ISSUE FOUR 2018
BY
The risk reward equation
Edward Buttery’s rapid fleet development
MANIFEST
3 At The Prow
Economy 4 5 7 8 9
US EU China India Brazil
Markets 11 Dry Bulk 13 Tankers 15 Containers 16 Offshore 17 Finance
27 Hellespont 29 Antong 31 Hรถegh LNG 33 NSA
Maritime CEO Forum 36 2020 Vision 38 Dry Bulk 39 Tankers
Hong Kong 40 Government incentives
Recreation
18 Is it time to change STCW?
42 Wine 43 Gadgets 44 Books 45 Travel
Profiles
Opinion
22 Cover Story Taylor Maritime 25 Paralos
46 Greg Atkinson 47 Scott Bergeron 48 MarPoll
Executive Debate
45
AT THE PROW
An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@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: Paul Collins 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 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime
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ISSUE FOUR 2018
Industrialisation of pollution or saviour of the planet?
I
t has been a brutal few months for purveyors of open loop scrubbers. Yes, sales tills continue to rush in with many manufacturers now saying they’re sold out through to mid-2020. However, the level of abuse aimed their way has been stunning. At recent conferences I’ve overheard open loop scrubbers variously described as “towers with showers”, “the industrialisation of pollution”, or even more pertinently by Euronav’s Paddy Rodgers who argued at the Global Maritime Forum in Hong Kong that vessels equipped with open loop scrubbers could well become “the ships that died of shame” once the general public finds out how this technology actually works. Pertinently the mainstream press in recent weeks has started to latch on to the scrubber controversy. Rodgers continued his attacks on the technology via Euronav’s third quarter results announcement in which scrubbers were branded a loop hole to sulphur cap compliance and memorably the tanker giant stated, “[T]he solution to pollution is not dilution.” Much of the debate around scrubbers reminds me of those old cigarette adverts (pictured) where doctors and dentists endorsed brands, something perhaps also not lost on Nikolas Tsakos, president and CEO of Tsakos Energy Navigation (TEN) and chairman of intertanko, who recently likened scrubbers to “inventing a new drug that perhaps
will kill one of the illnesses, but will kill the patient through another illness”. At our own Maritime CEO Forum, also in Hong Kong in October, the heat was very much on scrubber manufacturers. Bjørn Højgaard, CEO of shipmanager Anglo-Eastern, predicted a global ban on open loop scrubbers within the next three to five years, and also warned that maintenance costs of these exhaust gas cleaning systems could be a whopping 10 times higher than predicted. At the same event, Mats Berglund, CEO of Hong Kong’s largest shipping line, Pacific Basin, and a strong opponent of scrubber technology, argued that all scrubbers do is get ships to speed up and use more fuel. Our Maritime CEO Forums have become a great place for shipowners to let off steam. I’m delighted to report next October we’ll be taking the exclusive VIP gathering to the Monaco Yacht Club. ●
3
ECONOMY US
A healthy glow 10 years on GDP growth remains above par. A trade spat might not help
T
here’s been no escaping the progress reports in the American media – a decade ago the US economy tanked in the financial crisis, but right now the economy appears generally to have recovered from that seizure. Once again, as ever in this column, we are faced with the phenomenon that President Trump’s political leadership leaves many in America and around the world distinctly uneasy but the economy seems not to be bothered. Consumer sentiment is close to a 14-year high – not because of who is in the White House but because unemployment is low at under 4%, and lay-offs just fell to a 49-year low, despite the recently begun trade war with China. While it is true that consumer confidence and spend spurts occur following tax cuts the trick is to continue the good feeling. Naturally, as with all spending rises, there’s a consummate rise in inflation that concerns the Federal Reserve but that is manageable. The biggest economic problems in the US economy right now are a lack of skilled labour meaning many manufacturers cannot boost production to meet new orders. This also applies to new home building, which means less new properties coming into the market and so higher prices. However, if there are now more job vacancies than available workers then wages should rise and getting thrown out of your job becomes unlikely. The bigger question hanging over the economy is not how many roofers or electricians the construction industry can find nor how many skilled engineers manufacturing can find, but the fractious trade negotiations between the US, Canada and China. Fractious negotiations that could soon include the EU too.
4
US unemployment rate Month/year
unemployment rate (%)
April 2017
4.4
July 2017
4.3
October 2017
4.1
January 2018
4.1
April 2018
3.9
Source: US Bureau of Labor Statistics
a tick or two above most estimates of 4%. The discussion among economists is now about where is the peak for the US economy after 94 months of straight growth? Certainly the US economy is at a peak now from the start of serious growth under President Obama. Labour shortages are a problem but can be overcome, but they do take time. Similarly so with the lack of skilled workers; but education can’t occur overnight. The current president can’t really take credit for the long-term fall in unemployment, creation of new jobs or slight wage improvements. The key issue now is maintaining that growth – boosted temporarily by tax cuts for sure, but threatened by trade wars. The defining economic issue of the remainder of the Trump first term will be how this is handled and, if he’s to keep to campaign promises and improve economic performance over the previous president, then Trump needs to get quarterly growth over 5%. ●
Fresh tariffs or a breakdown in talks remain the biggest dangers for a US economy that appears to be growing at the fastest pace in almost a decade and a half.
“
Trump needs to get quarterly growth over 5%
”
The second quarter numbers from America certainly appear to reinforce the economic good news message, which means that while the president has all manner of political and social problems, he has few domestic economic ones. Second quarter GDP growth (April, May and June) came in at a very healthy 4.2%, maritime ceo
ECONOMY EUROPE
Beyond Brexit Whether it’s Hungary, Italy, Spain or Portugal, Brussels has plenty to contend with apart from the UK’s departure
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he clock is ticking on Brexit and, should Prime Minister May’s ‘Chequers’ plan be rejected by hardline Brexiteers, the EU commissioners or parliament then the UK goes hard Brexit. Certainly hard Brexit would be, for a time at least, tough on all concerned but as we approach the March 2019 exit date it is interesting to look at the UK and notice that politics and economics, as we are also seeing in America, do not run parallel very often. The UK economy is ticking along at around 1.5% GDP growth per annum – not very exciting but likely to actually uptick somewhat in the second half of the year. Unemployment is lower than at any times since the 1970s, public borrowing below forecast and inflation rates stable. But, it can be argued, that, like the US, Britain is benefitting from a benign global economy and that the underlying state of the UK economy remains, officially 10 years on from the 2008 financial crisis, fragile. But none of this means there is cause for complacency amongst what will be the remaining EU 27. Again politics and economics diverge. The Hungarian economy showed robust
Growth in government debt as percentage of GDP in five Eurozone economies Country
2007
2017
Spain
35.5
100.2
Germany
63.5
65.9
France
64.4
97.8
Italy
99.7
133.4
Greece
103.1
184.7
Source: IMF
ISSUE FOUR 2018
growth in excess of 4% in the first half of the year despite the country becoming increasingly ostracised politically for its hard right political leadership and facing sanctions from Brussels. Italy is also presenting major problems to the EU – a government Brussels dislikes, rising anti-EU sentiment and, economically, nothing close to what could be described as a credible national budget plan. Debt, deepening deficit and lack of political or economic reform indicate that Italy is about to join Spain and Portugal in the list of ‘economies mostly likely to follow Greece.’ All this of course means that the most stress lies within the Eurozone. The euro is certainly not benefitting from Brexit – some currency traders have urged buying sterling over euros in the near term. The macroeconomic question is should the Eurozone still continue fiscal consolidation and restraint 10 years after the 2008 crisis or start some stimulation? The problem is that nobody in the Eurozone except
Germany can really launch the sort of stimulus package that would make any difference and it isn’t keen to do so. Hence the loss of impetus in the Eurozone economy in the last quarter, only an average of 2.3%. For those non-Germans wanting stimulus the message may not be a good one. At a time of political uncertainty in Germany and the alarming rise of a far right the majority of German politicians and economic managers favour the status quo. But Germany has low unemployment, good growth, strong exports and money in the bank. Berlin’s lack of adventurousness does not hold back Germany particularly but it does somewhat retard the rest of the Eurozone. Budget deficits in France, Italy, Spain and Portugal range from 2.3% of GDP (Italy) to 3% of GDP (Spain and Portugal). Most of this comes from stimulus and they’d like some more to tackle unemployment and deficits. Brexit looms but the Eurozone still has its own issues to deal with. ●
5
ECONOMY CHINA
Trade war woes The People’s Republic is piling on the debts to counter its fallout with the US
I
n a war, regardless of who starts it, both sides take losses. China’s economy is certainly taking casualties at the moment but working out their cause is not always so simple. There is no doubt China’s exports to the US are taking a major hit and so Beijing’s influential Central Policy Research Office of the Communist Party is arguing vociferously that altering monetary policy is the way to combat this. In short – loosen monetary policy and print money. But, of course, when you have a strong, yet ring-fenced, currency there are all manner of problems with that strategy. So far the response by Beijing to the slowdown has been China GDP annual growth rate July 2015
6.9
Jan 2016
6.8
July 2016
6.7
Jan 2017
6.8
July 2017
6.9
Jan 2018
6.8
July 2018
6.7
Source: PRC National Bureau of Statistics
ISSUE FOUR 2018
characteristic of previous slowdowns – boost spending on infrastructure projects and encourage local governments to issue bonds. There’s a debt addition of course to this but Beijing has always firmly believed it can manage vast amounts of national and local debt. To be fair this is not like previous stimulus programmes – local banks are not lending recklessly. This is all top-down and cutting debt was a major economic pledge of President Xi Jinping. Things look like getting tougher as President Trump has decided slap tariffs on an extra $200bn of Chinese goods. China’s GDP growth last year narrowly missed 7% – a figure that won’t be achievable in 2018 for sure. Investment and factory sales are down and, given the longevity of the consumer miracle in China, more worryingly so are retail sales. But this is no crisis for China yet – unemployment isn’t kicking in and other indicators, for instance oil demand and the fabled Chinese property market, remain strong. The stock market may have taken a pummelling and that wasn’t overly surprising given market jitters over the US-China trade war and the RMB
is cheaper/weaker. Many analysts prefer to say cheaper rather than weaker as a cheaper RMB is the best way to boost flagging overseas sales and offset the US tariffs. Many in China have traditionally seen a strong RMB as a sign of a strong China (a sort of monetary nationalism) but, in the face of tariffs and having to work a little harder to find orders, are altering their view points these days. Debt though is the main worry – given that it is rising nationally and locally and the president’s pledge to reduce it. The extremely high debt rates are the product of previous poor lending decisions and the longterm legacy of the massive 2008 fiscal stimulus plan. Much of this debt is held by state-owned enterprises (SOEs) and large companies – just who needs to be investing to win new orders. The biggest issue for China right now – given that they cannot control President Trump – is how to deal with debt. Let it grow and hope that it can help fight the trade war and keep the economy healthy despite the US tariffs, or follow Xi Jinping’s original plan of reducing that debt? ●
7
ECONOMY INDIA
The countdown begins
Next year’s election promises to be tight
