Maritime CEO Issue Four 2015

ISSUE FOUR 2015

www.maritime-ceo.com

Wall Street pioneer

Pankaj Khanna’s handy plan

www.classnk.com

Manifest

3 At The Prow

Economy 5 6 7 8 9

US EU China India Brazil

24 AG Pappadakis 25 Pacific Basin 27 Taylor Maritime 28 Erasmus Shipinvest 29 IRISL 31 SAL Heavy Lift 32 Augusta Due 33 OL Group 35 ECSA

Markets

Recreation

11 Dry Bulk 13 Tankers 15 Containers 16 Offshore 17 Finance

36 Wine 37 Gadgets 38 Books 39 Travel 40 Golf 41 Yachting

Executive Debate 18 The race to be an IMC

Profiles 22 Cover Story Pioneer Marine

Opinion 42 The Secret Maritime Lawyer 43 The Contrarian 44 MarPoll

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Issue FOUR 2015

1

At the prow

An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editors: Jason Jiang jason@asiashippingmedia.com Katherine Si katherine@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Holly Birkett Mumbai: Shirish Nadkarni New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Editorial material should be sent to sam@asiashippingmedia.com or mailed to Office 701, 9 Renmin Lu, Zhongshan District, Dalian, China 116001 Commercial Director: Grant Rowles grant@asiashippingmedia.com Sales Director: Helen Ong helen@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2015’s four issues of Maritime ceo magazine.

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Issue FOUR 2015

Umbrella tactics to fight cybercrime

A

ccording to recent analysis

by Willis Group of 49 maritime transport companies’ 2014 annual reports, just 22% identified cybercrime as a potential risk.

This is a huge mistake. Shipping has yet to grasp the severity that cybercrime poses.

To give you an idea of the scale of the scourge, the International Institute of Strategic Studies (IISS) published a recent report in which it estimated online crime now equates to 0.8% of global GDP, similar to the provisions that macro-economists make for the annual cost of standard business crimes.

At October’s Danish Maritime Forum cyber risks were discussed in a breakout session on maritime security. Part of the problem with defeating cybercrime is that companies are unwilling to share their problems.

“On the cyber side this industry is not just an unlocked door, it is leaving it wide open,” commented a Danish national who runs a counter cybercrime firm.

The head of an African nation’s maritime authority called for the International Maritime Organization to come up with some form of cyber security information sharing regulations.

“Trust and information sharing will never happen between companies because they are competitors,” stressed the head of a leading Middle Eastern chemical tanker company.

His solution was to get the various shipping associations to handle this, a view many attending the debate agreed on. Another shipowner suggested it was up to flag states to take the lead.

Just about all present were in agreement that the best way to fight cybercrime was together – an

illustrator on hand picturing it as an umbrella to fight the crime storm.

Flip to the back page and you’ll see that fully 88% of readers who took our latest MarPoll online survey believe shipping lines should be sharing more information about cybercrime attacks.

“Far more transparency and overall data collection is needed. The industry is just out of date. They live by hiding the facts,” one respondent commented.

“Just like maritime accident reporting and piracy/armed robbery at sea incidents, shipping is generally reluctant to air their dirty laundry by sharing information on what may be perceived as an issue that may lead to insurance premium rises or failing to be covered by insurance due to training or personnel mistakes.

Unfortunately, transparency remains a problem within the shipping world,” argued another reader.

Finally, you’ll note a few cartoons throughout the magazine, including on this page. This new addition to Maritime CEO comes from the witty brain of a harbour pilot/cartoonist who likes to go by the pseudonym The Freaky Wave. ●

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ECONOMY REGULAR US

Stuck in low gear America is finding it impossible to get back to 3% growth

S

tuck in low gear’ is a phrase you hear often now talking to analysts of the American economy. After averaging over 3% growth a year from 1969 to 2007, the US now appears to be stalling at just over 2% GDP growth per annum. All indicators are that this year will top out at approximately 2.4% growth; that’s to say, exactly the same as last year. However, it should be noted, this is a high estimate and others are more pessimistic – the Atlanta Federal Reserve is projecting just 0.9% growth while Bank of America is forecasting an only slightly better 1.2% growth. What’s the problem?

Cheaper gas prices, more Americans in work and slightly improved wages were supposed to kick start the domestic economy, but American consumers have remained super cautious and kept their wallets closed. The Federal Reserve may keep saying it sees a “moderately improving” economy but it won’t put its money where its mouth is – interest rates remain at 0% – an historic low.

Of course, as Japan perhaps indicates, the American economy can remain in low gear for quite some time – a decade or more possibly. The economy is not booming so therefore it’s not overheating on any America’s trade balance – August 2015

$bn

Imports

233.42

Exports

185.09

Deficit

-48.33

Source: US Commerce Department

Issue FOUR 2015

swift rebound. Most analysts think that while the low gear is here to stay, which at least is better than a slump back into recession. And there are signs of improvement – car sales are back to a pre-recession high but the strong dollar is hurting US companies that do business abroad.

So the domestic economy is in low gear but stable while manufacturing is suffering due to the weak global economy and the strong dollar. The fact that US exports have declined this year for the first time since the Great Recession has made for big headlines. China has just passed the magic 50% mark in terms of domestic consumption versus trade and investment, but America remains domestic dependent with 70% of GDP based on domestic consumption. It’ll take more than improved car sales to maintain that strength. And the US still needs

to tackle the trade deficit -- which swelled 15.6%, to $48.3bn, in August, according to data adjusted for seasonal factors. “Trade will remain a drag on the real economy until well into next year,” said Steve Murphy, an economist at Capital Economics.

The strong dollar means the hit is global. Exports to Mexico fell by $1.5bn in August, and the European Union bought $500m less from America than it did in July. Exports to China also weakened even as imports to the US from the PRC grew by 3% in the last year. America’s economy seems tied to the health, or otherwise, of overseas markets more than ever and it seems only a boost to trade can create those jobs and wages that will be enough to lift American consumers out of their current spending despondency and get the economy shifted up from low gear. ●

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ECONOMY REGULAR EUROPE

Stable but unexceptional The European economy should be doing better

E

ven with the Greek crisis Europe’s economy overall has regained a certain level of stability since the height of the financial crisis, but growth remains slow and there is no sign of acceleration. Taken as a whole the EU recorded only a meagre 0.4% GDP growth in the second quarter of 2015, down from 0.5% in the first quarter and falling short of most analyst and national treasury forecasts. Growth tended to be slower in the Eurozone economies than those outside the monetary club. This is puzzling some.

In strict economic terms the EU should be doing better – the weak Euro exchange rate should be boosting exports, while lower oil prices should reduce factory costs and boost consumer’s disposable incomes. The high dollar should make Europe more competitive internationally. However, and as ever in the Eurozone, there are strong performers and weaker ones.

France is looking noticeably weak at the moment despite rising exports.

Consumer spending has dipped significantly in France of late prompting the Elysée Palace to launch an additional €11bn in tax cuts for companies and households over the next three years on top of €30bn in tax breaks already promised through the government’s so-called ‘responsibility pact’ with business. It is hoped this will spur some additional domestic spending.

Germany is adhering more to orthodox economic truisms – exports up on the back of a weak Euro. This is also generally true of the Italian, Dutch and Austrian economies at the moment. But perhaps more importantly within the Eurozone it is the healthier performance of the Spanish economy, which gives cause for optimism in

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European GDP forecasts for 2016 3% and above over 2015

Ireland, Latvia, Lithuania, Luxembourg, Malta, Poland, Romania, Slovakia

2% to 2.9% over 2015

Czech Republic, Denmark, Estonia, Germany, Greece, Hungary, Slovenia, Spain, Sweden, UK

1% to 1.9% over 2015

Austria, Belgium, Bulgaria, Croatia, Cyprus, Finland, France, Holland, Italy, Portugal

Source: European Commission

the longer term. Spain, which many analysts predicted would go the way of Greece in 2015, has to the contrary continued to gather pace with 1% growth in GDP in the second quarter of 2015 following 0.9% in the first.

The major economy outside the Eurozone, the UK, has continued to perform relatively well with GDP growth of 0.7% in the second quarter of 2015, up from 0.4% in the first quarter of the year. A raft of recent deals with China for inward investment as well as continuing strong trade with the US should ensure continued growth for the UK. Of course, the major question related to the UK at the moment is not whether growth will continue to inch up or not but rather which way the British public will vote in the upcoming referendum on EU membership. To be frank, and all opinion polls considered, the jury is still definitely out on which way that will go and what the longer

term impact on the UK economy and the wider Eurozone will be.

A little stronger then but still with some major flaws that could counteract the slight rises in GDP. Analysts point especially to Europe’s 18m unemployed and the noticeable increase in debt on Eurozone countries’ books since the 2008 financial crisis that leaves a lingering issue as recovery begins. ●

“Shipping must unite more than in the past. There is a lot of legislation coming in that is not necessarily that well thought out” — Claus Hemmingsen, chairman, Danish Shipowners’ Association

maritime ceo

ECONOMY CHINA

Slower than ever but rebalancing achieved ‘For investors the rebalancing story is more important as it indicates the longer-term trajectory of the Chinese economy’

P

remier Xi Jinping’s state visit to the UK in October (pictured) indicated just how far some western governments will go to accommodate China these days but most of the media was pessimistic regarding China’s third quarter macroeconomic results. And there was reason for pessimism – the 6.9% GDP growth announced was the slowest since 2009. However, as always, there were bright spots in the third quarter numbers.

The more optimistic pointed to the slight acceleration in retail sales growth, with most arguing that this indicated that domestic consumers had shrugged off the A-share market fall. It was a milestone of sorts for China’s economic planners looking to rebalance the economy through greater domestic consumption -- for the first time ever, services and consumption accounted for over half of China’s GDP. Andy Rothman, China analyst with Matthews Asia in San Francisco, also noted that the 6.9% retail sales growth was on a base that

Issue FOUR 2015

is approximately 300% bigger than it was a decade ago (when GDP growth was 10%) meaning that the incremental expansion in China’s economy this year is about 60% bigger than it was a decade ago.

Only those new to China watching really consider the GDP number significant. Rather GDP is determined by many factors in China including shrinking demographics, slower growth in construction activity and the base effect (as mentioned above).

For investors the rebalancing Key consumption stats for China Category

% growth Sept 2015 over Sept 2014

SUV sales

59

Cinema box office revenues

54

Furniture sales

19

Household appliance sales

11

New home sales

9

Passenger car sales

3

Source: China National Bureau of Statistics

story is more important as it indicates the longer-term trajectory of the Chinese economy. The boost to retail offsets expected declines in the importance of manufacturing and construction. But what is driving greater domestic consumption is important – wages particularly. In the first three quarters of this year, real per capita disposable income rose 7.7%, while over the past decade, real urban income rose 137% and real rural income rose 139%. Some of that increase was driven by government policy: the minimum wage in Shanghai, for example, has risen 187% over the past 10 years.

