ISSUE TWO 2017
www.maritime-ceo.com
Nor -Shi Spec pping Nor ial off wegia n shor e, fin ow ners , tech ance and nolo gy
Digital revolutionary
Lasse Kristoffersen and the changing face of shipping
MANIFEST
3 At The Prow
Economy 4 US 5 EU 7 China 8 India 9 Brazil
Markets 10 Dry Bulk 12 Tankers 15 Containers 16 Offshore 17 Finance
27 Tribini Capital 29 Denholm Group 30 EGPN Bulk Carrier
Maritime CEO Forum 34 Reports from shipping’s Davos
Norway 38 Introduction 39 Lines 40 Offshore 41 Autonomous ships
Recreation
18 Has shipping become commoditised?
42 Wine 43 Gadgets 44 Books 45 Travel
Profiles
Opinion
26 Cover Story Torvald Klaveness 25 Team Tankers 26 Grimaldi Group
46 Kris Kosmala 47 Frank Coles 48 MarPoll
Executive Debate
45
ISSUE TWO 2017
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AT THE PROW
An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Holly Birkett Mumbai: Shirish Nadkarni New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Editorial material should be sent to sam@asiashippingmedia.com or mailed to 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2017’s four issues of Maritime ceo magazine. Email sales@asiashippingmedia.com for subscription enquiries. Copyright © Asia Shipping Media (ASM) 2017 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 TWO 2017
Scandinavia leading the way in maritime innovation
H
aving lived in China for many years news that a giant hole was to be blasted in a mountain to allow ships through, avoiding some rough seas, I instinctively imagined that such a project could only be conceived in the People’s Republic – a country that has spawned many incredible, jaw dropping engineering feats this century. However, this world-first ship tunnel is not something concocted in China – it is a Norwegian creation. On reflection, I should not have been so surprised. The fact is Scandinavia is increasingly leading the world when it comes to all things maritime tech, something that will be in strong evidence come May 30 and the start of the latest edition of Nor-Shipping where this magazine is being distributed. Whether it’s Maersk’s multiple tech announcements this year, Finland’s growing lead as the place for autonomous ship R&D or DNV-GL’s data platform tie up with Microsoft, across the Nordics the shipping tech revolution is happening fast this year. Other regions – notably China – risk being left behind. Writing for Maritime CEO on page 38, Birgit Liodden, the director of Nor-Shipping, notes that Denmark, Norway, Finland and Sweden fill the first four positions, in that order, in the latest European
Commission Digital Economy and Society Index. This ranks nations within the continent according to connectivity, human capital (digital competency), internet use, integration of digital technology and digital public services. What’s more, when compared to leading non-European nations – including the United States, South Korea and Japan – the quartet retain their positions. Scandinavia does appear to have the right ingredients to lead our industry’s tech revolution. “We need to disrupt, to question convention and embrace innovation,” Liodden writes in her compelling artile. Frank Coles, the boss of Transas, is another writer in this issue – as well as a panellist at our second annual Maritime CEO Forum in Singapore in April. A key message he is trying to get out these days is that smart operations in maritime are already very much here and now – they are not something of the future. “The perfect storm is developing as the e-commerce players encroach, while technology impacts the way of doing business and the middle man is removed by the digitalisation creating commodity driven efficiency and a new world for maritime,” Coles notes, concluding: “Imagine the new world, but understand it is here already.” In Oslo from May 30 I imagine we will see this new world. ●
3
ECONOMY US
Confounding the critics? President Trump is presiding over a steady economy to the surprise of many international economists
I
t has to be said that the election of Donald Trump was met by many economists around the world with bewilderment, if not outright dismay. Predicting anything in the US economy was about to become much, much harder. However, so far, things have carried on with the momentum they were showing before the election and the inauguration. And that process appears to be being maintained post the President’s first one hundred days in office. The best news for ordinary Americans in April was that unemployment fell to a 10-year low as 211,000 people joined the workforce. Trump was quick to claim credit for this but the process was more longterm. Indeed, in April one key sector – construction – reported that it had hired less workers that month and was intending to do so for the rest of the year. Still America’s economic growth is nothing to get too excited about – just 0.7% in GDP terms in the first quarter, following a more impressive 2.1% for the last quarter of 2016. However, this is also not seemingly Trump-related – most of the dip in America’s largest trading partners, 2016 Country
Total trade ($m)
EU (combined)
686,991
China
578,588
Canada
544,894
Mexico
525,110
Japan
195,466
South Korea
112,198
India
67,687
World Source: US Department of Trade
4
3,643,564
growth is thought to be related to consumer sales that dipped over the Christmas and New Year due to warmer weather (less wool jumpers and overcoats) and quite significantly reduced utility bills following the unusually clement winter. Most analysts expect around a 2% growth in GDP across the first half of this year though the new president has promised a significant 4% growth due to his programme of tax cuts for individuals and businesses, deregulation and tougher enforcement of trade agreements. Just how much of this legislative change will actually occur and what its impact on the overall wider economy will be should become evident by JulyAugust. Some analysts expect him to take credit for growth despite the ‘tailwinds’ of consumer spending, a robust stock market and pre-existing wage growth that should be enough to see the economy through to autumn. In this scenario it will be next winter when the decision about whether or not Trumponomics works
or fails will be taken. America also still has to live with the rest of the world, however much a Trump administration is keen for a return to economic protectionism and isolationism. America’s exports are looking relatively good, despite the general slowdown in China. However, this is largely due to the fall in the dollar lagging and will probably get tougher for exporters later in the year. This was already seemingly evident as recently as last March with decreases into both exports from the US and imports into the US. Sectors that remain strong for exports were technology, meat and consumer goods though fuel oil, commodities, heavy industrial machinery and airplanes saw falls. However, once again, the unpredictability around the Trump administration could change this scenario too – for instance, meat and agriculture exports were up but the president’s threat to completely tear up the NAFTA agreement would put that growing trade in jeopardy. ● maritime ceo
ECONOMY EUROPE
Rise of the interventionists Britain’s exit gives Paris a stronger hand in Europe
Y
ou could be forgiven for thinking that economics and politics are two totally separate and often unrelated elements if you only looked at the European Union these days. The UK has triggered Article 50 and the Brexit negotiations will now ensue after the ‘snap’ election in early June called by Theresa May. However, the UK economy has generally carried on relatively strongly, albeit with a slight dip in consumer spending. The important English property market appears to be still robust and attracting local and foreign buyers, unemployment is low by average EU standards and the pound is not taking the battering many predicted in the wake of the decision to leave the EU. France got through its contentious elections too and opted for a fiscal conservative. However, unemployment remains stubbornly high in France (particularly among the young) at 10.1%, double the UK’s rate (5%) and significantly more than Germany’s (4%). French economic growth has also been lacklustre by EU standards – and certainly compared to the UK and Germany. France saw a GDP expansion of a mere 0.3% in the first quarter of 2017 over the previous quarter. France’s ‘structural rigidities’ that make the labour force less adaptable than other countries and its ‘tax wedge’ (basically the large sum it
ISSUE TWO 2017
costs a company simply to hire a worker) are problems new president Emanuel Macron must overcome if any economic change is to be seen in France. In economic terms Brexit will go to the heart of one of the EU’s biggest (but least discussed) economic issues. In one sense the departure of the UK is not that big a deal – the UK was not part of the Eurozone, nor of the Schengen Area. The economic issue for the EU post-Brexit will be which economic system will predominate – a German sense of laissez faire (which Berlin shared with London) or a more interventionist, state-led, top-down version of economics epitomised by France and many of the smaller EU economies? For those who want more market and less government in Europe the loss of the UK is ultimately bad news. It has been the case that greater economic liberalisation legislation in Brussels has been supported by Berlin and London and invariably opposed by Paris and Rome. It’s also worth remembering amid all the chatter of Brexit and the success, or otherwise, of political populism across Europe that the EU faces other stubborn trade challenges. There are issues with Canada over the pork trade and with Turkey over the paper industry. Trade and tariffs vis-à-vis China remain an unsettled issue, at least for many manufacturers even if Brussels
Selected EU unemployment rates Q1 2017 Country Greece
Unemployment rate (%) 23.1
Spain
18
Italy
11.5
France
10.1
Portugal
10
Belgium
7
Sweden
6.8
Ireland
6.6
Poland
5.3
Netherlands
5.3
UK
5.0
Germany
4.0
EU Average
8.2
Source: Eurostat
appears not to want to antagonise Beijing. It also has to be realised that a EU–minus-Britain has a rather different relationship to the US that could impact trade under the new leadership in America. However, so far economics and politics seem to be running on somewhat different courses in the major EU economies. The next big political challenge for the EU (Brexit negotiations aside) will undoubtedly be the German federal elections this September – effectively expected to be a referendum on Chancellor Merkel’s leadership. ●
5
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ECONOMY CHINA
Stage-managed deceleration Beijing is handling its slowing economy well
I
t’s hard not to see China’s economic growth deceleration as highly staged managed. However, the IMF numbers tell the same story as perhaps the more opaque Beijing stats – 7.3% GDP growth in 2014; 6.9% in 2015; 6.7$ in 2016; and now 6.6% expected (by both Beijing and the IMF) in 2017. And it’s likely to continue for a while yet – down to 6.2% per annum growth in 2018-2019, most expect. But just how managed is this slowdown? Beijing certainly has more powers over certain key areas of the economy than most (if not all, excepting North Korea) other economies. For instance, a good deal of deceleration comes from government measures to ‘cool’ the housing market; similarly Beijing has kept its fiscal deficit stable through disciplinary measures. However, the central government will be disappointed
that wage growth appears to be slowing which will, ultimately, dampen consumer spending, savings and any attempt (perhaps necessary at a later date) to ‘reheat’ the property market. Wage growth for China’s politicians and economic planners is all about building the loyal middle class and a slowdown in that process will ring a few alarm bells. However, China’s consumers remains robust by international standards – exceptionally so as formerly slightly lagging indicators, such as luxury good sales, appear to be on the up-tick again. Still, the biggest impact of Chinese deceleration is not on the Chinese themselves (at the moment) but on those who have come increasingly to rely on exporting to China to drive their own growth – regionally that means Malaysia and South Korea; internationally it means the oil producing
Chinese firm with biggest brand value, Q1 2017 Company Tencent Alibaba
Sector
Brand value ($m)
Technology
106,181
Retail
58,009
China Mobile
Telecoms
57,889
ICBC
Banking
31,482
Baidu
Technology
23,886
Banking
18,398
Ping An
Insurance
16,463
Moutai
Alcohol
16,219
Agricultural Bank
Banking
14,848
Construction Bank
Source: Digital Strategy Consulting
ISSUE TWO 2017
states of the Middle East as demand from the PRC slackens and worldwide to exporting nations including the US, India, Brazil (that slowing soybean demand), Europe and on and on. Meanwhile, China’s economic risks remain pretty much the same as they have always been – a shrinking workforce due to rapid aging of the overall population (a combination of improved diet and healthcare along with the remnants of the one child policy), overall wage growth, poor productivity in many sectors, the long term lack of management talent and the non-convertibility of the RMB. Add to that now of course the new uncertainty in the trade relationship with the US post-Trump’s ascendancy. Those who think China will weather the deceleration process easily point to recent noticeable rises in Chinese corporate earnings, the fact that the expected early ‘blow up’ with President Trump didn’t materialise and a reduction in financial sector risks. Those bears looking to see problems on the horizon point to a slight rise in inflation, which may balloon later this year leading to tightening interest rates and a subsequent squeeze on investment. There’s no doubt that there are signs of a credit squeeze in China at the moment, but the fact is that is more likely to impact those trying to sell to China than those manufacturing within the country. ●
7
ECONOMY INDIA
Fair weather ahead GDP growth is predicted to get near 8% this year
T
he Indian government is feeling decidedly bullish about the vast nation’s economy. That is maybe to be expected but a report from the UN Economic and Social Commission for Asia and the Pacific seemed to endorse New Delhi’s position by predicting 7.7% GDP growth in 2017. Both also claim the same major causes – increased consumer expenditure and higher infrastructure spending. The IMF has a slightly lower expectation at 7.2%. Still, anything between 7.2% and 7.5% should mean the government remains popular – if it makes it through the raft of elections, local, state and national, that are ongoing this year in the world’s largest democracy. It’s worth comparing India with the IMF’s overall-Asian region growth rate India’s exports to the US, by category, 2016 Category
