ISSUE ONE 2019
BY
From the barn to the corner room Lois Zabrocky’s rise to the tanker top table
MANIFEST
3 At The Prow
Economy 4 US 5 EU 6 China 8 India 9 Brazil
Markets 11 Dry Bulk 13 Tankers 15 Containers 17 Finance
Executive Debate 18 Have boxship sizes plateaued?
Profiles 22 Cover Story International Seaways
25 Scorpio 27 Norden 29 Zeaborn 31 Cockett 33 Topaz 35 StealthGas 37 Eastern Pacific 38 Ocean Opportunity Lab
Dubai 39 Hub status 40 DP World
Recreation 42 Wine 43 Gadgets 44 Books 45 Travel
Opinion 46 Hubert Jaroni 47 Kris Kosmala 48 MarPoll
45
AT THE PROW
An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Paul Collins Mumbai: Shirish Nadkarni New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Editorial material should be sent to sam@asiashippingmedia.com or mailed to 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Mixa Liu Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2018’s four issues of Maritime ceo magazine. Email sales@asiashippingmedia.com for subscription enquiries. Copyright © Asia Shipping Media (ASM) 2019 www.asiashippingmedia.com Although every effort has been made to ensure that the information contained in this review is correct, the publishers accept no liability for any inaccuracies or omissions that may occur. All rights reserved. No part of the publication may be reproduced, stored in retrieval systems or transmitted in any form or by any means without prior written permission of the copyright owner. For reprints of specific articles contact grant@ asiashippingmedia.com Twitter: @Splash_247 LinkedIn: Maritime CEO Forum Facebook: Splash Maritime & Offshore News
ISSUE ONE 2019
‘Shipping must get its humanity back’
T
he quote above came from Singapore-based shipping consultant Giulio Gennaro and was on the back of a series of articles our sister title, Splash, has been featuring regarding accommodation blocks. The debate started when we came across an article from the Mission To Seafarers, which suggested the sterile environment onboard ships nowadays makes hospitals look attractive by comparison. Flooring, panelling, deck heads, furnishing, all have gone the way of “function over form”, the mission observed. “We talk of mental health, or isolation and lack of social cohesion – but according to seafarers we are not providing living environments which help solve the issues, in fact many say they are part of the problem,” the article posited. Occasional Splash contributor, Bei Hong, in an opinion piece from five years ago, compared conditions onboard to budget motorway hotels. “These establishments offer small, utilitarian accommodation with no more than the absolute basics – somewhere to sleep but certainly not somewhere you would want to spend any more time than is absolutely necessary,” Hong wrote. Peter Gartsjö from PG Marine got in touch with us and submitted two brilliant articles on simple – often inexpensive – changes to make life at sea more bearable, covering everything from the angle of beds to laundry machines
and having more plants dotted around the place. “The block is a giant computer-generated cubicle with ‘x’ rooms, beds, bathrooms, chairs, tables with zero understanding that humans shall live and work there,” Gartsjö wrote in an article that attracted plenty of response with many taking aim at spreadsheet-focused CFOs who have never spent a night onboard. One reader pointed out how fatigue appears to be one of the major reasons for mishaps at sea. Fatigue, due to poor sleep is a major contributing factor, caused in no small part by the poor design of living quarters. Will the situation improve? One naval architect pointed out that any changes will come down to two things: the owners being willing to pay more to have a higher specification for the crew and the authorities specifying minimum standards that are better than what we have today. Once again I fear it is the hidden nature of our industry that will make change difficult – so few of us have actually spent any time onboard to appreciate the sterility. ●
3
ECONOMY US
A false economy? America is powering on, but the budget deficit is set to surpass $1trn
T
he American economy continues to power along. But how is this maintained power being achieved? A number of analysts point to massive and unsustainable deficit spending driving the economy forward. The nonpartisan Congressional Budget Office has estimated that the budget deficit is set to widen significantly in the next few years and in 2020 is expected to top $1trn even with healthy economic growth. This, if true, would indicate that the US is a ‘false economy’ and that what is seen as growth is actually an over exuberance that will at best lead to an inevitable slowdown and, at worst, a crash. Anti-Trump economists argue that the president has never shown himself, either as a businessman or as president, to be shy about taking on debt to propel himself forward. Certainly a trillion dollar deficit would be new territory translating into America spending $3,333 more than it takes in for every man, woman, and child in the country. The February State of the Union speech in Washington DC saw the president argue the country was “booming” and saying, unsurprisingly, that this was down to his leadership. About half the electorate it seems, according to polls, believe him. Some sectors of course have directly benefitted from Trump
administration policies - the US steel and aluminium industry is making increased profits after the steep tariffs his administration placed on imported steel and aluminium imports last year. Tariffs can take away as well as give though – farmers and car makers get a partially boosted domestic market but get hit on their exports (soybeans to China, say; cars to Asia). Most analysts – including the Federal Reserve and the IMF – expect the US economy to cool down next year but not to tank. Indeed the IMF thinks the only factor cooling US growth is the president’s trade wars, particularly the one with China. A move away from this policy, or an ending to these disputes, and growth could continue.
US Employment: Where the jobs were added August 2018 Sector
Jobs created (+)/lost (-)
Professional and Business Services
+53,000
Healthcare
+33,000
Construction
+23,000
Wholesale trade
+22,000
Warehousing & Transportation
+20,000
Mining
+6,000
Manufacturing
-3,000
Total Jobs added Source: US Bureau of Labor Statistics
4
201,000
Tax cuts have certainly been welcomed by many rich people but haven’t, as far as data can indicate, created many jobs, improved wages (up by just two cents an hour on average) or led to better bonuses. Most corporate tax cuts seem to have gone on stock buy backs. The trade wars are hurting and China is willing, at least for now, to absorb some more pain itself. Agriculture is hurting worst and the government has had to enact $12bn in aid to struggling farmers facing bankruptcy along with massive tax cuts funded by the state (hence the fast rising deficit). However, job creation is still happening, mostly in services though job creation dipped in the still sluggish factory sector (see table). Unemployment (excepting particular pockets) is not really a problem for the US economy at the moment. Finally, retail sales. They’re not totally disastrous, but should really be better in a consumption-led economy like the US. But paychecks are not improving so the spending and consumer confidence is simply not there right now. The big question in the coming months is how long, and how deep, will the trade wars continue to be?● maritime ceo
ECONOMY EUROPE
A continent of gloom The European Commission has warned Eurozone growth will slow to 1.3% this year
E
conomics is most definitely politics in Europe – the Brexit cliff edge; the Yellow Vests across France; collapsed FrancoItalian relations. Even with Brexit put to one side (and nobody is doing that!) the EU looks a political mess at the moment – Orban in Hungary; mass protests in Poland; relations with Russia seemingly never improving. Even the seemingly eternally optimistic European Commission (the last body that seems to believe wholeheartedly in the EU project) is despondent. According to their statistics industrial production across the 19-nation Eurozone is falling at the fastest pace since the financial crisis of 2008 and a deteriorating demand is clearly evident. In its latest quarterly forecasts, the European Commission warned Eurozone growth will slow to 1.3% in 2019 from 1.9% in 2018. Growth is expected to recover slightly to 1.6% in 2020, but the new estimates are less optimistic than the commission’s previous forecasts in November. These numbers worry some analysts as, unlike in, for instance,
Selected EU Countries – Projected Economic Growth 2017-2019 Country
% GDP growth
UK
1.3
Ireland
5.6
France
1.7
Belgium
1.7
Germany
1.9
Spain
2.8
Portugal
2.2
Italy
1.3
Source: European Commission
ISSUE ONE 2019
China where some stimulus may be in the pipeline, nothing similar is suggested in the Eurozone. With problems across France and Brexit making the headlines the worsening economic situation in Germany has been missed by many more casual Europe-watchers. Germany narrowly escaped tumbling into recession at the end of last year after its economy stalled, and bankruptcies have been at a record high prompting fears of a surge in unemployment. Consequently all growth forecasts for the EU have been slashed – post-Brexit. The commission’s worst 2019 projection is for Italy, now seen with minimal expansion of just 0.2% for the whole year. Officials in Brussels warned that the region’s outlook faces “substantial” risks. It seems likely that Brussels and Paris will have a deteriorating relationship with Italy over its rapidly expanding budget deficit that will threaten a range of EU spending plans. A major problem is the deteriorating export market due to China’s
slowdown in demand. This is hitting lower end producers in the EU such as Romania and Slovakia and a major reason behind the economic stagnancy in Poland, Bulgaria and the Czech Republic. Hungary has been the economic exports outlier with growth advancing to the fastest pace since 2004 due to the combination of a tight labour market, strong domestic demand and accelerating core inflation. So now (while the Yellow Vest protests continue) we head towards the end of March and Brexit. Only a rash fool would predict whether a no-deal will be avoided, more time extensions for the UK to resume negotiations with the EU or whether the whole thing may still be scrapped. Either way, across the spectrum of options from no-deal to scrapping Brexit, the process has revealed serious internal weaknesses in solidarity and ideologies across Europe. Even after Britain goes, the EU will have a host of economic problems to deal with. ●
5
ECONOMY REGULAR CHINA
Complicated slowdown Beijing’s national data sets can be infuriating
C
hina has been on the verge of a hard landing for many years, according to some analysts. Will the China bears finally be right in 2019? Well, maybe not the hard landing some predict, but the combination of the ongoing trade with the US and a significant and obvious slowdown in the consumer sector does not bode so well for the rest of the year. So far the economic deceleration has not been any more exaggerated than previously as the government gradually cooled the economy over the last half dozen years. The problem is that China’s growth rate slowed much more sharply than expected in the last quarter of last year. So what happened? Well, income growth slowed slightly, to 6.2% year-on-year – but still grew and was China’s Still Soaring Soybean Imports, 2015-2019 Year
million metric tons (mmt)
2015
78.3
2016
83.2
2017
93.5
2018
97.0
2019 (f)
100.0
Source: USDA Beijing Bureau
