Maritime CEO Issue Two 2016

ISSUE TWO 2016

www.maritime-ceo.com

Severe action prescribed Berge Bulk’s James Marshall on how to save the sector

Posi d Spec onia Gre ial ek o w

w in ners, fi e an d isl nance, and s

MANIFEST

3 At The Prow

Economy 5 US 7 EU 9 China 10 India 11 Brazil

Markets 13 Dry Bulk 15 Tankers 17 Containers 18 Offshore 19 Finance

Executive Debate

27 Navalmar 28 StealthGas 29 Premuda 31 Milaha 32 GMS 32 Ocean Yield 33 Humpuss

Maritime CEO Forum 34 Reports from shipping’s Davos

Recreation 40 Wine 41 Gadgets 42 Books 43 Travel

20 The state of the markets

Opinion

Profiles

45 Kris Kosmala 47 Andrew Craig-Bennett 48 MarPoll

26 Cover Story Berge Bulk

43

ISSUE TWO 2016

1

AT THE PROW

An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: 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 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2016’s four issues of Maritime ceo magazine.

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ISSUE TWO 2016

Shipbuilding as a demographic weather vane

I

look forward to the day we are not the world’s top shipbuilding nation.” On the face of it a strange thing for a vice president at the world’s largest shipbuilder, Hyundai Heavy Industries (HHI), to be telling a journalist colleague of mine some 12 years ago. At the time South Korea had only recently dethroned Japan into top spot in the global shipbuilding league, and HHI was about to go through an incredible decade of growth.

However, step back and view the comment from a greater historical and macroeconomic perspective.

Shipbuilding can be seen as a stepping stone in the evolution of a national economy. Go back to the 1970s and Gothenburg was one of the greatest shipbuilding cities in the world. A couple of decades prior to that and the United Kingdom still ruled the seas when it came to ship construction. But things move on, economies develop, demographics change – people get richer, their skillsets change, their ambitions go higher.

At the moment there is a great deal of soul searching in, errr, Seoul – the nation is questioning what its industrial priorities should be as its once solid shipbuilding scene faces a once-in-a-generation style crisis.

With all of the largest yards – HHI is joined by Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries, STX Offshore & Shipbuilding and Hanjin Heavy Industries & Construction – now going through painful restructuring with thousands of layoffs and many smaller yards folding, Koreans are wondering if the time has come for

that generational industrial shift.

Semiconductors, smartphones, even smart cars – these are all industries where South Korea can excel.

Koreans are asking whether their tax money should be going on saving old industries such as shipbuilding (and beleaguered shipping lines too).

The same questions are being raised in Singapore where shipyards – long viewed as a sunset industry, but that enjoyed an incredible Indian summer from 2010 to 2014 – are now in trouble.

Could Keppel and SembCorp merge? The two giants of the local Singapore yard scene are in trouble.

It is not out of the question.

Nevertheless, expect a large Korean and Singaporean presence at this year’s Posidonia. The world’s most famous shipping show kicks off on June 6 in Athens and this issue of Maritime CEO has a distinctly Hellenic flavour to it with Greek owners, finance, wine and islands all in the mix. Even resident cartoonist, The Freaky Wave, has his own take on the show and shipping’s fortunes.●

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ECONOMY REGULAR US

Stitched up Despite unemployment falling fears grow

I

n amongst all the politicking in the US at the moment it can be hard to get a handle on what is actually happening to the nation’s economy. Thus was it ever at primaries time in the States, but there are still numbers we can use between the political sniping and accusations of mismanagement, economic death and chaos. You may not have heard it over the slanging matches but, according to the Federal Reserve, in February, the United States added a robust 242,000 jobs – roughly the monthly average for the past six months. And America’s unemployment rate is now a low 4.9%, close to the rate the Fed associates with full employment (i.e. the rest is people moving between jobs or unable to work for medical or other reasons).

Still, inflation is low and has been low for some time now – longer than the Fed would like – and this means consumer sentiment remains weak and large ticket purchases are still being deferred. The slowdown in exports, weaker demand in China, Japan and other key markets don’t offer much hope for stronger inflation.

All this means that economists

ISSUE TWO 2016

are revising their annual GDP expectation for the American economy downwards – as low as 2.2% – from last year’s hoped for 5%. The IMF is now predicting 2.8%, down 0.3% from their end-of-2015 projection.

Key to any significant and long lasting recovery in America will be exports. These have received somewhat of a boost with the growth of petroleum exports – total US petroleum product exports continued to increase in 2015, up 467,000 bpd from 2014 to 4.3m bpd in 2015, and rising. Most of this is heading south to Mexico and Latin America.

American exports of fuel ethanol reached their highest level in four years in 2015, totalling 844m gallons in 2015. However, despite the growth US retail sales: October 2015 - February 2016 Month/Year

% growth/decline

October 2015

-0.1

November 2015

+0.3

December 2015

+0.3

January 2016

-0.4

February 2016

-0.1

Source: US Census Bureau

in petroleum and related energy exports, the US trade deficit rose in January as American exports fell for a fourth consecutive month, according to the US Commerce Department in Washington. The gap between exports and imports rose to $45.7bn in January from a revised $44.7bn in December. Exports of goods and services fell 2.1% in January to $176.5bn, the lowest level since June 2011. The consensus is, unsurprisingly, the still strong dollar combined with a slackening in demand from China.

Given its size and history, economists could hope that retail sales will be a saviour of the economy, but these remain weak too. US retail sales declined 0.1% in February as car purchases fell and cheaper petrol undercut receipts at service stations.

Americans may be increasingly in work and wages are steadily rising again, but it takes time for this process to work through the economy, and family budgets, and show itself as a boost in retail sales. Ominously perhaps, for those who prioritise retail spending, online sales fell by 0.2% in February after several years of steady growth. ●

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ECONOMY EUROPE

Driven by the east The continent is jittery, but its eastern fringes are showing some signs of growth

T

he European Union is in an uncertain time politically – Britain is in full campaigning mode for the Brexit referendum while Poland’s new populist government, led by the Law and Justice Party, looks likely to ignore the EU’s fiscal discipline rules that require countries to keep their deficits below 3% of their GDP. The Eurozone’s numbers may be fairly stable but they are not a cause for joy either – the Eurozone is showing no improvement on its quarterly real GDP growth of barely 0.3% and with inflation close to zero. Analysts predict 1.5% annual GDP growth this year across the Eurozone and below 1% in the coming years. Unemployment has slightly decreased to 10.3% in the Eurozone (and to 8.9% in the EU) but this average masks serious employment problems in some member states – for instance, Greece (48%), Spain (45%) and Italy (39%).

There may be some additional pain ahead if Britain votes to leave the EU in June while, in the wake of the continuing refugee crisis, the Schengen agreement on borders appears about ready to collapse. The combination of the refugee crisis and the impetus to anti-EU opinion from the British referendum has stoked anti-EU feeling in some quarters of Eastern European GDP growth (% per annum) – 2014-2015 Country

2014

2015

Czech Republic

2.2

2.4

Romania

2.4

2.7

Poland

3.0

3.1

Hungary

3.3

2.7

All EU

0.7

1.2

Source: HSBC

ISSUE TWO 2016

Germany, France and elsewhere.

Relations with Russia remain terrible due to the political impasse around Ukraine. Yet Europe remains important – accounting for approximately a quarter of the global economy (though that percentage may half by 2050).

So, behind all the media noise on refugees and Brexit, what is the real state of Europe’s economy? Investment and government spending on housing across the EU has offset some of the weakness in consumer spending in certain key EU member states, notably Germany.

The EU’s statistics agency reported that Eurozone GDP was 0.3% higher in the final quarter of last year than in the three months to September 2015. As expected exports are growing less slowly than imports, reflecting weaker demand from China and other large developing economies. The investment numbers indicate, to many analysts, that while populations may be worried about refugee numbers, unemployment and Brexit, businesses are less concerned – analysts point to the

resilience among German manufacturers despite the social shocks to the political system in the last year.

The eastern fringes of the EU may actually be where growth is occurring. The EU statistical body reported that Romania recorded the third largest economic growth in the EU last year. Poland, Slovakia, the Czech Republic and Hungary all had growth rates above 2.4% in 2015 and look likely to match those, or exceed them, in 2016. All these countries beat the EU average of 1.2% quite comfortably. ●

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ECONOMY CHINA

Choose your metrics carefully ‘Rail freight movements are no longer the key indicator they once were’

J

ust how should we measure China’s economy in 2016? Which metrics you choose to prioritise tends to determine your outlook.

Most analysts now accept lower GDP growth rates going forward and so 6% can appear fairly healthy. But, say those looking at other metrics, how to explain the weaknesses in areas such as electricity consumption and rail freight movements that would seem to indicate significantly less economic activity is actually taking place across the country?

Those preferring to look at metrics such as retail sales growth and the phenomenal rise of express package delivery firms and B2C e-commerce transactions can argue that things China’s electricity consumption growth rates, 2010-2016 Year

% growth (decline)

2010

20.9

2011

12.4

2012

5.7

2013

5.0

2014

5.3

2015

1.2

2016

-1.6 (forecast)

Source: National Bureau of Statistics

ISSUE TWO 2016

are actually healthier than 6% overall growth might indicate.

Retail sales are a more reliable metric than the behemoth number of GDP. Individual but important retail firms indicate the strong growth is real – for instance, Apple reported 14% growth in the last quarter while Mercedes-Benz reported sales up 50% in January and their orderbooks looking healthy for the remainder of the first half of the year.

There are explanations for the poorer metrics of electricity consumption and rail freight movements (both of which are generally reliable numbers) – the slowdown in construction has a significant knock-on as regards power consumption and rail transport. Back in the mid-2000s construction and heavy industry drove electricity use growth and both of these are in retreat at the moment.

