World Shipping - Summer 2013 by Maritime Media

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ISSUE 1 / SUMMER 2013

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WORLD SHIPPING

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DRY

RUN Is the dry bulk market starting a slow journey to recovery?

— FOCUS — CANADA, ASIA AND MIDDLE EASTERN PORTS — IMO REPORT — MARITIME SAFETY AND ENVIRONMENTAL ISSUES ARE BACK ON THE AGENDA — WHAT”S NEW? — ALL THE LATEST NEWS, PRODUCTS AND INDUSTRY REPORTS FROM AROUND THE WORLD

NEVSKY S H I P Y A R D E V E R Y

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M A T T E R S

Nevsky Shipyard, LLC Fabrichny Ostrov 2, Schliesselburg, Leningrad Region, RUSSIA 187320 Phone: +7 (812) 494-83-38; +7 (81362) 78-702 Fax: +7 (81362) 77-666; +7 (81362) 78-707 E-mail: sec2@nssz.ru Website: www.nssz.ru

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I N D U S T R Y

S U M M E R

M A G A Z I N E

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ISSUE 1 / SUMMER 2013

T H E

I N D U S T R Y

A U T U M N

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WORLD SHIPPING

S H I P P I N G

M A G A Z I N E

F O R

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w w w . w o r l d - s h i p p i n g . n e t

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DRY

RUN Is the dry bulk market starting a slow journey to recovery?

F R O M

T H E

— EDITOR —

PUBLISHER W H Robinson EDITOR Sandra Speares sandra.speares@mar-media.com SUB-EDITOR Sam Robinson sam.robinson@mar-media.com PROJECT MANAGER Taj Oberai taj.oberai@mar-media.com PROJECT CONSULTANT Alex Corboude alex.corboude@mar-media.com DESIGNER Hicham Kasbi hkasbi@hotmail.com

PUBLISHED BY: Maritime Media Ltd Suite 25, Hurlingham Studios, Ranelagh Gardens, London SW6 3PA, UK Tel: +44 (0) 20 7386 6100 Fax: +44 (0) 20 7381 8890 E-mail: inbox@mar-media.com Website: www.world-shipping.net

hese are challenging times for the shipping industry. Not only has the bottom fallen out of the ship finance market, but owners and operators and those who support them down the supply chain are having to grapple with high fuel costs, regulatory pressures and public scrutiny on environmental issues. The challenges are there in terms of spending – for example when it comes to new systems to meet regulatory requirements for ballast water treatment systems – but there are also opportunities. Suppliers are seeking solutions to these new requirements, owners are exploring innovative new technologies aimed at reducing their costs and the bunker industry – as well as operators – is mulling the cost of new low sulphur fuels that will be mandatory in the years ahead. Many operators are investing in eco friendly ship designs or those that use eco friendly fuels such as LGG, although the jury seems to be out as to how quickly LNG will become widespread for ocean-going ships. Ports will also find some challenges on the supply side. Competition between ports is only likely to become more intense with the coming on stream of new facilities such as London Gateway. Seafarers’ welfare is clearly at the top of the agenda, with a new Maritime Labour Convention and all that it implies. Enclosed space concerns and dealing with dangerous cargoes remain issues of paramount importance to ensure the safety of ships’ crews. While piracy may have been on a downturn in recent months, it remains a serious issue, while abandonment of seafarers by companies facing financial problems, not to mention exploitation of crews, continue to be serious problems which, in many cases, maritime charities have to resolve in the absence of other support. There continue to be safety issues to be learned from casualties such as the Costa Concordia, while many observers suggest that international maritime conventions such as the Safety of Life at Sea Convention, need to be revisited. World Shipping is exploring these issues and more. We hope you enjoy this inaugural issue.

SANDRA SPEARES

Summer 2013 —

USA_ANÚNCIO_A4_NAVAL_SHORE_GRAFICA.pdf 1 17/01/2013 16:20:32

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Contents

World Shipping

Issue .01 / Summer 2013

activities in the shipbroking sector

04 — BIMCO

A DATE WITH HISTORY BIMCO’s Documentary Committee first met 100 years ago and is still producing contracts covering anything from shipbuilding to piracy

07 — VIEWPOINT

THE HUMAN TOUCH Michael Grey discusses why there will always be a need for quality people

08 — SALE AND PURCHASE

AGE-OLD ASSETS ‘Eco-ships’ for the rich, ‘old ladies’ for the poor – sale and purchase in the dry bulk market is undergoing interesting times, says Basil M Karatzas, CEO of Karatzas Marine Advisors & Co

10 — TANKERS

SURGING AHEAD Several surveys and reports show that confidence is high in the tanker market, with demand recovering and cargo supplies increasing

12 — DRY BULK

DRY RUN The dry bulk market is finally enjoying some improvement after a period of crisis

14 — CONTAINERS

BOOM TIME The container industry is expected to take delivery of record volumes of teu capacity this year. Meanwhile, intra-Asian traffic is set to surge

15 — IMO REPORT

ON THE AGENDA Maritime safety and environmental issues have been on the agenda again, as well as a new code of conduct to tackle piracy in west and central Africa

17 — NEWS ROUND-UP

All the latest industry news, reports, company moves, management changes and surveys

41 — SURVEYORS AND CONSULTANTS

SURVEYING THE SCENE Surveyors and consultants have a key role to play in the shipping industry

20 — SHIP MANAGEMENT

MANAGEMENT INDUSTRY New initiatives are improving information flow and highlighting risks

25 — INSURANCE

CREW COVER The advent of the Maritime Labour Convention has resulted in a number of new products being offered specifically to seafarers

27 — MARINE SOFTWARE

A SOFT APPROACH From hull maintenance systems to maritime security charts, there is an exciting range of new offerings in the market

30 — SALVAGE

COST CONTROL Costs in salvage operations have been spiralling, says the International Salvage Union

32 — HEAVY LIFT AND BREAKBULK

FORGING LINKS Strategic alliances are the way forward in the heavy lift and breakbulk sectors

34 — RISK MANAGEMENT

RISKS AND REWARDS Risk management is also about keeping promises to those you work with

36 — REGISTRIES

REGISTERING INTEREST Preparing for new regulations and flag state performance

39 — SHIPBROKERS AND AGENTS

SPOTLIGHT ON SHIPBROKING From new levies imposed by Greece to insurance products that hit the spot – just some of the recent

44 — MIDDLE EAST

RISING IN THE EAST A number of new developments are underway in Middle Eastern ports as the region seeks to strengthen its position as a major hub for world trade

46 — ARA

ARA ATTRACTION Antwerp, Rotterdam and Amsterdam ports are undergoing investment and expansion to secure a healthy future

49 — CANADA

GOING GREENER Setting its sights firmly on the environment, Canada is implementing a range of initiatives that aim to have an impact

53 — ASIA PACIFIC

ASIA MAJOR Port developments, newbuilding contracts and new services add up to a thriving region

55 — LEGAL

SHIPOWNERS TAKE HEED Three recent decisions in the English courts are of particular interest to shipowners

57 — MARITIME LAW

TAKING CONTROL Haco van der Houven van Oordt, a partner with the shipping & offshore team at AKD law firm in Rotterdam, looks at liability. Plus: The Maritime Labour Convention; Asian Gypsy Moth

59 — RUSSIAN REPORT

NEW APPROACH While there may be concern about the number of newbuildings coming into the market, there is certainly demand in the Russian market

Summer 2013 —

BIMCO

The Documentary Committee’s centenary group

A DATE WITH HISTORY BIMCO’s Documentary Committee first met 100 years ago and is still producing contracts covering anything from shipbuilding to piracy

n central Paris 100 years ago this April, BIMCO’s Documentary Committee gathered for its inaugural meeting at the Hotel Continental near the Louvre. The agenda was modest, but the meeting itself was a seminal moment in the creation of what has become one of BIMCO’s best known and most respected activities – the formulation and revision of standard forms of contract. Many of the charter parties discussed that day have since become relics of the past such as the BELFRANCON and MILOBALT Charters. Others, such as the BALTIME Charter, are still in widespread use having been amended on a regular basis over the years. The agenda also tells a story about the strong sense of continuity in BIMCO. John Denholm, the great-grandfather of BIMCO’s newly elected President, John Denholm, attended the first Documentary Committee meeting and was later to become BIMCO’s sixth President in 1927. One of the most important decisions taken at the Paris meeting was to develop a new “general charter” for the industry – this decision led to the eventual development of the GENCON form, which continues to this day to be one of BIMCO’s most successful charter parties. On 27 May 2013, BIMCO’s Documentary Committee once again convened in Paris at the very same hotel where the first meeting took place 100 years before. The number of members serving on the Committee has grown over the years, as has the volume and diversity of documentary tasks. Conventional charter parties are no longer the sole focus of the Committee’s efforts. The standard contracts produced by BIMCO a century ago were 4

— Summer 2013

primarily charter parties for the carriage of timber, grain and phosphates. Today, BIMCO produces a very broad range of contracts covering everything from shipbuilding through ship management to armed guards. At the latest meeting in Paris, the Documentary Committee adopted one new contract, eight standard clauses and a revised edition of the jointly produced Charter Party Laytime Definitions (formerly VOYLAYRULES).

WINDTIME Top of the agenda at the Paris meeting was a standard time charter party, although one which is firmly rooted in the 21st century. WINDTIME is designed for the nascent offshore wind farm industry to provide a dedicated contract for the employment of small, highspeed personnel transfer vessels used to ferry technicians and their equipment to and from offshore wind farm installations. It is modelled on BIMCO’s highly successful and best-selling offshore charter party – SUPPLYTIME – but with adaptations for the offshore wind farm sector. MARITIME LABOUR CONVENTION 2006 In response to the coming into force of the Maritime Labour Convention 2006 (MLC 2006) on 20 August 2013, BIMCO has developed a suite of clauses for SHIPMAN, CREWMAN and SUPPLYTIME. From a contractual point of view, the main areas of concern with MLC 2006 are where the owners may not be the direct employers of some or all of the personnel working on board their vessel – such as in the offshore industry, where it is common

BIMCO

as a result of lying idle for an extended period on the orders of a time charterer. Under the newly adopted Hull Fouling Clause for Time Charter Parties, charterers will be responsible for hull cleaning if, as a result of their orders, fouling is caused by the vessel’s prolonged stay in port or at anchorage. It is left to the parties to decide what period of time constitutes a “prolonged stay” for the purposes of the clause – and they will have to take into account factors such as the type, age and condition of the hull coating and the paint manufacturers’ recommendations as well as the propensity for marine growth where the vessel is located.

WAR RISKS AND PIRACY The CONWARTIME and VOYWAR war risk clauses are incorporated as standard into BIMCO charter parties. Because of their widespread use and important purpose, regular scrutiny is of utmost importance. These clauses have been reviewed and updated by a team of legal and insurance experts. Clarification has been made in respect of the basis for determining war risks by reference to the level of danger, together with clearly stated provisions covering charterers’ liability for reimbursing owners’ additional insurance costs and the costs of any additional war risk related insurances required by owners. At the same time,

practice for the charterers to place specialists like geologist on board. The set of recommended additional clauses has been developed by a team of MLC experts from the offshore and ship management sectors.

ISSUES OF HULL FOULING With ships spending an increasing amount of time lying idle in ports and at anchor, the consequences of hull fouling on the performance of the vessel and the responsibility for cleaning under a time charter party has become a contentious issue. At common law and under most standard forms of time charter party, an owner is responsible for maintaining the vessel in an efficient state throughout the charter period. This includes a requirement to keep the vessel’s hull and other underwater parts free from fouling. If the owners fail to maintain the vessel and the vessel’s performance is affected, they may be exposed to claims by the charterers for under-performance. While this position is acceptable under normal trading conditions, many owners feel that they should not bear the burden of hull cleaning if their vessel has become fouled

“Many of the charter parties discussed that day 100 years ago are still in widespread use” the definition of “piracy” has been broadened to cover “violent robbery and/or capture/seizure”. BIMCO’s piracy clauses have also been reviewed and updated. The wording for the trigger mechanism of the clause has been adjusted in line with the war clauses to ensure consistency. Owners are now permitted to take out additional insurances required in connection with piracy risks, such as kidnap and ransom cover, with the costs recoverable from charterers. A new provision in the time charter version holds the charterers liable for hire, or an equivalent amount if redelivery has taken place, for time lost due to repairs after seizure.

REVISION OF NYPE The widely used NYPE “Produce” dry cargo time charter party is undergoing an overhaul. The main focus of the revision, which is a joint project between BIMCO, the Association of Shipbrokers and Agents, USA and the Singapore Maritime Fund, is to bring it up to date by incorporating many of the commonly inserted additional clauses and frequently made amendments. Among the issues being considered are the incorporation of more sophisticated wording in respect of speed and consumption and comprehensive bunker-related clauses. Work on the revision of NYPE will continue over the summer and it is hoped to finalise the charter party by November. AGENCY POOLING AGREEMENT Following publication of the standard pooling agreement for the tramp bulk sector, POOLCON, last year under which participating owners time charter their vessels to pool managers who act as principals in dealings with charterers, work is underway to develop an agency-based pooling agreement. Under the agency agreement, which will be codenamed POOLCON B, pool managers will trade participants’ vessels as agents to owners. Vessels will not be time chartered into the pool, but party rights and responsibilities covering the operation and trading of pool vessels will be set out in an underlying “Reference Charter”. LOOKING AHEAD With the recent completion of so many projects, BIMCO is ready to enter its second century by continuing to provide the shipping industry with balanced standard contracts and clauses. The men and women of the Documentary Committee, past and present, and the members of the many subcommittees who have drafted BIMCO’s contracts and clauses, have given and continue to give their time freely in the belief that harmonisation of terms and conditions brings a great benefit to the industry by oiling the wheels of commerce. The new work programme will see projects such as the development of a Ro-Ro Passenger Time Charter Party; a Ballast Water Management Sampling and Testing Clause; and the revision of the BIMCO Standard Bunker Contract. Sample copies of all BIMCO contracts and clauses and the latest up-to-date information on any of the above projects can be obtained by visiting the news section of the BIMCO website at www.bimco.org or by contacting the Legal and Contractual Affairs Department at documentary@bimco.org. Summer 2013 —

VIEWPOINT

“W

here are the pressure points on your business?” It was a reasonable enough question, posed to a panel of shipping company CEO’s at the recent BIMCO Annual General Meeting in Paris. Would the answer be the overcapacity in virtually every sector, caused by the extraordinary inability of owners to keep their cheque books in their pockets, when shipyards were offering cheap ships? Might it be the difficulty of obtaining bank finance, or the costs of all the environmental regulations piling into the industry? Niels Stolt-Nielsen, CEO of the big chemical and parcel tanker fleet that bears his name, was quite emphatic. His major challenge and regular preoccupation, he said, was in recruiting and retaining the well-qualified seafarers his company needed to run the very complex ships he operated. There was a massive training burden, but there was no getting away from the fact that these were very busy people, who had to deliver high quality operations in a demanding trade, with no relaxing and with a direct influence on the maintenance of customer loyalty. People matter, but the perennial problem of a “manning crisis” has tended to be pushed to one side in recent years, where owners’ survival and the global financial crisis — along with the cost of fuel and environmental burdens, have all seemed more important. But the need for quality people in a growing world fleet never went away and it was significant to listen to a major owner reminding us of this very point. There were other reminders at the IMO’s novel Symposium on the Future of Ship Safety in London, where the “human element”, although allocated a session all of its own, nevertheless managed to become a major talking point in virtually every one of the six main sessions. The human element clearly does matter and while it might be reassuring to think that clever equipment and ever more regulation will make ships safer and more efficient, the reality is that such will only be achieved with the intervention of those well-qualified seafarers that Stolt-Nielsen was seeking to find and to retain. At the IMO event, there were some really important matters flagged up, in which the human element was identified as a crucial component. Is it all a matter of education and training – getting the colleges to provide the right sort of courses? Education and training, it was said quite firmly, were “struggling” to keep up with the changes in technology that were roaring ahead. Not for the first time, it was suggested that the whole nature of seafaring was changing — as were the ships. The seafarer – both the “e-navigator” and the engineer - were having to cope with equipment that was changing at enormous speed, in which the ship’s officer as somebody who had to intervene constantly to keep machinery running and ship on course, was being replaced by people whose main role was to monitor the equipment, with all its computers and electronic sensors. Some might argue that the hands-on navigators and engineers of yesteryear have been de-skilled, while others might define this new role of oversight as one where these people are “differently” skilled, whether they like it or not. Does this permit greater job satisfaction, or less, of this important component? And if the latter, might this new role, in which the paperwork burden from more and more regulations is regularly complained of, be something that makes it less likely that people can tolerate the sea? Can

THE HUMAN TOUCH Michael Grey looks at why, despite the onset of sophisticated equipment taking over many onboard duties, the need for quality people in a growing world fleet has never gone away there be anything less attractive than “driving” one of the newest, largest containerships, peering around stacks of boxes to catch a glimpse of a sea horizon? I’m not answering these questions, you might observe! Is stuffing ships with sophisticated equipment making them safer? At the IMO event, DNV’s Tor Svensen showed us a worrying graph which showed that during the past 30 years, there had been no appreciable improvement in navigational safety. Just think of all the gear that clever equipment manufacturers had managed to pack into all those wheelhouses in these past three decades: the satnavs, the automatic plotting aids, the AIS, the integrated navigational systems, the electronic charts, the wonderful communication facilities, the things you can do at the touch of a button or an automated program. And yet ships are still colliding and grounding at the same rate as they did when navigational equipment was far more primitive. Are we doing something wrong here? Might it be that in the relegation of the navigator from one whose ability with a sextant, hands-on chartwork and coastal pilotage provided a measure of professional achievement, to the role of an “observer” or “overlooker”, we have cancelled out the advantages of all this new and exciting gear? It could be that the main navigational challenge these days, slumped in a comfortable leather chair and surrounded by equipment doing all the work, is staying awake and alert. We worry about “fatigue-induced casualties”, but might boredom and the lack of involvement be the principal enemy? Seafarers have made it quite clear that the threat of criminalisation, even fear of becoming piracy victims, have made the sea life less attractive, at least to those who might have choices. A long hard look at the lack of stimulation, even the “dumbing down” of marine professionalism and the endless oversight from ashore might also be features of modern seafaring that effectively “turn off” the modern seafarer. Summer 2013 —

SALE AND PURCHASE

AGE-OLD ASSETS

‘Eco-ships’ for the rich, ‘old ladies’ for the poor – sale and purchase in the dry bulk market is facing interesting times, says Basil M Karatzas, CEO of Karatzas Marine Advisors & Co

Basil M Karatzas

hipping asset prices have been at a fraction of their peak levels from about five years ago. While it is still debatable when the market will recover, it seems that the “smart money” concurs that present asset prices offer a good entry point to the cycle. For several asset classes, freight rates not only have consistently been above cash break-even levels, but also the present prevailing price levels allow for the decent return on the investment with a decent chance for asset appreciation. While “prevailing” shipping asset prices seem tempting, there have been a couple of parameters that make the dictum “this time things are different” true. First, there is minimal debt financing available for the traditional owners during the present phase of the cycle and, second, there is a marked dearth of modern, high-quality dry bulk and tanker vessels available for sale at prevailing market prices. In short, buyers have to utilise their own (or someone else’s) equity in order to grow, When they use their own equity, small owners have to focus on “cheap” vintage tonnage for acquisitions, or, if they have access to plenty of equity or equity from the capital markets, then the focus has been on the newbuilding market. A very modern capesize vessel has a market value in the $35–40m range; the freight market for such vessels has been below $10,000 per diem so far this year, just about the vessel’s daily operating expense. Since economies of scale are important in this market, one cannot go for just one vessel. Assuming an investment intent to acquire two-three vessels and make money based on an asset play strategy, approximately $100m will be required for such a game plan. Given that bank lending is tough to get by (and admittedly the freight market cannot support

much leverage, in any case), a buyer has to come up with $100m equity, not a small amount even for cash- rich buyers. Therefore, the sale and purchase (S&P) market is tough for modern tonnage, which is expensive in absolute terms. On the other hand, as a rule of thumb, a 15-year old panamax, handymax or handysize dry bulk vessel sells at about $7-10m, basically at about 2.5 multiple of the vessel’s scrap value. Wellmaintained, such vessels can have 10 years remaining economic life; the freight market is still below $10,000 pd for all these vessels, but with a daily vessel operating expense a few thousand lower than capesize vessels. The acquisition price is only a fraction of the modern capesize vessel, which makes not only the economics of the acquisition easier to justify, but mainly, the entry fee is much lower. Even at $10m per vessel’s acquisition, the total investment would be $30m for three vessels, a price easily affordable by many owners (whether operating shipowners, would-be managers of vessels or financial buyers looking to get a low risk entry to the market). There have been reports that quality, older tonnage coming to the market for sale from good “stables” have been attracting buying interest reminiscent of the good old days of five years ago. There have been reports of quality vessels, primarily coming for sale from Japanese owners, getting inspected by more than 10 parties at a time or receiving more than15 offers. Some quick, back-of-the-envelope calculations seem very compelling: these “old ladies” can generate about $3,000 pd operating profit, or about $1m per annum. Even when one assumes no market volatility, asset appreciation, optionality or low scrap value, on an unlevered basis, the project still generates a high single digit return, tempting by itself as an absolute number and tempting

“There have been reports of quality vessels getting inspected by more than 10 parties at a time”

— Summer 2013

SALE AND PURCHASE

PERCENTAGE CHANGES FOR DRY BULK VESSELS (2013 year-to-date) 5yr old

Capesize

2.17%

4.6%

2.38%

12.00%

-4.88%

Panamax BC

0.00%

16.7%

19.23%

12.50%

-4.88%

S’max / H’max

4.17%

10.3%

10.34%

11.76%

-4.88%

Handysize

0.00%

16.1%

8.33%

28.57%

-4.88%

AVERAGE

1.59%

11.92%

10.07%

16.21%

-4.88%

on a comparable basis given the low interest rate environment. And, of course, the entry fee for an acquisition of a few million dollars is still a manageable number by many. From market data sourced by Karatzas Marine Advisors, the above table was prepared showing percentage movements within different age brackets for mainstream asset classes in the dry bulk market. (There is always the disclaimer that the S&P market is still illiquid for valuation purposes, and thus some of the data points may be vessel or transaction specific rather than representative of the overall market/ market segment). From the table, it’s clear that there is an uptrend in asset prices for all dry bulk vessels. Whether newbuildings or old vessels, there has been a marked improvement of more than 10% in asset price year-to-date. Second, it seems that the asset appreciation curve has shown a “smile”, with vessels away from the 10-year age mark, meaning that newer (five-year-old, in this case) and older (15 year-old, in this case) have shown the most appreciation. Assuming that there are numerous data points and there is a normal distribution curve, one may presume that volatility has been higher for newer and older tonnage than 10-year-old vessels. It’s clear that older tonnage has appreciated the most, especially for handysize vessels. On the other hand, newbuilding vessels have appreciated the least. In a market that suffers from oversupply of vessels, one may

Newbuilding

10yr old 15yr old

Scrap Value

Newbuilding

presume that newbuilding contract price appreciation is expected to remain low. This may have been a fair assumption in recent months since when the market momentum and sentiment has been turning increasingly more positive. With freight rates improving (especially for smaller sized vessels), and the shipbuilders still struggling to generate strong interest for mainstream commoditised dry bulk vessels, newbuilding payment structures are still very favourable with most of the purchase price due at the time of the delivery. As a result, newbuilding contracts can mitigate the negative carry and become more affordable for the buyers as most of the payment is not due until the delivery of the vessels or at least a year after signing the contract. However, newbuilding financing is still subject to financing either by the builders and their export credit banks or by shipping banks in the West, a condition that presupposes bigger and stronger balance sheets and solid financials. While about 240 dry bulk vessels larger than 20,000 dwt were sold in 2013 year-todate in the secondary market, about 250 vessels of similar size were ordered at the shipyards in the same time horizon. Of these, 240 dry bulk vessels that were ordered, 60 of them were capesize vessels and 70 were panamax tonnage and only 40 of them of handysize tonnage. As one may expect, the secondary market has been dominated by the sale of vessels smaller than panamax size, with about 70% of the market share. The

5y old

10yr old

average age of the capesize vessel sold in the secondary market has been just below 10 years of age, while the average handysize /(older handymax size) age in the secondary market has been about 14 years. Some buyers of dry bulk vessels in the secondary market have been focusing on smaller and older tonnage, especially on the old ladies from reputable stables. Other buyers of dry bulk vessels with deeper pockets or access to the financial markets (or access to captive cargo) have been opting for newbuilding contracts of bigger sized vessels from shipbuilders; vessels that are more economical and can offer operational efficiencies over the vessel’s design life. Each type of these two distinct classes of buyers has been playing on the niche markets they are fitted best: whether for vintage, low-cost vessels that can be bought with cash and can be run efficiently for the next decade, or efficient tonnage that can be ordered brandnew, have deferred payment structure and bet on a long-term recovering market. The truth of the matter is that shipping is an ever-changing industry that takes flexibility to exploit the opportunities presented. As Heraclitus said: ‘Πάντα ῥεῖ’ (‘everything flows’), which is true both literally and metaphorically in the shipping industry. As market conditions change, so does the profile of assets more marketable for sale or desirable for acquisition. At present, so far this year, it seems that either newbuildings for the cash rich owners or vintage tonnage for the smaller buyers are the markets of the most interest. Basil M Karatzas is the CEO of Karatzas Marine Advisors & Co, a shipping finance advisory and ship brokerage firm based in Manhattan. The firm represents financial owners, institutional investors, lenders, and shipowners and vessel managers worldwide. For more information: E-mail Info@BMKaratzas.com Tel +1 713 545 5990.