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down just 0.2 of a per cent from 6.9% in Q417. That’s not economy rocking. However, far more alarming was the news that consumer goods by larger firms (supermarkets and department stores) slowed to 2.6% in Q418 from 7.3% in Q417. However, we should remember that China, annoyingly and confusingly, includes car sales in this category (rather than separating it as is the case in most national data sets globally) and most of this steep decline was falling car sales and this was to do with taxes being jiggered about staggering sales. These tax moves will mean that car sales will probably be depressed throughout 2019. So, retail sales less autos were pretty good, as were services, up 1.6% from a year ago. The slowdown in the car market affected overall factory output last year and new home sales were a little sluggish too because inventory levels were low and various tighter regulations on purchasing – the never-ending heating/cooling by Beijing of the national property market. Developers, who are used to these levers being regularly pulled, expect purchase restrictions to be relaxed in the future. Public infrastructure spending is down – this is of course a government
decision and partially reflects the last few decades of rampant spending on everything from internet cable to high speed rail plus a lot of roads. All of these things are manageable by the government, particularly given the level of economic control Beijing has in terms of just about every other government in the world excepting Pyongyang. Still, the most important driver of pessimism is the trade war with the US. This is increasingly not just about disruption of shipments to China’s top export market, but about Chinese students in America and the whole fracas over industrial espionage and telecoms giant Huawei. All of this impacts on Chinese investment decisions much more than Beijing might like to think. It is not the case that only free market firms make decisions based on external factors; Chinese state firms do too. And therein lies a big problem for China going forward - Xi Jinping has voiced strong support for stateowned enterprises (SOEs), but offered little love for private firms, which account for most employment and all net new job creation in China. If China’s entrepreneurs feel a little less like being entrepreneurial then that could be bad news for China. ● maritime ceo
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ECONOMY INDIA
Sparkling figures India is predicted to become one of the three largest economies in the world by 2030
T
here is seemingly no shortage of confidence on India’s economic prospects coming from the government with prime minister Narendra Modi openly stating that India will continue to be the fastest growing large economy, and could be the second largest economy in the world by 2030. This followed the release of a Standard Chartered report arguing that the world’s top three economies by the third decade of the 21st century would be China, America and India. These findings have been echoed by many including PwC and the World Bank. Recently India became the sixth largest economy in the world. PwC’s Global Economy Watch report projects real GDP growth of 7.6% for India in 2019. However, if India is to kick up the ranking within the next decade then a more solid exports boost will be required. A recent Confederation of Indian Textile Industry (CITI) report found that the south Asian country is lagging in cotton exports to major markets due to a duty disadvantage vis-a-vis other regional producers such as Bangladesh, Vietnam and Pakistan. Indeed, Indian exports of cotton yarn to the European Union and China slumped 25% in the past five years. Fabric exports are down 7%. Indian yarn carries a 3.5% import duty while
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Indian exports of cotton yarn are subject to a 4% duty in the EU, while Vietnam and Indonesia have a 3.2% tariff and least developed countries (LDCs) get completely duty free access. Farming is arguably in a worse state than textiles. Agricultural India: Top 5 Export Markets, 2018 Market/Country
$bn exports
US
39
UAE
23
Hong Kong
12
China
10
Singapore
8
Source: Indian Department of Commerce
commodity exports from India fell by up to a serious 46% in volume terms due to largely to a supply glut in the international market, according to India’s Agricultural & Processed Food Products Export Development Authority (Apeda). Basmati rice, buffalo meat, groundnut and fresh fruit exports are all down considerably. It’s not all bad news - exports of floriculture, processed fruits and vegetables have all grown, and continue to grow, over the past few years. Meanwhile dairy is, perhaps surprisingly, one area to have witnessed phenomenal export growth in the last five years.
Some agri-commodities appear recession-proof irrespective of global economic conditions - guar gum and sugar, for instance. But for the prime minister’s economic bullishness about the next decade to be realised agricultural exports will be key. New Delhi forecasts that India’s merchandise exports to grow 7.3% to $325bn in 2018-19, lower than the 9.8% recorded in 2017-2018. 2019’s slower growth reflects muted growth of traditional exports such as gems and jewellery (India’s largest single export commodity in value terms), agriculture and engineering/machinery. India’s exports were $303bn in 2017-18. Looking at India’s major export markets it is clear that any slowdown in China (and by extension Hong Kong) would have a negative impact on India’s export numbers. ●
“Studies have shown the sector continues to need more trained people, particularly seafarers” — Kitack Lim, IMO secretary-general
maritime ceo
ECONOMY BRAZIL
All change in Brasilia President Bolsonaro is shaking things up in Latin America’s largest economy
T
here has been a political convulsion in Brazil with the election of the far right Jair Bolsonaro last October. The new president (a former army captain and admirer of Donald Trump) claims to want to create a “new Brazil” and, at Davos in February, pledged to improve the business climate in Latin America’s largest economy as well as protect the environment. Environmentalists especially dislike Mr Bolsonaro who, they say, will not protect the Amazon. More likely is that the new administration will be more pro-market – the new government has promised to lower taxes on business and make the country more open to foreign trade. However, lower taxes will come only at the expense of cuts in welfare, particularly the country’s pension system which Bolsonaro describes as “over generous” and he’s looking to claw back a phenomenal $350bn over the next 10 years. Paulo Guedes, a former fund manager, is the man chosen by the president to reboot the Brazilian economy. He has some daunting challenges ahead – a massive fiscal deficit, growing public debt, near record unemployment with 12m people out of work and low productivity rates for those in work. A long Brazil: Top 5 Export Categories, 2018 Commodity
% of total
Iron Ore
40
Crude Petroleum
22
Soybeans
15
Raw sugar
15
Coffee
8
Source: Rio de Janeiro Statistical Organisation
ISSUE ONE 2019
running recession and repeated scandals haven’t helped the country’s international credit rating. However, if there is a good news story in Brazil right now, then it is ports and shipping. The volume of cargo going through Brazilian ports rose last year, mainly driven by exports. This growth in exports was seen in traditionally stronger key sectors of Brazil’s economy such as soybean, where exports reached new markets and new highs. Brazil exported goods worth an unprecedented $11.48bn to the Arab world in 2018, indicative of new trade relations with the region. Iron ore exports remained stable in 2018 and beef exports were up too. Most impressive was that most Brazilian of exports, coffee - Brazil exported 3.05m 60 kg bags of green coffee in January 2019, a record volume for the month and 20.3% more than for the same period last year, the Brazilian coffee exporters association Cecafé reported. And here’s an economic conundrum that seems odd given
unemployment numbers and the new government’s stated threat to pensions and welfare payments – retail sales are actually looking better too. The country’s retail sales grew 2.3% last year over the previous year, marking the best result since 2013, according to the state-run Brazilian Institute of Geography and Statistics (IBGE). This news is encouraging enough for Amazon (the Seattle online retail giant rather than the alarmingly threatened Brazilian rainforest) to announce that it is seriously expanding its warehousing and retail businesses in the country. Is it possible that although President Bolsonaro’s election has annoyed environmentalists, social activists and many world leaders in Europe and elsewhere (though not obviously in the United States at present) a sizeable number of ordinary Brazilians – in and out of work – have some faith in him and therefore whatever the structural ongoing problems of the national economy are experiencing significant consumer confidence? ●
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MARKETS DRY BULK
Newbuild headwinds This year’s ordering volume exceeds the ordering activity seen in 2017, 2016, and 2015, warns Jeffrey Landsberg from Commodore Research
D
ry bulk freight rates came under significant pressure earlier this year, but this has not led to a significant decline in newbuilding orders. In January, a total of 27 newbuilding orders were placed (which marked the largest amount since September). February then saw an additional 25 orders placed, which put the two-month total at 52 newbuilding orders and works out to a monthly average of 26 orders. This is basically on par with the monthly average of 27 dry bulk newbuilding orders that were placed during all of 2018 (approximately 327 orders were placed in 2018). This year’s newbuilding ordering volume also continues to exceed the ordering activity seen in 2017, 2016, and 2015. 2017 saw a total of approximately 293 dry bulk newbuilding orders placed, which worked out to a monthly average of 24.5 orders. 2016 saw a total of approximately 70 orders placed, which worked out to a monthly average of six orders. 2015 saw a total of approximately 173 orders placed, which worked out to a monthly average of 14.5 orders. Dry bulk freight rates have been disappointing to many this year and signs of distress have continued to be seen throughout the global economy, but this has not led to a sharp decrease in newbuilding orders. This is unfortunate for longer-term
ISSUE ONE 2019
market prospects, and there remains a great need for dry bulk scrapping volumes to jump this year. While we have seen some experts state that dry bulk scrapping volumes could jump by as much as 400% this year (due primarily to the upcoming IMO 2020 regulations), for now there has only been a moderate rise in scrapping. The first two months of this year saw a total of 22 dry bulk vessels scrapped, and this year is on pace to see a total of around 132 vessels scrapped. In comparison, approximately 73 dry bulk vessels were scrapped during all of last year. Dry bulk scrapping volumes could definitely experience a sharp surge later this year, but this still remains to be seen. For now, scrapping continues to come in both below this year’s newbuilding ordering volume (which affects longer-term prospects) and also below this year’s newbuilding delivery volume (which affects the spot market). Again, dry bulk newbuilding ordering volume has been coming in at a monthly average of 26 orders this year and newbuilding delivery volume has been coming in at a monthly average of 32.5 deliveries. Monthly scrapping volumes, on the other hand, have averaged only 11 vessels so far this year. For the dry bulk market, this is a problem. Also worth noting briefly is that our newbuilding delivery expectation for this year has been that 330 to 430 dry bulk vessels will be delivered. Assuming the 330 low-end of that range is seen, this would work out to a monthly newbuilding delivery average of 27.5 vessels, which would also exceed the 11-vessel monthly scrapping average that has been seen so far this year. There are at least some positive issues being
