Maritime CEO Issue One 2020

ISSUE ONE 2020

BY

Peaks and troughs

Euronav’s Hugo De Stoop on the mad VLCC trades

MANIFEST

3 At The Prow

Economy 4 US 5 EU 6 China 8 India 9 Brazil

Markets 11 Dry Bulk 13 Tankers 15 Containers 17 Finance

Executive Debate 18 Tech trends

Profiles

24 Concord Maritime 25 Auerbach Shipping 27 GoodBulk 29 Navigare 31 Grieg Star 33 Fratelli Cosulich

Recreation 34 Wine 35 Gadgets 36 Books 37 Travel

Opinion 38 Gavin Lipsith 39 Mark Stokes 40 MarPoll

23 Cover Story Euronav

37

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 ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Mixa Liu Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2020’s four issues of Maritime ceo magazine.

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ISSUE ONE 2020

Resolutions

T

here’s a joke, I’m sure many of you will have heard before but here goes.

How do you know if someone’s a vegan? Don’t worry, they’ll tell you soon enough.

Now I can’t claim to be a vegan it strikes me as too much of a faff, and frankly criminal living amidst the glorious cheeses on sale at the local market here in southwest France.

However, since January 1, I have eaten no meat, and you, dear reader, are among the first to know this; I do not genuinely want to make a big deal out of it. In fact, come to think of it, it won’t be until my Dad thumbs through this mag that my parents found out.

Maritime CEO’s commercial director Grant Rowles set me on this path. A fair dinkum Aussie who, true to stereotype, liked nothing more than throwing a steak on the barbie, he ditched meat in December having watched The Game Changers documentary on Netflix. His reasoning was dietary. The decision for me was different - something that had been brewing all year - it was environmental.

According to researchers from Oxford, meat, dairy, egg and fish farming use 83% of the world’s farmland, yet provide only 18% of the world’s calories.

The single biggest source of habitat destruction is now the livestock sector, keeping all those animals fed so we can get our Big Mac fix.

Moreover, 27% of humanity’s water footprint is used to produce animal foods. There’s other stats I can throw at you too. In the United States alone, farm animals produce nearly 50 times more waste per year than America’s human population. And here’s one that belatedly ties this page into its avowed maritime focus. The livestock sector is responsible for 15% of global man-made emissions. To put that in perspective, that’s about the same as all the emissions from all the transport in the world including planes,

trains, cars, vans and ships.

It’s not just dietary choices that I’m making this year. Our car is being retrofitted so that it can run on E85, an ethanol blend that here in France I have worked out will take all of 18 trips to the gas pumps to pay for the conversion.

Then there’s the issue of flights.

It’s been many years since I’ve flown regularly enough to warrant any type of loyalty lounge love from the airlines. Each year I’ve flown less and less. Now, coronavirus-permitting, the first time I strap into an economy seat in 2020 will not be until September.

The summer holidays in early June - or if that joins the growing list of event cancellations, then my first plane trip of the year will be in September. The summer holidays are all on trains and ferries.

The silver lining with the coronavirus as I see it is that suddenly people and businesses are having time to reflect. Do we need to travel so much? The answer, of course, is you do not. Video conferencing tech companies have been one of the big winners from this illness. Let’s keep it that way. And before you pile in with the obvious critique that my company organises our own events around the world for which people fly long distances to attend - well, yes, you’ve kind of got me there, but I can tell you Australia has tens of thousands of tree saplings planted on our behalf, not that that makes us angels, I admit, as Gavin Lipsith brilliantly elaborates on page 38 where he questions whether net zero claims are killing corporate credibility. ●

3

ECONOMY US

Still staying strong The president will hope things remain rosy through to November

A

gainst so many predictions the US economy remains strong. The United States economy grew 2.3%, that’s 2.1% at an annualised pace, in the fourth quarter, matching the previous period, though there were signs that consumer spending growth weakened and business investment declined.

Still, for those predicting tougher times ahead for the US economy, we should note 2.3% is a slowdown from the previous year and is short of the president’s stated aim of 3%.

Breaking it down consumer spending, spurred by rising wages and household wealth, remained strong but annual growth this year is predicted at 1.7%. As America enters its long electoral cycle economic slowdown could impact on the president’s re-election chances though employment levels remain high - labour force participation has climbed from a low of 62.4% in 2015 to 63.2% in 2019.

Newly signed trade pacts with China, Canada and Mexico could boost trade though, even with the worst of the US-China trade deal over, the outbreak of the coronavirus epidemic is likely to have a severe and long-lasting effect on trade and exports. Additionally, several other trade rows are brewing, especially with the European Union over tariffs and import duties. For the rest of USA: Textile Exports

by Major Category, 2019 Category

US$bn

Fabrics

9.1

Cotton and wool

6.7

Apparel

6.1

Yarn

4.4

Home furnishings/carpets

3.8

Source: US Department of Commerce

4

2020 consumer spending is expected to be the main driver of economic growth, while there are also signs that housing market is rebounding, thanks in part to low interest rates.

But the outlook for exports remains distinctly bleaker – coronavirus, trade fights with the EU. As of February 2020 it is difficult to predict to what extent the coronavirus will disrupt exports from China to the US. There are many ramifications affecting sentiment – the amount of cargo to and from China passing through America’s ports; the possibility of rising prices on Chinese manufactured goods and service; lost business in exports and also service opportunities. Everyone thinks of Apple phones and electronics but also 97% of the antibiotics used in America are made in China.

Professor Robert Chapman Wood, who teaches strategic management at San Jose State University told ABC News in America, “We could see shortages. We could see a decline in the Chinese economy that would ripple to other economies.

We could see declines in Chinese purchases. Lots of things could go wrong.” America’s first half growth

rates could well depend on how fast the Communist Party of China gets to grips with the coronavirus, which is obviously a factor Washington DC has only marginal influence over.

And hanging over all this is that 2020 is an election year in America.

Between now and November an economic slip, even if caused by the coronavirus, could cost Donald Trump his re-election. If America operated under the British system then Trump would probably call an election now. But he can’t, it has to be November and by then, in six months, the US economy could be looking decidedly less rosy. ●

“Shipping is cyclical, and any improvement in fundamentals can lead to a sharp increase in freight rates” — John Kartsonas, founder, Breakwave Advisors The Captain’s Table

maritime ceo

ECONOMY EUROPE

A year to negotiate Europe has much to overcome in 2020

A

nd so, finally, the UK has left the European Union, over three years after the initial referendum saw the country vote to leave. Though, while prime minister Johnson may be claiming ‘job done’, now the real work starts. Britain and the EU have less than a year – till December 2020 – to thrash out some sort of trade deal. Analysts are split on whether to get a deal the EU or Britain will compromise but someone will have to if the bloc is to avoid a mutually disastrous no deal Brexit.

So though the UK is apparently now trying to get past ‘Brexit fatigue’ German Car Exports by Major Country, 2019 Country/Region

% of total

USA

15.0

UK

14.0

China

8.4

France

6.3

Italy

5.9

Benelux

5.7

Other

44.7

Source: UN Comtrade

ISSUE ONE 2020

another year of Brexit dominating the headlines is inevitable.

So far the major predicted hits to the UK economy haven’t necessarily occurred despite some evidence of capital flight and falling investment.

As nothing essentially changes in 2020 before the December deadline the impact has been softened somewhat. Certainly, the pound is on a roller coaster but seems, so far, to have managed to bounce back from each slump. Uncertainty in both Europe and globally means the general consensus for 2020 is for zero growth in the UK. However, the eurozone is not looking at forecasts any more optimistically than the UK. The eurozone saw a paltry 0.1% growth in the last three months of 2019. Crucially two of the eurozone’s largest economies shrank in the period: France by 0.1% and Italy by 0.3% (Italy’s worst performance in seven years). The official numbers are not yet out at time of publication but it looks likely that Germany managed growth, though only of 0.2%. Spain managed the best growth in the zone. Labour problems and protests in both Italy and France have played a part. Noticeably

consumer spending across Europe contracted in most member states in the last quarter of 2019.

The major problem for Europe seems not to be Brexit but rather falling exports which indicates the main issue affecting the eurozone is the weaknesses in global trade. A major factor for Europe in early 2020 will be whether or not the Americans decide to impose tariffs and import duties on imports of cars from Europe. It also has to be said, just as US-China trade tensions ease, the coronavirus outbreak will hit exports – European luxury goods and drinks companies have issued profit warnings based on this including Louis Vuitton and cognac brand Remy Cointreau.

2020 will be a crucial year for the European Union, both in terms of global events – the start of the American election season and trade talks, the coronavirus outbreak disrupting trade with China, as well as political issues – the Brexit ongoing negotiations as well as populist protests such as the Gilets Jaunes and Five Star movement in France and Italy respectively. And there’s also a number of crucial elections upcoming – notably in Germany. ●

5

ECONOMY CHINA

Wuhan fallout GDP growth could be the slowest for decades

W

hatever the arguments over the state of the Chinese domestic economy and its slowing growth rates or the US-China trade wars, the coronavirus outbreak in Wuhan and then across much of the country overshadows everything else for now. China’s battle to contain the virus and its impacts across the vast economy and also to Hong Kong are crucial. The Chinese New Year holiday was extended but even after a supposed return to work there were obviously still problems. One luxury goods firm predicted a massive hit for that business and stock running low globally, as well as collapsing sales in China. The brand reported that it had been constantly phoning the manufacturer of their products in China, but nobody was answering the phone. This is an oft repeated story across the country and across every sector. The coronavirus outbreak has effectively put the Chinese economy in quarantine for the foreseeable future.

