#x153;BASED ON THIS AND A GROWING ISSUE OF OVERSUPPLY, COULD WE SOON SEE A 2006 BUILT ULCV SCRAPPED?â&#x20AC;?

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*All data provided by VesselsValue.com

ULCVs set to soar The ULCV fleet is going to grow by a massive 85 per cent, according to VesselsValue – creating even more oversupply and possibly upsetting the cost saving measures that container business mergers are intended to achieve. The container industry has been suffering from capacity oversupply and slow cargo demand, leaving many owners in a position where they have to reassess their operational strategies. The industry received news in October that Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK Line) and Kawasaki Kisen Kaisha (K Line) are merging their container businesses,

ULCV Fixed Age Value 5 year old 15,000 TEU 250 Value USDm

hit 250,000 teu in 2013, and this year is forecast to reach 248,000-249,000 teu. Last year, scrapping of this vessel type was under 100,000 teu. With the increased levels of scrapping, the average age of vessels scrapped has fallen by four years in 12 months. The average demolition age of vessels now registers at 17 years. The top country in terms of Panamax owners is Germany, with a total of 224 vessels and 924,178 teu (see figure on this page). In second place is China, with 110 vessels totalling 471,396 teu. This is not a surprise, given that the largest Panamax shipowner is China-headquartered China Ocean Shipping (Group) Co (COSCO), with 63 vessels totalling 272,213 teu. The lists of the top five countries and the top five shipowners of Panamax vessels both reveal the diminishing status of this ship type. The owner with the largest number of Panamax in the world, COSCO, only has 63 vessels. This number dwindles to just 30 for the fifth largest Panamax shipowner, Norddeutsche Reederei. And the fifth largest country in terms of the number of Panamax vessels is Switzerland, which only has 59.

200 150

80.02

100 50 0 01/01/07

01/01/08

01/01/09

01/01/10

01/01/11

Value

to be operational in 2018. Other recent mergers and acquisitions activity includes CMA CGM and Neptune Orient Lines (NOL), Hapag-Lloyd and United Arab Shipping Co (UASC), and China Shipping Group and COSCO. “Owners are acting in this way to reduce costs and gain competitive advantage through co-operation. It is too early to tell whether these mergers will help to stabilise rates. It does very little to tackle the situation of oversupply,” commented VesselsValue in a special report about ULCVs. ULCVs were first ordered in 2006. Sized above 13,500 teu, they were introduced to help win market share. Over the years, owners’ appetites for these vessels have led to an increase in the number of ULCVs and in their size. Now, through the prolonged downturn in the shipping industry, these vessels have helped stretched shipping companies to save costs, thanks to the economies of scale that they offer. Currently the live ULCV fleet comprises 171 vessels, totalling 2,658,300 teu and

a record year. Demolition rose by 289% on last year.

With the increased levels of scrapping the average age of vessels scrapped has fallen by 4 years in 12 months with the average demolition age of vessels registering at 17 years.

Source vesselsvalue.com

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300k

250k

200k

150k

100k

50k

Age (Years)

high set in 2013 and is expected to be

Total TEU scrapped

this year has nearly surpassed the

0 2011

01/01/13

01/01/14

01/01/15

01/01/16

Date

PANAMAXES SCRAPPED Panamax Containership scrapping

01/01/12

2012

2013 Total TEU

2014

2015

2016

Average Age

VesselsValue

All-Time Low

ranging in size from 13,500 teu up to 19,500 teu. There are 137 on order that are up to 21,100 teu in size, according to VesselsValue data. By 2019 the ULCV fleet could grow by up to 85 per cent. “This extraordinary growth will create an even greater situation of oversupply, so it is a possible scenario that the cost saving exercises of the container mergers may not bring enough stability,” explained VesselsValue. The entire ULCV fleet is currently valued at US$16.4 billion. The effect on values of the charter market for container ships has not hit ULCVs as hard as it has other vessel types but still represents a significant reduction, said VesselsValue. Post Panamax container values have fallen on average 40 per cent in 2016 and as much as 60 per cent for older vessels. ULCVs have experienced reductions in value over 2016 of 14 per cent on average. The figure at the bottom of the page shows the value of a fixed year five year old ULCV assumed to be a good build (from a Japanese or South Korean yard) and of a standard size (15,000 teu). The chart shows that ULCVs are at an all-time low with a five year old ULCV having a VesselsValue market value of US$80 million. The values are driven by softening rates and newbuilding prices rather than by second-hand transactions, as there are no transactions in the market on which to base them. There are no demolitions of ULCVs, either, because of their young age. The first ULCV to be launched, Emma Maersk, was in 2006. In 2016 the youngest ever container ships were scrapped at 10 years old. “Based on this and a growing issue of oversupply, could we soon see a 2006 built ULCV scrapped?” wondered VesselsValue. CST

Container Shipping & Trade | 4th Quarter 2016

Trade with the Far East and Asia represents 31 per cent of Port of Barcelona's total container throughput (Credit: Port of Barcelona)

NEW MEGA ALLIANCES TO SHAPE ASIA–EUROPE TRADE All eyes are turning to the roll-out of the new alliances’ strings next year, which are expected to shape trade conditions in the Asia–Europe market

he new mega alliances have laid out their Asia–Europe product roll-out for next April. The Alliance, comprising Hapag-Lloyd, Kawasaki Kisen Kaisha (K Line), Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK Line), Hanjin Shipping Co and Yang Ming Marine Transport Corp, will feature eight services in the Asia–Europe trade including three covering the Mediterranean market. The Ocean Alliance – CMA CGM, Evergreen Line, China Cosco Shipping Corp and Orient Overseas Container Line (OOCL) – will have six Asia–Europe services, with an estimated 110 port pairs. Drewry Shipping Consultants points out that only six ports in China, including an undisclosed facility in South China or Hong Kong, have been favoured in The Alliance’s product and there is apparently no provision for direct calls in the Baltic. In contrast, the G6 Alliance’s current Loop 7 berths at both Göteborg in Sweden and Gdansk, Poland. “This would suggest that The Alliance is prioritising fast transits in a bid to counter what some perceive to be its weaker position vis-a-vis 2M and the Ocean Alliance,” Drewry commented. It added: “Assuming 2M goes to six sailings a week (currently offering five) – especially if Hyundai Merchant Marine eventually joins Maersk Line and Mediterranean Shipping Co – then next spring there will be 17 end-to-end weekly sailings running between Asia and North Europe compared to the 16 operated by the four alliances today, and the average nominal vessel size will rise to over 15,000 teu.” As well as the new alliances, the Asia–Europe trade has seen dramatic changes. These include the impact of the collapse of Hanjin Shipping Co and the integration of the container businesses

Container Shipping & Trade | 4th Quarter 2016

of Japanese carriers MOL, NYK Line and K Line, among other consolidations. Furthermore, the trade is still battling the challenges presented by ultra large container vessels (ULCVs) as well as an excess of supply over demand. Highlighting how the new alliances will provide challenges in the Asia–Europe trade next year, Ruben Emir Gnanalingam, chief executive of Westports Holdings, commented: “There will be opportunities and challenges in every market across 2017 as alliances are changing, with their members fine-tuning and aligning services and ports of call.” He added: “The consolidation of container shippers which results from the changes in container shipping alliances to three major ones from four, is a challenge for transshipment ports. The new alliances will bring in larger volumes to premier transshipment ports in Southeast Asia, through a dual hub strategy. It is not yet clear which of the premier transshipment ports in the region would be the biggest winner from these changes in the container shipping landscape.” He explained that Westports Malaysia will meet the needs of the container shipping lines with the completion of the second phase of its terminal CT8 by the middle of 2017. This will increase its container handling capacity to 13.5 million teu. By December 2017, CT9 Phase 1 will be completed, which will further enhance the port’s capability to handle more vessel calls. Mr Gnanalingam added: “At the same time, we constantly engage with main line operators about how Westports can support their regional strategic aspirations and new services under enlarged alliances.” While growth in container throughput has improved in the

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ASIA–EUROPE TRADE | 11

Asia–Europe trade routes, Mr Gnanalingam said: “Excess capacity is still gripping the industry. The deployment of new ULCVs overwhelms demand for container shipping services.” Despite the challenges, in the nine-month period to the end of September 2016 Westports’ Asia–Europe trade container throughput has increased by 6.8 per cent over the same period last year. The Asia–Europe trade makes up about a quarter of the company’s container throughput. “This growth has encouraged us to work harder to obtain new services in the Asia–Europe trade. Year to date, our port utilisation rate has improved to a very high level of more than 80 per cent,” Mr Gnanalingam commented. Elsewhere, other ports, too, are updating their facilities and services to meet the new demands placed on them by larger vessels and bigger alliances. For Port of Barcelona, trade with the Far East and Asia represents 31 per cent of its total container throughput, while Southeast Asia accounts for 6 per cent. One single Asian country, China, is the origin or destination of 22 per cent of all traffic in terms of teu, according to 2015 figures. Sixte Cambra, Port of Barcelona president, said: “Our aim is to increase and intensify our trade flows with Asia. In fact, as our strategic plan states, Barcelona must become an alternative gateway for goods in and out of Europe, especially as regards traffic with Asia and Africa. Our objective for the upcoming years is to become the main euro-regional distribution centre in the Mediterranean, competing with the ports of Northern Europe. The Asia market is the main part of our strategic objective, with particular emphasis on China, the Indian subcontinent and the Persian Gulf.” Port of Barcelona has what it claims is the most advanced semiautomated terminal in the Mediterranean – Barcelona Europe South Terminal (BEST), owned and managed by Hutchison Ports. Opened in July 2012, it covers 100ha, with 1,500m of wharf and a draught of 16.5m, and has a total annual handling capacity of 2.6 million teu. APM Terminals’ Muelle Sur Terminal in Barcelona has recently been enlarged, too, to an area of 81ha and with capacity to handle 2.1 million teu annually. Mr Cambra added: “As part of our strategy to attract more cargo from and to Asia, we are enlarging our hinterland, mainly in the centre and north of the Iberian peninsula and in France. In recent years, Port of Barcelona has developed the ‘networked port’ with

inland terminals in Zaragoza, Madrid, Perpignan and Toulouse. Lately, some port operators, such as Hutchison Ports and APM Terminals, have become actively involved in developing inland terminals and new rail services. This trend will be reinforced in the near future, promoting new inland terminals at strategic points in the hinterland and extending Port de Barcelona brand services to these areas.” Port of Barcelona and Westports show, as a snapshot, how ports are doing their best to boost the efficiency of their infrastructure to cope with the demands of ultra large vessels. According to Container Trade Statistics, volumes from the Far East to Europe so far this year have shown only a very small increase compared to last year: quarter 1 volumes rose by a tiny 1.2% to 3.6 million teu, in quarter 2 there was an increase of 1.8% to 3.8 million teu, and in quarter 3, year-on-year volumes rose by 1.% to 3.9 million (see below). With regard to freight rates, after a year of freefall 2016 is ending on a stronger footing. The crash that has been experienced is illustrated by Container Trades Statistics’ Asia–Europe price index, which tumbled to its lowest level on record in March 2016 despite a marginal rise in volumes in the first quarter of this year. The Asia–Europe price index, which monitors spot, short-term and long-term freight contracts, lost eight points from February to slump to 36, which is the lowest level on record since its launch in 2009. It also represents a 31 per cent drop compared to the 52 points achieved in January 2016. However, since then the price index has strengthened, Reaching 51 in July, and 50 in both August and September. This is down on the 54 achieved in August and 52 in September last year. But carriers are pushing ahead with general rate increases for December. OOCL has announced a US$850 per teu general rate increase to North Europe and the Mediterranean, while CMA CGM will raise its freight of all kinds rates by 52 per cent on Asia to Northern Europe. The changes that are being experienced – consolidation, the collapse of Hanjin and the consolidation – might take their toll on beneficial cargo owner rates next year. Drewry summed up: “There is a general acknowledgement that headhaul contract rates have bottomed and need to rise next year but in an environment of such dramatic change one should not expect beneficial cargo owner rates to soar.” CST