On the industrial side construction is definitely slowing considerably as are heavy industries related to construction. While this is partly, indeed mainly, due to the growth rate of infrastructure and new home construction having peaked there has also been a general fall in global commodity prices. The downside to this is the emergence of renewed rustbelts, mostly in northeastern China where, first the least productive and most out-dated state-owned enterprises (SOEs) were located and took a pounding in the 1990s and where, now, the heavy industries being hit by the construction/infrastructure downturn are based. Manufacturing itself remains strong if not connected to construction and this is where jobs growth is occurring right now.

So, as we plough through the final quarter of the year, the indicators to watch are not GDP or heavy industry and construction but SME growth, retail sales and continued wages growth. ●

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Economy India

Still not flying Twenty months in office and the Modi government has yet to make the economic reforms needed

I

t’s been 20 months since the Indian elections and the hope of a new economic rebirth under the Modi government. However, analysts are complaining that there’s been a lot of talk, expectation and hope but little real movement and action. Perhaps everyone expect too much? Expected another China. The contrasts are stark – India invests 30% of its GDP, compared with about 50% in China; manufacturing is 20% of the Indian economy, compared to China’s 30%; China has the best physical infrastructure in the emerging market while India’s looks more like the poor country that it still is.

But still much-needed economic reforms are moving at a glacial pace.

When the Indian parliament broke for the summer in late August it had still not dealt with two key planks of Modi’s promised reforms: a goodsand-services tax (GST) and revisions to the country’s land acquisition India’s top exports, September 2014 to September 2015 Category % of total exports Petro products

20

Gems and Jewellery

13

Agriculture

10

Fabric and textiles

7

Transport parts

7

Machinery

5

Pharma

5

Electronics

3

Metal products

3

Plastics

2

Others

25

Source: Indian Ministry of Commerce and Industry

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laws. Without these the government can neither cash in on the middle class consumer boom in the big cities nor start to shift India’s agriculture onto a more commercial footing and boost manufacturing too.

However, in a world that is home to a slowing Chinese economy and little happening in other emerging markets, such as Brazil and Russia, India is still a positive story for most analysts – if perhaps a rather long-term one. Ajit Ranade, chief economist, Aditya Birla Group, recently told Forbes magazine: “There is no doubt that all the macro-economic pre-conditions [for higher growth] are in good shape” while the Confederation of Indian Industry (CII) expects growth to begin accelerating from the fourth quarter.

Most analysts hope that Modi may be able to stimulate the economy through public investment which would, hopefully, be followed by more confident private investment. Agriculture is bound to suffer this year. Reports say rains were 15% deficient so far this year meaning that food inflation seems likely

depressing consumer spending in non-food areas. Yet still the framework is positive based on declining interest rates, higher FDI flows and increased public investments.

But all of this isn’t helping trade at the moment. India’s exports of goods shrank by nearly a quarter in September from a year ago, according to data released by the Ministry of Commerce and Industry.

Exports to both the US and the EU were down, according to the data.

Gold and oil prices have stabilised somewhat and imports are slightly down though which has meant that, between April and September, the trade deficit shrank to $85.36bn from $97.17bn a year earlier.

Now analysts will be looking to the coming months in New Delhi to see if Modi can ram through the promised policy changes business has been waiting 20 months for. If he does then the Indian economy has a fighting chance to pick up the pace; if not then long-term stagnation could set in and India will lose its place as the current darling of the emerging markets. ● maritime ceo

Economy Brazil

Bright spots hard to find Just about every economic indicator is depressing at the moment in the South American nation

B

razilian politicians and economists have had to revise downwards their expectations this year as the economy looks bleak. Finance minister Joaquim Levy and planning minister Nelson Barbosa have lowered expectations citing the worsening national fiscal deficit. At the start of the year we were looking at a meagre, but positive, 0.8% of GDP growth. That was then downgraded to 1.7% in the summer and now to a 3% contraction by year end. Levy and Barbosa claimed that the ongoing scandals at state-owned oil company Petrobas were responsible for shaving fully 2% off GDP estimates.

Things have got so bad that the government has announced a $17bn austerity package. This comes at a time when local retailers say demand for some sectors, such as electronic appliances, is down by as much as 25%. Clearly consumer Brazil’s climbing unemployment rate, 2015 Month

% of total workforce unemployed

January

5.3

February

5.9

March

6.2

April

6.4

May

6.7

June

6.9

July

7.5

August

7.6

September

7.6

Source: Insituto Brasileiro de Geografia e Estaistica (BGE)

Issue FOUR 2015

confidence is at a very low point. It doesn’t help that unemployment is on the rise again. Brazil lost 95,602 payroll jobs in September, according to the country’s labour ministry; 86,543 jobs went in August.

And things don’t look like improving any time soon – analysts expect a slightly slower contraction in 2016 of 1.2%, but still in firmly negative territory. 2015 and 2016 will then be the worst contractions in the Brazilian economy since the bad old days of 1990. Brazil is also expected to post its highest ever inflation rate in the fourth quarter - fully 9.8%, more than double the official target.

However, in the search for bright spots, the nation’s current account deficit shrank to $3.1bn in September, from $7.9bn a year earlier. This is mainly thought to be due to Brazilian consumers buying home produced products rather than imports, a trend accentuated by the sharp depreciation in the country’s currency this year. The Brazilian real has lost about a third of its value so far this year over one year ago. It’s also true that, despite the recent announcement of the austerity package, government spending has increased, widening Brazil’s budget deficit to 9% of GDP in August, from 3% in 2013.

One other piece of good news is that exports may lift in the fourth quarter of this year. Grain exports are likely to have tripled in November

from a year earlier as a weaker Brazilian currency makes the country’s exports more competitive. Demand for corn is also particularly high demand after a record harvest. Pork and beef exports are also expected to grow.

Still, overall, Brazil’s economy remains mired in recession – the worst performing of the large emerging markets – by some degree.

Unemployment has reached 7.6 per cent and so consumer spending will remain weak. An austerity package is all very well but Brazilians will be wondering when the fast element of their fast track economy is going to kick in and just how the government is going to pull that off. ●

“With a declining offshore sector, a flat dry sector and overcapacity in liner we are going to see for the first time in a long time unemployed seafarers” — Mark Charman, CEO, Faststream

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Markets REGULAR Dry Bulk

It can’t get much worse?

Sure it can Jeffrey Landsberg from Commodore Research warns 2016 looks deadly

F

ar too often this year, the phrase “it can’t get much worse” has been thrown around in the dry bulk market. Even more surprising to us has been in recent months coming across some very positive views regarding the overall dry bulk market and actually seeing headlines suggesting that the dry bulk shipping market will rally in 2016. In addition, at conferences this year we have heard analysts state matter-of-factly that Chinese economic growth will rebound in no longer than six to 12 months. At times, no thesis or evidence has been provided and just simply those reassuring words are said.

To be frank, anything is possible in China, but it is very dangerous to operate under a blind hope that China will rebound. China’s future is anything but clear, but what is abundantly clear is that a very large amount of new dry bulk vessels are still set to be delivered.

At the very least, we anticipate that Q4 2015 through the end of 2016 will see the delivery of no less than 740 new dry

Issue FOUR 2015

bulk vessels. The number will likely be higher and we have seen orderbooks with totals exceeding 1,200 vessels for this period (although we believe much fewer than 1,000 will be delivered). At the very best, we believe that no more than 400 vessels will be scrapped during Q4 2015 through the end of 2016 (this year is on pace to see approximately 380 vessels scrapped).

This leaves Q4 through 2016 with the likelihood that the dry bulk fleet will grow by at the very least 340 vessels, and we find it unlikely that seaborne cargo growth will be able to absorb 340 additional dry bulk vessels.

As we have continued to stress, there remains potential for strong growth in global seaborne iron ore trade in upcoming years (which remains positive for longer-term capesize prospects). Outside of this segment of global commodity trade, though, there does not appear to be a great likelihood of strong growth in overall dry bulk seaborne cargo trade through the end

“

There is no reason to be even remotely bullish for freight rates prospects through even 2017

”

of 2016. And of course, even strong iron ore trade growth is not certain by any means. Steel production is falling across the world, and, as we have been stressing often, has been even worse outside of China (the last eight months have seen Chinese crude steel output decline year-on-year by 4.5m tons while crude steel output outside of China has fallen year-on-year by 10.9m tons during this same period).

Outside of the seaborne iron ore market, there is no reason to be even remotely bullish for freight rates prospects through even 2017. In the coal market, China’s coal imports could very easily fall further in 2016 and we do not expect Indian coal import growth to show any real improvement next year unless Indian electricity production growth finds drastic support. No huge increase in overall grain trade is expected, and any increase in minor bulk cargo trade is unlikely to come close to absorbing the large amount of overall fleet growth still set to occur in the market. The panamax and handymax markets are where we are most bearish, and it is the panamax market where we remain most concerned. ●

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Markets REGULAR Tankers

Asian trades boost product tanker employment Erik Broekhuizen from Poten & Partners identifies growing demand for refined products within Asia-Pacific

A

sia-Pacific has become an increasingly important player in the international product tanker trades and this trend is expected to continue as non-OECD economies in the region are maturing and sophisticated players start trading more refined products within the region.

Asian refining capacity continues to grow and while most of the expansion remains geared towards satisfying domestic demand, Asian companies are increasingly well positioned to both import and export product. These trades are taking place within the region as well as between the Pacific and the Atlantic Basin.

Historically, Asian refining capacity has grown in lock-step with product demand in many countries in the region, with a few notable exceptions. In the 1990s South Korea’s refining capacity expanded well beyond domestic demand and excess product was exported worldwide. Korean companies built sophisticated refineries that could produce a wide variety of products and over time the Korean companies started trading product. This established the Korean peninsula as a very important player in the Asian product trades since it both imports and exports significant volumes of clean petroleum products.

Due to its strategic location between the Indian and Pacific Oceans and near the Straits of Malacca, Singapore established itself as the largest player in the Asian refined product market (see chart).

While domestic consumption is

Issue FOUR 2015

modest due to the country’s small population and geographical area, Singapore is home to three large refineries with a total crude refining capacity of 1.5m barrels per day (b/d).

As a result, Singapore imports as well as exports large volumes of refined products and is the world’s largest consumer of bunker fuel oil.

The third largest player in the Asian refined product trades is India.

Unlike South Korea and Singapore, which are both significant importers and exporters of product, India is predominantly an exporter. In the period since 2010, India has built a number of large, sophisticated export oriented refineries. Companies like Essar and Reliance now sell petroleum products worldwide, both within Asia-Pacific as well as in areas as far afield as Europe and the United States. Significant additional refining capacity is expected to come online in India over the next five years.

While domestic demand is expected to grow rapidly, it is likely that some of the new capacity will be used for additional product exports.

Several other Asian countries are also net exporters of refined products (i.e. they export more product than they import). The most significant of these is China. While China has been a net exporter of clean petroleum products for several years already, it could become a more significant player in the product trades in the future as the country continues to rapidly expand its refining industry.

At the same time, demand growth for refined products is slowing down as the Chinese economy matures and the focus switches from heavy

industry and the construction sector to sustainable growth targeting energy efficiency and lower pollution.