Similarly steel production declined 2% last year as construction slumped.

With so much continued talk of ‘ghost cities’ this is not necessarily a bad thing and should (and is) stimulating the property market as supply currently matches demand to a greater degree than any time in the last decade.

For those that watch

transportation metrics closely it should be noted that while rail freight is down, road transportation is booming. Highways now carry 79% of total freight, up from 72% in 2006, and highway traffic rose 6% last year.

Quite simply rail freight movements are no longer the key indicator they once were. Road freight movement is harder to quantify as it involves vast numbers of small trucking operators, but still it is growing. Traditionally 50% of rail freight cargoes have been coal and the decline in heavy industry as well as the rise in non-coal fired generators means a decline in that key sector.

So, in conclusion, what can we say of the Chinese economy in the first half of 2016? Stable growth seems a fair analysis though, looking to the rest of the year, a pick up in non-consumer sectors hasn’t occurred as many thought and that could mean a drag on growth and, a major concern for the party state, a rise in unemployment. This could mean a meagre 4% growth for 2016 even with rising consumer spending.

This may give succour to the China bears to some degree, but it certainly doesn’t indicate a collapse scenario that some have been predicting. ●

9

ECONOMY INDIA

The long wait Narendra Modi’s much vaunted reforms have not materialised. The country is much worse off for this intransigence

I

ndia’s 2016 budget, presented to the parliament in March, was long on politics and short on economic reform. This might help prime minister Narendra Modi’s chances of retaining power but do little to assuage the generally negative view many analysts now have of him and his long awaited but seemingly never materialising reforms.

Modi and the BJP swept to power on the promise of economic reform, a slashing of the infamous ‘Bureaucracy Raj’ and open markets – promises that galvanised urban and middle class support and swung the country away from Congress. However, political commentators and economic analysts alike are now rather bemused by his swing back towards the rural population and issues.

“It is a politician’s budget. It is not a finance minister’s budget,” said Nilanjan Mukhopadhyay, an Indian political commentator.

Increasing anxiety that promised economic and financial reforms will not now be followed through is via the fact that the general election is not until 2019.

However, agriculture is a key issue in India and important to its economy none the less. Large scale spending on irrigation facilities to reduce monsoon dependency and substantial amounts of revenue to provide cooking gas connections to

rural households will undoubtedly be welcomed by the country’s legion of small scale farmers. Still, the urban middle class (Modi’s backbone of support) received no tax credits and, for many, taxes will actually increase.

India’s economics affairs secretary Shaktikanta Das believes the economy will grow 8% this year; many analysts concur with growth estimates at around 7.5-7.6%. Some of that growth will be down to front loaded government infrastructure spending but that will not be longterm. India’s GDP growth will now outstrip China’s for some time and, if the numbers can be believed, all of India’s states are in growth.

What analysts are looking for is that government stimulus will have a

India’s foreign trade, 2010-2015 2011

2012

2013

2014

2015

Exports

250

306

300

314

310

Imports

370

489

491

450

448

Balance of trade

-120

-183

-191

-136

-138

Source: Indian Statistics Bureau

10

knock-on effect for private investment. Low inflation and low interest rates may stimulate inward investment but many potential investors are still waiting for the promised reforms in terms of market access before committing and this is slowing the growth of the private sector.

Bad news for the private sector is that Indian exports have fallen for 15 months straight now and the index for industrial production has shrunk for three months in a row in 2016. IMF boss Christian Lagarde called India a “bright spot in the world” on a recent visit to the country, but many analysts question the reliability of India’s numbers. The government puts the fall in exports down to the global economic situation (notably China’s slowdown and America’s slow rebooting) yet other emerging economies have shown export growth in this environment.

As ever in India we are left hanging on the promise of reform. Until that promise is met the economy is not going to be effectively unleashed to realise its full potential. ● maritime ceo

ECONOMY BRAZIL

Depression all-round Now is the worst of times for Latin America’s largest country

A

journalist recently noted that Brazil’s economy has passed through recession into depression – that’s to say everyone is so depressed by Brazil’s lacklustre economic performance things can’t get much worse. Nearly impeached president Dilma Rousseff’s attempt to stimulate the slowing economy via massive insertions of new debt has in fact had the opposite result.

Consumers are depressed and have slashed their spending by 8%; investors are depressed and have cut investment by 10% since the start of the year; capital spending is down 21% since Rousseff came to power.

And it’s hard to find a bright spot. Small businesses have been pummelled – 1,200 have shut their doors in Rio de Janeiro alone since the start of the year and unemployment is now a whopping 16.5%.

The real has lost a quarter of its value against the American dollar in the last year.

The private sector is still contracting and the corruption scandals not only seem never to end but new ones emerge regularly.

The government is proposing more stimulus spending but tax revenues have been slashed as even the largest of Brazil’s conglomerates have seen their earnings tumble.

ISSUE TWO 2016

Credit card debt is at an all time high and even mobile phone revenues are down as people call each other less.

Last year GDP shrivelled by 3.8%, and is expected to shrink by a similar amount in 2016. Four years ago, the economy was growing by more than 4% a year.

What hope then for Brazil’s economy in this Olympic year.

Analysts believe that there may be a ray of sunlight in the rebounding prices for commodities and petroleum/oil, but it’s a thin shaft of light.

The private sector is contracting sharply and any improvement in commodity prices will take a long time to work through the economy in the form of additional jobs and profits. High debt levels persist and these too will hamper any growth that may be attained.

Analysts see Brazil as in a ‘perfect storm’ of both political and economic crisis. The only hope is that some sort of political pact will be reached that can stimulate growth and rebuild investor confidence as well as consumer confidence so that the potentially massive domestic economy can pick up once again.

A long-term industrial policy needs to be conceived – one that

Once mighty Brazil compared to other Latin American economies Country

2016 growth outlook (%)

Argentina

0.2

Brazil

-2.6

Chile

2.3

Colombia

2.7

Mexico

2.7

Peru

3.4

Venezuela Latin American Average

-4.8 0.8

Source: Instituto Brasileiro de Geografia e Estatística

does not put China at its centre and rely on demand for Brazilian commodities, from soy beans to iron ore, so heavily. This will almost certainly require a change of government – but with all political parties involved in the so-called ‘Carwash Operation’, or Lava-Jato, as it is locally known, the federal investigation into large corruption involving state-owned oil company Petrobras, large construction companies, and politicians, it’s very hard at the moment to see who could emerge to take charge of the country and rebuild international investor trust in Brazil.

Depression is the only word to describe Brazil as it heads towards the Olympics and a lot more hardship. ●

11

MARKETS REGULAR DRY BULK

Liquid challenges to arise later this year Jeffrey Landsberg from Commodore Research highlights China’s hydropower capabilities as something for owners to watch

D

ry bulk freight rates, particularly panamax and handymax rates, fared relatively well through much of April even with a steady supply of new vessels (particularly ultramax newbuildings) continuing to be delivered to the market. One key issue that Commodore has continued to stress, however, is that this year’s South American peak grain export season has been atypically strong.

From the start of March through mid-April, approximately 225 South American grain cargoes came to the market (while the same period last year saw approximately 185 cargoes).

The robust cargo volume this year has provided support to the panamax and handymax markets, with strength in panamax rates particularly reliant on what has been a very atypically strong South American grain export season.

Such a large amount of South American grain cargoes previously surfacing this year has masked what in reality is still a weak panamax market. Commodore is most bearish for the 2016 panamax market and is especially concerned for this segment of the dry bulk market starting in late August once the South American peak grain export season

comes to an end. The end of the grain export season in South America will be coinciding with the peak in India’s monsoon season along with China’s own rainy season. Hydropower production is set to be much higher in each of these major coal importing countries this summer which will have an adverse effect on coal import prospects. Chinese hydropower production is likely to be especially strong, and is also set to mark a drastic change from the contraction in hydropower production growth seen in China during much of last summer.

Going forward, there remains a very strong likelihood that this summer will see much stronger hydropower production growth in China than was seen in 2015. As we have discussed in several reports last year and this year, 2015 saw Chinese hydropower production increase year-on-year by only 5% which paled in comparison to the very robust 25% growth in Chinese hydropower production that was seen in 2014. This year, though, has so far seen Chinese hydropower production increase year-on-year by 19% and the upcoming summer months are likely to see a much larger surge in hydropower production than was seen during the

Chinese Hydropower Production (January 2013 - March 2016)

120kwh 100kwh 80kwh 60kwh 40kwh

Jan’13

Jan’14

Jan’15

Jan’16

summer of 2015.

The dry bulk market caught a break last year with Chinese hydropower production growth being very limited, but this summer is very unlikely to see that same result and Chinese coal imports will be negatively affected. It is remains very important to recognise that Chinese hydropower production contracted on a year-on-year basis during July, August, and September of last year.

The panamax and handymax markets have fared fairly well recently, but there are major issues that these markets still must face in Q3 and we remain most bearish for panamax prospects.

South America’s peak grain export season eventually coming to an end and China’s hydropower production growth being set to be much stronger this summer than seen during the summer of 2015 are two major demand-side issues that are still set to arise in the market.

Dry bulk newbuilding delivery volume, of course, also becomes much more significant as the months progress (cargo volume waxes and wanes at times, but the number of new ships added to the market only grows).

Handymax and panamax markets are each affected by the delivery of panamaxes, ultramaxes, supramaxes, and handymax vessels.

