ISSUE ONE 2017
Shaking it up
Khamis Buamim alters Gulf Navigationâ€™s course
3 Editorâ€™s Comment
Economy 4 US 5 EU 7 China 8 India 9 Brazil
Markets 10 Dry Bulk 12 Tankers 15 Containers 16 Offshore 17 Finance
Executive Debate 18 Blockchain and shipping
Profiles 22 Cover Story Gulf Navigation 25 Milaha
26 Nova Marine Carriers 27 Otto Danielsen 29 Barbaro Group 30 Garolla Group 31 Shinyo International 33 Magsaysay
Singapore 35 36 39 41
Introduction Lines Port Yards
Recreation 42 Wine 43 Gadgets 44 Books 45 Travel
Opinion 46 Mark Charman 47 Neville Smith 48 MarPoll
ISSUE ONE 2017
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An ASM publication Editorial Director: Sam Chambers email@example.com Associate Editor: Jason Jiang firstname.lastname@example.org Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Holly Birkett Mumbai: Shirish Nadkarni New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Cartoonist: The Freaky Wave Editorial material should be sent to email@example.com or mailed to 24 Route de Fuilla, Sahorre, 66360, France Commercial Director: Grant Rowles firstname.lastname@example.org Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email email@example.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to firstname.lastname@example.org or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Tigersoft Design Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged for 2017’s four issues of Maritime ceo magazine. Email email@example.com for subscription enquiries. Copyright © Asia Shipping Media (ASM) 2017 www.asiashippingmedia.com Although every effort has been made to ensure that the information contained in this review is correct, the publishers accept no liability for any inaccuracies or omissions that may occur. All rights reserved. No part of the publication may be reproduced, stored in retrieval systems or transmitted in any form or by any means without prior written permission of the copyright owner. For reprints of specific articles contact grant@ asiashippingmedia.com Twitter: @Maritime_CEO LinkedIn: Maritime CEO Forum Facebook: Splash Maritime & Offshore News
ISSUE ONE 2017
Humans still have the edge with complex deals
he debate on how digitisation in freight transport could threaten the traditional role of many a middleman has dominated many a headline in the shipping press of late. BHP Billiton’s move to create an online bidding platform for owners, Maersk tying up with Alibaba and Amazon’s first few months as a fully fledged ocean freight forwarder all lend credence to this feeling. However, you, the reader, have made your feelings perfectly clear on the future of shipbroking. Around three fifths of you reckon computers cannot replace the humble broker in a recent poll we carried. The sentiment we are getting is that brokers might indeed lose out to technology for plain vanilla deals, but the intricacies and nuances of most other transactions will continue to need the human touch. In short, if you’re a broker and you’re reading this, so long as capes aren’t the only string to your bow, you should be fine. Optimisation algorithms are repetitive but they cannot capture the strategic part of the process which is negotiation. The ultimate demonstration of the value of the shipbroker is surely in sale and purchase. In the majority of S&P deals the transaction would not occur at all without the broker. Online platforms today tend to be too restrictive. Shipping is all about the art of bargaining, something a computer can’t handle. As for another key middleman, the freight forwarder, reports of their tech-induced death also look premature. Tap a 40ft container from
Shanghai to Felixstowe enquiry into three of the most talked about online freight marketplaces and you are likely to be greeted by messages along the lines of: “Your route cannot be found, no rates found, no results found”. Like brokers, where a logistics market has significant complexity a machine cannot necessarily take over all the processes that a human currently carries out. What is undeniable is that technology can refine shipping’s cluttered information flow. Shipping is an industry of highly specialised information flow, middlemen arbitrage and asset play, but so much of what happens is either needless duplication or simply inefficient. The airline industry learnt a long time ago how to become more efficient by taking low value processes out of system. If you don’t adopt technology today as a middleman your days are numbered as Dr Zvi Schreiber, the CEO of online marketplace Freightos, told me recently. Schreiber stressed technology isn’t the enemy. “It’s a lifeboat,” he argued. “And the alternative for providers,” he neatly concluded, “is ctrl-alt-delete.” ●
Starry-eyed? The new president is seeking an annual economic growth of 4% yet his polices appear contradictory
he election and inauguration of Donald Trump as the president of the United States was the greatest wild card of the global economy in 2016 and into 2017. The true effect of the Trump administration on the US economy is, of course, yet to be felt as they enact new policies in their first one hundred days in office. At present American politics, and worldwide opinion, is so polarised it’s hard to gain any analyst consensus, but we do have some numbers from the end of 2016. Economic recovery was slower in the fourth quarter of last year than had been hoped for, at 1.9%. Trump has vowed to boost economic growth to 4% with a seemingly contradictory programme of, on the one hand, capital spending on infrastructure and, on the other, tax cuts and deregulation. Overall the US economy grew 1.6% in 2016, its worst performance since 2011. There was good news on the crucial consumer spending numbers in the fourth quarter. Consumer spending accounts for more than two-thirds of US economic activity. It saw 3% growth in the fourth quarter. USA – Major Export Destinations, 2016 Country
% of total exports
Source: US Trade data
After some improvements in the employment numbers in the last 18 months to two years it was expected that households would gain confidence and start spending more. Most important for shippers and logistics firms was that the US trade deficit fell in December as exports hit their highest level in more than 18 months amid record shipments of technology products. Though there was a greater level of imports (thanks to the consumer spending rise) there was still an improvement in the national balance of trade. However, that was all in 2016. Since then President Trump has withdrawn from the 12-nation Trans-Pacific Partnership (TPP) trade pact and stated that he wants to renegotiate the North American Free Trade Agreement (NAFTA). Both these new arrangements could have a seriously negative effect on imports and exports over the remainder of the year. However, exports remain an
interesting story. When they began to rise last year it was due to new exports of commodities but the more recent boost to exports have been in the aerospace, biotechnology and electronics sectors followed by consumer goods and cars. All of these sectors mean jobs and wages to further boost consumer spending. However, the US exports jump was not across all destinations. Exports to the European Union jumped 10.1%, with goods shipped to Germany surging 12.4%. Despite this, and not unexpectedly, exports to China, a sore point with Trump, fell 4.1%. Imports of goods from China fell 7.6% in December, while those from Germany rose 1.4%. The next few months will be a time of numerous economic policy statements from the new Trump White House, many of which could cause America’s economy, and overseas confidence in it, to fluctuate in either direction. It remains a time of uncertainty. ● maritime ceo
A need to prove itself Can the continent counter populism with a decent economic showing?
ithout doubt the big news for the entire EU economy in the first quarter of 2017 is the UK finally triggering Article 50 and beginning, in earnest, the process of exiting the organisation. The negotiations, whatever the final outcome, are expected to be long drawn out and tortuous. However, all the member states, large and small, are now prepared for them to occur. What is not known is what the outcome of other elections around the union, particularly in France (and Marine Le Pen’s - pictured - strong polling) may mean for the future of the EU. Though pro-EU officials in Brussels are keen to show that it is only the UK that has a major problem with the organisation, the indications from Holland, Paris and elsewhere indicate that problems lie deeper and in many other places too. Hence, those that advocate the EU programme are keen to be able to demonstrate that the union and, by extension, the euro currency are positive things for growth. Whatever your politics, this is not an easy thing to prove. Pro-EU analysts point to the fact that for the first time since 2007, all 28 of the union’s member economies are growing at the same time, on an annual basis. Overall the EU’s combined economy will probably grow by
ISSUE ONE 2017
Forecast EU export markets post-Brexit Year
% GDP growth
Source: Eurostat *=forecast
approximately 1.8% this year – ‘probably’ being a very important word here. The EU economy is exposed to many ‘ifs’ in 2017 – the economic policies of the new Trump administration in the US; just how messy Brexit will be; whether populist parties in other countries will see the brakes applied to EU integration at best and moves to exit at worst; and falling exports and FDI largely due to China’s economic slowdown. The idea that the EU could protect itself as a bloc looks fairly redundant. So, as so often before in the EU, it comes down to strong individual growth in the larger economies lifting the whole union (though now effectively without the UK’s input). Growth is important, though some analysts believe that growth in and of itself will not be enough to beat the rising tide of populism in Europe (to put it quite bluntly
growth does not totally negate hot button issues such as immigration). Spain, where GDP expanded by 3.2% last year, and Ireland, where growth is estimated to have topped the 4% mark last year, were 2016’s outstanding performers. However, Spain remains mired in unemployment (a whopping 18.6% overall and far higher among the under-25s) while Ireland is the country with its economy most at obvious risk from a ‘hard’ Brexit. Importantly overall, the German economy — still Europe’s growth engine — managed 1.9% growth last year. Worryingly, for those in transport, EU exports were weak in 2016 and were increasingly among EU members rather than with countries outside the bloc – such as, crucially, China. ●
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The new rebalancing challenge Can Beijing really find jobs for 11m people this year?