In addition to countries that are large product traders and and/or net exporters, there remain a number countries in Asia that are net importers of refined petroleum products.

Countries like Japan and Indonesia have been importing clean products for many years, mainly gasoline in the case of Indonesia and predominantly naphtha in the case of Japan. Another example is Australia.

Australia has gradually increased its imports over the years as domestic refining capacity is closing down.

Overall, clean product trades in Asia have grown in leaps and bounds and this is expected to continue.

New refineries and capacity expansions in China and India will likely add to future product flows, while countries like Singapore and South Korea will maintain their position in the product trades.

All product tankers, from the smaller handysize and medium range (MR) tankers all the way up to the large long range (LR1 and LR2) carriers, are benefitting from these developments in the Pacific Basin. ●

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Markets Containers

Major changes are coming China’s slowing economy hits liners just as a slew of giant boxships are entering the market. Massive rationalisation is inevitable, writes Lars Jensen from SeaIntel

T

he container shipping markets, and all active stakeholders in the industry, will likely have to face significant changes in the way they do business in the coming years. Whilst major changes always have multiple complex factors driving them, two key factors are particularly important in this context: China and ultra-large container vessels.

That the Chinese economy is not firing on all cylinders can be seen by the recent downwards adjustments to growth expectation from e.g.

OECD and Citibank and across the board growth expectations for China in 2016 are the lowest in a long time, and lower than during the financial crisis. Trade is suffering, and in terms of trade value Chinese exports were down 3.7% in September whereas imports were down 20%. In combination with economic woes in Europe, this has a significant impact on container volumes. Volumes in China’s top eight container ports were declining on a year-on-year basis in both August and September.

Given the importance of China Number of weekly services between Asia and Europe

60 50 40 30 20 10 0

2015

Issue FOUR 2015

2018

in the world container trades, this has had a profound impact on container volumes, and whereas the transpacific eastbound trade has seen positive developments, most trades have seen stagnation or outright declines.

These demand developments come at a time where the carriers are taking delivery of a large amount of ultra-large container vessels, and the effects are already being felt. We are seeing very negative financial developments in Q3 2015, led by Maersk Line which not only had to revise their earnings outlook downwards by $600m but also recently announced the temporary idling of one of their triple-E vessels. With an industry orderbook containing more than 70 vessels with a size similar to - or larger than - the triple-E vessels, this is bound to force changes in the industry.

The current order book is set to outgrow demand in 2015, and at best it will match demand growth in 2016 and 2017. Hence the structural overcapacity problems will not be resolved in the coming years.

It is clear that the new ultralarge container vessels will be phased into the Asia-Europe service, and it is equally clear that the increase in vessel size has to be accompanied by a reduction in the number of weekly services in order to retain some semblance of supply/demand balance in the trade.

Even when using an outlook of 5% demand growth on the Asia-Europe trade, the reduction in the number of weekly services will be significant

as seen in the figure. In worst case we will see a 40% reduction in the number of weekly services offered.

This in turn means that shippers must prepare for a future with significantly less choice when planning their supply chains. For the carriers this implies a future with even greater use of vessel sharing agreement in order to avoid excessive transshipment operations. And for the ports this means they need to plan for a future with significantly fewer port calls – but significantly higher volumes to be handled at each port call, which in turn will increase the strain on hinterland infrastructure. ●

“China’s demand has not met the expectations that optimistically built ships” — Denis Petropoulos, president, Braemar Asia

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Markets Offshore

Doom and gloom The global OSV community is facing dire financial straits. Consolidation could be on the cards for some, oblivion for others, writes Sam Chambers

T

he hatches have been well and truly battened down among the world’s OSV community, but with most analysts predicting oil prices to remain low for at least the coming 18 months there could be some very high profile bankruptcies coming.

With utilisation and charter rates down by more than 40% this year the vast majority of the industry are struggling, hit hard by overcapacity.

With banks now reluctant to lend cash to this toxic sector OSV operators are having to look at higher-cost alternative funding avenues such as sale and leaseback of assets as well as tapping up equity partners.

Leverage at many OSV companies has risen around the world. For instance, the median debt to equity ratio of 18 Singapore-listed OSV

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owners was up by about a third from a year earlier at 1.08 at the end of the second quarter, Thomson Reuters data showed.

Deutsche Bank, in a recent report, does not expect the OSV sector to pick up anytime soon. Any offshore contracts which are up for grabs are likely to attract aggressive bidders, and hence drive down prices and margins, Deutsche Bank said.

CIMB Research, in another recent report, notes how some OSV companies are negotiating with the banks to allow them to service only the interest portion of their amortising loans in the interim. Some are seeking refinancing via loan top-ups, as they had paid off a portion of the principal over the past years.

Meanwhile, some are also negotiating for an amendment of financial covenants. In addition, most OSV players are laying up their fleets and laying off staff. More desperate measures include hiring freezes, not replacing employee attrition, cutting salaries, reducing onshore and offshore crew as well as consolidating functional teams.

In total, 250,000 people have been laid off in the oil and gas sectors across the world in 2015 – a very

sobering statistic. Likewise, around 1,000 rigs have been laid up this year.

CIMB does not expect a strong rebound for the sector in 2016, and advised investors to focus on tendering activities to discern the sector’s shifts. More tenders and enquiries mean the prospect for more work which, in turn, means a positive revision in offshore fleets’ utilisation and day rates expectations.

In a legal update from earlier this year Oon & Bazul partner Kohe Hasan suggested low oil prices could lead to greater consolidation within the OSV sector.

“Smaller and newer OSV operators may not survive in this harsher economic climate and are likely to become targets of larger OSV operators with a healthy cash flow,” Hasan said.

“The impact of $50 oil has absolutely decimated the offshore industry,” Fazel Fazelbhoy, the former head of the UAE’s OSV major Topaz Energy and Marine, told the Marine Money conference in Singapore this September. Fazelbhoy, who now runs an offshore consultancy, warned there were another 400 OSVs still to be delivered.

A bloodbath seems unavoidable to many in the coming 12 months. ● maritime ceo

Markets REGULAR Finance

The rise of China Could Chinese financial institutions top ship finance rankings in two years? Dagfinn Lunde thinks so

S

hip finance is a funny old beast that on the face of it does not look to be in step with shipping freight rates. Here’s the funny thing – while the media is awash with how dire shipping’s fortunes are, sourcing finance for many is frankly simple.

Of course financing depends on which type of company you have and what ships you want to finance. If it’s a newbuild you’ll find capital as export credit agencies will do whatever they can to support you.

For secondhand buys, if you have a corporate structure, the ships you are buying are less than five years and you have a long-term bank relationship, you should be okay. The problem here is that many traditional shipping banks have disappeared, so many companies have to find a new long-term relationship which is not easy these days and sometimes you would like to buy a ship older than five years. The other issue when it comes to S&P is that small- and medium-sized owners have practically nowhere to go, they are the ones hurting now.

One ready source is China. A glance down at Marine Money’s list of top shipping finance institutions shows how Chinese banks have come

Issue FOUR 2015

up tremendously in recent years: Bank of China in sixth spot worldwide, China Exim (CEXIM) in eighth, and China Development Bank and ICBC high up on the leaderboard too. Bear in mind, these statistics do not include ship leasing. Ship leasing has become huge in China. Chinese institutions are taking a huge bite in leasing; when they underwrite they go for $1bn at a time, seven or eight ships per contract. Having said all this, from personal experience I can vouch that dealing with Chinese finance folk is not easy – I am in the midst of a transaction at the moment and I don’t mind admitting what a headache it is turning out to be.

In terms of interest rates, what Chinese banks offer are not especially competitive. It is more that they have the availability of funds and can underwrite big tickets.

Where everyone else has reined in outlays, with capital restraints and the cost of money going up, China has ploughed forth.

Here’s a big prediction on Chinese ship finance. With the likes of RBS, HSH, Lloyds Bank, Commerzbank et al falling by the wayside I’ll give it two years before the likes of Bank of China

“

In terms of interest rates, what Chinese banks offer are not especially competitive. It is more that they have the availability of funds and can underwrite big tickets

”

and CEXIM are matching DNB, Nordea and KfW at the top of the ship finance ranks. The fact is if you include ship leasing exposure many Chinese banks are probably already matching the top names.

Finally, since this column has skewed towards China, my take on the big news brewing there – the merger between Cosco and China Shipping. Clearly this is politically driven. From a rational economic point of view, these two loss makers are already too big – a full on merger might make matters worse. From a managerial point of view, I believe the best way forward would be not to merge these entities straight up, rather pair up matching sectors – bulk, tanker, box, etc – into new strong individual combined companies.

Whatever happens, watching China develop maritime-wise is never dull. ●

17

EXECUTIVE In profile Debate

The race to be an international maritime centre Sam Chambers identifies the runners and riders who harbour shipping hub ambitions

T

here’s been a raft of surveys of late detailing which is the greatest international maritime centre (IMC) in the world.

Maritime CEO’s own poll a year back saw Singapore come out firmly on top, a result it has since repeated twice more with reports conducted by firms in Oslo, London and Beijing.

While the best known, traditional names in the IMC mix vie for top billing there are a number of names who are emerging as contenders, bolstered by keen government focus and with energetic teams travelling the globe to highlight their strengths. For London, Singapore and Hamburg read Dublin, Vancouver and Manila among the newer names keen to make a name for themselves with the world’s shipping community.

So what makes an international maritime centre? In essence, Maritime CEO contends the magic IMC formula is a mix of easy access to capital, shippers and experienced staff combined with a reasonable legal and tax infrastructure.

To this end, Singapore has made itself the preeminent shipping hub in the world, but one that it is still looking to bolster. Singapore Shipping Association boss Esben Poulsson has repeatedly warned this year that the city-state cannot rest on its laurels.

“We feel we are a little weak in the capital markets and listings,” he tells Maritime CEO. Hubris and laurel-resting for a decade or so has seen two established names – London and Hong Kong – decline in the IMC rankings. Both cities are now planning maritime renaissances.

The newly elected Lord Mayor of the City of London, Jeffrey Evans has set out his goals to develop maritime

18

growth during his tenure. Evans, a broker with Clarksons Platou for more than 40 years and chairman of local lobbying group Maritime London, tells Maritime CEO: “It is now very exciting; right up to the highest levels of government there is an awareness that Britain has a massive amount to offer, we just must make sure that government is very well joined up, try to simplify processes, bring things to this cross government ministerial committee that the government will introduce.”

In Hong Kong, meanwhile, the city’s private sector appears to be making the right inroads finally with the local government to get maritime higher up the list of priorities.

“People, location and policies have to be our strengths.

Competiveness, not incentives, is key,” says Arthur Bowring, managing director of the Hong Kong Shipowners Association. Bowring reckons Hong Kong has people and location sorted. “What we need now is policy,” he maintains.

With government coming out in support of shipping the key now is to get the city’s Legislative Council – the de facto parliament – to follow suit, Bowring says.

Hamburg, Rotterdam, Oslo and New York all continue to grow in IMC status, the latter two as the most vibrant places to source capital in shipping.