However, the panamax market has long been the weaker of these two markets, and the panamax market remains most vulnerable. We remain most concerned for the demand and vessel supply-side issues that that panamax market is still set to face later this year. ●

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ISSUE TWO 2016

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MARKETS REGULAR TANKERS

The impact of the new Panama Canal Erik Broekhuizen from Poten & Partners wonders whether an expanded waterway bears any significance for the oil and gas trades

T

he original Panama Canal, a 48-mile ship canal located in the Republic of Panama, was opened in 1914 and connects the Atlantic and Pacific Oceans. In the first year of operation some 1,000 vessels transited the interoceanic waterway. By 2015, total annual traffic reached 12,330 transits and the canal generated almost $2bn in toll revenues. Originally, the dry and liquid bulk shipping segments generated most of the canal’s revenues, but gradually container vessels became its heaviest users. Due to the growing size of these vessels, the Panama Canal Authority decided to create a new lane of traffic and construct a new set of bigger locks. This will be the third set of locks and the chambers are 180 ft wide, 1,400 ft long and 60 ft deep, which will allow the transit of much larger ships. Work on these expanded locks started in 2007.

On June 26, 2016 the new, expanded locks will open for business. On April 29, the Panama Canal

ISSUE TWO 2016

Authority held a draw among its top 15 customers to choose the first commercial vessel transit on June 26.

Interested parties were required to indicate the name, type and dimensions of the neopanamax vessel that they plan to deploy on inauguration day. Only one neopanamax vessel in the southbound direction (from the Atlantic to the Pacific) will be allowed to transit the expanded canal for its inauguration during daylight hours. Regular commercial transits through the expanded canal will commence on June 27.

In terms of containerships, the original locks allow the passage of vessels that can carry up to 5,000 teu, the new expanded locks will allow for post-panamax vessels of up to 14,000 teu to transit. For crude oil and product tankers, the new locks are large enough for the use of aframax/LR2 and light-loaded suezmax tankers.

Almost all existing LNG and LPG tankers will also be able to use the new locks.

Once the new locks are fully in operation, it will allow for a total of 12 transits per day (it will take two hours for a vessel to go through the locks on either side). The expectation is that container vessels will be the most prolific users of the new locks, but it is much less certain how the expanded canal will impact the tanker market. How many crude and product tankers are likely to use the expanded waterway? While there could be the occasional transit of an aframax or suezmax with crude oil, these trades will likely be limited because there is little demand for the movement of crude from the Pacific to the Atlantic, while the reverse route is well served by another piece of infrastructure in Panama: the Trans-Panama Pipeline, which flows from the port of Chiriquí Grande in the Caribbean to the port of Charco Azul on the Pacific coast and has the capacity to handle more than 800,000 barrels of crude oil per day.

For product tankers, there is some potential for increased flows (for example, exports from the US Gulf to Asia), but the composition of current trades indicates a strong preference for smaller product tankers. Even though the existing canal can handle panamax sized LR1 product tankers of up to 75,000 dwt, the vast majority of the petroleum product tankers that transit the canal are smaller medium range (MR) and handysize tankers. ●

15

MARKETS CONTAINERS

The new emerging competitor landscape The past few weeks have been especially tempestuous for carrier alliances. Lars Jensen tries to make sense of all the changes

T

he past few weeks have seen the emergence of a new competitive landscape for the global carriers. The announcement of the Ocean Alliance consisting of CMA CGM/APL, COSCO/CSCL, Evergreen and OOCL is a clear step up in terms of both size and competitive pressure.

Looking from a vessel portfolio perspective, 2M and Ocean Alliance are matching each other evenly in terms of capabilities as the graph also illustrates. Given their differences they will likely apply these portfolios differently, however from a capabilities perspective they are matching each other evenly.

Then there is the third alliance made up of the leftovers. HapagLloyd, Yang Ming, Hanjin Shipping, K Line, MOL and NYK are joining forces to form THE Alliance.

The challenge with THE Alliance is that in order to have a chance of competing with 2M and Ocean Alliance on equal terms they need a substantial number

of alliance members. It will be a challenge in terms of agreeing on a network. In order to make this succeed it will require the members to cast aside significant parts of their own specific needs in the interest of the overall good for the alliance.

From a global fleet perspective, THE Alliance still needs more players to join for it to be on a similar pegging to the two other groupings.

UASC (in merger talks with HapagLloyd) and HMM are tipped to possibly sign up with THE Alliance before it officially starts operations next April. However, this is not certain.

Spare a thought for financially struggling HMM. If it does not get its finances in order quick and fails to gain membership to THE Alliance it will face a very challenging future on the main east-west markets, and over time would have to retract to defensible niche market positions.

With the 2M alliance still having eight years remaining of its filed lifespan, and Ocean Alliance

“

We will see a few more carriers disappear

”

and THE Alliance being targeted for five years, what we are witnessing is a reshaping of the competitive landscape which will set the tone for the next half a decade – and a very likely outcome is that over this period we will see a few more carriers disappear. ●

Number of vessels (current + confirmed orders) 250 200 150 100 50 0

8000 -11999 TEU

12000-13999 TEU 2M

ISSUE TWO 2016

14000-17999 TEU

18000+ TEU

Ocean Alliance

17

MARKETS OFFSHORE

What do you mean you want to revisit the contract?

Andre Wheeler on the current lawyer’s paradise

H

ow things have changed over the last few months. I recall many fund managers and companies reporting that there was clear forward earnings visibility for many as they had contracts in place thereby giving a fair amount of certainty. No one has been immune from the fallout and even the existence of a contract does not guarantee future earnings.

The situation has got to the stage that the nuances in the good news / bad news stories have changed emphasis. It is now seen as a positive when an existing contract is scaled back and charter values reduced rather than outright cancellation. I suppose that this is a better result than having the contract cancelled in its entirety, but has now introduced the next battleground as liquidity issues emerge front and centre.

Whilst the yards in Asia had distinct advantages in shaping their dominance over the sector in the last few decades, those advantages have diminished of late.

We currently have oversupply not only in existing vessel fleets, but we have newbuilds entering the market, suggesting market conditions will deteriorate. Consider, for example, that of the world fleet of approximately 5,000 OSVs, 1,300 are not active and there are 500 on order. We now have the situation that in some sectors, such as dry bulk, shipping companies have been forced into accepting zero charter rates, i.e. the charter covers operating costs only. In a sense the dry bulk sector has responded by increasing the pace of scrapping in 2016.

18

Other options that are available to the sector to bring about balance is to reduce the supply of vessels by means of disposals, demolition and stacking. Bourbon, the French operator, has adopted the stacking approach with more than 20% of its 511 vessel fleet now out of service.

In my view, the only real solution is to increase the level to which older vessels are scrapped. It has been suggested in some quarters that vessels beyond 15 years of age, whilst appearing costly and introducing short term impairment costs, clears the deck for sustained growth going forward.

Another consolidation method that will be attractive is debt restructuring, with the most popular being the conversion of debt into equity transfers to improve liquidity. We are seeing this taking place particularly at the South Korean yards, an example being Hyundai Heavy. Associated with this development in Korea has seen the Korea Development Bank receiving requests from the Korea Shipowners Association to go easy on loan to value breaches as values decline. Paragon, who recently disposed of its fleet, offered baby bond holders an exchange of $25 note for 60 shares of Paragon common stock.

I expect mergers and acquisitions will escalate over the next six months as companies move to rationalise fleets and services in order to rectify the current supply/ demand imbalance.

There has been further speculation that Keppel and SembCorp Marine will merge their offshore and marine businesses – particularly

coming out of the Singapore government’s investment instrument, Temasek Holdings. This has come to the forefront as both are exposed to Sete Brasil to the value of around $2bn and would have significant impairment costs, eroding shareholder value.

We are already seeing the evidence of shipping companies and shipyards moving to rationalising their fleet / focus and return to their core business. The most notable has been Paragon that made the decision to offload its entire fleet. Daewoo Shipbuilding has also recently announced that it will be moving away from offshore and focus on LNG and defence contracts and it is selling off non-core assets.

Other examples of companies selling off assets include Transocean and Diamond Offshore, but this option has become problematic when you consider that the price differential between new and secondhand vessels are at an all-time high.

Essentially the coming months will become a lawyer’s paradise as we see increased activity in contract reviews and cancellations. ● maritime ceo

MARKETS FINANCE

Posidonia talking points The fact that most of Dagfinn Lunde’s invites to parties in Athens this year are from tanker firms is telling

J

une in an even year can mean only one thing in the shipping calendar. It’s Posidonia time once again. The source of most of my invites to parties around Athens speaks volumes about the current shipping markets; they’re mainly from tanker firms.

Tanker owners are doing extremely well. The likes of Euronav and Nordic American Tankers (NAT) are really impressive at the moment with the dividends they’re able to hand out.

I’d say people do not expect Posidonia, this year, to be as amazing as in the past due to the bad shipping markets and difficulties the Greek economic situation faces. It will most likely put some limitations on the celebrations. With regards to the Greek economy one wonders how you go about getting blood out of a dead cow. Something maybe we should ask Brussels how to do.

Still, when you look at which

ISSUE TWO 2016

nation’s shipowners have handled the downturn best, I’d say it would have to be the Greeks. They know the markets better than most and tend to come out of downturns strongest.

They are good at being contrarian, something we see now by them being the biggest buyers of secondhand dry tonnage during the last two years.

They are also in other industries such as real estate, which helps them see the markets in a more rounded way.

They are savvy business people.

So where do we stand in the world of ship finance as Posidonia returns? In my mind, there are two categories of owners. The big ones – terms for them have improved a lot so you’re seeing a lot of refinancing going on now, such as with Scorpio.

Big names have good access to the banks and the capital markets. A lot of owners are looking at the possibility to reduce their debts.

However, if you are a medium sized or smaller it has become very

“

Greek owners have handled the downturn better than anyone else

”

tough. If you don’t have a long term relationship with a bank it is especially tough.

In Greece, the local banks have pulled back from helping smaller owners while Credit Suisse has trumped RBS as the lead provider of ship finance to the Mediterranean nation. Credit Suisse are not a typical shipping lender, yet they are doing fantastically well. Moreover, they do earn on both sides of their balance sheet as they will always require deposits at least as big as the loans.