ASIA-TRADE VOLUMES (TEU) (SOURCE: CONTAINER TRADES STATISTICS) Far East-Europe

Jan

Feb

May

Jun

Jul

Aug

Sep

2015

1,408,700

1,171,600

988,100

Mar

1,331,100

1,282,600

1,313,400

1,339,800

1,193,500

2016

1,388,900

1,026,600

1,196,000

1,301,000

1,287,100

1,363,800

1,341,100

1,213,300

3.6 MILLION TEU

QUARTER 1

3.8 MILLION TEU

+1.8%

QUARTER 2

2015

2016

Q1 3,568,400

Q1 3,611,500

Q2 3,795,500 Q3 3,846,700

3.9 MILLION TEU

+1.9%

FAR EAST TO EUROPE - TEU

QUARTER 3

INCREASE

+1.2%

Q2 3,846,000 Q3 3,918,200

12 | OPERATOR PROFILE

APL’s acquisition by CMA CGM a ‘happy coincidence’

APL has re-entered and launched in new markets after its acquisition by CMA CGM

In an exclusive interview, APL’s chief trade officer Calvin Leong tells Rebecca Moore about the impact of the company’s acquisition by CMA CGM

“The customer overlap between CMA CGM and APL is less than 30 per cent, so we are a good fit for each other.” Calvin Leong (APL)

PL’s acquisition by the CMA CGM Group has invigorated and bolstered the operator’s turnaround strategy, APL’s chief trade officer Calvin Leong said – with benefits that include the opportunity to expand in existing markets and re-enter others. In an exclusive interview with Container Shipping & Trade Mr Leong said: “It is a happy coincidence that the acquisition by CMA CGM has accelerated APL’s turnaround plan. APL has gone through a period of restructuring. We had a newbuild programme in 2010 and 2011 and ordered almost US$3 billion worth of new ships. These were delivered in 2013 and 2014, and were planned to coincide with our chartered ship redelivery spike in those years. As a result we had to undergo some quite dramatic network changes. It was a process of shedding old, inefficient tonnage and rightsizing our network by cutting

Container Shipping & Trade | 4th Quarter 2016

unprofitable services.” Indeed, APL got rid of more than 40 ships from 2013 to 2015, mainly 4,000 teu Panamax types. “They were very expensive to operate and were ordered at the wrong time in the cycle,” Mr Leong said. He revealed some of the changes that had taken place as part of the process of shedding the old tonnage and taking on the new ships. “Once we had made good progress in improving our fixed costs and – critically – our variable costs, we placed a major focus on cargo selection, as freight rates have been deteriorating over the last few years.” He said that APL used to take a container and route it through several relay points. Now the company has changed its strategy to deliver as much direct cargo as possible. “We have dramatically reduced relays by pursuing a strategy of

going direct where possible, to take out transshipment costs. Big areas of growth for us are gateway ports to major markets, rather than transshipment ports. We have densified our services around our hubs and this means that we get synergies from deploying bigger ships, feedering scale, and procurement of landside terminal and depot operations,” Mr Leong said. However, while the company is more focused on direct call strategies and cutting relays, for empties and laden boxes alike, Mr Leong said that the Port of Singapore had become a more important part of APL’s strategy. “The ones you keep become more important, as you do need some relay ports in order to keep high utilisation rates.” Mr Leong continued: “We use relay ports to serve more interesting and sometimes more profitable smaller markets, and Singapore

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OPERATOR PROFILE | 13

continues to be a central part of our Southeast Asia strategy. Everyone compares Port Klang and Singapore as if they were interchangeable, but Singapore has strategic advantages for serving Southeast Asia and the Far East, while Port Klang has a strong advantage for West Asia harbours.” He summed up the end of this period of change as leaving APL “primed for growth.” “At the end of 2015 we purged our network of inefficiencies and laid a robust foundation for growth. For 2016 we had always planned for disciplined and opportunistic growth by targeting specific markets where we have local advantages and are able to achieve top quartile economics. Being part of the larger CMA CGM Group has accelerated APL’s strategy of regaining share in our chosen markets.” The benefits of the

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acquisition for APL are wideranging. Mr Leong explained: “When you are part of a group like CMA CGM you also have the ability to tap into a large pool of ships.” Indeed, APL now has access to more than 500 ships within the CMA CGM Group, “from the biggest to the smallest in size. Right now there is a happy situation where we can access space on CMA CGM’s big ships and get big ship economics, while retaining the flexibility to deploy smaller tonnage to meet specific trade strategies,” he explained. The largest ships in the APL fleet are 14,000 teu. Currently, the operator has nothing on its orderbook. “Everything that we ordered has been delivered. Now that we are part of the CMA CGM Group, ship ordering becomes a group decision. If APL believed that it needed a certain size of ship and that there was a shortage of this within the group, we

would explore this with CMA CGM,” said Mr Leong. He singled out other benefits of the acquisition: “By coming together we now have an opportunity to expand the regions that APL covers. There were some markets in the past where APL had strong brand recognition but was not able to establish a cost competitive market presence. Now we can go back to those markets and profitably grow our business.” Examples include entering the India–Europe market with the IPE (India Pakistan Europe) service and re-entering the India–America trade. “We left because of inferior ship economics, but we redelivered those ships and resized ourselves and now we are back. It is quite a challenging market, but once you have the right economics you can cherry pick your cargo and grow into a profitable size,” he said. APL has also launched two new services via CMA

CGM loops: NCE (North China Express) direct to Europe, and FEX (Felixstowe Express) to five major Chinese ports. The former means that APL now has a direct service linking the Bohai region to Europe and the latter means that APL now has a service that calls at Felixstowe. Mr Leong expanded: “We have never had a direct service from Bohai to Europe, but now we have it. Also, we now go to Felixstowe. Our main port call in the UK has always been Southampton, so it has increased our market coverage.” And the merger has led to increased coverage in the Mediterranean for APL. It has taken space on the BEX (Bosphorus Express) service. Mr Leong continued: “A big positive for APL is in Latin America services, where we have participated in the ACE [Asia Caribbean Express] service.” This service links the Far East via the Panama

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14 | OPERATOR PROFILE

APL had a newbuild programme in 2010 and 2011 and ordered almost US$3 billion worth of new ships

Canal with the Caribbean with a ship of approximately 9,000 teu. “We used to be small in this market as we relayed boxes at Balboa, and then railed it across to the Atlantic side of the Panama Canal, before feedering it into the Caribbean. The costs of lift-on lift-off in the Panama terminals and the rail charge destroyed the economics, but now with our ACE service, we are able to compete and develop in this market.” The acquisition has seen the two companies merge back-end local and landside operations and support functions, including IT and human resources, as well as merging the equipment fleet of chassis and containers. APL will continue to operate independent sales, customer service, trade pricing, network design, cargo control teams and stowage planning teams. Mr Leong summed up: “The customer overlap between CMA CGM and APL is less than 30 per cent, so we are a good fit for each other.” The acquisition of APL fits into a wider trend within the container ship industry, where consolidation has been gaining momentum. Commenting on this wider picture, Mr Leong said: “The industry is going through a big consolidation process. Companies are merging, acquired and, unfortunately, even failing. I believe that we are going to see more names come together next year. The industry is changing very quickly.” APL is currently part of the G6 Alliance, but will be joining the Ocean Alliance when it starts operating next year. Mr Leong commented: “It is riskier than ever to be an independent, and while there are fewer degrees of freedom, being in a strong alliance is a necessary condition to compete in the East–West trades right now. We are really pleased to

be becoming part of the Ocean Alliance. We will be with the biggest alliance in the world and can compete with 2M in terms of scale and coverage. APL is in all the trades that the Ocean Alliance encompasses and it is important to note that far from shrinking, we are growing into this alliance.” The Ocean Alliance has revealed its new network, which will deploy around 350 box ships with an estimated carrying capacity of 3.5 million teu across 41 services on the East–West trades with around 100 ports of call and more than 600 port pairs. Ocean Alliance members COSCO Container Lines, CMA CGM, Evergreen Line and Orient Overseas Container Line (OOCL), recently signed a Day One Product document which sets out the proposed network, including the port rotation for each service loop. Services cover: • 20 transpacific services (estimated 160 port pairs)

Container Shipping & Trade | 4th Quarter 2016

- 13 Asia–West Coast North America services - 7 Asia–East Coast North America and US Gulf services • 6 Asia–Europe services (estimated 110 port pairs) • 5 Asia–Mediterranean services (estimated 165 port pairs) • 3 transatlantic services (estimated 70 port pairs) • 5 Asia–Middle East services (estimated 70 port pairs) • 2 Asia–Red Sea services (estimated 35 port pairs) Speaking about the difficult environment within the container shipping sector, Mr Leong said: “It is an extremely challenging environment. It is as tough as they come, and worse than 2009. That year was bad as it was such a big surprise, but the current environment was three or four years in the making. APL is ahead of the curve by having started restructuring ourselves two years ago, so we have been in the mindset of change all along.”

Mr Leong believes that the market trend towards consolidation is positive. He explains: “When consolidation is carried out the sector becomes a much healthier and more sustainable place to be in.” He draws comparison with the airline industry. “The aviation industry went through a wrenching period of change in the late 1990s, but now it is a fairly healthy sector where it is possible to make a reasonable return of capital.” APL is going through a double adjustment, coming together as part of the CMA CGM Group and switching into growth gear after two years of shrinking. However, its outlook is firmly positive. “Our ships are full, APL folks are motivated, and the strength of the brand is really coming to the fore. We remain focused on our customers, and are committed to keeping them happy,” Mr Leong summed up. CST

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16 | CUSTOMER PROFILE

Who’s to blame for rates? Is Kuehne & Nagel, the world’s largest sea freight buyer, really at fault for rock-bottom freight rates? by Gavin van Marle

revenue is down 12.5 per cent.” However, during the same period it has continually managed to increase its profits and margins through a relentless focus on costs, as well as leveraging its earnings from shippers in a way that container carriers can only dream about. As a result, some in the shipping industry have pointed an accusing finger at Kuehne & Nagel, as well as its largest competitors such as DHL, DB Schenker and Panalpina, and blamed them for the market volatility and low freight rates. This was categorically denied by Bill Rooney, Kuehne & Nagel’s vice president of trade management for North America, who took the stage at the recent TOC Americas Container Supply Chain conference in Cancún, Mexico, and claimed that the market is simply too diverse for any one player to be able to influence rate levels. “If you look at our market share on a global scale, it is actually very small. At the most it is 1 per cent of global container traffic, if you also consider the amount that beneficial cargo owners book directly. “So we simply are not big enough to influence the market. We do not drive the rates down or up. We want market rates. Fair rates,” he said. According to Mr Rooney, in the third quarter Kuehne & Nagel outperformed the market mainly as a result of material volume increases in the transpacific and intra-Asia trade lanes, as well as seeing an increase in reefer transports. This is an area which it has targeted – unlike many forwarders, as the sector continues to be dominated by direct carrier–shipper relationships. Compared to the first nine months of 2015, Kuehne & Nagel’s sea freight division saw gross profit rise by 4.3 per cent and the margin between earnings before interest (EBIT) and gross profit remained high at 31.8 per cent. Total EBIT for the first nine months from sea freight grew 1.5 per cent to CHF340 million (US$336.5 million).

oresight is a great attribute for a freight forwarder, particularly if they are buying and selling space in an arena as volatile as today’s global container shipping markets. And an ability to work out which way the market is moving has made Swiss logistics service provider Kuehne & Nagel the world’s largest buyer of ocean freight. In the third quarter of 2016, the company reported that its container carryings had grown by 4.5 per cent year on year, despite a weak market that has grown at less than half that rate. This indicates that it has resumed the process of winning market share, after a 2015 that saw it handle 3.8 million teu – the same amount that it had handled the year before. But if the third quarter’s growth rate is anything to go by, Kuehne & Nagel could push past the 4 million teu mark by year end – its ocean freight volumes grew by 6 per cent in the first quarter and 5.8 per cent in the second, so the assumption of a fullyear 4.5 per cent growth in volumes is probably at the low end of the scale. According to the Global Freight Forwarding Report 2016 published by market research solutions specialist Transport Intelligence, “an inability to translate sea freight volume growth into revenue growth suggests that Kuehne & Nagel is subject to the same market forces and low rates as competitors – volumes in the sea freight division are 43.9 per cent higher than 2008, but