espite many predictions of collapse, devaluation and a sudden end to the Chinese economic miracle 2016 passed off rather uneventfully for Beijing. Everything the analysts predicted would happen did; only not to the extreme extents they had claimed. China’s foreign exchange reserves did decline by 9.6% to $3trn in 2016, which was slightly less than the 13.3% decline in 2015. The RMB fell by a relatively small (at least as compared to what some more alarmist analysts had been predicting) 6% against the US dollar, roughly the same level of devaluation as it saw during 2015. In actual fact the RMB’s devaluation was ultimately more about the continuing strength of the dollar, rather than the weakening of the Chinese currency while over onethird of the year’s devaluation came in the last 50 days of the year – i.e. after the result of the US presidential election was confirmed and the dollar surged. Generally China closed out 2016 with the story unaltered. The structural rebalancing of the Chinese economy continued down its Where the Migrant Workers Go? Migrant worker employment by sector, 2016 Sector
Transport & Logistics
Hotels & catering
Source: China Labour Bulletin *= maids, cleaners, elderly and child careworkers etc
ISSUE ONE 2017
uneventful path for the fifth consecutive year in which the services and consumption (tertiary) part of the economy was bigger than the industrial (secondary) part, according to data published in January 2017 from the National Bureau of Statistics in Beijing. So what should we expect from China in 2017? This early March saw the National People’s Congress (NPC) in Beijing at which Premier Li Keqiang outlined the Communist Party’s goals for the national economy across the rest of the year. No great surprises in Premier Li’s work report to the NPC – further cooling of the economy, an estimated 6.5% growth in GDP across the year. Exactly in line with analyst expectations. It has to be noted that there are still concerns about high public spending leading to large unpaid government debt and also there is a need for a job creation. China is cutting hundreds of thousands of jobs in inefficient industries like steel and coal. It has set an ambitious target of creating 11m jobs in China’s cities this year alone to both employ those
urban residents without jobs, provide jobs for the continuing wave of rural migrants to the cities and re-employ the hundreds of thousands of workers being shed in unproductive state-owned enterprises. The problems, as ever in China, is that the new jobs will not necessarily be where the workers are – i.e. they’ll be in private industry along the coastal provinces and not inland or in the rust belt provinces of the far north east. Additionally those looking to move from rural regions to urban, and those laid off in the rustbelt towns, do not necessarily have the skills needed for the new jobs in services, logistics, finance and other growth sectors (see chart left). Overcoming this mismatch, in both skills and geographic terms, will be a major task for the government. Xi Jinping’s answer to these conundrums is to argue that he will ‘deepen and extend economic reforms’ yet, so far, he has added little detail to this slogan. The rest of 2017 will be a period when we will see how the government moves from rebalancing the economy to rebalancing the wider workforce. ●
Blurred export picture Top-line growth is masking problems elsewhere
or those who like their growth numbers big then India is still the emerging economy that seems to be delivering, especially with China revising its annual GDP for this year downwards again. China says it will see just 6.5% annual GDP growth in 2017; India is expecting anywhere between 6.7 and 7.2%. Admittedly GDP growth estimates are a much less precise science in India than in China (not that we all necessarily believe China, but they put out one number and stick to it regardless, whereas India tends to fluctuate over Indian Crude Oil Imports By Supplier, 2016 Country Saudi Arabia
% of total imports 18
Source: Indian Ministry of Statistics and Programme Implementation
the year). Some sources though are even more bullish than the government economists in New Delhi – the OECD is predicting GDP growth of 7.4% this year for India; while the minister of state for oil and gas went off on his own tangent and announced he was confident that the country would see 8% growth this year. The good numbers for 2016 were despite some economists’ concerns that there would be a sharp slowdown following prime minister Narendra Modi’s sudden announcement that he was scrapping all 500 and 1000 rupee notes - the two largest denominations - in early November as part of an anti-corruption drive. There was a certain element of chaos in taking 86% of the currency out of circulation virtually overnight, but this controversial ‘demonetisation’ ultimately didn’t seem to hurt top-line growth. However, there may be some issues with entrepreneurship and small business growth in 2017 – while the demonetisation didn’t seriously affect the formal sector it will have had more long lasting consequences on India’s large informal sector, which is both more cash reliant and accounts for 40% of total employment. However, the question for shipping and logistics firms is, of
course, whether or not any of India’s growth is coming from heightened export numbers rather than simply domestic consumption increases? Most analysts believe that India’s exports (which rely largely on US, EU and Chinese demand) are still lagging – up slightly, but still lagging other economic sectors and overly reliant on the three major trade partners. The growth in exports, though small, is also not across all sectors of the economy. For instance, exports of chemicals and ready-made goods are growing at 4.8% and 2.1% respectively. However, some important key exports sectors like gems and jewellery and drugs and pharmaceuticals have declined by 4.5% and 11.6% respectively. Worryingly for India’s trade balance and production costs both the cost of, and amount of, coal and oil imported shot up in the last quarter of 2016, just as global prices rallied meaning there will be a knock on effect for India’s energy bills, both corporate and consumer. Crucially, and despite government plans to increase reliance on natural gas and other energy sources, coal still provides 60% of the energy to India and this dependence on coal will continue for at least the next decade. ● maritime ceo
Heading back up Has South America’s largest country finally turned the corner?
n increasing number of optimistic analysts are suggesting that the worst may be behind Brazil economically. The government of President Michel Temer would definitely like to believe this. And for some sectors it’s true – civil servants have recently received significant pay rises (partly to try and cut corruption and graft) – up to 41% for the judicial branch. However, the country is still losing jobs rather than gaining them and so unemployment is worsening while the pensions deficit is alarming. It seems it is still the most vulnerable communities and workers that are suffering, despite some good news. Temer’s renewed calls for austerity are causing a bad taste in the mouth of many, as reflected in the uptick in industrial action by Brazil’s vocal trade unions. It may well be that the rich are managing to dodge many taxes in Brazil, and this needs to be addressed, but in the wider economy there are some indicators of hope. Though sometimes they are confusing and contradictory, as well as being quite hard to logically explain. For instance, Brazil’s economy contracted for the second year running in 2016, yet foreign
ISSUE ONE 2017
Brazilian Unemployment Growth – 2016/2017 Month
unemployment rate (%)
Source: Brazilian Statistics Institute
direct investment (FDI) in December last year hit $15.4bn, a record high for that month, according to the Brazilian central bank. Total FDI for the year was $78.9bn, up 6% on 2015. The explanation for this mismatch is, according to most economists, that Brazil is simply too big to ignore – if you sell anything from cars to planes to clothes to services Brazil should be a major market. This alone may well keep the FDI numbers edging up even as the economy remains sluggish, by developing economy standards internationally. Exports got a significant boost early in the year as oil exports hit their second consecutive record in February, with shipments almost double the level of the same period in 2016, as new offshore production continues to come on stream. The Paris-based International Energy Agency expects Brazil’s 2017 output
to rise 230,000 barrels per day (bpd) on the year to 2.84m bpd. The US, China, India, Malaysia, Singapore and Spain are the major demand markets for Brazilian oil right now. But oil is not the only good news story for the country’s exports – iron ore shipments have bounced back too in terms of both volumes and value. Demand from China, Japan and various Southeast Asian countries appear to be the major factor in the positive bounce. Imports into Brazil are also up, which is good news for shipowners, though many have been puzzled by the rising imports of coffee beans to Brazil - robusta output fell to its lowest level since 2004 after droughts in the main producing state Espirito Santo. Robusta type beans are largely used for instant coffee production. ●
MARKETS DRY BULK
China turns and the world follows Commodore Research’s Jeffrey Landsberg on how the PRC is leading bulk carriers out of despair
ne of the key themes in our global dry bulk research has been that the Chinese economy has been on a dramatic turnaround since the start of March 2016. As we have continued to stress, the turnaround in China has been intensifying over the past several months and this has continued to assist the dry bulk shipping market. Also quite encouraging is that much of the world outside of China has recently also been following China’s turnaround. Global steel production remains one area that continues to show significant improvement outside of China (steel production in China has also remained strong, and began to shift and rebound well before steel production outside of China). The most recently released data shows that global crude steel production outside of China totalled approximately 65.4m tons in February. This is 3.5m tons (6%) more than was reported last year for February’s 2016’s production. Global crude steel production outside of China has now increased on a year-on-year basis during six of the last seven months (August, October, November, December,
January, and February). This marks a very significant shift, as prior to August it had contracted for 18 consecutive months. China’s crude steel production, in comparison, has increased on a year-on-year basis during each of the last twelve months. It previously was the world outside of China where steel production had remained mired in a much longer slump than Chinese steel production, but since August this has changed and notable improvements have continued to be seen outside of China. Remaining of note to us is also that the pace of growth in global steel production outside of China continues to exceed the pace of decline in Chinese steel exports. Looking at this year’s data shows that through the first two months of 2017, global crude steel production outside of China has increased yearon-year by 8.3m tons. During the same period, Chinese steel exports have declined year-on-year by only 4.7m tons. Overall, the ongoing improvement in global steel production outside of China continues to come as a result of more than just the decline in Chinese steel exports. What is clear is that the world only relatively recently has been following the sustained turnaround in the Chinese economy that has been in effect since March 2016. For the dry bulk shipping market and global iron ore demand, it remains encouraging that steel production growth outside of China has been exceeding the pace of decline in China’s steel exports, and that total steel production worldwide has been increasing. However, the ongoing shift in global
steel production outside of China continues to represent a much more significant change, as it is pointing to an overall economic rebound outside of China. Over the last several months, we have continued to see many signs of improvement in various economies outside of China and we remain of the view that there has been a lag between when China first began its turnaround – a year ago - and when the rest of the world started to follow. As we have also been highlighting in our national and global economic research, one of the other most significant reversals seen globally has been US industrial production finally finding growth again (starting in December). Prior to December, US industrial production had previously contracted on a year-on-year basis for 15 straight months. That period of contraction was extremely telling to us, as prior to those 15 months the last time there were even two straight months of year-on-year contraction in US industrial production was back in 2009. Going forward, we do remain concerned that much of the world remains burdened by a huge amount of debt (as is seen in China), but it is at least very positive that ongoing shifts have been taking place in several nations’ overall industrial production, steel production, etc. It took a while, but the world is now following the turnaround that has remained in place in China since last March. Strength being seen both inside and outside of China remains encouraging for dry bulk prospects.● maritime ceo
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Making American crude great again US tight oil production is rebounding and the tanker market stands to benefit, writes Erik Broekhuizen from Poten & Partners
n April 2015, US crude oil production reached 9.627m barrels per day (b/d). This was the highest production number since the early 1970s, when US crude oil output briefly exceeded 10m b/d. One of the biggest differences between the production in the 1970s and now is the source of the crude oil. All of the US domestic production 45 years ago came from regular onshore fields from the lower 48 states. Gulf of Mexico offshore production only started in the 1980s and large scale Alaskan production did not come online until 1977. Today’s production profile is quite different and changing rapidly. Over the last 10 years the growth in US oil production has come mainly from tight oil formations, using hydraulic fracturing and horizontal well technology. According to the Annual Energy Outlook 2017, published by the US Energy Information Administration (EIA), total US crude oil production averaged 8.74m b/d in 2016. About 53% of this (4.6m b/d) came from tight oil, 20% from offshore fields and 5.5% from Alaska. Only 21.5% of last year’s production came from regular onshore fields in the contiguous US. From April 2015 to July 2016, US oil production declined almost 1m b/d as WTI oil prices declined from a peak of well over $100 per barrel in June 2014 to below $30 per barrel in early February 2016. This price drop hurt the tight oil producers in the US, because many of these companies
had relatively high production costs and carried significant debt loads. However, during the lean years, the US producers cut costs and increased productivity, focusing on the most prolific areas. The International Energy Agency estimates that US shale has achieved cost reductions of 30% in 2015 and a further 22% in 2016, although individual basins have seen much larger cost declines. The production costs of wells drilled in 2016 are less than half of those drilled in 2013. The combination of lower costs and (since early 2016) increasing oil prices has kick-started a comeback of the tight oil production. Unlike the earlier growth period of US tight oil, the current expansion is likely to have a positive impact on the international tanker markets, because in December 2015 the US government lifted a crude oil export ban dating back to the 1970s. This raised US crude oil prices to relative parity with international benchmarks. Since the export ban was lifted, US crude oil exports increased from 300,000 to 500,000 b/d (almost all destined for Canada, which was exempt from the export ban) to levels occasionally exceeding 1m b/d. US crude is now sold worldwide, from Europe to Latin America and Asia. The latest long-term forecast of the EIA projects that US oil production will peak at 10.55m b/d in 2029, with 6.14m b/d (58%) coming from tight oil. Tight oil production is expected to grow rapidly in the first
10 years of the forecast, from 4.6m b/d in 2016 to 6m b/d in 2026 but growth is projected to level off after that. The projected increases in U.S. oil productions will likely lead to more exports. US oil consumption is barely growing anymore and crude oil imports into the country have been relatively stable in recent years, despite growing domestic production. One of the main reasons for continued imports is that the domestic tight oil is of higher quality than what most US refiners prefer or need. Many US Gulf refiners have significant upgrading capacity, allowing them to use lower quality (and cheaper) imported crudes. This means that increasing levels of domestic crude oil production are available for export. Oil companies and traders taking advantage of this by actively adding pipeline capacity and upgrading terminals to accommodate more and larger ships. The US, as a growing crude oil exporter and driver of tanker ton-mile demand is here to stay. ● maritime ceo
Think global. Act local. “Thanks to the support of major ship owners over the last two decades, GMS has rapidly grown from a startup to become the Largest Buyer of Ships and Offshore Assets in the world! We built this business on integrity, professionalism and first class performance. In an industry mired with misleading and biased information, GMS has done its best to bring transparency, facilitate dialogue, promote change and encourage responsible ship recycling. We are proud to be part of an industry that has evolved and adds true value to the shipping fraternity. We appreciate the trust the industry has placed in us and shall continue to provide strong leadership and work hard for the development of the industry.” – Dr. Anil Sharma, Founder, President & CEO
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Liner shipping in 2025 Regular liner columnist Lars Jensen has a new book out in which he makes some bold predictions
he key is to understand that the industry is facing a fundamental transformation which will profoundly change the existing business models – and that this transformation will happen irrespective of the practical details such as demand growth and freight rate developments. Let us contemplate just two of the driving forces: digitisation and transparency. Digitisation will drive a development where the entire information flow related to a shipment becomes fully automated end-to-end, including the inland parts. The efficiency gains from this will be substantial, but are predicated on a more fundamental shift – and results in the need to transform the business model. Shipping lines need to realise that to successfully navigate this transformation, digitisation cannot be seen as an IT project. Surely IT is involved, but - more importantly - this requires the entire organisation to embrace process management as the core way of governing the business. Only with process management firmly in place will it be possible to digitise and automate efficiently. However, in order to have a successful business, automation cannot stand alone. Automation in itself will serve to commoditise the industry even further, eroding competitive differentiation across the carriers. However, exceptions will always occur in the supply chain. We will continue to see weather-induced delays, port strikes, congestion, equipment malfunction, etc. As such, carriers will have the possibility to use exception handling as a competitive differentiator. Doing this requires a transformation where
ISSUE ONE 2017
standardised jobs in major service centers are eliminated due to the digitisation and automation, but at the same time we will see an increased focus on having highly skilled customer service representatives in local offices to manage the exceptions. The successful carriers will be the ones who recognise that automation and exception handling are each other’s Siamese twin. Automation is necessary to achieve operational cost efficiency. Exception handling is necessary to achieve competitive differentiation. The other driving force we will contemplate here is transparency. An example of this is pricing transparency. We are currently seeing an increase in the availability of freight rate benchmarks in the market, and this development will continue to accelerate to the point where solid transparent benchmarks will be available in all major trades. Over the past few years this has caused headaches for the carriers. As an example, the Shanghai spot index has on various occasions been accused of being a contributing factor to the volatile rate environment. Whilst this argument can indeed be made, the underlying main factor is that the pricing and yield management models used by the carriers have not yet adapted to a transparent environment. In the coming years, we will see carriers implement new, and more sophisticated, pricing and yield management tools developed to successfully handle a more transparent rate environment for spot and contract rates. It is clear that a multitude of other fundamental changes will take place in parallel going forward.
