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SUMMER

- i n co r p o r at i n g -

COMPREHENSIVE

COVERAGE

OF

THE

SHIPPING

2014

INDUSTRY

The future is World Shipping / freight focus

BRIGHTER The world of shipping and freight is heading in the right direction

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

SUMMER 2014

World Shipping FREIGHTFOCUS

– Losses and risks – While shipping losses declined last year, there are still plenty of risky areas to consider

– Return to life – Dry cargo FFAs show stellar growth, according to FIS

–LNG attracts –

Activity in the ARA region continues to progress, with new developments at all three main ports, particularly in the use of LNG


Posidonia 2-6 June 2014

Metropolitan Expo, Athens Greece

it's a great deal The International Shipping Exhibition

Organisers: Posidonia Exhibitions SA, e-mail: posidonia@posidonia-events.com

www.posidonia-events.com


World Shipping FREIGHTFOCUS - i n co r p o r at i n g -

SUMMER 2014

WORLD SHIPPING FREIGHTFOCUS S U M M E R

- I N C O R P O R AT I N G -

COMPREHENSIVE

COVERAGE

OF

THE

SHIPPING

2 0 14

INDUSTRY

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

COMPREHENSIVE COVERAGE OF THE SHIPPING INDUSTRY

– LOSSES AND RISKS – While shipping losses declined last year, there are still plenty of risky areas to consider

– RETURN TO LIFE – Dry cargo FFAs show stellar growth, according to FIS

–LNG ATTRACTS –

Activity in the ARA region continues to progress, with new developments at all three main ports, particularly in the use of LNG

The future is WORLD SHIPPING / FREIGHT FOCUS

BRIGHTER The world of shipping and freight is heading in the right direction

FROM THE

– EDITOR – 1 WSI Summer 2014 FC 2.indd 1

27/05/2014 12:47

Publisher W H Robinson Editor Sandra Speares sandra.speares@mar-media.com Project Director / world shipping David Scott david.scott@mar-media.com Project Director / freight focus John Ferris john.ferris@mar-media.com Project Consultant Alex Corboude alex.corboude@mar-media.com DESIGNER Justin Ives E-mail: justindesign@live.co.uk

Published by: Maritime Media Ltd Suite 19, 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

www.world-shipping.net

I

f the latest confidence survey by accountant Moore Stephens points to a greater level of optimism in the shipping industry, there are still substantial challenges ahead for all industry segments. While shipping companies are still struggling to recover from the tough market conditions of the last few years, they also have to face up to a barrage of new environmental regulations which are going to place more demands on their purses, and may well also give rise to equipment and engine problems when using the low sulphur fuels which will be needed to operate in emission control areas. There has also been a change on the financial front with the emergence of greater private equity participation in the shipping arena and the withdrawal or scaling back of lending by some of the traditional bank lenders to the industry. Recent times have also seen the rise of alliances in the liner trades, with the advent of the P3 alliance between Maersk, MSC, and CMA CGM which is now expected to go live in the autumn following an extensive regulatory process. This in turn has led to concerns over the potential impact such a large alliance could have on the competition. Safety and security at sea has also been high on the agenda as far as regulation is concerned, with heightened awareness of the need to do more on this side following the Costa Concordia accident two years’ ago and, more recently, the Sewol ferry tragedy in April. The salvage industry has renewed its calls for action on the places of refuge issue. World Shipping International which incorporates Freight Focus, will cover some of these important issues, but also look at specialist freight related matters, including container weighing, which was on the Maritime Safety Committee agenda in May, but also electronic trading, including new swaps products fosr commodities like coking coal. Aside from regulatory developments, we look at legal developments with concerns over brokers’ potential exposure to legal costs. There is a specific focus in this issue on the Norwegian legal developments with specialist comment from law firm Wikborg Rein.

Summer 2014 – 1


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World Shipping FREIGHTFOCUS - i n co r p o r at i n g -

COMPREHENSIVE COVERAGE OF THE SHIPPING INDUSTRY

CONTENTS 05 – News News Round up

09 – Industry view Losses and risks

While shipping losses declined last year, there are still plenty of risky areas to consider

11 – Cargo At the coalface

Coking coal is becoming of increasing interest to markets, and the swaps market is on the rise

13 – Finance Finding finance

Finance costs and finance availability are just two of the current issues the shipping industry has to face

15 – markets Talking up the market

Confidence levels have grown in recent months, but all the sectors still have challenges to face

25 – registries

47 – Middle east ports

Registries are continuing to grow, sometimes on the back of private equity funding

Middle East ports are expanding rapidly with strong growth potential

Private equity

28 – classification Talking technology

Classification societies have had to respond to the challenges of new regulation as environmental requirements tighten

31 – Shipmanagement Losses and risks

With the recent introduction of the Maritime Labour Convention, seafarers are offered a greater degree of protection than has been the case in the past

36 – Communication Keep communicating

In expansion

50 – maritime law norway The importance of contemporaneous evidence

Nina M Hanevold, Chris Grieveson and Morten Lund Mathisen of Wikborg Rein law offices explain why it is important to collect evidence and take statements from relevant crew members as soon as possible after an incident

52 – insurance Risky business

Good risk management procedures are a good way of minimising costly damages and crew injuries

Communications are an increasingly important part of the maritime world, while training on systems like ECDIS is essential to ensure ships’ safe operation. WSI looks at some of the recent developments

55 – heavylift

39 – north america

A place of safety

Getting the right ship

Insurance issues are one consideration when moving high-value project cargoes

57 – salvage

Many of the big shipping alliances are targeting the US for their new services

There has been a major push to deal with the issue of places of refuge in recent months

42 – ARA

59 – technology

There have been a number of changes in trade patterns in recent months

Activity in the ARA region continues to progress, with new developments at all three main ports, particularly in the use of LNG

New products on the market range from telemedicine to steering gear solutions

23 – costs

45 – LEGAL

Environmental legislation is becoming increasingly stringent, placing many demands on owners and operators

18 – trading Return to life

Dry cargo FFAs show stellar growth, according to FIS

20 – transit In alliance

Cost control

Shipping consultant Drewry has launched a club to benchmark container shipping costs

Container lines target the US

LNG attracts

Broker litigation

Insurer ITIC has warned on the high cost of litigation for shipbrokers

High tech

61 – green issues Going green

64 – EVENTS & EXHIBItions Summer 2014 – 3


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NEWS

News Round up The boards of Braemar and ACM have reached agreement on a merger of the two companies. ACM shareholders will be entitled to receive two new ordinary shares and £2.50 ($4) in cash for every five ACM ordinary shares.. As a result, Braemar shareholders will own 72% of the enlarged share capital and ACM shareholders holding the remaining 28%. The deal is estimated to be worth £55 million. The boards of directors of Braemar and ACM believe that the merger will create a strong shipping services group. Commenting on the development, Sir Graham Hearne, chairman of Braemar, said: “We are delighted to have agreed this merger with such a complementary shipbroking business as ACM. We will be able to improve our market coverage and

the services we offer to our clients. This will consolidate and strengthen our position as a leading player in the shipbroking and shipping services markets.” Johnny Plumbe, executive chairman of ACM, said: “Since becoming a public company in 2006, ACM has successfully developed and grown its business. The merger with Braemar provides a unique opportunity to create a global, diversified shipping services group, with a significant combined shipbroking division which we expect will be a strong engine for future earnings growth. Our committed management and broking teams will complement those at Braemar, enabling a successful integration for the benefit of our clients, employees and shareholders.”

Tanker ZIM restructures deal BW has signed a purchase agreement to acquire 10 chemical tankers comprising two ships built in 2008 and 2010 and eight newbuildings to be delivered between 2015 and 2018 from Stream Tankers. The two chemical tankers are from Japanese shipyards Fukuoka Shipbuilding Co Ltd and Shitanoe Shipbuilding Co Ltd. The newbuildings are from the same shipyards and, when complete, they will be equipped with eco-design hulls and fuel-efficient engines. Andreas Sohmen-Pao, chief executive of BW Group, says: “Stream Tankers has a fleet of quality vessels and newbuildings and BW is pleased to be acquiring this fleet. With this purchase, we will be able to strengthen our service offering in the chemical tanker segment.” BW intends to manage the ships commercially through the WOMAR pool system.

ZIM has finalised the terms of its financial restructuring arrangements, a $3 billion restructuring plan including a $1.4 billion debt equity conversion with creditors following a protracted and complex series of negotiations. Following the agreement, the refinanced business will be strongly positioned for successful growth. The company has also reached an agreement with the Israeli Ministry of Defense regarding a revised ‘golden share’. Changes in the terms of the ‘golden share’ held by the state of Israel will ensure that national strategic interests are fully safeguarded, while eliminating provisions that stand in the way of implementation of the restructuring agreement. Israel Corporation has agreed to invest an additional $200 million in new equity, provide the company with a liquidity line of $50 million, and forgo $225 million of loans that were part of a $1 billion support from 2008-2012. In addition, related companies agreed to support the company by $180 million, by amending charter contracts and forbearing loans. The total support of IC and related parties in the last years will amount to $1.4 billion. The new structure, which involves a substantial reduction in indebtedness through the write-off of some $1.4 billion of debt and the injection of new equity, will enable ZIM to compete successfully in the global shipping

market. The estimated equity valuation of ‘new ZIM’ is $600-800 million. Chief executive Rafi Danieli said: “We are delighted to have reached these agreements after many months of hard work. We are grateful to IC for all its support and additional investment and to all our creditors for their efforts to get us to this point and for the support they have given to the management team and the business plan. We are confident that ‘new ZIM’ with its strong balance sheet is well placed to open a new exciting chapter in its development.”

We are delighted to have reached these agreements after many months of hard work

Summer 2014 –5


NEWS

Below: Michael Behrendt, chairman of the executive board of Hapag-Lloyd

Hapag Lloyd to merge with CSAV Hapag-Lloyd and Compañía Sud Americana de Vapores (CSAV) in April signed a binding contract on merging CSAV’s entire container business with Hapag-Lloyd, subject to the necessary approvals. Following the integration, the new HapagLloyd will rank among the four largest liner shipping companies in the world, with some 200 vessels with total transport capacity of around 1 million teu, an annual transport volume of 7.5 million teu and a combined turnover of e9 billion. The company’s head office will remain in Hamburg. In addition, Hapag-Lloyd will have a strong regional office in Chile for its Latin America business. In return for contributing its container business, CSAV will become a new Hapag-Lloyd core shareholder besides HGV (City of Hamburg) and Kühne Maritime. CSAV will initially hold a 30% stake in the combined entity. The partners have agreed on a capital increase of e370  million once the transaction has been concluded, to which CSAV will contribute e259  million. This will then increase CSAV’s share of Hapag-Lloyd to 34%. A second capital increase of e370 million will be linked to HapagLloyd’s planned stock exchange listing. “I am delighted that we have succeeded in concluding this partnership through which our two companies are playing an active part in consolidating the liner shipping industry. This day is an important milestone in the history of HapagLloyd,” said Michael Behrendt, chairman of the executive board of Hapag-Lloyd, upon signing the agreement. “The transaction increases the value of the company and therefore also the value of our shareholders’ shares.” “By joining forces, we are creating a stronger, larger and more global company with significant economies of scale and a considerably improved competitive position,” said Oscar Hasbún, chief executive of CSAV. The combination of CSAV’s container shipping business with HapagLloyd will result in annual synergies of at least $300 million. Service networks and fleets of both companies complement one another ideally. “The combination with CSAV, Latin America’s leading container shipping line, considerably strengthens Hapag-Lloyd in this growth market and adds a strong position in the north-south traffic to the company’s global network and to its established strength in east-west traffic,” said Hasbún. Order books are also complementary. While, at the end of April, Hapag-Lloyd put into service the last of 10 13,200 teu vessels ordered for the Far East trade, CSAV still has seven vessels, each of 9,300 teu, scheduled for delivery in 2014 and 2015. These container ships are specially designed 6 – Summer 2014

for the South American trade. “This means that we will have a young and cost-efficient fleet. The use of optimum tonnage in the trades is one of the key prerequisites for successful operations in the face of international competition,” said Hasbún. Both companies also fit in other regards – CSAV, founded in 1872, and Hapag-Lloyd, founded in 1847, share a similar blend of long tradition and entrepreneurial vision for the future. “By integrating CSAV’s container business, Hapag-Lloyd is able to build on its strengths and is therefore in an excellent position for future growth,” said Behrendt. “This combination will further strengthen our service portfolio and enable us to deliver an even better global service to our clients.”


NEWS

Boosting Eurotunnel shipping’s decision upheld image Attitude change is key to boosting shipping’s professional image, says Rajaish Bajpaee, chief executive of Bernhard Schulte Shipmanagement (BSM). Ensuring a robust and dependable safety culture onboard ship is essential to reducing large-scale accidents at sea, which is why BSM has placed seafarer attitude-change at the heart of its lossprevention strategy. “Getting your onboard and shorebased management teams to embrace a loss-prevention mindset is crucial to the industry goal of no injuries or loss of life, no damage or loss to cargo, no damage or loss to the ship, and no damage or loss to the environment,” said Bajpaee. He added: “In BSM, we have an elaborate process to select our seafarers with the desired qualities for a career at sea. However, to ensure they have that moral duty (ie the ‘attitude’ and ‘engagement’) to themselves, their colleagues and the environment, we actively promote and embed a loss prevention mindset, which, through continuous learning and development, should further improve the way they work onboard.” According to Bajpaee, the industry has to do what it takes to make shipping highly regarded as a professional, intellectually challenging and emotionally satisfying industry to work in. “It is important that we reinstall the pride in the seafarer’s job and make today’s youngsters dream of becoming a seafarer with the emphasis back on people. At BSM we entrust our top four officers and their teams with full accountability onboard, because we believe it is essential to make them fully understand the very important position they hold onboard our ships. This only serves to deepen their sense of identity, belonging and involvement to be an active and recognised member,” he said.

The Competition and Markets Authority has provisionally confirmed an earlier decision by the Competition Commission that Eurotunnel should be barred from operating a ferry service from Dover. In 2012, the Channel Tunnel operator acquired the three ferries and related assets of the former SeaFrance (now liquidated) and recommenced a ferry service on the Dover-Calais route under the MyFerryLink brand. In June last year, the Competition Commission (CC) decided that, by adding the ferries to its Channel Tunnel business, Eurotunnel would increase its share of the market to over half – and was likely to end up as one of only two ferry operators on the route – leading to price rises for passengers and freight customers. Following a legal challenge to that decision, the CC considered again whether the acquisition of the ferries by Eurotunnel, in partnership with a workers’ cooperative formed by former SeaFrance employees (known as the SCOP SeaFrance), qualifies as a merger under the UK merger control rules, after the issue was remitted to the CC by the Competition Appeal Tribunal (CAT). In March, the CC provisionally ruled that it did have jurisdiction to make the decision. The Competition and Markets Authority (CMA) took over the case from the CC at the start of April. The CMA has now also looked at whether there have been any material changes in the market which should lead it to reconsider its decision. Passenger growth on the DoverCalais route has been greater than originally anticipated, but at least two of the ferry operators are still making substantial losses. The provisional view of the CMA is that, if Eurotunnel is allowed to continue its ferry service from Dover, a competitor is likely to withdraw from Dover-Calais. This would leave Eurotunnel as the operator both of the rail link and one of two ferry services operating between Dover and Calais.

The CMA has also looked at its original remedy, which bans Eurotunnel from running ferry services from Dover. It has provisionally rejected an alternative proposal from the SCOP to operate the service independently from Eurotunnel. This remedy would require the SCOP to have access to substantial new financing and the CMA believes that the proposal as it stands would be subject to too much uncertainty and delay to represent an effective solution. The CMA has also provisionally rejected a proposal from DFDS to reduce the original implementation period before Eurotunnel would be required to stop running ferries in and out of Dover from six to three months. The CMA considers that the longer period is still necessary to avoid causing uncertainty for ferry passengers and freight customers who have advance bookings or annual contracts. Alasdair Smith, CMA deputy panel chair and chairman of the Eurotunnel Remittal Group, said: “MyFerryLink is making losses and being funded by Eurotunnel. This is causing the current level of competition on the Dover-Calais route to be unsustainable and is likely to lead to the exit of a competitor. The interest of cross-Channel customers, both passengers and freight, will not be well served if Eurotunnel ends up as one of only two ferry operators in addition to owning the competing rail link. Eurotunnel’s purchase of ferries means it now has over half the market and its share will rise further if competitors exit. “It is much better to have three competing cross-Channel operators – Eurotunnel running the rail link and two independent operators on the ferry route. “We have looked again at our proposed solution of banning Eurotunnel from operating ferries from Dover. We don’t think any of the alternatives proposed to us will restore effective competition on the Channel. A six-month notice period before the ban comes into effect will minimise disruption and uncertainty for ferry customers.” Summer 2014 –7


NEWS

New advice on PMSCs Videotel has made a new addition to its armoury of training materials with the creation of a brand new programme – Working with Maritime Security Guards – which has been developed in conjunction with the Security Association for the Maritime Industry (SAMI) and BIMCO. Produced in association with Steamship Mutual, the training programme had its launch onboard the HQS Wellington. As part of their anti-piracy measures, many shipping companies now employ armed security guards aboard vessels that transit pirate waters. It is essential, however, that any company that takes this route understands the importance of selecting the right operators for its requirements and understands how best to work with the team to ensure maximum efficiency and integration with everyday operations onboard ship. “There are legal and safety risks associated with the use of armed guards and so it is vital to choose a private maritime security company (PMSC) that offers highly competent and professionally trained guards who have demonstrable experience in protecting ships against pirate attacks,” explains Nigel Cleave, chief executive of Videotel. “Once the guards are onboard they must be successfully integrated with the crew on both a personal and a professional level. To reinforce this message, we have used firsthand accounts from a company security officer (CSO), a PMSC operations manager and a guards’ team leader.” The course provides shipping companies and personnel onboard ship with useful guidance on how to engage and work successfully with armed guards, from selecting the PMSC through to the guards’ disembarkation at the end of their deployment. It is a companion programme to Videotel’s ‘Piracy and Armed Robbery, Edition 3’, which deals with piracy prevention onboard ship. Primarily targeted at CSOs and also masters and senior officers, ‘Working with Maritime Security Guards’ is presented in a documentary style and is available as Videotel on Demand (VOD); VOD online; DVD; e-learning CBT and workbook. It covers the following topics: selecting a PMSC; planning the guards’ deployment; working and living together; and responding to a threat.

8 – Summer 2014

Container weights The British International Freight Association (BIFA) welcomed the news that MSC has approved the draft amendments to the Safety of Life at Sea (SOLAS), Chapter VI, to require mandatory verification of the gross mass of containers. The trade association that represents freight forwarders and logistics companies also cautioned that all concerned should accept that if the ‘aggregating’ method that has been put forward does not work, mandatory weighing of fully loaded containers is likely. The IMO subcommittee approved draft guidelines, giving shippers two methods to verify the weight of a container – either by weighing the entire loaded container using calibrated and certified equipment; or weighing the individual packages and dunnage and adding the tare mass to the sum of the single masses. BIFA director-general Peter Quantrill says: “During the UK consultation process, BIFA has made its views on the subject very clear. “There is a real problem with regard to this issue, and statistics issued by leading insurers indicate that approximately 20% of all containers are overweight. “All parties have responsibilities in relation to this subject and must fulfil them. “BIFA believes that the correct place to establish the weight of a loaded container is before the vehicle drives on the public highway. “In the final analysis, the present problems are a direct result of poor regulatory enforcement and trade compliance.” MSC has also approved global binding regulations intending to enhance safety of navigation in polar areas. This means, inter alia, new requirements for passenger ships. Following several years of intense negotiations, MSC has approved a new set of regulations on navigation in Arctic waters. Thus, the IMO has taken a decisive step towards making the so-called Polar Code internationally binding, the Danish Maritime Authority said. The entire palette of navigation in polar areas is covered by the Polar Code – from ship design and construction, over crew training and navigation, to improved coordination of search and rescue operations. The Polar Code will apply to passengerships and cargoships with a gross tonnage of more than 500. “Denmark has been active in placing the Polar Code on the IMO agenda. Therefore, I am extremely pleased that – with the Polar Code – we will now enhance the safety of ships navigating Arctic and Antarctic waters. Denmark especially has been striving to enhance the safety of cruise ships navigating Greenland waters. The new internationally binding regulations will also introduce a number of important measures to be taken when navigating icy waters, such as requirements for life-saving appliances and training of the crew. This is in line with the national regulations on cruise ships around Greenland that the Danish Maritime Authority is working on,” says the deputy director-general of the Danish Maritime Authority, Francis Zachariae. The IMO Maritime Safety Committee is expected to adopt the new regulations in the autumn of 2014. The environmental provisions in relation to navigation in polar areas will also be adopted by the IMO Marine Environment Protection Committee (MEPC) in the autumn of 2014.


industry view

Losses and risks While shipping losses declined last year, there are still plenty of risky areas to consider

S

hipping losses continued their downward trend with 94 losses reported worldwide in 2013, coming in below 100 for only the second time in 12 years, according to Allianz Global Corporate & Specialty’s (AGCS) second annual Safety and Shipping Review 2014, which analyses reported shipping losses of over 100 gross tons. Losses declined by 20% from 2012, when there were 117 reported losses. The 2013 accident year also represents a significant improvement on the previous 10-year loss average, with total worldwide shipping losses declining 45% since 2003. “More than 90% of global trade is carried by sea so the safety of international shipping vessels and routes is critical to the health of the global economy,” said Tim Donney, global head of marine risk consulting. “While the long-term downward trend in shipping losses is encouraging, there is more work to be done to improve the overall safety of these vessels as well as their cargo, crew and passengers, especially in Asian waters.

As an insurer we are always concerned about recognised issues such as training and safety management – human error is not something we can ignore and lack of skilled workforce is still an issue – but we also need to be alert for new risks as the industry continues to develop.” According to the report, more than a third of 2013’s total losses were concentrated in two maritime regions. As in 2012, the South China, Indo China, Indonesia and the Philippines region saw the highest number of losses (18 ships), closely followed by the seas around Japan, Korea and North China (17 ships). More than two years after the Costa Concordia disaster, improving passenger ship safety continues to be a priority, with 2014 likely to see the 100th loss of a passenger vessel since 2002. Sadly, since the report was issued we have seen the loss of the ferry Sewol with 300 lives off the coast of South Korea. As the report pointed out, Asia remains a hotspot for passenger shipping losses, especially for smaller passenger vessels and ferries, as demonstrated by the sinking of the ferry St Thomas of Aquinas as a result of a collision with another vessel off Cebu in the Philippines in August 2013, with the loss of at least 116 lives. “We have to ask how some Asian ship operators measure safety and quality, particularly when speaking about domestic trade shipping in South East Asia,” said Captain Jarek Klimczak, senior marine risk consultant at AGCS. “The understanding of quality and standards can sometimes appear 50 years behind Europe – maybe even more.” Around the world, more than a third of the vessels lost were cargo ships, with fishery and bulk carriers the only other type of vessels to record double-digit losses. The total loss of two bulk carriers in Asian waters in 2013, Harita Bauxite and Trans Summer, highlighted the importance of proper cargo handling and stowage of bulk cargoes. AGCS experts believe high moisture content and subsequent liquidisation, leading to free flowing instabilisation of the cargo, to be the primary cause of the accidents. Summer 2014 – 9


industry view

The most common cause of losses in the past year was foundering (sinking or submerging), often driven by heavy weather, accounting for almost 75% of all losses, which was a significant increase from both 2012 (47%) and the previous 10-year average (44%). For the first time, the report includes not only total losses but also the total number of shipping casualties by region. The East Mediterranean and Black Sea region is shown to be a casualty hotspot, responsible for 464 casualties (18%) out of a worldwide total of 2,596 during 2013, including the year’s oldest ship to be a total loss: the 108-year-old Hantallar which grounded off Tekirdag, Turkey. This region combines busy shipping routes and a reputation for weaker safety management practices with a regional fleet that has a higher proportion of lower-quality older vessels. The report also shows that over the past decade the British Isles have been the location of the most casualties, while January is the worst month for all casualties (including total losses) in the northern hemisphere. In the southern hemisphere, it is July. An increasingly difficult operating climate for ship operators has forced a number of innovations, including larger ship sizes to capitalize on economies of scale, the use of alternative fuels and changes in ship designs. At the same time, more economical trading routes are fast appearing in Arctic regions during the summer months, but these present their own set of challenges. Three emerging risks in particular were identified in the 2014 report. Vessel size: last year marked the arrival of the largest container vessel on record, over 400m long and boasting capacity in excess of 18,000 teu. This trend is set to continue. AGCS estimates that capacity grows by around 30% every four to five years, meaning the arrival of 24,000 teu carriers can be anticipated around 2018. “The claims arising out of maritime emergencies of these ‘mega-ships’ can be huge. For example, just think of the business interruption of ports and terminals if an accident was to block the entrance,” said Dr Sven Gerhard, global product leader, hull and marine 10 – Summer 2014

liabilities, at AGCS. “In addition, salvage might require unprecedented efforts and complex operations – in some cases, it may take many months, or possibly a year or longer, to remove all the containers, particularly if the accident were to happen in a remote location. The large loss potential has increased for events which are not extraordinary on these big ships. And these are unchartered waters for salvors.” Rise of LNG-fuelled vessels: use of liquefied natural gas (LNG) to power ships is expected to dramatically increase by 2020. There are safety concerns, however, as the industry will see the rise of ports that have never previously handled LNG providing bunkering stations on dock. “We need to ask what risks LNG-fuelled ships will present to the industry. The concern is storing the LNG as fuel and handling it onboard. LNG expertise is not easily available – there needs to be a change in mindset and training,” said Capt. Rahul Khanna, senior risk consultant, marine, at AGCS. Arctic trading routes: shipping casualties in Arctic Circle waters have increased to an average of 45 per year between 2009 and 2013 from only seven between 2002 and 2007. Damage to machinery caused a third of these incidents, higher than the average elsewhere, reflecting the harsher operating environment.

