Maritime CEO issue three 2015

ISSUE THREE 2015

Sabrina Chao

www.maritime-ceo.com

The future of Hong Kong shipping

Manifest

3 At The Prow

Economy 5 6 7 8 9

US EU China India Brazil

Markets 11 Dry Bulk 13 Tankers 14 Containers 15 Offshore 17 Finance

Executive Debate

32 Arkas 33 Sea World 34 Michele Bottiglieri 35 Giuseppe Bottiglieri

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

Opinion 42 The Secret Ship Inspector 43 The Contrarian 44 MarPoll

18 The connectivity argument

Profiles 22 Cover Story Wah Kwong 25 Euroseas 26 Vroon 27 Scorpio 29 Fujian Shipping 30 LT Ugland 31 GMS 31 Milaha

Issue Three 2015

22 1

Across the World

www.damicoship.com

At the prow

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

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Issue Three 2015

Of smashed rice bowls and egos

W

hat to make of the largest shake-up in Chinese shipping seen for a generation? Take a look at the infographic we commissioned from VesselsValue. com on just how big Cosco and China Shipping would be together.

But is a merger realistic? Has Beijing learnt nothing from the insanely tricky and ugly merger between two other state-owned lines, Sinotrans and Changjiang Shipping, something that five years down the track is still not fully settled.

My guess the best bet is not to simply bring the two together, but to splinter and combine each sector into individual companies. Thus there’d be one giant company looking after dry bulk, one for tankers and so on.

The container angle is obviously the most vexing issue – how would Cosco and/or China Shipping disentangle themselves from their respective container alliances.

Sources at both China Shipping and Cosco tell me that this idea of dividing the companies into sector specific units is unlikely and a genuine merger of the two groups is what is planned.

The move is such a slap in the face for the two behemoths of the pair who led them for much of the last 20 years – Li Kelin at China Shipping and Wei Jiafu at Cosco.

China Shipping was formed from the three coastal shipping bureaus that were outside Cosco (because they were coastal shipping companies) which were knocked together and given a deepsea shipping remit under Li Kelin who was the head of Cosco Container Lines and who got on badly with Chen Zhongbao who was then head of Cosco, just before Wei Jiafu took the top posting at Cosco.

China Shipping was formed for

one reason only, which was to get round the restrictions imposed on Cosco’s ability to vary its tariff at less than 30 days notice under the US-controlled carrier restrictions by creating a competitor for Cosco.

Li Kelin built up China Shipping at such a rate of knots. He and Wei were both alpha males, full of energy and bluster, loving the limelight – and allegedly despising each other.

Since the downturn, however, most of the senior staff have moved between the two at some point in their careers. Everybody knows everybody.

Beijing has attacked both groups for their poor financial performance as well as gross corruption.

With the merger scheduled to be completed by as early as 2017, some rice bowls will now be broken, one source tells me.

What’s next? Perhaps the two giant state-run shipbuilding groups, which split apart in the late 1990s, will come back together. ●

3

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ECONOMY REGULAR US

Fragile but at work There’s plenty of challenges to face through to the end of the year

F

ragile is the most common epithet being used to describe the American economy’s recovery at the moment. July’s employment rolls looked good and the economy is still continuing to add jobs helping the retail sales recovery as those now getting wages spend and consumer activity continues to pick up. America’s unemployment rate remained at a seven-year low of 5.3%, while wages inched upwards by 0.2% in July, resulting in a gain of 2.1% over the past year.

However, low inflation remains a problem and wages growth needs to continue to pick up for a full recovery to bed in. Usually, one would expect rising interest rates to be accompanied by rising inflation. The fact that this is not happening is a potential cause for concern and could be a symptom of porous economic fundamentals.

There’s little doubt that the devaluation of the renminbi will adversely affect the US economy, sooner rather than later. Exports to the United States fell by 1.3% in July.

The devaluation in Beijing obviously strengthens the US dollar making it harder for American exporters.

As much of the recent job growth has come from manufacturing this could be threatened if new orders don’t come through the pipeline. Gas prices will also fluctuate – some analysts predict as much as $2 a gallon.

Does all this, as some analysts suggest, mean that the US economy will lose momentum in the second half of the year? The US Commerce Department has reported that the trade deficit increased 7.1% to $43.8bn, which reflected a second straight monthly drop in exports.

May’s trade gap was revised to $40.9bn from the previously reported $41.9bn. This means imports of

Issue Three 2015

America’s major job growth areas Q1 2015 – It’s a bar business Sector

Job gains (‘000)

Restaurants & bars

660

Business services

450

Healthcare

355

Energy

22

Source: US Bureau of Labor Statistics

food and cars were the highest on record in June this year. A combination of the dollar’s strength and sluggish global demand trimmed exports though, which slipped 0.1% to $188.6bn in June. Imports from the EU reached a record high while exports to the Eurozone countries fell off by 2.3% over the quarter.

With China devaluing and other major economies in slower growth – India, Russia, etc – tapering is a term many are talking about. Tapering, a gradual winding down of central bank activities, used to improve the conditions for economic growth, is now being touted as central to American recovery and by extension

to global recovery. Central banks can employ a variety of policies to improve growth, and they must balance short-term improvements in the economy with longer-term market expectations. If the central bank tapers its activities too quickly, it may send the economy into a recession. If it does not taper its activities, it may lead to high inflation. For the Federal Reserve, who does the tapering, getting the monetary policy mix right in the second half of 2015 will be crucial to maintaining America’s fragile recovery. ●

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5

ECONOMY REGULAR EUROPE

Beyond Greece Aside from Athens unravelling, the Eurozone looks surprisingly strong

T

he Eurozone has continued to be immersed in the Greek crisis, which has consumed most of the efforts of finance ministers across the continent. The EU’s analysts expect the Greek economy to recede into a deep depression in 2016, shrinking an estimated 2.3% in 2015 and a further 1.3% in 2016.

They believe that if their bail out and restructuring plan works then Greece could return to growth as early as 2017 or 2018 – but that is highly debatable and subject to a myriad of political and economic qualifiers in the next few years.

But what of the European Union ex-Greece? Growth elsewhere appears stronger – even in countries tipped to perhaps follow Greece into a spiral down and possible exit from the euro. Ireland has rebounded with GDP up 6.5% on a year ago in the first quarter of this year. The Spanish economy is projected to grow by 3-3.5% this year and unemployment How important is Russia to Germany? Germany’s major trading partners, 2014 Destination

Exports (€bn)

France

100.32

USA

88.37

UK

75.64

Netherlands

70.94

China

67.02

Austria

56.17

Italy

53.32

Switzerland

47.32

Poland

42.35

Belgium

42.25

Russia Source: German Federal Statistics Of fice

6

36.1

is falling faster than in any other major European economy. Growth in Portugal is less strong, but it should grow by 1.5-2% this year. The larger economies also appear relatively healthy - the UK (obviously not in the Eurozone) economy is performing well, with GDP up 2.6% on a year ago in the second quarter. The UK should be the best performing G7 economy this year. German growth prospects are also positive at 1.7% growth.

However, all this shows the new economic realities of Europe – growth of over 2% is considered pretty remarkable in Western Europe.

Things are brighter still in Eastern Europe. GDP has risen by 4.1% in Romania, 4% in the Czech Republic, 3.7% in Poland, 3.3% in Hungary, 3.1% in Slovakia and 3% in Slovenia – all above initial analyst expectations.

The underperformers are France and Italy – important as they are major members of the Eurozone and both major manufacturing

and exporting nations. France may take a while to recover but in July, the purchasing managers’ survey of Italian manufacturers showed the best results for more than four years. Exports are more of a problem continent-wide. Exports to China are down 2.5% and exports to Russia are still suffering due to sanctions over the Ukraine issue. The China slowdown has particularly hit Germany and this slowdown could turn into stagnation, as the renminbi devaluation will make it more expensive for Chinese industry to import high-end German machinery and technology.

Additionally, Germany is suffering more than other European countries from the sanctions imposed on Russia. With orders from China in the doldrums right now, most major European manufacturing nations are looking to the United States - the current weakness of the single currency against the dollar reduces the cost of European products for foreign buyers. ● maritime ceo

ECONOMY CHINA

Don’t be swayed by the stock market rollercoaster

Devaluation will boost exports … eventually

I

t’s a lot easier to be a bear than a bull these past months in China, thanks almost entirely to the rollercoaster antics of the Shanghai Stock Exchange. But there are calmer heads around who’ve seen the Shanghai bourse act erratically before and those in China for the long haul, while having to wait a while, largely expect a return to normality eventually. The stock crash may have been well deserved (the ChiNext index was trading at over 140 times), but the fact seems to be that it is having very little effect on the broader economy.

For those operating in China it is important to note that the stock market is not the entire economy.

Given the legion of small, mom-andpop investors in the market it may not be even remotely representative of what is happening across the country in factories, production centres and export processing zones. Better perhaps to look at the underlying fundamentals of the economy.

First, China’s GDP growth rate is slowing, and most analysts expect it to continue to decelerate gradually for many years with general predictions of cooled growth to down to 5% or 6% by 2020. But that is still very fast

Issue Three 2015

growth, given the PRC’s very big base.

Secondly it’s important to remember that China’s job market remains largely stable. This means workers are earning wages, which is borne out in real (inflation-adjusted) retail sales rising 10.6% year-on-year in June, the fastest pace in four months. Online retail sales are particularly robust, rising 39% year-on-year during the first half of this year.

Third, let’s not forget amid the stories of small investors getting wiped out, that Chinese household debt remains very low and savings rates are stubbornly high still.

Household bank deposits are the China’s exports month-on month - First half, 2015 Month

Exports ($100m)

Jan

2002.58

Feb

1691.91

March

1445.69

April

1763.31

May

1900.58

June

1920.11

July

1950.97

Source: China General Administration of Customs

RMB equivalent of $8.5trn, which is greater than the combined GDPs of Russia, Brazil, India and Italy.

Of course RMB devaluation - a fall out from the stock market dip - is good for exporters. Chinese businesses have been complaining for a while now of the double whammy of rising labour costs and an expensive currency. Exports had dipped, but now being cheaper, should rise again as orders are placed (and most are priced internationally in dollars). It is true that the Beijing government’s devaluation of the RMB is a ‘limited devaluation’ and there will be a time lag between devaluation and a boost to export orders – but it should come.

The other side of that coin, of course, is that imports will become more expensive. Many industrial analysts believe that China should be investing in upgrading its production facilities at present to remain competitive in an increasingly hi-tech world and with competition at the low end from lower wage countries in Southeast Asia. That retooling may be a problem if import prices are high. As ever it’s a balance and Beijing must seek the right balance between a cheap and an expensive currency over the second half of the year. ●

7

Economy India

Currency wars The depreciation of neighbouring China’s renminbi will hit Indian exports

T

hough Prime Minister Modi’s much heralded, and long awaited, economic reforms may be mired in the political morass of New Delhi parliamentary bureaucracy, the economy appears to be in strong shape. Retail inflation cooled to a record low in July and annual growth in industrial production hit a four-month high in June. Consumer prices have risen a few percent, but at a slower growth rate than previously while output at factories, utilities and mines expanded an annual 3.8% in June.

