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ISSUE FOUR 2017

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Chin a

Ch i n Spec e ial port se ow ne rs, fi s an dy na spot ards in nce, the l ig h t

Leasing enters golden period

ICBC’s Bill Guo on the future of ship finance


MANIFEST

3 At The Prow

Economy 4 US 5 EU 7 China 8 India 9 Brazil

Markets 10 Dry Bulk 13 Tankers 15 Containers 16 Offshore 17 Finance

Executive Debate 18 How to end crew abandonment

Profiles 22 Cover Story ICBC Leasing

25 APL 26 Scorpio 27 Ardmore 29 Trans Sea 30 ECSA 31 Confirtama 33 G2 Ocean

China 34 Cosco 35 Ports 36 Yards

Recreation 38 Wine 39 Gadgets 40 Books 41 Travel

Opinion 42 Kate Adamson 43 Andrew Craig-Bennett 44 MarPoll

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An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Paul Collins Mumbai: Shirish Nadkarni New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Editorial material should be sent to sam@asiashippingmedia.com or mailed to 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2018’s four issues of Maritime ceo magazine. Email sales@asiashippingmedia.com for subscription enquiries. Copyright © Asia Shipping Media (ASM) 2017 www.asiashippingmedia.com Although every effort has been made to ensure that the information contained in this review is correct, the publishers accept no liability for any inaccuracies or omissions that may occur. All rights reserved. No part of the publication may be reproduced, stored in retrieval systems or transmitted in any form or by any means without prior written permission of the copyright owner. For reprints of specific articles contact grant@ asiashippingmedia.com Twitter: @Splash_247 LinkedIn: Maritime CEO Forum Facebook: Splash Maritime & Offshore News

ISSUE FOUR 2017

Clear as mud

T

he T word has been deployed by the powers that be an awful lot of late. Whenever I hear shipping’s top brass stress the word transparent my gut instinct as a roving hack is to suspect the opposite. Transparency and shipping have historically gone together like horseradish and chocolate cake. This is an industry of brass plaques, where pulling the string back to try and reveal corporate identities is a frustratingly knotty exercise. More than 80% of our readers voted 15 months ago in favour of ownership structures in shipping become more transparent. I’d urge the debate to go a step further and look at regulations and how they are formed. Take the furor this October from leading shipowner associations when they were denunciated by a Britishbased NGO for allegedly holding sway at the International Maritime Organization over climate talks. The accused – as one – all responded, rubbishing the report and saying how transparent they have all been in their environmental lobbying to date. The strong and similarly worded rebuttals once again made me wonder as a questioning journalist if owners were protesting too much. Even when there is seemingly laudable legislation, championed by the industry’s most vocal proponents, it is still so easy to poke holes. Take the Maritime Labour Convention (MLC). The term human rights is notably absent from this groundbreaking seafarers charter, leaving space for exploitative practices to be carried out by less scrupulous members of our industry. Shipping’s inherent secretive nature does not lend itself to transparency, but to progress collectively wouldn’t it be so much better for everyone to share more details on

accidents or cyber attacks? All of which brings me to the most egregious step back in openness – the recent news that Paris MoU member states will stop providing data at source to industry and publish only via parismou.org and equasis.org, a decision vetting company RightShip labelled as “regressive”. “Given that we are now in the midst of the digital age where transparency and access to data is ingrained in all modern safety systems, the decision to withdraw Paris MoU data – and the unintended consequences impacting fleet safety – seems baffling, illogical and regressive,” RightShip boss Warwick Norman told me. Rod Johnson, a former Port State Control officer, declared the Paris MoU move was “disingenuous”. “Worse than that, it’s selling out PSC inspectors, seafarers and the fine record of the Paris MoU by giving succour to a minority of shipowners who see safety as an overhead and not an enabler,” he said. Still, I’d argue those trying to paper over the cracks fail to understand that in today’s data-rich world shipping will be dragged into a far more open era where individual corporate actions will be easily trackable. Data accessibility will make the T word a given, not PR fluff going forward. ●

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ECONOMY US

Skills shortages hamper growth Unemployment is not a problem for Uncle Sam. Finding the right qualified people is now a growing concern

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hatever else may be causing fractures in American society and the Trump administration it is not the economy. The US economy expanded at a modest to moderate pace in September through to early October, according to the Federal Reserve. Inflation remains mild. There may be some slight negatives from the fall out from Hurricanes Harvey and Irma but not enough to shift the generally resilient (if unexciting) state of the economy overall. America doesn’t have an unemployment problem as such at the moment – indeed sectors such as construction, skilled manufacturing, healthcare and services say they can’t recruit enough qualified candidates. However, wages are remaining stable despite pockets of labour scarcity. In

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There will be pressure on wages to rise

some parts of the country this is actually getting to a point where it is holding back economic growth – manufacturers in Minneapolis, for instance, claim that a shortage of skilled workers means they are putting expansion plans on hold and can’t take new orders as they cannot guarantee that they will be able to fulfil them. This would indicate that Jobs by skill level, 2017 Skill level

% of jobs

High skilled

31

Medium skilled

53

Low skilled

16

Source: US Bureau of Labor Statistics

over the rest of the year there will be pressure on wages to rise as well as enhanced other costs to attract and retain workers – sign-on bonuses, better healthcare, help with housing costs, etcetera. In Washington, the Commerce Department announced in September that the twin good news of rising exports and falling imports shrank the US’s trade deficit in goods and services to the lowest level in nearly a year. Consequently the trade deficit — the gap between what the US imports and what it exports — narrowed to $42.4bn in August, down $1.2bn from July. Individually the US trade deficits with both China and the European Union shrank this past summer. As ever, as the global economy goes so go American exports. Due to the size and reach of the US economy stronger demand globally will always be good for the US. It is also the case that America is now actively exporting crude oil (since the change in the law in late 2015) and with growing demand from major consumers such as India – keen to diversify away from its dependence on Middle Eastern suppliers – this is buoying up overall export numbers as, effectively, a whole new category. But lumbering and overshadowing all of this generally positive news is the continuing uncertainty about economic policy eminating from the White House. It is still not possible to dismiss the idea of a major trade war initiated by the president in support of his ‘America First’ policy. There are any number of free trade agreements and preferential trade agreements that could be torn up as easily as the Paris Climate Change Agreement and US membership of bodies such as UNESCO. Of course a trade war is really in nobody’s interest and could end up harming the US economy most of all. However, this will be a political decision and therefore separate from the general state of the economy right now – which remains about as good as could be expected. ● maritime ceo


ECONOMY EUROPE

A story lacking coherence The continent is in a fragile state

E

uropean economics remain dominated by politics – Brexit’s lack of any substantial progress, a dent to Angela Merkel’s power in Germany, resistance to some reforms in Macron’s France. The thinking of many analysts looking at the Eurozone right now can be summed up thus: You can put off resolving underlying economic problems for a long time but eventually the pressures that result cannot be put off forever. Macron may want to reform the Eurozone but Germany’s government may now be too weakened to assist in this project, while Mr Macron The UK’s importance as a European market - Eurozone country export destinations, 2016 Export Destination

% of exports

UK

16

US

15

China

8

Switzerland

6

Russia

6

Turkey

4

Rest of world

45

ISSUE FOUR 2017

himself has problems with France’s notoriously volatile and anti-change labour unions. Neither Mrs Merkel nor Mr Macron can really look to the EU Commission for much guidance right now as it is feeling fragile after the surge in anti-EU votes in Germany, France, Holland and, of course, Britain. Policy seems to be largely on hold right now, especially in the unravelling crisis surrounding the future of Catalonia. The Eurozone saw exports grow over the summer – as with America, any rebound in global trade is good for Europe. This is especially true of the zone’s largest exporting nation, Germany where exports had their biggest monthly rise last August in 12 months. German exports were up fully 3.1% for the month. But, as ever with the hodgepodge of economies that make up the zone, the story is never uniform. Ireland saw exports fall, even with food exports from the zone and the EU as a whole reaching record highs. Holland saw the biggest gains in agricultural product exports over the summer largely due to sales to non-EU countries. Holland, despite being relatively small, accounts for over 16% of all EU food exports to outside of the

union. The largest food exporters to non-EU countries last year were, as noted, the Netherlands, followed by Germany and France. The main destination for EU-produced food is the US followed by China, Switzerland , Japan and Saudi Arabia. Food is a good story – cars less so as the stronger euro continues to hurt Eurozone car exports (and helps the case for keeping car factories in Brexit Britain for the moment). This particularly adversely hurts Europe’s largest car producer, Germany. Germany’s car industry, which is the country’s biggest exporter and employs some 800,000 people, is also engulfed in an emissions scandal courtesy of Volkswagen and so the sector is ailing at present. Lastly what to say of the UK economy? The pound has taken repeated batterings though there are, of course, pros and cons to this for exporters and sectors such as tourism. Inflation is up and will, the Bank of England admits, probably rise yet further but should peak in the fourth quarter. For now so much of the health of the UK economy still rides on whether or not the lethargic Brexit negotiations can get any steam going. ●

“The uncertainty in the lead up to Brexit is not helping London’s position as a global shipping hub and it’s going to get tougher once Brexit happens” — Mark Charman, CEO, Faststream Recruitment

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ECONOMY CHINA

Fine balancing act The doom-mongers look like they got this year’s forecasts all wrong

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s expected no surprises at the recently concluded 19th National Congress of the Chinese Communist Party in Beijing. Xi Jinping gave a three and a half hour speech (quite moderate by Communist Party Congress standards) outlining China’s policy direction in all major fields until the next congress. If delegates in the Great Hall of the People looked bored and kept checking their watches it was probably due to the lack of any real initiatives – steady as she goes is the primary message, after, of course, the party is in total control. The “moderately prosperous society” by 2021 goal remains as does the turning China into a “fully developed nation” by 2049 objective (which will be the 100th anniversary of the founding of the People’s Republic). However, there wasn’t much detail of how these goals will be achieved sadly. Maybe there doesn’t need to be – steady as she goes; just keep on keeping on would perhaps be the best policy. Third quarter growth looked solid enough. Indeed industrial profits accelerated the fastest since

Consumption is now responsible for nearly 65% of GDP growth ISSUE FOUR 2017

China’s steady export numbers, 2017 Month

exports ($100m)

May

1,902

June

1,965

July

1,936

August

1,992

September

1,982

Source: China General Administration of Customs

2012. The Chinese consumer story continues to be amazing – online sales growth up 28% year-on-year in September. Still, online B-2-C is a relatively new sector so higher growth rates are to be expected. Still consumption is now responsible for nearly 65% of GDP growth – 10% more than in 2012. China has more than rebalanced. Continued wage growth coupled with low unemployment and low household debt would indicate that consumer sales will continue to improve – offline and online. The industrial numbers were more interesting though. The best sectors were those where China bears tend to show more caution – construction (both infrastructure and residential) grew fast, defying notions of all those supposed bridges to nowhere and empty housing developments. Construction materials

naturally leapt too on this activity and boosted somewhat flagging raw material prices for the second half of 2017. New homes are still selling – property sales are up nearly 8% year-on-year (based on sq m prices) – this is with most local banks now requiring 30% deposits to secure mortgages. Some predicted that exports would be China’s weak spot in the second half of the year. However, the third quarter numbers show exports were up 8.1% from a year ago in US dollar terms, while imports grew by 18.7%. China has been remarkably successful at diversifying its trade and sales routes – with obvious implications for shippers and logistics services. American demand may not be what it was once was but, even with reduced exports to North Korea (which were never much in overall export statistics terms anyway) shipments to Latin America, the Middle East, Europe and South Asia/ Southeast Asia are all looking pretty solid. Due to the nuclear crisis and enhanced UN sanctions imports from North Korea have declined significantly - 37.9% in September from a year ago, marking its seventh month of decline. Imports of coal, iron ore, and apparel to its neighbour also fell sharply. Chinese exports to North Korea fell 6.7% in September. ●

