MATRIX
Inshyp Shape
Capt Darryl Braganza & Mr M Maheswaran
IMO sponsors first Maritime SheEO leadership Accelerator Program
08
Calling for Sea Change
18
Tanker market expected to undergo severe challenges One Voice
TODAY
M AR ITI M E
US$ 3 • ` 150 Vol 10 • Edition 09 • September 2021
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02 | Maritime Matrix Today | September 2021
Maritime Matrix Today | September 2021 | 03
Svanehøj acquires Wärtsilä tank control systems
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he technology group Wärtsilä announces the divestment of Wärtsilä Tank Control Systems business to Svanehøj, a Danish gas pump specialist involved in the design and manufacture of specialised deep well pump solutions. Wärtsilä Tank Control Systems design, manufacture, sell and service high-end measurement systems for gas tanks on LNG ships, offshore storage, and land-based LNG terminals. Tank Control Systems is also a leading supplier of safety products and associated systems and solutions for LPG land-based storage and underground cavern storage. “With the divestment, Tank Control Systems will have access 04 | Maritime Matrix Today | September 2021
to Svanehøj’s resources and service network, complementing the current installed base and future direction of our safety and gauging solutions,” says Chris Mais, General Manager of Tank Control Systems. The business became part of Wärtsilä as a result of the acquisition of Total Automation in 2006 and has approximately 50 employees based in the UK, France and Singapore with revenue of EUR 7.5 million in 2020. Tamara de Gruyter, President, Wärtsilä Marine Systems and Head of Portfolio Business says: “We are pleased to have come to an agreement to sell Wärtsilä Tank Control Systems to Svanehøj with whom we believe
the business to have a strong future.” “The acquisition of Wärtsilä Tank Control Systems is an expression of our desire to make Svanehøj a globally leading specialist in producing and servicing equipment for handling all types of liquefied gas – natural gas, biogas and not least the Power-to-X-based fuel of the future,” says CEO of Svanehøj, Søren K. Nielsen. Closing of the transaction is subject to fulfilment of closing conditions, expected in the fourth quarter of 2021. MMT
Maritime Matrix Today | September 2021 | 05
Indian Offshore Wind Energy market spotlighted “
Green Hydrogen market opportunities are the biggest boost for offshore wind energy in India,” said Ranjeet Mene, Co-Founder, GTPI
He was delivering a presentation on ‘The Challenges and Opportunities of Offshore Wind Development in India – Lessons Learnt from Europe’ at The Littoral Offshore Wind Energy India – 2nd edition virtual seminar held on 8th September. Mr Mene focused on Indian Offshore Wind Energy market advantages and disadvantages. While explaining the strength of Indian Offshore wind market Mr Mene found strong interest from local and International offshore wind developers & supply chain, well developed wind market, strong fabrication and maritime expertise and green hydrogen market opportunity as the best features of Indian market. According to Mr Mene observations, medium wind speeds, long consenting/ admin timelines monsoon conditions risk, grid connection delays and cost expectations are the biggest challenges of Indian Offshore wind energy domain. He elaborated the important role of local partner’s role in the offshore domain, community development, local job creation and awareness among the people about the offshore. Mr Alok Kumar, Area Manager, Southeast Asia areaDNVGL Manager delivered an insightful presentation on ‘Indian Offshore Wind - Opportunity and Challenges’. He spoke about offshore wind outlook’s progress so far in India, overview of tariff and the opportunities and challenges. Mr Kumar gave an elaborated outline of the offshore wind energy potential and activities in Gujarat and Tamil Nadu.
Ranjit Mene
Mr Raja Vaiz, Chairman, Littoral Communications welcomed the delegates and the speakers earlier; and Ms Surbhi Pal, Brand Manager, Littoral Communications proposed the vote of thanks. MMT
06 | Maritime Matrix Today | September 2021
Maritime Matrix Today | September 2021 | 07
IMO sponsors first Maritime SheEO leadership Accelerator Program T
he stranded Panamanian flagged MV Ali Bey crew, who have been abandoned and detained alongside Constanza port in Romania since 30 November 2020, without wage payment and suffering challenging conditions onboard, have provided Human Rights at Sea (HRAS) with an updated video testimony as to their position which amounts to a bleak outlook. “HRAS has consistently advocated for the public identification of abusers of seafarers, including those owners who manipulate crew, fail to pay wages, and introduce threats of the use or misuse of legal systems against them,” said a spokesperson from HRAS. In the latest video, Capt Abdullah Dahha, the Master of the vessel again laid out their challenges in securing all the wages they are owed, their poor living conditions onboard and highlighted the local voluntary support which is keeping them supplied with food, water, and electricity. Supported by the local ITF Inspector and an instructed local lawyer, backed by the ITF Seafarer team in London, the crew continue to wait for a legal solution to their case with real concerns as to their well-being as the months pass and winter conditions approach. “Our living condition has become like living in jail – we can’t go outside, can’t make anything, only live on the ship. We want 100% of our wages, that is $186,000 [USD] but owners are offering us only 60 percent of our wages. This offer was made by a strange man who boarded the ship to discuss and I refused. ITF bring supplies and food for us, but we 08 | Maritime Matrix Today | September 2021
need to finish this case. Also, winter is coming so we are afraid of our conditions,” shared a distressed Capt Dahha. HRAS has been working with the Romanian ITF Inspector and the ITF in London and has strongly propagated the message - once again, seafarers are the pawns in this unnecessary and ongoing abandonment case which puts the lives of the remaining seafarers on hold and clearly breaches their fundamental human rights to liberty, effective remedy, right to work, and not to be subject to cruel or inhumane treatment. Further, their human right to family life remains breached as their enforced separation from their families continues with no end in sight. HRAS remains in contact and has passed the latest testimony to flag State authorities. MMT
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Maritime Matrix Today | Septebmer 2021 | 09
CCUS plays an important role in reducing emissions A
BS and Daewoo Shipbuilding & Marine Engineering Co. Ltd. (DSME) are to jointly develop designs for a 70,000 CBM very large, liquefied CO2 (LCO2) carrier. The joint development project (JDP) is responding to the development of carbon capture utilization and storage (CCUS) technology, which will ultimately require larger vessels for CO2 transport than those used in the existing food industry. “CCUS can play a role in reducing emissions in a range of industries, but the supply chain will need vessels capable of transporting CO2 safely and efficiently. That’s why this JDP with DSME is so important, not just for the maritime industry but for ambitions to reduce the carbon footprint of the entire global economy. ABS is proud to be able to use its industry-leading expertise in gas carriers to support development of these important vessels,” said Patrick Ryan, ABS Senior Vice President, Global Engineering and Technology. DSME, which has previously developed a conceptual design of a 100,000 CBM LCO2 carrier, is developing a new design that can increase operational efficiency by increasing tank size. In order to increase tank capacity, the JDP will study the application of various steel materials as well as existing Low-Temperature Steel. Nuno Kim, DSME Director, Head of Ship Basic Design Division and Darren Leskoski, ABS Regional Vice President, North Pacific Business Development The new LCO2 vessels will comply with the ABS Rules for Building and Classing Marine Vessels and the ABS Guide for Liquefied Gas Carriers with Independent Tanks as well as the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code).