However, there are clouds on the horizon, apart from the ongoing political stalemate. First to note is that there are as yet no firm details on the long required tax system overhaul while, secondly, the devaluation of the renminbi in China will undoubtedly make winning export orders, particularly at the lower end of the value chain, harder.

Indian exports have fallen for seven straight months now this year India’s top export categories, 2014 Category Petrochemicals

% of total 20

Gems and Jewellery

13

Agricultural products

10

Transport parts

7

Fabrics and textiles

7

Machinery

5

Pharma

5

Metal products

3

Electronics

3

Plastics

2

Others

25

Total Source: GATT

8

100

and the renminbi’s devaluation won’t help that to turn around anytime soon. On a real trade-weighted basis the rupee has appreciated by 10% since the middle of last year.

A flood of cheap Chinese imports and a worsening in the Sino-India trade balance seem inevitable in the second half of the year. In contrast to China though India’s stock markets appear comparatively robust and buoyant depressing gold sales.

Still, it is exports that remain the major industrial and manufacturing concern. Producers fear Chinese dumping of goods into India to take advantage of the situation if the rupee remains comparatively high against the Chinese currency.

Engineering exporters’ body EEPC India chairman Anupam Shah told the Delhi media that a steep devaluation of the renminbi will deal a further blow to the Indian exports which are battling a slowdown in most markets of the world, as the shipments from India further lose competitiveness against the Chinese goods. Shah’s statistics show that Indian exports of engineering goods

have contracted by close to 6% in the first quarter of this financial year.

Added to this is the government’s decision to raise basic customs duty on base metals such as iron, steel, copper, nickel and aluminium by 2.5%, which hasn’t helped that sector compete against China.

Some help for Indian manufacturers has come from America which, this August, renewed its generalised system of preferences (GSP), a programme under which Indian exports gets concessional duty treatment in America. The US accounts for approximately 13% of Indian exports, mainly in the textiles, gems and jewellery and chemicals sectors.

Some Indian manufacturers have also criticised prime minister Modi’s so-called ‘port-led’ export drive, which they believe advantages port and coastal regions against the hinterlands. Plans to double container traffic through India’s ports are welcomed by many, such as manufacturers in Mumbai, but distinctly less so by inland manufacturers who claim they feel increasingly stranded. ● maritime ceo

Economy Brazil

‘An unprecedented seven-year stretch of zero or negative growth’ There’s no glimmer of light for the South American giant yet

I

t’s getting harder and harder to remember the last time the economic news out of Brazil was good. This month the Central Bank told the media that analysts expected Brazil’s economy to contract by 1.8% this year, with the inflation rate hitting 9.25%. So far this summer the Central Bank’s forecasts have become more and more pessimistic with each weekly release of the Boletin Focus, a weekly Central Bank survey of analysts from a hundred private financial institutions on the state of the national economy.

For those 100 analysts the major points of concern are firstly the continuing drop in the value of the real against the US dollar and, secondly, the recent increase in the cost of public services, such as water, electricity and transportation. It is also generally believed that the government’s plan to slash the national budget by RLS8.6bn ($2.66bn), is a move that will further slow economic activity and deepen the ongoing contraction.

Brazil’s economy grew by just 0.10% in 2014 and predictions that things will be worse this year are doing nothing to secure political calm - President Dilma Rousseff has been weakened by government

Issue Three 2015

approval ratings of just 7.7%. The massive and long rumbling corruption scandal unfolding at national oil company Petrobras and rippling across other top companies and into political circles is doing nothing to increase confidence in the senior policy makers in the government.

Brazil is now effectively on the brink of recession yet the Rousseff government’s commitment to austerity measures appears unshaken.

Current economic sluggishness combined with austerity could mean an unprecedented seven-year stretch of zero or negative growth.

As with the other BRIC countries, such as India, Brazil is now faced with greater competition in Where’s the value added? Brazil’s key export categories, 2014 Category

% of total exports

Iron ore

17

Petroleum

13

Soybeans

5

Steel

3

Copper & base metals

2

Gold & precious metals

1

Source: Boletin Focus

export markets with the Chinese and their newly devalued renminbi.

Conversely Brazil can also expect a flood of cheaper imports from China undermining its domestic lower end, as well as technology, companies.

Brazil’s trade minister Armando Monteiro recently predicted that China’s decision to devalue their currency could hurt the country’s manufacturing exports.

However, there are bright spots.

Brazil’s exports of poultry hit a new record high in July and look set to grow (Brazil is the only major emerging market not to ever experience any sort of bird flu outbreak) while ethanol exports to the US have doubled in the last six months to July. However, on the downside, exports of metals and metal products from Brazil are down significantly year-on-year.

Perhaps the biggest sign of a lack of confidence in Brazil’s economy and government was the decision in August by Moody’s Investors Service to downgrade Brazil’s government bond rating to Baa3 from Baa2.

The rating agency also changed the outlook on the rating to stable from negative. The end of this recession is far from in sight in Brazil. ●

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Markets REGULAR Dry Bulk

Lowest number of capesize deliveries since 2008 As well as the much reported scrapping in the big bulker sector Jeffrey Landsberg from Commodore Research points to limited newbuilds joining the fleet

C

apesize scrapping has received a great deal of attention this year, with scrapping volume having seen a dramatic shift in recent months. While the first four months of this year saw an average of 13 capesize vessels scrapped each month (with April seeing an amazing 23 capesize vessels scrapped), May saw “only” eight capesize vessels scrapped, June “only” six capesize vessels scrapped, and July only two capesize vessels scrapped.

However, what has still gone rather quietly under the radar is that capesize newbuilding delivery volume has been lower than the market anticipated when this year began. Before the year began, we saw predictions stating that as many as 150 capesize newbuildings would be delivered this year. That number appeared high to us, and at the beginning of this year we published our prediction that 105 to 125 capesize newbuildings would be delivered.

As this year has seen, however, only approximately 46 capesize newbuildings were delivered in the first half

of this year. On an annualized basis, this works out to an annualized total of 92 capesize deliveries. However, there is a real chance that 2015 will end with having seen even less than 92 capes delivered.

Historically, capesize newbuilding delivery volume (and all dry bulk newbuilding delivery volume) is largest during the first half of each year. Each year this decade has seen a larger amount of capesize newbuildings delivered during the first half of the year than during the second half of that year. 2014 saw approximately 59% of the year’s capesize newbuildings delivered in the first half of the year. 2013 saw approximately 60% of the year’s capesize newbuildings delivered during the first half of the year. 2012 saw approximately 69% of the year’s capesize newbuildings delivered in the first half of the year. 2011 saw approximately 53% of the year’s capesize newbuildings delivered in the first half of the year.

Overall, it is not being mentioned much that capesize newbuilding

Capesize Vessel Scrapping Volume (July 2014 - July 2015) 25 20 15 10 5 0

Jul

Aug

Sep

Issue Three 2015

Oct

Nov Dec

Jan

Feb

Mar

Apr May

Jun

Jul

deliveries are a good deal lower than what was anticipated by the market at the start of this year. Changes in scrapping have been getting most, if not all, of the attention. However, we believe very strongly that there is a solid chance that even the low range of our 105 – 125 estimate for capesize newbuilding deliveries will not be seen this year. There is also a real chance that this year‘s total will come in at 92 or fewer capesize deliveries, which would mark the fewest amount of capesize newbuildings delivered seen since 2008.

Relatively low capesize newbuilding delivery volume, combined with this year’s robust capesize scrapping activity (we count 70 capes as having been scrapped so far this year), and the expected second half of the year surge in Brazilian and Australian iron ore exports all point to capesize rates seeing even more support in the second half of this year – particularly in Q4.

We continue to expect that iron ore exports from Brazil and Australia’s Big Three (Rio Tinto, BHP, and FMG) will jump in the second half of this year by at least 78m tons from H1 2015’s total (2014 saw an H2 versus H1 jump of 71.2m tons).

We remain bullish for Q4 capesize rate prospects as a result of this year’s smaller than expected newbuilding delivery volume, robust scrapping, and the anticipated seasonal strength in Australian and Brazilian iron ore shipments. ●

11

Markets REGULAR Tankers

The top 10 crude trade flows into Asia through to July West Africa is rising fast, writes Poten’s Erik Broekhuizen

T

hrough its extensive spot fixture database, Poten has a feel for changes in spot crude oil movements from one period to the other.

We thought it would be interesting to use this data to rank the busiest dirty (crude and fuel oil) tanker routes into Asia. For this analysis we are looking at reported spot fixture data for the first seven months of 2015 and it is important to keep in mind that the actual cargo movements are most likely significantly higher.

It should also be noted that the use of private cargoes and charterer controlled tonnage is more prevalent on certain routes than on others.

For example, crude oil movements from the Caribbean (in particular Venezuela) to Asia have been growing rapidly over the last several years as both Chinese and Indian refiners have concluded long-term supply contracts with Venezuelan state oil company PDVSA. However, only a fraction of these voyages are reported in the market, so the number of spot fixtures on these trade routes is not representative of the volume of oil moving. However,

Million MT

despite all these caveats, we feel that this ranking and especially how it develops over time gives a good indication of how crude oil tradeflows are changing worldwide (or not).

The chart shows the top 10 dirty tanker trades into Asia for the period January to July 2015. It will not come as a surprise to anybody that the longhaul crude trade from the Arabian Gulf (AG) to the Far East (which includes China, Japan and South Korea) is by far the biggest. Second on the list is the AG to South Asia (India). In third spot is the first tanker route that does not originate in the Arabian Gulf. As countries the Atlantic Basin (in particular the United States) produce more light sweet crudes, demand for West African grades has declined and producers in Nigeria and Angola have directed more of their exports to the growing Asian market. The West Africa to Far East trade, which is in third spot so far in 2015, was in fourth spot last year. It leapfrogged the AG – SEA (Southeast Asia, including Singapore, Philippines, Thailand, etc.) trade.

The West Africa to South Asia (India) trade is fifth on the list. India,

Top 10 Dirty Tanker Trades into Asia

140 120 100 80 60 40 20 0 AG - FE

AG - WAF SOUTH FE ASIA

Issue Three 2015

AG SEA

WAF - FE - FE SOUTH ASIA

SEA FE

SEA SEA

CAR SEA

UKC SEA

“

Countries that rely for a significant portion of their energy supply on imports want to diversify their supply

”

like China gets an increasing share of their crude oil from sources outside the Middle East. The reason is not only related to the quality, availability and price of the West African crudes, but has also a strategic background: countries that rely for a significant portion of their energy supply on imports want to diversify their supply sources, so as to not to become overly dependent on one country or region.

Intra-regional trades, primarily originating from Indonesia, Malaysia and Kozmino in eastern Russia take the sixth, seventh and eighth spot in the ranking. These relatively short-haul trades are followed by two very longhaul trades, i.e. from the Caribbean to Southeast Asia and from the UK Continent to Southeast Asia. While these routes represent less volume than the other trades, they are more important for the tanker market because the long distances generate significant ton-mile demand. ●

13

Markets Containers

Storm rising SeaIntel’s Lars Jensen on the growing volatility plaguing the liner trades

I

t is by now not news to anyone in the container shipping industry that rates are extremely volatile.