% of total exports from India to US
Precious stones & metals
22
Textiles
17.7
Fuels and oils
10.9
Pharmaceuticals
8.6
Organic chemicals
5.1
Machinery
4.8
Electrical machinery
4.0
Iron and steel products
3.4
Other
23.5
Total
100.0
Source: US Department of Trade
8
predictions of about 2% less at 5.3% to 5.5% for this year. Things should go well for the ruling Narendra Modi government as most reports predict a good 20182019 too – the IMF claiming India will see GDP growth of fully 7.7% over the period. So everyone seems to think India is over the random downward blip caused by the rather chaotic demonetisation process and is settling down again. And the good signs are not just economic policies – so much of India’s economic fortune (historically, as well as today) relies on weather and the meteorologists are predicting a favourable monsoon season that will allow bumper harvests without significant damage and for the infrastructure (roads, etc) to be in better repair to move it from farm to market. For those in retail, consumer spending and the consumer goods businesses July 1 this year is a major date in the Indian calendar. That is when a goods and services tax (GST) will replace the multiple and confusing (and also, as a consequence, far more expensive to both avoid and collect) multi-layered taxes that presently exist to confound consumer goods company accountants. The new GST should add to the government’s bottom line this year almost immediately. Of course, there are always potential flies in the ointment – and in India it’s the uncertainty over sustained export growth. Admittedly the India export sector has been doing
well – and a good monsoon season will help. However on the horizon is Chinese economic slowdown and the subsequent reduced ordering as well as the possibility of the US blocking some Indian exports – President Trump is said to be keen to renegotiate the US’s trade agreements with India. Currently India exports more to the US than it imports from America – mostly labour intensive items such as commodities, leather goods, textiles etc (though it is more diversified than just that – see table). However, it is a largish importer of hi-tech from the US too. Assistant US trade representative Mark Linscott said recently on a visit to New Delhi that the Trump government is seriously looking at the $24bn trade deficit it has with India and wants to find ways to address the situation. The biggest fear at present is that the way of addressing that situation will be blocks or tariffs on Indian goods. ●
“I would not be surprised to see more mergers in shipmanagement, but I doubt they will all lead to notable improvements in efficiency” — Captain Norbert Aschmann, Bernhard Schulte Shipmanagement’s CEO
maritime ceo
ECONOMY BRAZIL
Two thumbs up Does a single quarter of firmer statistics mean Latin America’s largest country has turned the corner finally?
I
t has to be said that looking back over the last few years covering Brazil, there hasn’t been a lot of economic joy down Rio way. However, the last quarter saw some kind of progress and perhaps a sign of better things to come. Brazil’s inflation rate fell below the government’s target for the first time since 2010 in mid-April and appears to be set to drop further in the coming months. This has been hailed (unsurprisingly perhaps) a victory for policymakers and underscores analyst expectations of deep interest rate cuts ahead. Additionally consumer prices slowed their growth rate slightly in the same period. This means more affordable goods for consumers as inflation nudges just slightly below 4% (the government target had been 4.5%). Some analysts, admittedly the more bullish, are now projecting inflation to dip to 3.5% in July and August. So good news for the current Michel Temer government (pictured) – who remember well that excessively high inflation during the 2016 recession was also a major factor (along with her legal impeachment on corruption allegations) in the ousting of the previous leftist
ISSUE TWO 2017
government of Dilma Rousseff. Declining inflation rates, even by fairly small margins, do allow for other policy levers to be pulled. Already the Central Bank has started to cut interest rates (by around 3% since last October when inflation rises started to ease) to 11.2% currently. Analysts expect that, with hopefully more good news on inflation, interest rates will continue to be cut – perhaps down to 8.5% by July-August. The government is bullish enough that this is not a random blip in the statistics that they are discussing reducing their inflation targets from now until 2019. However, let us remember that this sliver of good news comes after the worst recession in modern Brazilian history – one that occurred despite the supposed ‘bounces’ of the Olympics and the soccer World Cup too. Still, we can expect the Temer government to be more resolute in its wider overall economic objectives for the Brazilian economy given this good news – primarily his attempts to try and reduce fiscal spending and reform the country’s problematic pensions system. The economy is still, probably, in contraction (though unemployment remains in growth at
Brazil’s stubborn unemployment rate Month/year
% unemployed
April 2016
11.2
July 2016
11.6
October 2016
11.8
January 2017
12.6
March 2017
13.7
Source: Instituto Brasileiro Geografia e Estatistica (IBGE)
present), it isn’t improving either. What analysts and foreign trade partners will be looking for from Brazil over the coming months are signs that the economy is returning to ‘sustainable’ economic growth – this doesn’t have to the vaunted expectations of the BRICS years, but some growth will be expected. Primary among these signs of sustainability will be a growth in consumer spending (and consumer’s buying imported goods especially). This requires good economic numbers, a reversal of the unemployment rate (which isn’t apparent yet – see table) and local banks to reduce their extremely high interest charges (for which there is now less justification) on loans, overdrafts and credit cards. ●
9
MARKETS DRY BULK
‘Strong demolition and no new orders pivotal for recovery’ If the fleet keeps growing, Q1 will prove to be a false dawn, warns BIMCO’s Peter Sand
T
he strong lift in freight rates in the first quarter of 2017 may have delivered on the promises a bit early, as the Baltic Dry Index (BDI) now finds itself below the 1,000 mark again. Despite better market conditions in 2017, compared to same period last year, we at BIMCO emphasise the need for continuous handling of the supply side in the dry bulk shipping industry. To keep further fleet growth at bay, the demolition activity must return to levels seen in the first half of 2016, together with an increasing focus on keeping slow steaming around. The first quarter of 2017 provided a somewhat stronger-than-expected dry bulk demand, mainly driven by China’s import of iron ore, coal and grain. Together with improved optimism, the freight rates and earnings
for the dry bulk shipping industry were lifted to profitable levels. The improved optimism led to fear of missing out on ‘the next super cycle’, as owners rushed to the secondhand market to expand their fleets, resulting in a sharp rise in secondhand prices for dry bulk assets. The growing interest in the secondhand market means that existing ships no longer are priced miles below newbuild ones. This can thereby eventuate in a return to the shipyards for some owners, who can’t get the vessel they are looking for in the secondhand market. If a flood of newbuilding orders comes around, it will certainly kill the current recovery of the dry bulk shipping industry once delivered, as a further growth in the supply side, will need an even stronger growth from the demand side.
Dry bulk fleet growth rate, deliveries and demolition 8%
6
6%
4
4%
2
2%
0
0%
-2
-2%
-4
-4%
-6
-6%
Demolition
Deliveries
Fleet growth y-o-y (RH-axis)
Source: BIMCO, Clarksons
10
Monthly y-o-y growth rate in per cent
8
Ja n. 2 M 014 ar. 2 M 014 ay 20 Ju 14 l. 2 Se 014 p. 2 No 014 v. 2 Ja 014 n. 20 M 15 ar. 2 M 015 ay 20 Ju 15 l. 2 Se 015 p. 2 No 015 v. 2 Ja 015 n. 20 M 16 ar. 2 M 016 ay 20 Ju 16 l. 2 Se 016 p. 2 No 016 v. 2 Ja 016 n. 20 M 17 ar. 20 17
Million DWT
2014-2017
The total dry bulk orderbook is currently at the lowest level since mid-2004, as the low ordering activity seen since early 2016 has continued into 2017. According to BIMCO’s Road to Recovery projection, a 0% supply growth is a condition for the dry bulk shipping industry to return to full year profitability in 2019. It is pivotal for the recovery of the freight market and for the return to profitable earnings, that the demolition activity does not stall and newbuilding orders remain limited. But why should you demolish ships when you are finally starting to make some money? Because it benefits you too. The dry bulk shipping industry cannot simply rely on demand to cure the current state of the industry by itself. With an estimated 2.3% growth for the full year 2017, it is obvious that the supply side is not supporting the 0% growth scenario or a near term recovery. BIMCO expects the supply side of the dry bulk market to lose some steam, as almost 50% of the total expected newbuildings for 2017 were delivered in the first quarter. BIMCO also expects to see a growing demand in the coming months, with iron ore and soybeans as the main driver. ● maritime ceo
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MARKETS TANKERS
Asia first US crude oil exports to Asia are accelerating in 2017, writes Erik Broekhuizen from Poten & Partners
I
n recent weeks and months, various tanker market analysts and executives of publicly listed tanker companies have pointed to the growing US crude oil exports as one of the silver linings around the dark clouds that are hanging over the tanker market, primarily as a result of significant fleet expansion that is expected this year and next. How significant are these volumes and do they represent a trend that could have a material impact on the tanker market in the coming years? To put things into perspective, oil markets in the United States have gone through various cycles since the early 1980s (and many more prior to that). After recovering from the recession in the mid-1980s, US refining demand grew steadily for the next 20 years. Oil demand in the US peaked in 2005 and the recovery in refining demand after 2008 has been primarily driven by rapidly growing refined product exports, not domestic demand. As oil demand growth levelled off in the early 2000s, so did imports of crude oil, which reached a high water mark in 2005 at 10.1m b/d. Crude oil imports fell by 2.8m b/d from 2005 until 2014. The substantial decline in imports has coincided with a ramp up in Kb/d 1200
domestic US output, largely as a result of the explosive growth in US tight oil production. Throughout most of this period, crude oil exports barely registered, mostly because of a 1970s era law largely prohibiting it (crude oil exports to Canada were allowed). After this restriction was removed at the end of 2015, exports have started in earnest. The chart shows the development of US crude oil exports. In the period 2010-2012, exports barely registered. Even in 2013, exports only averaged 134,000 b/d. Since then volumes have gradually expanded: 351,000 b/d in 2014, 465,000 b/d in 2015 and an average of 520,000 b/d in 2016, the first year after the lifting of the export ban. In 2017, exports have accelerated, with February volumes exceeding 1.1m b/d. Not only has there been a significant increase in US exports volumes, the oil is also travelling much further. The longer distances have created additional ton mile demand and are benefiting the international tanker market. Trade data for the first four months of 2017 shows that increased exports to Asia are currently replacing shipments to Canada and Europe. In 2017 to date 59% of US exports have been destined for Asia, compared to
U.S. Crude Oil Exports
1000 800 600 400 200 0
Canada
12
Other
just 22% in 2016. Not surprisingly, the shift in export destinations has also caused a change in vessel sizes. Some 40% of all US exports in 2017 have taken place on VLCCs (through reverse lightering from aframaxes in the US Gulf), with half of these shipments going to China and the remainder to Malaysia, Singapore and India. In conclusion, the growth in US exports is real and the recent trend towards shipping the crude to longer haul destinations in Asia will provide a significant boost for ton-mile demand, not only for the traditional aframax and suezmax tankers, but increasingly for VLCCs as well. However, it is important to remember that US exports are different in the sense that they are driven by price differences. Unlike most oil exporters in the world, the US is also a significant importer and in the total picture of US crude oil supply and disposition, current export volumes remain fairly insignificant. The US oil industry consists of a very large and diverse group of private companies that each make individual decisions on how much they will produce and who they will sell it to. Their actions are driven by short term commercial factors rather than the long term strategic or political reasons that may influence the actions of the members of OPEC for example. While the expectation is that US exports will continue to increase into 2018 on the back of higher tight oil production, it is important to remember that this can change quickly if (relative) prices move against producers and/or importers. â—? maritime ceo
Think global. Act local. “Thanks to the support of major ship owners over the last two decades, GMS has rapidly grown from a startup to become the Largest Buyer of Ships and Offshore Assets in the world! We built this business on integrity, professionalism and first class performance. In an industry mired with misleading and biased information, GMS has done its best to bring transparency, facilitate dialogue, promote change and encourage responsible ship recycling. We are proud to be part of an industry that has evolved and adds true value to the shipping fraternity. We appreciate the trust the industry has placed in us and shall continue to provide strong leadership and work hard for the development of the industry.” – Dr. Anil Sharma, Founder, President & CEO
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MARKETS CONTAINERS
Aggressive regional carriers Liners ranked 21 to 40 in the world have grown their capacity by a combined 14% so far this year. Is this smart, muses Lars Jensen from Seaintelligence Consulting?