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“DSME will maintain its unique competitiveness for the technology and quality in the field of liquefied gas carriers, such as LNG and LPG carriers, through this development of very large LCO2 carriers. And it will be able to maintain an advanced technology in the market of LCO2 carriers, which is one of the major concerns in the CCUS sector,” said Nuno Kim, DSME Director, Head of Ship Basic Design Division. ABS, a leading global provider of classification and technical advisory services to the marine and offshore industries, is committed to setting standards for safety and excellence in design and construction. Focused on safe and practical application of advanced technologies and digital solutions, ABS works with industry and clients to develop accurate and cost-effective compliance, optimized performance and operational efficiency for marine and offshore assets. MMT
ITF calls for greater recognition for seafarers
T
he ITF Seafarers’ Trust is calling for greater recognition for the hidden global workforce, on World Maritime Day.
a platform to the voices of seafarers during this challenging period providing an insight into their life and work.
Seafarers have been among the hardest hit during the Covid pandemic with many separated from their families for well over a year and some left abandoned on vessels due to the crew change crisis in multiple ports. Despite this, governments have been slow to offer assistance.
The Trust ran a photo competition earlier in the year to gather portraits of seafarers by seafarers, giving those on board the opportunity to tell their stories through images and personal accounts.
Chair of Trustees, David Heindel said “To say that seafarers have kept the global economy moving during Covid is no exaggeration. Without them carrying on, through loneliness, home sickness, illness and uncertainty, the global supply chain would have ground to a total halt. What the Trust wants to see now is governments recognising that and living up to their responsibilities to seafarers through recognition of key worker status, access to vaccines and facilitated crew change with the appropriate legislative support.” As well as supporting unions and welfare organisations with funding for their specific Covid projects, the Trust has also committed to giving
Head of the Trust Katie Higginbottom said: “The last eighteen months of the coronavirus pandemic have been some of the hardest times for seafarers in living memory. World Maritime Day is a great opportunity for us to honour the contribution of seafarers. We’ve produced a commemorative book of some of the most powerful entries to our “Out of Sight, Not Out of Mind’ competition and those have now been distributed all over the world to highlight seafarers’ voices to the people and leaders who can act on some of the changes needed.” The 40 portraits book also links in with celebrations of the Trust’s 40th anniversary this year. MMT
Maritime Matrix Today | September 2021 | 11
Artemis Technologies awarded £533,000 to investigate transformative solutions to decarbonise CTV operations
A
study, led by highperformance maritime design and applied technologies company Artemis Technologies has been awarded £533,000 to investigate transformative solutions to decarbonise crew transfer vessel (CTV) operations in the offshore wind sector.
12 | Maritime Matrix Today | September 2021
The grant, announced at London International Shipping Week, has been awarded as part of the Clean Maritime Demonstration Competition funded by the Department for Transport and delivered in partnership with Innovate UK.
an experienced CTV owner and operator; ORE Catapult, a research technology organisation specialising in the offshore renewables sector; and Lloyd’s Register, a globally respected maritime classification society.
Artemis Technologies is partnering with Tidal Transit,
It will seek to demonstrate the transformative power of the
revolutionary Artemis eFoilerTM electric propulsion system to drive down carbon emissions in global CTV operations. Dr Iain Percy OBE, CEO at Artemis Technologies said: “Operating for an average of 250 days a year, crew transfer vessels burn around 1,500 litres of diesel a day. Equating to almost 475,000 tonnes of CO2 emissions across the UK and EU annually, they are a major pollutant. With global offshore wind capacity set to soar over the coming decades, including the UK government targeting a four-fold increase by 2030, it is imperative that a solution to decarbonise CTV operations is brought to market quickly. We are pleased to be leading this project alongside a number of expert partners. Working together, industry can create the disruptive solutions required to enable the decarbonisation of CTV operations in line with global goals to reduce CO2 emissions.”
The study will use digital twin technology and include a full mission simulation of an eFoilerTM propelled CTV undertaking crew transfer operations, as well as provide a regulatory roadmap towards certification of the technology. Leo Hambro, Commercial Director, Tidal Transit added: “We are very excited to be working with Artemis Technologies on this game changing CTV design change. As a green industry we need to find a way to utilise the vast quantity of cheap zero carbon electricity produced by our clients and shift away from our reliance on diesel. The eFoiler aims to deliver an electric solution that would work even at the most far from shore projects over time and will revolutionise the industry.” Additionally, the companies are partnering on a £2.8m project led by MJM Power which will test an on-turbine electrical vessel charging system.
Artemis Technologies is also part of the Northern Ireland Green Seas consortium, led by Power NI, which is receiving £398,000 in funding to investigate shore power and hydrogen bunkering solutions. Announced in March 2020, and part of the Prime Minister’s Ten Point Plan to position the UK at the forefront of green shipbuilding and maritime technology, the Clean Maritime Demonstration Competition is a £20m investment from government alongside a further £10m from industry to reduce emissions from the maritime sector. The programme is supporting 55 projects across the UK, including projects in Scotland, Northern Ireland and from the south-west to the north-east of England. MMT
Maritime Matrix Today | September 2021 | 13
Robust earnings for newbuilding market
T
he rapidly improving longterm prospects of the shipping markets have prompted more owners to place newbuilding orders. In its latest weekly report, shipbroker Allied Shipbroking said that “the different outlook that has been noted since the beginning of the year between the dry bulk and tanker sectors was apparent once again in the newbuilding market. The robust earnings, despite the correction noted the last few weeks, and the solid sentiment in the dry bulk segment, have led to another series of newbuilding orders taking place during the past week. The rising newbuilding prices though and the fragile economic environment has retained newbuilding activity at levels that are not considered excessive so far. However, once the spread between newbuilding and second-hand asset prices starts to decline, it is likely that we will see increased interest emerge. In the tanker sector, fundamentals are in a completely opposite trajectory with poor sentiment and a market imbalance dominating the market. Therefore, the lack of confidence has limited investment appetite in the year so far and this past week was no exception. With shipbuilders though keeping active in other sectors and steel prices holding high, newbuilding prices 14 | Maritime Matrix Today | September 2021
are not likely to post any major downward revisions, trimming interest even further. Given that a freight market recovery has not yet emerged, it is unlikely for this current trend to shift in the short-term”.
Source: Allied Shipbroking In a separate note, shipbroker Banchero Costa said that “in the container market, MPC Capital has agreed with Hanjin for an order of four plus optional two 5,300 teu feeders at Hanjin with deliveries during 2023.
Source: banchero costa &c s.p.a.
Total cost (including the two optional units) to be $390 mln. More options were exercised during the week, Briese confirmed option for two additional 1,930 teu feeders at Huangpu Wenchong basis delivery during 2024 and five more 7,000 teu wide beam feeders were added by Seaspan at Jiangsu New Yangzjiang absis delivery end 2023, price around $105 mln each in the dry bulk segment. New Dayang received orders for 4x Ultramax (abt 63,000) from Ciner Shipping basis delivery 2024/2025. In Japan it was reported Fednav committed 10 lakers handy bc (34,500 dwt; Tier III) to be delivered during 2023-2024 at Oshima”. Meanwhile, activity in high in the S&P market as well. Allied commented this week that “on the dry bulk side, the modest flow in sales continued for yet another week. Notwithstanding this, we see a slight slowdown in activity levels during the past few weeks or so. Whether there is a similar correction in buying appetite, it is yet to be seen. It seems as though, many interested parties are in a catchup phase, given the upward continuation in asset price levels, causing many to be seemingly unwilling to rush into any quick deal for the time being.
Source: Allied Shipbroking
(at least). Moreover, thinking about the stagnant bearish mode from the side of earnings, it is only natural that the sales market will be more prone to “quiet” periods in terms of volume, with some sparks in buying appetite in-between”.