Nor is it news that they appear to be collapsing quite frequently.

However, looking more closely at the developments in the past five years, it is very clear that 2014-2015 has seen a very sharp – and worsening – trend in essentially all major deepsea trades out of Asia.

Using the spot rates from the Shanghai Container Freight Index, it is possible to look at trends in weekly rate changes. Instead of looking at actual freight rate changes, it is more relevant to look at rate changes in percentage terms, as this is a much clearer indication of the relative importance of a rate change in any given trade.

As an illustration, the attached figure shows the weekly rate changes in the trade from Asia to North Europe for weeks wherein rates have declined. The development seen is very clear. From 2010 to 2013, weekly rate declines tended to be less than 5%. In 2013 to mid-2014, this doubled to 10%. Then from mid-2014 to the

present date, the weekly rate erosion has constantly increased to the point where a weekly rate decline of a staggering 25% is no longer uncommon.

For other trades such as the transpacific, Asia to Australia and Asia to East Coast South America the same trend is seen.

A key question is whether this trend will continue, and looking at just a few key numbers the answer unfortunately appears to be a clear ‘yes’.

According to Container Trade Statistics, global demand for container transportation has grown a paltry 1.2% in the first five months of 2015. In the same period the global fleet has grown 3.6%.

According to Alphaliner, global fleet growth is predicted at 8.8% in 2015 overall. If global demand growth is to match this development, it would require a 14% year-on-year demand growth globally for the period June to December 2015. That is a growth rate which appears entirely unrealistic – especially when considering that the

Asia-North Europe: Weekly rate change in weeks of rate declines 0% -5% -10% -15% -20% -25% -30%

14

5

5

4

l-1 Ju

-1 Ja n

l-1 Ju

3

14 nJa

13

2

-1 Ju l

nJa

2

l-1 Ju

1 -1

-1 Ja n

Ju l

11 nJa

-1 0 Ju l

Ja n

-1

0

-35%

“

A weekly rate decline of a staggering 25% is no longer uncommon

”

pivotal Asia-Europe trade has actually declined by more than 3% in the period until May. Adding insult to injury, fuel prices have begun to decline again.

In the wake of the fuel price declines in late 2014, carriers expressed a desire to retain part of the fuel price savings. The freight rate developments seen thus far appear to indicate that such ambitions were far from successful. According to Bunkerworld, bunker fuel prices have declined almost 25% since mid-May, and this decline will now begin to materialise in the shape of reduced BAF levels on key trades.

Hence the combination of continued excessive capacity growth when compared to actual demand developments, and a fuel price which is once more rapidly declining, leads to the inevitable outlook that the storm the industry has been in lately is not abating, it is intensifying. ● maritime ceo

Markets REGULAR Offshore

Hatches battened down Utilisation rates and the price of oil continue to plummet. Redundancies are happening in their thousands, writes Mike Meade from M3 Marine

T

he offshore marine space continues to be operating in high stress mode with even the most noble and well run companies struggling to generate profits, or even positive cash flows.

Outside of the marine space the global oil and gas industry faces poor earnings visibility as capex and operating costs are being slashed.

The market continues to be challenging for the entire industry; including oil companies, vessel owners, service providers and shipyards.

Utilisation dropped on average 40% across the sectors with some areas effected more than others (North Sea/US Gulf of Mexico).

Charter rates are down, again at levels around 40%. This has put extreme pressure on vessel prices with the oversupply of vessels (existing fleet plus newbuildings galore) worsening the situation.

The market is out of balance when it comes to supply and demand; where even in the unlikely event of the entire rig fleet working, there would be still be a surplus of offshore support vessels.

After many years of relatively healthy vessel values in the second hand/resale space, these values have now fallen steeply since the downturn began, by as much as 20-30% and considerably more for older vessels.

This quarter, oil prices have tumbled to below $50 per month on the back of market events from China and Greece, Iran’s nuclear agreement, the continual threat of shale oil and the continued asset oversupply situation.

Issue Three 2015

The lifting of international sanctions on Iran should reinvigorate the offshore support vessel market in the Middle East. However, increasing export volumes would have a dampening effect on oil prices. The increased oil production from Iran will not be immediate as sanctions will not be lifted until the International Atomic Energy Agency (IAEA) reports Iran’s compliance with cuts to its nuclear-related commitments. We will also have to see an extensive amount of development/maintenance to make the extra production effective. Experts estimate implementation of the deal to take four to 12 months from a start at the end of Q3 this year, realistically making the earliest lifting of sanctions to Q1 2016.

At the end of the last quarter my take on the Brent oil price estimate for balance of 2015 and 2016 was $60+ pert barrel and $70 respectively. Since the recent re-correction, I don’t have the same level of confidence. A recent survey conducted

by Carnegie Energy found that half of investors believed the oil price in one year would be between $60 and $70, with the rest divided equally on slightly higher and lower levels.

Industry players are preparing to tide over this storm by implementing drastic measures, such as severe cost cutting and layoffs, to prepare their organisations for a different and more challenging business climate, with a shift in the way the industry is priced when we come through the downturn. Cost cutting measures unfortunately have resulted in huge job losses as

several oil majors and contractors -- including Shell, Chevron, Technip and Saipem -- have started laying off their people in the thousands.

For survival, it is crucial that new and niche market opportunities are recognised in this challenging period, in order for contractors to remain sustainable. In most of the offshore sectors, the focus has moved from deepwater to shallow water projects, focusing on short term production. Deepwater projects are nevertheless still ongoing, where selected deepwater fields continue to be developed. Deepwater has a solid future, and in the long term is far more economic and sustainable than shale. The subsea projects remaining in favour are subsea tiebacks to existing production hubs, due to the lower capex needed.

Another market to be on the lookout for is the offshore accommodation market, as the demand for accommodation units will likely average almost 42,000 personnel onboard per year over the 2015 to 2020 period, despite declining capex across the offshore industry. ●

15

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Markets REGULAR Finance

RBS quitting leaves huge hole in London’s shipping claims Dagfinn Lunde on the demise of what was once the world’s most important ship finance centre

B

ack in the late 1970s and the early ’80s as CFO at Klaveness I was a very, very regular visitor to London. Back then, the UK capital could claim to be perhaps the most important ship finance centre in the world. How times have changed.

With London International Shipping Week upon us, the proponents of the city as a leading international maritime centre have been dealt a hammer blow with Royal Bank of Scotland’s (RBS) decision to pull out of ship finance.

The association of RBS with maritime finance goes back to the 18th century. The cluster has lost a lost a key part of its attraction.

The fact is that London is completely disappearing from traditional ship finance. Basic financing over the past seven years has been in export finance on newbuildings, with far less need to offer S&P finance.

Lloyds Bank is also exiting the scene, joining a long list including RBS, Bank of Scotland, HSBC and its predecessor Midland. There are now very few indigenous traditional

Issue Three 2015

lenders left in London. Sure, there’s a number of branches of foreign banks – the likes of DNB and Deutsche Bank spring readily to mind.

London’s cluster as a whole is not what it was. Yes, there’s still plenty of maritime lawyers, insurance people and brokers still around, but not as many as during the heydays of the London Greek owners.

Nowadays, there are very few owners who call London home especially after the recent decision of the UK government to change the regime for ‘non dom’ residents from April 2017 onwards, a ruling that affects business people living in the UK for the last 15 years. Also the law will change for property owned by offshore companies. Inheritance tax will have to be paid, something that will hit Russian and Chinese residents in particular. They can keep their properties by limiting the number of days they are in the UK. They today pay taxes on income earned in the UK, but not for business carried out outside the country. From now on, if someone resides in the UK they will have to pay taxes for their

worldwide income and pay an annual fee of £30,000 to £90,000 depending on how many years they have been UK residents.

The Baltic Exchange has repeatedly warned that these changes in the legal system will destroy the shipowning part of the city.

The demise of RBS clearly drops London down the rankings. In terms of the capital market, New York, Oslo and latterly Singapore are all more important than the British capital these days.

In terms of traditional bank lending I’d place London in fifth spot in the global rankings these days.

Oslo, home to DNB, Nordea et al, is out in front, followed by New York then Singapore and Hamburg.

London does however remain strong for private equity firms and hedge funds although shipping for them is a small activity in the big picture.

On a related note, RBS’s decision to quit ship finance will be felt most keenly in Greece where the bank has a $5bn exposure. However, there are many banks that will be willing to step in and fill the gap. This gap, however, will not be fully filled leaving other avenues such as credit export financings, private equity and a few marginal players to come into the Greek market more. ●

17

EXECUTIVE In profile Debate

Divided industry A survey of 150 owners and managers on satellite communications held in association with Inmarsat throws up divergent viewpoints

M

aritime communications spent a long time being of little interest to most people. Beyond safety requirements, it took the dotcom boom to generate a significant uptick in activity, as software entrepreneurs discovered this ‘untapped’ market.

That ended with the dotcoms going belly up, but the Rubicon had been crossed. There was now a clear realisation that connectivity held the key to better productivity and perhaps even a more efficient supply chain.

Once again, the market was overtaken by events – namely the best earnings many had ever seen – and suddenly no-one cared about saving fuel or improving efficiency, because rates were through the roof.

Another crash followed and suddenly we are back to the future.

This time, the recession looks longer, deeper and likely to claim more scalps. The answer? Better connectivity for increased efficiency and improved crew retention.

There is a definite increase in activity and the adoption criteria is expanding. Prices are cheaper, applications are becoming more sophisticated and the number of vessels as good candidates for IT upgrades is increasing. With increased demolition of older ships the newer, better-wired ones are looking for efficiencies.

For this magazine we interviewed 150 top owners and managers for their views on maritime communications.

“

Support is what actually creates added value 18

”

Despite cost conscious times, price/ total cost of ownership was not the single most important aspect owners and managers sought when selecting their communications systems onboard. Global coverage stood out as the most vital selling point.

Rob Grool, a director at Belgium owner Vroon, says, “Communications are a totally fungible commodity like H&M insurance: you go for the most cost-efficient solution for your fleet.”

Respondents were split on the importance of access to movies, TV and sport to crew welfare, recruitment and retention.

“We find that most seafarers really want the connection to home and they want news,” says Vroon’s Grool.

A leading Asian tanker player disagreed, however, saying: “This is something that needs to be regulated – you cannot have this tap on all the time as it is distracting and unnecessarily expensive.”

A majority of respondents did however agree that access to social media was important in today’s modern age in terms of crew welfare, recruitment and retention.

“It’s how the world communicates nowadays, so to deny this at sea is to sever ties with loved ones,” an American containerline executive says.

“It is their emotional lifeline to their family,” says a leading European shipmanager.

There were some who dissented from this viewpoint.

