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Exclusive interview

Maersk Group China chairman: Maersk maximises China market US ports: the gloves are off as new Panama Canal opens New alliances – who is on top?

“The big issue is risk management. If you only have three alliances, your choices are increasingly limited” Filip Degroote, EMEA transportation director, Stanley Black & Decker, see page 16


contents

3rd Quarter 2016 volume 5 issue 3

12

06

Regulars 4 COMMENT 44 LAST WORD 45 BEST OF THE WEB

Market updates 6 The new heavy hitting alliances are battling it out. How do they compare (VesselsValue.com)?

Trade route 16

8 The Brazilian recession is continuing in full swing, but there are still trade opportunities for carriers on the South American-Asia tradelane

Operator profile 12 Maersk Group China chairman and North Asia chief representative Tim Smith unveils Maersk Line’s China focuses in an exclusive interview

Customer profile 16 Stanley Black & Dekker’s genuinely global supply chain demonstrates the knock-on effects on shippers of carrier consolidation

Ship description 20

18 The final vessel in Ignazio Messina’s enhanced roro container series has been delivered

Regional analysis: North America 20 The widening of the Panama Canal has sharpened competition between US east and west ports. We speak to bosses at major ports on both coasts to see how they are facing up

Top 20 ports 25 Last year was the second worst ever for ports – only 2009 could beat it – and the industry is having to make new choices

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Container Shipping & Trade | 3rd Quarter 2016


contents News analysis: VGM 32 The Verified Gross Mass (VGM) directive started on July 1. Since then how has the supply chain been faring, and what tools are out there to help? We take a look

Reefers

3rd Quarter 2016 volume 5 issue 3 Editor: Rebecca Moore t: +44 20 8370 7797 e: rebecca.moore@rivieramm.com

34 The need to cut costs and be energy and environmentally efficient are shaping the container reefer industry. We speak to some of the main manufacturers

Contributer: Gavin van Marle t: +44 20 7394 7209 e: gavin.vanmarle@rivieramm.com

Hull design

Commercial Portfolio Manager: Bill Cochrane t: +44 20 8370 1719 e: bill.cochrane@rivieramm.com

37 There are a new variety of mix-and-match vessels that are adaptable to multiple routes and ports

Vessel type: Panamax 40 The widening of the Panama Canal has spelled the death knell for traditional Panamax tonnage. What now?

Fleet stats & analysis

Head of Sales – Asia: Kym Tan t: +65 9456 3165 e: kym.tan@rivieramm.com Senior Sales Consultant: Ed Andrews t: +44 20 8530 8322 e: ed.andrews@rivieramm.com Group Production Manager: Mark Lukmanji t: +44 20 8370 7019 e: mark.lukmanji@rivieramm.com

42 Business is brisk for feeder newbuilding with low prices for new vessels, while German controlled tonnage still dominates

Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com

Next issue

Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Editorial Director: Steve Matthews Executive Editor: Paul Gunton Head of Production: Hamish Dickie Business Development Manager: Steve Edwards

Main features include: • Trade route analysis: Asia-Europe • Regional analysis: Middle East, Africa and Indian Ocean • Ship operations: slow steaming and propulsion systems • Special focus: ICTSI and PSA • Energy efficiency: coatings • Industry leaders • Ship type: multipurpose and conro. Front cover photo credit: Maersk Line

Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

www.rivieramm.com ISSN 2050-7011 (Print) ISSN 2050-7178 (Online) ©2016 Riviera Maritime Media Ltd

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Container Shipping & Trade | 3rd Quarter 2016

Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

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4 | COMMENT

Hanjin Shipping bankruptcy to cause turmoil H Rebecca Moore, Editor

“Hanjin Shipping’s potential bankruptcy would be the largest container shipping failure in history, dwarfing all previous carrier bankruptcies in absolute terms”

anjin Shipping’s bankruptcy is causing turmoil in the container shipping markets – with serious disruption to supply chains anticipated over the coming weeks, and a question mark hanging over what its position will mean for the current and new alliances. And the impact has been highlighted by Alphaliner, which said that Hanjin Shipping’s “potential bankruptcy would be the largest container shipping failure in history, dwarfing all previous carrier bankruptcies in absolute terms”. Hanjin Shipping filed for receivership at the end of August after its creditors refused to provide extra funding to the shipping line. But at time of writing it is thought that Hyundai Merchant Marine (HMM) may consider taking over some of its assets. Hanjin's board unanimously agreed to make the court filing for receivership at a meeting on Wednesday 30 August, a company spokesman said, after lenders refused to reschedule its debt under a new restructuring plan. South Korea’s Financial Services Commission said in a statement that HMM may consider taking over some of Hanjin Shipping’s assets, including vessels, network and staff. The impact of Hanjin’s impending bankruptcy is expected to hit all sectors of the supply chain, spanning shipowners, ports, container lessors, shippers, freight forwarders as well as others. A briefing by Holman Fenwick Willan LLP highlighted some of the major disruptions faced, such as the “immediate concern” for shipowners about non-payment of overdue or pending hire for vessels time-chartered to Hanjin. HFW added: “Owners of containers leased to Hanjin will also be concerned about the recoverability of hire due to them. It is reported that Hanjin has already been negotiating with several container lessors regarding hire payments, indicating the difficulty Hanjin was having in meeting its obligations to lessors.”

Container Shipping & Trade | 3rd Quarter 2016

It added that terminals and container yards currently owed fees/charges by Hanjin are also likely to be seeking advice on recovery. HFW said that reports suggest that port authorities in Shanghai and Xiamen in China, Valencia in Spain, and Savannah in the US, among others, have already refused access to Hanjin vessels due to concerns about Hanjin's ability to pay fees. “This will in turn cause serious delays to the delivery of cargoes,” said HFW. And of course the repercussions will instantly be felt by Hanjin’s alliance partners. HWF highlighted concerns ranging from recovery of freight and termination of their slot sharing arrangements, and added that Hanjin's alliance partners “may be looking to collect their cargoes from Hanjin vessels, and to bar Hanjin cargoes from being loaded onto their own vessels”. But what will its impending bankruptcy and possible takeover by HMM mean for the new alliances? According to VesselsValue figures, Hanjin will contribute 39 vessels at a total 283,286 teu to THE Alliance, making it the fifth smallest of the shipping lines in the alliance of six. Over in 2M, HMM contributes 18 vessels at a total of 135,898 teu. (For more about the new alliance sizes, see market updates, pages 6-7, and for more about the impact of HMM’s entry into 2M, read out exclusive interview with Maersk China chairman and main North Asia representative, Tim Smith, pages 12-14). If HMM does indeed carry out a takeover, of course there will be an immediate impact on the separate alliances that these two carriers belong to. But any potential acquisition/merge will not create a superpower. As VesselsValue says, the merge of the two South Korean carriers would bump up the combined fleet value of HMM and Hanjin to US$2.7 billion. VesselsValue points out that even though this sounds a lot, the merged Hanjin and HMM company would only rank 27th in the world in terms of fleet value (COSCOCS coming in first with 786 ships worth US$20 billion). CST

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6 | MARKET UPDATES

Alliances: who has the power? The new heavy hitting alliances are battling it out. Rebecca Moore looks at how they compare

T

he recently formed and reconfigured container shipping alliances are dominating the sector. Together, they represent 44 per cent of the world’s box fleet capacity and their value is a huge US$130 billion, according to VesselsValue.com. Ocean Alliance takes top spot with 539 vessels, a total size of 4.08 million teu and a total value of US$23.9 billion. Its newest member APL, which will enter the alliance after being acquired by CMA CGM, adds 54 vessels with a combined total of 460,656 teu. It adds considerably to CMA CGM’s fleet, which combined with APL will now have 155 vessels, at a total of 1.2 million teu and with a value of US$7.3 billion. However, China Cosco Shipping Corp (COSCOCS), which was formed from

the merger between China Shipping Container Lines (CSCL) and COSCO, still dominates in the alliance and has considerable weight. It owns 203 vessels with a total of 1.6 million teu. Ocean Alliance is expected to hold the largest market share on the Far East–North America transpacific route, with a 39 per cent share of the current capacity deployed on the trade, says Alphaliner. This is against 35 per cent for The Alliance and 19 per cent for 2M. A further 7 per cent of the trade is taken by smaller non-alliance carriers, according to Alphaliner. In second place comes 2M. The surprise addition of Hyundai Merchant Marine (HMM) means that 2M now has 483 vessels with a total of 3.3 million teu, worth a total value of US$16.62 billion,

TOP 3 BIGGEST ALLIANCES

2

1

OCEAN ALLIANCE Total vessels Total Size (TEU) Total Value

539 4,084,642 $24.0bn

2M 483 Total vessels Total Size (TEU) 3,296,709 $16.6bn Total Value

3

THE ALLIANCE Total vessels 347 Total Size (TEU) 2,710,424 Total Value $16.6bn

Source vesselsvalue.com

Container Shipping & Trade | 3rd Quarter 2016

WORTH

44% OF THE WORLD’S CONTAINER FLEET

TOTAL WORLD CONTAINER FLEET

$130bn VesselsValue

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*All data provided by VesselsValue.com

according to VesselsValue. Interestingly, VesselsValue’s figures show that HMM does not make much difference to the power of the alliance. It is only adding 18 vessels, with a total of 135,898 teu. This is insignificant compared with 268 box ships at 1.9 million teu for Maersk Line and 197 ships at a total 1.2 million teu for Mediterranean Shipping Co (MSC). And HMM’s total vessel value is US$688 million compared with Maersk’s US$10.5 billion and MSC’s U$5.4 billion. THE Alliance stands at number three and has a total of 347 vessels, at 2.7 million teu, worth US$16.61 billion. The merger of Hapag-Lloyd with United Arab Shipping Co (UASC) certainly boosts Hapag-Lloyd’s fleet, giving it a combined 121 vessels at a total of 1.07 million teu and a value of US$6.6 billion. This makes it the biggest of all the carriers in THE Alliance, the second biggest being NYK Line with 68 vessels at a total of 507,020 teu and a value of US$3.02 billion. The Alliance may be impacted after member Hanjin Shipping filed for receivership after it creditors refused to provide extra funding to the shipping line Hanjin's board unanimously agreed to make the court filing for receivership at a meeting on Wednesday 30 August, a company spokesman said, after lenders refused to reschedule its debt under a new restructuring plan. South Korea’s Financial Services Commission said in a statement that HMM may consider taking over some of Hanjin Shipping’s assets, including vessels, network and staff. If this was to happen, there would no doubt be an affect on the alliances, as HMM is a member of 2M. In terms of fleet and fleet value, Hanjin is the fifth smallest in THE Alliance, with 39 ships at a total teu of 283,286 capacity and at a value of US$1.5 billion. The smallest in The Alliance is Japanese carrier Kawasaki Kisen Kaisha (K Line), with 31 ships with a total of 240,440 teu capacity. The recent raft of first half 2016 financial results reveal the importance for carriers of having some protection, by being in large alliances. Many have posted losses as a result of plunging freight rates. These include Hanjin which has revealed a loss of US$182 million. Hapag-Lloyd has gone into the red with a half-year group net loss of €142.1 million and Maersk Line has been hit by a second quarter loss of US$151 million, amongst others. CST

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THE ALLIANCE COMPANY

NO. OF VESSELS

TOTAL TEU

TOTAL VALUE US$M

Mitsui OSK Lines (MOL)

36

309,189

2,144

Kawasaki Kisen Kaisha (K Line)

31

240,440

1,557

Yang Ming Marine Transport Corp

52

294,554

1,734

121

1,075,935

6,629

Hanjin Shipping

39

283,286

1,528

NYK Line

68

507,020

3,016

347

2,710,424

16,607

COMPANY

NO. OF VESSELS

TOTAL TEU

TOTAL VALUE US$M

Maersk Line

268

1,937,687

10,509

Mediterranean Shipping Co (MSC)

197

1,223,124

5,426

Hapag-Lloyd, United Arab Shipping Co (UASC)

TOTAL

2M

Hyundai Merchant Marine (HMM) TOTAL

18

135,898

688

483

3,296,709

16,623

NO. OF VESSELS

TOTAL TEU

TOTAL VALUE US$M

101

776,089

4,556

OCEAN ALLIANCE COMPANY CMA CGM APL

54

460,656

2,751

China Cosco Shipping Corp (COSCOCS)

203

1,632,151

9,365

Evergreen Marine Corp

120

673,805

4,101

61

541,941

3,219

539

4,084,642

23,992

Orient Overseas Container Line (OOCL) TOTAL

Hanjn’s bankruptcy could have an impact on THE Alliance

Container Shipping & Trade | 3rd Quarter 2016


8 | NORTH–SOUTH TRADES

Asia-South America trade demands discipline

The Brazilian recession continues in full swing, but there are still trade opportunities for carriers on the South America-Asia route by Gavin van Marle

I

n an era of container shipping that is characterised by dramatically declining freight rates, recent trends on the Asia– east coast South America trade show that there could still be hope for carriers – if they can just practise some discipline. At the beginning of 2016, container spot freight rates between Shanghai in China and the Port of Santos in Brazil languished at a sub-economic US$600 or less per feu through January and early February, according to Drewry Maritime Research’s Container Freight Rate Insight data, forcing carriers into what the analyst terms “drastic surgery.” The problem was, of course, falling demand. This had declined year on year by around 28 per cent on the trade, according to Drewry, with most of the blame being laid at the door of the deepening Brazilian recession. In 2015, Brazilian containerised import volumes from Asia were 14.5 per cent down on the year before, according to Brazil-based maritime data agency Datamar. The decline further sharpened this year – in February, Asia– Brazil volumes had declined by 37.3 per cent year on year, and Drewry predicted the trade was likely to record a year-end volume count some 20 per cent lower than 2015. “There seems little hope that the incumbent political classes have what it takes to get the country back to the boom times of just a few years ago when it was famously heralded as one of the fast-growing BRIC [Brazil, Russia, India, China] economies selling vast quantities of raw materials and commodities to China, and establishing its own high-tech industries. “A variety of factors have thrown the country way off course, one of which is that China has

Container Shipping & Trade | 3rd Quarter 2016

severely cut back its intake of Brazil’s raw materials and global commodity prices have fallen as demand peters out. According to the International Monetary Fund, Brazil’s GDP contracted by 3.8 per cent last year, and will do so again in 2016 according to its latest forecast, representing a 0.3 point downgrade from its previous assessment given in January,” Drewry says. It is important to note, of course, that Brazil is not the only country on South America’s east coast, and it has been a fillip for carriers this year that Argentina appears to have returned to growth, while the much smaller economy of Uruguay also put in a decent performance. “Traffic from Asia to the Plate region of Argentina and Uruguay is faring much better. Measures enacted by Argentina’s new government, including relaxing foreign exchange controls, seem to be working as Plate imports grew for first time in four months in February, rising 4.1 per cent year on year. The rolling 12-month average for Plate imports rose to 7.1 per cent on the back of February’s import spurt,” Drewry said. Imports to Argentina and Uruguay currently account for some 37 per cent of all Asia–east coast South America southbound traffic, up from the percentage share that was in the low 20s at the start of 2015. But Brazil continues to dominate the trade, and because of this the southbound volume between Asia and the east coast of South America was down around 25 per cent on the previous year. As result, vessel utilisation levels on the southbound leg also fell, from just over 70 per cent at the beginning of the year to around 65 per cent by April. The response by carriers was both dramatic and highly effective. Southbound capacity on the route was cut by nearly 30 per

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NORTH–SOUTH TRADES | 9

BELOW: The container facilities at Montevideo, Uruguay, one of the pockets of growth on the South American east coast