seen so far on the vessel-supply side, though, including capesize scrapping volumes continuing to exceed last year’s activity. During the first two months of this year alone, a total of nine capesize vessels were scrapped which works out to a monthly average of 4.5 vessels. In comparison, 2018 saw a total of approximately 12 capesize vessels scrapped, which worked out to a monthly average of just one vessel. The capesize market, though, is of course still facing a very significant chance that global iron ore trade will contract this year. China has also continued to show that robust steel production growth no longer necessarily equates to any growth in iron ore imports. Global steel production outside of China has also been recently contracting on a year-on-year basis. In addition, Vale’s severe production disruptions also continue to serve as yet another impediment to global iron ore trade finding any growth this year. Overall, this year’s moderate volume of both newbuilding deliveries and also newbuilding orders continue to present headwinds for the entire dry bulk market for both the near term and longer term. ●
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MARKETS TANKERS
No oil demand peak in sight BIMCO’s Peter Sand identifies what’s been driving the different tanker sectors in the first months of 2019
O
east – we know that means work for VLCCs. When it comes to VLCCs, it’s important to note 15 new units have been launched during January and February, with only one 25-year-old unit sent to the Indian sub-continent for breaking during the same period. 2019 is a year that will see the VLCC fleet grow strongly. By the end of February, that sector had already grown by 3% over the past 12 months. While limiting the upside, such strong fleet growth could not keep freight rates for VLCCs from going up and going against the general trend of crude oil tankers in February. Naturally, the new ships were not in place to fight for cargoes in the main loading areas in Arabian Gulf, West Africa and the US Gulf yet. A record high for any month at 329 VLCC spot fixtures in January (source: Clarkson) had reduced the tonnage lists to such an extent that even Chinese charterers being away during the festive season could not stop VLCC earnings from reaching $37,000 per day on the last day of
n November 4 2016, the Paris Agreement entered into force, hailed by some as a sure sign of a fast approaching stop for the burning of fossil fuels, a stop that would cause deep-rooted changes in every shipping sector. Not least the oil tanker sector. Paying more close attention to what is really happening, global oil demand continuously grows. According to the International Energy Agency (IEA), we must enter 2024 before the annual global oil demand growth falls below 1m barrels per day. China and India remain the largest single nation drivers behind this growth. In 2018, oil demand grew by 1.3m barrels when compared to 2017. Changes will also come around as demand shifts away from developed economies and transportation fuels in the west, towards Asia and petrochemicals. As global oil supply is also projected to shift, with the US accounting for more than half of the increased total oil supply in 20182024 – an opportunity for shipping may arise. If those US barrels head
Crude oil tanker fleet growth Y-o-y, previous 24 months
10%
9%
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
VLCC
Suezmax tanker
Jan. 2019
Feb. 2019
Dec. 2018
Oct. 2018
Nov. 2018
Sep. 2018
Aug. 2018
Jul. 2018
Aframax tanker
Source: BIMCO, Clarksons
ISSUE ONE 2019
Jun. 2018
Apr. 2018
May 2018
Mar. 2018
Jan. 2018
Feb. 2018
Dec. 2017
Oct. 2017
Nov. 2017
Sep. 2017
Jul. 2017
Aug. 2017
Jun. 2017
Apr. 2017
May 2017
Feb. 2017
Mar. 2017
Growth rate
11%
10%
Growth rate
11%
Total fleet growth
February, up from $14,000 per day on the first of that month. In the meantime, in the oil product tanker sector, freight rates for all sizes were back at loss-making levels by March 8. The positive knock-on effects from the falling oil prices back in October 2018 did deliver profits in December through most of February. Looking forward, it will all be a matter of when the positive knock-on effects from IMO 2020 start to kick in – as they will eventually do – one way or the other. The extent of which is still almost as uncertain as the rest of the oil tanker market prospects for the near to mid-term. It’s important to note that large-scale worldwide refinery maintenance is just about done, meaning May and June will help the oil product tanker sector as increased production needs distribution. The high level of refinery maintenance in January through to April in Europe and North America has already lowered the level of oil products output significantly. During March and April, Asian and Middle Eastern refiners are going offline too for maintenance. The second half of the year should prove more interesting rates-wise. ●
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MARKETS CONTAINERS
IMO 2020 is nothing new Shippers and carriers faced off earlier this decade over high fuel prices, recalls Lars Jensen from SeaIntelligence Consulting
A
t the annual Transpacific Maritime conference (TPM) in Long Beach, the impending implementation of the low sulphur fuel regulations loomed large over many of the discussions. Given that this is the kick-off of the annual contract negotiations for the Pacific trade with the commitments stretching well into 2020 it is only natural that this should be the case. Whilst substantial uncertainty still surrounds the actual costs from 2020, consensus at the moment is in the range of $10-15bn annually. The positive vibe coming out of the TPM corridor talks is that shippers in the main seem to accept that ultimately the cost of this change cannot be paid by the carriers and have to be passed on. But this is also the main extent of the conceptual agreement. The practicalities in relation to how this cost is going to be passed on is much more contentious. The carriers have devised fuel surcharge formulas which differ quite Development in bunker fuel price 800 700
500 400 300 200
Jan-19
Jan-18
Jan-17
Jan-16
Jan-15
Jan-13
ISSUE ONE 2019
Jan-14
Jan-11
Jan-12
0
Jan-09
100 Jan-10
USD/ton
600
substantially. Not because any formula is inherently more or less ‘fair’ than any other formula, but because the carriers have chosen differently in terms of apportioning the costs across for example head haul versus back haul. Clearly the shippers also have different opinions on how to apportion these costs. And this is what will provide the largest challenge in getting acceptance/adoption of the variable fuel surcharges. But in the midst of this, let us not forget that it is far from a disaster scenario for the shippers. Presently the bunker fuel price is around $480 a ton. The graph shows the development in the price for bunker fuel as per BunkerIndex over the past 10 years. It is clear that we have for a long time been in a situation where the price was at $600-700 a ton – which is the level we will get back to if the predictions for low sulphur prices are correct. Clearly the industry did not falter in the period 2011-2014, and it is even more abundantly clear that the shippers were okay with paying freight rates in that period which covered the cost of such high fuel prices. Moreover, during the period of $700 a ton bunker fuel, carriers also had floating fuel surcharges in place – and to boot carriers had different surcharges in the key trades to Europe as the block exemption abolition prevented them legally from aligning their formulas. The only thing different now compared to 2011-2014 is that the carriers are
somewhat more transparent in how their bunker surcharges work compared to five years ago. Hence, from a pure cost/pricing perspective it is hard to see that the envisioned situation in 2020 is the slightest bit different from the situation both carriers and shippers were perfectly capable of handling in 2011-2014. Only three things have changed: 1) Freight rates have dropped sharply, conferring the benefit of the lower oil price to the shippers; 2) Carriers’ fuel surcharges formulas are now a bit more transparent than they were previously; 3) Vessels have grown in size, and hence the fuel price has marginally less impact on the carriers’ costs. In essence this means that despite the air of calamity, the de facto fundamentals predicted for 2020 are nothing new at all. What might be a potentially much bigger issue is if the actual physical supply of compliant fuel is not available – in that case all bets are off. ●
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MARKETS FINANCE
Explosive situation Dagfinn Lunde is depressed by geopolitical developments, and reckons shipping should be too
T
he editor gave me a free rein this issue. “The choice of topic is totally up to you,” he said. He might regret that – welcome to the doom and gloom column. The following does not pertain to shipping per se, but looks at the big picture, issues that are seriously undermining the stability of the global economy. This has been the most dramatic March I have experienced in my lifetime. The Brexit discussions, critical US – China trade talks, Venezuela in total chaos, a nuclear standoff in Kashmir and Kim Jong-un readying some more nukes too; just to name a few matters keeping me up at night. Uncertainty will reduce growth for the global economy and by extension for most shipping sectors. I do not see a recession, just a protracted period of slower growth. A tally of readers’ votes carried on the back page shows you’re more worried about growing protectionism around the world than the slowing Chinese economy. Let me tell you I am genuinely concerned about the weakening Chinese economy – and you should be too. I was reading recently there are 65m empty apartments across China. 65,000,000 unsold properties! You wonder how banks can survive such a catastrophe. In a way you could argue the US actually now holds the whip hand in
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the ongoing trade talks. Still, for my money, I’d also warn as I see the US economy getting overheated with the lowest unemployment in 100 years according to sources close to the president. The problem for the world economy and by extension shipping is that there is no country that can replicate what China did since the dawn of the millennium in terms of growth. Hopes that India might replicate such a stunning economic transformation are misplaced. Back in Europe, meanwhile, once Brussels has finally resolved its Brexit discussions, EU-US trade talks are fast approaching and these two have been at each other’s throats in recent months. And Europe might now have to pay for the bad way they have treated US imports for many years. All of which leads me to agree with comments made by Søren Skou, the CEO of AP Moller-Maersk, earlier this month, suggesting that boxship sizes have plateaued finally (see the next page for more on this). We have surely reached a limit on boxship sizes as there is now very limited benefit of adding another 1,000 teu in size while growth for liners going forward will increasingly come from local and regional trades rather than the main east-west trades. And then there’s the threat posed by 3D printing, but maybe
that’s a whole other column for another time. Like the liner trades, the current woes facing the global economy would suggest dry bulk’s travails could be extended for quite some time. Indeed, the only areas set to profit from all that is going on are in energy transport, I would argue. As Angeliki Frangou famously said: “What’s bad for the world is good for the tanker market.” Changing oil patterns are going to work out just great for tankers with growing ton-miles, while I also can see a very bright future for those involved in clean energy shipping such as LNG and hydrogen – a bright spot to end on to keep the editor happy! ●
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EXECUTIVE IN PROFILE DEBATE
An end to box shipping’s arms race? Maersk’s Søren Skou has said he has no intention of building larger container vessels. Will others take heed?