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ECONOMY INDIA

10% annual growth for the coming decade? The bulls are getting very excited about prospects on the sub-continent

I

ndia got a very nice pre-Diwali holiday present – improved exports and factory output all wrapped up in lower inflation. The retail economy appears to have got over the initial shock of the introduction of India’s first serious Goods and Services Tax (GST) and the somewhat chaotic demonetisation campaign of Prime Minister Modi. India went into the major holiday in a good economic mood. In the third quarter consumer prices stopped rising and stabilised while inflation fell. Most importantly, for largely poor, largely rural India, this made food prices more affordable for the average citizen. August saw industrial production hit a year’s high at 4.3% as manufacturers rushed to finish orders before Indian oil imports, 2016-2017 Month/year

million tonnes

April 2016

17.9

July 2016

17.2

October 2016

18.1

January 2017

17.5

August 2017

18.1

*Source: Indian Economic Times

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the prolonged shut down over the holiday period. However, it is exports that have shown the best news lately. Indian merchandise exports grew at 25.7% in September, its fastest pace in six months, to $28.6bn, which helped trade deficit to narrow to a seventh-month low of $8.9bn. Of course there are challenges – more new urban jobs are needed if New Delhi is to manage the twin challenge of urbanisation and supporting the younger demographics of the country. Debt, banking regulation and government bureaucracy – the so called ‘Regulation Raj’ – all remain perennial problems hampering long term and sustainable growth. Still, the international community is seriously bullish about the sub-continent. According to the latest report published by Morgan Stanley, the Indian economy will grow at over 10% annually in the coming decade. This is incredibly bullish but Morgan Stanley firmly believes that the two biggest influencing factors to support this projected growth rate are a surge in adoption of cashless mediums of payments and a uniform taxation

system in the country. The report also suggests that growth of Indian GDP will be driven by increased internet penetration in the country. By 2027, it expects that over 920m Indians will have access to the internet and that will be a huge boost to push the digital transactions and bring the country under a single set of transparent guidelines. This is quite a turnaround for Morgan Stanley on India who, four years ago, grouped the country together with Indonesia, Turkey, Russia and South Africa on their ‘Fragile Five’ list. India is also importing more and has become a significant client for US crude oil of late. This is partly of course due to the lifting of the ban on US crude oil exports in 2015 by the Obama administration but also due to New Delhi’s perfectly sensible policy of diversifying its oil suppliers away from solely the Middle Eastern nations. Whatever, the result is more tanker shipments to India from more locations. The process is encouraged by the fact that since PM Modi met with President Trump in June the New Delhi administration has been encouraging more crude imports by waiving some shipping requirements. ● maritime ceo


ECONOMY BRAZIL

Jobs bring hope The Latin American nation is not out of the woods yet, but some indicators are promising

B

razil’s greatly improved new jobs data for this September will hopefully be a knock-on factor for good news in the country’s ailing consumer market and other related sectors for the rest of the second half of the year and into 2018. Brazil’s Labor Ministry claims that the Brazilian economy added a net total of 34,392 additional payroll jobs in September and a net 208,874 payroll jobs in 2017 so far. However, the news from Brazil is, as so often, rather contradictory. A significant number of new jobs were not matched by overall economic performance and, so the Central Bank claims, the economy contracted by 0.36% in August. Of course, there’s a lag effect with those new jobs needing a few months of wages paid before the retail sales market, let alone the residential property market, sees any boost.

The economy is expected to grow by 2.5% next year

ISSUE FOUR 2017

Brazil services sector PMI, 2017 Month

Services PMI Index

January

45

February

46

March

49

April

50

May

51

June

49

July

47

August

49

September

51

Source: Brazil Manufacturers’ Association

Still, new jobs and record low interest rates are combining to bring a smile to the faces of many Brazilian retailers - rising sales of products are closely connected to credit card use. The Brazilian economy is expected, by a respected panel of local economists, to grow 0.72% in 2017 and then accelerate to 2.5% in 2018. These may not be the astounding growth numbers we get from other BRIC economies such as India and China, but after quite a few bad performing years they are a major positive for Brazil.

The issues potentially dragging the economy back into sluggishness remain the same – corruption, bureaucratic red tape, unstable government – and all lead to a lack of investor confidence both inside and outside the vast country. As far as exports go it’s the usual mixed picture. Perhaps surprisingly sugar exports leapt in the third quarter despite Beijing raising tariffs on imports into the PRC. China maintains a tariff rate of 15% on imports within a quota of 1.945m tonnes a year. After the collapse of certain export markets due to overreliance on key markets – i.e. soybeans and commodities to China during the ‘super-cycle’ – it seems Brazilian exporters are learning to diversify. The last quarter reported significant growth in exports to relatively new markets for Brazilian manufacturers and farmers – South Asia, various Middle Eastern countries, the Arab nations of North Africa. Exports of agricultural commodities to Bangladesh, Egypt and Iraq showed particularly strong growth. Naturally Brazil is having to look at reorganising and extending its proliferating supply chains. Service industries are also seeing a slight resurgence – a sector we rarely even get around to mentioning in Brazil usually. However, services employ around 66% of the nation’s workforce. Services – banking, financial services, credit, utilities, retail – are also where the vast bulk of new job growth is coming from right now in Brazil and so more attention than ever is being paid to the sectors. Although that always comes with the caveat that many areas of the service economy are still surrounded and suffocated by protectionism and regulation. ●

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MARKETS DRY BULK

Water and pollution transfer Jeffrey Landsberg from Commodore Research suggests Beijing is playing into shipowners’ hands

A

s China continues to modernise, its citizens also increasingly want to live in cities with low levels of air pollution. At the same time, China’s government is determined to reduce the number of talented people leaving the country. Reducing brain drain, improving the health of its citizens, and having living standards in cities climb to levels closer to those in developed nations will remain of paramount importance in China. We remain of the view that upcoming years will witness China source a larger proportion of its commodities (including industrial commodities like iron ore and coal, and water intensive commodities like grain) from abroad. This will remain advantageous to the dry bulk market. In the case of iron ore and coal, China also remains set to continue shifting away from the mining of low quality types of these commodities. We also are of the view that a partial transfer of pollution will become a larger issue to the Chinese government as the years progress. One example is that China’s push to tackle pollution is having an adverse effect on Brazilian rainforests (where more iron ore is being mined and exported from). Mining is harmful to the environment in any nation where it is taking place. In addition to the direct impact, waste is produced, water is affected, and dust often pollutes the air during the mining and proceeding ground transportation of raw materials. China, in particular, has long been plagued from dust escaping open-top railcars used for transporting raw materials. This has become a secondary polluter from the domestic mining of industrial commodities. Dust also escapes from trucks, and trucks of course

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have their own polluting emissions. Overall, a large amount of China’s commodities are mined in the central and western parts of China, and these commodities must then be transported long distances to reach power plants, steel mills, and other heavy polluters that are often located near the coast. Using the same commodity that has been imported rather than mined domestically is better for China’s environment and air whenever imports are available (and of course using the highest quality, which is where imports dominate, is always the best). China’s government is well aware of this, and we continue to anticipate seeing more of a partial transfer of pollution take place. China is set to mine less low quality raw materials, while countries like Brazil will mine more of their own high quality raw materials. Going forward, we remain particularly bullish for China’s iron ore imports for both the near term and long term. We are bullish due to pollution concerns and also seasonality. Data throughout this decade has shown that Chinese iron ore imports always climb in the second half of each year, even though China’s steel output typically declines in the second half of the year. So far this decade, China’s iron ore imports in the second half of year have increased by an average of 30.5m tons compared with first half of the year volume, and we remain of the view that global miners will continue to dictate Chinese iron ore import volume. China is set to mine much less low quality iron ore, while nations like Brazil are set to mine more high quality iron ore. China’s domestic iron ore has an average iron content below 20%, while imports typically have an iron content

ranging from 50% to 65%. Demand for other high quality commodity imports is set to intensify in China as well, and overall we also expect to see more of a partial transfer of pollution take place as the years progress. China continues to sit on trillions of dollars of currency reserves and its urbanisation remains in relatively early stages, but the government must continue to combat pollution. It makes great sense for China to buy and import large quantities of high quality commodities. At the same time, Brazil and other nations will continue to look to their own raw materials (and the Chinese export market) for jobs and revenue. As time progresses, a partial transfer of pollution is likely to grow more prominent, just as it is likely that a global transfer of water (through the trade of agriculture) will intensify. Water is likely to become a much scarcer resource in the future, and China has long been suffering from regional water crises. Globally, it is estimated that about 70% of freshwater withdrawals go to agriculture – and since transporting water globally is not practiced in earnest, agriculture imports are an effective means of water redistribution. China has about 18% of the world’s population, but only an estimated 7% of the world’s fresh water. As a result, we expect to see China import a much larger amount of agriculture. ● maritime ceo


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MARKETS TANKERS

Slow rebalancing Fundamentals stand in the way of owners deriving decent profits, writes BIMCO’s Peter Sand

E

veryone wants better market conditions, including the oil sector, but there isn’t any way around the fundamentals in the end. What determines the oil price? Supply and demand in the long run. And in the short-term, perhaps more speculative, rumour-based movements determine volatility, but give no firm trend.

A slow rebalancing is unfortunate for the tanker industry, as tanker market demand will not normalise before global stocks are drawn down significantly. Nevertheless, it’s not all bad. US exports of crude oil reached a record high in the first half of this year, and kept on rising. They were up

Why is this relevant? It’s relevant because oil market conditions determine demand for oil tankers. Almost one year has passed of OPEC trying to balance the global oil market by cutting production to raise prices. Has OPEC managed to bring down oil stocks on a global scale? No. So now, OPEC calls upon US shale oil producers to scale back their production. This happens at a point in time when a major player in the US shale oil fields complains that the EIA’s forecast of a weighty increase in US oil production next year is overly optimistic and distorted. They may have a common interest, but are likely to respond very differently. EIA forecasts US crude oil production will reach 9.24m barrels per day in 2017, up by 4.3% from 2016. For 2018, EIA forecasts a 47-year-high production of 9.9m barrels per day, up by 7.4%.

58% year-on-year in the first seven months. Compared to 2016, the US now exports to many more destinations (27 vs 19 countries), and longer trade routes are also emerging. Changes to sailing distances often affect demand more significantly than changes to export volumes. US exports of finished petroleum products also set a record. From May to July this year, exports went above 1m barrels for the first time and exceeded the previous record in December 2016. In total, the first seven months of 2017 saw exports hike by 12%. Then along came Hurricane Harvey disrupting it all, adding plenty of uncertainty but leaving only small opportunities for the tanker shipping market in its wake (the results of Harvey mainly being about damage and refinery shutdowns).