T
he macro-level development in the liner shipping industry has largely been driven by the mega-carriers in the past years, with especially the injection of the new generation of 18,000 to 21,000 teu vessels, the shake-up of the alliance structure and the unprecedented pace of mergers and acquisitions in 2016. Hence it is only natural that the spotlight has been aimed at these carriers. However, one should not lose sight of the fact that once we go beyond the main deepsea trades, the liner shipping market continues to be comprised of a large amount of regional niche carriers. These are the ones that serve vital local markets, often having been in a specific niche for many decades. And in addition to serving local smaller markets, many also provide feeder services for the mega carriers to locations inaccessible to the global networks plied by the mega ships. Of course, these carriers also come in a variety of sizes, ranging from the largest non-alliance carriers such as PIL, Wan Hai and Zim to very small niche operators with geared vessels only taking a
ISSUE TWO 2017
few hundred teu. But amongst the largest of these niche carriers, we are seeing a trend in 2017 which points towards a rapid escalation in the competition within this niche. In the period from January to May 2017, the world’s 20 largest carriers grew their combined capacity by 4%. In a market with a baseline outlook of 2% to 4%, and a very positive 10% demand growth in Q1 2017, this appears to be a prudent approach if we are to restore some semblance of market balance. However, the next 20 carriers, ranked 21-40 globally on account of their fleet size, increased their combined fleet capacity by more than 14%. Smaller niche and regional carriers also did not show such a staggering growth. Although these carriers have increased the number of vessels they operate – and hence their service portfolio – the main part of the capacity injection is due to the phase-in of larger vessels, replacing smaller vessels. Clearly this signals an aim to achieve scale benefits, but, as is well-known, such benefits will only materialise if the larger ships can actually be filled with cargo
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It will not be uncommon to see regional carriers go out of business
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– and ideally said cargo should also be profitable. Consequently these larger regional carriers have placed themselves in a situation where they must increase their volumes – and by extension their market share – significantly in 2017. In the aggregate, this shows a level of aggressive ambition of expansion, and given that most liner shipping trades are zero-sum games, only some of these carriers will emerge as the ultimate victors of this game. The victors may indeed achieve the targeted scale benefits, but for some, the path towards that point in time might be very bumpy. Until such victors emerge, the scene is set for a significant fight for customers to fill the raft of larger ships making their way into the niche trades, and unlike for the main global carriers, it will not be uncommon to see regional carriers go out of business. ●
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MARKETS OFFSHORE
Sell, stack or scrap? What to do with all these unused OSVs? Andre Wheeler investigates
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o say that the offshore marine sector is in trouble is an understatement par excellence. I have seen an increase in the number enquiries asking the following questions: When do I think the downturn will end and the market shift? What are realistic values to ascribe to vessels? Should they scrap, lay-up or sell a vessel? Whilst these are very good questions, the current situation in the market makes the answers very difficult to construct. When looking at the general state of the offshore oil and gas market we see that the following OSV market drivers are in decline. Onshore shale gas supplies in the US have distorted market pricing mechanisms. Offshore field investment have declined by approximately 34% since the highs of 2014. Rig utilisation rates are down to 53% (the current mix: drill barge 25%, drillship 53%, and JUR 53%). In 2016 we had 600 rigs active, 82 new entries and nine scrapped. By 2020 the market will reach 658 rigs as against the 329-455 rigs that would be needed There are however indications that the market is starting to shift, and we are starting to see contracts renewed, extended and new ones
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awarded. Driving this, particularly in the North Sea and shallow water are two growth sectors: decommissioning and offshore wind farms. However, the picture is not rose across the world. In Southeast Asia, for instance, charter rates are down by 35% to 40% since early 2015. The oversupply of OSV vessels is marked by the number of vessels laid up. By my count there are now around 725 OSVs laid up across the world. And yet the current order book shows 171 AHTSs and 177 PSV newbuilds entering the market in 2017/2018. So the crisis may certainly have bottomed, but the key issue remains; what to do with all this overcapacity? Inevitability the discussion turns to why operators don’t sell or scrap vessels to bring about balance. This is where the issue becomes complicated. Essentially one has to understand the factors that affect decisions on price and those that affect scrap. Net oversupply of vessels would suggest reduced prices but very few vessels are publically on the market. Any real valuation of vessels right now would lead to a spread of breaches of security covenants with the banks. What I have seen is operators wait for an offer and depending on cash requirements to service debt, they will accept or reject the offer. In essence the sector is back to the basics whereby the price is what the buyer is prepared to pay. It also explains why vessel valuations range from 10 cents to 90 cents in the dollar. Overall we have seen prices for secondhand vessels drop between 15% and 20% over the last 12 months. Looming on the horizon for
owners is the age of the vessel as well as the impact of the ballast water management regulations. Indications are that vessels over the age of 15 years will have difficulty finding work as newer vessels are more efficient, less costly and more compliant with increased environmental conditions. Under the current scenario, the options open are to stack or scrap a vessel. Recycling is generally not seen as financially prudent as scrap prices on most OSVs are lower than build / book price, as the scrap rate is generally based on weight. Then there’s also the transport costs to a scrapyard. On the other hand, cold / warm stacking a vessel can be as low as $150 per day. In conclusion, the OSV sector has significant problems to overcome to bring about a market turnaround. The debate of whether to sell, scrap or stack is essentially an academic one as it does not address the supply/ demand imbalance. Until such time as vessels are removed from the market I do not see a full recovery, and to achieve this, governments may have to consider improving industrial incentives for owners to act. � maritime ceo
MARKETS FINANCE
The case for Oslo With Nor-Shipping upon us, Dagfinn Lunde argues the Norwegian capital deserves to be acknowledged as one of the world’s preeminent maritime clusters
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here are endless polls on which city ranks highest as an international maritime hub with invariably Singapore ranking top. Even this magazine has run such a vote in the not too distant past. I am not one for such navel gazing, but as a Norwegian I do think it’s worth pointing out how high little old Oslo repeatedly ranks near the top these days in the shipping cluster stakes. I note I am in illustrious company too; just a few pages forward this issue’s cover star, Torvald Klaveness boss, Lasse Kristoffersen, makes the case for the Norwegian capital as the most complete shipping hub in the world. Since Nor-Shipping is upon us this seems like a rich time to discuss the matter. Part of the problem with all these polls about who is higher than whom are with the categories that decide these sort of things. Oslo’s rise up the ranks, I would argue, comes at the expense of London, which has been deteriorating as a maritime hub for many years now, both from an owner and finance point of view. In Europe, I would
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Oslo’s rise up the ranks comes at the expense of London
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ISSUE TWO 2017
say that Athens/Piraeus is the only place that matches Oslo these days, and when it comes to finance it even trumps mighty Singapore, which while trying hard has failed to get local banks to truly catch on to the allure of shipping. Oslo’s only match when it comes to finance is across the pond in New York. However, these two cities are very different in their attitude to shipping. In Oslo, there have been many old owners, steeped in shipping lore, who have invested in KS structures. I have participated in a quite a few of these structures and can attest that those investing are really professional investors who know shipping inside out, unlike much of what I have seen in New York. Another important point to bear in mind about Oslo’s growing status as a key ship finance centre is that 50% of investments – including the bondholder market – are now foreigners with parties from the US, UK and Greece leading the way. Both the depth of the market and the ease with which to conduct business set Oslo just above all of its peers in the ship finance game – transactions can be concluded very fast here. Moreover, authorities are attuned to the business, closer to
shipping than any other country bar perhaps Singapore. I have seen this close up in helping set up a shipping bank in Oslo recently. In short, Nor-Shipping has much to celebrate. ●
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EXECUTIVE IN PROFILE DEBATE
Has shipping become commoditised? Some argue our industry always has been, while others reckon massive failures like Hanjin have halted the process
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t’s a common gripe you’ll hear at many a shipping conference from traditional owners. Shipping has become commoditised – low barriers to entry make it open to all and sundry. Kenneth Koo, chairman of the 100-year old TCC Group, is someone who regularly brings up this thorny issue. The Hong Kong owner says that since the global financial crisis shipping has become commoditised
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following the collapse of barriers to entry. “Our industry is now obsessed with short term returns and not long term strategising,” he says. Many banking analysts agree.