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t is now less than a year till the Indian general election. This probably means no policy shocks till then. The government will try and glorify its economic achievements while the opposition parties will try to show them as failures. It has to be said the last quarter was pretty good for India – a 15-quarter high of 8.2% GDP growth in the April-June period, according to the Central Statistics Office in New Delhi. More importantly it was quite even growth seeing improvements in retail sales, manufacturing and the agricultural sector. But, of course, it’s not all good news. The rupee is weak and, while this may help exports, it is hurting those who need to import fuels – oil particularly. A depreciating currency will impact the economy adversely, as India imports around 83% of its crude oil requirement. The knock on effect for transportation and logistics is that petrol prices have already crossed the Rs 80 a litre mark in Delhi and Rs 88 a litre in Mumbai, while diesel prices are up too. Consequently logistics and deliveries costs as well as the general cost of living for motorists is up. If these fuel prices stay high then
8
Rising fuel costs Fuel/Month/Year
Rs per litre
Petrol September 2017
70.17
Petrol September 2018
80.73
Diesel September 2017
58.37
Diesel September 2018
72.83
Source: Economic Times of India
the Modi government can expect to be unpopular and face mass protests in the run up to the general election. It is one major reason why the current account deficit widened to $15.8bn in the second quarter, or 2.4% of GDP - up from 1.9% in the JanuaryMarch first quarter. This caused the significant downward pressure on the currency. The weak rupee also means inflation is up and costs all round – for instance, car parts saw price increases and so manufacturers raised car prices hurting the nascent car owning economy in India (which is dominated by local manufacturers, like Tata and Mahindra and Mahindra, employing local workers). Airplane ticket prices are up on rising fuel costs also adversely affecting the emergent domestic tourism sector, which again is largely focused around
local airlines, who are already in a bloody and bruising ticket price war for market share. It’s still too early to call the 2019 general election. Modi’s Bharatiya Janata Party (BJP) won an outright majority of lower house seats in the 2014 general election, but its support has since eroded over various issues such as Hindu nationalism. The major economic issue hurting Modi is tax reform. The elections will probably be held next April or May. If oil prices and inflation remain high then many ordinary consumers – not wealthy enough to worry about tax reforms or politicised enough to worry about aspects of nationalism – may just feel ‘squeezed’ and look for alternatives to the BJP. ●
“This whole conversation about digitalisation is a just a case of moving with the times” — Frank Coles, the new CEO of Wallem
maritime ceo
ECONOMY BRAZIL
Controversial Bolsonaro proves popular with business The new president inherits a severely troubled economy and will need to make tough choices fast
T
he controversial election of far-right former army captain Jair Bolsonaro as president of Brazil has alarmed human rights and equality campaigners. However, it has to be said, the majority of the Brazilian business community – particularly big business – support his election. The election of his opponent, the left wing candidate Fernando Haddad, was viewed with alarm by many in finance and business as a return to high public spending and corruption. In the end Bolsonaro got 55% of the vote to Haddad’s 45%. Now Bolsonaro has won the hard fought election he will need to turn his attention swiftly to the nation’s economy that is, frankly, in a mess. Public spending is the major problem – Brazil’s credit rating deep is currently deep into junk territory at over 55% of the country’s GDP. This is double the rate of countries like Turkey or Indonesia. This will probably mean a round of severe austerity measures – slashed pension rates and further cuts to a social welfare already slashed to the bone. Bolsonaro has proposed downsizing the Brazilian state by cutting ministries and GDP growth rates Month/year
% growth/decline
January 2016
-0.9
July 2016
-0.8
January 2017
1.0
July 2017
0.6
January 2018
0.1
July 2018
0.2
Source: Instituto Brasileiro de Geografia e Estatistica
ISSUE FOUR 2018
selling off the country’s remaining public companies. Social and environmental campaigners have reacted with horror to Bolsonaro’s election but markets reacted reasonably positively largely on a belief that the new president will at least break the cycle of debt dependency and inflation that has been the hallmark of previous leftist and centrist governments. Essentially Brazil remains in recession and has not fully recovered from the economic dip of 2015-2016, the worst ever to hit the country. Growth has resumed, just, but not enough to create jobs for the more than 13m unemployed Brazilian workers. Inflation has been contained, despite recent financial market turbulence, but wages are stagnant. Many believe that even with Bolsonaro in charge debt will still eventually hit 100% of GDP. At that point there would be a major crisis as the government would be unable to fund itself.
“
Many believe that debt will eventually hit 100% of GDP
”
This scenario does not leave President Bolsonaro or Brazilians with much choice but to accept still more austerity and a weaker economy for some years before, perhaps, a return to stability and stronger growth rates. Of course, economies don’t always move in coordinated fashion or as the politicians would wish. Brazil certainly needs to up its exports to the rest of the world but one commodity – a major one for the country – has exceeded analyst expectations – soybeans. Brazilian soybean sales are now expected to reach 77m tonnes, or approximately $30.8bn, in 2018, an all time high. This is largely due to Chinese demand, but does show that some areas of the Brazilian economy are still strong and offer hope. ●
9
MARKETS DRY BULK
Cleaner air does not mean fewer volumes shipped Jeffrey Landsberg from Commodore Research points out how pollution in China is declining, but not at the expense of dry bulk ton-miles
A
ir pollution in Beijing (which is where air pollution is typically the highest and has been of paramount concern to China’s central government) has remained much improved during recent months, and as a result this year’s winter restrictions are much less intense than seen last winter. Each of the last eleven weeks of the third quarter saw no days where PM 2.5 levels in Beijing exceeded 200 (PM 2.5 is a widely used air pollution metric that measures hazardous particulates in the air that are less than 2.5 micrometers in diameter). Very significant is that prior to the last eleven weeks of the third quarter, this decade had never seen eleven straight weeks where there were no days that PM 2.5 levels exceeded 200. Air pollution in China has become much less of an issue than it was in earlier years, and maintaining overall growth and social stability remains the top priority to the government at present. Going forward, it remains very positive for the dry bulk shipping market that air pollution has seen significant improvement while steel production and coal-derived electricity production have still been setting new
ISSUE FOUR 2018
records again this year. As we also have been continuing to highlight in our weekly China reports over the last several months, issues like robust steel and electricity production have not been fitting neatly into the ongoing China slowdown narrative. Therefore these issues continue to be routinely glossed over by some major global media outlets and very large research providers. What is a fact this year, though, is that steel production and electricity production have been setting records even while air pollution in and around Beijing has continued to enjoy drastic improvement. As of the time of writing, the last four months of published data (May through August) showed Chinese crude steel production averaging a record 80.7m tons which marked year-on-year growth of 10%. Those same four months saw China’s overall electricity production average a record 595.5bn kilowatt hours which marked year-on-year growth of 7.5%. In addition, China’s thermal coal-derived electricity production has continued to set records recently as well, with thermal coal-derived electricity production setting a new record in July and again in August. While all of this robust production has been taking pace, air pollution in and around Beijing has nevertheless continued to undergo drastic improvement because the consumption of more higher quality commodities has continued to grow. Overall, this year has continued to see much lower levels of air pollution throughout China. Air pollution levels peaked back in 2013 – and 2014 then marked
when China’s central government started to become much more serious about improving air pollution. Going forward, China is set to be able to continue to enjoy strong steel production and electricity production while at the same time working towards further improving its environment. Upcoming years remain very likely to witness China importing a larger amount of high quality commodities from abroad. In addition, China is poised to continue working towards exporting more pollution by using the rest of the world as a ‘China-West’ where more of China’s massive industrial projects can be constructed (and where more Chinese goods can ultimately be sold to). As we have continued to stress in our weekly reports, China continues to push forward with its One Belt One Road initiative and a large number of industrial projects will continue to be constructed outside China. This remains very positive for the overall Chinese economy, and it also remains a very positive issue for China’s air pollution prospects going forward. ●
11
Leading with integrity
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MARKETS TANKERS
Fuel for thought The worst is over, but the markets remain some way off being sustainable, reckons BIMCO’s Peter Sand
I
f we only go by freight rates levels, it seems as if the worst is behind us for the crude oil tanker sector. Crude oil tanker freight rates recorded in January through mid-May were between $1,357 per day for a VLCC and $12,710 per day for an aframax. On average, it’s been miserable by any standard. By end-September rates ranged from $13,400 to 16,200 per day and suddenly surged in October to crest $50,000 for VLCCs. As we depart from the worst ever crude oil tanker market – make no mistake, the road back to sustainable freight rate levels will be long and winding and not appearing anytime now. If we try to call the bottom for the oil product tankers it gets slightly more complex. An LR1 trading clean on the Ras Tanura – Chiba route recorded earnings as low as $2,077 per day in the second half of August, whereas an MR was quoted at $4,101 per day at end-September. Still some hardship to endure there. The strong markets enjoyed during the six quarters in which the global refinery industry was building inventories globally (Q4-2014
Crude oil tanker demolition activity
Million DWT
Sep. 2013 Nov. 2013 Jan. 2014 Mar. 2014 May 2014 Jul. 2014 Sep. 2014 Nov. 2014 Jan. 2015 Mar. 2015 May 2015 Jul. 2015 Sep. 2015 Nov. 2015 Jan. 2016 Mar. 2016 May 2016 Jul. 2016 Sep. 2016 Nov. 2016 Jan. 2017 Mar. 2017 May 2017 Jul. 2017 Sep. 2017 Nov. 2017 Jan. 2018 Mar. 2018 May 2018 Jul. 2018 Sep. 2018
Million DWT
September 2013 - September 2018
7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
through Q1-2016) seem like ages ago now. Crude oil tankers earned quite a lot at that time, oil products tankers not quite so much. Putting it all into a wider perspective, it makes a lot of financial sense that oil product tanker owners have engaged in a considerable number of sale and leaseback deals this year. Removal of steel from the books to make sure no covenants are breached due to a lack of liquidity is a must-do for some, and a prudent call by others. While being a long way from a freight market where all tankers are utilised at a healthy level – the die-hard optimistic mentality which engulfs large parts of the shipping industry shows itself as clear as ever. Since July, the year-on-year crude oil tanker fleet growth has gone up, as demolition activity has cooled by 75% as compared to the first half of 2018. We have also seen new orders for four aframax and five suezmax tankers in September, on top of the 38 VLCC orders from the first six months of the year. As always in the fourth quarter of the year, hopes are high for a profitable winter. Last year we didn’t get any – for the first time ever I believe. Will it be different 7.5 7.0 in 2018/19? 6.5 Arguments in favour would 6.0 5.5 be: 1) the season can’t fail 5.0 4.5 twice, 2) bolstering of existing 4.0 3.5 oil inventories, 3) additional 3.0 newbuildings will not satisfy 2.5 2.0 demand instantly. 1.5 1.0 Will we see a boost to 0.5 0.0 tanker demand this November as US sanctions against Iran come into force? Most likely not, as all the substitutable grades
VLCC
Suezmax
Aframax
Source: BIMCO, Clarksons
ISSUE FOUR 2018
Panamax
for Iran’s mostly heavy sour crude oil exports are found elsewhere in the Arabian Gulf – leading to very little effect on seaborne demand. Arguments against would be: 1) massive oversupply of shipping capacity, 2) existing inventories will be drawn upon, 3) idle tankers are already in position to cater for higher demand, 4) 2.6m tonnes of oil products (kerosene-type jet fuel, petrol oil, etc) are entangled in the trade war between China and the US, 5) even though crude oil is not being tariffed, Chinese imports from the US have dropped significantly and may stay low. Looking further ahead – the 2020 sulphur cap remains a mystery in many ways. If we are simply putting ULS FO / MGO into tanks that previously held HSFO, will it matter at all in terms of demand? Will trades be altered since different refineries will provide the needed fuel as compared to those which provided it previously? One thing that seems certain however, is that the ability of the shipping industry to pass on the fuel bill to its customers will rely heavily upon a healthy freight market balance. ●