What will this mean in practical terms? Well a surge in unemployment is expected as well as a rise in debt - China’s banking regulator will Forecast Impact of the Coronavirus on Global Economies, Q1 2020 Country/ region

% revision downwards due to virus

EU

-0.1

US

-0.1

Germany

-0.3

Rest of World

-0.3

Japan

-0.5

Other Asia

-0.5

Global

-0.7

China

-1.5

Source: Deutsche Bank

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allow the country’s lenders to raise their tolerance for bad debt during the coronavirus outbreak. However, while this may tide over many businesses, China’s debt issue – already bad – will only get worse. Every industry – from movies to shipping – is requesting ‘special status’ bailouts and subsidies and these, if granted will cost the exchequer dear too. In a rejigging of banking terminology to also avoid negative press the China Banking and Insurance Regulatory Commission has stated that some new bad loans created during the crisis will not be counted as non-performing loans. Estimates of the impact are massive – for instance, RMB5.6trn ($800bn) in new bad debt, a trebling of non-performing loans, according to S&P Global Ratings.

It is the supply chain that is taking a massive hit and means the coronavirus is a global problem regardless of overseas infection rates.

Deutsche Bank forecasts that, due to the current coronavirus, Chinese growth will be 1.5% lower in the first quarter of 2020 compared to the same period in 2019, at 4.6%.

Global growth is expected to be 0.5 percentage points slower. Other analysts have predicted even more dire consequences for the Chinese economy and the knock-on effects

globally. Fiat-Chrysler, VW, Hyundai and other car makers have all issued double warnings stating that they cannot source parts just-in-time to their home plants while quarantine regulations mean they are having to shut, or at least reduce, operations at their plants in China.

And, finally, consumer demand within China has tanked with everyone from Disney Stores, to fast food chains, reporting massive fall-offs in business. As at time of writing there is no definite end in sight for the problems related to the coronavirus and so no sensible predictions can be made. It does seem clear that 2020 will be an ‘annus horribilis’ for China.●

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ECONOMY INDIA

Modi’s gamble Cutting income taxes and increasing spending is a big play by the prime minister

P

rime minister Narendra Modi is making a bid to kick start the Indian economy by cutting income taxes and increasing spending. His hope is to resuscitate growth. Although many think neither of this measures will do any good and could actually harm the massive economy. But still there does appear to be some buzz around the giant South Asian economy at the moment.

Consider if you will the following. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI), prepared by IHS Markit, rose from 52.7 in December 2019 to 55.3 in January 2020. That would indicate that manufacturing activity is rising and, though it could be a spike in demand, bodes well for the first quarter of 2020. The consumer goods segment seems to be responsible for much of the rise. GDP growth is expected to pick momentum over 2020-2021. In 2020-2021, the nominal GDP is expected to grow at a rate of ten per cent.

The other good news in the Nikkei India PMI is that hiring of new workers saw good growth in late 2019 too; the best new jobs growth in the last seven years. Even more

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India: Export Destinations 2019 Destination

%

Asia

47

Europe

19

North America

18

Africa

9

Latin America

3

Other

4

Total

100

Source: Export/Import Bank of India

interestingly exports growth is strong despite the global slowdown.

The exports rise is based on rising demand from consumers in Asia, Europe and North America. As crude oil has dropped in price so Indian manufacturing has been able to more competitively price and so win export orders.

Of all the economies Maritime CEO studies quarterly India’s is the least likely to suffer any major fallout from the new coronavirus outbreak in China. Of all the major economies India is the least reliant on international exports. Some Indian manufacturers, such as car maker Maruti Suzuki, do source parts from China but not a large amount and alternative sources are available.

Crucially India is not a significant importer of food, which is also a sector doing reasonably well in India at the moment. The first government advance estimates of 2019-2020 of the area and production of various crops indicates that domestic vegetable production is rising, especially among major food commodities like onions and potatoes, according to the Department of Agriculture, Cooperation and Farmers Welfare.

Some analysts believe this growth is partly due to government spending which has targeted the rural economy and the nation’s so called unorganised sectors.

So with both manufacturing and investment growth primed to help the economy grow in 2020 where’s the aforementioned threat from the government’s new policies? The answer is taxes. Several analysts have predicted the government might cut personal income taxes in the coming budget to boost consumer spending. That would not help the Indian economy, according to Arun Kumar, at the Institute of Social Sciences in New Delhi. However, there were cuts in the corporate tax rate in the last budget which was, unsurprisingly, welcomed by Indian business. ● maritime ceo

ECONOMY BRAZIL

Spring has sprung The country is forecast to see economic growth double this year

D

ivisive Brazilian president Jair Bolsonaro (pictured) appears to have achieved what many analysts thought impossible – improve the country’s economy, fight corruption and make Brazil’s cities safer. At least the voters seem to think he is achieving those objectives and his approval rating has surged.

Reversing a steady decline in popularity in his first year in office, the number of Brazilians who viewed his government as great or good climbed to 34.5% from 29.4% in August, the survey showed, while 31% now see the government as bad or terrible, down from 39.5% previously.

But are there are any serious grounds for this reversal of fortunes?

It does seem that the consensus is that economic growth is expected to more than double its pace to 2.1 or 2.3% this year based on improved consumer spending and a boost from recent privatisations of state-run businesses. However, Bolsonaro’s drive to overhaul the country’s pension system has met with unexpected resistance from lawmakers, Brazil: Power Generation by Type, 2019 Type

%

Hyrdo

61

Biomass

9

Wind & solar

8

Nuclear

1

Petroleum

5

Natural gas

8

Coal

2

Source: US Energy Information Administration

ISSUE ONE 2020

who eventually passed a diluted bill that fails to deal with the problem.

Still, more privatisations are coming including the planned sale of Brazil’s largest utility, state-run Centrais Eletricas Brasileiras, known as Eletrobras.

It is also the case that Bolsonaro has been helped by Brazil’s central bank, which has kept rates at record lows for more than a year.

Shipowners though may take note that Brazil posted a trade deficit of $1.745bn in January 2020, according to official data, the first shortfall for the month of January in five years and an indication that trade might continue to be a drag on overall economic growth. Brazilian economy ministry officials say that they expect rising imports in 2020 to lead to an even more reduced annual trade surplus than 2019’s, which itself was the smallest surplus since 2015. However, exports overall are down 20% year-on-year in January 2020 from January 2019.

The main reasons for Brazil’s

exports slide was a slip in business with neighbouring Argentina, the fall out from the US-China trade war and overall slippages in global trade.

Brazil is certainly one of the countries internationally worst affected by the US-China trade war and, even if the dispute is resolved, lost orders could mean that the second half of 2020 could be a major problem for Brazil, said Pedro Dejneka, a partner at MD Commodities. Dejneka told the Financial Times recently, “If the US and China live up to the deal and China likely buys heavy volumes of US beans, it could be Brazil that is left standing in this game of musical chairs, with potentially more than 10m metric tonnes of beans left over by year end.”

China is Brazil’s largest trading partner, with Beijing reliant on the Latin American country for the agricultural goods, iron ore and crude oil to fuel its economy. Soybean exports to China accounted for 83% of Brazil’s total soybean exports in 2018, up from 74% in 2016. ●

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MARKETS DRY BULK

Hope comes from very low orderbook Just 25 bulkers were ordered in the first two months of this year. This is good news according to Jeffrey Landsberg from Commodore Research

W

hile secondhand activity has remained healthy in the dry bulk market so far this year, newbuilding activity has been very low. A total of only 25 orders for new dry bulk vessels have been placed through the first two months of this year. This marks the smallest January/February total seen since 2017. In comparison, the first two months of last year saw 52 orders placed and the first two months of 2018 saw 67 orders placed.

The dry bulk market remains spooked by the ongoing global coronavirus outbreak. Coronavirus remains a significant issue in China and it also continues to intensify around the world. Over 50 countries are now dealing with coronavirus within their borders. Contrary to some very poor reporting, though, the coronavirus outbreak has not been slowing the dry bulk shipping market to a crawl (panamax, handymax, and handysize rates were

ISSUE ONE 2020

able to rise consistently throughout much of February). Instead, the coronavirus outbreak has been putting a damper on current market sentiment and has led to a significant slowdown in newbuilding ordering. This comes at an extremely good time for the dry bulk market as delivery volumes have remained an issue recently.

Last year marked the first time since 2011 that dry bulk newbuilding delivery volume increased on a year-on-year basis. Going forward, we continue to anticipate that this year will see another year-on-year increase. We expect that, at the very least, 415 new dry bulk vessels will be delivered this year (however, easily as many as 515 could be delivered). A very conservative view of the current dry bulk orderbook is that our market this year will see delivery of at least 65 handysize newbuildings, 125 handymax newbuildings, 130 panamax newbuildings, and 95 capesize

newbuildings. In comparison, last year saw delivery of approximately 400 dry bulk vessels.