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“In our view, ships are commoditised assets, and like any commodity, the cost to produce is the long-term driver of price. The implication of this means that focusing on expected rates and expected
It only requires a single major shipping line to succeed with digitisation and automation to accelerate the commoditisation
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maritime ceo
EXECUTIVE IN PROFILE DEBATE
returns is the wrong way to value a vessel. Long-term, shipping rates are arguably just shipowners’ cost of capital on top of this commoditised price,” JP Morgan said in a recent shipping report. “Although much has been made of their dependence on risk and pricing models, banks certainly do distinguish between shipowners as counterparties, and individual ships as security. In an oversupplied market, we believe that charterers are increasingly discriminating, and better operators and ships can earn more - at the margins this can make a big difference,” says Peter Illingworth, managing director of Deutsche Bank Asia. Providing some history and perspective on the matter is Dr Martin Stopford, the president of Clarkson Research. “Fifty years ago, most of shipping was differentiated, especially liners,” the famous shipping analyst tells Maritime CEO. “But my sense,” he adds, “is that the creeping commoditisation of merchant shipping has gathered pace over the last 40 years.” Tankers and bulkers took a big step in that direction in the 1980s recession as lack of timecharters and the growth of the spot market forced them to turn their attention to trading ships not cargo, Stopford relates. “This was good for cargo which benefitted from plentiful cheap transport,” he says. Containers followed a different path. In the 1960s liner companies still used the ubiquitous rate book which charged different rates for different commodities. But companies were terrified that containerisation would commoditise freight. “They were right and today, as they feared, rates on container routes are mostly commoditised,” Stopford says. Tobias Koenig, a columnist for this title and the founder of Lexington Maritime believes also that container shipping has become very commoditised. “When you look at the fact that there just three global alliances
ISSUE TWO 2017
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When game changers like Hanjin going bust hit the market, it brings counterparty risk back into the equation
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serving the big trade lanes, it doesn’t really matter a lot, which carrier you choose,” he says. “The transport unit is the box,” he stresses. “And to the box, it doesn’t matter, which ship it is carried on.” Koenig urges readers to look at aviation to highlight the way shipping is going. “Passengers mostly go for the cheapest carrier,” he says, adding: “As in container shipping, tariffs are fairly transparent.” Shipping consultant Lars Jensen writes in his new book, Liner Shipping 2025 – How to survive and thrive, that while there are some exceptions, port-to-port container services are becoming more commoditised. “It only requires a single major shipping line to succeed with digitisation and automation to accelerate the commoditisation,” he writes. Kris Kosmala, from software firm Quintiq, reckons shipping is not fully aware just how commoditised it is becoming. In Kosmala’s opinion, the products attributable to shipowners became indistinguishable in terms of attributes and ended up as commodities in the eyes of shippers, which is a typical outcome of the commoditisation process. The decisions by container lines to shed their inland transport units, exit the chassis business, and disgorge ownership stakes in marine terminal operations have all expedited the process. Maersk’s attempts to reestablish the connection between the ship and the business of shipping by assuring end-to-end carriage of goods by whatever means including sea, road, and air is a significant change of attitude, according to Kosmala. Maersk’s decision to reunite its land logistics arm, its terminal business and its ships is being pitched as a
way to reverse commoditisation. “Obviously, not all shipping lines believe in this approach, so over the next few years we will have a chance to compare the strategies and see their effects on the balance sheets,” Kosmala says. However, for some this perception of encroaching commoditisation is changing. Basil Karatzas, who runs Karatzas Marine Advisors in New York, says that shipping has always been commotidised. However, he goes on to add: “I think the secret is how to uncommoditise it.” Karatzas highlights Maersk’s ad campaign which shows a ripe yellow banana, implying that its service stands out, forging a brand name based on service. Karatzas is not alone in observing the seismic shift in shippers’ perceptions of shipping in the wake of the recent demise of South Korea’s Hanjin Shipping. “It took a Hanjin failure to have customers really ask whose ship actually will do the shipping. Before that, it was strictly commodity shipping,” he says. Quite so, concurs Khalid Hashim, the veteran managing director of Thai bulker concern Precious Shipping. Hashim cites American professor and author Philip Kotler who famously said: “There isn’t any brand loyalty that 10 cents can’t buy”. “This is true to an extent for any commodotised business and dry bulk is very much part of this system,” Hashim says, before concluding: “However, when game changers like Hanjin going bust hit the market, it brings counterparty risk back into the equation and large, serious players start to pay more than the proverbial 10 cents extra for the brand/reputation that good players have built.” ●
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IN PROFILE
Keith Denholm p.29
Morten Artnzen p.25
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 10 pages
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maritime ceo
IN PROFILE
Lasse Kristoffersen p.22
Emanuele Grimaldi p.26
Thomas Sรถderberg p.27
Zhang Yun, p.30
ISSUE TWO 2017
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IN PROFILE
Digital revolutionary Lasse Kristoffersen, the president of Torvald Klaveness, has committed to spending up to 2% of revenues on digital
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maritime ceo
COVER IN PROFILE STORY
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Torvald Klaveness Family run Norwegian owner that operates around 135 ships at any given time, made up of bulk carriers, combination carriers and boxships.
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t’s our Nor-Shipping special issue and there can hardly be a more appropriate person to front our cover story than Lasse Kristoffersen. Nor-Shipping prides itself on being the stage for the latest maritime technology; Kristoffersen, the president of giant Norwegian owner Torvald Klaveness for the last 10 years, is someone at the vanguard of shipping’s digital revolution. Kristoffersen likes to point out that Torvald Klaveness, founded in 1946, is a company that has always challenged the status quo. The operated fleet of this family owned line is made up of combination carriers, boxships and bulk carriers and numbers around 135 ships at any given time making it a major player on the world stage. Kristoffersen is adamant that the opaque nature of shipping will have to adapt very soon thanks to technological change. Shipping’s previous business model had been all about hiding information whereas coming up soon it will be all about sharing information, he explains. Kristoffersen genuinely believes that digital will change the very funda-
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Norwegian firms have always made their living out of new innovations
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mentals of shipping. It was around two years ago that under Kristoffersen’s watch Torvald Klaveness formed its own division to be abreast of the coming tech revolution set to hit shipping. Roughly 2% of revenues now go to Klaveness Digital. “Our objective is to utilise data, analytics and computing technology to improve value creation to our customers and increase value capture from our activities,” Kristoffersen tells Maritime CEO. The scope of Klaveness Digital is twofold; creating value for existing businesses, and generating new revenue streams through new service offerings such
ISSUE TWO 2017
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Norway may have the most complete maritime cluster in the world
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as advanced analytics. As much of the theme of this particular issue of Maritime CEO demonstrates, Norwegian maritime companies as a whole seem to be very far ahead of most other nationalities when it comes to pioneering and investing in digital technology. Kristoffersen reckons he knows why that is. He cites three main reasons. “Norwegian firms have always made their living out of new innovations and our flat/non-hierarchic societal structure is a good platform for that,” he says. Secondly, Kristoffersen makes the bold claim: “Norway may have the most complete maritime cluster in the world with leading owners, designers, system providers, financing institutions, technical/class organisations and so on.” And last but not least, and specific to this issue, Norway is one of the most mature countries in the world when it comes to digital and information and communication technology according to the World Economic Forum. Turning to Torvald Klaveness’s fleet plans, Kristoffersen says the strategy at the moment is to be asset light on standard dry bulk. “We will order more specialised dry bulk carriers,” he reveals. Expect to hear much more from Kristoffersen and his digital pioneering team in the coming months. ●
“I have the patent for the Google Car of shipping” — TMT’s Nobu Su
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IN PROFILE
‘Do the opposite of what the Norwegian banking world consensus position is’ Morten Arntzen is in a typically forthright mood when Maritime CEO pays him a visit
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e’s one of the most famous names in shipping, and one of our industry’s most amusing. Morten Arntzen, now in his sixties, shows no signs of slowing down, seen at many events around the globe, and remains adamant that however bad the markets might appear there are opportunities to be snaffled. Arntzen’s shipping career dates back to 1979, best known for his 18 years as a ship financier at Chase Manhattan Bank, before taking on the poisoned chalice that was the presidency of Overseas Shipholding Group (OSG), an American tanker giant that was forced to seek Chapter 11 protection during his watch. The OSG debacle however has not halted companies flocking to get his experience on their boards. Among many appointments Arntzen, the shipping veteran, has been the executive chairman of Denmark’s Team Tankers for the last two years. Team Tankers has built up a position whereby it is now one of the largerst
Spot on
Team Tankers International The Danish outfit is one of the largest chemical tanker operators in the world. The fleet consists of more than 40 chemical tankers ranging from 8,000 dwt to 46,000 dwt.
ISSUE TWO 2017
chemical tanker operators in the world. Arntzen was also tapped last year by Australia’s Macquarie to become the bank’s senior shipping industry advisor. Macquarie, noting the exit of many traditional European ship financiers, has been on a charge to fill the void. In unveiling Arntzen as its star shipping signing Macquarie noted his experience was “second to none”. For such a senior figure within the industry Arntzen unsurprisingly wears many hats. Among other important roles keeping him busy is Castine Maritime, his own private shipping investment consultancy. When it comes to investing in shipping, Arntzen quips, in keeping with this issue’s strong Nor-Shipping theme, that he likes to make decisions that go against what Oslo bankers are spouting. Typically forthright, Arntzen tells Maritime CEO: “My investment guidance is to do the opposite of what the Norwegian investment banking world consensus position is, as it is almost always hyped and usually wrong.” Shortly Arntzen will celebrate having been in shipping for 40 years. He feels that the worst is over from this current lengthy downturn and unlike many others the US citizen reckons shipping cycles will likely return to more normal lengths. “I think shipping cycles will be longer now,” he says, citing the “enormous” and continuing
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Shipping cycles will be longer now
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contraction in the bank markets for shipping finance as well as the poor experience of the private equity world with shipping, particularly with investments in newbuilding programs and finally the reduction in yard capacity. Neverthelss, Arntzen is cautious, concluding by saying the tanker markets will be soft for the next 12 -18 months, primarily because of the excess supply of ships coming into the market, notably in the large crude tanker segments, the deepsea stainless steel chemical tanker segment and the LR1 and LR2 markets.●
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IN PROFILE
Challenges plaguing Italian shipping abound Emanuele Grimaldi, chairman of the Italian shipowners’ association, gives Maritime CEO an exclusive interview
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he Italian merchant fleet, despite the downturns recently recorded, is still a force to be reckoned with: second in Europe and third between the fleets of the major countries gathered in the G20 and fourth in the world when considering the link between the nationality of the vessel and of its shipowner. The competitiveness of the Italian fleet has increased and been maintained by a regulation enabling shipowners to face up to international competition with the Italy’s popular international register. Since 1998, the national fleet has increased from 7.8m grt to 16.5m grt. Emanuele Grimaldi, chairman of Confitarma, the Italian shipowners’ association, warns Rome in an exclusive interview with Maritime CEO not to meddle too much with a system that is clearly working well. “Any reduction in operating flexibility causes loss of competitiveness and forces operators to increase prices to survive,” the famous shipowner says, adding: “Changing a coherent legislative system based on
Spot on
Grimaldi Group Established in 1947, Grimaldi is a fully integrated multinational logistics group specialising in maritime transport of cars, rolling cargo, containers and passengers.
