Fairplaymagazine

INSIGHTS FOR PROFITABLE SHIPPING

4 November 2010

Volume 370 Issue 6607

Price £15.00

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China expands How foreign investment by the Asian Powerhouse is fuelling demand for shipping

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INSIDE THIS THIS ISSUE: ISSUE STORY MARKETS: OF THE Supramax WEEK:shortfall Contracting COMMERCE: peace MARKETS: Distressed Theasset miller’s tale opportunities COMMERCE: REGULATION: Trans-Pacific boxRecycling blues DECISION-MAKERS: Convention costs TECHNOLOGY: Dick Welsh of Isle Weather of Man Registry routeing POWERHOUSE:–Xxxxxxxxx POWERHOUSE China: Banks xxxxxxxxxx extend their xxxxxxxxxxxxx reach, crude dependence, xxxxxxxxxxxxx turning to the water

this week

4 November 2010 volume 370 issue 6607

every week 3 Look out

30-42 Powerhouse: China expands

Optimism and uncertainty. Furious debate

As China has continued to post remarkable growth, its expanding wealth has allowed it to invest massively in foreign resources – meaning more business for shipping. Bouko de Groot reports [ Cover illustration: Roberto Filistad ]

4-5 Story of the week Rebuilding relations

6-15 Markets

4 Story of the week: Rebuilding relations Shippers see an end to their war with carriers through better contracts – but mistrust remains a barrier. Andrew Spurrier talks to Nicolette van der Jagt, secretary-general of the European Shippers’ Council

The miller’s tale. Scanscot insolvency highlights project market woes. Dry revival on the cusp. Japanese-built bulkers still attracting premiums

16-20 Trade & commerce Trans-Pacific box blues. ASRY revenues to remain flat. Italians banking on China. CMA CGM touts Dunkirk. China’s offshore club. New rules for nuclear. Healthy quarter for box shipping

22-24 Regulation ROs must learn to share in class. Can non-EU states scupper the scheme? Clean rules could prompt two-tier division. Do the customers care?

22 Regulation: ROs must share in class

16 Trade & commerce: Trans-Pacific trade blues New vessel capacity coming on stream in 2011 will challenge the liner industry’s newfound ability to tightly manage assets and raise rates in the TransPacific. John Gallagher reports

At a conference last month in Brussels, the EMEC explored the progress towards ‘mutual recognition’ by class societies in regard to Regulation (EC) No 391/2009, which was adopted by the European Parliament in March last year

25 Technology Shippers to take sulphur battle to European Parliament

26-27 Logistics & supply chain Namibia’s Walvis Bay ups the ante. Turbine lift requirements increasing

29 Reviews Great British passenger ships. The complete chief officer

44 Decision-makers: Man power

44-45 Decision-makers

Dick Welsh is passionate about the Isle of Man registry – but it is part of a grander plan to build a maritime centre of excellence, as he tells Richard Clayton

47 Movers & shakers 48 Shipping in numbers

SHIPS AGENCY RE-DEFINED One Global Agent

Making every port your home port

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4 November 2010

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Richard Clayton Fairplay Editor

look out Optimism and uncertainty China will be key to shaping the future of shipping – but it may not benefit all sectors China’s soaring economic development and its strengthening ties to sources of raw materials around the world are good news for shipping. The country’s foreign investment, especially in emerging African nations blessed by bountiful pay-dirt, is seen as the rock on which the future of the global maritime industry will be built. Indeed, China will play a key role in shaping the future of shipping, according to Lloyd’s Register chief executive Richard Sadler. However, there seems to be a disconnect between this cheerful optimism and the harsh reality of dollars per day. The tidal wave of dry bulk ordering is a concern for analysts, but there is little consensus about ‘slippage’. Although the concept of dry bulk order cancellation has become

anathema in the shipbuilding sector – something to do with loss of face – shipowners need to reconsider the state of the bulk market over the next two years. This might suggest the wisdom of delaying delivery where possible. Some believe up to half the Capesize vessels on order will struggle to achieve breakeven before the end of 2012, especially as the Chinese and Brazilians build for their own account. For owners based elsewhere, the estimates speak of a dry bulk fleet expansion of 8% this year (revised upwards from 5%). This is more than enough to offset the benefits of port congestion off east coast Australia and China. Panamax, Supramax and Handymax rates are all expected to come under pressure in 2011, and this will

Furious debate For once, it was a real debate. Unlike most seminars and conferences, the European Marine Equipment Council’s gathering in Brussels exposed some genuine differences of opinion and revealed a degree of mistrust between equipment manufacturers and class societies (see p22-24). It all hinged on the ‘Class

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Regulation’, adopted by the European Parliament in March 2009, that requires the EU’s recognised organisations – mostly IACS members – to accept each other’s equipment approval certificates. In the arguments that led up to the regulation, manufacturers and class societies made no secret of their opposing views and,

continue into 2012 until the orderbook surge passes through the system. The next two uncertain years will see fortunes gained and lost, as China’s market strength will not benefit all sectors of the dry market. With bankers unwilling to take risks where returns are, at best, unmanaged, owners should beware the siren voices of optimism and pessimism. Until orderbook pressures ease, equity investors will not be favourably inclined towards public dry bulk stocks, which is regarded as ‘relatively dead money’. The China factor for shipping is not as clear cut as the economic analysts would have readers believe. Investors must research carefully or suffer in the tsunami of newbuilding deliveries. F

now that it is in force, the two camps are working together only out of necessity. In public, class executives were being diplomatic: “The time for having a view is passed,” said one when asked what his organisation’s stance was. “We will do what we need to, to ensure compliance.” But another – speaking in advance of the conference – told Fairplay simply that “it will not work.” There were thinly-veiled

suggestions that class – which is tasked with developing a system to make mutual recognition work – is dragging its feet and ignoring the ‘low hanging fruit’ that manufacturers believe are there to be picked immediately. On one thing, however, everyone was agreed: this new approach is not easy and it will require commitment to change on both sides. Brussels at least showed that it is talking. F

4 November 2010

story of the week

Shippers see a way out of their war with carriers through better contracts – but mistrust remains a barrier. Andrew Spurrier reports

iven the warring nature of their public relationship, one would think that shippers and ocean carriers might be moving towards greater concertation, in an effort to put their dealings onto a more harmonious footing. As clients and suppliers respectively, they are two of the prime movers in keeping global commerce on an even keel, through the carriers’ provision of the best possible service and shippers through payment of a satisfactory price for it. However, concertation is not what Nicolette van der Jagt, secretary-general of the European Shippers’ Council (ESC), thinks is needed. Doubtless the word and concept look too much like conferences, of the kind which the ESC and its national member organisations successfully fought hard to have abolished from liner shipping by the European Union (EU). Conferences were outlawed by the EU in October 2008. Although she does not rule out concertation, and even co-operation, in certain

areas of mutual interest, Van der Jagt insisted to Fairplay that the commercial questions that continue to irk her members should be dealt with, as such, between individual shippers and carriers and not by some supra-national, consultative, conflict resolution structure. Van der Jagt thinks what is more important is the provision of tools to help shippers achieve a “better balance of power” in their dealings with shipping companies. On the subject of fuel surcharges, for example, which the ESC suspects are being used by carriers to generate additional profits, the council is working with academics on “a sort of mechanism” which will help shippers to negotiate over surcharges with carriers in future. This mechanism could be ready as early as next year, she said. “It is not transparent at the moment,” she said of the way shipping companies impose fuel surcharges. “Shippers want some transparency.” Fuel surcharges figure in a long list

of grievances that shippers have with shipping companies. Shippers contend that carriers tend to introduce measures unilaterally without forewarning, proper explanation or concertation. The introduction of slow steaming by shipping companies to cut costs is another example, she says. The shipping companies have not taken into account the additional inventory costs, which they have imposed on shippers by lengthening transit times, and they have not passed on any of the savings shipping companies have made as a result. “Shippers have to build more stocks to take account of the 10 additional days in the supply chain,” she said. “This has not been balanced by greater schedule reliability and lower charges.” The ESC’s ‘parent’ grouping – the Global Shippers’ Forum – summed matters up in a statement issued after its annual meeting in Macau in September, claiming that the past year had “witnessed a variety of unacceptable shipping practices, ranging from the imposition of abrupt and opportunistic rate increases and charges, cargo roll-overs, the limitation of shipping capacity and a general lack of adherence to rate agreements and contractual arrangements

All about the rate The World Shipping Council, which speaks for most of the carrier industry, is not entirely sympathetic to the shippers’ views. WSC president and chief executive officer Christopher Koch was not of a mind to give ground to shippers’ complaints when he spoke to Fairplay, arguing that they are largely responsible for their own problems. Koch argued that many of the problems they raised are the result of their “single-issue focus on rates” and their reticence to commit to providing cargo

4 November 2010

volumes over longer periods. “It’s all about the rate,” he said. “There are not the volume commitments as there are in the US trades. It tends to produce a lot of inefficiency in the network which one would hope could be addressed by better relationships and forecasting.” Koch thinks proposals from shippers for longer contracts could bring a favourable response from carriers in this respect. “If there is sufficient agreement on that point, the market place certainly

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story of the week

on an unprecedented global scale”. The impression given is that shippers have seen no improvement in shipping company behaviour since Brussels’ abolition, more than two years ago, of the block exemption of liner shipping conferences from EU competition legislation.

This is basically an industry coming out of cartel In her interview with Fairplay, van der Jagt almost assented to that impression, stopping short of doing so only to concede that the end of the block exemption was, in itself, a positive step. “We always said that we would not see results overnight, because this is basically an industry coming out of cartel. There has to be a change of mind set

and this will take at least five years.” Carriers need to end their fixation with their own market shares and give greater attention to customer care and satisfaction, she said. She acknowledged that the global economic slowdown complicated the task of the shipping companies but argued that the ravages of the downturn would have been even more severe had conferences still been in activity. Even so, the ESC head said, shipping companies often continue to act collectively rather than individually as is demonstrated by their common positions on such issues as capacity cuts, slow steaming and others. “If one introduces cuts, the others follow. You can say that they collectively agree to take out ships. That’s what we saw in the crisis.” It was the same sort of behaviour, Van der Jagt added, which led shipping companies to defy the laws of sustainability by massively over-ordering newbuildings. “They should have been doing more to prevent the whole thing from happening. Before the crisis, they just continued buying ships – which we thought was not sustainable.” The apparently irreconcilable philosophical, not to say ideological, differences between shippers and shipping lines can

allows it,” he said. “There is nothing to stop shippers and carriers from organising year-long contracts. There are a number of carriers who would see that as a very desirable improvement in the situation.” More generally, he agreed with Nicolette van der Jagt that the end of the block exemption for liner shipping conferences in the EU has not brought any substantial improvement in relations between shippers and carriers. “I think our members’ view overall is that the relationship with shippers is

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give the impression that the situation is hopeless; that they are condemned to continue their guerrilla warfare forever. That would ignore, however, that they are already managing to live with each other, albeit imperfectly, on a day-to-day basis at individual company level. Nor is the ESC pessimistic about the chances of achieving better relations with carriers in the future, apparently taking the view that the best instruments for doing so are the contracts which bind carriers and shippers together. Van der Jagt admitted that shipping companies are not the only ones that need ‘educating’ about contracts. She said some of the ESC’s national member organisations are already working on recommendations to help their members draft their contracts better.“Shippers can learn more about drafting clearer contracts,” she said. “They cannot just leave things as they are. They have to work on that.” She added that the ESC believes shippers would also benefit from having longer contracts, which would take them closer to their goals of service sustainability and reliability. Van der Jagt stopped short of calling for multi-annual contracts but insisted: “They should be longer than the three, six and nine month contracts we have at present. F

not significantly better and that it is not significantly worse,” he offered. He also agreed with her, however, that the way forward is in the negotiation of better contracts between shippers and carriers in future. “There is probably some legitimacy on both sides that we could be doing this better,” he said, “and the way to do this better is to draw up firmer, clearer and more specific contracts.” Founded in the US in 2000 by liner shipping company heads, the WSC is based in Washington, DC, and claims to represent 90% of global liner shipping capacity.

4 November 2010

Fairplay subscribers have access to listings of newbuildings, ship sales, fixtures and bunker prices on our website. Go to www.fairplay.co.uk and select the ‘Markets’ link in the top menu

Scanscot insolvency: highlights project market woes CMA sees dry market revival: on the cusp Japanesebuilt bulk carriers: still attracting premiums as trades in Panamax-size vessels and above remain healthy

The miller’s tale Putin has ensured Russian grain traders will stay in the export business – despite the export ban. John Helmer reports An order announced last week by Russian prime minister Vladimir Putin to extend the ban on wheat, rye, barley and corn exports until 1 July 2011 will make an exception to allow Russian millers and traders to ship milled flour abroad. If 1.4 tonnes of wheat makes one tonne of flour, the tonnage of wheat not allowed to be exported (which may be shipped as flour) may reach 1M tonnes – triple the volume of the flour trade in the year before the drought. According to the decree signed by Putin on 20 October, the ban on exports of wheat imposed

between 15 August and 31 December will be maintained for another six months. A spokesman for the prime minister has said there will be no loopholes for “unscrupulous exporters”. The extension of the ban doesn’t simply reflect the 30% reduction in the summer season’s harvest due to drought. The winter planting, according to Putin, has been reduced by more than 3M ha – 20% less than a year ago. This will mean that the next harvest will also fall short of domestic consumption levels and stockpiling requirements, unless the control on exports remains in place. Fear of wheat price inflation is also driving the prime minister to make sure that, as next year’s parliamentary election campaign accelerates as polling day in December approaches, Russian voters don’t let their

Russian exports of wheat flour 2004/05 season 2005/06 season 2006/07 season 2007/08 season 2008/09 season �

��

Thousand tonnes

��

[ Source: Russian Customs statistics ]

An agreement on supplying flour to the very promising market of Indonesia has almost been reached stomachs and their pockets rebel against the government and the ruling United Russia party. President Dmitry Medvedev’s chances for re-nomination for the presidential poll, scheduled for March 2012, will be seriously damaged if the governing party is badly defeated in the parliamentary election, so he is keen to keep up appearances that he is

doing everything he can to assure the supply of grain into flour and flour into bread. Putin told a meeting of farm policy officials in Rostov last week that he is offering the farm sector subsidies to help cover their fertiliser costs; subsidies to lower their railway expenses; a postponement of interest payments on agricultural loans; and subsidies for

VLCC Gulf rates firm on contracts and relets Affreightments and relets have given relief to VLCCs in the Gulf Contracts of Affreightment (COAs) may have cleared out some tonnage and helped firm 4 November 2010

VLCC rates in the Gulf last week. Unipec is reported to have taken eight Chinese vessels and afterwards the Japanese took four relets and the Koreans withdrew others for their use, say Braemar Seascope. The resulting rates may not

have staying power according to market sources. The developments increased owner sentiment and fixtures for Gulf-Japan rose from W60 to around W67 – a timecharter equivalent of $25,500-26,000/ day. These are levels that enable

owners to at least cover operating costs (which would be in the region of $10,000-12,000/ day on a modern VLCC). Westbound moves remain still show negative returns. The timecharter rates for West Africa – Gulf of Mexico for VLCCs www.fairplay.co.uk

markets

their spring planting costs. “It is important,” Putin said, “to reduce the financial burden on enterprises, thereby stimulating them to increase acreage in the spring. Therefore, I propose to allocate an additional Rb1Bn ($32.5M) in subsidies for spring sowing, including the purchase of seeds.” Victor Zubkov, the deputy prime minister in charge of agriculture, added that, to make up

asked the government to exclude flour from the ban and they agreed. We are very grateful for this exception. Flour exports will not do any harm to the Russian domestic market. On the contrary, it will keep the situation in balance.” Exactly what this balance may be is indicated from the sharp rise in the Russian flour trade. Since the 2006 season, the volume of wheat flour exported

World exports of wheat flour, 2008/09 Russia UAE Pakistan Argentina

5% 5% 5%

11%

29%

12%

Others

17%

16%

Kazakhstan Turkey

[ Source: International Grains Council ]

312,000 1M tonnes flour exports in 2009-10 growing season

tonnes potential flour exports for 2010-11 growing season

for the deficit in winter planting, additional subsidies for fuel and lubricants will be arranged in time to finance the spring planting. He also mentioned legislation and budget funding for improvement in agricultural insurance cover for farms and to establish irrigation of crops in the drought zone. Alexander Korbut, of the Russian Grain Union, told Fairplay: “We

has doubled, reaching 312,000 tonnes, according to the chart for 2008/2009. Adding other types of flour, the total exported in the 2008/2009 season came to 387,000 tonnes. According to the Russian Customs data, for the first half of 2010, exports of wheat (including wheat mix or meslin) totalled 8.5M tonnes – up 1.5M tonnes

(TD4, W56.) finally exceeding those on the Suezmaxes (on TD5 around W74.2) for which TCEs were $12,000-13,000/day. Equity analysts mainly opted for a glass that was ‘half full’ (with Asian buyers replenishing inventories) rather than ‘half empty’ (record high US inventories), painting a positive picture for investors. Long-term dynamics,

The rates may not have staying power

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specifically a worrisome tonnage oversupply, remain unchanged. Short-term calculations of available vessels are the heaviest influence on sentiment. Queues

(almost 21%) on the same period of 2009. In value terms, these grain exports jumped from $1.2Bn to $1.5Bn. Russia’s share of the global flour trade has also been growing fast. According to the International Grains Council, before 2006 Russia’s flour exports were too small to count in the top 10 of the global trade. But in the past two growing seasons, Russia moved into fifth place behind Kazakhstan, Turkey, the European Union and Argentina. The main buyers of Russian flour are Mongolia, Afghanistan and other former Soviet countries in Central Asia and the Caucasus.