Tim Huxley, CEO of Wah Kwong Maritime Transport, reckons that social isolation on vessels could be on the rise as shipowners provide more

and more internet access to seafarers. He worries too about the effect of increased access to social media on vessels, which potentially allow seafarers to discover upsetting news from families and friends while at sea while leaving them powerless to take any action.

“It really is a double-edged sword,” says Huxley. “Whilst connectivity and being in touch with loved ones and friends sounds a great thing, if you do have a family problem and you learn about it while you’re at sea there is not a lot you can do about it aside from worry”.

No single question posed in our survey elicited more response yet was so one sided as our wondering if MLC2006 should be updated to include mandatory internet access for all onboard. Fully 91% of the 150 companies surveyed thought this was an unnecessary extra piece of legislation for an industry already mired in reams of red tape.

One Asian tanker owner comments: “I think a strong recommendation is enough at the moment.

Still the prices are high and service providers are few, hence probably this can be considered mandatory in the coming years.”

“It is not necessary to amend the regulatory framework,” maintains Gaurav Bansal, CEO of SE Shipping Lines. “It is a part of being competitive to attract the best talent onboard,” he reckons.

Christopher Kirton, managing director at Norstar Ship Management, was one of the few who felt MLC2006 should be updated.

“It would stop the arguments of owners who don’t want to provide,” is maritime ceo

EXECUTIVE In profile Debate

“

”

Social media onboard is a double-edged sword

his own argument why it is necessary.

We also asked how owners and managers would like to see maritime safety services delivered in the future.

More than half replied over the web.

Email, podcasts, webinars were some of the alternative suggestions.

Peter Schellenberger, a procurement director at shipmanagement giant V.Ships, suggests via VPN or an app.

One Asian dry bulk owner says that in the future broadband internet will become automatically a necessity onboard. For example, he says, once ECDIS is on all vessels globally, these ships will require large data for corrections and updates. “Other safety data, weather updates, safety training, trouble shooting by video, etc can only be available once unlimited broadband is available onboard,” he

Issue THree 2015

points out.

Quite so, agrees Arnold Lipinski, a senior director at German containerline, Hapag Lloyd.

“Safety services like tele medicine, technical support, navigation advice via internet or satellite will be essential in the future,” Lipinski says.

The industry seemed divided on the need to develop applications to improve communication between the engine room, control room, bridge and shore staff, according to our poll.

Nevertheless, shipping is entering a future where a bewildering number of applications are on the market or under development. Maritime has been moving from a capacity constrained market to one of rich applications driven by user demand.

Many felt though that these apps are missing the point.

“Internal communication should be verbal or by email. With shore staff we can use existing applications,” says one Japanese bulker player.

Quite right, agreed a spokesperson from a leading Asia-based containerline. “With the current communication technology and maritime safety services available to us, we find it quite sufficient for the needs of our modern fleet today,” says the boxline source.

“What we need to work on is a general willingness to communicate between everyone onboard,” argues Vroon’s Grool, “and get rid of the still existing deck/engine division.”

Kevin Grant Leach-Smith, vice president at Singapore’s Masterbulk, agrees with Grool’s sentiment.

“We already have the equipment and the software,” he says.

“It is important to encourage more communication face-to-face or on the telephone, not via applications.” ●

19

In profile

Coco Vroon p.26

Lars Ugland p.30

Roberto Corvetta p.33

Emanuele Lauro p.27

Mariella Bottiglieri p.35

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

20

maritime ceo

In profile

Michele Bottiglieri p.34

Aristides Pittas p.25

Lucien Arkas

Yang Jinchang

p.32

p.29

Sabrina Chao p.22

Khalifa Al-Hetmi p.31

Anil Sharma p.31

Issue THree 2015

21

In profile

‘We’ve stuck to what we know’ As Sabrina Chao from Wah Kwong readies to take charge of the Hong Kong Shipowners Association she tells Maritime CEO how to get through a downturn

S

abrina Chao, chairman of one of Hong Kong’s most venerable names in shipping, Wah Kwong, is expected to become the new head of the Hong Kong Shipowners Association (HKSOA) later this year.

The association is one of the most vocal shipping bodies in the world, and for Chao her elevation to the post – the first woman to do so – marks another rung on her rapid ascent in shipowning.

Chao, 41, is the third generation at the helm of the conservative bulker and tanker owner.

Wah Kwong has navigated the downturn well, a lesson for many others.

“We’ve stuck to what we know,” Chao says. “We have ambitions, but we grow when we see the right

22

opportunity, not just when there is cheap money available.”

The company has maintained its approach of having period charters with significant charterers, so it has not been caught short with any unfixed newbuildings.

“It’s been about having the right assets and the right customers, but most importantly, it’s about having the right people and focusing on the detail at every level of the organisation,” Chao says.

Chao officially became chairman of Wah Kwong in 2013, though she has technically been leading the

“

company since 2010 when her father, George, was taken ill.

The Wah Kwong fleet is made up of 14 bulkers, three crude tankers and 10 LPG carriers.

On dry bulk, Chao is circumspect of analyst predictions.

“This time last year,” she says, “everyone was gearing up for the last quarter upturn, and it never came, so we all know it’s risky trying to make a call on markets. I do, however, think that we probably passed the worst in around April, but as we have seen in the past few weeks, any recovery is fragile.”

We grow when we see the right opportunity, not just when there is cheap money available

”

maritime ceo

cover In profile story

The backlog of bulkers still to deliver, however, combined with the slowdown in China leads Chao to believe that the market is some time away from reaching balance.

Tankers though are a source of optimism for Chao.

“It seems people are accepting that a low oil price is here to stay,” Chao says. “Demand appears to be holding up strongly and Asian consumers are sourcing their oil from further afield, so the outlook on the face of it is reasonably positive.” She describes the orderbook as “fairly disciplined” lending credence to the feeling that tankers are in for a

“

“reasonable run”.

“It’s encouraging that there seems to be a bit more enquiry for longer term charters, so perhaps the end users are thinking this has got some legs in it,” Chao notes of the current tanker markets.

In terms of what makes a good investment today, Chao, the daughter of one of shipping’s most assiduous investors, is aware of how secondhand bulk carriers are attracting a lot of interest lately. “The prices for the good ones are certainly on the rise,” she says, “but we are going to need a bit of sustained encouragement from the chartering

It’s risky trying to make a call on markets

Issue THree 2015

”

market before you can really justify that investment.”

Come November Chao will likely assume the chairmanship of the HKSOA. She is adamant that Hong Kong still has a strong voice in international shipping, and is determined to shout this from the rooftops.

“We have so many strengths as a shipping centre, but they are often not properly recognised or promoted,” she says, adding: “We need to make sure that Hong Kong is top of the list when companies are looking to expand their presence in the region, so we need to talk up our advantages.”

Nevertheless, Chao is not a fan of the incentive-led way of attracting business that has worked so well for other shipping centres like Singapore.

“I’m not a believer in giving financial incentives to companies to relocate as these are usually short term, but government certainly has a role to play in ensuring a city like Hong Kong remains an attractive place to run a business from and to live in as well as having a well educated, globally focused workforce,” Chao says. A starting point, she suggests, would be to negotiate more double taxation agreements with key trading partners. Expect her to promote Hong Kong better than most during her two-year tenure at the association. ●

Spot on

Wah Kwong Founded in 1952, Wah Kwong can trace its roots to Shanghai. It is one of the founding members of the Hong Kong Shipowners Association.

Currently owns either wholly or in partnership 27 ships, a mixture of bulkers, tankers and LPG carriers.

23

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10-11-14 17:34

In profile

Patriotism versus practicality The head of Euroseas, Aristides Pittas, discusses the difficulties of staying in Athens

A

ristides Pittas does not want to leave Greece, and says so emphatically. But like many of his colleagues in the Greek shipping community, Pittas and his company Euroseas, of which he is chairman and CEO, are caught in a conflict of patriotism versus practicality.

The Greek economic crisis has pressured the country’s shipping community to contribute further to Greece’s economy through increased taxation. Meanwhile, government-imposed capital controls have complicated cash flows and an atmosphere of uncertainty prevails.

Many Greek shipping companies are considering relocating to places such as Cyprus and maritime centres in Asia. Does Euroseas have a plan?

“Ideally, we would like to move nothing out of Greece,” he tells Maritime CEO. Between the NASDAQ-listed shipowning company Euroseas and its ship operator affiliate Eurobulk and related ventures, the group today manages around 30 ships from its base in Maroussi, Athens.

“Already we are paying much more by being in Greece than we would if we were somewhere else,” Pittas continues. “We appreciate that we have to pay and contribute

Spot on

Euroseas NASDAQ-listed Euroseas can trace its roots back to the 1870s. The 15-strong fleet is a mix of bulkers and boxships. Euroseas also owns about 15% of Euromar, a jv with private equity firms Rhone Capital and Eton Park, which owns another 11 feeder container ships.

Issue THree 2015

as much as we can to the country, but if that goes beyond a certain level – and the threshold is different for different companies – people will start leaving and we will reverse what has been achieved over the past years. Greece has become the biggest shipping entity in the world.”

Pittas has a little more optimism about the dry bulk market cycle than some of his peers, and says it’s a good time to be planning for the future.

“Unfortunately I am old enough to have seen an even worse dry bulk market, which was in the mid-1980s,” he says. “This is the worst dry bulk market since the mid-1980s, for sure.

“It came about because of the overordering of ships and the slowdown of the economy that was not expected, especially in China.

Consequently, charter rates are very low and vessel prices are very low, and in a cyclical business like shipping it really makes sense to be buying when you are at the bottom [of the cycle] because the market will correct itself eventually. When that will be is very difficult to call, but these current secondhand prices are so low that they are unsustainable.”

Secondhand vessels would be the way to go, should Euroseas wish to further increase the size of its fleet, Pittas says: “We usually go by the saying ‘When it’s cheap, buy it and the market will correct’.”

For now, the owner is awaiting delivery of two kamsarmax and two ultramax bulk carriers, which were ordered from Chinese shipyards in 2014. Euroseas considered selling the newbuildings at one point, Pittas says, but decided to keep them in order to grow the company.

The two ultramaxes have been delayed slightly by the shipyard, but the kamsarmaxes are on schedule,

which has worked out to be quite convenient for Euroseas, which expects a stronger dry market in 2016.

The weak chartering market has impacted Euroseas’ revenues, and the company felt the need to strengthen its balance sheet, Pittas says. In July, Euroseas announced a rights issue through which it hopes to raise up to $20m to fund its newbuilding programme.

“We believe it is the right time to be putting money to work in shipping because we are at a very low point,” Pittas claims.

Pittas believes Euroseas is in a good position to benefit from an upturn in dry cargo shipping markets: “The fact that we do not have long-term employments on our ships, we have been covering ourselves mostly on a short-term basis – shorter charters both in the container sector and the dry bulk sector – gives us a lot of room to improve together with the improving market environment.” ●

25

In profile

Niche consolidation sought Coco Vroon sees tanker investments as a smart play in today’s tricky environment

C

oco Vroon, who heads up one of Europe’s most diversified shipping companies, is on the hunt for consolidation opportunities in niche markets. The managing director of Vroon, a company with some 165 vessels to its name, tells Maritime CEO: “We are always looking for niche markets where you can make a difference, where you can hope to add value that people would be prepared to pay for.”