Logistics challenge The Chartered Institute of Logistics and Transport (CILT) has recently issued a report, ‘UK Freight Planning to 2035’, which examines the challenges facing the future growth of logistics capability in the UK. CILT’s well-received ‘Vision 2035’ report of 2011 captured headlines with its predictions for the UK’s infrastructure 25 years hence. Now the institute is following it with a series of in-depth reports addressing how the UK is shaping up to meeting these challenges. The first of these discusses the future of freight. The report has been drawn up by a team of senior transport and supply chain professionals, headed by Professor Alan Braithwaite FCILT, and makes the case that the importance of the UK’s freight

infrastructure is of such magnitude that it requires strategic national direction. This applies particularly in the case of multimodal rail interchanges, which are currently considered a political ‘hot potato’ because of local opposition. The report has four key observations to make: • Goods vehicle taxation should be re-examined and ideally be replaced by a lorry-user charging system based on road occupancy. • Planning for urban hubs should be made a priority under the national guidelines, and local authorities should be given powers to purchase land and determine its use for such schemes. This would provide necessary consolidation and relieve congestion in our cities and major towns. • All major distribution parks should be planned with a presumption of rail connection and suitable sites identified nationally and facilitated by local authorities. This measure will bring down the high cost of development and make a more effective market where national need is balanced clearly with local interests. • Planning for infrastructure that is considered to be of national importance in the UK should take precedence over local agendas. The devolved governments should be engaged in the UK planning process to ensure that regional and national policy developments are aligned. CILT chief executive Steve Agg says: “The UK is already congested and we cannot rely on market-driven solutions alone, we need direct policy input to facilitate engagement. This is about giving industry the confidence to invest to serve supply chains and meet the needs of local communities and national interests.” The report concludes that adopting these measures will form an integrated policy, which will, in turn, drive investment and growth and ensure that the UK’s economy has the infrastructure it needs both moving towards 2035 and beyond.


Cargo

At the coalface Coking coal is becoming of increasing interest to markets, and the swaps market is on the rise

L

eading broker for freight and commodities swaps Freight Investor Services will offer new CIF and FOB contracts from SGX to cement its place as a leading global broker in the cleared coking coal swaps market. FIS has welcomed the launch of two new coking coal contracts as new data shows the coking coal swaps market is nearing one million tonnes traded. During the first four months of 2014 alone, the coking coal market has seen more than 800,000 tonnes traded compared with a total of 168,000 tonnes for the whole of 2013. Market participation has increased, with the number of active counterparties doubling in the past six months. Regional interest is building, with coking coal of increasing importance to counterparties from the US to Asia and Australasia. The announcement of new listings by SGX of two TSI low vol premium coking coal benchmarks is designed to build on liquidity already established by benchmark indices from Platts and clearing by CME. Holly Midwinter-Porter, derivatives broker with Freight Investor Services, said: “This is a market that is changing fast, with huge price volatility over the past few years driving the need for a viable hedging tool. Price uncertainty continues, with no clear direction in the near term despite recent record lows. The launch of the SGX contracts illustrates the interest in the market that FIS has helped to create.” The huge volumes traded on the Dalian Commodity Exchange are encouraging a growing number of counterparties across Asia and mainland China to look at coking coal swaps, with the market made up of a combination of producers, endusers, banks and traders. Participants are also increasingly looking for opportunities to leverage the virtual steel mill concept pioneered by FIS, with arbitrage and complementary trades between coking coal iron ore, ASEAN HRC and Dalian coking coal futures, MidwinterPorter says. “Physical seaborne trade in coking coal is estimated to grow to 320 million tonnes this year. FIS has been at the forefront of building a new market that enables risk management across the steel space, with teams in Asia and Europe offering coverage throughout the trading day,” she added.

Above: Holly Midwinter-Porter, derivatives broker with Freight Investor Services

US crude exports The Obama administration is considering lifting or easing 39-year-old restrictions on exporting US crude oil, though no final decisions have been made, a White House official said on Platts Energy Week. “We’re seeing huge production increases in crude. And so we’re thinking through the implications of that, in terms of economics, environmental ... a whole bunch of dimensions,” said Dan Utech, a special assistant to the president for energy and climate, speaking on the all-energy news and talk show programme. “One of the things we’re focusing on is the match between growing crude supplies and our refining capacity,” Utech said. “So, we’re looking at all that and we’re going to evaluate policy options as needed.” Utech’s comments, combined with recent statements by US energy secretary Ernest Moniz and John Podesta, a top adviser to President Barack Obama, signal a strong administration interest in testing the validity of export restrictions that Congress enacted in 1975 after the 1973 Arab oil embargo left the US worried it might run short of oil, Platts says. Moniz first suggested the need for the review at a Platts conference in New York in December and, during a recent visit to South Korea, he confirmed that the issue is receiving attention from the administration. One consideration noted by Moniz, Podesta and Utech is the difficulty US refineries are having absorbing the surge in US oil production, including problems matching refineries’ needs for certain grades of crude oil with the supplies coming from shale reserves in Texas and North Dakota, Platts says. Summer 2014 – 11


Cargo

The US Energy Information Administration estimates that the US will double oil production from 2008 levels to 9.6 million b/d by 2019. Utech also indicated that the White House is satisfied with the pace of approvals by the Department of Energy for applications to export liquefied natural gas. “DOE has a process in place, and they’re moving through it,” he said. DOE has approved six applications to export LNG to countries without freetrade agreements with the US and 24 others are pending, Platts states. The department has been criticised by some in the gas industry for not acting faster, especially now that the crisis in Ukraine is raising new questions about Europe’s reliance on Russia for gas.

Biofuels In a speech in March to the Erb Institute at the University of Michigan, Cargill executive chairman Greg Page discussed how agriculture and risk management work together to affect food security. Looking at the evolution of food system production and consumption over the past 37 years, since 1975, and based on the positive trajectory of this historical data, “we believe the world’s farmers will be able to responsibly feed the growing world population”, Page told the audience. “Production of 16 key crops that form the building blocks of the global food system – including grain, rice and major oilseeds – has more than doubled since 1975. We anticipate this rate of increased production will continue.” “Today, 10% of the world’s grain and 11% of the world’s vegetable oil goes into the production of biofuels and biodiesel. The big positive of the biofuels era: it has led to the recapitalisation of farming. If you go back 40 years before 2004 or 2005, global agriculture was collectively decapitalising. Farming was an unprofitable endeavour for farmers in every country except those that provided subsidies. Farming stayed in place in most of the western world because of government subsidies, not because of the free market. 12 – Summer 2014

“What is the key takeaway from this situation? The advent of biofuels has raised our food security. We will have a food reserve available to us if we do two things: (1) continue to invest in agriculture and grow production as fast as we have been; and (2) dial back the use of crops for biofuel production in years of bad weather. “Many people think the advent of biofuels has lowered food security. However, biofuels have provided the economic incentive for farmers all over the world to invest in their farms, increase production and increase the overall amount of food available. “While biofuels themselves do not threaten food security, biofuels policies do. Food security is threatened if biofuels policies are so rigid that people are not prepared to cut back biofuels production in years of bad weather so we can make those resources available to the food supply. Another threat to food security is the debate itself regarding whether or not it is ethical to make fuel from food. I can tell you that – right now, today – we have enough calories available to feed the world’s hungry and still produce biofuels.” “The fact that we have hungry people in the world is a conscious decision of civil society. Society produced the calories to do it.

“Let me reiterate this important point: we can have 8% of our grain going to biofuels and still feed all the people in the world. However, society has elected not to do that. The public conversation so frequently tries to paint the food and biofuels debate as an either/or situation, but it isn’t. We can do both: have enough grain to feed the world AND make biofuels. We just need to make sure we size each opportunity appropriately. Commenting on biofuels and their use as a tool of government, he said that: “In the old days, governments would either give farmers money directly or would order farmers to produce fewer crops when farm prices were low. Governments did this in accordance with standard economic theory: if you manage supply down, you drive prices up. For the first 30 years that I was in this business, most governments approached price improvements by reducing crop supply. Governments reduced the supply by forcing farmers to idle their land. This approach cost a lot of money. “In the past 10 years, governments have realised they can raise prices by changing the demand element of supply and demand. An easy way to increase demand is to mandate biofuels. We now live in a world where governments manage farmers’ prices by regulating demand rather than regulating supply.”

Shale gas affects xylenes arbitrage

10% of the world’s grain and 11% of the world’s vegetable oil goes into the production of biofuels and biodiesel

Platts quoted sources as saying that the US shale gas boom has triggered a reversal of the mixed xylenes arbitrage with Asia, making it economical to send Asian material to the US, where the ongoing shift to lighter feedstocks has cut aromatics yields by as much as 55%, sources said. The previous MX trade flow from the US to Asia has been shut for most of the past year, mainly due to higher prices and lower output in the US and lower prices in Asia. The trend has been reinforced by the persistently weak Asian MX market due to bearish downstream paraxylene and polyester chains but firmer toluene and increased MX demand in the US for gasoline blending, Platts said.


Finance

Finding finance Finance costs and finance availability are just two of the current issues the shipping industry has to face

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he recent Moore Stephens business confidence survey showed a 1 percentage point increase – from 40% to 41% – in the number of respondents overall who expected finance costs to increase over the next 12 months. The number of respondents expecting finance costs to come down, meanwhile, fell by 3 percentage points to 6%, equal to the lowest figure recorded in this regard in the life of the survey. Owners were the only main category to record a fall in the numbers of respondents expecting higher finance costs – down from 41% to 38%. The figure for brokers was up from 36% to 39%, for managers from 40% to 42%, and for charterers from 28% to 35%. The number of respondents in Asia anticipating an increase in the cost of finance fell by one percentage point to 48%, while in Europe the numbers were up from 35% to 37%. In North America, meanwhile, the numbers anticipating higher finance costs fell from 33% to 29%. A number of respondents voiced concerns about the cost and availability of finance. “The banks must deal with their bad loans,” said one, “which will lead to an increase in foreclosures.” Another pointed out: “The banks have to realise their losses and accept write-offs, with tonnage of between 20 and 23 years of age scrapped and not sold on the secondhand market.” Elsewhere, it was noted: “The banks are supporting owners who are in trouble rather than letting them go.” According to Moore Stephens shipping partner Richard Greiner: “The survey also provided compelling evidence that a sea-change is set to take place in connection with shipping finance, with the industry currently attracting a significant level of interest and investment from the private equity sector. This is helping to fill the gap created by a comparative paucity of more traditional bank finance. Some of our respondents welcomed this development as a means to improve further the level of confidence in the shipping industry. Others, however, saw it as a recipe for depressing rates and delaying recovery, and even as a spur to reckless expansion plans.

“The truth is that shipping cannot, at present, fund itself through traditional bank finance alone. It has been clear for some time that shipping is heading for a multi-billion-dollar funding gap, and it is that gap which private equity is now beginning to fill, at least in part. “The interest of private equity investors in shipping has partly been fuelled by the distressed nature of the industry after a protracted downturn. There is also a reasonable expectation that, as rates rise and values recover, the returns in the next few years will be above the long-term average. This will be attractive to private equity investors, whose involvement in shipping is nevertheless expected to be comparatively short-term by shipping industry standards. But that involvement is already under way, and there is a clear opportunity for shipping to gain access to a type of funding with which it may be unfamiliar, but which could be used to help develop business in a sustainable way. “One issue which was largely noticeable by its absence from the comments of the respondents to the survey was the cost of impending regulation. This may be because the cost of complying with the likes of the Ballast Water Management (BWM) Convention and the proposed new regulations governing emissions control are as yet unquantifiable. This, however, has not stopped people from quantifying them, with one leading shipowner recently estimating that it will cost the industry $80 billion to achieve BWM compliance. “There are two main issues here. Firstly, where will shipowners find the money? Secondly, how will this expenditure be accounted for? Watch this space.” Stable outlook for Norddeutsche Landesbank Despite the continuing difficult situation in the international shipping markets, Norddeutsche Landesbank’s (NordLB) financing portfolio has remained very stable, the company said when announcing its 2013 full year results. Most of the portfolio can be classified as “performing loans”, while only a small number of ships are unemployed. Thanks to their low average age, the financed ships have a long remaining useful life with a Summer 2014 – 13


Finance

corresponding earnings potential. Despite the crisis, NordLB continues to take on new ship financing business, although it is only doing so on a very selective basis and with a heavy focus on relative weight analyses-friendly business. In particular, ship financing is being provided for business not related to traditional commercial shipping segments, such as offshore platforms, cruise ships and liquefied petroleum gas tankers. “Our shipping portfolio is the subject of constant close assessment and analysis,” explained Dunkel. “We also monitor market developments closely. The market has not yet started to recover. However, we expect to see signs of recovery in some segments from 2015 on. The recovery will initially be seen in the market for container ships, product tankers and multi-purpose ships, and later for bulkers and crude oil tankers. However, a differentiated view of the developments in the segments is necessary. Overall, it remains highly uncertain how the shipping markets will develop.” NordLB has made significant loan loss provisions for risks in the area of ship financing in recent years. As at 31 December 2013, €1.21 billion was put aside for specific valuation allowances. These provided risk cover for specific shipping exposures. NordLB has also put aside general loan loss provisions of €370 million to act as a risk buffer. The bank’s risk cover therefore totals €1.58 billion. While ship financing still faces major challenges as a result of the crisis, all of NordLB’s other business segments performed very successfully in 2013 and more than compensated for the negative effect of the crisis in the shipping sector, the company added.

Norton Rose Fulbright sees the way ahead According to global legal practice Norton Rose Fulbright’s fifth ‘The Way Ahead’ transport survey, which came out earlier this year, the shipping sector is anticipating a recovery. Two-thirds (66%) of respondents from the global shipping sector expect freights to rise, and almost half (45%) expect the allocation of available funds to investment rather than operating costs to increase. 14 – Summer 2014

The survey report, entitled ‘Where Next?’ revealed that 48% believe new opportunities are emerging for shipping, with investment in additional vessels seen as the most popular investment opportunity. China is viewed as the market offering the greatest investment opportunities, cited by 18% of respondents, followed by North America (13%) and Western Europe (12%). Respondents are also anticipating further consolidation and new investors entering the shipping sector. Almost a quarter (24%) believe that the most significant change in the participants in the shipping sector will be the increased dominance of larger owner-operators and a further 24% anticipate an increase in joint ventures, alliances and pooling activity. More than one-fifth (22%) believe alternative sources of funding will bring new players into the sector. The survey also suggests that shipping is now drawing on a wider range of sources of funding. Just one-fifth (21%) believe bank debt will be their primary source of funding for the next two years, followed by 19% who anticipate it will come from shareholders, 18% from private equity and 16% from the capital markets. While 66% of respondents believe that current market conditions are positive for their business, the shipping sector is less optimistic than aviation (75%) and rail (81%). The availability of funding is a concern. Just 21% of respondents were satisfied with their current access to funding, and the sector would welcome a more beneficial view of asset values for risk weighting purposes, with 23% of respondents believing this would help increase funding for their sector. Just 6% believe that investing in their workforce would be the investment opportunity most advantageous to their business, but 13% highlight a lack of suitably qualified people as hampering the future efficiency of the sector. Harry Theochari, global head of transport at Norton Rose Fulbright, commented: “New and exciting opportunities are opening up for the shipping sector and it is encouraging to see the sector planning

for recovery, albeit more cautiously than the aviation and rail sectors. China, which has stated publicly its ambition to create the world’s largest maritime centre, is seen as a key market, and the sector is looking also at a diverse range of markets for growth.” “However, overcapacity is an issue and it remains to be seen whether enthusiasm for investment in new vessels could create the overcapacity issues we have seen in the past.” According to Philip Roche, co-head of shipping: “The impact of the global financial crisis has caused a great deal of pain for shipping, but there are now real signs that the industry is beginning to rally. Funding and overcapacity are seen as key issues, but the shipping sector also faces wider-ranging challenges, such as the need for investment in the skills and size of its workforce to ensure that there are enough suitability qualified people to support the safe growth of the sector and the increasing environmental regulation of shipping which will continue to require new solutions and funding.” Simon Hartley, co-head of shipping, added: “The reduction in the availability of traditional forms of funding as a result of the economic downturn has meant that shipping is now drawing on a wider range of financing, which is bringing new blood into the sector. The availability of finance will be crucial for shipping to take advantage of improved sentiment and opportunities for growth.” Below: Harry Theochari, global head of transport at Norton Rose Fulbright


Markets

Talking up the market

Confidence levels have grown in recent months, but all the sectors still have challenges to face

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verall confidence levels in the shipping industry rose to their highest level for almost six years in the three-month period to February 2014, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. The survey showed there was an unchanged expectation of higher rates in the tanker trades, but a higher level of optimism with regard to rate increases in the dry bulk and container ship sectors. The number of respondents overall who expressed an expectation of higher rates in the tanker sector over the next 12 months was static at 43%, which remains the highest figure since May 2011. Charterers led the way, with 50% anticipating higher rates, as opposed to 36% last time. Managers’ expectations in this regard were up by 6 percentage point to 43%, while owners’ expectations were unchanged from last time at 43%. Meanwhile, 36% of brokers (as opposed to 40% last time) thought that tanker rates were likely to go up over the coming year. Geographically, the prospects for increased tanker rates were deemed higher this time by respondents in Europe (up from 40% to 43%). But they were lower in Asia (down from 46% to 43%) and in North America, where there was a 62 percentagepoint fall to 21%. One respondent maintained: “The tanker market is still suffering from over-tonnaging,” while another said: “Demand for newbuild tankers will be maintained as the effect of the phase-out of older, single-hull vessels is felt.” Elsewhere, it was noted: “We are confident that consolidation in the tanker market will positively influence the dirty and clean petroleum products trades.” In the dry bulk sector, meanwhile, there was a two percentagepoint increase, to 58%, in the overall numbers of those anticipating rate increases. This is the highest figure recorded in the life of the survey to date. Charterers, up by 29 percentage points to a survey high of 76%, led the way, followed by owners, up one percentage point to 59%, another all-time high. The expectations of managers, however, suffered a 3 percentage-point fall to 57%.

Expectations of higher dry bulk rates over the next 12 months were down in Asia (from 63% to 49%) and in North America (from 64% to 47%). But they were up in Europe by 9 percentage points to 64%. “After a long period of imbalance between supply and demand in the dry bulk trades, the number of new deliveries for 2014 is rather small, and demand should show healthy, positive signs. 2015 also looks good,” one respondent said. Another remarked, “Although rates are reasonable at the moment, this is mainly due to the lack of tonnage caused by wave after wave of bad weather disrupting shipping. Charterers may believe that owners are doing well, but there are a good number of owners whose fleets suffered during December and January, and finances are going to be strained.” In the containership market, meanwhile, the numbers expecting rates to increase over the coming 12 months was up by four percentage points to 34%. Charterers, up from 30% to 50%, led the way in this regard. Owners’ expectations were also up, by four percentage points on last time to 34%, while optimism in this regard on the part of brokers rose from 29% to 36%, and that of managers from 30% to 33%. Geographically, expectations of improved container ship rates were up by 2 percentage points in Asia to 38%, and by 4 percentage points in Europe to 31%. But they were down in North America, from 44% to 27%. Moore Stephens’ shipping partner, Richard Greiner, says: “Six years is a long time in shipping. Indeed, based on empirical evidence, it is long enough to qualify as a cycle in what is an historically cyclical industry. It is perhaps too soon to say that we have reached the end of the most recent downward cycle, but it seems that the worst may be over. This latest survey finds confidence in shipping at its highest level since 2008, with genuine prospects for further improvement over the next 12 to 18 months. “The outlook in all the major freight markets is brighter than at any time in recent memory, not least because some of the fears about over-tonnaging have been eased by increased scrapping and by a more pragmatic approach, albeit one dictated by necessity, to business expansion. Despite continuing difficulties Summer 2014 – 15


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in certain parts of the world, some of the volatility has been taken out of the global economic and political crises which have characterised the passage of the past few years. That is good for trade and good for shipping.”

Moody’s outlook Moody’s Investors Service has revised for the first time since June 2011 its outlook for the global shipping industry to stable from negative. “The revision reflects our expectation that the global industry’s aggregate EBITDA will rise by mid-single digits in percentage terms year-over-year in 2014, in line with our -5% to 10% growth range for a stable outlook,” says Moody’s analyst Mariko Semetko. “And, while overcapacity remains a concern, we believe industry conditions are at a trough and that the supplydemand gap will not worsen materially,” says Semetko. “In this environment, we expect the supply of vessels will exceed demand by no more than 2%, or that demand will exceed supply by up to 2%,” says Semetko. Semetko was commenting on the release of a Moody’s report entitled ‘Change to Stable Outlook for Shipping Sector Reflects EBITDA Growth’. As indicated, the industry outlook had been negative since June 2011. The report further notes that cost reductions – including the effects of lower bunker prices, as well as the application of slower steaming speeds and efficiency savings – have driven the growth in EBITDA. At the same time, market conditions remain tepid, but are not deteriorating, with freight rates for the dry-bulk segment showing some improvement but those for the container segment remaining under pressure. The sector is also saving on costs through postponing and cancelling deliveries of new vessels, scrapping the oldest and most inefficient vessels, and idling vessels. Moody’s would consider changing the outlook back to negative should it see signs that the supply-demand gap is likely to widen such that supply exceeds demand by more than 2%. Moody’s could also return the outlook to 16 – Summer 2014

In this environment, we expect the supply of vessels will exceed demand by no more than 2%, or that demand will exceed supply by up to 2% negative if it sees signs that the industry’s aggregate EBITDA will decline by over 5%, the ratings agency says. At the same time, it would consider a positive outlook if the amount of vessel oversupply declines materially and if the industry’s aggregate EBITDA growth exceeds 10%.