ISSUE FOUR 2017

China has grown its crude oil imports significantly, boosting oil product exports at the same time as import and refinery capacity fulfils domestic demand. During the first nine months of 2017, China imported 33m tonnes more of crude than the same period last year. BIMCO estimates that this equals a tonne-mile growth rate of 18% for Chinese crude oil imports alone. The challenges, which are in the hands of shipowners, mostly relate to demolition activity and new orders. Crude oil tanker demolition cooled in October, after July-September saw more than 1.3m dwt of capacity demolished. Too little and too late you may say? There’s more to come in 2018, as owners aim to reduce overcapacity from 2016 and 2017. Oil product tanker demolition in October was the second highest since May 2014, superseded only by the 518,000 dwt demolished in August earlier this year. In terms of new orders emerging, VLCCs have been popular with nine more added to this year’s tally in September. Orders of oil product tankers amount to only four ships in the past two and a half months, preparing the ground for low fleet growth in 2018-2019. ●

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MARKETS CONTAINERS

Blank sailings are coming back Carriers are managing the supply/demand balance in order to set the stage for a solid build-up to Chinese New Year, writes Lars Jensen from SeaIntel Consulting

T

he second and third quarters saw an almost complete elimination of blank sailings on the Asia-Europe and transpacific backbone trades. This was primarily driven by two factors. One very tangible factor was the strong demand growth on these trades. According to Container Trade Statistics, demand growth was 9% for the transpacific and 6.3% for Asia-Europe for April to August on a year-on-year basis. Last year the corresponding growth rates were only 4% and 2% respectively. In other words, transpacific demand growth has doubled, and Asia-Europe growth has tripled. The other less tangible factor is the establishment of the new Ocean Alliance and THE Alliance networks. This has caused an unprecedented reshuffling of services and products Asia-N.Europe 14% Consequently, in the deepsea trades. Asia-Med. 7% the carriers might well have felt a Asia-USWC 10% strong need to maintain consistent Asia-USEC 21% sailings to ensure customers got to

know the new products which were launched. Not to forget the carriers’ own need to get familiar with the new operational reality in the new alliances. Whilst this period of almost no blank sailings was indeed positive news for supply chain managers, this state of affairs is not going to last. Based on SeaIntel’s detailed database of deepsea vessel departures planned for the coming 13 weeks, it is possible to analyze the exact year-on-year capacity change on the main trades in Q4 2017. The Asia-North Europe trade stand to grow almost 14%, whilst Asia-Med grows a more modest 7%. But in the light of 5% demand growth year-todate, this is clearly problematic. The transpacific has grown 9% year-to-date. Whilst the trade to the USWC sees a comparatively reasonable injection of just off 10%, the all-water route to the USEC sees a whopping 21% capacity injection. The reason for these large

Q4 2017 Year-on-Year capacity growth 25% 20% 15% 10% 5% 0%

Asia-N.Europe

ISSUE FOUR 2017

Asia-Med.

Asia-USWC

Asia-USEC

growth figures is two-fold. One is the injection of ever larger vessels, but more importantly, we did see a substantial amount of blank sailings in Q4 2016. This means that without similar action taken now, overcapacity will grow rapidly. With spot rates already having been under pressure for the past couple of months, such overcapacity would lead to a disappointing end of an otherwise good year for the carriers. Realistically, we will see carriers implement a range of blank sailings in the final parts of 2017, managing the supply/demand balance in order to set the stage for a solid build-up to Chinese New Year 2018. Shippers should therefore make sure their supply chains are as flexible and resilient as possible in order to avoid major disruptions. Looking slight further ahead, the issue of capacity will continue to appear. Especially since Cosco and Evergreen are poised to take delivery of a substantial amount of capacity in 2018 – both have orderbooks of approximately 20% of their current fleet. Although some will also be delivered in 2019, this leads to a point where the Ocean Alliance will have no choice but to pursue significant market share growth in 2018. This might in turn reintroduce the freight rate volatility we have been accustomed to in the past five years – and in reality, thereby also bring back the ubiquitous use of blank sailings to attempt to bring tactical market supply under control. ●

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MARKETS OFFSHORE

Take the current when it serves Making his debut for Maritime CEO, OSV veteran Shesh Venkatraman outlines opportunities amid the protracted downturn

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e have reached and passed the three-year mark from when oil prices took a nosedive in October 2014. Since then, innumerable offshore services companies have had to restructure their balance sheets, resize their teams and rethink their futures. Utilisations range, more often than not, in the low 50s. More than 250,000 onshore jobs have evaporated. Many vessels are, even when working, barely covering opex. Banks are becoming de facto owners of hundreds of vessels. More than 1,400 vessels are idle, many of them coldstacked and unlikely to sail again. Shipyard quays are crowded with partially or completely built vessels, deteriorating rapidly. The tunnel seems interminably long, and exhaustingly dark. In this dank and gloomy environment, it is difficult to believe that there may be opportunities to exploit. But, opportunities exist, if one is willing to step back and look at the situation from differing perspectives. First, consolidation. Historically, very little consolidation has taken place in the much fragmented offshore services domain. This is due to, in most part, the very generous valuations most owners accorded to themselves. When the markets were buoyant and utilisation was in the high 80s, it was impossible to find two promoters willing to agree on relative valuations. Any offer was lowball. Any approach was suspect. Today, battered egos are much more amenable to discussions. Given that most equity has little

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or no value, relative valuations can be established with simple formulae. Small, sub-optimal, regional vessel owners can look to entering into cashless mergers that build a larger, more economically viable, multi-market capable company. This will reduce fixed costs as well as make operations more cost effective. A larger fleet can be more optimally deployed across more regions, increasing utilisation efficiency. The company can invest in more capable teams and more robust systems. In time, consolidation can lead to a less fragmented, more efficient and more accountable ecosystem, benefiting the industry, the clients and the offshore players themselves. Secondly, there’s the issue of new equity. This is the perfect moment for fresh, ‘patient’ equity to enter the market. Vessel prices are at an all-time low. Assets are available at the buyer’s whim. Putting together a 40-vessel fleet that would have cost about $400m in 2013/14 can be put together at less than $100m today. Buttressed by a capable board and a strong management team, this fleet can be made to deliver breakeven and above within 12 – 18 months. Low or no leverage will also allow opportunistic growth, when the time and price is right. In three to four years, given normal expectations of a gradually recovering market, it would be no great feat to sell the company/operation at two times or even 2.5 times of investment delivering mouth-watering returns. Thirdly, merging assets and services. In hindsight, one of the most common errors in the offshore

services domain was to drive a narrowly vertical strategy, and in many cases, a purely asset-based strategy. The reason for this approach is not hard to determine – buying a vessel needs little or no knowledge or expertise, and can be deployed quickly. Services need knowledge, technology and time, and thus are viewed with more reluctance. This approach has led to many of the ills that we face today. Ideally, a company should have at least two prongs, one that delivers the platform and the other that delivers one or more services from the platform. This allows for a higher value-add offering as well as a greater return on every invested dollar. It also makes for more sticky relationships and differentiation, leading to a premium rather than a me-too brand position. Finally, we should not forget technology. While it may seem counter-productive to invest in technology in a really adverse market, this is a necessity if one wants to survive and thrive in the coming years. Our domain is going to see much disruption – autonomous vessels, battery-powered and LNG/ battery hybrid propulsions, underwater drones, real-time well-tracking, remote operational control – that many of us are already behind the likely curve. This is no more a ‘nice to have’ augment to business, it is embedded in and will drive business. None of these opportunities are easily wrought. Each of these will take courage, effort and persistence. And an outlook that extends beyond the tunnel that engulfs our vision today. ● maritime ceo


MARKETS FINANCE

China’s long game Oversupply and shorter cycles in shipping are what the world’s most populous nation wants, argues Dagfinn Lunde

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hina’s maritime dominance is about to become all encompassing. National strategic long-term plans mapped out in the 1990s are now clear to see. China’s maritime players march to a different beat – they are there to serve the national interest, not to play the markets. What’s more, while we’ve all been marvelling at the rise and rise of Chinese shipping this century, I’d argue we’re about to see growth accelerate, whether it is in their merchant fleet, their shipbuilding capabilities or more pertinently for the purposes of this column – their financial offerings. A generation ago the Chinese set in motion plans to take a firmer grip of the republic’s supply chains, ensuring that at least a quarter of cargoes shipped in and out of the world’s most populous nation were done so on Chinese hulls. Fast-forward to 2017, and that goal has been smashed. In essence, the mandarins in Beijing have achieved what their counterparts in Japan did in the 1980s; getting raw materials imported and finished products exported on their own ships and at the lowest possible rates.

ISSUE FOUR 2017

The Chinese created enormous building capacity then added commercial support via weighty export credit agreements. Chinese banks piled in keen to create ship leasing companies, no doubt a decision that was made with regulatory incentives in mind, keeping money off the bank’s core balance sheets in the process. Today there are 4,500 leasing companies in China, 49 of which are bank system related leasing companies with RMB150bn ($22.63bn) and a strong focus on aviation and shipping. On a shipping portfolio basis, the Chinese lenders remain comparatively small, but are growing very fast. Of the 36 biggest lenders by shipping portfolio, just eight are Chinese, according to data from Marine Money. However, last year 13 of the top 23 lenders worldwide were Chinese banks or leasing companies to a large extent supported by Sinosure as the export credit guarantor. Familiar problems do persist for those looking to tap the Chinese for cash. Transactions still take too long, and the lenders are still looking to deal mainly with the biggest names

13 of the top 23 lenders worldwide are Chinese banks or leasing companies

in shipping. A key difference between Chinese lenders and their Japanese counterparts is the former are more opportunistic, while for the Japanese finance tends to center around long term relationships. China has done well filling the ship finance gap left by many European banks. The fact is shipping is not short of available loans, you just have to look east. The taps get turned on to keep yards busy. Chinese shipyards will see further consolidation no doubt, as their orderbooks are perilously short. However, I can see oversupply riding in fast to shipping once again as many of the deals being offered by local yards are now just too attractive for everyone to turn down. Over the long term, shipping has never returned more than 7% to 8% on the capital employed and that is due to long periods of oversupply, something that is clearly not going to go away. Cycles are now shorter as yards can deliver quicker; ships these days are churned out in just 14 months. Still, for China as a whole, oversupply and shorter cycles all play into its hands – bringing cheaper imported goods, and creating cheaper exports to world markets. ●

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EXECUTIVE IN PROFILE DEBATE

Stranded no more A high profile campaign run by our sister title Splash aiming to stamp out cases of crew abandonment has notched up tangible results in the past month

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hipping markets might be improving, and instances of seafarers being left stranded and out of pocket, are likely to be down this year compared to the recent past. However, ships and their crew are still being dumped by desperate, unscrupulous owners – 37 ships and 400 crew in the first eight months of the year alone. The secretary-general of the International Maritime Organization (IMO) has spoken of shipping’s “human duty” to ensure crew abandonment is kicked out. Kitack Lim, the South Korean in charge of the UN body since January last year, has urged port and flag states to cooperate more to help fight the scourge. “To address this issue in the longer term we need continual cooperation, not just between IMO and the International Labour Organization (ILO), but with flag states, port states and shipowner groups too,” Lim said. Lim’s thoughts have been echoed by others. Roger Harris, executive director of International

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Seafarers’ Welfare and Assistance Network (ISWAN), commented: “Flag and port states need to act more quickly to ensure that seafarers don’t languish aboard vessels for months and even years waiting for pay that is rightfully theirs in the first place.” The CEO of shipmanagement giant Anglo-Eastern, Bjørn Højgaard, has also called on international authorities to look at regulation changes to speed up crew repatriation. “Many flag and port jurisdictions do not facilitate the bankruptcy process quickly and decisively,” he said, explaining: “Seafarers have a maritime lien in the asset on which they are employed, and if only the system would work to speedily liquidate that asset so that they can get paid and repatriated it would be a great step forward to address a situation which is untenable for the quality operators in the shipping industry.”