I’m sure one of the talking points in Athens this June will be a debate on the future of the family shipping business model. Many people question its future. I say it has a strong future, you just have to be efficient, that is all. It’s also worth pointing out that most of these family run firms are in the dry bulk market, which are at record lows, but this is a cyclical business and those that can tough it out will bounce back. ●

19

EXECUTIVE IN PROFILE DEBATE

‘A year that proved shipping investors can’t take anything for granted’ A couple of months ago Splash, our global news site, turned one. Sam Chambers canvassed leading shipping names to gauge the past year and prospects ahead

M

any friends questioned my colleague Grant Rowles and I when we set about launching a global shipping news site. Last March, the industry remained mired in debt – and the shipping media landscape had ballooned to silly levels. One year on to the day, we reckon we could not have picked a better time to have made our entrance.

Hard-nosed, concise, free news had been in short supply for shipping until Splash came along. With journalists across the world – and without fear or favour – Splash has quickly made a name for itself with a string of exclusives and access to the top names in shipping.

The 12 months we’ve been operating have been among the most turbulent in the history of shipping, which as a journalist I must admit makes for good, exciting copy day in, day out.

Rather than me trying to tell you the mood of the industry these past 12 months and the likely shortterm future I got in touch with regular contributors. Dr Martin Stopford, president of Clarkson Platou Research Services, reckons the last 12 months were: “A year that

20

proved shipping investors can’t take anything for granted. The famous analyst adds: “Oil, dry bulk, tankers all seemed to abandon economic logic.”

No less flabbergasted by the actions of owners of late is Paul Slater, a famous name in ship finance and chairman of First International Corp.

“The shipping markets over the past 12 months,” he says, “reflect the stupidity of buying ships without any certainty of employing them profitably. The next 12 months will see the collapse of numerous publicly reporting companies and hopefully the exodus of the private equity and hedge fund investors.”

Dagfinn Lunde, Maritime CEO’s finance columnist, agrees with Slater’s “stupidity” viewpoint.

Owners should have seen the crisis coming more clearly, he tells me.

What’s more, Lunde is adamant 2016 will be worse than last year.

“Bulker prices have nearly halved in the last 12 months, as have

“

offshore assets and plenty of owners tell me prices could still come off further,” the ship finance veteran says.

Peter Sand, BIMCO’s chief shipping analyst, also believes shipping should have seen the trainwreck coming sooner. “Reality has hit home in the shipping industry in the past 12 months,” he says. “The changes to trade, patterns and volumes have been within sight for some time – but really started to affect shipping in 2015.”

The “new normal”, according to Sand, will result in a lower level of shipping demand growth going forward.

Clay Maitland, Splash’s most prolific opinion writer, has this to say on the biggest news from the last year.

“I think that the biggest story is the virtual bankruptcy of major bulk transport owners/operators,” he says, adding: “I have concluded that a recovery in the dry bulk sector is likely, and indeed certain, to be partial at best. The severe dry

Oil, dry bulk, tankers all seemed to abandon economic logic

”

maritime ceo

EXECUTIVE IN PROFILE DEBATE

bulk recession has in fact disrupted long-established patterns of trade; when a recovery comes, we will find that many dry bulk importers have established domestic and land-based sources of supply.”

Andrew Craig-Bennett, Maritime CEO’s lead opinion writer, takes issue with all those who claim dry bulk is at its lowest point ever – compared to the 1930s, it’s a cakewalk, he contends.

“We are told that, so far as dry bulk carriers are concerned, the past year has been as bad as the sector has ever experienced,” Craig-Bennett recounts. “I take leave to doubt this, because the statement relies on Baltic Index data, and whilst I am sure that data is carefully compiled and as accurate as it can be made, I am not sure that the BFI for 2016 is really an apples for apples comparison with the BFI for 1986.”

Ship operating costs are different now, Craig-Bennett notes and more pertinently there was no Baltic Index in the 1930s, when things were

ISSUE TWO 2016

“

Recession due to overtonnaging is the default condition of the global shipping industry

so bad that, famously, one British tramp ship sailed from its home port with a crew consisting entirely of officers – who had signed on as ratings to preserve their right to a company pension.

Craig-Bennett continues: “There is an odd aspect to this dry bulk recession – which is so bad that ships loading in Chile for Europe are being routed round the Horn to save Panama Canal dues equal to ten days’ hire and steaming – and it is that, as everyone concerned with bulk ships knows, the ports in most places are congested. The dry bulk sector is so overbuilt that even port congestion does not help.”

Shipowners generally have not paid sufficient attention to the increase in productivity in shipbuilding, Craig-Bennett reckons. A handy bulker today can be built for between

”

a half and a third of the man hours needed to build such a ship in the 1980s, he points out.

As for the immediate future – the “process of attrition”, as CraigBennett puts it, will work on the surplus ships and, more important, the surplus shipyards.

Looking further ahead, CraigBennett, never one to shy away from big statements, says: “Taking the long, long view of shipping, its SNAFU. Recession due to overtonnaging is the default condition of the global shipping industry.”

However bad the industry gets the team at Splash will be on hand to delve and deliver all the latest from around the world. We’re very grateful to all readers – especially those who have contributed comments or taken to social media as well as our supportive raft of advertisers. ●

21

IN PROFILE

Ian Douglas p.32

lcide Ezio Rosina p.29

Enrico Bogazzi p.27

Harry Vafias p.28

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

22

maritime ceo

IN PROFILE

Lars Solbakken p.32

Abdulrahman Essa Al-Mannai p.31

Theo Lekatompessy p.33

James Marshall p.24

ISSUE TWO 2016

23

IN PROFILE

Dry bulk prescriptions James Marshall, head of low profile Berge Bulk, is this issue’s cover story. He urges radical action to rectify the markets

J

ames Marshall is the son-in-law of the son-in-law of arguably the world’s most famous shipowner, bar Aristotle Onassis.

Sir Y K Pao selected his son-inlaw, Dr Helmut Sohmen, to take the reins of World-Wide Shipping (now BW) back in the 1980s. Another 20 years on, and Sohmen got his own son-in-law, Marshall, to steer Berge Bulk, a separate, privately held entity to the BW Group, while his son, Andreas Sohmen-Pao succeeded his

Spot on

Berge Bulk A dry bulk entity controlled by the Sohmen-Pao family created in 2007.

Fleet today is in excess of 40 vessels.

24

father last year as chairman at BW. Berge Bulk was acquired when Sohmen made his audacious $1.5bn move for Norway’s Bergesen back in 2003. At the time, Sohmen mulled selling the bulkers, predominantly VLOCs. It was just as well he did not as dry bulk then entered its mega earnings spurt, as Chinese demand for iron ore sent rates for capesizes into unheralded six-digit US dollar territory. After four years, Berge Bulk was spun off officially in 2007 as a separate entity, owned by the family, but with nothing to do the BW Group.

Although separate, Berge Bulk’s modus operandi bears all the hallmarks of how World-Wide and then BW have gone about their businesses.

Namely, being conservative, seeking out long term business partners and aiming big.

Since Marshall took the helm at Berge Bulk nine years ago the fleet has grown from seven ships to more

“

No good news is good news as we are seeing a lot of scrapping now

”

than 40, surpassing 11m dwt. Online pricing portal VesselsValue.com places the company as the 13th largest dry bulk company in the world in terms of its fleet value, clocking in at $989m.

“We will see mergers and acquisitions, but we will also see new entrants in the market ” — Andreas Hadjipetrou, joint managing director of Columbia Shipmanagement

maritime ceo

COVER IN PROFILE STORY

“

I don’t mind the market being $1,000 for the next year because it will wipe tonnage out “It’s obviously a very, very tough market at the moment,” Marshall tells Maritime CEO. Nevertheless, the bleakness of the markets does provide some solace in that owners are now willing to take more extreme measures to rectify the situation.

“No good news is good news as we are seeing a lot of scrapping now,” he says. This year is on track to be a near record one for dry bulk demolition, with ships as young as 15-years-old being sent for scrap.

Marshall acknowledges how scrapping volumes are up, and the price of scrap has been rising.

One ship due for scrap soon is the Berge Stahl (pictured), a 30-yearold VLOC, which was the world’s

ISSUE TWO 2016

”

longest and largest iron ore carrier for a full 25 years. Marshall is adamant that this 1986-built ship and others like it from it that era are just as fuel efficient as ships coming out of Asian drydocks today, dismissing the ecoship craze as a marketing ploy. The Berge Stahl has covered enough miles to make almost five trips to the moon. It has hauled a total of 8m tonnes of iron ore to Europe – enough to build 9.5m cars, and is, according to Berge Bulk, the original ecoship.

While commending the pick up in scrapping among dry bulk owners, Marshall feels there should be more ships laid up by now.

“We need more bad news to get

more lay-ups,” he says.

The fact that resale values are much lower than newbuild prices – and are likely to remain that way – should put a cap on any new orders, Marshall reckons.

“I don’t mind the market being $1,000 for the next year because it will wipe tonnage out,” Marshall says. “My umbrage,” he stresses, “is with charterers who pay two cents less for lower quality tonnage.” ●

“Chinese yards lack efficiency” — Li Weijian, president, Jinhai Heavy Industry

25

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IN PROFILE

Selling up Enrico Bogazzi, widely known as Il Dottore on home soil, has had enough and is cashing out of dry bulk

E

nrico Bogazzi, a well known name in bulk shipping despite being a very low profile man, can see no way out for the bulk carrier crisis and has decided to progressively offload all his fleet.

The Italian shipowner, based in Marina di Carrara, today still controls several companies such as Navalmar UK and BSLE, but in the past his name was linked also to Bnavi, Vittorio Bogazzi & Figli, Nordana, Brointermed, MC Shipping and Dannebrog Rederi with a fleet of some 50 general cargo ships, tankers, gas carriers and roro ships.