Scrap Value

15yr old

Capesize

32.5

21.5

12.5

410

390

18000

Panamax BC

15.5

410

390

12000

S’max / H’max

21.5

19.5

14.5

9.5

8.5

410

390

9000

Handysize

15.5

410

390

8000

Summer 2013 —

TANKERS

Coastal Tanker at sea

SURGING AHEAD Several surveys and reports show that confidence is high in the tanker market, with demand recovering and cargo supplies increasing

he tanker market has generated the most positive comments in recent months, according to a business confidence survey by Moore Stephens. As far as freight rates were concerned, the number of respondents overall who expressed an increased expectation of higher rates in the tanker sector over the next 12 months was up by two percentage points to 37% – just one percentage point below the figure recorded when the survey was launched in May 2008, but some way short of the survey high of 50% posted in May 2010. Owners (up five percentage points to 41%) led the way in terms of increased expectations of better rates, while charterers unsurprisingly set their sights much lower, at an unchanged 29%. The number of managers expecting improved rates was, meanwhile, down by one percentage point to 31%. Geographically, the prospects for increased tanker rates were deemed lower this time by respondents in Asia (down from 33%to 31%) and in North America (down by 23 percentage points to 24%), but higher in Europe, up from 36% to 40%. Drewry Marine Consultants’ latest LPG Forecaster reports that spot rates for very large gas carriers (VLGCs) on the benchmark trade lane from Saudi Arabia to Japan came down to $41.14 per tonne in the first quarter of 2013, from $43.83 per tonne in the fourth quarter of 2012. Rates 10

— Summer 2013

TANKERS

Jeddah’s Red Sea Gateway terminal

“Owners lead the way in terms of increased expectations of better rates”

were down by 8% compared to this time last year largely because of warmer than usual weather conditions, which led to lower heating demand. Chinese LPG imports in the first quarter of 2013 from the Middle East were down by 47% from 4Q12. The country imported 37% less LPG from the Middle East when compared to the first quarter of 2012. South Korean LPG imports from the Middle East were down 16% year-on-year. Availability of spot cargoes in the Middle East, especially from Iran and Saudi Arabia, were also tight initially during the quarter, which had a telling effect on the shipping rates, according to the consultant. Spot rates started to climb up in April as demand started to recover and as cargo supply increased. Propane cargoes from the US Gulf and the Middle East were being booked for european voyages as cracking propane proved to be more economical than naphtha. Completion of expansion works on the enterprise’s 7.2 million tonnes per annum export terminal in the US Gulf led to a gradual rise in cargo supply. Loading programmes for May had already been exhausted in April. Vessels waiting for employment for West of Suez voyages were absorbed readily as steady flow of cargoes from West Africa, North Africa and the US Gulf emerged. Drewry’s latest Tanker Insight reports that freight rates in most vessel categories remained on the softer side during the month due to weakness in chartering activity in the major loading regions barring Arabian Gulf. The same was reflected in the Drewry Tanker Earnings Index, which declined 31% during the month to 31.2. Despite this, the overall spot chartering activity in the dirty tanker market manage to inch higher in May on the back of a strong

increase in activity in AG. About 87 million tonnes of crude oil was fixed for shipments during the month, against 76 million tonnes the previous month. In contrast, the freight rates in the very large crude carriers (VLCC) market got some stimulus in May with an uptick in longhaul fixing from the Arabian Gulf on both sides of the Suez. About 40 million tonnes of crude were fixed for shipment in VLCCs, compared with 30 million tonnes in April. The spot rates in the tanker sector, especially for large vessel categories, have been very unattractive and owners are finding it difficult to recover the operating cost of their vessels. In such a scenario, a modest recovery in freight rates in May gave some solace to the owners. Drewry’s latest Tanker Forecaster suggests a market still suffering from surplus capacity. With seasonally weak demand in the second quarter, the short-term view for freight rates does not look positive. Global oil demand declined by 1.0% in the first quarter of the year to 89.9 million bpd, although some recovery in demand is likely in the second half of the year based on seasonal demand, which will push overall tonnage demand higher by 2% in 2013. This will be countered by a continuing supply of fresh tonnage through the year. With 46 million dwt already added since 2010 and a further 17.1 million dwt (4%) due this year, utilisation will be poor and freight rates will not show any noticeable signs of recovery, although there is a “glimmer of hope for the longer term from the slowdown in ordering and the gradual global economic recovery. Utilisation will improve from 2014 onwards and shift in trade patterns will also lend some support to rates as voyage lengths increase,” the consultants say. Summer 2013 —

DRY BULK

DRY RUN Although many remain cautious about the dry bulk market, things do seem to be improving

â&#x20AC;&#x201D; Summer 2013

The dry bulk market is finally enjoying some improvement after a period of crisis, with some quarters giving a cautiously optimistic outlook

DRY BULK

Increased activity out of the USG and USEC with fresh coal cargoes has caused rates to increase as the Northern part of Atlantic is tight for tonnage

here was marginal improvement in the dry bulk market as improvement in demand for larger vessel segments was countered by a decline in demand for the smaller ones, according to the latest Dry Bulk Insight. The Drewry Hire Index remained at 217 points. “The Chinese coal market remained in the news, with the policy of China’s National Energy Administration still unclear as regards a potential ban on low-quality coal imports. There have been several protests from big power companies against the proposal, following which the minimum limit on imports could be reduced from 4,500 Kcal/kg to 3,750 Kcal/kg. “This ban will have a direct impact on Indonesia, which supplies almost 50-70

“For Panamaxes, the floor was found after several weeks of declining rates in both hemispheres”

million tonnes of lower-calorific-value coal to China,” Drewry suggests. “However, Australia and South Africa are likely to benefit as they supply higher-grade coal. To a certain extent, this ban will support the dry bulk market by generating more tonne-miles (if China imports from Australia and South Africa), but this depends on China maintaining a certain level of imports rather than turning to domestic supplies. Domestically, the ban will increase production costs for power plants as they will be required to bring about changes in their machinery (such as boilers) to use different grades of coal. Looking ahead, with better weather projections and expected higher yields of crops, the smaller vessel segments are likely to enjoy better returns. Grain trade has already improved in the past month and will continue to do so. Meanwhile, for the larger vessel segments, a lot depends on demand.” In the dry bulk sector, meanwhile, there was a 10 percentage-point fall, from the highest figure in the life of the survey three months ago to 40% this time, in the overall numbers of those anticipating rate increases. All the indicators were down – in the case of owners from 50% to 43%, managers (52% to 36%), charterers (60% to 48%), and brokers (44% to 32%). It was the same story from a geographical perspective. In Asia, expectations of higher dry bulk rates fell from 52% to 33%, in Europe from 51% to 44%, and in North America from 65% to 35%. One respondent said: “The dry bulk market is in crisis and will remain so in the small-to-medium size sectors for at least two more years due to overbuilding.” Another noted: “The dry bulk market is structurally unhealthy due to the massive overbuilding of vessels.” Others were more optimistic, however, with one claiming to be hopeful that dry bulk rates will soon improve due to an improved balance between supply and demand. Fearnley’s June 19 report suggested that for Panamaxes “the floor was found after several weeks of declining rates in both hemispheres. This was followed by an upturn in rates with fresh cargoes entering the market. Increased activity out of the USG and USEC with fresh coal cargoes causes rates to increase as the Northern part of Atlantic is tight for tonnage.” For Capesizes, there was “finally a substantial improvement in rates!” The Atlantic has turned, the report suggested, with rates presently in excess of US$10,000. In the Pacific, low teens are being fixed for good ships. Summer 2013 —

CONTAINERS

BOOM TIME The container industry is expected to take delivery of record volumes of teu capacity this year. Meanwhile, intra-Asian traffic is set to surge TEU CAPACITY ON ORDER DROPS The ratio of container teu capacity on-order compared to the trading fleet dropped below 20% in June, according to research by brokers Braemar Seascope. The broker advises that, as the container industry is expected to take delivery of record volumes of teu capacity this year, the order book to trading ratio had eroded to approximately 20% in June 2013. Jonathan Roach, Container Market Analyst at Braemar Seascope, said: “With more than 1.7m teu expected to be delivered in 2013, the ratio is set to fall to approximately 16% by the end of the year. “During the six year ordering boom between 2003 and 2008, in the region of 10m teu of containership capacity was ordered. The order book ratio peaked at approximately 60% in 2007, when in excess of 3m teu was ordered. In the five years since the global financial crisis, vessel ordering has declined. From 2009 to 2013, we estimate that just 4m teu will be added to the order book.” He added: “Even though ship finance has become more difficult to secure since the 2008 banking crisis, new orders have increased in 2013 and the newbuilding market certainly has not collapsed – rather newbuilding activity is ticking over with selective and niche container ship ordering. “This year to date, we have noted 80 container ship orders with a combined capacity of 580,000 teu. In the corresponding period in 2012, only half that number of ships was contracted, with a combined teu capacity of 230,000 teu. Even with underwhelming global container demand seen in 2012 and a similar growth pattern expected this year, new orders are still materialising as shipyards reduce newbuilding prices in a strategy to bolster and maintain their forward cover.” GL CONTAINER DESIGN CONCEPT The importance of Intra-Asian trade routes continues to grow as the region’s economies continue to expand. Asian container traffic, in particular, is projected to be the fastest growing sector in the world for the next several years. In response to this, Germanischer Lloyd has developed a novel container vessel design for this region: the C-Dragon concept. GL unveiled this new concept with the international maritime community at Nor-Shipping in June. C-Dragon measures 211.9 meters in length between perpendiculars and 37.3 metres in width with a loading capacity of 3,736 teu. The new concept targets the actual 14

— Summer 2013

condition with short roundtrips and many port calls and is designed to outperform cascading older tonnage, which are now employed in this area, in terms of fuel efficiency, port turnaround and cargo intake. “Intra-Asian container traffic is set to surge and vessels in this trade typically sail beneath their design speed and make frequent port calls – 13 on a typical north south trading route,” said Dr Pierre Sames, Senior Vice President, GL Research and Rule Development. “The C-Dragon concept has been designed to reflect this, while also filling the strong need for more energy efficient ships amid rising fuel prices and new IMO regulations.” C-Dragon has a very high ratio of on-deck to total container teu capacity (2,376 teu versus 3,736 teu) and fewer bays, compared to reference vessels studied for the design. This particular vessel layout is instrumental in reducing port stay duration because the greater number of containers on deck reduces the need to remove hatch covers, while fewer bays result in fewer crane movements, GL says. Port efficiency simulations conducted using prototype software from GL, demonstrated that the average port stay was reduced from 15 to 14 hours for C-Dragon for each harbour stay. “C-Dragon’s faster port turnaround allows speed reductions in transit and therefore related fuel cost savings, without compromising any cargo transport capacity, in comparison to competing vessels,” explained Sames. “The effect is more pronounced for vessels on short routes with many port calls.” For C-Dragon, average transit speed is reduced from 15.5 knots to 15 knots. To lower steaming speeds and fuel costs, C-Dragon’s hull form has been optimised by FutureShip, GL’s consulting subsidiary. This optimisation and a reduced design speed delivers an EEDI value, lower than the IMO reference line for 2025, and fuel consumption 30% lower than that of the slow-streaming 4,250 Panamax existing reference vessel. Furthermore, the wide beam hull adopted enables lower speeds and, in most operating conditions, eliminates the need for ballast water. With zero ballast water usage, C-Dragon offers best-in-class deadweight tonnage (DWT) utilisation and outstanding cargo intake. For each teu at 14 tons, it only needs 14.8 tons deadweight, almost 4 tons less than the current 4,250 teu Panamax design, an additional potential for greater earnings.

INTERNATIONAL MARITIME ORGANIZATION

IMO REPORT Maritime safety and environmental issues have been on the agenda again, as well as a new code of conduct to tackle piracy in west and central Africa

s IMO secretary general Koji Sekimitzu put it at the end of the Maritime Safety Committee meeting on 21 June: “The Costa Concordia safety review has been the most important safety issue at this session. The Committee has taken firm actions to set a clear direction towards a safety review over critical areas such as stability and survivability. “Despite the short time available after the casualty investigation report was released, all delegations were prepared for discussion at this session and all areas of concern were evaluated based on the preliminary recommendations from Italy.” The Italian report that has been released suggested that issues relating to the human element were at the root of the loss of the Costa Concordia. However, a number of other recommendations included equipment and electrical distribution, emergency power generation, bridge team management, search and rescue, evacuation procures and stability issues. Recommendations on stability included: a double-skin to protect watertight compartments containing equipment vital for propulsion and electrical production; limiting of the down flooding points on the bulkhead deck; provision of a computerised stability support for the master in case of flooding; an interface between the flooding detection and monitoring system and the on-board stability computer. Sekimitsu said he hoped “that further critical technical information such as information on penetration depth supporting the recommendation for double-skin will be provided by Italy for further consideration”.

PIRACY Twenty two states signed a code of conduct concerning the prevention of piracy, armed robbery against ships and illicit maritime activity in west and central Africa. The code was adopted formally by the heads of state meeting in Yaoundé, Cameroon, on 25 June. The code was signed in Yaoundé by Ministers of Foreign Affairs or other delegates, bringing it into effect for the 22 signatory states: Angola, Benin, Cameroon, Cape Verde,

Koji Sekimizu, IMO Secretary-General

Chad, the Congo, Cote d’Ivoire, the Democratic Republic of the Congo, Gabon, Gambia, Ghana, Guinea, GuineaBissau, Equatorial Guinea, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Sao Tome and Principe and Togo. “I am fully committed to assisting western and central African countries to establishing a workable, regional mechanism of co-operation for enhanced maritime security. Maritime development is an essential component of African development and maritime zone security is fundamentally important,” Sekimizu said, noting that the code incorporates many elements of the successful Djibouti code of conduct, which has been signed by 20 states in the western Indian Ocean and Gulf of Aden area, and the existing memorandum of understanding on the integrated coastguard function network in west and central Africa, which was developed in 2008 by IMO and the Maritime Organization of West and Central Africa (MOWCA). Sekimizu also called on countries to provide contributions for a new trust fund to be established by IMO for the implementation of IMO projects for maritime security in western and central Africa. The new multi-donor trust fund will support an expanded programme of capacity-building activities in west and central Africa, to better enable the IMO to work with member states, United Nations agencies and other international and regional development partners for the benefit of safe, secure and sustainable development of the African maritime sector. The new code was developed by the Economic Community of West African States, the Economic Community of Central African States and the Gulf of Guinea Commission, in line with UN resolutions that expressed concern about the threat Summer 2013 —

SECTION HEAD

The IMO`s counter-piracy programme, the Djibouti Code, has proved successful in the western Indian Ocean and Gulf of Aden area

that piracy and armed robbery at sea in the Gulf of Guinea pose to international navigation, security and the economic development of states in the region. These resolutions encouraged the States of ECOWAS, ECCAS and the Gulf of Guinea Commission to develop a comprehensive regional strategy and framework to counter piracy and armed robbery, including information sharing and operational coordination mechanisms in the region, and to build on existing initiatives, such as those under the auspices of IMO.

BALLAST CONVENTION Issues on the agenda at the recent Marine Environment Protection Committee (MEPC) related to concerns by shipowners about potential bottlenecks resulting from the entry into force of the Ballast Water Management (BWM) Convention. The MEPC approved a draft IMO Assembly resolution on the application of regulation B-3 of the BWM Convention to ease and facilitate the smooth implementation of the Convention, for submission to the IMO Assembly in November. The draft resolution recommends that ships constructed before the entry into force of the convention will not be required to comply with regulation D-2 until their first renewal survey following the date of entry into force of the convention. The aim of the draft resolution is to clarify uncertainty in relation to the application of regulation B-3, through the application of a realistic timeline for enforcement of regulation D-1 (ballast water exchange standard) and regulation D-2 (ballast water performance standard), upon entry into force of the Convention. The MEPC also granted basic approval to three, and final approval to three, ballast water management systems that make use of active substances and approved BWMrelated guidance, including guidance 16

— Summer 2013

“This revised schedule is more logically pinned to the entry into force date of the Ballast Water Convention”

concerning ballast water sampling and analysis for trial use and a BWM circular on clarification of “major conversion” as defined in regulation A-1.5 of the BWM Convention. The MEPC also adopted a revised MEPC resolution regarding information reporting on type-approved ballast water management systems. INTERTANKO, the independent tanker owners association said the change to the dates “will smooth the installation scheduling for ships installing ballast water management systems (BWMS), a trial period for port state control and new guidance on BWMS type approvals”.

“This revised schedule is more logically pinned to the entry into force date of the Ballast Water Convention and allows for the installation of the ballast water treatment system to be undertaken at the first renewal survey after entry into force,” commented INTERTANKO’s Senior Manager for the Environment, Tim Wilkins. MEPC 65 also adopted a circular to initiate a trial period for the sampling and testing of ballast water by port state control, during which port state control will refrain from detaining a ship or taking criminal sanctions in the event that a BWMS does not meet the discharge. “This will allow time for PSC to determine which sampling and testing techniques work in practice and will also allow the industry to identify any problems associated with the operation of type approved BWMS,” said Wilkins. The third development relates to increasing the transparency of the type approval process and the adoption of amendments to both the type approval certification documents as well as the guidance to administrations on the type approval process. “With these amendments accepted, the revised documents will mean more information is provided to the industry and the owners on the capabilities of the BWMS as well as the ranges and limiting conditions in which the BWMS can operate”. The robustness of the type approval process for the expensive equipment has been of concern to the International Chamber of Shipping (ICS) as as the price tag for BWMS is put at between $1-5m. The methodology for sampling during port state control inspections, in addition to the time needed for as many as 60,000 existing ships to be retrofitted, has also been raised by ICS. According to David Tongue, Director of Regulatory Affairs at ICS, there are some concerns about the type approval process and the number of the type approved systems that are available. He says he feels that a mandatory type approval test regime for treatment equipment is needed. MEPC has agreed there should be a five year phase in period to fit treatment systems to the existing fleet following entry into force of the convention, pegged to individual ships renewal survey date. All ships built before the entry into force of the convention are deemed to be existing ships. It was also agreed that the renewal survey to be used to determine a ships regulation D-2 compliance date was that applicable to the IOPP certificate under MARPOL Annex I and not the International Ballast Water Convention certification, which means that 20% of the world fleet will be fitted per year over the five-year survey cycle.

• news •

ConfidenCe RISES Overall confidence levels in the shipping industry rose to their highest level for two and a half years in the three months ended May 2013, according to the latest Shipping Confidence Survey from accountant Moore Stephens. The survey produced evidence of increased enthusiasm for new investment, although doubts persisted about the availability of bank finance. Fuelled by ongoing concern about a surfeit of tonnage on the market, freight rates in the dry bulk sector, in particular, were expected to come under more pressure over the next 12 months, although the outlook for the tanker markets looked more encouraging. Moore Stephens shipping partner, Richard Greiner, says: “For the third successive quarter, we have seen a small increase in confidence. This encourages the belief that we are witnessing the start of a sustainable recovery, although some difficult issues remain to be resolved. “Despite increased scrapping, it is clear that there are still too many ships on the market. For as long as that situation persists, the freight markets will struggle to bounce back. Although the tanker market is looking healthier than it has for some time, the dry bulk trades in particular seem to be suffering from an over-supply of tonnage. “Owners’ appetite for new vessels has not, it seems, been terminally affected by five very difficult years for the shipping industry. Some reports suggest that current newbuilding business is almost one thousand per cent up on last year, with Greek owners alone having reportedly ordered almost twice as many ships in the first four months of 2013 as they did in the corresponding period last year. This is not a complete surprise. “Our survey revealed evidence of an increased enthusiasm for investment and the history of shipping confirms that it is an industry which is not reluctant to spend money. “Increased newbuilding activity is also somewhat

Late reporting PENALTY Inchcape Shipping Services is advising of foreign vessel casualty reporting requirements following a $75,000 penalty assessment by the US Coast Guard against a cargo vessel for failure to immediately report a marine casualty. The regulations require immediate notification of reportable casualties to the US Coast Guard, with a subsequent written notification on ‘Report of Marine Accident, Injury or Death’ form CG-2692 in five days. The USCG penalised vessel had experienced a failure of its main engine and had not reported the casualty for more than 10 hours.

inevitable, not least because of the strong state support which governments in the Far East are providing to their strategically important shipbuilding industries. Neither is it a bad thing. Every industry needs new investment to survive, and if that is coupled with regulatory and environmental compliance – for example, in the shape of eco-friendly ships – then so much the better. “If pulling the plug on newbuilding activity is not the way to resolve shipping’s problems, the answer must lie with addressing the issues that seem to militate against solutions built on new investment. We need more scrapping, for example, and fewer proposals such as the one currently before the European Parliament to ban the beaching of vessels for demolition. We need a more innovative approach to securing finance, embracing everything from bond financing to leasing, as well as the ability to convince potential investors of the credibility of business plans. We need a more concerted focus on risk management, which is not as well developed in shipping as it is in many other industries. And we need early identification of the need for restructuring and awareness of the options available. “Shipping is in reasonably good shape, given the problems it is facing. Indeed, it is difficult to think of another industry that is so capital-intensive in nature, so reliant on skilled personnel, and so heavily impacted by competition, politics, risk, protectionism and regulation, yet able to remain optimistic in the teeth of a global financial downturn. “Three months is a long time in shipping, but it is to be hoped that our next survey will complete a full 12 months of improving confidence. Shipping is an industry in which long-term investments have tended to bring long-term rewards. As such, it is worthy of a long-term outlook.”