Vroon says the company is particularly focused on sectors that, he reckons, need consolidation, such as tankers. Vroon thinks that bigger owners are able to offer more flexible services, and by extension commandeer higher margins.

On tankers, Vroon admits he has been surprised by how much the sector has picked up, but he questions how long the bullrun can last. On the markets as a whole, he is not at all positive for this year.

“Demand for maritime transport is okay,” he says, “but tonnage supply is so overwhelming. There are too many ships that we are a long way away from balance.”

The Vroon fleet is made up livestock carriers, bulkers, boxships, car carriers, offshore support vessels as well as a wide range of tankers.

Its heavy offshore exposure has

Spot on

hit its bottom line of late.

“Oil majors and charterers are asking to reduce rates while profit margins for the shipping companies are already thin. With the actual market condition we need to review the cost structure of every ship investment and we must sit at the negotiating table with charterers and other related parties in order to find savings and cost reductions,” Vroon relates. ●

Vroon

The Dutch firm is one of Europe’s most diversified shipping companies with 165 ships on its books.

“We welcome the developments at Frontline and Gener8’s recent IPO on the NYSE as this will further consolidate the sector and install underlying discipline within large tanker owners” — Paddy Rodgers, CEO, Euronav

“

We are always looking for niche markets where you can make a difference, where you can hope to add value that people would be prepared to pay for

”

26

maritime ceo

In profile

‘We have to face the music’ Emanuele Lauro is in contrite mood when Maritime CEO comes calling in Monaco

E

manuele Lauro cuts a very different figure to when he was last interviewed by Maritime CEO a little over a year ago. The dry bulk bet that led to the world’s largest orderbook for bulkers has put serious salt on his wounds. He is in an extremely contrite mood when Maritime CEO comes calling, willing to take the blame for a gamble that has backfired on the bulk side, though is paying off on the tanker front.

“We have to face the music,” he says. Said funereal tone has seen Scorpio Bulkers selling off much of its orderbook and converting others to tankers where possible.

“Dry cargo was definitely a big bet,” Lauro concedes. “Analysis at the time was supporting our ideas,” he says, before cautioning: “We should not blame analysts, we should be blamed. We made mistakes; we read the market wrong. We acquired assets that are worth less than the acquisition price.”

When Scorpio began its bulk binge it was buying at what were then historically low prices – ultramaxes, for instance, were being snapped up for an average of $28m each. “They were great prices to come in – these ships were worth $70m during the peak,” laments Lauro.

Spot on

Scorpio

Founded in 1973 by Glauco LolliGhetti. Now run by his grandson, Emanuele Lauro. Has listed spin offs Scorpio Tankers and Scorpio Bulkers and has among the largest orderbook in the world.

Issue THree 2015

Lauro says his team realised the market was not going to perform as he had hoped by the end of last summer, at which point an emergency fleet offload plan was first conceived.

“We did not know just how bad the market was going to turn, it’s a tragic scenario. The market has reached levels we did not expect,” he says.

“

We should not blame analysts; we should be blamed. We made mistakes; we read the market wrong

”

The rout might not be over either, with Lauro noting that each bulker resale has been lower than the last.

Lauro is unsure if the dry bulk market has bottomed out. “I wish I knew the answer,” he says wistfully.

“It’s difficult to see a fast recovery in the market. Our wounds are still fresh and it would not be prudent from our side to make a case to say that the market has bottomed out and a recovery is in place,” he says.

The mood brightens as Lauro turns to tankers. 90% of the Scorpio Tankers fleet is now on the water at good rates.

“We are still experiencing counter seasonal strong rates in the product trades,” he says.

Scorpio just recently raised equity to get resales of four LR2s for delivery from June to September.

The other sector that gives Lauro confidence is containers, where the company has three-plus-three 20,000 teu containerships on order

at Samsung Heavy Industries with a partner. More orders could follow.

“We look at the future in the container market with excitement,” he says.

Overall, however, Lauro says the coming 12 months is all about consolidation at Scorpio as the fleet nears 90 vessels.

The company’s history dates back to the 1950s and pioneering entrepreneur Glauco Lolli-Ghetti’s rise in the Italian shipping concern Navigazione Alta Italia. Lolli-Ghetti founded Scorpio Ship Management in 1973. The legendary shipowner then wheeled and dealed his way through many a cycle, before slashing his shipping portfolio in the later 1990s. He selected his grandson, Lauro, to take over from him. ●

27

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In profile

Fujian first The merger last year of three Chinese provincial lines has fostered a regional powerhouse

F

ujian, on the southeast coast of China, has always been an important shipping gateway for the country. The famous Chinese voyager Zheng He started his first voyage from Quanzhou in Fujian in 1405, opening a new chapter for the ocean shipping history of China.

As part of the plan to enhance the overall maritime power of the province, Fujian Provincial Communication Transportation Group merged the major shipping assets in the province late last year and established Fujian Shipping Group.

The new Fujian Shipping Group has integrated the three largest shipping companies in Fujian province, including Fujian Shipping Company, Xiamen Shipping Company and Orient Shipping Company and more than 40 medium and small sized companies with total assets valued at close to $1bn .

The group has become the top shipping group and crew management group in the coastal province with a fleet of 45 vessels.

Yang Jinchang, formerly the general manager of Fujian Shipping Company, has become the general manger of the new group.

“The total annual cargo throughput in Fujian is more than 300m tons, previously 90% of that figure

Spot on

Fujian Shipping Group Established at the end of 2014, Fujian Shipping Group is an integration of three major shipping companies in Fujian and more than 40 shipping related companies. The group currently operates a fleet of 45 vessels.

Issue THree 2015

was handled by shipping companies outside of Fujian, but now the situation will be changed gradually with the establishment of Fujian Shipping Group,” Yang says.

According to Yang, the group has made clear business divisions for the three major shipping companies after the merger. Fujian Shipping Company now mainly focuses on bulk shipping, Orient Shipping looks after container shipping, while Xiamen Shipping has dedicated its business to passenger transport after transferring its bulker assets to Fujian Shipping Company.

“The integration of the shipping assets in Fujian has optimised the fleet assets in the province and enhanced our shipping capability,” Yang says, adding that Fujian Shipping Group has set a good example for the promotion of mergers and alliances in the local shipping industry to cope with the current market recession. Beijing has been pushing for far greater maritime mergers since the downturn kicked in, none bigger

“

than the news this August that Cosco and China Shipping would be coming together.

In April, the Fujian Free Trade Zone (FTZ) officially started operations, following in the footsteps of Shanghai, Tianjin and Guangzhou.

The Fujian FTZ has been divided into three parts in Fuzhou, Xiamen and Pingtan with a total area of 118 sq km. One of the Fujian FTZ’s top priorities is to boost trade relations between mainland China and Taiwan.

Yang reckons thea group is expected to benefit from the Fujian FTZ, and it is also planning to increase service offerings between China and Taiwan with its integrated container fleet. The group has been approved by the Ministry of Transport to operate direct container services to Taiwan.

Yang says a number of steel and power projects will start operations in Fujian soon, which will increase shipping demand substantially. ●

The integration of the shipping assets in Fujian has optimised the fleet assets in the province and enhanced our shipping capability

”

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In profile

At home on the Isle of Man Lars T Ugland on what makes this rocky outcrop a great place to be a shipowner

O

ne of the most famous names in shipping reckons he has found the perfect home to conduct his business. On the Isle of Man, just off the UK mainland, Lars T Ugland runs his eponymous LT Ugland Shipping, which now has a fleet of seven supramax bulkers. Ugland, a Norwegian, comes from a long line of shipowners, builders, charterers and managers. He founded the company in 2007, the year he moved from London to the Isle of Man where has been living ever since.

“I believe the Isle of Man has the best ship register in the world,” he says, adding he’s worked with eight other registers in the past.

“The Isle of Man does not charge tonnage tax so as for VLCCs, capesizes and larger vessels this register has a great advantage. However, it is the

Spot on

LT Ugland Shipping A 2007 established bulker vehicle run

by Lars Ugland on the Isle of Man now with seven supramaxes.

“

There are deals to be made in a poor market. It is all about timing

service, understanding of the customer’s needs and flexibility that has impressed me most,” Ugland says, adding: “The Isle of Man has proven to be a great place to run a shipping company from. I am surprised that we don’t see more shipping companies relocate to this great island.”

LT Ugland Shipping’s fleet is made up exclusively of Tess 58s from Tsuneishi, a shipbuilder Ugland, 66, has a very close affinity with.

The Ugland family made its first order with Tsuneishi in 1978, becoming the first foreign owner to place and order with Tsuneishi.

Ugland is keeping his eyes open at expanding the fleet, he reveals.

”

“We are always looking at opportunities,” he says, adding: “There are deals to be made in a poor market. It is all about timing. We will stay with bulk carriers because this is where we have our expertise.”

On the markets, Ugland reckons dry bulk will bottom out this year and rates should gradually improve next year. “Market balance would come sooner if China became more active,” he admits. The bulker veteran does not however see a need for consolidation in dry bulk unlike other sectors. ●

“One of the reasons why Norway is an innovative country, why we have a very high productivity, is because labour costs are high” — Norway’s prime minister, Erna Solberg

ime-ceo.com www.marit 2015 ISSUE TWO

Nor-Shipping Special

Norwegian owner offshore, financ s, travel plus our e and annual Rich List

The title for leading shipping insights 250 interviews with the top names in shipping every year… guaranteed

t man ’s new fron Fredriksoebnert Macleod ine R tl ival of Fron and the rev

Maritime

CEO

1 2015May.indd

18/5/15

14:28

In profile

Scrap merchant Best known as a cash buyer for recycled ships, GMS also buys the odd vintage vessel

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s well as its leading position in the world of ship recycling GMS owns a number of ships.

The company is best known as the world’s largest cash buyer of ships for scrapping. However, it also operates a VLCC, two dry bulk vessels, and 11 containerships.

“We acquired several vessels at close to recent bottoms and hence, have seen some appreciation in both charter rates and asset values since the time of purchase,” says GMS’s founder and ceo, Dr Anil Sharma.

Although GMS has ventured into newbuildings, it generally tends to focus on vintage tonnage where there is more “opportunistic buying”, says Sharma, due to the absence of leading shipowners and lack of both debt and equity players.

As for recycling, 2015 has been hectic, the annual figure likely to be the highest since 2012, which was a

record high.

The charge has been led by capesizes. Some 65 capesizes have gone to scrap so far this year, with Pakistan the biggest beneficiary of this bulk clearout.

GMS internal research suggests that the number might exceed 100 vessels by the end of the year, an all time record.

Looking at the various countries associated with recycling, Sharma says profitability for recyclers remains tricky. Sharp fluctuations in currencies as well as in commodity prices, including that of finished steel, and cheap imported finished steel have weakened profit margins of recyclers. In less than a year, scrap prices have dropped by more than 25%, Sharma recounts.