One clear example of where port state control is making a difference is Down Under. Australia’s firm handling of cases of crew abandonment has been highlighted as a method for other states to follow to eradicate the problem. Captain Robert Gordon, managing director and principal lecturer at Singapore-based maritime education company SeaProf, stated: “The problem of the unpaid seafarer has been resolved onboard ships entering Australia by [the Australian Maritime Safety Authority].” Port state control enforcement of the Maritime Labour Convention is the new solution for seafarers who have not been paid, the seasoned maritime expert posited. Gordon explained crew should notify the International Transport Workers’ Federation (ITF) and the ITF then notifies AMSA. AMSA then attends to conduct a full port state control (PSC) inspection including enforcement of the Maritime Labour Convention (MLC). The MLC provides an obligation to pay seafarer wages in full and on a monthly basis. If wages are not fully paid, then AMSA will detain the vessel. Recent vessels detained in Australia have also been slapped with bans of up to 12 months on entering Australian waters. In addition to detaining ships, AMSA has the power to ban individual ships and even entire fleets from using Australian ports if they demonstrate a repeated failure to meet the minimum applicable standards.

Many flag and port jurisdictions do not facilitate the bankruptcy process quickly and decisively

maritime ceo


EXECUTIVE IN PROFILE DEBATE

AMSA has banned two ships in the past six months over unpaid wages. “If other national PSC authorities did the same then the unpaid seafarer problem could be solved on a global basis and formal ship arrest and the ensuing legal costs would no longer be necessary,” SeaProf’s Gordon noted, adding: “The key must now be to quickly educate seafarers as to the potential for the ITF and PSC joint process to trigger vessel detention for MLC non-compliance if wages are not paid.” The Canadian PSC has also been active in enforcing the MLC in order to protect seafarers. Moreover, in the past month Ottawa has introduced federal legislation aimed at outlawing the abandonment of vessels in Canadian waters. The Wrecked, Abandoned or Hazardous Vessels Act would levy fines of up to $300,000 and jail time of up to six months for individual offenders caught or proved to have ditched a ship in the nation’s waterways or harbours. Corporate violators face fines up to $6m. “Bottom line is that PSC enforcement of the MLC produces a faster and more positive result than attempts by the crew to arrest a ship for their wages,” SeaProf’s Gordon said, adding: “Arrest is expensive and

requires a large deposit to be made to cover service of the warrant and other court costs. These cases are also rarely be taken on by lawyers on a pro bono basis. Nor do the ITF seem inclined to put their hands in their pocket.” Meanwhile, the United Arab Emirates’ Federal Transport Authority has recently banned any Varun ship from calling at any UAE port or anchoring in local waters until further notice. Mumbai-based Varun has been a serial crew abandonment offender with a number of its ships and employees left stranded off the UAE. The IMO and the ILO have worked together in the Ad Hoc Expert Working Group on Liability and Compensation Regarding Claims for Death, Personal Injury and Abandonment of Seafarers to develop guidelines – now incorporated as an amendment to the MLC. Moreover, a database on abandonment cases is up and running, which on the back of October’s Splash campaign, RightShip, the third party ship vetting service, has just taken with a view to adding the details of these vessels to the company’s data sets. “We are taking action on crew abandonment and this will be reflected in our vetting process,” a

PSC enforcement of the MLC produces a faster and more positive result than attempts by the crew to arrest a ship for their wages

ISSUE FOUR 2017

spokesperson for the Melbourneheadquartered organisation said. From January 18 this year important new rules came into force on crew abandonment. Under the MLC shipowners must have insurance to assist the seafarers onboard vessels if they are abandoned. All ships, to which the convention applies, whose flag states have ratified the MLC must have the insurance certificate onboard and on show in English. The insurance will cover seafarers for up to four months outstanding wages and entitlements in line with their employment agreement or CBA. The insurance must also cover reasonable expenses such as repatriation, food, clothing where necessary, accommodation, drinking water, essential fuel for survival onboard and any necessary medical care. It will apply from the moment of abandonment to the time of arrival back home. Also as part of Splash’s crew abandonment campaign the world’s top eight shipmanagers – who combined have more than 120,000 seafarers on their books – have pledged not to do business with companies with a recent past of abandoning crew. Elsewhere, Splash contributor Captain Manjit Handa, a bulk carrier master, suggested a crew fund should be drawn from IMO member states, along the lines of the fund convention for oil pollution damages, in order to repatriate crews. Another Splash contributor, James Wilkes who heads up maritime consultancy Gray Page, mused on Twitter about the possibilities of authorising the expedited sale of ships by Admiralty marshals to settle unpaid wages of crew and costs of their repatriation. What is for sure is that naming and shaming of companies who ditch their employees will continue while an assortment of suggestions and solutions are being readied to show to IMO. ●

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IN PROFILE

Antony Gurnee p.27

Emanuele Lauro p. 26

Massimo Giovannini p.29

Mario Mattioli p.31

In profile this issue Maritime CEO’s 17 correspondents around the world have been in touch with many of the world’s top shipowners. Highlights are carried over the next 13 pages

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maritime ceo


IN PROFILE

Rune Birkeland p.33

Panos Laskaridis p.30

Bill Guo p.22

Nicolas Sartini p.25

ISSUE FOUR 2017

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COVER STORY

Market changer Bill Guo, the executive director at China’s ICBC Financial Leasing, is unquestionably one of the most powerful men in shipping

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hina’s ship leasors are changing the face of shipping, and they’re only just beginning. In the space of just a few years they have become among the largest shipowners in the world, changing the dynamics of big ship orders and by extension they are able to influence the financial health of individual sectors. In terms of contract value, the past two years in particular have a seen a rapid growth on the books of China’s shipping leasors. ICBC Financial Leasing, having firmly established itself as the largest financial leasing company in the country, is now looking to transform itself from a traditional credit provider into an integrated maritime financing service provider. Bill Guo Fangmeng, executive director of ICBC Financial Leasing, believes the growing momentum of China’s ship financial leasing business is a juggernaut that will not ease up anytime soon. “There is still a firm demand for

Ship leasing companies should focus more on the client’s actual demand

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ship financial leasing in the market and the next two to three years should be a golden period for the Chinese financial leasing industry,” Guo says, pointing out the significant financing gap left by the departure of many traditional European ship financing banks this decade, something the Chinese are keen to fill. ICBC Leasing owns a fleet today of more than 300 vessels with a total value of around RMB50bn ($7.5bn). With the promising outlook in the Chinese ship financial leasing sector, more domestic financial leasing companies and even shipyards are entering the ship leasing business. Both state-run shipbuilding conglomerates – CSIC and CSSC – now have leasing platforms, keeping their drydocks ticking over. Data from the China Banking Regulatory Commission shows that currently there are 60 financial leasing companies in China, 23 of which have exposure in the shipping sector, managing a fleet of in excess of 1,000 ships. Combined year-onyear growth fleet-wise is expected to top 50% in 2017. In Guo’s opinion, there is unlikely to be much intense competition within the Chinese ship leasing sector in the short term as the demand is still strong enough to let

most players get a slice of the cake. The growing ship leasing business operated by the shipyards is not a threat to the traditional financial leasing firms, Guo argues, as their leasing costs are higher and their main purpose, via this new strand of business, is to help secure orders and tide them over financially. “However,” Guo concedes, “when the market is saturated after this golden development period, the players need to have more innovative solutions to compete in the market.” ICBC Leasing has been making efforts to offer more flexible and innovative financing solutions in order to meet the complex demands from shipowners in the current volatile market, Guo says. In October, ICBC Leasing and China Merchants together ordered six VLOCs plus three options at CSIC-affiliated Qingdao Beihai Shipbuilding under a contract of affreightment (COA) with Brazilian miner Vale, following ICBC Leasing’s order of 10 VLOCs in 2016 under a similar deal with Vale. The deals are ICBC Leasing’s first newbuilding projects under a COA arrangement. “The COA deal with Vale is a great financial solution innovation for us. Vale, as a shipper, is quitting maritime ceo


IN PROFILE

The next two to three years should be a golden period for the Chinese financial leasing industry

its role as a tonnage provider but needs ships outside its balance sheet, while we can secure stable cash income in the long term via the arrangement; it’s a win-win deal,” Guo says. Guo reveals that one of ICBC Leasing’s main future development strategies is to get more into both shipowing and shipmanagement. “The traditional banking role will face more competition and will

ISSUE FOUR 2017

no longer meet the growing complex demands in the ship financing market,” Guo predicts. Talking about the challenges facing a slowly recovering shipping sector, Guo warns any speculative investment in the sector must be controlled. “Ship leasing companies should focus more on the client’s actual demand, not only on the appreciation or depreciation of ship assets,” Guo suggests. Another worry is the continued appreciation of the US dollar, which is hurting the whole Chinese leasing sector at the moment. In terms of the shipping markets themselves, the ICBC boss is most bullish on containers and especially

dry bulk for the coming couple of years. How Guo goes about making the most of this uptick will in no small way influence the length of the rebound. ●

Spot on

ICBC Financial Leasing Leasing arm of China’s largest bank whose shipping interests now include more than 300 ships worth $7.5bn.

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2018

Singapore Tuesday, March 13

committed to the quality of the world fleet

We are committed to upholding the values of safety, security, and environmental protection. This is evidenced through the quality of our fleet and outstanding port State control record as the only major international flag to remain on the United States Coast Guard’s Qualship 21 roster for 13 consecutive years. International Registries (Far East) Limited in affiliation with the Marshall Islands Maritime & Corporate Administrators

hongkong@register-iri.com blog.register-iri.com www.register-iri.com

Visit www.splash247.com/forum or contact Grant Rowles on grant@asiashippingmedia.com for details


IN PROFILE

The turnaround king Nicolas Sartini has managed to make APL profitable again after seven loss-making years. Here he explains how

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eptember marked one year since France’s CMA CGM took full control of Singapore flagship carrier, APL – 12 months in which a dramatic turnaround has been fashioned. APL notched up an interim profit this year, its first since 2010 and remains on track for a profitable full year. Nicolas Sartini, a 25-year veteran with CMA CGM, has been overseeing the integration of APL as the line’s CEO. He is the perfect man for the job having also been at the helm of other CMA CGM acquisitions in Asia Pacific in recent years, including ANL and Cheng Lie Navigation. “The results stem in part from a market uptick, but more importantly from a combination of cost management - leveraging scale synergies with the group - and APL’s revenue focus,” Sartini says. As part of a larger group, APL now has access to an enlarged fleet of 445 vessels with a combined capacity of 2.2m teu. While the APL brand remains – it has had a slight tweak to reflect its CMA CGM linkage – the Singapore company is able to cut costs by leveraging economies of scale from its parent. “To lock in cost synergies, CMA

Spot on

APL With a history dating back to 1848, APL is one of the most famous names in container shipping. Based in Singapore, the line was bought out by France’s CMA CGM last year.

ISSUE FOUR 2017

The ongoing consolidation will ultimately lead to healthier survivors, but the process has not finished yet

CGM Group has combined its operations, office footprints and support functions, and leveraged on the scale of the group to lower vendor cost through joint procurement,” Sartini explains, before adding: “However, on the front-line, nothing has changed as APL still operates as a standalone brand under the group. We have our own dedicated front office, sales force and customer services as well as APL independent suite of products and services.” It is noteworthy that since the integration with the Marseille container shipping giant, APL has seen 100% customer retention.