In the last few years Bogazzi sold his stake in most of the cited companies and now owns only four multipurpose ships (operated through BSLE shipping company) and two handymax bulk carriers (controlled by the London-based Navalmar UK).

Widely known as ‘Il Dottore’ in Italy, he has a negative outlook for the future of shipping, mainly in the dry bulk sector.

“I decided to exit the tanker market in 2012 but looking back at the rates of the recent past I took the wrong decision,” he admits, while on the dry bulk side he thinks that

Spot on

Navalmar A UK company owned by Italian Enrico Bogazzi with a pair of bulkers.

Bogazzi also controls multipurpose firm, BSLE.

ISSUE TWO 2016

“many years” are needed before any sort of recovery will take place.

“The industry,” he says, “is affected at the same time by tonnage oversupply and a global trade slowdown, furthermore the commodity price has dropped and also the oil price decrease has not helped business.”

Above all that, bulk carriers are more and more in direct competition with containerships in his view.

“These ever bigger container carriers are progressively stealing market share in minor and major bulk commodities and that’s true not only for small units but also for medium-size bulk carriers. If you think that steel coils from China to Europe today are more and more frequently shipped in a container,” he points out.

That’s the reason why the Italian owner is very busy at offloading ships today.

“How could I invest in buying vessels given the present market condition?” Bogazzi observes. “In any segment, from capesize to panamax

“

Ever bigger container carriers are progressively stealing market share in minor and major bulk commodities

”

or supramax, all the ships are losing money. At today’s rates in dry bulk you can neither repay operating and financial costs.”

Also the old project of a potential listing of his shipping activities has been cancelled by the Carrara-based owner: “That would be a nonsense today. The private equity funds that decided to buy non-performing loans of distressed shipping companies are losing money. Before them, the banks were used to finance shipowners’ investments with up to 90% of asset price and currently the same assets have dropped their value to 10%.

Bulk carriers are being sold at scrap price and then that’s not exactly the right moment to look for financial investors, I think,” he concludes. ●

27

IN PROFILE

Low oil price keeps a lid on VLGC earnings The Vafias family is keeping itself busy snapping up bargain bulkers while LPG remains stagnant

H

arry Vafias has always been one of Greece’s more approachable shipowners, not afraid to call things as he sees them without dressing up prospects.

Earlier this year he told Maritime CEO low oil prices would likely keep a lid on LPG demand this year. Oil prices need to be in the $50 to $60 per barrel range to get LPG trades moving again, he said. As a result, Vafias tells Maritime CEO in an exclusive interview that he has no plans to expand his gas fleet, instead eyeing some cut price bulker bargains.

“We don’t expect a big spike in oil prices in 2016,” Vafias says.

“VLGCs will do worse than last year, mid-size LPG ships will do quite well in the region of $25,000 daily and small ships will be the same as last year.”

StealthGas, which saw 2015 net profit slide from $12.7m to $2.6m, is finishing taking on 21 newbuilds over the past two years with just six left to deliver from yards in East Asia.

“Currently we have no plans to add more ships except for bargain priced quality bulkers,” Vafias says,

Spot on

StealthGas One of the world’s leading LPG players. Owned by the Vafias family, which has been active in dry bulk buys this year.

28

“

Most Greek companies have been able to weather the storm, buy cheap assets and will probably come out of this crisis even stronger

adding he’s only interested in secondhand dry bulk tonnage.

A couple of months ago the Vafias family were active in the sales and purchase arena, linked with the buying of two capesizes – Spring Hydrangea and the C Winner, the latter for as little as $11m, a 20-year low, once again highlighting Greek shipowners’ nose for a bargain.

“Despite the terrible economy in Greece and the ongoing problems with the refugees and dire dry, LNG, container and offshore markets most Greek companies have been able to weather the storm, buy cheap assets and will probably come out of this crisis even stronger,” comments Vafias.

Vafias says he’s looking forward

”

to this year’s Posidonia, the world’s most famous shipping get together, scheduled for early June in Athens.

Major talking points, he anticipates, will be bankrupty, Brexit, taxes and the relocation of shipping companies out of Greece. ●

maritime ceo

IN PROFILE

How shipping got into such trouble In his 62 years in shipping, lcide Ezio Rosina, the head of Premuda, has never experienced a downturn quite like today’s one

T

here are three main factors for the present crisis in some shipping segments, according to Premuda’s president, Alcide Ezio Rosina: the emerging role of China in the shipbuilding industry, excess of credit from banks until 2008 and private equity’s liquidity hitting the market in the last few years.

“From financial investors too much money flowed into shipping in a moment when profit margins and returns on investment were already low,” says the head of the Italy-based shipping company, adding: “The huge amount of money available for shipowners obviously played a large part in the present tonnage oversupply situation.”

Premuda is a very old Italian firm whose origins date back to 1907 when it was founded in Trieste under the name of Navigazione a Vapore (Steamship Navigation) G.L. Premuda and managed by the Tripcovich family. As of today the company is controlled by the Rosina family together with Duferco Italia and Assicurazioni Generali and is active both in the dry and liquid bulk

Spot on

Premuda Founded in Trieste in 1907, the company’s fleet today consists of 11 bulkers, six tankers and an FPSO.

ISSUE TWO 2016

through an owned fleet of 11 bulk carriers and six tankers plus an FPSO controlled and operated in a joint venture with Yinson of Malaysia.

Alcide Ezio Rosina’s son Stefano, CEO of the company, together with the managing director Marco Tassara, have been working for long and seems to be very close now to seal an agreement with the fund Pillarstone Italy (participated by KKR, Unicredit and Intesa SanPaolo) interested at buying banks’ loan exposure worth almost €400m ($443m). Once the deal is closed the company’s business will be relaunched with an injection of fresh new capital.

By and large the seasoned president of Premuda has a negative sentiment on the short- to midterm future of liquid and dry bulk shipping.

“2016 will be another very bad year for bulk carrier rates but also for tankers my view is for a likely slowdown in daily rates before the

end of the year. Furthermore, I’m wondering whether we are going to deal with some structural changes in the dry bulk business in the coming years with a consequent change of the rules of the game.”

Given this scenario Rosina is also pessimistic on the perspectives for small companies in the business.

“I’m also wondering if there will be still space for family model shipping companies in the future of the shipping industry. I have been in the business for 62 years now and I have lived through several downturns in my career but this time something different from the past is taking place.”

Rosina’s recipe for an upturn in bulk carrier charter rates is simple.

“The beginning of 2016 has been shocking and shipowners can’t go on losing much money day by day.

The only way to exit from the current situation is to take ships out from the market making a massive use of lay-ups.” ●

29

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IN PROFILE

No offshore pick up soon Qatar’s Milaha is making money from its tankers, masking offshore losses

Q

atar’s diverse owner Milaha has managed to get through the dire offshore markets via its solid tanker earnings. This widespread fleet is just as well as the firm’s ceo, Abdulrahman Essa Al-Mannai, sees no offshore pick up for at least the next two years.

“With current oil prices showing no signs of an imminent recovery, oil majors are likely to continue to control E&P spending carefully,” Al-Mannai tells Maritime CEO. “We do not believe demand for offshore supply vessels is likely to increase substantially in the next two years.

Besides, there is still a significant supply overhang to deal with.”

In this environment, Al-Mannai thinks that 2016 and 2017 will be years of consolidation for the industry with new alliances and partnerships whose main purpose is maintaining positive cash flows.

Milaha currently owns and operates almost 90 vessels ranging from tugboats and offshore support vessels to container vessels and product tankers. It also has varying stakes in four VLGCs and seven LNG carriers.

“We continue to look at opportunities to grow our fleet across a

Spot on

Milaha Diverse Qatari owner whose fleet includes crude and gas tankers, OSVs, boxships and tugboats.

ISSUE TWO 2016

“

We continue to look at opportunities to grow our fleet across a number of sectors

”

number of sectors,” Al-Mannai says.

On LNG, Al-Mannai reckons the spot market is likely to continue facing challenges for the next few years until the surplus tonnage is absorbed by new projects. He also notes the shorter time charter periods of five to seven years in comparison with the traditional longer charters of over 20 years.

As for the LPG market, Al-Mannai has already seen a drop in VLGC rates this year from the historically high rates of the last two years, which were mainly driven by increasing US exports.

“With over 200 VLGCs now in the water and an additional 25% due for delivery this year, it remains to be

seen whether US exports are sufficient to meet the growing LPG fleet,” he muses. ●

31

IN PROFILE

Further subsea consolidation ‘inevitable’ An interview with the head of Global Marine Systems

F

urther consolidation in the subsea sector is “inevitable”, according to one of the key architects of recent mergers in the segment.

Global Marine Systems, which was taken over by HC2 Holdings in 2014, has a legacy that spans 160 years in the telecommunications market. The business today though, is also immersed in other sectors supporting the digital requirements

“

Customer demands are changing with an emphasis for a single provider for their total subsea engineering provision

”

of the oil and gas market – fulfilling their demands for fibre to platform connectivity and undertaking a variety of projects that require the installation and burial of subsea cables. It also provides vessels for the offshore power market.

“In terms of consolidation, to a degree this is inevitable, a combination of which is being led by the oil and gas slump, and the ability today to acquire assets at a reduced cost,” says Ian Douglas, Global Marine’s ceo. “Also, customer demands are changing,” he adds, “with an emphasis for a single provider for their total subsea engineering provision and this is likely to impact on the structure of the industry of tomorrow.”

Earlier this year, Global Marine acquired offshore renewables specialist CWind.

