Baltic Spring 2013 by Think Publishing

online onboard Debate grows over the use of social media in shipping the baltic

class action The widening role of classification societies

the official magazine of the baltic exchange spring 2013 | www.thebaltic.com | Our word our bond

bringing back the shine How Nigel Richardson helped to restore the success of EA Gibson

Lethal lessons The human cost of counterfeiting

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ORIENT PROJECT SHIPPING

A world of difference...

+65 6227 2026 | shipping@orientproject.sg | www.orientproject.sg 002_BALTIC_SPR_13.indd 2

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chairman's message Spring 2013

Welcome to the baltic Chairman Quentin Soanes explains how the Baltic Exchange is staying ahead of the market and fighting its regulatory corner

illustration: Lauren crow

This February we shifted the publication of the Baltic Capesize Index forward by two hours to 11.00 GMT. Why is this noteworthy? Because it shows how the vessel chartering market has changed in the past couple of years. We have moved our reporting times forward because Singapore has established itself as a leading chartering centre, a place where there is authority to fix vessels. No longer do brokers in the Lion City await authorisation from a European head office; their principals in the region are able to give them the go-ahead to fix the ship. By reporting our Capesize Index routes at the end of the Asian working day and earlier in the European working day, we are supporting owners, brokers, traders and charterers in both regions. This builds on the services already being delivered by our Singapore office, including the publishing of supramax rates as well as tanker routes. The move is one of a series undertaken by the Baltic Exchange to ensure that its services meet the needs of the market. We have a continuing debate into our vessel descriptions, routes, publishing times and forward curves, with a series of committees and working groups that are able to take the freight and Forward Freight Agreement markets’ views into consideration and ensure that our independent data remains the leading benchmark mechanism for the shipping and freight derivative trading markets. The Baltic Exchange has been producing freight market data since the mid-1980s and we now provide a comprehensive suite of shipping

The Baltic remains the industry’s most reliable, independent source of data market data used and accepted globally. The news then that the Shanghai Shipping Exchange is producing its own data and bulk indices, although not altogether surprising, means that the Baltic Exchange cannot rest on its laurels and trade on former glories. With the Asian markets holding greater influence than ever before, it is vital that the routes reported by the Baltic reflect global trading patterns, that the information is relevant and usable by clients

worldwide, and that the information remains the industry’s most reliable, independent source of data. We believe that our methodology, input from members and experienced freight market reporting team make our assessments and indices the best currently available, and will remain so in the future. Ensuring that the Baltic Exchange’s information continues to be the best is a challenging task that is well within our powers, but potential regulatory threats to our indices are a challenge of a very different kind. The European Commission is currently in the process of examining the production methodology of all indices and benchmark mechanisms. This move comes in the wake of the LIBOR scandal, and our fear is that the Baltic Exchange will become caught in the crossfire. We are working hard to explain to legislators and financial authorities exactly how the Baltic’s indices are produced and why the shipping markets are so different from the financial sector. Our message to regulators is that the Baltic Exchange’s indices are based on professional assessments made by brokers with no money in the market. We are doing our utmost to explain to Brussels how the bulk shipping markets operate and why making an assessment of a vessel’s earnings is ultimately a professional judgement and not something that can be done with a database and a set of equations. We are confident that our explanations are not falling on deaf ears. For the Baltic Exchange’s indices to fail and no longer be used by the market because we failed to adapt and keep pace with change is something we will not allow to happen. Nor will we allow our industry to be regulated by politicians and advisers who simply haven’t considered the shipping markets. www.thebaltic.com Spring 2013

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THE REAL STORY

In daily life, faking it has become the norm rather than the exception, as cut prices entice upstanding citizens into buying counterfeit goods without fear of persecution. It was only a matter of time before fraudsters took on shipping, and take it on they have, with worryingly professional tactics. This issue’s cover story examines the sinister effects of fake parts, paperwork and processes. We must be on our guard to stop these criminals from denting the reputation of our industry. I urge you to check credentials, use trusted partners and above all be true to the industry’s motto of “Our word our bond”. Carly Fields

RETURNING PROSPERITY TO BREAKBULK – PAGE 66 EA GIBSON’S NIGEL RICHARDSON – PAGE 38

THE BALTIC Editor Carly Fields Art director Darren Endicott Senior sub-editor Alec Johnson Publisher Sam Gallagher Publishing director Ian McAuliffe Advertise with us: For all enquiries, contact Adam Lloyds at adam.lloyds@thinkpublishing.co.uk or +44 (0)20 8962 1253 Subscriptions This magazine is free to members of the Baltic Exchange and qualifying non-members. Others may purchase an annual subscription for £140. Contact baltic@thinkpublishing.co.uk

FEATURES

HOT TOPIC Counterfeit culture How should shipping tackle the growing, global problem of fake goods and parts? James Graham examines the perilous prevalence of counterfeiting in shipping, and finds lives and billions of dollars at stake.

The Baltic Exchange is a membership body at the heart of the global maritime market. It publishes freight market information that benchmarks freight rates across the major vessel sizes used to ship dry and wet bulk commodities. Its indices are used to settle Forward Freight Agreements (FFAs) used as a means to hedge exposure to freight market risk. The Baltic Exchange also publishes a daily fixture list, market commentary and FFA assessments.

BUSINESS BASE Net increase With social media use rocketing across the globe, Greg Knowler investigates the onboard use of the most popular platforms, and studies its impact on shipping businesses.

IN THE DOCK Road to recovery Carly Fields interviews Nigel Richardson, managing director of EA Gibson, to discover his path to the industry, his advice for managing the stresses of the job, and how he has been working to restore his company’s lustre.

CLASSIFICATION Classified information Tim Maughan speaks to Derek Hodgson, permanent secretary of the International Association

SHIP MANAGEMENT Food for thought With the recent ratification of the Maritime Labour Convention bringing in new requirements, this could be the perfect time to consider outsourcing ship supplies – according to Robert Steen Kledal of Wrist Ship Supply.

32 4

of Classification Societies, to discuss the organisation’s expanding role.

SPRING 2013 www.thebaltic.com

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contents spring 2013

www.thebaltic.com

our word our bond

the official magazine of the baltic exchange //

front

welcome Chairman Quentin Soanes looks at how the Baltic is representing its indices and work to Brussels.

opinion Igor Pankov of SCF Group makes the case for more shipping through the Northern Sea Passage.

quarterly digest News and views from across the industry, including cappuccino bunkers, ship design and the dangers of sanctions on Iran.

the debate David Cheslin, formerly of Coastlink, and Lars Erik Mangset from the WWF dispute the necessity and value of emission controls.

how utility ruined ship design – page 8

Fighting the fakes – page 18

// Ship finance Who’s hot, who’s not Banks seem to be moving away from lending to shipping businesses, instead favouring corporate loans. But there are still options. Craig Jallal analyses the financial situation and determines which banks might still prove fruitful.

Operations Wood for the trees While risk management is vital in assessing the dangers of the business, in some cases shipowners are finding too much information as bad as too little. Using the right tools is becoming essential. Tim Maughan separates the wheat from the chaff.

Environment Cleaner living Is eco-shipping all talk and no tonnage? Mary Parker assesses the current utility and potential value of environmentally friendly options.

Port focus Shipping surge for Latin American Emerging economies, particularly those that are rich in natural resources, are growing into shipping hubs. Clive Woodbridge looks at port expansion in Brazil, Uruguay and Chile.

Port briefs Latest news from the docks Updates from Hong Kong, Nigeria, Panama and Turkey.

back

the briefing Testing the waters Peter Lundahl Rasmussen on ballast.

Legal briefing The steel grasp of the law Nick Roberson looks at cargo condition.

unit loads Confidence returning to breakbulk segment Clive Woodbridge finds a sector upturn.

members’ news Events roundup 2012’s sporting and social activities.

insurance Laws that haven’t gone away Staying clean, by Andrew Jamieson.

P&I briefing Back to back Gavin Ritchie on back-to-back charters.

what a day! Hour by hour With Michalis Pantazopoulos.

financial crime hung out to dry – page 70

legal briefing New capital possibilities Simon Lew studies the value of bonds.

www.thebaltic.com spring 2013

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05/03/2013 15:44

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Program Overview The program consists of eight one-week modules plus a final integrating strategy project (thesis). All modules will deal with leadership issues and personal development. In the process of working with the integrating strategy project (ISP) the participants will give three presentations and the last presentation will function as the oral defence of the ISP/thesis.

Participants study the material in between sessions and write an assignment for each module. These assignments, as far as possible, will be focused on a problem related to the candidateâ&#x20AC;&#x2122;s own firm. For the final integrating strategy project, topics should be chosen for their strategic purpose and integrating function, giving participating companies a valuable and practical analysis.

Each module presents theories and gives a thorough introduction to reading material and motivates participants for their independent studies.

Pre-MBA (optional) Module 00

Accounting and international economics

18-20 Sept. 2013

Copenhagen Denmark

23-28 Sept. 2013

Copenhagen Denmark

02-06 Dec. 2013

Copenhagen Denmark Copenhagen Denmark

Shipping as a Business and a Market Module 01

Shipping as a business and a market + Leadership

Understanding the Global Environment Module 02 Module 03

Supply-chain management â&#x20AC;&#x201C; new logistical challenges International economics and market analysis + Leadership

10-15 Feb. 2014

Focus on Maritime Issues Module 04 Module 05

Ship design 07-11 April 2014 The maritime legal framework Operational management and information technology 23-28 June 2014 + Leadership

Hamburg Germany Copenhagen Denmark

Core Management Issues Module 06

Investment analysis, risk management and finance

01-05 Sept. 2014

Module 07

International marketing and organization Introduction to ISP Process Managing strategy and change Introduction to Industry Analysis + Leadership

03-07 Nov. 2014

Module 08

12-17 Jan. 2015

London UK Copenhagen Denmark Copenhagen Denmark

Integrating Strategy Project (ISP/Thesis) Presentation of Industry Analysis Introduction to Company and Issue Analysis Presentation of Company and Issue Analysis Introduction to Implementation Plan Presentation of the ISP with Implementation Plan (oral defence)

18-20 March 2015

Graduation

08 August 2015

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20-22 May 2015 05-07 August 2015

Copenhagen Denmark Copenhagen Denmark Copenhagen Denmark Copenhagen Denmark

05/03/2013 12:55

digest FFA forward curve, Singapore bunkering, emissions targets

quarterly digest n Derivatives

Activity weighted forward curves for tanker FFAs The Baltic Exchange has begun publishing an activity weighted forward curve for the tanker Forward Freight Agreement (FFA) market. Previously, forward curve calculations were based on an average of submissions given by Baltic Exchange panel brokers. The new curve takes into account the level of market activity each panel broker has undertaken over a specified period, and weights their submissions accordingly. This new calculation method will create a forward curve that is more aligned

with actual market activity and experience. The curve will be adopted for mark-to-market valuations by all clearing houses engaged in clearing tanker freight derivatives. Nils Arnesen, chair of the Tanker FFA Brokers’ Association and senior broker at Marex Spectron, said: “This is excellent news and a positive step. It sends a clear message of cohesion and unification to the tanker market and reinforces the Baltic’s commitment to this important sector of the shipping industry.”

When the global shipbuilding backlog is less than about 18 months, yards tend to cut prices for competitive advantage. However, prices appear to be bottoming out. There is far too much shipbuilding capacity out there. 2012 was the peak delivery year since the mid-1970s. So it is a question of who will blink first Mark Williams, research director at Braemar Seascope

n Bunkering

MPA announces measures to curb "cappuccino bunkers" Following complaints from members about problems with “cappuccino bunkers” in Singapore, where there appears to be excess air in the fuel supplied, the Baltic has held talks with the Maritime and Port Authority of Singapore (MPA). The MPA has now announced initiatives to improve bunker quality in the port. These include: • Singapore bunker deliveries must adhere to the Singapore Standard Code of Practice for Bunkering (SS600), which covers pre-delivery, actual delivery and post-delivery checks and documentation. See sg.sg/U9shj2 for details. • A 24-hour bunkering assistance hotline for the industry to contact the MPA for on-site assistance in bunker quantity disputes. Call 1800-BUNKERS (1800-2865377).

• Encouragement of the use of mass flow meters as the first step towards the development of a Singapore Standard for Mass Flow Metering. See www.mpa.gov.sg/sites/pdf/ mass-flow-metering-guide.pdf for full details. • The appointment of the National Metrology Centre to conduct an in-depth study on frothed bunkers. • Provision of a list of licensed bunker suppliers, as well as key metrics such as sales performance, and whether the supplier uses double-hulled bunker transfers or mass flow meters. If any members have comments or problems they are encouraged to advise the Baltic, which can take the matter further via the MPA.

The Royal Alfred Seafarers’ Society

Providing quality residential, nursing, dementia, short-term respite care and sheltered accommodation primarily for seafarers and their dependants. The nation owes a great deal to its seafarers so we provide them with a safe haven in old age and adversity. If you know of someone that needs our help, require more information or wish to make a donation please contact us.

Reg Charity No 209776

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Est 1865

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www.royalalfredseafarers.com

05/03/2013 10:45

n emissions

co2 cuts need more work towards low-carbon shipping study, which predicts a doubling of CO2 emissions by 2050 if no action is taken. The 2°C target was agreed by the European Council in 1996, based on the premise that global average temperatures should not exceed 2°C above preindustrial levels and that therefore concentration levels lower than 550 parts per million CO2 should

Shipping needs to do more than simply stabilise emissions to meet pressing carbon targets, according to DNV. “To achieve the 2°C target, the shipping sector must reduce CO2 emissions by 60% from today’s emission level,” said Magnus Strandmyr Eide, senior researcher at DNV Research & Innovation and main author of DNV’s Pathways

guide global limitation and reduction efforts. The DNV study has identified two cost-effective routes to achieving the 2°C target: first through nuclear power, or second by providing financial incentives for biofuel. While other pathways are described by DNV as “possible”, they are hampered by technologies that are costly or immature.

“Widespread use of biofuel in shipping depends on price, incentives and availability in sufficient volume,” says DNV. “To capitalise on the potential, action must be taken by shipowners, technology developers and regulators. This includes development of full-scale onboard prototyping and testing, as well as infrastructure development for bunkering.”

index summary Index level

3000

n Baltic clean tanker index n baltic dirty tanker index n Baltic Handysize index n Baltic supramax index n baltic panamax index n Baltic Capesize Index n Baltic dry index

2500

2000

1500

1000

500

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3 /2

3 /2 21

3 31

12 20 2/ /1

12 12

12 /1 21

0/ /1 10

2 /9 19

12 29

2 7/

2 /7 17

12 26

2 1/

2 11

2 01 19

/2 /3 27

05/03/2013 10:45

digest Ship design, claims reduction, International Shipping Week, waste management

written confirmation cuts claims

n Design

lines of beauty: Oslofjord

old masters

The appearance of ships has evolved over time, with the biggest changes following the shipping revolution of the 1960s. Ambrose Greenway regrets the passing of elegance Ships of today tend to be strictly functional, and designs are based on maximising efficiency and therefore profit. Passenger ships apart, this approach would have been familiar to 19th-century shipowners whose colliers and tramps were equally devoid of any pretension to beauty. Cargo was infinitely more important than looks. Of necessity, wars spawn utility vessels; some passably good looking, others less so, such as the US Hog Island freighters of the First World War, which derived their name not from their hoggish appearance but from an emergency shipyard on the Delaware River. Nor could the Liberty ships of the Second World War be described as beauties. In the 1920s shipowners began to take pride in the appearance and smartness 10

of their ships, which helped to convey an aura of reliability to existing and potential customers. Naval architects were allowed greater latitude, which manifested itself in curved stems and sweeping sheerlines, coupled with rounded superstructures and raking funnels and masts. Vladimir Yourkevitch’s revolutionary Normandie was as elegant as she was functional, and her fine-lined hull with pear-shaped, bulbous Modern functionality: Navion Hispania

forefoot made her a fitting rival for the traditional and more powerful Queen Mary. Sad to say, elegance is now a rare commodity, and while today’s ships are on the whole more colourful than hitherto, the use of hulls as floating billboards is to be deprecated. Daniel K Ludwig’s plain but highly profitable tankers and bulkers, which so enraged shiplovers in the 1950s, seem to have taken over the entire stable. Curves only appear when functional, such as in Ulstein’s extraordinary X-bow designs, while cruise ships are little more than hotel blocks stuck on a hull and car carriers are merely floating multi-storey garages. Is it too much to hope that the pendulum will one day swing back and that ships will once again become things of beauty?

An increase in claims on shipbroking members has prompted the International Transport Intermediaries Club (ITIC) to issue a warning on the importance of accurate record-keeping and the need to confirm telephone conversations in writing. ITIC has seen an increasing number of claims on its shipbroking members relating to the receipt and forwarding of messages. The club gives the example of how the failure of a shipbroker to provide written confirmation of the appointment of an arbitrator in a dispute between its principal – a charterer – and a shipowner, “exposed the broker to a claim and costs in excess of $200,000 at a court-ordered mediation in the US”.

Shipping is no place for careless gamblers. The risks are too high; the playing environment changes every day, while political and social demands shift with the tides Richard Sadler, chief executive officer of Lloyd’s Register

spring 2013 www.thebaltic.com

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05/03/2013 10:45

■ EVENTS

// EVENTS

NEW INDUSTRY WEEK LAUNCHED London is to host to its inaugural International Shipping Week this year, welcoming maritime industry leaders to the UK capital for a week of meetings and events. Taking place from 9-13 September, London International Shipping Week – Propelling World Trade will include a one-day conference and gala dinner on 12 September. Government and industry speakers will be invited to give their views on the future of shipping and London’s role in helping shipping emerge from the economic crisis. Doug Barrow, chief executive of Maritime London, described London International Shipping Week as a “great opportunity

for great networking with representatives across all maritime sectors”. London International Shipping Week is organised by Shipping Innovation – a joint venture between Elaborate Communications and Petrospot – in association with Maritime UK partners the Baltic Exchange, Maritime London and the UK Chamber of Shipping, and with TheCityUK, an independent promotional body for UK financial and professional services. FURTHER INFORMATION CAN BE FOUND AT WWW. LONDONINTERNATIONAL SHIPPINGWEEK.COM

7-12 April Singapore Maritime Week Singapore bit.ly/T5WKAM

WASTE TRAINING VIDEOS INCLUDE ANNEX V Training specialist Videotel has updated its Waste and Garbage Management training programme to accommodate updates to MARPOL Annex V. “Annex V will have an enormous impact on the ways ships handle their waste and demands an entirely new approach to waste management,” said Videotel chief executive Nigel Cleave. “The whole onus of responsibility has changed.”

■ SHORTS

COSTS TO RISE

Vessel operating costs are expected to rise by 3% in 2013 according to a survey by international accountant Moore Stephens. Lube expenditure and crew costs are to show the largest increases, according to the survey, which expects the smallest increases to be in management fees.

COLLISION TIPS

North P&I club has published a new loss-prevention guide for watchkeepers on how to avoid collisions at sea. Designed for use on ship’s bridges, it focuses on what the club considers to be the most important rules of the road in the International Regulations for Preventing Collisions at Sea 1972.

NEW P&I APP

The UK P&I Club has launched an iPad-based app to give mobile underwriting information to members and their insurance brokers. The iPandi app downloads underwriting data via the club’s IT systems, with security maintained by a unique licence key to access member information.

■ NUMBERS

537,000 7,300 number of UK jobs supported by the shipping, ports and maritime business sectors

number of jobs created by the UK shipping industry in the past two years

23-24 April Tradewinds Shipping China Shanghai, China bit.ly/QhRStl 14-16 May Breakbulk Europe 2013 Antwerp, Belgium bit.ly/RGKXXy 4-7 June Norshipping Oslo, Norway bit.ly/ZFNjdt 11 June IGC Grains Conference bit.ly/SQVuOr June (date tbc) Ship Lifecycle Management Conference Venue tbc The inaugural Ship Lifecycle Management Conference brings together the key stakeholders who achieve the efficient management of the ship as an asset through the use of new technology. bit.ly/U3kSEd 18-20 June Marine Money Week New York, US bit.ly/QLhcHY 11-12 July 11th ASEAN Ports and Shipping 2013 Windsor Plaza Hotel, Ho Chi Minh City, Vietnam Email: enquiries@ transportevents.com bit.ly/fSw9QG

Source: Maritime UK www.thebaltic.com SPRING 2013

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07/03/2013 13:57

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05/03/2013 12:38

DIGEST Iran sanctions, correction // EVENTS

For shipping in 2012, it was not so much a case of ‘Crisis? What crisis?’ as ‘Crisis? Which crisis?’ This year will be equally challenging Julian Wilkinson, Moore Stephens partner

■ INTERNATIONAL

SANCTIONS ON IRAN THREATEN UK SHIPPING The way the West is handling Iranian sanctions could have serious longterm repercussions for London’s marine insurance pre-eminence, according to Norton Rose. Philip Roche, a partner at the international legal practice, told The Baltic: “We are still working out quite a few problems where corporates have invested in Iran pre-sanctions and now find that business is unlawful. They are between a rock and a hard place. Quite often the authorities are being very hard-nosed. “There is so little diplomatic contact that service of English proceedings

on an Iranian counterpart is extraordinarily difficult.” Mr Roche believes shipping will look back at this period and see that sanctions harmed London’s and the West’s strength in P&I and marine insurance. “While it won’t become apparent for a long time yet, I think it will have a significant effect, long term, and that will be a shame,” he said. Sanctions are, he believes, stimulating development of new P&I and marine insurance providers that, without sanctions, probably would have taken longer to develop.

Simon Hartley, a fellow partner at Norton Rose, adds that the authorities do not appear to have anticipated the implications of these sanctions for shipping. “Shanghai and Singapore are actively promoting shipping, but the same is not necessarily the case in London, and with the tax regime in the UK now so horridly complicated it does not necessarily encourage people to set up shipping activities in the UK,” said Mr Hartley. “London has enjoyed a healthy position in the shipping sector and you fail to take steps to protect that position at your peril.”

