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ISSUE ONE 2014

Epic duo

Christensen and Buttery reveal gas expansion formula


MaRInE LuBRIcants

Just tELL us whERE anD whEn

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Manifest

3 At The Prow

27 Nakilat & Bahri 28 Stena Bulk 29 Masterbulk 30 KC Maritime & Chellsea 31 Belships 33 Star Bulk 35 Greathorse 36 Brightoil 37 Management Facilities 38 Horizon Lines 39 Renjian Group

Economy

Recreation

5 6 7 8 9

41 Gadgets 42 Books 43 Travel 44 Golf 45 Yachting

22

US EU China India Brazil

Markets

Opinion

11 Dry Bulk 13 Tankers 15 Containers 17 Finance

46 The Secret Security Guy 47 The Contrarian 48 MarPoll

Executive Opinion 18 Where to get financing

Profiles 22 Cover Story Epic Gas 25 Excelerate Energy Issue ONE 2014

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At the prow

An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editors: Jason Jiang jason@asiashippingmedia.com Katherine Si katherine@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Ronak Housaine Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Hong Kong: Alfred Romann London: Craig Jallal Mumbai: Divya Lad New York: Suzanne Smith Oslo: Hans Thaulow Portland: Joshua Samuel Brown Shanghai: Engen Tham Singapore: V Subramanian Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Charles De Trenck, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Peter Sand, Siddhartha Sanyal, Eytan Uliel Cover: Halcyon Media Editorial material should be sent to sam@asiashippingmedia.com or mailed to Office 701, 9 Renmin Lu, Zhongshan District, Dalian, China 116001 Commercial Director: Grant Rowles grant@asiashippingmedia.com Sales Director: Helen Ong helen@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.maritime- ceo.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to Asia Shipping Media, 20 Cecil Street, #14-01 Equity Plaza, Singapore 049705 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2014’s four issues of Maritime ceo magazine. Email subs@asiashippingmedia.com for subscription enquiries. Copyright © Asia Shipping Media (ASM) 2014 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: @Maritime_CEO LinkedIn: Maritime CEO Forum Facebook: ASM Maritime & Offshore News

Issue ONE 2014

Calling Generation Y

H

ere at Maritime CEO a very significant part of each working day is spent engaging readers via our various social media channels, which at the latest count now reach more than 30,000 people. A little while back we ran an opinion piece on our site from Jonathan Wichmann, who stepped down as head of social media at Maersk Line last September. You can access his article via the QR code below (if you are one of the thousands reading this online, simply click the QR code – our launch issue was read online by more than 15,000 people). Wichmann wrote about the longterm business value and implications that are set in motion by social media. Much like the telephone, Wichmann argued you can use social media for service, sales, branding, communications, PR, HR, operations, leadership, customer insights, business intelligence, internal collaboration and so on. Like a phone, too, he said maritime firms should use social media to listen to their customers – see the quote in the grey box.

“Wouldn’t it be great if there was a curious shipping company that truly listened to and understood its customers? This position in the market is up for grabs” — Jonathan Wichmann, ex-head of social media at Maersk Line

Wichmann went on to outline some big threats he sees facing our industry. His uppermost concern was how shipping was viewed as an unattractive sector to Generation Y or the millennials – those born between

the early ’80s and the early ’00s. This Maritime CEO article went viral and sparked heated debate on all our social media platforms. “Large, traditional, hierarchical organisations are unattractive to Generation Y for a multitude of reasons,” commented one reader on our LinkedIn group. Embracing future technology, disrupting the current business models and listening to and including the whole supply chain, was this reader’s solution. Another reader pointed group members in the direction of Eric Ries’ book The Lean Startup, which discusses corporate internal dynamics. Ries talks as much about ‘intrapreneurs’ as entrepreneurs as one of the keys to keep large organisations dynamic. Finally, talking of engaging readers reminds me to thank the more than 1,000 of you who voted in our Future of Shipping Poll, which we conducted at the turn of the year. Highlights of the poll are contained on the back page. As ever: thoughts, questions, reactions, quibbles to anything you see on these pages – feel free to drop me a line: sam@asiashippingmedia.com ●

Sam Chambers Editor Maritime ceo

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economy US

ECONOMY US

Upward curve Latest data draws a rosy picture

T

hose who’s businesses revolve around trade in America can perhaps finally take a little heart from the end of year trade statistics from the Commerce Department in Washington DC. The US trade deficit fell to its lowest level in four years at the end of last year, an encouraging sign for overall economic growth. Gains in energy production (especially petroleum exports) and stronger sales of American-made aeroplanes, cars and machinery lifted exports to an alltime high. At the same time imports into America slowed, with the noticeable exceptions of cars – Americans bought more overseas manufactured cars in 2013 than previously. Most economists would expect a reduced trade deficit in 2013 to lead to a boost in economic growth in 2014. The reduction should indicate that American firms are earning more from sales overseas, while

American consumers are buying fewer products from foreign companies boosting demand for local manufacturers. Of course, the boost to petroleum production has reduced America’s reliance on foreign oil petroleum imports have fallen 11.5% year-on-year over 2012 - which, in times of still relatively high per barrel prices, has important knock on effects for business efficiency, costs and the wider economy. However, the big story of America’s trade stats is that the country’s trade deficit with China fell 6.7% in November 2013 from October to $26.9bn with American exports to China hitting a record high. China represents America’s largest trade deficit with any country or region globally, by quite some way, so reducing the deficit is important to the overall economy. America also saw a reduction in its deficit with the European Union (EU) – the

More jobs, more wages should make Americans more confident

Issue ONE 2014

US deficit with the EU dropped by approximately 30% year-on-year to roughly $10.1bn. However, while European imports into America slowed, American exports to Europe barely grew either. Hence America’s trade with the EU remains largely stagnant. Exports remain crucial to the American economy despite its large and developed domestic consumer market. Indeed, it is a rebound in the strength of the manufacturing and export sectors that will probably lead to a renewed kick in the domestic retail sector. The rise in exports has started to lift factory output, and, as a result, a stronger job market is being evidenced than for several years. More jobs, more wages should make Americans more confident in the economy and lead to more spending on domestically made goods and, therefore, a stronger and quicker economic recovery. All this emphasis on America’s improved trade data may make the overall economic situation appear a little too rosy. There are obviously still factors mitigating against fast recovery, for instance, some drag from lower inventory growth and persistently higher than average unemployment. It has to be said that, by and large, this improvement in America’s trade stats has come at a time when the Obama administration has interfered little with the existing trade regime. This year the government though will get more proactive legislatively speaking with the 11-country Trans-Pacific Partnership (TPP) deal, which binds the US to many important countries including Japan and Vietnam. This should be followed by a Trans-Atlantic Trade and Investment Partnership (TTIP) with the EU. However, this is Washington and, right now, passing anything, however obvious the benefits, appears tricky.●

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ECONOMY REGULAR EUROPE

Watch the trade deals

This year could be make or break time for the EU as signatures are sought with the US, China and Russia

T

he worst may be over but challenges continue for the Eurozone. With a jobless rate across the zone of 12% and a growth rate of only 1.2% predicted in 2014 there’s no cause for champagne just yet. Still, that is a vast improvement over 2013, when the zone contracted by 0.4%. Mario Draghi, president of the European Central Bank, thinks the battle to stabilize the euro is now largely over but there are still wide discrepancies across the Eurozone from strong manufacturing economies like Germany to the ‘basket cases’ like Greece. The term ‘low-key optimism’ is the one most often heard in European capitals. The global economic crisis of 2008 was followed in 2009 by a flurry of problems in the EU—in Greece, Ireland and then Portugal. As a whole, during the worst phase in 2010-11, it looked like there was a real chance the euro project might fold. Italy, one of the zone’s largest economies, came precariously close to defaulting on its debt. Seeking money on the international markets pushed Greek interest on debt up over 6%. Again, some have faired better than others. Consumption in the Eurozone and the EU is up, and confidence is returning - Ireland, for one, has emerged from its bailout packages and is returning to growth. Outside the zone, but still highly influential, the UK, having implemented some of the harshest austerity measures in its history, is now considered out of recession by the International Monetary Fund despite earlier criticisms that its cuts in government expenditure were too deep and too fast. Growth in the last quarter of 2013 prefigures an estimated 2% in 2014. This is a good outcome when we look

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The term low-key optimism is the one most often heard in European capitals

back at the predictions late in 2012 that the UK was in real danger of going into a triple-dip recession. EU exports are up again, but this is largely dependent on the economic behemoth of Germany, a fundamental and long lasting problem, according to Jose Manuel Barroso, EU Commission president. Last year Germany and the EU combined dominated global exports with combined totals above China and the United States. But it’s still reliant on German exports (largely cars, machines, pharmaceuticals, chemicals, electronics and weapons), which reached an all time high of €99.1bn in October of 2013 with significant rises in exported goods to the three major markets of Russia, China and the US. As a bloc the EU has a raft of tricky trade deals to sort out this year. The first round of negotiations for an EU-China investment agreement took place in Beijing on 21-23 January. They were not

overly hopeful - whereas goods and services traded between the EU and China are worth well over €1bn every day, just 2.1% of overall EU foreign direct investment (FDI) is in China. The EU is hoping China will lift its multiple barriers to investment but Beijing appears to be resistant. Similarly the EU-Russia turnover in goods has tripled, reaching €336.5bn by 2013 but Moscow is similarly sticky on investment. Additionally, the EU’s exports to Russia were mostly machinery and pharma while the vast bulk of Russia’s exports to the EU were commodities – the value added lies firmly with the EU in the trade relationship. This year the EU will push for a free trade deal with China, a better deal with Russia and a resolution to issues with the US – namely that financial services should be part of the transatlantic trade deal that it is negotiating at the moment. Some have called 2014 the ‘make or break’ year for EU trade deals, deals that can bolster industry and trade within the EU and ensure that the road to recovery remains straight and without any bumps back into triple dip recession.● maritime ceo


ECONOMY CHINA

New balance Beijing looks to have avoided a hard landing

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hina’s economy is now officially decelerating, i.e. the rate of growth is slowing. But this is good news as it is allowing a more sensible ‘rebalancing’ of the economy away from exports and investment towards consumption over time. Taking this gradually and avoiding sudden bumps should mean no ‘hard landing’ for China’s economy. Analysts have long put ‘rebalancing’ and ‘hard landing’ in quote marks because it wasn’t always clear, and was always

debatable, whether either of these things were actually happening. Well, with the economic data for 2013 in, we now know – China is rebalancing and a hard landing is unlikely. China’s GDP shows the deceleration best – 7.7% for 2013, about the same pace as in 2012, but down from 9.3% in 2011 and 10.5% in 2010. Most analysts expect 2014 to come in at about 7-7.5% for the year – but there’s a long way to go yet. Deceleration though also marks

US trade with China, 2013 – A record year Month

$m

Exports

Imports

Balance

January 2013

9,384.6

37,172.0

-27,787.4

February 2013

9,302.6

32,715.0

-23,412.5

March 2013

9,435.4

27,321.7

-17,886.3

April 2013

8,991.9

33,101.8

-24,109.9

May 2013

8,786.5

36,646.2

-27,859.7

June 2013

9,181.5

35,831.3

-26,649.8

July 2013

8,735.2

38,818.4

-30,083.2

August 2013

9,280.9

39,171.7

-29,890.8

September 2013

9,596.0

40,067.4

-30,471.4

13,060.0

41,921.5

-28,861.5

October 2013 November 2013 TOTAL 2013 Source: United States Census Bureau

Issue ONE 2014

13,178.9

40,109.6

-26,930.7

108,933.4

402,876.6

-293,943.1

the end of a lot of processes we’ve all become rather familiar with in China – urbanisation is now 54% and not growing rapidly anymore; China’s demographics mean more old age and less newborns while the property market may, at last, be showing some signs of maturity after a decade of volatility. Rebalancing means more domestic consumption and less manufacturing for export – and this has indeed been the case. Exports have not been a significant contributor to GDP growth for many years, and were a slightly negative factor in 2013 and 2012. So less containers leaving China in future. But perhaps more arriving, domestic retail sales keep on booming – real retail sales rose 11.5% in 2013, close to the rates of 12.1% in 2012 and 11.6% in 2011. China is consuming more and a proportion of that is imported products. Some countries are doing better than others in terms of exporting to China – South Korea and America in particular. Seoul’s Ministry of Trade, Industry and Energy reported that exports to China accounted for 26% of South Korea’s export total in 2013. The US shipped more than $120bn of goods to China, according to data from the US International Trade Commission. That’s a new high in US-China trade – approximately 7% more than the 2012 total. China is now America’s third biggest trade partner after NAFTA partners Canada and Mexico. What else might affect shipments into and out of China? Infrastructure is one interesting area where in many things, from high speed trains to bridges, many components and products have been shipped in. Year-on-year growth in infrastructure spending did cool late last year, but may not continue into this year. Good news if you’re shipping infrastructure-related goods; bad news if inflation is what concerns you, as all this expenditure will inevitably push inflation higher. Inflation stayed fairly calm in 2013 and rises in the consumer price index were overwhelmingly in the food sector rather than non-food items. ●