The successful carriers will be the ones who recognise that automation and exception handling are each other’s Siamese twin
For the carriers, these are the formative years – especially as the transformation for any single carrier is a multi-year journey. This in turn means that the carriers which manage to successfully navigate this transformation will be a strong position to not only survive, but thrive, in 2025. Carriers which do not manage this transformation are unlikely to be part of the industry in the long run. ●
To buy Lars’s book, Liner Shipping 2025: How to survive and thrive, click here
Norwegian tycoons cash in on record low rig valuations Trøim and Fredriksen go all in on rig purchases. David Carter Shinn from Bassoe Offshore reports
n a two-week period from the middle of March, there were two offshore rig transactions involving 17 rigs. Some of the details are still not public, but two things are clear: rig values are now rising again; and a lot of people are betting on a full market recovery and a return to good times. John Fredriksen, via a new entity called Northern Drilling, purchased the Norwegian sector, high spec semisub West Mira from Hyundai Heavy for a price of around $360m in a deal where Seadrill and the yard settled on Seadrill’s termination of the construction agreement. Along with the deal, Fredriksen signed a $400m purchase-option agreement for another Norwegian sector, high spec semisub, the Bollsta Dolphin, which Fred Olsen cancelled last year. Nearly simultaneously, Tor Olav Trøim (formerly Fredriksen’s number two, but now acting independently) via Borr Drilling, agreed to the $1.35bn purchase of Transocean’s 15 rig jackup fleet, of which five are undelivered Super B Class rigs at Keppel FELS. Looking at rig values starting with the semisubs, our Rig Valuation Tool (RVT) showed at the time of the transaction a value range for a Norwegian sector, high spec semi from 2010–2016 in operational (drilling) condition to be $328m–$362m. The RVT does not value rigs which are not yet delivered, but using this as a reference point, we would say that the West Mira should be at the top of this range, or around $360m. As the midwater, harsh environment semi market has little oversupply and a stronger outlook for
demand compared to other segments, we will likely see values for these rigs rise further. Northern Drilling’s deal, while at levels in line with today’s market values, is at a discount of nearly 50% of the newbuild price of around $650m. Even if the market doesn’t recover to its highs of a few years ago, the upside on this deal outweighs the downside. The Borr deal, meanwhile, may seem not to be consistent with its previous acquisition of the Hercules rigs at $65m each. But that doesn’t consider the whole story. Looking at the newbuild rigs at Keppel FELS, Borr actually paid a price which, while discounted, is near market values for the rigs. In the deal, Borr will take over the newbuild contracts for the five rigs at a price which carries a 20% discount resulting from Transocean’s 20% payment on the $220m original price of the rigs. In addition, the yard has agreed to $15m in further discounts, or $3m per rig, in exchange for an up-front payment by Borr of $275m and an agreement to take delivery earlier than Transocean’s deferred delivery dates. So Borr will be paying around $172m, or $860m total, for the Transocean newbuilds. In an already oversupplied market with 107 newbuild jackups waiting to be delivered, upside at this price may seem limited. But what makes the deal interesting is that the cost of the newbuilds needs to be considered on an aggregate basis with the other ten delivered Transocean rigs. For the 10 delivered jackups Borr purchased, our RVT gives a combined value range of $500m–$730m. If we
take $615m (the midpoint of this value range – which can be considered conservative given the rigs were owned by Transocean) and compare it to the price of around $490m paid by Borr ($1.35 billion minus $860m for the newbuilds), then Borr has purchased these rigs at a significant discount to market value. Some or all of that discount can then be ‘applied’ to the newbuild rigs, making that part of the deal much more justified. In other words, the newbuilds can be seen as being acquired at under $150m which is nearly an all-time low for newbuild jackups in this class. With Borr’s unburdened balance sheet and their ability to enter the drilling market at current low levels, they look set to be better positioned than other contractors and will be a major competitive force in the market. Throughout the history of the rig market, high returns have been made on deals similar to what Northern Drilling and Borr have done. These players have come in early and taken advantage of special situations to position themselves for a recovery. They are part of the ‘reset’ taking place in the market and will have the fundamentals to compete and generate returns even in a lower dayrate environment. ● maritime ceo
MARKETS IN PROFILE FINANCE
German banks thaw out Finally a much needed clear-out is happening across the German fleet, writes Dagfinn Lunde
ike spring, the snow is beginning to melt at German banks – the thaw is finally here. In the year to date, for my money, the single most interesting development on the banking side of shipping has been watching the German banks come out of hibernation and start to gear up. When I look at what their portfolio is, I find it simply incredible how much money has been lost in the past few years both on the equities and the loans sides of their businesses. In the last three or four months we have witnessed a much needed massive clear out in Germany. Companies are being merged – others bankrupted – in a belated bid to clear the banks’ books. It is amazingly late in the process to have finally got around to doing this, but at least it is happening – it will be good for everyone. Having said that once all this clear-out is achieved I cannot see German ship finance coming back into the markets in such a strong way as, say, 10 or 15 years ago. They have been too badly burnt. To the north I am watching with interest how new entities from Norway are gaining quick traction. Take Mariitme and Merchant Bank, for instance. It’s been up and running from the new year and I can reveal it has been completely
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swamped – the new shipping bank got around 30 applications within the first two weeks of opening. Of course there’s been plenty of enquiries from the Norwegian market as Nordea and DNB have exited the local scene, but also from small and medium owners from around the world who have seen most other banks pull up their drawbridges. Also out of Norway – well via London and the Middle East! – there’s the new ‘non-bank’ Maritime Asset Partners (MAP) headed up by the highly capable former Deutsche Bank supremo, Nick Roos. I am sure MAP will do well in today’s market. There are actually lots of new banks coming into market. The traditional banks have completely mispriced risk while the new ones are getting it right. Over in Cyprus, for instance, I know there are a bunch of banks there clearly interested in getting into shipping. There are also plenty of funds coming into the market. It can still be hard to find loans in the region of 3.5 to 5%. If you go to 7 to 10% you will find money, but owners don’t like this and few shipping projects can support such high margins. As the days stretch and summer hoves into view in the northern hemisphere could anyone have sensed the optimism that has abounded in
dry bulk so far this year? It has certainly helped in the US, where New York-listed companies have managed to raise a record $2.5bn in the first 11 weeks of the year, largely riding the bullish back of the mini-boom in dry bulk as well as some optimism in the LNG sector. Still, this is shipping and as is traditional in this crazy industry that I have now been involved in for 40 years, owners are again gearing up to kill the goose before the egg has hatched. There’s plenty of enquiries right now at Chinese shipyards: newbuild prices have come down to far too tempting a price - $40m for a cape? My guess is that looking ahead with certain key new regulations coming in – ballast water, sulphur, etc - within two years we’ll see an enormous order boom for bulkers. The fact is you don’t want a 15-yearold ship as you will be spending minimum $1m on drydocking. New regulations coming into effect in 2018 and 2020 add to the attractiveness to getting a new ship – yards are desperate and prices are almost unheard of – the lowest since at least 2002. People are buying ships on the basis of the spot rates, which I have never understood. Bear in mind too, slow steaming will go soon when rates go up and fuel prices keep low – meaning more supply also from the present fleet is expected. Anyway, such rapid highs and lows is why we all love shipping. ●
EXECUTIVE REGULAR DEBATE
That’s the sound of the men working on the blockchain Working on the highways and seaways to paraphrase one Sam Cooke, blockchain has made much noise in the maritime press this year
digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. Origin: Early 21st century: from block and chain. That’s the Oxford English Dictionary reference to what blockchain is, a word shipping has heard a great deal about in the first few months of this year. Maersk made headlines in March by teaming up with IBM for a new initiative which the pair claimed in a release could “transform the global, cross-border supply chain”. The blockchain solution based on the Hyperledger Fabric and built by IBM and Maersk will be made available to the shipping and logistics industry. The solution will help manage and track the paper trail of tens of millions of shipping containers across the world by digitising the supply chain process from end-to-end in order, the pair claim, to enhance transparency and the secure sharing of information among trading partners. “We expect the solutions we are working on will not only reduce the cost of goods for consumers, but also make global trade more accessible to a much larger number of players from both emerging and developed countries,” claimed Ibrahim Gokcen, chief digital officer at Maersk. The costs associated with trade documentation processing and administration are estimated to be
up to one-fifth the actual physical transportation costs. A single vessel can carry thousands of shipments, and on top of the costs to move the paperwork, the documentation to support it can be delayed, lost or misplaced, leading to further complications. “We believe that this new supply chain solution will be a transformative technology with the potential to completely disrupt and change the way global trade is done,” said Bridget van Kralingen, senior vice president at IBM. “ Commenting on the news, KD Adamson, founder of Futurenautics, tells Maritime CEO that 2017 is shaping up as the year when platforms and ecosystems emerge that will shape shipping’s future. Maersk and IBM’s announcement along with HSBC and Bank of America’s recent trade finance blockchain point to a big shift in global trade, she reckons.