Drewry on dry bulk Drewry’s latest ‘Dry Bulk Forecaster’ saw freight rates on most routes decline in 2014’s first quarter as the previous quarter’s tonnage supply crunch eased out. The fourth quarter of 2013 proved to be an exception as rates surged despite modest demand on account of a tonnage supply crisis resulting from bankruptcyrelated issues with some dry bulk shipowners, the company says. The operating fleet, having contracted in the fourth quarter of 2013, regained its lost ground as vessels, which were unavailable due to bankruptcy-related issues, returned to service in the first quarter of 2014. The protracted low earnings for past few years have resulted in financial distress for many owners. “Some of them, such as TMT, STX and Excel, got trapped into earnings deadlock and were forced to file for Chapter 11 bankruptcy protection. The legal muddle resulting out of bankruptcy-related issues forced charterers to shy away from hiring these vessels, and the unavailability of many dry bulk vessels created a shortterm supply crunch in the market, which helped rates increase,” Drewry says. “Whilst the first quarter of this year has seen demand pick up to new highs, rates could go down – as vessels from these distressed owners become available for chartering, supply will go up once again putting pressure on freight rates.

Despite the short term pressure, the dry bulk market is expected to improve by the last quarter of this year as global demand improves further and increase in overall supply slows down.” Drewry’s ‘1Q14 Container Forecaster’ report highlights that the industry remains in an extended down cycle. This is being accentuated and extended by the constant delivery of new ships. The global cascade is now hurting the balance of north/south trades. Some of these trade routes have also not lived up to expectations in terms of cargo flows, and the sharp influx of many new ships of at least 8,000 teu has resulted in significant declines in spot freight rates, particularly on the Asia to East Coast South America trade. On the one hand, bigger ships may be delivering carriers the lower unit costs they seek, but the supply/demand imbalance coupled with the desire by most operators to protect their market share is a toxic mix for overall profitability. This is why all focus is now on reducing costs, and Maersk Line remains the “best in class”. “Drewry Maritime Research is forecasting 5.7% global supply growth for 2014, followed by 6.7% next year, with the emphasis on the delivery of 115 more ULCVs and a large number of ships in the 8,000-10,000 teu category. The order book’s momentum has not stopped and outside equity is fuelling this. We know NYK will confirm an order soon and Cosco has now re-entered the fray. CMA CGM’s decision to upgrade some of its ships to the 18,000 teu level may also instigate another injection of capacity. “For this year, we are forecasting global demand growth of just over 4%, but we do not see any real opportunity for the industry to recover and draw breath until


Markets

2016, and this is still dependent on what happens with the orderbook. Although scrapping rates are at record levels, the delivery profile in the next 24 months will continue to cause damage and carriers will have little if any long-term success with their constant general rate increase initiatives. On the contracting side, we also hear anecdotally that many contracts in the core east-west trades have been signed at the same level as in 2013 or, in many cases, significantly lower,” Drewry said in its report. “Multiple levers are being used by carriers to address the oversupply to varying degrees of success – void sailings, scrapping, idling vessels, slow steaming and new operational alliances and mergers. These alone are not enough, since freight rates are increasingly being dictated by carrier behaviour and psychology, rather than the fundamentals.” Neil Dekker, Drewry’s head of container research, stated: “Two major fights will continue for the carriers this year – to win contract and spot business. The larger battle will be waged in the spot market arena, which suggests that rate volatility will continue for the time being.”

Norden results Norden announced its first quarter results EBITDA as expected at $8 million (Q1 2013: $10 million). The heavy decrease in the dry cargo market has continued into the second quarter with unexpected magnitude, but improvement is expected in the second half-year, the company said. It described the MR market as “disappointing” but added there was a surprisingly strong Handysize market in tankers. Commenting on the results, Carsten Mortensen, president and chief executive of Norden, said: “As expected, the first quarter saw challenging market conditions, not least in dry cargo, where the Atlantic market more or less collapsed. This collapse has also had a significant impact on the second quarter, which we were otherwise expecting to contribute positively to operating earnings. Therefore, we now take the consequence and make a downward adjustment of the expectations for the results for the year. However, this does not change the fact that we are still expecting an improvement of the markets

in the second half-year and that I am pleased with the continued increase in ship values, which are now $175 million above carrying amounts.” Teekay Tankers reported adjusted net income attributable to shareholders of Teekay Tankers of $16.9 million, or $0.20 per share, for the quarter ended 31 March 2014, compared with adjusted net loss attributable to shareholders of Teekay Tankers of $3.5 million, or $0.04 per share, for the same period in the previous year. The increase in adjusted net income attributable to shareholders of Teekay Tankers is primarily owing to stronger spot rates in the first quarter of 2014 as compared with the same period in the previous year and an increase in interest income recognised from the company’s investment in term loans, the company said. “During the first quarter of 2014, Teekay Tankers realised its highest quarterly earnings in its Suezmax and Aframax crude spot tanker segments since 2010, mainly as a result of higher crude oil imports into China, an increase in long-haul crude oil movements from the Atlantic basin to Asia, and strong seasonal factors,” commented Bruce Chan , Teekay Tankers’ chief executive officer. “While rates have since softened from the fiveyear high levels experienced in January 2014 and are expected to remain soft as we enter the seasonally weaker northern hemisphere summer months, we believe that stronger oil demand, limited growth in the crude tanker fleet and improving economic conditions will continue to support a general firming of average spot tanker rates starting in 2014.” Teekay’s analysis of the market going forward said crude tanker spot rates strengthened significantly during the first quarter of 2014, with Aframax and Suezmax rates achieving their highest quarterly averages since the fourth quarter of 2008 and the second quarter of 2010, respectively. The increase in tanker rates was primarily owing to a combination of stronger fundamentals and seasonal factors, Teekay said, particularly during January and February of 2014. Record high crude oil imports by China of 6.6 million barrels per day during January 2014, and a greater volume of long-haul

Record high crude oil imports by China of 6.6 million barrels per day during January 2014 Asian crude imports from West Africa, led to an increase in crude tanker tonnemile demand during the early part of the first quarter. Seasonal weather delays, particularly in the Atlantic basin, further tightened the freight market and led to a significant spike in crude tanker rates. These strong rates dissipated during March 2014 as seasonal factors abated and Chinese crude imports slowed. This weakness has extended into the early part of the second quarter of 2014. Product tanker rates remained relatively flat during the first quarter of 2014, failing to benefit from the seasonal factors that drove up crude tanker rates. Mediumrange (MR) tanker rates declined during the quarter as the onset of seasonal refinery maintenance from March 2014 onwards led to a reduction in product exports from the US. Conversely, Long Range 2 (LR2) tanker rates gradually improved during the quarter, owing to an increase in naphtha volumes from the Middle East and the Atlantic Basin to Asia; however, rates remain below the long-term average. The world tanker fleet grew by 1.6 million deadweight tonnes (mdwt), or 0.3%, in the first quarter of 2014. A total of 3.7 mdwt of new tankers were delivered into the fleet, the lowest firstquarter delivery total since 1998, while 2.1 mdwt of tankers were scrapped. The tanker orderbook currently stands at 67  mdwt, or approximately 13% of the existing world tanker fleet. Taking into account expected slippage and scrapping, the company estimates the tanker fleet to grow by approximately 1.2% in 2014, the lowest level of tanker fleet growth since 2001, and by approximately 1.8% in 2015. Summer 2014 – 17


TRADING Below: FIS managing director John Banaszkiewicz

Dry cargo FFAs show stellar growth, according to FIS

Return to life

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raded volumes in the dry cargo forward freight agreement (FFA) market have roared back to life as the physical market has strengthened, bolstering hopes that the sector has finally shaken off the worst of the downturn, says freight and commodity broker Freight Investor Services (FIS). Higher volumes in the paper freight market reflect growing confidence that the physical market has recovered to something like normal levels after five years of depressed earnings. They also illustrate the continued need for owners and operators to hedge their freight exposure, as the increases in Q1 2014 have surprised even the most seasoned market watchers. In the first quarter of 2014, cleared volumes in the dry freight market increased 61% overall, to 321,004 lots from 199,402 lots traded in the same period of 2013. Capesize volumes have increased 85% to 173,201 lots, Panamax by 29% to 109,883 lots, Supramax by 83% to 35,790 lots and Handysize by 89% to 2,130 lots. Total freight options volumes increased 5% in the same period. 18 – Summer 2014

FIS managing director John Banaszkiewicz comments: “Dry bulk freight has been an undervalued market for so long that it was overdue for a recovery in both sentiment and in terms of supply/demand balance. Paper has come back into its own as a means to hedge freight risk and for traders who are looking to take advantage of the increased volatility.” The physical Capesize market has recovered during the first quarter as additional volumes of iron ore have entered the market. Projections for 2014 are for an increase  of 110 million tonnes of additional volume, bringing the total seaborne volume to over 1.3  billion tonnes. As sentiment has improved, operators and traders who had been able to take physical assets at low rates have once again preferred the flexibility of the paper market. Banaszkiewicz adds: “The increase in rates in the first quarter has been much higher than most people expected and has meant that a lot of short players have had to change their strategies and re-engage with the paper market in a much more concerted way. The increase in index pricing and use of shorter term is reflected in a market that is subject to much faster changes. The mood and the market have changed for good – we are in for an interesting year.” Alongside the increased volumes, a greater proportion of trading is being concluded between the large investment funds, operators and utilities, with the banks taking more of a back seat in contrast to their leading role pre-2008. Another sign of long-term change in the commodity derivatives market is the growth in trading of iron ore futures. Figures from the Dalian Commodity Exchange showed that a record of 230  million tonnes, a quarter of China’s total import volume, was traded on the exchange in a single week. Outside China, cleared iron ore swaps volumes have grown 82% in the year to date to 90.1 million tonnes.


TRADING

ASEAN Hot Rolled Steel FIS was closely involved during the first week’s trading on the new Association of Southeast Asian Nations (ASEAN) hot rolled coil (HRC) steel contract. FIS has concluded trades against the Steel Index’s ASEAN HRC index between Asian and European counterparts with clearing provided by SGX. Second only to oil as a global traded commodity, world steel production is forecast to increase 3.6% (to 1.64 billion tonnes) in 2014, according to a recent Financial Times poll of 15 steel analysts. Of this, Asia will account for 1.1 billion or 68% of this growth. As one of the originators of the virtual steel mill concept, FIS has encouraged the development of a tool that enables players to trade and hedge Chinese forward steel prices alongside the established market in iron ore. Andrew Cullen, steel broker at FIS, said: “The launch of the ASEAN HRC contract is a milestone for a market in which China, India and ASEAN nations account for the majority of production and consumption. FIS has leveraged its expertise in the ferrous market to enable clients to take advantage of an Asiafocused steel price risk management tool.” Hong Kong-based Concord Fortune Resource Pte Ltd was among the first to trade the new contract. General manager Li Meng commented: “As an active player in the ferrous derivatives market, we are pleased to see the launch of a new steel contract, especially for a product that reflects the price for the export market. The ASEAN HRC contract is set to become an important addition to our current portfolio in the ferrous commodities value chain.” Levmet is active in all paper contracts linked to the steel markets. Director Antonio Novi added: “As a strong advocate of hedging in the steel industry, Levmet is proud to be a party to the first ASEAN HRC trades. We fully support the launch of this product for its ability to effectively hedge finished steel products and we hope that it will further encourage and develop the use of hedging across the steel industry.” Steel coils are the most widely used product in the steel industry, accounting for around 40% of the 1.4 billion tonnes

of steel consumed annually. HRC is used mainly to produce sheet metal or simple cross sections, such as structural shapes, structural profiles, building beams, rails and columns. FIS has also introduced cash settled swaps with settlement against the Urea (Prill) fob China (metric tonne) price (Fertilizer Index). Trading commenced on 20 February, with trades concluded in the $314-$320 range for the March 2014 period. The price covers prilled urea shipped from a range of ports in China. Reported prices are based on actual fob trades concluded, or may be basis best estimates on netbacks when no new export sales are made in a given week. Prices are reported basis tax paid. The Nordic Exchange, Oslo Børs, and global clearing house LCH.Clearnet announced in March that LCH.Clearnet is now clearing listed securities on Oslo Børs and Oslo Axess. Through its EquityClear service, LCH.Clearnet now provides clearing for equities, including exchange-traded funds, listed on Oslo Børs and Oslo Axess on an interoperable basis with incumbent clearing house Oslo Clearing. Alberto Pravettoni, global head of repurchase agreements and exchanges at LCH.Clearnet, said: “This agreement with Oslo Børs is another example of our commitment to interoperability across the European equities market. Clearing members will benefit from margin offsets, reduced settlement cost through cross exchange netting and access to our first-class risk management and highly competitive pricing structure.” Tom Kristoffersen, senior vicepresident, client relations, secondary

Asia will account for 1.1 billion or 68% of this growth

markets, at Oslo Børs, said: “Oslo Børs recognises that many market participants want to see consolidation in European equities clearing and to be able to choose the clearing house that best meets their requirements. We are delighted that LCH.Clearnet and Oslo Clearing will be working together for the benefit of our customers.”

Transfer of title Law firm Holman Fenwick Willan (HFW) has highlighted the issue of the stage at which the title passes when trading bulk commodities. “English law generally allows sophisticated parties to commercial contracts the freedom to agree on key terms. However, in some limited instances, statutory provisions can override the parties’ express contractual intentions: one example of this is in the context of passing of title to parcels of goods which form part of a larger bulk,” HFW explains in its online Commodities Bulletin. “For contracts where the Sale of Goods Act 1979 (as amended) (the Act) applies, commodities traders buying or selling parcels of goods which form part of a larger bulk should bear in mind the impact of sections 16 and 20A of the Act on the point at which title to those goods can pass. It can have an unexpected effect.” “Commodities traders should bear in mind the following potential problems if, under the provisions of the Act, title in fact passes at a different time to that set out in the relevant sales contract: •

Onsales. A buyer cannot on-sell if he does not yet have title himself. This could affect chain contracts.

Jurisdiction. If property passes at a later time than expected, for example on discharge or exhaustion, title may pass in an unforeseen jurisdiction, giving rise to unexpected tax exposure, trading licence/permit requirements etc.

Insurance. The incorrect party may have insurance coverage at the time of an incident.” Summer 2014 – 19


Transit

In alliance There have been a number of changes in trade patterns in recent months

M

aersk Line, Mediterranean Shipping Company and CMA CGM’s P3 alliance startup has been put back to the autumn at the earliest. The P3 alliance on East-West trades, was originally set to start this summer, but has had to undergo regulatory clearance in Europe, Asia and the US. The aim is to improve and optimise operations and service offerings. The P3 Network will operate on three trade lanes: AsiaEurope, Trans-Pacific and Trans-Atlantic. While the P3 Network vessels will be operated independently by a joint vessel operating centre, the three lines will continue to have fully independent sales, marketing and customer service functions. The P3 Network will provide customers with more stable, frequent and flexible services, the companies believe Each of the lines will offer more weekly sailings in their combined network than they do individually. As an example, the P3 Network plans to offer eight weekly sailings between Asia and Northern Europe. In addition, the P3 Network will offer more direct ports of call. The improved network is expected to reduce disruptions for customers caused by cancelled sailings. In order to provide customers with a consistent service offering across the network, the lines will establish an independent joint vessel operating centre. Declining volume growth and over-capacity in recent years have underlined the need to improve operations and efficiency in the industry. This has prompted the creation of other operational alliances such as G6 and CKYH. Using the P3 Network, the lines expect to be able improve their efficiency through better use of vessel capacity. The P3 network is not without its critics, who believe competition will be affected and other carriers will be forced into larger alliances. 20 – Summer 2014

WA1 MOL, Evergreen Line and COSCO Container Lines have launched a weekly direct service from Asia to West Africa, branded the ‘WA1’. The new express link will further enhance each company’s service network to cover strategic markets in Africa to meet increasingly diverse commercial requirements, the companies believe. The jointly operated 12-vessel service commenced from Shanghai on 2 June 2014, with six of the ships being operated by MOL, four by Evergreen Line and two by COSCON. The rotation will be: Shanghai, Ningbo, Hong Kong, Nansha, Lagos Apapa, Tema, Lomé, Abidjan, Singapore, Shanghai.

Above: Evergreen Line has launched a weekly direct service from Asia to West Africa


Transit

ZIM changes

ICTSI deal

ZIM has announced a new structure of Med-US cross-Atlantic services, with a view to enhancing its customer service with improved port coverage and transit time. The new structure, in cooperation with Hapag Lloyd, is planned to commence in the third quarter, subject to FMC approval. The new, enhanced structure, connecting the Mediterranean with the US East Coast, Gulf and West Coast, includes the following: • ZIM’s flagship service, ZIM Container Service Atlantic (ZCA), covering the East and West Med to the US East Coast, now with expanded scope, better suited to customers’ needs. Final rotation details to be published. • Med-Gulf Express (MGX), connecting the Med to the US Gulf, Central America and Caribbean, with a new call at Kingston, ZIM’s hub in the Caribbean. Rotation: Cagliari, Salerno, Livorno, Genoa, Barcelona, Valencia, Kingston, Vera Cruz, Altamira, Houston, New Orleans, Cagliari • Med-Pacific Service (MPS) connecting the Med and the US West Coat. Rotation: Tangier, Cagliari, Livorno, Genoa, Fos, Barcelona, Valencia, Los Angeles, Oakland, Tangier.

International Container Terminal Services Inc (ICTSI) and CMA Terminals, a 100 per cent subsidiary of the CMA CGM Group, have announced their future cooperation in Nigeria by signing an agreement for ICTSI to sell 25 per cent of the container terminal in Nigeria, Lekki International Container Terminal Services LFTZ Enterprise (LICTSLE), to CMA Terminals. This will mean that a further major milestone has been achieved since the signing of the sub-concession for the terminal in 2012. LICTSLE will be providing a solution to the current congestion in the local market in Nigeria, and overall will serve as a regional transshipment hub in West Africa, allowing the countries connected with the hub to grow sustainably. With a straight-line quay of 1200m and a yard area of 66 hectares, this modern facility, which is expected to be fully operational in 2017, provides the market with an annual capacity of 2.5 million teu. This capacity will serve the Nigerian market in the long run, and

will ease capacity pressure. The terminal is designed to allow for further capacity growth exceeding the initial 2.5 million teu, the companies said. The advantageous location, 60km east of metropolitan Lagos, will be combined with state-of-the-art facilities including 14 post-Panamax quay cranes. Farid Salem, CMA CGM Group executive officer, declares: “We are very pleased with this cooperation with ICTSI. This major future investment is undoubtedly a great opportunity for the CMA CGM Group through its dedicated subsidiary CMA Terminals, to further increase its presence in Nigeria, a country in continuous development.” Jens Floe, ICTSI senior vice-president responsible for the Africa region, says: “The involvement of the CMA CGM Group shows the interest in West Africa and the confidence there is in the Nigerian market in the product we provide. We will strive to become the supplier of choice in West Africa as the principal transshipment hub, giving our customers a sustainable competitive advantage in the market range.”

Hapag Lloyd’s JSJ service Hapag-Lloyd has launched the new Japan-Singapore-Jakarta service (JSJ), which started on 12 March from Singapore. The new service will further enhance Hapag-Lloyd’s service network between Japan and South East Asia, and offer fast and reliable transit between Japan, Singapore and Jakarta. The JSJ service will be jointly operated by Hapag-Lloyd, NYK and “K” Line with four vessels with a nominal capacity of 4,200 teu each. Hapag-Lloyd will deploy one vessel on this service. The rotation will be: Tokyo, Yokohama, Nagoya, Kobe, Singapore, Jakarta, Singapore, Ho Chi Minh/Cai Mep*, Tokyo (*first calls will be at Cai Mep, but later this will be replaced by a Ho Chi Minh call). Summer 2014 – 21


Transit

NileDutch agreement NileDutch and CMA CGM have concluded a vessel-sharing agreement (VSA) for services from South America to West Africa. The vessel-sharing agreement will enable both companies to offer their customers a better and more efficient service. Initially, the service will operate using 2,500 teu NileDutch vessels. As of August, it will use two NileDutch and two CMA CGM vessels, each with a capacity of 4,250 teu. This service, operating every two weeks, will provide a valuable connection between these regions with their rapidly developing economies. Ports of call in South America will include Buenos Aires, Rio Grande, Itajai, Santos and Rio de Janeiro. Ports of call in West Africa include Lomé, Pointe Noire and Luanda.

Red Sea service In preparation for the coming peak season, Evergreen Line is implementing service enhancements for the Red Sea market. The carrier will adjust the port rotation of its Far East-Red Sea Service (FRS) and launch a new feeder loop. In addition, the line intends to further strengthen its Red Sea service network via slot exchange arrangements with a strategic partner. In April, the eighth ship was deployed on the FRS service to add a new call at Aden. The adjustment enables a direct service from Central China, Southern China and South East Asia to Yemen. Employing one vessel of 1,500 teu, Evergreen Line also launched a weekly Intra Red Sea (IRS) feeder service in early May. The line will use this new IRS loop for a slot exchange arrangement with X-Press, adding a service to Hodeidah, Yemen and Djibouti in East Africa via transshipment in Jeddah.

CKYHE alliance Evergreen has joined the grouping of COSCO, “K” Line, Yangming and Hanjin in a shipping alliance. To be operational only on the trades between Asia and Europe, including the Mediterranean region, it will be called the CKYHE Alliance.

22 – Summer 2014

The members of CKYHE have agreed to continuously review services on the Asia-Northern Europe and Asia-Mediterranean trades in order to optimise their efficiency and to enhance their service quality in terms of network coverage. The lines’ customers will benefit from a better quality of service in terms of transit times and service frequency.

Operational efficiencies will also strengthen the Alliance members’ effective environmental stewardship. The lines have a commitment to cleaner shipping, which they understand their customers value highly. The Alliance will continue to pursue measures to minimise bunker consumption via ‘eco-slow steaming’ and to reduce CO2 emissions.

The lines’ customers will benefit from a better quality of service in terms of transit times and service frequency


Costs

Cost control Shipping consultant Drewry has launched a club to benchmark container shipping costs

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ore shippers are benchmarking their container shipping costs to ensure that they secure the most favourable freight rates possible. A fast-growing number of major US, Asia and Europe-based international companies, including fast-moving consumer goods (FMCG), industrial and chemicals multinationals and a top-three US retailer, have joined Drewry’s recently launched Benchmarking Club. The club provides members the opportunity to benchmark their shipping costs against their peers’ and so aid their freight procurement processes. Member organisations provide their contract rates confidentially to Drewry and in exchange these are aggregated with other members’ rates to provide benchmark contract rates based on an average of the submitted rates. Such cost benchmarking clubs are already common in the fields of road transport, raw materials and energy costs, and are now developing in more specialised areas like ocean transport. “Drewry’s Benchmarking Club enables us to ensure that we secure competitive freight rates with carriers and identify lanes where we could possibly further lower our costs,” said Scott Larson, vice-president of global logistics and customs at US retailer The Bon-Ton Stores Inc and a member of Drewry’s Benchmarking Club. “We selected Drewry’s Benchmarking Club to benchmark our ocean rates with other retail industry leaders and to gain insight into container shipping market trends, forecasts and best practices through webinars provided to club members by Drewry.” Contract rate information held by Drewry’s Benchmarking Club is confidential and available only to members, who are limited to importers and exporters and exclude freight forwarders or non-vessel-operating common carriers (NVOCCs). Drewry will be publishing an index of contract rates across multiple trades on a quarterly basis to improve visibility of trends (but not actual rates) in the contract market. “Presently, there is plenty of visibility on spot rates, via Drewry’s Container Freight Rate Insight and World Container Index for example, but very little on contract rates,” said Philip Damas, director of Drewry Supply Chain Advisors. “Drewry’s Benchmarking Club will also enable exporters and importers, for the first time, to know the sea freight cost advantage of large shippers relative to medium and small shippers,” he added.