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cent, with whole services being axed, while at the same time carriers were able to increase vessel sizes to take advantage of pockets of growth, should they occur. “As of June 2016, there were only three weekly Asia–east coast South America services, versus twice that number 12 months prior,” Drewry noted. The nine different operators that operate on the trade have settled on optimal units, ranging between 7,500 teu and 10,500 teu and averaging at 8,500 teu, giving them greater operating economies of scale while at the same time presenting them with the opportunity to increase rates. And spot rates on the route have certainly soared. According to the latest Shanghai Containerized Freight Index, container spot rates between China and South America stood at US$2,543 per teu, having grown by 400 per cent. “The reconstructive surgery undertaken in the Asia–east coast South America corridor has allowed carriers to significantly improve their ship utilisation, giving them the traction needed to raise freight rates in a depressed market,” Drewry said. Why, then, cannot carriers replicate this upswing in the corresponding Europe–east coast South America trade, which has seen recent freight rate falls as ship utilisation levels

continue to be depressed? One key problem here is the influx of Panamax vessels since the opening of the expanded Panama Canal. Drewry confirms that freight rates have fallen over the course of the year as ship utilisation has weakened. Once again, slack demand is the root cause, with southbound container volumes from North Europe and the Mediterranean to the South American east coast declining by 17.4 per cent year on year in April, according to statistics from Datamar. This means that the trade saw 12 consecutive months of annual volume losses. It is important to remember that, historically, the southbound leg out of North Europe, in particular, as well as from the Mediterranean has been the headhaul leg, but that appears to be changing. Figures from Datamar show that at the end of April, cumulative volumes from the Mediterranean to the east coast of South America fell by 17.6 per cent year on year, while from North Europe they fell 12.7 per cent. At the same time, volumes on the northbound backhaul leg were greater than the southbound leg for 11 of the past 12 months on record. Datamar records for April show that northbound container shipments from the east coast of South America to North Europe and the Mediterranean rose by 4.4 per cent over the previous year, an increase that was aided by the depreciation of currencies in the Latin American exporting countries. “As well as becoming the dominant leg of the trade, the growth trend for the northbound voyage is the polar opposite of the southbound, with April’s result representing 12 straight months of year on year growth,” Drewry added. It concluded that some of this growth had also been due to strong trade between Latin America and other emerging areas, such as Africa and the Middle East, where there is demand for many of the perishable exports coming out of Brazil and Argentina. “The Mediterranean market – a transshipment hub for traffic from the east coast of South America to West Africa and the Middle East – has been at the forefront of the northbound renaissance, with volumes up by 24.6 per cent year on year after four months of 2016. In comparison, volumes from the east coast of South America to North Europe have risen by 5.7 per cent, although it remains the bigger trade in terms of teu,” it said. While that may be good news, it is set against what remains a very difficult situation given the state of freight rates, which are proving to be loss-making for carriers on the southbound leg. According to Drewry’s Container Freight Rate Insight, shippers were paying around US$1,400 per feu from Rotterdam to Santos at

Container Shipping & Trade | 3rd Quarter 2016


10 | NORTH–SOUTH TRADES

the beginning of the year, which had dropped to US$1,300 per feu by the middle of the year. The Genoa–Santos leg fared worse, dropping from just over US$2,000 per feu in January to around US$1,350 per feu six months later. Meanwhile, northbound rates barely moved during the first half of 2016, and at the end of May were at just under US$1,300 per feu to Rotterdam and around US$1,450 to Genoa, despite the volume growth. Drewry attributed this to carriers’ apparent refusal to reduce capacity, although it should be remembered that EU regulations on liner shipping have made it much harder for carriers to co-ordinate. “Given the grave state of freight rates on this trade it is somewhat surprising that carriers have not done more on the supply side, but the monthly slot count has barely changed in the first five months of 2016. Neither have lines engaged in many void sailings, with only three counted thus far.

“The consequence is that the average ship utilisation on the southbound leg continues to be below half-full (although it should be remembered that some of that space will be used to reposition empty reefers back to east coast South America), while even in the stronger northbound trade ships are at best three-quarters full,” Drewry said.

ABOVE: With a capacity of 9,800 teu, Hamburg Süd’s Cap San Augustin is one of the largest vessels in the Europe– South America east coast trade

South America continues to attract international port operators DP World has won a concession to develop and operate a new container facility in Ecuador, a country that has proved more resistant than others in Latin America to the charms of international terminal operators, after the Dubai-headquartered operator was awarded a 50-year concession to develop the port of Posorja, located around 65km from Ecuador’s largest port of Guayaquil. DP World is set to manage a US$1 billion investment plan for the project. An initial US$500 million will be directed into land purchases, dredging an access channel, building a 20km access road and constructing a 400m container and general cargo berth with annual handling capacity of 750,000 teu. Construction is due to start by the first quarter of next year and will take two years to complete. There are plans to invest a further US$500 million and the operator said that, ultimately, as much as 2km of berths could be developed as well as a logistics zone. The water depth of the port is 15m,

which is considerably more than the 10m offered by the port of Guayaquil. DP World is working with local companies Consorcio Nobis and Grupo Vilaseca. Roberto Dunn, executive director of Consorcio Nobis, said: “DP World Posorja will offer Ecuadorian importers and exporters a unique deepwater alternative that will dramatically improve the competitiveness of their products in world markets and has the potential to transform the Ecuadorian economy.” However, the economy is not without its difficulties. According to FocusEconomics, its GDP is set to contract by 2.8 per cent this year, making it the third-worst performer in South America after Venezuela and Brazil. Maersk Line data records imports from Asia in 2015 falling by 12 per cent and from Europe 15 per cent, while exports grew just 1 per cent. Early indications are that this year will be little better. Export growth of 8 per cent in the initial months of the year was offset by

Container Shipping & Trade | 3rd Quarter 2016

a 22 per cent decline in imports. “A dip in demand for cars, furniture, and electronic appliances accounts for the import slump which can be related to the country’s lower spending power as result of inflation. “Looking to the rest of 2016, it is expected that Ecuador will maintain a similar growth trend as registered in 2015, due to the steady decline in oil prices. The El Niño weather phenomenon is likely to impact exports, especially tuna, during 2016,” Maersk wrote in a recent trade report. Ecuador has proved to be difficult investment terrain for overseas port developers. Hutchison Port Holdings won a concession to develop the port of Manta in 2007, but withdrew from the project two years later, following what the principal officer at the US Consulate General, Doug Griffiths, described as “six weeks of turmoil over the concession’s future,” in a leaked government cable which is part of the Wikileaks cache. “President Rafael Correa threatened, during one of

his weekly radio addresses, to expel the company from Ecuador. Allegedly, in response to the unilateral changes to the concession terms imposed by Mr Correa, Hutchison announced that it would abandon the country. “The Government of Ecuador and Manta port authority officials then insisted that the concession remained valid and scrambled to find a way to keep Hutchison in Manta. Hutchison’s managing director told us that the change in the global economic environment, and the mercurial, anti-market behaviour of the Ecuadorian Government made the concession no longer viable,” Mr Griffiths wrote. Less controversial was the 20-year concession won by Filipino port operator International Container Terminal Services (ICTSI) to manage the container and general cargo terminals at Guayaquil under a privatisation arrangement. Throughput across the port reached a capacity of almost 1.75 million teu in 2015. CST

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12 | SHIPPING LINE PROFILE

Maersk ups its focus on China Maersk is growing its footprint in China by partnering with shippers and shipyards there, while HMM’s entry into the 2M alliance will boost its Pacific trade. Rebecca Moore spoke to Maersk Group’s China chairman

T

he weak demand, overcapacity and plunging freight rates that are plaguing the container shipping market are creating challenges for all shipping lines, including one of the world’s largest container operators, Maersk Line. But, as Maersk Group’s China chairman and North Asia chief representative Tim Smith told Container Shipping & Trade in an exclusive interview, there are also plenty of opportunities that Maersk Line is able to take advantage of – including government initiatives that have been launched in China to boost trade, developing partnerships with Chinese shipyards, and Hyundai Merchant Marine’s (HMM’s) entry into the 2M alliance. Maersk’s recent first half 2016 financial results highlight just how challenging the market is these days. Profit for the Maersk Group overall fell to US$134m, whilst the Group’s shipping division Maersk Line was hit by a second quarter loss of US$151 million, down from a profit of US$507 million for the same period last year. Commenting on the results, Mr Smith said: “The results are very disappointing across the group. It is the ‘perfect storm.’ Our transportation sector is suffering from

Container Shipping & Trade | 3rd Quarter 2016

low demand and very low freight rates and our oil businesses are suffering from a very low oil price.” With regard to the container sector, Mr Smith noted: “The markets are extremely tough right now. There is very weak demand and overcapacity in a lot of sectors. The question for us is how to trim capacity and meet the lower levels of demand that we are now seeing.” In June 2015, Maersk Line signed a newbuilding contract with South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) for 11 plus six optional second generation Triple-E container vessels with a capacity of 19,630 teu each. Mr Smith said that the company has decided not to exercise options for the six 19,630 teu vessels. The remaining 11 vessels will join Maersk Line’s fleet between April 2017 and May 2018. Singling out the challenges on the Asia–Europe trade, he said: “Asia–Europe is very tough. However, so far this year on the westbound leg total volumes grew by three per cent, which is better than the second quarter decline of six per cent last year.” The reasons for the stronger figures include a level of recovery in European imports and a modest improvement in trade with Russia. But in contrast, the eastbound leg

has seen a total volume decline of 4-5 per cent in the second quarter of this year compared with the same period in 2015. “China is not importing as much as it was, which is a bit of a disappointment to us. We had hoped that as China developed a consumption-led economy, this would drive an increase in imports. But in the last two years we have not seen much evidence of that. This may be because so far the rise in consumption has been mostly satisfied locally in China,” Mr Smith explained. He also highlighted the challenges presented by the volatile and weak freight rates that are being experienced in Asia–Europe trade. “We have tried to improve freight rates, sometimes with a bit of success, but the market remains very competitive and challenging. There is a lot of capacity out there, as most carriers seek to deploy very large ships on Asia–Europe. So we keep trying to raise freight rates but the competitive situation does not allow us to benefit from that in a consistent way.” Given the difficult market situation, Maersk has focused on cutting costs and has had considerable success. Mr Smith explained: “Our aim remains for now – at least until our strategic review has been completed – to achieve profitable growth. To do this we have to have a very strong

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SHIPPING LINE PROFILE | 13

Maersk Line has large plans for China

focus on cost efficiency and keep our customers with us in what are extremely challenging times. Demand is so low that the only way to make a profit is to keep taking costs out.” Maersk Line has managed to slash its cost per container to a record low – it has been below US$2,000 for the first time ever in the first half of this year – and for a number of years in a row the shipping line has been able to take 10 per cent of the cost out of its network each year, while still growing the network. “I think that cost leadership is a reason why Maersk Line has outperformed most of its competitors for the last few years, in terms of profitability,” Mr Smith commented. Indeed, he said that a number of Maersk Group’s main businesses are in the top quarter percentile of global performance against its peer group this year, as they were in 2015. Mr Smith added: “That does not mean that we are making the profits that we wanted but at least we are in the upper end of performance for our peer group.” Mr Smith’s focus is on maximising Maersk’s business in North Asia and China. The importance of China to Maersk’s transportation related business is underlined by the fact that China takes up 35 per cent of Maersk’s container throughput, making it

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the shipping line’s largest market. Mr Smith said: “The era of very high double-digit growth is over. China’s economic growth was just under 7 per cent in 2015, and 6-6.5 per cent economic growth is forecast for this year. But this is still pretty impressive growth by international standards.” There are good opportunities for Maersk Line to grow its footprint in China, including the growing international presence of Chinese companies. “The tremendous economic development means that a new group of Chinese champion companies has started to emerge. They have moved from being just manufacturers in China to become more global businesses. We are focused on the question of how we can partner with them as they expand internationally.” For example, many such companies have a strong target market in emerging economies in some African countries, and Maersk’s group footprint is often the market leader in these areas. Indeed, Maersk Line has a strong advantage when it comes to capturing business from these companies. Not only can it provide shipping services but Damco, the logistics arm of Maersk Group, has a presence in China with substantial business, including several joint ventures in this

country. Added to this, Maersk Group’s terminal business APM Terminals owns 12 terminals in China and 72 terminals globally, with a strong footprint in emerging market economies. A market development that is helping Maersk to develop closer links with China’s international companies is the Government’s One Belt, One Road initiative, which aims to boost transport infrastructure in a number of key corridors. Mr Smith said: “We are looking at how we can partner with companies involved in this initiative, not only by providing transport for project cargo, but also by acting as a partner and co-investor in these developments.” As an example, he singled out China Communications Construction Co (CCCC), a state-owned company involved in building the infrastructure. In Ghana, APM Terminals is building a new port in Tema, and Maersk has appointed a CCCC subsidiary as lead contractor to carry out the civil engineering for this project. Commenting on the One Belt, One Road initiative, Mr Smith said: “This is one of the few initiatives looking to develop demand for transport services and grow trade. This is exactly what our industry needs, as it is suffering from very weak

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14 | SHIPPING LINE PROFILE

demand and overcapacity. We want to support and get involved in this.” Elsewhere, Maersk Line hit the headlines recently when it was revealed that HMM is to join the 2M alliance. “The discussions between HMM and 2M are quite advanced and I think HMM will add strategic value. For example, despite the global scale of 2M, the Pacific is an area where the other two major alliances are going to be bigger than us next year. So teaming up with HMM, which has a good presence in the Pacific trade, gives us good options and a different mix of cargo. It is also very strong in South Korea. We will look to see how we can co-operate with it on the Pacific,” Mr Smith told Container Shipping & Trade. He added that Maersk is in a strong position within the 2M alliance compared to the other mega alliances – The Alliance and Ocean Alliance – thanks to its stability. He explained: “Maersk is fairly sanguine about the changes next year. 2M will have a relatively modest change in the network as we have only got to accommodate HMM, whereas the other alliances have major operational changes to carry out. They will have to phase out all ships from services and put in new service structures. When that happens, typically ships are not in the right place at the right time, requiring cargo to be relayed and carried forward by different services as ships phase in and out of operation. “There are a lot of practical issues that need to be managed when making these network changes and in 2017 a lot of carriers will be changing their services at the same time. We think that Maersk Line will be in a relatively better position at that time as we will have a fairly stable product when everyone else is changing. It is up to customers to decide how they manage this, but if they want a safe home for their cargo we think that we can provide that better than a lot of our competitors next year.” He said that while the new alliance structures would be challenging, their development was good for the industry in the long run. “We will potentially see more competition between carriers based not just on price but on service quality, which could be good news. We [Maersk Line] see it as a mixed bag. We are sure that we will face formidable competing services, but in the long run it will be good for us, too. It will force us to up our game, provide the services that customers want and make us stronger in the long run. We are certainly not frightened of it.”