13
MARKETS CONTAINERS
Increasing rates will be necessary Carriers and shippers are heading for a contentious 2019 according to Lars Jensen from SeaIntelligence Consulting
A
Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17
Jul!-18
Oct!-18
Jan!-18
Apr!-18
Jul!-17
Oct!-17
Jan!-17
65 71.53 65 71.35 65 71.79 66 72.38 67 72.31 ISSUE FOUR 2018 67 73.82 65 74.09 65 73.84 65 73.00 69 73.36
Apr!-17
Jul!-16
Oct!-16
Jan!-16
Apr!-16
Jul!-15
Oct!-15
Jan!-15
Apr!-15
Jul!-14
Oct!-14
Jan!-14
Apr!-14
agree with in many cases. But let us traditional, simplistic, ecolook at the underlying mechanisms nomic view would be that leading to this outlook. the price for any product is First supply. This is determined governed by supply and demand. If by the number of vessels available supply exceeds demand, prices drop. and the speed with which they move. This could be either because too They already move very slow and much product was made or because hence we cannot reduce supply much demand falls short of expectations. more using that approach. In other The remedy would be to remove industries, a bankruptcy helps the some of the excess supply or stimuoversupply by removing capacity. late demand by lowering prices. The In liner shipping the vessels do not customer would furthermore expect disappear – instead they are re-inthat if the quality of the product troduced in the market at even lower declines, so should the price. prices, as seen in the case of Hanjin None of this matches the reality where all the capacity was re-introseen in the container shipping secduced within 6 months. Same thing tor – and carriers and shippers are heading for a contentious 2019 where happens by redeliveries to non-operating owners. Lay-ups then? The the mechanism for rate increases have to agreed irrespective of supply, challenge is any carrier doing this unilaterally will take a loss, whereas demand or service levels.(CTS) Clearly Actual Global Rate Rate if compensated index for fuel changes Jan-14 92 81.95 competitors will benefit from the not a message shippers like, or even Feb-14 84 81.95 Mar-14 74 81.95 stronger conditions – not a sensible Apr-14 77 81.78 move for any CEO willing to keep his May-14 Actual rates not increasing in line with 81 81.78 Jun-14 82 81.78 job. Avoiding this requires cross-carfuel cost increases Jul-14 82 81.27 rier coordination, an action which is Aug-14 82 81.29 85 Sep-14 78 80.96 illegal and therefore also off the table. Oct-14 70 79.28 Nov-14 71 77.62 A few times we do see this happen 80 Dec-14 70 74.99 locally – case in point is the transJan-15 81 72.65 81 74.14 75 Feb-15 pacific in peak 2018 – but given the Mar-15 79 73.98 fungible nature of the vessels, such Apr-15 78 74.28 76 75.14 70 May-15 strength will be temporary and local. Jun-15 76 74.78 Jul-15 76 73.60 Demand is for the most part Aug-15 75 71.97 65 inelastic. The freight rate accounts Sep-15 74 71.82 Oct-15 71 71.54 for a tiny fraction of the price of the Nov-15 72 71.16 60 goods being sold (with a few excepDec-15 70 69.92 Jan-16 71 69.17 tions), and hence even large changes Feb-16 70 68.91 Mar-16 65 69.19 in freight rates do not change the Actual Global Rate index (CTS) Apr-16 64 69.42 underlying demand. May-16 64 70.95 Rate if compensated for fuel changes Jun-16 64 71.37 This has led to an inexorable
downwards spiral for the carriers over the past decade. It can be argued that this is partially self-inflicted through excess ordering of ultra-large vessels, but irrespective of the cause, this is the state of the industry. It has left the carriers to be perennially loss-making when matching their cost of capital to their return on investment. This has led to an erosion of service levels, in turn reducing the shippers’ willingness to pay, further eroding freight rates. Then we have the low sulphur rules. Present estimates place the cost at $11.7bn annually for the industry from 2020. Irrespective of whether one believes the past decade of overcapacity is self-inflicted or whether the declining service levels do not warrant increases, the fact remains that the carriers cannot absorb this added cost. 2019 will be the year where carriers will push very hard for these increases – and shippers likely push back equally hard. But failure to agree will plunge the carriers into such heavy losses in 2020 that we might well see a panic reaction similar to the one in the financial crisis of massive lay-ups and severe service disruptions. The shippers’ choice is therefore to either agree an enforceable way with the carriers during 2019 in which to take increasing fuel costs into account beyond 2020 – or await severe service disruptions in 2020 and have a solution pushed upon them. ●
15
MARKETS OFFSHORE
The mother of all offshore drilling rig owners The merger between Ensco and Rowan will change the entire offshore drilling industry, observes David Carter Shinn from Bassoe Offshore
I
f Ensco had a goal to become the world’s most powerful offshore rig owner, it nearly achieved it in October with thedeal to merge with Rowan in an all-stock transaction. The company will operate 28 floating rigs and 54 jackups. After taking its first step into market consolidation last year with the takeover of Atwood, Ensco decided it was ready to execute a supersized deal. Rowan offered the company just that. Ensco hasn’t just become the largest drilling owner by assets. It’s getting one of the most interesting and globally reaching offshore rig fleets in the market with Rowan. It’s getting the coveted ARO Drilling joint venture with Saudi Aramco (which owns another seven jackups and will build 20 more). It’s getting synergies, economies of scale, and more control over an industry that has suffered from an overly fragmented landscape Largest rig owners by # of rigs
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and oil companies’ drive to cut costs. The only thing that Ensco hasn’t gotten from this deal is access to harsh environment semisubs. If there’s one place you want to be right now (and in the future) it’s in North Sea floating rig market with its imminent shortage of rigs and prospect of much higher day rates. Once Ensco rationalises its new fleet, we wouldn’t be surprised to see it make a move into the segment. And as part of its fleet rationalisation process, we expect more scrapping and possibly further smaller-sized rig acquisitions. Two of the jackups still listed in Rowan’s fleet, for example, the Rowan California and Gorilla IV are expected to be removed from the combined fleet already (they’re not counted in the 54 jackups Rowan referred to and will likely be divested shortly). Ensco has at least four older jackups, which could be retired soon too. What does this deal mean for the rest of the industry? If you want to continue competing, you’re going to need to do something. As certain rig owners get bigger or more specialised (like Ensco and Transocean), others will find it difficult to maintain competitiveness due to their smaller size. Everyone knew the offshore rig industry needed to consolidate, and it’s been a relatively slow process so far. But every time more of it happens, it further alienates those who aren’t participating. As the larger players gain the size to justify scrapping, they’ll set a higher standard for specifications, equipment, and efficiency that will
allow them to continue building an advantage over others. We expect that deals like the ones we’ve seen from Ensco, Transocean, Borr, and Northern Drilling (along with Seadrill) will not only entice, but force, more rig owners to rethink their strategy and become more proactive in a changing industry. The offshore market is known to transform suddenly in a sort of hurryup-and-wait manner. Right now, it’s time for others to hurry if they want to keep their place in line. ●
“Digitalisation should not be seen as an additional cost” — Roger Holm, president of Wärtsilä’s marine solutions
maritime ceo
MARKETS FINANCE
‘Scrubbers are a cheat and it’s a travesty green banks are financing them’ Dagfinn Lunde is tasked with making predictions for next year but can’t help discussing 2020
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s is customary at this time of the year the editor tells me to stick my neck on the line and make my predictions for 2019. Let’s start with the hottest game in town at the moment – liquefied natural gas (LNG) where rates have zoomed up in the final quarter with reports of spot fixtures in excess of $200,000. Looking at the global orderbook – and the longer time it takes to build LNG carriers – I’d say there’s a good 18 months of gas left in the LNG run. This is the first time in my career where I have seen LNG exporting facilities coming onstream ahead of the new ships coming out of the yards, thanks largely to all the action out of the US. Historically, ships have entered service and confronted production line delays. Moreover, the growth on the demand side led by Asia and China in particular has been better than even the most optimistic could have predicted. On dry bulk I reckon we’ll see a small improvement over the course of the next year, but honestly I do not want to see a big pickup in this market, which to my mind is already at sustainable levels. Any further significant improvement would inevitably lead owners, like bees to honey, to order more ships, which is not what is needed. In the tanker segment, products, which are still suffering terribly, should finally pull through to
ISSUE FOUR 2018
manageable levels during next year. The pain is nearly over. Crude tankers, meanwhile, this year have been no finer example of the volatile nature of the industry we are in. VLCCs suffered their worst ever opening four months of a year in 2018 and yet are closing out the year in sudden good health. Iranian sanctions have – and will continue to – help prop up the segment and I’m confident that despite some likely jitters early on next year with a slew of deliveries due in the first quarter overall 2019 promises to be solidly in the black for crude. On the container side, I expect any improvement to be minimal as the ratio between trade growth and GDP growth continues to be low. The ongoing tariff wars are unlikely to disappear next year, but history tells us such spats are often beneficial for shipping. Extra tonnemiles are already evident in many trades, especially soya beans. Any war or political disruption tends to be positive for shipping. Enough of 2019, the truth is I am keener to discuss 2020 – it is the topic we cannot avoid, the sulphur cap and apologies for the following blast, but it is a topic that makes my blood boil. Shipping organisations have failed to deal with politicians and let regulators do things that are not always fit for purpose. We have known this cap was coming for years. Shipping bodies should have advised
IMO to get the oil refineries onboard much earlier. The leaders of the shipping industry have failed to live up to the expectations of the political environment, something that happens all too regularly in the maritime industry. Why not embrace the new sentiments and do something positive about it instead of resisting and procrastinating. I am also disappointed that Port State Control will now control and penalise ships coming in with different fuel. Why not just control the fuel sold in the harbours so nobody gets the wrong fuel? It works on land – I do not see any cars with scrubbers. Scrubbers are a cheat and it is a travesty – though sadly not surprising – the so called ‘green’ banks have been happy to extend credit lines to their biggest shipping clients to buy these polluter diluters. Sure, there might be a very brief financial advantage – and I mean a matter of months – for bigger ships with scrubbers come January 1, 2020, but rather quickly I feel low sulphur fuel and slow speeding will win the day. Here ends the lesson! ●
17
EXECUTIVE IN PROFILE DEBATE
Is STCW no longer fit for purpose? Shipowners and managers want to make comprehensive changes to how we go about training crews
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ou have to hand it to Esben Poulsson and the team at the International Chamber of Shipping (ICS), they certainly know how to set an agenda. While the shipowning body has spent much of the year focused on environmental matters this November Poulsson chose the big CrewConnect event in Manila to change tack and seek debate about dramatic changes to how seafarers are trained. Poulsson has called for a comprehensive overhaul of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW), and his arguments have been met with widespread approval from a range of senior executives contacted by Maritime CEO. Created by the IMO in 1978
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STCW has been updated a number of times since, most recently in 2010. The ICS boss argued that the standards of competence within STCW are not appropriate for the standards now desired onboard and suggested that it was a problem of international oversight of implementation. STCW has become “top-heavy and cumbersome,” Poulsson said, going on to say the convention was no longer fit for purpose and was unlikely to deliver the competent seafarers the industry needs going forward.