BarBiCan aCquisition Barbican Group has announced that it has acquired UK-based specialist marine insurance broker Seacurus. Established in 2004, Seacurus focuses specifically on revenue protection in the marine insurance market. A leading provider of marine kidnap and ransom insurance, the company offers a range of products designed to help companies in the shipping industry manage a wide variety of operating and financial risks. Seacurus will continue to operate under its current brand. Details of the transaction have not been disclosed. David Reeves, chief executive officer of Barbican, said: “Today’s acquisition marks a significant milestone in the continuing growth of our marine operations. Seacurus

has built a leading position within the marine insurance broking sector, particularly in the kidnap and ransom arena. Its success reflects the experience and expertise of its team, led by Thomas Brown. Seacurus is an excellent fit for Barbican and we see clear synergies between us, in terms of the portfolios of business and also the culture that exists in each organisation.” Thomas Brown, managing director of Seacurus, added: “Becoming part of Barbican provides us with an excellent platform from which to further expand and enhance the comprehensive range of bespoke solutions we deliver to our clients in the shipping industry. We look forward to working closely with our new colleagues to achieve this.” Summer 2013 —

NEWS

CONSTRUCTION GUIDE

CARBON TAX

Lloyd’s Register has issued the first Guide to New Construction in South Asia. The guide provides an overview of the shipbuilding and ship design industry in the area. With shipbuilding in South Asia growing – in numbers of ships, in capacity and in capability, this Lloyd’s Register guide provides factual information from across the countries. The future is looking extremely bright for shipping and shipbuilding in the South Asia area according to the guide. Maritime trade looks set to grow, demand for energy infrastructure is highly likely to grow and local naval power and ambition also looks set to grow. Global Marine Trends 2030, the Lloyd’s Register report released in April, identified the growing importance of Asian economic growth and significance in shipbuilding and shipping. The South Asia area was identified in the report as having very high potential for growth and shipbuilding in the area is forecast to grow and it is highly likely to continue and to strengthen if economic growth continues at anticipated levels. The area now boasts an increasing number of world-class shipbuilding centres, including joint ventures combining the design and management of Korean or Japanese industry heavyweights with local workforces in Indonesia, Vietnam and the Philippines. This model has been so successful that yards such as Hanjin Subic Shipyard, employing more than 18,000 workers, have propelled the Philippines to a position as the world’s fourth largest shipbuilder. In addition to joint ventures with international shipbuilders, the South Asia area has also seen significant growth in the number of public and private sector shipbuilding enterprises. This is especially so in India with the Indian government’s plan is to expand its global shipbuilding market share from 1% to 5% by 2020. This plan has already seen investment and expansion in both naval and commercial yards. A recent newbuilding first was the delivery of the first Panamax bulk carrier to be constructed in India – at Pipavav, from their 2 million square foot yard in Gujarat, on India’s west coast. Increasingly, shipowners are seeing the area as an attractive newbuilding option for current and future projects. Capability previously exclusively directed at local demand in countries like Indonesia and Vietnam, is now at a level that is becoming competitive with the quality, facilities and construction times of the world’s leading yards. South Asian yards are looking to compete on a global stage, whether building VLCCs and bulk carriers or smaller ships – such as technically challenging naval ships, offshore supply vessels, specialised tugs and aluminium supply craft. Mark Darley, South Asia Area Manager, Lloyd’s Register, said: “We are well placed to support the South Asia area and its development. Lloyd’s Register has produced this guide for the industry and investors as we continue to work and build our co-operation and mutual support with local and international owners, with the shipyards in South Asia and with suppliers and designers. We employ over 100 exclusive surveyors, including local and expatriate technical staff in the South Asian countries. These experts are supported by experienced technical performance, business development and support staff. We have over 20 offices across South Asia including site offices in many of the major shipyards where Lloyd’s Register-classed ships are under construction.”

The most vocal proponent of climate change action in the US Senate believes that a carbon tax, currently seen as a political impossibility, will become much more feasible if President Obama’s muchanticipated climate action goes farther than the energy industry wants. “There’s no chance [of a carbon tax] right now, but that chance can change dramatically if the president takes strong action,” Senator Sheldon Whitehouse, a Rhode Island Democrat, said on Platts Energy Week. Whitehouse, who is preparing legislation to put a price on carbon, said that despite opposition from Republicans and even the Obama administration on a carbon tax, it may be seen as a preferred alternative by industry when Obama releases his climate action plan sometime this summer. “The polluters have the best of both worlds now,” Whitehouse said, pointing out that industry is taking no action to curb emissions.

MARINE EQUIPMENT DIRECTIVE EU member states reached agreement on a new marine equipment directive in June that aims to ensure that marine equipment – such as life-jackets and lifeboats – is inspected and approved in a more homogeneous manner throughout the EU. 18

— Summer 2013

The experience gained from the current directive shows that the member states apply the directive differently and, ultimately, this may affect both safety and competitiveness. Second, the purpose of the directive is to ensure that the EU equipment manufacturers actually have free access to the entire market. Equipment approved by one EU member state must be accepted by the other EU member states. An update of the passenger shipping directive is also being considered following the grounding of the Costa Concordia last year.

ECO-SHIPS ARE HERE TO STAY Classification society Germanischer Lloyd says that the trend toward building and operating so called eco-ships, or highly energy-efficient vessels, is irreversible, given the potential cost savings for the maritime industry. The rise of the eco-ship has been questioned, with some suggesting that this focus on efficiency would fade if bunker prices fell. Christian von Oldershausen, GL’s Chief Commercial Officer, demonstrated how eco-ships have substantial cost advantages over existing vessels, which has been borne out in a number of container vessel optimisation projects undertaken throughout the world by GL. These advantages are found primarily at the concept design stage by targeting a vessel’s real operating profile, wider beam and increased capacity. “Alongside lower yard prices, bunkers will be a significant driver for cost savings in new vessels,” said von Oldershausen after analysing the composition of slot costs, made up of capital, operating, port/canal and bunker costs.

NEWS

HUGE BILL FOR THE ENVIRONMENT, SAYS ICS

Impending legislation to protect the environment potentially presented an additional industry-wide cost of more than half a trillion US dollars between 2015 and 2025, Chairman of the International Chamber of Shipping, Masamichi Morooka, told the Nor-Shipping conference in June. This is around 50 billion dollars of additional capital and operating cost in every single year for a 10 year period and beyond. “As many companies struggle to survive

during the difficult years ahead, we must persuade governments to avoid placing yet more straws that risk breaking the shipowner’s back – and the straws to which I refer are the impending costs of environmental legislation,” said Morooka. Much of these costs will result from the switch to low sulphur distillate fuel, assuming that a 0.5% global sulphur cap comes into effect in 2020, in addition to the 0.1% sulphur requirements that are expected to be enforced in Emission Control Areas in North West Europe and North America from 2015. However, the costs of installing new ballast water treatment equipment will also be significant, as will the potential contribution that shipping might have to make to the UNFCCC Green Climate Fund. “The imminent switch to vastly more expensive, low sulphur distillate fuel is a very serious concern which is compounded

by worries about the adequacy of supply and the dangers of modal shift,” added Morooka. Unless something very unexpected happens, the ICS Chairman felt it was unlikely that a lasting recovery in freight rates would begin in earnest in the immediate future. However, he believed that market forces would find a solution, which would almost certainly involve large numbers of ships going to the recycling yards much earlier than their owners had originally planned. In order to avoid prolonging the downturn, he said it was important that shipowners take sensible and considered decisions about ordering new tonnage. Noting that shipyards have similar overcapacity problems and are offering cut price ships, he remarked: “What might be in the rational interest of an individual shipowner might not always be good for the collective health of the industry as a whole.”

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Company Details; Oceanus Marine Oceanus 18, Triq patri Wistin Born, M’Skala MSK 3526, Malta 6 & 7 Empire Stadium street, Gzira, GZR 1300, malta Land Line +356 21 637737 Contact: Elio Desira AMS, Ch.Mar.Eng, IEng Mob: + 356 79422440 Tel: + 356 77637737 Email: info@oceanus-marine.com Website: www.oceanus-marine.com

Summer 2013 —

SHIP MANAGEMENT

MANAGEMENT

INDUSTRY There have been a number of initiatives to improve information flow and highlight risks in the shipping sector

he international Key Performance Indicator (KPI) Project, started by InterManager and now an industry-led initiative, has been widening in scope and, according to the latest figures, 120 companies have registered with the project. This is now managed by the independent KPI Association, and KPI data is being uploaded from more than 1,600 vessels into the web-based InterManager KPI Environment (IMKE) system. To date, more than 5,000 sets of data have been submitted for each KPI category — enabling meaningful analysis to provide industry rankings for each measurement. Captain Kuba Szymanski, Secretary General of InterManager – the international trade association for the ship management industry – said at the end of March: “This is the fastest growing IT shipping project ever. Within 16 months from launching it, we have 1,600 vessels already taking part. This is unprecedented – the biggest IT databases have taken years to achieve a figure like this. With this speed of growth, we are on target to reach 2,000 by the end of this year. “It is interesting to note that around 72% of those submitting data are owner-related – that is in-house managers, owners or owners who also offer third party management – with only 28% currently ‘pure’ third-party ship managers.” Of the vessels submitting data, tankers form the largest sector. Take-up is now also being seen from the passenger vessel sector. The breakdown is tankers 41%; container ships 28%; bulk carriers 14%; gas carriers 5%; passenger ships 1%; other; 11%. Szymanski commented: “It is no surprise to see tankers leading this table as Tanker Management Self Assessment (TMSA) and INTERTANKO benchmarking have been operating in the shipping industry for several years now.” 20

— Summer 2013

Above: Captain Kuba Szymanski, InterManager Secretary General Right: Nigel Cleave, CEO,Videotel Marine International

The findings are providing interesting reading. According to Szymanski: “We are starting to see some very interesting trends – trends that, in some cases, bust old myths and some that put a completely different angle on the shipping industry we thought we knew. We can see which sectors of the industry have safer records, which are exercising better retention rates and which are embracing KPI concepts faster than the others. The interesting trends are only suggestive at the start, based on the available data and are not necessarily conclusive.” The KPI Association plans to create regional MOPS centres (Managing Organisational Performance in Ship Management) in key strategic locations to assist shipping companies close to their bases. “We are aiming to model it on the successful Bergen Marine Research Cluster which is a great example of co-operation,” explained Szymanski.

LETHAL LIFEBOAT HOOKS Lifeboat hooks can be “lethal” and their design is out of date and unsuitable to meet modern demands, according to serving seafarers whose views have been gathered by InterManager. Following a series of incidents and fatalities involving lifeboat hooks, InterManager has gathered comments from seafarers of various ranks in an online discussion forum. Respondents included experienced masters, captains,

SHIP MANAGEMENT

“There is a great depth of feeling in the industry on the subject of lifeboats and their safe operation”

chief engineers and chief officers, who had served on a variety of vessels including LNG, chemical carriers, tankers and container ships. Crew members pointed out that they believed the hook designs have not kept pace with developments in the global shipping industry. “Nothing really has changed for the last five millenniums,” said one chief engineer with 35 years’ service on chemical carriers. “These hooks are lethal,” he said. A second chief engineer questioned: “Why are we still using very old designs and materials?”, while a master commented: “I don’t trust hooks and their arrangements.” Adding to the debate, a captain questioned training regimes, saying: “Because almost every vessel has lifeboats of a different design it is very often a steep learning curve for all involved.” Another likened his onboard training to “Russian roulette”. InterManager Secretary General Kuba Szymanski said: “There is a great depth of feeling in the industry on the subject of lifeboats and their safe operation. They are meant to save lives, not to endanger them further. I am pleased InterManager has been able to facilitate this debate”

CTL INSURANCE The constructive total loss of ship insurers ITIC’s loss of management fee covers the non-payment of management fees as a result of the termination of a ship management contract through actual or constructive total loss of the ship under management. Some ship management contracts will provide payment for a short period of continued employment for the manager, but will not replace the lost fees beyond that work, which is what the ITIC loss of management fee insurance has been designed to cover. A recent example was a ship under management that ran aground off the coast of the UK during bad weather. Salvors and other experts spent several weeks trying to refloat the ship. However, the ship was declared a total loss by the hull underwriters. The ship manager, who had ITIC’s loss of management fee insurance, had their fees re-imbursed by ITIC.

RETROFITTING SOLUTIONS A new manual from classification society Germanischer Lloyd, presented at NorShipping 2013 in June, shows how owners can make use of a suite of retrofitting solutions to ensure that existing vessels remain economic. Today’s newbuildings now consume up to 20 to 30% less fuel than vessels built only three to five years ago, which is leaving owners searching for solutions to remain competitive in the market. “Retrofit technologies offer the comparatively young fleet of existing ships the chance to remain active and economically attractive to owners and operators,” said Jan-Olaf Probst, GL’s Global Ship Type Director. These eco-efficient technologies not only benefit the bottom line, but will have a positive impact on the ecological aspects of the entire shipping industry.” The manual looks at how technical, operational and managerial solutions can increase the energy efficiency of existing vessels. It contains a number of possible options, background information on the technologies and important considerations for their implementation, as well as a chart that indicates the potential of the retrofit measure for each ship type in respect to its age, the required investment, payback time, ease of execution and required planning time. Over 30 technical measures suitable for energy efficiency retrofitting, grouped into such categories as hull and superstructure, propeller and rudder, main and auxiliary engine, supporting systems, energy consumers on board and capacity enhancement are outlined and assessed. Potential savings are often found in adapting a vessel to a vessel’s current, rather than design, operating profile. Measures taken to optimise hull, engine and propulsion, as well as supporting systems, can pay for themselves quickly. Fuel expenses are currently the largest single cost for shippers, some 30 to 60% depending on vessel segment and operational speed, and this cost pressure is set to increase. The manual shows that while essentially all of the retrofitting technologies are known and proven solutions, the pace of retrofitting of existing vessels is much lower than could be expected. It identifies lack of information, confidence, capital and investment incentives for owners as significant hurdles to their uptake. A lack of retrofitting expertise also means that shipping companies can find it difficult to identify the optimum solution among the large variety of options available. While the economic assessment for individual Summer 2013 —

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

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

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

Pre-MBA (optional) Module 00

Accounting and international economics

18-20 Sept. 2013

Copenhagen Denmark

23-28 Sept. 2013

Copenhagen Denmark

02-06 Dec. 2013

Copenhagen Denmark Copenhagen Denmark

Shipping as a Business and a Market Module 01

Shipping as a business and a market + Leadership

Understanding the Global Environment Module 02 Module 03

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

10-15 Feb. 2014

Focus on Maritime Issues Module 04 Module 05

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

Hamburg Germany Copenhagen Denmark

Core Management Issues Module 06

Investment analysis, risk management and finance

01-05 Sept. 2014

Module 07

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

03-07 Nov. 2014

Module 08

12-17 Jan. 2015

London UK Copenhagen Denmark Copenhagen Denmark

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

18-20 March 2015

Graduation

08 August 2015

20-22 May 2015 05-07 August 2015

Copenhagen Denmark Copenhagen Denmark Copenhagen Denmark Copenhagen Denmark

SHIP MANAGEMENT

Retrofitting has a positive impact on the ecological aspects of the entire shipping industry

“As well as failing to comply with SOLAS carriage regulations, the use of counterfeit charts and publications poses a serious risk to vessel safety” retrofitting options also often fails to be made in a professional fashion. “It is helpful to narrow down the solution space for the individual vessel and assess the different options in a structured way,” Probst noted. “These hurdles can be overcome with the increased professionalisation of the maritime industry.” He also suggested that financial institutions could play a valuable role by being more ready to offer vessel owners adequate financial support.

VIDEOTEL TRAINING Videotel has launched what it describes as a unique training software programme, Videotel webFSA. A flag state administration training and record management system, Videotel webFSA provides member states with the assistance they need to meet the forthcoming IMO requirement for a global quality management system in the implementation and enforcement of member state obligations and responsibilities relating to maritime transport. Developed in conjunction with the Cayman Islands Shipping Registry, and created from Videotel’s web Fleet Training Administrator (webFTA), Videotel webFSA is a secure web-based solution built around cloud based technology providing the detailed reporting needed to access to a surveyor’s records, results and performance instantly via the internet – wherever in the world they are operating. This will provide the member state with the detailed reporting necessary to meet the requirements of the 24

— Summer 2013

Voluntary IMO Member State Audit Scheme (VIMSAS), Resolution A.946 (23), which is likely to become mandatory in 2015. “Videotel webFSA is an extremely powerful, highly secure, on-shore records management programme, comprising of an outstanding piece of software that offers a custom-made solution for Member States,” explains Nigel Cleave, CEO of Videotel Marine International. “ The time saved by a Member State using webFSA is significant,” he says. “Working from a central database makes operations run smoother for everyone. This simple-to-use system saves time tracking surveyor training and processes audits quickly. With the individual training planner, the management team is able to build custom training schedule matrices targeting individual surveyor ranking using an easy-to-use drag and drop interface.” Videotel webFSA allows surveyors to maintain and progress their education and training wherever they are in the world, accessing Videotel On Demand Online through the Videotel webFSA portal.

COUNTERFEIT CHARTS The United Kingdom Hydrographic Office (UKHO) has issued a warning over the dangers posed to the safety of vessels, crews and cargoes by counterfeit nautical charts and publications and has produced a simple guide to help identify genuine Admiralty products. The UKHO has recently observed an

increase in the number of counterfeit versions of its Admiralty charts and publications in circulation. Counterfeit documents do not satisfy the carriage requirements of the International Convention on the Safety of Life at Sea (SOLAS) as they have not been issued officially by or on the authority of a Government, authorised hydrographic office or other relevant government institution. Their carriage may also fail to satisfy (and may be contrary to) the laws of flag state authorities and Port State Control, as well as increasing the safety risk for vessels, crews and cargoes. Furthermore, carriage of counterfeit documents is against the law in all countries that have signed the Berne Convention on copyright, which includes the vast majority of nations. John Dawson, head of marketing at the UKHO commented: “The UKHO urges all purchasers, users, inspectors and regulators to be vigilant for counterfeit Admiralty charts and publications. “Because these counterfeit versions have not been through the same rigorous checking procedures as official Admiralty charts and publications, they simply cannot be trusted for voyage planning or for navigational purposes. “As well as failing to comply with SOLAS carriage regulations and possibly flag state and Port State Control regulations, the use of counterfeit charts and publications poses a serious risk to vessel safety. “We are actively seeking to stop the production and sale of counterfeit copies of our charts and publications and have raised our concerns with the International Maritime Organisation, the International Hydrographic Organisation and Flag States. We also encourage anyone that suspects they may be in possession of counterfeit products to get in touch with us.” The UKHO has produced a simple guide to help users and inspectors to distinguish official Admiralty charts and publications from counterfeit versions. Official Admiralty charts bear the Admiralty Flying A watermark within the paper and will carry a thumb label strip on the reverse with the Admiralty logo, chart number, geographical area, barcode and date. Suspect charts and publications can also be identified by comparing them against official Admiralty versions, where variations may be spotted in the look, feel and weight of the product, the colour tone and strength of the ink, the folds on charts and the height and binding quality of publications.

INSURANCE

The advent of the Maritime Labour Convention has resulted in a number of new products being offered specifically to seafarers

CREW

COVER

rewsure has announced it has appointed G2 Crew Services, the recently formed partnership between Griffin Global Group Limited and Gulf Agency Company Limited to act as its global correspondent. Crewsure provides medical and personal accident insurance directly to crew and is underwritten by the Munich Group, one of the world’s leading insurance companies. The benefits provided are tailored to meet the needs of crew and the latest requirements of the Maritime Labour Convention. “Crewsure complements our strategy of assisting clients in both the marine and offshore sectors to set new standards for the duty of care provided to their crew,” said Simon Morse, Executive Chairman of Griffin. “Historically, the primary focus of marine services’ companies has been the owner, the vessel, or the cargo and, while contractually Crewsure’s client is the employer, the ‘door-to-deck’ service offered by us in partnership with GAC provides benefits directly to individual members of crew when in need.” Robert Johnston, Managing Director of Crewsure, explained: “The aim of Crewsure is to improve the welfare of crew by replicating the same type of health insurance that is provided to key employees based ashore, rather than simply mitigating owners’ risks to large claims. By extending the breadth of cover, reducing the excess, simplifying the claim process and providing local on-the-ground support in over 1,000 ports we can significantly transform the level of service provided to onboard personnel while containing the cost of cover well within existing levels.

“We are pleased to have appointed G2 Crew Services as our correspondent recognising the potential of the Crewsure product and its valuable role in handling crew in need of medical support and evacuations around the world.”

SECURITY FOR SEAFARERS Specialist marine insurance intermediary Seacurus has launched a policy to indemnify seafarers in the event of the financial default of their employers which, for the first time, offers recompense in respect of unpaid crew wages. The policy will enable all employers of seafarers to meet their regulatory obligations under the Maritime Labour Convention 2006 (MLC), which enters force on 20 August. The new policy, CrewSEACURE, provides up to $10m of cover in the event of an employer’s financial default. It includes personal accident protection and covers medical expenses as well as subsistence and repatriation costs. It will also respond, unlike any other product currently on the market, in respect of the non-payment of seafarers’ wages, for a period of up to six months. CrewSEACURE is underwritten by first-class A-rated global insurers in the Lloyd’s and company markets in London. It offers an independent round-the-clock claims service managed by Thomas Miller Claims, one of the world’s leading maritime ‘people claims’ service provider. It also includes a claims mandate which protects the interests of shipowner and seafarer alike to ensure a fair claims process. A 24-hour helpline is available for seafarers and their advisers, who have direct access to the insurers’ claims adjusters. To deliver the CrewSEACURE product to market, Seacurus will act as managing general underwriters with access to Lloyd’s security led by Brit Syndicates and Summer 2013 —

INSURANCE

companies’ market security provided by Aspen Insurance UK. CrewSEACURE provides cover that meets flag state and port state control approval and is authenticated by a shipspecific MLC 2006 insurance certificate to demonstrate compliance with the Maritime Labour Convention. Comprehensive cover is provided at low cost, with premiums available that cost as little as 50 cents perseafarer per-day. Thomas Brown, Managing Director of UK-based Seacurus, said: “CrewSEACURE has been designed to cover the requirements of MLC. The shipping industry faces economic challenges. Not all shipowners and operators will survive the current global recession and this will inevitably have a knock-on effect on those seafarers who are caught up in the resulting bankruptcy cases. Just recently, for example, we saw arrest orders issued by a court in the Far East in respect of two tankers after crew complained they had not been paid for almost three months. “The fact is that any cover that does not provide for the indemnification of unpaid wages fails to adequately protect seafarers against the real risk of abandonment.

— Summer 2013

“MLC is a watershed moment for shipping. It has been called the seafarer’s ‘bill of rights’ – and with good reason” History shows that the only way for seafarers to recover unpaid wages in the absence of any form of financial security is to remain on board until the ship is sold. This serves only to make matters worse for the shipowner as well as for seafarers and their families, who suffer further financial loss and hardship as a result of the long delays that can accompany the judicial sale of a vessel. “CrewSEACURE removes the need for seafarers to remain on board an abandoned vessel by ensuring that they receive their unpaid wages before being repatriated home to seek new employment opportunities.” Giles Heimann, Secretary-General of (the

International Maritime Employers Council (IMEC), said: “IMEC and its members believe that the Maritime Labour Convention is the most significant piece of maritime legislation for many years. We are committed to supporting our members in the run-up to its introduction in August 2013, and to working with them to secure effective and fit-for-purpose provision for seafarers and employers alike. I am pleased to see that companies such as Seacurus are providing options for the industry, to support their obligations under MLC.” Brown concluded: “MLC is a watershed moment for shipping. It has been called the seafarer’s ‘bill of rights’ – and with good reason. Previously, there had been a lack of political will or force of law to encourage the insurance industry to provide a workable system of financial security. But that will change with the imminent implementation of MLC. “Seacurus believes that effective employment protection must include crew wages. For that reason, it has provided an effective system of financial security to put an end to the spectre of seafarers becoming the cashflow casualties of their employers’ insolvencies.”