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the certainty of national and EU law, which has been in force for 20 years and has enabled Italian shipping to have unprecedented success, creating employment, is very risky because it would create advantages for no one but damages for all, owners, and users.” Grimaldi also emphasises that there is a huge list of challenges plaguing the shipping industry today. He cites political uncertainties, low freight rates, overcapacity, piracy and increasing demands to reduce emissions. “Changes in the international political scene, like the reactions against globalisation and the spread of protectionist policies, could create serious problems to the shipping industry,” he says, elaborating that protectionist policies announced by the new US president, Donald
Trump, are a strong downside risk to the outlook of global trade. “The slowdown of trade, in addition to the protectionist wave, is also due to interconnected structural factors such as the normalisation of growth in China combined with the additional factor of the sharp fall in commodity prices,” Grimaldi reckons. Another big challenge for Grimaldi is related to the environmental issues which lie at the centre of future maritime policies under discussion in European and international forums. With any upturn looking at best weak, Grimaldi is worried by the extra cost burdens coming to owners thanks to impending environmental legislation, something he is sure will cost world shipping billions and billions of dollars. ● maritime ceo
IN PROFILE
Tribini Capital eyes new sectors Hong Kong owner looks to get more into MPPs and financing
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ribini Capital is on the hunt for more assets. The company, founded in Hong Kong 13 years ago, has conducted hundreds of millions of dollars of business over the years including charter transactions, newbuilds and secondhand tonnage with a focus on containerships and bulkers. It currently has four ships on the water with investors ranging from private individuals to billion-dollar institutional investors, and according to Thomas Söderberg, a partner at the company, more ships are being considered. “We always looking at opportunities in containers and bulk, but,” says the Danish national, “we are patient people and are careful not to let the tail wag the dog when the money is eager but focus on the all important thing: timing.” The right time to buy from a shipping perspective often does not coincide with the availability of capital, Söderberg explains. Tribini initially saw an opportunity to step into the void left by the incapacitated German container
Spot on
Tribini Capital Founded in 2003 in Hong Kong seeking investors for shipping investments. Currently owns two boxships and two bulkers.
ISSUE TWO 2017
market, and while the company still thinks that it is an interesting space, the prolonged crisis and subsequent poor maintenance have left very few ships of acceptable quality around for it to buy. The Tribini fleet today is made up of two wide-beam 2,750 teu containerships and two kamsarmax bulkers from Ouhua Shipbuilding, all less than two years old. Despite rising prices seen in recent months, Söderberg and his team are confident of finding some bargains ahead of a predicted market pickup. “We are still looking at both bulkers and containerships. We believe that the recent hikes in both markets have been false starts driven more by coincidence and fluke events happening at the same time, and expect both markets to come off over the next few months,” he maintains. Söderberg does believe however that the aise in the two markets could indicate that supply and demand may not be that far apart as previously thought, and investing in the right assets within a six to 18 month time horizon could make for good returns. Söderberg’s career started with the AP Moller Maersk Group in 1985. He left the Danish firm five years late, heading to Asia and worked for a number of well-known names including HSBC Shipping Services and Seatankers Management, John Fredriksen’s private shipowning entity. Speaking with Maritime CEO,
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We believe that the recent hikes in both dry bulk and containers have been false starts
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Söderberg reveals Tribini is now looking at deals that are, as he describes it, “outside our normal comfort zone”. When pressed, he says these investments could include MPPs or passive investment in offshore assets. The company is also looking at making more of its name, Tribini Capital, by coming in to fill some of the gap left by European banks who have exited the ship finance scene. “The current lack of financing from traditional shipping banks combined with increased capital adequacy requirements and similar requirements imposed by the ECB and other regulatory bodies is making asset based shipping lending unattractive for banks and has driven up interest rates, especially for smaller owners like ourselves,” Söderberg explains, adding: “Whilst we know we are not alone looking at this space, we believe that we are talking about a large vacuum where there will be space for quite a few players, and is something that needs to be explored in more detail.” ●
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IN PROFILE
Keith Denholm returns home with dry bulk bargains in mind A famous scion of the Scottish shipowning clan is seeking pastures new having quit Castleton Commodities International
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eith Denholm (pictured, second on the left) looks set to return home to the UK after many years abroad, seeking new opportunities having left US-based trader Castleton Commodities International where he had been since 2011 during which time the company, formerly Louis Dreyfus Highbridge Energy, was bought and rebranded by DF Energy Acquisition. Denholm, 51, part of the famous shipping clan whose eponymous family business dates backs to the 19th century, is raring to go with new shipping ventures. With a CV that includes stints leading the likes of Eagle Bulk Shipping, Pacific Carriers and Malaysian Bulk Carriers offers for CEO roles should be in the post shortly. As well as being keen to get back into a leadership role at a dry bulk line, Denholm is also looking at raising capital to make the most of the attractive prices for bulker assets at the moment. He has contracted
Spot on
Denholm Group Scottish family run owner which can trace its roots back to 1872. Today it is involved in logistics, broking, offshore, seafood as well as being an owner.
ISSUE TWO 2017
Arctic Securities and Fearnleys Securities to set about a fundraiser with an aim to invest in bulker tonnage, principally supramaxes and panamaxes following in the footsteps of other famous names in shipping who have made aggressive bulk moves of late such as Arne Blystad, Marc Saverys and Andreas Sohmen-Pao. Denholm admits that secondhand dry bulk prices have increased considerably in recent months but still maintains there are still plenty of “opportune” buys, as he describes them, to be had in a sector that is only now finally emerging gingerly from a very protracted downturn. Maritime CEO understands Denholm has already obtained interest from some traditional shipping names for this new venture. The Scot also intends to trade off his strong
Japanese relationships to maximum effect. The prospect of returning home after three decades away clearly excites Denholm, but he is quick to acknowledge his time away is what has made him who he is today within the shipping industry. “I am enormously grateful for all the support and friendship I have experienced across all cultures and thankful for the opportunity to have worked within so many different cultures over the past 30 years since leaving the shores of the United Kingdom,” he says, adding: “While it is true we have progressed and become a more dynamic commodity with the help of strong analytical talent and financial trading tools, we must at the same time not forget the fact that we are still a people/relationships business as well.” . ●
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IN PROFILE
EGPN breaks cover A Chinese dry bulk concern made its first vessel purchases this March. More are expected in the coming months with a growing focus on capes
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urther consolidation in the subsea sector is “inevitable”, according to one of the key architects of recent mergers in the segment. In late March a low profile mainland Chinese shipping entity based in Hong Kong broke its cover taking a pair of threeyear-old kamsarmax sisterships – the Smooth Vitality and Smooth Velocity - for just shy of $14m each. The deal done by EGPN Bulk Carrier comes with a time charter attached at $5,500 per day until January next year. The two 82,000 dwt bulkers are the last remains from bust Sainty Marine’s fleet buildup and were built at Sainty’s now defunct yard in China. A week earlier EGPN had chartered in a modern cape for 11 to 13 months, while at the beginning of
Spot on
EGPN Bulk Carrier Chinese dry bulk entity based out of Hong Kong, formed as a result of the merger of two Beijingbased charterers.
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We will acquire more ships if there are suitable opportunities
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investment for Chinese owners, Zhang reckons. “We believe the shipping market will have a great chance to rebound after a long depression,” Zhang tells Maritime CEO. Zhang is especially hopeful for capesizes. The year 2017 has, to date, proved especially resilient for China’s steel mills and as a result the People’s Republic is on course for yet another world record of iron ore imports. The EGPN fleet now stands at two owned vessels and more than 20 chartered ships. Six capesizes and three supramaxes are under oneyear contracts and the rest are on the spot market. “We will acquire more ships if there are suitable opportunities,” Zhang reveals. ●
March it fixed another ship for four to six months. The private Chinese outfit was registered in Hong Kong a few years ago and was formed as a result of a merger between two Beijing-based charter operators. Zhang Yun, EGPN’s general manager, sees rising prices this year for both commodities and ships as a sign the market has finally turned for the better. Moreover, Beijing’s increased support for fixed asset investment this year suggests there should be less risk in bulk carrier
ime-ceo.com www.marit 2015 ISSUE TWO
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MARITIME CEO FORUM
Sniff of an uptick in dry bulk draws operators back into the arena The second annual Maritime CEO Forum saw famous names in shipping gather at Singapore’s iconic Fullerton Hotel for plenty of frank debate
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sniff of a return of a decent dry bulk market will likely see many operators return to the sector endangering any chance of a protracted upturn, delegates attending April’s Maritime CEO Forum were told. The event gathered a stellar line up of panellists and attendees. Moderating the dry bulk session was Tim Huxley, CEO of Hong Kong’s Mandarin Shipping, who kicked off proceedings by saying: “The general consensus is the worst has passed as best evidenced by the busy S&P activity seen in the first quarter this year.” Michael Nagler, head of chartering at the Noble Group, said he was “modestly positive” about dry bulk prospects but he warned that with volatility returning there is a strong possibility more operators will flock back to the market, something Nagler said was not good for future prospects. Govind Ramanathan, managing director at the Robert Kuok-controlled PCL Shipping, was not bullish. At best, Ramanathan said the sector was at the start of a recovery, but there was still a long way to go. He urged for more scrapping and said 2017 would remain “challenging”. Lasse Kristoffersen, president and CEO, Torvald Klaveness, agreed that more ships need to be recycled. “We have a supply problem,” he
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We are destroying this industry by ourselves
said, adding: “We are destroying this industry by ourselves. The demand side will be there, but yards I am sure will be able to deliver in 2018.” Pankaj Khanna, CEO at Singapore’s Pioneer Marine, was
the most optimistic of those on the stage, describing himself as “quite bullish”. He cited stats out of China this year showing how steel consumption was up 4%, iron ore imports are up 12% and coal 30%. maritime ceo
MARITIME CEO FORUM
“This is a demand-led recovery,” he maintained. Khanna also noted how the dry bulk orderbook now stood at less than 10% of the extant fleet for the first time since 2002, and he felt, unlike Kristoffersen, that shipyards will not be able to deliver much before the start of 2019. Khanna sees this current bulk uptick lasting 18 to 24 months. The uptick will see more investments pile in, Kristoffersen reckoned, principally from Asia and led by China. True, agreed, Khanna who said it was just too easy and cheap to get set up in dry bulk these days. PCL’s Ramanathan questioned this belief however, telling delegates: “I don’t see these fly-bynight operators having much of a future going forward – counter party risk is too important now.” Attention then turned to the likelihood of a bunch of new orders flooding the market, given how cheap newbuilds are these days with capes at just $40m and brand new kamsarmaxes being offered for just $24m. Kristoffersen revealed how he’d just been in Greece and met 20 owners, half of whom told him they were looking at ordering replacement tonnage. “I am afraid there is lot more action going on at shipyard boardrooms in China than we know,” he warned. Noble’s Nagler responded, saying: “Everyone can still feel the wounds from the past and that should slow down ordering.” Ramanathan from PCL hoped Nagler was correct. “It is definitely a worry if newbuilding orders come in a big way,” he said, adding: “Everyone needs to be responsible and a little restrained.” Nagler said the very nature of dry bulk shipping and its boom-bust cycles made it impossible to get the whole industry aligned. Concluding, Kristoffersen maintained: “If you want a sustainable return in dry bulk you have to focus on just three to six months ahead.”●
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CEO Connection
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Lighting up Hong Kong Maritime Week November 22
2017
Visit www.splash247.com/forum or contact Grant Rowles on grant@asiashippingmedia.com for details Sponsors:
MARITIME CEO FORUM
Tech changes will leave IMO ‘dead and buried’
A brand new session looked at the future of shipping
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pinion was very divided on the hot topic of ship automation during our future of shipping session. The managing director of OSM Ship Management, Steffen Tunge told participants, “People dreaming about autonomous ships, keep on dreaming, it won’t happen any time soon.” Quick to jump in on this statement was Frank Coles, the boss of tech firm Transas, who countered, “Automation, artificial intelligence and gamification will take us down a path of autonomous ships in a pretty quick manner.” The session’s moderator, Kate Adamson, the founder of think-tank Futurenautics, pointed out that autonomous does not necessarily mean unmanned but automated. A columnist for this magazine, Kris Kosmala, who is also the general manager for Asia Pacific at software firm Quintiq, observed that in other industries linked to shipping automation is already a long way down the line with miner BHP Billiton already
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Automation, artificial intelligence and gamification will take us down a path of autonomous ships
using autonomous trucks and another miner, Fortescue, set to debut autonomous freight trains soon. He also alluded to the recent news that BHP was using online auctions to avoid brokers. “They are going to commoditise you,” Kosmala warned. Sverre Prytz, who headed up BW Ventures before founding Helix Advisors last year, also carried warnings for those attending the forum. “We should be very careful that we do not get overrun by people coming in from the outside who can dictate prices, whereby shipowners could just be hiring out their hard assets,” he told delegates. Quite so, concurred the moderator of the session, Futurenautics’ Adamson, but perhaps we should look at this threat from a different angle, she posited, telling the audience that
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they needed to look to non-traditional competitors, but more importantly, to non-traditional partners, to take shipping forwards. Turning to how regulators keep track with all the tech changes, Coles from Transas was typically blunt telling attendees, “The way technology is changing now it will be impossible for IMO to catch up and then they are dead and buried.” ●
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MARITIME CEO FORUM
‘Shipping losing the war for talent’ Panellists and delegates were very vocal during our crewing and human resources session
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hipping is losing the talent war for the next generation of seafarers, and has failed to properly show the opportunities the industry has on offer for a career path. These were the two key takeaways from the Maritime CEO Forum’s feisty crewing and HR session. “There seems to be a disconnect as to how the shipowners and how the industry is responding to the needs of the latest generation,” argued Marlon Rono, chairman of Philippine crewing giant Magsaysay Maritime Corporation. This problem has been exacerbated, according to Michael Elwert, CEO of Elktrans Group, by the general public’s lack of awareness and misperceptions about shipping. “On a global scale public awareness is very low making it hard to attract the right people,” Elwert said, adding that shipping was losing what he described as “the war for talent” to other industries. A consensus among panellists and delegates was that there is an urgent need for much more coordinated efforts from the industry as a whole to showcase maritime career opportunities to today’s youth. This public relations exercise, however, is not helped the session’s moderator, Arthur Bowring observed, by much of the press coverage of the sector. The Hong Kong Shipowners Association executive listed oil spills, crew abandonment, piracy and criminalisation as unhelpful features about the industry as it looks to present an attractive career option.