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Economy India

Gridlocked The same old problems are backing up the nation

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ndia’s economy has left analysts disappointed – economic growth of 4.7% in the three months to December was down from 4.8% in the previous quarter in 2013. Inflation, falling investment and the weakening rupee are the culprits. The last quarter of 2013 was the fifth quarter in a row that India’s annual economic growth rate was below the 5% mark. None of this has been good for consumer spending either. Slower economic growth, particularly industrial production, has meant fewer jobs being created and so less money around to spend. India’s economy (to an even greater extent than China’s) is driven primarily by domestic demand and so a lack of jobs, a slow down in the growth of the key middle class and weak consumer sentiment are all bad news. However, tourists like India it seems – hotels, tourist receipts and transport services were all growth areas thanks to the opening of new airports, hotels and successful marketing campaigns. India is, of course, as Ghandi said, all about its villages and this is also true economically. Agriculture remains a key sector and showed strong growth in 2013, thanks in part to a good monsoon season. This helped restrain inflation and bring prices of consumer staples down, but even vastly improved agriculture doesn’t add many jobs and India needs an estimated 8% growth per annum across the board to generate

“Inevitably, there will always be many old boys in shipping who will prefer hardcopy” — Richard Rivlin, ceo, VesselsValue.com

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Inflation, falling investment and the weakening rupee are the culprits

enough new jobs for the 13m people entering the workforce each year. It isn’t doing that right now. The economic benefits of being in a ‘demographic sweetspot’ – over half of the country’s 1.2bn people are under 25 – are that labour remains both plentiful and usually cheap. But, the downside is that jobs have to be created for those young people and right now many industrial and services employers report that they are not hiring. Improved agriculture can actually add to the problem as when farming improves productivity it is invariably due to mechanisation and improved systems such as agri-business, which further reduces manual labour and adds to the unemployed numbers. The ruling Congress Party faces upcoming elections and needs urgently to revive the investment climate, bringing in money and jobs. But reform of the economy has been slow. One example is retail where the market remains incredibly protected

and lags the emergence of a modern retail economy such as what Brazil and China are seeing. Financial services added to economic growth in 2013 but this was a largely one-off trick bringing in overseas deposits from non-resident Indians – but it was short term and a one-off and, while it boosts the numbers, doesn’t create jobs or long term income for the country. Most economic analysts in India don’t believe there’s going to be a turnaround in the country’s fortunes anytime soon. Elections, politicking and good old-fashioned protectionism remain blocks to economic progress and scare many would-be investors while simply shutting out others totally. The old problems of too much red tape and bureaucracy remain firmly in place. Elections are set for spring 2014 and maybe, just maybe, things will reach a head and, so analysts hope, looser economic regulation will follow. ● maritime ceo


Economy Brazil

Back of the net The impending football World Cup is having a tangible effect on the nation’s finances

C

hina may have lost its economic lustre of late; India’s economy grew at a slower rate than expected in 2013; and many analysts are predicting collapse for Russia, but among the infamous BRICs Brazil is the stand out nation at the moment. The giant Latin American economy unexpectedly recorded a growth rate of 0.7% in the last quarter of 2013 meaning, over the whole year, the economy grew by 2.3%. Even the country’s finance minister admitted he was surprised by the strong performance. What’s going on? Surely it can’t all be World Cup run-up related? Well, in a way, it is – Brazil is benefitting from a massive consumer feel good factor. While China’s and India’s burgeoning middle classes are showing signs of suffering stagnation both in terms of growth and spending power, Brazil’s nascent consumer class is booming. And consumer confidence in Brazil now far outstrips that of any of the other BRICs. Brazilians are feeling good about being Brazilian and spending their money enjoying themselves. It also appears that business is feeling good – a 6.3% jump in investment in the last quarter of 2013 seems to indicate that business confidence is returning after rather ebbing away throughout most of last year. A major boost to both business and consumer confidence has been

Issue ONE 2014

the reduced inflation rate, which has now fallen back to 5.6% after peaking at 6.7% in June 2013. That means the central bank has put interest rates back to their 2011 level. Rising interest rates had been a major problem for president Rousseff which, at their peak, damaged both output and the currency. Exports are up too – and more importantly they are more diversified than previously. At various points over the last few years it had looked like Brazil was becoming a one-crop economy – soybeans – and a one-client nation (China) for that crop. Exports to China were the main source of export growth for some time with soybeans composing more than 40% of total shipments at one point. But Chinese demand fell away and, contrary to some expectations, Brazil has found new markets and new products. However, no economy is wholly a good news story. Brazil still has its problems – agricultural growth was flat in 2013 and industry shrank by 0.2% in the last quarter. But football, and the impending World Cup, reveal major problems too. Endemic corruption remains a major problem and a drain of public finances and spending. Too little money and too much ‘squeeze’ through graft has meant infrastructure and public works spending has lagged GDP growth significantly. The facilities for the World Cup have simply been

the most high profile public example of this problem and caused social disquiet and demonstrations. While the volatile and vocal public may want more of the wealth spread about the government finds itself between an economic policy rock and a hard place. A stronger economy boosts the public coffers but the government has also had to promise to cut $18.5bn in public spending to bring its budget deficit under control. The Financial Times has termed Brazil’s economy over a longer time frame as “go-go to so-so” though most would hail any growth as positive news. And the conundrum for the government remains – to keep the tide of positive investment flowing they need to further rein in the budget deficit. But paying down debt when people want services and infrastructure isn’t how you stay in power. Brazil is growing and likely to continue on the upward trend, but Brazilians may not find it so easy to retain their feel good factor. ●

“More attention must be given to digital technologies in our industry” — Krystyna Wojnarowicz, president, Marsec-XL

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Markets Dry Bulk

Record Chinese iron ore imports to propel capesize rates Jeffrey Landsberg from Commodore Research is in optimistic mood

D

espite China’s steel market starting the year off relatively weak with Chinese steel prices mired in a lull and steel stockpiles climbing due to annual first quarter restocking, we are quite bullish for Chinese iron ore import prospects this year. If our predictions are correct, another year of record-setting iron ore imports in China will propel capesize rates to levels higher than the FFA market is suggesting. We are quite bullish for Chinese iron ore imports first and foremost due to the very large amount of new iron ore production coming online in Australia and Brazil this year. We estimate that a total of 120m to 140m tons of additional Australian and Brazilian iron ore will be produced this year, due to expansion programs that were first put into motion several years ago. Our conservative estimate is that at least 80m tons of the new iron ore cargoes will end up being exported to Chinese buyers. Even if Chinese steel production growth slows by a small to moderate amount this year from the 9.5% growth seen last year, we believe strongly that Chinese iron ore imports will still find significant support. The 120m to 140m tons of new Australian and Brazilian iron ore production is coming to the market and will be consumed abroad. Overall, the very large amount of additional iron ore cargoes will put moderate pressure on iron ore prices and cause China to simply consume a greater proportion of imported iron ore rather than domestic iron ore – even if Chinese steel production growth slows this year. More smaller Chinese iron ore producers are poised to be pushed out of the market as lower iron ore prices will not allow the smaller

Issue ONE 2014

miners in China (where mining costs are much higher than in Australia and Brazil) to recover costs and profit from mining iron ore. Consuming a larger proportion of imported iron ore over domestic iron ore is also in the best interest to the Chinese environment and pollution concerns as domestic iron ore in China is of inferior quality to imported iron ore. Chinese iron ore averages approximately 15% in iron content. Using imported iron ore, which from the major international exporters, often exceeds 50% iron content, pollutes the environment much less than using domestic iron ore. It is therefore in the best interest of China as a whole to consume imported iron ore rather than heavier-pollution domestic iron ore. We do not believe China’s government is ready to sacrifice industrial growth in favour of supporting the environment. One fundamental way to allow steel production to remain high while also making efforts to improve pollution is for steel mills to consume more high quality iron ore imported from abroad. Overall, we anticipate that Chinese iron ore imports will average at least 75m tons a month. In total, this equates to China importing a record 900 tons of iron ore in 2014. Last year saw China import a record 820.3m tons of iron ore, which equated to a monthly

China’s government is not ready to sacrifice industrial growth in favour of supporting the environment

average of 68.4m tons. With Chinese iron ore import volume likely to grow by at least 10% from 2013’s volume, capesize rates are set to benefit. On average, the market is expecting that capesize fleet growth will come in at around 5% this year. The second half of last year has already shown that the capesize market has reentered the part of this shipping cycle where spot vessel availability can become very tight very quickly, which leads to sharp increases in freight rates. Demand for capesize vessels, primarily due to strong Chinese iron ore demand, is likely be strong enough at times this year to lead to very sharp increases in capesize rates. We remain most bullish for the second half of this year. Iron ore trade volume traditionally is strongest during the second half of every year due to seasonal factors, and the effect of relatively low capesize fleet growth will be compounded as the year progesses. ●

Chinese Iron Ore Imports (December 2011- December 2013) 80mt 75mt 70mt 65mt 60mt 55mt 50mt Dec

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Markets Tankers

Surprise turnaround A cocktail of slow steaming, low fleet growth, long hauls and demand shocks is creating a positive situation for many owners, writes BIMCO’s Peter Sand

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he year is off to a good start, as global economic growth already seems stronger than anticipated. At the end of January, the IMF adjusted its estimates upwards for global economic development in 20132015. 2014 is now seen at 3.7%. Amongst the noticeable positive adjustments were the US, Japan, Spain, the UK, China and India. A winter season that turned the market upside down is soon concluded. All eyes were on product tankers, wondering whether this would be the beginning of something beautiful in terms of higher earnings. No one really paid much attention to what was already in the making in the crude oil tanker sector before the fire that started amongst the VLCCs spread like wildfire to suezmaxes and finally included aframaxes too with earnings “not looking back” before $70,000$80,000 per day were bagged. While the VLCC market was mostly driven forward by increased Asian/Chinese demand, the strength in the suezmax and aframax sector originated from the North Sea, the Mediterranean and the Black Sea. Overcapacity is severe, if you look at how poorly the fleet is utilised, but as we have seen in dry bulk – windows of opportunities may occur

Issue ONE 2014

if and when the pace of deliveries ease off. In the last quarter of 2013, the VLCC fleet grew only by 2% and suezmaxes by little more than 4%. The aframax crude oil tanker experienced negative fleet growth for the last 10 months of 2013. Activity on the demolition markets in the past half year improved not just market sentiment, but also saw a year-on-year fleet growth arrive at just 1.9% at the end of 2013 for the entire VLCC fleet. The combination of slow steaming, low fleet growth, long hauls and demand shocks have tightened the markets, giving all the aces to the owners and operators with the charterers for once left with few options to secure their cargo program requirements. Several months ago, many owners expressed the view that an orderbook of around 200 MR units was still manageable for the market to absorb while remaining in the chase for higher earnings. At the end of January, the MR orderbook stood at 273 units – as more than 80 new orders have emerged in the market since early December. The recent development leaves it primarily up to a very strong demand side to provide the needed employment for the once again faster growing fleet, with supply management in a very important supporting role.