MARINE SECTION SOFTWARE HEAD

A SOFT APPROACH From hull maintenance systems to maritime security charts, there is an exciting range of new products to hit the market, making life easier for ship operators and owners

ith chart and nautical publication management highlighted as one of the most common reasons for deficiency detentions by Port State Control (PSC), ship operators are calling for new and effective navigation solutions. The unique features of Thomas Gunn’s new Voyager 4 digital chart management system, launched following successful sea trials, provide ship owners and ship managers with the tools they need to ensure that Safety of Navigation standards on board meet PSC and vetting inspection requirements. New Voyager is the only complete British Admiralty (BA) update service. Uniquely, it includes both the Annual Summary of NMs and Cumulative List of NMs as well as NAVAREA warnings, Loose Leaf publication updates, updates for BA charts and updates for both AVCS and the Admiralty Information Overlay (AIO). It also comes complete with the

best file compression on the market to increase efficiency and minimise data transmission costs and free access to Thomas Gunn’s Vessel Management Service – a web portal for ship managers to view individual vessel holdings and monitor a vessel’s update and supply status. “Voyager 4 is designed to prevent information overload and provide both on board and shore based personnel with optimum information management,” says Mike Bailey, Head of Product Development at Thomas Gunn. “Over the last 3 years the detention rate for SOLAS class vessels has been running at an average of 6% of ships per year, with 12.8% of the deficiencies in 2011 relating to Safety of Navigation and 6% of all deficiencies, relating specifically to Maintenance of Charts and Publications - so the statistics on navigation deficiencies make serious reading. With vessels increasingly manned by less experienced crews and, at the same time, often bearing greater workloads, Voyager helps to remove the risk of human error and avoid port inspection issues.”

MARINE COATINGS PPG Protective and Marine Coatings (PPG) has launched Sigma Syladvance 700, a high performance antifouling designed specifically for ships working at medium to high rates of operation and medium speeds. Based on the Sigma Syladvance 800 premium antifouling product, Sigma Syladvance 700 extends the product offer with an “entry-level” Sigma Syladvance, making premium technology available for a different set of requirements. Sijmen Visser, Global Marketing Manager Marine, said: “Antifouling coatings have evolved over the past decade, in some part due to technological advances, but also because of the very real need for vessel operators to reduce fuel costs whilst continuing to optimise voyage efficiency.” Summer 2013 —

SECTION HEAD

“PPG’s Sigma Syladvance 700 product can be specified for dry dock maintenance and repair projects”

SEASPAN UPGRADES SYSTEM Container vessel Seaspan Ship Management has chosen Germanischer Lloyd’s GL HullManager system to upgrade its in-house hull integrity management system. The condition-based monitoring software will be implemented across Seaspan’s entire fleet of 76 vessels over the next few years. “We developed our own temporary hull structure monitoring system at Seaspan to help us understand our needs and to quickly help us manage hull defects until we could assess and decided on our preferred system,” explained Peter Jackson, director of the projects and technology department at Seaspan . “Three different systems were 28

— Summer 2013

reviewed and as a result, GL HullManager was selected as the software most closely meeting our needs.” GL HullManager is a part of GL’s fleet management software portfolio and provides shipowners, managers and operators hull inspection and thickness measurement support. It supports the complete hull integrity process, from inspections to reporting and condition assessments of tanks, cargo holds and coatings, throughout its entire lifecycle by means of crew inspections and thickness measurements. The use of a vessel-specific 3D model enables visualisation and assessment of the hull’s structural condition. The crew can mark any coating or structural failures on the 3D model, such as marking an individual finding or adding a photo and descriptions, which can then be assessed by superintendents onshore. GL HullManager can make information on the condition of hull structures available to any employee across the company once the inspection results have been approved and synchronised. Stored in a lifecycle database, hull condition data for each individual vessel can be traced over time. Sister vessels from the same fleet can be compared easily. A dashboard overview of the entire ship makes it easy to pinpoint any critical findings by crew or thirdparty inspectors. “Owners are looking for ways to optimise their maintenance schemes and GL HullManager enables them to spot potential problems early on, minimise their operational down time, and smooth inspections through improving and standardising documentation,” commented Torsten Büssow, head of GL’s maritime software business. Ryan Bishop, GL’s Vice President of Business Development for the Americas, noted: “Clients are finding that the system is one that they can easily integrate into their existing maintenance processes, with the added benefit of on- and offshore teams having access to the same data. “With the training we can provide from local offices, we are confident that this partnership with Seaspan will see them roll out GL HullManager without a hitch.” Since its introduction in 2011, GL HullManager has built a user community of some 350 vessels of all kinds worldwide. The system was recently upgraded with a mobile client version for use in compartments and upcoming extra features in development include an automatic proposal for the amount of steel to be replaced for a dry dock tender specification, integration of hatch cover tightness measurement results and hot spot marking functionality.

OCEANSAVER OFFER For just 10% of the cost of its market-leading ballast water treatment (BWT)system, OceanSaver has announced that it will configure new ships for the easy installation of a unit at a later date, fitting base components to allow its typeapproved system to be simply ‘plugged in’ when required. Tor Atle Eiken, Senior Vice President of Sales and Marketing atOceanSaver believes the offer is genuinely compelling when set against the current confusion that has seemingly engulfed the entire ballast water treatment issue. The industry has been concerned that delays in finalising guidelines on ballast water treatment could mean bottlenecks for owners required to fit the new technology. “IMO’s BWT mandates are looming large on the horizon,” Eiken explained, “with all tonnage required to comply with the legislation and fit systems by 2016. However, several key territories have yet to ratify these IMO treaties, creating uncertainty – not to mention the potential for major system installation bottlenecks – right across the industry. “As a result, many shipowners are simply delaying planning for compliance – a dangerous game to play when the future operation of their vessels is at stake.” OceanSaver’s 10% deal – which sees essential piping and power supply installed, alongside other key base parts such as system bed plates and connections – gives owners and operators peace of mind, without the need for substantial financial outlay in an increasingly cost conscious sector. Once configured, ships are essentially future-proofed. If the conventions are ratified, as expected, systems can be fitted quickly, minimising the downtime of ships that can command day rates of tens of thousands dollars. The huge demand for BWT systems, upon ratification, will also push up dry docking prices exponentially, meaning lengthy retrofitting operations will cost a premium. OceanSaver’s “plug in” preparations will ensure ships leave the yards in record time, keeping installation costs to an absolute minimum. “It’s a win-win situation,” Eiken added. “It gives shipowners a kind of insurance policy, whereby they are prepared for any outcome. If the mandates are ratified the system can be quickly fitted, but if not then the shipowner has only paid a fraction of the price of complete installation. The sense of security that provides is something simply unheard of in the BWT arena.” Taking up the offer, Foremost Group, has charged OceanSaver with configuring two

MARINE SOFTWARE

The UKHO is now offering a suite of five anti-piracy and security charts

“This is the first time that such a suite of charts has been made available for the global shipping industry” bulk carriers for future system installation. Preparation work is due to take place on the vessels this year and main installation during first dry docking or according to IMO rules and regulations. Eiken is delighted at Foremost Group’s acceptance of the offer: “It demonstrates that we were right to break with tradition in the sector. To make this happen, a close and open co-operation between OceanSaver and Foremost Group was needed. It is a respected shipping company and it’s great to see a company of its pedigree signing up to accept our revolutionary installation concept.”

UKHO ADDS CHARTS The United Kingdom Hydrographic Office (UKHO) has published two new Admiralty Maritime Security Charts, covering the waters around India and Southeast Asia, including the Malacca Straits. These paper charts provide a single point of reference for recording the most up-to-date security information and, taken together with the UKHO’s three existing security and piracy charts, create the world’s first suite of security planning charts. Admiralty Maritime Security Charts are designed to be used by ship personnel, shorebased managers and security specialists as a key voyage planning tool for recording the

latest security-critical navigational information, which can be accessed for free via the UKHO’s Security Related Information to Mariners (SRIM) service, and for plotting any sightings or incidents that could pose a threat to security. This includes not just piracy, but also other security threats, including armed robbery, embargoes, exclusion zones, illegal fishing and smuggling, as well as routing and reporting requirements put in place by military or security forces. The Maritime Security Charts also provide instructions on the Voluntary Community Reporting (VCR) requirements, whereby merchant vessels operating in the VCR region of south-east Asia and surrounding waters can report any maritime security issues or unusual behaviour. Chris Parry, Head of UK Fleet AWNIS Unit at the UK Ministry of Defence, commented: “The UKHO’s new Maritime Security Charts provide an important voyage planning tool for vessels travelling in and around south-east Asia. Maritime security risks can take many forms and these charts allow vessel owners, operators and mariners to build up a record of maritime security information on a purpose-designed chart that can then serve as a valuable passage

planning aid. The charts also contain vital information on how to prepare to enter waters with known security issues and the contact details for regional security centres in the event of any observed activity that gives rise to security concerns. “In conjunction with our existing charts, the UKHO now offers a suite of five antipiracy and security charts,” he continued. “This is the first time that such a suite of charts has been made available for the global shipping industry, which is testament to the unprecedented level of international agreement that has been secured over the value of providing maritime security information on a chart. Used in conjunction with other navigational charts and publications, our suite of charts will allow shipping companies to engage in safe passage planning in the majority of waters with identified security risks and to do all they can to protect crew, vessels and cargoes.” These two new Maritime Security Charts have been produced by the British Royal Navy and cover Karachi to Hong Kong (chart number Q6112) and the Andaman Islands to the Torres Strait, including Indonesia (chart number Q6113). They add to the UKHO’s existing anti-piracy chart (Q6099), which covers the Red Sea, Gulf of Aden and Arabian Sea, and its two existing maritime security charts, which cover the Mediterranean (Q6110) and the Persian Gulf and Arabian Sea (Q6111). Free downloadable versions of these charts, along with the UKHO’s SecurityRelated Information to Mariners (SRIM) updates, are available at www.ukho.gov.uk/ security. The full suite of Admiralty Maritime Security Charts, including charts Q6112 and Q6113, are available to purchase from UKHO chart agents. Summer 2013 —

SECTION HEAD

COST CONTROL

Costs in salvage operations have been spiralling in recent years, as the International Salvage Union heard in a recent debate

ising costs of wreck removal have been the subject of much debate over the past year or two, according to Michael Kelleher, senior claims director at the West of England P&I Club and chairman of the International Group of P&I Clubs large casualty working group. The Costa Concordia and the Rena accidents caused quite a stir, not just as newsworthy cases in their own right, but also because of their financial impact on the P&I clubs through the pooling arrangement, the group’s reinsurers and ultimately on shipowners, Kelleher told delegates at the International Salvage Union’s associate members day. In considering the effect of these casualties on the incurred costs of the pool, 2011 already matches the worst years on record – 2006 and 2007. One of the repercussions was for both Lloyd’s of London and the International Group separately to set up task forces to consider the problem. Lloyd’s released its report on the rising cost of wreck removal in March, saying that costs were spiralling and the cost of the 20 most expensive wreck removals in the last decade was $2.1bn and rising. The objective of the International Group’s large casualty working group was to identify and review recent large 30

— Summer 2013

casualties handled by the clubs, which involved significant wreck removal elements, and associated salvage and SCOPIC expenses . The aim was to pinpoint the causes that had contributed to the significant cost escalation and to consider whether there were any practical recommendations that could be given to group clubs with regard to monitoring and controlling the level of such costs, Kelleher explained. In giving a summary of the findings of the working group, “unsurprisingly, the working group did not find a simple solution to the problem”, he told delegates. In considering influencing factors contributing to rising costs, he said: “Some were matters of pure fortuity and are not capable of being materially influenced at all, while others might by susceptible to influence with the objective of cost mitigation”. Issues to be considered included the geographical location of the wreck, water depth, environmental sensitivity of the wreck site, proximity of available salvage and wreck removal equipment, tidal and sea conditions, and access to wreck site were all matters of “pure fortuity over which responders had no influence”, he said. One area, Kelleher said where the elements of fortuity might be mitigated was in the area of the location of salvage

As well as the Costa Concordia, the Rena accident caused quite a stir because of its financial impact on the P&I clubs through the pooling arrangement

SALVAGE

equipment. For example, heavy salvage equipment is almost exclusively located in the Northern Hemisphere. Of 20 casualties reviewed by the International Group, 18 were located in the Northern Hemisphere and therefore were relatively close to salvage equipment. In two cases, in particular in the case of the Rena, one of the major financial impacts on the total cost of the casualty was because it occurred so far away from the location of heavy salvage equipment. The problem is less acute for equipment that can be transported by air. The report also found that the approach taken by the clubs to determining the most effective contractual arrangements with salvors and wreck removal contractors was sound. Much of the scope for bettering the financial impact comes at the planning stage, he said. In the immediate aftermath of an incident there is “intense time pressure to get moving”, he said – not least is the incident receiving widespread media coverage and attention from the local regulatory authorities. “All parties to contractual arrangements might get pushed into interim arrangements that suffer later on as a result of lack of planning or forethought,” Kelleher explained. The review encouraged clubs wherever possible to think ahead to “as seamless a transition as possible in casualties as they develop from salvage or SCOPIC cases, through interim contracts to wreck removal contracts”. Interference by the local authorities is also a feature in delaying transition between contracts. “A feature of some of the casualties for review was that the external influence in relation to the timing and termination of SCOPIC was a factor resulting in increased costs”. Detailed information on long-range weather and sea state forecasts was essential in order to ensure these forecasts could be built into a wreck removal contract “with fair risk- sharing between the parties”, he told delegates. Efforts made by clubs’ owners to provide as comprehensive a package as possible of relevant information and documentation including side scans, was very important he said. The International Group review also found that more use should be made of the 2010 version of the BIMCO wreck removal contracts, in particular including bonus and/ or penalty schemes to improve risk sharing in respect of unforeseen over-runs or delays, he added. While the review revealed general satisfaction with the work of salvage masters, contractors and wreck removal teams, it was accepted that an incorrect approach by a

salvor or contractor could have a very significant effect on the overall cost exposure. Conversely, he said there was evidence in many of the casualties reviewed there was evidence of innovative techniques used by salvors to deal with logistical problems “which is a feature of the competence and expertise of the salvage industry”. He added that there was a challenge for salvors and wreck removal contractors in recruiting and retaining personnel with the necessary training and skill sets to handle major casualties: “That is really down to the salvage industry to rectify”. Special casualty representatives appointed were not generally considered to be drivers of costs for the casualties under review. Bunker removal operations were “inextricably linked” to the increasing interest and interference of the authorities in matters pertaining to the environment. This increasing interest is directly related

requirements based on environmental concerns where the “consequent costs resulting from the vessel’s personnel and equipment deployed and the length of operations have been disproportionate to the benefits achieved.” Authorities have at times required a rapid response at the expense of detailed planning, he said, which has led to increased costs later down the line. Pressure from the media, the public and environmental interests has added to the mix. Recent cases have also pointed to “unnecessary interference” by the authorities that have jurisdiction over the casualty – in contractual arrangements, for example in preventing the termination of SCOPIC. Clubs and contractors have considerable expertise in casualty response which may not be recognised by all stakeholders he said. An outreach programme is therefore needed, targeted at key maritime organisations in

“As we have seen in the review, on a number of high-profile casualties there is limited or no room for manoeuvre on requirements imposed” to the increased costs involved in wreck and bunker removal, he said. In the 10-year period during which bunker casualties were reviewed, it is clear that where bunker removals used to come in between $1-4 million, they might possibly exceed $20-25 million today. In terms of container removal from a casualty is likely to be technically complex and time consuming and that will be ref lected in the costs involved. The International Group review considered six container ship casualties, none of which were the largest ships. Un-stuffing and re-stuffing contents could significantly increase costs particularly when the customs were involved, or hazardous goods were being carried. Government and other authorities intervention in large casualties involving SCOPIC and wreck removal is a “major driver for costs,” he said and is expected to continue to be a common feature of the largest casualties. “This is by far the most significant factor identified by the working group as a driver of increased costs”. Governments and local authorities have on occasion laid down operational

order to raise levels of understanding on the ability to deal with major casualties. “As we have seen in the review, on a number of high-profile casualties there is limited or no room for manoeuvre on requirements imposed. However, if such requirements are considered to be disproportionate or unreasonable then proper consideration should be given by the club or the owners to challenging such requirements through the courts if necessary, taking into account all the material facts and circumstances pertaining to the incident and the requirements imposed. Obviously, there will be practical difficulties, but we believe there is a greater need to focus on the need to question and challenge those requirements imposed which are clearly disproportionate or unreasonable.” Kelleher said the group believed that the review would lead between better liaison with SCRs and salvage contractors, and a better cross-fertilisation between P& I Clubs involved in salvage operations. Clubs will be encouraged to share knowledge with other clubs on major casualties he hoped.

Summer 2013 —

HEAVYLIFT AND BREAKBULK

Left: North P&I’s Head of Loss Prevention, Tony Baker Right: Rickmers-Linie has added Rickmers Savannah to its Pearl String Service vessels

FORGING LINKS Strategic alliances are proving the way forward in the heavy lift, project cargo and breakbulk sectors lipper Group and Thorco Shipping have merged to create the world’s second-largest multi-purpose/projects owner and operator. The new organisation will continue under the Thorco name, with headquarters in Copenhagen, Denmark. Thorco will operate a fleet of about 90 modern multi-purpose vessels with a lifting capacity up to 400 tonnes, ranging from 5,000 dwt to 20,000 dwt. “Clipper is very pleased with the merger,” says Kristian Morch, partner and group CEO at Clipper Group, responsible for Clipper Projects. “We are happy to participate in the consolidation of the industry and we are confident that the new entity will be able to generate significant value to its partners. This is, in our view, the best way to ensure a profitable business and future growth in the current multi-purpose market.” “At Thorco, we have been growing rapidly over the past 10 years, but we have been looking at making a quantum leap,” says Thor Stadil, who will continue as chairman of Thorco. “With the opportunity to merge with Clipper Projects, we can make this leap. We believe that the new Thorco will be able to provide a significant and flexible platform, which is unmatched in the industry and will create great value for our customers and partners.” Henrik Ramskov is CEO for the newly merged company. He has a strong shipping and logistics background from senior leadership positions in Maersk Tankers and Damco. Global Head of Operations is Andreas Jørgensen, who is currently Global Head of Operations at Clipper Projects, with Thomas Mikkelsen as global head of chartering. The merged company will have 130 employees, with offices in 11 countries around the world.

BIGLIFT JOINS FORCES WITH ROLLDOCK Global heavy lift and transportation providers BigLift Shipping and RollDock Shipping have also announced they are forming a joint company. BigRoll will operate two newbuild MC-class module carriers for the transportation of ultra large and heavy modular cargoes by sea, which will be available at the end of 2014/beginning of 2015. 32

— Summer 2013

The module carriers will be designed with a focus on short loading and discharging times, high service speed and low accelerations. The vessels will have DP2 and Finnish Swedish 1A ice class notations. The overall length of the MC-class is 169m and beam is 42m, providing the vessels with a deck space of 42 by 125 m. Maximum deadweight of the MC-class is 22,500 tonnes. Loading and discharging can be done over the vessels’ stern or side by ro-ro or skidding. To minimise loading and discharging time, the ballast capacity of the vessel is 12,000 m3/hr. The module carriers are not semi-submersible. BigRoll will concentrate on the offshore and onshore oil and gas and renewables markets, power generation, container cranes and shipyard industries. The vessels’ high ice class notation will make them ideal for Arctic regions and the DP2 notation will enable direct offshore delivery of modules. Arne Hubregtse, managing director of BigLift says: “I am very excited about the merger. Not only in designing, managing and operating the vessels, but also in BigLift, RollDock and BigRoll working together on special projects worldwide. As partners in BigRoll and having the innovative MC-class available, we can make a difference and add value.” Wout van der Zwan, CEO at RollDock says: “As a modern company we understand the importance of being ahead of the developments in the market. Our philosophy of not believing in limitations is highlighted in the decision to join forces with BigLift in this new venture to offer clients the ultimate in heavylift and transportation solutions worldwide.” BigLift Shipping owns and operates 14 heavy lift vessels, with lifting capacities up to 1800 mt, in the worldwide project and heavy lift market.

HEAVYLIFT AND BREAKBULK

RollDock Shipping presently owns and operates two semi-submersible/heavy lift/ ro-ro vessels trading worldwide with two more sister vessels to be delivered – one vessel by the end of this year and the other in April next year.

HEAVYLIFT CONTRACT Jiangsu Hongqiang Marine Heavy Industry and German owner Krey Schiffahrts have signed a contract for four Eco-trader 12550DWT heavylift MPP. The 12,550 dwt newbuildings are 144.7m in length and 22.8m across the beam. Classed by Germanischer Lloyd, the vessels will be equipped with the new low speed green M/E, with low oil consumption, two 250-ton deck cranes and a ballast water treatment system. The design allows for an increase in deadweight and cargo hold volume, while at the same time achieving a 30% reduction of fuel oil consumption. The ships will be capable of carrying long and large project cargoes, heavy cargoes, containers, and dangerous goods. BREAKBULK STOWAGE WARNING North P&I Club has warned of an increase in claims arising from poor stowage and securing of breakbulk cargoes, particularly on ships departing from China. Such cargoes – typically of bags and timber, as well as construction components and plant – can put people, cargo and vessels at risk if they start shifting while a vessel is at sea. According to North’s Head of Loss Prevention Tony Baker: “Poor loading practices of breakbulk cargoes are particularly prevalent in Chinese ports and have led to cargo shifting and stows collapsing during voyages. This, in turn, has resulted in damage to vessels and cargo and to items of cargo being lost overboard, resulting in substantial claims”. Baker says the problems include overstowing incompatible cargoes and the improper or insufficient use of lashings, dunnage and shoring. “For example, we have seen heavy cargoes such as steel girders, vehicles and containers stowed over jumbo bulk bags and lashings tied to ship’s ladders and pipework that are obviously not designed for the task,” he says. North has highlighted the issue in its loss prevention newsletter Signals, in which it reminds masters of their obligations under the International Convention for the Safety of Life at Sea to ensure all cargoes are loaded,

stowed and secured appropriately for the intended passage – even if charterers are responsible for loading. “We are aware of instances where masters have challenged stevedores on the method of stowage and securing of the cargo and yet stevedores have ignored these objections,” says Baker. “It is vital in such situations that masters exercise their authority and stop further loading until satisfied the stowage and securing is safe.” The Club says it is worth involving charterers as soon as any problems are discovered to minimise disruption. If concerns are not addressed by stevedores, a written note of protest should be issued. North also recommends shipowners appoint

continue to grow its terminal and cargo operations in its core Houston market while retaining control of the facility until 2068, including three 10-year option periods.” Intermarine broke ground on its new, state-of-the-art preparations centre on the Houston Ship Channel in April. This will house the company’s entire technical, operations, traffic and terminal teams.

RICKMERS-LINIE ADDITION Rickmers-Linie has added a tenth vessel to its eastbound round-the-world Pearl String Service as part of its continuing programme of investment in services. The global breakbulk, heavylift and project specialist has taken the Rickmers Savannah on long-term charter to help it meet customer demand. The 30,000dwt Superflex Heavy MPC, which was delivered by Jinling Shipyard in November 2010, is identical to the nine vessels of the Rickmers Hamburg class, which Rickmers-Linie already deploys on the service. The ships are self-sustaining, with four large cranes, the two heaviest of which can be twinned for a lifting capacity of up to 640 tonnes. Ad j u s t a b l e tweendecks allow for optimised stowage, while variations in cargo height and dehumidifying devices in all holds ensure that cargoes sensitive to corrosion arrive in good shape. According to Ulrich Ulrichs, COO and Managing Director of Rickmers-Linie: “Our customers rely on our scheduled liner services. The tenth vessel gives us the ability to react to market changes and, at the same time, we are enhancing our schedule integrity. The fact that the vessel is identical to our backbone fleet of nine RTW-vessels means it fits together perfectly with its fleet mates.” The addition of the Rickmers Savannah brings the total number of vessels operated by Rickmers-Linie on a regular/longterm basis to 18. Further vessels are spot chartered in case of demand to offer additional sailings within the existing liner services or to cater for special requirements and destinations. In March 2013, Rickmers-Linie launched a westbound round-the-world service, connecting areas of economic growth in Asia and South America and then on to North America, initially operated with two-to-three multipurpose heavy-lift vessels. The America-Asia westbound service established in 2006 now forms a part of this new service.