Container Shipping & Trade | 4th Quarter 2016

Bill Rooney (Kuehne & Nagel): “The people that supply capacity are fatigued, which is not surprising”

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Kuehne & Nagel headquarters in Switzerland. The forwarder “could push past the 4 million teu mark by year end”

Mr Rooney predicted that demand this year will be higher than last, while supply of new capacity is set to be considerably below last year’s level. “In 2015 demand growth in the container shipping industry was 2.2 per cent, which was against growth in supply of container slots on vessels of 8.1 per cent. The forecasts we have seen for demand growth this year are 3.4 per cent, which I think is about right, and supply growth of 2.2 per cent.” That might mean the shipping industry is finally heading in the right direction. But it is going to take some time for that to translate into healthier carrier balance sheets. “Most estimates are that the industry will lose US$10 billion a year. The carriers’ return on the cost of capital is about 3 per cent, while it has been borrowing capital at about 10 per cent. “Over an extended period, this is very similar to the airline business. Its cost of capital was about 9 per cent and the return was about 3 per cent, and they had some of the same issues in terms of government investment and state-owned airlines being kept in business because governments thought of them as strategic. But the net result of that situation was low rates and market volatility, and this has been happening in container shipping, too,” he added. Mr Rooney believes the level of volatility is getting worse, claiming that the liner shipping business cycle is shortening. “Just look at how long the business cycles have lasted. From 1997 to 2011 there were four business cycles, which got progressively shorter. The first lasted for five years from 1997 to 2002. The next was four years, from 2002 to 2006. Then it was three years, until the crash in 2009. And the fourth was from 2009 to 2011, lasting just two years. “That volatility is reflected in the freight rate levels. If you look at a graph of the Shanghai Containerized Freight Index showing rate levels on the route to North Europe, from the beginning of 2014 until now, it looks like a row of shark’s teeth – not least because of the carriers’ strategy of using general rate increases to try and prop up rates,” he said. “Current rates are crazy. They are unsustainable and cannot support investment. This is what is driving mergers and acquisitions activity as well as bankruptcies. At the same time, the people that supply capacity are fatigued, which is not surprising. “As far as the rate outlook goes, vessel utilisation is the key. It needs to reach 95 per cent for a sailing to become profitable,

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whereas 30 years ago that level was 85 per cent.” Until just a few months ago the end result of this situation was unclear, as if carriers could go on posting losses forever. However, the recent bankruptcy of Hanjin Shipping Co has turned a spotlight on the hidden vulnerabilities of the industry. “I am not sure that Hanjin is exactly the same thing as Lehman Brothers Holdings, as some have claimed. But it is a big deal, and it has rippled through the industry incredibly quickly because of the alliance structure,” he said. That does not, however, mean that the world’s largest sea freight forwarder is not a supporter of the alliance structure. Far from it. “At Kuehne & Nagel we generally believe that alliances are a good thing, for two reasons. First, they enable the carriers to develop global networks. And second, they reduce costs by enabling carriers to participate in ships that they otherwise would not be able to afford. “Carriers have saved tens of billions of dollars over the years through alliances but unfortunately most of that money has then migrated back to their customers. The result is that we are going to end up with three alliances – two 800lb gorillas, and one 500lb gorilla,” he said. From next April, and assuming the 2M partners of Maersk Line and Mediterranean Shipping Co allow Hyundai Merchant Marine to join them, this alliance will have a 29.7 per cent share of global capacity, the Ocean Alliance will have 26.5 per cent, and The Alliance will have 19.8 per cent. The main remaining unaffiliated carriers – Zim Integrated Shipping Services, Hamburg Süd, Pacific International Lines and Wan Hai Lines – will operate a combined 7.8 per cent of the world’s shipping capacity. “Larger shippers will spread their volumes over the different alliances, because if you are buying space you do not want to end up with all your business on one alliance. However, as we have seen, the continuing volatility causes alliances to be turned upside down and makes further consolidation a distinct possibility. “Also, the key to a commodity business is size. There are a lot of carriers that have a market share of 2-3 per cent, and that is not big enough in an industry of scale. “Mergers and acquisitions do not scare us. Generally they are not disruptive operationally, and if there is sufficient consolidation then rates will go up. At the end of the day, we will all be rewarded if the carriers are getting a proper return on their capital,” he concluded. CST

Container Shipping & Trade | 4th Quarter 2016

VESSEL PARTICULARS Name: Natori Port of registry: Kobe IMO number: 9729788 Classification society: ClassNK Operator: Imoto Lines Builder: Kyokuyo Shipbuilding & Iron Works Co Keel laid: 9 June 2015 Launched: 26 August 2015 Delivered: 11 December 2015 Hull number: 522 Length oa: 136.2m Breadth: 21m Depth, moulded: 9.20m Draught: 6m Gross tonnage: 7,390gt Deadweight: 6,953 dwt Main engine: 1 x MAN B&W 7S35MC7 Bow thruster: 1 x 970kW

CONTAINER CAPACITY On deck: 358 teu Underdeck: 190 teu Reefer: 100 teu Total: 548 teu

MAIN SUPPLIERS Main engine: Hanshin Diesel Works Propeller and bow thruster: Nakashima Propeller Co Diesel driven alternators: Daihatsu Diesel Alternators: Taiyo Electric Co Boilers, waste disposal: Miura Co Ship’s crane: Tadano Mooring equipment: Mitsubishi Heavy Industries Lifesaving equipment: Fujikura Rubber Hatch covers: Iwakitec Co Bridge control system: Nabtesco Corp Fire detection system: Nippon Hakuyo Electronics Fire extinguishers: Nippon Dry-Chemical Co Radars: Furuno Electric Co Waste shredder/crusher: Sanwa Churi Industry Co Sewage plant: Taiko Kikai Industries Co Ballast control system: Amco Engineering Corp

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The world’s first semi-spherical bow container ship Imoto Lines’ latest container ship Natori is described by the company as ‘an experiment in energy saving’ by Andrew McAlpine

he evolution that has been taking place in container ship design over the past few years has been most apparent in larger vessels of the type. It is the increase in size and the quick adoption by most container lines of the twin island design for all ultra large box ships that has been the biggest change. And 2017 will see yet another step up in size with the arrival of 21,100 teu MOL Triumph. As tougher environmental regulations are introduced and the need to reduce operating costs continues to grow, vessel efficiency and environmental impact are increasingly important for all shipping companies, whether they are operating the world’s largest box ships or small coastal feeder vessels. One company that is clearly looking at vessel design as a means of improving efficiency is the leading Japanese coastal feeder operator Imoto Lines. Headquartered in Kobe, the company has operated domestic shipping services in Japan since it was founded in 1973, when it started a service employing deck barges between Maya-futo in Kobe and Tanoura in Moji. Today it has a fleet of 25 feeder vessels ranging from 190 teu to 540 teu operating on services calling at 56 Japanese ports and providing feeder services under the Japanese flag to international carriers. Many of the company’s vessels have been designed especially to operate on its niche services that call at a number of small Japanese ports.

In December 2013 the company placed an order with Japanese shipbuilder Kyokuyo Shipyard Corp which has its shipyard in Shimonoseki, the most western city on Japan’s main island, Honshu. The shipbuilder was acclaimed in 2010 when it launched City of St Petersburg, the first of two innovative roro vessels featuring its ‘eco-ship’ design. Both featured its patented SSS-bow semi spherical shaped bow. Imoto Lines’ new vessel shares this unique bow design. Launched in December 2015, Natori was, according to Kyokuyo Shipyard, “the result of a chemical reaction between experience and expertise of the two companies.” Its design was the culmination of a project for energy saving using a large coastal container carrier with a nextgeneration SSS-bow, which received a government subsidy from Japan’s Agency for Natural Resources and Energy – part of a programme to promote energy saving logistics projects. Natori has an overall length of 136.2m, a width of 21m and a shallow draught of 9.2m, with a capacity of 7,390 grt. It can accommodate 548 teu which includes 100 reefers. It is currently the largest Japanese coastal container vessel and has a capacity that is double that of a conventionally designed container ship with similar tonnage. Its most striking feature is the windreducing SSS-bow, which incorporates the navigation bridge and accommodation and

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SHIP DESIGN | 19

Natori’s most striking feature is the wind-reducing SSS-bow

is located at the forward part of the vessel. The SSS-bow design was developed by the shipyard to reduce wind resistance and its performance was tested using a wind tunnel. The tests showed a maximum wind resistance reduction of up to 50 per cent compared with a conventional vessel. Unlike pure car carriers, the wind pressure area varies on a container ship depending upon the load condition, as the height of the container stacks can have an effect. The tests compared Natori’s design with a conventional container ship of the same capacity and with the bridge and accommodation superstructure located aft and in different load conditions. Each time the results showed that Natori achieves greater energy savings, including a 5 per cent reduction in fuel consumption in all load conditions. The use of the SSS-bow has a number of other advantages when compared to conventional design. With the bridge located forward of all cargo there are no visibility restrictions, which means that increased container capacity can be achieved by loading an extra tier of containers to a maximum of three tiers on deck – as there are no regulations affecting visibility aft of the bridge. The spherical shaped bow also provides extra protection to any containers loaded on deck in heavy seas, as the sea water is naturally deflected away to the sides. The design integrates the bridge and accommodation into the fore part of the vessel, and the spherical

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bridge is said to improve visibility. Crew comfort is improved, too, as all accommodation is separated from the engineroom, reducing both noise and vibration. Although separated, access to the engineroom is vital and is achieved by way of an enclosed passage under the upper deck. The passage is equipped with hydraulic watertight sliding doors and remains unaffected by bad weather or rough seas. An ecdis system, together with cargo and weather monitoring cameras, is installed and is connected to Natori’s own private network which enables the crew to view both navigation and cargo operations from their own cabins. A single MAN B&W 7S35MC7 unit with an output of 5,180kW at 173 rpm and built under licence in Japan by Hanshin Diesel Works provides main propulsion. This drives a single 4.1m diameter propeller, giving a maximum service speed of 16 knots. To help ensure that Natori has excellent manoeuvrability when in port, it is fitted with a single 970kW bow thruster and a mariner type Ocean Schilling rudder. This design improves the lift generated by the rudder itself which in turn improves manoeuvrability, especially at low speeds. The rudder can turn to 70 degrees port and starboard. During cargo operations draught adjustments can be carried out easily thanks to a ballast system supplied by Japan-based Amco Engineering Corp. This system can be controlled over WiFi via a

tablet in any part of the accommodation or bridge. As with most new vessels, a number of eco-friendly features are installed that aim to reduce Natori’s environmental impact. These include an improved underwater hullform, ultra low friction antifouling fuel saving paint, a fuel oil piping system designed to prevent oil spills during bunkering operations, and IMO PSPC (Performance Standard for Protective Coatings) compliant coatings in the ballast tanks. Natori has already achieved two awards. The first, awarded at the 17th Logistics Environment Awards organised by the Japan Association for Logistics and Transport, was for the development of technology that reduces the environmental impact of logistics operations. According to the organisers, the award recognised Natori’s innovative energy conserving measures, including the SSS-bow and special propeller, as well as the ship’s contribution to efforts to achieve a modal shift of freight from road to sea in Japan. This was closely followed in July this year by the award for the best small cargo ship at the 2015 Japanese Ship of the Year event hosted by the Japan Society of Naval Architects and Ocean Engineers. Imoto Lines received the same award the year before with its vessel Futaba. Natori is currently deployed on a service linking the ports of Tokyo, Yokohama, Kobe, Kitakyushu and Hakata. CST

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20 | MIDDLE EAST & INDIA

Dubai’s state-of-the-art Terminal 3 is focusing on higher margin transhipment volumes