The speed effect is having a bigger impact on the supply side than demolition

Going forward, we will still have a lot of focus on the charterers’ requirements for modern tonnage with the unwritten bar set at 15 years as a maximum age. Getting rid of the all vessels above the age of 15 years would reduce the crude and overall tanker fleet by 11.9% and 12.6% respectively. If we focus on the VLCC fleet only, an age limit of maximum 15 years would single out 60 units as over-aged (9%). This would bring the fleet size back to mid-2011 levels. For the MR product tankers we are counting 124 out of 1,064 to be above the age of 15 (11%). The multimillion dollar question is then – would the market return to healthy rates if all vessels beyond the age of 15 were to be demolished? If the VLCC fleet would continue to run at an average speed of 13 knots instead of 16 knots, it most certainly would, because the speed effect is actually having a bigger impact on the supply side than demolition. Trouble is speed reduction is not permanent – demolition is.●

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Markets REGULAR Containers

Absorption issues The sub-8,000 teu fleet is most at risk, argues SeaIntel’s Lars Jensen

A

s carriers’ financial accounts are being published, the picture of an industry under continued pressure solidifies. Rate levels in 2013 are markedly below 2012 levels, whilst rate volatility has continued to increase. Furthermore, the amount of cancelled sailings on main trades has also increased in 2013 compared to 2012, as carriers attempt to match supply to demand. With the current outlook for both supply and demand, this pressure will not be alleviated short term. Currently the global fleet stands to grow 5-6% in 2014 and up to 9% in 2015, with the majority of the tonnage being in the super post-panamax segment. The expectation for global demand growth is for a modest 5-6% growth for both years, which indicates a further deterioration in the situation. In the graph it can be seen how even an optimistic outlook of 10% demand growth will Demand fail to bring anyCapacity near-term balance 2008 100 100situation. into the supply/demand 2009 However, 90there is 105 more to this 2010 103.5 115 capacity injection than meets the 2011 111 important 123 which eye. It is equally 2012 131 size vessels115 we see delivered. The 2013 117.5 139 very largest vessels will mostly be 2014 148 deployed on129 the Asia-Europe trade, 2015 141 the next tier of vessels161 goes to the transpacific as well as a few other

trades and so on. If we take a more detailed look at this cascading effect, what do we find? We take the Asia-Europe trade as a starting point. The number of vessels on a weekly string varies depending on where it originates in Asia as well as where it goes to in Europe. Using a reasonable average, combined with an expected total demand growth of 15% until end 2016, we find that this trade can absorb most vessels in excess of 10,000 teu. Only a few such vessels would be left for injection into the transpacific trade combined with vessels in the size range 8,000 to 10,000 teu. If the transpacific trade in 2016 has seen the cascading of the second-largest tier of vessels, the average vessel size in this trade will be 9,000 teu – including the East Coast services as the Panama Canal will have been expanded by that time. Almost three-quarters of the vessels between 8,000 to 10,000 teu will be needed on the transpacific trade. The remaining vessels in excess of 8,000 teu will move into secondary trades, where we already do see such vessels. These are Asia-Middle East, Europe-Middle East, Far East-South America as well as Europe-South

Development at  10%  demand  growth  2014&2015   170   160   150   140   130   120   110   100   90   80  

2008

2009

2010

2011 Demand  

Issue ONE 2014

2012 Capacity  

2013

2014

2015

Even an optimistic outlook of 10% demand growth will fail to bring any near-term balance

America. This in itself would absorb the remaining vessels in excess of 8,000 teu. From this perspective the current order book can indeed be absorbed, as it pertains to the larger vessels, while maintaining the current supply/demand balance. The effect on smaller trades, which will see cascading of sub-8,000 teu tonnage, will on the other hand be highly negative. If additional ordering is to be absorbed, this requires additional cascading of 8,000+ teu vessels in strings where they are currently not deployed or the return to much higher demand growth rates in the Asia-Europe and transpacific trades. However in these considerations it must be kept in mind that the above balance refers to the maintaining of the current situation which is by no means balanced – rather the market already has overcapacity which will not be absorbed. ●

15


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Markets Finance

Short-sighted New columnist Dagfinn Lunde explains why shipping is no longer viewed as a clear long-term investment

S

hipping as a long-term investment just is not attractive these days due to the constant spectre of overcapacity. No sector stands a chance of solid returns of more than two years thanks to the vast amounts of shipyard capacity and cash on tap from export credit agencies. Sectors that are deemed hot are quickly washed over with waves of new tonnage, especially in the current environment where owners can put a downpayment on a ship of as little as just 5 or 6%; that’s like taking options. This time a year ago when Maritime CEO asked me what sectors in shipping held the best prospects I pointed towards LPG, product and chemical tankers and I am glad to report to readers that my selection proved to be on the money. What then for 2014? Largely more of the same. It should be another good year for LPG with demand still increasing, but the raft of newbuilds set to come onstream in 2015 and

“We will focus on the mid-sized and smaller shipping companies” — Halvor Sveen, managing director of brand new Norwegian shipping bank, Maritime & Merchant

Issue ONE 2014

2016 will see this two-year spike come to a familiar premature end. Similarly on the chemical front, I’m optimistic for 2014, before all the orders placed in 2013 come into the market. As far as the product market goes, the big question that will likely decide the fortunes of this segment is what will happen to American crude. If the Americans start to export crude, product demand will slide. In the world of offshore, there’s still plenty of upside for jack-up rigs. In terms of financing, what is very evident is the huge dichotomy between newbuild and secondhand financing. Newbuild financing is increasingly covered mostly by export credit agencies, led in force by Korea and China with other nations following suit. Last year saw the Japanese coming aggressively back in too on the lending front. Finance has become relatively easy for owners as yards are only after a small slither of a downpayment. It is in secondhand financing where options are far more trying, with plenty of traditional sources shutting their doors to shipping. In my mind, this is one of the most important issues shipowners face this year and next. Traditional banks have become restrictive in lending, searching for the right ship age profile and better corporate structures of clients. A serious lack of financing for second

No sector stands a chance of solid returns of more than two years

tier owners is where the real pain is, as a result of traditional German, Norwegian and Greek banks pulling out of the market. This provides a great opening for finance entrants such as Maritime & Merchant in Oslo, a new bank to which I am proud to say I am a board member. The bond market remains a decent option for owners this year, but it is expensive. Bonds will be especially attractive for those in offshore. Finally, private equity is still lurking around but not nearly as strong as last year. I do not see that rush of private equity going forward. Many are looking for IPOs and exits as the penny drops that shipping just is not that attractive from a longterm perspective. ●

17


Penny for your thoughts Maritime CEO canvasses the industry on where to access ship finance in 2014

W

hat is clear from our poll of leading names connected to ship finance is that access to capital in 2014, while no means straightforward, is easier than in the previous five years, albeit from non-traditional sources. Banks do not have capacity to fund the industry’s normal capital requirements. “Traditional ship mortgage debt is likely to remain in short supply during 2014,” says Harry Theochari, the global head of transport at law firm Norton Rose Fulbright. Quite so, agrees First International’s Paul Slater. “With the large orderbook in most sectors and with freight rates still uneconomic it is unlikely that bank finance will return soon,” he says. Banks have not exited due to the generic shipping downturn, all the major shipping banks have a proud history of supporting clients through the cycles. They have turned off the taps due to external pressures such as the Eurozone crisis and increases in regulatory capital requirements. Capital these days is now stemming from hedge funds, private equity and pension funds. Many shipping firms have moved towards stock exchanges and have procured equity directly from the capital markets. Shipping entities are using IPOs, bond issues, mezzanine capital and similar forms of financing focused on the capital market. The pace of capital market activity has picked up to near pre-Lehman levels, says Jim Lawrence who heads up respected finance title, Marine Money.

18

Nordic banks and East Asian export-import banks remain a solid source of cash too. “The market is more open than at any time since pre-Lehman,” says Tim Huxley, the chief executive of Hong Kong owner Wah Kwong Maritime Transport Holdings, before cautioning that it is still very tough if you are a smaller owner or a new entrant. “Asia is always a good place to obtain debt financing for solid established companies,” says Basil Karatzas, who runs a ship finance consultancy in New York. The issue, however, with sourcing cash in the East is that the lenders tend to be “territorial”, Karatzas says, with plenty of strings attached. While Asia is growing, the centre of capital will continue to be New York, reckons the head of StealthGas, Harry Vafias. “More and more companies will try and access the US capital markets through IPOs, private placements or in JV with private equity funds,” says the Greek owner. Private equity and hedge funds could be described as short term buyers with a vulture fund mentality, good in the short term, but not a long term solution to shipping’s finance woes, says Stathi Marneros, the managing partner of Spartan Partnership, an HR firm for the ship finance sector. There were more than 40 private equity shipping

The market is more open than at any time since pre-Lehman

maritime ceo


EXECUTIVE DEBATE

transactions last year, according to Marine Money’s Lawrence. “The trend at the start of this year shows no slowing,” he says. Not so convinced of private equity’s staying power in shipping is finance veteran Slater. “The arrival of large amounts of private equity capital last year is based on the false premise that secondhand ship values will rise,” he says. Private equity firms are interested in investing in shipping only as long as inflation remains low, argues Rajaiash Bajpaee, the head of Bernhard Schulte. The problem with the equity and debt capital markets is they are much more expensive than traditional bank lending, points out Khalid Hashim, the managing director of Thai bulker owner, Precious Shipping. What’s more, they can open or shut down very quickly. “Clearly the arrival of large funds on the shipping scene has had a fair amount of influence on the dynamics of ship finance and this, coupled with the apparent insatiable appetite of the Oslo over the counter market – and subsequent likely IPOs be it Oslo, New York or elsewhere – has really changed the landscape and offered a degree of choice for owners,”

Issue ONE 2014

says Esben Poulsson, the former Torm boss. Precious’s Hashim warns that in an industry that is highly capital intensive, characterised by high leverage and has wildly swinging cycles with traditional ship lending banks currently shunning the industry, only the very strong, publicly listed and cash rich, non-speculative shipowners will attract any or all of the funding that is available in the market. “The smaller, non-listed shipowners will be hung out to dry and will have to basically use much more of their own cash to get any business done,” Hashim says. Looking beyond 2014 Norton Rose Fulbright’s Theochari says we may well see the commercial leasing models that have dominated aviation finance emerging in shipping, albeit in a slightly different format, and export credit agencies playing a role in helping to create a secure bond market. ●

Smaller, non-listed shipowners will be hung out to dry

19


Ulrich Müller p.31

Rob Bryngelson p.25

Karin Orsel p.37

Sam Woodward p.38

Saleh Al-Jasser p.27

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 19 pages

20

maritime ceo


IN PROFILE

Erik H책nell p.28

Henry Chiang p.35

Guo Dongsheng

Spyros Capralos p.33

p.39

Vikrant Bhatia p.30

Gautam Chellaram p.30

Dr Sit Kwong Lam

Abdullah Fadhalah Al-Sulaiti

p.36

p.27

Nicholas Fisher p.29

Lars Vang Christensen p.22

Chris Buttery p.22

Issue ONE 2014

21


IN PROFILE

Epic by name and by nature

Singapore’s Epic Gas has expanded incredibly fast since its creation at the start of 2013. Next stop, the New York Stock Exchange?