“Blockchain as an underlying technology is important, but what it’s delivering is transparency, security and automated trust via a distributed digital ecosystem, and that’s strategically key,” Adamson says, adding: “Blockchain, if it can be adequately scaled, enables autonomous smart contracts and is the foundation for smart regulation for shipping—both will be profoundly disruptive.” John Taxgaard from Ericsson argues that shipping is an industry of highly specialised information flow, middlemen arbitrage and asset play, but so much of what happens is either needless duplication or simply inefficient. “The industry needs to need a move from anecdote to analysis and that means bringing new people and techniques into the mix. The automotive industry, retail and airlines are all using proven technologies, not necessarily talking about unproven maritime ceo
EXECUTIVE IN PROFILE DEBATE
future concepts,” Taxgaard urges. Jody Cleworth, CEO of UK freight forwarder Marine Transport International, reckons blockchain has the ability to empower the shipping industry into a true digital age. “The sheer volume of containers processed per year means that safely decentralising the management of these containers will radically reduce the complexities of shipping,” Cleworth says. “A grass roots approach in collecting and storing information on the blockchain is how shippers will be able to reap the full benefits of the technology,” he adds. So will blockchain become the game changing technology for the shipping industry? The two co-founders of Copenhagen-based blockchain solution provider BLOC, which is short for The Blockchain Labs for Open Collaboration, certainly hope so. “The maritime industry is facing a tough and unpredictable future. Overcapacity, trust issues, decreasing rates and increasing competition from non traditional players and outdated systems will have a fundamental impact on the industry’s long term prospects,” says Deanna MacDonald, co-founder and CEO of BLOC. MacDonald believes these challenges along with higher demands from society and cargo owners for transparency, traceability and accountability in the logistics chain will drive the industry towards exploring and implementing new solutions like blockchain. Speaking of the challenges for development of blockchain in shipping, MacDonald reckons one of the
biggest challenges has been the lack of clarity and understanding as to what blockchain actually is and this lack of understanding is not limited to the shipping industry. “On a general level there are technical barriers right now that cause relatively high transaction costs that may act as a hindrance in the short term and also future challenges that must be met to ensure existence of blockchain,” says Maurice Meehan, the other BLOC co-founder. Meehan used to work with the AP Moller Maersk Group, where he led the development and implementation of sustainability strategy in various business units. According to Meehan, such barriers include a lack of storage infrastructure, the high carbon footprint associated with it and the fact that there are few blockchain developers and even fewer ‘miners’ that can validate transactions to keep up with demand. “On the organisation level, due to the fact that blockchain is still in its early stages of development and is rapidly changing, it makes it a difficult technology to concretely assess, pin down and apply just yet because an application that is missing today might be there tomorrow,” Meehan says, adding that the recent announcement from Mærsk and IBM to adopt blockchain has helped clear up much scepticism in trusting the technology. In MacDonald’s opinion, leapfrogging is likely not an option for the shipping industry to adopt blockchain due to its breadth and complexity, but the firm sees
This new supply chain solution will be a transformative technology with the potential to completely disrupt and change the way global trade is done
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blockchain as both a transitional and a transformational technology that is accessible to companies of all sizes. “Transitional in that it will contribute to creating a shared commons of digital assets for the shipping industry and transformational in that applications built on top of this shared database will purposefully utilize the digital assets stored to provide more efficient and streamlined processes and new value streams throughout the global shipping industry,” MacDonlad explains. Dr Roar Adland, shipping chair professor at the Norwegian School of Economics, muses how soon until ship finance digitises and we can all chip in online to own a cape. “Technology is changing the world even when it comes to ship finance, enabling fractional ownership and the secure and seamless transfer of titles to micro shares through blockchain technology,” he says, continuing: “Pretty much anything can be digitised - houses, driverless cars, racing horses, intellectual property and, indeed, your oil cargo or capesize bulker. Once it is, micro shares of any such digitized assets could in theory be bought and sold on online exchanges, continuously and by anyone.” Neville Smith, a columnist for this magazine and founder of Mariner Communications, neatly concludes on this technological revolution, saying: “Blockchain’s origins in the crypto currency, BitCoin, make it appear shady but financial information service providers are already pushing its adoption as a means of clearing the millions of equities, derivatives and other trades made globally every day. The same is true of larger shippers, carriers and ports – anyone in fact with complex multi-party physical-financial transactions to complete.” Prepare to read a great deal more about this innovation in the months and years ahead. ●
Vincenzo Romeo p.26
Federica Barbaro p29
In profile this issue Maritime CEOâ€™s 17 correspondents around the world have been in touch with many of the worldâ€™s top shipowners. Highlights are carried over the next 11 pages
SÃ¸ren Andersen p.27
Carlo Garolla p.30
Fred Cheng p.31
Abdulrahman Al-Mannai p.25
Khamis Buamim p.22
Ian Claxton p.33
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The turnaround master Khamis Juma Buamim was parachuted into Dubai’s Gulf Navigation last year. In less than 12 months he’s changed everything
hospital pass is the sporting vernacular that many might have felt on hearing Khamis Juma Buamim had taken on the leadership at then struggling Gulf Navigation in Dubai last year. Still, in less than a year the ex-Drydocks World boss has tackled the oncoming financial opposition, sidestepping tricky vessel freight rates by fanning out wide in a huge diversification. Buamin was the chairman of
the local shipyard giant Drydocks World for five years and before that he spent 26 years with Conoco and ConocoPhillips. Having managed to put the brakes on at Drydocks World and turned it around, last April Buamim took on arguably his biggest
challenge, steering tanker firm Gulf Navigation, which had in recent years skirted with bankruptcy. His roles at the yard and the line have similarities as he explains. “In both cases I came in to salvage and resurrect and it’s something
I came in to salvage and resurrect and it’s something I enjoy maritime ceo
We are targeting to triple the fleet size and mix by 2020
I enjoy,” Buamim says in this issue’s cover story. On taking office at Gulf Navigation, Buamim quickly set about settling debts and then moved on to one of the fastest, most widespread diversifications any shipowner has ever sought. Extra revenue streams since Buamim took office include agency, shipyards and shipmanagement. The company has formed an agency partnership with Polimar Turkish Holding, while in
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shipmanagement it has partnered with Switzerland’s SeaQuest with a view to snaring third party management deals from owners from the Middle East and Africa. When it came to his yards diversification, Buamim, a veteran of the sector, headed east to tie up with the emerging giants in the field, namely the Chinese. In December he tied up with Wuchang Shipbuilding and Qingdao Beihai Shipbuilding Heavy Industry – both part of China’s statebacked China Shipbuilding Industry Corporation (CSIC) – to develop shipyard facilities in the north of the United Arab Emirates. The trio will take over an existing facility and then develop it with ship repair and shipbuilding both eyed in a triple phase development. “I am a believer in change and transformation,” Buamim says, “it is a critical part of knowledge and innovation for any business to become sustainable and profitable, you have to think beyond and challenge the status quo. The company had to be overhauled to ensure timely turnaround and speedy recovery.” With the extra revenue streams in place Buamim is not forgetting about the core of the business, namely shipowning. The fleet took a battering in the first half of this decade but now significant expansion plans are being put in place. “We are targeting to triple the fleet size and mix by 2020,” the tanker boss says. And it’s not just in its traditional product and chemical tanker domain that Gulf Navigation is hunting. Buamim has let it be known he’s keen to enter other sectors too as he pursues what he described as a “huge fleet”. Last December Gulf Navigation entered into a strategic alliance with Mena Energy which will see it acquire 12 new tankers, ranging between 50,000 dwt to 120,000 dwt. The strategic alliance will see the two companies co-operate in ship acquisition, chartering and
Gulf Navigation Dubai tanker company branching out at the moment into agency, shipmanagement and yards as well as eyeing new shipowing sectors.
commercial management while further strengthening their existing business ties. Gulf Navigation will be acquiring the new vessels specifically to time charter to Mena Energy for the carrying of crude and the petroleum products. Like many analysts, Buamim reckons product and chemical tankers are likely to perform better than their crude counterparts this year. He cites specifically the increased refining capacity in the Middle East for this prediction. In concluding the interview, Buamim urges his peers to get ready for massive operational transition. “I think shipowners need to adapt to a changing global finance and economy pattern, things are shifting and more than ever the maritime industry needs new thinking,” he says. “Unfortunately despite the changing business environment we continue to see manage rather than knowledge.”●
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Milaha expands at home and overseas A diverse revenue stream is helping the Qatari owner withstand the offshore doldrums
uch needed structural adjustments in the offshore sector could take years to complete, the president and CEO of diverse Qatari shipowner Milaha tells Maritime CEO. Abdulrahman Essa Al-Mannai has been in the top job at Milaha for just over a year and a half now. Previously he led commercial planning at Qatargas. Fortunately for him, he presides over a very diverse fleet, so while the vagaries of the offshore downturn have of course impacted Milaha’s bottom line, other business lines have helped shore up the company. Milaha currently fully owns and operates a fleet of 82 vessels, which range from container feeder vessels and offshore support vessels to tankers and gas carriers. In addition, it also owns and operates a fleet of harbour support vessels as well as having stakes in four very large gas carriers (VLGCs) and seven LNG carriers. The most recent addition to its
Milaha Diverse Qatari owner with interests in OSVS, boxships, LNG carriers and VLGCs. Fleet today totals 82 ships.