A new hope With container trades elsewhere showing little growth, carriers are looking to the Middle East as terminals invest in more capacity by Gavin van Marle

here is little sign of the dramatic ramp-up of port capacity in the Middle East Gulf region abating, with new facilities at both brand new as well as existing ports under development, amid reports that container volumes into the region are set to rebound. The first nine months of 2016 were not kind to the region’s major terminal operator DP World, which runs the flagship Jebel Ali container terminals in Dubai. Its facilities there handled 11.1m teu in the first nine months of the year, representing year-on-year decline of 6.7 per cent, one of the first volume drops the port has ever witnessed, and which the company attributed to “a reduction in lower-margin transhipment cargo”. In the first nine months of last year it handled 11.9m teu, while the quarter-on-quarter decline between the second and third quarters this year – down from 3,755,000 teu in the second quarter to 3,663,000 teu was just 2.4 per cent, indicating that there was little uplift from the peak season, which was far more muted than previous years. Partly the absence of the peak season was due to the slowdown in the Asia-Europe trade on which Dubai acts as a major relay transhipment hub, but the decline in Dubai’s volumes it also shows is reflective of a wider trend whereby terminal operators are becoming increasingly picky about which cargo

Container Shipping & Trade | 4th Quarter 2016

they choose to handle. In some ways that is hardly surprising, as new research shows that after two decades of almost uninterrupted growth and sold financial returns, it is going to get harder to replicate those results in the future. A recent report from Drewry, Ports and Terminals Insight, outlines the challenges that are facing terminal operators in the year of ultra large container vessels (ULCVs), just three deep sea shipping alliances and a customer base that is rapidly consolidating. “Terminal operators face a “perfect storm” of rising costs due to bigger ships, greater business risks from larger liner alliances, softening global demand growth and pressure on terminal handling prices from cash-strapped carriers,” it says, and adds: “Resisting downward pressure on terminal handling prices will be challenging, but not impossible, as much depends on local market conditions and the extent of choice for ever larger ships and alliances.” However, for the Middle East and Indian subcontinent, the prospects are brighter, Drewry forecasts, with India the last remaining BRIC economy that continues to post stellar GDP growth, and the Middle East expected to benefit from a predicted resurgence in oil revenues. “South Asia is set to be a star performer in relative terms, with its manufacturing industry likely to take some of the activity

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MIDDLE EAST & INDIA | 21

previously carried out in China. And in the Middle East, major infrastructure projects are expected to resume after a hiatus caused by the low oil price,” it says. And there are signs from other ports in the region that Drewry is correct in its prognosis. The Abu Dhabi Ports Company (ADPC), which opened the vast Khalifa Port Container Port just a few years ago, reported its half-year results in September, which saw container volumes grow by 11% year-on-year. “Bolstered by rapid growth in polymer exports and transhipment activity across the Gulf, 699,776 teu were handled in the first six months of 2016, up from 629,941 teu in the same period of 2015,” it said. It has responded to this growth with the decision to press ahead with development of a second container terminal depth of 18 metres on quay of 1,200 metres. The first phase of 800 metres is expected to begin operations in the first half of 2018, with the remaining 400 metres currently scheduled to be operating by 2020. On completion, the overall terminal will cover an area of 70 hectares serving as back up to three deepsea berths, and the facility will add 2.4 million teu capacity to Khalifa’s existing capacity of 2.5 million teu. Interestingly for a region which has generally promoted the business interests of local port operators above international terminal operators, ADPC signed a joint-venture agreement in October with China’s Cosco Shipping Ports Ltd to develop the facility, and even handed Cosco the controlling stake in a company which has been granted a 35-year operating concession contract, with an option to extend for a further five years. With Cosco set to be a member of the Ocean Alliance when it begins operating next April, that could mean significant deep sea volumes being diverted from Dubai to Abu Dhabi. The Ocean Alliance – which also includes CMA CGM, Evergreen and OOCL in its membership – will control around 30 per cent of the trade between Asia and the Middle East and is set to operate five dedicated services on the trade, all of which feature a call at Jebel

Gulftainer’s highly productive facility at Khor Fakkan will see increased competition

Ali while two services will call at Abu Dhabi. Could this change once Cosco’s presence in Abu Dhabi is cemented? The agreement with the J/V also includes the option to build a further 600 metre of quay length in which would take the terminal’s annual handling capacity up to 3.5 million teu, and the port’s overall annual capacity of up to 6 million teu. Mohamed Juma Al Shamisi, ADPC chief executive, said, “the new synergy, Cosco Shipping Ports will bring additional volumes to the port – adding to Abu Dhabi Terminals’ on-going business in Abu Dhabi. It will also ensure that the Khalifa Port maintains a competitive environment in serving the shipping industry as well as local business. Along with the added capacity, the shipping giant will facilitate specialist expertise, experience, technologies, practices and knowledge transfer, increasing Abu Dhabi Ports’ competitiveness on a global scale.” For Cosco’s part, the deal is also about the projection of Chinese economic power as part of its one belt road one policy, as much as it is its own attempts to develop a new regional hub. Wan Min, president of China Cosco Shipping, said: “Abu Dhabi’s Khalifa Port is a strategic hub along the ‘One Belt One Road’, as it has unique geographical advantage for the development of terminal and logistics businesses.” He also indicated that the company would seek to leverage its relationship with its shipping arm to secure volumes. “Its well-developed transportation and nearby ample supply of cargoes are conducive to Khalifa Port, to become the next hub port in the Middle East region. With the strong support from the large container shipping fleet of Cosco, Cosco Shipping Ports will dedicate its efforts to develop Khalifa Port Container Terminal 2 as a hub of the Upper Gulf region in the Middle East for international container shipping lines. We are confident that the project will stimulate the implementation of ‘One Belt One Road’ initiative, and will promote strategic cooperation between China and the UAE.” This could spell trouble for the Gultainer-operated port of Khor

22 | MIDDLE EAST & INDIA

Fakkan in Sharjah, which CMA CGM has used as its traditional Gulf hub. Khor Fakkan, which is one of the most productive ports in the world, has traditionally competed with Jebel Ai, as Drewry’s director of ports Neil Davidson explains: “As far as the location of Khor Fakkan vs Jebel Ali is concerned, I'd say it's swings and roundabouts. Khor Fakkan is closer to the main deep sea shipping routes and feeder locations like East Africa and India, but further from the Arabian Gulf feeder ports. Jebel Ali vice versa. “Jebel Ali of course has much greater scale than Khor Fakkan – 15.6 million teu in 2015 versus 3.4 million teu, and scale and hence connectivity is a big factor in the transhipment business – and has the advantage of the huge freezone that generates captive volumes. Having said that, Khor Fakkan isn't small though, and Sharjah has a the Hamriyah Free Zone,” he says. The interesting thing is that this challenge comes at a time when Gulftainer has embarked on a plan for significant international expansion, but it may find itself preoccupied with dealing on changes on its doorstep. The factors Mr Davidson highlighted could put Jebel Ali into a leading position when it comes to the expected explosion in container volumes going to and coming out of Iran, following the relaxation in international sanctions earlier this year. “We expect the easing of sanctions to create opportunities for the region and beyond. However, we see this as a medium term opportunity as in the near term, we believe cargo will go direct to Iran. Once that capacity is utilised we believe Jebel Ali will begin to benefit. Iran has some spare capacity and near term we expect that to get utilised first. After which Jebel Ali should benefit from demand growth,” said a DP World spokesman. “Iranian volumes are already growing fast,” says Mr Davidson,

India Shining If carriers and terminal operators are looking for a growth hotspot in the world, their eyes will inevitably come to rest on the South Asia region, where Drewry is forecasting a port demand growth of 4.8% per annum through to 2020. For years the region and the shipping lines serving it have been dogged by poor hinterland infrastructure and clogged ports, but that is about to change, says Drewry’s Neil Davidson: “In South Asia, actually there are a lot of capacity expansion projects in the pipeline so it looks like average regional utilisation levels will actually fall by 2020 even with the "strong" demand

growth, assuming everything gets built that's in the pipeline, which includes PSA at JNPT, plus expansion at Mundra, Ennore, Colombo and at ports in Pakistan.” The largest development remains PSA construction of a fourth container terminal at the country’s premier gateway of Jawaharlal Nehru port, close to Mumbai. The deal will almost double JNPT’s total capacity with addition of another 4.8m teu capacity when it comes on line, although until it does JNPT might lose its crown as the most important gateway for the country as its northern rival Mundra has been building up capacity through joint-ventures with CMA CGM and MSC. “It gets interesting at the

Container Shipping & Trade | 4th Quarter 2016

“Bandar Abbas [Iran’s main gateway] is up nearly 14% in the first nine months of 2016, for example, and should continue to do well. Initially this should be good for regional transhipment hubs like Jebel Ali but as the Iranian market grows, and port facilities are improved, more direct mainline services are likely.” At the same time, new competition could also emerge in the form of Qatar’s new Hamad deep sea port, which is expected to open for business any day, following the creation of a joint venture between the state-owned Qatar Ports Management Company and private Qatari shipping firm Milaha to operate the new facility. The first phase of Hamad will introduce 2m teu capacity to the country, although it will be accompanied by the closure of Doha port, and shipping lines have already begun to notify customers of the switch. Qatar Ports Authority’s director of corporate affair, Dr Mohamed Briouig said in an interview with Container Shipping & Trade earlier this year: “We are trying to establish an alternative hub for the region, and the strategy is to attract foreign and domestic investment to diversify the economy away from oil and gas, and penetrate the hi-tech, downstream energy, petrochemical and metallurgical industries. The $7.4bn into the project, which will eventually take container capacity up to 7 million teu will also see general cargo, grain and ro-ro terminals built, as well as two intermodal rail terminals. “The vision is that initially the cargo will be gateway traffic for Qatar’s fast-growing domestic economy and the 2022 World Cup, and after a couple of years we will begin to target transhipment traffic. “We are looking to act as a hub for upper countries such as Iraq and Kuwait – especially as Iraq develops – and could also act as a gateway for eastern Saudi Arabia,” he said.

more micro level yes, because the major Indian ports such as Chennai and JNPT are congested, and the private ports like Mundra are growing fast on the back of this. A

further complication is that a lot of the recent growth in Indian port volumes is being driven by increased coastal traffic, so the small ports are seeing big growth,” Mr Davidson adds. CST

Growth at Mundra port has been prompted by congestion in JNPT and Chennai

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PROPULSION & GREEN TECHNOLOGY | 25

New MAN engines target feeders and ULCVs M

AN Diesel & Turbo has added three new engines to its large-bore engine programme that are aimed at, among other types, ultra large container vessels (ULCVs) and container feeder ships. The engines are weight optimised, compared to their Mk 9 counterparts, and form the new design platform for a new Mk 10 engine portfolio. Key to the new platform is the development of the top controlled exhaust valve (TCEV) and fuel booster injection valve (FBIV) components. The new units are: • MAN B&W G90ME-C10 type, delivering 6,240kW per cylinder • MAN B&W S60ME-C10 type, delivering 2,490kW per cylinder • MAN B&W S70ME-C10 type delivering 3,430 kW per cylinder. The Mk 10 platform is based on a much more mass optimised design platform that results in lighter engines with reduced overall length, width and height compared to its Mk 9 counterpart. The purpose of the TCEV is to integrate the exhaust actuator, the hydraulic push rod and the hydraulic cylinder unit block into the exhaust valve. As a result of this dynamic behavior is improved, as there is no long hydraulic push rod. The FBIV and TCEV technologies are well suited for integration on the cylinder cover of the engine as the fuel injection valve control is separated from the exhaust valve control by means of the tried and tested electronic fuel injection valve and the new

proportional exhaust valve actuator. These are the first of a new generation of engines that ultimately will involve the upgrading of all S type and G type engines to the Mk 10 platform. Thomas Knudsen, MAN Diesel & Turbo head of low speed engines, told Container Shipping & Trade: “The new design platform enables us to lower fuel consumption by approximately 2 per cent, as well as achieving a significant reduction in the weight of the engines.” The S 60 and S 70 type engines are available for use by both ULCVs and feeder ships. Mr Knudsen said: “The biggest impact in the market will be on the container feeder. If you take the S 60 and S 70 size, the improvement that we have made is considerable. The fuel reduction equates to 2-3g per kilowatt hour – which is around a 2 per cent reduction of fuel – due to the new combustion chamber design and the new injection system.” This is the first time that the FBIV has been used by MAN. It was piloted on a cylinder on a container ship for around six months before being brought to market. Other benefits include the fact that the new design of platform is easier to maintain, with fewer components. “The cylinder cover unit – the fuel equipment, exhaust gas valve and complete cylinder cover – can more or less be maintained as a single unit, making maintenance cheaper, easier and safer,” said Mr Knudsen. CST