Container Shipping & Trade | 3rd Quarter 2016

Asked about the impact of the new alliance structure on freight rates, he said: “Changes to alliance services in the past have led to quite volatile trading conditions, but they are already so volatile today that I am not sure that it will make much difference to freight rates this time.” As well as the formation of new alliances, another recent trend in the container shipping sector has been a wave of mergers and acquisitions activity. But Mr Smith indicated that Maersk was not seeking to get involved in this. “I think our clear strategy is to grow organically. We have been reasonably successful at this in the last couple of years as we have grown at the same pace as the market, if not slightly faster.” But, he added: “Sometimes opportunities arise and if something came up we would be foolish not to study it.” Another important initiative is Maersk Line’s intention to build more vessels in China in future. With this in view, it is seeking to establish close partnerships with Chinese shipyards. Mr Smith said: “Shipbuilding used to be dominated by Japan and then South Korea, but China’s shipyards are really improving in terms of quality and capability. They are now providing quite interesting competition to shipbuilders in those countries. There used to be a trade-off when building a ship in China – it would be cheap to build, but not always of the best quality. But now the quality of China’s yards is starting to improve and they are offering cost effective alternatives.” He said that the Maersk Group hoped to increase its use of China’s shipyards in future. To this end it was looking at yards with which to partner. “We are looking to partner with the best yards and bring our technical expertise and best practices to help them improve.” Mr Smith added: “A personal ambition of mine is to see Maersk building ships with these Chinese yards on a regular basis and making a consistent effort to build up partnerships. If we can go back regularly and build a few more ships with them and really work together, I believe that it could be a win-win situation for both parties.” Maersk Line currently has seven 3,600 teu ships on order at China’s Cosco (Zhoushan) Shipyard, whilst Maersk Supply Service is building four subsea support vessels at Cosco (Dalian) Shipyard, and Samsung Heavy Industries’ Ningbo yard is building nine medium range product tankers for Maersk Tankers. CST

Tim Smith Starting from July 1, 2015, Tim Smith is chief representative of Maersk Group in North Asia and chairman of Maersk China Ltd. He is based in Beijing. He has worked in the container industry for 30 years, with much of that time in Asia. Initially with P&O Containers and then P&O Nedlloyd, Mr Smith has been with Maersk Line since their acquisition of P&O Nedlloyd in 2005. Mr Smith was appointed Chief executive of Maersk Line in North Asia from 2008 until June 2015. He graduated from the University of Oxford with a BA Hons first class in geography.

“A personal ambition of mine is to see Maersk building ships with these Chinese yards on a regular basis and making a consistent effort to build up partnerships”

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16 | CUSTOMER PROFILE

Tools of the trade Stanley Black & Decker’s genuinely global supply chain demonstrates the knock-on effects on shippers of carrier consolidation by Gavin van Marle

T

he yellow and black coloured power tool of Stanley Black & Decker is a familiar sight in the toolboxes of professional tradesmen and do-it-yourself homeowners alike across Europe and North America, and the company is truly a household name. Its product range does not stop at tools. Today it includes commercial security, hospital and healthcare services, fastening solutions, infrastructure products, and pipeline services under three divisions – global tool systems, industrial and security. The corporation has a market capitalisation of around US$18.5 billion, and last year had total revenues of US$11.2 billion. This was a six per cent increase over 2014, providing earnings before interest, tax, depreciation and amortisation (EBITDA) of US$1.7 billion. Stanley Black & Decker has a truly global supply chain, which means that it is in the front line when it comes to the challenges that major shippers face. Its logistics executives face, on a daily

basis, problems and challenges arising from the consolidation of shipping lines and alliances, the deployment of ultra large container vessels (ULCVs) and freight rate volatility, which can be described as structural problems. They also face oneoff regulatory hurdles, such as compliance with the recently introduced verified gross mass (VGM) container regulation added to the International Convention for the Safety of Life at Sea (SOLAS). The financial difficulties that the entire liner shipping sector is undergoing present further issues, explains Filip Degroote, Europe, Middle East and Africa (EMEA) transportation director for Stanley Black & Decker. “Carriers’ problems pose huge difficulties for us. We currently have cargo with Hanjin Shipping, and so are monitoring its situation daily, because there is a risk that a lot of our cargo could be blocked somewhere in a port. Not only would this be very difficult to retrieve but it is cargo that we need because customers have already ordered it. It is a very big risk, and is something that we are

Container Shipping & Trade | 3rd Quarter 2016

Filip Degroote (Stanley Black & Decker): Ultimately we want to be SOLAS compliant at our major plants so we can reduce the amount of physical weighing of our containers

dealing with on a daily basis. “In a lot of cases those goods have already been sold to customers and we are not able to produce them again. This is because our model is such that we have everything in inventory, if we sell out of that inventory and our customers are already waiting for their goods,” he says. He adds that such risks are, of course, present at all stages in the company’s supply chain. “The risk is not only in ocean transport, but also in road transport. It is a common issue that we see across the transportation chain. Two tier A road transport suppliers have gone bankrupt in the last two years and this caused huge disruption in our supply chain. “It was one UK and one French road transport provider, and the goods were blocked en route to customers. There were a lot of fines and disruption to the supply chain and it caused a lot of headaches,” he says. And the larger the shipper, the greater the headaches, according to a presentation that Mr Degroote gave at the recent TOC Europe Container Supply Chain Conference in Hamburg. In it, he described a complex supply chain network that spans the globe in terms of both manufacturing and distribution facilities. The company’s global transportation spend was US$450 million in 2015. Of this, the majority is spent in North America, which accounts for US$250 million per annum,

while Mr Degroote’s EMEA teams spend US$125 million a year. This clearly indicates the reliance of Stanley Black & Decker on the retail markets of Europe and North America. The remaining US$75 million budget was shared by the Asia, South America and Australasia departments. In terms of mode, globally the company spent US$140 million on ocean freight last year. Only road freight accounted for more, with US$200 million spent on full truck load and less-than truckload transport. It spent another US$75 million on express services and US$20 million on air freight. Speaking to Container Shipping & Trade on the sidelines of the TOC Europe conference, Mr Degroote explains that the company has adopted a twin contracting model by which it deals directly with carriers as well as outsourcing other operations to third party logistics (3PLs) and freight forwarders. Traditionally it has employed 3PLs to manage its supply chain but because of continuing pressures on the company’s inventory, it is now building its own less-than container load (LCL) boxes and is increasingly looking to contract directly with carriers. “However, if carriers want to play a bigger role with Black & Decker they will also need to provide some of the services that the 3PLs provide,” he says. “What kind of services

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CUSTOMER PROFILE | 17

do we want in addition to what we have today? At the moment we are working with forwarders who are giving us order management on a stock-keeping unit level. This is integrated with our SAP system and is linked to our customers. “On the other side there is also a huge pressure on inventory which means we are doing more and more LCL. We are making our own consolidation boxes, and we are going to a carrier-direct model which means carriers have to provide some of those services that forwarders provide,” he says. However, he acknowledges that this may be wishful

thinking, given the pressure that shipping lines are under in term of their core business, and the fact that their efforts to mitigate challenges – mainly through the deployment of ULCVs and the creation of larger alliances – pose additional risks to customers. “The big issue is risk management. If you only have three alliances, your choices are increasingly limited. In addition, we need to look inside an alliance and see how big a share each line has in that alliance. This is because we need guaranteed departures at origin so that we have the transit time to which we have committed.

“In some ways I think mergers are all right, because it is better to have a few major suppliers than a greater number of companies that are less healthy. A lot of companies are having financial problems. Look at the big integrators and the acquisition of TNT Express by FedEx Corp. Is that bad? I would argue that it is better to have three really strong suppliers rather than two strong competitors and two weaker ones – at least in the European market. “Our opinion is that a healthy market is more important than having greater choice,” he says. The trend to deploy ULCVs, on the other hand, is worrying

2015 revenue of US$11.2 bn

6% increase The corporation has a market capitalisation of around US$18.5 billion The company’s global transportation spend was

US$450 million in 2015. Of this, the majority is spent in North America, which accounts for US$250 million per annum, while Mr Degroote’s EMEA teams spend US$125 million a year. This clearly indicates the reliance of Stanley Black & Decker on the retail markets of Europe and North America. The remaining US$75 million budget was shared by the Asia, South America and Australasia departments.

Mode spend 2015 US$140 million

US$200 million

US$75 million

US$20 million

Ocean freight

Road freight

Express services

Air freight

Its DC is 60,000m2 of storage space which is set to be expanded to 75,000m2, and is linked to Antwerp by the Albert Canal

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Map of World and map of Belgium with Provinces - Single Color by FreeVectorMaps.com

because of the operational difficulties they cause, particularly at the main European hub of Antwerp in Belgium. “Antwerp is a very important port, and the bigger ships are creating congestion at the quay. There is congestion at the port gates and on the roads around the city. From a road traffic perspective, the congestion at Antwerp is terrible. “We are doing a lot of intermodal business, and the road congestion means that our barges are not getting all the containers they should be carrying to the inland terminals. That is causing additional delays in our supply chain. “We are not interested in a port-to-port transit time. We are interested in door-to-door. What we see with the larger vessels is that unloading is terrible, and as we are using barges into our hinterland this traffic is disturbed, too,” he says. Stanley Black & Decker’s state-of-the-art main European distribution centre is located at Tessenderlo. And as if these issues, in combination with continuing freight rate volatility, were not enough of a challenge, along came IMO’s VGM requirement for containers, which came into force shortly after Mr Degroote spoke to Container Shipping & Trade. “It is a huge effort to get this implemented. We are going to weigh our containers and make VGMs for our LCL boxes, and that process is going to be incorporated into our arrangements. Ultimately we want to be Solas compliant at our major plants. This is so that we can reduce the amount of physical weighing of our containers, because that will slow some parts of our supply chain. “Our SAP systems know the weights exactly. We are ISO certified at all our distribution centres and manufacturing plants. We are also C-TPAT certified. We are convinced our processes are all ok, the weights we have are correct and the paperwork is fine,” he says. CST

Container Shipping & Trade | 3rd Quarter 2016


18 | SHIP DESCRIPTION

Introducing conro

Jolly Palladio The final vessel in Ignazio Messina’s enhanced roro container series has been delivered. Andrew McAlpine reports and Jolly Quarzo, were delivered between 2011 and 2013. In 2012 a second series of vessels was ordered from another South Korean shipbuilder, STX Offshore & Shipbuilding Co, with the ships constructed at its yard in Jinhae. Both series are virtually identical. The first ship, Jolly Titanio, was delivered in April 2014 and was followed by Jolly Vanadio and Jolly Cobalto. The final ship, Jolly Palladio, was delivered in June 2016.

In-house design

South Korean shipbuilder, STX Offshore & Shipbuilding Co built Jolly Palladio

L

ong established family shipowners are becoming a rare breed, especially those that have continued to be successful in a niche market. But Italy’s Ignazio Messina & Co (Linea Messina) is just such a company. Established in 1921, the shipping company has a long history in operating services to and from the Mediterranean and has never ventured outside its niche market. Today, it operates a number of services covering Northern Europe, the Mediterranean, Africa, the Middle East and the Persian Gulf. Although it operates a number of container feeder services Linea Messina is best known for operating a number of large specialised roro container ships that, as well as containers, are able to carry breakbulk and rolling cargo. These vessels are deployed on two services linking the Mediterranean with the Red Sea, East Africa, and the Persian Gulf. Despite its long history the company had never ordered new vessels, always purchasing second-hand ships to replace older tonnage. In 2006 it started looking at a fleet renewal programme to replace older vessels. Because of the lack of second-hand large roro vessels that the company now needed, it had to look at ordering new ships for the first time. After making initial enquiries with a number of shipbuilders, an order for a series of four new conro vessels was placed with South Korea’s Daewoo Shipbuilding & Marine Engineering in December 2009. The four vessels, Jolly Diamante, Jolly Perla, Jolly Cristallo

Container Shipping & Trade | 3rd Quarter 2016

As a logistics specialist with interests in terminals as well as in ships, Messina has experience in operating and handling vessels that carry all forms of cargo, from containers to breakbulk, vehicles and project cargo. Many of the ports in its service network have restrictions, including lack of space and port infrastructure, with many also having draught limitations. With this in-depth knowledge of its market it was decided that the ships would be designed in house by Messina’s own technical department headed by Enrico Allieri, Messina’s technical director for newbuildings. The new vessels are updated versions of the third generation of deepsea roro container ships that Messina has operated successfully for a number of years. The concept and preliminary vessel designs were carried out by naval architects in Messina’s newbuildings technical department. In order to remain competitive it was important that the ships were as large as possible but could still be deployed on the company’s major African services. Maximum length and draught were the restricting factors when it came to designing the new ships. With this in mind, Jolly Palladio was designed with an overall length of 240m and a maximum draught of 11.5m. Crucially, the vessel’s beam did not have to be restricted, so to gain extra cargo space it has been designed with a post-Panamax beam of 37.50m.

A mix of cargo Messina class Jolly Palladio and its sisterships are multipurpose container and roro ships, but because of the nature of Linea Messina’s service network the ships have to be able to accommodate a wide variety of cargo. Access to the garage-cargo deck is by means of a jumbo stern quarter ramp, supplied by MacGregor Cargotec which also supplied the watertight stern door, two ramp covers, two rampway doors and three garage deck division doors. The ramp which dominates the stern has a length of 49.9m and a clear driveway width of 12.5m, which widens to 27.8m at the entrance. At the time it was one of the largest ramps manufactured by Cargotec. It is designed to accept heavy loads on multi-axle trailers, as well as containers and project cargo up to 7m high and up to 350 tonnes. Above the entrance and behind the stern ramp when closed is a separate top-hinged watertight door which is

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VESSEL PARTICULARS

27.8m wide by 7m high. There are four cargo decks. The tank top is the lowest deck and has a height of 3.3m and space for up to 840 lane metres of vehicle stowage. Next is the tween deck with a height of 5.7m. This can accommodate a maximum of 1,158 lane metres or 354 teu. The garage deck has a height of 6m and can accommodate 1,954 lane metres or 599 teu. Both of these decks are sufficient in height for the double stacking of containers. The main weather deck is open and is where the majority of containers are carried. A total of 1,760 teu can be carried in a maximum of six tiers. To allow additional tiers of containers on the weather deck the bridge and accommodation is raised, which has provided an additional cargo deck underneath. This upper deck has space for up to 750 lane metres of cargo or 176 teu. The garage decks do not have the elevators or movable ramps that are seen on some roro vessels. Instead, the internal architecture and cargo space design permits simultaneous, independent cargo operations in the main garage space, and the upper and lower cargo decks. This is to ensure cargo operations are as quick and efficient as possible without the need to use shoreside facilities. As a number of the ports that are on Messina’s network have limited port facilities, especially where containers are concerned, Jolly Palladio comes complete with its own fleet of heavy duty forklift trucks that are capable of stacking 20ft and 40ft containers up to four high on deck.