“The biggest challenge facing the industry,” he reckons, “is the frightening pace at which commodity

Diversity counters adversity The extremely diverse set-up at Qatari maritime conglomerate Milaha is seeing it get through the oil price drop. The president and ceo of the company, Khalifa Ali Al-Hetmi says, “The diversity of Milaha’s portfolio has allowed us to mitigate the impact of the changes in the energy market than many of our peers.” He explains that while the decline in the oil market may have some negative impact on the company’s marine offshore services business in the short term, Milaha’s gas and petrochem unit saw its net profit significantly grow on the back of high VLGC and tanker rates.

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“At the end of the day, being flexible and customer-focused is what determines your ability to weather downturns such as the one we are seeing now in the energy market,” Al-Hetmi says.

Milaha has investments in

prices are falling. Since recycled steel is competing with freshly produced steel, a drop in the price of the final product due to both, falling import prices from China as well as lower input costs due to sinking iron ore – it has virtually halved since January 2014 – and oil prices, eats up recyclers’ margins.” ●

container feeders, ports, LNG, LPG and OSVs among others.

The company is currently bidding for the management and operation of Qatar’s new Hamad Port, which Al-Hetmi reckons will reshape the maritime industry in the country and the region. Moreover, Milaha has expanded its offering in the container business with a new direct service to India, and it is looking at a number of other opportunities as well.

“We are also actively looking at various ways to grow our offshore business, both organically and inorganically,” Al-Hetmi concludes.

After 31 years at the company, Al-Hetmi will step down in September this year. ●

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In profile

Mediterranean shipping under great pressure One of Turkey’s largest shipowners explains how cascading tonnage is hitting the regional box trades

L

ucien Arkas is one of the most important shipowners in Turkey and also an expert of container short-sea transport in the Mediterranean arena.

Arkas’s eponymous family-run company has been in existence since 1902 and nowadays the group operates in many different fields, including logistics services that integrate sea, land, rail and air transportation, agency services, ship operations, port operations, bunkering, automotive, insurance services, information systems and cruise tourism. The Izmir-based firm currently has 57 offices and employs 6,500 people in Turkey and abroad in 62 different companies.

Talking about the biggest headache the shipping industry faces at the moment, Arkas thinks that “overtonnaging has been and remains the most serious problem facing the industry in recent times”. He adds that “the orderbook, especially for mega vessels, will not change foreseeably”.

Spot on

Arkas One of Turkey’s largest and most diversified maritime conglomerates with interests in boxships, bunker barges, ports and other modes of transport.

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He is directly involved in the containerline business since Arkas Group in 1996 founded EMES Shipping and Transport, first as a feeder operator and later as a liner service provider. In 2010, the name was changed to Arkas Container Transport and since then continues to provide services under the brand name Arkas Line providing scheduled services in the Mediterranean, Black Sea and West Africa market.

Looking at the present market condition in southern Europe, Arkas underlines that “the Mediterranean region is under great pressure.

Shrinking volumes coupled with cascading and overtonnaging point to difficult times ahead.”

Today the Turkish shipping company’s fleet owns 42 vessels and is ranked 21st in the world container fleet ownership according

to Clarkson. Arkas Line and EMES Feedering as of July 2015 operated 39 containerships, of which 30 are group-owned and nine are managed.

The Turkish company’s strategy on the S&P market has been quite aggressive in the near past as confirmed directly by Arkas.

“We have completed our programme for 2015 with the purchase of nine ships and in view of the general situation are adopting a wait and see policy,” he says.

The fleet also includes five bunker barges operated by the fully owned Arkas Bunkering founded in 2006 and active in refuelling services for vessels in many ports around the world, including the Mediterranean and Black Seas.

Besides all that, the group is also active in the container terminal business. In 2001 Arkas founded Marport, the first private container port in Turkey with an annual throughput capacity of 2m teu, and in 2008 it opened Autoport, the first and only dedicated car terminal in Izmir with an annual handling capacity of 350,000 vehicles. ●

built”

“Many more ships are begging to be

— Basil Karatzas, CEO, Karatzas Marine Advisors

maritime ceo

In profile

A dip into a pool likely As it pushes through a sizeable expansion of its product tanker fleet Sea World Management is looking at farming out some of its ships

I

n 2015 Monaco-based Sea World Management is emerging as one of the shipping operators most active on the S&P liquid bulk market.

The company, founded in 1990

by Roberto and Luca Corvetta, from January this year has purchased four MR tankers: Montenero from D’A lesio Group, Lisca Bianca from Augusta Due, and Cape Bruni and Cape Bille from Konig & Cie. “We are going to manage a fleet of seven similar MR oil and chemical tankers employed on time charter with profit share clauses and carrying refined products and edible oil for first class charterers. We don’t have a precise plan with an exact number of ships to buy, we will just see what the sale and purchase market will offer in the near future and we are ready to snatch any opportunity,” Roberto Corvetta tells Maritime CEO. With a compact management team of experienced shipping professionals, Sea World Management in the last 25 years has been managing many kinds of vessels, mainly oil and chemical tankers sized from 30,000 to 40,000 dwt but also obos and bulk carriers. The company used to operate tankers until the age of 15 years

Spot on

Sea World Management Founded in 1990 by Roberto and Luca Corvetta, the Monaco-based firm is in the midst of building up a sizeable product tanker fleet.

Issue THree 2015

“

Prices of secondhand medium range tankers are slightly but constantly going up

for the transport of refined products and then switched them to the edible oil shipping segment.

“As for the medium range tanker market we are quite confident for the future, the freight rates trend for the rest of 2015 and next year should maintain the present path mainly because the orderbook for 40,000 dwt tankers appears to be very slim,” explains Corvetta, who is the ceo of the company. “Looking at the asset values, prices of secondhand medium range tankers are slightly but constantly going up and that is one of the reasons why we decided to speed up at catching some opportunities.”

In addition to the new investment plan, Sea World Management is also working on another project.

“We are considering a strategic alliance with a pool manager, whose

”

name I can’t reveal, to employ some of our ships on the spot market,” Corvetta reveals. “With a fleet locked into period charters, Sea World is well poised to meet the immediate and long term challenges that the tanker market has to offer.” ●

“We anticipate strength in tanker earnings to be maintained in the near-term given improved oil consumption due to lower prices and continued inventory filling” — James Palmer, partner, Simpson Spence Young

33

In profile

‘We can only ask money from the banks, which have disappeared’ Michele Bottiglieri on the problems of being a small Italian shipowner

S

o far Bottiglieri’s shipping company has been performing quite well, even in the low dry bulk market experienced in the last few years, but the Italian shipowner’s thinking today is focused on how a small operator might survive in the near future.

“The work of the shipowner is still the same,” he says. “Nothing has changed in the way of operating ships. However, some major changes have occurred in the ship finance market with the funds entering the market and the banks moving away, especially the Italian lenders.”

Bottiglieri wonders how a small shipping company might obtain financial support for further investments in the coming years. “Since we are too small for listing, we can only ask money from the banks, which have disappeared from the shipping market. That’s why my view for the future is quite pessimistic: I can’t see

Spot on

Michele Bottiglieri Armatore Founded by Michele Bottiglieri, part of a famous line of Italian owners, in 2008. Fleet today is made up of five bulk carriers.

34

“

Some major changes have occurred in the ship finance market

”

sentiment on bulk carriers sea rates is negative, I think we have to wait at least one year to see a stable recovery of the market. China is still the main driver in the dry bulk segment and the country’s imports of coal have slowed down in the recent past. This factor, together with the tonnage oversupply, resulted in the perfect storm.” In the Italian owner’s opinion the only way to come out from this situation is linked to three factors: “A maritime transport demand upswing, no more orders for newbuildings and scrapping as many bulk carriers as possible”. ● a way for getting money to invest and increase my fleet.”

Nevertheless, the Italian shipowner is interested at diversifying his fleet, entering the liquid bulk market.

“I had the desire of investing in tankers, but the ship values are higher and higher. To tell the truth, in the short term I don’t think we will invest in other ships even if market prices for some sizes of vessels appear to be still cheap.”

Trying to give some forecasts on the dry bulk market trend for the future, Bottiglieri says: “My

“The shipping industry is known to be very conservative, and it is hence not an easy task to bring a new, radically different fuel saving technology to the market” — Toumas Riski, CEO, Norsepower

maritime ceo

In profile

Keeping it in the family?

As with many other Italian owners, running a family shipping line is getting harder and harder for Mariella Bottiglieri

T

o be a family business or not in shipping? That’s the question Giuseppe Bottiglieri Shipping Company and some other Italian companies are dealing with in the present market cycle.

Mariella Bottiglieri, managing director of the Naples-based company founded more than 150 years ago by Captain Giovanni Bottiglieri, thinks that some important changes are taking place in the shipping industry, mainly due to the entry of the private equity and hedge funds in the sector.

“We see that some private equity investors are trying to exit the market now,” says Bottiglieri, adding that financial investors and traditional shipowners have different business approaches. “The latter looks at longterm investment returns with an industrial vision and the final aim is to hand over the firm in good health to the following generations. On the contrary, private equity funds aim at short-term financial gains and don’t care about the company’s longterm strategies. That’s why I cannot imagine a happy marriage between financial investors and traditional shipowners.”

Anyway there might be some exceptions since the family business

Spot on

Giuseppe Bottiglieri Venerable name in Italian shipowning. Based in Naples with four tankers and 11 bulkers.

Issue THree 2015

model might need some sort of renovation, according to Bottiglieri’s thinking. “Times are changing also in shipping and companies like ours must modernise. In my opinion a partnership between a shipping company, as a major shareholder, with a financial investor, as a minority shareholder, might fit for the future.

Selling more than 50% of Giuseppe Bottiglieri Shipping Company’s shares is definitely something not of interest for us but, in the next two to three years there might be the possibility that our company will consider a partnership also with a financial investor as a minority shareholder.”

Mariella is joined by her two sisters, Alessandra and Manuela, at the helm of the famous name in Italian shipping.

Giuseppe Bottiglieri Shipping Company today controls a fleet of 15 ships: four chemical tankers (40,000 dwt), 10 post-panamax bulk carriers (95,000 dwt) and one capesize (186,000 dwt).

Talking about the crisis of in dry bulk, Bottiglieri underlines the need

for a stop in new ordering.

“The main problem today is the oversupply of maritime transport capacity driven by financial investors. In the last few months and weeks the companies that are still investing in new ships are backed by funds and I cannot understand why they don’t buy secondhand vessels instead of ordering new ships. Prices from the shipyards are low but these companies will put in the market low priced ships operating in a very poor business. There is no economic return even for them,” she says.

Looking at the liquid bulk, Bottiglieri’s sentiment on the future trend of the market is much more promising. “The tanker market is going well fortunately, there are niche segments such as clean products cargo, West Africa region, vegetable oils and palm oil that are performing well. In this business segment we are experiencing some structural changes in the traditional routes due to geopolitical and economical reasons that helped sea freight to soar,” she concludes. ●

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WINE

English sparklers put in a stellar performance England’s south coast is giving France a run for its money, writes Neville Smith

E

nglish wine has come a long way but it has taken a long time. Wine has been made in this country for centuries but only in recent years has interest been renewed to a point where it can hold its head up in polite company.