Man Diesel & Turbo’s new Mk 10 platform, G 90 engine

26 | PROPULSION & GREEN TECHNOLOGY

Scrubber interest surges following 0.5 per cent sulphur cap go-ahead T

he recent decision by IMO to implement the 0.5 per cent sulphur fuel cap in 2020 has led to a surge of interest in scrubbers from container ship operators. Nicholas Confuorto, president and chief operating officer of USA-headquartered scrubber manufacturer CR Ocean Engineering, told Container Shipping & Trade: “Previously, container shipping companies were not pursuing scrubbers, as they thought that this technology was not applicable to them. However, recently we have seen a big change in that attitude. There has been an upsurge in container ship operator enquiries about this technology, and many are interested in using it in order to meet the 0.5 per cent sulphur cap.” He continued: “Intensive interest began when IMO confirmed the 2020 sulphur cap.” CR Ocean Engineering has had enquiries from operators ranging from Europe to Asia. The 2020 deadline sparked interest from container ship operators, but interest in scrubbers has also increased because some ship operators who had been considering using liquefied natural gas (LNG) realised that “it has not been developed fast enough for them.”

Mr Confuorto added: “The issue with the container ship is the very large size of the ship’s engine. This means having a large size scrubber. Although a large scrubber costs more, the large engines use more fuel and so any fuel savings can be considerable. The larger savings can pay for the much larger scrubbers. Everything goes hand in hand: the fuel savings will pay for the scrubber technology in a reasonable time-frame and after that the ship operator or owner will gain significant future savings for the lifetime of the ship.” Among the strengths of the CR Ocean Engineering scrubber is its small size. “Our technology is very efficient which means we can make our systems smaller than a typical scrubber. The high efficiency of our systems allows high sulphur fuels to be used everywhere. This results in a lower operating cost in addition to the usually lower capital cost of our system.” Mr Confuorto said: “My recommendation is for ship operators to act as soon as possible and take advantage of 2016-2017 lower pricing. That way they can have the equipment ready for 2020 at a lower cost. As we get closer to 2020 one may anticipate higher costs and longer delivery times.” The boost in the use of scrubbers in the container sector is also illustrated by Sweden’s Yara Marine Technologies. The company recently scooped a contract for the supply of scrubber systems on four container feeder vessels that will be operated by German shipmanager Jüngerhans Maritime Services. The four newbuilds, currently under construction at Zhoushan Changhong International Shipyard Co in China, will have scrubber systems installed in full compliance with the new cap on sulphur emissions. Delivery of the first vessel is expected before the fourth quarter of 2017. With Yara scrubber systems installed, the container feeders can operate on heavy fuel oil (HFO) with a sulphur content of up to 3.5 per cent and will be compliant with both today's and future IMO regulations. The new vessels will be fully emissions compliant using any HFO fuel inside the current North European emission control area, and outside the emission control area when the new global sulphur regulations take affect from 2020. Yara said in a statement that Jüngerhans’ new vessels are “future-proof with regard to the new global sulphur cap.” Yara Marine scrubbers can clean fuel with sulphur content up to 3.5 per cent down to the strictest IMO sulphur emission control area (SECA) requirement of 0.1 per cent.

Olrik Wöhlert, Jüngerhans fleet engineering manager, and Peter Strandberg, chief executive of Yara Marine Technologies

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PROPULSION & GREEN TECHNOLOGY | 27

Becker launches LNG and energy saving solutions

Becker Marine Systems’ Twist Rudder is being used on COSCON, Maersk and CMA CGM newbuilds (Credit: Becker Marine Systems)

A main focus for Becker Marine Systems is energy saving products and the associated reduction in operating costs, and the development of solutions to protect the environment and reduce emissions. To this end it has developed its LNG PowerPac – a purpose-designed modular container system used to supply power to ships, that allows the liquefied natural gas (LNG) to be used directly on board container ships for cold ironing. This obviates the need to use other technologies or to carry out infrastructure construction work at ports which can be costly, explained Walther Bauer, Becker Marine Systems director of sales and projects. He added: “It is a solution for cold ironing container ships in harbour. It also has environmental benefits, as the vessel does not have to use marine diesel oil.” Germany-headquartered Becker Marine Systems received funding from the government to develop this solution, and is still in the process of developing it with a view to launching it in 2017. Another new product being developed by Becker is the Compact Battery Rack system, which is in test phase and starting in summer 2017. Mr Bauer commented: “If you want to equalise the power on a container ship, for best efficiency energy can be stored in the Compact Battery Rack. This energy can be used for the hotel load or for other purposes. For example, if a container ship operator installs a ballast

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water management system and does not have enough energy available to operate it, the stored energy in the batteries can be used to operate the system.” Elsewhere, the largest container ships are also continuing to operate using Becker full spade twisted leading edge rudders with optimised rudder bulbs. Shanghai Waigaoqiao Shipbuilding Co in China has ordered the Becker Twist Rudder with a rudder surface of about 100m² for six 21,000 teu container ships for COSCON, while Hyundai Heavy Industries’ shipyard in South Korea is deploying it on 14,000 teu ships for Maersk Line and also on a series of 14,000 teu ships for CMA CGM. Mr Bauer commented: “We have a lot of orders related to ultra large container vessels, as we offer a combination of the best manoeuvrability combined with the best efficiency.” While the product was launched more than 10 years ago, Becker Marine Systems has updated and improved the Twist Rudder regularly. “We have improved the performance and improved the use of environmentally friendly materials. Performance is optimised on a customised basis on every project by using computational fluid dynamics analysers. On the environmental side, we are using materials that do not need to be lubricated.” The material that is now used for the carrier bearings is high pressure polymer.

Box ship boost for seawater propeller shaft bearings An increasing number of liner shipping companies are favouring seawater lubricated propeller shaft bearings over oil lubricated versions, for both newbuilds and retrofits, says Canada’s Thordon Bearings. This is because of environmental considerations and the need to cut operating costs. Recent orders include UK-based Lomar Shipping’s decision in November to opt for Thordon’s COMPAC bearing solution for two 2,700 teu newbuilds that are being built by China’s Guangzhou Wenchong Shipyard Co. Previously, in late 2015, Thordon Bearings signed a milestone agreement to supply its COMPAC system to two 3,600 teu Jones Act box ships under construction by Philly Shipyard in the USA for Matson Navigation. A driver of this new business has been the United States Environmental Protection Agency’s ruling in December 2013 that vessels over 24m must adopt environmentally acceptable lubricants in all oil-to-sea interfaces before their next drydocking. It recommended that seawater lubricated bearings be used in propeller shaft lines in newly constructed vessels. However, there have been challenges in getting shipyards to use seawater lubricated propeller shaft systems. Craig Carter, Thordon Bearings director of marketing and customer services, said: “When shipowners look to build a ship, they typically write a specification and ask shipyards to quote. Due to unfamiliarity with seawater lubricated propeller shaft systems, many shipyards do not promote them. In fact, many shipyards have discouraged them even when shipowners specifically ask for them.” He added: “Another issue is that when the shipowner receives a quote from the shipyard, the yard typically charges a premium, compared to an oil lubricated system.” Frequent demand from shipowners, however, is beginning to bring about a change of thought. “Chinese yards, in particular, have learned that building a ship with water lubricated propeller shaft bearings actually takes less time to build and has fewer components than a ship with an oil lubricated system, so they are financially better off,” said Mr Carter. CST

Container Shipping & Trade | 4th Quarter 2016

28 | COATINGS

Biocide-free coatings launch into box ship sector In an exclusive interview Container Shipping & Trade speaks to AkzoNobel about its new biocide-free coating and the use of its carbon credit scheme, and to a Philippines box ship operator planning to use the new product

kzoNobel’s Marine Coatings business has launched a new biocide-free fouling control coating, Intersleek 1000, making it easier for container ship operators to switch to more sustainable shipping. Container Shipping & Trade caught up with Robert Wong, AkzoNobel Marine Coatings marketing director and Richard Towns, marine manager, to hear more about it and how it can benefit container ships. Intersleek 1000 is the first fouling control coating to be based on Lanion technology, which incorporates biorenewable raw material that helps to deliver enhanced vessel performance. This means that hulls coated with Intersleek 1000 maintain an ultra-smooth surface, reducing drag and lowering fuel consumption and emissions. Mr Towns explained: “We are looking at sustainability and at ways to reduce carbon footprint. Intersleek 1000 is part

of a wave of technologies we are looking at launching into the antifouling market. It is designed for the self-polishing copolymer type antifouling market, as this type of biocide-free technology is often beyond the reach of customer budgets. We are offering Intersleek 1000 to give them choice within their price range. This is a key reason this product was launched.” Intersleek 1000 was trialled for five years on a roro vessel operated by an Italian shipowner, leading to proven fuel savings of 6 per cent. Importantly, the coating links into AkzoNobel’s carbon credit scheme. Mr Towns said: “This technology saved 1,500 carbon credits over a five year period. The numbers come from independently verified data, which was collected from the shipowner before and afterwards, and the numbers were examined rigorously.” AkzoNobel’s carbon credits

How does the process work? Ship converts to Intersleek® technology

Container Shipping & Trade | 4th Quarter 2016

Ship owner/operator provides data for whole docking cycle prior to, and after the application of Intersleek®

Data analysed and a claim submitted to The Gold Standard

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Philippines operator 2GO has fleet-wide plans for Intersleek 1000

Dr André Veneman, AkzoNobel’s director of sustainability, presents 109,617 carbon credits to Dario Bocchetti, the Grimaldi Group’s corporate energy saving manager

methodology has been developed over a number of years in conjunction with The Gold Standard Foundation and the Fremco Group. Launched in 2014, it is the first initiative of its kind that financially rewards shipowners for investing in sustainable hull coatings that improve operational efficiencies and reduce emissions. Mr Wong said: “This drives credibility for the figures that are used. In times past all sorts of claims were made about fuel savings, and the problem was one of proof. Owners want a robustness in how these savings are measured and calculated.” He said that the tool used by AkzoNobel, Intertrac Vision, uses 3.5 billion data points to develop algorithms as well as collaboration with energy institutes. “It is all about transparency, credibility and robustness and I do not think that anyone else can say they have this,” Mr Wong commented. Homing in on the container sector, Mr Towns said: “Container ships use a lot of

fuel and this [Intersleek 1000 and Intertrac Vision] is ideal technology for these owners. The potential for savings is high. Also, our big data analysis tool lends itself very well to container ships.” Leading global logistics company the Grimaldi Group has received the largest number of carbon credits to have been issued through the carbon credits programme. Grimaldi, which specialises in maritime transport, was presented with a total of 109,617 carbon credits through the award-winning programme, which rewards shipowners for converting to sustainable hull coatings, such as those available in AkzoNobel’s International range. Each carbon credit represents the avoidance of one tonne of CO2 being emitted to the atmosphere. The credits can either be sold on the carbon markets – where they are valued at in excess of US$500,000 based on current prices – or used to offset emissions from other parts of an organisation. CST

The biggest domestic ship operator in the Philippines is planning to use AkzoNobel’s biocide-free fouling control Intersleek Series coatings. While 2GO Group mainly operates passenger ferries it also runs 12 container ships, six owned and six chartered, which move cargo on domestic routes. As well as Intersleek, the ship operator is using AkzoNobel’s Intercept 7000. 2GO head of shipmanagement Eduardo Dela Cruz said: “We are doing the whole fleet with the new coating. Every time we drydock we make sure we use the paint [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: “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 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.