Latest environmental technology Nowadays a vessel’s economy and its environmental impact are of great importance. Despite being ordered in 2012, Jolly Palladio has some of the latest and most environmentally friendly technology installed. Main power is provided by a single MAN B&W 7L70ME-C8 unit with a maximum output of 22,890kW at 108 rpm. This directly drives a single Wärtsilä Lips 7.2m diameter controllable pitch propeller that enables the vessel to operate at different speeds depending upon load conditions. Jolly Palladio has a design speed of 21.5 knots and a service speed of 19.5 knots at maximum draught. To improve efficiency a pre-swirl stator is fitted in front of the propeller. This device uses fins to optimise the flow of water over the propeller to reduce friction and vibration. In model tests the device has a power saving of around 4 per cent. Jolly Palladio and its earlier sisters were landmark vessels when ordered, as they were the first series of commercial vessels to be fitted with an exhaust gas cleaning system (scrubber). A Wärtsilä Hamworthy Krystallon seawater-based system is installed and all exhaust fumes produced by the main engine, diesel generators and auxiliary boiler pass through the scrubber. Once they enter, the exhaust gas is sprayed with sea water in three separate stages so that the sulphur oxides (SOx) react with the water and form sulphuric acid. The natural alkalinity of the sea water neutralises the acid without the need for harsh chemicals. The wash water is then treated and monitored at the inlet and outlet to ensure it complies with IMO-stipulated discharge criteria, to ensure there is no risk to the environment. The system operates in an open loop, and removes both SOx and particulate matter (PM) from the exhaust gases. The complete scrubber plant is located inside the funnel. Other technologies installed include an alternative maritime power system to enable cold ironing in ports equipped to supply electrical power from the shoreside grid, a fibre-optic Sensfib hull stress monitoring system, and a UV based ballast water management system. Thanks to the environmentally friendly technology installed, both classes of vessels were the first of their kind to qualify for Registro Italiano Navale (RINa) Green Plus certification. Jolly Palladio is registered in Genoa and has an all Italian crew. CST

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Builder: STX Offshore & Shipbuilding Co LOA: 240m Breadth: 37.50m Depth moulded: 37.50m Draught: 11.52m Gross tonnage: 51,055 Main engine: MAN B&W 7L70ME-C8 Design speed: 21.5 knots MCR: 22,890kW

CONTAINER/RORO CAPACITY Reefer capacity: 200 plugs Total capacity: 2,889 teu Roro capacity: 6,350m

MAJOR SUPPLIERS Ballast water treatment: Headway Technology Co (China) Stern ramp, all internal watertight doors and ramp covers: Cargotec-MacGregor (Finland) Main engine: MAN B&W (Germany) Bridge and navigation system: Wärtsilä SAM-Electronics (Germany) Controllable pitch propeller: Wärtsilä Lips Diesel generators: Yanmar Marine (The Netherlands) Generator alternators: Hyundai (South Korea) Bow and stern thrusters: KTE Co (South Korea) Scrubbing plant: Hamworthy Krystallon (United Kingdom) Emissions monitoring system: Martek Marine (United Kingdom) Hull stress monitoring system: Light Structures (Norway)

Messina class Jolly Palladio and its sisterships are multipurpose container and roro ships

Container Shipping & Trade | 3rd Quarter 2016


20 | USA REGIONAL FOCUS

CMA CGM Benjamin Franklin calling at Port of Los Angeles

East versus West: US ports battle it out Bosses at ports on the East Coast of the USA tell Rebecca Moore why the expanded Panama Canal gives them an edge, while those on the West Coast explain why they can ride this challenge out

Port of Long Beach chief commercial officer Noel Hacegaba ″We fully understand why the Panama Canal Authority has decided to invest and applaud it for completing this massive project that is very important to it. We are focused on delivering our own projects and building on our value proposition, which is our proximity to Asia and our natural geography. Currently 40 per cent of all water-borne imports enter through South California, and we are investing aggressively to maintain our competitiveness and value proposition. We have invested US$4 billion over a 10-year period in upgrading the infrastructure and modernising terminals. The most forward thinking and aggressive investment is Middle Harbor. This has just delivered phase one to our tenant, giving it a capacity of 1.5 million teu and the ability to handle 18,000 teu ships. When it is complete at the end of the decade it will have capacity of 3.3 million teu and be able to handle 24,000 teu ships. This terminal by itself is as large as the fourth largest port in the USA. Overall, Long Beach is ranked second in terms of teu. Imagine taking the fourth largest port and putting it into the second largest port. That is how vast our capacity is going to grow. We are also investing US$1.3 billion in a new bridge which will allow bigger ships to access the back channel of the port.

Container Shipping & Trade | 3rd Quarter 2016

This will be completed in 2018. We are also investing over US$1 billion in a rail system. The expanded Panama Canal is capped at 14,000 teu. At Long Beach we have received 14,000 teu ships since 2012, and have received an 18,000 teu vessel. The East Coast ports are still in the process of preparing themselves for the bigger ships. In addition, we have focused efforts on improving operations and are looking beyond the port and working with all stakeholders to optimise the supply chain. This is something that began 18 months ago and is a very rewarding and fruitful experience. When you bring everyone together it gives us all a better appreciation of the supply chain and focuses our attention on what needs to be improved and how to improve it. We believe that the entire supply chain benefits when all of us sit around the same table and have discussions to improve it. Longer term our vision is to further connect the supply chain. One of the things we are pursuing is an information system that links all stakeholders so that they all have visibility of a container’s place in the supply chain at any given time. We believe having a common portal will result in even greater efficiencies in operations. That is our vision and we hope to achieve this.″

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USA REGIONAL FOCUS | 21

Port of Los Angeles director of planning and strategy Michael Keenan ″Cargo carried via Los Angeles to Chicago is almost two weeks faster than using the Panama Canal. And for cargo that is higher value and time sensitive, the transport cost of this as a percentage of the overall value of the cargo is very small. Lower value cargo where transport costs are a higher percentage would be inclined to shift [from West Coast to East Coast], but much of that cargo goes through the Panama Canal already for that very reason. We are working on optimising the supply chain and investing in infrastructure, including deeper waters and cranes and rail, enabling us to handle even larger vessels than those that go through the widened Panama Canal. This means that we offer even more cost savings, as there are greater cost savings in an 18,000 teu vessel delivering cargo via the port of Los Angeles than a 12,000 teu vessel via the Panama Canal. Rail companies Union Pacific and BNSF Railway Co are

investing hundreds of millions of dollars in railroad infrastructure. We have demonstrated that we can handle 18,000 teu ships. CMA CGM's Benjamin Franklin has been here, and a 15,000 teu Maersk vessel has called here several times. Once we handled both of these concurrently at the same dock. At the moment there is not the demand for such large ships, but the fact that we have had the two largest ships in North America calling at the same time shows that when carriers want to make the switch and start using these larger ships, we are ready. It is too early to tell [if there has been any impact from the widened Panama Canal]. There has been a shift of cargo from the Suez Canal to the Panama Canal. But we have not seen an impact on the West Coast yet. Our supply chain efficiency combined with our infrastructure will help us compete with the Panama Canal. We are just finishing building on-dock rail at

our TraPac container terminal. It will be finished later this month, which means that we will be the only major port in North America to have on-dock rail at every container terminal. Our investment in infrastructure is on-going, as is our work to further improve efficiencies.″

John Wolfe, chief executive of The Northwest Seaport Alliance ″The Pacific Northwest is geographically advantaged with naturally deep water, proximity to the West Coast’s secondlargest concentration of distribution centres, and strong highway and rail connections. This positions us well against the East Coast and Gulf ports that need to dredge and build infrastructure to handle the larger ships that might come through the expanded Panama Canal. It is too soon to tell what effect, if any, the expansion might have on The Northwest Seaport Alliance, the partnership between the ports of Tacoma and Seattle, but we do not expect it to be a significant factor. Shippers generally look at cost, reliability and efficiency when deciding how to route cargo. It is still faster and cheaper for cargo to come to the West Coast and travel east by rail. We are more focused on our competitors on the West Coast, where ships too large to fit through the expanded Panama Canal are beginning to call. We are investing in upgrades to

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two container terminals to better accommodate the mega ships that are cascading into the transpacific trade. Terminal 5 in Seattle has reached 90 per cent design and is in the process of an environmental review. This is with a view to accommodating heavier cranes with a longer outreach and providing deeper draughts, to handle two 18,000 teu vessels simultaneously. Husky Terminal in Tacoma has had one berth strengthened to accommodate heavier cranes. Construction has begun on the adjacent berth to enable its realignment, to create one continuous dock for two 18,000 teu ships. We also are working with our partners to ensure the road and rail infrastructure outside our terminal gates will keep cargo moving. The state legislature recently approved a US$16 billion transportation investment package that includes significant freight mobility projects, and key rail projects are about to begin construction.″

Container Shipping & Trade | 3rd Quarter 2016


22 | USA REGIONAL FOCUS

South Carolina Ports Authority chief executive Jim Newsome ″Generally, South Carolina Ports Authority (SCPA) expects to benefit from the Panama Canal expansion with higher volume and larger per vessel throughput. In the near future several strings will be upsized, increasing lift capacity to Charleston. Today, 16 of our 26 weekly container ship services now employ vessels that would have been too large to pass through the Panama Canal prior to expansion. We have seen a continued shift in US–Asia trade from West Coast to East Coast, driven largely by major population growth in the southeast and an increase in manufacturing. The opening of the Panama Canal expansion removed the last major impediment to large ship deployment on the East–West trade, and as a result we expect this trend to continue. SCPA already offers the deepest harbour in the southeast, with 45ft of

depth at mean low water. Our deepening project to 52ft was recommended for Congressional authorisation in January. We expect to begin construction on the project next year and to conclude by 2020. Additional efforts to further enhance our capabilities for serving these big ships include: • Construction of SCPA’s new Leatherman container terminal, which will increase container capacity by 50 per cent. • In partnership with Norfolk Southern Corp, the Inland Port Greer project utilises an overnight train service to handle double-stack container trains to and from the Port of Charleston’s productive seaport facilities. Inland Port Greer has been so successful that in March we announced plans to consider a second inland port facility in Dillon, South Carolina. • A two-year project that is well underway to upgrade the structural

support of the wharf and fendering system at SCPA’s busiest container terminal, the Wando Welch, in order to handle the frequency of post-Panamax vessels calling at Charleston.″

Maryland Port Administration director of communications Richard Scher ″We are already benefitting from the expansion of the Panama Canal. Port of Baltimore is one of only a few East Coast ports that has been ready for the last three years to accommodate big ships – we have been receiving the super-sized ships from the Suez Canal. It is a very competitive business between ports to lure cargo so the fact that we have this infrastructure has given us good competitive advantage. Back in 2008, Port of Baltimore knew about the plans for the canal and we knew that in order to remain a legitimate container port we needed to deepen the berth and make infrastructure changes. Our view was that with the canal expanding, if we could not accommodate the larger ships, not only would they not come here but we could lose existing container business on smaller ships. It was the depths of the recession in 2008 so the State of Maryland did not have the funding that we needed to make the infrastructure changes. We therefore embarked on a 50-year public–private partnership with Ports America Chesapeake

Container Shipping & Trade | 3rd Quarter 2016

in 2010. The agreement required it to construct a 50ft deep container berth and pay for four neo Panamax cranes. We already had a 50ft deep channel, but to take the larger ships we needed to construct and dredge a container berth. Last month we took the first big ship [Evergreen Line’s Ever Lambent] from the Panama Canal. It is a great advantage that we can accommodate the big ships and others cannot. We are not expecting a large influx straight away. It will take some time, and so we are expecting measured, slow growth as a result of this major, game changing event in the maritime industry. Nonetheless we are expecting growth of 2-3 per cent per annum on the container side as a result of the enlargement of the Panama Canal. Our next challenge is to have doublestacked container trains. The main impediment has been the 100 year old Howard Street tunnel, which we need to reconfigure so that it can accommodate double-stacked trains. This year the US Government began a programme which

Copyright: Bill McAllen

provides funding for certain transport projects. We were unsuccessful in the first round but will reapply next year, when we think we stand a very good chance of getting this funding. This, together with funding from CSX and Maryland, will give us the support we need to make the adjustments to the tunnel. This will give us access to, and make us more competitive in serving, the markets in the Mid West.″ CST

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LNG NORTH AMERICA FOCUS | 23

DELIVERING INNOVATION IN LNG FUELLED CONTAINER SHIPS THE ADOPTION OF LNG BY US CONTAINER SHIPS HAS RAPIDLY GAINED MOMENTUM. SEAN BOND, ABS DIRECTOR OF GLOBAL GAS SOLUTIONS, EXPLAINS WHAT IS INVOLVED IN CONSTRUCTING SUCH VESSELS

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ith concepts for liquefied natural gas (LNG) powered vessels being announced with increasing frequency, it is easy to understate the impact of the decision taken in 2012 by US container operator TOTE Maritime to build a pair of LNG powered ships at General Dynamics’ NASSCO shipyard. At the time, no US shipyard had built ships of this type, so class society ABS was instrumental in helping to make the vessels a reality. The Marlin class container ships, Isla Bella and Perla del Caribe, are now successfully serving the USA–Puerto Rico trade. One of the principal drivers for their construction was the North American emission control area (ECA) established by the revision of Annex VI of IMO’s Marpol Convention. This came into effect in 2012, creating strict controls on emissions of sulphur oxides (SOx), nitrogen oxides (NOx) and particulate matter around the coastline of the USA. The US Caribbean Sea ECA, covering waters adjacent to the coasts of Puerto Rico and the US Virgin Islands, came into force in January 2014. As a US flag container operator, TOTE is a highly visible member of the US shipping community, engaged in direct USA– Puerto Rico trades. In seeking a way to comply with the US and Caribbean Sea ECAs, it decided to pursue the most environmentally friendly compliance strategy. The Marlin class ships were designed by DSEC Co, a subsidiary of South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME), and included DSME’s patented LNG fuel gas system and the first ever order for MAN Diesel & Turbo’s ME-GI dual-fuel slow speed engine. The main consideration of the project from the ABS perspective was the application, to a new ship type, of the experience it had gained over many decades in gas fuelled propulsion on LNG carriers. The safe handling and consumption of the gas would require a different configuration of storage, fuelling and propulsion systems compared with a typical container ship. It is the mission of class to make sure that this type of innovation meets applicable class rules, and to verify compliance with current

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The launch of TOTE’s LNG fuelled Isla Bella

regulations. With regulations not fully developed at that time it was important to work closely with the United States Coast Guard in determining and agreeing the criteria that would need to be met. For the early adopters of LNG as fuel such as TOTE, commitment to environmental stewardship carries considerable weight in the business case for using LNG as a marine fuel as does public perception of shipping companies to some extent. Shipowners and operators view the use of LNG as fuel as a significant step in reducing the carbon footprint of their vessels, and positive environmental performance has become an important element for shippers. As such, ABS has continued to work with clients to assist them in better understanding the current regulations and realise the environmental benefits of LNG as fuel. What is needed for the trend to continue both in the US and globally is further development of the fuel supply chain so owners feel confident that the fuel they need will be available in the right locations if they choose an LNG solution. In the US market, Conrad Shipyard’s Orange yard is nearing completion of a dedicated LNG bunker barge for WesPac Midstream and Clean Marine Energy. The barge will initially work loading LNG from JAX LNG and delivering the fuel to TOTE’s Blount Island Terminal facility where the Marlin Class container ships are berthing. Clean Marine Energy is working with other shipowners to deliver LNG out of the JAX LNG facility to locations in the southeast of the USA. Building the Marlin class ships in the USA meant a steep learning curve for the shipyards and owner, from a technical point of view. A great deal of experience was gained during this process. In any LNG as fuel project, there is a need for close co-operation and partnership between designer, shipyard, owner and class society. In this instance such a partnership will be valuable as TOTE Maritime moves forward with the LNG fuel conversion project on its Orca class trailer vessels. The same model can be used in the development and approval of other projects, such as the increasing number of LNG ready vessels that are under development. CST

Container Shipping & Trade | 3rd Quarter 2016


TOP 20 PORTS | 25

Ports on life support Last year was the second worst ever for ports – only 2009 could beat it – and the industry is having to make new choices by Gavin van Marle

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he ports and terminals sector has always looked to have more solid fundamentals than the customers that it serves, the shipping lines. However, that does not mean that ports and container terminal operators are immune from the difficulties facing the shipping lines. Far from it. As this issue of Container Shipping & Trade was being compiled, shipping lines were delivering the financial results of what will go down as one of the worst ever quarters for the sector. This is the result of some of the lowest freight rates that the world’s major deepsea trades have seen since the container was invented. Structural overcapacity in the world’s fleet in terms of teu slots has been compounded by weak demand and the latter, in particular, is leading ports and terminals to change their strategies to try and maintain previously strong earnings and shareholder returns in the face of stagnant volumes. Neil Davidson, director of ports at Drewry Maritime Research, describes the industry as undergoing a paradigm shift, in which it is moving from a period of growth towards an era of value, while remaining highly profitable. This process is being given an extra edge by the rising operational and capital costs facing terminal operators and ports as they address the twin challenges of larger ships and larger vessel alliances. “Global and international container terminal operators are faced with the dual challenges of weaker demand growth and rising operating and capital costs due to

larger vessels and alliances. On the stock markets, ports are increasingly seen as a mature value sector rather than a growth sector,” Drewry said in the executive summary of its recently published Global Container Terminal Operators Annual Review and Forecast 2016. It claims further that global container port demand is forecast to grow “by less than three per cent over the next five years with projections softened in particular due to the sharp slowdown in China’s exports.” The decline in exports from China has now developed into a long-term trend, with manufacturers of fast moving consumer goods, apparel and footwear products and consumer electronics increasingly relocating to new sourcing locations in Southeast Asia and the Indian subcontinent. Indeed, according to Alphaliner statistics, one of the fastest growing ports in its list of the top 110 in the world is Chittagong in Bangladesh, through which large volumes of the country’s garment exports pass. It posted a 17.2 per cent growth rate to top 2 million teu in 2015. South Asia was one of the few positive regions for ports and terminal operators identified by Drewry, along with the Middle East. It also noted a potential recovery in Russia, subject to rising oil prices. But these are pockets of growth. In global terms the industry has entered a period of what appears to be sustained stagnation, forcing ports and operators to reconsider their expansion and investment plans. According to Alphaliner, global port