Of the mid-tier names two European places – Cyprus and Monaco – are making a strong run on their growing maritime cluster

“

credentials. Monaco is growing as an all round hub, led by fast expanding owners while Cyprus, despite intense competition from other hubs, is leading the way in luring disgruntled Greek owners away from Piraeus.

Some 42 Greek shipping firms had emigrated to Cyprus and entered the island republic’s commercial registers by the end of November.

Among the young pretenders to the IMC throne are many familiar maritime names, often being repackaged to promote themselves in the face of very expensive established names. The biggest names – the Londons and Singapores of this world – do risk pricing themselves out of the market. Others are waiting in the wings. Vancouver, Dublin, Shanghai, Busan and Manila are all trumpeting their potential.

This September saw the international launch of the Vancouver International Maritime Centre (IMC).

The Canadian city is trying to position itself as a base for shipowners with very friendly tax preferences.

It is not the first time Vancouver has done this of course. Back in the 1990s, as Hong Kong readied for reunification with China, a number of owners hedged their bets by setting up in British Colombia.

Graham Clarke, the chairman and ceo of the new project, tells Maritime CEO: “Our mandate is three fold. First we will try to attract shipowners, then we will facilitate them, and also we are here to advise government.”

With shipowners at the

The magic IMC formula is a mix of easy access to capital, shippers and experienced staff combined with a reasonable legal and tax infrastructure

”

maritime ceo

EXECUTIVE In profile Debate

centre of the Venn diagram, as Clarke describes it, it is then vital to get other services onboard, not least ship finance.

Clarke says every facet of shipping services is now being looked at by his team to make the Canadian city a shipping hub, even the shipping register. Could there be a second flag? “You never know,” he says, “we’ll leave no stone unturned. We will do everything to make Vancouver a great place to settle down.”

Meanwhile, Ireland has a unique opportunity to become a shipping powerhouse, a report in July claimed.

The report, issued by the SocioEconomic Marine Research Unit (SEMRU) at NUI Galway, claims a planned International Shipping Services Centre (ISSC) could put the Irish capital on a par with established hubs such as London, Hamburg and Singapore.

“Building on the experience from the International Financial Services Centre, and on Ireland’s success in aircraft leasing, the ISSC plan aims at developing a hub for international ship finance in Dublin to establish Ireland as an international maritime centre such as London, Hamburg and Singapore,” the report noted.

ISSC Dublin aims to be the world’s first shipping centre with everything under one roof like a trade centre, its ceo, Cormac Megannety, tells Maritime CEO. Megannety also says that the renewed focus on maritime by both the public and private sectors could see the Irish flag promoted as an attractive registry for global shipowners.

Ireland is growing as a global

Issue FOUR 2015

maritime business hub and its strengths in asset leasing could provide an alternative source of finance for shipping, according to a new report commissioned by the Irish Maritime Development Office and authored by tax advisors KPMG and legal firm Dillon Eustace.

The republic is trying to position its maritime sector to be as globally dominant as its aviation industry.

Half of the top 50 aviation leasing companies in the world are based in Ireland, and more than half of the world’s leased aircraft are managed from the country.

“This report identifies many advantages that set Ireland apart as a hub for maritime commerce with a 12.5% corporate tax rate, combined with a very competitive tonnage tax regime, extensive double taxation treaty network, and favourable treatment of leasing, securitisation and other structured finance,” says Liam Lacey, director of the Irish Maritime Development Office.

The final three in our line up of heirs are all Asian, but vastly different. Shanghai might bristle at being termed an up-and-comer. It is the world’s largest container port, a major shipbuilding centre, and home to a number of very decent maritime tertiary educational establishments.

It has brokers, banks, leasing companies, lawyers and owners. It also aims to be an international finance and maritime centre by 2020 – it is just the rules and regulations, despite the opening of a free trade zone, that are not moving fast enough. Among Shanghai’s key IMC backers is Ben Zhang, a serial entrepreneur, who has

founded the Shanghai Maritime and Finance Excellence Center (MFEC) – a one-stop-shop service platform in the heart of Pudong. The centre has the backing from the UK capital, with industry lobbying body Maritime London and the City of London both supporting the initiative. Incentives are on offer to move in to the building. These include 20% off rent as well as the ability for companies who move there to leverage off MEFC’s pan-China network.

“By bringing everyone together under one roof, the cluster will help grow business for everyone,” Zhang says.

Busan, meanwhile, is having huge amounts of money thrown at it by the municipal and national governments to make it an IMC. Like Shanghai generous financing and leasing opportunities are on offer.

Busan’s biggest problem is its lack of internationalism – it remains too Korean, English is not common.

Finally, there is Manila, an appropriate place to grow as an IMC given shipping’s lengthy downturn.

The Philippines has already attracted many managers and lines to shift their back offices there. Authorities in the Southeast Asian nation are keen now to build on its maritime cluster.

Infrastructure has to improve for that to happen but the low cost base when compared to Hong Kong and Singapore, an educated workforce and proficiency in English means there is a platform from which they can build.

Despite the downturn, the pursuit to become an IMC has never been stronger. No one can rest on their laurels. ●

19

In profile

Toshi Yamazaki p.31

Thomas Rehder p.35

John Su p.28

Rome Brullo Raffaele p.00 p.32

In profile this issue Maritime CEO’s 17 correspondents around the world have been in touch with many of the world’s top shipowners. Highlights are carried over the next 13 pages

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maritime ceo

In profile

Nicky Pappadakis p.24

Mohammad Saeidi

Mats Berglund p.25

p.29

Edward Buttery p.27

Eberhard Koch p.33

Pankaj Khanna p.22

Issue FOUR 2015

21

In profile

From cadetship to Wall Street Schooled by the likes of George Economou, Bjorn Moller and Peter Evensen, Pankaj Khanna has not hung around since founding Pioneer Marine in Singapore two years ago

P

ankaj Khanna, CEO of Singapore’s Pioneer Marine, has learnt his trade from some of the best-known names in the industry. Aged 45, Khanna started out as a cadet 27 years ago. His work ashore has seen him take on c-suite roles with Alba, Excel, Dryships, Ocean Rig as well as seven years with Teekay.

Khanna got into shipping by accident. “A friend was going for an interview,” he recounts, “he said

Spot on

Pioneer Marine Founded in September 2013, Pioneer Marine owns 13 handysize and one handymax dry bulk carrier with an additional five handysize newbuildings on order.

come along and I got hooked.”

Khanna joined Barber Ship Management and sailed for seven years before moving shoreside. He joined Simpson Spence and Young (SSY) as an analyst and then moved to Teekay in Vancouver in 2001 where he focused on a wide range of tankers including LNG, shuttle and FPSOs. In 2007 an opportunity arose when a friend was starting a dry bulk business and asked Khanna to join as CEO for a new $2bn company called Alba Maritime. At Teekay Khanna had been identified as a potential future CEO in maybe a decade. He opted for this new dry bulk company instead when dry bulk rates were in six-digit territory but about to slide.

Khanna sold nine contracts for capes just two weeks prior to the Lehman

“

crash at prices ranging from $85m to $107m. He then left the company.

Chastened by that experience, Khanna decided it was time to do something on his own. He approached several banks and told them he could manage their distressed assets. “It was too early in the cycle for that, the banks kicked the can down the road and are still dealing with issues from 2008,” he recalls. Instead, he joined Excel as CEO where he was in place for just four months before jumping ship to join George Economou at DryShips, another key moment in the education of this enterprising Indian national.

Economou wanted to tie him down to a three-year contract, something Khanna was unwilling to do, opting instead for a 12-month contract.

2016 should be a transformative year for Pioneer but that is market dependent

22

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maritime ceo

cover In profile story

“DryShips was very interesting as I got into offshore,” Khanna says, detailing how he went out and raised close to $2bn of equity including a $500m IPO for Ocean Rig. Finally, he reached a point in 2012 where he wanted to go out and do his own thing. Pioneer Marine was in the offing.

Khanna decided on handysize bulk carriers because the fleet age profile was old with a fragmented ownership – “3,000 ships, 1,000 owners”.

“Opportunities were there. It had all the characteristics of a sector where you could go in – you might not hit the ball out of the park and make huge amounts of money, but on the flipside you won’t go bankrupt,” Khanna says.

Economou, who 30 years prior had himself started out with handies, wished him luck.

Khanna pitched his plans to around 100 different funds before finally meeting kindred spirits in the form of Garrison Investments, who liked handysizes, having bought two previously with Tufton Oceanic. In September 2013, the pair signed a deal to go into business with the fund stumping up $100m in the first month alone. In January 2014, Garrison’s co-investors added another $100m.

“We got a full management team in place straight away; the idea was this would not be an asset play,” Khanna explains, adding: “Handies are not good for that. Volatility is not there like capesizes. The idea was it was an operational platform that would eventually lead to an IPO. In this way we’re different to others who have no operating platform.”

Pioneer has not hung around. Its existing fleet is primarily Japanese.

It has bought 13 secondhand vessels, nine of which are Japanese and three were built with full Japanese equipment by a Japanese company in China. For newbuildings, Pioneer opted for 12 vessels at Yangzhou Guoyu Shipyard of which one has

Issue FOUR 2015

delivered. It has lately canned three of these and delayed the remaining eight on the back of the poor dry bulk markets. “We decided to go for China as price differential at the time was $3m each. There is no earning differential between a good quality Chinese built vessel and a Japanese so why pay such a large premium over 12 vessels,” Khanna says.

In March 2014 Pioneer raised $75m through a private placement and the company’s shares started trading on the Norwegian OTC, a precursor to Khanna’s eventual goal – an IPO in America.

“Our objective is a US listing,” Khanna confirms, admitting that the plan has been pushed back a couple of years because of the markets. “The name of the game is survival today.

You have to have cash,” Khanna says.

With that in mind Pioneer raised another $25m from existing investors in August.

“First mover advantage will be key for the US IPO market,” Khanna reckons, “but you need consolidation and heft to do that. You need to have a $500m market cap and higher to get a $150m IPO done.”

“

Pioneer is looking at merger opportunities. Private equity firms have invested in around 100 handies to date, but all in small numbers.

Khanna feels that the shipping market has changed especially with regard to sources of capital.

Unlike traditional owners’ with deep pockets who can source equity from within the fold, Khanna points out: “For someone like me who started out as a cadet only with the relationships and reputation built over 27 years the non-traditional sources of capital including PE is my backyard – the capital markets, this is where I work with investors to create companies.”

He is also looking at setting up a pool for handies in the new year.

After handies, Khanna might look at other ship types, he says.