Wasting energy DNV GL has recently released a report that discusses how ship managers can identify the biggest sources of useful energy that are currently being wasted on their ships “Ship operations and environmental legislation have become

more complex, and it has become increasingly difficult to assess or even define efficiency with consistency and accuracy,” said Rune Torhaug, director, strategic research and innovation, at DNV GL. “We have therefore revisited the basic and universal laws of thermodynamics to develop a methodology based on exergy, sometimes called available energy, which is a metric for describing the maximum useful energy that can be derived from a process, component or system.” The methodology can be adjusted to suit newbuilds still in the design phase or operating ships, and it is designed to help managers make the most out of their ship energy efficiency management plans. Using both onboard measurements and the DNV GL modelling suite COSSMOS, energy losses throughout the ship including hull, propulsion power train, machinery and electrical systems are quantified and ranked. Even difficult-to-capture processes such as throttling and fluid mixing can be incorporated. The report includes an analysis of a waste heat recovery system. These complex systems can easily contain 70 components. “Through our exergy-based methodology, the true sources of useful energy losses were identified, revealing a picture far from self-evident. Subsequent optimisation in DNV COSSMOS yielded an increase in fuel savings that halved the payback time of the system,” said George Dimopoulos, senior researcher and project manager of this position paper. A second study examined the fuel pre-processing subsystem for the marine fuel cell onboard the offshore supply vessel Viking Lady. This resulted in a solution capable of a remarkable 50% reduction in exergy losses. When the main engine of an aframax tanker was analysed using operating data in combination with COSSMOS modelling, the true sources of losses were identified with greater accuracy than a traditional energy analysis, says Dimopoulos. “In fact, the standard energy analysis failed to identify the turbocharger as being the second largest contributor to exergy loss.” With this ‘common currency’ for efficiency, DNV GL provides a way of energy management that will work for all ships, and all system and components that convert energy on board. It thus offers ship managers an unparalleled way of prioritising investment in technology alternatives or new operational strategies. COSSMOS is a computer platform that models, simulates and optimises complex and integrated ship machinery systems with respect to energy efficiency, emissions, costs and safety. With COSSMOS, DNV GL is able to analyse alternative configurations in new vessels, perform assessment and optimisation for ships in operation, and evaluate the potential of new technologies. Summer 2014 – 23


Costs

ECO Assistant DNV GL has been celebrating five years of ECO Assistant, its award-winning trim and fuel efficiency tool. One of DNV GL’s most widely used software products, ECO Assistant has improved the profitability and sustainability of over 500 vessels across all ship types, with verified fuel savings. Over only half a decade in operation, ECO Assistant has already saved in excess of $150 million in fuel costs, with a resulting reduction in CO2 emissions of 700,000 metric tonnes – the amount of carbon removed from the atmosphere by over 100,000 acres of forest over the same period. Of all the ‘quick fixes’ to optimise energy efficiency on existing vessels, or newbuildings, trim optimisation tools can have the most immediate impact on the bottom line profit of an existing vessel. An easy refit and payback times of, in most cases, only a few months can lead to significant savings over the life of a vessel. “When we first presented the potential gains from using ECO Assistant, the initial response was sceptical. Not many believed that the savings we predicted could be true,” says Heikki Hansen, team leader,

fluid engineering, at DNV GL. “Within the first year, however, we saw that as we demonstrated the system, its ease of implementation and the demonstrable results we could produce grabbed customer interest – so much so that ECO Assistant very quickly became one of our most popular solutions.” “One of the advantages of ECO Assistant is that we are not reliant on logged operational data to calculate the optimum trim, unlike most of the other trim tools,” explains Frank Hennig, product manager, ECO Solutions, at DNV GL. “Instead, we run hundreds, even thousands, of high-fidelity computational fluid dynamics (CFD) simulations, something that simply cannot be replicated by model tests and which avoids the imprecision of extrapolating from real-world data.” ECO Assistant’s strength lies in not only giving the optimum trim under everyday conditions but being able to modulate the advised trim to deal with off-design and unfamiliar vessel states. These results, which can improve upon crewing best practice by 3% to 4% or more, are also easily accessible onshore and can be used for fleet benchmarking.

Since its introduction, ECO Assistant has challenged many long established practices for setting the trim of a vessel, replacing rules of thumb with verified data. “Perhaps the most interesting discovery we have made is the positive effect of additional ballast water. At first we thought this must be an error, but it has been proved by results from vessels in service and subsequently implemented by several companies,” says Erik Heller, DNV GL Expert Operations. “Simply by taking on an additional 10,000 tons of ballast water, large container ships can save 5%, cutting their fuel consumption by 4 tons per day.” DNV GL uses one of shipping’s most powerful computing clusters, bringing some 8,000 cores in parallel and nearly 70 teraflops of computing capacity to bear on these “numerical sea trials”. The attending simulation software is also regarded as one of the best worldwide, according to international validation contests. The upgrade to ECO Assistant 4.0 added several new features, including e-learning to speed crew uptake, streamlined reporting and document preparation for regulations, loading computer integration and a fuel calculator to estimate realistic power demand and fuel consumption.

Above: ECO Assistant screenshot

24 – Summer 2014


Registries

Private equity Registries are continuing to grow, sometimes on the back of private equity funding

Above: Scott Bergeron, chief executive of the Liberian International Ship & Corporate Registry (LISCR)

T

he Liberian Registry says the entry of private equity funding into the ship finance market is helping to sustain its continued growth. Scott Bergeron, the US-based chief executive of the Liberian International Ship & Corporate Registry (LISCR), says: “Owners are ordering ships again, and there is a great deal of private equity funding entering the market, in the US and elsewhere, which is filling the shortfall created by a reduction in traditional bank finance for shipping. Liberia has the second-highest share based on market capitalisation of shipping companies listed on the US stock exchange, behind

only the US. Well-informed private equity investors recognise Liberia’s pedigree in shipping, and understand that it is a key player in the market. “The Liberian Registry continues to grow with the addition of ships from both existing and new owners. The fleet now stands at approximately 4,000 ships, aggregating 136m gt and over 207m dwt.” Bergeron continues: “We have stood by our owners during what has been a difficult five-year period, and now we are starting to see a recovery in the market.” Greek interests are playing a major role in publicly traded US companies, and figures released by the Greek Shipping Co-operation Committee show that, in deadweight terms, 17 per cent of Greek-controlled ships were registered under the Liberian flag at end-March 2014 – second only to the Greek national flag itself. This is an increase of 3.5m dwt on last year. A total of 678 Greek-controlled ships, aggregating 49.05m dwt, are currently registered with Liberia, compared with 819 vessels aggregating 76.11m dwt flying the Greek flag. Bergeron says: “Liberia and Greece share a strong maritime tradition of successful co-operation dating back 65 years to the birth of the Liberian Registry. It is a source of great satisfaction to know that Greek owners still value the efficiency, safety and responsiveness of the Liberian flag administration.” The Liberian Registry has launched a powerful, state-of-theart mobile app to enable owners, managers, operators and others to communicate and interact with the registry on a round-theclock basis. The FlagState app builds on Liberia’s commitment to provide innovative technology and services to its clients, who own, manage and operate more than 4,000 vessels worldwide. From an iPhone, iPad or an android device, users can read upto-the-minute news and developments; access a comprehensive global maritime events calendar and, with the click of a button, add events to their calendar and share upcoming events; verify the authenticity of certificates and documents for Liberianflagged ships; search Liberia’s global network of inspectors and ISM/ISPS/MLC auditors; validate seafarer credentials; submit a Maritime Labour Convention (MLC) complaint resolution form; track the daily vessel positions on an interactive world map of all Liberian-flagged ships; browse photos of Liberia’s quality fleet; and quickly access the registry’s Facebook, Twitter and LinkedIn profiles. Allison Williams, communications and research manager at LISCR, says: “The demand for instant access to important information in the shipping industry has never been greater than it is today. New technology means that there is no longer any need to be out of touch with developing news and events, Summer 2014 – 25


service and quality are within your reach

International Registries, Inc.

in affiliation with the Marshall Islands Maritime & Corporate Administrators

tel: +1 703 620 4880 | info@register-iri.com

www.register-iri.com


Registries

wherever you are in the world. Liberia is dedicated to harnessing that technology for the benefit of its clients, and the FlagState app is a perfect demonstration of its commitment in that regard.” Marshall Islands passes 100m gt International Registries Inc (IRI) and its affiliates, who provide administrative and technical support to the Republic of the Marshall Islands (RMI) Registry, are celebrating the RMI Registry passing the milestone of 100m gt at two major shipping events in China – the Asia Shipping Fortune Summit, which took place in Shanghai from 13-14 May, and the World Shipping (China) Summit, which is due to take place in Autumn 2014. “We are delighted to celebrate this landmark achievement with shipowners and other industry stakeholders in the Chinese maritime community,” said Annie Ng, head of Asia at IRI.

to working more closely with China. “We see many opportunities to develop our cultural and business ties with China in the future,” he continued. “There are many areas where our two countries can co-operate and collaborate in order to build a sustainable relationship based on our individual needs and shared economic interests,” said Loeak. The RMI Registry is the only major open registry to be included on the white lists of both the Paris and the Tokyo Memorandum of Understanding (MOU) and to have held Qualship 21 status with the United States Coast Guard for nine consecutive years. “The RMI Registry is committed to our owners and operators in China and will continue to provide strong support to this developing market,” concluded Annie Ng. The RMI Registry announced the launch of its seafarer identification (ID) card during the Cruise Lines International

We see many opportunities to develop our cultural and business ties with China in the future “Since 2011, there has been, on average, a 20% increase in the number of Chinese owners in the RMI fleet due to the shipyards and other maritime services companies in China that have expanded their global reach and influence,” she continued. The RMI Registry is the third largest in the world and now stands at over 103m gross tons, with more than 3,100 vessels. “While the RMI Registry’s largest shipowning countries include Greece, the United States, Germany and Norway, we have been very happy to see tonnage coming out of the Far East,” said Annie Ng. Reflecting on the importance of China to the government of the Republic of the Marshall Islands and the RMI Registry, the country’s president, Christopher Jorebon Loeak, said he is looking forward

Association reception at the Cruise Shipping Miami (CSM) event in March. The RMI Maritime Administrator discussed the launch of officer certificates (OCs), seafarers’ identity and record books (SIRBs) and seafarer ID cards incorporating a QR code at CSM 2013. Production of OCs and SIRBs with a QR code started in August 2013 and, in January 2014, RMI began issuing the seafarer ID card. One of the key benefits of the seafarer ID card is that it enables seafarers to carry their credentials with them at all times (shoreside and at sea). While the RMI Maritime Administrator’s website already provides for OC and SIRB verification, the scanning of the QR code provides additional verification information, including a photo of the seafarer, OC limitations and any special qualifications.

Green incentives for Isle of Man The Isle of Man Ship Registry announced earlier this year that from 1 April 2014 it was introducing new incentives for shipowners to adopt energy-efficient ship designs that reduce fuel consumption and air pollution. For qualifying vessels, there will be a 25% reduction in the cost of a Certificate of Registry for new registrations, while, for vessels already registered with the Isle of Man, there will be a 10% discount on the annual registration fee. Since the International Maritime Organization (IMO) formalised an international system for determining the energy efficiency of ships, it is now possible to compare energy efficiency across ships of different types and sizes. This system forms the basis of the Isle of Man’s ‘green ship’ incentive scheme. Dick Welsh, director of the Isle of Man Ship Registry, commented: “Shipping is a global industry and requires an international solution to the problem of air pollution caused by ships. It is fair to say that the shipping industry is the first to tackle emissions on a global scale. “This ‘green shipping’ initiative is an important part of our drive to reduce emissions from ships and is welcomed by our clients. We are delighted to be able to reward owners and operators who employ ship efficiency measures ahead of the international implementation dates. “The Isle of Man is proactive in pursuing green technologies and is establishing a reputation as a jurisdiction to which ‘clean tech’ businesses are choosing to relocate.” In order to qualify for the reduction in fees, shipowners must submit a copy of the International Energy Efficiency (IEE) Certificate or pre-verification report to demonstrate that the ship’s attained energy efficiency design index (EEDI) reduction factor exceeds the IMO’s EEDI reduction factor requirements for that particular vessel ahead of the IMO’s implementation dates. The Isle of Man Registry is set to showcase its offering during the Maritime Logistics and Energy event, which is being held in Liverpool in June. Summer 2014 – 27


Classification

Talking technology Classification societies have had to respond to the challenges of new regulation as environmental requirements tighten

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NV GL has responded to regulations mandating the use in US waters of environmentally friendly and quickly degradable lubricants in any interfaces where oil can be discharged into the water with a new service designed to smooth adherence to the new requirements. The Environmentally Acceptable Lubricants (EAL) Report Service helps ship operators to meet the new rules without the need for extensive outlays and provides valuable feedback on areas of concern. The Vessel General Permit (VGP) framework, which came into effect in December 2013, stipulates that biologically degradable oils or EALs must be used at all oil-to-sea interfaces, where technically feasible. All ships with a total length of 24m or more that enter US waters must observe the new environmental standard. Numerous components in the underwater area of a ship are affected by the new rules. This includes the stern tube seal, as well as mechanical components in the propeller, bow thrusters, the rudder shaft, as well as other underwater equipment. “A number of questions arise here for ship operators,” says 28 – Summer 2014

Jörg Lampe of DNV GL’s risk and safety, systems engineering department. “Which lubricants are allowed to be used, and are there technical challenges involved in switching to them? For example, the stern tube seal, as the largest connecting piece between the propeller and stern of the ship, need not be exchanged before the next planned dry dock as this is not technically feasible.” In order to adhere to VGP 2013, proper documentation onboard is also required. DNV GL’s reporting service includes the issuing of an EAL factual statement of compliance in order to fulfil the EAL requirements of ship operators. “We have received positive feedback from the US Environmental Protection Agency and Coast Guard on our new service,” Lampe explains. “Thanks to our global expert network, we are also in the position of being able to offer an efficient and reliable service that makes it easier for ship operators to comply with the new regulations and to correctly create the reports due at the end of the year.” Additionally, DNV GL offers consulting services for sealant materials, such as those in older stern tubes still in use, for example.


Classification

Sox project for ClassNK Ship classification society ClassNK has announced that it will participate in a joint development project to install and verify the effectiveness of new sulphur oxide (SOx) scrubber technology onboard a pure car carrier (PCC) being carried out by Kawasaki Kisen Kaisha (“K” Line), Mitsubishi Heavy Industries (MHI), Mitsubishi Kakoki Kaisha (MKK) and Japan Marine United (JMU) Corporation. This joint research project is being implemented as part of “K” Line’s Drive Green Project, which aims to protect the environment and reduce CO2 emissions through the use of new maritime technology. As part of the Drive Green Project, “K” Line will install a variety of green technologies, including a new hybrid SOx scrubber system developed by MHI and MKK, on a 7,500 unit PCC being built at JMU for delivery in 2016. The vessel will be the flagship of a series of eight new PCCs currently on order by “K” Line. In addition to CO2 emissions, SOx emissions are a major concern for

shipowners and operators. Under amendments to MARPOL Annex VI, which regulate harmful emissions from ships, the International Maritime Organization (IMO) will lower the cap on sulphur emissions for vessels in emission control areas such as the Baltic and North Seas to 0.1% from 1 January 2015. MHI and MKK’s new hybrid SOx scrubber system effectively removes sulphur from the exhaust engine exhaust, making it possible for vessels to satisfy the SOx emission requirements while using heavy fuel oil, which is less expensive and more widely available than low-sulphur fuels. The new system is the first Japanese-made scrubber system to satisfy the new emission restrictions. ClassNK will oversee the installation of the new hybrid SOx scrubber system on the vessel as well as verification of its effectiveness in actual operations. For its part, ClassNK will support the safe installation and operation of the system onboard, as well as making use of data and experience gained from the research to support its certification and emission verification activities.

Through our exergy-based methodology, the true sources of useful energy losses were identified, revealing a picture far from selfevident Onboard efficiency In a new report, DNV GL has been looking at how a ship manager can identify the biggest sources of useful energy that are currently being wasted on its ships. The methodology can be adjusted to suit newbuilds in the design phase or operating ships, and it is designed to help managers make the most of their ship energy efficiency management plans. Using onboard measurements and the DNV GL modelling suite COSSMOS, energy losses throughout the ship, including hull, propulsion power train, machinery and electrical systems, are quantified and ranked. Even difficult-tocapture processes such as throttling and fluid mixing can be incorporated. “Ship operations and environmental legislation have become more complex, and it has become increasingly difficult to assess or even define efficiency with consistency and accuracy,” said Rune Torhaug, director of strategic research and innovation. “We have therefore revisited the basic and universal laws of thermodynamics to develop a methodology based on exergy, sometimes called available energy, which Summer 2014 – 29


Classification

Right: Making the most out of their ship energy efficiency management plans

is a metric for describing the maximum useful energy that can be derived from a process, component or system.” The report includes an analysis of a waste heat recovery system. These complex systems can easily contain 70 components. “Through our exergy-based methodology, the true sources of useful energy losses were identified, revealing a picture far from self-evident. Subsequent optimisation in DNV COSSMOS yielded an increase in fuel savings that halved the payback time of the system,” said George Dimopoulos, senior researcher and project manager of this position paper. A second study examined the fuel preprocessing sub-system for the marine fuel cell onboard the offshore supply vessel Viking Lady. This resulted in a solution capable of a remarkable 50 per cent reduction in exergy losses. When the main engine of an Aframax tanker was analysed using operating data in combination with COSSMOS modelling, the true sources of losses were identified with greater accuracy than a traditional energy analysis, says Dimopoulos. “In fact, the standard energy analysis failed to identify the turbocharger as being the second largest contributor to exergy loss.” With this ‘common currency’ for efficiency, DNV GL provides a way of managing energy that will work for all ships, and all systems and components that convert energy onboard. It thus offers ship managers an unparalleled way of prioritising investment in technology alternatives or new operational strategies.

Bureau Veritas speeds CSR-H implementation Bureau Veritas (BV) has completed a series of consequence assessments with all the major shipyards in Korea, China and Japan to help them speed implementation of the International Association of Classification Societies’ (IACS) harmonised common structural rules (CSR-H). The assessments of current shipyard designs were made using BV’s fully adapted suites of userfriendly software for structural analysis, MARS 2000 and VeriSTAR Hull. 30 – Summer 2014

Christophe Chauviere, head of the development department for BV’s marine and offshore division, says: “Because BV played a leading role in the harmonisation of the IACS common structural rules, we were able to rapidly update our software for the new standards. As our software tools are not class-specific and many yards already use our tools, we were able to help them check out their designs and adjust them to be ready for the entry into force on 1 July 2015.” MARS 2000 is BV’s tool for 2D prescriptive requirements assessment. It is free of charge, with free access, and its fast and user-friendly input process allows quick assessments of designs against the new harmonised rules. BV has invested heavily in training across its network to ensure local offices can support shipyards wherever they are. MARS 2000 delivers assessment of global yielding, ultimate and residual strength criteria, local scantling minimums, including yielding and buckling of strakes, longitudinal and transverse stiffeners for cross sections and bulkheads, fatigue calculations of connections between longitudinal

stiffeners and primary structure, assessment of the side frames and grab loads for bulk carriers and assessment of the primary supporting members ring for oil tankers. “We made it easy for the yards by simplifying conversion of databases for the separate CSR rules for tankers and bulkers into a CSR-H database with the necessary extra data,” explains Chauviere. VeriSTAR Hull is the BV rule tool for performing analysis of threedimensional models by finite element calculation. VeriSTAR Hull is already available and compliant with the last version of CSR-H, including new requirements concerning buckling, aftmost/foremost cargo hold assessment and fatigue check. “During the CSR-H implementation in VeriSTAR Hull, based on our experience of CSRs, a lot of attention has been given to adapting the tools to reduce the time needed for pre and post processing,” says Chauviere. “Yards need to react quickly to new design requirements and these tools deliver rapid and thorough assessment fully compliant with CSR-H. It is the attention to ease of use and speed which makes them stand out.”


Ship management

Protecting seafarers With the recent introduction of the Maritime Labour Convention, seafarers are offered a greater degree of protection than has been the case in the past

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rade association InterManager has welcomed the adoption of new measures to protect seafarers against abandonment. Amendments to the Maritime Labour Convention (MLC) 2006, agreed at a meeting of the International Labour Organization in Geneva recently, will ensure the provision of financial security systems to assist seafarers in the event of their abandonment and for compensation for contractual claims for death and personal injury. InterManager secretary-general Kuba Szymanski said: “InterManager welcomes this protection for seafarers. As a percentage of the total international fleet, the number of ships abandoned is very small. However, the tremendous effort demonstrated at this special tripartite meeting to resolve this weak link in the coverage of the convention sends a very clear and important message to the world: that we very much care for our global maritime professionals, our seafarers, who are the heart and soul of a ship.” The amendments were approved at the June meeting of the International Labour Conference. They will require member states to ensure that ships sailing under their flag maintain a financial security system to cover contingencies such as personal injury or death, long-term disability or abandonment. Vessels will be required to carry onboard a certificate proving their coverage, in the form of either insurance, a national fund, social security scheme or similar arrangements. The amendments followed the first official Special Tripartite Committee meeting under MLC. Szymanski added: “We are grateful to the members of the Special Tripartite Committee for the tremendous effort and work that led to such concrete results. Coming to a resolution on the issue of abandonment further strengthens the MLC in years to come.” Ship and crew managers consider the strengthening of the MLC to be an important boost to improving the recruitment and retention of seafarers. Szymanski said: “A strong Maritime Labour Convention document is a welcome development that sets the tone for providing a level playing field in the supply of

Above: InterManager secretary-general Kuba Szymanski

seafarers, while guaranteeing better social benefits and living conditions onboard. “At the end of the day, having a solid governance document such as the MLC will be helpful in attracting future potential recruits into this profession. Given that shipping moves the world as the backbone of a global logistics supply chain, the MLC serves as an important tool that will go a long way to ensuring that the industry will continue to have the human resources needed to deliver on its mandate.”

Filipino officer concerns InterManager has also been warning that ship managers should put in place sensible contingency plans to guard against a worst-case scenario should Filipino officers potentially find themselves banned from working on EU-flagged vessels. This follows concerns raised by the European Maritime Safety Agency (EMSA) over the ability of the Philippine Maritime Administration to fully and effectively implement all provisions of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). The call by InterManager is intended to put perspective on anxieties about what the EU may ultimately decide with regard to the results of EMSA’s most recent audit of the Philippines in October 2013. Meanwhile, the Philippine government and industry representatives are working hand-in-hand to rectify original EMSA findings, and Philippine sources are confident that this will achieve the desired results for all stakeholders. To mitigate the immediate impact of any possible ban that may be promulgated by the EU, InterManager is calling on all ship managers to ensure that their Filipino officers have extended the validity of their Certificates of Competency (CoCs) prior Summer 2014 – 31


Ship management

We will work with the right crewing institutions and entities to ensure these officers are properly trained and certificated

Below: InterManager president Gerardo Borromeo

to any ban coming into force. The EU has indicated that, if a ban were to take effect, this would not be levied against valid and active CoCs. By extending their certificates, the Filipino officers are able to gain a maximum five-year period of grace. Should the EU ever implement a ban, it is likely that a resolution would be found within that five-year grace period. Georgia, which has recently been subjected to a similar ban, resolved its shortcomings within two years. Owners and managers should hold discussions with signatories to the various Port State Control Memoranda of Understanding to extend this fiveyear window to Filipino officers serving on non-EU flagged vessels that may call at EU ports. InterManager president Gerardo Borromeo said: “Our primary duty is to ensure that ships continue to sail safely and efficiently, which means we will put the right people onboard these ships and, in the case of Filipinos, we will work with the right crewing institutions and entities to ensure these officers are properly trained and certificated.”

Videotel crew training Videotel Marine International has released an application programming interface (API) service in order for its clients to be able to manage their crew training records housed within webFTA – Videotel’s powerful cloudbased training records management programme – directly from their own crew management system (CMS) portal. Videotel’s API service has two main processes – namely, pulling crew data from the Videotel cloud so it can be displayed in the CMS portal and, second, pushing crew data from the CMS portal to the Videotel cloud, which, in turn, triggers crew data to be sent to the vessels automatically. This enhancement means that office staff can manage the day-to-day operation from one console and still benefit from using webFTA without the need for double entry or updating of crew records, which is handled automatically. When away from the office, through webFTA, managers can still login and access the training records from any computer with an internet connection. Clearly, the crew onboard benefit immensely as they do not need to manually add records themselves or request them, as they will be received automatically. This drastically reduces duplication of records as well as the time that such a process can often entail.