Source: banchero costa &c s.p.a. Finally, Banchero Costa concluded that “the dry cargo market continues to be the most active in terms of transaction volume. The sale of the Kamsarmax Vijayanagar 82,000 dwt Blt 2010 Tsuneishi Tadotsu (JPN) at $24.2 mln has been reported. 2 sister vessels Ultramaxes Nautica Runa and Lucia 63,000 dwt Blt 2015/2016 Jiangsu reported sold enbloc at $55 mln”. “On the tanker market, PT Samudera (Indonesians) are the buyers for Chemical Tanker owned by FSL, FSL London 19,000 dwt Blt 2006 Usuki, which is valued at USD 10.2 mln based on a three-year t/c at $12.000/d”, the shipbroker concluded.
MMT
On the tanker side, it was another mediocre week for the SnP market, given the limited number of fresh transactions taking place. Rather inline with previous week, the MRs are the only segment were we can expect a more stable stance in the near term Maritime Matrix Today | September 2021 | 15
IRClass’s ERP & OSCP ensures Qatari ports preparedness to handle any eventuality I
ndian Register of Shipping (IRClass) has delivered a set of detailed Emergency Response Plans (ERP) and Oil Spill Contingency Plans (OSCP) for Hamad and Al Ruwais ports. The two ports fall under the authority of Mwani Qatar. Dr Asokendu Samanta, Divisional Head, Research & Development Division at IRClass said: “Preparing ports for any eventuality is a critically important function and we at IRClass are proud to support our colleagues working at the two ports (Hamad and Al Ruwais) and play our part in ensuring that these two vital ports are prepared to handle any eventuality if it occurs. Working hand in hand with Mwani Qatar, we have delivered the plans on schedule and we are delighted to see that the ports meet the highest international standards.” The plans meet both national and international guidelines and provide assurance that the ports will be able to respond effectively to any emergency, as well as cope with large and small-scale oil spills. The two busy ports handle a wide range of vessels including container, general cargo, ro-ro, livestock & offshore support and play a key role in Qatar’s economic diversification and competitiveness strategy.
Dr Asokendu Samanta
Ahead of drafting the reports, IRClass undertook a comprehensive site survey to identify possible hazards, interviewed port personnel and reviewed all operating and emergency procedures to determine possible gaps. Detailed analysis was then undertaken to determine the impact of any port oil spills. Extensive quantitative risk analysis was done, taking into account potential hazardous operations being undertaken and handled at the port/s. MMT
16 | Maritime Matrix Today | September 2021
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Maritime Matrix Today | September 2021 | 17
Calling for Sea Change
M
aritime industry leaders have written to the Chancellor calling for a “sea change” in investment and collaboration no later than this year, or Britain will fail its 2050 net zero target.
And the government’s £20million Clean Maritime Demonstration Competition, announced today, which funds trials and research, is described as a “drop in the ocean” for what the industry and environment needs.
The sector is calling for £1billion co-investment, so Britain’s fleets can be renewed in time for 2050, given the average lifespan of a ship is 30 years.
The letter comes during London International Shipping Week, on the day global industry leaders focus on how to decarbonise the global maritime sector.
18 | Maritime Matrix Today | September 2021
Sarah Kenny, chair of Maritime UK, the trade body who organised the open letter, said: “The window we have to decarbonise UK fleets in time for 2050 is closing. Unfortunately, investment for Net Zero has not yet been a rising tide, with other industries like automotive getting the share they need, but not us, despite the fact we are an island nation, with maritime surrounding us. £1billion co-investment must be delivered at this year’s Spending
Review. We’ve reached the point where our industry’s global competitiveness, and Britain’s net zero pledge, now depend on greater and faster investment, and more agile collaborative working.” The open letter is signed by almost 40 industry leaders, including trade body chiefs across the sector, such as Bob Sanguinetti, CEO of the UK Chamber of Shipping; Tim Morris, chief executive of the UK Major Ports Group and Tom Chant, CEO of the Society of Maritime Industries. They are joined by business leaders including the leadership of the two biggest cruise operators in the world, signed by the president of Carnival UK, Simon Palethorpe and the chief executive of Royal Caribbean Cruise Lines, Ben Bouldin, alongside Nick Brown, CEO of Lloyd’s Register Group – a global professional services company and the world’s first marine classification society, created more than 260 years ago. While shipping is among the greenest modes of moving cargo, its enormous scale means the estimated cost for decarbonising the global sector stands at $2trillion, more than the combined value of the world’s industry.
Competition, in Spending Review.
October’s
Given the government’s Clean Maritime Demonstration Competition was oversubscribed with bids worth 225% of the available budget, the UK’s maritime sector calls for grants to be significantly scaled-up to develop hydrogen fuels and electric propulsion solutions. Shore power is also identified as an area requiring £200 million investment by Maritime UK, as a proven technology enabling vessels to turn off their engines at berth in ports and providing the infrastructure to charge tomorrow’s electric vessels. According to recent research by Maritime UK, produced Royal HaskoningDHV, the US has 10 shore power facilities, Norway has 11, Sweden has eight, China has six, Canada has five, Germany four, and there are three each in Denmark, France and Italy. Meanwhile, Britain’s North Sea counterparts, Belgium and the Netherlands, each have two.
Today is day three of London International Shipping Week (LISW), where global industry leaders have converged on Britain for the biggest event in the global industry’s calendar. The focus of Wednesday is decarbonisation. Government ministers including Grant Shapps, Robert Courts, Graham Stuart, industry leaders like Maritime UK’s chair Sarah Kenny, and green technology champions in maritime are all expected to board HMS Albion, a Royal Navy vessel which has arrived on the Thames for LISW. HMS Albion will host the week’s Net Zero hub and government will be announcing the winners of its £20 million Clean Maritime Demonstration Competition on the ship, which has been described as the “Swiss army knife” of the Royal Navy. MMT
However, while the government is officially opening a shore power facility in Southampton today, this will not be operational until next year, putting the UK behind almost every major economy.
Other governments, from Germany to Norway, have recognised domestic industries can’t shoulder this burden alone with significant co-investment in green technology. Maritime UK and industry leaders used the letter to urge the chancellor to provide £1billion co-investment, to accelerate recent progress from the Clean Maritime Demonstration Maritime Matrix Today | September 2021 | 19
Cover Story
Shape
Capt Darryl Braganza & Mr M Maheswaran
20 | Maritime Matrix Today | September 2021
W
ith the o n g o i n g pandemic, most businesses have switched gears to online business and digitization, which is the future and here to stay. It’s critical for the Marine Industry to have efficient and timely support to make Marine Operations seamless. “We knew that there had to be some dependability and a lot of trust because we’re working remotely across the globe. This was our motivation to launch INSHYP – a digital platform for Mariners, Suppliers, Service Providers and Consultants. We felt that this need is so great now and also well into the future not only for international shipping but in other areas of marine like offshore and ports etc,” expressed Capt Darryl Braganza, Director, INSHYP.
The INSHYP team is a very diverse but close-knit family, which is actually their strength. The team comprises of Master Mariners and Chief Engineers who have hands-on experience in shipping as well as in the ports sector; individuals who are professionals in the procurement field; and professionals who are in the digital and the analytical field. In a way, we have synergised our strengths to make INSHYP happen, Capt Braganza continued. The ship being a vast universe by itself, it needs everything right from spares to provisions to supplies to lubes and marine support services, etc. “The INSHYP platform is built in such a way that caters to the entire requirement of the mariners, suppliers, service providers and consultants; under one roof,” articulates Mr M Maheswaran, Director, INSHYP. On Marine Procurement, Mr Maheswaran elaborated that any Ship Manager or Master would like to see an easier platform that really simplifies his day-to-day working life. Keeping that in mind, INSHYP has been designed and developed as a one-stop platform for all Marine procurement, from verified supplies and services vendors. Thus, INSHYP ensures seamless experience for clients to complete their procurement in easy steps. It is exclusively for Marine Industry members who will be privileged to choose across 49,500+ Products and Services through validated vendors.