J

ust 14 months ago the industry saw the creation of a new gas carrier owner and operator following the merger of Epic Shipping Holdings and Pantheon. Since then, Epic Gas has been one of the most active owners in Singapore, setting about a rapid expansion to make a big impact in the regionalised pressurised LPG markets. The company has significant backers including Jefferies Capital Partners and DVB Shipping

22

Intermodal Investment Management (SIIM) and a group of private shareholders. The company also has investment from one of the region’s canniest shipping players, former Pacific Basin boss, Chris Buttery (pictured, left) who officially was appointed chairman along with

another shipping veteran and board member Paul Over last year. Both were long standing partners, indeed original founders, in Epic but not directly involved in management until recently. In May last year Lars Vang Christensen (pictured, right) joined

If you get in first with the best ships at the right prices then things can’t go too wrong

maritime ceo


IN PROFILE

the shipowner as ceo. Christensen has over 30 years of international shipping industry experience having joined A.P. Moller-Maersk in 1979. Among a glittering list of accolades in his career in shipping, Christensen was the chairman of the Danish Shipowners’ Association. Including newbuilds Epic now controls a fleet of 40 pressurised LPG ships. Its offices around the world now include London, Tokyo, Hamburg and Manila and Maritime CEO believes a Hong Kong office is also in the offing. With 12 ships ordered in Epic Gas’ first 14 months of operations – all in Japan, Christensen smiles when asked by Maritime CEO on what is

Issue ONE 2014

the company’s ideal fleet size. “Our loyal customers will decide that,” he replies, adding: “Our focus is our clients’ need for transportation and therefore on delivering quality services that meets their expectations.” Since Epic was formed, LPG has suddenly become a hot sector in shipping, but Christensen is not concerned. “The growth,” he says, “is in many respects because owners like us are seeking replacement tonnage and there is all this talk about shale gas and predicted need for pressurised LPG carriers – it is a combination of fleet renewal, a recovery of the world’s economy and hence the positive implications for pressurised LPG carriers”. Having the likes of legendary shipping names Chris Buttery and Paul Over onboard helps build the Epic brand, says the ceo. “They are strong names in east and west. It is all about being trustworthy and reliable.” Of course, having such well known shipping entrepreneurs as Buttery and Over at the table – the pair founded, listed, sold and re-established Hong Kong’s Pacific Basin – suggests a listing sometime soon, with speculation rising that New York could be the place for the IPO. As a precursor to a future IPO Epic carried out a successful over the counter offering in Oslo in January, raising $75m in the process. “We are pleased that there’s a keen interest in our company. Epic Gas is a good story,” Christensen says, without elaborating on when

“Shipping is in the early stages of a cyclical recovery, thus it provides good investment opportunities” — Basil Karatzas, managing director, Karatzas Marine Advisors

Spot on

Epic Gas Founded 14 months ago in Singapore via the merger of Epic Shipping and Pantheon, Epic Gas is today one of the fastest growing pressurised LPG shipping lines in the world with 40 ships – including those on order – to its name. Jefferies Capital Partners and DVB Shipping Intermodal Investment Management are among key investors as is chairman, the legendary shipping figure, Chris Buttery, who founded Pacific Basin.

and where the company might eventually list. Buttery, meanwhile, notes that Epic’s current shareholders are basically the same he had during the build up to the Hong Kong listing of Pacific Basin in 2004, so the Japanese yards which Epic Gas contracts with have been happy to deal with the pressurised gas shipowner. Buttery, the shipping veteran who has played his hand remarkably well through countless shipping cycles, does observe some similarities of the gas market now and the bulk markets of the early 2000s when he led Pacific Basin in Hong Kong. The significant driving factor back then was bulk and the China story. For Epic, there’s now the gas and shale story. Both are “game changing” events, Buttery says. In terms of cash, the strong shareholder base, with New York’s Jefferies Capital Partners as the largest shareholder, has allowed Epic to handle capital by itself. Indeed, being in charge of every aspect of operations is a key part of the Epic credo. “It is all about quality operations, safety and reliability,” Christensen says. “Epic delivers everything in house from commercial, finance, technical management and crewing. In addition Epic Gas provides technical management for external owners”. The final sage advice comes from Buttery. “If you get in first with the best ships at the right prices,” he says, “then things usually can’t go too wrong.” ●

23


We make your business seaWorthy

Management Facilities Group (MFG) is a rapidly growing and internationally active shipping company. The office is based in Farmsum (Delfzijl), a central location on sea-transport routes in Northwest Europe, on the north-east coast of the Netherlands. Marin Ship Management, the core division of the company, operates under the MFG flag. In terms of size, Marin Ship Management ranks in the top five of the Netherlands. The shipping company is a leading player in the tanker segment in particular. Marin Ship Management is ISO 14001 and TMSA (Tanker Management and Self Assessment) level three certified and complies with the ISM code (International Safety Management). The organisation believes that care for and attention to safety and the environment are critical success factors. MFG is a full-service fleet manager. The company organises every aspect of ship management for its clients - from supervising new-built vessels, crew matters and nauticaltechnical management to financial management and quality assurance. We organise every single one of those processes down to the finest details. Safe and reliable. And with optimum use of our expertise, knowledge and means. Combined with a hands-on mentality we offer clients, shipping companies and captain-owners 100% ‘seaworthiness’; a well-considered interplay between confidence in the ship, its crew and professional management ashore. That leaves our customers entirely free to concentrate on what they’re best at: transport from A to B. In other words, we make your business seaworthy! MFG manages a fleet of 57* vessels - 42 multi-purpose vessels and 15 product and chemicals tankers, ranging from 3,000 to 10,000 DWT. Our activities and good results have not gone unnoticed. Increasing numbers of clients hear and see that we offer added value to their business, helping to meeting their targets and objectives better and quicker. A ‘seaworthy’ development that is set to continue in the (near) future. Not least because we’re always there for our customers - day in, day out.

*reference date: October 2013

www.managementfacilities.nl

We make your business seaworthy

13MAFA0200_adv_corporate-UK-elaborate_174x130_fc.indd 1

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IN PROFILE

‘Speculative FSRU newbuilds aren’t an advantage’ In Texas, Maritime CEO meets the boss of the world’s largest FSRU fleet

T

he sudden growing orderbook of floating storage regasification units (FSRUs) is not a concern, and speculative orders are not the way to go, argues Rob Bryngelson, the president and ceo of Excelerate Energy. Excelerate is an American developer of LNG transportation and floating regasification infrastructure, a provider of LNG storage and floating regasification services, a trader and importer of LNG and it recently entered into floating LNG production. Excelerate has the world’s largest FSRU fleet, with eight vessels currently in operation and one under construction. “Length in the FSRU fleet is not a concern,” Bryngelson says, “as we don’t see speculative newbuilds being an advantage.” Most projects have unique performance and environmental characteristics that may not be satisfied by a speculative ship, he explains, requiring modifications or redesign – translating into higher cost to the customer. Moreover, he points out that there is generally sufficient time to construct a new vessel in parallel with onshore infrastructure. “For time-critical situations, we can provide one of our fleet as a bridging vessel or a permanent solution,” Bryngelson adds. Still the focus on the orderbook is wrong anyway, Bryngelson contends. “More important than the number of vessels available is the ability of the regasification service provider to deliver on its commitments. Unlike our competition, Excelerate doesn’t simply focus on the vessel,” he says. Excelerate can offer a complete solution where it designs, builds, owns and operates the FSRU and

Issue ONE 2014

fixed infrastructure, such as jetty and pipeline, to connect to the onshore load. Similarly, Excelerate can simply offer an FSRU and consult on the design of the fixed infrastructure should the customer choose to build it themselves. “We can couple this with our ability to source LNG from our established trading relationships. Our customers aren’t just looking for an FSRU - they want natural gas, and we are flexible in the deal structures we can accommodate,” the gas boss maintains. Excelerate’s latest vessel, being built for Petrobras, is the largest FSRU in the world – with regasification capacity of over 800m cu ft per day. Excelerate’s existing vessels, along with option slots it holds with Korea’s Daewoo Shipbuilding & Marine Engineering, allow it to offer tailored solutions for loads ranging from 50m to over 1bn cu ft per day. On the market outlook for rates for FSRUs, Bryngelson admits further down the line there is likely to be some cooling off. “FSRU rates have been fairly stable for several years now, and do not fluctuate with the same volatility as conventional charter rates,” he says, adding: “There may be some rate compression as the markets mature.” Excelerate’s very latest news, announced in late February, is its application to construct, own, and operate the first floating liquefied natural gas (FLNG) export facility in the US. Lavaca Bay LNG, due to be operational in 2018, is located along the coast south of Point Comfort, Texas. Aiming to be the total LNG solutions provider Excelerate is rolling out a raft of new initiatives. One area is in the development of small-scale delivery – or hub-and-spoke

– solutions. These comprise a series of small-scale tankers and either floating or land-based regasification, allowing Excelerate to serve smaller regional markets from a central hub. “This is ideal for serving multiple load centres not connected by a pipeline network or are located on multiple islands in a region,” Bryngelson explains. Another new development is Excelerate’s FSRU + design - a largescale FSRU with 265,000 cu m of storage and as much as 1.2bn cu ft per day of regasification capacity. “This,” says Bryngelson, “is ideally suited for large markets or markets with significant growth potential, and can be delivered at significantly lower cost and with a shorter time to market than traditional onshore facilities.” ●

Spot on

Excelerate Energy Excelerate Energy is a US developer of LNG transportation and regasification infrastructure, a provider of LNG storage and regasification services and an importer of LNG. Excelerate has the world’s largest FSRU fleet, with eight vessels currently in operation and one under construction.

25


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IN PROFILE

Middle East focus Maritime CEO interviews two of the largest owners in the Gulf starting with Qatar’s Nakilat

T

he Nakilat fleet is worth some $7.02bn, according to VesselsValue.com, and market movements suggest that value is set to jump with a raft of new orders in the offing. For instance, at the end of January Nakilat fixed a $669m facility with Qatar National Bank for the refinancing of two existing LNG vessels and the purchase of two additional ones by its joint venture with Greece’s

Spot on Nakilat Qatar Gas Transport Company (Nakilat) was founded in 2004 and listed in the following year. It is among the largest gas transport companies in the world, operating the largest gas ships afloat and also is involved in LPG transportation, shipbuilding and ship repair. In terms of fleet value, Nakilat is the Middle East’s largest owner.

Angelicoussis Group, Maran Nakilat. Nakilat managing director Abdullah Fadhalah Al Sulaiti will not be drawn on precisely what ships the company will order, merely commenting: “We are currently studying and evaluating a number of shipping projects of varying scale and scopes.” Nakilat is involved in the ownership of 58 LNG vessels, 25 of them wholly owned, and in the ownership and technical management of four large LPG vessels. Al Sulaiti, who has been in the top job for four months, is not optimistic about LNG carrier freight rates for this year and next. There are more than 100 speculative LNG vessels under construction, he points out, and although the marketplace for LNG production worldwide is growing with new projects coming online and with the impact of shale gas unknown, the vessels’ delivery profile will still probably outpace production. “Some

volatility in the rates could be seen in the next few years before returning to stability,” he reckons. Nakilat runs the largest gas ships afloat, the Q-Maxes, which are 345 m long and can carry 266,000 cu m of gas. There are now 14 afloat. On whether gas ship sizes have plateaued, Al Sulaiti is circumspect, saying: “It’s difficult to say since shipping dynamics are influenced by a number of factors only one of which is the economy of scale — freight rates, flexibility and terminal acceptability.” The crude oil tanker market is an example, he says, citing the late 1970s when the ULCC mammoth vessels hit the oceans and thereafter a downward trend to the VLCC as a more common size. “Size doesn’t always continue to grow,” he points out. ●

Bahri’s bulk binge

T

he fleet mix of Bahri (also known as the National Shipping Company of Saudi Arabia) is changing dramatically, and not just because of the merger with fellow Saudi shipowner Vela a year ago. Bahri’s current fleet consists of 17 VLCCs, 23 chemical tankers, four general cargo ships and, importantly, four brand new dry bulk ships, marking the first time Bahri has entered the dry bulk game. On order is a large chemical tanker, three general cargo ships and a final bulker in the series of five. “The company’s first dry bulk vessel came on stream in November last year,” says Bahri CEO Saleh Al-Jasser,

Issue ONE 2014

adding: “In the last two years we have almost doubled the size of our chemical tanker fleet.” Bahri’s VLCC fleet is among the global top ten. Similarly, largest VLCC

Spot on

Bahri

The Middle East’s largest owner by fleet size following 2012’s merger with fellow Saudi firm, Vela. Ships on order will take Bahri fleet past 50. Strongest focus is in VLCCs and chemical tankers. Has entered dry bulk trades in past half year.

owners. Similarly, Bahri’s 80% owned chemical subsidiary NCC ranks among the top in the world. Shipping line mergers can be very difficult. However, Al-Jasser maintains the Bahri-Vela merger has been a “smooth transaction”. On the markets Al-Jasser is hopeful. For VLCCs he notes that the orderbook has declined sharply to less than 10% and the number of new deliveries is declining. “As demand picks up, rates will react positively,” he says. ●

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IN PROFILE

Firm palm oil grasp Stena Bulk is making inroads into the chemical tanker sector

I

n February Stena Bulk along with joint venture Stena Weco and Indonesian palm oil producer Golden Agri Resources announced they are investing around $100m in six secondhand chemical tankers. The corporate trio, known as Golden Stena Weco, headquartered in Singapore, now own eight chemical tankers. Erik Hånell, president and ceo of Stena Bulk, was quoted in a release saying: “We see this as part of the strategy of capturing market shares in Asia in particular with the longterm aim of establishing a presence, via our close partners, in new areas in this segment with the possibility of developing on other continents.” Speaking exclusively to Maritime

Spot on

Stena Bulk Part of Sweden’s Stena Group, Stena Bulk, founded in 1982, has 92 tankers (product, chemical and suezmaxes) and three LNG carriers.