“Our focus remains on delivering exceptional subsea engineering services to customers across our core markets from both an installation and an ongoing maintenance perspective,” Douglas concludes. ●

$350m a year spend on fleet growth

W

hile other owners might be reining in their expansion plans in these tricky times Norway’s Ocean Yield has outlined to Maritime CEO plans to spend $350m a year in annual new investments in vessels on long-term contracts to increase diversification, earnings and dividend capacity.

Lars Solbakken, the firm’s ceo, says: “We will continue our conservative investment strategy to acquire modern, fuel efficient vessels with long term contracts to strong counterparties. We have a

32

“

We have a multisegment strategy to diversify our portfolio

multi-segment strategy to diversify our portfolio.”

Ocean Yield is a shipowning company, founded four years

”

ago, with investments within oil services and industrial shipping. It listed in 2013 and brands itself as the dividend yield company.

Ocean Yield has recently been working to secure a strong funding base, securing strong support from a large group of relationship banks. This will be used, Solbakken says, “to build a much larger company”. ●

maritime ceo

IN PROFILE

Ramifications of the regionalisation of LNG trades The head of Indonesia’s Humpuss Intermoda Transportasi is adamant the LNG gas sector has peaked in terms of ship size

L

NG shipping is going through a massive change – the reverse of much of the rest of the industry where bigger is better has been the mantra for much of the past decade. According to Theo Lekatompessy, the president of Indonesian LNG outfit Humpuss Intermoda Transportasi: “It is no longer big is attractive, but small is beautiful.”

Lekatompessy argues that this change is being brought about by something far larger in the world economy. “There is no globalisation,” he says, “There is regionalisation.”

Vessel designs are changing accordingly with trades of the future likely to call at multiple not single points.

Spot on

Humpuss Indonesian tanker player with a fleet of around 40 ships, including crude, product and LNG vessels.

“

It is no longer big is attractive, but small is beautiful

While vessel capacity designs have been moving upward to achieve efficiency for import LNG from regional suppliers in order to achieve multipoint distribution this will see a growing number of 20,000 cu m LNG carriers as well as 4,000 to 8,000 cu m ships come in to operation, Lekatompessy argues.

In business diversification mode, Lekatompessy says his company now plans to enter the port infrastructure business to support Jakarta’s

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

”

program aimed at improving connectivity in the archipelago.

Former president Soeharto’s youngest son, Hutomo Mandala Putra, is a major shareholder of Humpuss, whose fleet of around 40 ships also includes crude and product tankers.

Humpuss signed a seven-year contract worth around $100m in December last year to transport LNG from Bontang to Bali. It will deploy a 20,000 cu m LNG carrier to fulfill the contract. ●

“Ransomware can essentially lock down a vessel or an entire company’s IT network” — Tore Morten Olsen, president, Marlink

MARITIME CEO FORUM

Would President Trump be good for tankers?

The first Maritime CEO Forum had very strong, favourable feedback from delegates

A

s any conference organiser will tell you, getting audience participation is both vital and tricky. When, however, you have Frank Coles, the never dull ceo of Transas on hand, an entertaining, interactive event tends to be on the cards.

Coles’ hand popped up to ask the very first question at the inaugural Maritime CEO Forum held in Singapore’s iconic Fullerton Hotel. Would any of the panellists on

34

the tanker session vote for Donald Trump and what impact would he have on the tanker trades if he won the US presidency, Coles – who is half American – asked.

Frans van de Bospoort, managing director of ship finance in the eastern hemisphere for DVB Bank, said Trump being elected would create “uncertainty and unrest”. He cited a regular client of his, Angeliki Frangou, who often says: “What’s bad for the world is good for the tanker market.”

Alan Hatton, ceo of First Ship Lease Trust, agreed, saying there would be “positive repercussions” for the tanker markets were Trump elected.

Tim Huxley, ceo of Wah Kwong Maritime Transport Holdings, commented on the US primaries, “When you look at the crop of candidates you’ve got, you’d pick the dog with least fleas.”

The tanker session was imbued with a sense of cautious optimism from both panellists and delegates,

and set the tone for what was a lively three other sessions to follow.

Van de Bospoort said his bank was bullish on tankers. Kenny Rogers, who heads up IMC’s chemical logistics division which includes 28 tankers, saw a solid year ahead for his sector, which could see the Singapore owner order more vessels.

On the crude side, Wah Kwong’s Huxley said: “I’m with Paddy Rogers [the ceo of Euronav] – go buy some Euronav shares but for God’s sake don’t put a fund together to go and order a load of ships.”

Hatton from FSL was of a similar opinion for product tankers.

The sector had been “reasonably resilient” in the past year, but owners must shy away from ordering more vessels, he said. Hatton also observed of the product sector: “Talk of a two-tier market from all the new ecoships has not come to fruition and looks like it never will do.”

The “elephant in the room” on the crude side, according to former broker Huxley was all the maritime ceo

MARITIME CEO FORUM

CEO Connection

shipbuilding capacity suddenly available from cancelled offshore, LNG and boxship contracts. “Will shipbuilders offer very, very low prices for tankers?” he mused, suggesting a $75m VLCC newbuild is not far off.

The sector is still cautious, panellists agreed, as evidenced by there being next to no period charters fixed for three to five years at the moment. This lack of fixing could rein in owners mulling ordering ships however.

For the record, none of the panellists said they would vote for Trump, while moderator Sam Chambers, editor of this magazine, quipped Trump’s election could be good for cement carriers what with the real estate mogul’s plans for a wall stretching across the border with Mexico.

The forum brought together a very high calibre of shipowning ceos for full, frank discussions with reports carried over the following pages. ●

ISSUE TWO 2016

35

service and quality are within your reach

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We look forward to seeing you at Posidonia 2016

Visit us at Booth 4.215

International Registries, Inc. in affiliation with the Marshall Islands Maritime & Corporate Administrators tel: +30 210 4293 223 piraeus@register-iri.com www.register-iri.com

MARITIME CEO FORUM

Should seafarers ditch their career at sea early?

HR and crewing formed one of four sessions at the inaugural Maritime CEO Forum at the Fullerton Hotel in Singapore

S

hould seafarers ditch their career at sea early? This demographic debate sparked heated discussion at the Maritime CEO Forum in Singapore held two months ago.

Mark Charman, ceo of Faststream Recruitment and a moderator at the event, pointed to a recent survey from his firm in which it was shown the average age these days that seafarers want to head ashore is just 31.

“Seafarers want to come ashore earlier,” Charman said.

P B Subbiah, director of human resources at Pacific Basin Shipping, believed that crew should come ashore earlier. “It is hard when you are in your mid- to late-40s coming ashore as you start at the bottom of the ladder. There is no way you will get the top job,” said Subbiah.

Kenny Rogers, head of Aurora

ISSUE TWO 2016

“

It is hard when you are in your mid- to late-40s coming ashore as you start at the bottom of the ladder

Tankers, agreed with Subbiah, saying: “It is very difficult to come into lower management when you have been a captain of chief engineer before. It is better to come in earlier.”

Frank Coles, the head of maritime technology firm Transas, who himself came ashore aged 30 after 12 years at sea, said companies need to make greater interaction between ship and shore. He noted how one large European container player rotated masters through head office every three months.

Warwick Norman disagreed. The head of vetting platform RightShip said: “It would be disastrous if we were turning over our seagoing staff

”

at 31. We need to make the conditions onboard better.”

The problem with that, Coles said, is that: “The desire to improve conditions is not there.”

Lars Modin from V. Ships warned that sending people ashore too early would create too many “incompetent people” both ashore and at sea.

Maritime CEO asked this demographic question to its readership as part of its quarterly survey, full results of which are carried on the back page. Nearly two thirds of the more than 500 respondents said seafarers should not quit their seafaring career early. ●

37

MARITIME CEO FORUM

Cutting costs versus cutting corners A key takeaway from the operating efficiency session was the risks of greater accidents at sea as the downturn continues

T

he operating efficiency session at the high level Maritime CEO Forum in Singapore saw delegates warn that the prolonged nature of the downturn in various sectors could impact safe operations.

“There’s a big mismatch between commercial operations and safety,” warned K.K.Mukherjee, director of operations at NYK Bulkship.

“There is increasing concern in the dry bulk space that this cycle will lead to problems maintenance-wise,” said Warwick Norman, ceo of ship vetting firm RightShip.

Quite so, agreed members of the audience, including P B Subbiah, a director at Hong Kong’s Pacific Basin Shipping, who noted: “Cutting costs for the sake of survival is dangerous as that is where companies start to

38

“

Cutting costs for the sake of survival is dangerous as that is where companies start to cut corners

cut corners.”

With much of the efficiency session focusing on costs, the moderator of the hour-long discussion, Clive Richardson, ceo of V. Group, pointed out: “Cost and efficiency are two different things. In other sectors there is something called spend to save – I don’t really see that in shipping.”

Maritime CEO asked its readership whether shipping understood the concept of spending to save for its quarterly survey called MarPoll, full results of which are carried on the back page. Nearly 70% of the more than 500 respondents said the industry did not get this concept. ●

”

“There is no doubt that in recent years the marine industry has been attracting too few new entrants, and faces both a shortfall of staff and a serious skills gap” — Jane Smallman, president of the Institute of Marine Engineering, Science and Technology

maritime ceo

MARITIME CEO FORUM

‘Dry bulk charterers living in a fool’s paradise’ The final session of the forum was a no holds barred dry bulk debate

T

he dry bulk session at the Maritime CEO Forum took charterers to task for seeking ever-cheaper rates and thus endangering the safety of the global bulker fleet.

The stellar line up of panellists – comprising James Marshall, ceo of Berge Bulk, Pankaj Khanna, ceo of Pioneer Marine, Khalid Hashim, managing director of Precious Shipping and Michael Nagler, head of chartering at Noble Group – were moderated

by Tim Huxley, the ceo of Wah Kwong Maritime Transport Holdings.