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“The pace of both technological and regulatory developments will make the next revision critical,” Poulsson said of any changes to be made at STCW. The ICS chair highlighted four possible high-level goals or priorities he’d like to see in the next comprehensive revision of STCW. First, any revision should continue to provide an international regime of recognised standards for seafarer training and certification. “Regional requirements constantly threaten global standards. Shipping companies and seafarers
Rapid technology development will set a totally new set of requirements regarding seafarer competence and knowledge
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maritime ceo
EXECUTIVE IN PROFILE DEBATE
cannot afford for this threat to be realised,” Poulsson observed. Secondly, any STCW revision must deliver competent seafarers to meet the industry’s needs. “We own and operate ships, not maritime education and training institutions. Shipping companies are the customers of training providers and require competent seafarers. There have been recent examples where training has been manufacturer and training industry led, rather than user or customer led, which must change,” the shipowner boss stressed. Thirdly, Poulsson, who is also president of the Singapore Shipping Association, said a revised STCW must respond and adapt to technological developments, including increased automation of ship systems, equipment and operations. It should provide a structure of sufficient flexibility and adaptability to “hit the moving target” of a changing world fleet and may need to develop a more modular approach to training and competency accumulation and certification. Finally, Poulsson said a revised STCW must seek to improve transparency and robustness of oversight of implementation. The current STCW Whitelist is not transparent enough and does not contain robust monitoring of national implementation to ensure STCW delivers quality seafarers, Poulsson argued. At the same event AngloEastern’s Captain Pradeep Chawla agreed with Poulsson on the urgency for change, saying: “The fundamental need is that any regulation must keep up with what’s happening in the industry. In my view, there has to be a comprehensive review of all IMO regulations to see what’s the current issues with seafarers.” “It is now time to revise, revamp and relook at the entire process of seafarer training. Understanding the shipping reality today means addressing requirements rather than learning from the training,” said Fared Khan, marine director of
ISSUE FOUR 2018
“
There has to be a better way to assess and ensure competency
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Wallem Shipmanagement. “I think the future will go much more towards sealess operations, we have to reconsider the entire concept of STCW, which has to be made in a different way,” said Torbjorn Eide, vice president of Klaveness Ship Management. “As a shipowner and ship operator, STCW is a prerequisite of our operations. But we live by the customers who are actually raising the bar. So it’s not the STCW that makes us good, it is our customers,” Eide maintained. According to Eide, STCW sets restrictions on his company when it wants to optimise safety standards by using digital tools. “It would be a completely different mindset when it comes to marine safety in the future as more engineering jobs could be moved to be shore-based,” Eide reckoned. Speaking with Maritime CEO, Frank Coles, the newly installed CEO of Wallem Group, says change is needed, but anything that passes through IMO risks being out of date by the time it is legislated. “ While the regulations are possibly outdated they only set out a minimum standard,” Coles points out. Coles, famous in shipping for being a digital provocateur, questions how to write a new STCW of minimum training requirements when the environment and technology in use is changing rapidly. “The usual manner is to create a generic, broad regulation open to interpretation and abuse. This is the case with the current STCW and other regulations,” he maintains. Carl Schou, another shipmanager with a keen eye on future technology necessities, has a similar point of view with his Wallem counterpart. The CEO of Singapore-based Wilhelmsen Ship Management says, “ STCW must reflect the challenges we are seeing
today and tomorrow in shipping. The rapid technology development we are seeing will set a totally new set of requirements regarding seafarer competence and knowledge and this must be reflected.” He also applauds Poulsson for saying that it must be owners and managers – not manufacturers – who set the agenda. Schou says it is also important we get a more robust global regulatory framework, observing: “We are seeing today member states who fall far out of the scope of implementing today’s STCW – and they are still on the white list.” Another Singapore shipmanager, Vinay Gupta, managing director of Union Marine Management Services, reckons the correct future proofing of training techniques can make shipping safer, if however there are inconsistencies in the new legislation trouble will arise. “A chain is as strong as the weakest link,” quips Gupta. Arthur Bowring, a consultant and former head of the Hong Kong Shipowners Association who knows the intricacies of STCW better than most, reckons a key problem with the existing legislation is in the competency standards that, he says, do not actually indicate competency. “There has to be a better way to assess and ensure competency,” Bowring urges. Many companies have their own assessment of competency with sea time in a rank prior to promotion, but it has been a common issue that once seafarers gain a certain proficiency level they then demand promotion to that level. If they do not achieve such instant promotion, they threaten to leave for another company that will offer them the promotion they seek. “STCW could be revised to ensure a more consistent approach to competency,” Bowring concludes. ●
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IN PROFILE
Harald Solberg p.33
In profile this issue Every issue Maritime CEO’s correspondents around the world make contact with leading owners to gauge their thoughts. Interviews are carried over the next 14 pages
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maritime ceo
IN PROFILE
Sveinung Støhle p.31
John C Lyras p.25
Guo Dongsheng p.29
Ed Buttery p.22
Phrixos Papachristidis p.27
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21
COVER STORY
Handy timing Ed Buttery has presided over a stunningly fast fleet buildup at Taylor Maritime in Hong Kong
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link and you will miss it. Fleet growth at the 2014-founded Taylor Maritime has been astonishing this year with a canny team traipsing the world to inspect and pick up bargain Japanese-built handysize bulkers. At the start of the year the Taylor Maritime fleet stood at 16 ships; as we go to print
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that figure has leapt to 28 with plenty more vessels being inspected day in, day out. Still, with a Buttery at the helm and a growing host of well-known names advising and investing in the Hong Kong vehicle, the smart acquisitions look to have been timed just right.
Ed Buttery founded the company, named after his wife Paula Taylor, in January 2014, having spent the previous two years with Nordea Bank. He is the son of Chris Buttery, the famous founder of Hong Kong bulker giant Pacific Basin. “We felt the timing was good earlier this year to acquire more maritime ceo
IN PROFILE
ships since interest in buying from competition was scarce and we had some old friends in Japan with whom we were able to transact privately as with most of the deals we have done,” Buttery says of the busy year he and his team have had. There is no ideal fleet size in mind for this young company, Buttery maintains. Ships continue to be inspected but there is no urgency to bulk up. “With 28 vessels, we now have scale, so we remain open to the right opportunities but we are in no rush,” Buttery says, elaborating: “The risk reward equation is the main dimension along which we view ship investments and with the market
ISSUE FOUR 2018
outlook as it is, we feel that we have a good level of exposure and can create value for investors from where we stand now. That being said, we continue to inspect ships and are in a position to be opportunistic where we see value. Overall, we do believe there remains considerable upside even at today’s prices.” On the handysize markets, Buttery says he’s cautiously optimistic on prospects for 2019. “What we are experiencing in our business is that trade patterns are changing, which is not necessarily to our detriment,” he says, observing that minor bulk demand is looking healthy in the coming years and supply is limited. “We expect the market to improve, with bumps along the way, and we hope our timing will prove fortuitous but of course we aren’t clairvoyants and can only rely on the research we are doing and the track record and experience we draw upon from our investors, directors and advisors,” the CEO says. The team Buttery has assembled around him is impressive with some very notable signings this year. Alastair Macaulay, a wellknown lawyer in Hong Kong, has come onboard as a senior advisor while Esben Poulsson, chair of the International Chamber of Shipping and president of the Singapore Shipping Association, has recently become chairman of the company’s technical management partner, Tamar Shipmanagement. Tamar specialises in third party management of geared ships. Taylor also has Ryoji Mochizuki, the ex-president of Oldendorff Japan (and ex-Pacific Basin) who advises the company on all things Japan. He first started working with the Buttery family in the late 1980s. The company’s deputy CEO is the well regarded Alex Slee whose past career included working for the likes of Richard Hext and Bjorn Hojgaard. At the end of last year Buttery’s father became group chairman overseeing all of the investments both within and outside of shipping. Buttery’s sister, Camilla, has also
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With 28 vessels, we now have scale, so we remain open to the right opportunities but we are in no rush
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joined the fast growing team. “He is an integral part of keeping us all in check and nothing we have done would have been possible without him,” the younger Buttery says of his father, adding: “I am so lucky to have a father who remains constantly available for advice. Dad wasn’t as involved at the start as he is now but having him around means I am able to run with my ideas all the whilst having someone with incredible experience to oversee me.” With his father’s track record there has been speculation that Taylor Maritime will set itself up for an IPO soon but Buttery seems to be in no hurry, saying that an IPO is not an end-goal in itself and the current conditions do not seem quite right for a listing. Raising capital to date does not seem to have been a problem in the first few years of Taylor Maritime’s existence. “So far we have only taken on very limited debt to expand,” Buttery says. “We are risk averse and are in the fortunate position to have been able to continue as a mostly equity financed business. Capital structure responsibility remains at the forefront of our minds.” The Buttery shipping dynasty looks like it is in safe hands. ●
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Taylor Maritime Founded in 2014 in Hong Kong, the Ed Buttery-led company has amassed a fleet of 28 handy bulkers within five years.
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IN PROFILE
How European shipping can survive in the 21st century Greek owner John C Lyras outlines the hurdles he and his peers face
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egulations, desulphurisation and shipbuilding oversupply are the three main challenges the European shipping industry must confront in order to survive on the global stage, according to John C Lyras, principal of Paralos Maritime Corporation and a very well known face in shipping since he started out in 1975. Lyras comes from a Greek seafaring family with a tradition in shipping that goes back four generations. In his time Lyras has been president of the Union of Greek Shipowners, president of the European Community Shipowners Associations (ECSA) and today he is still vice chairman of the International Chamber of Shipping (ICS). He is also a founder member of Hellenic Marine Environment Protection Association. Talking about the main challenges the European shipping industry is facing today, Lyras mentions “competitiveness” as the only way to survive. “This is the only characteristic which allows us to still command 40% of the world fleet,” he tells Maritime CEO. Lyras states that the competitiveness of the fleet depends very
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Paralos Maritime Corporation Shipping vehicle of John C Lyras, a scion a famous shipowning clan from Oinousses, a tiny set of Aegean islets, whose maritime heritage stretches back to 1850.