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he instigator of the so-called ‘arms race’ or supersizing of container shipping is downing weapons, claiming boxship sizes have plateaued finally. Speaking at TPM in early March, the giant container conference in Long Beach, Søren Skou, the CEO of AP Moller-Maersk, told delegates he had no intention of building larger ships. Maersk, the largest liner in the world, has repeatedly kick-started newbuild crazes for ever-larger sized boxships this century, something liner veteran CC Tung, the former chairman of OOCL, compared to an arms race in an address in Singapore four years ago. The delivery of the 20,568 teu Madrid Maersk (pictured) briefly became the world’s largest container vessel in 2017 before it was eclipsed
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by competing giants. Skou said investments going forward would be elsewhere rather than on so-called megamaxes, a ship type he likened to Airbus’s A380 aircraft, which has proven to not be a commercial success. Skou observed that megamaxes are only suited for a few ports around the world. “Skou is right, just like many airports were right not to rebuild themselves to handle the A380s,” Maritime CEO columnist Kris Kosmala suggests. Kosmala, a director at Dutch engineering consultancy Royal HaskoningDHV, argues that global trade increasingly does not like to travel through hub-and-spoke
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networks, because its nature is rapidly changing. “New, smaller markets appearing in places not seen before are becoming common,” Kosmala says. Tobias Koenig, managing director at Lexington Maritime, reckons the Maersk admission is something other liners were also tacitly acknowledging. “I think that the carriers have realised that the big ships don’t help, because they increase transit times. Too many slots to fill and too many ports to call,” Koenig tells Maritime CEO, explaining that shippers are increasingly worried by the extra costs and inventories needed to
Shipyards are readying designs of 25,000+ teu with leasing companies standing by to offer them to liners
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maritime ceo
EXECUTIVE IN PROFILE DEBATE
accommodate the giant new generation of boxships. “Carriers need workhorses and those could be around 10,000 and 16,000-20,000 teu,” Koenig says, predicting: “I don’t think that the trend to ever bigger ships is going to continue.” The latest results from MarPoll, our quarterly survey (see back page for full details), show 59% of readers believe the ordering frenzy for ultra large container vessels is now over. Lars Jensen, a partner at SeaIntelligence Consulting, reckons the size plateau has been reached for boxships. “The construction of the 18,000 to 23,000 teu vessels is very likely to be the end of the line for vessel upsizing – and in retrospect, having kept the maximum size at 14,000 to 15,000 teu would have provided a more flexible setup with more direct port-pairs, less transhipment costs and more resilience in the system,” Jensen tells Maritime CEO. Andy Lane, director of Asia for SeaIntelligence Maritime Analysis, agrees, telling Maritime CEO: “Since alliances on the main trades cannot get any larger, due to regulatory issues, to fill larger ships would likely mean adding more ports of call per string and increasing transit times. Fewer strings would be required reducing sailing frequency, and this makes the product less attractive. In addition, the economy of scale of going from say 20,000 to 28,000 teu is minimal. So the risk is too high, for modest gains. Everything has a
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maximum, such as VLCCs for example, and containerships have reached that maximum now.” Andrew Craig-Bennett, lead opinion writer for this magazine, believes we have actually reached “peak container”. “Where are all the exciting plans for new container ports, and for even bigger ships? They aren’t anywhere. Those ideas are not exciting, or remunerative. The economies of scale have been taken,” Craig-Bennett argues. A report out in January claimed major lines have sated their appetite for ultra large container vessels, with UK consultants Drewry slashing its projected boxship order forecasts from 2020 onwards. The latest edition of Drewry’s Container Forecaster looks at how top lines are increasingly focused on spending to become all-round supply chain companies rather than beefing up their fleets. “We believe that the industry’s supply-demand balance will benefit from a reduced appetite for ultra large container vessels (ULCVs) among the major carriers, some of which now have their eyes fixed on a bigger prize of becoming global logistics integrators,” said Simon Heaney, senior manager, container research at Drewry and editor of the Container Forecaster. Daniel Richards, an analyst at Maritime Strategies International (MSI), believes liner outlays on new ships will focus on smaller sized vessels. “The small ship sector has seen structural underinvestment over recent years, with predictable consequences,” Richards observes. The old fleet is expected to significantly step up over the coming years as the wave of investment in 2003-2007 hits 15 years old, the MSI analyst predicts. Compounding this is the fact that many
of the vessels built in 2003-2007 were optimised for high speeds – in fact vessels built in 2005-2007 represent some of the least fuel-efficient vessels in the fleet. And fuel efficiency, of course, is at the front of the operators’ minds across the industry. However, other experts contacted by Maritime CEO remain circumspect that Skou’s big ship climb-down will be followed by rivals. Alphaliner’s Hua Joo Tan says that the A380 analogy is not entirely appropriate in this case. “Maersk may have called a timeout in the race that they have started themselves, but that doesn’t mean their rivals are going to sit still,” Tan says, adding: “Maersk’s 23-row EEE ships will be surpassed next year when the first 24-row ships are delivered.” Maersk’s partner on the 2M vessel sharing agreement, MSC, is readying to take on a series of record-breaking 23,000 teu ships shortly while Cosco has some 25,000 teu designs ready. Tan reckons that while ship sizes will likely plateau for some time, the end of the race is far from over, a point of view shared by Peter Sand, chief shipping analyst at shipowning organisation, BIMCO. “Time will tell if others will follow suit. For now it mostly appears as an invitation for others to follow,” Sand says, noting that shipyards are readying designs of 25,000+ teu with leasing companies standing by to offer them to liners. Nevertheless, current market conditions lend themselves to a cessation in the boxship arms race, Sand maintains. “The way that we see the future of liner shipping – saturated demand on the megaship hauls – there is more a need to stop ordering and start filling up the ships instead,” Sand says. This saturation has seen megamaxes become regular fixtures on Middle East loops and on the Asia – Mediterranean tradelane this year for the first time. ●
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IN PROFILE
Lois Zabrocky p.22
Robert Bugbee p.25
Ove Meyer p.29
In profile this issue Maritime CEO’s 17 correspondents around the world have been in touch with many of the world’s top shipowners. Highlights are carried over the next 17 pages
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maritime ceo
IN PROFILE
Birgit Liodden p.38
Jan Rindbo p.27
Harry Vafias p.35
Cem Saral p.31
René Kofod-Olsen p.33
Gil Ofer p.37
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COVER STORY
‘I never looked back’ The head of tanker company International Seaways took an unusual path to the top
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ois Zabrocky, CEO of NYSE-listed tanker owner International Seaways (INSW), is not your typical shipping boss. It’s rare enough in this industry for a woman to be in charge. It’s rarer still for her to hail from a farm. “I was the youngest of eight kids growing up on a dairy farm in Iowa,
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and we worked. We were running 150 milking cows with zero help,” she recalls in an interview with Maritime CEO at her company’s midtown Manhattan office. Her brother, two years her senior, left the farm to attend the US Merchant Marine Academy at Kings Point in New York. He urged her to
I find that many, many people in the world do not want to make decisions. But if you don’t make a decision, one will be made for you
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follow him. She did. “I never looked back,” she says.
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International Seaways Spun off from OSG in December 2016 and currently owns 36 crude and products tankers including last year’s purchase of six VLCCs as part of the sale of Gener8 Maritime to Euronav.
maritime ceo
IN PROFILE
Zabrocky was one of 20 women in a class of 160. She describes Kings Point as “intense”, but never once considered dropping out, and came away with a deep belief in “how important it is to have strong people alongside you, who support one another”. The academy’s requirement to serve aboard a US-flag vessel was a formative experience for her as a decision-maker. “At 22 years old, I was in charge of a tanker on the 4-8 [am] watch – and it matures you. When you’re on watch, you’re in charge of the ship, you’re making traffic decisions, and you’re in charge of the safety of the people onboard. There are situations where you have to make decisions that you don’t face naturally when you’re ashore, and I think that shapes you. “I find that many, many people in the world, for whatever reason, do not want to make decisions,” she says. “But if you don’t make a decision, one will be made for you.” After her time at sea, she took a job at Maritime Overseas Corporation, the predecessor to OSG. “I was the first women ever hired in the chartering department of the company,” she says. Her years in chartering have proven extremely valuable. “Chartering is all about problem-solving. When you’re doing chartering, you have to learn everything. You have full access to everybody in the company.” In 2005, she was appointed head of OSG’s product tanker business unit, a promotion that added yet another facet to her management acumen. “It was like running a mini-company. With business units, you have P&L [profit and loss statements]. To manage P&L in shipping, mostly what you can do is control your costs, so you have an appreciation for operational expenses and what you are willing or not willing to do.” Her combined experiences – of seafaring during her academy years, of negotiating ship charters as she rose through the ranks at OSG, and of managing costs as the head of a
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Knowing you don’t know everything is really important. You have to have the people on the team that can bring the horsepower and make your ideas happen
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business unit – all came together in her role as CEO of International Seaways, which was spun off from OSG in December 2016 and currently owns 36 crude and products tankers. On the markets Zabrocky is optimistic telling Maritime CEO: “I think in 2020, at a minimum, we’ll see increased refinery utilisation, and there’s a lot of refinery capacity coming online this year.” A US-China trade détente would be another plus. “It would be better, because the Chinese had been steadily increasing how much they were buying. With the Chinese out of the equation, India is a big recipient, some is going to Korea, and some to Japan, Taiwan, Malaysia and Singapore. But some of the barrels are going shorter distances, on suezmaxes and afras.” Summing up her management style, Zabrocky explains, “I’m a
people person. This team we have here is super-dedicated and there’s mutual respect. And I think that if you’re going to be on a team, every player has to be ‘bringing it’ to have mutual respect. I also think knowing you don’t know everything is really important. You have to have the people on the team that can bring the horsepower and make your ideas happen.” ●
“Buying a ballast water system is like buying a coffin – it’s dead money” — Mark Hadfield, founder of Flow Water Technologies
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IN PROFILE
The long and winding road Scorpio’s Robert Bugbee on how to navigate shipping’s peaks and valleys
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ur people have been forged by fire. They haven’t had it easy, and because of that, they’ve had to come together, learn new things, make tough decisions, and keep fighting,” affirms president Robert Bugbee of his teams at Scorpio Tankers and Scorpio Bulkers. To say these two companies haven’t had it easy is an understatement. Since their stock exchange debuts, both have piled up far more net losses than gains, and as of late January, share prices of Scorpio Tankers and Scorpio Bulkers were down around 85% and 95%, respectively, from their IPO prices. Bugbee remains undaunted, convinced of the upturn to come. “I’m belying my age, but this is the third time I’ve been at this stage of the market,” he tells Maritime CEO. He joined mixed-fleet owner GotaasLarsen in 1984, in the midst of a severe shipping slump. He moved on to tanker owner OMI Corp in 1995, rising to the position of president by the time OMI sold out in 2007, at the height of the shipping boom. Throughout his career, he has garnered a reputation as an executive who is adept at maneuvering across the cycle – and one who enjoys himself along the way. He has been notoriously irreverent at conferences,
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Scorpio Led by Emanuele Lauro and Robert Bugbee the combined fleet contains 109 product tankers totaling 7.9m dwt and 57 bulkers totalling 3.9m dwt plus recent offshore investments via new acquisition, Nordic American Offshore.
ISSUE ONE 2019
taking the podium in costume on various occasions as Sgt Pepper, a football referee, and a beach bum.