One of INSHYP’s main objectives is to provide advantages to both buyer and seller. While for a buyer the three important criteria are good quality product, timely deliveries and prompt responses to his/her queries; for a seller it provides global recognition, repeated orders and feedback to improve the product or service. INSHYP’s Ship Sigma Index with apt KRIs tracks the client’s Supply/Service Spend and explores the hidden spending patterns and variances. These Analytical Insights is another key feature that provides spending insights on the procurements and suggests optimal options to save time and reduce expenses. On INSHYP’s roadmap for the future, Capt Braganza said, “We have broken up into four phases: we intend to cover the Indian Subcontinent; then take on the Middle East, Southeast Asia and Sri Lanka; move towards Europe and the Far East; and finally America, of course. This way we can pace ourselves correctly to take on more loads. If something does come up from any of these areas we will definitely service them. We are working towards becoming one of the leading online supplier and services provider to global marine industry in the next five years.” MMT
Maritime Matrix Today | September 2021 | 21
One Voice T
his was one of conclusions reached by experts on the first day of London International Shipping Week, “Meeting the welfare needs of seafarers in a digital age” was held at IMO’s London headquarters and, for those who could not attend, online. It was organised in collaboration with four major seafarer charities – The Mission to Seafarers, The Seafarers’ Charity, Stella Maris, and Sailors’ Society.
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Free and unlimited access to wifi was identified as an essential aid in endeavours to support the ailing mental health of many seafarers who, together with their families, have endured untold hardship since the start of the pandemic. Columbia Ship Management’s president and CEO, Mark O’Neil, commended Inmarsat on cutting charges for seafarers at an early stage. But many ships still have little connectivity and none available for crew members.
Presenters at the event, which was moderated by V.Ships UK managing director John Adams, included Dr Grahaeme Henderson, ex Shell shipping chief and chairman of Together in Safety, Ronald Spithout, president of Inmarsat Maritime, Nick Chubb, founder and managing director of Thetius, and Andrew Wright, secretary general of The Mission to Seafarers. Representatives from the other charities also attended but V.Ships’ CCO of Ship
Management, James Muir, could not participate for personal reasons. Attendees heard deeply disturbing stories relating to the treatment of seafarers over the last 20 months, including a failure by some shipping companies to provide internet access or any means to communicate with families. Sometimes, tours of duty extended way beyond what was actually legal for reasons far beyond the control of ship operators. At one stage, V.Ships introduced a campaign called “Not 2 C’s” – standing for not two Christmases (in succession without a break). Similar arrangements were made for other religious holidays including Diwali and Eid. While some crew members have been unable to communicate with loved ones for months on end, others have been effectively trapped in their workplace, unable to disembark for any reason. Adams spoke of one non-Covid death in which
successive ports had refused to allow the body to be sent ashore for transport home. Crew members endured three months before it could be taken ashore. The question of why shipping’s leading groups had failed to make progress on seafarers’ welfare in many locations throughout the crisis came up several times. It prompted Columbia Ship Management’s O’Neil, to call on the industry’s many associations to collaborate in the setting up of a new one – possible name International Maritime Committee – to tackle industry issues at a government and international level. It would consist of representatives from all of shipping’s major bodies – ICS, BIMCO, Intertanko, Intercargo and so on – with its presidency rotating between them. “There’s a need for the industry to have one voice,” O’Neil declared. “Until we have that one voice, we’re never really going to be able to bring about the
considerable pressure and make forceful arguments at national and international levels.” The welfare of seafarers was an issue that required such a coordinated response, he said, inferring that the lack of progress in some areas relating to the treatment of seafarers could have been handled more effectively by a cross-industry organisation. He gave another example of where an International Maritime Committee could have played a role. Referring to COP26 in Glasgow in November, O’Neil asked: “Where has there been a really serious deep debate across all sectors of the shipping community so that we are able to produce a boiled-down, hard, position paper to national governments?” MMT
Maritime Matrix Today | September 2021 | 23
Operation DGAR
By the spring of 2020, COVID-19 restrictions on travel had stranded hundreds of mariners on 13 commercial and U.S. government-owned ships based on and around the remote island of Diego Garcia in the Indian Ocean. The pandemic had shut down the normal military flights between Bahrain, Singapore and Diego Garcia, leaving the mariners and the island’s land-based personnel with no way on or off the atoll. The situation was growing worse by the day. Willie Barrere, National Executive Vice President of the America Maritime Officers union remembers the situation well:
Line, Limited – assembled a team to come up with an “outside the box” solution.”
“Our Mariners were stranded on their vessels in Diego Garcia unable to get back home to their families – some for over nine months. At the same time, their designated reliefs were home unable to collect a paycheck and feed their families. The situation got worse by the day and no one was able to come up with a contingency plan to solve this serious issue. As concern escalated on all fronts, one of our civilian operating companies – Maersk
Mariners traveling to and from ships stationed on Diego Garcia would normally board commercial flights from the U.S. to either Bahrain or Singapore where they would remain in hotels until they could catch a flight on an Air Mobility Command (AMC) C-17 military cargo plane – a trip which typically takes three to four days. As the COVID-19 pandemic spread across the globe, getting commercial flights to Bahrain and Singapore became difficult, and the Air Mobility Command flights from those locations
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But what to do? The island of Diego Garcia (often referred to as DGAR for short), is located in the middle of the Indian Ocean, and is one of the most isolated and geographically remote places in the world. Its location in the middle of nowhere is a key reason the island is so strategically valuable to the U.S. and U.K. militaries, but its remoteness makes it very difficult to support logistically in normal times – and these were anything but normal times.