How much more flour can Russian exporters and traders sell into the global market? Anton Shaparin, representing the Grain Union, said on 20 August: “Russian manufacturers of flour have been capturing foreign markets for four years with great difficulty. An agreement on supplying flour to the very promising market of Indonesia has almost been reached. It is easy to lose the captured foreign markets, but it’s very difficult to get them back.” That said, it is possible to calculate that after the 30% reduction in this year’s wheat harvest, the volume of wheat available to export in the first half of 2011 would be that much less than the 7-8M tonne figure recorded as exported in the first half of 2009-

2010. That subtraction would leave between 5-6M tonnes, assuming the pre-drought level of foreign trade. Putin’s extension of the ban order means that none of this can be exported. However, if flour exports are allowed instead, the millers can, in theory, convert these wheat volumes into roughly 3.6-5.7M tonnes of flour. Such volumes dwarf the flour export volumes which Russia has been shipping, even in the fast-growing global market. So long as the spread between the price of domestic wheat and export flour allows a sizeable profit for the conversion, the door to unlimited flour exports remains open. The export-limiting factor will be the price at which Russian flour marketers attempt to beat the competition in foreign markets. This level may support a projected jump in flour exports next year to around 1M tonnes, up from 312,000 tonnes this year. Asked for their estimate of this number, two leading grain producers, Russian Grain and Razgulyai, declined to comment. Korbut, of the Grain Union, however, acknowledges flour exports in the first six months of 2011 have doubled, equalling the volume exported over 2009. “We believe in January-June 2011 flour exports will reach 300,000-400,000 tonnes, not more. Flour and wheat export markets are different [but] we have never exported flour to Egypt, nor do we plan to now.” F

in the AG reached as high as 116 several weeks ago, before the recent surge, compared to the more typical 80 ships. Johnny Kulukundis, writing for CR Weber, tied the run on tonnage to the market dislocations of the past few weeks in France, describing a situation where: “available tonnage slowly shrunk, charterers, who had been

in no hurry to fix their business based on an ever growing tonnage list and declining Worldscale rates decided they had better act.” The broker team at CR Weber says that 39 vessels were fixed during the last week in October, and Kulukundis pointed to a possible post-Halloween wildcard – the November cargo list. F

Capturing foreign markets

4 November 2010

markets

Woes take a toll on heavy lift The insolvency of Hamburg’s project/heavy-lift operator Scanscot has cast a harsh light on the growing supply/demand imbalance in one of shipping’s more robust sectors. The company was put into administration after defaulting on ship mortgage loans for newbuildings ordered at Germany’s former Hegemann shipyard group during the boom years. By the time the 9,500dwt ships (with a combined lifting capacity of 700 tonnes) were delivered in late 2009/early 2010, freight rates and ship values had plunged to such an extent that Scanscot could not guarantee their profitable deployment anymore. Only one of them was covering its costs, prompting the financing bank KfW Ipex to declare the loans in default and seize the ships, according to Scanscot managing director Michael von Brauchitsch. KfW Ipex refused to comment on the case. Informed sources said that Commerzbank subsidiary Deutsche Schiffsbank is also involved in the projects. The Scan Britania (under charter as Hyundai Britania) and Scan Espana are in Singapore, waiting to be sold or transferred to another owner/manager. Asking prices are believed to be in the range of $35M/vessel, which market sources suggest is too

high, given the short-to-near term outlook for project freight. However, it will be difficult for the banks to offer a discount on the ships, mainly for political reasons. The loans for the Britania and Espana are backed up by German state loan guarantees which means the banks would be reimbursed for their losses. However, a drawdown

50% 500%

set to double to 303 vessels over the coming years, according to a survey by Dutch research firm Dynamar. Supply-side pressure will be the highest in the sub-segment of ships fitted for 750 to 1,000tonne lifts, where capacity will increase by a staggering 500%, according to Dynamar. Spot

decrease in heavy-lift freight rates

increase in number of heavy-lift ships (750-1,000 tonne capability)

[ Photo: Dietmar Hasenpusch ] of the guarantees could cause a political backlash and prompt federal and state governments to take a tougher line on applications for state support in the future. The fate of the Scanscot ships may only be a foretaste of the battles yet to come: the heavy-lift sector is poised for steep growth over the coming years amid a severe lack of high-value project cargoes. The fleets of the 17 leading tonnage operators – counting only ships with combined lifting capacities of over 250 tonnes – is

freight rates for project modules have dropped by 30-50% over the past two years, with only the super heavy-lift segment above 700 tonnes holding reasonably steady. “We believe the higher load segments will come under more pressure because of all the newbuildings,” said Lars Rolner, managing director of German heavy-lift carrier SAL. Even though project demand appears to be recovering, supplyside pressure will continue to dampen the market, said Peter

BRUHN SHIPBROKERS

Activity still low Project start-ups are expected to increase in key markets, such as the Gulf and Australia, next year, but the usual time lag between project launches and peaks in material flows means that the lull is bound to drag on. “It takes oneand-a-half years from the award of the project contract to the EPC [engineering, procurement and construction company] until we as a carrier come into play. And the activity is still fairly low so the demand gap may continue next year,” Bloch explained. The prospects and impact of scrapping pose a conundrum for sector specialists. About one-third of the wider multi-purpose ship fleet is over 25 years old, fomenting hopes that a supply/demand equilibrium can be found rather sooner than later. The evidence so far is sobering. “There is still an appalling amount of very old MPP tonnage with lifting capacity of up to 150 tonnes trading in Africa and Asia,” noted Gerhard Janssen, general manager, marketing and sales, at Rickmers-Linie. Emilio Reales-Bertomeo, managing director of Bremenbased Beluga Group also admitted in a recent speech in Bremen that scrapping activity has failed expectations so far. F

GMBH

Low activity and rates are threatening heavylift sector companies

Bloch, commercial director at Rotterdam’s Jumbo Shipping. “One year ago we were somewhat more optimistic about 2011. We thought 2010 would be dramatic, but now it looks as if next year will not be much different,” Bloch told Fairplay.

Sale & Purchase of Ships • Contracting of Newbuildings An der Alster 30 • 20099 Hamburg • Germany • Fon +49.40.555 027-0 • snp@bruhn-shipbrokers.de • www.bruhn-shipbrokers.de

4 November 2010

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markets

Dry revival on the cusp Up to a 40% slippage rate in newbuildings may take pressure off dry bulkers The dry bulk market remains active, but Capesize momentum appears to be slowing, at least temporarily. The Baltic Exchange’s Capesize TCE average, which had climbed as high as $46,000/day, slipped lower last week with a month-end dip below $44,000/day. Among the individual routes, trans-Atlantic round voyages (which had been fuelled by ore cargoes) were easing the most. In a sluggish paper market, the curve remained downward sloping, but softened a bit in line with spot rates. The allimportant 1Q11 Cape contract, which had been assessed above $30,000/day, pulled back below this important marker.

very healthy $41,250, with the strong rate reflecting the delivery in Mundra (western India). The Panamax spot TCE averages had rallied slightly, up towards $20,000/day. In contrast to the Capesizes, short rates on Panamax period fixtures were above spot – several Panamax transactions were done for periods out to one year, at around $23,000/day. The 1Q11 and 2Q11 FFAs had reached similar levels, before pulling back to $22,000/day. One bullish view of market prospects came from George

several years. On the demand side, Economou waxed optimistically about Chinese demand continuing to propel the market forward, saying “the drivers are still alive” The CMA lunch marked the beginning of the season of 3Q10 earnings; the relatively positive rate structure is benefiting at least one company set to release earnings. Analyst Scott Burk, from Oppenheimer & Co, in supporting an Outperform rating on Excel Maritime, said: “We see potential earnings upside with 4Q10 opportunities to re-charter

$23,000/day

fixtures reported for Panamax one-year charters, trending above the Baltic Exchange TCE average spot rates of about $20,000/day

Period fixing continued The Calendar 2011 FFA position, reflecting views of four Capesize quarterlies, still remained above $26,000/day – discounted below period fixtures of comparable tenors. The spate of period fixing (an optimistic sign) continued, with a five-year fixture on the 2010-built Samjohn Solidarity; Cosco Tianjin took the ship at $27,750/day. Cargill did a oneyear deal on the new Cape Venture at $32,500/day, being relet by Deiulemar. Classic Maritime booked a 1999-built unit for a

Economou, CEO of Dryships, which maintains a large presence in the dry bulk sector in spite of its recent focus on ultra-deepwater drillships. Economou, speaking to an overflow luncheon audience at the Connecticut Maritime Association, talked about an orderbook characterised by slippage of approximately 40%, partly due to a lack of financing, after the Lehman Brothers collapse two years ago. He said that funding difficulties would continue for

a large part of its fleet in what could be a strong rate environment.” Burk’s company model assumed at $21,250/day rate on Panamaxes in 2011, with a 10% sensitivity worth $0.35/share – a significant boost to the bottom line compared to the base earnings estimate of $0.72/ share. Expressed differently, if Panamaxes were to garner $23,375/day in 2011, Excel earnings would be 50% above this analyst’s base case forecast. The big ships are presently

riding high. One attendee at the CMA event, Norman Barouch, a Capesize veteran now managing ships through NB Maritime, expressed concern about moves by raw material shippers to control freight rates. Barouch, well known from his days at P&O Bulk, told Fairplay: “As I understand the programme that Vale has initiated, it is building sufficient tonnage to handle a very significant portion of its sales to China. Once the programme is in full swing, it will have a serious impact on the Capesize shipping market. I expect it will all but take Vale out of the market for candidates on the Brazil – China run and for the times that they do require market tonnage, it will no doubt result in very low freight rates.”

In the money Economou’s presentation contained an investment analysis for hypothetical Capesize and Panamax vessels purchased in 2005 showing at a 10% return on equity could be generated by rates of $26,670/day and $20,362/day, respectively. The Capesizes, at today’s spot rates (and using assumptions of $6,500/day in operating expenses) are clearly ‘in the money’; Panamaxes (with similar operating expenses) are on the cusp. The five-year Capesize TC, on the other hand, shows only marginal contributions to capital costs. Based on the downward forward rate structure, and big period discounts, Barouch’s views reflect the sentiment of traders booking physicals and paper. F

THE CONTINENTAL GATEWAY www.zeeland-seaports.com

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4 November 2010

markets

Japanese-built bulkers still attracting premiums Trades in Panamax size and above remain healthy The charter market remains relatively subdued, although the asset trade in modern over-Panamax and Panamax ships remains brisk, with each deal seemingly at firmer levels than before. Both Greek and Chinese buyers are actively inspecting ships and bidding higher levels, with the usual premium on offer for higherdwt Japanese ships. Even though the yen is potentially less than a few trades above the $80 level, Japanese owners continue to sell ships, especially in the dry sector where yen returns remain sufficient to produce a profit on the sale of older ships, the book values of which have been written down over long trading lives. It is thought that the Ruby Stream (built 2005 Sasebo, 76,728dwt) has been committed to Odysea Carriers of Greece at a price level of about $39M basis prompt charter free delivery. By comparison, the same Japanese seller, Fukujin Kisen, sold its very similar 2005-built Ikan Kerapu, at the time a year younger, for $30.5M in April 2009. The Handymax CS Fortune (built 2002 Minami Nippon, 47,305dwt) is reported to have been sold to Greek interests for a

price in the region of $28-29M, reflecting the ship’s sub-Supra deadweight but nonetheless a level which is more or less in line with recent sales of older vessels. In the Handy sector (but from the same builder), Orient Saori (built 1997 Minami Nippon, 30,835dwt) is said to be expected to sell for a price close to the $21M achieved by Cielo Di Vaiano (built 1998 Saiki, 31,962dwt) when offers are invited from buyers in the near future. Despite reports of a fixture a few weeks ago, the Itochu and Iino joint venture-controlled ice-class MR Northern Dawn (built 2003 Koyo, 47,994dwt) is once again available for inspections, with price expectations unlikely to be lower than the $23M at which the ship was previously reported sold.

Tanker activity The first generation double-hull Aframax Genmar Alexandra (built 1992 Shin Kurushima, 102,262dwt), originally contracted by Norden, has been sold at about $12M, a relatively soft price for a Marpol-compliant ship with no phase-out date. Greek buyers are believed to be behind the purchase of two MR-type product tankers from Top Tankers’ fleet. The Doubtless and Spotless (both built 1991 Halla, and 47,076dwt) achieved about $7M each, reflecting limited

Maritime SECURITY CENTRE

Visit www.mschoa.org 4 November 2010

$21M

Orient Saori is expected to sell for a price close to $21M [ Photo: Fotoflite ]

earning prospects in the current market, as well as looming special surveys next year. According to IHS Fairplay data, the ships last changed hands for about $24M each in 2008. Uyeno Transtech’s operated stainless chemical tanker, Sunrise Rosa (built 2004 Shin Kurushima, 8,626dwt) has been sold and delivered to Dong Jin Shipping of Korea for a price of around $12M, more or less in line with recent sales of similar units. While Korean tanker buyers are more active now than for quite

some time, government restrictions placed on Korean banks from lending foreign currency in an effort to prevent further increases in the value of the won are limiting the number of deals concluded. There are tentative signs that the gas charter market is picking up, and the number of purchase enquiries for LPG carriers appears to have increased accordingly. One reported sale, albeit for a vessel with fixed employment, has been that of Teekay’s 7,500m3 ethylene carrier Dania Spirit (built 2000 Hyundai, 8,669dwt) which has gone to undisclosed Dutch investment buyers with its current longterm charter to Statoil attached. With the similar, 7,200m3 pressure-type Loex (built 2001 Murakami Hide, 6,625dwt) having been sold by Geogas to Diamantis Pateras for $16.25M in October, it is likely that the slightly larger vessel will have done rather better on price, always subject to the charter terms that come with the deal. Charter-attached sales also prevailed in the container market last week. Technomar has continued its fleet expansion by purchasing the 5,041teu sisters CMA CGM Orca and CMA CGM Dolphin (built 2006 & 2007 Hyundai Samho, 65,890dwt) for $52.5M each, with a charter back to the operators at $24,500/day for two years. In the general cargo sector, the MPP-type Prinsenborg (built 2003 Fujian Mawei, 20,396dwt) has reportedly achieved $16M from Greek buyers, who were prepared to pay up for its combination of three 35-tonne cranes and 658teu capacity, as well as its breakbulk capability. F

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shipping markets

Weekly summary of all the key industry indices and data

Baltic dry indices BDI: 2,678 49 (1.8%)

3 mth high: 2,142 3 mth low: 1,722

This week: 897 Last week: 950

3 mth high: 1,085 3 mth low: 897

��

Outlook: In the North Atlantic, Capesize rates approaching $70,000/day for ore cargoes (Narvik and St Lawrence) have been driving the market, say brokers. Brazil-China fixtures have been reported at $30/tonne. The Pacific may be firming, with rates for round voyages (C10_03) up to $39,850/day up $982. The Baltic Panamax index firmed to 241, up 191 points, but overall rates have been drifting. Brokers suggest firming sentiment for period fixtures which have been trading at higher levels to spot rates. Handy and Supramaxes have seen a charterer’s market as they withhold cargoes hoping for cheaper rates. The Supramax average of timecharters softened to $18,301/day.