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fleet was the Milaha Explorer, a liftboat, with a large deck area as well as the ability to accommodate 300 persons onboard. “As part of our multi-year strategy, we continuously seek opportunities to create and deliver a stronger value proposition to our clients through the introduction of new services and offerings and fleet growth,” Al-Mannai says. He admits that 2017 will continue to be “challenging” for the shipping industry with the continued vessel oversupply and subdued demand. “For the offshore industry,” Al-Mannai observes, “there is a pressing need for structural adjustments which could take years to complete.” “For Milaha, however,” he argues, “the growing trade volumes and ongoing economic growth of our home country, Qatar, will help offset the global trends to some extent.” Milaha’s container feeder business recently launched the KDX service, the first ever direct common carrier feeder service between Saudi Arabia and India. It comes less than two years after the company launched the first direct service between Qatar and India. “Both services have the potential to reshape trade patterns between the Gulf region and the Indian Subcontinent, and will support trade growth between the two regions,” Al-Mannai claims. In its ports business, Milaha has
For the offshore industry there is a pressing need for structural adjustments which could take years to complete
formed a jointly owned company, QTerminals, which will manage phase one of Qatar’s new Hamad Port as part of its activities. Milaha also established an office in Singapore in 2016 as part of its efforts to expand its oil and gas sector offering to cater for the Southeast Asian market in specialised offshore services. “We will continue to pursue opportunities to expand our footprint both locally and abroad, as we did in 2016,” Al-Mannai concludes. ●
Technology and partnerships to weather the storm The boss of Nova Marine Carriers outlines how he is handling the bulk downturn
mid the current challenging market scenario for dry bulk shipping, Nova Marine Carriers is facing the crisis with twin strategies in mind: investments in technology and new partnerships. The shipping company headquartered in Lugano in Switzerland and founded by the seasoned Italian shipowner Giovanni Romeo from Naples operates a varied fleet of modern bulk carriers and belt self unloading vessels ranging from 5,000 dwt up to 57,000 dwt. With more than 100 ships under control, Nova specialises in bulk traffic in the Mediterranean, Atlantic and Persian Gulf and in Italian cabotage. “Partnership is the leitmotiv of our shipowning and commercial vocation,” is written on the company’s website and is very much its modus operandi of late. Nova Marine Carriers in the last 12 months teamed up with Navesco (a JV for operating dry bulk vessels on routes to and from the Americas), with Algoma Central (a JV active in the cement sea transport business) and with Carisbrooke Shipping (a JV active in the niche of the small handysize bulkers market). The most
Nova Marine Carriers One of the largest names in Swiss bulk, operating more than 100 ships. Of Italian origin, Nova Marine is an adroit owner when it comes to setting up JVs.
recent news announced by Nova was a wider partnership still to be defined with the Canadian Algoma Central group aimed at creating a new initiative in global short sea shipping. “As a result of these actions our fleet soared from 60 to 104 units from 2016 to 2017,” says Vincenzo Romeo, son of the founder Giovanni and at the helm of the company together with his brother Antonello and his sister Laura. “Since my father started investing in ships in the ‘80s all our history in shipping is based on partnerships, first with steel trader and producer Duferco, and then also with cement producer Italcementi Group which is now part of the German HeidelbergCement group. They needed someone skilled in shipping and interested at investing in tailor-made ships for their supply chains and this step marked the beginning. We started with 5,000 dwt open hatch dry bulk carriers and today we operate ships up to 60,000 dwt capacity.” According to Romeo, transporting cement by sea is a highly qualified business school since the incidence of seafreight rates on the cargo value is significant considering that a single ton of cement is worth €40 today. “Our duty is to take care of the transport and logistics activities on behalf of our partners finding the most efficient way and the appropriate vessels to move their cargo from one point to another. In the everyday business we are used to do our job following the latest market trends heavily investing in technology,” adds Nova’s CEO, emphasising the fact
that they have recently ordered a new cement carrier in China which will be the first equipped with dual fuel propulsion system in the world. “We must follow the market and the legislation produced in the shipping industry,” Romeo says, noting that many of their ships deployed in the North Sea and in the Baltic region have been retrofitted with scrubber systems in order to make them compliant with the rules introduced in the ECA areas. “Today, our main goals are to protect the environment and find the best solutions to make our ships as competitive as possible. The key factor is the idle time and we want our ships to spend the least time possible in the ports,” Romeo says. That’s the reason why the Lugano-based company is constantly looking for projects and technologies capable of reducing idle time and optimising its vessels’ capacity to transport steel products, cement and other dry bulk cargoes. “Apart from the challenge to deal with the Chinese owners’ pressure on freight rates for bulk carriers, we, as a European shipping company, have to bet on technology and customer service to stay afloat in the current storm,” concludes Romeo.● maritime ceo
The boutique maritime asset management platform A few months ago Jens Gronning and Søren Andersen bought out Danish shipowner Otto Danielsen to embark on a new voyage
round the start of the year two old shipping pals clubbed together to buy a Danish shipowner as a platform for a new business vehicle. Jens Gronning (pictured, right) and Søren Andersen (pictured, left) purchased Otto Danielsen from Norway’s Tschudi Shipping Company. Otto Danielsen’s foundations date back to 1944 when it was created initially as a shipbroker. Latterly it became an owner, while retaining its broking division and in 2005 Tschudi bought out the family run firm. Gronning revealed via his LinkedIn page: “[O]ur aim is to create a boutique asset management platform offering maritime investment opportunities to capital investors and providing full project and asset management services from conception to exit.” Andersen, speaking with Maritime CEO, explains he and Gronning’s working relationship goes back a long way. They worked together in the 1990s in Denmark for Knud I Larsen and later for Tschudi & Eitzen. “We know the chemistry between us is excellent,” Andersen says. Since the 1990s Gronning has
Otto Danielsen Founded in 1944, and just bought from Tschudi Shipping by Scandinavian shipping veterans Jens Gronning and Søren Andersen who aim to use the line as a maritime investment vehicle.
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mainly been in the tanker business at UACC in the Middle East and most recently with Team Tankers, while Andersen has worked a lot in the multipurpose and containership sectors both on the shipowning side as well as with liner operations. For the last 12-18 months the two men worked separately as independent consultants on various shipping projects including acquisitions, sale and leasebacks, and warehousing for German banks. “We had ambitions and appetite for more, but we felt we lacked a structured platform from which we could expand,” Andersen relates. They found that platform in Otto Danielsen where Andersen had previously acted as managing director from 2005 to 2014. The business rationale for the new venture is to offer maritime investment opportunities to capital investors and provide full project and asset management services from conception of the project to the exit. “We believe,” Andersen says,
“that in today’s market it’s all about delivering an innovative and personal service to clients. We aim to do exactly that by combining our extensive managerial experience with our hands-on operational capabilities.” Expect this Scandinavian pair to make investments in plenty of different sectors. Andersen says the time is “ripe” for dry bulk acquisitions, but there are also some “interesting opportunities” for tankers and containerships. “The challenge is picking the winners not only from a timing point of view,” Andersen maintains, “but also considering a vessel’s quality/ condition as well as the employment situation, counterparty risks, etc. “It’s no good getting the timing right,” he continues, “if what you buy is of an inferior quality either structural or from an employment perspective.” This is where Andersen and Gronning believe they can add value to their clients’ investment strategies.●
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Bound for Asia and closer relations with Russian partners Palermo-based Barbaro Group is looking east
eadquartered in Italy, with partners in Russia and new plans to increase business in Asia. That’s the Palermo-based Barbaro Group in brief, a company active in the field of transportation of crude and oil products, shipmanagement, offshore/FSOs, ship agency, towing and other harbour services. In the recent past the company controlled by the Barbaro family was the first Italian shipping firm to penetrate the Russian shipping market, operating a fleet of river tanker vessels and resulting today in several partnerships launched with some of the leading local companies. Federica Barbaro, CEO of the company, summarises the company’s plans, saying: “While consolidated relationships with oil majors and other our clients continue to drive our business, we’re focusing on developing new projects via joint ventures with Rosneft, one of the biggest and most important oil companies in the world. We are now actively involved in a start-up of our new joint venture with them which is aimed to strengthen Rosneft’s position in shipping, bunkering, brokering and other activities.” As of today PB Tankers, the
Barbaro Group Family run, based in Palermo and involved in crude and oil products, shipmanagement, FSOs, ship agency, towing and other harbour services.
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We are cautious about the high tonnage in the market compared to a fairly low demand
shipping arm active in the liquid bulk, currently owns and operates six double hull product tankers plus two chartered-in vessels and manages an FSO vessel called Alba Marine for Edison Group in the Adriatic Sea. Apart from the last JV signed with Rosneft last year, in 2015 Barbaro also started a new important partnership for Prime Shipping, its Russian subsidiary for sea-river transportation, through the creation of a Russia-based joint venture between Rosneft and also Sberbank Investments. “We are actively collaborating with our Russian as well as other partners at developing new joint projects and programs,” continues
Barbaro revealing an interest in the Asian market as part of the company’s next strategy. “Probably, as many other shipowners in the current moment, we are cautious about the high tonnage in the market compared to a fairly low demand. We also note a long lasting difficult situation in the newbuildings market. Hopefully the Far East area gives positive signals to the market and demonstrates signs of growth; we will be happy to increase our collaboration in that area,” says Barbaro. Nevertheless, Barbaro’s sentiment on the shipping market seems to be prudent. “We deem that the trend for liquid and bulk market will remain, in any case, low for the coming period. We all know that oil and the oil transportation markets may be subject to unpredictable phenomena but let’s be positive and follow our passion for shipping,” she concludes. ●
Fleet diversification drive Naples-based Garolla Group is in an opportunistic mood when Maritime CEO comes calling
he company’s last investment was a new bunker vessel to be deployed in southern Italy but for the Naples-based Garolla Group further diversification and opportunities are still to come either for the tanker business (operated through Sarda Bunkers) and in the offshore market (where the group is active with Med Offshore). The fleets are respectively made up of four small tankers and three AHTSs. Carlo Garolla, chairman of Sarda Bunkers (pictured, right), tells Maritime CEO: “The recent purchase of the SB Alisea bunker vessel is a remarkable move for our company, not only in terms of quality of the ship but particularly because it confirms our group’s intention to continue betting on the development of our business in southern Italy, despite the crisis of shipping and cargo volumes in the port of Naples and Salerno.” Garolla is at the helm of the company together with his son Andrea (pictured, left) and his cousin Federico. Following the last purchase of the small tanker SB Alisea the Garolla family seems to be still in the market for catching new opportunities potentially arising. “We are currently monitoring
Garolla Diverse family-controlled southern Italian owner with interests in bunkering, tankers and offshore.
Family-run companies will in the future not necessarily own vessels 100%, but act as skilled managers
the global offshore scenario, paying particular attention to oil price fluctuations and are ready to seal innovative investments,” says Garolla. “We are definitely ready to make further investments. We might diversify in different market segments should there be any interesting opportunities. For instance, we’ve been attentively evaluating the LNG development as a future alternative fuel for some time.” Andrea Garolla, who is also chairman of the national young shipowners association in Italy, reckons: “The Italian shipping industry has generations of know-how on which to build for the future. In particular know how to structure companies in the best way to secure investments
and manage vessels efficiently. Family-run companies will in the future not necessarily own vessels 100%, but act as skilled managers, especially where specialised ship types are concerned.” ●
Cape crusader Despite being linked to VLCCs, Fred Cheng is focused on building a cape fleet at the moment
ake news,” he says, grinning, his hands waving. Ebullient as ever, Fred Cheng bats away broker talk that he has finally bought a VLCC with a Donald Trump riposte when Maritime CEO comes calling at the start of March. On the contrary, he insists the aim right now is to build up a capesize fleet. Cheng’s Shinyo International was listed by brokers as the buyer of a Gener8 Maritime VLCC still under construction at Hanjin Heavy’s yard in the Philippines. The deal, many brokers claimed, was subject to a fiveyear time charter tender to China’s Unipec “I have no idea how this fake news came about,” Cheng tells Maritime CEO. “I’ve been asked by so many people, but I did not buy the ship,” he stresses. Towards the start of this year, Cheng, the former boss of Golden Ocean, bought his second capesize – the Bulk Prosperity, to be renamed Shinyo Brilliance - as he gradually dips his toes back into vessel ownership. “I’m still looking at older capes,” Cheng says. However, he cautions he’s not
Shinyo International Founded in 2001 by the former Golden Ocean tycoon Fred Cheng. Currently owns two capesizes and is looking for more.