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We’ve become specialists in surviving through bad markets
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He’s still enjoying himself, even though markets have not played out as the Scorpio companies’ founders had expected. “You’d always like the easy way, to start something off and have it go to the moon and never look back, but we’re still having a blast right now. It’s fun to build things,” he says, adding, “That’s the way it is with management. You earn less money and get less reward for having to work 10 times as hard in a bad market, then in a great market, when management is rewarded the most, the best course for management is often to do nothing.” Scorpio’s public companies have certainly taken the ‘long and winding road’, but Bugbee is bullish on where they’ve ended up. Two very large platforms have been created – 109 product tankers totaling 7.9m dwt and 57 bulkers totaling 3.9m
dwt – both with very high operating leverage via spot exposure. All they need now is for freight markets to cooperate. “We don’t think there’s more structurally that we need to do,” he explains. “We’re not looking to buy anything. We’re not looking to order new ships. For the first time in my career, I’m at companies that are in position at the point where we think there’s going to be a market recovery with fleets that are fully delivered, modern, and have operating leverage.” The completion of the dry bulk and product tanker platforms “has enabled us to start what is the next chapter for us – which is offshore”. Bugbee confirms that the recent Nordic American Offshore transaction, in which Scorpio invested in equity and took over management with Bugbee as president – is part of a broader strategy. “That’s just the start. We’ve decided that with all we’ve worked through [in the dry bulk and product-tanker sectors], we’ve become specialists in surviving through bad markets. So, we think we can apply our skill sets to offshore – which is in a terrible mess at the moment.” ●
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IN PROFILE
The asset-light approach Norden’s CEO is adamant he has the right business plan to get the Danish line though a tricky patch
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an Rindbo aims to take Norden further down his planned digital and global path this year. The CEO of one of Denmark’s largest shipping lines is anticipating an improved financial year for his giant dry cargo and tanker fleets after what turned out to be a trying 2018 in which the company was forced to downgrade its full year forecasts on the back of the weak tanker segment. The Norden fleet today numbers 321, made up of 264 bulkers and 57 tankers. A total of 37 ships are owned with the majority chartered in, a ratio unlikely to change under Rindbo’s watch as he believes in maintaining an asset-light organisation. “We believe the shipping market should perform well in 2019, as we still have a manageable fleet supply and there is decent economic activity,” Rindbo tells Maritime CEO, picking out tankers in particular as a sector set for recovery. “Norden has a diversified portfolio, which we see as giving us resilience and strength and the ability to invest in the most attractive segment at any given time,” Rindbo says. On plans for this year, the former Pacific Basin executive says, “In 2019, we will continue to make our
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Norden
company more agile, digital, customer-centric and even more global. Norden is on a journey to become increasingly asset-light as we grow our ordering activities on shorter term chartered vessels, which also benefits us in terms of the cycles in the industry.” Among the most high profile
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Our diversified portfolio gives us resilience and strength and the ability to invest in the most attractive segment at any given time
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events for the company of late was a recent landmark voyage using used vegetable oil as fuel. “Our early conversations with potential customers are so far very positive, and Norden plans to offer a limited number of C02 neutral transports to selected customers in 2019,” Rindbo reveals. On shipping’s topic du jour, scrubbers, Rindbo is an advocate of the technology, believing the maths makes for a simple business decision. “The cost difference between low sulphur and high sulphur fuel oil is expected to increase significantly for a sustained period, making scrubbers an attractive choice for
compliance,” Rindbo says. During 2018, Norden contracted to get up to 31 of its ships fitted with scrubbers. “We believe scrubbers will give Norden a significant competitive advantage when the new sulphur regulations are introduced in 2020,” the Dane concludes. ●
One of Denmark’s largest shipowners with 321 ships on its books, made up of 264 bulkers and 57 tankers.
ISSUE ONE 2019
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IN PROFILE
Germany’s shipping consolidator Zeaborn has plenty more acquisition targets in mind
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eaborn, Germany’s chief consolidator of shipping lines, is looking to further strengthen its position as one of the leading fully integrated shipping companies in the world, likely to profit from the continued doldrums among many of its struggling peers on home soil. The German shipping industry has been hard hit in the past few years, its commercial shipping fleet has shrunk by a third over the past six years along with a series of bankruptcies. Once the world’s predominant shipping lenders, most German banks have now abandoned ship finance to write off tens of billions of nonperforming loans. Germany has also become the largest seller of secondhand tonnage in the past six years, having sold nearly 1,700 ships between 2012 and the end of 2018. The Zeaborn Group was founded by Kurt Zech together with Ove Meyer and Jan Hendrik Többe in 2013. Currently the company has four main business segments, shipowning, shipmanagement, liner services and tramp services. Zeaborn now manages the fifth-largest MPP fleet in the world and it is also expanding its business
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Zeaborn Founded in Bremen in 2013. Involved in shipowning, shipmanagement, liner services and tramp services and boasts the fifth-largest MPP fleet in the world.
ISSUE ONE 2019
in the area of technical and commercial management. In 2017, the company entered the liner sector by taking over Rickmers-Line. Ove Meyer, managing partner of Zeaborn, admits the breakbulk and project cargo shipping markets have got off to a slow start this year, however a gamechanger could be in the offing during the second half of the year. “This change is not driven by cargo volumes, it is mainly driven by the environmental regulations and by the sustainability of the worldwide tonnage available,” says Meyer. “The frame parameters are bringing a new reality into the sector. The 2020 sulphur cap as well as ballast water treatment (BWT) are a significant challenge to the technically and financially massively stressed world fleet. We see new ownership of significant parts of the currently stressed tonnage, mainly under the control of the financing banks,” Meyer believes. According to Meyer, currently about 30% of the world MPP fleet is not able to service their debts. These assets are being held by banks and are ready to be traded off. Meyer also sees the end of pool solutions and operators, as financial pressure on owners and operators is increasing, and it is leading to a more selective view from customers, who have started raising what he says are overdue questions of who is the carrier and their financial standing. This become far more evident after Hansa Heavy Lift filed for chapter 11 last year, becoming breakbulk’s Hanjin moment. “It is a crucial question today, when it comes to shipments with a
lead-time of more than three months, as most operators run their fleet on three-month charters or operating distressed ships on a pure management or pool basis, and are not able to secure the availability of tonnage for forward shipments,” Meyer explains. In Meyer’s opinion, the consolidation in the MPP sector will probably continue throughout this year and the first half of 2020, in what is already one of the shipping sectors to have experienced the greatest contraction of players in recent years. In the past two years, Zeaborn absorbed two compatriot shipmanagement companies Rickmers Shipmanagement and ER Schiffahrt, and integrated the two units into one global brand, Zeaborn Ship Management. The combined technically managed fleet currently comprises more than 150 ships. With regard to future investment, Meyer says the company has a clear picture of the structural fleet requirements and the company is eyeing younger secondhand tonnage including the vessels the company is currently taking over from bust Hansa Heavy Lift. ●
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IN PROFILE
IMO 2020 solutions Cockett Group’s CEO Cem Saral discusses key issues owners need to be aware of as the clock ticks down to the sulphur cap
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ockett Group’s CEO Cem Saral has been busy visiting clients and vendors all over the world over the past 18 months, collaborating with them on what they need to know and do as the global sulphur cap approaches. Saral is ideally placed to provide advice. An oil trader for the last 23 years, the Turkish national moved from Vitol in 2015 to head up Cockett the following year. Vitol came in for a 50% stake in the marine oil specialist in late 2012. How IMO 2020 goes will in no small part be dictated by how well crew are prepared for the new fuel and lubes hitting the markets, Saral argues in an interview at his Dubai office with Maritime CEO. “As a reseller we are very worried about a high potential of claims surrounding 0.5% fuel qualities that are actually onboard handling issues,” Saral says. “End-users will likely be quick to blame fuel quality rather than onboard handling.” As such it’s a marine equivalent of the old adage that a bad workman blames his tools. Historically marine fuel purchase behaviour and lube purchases have been handled separately, thanks to charter arrangements, with different people involved. However, this is now changing as shipowners realise the operational complexity of the fuel and lube choices ahead of them.
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Cockett Established in 1979 the Cockett Group has grown to become one of the world’s largest resellers of marine fuels. 50:50 owned by Vitol and Grindrod.
ISSUE ONE 2019
“We’ve been expecting a convergence of marine fuel and lube buying thanks to regulations,” Saral says, adding: “There will be huge differences in quality, viscosity and density for 0.5% fuel which will require all different types of cylinder oil. This will need segregation onboard, something that is new to most shipowners.” Saral is predicting what he describes as “controlled chaos” starting to manifest across the global merchant fleet from mid- to late October this year with full reliance on compliant fuel needing to kick in at least globally 60 to 90 days prior to the January 1, 2020 start of the sulphur cap. Gone will be the days where a simple, single email could fix all your fuel and lube needs for a ship at its next port of call. Saral reckons it will take an enormous amount of back and forth communication between buyers and suppliers for each and every transaction, something likely to last until at least next June as world shipping has to get used to the new fuel types and availability. “Owners will be demanding detailed fuel quality information over price,” Saral says. “We are saying you need to look at the value of the oil, not the cheapest price as they are not the same. The focus on commercial decisions should be about energy content, not unit price by weight alone.” Recent comments from various players including some oil majors saying niche ports will not have compliant fuels adds to market fears and does not necessarily reflect a true picture, Saral claims as there will be marine gasoil available in places where 0.5% fuel is not to be found. Saral will not be drawn into the rights and wrong debate over scrubbers, stressing how as a reseller he is “agnostic”.
“We maintain a neutral approach to the scrubber debate. We believe scrubbers are a solution, not the solution to the desulphurisation of shipping emissions,” he says, hitting out at the two factions – pro- and anti-scrubber – for trying to bend other people’s opinion, something he believes is not at all constructive. “For us scrubbers are more of a fleet-specific, ship-specific discussion, as a reseller we display a high level of adaptability to changes in supply/demand drivers to geography or product. We predict considerably more visible headwinds and challenges in the adapting to post IMO2020 dynamics across the physical supply chain,” Saral says. Nevertheless, the Cockett boss does believe scrubbers have a very finite shelf life or “time stamp” of somewhere between five to 10 years as Saral believes the pressure to decarbonise quicker and further will manifest in shipping in the coming decade making today’s desulphurisation process look like small change compared to what lies ahead. ●
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IN PROFILE
What it will take to revive the OSV sector Plenty of older, laid up ships ought to be scrapped, says the boss of Topaz in Dubai
A
fter many years of dire returns sparking huge consolidation within the sector, are offshore support vessels finally poised for a revival? René Kofod-Olsen, CEO of Dubai-based OSV operator Topaz, reckons there is reason to be optimistic. “While the price of Brent continues to be volatile, it is at a more constructive level. And so, investments will now need to increase to meet the rising demand – both on new assets and importantly on maintenance of existing assets,” says Kofod-Olsen, adding that there are already many exciting offshore projects underway as E&P companies have reduced the breakeven capex levels of projects during the downturn – in some cases by as much as 50% – making offshore projects very competitive. Kofod-Olsen believes the OSV sector is in the middle of an evolution and the sector will largely be directed by the larger more diversified operators as customers no longer want to deal with several suppliers, which will most definitely require further OSV consolidation. “The way we see the industry evolving is that some companies will take over additional planning of the customer supply chain, handling their logistics planning and execution,” he says. As for the company’s operations, Kofod-Olsen says Topaz has increasingly moved away from its previous strategy of simply being an asset provider to a solution-oriented business.