(Credit: AkzoNobel)

Independent auditor verifies analysis

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The Gold Standard validates and issues carbon credits

Credits available

Container Shipping & Trade | 4th Quarter 2016

30 | INDUSTRY LEADERS

THE PACE OF CHANGE IN A YEAR OF PROFOUND TRANSFORMATION, THERE ARE SOME NEW FACES IN THIS YEAR’S INDUSTRY LEADERS LISTING

s the container shipping industry consolidates it should, in theory, become easier to name the top 20 industry leaders. But the past year has been so tumultuous that this list is probably more eclectic than ever. The industry finds itself entering uncharted waters.

Søren Skou, Maersk Group chief executive

The changes that have taken place in the upper echelons of the Maersk Group surprised many outside the small group of executives who control Denmark’s largest corporation. There had been little visible sign from outside the group’s enormous headquarters building in Copenhagen that a power struggle was under way on its top floor. The incumbent chief executive Nils Andersen had led the company for over a decade as it transitioned from being a highly private family-owned shipping group to a listed corporation, with all the transparency that entails. Where Mr Andersen ran into problems,

however, was in pushing the group’s share price to reflect its growing profitability, even in the face of adverse economic conditions. At the same time there was growing disquiet amongst AP Møller-Maersk veterans – apparently including the AP Møller family, which still owns a significant stake in the group – about his insistence that the group’s different activities be kept at arms’ length from each other. For example, APM Terminals has spent much of the last decade insisting that it is a third party port operator, independent of its sister company Maersk Line. This position has been reversed with the appointment of Mr Skou to chief executive of the entire group – although he will continue in his role as head of the container shipping division. The Maersk Group will now be divided into two divisions –Transport & Logistics, which will be made up of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry, and Energy, which will comprise Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers. “By operating as one entity, Transport & Logistics will be able to harvest synergies and optimise operations to secure the industry’s most effective and reliable network,” Maersk Group said in a statement. “Strong capital discipline and better utilisation of assets will be ensured. When making investments, acquisitions will be the preferred option,” the company said. It will be Mr Skou’s job to make sure this strategy pays off. How Maersk develops over the year to come will be of interest to everyone in the industry. Because, make no mistake, alliances or not, the company remains the biggest influence in the box shipping sector.

Rodolphe Saadé, CMA CGM vice chairman

Søren Skou, Maersk Group chief executive

Container Shipping & Trade | 4th Quarter 2016

2016 was the year that marked the transition of power in French shipping line CMA CGM from founder Jacques Saadé to his son Rodolphe. The achievement of

Mr Saadé senior in building the world’s third largest shipping line is considerable, and it is now up to Mr Saadé junior to make sure the operator retains its position. He has got off to a flying start, with the take-over of Singapore’s Neptune Orient Lines (NOL) completed in the middle of the year. This was followed by the creation of the Ocean Alliance which saw CMA CGM surprise its mega-carrier rivals Mediterranean Shipping Co (MSC) and Maersk Line by bringing together Evergreen Line, Orient Overseas Container Line (OOCL) and China Cosco Shipping Corp (COSCOCS), in a grouping that will rival 2M in terms of capacity and geographic scope. However, the challenges that he faces in the coming year will be every bit as difficult as they have been in 2016. CMA CGM has so far reported a group of loss of nearly US$500 million in 2016. If it is going to turn that around, it cannot rely on the global economy to make a miraculous recovery. It needs to make good its promise of synergies as its absorbs NOL’s APL brands. And, as the senior partner in the Ocean Alliance, it needs to make sure that all the participating operators extract every saving the network can offer.

Diego Aponte, Mediterranean Shipping Co chief executive

The mantle has been firmly transferred from father to son, and Diego Aponte is now the driving force behind the world’s second largest ocean carrier, Mediterranean Shipping Co (MSC). For MSC, 2016 has been a year of consolidation. It has spent the past 12 months bedding down the 2M alliance with Maersk Line, while retaining its own identity. Although it partners with Maersk on the main Asia–US East Coast services, it has also kept a separate service that calls into Philadelphia and Boston. But the influence of Mr Aponte is, perhaps, felt most keenly in the Northern Europe port sector, where the carrier has

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INDUSTRY LEADERS | 31

Diego Aponte, Mediterranean Shipping Co chief executive

been almost single-handedly responsible for hauling Antwerp up the rankings in recent years. It is now the second largest container port in the region, overtaking Hamburg, and MSC volumes account for more than half of its throughput. And with an enormous new terminal under construction for the carrier in the port, that influence is only going to get bigger.

Rolf Habben Jansen, Hapag-Lloyd chief executive

Last year Container Shipping & Trade wrote about the challenges faced by HapagLloyd, notably the integration of Compañía

Rolf Habben Jansen, Hapag-Lloyd chief executive

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Sudamericana de Vapores (CSAV) and the need to maintain investors’ confidence following Hapag-Lloyd’s partial initial public offering. But 2016 has proved to be even more interesting for shareholders, with the expected merger with United Arab Shipping Co (UASC) and the creation of The Alliance, in which Hapag-Lloyd will be a key player. Joining UASC to the Hapag-Lloyd family could well prove to be a master stroke, provided it is completed. In one movement, Hapag-Lloyd will gain 18 ultra large container ships for which UASC paid around US$2 billion but was unable to operate effectively, due to its lack of a global network. By plugging that capacity into Hapag-Lloyd’s network, Mr Habben Jansen has created a genuinely heavyweight carrier. At the same time, the expected change in the company’s shareholding, with the addition of UASC’s Qatari and Saudi Arabian shareholders, will bring some serious weight to its ownership structure – the 15 per cent free float notwithstanding – and give it a solid platform for further investment should it wish to go to its banks for further finance.

Ahmed Bin Sulayem, DP World group chairman and chief executive

If any port executive has demonstrated how well he understands the intersection between container handling infrastructure and society, it is DP World’s chief executive Sultan Ahmed Bin Sulayem. The Dubai-headquartered terminal operator is his brainchild and has its origins in the time he was a customs agent in Dubai, when it was little more than a sleepy fishing port. Its growth to become one of the largest box terminal operators in the world, mainly through acquisitions, has been well documented, but 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 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 propels a pod-like vehicle through a near-vacuum tube at the speed of an aircraft. This 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

Following some disastrous years for Chinese container shipping concerns, China’s Government pushed through one of the quickest mergers in the history of the sector when it forced China Shipping Container Lines Co (CSCL) and China Ocean Shipping (Group) Co (Cosco) to join forces. The latter has become the container shipping and terminal operating arm of the company, and the former has effectively become the ship finance and container leasing arm. How successful this merger is in the longer term will depend upon Cosco veteran Xu Lirong. His career began in March 1975, and he has variously been deputy head of Cosco’s shipmanagement department, president of Cosco Shanghai, general manager of Cosco Shanghai’s freight forwarding operations, president of the Shanghai Shipping Exchange, and president of Cosco Container Lines (Coscon). In November 2013 he became chairman of the board of China Shipping Group, and was promoted to his current position in January 2016.

Morten Engelstoft, APM Terminals chief executive In any normal year, the name of APM Terminals’ long-standing chief executive Kim Fejfer would have appeared in this listing. But Mr Fejfer was one of the casualties of Nils Andersen’s departure as

Morten Engelstoft, APM Terminals chief executive

Container Shipping & Trade | 4th Quarter 2016

32 | INDUSTRY LEADERS

chief executive from the AP Møller group. Into his shoes has stepped Morten Engelstoft, previously chief executive of APM Shipping Services. This is likely to be the biggest challenge of his career, involving what appears to be the strategic realignment of APM Terminals as well as addressing the deficiencies in its network. Its Russian network remains vulnerable to a weak economy and ongoing sanctions; the recently acquired Grup Maritim TCB has allegations of corruption hanging over some its executives (which, it must be emphasised, date from before the takeover); and investment throughout Africa and other emerging markets has seen much slower growth than originally anticipated. Turning all of this around is not going to be easy.

Jorge Quijano, Panama Canal Authority chief executive

The expanded Panama Canal finally opened its lock gates to commercial traffic this year, after what was one of the most protracted engineering projects of recent years, and one that suffered a constant barrage of criticism. However, now that the size of vessel able to pass through the canal’s locks has increased from around 5,000 teu to up to 14,000 teu, the shipping industry suddenly looks a very different place. Carriers are set to re-route increasing numbers of services with larger vessels, spelling an end to the Suez Canal Authority’s attempts to win Asia–US East Coast services and, possibly, to the conventional reefer shipping industry.

John Fay, INTTRA chief executive

Tan Chong Meng, PSA International chief executive

Now into his fifth year at the head of Singapore terminal operator PSA International, the job of leading one of the city-state’s flagship companies does not appear to have got any easier for Tan Chong Meng. After signing off one of the largest port expansion projects in the industry, the Tuas reclamation project that will eventually take the port’s capacity to 60 million teu, the business has had to deal with stagnating container volumes and growing competition from nearby Malaysian hubs. At the same time, there is more work to be done on the further development of its growing network of international terminals, some of which are in areas of potentially high growth. The deepsea port of Mariel in Cuba is expected to become a key hub as trade grows between Cuba and the USA in the wake of better relations. It could even become a major transshipment hub in the region.

Gerry Wang, Seaspan chief executive

Jorge Quijano, Panama Canal Authority chief executive (Copyright: World Economic Forum/Benedikt von Loebell)

Container Shipping & Trade | 4th Quarter 2016

2016 was the year that the chickens came home to roost for Seaspan, as its strategy of securing long-term charter deals with carriers unravelled with the bankruptcy of Hanjin Shipping Co. This was arguably hastened by Mr Wang’s refusal to accede to Hanjin’s request for rate reductions. Seaspan is now the largest single creditor of Hanjin, and it remains to be seen how much of the US$41.6 million it is owed will be recouped. Will this lead Mr Wang to rethink his strategy? If he does, it could augur change for the industry.

This is the first time that a technology company has been included in Container Shipping & Trade’s list of the industry leaders, but it is about time that it is. Around one in every four container shipments booked globally is done over INTTRA’s system. Much of that volume is due to organic growth – the platform is still owned by the carriers who use it, who have benefited from the considerable efficiencies that digitalisation brings. This year it celebrated its 15th anniversary, which is a very long time in the IT world. Aside from that, 2016 was a watershed year for INTTRA given the role it played in the development of the electronic verified gross mass (VGM) document. It came at a crucial time – a few months before the new Solas regulations on container weight were due to be implemented, when industry tensions were reaching fever pitch. The development of the document, as well as the provision of a neutral industry forum for discussing the implementation, went some way towards taking the hysteria out of the count-down.

Doug McMillon, Walmart chief executive

Walmart often makes an appearance in this listing by virtue of its size as a shipper. It is estimated to control upwards of 600,000 teu per year, although that is still far less than the largest forwarders are booking. Next year, however, could signal a sustained shift in its container supply chain strategy after its recent US$3 billion acquisition of online retailer Jet.com, as it looks to compete with Amazon head on. How this battle plays out will have considerable ramifications down the supply chain, especially if a high proportion of consumer goods continues to be sourced in Asia.

Ed Feitzinger, Amazon vice president of global logistics

Ed Feitzinger was the highly respected chief executive of UTi Worldwide before he joined Amazon 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. This allows it to operate as a sea freight forwarder, possibly bringing a whole new dimension to the triumvirate relationship between e-commerce retailers, freight forwarders and ocean carriers. Delivering

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European Marine Engineering conference | awards | exhibition 25-26 April 2017, Amsterdam MĂśvenpick Hotel Amsterdam City Centre

Nominations are now open for the Marine Propulsion Awards 2017 The Marine Propulsion Awards Ceremony and Gala Dinner will be held on the 25th April 2017 during the European Marine Engineering Conference at the MĂśvenpick Hotel in Amsterdam City Centre. Nine awards will be presented to industry professionals and leading companies from across the marine engineering sector, recognising and celebrating achievements from across the industry. All entries must reflect developments that have been made during 2016. For further information on the awards criteria, visit www.marineengineeringeurope.com/awards Marine Engine of the Year Award The winning entry will be incorporate an innovative and original development that resulted in a stepchange in engine technology.