RIGHT: Hong Kong suffered the largest cargo volume decline in the top 20 ports in 2015

www.containerst.com

Container Shipping & Trade | 3rd Quarter 2016


26 | TOP 20 PORTS

volumes – or at least the 400 largest ports for which the company has collected data – grew by just 1.1 per cent in 2015. This was the second lowest annual growth rate ever recorded, beaten only by the 8.4 per cent decline in port throughput recorded in 2009 in the wake of the collapse of US investment bank Lehman Brothers and the subsequent decision by major shippers – retailers, home construction companies and others – to run inventories down to record levels as consumer demand evaporated. Last year, however, things looked decidedly more positive. US consumers appeared to have had their confidence restored, although the first quarter congestion problems experienced on the West Coast dampened annual growth prospects There was even talk of the Eurozone economies expanding once more, with the apparent resolution of the Greek sovereign debt crisis. But there also appears to be a more fundamental, structural change underway which lies underneath Drewry’s analysis. The relationship between container volumes and gross domestic product (GDP) numbers, upon which most investment in container transport – be it terminals, ships or other assets – has been predicated, is weakening, possibly permanently. “Although global GDP grew by 3.1 per cent in 2015 according to the latest IMF [International Monetary Fund] estimates, container volume growth grew by less than half of the GDP growth – the first time that the global teu volume growth to GDP multiplier fell below 1x,” Alpahliner wrote. “The GDP multiplier has been steadily declining over the last 30 years, dropping from an average of 3.4x in the period from 1990-1999 to 2.6x in 2000-2008. Since 2010, the GDP multiplier has fallen further to 1.5x as the container shipping industry reaches a new level of maturity,” it added. Analysts and industry players ascribe this to a number of factors. Firstly, one of the chief causes of growth was the conversion of breakbulk materials from being transported in general cargo vessels to containers, where the benefits of the intermodal nature of container transport made raw and semi-finished material supply chains considerably more efficient. That process of so-called “container penetration” has largely been completed – even raw materials such as coal are increasingly being transported in boxes. Secondly, finished goods, which provided so much of the global growth over the last decade and a half – and turned China into an economic powerhouse, propelling its ports to dominate the global rankings – are simply

getting smaller, thus reducing demand. Thirty years ago people used VHS recorders to watch films at home. Fifteen years ago these had been supplanted by DVD players. Today, Netflix rules supreme and DVD players, and possibly even televisions, are set to become a thing of the past. At the same time a third factor, which has become increasingly important in the aftermath of the global financial crisis and the need for shippers to reduce supply chain costs, is the move towards nearshoring. While this is unlikely to lead to the “Made in America” label becoming widespread to any great extent, it has substantially benefitted the Mexican economy. The automotive industry, including iconic US car makers such as Ford and General Motors, have cumulatively invested over US$10 billion in manufacturing plants in Mexico in recent years. This is in preference to building new production in China, which is suffering from rising labour, land and other costs. And Chinese policy makers have

not tried especially hard to reverse this situation, because a confluence of factors – environmental degradation from heavy industry and a desire to move up the value chain, manufacturing higher-end goods and entering the more lucrative service industries – have combined to force China’s Government to rethink how it wants its economy to develop, leading it to encourage domestic consumption rather than export production. All of these factors combined have led many ports and their principal terminal operators to scale back large scale infrastructure building projects and instead focus on mergers and acquisitions (M&A) opportunities as a way of maximising their returns. “In response, terminal operators and investors have been urgently reviewing capacity expansion plans. Many projects within the five-year forecast horizon are already too far advanced to change significantly, but those scheduled to appear later in the period are subject to reconsideration in terms of timing and scale,” Drewry said.

TOP 20 PORTS 10 LA-Long Beach USA 15,350,000 (2015 teu)

% CHANGE FROM 2014 (TEU) Shanghai........................................ 3.5 Sinagpore...................................... -8.7 Shenzhen........................................0.7 Ningbo................................................ 6 Hong Kong.................................... -9.7 Busan.................................................. 4 Guangzhou.....................................5.7 Qingdao......................................... 5.3 Dubai............................................... 2.3 Los Angeles-Long Beach............ 1.3 Tianjin............................................. 0.4 Rotterdam..................................... -0.5 Port Klang.......................................8.7 Kaohsiung..................................... -3.1 Antwerp...........................................7.5 Dalian.............................................. 8.2 Xiamen............................................7.1 Port of Tanjung Pelepas...............7.1 Hamburg....................................... -9.3 Laem Chabang............................. 3.6 NB: Rank denoted in graphic by

#


TOP 20 PORTS | 27

Interestingly, this is likely to have a big impact on the standing of the largest international terminal operators, with Drewry expecting the new Chinese behemoth China Cosco Shipping Corp’s (COSCOCS’) terminal operation, created through the merger of Cosco Pacific and China Shipping Ports Development Co, to be the largest international terminal operator, with a significant building programme in the pipeline. “For terminal operators, the focus is switching from greenfield developments to M&A activity, with a number of major deals already in the pipeline and more likely to come,” Drewry said, citing the recent €1 billion deal that saw APM Terminals acquire Spanish operator Grup TCB – although recent reports suggest it could have problems on its hands, given that Grup TCB’s operation in Guatemala is the subject of a corruption investigation. CMA CGM’s acquisition of APL included a decent terminal portfolio, particularly in the USA, and Turkish operator Yilport Holding demonstrated the extent of its ambitions with the

takeover of Portuguese terminal group Tertir, as well placing a reported €1 billion bid for Ports America. “Three Chinese companies – China Merchants Port Holdings, Cosco and China Shipping (the latter two now merged) – have a strong appetite and significant activity in terms of expansion through buying existing businesses. By 2020 the combined Cosco-China Shipping entity will be the largest of Drewry’s global/international terminal operators (measured by capacity), albeit with a large proportion of this in one country (China),” Drewry added. Drewry’s Mr Davidson further explained: “It is clear that global and international terminal operators are fundamentally reviewing their strategies, becoming cooler on greenfield projects and more interested in M&A opportunities. A natural response to the increasing size of liner alliances is for terminal operators to look to consolidate terminal ownership in parallel. “However, a dichotomy in approaches is evident. On the one hand many of the established international players have

1 12

19

Rotterdam

Hamburg

The Netherlands 12,230,000 (2015 teu)

8

Qingdao

Shanghai

Germany 8,870,000

China 17,500,000

China 36,540,000

(2015 teu)

(2015 teu)

(2015 teu)

11

Tianjin

9 Dubai

China 14,110,000 (2015 teu)

UAE 15,590,000 (2015 teu)

become more cautious because they are concerned that returns may be less than what they are used to. But on the other hand there are several expansion-minded players, like the Chinese operators and Yilport Holding, whose top strategic priority is to acquire more assets.” The opportunities for greenfield projects are becoming thinner on the ground, as much of the privatisation process of port assets that has taken place over the last 20 years has been completed. State-run container terminals are increasingly rare in today’s shipping, as most port authorities have accepted the prevailing wisdom that private operators run terminals more effectively and are often better equipped to raise the finance that those sorts of projects require – leaving port authorities to concentrate on their role as statutory bodies. This means that for companies with the funds to target growth, acquisitions may be the only option to access markets. The question in today’s low-growth environment is which markets warrant those levels of investment.

16

6

Dalian

Busan

China 9,300,000

South Korea 19,430,000

(2015 teu)

7 Guangzhou

(2015 teu)

4

China 17,570,000

Ningbo

(2015 teu)

China 20,630,000

15

Antwerp

(2015 teu)

5 Hong Kong

Belgium 9,650,000 (2015 teu)

17

Xiamen China 9,180,000

China 20,080,000

(2015 teu)

(2015 teu)

20

14

3

Laem Chabang Thailand 6,820,000

Shenzhen

(2015 teu)

13

2

Port Klang

Singapore

(2015 teu)

(2015 teu)

Malaysia 11,890,000

Singapore 30,920,000

China 24,200,000

18 Port of Tanjung Pelepas Malaysia 9,130,000 (2015 teu)

(2015 teu)

Kaohsiung Taiwan 10,260,000 (2015 teu)


28 | TOP 20 PORTS

CMA CGM is scheduled to open a three million teu capacity terminal in Singapore next year. The effect on Port Klang remains uncertain

Ocean Alliance re-jig shakes Southeast Asia transshipment scene Some of the biggest volume losses in the top 20 ports were posted by the world’s major transshipment ports, and the trend has continued into 2016. Singapore and Hong Kong were the two most high profile casualties, losing 8.7 per cent and 9.7 per cent in volumes respectively in 2015 compared to 2014. In the first six months of 2016, Singapore has lost a further five per cent of volumes year on year and Hong Kong has fared even worse with a 10 per cent decline in half-year volumes. This poses considerable problems for the two ports, due to the fact that so much of their business is transshipment traffic. And with carriers grouping into increasingly larger alliances, consolidating from four to three early next year, the risks are likely to increase. According to Drewry, around 85 per cent of Singapore’s 2015 throughput of nearly 31 million teu last year was transshipment traffic, and the fact that its principal local rivals for that traffic – the Malaysian hubs of Port Klang and the Port of Tanjung Pelepas – saw gains of 8.7 per cent and 7.1 per cent respectively shows how fiercely competitive the business has become. “Having fewer but larger alliances poses another risk to all transshipment-heavy ports as it will reduce the client pool for terminal operators and will see business won and lost in much bigger chunks. The trend towards fewer services using bigger ships with multiple carriers pooling cargo will create winners and losers with successful terminal operators most likely having strong connections to the dominant carriers in the alliances,” Drewry wrote in a recent analysis. “In Drewry’s opinion, the rise of the mega-alliances could actually be beneficial to larger transshipment ports where there is ample capacity (in both the near and medium term) to cater to increasing alliance-level volumes. Alliances will also be lured by their greater connectivity and lower risk of congestion during peaks. The transshipment ports that appear most at risk are those that are smaller or more fragmented. In the world of the mega alliance, the mega hubs are best able to compete,” it continued. Next year will see how true this hypothesis is, after CMA CGM and PSA International open their joint venture terminal in Singapore. A commitment to develop this was a key part of the deal for CMA

Container Shipping & Trade | 3rd Quarter 2016

CGM to buy APL from its major shareholder Temasek Holdings, the investment arm of the Singapore Government, which is also the majority shareholder of Singapore port operator PSA. The terminal will feature four berths with a total capacity of 3 million teu per year. It will be interesting to see what effect its creation will have on the numbers going through Port Klang, which has hitherto acted as the French carrier’s Southeast Asia transshipment hub. “APL’s current volumes will be kept with PSA and we will shift some volumes away from other hubs. We believe in view of the acquisition that it makes sense to establish a strong base in Singapore rather than have many smaller offices around the region,” CMA CGM vice-chairman Rodolphe Saadé said. However, analysts believe that with the creation of the much larger Ocean Alliance next year, there will be other volumes that could be picked up by Port Klang in compensation. “We do not expect Westports [Holdings] to lose CMA CGM altogether, due to its competitive edge, and we believe there will be more than sufficient volume for a dual hub – especially once the new Ocean Alliance kicks in by April 2017,” said an analysis by Malaysia’s Kenanga Research. “The new Ocean Alliance [comprising CMA CGM, China Cosco Shipping Corp (COSCOCS), Evergreen Line and Orient Overseas Container Line (OOCL)] will have sufficient throughput volume that could be deployed to Westports, where tariffs are still among the cheapest in the region,” it continued, adding that its handling charges are around 50 per cent lower than Singapore’s. And according to Drewry, with container shipping lines’ financial position more precarious than ever, there are structural changes to shipping in the region that will create further challenges for transshipment hubs. “Ocean carriers are under severe financial pressure to reduce their operational costs and some of their actions have accelerated the shift towards more direct calls at the expense of transshipment. “More previously feedered ports are being added to mainline services to save on feeder costs. The addition of more ports onto weekly loops has extended the round voyages of services, requiring additional ships to maintain the frequency, helping absorb surplus vessel capacity,” it said.

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TOP 20 PORTS | 29

North European gateways fight for share of declining market The winning port in 2015 in northern Europe was unquestionably Antwerp, which saw strong growth. The traditional leading two of Rotterdam and Hamburg both declined, the latter by nearly 10 per cent, which saw its place as the second largest container port in Europe given to the Belgian gateway. Germany’s Hamburg has a number of challenges to contend with. Its throughput has fallen for two years consecutively as its position as the chief entrepôt for the Baltic has been eroded. This is due to the steep decline in Russian volumes following the imposition of sanctions on the country, as well as the build-up of deepsea terminal capacity in the region, in particular the

development of the Polish port of Gdańsk. It is significant that Hamburg’s decline coincides with the point when Gdańsk began serving Maersk Line’s Triple-E class ultra large container vessels (ULCVs). Hamburg remains constrained by its access on the tidal Elbe river, as was vividly illustrated this year by the CSCL Indian Ocean casualty. This grounded on its approach to the port and raised questions about Hamburg’s suitability as a gateway. The fact that the largest ULCVs have to wait for high tide before they enter the river has been blamed for the severe congestion that the port has suffered since the widespread introduction of ULCVs, with vast numbers of containers

DP World looks to enter Taiwan Dubai-headquartered container terminal operator DP World has signed a memorandum of understanding (MoU) with the stateowned Taiwan International Ports Corp (TIPC) for the development of Kaohsiung Port’s Terminal 7. The move is a step change for Taiwan and its approach to box shipping. Hitherto it has remained off limits to international port investors, with capacity being built either by the state or by one of the country’s three container lines – Evergreen Line, Yang Ming Marine Transport Corp and Wan Hai Lines. But with its major port of Kaohsiung having to respond to the challenges of new container vessel sizes as well as the changing face of deepsea alliances, the MoU brings a change. “The agreement marks the beginning of a joint effort to seek future business opportunities and to steer growth in Taiwan’s port infrastructure, while enhancing the country’s trade potential by establishing seamless cargo movement across its supply chain,” DP World said in a statement. DP World group chairman and chief executive officer Ahmed Bin Sulayem said: “We look forward to bringing our expertise and experience to the development of Taiwan’s economy. It is commendable how TIPC and the Taiwan Government are committed to planning and steering the country’s economic growth, building a better future for generations to come. “Our strategy in developing in strategic locations where our customers want us to be, serving global trade and being able to handle the new generation of ultra large vessels shows how we are investing in the future, translating our vision into reality. “At DP World, we think ahead – to foresee change and innovate to create the most efficient, safe and profitable trade solutions.

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accumulating during peak periods. This has a knock-on effect on the city’s traffic levels, and long-term plans to develop the port’s Steinwerder area into a new container handling facility appear to have been put on the back burner. A return to growth for this and other European ports is by no means certain. Alphaliner says that overall European port throughput is estimated to have shrunk by two per cent in 2015, with over half of the main European ports recording negative growth during the year. If growth does return, capacity over the next few years in northern Europe will be provided by the highly automated terminals in the Maasvlakte II area, which

were opened last year, as well as the PSA InternationalMediterranean Shipping Co (MSC) terminal in Antwerp, which is in the final stages of construction and has seen MSC’s enormous Antwerp volumes gradually migrate from behinds its locks to the Deurganck dock area. The Maersk-MSC 2M partnership is set to place the new MSC-PSA European Terminal at the heart of its Asia–Europe services. When the terminal is fully completed by year end, it will have a capacity of 9 million teu per year, making it the single largest container terminal facility in Europe. The terminal will be equipped with 41 quay cranes and 200 straddle carriers.