Video games Many of today’s recruits into the shipping industry have grown up with games and their technologies. They are used to the personalisation and individualisation that such technology delivers. But can the shipping industry focus the energy and enthusiasm that people have for video games into valuable learning experiences for serious purposes? This was the question explored by Raal Harris, Videotel’s director of e-learning and digital media, speaking at the recent European Manning and Training Conference in Copenhagen. According to Harris, interactivity is key to the future of training. “It has been proven that people retain the most knowledge from ‘doing’,” he explains. “With interactivity a proven aid to 32 – Summer 2014


Ship management

learning and our developing understanding of games as a fundamental part of human development, it is no surprise that the concept of using games in a learning environment has been established. “Games can be serious, and indeed are now part of everyday life. 44% of people play mobile games, and console games are big business, with the average age of gamers now about 30 to 35. Consequently, this familiarisation means that there is a role for well-designed game elements and mechanics as an additional tool in the trainer’s armoury, used in conjunction with existing learning. “With a history of staying ahead of the market – from early adoption of video projectors onboard ship to today’s use of cloud-based technology to deliver training, we are well placed to meet this challenge in the maritime training context.” “Videotel is developing two games,” he told the conference. “The first is a bad practice app, in which players must identify hazards and bad practice in a variety of shipboard scenes to a pre-set time limit. It uses many game elements to motivate the learner, encourage debate and [get people to] think differently. “The second project involves the dangers of enclosed spaces, and builds on existing Videotel/Mines Rescue material to put the learner into a realistic scenario and challenge them to apply their knowledge to specific situations and under similar pressures to those they would find onboard ship. “Feedback so far has proven very encouraging,” he concluded. “The only limit to the use of this technology seems to be the time and cost involved in developing the convincing multiple scenarios essential to its success.”

Thome expands in Asia Thome Group has underlined its commitment to the burgeoning South East Asian shipping cluster by opening a crew recruitment and placement services agency in Myanmar. Thome Myanmar is seen as an important step in the company’s expansion into the growing economies of South East Asia and positions it well to offer, in time, its full range of ship management services to the country. It will immediately enable Thome to tap into the vast wealth of seafarer potential that Myanmar has with its population of 60 million. Thome Group chairman Olav Eek Thorstensen said at the launch: “Establishing a strong manning operation in Myanmar underlines the Thome Group’s commitment to this fast-moving and highly important seafarer recruitment market. The oil and gas sectors are also very important in this part of the world and the opening of an office here places the Thome Group in a good position to service the future needs of this and other growth areas.” The Myanmar/India/Sri Lanka region is seen as an area of massive potential growth for Thome, not only as far as crew recruitment and training is concerned but also in the supply of general ship management services. Thome already employs close to 1,000 crew from the region, and it sees significant opportunities for expansion through the new office. According to Capt. Michael Elwert, director of group HR, strategy and support at the Thome Group, seafarers from the country are “extremely qualified as they are educated to a very high level”. He said: “Thome Myanmar has received its manning agency and Maritime Labour Convention licences and a programme of cadet recruitment has already started, with 30 cadets taken on. Training is important to us, and we have appointed a regional training manager, who will oversee the training of such cadets and others from the Myanmar/India/Sri Lanka region.”

Can the shipping industry focus the energy and enthusiasm that people have for video games into valuable learning experiences

Summer 2014 – 33


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Communication

Keep communicating Communications are an increasingly important part of the maritime world, while training on systems like ECDIS is essential to ensure ships’ safe operation. WSI looks at some of the recent developments

A

irbus Defence and Space has launched its new Global Field-Service Alliance (GFSA). The alliance is designed to ensure fast, professional and cost-effective very small aperture terminal (VSAT) installation and service support for maritime VSAT satellite service providers. The objective of GFSA is to bring together expertise in maritime field installation and equipment to enable 24/7 installations and maintenance in major ports around the world, ensuring new levels of service response and quality for shipowners. Upon the launch of GFSA, three service partners have already been fully certified as members. Pro Nautas Marine Electronics in Germany, Livewire Connections in the UK and SRH Marine in Greece have met stringent requirements covering areas such as: antenna installation, training and certification, logistics, warehouse and spare parts capabilities, guaranteed response times and local, regional and global operating areas. The Global Field-Service Alliance offers Airbus Defence and Space’s global partner network more control and greater rewards when offering VSAT services to end-users. GFSA-certified partners will provide the complete range of installation and technical services to ensure uninterrupted operation of Airbus Defence and Space’s VSAT services. This includes installation, demobilisation, repair, upgrade, replacement and maintenance of VSAT equipment. The number of certified companies and engineers operating under GFSA is set to expand in the coming months. Ultimately, the alliance will consist of a highly qualified network of VSAT service partners, including both independent field service partners and Airbus Defence and Space’s field service engineers, ensuring complete global coverage for fast response and highquality customer support. “Alongside our new AuroraGlobal network, this initiative will help to improve customer support of current Ku band and future Ka band-based services via our service provider partners, 36 – Summer 2014

while strengthening end-user confidence and satisfaction in the satellite services they choose,” says Tore Morten Olsen, head of maritime satellite communications activities at Airbus Defence and Space. “We are committed to expanding GFSA in order to build a substantial resource that is capable of performing installations and maintenance to the highest standards anywhere in the world.”

TracPhone To meet growing bandwidth usage and Internet demand onboard its tanker fleet, RHL Hamburger Lloyd Tanker of Hamburg has chosen KVH Industries Inc for its mini-VSAT broadband satellite communications solution. Twelve oil and chemical tankers will be outfitted with KVH’s TracPhone V7IP satellite antenna systems in the next month, with a potential for 16 additional container vessels to receive KVH systems. “We needed a solution for the growing bandwidth usage onboard our vessels, for operational tasks such as fuel consumption monitoring and electronic chart updates and also for crew access to Internet,” says Peter Fromming, fleet director for RHL Hamburger Lloyd Tanker. “KVH provides a reliable satellite communications solution with global coverage and also the onboard network management that is essential for controlling access onboard and staying within budget. We regard the KVH systems as having the most suitable airtime plans and return on investment for our needs.” The KVH systems will be installed on sophisticated tankers known as Safety Chemical Oil Tanker (SCOT) 8000s, which are considered environmentally friendly because their advanced design is intended to minimise the risk of a spill. RHL Hamburger Lloyd Tanker was heavily involved in the design and construction of the SCOT 8000 tankers, which are propelled and manoeuvred by two separate drive systems and are built with a double hull; the tankers have a capacity of 8,000 tonnes.


Communication

ECDIS roll out Meanwhile, the roll out of the installation of electronic chart display and information systems (ECDIS) reaches its next deadline on 1 July 2014, when cargo ships other than tankers of between 3,000gt and 10,000gt constructed on or after 1 July 2014 will need to have ECDIS fitted. The same deadline applies to passenger ships of 500ft and upwards constructed before 1 July 2012, with ECDIS having to be fitted not later than the first survey on or after 1 July 2014. The next deadline will be in July 2015, when tankers of 3,000gt and upwards, constructed before 1 July 2012, need an ECDIS system fitted not later than the first survey on or after 1 July 2015. One major challenge is training, although concerns have also been raised about the cost of fitting the system, particularly when owners and operators have many other pressures on their purses to meet new regulatory requirements.

Nautical Institute director of training David Patraiko recently stressed the need for an “ECDIS mindset”. Crew members moving from one ship to another may have to learn how to operate a new system and therefore the correct training is vital. Concerns have also been raised that some ECDIS manufacturers are providing too much functionality to ECDIS. Commentators argue that front-of-bridge ECDIS should be a pure navigational function, with other issues like bunker costs and availability being handled by the back-of-bridge system. “With constant demands for greater flexibility from crew and Standards of Training, Certification and Watchkeeping (STCW) requirements calling for proficiency in working with the specific type of ECDIS system found onboard, bridge personnel have to ensure they have the right training to work on the equipment they are given,” explains Nigel Cleave, chief executive of Videotel Marine International. “Offering a truly

blended approach, Videotel provides the foundation stage, which then allows delegates to progress to type-specific training offered by Safebridge – either online with real-time simulation, or in locations around the world.” “The Videotel Maritime and Coastguard Agency-approved IMO Model Course 1.27 (2012 edition) covers perhaps one of the most important subjects we have undertaken, providing the very mindset and understanding so essentially required on the principles of the ECDIS system and how it should be used to facilitate navigational safety. “Intended for all deck officers as part of their mandatory ECDIS training, participants will leave with an understanding of the principles of ECDIS, the fundamentals of ECDIS capability and operation and will know how to use the system for route planning and monitoring. Importantly, they will also know the limitations of ECDIS and the dangers of over-reliance.”

There are constant demands for greater flexibility from crew and STCW requirements calling for proficiency in working with the specific type of ECDIS system found onboard Right: Nigel Cleave, chief executive, Videotel Marine International

Summer 2014 – 37


Communication

Created with the input of the International Maritime Organization, Videotel’s ECDIS training course follows the new STCW Manila amendments and the 2012 IMO Model Course 1.27. This course provides a sound mindset and understanding of the principles of the ECDIS system and how it should be used to facilitate navigational planning. The course, available on video on demand (VOD) and VOD Online so that study can take place seamlessly at sea or onshore, is delivered in a modular form, using self-paced, interactive e-learning computer-based training (CBT). Comprehensive instructions are provided to the candidates to guide them through the course. The CBT contains English text and narration, short video sequences, graphics and interactives. Subsequent training can be taken anywhere there is Internet access, so there is no restriction on where to do the training. It delivers the original equipment manufacturer’s typeapproved ECDIS software via the Internet to the student’s computer, so they can practice on the real ECDIS software even when at home.

UKHO training courses The United Kingdom Hydrographic Office (UKHO) has launched the latest free-to-attend ‘ECDIS implementation, policy and procedures’ seminars, the first of which were held in Bergen, Oslo and Rotterdam. Captain Paul Hailwood, an internationally renowned expert on ECDIS and integrated bridge operations, will lead the seminars. The seminars have been established to help all within the shipping industry gain an improved understanding of how best to use digital navigation systems at sea, as required by international regulations including the International Safety Management Code (ISM) and the SOLAS-mandated carriage of ECDIS. In 2011/12, the ‘Are you ready for ECDIS?’ seminar was delivered to over 860 delegates around the globe and, in 2012/13, the ‘Implementing your ECDIS procedures’ seminar was delivered to almost 1,500 delegates in similar locations. The ‘ECDIS implementation, policies and procedures’ seminar 38 – Summer 2014

We are delighted to have the opportunity to bring our seminars to such major shipping nations

continues to offer clarity on ECDISrelated questions, visiting 23 global maritime locations throughout 2014. Each seminar will clearly identify the stages of ECDIS implementation, focusing on key topics for delegates and offering a short review of the nine stages to ECDIS transition. Details of the necessary onboard legal requirements, risk assessments and safety procedures for the operational use of digital navigation systems will be discussed. There will be advice on hazards, with information on incorporation into safety management systems, bridge procedures and the development of effective and practical control measures for using ECDIS at sea.

© Videotel

Hailwood commented: “We are delighted to have the opportunity to bring our seminars to such major shipping nations as Norway and Holland and to offer our expertise on the challenges surrounding implementing ECDIS onboard and the policies and procedures that come with incorporating digital navigation. For the first time, attendees will also have the opportunity to submit their specific ECDIS questions and concerns in advance, when registering for the event. This will allow the seminar to be tailored to the particular needs of those attending. I would encourage anyone implementing or using ECDIS to come along.”


North America

Container lines target THE US Many of the big shipping alliances are targeting the US for their new services

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he US has been attracting a good deal of attention from container lines, with a number of alliances operating services to both the East and West Coast. Evergreen and its partners in the CKYHE alliance – COSCO, “K” Line, Yang Ming and Hanjin – will be operating container services to the United States East Coast. While the inauguration of the P3 Network of Maersk, MSC and CMA CGM has been delayed until the autumn, they too will be operating in the US along with the G6 alliance of APL, Hapag-Lloyd, Hyundai, MOL, NYK and OOCL on both the US West and East Coast. The Federal Maritime Commission (FMC) announced in March that it had concluded an extensive review of the proposed P3 Network Vessel Sharing Agreement and had given the go-ahead for A P Moller-Maersk, CMA CGM and MSC to share vessels and engage in related cooperative operating activities in the trades between the US and Asia, North Europe and the Mediterranean. “The commission’s action on the P3 Agreement takes into account the comprehensive, competitive analysis conducted by the FMC staff and comments received from shippers and other stakeholders. While the agreement is expected to produce operational efficiencies for the benefit of the US consumer,

the new reporting requirements specifically tailored to this agreement’s unique authority will ensure we have timely and relevant information to act quickly should it be necessary,” said chairman Mario Cordero.

Training grants The US Department of Transportation’s Maritime Administration announced earlier this year that America’s six state maritime academies – California Maritime Academy, Great Lakes Maritime Academy, Maine Maritime Academy, Massachusetts Maritime Academy, SUNY Maritime College, and Texas Maritime Academy – and the United States Merchant Marine Academy in Kings Point, NY, will each receive $1 million from a government programme that recycles obsolete vessels. The funding will help ensure welleducated and highly skilled US Merchant Marine officers are available to meet the nation’s national security and economic needs. “The most important element in our US Merchant Marine fleet is our people,” said US transportation secretary Anthony Foxx. “This funding will help ensure that dedicated men and women of our maritime academies continue to have the resources that make them the best educated and most highly trained mariners anywhere.” Summer 2014 – 39


North America

The money for this round of funding came from the sale of obsolete vessels from the Maritime Administration’s National Defense Reserve Fleet, which were purchased for recycling. As required by the National Maritime Heritage Act, 25% of the funds from sales is distributed to maritime academies for facility and training ship maintenance, repair and modernisation, and for the purchase of simulators and fuel; another 25% is used for maritime heritage activities; while 50% funds the acquisition, maintenance and repair of vessels in the National Defense Reserve Fleet. “The Maritime Administration continues to focus on the future of our maritime industry,” said acting maritime administrator Chip Jaenichen. “We’re proud to support the education that prepares the next generation of maritime professionals for the challenges they will face.”

40 – Summer 2014

MEPC The IMO’s Marine Environment Protection Committee adopted amendments to the MARPOL Convention to set a date for the implementation of Tier III standards within emission control areas (ECAs). The amendments provide for the Tier III NOx engines installed on ships constructed on or after 1 January 2016 and which operate in the North American ECA or the US Caribbean Sea ECA. This brings IMO provisions into line with those that are already outlined in US law.

Biofuel tests MARAD has recently completed tests of renewable biofuel technology onboard the training ship State of Michigan. The project was part of a MARAD initiative to conduct “at sea” tests of advanced renewable fuels and assess its impact on the ship’s engine. The tests compared operational, vibration,

and air emission differences between regular ultralow sulphur diesel (ULSD) fuel and a 76/33 blend of ULSD and Amyris renewable diesel (ARD) fuel, which is derived from sugar. The study determined that ARD reduced air emissions without any significant difference in engine performance.

SeaLand Earlier this year, Maersk Line, announced the formation of a regional, containerised shipping company – SeaLand – dedicated to the intra-Americas market. This new affiliate will have a structure similar to Maersk’s other successful regional carriers, including: intra-Asia carrier MCC Transport and intraEurope carrier Seago Line. SeaLand will feature knowledgeable, local sales and support personnel, positioned in North, Central, and South America, as well as the Caribbean, to meet the unique needs of customers throughout the region. This agile framework will provide greater flexibility and a higher-level of customerfocused service to these local markets. Maersk Line’s existing Intra-Americas service network will be the foundation for SeaLand’s ocean products. This new, independent unit will officially commence operations on 1 January 2015. Maersk Line will begin the transition of its Intra-Americas business to SeaLand in a phased approach throughout 2014. The newly established team of approximately 240 highly skilled personnel will begin their new roles by 1 July 2014. SeaLand will be led by Maersk Line veteran Craig Mygatt, who will serve as chief executive at SeaLand. The company will be headquartered in the US, with the exact location to be determined. SeaLand will share specific Maersk Line operational services, such as finance, landside operations and HR. “We heard from our customers that they value Maersk Line services but they required greater service stability and commitment. That’s one of the key reasons why we’re responding with an improved, restructured solution for the Intra-Americas,” commented Mygatt. “We look forward to developing strong, enduring customer relationships as the new SeaLand organisation.”


North America

“This reorganisation is an investment in our global container business. It enhances and strengthens service in this important and growing trade region, as well as the future of our overall global service network,” said Vincent Clerc, chief trade and marketing officer at Maersk Line. Robbert Van Trooijen, chief executive at Maersk Line Latin America and Caribbean, said: “This new IntraAmericas commitment will meet the needs of Latin American customers that ask for local customer specialists who are empowered to act quickly and respond to changes in the market. We have a long history in this region that will set the foundation for future growth.”

Fines for ASM Jordan-based Arab Ship Management pleaded guilty in May in federal court in Wilmington, Delaware, to one count of violating the Act to Prevent Pollution from Ships, in the latest ‘magic pipe’ case to hit the US courts. In accordance with the terms of the plea agreement, Arab Ship Management Ltd was sentenced to pay a criminal penalty totalling $500,000 and be placed on probation for two years, during which time ships operated by the company will be banned from calling at ports within the US. “The defendant violated environmental laws that protect our marine environment from harmful pollution,” said the US attorney for the district of Delaware, Charles Oberly. “This conviction ensures that the defendant is held accountable with a criminal fine and a contribution to conservation efforts in coastal Delaware, as well as a two-year ban from United States ports. The message to the shipping industry is clear: environmental crimes at sea will not be tolerated.” “This case demonstrates one way the Coast Guard acts to protect the environment,” said Capt. Kathy

Moore, US Coast Guard commander of sector, Delaware Bay. “Marine inspectors detected serious problems with the ship’s operations. They dove into the details and worked with the Department of Justice and the Coast Guard Investigative Service to bring this case to an appropriate resolution.” According to court documents and state­ ments made in court, Arab Ship Management operated the Neameh, a 6,398 gross tonne oceangoing livestock carrier. On 28 March 2013, the US Coast Guard boarded the vessel in the Delaware Bay Big Stone Anchorage to conduct an inspection. The inspection and subsequent criminal investigation revealed heavy oil sludge inside the piping on the discharge side of the pollution prevention equipment leading directly overboard, where no oil sludge should be if the pollution prevention equipment is operated properly. Inspectors also discovered that the vessel’s piping arrangement had been modified in a prohibited manner so as to allow oil sludge to be pumped directly overboard. This prohibited piping arrangement was removed prior to the vessel’s arrival in Delaware. Also during the inspection, Coast Guard officers were presented with two oil record books, which are required by law to be accurately maintained onboard the vessel. These two oil record books contained different and contradictory entries for the time period of 30 November 2011 through to 2 January 2012, as well as fake oily waste disposal receipts.

Marine inspectors detected serious problems with the ship’s operations

Carnival goes for scrubbers Cruise giant Carnival has announced plans to significantly increase installations of scrubbers to more than 70 vessels. The expansion covering over 70% of its entire fleet represents an increase from the 32 ships announced in September 2013. The company is investing $400 million to design, build and install the systems, being used for the first time in the restricted space found on cruise ships. The systems will enable Carnival Corporation to meet new regulations that place a cap on sulphur content of fuel oil at 0.1%, resulting in significantly reduced air emissions. The systems will help the company meet its environmental sustainability goals, as well as mitigate escalating fuel costs. “This is a key step forward for Carnival Corporation and its 10 brands – and most importantly for the environment,” said Carnival Corporation chief executive Arnold Donald. “We believe Carnival Corporation’s investment in this industry-leading technology will set a new course in environmental protection and cleaner air for years to come. Increasing environmental sustainability is one of our most important corporate goals, and having the new systems on our ships will be another effective way for us to meet that objective.” Summer 2014 – 41


ARA

LNG attracts Activity in the ARA region continues to progress, with new developments at all three main ports, particularly in the use of LNG

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pril saw the port authorities of Antwerp, Mannheim, Rotterdam, Strasbourg and Switzerland sign a joint venture for the introduction of liquefied natural gas (LNG). This involves cooperation in research, promotion, knowledge transfer, legislation and bunker infrastructure. The agreements follow on from the LNG masterplan for the Rhine-MainDanube corridor, in which all participants are involved. The aim of this masterplan is to put LNG to full-scale use as a fuel for inland shipping on the corridor. The European Union has provided a subsidy of €40 million to support an LNG infrastructure for the RhineMain-Danube area. The cooperation ties in with the Port of Rotterdam Authority’s aim to see the market for LNG as a fuel develop to its full potential, and to open an LNG hub in Rotterdam before the end of 2015. In order to realise this, the port authority is investing in infrastructure, is closely involved in the formation of the necessary national and international policy and legislation, and invests in cooperation with relevant partners. There has been a special terminal for the storage and handling of LNG in the port of Rotterdam since 2011 – the Gate terminal – and inland vessels have already bunkered there. The Port of Rotterdam’s throughput in the first quarter of 2014, at 109 million tonnes, was 0.2% below the level for the corresponding period last year. Split by goods type, less crude oil was down 2%, mineral oil products down 14% and other liquid bulk cargo down 14%. On the positive side, iron ore and scrap throughput rose 5%, coal by 15%, agribulk by 69%, other dry bulk cargo by 13%, containers by 1%, roll on-roll off (ro-ro) by 9% and other mixed cargo by 9%. Commenting on the figures, Allard Castelein, chief executive of the Port of Rotterdam Authority, said: “The falling tendency of the second half of 2013 continued initially, but, thanks to a strong month in March, the throughput in the first three months nonetheless stayed almost the same. 42 – Summer 2014

“For the whole of 2014, I am counting on slight growth, but my attention will mainly be on structural developments that are putting the Port of Rotterdam under pressure. These include the over-capacity in the European refinery sector, the rapid rise in American shale gas that is putting investments in the European chemicals sector under pressure, and changes in the containers sector. “Shipowners are building ever-larger container ships and starting to cooperate intensively to fill them optimally. At the same time, extra terminal capacity has been built in many North-West European ports while economic growth has lagged behind. Together with customers and stakeholders, we are working to rise to these challenges.” At Maasvlakte in the Port of Rotterdam, Falck has started work on the first North-West European training facility for disaster prevention involving LNG. The Port of Rotterdam Authority and the joint fire service in the port area are closely involved in the development of this training facility. From September 2014, fire crews, employees and members of company emergency response teams in the chemical and petrochemical industry, the road haulage and water transport sector and storage and stevedoring companies will be able to practise and train in a realistic environment to combat disasters involving LNG. LNG is on the way to becoming the leading fuel for road transport and shipping. It is in keeping with European policy for cleaner fuels. It is not only cleaner than diesel but also cheaper. Investments in the production, storage and transport of LNG are increasing sharply in the Netherlands. This ‘green growth’ development is of strategic importance for the Port of Rotterdam. Port of Amsterdam achieved a turnover of €143.3 million in 2013, an increase of 3% compared with 2012. Earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2013 was €89.4 million. The two principal sources of income for Port of Amsterdam are port and harbour dues and the leasing of port sites.