to DGAR stopped flying. As a result, crew changes ground to a halt, and hundreds of mariners on ships pre-positioned in Diego Garcia, or operating in the region, were effectively stuck there. The crews had already been forced to work extremely long rotations onboard with no relief and the stressors of those prolonged tours with no rest or time off were taking their toll on the mental and physical well-being of the men and women who were stranded. Operation DGAR is born The team at Maersk Line, Limited (MLL) went to work to see if they could solve the DGAR crew relief challenge. It wouldn’t be easy. Any solution providing crew transport from the U.S. East Coast to Diego Garcia would need to include a strict 14day crew quarantine; multiple rounds of COVID-19 PCR testing; “clean” charter bus transportation to a private air terminal; a private aircraft capable of flying long distances over the water; “clean” ground transport from the airfield in DGAR to the marina; and finally, launch service from the marina to each ship anchored in the harbor. Steven Case, a Program Manager at MLL, volunteered to develop the airlift solution. “It was an exciting opportunity. My experience is primarily in ship operations, so I had to learn a lot about aircraft charter operations really quick” Steve remarked. MLL partnered with the global aviation services provider ACC Aviation to help in vetting potential aircraft operators and provide ongoing management of this unique and challenging airlift mission. Working closely with ACC’s specialists, MLL concluded that a plane with extensive range would be needed for this operation due to the distances required to be flown over water. Additionally, in order for the plane to be able to carry U.S. Government personnel, a Department of Defense Commercial Airlift Review Board (CARB) certification would be required, a certification which only very few air carriers possess. Based on the challenging airlift requirements, private aircraft operator Omni Air International was determined to be best suited to provide chartered aircraft for the mission, utilizing one of their 767-200 extended-range wide-body passenger jets. These aircraft had the range to fly from the continental U.S. to DGAR only making one stop to re-fuel, and could carry 200+ passengers and several tons of cargo. Finding an aircraft that could make the flight was one thing, but figuring out how to make the
operation financially viable was another. Normal flights under pre-COVID conditions to DGAR from the U.S. East Coast cost about $3,500 to $4,000 per person. Chartering a 767-200 round-trip from the East Coast to DGAR and back was going to be expensive – really expensive. While Steve Case was musing on how to make the airlift portion of the mission more cost-effective, Mike Hawley was hard at work developing a COVID testing and quarantine solution. “Fourteen days is a very long time to be locked in a hotel, so I visited a lot of hotels to try and develop a solution which would provide the best compromise between safety and crew comfort,” he recalled. In addition, COVID-19 testing would be required on the first and last days of the quarantine for each traveler – rules that were established by the U.S. and U.K. military leadership responsible for managing operations on the island. While COVID testing is fairly easy to come by now, in the spring of 2020 it was in high demand and a challenge to secure the quantities of testing materials needed for a large group of people, especially since it needed to occur at the quarantine location. Mike found himself running into the same problem that was stymying Steve – the quarantine and testing was going to be expensive. For the operation to move forward, it became clear that significant economies of scale for both the air charter and the quarantine and testing solution were going to be needed. “For this to work, we need to partner with our competitors.” Let’s be honest, that’s not a phrase you hear very often in business, especially in the fiercely competitive U.S. Maritime industry. Would there be interest in working together? How would the idea be received? There was only one way to find out. So, the team started working the phones calling every ship operating company with ships in the Diego Garcia region. “If you can make it work, we are in!” That was the response from all commercial ship operators, as well as the U.S. Military Sealift Command (MSC), which was also struggling to conduct crew reliefs for its civilian mariners (CIVMARs) on ships in the region. It was time to try and bring all the pieces together and determine if the mission was operationally and financially viable. A target date of departure was set for May 20, 2020. The team worked the phones to tally total passenger interest. Patriot Contracting Services, Crowley Maritime, Schuyler Lines Navigation and Sealift all eagerly requested Maritime Matrix Today | September 2021 | 25
seats on the mission for their respective crews. as did MSC. The passenger list even included an active-duty military member trying to make it out to the island. The total round-trip tally came to 233 travelers. “This might just work…” the MLL team concluded. With a notional total passenger count, the denominator portion of the financial viability equation was established. The missing piece was the numerator – the total mission cost. After many rounds of contract negotiations, the MLL team had all of the remaining costs pulled together and entered into a cost-tracking spreadsheet. When the final costs were tallied and divided by the total number of committed passengers, the price per person for airlift from the U.S. East Coast to DGAR was approximately $2,700 dollars per person. That was a significant cost savings per person compared to utilizing the normal mode of transportation to Diego Garcia! In addition, the total travel time to and from DGAR would be 22 hours versus the normal three to four days. “Now we need to get a lot of permissions and clearances.” As one might imagine, you can’t just land a commercial jet liner on one of the most secure military runways in the world, so extensive clearances had to be applied for and granted by the Federal Aviation Administration (FAA), MSC, as well as relevant U.S. and U.K. military authorities. Additionally, since the aircraft would be returning back to the U.S. during the COVID-19 pandemic, special approvals were needed through the Centers for Disease Control (CDC) and U.S. Customs and Border Protection. One by one, and not without a lot of administrative challenges, all of the required approvals were obtained. The team from ACC Aviation and Omni Air International, with support from MSC, deserve a lot of credit for obtaining these approvals so quickly. “We are a go!” With enough passengers to make the plan feasible and all the required regulatory approvals in hand, it was time to put the months’ worth of planning into action. Mariners flew in from all corners of the U.S., and even from overseas to begin the mandated 14-day quarantine. Quarantine day one started off with the prescribed COVID-19 PCR testing – deep nasal swabs greeted the socially-distanced mariners as they moved through the testing line, clad in protective masks and toting bottles of hand sanitizer. The next day, the test results showed several mariners were, in fact, COVID positive, and thus would not be able to join the flight and return to work. Proper arrangements 26 | Maritime Matrix Today | September 2021
were made by their respective companies, and they departed for medical care and observation. As the mariners settled into as comfortable a quarantine routine as could be accommodated, the team was working to establish the logistics plan for the day of departure. One challenge remaining was working through the passenger screening plan. MSC’s COVID policy prohibited crews from utilizing the main aircraft terminal at Norfolk International Airport over concerns of potential exposure to COVID just prior to traveling to DGAR. Signature Aviation operates a private air terminal (referred to in aviation-speak as an FBO) at Norfolk International Airport; however, it is designed to service much smaller planes. As it turned out, however, Signature Aviation had previously serviced one 767-200 at their facility – owned by none other than the Canadian rapper and actor Drake! While the aircraft could land and taxi to Signature Aviation, the asphalt tarmac wasn’t rated to turn the aircraft when it was fully fueled, which was required for the flight to the planned refueling stop in Sofia, Bulgaria. To solve this issue, a plan was devised to land the aircraft, turn it around, and back it into position. The aircraft would then be pointed directly at the runway so that it could be fully fueled, then proceed directly onto the stronger main runway at Norfolk International Airport for departure. The days passed slowly for the mariners quarantined in the Hilton Garden Inn in Suffolk, Virginia. Mike had selected this hotel for its large rooms and a few acres of green space where people could get outside for fresh air or exercise while staying socially distanced and abiding by all of the quarantine rules and regulations. Fifteen days after the mariners arrived, four “sanitized” chartered buses arrived and everyone began boarding for the 45 minute drive to the airport. “We are all loaded up and rolling,” Mike exclaimed to Steve as he pulled in front of the four-bus convoy departing for the airport. Steve replied, “The plane is on the ground, turned around and lined up with the runway. We just need to get her fueled up, and we will be ready for you when you get here.” Steve carefully reviewed the various passenger lists, rechecking the flight manifest to ensure everyone was accounted for. At 7:15 PM local time, Mike led the bus convoy of mariners through the gate at Signature Aviation and out onto the tarmac. There, a glistening white and red, fully fueled Boeing 767-200 was sitting pointed directly at the runway, with its cargo and
passenger doors open and ready for passengers. “That’s cool!” Mike yelled out over the jet noise emanating from the aircraft’s auxiliary power unit as he brought the convoy to a stop at the base of the accommodation steps leading up to the aircraft. One by one, mariners exited the charter buses, were processed through passenger screening, and boarded the aircraft. At 9:15 PM the aircraft taxied straight out of the Signature Aviation flight line, and onto the main runway at Norfolk International Airport and queued up in line for departure. It took off at 9:30 PM. After a 22-hour flight, including the refueling stop in Sofia, Bulgaria, the first flight of what would become known as “Operation DGAR” landed at 5:15 in the morning. Mariners were greeted by U.S. Navy logistics specialists who collected them and their baggage, and shuttled them to a nearby boat ramp to be transported out to their respective ships anchored in the lagoon. Over the next 36 hours, mariners would perform their customary crew relief procedures getting briefed on ship operations and material condition issues that had transpired since they were last on board. After a day and a half overlap, the weary crews that had been stranded in DGAR (some for over nine months!) began their much-needed journey home. First came a landing craft-ride to shore. This was followed by a truck ride to the air terminal and a long walk to board the aircraft. Then came a 22-hour flight back to Norfolk and finally, the last leg of the journey home – and to a world that was strangely different than the one they departed when they had gone to sea many months before.