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Public awareness is very low making it hard to attract the right people
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Public awareness is very low making it hard to attract the right people
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Lars Modin, a director at shipmanagement giant V.Ships, said that the industry was at a “crossroads” in terms of supply and retention of crew with the increase in the global merchant fleet. “Knowledge skills are being eroded onboard,” Modin, a 47-year veteran in shipping, said. Mike Kennedy, managing director of Hellespont, stressed that crew retention was key to get skillsets to the right level. “Retention is hard to do unless you can get them to believe in their job and that they will have a job tomorrow,” the Hellespont boss conceded. “People are moving quicker than ever for better pay or conditions,” he added. The debate turned to the thorny
issue of internet contact at sea, something many in the room felt was among the biggest stumbling blocks today in getting people to sign on for a seafaring career. According to Came By Ship, a UK organisation aimed at promoting shipping to the general public, twothirds of ship crews have no means of communication while they are on the open sea. Only about one in 10 will have internet. V.Ships’ Modin related how the first question crew ask these days before choosing a ship is whether there’s internet onboard. Hellespont’s Kennedy concurred, but cautioned in concluding that resting hours becomes an issue so his company has put time limits on the use of social media. ● maritime ceo
MARITIME CEO FORUM
Trump viewed as good for tanker trades The heads of Teekay Tankers, AET Tankers and Team Tankers made for a very strong opening line up at the forum
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resident Donald Trump is proving to be good for tankers, a high level panel looking at the crude and products trades maintained. While quick to distance themselves from the US leader politically panellists at the forum’s tanker session all maintained that Trump’s first 100 days in office had shown clearly he was pro-energy. Pipeline approvals were cited as was the make up of his cabinet with a number of energy figures holding senior positions, most notably Rex Tillerson, formerly the boss of ExxonMobil, who now serves as secretary of state. In terms of the markets Frans van de Bospoort from DVB Bank set the scene, saying he could see crude tanker rates heading north this year by 10 to 20%, while product and chemical tankers will remain flat and under pressure. Van de Bospoort’s crude tanker predictions were eagerly accepted by Kevin Mackay, president and CEO of Teekay Tankers, who said he’d take them: “Every day of the week and twice on Sundays”. Mackay questioned why Greeks were returning to the yards this year for VLCC orders. The Teekay
boss said the young global average age profile of the VLCC fleet did not warrant new orders. Morten Arntzen, executive chairman at Team Tankers, took issue with van de Bospoort’s flat outlook for chemical tankers, saying that no other sector had such a small orderbook. Captain Rajalingam Subramaniam, president and CEO of Malaysian giant AET Tankers was circumspect on prospects. AET’s diverse fleet allowed him to discuss all sectors, and like Mackay, the tanker veteran was adamant that no orders should be placed as the
supply/demand equilibrium is fragile across the board. The next Maritime CEO Forum is scheduled to take place in Hong Kong at the Foreign Correspondents’ Club on November 22. ●
“The world fleet is not old enough to warrant ordering” — Euronav CEO, Paddy Rodgers
Maritime CEO Forum sponsors:
ISSUE TWO 2017
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NORWAY
The home of disruption Look to the Nordics for a new wave of digital maritime solutions, argues Birgit Liodden, the director of Nor-Shipping
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he world isn’t standing still, and shipping can’t afford to. The pace of change in society is accelerating every day, enabled by digitalisation and facilitated by individuals and firms that see potential rather than challenges. New business models can be born overnight, efficiencies unlocked with the tap of a screen, and resources utilised as never before. So where do we, as an industry, fit in? How can we ensure we keep up with developments and, where possible, push them forwards? I believe we have to look to the Nordics. Before any readers out there accuse me of bias – yes, I’m Norwegian and proud of it – I’ll back up this opinion with some hard facts. Denmark, Norway, Finland and Sweden fill the first four positions, in that order, in the latest European Commission Digital Economy and Society Index. This ranks nations within the continent according to connectivity, human capital (digital competency), internet use, integration of digital technology and digital public services. The Nordics lead the way, defined by sophisticated skills, business digitalisation and near universal access to high-speed services and connections. What’s more, when compared to leading non-European nations – including the United States, South Korea and Japan – the quartet retain their positions, based on the judging criteria, emerging as undisputed world leaders. There is no other place where digital technology is as well integrated as it is here, in the Nordics. It has emerged as a natural part of our
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collective culture. This understanding, in combination with our distinct maritime heritage and expertise, gives us, and the industry as a whole, a unique opportunity. We can be a global centre of excellence for advanced digital maritime solutions. My home country’s decision to take the lead role in autonomous vessel research provides a case in point. In October last year the Norwegian Maritime Authority and the Norwegian Coastal Administration signed an agreement allowing for testing of autonomous ships in the Trondheim fjord in central Norway. With collaborators from across the spectrum of maritime and technology – including NTNU, Kongsberg Seatex, Kongsberg Maritime, Marintek, Trondheim Harbour and Maritime Robotics – this project is a world first, bringing innovative partners together in what is effectively a huge natural ‘laboratory’ to develop and pilot ideas that could transform the very nature of shipping. And have no doubt, this
endeavour is underpinned by digital expertise. The sharing of information, seamless connectivity between assets and teams at sea and on shore, and collaborative technological solutions form the very life and soul of this project. Shipping is facing a series of challenges – from unpredictable and hugely damaging cyclical shifts, to environmental concerns, geopolitical threats, economic macro-trends, and more. We need new solutions, new technology and new ways of working together, as we’re seeing in the Trondheim fjord, to tackle these challenges and chart a course to a sustainable future. In short, we need to disrupt. To question convention and embrace innovation. There’s no doubt that digital technology will be at the heart of not just our exhibition, but also the next generation of shipping solutions. It therefore makes perfect sense to look to the most digitally advanced countries in the world to seek them out. Welcome to the Nordics. ● maritime ceo
NORWAY
Busier than ever The retirement age in Norway is 62. No one seems to have informed John Fredriksen or Arne Blystad
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ohn Fredriksen, the world’s most famous shipowner, turned 73 on May 10, an age where most people might choose to ease up a little. However, Norway’s richest man shows no sign of slowing down, indeed the first five months of this year have been among his busiest ever. Fredriksen (pictured) indicated earlier this year that he will stay in the day-to-day business of shipping for years to come, vowing to see through the restructuring of his troubled rig unit, Seadrill. Fredriksen has gone on the record to say Seadrill has been his most complicated transaction he has been involved in during his half century in shipping. Despite his advancing age, Fredriksen, who claims to still be working 18 hours a day, has been making waves in most sectors in shipping this year, repeatedly trying to snap up VLCC rival DHT Holdings, agreeing to merge his OSV unit Deep Sea Supply (see next page) while also on the hunt for distressed dry bulk assets, something that saw his firm Golden Ocean snap up the 14 bulkers belonging to Greece’s Quintana Shipping in March. “Retirement is not an option for me, at least for the next three to five years,” Fredriksen told the Financial Times in February. Eleven years Fredriksen’s junior, Arne Blystad, another famous name in Norwegian shipping, technically became a pensioner this January, but is just as active as ever. With a former Fredriksen high flier by his side in the form of Herman Billung, Blystad has been among the most aggressive buyers of bargain bulkers in the past year via his unit, Songa Bulk.