ARA

Income from port dues totalled almost €50 million in 2013, and income from harbour dues was over €6 million. At almost €75 million, income from rents, ground lease and quayage contributed over 52% to total turnover. These key figures can be read in the annual report, which was published in May. Chief executive Dertje Meijer commented: “2013 was a special year for several reasons. It was the year of the corporatisation of Port of Amsterdam and, moreover, an economically successful year for the port. Transhipment in the Port of Amsterdam achieved a record of 78.5 million tonnes. This is an excellent result, particularly in view of the challenging market conditions. “The 3% turnover increase is likewise a result in which we take pride in our first year as the corporatised Port of Amsterdam. This growth was attributable to the Port of Amsterdam business community, to which we are grateful for this. Our outlook for the future is

year earlier. Growth is expected to continue and a profit is expected to be achieved for the full year 2014. ALBA Group has opened a unique new export terminal in the Port of Amsterdam, which will enable the company to market scrap steel and non-iron metals as well as plastics and paper all over the world. The opening of the terminal means not only that ALBA Group will benefit from new possibilities for the exporting of steel and metal but also that the group will be able to service high-value customer-specific quality requirements. The ultramodern terminal is one of the key investments by ALBA Group in the business area of commodities in recent years and another key step forward in the company’s stronger international alignment. The operator of the terminal is the ALBA Group subsidiary ALBA Scrap Trading BV (AST), which is also situated at the terminal. With an area of 27,000m2, a quay length of 180m and storage capacities of

The 3% turnover increase is likewise a result in which we take pride in our first year as the corporatised Port of Amsterdam positive, we see numerous opportunities to capitalise on market developments and to cooperate and do business with various partners. If we can continue to grow, we will also be able to add more value to the city, the port region and the Amsterdam metropolitan area, as port of partnerships.” The number of ships that visited the port region (Velsen, Beverwijk, Zaandam and Amsterdam) in 2013 totalled 7,596 – a slight decrease compared with 2012 (7,690), but the average size of the ships increased. A total of 137 sea cruises visited Amsterdam, compared with 144 in 2012. The river cruise market continued to grow, with 1,483 visits to Amsterdam compared with 1,382 a

Summer 2014 – 43


ARA

over 200,000 tonnes, the new terminal is more than five times bigger than the previous ALBA site in Dordrecht. In the future, ships with a loading capacity of up to 50,000 tonnes and a draught of 12.5m will be dispatched at the new terminal. The Port of Amsterdam, with its water depth of 15m, offers the ideal conditions for this work. Its rapid links to the North Sea, just a few kilometres away, are also perfect. The location also offers superb links with local motorway and rail networks and Amsterdam airport. ALBA Group primarily exports to Turkey, Egypt, Spain, Greece, the Far East and the United Arab Emirates. “The terminal serves as an interface between the European and global market for ALBA Group,” explains executive chairman Dr Axel Schweitzer. “In Amsterdam, we have created the best conditions for further building on our position as one of the leading international high-quality recycling and raw materials-handling companies.” As of 20 December, inland navigation vessels can bunker LNG in the Port of Amsterdam. The port has designed the ‘Groene Kade’ (Green Quay) in Amerikahaven to enable safe bunkering from a tanker truck into an inland navigation vessel or small ocean-going vessel. LNG is a clean fuel that is a promising alternative to marine fuel. Port of Amsterdam encourages clean shipping in the port.

44 – Summer 2014

“The Port of Amsterdam is doing everything possible to encourage the use of cleaner fuels, including LNG. As an energy port, we’re pleased to contribute to greening marine fuels,” says chief operating officer Koen Overtoom. “We’re currently developing plans with our partners to convert green gas into the even cleaner bio-LNG, so that we can reduce CO2 emissions even further.” The Mediterranean Shipping Company (MSC) has announced plans that it is to consolidate all its activities in the Port of Antwerp in the Deurganck dock, on the left bank of the Scheldt. The transfer is necessary in order to permit further expansion by MSC in Antwerp. The shipping company announced at the end of last year that it wished to have a new location below the locks, not only because its present site in the Delwaide dock had reached saturation point but also because of the increasing size of the ships being introduced. The Deurganck dock was the obvious choice, as it is already used by the other members of the P3 alliance of which MSC forms part. Furthermore, the alliance plans to make even greater use of it in future. With a volume of 4.5 million teu in 2013, MSC is the Port of Antwerp’s biggest container customer. Antwerp is the only port in western Europe apart from Wilhelmshaven to gain loops with the new P3 network. But even without the P3 concept, the move by MSC to a new, larger location would be essential, as MSC plans to use Antwerp as a base

for development in the Benelux region. The expansion of MSC’s volumes and those of the other P3 partners is of particular significance for the Port of Antwerp. Studies have shown that the added value created by MSC is €2.69 per tonne. This would mean that MSC activities generated an annualised value of €154.1 million in 2013. MSC is very important for employment in the port too: the shipping company’s activities provided no fewer than 1,060 jobs in 2013. The MSC Home Terminal is a joint venture between Terminal Investment Limited (TIL) and PSA Antwerp, which holds the concession on the west side of the Deurganck Dock. PSA Antwerp will transfer its concession to a new company, PSA DGD, a subsidiary in which TIL also has a stake. The PSA DGD joint venture would have a capacity of more than 7 million teu on the west side of the Deurganck dock. The unused part of the concession on the east side of the dock would be reassigned from the current Antwerp Gateway terminal and given in concession to the new MPET joint venture. If everything goes according to plan, then the move by MSC to the left bank should be completed by the end of 2015. The port of Antwerp handled 48,166,806 tonnes of freight in the first three months of this year, 2.5% more than in the same period last year. Container freight did well, while ro-ro and liquid bulk also produced good growth figures. The container volume rose once more during the first quarter by 2.1%, to 26,004,571 tonnes. This corresponds to 2,146,392 teu (up 0.9%). Ro-ro also did well, with 1,184,608 tonnes or an increase of 5.8% compared with the first quarter of last year. The number of cars handled for its part rose by 2.5% to 313,436. Conventional breakbulk, however, was down by 9.1% during the first quarter, to 2,407,726 tonnes. Steel, in particular, suffered a significant contraction during the first two months of the year, owing to the weak steel market, although the volume picked up sharply again in March. The result for the quarter was a total of 1,560,753 tonnes, representing a fall of 5.5%. The drop in conventional volumes is a trend that is also making itself felt in neighbouring countries.


Legal

Broker litigation Insurer ITIC has warned on the high cost of litigation for shipbrokers

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survey of London solicitors by the International Transport Intermediaries Club (ITIC) has highlighted the high cost of litigation for shipbrokers and others seeking judgment in the English courts. ITIC gave a panel of London solicitors – all of whom had previously been instructed on cases involving ITIC members – a hypothetical claim scenario involving a broker that had been cut out of commission. The solicitors were asked to estimate the costs that the broker would have to pay to take the matter to court. The average estimate of the costs was £177,163. The claim scenario given to the solicitors was based on actual cases financed by ITIC under its debt collection cover. It involved a sale and purchase broker, which claimed that it had introduced principals and performed the original groundwork for the deal. The broker claimed that it had then been cut out at the last minute and replaced by another broker, which had simply ‘tied up the loose ends’. The sellers denied that they had any commitment to the broker. ITIC says: “A dispute of this nature is likely to involve no more than a couple of witnesses and an expert giving evidence on each side. If, at £177,163, the cost of winning was expensive, then losing would be even more so. “Under the English legal system, a losing party is responsible for its opponent’s costs. The solicitors estimated that the likely additional liability if the broker lost would

have amounted to £139,687. This would have brought the total costs liability faced by the broker to £316,850.” ITIC says that, although few cases proceed all the way to trial, and many will settle at an early stage, often without the need for formal legal proceedings, it is important that brokers have a sufficient level of cover to fund the matter going to litigation. ITIC’s debt collection cover pays not only for the broker’s own costs but also for the potential liability to opponents.

Oil fraud The International Maritime Bureau (IMB) has been warning that shipowners are facing new dangers from criminal gangs making spurious oil fraud claims. The ‘victims’/fraudsters try to extort money from owners by bringing action against them for failing to deliver cargoes of oil they allegedly own. Such scams were previously confined to West Africa but now appear to have spread to other countries, as a case reported to the IMB recently shows. It involved a vessel that trades regularly into the Arabian Gulf. A claim has been lodged against the shipowner to recover over $50 million, the full value of a consignment of oil. The claimant alleged that the cargo of oil it owns was loaded onto the vessel in Russia but was never delivered to the designated discharge port in the Arabian Gulf. Moreover, the claimant apparently had documents to prove this, and a local court in the region issued a warrant of

A dispute of this nature is likely to involve no more than a couple of witnesses and an expert giving evidence on each side

Summer 2014 – 45


Legal Right: Carel van Lynden, a partner at AKD

arrest against the vessel named in the claim. The case put the shipowner in a dilemma as he was reluctant to risk taking the vessel into the jurisdiction where the warrant was issued for fear that it would be arrested and that litigation to get it released would follow. At the same time, he was obliged to enter the region under the terms of the vessel’s charter party. Defaulting would mean incurring financial penalties. Another snag in the case was that the documents presented to the court to obtain the arrest warrant looked authentic and appeared to confirm that the vessel did load the oil at the Russian port, although, in reality, the vessel had not called at that load port. IMB, which is assisting the shipowner and has seen the documents, is warning other owners to be on their guard. It notes that what stands out in this new variation on the West African fraud is the fact that the documents produced in this case seemed extremely credible, enough to convince courts of the claim. “This may be the first of many other similar claims to be lodged against shipowners around the world if organised crime is involved. It is important that information on similar scams is collated” IMB said. “If we can build a picture of what is happening, it may be possible to identify the perpetrator or at least inform shipowners as to what to watch out for,” it adds. IMB is asking shipowners who have experienced or have suspicions of this new type of crime to contact them so that a suitable response can be coordinated. The bureau offers a range of services to assist shipowners in determining the authenticity of trade documents, one of which includes detailed analysis by specialist document checkers.

Bunkers The issue of bunkers as waste was seen back in the Dutch courts in April with a fresh ruling that the country’s environment and transport inspectorate was wrong to order the destruction of bunkers. The ruling may come as reassuring news for bunker market players who feared that destruction of bunker fuel as waste would make it worthless. 46 – Summer 2014

Recent guidance handed down by the European Court of Justice (ECJ) which ruled that off-spec fuel oil does not have to be handled as waste, was hailed as a triumph of common sense that will be welcomed by all suppliers of fuel oils and bunkers, Dutch law firm AKD said in January when the ECJ judgement was announced. Shell Nederland and Shell Belgium were disputing a ruling by the Dutch environmental authorities (ILENT), which wanted to force them to handle a parcel of diesel oil rejected by a Belgian client as waste, when, in fact, Shell intended to upblend the fuel to specification for selling on. The latest ruling, given by the Dutch State Council, involved a stem delivered in Rotterdam in 2012 to a vessel on charter to Stena Weco – a joint venture between Stena Bulk and Weco. Carel van Lynden, a partner at AKD, says the decision in the Freja Crux case confirms the ruling of the ECJ in the Shell case. Whereas the Shell case concerned diesel oil for cars, the Freja case concerned high-sulphur fuel oil; in the Shell case, there was a proven unintended mixing with another product; in the Freja case, it was unclear how the styrene and dicyclopentadiene came in. But the mere fact that the owner wanted to discharge for the purpose of getting his money back meant that the fuel could not be qualified as waste. The recent case thus applies the ECJ decision in a wide and general manner. The literal interpretation of EU waste regulations has resulted in odd situations. For instance, bunkers with an aluminium/silicon content of 82 (80 being the 2005 industry standard), which were refused by a vessel, could only be debunkered by a licensed waste collector. The normal practice in the Netherlands until then would have been debunkering by the supplier, blending with a parcel with a lower aluminium/silicon content and resale on the market. There has even been a case where the master of a vessel wanted to reject high-sulphur fuel because low sulphur had been ordered, and where, for the mere reason that the

master wanted to “discard” the perfectly sound high-sulphur fuel, it was qualified as waste.

Noise reduction The International Maritime Organization (IMO) recognizes that high noise levels onboard ships could affect seafarers’ health and impair the safety of the ship. On 1 July 2014, the International Convention for the Safety of Life at Sea (SOLAS) will be amended to make the Code on Noise Levels Onboard Ships mandatory for new vessels. The purpose of the code is to limit noise levels and to reduce seafarers’ exposure to noise. It also aims to protect marine life. Maritime Progress, a company that produces a range of safety posters for ships, says that while the code will become mandatory from 1 July 2014 for new vessels, all vessel owners and managers are encouraged to review their responsibilities in relation to this code. Responsibilities include: instruction in the hazard of noise exposure and the risk of hearing loss at initial employment and periodically thereafter; providing warning signs at all entrances to spaces exceeding a noise level of 85dB(A), with entry to such areas to be controlled; and warning information provided on hand tools, galley equipment or other portable equipment exceeding that decibel level; as well as providing effective hearing protection on an individual basis. The company recommends providing a hearing conservation plan for seafarers exposed to high levels of noise and for no expense to be incurred by the seafarer.


Middle East ports

In expansion Middle East ports are expanding rapidly with strong growth potential

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irst quarter results for DP World showed a very strong performance in the UAE, according to DP World chairman Sultan Ahmed Bin Sulayem. “First-quarter growth was largely driven by an improved performance from our Asia Pacific, India and UAE terminals, with Europe continuing to show signs of improvement. The UAE delivered a very strong quarter, handling 3.6 million teu. “As anticipated, we have seen a return to volume growth in 2014 due to the addition of new capacity and a pick-up in global trade in the first quarter. We are encouraged by the volumes handled at our flagship Jebel Ali Port, with the 1 million teu expansion of Jebel Ali’s Terminal 2 contributing to the strong result. “The addition of 4 million teu capacity with Terminal 3 opening this year will ensure we are well placed to handle future capacity demands in Dubai. “Our key developments at Nhava Sheva (India) and Rotterdam (Netherlands) remain on schedule for delivery and we recently commenced construction at Yarimca in Turkey, where we anticipate adding approximately 0.8 million teu capacity in the second half of 2015. “Overall, we are very pleased by the portfolio’s first quarter performance, which shows we have the right capacity in the right locations. Despite a solid start to the year, macro-economic conditions across some locations remain uncertain. However, we believe we are well positioned to outperform the market, which is forecast to grow at approximately 5% in 2014. “As always, we remain focused on driving profitability by targeting higher margin throughput while containing costs and improving efficiencies. We remain confident of meeting full year market expectations.” DP World has recently opened Jebel Ali’s largest container inspection facility. The 7,000m2 facility will add 29 customs

inspection bays and 30 health and environment inspection bays. The new facility is one of the largest inspection centres in the region. The new facility is equipped with the latest technologies to inspect cargo containers arriving through the 6 million teu capacity Terminal 2. According to Dr Rashid Ahmad Bin Fahad, minister of environment and water, the new facility at Jebel Ali, the port gateway and the biggest transit of imports to the UAE “is a great achievement and an important contribution to the promotion and efficiency of procedures for quarantine and veterinary and in our efforts to sustain environmental security and said rates of bio-security and food”. Hussain Nasser Lootah, director-general of Dubai Municipality, said: “The new inspection facility allows Dubai Municipality inspection teams to provide more efficient services for imported agriculture and food products coming to Dubai and the UAE, with an annual volume of over 10 million tonnes equal to almost 60% of our nation’s imports. This facility will add value to ensure Dubai provides the best service with the increase in local demand for such products.” Ahmad Mahboob Musabih, director of Dubai Customs, said the new customs inspection facility operates 24/7 to keep up with the increase in capacity handling at Jebel Ali Port, strengthening Dubai’s position on the global trade map as a leading regional hub, as well as to promote the development of Dubai as a leading destination for business and trade by simplifying and speeding up procedures while maintaining safety and security of the community and the economy. Jebel Ali Port provides market access to over 2 billion people across the Middle East and the wider region, including Africa and the Indian subcontinent. Container Terminal 3 (T3), which is due to open this year, will take container capacity at the port to 19 million teu. T3 is set to be the world’s largest semi-automated facility. Summer 2014 – 47


Middle East ports

ICTSI in Iraq International Container Terminal Services Inc (ICTSI) is partnering with the government of Iraq to invest in Umm Qasr Port, facilitating the unlocking of Iraq’s enormous economic potential by building the country’s “port facilities of the future”. ICTSI will operate and expand container and general cargo facilities in the port. Phase 1 of the Umm Qasr expansion will include a new 200m quay wall and storage yard, with a capacity of 300,000 teu. At full build, the facility will have 600m of quay and a 900,000 teu capacity. Furthermore, ICTSI will operate and manage the existing container terminal on Umm Qasr’s Berth 20. Initial investments are expected to exceed $130 million. “This is by far the largestever private investment in Iraqi ports. We are excited about this opportunity, and we would like to thank the government of Iraq for the continued support in this endeavour,” comments Enrique Razon, ICTSI chairman and president. Located on Iraq’s Gulf coast, Umm Qasr is the largest port in Iraq and the main gateway to the Iraqi market. The port handles liquid and dry bulk,

48 – Summer 2014

The port has seen impressive growth over the past decade, and this is testimony to the [team’s] skills

general cargo and containers. It has 21 berths, with total berth length of 5,000m. Container throughput totalled 500,000 teu in 2013. As noted by Hans-Ole Madsen, ICTSI senior vice-president for the Europe and Middle East region: “The port has seen impressive growth over the past decade, and this is testimony to the spirit and skills of Umm Qasr Port’s management team.” Madsen went on to say: “But current cargo volumes are still only a fraction of what is expected in the future. The Iraqi economy is being transformed as Iraq develops its

industrial potential and catches up with its neighbouring economies. “ICTSI will provide the world-class port infrastructure and cargo-handling skills required to support Iraq’s economic transformation.”

Marine survey operations at Jeddah In an attempt to preserve the operating performance level in Jeddah Islamic Port and to maintain the safety of ships that head to the port, marine survey operations for 350km2 of water surface have been completed. The international Horizon Company conducted marine survey operations for the internal basins of Jeddah Islamic Port, for the navigation canal and for the internal and external areas where ships set sail. The Saudi Ports Authority aims to provide the highest safety levels for all ships and this project is considered as one of the projects to be completed by the lessee of the marine equipment (Abdulrahman Al Turki Corporation for Trading and Contracting) in Jeddah Islamic Port, based on its commitments concluded with the Saudi Ports Authority. The lessee of the maritime equipment has consigned a number of national key staff to attend sessions in the field of hydrography, so that in the future these very well trained staff will be able to conduct hydrographic operations. The Red Sea Gateway Terminal (RSGT), the newest international container terminal at Jeddah Islamic Port, achieved record figures for ship productivity in the first quarter of 2014 in comparison with previous years, with an average of 125 movements per hour for every ship.


Middle East ports

Maritime training centre for Abu Dhabi The Maritime Training Centre of Abu Dhabi Ports Company (ADPC) has been officially certified by Lloyd’s Register as an approved training provider. It is the very first in the GCC region to offer maritime training of this international standard. Officials from both organisations came together at ADPC’s state-of-theart training facilities in Musaffah Port to receive the approval certificate and celebrate the special occasion. “We are very proud to have been officially approved by Lloyd’s Register – a worldwide recognised quality assurance body. The approval confirms the high quality of our teaching programmes, which are now attracting maritime professionals from across the GCC countries” “All of our courses are designed in line with international standards, but the formal approval by Lloyd’s Register is an accolade that makes it official on a global scale,” said Capt. Mohamed Juma Al Shamisi, chief executive of ADPC. The Maritime Training Centre, which complies with ISO quality standards, has been approved by Lloyd’s Register to provide a wide range of shipping and maritime courses, including vessel traffic services courses, navigational safety training courses, local port service training courses, nautical knowledge (IALA module 4) courses, channel familiarisation courses and high-speed craft navigation courses. The Middle East region is currently seeing massive investment in maritime infrastructure, with analysts predicting that the region will become a significant global hub over the next 20 years.

Hyundai contract Abu Dhabi Ports Company and Hyundai Engineering & Construction have signed a contract, agreeing the allocation of a dedicated 40,000m2 plot of land and warehouse facilities covering 4,536m2. These will be used for the import and export of cargo to support the Satah AlRazboot (SARB) project. Hyundai Engineering & Construction has been a long-term customer of ADPC, and this contract reflects the increased import and export volumes that will be required to support the company’s contract with Abu Dhabi Marine Operating Company (ADMA-OPCO) for the SARB Field Development Project Package 4 EPC Work. The plot of land and warehouse in Zayed Port will also include a temporary storage facility and a workshop that will

We are delighted to be able to sign this contract and move forward together, supporting this project and the government’s strategic development strategy

undertake light assembly fabrication work, coupled with a laydown yard for accommodation modules and other materials. The contract agreement was signed by Gary Lemke, executive vice-president ports at ADPC, and Hong-Joo Lee, administration manager at Hyundai Engineering & Construction. Lemke said: “Hyundai Engineering & Construction is a valued long-term customer of ADPC, and we have been working together for some time to understand their requirements and establish how we can provide the additional facilities that they will need to service the SARB project. “We are delighted to be able to sign this contract and move forward together, supporting this project and the government’s strategic development strategy.” Lee added: “The SARB Field Development Package 4 EPC Work is an ADNOC strategic initiative, which will support the government’s oil production enhancement plans and Abu Dhabi’s broader development strategy. “The development project is part of ADMA-OPCO’s overall scheme to add 200,000 barrels per day of additional production from its new offshore fields, with about 100,000 barrels per day coming from the SARB oilfield.” Summer 2014 – 49


Maritime Law Norway

The importance of contemporaneous evidence Nina M Hanevold, Chris Grieveson and Morten Lund Mathisen of Wikborg Rein law offices explain why it is important to collect evidence and take statements from relevant crew members as soon as possible after an incident

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recent study of Norwegian case law confirms that Norwegian courts will attribute significant weight to evidence arising from or collected in the immediate aftermath of an incident – so-called ‘contemporaneous evidence’. A similar principle has long been applied by the English courts. Parties facing a potential dispute should therefore take care to collect all relevant documentary evidence, and be cautious when issuing preliminary reports or other documents until all relevant facts are identified. Nowhere is this more important than in the context of marine and offshore casualties. Under Norwegian civil procedural law, litigating parties are free to present whatever evidence they wish, with very few restrictions. Evidence may typically include physical or documentary evidence, witness statements and statements by experts. Unlike the procedure under English law, however, written statements are relatively rare. Normally, both expert witnesses and ordinary witnesses only give statements through oral testimony in court. The Norwegian Civil Procedure Code provides for a ‘free’ consideration of the evidence by the court. In principle, there is no order of priority between different types of evidence. 50 – Summer 2014

The courts will assess each piece of evidence jointly with the other evidence in order to reach a conclusion on the facts. Norwegian courts have nevertheless developed a general principle whereby more weight is usually attributed to contemporaneous evidence. This principle was first expressed in a 1995 Norwegian Supreme Court judgment. When considering the evidence, the court stated that particular weight should be given to the contracts, other documents and the parties’ behaviour up until the dispute arose. Documents and statements produced subsequently – and, in particular, statements given as evidence in court – should generally be given less weight. The reasoning was that statements given once the dispute had arisen would be influenced by the conflict and the parties’ interests in its outcome. Subsequent case law has confirmed this principle. This reasoning is easy to apply in a maritime context. The officers and crew involved in a collision or grounding may have had plenty of time to consider what happened – individually, among themselves and sometimes with third parties – before a lawyer arrives on board to record their statements. The crew


Maritime Law Norway

would not be human if they did not realise that the casualty could have major consequences for the owners and often, regrettably, for the crew themselves. Accordingly, there will always be the temptation to present their evidence in the most positive light. This will be the case no matter how soon after the casualty evidence is recorded. The rule of ‘first in time evidence’ was first applied to a maritime case by the Norwegian Supreme Court in a remuneration salvage case. The issue at hand was whether a pilot vessel had been exposed to such danger that the owner, the Norwegian State, had a duty to pay salvage for the assistance rendered by another vessel. The Supreme Court awarded salvage remuneration and stated: “Significant weight should be placed on written notes taken at the time of the salvage act or immediately thereafter. As the Supreme Court has noted in several decisions, there will often be reason to place less weight on information from witnesses which has been provided a long time after, and which is contrary to or which changes the picture which evidence provided closer to the incident gives.” The Supreme Court added that statements provided by crew at a later stage could be influenced by subsequent factors. The judgment was based on evidence provided at the time of the incident, disregarding the contradictory subsequent evidence. It is worth mentioning that the casualty in this case took place almost 25 years ago, when the computerised electronic navigation aids we see today were not available. Today, an automatic identification system (AIS) or voyage data recorder (VDR) showing the track of the vessels in the lead-up to a collision would probably play a dominant role when considering which crew statements were most reliable. In a recent Norwegian appeal court judgment, an incident report (prepared by shipowners less than a month after the incident) was considered

contemporaneous evidence, upon which significant weight was placed. Witness statements providing for alternative causes of the incident given several years later, during the main hearing in the court of first instance, were not considered persuasive. This may be a very worrying conclusion for shipowners. In complex cases, the significance of some evidence may be overlooked in the early stages. To fix the parties with a rough and ready assessment of the causation of the incident could be very unjust. Equally, the judgment highlights the inherent risk in reports that identify or purport to identify root causes and areas for improvement. The approach taken by the English courts is similar to that seen in Norway.

to attend immediately to interview crew and collect ships’ documents. Of equal concern, and where appropriate, the conclusions in early reports should be identified as preliminary and only based on the available evidence at that time. Such an approach is helpful as regards root cause analysis and reports produced to comply with safety management systems and the requirements of vetting agencies, oil majors and the like. Disclosure of these reports can be requested in legal proceedings or by governmental authorities in connection with pollution claims. It is also worth mentioning that, while the most obvious type of contemporaneous evidence following a casualty is the vessel’s VDR, our experience indicates that the VDR data is correctly retrieved in less than 50 per cent of incidents. This is typically because of a failure to secure the recordings before they are overwritten, or incorrect extraction of the data by crew members or authorities. There are, of course, many other ways to reconstruct events from electronic data sources such as electronic chart display and information systems (ECDIS) or automatic radar plotting aids (ARPA) as well as vessel traffic services (VTS) or AIS. In recent years, social media has also emerged as a source for contemporaneous evidence, as it may be a useful place to see what the other side’s crew are saying about the incident. Given the problems with retrieving VDR data and the exaggerated weight that courts may place on preliminary reports, the art and value of statement-taking is far from dead and remains an important precaution for any owner experiencing a casualty. For these reasons, it is important to collect evidence and take statements from relevant crew members as soon as possible after an incident. Instructing legal advisers at an early stage can be an investment in the best possible outcome of a future dispute.