That vision has helped us stay one step ahead of the global vessel upsizing trend and we look forward to sharing this experience with Kaohsiung port, helping Taiwan grow and its people prosper.” Meanwhile, DP World Asia Pacific Region senior vice-president and managing director Rashid Abdulla said: “We are pleased to be working with TIPC on strengthening our ties – to grow our supply chains using modern infrastructure to unlock business potential and connect world markets. “Kaohsiung has the potential to benefit from our operational efficiencies in the region. It has enough container capacity to serve immediate growth in Taiwan but does not yet have the capability to attract new growth resulting from the ultra large container vessels added to linehaul services. This MoU marks the intention to tackle this challenge,” he continued. DP World’s portfolio in Asia Pacific and the Indian subcontinent now spans 11 countries, with 26 operating terminals and a combined capacity of 35 million teu. CST

Kaohsiung Port has yet to meet the challenge of serving the largest container vessels operating on the world’s trades

Container Shipping & Trade | 3rd Quarter 2016


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VGM SPECIAL FOCUS | 31

Container weighing still in the balance Now that 1 July has come and gone Peregrine Storrs-Fox, TT Club’s risk management director, considers the early lessons and what level of clarity has been achieved for the revised SOLAS regulation requiring verified gross mass

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he revision to Solas requiring a verified gross mass (VGM) for every container is simple enough. What is delivered to the ship must be weighed for ship safety purposes. And there was a long and thorough international consultative process spanning four years. Yet the media was filled with reports of confusion, lack of knowledge and outright defiance during the weeks running up to the effective date on 1 July. Despite this, early experience seems to show that the majority of the supply chain industry has overcome the challenges of the new requirements. When a packed container is delivered to the ship’s side, what is important is the full weight of the box, including everything that is packed inside it. Malpractice – or at least the possibility of confusion – has reigned too long. The hangover from breakbulk habits of declaring the weight of the cargo alone has been exacerbated by the inevitable continuation of the requirement for precisely that mass for bill of lading and customs purposes. What is entirely logical in relation to contractual liability (where it is based on mass) and tariff filing necessarily neglects the fact that the ship is taking the strain for cargo, dunnage, securing and the box containing it all. While many might understand this, the fact that almost as many do not means that carriers have historically been presented with data that cannot be confirmed (absent specific intervention) and inevitably have made assumptions. While the MSC Napoli report pointed to 20 per cent of the deck cargo being around 3 tonnes different to the declared mass, one shipper representative – seeking to argue how unfair the regulation was on the 60 per cent that already comply – admitted in early 2016 that 40 per cent may not be compliant. For a carrier, or any stakeholder or bystander through the supply chain, it is well nigh impossible correctly to identify how a shipper is presenting the information. However a shipper chooses to obtain the VGM figure, it now has to be supported by an actual weighing process. Method 1 – weighing the container once the packing process is complete – should be simple enough to understand. The alternative, Method 2, specifically negotiated amongst the industry stakeholders during the prolonged IMO working group meetings, allows for calculation of all the constituent parts of the load.

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Recent months have witnessed many other debates, as the impact of this change reverberates through the entire supply chain. There should be no doubt that the change requiring additional data to be obtained and communicated, distinct from what has been used in international trade until now, involves cost and detailed mapping discussions between counterparties. Unsurprisingly, the industry has sought guidance from regulatory authorities about the approach and expectations in each state. After all, for trade to be facilitated effectively, all supply chain stakeholders need certainty and consistency. In too many parts of the world this governmental guidance has been lacking, contradictory or simply delayed. Even now – well after 1 July – many industry stakeholders are unclear and are forced to request indulgence from counterparties. While IMO allowed three months for ‘practical and pragmatic’ enforcement, it also urged governments and industry stakeholders to communicate ‘frequently and fully’ in relation to the implementation of the regulation, as well as to share best practice. While the container industry has, in general, risen to the challenge to implement the necessary process changes, there has been frustration caused by the lack of support from many competent authorities. From a global perspective, those involved in packing and moving the world’s containerised trade deserve co-ordinated and consistent advice from regulators, not least to facilitate trade. The safety issues that VGM goes part way to addressing remain TT Club’s chief concern. Weight is a modest part of the cargo risk matrix, dwarfed by poor packing practices and misdeclaration of contents. There is ever-growing importance in the CTU Code (the Code of Practice for Packing of Cargo Transport Units jointly developed by IMO, the International Labour Organization, and the United Nations Economic Commission for Europe) that the industry needs to absorb. Container safety is a shared responsibility, and all parties have an interest in improving the safety of ships, their crews and others throughout the containerised supply chain, while improving processes and reducing the risk of damage to cargo at the same time. CST

Container Shipping & Trade | 3rd Quarter 2016


32 | VGM FOCUS

VGM method two and online tools create smooth landing The launch of the VGM requirement has been surprisingly smooth – but industry insiders warn against exploitative charges by carriers and terminals

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he supply chain has “got its act together” and enabled a “relatively smooth implementation” of the verified gross mass (VGM) requirement, Global Shippers Forum (GSF) secretary general Chris Welsh told Container Shipping & Trade. This is a huge relief for many in the container industry who feared that disruption might ensue following the launch of this directive. Under the amended SOLAS regulations, from 1 July all packed containers loaded onto ships must have a recorded VGM before they are loaded – otherwise they remain at the terminal. The VGM is a safety initiative that many in the industry have been calling for. It should reduce the safety risks to shipping and mitigate the potential for insured losses. Two methods of verifying weight are acceptable – either weighing the packed container using certified and calibrated equipment or – method two – using a calculated weight method. This involves adding up the individual items separately, and adding the tare weight of the container and packing materials using an approved process. The UK’s Accredited Shipper Approval Scheme will allow large shippers to use their existing audit-based systems to comply with the new rules. GSF has sponsored method two – and Mr Welsh attributes a lot of the early success of the implementation of the VGM to this method. “This method has been very successful and the relatively smooth implementation would not have been possible if every container had to be weighed at the terminal, especially for large volumes.” The one fly in the ointment has been

Container Shipping & Trade | 3rd Quarter 2016

that some carriers and freight forwarders appear to be exploiting the introduction of the new VGM rules by “imposing exorbitant and unjustified charges for questionable and unspecified administration fees and other services,” says GSF. Mr Welsh said: “We know that the transaction costs of electronic submission are minimal, and yet some shipping lines and terminals are requiring fees of US$1525 a box, when we know transaction costs are cents per container rather than dollars. Others are just adding additional admin fees and other unspecified charges and exploiting the implementation of what is a safety

regulation. That is a serious concern, as those charges are exorbitant and unnecessary.” He made the point that these charges were unnecessary for method two, where VGMs are submitted electronically. In contrast, extra charges were justified for method one, because third parties such as ports were providing a legitimate service by physically weighing the container. “That is very different. Making a charge for an electronic VGM is unwarranted,” Mr Welsh summed up. GSF is determined to make it clear to companies that shippers are fully aware of what the implementation costs are and make shippers aware of the facts, as well as putting pressure on those who are exploiting the situation.

Online tools aid VGM

Chris Welsh (Global Shippers Forum): “Others are...exploiting the implementation of what is a safety regulation”

There are a number of online tools to help shippers and shipping lines with VGM measurements, which are rapidly gaining momentum. For example, a growing list of shipping lines, including United Arab Shipping Co (UASC), NYK Line, HapagLloyd and Zim, have chosen Inttra’s electronic VGM service to ensure they comply with the rules. EVGM supports multiple weighing and container packing scenarios with a range of communications methods. It enables the digital submission, receipt, processing and auditing of Solas compliant VGMs. There are two versions of eVGM, one for shippers and another for container carrier owners. UASC global head for customer services and e-commerce Vijay Minocha said this provides its clients with tools to standardise their VGM submissions. Inttra already

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VGM FOCUS | 33

UASC is using Inttra’s eVGM for digital submission, receipt, processing and auditing of container weights (Credit: UASC)

provides other e-commerce solutions to UASC, including transaction and other information products. Lincoln Leung, head of global business process management at NYK Line, said: “The flexibility of the INTTRA eVGM solution enhances our range of customer solutions relating to Solas VGM, and we will benefit from the efficiencies of standardisation.” At Zim, Dudi Avni, vice president of customer service, said: “The eVGM solution now made available to our customers is part of our ongoing efforts to

provide first-rate customer service, as part of our strategy and vision.” Other examples include the Bureau International des Containers et du Transport Intermodal (BIC), that has started a technical characteristics database that provides easy access to tare information. This should help to harmonise the measurement of containers across the industry. The Maritime Authority of Jamaica (MAJ) has developed guidelines and online tools for the new weight container rules. MAJ’s online guidance says that if a packed export container arrives at

Holistic approach is needed Maritime consultancy Brookes Bell Group said that it welcomes the VGM requirement – but underlined the importance of using other basic principles alongside this to ensure safety. Brookes Bell master mariner Daniel Millett said: “We welcome the latest amendment to the SOLAS Convention. The potential implications of the mis-declaration of the weight of some of those containers can have serious consequences with respect to the stability and structure of the vessel. As the size and capacity of container vessels continue to increase, with vessels such as MSC Oscar and CSCL Pacific Ocean having a capacity of over 19,000 teu, there is an even greater risk.” But he warned: “From our experience, verifying the weight of containers is only one part of ensuring that a vessel arrives safely at the port of destination with all container stacks still in place, and that the containers, and thus the cargo shipped within them, arrive at the customer’s premises in a safe and sound condition.” He said Brookes Bell saw a large number of container vessel incidents where damage would have occurred even if the weight of all the containers had been verified in accordance with the

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the Kingston terminal without evidence that the gross mass of the container has been obtained, then it will not be loaded on board a Solas compliant vessel. MAJ will maintain a list of approved weighing scales, approve the quality management procedures for determining the verification of the VGM as stipulated in SOLAS, and inspect ships for compliance. The authority said there will be zero tolerance for improper recording of declarations. Any mis-declarations of the gross mass of a container should be corrected by the shipper as soon as is practicable.

new SOLAS amendment. Factors causing incidents include cargo not being packed and secured correctly and appropriately inside the container, in accordance with the IMO Code of Practice for Packing of Cargo Transport Units (CTU Code), and containers not being secured and lashed correctly on board in accordance with the vessel’s Cargo Securing Manual and the IMO Code of Safe Practice for Cargo Stowage and Securing (CSS Code). Sometimes no lashings have been put in place or the securing equipment fails because of corrosion, deformation or poor maintenance. Other factors include the relationship between stability and the roll period of the vessel, such that the securing systems or securing equipment on board are overloaded and subsequently fail during the ocean voyage, and inappropriate ship handling of the vessel by the master during adverse weather, in an attempt to reduce excessive pitching, pounding or rolling. This results in excessive loads being placed on the securing equipment, which in turn overloads the securing equipment. Mr Millett highlighted the importance not only of having the verified weight but of following basic principles at the same time, such as the cargo being properly secured inside the container, the containers having in place adequate and sufficient lashings when in stowage, and the lashing equipment being properly maintained. CST

Container Shipping & Trade | 3rd Quarter 2016


34 | REEFERS

Legislative drive pushes new reefer refrigerant launches Energy efficiency, atmosphere control and potential refrigerant legislation all drive reefer developments

Hamburg Süd has equipped reefers with Carrier Transicold’s XtendFRESH atmosphere control system

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SA-headquartered Thermo King has launched two brand new products for refrigerated containers – software that will save energy in older reefers and a new type of refrigerant for marine reefers. Pauli Johannesen, vice president and general manager of Thermo King’s marine, rail and air business, told Container Shipping & Trade: “The marine world is suffering, with overcapacity driving down freight rates. We are therefore looking at different ways to help customers become more efficient in their operations.” One example of this is Thermo King’s new software for older reefers, which was launched in July this year. Mr Johannesen said: “It operates units in a much more efficient way, so it saves up to 30-40 per cent of energy. There are thousands of old marine reefers, and for a relatively low investment, shipping lines can make significant savings in a really fast pay-back time by using this software.” Thermo King points out that it is able to offer savings in this way without compromising the temperature. “We

Container Shipping & Trade | 3rd Quarter 2016

have the best temperature management in the business. We could make more savings but that would compromise the temperature. This new system does not compromise anything. You get the same unit performance, so we have got the balance just right,” said Mr Johannesen. Thermo King’s marine reefer temperature control system reaches -40°C, which the company says is the lowest in the industry. It also has the fastest pulldown of temperature. It developed the software with a major shipping line. Elsewhere, Hamburg Süd has 400 refrigerated containers in its fleet that are equipped with Carrier Transicold’s XtendFRESH atmosphere control system. To slow ripening and help preserve the quality of produce, the XtendFRESH system manages oxygen and carbon dioxide levels within refrigerated containers, and removes ethylene which stimulates the ripening of fruit. The system has a carbon scrubber that takes ethylene out of the container and releases it outside. Previously the removal of ethylene was not available in an integrated

system but had to be added separately. The XtendFRESH systems have been placed into service in support of avocado exporters shipping from the west coast of South America to Asia, North America and Europe, according to Martin Schoeler, senior manager for logistics and technology at Hamburg Süd. “Avocados are a significant market and initially will be the main target of utilisation,” Mr Schoeler said. He added that banana exports beyond 30 days can also benefit from the XtendFRESH system. Another German shipping line, Hapag-Lloyd, has likewise received 1,000 refrigerated containers equipped with the XtendFRESH option. It, too, has deployed them in service to exporters of perishable goods from South America. Carrier Transicold director of marketing Edward Goh told Container Shipping & Trade: “These orders reflect the trend in the container reefer industry towards controlled atmosphere technology, which fine-tunes oxygen and carbon dioxide levels in the container and slows down the post-harvest ripening process above

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REEFERS | 35

and beyond what can be done with refrigeration alone. “Controlled atmosphere technology has become very popular with agricultural exporters, as it helps to maintain product quality and enables longer transit times. This means that producers can ship their produce to more people around the world. In Asia, the use of controlled atmosphere technology means that rather than being transported by air, avocados can be shipped by sea, significantly reducing the cost of the fruit for consumers.” Mr Goh also highlighted the fact that previously the total shipping time of bananas was a maximum of four weeks, but with XtendFRESH transit time can be doubled to eight weeks. “This is a huge advantage for a lot of growers, because it opens up new markets for them.” The system is also particularly useful for shipping romaine lettuce, asparagus, mangoes, tomatoes, broccoli and green beans, and can also be used with different cut flowers such as some roses and gladioli. “Controlled atmosphere is a particularly exciting area for the perishable shipping business,” Mr Goh said. Citing the recent fleet acquisitions of the XtendFRESH system, he added: “It is becoming more popular as people test and trial it.” As well as new product launches, the focus on marine reefer refrigerant has been boosted because of potential new legislation. The European Union’s (EU’s) F-Gas (fluorinated greenhouse gas) regulation, which has set out a timetable to halve the amount of CO2 contributing to global warming by 2030, and the bans proposed by the United States Environmental Protection Agency’s Significant New Alternatives Policy (SNAP) suggest a continued move towards more environmentally responsible refrigerants. USA-headquartered Carrier Transicold has readied itself for any future legislation that could affect container reefer refrigerants. Mr Goh said: “We have aligned ourselves behind CO2 as the future refrigerant, as it has the lowest global warming potential and the lowest cost of all the refrigerants currently in use within containers. Our NaturaLINE container refrigeration unit is specially designed to use CO2 refrigerant. We believe that the NaturaLINE unit is future proofed in the sense that if there are restrictions on the use of different types of refrigerants, we do not foresee issues with CO2. It is a natural