“We are aware of instances where masters have challenged stevedores on the method of stowage and securing of the cargo and yet stevedores have ignored these objections” a competent supercargo to improve communications with stevedores. The Club has also published a new loss prevention poster to help raise awareness of problems resulting from poor break bulk stowage. Entitled “Stowage and Securing”, the new poster in North’s Cargo Wise series shows the aftermath of poor stowage and provides brief guidance on how to carry it out properly.

INTERMARINE TERMINAL SALE Intermarine has announced the sale and leaseback of Industrial Terminals, the leading breakbulk terminal on the Houston Ship Channel. The company has entered into a 25-year leaseback agreement with an affiliate of Lexington Realty Trust for the sale and leaseback of the entire terminal facility. Chief Financial Officer Michael Dumas explains: “This financial arrangement will allow Intermarine to

Summer 2013 —

SECTION HEAD

JLT Specialty’s Andrew Webster

RISKS AND REWARDS

Risk management is also about keeping promises to those you work with, according to a recent seminar

liminating risk altogether is not possible, and it is necessary to live with a certain level of risk, but the question is how to manage that risk within the operation you are trying to perform, within the operation you are trying to make money out of? That was the question posed by Andrew Webster, partner in the energy and marine division of JLT Specialty at a recent London Shipping Law Centre seminar on risk management for shipping, ports and terminals. Risk, he said, had to be considered in the context of a commercial operation. “When we are talking about risk, we are also talking about keeping promises,” Webster told delegates. “If you perform a contract, you are really actually keeping a promise to someone to do something in the way you said you would do it,” he explained. “The risk of not keeping your promise is something we deal with every day in the insurance context and how to take that risk and transfer it to someone else, who is either better able, or more interested in the risk than you are”. As far as financial risk is concerned, in the current climate capital is difficult to find, whether building a port or financing a ship. Capital has its own terms and wants a return, so in order to develop that return, promises have to be made, Webster said. “It is this promise to do things that drives the contract you have to make with your capital providers”. These could be pure capital providers giving a mortgage or partners in the venture, which “changes the way in which you deal with those who provide you with your capital to start a venture”, Webster explained. That can be contractually tricky, he added, and good legal advice upfront was essential. It was often the case that not assessing risks at the start of a relationship “that lead to problems later on”. While it was not pleasant to “consider the divorce before the marriage, if you do that carefully there are ways to deal with situations and solve problems before they get to breaking point”. In considering port risks, when building a new port, 34

— Summer 2013

archaeological finds could be one issue which could delay any start up hugely, Webster said. “The guys who lent you the money want a return, and a return within a certain time frame. You promised to give them that return in that time frame, and now how is your promise stacking up against the actuality of an archaeological find?” This is an important issue to consider when contemplating major infrastructure work, Webster said. Another issue could be protesters’ action aimed at stopping a project. Finding capacity for risks is often quite a challenge he said, particularly where wet works were concerned. Getting adequate risk transfer mechanisms in place could be aggravated by limits, exposure and loss record. Not only is there complexity over design and build issues, but also on risk transfer. Brownfield sites mean environmental issues may arise. Another concern he raised was that of owner-controlled insurance programmes as opposed to contractor controlled ones. “Do you really want your contractor in charge of all insurance programmes? I don’t think so. You want to have control yourself, know where things are going, what is happening and how to resolve disputes. It is enabling you to keep your promise.” Key benefits of owner-controlled insurance programmes include cost control, premium savings and seamless cover, which he said was “always a goal we have when we deal with

“Do you really want your contractor in charge of all insurance programmes? I don’t think so. You want to have control yourself”

RISK MANAGEMENT

it to ensure you have the best risk transfer mechanism available, so you don’t have to worry about your risk not being taken care of.” According to Peregrine Storrs-Fox, risk management director at the TT Club, the club insures about 80% of all maritime containers, 400 ports and terminals and around a 1000 freight forwarder and logistics operators. When talking about risk it is easy to focus on accidents he told delegates. However, as an insurer, risks need to be assessed in the first place. “It isn’t just about looking at losses, but identifying what the management procedures are and the controls that are in place that help and sustain profitability for businesses that we are looking to insure.” Unusually for an insurer, he said, the TT Club is interested in helping insureds to manage their risk more successfully so that they pay less premium.

tenants is key,” Webster continued. It has made a promise to keep the port operational and keep the access channel accessible, he said. That is a promise made to its tenants, and if it fails, what remedy have the tenants got? City connections including road and rail are important responsibilities as well. Terminal operators also have liabilities which are more immediate as they have responsibility to those for whom they are moving cargo. “If you don’t get it right, what are they going to do to you? Are they going to move away? There is a massive concentration of risk in the operation that is being performed. There are also business interruption issues, Webster said, because if the operator cannot perform the operations for which he has borrowed money, they will come after him. The key, he said is to anticipate and manage risks. “It is never too early to think about insurance. You have to keep on top of

Maersk’s new generation 18,000 teu container ships are difficult to imagine, he said, and if the containers were put end to end they would take 70 miles to drive past. The ships stand for economy of scale, energy efficiency and environmental improvements, he said. The size of the ships presents some challenges, not least because of the need for a high utilisation rate of 85%. From a risk perspective, he said, there was the issue of cargo management because with vessel sharing agreements containers could be booked by other carriers like Hapag Lloyd, OOCL or CMA CGM. “Maersk won’t have control over all of those containers and the way in which they are loaded, stowed and brought to the ports in the first place,” he said. Issues of costs, port dues, pilots and tugs become more complex when dealing with a ship of this size, he said. In the case of the Rena, which was a much smaller ship, it took six months to clear half the containers off

JLT

any one of our clients”. Other benefits included reduced administration costs, and efficient claim resolution. Other considerations included delay in start-up, sabotage and terrorism, environmental insurances and professional indemnity – “another huge load of issues to consider within a major infrastructure project”. As far as operational issues were concerned, there were two major entities to consider in a port scenario, first the port authority as landlord and the terminal operator. The port authority has essentially two concerns: the property and its liability which is a “nightmare on wheels” given the extent of the port’s responsibility for bridges, waterways, buoys, lights, and perhaps bunker services are also potential risks and it also has a property risk as well. “The relationship the port authority has with its

the ship. The clubs involved in the case had a very time-consuming task dealing with the maritime administration. In terms of an insurance claim in excess of $300m, about one third was on the Special Compensation P&I Club Clause (SCOPIC) claim for the salvage. In the case of the MSC Flaminia, finding a port of refuge proved a problem and once found, water in the hold needed to be pumped out in an environmentally friendly manner, with a sizable insurance claim for a vessel a third of the size of some of the ships being built now. Such casualties also have an effect down the supply chain Storrs-Fox said. In the case of MSC Napoli, for example, the VW plant in South Africa had to close down because they did not have sufficient parts. As far as ports are concerned, quay crane claims could include collapses, wind damage, boom to ship collisions, stack collisions , weight , twistlock and cell guide issues. With all of these claims, he said, they can be prevented, with risk management procedures and technologies to help avoid crane collapses and the impact of wind damage. The reality with bigger ships, he said, was that crane drivers needed a lot of technical support or binoculars so as to be able to see what they were doing at the bottom of the hold. Regular structural examination of cranes is statutory in most jurisdictions, but not necessarily followed through he said. As cranes grow older or are stretched to accommodate larger ships then risks are more substantial from an engineering perspective, he warned. Ships needed to ensure they had sufficient tugs to deal with the size of the ship, he added. The windage on a containership of 16,000 teu is massive, he said, raising the prospect of the ship getting out of control. Although it might make sense for a ship to go off the berth in stormy conditions, but for those staying alongside “when was the last time a port actually checked the bollard strength to ensure that the size of the ship that is moored can actually be held in storm conditions?” Master and pilot communications are critical to any operation, he said, as are communications between the port and the terminal: “Everyone needs to be talking to one another.” Container weighing is one issue that has been going through IMO and shippers and packers will have to be more diligent. Ports have an opportunity to play a key role, he said. There will be an advantage for carriers who will be able to optimise their ship stow, which will lead to better carrying capacity and fuel consumption. Summer 2013 —

REGISTRIES

REGISTERING INTEREST

Ship Registries not only have to prepare themselves for new regulations, but also submit to being put on the spot on flag state performance

Left: LISCR CEO Scott Bergeron. Right: Ugo Salerno CEO RINA

he Liberian Registry is ready for the entry into force of the Maritime Labour Convention (MLC) 2006. In fact, it has been getting ready for some time. It has had to. MLC 2006 applies to no fewer than 3,273 ships registered with Liberia. Liberia was the first country to ratify MLC 2006 and has consistently led the way in pushing for swift overall ratification. So of course it welcomes the entry into force of the convention this year and continues to reinforce its role as a world leader in maritime safety and seafarer welfare by strengthening its team of flag state inspectors qualified to undertake MLC 2006 inspections. Liberia currently has a record number of 159 qualified MLC 2006 inspectors conducting compliance inspections and issuing Maritime Labour Certificates on behalf of the Liberian Registry. And it is committed to ensuring that the involvement of other service providers such as crewing agents should not be allowed to dilute or distort the MLC 2006 process.

— Summer 2013

To date, Liberia has issued 152 MLC certificates and is busy scheduling further inspections at the rate of over 100 per month. It has also issued 1,750 Declarations of Maritime Labour Compliance (DMLC) Part I and accepted more than 1015 DMLC Part II documenting shipowners compliance. LISCR CEO Scott Bergeron says: “Liberia believes in protecting the welfare and the rights of the seafarers on board its ships. Without them, Liberia would not be among the very best ship registries in the world. This is not something to which Liberia simply pays lip-service. The Liberian Registry wants its seafarers to be safe and happy and it wants to know about it if they are not.” Among other initiatives, the Registry is launching an online seafarer complaint procedure, which will allow seafarers to submit any complaints they might have using a form-based template. The Liberian administration will follow up with individual seafarers who use this process and it will provide any necessary guidance and recommendations. Bergeron says: “It is important to remember that it is not just seafarers who will benefit from the implementation of MLC 2006. When the convention is properly and effectively implemented, owners and managers will reap the benefits in terms of improved retention of happy and properly motivated seafarers. “They should also benefit from a level playing field, with no more favourable treatment for ships flying flags of nonratifying countries. “Liberia is proud of its reputation for upholding the highest standards of crew welfare and is fully behind the introduction of MLC 2006. The convention will create a better connection between the people at sea and their management ashore, and will bring a new level of openness and communication

REGISTRIES

that will help eliminate many of the frustrations and insecurities that seafarers experience in their relationships with shipowners, managers and crewing agents. Everything should be transparent, open and, ultimately, verifiable. “MLC 2006 has been termed the ‘seafarers’ bill of rights’. It is incumbent on the shipping industry to ensure that it functions properly in that role,” he concluded. Earlier this year, LISCR completed more of its ISM/ISPS Flag Auditor and MLC 2006 Flag Inspector courses, in Piraeus, Greece, The six-day ISM/ISPS Lead Auditor Course produced eighteen new, fully qualified ISMISPS auditors. Meanwhile, 29 new inspectors, certified to conduct Maritime Labour and ILO-92/133 crew accommodation inspections, successfully emerged from the MLC 2006 Flag Inspector Course.

GREEK TONNAGE TAX There is a new requirement for Greek shipowners to pay tonnage tax on ships operating under flags other than the Greek flag that are managed by companies based in Greece, or offshore companies that have a branch in Greece, operating under Law 89 of the Greek constitution. Michael Kotsapas, a partner with the Moore Stephens shipping team, says: “This new requirement to pay tonnage tax, effective from 1 January, 2013, mirrors that which is already in existence for the Greek-flag merchant fleet. A large part of the Greek fleet currently sails under foreign flags and therefore is impacted by the new tonnage tax regulations. Management companies are jointly liable with shipowning companies to pay the tax. Any foreign tonnage tax paid can be set off. “Shipowning companies operating vessels under a foreign flag are exempt from any other taxes on profits derived from the operation of the vessels outside Greece, similar to exemptions available for operating Greek-flagged vessels.” PARIS MOU INSPECTION The Paris MoU Committee has approved the 2012 inspection results and adopted new performance lists for flags, with effect from 1 July 2013. The white, grey and black list presents the full spectrum, from quality flags to flags with a poor performance that are considered high or very high risk. It is based on the total number of inspections and detentions over a three-year rolling period for flags with at least 30 inspections in the period. On the list for 2012, a total number of 78 flags are listed: 45 on the white list, 19 on the grey list, and 14 on the black list. The

white list represents quality flags with a consistently low detention record. Compared with last year, the number of flags on the white list has increased by two flags to a total number of 45 flags. New on the white list are the US and Thailand, which were still on the grey list last year. France has been placed highest on the list in terms of performance. The next in line of

has complementary strengths. Initially, co-operation will focus on yachts and ice class, where they have specific strength and expertise. RINA will use its expertise with yachts, pleasure craft and passenger vessels to help RS approve specific projects for yachts and passenger vessels that may operate in Russian waters or under the Russian flag.

“When the MLC 2006 convention is properly and effectively implemented, owners and managers will reap the benefits in terms of improved retention of happy and properly motivated seafarers” the best performing flags in 2012 are Germany, Hong Kong, Sweden and Greece. Flags with an average performance are shown on the grey list. Their appearance on this list may act as an incentive to improve and move to the white list. At the same time, flags at the lower end of the grey list should be careful not to neglect control over their ships and risk ending up on the black list next year, the Paris MOU said in a statement. On this year’s grey list, a total number of 19 flags is recorded. Last year, the grey list recorded 20 flags. New on the grey list is the Syrian Arab Republic,which was on the black list last year. The poorest performing flag is Bolivia (very high risk), followed by Tanzania, Togo, Sierra Leone, Honduras and Moldova (medium to high risk). New on the black list are the flags of Honduras and Dominica. A flag’s ranking is taken into account when targeting ships for inspection and ships flying flags listed on the black and grey list are liable for banning from the region after multiple detentions. The performance lists will be used for calculating the ship risk profile and flags on the grey list and black list are subject to the more stringent banning measures in force since 1 January 2011.

RINA AND RUSSIAN LINK UP RINA Group’s certification company – RINA Services (RINA) – and the Russian Maritime Register of Shipping (RS) have agreed to co-operate on specific projects where each society

RS will help RINA to meet the needs of some of its clients for Arctic navigation and offshore operations, especially with respect to ice class and winterisation. Subject to the consistent and positive implementation of this scheme, the societies will consider further development of rules and relating software and training instruments in these or in other mutually beneficial fields of interest. Ugo Salerno, CEO, RINA Group, says: “I welcome this step in what I believe will strengthen the long-term co-operation between our companies. “Co-operating in specific areas where we each have particular expertise will help us build a platform for win-to-win situations in the marine as well as in other sectors. “We are both growing in certification and validation across a range of industries and by working together we can meet the needs of our clients more effectively.” Mikhail Ayvazov, CEO, Russian Register, says: “RS is pleased to pursue the development of bilateral co-operation with RINA on issues that give us very good opportunities for some common advancement ahead. “Both RS and RINA are rather comparable in size and have complementary expertise in areas at hand. This approach, based on the principles of fair and equitable co-operation, opens very good perspectives for our companies to raise the level of our expertise in new and promising areas, where there is a demand from our clients for reliable services and where RS and RINA are committed to expand their presence.” Summer 2013 —

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— Summer 2013

SHIPBROKERS AND AGENTS

Michael Kotsapas, a partner with the Moore Stephens shipping team. Right: Julie Lithgow, who became the Director of the Institute of Chartered Shipbrokers in September 2011

SPOTLIGHT ON

SHIPBROKING From new levies imposed by Greece to insurance products that hit the spot are just some of the recent activities in the shipbroking sector

he European Community Association of Ship Brokers and Agents (ECASBA) has joined other trade associations in warning against proposals by the Environment Committee of the European Parliament to impose a levy on all ship calls at EU ports to fund sustainable ship recycling. The ECASBA joined with the European Community Shipowners Association, the European Sea Ports

Organisation, the Federation of European Private Port Operators, the European Boatmen’s Association , the European Dredging Association and the European Tugowners Association in signing a joint letter to the Parliament calling for the levy to be abandoned. While welcoming the European Commission’s plans to implement the measures incorporated in the 2009 Hong Kong Convention on the Safe and Environmentally Sound Recycling of Ships, the associations fear that imposing an additional cost burden on European ports would adversely affect their competitiveness, while at the same time penalising shipowners who have already invested in vessels that comply with the Hong Kong Convention. Furthermore, introducing the levy may result in the main ship recycling states failing to ratify the Convention.

GREEK LEVIES A range of levies has been introduced for companies providing services to the shipping sector in Greece. These changes affect shipbrokers, insurance brokers, agents, average adjusters, charterers and others, irrespective of whether they provide services to ships under Greek or foreign flag, but exclude ships trading on purely domestic routes and some passenger ships. Shipowners and ship management companies are exempt. The new service-related charges will be imposed on remittances of foreign currency, based on the following scales: 5% on remittances up to $200,000; 4% on remittances between $200,001 and $400,000; and 3% on remittances over $400,000. The charges are annual and will be made for a four-year period, beginning retrospectively from 2012. In Summer 2013 —

SHIPBROKERS AND AGENTS

there is no need to make any further individual declarations as fixtures within the limit of liability are automatically covered.

The MSC Napoli

addition, service company profit distributions, either as dividends or as bonuses to directors and staff, are now taxed at a flat rate of 10%. Michael Kotsapas, a partner with the Moore Stephens shipping team, says, “Shipping remains a key industry for Greece and an important source of foreign currency. In recognition of the need to maintain the attractiveness of Greece as a base for companies engaged in the shipping industry, these service-related charges have very recently been reduced to 50% of the figures included in the original legislation.”

ITIC CLAIMS REVIEW ITIC has highlighted the value of diligently pursuing the collection of shipping industry debts in today’s difficult economic climate. In its latest Claims Review, ITIC notes that a shipbroker acting for charterers was owed $25,000 in commission by an Indian voyage charterer under a charter party, which provided that the charterer would deduct the commission. Having written to the charterer and not received a response, ITIC ascertained from local sources that the charterer was in serious financial trouble. It was also rumoured that the charterer was about to receive a large injection of finance from a foreign investor. A local lawyer was appointed to pursue the debt and a letter was sent to the charterer stating that, if it did not pay the outstanding commission, winding-up procedures would be started. Again, the charterer did not respond with an offer of settlement. ITIC began the winding-up process and this prompted an immediate payment to the shipbroker by the charterer. The ITIC Claims Review also highlights a problem of a different nature faced by a 40

— Summer 2013

“The case shows the importance of ensuring that claims are properly filed in liquidations” ship agent in Canada, which was owed more than C$70,000 by a local company that had been declared bankrupt. ITIC instructed lawyers to have the ship agent properly listed as a creditor and, although there were other creditors, aspects of the agent’s debt took priority over many of the claimants and ITIC managed to recover C$42,998 on behalf of the ship agent. ITIC says: “The case shows the importance of ensuring that claims are properly filed in liquidations.” Loss of commission insurance is as essential for shipbrokers as business interruption and loss of profits insurances are to other businesses. The loss caused by, for example, the sinking of a vessel on a long term time-charter could seriously diminish a shipbroker’s income. ITIC offers two types of loss of commission cover, the simpler being loss of commission resulting from the charterparty being terminated due to actual or constructive total loss of a vessel. The more comprehensive cover includes loss of commission due to a charterparty being cancelled for a wide range of marine perils. Cover is offered either on an individual declaration of a charter, sale or purchase, or the more popular annual cover for all fixtures concluded throughout the year. With the latter,

CASE STUDIES — Constructive total loss of commission insurance The shipbroker who fixed the MSC Napoli for a period charter lost its right to commission when the ship, which was famously beached on the south coast of the UK, was declared a constructive total loss. The shipbroker insured his commission with ITIC and the Club paid US$500,000 to the broker – the equivalent of the balance of the commission due over the remainder of the period charter. The shipbroker received his commission and had it paid up front. — Wider loss of commission insurance A ferry on a regular route suffered many deficiencies, including engine breakdowns and machinery deficiencies and was often put off hire. Ultimately, the charterers applied a clause in the charterparty that allowed them to terminate the charterparty due to the number of off-hire periods. The shipbroker had taken out ITIC’s full loss of commission insurance and therefore claimed for the remaining period in which it should have received commission against the insured peril of the breakdown of the engine or equipment. The commission lost totalled US$80,000 and was covered in full by ITIC. Shipowners often require agents or managers to deliver cash to ships while in port. The ship agent or manager needs insurance to cover cash when it is temporarily in his custody, whether during transport to the ship, in a strong room at his office, or in a safe at home or on the managed ship. ITIC provides a product offering this combination of insurances, which can be offered either on a single occurrence or annual basis. — Theft from Master’s cabin A Master on a managed ship received US$10,000 from the ship agent. The fact the cash had been received was confidential and only the Master, the ship agent and the ship manager’s representative were aware of the transfer. The cash was placed in the safe, located in the Master’s day room, inside a cabinet. The Master had to go ashore for two hours and on his return realised that the monies had been removed from the safe. The loss was reimbursed through ITIC’s loss of money insurance. — Theft leaving agent’s office A port agent was asked by the owner to deliver US$15,000 to the master. As the agent left, he was held at gunpoint and the money stolen. The agent had loss of cash insurance from ITIC and the monies were reimbursed.

SURVEYORS AND CONSULTANTS

Deepwater Horizon, April 2010

SURVEYING THE SCENE

Surveyors and consultants have a key role to play in the shipping industry, as a range of developments demonstrate

new professional body – the International Association of Marine Warranty Surveyors (IAMWS) was launched recently. With around 120 representatives from the energy insurance market together with brokers and oil company representatives in attendance. IAMWS will assess and provide accreditation to practicing marine warranty surveyors from across the world to ensure they operate to an acknowledged minimum professional standard and code of ethics. The benefits of a common standard have increasingly been discussed by the offshore oil and gas industry, and IAMWS has been created to promote a consistent and robust level of service. The IAMWS offers accreditation to individual practicing marine warranty surveyors (not companies) allowing them to become Certified Marine Warranty Surveyors (CMWS). To qualify, surveyors need to demonstrate that they are capable of performing to a set of minimum standards. They will undergo testing, continuing professional development and be subject to the rules of the Association. Certification is currently limited to offshore development projects (oil and gas), but plans exist to extend this to include rig moves, rig location and energy related heavy lift operations. IAMWS is an all-inclusive association and, to date, around 30 marine warranty surveyors have been accepted and certified. It is thought that around 800 marine warranty surveyors will apply for membership from around the globe.

As well as providing certification, IAMWS aims to serve as a technical forum to share ideas, best practice and lessons learned, as well as holding seminars to promote open dialogue with underwriters, oil and gas companies, contractors and other stakeholders in major offshore oil and gas development projects. Speaking at the launch, inaugural IAMWS chairman Steven Weiss said: “This new association will give the insurance sector additional confidence that the marine warranty surveyors attending operations are equipped to do the job that is required. It will also provide a platform to enhance the dialogue and develop a much closer relationship between surveyors, underwriters and other stakeholders in the offshore energy sector.”

APPETITE FOR RISK US oil and gas professionals are losing their appetite for risk and are worried about rising operating costs, as they grapple with the consequences of a tougher, post-Macondo regulatory regime, according to new research published by GL Noble Denton. Despite the new regulations, the vast majority believe that the US will continue to be a leading investment destination and that the changes are necessary to improve the safety and reputation of the industry, according to the report. The findings come from a study, Reinventing Regulation: The impact of US reform on the oil and gas industry. The Summer 2013 —

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— Summer 2013

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SURVEYORS AND CONSULTANTS

research provides a snapshot of industry sentiment towards the issue of new regulation being introduced in the US. It is based on a survey of more than 100 senior oil and gas professionals with operations in the US, and in-depth interviews with 10 industry executives, analysts and academics.