CEO, Hånell expands on plans to grow the chemical tanker fleet as well as other sectors at Stena Bulk, one of the blue chip names in shipping in Sweden. The chemical tanker business for Stena Bulk is a relatively new one, starting with Golden Agri, the world’s second largest palm oil plantation company, in 2011. More chemical tanker tonnage is still on the cards, Hånell says. “We have a strong belief in this sector and would look at more tonnage,” he says, adding: “This is the sector where we

28

will probably grow most in the years ahead in percentage terms.” The plan is to grow with Golden Agri. Hånell has plans to invest in more than just chemical tankers. In LNG, Stena Bulk’s biggest investment, with three ships currently out on long term charters, there are plans afoot to add more tonnage. Stena Bulk has been repeatedly linked with on and off LNG orders. Under Hånell, however, no orders for ships are placed speculatively. “We invest together with contracts,” he stresses. The three ships were fixed in 2010 and 2011 at decent rates before the sector crashed. These ships will be open again in 2015 and 2016 and Hånell is confident the market will have picked up by then. “I have a quite strong belief for 2016 and going forward,” Hånell says, backing up this feeling with a hint of further LNG ships to come to the fleet. “For the right conditions we will invest in more of this tonnage,” he says. Other sectors Stena Bulk is involved in include suezmaxes and MR product tankers. On the former,

Hånell says the spike in the suezmax market was unexpected, but could well be the start of a positive trend. Nevertheless, he is honest when admitting suezmaxes are still “far away” from breakeven levels in terms of earning levels for investment levels on the ships. “Maybe 2015 suezmaxes might get to black but 2014 will still be a tough year.” As far as the MR sector is concerned, Hånell admits it has been hyped up a lot in the last 18 months with a lot of new orders. Still, he reckons: “The fundamentals for ordering have been there with an okay market where you can at least break even on an investment.” Future demand in seaborne products transportation looks like strong growth, he says. Once again, Hånell’s down to earth assessments are refreshing, in a segment awash with too much hype. Analysts are predicting rates of $22,000 to $23,000 this year for MR tankers, he relates, something he views as unrealistic. Last year, rates for MR tankers stood at around $15,500. “This year might be $1,000 more,” he says. Hånell became president and ceo of Stena Bulk in December, 2012. He worked at sea for 10 years and joined Stena Bulk 15 years ago. ●

“An idea to address the shortage of officers – onboard and ashore – is to encourage women to take up a maritime degree” — Doris Ho, president and ceo, Magsaysay

maritime ceo


IN PROFILE

Master of more than bulk Nicholas Fisher has been in the role of ceo of Singapore’s Masterbulk for half a year in which time he has presided over much change

Spot on

Masterbulk Based in Singapore and linked to Norway’s Westfal-Larsen, the company has 20 openhatch ships and is now growing a dry bulk fleet as well as a nascent shipmanagement arm.

Like it or not, change is on the horizon for dry bulk shipping. Regulatory compliance is becoming an increasingly large part of everyday business

N

icholas Fisher is using his experience gained in diversifying Oman Shipping Company to broaden the revenue base for Singapore’s Masterbulk, having taken on the ceo role last September. His CV also includes 14 years at at A.P. Møller-Mærsk. “Diversification in dry bulk activities will be key for the Masterbulk’s business going forward,” Fisher tells Maritime CEO. Plans for the medium term include strengthening the company’s position in the forest products market.
 Masterbulk owns 20 open hatch gantry crane vessels, 16 of

Issue ONE 2014

which are technically managed through its own shipmanagement activity in Singapore, and four of which are managed through Westfal-Larsen Management in Bergen. The f leet is commercially managed by sister firm WestfalLarsen Shipping. Presently the company has no vessels on order. As part of its diversification Masterbulk chartered in its first dry bulk ship at the end of January. The 58,000 dwt Aetolia is expected to be the first of a number of dry bulkers to join the Masterbulk fleet. In December last year, Masterbulk also announced the launch of Masterbulk Ship

Management (MBSM) to conduct full technical and crew management services for its own and third party vessels. Based in Singapore, MBSM will concentrate initially on the dry bulk sector and now manages 20 dry bulk vessels. Opportunities with both shipowners and financial institutions who have taken possession of distressed assets are also being explored. Fisher says one of the goals of MBSM is to put in place processes and standards more suited to the tanker management business. “Like it or not,” he says, “change is on the horizon for dry bulk shipping. Regulatory compliance is becoming an increasingly large part of everyday business.” ●

“We think third party management is here to stay and here to grow, especially with private equity” — Peter Cremers, ceo, Anglo-Eastern

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IN PROFILE

Chellarams branch out The Kishinchand Chellaram (KC Group) of shipping companies is getting ever broader. Maritime CEO checks out its offshore subsidiary as well as its bedrock dry bulk operations

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hellsea, one of Singapore’s newer entrants into the offshore support vessel (OSV) scene, is undergoing a period of significant expansion. Part of the Kishinchand Chellaram (KC Group) of shipping companies, Chellsea was set

Spot on

Chellsea

Founded in 2011 in Singapore Chellsea specialises in offshore support vessels, in particular platform supply vessels.

up by Gautam Chellaram three years ago as part of the group’s strategic diversification, with, he says, modestly, “a blank piece of paper”. Said blank piece of paper has since transformed into a fleet on a rapid rise. “Our focus is on building the infrastructure,” says Chellaram. The Chellarams traditionally have focused on dry bulk via Hong Kong’s KC Maritime (see below), but saw the coming offshore explosion and bought a platform supply vessel in 2011, kicking off new firm Chellsea. Further ships have since been added. In the middle of last year Chellsea went to a new level, ordering in China four plus four options of Rolls Royce designed, high spec, large accommodation, DP II PSVs with the first to be

delivered in early 2015. The Chellsea ceo does see an issue with oversupply, but he reckons it won’t materialise for at least the next few years, and quality will make the difference, he suggests. Chellaram says that while he may look at other vessel types in the future, at the moment the focus is very much on this new fleet of highend PSVs. ●

KC Maritime takes the plunge

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etting in on the newbuild bulker craze is one of Asia’s more conservative owners, KC Maritime. At the end of November Hong Kong-based KC Maritime ordered a quartet of 64,000 dwt bulkers at CSSC Guangzhou Huangpu Shipbuilding, the owner becoming the first from outside mainland China to order at the southern Chinese yard. The 64,000 dwt ecodesign is an update

of Huangpu’s 57,000 dwt design. KC Maritime is run by India’s Chellaram family and is headed by Captain Vikrant Bhatia, who used to be with another Hong Kong-based owner, Valles Steamship. “We are cautiously optimistic for 2014,” Bhatia tells Maritime CEO. “Trade numbers look good with lots of new mining developments coming onstream,” he says, before cautioning: “China GDP is a concern and we are watching what we are doing in that space.” Bhatia, a thoughtful and insightful shipowner, questions whether the traditional shipping cycles have come to an end. “With the increasing shipbuilding capacity is the cyclicality model over?” he muses,

noting how the lead in time to order ships these days is so short – there are still early 2015 slots available, he observes. The KC Maritime fleet numbers 12 in operation and another six on order. The ships are bulkers and are a mix of panamaxes, kamsarmaxes, supramaxes and ultramaxes. “We will stay within our core sector,” says Bhatia when questioned on possible plans to diversify. ●

Spot on

KC Maritime Part of the Chellaram’s diverse maritime holdings, this Hong Kong bulk owner has 12 ships in operation and another six on order.

With the increasing shipbuilding capacity is the cyclicality model over?

30

maritime ceo


IN PROFILE

Bulk pure play Belships is ditching its traditional mixed fleet in favour of a buildup of supramaxes

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orway’s Belships plans to stay focused on dry bulk. While in the past it has been a company with what managing director Ulrich Müller describes as a “mixed bag” portfolio, the concentration going forward is a “pure play strategy”, he tells Maritime CEO. The plan is to grow the fleet and diversify the customer base, says Müller. Belships, headquartered in Oslo, with offices in Singapore, Shanghai and Tianjin, has been stocklisted in Oslo since 1939. The company is an owner/operator of dry bulk vessels, focusing on the supramax segment. The Tidemand family is a strong shareholder. The current fleet consists of three 58,000 dwt supramax vessels built between 2009 and 2011 fixed on 10-year time charters to Canadian potash company Canpotex from delivery. In addition the owner has signed newbuilding contracts for two 61,000 dwt supramax vessels for delivery from Imabari Shipbuilding in Japan from the end of 2015 to the beginning of the following year. A third identical supramax vessel will join Belships’ fleet in 2017 under an eight-year lease with three extra year options

“As owners margins continue to be squeezed, they neglect to invest in maintenance or cut corners” — Warwick Norman, ceo, RightShip

Issue ONE 2014

You need to have a balanced portfolio in terms of charter party duration and quality counterparts

and a ¥2.9bn purchase option at the end of year four. The one non-dry bulk ship that Belships operated was a chartered-in product tanker but in line with the pure play plans, the ship was redelivered to owners, Lauritzen Tankers, in January. On prospects for 2014, Müller reckons a further improvement in market fundamentals seems likely. “A declining rate of newbuildings coming into the market combined with a robust growth in seaborne dry bulk trade should result in a further improvement of average capacity utilisation in 2014,” he says, adding: “We anticipate stronger rates to prevail from second half of 2014 with Chinese iron ore imports increasing significantly.” As a useful lesson to other owners, Müller notes, “Every downturn

Spot on

Belships One of the best-known names in Norwegian shipping, founded in 1918, Belships has ditched its former preference of having a mixed fleet in favour of focusing almost exclusively on dry bulk, specifically supramaxes. Keen to grow in size.

is a reminder that you need to have a balanced portfolio in terms of charter party duration and quality counterparts.” Müller is close to celebrating his third anniversary with the 1918-founded Belships. His 35 years’ of shipping experience includes stints at Viken Marine, Spar Shipping and the Grieg Group. ●

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IN PROFILE

Star shoots for more Greece’s Star Bulk Carriers has posted its first profits for three years and set about a significant expansion as it remains a cape bull

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he remarkable turnaround in fortunes in Greece’s Star Bulk Carriers Corp is set to unleash a period of fleet expansion. Led by Spyros Capralos, the New York-listed firm has undergone debt restructuring and has since gone

about raising capital. Its market cap has gone from a low of just $30m to its current healthy standing of more than $200m, a figure that is likely to rise if capesize rates head north, something Capralos is cautiously confident they will. In March Star Bulk announced it had swung back into profit for the full year of 2013 after two years of being in the red. Star Bulk managed to raise $150m in new equity last year and has since placed orders for 11 ships, with Capralos claiming he was able to order the ships before prices rose by at least 15%. Furthermore, Star Bulk bought four secondhand ships last year as the company repositioned itself to house a fleet made up of larger tonnaged vessels. The outlook for the dry bulk market, especially the larger ships, are better, Capralos reckons. “Oversupply is

“Having armed guards onboard is sticking a plaster over a broken leg” — Daren Knight, founder, Knight Associates

over and demand continues to be healthy. The fundamentals are there for a healthy market but there is a risk owners will start ordering,” he says. Other reasons for optimism, according to Capralos, are that there are fewer banks around so less easy money. “It is also good that owners today are reluctant to place orders at second rate yards,” he adds. He concludes by noting how scrapping is down and predicts that slow steaming is likely to go. ●

The fundamentals are there for a healthy market but there is a risk owners will start ordering Spot on

Star Bulk Carriers Corp New York-listed Greek entity with 16 ships on the water and 11 newbuilds to deliver in 2015/16. Fleet a mix of capesizes, supramaxes and ultramaxes. Also manages eight third party vessels.

Issue ONE 2014

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Ltd. • Thoresen & Co., (Bangkok) Ltd. • Tolani Shipping Co. Ltd. • U-Ming Marine Transport Corp. • Unique Shipping (H.K.) Limited • Univan Ship Management Ltd. • Universal Navigation Pte. Ltd. • Varun Shipping Company Limited • Vinalines Container Shipping Company • Wah Kwong Shipping Agency Co. Ltd. • Wallem Shipmanagement Ltd. • West Asia Maritime Ltd.