NORTON ROSE PARTNERS PHILIP ROCHE (LEFT) AND SIMON HARTLEY (RIGHT)

9-13 September London International Shipping Week London, UK Email: info@shipping innovation.com www.london international shippingweek.com 11-12 September 2nd Black Sea Ports and Shipping 2013 The Marmara Taksim, Istanbul, Turkey Email: enquiries@ transportevents.com bit.ly/fSw9QG 23-24 October 8th Southern Asia Ports, Logistics and Shipping 2013 The Leela Kempinski Hotel, Mumbai, India Email: enquiries@ transportevents.com bit.ly/fSw9QG 21-22 November 11th Intermodal Africa South 2013 Feather Market Convention Centre, Port Elizabeth, South Africa Email: enquiries@ transportevents.com bit.ly/fSw9QG Date tbc Shiprepair Networking Event 2013 Venue tbc An innovative networking event with a fresh approach. bit.ly/U3kSEd

CORRECTION

On pages 42 and 44 of the winter 2012 issue of The Baltic, SSY was mistakenly referred to as Simon Spence & Young, instead of Simpson Spence & Young. Think apologises for any confusion the mistake may have caused.

www.thebaltic.com SPRING 2013

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07/03/2013 13:57

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04/03/2013 17:27

opinion Arctic logistics

the Rime of the modern mariner With the right training and equipment, the Northern Sea Passage can be a viable shipping alternative, argues Igor Pankov of SCF Group While winter gripped the northern hemisphere, the thoughts of many turned to the seasonal pleasures or inconveniences of snow and ice – depending on your preferences. At Russia’s SCF Group, by contrast, we have to address the challenges and opportunities presented by such conditions all year round. With the Arctic region estimated to hold 25% of the world’s remaining oil and gas reserves, the commercial attractions of this and nearby regions are clear. The question is how best to exploit the potential of this resourcerich area in a safe, environmentally friendly and commercially viable way. Given that more than 20% of Russia’s territory is north of the Arctic Circle and significant hydrocarbon resources are located there, the country clearly stands to benefit from improved access to the region. SCF Group, meanwhile, is uniquely positioned to provide that access. Generations of Russian merchants, seafarers and scientists have already gained a unique insight and expertise in Arctic exploration. Since the early 20th century, for example, Russia has been accumulating experience of regular ice navigation through the Northern Sea Route (NSR). It is only recently, however, that the full logistical potential of the NSR has come into focus. A typical voyage from Murmansk in the west to Japan in the east, along the NSR, cuts the distance in half compared with the alternative route via the Suez Canal. Add the potential to bring locally sourced energy to the Pacific region, while avoiding the piracy black spots of the Suez Canal route, and the case for the NSR becomes compelling. The possibility of large commercial vessels transiting the NSR only began to be evaluated seriously in 2009. Led by SCF Group and our Russian partners, this involved risk assessment and the implementation of special

operational controls, as a prelude to two record-breaking eastbound voyages. The first voyage was made by our aframax tanker SCF Baltica, in August 2010. A year later our larger suezmax tanker Vladimir Tikhonov completed her transit with a cargo of 121,000 tonnes of gas condensate, establishing a new high-latitude deepwater route. These pioneering voyages of large-capacity vessels were followed in 2012 by 46 vessels transiting the NSR, carrying around 1.2m tonnes of

Harsh and delicate Arctic environments require the use of innovative technical solutions for ships

cargo. Finally, Russian giant Gazprom shipped the first cargo of liquefied natural gas through the high-latitude deepwater route. The voyage of the ice-class-1A, winterised gas carrier Ob River, accompanied by two nuclearpowered icebreakers, was supervised by a Sovcomflot ice navigation expert, who was present onboard during this pioneering LNG Arctic journey. The resulting wealth of practical experience and data has revealed the true potential of the NSR, as warming seas and thinning ice have made it possible for large vessels to use this trade route, which in turn has increased its commercial attraction. With a third of our

158-vessel fleet being ice class, we are certainly well placed to develop use of the NSR and other high-latitude sea lanes. One thing is clear, however, and that is the importance of having highly trained and experienced seafarers to navigate in ice. This necessitates the investment of significant time and resources. To qualify as an ice captain of an SCF vessel, for example, requires a longer training period than to become a cosmonaut. Some time ago a special SCF ice captains league was founded, with the admission ticket being a minimum of three years of proven seagoing experience in ice conditions. Today the league is 56 captains strong and growing. Another major determinant of success is having the right hardware. Harsh and delicate Arctic environments require the use of innovative technical solutions for ships. In addition to specialist winterisation capabilities, vessels also need to comply with strict environmental standards, as Arctic ecosystems are fragile and need protection. With a commitment to human resources and infrastructure, long-term planning and continuing investment in hardware, it is possible to see the NSR become navigable routinely for up to half the year. Through effective risk management, supported by continuing global demand for the resources of the Arctic and its neighbouring regions, the NSR looks set to become an attractive and viable artery for world trade. //

Igor Pankov

is vice president of SCF Group and head of the safety and quality department. SCF Group is Russia’s largest shipping company and a leading energy transporter.

www.thebaltic.com spring 2013

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05/03/2013 10:47

debate Emission control areas

Fuel fight

With shipping profits falling, David Cheslin wants emission controls to be relaxed. But Lars Erik Mangset argues that the environmental cost would be too high

against

David Cheslin

former Coastlink chairman

David was chairman of Coastlink, a European members’ organisation dedicated to the promotion of shortsea and feeder container shipping, from its startup in 2004 until the end of 2012. With a background in shipping journalism, David has worked in international public relations for more than 33 years, specialising in shipping and allied industries.

During my term as chairman of the Coastlink Network, emission controls grew to be a major issue, and our conferences included several presentations on it. It was generally considered to be a threat to the business of shortsea container operators, as it seemed likely to damage the already-marginal competitive position of shortsea shipping versus road and rail modes. Today, operators have come to accept that sulphur emission control areas (SECAs) are here to stay, new SECAs will be created and permissible emission limits will be reduced, eventually to 0.1% sulphur oxides (SOx) by 2015 in the English Channel, North Sea and the Baltic. Globally, the cap is currently 3.5% but will drop to 0.5% by 2020. Perhaps the deadline will be stretched to 2025 if a review in 2018 decides there will be insufficient availability of suitable fuels, but few would bank on this happening. The question now is what steps can be taken to prevent the cost of fuelling ships from becoming prohibitive. Interestingly, the Irish Sea is not governed by the strict SECA limits that apply in the English Channel, North Sea and Baltic, but by the global cap. However, there is much speculation, especially in Ireland, as to whether this will continue to be the case. For the time being, to reduce SOx emissions to mandatory levels, virtually

The money for investing in ecofriendly systems simply isn’t there 16

all shortsea container vessels use distillate fuels. There has been some trialling of scrubber systems: in the summer of 2011, the Finnish company Containerships fitted one of its own ships with a Wärtsilä scrubber system, but little feedback on the results has entered the public domain. So far, scrubbers are more common on ferries, as they consume far more fuel per day than shortsea container ships. Much talk has surrounded liquefied natural gas (LNG) as an alternative fuel, but no one is building shortsea containerships at present, and the cost of converting existing ships is prohibitive given that most are not that new. And, of course, no one knows how much LNG will increase in price as the years go by. It may not prove to be a cheap fuel in the future. The cost of investing in eco-friendly systems falls on the shipowners, not the operators, and most shipowners are wholly dependent on their bankers for their continued existence. The money simply isn’t there. Feeding containers to outports must continue, as road and rail do not provide viable alternatives. Shortsea/intermodal faces a less certain future as the competition from road is a serious concern. Somehow I feel that resourceful operators such as Samskip will survive, but it will be a challenge. Finally, it should be pointed out that shortsea shipping is a green solution: a single engine and a small crew can move 800-1,200 teu. A truck only moves the equivalent of 2 teu and requires a clean engine and a driver to do so. Meanwhile, rail is only moving 80-120 teu per train, and diesel traction for freight is more common than electric locomotives.

Spring 2013 www.thebaltic.com

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background

Lars Erik Mangset

shipping and climate adviser at WWF Norway

for

The argument that shortsea shipping is very green compared with road or rail is traditional, but tends to overlook the fact that ship pollution covers many more areas beyond the emission of greenhouse gases. Sewage, grey-water discharge, garbage disposal, disturbance of wildlife, the translocation of species and contribution to poor air quality means that the broader picture is not one of a typically green sector. The revised International Maritime Organization Emission Control Area regulations now cover two types of pollutants: nitrous oxide (NOx) and sulphur oxide (SOx). Shipping is estimated to contribute about 15% of global NOx emissions and 8% of global SOx emissions. In comparison, shipping contributes about 3% of global CO2 emissions. So relatively speaking, shipping is a high contributor to poor air quality. Yes, emission control areas (ECAs) could be a headache for certain ship operators that would like to stick to using residual or heavy fuel oil, but it cannot be ignored that marine fuel in its current form is on average 2,700 times dirtier than fuel used in the road sector on a weight-for-weight basis. From a wider perspective, shipping counts for several tens of thousands of premature deaths in Europe each year – it has been calculated that it is as many as 50,000. Associated health expenditure is put at around €60bn, and those numbers don’t take into account the adverse environmental impact, for example the loss of fish stocks through the eutrophication of water. Full implementation of the ECA rules could save perhaps half of the premature deaths and make associated societal savings. Beyond

Lars Erik holds a master’s degree in economics. After several years as a researcher in Det Norske Veritas, he is now an adviser for the World

Wide Fund for Nature in Norway. At WWF he follows shipping policy related to greenhouse gas emissions and Arctic shipping.

the health benefits there are significant environmental benefits such as reduced contribution of acidification of land and water. In the longer term, it is technically possible to develop zero-emission ships. The first step towards that would be to get rid of heavy fuel oil altogether in shipping. Using less heavy fuel oil can also reduce the risk of acute pollution from fuel. This is a specific concern in Baltic and Arctic waters – wherever there is ice – because heavy fuel oil emulsifies in the water and sticks to the ice, whereas diesel evaporates.

Marine fuel, in its current form, is 2,700 times dirtier than fuel used in the road sector This means that it can take a long time before it is diffused either into the air or into the water. At the moment, the shipping industry continues to engage with refineries about how they can still use heavy fuel oil with lower sulphur levels, but they should be considering a permanent switch to an alternative fuel instead. That’s what I see for the future. Existing ships could switch directly to distillate or diesel fuels as a permanent solution. Beyond that, liquefied natural gas could be a viable alternative. I would also like to see fuel cells in use on ships, and am delighted to see some pioneers already looking into it.

The International Maritime Organization’s (IMO’s) MARPOL Annex VI was adopted in 1997 and limits the main air pollutants in ship exhaust gas, including sulphur oxides (SOx) and nitrous oxides (NOx), and prohibits deliberate emissions of ozonedepleting substances. The annex also regulates shipboard incineration and the emissions of volatile organic compounds from tankers. After the annex came into force on 19 May 2005, the IMO’s Marine Environment Protection Committee (MEPC) agreed to revise MARPOL Annex VI to strengthen the emission limits in light of improved technology and the implementation experience. After three years’ examination, the MEPC adopted the revised MARPOL Annex VI in October 2008, and the associated NOx Technical Code 2008 entered force on 1 July 2010. Source: IMO Shortsea container shipping can be split into two categories: feeding and shortsea/intermodal. Feeding is the business of moving deepsea containers between major hub ports such as Hamburg and Rotterdam, and outports in the Baltic Sea, northern Spain, Ireland and Scotland. Shortsea/ intermodal operators offer door-to-door services throughout Europe using road, rail and sea modes as appropriate. They compete head-to-head with road transport operators, who will use ferries or the Channel Tunnel where water needs to be crossed. Shortsea operators tend to own few ships; they rely instead on the short-term charter market, with many ships owned by small German organisations or KG funds.

www.thebaltic.com Spring 2013

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05/03/2013 10:49

Hot topic Counterfeiting

James Graham looks into the murky world of the false, forged and phony » illustration: matt murphy

spring 2013 www.thebaltic.com

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When refrigerated containers started exploding on dock in 2011, shipping lines and port operators were initially at a loss to pinpoint the cause of the sudden eruptions. But once the dots had been joined it became clear that the problem stemmed from maintenance that had taken place in Vietnam earlier in the year using counterfeited gases. The villain of the piece was counterfeit R134a refrigerant, which had been re-gassed into reefers at more than one container depot in Ho Chi Minh City in Vietnam. After this, more fake refrigerant was found in containers in other countries.

Four port workers paid with their lives for this instance of counterfeiting. This simple and dramatic demonstration of the dangers posed by counterfeited marine products should be a wake-up call to a shipping industry that it is as vulnerable as any other to counterfeited and faked products and spares. That is the message from Cambodia-based maritime safety consultant Bob Couttie. Mr Couttie, who runs a maritime safety website, says: â&#x20AC;&#x153;I doubt container owners were actually aware of the dangers or the likelihood of counterfeit gases. Container www.thebaltic.com spring 2013

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Hot topic Counterfeiting

For seafarers and longshoremen, the costs will usually be in health and safety as a result of death and injury Andrew Linington, Nautilus International

shipping generally works on slim margins and speed. Was it cheaper to do the maintenance in Vietnam than elsewhere? Almost certainly, yes. Would companies take the time to have the gas analysed before it was installed? Probably not – that would take time and money. “I don’t think the consequences of fake gas even occurred to them.” Real problems The annual parts and supply needs of the global maritime industry runs into billions of dollars – an attractive proposition for fraudsters and counterfeiters looking to relieve funds from legitimate customers with illegitimate products. Counterfeiters prey on companies desperate for an obsolete part or facing a constrained supply. Captain Pottengal Mukundan, director of the International Maritime Bureau, part of ICC Commercial Crime Services, sees counterfeiting of maritime spares and equipment as simply another aspect of world crime that needs to be tackled. “Counterfeiting is widespread across all industrial sectors, including maritime. It is a world crime that needs to be dealt with, as it is often associated with organised crime,” he says. Seafarers as well as owners are concerned about counterfeit parts, says Andrew Linington, director of campaigns and communications for the seafarers’ union Nautilus International. “[We] are concerned that it could increase as a consequence of cost-cutting pressures in the current economic climate. We have seen some estimates that as much as 50% of component sales are counterfeits,” he tells The Baltic.

“For shipowners, the immediate attraction is that fake parts are said to be up to 40% cheaper than genuine components. However, this masks longer-term costs as a result of factors such as higher running costs, more frequent breakdowns, machinery failures, vessel downtime, cargo damage (eg from failures in hatch seals) and invalidated warranties. “For seafarers and longshoremen, the costs will usually be in health and safety as a result of death and injury, and also asbestos.” Mr Couttie’s website, Maritime Accident Casebook, notes the case of a captain whose ship ran aground on a sandbank as the vessel was guided by pirated navigational software. And, as recently as June 2012, an alert was issued by the International Maritime Organization (IMO) that counterfeit life-saving appliances (LSA) are available on the market. The IMO warns that these goods cost less than the real product and are “always inferior and, therefore, less durable, unsafe or downright dangerous because they have not undergone the rigorous testing that should be applied to make sure that they are safe.” At the same time, Lloyd’s Register issued a safety alert over fake safety equipment concerning Unitor emergency escape breathing devices (EEBDs). Mr Couttie’s response is direct: “The main repercussion is the likelihood of death. When you’re in a circumstance where you need to don an EEBD and find it doesn’t work, you’re not likely to be able to run out and get a real one. That is what is frightening about counterfeit emergency equipment – you might not find out it doesn’t work until it’s too late.”

material hazard Asbestos use on ships has been banned by international rules for more than a decade, yet Nautilus International is concerned that forged parts from China are reintroducing asbestos into the maritime workplace. Nautilus’s Andrew Linington says: “There are examples of Chinese components stamped ‘asbestos-free’ containing significant quantities of the substance – as much as 25%.

We have had serious concern over the continued presence of asbestos on ships, despite international rules introduced in 2002 to ban its use. In 2009, Nautilus revealed evidence of how asbestos had been found in several thousand parts onboard a new ship, and it was recently revealed that 95% of ships checked in the previous four years contained the deadly material.

“We also warned that the problem affects ships which have been certified as asbestos-free. Often counterfeit components or spare parts containing asbestos would be installed after the vessels had been built and declared safe from asbestos. We have also seen evidence of problems with hatch cover failings as a result of counterfeit gaskets and engine problems as a consequence of fake spares.”

spring 2013 www.thebaltic.com

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05/03/2013 10:50

40%

the reported price difference between genuine and counterfeit components

While counterfeiters may not tackle large equipment such as derricks, turbines or cargo handling equipment, Capt Mukundan remains concerned that safety is being compromised. He says: “I do not think there is likelihood that larger items are in danger, but smaller components can be counterfeited. This can compromise safety.” Mr Couttie agrees: “I suspect you are more likely to find smaller items counterfeited. Larger equipment is more likely to be seen by the original equipment manufacturer (OEM) during its maintenance. If it can be manufactured, then it’s likely it’s being counterfeited,” he says. As to the scale of counterfeiting worldwide, the jury is still out, according to Mr Couttie: “At the moment, as far as I know, there hasn’t been an adequate study, but it’s serious enough for the Japanese Marine Equipment Association to consider it significant and seek steps to fight it,” he says. A large proportion of the counterfeits originate from China, India, South Korea and Eastern Europe, although genuine manufacturers believe that some of the counterfeit parts are being made in Greece, Spain and the UK. Genuine articles Capt Mukundan is convinced that the best way to keep counterfeit items out of the maritime industry is complete supply chain visibility. He notes: “In the airline industry, every nut and bolt has a complete history. It is not the case in the maritime industry.” He believes responsible owners will never seek out counterfeit items. However, with non-existent margins in much of shipping today, unscrupulous owners will be attracted to counterfeit goods when they are offered at below-market prices. His comments are echoed by a spokesperson of shipping line Hapag-Lloyd, who comments that the supply chain is best protected by lines’ knowhow and the experience of procurement staff who are “not only looking for the lowest price on the market, as counterfeit parts are often much lower in price than the original spare parts”. Mr Couttie says: “There is certainly a need for greater awareness of counterfeit spares and so on in the maritime industry. There may be a need to ensure the integrity of the supply chain – counterfeits do find their way on to the shelves of legitimate chandlers – and for manufacturers to look at ways to ensure that end-users can authenticate the products they are using or buying [as] legitimate. That said, counterfeiters are fast on their feet – years back, laser

The costs associated with counterfeiting are, by any measure, staggering. In terms of lost sales to legitimate manufacturers, lost tax revenue and duties which go unpaid by the criminals involved in the trafficking, lost jobs, and lost investment in capital improvements and research and development International AntiCounterfeiting Coalition

The scale and impact of counterfeiting today is unprecedented. It has become a serious global problem The AntiCounterfeiting Group

The immense adverse economic and social impacts of intellectual property theft, require that combating counterfeiting and piracy become a priority for governments, rights holders and society Business Action to Stop Counterfeiting and Piracy

www.thebaltic.com spring 2013

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HALF HORIZONTAL.indd 1

DPW006_Baltic_HP 124 x 178mm_Feb2013_r1.indd 1

04/03/2013 10:39

3/3/13 9:59 AM

The Connecticut Maritime Association would like to thank all participants at this yearâ&#x20AC;&#x2122;s

We hope to see you next year at CMA Shipping 2014

March 17, 18 & 19, 2014 Once again at the Hilton Hotel, Stamford, CT

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04/03/2013 17:27

Hot topic Counterfeiting

In the airline industry, every nut and bolt has a complete history. It is not the case in the maritime industry Capt Pottengal Mukundan, International Maritime Bureau

hologram stickers were used to identify genuine articles; however, within a short time, counterfeiters were able to counterfeit them.” From the offshore side, Nautilus International’s Mr Linington explains that the union has “stressed the importance of senior personnel who are responsible for ordering parts to ensure that they are acquired only from recognised manufacturers and bona fide suppliers. We have also advised members onboard ships to check that spare parts that they are supplied with are genuine and to refer to the fleet superintendent or managers ashore in the event of doubt. “We have also raised concerns with the authorities in the UK and the Netherlands – notably in respect of asbestos – and these have in turn been taken to the IMO.”

“There are two consequences: since they don’t work, it increases the chances of illicit drugs, stowaways, or even, conceivably, terrorists or bombs, being loaded aboard ship in those ports that use them. We know they are being used in petrochemical facilities in Mexico, for instance. That increases the ease with which a bomb could be placed in the facility and, obviously, presents a threat to ships at that facility. “The other is what we have seen onshore: supposedly positive responses by this equipment used to justify shakedowns and detention. It could be used to justify detention of a vessel on suspicion of, say, drugs, pending a long, slow search of the vessel, with the offer of making things easier with the appropriate greasing of palms.” Counterfeit OEM parts can cost much less than the genuine components. software struggle In difficult economic times, buyers, Pirated software poses yet another guided by cost considerations, threat. Mr Couttie says: “I suspect may seek to obtain parts from the threat will come over time those offering the cheapest as computer systems become prices. If the parts purchased more and more integrated. One estimate of the proportion are counterfeit, higher running wonders how many companies, of components costs will evaporate any savings. especially in less developed sold that are Much worse, the counterfeit parts countries like the Philippines, counterfeit can cause machine failure and are using illicit copies of, say, subsequent vessel downtime, cargo Microsoft Word, which have viruses damage and, in the most extreme loaded into them? I have found cases, death or injury to crew. 60 different viruses on a brand Genuine manufacturers are urging buyers new computer. to deal directly with OEMs and reliable spares “I think we have to look at the implication suppliers, and to be wary of some websites that of the Stuxnet attack on the Iranian nuclear have sprung up selling marine equipment spares. facilities, and similar problems in the US. Already They, and many others in the industry, see it as we have viruses being injected into and disabling reckless, not to say a false economy, to knowingly computers, followed by demands for ransom acquire a counterfeit part, implying a decision to payments to unlock the computers. There is buy down to a price, not up to a standard. similar potential for similar attacks on shipping Counterfeiting is not a victimless crime. companies, disabling ships at sea, and we Pirated DVDs, fake branded handbags and probably wouldn’t know it was happening. phoney cigarettes take revenue from genuine Pirate software is a potential avenue for installing manufacturers and tarnish brands. Counterfeiting such a virus, although [it is] more likely to come at sea takes on a more sinister slant with fake through a network connection.” ship’s equipment, false bills of ladings and more Mr Linington adds: “There have been concerns impacting on safety at sea where the victim may, in the past about the use of illicit electronic ultimately, pay with their life. charts – although many shipping companies go to great lengths to ensure seafarers do not use ship-sensitive systems for personal use.” // James Graham On a hardware side, fraudulent bomb-detectors After a career in daily newspapers, being marketed to vulnerable government James started in business-to-business security agencies and anti-terrorism companies transport journalism in 1995, and specialises in ocean and rail-cargo are being used to assess the presence or absence transport. Outside journalism, James also of explosives aboard ship. This equipment, and works for a leading transport PR agency. other ineffective devices, have repercussions for shipping lines, says Mr Couttie.

50%

fast facts • Counterfeiting costs US businesses $200bn-250bn annually. • Counterfeit merchandise has been directly responsible for the loss of more than 750,000 jobs in the US. • Since 1982, the global trade in illegitimate goods has increased from $5.5bn to approximately $600bn annually. • Approximately 5%-7% of world trade is in counterfeit goods. • US companies suffer $9bn in annual trade losses due to international copyright piracy. • Counterfeiting poses a threat to global health and safety.

Source: International AntiCounterfeiting Coalition

www.thebaltic.com spring 2013

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05/03/2013 15:44

hot topic Counterfeiting case study

ICC Commercial Crime Services

fakes’ progress Fraudsters are increasingly using intellectual property theft, document forgery and better technical skills, laments Max Vetter of ICC Commercial Crime Services Max Vetter

is assistant director at the Counterfeiting Intelligence Bureau of the ICC Commercial Crime Services. He holds a BSc in physics with astrophysics and an MSc in communication systems and signal processing from Bristol University. Max is also a Metropolitan Police special constable, allowing him to combine his expertise in internet intelligence, investigations and anticounterfeiting to train and work alongside units in police and government agencies.