PARIS MOU RECOGNITION The Paris MoU has agreed on the performance listing of Recognised Organisations (ROs) as part of its recently released statistics on flag state performance. ROs have been delegated with statutory responsibilities by flag states. This list uses the same method of calculation as the flag state table, but counts only those detentions that the Paris MoU considers to be directly related to a statutory survey carried out by the Recognised Organisation and a minimum number of 60 inspections per RO are needed before the performance is taken into account for the list. In 2012, 30 ROs were recorded on the performance list. Among the best performing Recognised Organisations were the American Bureau of Shipping, Det Norske Veritas and Lloyd’s Register. The lowest performing ROs were: Phoenix Register of Shipping (Greece), INCLAMAR (Cyprus) and Register of Shipping (Albania).

SAMI’s Peter Cook

“Now companies finally have a chance to put that pledge to the test and open themselves to rigorous scrutiny. We are sure that they will excel”

but most of it is the same for all ships in any one fleet. We have built a system to automate the process for the owner and to speed CERTIFICATION TIME FOR MLC review. It is web-based, simple and quick. Classification society Bureau Veritas (BV) And owners need it right now because the has set up a web-based system that will help deadline is looming.” shipowners cut certification time for the Maritime Labour Convention 2006 SAMI PILOT SCHEME dramatically. The Security Association for the Maritime BV says the system is needed because Industry and its certification partner, RTI, some shipowners are leaving it until late to have launched a pilot scheme assessing companies against the ISO/PAS 28007:2012 seek the necessary MLC certification. An addition to the services available to Guidelines for Private Maritime Security BV clients through the individual private Companies providing privately contracted section of its Veristar Info website, owners armed security personnel on board ships. can create and clone the Declaration of The pilot study will see RTI working Maritime Labour Compliance Part II, the with Bowline Defence, Control Risks main compliance document needed, across Group, Securewest International and Zeal their fleets and to submit fleet-wide Global Maritime Solutions during its documents easily for review and certification. first phase. Boris Gruden, MLC implementation Speaking of the launch, Peter Cook of leader for Bureau Veritas, says, “Shipowners SAMI stated: “Private maritime security have to have MLC documentation in place companies have supported the development and certified by a Recognised Organisation of ISO28007 to demonstrate their before August 20 this year or risk detention willingness and capability to embrace of their vessels. Some have not even begun improved standards and to highlight to work on this yet. They need to work with their commitment to quality and welltheir flag states to have the norms for their trained professionalism. fleet set out in a document DMLC Part I. “Now companies finally have a chance to Then for each ship they have to prepare a put that pledge to the test and open DMLC Part II which must be reviewed and themselves to rigorous scrutiny. We are sure certified by the RO, usually class. The that they will excel and that PMSCs within DMLC Part II is built on the requirements the SAMI membership will continue to keep set out by the flag state and is ship specific the maritime industry safe and secure.”

The pilot programme runs to December 2013, during which time RTI will audit a limited number of companies and compare their findings with other pilot scheme certifiers through regular meetings at The United Kingdom Accreditation Service. Only at the end of the year, once the pilot scheme is completed and the certifying bodies are accredited by UKAS, will PMSC’s be deemed to have satisfied the ISO28007 standard. Peter Cook emphasised this and warned the industry: “If any PMSC claims to be 28007:2012 certified before the end of the year, they are mistaken.”

LOC AQUISITION London Offshore Consultants has bought SCUA Middle East Consultancy. The deal took effect at the beginning of April 2013. The acquisition combines LOC Middle East and SCUA Middle East to form a team of nearly 30 staff, including marine engineers, master mariners, naval architects and civil/ structural engineers with wide-ranging skills and knowledge LOC Middle East’s Managing Director Paul Miles sees this as a very attractive acquisition: “This additional expertise complements LOC Middle East’s current profile, contributes to our strategic growth plans, and improves the service lines we provide, benefitting our client base tremendously.” Summer 2013 —

MIDDLE EAST

Jebel Ali Port is undergoing a huge expansion, allowing it to handle six megaships simultaneously

RISING IN THE EAST A number of new developments are under way in Middle Eastern ports as the region seeks to strengthen its position as a major hub for world trade

P World chairman Sultan Ahmed Bin Sulayem recently opened the new extension to Container Terminal 2 at Jebel Ali Port. The expansion adds 1 million TEU, to take the capacity at Jebel Ali Port to 15 million TEU, extending the T2 quay wall by 400 metres to 3,000 metres. This allows the simultaneous handling of six megaships. Together with Container Terminal 3, which is now under construction, Jebel Ali Port will reach 19 million TEU capacity by 2014 and will be able to handle 10 of the giant new generation vessels at the same time . Mohammed Sharaf, Group Chief Executive Officer, DP World, commented:“Expanding Jebel Ali Port’s capacity in line with market demand is part of our commitment to be always ready to meet the emerging needs of the shipping lines and traders. “ Mohammed Al Muallem, Senior Vice President and Managing Director, DP World, UAE Region added:“ With our customers now deploying ultra large container ships , 44

— Summer 2013

we are working tirelessly to complete the work on Container Terminal 3 as planned to cater for even more of these giants.” With an average monthly throughput in excess of 1 million TEU over the past two years, Jebel Ali continues to be under pressure with larger vessels and a larger proportion of cargo destined for or originating from this market. The new T3 have a quay length of 1,860 metres, a 70 hectare storage yard and a draught of 17 metres. DP World has recently announced its first quarter results and acknowledges that operating conditions continue to be challenging. “DP World handled 12.8 million TEU across its global portfolio in the first quarter of 2013. While this was 7.0% lower than the same period last year, when adjusted for the divestments and monetisation across our portfolio, the decline was 3.5% on a like for like basis. “This decline in gross container volume was as a result of lower volumes in the Asia Pacific and Indian Subcontinent region and the Europe, Middle East and Africa region. In the Asia Pacific and Indian Subcontinent region we continue to focus on handling a smaller number of higher margin containers,” its statement said. “In Europe, Middle East and Africa, our European and Middle East businesses operate in a challenging macro environment. Within this region, our UAE facilities handled 3.1 million TEU.” The importance of a strong legal framework in building a sustainable business was underlined during a visit by Dubai Courts Jebel Ali port recently. According to Jamal Majid Bin Thaniah, Vice Chairman, DP World: “Dubai Courts oversee the legal requirements for ship berthing and container handling and play a key role in the efficiency of our operations through the settlement and adjudication of maritime law. “The UAE and Dubai have become an international hub for the maritime industry, and a robust and efficient legal and court system has been, and remains, crucial to this important position.”

MIDDLE EAST

JOINT DEAL IN KING FAHD PORT Vopak and Sabic have decided to jointly invest in a new terminal in King Fahd Industrial Port at Jubail, Saudi Arabia, to serve the expansion of the petrochemical and downstream industries. The initial storage capacity will be approximately 250,000cbm after completion in early 2015. The two companies have formed a joint venture for the project, the Jubail Chemical Storage and Services Company, in which Sabic holds 75% and Vopak 25%. The new facility will have an initial storage capacity of approximately 250,000 cbm. The first phase will consist of around 40 commodity and speciality chemical storage tanks, complete with truck handling and ship loading facilities for five5 berths, and is expected to be ready for commissioning early 2015. Capacity can be expanded in the future. The investment in this industrial terminal will provide the petrochemical industry in

“We have been encouraged by the uptake we have seen from both local and international companies” Jubail with a critically important export facility, designed to the highest safety standards, and will enable the continued growth of the petrochemical and downstream industries in one of the largest petrochemical production locations in the world, according to the new venture.

GRAND MILLS SHIPS SOYA Abu Dhabi Ports Company (ADPC) and Agthia Group’s Agri Business Division, Grand Mills, have made the first shipment of soya bean meal into Abu Dhabi, through Mina Zayed. Grand Mills has chosen to ship the material directly into the UAE capital rather than relying on road transport. The first shipment of 11,000 tonnes of soya bean meal arrived on the vessel Tarsus. A total of 55,000 tonnes is scheduled for import on an annual basis. By having the bulk cargo delivered closer to its warehouse and processing unit, Grand Mills can dramatically reduce logistics costs and environmental impact by removing an

estimated 1800 truck movements annually. Additionally, to support Grand Mills expansion plans, ADPC has recently allotted an area of about 23,000 m sq in Mina Zayed. It is estimated that by importing and discharging cargo directly at Mina Zayed, Grand Mills is expected to generate savings. Manolis Trigkonis, General Manager of Grand Mills, said “By working closely with ADPC, we have been able to identify ways we can optimise and upgrade our operations. Our recent expansion means that we can now receive bulk cargo direct from the ship dramatically reducing our road haulage requirements – better for our production process, our customers and the environment.”

BAUER AGREEMENT AT KIZAD Bauer International, part of the German multinational Bauer Group, and Khalifa Industrial Zone Abu Dhabi (Kizad), the industrial and logistics zone situated next to Abu Dhabi’s Khalifa Port in the UAE, have announced the signing of a 50-year lease agreement. Bauer has committed to build a service, logistic and maintenance centre in Abu Dhabi to support its growing operations in the region. Due to be operational by December 2013, the E1.57mn service centre will occupy a plot size of just over 442,000 sq ft in Kizad’s engineered metal products cluster. According to Bauer’s Regional Managing Director Riaz Malik:“With a growing demand from existing and future projects, in the UAE and the Middle East and North African region, this specialist service, logistic and service support centre will offer ongoing support to Bauer International’s developing operations and aspirations in the region. Being based at Kizad will clearly provide Bauer with a genuine competitive edge, operational effectiveness and added value to our customers.” Bauer was one of the contractors that worked on the E5.64bn development of Khalifa Port, which is situated adjacent to and serves the Kizad industrial zone. Khalifa has a current capacity for 2.5mn TEUs per annum. All container shipments into and from Abu Dhabi are now handled through this new facility. Kizad has also announced the award for construction of phase 1 of its pre-built warehousing to System Construct, a UAEbased construction company, The value of the contract is placed at just over AED100 million, with the first units set for delivery in Q4 2013. The PBWH project has been divided into three phases, with a total of 105 units, covering 118,965m2 (1,280,000ft2). The first phase, now underway, covers an area of

46,453m2 (499,834 ft2). Charles Acworth, Head of Project Development at Kizad, said: “We have been encouraged, not just by the significant interest shown in our pre-built warehouse project, but also by the uptake and commitments we have seen from both local and international companies. The show warehouse has been an invaluable marketing tool and System Construct delivered a quality product on time and to budget. The announcement of the main contract award to System Construct is very welcome and is the first of many milestones we will be announcing in the coming months.” Kizad is part of the Abu Dhabi Ports Company’s huge AED26.5bn investment in its new maritime gateway and the industrial and commercial zones for the emirate of Abu Dhabi. That figure includes both the first phase of Kizad’s infrastructure and the adjacent deep-water, Khalifa Port. Now fully operational, it is currently the only deepwater port in the region with a semiautomated container terminal. The area for the first phase of the industrial zone in Kizad covers 52 km2. The second phase stands at 366 km2 area – approximately two-thirds the land-mass of Singapore. Abu Dhabi Ports Company recently announced that its Ports Training Centre will broaden its training course offering, in 2013, as it seeks to become a regional training hub for port and maritime professionals.

BP BUILDS IN IRAQ Oil major BP has signed a deal with General Company for Ports of Iraq for a terminal at the port of Khor al-Zubair A spokesman at the General Company for Ports of Iraq told Reuters:” BP will help Iraq build an advanced terminal to receive refined oil product shipments and to export products in future. BP will pay around $7 for each cubic meter of imported and exported refined products through this terminal.” Iraq relies on imports to meet demand for oil products such as gasoline as its own refineries struggle, and more than 1.5 million tonnes of refined products are delivered over a year, which could generate billions of dollars for BP over the period of the contract. In 2009, BP signed a service contract with Iraq to develop the Rumaila field, which has estimated reserves of 17 billion barrels and currently produces around 1.35 million bpd – more than a third of Iraq’s total output of around 3 million bpd. A BP spokesman said the initial phase to build the new terminal at Khor al-Zubair would involve using an existing import facility and improving efficiency to bring in higher volumes of oil products. Summer 2013 —

SECTION HEAD

Amsterdam is strengthening its infrastructure. Below left: the Port of Antwerp is attracting significant investment

ARA

ATTRACTION

urope’s ports have seen some difficult years. But even with only modest assumptions of growth, port cargo volumes should rise by more than half by 2030. That will almost certainly cause congestion, Siim Kallas Vice-President of the European Commission told a recent meet ing of t he Europea n Sea Port Organisation (ESPO). However, there has been substantial investment in port development in the Antwerp, Rotterdam and Amsterdam (ARA) region, not least to improve automation and therefore efficiency in port operations. As he pointed out “While Europe is home to some of the world’s best port facilities, efficiency and performance vary a lot, causing a real EU divide. Take Rotterdam, Antwerp and Hamburg, which handle 20% of all goods.” In his speech to the ESPO, he stressed the issue was not about diverting traffic away from some ports to others or telling customers which ports they should use, it was about “creating better conditions so that we have more short sea shipping connections and for all ports to be fully integrated in the logistics chain. Even the best-performing ports need other ports to be successful, for example to develop huband-spoke operations, and avoid congestion.” 46

— Summer 2013

ROTTERDAM EXPANSION CONTINUES Koninklijke Boskalis Westminster and Van Oord Dredging and Marine Contractors completed the first stage of Maasvlakte 2 for the port of Rotterdam in April, with the new development officially opening in May. PUMA, the joint venture of the two contractors, started the expansion of the port of Rotterdam five years ago and Maasvlakte 2 is now comprised of 700 hectares of new industrial sites, 11km of seawall, 3.5km of quay wall, 24km of roads, 14km of rail and 560 hectares of port basin. In the coming year work will continue full steam ahead on infrastructure on the boundary between the existing port area and Maasvlakte 2, including the construction of a flyover intersection at the ECT terminal, so that the new port terminal can connect seamlessly to the existing one. In addition, APM Terminals (APMT) and Rotterdam World

ARA PORTS

observed that there is increased interest in distribution activities due to the coming of the new container terminals.” The port is also investing in equipment for ship-to-ship transfer as the market is growing strongly, especially for the liquid bulk sector (mainly oil coming from Russia, which is shipped to Asia via the port of Rotterdam) and dry bulk. The construction of the container terminals of APM Terminals and Rotterdam World Gateway is on schedule. Both terminals will be operational at the end of next year. The coming of the terminals is generating more interest from companies that want to establish themselves in the Maasvlakte distribution park.

Despite the current economic climate, the Antwerp, Rotterdam and Amsterdam ports are undergoing investment and expansion to secure a healthy future

“With Maasvlakte 2, the Netherlands is throwing the door wide open to the newest generation of container ships” Gateway (RWG) are working hard on the new container terminals, which should be in operation by the end of 2014. The Port Authority had a budget of ¤1.9bn for the construction of the first stage of Maasvlakte 2 and the contract with PUMA was worth ¤1. bn. The deal includes a maintenance period of 10 years. Boskalis and Van Oord will keep the entire seawall at optimum strength until 2023. Similar to the entire Dutch coastline, sand will also have to be added here to the soft seawall. Following every severe gale, the hard seawall will also be inspected and, if necessary, the cobble beach will be replenished. “Today, we are clearing the way for

international shipping and trade. With Maasvlakte 2, the Netherlands is throwing the door wide open to the newest generation of container ships. And we offer space for the latest terminals. The port is growing 20% larger and the container capacity has doubled. Thousands of direct and indirect jobs will be created,” Melanie Schultz van Haegen, Minister of Infrastructure and the Environment said at the opening in May. “Together, we have succeeded in constructing this phase of Maasvlakte 2 according to schedule and well inside budget. The project has turned out approximately ¤150m less expensive than estimated,” added Hans Smits, CEO of the Port of Rotterdam Authority. The construction of the two container terminals of RWG and APMT is on schedule, Smits said. “They will be operational at the end of next year, but there will be other activity in the short term as well. In the second half of this year, the Port Authority will place poles in the inland lake of Maasvlakte 2 for shipto-ship transfer. There are also advanced plans for developing an industrial park for the (bio-based) chemical industry on the site next to LyondellBasell. Together with our partners, the Port Authority will construct the infrastructure so that new businesses can set to work quickly. We have also

QUAY AGREEMENT United Waalhaven Terminals (UWT) and the Port of Rotterdam Authority have reached agreement on the construction of a new quay on Bunschotenweg. The quay will be dug on the Johan Friso Haven and will be able to accommodate short sea vessels as well as inland vessels with a draught of 7m and a length of 135m. The quay is designed primarily for handling empty containers, but can also be used for full ones. It will enable UWT to cope easily with the increasing modal shift from truck to inland shipping. The firm expects that around 40% of all empty container movements will ultimately be made through inland shipping. United Waalhaven Terminals has also taken over the 50% interest in United Container Freight Station (UCFS) from the ECB Group. UCFS operates approximately. 20,000m2 of warehouse space and outdoor storage on Bunschotenweg. The parties intend to transport containers to and from UCFS solely by inland shipping. Ultimately, that will not only yield a cost advantage, but also relieve the A15 motorway and reduce CO2 emissions. PLANT GROWTH AT ANTWERP Praxair has announced it will build its second air separation plant and extend its pipeline system in the Port of Antwerp, the second largest petrochemical enclave in the world. The new 1,300 ton per day plant will increase Praxair’s oxygen and nitrogen capacity in the port and expand its business with customers under long-term contracts, including agreements with several leading global companies. Start-up of the air separation plant is expected in early 2016. Praxair’s new plant and extensive pipeline system will have the ability to supply oxygen and nitrogen to the majority of chemical companies in the port. The new facility is also designed to produce liquid oxygen, Summer 2013 —

ARA PORTS

Amsterdam is the world’s largest cacao port Right: Rotterdam is expanding rapidly

nitrogen and argon to support customers in the pharmaceutical, chemical, glass, cement, metal fabrication and food industries in Belgium and the Netherlands. According to the Antwerp Port Authority, some of the world’s leading refining, petrochemical and chemical companies have announced more than one billion euro of investments into the port. The Port Authority also projects an additional one billion euro of investments to be made in the near future. “The increase of installed capacity, as well as an expansion of Praxair’s pipeline network in the Port of Antwerp, gives us the reach and production to supply the increasing oxygen and nitrogen demand of customers throughout the port,” said Todd Skare, president of Praxair Europe. “Integrated ports such as Antwerp have remained competitive, in spite of the extended recessionary period in Europe, and we fully expect the port to continue to grow and attract significant new investment in the future.” “The Antwerp Port Authority is very pleased with Praxair’s new investment on the right bank of the river Scheldt,” said Eddy Bruyninckx, chief executive officer of the Antwerp Port Authority. “We have always appreciated Praxair’s 45 year-plus presence in our port. This new investment further strengthens the Port of Antwerp’s position as the largest chemical and petrochemical cluster in Europe and will enhance the competitiveness of industrial firms here.”

RAILWAY LINKS Freightliner has announced the purchase of intermodal rail operator and railway undertaking ERS Railways from Maersk Line. The acquisition of ERS Railways supports Freightliner’s strategy of developing businesses in rail markets 48

— Summer 2013

“We fully expect the Port of Antwerp to continue to grow and attract significant new investment in the future” globally, in partnership with strong local management teams. ERS Railways provides maritime hinterland services from key European ports, including Rotterdam, Hamburg, Bremerhaven, Lübeck and Rostock, as well as continental European rail services for intermodal operators and forwarders. Corridors served run through continental Europe to various destinations in Italy, Poland, Germany, Switzerland, Austria and the Czech Republic. ERS owns 47% of boxXpress.de GmbH, the Germany-based railway undertaking active in German maritime hinterland traffic. Confirming the sale, Soren Toft, Vice President of Maersk Line, said: “This new set-up provides us with the opportunity to continue our long term contractual relationship with both companies as well as to develop our key European markets. I am confident that Freightliner is a good owner of ERS Railways, while Maersk Line can focus even stronger on developing our current and future deep sea liner network in Europe and other parts of the world.”

AMSTERDAM POWERS AHEAD The port of Amsterdam is set to run a rail service to Berlin as part of plans to strengthen its position as the largest cacao port in the world and increase the amount of cacao stored and transhipped in Amsterdam. The amount of cargo carried on board one

train is equivalent to cargo transported on 50 trucks. The cacao on board the new shuttle is offloaded at the BEHALA rail terminal operator in Berlin. The rail shuttle is an addition to the port of Amsterdam’s European network of hinterland connections. The freight train runs from the Amsterdam port to the BEHALA terminal in Berlin one a week in both directions. The Amsterdam-Berlin cacao shuttle originated after intensive cooperation between Amsterdam port community members Cargill, Katoen Natie and Ter Haak. To Cargill’s cacao factory in Berlin, it is a sustainable and reliable solution when cacao supply is involved. Cargill buys cacao that is shipped from West Africa to Ter Haak’s United Stevedores Amsterdam terminal. Katoen Natie is responsible for specialist cacao storage and Ter Haak provides logistics to Germany, allowing Cargill to process cacao at its factory in Berlin. Approximately 700,000 to 800,000 tons of cacao arrive at the port of Amsterdam every year, a large quantity coming to Amsterdam from West African countries such as the Ivory Coast, Ghana, Nigeria and Cameroon. Amsterdam is the fourth port in Europe and a large port for transhipment and processing energy products. The North Sea Canal area tranships almost 100 million tons of cargo annually, approximately 75 million of which is transhipped in the port of Amsterdam. In the port region 55,000 people in total work for companies that are located in the port or for port-related companies. About 23,000 of these people work in Amsterdam.

SECTION HEAD

Green goals: Port Metro Vancouver’s collaboration with NWPCAS partners has strengthened its air emissions initiatives opposite page: Minister for Transport, Infrastructure and Community Denis Lebel

Setting its sights firmly on the environment, Canada is implementing a range of initiatives that aim to have an impact

GOING

GREENER

n common with the rest of North America, Canada is now implementing an Emission Control Area (ECA) round its coastline. The move was announced by Minister for Transport, Infrastucture and Community Denis Lebel. “These changes further align Canada’s air emission standards with the United States,” he said. “Since vessels from Canada and the United States routinely travel in both countries’ waters, aligning our regulations is the logical thing to do. “We are making progress on our Copenhagen commitment to reduce our greenhouse gas emissions by 17% by 2020. Canada is now halfway towards meeting this target.” He said it was expected that the changes will result in an annual reduction of ship-sourced greenhouse gases of 9%, or 11 megatons, by 2025.

“Canada is further aligning its emission standards with the US with the adoption of the North American Emission Control Area. Air emissions standards under the ECA are stricter than global requirements,” he continued. “And we have set out new standards to minimise the impact that marine diesel engines have on our environment. After 1 January 2016, new ships with large engines must meet the most stringent international standards for nitrogen oxides –another key pollutant. New ships that have smaller engines will need to meet standards set by the US Environmental Protection Agency.” Sulphur oxides were expected to be reduced by 96%, the minister said. “While these regulations will protect this environment, they will also support our commitment to building marine industry that is safe. “To protect our marine environment, we need, first of all, Summer 2013 —

CANADA

“By exchanging ideas and information, setting shared targets and tracking performance annually, we know where we are making progress and where we need to improve” to reduce emissions from all vessels of all sizes. To this end, for the large vessels that carry our trade, we have established new requirements to make international vessels in our waters more energy efficient.” The ministry of transport has also set out new conditions so that vessels operators properly dispose of greywater. New vessels carrying more than 500 passengers must ensure greywater is managed to the same standards as sewage. All vessels must ensure greywater does not cause a sheen on the water or result in solids on the shore. Requirements concerning ship-to-ship transfers have also been tightened. “Tankers will have to have ship-to-ship operations plans that account for best practices in these types of operations,” Lebel said. The minister added: “To further strengthen our environmental benefits, cruise ships will soon be using energy efficient Shore Power Technology. It will be available here at the Port of Halifax in 2014. This builds on experience we have had in Vancouver and Prince Rupert through Transport Canada’s Shore Power Programme.” The minister added that “Transport Canada will not hesitate to enforce these regulations that it be through our own 50

— Summer 2013

officials or through our partnership with federal counterparts. Aerial and satellite surveillance of shipping lanes will be used to detect ship source pollution.”