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It’s much too late to catch the bottom, but there is still some upside left
close to sealing any new deals since competition for bulkers is so intense right now. “Every ship purchase in dry bulk today is an auction for cash buyers only,” Cheng says. He admits that cape prices are on the rise, saying: “It’s much too late to catch the bottom, but there is still some upside left.” Cheng has been linked numerous times with making a VLCC comeback in recent years, however he feels that particular market cycle still has some way to run before investments become tempting again. “VLCC prices will continue to drop and the spot market will take a true dive within the next 12/18 months. Perhaps then there will be some opportunities,” Cheng says, adding: “What I like about shipping today is that the cycles are shorter, which gives oldies like myself some
more shots at it.” Cheng founded Golden Ocean in 1978. Mistimed VLCC orders and the Asian financial crisis saw him sell the company to John Fredriksen in 2000. The following year he founded Shinyo International while also running a number of VLCCs for a short time in a joint venture with Captain Charles Vanderperre, the founder of Hong Kong’s Univan Ship Management. ●
“The market will, as it always does, set the terms for newbuild activity” — Nick Roos, CEO, Maritime Asset Partners
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How to make shipping in the Philippines easier Ian Claxton has some ideas for Manila to hear
well-known name in Southeast Asian shipping circles, Ian Claxton, quit his post at Thailand’s Thoresen Shipping last year, and is now heading up one of the Philippines’ largest lines, Magsaysay Transport and Logistics. Having worked in many places across Southeast Asia, including Singapore, Claxton is well placed to note what needs to happen in the Philippines to make shipping – and indeed transport in general – more smooth. “The government has correctly identified the need for additional transport infrastructure here in the Philippines,” Claxton says. This includes ports, inland access to those ports, transportation and warehouse/ distribution facilities to service each and every growing metropolitan area. Claxton relates how port and road congestion currently creates massive cost inefficiencies, with ships waiting several days to berth in some instances, and trucks jamming access roads, predominantly at domestic ports, affecting the cost of operation by demanding the deployment of more assets – ships than should be required to carry the available market volume. With many countries within ASEAN as good examples of industry clustering, Claxton argues there is a lot the government can do to assist through efficient zoning and removing the need for wasteful investment in patchwork facilities. Segregating ports and the industry transportation congestion away from metropolitan areas and their private transportation needs would relieve the commuter of many lost hours currently spent stuck in traffic jams, Claxton says.
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Also on Claxton’s wish list for the government to fix is reducing red tape such as the application of business licences and the myriad public service forms required for customs clearances and tax payments. Claxton also feels that this archipelago needs a greater commitment from government to help owners invest for the long term. “The domestic shipping scene requires long term commitment. It is one market and the player cannot dip in and dip out as and when international freight rates become more attractive or less attractive,” Claxton says, adding: “Because of that, combined with the relatively small size of the domestic market, players need some level of reassurance they can stay long term.” Domestic ship operators are, Claxton claims, saddled with higher costs, including costs of drydocking, facilities for which are limited and therefore relatively expensive compared to other Asian alternatives. Domestic players are obliged to flag and man from the Philippines, something that is not an issue per se as the Philippines provides the largest number of excellently qualified officers and crew to international shipowners. However, matching international salary levels is a “challenge” for the domestic sector, Claxton observes. The domestic port congestion environment is different to the international player, where an owner can get a fixed day berth window in most ports worldwide, something, as Claxton makes clear, is not the case in the Philippines. “Domestic ships spend time awaiting berth availability, operating
on a first come first served basis, with limited shore cranes available, geared vessels are a must and even so, should a passenger/roro vessel arrive she goes straight to the front of the queue, meaning the ability to operate a fixed day sailing to domestic customers is virtually impossible unless a 50% redundancy is built into a fleet or a schedule, something that is very expensive to maintain,” Claxton stresses. Then there is the worrying issue of piracy off Mindanao. “The industry is becoming desperate for a resolution to this problem, especially as Mindanao becomes more and more a focus area for growth, both agriculturally and industrially,” Claxton says. Magsaysay is engaged on a gradual fleet renewal program and will take delivery of its latest acquisition - a 600 teu secondhand containership in April. ●
Magsaysay Transport Manila-headquartered firm owns 12 small domestic boxships, 17 small tankers plus three passenger catamarans.
Taking A Long Term View
Education and Training
With some sectors looking to have bottomed out many in the Lion Republic are buying up cheap assets
peak it quietly but among Singapore’s battered shipowning community there is a feeling that the worst is over and now is the time to gear up and make the most of any opportunities that arise. Indeed, Singapore-based dry bulk players have been among the most aggressive owners snapping up bargain tonnage in recent months (see overleaf). Not every sector is out of the woods however, as Esben Poulsson, president of the Singapore Shipping Association, elaborates in conversation with Maritime CEO. “I believe for the offshore segment, any light at the end of the tunnel remains very faint, even if there is some evidence of a slight increase in exploration activity in the pipeline, judging by a notable increase in enquiries,” Poulsson says, adding: “The segment remains plagued by over capacity and for now at least, a fairly stable oil price.” On the other hand, Poulsson, who is also chairman of the International Chamber of Shipping, sees the dry bulk and container segments improving both in terms of rate levels and sentiment. Tankers, meanwhile, remain “volatile”, he says,
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still affected by overall excess in capacity.
Next generation Singapore is aware of all the digital transformation chatter sweeping the shipping industry and is adamant that its citizens be ahead of the curve in this respect. Tan Beng Tee, a senior official at the Maritime and Port Authority (MPA) and one of the best known women in shipping in the Lion Republic, warned recently the industry’s workforce needs to up its game when it comes to IT literacy. Speaking at a briefing session ahead of the Sea Asia 2017 conference and exhibition, Tan said: “The advent of digitalisation will help improve processes in the industry but it will also disrupt the way you do business. With this in mind, there is a need for us to be prepared and start thinking about the new business models that will arise as a result of digitalisation in the industry.” Tan continued: “Another area we need to start focusing on is the skills of our workforce. Shipping is a
traditional and documents intensive industry. This will no longer be the case in the future with blockchain coming into the market. New skills will be required and we will need to start equipping our workforce with cross-disciplinary skills such as IT literacy and data analytics.” Reacting to news carried on our news portal Splash that a majority of the industry is still not investing enough to harness technology, Andrew Tan, the MPA’s chief executive exhorted that there was a need to raise greater awareness of the importance of digital to shipping. “It will take time but the conversation has to start now given disruptions underway,” Tan noted. ●
Unrivalled daily coverage of Singapore maritime
BW rings the changes Andreas Sohmen-Pao has sold his VLCC fleet, while other local owners have feasted on cheap bulker bargains this year
ndreas Sohmen-Pao continues to remake the BW Group in his own image. The third generation at the helm of what was originally World-Wide Shipping prior to 2003’s buyout of Bergesen, Sohmen-Pao is very much a poster boy for Singapore Maritime Inc too, on the board of various local shipping boards and chairing the Singapore Maritime Foundation. This year Sohmen-Pao chose to ditch the strand of business that arguably made his grandfather, Sir YK Pao, more money than anything else, namely VLCCs. BW Group surprised the market this March by selling all of its 11 VLCCs, including two newbuilds, to New York-listed DHT Holdings for $538m.
While still retaining a strong focus in the product tanker sector via BW Pacific, Sohmen-Pao is more keen these days to focus investments in the offshore and gas sectors as well as proving increasing adept at asset plays in the supramax to kamsarmax dry bulk sectors. BW Dry Cargo formed last April has been among the most aggressive buyers of sub-panamax tonnage in the world – and latterly has also made tidy profits from selling some of these cheaply acquired assets. Having completed the takeover of Norway’s Aurora LPG in December, this year BW LPG has set about rebranding the acquisition whereby all the bought ships are being renamed with BW suffixes.
The acquisition gives BW LPG a commanding 52-ship share of the global VLGC sector.
Resurgent dry bulk A host of other local names than BW Dry Cargo have also been at the forefront of the global rush to snap up cheap secondhand tonnage of late. The most aggressive has been Winning Shipping, a Chinese firm headquartered in the Lion Republic that was among the top five dry bulk buyers of 2016, and has continued in this frame into 2017, taking three capesizes within the first two months of the year. Bearing plenty of similarities to Winning is Everest Shipping – in maritime ceo
that it is Chinese, based in Singapore and splashing serious cash for bulker bargains. In February Everest summited tonnage-wise talking its largest ships to date, paying $70m for a pair of VLOCs. It has also added five capes to its fleet since the turn of the year marking it out as an advanced climber up the dry bulk ranks. Not to be left behind from this bargain hunt, China Navigation has been busy scouring the market. It secured a one-year-old handysize for $15.5m in January and remains on the lookout for more vessels. Towards the end of March Wilmar International, owned by local tycoon Kuok Khoon Hong, bagged a brace of supramax bulkers for just $19m en bloc. While still cheap, the deal shows how supramax prices have shot up in recent months. Wilmar secured a
six-year-old supramax last August for $7m.
PIL turns 50, nears 500,000 slot mark On the occasion of the 50th anniversary of the founding of Singapore liner firm Pacific International Lines (PIL), its managing director gave a rare interview this March with the Straits Times in which he outlined plans to grow his fleet beyond the 500,000 slot mark. With CMA CGM buying APL last year, PIL, one could argue, is now Singapore’s flagship carrier. Teo Siong Seng, better known as SS Teo, said the 12 ships it has on order will take the company’s fleet size beyond half a million teu for the first time next year. Teo said the vessel additions would cement PIL as a “B-division” player, up from its
erstwhile “C-division” status. “We will be comfortable to operate at this size and there are only a handful of companies like this,” Teo told the Straits Times, adding: “At the moment, we don’t have any ambition to go into the next phase as we’re still a private company and capital is limited. We may in future, but I think we still have to be quite cautious for now.” Teo said PIL is looking at adopting a range of digital technologies - from data analytics to blockchain to Internet of Things - to beef up its operations. PIL was founded by Teo’s father in 1967, starting off with four coastal vessels. Today it is one of the largest shipping lines in Southeast Asia and the Teo family has plenty of other interests too, not least Singamas, one of the world’s largest container manufacturers. ●
Train wrecks, OSVs and transparency A TRAIN WRECK in slow motion.” That’s how Venkatraman Sheshashayee, best known simply as Shesh, the offshore veteran and CEO of Micyln Express Offshore, described the collapse of oilfield services firm Swiber Holdings last year during a live Q&A on our news site Splash. Other Singapore offshore firms have since been derailing in front of our eyes and yet the silence from those driving these troubled wrecksin-the-making begs once again for more stringent transparency rules to be applied on listed entities in Singapore. As well as Swiber the list of offshore firms seeking bankruptcy protection in recent months has extended to Swissco Holdings, Ezra Holdings and its jointventure Emas Chiyoda Subsea, while another Ezra subsidiary, Emas Offshore, stands on the brink as we go to print. It is not just the local stock exchange that is coming in for flak
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with all of these collpases. There is also a growing angry clamour directed towards local banks who bankrolled the excess seen across Singapore’s offshore scene. The pain among the local offshore community will continue. Bob
Dudley, the boss of energy major BP, warned at the start of March he saw no oil price rise for the coming five years, news that would have sent a shudder across Singapore’s overleveraged offshore community. Ezra is unlikely to be the last casualty. ●
Fullerton Hotel, Singapore Monday, April 24 Visit www.splash247.com/forum or contact Grant Rowles on email@example.com for details Sponsors:
SINGAPORE IN PROFILE PORT
Pros and cons of container consolidation Singapore’s port is seeing more calls thanks to the recent alliance merry-go-round
he island’s top terminal operator remains cautious on prospects this year, however analysts have made it clear the big container alliance reshuffle has favoured the world’s biggest transhipment hub. The head of port giant PSA International has admitted times are tough for those in the terminals sector. In announcing results for 2016 recently, Tan Chong Meng, group CEO of PSA International, said: “The tough business environment is likely to continue into 2017 but that is not the whole story. We may witness more system-wide changes brought on by the convergence of slow market growth, emerging technologies and new business needs. Rapid consolidations in the container liner industry are giving rise to uncertainties as well as opportunities. New shipping service deployments and products will hit the market, demanding adjustments and adaptations by not only terminal operators, but players big and small in the global supply chain.” Despite the cautious sentiment, what is clear is that the April 1 box shipping alliance changes have been kind to Singapore. Hong Kong-based shipping software firm CargoSmart has provided data to Maritime CEO that shows the new alliances structure sees the Lion Republic get an extra weekly service on the main east-west trades, eight more ships calling and the average size of these vessels dropping by increasing by 1,200 teu to 12,200 teu, the largest average ship size to call at any major port worldwide.