International (BWI) airport. Additionally, Crowley Maritime sourced and shipped hard-to-obtain COVID test kits to Diego Garcia when the CDC and FAA implemented mandatory COVID testing for all international passengers traveling back into the U.S. The shift to MITAGS-MCC as a quarantine location significantly improved the overall quarantine solution as the facility offered a closed campus with better accommodations, on-site COVID testing, meal preparation, and “clean” transportation to BWI (five minutes away). As an added bonus, mariners could receive various maritime training courses while stuck in quarantine. The MITAGS-MCC team worked as an extension of MLL, providing everything from an orientation video to hands-on operational oversight while mariners stayed on campus. Between May 20, 2020 and July 31, 2021, Operation DGAR completed eight airlift missions from the U.S. East Coast to Diego Garcia, moving 1,849 commercial and civilian mariners, regulatory personnel, contractors, and active-duty military personnel from the U.S. Navy, Army, Air Force and Space Force. Additionally, those flights carried over 10,000 pounds of critical spare parts and supplies needed to sustain more than 13 different ships supporting government operations in the Indian Ocean region. Willie remarked: “Maersk’s drive to bring some normalcy to a chaotic situation was eclipsed only by the execution of their repatriation operation. On behalf of all our mariners, a Bravo Zulu to the MLL team!”
The first flight of Operation DGAR was an overwhelming success, safely repatriating 119 mariners and transporting 114 replacement crewmembers to DGAR, ensuring continued readiness of the fleet while allowing mariners to get back to their ships and start receiving pay again. At that point, no one envisioned that more than a year later Operation DGAR would still be underway, nor would they have predicted the impact it would have on U.S. military readiness and crew welfare.
Operation DGAR not only solved the COVID crewing and re-supply challenges on Diego Garcia, but it did so at a significant cost and time savings. In fact, the solution was so efficient that MLL is working to train its competitors on how to continue to run the service once the last Maersk ship departs the region, allowing mariners and their ships operating in and around Diego Garcia to continue to take advantage of Operation DGAR’s cost and time efficiency and reliability.
As the operation progressed, it continually improved through unusually close teamwork among industry competitors. For example, Patriot Contracting Services spearheaded the shift of quarantine location to the Maritime Institute of Technology & Graduate Studies (MITAGS), and Maritime Conference Center (MCC), a maritime training campus just outside of Baltimore-Washington
MMT
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IMI & JSA Loadmaster sign Long Term Agreement to boost supply chain localization
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nternational Maritime Industries (IMI), the largest maritime yard in the MENA region, has today signed a long-term agreement with JSA Loadmaster to enhance its efforts to localize its supply chain in Saudi Arabia.
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The agreement will enable JSA Loadmaster, a joint venture between Jackup Structures Alliance (JSA) and Loadmaster Industries, to localize its rig product manufacturing in Saudi Arabia and boost its lifecycle and maintenance support. Through the agreement with IMI, JSA Loadmaster is expected to contribute around SAR 750 million (USD 200 million) to the Saudi economy over the next eight years. The company will produce rig rack and chord, as well as derricks and other engineered structural products in the Kingdom, in line with the highest standards of sustainability and environmental excellence. IMI, a joint venture between leading industry partners Aramco, Lamprell, Bahri and Hyundai Heavy Industries, will benefit from being able to source products for itself and its clients locally for rig manufacturing, reducing the cost of importing products from abroad. As part of the agreement, IMI will guarantee the ordering of rack and chord for four rigs, with an extension option of an additional two rigs. The signing marks the establishment of IMI’s first longterm agreement with a supplier and a significant milestone in the company’s efforts to localize its supply chain. The partnership will also provide IMI with the opportunity to learn and align with industry best practices and further improve its rig services, building on its competitive overall market position. The long-term agreement was signed by Fathi K. Al-
Saleem, President and Chief Executive Officer of IMI and Jay Fogal, Managing Director of JSA Loadmaster Arabia and President and CEO of Jackup Structures Alliance, during a ceremony at Dhahran, Saudi Arabia. It was also attended by executives from IMI, JSA Loadmaster, Saudi Aramco and ARO Drilling. Fathi K. Al Saleem, President and CEO of IMI, said: “This agreement with JSA Loadmaster is an important milestone for IMI, marking our first big step towards supply chain localization. We are proud to partner with a renowned global company like JSA Loadmaster, which is dedicated to supporting IMI’s mandate to contribute to the development of the local maritime industry. “As part of IMI’s localization strategy, the agreement lays the foundation for the establishment of a local, cost-competitive manufacturing operation where all manufacturing and delivery activities occur in the same place. It will also improve the efficiency, agility, and logistics of the manufacturing process overall; and create employment opportunities while adhering to the highest international standards of sustainability and environmental excellence.”
the IMI initiative, we formed JSA Loadmaster under the leadership of our Middle East VP Shaun Hanton, supporting Saudi Vision 2030. Our Joint Venture combines the strength, knowhow, and technical expertise of both Jackup Structures Alliance and Loadmaster Industries.” Jeff Myklebust, CEO for Loadmaster Industries, stated: “JSA Loadmaster will deliver an industry-leading manufacturing and supply solution supporting and partnering with IMI. Our localization plan includes a large percentage of technology and knowledge transfer through our technical and operations team led by Jeremy Guillotte. We will be developing and training Saudi employees to drive and grow the ecosystem required to support the initiatives of this Long Term Agreement, while respecting the culture, safety, and the environment in Saudi Arabia.” IMI’s localization efforts are focused on the procurement of materials and services used in rig and vessel production, as well as maintenance, repair and overhaul (MRO) practices. The company intends to form more long-term partnerships with suppliers that are committed to localizing the manufacturing of their products in Saudi Arabia. MMT
Jay Fogal, CEO for Jackup Structures Alliance, stated: “Our team embarked upon this journey with IMI and ARO four years ago with the support of Loadmaster’s Chairman, David Russell. As we developed our understanding that we could add significant value to Maritime Matrix Today | September 2021 | 29
MPA establishes robust regulatory framework for bunker suppliers
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ntense competition in the Singapore delivered bunker market that has squeezed margins, particularly for IMOcomplaint low sulfur bunker fuel, is limiting the ability of some players to operate profitably, industry sources told S&P Global Platts. An uptick in the cost to secure ex-wharf supplies amid a firming upstream marine fuel 0.5%S cargo market, coupled
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with stiff competition to retain a slice of the delivered market, has led to a crunch in margins for some companies, especially those considered tier-2 in the Singapore bunkering landscape, market sources said. The result has been that some medium-sized independent companies are considering scaling down operations or even exiting the market, one source said.
The market is not good for physical suppliers, with even the big players being impacted by intense competition amid tepid demand, an industry analyst said. Oil majors and large integrated trading companies can usually fare relatively better in the delivered market due to control over their upstream and downstream supply chains, as their costs are lower than
independent suppliers that have to factor in the ex-wharf cost component, a Singapore-based bunker supplier said.
$3.42/mt over Sept. 1-23, rising from $2.65/mt in August and $2.25/mt in July, Platts data showed.
The narrowing price spread between marine fuel 0.5%S bunker sold on a delivered basis and on an ex-wharf basis, or barging spread, has been cutting into margins, especially for smaller-sized sellers involved only in the delivered bunker trade, market sources said.
“More demand, especially for low sulfur fuel oil bunkers, is needed to sustain the delivered bunkers business, which has been under pressure from below-average trading activity amid ample availability,” another Singaporebased bunker supplier said.