CMA CGM’s capture of APL has been just one chapter in a dramatic couple of years of consolidation for the container sector, a phase Sartini believes is yet to close. “Container shipping is headed into a period of renewed focus on profitability as we have seen a healthy growth in volume and more discipline in the market,” he says, adding: “The ongoing consolidation will ultimately lead to healthier survivors, but the process has not finished yet and we are not out of the woods as an industry, with many of the 12 carrier groups still not back in the black.” ●

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IN PROFILE

Lauro back in expansion mode across many sectors Having waited on the sidelines as the markets edged back the Scorpio boss is now in a buying mood once again

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he last time Emanuele Lauro featured in Maritime CEO he cut a contrite figure, taking the rap for mistimed bulker gambles that had backfired spectacularly. In the ensuing 29 months since then however the famous Italian owner has been busy preparing and unleashing his next multi-pronged assault on the shipping markets. Scorpio Bulkers is back in buying mode. After more than two years of scaling back its fleet and waiting on the sidelines while others feasted on cheap bulker bargains, the company pounced for six modern Golden Ocean ultramaxes in late September in what is anticipated as the start of another buying binge from the Monaco-based owner. John Fredriksen’s Oslo-based Golden Ocean has sold six Chengxibuilt bulkers, all built between 2015 and 2017, for $142.5m to the Lauro company. During the second quarter of this year, Scorpio Bulkers completed its huge 46-ship newbuilding program. Having significantly pruned back its fleet over the past couple of years the Monaco company is now

Spot on

Scorpio Founded in 1973 by Glauco LolliGhetti. Now run by his grandson Emanuele Lauro. Has listed spin offs Scorpio Tankers and Scorpio Bulkers and has recently revealed a new offshore division.

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very much back in expansive mode. Lauro has not been shy in coming forward too when it comes to his tanker division of late. In late August the shareholders of Navig8 Product Tankers approved the previously announced merger with Scorpio Tankers, creating the third largest player in the liquid bulk market worldwide in terms of dwt and the second for number of vessels owned, according to statistics provided by VesselsValue.com. Scorpio Tankers has taken on 10 LR1s and LR2s owned by Navig8 Product Tankers, as well as taking over the 17 vessels from CSSC Shipping, China Merchants Bank, Bank of Communications and Ocean Yield on bareboat charter to Navig8. However, while both the bulker and tanker deals are impressive it is in a whole new sector where eyebrows have been raised most. By his

own admission, Lauro and his team “quietly” launched Scorpio Offshore towards the end of 2015. “We have quietly and slowly expanded the fleet starting with entry level assets such as fast crew boats,” Lauro tells Maritime CEO. Scorpio Offshore now has an eightstrong fleet of crew boats. Other ship types are being bought too, including most recently a pair of anchor handlers. “We have no geographical preference or asset focus in the OSV arena however we are conscious of being a very small player who has just recently left the starting line,” Lauro says. The Italian shipping magnate reveals he’s keen to open his offshore division’s capital structure to investors when the right opportunity presents itself. Once again the stars are in the ascendant for Scorpio. ● maritime ceo


IN PROFILE

Disciplined approach The boss of Ardmore Shipping hopes others in the product and chemical trades will be as restrained as him when it comes to ordering new vessels

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here is a prudence surrounding the business decisions Anthony Gurnee tends to make that were his peers to follow would likely lead a far more healthy product and chemical tanker sector. The CEO of Ardmore Shipping stresses the importance of focus and restraint when interviewed by Maritime CEO. While he believes underlying fundamentals suggest product and chemical tankers have a solid medium term outlook, current charter rate levels are “challenging”. The supply/demand equilibrium is falling into place, he argues, but it remains a very fine balance. “There are plenty of reasons to be positive about the demand growth for our sectors, which is set to continue at around 4-5%, driven by increased consumption and export-oriented refinery activity. At the same time, although there has been an imbalance in the MR segment, net fleet growth has declined and the orderbook is at a historic low,” Gurnee points out. Ardmore is unlikely to get distracted by pursuing other ship types with Gurnee at the helm as he explains. “We are disciplined in our strategic focus on the product and chemical sectors, rather than chasing opportunities in other sectors that risks diluting our expertise,” Gurnee says. When it comes to this ‘discipline’, Gurnee uses the Maritime CEO platform to urge his peers to think twice before being swayed by very cheap newbuild temptations in the market at the moment. “We hope that newbuild decisions by any operator will consider

ISSUE FOUR 2017

The right decisions on fleet growth are based on timing, access to capital and prudent market analysis

the wider supply-demand balance,” the Ardmore boss says. Leading by example, Ardmore currently has no ships on order and Gurnee says there are no plans to order more at the moment. “Having grown our fleet responsibly to this point, we don’t wish to add to net fleet growth in our sector at this time,” Gurnee says. Meanwhile, when it comes to the secondhand market Ardmore is maintaining a “watching brief” to act if the right opportunity presents itself. “The right decisions on fleet growth are based on timing, access to capital and prudent market analysis, which requires insight on where the market is and foresight on where the market is heading,” Gurnee explains. Gurnee founded Ardmore in

2010 with the backing of private equity firm, Greenbriar. Gurnee had already had a long career in executive positions before Ardmore, having spent time as CFO of Teekay, president of Nedship International, and president and COO of Singapore’s MTM Group, among other positions. ●

Spot on

Ardmore Shipping Founded in Ireland in 2010, the company has grown fast, with a mix of chemical and product tankers.

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IN PROFILE

Vintage bulkers offer opportunities Trans Sea Transport shows ageing can be a beautiful process in shipping

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well maintained bulk carrier can operate until its 30 without any problem. That’s what Massimo Giovannini, managing partner of Monaco-based Trans Sea Transport (TST), believes when looking back at what he has experienced in his career in the dry bulk market. TST began its activities in 1979 with a large COA to ship monthly parcels of 10,000 tons of steel from Italy to the US but in the following two decades the original company changed. It grew and evolved in a new direction, entering different segments of dry bulk such as grain, cement, wood pulp and wood chip. “Due to a fundamental change in market conditions in 2003, we saw an opportunity to become asset players in the shipping industry and play the cyclical market to our advantage,” Giovannini says, recalling when TST started with a fleet of two owned vessels which has increased nowadays to six units. “Our strategy,” he outlines, “is based on some specific features: we are active only in the handymax sector, we are used to operating older tonnage – our ships are ranging

Spot on

Trans Sea Transport Monaco-based dry bulk owner founded in 1979. Fleet today consists of six handymaxes. Now looking at making a kamsarmax entry.

ISSUE FOUR 2017

today from 14 to 20 years old. We operate all of our fleet on the spot market, mainly in the Atlantic basin, and sometimes we charter-in ships. While we are not tonnage providers, we are not scared of operating old ships. All that said let me emphasise that we only select Japanese-built vessels.” Evidence of this approach is that in 2011 the company scrapped two bulk carriers, which were 36 years old. TST is based in Monaco (along with agent company Sogemm), in Greece where technical manager TST International operates the fleet and in New York, which is home to commercial agent Triworld Shipping Services. TST is today in a buying mood. “We have been negotiating the sale of one of our units recently since the investment fund which retains a majority share on several ships decided to exit after a cycle of some seven years,” Giovannini reveals. The ship on the sales block is the 1997-built bulk carrier Dokos. At the same time the head of TST is also clear that the company is going to invest in further tonnage. “We are obviously looking at handy bulk carriers in the range of 35,000 to 56,000 dwt since there were practically no orders for these ships in the last few years, but I’m also considering kamsarmax sizes. I would like to work with the banks for financing the next purchase but the challenge is that, unlike investment funds, they do not lend money for a deal if the loan term exceeds the 15th year of age of the financed vessel,” the owner says.

Thanks to the postponement of the ballast water treatment introduction, older bulk carriers will have the possibility to obtain good rates in the next three years

On the markets, Giovannini sees opportunities, saying: “Thanks in particular to the postponement of the ballast water treatment introduction, older bulk carriers will have the possibility to obtain good rates in the next three years and shipowners can go back to investing in new tonnage set to be repaid in the next decade. The historical low market rates seen in the period 2015 and 2016 were not sustainable for bulk carriers, yet the high rates reached in 2007 and 2008 were not normal either. The dry bulk market today is again in the hands of physical trades and no longer in the FFAs’ hands.” ●

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IN PROFILE

European shipping could go the way of its yards Panos Laskaridis becomes president of the European Community Shipowners’ Associations at the start of next year. His tenure is likely to be a forthright one

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he incoming head of the European Community Shipowners’ Associations (ECSA) has a stark warning for bureaucrats in Brussels – support shipping or watch the industry die. ECSA’s president-elect Panos Laskaridis uses the Maritime CEO platform to call for help. European flags and the regional shipping industry need specific measures from Brussels, he says, in order to keep the maritime cluster alive and to avoid a similar fate to the continent’s shipbuilders, who have seen their businesses usurped by Asian upstarts. Laskaridis is set to take over from Niels Smedegaard at the influential shipowning lobby group in January for a two-year stint. The seasoned Greek shipowner is the founder of Laskaridis Shipping and Lavinia Corporation. Laskaridis believes that keeping a strong local fleet is in the interests not only of the European countries and economies but also in the US and Canada since, he says, “They don’t want to wake up one day and

Spot on

ECSA The European Community Shipowners’ Associations (ECSA) was founded in 1965. It’s a trade association representing the national shipowners’ associations of the EU and Norway.

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Regional legislation rarely works

find that their products are carried by ships which have been built, operated, owned and manned by their main commercial competitors – the Chinese and Japanese – who are competing with them on every side of business”. The ECSA board of directors gathers together the directors of its 21 national member associations and has authority to take decisions on all relevant issues within the shipping sector. Talking about the present political scenario Laskaridis says that shipowners have to regain the initiative on the agenda of shipping issues. “I’m saying this because in Europe, and in the world, the stakeholders – politicians, regulators, the EU parliament, ministers and so on – when they speak about shipping they mainly mean what we shipowners

understand as the shipping cluster. I don’t particularly like thinking of us shipowners just as a small link in the chain; I think we should think in terms of the shipowning business as the solid foundation from which everything has built up.” He also stresses the importance of distinguishing among different ship types in trading when it comes to discussing the competitiveness of the European fleet and what it means for different shipping segments. Another very important distinction to be observed is between international and regional regulations, according to Laskaridis. “We stand squarely on the side of the internationally accepted regulations,” he states, before adding: “Unfortunately this is not happening in all aspects today. There are examples both in Europe but also on the other side of the Atlantic where local governments and local interests produce regional legislation and only after the event when we have seen the bad effects of these regional regulations we try to find international solutions.” ●

“Maturity in cyber security is best achieved in incremental steps” — Markus Schmitz, managing director, SOFTimpact

maritime ceo


IN PROFILE

‘Italian owners must grow up’ Small is beautiful no longer works in Italy, according to the new head of the local shipowners’ association

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he newly elected chairman of the Italian shipowners’ association (Confitarma), Mario Mattioli, has some specific priorities to work on in the coming years. The main challenge for the local shipping cluster, as he sees it, is to keep the international register alive and competitive. Speaking with Maritime CEO, the Naples-based shipowner at the helm of the family-owned group Cafima (controlling shipping companies Augusta Offshore, Capieci and Synergas) says he will be working “very hard” to keep an eye on regulations governing the nation’s international register, Italy’s tonnage tax regime. “It’s a very important tool for keeping European flagged vessels competitive with competitors worldwide,” Mattioli argues. “Our priority is to keep that register still active for the future and for the competitiveness of our national fleet. It’s not an advantage compared with the other industries but it represents the only way for a shipping company based in Italy to survive,” Mattioli says. Presenting Confitarma’s to-do list, Mattioli also mentions the importance of the human capital factor in shipping today, which he defines as “crucial” and far more

Spot on

Cafima Naples-based shipowning group with a number of shipping brands under its umbrella, including Augusta Offshore, Capieci and Synergas.