The reason for that is a combination of geography and a taste for beating the French at their own game. The same chalk ridge that rises in Champagne curves under the English Channel to break ground in the south of England, where the climate is similarly benign.

Given that this part of England has plenty of well-drained, south

Two to try Barrister Wendy Outhwaite has another string to her bow; making Ambriel Classic Cuvee (£29.50 www.privatecellar. co.uk) – an idiosyncratic take on English fizz that puts the emphasis on structure and evolves into a complex, layered, satisfying mouthful.

36

facing slopes, it has the conditions to grow Champagne’s holy trinity of Pinot Noir, Pinot Meunier and Chardonnay.

The phenomenon is not restricted to the southeast, but the spiritual home of English sparkling wine stretches from Kent, through Sussex, into Hampshire and beyond.

Granted, the UK lacks a continental climate but for sparklers this matters less thanks to a winemaking process, which involves secondary fermentation and a final ‘dosage’.

In different ways, both are useful in allowing winemakers to balance acidity and sugar levels.

It was a hard choice between Wiston Estate Cuvee Brut from Sussex (£24.95 www.corneyandbarrow.com) and Hambledon Classic Cuvee from Hampshire (£29.95 www.bbr.com) – both are aged on the lees for complexity with the ‘biscuity/bready’ black grape notes adding weight and structure. In the end I would plump for Hampshire over Sussex, but it’s a close run thing. ●

Thus, if the summer is less kind than predicted, the risk is reduced of ending up with a wine that is underripe. The result is a product that at its best can match many growers’ Champagnes and can easily outbat the often very average generic bottles that line supermarket shelves.

Grand Crus they may not be, but they are very smart; pioneer Nyetimber is poured at Buckingham Palace, particularly when the French are visiting.

This trailblazer has been quickly followed by a host of others, so much so in fact that the region is experiencing something of a boom, with hot money planting new vineyards and seeking some reflected cache.

The glitch if there is one, is that, just as in Champagne, wine of this quality does not come cheap. It is possible to buy sparkling wine from France, Italy and Spain that is less expensive, but do so and see how you feel about a second glass, or a third.

This shipping market may not feel like a Champagne moment, unless you are in big tankers, but I would urge you to try the output of Nyetimber, Wiston Estate, Hambledon or Ambriel, as well as looking further west to Camel Valley. ● maritime ceo

gadgets

On land and sea

Q

uadbikes or ATVs are indisputably fun to drive.

Jetskis are splendid fun too. Why not combine the two, and double your fun? Gibbs Sports has it covered with its Quadski. Powered by a four-cylinder, 1.3 litre, 16 valve double overhead camshaft engine, the Quadski has a top speed of about 70 kmh on land through its rear wheel drive and in the water through the Gibbs jet drive. Converting from land to water takes less than five seconds and one touch of a button to retract the wheels.

Not quite James Bond, but close enough.

Gibbs Quadski gibbssports.com $49,000

Blue lightening

I

f bombing around on a Quadski isn’t your thing, there are other ways to get people noticing you. Take the new Ferrari 488 Spider, the successor to the brilliant 458. Officially debuting at the Frankfurt IAA Cars in September, the 488 Spider is the convertible version of the 488 GTB, and as such is a magnificent beast of a machine. The 661 hp, twin-turbocharged, mid-mounted V-8 engine is smaller than the 458’s but gives out more power and torque — bringing you 0-60 mph in under three seconds and a top speed somewhere around 330 kmh. The roof deploys or stows away in 14 seconds, which is pretty quick, but you’ll want to keep your foot off the accelerator until it’s done.

Ferrari 488 Spider ferrari.com $275,000

Nimble shot

I

f you get a Quadski, you’ll probably want to take some selfies or some good footage of the fun. GoPro’s new HERO4 is definitely the answer – small (4 sq cm), light (74 g) and waterproof to 10 m, it lets you capture the moment in 1080 p60 video and 8 MP photos. Two microphones – one facing the front, the other facing the back – provide audio with the camera choosing the best signal, reducing wind and other noise. The built-in battery offers two hours of filming before you need to recharge it via USB, and it can take up to 64 GB MicroSD cards to record on. It can also be controlled from your phone via wifi or bluetooth.

Go Pro HERO4 GoPro.com $400

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37

REGULAR Books

The key to PR Paul French looks at how to manage disasters

D

espite all the precautions corporations take sometimes disaster strikes. The last year has seen many and various events it would have been hard, if not impossible, to plan for. Think of the Malaysian Airways tragedies or the recent Tianjin factory zone explosion. Similarly newspapers have pounced on public relations issues across the region from tainted food products to mistreatment of employees.

Handling such events, protecting company integrity and brand loyalty as well as legal challenges is an essential part of business planning. Several new instructive books look at the issue of public relations from the perspective of Asia.

David Wolf is a seasoned veteran of many a corporate problem.

Based in Beijing he is managing

“

director of Global China Practice for Allison+Partners. His new book, Public Relations in China: Building and Defending your Brand in the PRC is the latest title in the useful Palgrave Pocket Consultants series. Wolf argues that China presents a massive market with intense competition and little brand loyalty, and that effective public relations are essential for any company seeking success. Yet, Wolf contends, few companies have found the right formula, but those who have done so have been rewarded with thriving franchises in the world’s largest market. However, looking at recent corporate scandals and disasters in China Wolf argues that the time has come for public relations in China to turn away from its traditional role as corporate propagandists

Handling negative events, protecting company integrity and brand loyalty as well as legal challenges is an essential part of business planning

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”

and make PR the strategic function it was always meant to be, a function that guides corporate behaviour and not just corporate communications. His handbook to successful PR in China is a good starting place.

Digital now plays a crucial role in any disaster or PR crisis. Mark Sheehan and Deirdre Quinn-Allan’s edited collection Crisis Communication in a Digital World examines the challenges PR professionals face in a world where social media is a key source of communication. The book includes a host of examples of media meltdowns, natural disasters and celebrity crises through examining how to manage new phenomena such as global media cycles and social media activism.

In many cases seeming PR disasters can be turned around if corporations can get their message out coherently and quick enough. However, not everyone has deep enough pockets to hire a large PR company. Alex Singleton’s The PR Masterclass: How to Develop a Public Relations Strategy That Works comes highly recommended for those who might need to craft a response on a budget. In an easy-to-read format Singleton shows how to put in place a practical, reliable and successful media strategy, regardless of your budget.

Perfect for small- and medium-sized companies.

Disasters do occur – corporations make mistakes but sometimes the media, or governments, decide to target companies or products. As the Boy Scouts say, “Be Prepared” and the fallout can be a lot less than if you are not in control of the situation. These books perhaps help companies to start crafting practises that should be a standard part of doing business in Asia, and indeed the rest of the world, now. ●

maritime ceo

Travel

Quirky jewel of the Pacific Northwest Lonely Planet author Joshua Samuel Brown writes about Portland

Q

uirky, individualistic, weird.

These adjectives and more have been applied to Portland.

But is Oregon’s largest city truly unique?

Portland earned its name in a coin-toss between nineteenth century pioneers Asa Lovejoy and Francis Pettygrove, both of whom agreed that the name Stumptown was unworthy of the shipping metropolis they envisioned springing up on the Willamette’s western bank.

Pettygrove (of Maine) won, and thus Portland, Oregon (and not Boston, Oregon, which Lovejoy wanted) was born. The Portland Penny is now on display along with other historical artifacts at the Oregon Historical Society.

Shipping is in Portland’s DNA (despite the city being 82 miles from the ocean). This is thanks to Portland’s position halfway between the mighty Columbia (which heads to the Pacific) and Oregon City, terminus of the once-important Oregon Trail. Like most cities built on shipping, Portland’s early days were filled with colourful characters, many of whom earned both coin and reputation helping unemployed transients find jobs in nautical professions. Trickery, alcohol and violence were sometimes involved.

Remnants of the city’s seedy past including a visit into what remains of Portland’s so-called ‘Shanghai tunnels’ (which, though reputed to have been a conduit for kidnapping, were actually used for flood control

Issue THree 2015

and shipping) – can be explored in the city’s Old Town neighbourhood.

Portland Walking Tours runs daily tours.

With its shipping and kidnapping heyday long behind it, Portland has since reinvented itself as a model of pedestrian friendly urban planning and sustainable development. Filled with publicly funded art ranging from historical (tiles depicting scenes from Portland’s past) to the quirky (a sculpture that plays music and predicts the weather), Pioneer Courthouse Square is in the city centre and a great place to start your explorations. Just a block east (past Pioneer Courthouse, completed in 1875) Pioneer Place Mall and Portland’s Apple Store allow you to take advantage of Oregon’s absence of sales tax. Three blocks north sits the Art-Deco Portland Building, whose iconic colour scheme would be considered clashing in most other cities. Make sure you take a moment to appreciate Portlandia - not the show, but the hammered copper statue gracing the Portland Building.

(Take photos, but be advised that using her image for commercial purposes will invite a lawsuit from the statue’s creator, Raymond Kaskey).

From here, head east towards the river, passing by Portland’s famed Thompson Elk Statue (the sculptor’s unfamiliarity with alcine anatomy becomes clearer the closer you get) and various facets of Portland’s environmental bona

fides, including electric car charging stations and solar powered trash receptacles. The waterfront, once an unsavoury stretch of docks (and later, a highway) is now home to the 37-acre Tom McCall Waterfront Park, a beautiful urban green space with a view of Portland’s bridges, the Willamette river, and (on a clear day), the snowy peak of Mt Hood.

Mt Hood is one of many scenic beauty spots located within an hour’s drive of the city. Others include Multnomah Falls and the Columbia Gorge. But you don’t have to actually leave the city to leave the city. Forest Park cradles the city’s northwest quarter and encompasses over 5,000 acres of trails, ravines and old growth trees.

Portland is also well known for its street food culture, thanks to the prevalence of food trucks, which, like whales, congregate in pods. The largest of these pods, a veritable culinary UN, takes up a full city block on 10th avenue (on Alder, just a few blocks south of Powell’s City of Books). Smaller pods (and even individual trucks) abound. If it’s just a snack you’re after, why not stop by Voodoo Donuts for a bacon maple bar? There’s often a line, but if you’re lucky you just might catch an impromptu street performance

by Portland native The Unipiper, a unicycle-riding musician whose attire includes a kilt, a Darth Vader helmet and a set of bagpipes that shoots fire.

And if that’s not unique enough for you, we don’t know what is. ●

39

REGULAR GOLF

Play safe or be the hero Budding golfer Johan Gustavsson from Transas takes readers to a treacherous watery hole in Singapore

A

s with so many other people who have taken the Martime CEO golf challenge in naming their favourite hole mine centers on one where brain plays out against brawn, boldness faces the dark reality of a lost ball in the water – it’s a hole where fortune does not always favour the brave, but the cunning course designers are tempting your bravado.

Imagine a humid, sunny early Sunday morning in Singapore. No traffic when driving to Sentosa.