The production of counterfeit company websites, bills of lading (BoL) and even certificates of authentication is nothing new, but several recent cases investigated by ICC Commercial Crime Services have seen all of these fraudulent activities used in combination, resulting in a sophisticated fraud that companies are falling for more frequently. First the fraudsters create counterfeit websites for various legitimate companies. Then the fraudsters offer a range of goods for favourable prices by either advertising online or contacting victims directly. Once the victim is engaged, the fraudsters present them with counterfeit certificates of major trade associations, ISO accreditation and images of the goods purporting to be shipped. They also provide links to the fake websites and to legitimate business registration materials of real companies to convince victims that they are legitimate. The fraudsters then send the victim a counterfeit BoL and shipping details, purportedly showing that the goods have been shipped, requesting that they also check the shipment on a carrier website. The counterfeit carrier website looks startlingly like the original company’s website, including letterheads, layout and even the latest news items. Checking via the counterfeit website would show that the shipment was legitimate, so the victims would then forward payment for the goods. The victims would discover fraud only when the shipment did not arrive at the destination weeks later and when, on rechecking the website, they found that it was counterfeit. The following two examples explain the process in more detail. The first concerned what appeared to be a valuable containerised

Online confirmations – while appearing convincing – cannot always be taken at face value and relied on 24

shipment of copper cathodes from South America to the Far East. On their faces, the BoLs presented appeared to be in order. The carrier’s website further attested that the cargoes had been loaded as per the two BoLs referenced. However, after further investigation it transpired that the details on the BoLs contradicted what the website stated. When contacted, the physical carrier was able to quickly confirm that the vessel was trading elsewhere and that while the vessel had bunkered at the discharge port, no cargo operations had been performed in respect of this transaction. On further inspection, several details on the fake carrier website connected to the vessel were found to be factually incorrect. The second example relates to the purported shipment of a spurious urea cargo from Malaysia to Vietnam. On this occasion, the carrier’s website bore a remarkable resemblance to the legitimate website of one of the world’s largest liner companies. In fact, the website pages had been replicated and presented in such a manner that at first glance they could lead users to unwittingly believe that they were dealing with the legitimate carrier’s website. Corporate logos resembling those of the liner company were also present throughout the web pages. The liner company subsequently had the offending website taken down. By this time, however, the damage had been done, and the victim had already paid a considerable amount of money to the fraudsters. These cases illustrate how such online confirmations – while appearing convincing – cannot always be taken at face value and relied on. They also underline the need for independent verification of documents (particularly of BoLs), the legitimacy of companies involved, and the validity of websites for these companies. Further, caution must be exercised by banks and others when seeking online confirmation for certain carrier websites. Unless the origins of the website are verified, total reliance on website confirmations should be avoided. Like legitimate businesses, fraudsters have been quick to appreciate the value of a wellpresented website in furthering their business.

spring 2013 www.thebaltic.com

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05/03/2013 10:51

www.solaceglobalmaritime.com

Safeguarding the maritime industry and its resources across the globe. Visit our stand Q33 at Sea Asia, 9th-11th April 2013

Solace Global Maritime Limited Twin Sails House, West Quay Road, Poole, Dorset, BH15 1JF, UK T +44(0)1202 308810 E info@solaceglobalmaritime.com W www.solaceglobalmaritime.com

Registered in England and Wales, Company Number: 07262248

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06/03/2013 09:08

Business Base Social media

Corporate use of social media is thriving, but is shipping getting involved? Greg Knowler logs in

net increase

he first tweet went out a few hours after the Costa Concordia cruise ship ran aground off the western coast of Italy on 13 January 2012. From then on the drama was played out in real time, with shipowner Costa Cruises rapidly losing any corporate grip on events. More than 250,000 tweets were posted on the accident, explains Mark Clark, director of crisis communications network Navigate Response, with figures peaking within 24 hours of the incident. Few said anything positive about the company. “No one ever wants to imagine needing a plan for something as tragic as the sinking of a cruise ship, but on the brink of a disaster, having a plan for such an emergency makes dealing with social media outrage or heartfelt condolences easier,” Mr Clark says. The Costa Concordia disaster illustrated the dark side of mismanaging or ignoring a social media presence, but as part of a communications and marketing strategy, social media can provide unparalleled interaction between a company and a vast market of potential customers. The numbers are irresistible: more than half a billion tweets are sent each day; Facebook boasts more than a billion users. Never before has so much information and instant feedback

been so available, all free from filtering by news organisations and untouched by third parties. Business is widely using Twitter, Facebook, LinkedIn, Upcoming, Yahoo! Answers and YouTube to connect with customers and employees. But making sense of this ability to interact with customers is pushing maritimerelated organisations deep into uncharted waters. In shipping, one of the world’s biggest carriers, Maersk Line, was quick to establish itself in social media. The line won an award for “Social Media Campaign of the Year” at the European Digital Communications Awards in 2012 after securing, at low cost, 420,000 Facebook fans in 11 months. What Maersk Line did before many organisations is employ a person dedicated to establishing and boosting the company’s social media presence. Jonathan Wichmann joined the line in early 2012, and today the carrier is present on nine platforms and has its own website dedicated to social media. “The main reason we chose to get engaged was to get closer to our customers,” Mr Wichmann says. “To try to see if we can nurture our relationship with them further through these channels in a more informal space, you could say. In the past years we’ve gradually become more and more focused on our customers’ needs,

spring 2013 www.thebaltic.com

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05/03/2013 15:44

From solitude to social butterfly The business of shipping has changed little in the past two decades: cargoes still get loaded and unloaded, ships still trundle along, and seafarers still spend too much time away from family and friends. But the arrival of the internet, and consequently easier ways to get in touch with those ashore, has allowed life for those on the ocean waves to seem less remote. Maersk’s social media guru, Jonathan Wichmann, thought it was time to find out what social media has done for this group of often overlooked individuals, and used seafaring blogging site gCaptain to pose a question: “How social are mariners?” Those who responded didn’t hold social media sites in high esteem. “gCaptain is as close as I get to social media,” said one. “I’m not on Facebook, Twitter, or anything else that has been created recently. If I want to reach someone, I’ll call or email them. Beyond that, I don’t want my life on the internet.” Another explains that the level of sociability depends on the level of the mariner: “Newer [mariners] are a little more social and less opinionated.”

and this was the natural next step in our journey towards true customer-centricism.” This ability to address stakeholders directly is a key benefit for a company establishing its social media presence. Allison Skipper, public relations manager for the South Carolina Ports Authority, says the authority had found great success in using social media to reach its audience. The @SCPorts account on Twitter posts news, links to relevant articles, photos and snippets about what port staff are doing in the community. “We also use Twitter to live tweet during industry conferences, particularly when port executives and customers are presenting,” says Ms Skipper. Content such as marketing videos, news and presentations is posted across the port authority’s Facebook, YouTube and Twitter accounts. “Keeping the content on each of these media up to date and relevant does take time and commitment from the organisation, but the speed of information flow, level of interaction with influencers and customers, and low cost of entry – most of what we do is 100% free – makes it well worth the investment.” The Baltic Exchange’s twitter account (@BalticExchange) has a growing number of followers and hopes are that the launch of a new website later in the year will further improve the

Some point out that ‘social’ has different meanings for different people: “I think we used to be much more sociable on board years ago. With computers nowadays, we lock ourselves up in our rooms and talk to people far away via the internet. Years ago, we played cards in the mess, watched movies together in the mess or lounge and generally interacted with our shipmates much more than we do now.” Another agrees: “With the advent of laptops and WiFi in cabins and in all other areas of the vessel people now, when they go off watch, will go to the cabin and surf the net or go on Facebook, rather than going down and having a game of darts or chess or something like that. So internet has made mariners more social with the outside world, but a lot less with shipmates.” But perhaps the most worrying statement is how social media threatens safety at sea. “I’ve seen quite a lot of officers on the bridge surfing the internet, going on Facebook on their phones, iPads or on the bridge computer, when they should be keeping a watch, frequently when there’s no lookout present.”

Making sense of social media’s ability to interact with customers is pushing maritime-related organisations deep into uncharted waters organisation’s social media involvement. The Baltic Exchange also manages the FFA Traders (FMIUG) & FFA Brokers’ Association LinkedIn discussion group. “We recognise that we need to be communicating across all channels and are working to increase our social media presence,” says a spokesperson for the Baltic. What investment is required? In a word: people, or, usually, one person. Mr Wichmann remains the only one involved in social media at Maersk. “The first six months only half my time was spent on it, but from last summer I’ve been focusing on [social media] 100%,” he says, adding that little was spent on the programme. “That’s why social media is good in the current state of things. It’s low cost, high impact.” www.thebaltic.com spring 2013

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BUSINESS BASE Social media

In past surveys, social media has often been described as a waste of time, but the last year has seen a real shift in opinion But it can generate huge volumes of activity, which veteran US ports communications manager Tom Swinson says can be challenging to manage. “For ports and other logistics organisations with the luxury of large communication teams to handle the volume, it can be very effective,” he says. However, Mr Swinson says most US ports have been slow to recognise the potential long-term value of social media outlets. “It’s definitely a long-term commitment and has to be embraced by senior management. We’re getting closer, but the widespread, long-term effective use of social media by US ports as a whole is still finding its way into the communications mix.” Mr Swinson says traditionally conservative US ports have shied away from social media because of the risks of conversations on controversial subjects, such as environmental issues, operational challenges, service breakdowns, contentious projects or upset customers. Avoiding sensitive topics is one thing, but international law firm Ince & Co says in the professional arena employers also have to be aware of the risks of employee misuse.

70%

of shipping companies say their use of social media has increased in the past year

25%

SOURCE: SHIPSERV SURVEY, 2012

are still not using it for business purposes

200

million Linkedin members in 200 countries

If Twitter were a country it would be the largest in the world, counting active users

5th

The firm reports typical issues including employees posting comments about the organisation, colleagues or clients that created liabilities for the employer and formed the basis of claims against it. In its May 2012 employment bulletin, Ince & Co also asks who owns the connections in an employee’s personal LinkedIn account, and how a company could control the use of smartphones owned by employees. For Maersk’s Mr Wichmann, this isn’t a problem; he feels employee use of social media does not need to be controlled as much as guided. “We’ve picked out a number of employees and given them guidelines, and are talking to them regularly. Of course they will make mistakes, but we’ll learn from that,” he says. “Anyway, it’s not like they don’t know that they shouldn’t go out and say all sorts of confidential things. In that way it’s no different from the old days when you could go to the press or take to the streets or whatever.” Still, when it comes to change, shipping moves about as fast as a turning supertanker. So it is no surprise to hear that for many in the industry, social media is not part of any immediate strategy. Arthur Bowring, managing director of the Hong Kong Shipowners Association – whose 1,990 vessels comprised nearly 134 million dwt in December 2011 – is not convinced of the benefits social media would bring to the association. “Communication is very important in the maritime industry, make no mistake, but there are better ways to communicate with our members than Twitter or Facebook, such as email, newsletter and even by fax,” he says. “Yes, we are looking at social media, but for our organisation it is not the way to go at the moment.” //

SOCIAL MEDIA BY NUMBERS

Official LinkedIn statistics Official YouTube statistics Twitter figures, from AllTwitter Go-Globe’s social media facts

bit.ly/VPqUXr bit.ly/gzYBVx bit.ly/QC4eeM bit.ly/12QzzOG

SPRING 2013 www.thebaltic.com

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the interactivity surge Corporate use of social media has matured in the past two years, moving from the simple broadcasting of messages to more sophisticated and interactive use, according to Burson-Marsteller. The global public relations company has been following and examining the Fortune Global 100 companies’ social media presence and use since 2010 and reports its latest findings in its Global Social Media Check-Up 2012.

“This year’s study shows an interesting trend in the increase of content creation among the Fortune Global 100,” said Burson-Marsteller worldwide chief executive Mark Penn. “Since 2010, it has been interesting to see the companies’ use evolve from broadcasting to engagement to content creation. Companies are now integrating more original multimedia content to share with followers on Twitter, Facebook and YouTube.”

Companies in the Fortune Global 100 were mentioned a total of 10,400,132 times online during a month-long period, mostly on Twitter. BursonMarsteller also reports that 87% of companies are using at least one of the major social platforms to communicate with online stakeholders. The largest growth has been on YouTube, where 79% of companies in the study now use a branded YouTube channel, compared to 57% in 2011.

Perhaps more important are the statistics on followers, proving that there is an online market for information on these companies. Since 2011, the average number of followers per corporate Twitter account has nearly tripled to 14,709, while on Facebook the average number of likes per company page has increased by 275% since 2010 to 152,646 likes in 2012. For more information, go to bm.com/social to view the findings.

25%

40%

45%

65%

start and complete their business purchasing online

don’t measure the success of their company’s internet activity

say senior management has little or no interest in social media

have a company LinkedIn profile

A spokesperson for the Singapore Shipping Association expresses a similar sentiment. She says that while the members may be active in social media, the association itself is not involved. Mark Warner, business development director at ShipServ, a maritime and offshore e-marketplace, found in its 2012 Internet and Social Media Use in Shipping Survey that doubts remain over the use of social media as a business tool, with little backing from senior management. “In past surveys, social media has often been described as a waste of time, but the last year has seen a real shift in opinion, and this has been helped by noticeable campaigns by leading shipping companies such as Maersk and Teekay,” Mr Warner says. Even though use of social media continues to grow, a quarter of respondents surveyed said they did not use social media in a business capacity. LinkedIn was the most popular social media platform for shipping companies and suppliers, with 65% of respondents having a company profile. Yet 45% of respondents said senior management had little or no interest in social media. “There are still sceptics over the usefulness of social media in the industry, and this is highlighted by a lack of support from senior management,” Mr Warner says.

source: shipserv survey, 2012

That scepticism stems from the difficulties in securing a measurable business value from any investment in money, people or effort in social media. The market is there, the means to reach it are in place, and the people willing to put in the hours are hunched over their computers. But can a tweet, or a Facebook or LinkedIn posting, be converted into a sale? For Lloyd’s Register group media manager Russell Barling, that is the holy grail of social media, but it should not be regarded as the only way to measure a return on any investment. “Being able to follow a tweet back to a sales opportunity is obviously very appealing, but what social media really does is bring you a market – a very wide and hugely viewed market. If someone is following your company, they obviously want to hear what you have to say,” he says. “It’s like talking to the world without needing to have anyone in the room. The world’s biggest virtual press conference.” For shipping companies deciding to connect with all these customers across social channels, unlocking social media without a solid strategy and the resources in place to manage it can be likened to roping a tiger: the savaging of Costa Cruises is an example of the damage this vast and uncontrolled audience can do to a company when it gets riled up.

greg knowler

Greg has more than two decades of journalism experience, covering transport and supply chains in Asia for the past eight years. Based in Hong Kong, Greg is editor and publisher of Cargonews Asia, and is a respected blogger for Maritime Professional.

www.thebaltic.com spring 2013

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14-16 MAY 2013

The Antwerp Expo, Antwerp, Belgium Attend and exhibit at Breakbulk Europe - Europe’s largest gathering for heavy-lift, project cargo and breakbulk cargo transportation. During this two-day conference, industry leaders will discuss today’s most pressing transportation issues, while a packed exhibition floor will offer a premier networking opportunity with the world’s leading specialized carriers, forwarders, ports, and terminals and service providers. More than 5000 breakbulk & project cargo shippers, forwarders and service providers will attend Breakbulk Europe. What do they know that you don’t?

ATTEND The Breakbulk Europe Conference is the largest conference in Europe focused on traditional breakbulk and project cargo trade and transportation issues. This conference has nearly doubled in size each year since its inception, an indication that there is a great need for education and networking in this market. During this conference, shippers have the opportunity to learn about breakbulk and project cargo issues as they relate to European trade and to meet with specialized carriers, ports, terminals, freight forwarders, equipment companies and packers. Conference program includes education sessions as well as networking functions and an exhibit hall.

EXHIBIT If you market to a highly targeted audience of senior transportation managers, you’ll want to explore the range of opportunities and benefits available at this in-demand Breakbulk event. Becoming a highly visible exhibitor at Breakbulk Europe is a prime opportunity to: · Elevate your company above the competition · Heighten your global brand recognition · Remind your customers of your market presence · Generate sales · Introduce new company officials · Announce a new product or service · Have face-to-face contact with potential customers · Entertain clients

TO ATTEND: Visit www.breakbulk.com for additional information and to register. TO EXHIBIT OR SPONSOR: EUROPE: Contact Adrian van Beuningen at +32-2-808-4355 or avanbeuningen@breakbulk.com NORTH & SOUTH AMERICA: Contact Christian Thompson at +1-281-416-4672 or cthompson@breakbulk.com ASIA: Contact Gary Tang at +852.2585 6199 or gtang@breakbulk.com

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SPONSOR Sponsoring at the Breakbulk Europe Conference & Exhibition provides a strong in-person connection for companies who are interested in aggressively marketing their services to European Project, HeavyLift, RoRo and/or Traditional Breakbulk decision makers in 2013. Sponsorships range in pricing and are customized to meet the needs of companies who are looking for lead generation and/or brand awareness. Sponsorship opportunities include: · Metal Sponsorships · Welcome Reception/ Luncheons · Golf or Bike · Equipment or Product Promotion · Registration Area · Hospitality Suites · Live Webcast on the Show Floor · Educational Sessions · Marketing Material Distribution · Program Guide & Breakbulk Magazine Advertising

Official Publication:

04/03/2013 17:28

Business Base Social media case study

Coracle Online

Spinning the web Social media is everywhere, and businesses need to know what they’re trying to achieve, as well as how to do it. James Tweed advises on how to make an impact online

James Tweed

is founder and managing director of Coracle Online. Coracle builds learning, training and development communities for professional institutes, member organisations and companies. www.mycoracle.com

The ethos behind social media is influencing all aspects of our lives. It is driving mobile communications, facilitating international trade and, in some countries, enabling democracy. While social media presents a daunting prospect for some, there are compelling reasons for squaring up to the challenge, and they go way beyond sales and marketing. First, the shipping sector deserves more recognition for its contribution to world trade; as a sector we must use all communication channels at our disposal to trumpet our achievements and influence policy for the future. Second, no company wants to find itself at the heart of a crisis without a voice on the web. Third, social media and mobile communication are in the DNA of the next generation. Companies that don’t embrace it risk looking out of touch to tomorrow’s employees, partners or customers. And finally, social media addresses some of the communication challenges experienced by global shipping companies with distributed teams. E-learning is a case in point; at Coracle we recognise that what used to be known as “distance

Social media and mobile communication are in the DNA of the next generation. Companies that don’t embrace it risk looking out of touch to tomorrow’s employees learning” is now more connected and real-time than ever before. Our work today is as much about making good-quality digital content accessible on mobiles and tablets as it is about enabling sharing and peer-to-peer exchange of ideas and resources. In short, e-learning has become social, and companies and membership organisations alike, across a variety of sectors, are finding new opportunities to engage with their members. Rather than debating whether or not social media is useful, focus on how your company can put it to work and what you should think about before you get started.

To create a successful social networking campaign, you need to be clear about your objectives from the start. Are you focusing on brand awareness, customer relations or lead generation? Ask yourself what success looks like, then work out how you’re going to measure it. You need to think about your audience and what they want to hear from you; this will inform content and the tone you adopt in conversation. Take the time to check out what your competition and the trade media are doing – this could give direction to your use of social media. Also, bear in mind that while many of the tools are free, you still need to invest in resources to manage your social media presence – or make sure existing staff members have time and expertise. It is also wise to seek advice if you don’t know what you’re doing, as this will save you time and money in the long run. It takes time to build a community in the networks; experienced social media users such as the International Maritime Organization (@IMOHQ) and Maersk Line (@MaerskLine) didn’t get their respective 8,400 and 34,700 Twitter followers overnight. If it’s message-generation you are developing, traditional communications channels still have a role, but you can amplify your message by joining your social media efforts to other business development and marketing activity. But remember that social networking is a conversation – people will switch off fast if all you do is shout about yourself or your organisation. And social media goes beyond the feeds. New followers and contacts will refer to your website, so it needs to look good and be up to date. But it doesn’t stop there: make sure you’ve got plenty of digital content to link to in your posts – video, white papers and opinion pieces are popular. My advice to companies sitting on the fence is to get started now. The social agenda is pushing all of us. The likes of Facebook, LinkedIn, Twitter and YouTube have shown us the opportunities and benefits of sharing. As a sector, shipping must adapt and grasp the commercial opportunity. A more all-embracing commitment to social media will be to the collective benefit of all. www.thebaltic.com Spring 2013

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05/03/2013 10:52

classification IACS

Classified information The International Association of Classification Societies has an important role, says its permanent secretary, Derek Hodgson. But wider forces are at work, changing the lot of shipping. Tim Maughan reports illustration: tom jay

hat would the maritime sector be like without a body such as the International Association of Classification Societies (IACS)? Its permanent secretary, Derek Hodgson, believes that it would be fragmented, and that it would lack uniformity. Each different organisation would interpret conventions in a different way. “It would be very difficult for ship safety, generally, if IACS didn’t exist,” he says. Before his IACS calling, Mr Hodgson saw the ramifications of compromising ship safety in his career as a lawyer. “Over the years, I was involved in a number of high-profile sinkings and casualties,” he says; the incidents occurred in the bulker, tanker and car transporter sectors. In his legal days, he acted on behalf of both defendants and claimants. He saw how political tensions could disrupt the flow of commodities, and he explains how he would assist: “The supplier would be unable

spring 2013 www.thebaltic.com

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It would be very difficult for ship safety, generally, if IACS didn’t exist

classification society. Rates are perilously low as this shipping cycle’s trough takes its toll. The cyclical nature of the maritime business is well acknowledged: rates were “fabulously” high in 2007, but now, in some cases, companies are struggling to cover even their operating costs – a problem compounded by the oversupply of ships. But there are exceptions: “There are canny operators who are able to withstand the downsides in order to take part in the upturns,” says Mr Hodgson. “A smart operator knows when to not invest too heavily in the business, and when to take his ships out – when to sell and when to buy. The Greek shipowning companies have always been the best at that, again and again.” Mr Hodgson moves on to talk about other maritime trends and developments, including high fuel prices and the increasing use of gas-powered ships. Eco-ships will require slow steaming, which benefits the environment but brings its own operational hazards. If ships travel too slowly, he says, ABS American Bureau of Shipping BV Bureau Veritas safety is compromised; CCS China Classification Society vessels are less able to CRS Croatian Register of Shipping get out of dangerous DNV Det Norske Veritas situations. However, GL Germanischer Lloyd the trend of building IRS Indian Register of Shipping ships to move more KR Korean Register of Shipping slowly will continue, LR Lloyd’s Register first to save money and NK Nippon Kaiji Kyokai second to help protect PRS Polish Register of Shipping RINA Registro Italiano Navale the environment, RS Russian Maritime Register of Shipping according to Mr Hodgson. The Ballast Waste Convention is another consideration. “Every ship will have to have these expensive systems fitted, which could cost from $1.5m upwards, to treat the ballast water,” he explains, “and the shipowner has to find the money to pay for that system. There is going to be a radical overhaul in the way ballast water is treated, and that is going to bring vast expense to the industry.” Looking at the wider picture, The Baltic asks Mr Hodgson where the hub of today’s maritime world is. London, he believes, is still at the forefront of the shipping business. But New York, Singapore and Hong Kong are not far behind. Derek Hodgson also talks about his IACS ‘permanent secretary’ job title: “It’s a rather

to produce the commodity, in accordance with the terms of the contract, agreed with the buyer. He would, therefore, be seeking ways of reducing his loss.” With more than 90% of the world’s seaborne freight transported by IACS members, the organisation seeks to support the uninterrupted flow of trade by enhancing its reputation of classing “excellent members” – but how can this improvement be brought about? “Through technical knowledge, setting common performance indicators, benchmarking, and the development of common structural rules for bulkers and tankers,” says Mr Hodgson. “Our flagship work at the moment is on the harmonisation of the common structural rules. We develop the rules, and they fit in with the [International Maritime Organization (IMO)] conventions.” He adds that insurers see IACS members as a lesser risk than non-IACS members. However, shipping risks today have moved well past the IACS membership status of an operator’s

IACS members

www.thebaltic.com spring 2013

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05/03/2013 10:54

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27/02/2013 12:05 07/03/2013 14:21

classification IACS

More than 90% of the world’s cargocarrying tonnage is covered by the classification design, construction and through-life compliance rules and standards set by the 13 member societies of IACS Source: IACS

grand title, but what it really means is that I am the chief executive of the IACS members’ secretariat.” He joined the organisation in 2009, after decades working as a shipping lawyer. “I was a partner at Clyde & Co. There, I was head of the shipping department; I was a shipping lawyer for 30 years,” he says. “I was involved in arbitration and court cases between shipowners and charterers, shipowners and insurers, and shipowners and cargo interests. It was disputes – I wasn’t a non-contentious lawyer, one who does ship finance or something like that, producing contracts. “I did litigation. When ship owners or charterers got into trouble, or insurers were being sued, that’s the kind of involvement I had. It gives you a very good grounding of the practical problems that one encounters in shipping.” Mr Hodgson works from the IACS head office, opposite St James’s Park Underground station in central London, within walking distance of the IMO, which he describes as “central to our business”. Mr Hodgson says of the relationship: “[IACS] was set up largely as a result of the requirements of the IMO; our members have to comply with their regulations. We work very closely with the IMO; in fact we are their principal technical adviser.”