The spread between Singaporedelivered and Singapore exwharf marine fuel 0.5%S bunker has averaged $3.91/mt over Sept. 1-23, shrinking from $5.06/mt in August and $5.61/ mt in July, Platts data showed. Some suppliers are struggling to break even as the barging spread is below the $5-$8/mt typically required to offset operational costs, a Singapore-based trader said. The premium for marine fuel 0.5%S bunker delivered in Singapore over the benchmark Singapore marine fuel 0.5%S cargo assessment has averaged $7.33/mt over Sept. 1-23, shrinking from $7.71/mt in August and $7.86/mt in July, Platts data showed. The premium to deliver IMOcompliant bunker to vessels calling Singapore has averaged $7.65/mt in the third quarter to Sept. 23, down from $15.45/mt in Q3 2020, according to Platts data. The fall in the delivered premium comes amid an increase in costs to acquire product on an ex-wharf basis. The premium for Singapore ex-wharf marine fuel 0.5%S bunker over the Singapore marine fuel 0.5%S cargo assessment has averaged
The squeeze in margins was also likely pushing companies to scale down operations by reconsidering or not renewing the time charter of their barges, traders said. The number of MPA-registered bunker barges currently stands at around 207, down from 210 in March 2021 and 215 in July 2020, Maritime and Port Authority of Singapore data showed. The 207 figure includes a newly-registered LNG bunker barge. Consolidation likely underway While the Singapore bunkering landscape has already seen the number of licensed suppliers shrink in recent years, further consolidation due to the stiff competition was very much on the cards, market sources said. “Given where the delivered premiums are, the market is still too crowded with 41 [licensed] bunker suppliers even after a couple of recent exits; a few of these entities could even be dormant or biding their time with only few bunkering jobs on hand,” another trader said.
A recent supplier to exit the Singapore bunker market was Pacific Bunkering Services, which had not renewed its bunker supplier license in the latest MPA list. “The cessation of operations was not due to economic reasons,” a company source said. The MPA closely monitors bunker demand and supply in the Port of Singapore while ensuring that the local bunker market remains well-diversified and competitive, a MPA spokesperson told Platts recently. “The number of bunker suppliers will ebb and flow with local and global market developments. We ensure that there is sufficient competition in the market so that bunker pricing is competitive internationally,” the spokesperson added. MPA has established a robust regulatory framework through the implementation of bunkering standards as well as an accreditation scheme, licensing and enforcement regime for bunker suppliers. “This regulatory framework ensures that all suppliers can provide bunkering services competently,” the MPA spokesperson said. MMT
Singapore has seen its accredited bunker supplier list shrink from over 50 in September 2017 to 45 in January 2021 and 41 in August. Maritime Matrix Today | September 2021 | 31
Record gas prices act as catalyst for oil demand
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he rise of gas prices could act as a catalyst for oil demand and thus more cargoes for oil tankers, should more countries opt for oil-based supplies for their winter needs. A cold winter could also play its part. In its latest weekly report, shipbroker Gibson said that “the current strength in gas prices is having major ramifications for global energy markets. Record prices in Europe and Asia are forcing utility firms to look for alternative energy sources and have pushed some companies into bankruptcy. Many have been forced to burn more coal despite the environmental consequences, whilst oil-based fuels will also receive a demand boost in regions where oil fired power capacity still exists.
Source: Gibson Shipbrokers According to Gibson, “the answer to this question depends on the scale of the demand increase, which Goldman Sachs estimate could equate to a near 1% uptick in global oil consumption. However, this would depend on a ‘cold winter’ and would also likely be focused East of Suez where oil-based fuels have greater potential to form part of the power generation market. High sulphur fuel oil (HSFO) is expected to be the primary beneficiary of the oil-based fuels. Countries including Pakistan and Bangladesh, as well as some Middle Eastern players have 32 | Maritime Matrix Today | September 2021
already been more active in the spot HSFO market as LNG prices began to rise in Q2. Now HSFO burn is also likely to increase in parts of East Asia, such as Japan where oil fired capacity is still available. However, higher HSFO prices and limited supply will eventually restrict this practice. Unlike East of Suez, Europe has limited capacity to burn HSFO for power generation (oil-based fuels generated just 1.8% of the EU’s electricity supply in 2019), so in Europe there is less potential for an increase in oil demand to offset higher gas prices”. The shipbroker said that “higher HSFO prices could also potentially increase refining run rates, supporting crude demand. Fuel oil cracks, although still negative, are currently close to multimonth highs, which combined with stronger Asian gasoil and jet margins, could incentivize higher refining activity. Asian refiners may also seek to boost HSFO output through changes to refining slates/ configurations if prices continue to find support from the gas market. Relatively stronger demand for HSFO in power generation in the East compared to the West should also offer some support for arbitrage flows. Typically, arbitrage flows ease this time of year as Middle East power generation demand falls in line with cooler temperatures. However, higher gas prices have the potential to support above average West to East HSFO flows this winter”. Gibson added that “crude direct burn also has the potential to increase due to higher gas prices. This practice is most common in the Middle East, although regional players have sought to reduce the
practice in recent years, shifting focus to ‘cheaper’ gas/LNG and HSFO. Now that the price relationship has changed and gas has a higher value, consumption of crude could find support once again. Whilst this would theoretically reduce the amount of crude available for export from the Middle East, this practice is expected to be limited. Many Middle East consumers of domestically produced gas lack the infrastructure to divert domestic volumes to the export markets and have a limited capacity to exploit the current strength in gas prices. Some are even importers of LNG and may switch to HSFO or crude once again”. “For tankers, any increase in oil demand is positive. If demand continues to find support from firm gas prices, then tanker owners can expect to benefit from increased oil trade, be it increased HSFO trade, higher refining run rates or a boost in OPEC+ output. However, any increase in crude direct burn in the Middle East could offset some of the benefit. Any gas related demand increase is unlikely to be enough to return oil demand to pre-covid levels but could at least provide a temporary boost”, the shipbroker concluded. MMT
Tanker market expected to undergo severe challenges
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his year has been a challenging one for tanker freight rates, while the dry bulk and container markets have been experiencing decade highs with elevated rates not seen before in maritime. What is more, there should be persistent concern regarding the drivers behind this adverse evolution from the summer of 2020 till today. In this piece, we will examine the degree to which the plunge in the tanker freight market is driven
by the oversupply of ships, and by the remarkable volatility in the recent estimates on world oil supply and demand that has had an enormous impact on the healthy rebalancing of the shipping market, prolonging the downturn cycle we see months now. The IEA and OPEC recently underlined that the economic impact of the Covid-19 Delta variant and rebounding output mean that expectations of Maritime Matrix Today | September 2021 | 33
global oil demand outstripping supply are fading. In its closely watched monthly market report, the International Energy Agency said that the worsening of the pandemic, as well as revisions to historical data, mean its global oil demand outlook has been “appreciably downgraded,” with some of this year’s forecast recovery shifted to 2022. The IEA cut its 2021 global oil demand growth forecast by 100,000 barrels a day, while upgrading its 2022 forecast by 200,000 barrels a day. Both the IEA and OPEC expect the world’s thirst for oil to return to pre-pandemic highs in the second half of next year. The Paris-based organization commented that the timing of the variant’s spread has coincided with planned supply increases from the Organization of the Petroleum Exporting Countries and its allies “stamping out lingering suggestions of a near-term supply crunch or supercycle.” The latest OPEC Monthly Oil Market Report projected world oil demand to increase by 3.3mb/d year-onyear in 2022 and to surpass 100mb/d in the second half of 2022. Economic growth is estimated to pick up on the back of massive stimulus packages, whereas the Covid-19 pandemic is anticipated to be under control, supported by vaccination programmes and improved treatment, allowing for steadily rising oil demand in both the OECD and non-OECD. For the non-OECD, oil demand is expected to grow by 1.8 mb/d, led by China, other Asian countries and India. Demand in China and India is likely to outstrip pre-Covid-19 levels, due to a healthy rise in demand for transportation and industrial fuels. Additionally, mobility increases and progress in the industrial sector will fuel oil demand growth for other Asian countries, Latin America and the Middle East. Prospects on product markets and refinery operations emerged promising in July driven by an increase in refinery margins for July, which was supported by the seasonal strength of transport fuel. In the U.S, OPEC Monthly Oil Market Report highlighted that a counter seasonal decline in refinery utilization rates and the subsequent downward pressure on product inventories, as well as strong exports to South America, lifted product markets in the country. It added that there is also a positive sentiment in Asia due to a healthy regional fuel consumption, robust petrochemical feedstock demand and strong conversion margins that lead to gains for clean products. In July, IEA mentioned that world oil markets are 34 | Maritime Matrix Today | September 2021
on edge with OPEC+ negotiations to boost supply now in deadlock. Most OPEC+ delegates tentatively agreed to raise output by around 400 kb/d per month from August until the remaining 5.8 mb/d supply cuts are unwound, effectively extending the deal to the end of 2022. Overall, oil markets are likely to remain volatile until there is a clarity on OPEC+ production policy, while the uncertainty over the potential global impact of the Covid-19 Delta variant in the coming months is also tempering the sentiment. Using Signal Ocean data, we will review how tanker freight markets have been responding to these highly volatile and fundamentally oversupplied market conditions, by examining the evolution of supply-demand balance, cargo volumes, ship supply, average laden speeds, idle times for major dirty and clean trading routes and from pre Covid-19 times until today. Freight Market Drop in demand for seaborne crude oil combined with a steady flow of vessels returning from floating storage and strict oil production cuts in countries exporting crude oil caused crude tanker freight rates to record a sharper decline than the smaller vessel segments. Few carry market expectations for a strong second and third quarter of this year, however, there is a bullish sentiment for recovery of freight rates in 2022 and 2023, also backed by positive signs in the correlated oil market macroeconomics. A gradual soft upward sentiment of freight rates towards the end of this year may still be a possibility. In image 1, we plotted the performance of tanker freight rates on major clean and dirty trading routes per ship size from the fourth quarter of 2019 till summer of this year. We see the spikes of freight rates at the end of 2019, pre-Covid, and first quarter of 2020, whereas the volatility has pretty much flatlined ever since.