IN PROFILE

At a canter Henry Chiang, president of Greathorse Shipping, part of the Tiger Group, is ahead of the pack

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rivate shipowner Greathorse, in testament to its namesake, is hitting its stride. Even as other owners flounder, Greathorse remains profitable and has ordered twelve fuel-efficient 64,000 dwt ultramaxes – split evenly between Chengxi and Yangzijiang Shipbuilding in China. Presiding over the company, the amicable Henry Chiang is well placed to ride a steady course. Chiang was the area manager for the Greater China region at Lloyd’s Register for three years before joining Greathorse in 2005 and comes from a long line of seafarers. His father and grandfather both worked in shipping. The company, founded in 1997 by Xue Chao Cun, is affiliated with

“Ship-centric liquidity is in the US and China” — Stathi Marneros, managing partner, Spartan Partnership

Issue ONE 2014

We are risk averse and take a conservative approach to our investments

Hong Kong private investment firm Tiger Group Investments. Chiang puts its success in part down to its relationship with the Chinese shipping industry. “The company is well connected to shipping in China. Our clients include Huaneng Group, China Shipping and Sinochem,” says Chiang. Focus on long-term charters to high-quality charterers is key, he says. “We only charter to first-class charterers.” Another advantage the company has is its affiliation with Tiger Group, which provides financial and industry support, says Chiang. The firm is also cosy with banks, which provides a strong channel of ship finance. “We have strong links to foreign and Chinese banks,” says Chiang. Greathorse takes a conservative

and long-term approach to assess investments in ships, offering their clients modern fuel-efficient vessels at competitive charter rates, which will enable them to compete in a very difficult market. Although Greathorse is outpacing others in the market, the company is not unaware of the challenges facing all owners globally. “China is a very important market. The biggest threat is oversupply of tonnage. There is still a lot of shipbuilding capacity especially in China. It is easy to order at a reasonable price, but in years to come this will put increased pressure on the market,” remarks Chiang. The recent development of fuel saving technology will also increase the pace of competition. “Many owners believe one cannot compete in the near future if one does not buy into the new fuel efficient vessels,” Chiang says. “This will put pressure on ships going to scrap at a younger age. Previously, you could expect a ship with a life cycle of 25 years. Now owners are scrapping [ships] as young as 15-years-old.” The firm is comfortable with evolving. Greathorse started life as a business consultancy that brokered shipping deals for foreign owners, but in 2005 morphed into an owner. However, despite its appetite for change, the company is comfortable with the conventional types of vessels that it operates and is not planning to move into hi-tech ships. “We are not looking at LNG or offshore vessels. Although we are always on the lookout for investment opportunities” says Chiang. “We want to focus on the traditional ships that we know we do well.” ●

Spot on

Greathorse Founded in 1997, Greathorse Shipping is a private company focusing on small containerships, chemical and oil tankers and bulk carriers. The company currently has a fleet size of 22 ships and 12 ships on order. Leases are mainly long-term charters with maturities of between 12 and 15 years.

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IN PROFILE

Bright future upstream Dr Sit Kwong Lam, chairman of Brightoil, says it’s time to change tack

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rightoil has come a long way in a short amount of time, from niche bunker activities to global oil player. The company is now one of China’s premier marine bunkering service providers, also selling overseas, as well as a developer of oil and gas fields and last but not least a significant shipowner with a fleet of VLCCs to go alongside its increasing number of bunker barges. “China will continue its market-oriented reform and maintain a long-term healthy development of its economy, while its urbanisation development approach will provide significant potential for long-term growth of its domestic consumers and industrial demand, creating substantial possibilities for higher energy demand,” maintains Brightoil’s chairman Dr Sit Kwong Lam. Currently, the company is focusing more of its efforts on growing its marine fuel oil storage and terminal business in China, constructing a 3.16m cu m oil storage and terminal facility on Waidiao island in the Zhoushan archipelago and another 7.19m cu m oil storage facility and terminal on Changxing island, off Dalian. Combined with its existing, Shenzhen facility Brightoil now owns Chinese oil storage depots with a total volume of 15m tons. It also has leased areas in Ningbo, Qingdao and Shanghai. Brightoil has become one of the best-known names in Asian bunkering. It has been among the top three suppliers measured by volume in China and Singapore for the last few years.

Not content with merely being a bunker player, Sit has taken Brightoil into other rungs of the oil supply chain. The international trading and bunkering division of the company has added a new crude origination resource in the US to allow the crude trading bench to source competitively valued suppliers in Latin America for arbitrage sale into North Asia, however, expansion plans in Europe have been temporary held off until market conditions improve. To aid this global oil push Brightoil has built up its own fleet of tankers. In 2012 it took on the first of what now stands at five Hyundaibuilt VLCCs. The VLCCs go alongside Brightoil’s other vessels, a very rapidly growing set of bunker barges, with 15 added last year alone. Then there is Sit’s biggest change in focus – getting involved in oil and

The upstream sector will be the major driver for Brightoil’s future growth

36

gas exploration and development. The Dina 1 gas field in Xinjiang in northwest China has been generating remarkable cash inflow to the group, while the Tuzi gas field development plan has been approved by the National Development and Reform Commission and is expected to be officially commissioned shortly. “We will continue to further develop oil and gas fields to deploy our strategy with a focus on upstream business,” says Sit, adding: “The upstream sector will be the major driver for Brightoil’s future growth and value adding. Looking ahead, demand for oil and gas resources in China will remain strong and an upward adjustment of the natural gas price is expected to continue in the future.” Even though the financial performance was severely impacted in the first half of the 2013 financial year, “we adjusted our business strategies and risk control measures according to different markets and business environments and managed to achieve significant improvement in operating results,” says Sit. “We have every confidence that the scalable and global development of our core businesses, the upstream business in particular, will lay a solid foundation for Brightoil to become a renowned international energy conglomerate,” Sit concludes. ●

Spot on

Brightoil  

Hong Kong-based Brightoil is principally engaged in bunker trading, oil storage and terminal facilities, marine transportation as well as a growing focus on upstream. Fleet includes five VLCCs.

maritime ceo


IN PROFILE

Beyond Europe The head of Dutch owner, Management Facilities Group, discusses fleet growth plans as well as her tenure as president of the Women’s International Shipping & Trading Association

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arin Orsel was recently elected for another two-year term as president of the fast growing Women’s International Shipping & Trading Association (WISTA). WISTA is an international organisation for women in management positions involved in the maritime transportation business and related trades worldwide. It is a major player in attracting more women to the industry

Spot on

Management Facilities Group

Partly owns and manages a fleet of 57 vessels made up of product/ chemical tankers, dry cargo and self-unloaders. The Dutch firm aims to grow fleet to 75 ships by 2020.

and in supporting women in management positions. In Delfzijl in the Netherlands Orsel runs Management Facilities Group (MFG), a significant Dutch shipowner. Orsel is clear about the importance of WISTA to world shipping. “We need role models, ambassadors and ladies at board and top management level,” she says, “to pave the way for future generations for both women and men. As an industry we have a reputational issue and problems to attract the next generation. Only with a joint effort will we be able to make a change.” MFG partly owns and manages a fleet of 57 vessels made up of product/chemical tankers, dry cargo and self-unloaders. The company is about to take over another three to five second hand vessels in the next few months and has two newbuildings on order. Other projects are too premature to share at this moment, Orsel says. 


The aim is to grow the managed fleet by a quarter to 75 ships by 2020, getting more clients from outside of Europe. ●

“We could be looking at a period of corporate Darwinism in the bunker sector” — Lars Møller, ceo, Dynamic Oil Trading

Every weekday Maritime CEO carries the thoughts of a top name in shipping No other title is so focused on targeting maritime’s top echelon

www.maritime-ceo.com


IN PROFILE

Cautious growth American containerline Horizon is not making any sudden expansion plans

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hastened by a tough experience on the transpacific America’s Horizon is cautious on international expansion. Horizon operated a five-vessel US flag service in the China-US trade in 2011 that also provided a US to Guam service. However, the service incurred significant operating losses during the downtown, largely due to the volatile transpacific freight rates and high fuel prices, and was discontinued in December 2011. “The downturn has taught us lessons about the competitiveness of the international trades and to be mindful of those lessons as we explore new growth opportunities beyond the US domestic markets,” says president and ceo Sam Woodward, who has been in the job since July 2012. Horizon owns a fleet of 13 fully containerised, US flagged, Jones Act qualified vessels. Ten vessels are operated in its regular liner service network while the other three ships are deployed for season surges and drydock replacement vessels. There are no plans to add to the fleet at the moment, Woodward says. However, last June the company announced plans to convert the power plants on two of its steam turbine vessels to modern diesel engines capable of burning

Spot on Horizon North Carolina-based containerline primarily focused on linking to distant parts of the US. 13 ships in the fleet, some of which are set to be converted to use LNG as a fuel.

38

conventional liquid fuels or liquefied natural gas (LNG). The project’s goal is to reduce fuel consumption and lower emissions. The project will include an integrated repowering solution encompassing main engines, supporting components, and LNG storage tanks for these two initial ships, with the potential to expand the initiative to more ships in Horizon’s fleet in the future. Horizon is the only ocean carrier serving all three non-contiguous US domestic markets of Alaska, Hawaii, and Puerto Rico from the continental United States. “Of the three primary markets we serve, we see Alaska experiencing steady growth, Hawaii recovering nicely and Puerto Rico stabilising after several years of negative GDP growth,” Woodward comments. In addition to serving the US domestic markets, Horizon also serves the Micronesia Islands through its partnership with Mariana Express Lines Limited (MELL). This partnership connects the US West Coast with the Pacific

islands of Majuro, Pohnpei, Chuuk, Yap, Palau and Saipan. Under this arrangement, Horizon serves as MELL’s dedicated shipping agent for the container service providing US sales, vessel connections and logistics support. The partnership with MELL has been an area of growth for both companies since commencing this arrangement in December 2012. “Our relationship with MELL has proven beneficial for both carriers and is a model for further growth in the Pacific islands and other areas,” comments Woodward. Woodward joined Horizon from Traffic Tech, an international freight forwarder, where he held several executive leadership roles. He also served as a managing director of Bengur Bryan, a middle market investment bank, where he headed the firm’s transportation and business process outsourcing practice. From 2004 to 2008, Woodward was head of Gemini Air Cargo. Prior to Gemini, Woodward was president of SAW Investment Services, his own investment firm, where he oversaw investment and management services in the US freight- and logistics-based technology markets. ●

“While it may be controversial, I believe that a country which, for the most part, does not have a player in the global carrier industry, no longer has a need for cabotage laws” — Bill Wyatt, executive director, the port of Portland

maritime ceo


IN PROFILE

Renjian rising The young boss of China’s largest private domestic coastal containerline is taking his ships overseas for the first time

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enjian Group from Quanzhou in Fujian province is an integrated logistics service provider with businesses in ground logistics, shipping, warehousing, cold chain, and trading. It operates the largest container fleet in terms of capacity in the private domestic coastal container shipping sector and is now dipping its bows overseas with the first of potentially a number of international routes. It currently runs more than 70 container vessels totalling 850,000 dwt. Born in a fishing village in Fujian, the 36-year-old , the president of Renjian Group as well as the president of Quanzhou Container Association, started Ansheng Shipping with his brother in 2002, using one old vessel left by their father, a shipping veteran in Fujian. The next year, the brothers established Antong Logistics and in 2005, they registered Renjian Group, which was named after their father, in Hong Kong and integrated Ansheng Shipping and Antong Logistics into the group. “Ansheng Shipping and Antong Logistics are the cornerstones of the group,” says Guo. With the integration of its shipping and logistics units, which operate more than 4,500 vehicles and 350,000 sq m of warehousing space, Renjian is now able to offer customers door-to-door services. “The intermodal transport is very competitive. We will expand our cooperation with trucking, warehousing and railway in the future, and greatly extend our coverage in China,” Guo says. In the meantime,

the company is expanding its reach in project consultation and capital investment with the goal of becoming the best domestic logistics provider. Despite his relatively young age for a shipping boss, Guo is a shrewd decision maker who believes cost structure is key to a company’s operations. “To change the cost structure, primarily the transport mode needs to be changed,” Guo says. He and his brother made a vital decision in 2004 when they sold all of their bulk carriers and bought container vessels instead, which has led to the success of the company today. “The impact of the shipping crisis is still not over, if we just simply wait for the market to get better, the network we have built might be eroded slowly but turning crisis into opportunities is our way ahead in this environment. We have been expanding our domestic network and opening new route services. It’s very difficult to be a leader in prosperous times,” Guo says, adding that the return on investment might be doubled in recession times. Under a new round of fleet expansion, Renjian has made an order for ten 2,400 teu vessels at Taizhou Sanfu Shipbuilding in the fourth quarter of 2013. Total investment on the vessels is RMB2bn. “The order is based on our discreet analysis of statistics on the domestic shipping market, and these high-tech vessels will lower the fuel consumption by 30% and will better serve the demands from ports and our operations,” Guo maintains. In December, Renjian also commenced operation of its first

Turning crisis into opportunities is our way ahead in this environment

Issue ONE 2014

international shipping route from Haikou to Ho Chi Minh City in Vietnam. Renjian plans to invest RMB3bn in the next five years in Haikou on Hainan Island in the south of China to expand its presence in the city including spending RMB860m to build a regional operations headquarters. Antong Logistics completed a volume of 450,000 teu at Haikou port last year, which accounts for about 44% of the port’s annual container throughput. “Haikou is a gateway port to both the Beibu Gulf and ASEAN, we will increase our total throughput at Haikou port by 30% each year, and a lot of our new vessels will be registered at the port,” Guo says. ●

Spot on

Renjian Group China’s largest private domestic coastal liner is headed by two brothers from Fujian. The company has 70 ships with another ten on order and has just started operating international routes.