ISSUE FOUR 2018
much on the taxation regime in shipping, the tonnage tax system. “I think the current regime of taxation in Europe has to remain as we are going to remain as Europeans in this business, and we are in an internationally competitive situation,” he says. Another great challenge for shipping companies today is regulation, which affects the industry in safety and in the environment, especially decarbonisation and desulphurisation. For Lyras the lack of visibility of available fuels come 2020 is infuriating him. “For me,” he says, “it’s unacceptable we do not know what products the bunker suppliers are going to supply before the 2020 deadline. This is not happening in other sectors and I don’t know why it has been allowed to take place in our industry. Is it easier to fit 40,000 ships with scrubbers or a hundred refineries? Why are the ships asked to desulphurise fuels?” The seasoned Greek shipowner says regulators have failed to hold the right, timely dialogue between all parties – oil companies, shipowners and shippers. “The regulators should have
tried to harmonise those interests rather than exacerbate them,” Lyras maintains. “The shipping industry has not got the technology available to reduce emissions by 50% before 2050 with growing trades and populations.” Looking at the current markets, Lyras says he has never seen such polarised sectors where there’s one segment doing very well and another one very bad. “In the past usually it was good for everybody or bad for everybody,” he recalls. In the last 10 years that has all changed with dry bulk in the dumps after 2008, and tankers doing better until the last 12 months where the roles reversed. Lyras reckons part of the reason for this bifurcation of earnings between the two sectors is down to the huge amount of speculation in shipping these days via derivatives, which he believes distorts the markets. “Today it’s expectations that create the market rather than the real supply and demand picture,” Lyras reckons. The Greek shipowner concludes his chat with Maritime CEO warning that the biggest problem shipping faces, something he believes has been the case since the 1980s, is the overcapacity seen in shipbuilding. “It’s very easy to supply the market with ships when the market is good and oversupply it when it goes down. Furthermore, there is no way to date to regulate the shipyards that have been opened in Korea, China and Japan,” Lyras says, concluding: “This is an endemic problem for shipping which obliges shipowners to be more conservative since is very easy to oversupply the market.” ●
25
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Expansion across multiple fronts Hellespont’s CEO is ready to add ships, both owned and managed
Papachristidis, adding how as a manager the company brings a genuine “owner’s intense scrutiny” to all operations. Today, Hellespont manages 25 vessels, made up of eight tanker, eight bulk carriers and nine OSVs. These 25 include eight ships that the company has ownership interests in and 17 ships under third party management. Hellespont also provides crewing services for a further 30 ships. The group employs 150 shorebased staff in Hamburg, Athens, Singapore and Manila.
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Hellespont has weathered the KG storm. The group is profitable
P
hrixos Papachristidis, grandson and namesake of Hellespont’s founder, became CEO at the age of 28. That was eight years ago now, a tenure at the top during which he has had to endure one of the worst storms to
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Hellespont Blue chip family Greek owner. Founded in 1946 with third generation now at the helm. As well as its owning business, it entered third party shipmanagement six years ago.
ISSUE FOUR 2018
ever hit the shipping markets. Now, however, he feels the worst is over and the time has come to expand his 72-year-old company. “Hellespont has weathered the KG storm. The group is profitable, and free of any debt or residual obligations. It is still 100% privately owned by the Papachristidis family,” Papachristidis tells Maritime CEO. While shipowning remains Hellespont’s main vocation, from 2012 it decided to diversify into third party shipmanagement. “We started offering these services to friends who quickly became partners. We think our background, our history, our modest size affords us our flexibility which is what attracts our clients,” says
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“We are alert to opportunities and working to expand all sectors of Hellespont’s operations: owning, managing and crewing,” Papachristidis says. However, on the management size, do not expect massive growth with the Greek telling Maritime CEO he prefers to be selective, in line with Hellespont’s emphasis on quality rather than quantity. As far as growing the owned fleet, there’s plenty of projects under investigation. “We see opportunities coming from distressed assets and continuing yard overcapacity: we are identifying the right projects,” Papachristidis says, identifying LR and MR tankers in particular, both newbuilds and secondhand. The Papachristidis family started in shipping in 1946 and was established by Papachristidis’s grandfather and namesake. Papachristidis’s father, Basil Phrixos Papachristidis started in the business in 1965, but only took over when his grandfather died in 1981. After university, the younger Papachristidis went to work for brokers Poten & Partners, before joining Hellespont in 2007 and becoming CEO in 2009. ●
27
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Climbing up the charts Two brothers in Fujian province have built up a liner company from scratch that is now the 14th largest in the world
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ntong Holdings, the parent group of Chinese domestic container shipping major Ansheng Shipping and logistics service provider Antong Logistics, is on a major expansion track as the company looks to develop itself into an integrated supply chain and logistics service provider. For those that have not been watching this low profile carrier’s growth – made more impressive, of course, with consolidation in the liner sector - Antong now controls the world’s 14th largest liner in the world. Hailing from Quanzhou in Fujian province, Guo Dongsheng and his brother Guo Dongze started Ansheng Shipping in 2002 and Antong Logistics in 2005, and integrated the two firms into Renjian Group, which was named after their father. In 2016, Antong Holdings joined the Shanghai Stock Exchange via a backdoor listing deal after the company joined the restructuring of chemical trader Heihua Group, and integrated all the shipping assets of Renjian Group. Guo Dongsheng, president of Antong Holdings, says the company is now making efforts to complete its intermodal logistics network to
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Antong Holdings Started with one vessel in 2002, Antong now controls a fleet of 115 ships with a total capacity of 140,325 teu, ranked 14th worldwide by Alphaliner.
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provide comprehensive container logistics services. This month, the company’s $473m fundraising plan was approved by the China Securities Regulatory Commission. Under the plan, the company will use the proceeds for the development of two intermodal logistics bases in Tangshan and Quanzhou and the acquisition of twelve 644 teu feeder boxships. The vessels will be built at three domestic yards - Fujian Southeast Shipbuilding, Fujian Mawei Shipbuilding and Nantong Xiangyu Shipyard. “The two logistics bases in Tangshan and Quanzhou will further integrate different resources in the supply chain including bonded warehousing, cold chain, processing, financial service and information system, and eventually lower the logistics cost for clients,” says Guo. According to Guo, there is still huge room for the development of intermodal container services in China, as the total sea-rail container transport volume only accounts for 1.5% of the total port container throughput in the country. He adds
that currently Antong Holdings has developed over 130 sea-rail transport routes covering all the major ports and their hinterland in China. The company is also expanding its network further into inland rivers using container barges. “The Belt and Road Initiative will bring huge opportunities for international logistics and the company will be well prepared when the opportunities come,” Guo says. Antong Holdings has a wide range of vessel sizes ranging from 3,600 dwt to 60,000 dwt, which gives the companythe flexibility to reasonably deploy tonnage to diversified market demands. “We have set a long-term vision to develop an efficient and ecofriendly shipping fleet to ensure the sustainable development of the shipping business. In the meantime, we will keep all the business segments to create good synergies for each other,” Guo concludes. The company reported a profit of RMB512m ($73.5m) in the third quarter of this year, representing a strong year-on-year growth of 39.93%. ●
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Flexible FSRUs Höegh LNG is well placed to profit from the current surging gas markets
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veinung Støhle, president and CEO of Höegh LNG, is in a happy place. As the year comes to a close the tightness in the LNG market, which he had been predicting, has seen rates soar into unchartered territory. The Höegh LNG fleet is well placed to prosper from this sudden uptick. While the Höegh LNG core business is and will continue to be FSRUs, these ships are also well suited to serve as LNG carriers as well. One of the company’s vessels is currently trading as an LNG carrier on a short contract, underscoring the flexibility of Höegh LNG’s assets. “While FSRU projects take time to develop and may be delayed, we can employ our vessels as LNG carriers in between when this adds up,” Støhle points out, adding that FSRUs are also flexible in that they can serve as hubs for distribution of LNG either by breakbulking cargoes for smallscale distribution by smaller carriers, by reloading LNG for use as marine fuel, or for onwards distribution onshore. Støhle admits that among the global fleet of FSRUs there are a few available units at the moment, however, he claims that there are many different levels of quality within the sector and his modern fleet should ensure Höegh LNG is capable of
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Höegh LNG Norway’s Höegh LNG is a pioneer in LNG transportation with more than 40 years of experience. Currently owns and operates four FSRUs and two LNG carriers.
ISSUE FOUR 2018
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The market will tighten considerably in the next two to three years
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competing for the best projects. “Looking at the steep growth in global LNG we’re optimistic that the market will tighten considerably in the next two to three years,” the Norwegian national says, adding: “Going forward I think it’s worth noting that there is a strong drive to replace coal with LNG and that the growth of intermittent renewables comes with a need for flexible back-up capacities. In addition comes the obvious point that certain parts of the world, not least Asian economies, are growing fast and need more and cleaner energy.” Further into the future, Støhle admits some concern. “The question is,” he ponders, “what happens if the fleet keeps growing while the increase in liquefaction capacities flattens around 2022?” In terms of business diversification, Höegh LNG has recently
invested in the small-scale market through a new company called Avenir LNG that it has launched together with Stolt-Nielsen and Golar LNG. With more than 100m tonnes per annum of LNG hitting the market over the next few years and new projects seeking to add to these volumes, resource holders are increasingly interested in supplementing their efforts in large markets with entry into smaller markets, Støhle explains. “There are actually many more small markets for LNG than there are large ones, and the aggregate potential for small-scale supply is substantial, which is why we are very optimistic that Avenir LNG will be a great success,” Støhle concludes. ●
“There will always be bad owners” — Andrew Wright, secretary general of the Mission to Seafarers
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A desire to explore Harald Solberg, CEO of the Norwegian Shipowners’ Association, is part of an exciting new generation of pioneers in the Nordics
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arald Solberg, CEO of the Norwegian Shipowners’ Association, sees a world of opportunity from his office overlooking Oslo. Hearing the 42-year-old outline a career that has so far taken in politics, media, the Norwegian Royal Palace, and, of course, shipping, is a little surreal. The relatively new CEO of the NSA is the embodiment of a transition taking place in Norwegian shipping and, arguably, the industry as a whole. In what was once regarded as the traditional stomping ground of slightly more ‘mature’ individuals, Solberg and other leading figures – such as NSA president and CEO of Klaveness Lasse Kristoffersen and Wilhelmsen CEO Thomas Wilhelmsen – are putting a fresh face on the business. In fact four of the 10 NSA boardmembers are under the age of 50, with one still in their 30s. But it’s not simply a matter of youth; it’s more about attitude, as Solberg is keen to stress: “Shipping is evolving and we have to evolve with it,” he states. “Once this was an analogue industry, transporting cargo from A to B. Now it is an integrated part of supply chains, with increasing digitalisation empowering better decision making, unlocking new value and presenting opportunities beyond traditional business practices. This is an incredibly exciting time to be involved in shipping and we, in Norway, are determined to secure our place at the leading edge of developments.” Solberg took up the position as NSA CEO on January 1, after close to two years at the royal palace as chief of the royal secretariat. Prior to that
ISSUE FOUR 2018
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The greatest challenge facing us, and society in general, right now is sustainability
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he’d enjoyed almost five years at the NSA, rising from the role of director to that of deputy CEO. “Norway has the second largest offshore fleet in the world,” he notes, “so the low rates and demand in that segment impacts more upon us than other key shipping nations. Tankers and chemical tankers also face challenges, but there’s more favourable conditions for dry bulk, while our short sea members are
more positive. It is, to say the least, a mixed market.” Mention of 2019 doesn’t prompt a surge of optimism, with talk of Trump, trade wars and increasingly protectionist attitudes, but mid-term signs and long-term prospects see Solberg’s smile, and that word ‘evolution’, return. “Norwegian shipping has always evolved to embrace new opportunities,” he says. “From discovery, to trade, transport and then into offshore. Now, for example, that offshore expertise is being transferred to renewables, with a new breed of service and construction vessels (continued on page 35)
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IN PROFILE
tailored for the wind industry, and into aquaculture and fish farming. The future holds immense opportunities for mining and mineral extraction, where we can bring our strong subsea pedigree into play, and there’s real excitement around the development of the expedition cruise segment.” Here Solberg sees possibilities for Norway to establish a mantle as a leader in specialised vessels with an emphasis on quality rather than volume.