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Singapore could well close the gap with top spot Shanghai teu-wise in the coming 18 months
To put these statistics in perspective, Shanghai, which is the only boxport with more throughput than Singapore in the world, is experiencing – post alliance changes – five less weekly services, 50 less deployed vessels and an average ship size by alliance members calling of 11,400 teu. Singapore could well close the gap with top spot Shanghai teu-wise in the coming 18 months. Analysts Alphaliner also have highlighted how Singapore has won big on the Asia – Europe tradelane post April 1.
Alphaliner states Singapore will be handling 34 weekly calls on the Asia-Europe tradelane, up from 29 previously. The growth comes at the expense of neighbouring Port Klang in Malaysia. France’s CMA CGM, the world’s third largest containerline, having bought out Singapore’s APL last year, has committed to more calls in Singapore and has also inked an agreement with PSA to establish a joint venture terminal. Container consolidation, while damaging to others, has actually proved a bonus to Singapore. ●
THE LEADING MARITIME EVENT WEEK
DISRUPTIVE SUSTAINABILITY HALL ENTER THE OCEAN SPACE
SINGAPORE IN PROFILE YARDS
Singapore’s millionaires are not best suited to build rigs Demographics as much as the low price of oil is spelling disaster for the republic’s offshore building ambitions
he obituary for Singapore’s shipyards has been written many, many times. It’s Indian summer – roughly 2006 to 2012 – in which an insane number of rigs were ordered, now feels a long time ago, unlikely ever to be repeated. Keppel’s announcement at the end of January that it was closing three yards at home and laying off another 2,620 staff to add to tens of thousands already announced was massive news on our news site Splash with more than 30,000 of you reading the report. Keppel has since announced the sale of its Dutch yard to Damen. The business of shipyards is actually one of the most simple, most base of any sector in maritime. It is the ultimate arbitrator of supply and demand as well as a keen adherent to demographics. At around $57,000 per person, only Qatar and Luxembourg are now richer than this Southeast Asian country, the republic’s ministry of finance crowed in a recent posting on its website. By 2020, it is estimated that an astonishing one in 30 Singaporeans will be US dollar millionaires. The streets of the Lion City are a homage to consumerism; the world’s chicest brands opening ever more flash stores in the endless kilometres of shopping malls that seemingly stretch from one end to the other of the little city-state. This is all well and good – but combined with a strict immigration policy – it makes the future of those in heavy industries very hard to
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Only Qatar and Luxembourg are now richer than this Southeast Asian country
fathom. Add on top of that the fact that there is simply no demand for new rigs whatsoever for the coming year – or years – and you can see that the pain is going to grow at Keppel and Singapore’s other major yard, Sembcorp Marine – the argument for the two rivals to merge will only intensify. The death of shipbuilding, while sad for those associated with the sector, should actually be seen as a nation’s evolution up the economic ladder. It wasn’t all that long ago that Sweden could lay claim to being the world’s second largest shipbuilder, for instance. Even once mighty
Mitsubishi Heavy Industries of Japan is now having to question whether it’s worthwhile building vessels anymore. ●
“Most of the discussion I’ve been hearing about cyber and cyber threats has actually been about IT hygiene” — James Wilkes, managing director, Gray Page
Beyond bland: why the US needs a wine revolution Neville Smith is adamant other Pacific nations are trumping America when it comes to oenological diversity
e have a Sauvignon Blanc and a Chardonnay.” Words to make the heart sink. Having spent the better part of a fortnight in the US recently I can confirm that the country, among its other many challenges, is still living in the 1990s, oenologically speaking. The trouble is that, while the quality will change depending on the bar, restaurant or reception, the choice barely moves the needle. The same goes for reds, where its Cab Sauv, Merlot or Pinot Noir, or Sangiovese if you’re lucky. Leaving aside that Cab Sauv is really a food wine, most Merlot a bland fruitbomb and the Pinot usually too sweet, at least the choice
Two to try ENGLISH SPARKLING WINE is still a poor branding exercise to my mind but Berry Bros. & Rudd’s fine example by Kent/ Sussex producer Gusbourne Estate 2013 (£25.95) is an absolute stunner, precise, clean fresh and very moreish.
is fractionally wider. This is not to say that better wine is not available, but you have to hunt for it and if you are looking for many of the more fashionable varieties you might be disappointed. I should immediately caveat this most sweeping of statements. North America is home to some of my favourite wines but it is this wealth of variety and quality that makes the reversion to the mean so disheartening. And this from a man who likes Chardonnay – and likes nothing more than successfully serving white Burgundy to people who say they never drink it – as well as its red counterpart, both of which shine
An old favourite (which is these days in the hands of Alibaba owner Jack Ma) Château de Sours is classic Bordeaux Rose, juicy and fresh but lighter and fresher than the luminous examples found elsewhere. ●
here. Syrah too, Zinfandel even, not to mention some fine Rieslings. Open up the Southern Cone and the choices spike – despite a tendency to grow a shedload of Sauvignon Blanc. I guess it’s a result of that commodification of wine highlighted some years ago in the documentary Mondovino, that the options – as well as the styles - of wine available are being denuded by the idea of global tastes that sees countries with interesting, unusual indigenous varieties rip them out and plant more Pinot Grigio. But not to gripe. Spring is here in the northern hemisphere and beyond that some better weather, the chance of some outdoor eating and more wines to try and enjoy. I’ve highlighted two to try below but if a glass of Pinot is your thing, don’t overlook New Zealand Pinot Noir 2014 by Greystone Wines (Berry Bros & Rudd, £17.50) which is a tart and textbook example from this grape’s second home. Likewise, if you want a twist on a party pleaser, Intipalka Malbec 2015, Viñas Queirolo, Ica Valley (Corney & Barrow, £9.95) has plenty of talking points: Grapes grown at high altitude with favourable maritime influence, and it’s from Peru. ● maritime ceo
he Gadget Cupboard recently noticed — with some alarm — that only one of the computers we own has a CD drive. We don’t bemoan the demise of CDs, but it does mean — now that we listen to music primarily on computers or phones — that it’s time to get more serious about computer audio. In olden days this meant a sound card, but nowadays the DAC is the way to make computers sound great. One of the best names in DACs is — ironically — Schiit and their finest offering is the Yggdrasil, named after Norse mythology’s primal source, the world tree. It converts almost any digital input into highly accurate analogue sound, eschewing the traditional delta-sigma conversions for a multibit ladder DAC. In short, it doesn’t leave things out or guess stuff; it faithfully transmits what’s there. On top of that it has Adapticlock, which sorts out any signal oddness from USB clock jitters, which means that it performs beautifully even if your computer is a bit dodgy. Yggdrasil www.schiit.com $2,300
ow that the sound is converted, you’ll need it amplified. You could do no worse than a matching Schiit Ragnarok. Named after the Norse mythos apocalypse, the Ragnarok is capable of running the most sensitive headphones as well as 60W per channel 8-ohm speakers. An integrated amp, it has outputs to use as a preamp as well as balanced and single ended outputs for headphones and speakers. It also uses a microprocessor to keep the signal pristine with only 0.03 ohms of impedance and to automatically revert to zero-volume low gain mode if there’s a fault anywhere. The volume dial is number-free, so it’s impossible to categorically state whether it goes up to 11 or not — a question at the back of any true audiophile’s mind. Ragnarok www.schiit.com $1,700
Music on the go
ll that remains is the problem of smartphones, perhaps the medium people use most for listening to music. Now the audio quality will necessarily be more spotty — a DAC isn’t exactly portable. Headphones on the other hand can help a lot. Sennheiser is a byword for audio quality, and they have stepped things up a notch for the humble smartphone with their Momentum 2.0 Wireless Headphones. They have active noise cancellation, which is not absolute, but gives the audio a better than fighting chance against urban noise — and they do so with the usual deliciously crisp, clear and full sound that you’d expect from Sennheiser. They also have a built-in microphone to enable you to accept calls while you’re wearing them. The battery life is such that it will generally outlast your phone by about six hours, but they will work without power (minus noise cancellation) by using an old-fashioned jack plug cable. They are light and comfortable, and fold up into a smallish bundle. If you’re upgrading from earbuds, they may well rekindle a love of all things musical for you. Sennheiser www.sennheiser.com $500
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China’s coming out party The People’s Republic is stretching its influence far and wide. What are the consequences? Paul French reports
hina may sometimes seem a very insular country. Its profile at the United Nations is low, it rarely involves itself in international peace keeping missions or other ventures that involve multilateral action. However, a number of authors are now arguin, China is engaging with the rest of the Asian region and beyond more than ever – but with Chinese characteristics. Tom Miller’s China’s Asian Dream argues that China under president Xi Jinping is actively seeking to restore its historical status as the dominant power in Asia. It is doing this by promising neighbouring and regional countries new roads, railways, dams and power grids – infrastructure in return for influence. More contentiously Miller argues that this may have the end result of reducing some of China’s poorer neighbours (think Myanmar, Cambodia, perhaps even eventually the more recalcitrant North Korea) to little more than vassal states. The threat of this is
stirring up anti-Chinese feeling, Miller contends, in some countries, such as Vietnam. China may achieve its apparent goal of regional dominance but at what price? Miller concentrates on China’s role in Asia. Veteran sinologist David Shambaugh’s take on China’s role in the world in China Goes Global, admittedly a couple of years old but still an excellent guide to the PRC’s spreading tentacles of influence across Africa, Latin America and the Middle East. Oil, commodities and trade routes are the cause of this renewed interest in the world. However, Shambaugh appears less worried than Miller, arguing that China’s influence is more broad than deep. China has influence but perhaps not as much as we think and certainly not compared to either the US or the EU. China is what Shambaugh terms a “partial power” with a way to go yet before it has real and lasting influence outside East Asia. Lastly China commentator Jonathan
Fenby has just updated his book from a few years ago, Will China Dominate the 21st Century?. It’s a concise book at under 150 pages but no less fact and argument filled for that. Fenby examines China to seek its breaking points, those parts of the system that are weak and might not hold over the long term or survive a dip in the Chinese economic miracle. Ultimately Fenby concludes that ‘reblancing’, ‘bubble economies’ and all the other buzz phrases are not the main danger. Rather, central to his hypothesis is the idea that the central government is too impervious to change and eventually its conservatism will stifle any ongoing reform efforts, putting a brake on the economy and any global ambitions. It’s a fairly wide range of opinions – from Miller’s idea that China is reinstating the vassal state system from previous dynasties to Shambaugh’s that China has taken on too many engagements in too far flung destinations and Fenby’s return to the old problem of a rigid autocratic state. But China persists and, perhaps despite the economic odds, continues to thrive. Time alone will tell who, if any, of these authors have got it right. ●
“We talk to each other, we shy away from social media and then we wonder why no one knows anything about us” — Lena Göthberg, founder, Shipping Podcast
Charming Port Chalmers Sam Chambers heads to one of the world’s most southerly ports. Next stop, Antarctica!