“2016 should be better than 2015,” Khanna hopes, adding: “2016 should be a transformative year for Pioneer but that is market dependent.” The markets have been harsh this year – the latest quarterly results for Pioneer showed a $5.4m loss, something Khanna is desperate to turn around as he eyes Wall Street. ●

First mover advantage will be key for the US IPO market, but you need consolidation and heft to do that

”

23

In profile

‘Freight can only be a fraction of the value of the commodity carried’ The wise words above from the father of Nicky Pappadakis have served him well during his 54 years in shipping

S

hipping rates sooner or later will recover but market consolidation – similar to what is happening in the aviation space – will likely be needed in the dry bulk arena. That’s the view of veteran Greek owner Nicholas (Nicky) Pappadakis, chairman at family firm A.G. Pappadakis and Co. “Will shipping copy the airlines industry where a large amalgamation is taking place?” he muses. He notes how in 2012 there were around 1,850 privately owned companies active in dry bulk with a fleet ranging between three and eight ships, while 15 or so companies had 100 ships or more. “I think this is a quite interesting statistic,” says the former Intercargo chairman.

Dry bulk finds itself in its current crisis, the seasoned shipowner says, because of overtonnaging – too many speculative orders in the past are now haunting the sector – combined with the slowdown in the Chinese economy.

“Those are the two main reasons but personally I’m confident that in the

Spot on

A.G. Pappadakis Traditional shipping family with its roots on the Aegean island of Kasos. The company has been involved in tankers and bulkers. Currently eyeing a return to dry bulk.

24

future dry bulk shipping will eventually rebalance,” says Pappadakis who started working in the ship chartering business in 1961 and has lived through nine downturns in his career.

He recalls how before the boom started in 2003 the shipping world was in crisis.

“In December 2002, panamax bulk carriers were earning $8,000 per day and by the end of January 2003 I believe the same ships were earning some $30,000 per day. All I’m trying to say is that the freight market can move dramatically up or down and often because of reasons that are nothing to do with the under orderings or over orderings of ships.” Pappadakis says.

He says sea freight rates reflect the utilisation of ships and one of the mantras his father taught him is: “Freight can only be a fraction of the value of the commodity carried”.

“Thanks to that,” he says, “some years ago I realised that the boom that started in 2002 could not last for long and that’s why I sold the fleet in

2007. The positive cycle experienced from 2002 to 2008 was the largest ever and it’s like bubblegum: if you blow it, it’s good as long as the integrity of the bubble doesn’t break.”

Looking into the recent dry bulk past, Pappadakis says that China and India have been “the two shoulders of the shipping boom” and now, despite the slowdown registered this year in the GDP growth of China, he is confident that India will contribute to the world economy in the coming years. “Both countries,” he says, “have a long way to go before they become fully industrialised.”

Bulk carriers rates sooner or later will rebound, Pappadakis insists. “I think it’s a question of only when the rebalancing between demand and supply of tonnage will happen. Because it’s sure that it’s going to happen. What I can’t say it’s when it is going to happen.”

The good news for the market is that now it’s harder to find lenders for newbuilding projects or for secondhand vessels to buy. Looking at the present market condition of ship financing, the Greek owner thinks that private equity has a role to play but investment funds take a different timeline outlook.

“Greek shipowners, when they order a new ship, are looking for 25 years time, private equity five years often maximum,” he observes.

Pappadakis does strongly believe in family run businesses but he thinks that from now on a market consolidation is inevitable. ● maritime ceo

In profile

Happy with handies Mats Berglund has streamlined Pacific Basin dramatically in his threeyear tenure in Hong Kong. He now needs the markets to pick up

M

ats Berglund is content with how he’s got his company – Hong Kong’s largest shipowner by fleet size – running, it’s the 30-year lows in the lousy markets, that is driving him up the wall.

Berglund, a Swedish national, took over Pacific Basin three years ago.

His immediate priority was to strip away non-core businesses and return the line to its core area of expertise – handy bulkers. Out went roros and its towage business, while Pacific Basin embarked on a fleet build up, ordering a slew of bulkers two years ago that are still delivering. The focus is paying off; the latest quarterly results from the Hong Kong-listed firm show its handysizes and handymaxes are outperforming spot market rates by 39% and 15% respectively.

“My philosophy – especially for a listed company – is that investors want to know what they are buying into – it is best to be specialised,” Berglund says. It is also cheaper to focus on one or two sectors rather than many disparate shipping strands, he adds. Admitting Pacific Basin did not have a strong market position in roros and towage, he says it is easier to be focused and much harder for anyone to fool the company when it comes to handies.

Spot on

Pacific Basin Hong Kong’s largest shipowner by fleet size. The handy bulk specialist operates 215 ships of which 83 are owned.

Issue FOUR 2015

“We put our money where do have an edge,” Berglund says. “We have good market penetration, the only problem is the market.”

The plan going forward for Berglund’s company is to redeliver expiring and long-term chartered-in ships and rely more on owned ships, complemented by shorter-term and index-linked chartered ships.

“Short-term charters are the only thing you can make money on in this market,” Berglund tells Maritime CEO, adding: “With long term charters you are burning cash.” This quick manoeuvring in the markets requires “good footwork”, says the ex-Stena man.

Berglund says Pacific Basin has been positioned for upturn by buying much during the downturn, but it still has to be careful and maintain a strong balance sheet. It will seek out opportunities in the weak market to grow the fleet, but only very selectively.

“Secondhand prices are much more attractive than newbuild prices at the moment,” Berglund comments.

In its latest quarterly announcement Pacific Basin stated the weak bulk markets would continue for the “medium” future. Berglund will not be drawn on how long the word ‘medium’ actually is, merely saying that today’s environment for dry bulk is an “extraordinary uncertain market”.

Still, Berglund is happy to be in handies rather than bigger tonnages exposed to iron ore and coal and the “whims” of Chinese imports.

“We prefer minor bulk exposure over major bulk exposure,” he says, explaining that scale, expertise and people really make a difference in minor bulks.”

“

Short-term charters are the only thing you can make money on in this market

”

Pacific Basin’s ships are trading 90% laden, something larger ships can rarely claim these days.

“With capesizes and panamaxes you cannot do this as you are at the whim of Chinese coal and iron ore imports, you are exposed to the markets and do not control your own destiny,” he elaborates. “The smaller the ship, the more difficult the operating environment. We like more difficult; it makes higher barriers to entry than say capesizes or VLCCs.” Pacific Basin operates 215 dry bulk ships of which 83 are owned, 41 are long-term chartered and 91 are on index linked or short-term charters. A further 15 owned and seven chartered newbuildings are scheduled to join the fleet over the next two years. ●

25

In profile

Chip off the old block Edward Buttery is buying Japanese handysizes during the downturn, just like his father did 20 years ago

L

inda Ho smiles as she recalls how she tried to persuade her godson when he was young not to take a career in shipping. “I told him, try anything else, just not shipping, it’s such a tough business,” says Ho, herself part of Fairmont/ Magsaysay shipping dynasty.

The thing is her godson was steeped in shipping lore from an early age. “He was determined that this was going to be his future,” Ho says.

Ho’s godson is Edward Buttery.

The surname might help quickly discern why shipping is in his blood.

Edward is the son of one of the most famous names in Hong Kong shipping, Chris Buttery, the legendary founder of Pacific Basin and current backer of Epic Gas. And it seems to Maritime CEO that he is like a chip off the old block – albeit perhaps a more polished one – wheeling and dealing as he starts up his own fleet.

Edward Buttery founded Taylor Maritime in Hong Kong last year.

The company name is a nod to his Thai wife, Paula Taylor. Buttery has since gone about pursuing a handysize bulker fleet build up, like Pacific Basin did in the 1990s.

Taylor Maritime’s fleet today stands at five ships, the most recent one acquired was the Kwela (32,474

Spot on

Taylor Maritime Founded in 2014 by Ed Buttery in Hong Kong. Focusing on handysizes.

Fleet today consists of five secondhand Japanese vessels.

Issue FOUR 2015

dwt, 2002 built) from Japan’s Santoku Senpaku for $6.8m. The Mitsubishi Heavy-built vessel comes with four 30.5 ton cranes. All the ships bought so far have been Japanese second hand tonnage.

“Since the family exited the handysize segment with Pacific Basin, we’ve not had the market to reenter until now,” Buttery says.

“However with Taylor Maritime we are starting small to lay the foundations for a company we hope will be known for being a reliable long-term partner with high standards and well-run ships.”

Prior to founding the company, Buttery was at Nordea Bank for two years.

Buttery admits he is on the hunt for more tonnage.

“I feel there will be some fantastic opportunities for investment end 2015 and throughout 2016 that any investor with capacity might find difficult to ignore,” he says, adding: “It is my intention to continue to expand the fleet over the next year provided the team remains confident that it

can maintain the same focus on the service provided to our customers.

Obviously there is some doubt as to how long this poor market will last and as such I remain focused on cash flow and manageable capital structure.”

The opportunity most open to Taylor Maritime is the chance to invest at what Buttery describes as “a historically low point in the cycle” without having to shoulder the weight of legacy issues.

Some might argue it is brave or foolhardy even to start a dry bulk company during one of the sector’s worst and most protracted downturns. Others would say the timing could not be better.

A source was speaking with Chris Buttery’s cohort and Pacific Basin cofounder Paul Over recently.

Over told the Maritime CEO source: “This is exactly the time when Chris and I would start buying ships in the old days.”

Clearly the younger Buttery has his father’s sense of market timing in him too. ●

27

In profile

Doubling down during the depression Despite admitting the terrible market conditions for dry bulk, Erasmus Shipinvest’s John Su sees great opportunities to expand his fleet

J

ohn Su, the founder and CEO of dry bulk player Erasmus Shipinvest, admits that the immediate outlook for the sector he is in is very grim.

“The dry bulk shipping market is experiencing the lowest level for the past 30 years and unfortunately there’s still a massive orderbook and weak demand outlook due to the financial crisis worldwide,” Su says, adding: “It is hard to see a dramatic change of market tonnage balance in the short term.”

Su has been preparing for this harsh reality for a number of years. He now believes demand-wise the market has hit rock bottom. ‘‘We are seeing the collapse of the bubbles from the super cycle in the shipping industry. When we saw the spark in bulk shipping in 2010, people thought the crisis in shipping was over but they were wrong. A lot of the shipyards made orders on their own account. We will see major bankruptcies in private yards,’’ Su reckons.

Following graduation from Dalian Maritime University, Su, now based in Rotterdam, has nearly 20 years experience in shipowning, operating and investment fields in dry bulk and

Spot on

Erasmus Shipinvest Founded five years ago in the Netherlands Erasmus Shipinvest focuses on panamax and kamsarmax bulkers.

Also has offices in Greece and China.

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container shipping in Asia and Europe.

As if rates were not bad enough for dry bulk owners, the regulatory avalanche hitting shipping will make profits even scarcer.

“Today, owners are facing more and more challenging regulations which certainly increases the running costs of the ships in such a tough market, and it’s also not easy to maintain reliable and experienced crew sources.”

However, Su still has great plans to increase his fleet capacity.

The company currently runs 10 bulkers – a mix of panamaxes, kamsarmaxes and ultramaxes.

“We intend to double the fleet size in the coming three years during the low cycle of the dry bulk market,” Su says.

Most of Erasmus’s vessels are fixed on long-term charters – typically between five to seven years.

Despite the gloomy market conditions, Su still has achieved three consecutive years of profit and is on track to make it four out of four soon.

Next up, Su has ambitions to tap the public capital markets to raise funds for fleet growth.