Spot on
NSA Founded in 1909 and today has more than 150 members who control close to 2,000 vessels.
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Norwegian shipping has always evolved to embrace new opportunities
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“I genuinely think this segment could be a star performer for Norwegian shipping,” he stresses. “In a way it sums up what defines us; high quality, ambition and a desire to explore. These are values intrinsic to our success as a small nation, with a large industry impact.” Solberg is keen to position Norway and its 25,148 km long coastline as a ‘laboratory’ for new ideas and technology, as exemplified by the opening of the world’s first autonomous shipping test-bed in Trondheimsfjord in September 2016, the current growth of battery powered ferries, and the first development of a hydroelectric ferry, to be launched in Rogaland in 2021. He believes that new technology
can be conceived, tested and made ready for market here – for both the maritime and ocean industries – before being scaled up for global release. “With the strength of our cluster we can pioneer new ways forward,” he enthuses, adding, “and that is crucially important with regards to the greatest challenge facing us, and society in general, right now – that of sustainability.” Here, again, we see that new age, approach and energy in effect. ●
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MARITIME CEO FORUM
Sulphur cap like playing poker blind with half the cards Returning to Hong Kong in October the VIP shipowner gathering had a special 2020 Vision panel on shipping’s topic du jour
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laying poker blind with half the cards,” was how moderator Thomas Söderberg, the founder of Tribini Capital, introduced the choices facing owners with the global sulphur cap less than 15 months’ away. In a one-off special 2020 Vision panel at our latest Maritime CEO Forum in Hong Kong, owners, managers, class and flag states debated shipping’s topic du jour. Bjørn Højgaard, CEO of shipmanagement giant Anglo-Eastern, told delegates installing scrubbers was “insane”. “If we had chosen chosen to solve this issue at source, via the refineries, it could have been done for $30bn,” Højgaard said. He warned that there would many maintenance
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issues that had yet to be fully understood by the industry at large. Compliant fuels will not be blendable between one supplier and another, even between two different bunker ports, the shipmanager claimed, adding that they may also be unstable and have a short shelf life. “We see today ships changing fuel from one to the other have had blackouts. There are safety issues,” Højgaard said. Højgaard also predicted a global ban on open loop scrubbers within the next three to five years. Jack Hsu, managing director of Oak Maritime and chairman of the Hong Kong Shipowners Association (HKSOA), also revealed he was not a fan of scrubbers “I too am very much against
scrubbers,” he told the audience at the top floor of the Foreign Correspondents’ Club in Hong Kong’s Central district, adding: “But as a public company from a hedging perspective we need to look into them.” Nick Brown, marine and offshore director at UK class society Lloyd’s Register, warned those attending the exclusive, by invitation only gathering that it was now “increasingly challenging” to get good quality scrubbers installed in time for January 1 2020. He said ships that burn 10,000 tons of fuel a year or more were likely to be the “magical figue” to opt for scrubbers. Scott Bergeron, CEO of the Liberian Registry, revealed how his organisation has asked coastal states declare their fuel availability in the maritime ceo
MARITIME CEO FORUM
run up to the sulphur cap kicking in. “Why do owners have to gamble?” Bergeron said. “We would like to see more transparency about what is available at ports around the world.” Bergeron predicted open loop scrubbers would face greater regulation. For closed scrubbers there was also many issues still to solve, he said, such as where to discharge, how to store the waste onboard, and how to train crew. “Coastal states are not doing enough to prepare for this,” Bergeron insisted. LR’s Brown also voiced his concern about the extra workload there will be on the crew. He also predicted most ships will not have large enough fuel tanks. One upshot of the cap, Oak Maritime’s Hsu predicted, would be less laden ships, and more ships waiting in port, whereby the ton/mile situation could shoot up. The session heated up as Højgaard labelled the whole IMO 2020 debate a “red herring”. “IMO 2050 on decarbonisation is the big deal,” he insisted, saying that shipping kept on doing incremental changes without looking at the big picture with different technology to decarbonise. Højgaard said he felt hydrogen could be shipping’s real fuel of the future. “2050 will be shipping’s biggest challenge,” concurred LR’s Brown, claiming: “2020 will seem easy compared to that.” From the floor, Mats Berglund, CEO of Pacific Basin, and a strong opponent of scrubber technology, argued that all scrubbers do is get ships to speed up and use more fuel. “Every operator with a calculator makes a voyage calculation and decides the speed on two factors – the freight rate and the price of bunkers,” he explained, adding: “To argue that sulphur is environmentally friendly is incorrect as they will consume more fuel and go faster. It comes across as promoting scrubbers as a clean initiative, but it really is not, as they go fast. HFO should have been banned overall.”●
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CEO Central
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MARITIME CEO FORUM
Private versus public dominates dry bulk debate Famous names take to the stage
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he merits of being either a private or public company dominated much of the discussion during the dry bulk panel. An all-star lineup of top dry bulk owners took to the stage, moderated by Mandarin Shipping’s Tim Huxley for a lively debate. Mats Berglund, CEO of Hong Kong-listed Pacific Basin, made the case for being a public company, telling the audience: “There is a demand for quality. There is a flight to bigger companies.” Berglund said that as a handy owner and to be a large operator in minor bulks scale is important. To operate a global minor bulk business he said it was vital to have worldwide offices, a large fleet and economies of scale. Kenneth Koo, chairman and CEO of Hong Kong private bulk company TCC Group, said that there will always be a role for family companies. “We have learned to know our limits. We have seen so many ups
and downs. We have come through it. We never look at borrowing more than 50%,” Koo said. “Private is much better than public,” argued Vikrant Bhatia, CEO of Hong Kong bulker company KC Maritime. “Decision making is quicker and you are not having to look at your share price all the time,” he added. John Michael Radziwill, CEO and chairman of Monaco-based GoodBulk had some simple advice for the many owners attending the by invite only gathering. “The best route is to protect your balance sheet,” he stressed, adding: “Too much debt is greedy. Keep your balace sheet iron clad and at some time you will make some serious money.” Having a low leverage was key, he insisted. Overall the panel was optimistic on the markets with some caveats. Radziwill said the Q4 rally has happened and the cape FFA market was no longer “boring”. “Things are looking better,”
agreed Pacific Basin’s Berglund, who reckoned slow, steady growth might avoid a rush to order new ships. “It is absolutely insane to order new ships,” Radziwill chimed in. TCC’s Koo, however, questioned the long-term sustainability of any bulk run, suggesting that timeframes had become much shorter. Coal was identified by KC Maritime’s Bhatia as being the big driver of rates this year. ●
Chemical tanker spotlight DR ADAM KENT, managing director of UK consultants Maritime Strategies International (MSI), kicked off this year’s Hong Kong forum with a quickfire Q&A session in which he picked out larger, stainless steel chemical tankers as among the ships likely to appreciate most in the next two years. On China, Kent was bullish on growing ton/mile demand for tankers while he was less optimistic on the dry bulk side where he saw a slowdown in Chinese imports in the coming years.
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Kent called the bottom of the tanker sector, albeit it was likely to “bumble” along the bottom for a while. “On the tanker side, we will be stay at the bottom for a while. We have seen the crude tanker one-year TC rate start to climb up which shows positivity,” Kent said, noting how the VLCC sector this year will see negative fleet growth for the first time since 2002. On scrubbers, a topic that featured prominently throughout the forum, Kent said owners should
either install them from day one, if they are confident there will be a difference of fuel prices, or for the more cautious wait three or four years to let the dust settle as he said there’s still a few issues with the technology. ●
maritime ceo
MARITIME CEO FORUM
‘The bottom has turned and it bodes well for next year’ The fragile tanker recovery must be protected
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anellists at the tanker session stressed the need to protect any imminent recovery in the sector. Featuring a banker and three owners, the panel was of the opinion that tankers are now bottoming out finally, however any hope of a sustained recovery will need all market participants to act responsibly as fundamentals remain uneven. Bob Burke, head of Ridgebury Tankers, said he was positive the sector was set for a turnaround. “It seems as though as if demand and supply is getting there. Trade patterns have changed with more ton-miles. Deliveries have not been as fast as expected and the scrap price is holding up,” Burke said. Morten Arntzen, chairman of chemical tanker giant Team Tankers International, was bullish on prospects for his sector, made better by the consolidation seen his segment. “We think the bottom has turned and it bodes well for next year,” Arntzen said. Much to Arntzen’s joy, Domenik Nizet, senior vice president at DVB bank, picked out larger, stainless steel chemical tankers as his pick of the tanker segment. David Palmer, recently installed as CEO at Hong Kong’s Wah Kwong, cited recent positive chartering data, which would suggest a turnaround in tanker fortunes.