Ship of the Year Award The winning entry will be a vessel of any type that incorporates innovative technical developments that identify it as a landmark vessel.

Environmental Performance Award A process or management approach that has featured in a shipboard installation during the previous calendar year.

Electrical Power System of the Year Award The winning entry will be an electrical power system or major component (such as a generator, transformer or motor or any combination).

After-sales Service Excellence Award For an after-sales programme that takes a novel approach to providing customers with a better, faster or more economical after-sales service.

Marine Coating of the Year Award For a marine coating or coatings-related technology or research that has contributed to a substantial improvement in a coatingâ&#x20AC;&#x2122;s performance

Planned Maintenance Software System Award For a company or individual to enter software-based products, systems or processes that improve planned maintenance of onboard equipment.

Graduate Research Award Recognising research that advances marine engineering knowledge in a way that will improve overall ship efficiency, machinery performance, safety or environmental impact.

The Lifetime Achievement Award The Lifetime Achievement Award chosen by the editors of Marine Propulsion & Auxiliary Machinery is presented to an individual who has shown consistent leadership and technical inspiration in the field of marine engineering.

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www.marineengineeringeurope.com/awards

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INDUSTRY LEADERS | 35

products direct from manufacturers to consumers is not a new concept, but this is the first attempt to develop the dropshipping model on a global scale.

Horst Joachim Schacht, Kuehne & Nagel executive vice president sea logistics Mr Schacht’s career in shipping has spanned nearly 40 years. For the first half he held various positions with HapagLloyd, including three years in the USA, as well as being its Asia–Europe trade manager. He left the carrier to join Kuehne & Nagel in 1997, and has led its ocean freight activities ever since, propelling the group to become the largest buyer of sea freight in the world and navigating it through all the upheavals the industry has gone through, and is set to further witness.”

post, due to a non-compete clause in his contract, but he is expected to have a huge effect on the world’s second largest sea freight forwarder, which last year processed 2.9 million teu.

Enrique Razon, International Container Terminal Services chairman

Mr Razon has been a director of International Container Terminal Services (ICTSI) since December 1987 and its chairman since 1995, and has been the architect of the creation of one of the Philippines’ few genuinely world class companies. Until now, ICTSI has been a niche operator, prepared to go into concessions where larger operators will not go, but that is changing. With its new state-of-the-art development in Melbourne, Australia where it will deploy some of the most advanced technology in the industry, ICTSI has become an established player that is now present at almost every important tender – and has a genuine chance of winning some of them.

Chris Welsh, Global Shippers Forum secretary general

This year Chris Welsh received an MBE from the UK honours system for his services to the freight industry. There are plenty of figures in the carrier community who despise Mr Welsh for what they see as the damage he has inflicted on the industry. But if it had not been him, someone else would eventually have

Horst Joachim Schacht, Kuehne & Nagel executive vice president sea logistics

Tim Scharwath, DHL Global Forwarding chief executive

This time last year DHL Global Forwarding was in a difficult position, still trying to come to terms with the €345 million fall-out from a failed IT system and chaos at its senior management level – which ultimately meant that group chief executive Frank Appel had to take acting control while he searched for a successor. The company eventually settled on Tim Scharwath, a well-known figure in the air freight industry and one of the youngest members of the Kuehne & Nagel board. Mr Scharwath has yet to take up his

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convinced the European Union (EU) to rescind the block exemption from antitrust legislation enjoyed by container shipping. Sooner or later the sector was going to lose the exemption, as European legislators have sought to harmonise the EU’s freight transport policy. This year will see the surcharge system come into Mr Welsh’s sights, in addition to his continued broadsides about the alliance structure and the deployment of ultra large container vessels.

Donald Trump, US president-elect

Like him or loathe him, see him as sublime or ridiculous, it seems almost impossible that anything in the entire world will remain unaffected by the election of Donald Trump as president of the United States. But in his promise to rip up the North American free trade agreement, and introducing tariffs on Chinese exports to the USA, there are signs that Mr Trump could have an immediate effect on shipping – particularly on the transpacific and, to a lesser extent, the transatlantic trades.

Lee Dong-geol, Korea Development Bank chairman

What a year it has been for South Korea’s container shipping industry. It seems almost inconceivable that what at the beginning of the year was one of the smaller global carriers, Hyundai Merchant Marine, has now become the country’s only deepsea carrier following the bankruptcy of its larger compatriot Hanjin Shipping Co. What became clear in the protracted financial restructuring was that the real power lies with the state-owned Korea Development Bank. It was this institution that saved Hyundai Merchant Marine, thanks to its decision not to intervene in Hanjin’s difficulties that led to its bankruptcy.

Hochen Tan, Taiwan minister of transport

Chris Welsh, Global Shippers Forum secretary general

With the recent decision to offer US$1.9 billion in funding support for Taiwan’s three box shipping lines – Evergreen Line, Yang Ming Marine Transport Corp and Wan Hai Lines – Taiwan has sought to stave off the crisis that has so undermined South Korea this past year. Mr Tan only took his present position in May, but he has made it abundantly clear that the financial health of Taiwan’s shipping lines is a national priority. CST

Container Shipping & Trade | 4th Quarter 2016

36 | CLASS

PERFECt LNG FUELLED BOX SHIP MOVES INTO SECOND PHASE THE PERFECt CONTAINER SHIP PROJECT HAS ACCELERATED. REBECCA MOORE SPOKE TO KEY PARTNERS, INCLUDING DNV GL, ABOUT THE DESIGN

The signing of the memorandum of understanding at SMM

Container Shipping & Trade | 4th Quarter 2016

he PERFECt liquefied natural gas (LNG) fuel project has moved forward after entering its second phase with new participants ABB, Caterpillar subsidiary Solar Turbines and Odense Maritime Technology (OMT) coming on board. The trio and original project partners Gaztransport & Technigaz (GTT), CMA CGM and its subsidiary CMA Ships, and class society DNV GL signed a co-operation agreement at the SMM trade fair in Hamburg in September. The Piston Engine Room Free Efficient Containership project investigates the possibility of using a combined gas and steam turbine (Cogas) system to power an ultra large container vessel. The first phase of the project, carried out by GTT, CMA Ships and DNV GL, showed promising results regarding the commercial competitiveness of the design compared to a heavy fuel oil (HFO) fuelled ship with a conventional propulsion system. The aim of the second phase of the project is to detail the technical concept and its commercial feasibility and work towards the issuance of an approval in principle. “CMA CGM and its subsidiary CMA Ships position themselves as pioneers by contributing to this world-leading innovation. We are glad to be part of the second phase of the PERFECt project, which aims at ensuring the efficiency of this innovative vessel design,” said CMA Ships executive vice president Ludovic Gérard. “The Cogas system with electrical propulsion gives us a great deal of freedom in the general arrangement and in tailoring the installed power to the real operational requirements we are facing. New partners will bring their expertise to go further than the initial concept,” he added. Malte Zeretzke, senior project engineer at DNV GL, told Container Shipping & Trade: “The result of the first stage of the study was really promising and persuaded us, along with CMA CGM and GTT, to investigate even further. In the second phase we are going into much greater detail to fully explore the optimisation potential. We want to be very concrete in terms of the costs and feasibility of this concept.” The second study will finish in the middle of next year. The benefits of using LNG to power a box ship are numerous. Mr Zeretzke said: “It is beneficial for the container ship industry to use this fuel, especially in light of the incoming sulphur cap in

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An LNG carrier tank equipped with GTT technology. PERFECt partner GTT wants to break into container shipping (Credit: Samsung Heavy Industries)

2020. New liquefaction terminals are likely to be built, and it is expected that in future the price of LNG will drop, resulting in lower energy costs.” He said that the PERFECt concept was a good fit for the use of LNG. Even though the volume of the fuel tank is larger, because of LNG’s lower energy density, it saves space and even allows more containers on board compared with the same ship using HFO. “In this arrangement we selected gas and steam turbines combined with electric drives, which all have a very high power density. This means that just a few cubic metres are needed to provide the same amount of power, compared to an HFO concept, which saves space and enables the engineroom to be reduced in size.” In the usual HFO vessel design, the engineroom is placed aft and a funnel is needed to get rid of exhaust gases. This arrangement encroaches on cargo space. Mr Zeretzke said: “The Cogas system means the funnel does not need to be aft. This allows us to shift the funnel for the turbines to the wheelhouse, while the turbines themselves are placed above the LNG tank, so cargo space is saved aft. This space saving more than compensates for the larger size of the LNG tanks.” Gas and steam turbines have been used before on cruise ships, but never in a container ship. Today, a modern, land-based combined cycle LNG fuelled power plant can reach fuel-to-power efficiency ratios of up to 60 per cent. This is considerably higher than conventional diesel engines, which can achieve up to 52 per cent, said Mr Zeretzke. This served as the impetus for the PERFECt project, he added. There are challenges to overcome, as the system is complicated. “It is a complex power system where different components are interacting. And in a conventional vessel, having the engine positioned aft provides additional stiffness to the hull structure. However, the first phase of the PERFECt project demonstrated that with minor changes to the hull structure, such as some additional thickness in some steel plates and added radii, we can achieve the same results as in a conventional vessel.” GTT is one of the founding companies of the PERFECt project. The France-based designer of containment systems with cryogenic membranes is supplying the design and engineering of the LNG tanks and the fuel gas handling system. Two tanks will be arranged with a total capacity of around 20,000m3 to match the

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power requirements of the ship. There will be structural elements between them to add to the structure of the ship. “The results of the first phase prove not only that the project is technically and economically viable, but also that the proven technologies can be deployed to make the PERFECt project a reality”, said GTT chairman and chief executive Philippe Berterottière. He added: “Our two main areas of focus for LNG as a fuel are cruise ships and container ships. At present there are consolidations in this sector and fuel prices are low, but at a certain point in time there will be new orders for container ships, and I think owners will consider LNG prices attractive and be ready to invest in LNG tanks and associated systems. There is also the fact that there are an increasing number of initiatives for setting up the infrastructure needed for LNG supply in harbours and ports.” GTT has detailed plans about how to fit an LNG tank into a container ship and is in talks with several shipyards on this subject. Mr Berterottière said: “We are looking at ways to apply our technology to container ships. The main GTT advantage for container ships is that our tanks are optimised, so for a given volume you can carry more LNG than competing systems. This makes our technology more cost effective.” The reason there is more space for LNG is that the GTT system is totally integrated into the vessel’s structure. As well as being the right shape to fill with more liquid, it fits the natural shape of the ship. To assist the shipping industry with this energy transition and to better respond to customer requirements wishing to adopt LNG propulsion systems, GTT is forging strategic industrial partnerships with key players such as Endel in France, AG&P in the Philippines and Spain’s Gabadi. AG&P and GABADI. This partnership reinforces both parties’ product offering to clients seeking to equip their vessels with LNG membrane tanks adapted to suit a range of ships – including cruise liners, container ships, bulk carriers and roro vessels. “All these partnerships and initiatives are welcome and helpful in the long run to encourage these industries to move to LNG,” Mr Berterottière said. “Today, LNG is clearly less expensive than marine gas oil and nearly at par with HFO. Once the price differential becomes more important, it will fully justify the investment in LNG tanks. All GTT initiatives aim at establishing a competitive and environment-friendly supply chain”. CST

Container Shipping & Trade | 4th Quarter 2016

38 | FLEET STATISTICS & ANALYSIS

A new dawn for post Panamax?