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Pauli Johannesen (Thermo King): “There is no legislation currently for marine reefers but to be prepared we have introduced R452A”

gas with a global warming potential of one, it is cost effective, it is widely available and we do not believe it will be affected by phase-outs or other regulations.” The NaturaLINE unit’s energy consumption profile is similar to Carrier Transicold’s PrimeLINE unit, while providing the same full refrigeration capacity. Thermo King currently uses the R404A refrigerant in marine reefers, but in September this year it is due to offer the option of using R452A, which would meet any future EU refrigerant legislation. Mr Johannesen explained: “There is no legislation currently for marine reefers

but to be prepared we have introduced R452A. There is a lot of discussion about refrigerants and so we have to be smart and make sure that if something comes we are prepared. The R452A is a sustainable solution that will allow marine reefers to be put on the market in the EU now and in the future. “We want to show the market that we have a solution that can take over from older refrigerants and comply with the next stage of legislation.” He said that Thermo King had carried out extensive testing on marine containers with customers in live environments and had “very positive feedback”. As well as meeting potential new legislation, the newly offered refrigerant will help Thermo King and its owner Ingersoll Rand to achieve its objective of reducing greenhouse gas emissions by 35 per cent by 2020. Mr Johannesen explained that the performance of R452A is as powerful as R404A. The company will continue to offer R404A. Another important point is that the company has carried out tests to establish what will happen if R452A is accidentally blended with R404A in a reefer. Mr Johannesen said: “We have done a lot of testing to check whether, from a safety and performance perspective, it might cause problems if the two were blended. We can confirm that there are no problems at all. There has been concern about safety and about what happens if refrigerants are blended, so it is important for customers to understand that there is nothing to be worried about.” CST

Thermo King has developed new energy saving reefer software

Container Shipping & Trade | 3rd Quarter 2016


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HULL DESIGN | 37

A SHIP FOR ALL REASONS THE DESIGN OF CONTAINER SHIPS, LARGE AND SMALL, HAS UNDERGONE A REVOLUTION SINCE THE SHOCK COLLAPSE OF THE OIL PRICE CHANGED THE GAME by Selwyn Parker

Colour coding reveals the major areas of stress on a hull

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s the shipping industry reels from the double blow of collapsing oil prices and slowing global trade, naval architects are coming to the rescue with a new variety of mix-and-match vessels that are adaptable to multiple routes and ports. But this is a juggling act that involves big data, as mountains of information are collected and analysed. “The inputs and the parameters are changing all the time,” explains classification society DNV GL’s Karsten Hochkirch, head of the department of fluid dynamics. “You have to look at a whole range of elements such as the capital cost of construction, the fuel cost of operations, port costs, specific trade routes and different optimal speeds, among others.” As a dramatic illustration

of how the parameters have changed since the crisis first hit, he points out that in 2010 the fuel price amounted to one third of the cost of investment in a ship. This statistic has now been turned upside down. “In naval architecture the calculation of fuel consumption on the design was much greater than it is now.” Today, the aim is to extract every ounce of efficiency from a design. “We optimise a ship for a range of different trades,” explains Dr Hochkirch. “The closer a shipping company can come to defining exactly how it wants to use the ship, the more we can optimise the vessel.” And with the help of big data, the optimisation process has become much broader and deeper than before. At DNV GL, for instance, the aim is not merely a vessel that consumes less fuel, but one that consumes the minimum amount of fuel per transported container – a much more meaningful goal. “You cannot make a voyage shorter but you can make it more efficient,” says Dr Hochkirch.

Ports dictating hull shape design

Quite separately from global economics, there are a host of local factors that are influencing hull shapes, and their length and width. This is particularly true in the rapidly growing intra-Asia trade where many smaller ports – for instance, those located on rivers – can only accommodate ships with shallow draughts. Others may have berth lengths and turning circles that

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Container Shipping & Trade | 3rd Quarter 2016


38 | HULL DESIGN

automatically disqualify many larger vessels. Similarly, there are limitations on draught and length in the Americas that determine the upper limits of the size and depth of hulls. One positive development in this regard is that the restriction on air draught in the USA’s third largest port, the Port of New York, because of the low height of the Bayonne Bridge, is expected to be lifted by late 2017. Work is well advanced on the US$1.3 billion project to raise the bridge substantially, by 64ft (19.05m). Taken together, the size and infrastructure of ports and harbours are, to an increasing extent, determining what kind of vessels can ply certain routes. And these vessels are not expected to get much bigger in the foreseeable future. That is the view of Lou Danping, deputy chief engineer of Chinese shipbuilder HudongZhonghua Shipbuilding (Group) Co, who believes the 20,000 teu vessel will remain the upper limit for some time yet. “Facility limits, such as port capacity and crane workload, as well as the clearance conditions of fairways and bridges will constrain the expansion of container ships’ size,” he argues. The result of this is a growing demand in Asia and the Pacific for economical and versatile smaller vessels that can be readily switched or adapted to different routes according to the dynamics of trade.

Slamming

Some ship design developments, though, are simply to do with hulls and hydrodynamics. Naval architects are working to mitigate the effect known as slamming – which leads to whipping – that is thought to lie behind the collapse of the hull of post-Panamax container ship MOL Comfort in June 2013. The vessel split into two after suffering a crack

The use of computational fluid dynamics identifies the way water streams over the surface of the hull

amidships, off the coast of Mumbai, India. Caused, in part, by a vessel steaming slower than its design speed, slamming is a phenomenon that imposes stresses and strains on container ships, particularly the larger ones. It is uncomfortable and more dangerous for the crew working the foredeck, too. The risk is considered significant enough that, according to classification societies, shipowners are expressing concerns about the structural integrity of their vessels in severe and violent seas. For example, more and more feeder vessels are being designed with a straight bow, as distinct from the traditional bulbous appendage. "The straight bow reduces wave resistance loads on feeder vessels which operate in the Asian area, which of course improves speed under normal operational conditions,” explains DNV GL’s Marcus Ihms, the society’s expert on container ships. The straight bow also confers other advantages, as shipping companies seek more and more versatility. It allows the naval architect to design the vessel around a more constant water plane, thus producing hulls with a wider range of draughts. “The vessels of ten years ago cannot compete economically with these more versatile ships,” adds Mr Ihms.

Container Shipping & Trade | 3rd Quarter 2016

Nose job

Hulls are also being reconfigured as a result of global economics. Wärtsilä’s Maarten van der Klip, general manager of projects, sales and development, explains: “All container ships built since 2008 were designed for speeds above 20 knots but the operating reality is that they are now sailing far below their design speed, at more like 17 to 18 knots.” Wärtsilä has come up with what is popularly known as a “nose job” – a retrofitted bow and matching propeller designed for slower speeds. Retrofits can prove extremely cost-effective, points out Mr van der Klip. At a cost of around €2million, Wärtsilä’s solution is the result of computational fluid dynamics that underpins the design of all of today’s hulls. In essence, the retrofit reshapes the bow wave in a way that creates a smoother passage and more sea-kindly behaviour. Wärtsilä points out that the replacement is close in design to the so called “perfect bow” on the Ecoship project. A number of operators such as Hapag-Lloyd, Maersk Line and CMA CGM have adopted the package and Mr van der Klip says that Wärtsilä is fielding enquiries from a number of second-tier operators anxious to extend the life of their vessels and achieve more economies along the way. Depending on the type of

vessel, running costs excluding fuel fall by about 10 per cent as the result of a nose job.

Beamier

In a time when speed is no longer the main imperative, ships are becoming beamier and shorter. And that is partly because they are cheaper to build per teu. For every extra metre in length, the cost of construction doubles for that metre because longer ships have to be made stronger. As naval architects point out, it is much cheaper to make a vessel 5m wider than 15-20m longer to get the same cargo space. The modifications to the locks in the Panama Canal have also put a premium on beamier vessels. Now that wider container ships – that is, those up to 49m or 12,800 teu -- can pass through the canal, vessels designed to the old 32m limits have become almost obsolete. To get their money’s worth out of these vessels, shipping companies went through a period of converting them -- basically by slicing them lengthways down the middle and making them wider -- but these conversions have become uneconomic. And that is the naval architect’s dilemma. A vessel design that was economic a few years ago may be rendered unviable because of extraneous factors that have nothing to do with the sea. CST

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40 | PANAMAX VESSELS

The Age of Extinction Too big to transfer to most other trades, the traditional Panamax class of vessel seems destined for scrap since the Panama Canal expanded by Gavin van Marle

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The expanded Panama Canal signs the death knell for the traditional Panamax class of vessel

Container Shipping & Trade | 3rd Quarter 2016

he mid point of this year finally heard the death knell of the traditional Panamax vessel. With the formal opening of the Panama Canal expansion in June, the very definition of what constitutes a Panamax vessel – that is to say, the maximum dimensions of a ship that can pass through the canal’s lock gates – has been radically upsized, leading analysts to coin the term neo-Panamax to refer to the new type of ship that can now transit the waterway. “The term neo-Panamax ship refers to modern wide-beam vessels with a cross section of 19 container rows on deck. This corresponds to the new permitted maximum breadth in the Panama Canal and its locks,” Alphaliner wrote recently. However, as the analyst also noted, a full sized neo-Panamax ship with a container-carrying capacity of 13,000 teu, a length of 365m and beam of 19 rows has yet to be sent to the Panama Canal. The first container ship transit of the expanded canal took place on 26 June, when 9,443 teu COSCO Shipping Panama made the passage – although it was effectively a ceremonial transit, as the vessel was deployed on a service between the Mediterranean and Asia and was off-schedule, carrying mostly empty boxes. However, since the opening of the waterway’s new lock gates, six Far East–United States East Coast services are deploying vessels in the 6,000-10,000 teu range, effectively signalling the end of demand for Panamax vessels. In the run-up to the opening of the enlarged canal, the major east–west vessel sharing alliances redesigned their trans-Panama Canal networks to employ much larger tonnage. For example, six services operated by the G6 Alliance and the CKYHE Alliance – the G6’s NYX and PA2 Asia–US East Coast, and the CKYHE’s AWE1, AWE3, AWE4 and NUE services – have all deployed vessels of over 6,000 teu, some of them over 10,000 teu. “More than 50 vessels in the size range from 6,000 to 10,000 teu are to be assigned to these strings, replacing some 80 classic Panamax ships of 4,000 to 5,100 teu.” The shift is corroborated by the latest idle fleet figures recorded by Alphaliner as at 13 June. While the idle numbers for neo-Panamax vessels are falling, the headcount of unemployed classic Panamax ships is on the rise again. “This trend is expected to continue over the next two months, as the larger ships are being phased into the new all-water services,” Alphaliner said. The Panama Canal expansion also allowed Maersk Line and its 2M partner Mediterranean Shipping Co (MSC) to shift one of their Asia–US East Coast services that had previously been transiting the Suez Canal, transforming it into a stand-alone, around-the-

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PANAMAX VESSELS | 41

world service that bore the hallmarks of the innovative round-theworld services operated by Evergreen Line in the 1990s. On the eastbound transpacific headhaul leg out of Asia, the reconfigured TP12 service will transit the new Panama Canal locks and call at the ports of Newark, Norfolk and Baltimore on the US East Coast. On the return leg to Asia, vessels will go through the Suez Canal and call at the ports of Salalah in Oman, Colombo in Sri Lanka, and Singapore. Klaus Rud Sejling, head of Maersk Line’s east–west network, says: “We are changing our TP12 service to provide a better product to shippers in Korea and northern and eastern China. By transiting the expanded Panama Canal, we will significantly reduce transit times into key ports on the US East Coast. At the same time, we will reduce our CO2 and exhaust gas emissions because of the shorter distance.” In addition, Maersk Line will connect its TP11 and TP8 services to form a pendulum service that expands the coverage of both services. The TP18 service will remain unchanged, although the line deployed the 6,000 teu ER Los Angeles to the service in late June. “But it is the only large ship employed on this service, operating alongside nine classic Panamax ships of 4,200-5,100 teu for the time being,” said Alphaliner. However, there will be no changes to capacity in Maersk Line’s Asia–US East Coast network, with 11 vessels of 8,500 teu deployed in the redesigned TP12 service, and 17 vessels of 8,500 teu operating in the TP11–TP8 pendulum service. Meanwhile, MSC has upgraded its Europe–Caribbean–west coast South America service, with 8,819 teu MSC Brunella joining the service and making its inaugural Panama transit in July. While initially the neo-Panamax ship will operate alongside smaller Panamaxes of 4,500-5,300 teu, the service is expected to be upsized during the remainder of this year. As has been widely predicted over the past two years, the exodus of old Panamax vessels from Asia–US East Coast, Asia– South America east coast and Europe–South America west coast services has meant daily charter hire rates for this class have dropped precipitously in recent months. This has had a disastrous effect on the finances of non-operating owners, as most recently evidenced by the half year results from Singapore-based Rickmers Trust Management, which reported a net loss of US$57m for the first six months of the year as it battled to stay afloat in severe market conditions. Revenues for the period declined by 31 per cent year on year from US$57 million last year to US$39 million in the first half of 2016. The company said it was “likely to face even stronger headwinds” in the remainder of the year from the impact of a depressed market compounded by Panamax vessel redeliveries driven by the expanded Panama Canal. Chief executive Søren Andersen said: “We have 11 [Panamax] vessels trading in the spot market, and we need to take practical measures and actively consider decommissioning some of these vessels by laying them up when they are redelivered. “This will reduce operating costs significantly while the market is depressed. The shipping market is volatile, and we have to strike a balance between minimising costs through this extremely adverse time by decommissioning vessels, and at the same time keeping some vessels active in the spot market for the flexibility to capitalise on any upturn in the market,” he added. According to Alphaliner’s latest list of idled tonnage, some 85 of the 269 container vessels laid up are ships of between 3,000 teu and 5,100 teu capacity. This compares with just 10 vessels in

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that category at the same point last year. Looking at the history of container shipping, in the normal course of events the Panamax vessels that had been superseded would be cascaded to other trades, displacing smaller tonnage by virtue of offering better economies of scale. The intra-Asia trade was one area where demand was expected to soar for Panamax vessels. However, replacing vessels in the 1,800-2,000 teu range with ones that are double the size has had a deleterious effect on rates, because demand for intra-Asia container transport has not doubled. Furthermore, for many routes vessels of that size are not suitable. One reason why the 1,800 teu Bangkok-max class remains so popular with intra-Asia carriers is because it can access such a variety of ports including, of course, Bangkok, which is one of the ports that lie at the heart of the trade. With so many Panamax units on the market it is hard to see how other trades can soak up that capacity. It would appear that the only option left for shipowners, given the costs of lay-up and the improbability of the vessels finding alternative trades, is that they will head to the breakers’ yards. The recent case of 2003-built 4,646 teu Seaspan Excellence (previously known as MOL Excellence) probably shows what is in store for the sector. It became the youngest container ship to be sold for scrap in July for a sum reported by VesselsValue. com to be US$280 LDT, equating to a total demolition value of US$5.96 million. Seaspan bought the vessel from Mitsui OSK Lines (MOL) in March 2013 for US$17.2 million, only to be forced to sell it for scrap for US$11.25 million less than it had paid for it, just three and half years later and at least a decade before the end of its operating lifetime. And if the market does not show signs of improvement it would seem only a question of time before 10 year old Panamax container vessels are being consigned to the recycling yards, too. CST

How long will it be before a 10 year old Panamax container ship is sent to the world’s scrapyards?