Most shipowners and their underwriters will require lawyers to attend immediately to interview crew and collect ships’ documents It is entirely at the discretion of the judge to decide what weight to attribute to different aspects of evidence. However, evidence that appears more impartial will often be favoured over evidence created a long time after the incident. By way of example, evidence that is mechanically or electronically generated, or which came into being before there was an incident or immediately after it, will generally be given more weight than witness statements obtained a year or more after a casualty. Taking into account the significant weight placed on contemporaneous evidence by both the Norwegian and English courts, parties facing pos­sible future litigation can benefit from a conscious effort to collect contemporaneous documentary evidence and witness statements. For example, most shipowners and their underwriters will require lawyers

Summer 2014 – 51


INSURANCE

Risky business

Below: TT Club’s Phillip Emmanuel

Good risk management procedures are a good way of minimising costly damages and crew injuries

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ccording to the TT Club’s analysis, the overwhelming majority of insurance claims have showed that costly damages and loss, as well as serious bodily injury, can be prevented or significantly minimised by sensible and concerted risk management efforts. Speaking at the TOC Container Supply Chain Asia Conference in Singapore, TT Club’s Phillip Emmanuel drew attention to the wide-range of causes leading to insurance claims by transport and logistics operators. “While these causes are varied; ranging from theft and poor maintenance of equipment to bad cargo handling and packing and clerical error; they share in common the fact that through good training, the employment of best practices and detailed monitoring and checking procedures, the vast majority are avoidable,” emphasised Emmanuel. As a leading freight transport insurer, TT Club is in a prime position to both identify the causes of risk in the supply chain and to offer advice on how such issues can be managed to ensure a reduction. Such action, of course, not only saves staff from injury and assets from damage but also reduces insurance overheads, maintains operational efficiency by minimising interruptions and delays and keeps customers satisfied. In his presentation to industry leaders at the conference, Emmanuel, who is TT Club’s regional director, Asia-Pacific, used a claims analysis carried out by the club on data received over the past seven years. Including bodily injury, property and liability, over 2,600 claims from transport and logistics operators were analysed. A low percentage, just 5%, were caused by the weather, with a quarter resulting from poor maintenance of property or equipment and a large proportion, some 66%, down to failures in some facet of the operation. Emmanuel was at pains to highlight the lessons to be learned from analysis of these operational issues in particular. “Here we found that over half of the incidents involved the internal systems and processes of the operator and another quarter were due to theft. These types of claim are most assuredly to be placed in the category of preventable,” he said. 52 – Summer 2014

Transport and logistics operators are strongly urged to employ effective monitoring and checking procedures, a regular training regime and to maintain industry best practice for safety and security. The conference presentation highlighted a number of situations where cargo that was badly stowed, packed, loaded incorrectly or otherwise poorly handled caused damage and injury. Examples of miscommunication of information about refrigerated cargo, misdeclaration of hazardous cargo and load weights, inaccurately drafted contracts with subcontractors and a lack of IT security were all discovered in the analysis. “Prevention is a combination of safe and physically secure facilities and equipment, rigorous checks and double-checks on paperwork and information flow, combined with well-trained, well-motivated employees and trusted partners,” he concluded.


INSURANCE

Left: Robert Hodge, senior underwriter for the offshore sector

Hold harmless clauses The International Transport Intermediaries Club (ITIC) has warned that the so-called ‘hold harmless’ clauses in many of the contracts entered into by its members may contain pitfalls that could prejudice their rights. A mutual hold-harmless indemnity clause should provide that each party to the contract agrees to take responsibility for – and to indemnify the other against – injury and loss to its own personnel and property and its own consequential losses, even if the accident and related losses are caused by negligence. But ITIC notes that, in many of the contracts it reviews, the party with the greater bargaining power will naturally seek to swing the balance back in its favour. Writing in ITIC’s newsletter The Wire, Robert Hodge, senior underwriter for the offshore sector, says: “It is staggering how often we see contracts stipulating that ‘the consultant shall indemnify the company against any and all losses’, yet there is no reciprocal benefit to

the consultant. The clause must have a mutual provision.” Meanwhile, the mutual hold-harmless clauses seen by ITIC often leave the distribution of third-party liabilities unclear. Hodge says: “A hydrographic consultant on a survey vessel, for example, should be protected from third-party claims arising from the operation of the vessel. The consultant should not be responsible for potentially multi-million-dollar pollution liabilities or collision damages to third-party property. These should fall on the party which has insurance for these liabilities.” ITIC notes that, in some cases, it sees hold-harmless clauses amended to state that, if one of the parties is found to be grossly negligent, it will not be held harmless. Hodge emphasises: “There is no true concept of gross negligence under English law. The line between negligence and gross negligence can become blurred, and cases will turn on facts and expert evidence. The inclusion of gross negligence within a hold-

Taking into account the current day rates of drill rigs, this could form a substantial part of any claim

harmless clause in a contract pursuant to English law can lead to uncertainty and increased litigation costs.” ITIC also warns that the distinction between indirect and direct loss can be complicated. Hodge says: “A common misconception is that all ‘loss of profits’ is indirect loss. This is wrong. Loss of profits can be either direct or indirect, depending on the facts of the case. If, for example, a consultant was providing design work for sub-sea equipment and carried out the design negligently, this could cause not only damage to property but also lost drilling time, leading to lost revenue and profit. In such a case, a tribunal could find that the loss of profit arose naturally from the breach and was therefore a direct loss not excluded under the hold-harmless clause. “Taking into account the current day rates of drill rigs, this could form a substantial part of any claim. The clause should be amended to state that loss of profits is excluded, whether direct or indirect.” ITIC concludes that hold-harmless clauses should be carefully reviewed to ensure that they are actually mutual.

T&P notices The London P&I Club says it has seen a rise during the past 12 months in the number of deficiencies relating to temporary and preliminary (T&P) notices to mariners, and an increase in negative findings in relation to the management of radio navigation and meteorological warnings. In its StopLoss Bulletin, the club says its ship inspection programme has identified failure to manage T&P notices, or to apply them to the ship’s chart folio, as a common occurrence. It says: “If T&P notices are not consistently applied to the chart folio, the ship’s navigating officer and officers of the watch may be deprived of valuable passage planning information. T&P notices contain a vast array of information that may influence the planning or conduct of a passage. Efficient passage planning requires the assimilation of good-quality information, which ought to leave the mariner better equipped to decide how to conduct the passage of a ship.” Summer 2014 – 53


INSURANCE

UK Club’s fitness programme The UK P&I Club’s Pre-Employment Medical Examination (PEME) Programme, the world’s leading scheme for assessing the fitness of prospective seafarers, has just completed its 300,000th examination. At the beginning of April, Edward Nefuda, a second engineer from AngloEastern Crew Management, Philippines, Inc, was successfully passed fit at the Halcyon Clinic in Makati’s central business district. For the past 18 years, the PEME programme has provided crew with a first-rate health check before going to sea, while protecting shipowners from claims arising from medical conditions existing prior to employment. It is the leading loss prevention initiative managed by the UK P&I Club – and the most extensive and comprehensive programme of its kind. It has long proved itself by reducing the volume and level of claims, saving huge sums for shipowners and P&I insurers. Sophia Grant, who heads the PEME programme for the UK Club, explains: “We constantly strive for continual improvement in prescribed standards and programmes focused on seafarers’ welfare. PEME’s achievements are clear: fewer claims, safer ships, less disruption and fitter and healthier crews.” The UK P&I Club devised the PEME programme in August 1996. The decision stemmed from a detailed analysis of major claims highlighting the incidence of compensation claims arising from preemployment medical conditions. Investigations revealed inconsistencies in the standards observed by clinics in making earlier examinations. Many adhered to the minimal standards required by local authorities. Further, there was no understanding or acceptance of accountability to shipowners for poor and erroneous assessments. Accordingly, the club laid down exacting terms for medical examinations based on International Labour Organization (ILO) standards for pre-sea medical assessments. These are set out in the PEME medical examination form, which serves as the basis for a stringent accrediting and auditing process while providing an effective system of quality 54 – Summer 2014

control. Clinics approved by the club are fully accountable. Reports on all examinees, fit and unfit, are recorded on a confidential medical database online and are made directly available to the PEME team.

Safety culture Developing an effective safety culture onboard involves thinking outside the box and away from established practice, according to Martin Hernqvist, head of The Swedish Club Academy, the body set up to deliver The Maritime Resource Management (MRM) programme, speaking at the European Manning and Training Conference in Copenhagen. “It is only through a genuine change in attitudes that behaviour can be changed and a demonstrable improvement in a company’s safety culture made,” said Hernqvist. “If attitudes are poor, it doesn’t matter what technical skills and knowledge a company has in place, as it will not see the change in behaviour needed to achieve results in the loss prevention arena. “It’s about having the right culture in place – both at sea and onshore – and

this is why attitudes must ultimately be driven by the shipowners themselves.” While this culture change must start from the top down, Hernqvist sees inhouse training as a key contributor. “In our MRM training, we have found this to be the most effective route to achieving long-lasting results. The use of a company’s own incident reports and procedures ensures that the training is operating closer to the participants’ own reality, and new behaviours are much more likely to be reinforced in the future. “In addition, what goes on inside the training room should be replicated in the working environment,” he said. “Companies should use the MRM terminology and tools in communication with ships and for incident analyses, and safety management systems should be updated and in line with the training objectives set during the course. Hernqvist concludes: “There may be challenges ahead for the established maritime academies and training centres to produce good and long-lasting results, since they are further away from the organisational cultures that the trainees eventually will be part of.”


Heavylift

Getting the right ship Insurance issues are one consideration when moving high-value project cargoes

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n its risk bulletin earlier this year, Allianz Global Corporate & Specialty outlined some of the points to be addressed when vetting vessels to carry project cargo. This included flag state considerations but also the use of joint ventures like RightShip, formed in 2001 between BHP Billiton, Rio Tinto and Cargill, which introduced an online vetting system and offers its clients risk management valuation of a particular vessel or fleet. Insuring project cargo and heavylift projects is a specialist business, with insurers AIG, ACE Marine and Allianz Global Corporate & Specialty being three providers. One key area of insurance is delay in start-up (DSU), which covers against the possibility of a project being delayed because the cargo failed to arrive on time. DSU insurance has been a growth area in recent times as those involved in projects come to realise the potential impact of their failing to start on time. Projects are becoming increasingly complex, with the use of large, pre-assembled modules (PAMs) becoming increasingly popular.

Getting PAMs to the site may involve building new infrastructure, and most insurers employ a wide range of specialists that are able to assess the risks of different projects, including country risks, and act accordingly.

Better times ahead Drewry’s latest ‘Multipurpose Shipping Market Review and Forecaster’ report anticipates better times ahead for the sector following a tough 2013. Last year, cargo demand for multipurpose and heavylift vessels was adversely affected by determined competition from other shipping sectors. While cargo demand has risen steadily since the crash of 2009, the multipurpose sector share of those volumes has eroded. Drewry reckons that 2013 was, in fact, a worse year for shipowners than recession-blighted 2009, as its market share dropped to just 8% of dry cargo, although tonnage was higher. The biggest growth in 2013 volumes came, not surprisingly, from minor bulks, consisting primarily of steel and forest products. Global steel production in 2013 exceeded 1.6 billion tonnes, with growth of almost 5% compared with 2012. While some major exporters (South Korea, EU, US) reported decreased exports over 2012, China and Taiwan continued to show strong growth (18% and 9% respectively), which contributed to an expansion in overall global traffic. By contrast, demand for general cargo, which includes project cargoes, dropped over 30%. Drewry believes this was due to a double hit of increased competition from other shipping sectors and a slowdown in the project market. Drewry estimates that project cargo volumes fell by almost 15% over the year. However, the outlook is more positive. Global steel production is expected to rise at an average annual rate of 5% over the next two years. The outlook for project cargo is more mixed. While the expectation for 2014 remains subdued, there are signs that this sector should begin to pick up further volumes towards the end of the year and grow in 2015/2016. Drewry forecasts that demand for multipurpose shipping will grow at an average annual rate of 5% over the coming years. However, it is expecting only modest growth in 2014, Summer 2014 – 55


Heavylift

as competition from other shipping sectors will continue to eat away at market share. But it expects the sector’s market share to recover through 2015/16. Susan Oatway, senior consultant at Drewry, said: “We continue to be concerned about competition from container lines, particularly for the project carriers; any delay in the recovery of that sector will also delay recovery in this one. Meanwhile, the multipurpose vessel orderbook is very manageable and as long as newbuildings have a unique quality – whether that is eco-friendly engines or extraordinary lift capacity – there is still space to accommodate them. This means that Drewry’s forecast does provide some room for optimism for owners. Demand is expected to continue to grow and has the potential to deliver significantly increased volumes. “Drewry said last year that current market conditions were untenable, but carriers seem to have borne them even longer. With the new vessels that are now trading, capital costs are a significant part of most shipowners’ bottom lines, and that can only be borne for so long. It remains our view that those owners that are able to promote their vessels as the valueadded alternative to containers will be the ones to see positive results again sooner rather than later.”

HTV study Royal Boskalis Westminster has announced that it has started a study into a new ultra-large V-class heavy marine transport vessel (HTV). The Dockwise Vanguard, which came into service in early 2013, is already the world’s largest V-class HTV with a carrying capacity of 117,000 metric tonnes and a deck space of 270m by 70m. Peter Berdowski, chief executive of Boskalis, said: “The Dockwise Vanguard has been well received in the market. Our decision to start this study is a reflection of this and we see many more exciting opportunities in the floating production, storage and offloading (FPSO) and floating liquefied natural gas (FLNG) markets.” 56 – Summer 2014

The study addresses both the market opportunities and the technical requirements for the new vessel. Boskalis will engage with clients to understand how this vessel can accommodate the expected growth in the FPSO and FLNG markets in addition to the ocean-going transport of outsized heavy marine structures. Compared with the Dockwise Vanguard, the new vessel will be larger in terms of length, breadth and carrying capacity, but will also have a bowless design and asymmetric accommodation. The addition of another V-class vessel to the current fleet of semi-submersible HTVs allows Boskalis to further expand its market-leading position in the offshore energy industry.

More dock gates for Panama The Panama Canal Authority reports that the ship Sun Rise, with four new gates for the canal’s third set of locks, has sailed for Panama from Trieste, Italy. The ship is expected to arrive in midJune, depending on weather conditions. “This is another important milestone towards the completion of a project that will have an important impact on the international maritime community,” said Panama Canal administrator Jorge Luis Quijano. This is the second shipment of gates being transported to Panama. Four other gates arrived in August 2013. The Panama Canal expansion programme is currently 74% complete.

BigRoll module carriers BigRoll Shipping announced recently that two MC-Class Module Carriers for the transportation of ultralarge and heavy modular cargoes are scheduled for delivery from COSCO Dalian in May 2015 and August 2015. The contract has an option for two additional vessels. The MC Class is designed with a focus on reliability of operations, short loading and discharging time, high service speed and low accelerations and will have FinnishSwedish 1A ice class notation. The vessels are DP2 prepared. Their overall length is 173m with a beam

of 42m, giving the vessels a deck space of 42m by 125m. The deck is completely free of manholes, air heads etc. The depth is 12m and the maximum deadweight of the MC Class vessels is 21,000 metric tonnes. The vessels are highly suited to travel to remote areas such as the Arctic, as well as for direct offshore supply. Global heavylift and transportation providers BigLift Shipping and RollDock Shipping announced they were forming a joint company, BigRoll, last year. This will operate the newbuild MC-Class Module Carriers for the transportation of ultra-large and heavy modular cargoes by sea. 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 to operate in the Arctic regions and the DP2 notation will enable direct offshore delivery of modules.

This is another important milestone towards the completion of a project that will have an important impact on the international maritime community


Salvage

A place of safety There has been a major push to deal with the issue of places of refuge in recent months

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hipowners, salvors and insurers – through their respective trade associations – have jointly called for the prompt and proper implementation of international measures to provide a place of refuge for stricken vessels, following a series of incidents where casualty vessels have been delayed in accessing a safe harbour. The International Chamber of Shipping (ICS) says that it has noted “with dismay” the refusal by some coastal states to make places of refuge available, thereby risking lives and the environment, even after the high-profile cases of the Stolt Valor and the MSC Flaminia in 2012. The recent plight of the Maritime Maisie off the coast of Japan has brought this subject back into sharp focus. After almost 100 days at sea following a severe collision and fire, the chemical tanker Maritime Maisie, owned by Singaporebased MSI Ship Management, was finally given refuge in Korea in April. The Hong Kong-flagged tanker was carrying an estimated 30,000 tonnes of a hazardous cargo when it was involved in a collision with a pure car and truck carrier near the port of Busan in December last year, subsequently catching fire. The ship was then held at sea by tugs, with the Japanese and South Korean governments unwilling to give it refuge owing to the hazardous nature of its cargo and the severe damage to the hull, despite the risk of a wider environmental disaster if it broke up and sank. Poor weather conditions in January and February and prolonged exposure to swells of up to 4m high complicated matters further and could also have contributed to further damage. Wijendra Peiris, team leader for Lloyd’s Register’s Ship Emergency Response Service (SERS), said: “This was quite an unusual situation, and multiple teams in LR had to work together to resolve it. Maritime Maisie was a Hong Kongflagged, Singapore-owned vessel carrying a hazardous cargo.

After it was damaged in Korean waters, the vessel drifted into Japanese waters, its fire raging for well over a week. This, together with poor weather conditions, meant we had to make sure our calculations of the ship’s condition and recommendations to the owners were as accurate as possible.” “The vessel wasn’t safe enough for LR surveyors to get onboard and properly assess the damage until March, but SERS, Lloyd’s Register Class and LR regional operations teams worked closely with MSI Ship Management throughout the period to keep them informed. The decision to allow Maisie into the port of Ulsan in Korea was welcome, and MSI thanked LR for their support. David Power, senior principal surveyor in LR’s Classification Group, said: “This was a great opportunity for teams across consultancy services and traditional class services along with LR’s Client Facing Office (CFO) business team to really complement each other and work together to achieve a common goal.” Iain Wilson, LR’s regional marine manager for Asia, said: “This is an excellent example of marine employees across multiple countries and teams pulling together and offering fantastic levels of support to a key client. Individuals from SERS, Class and surveyors in Korea, Japan, Singapore and Hong Kong all played a part in helping this vessel get safely to port and should be proud of that achievement.” The International Union of Marine Insurance (IUMI), the International Salvage Union (ISU) and ICS all recognise that the issue of places of refuge for casualty vessels is sensitive and that the risk of pollution from casualties cannot be completely removed. They also recognise that decisions with regard to handling casualty vessels carry political implications and may affect coastal communities. At the same time, failure to offer a suitable place of refuge may prevent successful salvage intervention and therefore allow Summer 2014 – 57


Salvage

Left: Peter Hinchliffe, ICS secretary-general

a casualty’s condition to worsen and ultimately lead to pollution that might otherwise have been prevented. That pollution may affect a wider area than need have been the case. Peter Hinchliffe, ICS secretary-general, said: “Guidance on handling of requests for places of refuge was agreed at the International Maritime Organization (IMO) but often, when a case arises, the coastal states concerned take a ‘not in my backyard’ attitude. This is in marked contrast to attitudes to aircraft in need of assistance. This current case shows that recent lessons have simply not been learned.” Commenting on the matter, president of the ISU Leendert Muller said: “Our members are right on the front line of this issue. Too often, they are unable to follow the best course of action, which is to take the casualty into shelter, which does not necessarily have to be a port. We have seen infamous cases like Castor and Prestige and more recently the MSC Flaminia and Stolt Valor and now the Maritime Maisie, where our members, attending damaged vessels, experienced great difficulty in finding an authority willing to accept the casualty.”

Ole Wikborg, president of IUMI, points out: “The potential impact of environmental damage has to be reduced as much as possible and the safety of crews is paramount and we have to minimise material damage to ships and equipment. Coastal states must be able to make the best possible decision to prevent further

recommending all coastal states to establish a Maritime Assistance Service; the 1989 International Convention On Salvage; and the European Union vessel traffic monitoring and information system (Directive 2002/59/EC as amended by Directive 2009/17/EC), which prevents member states from issuing an outright refusal to provide a place of refuge and states that safety of human life and the environment are of over-riding concern. The industry bodies see no merit in pursuing extra international legislation, which would be a lengthy process and consume resources. Instead they will campaign for better application of, compliance with and enforcement of existing rules and guidance. ISU has formally presented views on places of refuge to EU member states through the EU Commission; the issue will be raised in IMO fora this year and there will be direct engagement with governments of individual coastal states. In short, coastal states should be encouraged to recognise that granting a place of refuge to a casualty vessel may be the most appropriate course. States should establish an authority to assess each case on its merits without political interference. Such an assessment must include a visual inspection and conclude with recommendations for managing and mitigating the risk of any impact on local coastlines and communities. The assumption should be that a place of refuge will be granted if needed and that there should be “no rejection without inspection”. IUMI, ICS and ISU would like to see wider adoption by coastal states of simple, robust, single-point command-and-control models akin to that of the UK’s SOSREP (Secretary of States Representative for Maritime Salvage and Intervention) system.