ISSUE TWO 2017
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Retirement is not an option for me
By the end of April Songa Bulk’s hastily assembled fleet of 10 ships, bought for $169.95m, was already worth $190.6m, according to data from Clarksons Platou Securities. Songa Bulk is expected to swoop for many more ships in the coming months. Elsewhere, Norwegian shipping bade farewell to another line – Aurora LPG snapped up by Andreas Sohmen-Pao’s BW LPG. Norway knows BW well; it was Sohmen-Pao’s father, Helmut Sohmen, who bought out Bergesen in 2003. With much consolidation happening across the LPG sector another Norwegian gas player took action to avoid any aggressive takeover. In May a group including AS
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Clipper and the Steensland family took gas shipowner Solvang private. Solvang’s 18 ships are a mix of ethylene carriers, LPG ships and VLGCs. The company is chaired by Michael Steensland-Brun. ●
“As ship/shore connectivity improves, ships become bigger targets for attack, more vulnerable to malware” — Ronald Spithout, the president of Inmarsat Maritime
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NORWAY
Offshore consolidation reaches its peak Farstad, Solstad and Deep Sea Supply joining forces will create a fleet of 154 vessels
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he consolidation seen across the decimated Norwegian OSV scene reached its apogee in February with the nation’s biggest maritime magnates forging a dramatic merger that will see Farstad Shipping, Solstad Offshore and Deep Sea Supply join forces. Aker tycoon Kjell Inge Røkke and John Fredriksen have agreed a restructuring plan of beleaguered Farstad Shipping as well as inking plans to merge their own OSV entities with Farstad to create one of the biggest fleets in the sector with Røkke’s Solstad as the lead stakeholder. “As repeatedly expressed by a range of industry experts, the fragmented Norwegian OSV industry requires consolidation. By agreeing to complete the Farstad restructuring and to work for the proposed combination, senior lenders, bondholders and long-standing family owners supported by industrial investors are making a collective effort to secure a successful refinancing of Farstad Shipping and to create a new and robust OSV company operating out of Norway in the high-end segments of the global OSV industry,” the three parties said in a release. “With this solution, we provide Farstad, Solstad and Deep Sea Supply with an industrial platform to sustain the current downturn in the OSV market and be well positioned to exploit a market recovery,” said CEO Karl Johan Bakken of Farstad Shipping. A successful completion of the
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The fragmented Norwegian OSV industry requires consolidation
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combination would create the largest company in the high-end global OSV industry with a fleet of 154 vessels. When including all vessel classes and lower spec vessels, the company ranks fourth globally. The company will operate a fleet of 33 CSVs, 66 PSVs and 55 AHTSs vessels deployed globally in all deep water hubs. “For over a year we have advocated strongly for consolidation in the OSV industry. One step was taken through the merger of REM Offshore into Solstad Offshore in 2016. With a successful completion of the combination we would take further steps to build the world’s leading OSV company,” Lars Peder Solstad, CEO of Solstad Offshore, commented. Solstad Offshore will be the parent company in the consolidated group which will be called Solstad Farstad. “We are excited by this
opportunity to work closely with the Fredriksen group and other stakeholders to realize our ambition to establish an efficient global leader in the OSV segment. The proposed combination of Solstad’s, Farstad’s and Deep Sea Supply’s operational experience, high quality fleet and global network together with the Fredriksen group’s and Aker’s industrial expertise, M&A capabilities and financial strength will provide a powerful platform through Solstad Offshore,” maintained Øyvind Eriksen, president and CEO of Aker. The new consolidated group, Solstad Farstad, will be able to shave costs by somewhere between NOK400m ($47m) to NOK650m a year, the three parties stated. Lars Peder Solstad will be proposed as the CEO of the combined company, which will be headquartered out of Skudeneshavn just north of Stavenger. ● maritime ceo
NORWAY
The world’s first autonomous, no emissions boxship Not everyone was taken by this big Norwegian announcement in May
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his May Norwegian fertilizer producer Yara International and compatriot maritime technology firm Kongsberg formed a partnership to build a groundbreaking autonomous and zero emissions containership (artist’s impression, pictured). The two companies say the vessel, which has been named Yara Birkeland, will be the world’s first fully electric and autonomous containership, with zero emissions. The ship is scheduled to commence operations in the second half of 2018, shipping products from Yara’s Porsgrunn production plant to Brevik and Larvik in Norway. The vessel will initially operate as a manned vessel, moving to remote operation in 2019, and is expected to be capable of performing
ISSUE TWO 2017
fully autonomous operations from 2020. The two companies say the new vessel would be a game-changer for global maritime transport contributing to meet the UN sustainability goals. Kongsberg is responsible for development and delivery of all key enabling technologies on Yara Birkeland including the sensors and integration required for remote and autonomous operations, in addition to the electric drive, battery and propulsion control systems. Geir Håøy, president and CEO of Kongsberg, tells Maritime CEO that he thinks the Yara Birkeland will be the first of many such groundbreaking ships, especially for the short-sea trades. “Autonomous shipping will
be sustainable both financially and environmentally,” Håøy tells Maritime CEO. “Within short-sea shipping we will probably see a transformation in the market both on the shipowner side and the way we shift goods from roads to sea,” he adds. Not everyone however is so convinced about this short-sea shift. Roar Adland, shipping chair professor at the Norwegian School of Economics, tells Maritime CEO the odds for short-sea shipping may not be good. It’s not about technology,” the professor says. “It’s mainly about land-based competition and, to a lesser extent, about regulation, certainly at the international level.” Adland says other transport modes than shipping have had the same bright idea, and with potentially much greater economic benefits. “Autonomous trucks, powered by renewable energy, will become available a lot sooner and cheaper than autonomous vessels,” he says, citing Tesla’s prototype semi truck due to be unveiled this September. The “killer” selling point that autonomous trucks have up their sleeve, according to Adland, is that productivity will roughly double once the driver is no longer needed. While human drivers are bound by law (and physiology) to rest for about 50% of the time, such limitations do not apply to computers and so the direct result of this is an easy 50% reduction in unit freight transportation costs. This is not even accounting for the roughly 30% savings in operating costs from not employing a driver in the first place. Autonomous ships will not have this gain in productivity, as they tend to operate 24 hours per day already, though of course both modes are subject to constraints in the operating times of ports/depots. “In an autonomous and fully electrified world of freight transportation, the numbers still don’t add up for short-sea shipping,” Adland concludes. ●
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WINE
Summer madness ‘The risk of a bubble, and a crash are real. But you work in shipping, so you knew that already.’ Neville Smith on the En Primeur season
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his is the time of year – in case you had not already noticed - that your wine merchant becomes especially solicitous. The marketing emails that might drip through respectfully during a dry first quarter suddenly turn into a deluge, phone calls proliferate and the feeling grows that something big is happening and that you might be missing out. What you have is a case of En Primeur, a condition similar to Tulipmania when otherwise sensible people lash thousands of pounds on as yet unbottled wine they have not tasted and they may never see, let alone drink. The reason? Bordeaux is on a roll – in fact it’s on a hat-trick of strong vintages with 2016 coming in strongly and reversing a trend that had seen prices and interest falling in the face of poor but high-priced vintages. Prices are high this year too, but with much better reason. The joy of En Primeur is that we already know what the weather was like (a bit mixed) but the crop was large and the quality good so the intervening time has allowed the wizards of the Garonne to apply their magic to blends that can command cache rather than just cash. And that, arguably is the point. Let’s face it, apart from bulker, containership and offshore owners, everyone has money. What Bordeaux En Primeur promises is exclusivity, the rare, the unobtainable. It’s why so much of the very top end Grands Crus will never be drunk by their buyers, but flipped like a four-option-two slot at a Chinese shipyard pre-2008.
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And that is where the buyers hope to see the traction re-emerge, provided that the Chinese who can afford fine Bordeaux are not still hampered by the campaign against graft, privilege and the need to keep bling under wraps. There are other issues; notably fraud, especially in a strong year, with the unwary falling victim to the unscrupulous. This is even more of a problem in the aftermarket since the top wines of Bordeaux have a trajectory that puts them at just broachable after about a decade. So where does that leave the modest but aspiring buyer, collector and drinker? Assuming you are not plutocrat enough to have someone paid to read Maritime CEO to you, consider the following. Allocations of the very top wines are long gone and if you don’t have strong merchant relationships then forget it. There are many expert reviews out there – most of them approaching the ecstatic but if you
can, spend a bit of time digging into the offers and try to segment by style, price and interest. For the most part that means wines that will be drinking well in a decade or so rather than merely emerging, and some even before. Bear in mind too that the prices you see are in bond, so minus import duties, local taxes, shipping and storage. If you miss the boat, never fear, many wines will be on the secondary market quite quickly, often at lower prices. And if you want to drink rather than collect then you are much better off buying mature, landed vintages for immediate delivery. And in case it needs saying, remember that it is the merchants’ job to get excited about every Bordeaux vintage (and they do) so if you are paying top dollar for 2016s, the risk of a bubble, and a crash are real. But you work in shipping, so you knew that already. ● maritime ceo
GADGETS
Quick! To the Batcart!
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ost golfers will grudgingly admit their game could do with some help. Enter the Dark Knight of Golfham City, or at least his golfcart. This wonderful — well, batcart, I guess — is based on the Tumbler batmobile in the most recent films. The batcart tops out at about 60 kmh, thanks to it’s 6 hp battery powered motor, and its six links-friendly tires and 4-link rear suspension makes it smooth over the rough. There’s room for a handicaped crusader, batclubs and a boy wonder — or a super villain, if you like a more competitive game. Shark repellant not included. The Gotham Golfcart $28,500 www.hammacher.com
Wireless audio precision
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f — like Batman — you’re a bit of a night owl but the rest of the house is asleep, watching TV is annoying for all concerned — unless you use headphones. But serious headphones are mostly wired, and wires can be a little short for the sofa, or getting up to top up your drink. Sennheiser to the rescue, with their new Flex 5000. It’s a wireless system for wired headphones: one part plugs into a power socket and your TV via 3.5 mm jack or digital optical input, the other you carry with you, and plug in your favourite pair of headphones to it. The signal has a range of up to 60 m, with 12 hours use before a recharge, which is done on by placing it back on the transmitter. You can change the balance and equalisation settings on the transmitter, whilst the receiver has control of the volume and toggles the speech intelligibility function — which enhances the dialogue over background music and noise. Sennheiser Flex 5000 $139 www.sennheiser.com
Affordable 3D printing
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f you’re looking to put an exploratory toe into the murky waters of 3D printing, the new MP Select Mini 3D Printer is probably a great way to do it. It’s low cost, but unlike most low cost printers, it comes assembled and working out of the box (except for a quick check that the print bed is still level). It’s billed as open source because — with its heated build plate and wide range of extruder temperatures — it will work with any type of 1.75 mm ABS and PLA filament from any manufacturer. The v2 has some improvements over the v1 too: nozzle and main board cooling fans, and an all-metal nozzle all serve to improve accuracy and reliability. It sports wifi and USB connectivity, and will also read MicroSD cards. MP Select Mini 3D Printer V2 $199 www.monoprice.com
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REGULAR BOOKS
Robots and electric sheep Paul French tries to get to grips with how artificial intelligence will change our lives
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rtificial intelligence (AI) – the next big thing, a major buzzword and something nobody in business can ignore. AI is reshaping the way we do so many things – from customer interface to manufacturing processes; it’s fighting fraud and extending human intelligence (HI) into new fields. It’s a term that’s all over the business world and we all need to understand it. There’s no need to be embarrassed if AI is all a bit of a mystery. It was to no lesser a personage than Bill Gates too. So he read up on it… and his recommendations are surely a pretty good place to start. Gates recommends reading Nick Bostrom’s Superintelligence: Paths, Dangers, Strategies and Pedro Domingos’s The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World. Domingo sees AI as “science on steroids”. AI allows us to store together and then understand far more knowledge than is possible with simply HI. We can create new AI-generated algorithms that will push science both forward and also into new directions, he posits. Bostrom is perhaps less hyperbolic about the opportunities of AI. Indeed, along with Tesla boss Elon Musk, he’s actually worried that AI might take us in a direction we can’t control. Bostrom uses the example of gorillas saying that it is now human-made decisions that ultimately decide the fate of gorillas more than any decisions they make themselves. AI is a world of infinite possibilities to Domingo and a rather scary one to Bostrom. But perhaps we need something to explain the basics first? Keith Warwick’s Artificial Intelligence: The Basics might be a good starting point. It gets to grips with basic questions many of us have – can