��

BDI BFA BDI �Q�� BFA BDI �Q��

��

��/��

Handy Index

��

��/��

This week: 1,750 Last week: 1,791

-5.9%

��

3 mth high: 3,396 3 mth low: 2,172

��/��

Supramax Index

+7.9%

This week: 2,410 Last week: 2,219

��/��

-2.3%

3 mth high: 4,461 3 mth low: 1,939

��/��

This week: 4,262 Last week: 4,373

��

Panamax Index

��/��

Capesize Index

index value

-2.6%

��

[ Source: Baltic Exchange data ]

Baltic tanker indices Outlook: VLCCs in the Gulf saw vessels removed from the spot markets, which broke weeks of unprofitable rates. From there to Japan (TD3), 280,000 tonnes was rated around W66.4, up about 22 points. Even to the Gulf of Mexico (TD1) rates climbed to W38.9, an increase of about eight points. In West Africa-Gulf of Mexico trading, the balance for charterers between taking a VLCC (TD4W56 up four points) and a Suezmax (TD5-W74.2 down 6.6 points) became less clear cut. For Suezmaxes on the Continent, the Baltic (where rates have remained firmer than in West Africa) may be more attractive, particularly if Turkish Strait delays increase.

Dirty tankers Baltic dirty tanker index

VLCC TCE

This week: Last week:

758 734

Suezmax TCE $12,396/day This week: $3,446/day Last week:

$5,180/day $6,248/day

Clean tankers Baltic clean tanker index

MR-TCE

This week: Last week:

627 638

$7,162/day $7,368/day

LPG 1

BPOIL

This week: $40.88/tonne Last week: $39.63/tonne

This week: $44.98/tonne Last week: $44.91/tonne

[ Source: Baltic Exchange ]

ConTex

Currency rate vs $ 21 Oct 7,355 8,549 12,998 574

Outlook: Most size classes of box ships closed the week on losses as the amount of prompt tonnage in Asia builds up. Ships ranging from 2,000-4,000teu are most afflicted by the softening in rates, with fresh fixing activity down to a trickle. “When deals are concluded, they are likely to be at a significant discount to last done,” commented one broker. MSC and PIL secured older sub Panamax tonnage of 3,000-3,330teu at a few thousand dollars below current benchmarks. 4 November 2010

��

ConTex

28 Oct 7,381 8,397 12,803 565

��

�� US �

Container ship Timecharter Assessment 1,100teu 1,700teu 2,500teu ConTex

Aframax TCE $13,057/day This week: $17,852/day Last week:

�� Type �� Type �� Type �� ConTex �right scale�

��

May

Jun

Jul

Aug

Sep

Last wk Last wk high low

Euro Pound Yen Real Aus dollar Swiss franc

1.4080 1.6046 81.99 1.7246 0.9974 0.9929

1.3734 1.5657 80.39 1.6937 0.9652 0.9663

3M high

3M low

1.4080 1.6107 86.89 1.7822 1.0004 1.0624

1.2588 1.5297 80.39 1.6442 0.8771 0.9463

Outlook: This week could be pivotal in the markets ��

��

Oct

[ Source: Hamburg Shipbrokers’ Association (VHSS) ]

with central bank meetings coming from the RBA, FOMC, BoE, ECB and the BoJ, as well as the all important nonfarm payrolls from the US on Friday. It is expected that the FOMC will be expanding the quantitative easing by a further $500Bn. [ www.corporate-fx.co.uk/fairplay ] www.fairplay.co.uk

Bunker prices

[ Source: [ Source:Cockett CockettMarine MarineOil OilLtd. Ltd.Tel: Tel: +44 1689 883400 ]

Latest mid-range prices listed in $ as at Monday 122Nov Feb2010. 2010. d=delivered, w=ex-wharf. Ports listed regionally clockwise from NE. Europe 380cst 180cst Mdo d St Petersburg 353.50 347.50 363.50 347.50 503.00 475.00 d Great Belt 473.00 476.00 500.00 498.00 689.00 632.50 d Hamburg 467.00 447.00 485.00 458.00 580.00 706.00 d Rotterdam 455.50 457.00 481.00 470.50 720.00 595.00 d Antwerp 456.00 459.50 482.00 468.50 714.00 587.50 d Le Havre 456.00 467.50 482.50 475.00 n/a d Falmouth 494.00 496.00 684.00 518.00 772.00 712.50 Mediterranean 380cst 180cst Mdo d Istanbul 485.50 491.00 501.00 511.00 n/a d Piraeus 468.50 466.00 480.00 495.50 n/a d Valletta, Valletta Grand Harbour 465.50 472.50 483.50 492.50 n/a d Augusta 477.00 477.50 495.00 535.00 n/a d Fos/lavera 483.50 532.50 538.00 557.50 n/a d Gibraltar 463.50 471.00 478.50 487.00 730.00 650.00 Africa 380cst 180cst Mdo d Arzew d 506.00 494.00 490.00 526.00 n/a d Durban n/a 512.50 515.00 752.50 657.50 d Lagos 492.50 507.50 535.00 537.50 n/a d Dakar 512.50 514.00 645.00 542.50 n/a d Las Palmas 478.50 487.50 500.00 494.50 750.00 676.00

Mgo 589.00 570.00 734.00 677.50 716.00 641.50 644.00 720.00 640.00 714.00 722.50 670.50 772.00 712.50 Mgo 695.00 742.50 650.00 727.50 644.00 725.00 678.00 752.50 678.00 755.00 730.00 675.00 Mgo 772.00 669.00 667.50 767.50 786.00 705.00 700.00 837.50 686.00 750.00

Middle East 380cst 180cst Mdo dd Khor Fakkan 482.50 463.00 502.50 479.00 n/a d Aden 485.00 515.00 525.00 495.00 n/a d Jeddah 500.00 495.00 510.00 535.00 n/a d Suez 508.00 492.50 492.50 517.50 n/a d Dammam 480.00 465.00 490.00 475.00 n/a Asia 380cst 180cst Mdo d Tokyo d 499.00 527.00 506.50 532.50 662.50 735.00 d Sydney 590.00 527.50 600.00 527.50 711.50 n/a d Colombo 515.00 527.50 525.00 527.50 n/a d Singapore 462.50 470.00 485.00 472.50 652.50 697.50 d Hong Kong 482.50 477.50 495.00 487.50 662.50 712.50 d Kaohsiung 500.00 491.00 499.00 510.00 680.00 720.00 d South Korea 490.00 492.00 504.00 502.00 730.00 677.50 Americas 380cst 180cst Mdo w New York 458.50 459.50 468.50 479.50 662.50 697.50 w Houston 461.50 458.50 468.50 260.00 732.50 635.00 w Cristobal 503.00 470.00 504.00 533.00 701.50 777.50 w Venezuelan VenezuelanPorts Ports 486.50 467.50 516.00 495.00 677.00 n/a d Rio De Janeiro 506.00 467.00 490.50 524.50 n/a d Buenos Aires 472.50 491.50 512.50 492.50 812.50 702.50 d La Libertad 511.00 487.00 551.00 527.00 n/a w Los Angeles 453.00 473.50 463.00 493.50 687.50 757.50 w Seattle 481.00 458.50 478.50 491.00 682.50 757.50 w Vancouver Bc BC 466.50 490.00 500.00 486.50 805.00 692.50

Mgo 740.00 655.00 705.00 745.00 1,000.00 765.00 990.00 805.00 660.00 725.00 Mgo n/a 800.00 711.50 725.00 731.50 652.50 697.50 662.50 712.50 695.00 735.00 730.00 677.50 Mgo n/a n/a n/a 685.00 771.50 713.00 751.00 837.50 717.50 1,014.00 1,114.00 n/a n/a 805.00 725.00

For online bunker information:www.fairplay.co.uk/secure/markets.aspx or visit www.bunkerworld.com or www.cockettgroup.com

Bunker outlook Outlook: With crude oil futures trading in the $80/barrel range almost exclusively this month ($82 on average), this has supported bunker prices at higher monthly averages than since early this year. The BW380 index averaged $476/tonne for October, the thirdhighest monthly average behind April ($486) and January ($484). Interestingly, crude oil values were slightly lower than current prices in January at $78 while in April it averaged $85/barrel. Bunker prices, therefore, were comparatively more expensive in January than in April. Singapore reported no supply issues last week and moderate demand – price movements were muted. Average prices for IFO380 were $467/tonne and prices last week were in line with that level. These levels put prices well above September’s. www.fairplay.co.uk

Bunkerworld index prices

BW380 cSt

$478 $4 BW180 cSt

$490 $3 BWDI distillate

$658 $3

Fujairah saw no particular supply issues this week but did see a slight narrowing of its premium over Singapore towards the end of the week. Over the last three months, the premium averaged $5.60/tonne, widening from an average of $3 over the past twelve months. October saw average prices of $473/tonne for IFO380 in the port. Despite the recent price increases, demand has been steady in Rotterdam recently and suppliers this week reported being booked until the end of the month. Like Singapore, prices for IFO380 in Rotterdam this week stayed close to the monthly average, in this case coming in at $458/tonne. Again, this is in marked contrast to September when the grade was $432/tonne on average. Like other major ports, Houston reported relatively small daily price movements this week. Prices stayed

generally close to Rotterdam levels, although the monthly average for October was $4 higher at $462/tonne. The current situation, based on October averages, is good news for bunker buyers – lower prices relative to crude than seen at other times. The average premium of crude futures over the BW380 so far this year is $128/tonne. The current premium is $149, so global bunker prices are $21/tonne undervalued relative to crude. Singapore, for example, posted IFO380 prices just over $500/tonne early in the year when crude oil was at similar levels. Bunker prices may be high currently compared to last month, but they still represent good value. [ www.bunkerworld.com/prices ]

4 November 2010

To the very latest information on shipbuilding activity, subscribe to the Forget online bunker prices, visit www.fairplay.co.uk and select the ‘Markets’ tabDaily in the top menu Newbuilding News email service. Visit www.lrfairplay.com ororemail email sales@lrfairplay.com sales@lrfairplay.com For bunker news and information, visitwww.ihsfairplay.com www.bunkerworld.com or www.cockettgroup.com

newbuildings

[ [Source: Source:IHS IHS Fairplay Fairplay ]

SELECTEd nEWBuILdInG ORdERS REPORTEd WEEK EndInG 5 nOVEMBER 2010 Shipbuilder Oshima Sungdong Yangfan Group Yangfan Group SPP Hyundai Samho Meyer Werft STX Finland Cruise Remontowa

no 2 2 2 4 4 2 2 1 4

Owner/Operator Rio Tinto Akmar Shipping & Trading John T Essberger Ulusoy Denizyollari Isletmeciligi Metrostar Management Andriaki Shipping NCL Viking Line Torghatten Nord

delivery 2012 2012 2012 2011 2013 2012 2013 2013 2013

Type Bulk carrier Bulk carrier Bulk carrier Bulk carrier Container ship Crude oil tanker Passenger Passenger/ro-ro Passenger/ro-ro cargo ship

Capacity 73,000dwt 82,000dwt 34,500dwt 57,000dwt 3,600teu 164,730dwt 4,000 passengers 2,800 passengers 390 passengers

SELECTEd dELIVERIES REPORTEd WEEK EndInG 5 nOVEMBER 2010 Vessel Attallia Darya Moti Eagle Klang Gaschem Bremen GCL Argentina Hanjin Versailles Maersk Nexus Magda P Orient Transit Paramount Hatteras Safmarine Sumba Santa Clara Toki Arrow

Shipbuilder Tsuneishi STX Tsuneishi Hyundai Mipo Shanghai Jiangnan Changxing Hanjin HI Astilleros y Servicios Navales Cosco Dalian Samjin Sungdong Jiangsu Sugang Daewoo Oshima

Owner/Operator Andriaki Shipping Chellaram Shipping (Hong Kong) AET Hartmann Schiﬀahrts Brave Maritime Danaos Shipping AP Møller Common Progress Compania Naviera Interorient Navigation AET SCL Reederei Hamburg Sud Gearbulk Holding

delivery 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10 2010/10

Type Bulk carrier Bulk carrier Crude oil tanker LPG tanker Bulk carrier Container ship Oﬀshore tug/supply ship Bulk carrier Bulk carrier Crude oil tanker General cargo ship Container ship General cargo ship

Capacity 82,600dwt 80,545dwt 107,500dwt 35,000dwt 177,700dwt 3,398teu 4,400dwt 57,000dwt 33,500dwt 114,700dwt 18,000dwt 7,100teu 55,500dwt

for full listings of newbuilding orders and deliveries: see www.fairplay.co.uk/secure/markets.aspx

Sale & purchase COnTAInER & MuLTI-PuRPOSE

All details given in good faith but without guarantee Built Sumitomo HI, Sulzer, 10,261bhp/14kt.

Z CAPELLA (container ship) ex-El Flaco: sold by Alpha Ship, Germany, to undisclosed interests, Germany, $17M. 2007. 13,760dwt, 9,928gt, 1,098teu. Built Jinling Shipyard, MAN-B&W/20kt.

GOLdEn QuEEn tbn Sag Bulk Germany: sold by Golden Ocean Group, Norway, to Salamon, Germany, $84.9M. 2010. 175,918dwt, 91,971gt. Built Jinhai Heavy Industry, MAN-B&W/14kt.

CMA CGM dOLPHIn & CMA CGM ORCA sold en bloc by CMA CGM Holding, France, to Technomar Shipping, Greece, $105M (both container ships).

KAMSAR GOLd: sold by Doun Kisen, Japan, to undisclosed interests, Greece, $41.5M. 2006. 82,981dwt, 42,898gt. Built Tsuneishi, MAN-B&W/14kt.

CMA CGM Dolphin: 2007. 65,890dwt, 54,309gt, 5,041teu. Built Hyundai Samho HI, MAN-B&W/24kt. CMA CGM Orca: 2006. 65,890dwt, 54,309gt, 5,041teu. Built Hyundai Samho HI, MAN-B&W/24kt. BuLKERS GREAT CEnTuRY: sold by China National Foreign Trade Transportation (Sinotrans), China, to undisclosed interests, China, $32M. 2000. 73,747dwt, 38,426gt.

SunnY SuCCESS: sold by Mitsui OSK Lines, Japan, to undisclosed interests, $16.5M. 1991. 42,203dwt, 23,275gt. Built Oshima, Sulzer, 7,200bhp/14kt. TAnKERS LOEX (LPG tanker): sold by Geogas Trading, Switzerland, to undisclosed interests, Greece, $16.3M. 2001. 6,625dwt, 5,764gt. Built Murakami Hide. B&W/15kt.

SAMHO GLORIA (chemical/oil products tanker): sold by Samho Shipping, South Korea, to undisclosed interests, $16M. 2008. 13,153dwt, 8,689gt. Built Samho, MANB&W/13kt. nEWBuILdInG RESALES TSunEISHI TAdOTSu 1422 (crude oil tanker): sold by Cyclops Ships, Cyprus, to Brightoil Petroleum, Hong Kong, $60M. 2010. 107,500dwt, 60,400gt. Built Tsuneishi Holdings Tsuneishi, MAN-B&W/16kt. THOMAS SELMER ex-Taizhou Sanfu SF060110 (bulk carrier): sold by Oskar Wehr, Germany, to undisclosed interests, $32M. 2011. 57,000dwt, 32,300gt. Built Taizhou Sanfu Ship Engineering, MAN-B&W SOLd fOR dEMOLITIOn MSC VOYAGER (container ship) ex-Sea-Land Voyager: sold by Target Marine, Greece, $7.7M (468.00/ldt), 1980.

for full listings of sale and purchase deals: see www.fairplay.co.uk/secure/markets.aspx  4 November 2010

www.fairplay.co.uk

Maritime Research Inc.