In the crude tanker routes, VLCC- AG to Far East, the decline comes to 78% of WS rate at the end of
July this year compared to the average value of October 2019 and a similar reduction of about 70% was encountered in the Suezmax- Wafr to Cont. In the Med Aframax and the Caribs-USG Panamax segments we have seen 50% fall in the average value of July compared to October 2019, whereas, in MR1/MR2 clean routes, the decline is around 20-24% decline. The graph also depicts a recent and gradual upward trend on MR2 routes, which could become even stronger during autumn, given the optimism on the prospects of product markets and refinery operations that OPEC outlined in their latest Monthly Oil Market Report.
By examining all the above, overall, the cargo intensity provides a stronger image in the clean segment compared to crude, however, the AG region gives strong prospects for VLCC and MR2 sizes.
Cargo Volumes
Supply Trend
Looking at the volume of cargoes to help us interpret the current trends across routes and sizes, we can see the intense volatility with mostly downward momentum from the third quarter of last year till the end of the second quarter of this year. However, July ended with signs of recovery in the AG for VLCC and Panamax tankers. In image 2, we plotted the evolution of cargo volumes in key loading areas for VLCC, Suezmax, Aframax and Panamax tankers. In the Suezmax segment, the anemic volume of cargo intensity at West Africa is a clear signal for sharp fall in Suezmax WS rates.
The supply trend graph below (Image 5) depicts the evolution of the number of ships available to load at major areas over time. The graph pretty much explains the current freight market sentiment and provides insight into the downward cycle of rates. The gloomiest picture appears to be in the VLCC segment with AG Ras Tanura supply trend presenting a 54% increase compared to the levels of September 2019, while Suezmaxes out of West Africa come in at a 46% increase. In contrast with the picture of the larger crude carriers, the Aframax Med supply trend, despite the spikes we experienced between the end of the second quarter and third quarter of last year, is now fluctuating at almost similar levels to September 2019.
In MR2 and MR1 segments, images 3 and 4 show how the Caribbean region provides a much stronger outlook from May till July, while the West African market despite a strong spike in May shows soft sentiment along with other areas. In the MR2 segment, AG region appears promising with a continued upward volume over the last three months.
• VLCC AG-Ras Tanura: based on 16 days laycan, fwd, pushed/pushed poss and spot relet vessels • Suez Wafr Escravos: based on 20 days laycan, fwd, pushed/pushed poss and spot relet vessels • Afra Med Ceyhan: based on 6 days laycan, fwd, pushed/pushed poss and spot relet vessels • Panamax Caribs Mamonal: based on 12 days laycan, fwd, pushed/pushed poss and spot relet vessels • MR2 Cont Houston: based on 12 days laycan, fwd, pushed/pushed poss and spot relet vessels • MR1 Algeria: based on 12 days laycan, fwd, pushed/ pushed poss and spot relet vessels Maritime Matrix Today | September 2021 | 35
In the clean segment, the supply trend in Algeria for MR1 vessels has been more or less consistent pre and post Covid, with similar levels of supply in July 2021 and September 2019. The most promising outlook is presented in the MR1 segment, as the Continent supply trend recorded a declining trend with the volume of available ships falling by 31% in July compared to September 2019 levels. Idle Time per Voyage The significant overall increase in the supply of dirty tankers as a reflection of the tough conditions of voyage optimization and profitability in employment opportunities led the idle time per voyage to a sharp increase from the end of the fourth quarter of 2019 and the first two quarters of this year.
In image 6, we plotted the average value of idle time per voyage for crude and clean tankers, per ship size to compare the fleet utilization across ship sizes and foresee positive market prospects for freight earnings. The results for MR1 and MR2 clean segments present a declining trend in the average idle number of days compared to excessive highs of VLCCs. However, in the crude tanker segment, the Suezmax and Aframax dirty tankers recorded a fall at the end of the second quarter of this year, which may bring a stronger third quarter outlook in freight earnings for the smaller crude tanker ship sizes. Laden Speed The challenges of the continued downturn of the tanker freight industry directed ships towards lower speeds to reduce fuel consumption as tanker earnings are still facing mounting pressure. In image 6, we plotted the fluctuations in laden speed applied over the last 12 months, where the estimates confirm a declining trend across all sizes over the last three months with an exemption in the MR1 segment.
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Slow steaming seems to be an obvious counter-balancing remedy for the crude tanker segments, as crude oil supply and demand estimates are still trying to find a healthy pace to support vessel earnings. Indicatively, the laden speed of VLCC tanker fell to 11.67 knots end July compared to 12 knots end September 2020. This persistent declining trend of laden speed in crude tanker ships can lead the average laden speed of seagoing vessels to fluctuate at levels of lower than 11knots, however, in the MR clean segment, the trend seems to be on the rise again towards 12knots. Outlook The tanker market is expected to undergo severe challenges on oil demand that may prolong the downturn of freight rates during the second half of this year mainly for the crude segment. Significant risks to the demand outlook remain, with the spread of the Covid-19 ‘Delta’ variant raising concerns about the pace of oil demand recovery in Europe, North America and Asia. Looking ahead, supply and demand freight market dynamics will see improvements in 2022 due to continued rebound in global oil demand and scheduled easing of supply cuts that will support crude and product tanker shipments and freight rates’ upturn. Market consensus is that 2022 will be the year of freight rates’ increase above 2019 levels and rebalance of oil supply with world demand. This tanker shipping market report for dirty and clean products was produced using insights, data and reports from the Signal Ocean platform. MMT (Courtesy: The Signal Group)
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