“We have already identified a series of promising prospects and we look forward to implementing them at the right time,” the serial shipping entrepreneur concludes. ●

“

We are seeing the collapse of the bubbles from the super cycle in the shipping industry

”

“There is a serious oversupply of seafarers. This means no pressure on salaries and conditions of employment” — Kuba Szymanski, secretary-general, InterManager

maritime ceo

In profile

Back in from the cold The head of IRISL is about to sign for a slew of post-sanctions ships

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anctions against Iran are expected to be lifted early next year – the nation’s shipping lines are raring to go.

The new chairman and managing director of Islamic Republic of Iran Shipping Lines (IRISL), Dr Mohammad Saeidi, is readying a slew of orders at East Asian yards.

The former deputy head of Iran’s Atomic Energy Organisation took over IRISL in August.

“We are facing a new situation with the West. There are lots of opportunities, especially for IRISL,” Saeidi tells Maritime CEO, adding: “We have to develop and increase our facilities and ships.”

On the IRISL shopping list are container vessels, dry bulk ships and general cargo ships. The boxship splurge alone could number close to 600,000 teu worth of new ships.

Irano-Hind, a joint venture that was wound up in 2013, after 38 years in operation, thanks to the sanctions.

Saeidi also reveals that fellow Iranian shipping line, NITC, the country’s giant tanker company will order a slew of ships soon too. “They are looking right now,” Saeidi says.

Local sources suggest NITC could order as 20 new tankers in the early months of 2016. ● Saeidi says that by early 2016 he anticipates all European ports will be open to his company without any limitations.

The IRISL boss is looking at forming joint ventures with many of the top 10 containerlines and has already held a number of discussions with leading liners. Both MSC and CMA CGM have been tapped in recent months.

IRISL is also in discussions with Shipping Corporation of India to revive

Spot on

IRISL

Islamic Republic of Iran Shipping Lines (IRISL) has 115 ocean-going vessels, totalling 3.3m dwt. It is preparing to reenter many trades as sanctions will be lifted soon.

THE MARSHALL ISLANDS REGISTRY service and quality are within your reach

www.splash247.com Splash - for incisive, exclusive maritime news and views 24/7.

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in affiliation with the Marshall Islands Maritime & Corporate Administrators

tel: +86 21 6341 0219 | shanghai@register-iri.com | www.register-iri.com

OUR PEOPLE OUR PASSION OUR BUSINESS

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Moving Forward

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10-11-14 17:34

In profile

‘A fierce market where cost excellence is the primary driver’ Further consolidation in the heavylift sector is on the cards

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he heavylift shipping sector, which has been the scene of huge mergers and acquisitions in recent years, will likely consolidate a great deal more going forward, suggests one of the key names in the business.

Toshi Yamazaki is the managing director of Hamburg-headquartered SAL Heavy Lift, a firm bought out by Japan’s Kawasaki Kisen Kaisha (K Line) in 2011. He took over the role a year ago.

“I believe we will see an increased amount of consolidation in the market – this has been an ongoing theme for the past few years, but the likelihood and the circumstances now, with the low oil prices forcing a lot of investments to either disappear or go on hold could likely speed things up,” says Yamazaki.

SAL’s current fleet size consists of 14 self-owned and operated heavylift vessels with a lifting capacity of 550 tons to 2,000 tons plus two longterm time charter vessels.

Yamazaki is circumspect about adding more ships given current conditions.

“Today’s market,” he says, “is characterised by a large supply of

Spot on

SAL Heavy Lift History dates back to 1865. The German company was bought out by Japan’s K Line in 2011. Fleet today numbers 16 vessels.

vessels against a still modest demand worldwide. Speculating about timing is always hard, as there are so many influencing factors to when the right time for newbuilds is. It is certain that today’s market offers favourable prices for newbuilds currently, however the newbuild program has to be matched with the expectations of what segments and strategy the particular vessel shall serve. I am afraid that a lot of the newbuilds coming into the market currently are

“

Speculating about timing is always hard

Issue FOUR 2015

entering into a fierce market, where cost excellence is the primary driver to success.” ●

” 31

In profile

Tanker bonanza helps pay back debts Rome’s Augusta Due is making the most of the current upswing in fortunes for product tankers

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he recent improvement experienced in freight rates for tankers is helping some shipping companies to recover from their complex restructuring plans.

That’s certainly the case for Romebased Augusta Due, a shipping company founded in 1994 by the Brullo family and active in the liquid bulk market with a focus on Italian cabotage and short sea routes in the Mediterranean.

Spot on

August Due Rome-based owner, part of the Mednav Group, with 16 product tankers in its fleet mainly operating within the Mediterranean.

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Raffaele Brullo, ceo of the company controlled by Mednav Group, confirms: “At the moment the market trend for our specific business of tankers is offering very interesting financial returns and that helps shipping companies like ours to solve earlier debt restructuring agreements signed with the banks.”

The seasoned shipowner started working in the shipping arena in 1971 and, following some partnerships and joint investments with other Italian groups (for instance with Mediterranea di Navigazione of Ravenna), set up his own company in 1994 purchasing five tankers in the first two years. But Brullo explains that the turning point came from 2000 onwards when Augusta Due decided to renew its fleet. Today’s fleet consists of 16 modern products tankers ranging from 3,000 to 42,000 dwt and built from 2000 to 2009. All the vessels are employed with time

charter contracts and COAs for first class oil companies and traders. Last year Augusta Due’s fleet performed 619 voyages transporting some 8.8m tons of oil products. As well as the Mediterranean basin some ships are occasionally deployed in some North Sea and Black Sea trades.

Brullo, looking back at the last decade, says: “The economic downturn in shipping, and more generally speaking in economics worldwide, put many companies under pressure and in the last seven, eight years it was hard to survive in such a challenging market context. Like many other firms also Augusta Due was obliged to restructure its financial exposure and, as a consequence, our current strategy is now to hold and consolidate the business respecting all the convents inked with the lenders.”

As a result the Sicilian owner stresses that today the shipping company he heads is mainly dedicated to “the best possible commercial employment of the fleet” and that “no investments in newbuildings are in the pipeline soon”. ●

“The impact of $50 oil has absolutely decimated the offshore industry” — Fazel Fazelbhoy, founder, Synergy Offshore

maritime ceo

In profile

Rebrand time A grand old name in European shipping is changing its name in a bid to drum up investors

Ö

sterreichischer Lloyd, a grand old name of European shipping whose heritage stretches back to 1836, is going through a rebrand as it looks to garner investors.

The Cypriot brand is now known as ÖL Group.

Explaining the change in name in a release, the company said: “ÖL chose to rebrand to clearly and visually identify her services to its associated industry related partners, existing investors and to welcome new investors by also incorporating her original motto ‘Vorwärts’: Always Steaming Ahead.”

The rebranding further represents the company ownership / structure changes to pure shipowning that took place in 2008 with a name change in the German word, ‘Seereederei’ to Oesterreichischer Lloyd Seereederei (Cyprus) Ltd. The company has interests in containerships and dry bulk.

Captain Eberhard Koch, the chairman of the company, says container shipping has far brighter prospects than dry bulk for the foreseeable future.

“With a huge orderbook for bulkers for 2015 and 2016, the market

Spot on

ÖL Group Formerly known as Österreichischer Lloyd, this Cyprus-based firm’s history dates back to 1836. Currently involved in dry bulk and containers.

Issue FOUR 2015

“

”

Things look brighter for container shipping

does not look promising for the coming year, at least,” he tells Maritime CEO. “Things look brighter for container shipping,” he says. “We recognise rising volumes which will help to support freight rates and tonnage demand. When we are very optimistic, the expected demand may even outstrip the supply over the next 12 months.”

Koch is especially optimistic when it comes to smaller boxship sizes where there is significant scrapping and almost a zero orderbook.

“We have seen much lower lay-up numbers in both terms of numbers of ships and total teu and this during the traditionally low

winter times compared to previous years. We see chartering activities are very active these days,” he says.

As for his own fleet plans, Koch says there are definitely no newbuilds to be ordered anytime soon.

Second hand multipurpose vessels on the other hand are a possibility. ●

“We need to optimise Britain’s maritime offer” — Jeffrey Evans, Lord Mayor of London

33

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In profile

European wishlist The chairman of the powerful European Community Shipowners’ Associations sits down with Maritime CEO

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marter, better and complimentary legislation. That’s what European shipowners want from politicians and regulators, according to Thomas Rehder, chairman of the powerful European Community Shipowners’ Associations (ECSA).

Speaking to Maritime CEO, Rehder says that 2016 will be a vital moment for shipping in Europe.

“We shall try to go up very much with the European Commission for Transportation for the maritime year that we will have next year. That means that we are trying to provide contributions to the maritime strategy for the short sea shipping market, but also for the employment, for the pressing issue of making shipping more competitive and we want to have smart legislation because smart legislation means no overlap by different laws and rules,” underlines Rehder. “We must avoid counterproductive effects as we have seen in the case of ballast water treatment.”

The European Commission has declared 2016 as the year for maritime agenda. Rehder’s wishlist starts with the tonnage tax regime, which he wants to get OSVs more involved in.

ECSA’s chairman goes on underlining that there is one field which

Spot on

ECSA The European Community Shipowners’ Associations collectively control 40% of shipping worldwide.

The association is currently chaired

by Thomas Rehder, managing partner at Hamburg’s Carsten Rehder.

Issue FOUR 2015

is, in many ways, at the core of the European agenda: short sea shipping.

“There is a lot that can be done to make short sea shipping a real tool for the single market. Regulations from shipping companies do not only come from governments or public authorities, we have to deal also with unions, we have to deal with public monopolies, pilots and other situations that actually distort competition, that distort a fair global and regional market situation. Our industry has to deal also with internal competition that many times is politically protected between different modes of transportation: I’m speaking of road transportation,” he says.

Looking at the main challenges European shipowners are facing nowadays, the head of ECSA speaks about the poor freight rate environment, and more specifically about tonnage oversupply in some segments.

“In the containership business there are so many large container vessels deployed by the lines in a situation where the volumes are dropping,” he says, adding: “There are challenges in the field of finance.

Because the banks are under pressure, they are still in a financial crisis. We are all suffering from the financial crisis that the banks are going through.”

The short sea crisis is affecting most European lines in similar ways. “Since we are part of the same markets, we are all subject to the same troubles and in every country

“

there are some companies that have special segments that make them less dependent from general market tramps. But by and large I think we are all seeing the same problems,” Rehder says.

The chairman of the European shipowners also highlights the fact that 40% of shipping worldwide is controlled by EU companies.

Furthermore the total economic impact of shipping in Europe is €147bn and all together there are 2.2m jobs are connected to shipping across the continent.

Rehder is managing partner at Hamburg’s Carsten Rehder, where he also became responsible for the shipowning side of the business in 1996.