View from the outside “The classification system has served the shipping industry well. The technical input of the societies to the work of [the International Maritime Organization (IMO)], through IACS, is of immense value to the organisation. “IACS contributes significantly to the detailed work of many of the organisation’s technical committees and sub-committees. One of the most important and certainly groundbreaking of these has been the development of goalbased ship construction standards. With their successful finalisation and adoption by the Maritime Safety Committee, IMO

has entered new territory by setting, for the first time, comprehensive mandatory requirements for the construction of ships, thereby expanding the alreadyexisting Safety of Life at Sea and Load Line provisions, which require compliance with appropriate structural standards of classification societies. “The role of classification societies, through IACS, in the development of these new standards has been very important indeed. From the outset, IACS has been heavily involved in the process of developing the goal-based standards, and the five-tier system finally

agreed, consisting of goals, functional requirements, verification of conformity, rules and regulations for ship design and construction, and industry practices and standards, is based on a proposal by IACS. Furthermore, the active cooperation of IACS and your very helpful attitude during the trial application of the [goal-based standards (GBS)] verification process using the IACS Common Structural Rules was instrumental for the timely finalisation of the GBS package.” Excerpt from a speech made by IMO secretary-general Koji Sekimizu at the IACS Council meeting 2012 in St Petersburg.

www.thebaltic.com spring 2013

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04/03/2013 17:28

classification Diversification

wider roles

It’s class Jim, but not as we know it: classification has evolved, but is that in response to calls from clients or just part of a wider trend towards diversifying? Carly Fields investigates Classification used to be simple. Naval architects looked at what made ships safe then wrote a book of rules based on that experience. They hired out their services to check that ships were built and maintained to the rules. That made ships safer and the seas cleaner, and, most importantly, it made the insurers happier. It was a business model that lasted for more than 150 years. However, it looks as if it’s a business model that can’t survive, because pure vanilla classification simply doesn’t make enough money. But is class diversifying to survive, or in response to the needs of owners? Bureau Veritas’ deputy director of the marine and offshore division, Pierre de Livois, says: “It is not realistic to suggest that traditional classification is dead. We class over 10,000 ships and many of the owners only want good traditional classification services. But it is true that it would be very hard to deliver pure classification services without a diversified group to back that up. “And if you look closely you will see that even the simplest class service today probably also includes a range of other services, which the original classification societies never contemplated, such as [International Safety Management] certification, [Maritime Labour Convention] certification, and flag state support.” Bureau Veritas is the biggest and most diversified group providing classification services. With 50,000 staff globally it is huge compared with other IACS societies. “Size itself is not an aim, but there are two things that matter to the shipowner about size and diversity in a classification society,” says Mr de Livois. “Firstly, with size and diversity comes strength, so when there is a downturn in one area, such as marine now, the group strength ensures the continuance of good service and also essential development. “Secondly, more and more owners want a complex range of services from their class society, as they themselves diversify into offshore, for example. We can do that, saving time and cost and duplication for the owners. A narrower traditional class society focused mostly on marine could not do that.” A quick look at the recently announced shotgun marriage of Det Norske Veritas and Germanischer

Lloyd is an example of how this works. Germanischer Lloyd was strong in containerships, but not widely diversified. It found itself first a takeover target for Bureau Veritas, the rejection of which led to private business ownership, then, in summer 2012, approaching Det Norske Veritas for a partnership, which looks to the outsider like a buyout, so it could survive and grow. In Italy, Genoa-based Registro Italiano Navale doesn’t want to get caught out depending on marine business alone. Years ago it begin to diversify in order to grow. “We have a very loyal core of shipowners who come to us for traditional technical expertise in maritime issues,” says chief executive Ugo Salerno. “That is the heart of the group and still makes up 30% of our business. We still have room to grow thereby increasing our presence in new areas such as China, and we are doing that with success. There is also growth to

Pure vanilla classification simply doesn’t make enough money come from more non-traditional services for our marine clients, such as fuel-saving consultation. “But it is true that the strong growth of the group is in other sectors. We merged with the D’Appolonia engineering consultancy in 2011 and we have a programme of acquisition and organic growth. Our environmental services, for example, are growing fast, and we are showing high levels of growth in Asia and in industries such as railways. “If you think class is dead then you are wrong. Class is very much alive. It is alive inside diversified groups and using its experience and expertise to help more and more industries in more and more countries.” The lesson for owners? Take a good look at your classification society. Is it strong enough to keep pace with technology in a tight marine market? Can it do more for you if you need it? Class may not be dead, but it is having to do more to thrive, and that has to be good for owners. www.thebaltic.com spring 2013

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in the dock Nigel Richardson, EA Gibson

road to recovery

Carly Fields meets Nigel Richardson, EA Gibson managing director, to find out how he reversed the company’s fortunes photography: dean belcher

hen EA Gibson veteran Nigel Richardson took over the helm of the London-based broker in 2008, his vision for the Hunting plc offshoot was a volte face from its business plan of the time. In the 26 years before his appointment, Nigel had watched Gibson shrink from the public eye, and he made it his goal to bring it back out from the shadows. “The diamond had lost its sparkle,” he tells The Baltic. “I was determined to bring back the lustre and sparkle to the diamond that is Gibson.” He describes the drift, saying that the broker had, in his view, failed to push its standards as high as they should and could have been. It’s been a tough slog, but one that is now paying dividends for the Hunting shareholders (Gibson is the shipbroking arm of the publicly listed energy-services provider). The shipbroker has increased its market share and since Nigel’s appointment, and while today’s challenging markets threaten to rock this boat, Nigel remains up to the test: “This is the excitement of the challenge, particularly when the plan begins to come together.” Gibson’s gain is yachting’s loss, as Nigel had designs on a professional yachting career before the commercial shipping world took him. He cites heroes such as Sir Francis Chichester, Sir Robin Knox-Johnston, Éric Tabarly and, more recently, the extraordinary talent that is Ben Ainslie. But there are industry heroes, too, who give an insight into Nigel’s reverence for the commercial shipping industry. “Professionally, I greatly respect the chairman of Gibson. Texan Dennis Proctor has transformed our parent company Hunting plc into a strong, immensely dynamic, FTSE250 oil and gas global service-sector company.” He modestly credits the chairman for these successes, but his own drive to push Gibson forward has played its part in Hunting’s accomplishments: Nigel has worked doggedly over the past five years to bring Gibson back into the limelight. An 18.00 finish is rarely on the cards. “My working day usually starts in the London office at about 08.00 when I make my regular calls to clients and colleagues in the East – mostly Singapore and Hong Kong. Following this I can be found in the company finance director’s office for about 30-45 minutes, often joined by the head accountant.” This gives the team an opportunity to discuss the business of running a company of about 165 employees in four countries.

“The balance of my day is a mix of regular, short meetings with the various sections, some meetings with individuals, and other meetings with our extensive range of clients.” Lunch, he says, is for entertaining, as it provides an “ideal platform to discuss business with colleagues and clients in a more engaging and informal manner, and occasionally – when appropriate, of course – in a time-honoured fashion!” Otherwise, it’s a healthy Graze box or salad for lunch at the desk. When the evening rolls around, Nigel views it as another chance to spend time with clients and colleagues. “The working day is long, and it is demanding switching between offshore, product or crude tankers, dry bulk, [liquefied petroleum gas], [liquefied natural gas], vegoil or chemicals, and an active consultancy and sale and purchase sections. However, we have an excellent team of section managers and directors, with whom I work closely. I find that this variety is most invigorating after 25 years of a rather single-minded focus on clean spot chartering.” Nigel refers here to his steady desk broking job in Gibson before his appointment to managing director: he proved his worth to Hunting by establishing a successful clean and dirty products section in Gibson. This broking background gave him a solid base to manage the company from. “To be a successful shipbroker you need to be inherently motivated and hardworking,” he says. “This tenacity and determination is equally as important to my role as managing director. It takes a great deal of energy to change the direction of a company, but with hard work, commitment and focus, goals can be achieved, even in the current largely hostile shipping markets.” The job’s variety helps focus his mind. “Being actively involved in the variety of sectors covered by Gibson is one of the most interesting aspects of my role as managing director. Shipping is a truly diverse sector of global commerce, and this brings with it a multitude of opportunities. “In shipping you are playing your part in an international team of logistic professionals who are responsible for the movement of over 90% of the world’s trade. How can you not feel invigorated by being actively involved?” And he is not standing still: Gibson is currently expanding its range and depth of service to its clients, while working towards raised standards. But all this comes at a price: Nigel jokes that his wife would be the best person to ask about the negatives of his job. “Long hours in the office, regular working while

spring 2013 www.thebaltic.com

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07/03/2013 13:57

In shipping you are playing your part in an international team of logistic professionals who are responsible for the movement of over 90% of the worldâ&#x20AC;&#x2122;s trade. How can you not feel invigorated by being actively involved?

www.thebaltic.com spring 2013

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in the dock Nigel Richardson, EA Gibson

I was determined to bring back the lustre and sparkle to the diamond that is Gibson at home, having to plan your life around client and internal events, plus travel commitments conspire to make home life fragmented at best. There is no doubt that any success I may enjoy would only have been possible with the total support and understanding of my wife and family.” Perhaps his long-suffering wife would have preferred his early aspirations of a yachting career, or his short-lived teaching calling, or even his designs on the construction industry. Nigel’s first full-time employment was in the commercial section of John Laing, a large, predominantly civil construction firm in the UK. There, he enjoyed the responsibility and role of a buyer for substantial construction projects. However, the industry and the company were heading for a major recession. “It was time to take stock and rethink my career options,” he says. By chance, a friend suggested that shipping might appeal to him, and after applying to all the London shipbroking companies, including Gibson, his only offer of employment as a trainee tanker broker came from Cambridge Tankers. He accepted. “I am probably not alone in that I came across shipbroking by accident,” he concedes. After a couple of years, he moved to Giles W Pritchard Gordon Shipbrokers to help establish the product team, and after another couple of “exceedingly intense yet fulfilling” years he moved to Gibson, with a similar remit of establishing a global presence in the fuel and clean products sector. Thirty years of his 35-year shipping career have been at Gibson. “I would like to be remembered as someone who as a shipbroker was successful, having been part of a mostly pre-eminent products section, from 1982 until 2007,” he says. “This team is now larger, more vibrant, and I take enormous pleasure from watching their continued and growing successes.” Of course, there have been hiccups along the way, but Nigel has tackled them with his trademark calm, unflustered manner. “I try not to worry about things,” he says, “although I care passionately and find it difficult not to mull issues over in my

mind. That said, my concern never keeps me awake at night. If I am particularly troubled by an issue I try to remember an adage my daughter told me some years ago: ‘Worrying is like riding a rocking horse – you go backwards and forwards, but never get anywhere.’ I try to be as pragmatic as possible in these situations.” With that in mind, Nigel says it is client entertaining that is most likely to keep him up at night, rather than the trials of the job. “Shipping is still a very personable business, and an extensive network of clients is essential. You have to enjoy this aspect, given the hours you have to put in.” But what he would most like to be remembered for is his success in reinvigorating the company with the energy required for its global growth and success. When Hunting put its money on a products broker for the top slot of one of the leading international shipbroking firms, it got a determined, unassuming leader who has been able to give Gibson the shot in the arm it needed, as well as a direction for the path it is now firmly on.

market mender In his three-plus decades in shipping, this isn’t the first trough Nigel Richardson has seen the market sink into. This experience of the markets has made him rightly cautious in giving his forecast for the future. Predictions for any of the major sectors are “always precarious”, he says.

But he feels comfortable picking out the prime suspect for the current malaise: tonnage oversupply. “This is the most significant factor for the tanker segment, given that oil supply last year reached levels last seen in 2007.” Strategies for improvement exist, though some would

call for strong stomachs to see them through. Nigel gives the examples of an oil contango – which would foster an appetite for storage that would itself affect the markets – self-imposed layup; selling the more mature vessels for scrapping, not resale; retrofitting to improve

efficiency; slow steaming; and a notable reduction in the cost of bunkers, which would immediately help every owner, a situation that “could not come a moment too soon for many”. “Collectively, these changes will contribute to a firmer market,” Nigel says.

www.thebaltic.com Spring 2013

038-041_Baltic_interview.indd 41

05/03/2013 10:56

ship management Supplies

consumables: food for thought

Wrist Ship Supplyâ&#x20AC;&#x2122;s â&#x20AC;&#x2020;Robert Steen Kledalâ&#x20AC;&#x2020; presents the case for outsourced ship supply contracts, in support of the seafarer welfare demands of the upcoming Maritime Labour Convention

Above: a wrist ship supply lorry unloads its cargo

hip supply is evolving and its role in operational efficiency is beginning to receive greater recognition, as providers look for innovative ways of working that take advantage of technology developments to streamline procurement, reduce costs and take account of changing regulatory guidelines. In the current volatile and uncertain economic conditions, procurement departments are under pressure to ensure that expenditure is reduced and profit is maximised. However, treating ship supply simply as a cost centre is a limiting view that fails to take into account the impact that quality and cost of consumables can have on the bottom line and on the overall performance of daily operations. While it can be tough for the smaller ship suppliers, the larger organisations with a global network, liquidity and the purchasing power that comes with this can standardise prices across the board and reduce costs in the supply chain. And as regulation enters

the mix for the first time, shipowners and operators will need to review their approach to ensure compliance. The recent ratification of the landmark Maritime Labour Convention 2006 (MLC), due to come into force in August 2013, will ensure that the role of quality ship supply in motivating seafarers and ensuring their welfare and morale, as well as safeguarding efficiency and productivity, is essential. Making sure seafarers receive a low-cost, high-quality, nutritionally balanced diet is therefore a priority and it is a positive and progressive move to place this under scrutiny now that 22 countries have ratified the regulation. While the MLC will benefit shipowners by giving them a regulatory point of reference for the first time, it will also bring additional complexities for ship supply. Managing these ship-supply challenges through an outsourced model that uses intelligent software systems will therefore deliver value to ship owners and operators, enabling them to concentrate on their core operations, reducing the risk

spring 2013 www.thebaltic.com

042-045_Baltic_ship management.indd 42

05/03/2013 10:58

Treating ship supply simply as a cost centre is a limiting view that fails to take into account the impact that quality and cost of consumables can have on the bottom line and on the overall performance of daily operations

the year ahead Depressed freight rates and a lack of “professional and competent” staff both on- and off-shore are key concerns for ship managers in 2013, according to an industry survey by InterManager, an international trade association. InterManager’s members also raised concerns about how current market conditions will affect operating budgets, and

cited bureaucracy as a continuing problem for ship management. For its part, InterManager plans to introduce new initiatives in 2013 to address training and recruitment, including a young executives group to encourage and support the industry’s rising stars. This year the association also plans to focus on crew management

matters with a cadet scheme and a worldwide seafarers’ survey. InterManager president Gerardo Borromeo said: “The human element is key to successful ship management and we must ensure we work together as an industry to raise standards and to encourage good staff – the best and the brightest – to enter and stay in shipping.”

Important Issues for 2013

in nces Adva ology techn

t men

on Envir

ter st Wa Balla ntion onve ent C gem ative Mana inistr Adm afarers se en on burd ncy fficie e Fuel

60% 50% 40% 30% 20% 10% 0%

es – ht rat Freig ituation et s mark ional ofess of pr hip staff y it il s ab Avail mpetent g o trainin and c d n tion a a c u r Ed abou ime L Marit nvention Co y Pirac

of fines, providing a healthy diet for the crew and providing a procurement resource that can be updated as further regulation comes online. Working with an outsourced partner with a global network and infrastructure can help to protect shipowners and operators from risks in both the long and short term – ensuring optimum efficiency in a fluid market. Change and innovation, spurred on by developments in technology that allow visibility and transparency of consumable costs, are in demand. This is driving the evolution of the ship-supply market, as shipowners look to strip out inefficiencies in their operations and save costs wherever possible. Making this change to an outsourced partnership for the supply of ship consumables is an investment in the long-term operational efficiency of a vessel (and fleet), and is an approach that many shipowners are demanding. Larger providers with a global network can manage all provision orders, anywhere in the world, at all times, and tailor these to match crew and regional variations, vessel by vessel. All provisions are secured based on a worldwide price index, for best value. Operational efficiencies can be generated, costs can be reduced, and improved wellbeing and motivation can be delivered to crews as a result of better-quality consumables onboard. This improves morale and builds competitive advantage. To further aid shipowners, the ship-supply sector has developed advanced procurement software and implemented enterprise resource planning (ERP) systems that create transparency across all operational areas, as well as providing business intelligence and insight on procurement habits and expenditure. These systems also allow supplies to be tailored to individual vessels, depending on the specific voyage or dietary requirements, enabling ship operators to meet crew nutrition standards and cultural nuances.

source: Intermanager survey, 2012

ERP systems and advanced software streamline the ordering process from suppliers through to the kitchen, enabling more effective cost control, menu planning and increasing efficiencies. As an example, Wrist Ship Supply has recently launched a new software programme, Xena, aimed at streamlining the purchasing process for consumable ship supplies, optimising vessel economy and improving health at sea. Xena is a menu-planning tool and electronic cookbook that gives shipowners inventory control, reducing waste and enabling transparency to ensure that they stay within nutritional guidelines. Recipes in this programme also provide cost-per-meal information and compare this to existing stock. Cost-effective, quality ship supply has a significant impact on all operational areas of every vessel in the global fleet. Viewing a progressive, innovative approach as an investment in the productivity and performance of your crew – and one that ultimately safeguards results for your customers – is critical to maintaining competitive advantage in a challenging market.

Robert Steen kledal

Robert is managing director of Wrist Ship Supply.

www.thebaltic.com spring 2013

042-045_Baltic_ship management.indd 43

05/03/2013 10:58

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04/03/2013 17:29

SHIP MANAGEMENT Supplies CASE STUDY

Bernhard Schulte Shipmanagement

SHIFTING PRIORITIES Bernhard Schulte Shipmanagement’s Ravi Korivi explores the changing role of ship managers through the ages

RAVI KORIVI

is chief marketing and business development officer at Bernhard Schulte Shipmanagement.

Compared with the millennia-old business of shipping itself, third-party ship management is a relatively new industry. It started as a purely cost-driven activity, but has evolved into much more than a cost arbitrage outsourcing. Today, the leading ship managers emphasise and compete on the quality of their operations as much as their expertise in controlling operating costs. Having said that, while ship managers continue to develop, the role of and focus expected from the ship manager has changed with the times. The different critical goals and requirements of clients of ship managers (ie, shipowners) can change drastically depending on the circumstances, and as a service provider it is the ship manager’s duty to adjust their services to fulfil these expectations, without compromising the core universal requirements of safe operations enshrined in the International Safety Management Code. Just a few years ago, at the height of the shipping boom, the priority of shipowners was to avoid service disruption at any cost. Budget and cost control, while never ignored, were of secondary importance. In today’s market, budget and cost control is of far greater importance, so the ship manager has to be much more judicious in this area, again ensuring that the vessel’s safety and crew wellbeing are never compromised. Similarly, when charter rates relative to bunker costs were high, it was of the utmost importance to maintain service speeds, even at the cost of higher bunker consumption. But today, when

In today’s market, budget and cost control is of great importance, so the ship manager has to be judicious, ensuring that the vessel’s safety is never compromised

charter rates are probably at an all-time low relative to bunker costs, bunker consumption needs to be minimised, and here even a reduction in the service speed is justified. For the ship manager, either scenario – maximising speed or minimising bunker consumption – brings its own difficulties and technical challenges that need to be efficiently addressed. Apart from these operational aspects, the function performed and the service provided by the ship manager also has to change depending on the profile of their clients. In the present environment various organisations have become unwilling shipowners. This description includes banks that have repossessed vessels due to owners’ defaults, and shipyards stuck with completed vessels whose owners cannot or will not take delivery. For such organisations, whose core business interest and competence is not shipowning, the service required from a ship manager is rather different. Importantly, as these organisations are not so familiar with the shipping world, the ship manager has to take on more responsibility in guiding and assisting the owner, even for aspects that are not, strictly speaking, ship management matters. Also, these unwilling shipowners are always on the lookout for a chance to offload their assets, and the ship manager has to fully cooperate and assist in this endeavour. Finally, new international regulations and specific national regulations coming into force all need to be complied with in a costefficient manner, without any disruption to the vessels schedules. Keeping in mind that in many cases compliance with the regulations requires retrofitting of equipment, changes in operating procedures, certification and crew training, all to be in place by a deadline, ship managers have to plan ahead and ensure that their efforts are properly coordinated to achieve the objective. At Bernhard Schulte Shipmanagement the philosophy is simple. Our mission is to be the leader in quality ship management, and to this end we have to constantly evolve to provide our clients not just with better service, but with a service specifically targeted to their needs. www.thebaltic.com SPRING 2013

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05/03/2013 12:50

ship finance Lending

Who's hot, who's not Many small shipowners will find themselves unloved as banks move away from ship-based lending towards lending to corporates. What can operators do to help this out-of-bank situation, and which banks should they approach? Craig Jallal reports

anks are under pressure to clean out underperforming bilateral ship loans from their portfolios and restock with syndicated loans to well-financed corporates. Several forces are driving the change: lack of liquidity, higher cost of funds for banks and the emergence of Basel III are all forcing banks to hold higher deposits and increase capital limits. Resources for shipping finance are scarce. In 2008, Dealogic’s table of lead arrangers of syndicated marine loans (offshore and shipping) ranked RBS in tenth place with $2.6bn. In 2012, $2.6bn would have put RBS in third place. So 1.

Loans Harder to Find Syndicated loans ($bn)

2008

86.62

2009

32.58

2010

51.51

2011

50.99

2012

40.79

Source: Dealogic

Marine* Syndicated Loans 2012 (Ranked by Lead Arranger)

Rank Bank

Deal value ($m)

No.