Overall, we continue to stress that fleet growth last year and this year has not at all been a positive issue in the dry bulk market. During much of last year we continued to read many glowing articles and reports discussing a low orderbook, but the fact remains that the dry bulk fleet is still growing by a moderate amount, while the global economy also continues to face very significant non-coronavirus related headwinds. Newbuilding delivery volume in the handymax, panamax, and capesize fleets all remain extremely likely to increase on a year-on-year basis again this year, and it still remains only the handysize fleet that is likely to experience a decline in newbuilding delivery volume this year.

Much more positive, though, is that newbuilding ordering at least has fallen dramatically this year (this will assist the dry bulk market in 2021 and afterwards). Overall, it turns out that global epidemics can have silver linings for the shipping market. â—?

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MARKETS TANKERS

When China sneezes These first months of the new decade have shown just how reliant the tanker shipping industry has become on the People’s Republic, writes BIMCO’s Peter Sand

T

he first quarter is usually a seasonally strong time for the tanker market but things have been shaken up in 2020: freight rates have nosedived since the start of the year, as the factors which pushed rates up in Q4 2019 have gone and the coronavirus outbreak has brought added misery.

Going into the year, some pundits saw 2020 shaping up to be a better year than 2019, as fleet growth is set to slow from the high rates seen in 2019, and the industry was set for a boost from the 2020 sulphur cap. However, the removal of US sanctions on around 40 tankers, more than half of which are VLCCs, combined with the effects of the coronavirus and a warm winter in the northern hemisphere have eroded any previous optimism.

Furthermore, any potential benefits which the tanker shipping industry was set to gain from the signing of the Phase One agreement between the US and China have been put on hold following the outbreak of the coronavirus. As part of the

ISSUE ONE 2020

deal, China has agreed to increase its imports of certain commodities from the US. This includes a commitment to increase imports of crude oil, refined products, coal and LNG to $26.1bn in 2020 and $41.5bn in 2021. These both represent massive increases from the $3.1bn which the US imported in 2019. BIMCO was already sceptical about these levels being reached even before the coronavirus outbreak, which only makes it even more unlikely that the commitments will be met.

As well as disrupting the US-China agreement, the coronavirus has caused severe disruption in China, disruption that has spilled over to tankers, as well as the rest of the shipping industry. Widespread travel bans and flight cancellations both within China as well as to/from the rest of the world have dramatically reduced China’s thirst for fuel.

Furthermore, as the return to work after the Chinese Lunar New Year was postponed, oil refineries cut their throughput.

State owned Sinopec has

announced a 600,000 barrels per day cut to its throughput, the equivalent of 12% of its average crude runs. Data compiled by Reuters suggests that China’s state refiners will reduce their output by 940,000 barrels per day in February. Lower throughput means lower demand for crude oil, therefore hurting Chinese crude oil imports, which have been an important growth driver to the crude oil market in recent years. In 2019, China imported 505.7 m tonnes of crude oil, an extra 146 VLCC loads from the 461.9m tonnes imported in 2018.

Once the outbreak has been contained, BIMCO expects a steady recovery back to normal levels, but the demand lost while the virus is still not contained will not return.

For every day in which the coronavirus continues to cause lower power generation, industrial production, transport and consumer spending, the impact on the tanker shipping industry will increase.

These first months of the new decade have shown just how reliant the tanker shipping industry has become on China and how disruptions there can knock the whole industry off course. ●

13

MARKETS CONTAINERS

Virus can trigger reshaping in Asia Hard-pressed intra-Asia operators are most at risk from the coronavirus, writes Lars Jensen from Sea-Intelligence

J

TEU

ust as everyone had prepared for IMO 2020 to be the main disruptive event to focus on here in the new year, the coronavirus outbreak rapidly changed the landscape.

At the time of writing this piece the carriers have already cancelled 70 sailings across the Asia-Europe and transpacific networks, and in addition to this also a raft of services on all other trades. These are all cancellations which are in addition to the blank sailings already pre-announced for the Chinese New Year.

Looking further into what the usual seasonal volume drop is during Chinese New Year and comparing this to the additional virus-related blank sailings, this leads to an estimate of an additional volume downfall of 1.9m teu for the container lines combined.

Losing 1.9m teu indicates a revenue loss of some $1.9bn if one is to use the rule-of-thumb that

an average teu brings in $1,000 including all surcharges. The actual number of course varies significantly across tradelanes. But for the carriers, the problem is that the lost revenue is not matched by an equal reduction in costs. By blanking the sailings, they effectively save the fuel costs for running the vessel as well as the handling costs in the ports and terminals. But the other costs remain. On top of that they have additional costs related to handling all the disruption in the customers’ cargo flow as well as their own empty equipment repatriation.

Making matters worse, anecdotal evidence is emerging that some vessels have excessively low utilisation when leaving China – to a degree where they would normally have been cancelled. But there is a limit as to how many sailings you can cancel without having the network become inoperable.

Furthermore, the lost revenue also leads to a direct negative impact on their cashflow. Hence carriers which were under financial pressure already will now face a sharp negative impact on their immediate cash balances as well. If this situation persists for very long, it can very well lead to bankruptcies amongst especially smaller vulnerable carriers – this could be particularly troublesome for those carriers in the intra-Asian market which are highly exposed to Chinese cargo, either direct or as feeder providers.

Loss of volume due to Corona Virus Annual demand drop due to Chinese New Year Ports and terminals are also Estimated demand drop due to Corona virus going to be negatively hit. When 3,000,000 1.9m teu less needs to be shipped, 2,500,000 this equals up to 7m teu handled in the ports due to the transhipment 2,000,000 effects. A substantial part of this 1,500,000 takes place in Asian ports. The only 1,000,000 mitigating factor for the terminals is that the raft of blank sailings 500,000 might well lead to an added need for - transhipment in some places as the Annual demand drop due to Es=mated demand drop due to usual direct connections become Chinese New Year Corona virus unavailable. ●

ISSUE ONE 2020

15

MARKETS FINANCE

Unprecedented uncertainty What a start to the 2020s it has been. Dagfinn Lunde is struggling to get his head around it all

I

’ve been in this wonderful shipping business for more decades than most and I can state categorically that I’ve never sensed greater uncertainty among shipowners than in the first few months of this decade.

Respect for the shipowner who has to make the big decisions these days on fleet development. Whether it’s hard to read the markets, the regulatory intransigence or fuel conundrums there is just so much that is up in the air when committing to a newbuild that will be on your books for potentially 25 years.

Shipping historians will look back on the global sulphur cap as a storm in a teacup, a non-event similar to the Y2K threat 20 years ago, especially when taken in context of the challenges that have ensured IMO 2020 has faded smoothly from the headlines.

Personally, I find the rapid narrowing of prices between low and high sulphur fuel wonderful news, and yet there are owners out there still installing scrubbers. We all ought to have used clean fuels from the beginning with no loopholes, but this is a shipping, an industry that has made its billions over the years from exploiting holes in the international

ISSUE ONE 2020

regulatory framework.

A black swan does not do justice to the size or magnitude of the coronavirus on shipping. As oneoff demand killers go, Covid-19 is unprecedented in modern shipping history and will ensure red ink is awash at interim results for most shipping companies this year. And then came the second black swan, the oil price war between Russia and Saudi-Arabia – that should be good for the tanker owners and if lasting more than a year, also good for the world economy.

This year we expect to see reduced global economic growth.

People are afraid, share prices are falling and falling. The Fed has had to step in, gold is back in vogue again — all sure fire signs we’re in for a very tough period.

Shipowners are not investing much thanks to long-term technology concerns and short-term coronavirus fears. Newbuild orders in the first 10 weeks of 2020 were down 64% year-on-year, and bear in mind 2019 was also a below average year for ship orders.

I note with interest on the back page of this magazine that a majority of readers see no pick up in orders before 2022 at the earliest.

“

The irony of all this uncertainty and hesitancy is that it comes at a time when financing and liquidity for shipping is finally back on the table

”

The irony of all this uncertainty and hesitancy is that it comes at a time when financing and liquidity for shipping is finally back on the table.

Private equity and banks are back, albeit financing more sensibly, having learnt harsh lessons before.

Welcome to the not boring 2020s, a fast cry from the roaring 1920s. ●

17

EXECUTIVE IN PROFILE DEBATE

Walk before you can run Optimisation is set to drive technology advancement in 2020 rather than landmark breakthroughs, a survey for this magazine has found

E

xpect a year of mini-breakthroughs rather than wholesale change when it comes to the maritime tech outlook for 2020.

The fragmented nature of the tech providers and the naturally conservative, cost-conscious shipowning set will put the brakes on any huge technology changes, according to a Maritime CEO survey of leading owners, managers, consultants and entrepreneurs.

In today’s era of high fuel costs, vessel optimisation ranks highest among this year’s predicted maritime technology developments.

“The obvious first driver this year is technology that can delivery genuine fuel savings, lower emissions and better vessel performance, since fuel prices are likely to continue to be higher in the long term and volatile in the short term,” says Tore Morten Olsen, president of maritime at Marlink.