ISSUE FOUR 2017

important than in the past. The third big point about Confitarma’s “foreign policy” is to actively take a role in the discussions concerning new regulations impacting both shipping and climate. “We, as shipowners, have to participate in order to grant a better world to future generations,” the Italian owner stresses. Mattioli also talks about the increasing role of China in terms of maritime transport as well as on the infrastructure side, highlighting the importance of the One Belt, One Road (OBOR) project whose amount of investments planned for the next 10 years – Mattioli says – is something like 12 times the present value of what was committed in the Marshall Plan by the US after the Second World War. This new Silk Road initiative may represent a big opportunity of growth mainly for Italian ports since they can become the next preferred gateway for goods coming from Asia to Europe, while today cargo flows are more often unloaded in northern Europe before being distributed in central and sometimes also in southern Europe. By and large the new head of the Italian shipowners considers that what his country needs in order to make some steps forward in shipping and create a political consensus for

the industry is a dedicated ministry for maritime affairs. “I’m not talking only about the shipowners, which are just a part of the chain,” he explains, adding: “The dream in Italy is not to go back to the ministry of the merchant marine but to have a sort of ministry of the sea, intending the sea as something that is really affecting the whole cluster: i.e. logistics, infrastructures and so on.” The other main issue Mattioli is determined to fix is to reduce bureaucracy across the Mediterranean nation. The Cafima boss also uses the Maritime CEO platform to urge Europe to modernise its training facilities to make shipping a more attractive career option. “Not only in Italy but also elsewhere in Europe we have a lack of officers onboard our ships,” Mattioli says. Finally, commenting on how rapidly financial players have been progressively taking a leading role in the Italian shipowning market purchasing non-performing loans of companies involved in the restructuring process (with Pillarstone Italy and Deutsche Bank at the forefront), the chairman of Confitarma concludes: “This is a new factor we have to take into consideration as it is the result of the rapidly changed ship finance business. I think it might also represent a breakthrough for our traditionally family based business model since small is beautiful is not working anymore probably. Shipping companies in Italy need to grow up in many cases, to get further qualifications at management level and my colleagues should be aware that a governance set-up is definitely more important today than going on following first hand the chartering operations of their fleet.”●

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IN PROFILE

Six months on Gearbulk and Grieg Star pooled their resources on May 1 to create G2 Ocean. Since then top management has been busy ringing the changes

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t is six months since G2 Ocean began work on Labour Day, and the changes continue to roll in thick and fast. The joint venture between Gearbulk and Grieg Star is present in 16 different countries on six continents with headquarters in Bergen, Norway. In total approximately 130 vessels are operated by the pool. That includes open hatch, semi-open and conventional bulk carriers. The company is held 65% by Gearbulk and 35% by Grieg Star. “It’s still a work in progress as we are only six months in but we feel we are moving in the right direction,” G2 Ocean’s CEO Rune Birkeland says. “We have already swapped vessels between trades to improve services and are offering some customers higher frequency and more choice as a result of the bigger fleet and network. In addition we have been able to rationalise and the savings achieved have helped considerably.” As with much of dry bulk, Birkeland is cautiously optimistic about the open hatch trades, a segment G2 Ocean is now a dominant player in. “In line with the general market, prospects for open hatch are

Spot on

G2 Ocean Joint venture created this year between Gearbulk and Grieg Star with a fleet of 130 ships.

ISSUE FOUR 2017

Pan Ocean and Cosco are just two more players in a competitive market

improving slowly,” he says. Nevertheless, this Scandinavian outfit is having to face up to growing competition from Asia where the likes of China’s Cosco and South Korea’s Pan Ocean have been building up their own open hatch (OH) fleets of late. “There is plenty of competition in the OH market,” Birkeland concedes. “In some cases this comes from containers, in others it is the MPP companies and in others the established OH players. We regard Pan Ocean and Cosco as just two more players in a competitive market.” Despite low newbuild prices, the

G2 boss says he has no intentions of ordering new ships at present. “We have a lot of young vessels in the fleet and are okay for a few years, we have time to decide,” he concludes. ●

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CHINA COSCO

Back basking in the big time After a period of being in Beijing’s bad books, Cosco is firmly back in favour. Local yards look likely to celebrate

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n no other nation is politics so entwined with shipping than in the People’s Republic of China, and rarely more tightly than in the past five years with Xi Jinping at the helm of the nation. It has taken since 2012 for the Xi regime to weed out Cosco senior management that were deemed too close to Bo Xilai, a rival politician once tipped for the top job who is now in jail. With the clear-out now complete the conglomerate is out of Beijing’s bad books, past misdemeanours forgotten, and the cash taps have firmly been switched back on for what promises to be a period of dramatic growth. The former head of Cosco, Capt Wei Jiafu, had run the organisation as his own fiefdom during his tenure at the top. His ties to Bo ensured he was elbowed out of the corporation four years ago after more than 40 years there. Wei headed to live in the US to be replaced by an interregnum in the form of Ma Zehua who in turn handed over to the current incumbent, Xu Lirong, at the start of last year. Corruption charges have been the most common way of removing senior figures at Cosco. Job replications brought around by the merger with fellow state-run firm China Shipping two years go afforded the powers that be the chance to get rid of the last strand of those deemed

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not 100% in favour of the current national leadership. With the personnel now sorted, Beijing is happy for Cosco to be a spearhead in the rollout of its One Belt, One Road initiative – the multi-billion dollar infrastructure program yoking Asia with Europe.

Beijing is happy for Cosco to be a spearhead in the rollout of its One Belt, One Road initiative

Being competitive is secondary to scale in terms how Beijing views Cosco in the medium term. The plan is to keep building the conglomerate up to the point whereby, from a box perspective, it can match or even overhaul top ranked Maersk Line. Having made a $6.3bn move for OOCL this year, Chinese statebacked entities are now eyeing up France’s CMA CGM, Maritime CEO understands. Next year Cosco’s container division will go through an unprecedented growth spurt, larger in size even than when it merged recently with fellow state-run giant China Shipping. Container analyst Alphaliner suggests Cosco’s total capacity could hit 3m teu by the end of next year, thanks to absorbing the 710,000 teu

fleet of Hong Kong’s OOCL as well as taking delivery of 29 newbuildings with a total capacity of 522,000 teu. Its orderbook, which represents 29% of its extant fleet, is the largest of any liner. It’s not just containerships either. Already there are sizeable tanker newbuilds coming from Cosco, and it is also ordering very large ore carriers while bolstering its global ports footprint. In the coming 18 months expect Cosco to be patriotic and mop up excess shipyard capacity in China. Its days in the doghouse are over. ●

For unrivalled coverage of Chinese shipping

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CHINA PORTS

Clumped together The nation’s ports are merging along provincial lines

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hina’s central government has accelerated the consolidation process of local ports this year as part of overarching plans to reform state-owned enterprises. By consolidating port operations according to administrative regions, Beijing hopes to reduce competition, improve efficiency, and promote economies of scale. So far, 18 provincial level regions with sea or river ports have been ordered by central government to ramp up mergers. In the Bohai Rim region, Liaoning provincial authorities signed a framework agreement with China Merchants Group in June to establish a new Liaoning Port Group through the integration of Dalian Port, Jinzhou and Yingkou Port Group. Full integration is expected to be completed by the end of next year. Currently China Merchants is also in negotiations with Liaoning’s Dandong Port, one of the few privately owned ports in China, for a takeover deal. Dandong Port, on the North Korean border, has been severely struggling financially. Tianjin Port is currently enhancing cooperation with neighboring ports in Hebei, having established various joint operation agreements with Hebei Port Group and Qinhuangdao Port under the central government’s Beijing-Tianjin-Hebei integration project. “China’s port industry is suffering serious overcapacity, which has led to cutthroat competition,” says Zhang Lu, a professor at Dalian Maritime University As an example, he cites seven major seaports around the Bohai Rim which basically share the same hinterland. “It is imperative to conduct a nationwide consolidation,”

ISSUE FOUR 2017

Zhang says, suggesting the process will drive profitability while cutting operational costs. Much more integration across China’s port industry is expected as the country draws up its seaport connection blueprint for China’s One Belt, One Road initiative. On the east coast of China, the establishment of Zhejiang Port Investment Operation Group is the new operating platform for all the port assets in the province including Ningbo-Zhoushan Port, Wenzhou Port and Taizhou Port, while Jiangsu province also established Jiangsu Port Group in May this year. In south China, Guangxi province was the first province in the nation to complete its port asset consolidation. In 2015, Beibu Gulf Port Group brought three ports in the province, Beihai Port, Qinzhou Port and Fangchenggang Port under one roof. Zhao Nan, an expert at the Shanghai International Shipping Institute (SISI) reckons port consolidation will see the republic’s port operators expand their service offerings. “China’s ports are gradually transforming from traditional operators engaged in loading and unloading to logistics services providers linking upstream and downstream industrial chains, and even financial service providers,” Zhao says. In the Pearl River Delta region, Guangdong province is expected to follow other provinces in integrating its port assets. However, potential consolidation there is considered to be a more tough process due to the complex market conditions in

the region. Guangdong is home to a total of a six listed port operators and involves port investments from both state-owned, private and foreign investors. Currently the Guangdong government is still doing feasibility studies on the port consolidation plan, which is expected to be introduced by the end of this year. At the end of September, Guangzhou Port signed a framework agreement with Dongguan Port to jointly promote the integration of operations as the first step of port asset consolidation in the province. Guangdong province’s neighbour, Fujian, also started bringing its ports together this year. In June, Fujian’s State-owned Assets Supervision and Administration Commission transferred all its port assets to Fujian Provincial Communication Transportation Group, which will serve as the management platform for the ports in the province. “There are still lots of challenges that need to be tackled in this massive consolidation,” says SISI’s Zhao, not least managing interests involving listed companies. In addition to the seaports, ports along Yangtze, the world’s third longest river, are teaming up. In November, the Yangtze River Midstream Shipping Center Port and Shipping Alliance was established in the central Chinese city of Wuhan. The alliance is led by Wuhan Port and Shipping Development Group and joined by 115 Chinese firms and organisations. China Merchants Group also announced a plan to invest RMB100bn in Wuhan with a view to making the city a major shipping hub. ●

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CHINA YARDS

Merger mania intensifies The nation’s top 10 yards will hold 70% of yard capacity within three years

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he modus operandi ahead of big Chinese maritime mergers involving state entities in recent years has been to install opposing heads in each camp. At the nation’s top two shipbuilding conglomerates this management swap has taken place getting tongues wagging that China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC) could become once again a single entity. They were split up in 1999 with the Yangtze river serving as the geographical demarcation – CSIC to the north and CSSC to the south of China’s principle waterway. The Chinese shipbuilding industry is staggering with declining new orders and unsolved overcapacity issues. Further consolidation in the sector is viewed as inevitable. Data from China Association of the National Shipbuilding Industry (CANSI) shows that Chinese yards took just 15.85m dwt in new orders in the first eight months of the year, an 11.3% year-on-year drop. The decline in new orders also resulted