Carsten Rehder presently operates 25 container vessels and five bulk carriers. ●

We are all suffering from the financial crisis that the banks are going through

”

35

WINE

On the Burgundy trail ‘Of all the drops that can be happily consumed by roaring fires, Burgundy sits at the apex’. Neville Smith heads to France for some winter cheer

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inter in the northern hemisphere and as the nights draw in and the fallen leaves drift around the door, the wine lover’s thoughts turn inevitably to Burgundy. Of all the drops that can be happily consumed by roaring fires or with slow-cooked food, Burgundy sits at the apex.

There’s something of a religious fervour to the enjoyment of Burgundy that is unmatched in the Northern Rhone, Piedmont or Bordeaux. Burgundy fans, or Pinotphiles if you will, are some of the most obsessive in pursuit of the obscure and elusive.

There are several reasons for this. Burgundy is home to a unique

Two to try There are many merchants and brokers who claim to know Burgundy but in this terrain you need a sherpa not a chauffeur. For that, look to the Wine Society and its admirable list, in-depth knowledge and helpful people. You will need to buy a share to join, but the dividends are considerable.

36

patchwork of growers and producers, whose microsites produce wine in often tiny quantities with astronomical prices. There are exceptions – some large cooperatives press and bottle direct from the growers – but there are more than a few iconoclasts.

Burgundy has an unusually high proportion of female winemakers and marriage between the families has resulted in a tight-knit community. In recent years, a new generation has taken charge and the region demands all the ambition that youth can muster.

Blessed with rolling hills and strong weather patterns, Burgundy produces wine with character in a world of drab conformity. Vintage

Oliver Leflaive Bourgogne, Oncle Vincent 2013, £16, is ‘lowly’ Bourgogne blanc that over-delivers, made from vineyards near those of the legendary Puligny-Montrachet.

From not so Young Turk Nicolas Potel, Domaine de Bellene, Côtes de Nuits Villages, Vieilles Vignes 2008, £17, is from a cool vintage red showing fresh acidity and black fruit character. ●

variation can be marked and poor years are not uncommon.

It’s a region of varietals and it has on one hand, one of the world’s most adaptable grapes and on the other, one of its most challenging.

Chardonnay, whose reputation has been dragged through the mire in recent years, will produce wine in even marginal growing conditions and in a number of different styles. In Burgundy it achieves the pinnacle of the world’s finest whites.

Pinot Noir on the other hand, is thin-skinned, pernickety, frostprone and a bit of a prima donna. It needs to be coaxed and encouraged, handled with extreme care and sensitivity, if it is to reveal its silky, smoky charms.

In either colour, the results can be astounding; wines that range from the steely and precise to the gentle and charming, often very long-lived.

All of which makes it a labour of love to buy and enjoy. The top wines have always been rare and expensive and since China’s collectors have broadened their scope northeast from Bordeaux, prices have firmed.

So apply some lateral thinking; look for the lower level wines of the better producers, consider cooperative wines especially the whites, and prepare to become hooked. ● maritime ceo

gadgets

Back to the eighties

N

erds who grew up in the eighties are fizzing with the knowledge that this is the year Marty McFly travelled to in Back to the Future. They’re also disappointed by the lack of hover boards, which are sadly still in prototype, and need special surfaces to run on. They will be fairly thrilled to know that you can get your hands on an Electric DeLorean DMCEV with a 260hp motor that takes it from 0-60 mph (0-96 kph) in 4.9 seconds and with a top speed of 125 mph (201 kph), getting to the time travelling 88 mph is a cinch. Sadly the time travel device is not included.

Electric Delorean www.firebox.com $105,000

Virtual seat

I

f that wasn’t enough of making fantasy-driving reality, we present the Force Dynamics 401cr. This is a computer gaming chair that is built on a motion platform with racing simulations in mind — it bounces, and rotates on all axes to give the feel of reality. In front of you, a set of three monitors gives a surround view, and to control this wild ride, you have a strong force-feedback wheel. The system recently went viral with a YouTube video of them playing GTA V on it. It comes with the Windows computer built in, and prices start at $85,000, depending on what specs you want involved.

Force Dynamics 401cr www.force-dynamics.com $85,000+

Apple view

F

or those who prefer a more passive view of things, the new AppleTV is out, and it has had something of a game-changing outlook on the previous versions: apps. Apple have finally come to their senses: the new AppleTV 4’s use of apps, media servers such as Plex and games such as Minecraft are set to blow the doors off the prior versions’ proprietary lock-in, and make it a useable and desirable platform. The new version has 2GB of RAM and comes in 32GB and 64GB versions, uses 802.11ac wifi with MIMO and Bluetooth 4.0, and it provides 1080p over HDMI 1.4.

Apple TV4 www.apple.com $149 (32GB) $199 (64GB)

Issue FOUR 2015

37

REGULAR Books

Down to the sea in ships Paul French applauds a recent raft of books that look at life at sea

I

n his new travelogue of crossing the seas in container ships award-winning author Horatio Clare declares at the start, “Our lives depend on shipping but it is a world which is largely hidden from us. In every lonely corner of every sea, through every night, every day, and every imaginable weather, tiny crews of seafarers work the giant ships which keep landed life afloat.”

Clare’s book, Down To The Sea In Ships: Of Ageless Oceans and Modern Men, is a rare beast – a book that looks both at the nuts and bolts of commercial shipping as well as being a highly readable literary feast of anecdotes about the sea, ships, sailors and international trade.

Big rusty containerships and lumbering giant VLCCs don’t normally inspire lyricism in the way the tall ships and Indian clippers of yesteryear did, but Clare was writer-in-residence for the Danish container shipping giant Maersk.

“

Onboard to record life he sails from Felixstowe to Los Angeles via the Suez Canal and China and then takes a second journey from Antwerp to Montreal in “a ragged old battler”. He examines exactly how containerships from China supply the rest of the world with goods and how oil tankers supply China with the fuel to produce them. But within this narrative he sprinkles the greats of waterborne literature – Joseph Conrad, Jerome K. Jerome – as well as his own lyrical meanderings. What emerges is part travel writing, part history, part economic examination of global trade.

But what’s important is that, for those in the shipping business, he reminds us that the sea is a magnificent thing we should never stop fearing or ever take for granted while, for those “landlubbers” who never see a ship larger than a local ferry or a millionaire’s yacht in a harbour, the seas remain the vital arteries of trade.

Big rusty containerships and lumbering giant VLCCs don’t normally inspire lyricism in the way the tall ships and Indian clippers of yesteryear did

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”

Rose George’s Deep Sea and Foreign Going: Inside Shipping, the Invisible Industry That Brings You 90% of Everything is another personal voyage aboard ship. However, George looks at other ships that are rarely seen – for instance, pirates and illegal factory ships. George also looks at the shorebound communities that rely on shipping. Not just the stevedores, dockers and shipbuilders, but shipping’s informal workforce, such as the beachcombers who track the 10,000 containers that are lost every year, the robots who are gradually replacing human crews, and the environmentalists campaigning against the tide of marine pollution.

And finally, a voyage with another writer aboard the largest of the leviathans crossing the oceans – Geoff Dyer’s Another Great Day at Sea where the man who normally writes about D.H. Lawrence or modern art joins the crew of the aircraft carrier the USS George Bush, on active service in the Arabian Gulf. Dyer sees the carrier as a microcosm of society, a decent sized town on the oceans with 5,000 people living and working on a giant hunk of floating steel. ●

maritime ceo

Travel

Shanghai by day and night Where to go and what to see in China’s financial metropolis

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irst time visitors to Shanghai are easy to spot. They’re the ones rubbing their aching necks thanks to all the peering up at the outrageous soaring architecture in this Bladerunner-esque metropolis. Getting to see China’s most cosmopolitan city has never been easier as the city has waived visas for 50-odd nations for 72-hour visits.

Everything is big and impressive in this city of close to 20 million people. Shanghai’s high-speed Maglev train is the fastest way from the airport, and indeed the fastest train ever built. It takes seven minutes, albeit it stops at an inconvenient location.

Shanghai is split in half by the Huangpu River, with Puxi (meaning west bank) on one side and Pudong (east bank) on the other. Pudong is the city’s financial district. Its burgeoning skyline of skyscrapers, dominated by the spike of the Oriental Pearl Television Tower is one of Shanghai’s landmarks.

Puxi remains the city’s historic centre, home to the Bund – the embankment lined with grand neoRenaissance buildings that served as the headquarters for big Western businesses in Shanghai’s 1930s heyday – and the French Concession, the leafy residential district that is easily the most charming part of the city.

In terms of where to stay, three places spring to mind. Hotel Indigo

Issue FOUR 2015

on the Bund at 585 Zhong Shan Dong Er Road has fabulous views and a great location.

Quintet is a B&B at 808 Changle Road in the French Concession. Its six en suite rooms are lovely and the staff will go out of their way to make you comfortable.

The Park Hyatt hotel at 100 Century Avenue in Pudong is situated at the top of the Shanghai World Financial Centre, the city’s tallest building that looks to this ale drinking writer like a bottle opener.

One of the highest hotels in the world, it boasts spectacular views of the Bund and Puxi beyond.

The bar on the 91st floor is fun and thumping; the elegant Living Room next to the hotel lobby is quieter and more refined. Order a fig martini for RMB110 and then marvel at the city lights beneath you.

For a characterful experience away from the myriad malls, head to Xintiandi, a pedestrianised enclave of boutiques in traditional shikumen houses with beautiful stone doorways.

The Shanghainese take their food very seriously. For dim sum, head to Din Tai Fung in the South

“

No trip is complete without an evening on the Bund

”

Block Plaza in Xintiandi. This Shanghai institution (actually a Taiwanese chain) is renowned for its dumplings. The xiaolongbao, Shanghai’s famous pork and crab soup dumplings, are exceptional.

No trip to Shanghai is complete without an evening on the Bund, the riverside strip of grand buildings that’s home to swanky bars and restaurants. Rub shoulders with Shanghai’s glitterati at the smart Italian restaurant Mercato at 3 on the Bund, the latest from JeanGeorges Vongerichten.

For a more low-key choice, Lost Heaven at 17 Yanan Dong Lu is just round the corner and serves Yunnanese food to a mix of Shanghainese and foreigners. The jin bo ghost chicken and spicy Burmese tea leaf salad are the dishes to go for.

In terms of a spot of culture a trip to the Shanghai Museum at 201 Renmin Dadao on People’s Square is well worth a visit. It offers four floors of ancient Chinese artefacts which are revealing and beautiful in equal measure. The audio guide is well worth the RMB40, though you’ll need a passport or driving licence as a deposit.

Across the square is the inauspicious sounding but rewarding Urban Planning Centre. Highlights include an exhibition revealing how the Bund has developed over the past century. ●

39

REGULAR GOLF

‘The ultimate risk and reward hole’ Steve Parks from Wake Media details the dastardly eighteenth at a course in Wales built to stage the 2010 Ryder Cup

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n 2010 I was lucky enough to attend the Ryder Cup at Celtic Manor in Wales. Whilst the event ended in a European victory (happy days!) on the 17th hole, a lot of the drama unfolded on the 18th.

Built to stage the 2010 Ryder Cup, the first course to be built specifically for golf’s greatest team tournament, it measures a robust 7,493 yards off the back tees and has a par of 71.