In support of that, Olsen says simplified data collection for efficiency and compliance; owners need systems that can remotely connect bridge system data with communications infrastructure to give them access to a vessel data dashboard on a per vessel basis.

“Artificial intelligence (AI) can be used to harness both shipboard and external data to optimise vessel performance and thus reduce excess fuel consumption and, consequently, emissions,” says Gil Ofer, head of open innovation at Eastern Pacific Shipping.

To see the most significant gains from AI, however, Ofer points out that the use of high-frequency data coming from sensors will be necessary,

18

and as such, the Internet of Things (IoT) will be a top theme for the year, Ofer predicts.

Manish Singh, the newly installed CEO of Videotel and Seagull, agrees with Ofer, arguing that 2020 could herald the real adoption of the Internet of Maritime Things, as he describes it, with stronger and cheaper connectivity to ships, MESH networks onboard, greater use of sensor technology, vessel position and operational data, which will deliver significant new digital tools.

For Alexander Saverys, CEO of Belgian shipping giant CMB and one of the industry’s hydrogen pioneers, fuel developments are unsurprisingly his top pick for the year ahead.

“I’m not expecting any major large-scale breakthroughs because a lot of research is still in its early stages,” Saverys tells Maritime CEO, saying he anticipates “smaller, but nevertheless meaningful breakthroughs”, which will serve as valuable testbeds in the development of larger applications.

Like other owners polled, the CMB boss says his company is focusing hard this year on improved digital fleet performance monitoring.

“The higher the fuel cost, the higher

the potential savings,” he says.

Morten Lind-Olsen, CEO of Dualog, picks up on this widely held perception that digital fleet performance monitoring will grow and grow this year. This is in no small part down to the impact of increased bandwidth at sea, he points out.

“We’re seeing the creation of the integrated digital ship,” he says. “This is partly linked to the bandwidth issue, but as I see it there is a huge focus on increased business efficiency through consolidated ships operations.”

This goes all the way from automating human/manual interaction through digital solutions to much more machine to machine interaction like IoT data and sensors and DB exchanges, Olsen explains, something that will drive more analysis and systematised planning and exchange of data on the shore side.

Olsen’s predictions are not dissimilar to Henrik Hyldahn’s, the CEO, ShipServ, who tells Maritime CEO: “In 2020, the continued upgrading in IT infrastructure within shipping will create the platform to accelerate the use of data and analytics, which provides owners and operators with real transparency maritime ceo

EXECUTIVE IN PROFILE DEBATE

to analyse their organisations and business models, driving efficiencies and optimising performance and profitability. In line with this, throughout the year we will also see further progression in automation, which will lay the foundation for cognitive systems and intuitive interfaces, which – from a procurement perspective – will be a key element in its ongoing digitalisation.”

In Hong Kong, William Fairclough, the managing director of Wah Kwong Maritime Transport Holdings, reckons 2020 will be the year where Big Data changes the business of shipping with a host of competing platforms coming online promising to deliver unprecedented insight into the movement of cargoes around “I think 2020 is the year when Big Data will start to be seriously offered to shipping companies by a number of different companies,” Fairclough says, pointing out that it is no coincidence that many of these projects are reaching the market at the same time – the cost curve and development time are factors generally shared by everyone.

“There may be some differences between the offerings but there will be many overlaps too,” Fairclough says, adding: “They are all looking to change the way we process information relating to things like voyage data, charter parties, operational messages, market data, pooling and chartering. There are basically multiple platforms all claiming to do various parts of this all coming to market at the same time” Fairclough goes on to list tools created by AXS Marine, Sea by Clarksons, Ocean Freight Exchange, Signal, Shipnext, MSI Horizon and VesselsValue’s new Trade tool, all having the potential to change the way owners fix their vessels.

“Some will thrive, others probably won’t. It will be their ability to adapt and remain cheap – and relevant – that will separate the winners from the losers,” says the Wah Kwong boss.

Turning specifically to the

ISSUE ONE 2020

liner trades, Thomas Bagge, CEO of the Digital Container Shipping Association, reckons this year will see a continued acceleration of smart container usage, greater adoption of blockchain-enabled platforms and like Ofer at Eastern Pacific, increased use of AI. “What would hold the industry back from leveraging technology to achieve breakthrough results is if we repeat the same patterns of behaviour from the past,” Bagge says, in comments echoed by many interviewed by Maritime CEO. “To move the industry forward,” he continues, “we need to collaborate on basic elements, similar to what has occurred in many other industries. When we are willing to change the way we work and proactively collaborate, we, as an industry, will truly benefit from technological advancements.”

Maritime CEO columnist Kris Kosmala agrees with Bagge that this year in the liner space it will be all about incremental changes rather than transformative technologies.

As to what will hold the shipping industry as a whole back from taking the plunge with greater tech adoption, Carl Schou, president and CEO of Wilhelmsen Ship Management, cites the all too familiar refrain of the conservative nature of the industry and the cost versus risk rewards.

The markets will need to pick up for a period of time to swell owners’ coffers before they’re willing to part with their cash for new technologies, argues Thomas Reckefuss, managing director of Thomas Schulte Ship Management.

“The last quarter in 2019 wasn’t as good as anticipated, therefore shipowners are and will be again more reluctant to invest into new developments or newbuildings,” Reckefuss reckons.

For Frank Coles, CEO of the Wallem Group, the biggest hurdle is the sheer breadth of technology companies touting their products to what is actually a comparatively small audience.

“In maritime, technology is brought to market in a fragmented,

uncoordinated and non-standard manner. This is the single biggest hinderance to proper advancement of digitalisation in the maritime industry,” Coles says.

The Wallem head argues that there is little motivation from the large engine manufacturers to move into a standardised environment.

Likewise, he says there is little motivation for most innovators to collaborate with the other solutions providers.

The fragmentation argument is indeed the biggest hurdle maritime tech faces, agrees Eastern Pacific’s Ofer. Another stymie is a lack of seed funds, says Ofer, a man who last year helped found a maritime tech startup incubator in Singapore “The pool of top-tier, risk-taking venture capital funds that have maritime tech on their radar is severely limited,” Ofer says, a statement backed up by a report from UK consultancy Thetius published in January, which showed that if one discounted Softbank’s massive one-off $1bn investment in Flexport, venture funding in maritime tech actually declined by 24% last year.

“Start-ups are usually forced to raise money from strategic partners such as shipowners, shipmanagers, yards, class societies, and the rest of the actors involved in commercial maritime. But it’s the fragmentation of our industry and the risk-averse, traditional mentality of these typically family-run businesses that make the task of raising money for maritime tech such a big hurdle,” Ofer points out.

“For the industry that carries the world on its shoulders, it is essentially niche in the number of ships, and has way way too many suppliers.

This means that it is hard to create a standard, or encourage collaboration,” Wallem’s Coles says, a point of view shared by Videotel’s Singh, who concludes: “The maritime sector will need to go past the not invented here syndrome and work with peers and competitors to collaboratively roll out new standards across the sector.” ●

19

IN PROFILE

Hugo De Stoop p.23

Timothy Cosulich p.33

Ben Ognibene p.24

John Michael Radziwill p.27

In profile this issue Maritime CEO’s 17 correspondents around the world have been in touch with many of the world’s top shipowners. Highlights are carried over the next 11 pages

20

maritime ceo

IN PROFILE

Matt Duke p.31

Henrik Ramskov p.29

Lucius Bunk p.25

ISSUE ONE 2020

21

COVER STORY

Ever the opportunist Euronav has been busy making the most of the dramatic ups and downs in the VLCC sector over the last few months

A

rguably no sector in shipping is more constantly on a knife edge than the VLCC sector, a segment prone to extremely rapid swings in earnings. A safe pair of hands is what is needed to navigate the supertanker seas and in Hugo De Stoop, Euronav has the right person for the job. A 15-year veteran at the Antwerp company, De Stoop stepped up from CFO to CEO 10 months ago.

Analysts gushed when on January 30 the Belgian tanker giant revealed its stunning $160.8m net profit for Q4. Citing “robust fundamentals”, Euronav stated at the time how its VLCCs in January had been trading at $89,200 per day and the firm’s suezmaxes pocketing an average of $57,000 a day.

And then the full effects of coronavirus blew in, ushering in a precipitous drop in tanker fortunes, rarely seen in terms of its speed and severity. Chinese oil demand suddenly dropped by around 20% making it the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009, and the most sudden since the September 11 attacks in the US in 2001. This combined with the lifting of sanctions on 26 Cosco VLCCs saw many of the world’s largest tankers plummet from earning six-figure

Spot on

Euronav Founded in Antwerp in 1995.

Largest New York-listed tanker firm in the world.

ISSUE ONE 2020

daily sums last month to operating below opex.

However, for Euronav and De Stoop, this monumental change of fortunes brought opportunities and he used the time to add to his fleet, just ahead of another massive spike in March when Saudi Arabia and Russia launched a crude oil production war that has seen VLCC rates soar back into six-digit terriotory.

In February, Euronav pounced for four Sinokor resale VLCCs due for delivery later this year and early 2021 from Daewoo Shipbuilding & Marine Engineering (DSME). While most of the reporting surrounding the deal centred on the fact that the ships will be Euronav’s first to feature scrubbers, the real headline was the price paid – $93.5m per ship. Resales for the last couple of months had prior to this been priced for $100m or above.