CONTRACTING OF CONTAINER SHIPS DURING 2016 5,001 TEU AND ABOVE SHIPOWNER

TEU

87,000

NYK Line

70,000

Pacific International Lines

47,200

undisclosed

102,450

306,650

TOTAL

There is a more promising outlook for the post Panamax sector. Barry Luthwaite takes a look

here is cautious optimism that the post Panamax container ship sector is set to enjoy a break-even position or even a small profit in 2017 and a greater recovery in 2018. There have been so many false dawns that most would doubt that this recent optimism carries any credence. There are, however, some factors that support the possibility of a more promising outlook in the post Panamax sector. Ordering activity so far in 2016 has seen commitments for just 21 new ships from four owners. These were Islamic Republic of Iran Shipping Lines (IRISL) with six vessels, Nippon Yusen Kaisha (NYK Line) with five, Pacific International Lines (PIL) with four and Shoei Kisen Kaisha with six ships on order. These will eventually add 306,650 teu to the global fleet. First, however, the market will have to cope with a lack of earlier orders. This is welcome for operators who face an onslaught of new deliveries. Up to mid November, 73 new vessels were delivered, bringing capacity to the market that easily outstripped new business. There were optimistic signs from the demolition market, where business turned in promising totals, but this needs to move a lot faster in terms of volume intake if it is to make a significant contribution to trade equilibrium. Prices remained low,

Islamic Republic of Iran Shipping Lines

however, and are not high enough to induce most owners. That said, after the monsoon season most business was being concluded at more than US$300 per ldt (lightweight tonnage). Perhaps the most influential factor in any recovery will be the compulsory introduction of environmental technology for all by 2020. A new record was established for the disposal of the youngest vessel, in the form of a 2004-built 5,040 teu unit. A ship of just under 5,000 teu later followed at only ten years of age, the youngest ever casualty-free sale. Equilibrium would still appear to be a long way off as only 20 vessels of 5,000 teu and over were disposed of for recycling. However, Panamax units just below this size boosted demolition disposals to the highest levels in a long time at 96 units aggregating 4,764,366 teu. Vessel lifespan in a highly competitive, if depressed, market is reducing considerably and now averages just 13 years. Over the next five years this could reduce still further to ten years. The major operators would appreciate this trend, which would enable freight rates to rise as a result of economies of scale and fewer ships plying their routes. However, 241 container ships are still on order, bringing 3,467,528 teu into commission

up to 2020. Deliveries have slowed after owner requests for delays and there is still evidence of vessels leaving the shipyards and going into warm lay-up in the hope that the market will improve. Although the overall picture is not encouraging for operators, the 21 orders for post Panamax newbuildings in 2016 is the lowest total since 2010 â&#x20AC;&#x201C; although the year still has six weeks to run. The previous lowest annual figure was 32 in 2012. Certainly there is no appetite to order at the moment in the sectors that deploy vessels of larger capacity. Any newbuilding business is centred on feeders which continue to enjoy good earnings. HANJIN SHOCKWAVES The collapse of Hanjin Shipping Co sent shock waves through the industry. Repercussions will be felt for some time yet, but there is likely to be a short-term gain. The bankruptcy proved to be the biggest in box ship history â&#x20AC;&#x201C; the owner and operator was the seventh largest company in the container business. Older vessels built in the late nineties have gone for scrap as further trading values hit rock bottom. The Hanjin debacle is a doubleedged sword, with winners and losers. A Korea Inc rescue plan, which many hoped for, was finally rejected in favour

VESSELS ON ORDER (5,001 TEU AND ABOVE) BY COUNTRY OF SHIPBUILDER COUNTRY OF SHIPBUILDER

2016

2017

2018

2019

2020

TOTAL

teu

China

220,430

305,000

607,128

90,700

14,500

100

1,237,758

Japan

97,740

104,500

438,560

228,000

103,500

972,300

Korea, South

122,880

615,280

233,250

971,410

Philippines

75,550

162,310

20,600

258,460

1,187,090

1,299,538

Taiwan

27,600

TOTAL

544,200

Container Shipping & Trade | 4th Quarter 2016

318,700

118,000

27,600

241

3,467,528

www.containerst.com

All data provided by BRL Consultants

of liquidation. Companies that had committed their vessels on long-term charters over 5-10 years at attractive trading rates lost this security overnight, leaving a huge hole in the earnings of individual vessels. Overall the combined capacity of the Hanjin box fleet, including chartered vessels, was around 600,000 teu which was soon snapped up by rival operators. Although losses are still prevalent on most routes, cargo volumes are up. But absorbing such losses will not be easy, and shippers continue to hold out against bids to raise the price of teu movements. Understandably the world’s biggest box owner and operator, Maersk Line, lost no time in snapping up Hanjin’s most modern ships. Rival operators are eyeing, in particular, Hanjin’s former transpacific services. The Korean operator was unprofitable in four of the last five years, amassing debts of GD£4.1 billion (US$5.2 billion). Investor confidence in shipping is declining, as it is no longer seen as a safe long-term investment, so it was no surprise that more money was not forthcoming. A lot of Hanjin’s operational offices in Europe have closed, including those in Germany, Spain and Poland. UK offices in London, Manchester and Felixstowe have, so far, been reprieved. Hanjin had a strong connection with Germany, where several vessels were financed. HSH Nordbank was a major creditor and will take possession of nine vessels. These will pass to a syndicate that includes the bank, which will team up with Maersk Line and Mediterranean

Shipping Co (MSC) to lease the nine ships on long-term charter arrangements. This will enable HSH Nordbank to recoup outstanding monies owed on the ships. Maersk will take six of the vessels, built in 2012 and 2013 and with capacity for 13,100 teu, and MSC will take three, commencing in December. It will be interesting to see the rates and lengths of charters. Within the syndicate Döhle Group has agreed to act as technical manager. The three ships entrusted to MSC are smaller, at around 10,000 teu. Shippers will be pleased that nine ships will be absorbed into the 2M alliance, as they sought safe and reliable carriers for their customers. Hanjin catered for around 3 per cent of global trade. Maersk itself is still recording container trade losses but it is seeing better returns in freight rates. It will concentrate on promoting a stable network in its 2M trades which will help induce client loyalty. New post Panamax deliveries and scrap levels are running neck and neck in unit terms which is encouraging. Furthermore, the market is in such a bad state that newbuildings are experiencing delay requests of between six and 12 months. The one consolation for owners that have contracted newbuildings in the last two years is that they are paying considerably less for their ships than four years ago. Slippage on newbuildings has risen from 11 per cent to 40 per cent in 2016 in terms of teu capacity. The reason for this could be that owners have woken up to the situation of oversupply in the market, and are now evaluating how to tackle it.

Economies of scale and the undisguised desire to push smaller operators out of the market have underestimated the resilience of such companies. But that is not to say that it cannot happen. It is encouraging to note that freight rates are going up and operators are offering longer-term charters – always a good sign. In a bear market and at a time when finances are being squeezed, more distress sales are inevitable. Major liner operators are contacting owners to request reductions in originally-agreed charter rates. Since the financial crisis there are still a lucky few who have held on to their original ten-year charter rates. And if reduced, they still come well above today’s offerings. Meanwhile, talk continues of more mergers as a means of stemming losses. The latest centres on a possible merger between Japan’s big three of NYK Line, Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (K Line) which will be created in July 2017 and commence operations at the start of the 2018 fiscal year. In this firstever move to work together the merged companies are expected to be members of the newly formed The Alliance which is seeking approval to operate from spring 2017 in direct competition with the MaerskMSC 2M alliance. The harsh reality is that mergers of larger owners are seen as the only escape route from mounting losses. The merger will produce the sixth biggest operator in the world and claim a 7 per cent share of global trade. CST

VESSELS ON ORDER (5,001 TEU AND ABOVE) BY COUNTRY OF SHIPOWNER COUNTRY OF SHIPOWNER

2016

2017

teu

Canada

47,600

43,030

China

169,000

Denmark

449,030

20,600

145,800

52,800

89,580

102,420

126,600

Iran

2 2

Norway

73,200

810,048

42,300

97,740

90,630

29,980

teu

8 233,250

10,500

438,428

teu

Germany

Kuwait

111,200

Japan

teu

215,780

TOTAL

202,620

14,000

Israel

teu

2020

Hong Kong

2019

France Greece

2018

22,000 29,000

43,500

14,500

12,600 11

184,900

438,560

11,500

106,200

103,500

87,000

12,600

950,250

29,980

84,700

246,400

Switzerland

44,040

United Kingdom

21,200

1,187,090

241

3,467,528

www.containerst.com

544,200

1,299,538

47,200

126,600

228,000

214,000

Singapore

GRAND TOTAL

93,000

318,700

118,000

Container Shipping & Trade | 4th Quarter 2016

40 | LAST WORD

MAKE EVERY CONTAINER SLOT COUNT AS DWINDLING MARGINS, OVERCAPACITY AND IDLE SHIPS PLAGUE THE INDUSTRY, MACGREGOR’S CARGO SYSTEM DEVELOPMENT MANAGER JANNE SUOMINEN EXPLAINS WHY THERE IS NO BETTER TIME TO ENSURE THAT A VESSEL IS ABLE TO CARRY ALL THAT IT CAN

eclining revenues, plummeting freight rates and volatile market conditions pose many challenges for today’s operators. Combined with a predicted rise in bunker prices, things do not look much better over the horizon. As a result, overcapacity and idle ships continue to plague the industry. However, some operators are unable to accommodate the containerised trade that is available on the market, because their vessels’ cargo systems are under-performing. A container ship’s capacity is measured by the number of its container slots. However, this is not the whole picture. Slots may be available, but they may be unusable for available cargo because of their size or weight constraints. This indicates that the cargo system is not sufficiently efficient or flexible to accommodate the variety of containerised cargo on offer. This has huge implications environmentally, as the greater the number of containers loaded on board, the lower the emissions per transported container. Containers that cannot be loaded have to be moved within the port and stored while waiting for a suitable free slot. This wastes port resources and contributes to wider negative commercial and environmental impact. Under-utilisation of fleet capacity still seems to be an issue that is not sufficiently appreciated, or perhaps just not discussed as much as it should be. However, the gap between nominal and actual cargo system

Container Shipping & Trade | 4th Quarter 2016

capacities has continued to widen as ship sizes have grown since the 1990s. MacGregor has investigated the reasons and believes that they can be divided roughly into two categories – mechanical wastage and usability wastage. Mechanical wastage means that the cargo system’s design and hardware does not meet the requirements set by the cargoes and routes. For existing ships, MacGregor is able to analyse and re-think the cargo system so that it can be used to its maximum capacity, on a specific route. MacGregor calls this service a Cargo Boost. The process starts by studying the ship’s cargo system with the customer and reviewing it against anticipated routes and cargoes. MacGregor commonly looks to make improvements in under-performing cargo handling systems in a number of areas, including cargo securing manuals and calculations that are based on routespecific rules. It also looks at maximising capacity by increasing stack weights (either by re-calculating according to the latest rules or through engineering solutions), lashing arrangements (often switching internal to external systems), mixed stowage opportunities, and adaptations to lashing bridges. In practice a Cargo Boost can vary from document updates to cargo system design and hardware and even structural or engineering changes, which are ideally carried out during drydockings. To be able to generate an accurate

Cargo Boost proposal, the process starts with an analysis of the cargo that the vessel carries and its operating profiles, including route-specific data. Critical information used in the analysis comprises Baplie files, which indicate what containers are loaded on board the ship and where, container data, and other vessel operating data. Typically, different options are presented and the customer is able to review them to find the best fit for its cargo profile and operating efficiency. The data collected from the vessel helps to verify and fine-tune cargo system efficiency and, if necessary, other areas of operational inefficiency can be identified and removed. This might mean, for example, better training and communication procedures. A recent MacGregor Cargo Boost project on board three vessels has delivered an additional payload capacity of 300 high cube feus (670 teus) to each container ship and given the vessels more operational flexibility, helping them to adapt to changing markets. As part of the project, the internal lashings were converted to an external lashing arrangement. This delivered a much better loading profile. Lashing bridge extensions were built behind each vessel’s accommodation block in areas where there were no visibility restrictions. And the latest route-specific rules were considered and Lashmate lashing calculation software was used to maximise the vessels’ cargo system utilisation capacity. CST

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