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Posidonia 2014 2-6 June 2014

Metropolitan Expo , Athens Greece

it's a great deal The International Shipping Exhibition

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

www.posidonia-events.com


GADGETS

Under the deep blue sea

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f a life on the ocean wave has lost some of its allure after years in the maritime industry, perhaps a life under it might be what you need to shake things up a bit. This five-person submarine should be just the ticket. It allows you (and the Beatles) to dive to 200 m in climate-controlled comfort, and the 8.25 cm thick acrylic sphere lets you view and talk about the wonders of the deep — be it reef, wreck or wildlife. The sub meets IMO safety guidelines with two independent life support systems and is classed by DNV GL. It also has a VHF radio for communication on the surface, and an underwater telephone to talk to the surface while submerged. The dual pontoon structure provides good stability on open seas. It has two horizontal thrusters which allow it to make four knots on the surface and 2.5 knots submerged, and two vertical thrusters for depth control and it’s lithium-ion batteries provide up to eight hours of underwater fun. It’s just over 5 m long, 3.75 m wide, 2.25 m tall and weighs in at seven tonnes. The price includes training, so you won’t be all at sea when you buy it. $2.7m

Double vision, triple dimension

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inoculars get you close to the action, but a camcorder means you can share it with your friends. Combining the two gives you the best of both worlds, but as these are binoculars, you can push the envelope and record the action in 3D and in 1080 high definition. If photography is more your thing, still images up to 20.4 megapixels are possible. The optical zoom ranges from 0.8x to 12x and digital zoom takes you to 25x, bringing things very close indeed. For fast moving wildlife or faster moving sports such as racing cars, this pair of binoculars is equipped with triple axis stabilisation and auto-focus, avoiding blur and keeping things crisp for your viewing pleasure later. With a backlit CMOS, the two OLED viewers enable you to keep things viewable in poor lighting conditions, down to about 11 lux, which means you’ll still be able to see things at sunrise and sunset. The binoculars record on SD, SDHC and SDXC cards up to 64 GB, and come with jacks for both headphones and microphone. $2,000

Flash trash can

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t might look like a trash can, but the new MacPro is definitely not rubbish inside. It is also devilishly small for the power it contains — up to twelve Intel E5 cores, 64GB of RAM, up to 1TB of PCIe-based flash storage for a hard drive and dual AMD FirePro graphics cards with up to 6GB of RAM each, all crammed into a 25 cm tall can, just 17 cm in diameter. This compactness is achieved by having a central fan and chimney (or unified thermal core as they call it) to cool all of the various hotspots (CPUs and GPUs) at once, which it does amazingly quietly; it is also achieved at the cost of internal expandability: everything else you might want to add on such as extra hard disks will have to be external. This is not quite the tragedy it sounds, as the MacPro comes with six thunderbolt 2 connections to do exactly that and at great speed. You can also hook this up to a spiffy new 4K monitor at 60fps, something mere mortals with PCs will have to wait for. If you don’t use a computer for intensive tasks such as rendering HD video, then this is overkill. Terrible, gloriously designed, sexy overkill. $3,000 – $9,600

Issue ONE 2014

41


Books

All eyes on the ultimate emerging market Paul French sifts through a raft of titles on Brazil

A

mong the fabled BRIC countries it is perhaps the ‘B’ – Brazil - that is the least explored and known by most people. China and India have had literally shelves and shelves of books written about them and become dream markets for just about every business and service. Russia has been well covered, if perhaps mostly to warn the eager businessman or woman of the perils of the vast, but super tricky, market. Brazil though remains the least known. Of course there are snapshots – beaches, soccer, favelas, sunshine… but what of the economy and society of the country. With the 2014 World Soccer Cup imminent and the Rio Olympics in 2016, along with growing curiosity about the country’s untapped consumer markets and manufacturing output, it seems it will be Brazil that will be filling shelves this year. Brazil, unsurprisingly, features heavily in the man who invented the term ‘BRICs’ Jim O’Neill’s new book The Growth Map: Economic Opportunity in the BRICs and Beyond. When O’ Neill, chairman of Goldman Sachs Asset Management, started

talking about the BRICs in 2001 Brazil was a country that had long been viewed as having the potential to become a major economy. For decades, Brazil had failed to live up to expectations. This changed in 2003 when Lula da Silva became president, and began an effective anti-inflation policy. The end result, O’Neill says, is that Brazil will have an economy in 2050 that is four times larger than today. This will be due to the country’s young and energetic population and a ‘Growth Acceleration Policy’ that should work. However, bureaucracy, political controls and investment regulations make the country as hard to fully penetrate as Russia, China or India too. Ruchir Sharma’s Breakout Nations: In Pursuit of the Next Economic Miracles also surveys the BRICs but is less enthusiastic about Brazil citing that in the country investment as a share of GDP has been stagnating at about 19 or 20% of GDP. i.e. Brazil is too reliant on commodities exports and so at the mercy of global price fluctuations. Additionally, Sharma, an emerging market portfolio manager, reckons

The country is too reliant on commodities exports

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Brazil has massively underinvested in terms of upgrading its infrastructure to what it needs to fully emerge as an industrial and manufacturing powerhouse. So much for the generalists, what about those who’ve got up close and personal with the country? New York Times reporter Larry Rohter charts Brazil’s amazing jump from a debtor nation to one of the world’s fastest growing economies in Brazil on the Rise: The Story of a Country Transformed. In contrast to many, Rohter praises the benefits obtained for Brazilian development through the significant role given to the state in economic policy, but, he believes, Brazil continues to be a country fraught with contradictions. However, with the discovery of the largest oil field in the last century, it has the opportunity to become a major exporter of crude oil to the United States and so fund its own development. Finally we have a collection of essays from analysts at the Global Economy and Development program at the Brookings Institution, Brazil As an Economic Superpower?: Understanding Brazil’s Changing Role in the Global Economy. The book analyses the key pillars of Brazil’s economy - energy, agriculture, service industries, and high technology. All areas where Brazil has the power to be a world player, yet Latin America’s largest nation still struggles with endemic inequality issues and deepseated ambivalence toward global economic integration. What all these books seem to conclude is that Brazil could be the ultimate emerging market, if it just sat back and saw itself that way. ● maritime ceo


TRAVEL

Shipping central Berthed in Singapore with time to kill? Eytan Uliel provides the inside lo-down

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ead to the Robertson Quay area and start your day with breakfast at one of Singapore’s hippest cafes: Kith Cafe – hands down best coffee in town, or Epicurious – green eggs and ham, oddly delicious (both on Robertson Quay); or Baker & Cook (nearby on Martin Road) who make pastries to die for. Then stroll along the Singapore river, from Robertson Quay to the city (about 3 km). Along the way you’ll pass Clarke Quay, the Singapore parliament and civic district, and Boat Quay, with spectacular views of Singapore’s skyline. Criss-cross the river at various bridges and make sure you see the bronze sculptures that dot the riverfront along the way. For a touch of culture, pop into the Asian Civilisation Museum at Empress Place, where you’ll find a stunning museum in an equally stunning setting. Next up: time to shop. Singapore is a land of shopping malls, so why wouldn’t you have a quick wander through the best one? Cab to the Ion on Orchard Mall. The top floors are wall-to-wall designer brand names; you’ll find cooler, funkier stores in the basement levels. Remember most stores don’t open until 11am. If you are up for it, stroll along Orchard Road and check out some of the

Issue ONE 2014

other malls – the section from Ion to Paragon Mall is best. By now you should be hungry again, so make like a local and head to a hawker stall, which is where Singaporeans get most of their daily sustenance. The Opera Food Court at Ion is a bustling yet gentle introduction to eating, Singapore style. Try local favourites like Hainan chicken rice, laksa (spicy curry noodles and seafood soup) or Singapore chilli crab. For real local flavour try coffee si – strong brewed coffee with condensed milk, and a serving of kaya toast (a green jam, made of pandan leaf, egg yolk and sugar – sinfully delicious). Finish with a deep-fried dough-ball ‘butterfly’, and your local dining credentials are assured. A short cab ride from Orchard

Road is the Singapore Flyer (pictured), one of the world’s largest observation wheels. A full cycle takes thirty minutes. Yes, it is cheesy and touristy, but it’s worldclass, and the views along the way give a real sense of the modern miracle that is Singapore. For the truly adventurous, visit Kenko Fish Spa in the mall beneath the flyer. Plunge your feet and lower-legs into tubs of water and watch small fish nibble the dead skin away. It might sound gross, but is a completely unique sensory sensation (a cross between massage, static-shock and tickling), and your feet will be smoother than a baby’s bottom when you are done. You can also get an excellent reflexology foot-massage or shoulder rub as well. Singapore’s latest gob-stopping attraction – the Gardens by the Bay – is a short cab ride from the Flyer, and is absolutely worth the hype. Here you will see flowers and plants galore, spectacularly displayed in giant greenhouses, complete with indoor mountains and waterfalls. Don’t miss the Supertrees, a grove of massive treelike structures covered in flora of the world. Once you’re all flowered out, cross the bridge and head to the Marina Bay Sands Hotel. Its tri-towers are an architectural marvel. Buy a ticket and ride the elevator up to the Skypark. Views are sublime, and the world’s most spectacular infinity swimming pool, 58 floors up, is something to behold. A cocktail up in the sky, or a meal at the ultra trendy Ku De Ta restaurant, will be the perfect way to end your day. ●

Your Day Plan Summary: 12 hours, around $250: Activity

Time

Cost

Breakfast at Robertson Quay

1 hours

$20

Stroll the Singapore River

1 hour, 30 minutes

Free

Visit the Asian Civilisation Museum

1 hour

$10

Mall visit

1 hour

Free

Hawker stall lunch

1 hour

$15

Ride the Wheel

1 hour

$30

Be eaten at the Fish Spa

1 hour

$75

Commune with nature at Gardens by the Bay

2 hours

$30

Amazing view at Marina Bay Sands

1 hour, 30 minutes

$40

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GOLF

Alpine downhill Every issue we ask readers to describe the best golf hole they’ve ever played at. Manish Singh, managing director of Ideocean Holdings, swaps his skis for his Pings heading to the French Alps resort of Méribel

F

rom the outset let me say I was surprised when the editor contacted to me to put pen to paper – or digit to keyboard – on the subject of golf. It’s not an understatement to say my handicap is crippling, but that’s not to say I don’t enjoy the game; it is true you do tend to only remember the good shots, which are about once a decade for me. Still, for those of a less than average skill level in the game I can highly recommend the spectacular surroundings of the Méribel golf resort high up in the Alps, so high and stunning in fact that it is easy to take your breath away.