Container Shipping & Trade | 3rd Quarter 2016


42 | ORDERBOOK ANALYSIS

Feeder newbuild boom A

lthough ordering has slowed, feeder vessels are still enjoying the fruits of busy trading at very satisfactory spot and period charter rates. Deepsea business remains in the doldrums, especially on the lucrative Asia to Europe services. There is specific interest in the hire of vessels of up to 3,999 teu, but many so-called Panamaxes of between 4,000 and 5,000 teu are now finding the going tough. More are becoming uncompetitive, especially against wide beam vessels. The lowest end of the range, 1,000 teu units, are doing well, especially in Europe and Asia. With regard to Asia, it is noticeable that Asian owners are renewing fleets with vessels of this size. The other popular niche sizes are 1,700 teu and 2,400 teu. Germany continues to be a strong player and may have turned the corner by forming alliances and establishing commercial management to take control of bank-owned former KG tonnage. But the situation remains fragile. This latest security of tenure measure has introduced some stability and should help to halt the loss of former KG tonnage from the German fleet. Experienced operator and manager Peter Döhle is one business that is involved with others in this way. With newbuilding prices at low levels there has never been a better time to order. Deepsea orders have virtually dried up but feeder interest remains very strong. This is evidenced by the fact that the feeder order backlog stands at 296 vessels aggregating 619,921 teu, compared with

Business is brisk for feeder newbuilding with low prices for new vessels, while German controlled tonnage still dominates by Barry Luthwaite

266 vessels totalling 568,649 teu six months ago. Business is therefore brisk. China leads the way with a remarkable 217 units which will eventually commission 461,569 teu of vessel capacity into global trade. Many of these are for Chinese ownership to serve its cabotage trades which cover a vast hinterland, and to ease congestion in larger Chinese ports. The biggest mover in feeder business is London based Lomar Shipping, which has ambitions to be one of the biggest feeder size owners. In August it confirmed the first stage of an order which may eventually see as many as 18 1,750 teu vessels delivered in 2018 and 2019. Four will be built by Jiangsu New Yangzi Shipbuilding Co and three by COSCO (Guangdong) Shipyard, with options attached for eight and three more respectively. The current fleet now numbers 60 units, with more second-hand vessels and 17 newbuildings due to be added. Lomar Shipping has built up much of its business by acquiring distressed sales, which are still available in significant numbers. It is not alone in doing this. Owners in Japan, Taiwan, Malaysia and South Korea are utilising a mix of newbuildings and second-

Container Shipping & Trade | 3rd Quarter 2016

hand purchases. Demand for new vessels has given a boost to smaller yards in Asia, which might otherwise have struggled to survive, as feeders are uneconomical for bigger builders. Some owners in the second-hand market are waiting to see what happens when the Ocean Alliance, comprising CMA CGM, China Cosco Shipping, Evergreen Line and Orient Overseas Container Line (OOCL), is launched in April next year to take on the Maersk Line and Mediterranean Shipping Co (MSC) 2M partnership on east–west routes. Feeder connections will be up for negotiation, further boosting shortsea trades. One sobering thought is the trouble that two leading box players, Hyundai Merchant Marine and Hanjin Shipping, find themselves in. They are being forced to negotiate long-term charter reductions of at least 20 per cent, which is a blow in an already struggling industry. Some of these rate cuts affect higher volume feeder units of 3,700 teu. Feeder opportunities continue to present themselves, not least with the return of Islamic Republic of Iran Shipping Lines (IRISL) into international liner trades. An increase is forecast in teu

passing through Iranian ports this year which is expected to surpass the 1 million teu handled in April 2015 when sanctions were still in place. IRISL is negotiating business with more feeder lines. The first to break the deadlock was Unimed Feeder Services, a subsidiary of Denmark’s Unifeeder, which will provide services to Dubai and India with feeder slots for IRISL’s subsidiary Valfajr Shipping Co. By spring 2016 as many as 22 deepsea services were scheduled to call at Iranian ports. Since sanctions were lifted, teu import growth is expected to double from 3 per cent to 6 per cent per annum. Feeders with reefer capacity are in demand and can command premium rates. The latest feeder newbuildings offer reefer space, even on vessels with capacity as low as 1,000 teu. Companies such as Maersk and CMA CGM chartered 2,500 teu vessels at US$11,500 a day in May, to commence four to six months later for a period of three or four years. The French liner company paid US$11,000 for a similar unit over one year. Reefer produce provides one of the brightest spots in the box trades, but now the problem is not that there are not enough reefer slots on feeder vessels, but that lack of availability is pushing up rates for feeder slot moves. German controlled tonnage is still the leading player in feeder business, but the KG debacle still hangs over companies’ financial positions. This year has seen positive moves by the banks to halt the loss of vessels from fleets and free up German

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ORDERBOOK ANALYSIS | 43

liquidity. Several banks are now working on protection measures for the KG ships that they reluctantly own. With second-hand and demolition prices unappealing for smaller feeder sizes, the banks are reluctant to sell tonnage and prefer instead to find solutions to lessen debt and improve

trust in German knowledge of the markets. Although confidence has been knocked, shareholders can still be attracted to a strong German disposition in feeder trades. A new German owner, Okee Maritime, was formed in Hamburg in 2014 and immediately moved to

FEEDERS ON ORDER (AS OF 15 AUGUST 2016) SHIPOWNER

buy two 1,500 teu former KG units at rock bottom prices. Both vessels have attracted period charters at US$6,0007,000 per day, which is firm in today’s market. Further acquisitions will happen this year and all will be distressed KG sales. One of the difficulties in attracting investors is a reluctance to assist owners who are carrying debt ridden tonnage that is under the control of creditor banks. In a few cases banks are now allowing owners to sell fleets, “at the best possible prices,” to pay off financing loans. Free from debt liabilities, companies can then move to attract investors to buy new ships. Some of the earnings can then go towards reconciling the outstanding debt situations with banks. The boldest of these moves centre on the coming together of northern based German owners forming alliances to take on multiple ships from German banks. Such is the activity that dozens of German ships have changed hands in “off market” deals to relieve pressure on KG owners and banks alike. HCI Capital took over 13 vessels in the 800-1,800 teu range from HSH Nordbank, in just one of many such moves designed to remove toxic debt from banks. Under the so-called Nautilus scheme, all the vessels were promptly installed under HCI Capital ownership with an estimated total value of US$60 million.

Peter Döhle was a key mover in this transaction as it holds a 39.19 per cent ownership in HCI Capital. The investment company now has ambitions to build up its owned fleet, many of which will operate in the Peter Döhle container pool. More small German owners are being swallowed up in restructuring moves of this kind, but if this means the lessening or removal of debts and the survival of a strong German feeder fleet, then the initiative makes sense for the immediate future. In April commercial management platform Liberty Blue, based in Leer, sought to establish an alliance of owners in northern Germany. Smaller German owners have been invited to join the Liberty Blue fleet while retaining their names and technical management. The latest example of this was the takeover of 14 feeders from Rohden in August, raising the number of vessels in Liberty Blue’s fleet to 47. Nonetheless, managing director and owner of Liberty Blue Dietrich Schulz believes the situation is so serious for German feeders that this solution may not be enough for small feeder owners to survive. Rohden is the third member of the Liberty Blue fleet. The others are Reederei Buss and Liberty One. In the coming months Liberty Blue will negotiate deals with banks for more distressed vessel business. CST

NO

TOTAL TEU

Others

81

162,515

Evergreen Marine Corp

20

56,000

Zhonggu Shipping

18

46,400

Lomar Shipping

16

32,132

Reederei Nord

11

23,650

Seatrade Groningen

10

22,200

CMA CGM

9

24,100

Jiangsu New Yangzijiang

8

8,800

Sinotrans

8

23,600

Wan Hai Lines

8

15,200

AP Møller

7

25,900

Ningbo Ocean Shipping Co

7

8,600

GNS Shpg./Nordic Hamburg

6

8,208

Marlink

6

6,972

Delphis

5

9,500

Arkas Group

4

10,000

Brod Split Navigation

4

8,000

Cosmoship Management

4

7,200

Peter Döhle

4

13,000

Hamburg Süd

4

15,472

Harren & Partner

4

5,600

Jungerhans & Co

4

4,000

Mandarin Shipping

4

6,920

Nordic Hamburg Shipmanagement

4

5,600

Nordic Hamburg/Containerships

4

5,472

Quanzhou Ansheng Shipping Co

4

9,600

Bernhard Schulte

4

9,360

Temas Line

4

1,440

Tribini Capital

4

9,630

FEEDERS ON ORDER

Tropical Shipping

4

2,800

TEU RANGE

TS Lines

4

7,200

below 1,000

27

13,177

Cape Shipping S.A.

3

5,590

1,001 - 2,000

125

192,502

Log-In Logística

3

8,100

2,001 - 3,000

106

268,580

Shanghai Hai Hua Shipping Co

3

3,060

3,001 - 4,000

34

126,211

Tufton Oceanic

3

8,100

4,001 - 5,000

4

19,451

296

619,921

296

19,921

TOTAL

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TOTAL

Source: BRL Consultants

NO

TOTAL TEU

Container Shipping & Trade | 3rd Quarter 2016


44 | LAST WORD

The tide has turned for shipper-carrier contracts As Richard Lidinsky bows out from the US Federal Maritime Commission after a seven-year term as both chairman and commissioner, he shares his parting thoughts on some of the major US container shipping issues

M

id July marked the final day of my term as the United States’ Federal Maritime Commission [FMC] chairman and commissioner since President Obama appointed me in July 2009. While there were many important and controversial issues that confronted the FMC during that time, a few stand out and I would like to recount them in the context of now, and the future. The issue of shippercarrier relationships is a tale as old as the first cargo vessels – a delicate, complicated, and at times contentious shipper-carrier saga. It is very rare for harmony to exist amidst charges of excessive shipping fees, or those using the services not being appreciative of the time, cost and daily effort required to deliver the goods. For the FMC, the service contract – the specific deal between ocean carrier and shipper – is a means of covering not just costs, but all contingencies that may arise. Over the years, regrettably, the shippers have kept a focus on carriage costs and let other vital areas such as detention, cargo delay, and so on go unaddressed. Many times they then come to the FMC for the free services of the

excellent Consumer Affairs and Dispute Resolution office. I am pleased to say that in the most recent round of contracting activity it appears the tide has turned and the trend is towards more realistic expectations on both sides. Another issue is that of alliance growth and cargo movement. The last few years have seen the birth and growth of carrier alliances with global reach and a powerful vessel presence in all trades. The first phase of this new industry structure is moving into a second phase early next year, and it appears to be moving in the right direction for all concerned. It is hoped that new transport developments for cargo movement, such as the expanded Panama Canal, will help spur all-water commerce from Asia to the US East Coast and gulf, with return voyages of liquefied natural gas and other energy supplies. This is an area that bears close scrutiny by all sectors of the maritime family. There are many “good citizen” carriers, but unfortunately there are others that engage in practices that are not in keeping with the best interests of shipper, port and consumer customers. Hopefully, the FMC, the EU and PRC regulatory officials will keep an eye on this growing form of ocean commerce to the benefit of all.

Container Shipping & Trade | 3rd Quarter 2016

Throughout their 100 year history, the statutory bodies regulating American waterborne commerce – for 55 years the FMC – have recognised the key role our ports have played in our transport chain. The obvious presence and development of ports – dredging harbours, developing terminals, purchasing vital cranes and providing the labour base to handle the cargo – is easily recognised. What is not visible is the ongoing and at times fierce competition for this business. In the past, ports became possessive about certain commodities and shipment patterns, so that in the last century for many years a concept of cargo being “naturally tributary” to a port was recognised in law and regulatory practice. The explosive growth of containerisation put paid to this, but to this day ports exploit their geographic and local advantages. In recent years, ports in Canada and Mexico have started a land-bridge type of movement where US-bound containers that would normally be unloaded in a Pacific North West or California port are carried by rail across the neighbouring country, to cross into the USA. By doing so, the shipment avoids our Harbour Maintenance Tax and, by going directly to supply centres throughout the Midwest by rail,

avoids any US port facility. Our agency examined this question in great detail six years ago and found that while it was legal, the US ports that were experiencing this growing cargo loss needed to recognise what is happening and act in a competitive fashion, in order to return these containers to our ports and domestic delivery systems. Some shippers are aware of this development and, indeed, have adopted it as a secondary strategy in the event of West Coast port congestion. Experience has shown that no matter what routes a shipper utilises for their goods, they should not yield crucial port selection to their freight forwarder, non vessel operating common carrier, third party logistics advisors or to electronic analysis systems. All of these can be consulted, but only the owner of important container cargo should have the final say in this very important process. I am grateful for this opportunity to share my parting thoughts and wish Container Shipping & Trade and its readers all the best. CST

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BEST OF THE WEB | 45

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by the P3 alliance and the language in the existing 2M alliance (Maersk Line and Mediterranean Shipping Co). I would like to see fair dealing and transparency in how the parties handle negotiations with third parties, suppliers, small businesses, and other service providers. Using their proposed buying power through proposed joint purchasing agreements could harm both downstream and upstream participants.” http://bit.ly/2bWkbOH

FMC ‘stops the clock’ on Ocean Alliance The United States Federal Maritime Commission (FMC) has halted progress on the Ocean Alliance agreement after commissioner William Doyle voted in favour of a request for additional information (RFAI). A statement by the government agency explained that the RFAI effectively ‘stops the clock’ on the agreement until such time as the filing parties answer the questions proposed in the RFAI. Once those questions have been answered and filed with the commission, a new 45-day period commences. Mr Doyle stated: “I pay special attention to competition matters especially with regard to small businesses, downstream participants and the upstream ‒ supplier and vendor ‒ markets. We have been down this road before with language proposed but not implemented

Hanjin files for receivership – HMM eyes its assets Hanjin Shipping Co has filed for receivership after its creditors refused to provide extra funding to the shipping line – but Hyundai Merchant Marine (HMM) may consider taking over some of its assets. According to a company spokesman, Hanjin’s board unanimously agreed to file for receivership at a meeting on 30 August, after lenders refused to reschedule its debt under a new restructuring plan. South Korea’s Financial Services Commission said in a statement that HMM may consider taking over some of Hanjin Shipping’s assets, including vessels, network and staff. HMM said no more than that it would work with authorities to come up with measures. HMM’s shares

soared by 22 per cent after the Financial Services Commission’s statement. http://bit.ly/2bVtslu

Matson books two LNG fuelled conro ships at NASSCO USA-based Matson Navigation Co has signed a US$511 million contract with General Dynamics NASSCO to build two conro vessels for its Hawaii fleet, to be delivered in late 2019 and summer 2020. Matson has named the vessels’ class Kanaloa, after the ocean deity in native Hawaiian culture. The Kanaloa class vessels will be fitted with dual-fuel engines, operating at speeds of up to 23 knots on conventional fuel oils or liquefied natural gas (LNG), with some adaptation for LNG. Built on a 3,500 teu vessel platform, they will be 265m long, with a 34.9m beam and a deep 11.5m draught. They also feature enclosed garage space for up to 800 vehicles. The first vessel will be named Lurline, the sixth Matson vessel to carry that name, and the second vessel becomes the fifth Matson vessel named Matsonia. The Kanaloa class ships will replace three diesel-powered vessels, which will move to reserve status. http://bit.ly/2ctzizy

To view more whitepapers visit the Knowledge Bank on www.containerst.com To upload a whitepaper to the Knowledge Bank, please email Steve Edwards at steve.edwards@rivieramm.com www.containerst.com/s/knowledgebank

Editor’s selection:

Editor’s comment:

Future Trends of Electrical Propulsion and Implications to Ship Design, by ABB

Importantly, the paper also explores two emerging technologies in electrical propulsion and distribution and how these influence ship design in terms of DC distribution and energy storage.

Over the last 10 years the electrical propulsion fleet grew three times faster than the world fleet. This paper provides an overlook of the main drivers supporting this impressive growth and explores supporting drivers for future growth.

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Container Shipping & Trade | 3rd Quarter 2016



Container Shipping & Trade 3rd Quarter 2016