t’s one of the most southerly ports of calls in the world, primarily for cruiseships and logs, and also was the last stop legendary explorer Robert Scott made before heading on his final treacherous expedition to the Antarctic. Welcome to Port Chalmers in the far south of New Zealand, essentially a distant suburb of Dunedin, a city twinned with Edinburgh and with a suitably Scottish ambiance… and weather. It’s not big – with a population of just 3,000 this Kiwi outpost can claim to be the smallest destination covered within our travel section ever. Its quaint size is best evidenced when a giant cruiseship comes calling, dwarfing the surroundings. Much of Port Chalmers is located on a small hilly peninsula, at the northern end of which is a large reclaimed area, now the site of Dunedin’s container port. Close to the southeastern shore of this peninsula are a pair of islands, which lie across the harbour between Port Chalmers and the Otago Peninsula. Port Chalmers is some 15 km
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northeast of Dunedin and shares the same long, narrow waterway, Otago Harbour. From Port Chalmers it’s worth heading up the peninsula to the windswept beaches of Aramoana via various spectacular bays, the first of which houses the wonderful Carrey’s Bay Hotel, home to sensational seafood. Heading in the opposite direction brings you to Dunedin, the second largest city in the south island of New Zealand. Among the most visited sites in this city of 130,000-odd citizens is Baldwin Street, which has its mention within the Guinness Book of Records as the world’s steepest street – a right calf-buster! Not far from there are the botanical gardens, which, rainpermitting (you have been warned!) are well worth a wander. After that, you could be thirsty.
It’s just as well then Dunedin is very well endowed when it comes to breweries, the two biggest of which, Speights and Emersons, also come with adjoining restaurants. From Dunedin head around the other southern side of Otago Harbour along winding roads, past the country’s only castle, to the headlands opposite Aramoana and visit the Royal Albatross Centre, set along a truly rugged coastline. In terms of where to stay, we’d recommend Bluestone on George in the heart of Dunedin and a stone’s throw from the best espresso (short black in this particular neck of the woods), namely the Good Oil Café. And right next door, for good pressies to take back home as well as if it just so happens to be a tad inclement when you’re there, is Glowing Sky, home of the best merino wool clothing money can buy. ●
Its quaint size is best evidenced when a giant cruiseship comes calling, dwarfing the surroundings
In search of the perfect person at the helm A modern day hero or a figment of our imagination – does the perfect maritime CEO really exist? Faststream’s Mark Charman investigates
n the modern world of maritime, with its ever changing landscape led by economic uncertainty and political unrest, the job of a maritime CEO has never been more difficult. The demands, expectations and trust placed on a CEO to steer a business successfully through these challenging times are at an all-time high. From proven industry experience to specialist skills and excellent personal qualities, the picture we paint of the perfect CEO could be likened to a superhuman. The reality is that the perfect person rarely exists, but there are some key attributes that will get them well on the way. Here is what organisations tell me they are looking for in the (nearly) perfect CEO.
Cost conscious Organisations must have their finger on the pulse when it comes to running a lean business and this buck stops with the CEO. They must be well-versed about the running costs within their business, from top to bottom, and should be the driving force behind asking, and answering the questions; “Do we need it?” or “can we get it cheaper?” Operating lean is not about cost cutting or being under resourced, it’s about maximising profits in the good and bad times. The main focus of a CEO must be with the results of the business. A great CEO will be on top of their numbers because without this, the business will not move forwards. They must be results orientated which is not just about the ‘hear
and now’ results of the business, but having a broader perspective on where future profits will come from tomorrow, next week, next month and next year.
Laser-like focus A maritime CEO will have to navigate distractions, turmoil and every other possible eventuality that their business or the market throws at them. The unexpected will happen inside and outside of their business but they have a job to do and objectives to meet. They’ll be able to maintain complete focus on the job in hand regardless of what’s going on around them.
Bravery The maritime industry is not for the feint heated and a CEO will need to be brave about the way they run and develop their business. A great CEO will be flexible enough to roll with the punches whilst thinking and acting strategically and having the courage of their convictions.
Global perspective There’s arguably no other industry which operates on a more global stage and the same should apply to a CEO. They should be culturally adept, have a brilliant global perspective and the ability to look at the bigger picture and spot opportunities and threats. This doesn’t mean it’s necessary for the perfect CEO to have worked in all seven continents, but they do need to have a genuine
knowledge of how their business can expand in different parts of the world, how their product or service may need to be adapted and what ROI they expect in return for these efforts.
Entrepreneurial spirit Entrepreneurs don’t always make the best CEO’s, but having an entrepreneurial spirit with the skills and knowledge to match their ambition almost certainly will. Entrepreneurs are creative, adaptable, open to change and quick to spot opportunities. A perfect CEO will need to have a combination of all this on top of the knowledge and skills they need to do their job. There is no ‘one size fits all’ model for the perfect CEO, but whether you’re a current CEO or you’re looking to be one in the future, the tips may help you become successful. ● maritime ceo
Turbulence ahead for shipping’s smart future Neville Smith argues the graphics department has got ahead of engineering’s ability to deliver
happened to be flying from Hamburg to London at the end of February when storm Doris was doing her worst to disrupt travel and transport in the UK. Having already had my original homeward flight cancelled, I raced onboard and sat tight even though I knew what might be coming. After an hour on the tarmac while Heathrow decided if they would let us takeoff, we finally departed and I turned my attention to typing up some notes on – what else – digital disruption and the future of smart shipping. As the flight drew on, the bumps and shocks grew worse. On final approach conditions worsened dramatically and much use was made of what we used to call sick bags but which are nowadays probably known as universal waste fluid solutions. How apt, I thought. I’m experiencing a physical manifestation of what is happening - and will continue to happen – to shipping. The principle trouble with the future of shipping is that, to my mind, the graphics department has got ahead of engineering’s ability to deliver. But there are more fundamental issues too. Let’s begin at the sharp end of the challenges. A realistic re-valuation
ISSUE ONE 2017
of shipping assets and re-ordering of business models will call for a very strong stomachs; it’s the reason why so little of either has happened. The prospects for digitally disintermediated sectors – freight forwarding is under pressure but there are others – look fragile. We are told almost continually how much the industry needs to embrace its role in the wider supply chain but many will baulk at the changes this requires. There was plenty to ponder but I wondered if in fact this wasn’t the storm but really just the tremors that precede the real action. My notes on disruption and shipping’s digital future are increasingly typically of the content I produce and some recent conversations make me think there may even be something of a backlash building against the futurologists. I won’t speak for my clients but from a personal point of view, some of the ideas we hear proposed as part of shipping’s smart future will remain at the very outer edges of credibility. I’m pretty tired of lazy reversions to arguments for autonomous ships that prefer snazzy graphics to actual use cases. Forget a milk run from the Elbe to the UK, when transiting the North Atlantic in winter, an owner as well as a shipper will want crew onboard to keep an eye on the
cargo and the ship. Problems that go unattended can very quickly have huge commercial and environmental consequences and crew costs are relatively minor compared to the potential costs of not being able to respond to problems. Equally, when I hear speakers talk about Uberisation I wonder whether those making the assertions really understand their context. We are hearing about this subject as if it is expected tomorrow and the overexcitable believe the industry can solve operational problems with better apps. Yes, software will help make operations safer and play a powerful and transformative role in connecting demand with supply, but when it comes to fulfillment it’s still all about steel. What is much harder is for companies to look at their internal structure, cost base and business model and decide whether it is sustainable. Just because the future is not going to be like the past doesn’t mean we have to throw everything away. As for the return of wind power, well I don’t need to remind you what happened to the last company to try this one on. Navigating bad weather is difficult enough without having also to manage sails, so the usage window will likely be small. Agree or disagree, the mistake is to buy the hype. Spending too much time thinking about wind power, autonomy or Uberisation risks wasting time that could be used on more pressing problems. There are plenty of technologies whose time – thanks to better bandwidth and cloud computing - has come but where to focus and refocus is as important as simply looking for the latest shiny and fashionable thing. As my flight landed safely a round of applause broke out. I won’t labour the fact that this was because a qualified and highly competent team of humans was in the cockpit making decisions and anticipating risk faster than a computer. You’re human, and I suspect had already worked out how the story would end.●
The year ahead Every issue we ask readers topical questions. This time we’ve been digging out our crystal balls How will the crude tanker sector perform in 2017 as compared to 2016?
Exports from North America will increase three-fold
It will be quickly killed by over investment and new vessels
How will the product tanker sector perform in 2017 as compared to 2016?
Which sector will perform the best in 2017?
Unless there is a flood of new orders the markets will remain balanced but not exciting
Slightly better as India and US will invest more in infrastructure
Crude tankers 15%
Product tankers 14%
Dry bulk 26%
LNG carriers 32%
What will be the average price for a barrel of Brent crude in 2017?
How will the LNG carrier sector perform in 2017 as compared to 2016?
New terminals coming on line will increase demand for shipping services, if not rates
Old models do not really work anymore. Supply elasticity
Under $30 1%
$61 - $70 26%
$31 – $40 3%
$71 - $80 4%
$41 – $50 18%
$81 and above 2%
$51 - $60 46%
How will the containership sector perform in 2017 as compared to 2016?
Consolidation will take a few years to solidify and shake out the losers Better 52% Worse 48%
How will the dry bulk sector perform in 2017 as compared to 2016?
The historic link between global GDP growth and shipping volumes has decoupled
Until public markets and private equity firms stop following each other, GDP and shipping will not return to their historic link Yes 66% No 34%
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Khamis Juma Buamim, the CEO of Gulf Navigation in Dubai has made the cover of the latest packed issue of Maritime CEO magazine, which publis...
Published on Apr 12, 2017
Khamis Juma Buamim, the CEO of Gulf Navigation in Dubai has made the cover of the latest packed issue of Maritime CEO magazine, which publis...