Panellists agreed that counterparty risk was the biggest issue in day-to-day business with Nagler telling the audience: “Our word is our bond has completely slipped – it is like no one cares.”

Hashim agreed, saying: “Every single so called blue chip charterer is renegotiating contracts.”

Hashim urged charterers to pay more or risk dire consequences.

“If you are going to pay $800 and expect [a capesize] to operate perfectly you are either smoking something not allowed or are living in a fool’s paradise,” Hashim said to much mirth among delegates.

The dire rates could hit charterers’ supply chains, Khanna noted.

“Standards of maintenance are going

down,” he said, which will see more ships failing to reach their destinations on time.

“Increasingly people are saying 2016 is just about survival,” Huxley said in his opening remarks, noting how the orderbook for this year – were it to actually deliver – sees a new ultramax deliver every 14 hours this year and a capesize roll out of yards every 36 hours in 2016.

Marshall noted how scrapping volumes were up, and the price of scrap was rising. He said he thought there should be more ships laid up by now. “We need more bad news to get more lay-ups,” he mused. The fact that resale values are much lower than newbuild prices – and are likely

to remain that way – should put a cap on any new orders, Marshall reckoned.

Contrasting today’s poor markets to the awful times of the mid-1980s, Hashim said today’s low interest rate environment was prolonging the pain.

“Interest rates during the mid-1980s were 20-25%, today they are maximum 4%, this is what has allowed a lot of rubbish to keep floating,” said the veteran bulker owner.

Delegates rounded off a pleasant day of networking at the Fullerton Hotel’s Post Bar. The next Maritime CEO Forum is scheduled to kick off Singapore Maritime Week on April 24 next year. ●

Maritime CEO Forum sponsors

ISSUE TWO 2016

39

WINE

Dive in to the wines of the Med Neville Smith takes on a tricky challenge set by the editor with gusto

T

he Mediterranean,” said the editor, his voice as limpid as the waters of the sea itself. I was taken aback. “All of it?” I asked.

“The best of it,” he replied. “Our readers are a sophisticated bunch.

Seekers after the unusual and the inspirational, they look for value but are prepared to pay for quality. Now get on with it.”

With that he hung up, doubtless to chase another exclusive, leaving me to ponder how to circumnavigate such an expanse in 500 words or so.

For reasons of practicality the southern shores are out, but the eastern basin might be profitably explored. We could pass over much of mainland Greece but island-hopping was an option. For the rest, as ever, it is a question of judicious selection.

Let’s begin with a country with thousands of years of vinous history: Israel. While much of the country is simply too hot and dry to produce wine of international quality, there are signs that adventurous winemakers are finding judicious sites in the Judea Hills, Carmel Valley and Galilee where the vines can take advantage of higher ground.

Two to try RECANATI WINERY SHIRAZ, Upper Galilee, Israel (Berry Bros & Rudd £15.00).

Styled somewhere between Northern Rhone and the Barossa Valley, this has a finely delineated nose, and a smooth, mineral palate that is meaty but refined.

40

Galilee may not be Napa Valley, but a combination of strong day/ night temperature variation makes this a blessed location for full-bodied but fresh tasting wines, which flatter varieties with Middle Eastern roots.

If Israel seems an unfashionable choice then try Cyprus on for size.

The island has a reputation we could charitably describe as a bit sullied.

This is a shame, not least because wine’s place in the island’s history dates back at least to 3,500 BC. 2012 Zambartas, Maratheftiko,

Petale de Rose Chateau La Tour de l’Eveque Rose AOC Cotes de Provence 2014 (Corney & Barrow £15.95). In the Med there must be rosé and what a pinkun; organic, near-biodynamic handling yields the most beautiful, onion-skin colour with a beguiling combination of silky summer fruit and crisp acidity. ●

Krasochorio, Limassol, (Berry Bros & Rudd £16.95) is a very good argument for a Cypriot renaissance.

Maratheftiko might not roll off the tongue but it is very classy drinking; like a wilder-edged Italian, all creamy oak nose and dry black fruit with a smooth palate and balanced tannins – it cries out for some grilled meat.

The Maremma region of Tuscany is greatly influenced by the Middle Sea and its varietal wines, both dry and sweet are increasingly sought after. Growers can blend international varieties too but Simone Castelli plumps mostly for the former in his Morellino di Scansano Podere 414 (Private Cellar £15.79), which is 85% Sangiovese with Ciliegiolo, Colorino, Alicante and Syrah making up the remainder.

Maremma’s cooling sea breezes allow Castelli’s fruit longer ‘hang time’ to develop maximum flavour and despite a lush colour this is a very drinkable summer red, with a creamy oak-led nose with plenty of grip and juicy sour cherry notes. ● maritime ceo

GADGETS

I’d like to be under the sea

N

ow, we’ve covered a submarine or two before, but the Undersea Aquahoverer is easier to use due to its six electric-powered 400 rpm ducted propellers, which allow you to move or hover easily, using the same sort of skill level as driving a car. This saves a lot of extra mucking about with ballast or weight systems. It can also take you down to about 120 m, thanks to its composite pressure hull. It features independent monitored oxygen systems, dual control systems, internal and VHF communication to the surface and it’s powered by a 15 kWH rechargeable battery. As a bonus it basically looks like a Formula One racing car with propellers instead of tires.

Undersea Aquahoverer $1,500,000 www.hammacher.com

Laptop building

T

hose fiends at ThinkGeek have come up with a wonderful new retro game to play on your MacBook: LEGO. Let us be clear — we don’t mean any of the numerous Lego movie franchise X games: we’re talking actual LEGO. The Brik Books Build-On Macbook Cover snaps on to the top of your MacBook, and you stick the bricks on.

It’s also compatible with Mega Bloks and KRE-O too, so the choice of brick is up to you. There are two small drawbacks: the bricks aren’t included, so you’ll have to get your own; and you may actually never want to open your MacBook again.

ThinkGeek has covers to fit both MacBook Airs and MacBook Pros.

Brik Books Build-On Macbook Cover $60 www.thinkgeek.com

Guiding light

L

EDs are very small; light bulbs are very big. This leaves a lot of room for manufacturers of LED light bulbs to get creative. For those who like a bit of music with their light, there’s The Twist. It’s an E27 self-adjusting LED light bulb (it changes colour from blue-white in the morning to warmer hues in the evening, mirroring the sun) which also sports a premium wireless Bluetooth/Airplay speaker built-in to it. You control it with a smartphone, and if you have multiple Twists, you can synchronise them, all without any extra hub device. If you pre-order now, you can save up to $100. Shipments are slated to start next month.

The Twist $129 for one, $299 for three hellotwist.com

ISSUE TWO 2016

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REGULAR BOOKS

Securing the seas Paul French provides a roundup of the latest publications covering maritime security

M

aritime security is an issue nobody operating in today’s shipping world can ignore.

The sheer range of issues that need to be thought about grows all the time – from the age old problems of cargo theft and piracy through to newer threats such as illicit transport of weapons of mass destruction and cargo manifest cyber-security. A number of recent books address the legion of problems shippers can encounter.

Michael McNicholas’s Maritime Security: An Introduction is a good place to start. Essentially a ‘how to’ guide to the field it covers both portside and shipboard security issues, the range of threats that currently exist; and what security policies, procedures, systems, and measures must be implemented to mitigate these threats. This is actually the second edition of McNicholas’s guide and now covers very contemporary problems such as illegal migration and the problems of people trafficking by seas, transnational crime and smuggling as well as the latest UN legal conventions and frameworks. McNicholas, whose day job is managing director of Phoenix Management Services in the US, believes that the best way to ameliorate threats is at the primary “choke

42

points” – the load seaports and their ships.

National governments and multinational bodies have a major role to play in guaranteeing and enforcing maritime security. Paul Shemella’s Global Responses to Maritime Violence: Cooperation and Collective Action looks at what governments can do, short of all-out war, to protect maritime security. As with McNicholas’s book, the range of issues is broad and growing annually; Shemella, a retired US Navy captain and now working with the Center for Civil-Military Relations at Naval Postgraduate School in California, looks closely at issues such as terrorism and illegal fishing as well as armed robbery at sea and drug smuggling. Shemella is a harsh realist believing that guaranteeing maritime safety is a “wicked problem” with no ultimate solution, but that governments and international agencies can better prepare their responses to

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Trouble onshore will ultimately mean trouble at sea

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threats in conjunction with port operators and shippers.

Somalia and the Horn of Africa have been perhaps the most problematic areas for maritime safety in recent years – piracy, smuggling, armed robbery, illegal fishing have all featured in these waters. The global response to the problem involved many nations from the US to China and, of course, African nations. What did we learn from the experience? Mugambi Kiogora’s Turning the Tide: International Responses to Maritime Piracy in Somalia looks at the lessons. What Kiogora believes we learnt was that multinational naval efforts in conjunction with shipping lines were essential. However, everyone involved also needed to understand the problems in the Gulf of Aden and Somalia’s coastal communities to a greater extent. The simple conclusion is that navies and shippers cannot totally secure their waters, vessels and cargoes unless a similar effort at security takes places in the coastal nations where the threats emanate from. This, it appears, is as true of piracy in Somalia as it is of armed robbery in the Malacca Straits and people smuggling in the Mediterranean. Trouble onshore will ultimately mean trouble at sea. ●

maritime ceo

TRAVEL

A is not for Athens Sam Chambers picks out three Greek islands beginning with the letter A as perfect places to detox from a hectic Posidonia week

E

very two years I count down the days to Posidonia, not for the event per se but for the chance to explore and enjoy some of the most beautiful scenery and fabulous hospitality in Europe.

If you are coming to Athens for shipping’s most famous (and raucous) show, then some R&R on a beach is recommended. Even if you have just a couple of days an hour’s ferry ride can feel like a very different world to the hustle and bustle of the Greek capital and the faded glory of Piraeus.