Conceding 2018 had been a “horrendous” year to date, Palmer added a bright note, saying: “We are starting to see, for the first time, in all the three tanker sectors, where charter rates are higher this month than the same month in the previous year. That’s important because it takes out the seasonal factors, and this is the first time in 32 months we have seen this happen.” Palmer went on to urge his peers to ensure any fragile recovery was not steered off course. “We’re in the very bottom of a tanker cycle and these things end when people do the right things,” Palmer told delegates made up of top shipping CEOs from around the world. “A note of caution as we come out of the tanker bottom, we are going to see a lot of volatility and we will need to conserve cash flow to counter that volatility as we come
through a recovery. We need to act cautiously and protect that recovery,” he stressed. On further consolidation within the tanker sphere there was a mixed feeling about the benefits. Team Tankers’ Arntzen was adamant further mergers were beneficial, saying: “My view on the tanker space is that consolidation is absolutely necessary and has to happen. The world needs big, large scale public companies that can earn better and invest in the needed regulatory changes.” Ridgebury’s Burke, however, questioned the rationale for more mergers. Conceding bigger tanker players have access to cheaper capital, Burke countered: “How long will consolidation take to get pricing power? I don’t see an answer to that. I find it challenging for a shipowner to control freight rates.” ●
Maritime CEO Forum Hong Kong was sponsored by:
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The next edition will be in Singapore on April 8. For more information contact grant@asiashippingmedia.com
HONG KONG
Wind in its sails After a couple of decades of inertia local authorities are finally taking maritime seriously
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t the time of Hong Kong’s reunification with China 21 years ago it was the undisputable maritime centre of Asia. Successive administrations that followed failed to bolster the city’s shipping credentials and the local shipping community watched on as its dominant position was overtaken by Singapore with Shanghai also rising rapidly. The last few years however have seen local government listen to the private sector and take heed of how important maritime is to the economy. In her second policy address since coming to power last year, Carrie Lam, the chief executive of Hong Kong, last month made good on earlier promises to boost maritime spending.
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“We will continue to serve as the best springboard for mainland maritime companies seeking to go global, and to provide facilitation for international maritime organisations to set up a presence in Hong Kong and tap the mainland market,” Lam said in a lengthy policy address. Among new measures, the Hong Kong government will look to implement tax relief proposals for marine insurers and ship leasing companies. A further HK$200m ($25.5m) will be injected into the city’s Maritime and Aviation Training Fund. Lam also promised to spend more developing the Hong Kong Shipping Registry, the world’s fourth largest shipping flag, and an institution local owners have been crying out for more financial backing. Regional desks in selected
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A successful shipping centre is after all a successful global city
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government overseas and mainland offices will be created to provide support to shipowners and promote the registry. Finally acknowledging the brain drain of shipping expertise from local shores to rival maritime hubs, the Hong Kong government in August unveiled a scheme whereby shipping professionals will be among 11 skill types welcomed into the city with easier immigration processes. Among the 11 professions earmarked to get priority to live in the city even if they do not have a job lined up yet are marine insurers, maritime ceo
HONG IN PROFILE KONG
naval architects, marine engineers and ship superintendents. In May this year, Hong Kong’s Financial Services Development Council (FSDC) released a research report, addressing the importance of developing a significant maritime financing and leasing industry in Hong Kong. The report has recommended various measures for developing the maritime cluster in Hong Kong, including tax concessions for maritime firms; allowing qualified investors to access credit and liquidity enhancement products supported and/or endorsed by sovereign-rated financial institutions; full consultation with the industry on implementation of a tax review package; encouraging the growth of shipping and maritime-related
ISSUE FOUR 2018
support and management services; talent development in the maritime cluster; further double tax agreements with major shipping jurisdictions; increased participation in international industry bodies by Hong Kong-based organisations; and upgrading the Hong Kong Maritime and Port Board or creating a centralised maritime office. The belated efforts by local government to bolster the city’s shipping credentials have been noticed. The fifth annual XinhuaBaltic International Shipping Centre Development Index Report, published in July, saw Hong Kong overhaul London for the first time into second spot behind perennial rival Singapore. In a note to readers towards the back of the report, Mark Jackson, chief executive of the Baltic
Exchange, wrote: “We hope that this report helps shape shipping company executives’ thinking and spurs cities and their governments to provide the best support possible. A successful shipping centre is after all a successful global city.” Hong Kong likes to promote itself as a global city; finally it is remembering that it is also a shipping hub. ●
“Seafarers don’t necessarily feel the uptick in the markets” — Katie Higginbottom, head of the ITF Seafarers’ Trust
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WINE
Something special from the cellar
What wines work amidst the festive excess? Neville Smith has some suggestions
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suspect this Christmas will be a merry old affair in many a shipowner’s winter quarters. It’s not normally a time for skimping, given that owners have had plenty of bumper years to lay down the good stuff and have it come to maturity. The last decade may have seen those stocks depleted but for the most part, these are people know how to make money even in bad markets and 2018 has been no exception. For some it’s been a particularly rewarding year and for others, well there’s always 2019 to toast. Still, for most of us who make our livings around the edges of the hallowed ground of shipping, the song remains the same, we pursue value as a default setting and work on the basis that you get what you pay for and quality is not always equivalent to a glitzy brand or a shiny label.
Two (more) to try FEW PEOPLE WOULD mistake a Basque country white made from Manseng and Petit Corbeau for Burgundy, but there’s something of the same approach to Jean-Claude Berrouet’s Herri Mina 2016 (£17.95, Corney & Barrow), combining food-friendly minerality with rich, honey-flecked lemon fruit.
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Probably the best advice for Christmas drinking is not to believe that simply because the rest of the world is going bonkers, you should completely change your habits. There’s likely to be a good reason that you don’t drink port or brandy between January and November so don’t feel you have to in November and December. If you think that most Prosecco tastes like alcoholic pear juice with hangover written all the way through it, then resist. Fine red Bordeaux and white Burgundy grace a Christmas or New Year lunch table but let’s be honest, you will need deep pockets and some idea of vintages and drinkability to get the good stuff. And besides there is still a world of choice out there and plenty of opportunity for decent drinking that returns something interesting and affordable. In my book most Malbec is to be avoided as bland and unexciting; 2014 Ambrosía, Viña Unica, (£14.95, Berry Bros and Rudd) rips up the rulebook; warm, rich and velvety but with real depth, structure and character this could work wonderfully on Christmas Day. ●
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The best advice for Christmas drinking is not to completely change your habits
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Rich food in probably more quantity than is good for you means you need wines that can cope with pretty much any combination of sweet, salty, sour and even a bit of festive umami, so let’s think differently. Pinot Noir might be more of an autumn wine than a winter one, but when you want more body and punch then don’t hold yourself to the northern hemisphere. New Zealand makes some of the world’s best Pinots and Eradus 2016 from Martinborough (£16.25, Corney & Barrow) pretty much has it all. Rich, silky fruit but with lovely freshness, this is easily enjoyable on its own but would love a winter stew. Albariño has been fashionable for so long it must be starting to come back round on itself but it’s always been a firm favourite for its combination of fruit and spice. At £13.95 (Berry Bros & Rudd) Albariño 2017, Igrexario de Saiar, Bodega Sucesores de Benito Santos is so good you need never drink boring Sauvignon Blanc again. ● maritime ceo
GADGETS
Razer has the edge
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ith the advent of the super fast thunderbolt 3 protocol, external graphics cards became a possibility — allowing a laptop to play games at the same sort of high settings as a desktop PC. New technology is almost always expensive, but Razer’s latest card enclosure brings the cost down a bit. The Razer Core X stand-alone GPU enclosure comes with a 650W power supply and connections for any graphics card from 2014 and up. MacOS users are limited to a list of AMD cards (available on Razer’s website) and must be on High Sierra 10.13.4 or later. The Razer Core X https://www.razer.com/gaming-laptops/razer-core-x $300
Boarding time
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mart watches abound these days, but Garmin’s new D2 Delta PX aviator watches are definitely a flight above the rest when it comes to navigation and flight data. There’s dynamic colour maps, NEXRAD weather data and radar graphic overlays, a worldwide airport database, automatic flight logging and connectivity with select avionics via Garmin’s Connext technology. It also monitors your heart rate and blood oxygen levels, can store up to 500 songs, and can do contactless payment via Garmin Pay. D2 Delta PX https://buy.garmin.com/en-US/US/p/633646/pn/010-01989-30 $1,250
Pizza at your hut
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tone-baked wood-fired pizza ovens are all the rage in restaurants, and not without reason — the taste is totally transformed. But whilst restaurants have plenty of room and monetary incentive to install them, home users don’t always have the space to dedicate to a pizza oven, and you can forget about moving the oven to the neighbours’ or a new house. Enter the Ooni portable outdoor pizza oven from Finland. It reaches 500°C in just 10 minutes and will cook a 13” pizza in about 60 seconds. If wood pellets are a step too far, it also comes with a gas burner attachment. The oven doesn’t just do pizza, of course, and Ooni provide recipes for meat, fish and BBQ dishes. Ooni 3 Portable Pizza Oven ooni.com $300 for wood-fired only, $425 with gas burner attachment
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REGULAR BOOKS
China’s gas needs Understanding Asian demand for LNG could make you very rich
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f you want to understand China’s energy future then reading up on LNG might be the way forward. This year we’ve gone from winter coal bans causing rural residents to freeze through to one of the hottest summers on record in northeast Asia. China’s determination to move away from coal to cleaner natural gas for its electricity needs is very real – last year China imported 5bn cu ft of LNG daily – more than South Korea and not much less than Japan. That’s a doubling of imports in 24 months. A cold winter is predicted for this year in the region so expect China’s LNG shipments to only grow. Saeid Mokhatab, John Y. Mak, Jalil Valappil and David Wood have got together to produce The Handbook of Liquefied Natural Gas. It’s a good starting point especially on the LNG industry’s moves to diversify its supply chains and increase its share of the global natural gas trade. The book covers the LNG supply chain from liquefaction to
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regasification by addressing the LNG industries’ fundamentals and markets, as well as detailed engineering and design principles. China’s relatively recent move from coal to imported LNG for electricity generation means Beijing has to largely rely on the spot market – good news for tanker companies and, if another cold winter is in the offing, then demand for cargoes should be great. Just how China sources and finance LNG purchases and transportation is well covered in Liquefied Natural Gas in China: Options for Markets, Institutions and Finance, a World Bank Discussion Paper from a few years ago but still very relevant. The ‘discussion’ stems from China’s State Power Corporation requesting World Bank assistance to assess the viability of imported as a fuel source for China’s coastal provinces. This book is basically the World Bank’s heavily researched response. Of course transportation of LNG is not without risk, both accidental and
The People’s Republic has doubled LNG imports in the last 24 months