% share

DNB Bank ASA

3,873

9.5

Mitsubishi UFJ Financial Group

3,094

7.6

Nordea Markets

2,685

6.6

State Bank of India

1,761

4.3

HSBC

1,726

4.2

BNP Paribas

1,676

4.1

RBS

1,487

3.6

Sumitomo Mitsui Financial Group

1,360

3.3

Mizuho

1,292

3.2

1,279

3.1

Subtotal

SEB

20,232

114**

49.6

Total

40,787

172** 100.0

* Shipping and offshore. ** Sum of syndicated deals, not sum of banks taking part. Source: Dealogic

the first step is to find out which banks are still active in shipping finance. Table 3, overleaf, shows all the banks that have appeared in the Dealogic top ten lead arranger list between 2008 and 2012, the percentage of their activity among those banks, and their current status as a lender. The current status is my opinion and not that of the Baltic Exchange, and it is based on conversations with bankers and deals reported in the press. Some of those banks have left shipping, while others are still active but have restricted themselves to lending to core clients with whom they have commitments. However, they may lend to today’s sexy sectors of liquefied natural gas and offshore. Then there are banks that appear to be lending to new clients. Together, these form the group of banks for operators to target in their quest for funding. The active banks are led by DNB, one of four Scandinavian banks on the list. The Scandinavian

The Scandinavian banks still support small and specialised shipowners, but are moving away from ship-based lending towards corporate lending banks went through their own financial crisis in the 1990s and emerged fewer and stronger. They were less affected by the recent financial crisis, and were able to continue lending when other European banks struggled with liquidity. The Scandinavian banks still support small and specialised shipowners, but are moving away from ship-based lending towards corporate lending. These banks are not such a good prospect for the small, five-to-six-bulk-carrier operator who cannot secure finance. The next group are the Japanese banks, which are accessible to Japanese owners and to European owners building in Japan. It is not www.thebaltic.com spring 2013

047-051_Baltic_finance.indd 47

05/03/2013 11:00

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ship finance Lending known if these banks are changing their lending policies or their appetite for new clients. One surprise in 2012 was the return of HSH Nordbank to lending. A separate $18bn non-performing portfolio and restructuring team was created. As these clients were removed and loans repaid or amortised down, lending capacity has been freed up. Also lending again to new clients is BNP Paribas, which moved swiftly to comply with the new Basel and other capital requirements by reducing costs. However, the French bank seeks only well-financed clients, as does ABN AMRO, which came out of the other part of the Fortis Bank merger. European banks understand the ship-based finance model well, 3.

but are still constrained by limited access to dollars and their exposure to the eurozone. Consequently, they have limited potential to take on an out-of-bank client. The main opportunities for out-ofbank clients are the US banks and the banks expanding their shipping books. Citi, Bank of America and other US banks have ready access to dollars. They have also been slower to retain capital for the Basel III requirements, giving them a lending advantage over the European banks. Best of all are those banks that had limited exposure to shipping pre-crisis, and are now looking to expand their shipping portfolios. They will be seeking the best clients, of course, but operators should be beating a path to the doors

Bank Activity – Syndicated Loans (Ranked by Lead Arranger 2008-12)

Rank

Bank

DNB Bank

Nordea Markets

Mitsubishi UFJ Financial Group

BNP Paribas

Sumitomo Mitsui Financial Group

6 7

$m % activity Status 19%

Active

21,072.2

15%

Active

19,093.9

14%

Active

17,243.8

12%

Active

8,529.0

Active

ING

7,263.9

Core, LNG, Offshore

Citi

6,306.7

Core, LNG, Offshore

Crédit Agricole CIB

6,248.4

Inactive

HSBC

5,175.7

Active

RBS

4,087.1

Core, LNG, Offshore

Commerzbank Group

3,429.0

Inactive

SEB

2,775.9

Core, LNG, Offshore

Deutsche Bank

1,775.7

Core, LNG, Offshore

State Bank of India

1,761.1

Core, LNG, Offshore

ABN AMRO Bank

1,665.9

Active

Wells Fargo Securities

1,660.4

Active

JP Morgan

1,427.1

Active

Mizuho

1,292.1

Active

Danske Bank

1,217.2

Core, LNG, Offshore

Svenska Handelsbanken AB

1,194.4

Inactive

Subtotal

139,256.5

Total

262,490.5

Inactive

10,871.8

Core, LNG, offshore

25,187.5

18%

103,197.3

74%

Active new clients Status key

26,037.2

Active = Making loans to old and new clients Core = Dealing with core clients only LNG = New business allowed in the liquefied natural gas sector Offshore = New business allowed in the offshore sector Inactive = No new business, running down or selling portfolio to leave shipping

saying yes What can shipbrokers contribute to a client’s search for finance in today’s tough market? “Nothing,” is the reply from one head of shipping in an active European bank. He explains to The Baltic: “We are expected to know the market and choose the best clients. Why would we need shipbrokers?” Another banker was harsher: “Brokers should stop presenting us with crooks. We are not stupid, you know.” Therefore, before presenting a client, the first thing a broker should do is protect its own image and reputation, then follow these guidelines for the best result: • Limit the negative: banks have been forced to introduce rigorous know-your-customer (KYC) procedures, and some owners fail. Do your own KYC before presenting to the bank. • Build up goodwill: most banks have no budget for research. This is a marketing opportunity for brokers. Send the head of shipping a broking report each week, and organise a regular presentation and lunch. • Change your clients: financing the company is replacing financing the ship, which means the five-to-six-ship operator needs to be a 20-to30-ship operator to meet the criteria. Brokers can drive the necessary consolidation. • Bonds and initial public offerings (IPOs): there is an appetite for bonds in Asia. Bond investors are looking for a higher return than bank deposits and lower volatility than the stock markets. A broker can help prepare the industry section of a prospectus for a bond issue for a client. This is just a few pages long and takes a few days. Helping a client with an IPO is much harder. The industry section can run to 16 pages or more, and requires a higher level of due diligence. Lawyers will want to see the source of every graph, table and number, plus a sign-off from the originator. For this reason, most of the IPO shipping prospectuses written in the 2000s were by complied by Clarkson Research or Drewry Shipping Consultants.

Source: Dealogic. Compiled by Craig Jallal, January 2013

www.thebaltic.com spring 2013

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FULL PAGE.indd 1 050_BALTIC_SPR_13.indd 50

30/10/2012 12:49 17:05 05/03/2013

ship finance Lending 4.

Banks with Shipping Finance Appetite in 2013

Active lenders

Contact

Telephone

ABN AMRO Bank

Gust Biesbroeck

+31 10 401 9701

gust.biesbroeck@nl.abnamro.com

Bank of America

Philippe Chryssicopoulos

+44 20 7995 6082

philippe.chryssicopoulos@baml.com

BNP Paribas

Paul Barnes

+33 1 4316 8120

paul.p.barnes@bnpparibas.com

Citi

Michael Parker

+44 20 7986 2727

michael.parker@citi.com

Commonwealth Bank of Australia

Simon Baker

+44 20 7710 3607

simon.baker2@cba.com

Danske Bank

Ă&#x2DC;ivind Haraldsen

+47 85 40 57 61

oivind.haraldsen@fokus.no

Deutsche Bank

Ralf Bedranowsky

+49 40 3701 4647

ralf.bedranowsky@db.com

DNB Bank

Harald Serck-Hanssen

+47 22 48 37 33

harald.serck-hanssen@dnb.no

HSBC

Mark Long

+44 20 7992 2347

mark.long@hsbc.com

HSH Nordbank

Ingmar Loges

+49 40 3333 14910

ingmar.loges@hsh-nordbank.com

ING

Dr Marco Albers

+31 20 563 5200

marco.albers@ingbank.com

JP Morgan

Eric Stein

+1 212 622 2477

eric.j.stein@jpmorgan.com

Mitsubishi UFJ Financial Group

Mamoru Takahashi

+81 3 5252 0756

mamoru_2_takahashi@mufg.jp

Nordea Markets

Hans C Kjelsrud

+47 22 48 66 01

hans.kjelsrud@nordea.com

RBS

Robin Perkin

+44 20 7085 7050

robin.perkin@rbs.com

SEB

Arne Juell-Skielse

+46 8763 8638

skielse@seb.se

Standard Chartered

Nigel Anton

+44 20 7885 6456

nigel.anton@sc.com

Sumitomo Mitsui Financial Group

Stanislas Roger

+33 1 4471 4010

stanislas_roger@fr.smbcgroup.com

Wells Fargo Securities

Eric H Schless

+1 212 214 8210

eric.schless@wellsfargo.com

Consultants

Contact

Telephone

Tufton (Islamic finance)

Andrew Hampson

+44 20 7518 6718

andrew.hampson@tuftonoceanic.com

XRTC (Chinese banks)

George Xiradakis

+30 210 429 1226

george.xiradakis@xrtc.gr

of the Commonwealth Bank of Australia, Standard Chartered Bank and HSBC. The Chinese state banks are active in lending and leasing to foreign owners with ships under construction in China, but it is a long and fraught process. Out-of-bank shipowners looking to go down this route should talk to a specialist consultant. The same could be said of those considering Islamic financing. Bond issues to finance cashflow, assets and payment of previously issued bonds were popular in 2012, with $9.32bn raised, mainly in Asia. The bonds are unsecured and bond buyers tend to look only at the coupon rate, not the underlying quality of the assets or the revenue stream to repay the principle. The bond buyers are wealthy individuals and corporates investing a small portion of their portfolio for a high return in a risky investment. Often talked about but rarely seen are the equity funds. Even more limited is the possibility of taking the initial public offering road. The final option is to wait. Newbuilding orders have fallen and the order book is contracting. This year will see the last big tranche of expected deliveries: 132.2m dwt, according to Clarkson Research, falling dramatically to 76.7m dwt in 2014. This suggests that the demand for loans to pay off newbuildings will fall significantly in 2014 and beyond.

IPOs, Follow-ons and Bond Issues IPOs and follow-ons ($bn)

2008

Bonds ($bn)

Total

4.29

1.40

5.69

2009

7.69

14.54

22.23

2010

4.94

13.86

18.80

2011

12.64

12.20

24.84

2012

0.86

9.83

10.69

Source: Clarksons Research. Compiled by Craig Jallal, January 2013

Meanwhile, a significant portion of loans made in 2007 and 2008 will have amortised downwards, freeing up lending capacity. Some banks will use that as an opportunity to shrink their book, but others will be looking to maintain or grow the book. To do so they will need new clients, and the competition for out-of-bank clients will begin. //

Craig Jallal

After finishing a shipping degree, Craig spent the 1990s examining the industry on the now defunct Lloydâ&#x20AC;&#x2122;s Shipping Economist. This proved to be a solid foundation for nearly a decade at Clarkson Research under Dr Martin Stopford. He then spent four years in ship finance at Fortis Bank, and later BNP Paribas. Today Craig is an independent shipping researcher and freelance writer.

www.thebaltic.com spring 2013

047-051_Baltic_finance.indd 51

05/03/2013 11:01

operations Risk

Wood for the trees Seaborne transport is fraught with operational dangers and business uncertainties, and risk-management tools can help mitigate the hazards. But, asks Tim Maughan, is there too much information, and how do you focus on exactly what you need? »

here are plenty of shipping tools that promise to mitigate and manage risks faced by shipbrokers, shipowners and ship operators. But, ironically, the sheer amount of information can bewilder those it seeks to help. Maritime professionals need to be able to sort the wheat from the chaff, and this is not always easy. John Phillips, managing director of Singaporebased marine credit insurance and management consultancy Awyr Las, warns that operators and brokers can actually lose money if they pay attention to the wrong risk-management tools. He explains that shipping, which is, after all, the process of transporting a commodity over a given route, is straightforward. “We have made it far, far more complicated than it needs to be,” he says. “Risk-management tools are anything which is going to mitigate your risk, in one way or another. The most important tools here are things such as credit modelling and credit insurance; you can look at other ways to mitigate risk, such as securing your exposures against assets.” The 30-day credit term is common, although, says Mr Phillips, some larger companies may push for 40 or 45 days – or even 75. “What keeps the

vessels running is the fact that they can buy their fuel on credit, and pay tomorrow for what they are using today. It is a matter of the supply company looking at the financial justification behind that. “If you can eke out an additional per-tonne rate to cover the finance cost, and you have the equity to extend those sorts of lines, then why not?” Changeable routes, ships and credit terms: the maritime sector contains substantial risk. Training can reduce these risks, and the Baltic Exchange offers courses on Freight Derivatives & Shipping Risk Management and Advanced Freight Modelling & Trading. Modules include freight rates, bunkers, financial risks, ship price, value and credit risk. “Training can help a wide range of shipping professionals to recognise and then mitigate potentially damaging financial and operational risks before they become a problem,” says course organiser Professor Nikos Nomikos. These courses are held around the world and delivered by Prof Nomikos and Dr Amir Alizadeh from the Centre for Shipping, Trade and Finance at Cass Business School, in partnership with the Baltic Exchange. The Baltic Exchange also offers other riskmanagement services, including its postings service, which goes back to its coffee-shop roots in the 18th century. While it started as a simple blackballing process, the postings service has evolved to become an active riskmanagement service, where members can check an online listing of blacklisted companies at www.balticexchange.com before fixing. The Baltic’s Barrie Wooderson is on hand to provide advice (bwooderson@balticexchange.com)

Ask for the background of the company. One reason you see people in a mess is because they go for the cheapest rate. And that is normally not the best rate

The top ten global risks

Regulation and compliance The leading business worry is that uncertainty about regulation will stall decision-making and planning.

Cost-cutting Falling profits and national austerity programmes are forcing companies into trimming their expenditure, preferably without cutting staff.

Managing talent A human resources challenge, split between internal problems, such as company processes, and external factors such as competition for top employees.

Pricing pressure Mature markets and slow organic growth, combined with the continuing recession and declining and ageing populations, are creating fears for many organisations.

Emerging technologies Rapid development creates risk from the unforeseen effects of new approaches and the challenge of choosing what to adopt – and when.

spring 2013 www.thebaltic.com

052-055_Baltic_Operations_Risk.indd 52

05/03/2013 15:45

and assist members that have had difficulties in obtaining commissions or arbitration awards. One of the better-known risk-management tools is the Forward Freight Agreement, for which the Baltic offers assessments and a brokers’ association. Credit reports are another tool – and one that is unique to the sector, according to Mr Phillips. Four companies provide this information, including Ocean Intelligence, one of Mr Phillips’ businesses. Useful as these are, there are limitations. “There is no global transparency when it comes to corporates,” he says. “Every country has different rules for different types of companies.” That said, “the analysts have a good understanding about what is going on,” Mr Phillips notes. “They offer a dated snapshot of a company, from the point of view of who is behind it, what it does, what it is looking to do, and what its payment performance is like. It is useful information, provided people know what they are getting and they know the limitations.” With the diversity of risk-management tools available, brokers, owners and operators have to ensure they are looking at the right information and ignoring what is irrelevant. Is too much information available? An industry source says not. The emphasis, he says, is on investigating other parties, and doing your homework before you begin business. “You network in the market, and in less than one hour, you know who they are. You will ask for the background of the company, you will check them out – are they good enough, are they trustworthy? One reason you see people in a mess is because they go for the cheapest rate.

THE INSECURITY INDEX Risk can come at a business from any angle. The details may vary, but there are certain major categories of risk that most businesses will encounter at some point. These include:  Compliance risks: the laws and regulations applicable to each business, such as tax, employment, and health and safety.

 Health and safety risks: what situations could apply, and how would they affect customers, as well as employees.

 Employee risks: this includes strikes and illness.

 Operational risks: operational and administrative procedures, including record-keeping and IT systems.

 Environmental risks: the detrimental effects of natural disasters and difficulties created by accidental property damage.

BELOW: JOHN PHILLIPS, MANAGING DIRECTOR OF AWYR LAS, STRESSES THE VALUE OF THE RIGHT RISK MANAGEMENT TOOLS

 Financial risks: dangers posed by business transactions and financial systems.

 Political and economic risks: the possible results of changes in government and government policy, or recessions and their impact on interest rates.

And that is normally not the best rate. “There is a lot of information, and you need to separate it. But the rumours in the market run so fast that if a company is in financial difficulty, it will boil in the market.” The amount of information available can be vast, but, stresses Mr Phillips, the knack is dividing the necessary from the unnecessary. Shippers and brokers, he says, have to “use a little bit of the grey matter between their ears”. //

TIM MAUGHAN

Tim is a freelance journalist based in Osaka, Japan, hailing from northern England. He started writing in 1997 and spent nine years with Reed Business Information in London.

Market risks Commodity price instability and financial market volatility are making careful monitoring vital.

Expansion of the role of government Seen as a difficulty particularly in the US and China, intervention has alarmed many businesses.

Slow recovery Expectations of economic recovery have risen, but most organisations remain wary of the effect global risks can have on their operations.

Social acceptance and corporate social responsibility The impact of public reaction to corporate behaviour should not be ignored.

to credit 10. Access Reports of lending

difficulties have declined since the height of the financial crisis, but uncertainty remains in many areas.

SOURCE: THE TOP 10 RISKS FOR BUSINESS – ERNST & YOUNG, 2012

www.thebaltic.com SPRING 2013

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05/03/2013 15:46

Shipping & Ship Finance

or rs ST f e s! U nt n e M ve w tiv e e n O cu Th ND via xe E TE ina e AT nd itim a r Sc Ma &

Conference 2013 Supporting Industry Organisations:

3rd Scandinavian

Shipping and Ship Finance Conference 2013

Wednesday 17 & Thursday 18 April 2013 Marriott Hotel, Copenhagen, Denmark

Event Highlights include: • What are the prospects for world trade and the financial markets? • How can shipping close the funding gap? • What does the immediate future hold for container, dry bulk and tanker markets? • When should owners place eco friendly orders and what are the alternatives? • What risk management strategies should today’s shipping companies put in place? • Who can access Asian export credit finance and is there a down side? • What are the absolute necessities for a restructuring to have positive prospects?

Meeting the Challenges of Doing Shipping Business Today £100 Discount – Quote VIP Code: FKT2485BTAD Conference Chairman:

Industry Address:

Hans Christian Kjelsrud, Global Head of Shipping, Offshore & Oil Services, Nordea Bank Norge ASA

Peter Appel Appel, Managing Partner, Gorrissen Federspiel, Denmark

Featuring the Participation of: Jens Andersen, Chief Executive Officer, Royal Arctic Line Jan Bagger, Director, Clarksons Securities Ltd Simon Booth, Managing Director, Bermondsea Henriette Brent-Petersen, Head of Research, Maersk Brokers Kjartan Bru, Senior Vice President Shipping, Offshore & Logistics, DNB ASA Torben Carlsen, Chief Financial Officer, DFDS Seaways Martin André Dittmer, Partner, Head of EU & Competition, Gorrissen Federspiel Anders Engholm, Chief Executive Officer, Hafnia Management AS Jo Forfang, Attorney, Norsk Tillitsmann ASA Thomas Franck, Chief Executive Officer, Bore Shipping Company

Mark Friedman, Senior Managing Director, Evercore Partners Jan Fritz Hansen, Executive Vice President, Danish Shipowners Association Nicolai Hansteen, Chief Economist, Pareto Shipping AS Jeremy Harwood, Partner, Blank Rome LLP Espen Hemminghyth, Senior Vice President DNB Markets – Debt Capital Markets, DNB Bank ASA Sturla Henriksen, Director General, Norwegian Shipowners Association Grant Hunter, Chief Documentary Affairs Officer, BIMCO Søren Johansen, Managing Partner, Altor Equity Partners AS

Peter D. Knudsen, Senior Partner, NorthCape Capital AS Stephen Marais, Partner, Ince & Co LLP Richard Meade, Editor, Lloyd’s List Jacob Meldgaard, Chief Executive Officer, TORM AS Helge J. Pedersen, Global Chief Economist, Nordea Group Christer Schoug, Managing Director, Swedish Shipowners Association Jakob Stausholm, Chief Strategy, Finance & Transformation Officer, Maersk Line Michael Weigaard Heimann, Newbuilding Responsible, Maersk Line Olof Widén, Managing Director, Finnish Shipowners Association George Xiradakis, Managing Director, XRTC Business Consultants Ltd

Registration Hotline: +44 (0)20 7017 5511 For latest programme and to book online, please visit: http://www.informamaritimeevents.com/FKT2485BTAD 054_BALTIC_SPR_13.indd 54

Workshop: The Essential Guide for Shipping: Ensuring Compliance with Competition Law & Anti-Corruption Regulations Key Insights into Competition Law and Anti-Corruption Regulations Ensuring Smooth Handling of Contentious Issues Tuesday 16 April 2013 (at the conference venue) Led by Gorrissen Federspiel, Denmark

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04/03/2013 17:29

operations Risk case study

GFI

Back to the futures Will Leslie of GFI Group is surprised and unimpressed by some industry attitudes towards the futures market

Will Leslie

joined GFI Group in September 2001, and set up the freight derivatives desk in April 2002. In January 2008, he took over the running of the freight derivatives desk, where he remains today. GFI Freight offers freight brokerage services, alongside joint venture partners ACM Shipping and McQuilling.

Having worked as a freight derivatives broker for the past ten years, it still amazes me how little is known about the existing Forward Freight Agreement market in the industry. Liquidity may be challenging, and the existing instruments may not address all needs exactly, but there are people who have saved themselves millions of dollars by putting enough extra wool on their back to protect themselves from the current deep shipping recession. When people discuss risk-management tools, I take that to mean financial instruments such as futures and options that help a participant who has an exposure to a particular underlying market to manage their income stream. On a broad level, the purpose of these futures markets is to allow people to transfer this risk to another market participant. That could be someone who has an opposing exposure (such as an oil major charterer versus a tanker owner) or a speculator such as a hedge fund that actually wants exposure to a market that it didn’t originally have. I find it both incredible and unfortunate that there are members of our industry who view the futures market as a potential additional risk when in actual fact it provides them with tools to manage some of the risks they encounter on a daily basis. What’s even more surprising is that this culture exists in an industry where the assets are worth tens of millions of dollars. I would not generally include operators in this group, be they oil majors or trading companies operating their own assets, because from my experience it is the operators that have been the quickest to identify the benefits of managing shipping exposure by participating in futures markets.

One could argue that owners, by time-chartering vessels out to the operators in the first place, are hedging their risk to the spot market. By time-chartering out an asset, however, an owner is restricted to hedging a whole ship for the duration of the contractual period (on terms that are negotiated by both parties). Their alternative would have been the futures market, which would allow them to later change their market view, and remove all or part of the hedge. Not to mention that the flexibility of the risk-management tool allows you to maintain a presence in the market you’ve invested millions of dollars in. At the other end of the spectrum, there are plenty of companies running large, net shortfreight positions. While they might currently feel comfortable having those naked positions in a weak freight market, I hope they are confident they can time and manage this risk before the market turns. It is neither the function nor design of any futures market to increase or decrease volatility in the underlying market. This is as true of tankers as any other futures market; that spot volatility comes from fundamental drivers (ie, pure supply and demand). When we see more volatility in the spot market, we do see greater participation in the futures market, as people seek to manage risk or gain exposure. Conversely, in times of low volatility, as some segments of the market are currently experiencing, we see a decrease in participation. After all the hard work that’s gone into creating a functioning futures market over the past ten years, and the benefits that a meaningful forward curve can bring, we must ensure that we all use the tools available to us, or they may not be around in the future when we may need them most.