De Stoop reminds readers that Euronav, throughout its history, has always been an opportunistic type of company.

“When the cycle is down we can be opportunistic to take ships at a good price to operate long term,” he says in connection with the recent acquisition, saying that before the Sinokor deal prices had been too high for resales.

Ahead of the global sulphur cap,

Euronav had been one of the most high profile opponents of going down the scrubber route, opting instead for a unique strategy of buying up huge volumes of VLSFO in early 2019 and sending it for storage to Malaysia on one of its ULCCs. However, as De Stoop, ever the numbers man, stresses – reacting to all the scrubber headlines– Euronav’s stance was always regarding existing ships, not newbuilds.

“You can’t get a newbuild for prompt delivery without scrubbers,” he points out, adding: “We were not convinced about the economic case for scrubber retrofits.”

De Stoop says he and his team liked the four ships for all their specs and the price negotiated, not simply because they happened to have scrubbers installed. Indeed, De Stoop makes the point that Euronav would not have changed anything in its sulphur cap strategy if he had the time again.

On the coronavirus, the Belgian executive reckons the effects will be felt in the tanker trades into Q3, but by next winter China ought to be in a position to pick up demand.

“Yes, it is a catastrophe,” he concedes, “but we know it is temporary in nature, and when the Chinese come back they will accelerate.”

The actual supply fundamemtals of the tanker sector remain good, De Stoop argues, pointing to the limited orderbook in the coming 24 months and the tranche of ageing ships that will head for demo soon.

Pointedly on the virus, the boss of the largest independent crude oil tanker company in the world, tells Maritime CEO: “It’s been a good reminder to people in the tanker sector that rates can go up and down very quickly.” ●

23

IN PROFILE

‘Tanker owners usually wind up with the people they know and trust’ What makes a successful shipping pool? Ben Ognibene has some ideas on the matter

D

ecember saw tanker commercial management firm Concord Maritime, launched in April 2018 by Ben Ognibene, move into shipowning with the acquisition of 2007-built Samsung aframax tanker Aegean Blue from Greece’s Arcadia Shipmanagement.

“We like the fundamentals in the aframax markets – global cargo volume growth, rapidly slowing fleet growth, dearth of newbuilds, volatility in rates, and baseline earnings,” Ognibene, formerly with Heidmar, said at the time of the acquisition.

Discussing more in depth the decision to go into shipowning, Ognibene tells Maritime CEO: “We started looking at the TC markets last spring thinking rates were appreciating more quickly than asset values. We built a case to invest in midlife aframaxes which at the time were below historical averages.”

Spot on

Concord Maritime Aframax specialist, which started out two years ago as a pool operator, and has just bought its first tanker. Led by Ben Ognibene, the former CEO of Heidmar.

24

The first ship - the Aegean Blue - has been busy from the moment it was bought, entering Concord’s growing Dakota Tanker pool.

Concord Maritime currently has 13 aframaxes in its Dakota Tankers pool including tankers from Atlas Maritime, Emarat Maritime, International Seaways and Chartworld.

“We are in discussions with other quality owners about participating in the pool,” Ognibene says, also revealing: “We are also evaluating projects, including purchase, for additional aframax vessels.”

The fundamentals for aframaxes still look good for the next couple of years, Ognibene argues, looking at the fleet profile and orderbook.

Ognibene has been in the pools business for the past 16 years. At no time has activity in this niche been as frenzied as this year with new pools starting, old ones changing hands and interest in the concept picking up.

“The pool landscape is shifting,” Ognibene concedes. “Trust is built up over decades. While good marketing and snappy software are alluring, tanker owners usually wind up with the people they know and trust who have delivered for them in the past.”

Connecticut -based Ognibene partnered with private equity firm American Working Capital to form

“ ”

Trust is built up over decades

Concord Maritime nearly two years ago, a period of time that has witnessed extraordinary volatility in the tanker trades, something that tends to favour pools. ●

“The market has matured and become extremely competitive with the bulk of third-party managed ships in the hands of a dozen large companies” — Kishore Rajvanshy, managing director, Fleet Management

maritime ceo

IN PROFILE

Composure, reflection, action Auerbach Shipping turns 10 this year. Founder Lucius Bunk shares with readers how to navigate the tricky MPP waters

I

t’s been five years since Maritime CEO came calling at the Hamburg headquarters of Auerbach Schifffahrt. It has been a bumpy ride for sure, but the very Hanseatic founding principles of this multipurpose shipowner remain the same - composure, reflection, action.

Founded in 2010 by former Ernst Russ executive Lucius Bunk, the fleet today is made up of 15 MPPs, a growth of 10 since 2015.

“It’s been a challenging journey in a market environment that contrary to our expectations five years ago did not stabilise or improve but instead saw several established operators and competitors not only struggle but declare insolvency and give up,” Bunk concedes.

Auerbach vessels are employed with various well-known operators on a time charter basis for between six and 12 months periods.

From the outset, Auerbach has focused solely on the MPP sector and has no plans to alter this fleet mix.

“Given the limited size of our niche market we profit from a close

Spot on

Auerbach Shipping Founded in 2010 in Hamburg. Pure MPP player with plans to double fleet size from today’s figure of 15 ships.

ISSUE ONE 2020

“

A shipowning company active in the MPP sector has to be set up in a way that allows for sound access to capital, solid technical expertise and a good commercial network

”

dialogue with relevant stakeholders in a tight knit global network,” Bunk explains.

Massive global developments beyond Auerbach’s control are certain to damage earnings this year, Bunk admits, but the MPP sector ought to be better shielded from the ongoing chaos seen around the world at the moment.

“A prediction on developments under current market circumstances is rather difficult,” Bunk says. “In light of the spread of the coronavirus and the soaring conflict between Russia and the Middle East on pricing of oil we expect some adverse

effects on demand, global supply chains and the availability of project cargo. Having said same there is a lot of contractual long-term business and we expect effects on the MPP market not to be as severe in the short run as on other sectors in the industry.”

Auerbach’s ‘one step at a time’ approach to business looks sensible given current conditions and the travails seen by many of its larger peers in the MPP sector of late.

Plenty of the consolidation within the MPP sector have been misguided, Bunk argues.

“A shipowning company active in the MPP sector has to be set up in a way that allows for sound access to capital, solid technical expertise and a good commercial network to secure adequate employment,” the German says.

The aim going forward, maybe for the next Maritime CEO interview circa 2025, is to grow the fleet to somewhere between 25 and 30 vessels. Beyond that, Bunk has far greater ambitions - with plans to revolutionise shipping as a whole.

“We have decided to allocate funds to address the mega trends and challenges such as climate change and digitalisation of the upcoming decade and are about to co-launch a company builder with a focus to initiate and support ventures geared at introducing fresh and innovative concepts to support the evolution of the maritime industry,” Bunk reveals in a Maritime CEO exclusive. ●

25

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IN PROFILE

‘In this market, it seems you are almost the bad guy because you made money’ GoodBulk’s John Michael Radziwill on how to earn a crust even in the darkest of times for dry bulk

J

ohn Michael Radziwill has hit out at shipping’s naysayers, arguing that there’s plenty of money to be made, even in dry bulk.

The extravert boss of Monacobased GoodBulk announced a $10.9m net profit on February 19 for the fourth quarter, resulting in earnings per share (EPS) of $0.36 and a dollar dividend to his shareholders, something Radziwill argues in conversation with Maritime CEO that sets his company significantly apart from all his competitors.

The dollar dividend, GoodBulk’s eighth consecutive quarterly handout, is many times more than anyone else, Radziwill claims, saying his company has been “massively outperforming” the cape market as a result of the performance of its capesize pool and the ability to properly time market swings.

Spot on

GoodBulk Founded in Monaco in 2016, buying up a sizeable fleet of secondhand dry bulk vessels between 50,000 to 210,000 dwt.

ISSUE ONE 2020

“The platform we have should be recognised as best in class,” Radziwill says, clearly irked at some of the reporting of how his company is faring.

“In this market, it seems you are almost the bad guy because you made money,” Radziwill says, adding: “We can show our industry is a profitable one if operated with discipline and in the right manner.”

The GoodBulk results also confirm reports that the company sold two capes in January – the Aquacarrier and the Aquajoy.

With the Baltic Capesize Index in recent weeks picking itself off the floor, Radziwill, who tends to exude bullishness, is confident the worst is over for dry bulk.

“We think there is light in the

cape market for 2020 and beyond,” he says, going on to describe what he terms as the “coiled spring effect” that ought to manifest the market in the coming months as the coronavirus eases, something similar to what happened in 2019 after the disastrous start to the year with Vale’s myriad production woes.

As well as demand coming back, the orderbook remains low with Radziwill saying any owner would have to be “very brave” to contract today and scrapping levels are increasing.