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Kofod-Olsen has been with Topaz since 2012. Prior to that he was with Maersk for nearly 16 years. “We aggressively reduced costs, but also challenged the status quo, by daring to position ourselves to be an even stronger partner to our clients – moving with them in the rapidly-changing marketplace to add value through distinct, more tailored services and solutions,” Kofod-Olsen says.
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It is critical that none of us go on any spending sprees or reactivate vessels without thought
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Topaz has added selected new services to its portfolio, and integrated IT capabilities, allowing it to take on a bigger part of its customers’ supply chains. Kofod-Olsen expects the currently laid up vessels, accounting for 30% of the global fleet, to reduce the supply of tonnage permanently and start to balance future supply and demand, as more than half of the laid up vessels are over 30 years old and would be expensive to reactivate. Topaz sold five vessels for scrap during 2018 as the reactivation costs simply exceeded the earning potential of the vessels, despite being only 10-12 years old. “It is critical that none of us go on any spending sprees or reactivate vessels without thought – bringing older vessels back to service comes at a very high cost and the safety
implications can also be significant,” warns Kofod-Olsen. “The market is performing in the right direction. To sustain the expected demand, an additional 60m barrels of oil need to be brought onstream by 2023, which will require upstream capex to increase significantly,” Kofod-Olsen concludes. ●
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Topaz Headquartered in Dubai with 40 years of experience in the Middle East, Topaz operates a fleet of more than 90 offshore support vessels.
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IN PROFILE
Stars in alignment for LPG Harry Vafias is confident of a decent year ahead
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arry Vafias is in typically bullish form when Maritime CEO comes calling for our first interview of 2019. The StealthGas CEO spent much of last year selling off older tonnage, and now has his eyes out for some
Spot on
StealthGas StealthGas is the world’s largest owner of LPG pressurised carriers in the 3,000 - 8,000 cu m segment. It also owns three MRs and one aframax.
bargains to bolster his LPG fleet amid what he sees as a healthy equilibrium for the global LPG shipping sector. “The stars finally seem to align,” Vafias tells Maritime CEO citing the low orderbook, an ageing existing fleet, increasing demand and the higher price of oil as reasons for his optimism. “Our plan for the new year is to buy back our own shares since they are trading at a big discount to NAV or start a dividend if the market continues to improve,” Vafias reveals. StealthGas will also continue to sell more of its older ships in 2019, with Vafias saying he’s in the market for modern secondhand LPG carriers if he regards the prices as reasonable. In total, StealthGas sold seven
ships last year having just completed a mammoth 26-ship newbuild project. Another prediction for this year from the charismatic Greek is for LPG to become a marine fuel for some vessels around the world. “We are big believers of this idea, LPG is environmentally friendly, cheap and abundant,” he says. ●
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IN PROFILE
‘2019 set to be a milestone year for maritime startups’ A scion of a famous name in shipping eyes shipping’s next great disruptor
I
dan Ofer’s Eastern Pacific Shipping and startup specialists Techstars have launched a shipping startup accelerator in Singapore, marking the first time an established and renowned accelerator has joined forces with a more traditional shipping organisation, one with deep expertise and direct experience. The EPS MaritimeTech Accelerator Powered by Techstars will be based in Eastern Pacific’s headquarters in Singapore. From April this year, the EPS MaritimeTech Accelerator Powered by Techstars will accept applications from startups around the world and ultimately select 10 companies – including the most promising Singapore and regional early-stage ventures – to participate in the inaugural class. In November this year, the class will gather in Eastern Pacific’s headquarters for a three-month programme of research and development, mentorship, and collaboration. The accelerator will culminate in February 2020 with a demo day wherein every startup will pitch its newly polished business to an audience of venture capitalists,
Spot on
Eastern Pacific Shipping One of the largest shipping companies in Singapore and part of Idan Ofer’s sprawling maritime empire. The company has more than 13m dwt on its books, across six different segments, with over 30 newbuilds set to join its portfolio.
ISSUE ONE 2019
corporate innovation leaders and industry experts. Gil Ofer, Eastern Pacific’s business development manager and son of Idan Ofer, tells Maritime CEO that this year is set to be a milestone one for maritime startups around the world.
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If we compare the industry to others, then I would say that shipping is behind the curve
”
“I’m optimistic that 2019 will see both new entrants and incumbents that attempt to disrupt the shipping journey through technological innovation gain more traction than ever before, especially across AI, IoT, blockchain, and autonomous shipping,” Ofer says in an exclusive interview. Singapore-based Ofer is well placed to judge where shipping is tech-wise. Prior to joining the shipping arm of his family business, Ofer was the co-founder of IMGN Media, one of the largest publishers of video on Instagram. “If we compare the industry to automotives, media and entertainment, or finance and banking industries, then I would say that shipping is behind the curve,” Ofer says. However, he notes the belated increasing attention in the media to startups and corporates bringing technology to maritime shipping, as well as a significant increase in overall funding to these startups. “I think that 2019 will be a milestone year where commitment
from private enterprise will reach breakthrough levels and thus act as a catalyst for the maritime startup movement. The widespread application of the various types of technology across our industry, however, will necessitate more time,” Ofer concludes. ●
“Data collection, sharing and analysis is really the bedrock of the next wave of technology innovation in the industry” — Rob O’Dwyer, co-founder of the Smart Maritime Network
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IN PROFILE
The world’s first floating ocean entrepreneur hub Birgit Liodden has become the chair of a shipowning venture with a difference
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famous name among the Norwegian maritime community has become a shipowner … kind of. Birgit Liodden, who previously headed up Nor-Shipping before being appointed director at startup supporter Oslo Business Region, is set to become chair of the board looking after new acquisition, Bjørvika (pictured below), a passenger ship that is being transformed
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to house startups for a new venture, the Ocean Opportunity Lab. The ship will officially be relaunched in the Norwegian capital as the world’s first floating ocean entrepreneur hub at this year’s Nor-Shipping. “This will specifically be a lighthouse to gather the world’s coolest and craziest people to explore the future, and become an attraction in itself,” Liodden tells Maritime CEO. “It’s also the symbol of entrepreneurship – grassroots, pushing from the bottom up, built on reuse and utilising existing resources, and requiring limited resources.” The Ocean Opportunity Lab is yet another example of how Norway – and Scandinavia as a whole – is leading the world in harnessing novel technologies to change maritime. Why the Nordics seem to have carved out this maritime tech leadership is clear to Liodden – it’s
largely down to geography and demographics. “I think it’s all about scarce resources, the tough climate and the lack of hierarchy,” she says, adding: “We’re fuelling the explorers and adventurers’ mentality and from a young age we’re encouraged to think smart and find solutions.” No doubt, this mentality will be very much on display at Nor-Shipping this June. ●
Spot on
Ocean Opportunity Lab The world’s first floating ocean entrepreneur hub will be housed in the Bjørvika, a converted passenger ship. Set to launch at Nor-Shipping in Oslo this year
maritime ceo
DUBAI
Mission possible Dubai is now widely polled as being among the world’s top maritime centers. The authorities are determined to further climb the ranks
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uild it and they shall come. That has been the mantra of Dubai maritime over the past 20 years. Not a cargo generator, the city has positioned itself as a cargo facilitator, a vital node on the global logistics map. Money has been poured into infrastructure, incentives and services with the maritime cluster today boasting more than 5,500 maritime companies supporting more than 76,000 jobs. While it is in port services that the city has excelled the most, ancillary maritime services are now very firmly established whether it be legal, broking, yards, finance and latterly classification. Dubai’s climb up the maritime ranks was recognised last year when it was crowned among the top five maritime hubs in the International Shipping Centre Development Index, a survey carried by the Baltic Exchange and Chinese news agency, Xinhua. Dubai secured fifth position overtaking Hamburg. A delighted Amer Ali, executive director of Dubai Maritime City Authority (DMCA), commented on making the top five: “We are working
ISSUE ONE 2019
hard to create a vibrant maritime environment to attract industry leaders and to promote Dubai’s status as a global shipping centre.” The International Shipping Centre Development Index sets its rankings by using a methodology assessing the hub’s competitiveness, its ability to attract maritime businesses, the development of efforts in relation to creativity and innovation, and whether it plays a key role in promoting the growth of the global shipping sector.
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one of the leading maritime cities of the world,” Erik Jacobsen, Menon’s managing partner, tells Maritime CEO. “Dubai’s strength is particularly connected to the container port operated by DP World, and more generally to its physical and logistic connectivity to all major countries in the world.” ●
Dubai’s strength is particularly connected to the container port
”
In another biennial survey carried by Norwegian consultancy Menon Economics, Dubai was ranked among the top 10 international maritime cities in 2017, and is expected to shoot up the ranks when Menon releases its next survey in April. “Dubai is the leading maritime center in the Middle East, and in fact,
For all the latest shipping news from Dubai
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DUBAI
Outside port perimeters DP World has ventured way beyond its terminal operating roots
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one are the days where global terminal operators just invested in quayside developments. Today’s biggest names are reaching right across the supply chain. None more so than Dubaiheadquartered DP World, which is now among the most diverse stakeholders in terms of the breadth of its investments related to container shipping. In a recent post on LinkedIn headlined Data is the New Container, Sultan Ahmed Bin Sulayem, the group chairman and CEO of DP World, discussed how his company was currently “exploring the technologies and partnerships of the future” and how vital it is for his company to harness data to evolve the business. The investment that attracted the most headlines over the past year was not data related per se. The $764m outlay to buy Europe’s largest feeder operator, Unifeeder, sparked
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We have become known for seeking ways that transform the way goods are moved
”
huge conjecture among analysts. “The acquisition of Unifeeder will further enhance DP World’s presence in the global supply chain and broaden our product offering to our customers – the shipping lines and cargo owners – with a view to ultimately reduce inefficiencies and improve the competitiveness of global trade,” DP World stated when buying the liner last August. Commenting on the move into shipowning, regular Maritime CEO columnist Kris Kosmala was sceptical. Kosmala has long advocated ports take more aggressive actions in expanding services aimed at
improving supply chain execution outside of ports’ gates. Ports should expand, Kosmala reckons, by building new disruptive services on the basis of the data they have about the shippers, the carriers and the cargo. The margins on such digital services would be similar to the margins seen in gateway port operations, Kosmala argues, something DP World has stated it is looking to harness.