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terrorist. John Layton and Barry Keller’s Liquefied Natural Gas: Security and Hazards looks at all manner of threats to LNG shipments and shipowners globally both in terms of LNG as a hazardous and potentially unstable cargo and the possibilities of theft (piracy) and/or terrorist attack. Right now the LNG industry is very focused on China but of course the PRC is not the only developing nation looking to diversify away from coal to LNG – think India particularly and elsewhere in Asia. All this will mean higher prices and greater cargo demands. Trying to assess just what the level of this demand will be (and spot price fluctuations) is key to success. Susan Sakmar’s Energy for the 21st Century: Opportunities and Challenges for Liquefied Natural Gas is a comprehensive study covering topics such as the LNG value chain, the historical background and evolution of global LNG markets, trading and contracts, and an analysis of the various legal, policy, safety and environmental issues pertaining to this important fuel…a fuel that is only going to grow in importance to national energy security portfolios and Asian regional shipping demands.●
maritime ceo
TRAVEL
Alps alternative Editor Sam Chambers gives readers a glimpse of his backyard
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he ski season in the northern hemisphere is upon us and meteorologists are predicting an especially chilly European winter. With the Alps increasingly crowded (and overpriced) why not try something a bit different this season? Head to the French Pyrénées for spectacular views, generous hospitality, and if you’re super lucky (!) you might even see your humble scribe bombing down the slopes for this is where I have called home for the past six years. Starting on the Med side of the mountain range it’s possible to have a delicious seafood spread at the harbour town of Collioure, just to the south of Perpignan, and to be in the mountains within 90 minutes of polishing off your last oyster. The first resort worth spending some time at is Les Angles, one of the largest, most advanced in the French Pyrénées with a good mix of pistes for all levels of skiers. Enjoy the Catalan warmth and fare on offer in the bars and restaurants, all within easy walking distance. Less than 10 km away is another
ISSUE FOUR 2018
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It’s possible to have a delicious seafood spread by the Med and to be in the mountains within 90 minutes of polishing off your last oyster
comparatively large Pyrenean station, Font-Romeu, which is actually a merger of a couple of resorts and boasts plenty to do for families and serious skiers alike. It’s around here that Martin Fourcade, biathlon extraordinaire and France’s greatest Olympian lives. Continuing west we come to the tax haven that is Andorra – surprisingly it is not yet a shipping register. In the heart of the mountain range and with more than 200 km of runs, the principality is one of the largest in all of Europe, and one of the liveliest. On the other side of Andorra, not too far from Toulouse, is Superbagnères (pictured), the oldest resort in the Pyrénées and arguably the most spectacular. A ten-minute ride from the lovely spa town of Bagnères de Luchon on a ski lift takes you 1,200 metres in altitude and out onto a plateau looking
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out to some of the highest mountains in the range. Just 20 minutes away is another personal favourite, Peyragudes, an amalgam of two mountain villages where, if there’s fresh snow, the off-piste opportunities are among the best in the region. Finally in our whistlestop tour among the best of the French Pyrénées we come to one of the big daddies, La Mongie, just south of the famous religious site of Lourdes. With 69 pistes and 43 lifts there’s no queues here and some very challenging black runs that would not look out of the place in the Alps. What’s remarkable with all these resorts is that they are all so close by so you can spend a day or two at one, and shuffle off to the next one, which is never more than an hour’s drive away. Time to get the skis out of the locker. ●
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OPINION
Green ships, scrubbers and all things digital Our challenge is to deal with environmental and tech issues based on facts and science, and not have solutions driven by lobbyists and industry groups alone, argues Greg Atkinson from Eco Marine Power
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he development timeframe for most new technologies can be measured in years so anything that seems like it has just appeared hasn’t really. Green shipping technologies for example have been on the agenda since at least the 1980s, although they’ve been tagged with a variety of names along the way. Not that I’m complaining, as a CTO in a company that is developing renewable energy systems for ships I’m quite happy that the mood has changed. But I’m also aware that in many cases it’s just the mood that’s changed, not much else. For instance a couple of years ago I was explaining to a senior manager at a shipmanagement company how easily they could install our fuel monitoring system on their ships. The idea being that the crew would not have to manually log fuel consumption data and calculate CO2 emissions. The upfront cost was about the same as heading to a couple of shipping conferences in business class, so it wasn’t a major investment decision. But I was told that the crew followed instructions and that they had plenty of time to do such tasks. The technology to automate many tasks has been available for some time and plenty of people will talk about it, but often that’s as far as things proceed. At least when you mention alternative power and propulsion options these days you’re not considered part of some fringe group. The challenge now is to deal with environmental issues based on facts and science, and not have solutions driven by
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lobbyists and the ever-expanding universe of industry groups alone. Because over the longer term, I don’t believe it will benefit the industry or the environment for technologies to be implemented despite the legitimate concerns of shipowners and shipping companies, simply because of eco-politics. If that happens, then there’s a risk that investment will flow towards solutions and technologies that are not effective, while other promising solutions and technologies might be ignored. One way to avoid this situation could be for shipping companies to take a more active role in the new product development process. This could include becoming joint owners of intellectual property or investing directly in start-up ventures. It would also be a good way to tap into the skills of those working at sea and involve them more actively in R&D projects. This leads me onto the very delicate topic of scrubbers. The only comment I dare to make is that it seems to me that spending a couple of million dollars per ship to clean exhaust so that a dirty fuel can be used is not my idea of a great leap into the mid-21st century. Finally, a few words about all things digital. On the surface it may not appear that there’s much automation or digital technology onboard ships, but the reality is that we wouldn’t have 180,000 dwt bulkers operating with just a couple of dozen crew, if these technologies were not already at work. Digital technology is nothing new, but it’s one of those
topics that the marketing and media teams have latched onto, so apparently it’s something new after all. But that’s not necessarily a bad thing if the focus is on the right areas. I prefer not to use the term digitalisation since what is often meant is information technology (IT). So on that basis, I’d say there was plenty of scope for the shipping sector to consider how to use IT not so much as a means to replace seafarers, but more importantly how to assist them with their work, improve their lifestyles and provide opportunities for career enhancement via onboard learning and training courses. Of course automated futuristic ships attract attention, but I often feel those of us ashore forget about those who are at sea and how we can develop technologies specifically to help them. To finish on an optimistic note I believe that with some further infusion of new ideas and technologies, that there’s every reason to think the future for shipping will be bright. We just need to be smart about how we get there and although technology will be driving us forward – let’s not forget about the human element. ●
“Repositioning empty containers costs the industry $20bn every year” — Christian Roeloffs, founder, xChange
maritime ceo
REGULAR OPINION
What’s killing our seafarers? Scott Bergeron shares data from his flag, the Liberian Registry, in a bid to get us all talking about how to improve safety at sea
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t is easy to forget the strength and brute force that the ocean can render. Few appreciate this more than the seafarers that ply the world’s waterways in support of global trade and economic growth. Ships are not designed for the calm waters of a protected harbour. As a community, we have recognised the need to improve the safety of life at sea. Our present collective international efforts started in earnest in 1948 when the SOLAS Convention was first adopted at the International Maritime Organization’s predecessor, the International Maritime Consultative Organisation (IMCO). Where early SOLAS requirements focused on materiel standards, more recent updates include operational issues through the International Safety Management Code; crew training and competency issues through the Standards of Training, Certification and Watchkeeping for Seafarers Convention and most recently, the safety and welfare through the International Labour Organisation’s Maritime Labour Convention. But we should ask ourselves, have we gone far enough —do we go far enough— to look after the safety of those that ensure the reliable and efficient delivery of raw materials, commodities and finished goods? At the Liberian Registry, we hold a weekly management meeting and a standing item on the agenda is a summary report on seafarer casualties. Unfortunately, this is a weekly reminder of the inherent dangers and the difficulty of working in remote areas of the world. Rarely a week goes by where we are not required to investigate the death of a seafarer. No one expects to go to sea and not return home. Tragically, it is a living fear for those family and friends
ISSUE FOUR 2018
that every seafarer leaves behind as he or she starts a new multi-month contract. We consider it an inherent and globally shared passion to prevent accidents that cause injury and death. As such, we felt it would be useful to share the following Liberian Flag Cause of Death data we have collated for the last five years so that, we, as an industry, can try to make sense of these facts, figures and trends. The very nature of shipping, and other industrial jobs, is that the environment comes with risk. Working with machinery, chemicals, fuel, and gasses in unforgiving surroundings means small accidents and oversights can have terrible consequences. Anyone who has served at sea understands this. The climb/ slip/trip/fall numbers are a reminder to us all of what can happen when ‘everyday’ mistakes occur. Seafarer health, welfare, and mental illness has been a regular topic of coverage in the trade press and, from the figures carried above, it appears this is an area that rightly requires attention; it is the largest killer at sea by these records. The occurrence of heart attacks and
other similar health-related incidents may not be a surprise given the increasing age of seafarers. To a degree, we are taking common onshore ‘middle-age’ problems to sea. According to our investigations, it is also likely that many of the missing crew are victims of suicide (though there is not enough evidence to classify their deaths as such). Solving this problem might require a rethink on how we address training and health education for seafarers and masters. Onshore everyone can access doctors, counsellors, and (dare I say it) online information about health issues. At sea things are different and employers and fellow seafarers do have a duty to each other to ‘red flag’ health and mental wellness concerns…because no one else can. But to do this crew must be supported by training and onshore empathy when issues are highlighted. It is not an enjoyable task writing about what is killing our people. But it is vital that we share and talk about this information, and that we continue to highlight where improvements need to be made. ●
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MARPOLL REGULAR
Your views
Every issue we get readers to vote on a series of topical questions. Results and key comments are carried below Which sector will perform best in 2019?
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What is the most important exhibition to attend next year?
LNG utilisation looks tight at the moment
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Nor-Shipping is still the most innovative forum for shipping companies
”
Containers
12%
OSVs
Tankers
18%
LNG
Dry bulk
29%
LPG
35% 4%
By the end of 2020 what will be the price differential between MGO and HFO fuels?
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Sea Asia
27%
$201 – 300 25%
Not
27%
$101 - $150 14%
$301 – 400 16%
Slightly
51%
$151 – 200 19%
$400+ 16%
Greatly
22%
Sometimes a regulation may seem to impact trade negatively but creates other less efficient trades which can be good for shipping
”
Are operators now ready and willing to connect their systems to the shore and take them online?
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The IMO needs a better balance between commercial, operational, technical and technology maritime representatives
”
20%
Marintec China 18%
“
Less than $100 per ton 10%
No 68%
CMA
How worried are you about a trade war harming your business?
”
Can IMO keep up with all the pace of tech changes sweeping through the industry?
Nor-Shipping 35%
The expected spread increase will fizzle like Y2K
Yes 32%
”
2%
“
There’s still too much paranoia
”
Yes 36% No 64%
Do you think advice/expertise from class has got better or worse over the last 10 years?
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Have owners now left it too late to get scrubbers installed before January 1, 2020?
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The expertise of the experts has surely increased
Many scrubber suppliers are now turning customers away
”
Better
28%
Yes 69%
Same
45%
No 31%
Worse
27%
48
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maritime ceo
SAFER VESSELS CLEANER SEAS STEERING A PATH TOWARDS A SAFER AND CLEANER MARITIME ENVIRONMENT RIGHTSHIP.COM
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