I find it both incredible and unfortunate that there are members of our industry who view the futures market as a potential additional risk www.thebaltic.com spring 2013

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05/03/2013 11:05

environment Eco trends

a greener blueprint We are given to believe there is a huge push to put eco-ships on the water. But is that really the case, and, if so, what is driving it? Mary Parker takes a closer look r

rom meeting the legal requirements at the ‘minimum’ end of the scale to being virtuously ‘green’ at the other, there can be few shipowners and operators that are not looking for solutions to save fuel and reduce emissions. But often the middle ground is misunderstood, says Alison Jarabo-Martin, managing director of Fathom Shipping. “There is a growing understanding that moving towards eco-ships is important and people do want to do the right thing – but the shipping industry is also struggling in tough financial times, so it needs to have

some business benefits, and not everyone understands all the business benefits of eco-efficiency,” she says. “It is about understanding what the business case is, and implementing it effectively. I don’t think there should be a green-wash for the sake of it, because that doesn’t get anyone anywhere. We went through a phase of that in the industry and to an extent we still are – with all the eco-ships being marketed, it can sometimes appear as if every ship coming out of the yards is an eco-ship.” There is obviously awareness that ‘eco’ is good, and there is also

spring 2013 www.thebaltic.com

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05/03/2013 11:09

green gains

I keep hearing talk that there will be better charter rates for eco-ships, but feedback from owners suggests this is not necessarily happening

image: Jason Reed, thinkstock

Alison Jarabo-Martin, Fathom Shipping

increasing consumer pressure – operators need to be transparent to their end users, who are seeking greener supply chains, says Ms Jarabo-Martin. “And there have been some really interesting developments,” she adds. KfW Bankengruppe worked with classification society Germanischer Lloyd to benchmark the bank’s whole loan portfolio against the Energy Efficiency Design Index, to see where the vessels sat in terms of fuel efficiency, emissions and so on. “Among other findings, they discovered that less energy-efficient ships posed a higher credit risk, and some that had a particularly poor energy-efficiency profile directly corresponded to loans that had been more challenging in performance. It wasn’t necessarily what they expected to see, but it certainly demonstrated that the more responsible operators were better in terms of risk.” There are always going to be the front-runners, of course, and at the opposite extreme there are shipowners and operators not even meeting the legislation, says Ms Jarabo-Martin. “Then there is a whole host in between the two extremes.” But remove the virtuous bit, and what are the advantages? Clearly, less fuel means less expense. There is a view that more efficient ships will have a better lifecycle, so owners could gain better lending terms. As to whether eco-ships will get better charter rates, this is unclear. “I keep hearing talk that there will be better charter rates, but feedback from owners suggests this is not necessarily happening,” she says. “However, I do believe eco-ships are more charterable. It makes more sense to charter the best vessel to get the most fuel efficiency.”

However, one of the big issues is establishing the actual fuel savings, she says. “There has been this fuelsaving-technologies bandwagon people have jumped on, and it has made owners and operators very suspicious. Fuel savings claims are made but there is no easy way for this to be verified by them – that lack of information is almost creating a barrier to the uptake of the technology.” assessment options Two years ago, Fathom Shipping compiled a book on the different fuel-saving technologies and measures, critically analysing the providers: “That was very successful, as finally people had a source where they could easily understand the market. However, it is a market that is constantly evolving.” As well as producing a second edition of its book, Ship Efficiency: The Guide, due in April, Fathom Shipping has moved its assessment concept online. Its ctech website provides a platform for collating and reviewing maritime clean technologies and providers – giving overviews of products and their attached savings claims, as well as supplying cost, return on investment, maturity and case-study data where possible. Shipowners and operators have free access to the site and are encouraged to add their own information. “The website features real case studies of the technologies available, and we are continually developing the website and its content in order to give a wider and wider profile of what is proving to be really useful,” says Ms Jarabo-Martin. “Ctech has been founded on wide industry support and an extensive contact network to give the most up-to-theminute knowledge and insight on maritime eco-efficiency providers.”

At a time of shortage of capital, do eco-ships have the added virtue of being more attractive to the ship finance sector? Opinion seems divided. Phil Cowan, head of corporate finance at Moore Stephens, says: “I wouldn’t say having an eco-ship was a magic wand in terms of getting finance. I think the market is still looking at eco-ships and whether they will or will not make a difference in the market in a few years. “Potentially, eco-ships, if proved to work and provide an advantage, will become a significant factor in lending decisions – but, having said that, our approach would need to be ‘stand the test of due diligence’, and other ships may well stand on their own merits if prices reflect the fact that a ship isn’t, relatively speaking, an eco-ship compared to another one.” Lawyers at Norton Rose believe that the squeeze on capital is slowing the move to eco-ships. “I think if there was the capital, there would be an even greater push towards eco-ships, of course, with their added benefits,” says banking lawyer Richard Howley. Eco-ships have clearly become an issue, he says, “and you could see a position in a few years’ time where, in certain sectors, shipping assets may be trading at a significant discount if they are burning bunker fuel too heavily. Eco-ships will become an increasingly important subject in view of emission control areas and the cost of expensive scrubbing technology, or of a vessel not being technically able to burn [liquefied natural gas], for example. “I think operators understand the risk that their vessels may not be competitive in the future, but they are looking at bigger problems at the moment; changes in environmental requirements may not be in the forefront of financiers’ minds, although they will be keeping an eye on these risks, too.” Norton Rose asset finance lawyer Simon Lew adds: “The problems associated with the lack of capital in the industry mean that proposals to refleet with eco-ships are generally being forced on to the back burner. It isn’t good for the industry as a whole, and that is a direct result of the lack of capital.”

www.thebaltic.com spring 2013

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05/03/2013 11:09

port focus South America

shipping surge for latin america Clive Woodbridge analyses the port capacity expansion that is accompanying the region’s economic growth

here is no doubt where the focal point for bulk port development in Latin America lies at present. Commodityrich Brazil is urgently seeking to unlock its full potential and remove port-related bottlenecks inhibiting participation in world trade. To address this problem, several large-scale bulk terminals are being built and others are at the planning stage. In December 2012, the Brazilian government announced a $26bn investment programme for the ports and logistics sectors, as part of a package of measures aimed at modernising the country’s ports infrastructure, facilitating the participation of the private sector in the ports industry and increasing overall operational efficiency. One of the changes promised is to sweep away restrictions on private terminals handling third-party cargoes, something that until now has been, in theory at least, the preserve of state-controlled port organisations. Considerable private-sector investment in Brazilian bulk ports is already under way. But with state spending now pledged through to 2017, largely to provide facilities for lease to private terminals, and with a new regulatory framework in place, a further wave of investment can be expected. This should enhance the ability of the country’s ports to meet overseas demand for a wide range of Brazilian commodity exports, from iron ore and coal to grains and soya beans. Brazilian entrepreneur Eike Batista’s EBX Group is behind two of the biggest current projects. Its MMX mining subsidiary is developing the Superporto Sudeste facility at Baía de Sepetiba, Itaguaí, which is designed exclusively for iron ore handling. The initial capacity of Superporto Sudeste will be 50m tonnes a year, although a second phase is planned, which would take this to

a computer generated image of how açu superport TX1 will look when completed

The iron ore berths at Açu Superport’s TX1 facility are already constructed

Considerable private-sector investment in Brazilian bulk ports is already under way 58

100m tonnes annually. Operations at Superporto Sudeste are expected to begin later this year, when it will have two berths for bulk loading, both with a draft alongside of 20 metres, allowing access to large bulk carriers up to capesize. Sister company LLX is investing in the Açu Superport facility north of Rio de Janeiro, which comprises two separate port areas. One part, TX1, is being developed in partnership with Anglo American and is an offshore terminal that will provide facilities for crude oil and iron ore exports. The iron ore berths are complete and are awaiting the construction of the Minas-Rio iron ore pipeline by Anglo American, while dredging is under way in preparation for the development of the oil terminal. TX2 will be a shore-based, multipurpose port facility with 13km of quay and

spring 2013 www.thebaltic.com

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05/03/2013 11:10

more than 30 berths, catering for coal, liquefied natural gas, liquid bulk, dry bulk and offshore support operations. Civil engineering works are making good progress at this site. Cargo handling operations are scheduled to start at Açu Superport by the end of 2013. The complex, which will have an initial draft of 21 metres, allowing it to handle capesize, chinamax and very large crude carrier vessels, has been designed to provide a total throughput capacity of 350m tonnes a year, potentially making it one of the largest ports in the world. As well as these new greenfield projects, there is considerable investment in expanding existing bulk port facilities in Brazil. Tecar, part of the Companhia Siderúrgica Nacional (CSN), is going through an expansion that will increase its dry bulk handling capacity from 30m tonnes to 45m tonnes a year. Phase one is due to be operational in September 2013, and the company is working on the design of a second phase that will boost annual capacity to 60m tonnes. However, a Tecar

the mining, agribulk, offshore supply, and oil and gas sectors. Porto Central is finalising its environmental impact assessment and a construction licence is expected by the end of 2013, allowing construction to start in 2014. Elsewhere, the Adriana Group of Brazil has teamed up with Seabulk Systems to develop an iron ore facility in Minas Gerais. This will be capable of handling 20m tonnes a year initially, rising to 50m tonnes in time. Allen Palmiere, chief executive of Adriana, says, “We recognised an infrastructure opportunity in Brazil for an independent iron ore port facility to capitalise on the restricted market of many small and mediumsized iron ore producers in Minas Gerais. We have now secured the strategic land position and have established a key relationship with Seabulk Systems, who will assist us in port development.” Outside Brazil, Navios South American Logistics is pressing ahead with plans to upgrade its dry bulk terminal facilities in Nueva Palmira, Uruguay, after inaugurating the largest silo of its kind in the

As well as new greenfield projects, there is considerable investment in expanding existing bulk port facilities in Brazil spokesperson cautions: “The time frame for phase two is still uncertain, as it will be linked closely to international market developments and the consequent demand for iron ore.” Tecar handles imported coal used at CSN’s Volta Redonda steel mill, and exports iron ore mainly to China and elsewhere in the Far East. In 2012, the terminal’s throughput was around 27m tonnes. For the future, two other major bulk ports projects are at an advanced planning stage. One is Porto Central, north of Rio de Janeiro, which is being led by the Port of Rotterdam in a joint venture with a group of Brazilian investors called TPK. The aim is to create an industrial port, modelled on the Port of Rotterdam’s experience in Sohar, Oman, that will focus on supporting Construction work in progress at Açu Superport TX2

country late last year. The $10m silo, which can store 100,000 tonnes of grain, takes Navios’ total storage capacity in the port to 460,000 tonnes. The new silo at Nueva Palmira is the first stage of an ambitious investment plan that also involves constructing a new conveyor belt linking the series of silos to the berths. The new conveyor, due to be completed in the first quarter of 2013, will reduce vessel waiting times, doubling Navios’ loading capacity. Navios also plans to widen the scope of its operations in the port to include other commodities, including iron ore. Meanwhile, in Chile, Empresas Marítimas Oxxean has started construction of the first phase of a new bulk facility in the Caullahuapi area of Puerto Chincui, near Puerto Montt, with a design capacity of 750,000 tonnes a year. The berths will have a 15 metre water depth alongside, allowing larger bulk carriers to call into Puerto Montt. Representing an initial investment of $25m, the first phase is expected to be operational in December 2013. Founded by the Pacheco brothers 25 years ago, Oxxean plans a further $50m of investment in the Caullahuapi terminal by 2020, boosting capacity to 1.5m tonnes a year.

clive woodbridge

Clive has been writing about shipping, ports and transport for 30 years. He has contributed to Lloyd’s List, Seatrade and Container Management, and edits Ship Repair and Conversion Technology for the Royal Institution of Naval Architects.

www.thebaltic.com spring 2013

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05/03/2013 11:10

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04/03/2013 17:29

port briefs

latest news from the docks HONG KONG

Seawall reinstatement, landing steps construction and drainage outfall reconstruction

Until June 2013, marine works involving seawall reinstatement, landing steps construction and drainage outfall reconstruction are being carried out at Tseung Kwan O, Hong Kong. The works are being conducted by one split hopper barge and two derrick barges with one tug assisting. The number of vessels engaged in the works will change from time to time to suit operational requirements over the course of the project. A working area of roughly 50 metres around each derrick barge has been established, with yellow marker buoys fitted with yellow flashing lights laid to mark the positions of the anchors extending from the barges. A silt curtain extending from the sea surface to the seabed has also been established in the works area, identified by yellow flashing lights. Diving operations will be carried out at times during the hours of work (07.00 to 19.00), Monday to Saturday, excluding public holidays. Source: Government of Hong Kong Special Administrative Region Marine Department Notice No 6 of 2013

TURKEY

Sanitary inspections in bosphorus and dardanelles

Vessels transiting the Dardanelles and the Bosphorus must now hoist the yellow flag and turn on their red and white quarantine lights to declare readiness for sanitary inspection before passage, according to a recent notice. Vessels that fail the sanitary inspection, or that do not allow the motorboat alongside or provide the necessary documentation in time will be fined. Masters have been advised to ensure that the sanitary boat is allowed alongside, to avoid any inspection failure and penalty. Sanitary dues for port calls have also increased to 0.75 Turkish Lira, up from 0.70 Turkish Lira, for all commercial vessels with a net registered tonnage over 50.

WORLDWIDE

lifeboat safety amendments

Changes to the International Convention for the Safety of Life at Sea (SOLAS) aimed at preventing accidents during lifeboat launching came into force on 1 January 2013. The changes, adopted in May 2011, add a paragraph 5 to SOLAS regulation III/1, to require lifeboat onload release mechanisms that do not comply with new International LifeSaving Appliances Code requirements to be replaced, no later than the ship’s first scheduled dry-docking after 1 July 2014 and, in any case, by 1 July 2019. Information submitted by flag states on their assessments of existing lifeboat hooks is available on the Global Integrated Shipping Information System under ‘Evaluation of Hooks’. Source: International Maritime Organization (www.imo.org) press briefing 02, dated 2 January 2013

NIGERIA

Unauthorised designation of areas for vessel operations

PANAMA

Just-in-Time Service Trial period begins

The Nigerian Navy has been statutorily charged with the responsibility to check criminal acts of crude oil theft, illegal bunkering and piracy penetrated within the nation’s maritime domain. Operating off the shores of Cotonou, Lome and Brass – where there are no refineries, discharge terminals or other infrastructure necessary for ship-to-ship and shipto-rig tanker transfer – is prohibited and will be monitored by the authorities. An earlier notice issued by the Nigerian Ports Authority (NPA) decreed that all ship-to-ship and ship-to-rig tanker transfer operations must be performed offshore in specified lighting zones. Accordingly, vessels found to be operating outside these officially designated areas will be targeted by the authorities, as they will be deemed to be perpetrating criminal acts of crude oil theft, illegal oil bunkering and fuel subsidy scams. The Nigerian Navy and NPA have requested the assistance of all stakeholders in ensuring that documents provided by official sources adhere to designated lighting zones.

The Panama Canal Authority (ACP) is exploring new options for relaxing the required arrival times of booked vessels, as established in section three of the Regulation on Navigation in Panama Canal Waters. The ACP is currently developing the concept of a just-in-time service that would allow booked vessels to arrive at an hour much closer to their scheduled transit time, reducing time at anchor before transit. To properly evaluate the functionality of this new service and determine the regulations that may be required, the ACP will be conducting a trial period of up to 60 days from 1 February 2013. Participation in the trial is limited to booked vessels, with up to four vessels per day (two per direction) eligible to participate. These vessels must be equipped with type A automatic identification service devices, and must have submitted the ‘JustIn-Time Service Trial Period Request Form’ no later than 96 hours before 09.00 on the intended transit date, via email or fax.

Source: Nigerian Navy Public Notice published in Nigeria’s The Guardian on 15 January 2013

Source: Panama Canal Authority Advisory to Shipping A-03-2013, dated 28 January 2013

This information has been supplied courtesy of GAC’s HOT PORT NEWS. Interested readers can sign up for GAC’s free HOT PORT NEWS email for daily updates from ports around the world, and subscribe to RED HOT PORT NEWS for free SMS alerts of breaking news at www.gac.com/hpn

www.thebaltic.com Spring 2013

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05/03/2013 11:11

the briefing BIMCO

testing the waters

The very stability of shipping is being tested by incoming ballast water management legislation. What was once a simple task is fast becoming a convoluted process, as BIMCO’s Peter Lundahl Rasmussen explains illustration: phil couzens

On most ships, ballast water is an indispensable part of ensuring safe operations en route, at anchor or in port. But incoming legislation on ballast water means shipowners, crews and shoreside stakeholders will have to rethink their procedures, including amending safety management systems, for the handling of this ship stabiliser. The International Maritime Organization’s (IMO’s) International Convention for the Control and Management of Ships’ Ballast Water and Sediments (BWM) Convention will heavily influence day-to-day shipboard operations, including bunkering, discharging and loading, which all

spring 2013 www.thebaltic.com

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05/03/2013 11:12

The installation of a ballast water management system is just the start of the BWM Convention compliance process convention update In February, the International Maritime Organization Subcommittee on Bulk Liquid & Gases gathered in London for its 17th meeting. It discussed the proposed ‘gross non-compliance’ concept and the finalisation of outstanding guidelines, and assessed the content of a draft resolution developed by a correspondence group that looked at the Control and Management of Ships’ Ballast Water and Sediments (BWM) Convention Regulation B-3 and the possible ease of bringing it into force for existing ships. It considered:

normally require the use of ballast water to control ships’ draught, hull strength, stability, trim and list. The BWM Convention is due to enter force after at least 35 IMO member states controlling a minimum of 35% of the world’s gross tonnage have ratified, accepted, approved or acceded to it. Currently, 36 IMO members controlling 29.07% of global gross tonnage have committed to it. However, the US Coast Guard (USCG) published its final rule on ballast water treatment standards on 23 March 2012 and its regulations came into force on 21 June 2012. These apply to new ships constructed

on or after December 2013, as well as to existing ships from 2014. All ballast water management systems (BWMS) intended for use in US waters have to be approved by the USCG, although BWMS with an approval certificate stating compliance to the IMO standard issued by or on behalf of a flag administration might be accepted after a USCG review. To address the US implementation schedule for BWMS containing dates before 2015, the USCG has introduced an ‘alternate management system’ (AMS) for BWMS, which has received IMO type-approval. Ships with an AMS installed have

• Classing ships built before the entry into force of the convention as ‘existing ships’, and postponing the requirement for those ships to install treatment systems until their periodical surveys after 2014/2016. • Removing the requirement to retrofit a treatment system at the intermediate survey after 2014/2016, keeping only the requirement for ships to retrofit a treatment system by the first renewal survey after the anniversary date of the delivery of the ship in 2014/2016. However, the correspondence group’s proposals might have only minimal effect on the BWM Convention challenges between 2016 and 2020, because of the US Coast Guard’s firm BWM compliance dates for treatment requirements.

www.thebaltic.com spring 2013

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05/03/2013 11:12

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the briefing BIMCO

There is certain to be more innovation on ballast water management systems, which the incoming IMO legislation and the USCG rules will not have considered

a grandfathering period of five years beyond their USCG compliance date. US type-approvals are unlikely to be granted before 2015. new standards The use of ballast water on ships today is an uncomplicated operational task using gravity and pumps in a simple piping and tank arrangement to control the ship’s condition. However, the BWM Convention, as well as alreadyimplemented national requirements for ballast water management, will complicate procedures. Soon, ships and crews will have to get acquainted with the BWM Convention, onboard BWM plan familiarisation, handling and operation of new equipment, more procedures, more reporting, and new log- and record-keeping. All this must be kept in mind when planning how to comply with the BWM Convention and national legislation. First, owners need to get their fleet or ship ready for interim compliance with the convention’s regulation D-1 ballast water exchange standard, which, among other things, requires the carriage of an approved ballast water management plan, exchange of ballast water and record-keeping of the ship’s ballast water operations. Next, owners must establish their BWM needs and plan ahead. The industry is progressing and a growing number of manufacturers are making new systems. Several BWMS have already received type-approval and appear to comply with the BWM Convention’s D-2 discharge standards. However, installation of a BWMS is just the start of BWM Convention

ballast management selection With so many ballast water management systems (BWMS) to choose from, owners and operators can be forgiven for feeling confused. But there are several factors that, if properly considered, will reveal the most suitable options. BIMCO offers the following checklist to aid owners in their decision-making:

• What is the ambient salinity of the waters that you operate in? Can the BWMS treat fresh, brackish and salt waters? • What is your ballasting capacity? Can the BWMS treat water at both high and low flow rates? • Is the BWMS fully compatible with your ship and designed for the applicable shipboard conditions? • Will the BWMS be effective in all sea

compliance. Owners and ships could face challenges just to prove their operational compliance, as they currently lack any onboard means to assess whether the BWMS is operating to the D-2 ballast water treatment performance standard. Crew and officer competencies and skills in ship handling have to be reassessed, and ship arrival and departure conditions with minimum ballast water onboard need to be planned for to save energy and time in any BWM operation. other considerations Key officers and crew members will also need to familiarise themselves with and be trained for new shipboard equipment and new regulatorily imposed procedures related to the safe operation and maintenance of the BWMS, record-keeping and basic understanding of the BWM Convention’s requirements. Another angle to consider is the effect this changing legislation will have on the global fleet. In general, existing ship designs make the use of ballast water a necessity, especially for operational purposes, but future ships are likely to be designed and built taking into account the BWM Convention. This may mean that

conditions, in all weather conditions and at all temperatures? • How rugged is the BWMS? Is it designed to cope with the particular environmental conditions onboard the ships? • Is the BWMS suitable for your dominant trade and trading areas? • Does the BWMS have worldwide approval, or is the acquisition of that approval in progress?

they have optimised ballast systems, stability and strength that will make it possible to operate with a minimum ballast water capacity. This imbalance will put the global fleet on an uneven footing. To ensure efficient world trade and to protect the global economy, ships must be able to trade on equal terms under a global legislative regime where port states accept a ship’s international BWM certificate as evidence that it fulfils the requirements of the BWM Convention and features the D-1 (ballast water exchange) and D-2 (ballast water treatment) standards. And there is certain to be more innovation on BWMS, which the incoming IMO legislation and the already enforceable USCG rules will not have considered. Might we one day see alternative ballast water supplies – such as fresh or recycled industrial processed water – that could control organisms, and which may be attractive in some trades if saleable at the loadport? Could shore-based treatment, dedicated treatment barges or tankers have a role, providing mobile ballast water management services or permanent port reception facilities for ballast water or sediments? BWMS are still in their infancy, and it will be an interesting area to watch.

Peter Lundahl Rasmussen

Peter is a master mariner with 12 years’ seagoing experience onboard chemical and oil tankers. He joined BIMCO as a technical consultant in 1996 and today is senior marine technical officer in BIMCO’s marine department. He has been involved at non-governmental organisation level in the International Maritime Organization’s marine environmental protection and safety-related work for more than 15 years.

www.thebaltic.com spring 2013

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05/03/2013 11:12

unit loads Market outlook

Confidence returning to breakbulk segment New construction orders hint that the sector could be approaching an upturn. Clive Woodbridge peruses the orderbooks Breakbulk shipping has inevitably been affected by global economic problems, but there are tentative signs that this particular market could be poised for a recovery. The leading operators in this market tend to offer a mix of heavy-lift, project cargo and breakbulk services, and the consensus is that 2012 earnings from breakbulk operations were the same, or perhaps even below, 2011 levels. Raymond Fisch, senior vice president of BBC Chartering, tells The Baltic: “The supply situation regarding multipurpose tonnage continued to be a challenge for vessel owners in 2012. We saw declining volumes in some cargo segments and allocating vessels adequately, to maximise utilisation, was and remains an issue for all players in the market.” However, there were also some positive trends. As Joerg Roehl, chief commercial officer and head of marketing at Hansa Heavy Lift, points out: “Our experience is that cargo segments which require modern tonnage and tailored engineering solutions performed much better than others, especially in the oil and gas industry. We are cautiously optimistic for 2013 and anticipate higher market growth in the medium term.” 66

As well as good levels of demand from oil and gas customers, another factor underpinning renewed confidence is a slowdown in the delivery of new multipurpose project (MPP) cargo ships in 2013, after several years of significant fleet growth. Mr Fisch says: “We expect growth in the supply of tonnage to weaken, and it seems likely that the market will slowly get more balanced again. However, we expect price competition will be fierce and rate recovery to be muted at best.” Consolidation in the industry is also expected to create more stable market conditions. The merger between

Mammoet undertaking Heavy-lift specialist Mammoet has delivered a specially designed linkspan bridge to Associated British Ports’ Port of Grimsby as part of the port’s £26m Grimsby River Terminal development.