499 Emston Rd Parlin NJ 08859 USA Phone: (732) 727-8040 Fax: (732) 727-0243 Email: mri499@aol.com Website: www.maritime-research.com

• Fixture Reports via email • Historical data dating back to 1951 To get the very latest information on shipbuilding activity, subscribe to the Daily • Spreadsheet, Database or PDF formats • Indexes and statistical analysis Newbuilding News email service. Visit www.lrfairplay.com or email sales@lrfairplay.com

Supplying the maritime industry with comprehensive and independant ﬁxture information for over 50 years!

fixtures

[ Source: [ Source:Maritime MaritimeResearch ResearchInc Inc//www.maritime-research.com www.maritime-research.com ]

dRY fIXTuRES Cargo

Vessel

From

Tonnes

Date

Rate

Chart

Terms

Coal Coal Hvy grain Hvy grain Iron ore Iron ore Iron ore Urea

Steamer, (PG Shipp) Steamer Steamer St Andrew, 96 Steamer Steamer, (Classicmar) Tai Chang, 10 Peace Traffic, 09

Norfolk Mobile US Gulf R Plate Pt Hedland Tubarao Seven Islands Sur Oman

EC India Swinoujscie China Genoa Qingdao Qingdao Taiwan Pipavav

75,000-10% 65,000-10% 55,000-5% 28,000-5% 170,000-10% 160,000-10% 80,000-10% 30,000-5%

Nov 15/25 Nov 1/10 Nov 15/24 Nov 1/2 Nov 10/20 Nov 15/20 Nov 5/15 Nov 1/3

40.00 18.25 57.00 41.50 12.00 32.10 33.00 14.50

SAIL Arcelor-Mi MorganStan Dreyfus BHP-Billit CNR CSE POI/Transc

FIO;35,000tShex/20,000tShex FIO;25,000tShinc/22,000tShinc FIO;5days/8,000t PtC;FIO;4\days/10,000t FIO;ScLd/30,000t FIO;ScLd/30,000t FIO;60,000t/38,000t FIO;12,000t/4,000t

TIMECHARTERS Consumption Vessel Unrptd 14k/36t 14k/36t 14k/32t Unrptd Unrptd Unrptd Unrptd Unrptd 14k/52t Unrptd 13.5k/22.5t

Brisbane, 95 Navios Titan, 05 Marco, 09 North Friendship, 99 Fantastic, 10 Genco Warrior, 05 Ocean Star, 07 Ocean Melody, 08 Callisto, 10 Genco Constantine,08 Thelisis, 10 Mohave Maiden, 84

From

Tonnes

Date

Rate

Chart

Terms

Del Pt Talbot DelExYrdShanghai Del Davant Del Guangzhou Del US Gulf Del Haldia DlSailParanagua Del Inchon Del Haldia Del Far East Del ExYard China Del Pass Durban

Redel China Redel China op India Redel Immingham Redel Pass Muscat Redel Mediterranean Redel India Redel Morocco Redel ECSoAmViaNChina Redel China Unrptd Unrptd Redel Atlantic

151,066 82,936 81,393 74,732 57,000 55,435 32,754 29,572 25,009 180,200 59,000 28,074

Nov 10/15 Nov 22/26 Nov 9/14 Nov 1/5 Oct30/Nov 5 Oct 25/30 Nov 4/8 Oct31/Nov 5 Oct 30/31 Oct 25/31 Nov 4/6 Oct28/Nov5

60,000 17,500 20,000 24,500 28,750 14,000 16,000 10,000 10,000 36,000 19,100 15,000

PacificBlk BHP-Billit CTranspor ‘K’ Line PanOcean Crossbridg Clipper Merbulk CNR Oldendorﬀ Cargill XOShipping

Tripout via Pointe Noire HayPtRd Trip out+$450,000bonus TripViaAus/MEGulf Trip out RichardsBayRd Trip out TO, Ferts Trip out 4-6MoTrdg, Relet 3-5MoTrdg 3-5MoTrdg

Terms

WET fIXTuRES Cargo

Vessel

From

Tonnes

Date

Rate

Chart

Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil clean Oil clean Oil clean Oil clean Oil clean Oil clean

Western Jewel, 94 Marina M, 00 Tosa, 08 Falkonera, 91 Pacific Voyager, 09 George S, 09 Delta Kanaris, 10 Mindanao, 98 Narova, 92 Remi, 91 Minerva Astra, 01 KWK Esteem, 00 Amalthea, 06 Genmar Princess, 91 Moonlight Venture, 06 Chemtrans Sun, 00 Elka Athina, 04 Oriental Green, 98 Energy Centaur, 08 Dl Cosmos, 07 Histria Ivory, 06 Bit Okland, 06

ME Gulf Kharg Island ME Gulf ME Gulf W Africa Novorossiysk Ceyhan Terminal North Sea W Africa ME Gulf Novorossiysk Bintulu Libya EC Mexico Banias Venezuela ME Gulf Yenbo ME Gulf Port Moresby So Korea Newhaven

US Gulf Spain op Via Suez Japan Paradip EC India UK/Continent USAtlantic Portland USAtlantic Mangalore Mediterranean Ulsan Mediterranean US Gulf US Gulf USAtlantic UK/Continent Japan Japan Dalian WC US UK/Continent

280,000 280,000 265,000 262,000 260,000 140,000 135,000 130,000 130,000 90,000 80,000 80,000 80,000 70,000 55,000 50,000 90,000 75,000 55,000 33,000 30,000 22,000

Nov 07 Nov 10 Nov 14 Nov 12 Nov 23 Nov 10 Nov 10 Nov 02 Nov 13 Nov 05 Nov 05 Nov 10 Oct 29 Nov 02 Nov 03 Nov 02 Nov 02 Nov 04 Nov 05 Nov 20 Oct 26 Nov 01

W30 W32op W35 W45 W45 $2,590,000 W90 W67 W77 W67 W80 W110 W89 W120 W95 W117 W130 $1,900,000 W92 W107 $380,000 $950,000 W207

ExxonMobil Repsol NGT IOC IOC Transway Sun Sun Sun MRPL Shell SK Shipp Petraco Citgo Mercuria Nustar BP NobleChart CNR DalianFuji Glencore Newton

PtC;Lump sum

Part cargo Part cargo Part cargo PtC;OpW135High heat Lump sum Part cargo Part cargo PtC;lump sum Lump sum

for more information on ﬁxtures see: www.fairplay.co.uk/secure/markets.aspx www.fairplay.co.uk

4 November 2010 

For trade and commerce news around the clock: www.fairplay.co.uk

Italian shipping: banking on China China’s offshore climb: offshore sector has a long way to go CMA CGM: touts Dunkirk dynamo New rules for nuclear: on the cards Container shipping: toasts a healthy quarter

The Trans-Pacific box blues Can carriers hold the line on rates in 2011? John Gallagher reports New vessel capacity coming on stream in 2011 will challenge the liner industry’s newfound ability to tightly manage assets and raise rates in the Trans-Pacific. After losing an estimated $15-20Bn in 2009 due to falling transport rates and rocketing fuel costs, carriers regrouped in 2010, successfully fighting the urge to flood idle capacity back onto the market when shipper demand began to heat up. Industry insiders agree that the rate increases that followed will moderate as the autumn peak shipping season in the Asia-US trade weakens. But whether rates will continue to moderate, hold steady, or increase again during 1H11 will depend largely on whether carriers can continue the unprecedented capacity discipline they showed in 2010. “Over the course of the last year, carriers have discovered something they should have realised a long time ago: less capacity in the market means higher rates,” Mark Page, director of Liner Shipping for Drewry Shipping Consultants said recently. Scrupulous capacity management “is new to the liner trade”, Page said. 4 November 2010

Vessel capacity, such as that provided by China Shipping, is forecast to increase [ Photo: Danny Cornelissen ] next year

The world container fleet rose by 5.6% during 2009 from the previous year, according to Alphaliner. That compares with an expected rise of 9.5% during 2010, 9.5% again during 2011 and 7.8% in 2012. The average growth forecast for the three years from January 2010 to January 2013 is 8.9%, Alphaliner estimates. That growth should keep rates under sufficient pressure to keep carriers from trying to push them much above current levels, Hayden Swofford, executive director of the Pacific Northwest Asia Shippers Association, told Fairplay. “[Carriers] always try for increases, that’s just the nature of the beast when you’re talking about imports”, Swofford said. “But additional new capacity

coming on will take away the ability to make the same demands” on shippers that were made during early 2010”.

‘[Carriers] always try for increases; that’s the nature of the beast’ Carriers have a different view of the landscape. “It’s going to depend on the trade lane,” World Shipping Council president Chris Koch told Fairplay. “In the transPacific, rates are still below 2008 levels, and everything seems to indicate there will be moderate

volume growth next year, and I think there’s hope on the part of carriers that it will come with some revenue increase.” A trade consultant who declined to be identified said major box shippers like Wal-Mart are expected to cut costs in anticipation of big rate increases next year, despite the influx of capacity. “They’re looking to relocate distribution centers, trying to find ways to reduce their private truck fleet fuel costs. It’s a reaction to a fear that rates are going to surge again in 2011,” he said. Paul Bingham, an economist with Wilbur Smith, forecasts that trans-Pacific rates will increase in the low single digits “at best” for 1H11, with the possibility that they may end at the same level as last year. “The lessons are there for the carriers that if they manage capacity they certainly can have an influence on the rates they achieve despite the overriding fundamentals of the oversupply of vessel capacity,” Bingham told Fairplay. But vessel operators will be reluctant to put capacity into layup for too long, Bingham asserts. Even if carrier discipline allows rates to be sustained long enough above the fundamentals of available supply, “you will get new entrants who will figure out how to put together strings of ships and start undercutting the bigger guys enough to capture that differential between the operating costs and the rates that are getting achieved.” F www.fairplay.co.uk

trade & commerce

US anti-trust debate shifts to 2011 Bill outlawing carrier discussion is dead, but could re-emerge Both carriers and shippers believe the Shipping Act of 2010, which would heavily curtail US anti-trust exemptions, has no chance of passing by the end of the year. “This bill is essentially dead on arrival,” asserted Bruce Carlton, president of shipper group National Industrial Transportation League (NITL), during a Journal of Commerce forum last week. “No action is expected in the [post-election] lame-duck session,” added Chris Koch, head of carrier group World Shipping Council. The bill, HR6167, was introduced 22 September. Unless approved this year, it expires and must be re-introduced in the next

Congress. The practical question is what form legislation will take if it’s reborn in 2011. Koch underscored the key negatives in the 2010 draft: rates would be more volatile if discussion groups were ended, vessel-sharing agreements (VSAs) would be “drastically impaired”, and the Federal Maritime Commission (FMC) would become “far more intrusive”. “Is the assumption that eliminating rate discussion immunity will produce significantly lower carrier revenues, and if so, to what effect?” asked Koch. “Every time carrier revenues and profitability take a hit, carriers have no choice but to cut costs,” he emphasised. Koch also explained how HR6167 cripples VSAs. “It says that no VSA may reduce capacity. The perverse incentive is that it would drive carriers to put in the

least amount of capacity possible, because they’d never be able to decrease it.” Conrad agreed that the bill’s VSA language is “unworkable”. Nevertheless, NITL is highly supportive of injecting competitive forces into the trans-Pacific and ending carrier anti-trust immunity. “The most disturbing aspect to League members was the manner in which carriers sought rate restoration,” said Conrad. “Through legally sanctioned discussion agreements, carriers announced so-called voluntary guidelines that turned out to be virtually uniform, across-theboard rate increases among each of the carriers of the TSA [Transpacific Stabilisation Agreement]. There was no variation. Our customers had no choice but to pay the bill. I don’t know of any other

segment of the transport industry that has the privilege of moving prices up in lock-step.” Conrad and Koch were asked how the next Congress, in the wake of this week’s mid-term election results, would approach the shipping reform debate. “Republican leadership would be favourably inclined to normalise anti-trust competition rules,” opined Carlton. “But with equal vigor, Republicans would be very disinclined to create ‘super-regulatory’ agencies,” he said, referring to HR6167’s pro-FMC language. According to Koch: “If we do get into this in the next Congress, I’d hope the proposals that obliterate the present efficiencies from vessel sharing and the regulatory burdens proposed in HR6167 would fall away, and that this would become a rational debate.” F

ASRY revenues will remain flat, says chairman ME shipyard chairman believes recovery won’t arrive until 2011 The Middle East’s ship repair industry is still under pressure, the chairman of Arab Shipbuilding and Repair Yard (ASRY) has said. The sector has entered into the financial crisis last and should recover last, Shaikh Daij Bin Salman Bin Daij Al Khalifa commented. “We are seeing an improvement in the shipping sector in general this year over last year – but the ship repair business is yet to recover. I think that we are on the road to recovery and will see that recovery next year,” he told Fairplay at the Seatrade conference in Dubai. Despite this, ASRY expects www.fairplay.co.uk

to remain in profit this year. Al Khalifa said the repair firm will end this year with a similar number of activities and revenues as they had last year. Although ASRY repaired 168 vessels last year (a 26% increase on the previous record-breaking year), revenue fell 37% to $131.4M in 2009. “The market is very competitive and, as a result, there is an intense competition,” Al Khalifa said. “We’ve seen a lot of work at the yard but there have been some heavy discounts as well. We were profitable last year by $131M and we expect this year to be similar to that.” ASRY’s net operating income in the first nine months of this year stood at $106.3M. It has repaired 147 vessels but sales dropped due

to severe competition. “The improvement is yet to come,” he said. “We were the last to be affected negatively so we will probably be the last to recover.” The ASRY is now focused on the $188M expansion plan it embarked on in January 2009 and is not looking at other expansion or merger/acquisition opportunities. Al Khalifa said the

expansion is running smoothly, with most of the features to be completed before the end of 2011 and the rest by 2012. The first 400m of quay walls and the 180m return walls are expected to be delivered at the end of this year and the remaining 800m quay wall is expected to be completed by 4Q12. With regard to the ElectroMechanical Infrastructure, services required to be extended to the quay wall are to be tendered soon and the main services are to be completed in parallel with the wall by the end of 2011. The auxiliary services will extend to 2H12. F Shaikh Daij Bin Salman Bin Daij Al Khalifa [ Photo: ASRY ] 4 November 2010

trade & commerce

Italians banking on China

3,000

Italian shipping beneficiaries say ‘si’ to Chinese bankers Italian shipowners say they are beneficiaries of a co-operation agreement between their association, Confitarma, and the Export Import Bank of China. The agreement highlights the availability of Chinese finance to European shipowners that order newbuildings from China. It follows hot on the heels of China’s recent $5Bn deal with Greece. Confitarma president Paolo d’Amico said the timing of the latest deal, signed on 6 October, is significant as it follows an earlier co-operation deal between Confitarma and Exim in January 2008. Italian owners have been loyal to China since then with few cancellations at Chinese yards, he told Fairplay.