Arriving at the Serrapong golf course to have breakfast with your friends before teeing off. This challenging PGA golf course with 18 holes just along the coastline of the island of Sentosa faces the port of Singapore.

It is one of two courses at Sentosa Golf Club, the other being Tanjong.

Both have welcomed the world’s best golfers along for big international tournaments.

The expectations before the first tee-off are enormous. Playing the first three holes your mind is racing ahead to what lies ahead on the course’s biggest challenge, the fourth. I always have the same thoughts going on in my head: play safe or be the hero.

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You end up every time taking the hero route. Nobody will remember a coward.

Tee-off is challenging over water and you need to carry 200 m in order to be safe. You know directly when you tee off if you will make it or not. But still you keep jumping up and down; like that would actually help the ball to fly longer. A regular disappointment hits as rings on the water form. The next question comes – shall I do it again, or play safe. I have donated many, many balls to the bottom of the water when playing here, but the feeling if you make the shot and the level of self-esteem you have is incredible.

This is the hole on the golf course that will set the mood for the coming 14 holes. ●

”

Nobody will remember a coward

maritime ceo

Yachting REGULAR

Across the Ionian Pierre Chateau from Lloyd’s Register takes readers through azure Greek waters

I

n the west of Greece, south of the Adriatic, the Ionian Sea begins.

Less famous than its east coast counterpart, the Aegean Sea – with its Cycladic Islands attracting charter flights and passenger ships – the Ionian is unspoiled by mass tourism and offers one of the best waters I have ever had the chance to sail on.

The islands there are Corfu, Lefkas, Ithaca or Kefalonia, and they create a protected archipelago that stretches north to south for more than 150 miles.

We sailed there on our modern classic 45 footer cutter yacht Avocet of Ryme at the beginning of our 20-month journey that later took us across the Atlantic, but we have very fond memories of these Greek islands from the beginning of our trip.

Our journey there started like many others, on the island of Lefkada. Linked to the continent by a floating bridge, it is that the heart of the Ionian, separating the south and the north islands by a narrow canal.

The little town of Lefkas has seen the recent development of a modern marina but it has kept its authentic charm with many small streets to explore and get lost in.

Sailing south, it is a vast archipelago fantastic for sailing.

After exiting the canal, we left the aptly named tranquil bay and Scorpio Island (private property of the Onassis family), on starboard to sail to one of the multiple unspoiled bays of Meganisi. There, the deep blue of the sea contrasts with the colours of the hills, covered in pine, cypress and colourful fields of flowers.

Continuing to the south, 15 miles of flat seas sailing will bring you to the island of Ithaca, home to the mythical Odysseus and Penelope.

There, the sheltered anchorage of Vathi will encourage you to go and explore the island deeper by land to

Issue Three 2015

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The Ionian is unspoiled by mass tourism and offers one of the best waters I have ever had the chance to sail on

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immerse yourself in the beauty of this remote place.

And this is only one of the so many places that offer themselves to sailors cruising these waters.

Sivota or Fiscardo are other places worth mentioning. There, anchored in natural harbours, with a mooring line tying the stern to the quays, crews can enjoy the special atmosphere that Greek villages have to offer. It is like entering a place where time flows at a different pace, slower, without the spin of our modern lives, filled with deadlines, targets and

responsibilities. Here, it is all about stepping back, watching the sunset on a terrace with a glass of Ouzo and enjoying the moment.

Epicure was Greek; I don’t know if he was from the Ionian, but when loitering there, one doesn’t need to read his essays to understand what his philosophy was all about.

What to say of the northern islands? The smaller Paxos and Antipaxos, the ancient Corfu, so much filled with history. The day sail to their shores in open waters will probably be in company of dolphins playing at the bow as they are very common in these waters, and it is guaranteed that the arrival in the old town of Corfu by sea will not leave you unmoved. Its imposing city walls and fortress which have been standing for many centuries are treasures asking to be explored. ●

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The Secret Ship REGULAR Inspector

‘Seen it, heard it, he can spot a fib from afar’ A look at what it takes to be a scrutiniser of the world’s fleet

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escribing your modern day ship inspector should begin by a series of not-propositions. He is not exactly like his regulatory peers in stockbroking, banking, pensions and the like. He may not exactly correspond with that Freudian personality type known as the anal-retentive. But, he certainly knows the rules and practices of navigation, learnt during a time when GPS was still something in the imaginations of people so far as sailing across the ocean blue was concerned.

And seen in his office he might have his pencils lined up at right angles to the lower edge of his desk below a ruler perfectly parallel to the upper edge. Certainly the term rectilinear comes to mind if you have an eye for external details.

Moreover, the ship inspector to the naked eye is of a certain age.

He has that self-contained quality, a knowledge of customs and history, a liking for navy blue blazers: he sees himself as a force for good, helping to hold the ring for the better qualities of the maritime world and the civilisation of international trade. And his eyes resemble those of an experienced copper. Seen it, heard it, he can spot a fib from afar.

Modern ship inspection is something like modern association football. Invented by the Brits during their prime, it has found its way all over the planet into the offices and procedures of all the usual industry players. No superhero he, the ship inspector has to fit in with the relevant regime in place. Working for hull insurers, he is a maid of all work, poorly funded, wiping a dirty rag over the bits that catch the eye and

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ticking the boxes briskly. Working for the more cerebral P&I clubs, the ship inspector is a man of the world, designing foible traps, helping his association to ensure the right sort of people and their ships are members of the club. There are dangers here. A righteous ship inspector must guard himself from trying to filter an ideal world into the ledger of the entered tonnage and always remember that his findings should inform the underwriters in the club, a body of people otherwise liable to be tempted into the have-a-go-suck-it-and-see school of risk management.

There is a different order of hazard magnitude for the ship inspectors whose decisions inform the operations of tanker charterers, classification societies and leading consultants. Get the thing wrong and good old litigation surely follows which will last a decade. Extreme circumspection and highly honed

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qualifications and provisos are the order of the day. Poor prose writers need not apply.

You can do worse than spend an hour or two with a few ship inspectors. They have an endless trove of anecdotes. They use a range of worldweary phrases: That’s just the way it is. There is just not enough time.

Good sense doesn’t cost much money.

I warned them but they wouldn’t listen.

Back in the late 1980s, the fashion for ship inspection exploded.

Masters of highly variegated tonnage and type found all sorts of characters walking up their ladders instructed to do inspections for charterers, class, club, cargo or port state.

Nowadays good thinking holds that it is not sufficient to scrutinise all that steel. The fault in ships and shipping often lies deeper in the souls of its people and the values of the companies which employ them. ●

He has that self-contained quality, a knowledge of customs and history, a liking for navy blue blazers

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maritime ceo

The REGULAR Contrarian

Life in a silo and its consequences Andrew Craig-Bennett takes aim at those who have contributed to the many dead seafarers from transporting nickel ore

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here is a management-speak jargon phrase about people working in ‘silos’ such that they are unaware of what their colleagues are doing.

Asian companies, where the culture emphasises deference to authority rather than inquisitiveness, are more than usually prone to the ‘silo mentality’, and very often they neither know nor care what people elsewhere in their own offices are doing.

This is a story about how very little people know or care about the industry – merchant shipping – that they work in.

It came to pass, not terribly long ago, that ships which loaded nickel ore concentrate sometimes failed to arrive.

This was a fairly new cargo.

Nickel as a cargo was not new, but for very many years nickel was smelted and carried in the less bulky, more readily portable form of ingots, notably from places like Noumea in New Caledonia.

As Chinese industrial production grew there was an increase in the demand for nickel, and other sources of supply were found. Nickel ore could be mined in Indonesia and in the Philippines. New mines were established, and, as often happens, the mines were not very well capitalised and their facilities for shipping out their product were rather simple.

Rather than smelt the ore, and ship ingots, these mines

Issue Three 2015

concentrated the ore and shipped it as fines in handysize bulk carriers.

And China bought the cargoes, and everybody was happy. Until ships sometimes did not turn up.

When a ship is lost at sea, it often happens that she is insured, and so is her cargo. The people concerned with insurance noticed that ships with cargoes of nickel ore loaded at unknown and unheard of ports in Southeast Asia sometimes sank. And they asked why this might be. They asked experts. And the experts told them that small mines in tropical climates were not in a good position to control the moisture content of the nickel ore fines that they stockpiled in order to load onto ships, because sometimes, it rains in Southeast Asia.

And the experts said that the cargoes were slurry liquefying because they were above the transportable moisture limit, which is a number set up by the IMO as being the wettest that a given ore cargo can be before it becomes unsafe to carry in bulk by sea, as if it is any wetter it may suddenly behave like a liquid.

Now, the insurance people in general, and the P&I Clubs in particular, decided to do something, because ships sinking and seamen drowning are messy, and also expensive.

And it came to pass that the West of England P&I Club issued a circular requiring its member shipowners to ensure that cargoes of nickel ore fines should be checked by capable surveyors before they were

loaded, to make sure that they were safe.

So the charterers wrote a clause into their charter parties for the carriage of nickel ore in bulk.

Did it say: “Cargo to be loaded under survey of a capable surveyor...?”

No. It said: “Vessel not to be insured by the West of England P&I Club.”

And shipowners’ chartering departments read this, and told their insurance departments not to insure ships with the West of England P&I Club.

And because the chartering department is mightier than the insurance department, a significant number of blithering idiots actually said okay, and drowned seamen and sank ships.

This is a true story of people in offices in shipping companies in Asia within the past five years, being too lazy to read up a problem, incredibly stupid, unbelievably stupid, and scared of their bosses, and greedy.

The problem is now less acute because the Indonesian government decided that it suited Indonesia better to export ingots, not fines.

This is not something that happened long ago. This is something that happened a couple of years ago.

The people who did this have not been fired. They are still drawing their salaries today.

I think they should have been fired. Don’t you? ●

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MARPOLL REGULAR

Your opinions 643 of you filled in our latest survey on diverse, topical maritime topics. Results and feisty comments below Does the VLCC run have legs?

Which is a greater threat to shipping?

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The down cycle will come faster due to the massive switch from dry bulk/ offshore Yes 51% over ordered slots No 49% converting to tankers to over tonnage the wet market

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Yes 51% No 49%

Is shipping less of a ‘gut feel’ business in the 21st century and more analysis-driven?

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These threats are definitely flying under the industry’s radar

Cyber security

34%

Terrorism

20%

Piracy

46%

Which area do vessels currently face the greatest risk?

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As the west learns to cut off the oil supply of ISIS, they may turn to piracy in the southern Med

Many are still doing very simple analysis based on gut and old salt

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Yes 67% No 33%

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Yes 67%

West Africa

31%

No 33%

Southeast Asia

34%

Mediterranean

9%

East Africa

26%

Are classification societies as reliable today as 10 years ago?

Would a China-wide emissions control area change shipping forever?

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Assuming of course someone in China is able to enforce the ECA

Class needs to make a decision. Do they want to sell products, or consult? They can’t do both.

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Yes 36%

Yes 55%

No 64%

No 45%

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maritime ceo