“Once things normalise after the coronavirus, the world will play catch up with iron ore and also coal,” Radziwill predicts, hoping for a ninth consecutive dividend. ●

“ An equity-based crowd investing platform in the shipping industry was only a matter of time” — Hanno Tamminga, managing partner, New Shore Invest

27

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IN PROFILE

The deal sourcing pipeline Navigare Capital Partners is shaking up ship investment. Its managing partner, Henrik Ramskov, explains what makes a good vessel purchase these days

N

avigare Capital Partners, a Copenhagen-based alternative investment fund manager dedicated to investments in maritime assets, is gearing up for a new round of ship acquisitions with its Maritime Investment Fund II. Navigare was founded in 2017

by Robert Mærsk Uggla and four partners to provide institutional investors with the opportunity to invest in maritime assets. The firm is governed and regulated by the Danish Financial Supervisory Authority.

Navigare is headed by managing partner Henrik Ramskov, who served many executive roles in the Danish shipping industry including stints as CEO of Thorco Shipping, CEO of Maersk Logistics and senior vice president of Maersk Tankers, before he co-founded Navigare.

According to Ramskov, Navigare invests in maritime assets with strong cashflows through a disciplined operating model with a high focus on risk management. The company could invest in ships through straight acquisitions or sale and leaseback arrangements to assist the seller to release cash.

The traditional European ship financing banks have massively withdrawn from the market in the past few years, while institutional investors have become more active when it comes to investing in ships.

Pension funds, squeezed by low interest rates, are exploring investments in shipping in the hunt for higher returns.

“The traditional ship financing

ISSUE ONE 2020

by the banks will likely continue to be at a lower level as we see already and the regulatory environment will increase the qualification requirement that banks are setting for those seeking ship financing,” Ramskov says.

Since its establishment three years ago, Navigare has invested in a diversified portfolio of ships, which is now made up of three bulkers, six tankers, nine containerships and one LNG carrier newbuilding.

Most notably, all of the company’s ship acquisitions in the past 12

“

Pension funds, squeezed by low interest rates, are exploring investments in shipping in the hunt for higher returns

”

months are focused on the container sector with five boxships bought.

The recent acquisition of the 13,800 teu containership Thalassa Pistis is the largest containership Navigare has bought to date.

“The rationale has been that in our deal sourcing pipeline those opportunities have provided the most interesting risk adjusted returns and with contracts that are fitting into our portfolio strategy,” Ramskov explains.

Navigare Capital Partners now acts the manager of Maritime Investment Fund, established by three Danish pension funds

- PensionDanmark, Danica Pension and Lægernes Pension - to oversee ship investments.

Maritime Investment Fund I generated a total commitment of $450m and has now created a $1bn portfolio of vessels chartered on long-term contracts, while the three pension funds have pledged to invest over $300m in the second of the series, Maritime Investment Fund II. Currently Maritime Investment Fund II is in the middle of its fund raising process and going forward Ramskov says Navigare will continue its diversified investment strategy, which will allow institutional investors to invest in a broad portfolio of maritime assets with long stable cash flows and the fund will keep looking at the segments where it has already made investments in the first round. The fund operates with an investment period of four years.

“We are continuing to develop our investment pipeline where we see a number of interesting deals, while at the same time fundraising for fund II,” Ramskov says. ●

Spot on

Navigare Ship investment vehicle founded in Copenhagen three years with Robert Mærsk Uggla onboard.

29

IN PROFILE

‘Start with the value proposition first, not the solution’ Matt Duke on Greig Star’s digital journey

O

n July 1 last year Matt Duke took over from Camilla Grieg as CEO of Grieg Star, one of the best known names in Norwegian shipowning. Coming from an IT background, Duke is busy transforming the company into a pioneer for the digital age.

Duke joined Grieg Star as chief business process officer in January 2018. He came from a role as VP digital platform maritime at Kongsberg Digital. Prior to that he worked for 14 years at Odfjell, lastly as corporate vice president IT. “Grieg Star is no different than other shipping companies in that we see the need to deliver on targets relating to safety, profitability, sustainability and digitalisation,” Duke tells Maritime CEO. In order to achieve this, he’s busy putting in place what he describes as a “lean, high quality, high competence” organisation.

“We need to foster a hunger for knowledge and personal development. We need to make sure the organisation is diverse. These are the foundations that give that dynamic environment that produces new ideas and solutions,” Duke maintains.

Grieg Star has developed digital solutions for many years. Duke arrived at the company in a situation where it was clear the firm could build on these foundations and then take advantage of new opportunities related to emerging technology.

“It is not about digital technologies,” Duke says, “but about getting

ISSUE ONE 2020

“

We need to foster a hunger for knowledge and personal development. We need to make sure the organisation is diverse

”

the best results by building a good mix between carefully identifying the problems we need to solve, and then empowering our experts with new technologies to complement their domain knowledge.”

Duke stresses to all employees that it is vital to always focus on the problem they are trying to solve first.

“It is only after defining the value and benefit of solving the challenge, that we use resources to develop solutions and new processes that improve our performance,” he explains.

In that way, for example, Grieg Star used time to build business analytics to pull specific trends and indicators out of its core systems that have value.

“There is no value in the

technical achievement of bringing sensor data from our assets, if the information isn’t understood and of use to our experts. We start with the value proposition first, not the solution,” Duke asserts. ●

Spot on

Grieg Star Run by the Grieg family for generations, this blue ribbon name in dry bulk now runs its commercial operations via G2 Ocean, a joint venture with Gearbulk.

31

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IN PROFILE

New fuels equal new ships An interview with Fratelli Cosulich to find out how the first months of the global sulphur cap have gone

T

he Italian family Cosulich ordered full steam ahead with new investments in ships as the IMO low sulphur rule entered into force on January 1. Apart from the activity as a shipping agent, freight forwarder and logistics operator, the Fratelli Cosulich group is very well known in the shipping business as trader worldwide and physical supplier of bunkers in the port of Singapore.

Earlier this year the Genoa-based group added a sixth modern vessel to its fleet - renamed Emma Cosulich.

This is just the first step of a bigger investment plan in new ships.

Timothy Cosulich, head of the bunker business at Fratelli Cosulich, tellsMaritime CEO that “imminent is the signing of new orders for two, more likely three, newbuildings.

“The intention of our group is to increase the number of owned vessels and that’s why two bunker tankers operated in charter were recently redelivered,” Cosulich says.

The new ships will be bunker tankers with 8,000 tons capacity, probably a Chinese shipyard will build them and the investment is estimated at about $10m each.

In the pipeline there is also the debut in the LNG market as the group

Spot on

Fratelli Cosulich Bunker barge owner, fuel supplier,. shipping agent, freight forwarder and logistics operator with twin bases in Genoa and Singapore.

ISSUE ONE 2020

“

Traders cannot risk excessive financial exposure and this situation inevitably leads to increased pressure on shipping companies in terms of liquidity

a few weeks ago took a 33% stake in the GnlMed joint venture with Novella and Autogas groups to serve the North Tyrrhenian ports in Italy.

“In a few months’ time we are going to order also a new LNG bunker tanker with 7,000 cu m capacity,” continues the Italian owner who has been based in Asia for years.

Following the experience made in the port of Singapore, Fratelli Cosulich as from last November started also acting as a bunker physical supplier in the port of Genoa, buying low sulphur fuel from the refineries and then selling the product to the ships calling the port.

“For our group, which had never traded on the local market before in Genoa, this is another very important innovation,” says Cosulich.

The global sulphur cap has caused some problems, mainly operational and financial, for shipping companies and shipowners in general in its opening weeks, Cosulich says.

The first concern is the scarce availability of low sulphur fuel. “After the first round of supplies by refineries was completed and the related round of ships refuelling carried out for the first time, there is now a shortage of product on the market and the consequence,” he says.

In addition to these operational complexities, there are also financial

”

issues. The manager of Fratelli Cosulich explains that there is a criticality related to credit management because, depending on their financial solvency, traders anticipate up to certain amounts or grant particular payment terms to shipowners.

“Traders cannot risk excessive financial exposure and this situation inevitably leads to increased pressure on shipping companies in terms of liquidity,” Cosulich says.

Finally, on the market there is also an issue related to the complexities of the bunker logistics chain and consequently the availability of bunker barges in ports both for high sulphur fuel oil and for low sulphur fuel oil, something that is easing as we reach the fourth month of the new era in ship fuels. ●

“Thai crew are now the best value maritime staff anywhere in the world today” — Andrew Airey, managing director, Highland Maritime

33

WINE

The hipster will see you now Neville Smith on natural wines

W

ould you like to see our list of natural wines?” the dude asked, apparently without irony. There is no need for irony where natural wines are concerned I thought. The wines take care of that.

This irony, in case it’s not obvious is that natural wines might sound like a good idea but in my experience have been anything but.

It’s not just the attendant hype (in the heaving metrop at least) and flim-flam that has always grated with me, it’s the sheer bloodyminded youthfulness of the project.

Not for these makers, working within appellation rules, slaves to tradition and history, producing wines that sell by the caseload. No, these men and women are iconoclasts, determined to overturn the established order of wines produced

with skill and expertise, built to deliver rewarding drinking over many years.

No, that’s just too easy – and in some ways I understand that too.

Appellation rules in some countries are a straight-jacket, too much wine is made and far too much to a price point and little more. The overproduction in European countries means a lot never makes it to the table, let alone the glass.