maritime ceo
IN DUBAI PROFILE
“It has never crossed my mind that a port would instead expand by acquiring metal,” said Kosmala. “A shipping company would give an arm and a leg to generate margins of the port operators. So what is a highly profitable company doing acquiring a much less profitable company in a very different industry?” There’s been plenty more eyebrow raising investments by this Dubai company recently. In May last year, DP World and Virgin Hyperloop One introduced DP World Cargospeed, an international brand for hyperloop-enabled cargo systems to create fast palletised cargo deliveries. The two companies claim DP World Cargospeed systems will deliver “freight at the speed of flight
and closer to the cost of trucking”. Travelling at top speeds of 1,000 kmh DP World Cargospeed systems, enabled by Virgin Hyperloop One technology, will transport high-priority, time-sensitive goods. Meanwhile, in December an intelligent multi-storey container park was unveiled by DP World and German engineering company SMS. The revolutionary design will be built at DP World’s flagship Jebel Ali Terminal 4, in time for the Dubai Expo 2020 world fair. Instead of stacking containers directly on top of each other, which has been global standard practice for decades, the system places each container in an individual rack compartment. Containers are stored in an 11-story rack, creating 200% more
capacity than a conventional container terminal, or creating the same capacity in less than a third of the space. Thanks to the rack’s design each container can be accessed without having to move another one, enabling 100% utilisation in a terminal yard. Bin Sulayem, the DP World boss, said at the unveiling: “Our engagement in new technologies is a major priority and we have become known for seeking ways that transform the way goods are moved across the world. Innovation is part of our DNA and at the heart of our success.” Certainly DP World is transforming the role of the humble container terminal operator to become an end-to-end logistics solutions provider. ●
Jebel Ali welcomes regular 20,000 teu visits PORTS IN THE Middle East including Dubai’s Jebel Ali are set to receive 20,000 teu ships for the first time on a regular loop from Asia. Ocean Alliance, the container shipping grouping between CMA CGM, Cosco, Evergreen and OOCL, recently revealed its service changes, effective from April. The Asia – Middle East MEA5 loop will be up-sized to ships of 20,000 teu. “For the first time ever,
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container ships of this capacity are thus used outside of the Asia – North Europe route,” Alphaliner noted in a recent weekly report. The MEA5 calls at Qingdao, Shanghai, Ningbo, Nansha, Singapore, Jebel Ali, Abu Dhabi, Dammam, Abu Dhabi, Port Klang, Qingdao. Commenting on the news, Andy Lane from SeaIntelligence Maritime Analysis suggested the move could
usher in another freight rate war. “Upsizing services is only bottom line beneficial if you can continue to fill them with good revenue cargo. You do also sacrifice port-pair coverage and sailing frequency. I think that the Asia-Middle East trade is not yet of sufficient scale to host 20,000 teu ships, and a likely outcome is overcapacity and a race to the bottom on rates, at least short term,” Lane said. ●
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WINE
Mad wines and crazy food Matching Asian cuisine to western wines is no puzzle, it just requires a little planning and preparation, writes Neville Smith
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t’s Singapore Maritime Week and two things are certain, much drinking and eating, with a little shipping business done on the side. The array of events and receptions, parties and play, go all the better for being in a country with global food culture and strong local cuisine. Though the primary food style is one that appears to go better with beer than fine wines, the pan-Asian craze is as strong as ever and that means a continued hunt for wines that will work either with spice and aromatics or with strong and rich sauces. Just because the flavours are big doesn’t mean you can’t go for delicacy but you will need something with backbone if it’s going to work. For the first group, where delicacy and intensity are the key elements, it makes sense to look for off-dry white styles or lighter reds, both of which will have the acidity required but also varying degrees of fruitiness. For the latter, bigger reds will work - but more likely something smooth and not too tannic unless going for the most intense of braised meat dishes. The fact is the are so many potential styles - not to mention plenty of western food options - that
Two (more) to try LESS WELL-KNOWN THAN Riesling is Hungary’s Furmint, used in the country’s great sweet wines and increasingly fermented dry. In the village of Mád, Vivien Ulvajri makes Egy Kis Dry Furmint Barta 2017 (Corney & Barrow £14.95) which packs similar fresh-fruit driven intensity with an almost Chardonnay-like minerality.
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most of the time you will be hard pressed to go wrong, but there are couple of good rules of thumb to follow. The first is that our old friend Riesling comes into its own with Asian food, especially when off-dry. The combination of acidity and flashiness can match many styles and the food will bring out the intensity of the wine. The same is true for Chardonnay - whether that’s bone dry Chablis or a fleshier example with some oak. For reds, Chardonnay’s red The clue really is in the name of The Whole Shebang, Cuvée XI (Berry Bros & Rudd, £16.95) a multi-vintage, multi-variety blend Zinfandel, Carignan, Petite Sirah, Mourvèdre, Alicante Bouschet, Grenache, Syrah and Barbera, aged in French oak. It’s big, it’s juicy and it loves food. ●
sibling Pinot is a must for similar reasons - acidity, fine bones and soft tannins. But go bigger and you can find plenty complementary styles, moving into the territory of Zinfandel or Malbec that provide plenty of fruit and lots of depth. Below are four good examples from the fine white/meaty red matrix, each capable of enhancing your Singapore food experience. First up is one to make you feel good. Santa Florentina Malbec Reserva Fairtrade 2017 (Corney & Barrow £9.95) is juicy with a high concentration of black fruit on the palate, flavours characteristic of this high-altitude valley. La Riojana winery operates to Fairtrade certification with growers given fair prices for the grapes as well as benefits like insurance and education programmes for the farmers. An absolute classic from The Saar, 2016 Riesling Schiefer (Berry Bros & Rudd £15.00) has delicately white fruit aromas and a superbly fleshy palate with an undertow of fine, mouth-watering minerality. ● maritime ceo
GADGETS
Massively useful
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towel, The Hitchhiker’s Guide to the Galaxy says, is about the most massively useful thing an interstellar hitchhiker can have. True enough, but towels are bulky and often damp if you’re living out of a suitcase. Matador have come up with a splendid answer to the problem. The Matador NanoDry Shower Towel is a 120 x 60 cm towel that folds up into a silicone case the size of your hand and weighs 142 g. The quickdrying nanofibre material can absorb 2.3 times its own weight in water, has an anti-microbial coating to stop mildew and is machine washable. The silicone case has a carbine, so you can hang it outside your pack, keeping any dampness away from your gear. Matador NanoDry Shower Towel https://matadorup.com/products/nanodry-shower-towel-large $40
Sunny disposition
N
ow you’ve got rid of that hefty large towel, why not replace it with a solar charger for your phone? The Anker PowerPort Solar is a 21 W dual USB solar charger with Anker’s PowerIQ technology that delivers the fastest possible charging speed up of to 2.4 amps per port or three amps overall under direct sunlight. The solar array is 21.5-23.5% efficient, providing enough power to charge two devices simultaneously, and at 354 g, it weighs just about the same as a can of soda, so it’s not too hefty to stick on top of a backpack to charge while hiking. Unfolded, it measures 48 cm x 28 cm, and it folds up to a modest 16 cm x 28 cm. Anker PowerPort Solar https://www.amazon.com/dp/B012YUJJM8/ $140
Trim cut
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fter decades of helping spread hair all over barber’s shops around the world, Wahl have decided to tidy things up a bit. They have started with beards, which can be the scourge of any bathroom when it’s trim time, with hair clogging up drains or just getting everywhere. Wahl’s answer is the Lithium Ion Vacuum Trimmer, a rechargeable beard trimmer with a built-in vacuum cleaner to take away all the messy hair as you make, putting it all into an easy to empty chamber. The blades are self-sharpening, and the trimmer comes with a five-year warranty, ten attachments, including six adjustable length and a rotary nose and ear trimmer, as well as a cleaning brush and blade oil. The clippers will go for 90 minutes on a single recharge: overkill for even the most unkempt beard. Lithium Ion Vacuum Trimmer https://wahlusa.com/products/grooming/vacuumtrimmer-9870-100.html $120
ISSUE ONE 2019
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REGULAR BOOKS
Black Sea borders and blockages Paul French gives readers a primer on an underreported part of the world
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il tankers exporting Kazakh and Russian crude oil from ports in the Black Sea are contending with ever-worsening delays when navigating Turkey’s key shipping straits. This is causing delivery delays for millions of barrels to refineries across the Mediterranean and beyond. In part the lengthening queues to pass through the Bosphorus and Dardanelles are due to a change in rules back in September requiring more vessels to be escorted by tugboats. However, bad weather is also a factor. There is also much talk of expanding the number and size of various Black Sea ports in Georgia and Turkey. Perhaps worth then knowing a little more about this region. Neal Ascherson’s Black Sea: Coasts and Conquests: From Pericles to Putin is a good place to start. This very readable book (as is everything by this Scottish writer who has written many books on Eastern Europe in particular) may go all the way back to Byzantium, the mysterious Christian Goths and the
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Tatar Khanates but it brings the region’s importance and clashes right up to date. Of course, the Black Sea now touches on so many crucial geopolitical issues – shipping and guaranteed stable oil supplies, Russia’s expansion, RussoUkrainian tensions and current issues with Erdogan’s Turkey too. Charles King’s The Black Sea: A History is also a good primer to the region. King is professor of international affairs and government at Georgetown University and has written extensively on related Black Sea subjects – the port city of Odessa and various issues in Turkey. King shows how centuries of ethnic conflict, economic collapse, and interstate rivalry all still run deep and add to the problems of finding agreement and consensus on any common approach to the Black Sea. However, King argues common heritage and common interests also run deep and those are what we need to accentuate rather than the differences (political, religious, racial, etc) and old historical grievances
of the region. Additionally, new threats to the Black Sea could galvanise cross-border initiatives – for instance, the ecological destruction caused in the region by post-Second World War industrialisation of the littoral states. Both Ascherson and King are keen to emphasise the obvious, but oft-forgotten, truth that the Black Sea unites Europe and Asia, lapping on both borders and encompassing the interests of the Caucasus, Russia, Ukraine, Romania, Turkey, and Greece. Clifford Gaddy and Barry Ickes are Russia specialists though their Russia’s Addiction: How Oil, Gas, and the Soviet Legacy Have Shaped a Nation’s Fate looks closely at the contemporary issues Moscow faces around the Black Sea. The authors argue that, rather than being an obstacle to any progress on Black Sea issues, Moscow may actually be the country to force moves as Russia’s dependence on its oil and gas revenues is much deeper than generally recognised.●
maritime ceo
TRAVEL
Basqueing in heaven Your editor needs to have a word with his bank manager. Another mortgage is required. San Sebastián has blown his mind