The linkspan arrived on the crane barge Mammoet Amsterdam. John Fitzgerald, ABP’s port director for Grimsby and Immingham, said: “It’s great to see this exciting phase in the development of the Port of Grimsby take shape with the addition of this

new linkspan. The new terminal is on course to secure Grimsby’s position as the UK’s leading car import facility.” The Netherlandsheadquartered Mammoet specialises in tailormade heavy lifting and multimodal transport solutions.

spring 2013 www.thebaltic.com

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05/03/2013 15:46

While investment in new tonnage is undoubtedly slowing down, some companies are continuing to place orders for new ships

BBC Amethyst, a sister to the recently delivered BBC Moonstone

Intermarine and Scan-Trans in 2012, creating a company with more than 50 multipurpose and heavy-lift vessels in its fleet, is the most significant example to date. More recently, Clipper Projects announced the creation of a new MPP pool, together with Enzian Ship Management of Switzerland and Freese Shipping of Germany, which will initially comprise 14 15,000-20,000 dwt vessels. Kristian Morch, chief executive of Clipper Projects, explains: “The creation of this pool is in line with Clipper Projects’ strategy to participate in the consolidation of

the multipurpose market, and we believe that the pool will form a solid platform for further growth.” While investment in new tonnage is undoubtedly slowing down, some companies are continuing to place orders for new ships. Rickmers-Linie has, for example, ordered two 20,000 dwt multipurpose newbuildings with a fuel-efficient design from HudongZhonghual Shipbuilding in China, for delivery in 2015. Managing director Ulrich Ulrichs says: “Bearing in mind that the current multipurpose and heavy-lift orderbook shows that deliveries from 2015 onwards are

very few, we are confident that there will be strong market requirements for these excellent vessels.” Another company that has dipped its toe back in the newbuilding market is Nordana of Denmark. The company has confirmed orders for four 12,000 dwt multipurpose heavy-lift ships from the Taizhou Sanfu shipyard, for delivery starting in 2015. Meanwhile, existing investment in new ships is working its way through the system. BBC Chartering has one of the biggest newbuilding programmes, totalling 35 ships. In January 2013 the company took delivery of the BBC www.thebaltic.com spring 2013

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05/03/2013 11:13

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04/03/2013 17:30

unit loads Market outlook

Oil and gas cargoes have been less affected than other markets, reports Hansa Heavy Lift

Breakbulk vessel operators continue to position themselves to take advantage of emerging market opportunities Danube, the seventh and last in a series of 17,000 dwt multipurpose heavy-lift ships. Other new vessels that have entered the company’s fleet recently include the BBC Vesuvius, the seventh of eight 9,300 dwt vessels; BBC Moonstone, the eighth of 14 14,360 dwt vessels; and BBC Bahrain, the last of six 8,000 dwt multipurpose ships. As well as modernising their fleets, leading breakbulk vessel operators continue to position themselves to take advantage of emerging market opportunities by setting up new offices and upgrading services. Since the beginning of January, Hansa Heavy Lift has been represented in India by Allcargo Logistics, as part of its growth strategy. Mr Roehl says: “India is a growing market with a lot of potential. The presence of an exclusive agent locally is an important strategic step for us and will improve service levels for customers in this region.”

In 2012, BBC Chartering set up three new offices, in Antwerp, Istanbul and Perth, and added capacity on some trade lanes due to demand. For example, frequency on the Andino Line service between Houston and the west coast of South America has been increased to weekly. “South America, Asia and increasingly Australia and West Africa are important markets for our part of the shipping industry,” says Mr Fisch. “We expect the offshore oil and gas sectors in these regions will provide numerous opportunities for breakbulk and project cargo shipments in future.” West Africa is also a focus for newly created Safmarine MPV, which has been established in Antwerp as an independent business in the AP Moller-Maersk Group. The company offers niche liner services for project and conventional breakbulk cargo

between Europe, the US, South Africa and West Africa, using a dedicated fleet of owned and chartered-in multipurpose vessels. Safmarine MPV managing director Jorg Knuttel suggests that: “Setting ourselves up independently allows us to cater more towards our customers’ needs.” The transition to an independent Safmarine MPV is scheduled to be completed by the end of the first quarter of 2013 and will involve establishing a stand-alone agency network outside that provided by Maersk and Safmarine. As a first step, the Royal Burger Group has been appointed to act as liner agent for Belgium and the Netherlands, and other appointments will follow in the key markets covered by Safmarine MPV, whose fleet includes newly built multipurpose vessels that have been purposedesigned for African conditions.

clive woodbridge

Clive has been writing about shipping, ports and transport for more than 30 years. He has contributed to and edited many leading publications.

www.thebaltic.com spring 2013

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05/03/2013 15:47

Insurance Legal

laws that haven’t gone away There is often a flurry of interest about new laws. Articles in trade publications will predict dire consequences for those who ignore the gathering storm; lawyers will tender advice on how to deal with the threats; seminar organisers will offer to educate those in ignorance. Rapidly, a little industry seems to grow up, and then the next new big thing is announced. Editors, lawyers and promoters of seminars seem to move on. The publicity in relation to money laundering and bribery fits the above pattern. But it is important to remember that, while the publicity has died down, the laws have not ceased to exist. The steps put in place when the laws were introduced need to be reviewed periodically. Money laundering is a process intended to alter the identity of the 70

source of illegally obtained money. The legislation applicable in England and Wales is contained in the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2007. Shipbrokers are unlikely to be affected by the extensive obligations in the

A broker cannot avoid liability because the dirty deed was done abroad

regulations that apply to the regulated sector, but provisions of the legislation apply to all individuals and companies. The International Transport Intermediaries Club was recently reminded of the obligations that all companies have in relation to financial crime. The police had contacted a broker member wanting information on one of its clients. The police explained that the investigation related to suspicions of money laundering, and a formal data request was sent to the member. There was no suggestion that the broker had itself been involved in any wrongdoing, but it was not something it could discuss with its clients. Brokers will normally regard information on their principals as strictly confidential, and want to seek instructions before releasing it. It is important, however,

Photography: thinkstock

The arrival of the police is not the best time to review money-laundering and bribery policies. The International Transport Intermediaries Club’s Andrew Jamieson explains why

spring 2013 www.thebaltic.com

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05/03/2013 11:13

Galleon Marine Insurance Agency Galleon provides liability insurance for marine and offshore professionals such as (but not limited to) ship brokers, agents, managers, marine surveyors and consultants. We also cover cargo and third party liability for logistic providers, freight forwarders and transport operators as well as cargo “all risks” insurance. Our Insureds benefit from the following: • Extensive cover that can be tailored to suit each Insured’s business needs; • Policies that are supported 100% by underwriters at Lloyd’s of London; • Fixed premium insurance; • 10% no claims rebate which increases after 24 months of continuous cover; • A supportive and efficient claims service with prompt assistance; • Knowledgeable and experienced staff that have the time and resources to respond quickly and effectively We are very proud of our claims service. We believe it is of utmost importance to work with our Insureds to settle a claim quickly whilst supporting them to maintain their business relationships. We also have a network of professionals around the world with specialist knowledge acting as advisors (including long standing member of The Baltic Exchange – Ron Church of Ron Church Chartering who has over 50 years experience in the industry). Contact: Chris Curran (Underwriter) or James Munn (Deputy Underwriter) Galleon Marine Insurance Agency, 10 Fenchurch Avenue, London, EC3M 5BN Tel: +44(0) 20 3178 8866 E-mail: contactus@galleon.uk.com Galleon Marine Insurance Agency is a trading name of Crispin Speers & Partners Ltd which is authorised and regulated by the Financial Services Authority (FSA). Our registration number is 311507.

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05/03/2013 15:58

Insurance Legal Agents facing liability pressure Ship agents are coming under increasing pressure to accept liability in today’s financially stretched shipping industry – a fact that the International Transport Intermediaries Club’s (ITIC’s) claims files can attest to. In one case, a vessel was attempting to leave berth when a stowaway was discovered. The ship agent immediately contacted the immigration authorities to ask them to remove the stowaway, but failed to notify the port authorities to obtain a time extension for leaving the berth. As a result of the vessel’s delay in leaving the berth, the port authorities imposed a penalty of $5,000 and refused to grant port clearance until the penalty had been paid. It was late in the evening when the ship agent received notice of the penalty and it could not be settled until the banks opened the following morning. In addition to the penalty, the shipowner incurred significant costs as a result of the vessel’s delayed departure. In another case, a liner agent accepted, on behalf of a shipping line, a cargo of scrap plastic from the southern hemisphere to the Far East. Unfortunately the agent had previously received instructions from its principal not to accept any waste or scrap material for shipment to the Far East. When the cargo arrived at its destination, the authorities prohibited the import of the scrap, and required it to be re-exported, costing the shipping line $20,000. The line was unable to recover these costs from the shippers, who had disappeared. The line looked to its agent for reimbursement of these charges, which included storage fees, port charges, customs inspection fees and container demurrage. ITIC sought advice to determine whether the three months it took to re-export the cargo was reasonable. The advice confirmed that the costs were reasonable and arose solely from the failure of the liner agent to follow the shipping line’s instructions. On this basis, ITIC agreed to reimburse the agent for the full $20,000.

It is important that brokers understand that advising their principals of a money-laundeirng investigation would be a criminal offence

that brokers understand that advising their principals of the investigation would be a criminal offence. Section 342(1) of the Proceeds of Crime Act 2002 makes it an offence to prejudice a money-laundering investigation if the person making the disclosure knows or suspects that an investigation is being – or is about to be – conducted. Telling a principal, however informally, that it is being investigated could lead to a fine or prison sentence. There are similar provisions relating to interfering with material likely to be relevant to a money-laundering investigation. Attempts to dispose of the evidence of a fixture or commission payment would clearly fall within these offences. The bribery act 2010 The implementation of the Bribery Act 2010 created a great deal of comment, especially about the need for companies to have anti-bribery policies. In many ways the Bribery Act 2010 simply codified existing law. Most actions illegal under the Bribery Act were already prohibited. But some new offences were created. UK legislation does not make exceptions for facilitation payments. Additional payments made to secure business, whether paid directly or disguised as commission, will constitute bribes. Note that the Bribery Act is not restricted to payments made or received in the UK. A broker cannot avoid liability because the dirty deed was done abroad. Before the Bribery Act, if a staff member was caught making an unlawful payment, senior management would attempt to distance the company from the illegal conduct by saying that it was the action of a rogue broker. The Bribery Act has not only prevented this reaction but has created an offence of failing to prevent bribery. If a staff member

pays a bribe, the company will be guilty of an offence. That liability is strict unless the organisation can show that it had adequate procedures to prevent bribery. The Bribery Act is part of a worldwide trend towards anticorruption legislation. In many countries, corporations are liable to penalties if a person acting on their behalf – for example, a broker – pays bribes. One reaction to the new legal climate has been for principals to ask their brokers to sign formal ethics statements in which they agree to abide by the principal’s policies. The principals hope the agreements will demonstrate to their national authorities that they have taken steps to prevent corruption. The need for UK companies to have such procedures was the subject of much legal comment when the draft legislation was published. Guidelines are available from the Ministry of Justice. The published principles include firms showing a top-level commitment to preventing bribery. The firms’ policies must be communicated throughout the organisation (including relevant training) and the procedure must be monitored and reviewed. Simply producing a copy of an email sent out when the Bribery Act came into force in July 2011 will not be adequate. The penalty for bribery committed by an individual can be imprisonment. The maximum sentence for an offence committed by a corporate body is an unlimited fine. Clearly, it is worth taking the time to review your money laundering and bribery policies. andrew jamieson

Andrew is claims director at the International Transport Intermediaries Club.

www.thebaltic.com spring 2013

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05/03/2013 11:14

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04/03/2013 17:30

P&I briefing Chain of responsibility

Back to back

illustration: getty images

The Charterers P&I Club’s Gavin Ritchie reveals why being in the middle of the supply chain is not as safe as it might seem For many operators, back-to-back charters sound like the ideal solution: risk and responsibility passes up and down the contractual chain and the lucky operator is like Teflon – no risk sticks to it and it gets a margin on either the hire or the freight – happy days! Unfortunately, as most of us involved in shipping know, things don’t always run smoothly or according to plan. In many cases what was otherwise seen as a simple back-to-back scenario

can end up as a complex nightmare. Just a comma in the wrong place can completely reverse the interpretation of a charterparty clause. Furthermore, in today’s volatile market the risk of a counterparty default is very real. Being able to pass liability up and down the chain does not absolve the operator of its primary responsibilities to other parties. Let’s start with the definition: what is a back-to-back charter? From the insurer’s perspective it is a situation

where the charterparty forms and the terms relevant to the charterer’s liability are materially identical between the head and the subcharter parties. The hire, freight or demurrage can all vary, but clauses that relate to cargo responsibility, stevedore damage or safety guarantees in relation to load and discharge ports should all be materially identical, theoretically allowing risk to pass through the charterer in the middle of the chain. www.thebaltic.com Spring 2013

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05/03/2013 11:14

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P&I briefing Chain of responsibility Therefore a back-to-back series of charterparties should allow the risk to flow through the charterer in the middle of the chain. However, as I explain below, it does not necessarily eliminate the charterer’s risk. The charterer in the middle of the chain – ie, the party who is backto-back – should always determine whether the charterer underneath them in the chain has insurance cover for their charterer’s liability. If there is no insurance or inadequate cover, the middle charterer is exposed because the subcharterer might not have the liquidity in its balance sheet to selffund a claim that could run to tens of millions of dollars. It is therefore vital that any charterer in the middle of the chain ensures that they check that their subcharterer has insurance cover with a reputable insurer who will support their client following a loss,

in definition

A back-to-back charter is a contract between a charterer and a subcharterer whose terms and conditions are identical to the contract, known as the head charter, between the charterer and the shipowner. The purpose of agreeing identical terms is to ensure that any money for which the charterer may be liable in the subcharter, for example despatch money, is recoverable from the shipowner. Source: TKM Global

Being involved in a back-to-back chain does not necessarily mean that the charterer can avoid getting involved in a claim

and that the limit purchased is equal to or greater than the cover under their own insurance policy. Where the subcharterer has no insurance cover for their exposure under the charterparty, there is a risk that any claim pursued by owners will flow no further down the chain than the charterer in the middle. This may be because the subcharterer refuses to accept responsibility or simply doesn’t have the liquidity to settle the claim, or that the subcharterer disappears at the first sign of trouble – hardly risk-free for the poor charterer sitting in the middle, who remains on the hook as far as the owners are concerned.

While the middle charterer may be back-to-back from a contractual perspective, this is meaningless unless it has established that the subcharterer can meet its obligations. In this day and age all charterers should carry charterer’s liability insurance. From a practical insurance perspective I would not regard any back-to-back arrangements as valid unless the subcharterer has proper insurance from reputable underwriters. Over the years, the underwriting team at the Charterers P&I Club has seen some spirited examples of backto-back conditions from prospective clients or their intermediaries. Probably the most entertaining from our perspective was the charterer that claimed they were materially backto-back having chartered a vessel in on a period charter on a Baltime charterparty and out on a voyage charter on a Gencon charterparty. Being involved in a back-to-back chain does not necessarily mean that the charterer can avoid getting involved in a claim. Privity of contract would not allow a charterer to simply remove themselves from a chain, and

they will be required to handle claims under the contract. Claims can run into millions of dollars if they involve serious hull damage, and legal fees can spiral. If it’s a commercial loss – eg, a hire dispute – the legal fees can again run wild, and they are effectively incurred twice as the arguments are run up and down the charterparty chain. In both scenarios the charterer in the middle will need to get heavily involved in claims handling, which will mean huge amounts of time and, as mentioned, potentially large legal bills. When it comes to handling any claims, the back-to-back charterer cannot simply take a passive position and pass claims through the chain; the charterer and therefore their insurer must still examine the charterparty and the facts of the case to determine whether the proposed action or messages being passed down or up the line are factually accurate and represent the correct course of action from the owner or subcharterer. Being caught out by poorly drafted advice or relying on someone else’s risk analysis is no defence. Often, just as much and sometimes even more work goes into defending or pursuing claims in circumstances where the terms are back-to-back. This means that in practice it is not unusual for back-to-back arrangements to actually cost more in legal fees, because the charterer in the middle has to deal with two parties on the same matter, determining communication and negotiating settlement. On the positive side, assuming the terms are materially back-to-back and that the subcharterer has adequate insurance cover, most insurers can often be persuaded to provide a small saving in the liability class premium for the voyage. In conclusion, at face value backto-back chartering can be an effective way for an operator or a charterer to earn a margin with little risk; however, it is easy to be led into a false sense of security. When contracting on back-toback terms, charterers must be vigilant and actively manage their contractual and counterparty risk to ensure that a sweet deal does not turn sour.

Gavin Ritchie

Gavin is the underwriting director of the management company of the Charterers P&I Club and has 20 years of riskmanagement experience in this specialised field.

www.thebaltic.com Spring 2013

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05/03/2013 11:14

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04/03/2013 17:30

legal briefing Alternative finance

bonds offer new capital possibilities for ship financing

Market movements have left shipping with a capital shortage. Norton Rose’s Simon Lew explains why bond structures could provide a valuable source of new investment Shipping is a cyclical business and has always relied heavily on commercial bank debt to fund activity through its cycles. What makes this cycle different is that it coincides with a period when the world’s leading banks are reshaping their balance sheets in response to the new regulatory environment arising from the global financial crisis. The result is a severe shortage of capital. The industry has long recognised that it needs to find alternative sources of finance, and the debt capital markets have been much touted as a solution. Certainly, there is a growing sense that insurance companies and pension funds (traditional investors

US bond markets, secured on will emerge as a significant drilling ships and, in one alternative funding source of the deals, a floating for the industry. production, storage That is not to say and offloading vessel that shipowners are chartered to Petrobras avoiding the bond total value of four and operated by markets. On the shipping-secured bond transactions Odebrecht, Schahin contrary, the volume in the us market or SBM. The senior of shipping debt between 2010 and 2012 bonds are all rated at or listed in Norway last above the corresponding year alone is proof that default rating of Petrobras. shipping companies are These structures could very happy to tap the bond easily be used to finance, for markets, and bond investors are example, a fleet of liquefied natural equally happy to provide the capital. gas tankers on long-term charter. They However, the Norwegian bonds might equally be applied to other are mainly unsecured, high-yield types of vessels owned and operated by stronger industry players. The key is a structure that provides a regular fixed income to service the bonds, with a security package that can, in practice, be enforced (meaning the ship arrested, remarketed and the sale proceeds distributed) within a reasonable period following a default. From a legal perspective, the rating agencies (and through them the institutional investors) will need to be convinced that the story surrounding enforcement of security in the shipping sector is as good as in other sectors where there is (or has been) an debt instruments with short tenors. active secured bond market, such as Furthermore, disclosure and listing real estate or aviation. Of course, the requirements in Norway are more major shipping banks got themselves relaxed than those in other markets comfortable with this a long time ago. such as New York, London and There is no reason why other providers Luxembourg. While these factors of finance cannot do the same. appeal to some investors, they can It will be interesting to see what 2013 impede many institutional investors, brings in this area. limiting the amount of funding available via the Norwegian market. The real prize would be to open // Simon Lew up the US capital markets to take Simon is a partner at advantage of their deep investor base. international law firm In the offshore sector, this has Norton Rose LLP. started to happen. Between 2010 and 2012, four separate secured bond transactions (in aggregate around $3bn) were placed in the

$3bn

The volume of shipping debt listed in Norway last year alone is proof that shipping companies are very happy to tap the bond markets in the US and European debt capital markets) are developing an appetite for shipping. This is not so surprising. The basic structure of traditional ship financing falls squarely within their recognised investment criteria: fixed income, long maturities and collateral over hard assets. That said, bond investors want rated and liquid (ie, listed) debt instruments, and these last two requirements have been a stumbling block for many shipping companies because of the time and expense (as well as the disclosure) associated with obtaining a rating and getting a listing. Consequently, the jury is still out on when and if the bond markets

www.thebaltic.com spring 2013

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legal briefing Bills of lading

the steel grasp of the law

IMAGE: Getty images

Holman Fenwick Willan’s Nick Roberson analyses a new decision on the use of Retla clauses and the condition of cargo Every master knows that issuing clean bills of lading covering steel cargoes that exhibit more than superficial rust or moisture damage on shipment could expose the carrier to liability. Or do they? Receivers taking up the bills, who are unlikely to have seen any load-port survey report, routinely complain that the cargo description in the bills, on which they relied when contracting with the shippers, does not accurately represent the shipment condition of the steel. These issues were examined in the recent case of the Saga Explorer, which concerned the shipment of steel pipes from South Korea to ports in the US. On discharge, the pipes were found to be rusted, and the consignees accordingly claimed that they were damaged on arrival. A pre-shipment survey had been carried out at the load port by Korean surveyors. Their report stated that the steel was “in apparent good order and condition with the following damage/ exception”. The report then featured 16 pages of qualifying remarks, including that the steel was “partly rust stained”, or a variation of this wording, such as “wetted before shipment by rain and partly rust stained in white oxidation on surface”. The report recommended that these comments be claused in or appended to the mate’s receipt. The mate’s receipt and the bill issued subsequently also contained a Retla clause, which provided that where steel goods were shipped, the phrase 80

“’apparent order and condition’… does not mean the goods, when received, were free of visible rust or moisture”. The clause also stated that, if the shipper desired, he could request a substitute bill omitting this clause and setting out any notations appearing in the mate’s receipt. While the mate’s receipt recorded that the condition of the cargo was “as per survey report”, the bill of lading did not include any reference to the report. The bill, which stated that the pipes were “shipped in apparent order and condition”, had been issued against provision of a letter of indemnity in the carrier’s favour. The receiver claimed that the goods were damaged on arrival. In response, the carrier argued that the steel, on outturn, was as recorded in the bill, and that the receiver had no claim. The judge observed that precise definition of pre-shipment condition of steel is difficult. He noted that the experts in the case did not agree on the condition of the cargo on shipment, nor on how the rust should be described using the guidelines in the widely used 1993 North of England P&I Club circular on steel pre-shipment surveys. However, the judge noted that it was common ground between the parties that there was no significant deterioration of the cargo during the voyage, and considered it noteworthy that none of the discharge port surveyors considered that the damage was “normal” or “to be expected”.

Did you know?

Shippers probably view the information in a bill of lading as private, and may be surprised to learn that all that information is freely available to competitors under the US Freedom of Information Act. In the US, every time a bill is produced it is collected and recorded by the federal government and used to feed government trade statistics. And the specific information – be that shipper details, commodity, consignee, date, origin and more – is there for the asking. Indeed, there are companies that make a living from packaging and selling this information, such as PIERS and Zepol.