Hence the (now well established) trend of making wine outside the system, with the results proudly classified at the lowest possible level despite often fanatical attention to detail. The results can be amazing – especially when these ‘declassified’ or ‘next-door’ wines cost a fraction of the ones with the right names on the labels.

Then there is the religion of

Two (more) to try

If you fancy something much more immersive, I can definitely recommend you try Naranjo Torontel Loncomilla Maturana Wines 2018 (Corney & Barrow £POA) which owes its deep orange colour to extended skin contact and its flavour to, well you decide. For me it’s a Proustian rush of Cider Mivvi all the way. ●

FOR THOSE JUST dipping a toe into natural wines, start with 2018 Wild Soul, Domaine Julien Sunier, Beaujolais (£21.00, Berry Bros & Rudd,) bottled with low sulphites and combining a mild spritz on the open with generous full dark red full bodied fruit within. It’s natural in the best possible way.

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biodynamics, following the creed of Rudolf Steiner, proclaiming vineyard treatments and interventions that the conventional scoff at some of which have found their way into the mainstream. The observable difference with these wines is that they have scored higher than organics and conventional wines in blind tastings, so something is working.

Though its roots run deep, today’s natural wine movement is predicated on a ‘nothing added, nothing taken away’ mantra. Anyone who gets headaches from drinking wines with added sulphites will welcome that, the grapes are organic and yeasts natural. Some go much further, eschewing traditional fermentation and maturation techniques, encouraging oxidation and generally cocking a snook at mainstream techniques.

Thus, in service of you, dear reader I decided to put my wellfounded scepticism aside and dig out something that you might reasonably serve and not have your guests asking for the chardonnay.

An honourable mention goes to Garnacha Loncomilla Maturana Wines 2018 (Corney & Barrow £15.25) which delivers a lot of the natural wine experience; dry-farmed grapes get 10 months ageing in amphorae rather than barrels and the result is massive power with genuine finesse from an under-rated varietal. ● maritime ceo

GADGETS

Hot brew

W

ith all the things available to do on computers — work, games, video and the internet — it’s easy to get so distracted that you end up with a distressingly cold cuppa. Glowstone’s Smart Mug is their well thought out answer. If the very phrase ‘smart mug’ has you imagining some horrifying plastic and metal affair, relax: it looks like any other ordinary china mug. In fact it’s made from fine bone china, so it’s a fair bit posher. And a heater in the bottom of the mug will extend that perfect drinking temperature of 60-65°C from the usual three minute window to a good 30 minutes, all while leaving the base of the mug itself cool enough to handle. The electronics are completely enclosed, and it recharges wirelessly, so it’s even dishwasher safe.

Glowstone smart mug $175 www.glowstone.tech

Like a native

N

ow that you’ve got a nice hot brew, you can sit down and have a chat. What if you’re abroad and you can’t speak the local language?

Langogo Genesis, a pocket AI translator, can help you out. It can translate over 100 languages and the system runs in eight languages (Simplified and Traditional Chinese, English, Japanese, Spanish, French, German, Korean). It also has a built in esim, with a free data plan for two years to connect to the internet in 74 countries, which powers the AI voice assistant to help you locate restaurants, hotels and tourist spots. It also doubles as a wifi hotspot. To work it, you simply speak into the Genesis and the AI will give you the translation in text and audio.

Langogo Genesis $300 www.langogo.ai

Click print

3

D printers come in two basic flavours, filament-fed or liquid resin. Filament-fed printers are generally cheaper and a bit less messy, but they are also less high resolution, and can have a layering effect. The Elegoo Mars is a liquid resin printer, offering XY resolution of 0.047mm, and it comes with the latest version of ChiTu Box Slicing Software, which speeds up the pre-printing preparation and can save you resin by hollowing out the 3D model. After printing, the print needs to be cured by UV light to harden properly. Elegoo have made a big effort to take a lot of the mess and annoyance out of the liquid resin printing process with a carbon filter to cut down on fumes and an easy to level build plate.

Elegoo Mars $370 www.elegoo.com

ISSUE ONE 2020

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REGULAR BOOKS

Viruses, epidemics and pandemics Paul French looks at tomes on previous pestilence to identify how the coronavirus might play out

I

nevitably perhaps this issue’s book reviews hopefully provide a backgrounder on past outbreaks of flus, epidemics and how they’ve been identified and beaten. The coronavirus outbreak in China currently is having ramifications globally and naturally has everyone – both as members of families and communities as well as business people – nervous.

So, perhaps a good place to start is Laura Spinney’s The Pale Rider, which looks back to the Spanish flu pandemic of 1918-1920 that had a death toll of between 50m and 100m people and a global reach. Spinney recounts the story of this now often forgotten pandemic, tracing it from Alaska to Brazil, from Persia to Spain, and from South Africa to Odessa. She shows how the pandemic was shaped by the interaction of a virus and the humans it encountered; and how this devastating natural experiment put both the ingenuity and the vulnerability of humans to the test. Alternatively John M. Barry’s The Great Influenza is another good history of the 1919 flu pandemic.

Also good as an overview is Mary Dobson’s Murderous Contagion: A

36

Human History of Disease. Murderous Contagion tells the compelling and at times unbearably moving story of the devastating impact of diseases on humankind - from the Black Death of the 14th century to the Spanish flu of 1918-19 and the AIDS epidemic of the modern era. In this book Dobson also relates the endeavours of physicians and scientists to understand and identify the causes of diseases and find ways of preventing them. In a similar vein is Sean Martin’s A Short History of Disease: From the Black Death to Ebola, written in 2015 during the world’s response to the outbreak of Ebola in West Africa, which caused widespread devastation after it was first reported in March 2014, and, prior to the coronavirus in 2020, has been at the forefront of public health discussions.

Interesting in terms of China and its history is William C. Summers’s The Great Manchurian Plague of 1910-1911:

“

The Geopolitics of an Epidemic Disease.

When plague broke out in Manchuria in 1910 as a result of transmission from marmots to humans, it struck a region struggling with the introduction of Western medicine, as well as with the interactions of three different national powers: Chinese, Japanese, and Russian. In this fascinating case history, Summers relates how this plague killed as many as 60,000 people in less than a year, and uses the analysis to examine the actions and interactions of the multinational doctors, politicians, and ordinary residents who responded to it.

It’s hard to know now, with so much conflicting data and reporting, just how the coronavirus will play out in China and globally, nor what the total human and economic toll of the epidemic will be. What all these books on disease and epidemics though tell us is that concerted and determined action combined with open and honest authorities can defeat disease outbreaks. ●

Concerted and determined action combined with open and honest authorities can defeat disease outbreaks

”

maritime ceo

TRAVEL

Where pigs can swim To get a glimpse of the climate crisis on the frontline editor Sam Chambers describes his voyage to a distant dot in the Pacific

A

fter six hours the lush green mountains of Samoa fades away and the rich, dark copper sulphate coloured Pacific envelopes the view from horizon to horizon.

In another 24 hours, following a tetchy night on deck, periodic squalls and endless tinny Polynesian music, a dot appears on the horizon. The spec gradually widens to a dark strip and then it perforate and turns green.

Palm trees in their thousands. We have arrived.

To get more remote than Tokelau, you’d have to apply to Nasa. There’s no capital, airport or port. The civil service even works in another country. Located roughly where the international dateline bisects the equator the tiny trio of coral atolls are New Zealand’s last colony and, as the locals – all 1,447 of them – like to comment, the last paradise on earth.

Discovered by the poet Byron’s grandfather in 1765, it was visited a few years later by another British navy ship looking for mutineers from Captain William Bligh’s HMS Bounty. It was the

ISSUE ONE 2020

last place in the British Empire to hear that World War One had started, a full five months after hostilities got underway. It was also the last place on earth to have telephones. Yet, this far-flung territory does have one unfortunate first that it can boast. It is likely to disappear off the map before almost anywhere else.

Tokelau is a Petri dish of climate change in motion, with tides higher and more irregular. In a Darwinian twist, the pigs on the southern atoll of Fakaofo have even evolved so that they can now swim and fish for eels.

“If you want an example of the canary in the mine for extreme events related to global warming, Tokelau is your candidate,” says David Payton, the New Zealander who used to administer Tokelau.

Near where the boats land on the middle atoll, Nukununo, just in front of the ladies playing bingo Mike Perez cast his arm forwards. “You see that,” he says, pointing 20 metres in the distance, “When I was growing up the sand went all the way to there. Now though,” he points directly down, “the waves are

lapping at our feet.” His cousin, Luciano Perez, an avid fisher, recalls how El Nino dried out the lagoon for three months a few years ago. Luciano runs Tokelau’s only hotel/bar – a lovely, simple house with seven guestrooms that he set up in 1995 after 31 years as a schoolteacher and to this day his guestbook stretches to less than 25 pages. No more than 40 foreigners visit each year.

A twice-monthly 30-hour cargo boat ride from Samoa 500 km to the south represents the only transport link with the outside world.

Unusually for Pacific atolls, all three are totally encompassed by coral so that the tides of the sublime, 360-degree paradise vision turquoise lagoons inside are different to the ocean outside. Yet if Tokelau is to survive it will have to work out how to deal with the outside world.