Contract terms While Exim will facilitate contacts between Italian owners and Chinese shipbuilders, Confitarma will create conditions for better relationships between owners and the bank. Confitarma and Exim agree to open a direct link to exchange information on the shipping industry. “As many other

vessels Exim has financed in last 15 years

Mariella Bottiglieri: Italian shipowners will continue to show their loyalty to Chinese yards [ Photo: North Downs Photography ]

Italian shipowners, of course, I also warmly welcome the news,” Mariella Bottiglieri, MD of Giuseppe Bottiglieri shipping company, told Fairplay. Bottiglieri said her father and former company chairman, Giuseppe, was the first to speak to their Chinese shipyards and Chinese government to introduce a demolition premium: “This is the strategy to rebalance the tonnage supply and demand. He was right.” She also commented that the recent Greek deal, which provides $5Bn of Chinese bank finance for Greek owners ordering vessels at Chinese yards, would not be confined to newbuildings: “In my opinion, the issue is not only building, but also scrapping.” Exim said that more and more

China’s offshore climb China’s expansion into offshore has a long way to go Offshore offers a lucrative escape from shipbuilding’s overcapacity. However, “China remains at the lower end of capacity, compared 18

4 November 2010

with Korea and Singapore,” said Matthew Flynn, CEO of Worldyards.com. The exceptions are projects – “essentially in-house deals” for domestic players like CNOOC and COSL. Chinese yards have completed around 50 offshore exploration and production units, with more than 30 on order.

foreign owners come to the Chinese banks to finance their vessels. Dan Li, director of the shipping finance division of the bank, suggested that this is because their finance is much wider than that of other banks. It includes ship-related sellers and buyers credit, in US dollars and Chinese renminbi respectively. Exim has $3.2Bn outstanding in buyers’ credit at the moment, with more than 3,000 vessels exceeding 1M dwt financed over the past 15 years. The good news for owners is that Exim also refunds guarantees on behalf of the Chinese yards. The only requirement for foreign buyers is that the yard must be Chinese-owned (private, listed or state-owned). Li pointed out that foreign buyers are likely to accept

Some yards have a good track record, but delays and problems are to be expected – the “teething problems of a starting industry”, as Flynn put it. “There is an

20M m

land reserved for new offshore yards

Exim because “we have the same ranking as the government”. The Confitarma agreement encourages more owners to order vessels from China, Furio Samela, partner at Watson Farley & Williams office in Rome, commented. “There are at least 16 Italian shipping companies with orders in China – we would expect all of them to be factoring in the possibility of borrowing from Chinese banks – with China Exim at the top of the list,” he said. Some possible beneficiaries of the Contifarma agreement are the owners that attended the signing at Contifarms Rome HQ in October. These included Perseveranza, Ca Li Sa, PB Tankers, Gruppo Lauro, d’Amico and Grimaldi. Furio Samela commented: “From our perspective, China Exim has been very efficient and pro-active in pursuing what is clearly a mandate from the Chinese government to support the export of ships built in China.” Asked whether he thinks the Chinese banks might be more stringent with the loan terms if the ships are being built at Chinese yards, he said: “For the Chinese banks lending to international owners, their loans are broadly at market on the rates. They are sometimes willing to lend higher percentages than traditional ship finance banks and, most importantly, they have the funds and are willing to lend.” F

enormous uphill climb for China to master the offshore arena,” he added. Yards are mainly building hulls, rather than integrated topsides, “but this is gradually changing”. With 20M m2 of land reserved for new bases, overcapacity already lurks around the corner, but it’s experience, not hardware, that will make the difference, Flynn advised. F www.fairplay.co.uk

trade & commerce

CMA CGM touts Dunkirk dynamo French major hopes to give port’s box terminal international status The port of Dunkirk in northern France has not yet exploited the full potential of its proximity to the UK, according to the French container shipping group CMA CGM. The group believes it can use the port’s position to boost throughput at Dunkirk’s Nord France container terminal, which it took over from the Maersk group’s APM Terminals in July. It is looking to double throughput at the terminal to 400,000teu over the next three years, notably through new rail and feeder links with the UK. Chairman Jacques Saadé, who was present at the inauguration of the change of management at the terminal on 11 October, explained the group’s thinking. “There are plenty of English ports and cities that are not far from here and can be served from Dunkirk,” he said. Saadé added that the group would be looking at the possibility of creating a link via the Channel tunnel between Dunkirk and the British Midlands, where there was a concentration of major UK distributors. Another option it would be exploring, he said, would be to use Dunkirk as a transhipment hub serving secondary ports in UK and Ireland by feeder. Olivier Tretout, deputy chief executive of the group’s terminals

‘There are plenty of English ports and cities that can be served from Dunkirk’ Jacques Saadé, CMA CGM [ Photo: CMA CGM ]

Not the first attempt As Dunkirk dockers’ leader Franck Gonsse pointed out, CMA CGM will be the fourth operator to attempt to put the Nord France Terminal on the international container map. APM Terminals tried, before deciding to cede the majority stake it acquired in November 2006 to CMA CGM last July in return for the latter’s 20% stake in the Mobile Container Terminal in the US. Before APM, however, the terminal was controlled by Interferry Boats, a subsidiary of Belgian rail operator SNCB, and, before that, by the former Compagnie Générale Maritime and Delmas. The terminal has been developed over the years to the extent that it now offers 1,200m of quay length able to accommodate vessels drawing up to 16.5m and is served by five super post-Panamax gantries. CMA CGM is its principal user, accounting for more than half of total throughput, with more than 80,000teu during the first nine months of this year. Its FAL 3 Asia-North Europe line calls there, as does its Panama Direct service to the South Pacific and its lines between northern Europe and the French Caribbean and Morocco.

subsidiary, Terminal Link, said that Dunkirk, by virtue of its position one-and-a-half hours of sea time from the Far East-North Europe trade lane, could offer an attractive alternative to UK ports, which are considered to be expensive. Saadé told guests at the inauguration, however, that the group would not be relying solely on the UK market to develop container

traffic at Dunkirk. He estimated that it could also win back traffic destined for the French market, which was currently transiting through Belgian ports. “In this field, the action which needs to be taken involves French customs, which need to adopt more flexible practices while still, of course, respecting European regulations,” he

said. Other possibilities the group would be exploring, he added, were the creation of full train services towards Paris and eastern France and the development of inland waterway traffic between Dunkirk and Lille and the multi-modal platform at Dourges, just south of the northern French capital.

A cautious approach Tretout said that the group was taking a cautious approach to increasing activity at the terminal. Its agreement with the port of Dunkirk provided for it to at least match the average growth registered by its neighbours in the northwest European range over the coming three years. But he confirmed that the group believed that it could double throughput at the terminal, which stood at 212,464teu last year, over that period. The group, which has had control of the new terminal since early July, has begun the task of bringing operating costs at the terminal down to the level of those at neighbouring Belgian ports. It is working on that closely with the port’s dockers, whose leader, Franck Gonsse, created some surprise among CMA CGM executives at the inauguration ceremony when, untypically for a French dockers’ leader, he promised the group full co-operation in achieving its objectives. “With CMA CGM, we really hope that things are going to take off,” he said to delighted applause. F

DORIS & NAESS

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www.fairplay.co.uk

4 November 2010

trade & commerce

New rules for nuclear on the cards Lloyd’s to produce new rules for nuclear propulsion of vessels The dawn of a new era of nuclearpowered merchant ships is upon us, according to the marine risk adviser for classification society Lloyd’s Register, as the rising costs of fuel and the threat of fines for pollution make owners rethink their future strategy. Speaking to an audience of marine underwriters and brokers at Lloyd’s, Vince Jenkins said the classification society was to present a new set of rules to its technical committee on nuclear propulsion. He added the expectation was that the first steel would be cut on a new breed of nuclearpowered ships within the decade. “My view is that we will see numbers in the hundreds and not thousands,” he added. “The capital expenditure needed will limit the vessels only to the ‘blue chip’ shipping firms, which can afford the initial outlay.” He said the use of nuclear propulsion would see the vessels move to steam power,

Lloyd’s Register’s Vince Jenkins says shipowners will have to consider nuclear propulsion [ Photo: Lloyd’s Register ]

which would create benefits through the removal of fuel tanks, greater cargo capacity and the ability for vessels to easily average 30 knots on the open seas, thus cutting down voyage times. “The marine market may well mirror the aviation industry when it comes to the finance and use of nuclear engines,” he said. “In aviation, for example, British Airways will own the airframe but will lease the engines and it may well be the model for the use in the marine sector.” The engines will have a life of 4-5 years before they require new fuel rods. “I believe what we will see are countries not companies develop-

ing a marine nuclear propulsion industry,” said Jenkins. “It may well be that we will see countries establishing an integrated nuclear engine industry which will include refueling sites.“Japan and Russia, for instance, may look to establish facilities where vessels can have their engine cores replaced.” He added that the biggest barrier to nuclear propulsion is the fears that atomic energy engenders. “The expectation is that the first nuclear-powered vessels will be brought into service on specific routes which will see the vessels using two ports. Ports will clearly decide on an individual basis whether they are prepared to allow

Box shipping toasts a healthy quarter Good news for 3Q10 – but uncertainty lies ahead for box lines Container shipping enjoyed a strong third quarter, with Neptune Orient Lines in Singapore saying that the average freight rate it obtained in the four weeks to 17 September matched those of the peak two years ago. Looking ahead, a lot depends on how the industry can react to changes in capacity. 20

4 November 2010

For the near future, things appear to be under control. Arctic Securities in Oslo noted on 27 October in a daily market report that as the peak season is over, several major operators have cut capacity on the Asia-Europe route and the number of idle ships is ticking higher. “However, most brokers expect a rise in rates in the wake of the Chinese New Year and are thus not eager to charter vessels out on long-term charters,” they concluded.

Beyond this, owners will probably need to adapt to a more volatile environment so that a 20-year life cycle of a vessel will include both very busy years and years when the ship is laid up for months. “This is a new situation, in which there is less and less control over the market,” summarised Alan Robertson, MD of the UK-based consultancy Webster Robertson. Demise of the conference system removed a capacity control tool, which is now in the hands of

access to nuclear-powered vessels and, therefore, we will see vessels coming into service on designated routes which encompass ports that are happy to accept them.” Jenkins said the marine engines will utilise very low-grade nuclear material, meaning there is no risk of them causing any type of nuclear explosion. He added the ability of a terrorist group to use a vessel as a floating ‘dirty bomb’ was also extremely remote. The core drivers behind the growing interest in nuclear population are the rising cost of fuel and the prospect that owners could be fined for CO2 emissions in the future, he explained. “We have been approached on a regular basis by owners and operators who are examining the use of nuclear propulsion,” he told the meeting. “There are already a range of Russian icebreakers that are not only nuclear powered but also able to carry passengers. The use of nuclear power is seen as a clean energy source and one where the technology is already in place and has been for many years.” F

individual lines and alliances of operators. Robertson noted that this also concerns the supply of containers, not just vessels. “Also, it’s one decision to take ships out of service and another decision when to reintroduce them.” While the industry is likely to expand in line with global growth, high cyclical and seasonal volatility mean that an old-established business model (whereby a strong cash flow was invested in new capacity) is now open to question. “Those companies that are able to respond quickly are likely to survive longest,” Robertson told Fairplay. F www.fairplay.co.uk

For the safety aspects of regulations see Safety at Sea International: www.safetyatsea.net

ROs must learn to share in class The European Marine Equipment Council explores progress towards ‘mutual recognition’ A conference last month in Brussels underlined how much remains to be done to bring into effect a European regulation intended to reduce cost and bureaucracy for marine equipment manufacturers. The event, organised by the European Marine Equipment Council (EMEC), set out to find “the way forward” towards efficient classification. This, its sub-title declared, would be “a win-win-win situation for the maritime industry”. The document that prompted October’s debate is ‘Regulation (EC) No 391/2009 of the European Parliament and of the Council on common rules and standards for ship inspection and survey organisations’ – or the ‘Class Regulation’ for short, which was adopted by the European Parliament in March last year. It entered force at that time but recognised organisations (ROs)– which are all class societies – have five years to comply with it. Pim van Gulpen, chairman of the European Marine Equipment Council, urged all parties to work as a team and not trip each other up. After that, the European Commission will review whether 4 November 2010

The regulation requires class societies to recognise each other’s equipment approvals [ Photo: Malcolm Latarche ]

enough progress has been made and report to the European Council and Parliament, which will decide whether additional measures need to be taken. Of the regulation’s 19 articles, it is Article 10 that especially excites both manufacturers and class societies, as it calls on ROs to, “in appropriate cases, agree on the technical and procedural conditions under which they will mutually recognise the class certificates for materials, equipment

and components.” This will mean, said a briefing note prepared by EMEC for the conference, that “equipment suppliers shall no longer be forced to apply for as many certificates as there are recognised organisations. Their products/services will be tested only once, according to the most demanding standards.” The dilemma can be summed up in two quotes. One was made to Fairplay recently by an executive from a European class society:

“It will not work. It’s as simple as that.” The other is from Jesus Bonet Company, an expert within the European Commission’s Directorate General for Mobility and Transport, who addressed the issues surrounding data sharing between ROs during the EMEC conference: “the information needed for mutual recognition is small. It can be done.” ROs have been tasked with working together to harmonise their rules and develop a consistent interprewww.fairplay.co.uk

regulation

For more on this story: The Regulation can be found online at http://tinyurl.com/Class-regs

tation of the international conventions and it is hoped that this will be achieved by the end of this year. From next year, equipment suppliers themselves will be involved in the discussions. It was clear from the Brussels meeting that many equipment companies believe that the process could have moved faster than it has. Martin Uhlig, sales director of Austria’s BrandschutztechnikDöpﬂ, believes that it should be

Tim Kent, technical director of Lloyd’s Register, speaking in a later session, assured delegates that “we aren’t dragging our heels” but that it takes time for 12 organisations to form a consensus. The ROs have selected 10 items of equipment to study “to prove the process”. He had some sympathy from Robby De Backer, director of the newbuilding department at dredging company Jan de Nul. “Who could be against it?” he said of

The EU’s recognised organisations American Bureau of Shipping Bureau Veritas China Classification Society Det Norske Veritas Germanischer Lloyd Hellenic Register Korean Register Lloyd’s Register Nippon Kaiji Kyokai Polish Register Russian Maritime Register Registro Italiano Navale

www.fairplay.co.uk

Non-European states could cause trouble for class regulation Whatever the European regulation says, non-European ﬂag states can choose to ignore it. That was confirmed in a letter sent in June by Siim Kallas, vicepresident of the European Commission, to representatives of nine ﬂag states that had written to his predecessor in November last year to raise concerns about the regulation.

tions,” his letter concludes, while encouraging them to join the European Union’s efforts to raise the standards applicable to classification societies worldwide. For MEP Luis de Grandes Pascuel, who is the rapporteur for the Class Directive and Regulation at the European Parliament, Kallas’s letter made the right points. But he made what he described as “less diplomatic” comments to the Brussels meeting, saying that although the role of ROs is “widely accepted and difficult to substitute”, it was a

‘It is within the sovereign rights of any non-EU state to pass legislation [to the] contrary’

Pim van Gulpen, chairman of the European Marine Equipment Council, urged players not to trip each other up [ Photo: EMEC ]

possible to “take the low-hanging fruit” and allow mutual recognition for many items of equipment immediately. But Karel Van Campenhout, chairman of the mutual recognition advisory board of the EU’s recognised organisations and a senior vice-president in ABS’ Europe Division, told him that this had been investigated and found not to be possible. For two societies to do so might be possible, he said, “but with 12 societies, it’s more difficult.”

Can non-EU ﬂag states scupper the scheme?

mutual recognition, but to agree the standards is not easy. “You have to put people in a room and expect them to agree that their standard is not the most rigorous.” What became clear from the day’s discussions was that there was still much to be done, and “the clock is ticking,” Bonet Company reminded delegates. In his opening comments, van Gulpen had set out three principles that would lead to success: common sense, co-operation and trust. F

Although the letters have not been published, they are widely available and Fairplay has obtained copies. In their November letter, the ﬂag states express concerns that mutual recognition has an impact on sovereignty, safety and freedom of choice, all of which are dealt with in Kallas’s reply. He pointed out that classification rules are technical, “they are not law,” he wrote. As for safety concerns, “I should like to dispel any fears that Article 10 could be implemented in such a way as to pressure recognised organisations to compromise safety standards,” he said. Far from restricting freedom of choice, he believes that the opposite is the case. Nonetheless, “it is within the sovereign rights of any non-EU state to pass legislation contrary to the practice of mutual recognition by its recognised organisa-

“different story to try to elude the application of the regulation by claiming causes that cannot bear a critical examination”.

Misconceptions Fotis Karamitsos, director of the maritime transport section of the European Commission’s Directorate General for Mobility and Transport, told the meeting that the November 2009 letter had expressed genuine concerns but contained “plenty of misconceptions.” He also pointed out that “we see massive mutual recognition every time a ship changes class and no one objects to that.” But he later confirmed to Fairplay that, while EU ﬂags are bound to follow the regulation, others are not and he believes that those states that signed last November’s letter – who claimed 57% of the world’s tonnage under their ﬂags – will not abide by it. F 4 November 2010 

regulation

Class regulation rules could prompt a two-tier division Class regulation could divide recognised organisations Implementing the European Union’s Class Regulation could lead to a two-tier division among its recognised organisations (ROs), which include some nonIACS classification societies. This emerged during discussions at the EMEC workshop (see p22), and appeared to surprise some delegates. “I don’t know how you could do it,” commented Karel Van Campenhout to Fairplay. He is chairman of the mutual recognition advisory board of the EU’s ROs and a senior vice-president in ABS’ Europe Division, and said that the intention had always been to develop a system that included all ROs. This possibility emerged during discussion on one of the requirements in the regulation that requires ROs to recognise each other’s certificates

“taking the most demanding and rigorous standards as the reference.” But one paper – which described how Bureau Veritas and RINA had co-operated over a joint French/Italian navy project – prompted the question of whether it would be possible to have small groups of ROs co-operating. That, said Bernard Anne, executive vice-president of Bureau Veritas, “could help to make progress,” but he pointed out that BV and RINA’s co-operation on that project had been at the request of the French and Italian navies, saying that it would not be so easy to deal with a group of 12 organisations. And for navies, full mutual recognition would be “out of the question,” he said. Fotis Karamitsos, director of the maritime transport section of European Commission’s Directorate General for Mobility and Transport, underlined that societies should base their mutual recognition on whatever they agree to be the highest standard.