For those pressed for time, tacking on a weekend pre or post the show for instance, Aegina is a good first foray. It’s a simple journey – perhaps washed down with an ale on two on deck, passing giant cruiseships in Piraeus and out to sea. Aegina, famous for its pistachio nuts, is laid

ISSUE TWO 2016

back with with delicious meals and welcoming locals. Head out of the capital and southwest to little Perdika where Mo and Pavlos will provide a lovely welcome at their geranium strewn Hotel Hippocampus and great seafood and sunsets await just around the corner. A short 10-minute boat ride from Perdika lies the island of Moni, a nature reserve with peacocks, deers and little else.

If you are willing to go further afield, take a plane to the little airstrip on Astypalaia, a beautiful island where the Cyclades meets the Dodecanese with scarcely more than 1,000 residents. Stay in Chora, the capital, a classic Greek island town,

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Some R&R on a beach is recommended

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easily one of the most picturesque in the Aegean, all white washed, blue shuttered houses with a castle atop and a line of windmills. The island is dotted with wonderful beaches and tourism is mercifully free of the clubs and drunkenness that is common elsewhere. Remember this is a detoxfocused article.

From Astypalaia it is not far by ferry to Amorgos, a stunning island where Luc Besson filmed diving movie The Big Blue in 1988. Aegali in the north is where to stay – it is an eighthour ferry ride from Piraeus, or two hours from Astypalaia. Stay at Apollon Studios in the heart of town and do eat at Limani Katinas. Run through the herb scented mountainous roads.

Hire a car and check out the picture postcard beaches and cliff-clenching churches. In short, explore! ●

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Posidonia 4-8 June 2018 Metropolitan Expo, Athens Greece

The International Shipping Exhibition

posidonia@posidonia-events.com

www.posidonia-events.com

OPINION

Whose piggy bank is feeding the shipbuilding frenzy?

The Big Short movie inspires Kris Kosmala to pen the following

T

he stream of shipping industry news over the last 18 months could provide enough juicy material for a few episodes of Saturday Night Live. But SNL is not what inspired this article. No. It was my choice of entertainment on one of my recent flights. I decided to catch up with all those movies I missed over the last six months and settled in to watch The Big Short. If you have not seen it, you should check your Netflix library and watch it after reading this.

The Big Short is a story of greed, the idiots, the wise ones, and a few lucky ones. And let me tell you, in my opinion, it looks like the reality of the ship financing market of 2016. Let’s recap the situation in a few words.

Bulk shipping is not making money. The industry seems to be in possession of the largest quantity of scrap steel in the world, well in excess of any new demands for steel production. With rates so dire ships below 20 years of age are being sent for scrap.

The container business does not look any better. Reports of some shippers demanding and getting $0 rates for container shipments on the Asia-Europe tradelane make for uninspiring reading. The ongoing

ISSUE TWO 2016

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The ship finance market exists in a sort of suspended reality

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changes in the Chinese economy show that the predicted comeback of massive container volumes shipped between China and other markets may never materialise.

Going back to the movie, why would the story of the American subprime mortgage crisis cause me to think of the ship financing market?

Well, it seems that the ship finance market is existing in a similar sort of suspended reality.

We have buckets and buckets of money being invested into new ships, even though additional capacity is not needed. Those new ships are being bought by the buyers solvent only on paper written up by the financing industry. Just like in the movie, we have the deserted estates in the form of the laid up ships. The owners of those laid up vessels are endlessly hoping for revenues that would allow them to repay the banks and cover ongoing costs.

Behind all of that industry stands the financial industry – the bankers and the reinsurers. As signs

of stress come up to the surface, the banking industry seems to be able to find one or two captains of the shipping industry who publicly announce that while not everything is fine, the economy will turn around in no time and all will be fine. Everybody seems very relaxed and pretends that the total exposure of the bankers to shipping loans is simply someone else’s problem. Nobody seems to imagine that those loans cannot be called and actually paid back with cash instead of repossessed equity. Would it be possible that those loans were bundled together and resold in some form of CDOs to other bankers?

As you watch the movie, some well-known individuals appear in cute cameos to explain what collateralized loan obligations (CDOs) are and how many people really “understood” them. What’s missing in the shipping market story is some regulatory player pretending to be in control of the situation and a few renegades playing ‘the big short’: betting against the oblivious majority.

I am not looking forward to watching another version of The Big Short dedicated to the ship financing market, but should that ever happen, I want a cameo role. ●

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Maritime Future Summit smm-hamburg.com/mfs

be connected 5 sept 2016 hamburg Hype or revolution?

Digital technologies could transform the whole shipping industry. What are the benefits with regard to efficiency, security and energy savings? What is needed to turn visions into reality?

Hot topics – to be discussed at the all-new Maritime Future Summit.

in cooperation with

facebook.com/SMMfair

linkedin.com/company/smmfair

twitter.com/SMMfair #SMMfair

youtube.com/SMMfair

REGULAR OPINION

It could get a whole lot worse We’ve entered a non-expansionary shipping market and have no idea how to handle it, argues Andrew Craig-Bennett

I

am going to suggest that, far from being near the bottom of the classic shipping cycle, we are at a point where things just might get a whole lot worse.

Let us – for a moment – stand back from the business we all love and try to see the Big Picture.

Rates of return in shipowning are dire – they have been dire since the 1970s – we all know that.

The business is mature and cyclical – we all know that.

It’s all about the oil price – we very often say that, even if we don’t really mean it.

The only way to make real money is to get your investment timing right.

And so on, and so forth.

Here’s why. There have been very few real changes in the technology of the industry in the lifetime of most of us. There have been incremental improvements, but nothing in the 40 years from 1976 to 2016 compares with what went on in the 40 years from 1936 to 1976.

In 1936 ships were rivetted up on slipways, driven by reciprocating steam engines and Scotch boilers, or occasionally by turbines or primitive diesel engines, and whether they were tankers or tweendeckers, they were all much the same size – which we would now call small. Cargo moved in crates and sacks, lifted in and out by derricks. Wheelhouses contained a magnetic compass and a steering wheel and no electronics.

Passengerships carried people from A to B. There were no containerships, no

“

We are the most unimaginative generation in the history of merchant shipping

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ISSUE TWO 2016

roros of any sort, no gas carriers, no chemical tankers, no bulk carriers.

In 1976, ships were much as they are today. The big passengerships and containerships were not quite as big, but big tankers were bigger. And, apart from details, that was it.

We are perhaps the most unimaginative generation in the history of merchant shipping. The reason why we have turned a business that was famous for making fortunes into a casino that destroys value at least as fast, if not much faster, than it creates it, is that we have not found ways to do things better. The best that we have come up with have been ways to do the same thing slightly cheaper, in a more standardised way.

That’s only half the problem. Up to now, we have been able to count on a secular trend of rising demand – our version of Moore’s Law is that ton mileage doubles every 15 years.

This rise in demand has tended to bail us out by mopping up excesses in newbuilding. One of the reasons for the excess in newbuilding is that ships have got cheaper and simpler to build, needing far fewer manhours to throw the ever cheaper steel together.

Shipbuilding has advanced; shipowning has not.

The state of the global economy suggests that we may be coming to the end of that regular doubling of ton mileage, which has been driven by globalisation – specifically the homogenisation of demand and the globalisation of sourcing – as there is a move to deliberately manufacture as close to where the demand is as possible.

Consider the 3D printer – at the moment, not much more than a toy, but capable of very much more – and consider the very widespread demand for better employment opportunities, along with the demands for ‘local’ foods, and, above all the migration of so much human activity onto screens and virtual worlds. These are not things that do a lot of good for containerlines, or bulk carriers, or even tankers.

Now consider the poor old planet, which really cannot take much more.

The growth in demand for seaborne trade has to come to an end.

We can all see that. The real problem is working out how to make a lot of money in a non-expansionary shipping market.

Time for a Malcom McLean, or Alfred Holt, or Aristotle Onassis, type Big Idea. Anybody got one? ●

47

MARPOLL REGULAR

Your thoughts Every issue we ask readers for their thoughts on topical issues. Results and key comments from the more than 500 respondents below Is the panamax bulker redundant?

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Recession due to overtonnaging is the default condition of the global shipping industry for the long term

Many are coming for sale and being scrapped with few being bought

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”

Yes 51%

Yes 82%

No 49%

No 18%

Would President Trump be good for tankers?

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“

Too often the general public get confused with dry bulk’s woes

Yes 33%

Yes 74%

No 67%

No 26%

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To many ‘second mates’ are ashore. They lack fundamental industry knowledge and create dysfunctional organisations

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Yes 32%

Yes 36%

No 68%

No 64%

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Is the Baltic Exchange as relevant today as it was 20 years ago?

Accelerated scrapping of bulkers has helped

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But not everyone knows that and so it’s a great time to sell

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Dry bulk

53%

Offshore

18%

Yes 38%

Containers

29%

No 62%

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Should seafarers ditch their career at sea early to have better prospects ashore?

Rarely in shipping is it wise to spend money earlier rather than later. Cash is king

Which sector will be the first to recover?

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Stockmarket investors do not get tankers as an investment story

He would be good for nothing

Does shipping understand the concept of spending to save?

It will be so long as governments continue to subsidise shipbuilding as an employment and economic stimulant

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maritime ceo

MAXIMISE YOUR SHIP’S EARNING CAPACITY RIGHTSHIP’S GHG EMISSIONS RATING IS USED BY CHARTERERS TO SELECT 1 IN 5 SHIPS. MAKE SURE YOUR SHIP IS THE ONE. environment@rightship.com Rightship.com/ghgrating

Expand your operations to ancouver, Canada.

Set up your branch office and manage your international shipping business from Vancouver.

Canada offers a competitive, predictable and flexible regime with a strong banking system.

vancouverimc.org