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ithin about five minutes of arriving on this spectacular slice of Atlantic coastline my wife and I wanted to buy a flat. Few people fail to be impressed by San Sebastián, the jewel of the Basque region. Spread across three giant sandy bays in the north of Spain on the border with France is sun, surf and sensational culinary treats. San Sebastián, or Donostia to the Basques, is wonderfully walkable – to get from one end to the other takes around 30 to 40 minutes on foot. Crammed into this little city are more Michelin stars per square kilometre than anywhere else on the planet. Basque-style tapas are known as pintxos and are usually small pieces of bread, topped with a variety of different ingredients – anything from Spanish ham, prawns and anchovies to cheese, chorizo or wild mushroom croquettes. They are usually speared with sticks and heaped along the bar for diners to come and help themselves, and cost between
ISSUE ONE 2019
€1-3 each. At the end of the night, your sticks are counted up, and you pay your bill. San Sebastián is the king of pintxos, home to many varieties of places selling them from classic old-style eateries to innovative new gastro bars. A fun way of exploring the gastronomic fare on offer is to do a Basque version of a pub crawl, popping into one tapas place after another for a bite to eat and a glass of wine (or cider, a local delicacy). Watch what the locals opt for on the counter, there’s normally one particular dish that each restaurant is especially famous for. Take Casa Senra Donostia as a great example. Situated a couple of streets back from Zurriola, the surfers beach, pop in here and ask for
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the mushroom aioli dish, you won’t be disappointed. Similarly Atari Gastroteka in the old town in the centre, prepare for a taste bud sensation when you order their smoked salmon. With all those calories you’ll need to do some exercise. Rent a kayak to paddle along the bays, hire a surfboard if you’re feeling brave, or go for a short hike to visit the statue of Christ on top of the mountain between the beaches. It takes around an hour to walk up at a leisurely pace and offers spectacular views of the crescent-shaped bays. In terms of where to stay, opt for the granddaddy of all Basque hotels, the Maria Cristina, which neatly straddles the cobbled old town and the crashing waves of Zurriola beach. ●
Crammed into this little city are more Michelin stars per square kilometre than anywhere else on the planet
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OPINION
An outsider’s view of our neglect of seafarers In April Hubert Jaroni (pictured) will be running the London Marathon to raise funds for Sailors’ Society. Below this landlubber explains why he chose to run for this charity
M
y brother-in-law is your not so humble editor of this magazine and my window into an opaque industry that the more I get to learn about the more it blows my mind. Throw a dart into the middle of a map of Poland and that’s where I call home, Plock, a town that’s a couple of hundred of kilometres from the nearest sea. Like 99% of the world’s population I had little comprehension of the global shipping industry and the women and men who work at sea to smooth our daily consumption needs until my sister picked up the co-founder of Maritime CEO hitchhiking a number of years ago – a story for another time! Since then I have learnt about this largely hidden, out of sight industry and been amazed at its scale and complexity. What has hit home more than anything else, however, as an outsider looking in, is the scant regard so many of those in shipping working ashore have for their peers at sea. Recently I saw one of the most shocking images that anyone could
Help Hubert cross the line in his fundraising for Sailors’ Society. Donate here today!
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ever see in shipping, something that has been impossible to get out of my head since. In orange overalls, a seafarer was photographed dangling from an OSV in Malaysia. He’d tied a noose around his neck, and leapt over the rails. Life at sea had proven too hard for this man, his corpse swinging with the gentle waves below. Numbers from Singapore shipmanager Synergy Group show 5.9% of all deaths at sea are proven suicides. If the suspicious cases of probable suicides – seafarers that went missing at sea – are considered, then this figure jumps to 18.3%, close to one in five deaths, a truly horrifying statistic. Researching the mindset of crew in 2019 for this article I clicked on the tag Seafarers over on the Splash website and I would strongly recommend all readers do likewise – laid bare through hundreds of articles are the daily travails of those at sea. The Mission to Seafarers publishes a regular Seafarer Happiness Index, a gauge of life at sea. It makes for essential reading for anyone with even a fleeting care for the 1.25m men and women working on ships today around the globe. The latest results from the survey show seafarer happiness around the world places crews in the ‘struggling zone’ on the UN Happiness Reports’ Catril Scale. In a study from last year of seafarers’ mental health, conducted on behalf of Sailors’ Society by Yale University, more than a quarter of seafarers indicated signs of
depression. Is it any wonder when conditions onboard are equal parts stress and sterile? Recent articles I have read on the subject describe living conditions on today’s ships as sub-par compared to hospitals and budget motorway accommodation. Flooring, panelling, deck heads, furnishing, all have gone the way of function over form throughout just about every accommodation block sliding out of shipyards the world over these days. What I would like to see – as an outsider – is for shipping to take greater care of those that make the industry actually function. In April I will be running the London Marathon, raising money for Sailors’ Society. Whatever you can spare I can guarantee is going to a worthy cause. ● maritime ceo
REGULAR OPINION
Maritime automation will not spare crew We will not need so many people working at our ports or on our ships soon, argues Kris Kosmala
H
umans have a tenuous relationship with automation. On balance, we love it. It has made our lives easier. Freed up time for leisure. Freed up time for thinking … about more automation. Progressively, we have made automation cleverer. First, we armed it with simple decision trees, then with supervised reasoning, until we arrived at self-learning mathematical algorithms. Along the way, automation equipped with artificial intelligence allowed us to eliminate human efforts all around. To put it in perspective, we started with replacing elevator operators with buttons and self-locking doors. We arrived at autonomous cars making better driving decisions than humans themselves. In the process, we also depopulated, among others, factory floors, bank branches, public services offices, and airport service areas. Are you thinking that a more specialised human workforce is going to be immune? An artificial intelligence program developed in China combs through test results, health records and even handwritten notes, to consistently match or outperform primary care paediatricians. Welcome to the ‘depopulated’ doctor’s office. Industrial manufacturing led the way, deploying robotics and artificial intelligence on the factory floors to automate labour-intensive, repetitive processes and task processes, then moved on to back-office processes such as purchasing, invoicing, collections, and customer service. Predictive analytics were put to work to improve demand forecasting,
ISSUE ONE 2019
increase asset utilisation, and more economically maintain diverse pieces of equipment. In all cases, AI-based technology showed itself to learn and improve in a way similar to humans, but with virtually unlimited capacity for processing and retaining data. Transportation is not immune from the automation trend and displacement of humans with some form of automation, often augmented by artificial intelligence. Back offices of transportation companies came first. Contract optimisation took out contract administrators, pricing optimisation reduced the number of pricing analysts, allocation optimisation reduced the need for tradelane analysts, and talking bots displaced humans in customer service centers. Recent news of OpenAI writing convincing news stories and works of fiction is only a step away from digitising it into speech, thus opening the way to displace humans in already downscaled sales offices. The front lines of transportation have not been immune from those changes, although here the causes were different. Trucking has been hit most severely, as numbers of retiring drivers far exceed numbers of new candidates to take their places. Added weight of regulations
affecting drivers’ employment, like that seen in countries of European Union pushed many drivers back to their home countries, unintentionally triggering a driver supply crisis earlier than predicted. Train drivers and train operations staff will follow. Rail operators are watching full train automation spearheaded by Rio Tinto, a mining company in Australia. Using driverless trains, robotic operators, cameras, lasers, and tracking sensors, the company is able to manage their mine-to-port supply chain remotely, while improving the overall safety of their rail operations. Their competitor, BHP Billiton is on the cusp of designing and enabling a fully automated mine. Maritime transportation is not immune from all those automation trends. On the terminal quays, gangs of 25 workers have been downsized to 8-10. On the ships, technology is reducing human activities from the engine room all the way up to the bridge. Yes, things are still breaking down and they call for a safe pair of human hands and human brainpower, but the overall need for the sizes of crews of old is diminishing. Larger ships don’t require larger crews and modern ships replacing older ships size for size allow for smaller crews. Ignore the hype of fully autonomous vessels cutting the need for human crews to zero. That’s a fantasy. The reality of the staffed ships of today tells a sufficiently worrying story for the future of human employment. The maritime industry cannot defy the trend of automation reducing the need for human workers. ●
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MARPOLL REGULAR
Your verdict
Every issue we ask readers for their thoughts on topical maritime matters. With more than 450 votes cast here’s the latest MarPoll results with key comments What’s the best fuel for shipping to meet its 2050 decarbonisation goals?
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Is the ordering frenzy for ultra large container vessels now over?
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Hydrogen, or maybe methanol, either as combustion fuels or fuel cells
Whenever Maersk say they will not do something, the opposite is usually the case. Other lines also perceive a need to continue ordering until their mega fleets are on a par with Maersk
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LNG
37%
Low sulphur fuel 15%
Yes
59%
Hydrogen
29%
LPG
No
41%
Biofuel
13%
6%
What’s the greater worry for international shipping?
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What’s the most important thing for you when deciding on a P&I Club?
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Most important factors are quality of other members and finances
China to be replaced by India and Vietnam?
A slowing Chinese economy
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39%
Growing global protectionism 61%
Which secondhand ship type will appreciate the most in 2019?
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Price
17%
Relationship
Reputation
32%
Global network 2 4%
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Quality of service and reasonable prices for the services rendered
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Boxship
23%
Price 14%
Bulker
23%
Reputation 46%
Tanker
54%
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Relationship 25% Global network 15%
What’s the most important thing for you when deciding on a ship register?
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We’ll find some way of screwing up any possible benefits
Ask no questions, charge not very much, not be blacklisted
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Yes
62%
Price 19%
Relationship 18%
No
38%
Reputation 49%
Global network 14%
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27%
What’s the most important thing for you when deciding on a class society?
My guess that all will depreciate, so this is a hard pick
Will the global sulphur cap have a noticeably beneficial effect on product tanker rates?
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maritime ceo
SAFER VESSELS CLEANER SEAS STEERING A PATH TOWARDS A SAFER AND CLEANER MARITIME ENVIRONMENT RIGHTSHIP.COM