With water hazards on half of its holes, the Celtic Manor course has six signature holes with the real sting in the tail saved to the very end.

The 18th at the 2010 course is a par 5 measuring 575 yards. There is

40

a lot of versatility here and I believe they used the forward tee for the Ryder Cup so the pros could potentially reach the green in two. This makes for the ultimate risk and reward hole. It needs a gentle right to left draw off the tee to leave the best chance of making the green in two. With bunkers strategically placed down the hole there is also an almighty lake in front of the green making the second and third shots

“

very intimidating.

I’ve been very fortunate to have played this great course twice since and the 18th has swallowed me up both times. Let’s just say the shot into the green wasn’t my second or third (or fourth for that matter!).

The 18th at Celtic Manor has a short history, but it feels amazing to tread the same fairways as Rory, Tiger and Phil. If you get a chance, playing this course is a must. ●

With bunkers strategically placed down the hole there is also an almighty lake in front of the green making the second and third shots very intimidating

”

maritime ceo

Yachting REGULAR

Thai time We’re always seeking readers’ favourite destinations. This issue Peter Schellenberger, procurement director at V.Ships Asia, takes us to Southeast Asia

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hen pondering great yachting experiences for this column, my mind keeps returning to a great experience last year in the Royal Phuket Marina in Thailand.

I was invited to go on to a 28 footer cruiser of a good friend, heading for Phi Phi island with a well-filled fridge and ambitious wakeboarding equipment all loaded.

The marina is located quite conveniently on the way to the airport and has a nice bar and good restaurant facilities, which were badly needed after the day out.

What I particularly like about the location of the marina on the east coast situated in the middle of the island is the easy access to spectacular nature spots and tourist attractions. They range from small islands such as Ko Rang Noi, Ko Rang Yai, Ko Yao Yoi to the famous James Bond scenery a bit further away. Many of these places can only be reached by boat and have secluded beaches and pit stops in a

Issue FOUR 2015

wonderfully relaxed atmosphere.

For folk that have diving and snorkelling equipment onboard there is a plethora of options to see marine wildlife including sharks and barracudas as well as accessible caves in dive spots such as Shark Point and others.

Another attraction are the limestone sea caves in and around Phang Nga Bay which are accessible by sea canoes and offer exciting views and experiences.

The downside of the Royal Phuket Marina is that the boats have to reach open waters through a channel that depends strongly on the tide, so one always has to watch a rather rigid window of time in order

“

The Royal Phuket Marina has easy access to spectacular nature spots and tourist attractions

”

to avoid a muddy and bogged experience going back in with the precious piece of hardware.

As to be expected, that day not only did we lose sight of time after a sumptuous lunch on Phi Phi, but also my weight behind the boat during a rather embarrassing trial to stand on the wakeboard for longer than 10 seconds made the engine cut out for a while. With more time lost trying to fix the engineering masterpiece we just about made it back in to port with almost no water under the keel and lots of mud in the screw – an almost stressful end to an otherwise very relaxing day.

That was then certainly reason enough to do a proper audit of the marina facilities and their beverage options available. I am told that the infrastructure of the marina in terms of technical support and maintenance is quite good so that boat owners that are only occasional guests on the island can rely on their hardware being well kept and ready to go once they fill the cooler box. ●

41

The Secret REGULAR Maritime Lawyer

‘Many see us as engineers of the human soul’ Every issue we ask a brave soul to bare all about their chosen profession. This time we have a legal insight

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here are surely other branches of the law that have the conservatism and reverence for history of maritime law. There must be. Canon law maybe. When you present yourself for law studies, it is unlikely you had shipping in mind or at least a very clear idea of what you would be letting yourself in for. Many law schools have no courses on maritime or transport law whatsoever.

From the outset you get of course the constant company of other lawyers. Newly qualified we are much of a muchness. Except that these days the professions are full of highly motivated, well educated, striving persons of the female persuasion. Whichever half of the human race you come from as a paid up and qualified lawyer you will have certain traits. You will be sensitive to political current, to the advantages of situations, to the merits of timely silence, temporary deafness and passing blindness. The rest of humanity may sometimes see us as engineers of the human soul.

That’s going some. But we also have to tread the legal treadmill, billing hours, working terrible hours, devilling for more senior lawyers who have

42

most of the client contact and most of the fun.

Once launched into the long distance run to becoming a partner we have a group of clients, a rack of one hundred cases, and the mercies of our peers. In some firms there may be some downish sides to the life.

The hours and the work speak for themselves, but then there will be the ethos of the place. Is it a firm with many thriving lickspittles? That can be horrible. Or is it the kind of place wherein a near autistic kind of legal brilliance is highly prized? Are the partners all divorced and frequently drunk after prolonged periods of client entertainment? Is the milk of kindness in short supply?

Do people go about making allegations that certain people have attained the ring of partnership by extra legal, extra marital machinations? One certainly hears tales of such things. We are only human.

Coup up a load of bright, calculating, ambitious, maybe slightly unimaginative people and you may well see the high road as easily as the low road.

It is striking how in shipping, every segment of the legal services market is served and served well. For the money no object crowd — a distinct minority these days of all days — there are grand firms that bill like fury. They bill for everything. Even the photocopying has a cost centre code and makes a tremendous turn.

Then there are the large specialist maritime firms with awful cost bases and floods of associates bursting out to set up smaller boutique firms. Even

the shady nooks of shipping have their maritime attorneys. These like their fees up front but once paid act with the utmost vigour.

Here’s the human qualities necessary to take a career in the law.

You need to be a good observer of life and its foibles, not too unsettled by the way that big money may triumph over elementary fairness or rightness, good judgment you need and the constitution of considerable fortitude to go from graduation to global eminence. And despite everything you may end up as the

party people will seek out, to hear your views, to profit from your ability to diagnose troubles and resolve them.

On the way up in the profession you will learn to deal with the base ingratitude of insurers and such, the slippery truths within disputes and the partiality of clients. This is what we wanted isn’t it? ● maritime ceo

The REGULAR Contrarian

A third-world industry?

Andrew Craig-Bennett takes shipping’s green promoters to task

Y

ou may recall a fairy tale by Hans Christian Andersen in which a young and vain emperor is persuaded into buying from two confidence tricksters a suit of clothes that are “invisible to anyone who is unfit for their position or just hopelessly stupid”. When the emperor is dressed by the charlatans in the wonderful new clothes, everyone pretends to see them, until a small child, too young to know better, calls out: “But the emperor’s got no clothes!”

I used to work for a shipowner who, when a competitor bought an investment bank, said, “I like to own things that I can walk up to and pat.”

His judgment proved correct.

We mistrust things that we cannot see in shipping because, to speak frankly, our industry operates on rather a low level of trust, and we suspect that if we cannot see something, there is probably a scam going on.

Paying for carbon dioxide produced in the course of a business – or ‘emissions trading’ to give it a sexier name – looks remarkably like the Emperor’s New Clothes. A lot of clever people busy making money out of something that we stupid people cannot see, or touch, or reliably measure, and telling us that it is all for the good of the planet.

There are plenty of scams involving stuff that we seldom see, but which we think we can measure, such as fuel oil, both as bunkers and as cargo (in the minds of some tanker owners, there is little difference) and we are used to them. Magic pipes,

Issue FOUR 2015

weird and wonderful piping plans, contents of bunker hoses dropped back – this is the stuff of everyday shipping.

We all know those venerable war horses, the International Chamber of Shipping, in the blue corner, representing capital in the form of shipowners, and the International Transport Federation, in the red corner, standing for labour in the form of seamen and dockers.

Well, it seems there is another ITF, and the ICS has picked a fight with this one, too. This one is the International Transport Forum, and it is an OECD (Organisation for Economic Co-operation and Development) think tank. It has decided that merchant ships ought to pay $25 per tonne of carbon dioxide emitted. Diving deeper into alphabet soup, this proposal popped up at the UNFCCC – the United Nations Framework Convention on Climate Change, as part of a proposed MBM (Market Based Measure) in accordance with UNFCCC CBDR (Common But Differentiated Responsibility).

CBDR means that rich countries ought to pay more than poor countries.

The International Transport Forum thinks this would raise $26bn annually.

The ICS does not agree. The ICS says – and this is the good bit – that because some 70% of the world’s ships fly the flags of UNFCCC non-Annex I developing countries, the CBDR rules ought to apply and shipping should be

paying, if anyone ever does pay, a levy on the basis of what industries in poor countries pays, which would be about a third as much.

This is specious reasoning. Every schoolboy knows that the flag of a ship has no necessary connection with the domicile or nationality of their owners, and indeed that shipowners are, as a class of people, a bit different to peasant farmers and such folks. I cannot recall when I last saw a shipowner driving a bullock cart.

Wait – it gets better! I quote the ICS press release: “Shipping meanwhile has already reduced its total CO2 emissions by more than 10% (2007- 2012) and CO2 per tonne-mile by around 20% (2005 - 2015). It is therefore on course for carbon neutral growth.”

Well, I’m staggered! What public-spirited folks we all are! The ICS sees fit not to mention that its start dates for both runs of numbers coincide with the greatest boom our industry has ever known, with ships dashing from A to B at top speed, and they continue through a period of high fuel prices to end in a period of deep recession. Amazing as it may seem, if you slow your ship down, it burns less fuel per ton mile, but don’t let’s go telling the world that.

Oh, and the good news – none of this will happen any time soon. The IMO stopped talking about it in 2013, and is due to resume next year. So that’s all right, then.

Put the emperor’s clothes back in the dressing up box. ●

43

MARPOLL REGULAR

You decide Our latest survey of topical issues resulted in more than 500 votes. Results and key comments below Are 20,000+ teu containerships set to go the way of the ULCC tankers of the 1970s?

Does shipping understand crisis management in the social media era?

“

“

The marginal economies of scale have already been reached and the 20,000+ teu class is proving difficult to fully utilise

”

Yes 70% No 30%

There are professionals you can hire for that purpose and that works well

Yes 21% No 79%

Should shipping lines be sharing more information about cyber crime attacks?

Is there a need for the Nicaragua Canal?

“

“

Far more transparency and overall data collection is needed.

The industry is just out of date.

They live by hiding the facts

”

Yes 88% No 12%

Is the Jones Act fit for purpose?

Yes 34%

It is an outdated law that not only is it unsustainable, commercially ill-fated, uncompetitive, monopolist and discrepant, but it turns out that is unsafe too

”

No 59%

Has IMO done enough to curb shipping emissions?

“

History has proven that most shipowners respond only to the stick

44

”

”

Yes 79% No 21%

Are there too many ‘shipping weeks’?

“ No 61%

”

Should fines be hiked and made more standardised for those caught flouting new ECA rules?

“

Many of the events have lost their value. But they are better than the industry awards, which have no integrity

The IMO is a slow-moving beast that historically has trailed the requirements of industry and society

Yes 39%

Too many cases of Panamanian canal authorities jacking around ship and crew only to show who is in charge. Vessel operators need another option

No 66%

“ Yes 41%

”

Yes 59% No 41%

”

maritime ceo

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