ENVIRONMENTAL CO-OPERATION Port Metro Vancouver, the Port of Seattle and the Port of Tacoma, along with regulatory partners on both sides of the border, are updating the 2007 Northwest Ports Clean Air Strategy (NWPCAS) and setting new goals that aim to reduce diesel particulate emissions by 75 per cent per tonne of cargo by 2015, and 80 per cent by 2020. “Collaborating with the NWPCAS partners has strengthened our air emissions initiatives,” said Ronan Chester, Manager for Strategic Environmental Initiatives. “By exchanging ideas and information, setting shared targets and tracking performance annually, we know where we are making progress and where we need to improve”. The NWPCAS is a result of an ongoing collaborative effort to set common air emissions reduction targets by Port Metro Vancouver, the Port of Seattle and the Port of Tacoma. The NWPCAS includes regulatory partners Environment Canada and Metro

Vancouver in Canada, and the Environmental Protection Agency, Washington State Department of Ecology and Puget Sound Clean Air Agency in the US. Port Metro Vancouver released its 2012 Economic Impact Study in June, showing a significant increase in the total value of cargo handled annually through the port. Other findings demonstrate considerable growth in the average port-related wage, as well as in the number of full-time positions since the last study, released in 2008. According to the report, Port Metro Vancouver handles $172bn of cargo each year, or approximately $475m every day. This figure represents one-fifth of Canada’s total trade by value. “We are very pleased to release the economic impact data to highlight the significant role of Canada’s largest gateway to the Asia-Pacific,” said Robin Silvester, President and Chief Executive Officer. “The report demonstrates our substantial employment and economic impacts provincially and nationwide, with a particular focus on the communities that surround the Lower Mainland.”

CRUISE BUSINESS BUOYANT Some 18 vessels from nine cruise lines will call at two or more British Caledonia ports in 2013. The BC port communities of Nanaimo, Port Alberni, Prince Rupert, Victoria and Vancouver will enjoy a total increase of 75% over 2012 in the number of cruise itineraries with two or more calls to BC ports, with cruise lines offering 35 different itineraries in total. According to Carmen Ortega, Chair of

COMPANY PROFILE

IMS MARINE SURVEYORS & ANALYTICAL LABORATORIES Hatch Cover Tightness Testingusing the right equipment a must;

Based on Canada’s west coast, IMS can cover all your surveying needs. It can attend an emergency call-out to any area within the Port of Metro Vancouver in less than two hours, and has never failed to promptly attend an emergency call since 1992. Its laboratory has been FOSFA Approved Analyst L1 and it has been the leader in Canada for several years for vegetable oil and biodiesel testing. In addition, it is also GAFTA approved for grain and feedstuff testing

Heavy Weather Damage – IMS can make a difference

Left to right: Steel Survey at Terminals; Steel Pipes outturn survey; Supervision & approval of Heavy Lift & Project Cargoes.

e are often amazed to see that surveying companies that are actually located overseas are called upon to carry out surveying assignments in Vancouver, British Columbia. These companies often don’t have dedicated local surveyors and may not have the required competency. We often find that they are lacking even the most basic equipment and tools. An e-mail address indicating a presence in Vancouver doesn’t guarantee that they actually have an office or surveyors based there. IMS was established in January 1992 and has grown to become one of western Canada’s largest independent marine surveying and cargo inspection organisations. It has earned a reputation as an unbiased and objective company, providing the highest professional standards. Based in Vancouver – Canada’s largest port – IMS offers a comprehensive range of professional consulting, superintendence, inspection, testing and marine surveying services across Canada, the US and worldwide for international traders, brokers,producers, buyers, charterers, owners, insurances and legal entities. The company offers a full-service surveying and analytical

laboratory, providing professional testing, certification and consultation in the grain, oilseed, meals, fats and oils, biodiesel, chemicals, marine, environmental and food-related fields. IMS has developed sophisticated computer software for different kinds of surveys and is fully compliant with relevant international standards. It became ISO certified in 2001 and is currently certified under the BSI ISO 9001:2008 standards. IMS is both a FOSFA and GAFTA superintendent and certified laboratory – the only organisation in Canada with both certifications. IMS is also flag state ship inspector, representing the Bahamas, Barbados, Cyprus, the Marshall Islands and Panama, and it is a class surveyor for CR Taiwan, OMCS Panama and Qualitas Panama. The company is also the only certified ultrasonic hatch-cover tightness testing firm on the West Coast. IMS has approved IICL container Inspectors and it also deals with all aspects of container inspections and re-certifications. P: +1 604 298 9968/ F: +1 604 298 4862 / www.ims-van.com E: admin@ims-van.com / imslab@ims-van.com Summer 2013 —

SECTION HEAD

underway, the new ACI service will enable owners and charters to meet all ACI needs simply and efficiently.”

shore power

“The growth we are seeing for 2013 translates into an economic boost for the region, bringing additional economic activity to local restaurants, hotels, shops and tours” Cruise BC: “The growth we are seeing for 2013 translates into an economic boost for the region, bringing additional economic activity to local restaurants, hotels, shops and tours.” In addition to the significant increase in BC itineraries, BC also benefits from the economic contribution of the cruise sector on the British Columbian and Canadian economies. An economic impact study released jointly in March by the Cruise Lines International Association – North West and Canada, Cruise BC and other cruise associations across Canada, shows that BC ports continue to be the largest cruise region in Canada, accounting for 57% of the Canadian cruise traffic and welcoming nearly 1.2 million passengers in 2012. Vancouver and Victoria are the first and second largest cruise ports in Canada respectively. The study also found that BC accounted for approximately two thirds of the national economic impacts of the Canadian cruise industry in 2012, with $1.56 bn in total industry outputs and 12,252 jobs paying $532m in wage income. Direct spending by cruise lines, passengers and crew amounted to $790m in BC in 2012. British Columbia enjoyed the highest average expenditures across Canada for both passengers and crew – good news for businesses across BC. 52

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ADVANCED NOTICES Inchcape Shipping Services (ISS) has launched an Advanced Cargo Information (ACI) department for Canadian ports following new regulations and procedures for cargo and vessel reporting set out by the CBSA (Canada Border Services Agency). Based in Montreal, the centralised ISS ACI department will offer expert guidance on all cargo and reporting requirements to shipowners or charterers with vessels arriving at Canadian ports. Services provided by the new ACI department will include assistance in obtaining a carrier code, advance manifesting for all Canadian ports and, if required, conveyance reporting and arrival messaging. Several major carriers have already subscribed to the service. New CBSA regulations and procedures include a new Conveyance Arrival Certification Message (CACM) introduced on 9 June 2013 for applicable marine conveyance arrivals, such as vessels arriving with cargo for discharge or with freight remaining on board. Marine carriers or their authorised service providers are now required to transmit a CACM message via an Electronic Data Interchange method to the CBSA. According to Jason Skorski, ISS General Manager, Eastern Canada: “With the CBSA’s regulations and procedures now

ARBITRATION AWARD Algoma Central Corporation has announced that an arbitration in London has been awarded in its favour in a shipbuilding contract dispute involving Algoma Tankers International, a wholly owned subsidiary of Algoma Central Corporation. “We are extremely pleased that the Tribunal agreed with the merits of our claim,” said Greg Wight, President and CEO of the Corporation. “We will now proceed to make a formal demand for reimbursement of our installment payments as provided for under the terms of the contracts.” “A lot of effort went into achieving this result,” added Duncan Jackman, Chairman of the Board of Directors of Algoma. “I would like to extend my thanks to everyone involved in this for their diligence and hard work.” In 2007, the Corporation, through its wholly owned subsidiary, entered into contracts to build three 16,500 dwt product tankers in China. Each contract contained provisions that permitted cancellation under certain conditions. These conditions were met in 2010 and Algoma accordingly issued notices of rescission to the shipyard seeking to cancel the contracts, and demanding reimbursement of the instalments that had been advanced. The matter was taken to arbitration by the shipyard and hearings were conducted before the Tribunal in London in September, 2012. LIQUEFACTION AMBITIONS Golar LNG’s ambitions toward moving into the liquefaction space on the LNG value chain took a significant step forward recently with the conclusion of basic framework agreements for the partnership that will take the Douglas Channel LNG project to a final investment decision sometime in the third quarter of 2013, the company said in a statement. Golar has acquired both the rights to invest in and the control of off-take of at least 25% of the project, which will have a total capacity of 0.6-0.7 million tonnes of LNG per annum. In addition to this, the DC project partners have also agreed to investigate a future liquefaction train that could fully utilise the Project’s existing National Energy Board licence, which allows it to export up to 1.8mmtpa for a period of 20 years. Golar said it is also pursuing several active opportunities for similar projects in the Americas, offshore West Africa and other locations.

ASIA PACIFIC

hina has been investing heavily in port development in recent years, initially through inward investment, but more recently on its own account. Port projects like the Yangshan development, south of Shanghai, have aimed to take port facilities outside the city to a dedicated site. In terms of consolidation, one of the largest to be mooted in recent times is Guangzhou Shipyard International’s announcement that it planned to sell 2.5 bn yuan of new shares to fund the acquisition of Longsui Shipbuilding from its controlling shareholder China State Shipbuilding Corp. The purchase is estimated to be worth about 1bn yuan, with the rest of the money being destined to be used as working capital. The new shares will be sold to Guangshou’s parent and a number of other investors. Longsui builds large ore, bulk and oil vessels in southern China, with annual capacity of 3.5 million deadweight tons, according to a statement Guangzhou Shipyard .

NEWBUILDING PROGRAMME Meanwhile, China Oilfield Services signed agreements for the construction of 15 vessels in June. The 15 vessels, including one output enhancement vessel, four 6,000HP platform supply vessels , two 9,000HP PSVs, two 8,000HP anchor handling tug supply vessels, four 12,000HP AHTS vessels and two 15,000HP AHTS vessels, will be constructed by five shipyards, and are expected to be delivered between January and August 2015. Commissioning these vessels represents a major inroad by COSL to implement its “structural adjustment, deepwater and high end” strategies for large-scale equipment, which will further enhance the company’s capabilities in deepwater operations, addressing China’s demand for offshore oil and gas exploration and development, COSL said in a statement. In announcing its first quarter results, the company said it has been reinforcing its presence in existing markets and exploring new domestic and overseas markets. Revenue for the first quarter of the year amounted to RMB5,720.1 million, representing an increase of 19.3% when compared with RMB4,794.5 million for the last corresponding period. Net profit for the period amounted to RMB1,211.1 million, representing an increase of 1.2% when compared to the corresponding period of last year. COSL Group CEO and president Li Yong said: “During the first quarter of 2013, COSL achieved satisfactory results from our major segments in both the domestic and overseas markets, while the higher business volume and commencement of operation of new equipment contributed significantly to our growth. Looking forward to the remainder of 2013, the Group expects the operational environment to be steady in general. “While strengthening our position as a leading oilfield services provider in offshore China and striving to meet the growing demand from the domestic market, the Group will also continue its efforts in enhancing operational management, increasing contributions from overseas markets, focusing on meeting of our full-year performance targets, and striving to create better returns for our shareholders.”

ASIA

MAJOR

Port developments, newbuilding contracts and new services all add up to a thriving region although there have been casualities TMT FILES FOR BANKRUPTCY Tough market conditions that resulted in Taiwan-based TMT not being able to restructure its debt has led the shipping company to file for bankruptcy protection. TMT filed for Chapter 11 protection in Houston, with the company announcing that it wanted to deploy restructuring firm Alix Partners to advise it. South Korea’s STX Pan Ocean Co also sought protection from creditors in the US, less than two weeks after filing for court receivership in South Korea. The company is reported to have had vessels arrested in China. Shipping companies continue to be dogged by low freight rates coupled with over-capacity in the market due to a surge in shipbuilding orders before the market collapsed in 2008. In consequence, TMT was unable to fund its newbuilding orders and has a number of ships arrested. While markets have now begun to improve, TMT has not been able to reach agreement with its creditors. EVERGREEN STRENGTHENS NETWORK With the launch of two new services – the ISC-Bangladesh Service and the Intra-Gulf Service – Evergreen Line is now broader prepared to enhance its service network in the Indian-subcontinent and the Gulf. Evergreen, NYK and Simatech are joining to launch a new weekly service connecting West India and Pakistan directly to Bangladesh. It will also serve as a double loop feeder service connecting the hub in Colombo to Chittagong and Karachi/Mundra. Employing four vessels of 1,600 teu1,800 teu, the ISC-Bangladesh weekly service commenced with an inaugural sailing from Chittagong in June. The Summer 2013 —

ASIA PACIFIC

rotation will then follow by ports in Chittagong, Colombo, Karachi, Mundra, Colombo and Chittagong respectively. In addition, Evergreen will deploy a 1,600 teu vessel on the weekly Intra-Gulf Service commencing in July. The feeder service shall efficiently bridge the line’s network hub in Jebel Ali (UAE) and Umm Qasr in Iraq. The new services coming up will further expand Evergreen’s regional service and closely connect its global service through its network in Colombo and Jebel Ali. In partnership with Wan Hai Line (WHL), PIL and COSCO, Evergreen Line has also improved its service to South America with the Asia-West Coast of South America Service, linking Taiwan and China with five countries along the West Coasts of Central and South America. Employing nine vessels of 3,500-3,900 TEU, the weekly service started from Kaohsiung in May. The port rotation is Shekou - Hong Kong Ningbo - Shanghai - Manzanillo (Mexico) - Lazaro Cardenas (Mexico) - Puerto Quetzal (Guatemala) - Buenaventura (Colombia) - Callao (Peru) - Guayaquil (Ecuador) - Manzanillo - Kaohsiung. Evergreen Line and COSCO will provide one ship each, WHL four and PIL three.

— Summer 2013

The region of South America covered by the service is enjoying strong economic growth forecasts that support Evergreen’s strategy of network expansion to/from these West Coast ports. According to the IMF’s World Economic Outlook report published in January, Latin America as a whole is forecast to attain economic growth rates of 3.6% in 2013 and 3.9% in 2014 compared to 3% in 2012. The report suggests that stable cargo growth can be expected for the region’s trade with Asia. Ever Liven, the tenth in a series of L-type containerships to be operated by Evergreen Line, was christened by SS Lin, the Evergreen Group’s First Vice Group Chairman, at the Samsung Heavy Industries shipyard in Korea in April.. The two ships will join Evergreen Line’s Far East - Europe routes after their delivery into service in late April. From a fleet deployment perspective, the L-type containerships are very flexible, fulfilling the demands of various markets. In addition to the east-west long-haul trades from Asia to Europe and North America, L-type ships can be employed on north-south routes linking Asia to South Africa and South America. Equipped with such vessels,

Evergreen Line is more able to adjust its fleet capacity across a number of trades to meet the variable demand of the global market. With the primary aims of upgrading and renewing its fleet as well as better catering for its customers’ future space requirements, Evergreen Group commenced its new shipbuilding programme in 2010 with an order for 20 L-type vessels from Samsung Heavy Industries. In 2011, Evergreen ordered a further 10 vessels of the same specification from Taiwan Shipbuilding Corp. Eighteen of the 30 newbuildings are expected to be delivered by the end of 2013.

GOLDEN OCEAN CONTRACT Golden Ocean Group has signed three newbuilding contracts for 64,000 dwt Supramax bulk carriers with Chengxi Shipyard Co and China Shipbuilding and Trading Company Limited . The vessels will be delivered to the company during the first half of 2015, with an optional vessel to be declared within four months from now. Golden Ocean will, in a few years, own a fleet of five to eight fuelefficient Supramax bulk carriers. Golden Ocean said it has obtained favourable terms.

LEGAL

Clare Calnan and Gaute Gjelsten

CASE NOTES FOR

SHIPOWNERS

Clare Calnan and Gaute Gjelsten, partners with Wikborg Rein in London and Oslo respectively, consider three recent decisions of the English courts to which owners may wish to pay particular attention

here charterers default on their obligations to pay hire, liens on sub-hires and freights are often a valuable right that owners can use to secure much-needed income to complete a voyage. The 2013 decision on the Bulk Chile is a welcome endorsement of the rights that owners possess, and of the willingness of the courts to enforce such rights. The Bulk Chile was time-chartered by its owner to Korea Line, which in turn trip-time-chartered the vessel to sub-charterers, which then voyagechartered it to the shippers of the cargo. The vessel loaded a cargo of steel.

Bills of lading were issued that stated that freight was payable as per the voyage charter. The bills were also marked â&#x20AC;&#x153;freight prepaidâ&#x20AC;?, although no freight had in fact been prepaid. Korea Line defaulted in the payment of hire and owners issued a notice of lien under the time-charter to both the sub- and voyagecharterers requiring them to pay any hire and freights due under the charters, bills of lading or other contracts of carriage. In addition, the owners required the shippers (which were also the voyage-charterers) to pay the freight due under any bills of lading direct to owners. Despite the notices that had been given, the voyage-charterers paid the bill of lading freight to the sub-charterers, claiming that it was required to do so under the terms of Summer 2013 â&#x20AC;&#x201D;

LEGAL

the voyage charter. The owners demanded that the voyage-charterers, as shippers, pay to it the freight due under the bill of lading. The High Court upheld this right and stated that owners were entitled to redirect to themselves the payment of freight due under the bills of lading, providing that owners’ notice of redirection had been given to the shippers before the freight was paid to the sub-charterers under the voyage charter. The result, therefore, was that the voyage-charterers were forced to pay the freight twice. The shippers appealed, but the Court of Appeal upheld the owners’ entitlement to receive the freight under the bills of lading. The court explained that the sub-charterer was to be regarded as the agent of the owner and was entitled to receive the freight due on the owners’ behalf. Thus, owners were entitled at any time to revoke the instruction to pay freight to an agent and, provided the notice was issued before the payment was made, the shipper was obliged to make payment directly to the owners. Redirecting the payment of freight under a bill of lading can be a simple means whereby owners can secure for themselves any freight that is outstanding. This, however, is one of many weapons that owners can deploy where charterers default. Ensuring that there are effective lien clauses in the time charter in respect of both sub-hires and sub-freights is also important – as is taking steps to ensure that, where necessary, such lien rights are registered against the charterers so that they can be effectively exercised in the event of a default brought about by the insolvency of the charterers.

NET LOSS OF TIME The 2012 decision of the High Court in the Athena case provided a much broader interpretation of the net loss of time provisions in Clause 15 of the NYPE charter party. Following the 1993 decision in the Berge Sund, the generally held view was that, in determining whether there had been a net loss of time under Clause 15, consideration had to be given to the services immediately required of the vessel. But the decision in the Athena case suggests that this may no longer be the correct approach, since the court adopted a much broader interpretation to the question of what “net time” had been lost by reason of the vessel not performing the services required by charterers as a result of an off-hire event. In the Athena case, the vessel was delayed outside Benghazi until problems with the bills of lading were resolved. Charterers maintained that the owners’ decision not to allow the vessel to proceed to the discharge 56

— Summer 2013

port was an off-hire event under NYPE Clause 15. This was because the vessel could not perform the service immediately required, which was to proceed to the discharge port. But it was clear that, had the vessel proceeded to the discharge port, it would not have been permitted to berth until such time as the bill of lading issue had been resolved.

The Kyla was chartered for 12-to-15 months and was involved in a collision 10 weeks into the charter. The collision occurred due to no fault on the part of the owner, but the charter required that the vessel be insured for a fixed value throughout the period of the charter. Following the collision, the owners abandoned the vessel to its underwriters as a constructive total

“Owners would be well-advised to ensure that there is an express clause in the charter stating that where, for insurance purposes, the vessel is an actual or constructive total loss, this will bring the charter to an end”

The court held that, in determining whether there had been any loss of time, it was necessary to look at the overall causal effect of the vessel not proceeding to the discharge port when ordered to do so. It was held that there was no loss of time because, even if the Athena had proceeded earlier, it would not have discharged its cargo any sooner than it did. This decision gives greater commercial weight to the term ‘net loss of time’ and avoids owners being unfairly penalised when a vessel cannot immediately perform the chartered services at a time when interruption of the performance has no material impact on the overall time taken to perform the services required under the charter. The decision is, however, inconsistent with the reasoning in Berge Sund, and for that reason it is not surprising that the case has been referred to the Court of Appeal.

TOTAL LOSS MAY NOT END THE CHARTER In most cases where a vessel is a constructive total loss, owners will assume that the loss of the ship will bring to an end any charter under which the vessel is performing. Following the 2012 decision in the Kyla case, however, such an assumption may not always be correct.

loss on the grounds that the cost of repairs exceeded its sound value at the date of the casualty. Underwriters settled the claim and the owners then alleged that the charter had been frustrated on the grounds that the cost of repair exceeded the market value of the vessel. The charterer asserted that, since the charter provided that the insured value was a fixed amount, the charter was only frustrated if the costs of repair exceeded the insured value of the vessel. Thus, the owner was obliged to repair, notwithstanding that the vessel was for insurance purposes a constructive total loss. The arbitrator agreed with the owners, but the court reversed the decision. The judge held that, since the owners had warranted the insured value of the vessel, they had assumed the risk under the charter to repair the vessel where the costs of repair were within the insured value. By electing not to repair the vessel, the owners had in a sense frustrated the charter by its own decision. For the time being, owners would be welladvised to ensure that there is an express clause in the charter stating that where, for insurance purposes, the vessel is an actual or constructive total loss, this will bring the charter to an end.

MARITIME LAW

TAKING

CONTROL Haco van der Houven van Oordt, a partner with the shipping & offshore team at AKD law firm in Rotterdam, looks at liability Plus: The Maritime Labour Convention and dealing with Asian Gypsy Moth

Top: Haco van der Houven van Oordt from AKD in Rotterdam Bottom: Michael Behrendt, President of the German Shipownersâ&#x20AC;&#x2122; Association

reditors looking to recover major claims against shipowners following a substantial maritime incident will look to have their claims heard in the jurisdiction that is most favourable to them writes Haco van der Hooven Van Oordt. They will look for the jurisdiction where the highest possible limitation of liability limits apply. Other procedural advantages, meanwhile, may also cause a creditor to opt for a specific jurisdiction. It is often impossible for owners to control the many varied interests that may have a claim against their ship in the event of a major maritime incident. Owners are invariably left with little option but to wait where creditors take action. But owners can take control and change the traditional game of forum shopping by taking the Australian Exit. In order to protect its interests, a shipowner should consider applying for its own insolvency, either in its own domicile or in another, possibly more favourable jurisdiction. Applying for its own insolvency is clearly a major step, but applying for the insolvency of a single ship company, which owns only the ship which caused the incident, may not, in fact, be such a drastic step, especially when compared to the potential advantages of such insolvency. The consequence of insolvency is that the insolvent ship

owner enjoys insolvency protection. This dictates that the liquidator assumes control over the ship and all actions against the insolvent shipowner are automatically and indefinitely stayed. Recovery against the insolvent shipowner is subsequently only available through the liquidation process. International recognition of insolvency protection could force a claimant to pursue its claim in the jurisdiction chosen by the ship owner. The claimant may potentially even be left completely empty-handed, depending on the rules applicable to the distribution of the assets in the country where the ship owner applies for voluntary liquidation. Worldwide, there are two main approaches to the recognition of cross-border insolvencies. One is the territorial approach and the other is the universal approach. Very few countries adopt the territorial approach to cross-border insolvencies. These countries do not recognise insolvency protection following on from foreign insolvencies, so a foreign insolvency, therefore, doesnâ&#x20AC;&#x2122;t preclude or limit the possibility to attach or arrest assets of the insolvent debtor. The Netherlands is a prime example of a country that adopts the territorial approach, as was confirmed by the Supreme Court in a dispute involving Russian oil giant Yukos, which had been declared bankrupt in Russia. However, the majority of countries adopt a universal Summer 2013 â&#x20AC;&#x201D;

MARITIME LAW

approach to cross-border insolvencies. Under the universal approach, it is not possible to arrest and/or attach the assets of a company once it is the subject of insolvency proceedings, irrespective of where the insolvency proceedings are pending. This universal approach is codified in the 1997 UNCITRAL Model Law on Insolvency, which is designed to recognise foreign bankruptcy proceedings and to avoid forum shopping. Signatories to this Model Law include Japan, Korea, Mexico, New Zealand, Poland, South Africa, the UK, and US. In those countries where it is implemented, there is a general recognition of the liquidator’s authority, all proceedings against the debtor can easily be stayed and there is

financial difficulties as a result of the global economic downturn. But voluntary insolvency could provide a vital line of defence for single-ship companies faced with substantial claims resulting from a major maritime incident.