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in a decrease in Chinese yards’ order backlog, which stood at 81.11m dwt in the same period, a decline of 29% year-on-year. According to statistics from online pricing portal VesselsValue, so far this year Chinese yards have taken the highest number of orders of any shipbuilding country, with 203 tanker, bulker, container, gas and offshore orders, 24 ahead of its nearest rival, South Korea. The main vessels being bought in China are dry bulk vessels, accounting for 60% of all new orders this year. The majority of orders placed in Chinese yards have gone to China State Shipbuilding Corporation (57 orders) and Yangzijiang Shipbuilding (45 orders). “The domestic shipbuilding sector is still facing severe challenges, including the decline in new orders and increasing costs of raw materials, labour and financing. The existing overcapacity issue has yet to be solved and the R&D capabilities of local yards need to be further improved,” says Guo Dacheng,

president of CANSI. Guo reckons cutting overcapacity is still one of the top priorities for the domestic shipbuilding sector, despite a total of 15m dwt shipbuilding capacity being shed in the People’s Republic since 2013. Dr Adam Kent from consulting firm Maritime Strategies International (MSI) says the huge contraction in Chinese shipbuilding capacity both through consolidation and wholesale closure of shipyards over the last five years still has a way to go. According to Kent, the Chinese government’s white list of shipbuilders, designed to help drive and shape consolidation and restructuring, has been overtaken by market factors with deliveries continuing to outpace contracting and most yards struggling to match historical utilisation rates. Of the 70 yards currently on the white list less than half have taken an order in the last 12 months. “Apart from a small number of diversified private yards including maritime ceo


CHINA YARDS

Yangzijiang Shipbuilding, the focus in China will increasingly be the larger state backed shipyards. In a classic Darwinian struggle where only the fittest survive, it helps to have the hand of the Chinese government propping you up,” Kent says. By 2019 MSI is forecasting Chinese shipyard capacity to be at less than half the levels witnessed at its peak in 2011. “With the Korean shipbuilding model, a small number of mega yards building a wide range of high value vessel types, the identified end goal it looks as if through design or misfortune the Chinese shipbuilding industry is on the right, if somewhat tortuous, track,” Kent reckons. Peter Sand, chief shipping analyst at BIMCO, reckons not many shipyards can be considered healthy and profitable now with the low volume of ordering continuing despite recent megaship orders.

Sand points out that the price of steel has shot up this year, unlike newbuilding prices, eroding margins further. “The wave of consolidation in the shipbuilding industry will go on some time still”, Sand says. “A heavy industry activity like shipbuilding, which also holds a lot of jobs, is deemed to be poisoned by state interest. This is hurting the free competition and limits the chances for private entities to stay in business,” he warns. According to statistics from the China Shipbuilding Economy Research Center, over 140 shipyards, mostly private entities, went bankrupt and around 90 shipyards were acquired and merged in China from 2009 to 2016. “Nevertheless, we are seeing Chinese shipyards bringing home orders, also from outside China, for ships of considerable size and technological advancements, like the 22,000

If mergers in other sectors are anything to go by the efficiency gains are not that easy to spot

ISSUE FOUR 2017

teu ships. They are preparing for a future which will be quite different from the past that held a lot of simple designs,” Sand says. Life is not easy for the Chinese state-run yards too. In 2016, Taizhou Wuzhou Shipbuilding, a subsidiary of Zhejiang Shipbuilding, became the first state-run shipyard to go bust. In September, Qingshan Shipyard, an affiliate shipyard of state-run shipping and logistics giant Sinotrans & CSC, decided to quit shipbuilding as the parent group’s latest effort to cut capacity. All of which brings the CSIC/ CSSC merger speculation back into sharp focus. Could the biennial Marintec China mega exhibition in Shanghai be the moment where the nuptials of these two state-backed giants are announced? Maybe. Will it make much difference to the overall capacity scene? Unlikely. “In terms of the day to day effect on the shipbuilding market, I would think it is unlikely to have a profound practical consequence,” says Martin Rowe, managing director at Clarksons Platou Asia. “Whilst nominally CSIC and CSSC have been competitors until now there has been remarkably little difference in pricing and they produce similar designs and types of vessel. Consolidation of Chinese shipbuilding capacity could well make economic sense but, if mergers in other sectors are anything to go by the efficiency gains are not that easy to spot – ie no layoffs, no reduction in management capacity, etcetera,” Rowe adds. The Chinese government has reaffirmed its focus on capacity consolidation in the shipbuilding industry this year, and set a target for the top 10 domestic builders to account for 70% of total Chinese output by 2020. “The small and medium sized private Chinese yards will continue to suffer and it would be more difficult for them to win orders and secure finance. We expect to see more consolidation in the private sector,” concludes Han Yongfeng, an analyst at the Shanghai International Shipping Institute. ●

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WINE

For a successful Christmas, go big and go home There is a Grinch about Neville Smith when the festive season approaches. Mercifully, a wellstocked drinks cabinet comes to his aid

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he best advice I have ever heard on surviving the festive season comes courtesy of legendary satirist Tom Lehrer who sang, “Christmas time is here by golly, disapproval would be folly. Deck the halls with chunks of holly, fill the glass and don’t say when”. I’m aware that many readers will be more positive about Christmas than me. Mrs Veritas for instance, very much enjoys the thrill of the thing, so in reality I have little choice but to succumb to the jollity. My strategy for Christmas drinking doesn’t vary much from the rest of the year, so as always we should consider when to break the rules and when to observe them. It’s not for nothing that at least one wine merchant sells a ‘Christmas Survival Case’ but I would consider the following as worthy of your consideration for aperitif, party and main event. Start with Corney & Barrow’s own Blanc de Blancs Methode Traditionnelle (£12.75) a proper fizz,

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made in Savoie from a Chenin-based blend of local grape varieties, which exhibits creamy elegance and some decent body along with its lemony scent. I accept that Welhener Sonnenuhr, Riesling Kabinett 2016, Selbach-Oster (Berry Bros & Rudd £16.25), probably isn’t most people’s idea of a party wine, but this gloriously ripe and giving wine works on its own or with food and begs to be part of the celebrations.

Two (more) to try AS A CHANGE to tiresome Prosecco, reach for Moscato D’Asti 2016, Marcarini (Berry Bros & Rudd £13.50). It’s light refreshing floral style is a real talking point that could get things going or round them off in delicate style.

For a party red, new to the Private Cellar List is Camas Pinot Noir, Anne de Joyeuse, Languedoc 2016 (£12.45) which leverages the southern climate to produce a juicy, full-bodied Pinot with hints of Cru Beaujolais. The traditionalist will want Bordeaux for the big lunch and there’s no reason to demur. If you prefer a younger, approachable style which still has some heft, try Les Tours de Beaumont, Haut-Médoc 2014 (£15.50, Private Cellar) whose dense redblack fruit packs lots of food-friendly appeal. Having previously expressed my devotion to Italy, I cannot spurn her this time around. My latest confession is that that very old and grand Barolo isn’t to my personal taste. I like it with fruit, flesh and richness, things that Berry Bros. & Rudd’s Barolo 2012 by Giovanni Rosso (£28.50) delivers in all departments. Perfect for lunch, dinner and all manner of savouries. If you have managed to avoid the dreaded Christmas pudding, or are starting the cheese, leave room for Corney & Barrow’s Sauternes 2012 (£9.96/half) which combines sweetness with refreshing acidity in a light, approachable style. ●

Spanish reds are always good for a celebration but modern tastes fight shy of dusty traditional styles. Bodegas Pinuaga Nature, Tierra de la Castilla 2014 (Private Cellar £13.60) is bang up to date, a fresh, juicy organic Tempranillo with clean, soft tannins. ●

maritime ceo


GADGETS

Dust-free destiny

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our home is your castle: why not turn to the dark side and make it your Death Star? Samsung’s POWERbot Star Wars Edition robot vacuum cleaners are definitely the droids you are looking for to help you with the dirty work of empire building. You can choose between the standard stormtrooper model or upgrade to Darth Vader (with a remote controller) and have the Dark Lord himself patrol your floors, freeing your empire from dirt, dust and Jedi alike. Both use the cyclone force to give 20 times the suction of Samsung’s previous generation of cleaner bots and come with sound effects. May the floors be with you. Samsung POWERbot Star Wars Edition www.samsung.com/starwars/ $700 (Stormtrooper) / $800 (Vader)

From droids to drones

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rom droids to drones — well, a drone camera. DJI have just brought out the Zenmuse X7, a 35mm camera on an integrated 3-axis gimbal designed for its popular DJI Inspire 2 drone. The camera, weighing in at just 631 g, produces the sort of resolutions that were previously only available on hefty professional drones — 6K CinemaDNG RAW or 5.2K Apple ProRes at 30fps. The 35 mm sensor also has 14 stops of dynamic range, and can be fitted with four different f2.8 lenses (16mm, 24mm, 35mm and 50mm) costing $1,300 each except the 50mm which is $1,200. The lenses can also be bought as a set for $4,300. With a DJI Inspire 2, there’s a 23-minute flight time. DJI Zenmuse X7 camera www.dji.com $2,700 (camera — no lens) ($4,300 all four lenses)

Print your own pancake

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or those fed up with normal printing PancakeBot2.0 is a printer that will ensure you’re just fed. It offers an interesting and tasty entry into the world of 3D printing — a way to design, edit or just download other designs and print out your own pancake. Eat and repeat. It comes with Windows or Mac software (Linux people will have to faff about, but they seem to like that sort of thing). Transfer the design to the printer via its SD card, mix up some batter and presto — pancakes! Lemons not included. PancakeBot 2.0 www.pancakebot.com $300

ISSUE FOUR 2017

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REGULAR BOOKS

The return of geopolitics The heads of the US and China make for fascinating if scary subject material on global dominance

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eopolitics used to be a major buzzword in the publishing world. How big nations stacked up against each other at the end of the Cold War was a prime subject – many, many books (good, bad and indifferent) were published. Then things shifted. The idea of old style wars between big powers ebbed as new, harder to find and define threats (ISIS, Al Qaida, terrorism in general) became the major issue. However, now geopolitics is back thanks largely to two factors – the rise of China to superpower status and the election of Donald Trump in America and the prospect of both military and trade wars. Asia is at the heart of this new geopolitical resurgence. Asia’s Reckoning: The Struggle for Global Dominance is the new book from Financial Times correspondent Richard McGregor. It’s the story of

Asia is at the heart of this new geopolitical resurgence

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the world’s three largest economies – China, America and Japan – and the fact that they all share borders on the Pacific Ocean. McGregor is well placed to examine the question having been the FT’s bureau chief in Tokyo, Beijing and Washington DC over the last two decades. China rises and asserts itself militarily in the region at the same time as Japan remains stubbornly mired in recession and America has a highly unpredictable commander-in-chief. Of course adding Kim Jong-un and North Korea to this mix makes it even more volatile. McGregor believes America is now overstretched in Asia but that, despite heightened Sino-US rhetoric, it is the rumbling relationship between Beijing and Tokyo that will ultimately be the biggest problem in the region. McGregor’s take is somewhat unique in that he still considers Japan as important due to the size of its economy. Tokyo is too often overlooked due to its lower profile militarily and diplomatically. Jude Woodward’s The US vs China: Asia’s New Cold War? is an introduction to the issue. Perhaps it is most useful

not so much in reviewing the various Beijing-Washington spats but in looking at the host of ‘side issues’ that affect the relationship and invariably seem to divide the US from the PRC – North Korea, Myanmar, Duterte’s Philippines, Russia’s turn to the east. Finally, perhaps the rise of China and its next moves might best be gleaned from the best biography to date of Xi Jinping. Kerry Brown’s CEO China: The Rise of Xi Jinping. Noted China expert Brown weighs up the strengths and weaknesses of President Xi – the crackdown on corruption as well as the crackdown on opposition; the overseas expansions of the One Belt, One Road initiative compared to the limitations on the internet within the country. What is clear is that it is extremely hard to get a serious handle on China’s paramount leader and determine what he will do next. However, that is also true of the new president in the White House. It is the very unpredictability of these leaders that makes these books so important – figuring them out is a tough business. ●

maritime ceo


TRAVEL

Volcanoes, beaches and sails Kiwi Graeme Somerville-Ryan champions his home city of Auckland

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uckland – the city of sails – is New Zealand’s largest and most vibrant city. Home to a wide array of beaches, eateries and bars, Eden Park, and the America’s Cup; Auckland offers a lifestyle the envy of many better known, larger, destinations. But it is two key features that really define the Auckland experience: the 48 volcanic cones dominating the local geography and the region’s close connection to the ocean. Greater Auckland is situated on an isthmus, with Waitemata Harbour to the north, and the famously treacherous Manukau Harbour to the south. Auckland is the only city in the world built on a live basaltic volcanic field, and these (easily accessible) volcanic cones dominate the urban landscape. The beaches, cafés, and waterfront lifestyle mean that Auckland is consistently ranked as one of the best places in the world to live. So, what to do if you find yourself at the end of the world for work or on a short vacation?