Yet an expert from his directorate, Jesus Bonet Company, said that this could result in a group of societies recognising higher standards among themselves while not recognising those of other ROs. In that situation, he said, the other ROs would have to recognise certificates issued by the higher-standard organisations. Although this possibility was unexpected by many at the event, it was no surprise to Pim van Gulpen, chairman of the European Marine Equipment Council. “If all IACS members had the same quality standards, mutual recognition would not be a problem,” he remarked to Fairplay. “But no IACS member wants to be sub-standard. That was always the problem.” He appeared to doubt, however, whether ROs would accept a two-tier solution, describing it as “politically sensitive” to identify some class societies as having higher standards than others. Bernard Anne had summed up the situation in his first contribution to the debate: “I am pleased to see that everyone realises it’s complex,” he said. F

‘I am pleased to see that everyone realises that it’s complex’ Bernard Anne, executive vicepresident of Bureau Veritas [ Photo: Paul Gunton ]

4 November 2010

Do the customers care? Many class society clients seem to like mutual recognition As far as Pim van Gulpen, chairman of the European Marine Equipment Council, is concerned, class societies should embrace mutual recognition “because their clients like it,” he told Fairplay. And it was clear that many do like it, from equipment manufacturers to a leading ship manager, SeaTec UK (part of the V. Ships group). SeaTec UK’s engineering director, David Yuill, remarked that “any initiative to reduce paperwork is greatly appreciated” and spoke of the advantages of having a consistent and common baseline. He expected the Class Regulation to save money: “If we have a vessel classed by one society we can now choose equipment approved by another,” he said. A shipowning company that sees benefits is the Grimaldi Group. Its purchasing director, Giancarlo Coletta, said that mutual recognition brought advantages because “a system in which costs are not clear doesn’t lead to trust”. It will make classification more efficient and less costly, he believes. But Coletta wondered whether the regulation represented “a solution or a first step”. He decided it was the latter and proposed an even more radical second step: a joint seaworthiness requirement’, to match the airline industry’s ‘joint airworthiness requirement’. F www.fairplay.co.uk

For in-depth coverage of technological innovations see Solutions: www.fairplay.co.uk

Shippers take sulphur battle to European Parliament New limit could force shippers to delocalise manufacturing sites European shippers are preparing to involve the European Parliament in their battle to prevent the European Union from introducing a strict new limit on the sulphur content of marine fuels in northern Europe in 2015. Shippers’ bodies were prominent among the signatories of an open letter on the subject sent to the European Commission in May by a shipping-industry alliance comprising more than 50 national and international organisations. In the letter, they warned of the danger that efforts to shift freight from roads to sea could be reversed as a result of the additional cost the new sulphur limit would impose on shipping companies. The commission, which has not responded to their call for talks to find “an alternative way forward”, is proceeding with the planned revision of its existing ‘sulphur’ directive with a view to incorporating the new limit, which was adopted by the International Maritime Organization in 2008. As things stand, the revised directive will set a 0.1% limit for the sulphur content of marine fuels in emission control areas in the Baltic Sea, the North Sea and www.fairplay.co.uk

0.1%

new limit on sulphur content to be introduced in a new directive by the European Union

[ Photo: Shutterstock ]

the English Channel from 2015. European Shippers Council (ESC) secretary-general Nicolette van der Jagt told Fairplay, however, that shippers remained extremely concerned about the consequences of imposing the new limit. “A lot of shippers are panicking,” she said, adding that some industrial groups, notably in the Scandinavian pulp and paper sector, believed that the increase in their transport costs, which the new sulphur limit would engender, could force them to relocate their manufacturing facilities to sites outside of Europe.

“This will basically mean for shippers in some parts of industry that the prices of their products can increase by up to 30%,” she said. The commission is in the process of launching a public internet consultation on the sulphur directive, which will allow for the discussion of measures to alleviate the additional costs of

introducing the new sulphur limit. It has already indicated, however, that it does not believe that the new limit will have a major effect on the competitiveness of shipping and, by extension, industry in northern Europe. A commission official told Fairplay that its view was supported by a recently published study it commissioned into the impact of environmental measures on the competitiveness of short sea shipping. In any case, the ESC is not expecting any substantial change in position on the commission’s part. “The European Commission is listening and saying they will take alleviatory measures,” said van der Jagt, “but we don’t really know what that means.” She indicated that that the council was now looking to the European Parliament to help it to prevent the new limit coming into effect, either through postponement of the date for its implementation or through substitution of a less stringent limit. She said that work had already begun on “raising awareness” on the issue among members of parliament in an effort to prepare them for the debate on the revised directive, which the commission is expecting to adopt next spring. “The problem is the 0.1% sulphur limit,” she said. “We have no problem with 0.5%.” F

Nicolette van der Jagt hopes that the European Parliament will be able to force the commission to change its plans [ Photo: Andrew Spurrier ]

4 November 2010

Fairplay now looks at movement of cargo from manufacturer to customer (door-to-door)

Namibia’s Walvis Bay ups the ante Namibian port hopes to boost its role as the preferred gateway to southern Africa. Terry Hutson reports The Namibian port authority, Namport, has announced its intention to invest nearly $400M to upgrade Walvis Bay port. The investment aims to double the port’s annual box capacity to 500,000teu. It will also include dredging its approaches to a minimum of 16m in anticipation of larger ships as Namport markets Walvis Bay as a hub and alternate gateway into southern and central Africa. For now, Walvis Bay is adequate for traffic volumes to Namibia itself, but promoters have taken up the challenge of targeting trade routes into neighbouring SADC countries (South Africa, Namibia, Botswana, Lesotho, Swaziland, Mozambique Zambia, Malawi, Zimbabwe, Angola, and the DRC). In so doing, Walvis Bay will be competing with South Africa’s ports

of Durban and Ngqura, as well as ports in Mozambique and Das es Salaam in Tanzania. Walvis Bay’s main advantage relates to vessels coming from or going to Europe and the Americas: the Namibian port provides an incentive of between three and five days shorter sailing time compared to the South African ports further east, and even longer for those in East Africa. But this depends on the success of its transport corridors to its neighbours. “The Walvis Bay Corridor has developed tremendously, not only in terms of the volumes it generates, but also with regards to service excellence,” Johny Smith, CEO of the Walvis Bay Corridor Group (WBCG), told Fairplay. He said that reducing transit time, removing bottlenecks and improving corridor logistics through publicprivate partnerships remains the cornerstone of WBCG’s strategy. WBCG is marketing three basic corridors: the Trans-Kalahari road, which extends through Botswana into South Africa, the TransCaprivi road that runs through

Dar es Salaam

ANGOLA MAL A W I ZAMBIA

ZIMBABWE NAMIBIA

Walvis Bay

BOTSWANA

MOZ A M B I Q U E

Maputo

SOUTH AFRICA

Richards Bay Durban

Capetown

the northeast of the country to Zambia in the Caprivi Strip, and the Trans-Cunene, an ambitious project involving rail and road that has Walvis Bay targeting the markets of southern Angola. WBCG operates on a privatepublic partnership basis and has

Land routes (rail and road) and sea routes around southern Africa. Walvis Bay is a major hub for routes to Europe, the Americas and Asia

had limited success in establishing Walvis Bay as an alternate port for South African importers in Gauteng, who would normally look to Durban.

‘We need to continually promote the Walvis Bay corridor as the preferred route in southern Africa and beyond’ Johny Smith, CEO, Walvis Bay Corridor Group 26

4 November 2010

www.fairplay.co.uk

logistics & supply chain

According to Smith, WBCG is hoping to increase the volume of traffic along the Trans-Kalahari road corridor into South Africa. He said that by using Walvis Bay and this corridor, importers could save several days as opposed to shipping cargo through Durban. For timesensitive cargo, there were obvious advantages, he pointed out. WBCG faces numerous challenges, not only regarding improvements at the port but also because volumes along the Trans-Kalahari road corridor remain lower than Namibia might have hoped. “We need to continually promote the corridors as the preferred route in southern Africa and beyond,” Smith said. “The development of the Walvis Bay Corridor would ensure economic development in Namibia and the region as we try to find ways of reducing the cost of doing business in the region.”

Solution to border delays One tangible improvement is the establishment of a one-stop border crossing involving South Africa, Botswana and Namibia. This has resulted in delays of just 20-30 minutes at the respective border crossings, compared to three or four days or more elsewhere in southern Africa. A major challenge in developing the Walvis Bay Corridor involves building capacity in the transport and logistics industry to sustain the growth of the port and the corridors. Nevertheless, Smith remains positive about Namibia’s role as a gateway to the rest of the SADC region and said Walvis Bay and its corridor group is creating more interest both regionally and internationally. With more direct shipping calls at Walvis Bay, improved efficiencies and shorter transit times, as well as strategic partnerships, the Walvis Bay Corridor routes are now in a robust position to serve the SADC market to the rest of the world, Smith concluded. F www.fairplay.co.uk

Israel’s Agrexco switches Euro hub The exporter is moving its EU base from Italy to France Agrexco, Israeli’s largest exporter of agricultural produce, is shifting its hub for exports to the EU from Vado Ligure in Italy to the French port of Sète, southwest of Montpellier. “Sète will be used to distribute our exports all over Europe, including Germany and Scandinavia,” Malchi Malinovitch, Agrexco Logistics vice-president told Fairplay. “A big part of our goods are destined for France

and, on top of this, Vado is not geographically positioned well to serve all of Europe,” he explained. Malinovitch added that Agrexco will begin to operate from Sète from next spring, when Orsero Group’s reefer terminal will be operative. He said the Sète will run for 12 years. Agrexco’s 16,397dwt reefer ships Carmel Ecofresh and Carmel Bio-Top have been calling weekly at Vado Ligure, west of Genoa, since January 2009, when the company left its previous EU hub, Marseilles. Agrexco left France’s largest port after talks to renew a commercial deal with a local

operator failed to bear fruit. Malinovitch revealed to Fairplay that the sale of the Israeli government’s 50% share of Agrexco is being discussed, but could not comment on the discussions. However, another source at Agrexco told Fairplay that privatisation talks could take up to two years because the company’s recently-appointed CEO, David Bondi, is still assessing possible outcomes. Tel Aviv-based Agrexco exports an average 350,000 tonnes of fresh produce from Israel/year, yielding an annual turnover of $580M. F

Turbine lift requirements increasing [ Photo: iStockphoto ]

‘There is room for upscaling out there’ Bigger offshore wind turbines will require logistics innovations Investors in specialist vessels for offshore wind turbine installations need to build enough slack into their ship and crane systems to cope with the logistical challenges associated with increasing module sizes, senior sector managers have warned. Speaking at a forum in Elsfleth, Germany, last week, the outgoing managing director of offshore wind park developer Bard, Heiko Ross, said he expected bigger

offshore turbines than today’s maximum 5-6MW units to be introduced in the North Sea over the coming years. “There is room for upscaling out there,” he said, pointing out that a German manufacturer has constructed a 7.5MW onshore turbine. Larger power outputs generally require bigger designs and hence larger and heavier project modules to be carried into the fields. Nacelle weights, today at just under 300 tonnes for big turbines, may increase to around 400 tonnes, some have suggested. Cargoes would also become bigger and bulkier,

with Ross suggesting that blade lengths of 60m could easily be increased to 70-80m. “This would not pose a problem,” Ross said. His former company, Bard, is one of the pioneers in wind park developments off the German North Sea coast in water depths of more than 30m. Ross was replaced at the helm in early October but remains a leading figure in offshore wind-energy. Bard’s own vessel, Wind Lift I, delivered from Lithuania last year, was commissioned this year after technical rectifications. It is now “probably the most efficient vessel” of its type, achieving the installation of 14 turbine foundations in 40m water depths in the space of five months this year. “This is significantly better than on the Alpha Ventus project,” Ross explained. Alpha Ventus is a joint pilot project by energy groups EWE, E.ON and Vattenfall for turbine operations on the high seas, 45km off the German coast line. F 4 November 2010

reviews The Great Escape The intensely-researched Great British Passenger Ships documents the more than 100-year history of UK passenger liners. Its 96 pages are divided into eight extensive sections, richly furnished with facts, archival material and intriguing photographs. Author William Miller writes with an enthusiast’s passion and his attention to detail is deeply impressive. In chapter two, we are told that the Aquitania was among the greatest liners to survive the First World War intact. Miller writes: “She was soon back in her Cunard finery – a long black hull, snow-white upper-works and that quartet of lofty funnels... coloured in Cunard’s distinctive orange red.” Miller is unsparing in his flattery: “Having just the right balance and rake, she looked splendid, every inch the grand ocean liner.”

Good advice for a first mate This book is for the young officer aspiring to the position of chief officer, or one who has recently been promoted into the position. It is a practical book, rather than a theoretical manual, dealing in the ‘real world’ of the sea and discussing the various problems that can be encountered by a first mate. Written in an engaging style, the first chapter explains how the chief officer’s job can be the best on board – but brings great responsibility: “It is your job to surmount these obstacles and ensure that the ship is efficient in all aspects where

The book is welldesigned and features a centre section showcasing rare posters from P&O, brochures from the mid-1960s, Cunard souvenirs and more. It is reminiscent of a time when liners spared no expense in their elaborate advertising campaigns. Overall, this illustrated history charts the heyday of the British passenger ship – those great and grand vessels that connected the continents and colonial outposts of the Empire. While many remember the Cunarders, the less-known likes of Booth Line (which ventured to the Amazon) and Royal Mail (which sailed to Rio) are also recalled and celebrated here. F Miriam Fahey

you have a jurisdiction,” Captain Lloyd writes. Helpful advice on what to expect from different vessels are also offered, along with a swathe of chapters outlining the roles of persons on board. Every topic – from security to training to safety, ISM and even garbage disposal are considered – and very little of importance is omitted. Some useful advice is offered, for instance, in chapter 10 on the subject of cargo work in ice conditions with some tips on the behaviour of hydraulic oil: the colder the weather gets, the thicker the oil becomes. Therefore, if you do not have heaters for your hydraulic system,

Extensive research and beautiful photography capture the history of British passenger ships

Great British Passenger Ships, by William Miller, published by The History Press. Price: £19.99. www.thehistorypress.co.uk

switch the motors on well before they are needed.” Another impressive chapter focuses on relationships, and the co-operation between chief officer and deck officers, chief engineer, captain, bosun (chief petty officer, or right hand man on all matters regarding seamanship) and crew. Especially helpful is a letter at the back of the book, which reminds the chief officer about the importance of good seamanship. Witty, concise and written in a refreshingly direct style, this is a must-read for any aspiring chief officer. F Miriam Fahey The complete chief officer, by Capt Michael Lloyd, published by Witherby Seamanship. Price: £20. www.witherbyseamanship.com

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4 November 2010

powerhouse

china As China has continued to post remarkable growth, its expanding wealth has allowed it to invest massively in foreign resources – meaning more business for shipping. Bouko de Groot reports

$9.8Bn Europe

china’s

wealth ﬂows abroad

rowing domestic demand and the successful free trade zone within Southeast Asia have become new drivers of China’s fortunes. With its wealth constantly expanding, Beijing is focused on fi xing the growing gap between rich and poor, solving its environmental issues and keeping infl ation in check – all vital for its ‘harmonious society’. That growing wealth has meant that while the global fi nancial crisis caused demand for resources from the rest of the world to decline, China’s domestic demand continued to grow. “For cash-rich China, that was the time to buy,” explained Javier Cuñat, sourcing strategy manager at Bateman Beijing Axis. Increasingly, China is dependent on imported resources – at prices Beijing cannot control, despite attempts by the organisations like the China Iron and Steel Association. This dependency puts a strain on China’s price competitiveness. “That’s why Beijing has gone out to invest abroad, in everything, everywhere, though with a focus on resources,” he said. Foreign investment by China jumped from from $1Bn in 2000 to $12Bn in 2005. The total for this year is expected to top $65Bn.  4 November 2010

In several countries, China is now the largest foreign investor and “will be in the global top 10 of foreign investors within fi ve years”, Cuñat predicted. A lot of Beijing’s money fl ows to developing countries, especially in Africa. Local infrastructure and Chinese construction companies benefi t from this. “Often, good road and rail infrastructure are a Chinese requirement for the investment deal,” Cuñat says. Beijing then off ers fi nance. China’s overseas investments are growing in both dollar size and effi ciency. In Brazil for example, the largest Chinese steel mill outside of China is being built. “This cuts down on ore transport cost and the dependency on the big mines,” Cuñat explains. Another example is the railway that runs from a Siberian mine straight to a steel mill in China. With the vast reach of its overseas interests, shipping is only becoming more important to China. “As the emerging maritime superpower, China will play a key www.fairplay.co.uk

powerhouse

china

[ Source: National Bureau of Statistics of China ]

China’s 2009 foreign investment

$15.7Bn Asia

$10.5Bn North America

$3.7Bn

Latin America

$1.1Bn Africa

$9.1Bn Oceania

‘china will be one of the global top 10 foreign investors within five years’ www.fairplay.co.uk

4 November 2010 

powerhouse

china China overseas investment, $Bn ��

Oceania

Europe

North America

Asia

Latin America

Africa

��

centre, Sadler stressesd that “China also has all the capabilities to be central to improved regulation.” As long as Beijing keeps looking outward, it will mirror the west in leading in foreign investment and even regulation. “More Chinese companies are looking internationally for potential markets, new technology, and mineral and energy resources,” said Cuñat. “Expect China’s global aspirations to grow – and so too the footprint of China Inc.”