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The judge also pointed out that the carrier would not have needed any letter of indemnity if the cargo had truly been in apparent good order and condition. The general manager of the owner’s shipping agent, Mr Kim, had explained that the reason why he had asked the shipper to provide a letter of indemnity was “out of caution” and “as a last resort”. The judge doubted this was accurate, and considered that it was more likely that the carrier had accepted the letter of indemnity because the shipper realised that if the bill of lading was claused they would not be paid under their letter of credit. He suspected that the shipper therefore persuaded Mr Kim that the owner should issue a clean bill of lading in exchange for the letter of indemnity. Looking at all the evidence, the judge concluded that the bills ought to have been claused. The carrier additionally argued, following the 1970 Retla case that gave the clause its name, that where the

It is no longer open to a carrier to argue for the literal interpretation of Retla clauses

A PAYLOAD OF ROLLED-UP STEEL IN A CARGO SHIP

bills contained a Retla clause, there would never be any need to issue claused bills since all surface rust, of any degree, would be excluded from the representation of apparent good order and condition. The judge rejected this, saying that the Retla clause should not be construed as a contradiction of the representation regarding good order and condition, but merely as a qualification. He said that the clause was plainly intended to apply to the situation in which the cargo exhibited superficial oxidation of a kind that could be expected to appear on any such cargo, and which was difficult to avoid. The judge considered that to construe the Retla clause in the way contended for by the owner would render the representation as to good order and condition meaningless. Some previous US decisions had effectively found that Retla clauses enabled clean bills to be issued, however badly the cargo was affected by surface rust. Those decisions had been justified partly on the ground that the shipper always had the option of demanding a different bill of lading that did not contain a Retla clause, and

which spelt out all of the remarks in the mate’s receipt. The judge rejected this argument, pointing out that it was commercially unrealistic to expect the shipper to make such a request, since a reissued bill in these terms would be claused by the carrier, and a claused bill would not enable the shipper to be paid under its letter of credit. The judge concluded that the carrier had not provided an honest and reasonable non-expert view of the cargo, as was required, but had made a “deceitful calculation”, and issued a false and untrue representation on which it intended the receiver to rely. The judge accepted the receiver’s evidence that it would have rejected the bills if it had known that they misrepresented the condition of the cargo. The judge’s finding that the carrier’s load-port agents intended to deceive the receiver may have facilitated his conclusion that the clause was intended to apply only to cargoes exhibiting superficial surface rust or oxidation. Arguably, such a conclusion would have been more difficult had the carrier honestly (but, in the judge’s view, wrongly) believed that the Retla clause permitted description of the cargo as being in apparent order and condition, and as a result had not secured any letter of indemnity from the shipper. Many will welcome this clarification of the scope of the Retla clause. It is no longer open to a carrier to argue for the literal interpretation that would have permitted it to issue clean bills where this would plainly not have been justified in the case of a bill without such a clause. It is unlikely, however, that the Retla clause has been deprived of all practical effect. The fact that precise categorisation of pre-shipment condition remains problematic means that disputes regarding whether clean bills are justified are unlikely to go away, whether or not there is a Retla clause. And where the line regarding whether bills should or should not be claused is difficult to draw, it is possible that clauses of this kind will, in practice, still assist masters in justifying any decision to issue clean bills. // NICK ROBERSON

Nick is an associate at Holman Fenwick Willan, an international law firm advising businesses engaged in international commerce.

www.thebaltic.com SPRING 2013

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MEMBERS' NEWS Sporting activities

MEMBERS’ NEWS 1

● DAVID BRADLEY CUP 2012

HOWE ROBINSON CLAIMS VICTORY IN CLOSE-RUN COMPETITION 2012 was a busy year for Baltic members who continued to give up their own time to keep the eight Baltic sporting and social associations running. Thanks to their collective dedication, there were more social events last year and an increase in the number of members involved. One of 2012’s biggest events was the David Bradley Cup, which takes its name from the much-loved and missed former Baltic head of freight who died suddenly in 2008. David was a sporting enthusiast, so it is fitting that he’s remembered in a way that captures his passion. The annual trophy is awarded to the team that takes first place overall from the contributing events of sailing, tennis, golf and the quiz night. Baltic Exchange Sailing Association kicked off the cup at Seaview Yacht Club on the Isle of Wight, with ten crews of four taking to the water in 26ft Mermaid-class keelboats. These halfopen Bermuda rigs are relatively simple to sail, and with added buoyancy they are ideal for less experienced crews. After six races and an excellent Yacht Club dinner, Howe Robinson, under 82

commodore Simon Cox, was placed first; followed by EA Gibson, skippered by Rupert Scott-Hughes; then Baltic director Andrew Francis’ team in third, and Lykiardopulo in fourth. The second leg in July saw 20 shipping teams gather at Surbiton Racket & Fitness Club. The tennis competition – the Fehr Cup – has been organised by former county player Perry Perera for 21 years.

tournament while the pros slog it out in the main competition. The day started beautifully, with bright skies and a gentle breeze. Spirits were high as Clarksons’ Graeme Murray and Richard Wetzki managed to seal a victory over last year’s winners, Tim Mellet and Charles Morrison of Braemar. And as umpire Costas Maramenides called the final “Game, set and match”, the heavens opened,

Thanks to members’ collective dedication, there were more social events last year As the Bradley Cup rules require companies to compete in each of the four disciplines, participating teams must send someone along even if they don’t have a Boris Becker on their desk. As a result, this usually attracts a mixed bag of talent, so lower-grade players are split off into an American

leaving a soggy sprint back to the clubhouse for tea and prizes generously presented by Richard Fehr. In October, the Golf Cup was played at Moor Park, where plans for the Battle of Arnhem had been made in the Second World War. It was with similar zeal that Baltic Exchange Golf

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CLOCKWISE FROM FAR LEFT: 1. SPINNAKERS UP IN THE CUP’S YACHTING LEG 2. SIMON COX OF HOWE ROBINSON RECEIVES THE SAILING TROPHY 3. PRIZEGIVING AT THE TENNIS COMPETITION 4. AFTER THE FINAL AT THE FEHR CUP 5. MIDMATCH, UNDER THE WATCHFUL EYE OF COSTAS MARAMENIDES 6. TENNIS CHAMPIONS GRAEME MURRAY (LEFT) AND RICHARD WETZKI (RIGHT) OF CLARKSONS 7. JO SIMMONDS (RIGHT) OF HOWE ROBINSON

// EVENTS Society laid siege to the indomitable fairway record of AM Nomikos. A call to golfing action spread far and wide, but it proved futile. In a competition that saw players from the US, Switzerland, Denmark and Monaco jet in to take them on, Mark Ravenscroft and James Pendered put Nomikos firmly ahead of the pack once again. Gibson’s, which had been high in the rankings, dropped out after a no-show in the golf, which let Howe Robinson slip into first place, with the Baltic team trailing by a point, Clarksons in third and Nomikos in fourth, followed by Holman Fenwick Willan. By the quiz night in November all was still to play for, and the turnout was telling. Howe Rob entered two teams just to be sure; Nomikos, having won three years on the trot, were more relaxed; while Holman Fenwick Willan enlisted its finest minds to the cause.

GET INVOLVED

With the pressure on, this was not the time for errors – or, indeed, marking errors – and as the Baltic raised the quiz trophy shortly before midnight, little did they know that triumph in both the quiz and therefore the Bradley Cup would be short-lived. The following morning, a polite email was issued which said that a recount had discovered that Holman Fenwick Willan had not been awarded some crucial points, which not only made them champions of the quiz, but also scuttled the Baltic’s Bradley trophy claim by denying them the crucial point needed over Howe Robinson. Every year, the David Bradley Cup becomes bigger, with more competitors, and our thanks go to the organisers for making the events the success that they are. And, of course, our congratulations go to this year’s deserving winners, Howe Robinson.

Numerous societies are available for Baltic members, beyond those involved in the David Bradley Cup. Members can join the cricket, sub-aqua, Irish, Caledonian and football societies, and of course the Young Baltic Association (active in Singapore, Shanghai and London). Contacts can be found on the Baltic Exchange website, under associations.

11 April Baltic go-kart race night, Greenwich. Email gokart@balticexchange.net 18-19 May Seaview sailing weekend. Email Simon Cox at hrs.cement@howerobinson.com 6 June (tbc) FFABA Dry Derivatives Forum (Europe), Geneva. Email ceccleston @balticexchange.com 9-13 September London International Shipping Week. Email ceccleston @balticexchange.com 13 November Member drinks with the Lord Mayor at the Baltic Exchange. 14 November FFABA Tanker Derivatives Forum, Geneva (tbc). 5 December (tbc) Athens Christmas Cocktail Reception.

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SHIPPING’S BIGGEST NEW LAUNCH The Baltic magazine is the official magazine of the Baltic Exchange. It is a vital resource for anybody affected by the big issues in today’s markets and tomorrow’s maritime world

ONLINE ONBOARD Debate grows over the use of social media in shipping THE BALTIC

THE BALTIC IS AVAILABLE FREE TO MEMBERS OF THE BALTIC EXCHANGE AND TO QUALIFYING NON-MEMBERS

CLASS ACTION The widening role of classification societies

THE OFFICIAL MAGAZINE OF THE BALTIC EXCHANGE SPRING 2013 | WWW.THEBALTIC.COM | OUR WORD OUR BOND

Subscribe today to receive your free copy of the quarterly magazine and get access to:

BRINGING BACK THE SHINE How Nigel Richardson helped to restore the success of EA Gibson

LETHAL LESSONS THE HUMAN COST OF COUNTERFEITING

■ Debate from the sharpest minds in shipping ■ Expert analysis of the global business trends influencing the maritime industry ■ Market insight from trusted, experienced professionals

SPRING 2013

To subscribe to The Baltic, please email your details to baltic@thinkpublishing.co.uk, citing full name, job title, company and postal address. Alternatively, complete and post the form below

COMPLETE AND POST TO: THE BALTIC, THINK, THE PALL MALL DEPOSIT, 124-128 BARLBY ROAD, LONDON W10 6BL, UK PLEASE SEND THE BALTIC TO: Name

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MEMBERS' NEWS Social engagements CLOCKWISE FROM FAR LEFT: 1. YBA SINGAPORE 2. YBA SHANGHAI 3. FFA BROKERS’ ASSOCIATION CHAIR EMILY DRIVER AND OLIVER TERRY 4. YBA LONDON 5. CHRISTMAS RECEPTION AT THE BRITISH EMBASSY IN ATHENS

● SOCIAL EVENTS

ENDING THE YEAR IN STYLE Baltic events came thick and fast at the end of 2012, with Dry Forward Freight Agreement Brokers’ Association (FFABA) forums in Amsterdam and later Singapore, as well as the Tanker FFABA Forum in Geneva. On the social side, Baltic members and guests gathered at Young Baltic Association (YBA) events in London, Singapore and Shanghai, while Athens-based members and guests were invited to a Christmas carols and cocktails reception at the British Embassy in Athens. It will come as little surprise to hear that the YBA events were the

stepped down from the YBA committee after four years of helping to organise events, and the Baltic Exchange would like to express its thanks for their time and effort over the years. For the final London YBA gettogether of 2012, the YBA held a Christmas buffet lunch in Balls Brothers wine bar on Bishopsgate. The event was attended by around 80 London-based member companies, which managed to find time in hectic Christmas diaries to squeeze in a light lunch. Almost simultaneously, in the Far East a much grander YBA

Around 150 shipping people gathered for drinks in the embassy ballroom most energetic, thanks to the YBA’s representation of young shipping professionals looking to build relationships in the industry. As an aside, the term “young” is loosely applied, as the cut-off age is 35. Earlier in the year, Howe Robinson’s Jo Simmonds and Sarah Anthony

affair was taking place. For the second year running, and with the outstanding organisational skills of Scarlet Li of Seamaster and the Baltic’s own Sun Wei, the YBA returned to Shanghai to hold a sumptuous evening attended by more than 100 members and guests. The event took place at

the exclusive M1nt club, a venue known for the prowling sharks that swim up and down in huge fish tanks along one side of the room. The Baltic is once again grateful to Ji Wenyuan, managing director of Shanghai Seamaster, who, along with Baltic Exchange chief executive Jeremy Penn, not only addressed the crowd from the bar-top, but also made this event possible. The final social event of the year was the Baltic Christmas carols reception at the British Embassy in Athens. The embassy, which through UK Trade & Investment is charged with promoting business overseas, hosted the evening. Around 150 shipping people gathered for drinks in the embassy ballroom, to a backdrop of traditional Christmas music. It was a fitting end to the year, as outgoing Ambassador to the Hellenic Republic Dr David Landsman OBE, who has hosted other Baltic embassy events in recent years, welcomed members on arrival for the final time. //

THE YEAR AHEAD

In 2013, expect even more events for Baltic members, including those taking place at the first London International Shipping Week, in September. Details of all events can be found on www.balticexchange.com or by emailing events@balticexchange.com

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members' news Book review, Remembrance Day, Expert Witness Panel l book review

Blockade Runner

David Kent-Lemon Pen and Sword Books RRP £9.99

A book inspired by the career of one of the founders of Galbraith’s, Edward Pembroke, has been published. Blockade Runner, published by Pen and Sword Books, was inspired by the early career of Edward Pembroke, who owned blockade-running steamships.

out now

buy blockade runner directly from its publisher at www.pen-and-sword.co.uk/ Blockade-Runner/p/3684

He became one of the most successful and distinguished men in 19th- and early-20th-century shipping. His shipbroking firm became Galbraith, Pembroke and Co and continues to thrive today as Galbraith’s – specialists in the tanker and dry bulk business.

The novel has been carefully researched and gives a fascinating insight to that extraordinary period

David Kent-Lemon’s new American Civil War novel follows the adventures of Tom Wells, who runs the Union naval blockade of the Southern States’ ports, smuggling much-needed arms to the South, and cotton out again. Tom’s adventures are not restricted to the hazards of the blockade. He is in pursuit of a woman from a distinguished Southern family, and is embroiled with a lady of easy virtue in Nassau. Says the publisher: “The background to the novel has been carefully researched and gives a fascinating insight to that extraordinary period.” Edward Pembroke is a character in the novel.

l youth involvement

cadets take part in remembrance service Young cadets from Twickenham Sea Cadets Unit attended the Baltic Exchange’s Remembrance Day service in November 2012, in keeping with a now five-year tradition. The cadets laid a commemorative wreath and delivered the Kohima

Prayer at the service. After the service and a hearty lunch in the member’s dining room, the cadets enjoyed a round trip to the Woolwich Barrier on a spotchartered rib, followed by a visit to HMS Belfast.

Dry ffaba Chair 2013 election results The Baltic Exchange is delighted to announce that Ed Radcliffe from GFI Group has been elected as Dry Forward Freight Agreement Brokers’ Association chair for 2013. If you would like to contact Mr Radcliffe about dry Forward Freight Agreement market issues, please email ceccleston@ balticexchange.com the Twickenham cadets

spring 2013 www.thebaltic.com

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l panel update

Reputation management in a crisis

Left to Right: Neil Medlyn, Peter Vaughan James, Mike Robson

expert witness board movements The tenth meeting of the Baltic Expert Witness Panel was held on 26 November 2012 in the Baltic Exchange boardroom and was chaired by Peter Vaughan-James. As always, this meeting was open to all Baltic members, experts and their guests. Peter and Neil Medlyn – a member from Luxembourg, the panel’s secretary and a former chief engineer – started the group on 21 May 2008, with the blessing of the Baltic board. Peter introduced George Papadakis, a director of AP&A Group, which is involved with ship repairs and building around the world, and specialises in China. George gave an excellent presentation and made the group revise its thoughts on China. The group includes arbitrators who confirmed that they had heard several cases and that the Chinese shipbuilders were learning fast. At the meeting, Peter stated that he felt the time had come to stand down as chair, but would remain an active past chair. Mike Robson, a Baltic director, had been appointed by the board to take over. Neil Medlyn remains as secretary. Peter thanked Mr Papadakis and handed over to the new chair, who, after a few kind words of thanks to Peter, invited those present to a well-deserved glass of wine. Members can formally join the panel if they are already sole traders, principals or representatives of a company member of the Baltic Exchange. Panel members must

Peter VaughanJames stated that he felt the time had come to stand down as chair attend meetings and undertake a programme of specifically tailored continual professional training. They normally attend twice a year and receive attendance certificates. Members of the expert witness panel give their opinion on the basis of “Our word our bond”, and have reaffirmed their acceptance of this before a director. Experts are aware that the Disciplinary Committee exists. The group is growing and has regular guests, who include members of the Institute of Marine Engineering, Science & Technology, and handson experts in hulls and machinery, cargo, and white-collar experts in ship valuations, chartering and Forward Freight Agreements. For more information, please contact Peter Vaughan-James at pvj@balticexchange.net

Greek shipowners and operators attending the Baltic Exchange’s crisis communications workshop in Piraeus this February were given insight into how the media react to a maritime incident, how to engage with social media, and ways to deal with aggressive journalists. Led by former Maritime and Coastguard Agency media manager Mark Clark, now director of Navigate Response, the free course gave an inside view of the media, the speed of response required and how to deal with the media in a crisis. “In a serious shipping incident, there will be discussion and commentary about your crisis on television, online and on social media before you’ve even had time to obtain the full facts,” says Mark Clark. “Successful crisis management is all about preparation and training.” He added: “Communicating with the media in a crisis is about the speed and quality of your response. If you don’t meet the need for speed, the media will get their answers elsewhere and that ‘elsewhere’ will most likely be a place that you have little or no control over: favoured self-appointed experts to whom the media will turn in the absence of answers or informed comment. However, it is in the interests of the company to get on the front foot with the media, which requires a confidence and establishing a trust with them, whilst the crisis team is assembling the facts.” Workshop attendees were also given a blow-by-blow account of the MSC Napoli incident, which hit headlines in 2007 when the containership beached off the UK coast and looting of containers ensued. The workshop was part of a seminar series for Baltic members in shipping centres around the world. Further crisis communications workshops are planned for later in 2013.

www.thebaltic.com spring 2013

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Today, Cyprus is a fully fledged maritime centre, combining a sovereign flag and a resident shipping industry that is renowned for its high-quality services and standards of safety. The Cyprus registry now ranks tenth among international fleets and third in the EU. Responsibility for the development of maritime activities lies with the Ministry of Communications and Works. Its authority and jurisdiction are exercised through the Department of Merchant Shipping, whose activities include: • registration of ships; • administration and enforcement of the Merchant Shipping Laws; • control of ships and enforcement of international conventions ratified by the government of Cyprus; • protection of the marine environment; • vessel traffic monitoring in the sea around Cyprus and information-system implementation; • monitoring the conditions of living and work onboard Cyprus ships; • registration, training and certification of seafarers; • Control of coastal passenger vessels and small craft; • investigation of marine accidents; • continuous updating of the merchant shipping legislation and its harmonisation with that of the EU; • coordination of the EU Integrated Maritime Policy; • administration of the state aid scheme for maritime transport and the tonnage tax system; and

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SPRING 2013 www.thebaltic.com

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THE MISSION TO SEAFARERS Andrew Wright has joined The Mission to Seafarers as its new secretary general. The Revd Andrew Wright took up his new post as secretary general of The Mission to Seafarers in February 2013. Andrew’s appointment follows the sudden, tragic death of the mission’s previous secretary general, the Revd Tom Heffer, in 2012. Robert Woods CBE, chairman of The Mission to Seafarers, said: “Having worked in close collaboration with some of the key maritime

THE MISSION TO SEAFARERS

St Michael Paternoster, Royal College Hill, London EC4R 2RL

The mission’s work is critical to the wellbeing of seafarers and their families everywhere

agencies in the UK, including the Maritime and Coastguard Agency, the Department of Transport and the Merchant Navy Welfare Board, Andrew has developed considerable insight into the issues seafarers face, which will help to shape the mission for the future.” On his first day, Andrew said: “It is very exciting to be taking on the role of secretary general with the leading global charity in maritime welfare provision. The mission’s work is critical to the wellbeing of seafarers and their families everywhere. In an ever-changing world, the mission’s reassuring presence is a comfort and a welcome relief, and visiting the mission in port is part of the fabric of seafaring life. I look forward to meeting with you and working in partnership with the shipping industry in 2013 and beyond. The Mission to Seafarers is needed today more than ever before.” IF YOU ARE INTERESTED IN WORKING IN PARTNERSHIP WITH THE MISSION TO SEAFARERS, PLEASE CONTACT TARA FOX, HEAD OF CORPORATE PARTNERSHIPS, ON 020 7246 2980 OR BY EMAIL AT TARA.FOX@MISSIONTOSEAFARERS.ORG www.thebaltic.com SPRING 2013

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BACK What a day!

HOUR BY HOUR

Michalis Pantazopoulos is senior vice-president of the Liberian Registry, the second-largest ship register in the world, and general manager of its office in Greece (LISCR Hellas). He talks The Baltic through a typical day 06.50: the BlackBerry alarm goes crazy. I snooze for five minutes, then it’s up, shave and downstairs for breakfast: a banana, a glass of orange juice, a small cup of Greek coffee and a “no-no” cigarette on the back balcony while reading the midnight BlackBerry messages. It’s a “no-no” cigarette because I shouldn’t smoke and it’s prohibited in the house. 07.15: I go back upstairs to dress, then downstairs to kiss my wife (if she is home) before taking the elevator to the garage, getting in the car and driving for about an hour from Athens to the office in Piraeus. Ten years ago, I could take bus and the metro, but for several years now I have driven in. It’s not the best as you never know when there is going to be a strike, or if the roads are going to be closed. Also, I lose time and I can’t read the newspaper, but I compensate by reading my BlackBerry messages at the red lights. There is a message about a problem with a client’s vessel, so I pull over to read and reply (in Greece, there is a €300 fine for doing it on the move). 08.30: I arrive at the office after a five-minute walk from the parking lot. When I get to my desk I find a freshly made Greek coffee waiting for me, along with a hundred emails on the PC. Most days I receive and read at least 500 messages. 09.30: one hour – and another Greek coffee and a couple of no-no cigarettes – later, and I have finished reading my messages and steal a moment to take in the view of Piraeus port, which is great today. I have a lucky window overlooking the port, the mountains and, on a clear day, the nearby islands. 10.00: marketing time now, so I read the shipping news to see who’s buying which vessel, and who’s selling – is there an opportunity for Liberia? I make a note to call them – clients or not. How are we doing and what is the competition doing with Greek 90

At my desk I find 100 emails waiting for me. Most days I receive at least 500 messages shipowners? I make phone calls to regional offices in Singapore, Dubai and London for updates. 12.00: I complete a proposal for a couple of newbuildings; the client always asks for a better fee and a discount. I set up a meeting appointment for tomorrow. The phones ring continually. I have two phones on my desk, plus two mobiles. Many times I find myself speaking simultaneously on different phones – Greek or English, it doesn’t matter. Fifty calls a day is fairly normal. 15.00: time for the daily ten-minute walk to the sandwich shop, greeting six or seven people on the way. Piraeus is a small town in some ways. I order my usual basic vegetable sandwich on rye bread; my cholesterol is down to 170 these days. After a couple more no-no cigarettes, I make my way back through the chaotic Piraeus traffic to the office, checking the BlackBerry on the way. 15.45: a client calls asking for a major exemption. It’s a tanker. As always, the answer is yes. Liberia is one of the biggest registers in the world, and we always look out for our clients. At all times, safety is of primary importance, and bureaucracy is something we don’t have time for. 17.00: a quick check with colleagues to confirm that everything is taken care of for today. Thank you and good

night. I speak to LISCR headquarters in the US, which opened a few hours ago; shipping never sleeps. 18.00: I’m alone in the office now. What have I learnt today? I check the internet and make a list of potential appointment prospects. With networking in place, I check what’s in the diary for tomorrow. 19.00: my wife calls, asking if I am still in the office. “Come home,” she says. “The kids are driving me mad.” 19.45: I walk back to the parking lot, then drive another hour back home. A quick shower, then check my daughter’s maths and English homework. My middle son wants to show me a game on the computer that he always wins. 21.00: dinner time, accompanied with a glass of my own home-made red wine. The kids are in bed. It’s just me, the baby and my wife. “Talk to me,” she says. We discuss chores for tomorrow and work, both mine and hers (she is a classical Greek language teacher in high school). 23.45: time for bed. A few minutes with my book, then it’s goodnight and sweet dreams. Six hours’ sleep – that’s what I need. I dream. Tomorrow is another day.

SPRING 2013 www.thebaltic.com

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05/03/2013 11:29

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Mario Behe

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