ISSUE FOUR 2017

1a. Auckland Museum and Domain. In the middle of the city, one of the best museums in the country especially for NZ/Pacific history. 1b. Climb Mt Eden. Walkable (a few k’s though) from the museum. Great views of the city. Mt Eden is a volcanic cone and pre-European Maori fort. 1c. Lunch/dinner in Mt Eden village. Just below the mountain, Fraser’s cafe has always been a local favourite, though there a numerous well-rated choices. 2. Rangitoto. The volcano in the harbour. At least half, maybe a full day. Accessible by regular public ferries. Lots of walking and exploring of volcanic caves, peaks etc. 3. Fish and chips on the beach. No trip to Auckland is complete without a visit to Mission Bay and a bite to eat on the beach. A short drive around the bays to this iconic spot. 4. Catch a game of rugby or cricket at Eden Park. Sample some real Kiwi culture. New Zealand are still

The beaches, cafés, and waterfront lifestyle mean that Auckland is consistently ranked as one of the best places in the world to live

rugby World Champions at the time of publication (Sam…you can sit on this article for a while). 5. Island and wine. Go to Waiheke Island (public ferries available) for the day (or overnight) and do a wine tour. 6. Piha or Murawai beaches. Auckland’s iconic west coast surf beaches. Big waves...and great black sand beaches. 7. Most of Auckland’s restaurant/ bar scene is in the Viaduct, or in the nearby suburbs of Parnell and Ponsonby. An in-theme place I can suggest is a visit to Seafarers/ Ostro right on the downtown waterfront – great seafood and views. ●

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OPINION

Quit Weining Kate Adamson, the founder of Futurenautics, draws parallels between Hollywood producer Harvey Weinstein and shipping’s rotten apples

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erial Oscar-winning movie producer Harvey Weinstein has finally been publically outed as a bully who has subjected numerous actresses to unwanted sexual advances and in some cases sexual assault. Allegedly. One man’s behaviour—you might argue—doesn’t warrant this degree of brouhaha, but as is so often the case, Weinstein’s behaviour in a bathrobe is just a symptom of a deeper malaise. What’s being exposed is the real workings of an industry where powerful men routinely exploit young women (and no doubt young men too). And it’s even less appetising than the thought of Harvey in a bathrobe. What the film industry is now struggling to come to terms with is that despite pretty much everyone knowing exactly who’s ‘Not Safe In Taxis’ as my grandmother would have said, absolutely no one had the courage to stand up and say it out loud. In the case of Weinstein his ability to get movies made about subjects others wouldn’t touch, and his championing of independent film meant that value judgments were made by everyone from producers to financiers to stars. They decided that however unsavoury what Harvey did around the edges was, and sorry though they were for those who were damaged by him, there wasn’t much they could do about it. Because that’s just the way the industry works. But industries don’t just work. Industries are made up of people and it was people who supported and facilitated Weinstein’s luring of women to one-on-one meetings, people who sorted the logistics with the hotels, assistants who set up the meets, travel agents who booked the

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flights, and the women’s own agents who told them to go. Change happens when people make it their business, and it takes courage to be the first to stand up and declare. The Weinstein scandal wasn’t broken by the Hollywood Reporter, or The Wrap or Variety, although it’s almost impossible to think that all those journalists didn’t know exactly what was going on. That’s the problem with industry media; it’s so dependent upon the advertising revenues and the relationships with the powerful companies and individuals in its market that blowing open a story, or taking a stand just isn’t in its interest. Most industries have a Weinstein or two. Some dirty open secrets that people shake their heads over in private, sympathise with the victims, but continue to book the hotel rooms and launder the bathrobes afterwards. Crew abandonment is one of shipping’s Weinsteins. How is it that in the 21st century it is possible for seafarers to find themselves without money, food or water with no way of getting back to their loved ones? The parallels with Hollywood’s

current local difficulties are legion. The Weinstein Shipping Companies need to be identified, pilloried and run out of town, but that’s only one part of the problem. What’s required is a cultural change amongst the vast network of enablers—from shipping organisations to insurers to financiers to flag states—who are willing to look the other way as long as the hit movies keep coming. This particular dirty secret has been well known to the shipping industry media for many, many years, but none has ever taken a stand on it. Like Hollywood, one assumes that the relationships and the advertising money is just too vital to jeopardise for a bunch of seafarers who really should know better than to agree to meet Weinstein Shipping in a hotel room. In our increasingly hyper-connected world the days of the industry Weinstein really are numbered, because as the digital ecosystems develop which connect new stakeholders around ships and shipping’s customers, the bathrobe isn’t just going to hang open, it’s going to be ripped off altogether. The kind of radical transparency we’re heading towards is going to mean that the only way to thrive, and indeed survive, will be to act with integrity and authenticity. Because those who don’t are going to find that box-office receipts won’t be enough to save them. I remember a conversation with Roberto Giorgi about shipping’s Weinsteins when he told me that shipping had to get rid of the rotten apples. And he was absolutely right. Now we have the opportunity to stop whining about it and make a difference. ● maritime ceo


REGULAR OPINION

Can we be honest about the damage we are all doing? In a startling column Andrew Craig-Bennett suggests we scrap the current merchant fleet and start again

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et’s be practical. We are in this business to make money. How can we make lots of it, whilst at the same time keeping this planet’s delicate oceans and atmosphere intact? Planets don’t come with lifeboats. A recent report from an American university shows lightning strikes are twice as common over the two busiest shipping lanes in the world, those leading towards and away from the Straits of Malacca, as they are elsewhere, thanks to the greater number of particulates in the atmosphere over those shipping lanes, which affects cloud formation. That is direct evidence that our ships are interfering with the climate. Remember, if you have been in shipping for 30 years, that the world fleet is now four times as large as it was when you started. The International Maritime Organization (IMO) does not have the power to influence public opinion, all it can do is to slow down, or speed up, regulatory charge. Regulation of emissions exists, in a very feeble form; real regulation of emissions is unavoidable; all we can do is to choose to promote it or to try to delay it. We all know that if we try to regulate emissions by measuring fuel consumption, and so on, people in our business are going to cheat. It’s what people in our business do. The only way to keep ourselves honest is to ban the internal combustion engine altogether, along with the external kind, and to adopt zero emissions. Before you throw your hands up

ISSUE FOUR 2017

in horror, take a moment to think about this. The best way to make loads of money whilst stimulating economic development is the same as it always has been – to ride the wave of a truly disruptive technology. Containers, diesel engines, welding, steel, refrigeration, wireless, the telegraph cable, compound expansion steam, carvel planking, the astrolabe and the mariner’s compass – these have been the great disruptors, and the biggest of them involved propulsion. We want to make money, and to lead long, comfortable, lives. These are the only facts that matter. I hope we all agree? Because if we do, we must also agree that the only sensible proposal before the IMO is the one coming from the Pacific islands – including the Marshall Islands – calling for zero emissions by 2035. That would give us 17 years to scrap every ship on the planet and replace them with ships that do not consume hydrocarbons and emit greenhouse gases when in operation. That’s a real disruption, unlike unmanned ships and suchlike, which are chicken feed. Seventeen years is long enough to pay down and scrap all existing ships and replace them with something else. Let’s take a blank sheet of paper and think about that. The playing field is now quite level. The available means of ship propulsion without emissions are nuclear, solar and wind. We can put ‘solar’ in a little box and almost ignore it until energy storage improves, because we don’t want to go lugging main propulsion

batteries around, using up deadweight, but we only ‘almost’ ignore it, because we do want battery power to drive auxiliaries. Nuclear power is well proven, and it’s perfectly possible to fit package reactors which can run for a ship’s lifetime without refuelling. Submarines have them now, but nuclear reactors are very expensive and time consuming to build, so only a few ships are going to be nuclear. Everything else is going to get there under some form of wind power, at sailing ship speeds. You can see why this is such an exciting prospect – if demand in ton miles is about as price sensitive as it always has been, and the supply of tonnage is going to be moving at three to four knots, not 10 to 14, and the cargo is going to have to be stevedored in and out of hatches obstructed by sailing gear, taking much longer in port, we are going to see a freight boom that will make 2004 to 2008 seem trivial. I am not talking about the romance of sail; I am talking about making serious money in proper shipowning. Henry Ford said that if he had asked his customers what they wanted, they would have said “a faster horse”, and I’m perfectly sure that the shipowners of 1866 were fascinated by movements in the S&P market for wooden square riggers, as Alfred Holt set out to make them all irrelevant. We all know this change is coming. We can lead it, get rich and be on the side of the angels or we can share the fate of the other rustbelt industries. Simple. ●

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MARPOLL REGULAR

Your view Every quarter we ask a series of topical maritime questions. With more than 450 votes cast the results – plus juicy comments – are carried below Should the IMO’s EEDI targets be tightened?

Have we become too dependent on weather routing to avoid heavy weather?

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We have been for three decades

The problem will as always be enforcement

Yes 65%

Yes 55%

No 35%

No 45%

Has the offshore market bottomed out?

2017 is set to be a record year for S&P deals. Do the markets justify this exuberance?

It has bottomed out, but will stay there for the foreseeable future

Yes 51%

Yes 44%

No 49%

No 56%

Do you think technology vendors understand the challenges that shipowners (and crew) face?

Yes 23%

No 77%

Has shipping thought enough about the increasing severity and frequency of storms with global warming?

The start of a shift in global trade patterns

Yes 21% No 79%

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Yes 64% No 36%

No liner company with less than 1.5m slots will be operating on the main east-west trades by the start of the next decade.

As can be seen from larger ships making better economics per teu per sea mile

There appears to be no coordinated effort by IMO or other bodies to make allowances in vessel construction to help mitigate the storm effects on vessels

China’s closures of ore and coalmines will have little effect on ton/miles; they were only marginal capacity.

Shipowners are looking for the cheapest option and vendors are looking to gouge as much money from the customer as they can. The crew are stuck in the middle

Exuberance is the wrong word. Experienced owners can’t make real money any more. And the risks are too great. The new money is ill informed

Agree 71% Disagree 29%

maritime ceo


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Maritime CEO Issue Four 2017  
Maritime CEO Issue Four 2017  

The final issue for 2017 of Maritime CEO has a distinctly Chinese flavour to proceedings. The executive director of ICBC Financial Leasing f...

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