The potential impact of environmental damage has to be reduced as much as possible

58 – Summer 2014

damage following a maritime accident. Some countries have a system that seems to be functioning. IUMI is of the strong opinion that the prevailing regulations as set out, for example, by IMO and the EU are sufficient but that the necessary steps have to be taken to make the rules work.” ISU, ICS and IUMI all note the international legal context for the issue and the significant relevant legislation that is in place internationally and regionally. In particular, they refer to: IMO Resolution A.949, “Guidelines on Places of Refuge for Ships in Need of Assistance”; Resolution A.950(23),


Technology

High tech New products on the market range from telemedicine to steering gear solutions

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lobecomm has joined up with Future Care to create Future Care Live, a video-enabled telemedicine solution integrated into Globecomm’s popular Access Chat service. Future Care Live combines Future Care’s Caring for the Crew programme with Globecomm’s Access Chat Plus live video streaming software to provide a revolutionary level of medical care to commercial shipping and marine personnel during emergency illness or injury at sea, as well as to respond to routine healthcare needs. Using the video streaming properties of Access Chat Plus, Future Care Live creates a ‘virtual ER’, which allows for the simultaneous remote participation of general and specialist physicians, hospital treatment staff, the Future Care case manager, shipowner representatives and family members while the patient is onboard ship. Christina DeSimone, president and chief executive of Future Care, says the alliance would allow both companies to greatly expand the reach and effectiveness of maritime telemedicine services. “Telemedicine is a truly shared benefit – to the ship or boatowner or ship manager, as well as to individual crew members – and in ways not imaginable a few short years ago. Seafarers will benefit from the virtual presence of Future Care’s network of physicians and other medical professionals onboard ship, while the shipowner and his P&I Club will save in medical costs, time lost and avoidance of deviation.” Malcolm McMaster, president of Globecomm Maritime, said the ability to provide a genuine telemedicine was a timely development, given the ratification last year of the Maritime Labour Convention. “Shipowners and managers are more than ever focused on the human factor as the key to safe and efficient operations. Until now, this realisation has lacked the mechanism to truly provide innovative services like telemedicine. Putting Access Chat Plus together with Future Care creates the opportunity to deliver a service that can improve healthcare for mariners and also be highly cost effective.”

Originally developed for military use, Future Care Live meets the requirements of the US Health Insurance Portability and Accountability Act and international standards for the electronic transmission of private medical information. Other capabilities include virtual face-to-face secure communication in one-to-one or group settings for non-medical discussions, as well as the encrypted transmission of business documents of any size and in any format between ship and shore.

Steering gear MacGregor, part of Cargotec, has announced a new addition to its Hatlapa product range: the steering control system, Hebe. It will be offered as an integrated part of the company’s Hatlapa range of steering gear solutions and its inclusion will deliver operational and equipment compatability benefits for customers. The name Hebe for the steering control system follows the tradition of naming Hatlapa’s steering gear products after Greek gods and goddesses. Hebe is the goddess of youth. “Selling an integrated steering gear package affords several important advantages,” says Jörg Tollmien, head of sales for MacGregor’s Hatlapa products. “Sourcing a number of linked products from a single company helps shipyards simplify their supply chains. Minimising the number of suppliers also makes it much easier for shipowners to manage their servicing requirements throughout the equipment’s lifetime.” “The lower the number of interfaces that have to be handled by the yard the better,” he continues. “This approach eliminates potential problems with equipment compatibility. The control system and hydraulic actuator must be combined in the right way, and who better to do this job than the steering gear manufacturer? The systems are designed to be fully mutually compatible and they work extremely well together. “Hebe main steering control systems are designed for operation from nominal 24V DC or 110/230/440V AC power supplies and are suitable for virtually all SOLAS vessel types and high-speed craft,” says Carsten Pump, Hatlapa steering gear specialist at MacGregor. “They can also offer cost-effective Summer 2014 – 59


Technology

control solutions for smaller non-SOLAS units such as workboats and patrol craft. “The modular aspect of the Hebe series provides a flexible approach to customised control requirements for single and multiple rudders – including operator selectable independent or synchronous operating mode facilities if appropriate – and can also be configured to interface with Azimuth steering pods and steering jets.” The Hatlapa steering gear portfolio comprises four-cylinder ram-type steering gear up to 8,893 kNm, two-cylinder ramtype steering gear up to 950 kNm, rotary vane-type steering gear up to 1,100 kNm, twin-rudder steering gear, compact pistontype steering gear and rudder carriers. “The Hebe system is also compatible with MacGregor’s Porsgrunn steering gear,” notes Steinar Eliassen, responsible for Porsgrunn steering gear. Porsgrunn rotary vane-type steering gear has a torque range of between 600 and 5,850 kNm. ShipServ hooks up with Thome ShipServ, the leading marine and offshore e-marketplace, has built further on its trusted position among ship managers with the signing of leading integrated ship management service provider Thome Ship Management. Thome chose ShipServ on the strength of its ability to offer advanced sourcing and procurement tools alongside its core offering of increasing transaction speeds and improving purchasing efficiency. These advanced tools and services include ShipServ Match, an automated supplier recommendation service that can cut purchasing costs by up to 10%, and a KPI benchmarking tool that provides specific purchasing KPIs based on the trading activities of over 8,000 vessels. Thome is currently responsible for the technical management of over 200 vessels, including bulkers, tankers and offshore vessels. The Singapore-based manager will connect to ShipServ through its current Spectec AMOS system software suite. Paul Ostergaard, chief executive and founder of ShipServ, said: “We are delighted to welcome such a major and progressive ship manager to the ShipServ community and that a key factor in Thome’s decision was our recently 60 – Summer 2014

launched decision support tools that are proven to help purchasers reduce costs and save time” Carsten Brix Ostenfeldt, chief executive of Thome Ship Management, said: “Managing ships to a high standard while keeping costs under control is the challenge we all face in the industry today. We are confident that working with ShipServ will give us the tools we need to ensure our vessels are fully supplied to our specification and at the right cost level.” ShipServ has a number of leading ship managers and shipowners and operators using their platform and services such as the KPI benchmarking tool and ShipServ Match. These include AP Moller-Maersk, CMA CGM, Teekay Shipping and Anglo-Eastern. Thome also joins a growing band of Asian shipowners and managers that are currently using ShipServ – including Aboitz Jebsen, BW Fleet Management, Epic Shipmanagement, MSI Shipmanagement, “K” Line Shipmanagement, NYK Shipmanagement and MISC Berhad.

Energy management Eniram Limited, the fast-growing Finnish provider of energy management technology and data analytic services to the shipping industry, and Becker Marine Systems, market leader for highperformance rudders and manoeuvring solutions, have announced that Eniram’s Propulsion Power Decomposition (PPD) technology helped measure the impact of the Becker Marine Systems’ Twisted Fin (BTF) on Hamburg Süd Santa-class vessels. In January-February 2013, in order to improve the propulsion performance of its vessels, global container operator

Hamburg Süd decided to replace the pre-swirl stators originally installed on its Santa-class vessels with the new BTF, a further development of the Becker Mewis Duct. In order to validate the impact of the installations in real operation, Santa Catarina, with Eniram’s Dynamic Trimming Assistant (DTA) onboard was chosen as an example vessel to be analysed. Data from three months before and after the twisted fin installation was used in the analysis. To analyse the performance in similar conditions, periods in laden (draft more than 11m) and ballast (draft below 10m) were chosen for comparison. In order to eliminate the impact of varying environmental and operational factors, data was analysed using Eniram’s Propulsion Power Decomposition (PPD) technology. No other major operations were done at the installation of the twisted fin, which meant that the change in performance was undoubtedly attributed to the twisted fin. Walther Bauer, director of sales and projects at Becker Marine Systems, commented on the results: “In laden conditions, the improvement in performance was seen at speeds above 15 knots. Eniram’s analysis of the real data confirmed the original theoretical calculations and provided deeper insight into the savings generated by the BTF under different operational conditions.” Andrew Rayner, sales manager, Eniram Germany, adds: “The total impact to propulsion energy was estimated by analysing the operational profile from all of the collected data over two years of time. Thanks to our unique data platform, Eniram is the only player right now in the industry who is truly able to make sense of all this.”

Eniram is the only player right now in the industry who is truly able to make sense of all this


green issues

Environmental legislation is becoming increasingly stringent, placing many demands on owners and operators

Going green W

ith further environmental regulation due to enter into force next year, shipowners continue to face challenges relating to meeting the new low sulphur requirements, as well as cutting costs via greater onboard efficiency and dealing with the ballast water issue. There have also been regulatory moves to tackle issues such as ship recycling and wreck removal. The International Chamber of Shipping, the Baltic and International Maritime Council (Bimco), the International Association of Dry Cargo Shipowners (Intercargo), the International Association of Independent Tanker Owners (Intertanko), the World Shipping Council, the Cruise Lines International Association (CLIA) and the International Parcel Tankers Association (IPTA) continue to voice concern about serious implementation problems associated with the International Maritime Organization (IMO) Ballast Water Management (BWM) Convention and say they cannot recommend further ratifications of the convention until the problems are resolved. At April’s IMO Marine Environment Protection Committee (MEPC), governments decided neither to discuss in full nor to resolve these pivotal issues on which industry had made a detailed submission, the associations said in a joint statement after the meeting. The industry submission addressed the lack of robustness of the current IMO type-approval process for the expensive new treatment equipment, the criteria to be used for sampling ballast water during Port State Control inspections and the need for ‘grandfathering’ of type-approved equipment that has already been fitted. However, governments decided not to address these proposals until after the convention comes into force (which has not yet occurred, owing to a lack of member state ratifications). The industry concerns were shared by a number of flag states (including some that ratified the convention in its early years), but rather than agreeing to a ‘road map’ that would demonstrate IMO’s commitment to addressing the concerns, the MEPC

decided to look into conducting a study of the problems raised. This could take at least three years to complete and gives no guarantee as to what actions might emerge, the associations said. The industry organisations noted that once the convention enters into force, shipowners will collectively be required to invest billions of dollars in ballast water treatment equipment. The consequence of the MEPC decision is that shipowners, and society at large, will continue to lack confidence that the new treatment equipment will actually work, or that it will comply with the standards that governments have set for killing unwanted marine micro-organisms, the joint statement said. “The shipping industry maintains that the legal changes needed to make the ballast regime truly global and fit for purpose – such as making IMO guidelines on type-approval mandatory – are relatively straightforward and could still be agreed in principle by governments quickly. In a constructive response to the IMO’s decision, the industry therefore intends to make another full submission outlining concerns and proposing a possible way forward to the next IMO MEPC meeting in October 2014. “In the meantime, the shipping industry cannot recommend that further member states ratify the BWM Convention until confidence building measures on resolving implementation concerns have been set in place.”

Wreck removal The Nairobi International Convention on the Removal of Wrecks will enter into force on 14 April 2015 following the deposit, on 14 April 2014, of an instrument of ratification by Denmark, with the IMO. Among several provisions, the convention will place financial responsibility for the removal of certain hazardous wrecks on shipowners, making insurance, or some other form of financial security, compulsory. Denmark became the 10th country to ratify the convention, thereby triggering its entry into force exactly 12 months later. Summer 2014 – 61


green issues

Recycling agreement The International Maritime Organization (IMO) and the government of the People’s Republic of Bangladesh have signed a landmark agreement to work together to improve safety and environmental standards in the country’s ship-recycling industry. A memorandum of understanding formalising the cooperation between the two was signed by Nicolaos Charalambous, director of the IMO’s Technical Cooperation Division, and Md. Ashadul Islam, additional secretary, Economic Relations Division, at the Bangladesh Ministry of Finance, on 10 April 2014. IMO and Bangladesh will jointly implement a project entitled “Safe and Environmentally Sound Ship Recycling in Bangladesh – Phase I”. With an annual gross tonnage capacity of more than 8.8 million, the Bangladesh ship recycling industry is one of the world’s most important, second only to neighbouring India in terms of volume. The project, aimed at improving standards and sustainability within the industry, will consist of five work packages, covering studies on economic and environmental impacts and on the management of hazardous materials and wastes, recommendations on strengthening the government’s OneStop Service (in which all the various ministries with a responsibility for ship recycling – eg industries, environment, labour, shipping – offer a single point of contact for related matters), a review and upgrade of existing training courses and the development of a detailed project document for a possible follow-up project to implement the recommendations of phase I. It will be executed by the Marine Environment Division of IMO, in partnership with Bangladesh’s Ministry of Industries, over the next 18 months. The Bangladeshi ministry will coordinate input from the different stakeholder ministries within the country, while IMO will also collaborate with other relevant UN agencies, including the International Labour Organization and the United Nations Industrial Development Organization to ensure successful delivery of the project. 62 – Summer 2014

The principal funding for the project will come from the Norwegian Agency for Development Cooperation (Norad), while the Secretariat of the Basel, Rotterdam and Stockholm Conventions (BRS) will also support the project by mobilising EU funding towards the work package related to the management of hazardous materials, which will be implemented partly by BRS. IMO, the government of Bangladesh, Norad and BRS have been working towards the establishment of this project for a number of years. It demonstrates a major commitment from the government of Bangladesh to improve safety and environmental standards within this vital industry.

Scrubbing systems EnSolve Biosystems has developed a new product called EnScrub, which treats particulates and petroleum hydrocarbons from the effluent of shipboard sulphur oxides (SOx) scrubber systems. This patent-pending technology, partially funded by a Phase II National Science Foundation grant, combines biological and physical processes to remove and destroy petroleum hydrocarbons from the aqueous effluent of SOx scrubbers. “Whereas SOx scrubber systems focus on the removal of sulphur oxides from engine emissions, harmful particulates and petroleum hydrocarbons end up in the aqueous effluent of these scrubber systems,” explained Jason Caplan, president of EnSolve. “If this petroleumtainted effluent is sent overboard, it can present an environmental and regulatory problem for the shipowner. The EnScrub system addresses these contaminants, thereby reducing or eliminating the regulatory risk of discharging untreated SOx scrubber water overboard.” In late 2012, EnSolve conducted efficacy testing of a prototype EnScrub system on effluent obtained from a SOx scrubber system at the Port of Long Beach, California. The analytical results indicated that the EnScrub system was successful in reducing more than 99% of the petroleum hydrocarbons from the SOx scrubber water effluent. Subsequent testing in 2013 confirmed the results of the 2012 Port of Long Beach field trial.

“It’s important to note,” added Caplan, “that the EnScrub product is a complementary, not competitive, technology for SOx scrubber systems. Our goal is to provide this add-on technology to SOx scrubber systems to help keep both the scrubber manufacturers and shipowners in compliance with domestic and international clean water regulations.”

Cammell Laird developments Birkenhead shipyard and engineering services company Cammell Laird says it has developed one of the most advanced bespoke environmental packages for ferries in the shipyard industry, following its strongest year of trading in the sector. The yard says it has docked 24 ferries between 2013 and the beginning of 2014 and, in addition, has carried out a further 24 afloat repairs for ferry operators. During 2013, Cammell Laird repaired, built and converted almost 250,000gt of ferry and ro-ro ships for a wide range of owners. Already in 2014 it has docked and repaired ferries of 150,000 gross tons. Ferries worked on include both conventional and high-speed vessels in steel and aluminium. Customers include Caledonian MacBrayne, Isle of Man Steam Packet Company, Irish Ferries, Mersey Ferries, NorthLink Ferries, Orkney Ferries, P&O Ferries, Seatruck Ferries and Stena Line. Cammell Laird technical manager Paul Ashcroft says a massive challenge and focus for the sector moving forward is to find cost-effective solutions to the new environmental standards that ferry companies have to meet. “There has never been greater pressure on ferry companies to become greener than now,” he said. “As a result, we have developed a highly advanced and specialised new environmental package addressing some of the hardest challenges. This covers carbon emissions, airborne pollution and the spread of aquatic nuisance species, in particular, MARPOL Annex VI and the Ballast Water Management Convention – challenges that require considerable pre-planning.” Ashcroft said that Cammell Laird’s green package has been developed to be bespoke and address the challenges faced by each individual ferry.


green issues

Right: Cammell Laird

“There is not one simple solution to suit all vessels,” he said. “Much depends on the type of ship, the geographical trading area, its age and operating profile. This is made harder by stretched ship management resources and the multitude of new, often competing, technologies. However, because we work on such a variety of vessels, Cammell Laird is right at the forefront of these challenges. This has led us to forge excellent links with a wide range of technology providers. Those providers are working closely with our design engineers and naval architects to develop solutions, with services ranging from initial feasibility studies to comprehensive turnkey retrofits.” As an example, Cammell Laird has recently completed a fleet study on a range of vessels for a shipowner to provide workscope and drawings to achieve class approvals for modifications. These are required for future emissions regulations in the North Sea. The vessels are to be modified to allow the main engine to operate primarily on marine diesel oil (MDO) rather than heavy fuel oil (HFO). Further projects include feasibility studies for the installation of exhaust gas cleaning systems (exhaust scrubbers) and other eco-economy measures.

ABB order ABB, a global leader in power and automation technology, has secured a new order to supply electric power plant and Azipod propulsion units for an icebreaker vessel built for the Finnish Transport Agency (FTA) at Arctech Helsinki Shipyard. Competitive bidding took place between several suppliers. Due for delivery in 2016 and set for operation in the Baltic Sea, the new

vessel features dual fuel capability. As such, it will be the first icebreaker in operation able to run using liquefied natural gas (LNG) as a fuel, cutting both emissions and fuel cost. In fact, the concept designers at Aker Arctic Technology and ILS were instructed to select the industry’s most advanced technologies to meet icebreaking conditions in the Baltic Sea year-round, and to perform opensea oil spill response and towing duties in summer and winter. Arctech will provide the basic design of the vessel. Once operational, the new vessel is expected to attract worldwide attention to Finnish Arctic expertise. Central to the vessel’s performance will be its three-pod propulsion solution, with a 6MW Azipod unit at the bow and two 6.5MW units at the stern included to optimise efficiency and manoeuvrability in ice-ridge conditions in particular. “The safety of seaborne transport in the Baltic Sea is under political and

Once more, the system’s performance and its ease of maintenance have proved critical factors in the selection process

regulatory scrutiny as never before, [leading to] FTA’s preference for ABB’s power and propulsion technology based on our proven references,” says Heikki Soljama, head of ABB’s marine and cranes business unit. “Once more, the system’s performance and its ease of maintenance have proved critical factors in the selection process. It is no coincidence that the most forwardlooking icebreaker designs invariably feature podded propulsion.” The new Finnish icebreaker is a continuation of the cooperation between ABB and Arctech Helsinki Shipyard. In 1987, the Azipod propulsion system was developed in close cooperation between ABB and Arctech Helsinki Shipyard, combining the expertise of electrotechnical experts and shipbuilders. ABB can trace its supply of icebreaker electric propulsion technology to the Finnish market back 75 years to the delivery of the icebreaker Sisu to the Finnish government in 1939. This featured electric propulsion systems from Stromberg. The wide adoption of Azipod propulsion technology in the icebreaking field has strengthened ABB’s reputation to fulfil even the most demanding sea transportation performance requirements. ABB has delivered electric propulsion systems to over 80 icebreakers or ice-going vessels with a propulsion power of up to 36MW.

Summer 2014 – 63


EVENTS & EXHIBItions

2 - 4 June

LNG Bunkering North America, Vancouver, Canada

24 - 25 June

11th Annual Bunker & Residual Fuel Oil Conference, Houston, Texas, US

14 - 17 October

Ship operators, LNG providers, ports, technology specialists and regulatory bodies will gather to discuss crucial progress on the LNG bunkering front. The proigramme will include a series of regional case studies and feasibility reports from North American leaders along with presentations from LNG bunkering pioneers in Europe.

Focuisng on fuel quality, supply, and market dynamics, Platts 11th Annual Bunker & Residual Fuel Oil conference aaims to providethe latest information on the state of the industry and the key drivers for bunker and residual fuel oil, the "bottom of the barrel."

As various regulatory and commercial developments continue to impact the bunkering industry, SIBCON 2014 will once again bring you a high-powered speakers line-up, and unrivaled networking opportunities.

www.lngbunkeringnorthamerica.com

www.platts.com/conferencedetail/2014/ pc422/index

2 - 6 June

12 - 14 August

Posidonia, Athens, Greece Known as the world’s most prestigious shipping event, Posidonia 2014 will see more than 1.800 exhibitors with over 18.500 visitors from 92 countries attending. The week-long event, which will start on June 2 and run to the 6th June 2014 at the Metropolitan Expo Centre in Athens, will attract attendees from across all aspects of the shipping industry.

www.posidonia-events.com

17 - 20 June

LNG Carrier Shanghai, CHINA LNG Carrier & FSRU Conference is the FIRST event in China to address hot issues in LNG carrier/regasification vessel building and FSRU development potential.

www.lngcarrierfsru.com

18 - 19 June

Shipping in Changing Climates: Provisioning the Future, Liverpool, UK Climate change poses great challenges for the shipping sector. It is a key element of consumption and production systems worldwide but what we consume and how goods for consumption are provisioned will both affect and be affected by climate change.

www.maritimelogisticsandenergy.com

18 June

IBIA Seminar and Drinks Reception: Qualifying Quality, Liverpool, UK One of the biggest challenges the shipping industry is facing is qualifying the quality of the bunkers purchased. The quality of bunker fuel has long been a source of concern to shipowners and charterers and the issue is becoming ever more prevalent as sulphur thresholds reduce.

www.ibia.net

64 – Summer 2014

Marintec South America 2014, Rio de Janeiro Marintec South America – Navalshore, acknowledged as the strategic event for the maritime value chain in Brazil, provides opportunities for your company to drive new revenue with a highly qualified audience.

www.navalshore.com.br

9 - 12 September

SMM Hamburg, Germany SMM is the leading international forum of the maritime industry. Every two years, the representatives of the shipbuilding and marine equipment industries from all parts of the world meet in Hamburg, present innovations and forward looking technologies, and set the course for future success of the industry.

smm-hamburg.com/en

28 - 30 September

RESCON 2014 – The Red Sea and Gulf Bunkering Conference, Dubai, United Arab Emirates RESCON 2014 is the comprehensive business gathering of bunker professionals focused on the Red Sea and Gulf region, this year including North and East Africa, India and Pakistan.

rescon.iirme.com/#sthash.1kUfCJP0.dpuf

8 - 10 October

Marintec Russia, St. Petersburg The first Russian specialized Exhibition and Conference Offshore Marintec Russia dedicated to development of continental shelf infrastructure will take place in SaintPetersburg.

www.offshoremarintec-russia.com

18th Singapore International Bunkering Conference and Exhibition (SIBCON) 2014, Singapore

www.sibconsingapore.com

28 - 30 October

SeaTrade Middle East, DUBAI Now firmly established as the region’s leading shipping event, the 2012 event welcomed 7,065 attendees across the 3 day exhibition and conference, whilst 242 exhibiting companies took part in the event from 33 countries over a net exhibition space of 4,338 sq m - a 7% increase on 2010.

www.seatrade-middleeast.com

4 - 6 November

IBIA Convention, Hamburg The title and focus of the convention is “Clarifying Quality and Compliance” and the week-long package of events will feature many guest and keynote speakers, along with training courses, discussion on IBIA working groups and of course many networking opportunities for you and your business. We round the convention off with a boat tour of Hamburg Port, so join us aboard for lunch and drinks.

www.ibia.net

23 - 25 March 2015

The 9th International FUJCON 2015, Fujairah, United Arab Emirates FUJCON enjoys international recognition and attendance from 46 countries covering diversified sectors of the bunkering industry. Recognised as an international service anchorage, Fujairah is among the world’s top three bunkering locations & a global hub for both oil storage and oil product supply.

www.cconnection.org/event/FUJCON/2013/ resources/CC14276_FUJCON2015_Postcard_ FA_WB.pd


youtube.com/user/NHSTevents1 @TWevents_NHST +44 20 7029 4163 info@tradewindsevents.com tradewindsevents.com

TradeWinds is delighted to announce it will be hosting the TradeWinds Shipowners Forum as the opening keynote of Posidonia 2014 in the Metropolitan Expo Centre on 3 June 2014. Following a sold-out, record attendance on the opening day of Posidonia 2012, the Forum will once again set the intellectual agenda for the entire week and attendees can expect a stimulating and inspiring start to shipping’s most important week of the year. The Forum is an interactive discussion led by a panel of experts and designed to reflect TradeWinds’ readers priorities and concerns, comprising two presentation / discussion sessions combined with high-level networking breaks. Attendance is by invitation. To register your interest to attend, please email info@tradewindsevents.com

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