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AI might take us in a direction we can’t control
machines think? What intelligence are they capable of ? What are the range of applications for AI to business? A little more in-depth is The Cambridge Handbook of Artificial Intelligence, edited by Keith Frankish. This book is especially useful in looking at how AI helps us, as humans, interact with each other – as businesses-clients, vendors-customers, or doctors-patients. I’d also recommend John Brockman’s What to Think About Machines that Think: Today’s leading Thinkers on the Age of Machine Intelligence. Brockman’s book is quite philosophical but certainly thought provoking. After perusing several dozen books on AI for this review I found that trying to get to grips with the technologies, their
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applications and implications, without thinking philosophically at times was nearly impossible. AI is a brave new technological world – even for those of us who start every day opening up our laptops and logging on to the internet. Clearly AI-generated ‘superintelligence’ can do wonderful things, but could have worrying downsides. Calum Chace’s Surviving AI: The Promise and Peril of AI brilliantly lays out the pros and cons of AI and let’s you decide. Finally, if it all gets too much for your limited HI capability – there’s always sci-fi writer Philip K Dick’s great novel (amazingly first published in 1968) Do Androids Dream of Electric Sheep? ●
maritime ceo
TRAVEL
Forget the Côte d’Azur The nearby Côte Vermeille is far better, argues your editor, Sam Chambers
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he European summer is upon us, which means that given more than 80% of you who receive this magazine are c-suite shipowners then the Côte d’Azur in the southeast of France is set to be descended upon. However, I’d like to point you in a direction a little bit further southwest than the over built, froufrou St Tropez and its environs, namely the Pyrénées Orientales and its spectacular Côte Vermeille, the home of your humble, suntanned editor, and more specifically Port-Vendres, a rare deepsea port in this part of the world. As well as a reefer port, the town is a working fishing centre, and visitors will have an abundance of fantastic seafood choices on arrival. Its history can be traced back to the Ice Age. The Romans developed the town, calling it Portus Veneris after the goddess Venus and exporting plenty of the wonderful local wine from here across the Roman Empire. Behind are scattered steep vineyards and fortifications, ahead is the Mediterranean and to your right the Pyrénées tumble into the sea
ISSUE TWO 2017
on the border with Spain. In short, geography has been very kind to this spectacular port. Most tourists tend to make a beeline for Collioure, another fishing port steeped in history just to the north. However, whereas Collioure is postcard perfect for tourism there is something more gritty, more down to earth with its neighbour, Port-Vendres. Come on a Saturday for market day for the full experience. Head down to the harbour, stick to left side and wander towards the sea. The market is in the main square and is a Catalan hotchpotch of local fare. Continue on around the bay, past the church, and you will get to the fish market, a place we strongly recommend you stop
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Behind are scattered steep vineyards and fortifications, ahead is the Mediterranean and to your right the Pyrénées tumble into the sea
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for an oyster or two and an aperitif, perhaps the local Picpoul de Pinet, a crisp white produced nearby. From here, head back into the heart of town and lunch is best served at La Tramontane, a fine seafood restaurant with fabulous views of the harbour. The chef takes his fish from the boats docking right opposite you. A tad bloated it is then time for a hike. Stroll to the other side of the port and continue on – i.e. in the direction of the mountains and Spain. The rugged coastline that emerges along Cap Béar is breathtaking. There’s a fort above you to check out and the views from the lighthouse at the outer reaches of this peninsula are second to none, stretching into Spain, bay after bay. For those that prefer a more sedate, though equally stunning, afternoon take one of the tourist boats for a cruise – they head south into Spain all the way to the Cap de Creus where Salvador Dali used to hang out. In terms of where to stay, Les Jardins Du Cèdre with its great sea views and lovely pool should fit the bill just fine. ●
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OPINION
Digitalisation may not be the carriers’ doing Kris Kosmala looks at the big picture behind the Maersk-Alibaba deal
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uch ink has been spilled on the subject of Maersk and Alibaba striking a deal allowing Maersk’s booking process to be accessed on the Alibaba’s e-commerce platform. Industry commentators jumped in pointing out the small scale of the engagement, risk to Maersk’s reputation, glitches in the transaction management process, and the uncertain returns for either party. Many were wondering if Alibaba was even the right partner for Maersk. In parallel, and somewhat prematurely, the deal was also hailed as part of the digitalisation revolution occurring in shipping. In the background, there were also ideas of Alibaba and Amazon acquiring their own fleets and competing against the existing carriers. If you look closer at the MaerskAlibaba agreement, you will notice the key motivation in employing digitalisation. It comes down to solving the most annoying problem from the carriers’ point of view – no shows. Lack of predictability of bookings leads to wrong network design, wrong sailing schedule design, wrong port contract design, and most annoyingly, unreliable cost, revenue and profit forecasts. Clearly, deals between the carriers and e-commerce platform operators who could easily apply cancellation/no-show fees on the booker and thus reduce uncertainty of the cargo showing up for the sailing could be seen by the carriers as highly beneficial to solve the problem of no shows and enable them to further reduce their costs. Solving the no shows problem is of no interest to the e-commerce
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platform owners. I don’t even think they are planning on making huge profits on the booking transactions, even if Maersk exposed all their services and all types of equipment on the existing e-commerce platforms. What’s more, platform owners would not make that much money even if all carriers exposed all of their services on the platforms, as fierce competition just between Amazon and Alibaba would quickly reduce that booking service charge to nothing. Nonetheless, the Maersk-Alibaba deal, and others that will follow, has huge significance to the process of container shipping and the ensuing commoditisation of the carriers. When you look at the operating models of Alibaba, Amazon and many other companies acting as trading platforms, you will notice that there is an immense value being created in the form of data and data services that Alibaba and Amazon can profitably resell to shipping market participants. You might think that I am talking about the data related to the transaction itself, but you would be wrong. The data that is so valuable for resale relates to failures and behaviours. While the carrier will only see the data on transactions relevant to their own offering, the platform will see everything that happened before and after the transaction was booked. They will see all the behaviours of specific shoppers. The value of this this profiling data far exceeds any profits to be made from being a middleman in the final transaction. The value of the data on failures could even lead to the situation where
the e-commerce portals would offer financial incentives to the carriers to sign up to their platforms. In turn, the insights resulting from all the shopper behaviour data can be easily resold in the form of profitable subscriptions to those very same carriers, ports, freight consolidators, freight forwarders, and countless other participants involved in handling the containerised cargo along its journey. This approach is compatible with how the e-commerce platforms used shopper behaviour data in the past to drive their own profitable contracts with the sellers perusing the platforms. It firmly positions the platforms as merchants of information that no individual party would be able to accumulate. As the platforms get richer in data, they will reduce the shipping companies to suppliers of containers and providers of sea transport services, the most commoditised aspects of their present business models. In summary, don’t worry about Amazon or Alibaba forming their own fleets. Their power will be in forming an information and insight bank that will make them much more powerful in the business of shipping. Is there a way for carriers out of the commoditisation stress? It could be through adding services back in. Maersk’s decision to reunite the land logistics arm, the terminal business and the ships will not be available, or even possible, to other carriers. Even if it was, not all shipping lines believe in taking this approach, so over the next few years we will have a chance to compare the strategies and see their effects on the balance sheets. ● maritime ceo
REGULAR OPINION
‘If FedEx couldn’t satisfy the demands of Amazon, how is it today’s shipowners think they can do any better?’ Transas’s Frank Coles says shipping’s business model must change fast
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et’s go back to basics. Shipping is the transportation of goods from producer to consumer. Maritime forms only one link of the shipping chain – albeit an essential link for the long distance and intercontinental movement of large volumes of cargo. What happens next in the maritime sector will be determined by more than an aspirational digital vision. It will also be profoundly affected by changes in the political and economic climate. Together, these will create various difficult to predict feedback loops in the shipping and maritime ecosystem. The maritime industry is not unique; it is just late, old and behind the times. That makes it especially vulnerable to disruption from the likes of young digital start-ups. Even if it evades that onslaught, it will still be exposed to pressures and demands for digital transformation from elsewhere in the shipping supply chain. This transformation is already underway and creeping ever closer to maritime. When it arrives, the impact will be substantial and likely
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The idea of owning and operating assets will be severely challenged
ISSUE TWO 2017
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turn traditional business models and ways of operating upside down. It is inevitable that eventually Amazon will lease ships in the same way it does planes. If FedEx couldn’t satisfy the demands of Amazon, how is it today’s shipowners think they can do any better? The idea of owning and operating assets will be severely challenged. The global economy is changing and with it the flow of goods around the world. The signs are that growth in regional trade is picking up at the expense of the international commerce patterns that have dominated for the last thirty or so years. Naturally this will drive changes in preferred modes of transport, as logistic operators adjust their use of rail, road, air and ships to optimize the route goods take from producer to consumer. It is not hard to picture maritime transport losing out. This will add to pre-existing pressures for improved efficiency and for responding to a more digital world. At the simplest level, shipping is the delivery of cargo to the right place at the right time as cost effectively as possible. It does not make sense to have numerous intermediaries – brokers, agents, freight forwarders – bringing unnecessary complexity to this process. Other sectors have made or are making the adjustment and maritime will have to do the same.
Innovation from within the maritime industry won’t be enough unless it dares to tackle the things that disruptors would fix or eradicate. Even then, it might be insufficient to address the fundamentals of the current model. What we see today are maritime stakeholders scrambling for a place in the world of tomorrow. A world driven by commoditisation, where scale matters and where many stakeholders will find themselves redundant. There are too many players chasing too little value in maritime operations. This endangers ship owners, vessel operators, equipment vendors, insurers, yards, ports to varying levels. It is the business model, not technological change, which will decide the future shape of vessels and operations. Unmanned ships won’t happen unless the economics make sense. If increased automation and further reductions in crew makes better sense, then that will happen and probably more quickly. Or maybe having ships designed for specific routes managed from ashore in large operations centers will work best. Ultimately what we have to ask is what shippers want from the maritime sector and how maritime companies can step up, find the efficiencies and compete with other modes. And if they can’t do it, then who will? ●
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MARPOLL REGULAR
Your views Newbuild prices, 22,000 teu boxships, bunker fuel levies and plenty more made up our questions posed in our latest quarterly survey Is shipping pitching itself properly as an attractive career option for today’s youth?
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Have you seen shipowners at college career fairs?
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Giantism is a tendency of transport efficiency
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Yes 27%
Yes 79%
No 73%
No 21%
Have newbuild prices bottomed out?
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Autonomous ship regulation is a bigger challenge than the technology
Not yet. The tell tale sign is the orderbook. A short orderbook means hungry shipyards
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First comes decision support, then comes automation, and only then do we decide if we even need unmanned
Yes 48%
Yes 84%
No 52%
No 16%
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Everything is overvalued in shipping
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It’s by far the most simple and elegant way to drive the market to value efficiency
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Yes 58%
Yes 59%
No 42%
No 41%
What is the one must-attend exhibition in the shipping calendar?
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Best parties. Simples!
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Posidonia 38%
Sea Asia 12%
SMM 17%
CMA 9%
Nor-Shipping 10%
None of the above 12%
Marintec China 2%
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A bunker fuel levy is the best option for shipping to tackle CO2 emissions
Are secondhand bulker prices now overvalued?
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Will we ever see a 22,000 teu boxship?
Will London be marginalised as an international maritime centre post-Brexit?
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Never count London out
Yes 45% No 55%
maritime ceo
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