Every day now the 1,447 citizens of Tokelau wake to find their land that bit smaller, the sound of the lapping waves ever closer. Soon this little slice of paradise could well be wiped off the map forever, a fate that faces many other islands in the Pacific. ●

37

OPINION

Are net zero claims killing corporate credibility?

Gavin Lipsith from Wake Media on swapping ethics for accounting

A

s a stepfather to five teenagers I am no stranger to murderous impulses. But I’ve been put off by worrying about how I would pay for my crime; there’s no time for rehabilitation in the busy maritime world. Now, inspired by recent announcements, I have a solution. I’m becoming a net zero murderer. Next time the red mist settles there will be two ways to clear my account. Either pay someone else not to kill someone, or get someone else pregnant.

If that seems like cheating, it’s just the kind of fun logic that entails when you swap ethics for accounting.

The hollow-sounding declarations of companies aiming for net zero emissions are a case in point.

Net zero is not zero. If I poison you but promise to remove the poison in, oh, a week’s time, there is not a net zero impact on your health.

What’s critical is the effect and the timescale – the damage is done, the remedy is long overdue, but because you’ve planted trees or invested in windfarms, you can claim to be a net zero emitter. And that label can easily be taken to mean more than it does by people who don’t know better.

Like the takings of a disappointed fisherman, the net is the catch. There are genuine concerns that disingenuous companies will rely on emissions offsetting and

38

trading to balance their emissions rather than taking the more painful and costly moves that could slow their actual emissions output. In the case of shipping companies, that means working as quickly as possible to introduce zero-carbon fuels or energy sources and meanwhile optimising ship design, operation and fleet management for energy efficiency. In the case of oil companies, it is a far thornier issue, for obvious reasons.

Now I am no environmentalist.

Nor am I claiming that there is no place for emissions offsetting- be that planting trees, investing in new clean technology or in recapturing carbon from the atmosphere. Even emissions trading on an inter-governmental scale may help to rebalance the injustice of developed countries suddenly demanding that developing countries stop emitting. What I am is a communications specialist that believes the public and media should be treated with respect.

As journalists and laymen become more familiar with the concept of ‘net zero’ they will take a scalpel to such claims. How much is a genuine move to reducing emissions?

“

How much is offsetting? And, crucially, when will each step happen?

The companies with only vague answers will encourage scepticism.

Those trying to buy themselves the right to emit more will lose trust.

Why risk being seen as evasive or dishonest? Better to truly inform the public. Accept and explain the difference between net zero and zero emissions: be part of the public’s education process. Then explain separately your emission reduction and emission offsetting plans. At Wake Media, we call this business-to-person communications. Before they are customers or stakeholders or business partners, your target audience are people. And people respond to honesty.

Planting more trees and capturing carbon is fine; investing in and incentivising zero-carbon companies is fine. But that doesn’t relieve companies of the responsibility to cut their own, gross emissions where possible, or to communicate truthfully about their path to lower emissions. Whether the victims are climate change targets, corporate credibility or even stepchildren, killers rarely escape justice. ●

Net zero is not zero. If I poison you but promise to remove the poison in, oh, a week’s time, there is not a net zero impact on your health.

”

maritime ceo

REGULAR OPINION

On the subject of thought leadership Mark Stokes, a director at BLUE Communications, has some communications advice for the shipping industry

T

hought leadership is seemingly in vogue, a now mainstream buzzword amongst PR professionals seeking to add value to their profession.

Creating assets to feed through communications channels, and providing considered comment in order to engage in, or indeed lead, a meaningful conversation to move the industry forward is a positive thing.

However, too often clients come to PR agencies wanting ‘thought leadership’ without having worked through the fundamentals of their brand or indeed being clear on why they want to communicate, beyond getting coverage. The result is often a series of confusing, disparate and increasingly sensational transmissions that may result in headline-grabbing clickbait but does little to build trust in the minds of their stakeholders, let alone position themselves as thought leaders.

And the key word here is transmission. True thought leadership means firstly creating genuine intellectual capital, and secondly engaging in a sustained conversation with the industry to achieve a shared goal, drive progress and enact change. Just adding ‘noise’ to the conversation for the sake of generating a few column inches or inflating the CEO’s ego isn’t helpful, particularly given the tsunami of views, opinions and comment we see daily across the plethora of news channels, Twitter, LinkedIn and other social media.

The first rule of communications is to only communicate when you have something meaningful to say and you want people to think, feel or do something differently. The rest is just noise, or ‘fried air’ as Roberto

ISSUE ONE 2020

Giorgi once put it.

To quote another ex-colleague, ‘thought leadership relies on leaders having thoughts’. Too often an ill-prepared CEO is put forward to speak on a topic he or she is unfamiliar with in the hope of building a thought leadership position. Often it results in the opposite outcome. Far better to put forward your true subject-matter experts who have real, validated knowledge and proven insight, and have built trust with the industry through many years of experience on the subject.

Which brings us back to the ‘why’. True thought leadership, and indeed, any effective communications strategy, can only be founded on and aligned to a clear understanding of a company’s brand – its purpose, its core beliefs, its vision, its values, culture and customer promise. Ultimately, it is the brand that drives everything.

For many companies, this just isn’t understood. A recent PRWeek article highlighted that most B2B leaders know purpose is important, but very few say it’s an integral part of their business, and most think purpose engagement feels like a PR tactic, according to new research.

If you can’t inspire or articulate why your people should get out of bed in the morning, then it’s best to stay in bed. People want to work for and work with companies and organisations that have a clear sense of purpose in why they exist, who they serve and what their contribution is, not just to shareholders but to society as a whole.

The current focus on ESG (environment, social and governance) reporting underlines this point.

Brand and purpose cannot be just a PR tactic. The drive for ESG transparency is challenging companies to look at the fundamentals of what they believe in and why they exist.

Hard business decisions are having to be taken, and commitments made, that extend beyond shareholder return. What were once thought of as PR problems are now being viewed as fundamental business problems.

Effective thought leadership is therefore not about adding noise to the conversation, it’s about clearly articulating your beliefs and commitment to effect change.

I’m slightly loathe to quote for former UK prime minister Margaret Thatcher, but she made a very fine point about thought leadership.

“Watch your thoughts, for they become words. Watch your words, for they become actions. Watch your actions, for they become habits.

Watch your habits, for they become your character. And watch your character, for it becomes your destiny.

What we think, we become.”

In other words, your thoughts become how your brand is perceived, so you need to be damn sure that you’re clear on why you’re communicating and how it aligns to your company’s brand and purpose. ●

39

MARPOLL REGULAR

Your thoughts Every issue we ask readers for their take on important shipping issues. Results and key comments below Will the additional costs of either IMO2020 compliant fuel or scrubber capex continue to be reimbursed from 2020 Q2 and onwards?

Will the proportion of the global fleet on long-term charters increase as more expensive alternatively fuelled ships are ordered?

“

“

Commercial pressures and the always present market share agenda will push lines to compromise on BAFs

Until there is a feasible zeroemission fuel of the future, a good hedge is to charter more and own less ships

”

Yes 65% No 35%

Yes 64% No 36%

Do human rights matter in the supply chain, or is it a commercial distraction?

“

Will the 2020s prove more profitable for shipowners than the previous decade?

“

It’s reactive. Once news of neglect breaks, action is taken

Yes, but only because they could not possibly be worse

”

Yes 72%

”

”

Yes 55% No 45%

No 28%

Which carrier is furthest down the line towards digitalisation?

What will be the price spread between VLSFO and HSFO by the end of the year?

“

“

Probably Maersk, but that is also maybe perception-based as they often blow their own trumpet

”

This is mere guesswork with limited fundamental underlying assumptions

”

CMA CGM 9%

Hapag-Lloyd 7%

MSC 9%

Less than $50 6%

$201 - $250 13%

Cosco 12%

HMM 6%

ONE 7%

$51 - $100 19%

More than $250 11%

Evergreen 3%

Maersk 35%

ZIM 11%

$101 - $150 21%

HSFO to be more expensive than VLSFO 11%

2019 was a very low year for vessel orders.

When do you anticipate ship ordering to pick up again?

“

By rights, no time soon. But some will break the rights, and attempt a market-share grab

This year

10%

2022

Next year

22%

No time soon 39%

40

29%

”

$151 - $200 14%

Will the industry ever solve its diversity problem?

“

It is a change which needs to be both gradual and natural, and not forced due to it being overhyped Yes

13%

No

55%

”

What diversity problem? 32%

maritime ceo

Listen to the sea

Posidonia 26 - 30 October 2020 Metropolitan Expo, Athens Greece

The International Shipping Exhibition

Organisers: Posidonia Exhibitions SA, e-mail: posidonia@posidonia-events.com

www.posidonia-events.com

NAME

Holger Börchers

“

POSITION

IT Manager

COMPANY

Briese Schiffahrt Leer, Germany

SCOPE

Dualog® Business Mail implemented on 130 ships

My life has become easier – We had to replace numerous outdated systems with one reliable and future proof solution across the entire fleet. I needed one unified strategy to deal with data management and cybersecurity. I found that Dualog had a unique offering, and I can now focus on business improvements instead of problems.

Photo: Lars-Josef Klemmer

#DUALOG CUSTOMER STORIES

Email | Smart Internet | Cybersecurity | Data Transfer

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