A welcome for China abroad

�� H�� [ Sources: National Bureau of Statistics of China, Commodore Research & Consultancy, Bateman Beijing Axis ]

Selected bulk trades/month Bulk type Total coal imports Iron ore imports Crude steel production

2008 3.4M 37.0M 41.5M

2009 10.5M 52.4M 47.2M

2010 13.5M 50.7M 53.3M

role in shaping the future of shipping as it becomes the world’s primary maritime market,” said Richard Sadler, CEO of Lloyd’s Register at Shipping China in Beijing. The number of ships needed to serve the growing world population “will increase, along with emissions,” he added. With a huge domestic demand for freight, a shipping-reliant export economy, unprecedented shipbuilding capacity and growing strength as a maritime service

Chinese Wuhan Iron and Steel and Brazilian MMX Mineracao e Metalicos signed a 70%/30% joint venture deal last April worth up to $5Bn for the establishment of a steel mill in Rio de Janeiro. It’s China’s biggest investment in Brazil and its largest overseas steel mill, expected to be put into production within three years. Some of the mill’s 5M tonnes/year output will be exported to China. Earlier, Wuhan Iron and Steel bought a $400M share in MMX, who will provide the Chinese with at least 50% of the ore from Serra Azul for 20 years. Baosteel and Indonesian nickel and gold producer PT Aneka Tambang will start construction of their $1.2Bn nickel plant on Kalimantan Island later this year. Its output will reach 500,000 tonnes of ferronickel/year. China Development Bank provided a $1.2Bn loan to Gindalbie Metals to develop its $2.3Bn Karara iron ore project in Western Australia. It’s a joint venture between Gindalbie Metals and Chinese steel mill Ansteel to convert low grade iron ore into a premium product for export to China. When it opens next year, it will produce up to 10M tonnes of iron ore annually. Construction of infrastructure to support much higher production levels in anticipation of future expansions has already begun. F

CHINA at a glance 1,348M

GDP

2009

2010 (est)

$4,984.7Bn

$5,758.6Bn

Population (2008)

Real GDP growth

$ = 6.68

GDP per capita

Rmb (27 October 2010)

9.1%

10.3%

$3,735

$4,288

Inflation

-0.7%

2.9%

Unemployment

4.3%

4.2%

source:

www.ihsglobalinsight.com

Export partners (2008) US Hong Kong Japan South Korea Germany

17% 13% 8% 5% 4%

Import partners (2008) Japan South Korea US Germany Australia

13% 10% 7% 5% 3%

[ Derived from IMF Direction of Trade Statistics ]

Trade profile: China accounts for 9.62% of the world’s total exports. Almost 94% of its exports are manufactured, 3.4% are agricultural and 2.9% are fuels and mining products. Of its imports, 61.7% are manufactured, 7.6% are agricultural and 24.9% are fuels and mining products. 2009 saw 11M new jobs – and over 5M laid-off workers back in employment. Many of these were in labour-intensive sectors such as construction and manufacturing. At the same time, accelerated export growth suggests trade is recovering from the global crisis that battered Chinese exporters of shoes, toys and other low-cost products, and wiped out millions of jobs.

4 November 2010

www.fairplay.co.uk

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powerhouse

china

Banks extend their reach in ship finance

Greater China of BNP Paribas. “Now it’s the other way around. At the moment, financing is expensive,” he admitted, “but at least it’s available.” One possible reason for the price hike is the banks’ inexperience in this sector, especially its risks. “Risk can generate profitability,” said Philip Adkins, CEO of Fairstar Heavy Transport, which is building two semi-submersibles in China. “But that hinges on understanding risk,” he added. According to Adkins, owners’ ccording to Anthony Zolotas, CEO of Eurofin, task is to explain their risk to financial institutions so “in 2009, Chinese banks accounted for 5% of they can be priced accordingly. “That takes time – to the $333Bn total portfolio of the 25 largest study and understand and manage those risks.” China’s global shipping banks”. A year before, China’s banks are still in the process of doing this. To prevent share, mainly from the Bank of China and the Indusserious damage from inexperience’s inevitable risk trial and Commercial Bank of China, was a mismanagement, China Export & Credit Insurance Corporation’s Sinosure support meagre 0.5%. the banks. However, Zolotas added that Chinese “We mainly do buyer credit insurbanks fund more, so a one-on-one ance,” said Guang Xu, an underwritcomparison is not particuarly er with Sinosure. “By mid-2010 instructive. Finance from the Export-Import Bank of China (Exim), we had $2.5Bn in our portfolio.” for example, “is much wider than Sinosure also co-operates with that of other banks,” said Dan Li, foreign banks such as ING, director of the Shipping Finance Société Générale and BNP $4Bn Ship leasing Division of the bank. It includes Paribas – as long as it involves Chinese yards. “Chinese ship-related sellers and buyers content must be at least 50%,” credit, in US dollars and Chinese Four biggest financing banks $25Bn explained Xu. Norden, Bernard renminbi respectively. Sellers are Schulte and STX are some of the top-tier Chinese yards, buyers $3Bn Public debt issue foreign buyers that are involved. are foreign owners. “More and Ideally, they pay in renminbi, at more, foreign owners come to least from the yard’s point of view. the Exim and other Chinese banks That is another goal for the banks. to finance their vessels, because “We will try to convince foreign western banks are reluctant to do so,” buyers to pay in renminbi,” confirmed she explained. Li. “It is possible for foreign owners to borExim has $3.2Bn outstanding in buyer’s row in renminbi, but in reality it’s not easy,” she credit at the moment, with more than 3,000 admitted. Foreign owners should have a cashflow vessels exceeding 1M dwt financed over the past in renminbi – and that takes time to develop. “But big 15 years. Li’s bank also offers refund guarantees on firms that have commodities and trades here, they have behalf of Chinese yards. The only requirement for foreign a renminbi cash-flow, so then it’s possible,” Li said. Or, if buyers is that the yard must be Chinese owned. This a foreign owner charters to a Chinese client, like a steel safeguards the workforce, another important reason mill, revenue can be in the necessary renminbi. why Chinese banks move into global ship financing. “Some Indonesian owners have done it already,” added “More than 76% of finance for ships comes from banks,” Xu, “Times are changing.” Those changes will take time, said Zolotas – so China’s entry is welcome. Their newbut Li thinks that “this is the trend for the next decade.” found international outlook contrasts with for example First though, Chinese banks must catch up to their “Greek and Italian banks, who really only look at domestic owners,” he added. western counterparts. “Chinese banks must develop a China’s banks were not as significantly affected by the global approach,” said Zolotas. crisis. At the same time, they had to help the yards conKnow the sector, learn the risks. “Then, over time, say tinue production. “Last year Chinese banks were cheaper in five years, I hope Chinese banks won’t need Sinosure [ Source: Minsheng Financial Leasing ] than others,” said Antoine Gustin, head of export finance and Exim anymore,” added Adkins F

China’s share of the global ship finance market has grown tenfold – to 5% – in just one year

China ship finance, 2009

4 November 2010

www.fairplay.co.uk

powerhouse

china

China’s crude dependence

China is a net importer of coal and also buys foreign LNG – but those trades are minor compared to its ever-growing need for imported crude oil

espite growing domestic demand and a deep reluctance to import essential commodities, China’s own crude oil production decreased markedly last year. Ralph Leszczynski, head of research at Banchero Costa, believes that “China’s crude production has failed”. But that failure is a boon to shipping. China has overtaken the US in long-haul oil imports from the Middle East, according to Steve Christy, head of research at Gibson Shipbrokers. Over the past year, China’s crude imports have jumped by 2M bpd to around 5.5M bdp. “Last year, China needed to import 53% of its crude,” pointed out Nikhil Jain, research manager bulk shipping of Drewry Maritime Services India. By 2020, that number will have grown to 60% – almost all of which will come by ship. Beijing works hard to lessen this dependence. Growth of its newly-discovered reserves barely keeps up with domestic demand, so part of the solution must come from abroad – by pipeline from Kazakhstan, for example. “It comes all the way from the Caspian sea, with a 7M tonnes/year capacity that will be upgraded to 20M tonnes/year,” explained Leszczynski. More pipelines come in from Russia and by 2012, the one leading to Kozmino on the Pacific should be able to supply 80M tonnes/year, thanks to a $25Bn loan package from China, he said. Another pipeline branches off from this main line. “Construction starts this year for a planned capacity of 15M tonnes/year or 300,000bpd,” he added.

Nationalising crude imports Beijing tries to solve its crude dependence by building pipelines, gaining ownership of foreign resources and exploiting its huge sea reserves, spurring on its domestic offshore industry along the way. A potential measure that has caused some anxiety among foreign shipyards and owners was the touting of a possible requirement that at least half of China’s oceangoing energy demand should be shipped in Chinese-built and owned vessels. However, such a regulation is unlikely to come to fruition. “That was just someone’s idea of what we could or should be able to do,” Kejun Li, president of the China Classification Society, told Fairplay. At the moment, the figure is around 18%. “People may now say that we must reach 60% or even 80% of transport self-sufficiency,” he said, “but look at the reality – creating a strategic petroleum reserve is a better way to ‘nationalise’ crude import than owning half the fleet.”

4 November 2010

53%

of China’s crude oil was imported in 2009

Two-thirds of China’s imported crude comes from Africa and the Middle East, a VLCC lifeline that meanders through the bottlenecked Strait of Malacca. China is attempting to circumvent this with a 2,380km-long pipeline, running from Kyaukryu in Myanmar to Kunming. Construction of the parallel gas and oil pipeline started earlier this year. The finished pipeline will carry up to 22M tonnes/year and will completely bypass the Strait, shortening the sea voyage by 1,200km. An even more ambitious project is the planned link to Pakistan’s Gwadar, “just outside the Strait of Hormuz, the perfect place”, as Leszczynski put it. But high mountains and a restless Kashmir may prove to be greater impediments than the Malacca bottleneck. Demand in China grows so fast, however, that all new pipeline projects combined will scarcely change the country’s dependence on seaborne crude imports, which will require more VLCCs. China’s oil majors are, therefore, busy building more crude terminals to accommodate these carriers – an increasing number of which will be supplied by imported (but Chinese-owned) crude. As with LNG, “Chinese national oil companies have boosted investments in overseas upstream activities through acquisition deals and loan-for-oil contracts - $40Bn in Iran alone,” said Jain. China’s overseas equity oil output thus rose from 140,000bpd in 2000 to 1.5M bpd this year. This means Beijing could supply almost onethird of its import needs from Chinese sources abroad. F

Crude imports, M tonnes 2005 2006 2007 2008 2009 [ Source: Banchero Costa ]

Crude imports, origin 127 145 162 179 202

Middle East Africa Asia Pacific Russian Federation Latin America Others [ Source: Banchero Costa ]

41% 25% 14% 10% 7% 3%

Crude imports, VLCC needs

Crude import vessels, 2009

2009 93 2013 148 2016 178 [ Source: Drewry Maritime Services ]

VLCC Aframax Suezmax Panamax etc [ Source: Banchero Costa ]

72% 12% 10% 6%

www.fairplay.co.uk

powerhouse

CHINA

Turning to the water As China’s growing coal consumption overwhelms its rail and road infrastructure, water transport seems to be the way forward

t present, China’s railways only just manage to keep up with growing demand for transit. Its roads are of little assistance, with some routes experiencing traffic delays that last several days. “The movement of goods on water is going to be the real growth area of the future,” said Peter Murray, chief representative in Shanghai for Ince & Co. In a country where environmental considerations are being pushed higher up the agenda, “carriage by water is far and away more environmentally friendly than by road,” Murray added. The Yangtze River has huge potential, but “this will not be fully developed unless the risk of pollution is kept under control”. According to Xiaoyun Deng, researcher with the Institution of Water Transport, 800M tonnes of coal are shipped along China’s coast – or around a quarter of total freight volume. With regards to coal, she expected the three main inland waterways (the Grand Canal, the Xijiang and the Yangtze) to see only a “limited increase of coal transport” until 2020. She added, however, that there will be an increase in efficiency, with power plants put next to rivers and equipped with high-capacity docks. The storage capacity of the northern coal ports, for example, has increased, to 1,100M tonnes. China’s container ports and their throughput continue

4 November 2010

Yangtze cargo, 2009 22%

27%

% 6%

20%

15%

[ Source: Yangtze Transport ] Ore Coal Building materials Grain etc Oil etc Others

22% 20% 15% 10% 6% 27%

10%

[ Photo: iStockphoto ] to grow with Shanghai finally pushing Singapore from the coveted number one spot. VLCC crude terminals are being added in Dalian, Huangdao, Huizhou, Maoming, Ningbo, Rizhao, Tianjin, Zhoushan etc. It is estimated that, over the next five years, 50% more VLCCs will be required to handle the expected growth in crude imports. Weiping Hu, director of the oil & gas division of the Energy Bureau of the National Development and Reform Commission, said LNG will also see continued growth. “With its well-developed economy, large population, short supply of energy and strong consumption capability in

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powerhouse

CHINA Yangtze River The world’s largest river in terms of cargo throughput, the Yangtze accounts for 80% of China’s inland waterway cargo volumes, carried in around 125,000 vessels. Yet the river remains an under-used resource, according to David Lammie, publisher of Yangtze Transport. For example, the average vessel is only 426dwt. Most of the cargo volumes are handled between Shanghai and Nanjing, 300km inland. The biggest bottleneck to fully developing the Yangtze is the co-ordination between local and

central government efforts to address issues such as dredging, vessel standardisation and safety. “Once a year all the major Yangtze port city mayors gather at a forum to agree on the macro direction,” Lammie told Fairplay, “but that leaves a lot of implementation work.” For example, with vessel standardisation, the central government requires these plans to be carried out within five years, but money needs to be found to compensate owners of old vessels. Foreign operators have so far only been allowed to ship dangerous goods

China port container throughput 1. 2. 3. 4. 5. 6. 7.

Port Shanghai Shenzhen Ningbo-Zhoushan Guangzhou Qingdao Tianjin Xiamen

2010 21.6 16.9 9.8 9.1 8.8 7.4 4.3

+/- 2009 +18.5% +28.4% +28.5% +12.0% +15.3% +15.7% +26.5%

8. Dalian 3.8 9. Lianyungang 2.9 10. Yingkou 2.5 – Other coast, total 9.8 – River ports, total 10.6 – National total 107.5

+14.2% +32.1% +24.6% +20.7% +20.5% +20.7%

[ Source: Chinese Harbour Association ]

the coastal cities of China, the region has the potential to import a large amount of LNG,” he explained. The railway network continues to offer huge potential, despite its shortcomings, with coal accounting for more than half the country’s rail-freight volume. “China’s trains moved 1.75Bn tonnes of coal last year,” Shunhu Su, vicedirector of the Transportation Department of China of the Ministry of Railways told Fairplay. This year will see solid growth, thanks to major investments. Elsewhere, there is potential for influential growth as well. Container terminals, for example, are not always

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(Jan-Sep, M teu)

21%

rise in China’s container throughput this year

in joint ventures. “Apart from that, foreign lines can enter a Yangtze port direct from overseas, but are not allowed to engage in internal transport,” Lammie said. And there is no immediate prospect of this changing. “Yangtze officials commonly site the example of the Mississippi, where similar policies apply. “Maersk Line has been lobbying hard to adopt the practice on the Rhine,” he added. “The latest we know is that the Chinese have agreed to talk with the EC to discuss the issue as part of wider talks.”