MARITIME LABOUR CONVENTION Germany’s lower house of parliament the Bundestag adopted the Maritime Labour Act in March to prepare for implementing the International Maritime Labour Convention 2006 (MLC) of the International Labour Organization (ILO). It supercedes the German Seafarers’ Act. “The Maritime Labour Act reinforces the rights of seafarers on board ships. We greatly

“Maritime shipping is the only industry segment in the world that has such a tightly knit and effective body of rules” a prohibition on the attachment or arrest of the debtors’ assets. An application for its own insolvency by a single shipowner faced with serious claims in unfavourable jurisdictions is therefore likely to result in immunity from litigation in all jurisdictions that adopt a universal approach. That could also be the case in jurisdictions that adopt a territorial approach on the basis of an anti-suit injunction issued in the jurisdiction where the insolvency is pending, or in a jurisdiction where the insolvency is merely recognised. It may be argued that insolvency protection is not available for a shipowner that applies for its own voluntary liquidation, an issue that has already been ruled upon in the US. A template of sorts was provided by the 2009 ruling of the US Bankruptcy Court in Nevada in a non-marine case in which Betcorp, a company registered in Australia, was sued for patent infringement by a USbased technology provider. Betcorp applied for voluntary liquidation in Australia, on the strength of which the Nevada Bankruptcy Court subsequently granted a stay of all litigation against it in the US. Thus, the Australian Exit was born. For the past two years, a pattern has been emerging in the shipping industry of owners instigating preliminary insolvency proceedings as a means of immunising themselves against enforcement actions by the banks and other financiers. To date, this course of action has been limited to those owners who have encountered serious 58

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appreciate that the Bundestag has now implemented the fourth pillar of international maritime law into German law,” said Michael Behrendt, President of the German Shipowners’ Association. “The convention also boosts the competitiveness of German shipowners, who already meet many of these criteria today.” The MLC will come into force on an international scale in August 2013. “Once it does, uniform standards will apply across the globe to working and living conditions on board of maritime vessels – irrespective of the flag under which a particular ship sails. The Maritime Labour Convention is a key preventive measure against social dumping,” explained Behrendt. The Convention enshrines numerous minimum standards, such as for working and rest periods, medical treatment on board and onshore as well as for accommodation and food for seafarers. Even ships sailing under flags of states that have not ratified the Convention cannot avoid or ignore the standards as soon as they call at ports of signatory states. If any violations of the Convention were to be identified in the course of port state controls, severe sanctions may be imposed, ranging from fines all the way through to arrest of the ship in question. With the MLC, the fourth pillar of the international body of maritime shipping rules will be added. The other three pillars are the International Convention for the Safety of Life at Sea , the International Convention for the Prevention of Marine

Pollution from Ships and the International Convention on Standards of Training, Certification and Watchkeeping. “Accordingly, maritime shipping is the only industry segment throughout the world that has such a tightly knit and effective body of rules,” said Behrendt.

ASIAN GYPSY MOTH Inchcape Shipping Services is advising of Asian Gypsy Moth (AGM) regulations for vessels arriving at North American ports this summer issued by the US Department of Agriculture and Canadian Food Inspection Agency. The risk of introduction of AGM into North America from Far East Russia, Japan, Korea and Northern China is considered to be high for 2013. Asian Gypsy Moth is a serious pest that can be carried on the superstructure of ships and cargo and is prevalent in some seaport areas. US and Canadian authorities intercepted many vessels with egg masses arriving in North America last year. Where vessels arrive without the required AGM documentation or on detection of AGM, there can be huge delays in cargo loading or discharging. ISS warns it is the responsibility of shipping lines to meet requirements for entry to the US and Canada. Vessels must arrive at North American ports with required pre-departure certification and free of AGM. For vessels that have called on areas regulated for AGM, several measures are required as follows: l Vessels must be inspected and obtain predeparture certification from a recognised certification body located in a regulated area and forward a copy of the certificate, stating that the vessel is free of Asian gypsy moth life stages, to their US or Canadian agents. The inspections should be performed as close to departure time from the regulated port as possible. l Vessels must arrive to North American ports free from AGM. Shipping lines should perform intensive vessel self-inspections to look for, remove and dispose of or destroy all egg masses and other life stages of AGM prior to entering US and Canadian ports. l Vessels must provide two-year port of call data at least 96 hours prior to arrival at a North American port, to the Canadian or US agent. The US and Canada are in full agreement on the requirement for AGM pre-departure certification and vessels arriving free from all AGM life forms, although due to sovereign regulations, there are differences in port-ofentry processes between the two countries. Local inspection authorities should be contacted for any questions regarding AGM import requirements or clearance procedures.

RUSSIA

St Petersburg’s has been improving its infrastructure. Left: Novorossiysk has extended its credit facility

While there may be concern about the number of new buildings coming into the market, there is certainly demand in the Russian market

RUSSIAN

REPORT

ovcomflot has signed an agreement with United Shipbuilding Corporation for construction slots to build further gas carriers in the Velikiy Novgorod series. Along with the agreement on the reservation of construction slots, Sovcomf lot concluded a memorandum of understanding with Gazprom Marketing and Trading, which provides for a construction order for up to 13 gas carriers in the Gaz Ice series. Two Gaz Ice series ships were ordered by Sovcomflot in 2011. The Ice2 Atlanticmax class vessels have a cargo capacity of 170,000m3 and a diesel-electric propulsion system. While retaining their cargo capacity of 170,000m3, the gas carriers will be fitted with a new ME-GI slow-speed dual-fuel diesel engine with direct drive, replacing the dieselelectric propulsion system. The engine’s performance parameters will make it possible for the new vessels to work in any climatic or ice conditions, the company says. At the same time, improved propulsion system characteristics and an optimised hull shape will allow the ships to operate in open water with the same fuel consumption as non-ice-class vessels. In contrast to the first series of vessels, the new gas carriers in the Gaz Ice series will have a higher ice class – Arc 4 (as classified by the Russian Maritime Register of Shipping). This will allow them to transport LNG via the Northern

Sea Route during the summer period. The new vessels will also offer better efficiency than other similar gas carriers as they will be fitted with a cargo containment system that reduces levels of gas lost through evaporation to no more than 0.1% per day. The agreement signed in St Petersburg provides for the phased localisation of production at OAO USC facilities and the start of LNG carrier construction at Russian shipbuilding enterprises by 2018. Russia’s first gas carrier to be manufactured on home soil is expected to be built as early as 2020. These new vessels will transport fuel from existing (and future) Russian LNG terminals in the Far East and the Arctic. “Expanding Sovcomf lot participation in LNG transportation is one of the priority targets in our company’s development strategy,” said Sergey Frank, President of Sovcomflot. “Today, the SCF fleet includes six LNG tankers and a further six carriers have been ordered and are currently under construction. In collaboration with USC and its overseas partners, we were able to enhance the technical design of the vessels previously developed for Gazprom. This means that in the near future it will be possible to build gas carriers at Russian enterprises. In the long-term, we will continue to provide our partners with solutions that guarantee greater efficiency and environmental safety.” Summer 2013 —

NEVSKY SHIPYARD

Self-propelled dry-cargo vessel Neva-Leader 3 deadweight, 7150 tons project RSD49

The lead multipurpose salvage vessel Spasatel Karev, MPSV07 project

NEVSKY SHIPYARD he construction of Russia’s Old Ladoga Canal in 1719 – one of the first major canals in Russia and the largest hydraulic structure in Europe at the time – laid the foundations of Nevsky Shipyard’s history. Cargo traffic through the canal increased rapidly, necessitating the repair and maintenance works of passing vessels and leading to the establishment of the Schliesselburg ship repair workshops in 1913, which became the modern Nevsky Shipyard. In 1923, the Shipyard came under the control of the North-West River Shipping Company. Workshops were redeveloped and expanded and soon the enterprise began to carry out large fleet orders. Serial shipbuilding – today Nevsky’s main business – started in 1952 with passenger motor ship Leningradets. Since then, more than 300 vessels of various classes and purposes have been constructed at the Shipyard, from small passenger vessels to tankers. The Shipyard has kept abreast of new technological advances and has increased production capacities for its main activity, shipbuilding, as well as traditional ship repair. The Shipyard was able to live out the difficult years that followed Perestroika thanks to its reputation as a reliable business partner and shipbuilding orders from foreign companies rolled in. In 2005, Nevsky Shipyard completed its contract for the construction of tugboat hulls for Damen Multi Cat 1506 type (eight hulls) and Damen Multi Cat 1908 (four hulls) with Dutch company Damen Shipyards Bergum. During May 2007 to April 2008, it built the hull for a multi-purpose, dry-cargo vessel Damen Combi Freighter 3850 for the same customer. And, in 2008, Nevsky received an order for the construction of two bunkering tankers for the coastal trade of 850 tonnes deadweight from Norwegian company Haugland

— Summer 2013

One of the most technologically advanced shipyards in north west Russia celebrates its centenary this year. Nevsky Shipyard’s shipbuilding and ship repair businesses remain in high demand across the world, built on a century of the highest levels of industrial skill and production

NEVSKY SHIPYARD

The Nevsky Shipyard workshop

Tankers AS. The vessels transport clean and dirty oil products with a flashpoint above 60oC and were delivered to the customer in 2009 and 2010. Nowadays, both vessels operate in the Norwegian harbours of Oslo and Bergen. Since 2009, Nevsky has had a full order book from Russian companies and is currently carrying out two important projects. The first is multi-purpose salvage vessels project MPSV07 for the State Marine Pollution Control and Salvage and Rescue Service of the Russian Federation (Gosmorspassluzhba). Nevsky is building four vessels under this project, which will be incorporated into the state rescue fleet. The vessels’ multi-functionality makes them unique and able to perform the following functions: search and assistance to vessels in distress; search, rescue and evacuation of people; refloat damaged vessels and their tow; fire fighting on vessels; fire fighting fuel burning on water; oil spills response; deep-water diving operations at a depth of 300m; investigation of sea bottom and damaged objects to a depth of 1000m. Lead project vessel Spasatel Karev has already been delivered, while the second, Spasatel Kavdejkin, and third, Spasatel Zaborschikov, have been launched and are scheduled for delivery this year. In

LANDMARKS IN NEVSKY’S HISTORY 1913

The establishment of Schliesselburg ship repair workshops

1923

The North-West River Shipping Company was founded, taking over the Schliesselburg workshops

1926 – 1936

Industrialisation of Russia’s ship production sector gave a powerful incentive to the development of the ship repair workshops. The Shipyard began undertaking large fleet orders

1939-1945

Work didn’t stop during the Second World War, with increased production of river and lake naval ships and repairs

1952

The beginning of a new and promising activity – shipbuilding

1970-1990

High production volumes begin, with the construction of new types of vessels and important state and international orders

2005

Modernisation and upgrading of production equipment, involving an investment of more than US$15m

2012

Shipbuilding becomes Nevsky’s main activity. The Shipyard builds and successfully delivers the following vessels: • Lead multipurpose salvage vessel Spasatel Karev, part of the MPSV07 project • Lead dry-cargo 7150 dwt vessel Neva-leader 1, part of the RSD49 project, named by the Royal Institution of Naval Architects as one of the ‘Significant Ships of 2012’ on its annual list. • Self-propelled dry-cargo 7150 dwt vessel Neva-leader 2, part of the RSD49 project

April this year, Nevsky began the construction of the fourth vessel. The second project, RSD49 for NorthWestern Shipping Company JSC, involves the construction of 10 multi-purpose drycargo vessels of river- sea 7150 tons dwt. The vessels can carry general and bulk cargoes, including steel, grain, timber, coil, large and heavyweight goods and hazardous materials. Two vessels were successfully delivered at the end of 2012 and set off on their maiden voyages to Europe. The remaining eight are currently under construction, with the delivery of four vessels scheduled this year. Although Nevsky’s main activity is shipbuilding, ship repair still remains an important part of its business. Repairs include navigational, maintenance, dry docking, and modernisation and remodelling. With its advantageous location on the VolgaBaltic waterway – which allows navigation by inland waterways as well as to the international port of St Petersburg – repairs and maintenance works can always be carried out swiftly. High-quality repairs and vessel construction on time and to the highest standards is ensured not only by Nevsky’s modern production capacities and top workmanship of its fully-qualified employees, but also by the fact that the Shipyard is acknowledged and certified by leading class societies including the Russian Maritime Register of Shipping, Russian River Register, Lloyds Register of Shipping, Bureau Veritas, Germanischer Lloyd and Det Norske Veritas. To ensure the highest standards of shipbuilding and ship repair, the Shipyard is constantly updating its production capacities. For example, in 2009 a fully automated assembly line for flat section welding was put in place by German group IMG. In 2011, the line reached a capacity of 1000 tons of metal structures a month. In addition, two of the latest Esab Suprarex plasma cutting systems of third generation M3B were put in operation in 2011. A slipway has also been put into operation, transport fleet and production workshops have also been updated and additional crane equipment has been installed, resulting in an up-to-the-minute Shipyard able to deal with most engineering and production problems. Today, Nevsky Shipyard is a modern, dynamic enterprise, open for fruitful and long-term partnerships in all spheres of shipbuilding and ship repair. We provide the optimum balance of price, quality and project terms. Summer 2013 —

RUSSIA

YAMAL GAS PROJECT Sovcomf lot, Russia’s largest shipping company, OAO Novatek, the leading independent natural gas producer, and the state corporation Bank for Development and Fo r e i g n Economic Affairs (Vnesheconombank) signed a memorandum on co-operation as part of the Yamal LNG project, providing for the construction of two gas carriers for the Yamal LNG project. Vnesheconombank is to look into the possibility of financing the construction of two pilot liquefied natural gas carriers for the Yamal LNG project. Sovcomflot, meanwhile, has confirmed its interest in operating the new vessels as a bareboat charterer and technical manager. The LNG carriers are due to be built at one of the world’s leading shipyards, following a tender process. The agreement provides for the participation of Russian shipbuilders in the project, including the transfer of LNG tanker construction technology to Russia, as well as the organisation of training for Russian specialists at overseas shipyards and subsequent technical support in establishing gas carrier production in Russia. Sovcomflot specialists will participate in the final approval of optimal technical, commercial and operational solutions. The design of the 170,000m3 capacity gas carriers has been specially developed for the LNG Yamal project and is unique in its technical characteristics. A high ice class (Arc7) means the new vessels are well suited to the challenging climatic conditions of the Arctic. To ensure uninterrupted operations, the gas carriers will be fitted with a dieselelectric propulsion system that includes three Azipods, each with an output of 15MW. At present, there are no other gas carriers in the world with an equivalent overall propulsion power. Final delivery of the new vessels is due to take place in 2016. The agreement is a logical continuation of documents signed by Sovcomflot and VEB in 2011 as part of the Saint-Petersburg International Economic Forum. At that time, the companies signed a bilateral co-operation agreement providing for the development of joint proposals on the construction, acquisition and subsequent operation of a fleet for the Yamal LNG project. The implementation of this project has been approved and provided for by a comprehensive Russian government plan to develop liquefied natural gas production on the Yamal Peninsula. Commenting on the deal, Sergey Frank said: “Providing LNG shipping in the challenging climatic conditions of the Arctic requires the mobilisation of significant 62

— Summer 2013

Novoship

“Providing LNG shipping in the challenging climatic conditions of the Arctic requires the mobilisation of significant resources” resources – including advanced shipbuilding technologies and many years’ experience and expertise of captains and crews working on modern gas-carriers. “At Sovcomflot, we are confident that our long-standing experience of Arctic shipping and successfully implemented Arctic projects, for example Varandey and the Northern Sea route transit crossings, will ensure we cope successfully with the task of providing uninterrupted LNG transportation in the challenging climatic conditions of the Yamal Peninsula.” OAO Novatek and China National Petroleum Corporation (CNPC) concluded a framework agreement on co-operation within the Yamal LNG project the agreement provides for acquisition by CNPC of a 20% stake in the project. Details of the deal incclude conclusion of a long-term contract for supply of at least three 11 million tons of LNG per annum and active assistance in organising the provision of external financing for the project’s Chinese financial institutions.

The deal is expected to be concluded by 1 October 2013. CNPC Chairman Zhou Jiping said: “We are glad to conclude this agreement with Novatek on our entrance into the Yamal LNG project based on vast conventional gas reserves, guaranteeing long-term sustainable supplies of LNG to China. We acknowledge that Russia is giving a lot of attention to its expansion into the international LNG markets and we welcome the increase in Russian LNG supplies to China”. According to Novatek’s Chairman Leonid Mikhelson: “This agreement is a very important step in the implementation of the Yamal LNG project. We see CNPC as a reliable partner with considerable experience in international LNG projects, as well as a long-term buyer of LNG representing one of the fastest growing gas markets in the world. “We are also looking forward to CNPC’s significant contribution into attracting external financing for the project.” Yamal LNG project envisages the construction of an LNG plant with annual capacity of 16.5 million tons per annum based on the feedstock resources of the South-Tambeyskoye field. According to the PRMS reserve standards, the proven and probable reserves of the South-Tambeyskoye field as of 31 December 2012 were appraised at 907 billion cubic meters of natural gas. The Project also requires the construction of transport infrastructure including a sea-port and an airport located at Sabetta (north-east of the Yamal Peninsula).

COMMERCIAL ROFILES

— BARBADOS MARITIME AGENCIES PVT LTD — LEADING SHIPPING AGENCY IN INDIA

INDIA-BASED Barbados Maritime Agencies Pvt Ltd. is a leading shipping agent which provides a complete range of shipping services at all west coast ports of India. The company also has branch or associated offices at most east coast ports of India, and thus covers all Indian ports in order to better serve its valued principals. We specialise in providing agency support at anchorage ports to protect owners’ interests, prevent time loss for vessels, and we offer round the clock safeguard support to shipmasters, deploying vessel to vessel special onboard representatives who monitor complete loading and unloading operations. We have good contacts with all local concerned parties and are able to liaise successfully on our clients’ behalf. “We have a strong and independent work ethic.”

Company Details; For more about us visit www.barbados. co.in Mr Sanjay Chauhan, MD Barbados Maritime Agencies Pvt Ltd, 103, 1st Floor, Cams Corner, Bedi Port Road, Jamnagar 361002 Gujarat, India Tel: +91 288 2673982, Direct: +91 288 2553982 Fax: +91 288 2663982 Cell: +91 98242 12312 Email: barbados@barbados.co.in barbados@sancharnet.in sanjay.dc11@gmail.com www.barbados.co.in

— TRANSOILBUNKER — A RELIABLE BUNKERING PARTNER IN the 18 years since our company was established, we have continued to build on our reputation as a reliable, fast-acting and trusted partner. Since our appearance in the Far East bunker market, we have strengthened our position and have brought right up to date our experience and knowledge. Our company supplies marine fuels to Russian Far East ports Vladivostok, Nakhodka, Vostochniy, Posyet, Zarubino and Slavyanka. Currently, we have five bunkering barges, ranging from 600 to 3350 tons capacity. In addition, we operate our own tank tracks to deliver fuels to shoreside customers. Our technical facilities allow us to offer customers different grades of fuels, from 30 to 180 cSt and MGO. We have developed a wide net of supply from refineries located in Siberia, which deliver fuels to our company by direct contracts, giving us the opportunity to offer competitive prices to our clients. Fuel quality is also under our strict control, from the refinery up to delivery to oil terminals in our ports and on to the supply of vessels. We also have systematic quality and quantity inspection performed by Saybolt or SGS or Inspectorate. Our focus is always on quality of service, quality of fuels, safe work and environmental precaution at every stage of the bunkering process. We value our professional and reliable staff. Each staff member understands that if our partners trust us, we must do our utmost to maintain our good reputation. Further development of our company is focused on expanding its activity and attracting new clients by co-operating with the bunker traders of Singapore, Hong Kong, South Korea, Japan, China and Europe.

Company Details; TransOilBunker 53 office, 11 Aleutskaya Street, Vladivostok, 690091, Russia Tel/fax.: +7 (423) 2642-448, 2608-550, 2642-449 Mobile: +7 914 704 28 56 E-mail: bktob2006@yandex.ru Website: www.transoilbunker.org

Summer 2013 —

SECTION HEAD

Novorossiysk has enjoyed a successful year

“The seven-year, US$110m credit facility will refinance shareholder loans used to construct the fuel oil terminal and infrastructure, including tanks, rail-car discharging racks and pipeline” PORT OF ST PETERSBURG The port of St Petersburg has been investing in port infrastructure during the course of the year. In the 1st quarter of 2013, it transferred 44.2m roubles for the modernisation of cargo terminals and port infrastructure. Most of the funds were transferred for leasing payments for equipment, purchased by the company within the programme on renovation of handling equipment fleet. In order to improve safety in handling mineral fertilisers in the port, the company is upgrading its dry cargo facilities for temporary storage. In particular, work was carried out on ventilation and air treatment facilities as well as power supplies. NOVOROSSIYSK TERMINAL Novorossiysk Fuel Oil Terminal, which is jointly owned by Gunvor Grou and PJSC Novorossiysk Commercial Sea Port (NCSP), has successfully closed a secured 64

— Summer 2013

seven-year US$110m credit facility from ZAO Raiffeisenbank. The proceeds will refinance shareholder loans used to construct the fuel oil terminal and infrastructure, including tanks, rail-car discharging racks and pipeline. The fuel oil terminal, which has a capacity of 119,000m3 and a throughput of 4m tons a year, was successfully commissioned and received an operating permit in 2012. Novorossiysk Commercial Sea Port Group announced recently that its consolidated cargo turnover for the period of January-May 2013 amounted to 61.3m tonnes, compared to 68.4m tonnes in the first five months of 2012. Handling of liquid cargo in the first five months of 2013 was 51m tonnes, compared to 56.1m tonnes in January-May 2012. Crude oil handling in the period totalled 40.8m tonnes, oil products handling amounted to 10.6m tonnes; seed oils and UAN volumes totalled 349,000. tonnes.

Oil products handling in the first five months increased by 36.4% year-on-year. The Novorossiysk Fuel Oil Terminal and the Primorsk Trade Port continued to drive oil products growth, with volumes up by 1.1m tonnes (110.4%) and 1.2m tonnes (54.8%), respectively. Handling of liquid fertilisers (UAN) during the first five months of 2013 increased 118% year-on-year. In January-May 2013, NCSP Group handled 2.6m tonnes of bulk cargo. Grain volumes remained lower yearon-year. However, expectations for the new 2013 crop helped grain volumes to reach 193,000 tonnes in May, which is more than in the previous four months of 2013 combined. Iron ore handling remained largely unchanged year-on-year, while cement handling increased 23.3% and sugar volumes were up 49.5% year-on-year. General cargo volumes in the first five months amounted to 4.7m tonnes. Ferrous metals volumes remain on the same level as last year, with significant growth coming from perishable and other cargoes. NCSP Group’s total container throughput in January-May 2013 was 269,000 TEU, an increase of 7.4 TEU compared to the same period in 2012. The slight decline in container volumes measured in tonnes was due to the declining share of loaded containers in export container traffic.