Hole 3 at the Golf Club de Méribel

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Méribel is famous as a ski resort, nestled in the centre of the Trois Vallées, the largest ski area in the world. Tragically, it has been in the news of late for ex-Formula One driver Michael Schumacher’s accident and subsequent coma. Come the summer months, while there is still glacier skiing nearby, the resort is home to hiking, biking, tennis (with extra heavy balls due to the altitude), hot air ballooning and golf. The 18-hole course is located by the resort’s small airport and is open from June to November. In terms of design it is more akin to something out of America with its incredibly well manicured fairways. Every hole has sensational views and your heart will race as the altitude stretches from 1,565 m to 1,850 m around the 5,538 m long par 71 course. Nowhere is this altitude more useful for someone as ordinary at golf as yours truly than on the towering

third hole, in my mind, the greatest hole in golf. Standing at the tee high, high up, peering down and around at what lies ahead, even the most pedestrian of golfers must marvel at the possibility of whacking a Titleist hundreds and hundreds of metres. The drop is more than 200 m, and given that you are nearly 2 km up the ball will fly further than at sea level however you hit it. Beyond the course, mountainous valleys frame the skyline. However, despite the height, it is not all that easy. The par 5 hole doglegs so it’s impossible to see the pin. Nevertheless, once you’ve played more than once, whack the ball as hard as you can and aim above the trees to your right, and a birdie is possible (or a forage through the forest). The real problem with this glorious hole is simple. Newton science in reverse. What goes down, must come back up – and the following steep mountainous climbing holes are a vicious dose of reality. ●

Every hole has sensational views and your heart will race as the altitude stretches from 1,565 m to 1,850 m

maritime ceo


ONYachting THE MONEY

Three tantalizing destinations Danish shipping personality Esben Poulsson describes his favourite voyages

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first started sailing as a 12-yearold – now more than 50 years ago. I am at heart a racing man having done a dozen Hong Kong - Manila races, three Sydney - Hobarts, three Fastnet races including the infamous 1979 version when 15 people lost their lives. I was also a part of the Hong Kong Admiral’s Cup teams in the ’70s and ’80s. I continue to race to this day, in Singapore in my little Esse 7.5 m ‘’petit bateau’’ and in England, where I own a half share in a well known classic yacht from the 1960s called Firebrand, designed by Sparkman & Stephens and herself a member of the British Admiral’s Cup teams of 1965 and 1967. As well as racing, however, I do love cruising too. I have been tasked to write about great yachting destinations and here I have three recommendations. For beautiful warm weather, great winds and a wonderful atmosphere Antigua is very hard to beat. I did the classic regatta there twice in the 1990s, followed by some great cruising and have difficulty thinking of anything better in terms of winds

and weather. At English Harbour one meets yachtsmen from all over the world and the many wonderful bars and restaurants, let alone Nelson’s Dockyard, offer amazing venues for socialising and the swapping of yachting yarns in equal measure. For the more hearty, I think the west coast of Scotland and the west coast of Norway are hard to beat. The former has the advantage of enabling one to carry out almost daily distillery visits, ensuring a little warmth when required. And if on the Isle of Mull, a visit to Lady Claire Macdonald at Kinloch Lodge is everything it is cracked up to be: wonderful! And if time allows, I can strongly recommend a transit through the Crinnan canal for something a bit different. On those rare days when the sun comes out, what can be better than the Geiranger fjord, or island hopping the outer Hebrides on Scotland’s west coast? Whilst the natural scenery of Norway is as spectacular as the west coat of Scotland, if not more so, don’t

The west coast of Scotland offers daily distillery visits, ensuring a little warmth when required

Issue ONE 2014

bother dropping into the Bergen yacht club if you feel a great thirst – they do not serve booze because (in their words), sailing is a sport and thus incompatible with the serving of alcohol. For the even more hearty types, the Beagle Channel (pictured) and Cape Horn is, to me, the ultimate – but make sure you have the right kit because horizontal sleet in 50 mph winds in the middle of summer is not uncommon – but nor are blue skies and a comparatively balmy eight degrees. Setting foot on Cape Horn was for me, at least, one of those moments I shall never forget. The fact we were allowed to land indicates that our rounding of the most southerly point on Earth was relatively benign – though not many hours after being back in the Beagle Channel, icy winds of 40 mph were once again upon us. A visit to Puerto Williams (on the Chilean side of the channel, 50 or so miles southwest of Ushuaia on the Argentinian side) is a must and even more so, Puerto Toro (population: 20 brave souls), the world’s most southerly settlement which is quite special and where the air is as clean as it is possible to be. And if weather bound, the hiking on the island of Navariono is exceptional. ●

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The Secret ON THE MONEY Security Guy

Fear and loathing at sea The private maritime security racket is not for the faint hearted as our special reporter reveals in the first of a series of undercover exposés

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erein lies a brief narrative of the UK maritime security industry, a tale of betrayal, back stabbing, lies, lost friendships, broken marriages and dislocated egos. Let’s start at the very beginning. This is a dirty business, mostly full of grubby, self promoting little nobodies usually with the IQ of a cement mixer, and with all the social graces of Idi Amin and who having the audacity to call themselves ‘businessmen’ are laughingly nothing more than a bunch of chancers who got lucky and took advantage of a situation that shipowners were pretty much backed into by various entities and the actual hijacking of vessels. Friendships of many years standing as soldiers have been ruined by the greedy, grubby brigade. I personally took on the following who are now ‘directors’ of their own companies: a guy who was living on his grandmother’s sofa, a chap who was being made homeless, and a convicted thief. In 2007 we were engaged to train a police force in the Middle East in

46

the delicate art of FIBUA techniques (fighting in built up areas) or commonly known as FISH amongst the educated - fighting in someone’s house. It was during this time that I was approached by a family friend who worked at a senior level for a shipping company. He asked if I had ever deployed security teams to ships, and after a few more beers, I lied and said, yes, of course. How hard could it be? Two days later I had deployed three unarmed teams to this friend’s ships, many more followed. I had managed to scrape together a few ex-Marines and some ‘friends’ from days in the sandpit. As time went by and the attacks on ships increased, shipowners started to make very quiet enquiries about the deployment of security teams with weapons. Some companies laughingly deployed with flares, bear bangers and other toys such as BB guns. After much haggling among flag states weapons onboard became, if not agreed upon, then at

This is a dirty business, mostly full of grubby, selfpromoting little nobodies

least not illegal. We set about buying weapons. Little did I know that my greatest threat came not from Somali warlords but my own staff. To be continued. ●

“In a shipping industry driven by standards and compliance, the private maritime security sector has rightly been taken to task on the quality, legality and efficiency of its product” — Andrew Varney, managing director, Port 2 Port Maritime

maritime ceo


The ON Contrarian THE MONEY

Elementary, my dear owner Andrew Craig-Bennett investigates what makes owners’ tails wag in the world of P&I

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ere’s a column on P&I imbued with the spirit of Sherlock Holmes creator Sir Arthur Conan Doyle. I am not going to tell you which P&I Club to insure with, or how. Your broker can do that. I want to look at something else. When I was a callow youth, in the third quarter of the last century, the institution known as Lloyd’s was mighty pleased with itself. Its members prided themselves on the excellence of their (paper) systems, on their having, famously, been the only insurers to honour their policies after the San Francisco fire, thereby securing, through the foresight of Cuthbert Heath, a century’s dominance of North American insurance, on their calm fortitude in accepting unlimited liability and on the excellence of their market making system, which could and did price any risk other than those which Lloyd’s itself had deemed uninsurable under the Waterborne Agreement. Things are a different now. After the Rowland reforms, all that really remains of that body of (almost entirely) men, who once bestrode the insurance world like a colossus, is the excellent pricing mechanism. Real power has almost left the building. Ask Warren Buffett. But not quite: the annual negotiation of the P&I Clubs’ Group Excess of Loss contract threw up

an interesting little twist, or so a small bird tells me. Reeling under the considerable shock of the most expensive wreck removal operation yet attempted, Munich Re, or so I am informed, proposed that, in future, wreck removal claims should be limited to $1bn per single accident or occurrence. This did not come to pass; others on the slip declined to follow the Munich Re’s lead. For the moment, the possibility of another Costa Concordia type wreck removal remains. A little victory for London. This episode, trivial in itself, tells us something more important. There is a real capacity issue. The risks are getting too big for the P&I system that we have grown up with. The Costa Concordia (pictured) was not an exceptionally large ship, by the standards of big cruise ships, and not very many of her passengers and crew died. The MOL Comfort was by no means an exceptionally large container ship, yet the group clubs should be thanking their stars that most of the cargo will have been shipped CIF and insured within the Japanese marine market, which plays by Japanese rules, so the cargo claims will be much less than they otherwise might have been. The rather alarming prospect is that these circumstances may not be unusual. The P&I Clubs have been told that a mistake in the design of the sponsons required to

Scotland Yard detective: Is there any other point to which you would wish to draw my attention? Holmes: To the curious incident of the dog in the nighttime Detective: The dog did nothing in the nighttime Holmes: That was the curious incident

“” “ “

Issue ONE 2014

” ”

float the hulk of Captain Schettino’s ship has added another $12m to the bill. That’s a pool claim in itself. Yet nobody batted an eyelid. A trifling sum of misery added to the account. It is not the prospect of an even bigger bill that should concern anyone. It is the likelihood that claims of these ruinous proportions will occur again, and again. You might have thought that the shipowners of the world, having to pay for these enormous losses, would first demand an explanation from Carnival Corporation as to why they did not require Schettino to at least lay down a parallel index, before showing off to his girlfriend, and an explanation from Mitsubishi Heavy, MOL and Class NK as to why their ship broke in two in quite normal weather. Not rocket science; common sense. Nobody even asked. The dog did nothing in the nighttime – did not even bark – because the dog recognised its owner. The ordinary shipowners of the world have not barked. They recognise their owners – the handful of giant corporations, with incomes bigger than the GDP of many nations, who alone can perpetrate such awful follies as these, and require everyone else to pay for them.●

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ONMARPOLL THE MONEY

The future of shipping At the turn of the year we invited readers to vote on pertinent issues about the coming years in our industry. With more than 1,200 respondents, the poll hit a nerve or two By 2020, which nation will be the largest owner by gross tonnage?

Which city is going to be the most vibrant international maritime centre in the coming five years?

“ China

65

Greece

17

Another country

9

Japan

6

Germany

3

We will be moving away from family owned shipping China 65 companies to sovereign state Greece 17 Another country 9 shipowning/multinational Japan 6 Germany 3 commodity organisations owning shipping

Has the era of European banks as the dominant force in ship finance passed for good?

Singapore will try to hold on to the title, but Shanghai Singapore 57.73 has the hunger as well as Shanghai 29.9 London 13.4 the landmass2.06 to make it Athens Hong Kong 5.15 happen

Singapore

57.73

Shanghai

29.9

London

13.4

Athens

2.06

Hong Kong

5.15

What will be the biggest headache for shipowners in the coming five years?

The Middle East (with Islamic financing options) and the Far East will take Yes 54 over this role No 46

Yes 54

Overcapacity

42

Environmental regulations 40

No 46

Finance

Will private equity continue to play such a large role in shipping in the coming five years?

18

Yes 79 No 21

Which sector will see its supply/demand balance return to equilibrium first?

A lot of P/E investments in shipping will struggle to achieve the quick and clean Yes 79 exits that P/E desires, so No 21 we may see a second wave of P/E ‘parcel passing of assets’, restructurings and consolidation in the next five years

Shipowners in the past couple of years have jumped back into ordering 42ships with Overcapacity Environmental regulations 40 gusto. Whereas, pre-2008, we Finance 18 shot ourselves in the foot, we have now taken the gun and are pointing it at our head

Tanker operators are more sensitive to market Tankers 35.35 trends Bulkers 39.39

Containers

Tankers

25.25

35.35

Bulkers

39.39

Containers

25.25

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maritime ceo


smm-hamburg.com

53°

33

ham‘ 47“ N, 9° 58 ‘ bur g 3 3“ E

keeping the course 9 – 12 september 2014 hamburg the leading international maritime trade fair new in 2014: the SMM theme days

scan the QR code and view the trailer or visit smm-hamburg.com/trailer

8 sept

finance day

9 sept

environmental protection day

10 sept

security and defence day

11 sept

offshore day

12 sept

recruiting day


Profile for Asia Shipping Media Pte Ltd

Maritime CEO Issue One 2014  

The former head of Hong Kong’s Pacific Basin and one of the best known wheeler dealers in shipping is on the cover of Maritime CEO’s first i...

Maritime CEO Issue One 2014  

The former head of Hong Kong’s Pacific Basin and one of the best known wheeler dealers in shipping is on the cover of Maritime CEO’s first i...

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