Yangtze trunkline 2010 forecast Domestic throughput* 1,230M Foreign trade 170M Container throughput 8.5M

Units Increase tonnes +10% y-o-y tonnes +14% y-o-y teu +16% y-o-y

* including domestic transhipment of foreign trade [ Source: Yangtze Transport, 3rd edition ]

perfectly connected to the railroads. Shanghai’s Yangshan Deep Water port is still effectively without a rail link. Su expects that by 2012 the bottleneck restriction of railway transport will “be relieved to some extent”. But perhaps Su is too cautious. “Everybody has been very surprised by the massive scale of the high speed passenger rail network which has sprung up all over China,” said Murray. “If similar planning is applied to the freight rail network,” he added, “that will have a direct impact on waterborne carriage and will provide its greatest competition.” F

4 November 2010

powerhouse

china

Yards slow to accept crisis Overcapacity has China’s yards looking to repair, recycling, offshore and renewable energy

hujia Fang, chief engineer of CSIC and appointed expert of the State Council, observed that shipbuilding “overcapacity is especially huge in China”. Globally, 117M of the scheduled 156M dwt was delivered in 2009, according to Clarksons, Hong Kong. “Things have settled down in the shipbuilding industry since the grim situation last year,” said Martin Rowe, managing director of Clarksons. For the next two years he expects more delays, but not cancellations. “No yard will accept an empty slot if they can build something.” Unfortunately, from a global perspective, that ‘something’ from most Chinese yards doesn’t cut it anymore.

Estimated deliveries, M dwt/quarter China South Korea 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

��

4 November 2010

1.22 1.01 10.81 12.2 18.02 14.12 14.95 15.87 16.73 13.34 13.98

0.56 0.06 9.01 13.12 14.72 13.1 13.74 16.8 13.05 11.7 11.53

Japan Others 0.09 0.49 5.46 6.45 8.83 6.9 7.02 8.15 7.75 5.48 6.25

1.31 1.25 2.54 3.86 4.49 2.76 1.97 2.49 2.31 1.52 1.61

China South Korea 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

11.2 12.29 7.64 6.2 4.08 5.01 2.78 2.04 1.5

Japan Others

10.59 9.23 5.86 5.58 3.6 4.02 0.94 0.6 0.09

6 4.88 2.87 3.43 2.98 2.52 1.57 0.59 0.35

1.08 1.55 1.17 0.59 1.25 0.92 0.12 0.01 0.01

[ Source: Clarksons Hong Kong ]

“We should acknowledge that China’s shipbuilding is not yet up to demand and market requirements,” admitted Fang. According to him, China still lacks some high-spec technologies, while efficiency is also lagging. “Productivity in China still is far behind South Korea,” agreed Rowe. To weather the crisis, Koreans also have a strong cash cushion to fall back on, which means they “are very unwilling to renegotiate prices – only a token 5-10%”, said Rowe. This, it seems, leaves Chinese yards with two options – either focus on the domestic market or compete on price. However, because of a lack of money, “the trend implies that about 40% of scheduled deliveries will not materialise,” said Michael Bodouroglou, CEO of Paragon Shipping. “This way the financial crisis is actually saving the dry bulk sector from years of misery,” he added. But it worsens the plight of Chinese yards, which now need domestic banks to help them survive by financing buyers or buying cancelled vessels. Which means “China has 66M dwt building capacity, but only needs half of that,” said Chunlin Wang, director of Pacific Basin. He expects many more Capesizes to be built than are needed. With an orderbook comprising as much as 65% of the global fleet, “the Capesize orderbook worries me, others not so much,” he added. There are, of course, exceptions to China’s conservatism. “Even though we are a newcomer, we have the biggest orderbook,” said Yaping Luo, chief engineer of Rong Sheng Heavy Industries. In the middle of the crisis, they managed to win plenty of orders, including VLOCs. “We didn’t get those orders on the basis of price, but on the basis of the technological advantage we have,” she told Fairplay. F www.fairplay.co.uk

powerhouse

china

comment The domestic case for revaluation There has long been widespread international pressure for China to revalue its currency. But a compelling domestic case for revaluation has recently emerged. Jamie Jemmeson of Corporate FX reports

Renminbi/dollar exchange rate, 2010

[ Source: Corporate FX ]

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Rmb/$

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On 19 October, China surprised investors by raising interest rates. This sparked a worldwide sell-off in stocks, commodities and emerging-markets currencies as investors lowered their expectations for Chinese growth. In China we have seen growth at a double-digit pace and, as a result, this growth is seen as a key driver of the global economy. Independently, it would appear that the global recovery is starting to lose steam with talk of further quantitative easing from western nations on the way. China, like many countries, had cut interest rates several times between September and December 2008 as the financial crisis took hold. This increase in interest rates is the first since December 2007. One explanation for this is that inflation is at its highest level since November 2008. Meanwhile, raising rates will also aid in restricting lending and, at the same time, help cool the economy. Some forecasters are expecting a further two 25 basis-point rises over the next 12 months.

4 November 2010

�Q J

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At the recent G20 meeting, currency was the hot topic of discussion as talk of ‘currency wars’ and protectionism had been high on the agenda. Central to this debate is the political pressure the Chinese renminbi continues to find itself exposed to. China has been openly criticised by the Obama administration of keeping the renminbi undervalued. One reason for the US pushing for the renminbi to be revalued is to help deal with its trade deficit. According to government statistics, US imports from China were worth $296.4Bn in 2009 while its exports to China accounted for only $69.5Bn, leaving a deficit of $226.9Bn. After the G20 meeting, the Chinese renminbi strengthened from its steepest slide in 22 months, on the optimism that policy makers will heed calls from the US to strengthen the renminbi. US treasury secretary Timothy Geithner stated in an interview in late October that Chinese officials understand it is in the interests of domestic growth and global economic stability to let the renminbi strengthen.

However, in addition to the redressing global imbalances and pressure from the US, a more domestic-based case for revaluing the renminbi is starting to emerge. Firstly, China wants to move away from a purely export-led economy and move towards a domesticdemand fuelled economy. As a result of China’s record pace of expansion, the modestly wealthy workforce has cash to spare. To add to this, a new breed of consumer is growing outside the centres (such as Shanghai) who desire foreign goods. As a result of a weaker renminbi, it is harder for the Chinese consumer to satisfy this desire. If China is serious about boosting a domestic demand economy, it will have to let the its currency strengthen. This would, in turn, encourage the companies within China to start importing foreign goods to fuel this demand. This could ultimately have a ripple effect on the whole economy from shipping and transportation to retail and foreign direct investment throughout China. It will be interesting to see how this situation develops. Beijing is attempting to cool the economy gradually by raising interest rates and restricting lending – but this may not be enough. China is certainly making all the right noises and is letting the renminbi appreciate, albeit at a slower pace than many of its global counterparts would like. With the worst of the global recession arguably behind us, China could well have got its timing right. The need to combat inflation and China’s growing appetite for foreign consumer goods gives the People’s Bank of China an appropriate backdrop to let the renminbi appreciate at a quicker pace. Only time will tell if China is just playing diplomatic lip service or whether it is serious about addressing the global imbalances. F

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4 November 2010

decision-makers

Dick Welsh

Man

power Dick Welsh is passionate about the Isle of Man Ship Registry – but it is just part of a grander plan to build a maritime centre of excellence, as he tells Richard Clayton

ick Welsh, director of the Isle of Man ship register, sets himself tough targets. A hard-talking Manxman, Welsh is driven by a passion to build a maritime centre of excellence on this jewel set in the Irish Sea. He is doing this by persuading Japanese shipowners to think twice about registering ships in Panama and looking at the merits of what the Isle of Man (IOM) has to offer. It’s a long, slow persuasion that involves relationship-building over many years. Yet Welsh is convinced that the traditional conservatism of the older generation of Japanese owners is turning. The new generation, wanting to go beyond registration in Japan or Singapore, is assessing the many competing flags on the basis of quality of service, and no longer merely on cost. That’s Welsh’s starting point: “I can provide a far greater service level”, he assures Fairplay, adding that his maritime cluster “doesn’t stop with registration, it starts with registration”. Welsh and his team have set up an agent in Tokyo and are planning to contract out surveyor services. The time and cost of flying down to London, then across to Tokyo is a concern, so the time has come to do the job properly. The need now is for a push to raise the image of the Isle of Man brand on the streets of Japan’s

4 November 2010

shipping centres, where the IOM is known only for motorbike racing. That’s another tough task for Welsh, but he knows that his initial success has

In the spotlight Dick Welsh Current position: Director, IOM Ship Registry (since March 2006) Education: 1989-1992: B Eng (Hons) 1st class, mechanical engineering, Liverpool John Moores University 1979-1980: Engineer officer cadetship, marine engineering, Riversdale College of Technology Family: Married with two children, 12 and nine- years old Hobbies: Plays with Southern Nomads rugby club (which, despite the name, plays home matches at King William’s College in the south of the Isle of Man), Sunday morning sea swimming

won the backing of his local government. In the recent administrative reshuffle, the IOM registry was transferred from the Department of Trade & Industry to the

Department of Economic Development. It’s a strategic move, one that signifies a change from the old silo mentality to a closer liaison with the government’s broader remit of building an independent economy. “The government is aware that it needs to be proactive,” he says. “Where is the next business coming from?” Welsh has overseen steady growth in the number of commercial vessels – both merchant ships and superyachts – to the 500 mark, while the gross tonnage has leapt from 9M gt in mid-2008 to more than 12M gt. No doubt this has stemmed from inclusion on the US Coast Guard’s Qualship 21 scheme, one of only 15 of the 130 international registries that assesses safety performance of ships visiting US ports. For ships visiting European ports, the IOM registry has maintained its position in the top third of the White List, and, most recently, a team of auditors appointed by the IMO was on the island in June to carry out a voluntary audit of the IOM’s capabilities. A report (described as “positive, yet balanced”) has been put together that indicates areas of improvement but also contains encouraging statements about the quality of the fleet and the best practices on offer. Welsh is not chiefly an administrator. Both his grandfather and father went to sea as engineers, and he joined up with T&J Harrison in Liverpool in the 1970s, moving on to Canadian Pacific. He came ashore with a second engineer’s certificate and kept a power station running, reading mechanical engineering at Liverpool Polytechnic (now John Moores University) as a mature student. He is passionate about personal development, excited that seagoing qualifications are now recognised ashore, and fully supports an IOM ‘opportunities fair’. “This used to be about school children,” Welsh explains, “but it’s now aimed at people looking for a change of direction. I want to push what the IOM has to offer”. He is a gifted communicator, happy to address the IOM Association of Corporate Service Providers – which represents financial and corporate management and administration services – or gatherings of students. “The registry is at the heart of the shipping industry on the Isle of Man,”

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decision-makers [ Photo: Jim Willson ]

he says, seeking to persuade customers that the fl ag passes what the Germans call the ‘substance test’. The next step is to make it easier for companies to register their ships in the IOM. “We are hearing that operators are dissatisfi ed with their registries,” Welsh reveals. “All fl ags try to operate to the same quality standards but the key question is what’s the standard of service?’ Are the ships kept running whatever happens?” The new fee scheme, priced at a competitive $1,000/ship, carries no annual inspection fee, no casualty investigation fee or consular fee – and there are incentives for multi-ship deals. However, IOM off ers more than competitive fees. The tool under development is the Maritime Administration, Regulation and Information System (MARIS), which is expected to go live in 2012. This tool will replace all the piecemeal systems developed over the registry’s 25 years, with all their potential for error. The plan is for one level of access for the public, lawyers and non-members, and another level for the companies committed to the fl ag. The aim is to have all seafarer documents online, so ship managers can do what they do best: manage ships. MARIS will also help the registry’s staff to achieve more with fewer people. In bringing in change, Welsh stresses the importance of making sure everyone understands each element of that change. The resource base is limited on an island of just 82,000 people, but there’s one fi nal factor that Welsh believes in – the innate attraction of the island itself. “There’s a time in every man’s life when he wants to come home,” he says – although not so many years ago there wasn’t much on the island to come home to. That has changed, and it’s not just former Manx residents who are returning; many expatriates from European companies are staying. “People no longer take a fi veyear contract, then go home,” Welsh adds. They stay, and contribute to the maritime community. The IOM will never be another Singapore, but it is witnessing the growth of a maritime cluster – with Welsh and his registry at its heart. F

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Dick Welsh

‘The key question is what’s the standard of service?’ 4 November 2010 

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movers shakers Decision-makers from the worlds of energy, mining, manufacturing, industry, commerce and agriculture all affect shipping. Fairplay reports on the great and the good

Shipping eyes on Singapore Shipbrokers and charter managers can expect great job mobility, even in today’s tight economic times, according to Mark Charman, CEO of recruiting company Faststream. “We know of candidates in Singapore resigning from jobs without one to go to, so confident are they of finding lucrative employment quickly and easily,” he said. This is not the case in Europe or the US, but even in London, the weariness of the past 18 months is disappearing, he added, with candidates much more receptive to furthering careers by moving to different companies. Singapore has consolidated its role as a leading shipping centre. “In the past two years, we have seen the country develop from what was mainly a tanker chartering centre to one that covers dry bulk as well as niche trades, such as LNG, offshore and heavy-lift trades,” he said.

GL appoints CEO

Finance man for Lomar

Germanischer Lloyd (GL) is tightening its board structure with the appointment of Erik van der Noordaa, former COO of the Netherland’s Damen Shipyards Group, as CEO. Van der Noordaa has earned his stripes with university degrees in both naval architecture and mechanical engineering. He will succeed Dr Hermann Klein as board member in charge of the group’s maritime service from December. Klein may be resigning but he will remain with GL in an advisory role. The creation of a CEO role marks a departure from the class society’s traditional leadership structure. Until now, its executive board has comprised three directors with equal authority. However, GL’s management and reporting structures have been under close review since the takeover of the group by private investor Günter Herz at the end of 2006. In its core maritime division, the group continued to gain market share in the classification of container ships. Since 2003, its coverage of the worldwide box ship fleet has risen from 34% to 40%, GL says.

London-based Lomar Shipping has promoted Achim Boehme, a former manager at ship financier Deutsche Schiffsbank, to CEO. He joined the group in spring, initially as chief financial officer, after leaving Schiffsbank amid the bank’s ongoing integration into parent group Commerzbank. Since Boehme’s arrival, Lomar – the shipping company of the Logothetis family – has gained strength in the German market through a number of vessel acquisitions. The lawyer, who splits his time between the group head office in London and Lomar’s office in Bremen, is also a wellknown player in Greek shipping circles through his previous position as head of Greek shipping at Schiffsbank. Lomar Shipping stirred the market in late 2009 with its $325M takeover of Allocean Group including 26 ships. It had built its war chest through the disposal of 67 ships during the boom years 2004-06.

VP for Ocean Freight Tennesse-based OHL has hired Lars Huebecker as vice-president of Ocean Freight-Americas within the company’s freight management and logistics business unit. Huebecker, formerly a senior director at freight forwarder Damco in the USA, will be responsible for development and procurement of all ocean freight services for OHL’s customers in the Americas, as well as for operations standards and regulatory compliance.

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4 November 2010

shipping in numbers Increase in number of heavy-lift ships (7501,000 tonne capability)

Gross tonnage increase in the Isle of Man Shipping Registry since 2008

$39M Reported sale price for a 2005-built Japanese bulker of 76,728dwt

350,000 Tonnes of fresh produce Israel’s Agrexco exports each year

$400M

Amount being spent to upgrade Walvis Bay port in Namibia

8.9%

500%

33%

Average container fleet growth forecast for the three years until January 2013

57%

Proportion of world tonnage with flag states opposed to mutual recognition of equipment approvals

20M 26% $70,000 Square metres reserved for new shipyards in China

Increase in ship repairs at Bahrain’s ASRY repair yard this year

Day rate for Capesize ships in the North Atlantic (Narvik and St Lawrence) ore trades

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