INSIGHTS FOR PROFITABLE SHIPPING
13 May 2010
Volume 369 Issue 6582
Consequences of the Gulf of Mexico oil slick for shipping
INSIDE THIS ISSUE MARKETS: Putting the squeeze on Belarus COMMERCE: Changing face of trade/ship finance REGULATION: Courting a piracy solution TECHNOLOGY: Trimming operating costs LOGISTICS: Shifting into transload gear DECISION-MAKERS: Tony Hayward, CEO of BP
What is your phase-out plan? After 31 December 2009, the European Union will prohibit the charging of virgin R-22 on all EU agged vessels.
What are you planning to do about it? Our world-wide network has successfully performed more than 1,300 changeovers in recent years, both during dry-dockings and on vessels in service. By sailing between ports and completing the project at sea, there are no interruptions to the day-to-day functioning of the refrigeration systems, or delays for the vessel. Please contact us for more information.
13 May 2010 volume 369 issue 6582
every week 3 Look Out
4-6 Story of the week: Fears on the Horizon
Looking beyond the Horizon. Green is as green does
International tanker markets are bracing themselves for the possibility of tougher regulations as efforts continue to stem the oil from the Deepwater Horizon. John Gallager watches developments [ Cover photo: PA Photos ]
4-6 Story of the week The possibility of major shutdowns in the Gulf of Mexico has already added to contango in the oil trades
7-5 Markets Box lines buy into recovery. Ukraine studies LNG. India plugs coal gap. Russia puts the squeeze on Belarus. Prospects for tankers. Market numbers
7 Markets: S&P markets watch currency turmoil There are no indications as yet that the IMF/EU bailout of Greece will impact on S&P. Existing ship valuations may be sustained if Baltic indices continue to relect current healthy demand and credit remains available
6 Trade & commerce: The changing face of trade and ship finance Fears of an oversupply of tonnage are proving unfounded, thanks to a major shift in trade patterns. Hal Brown looks at the evidence that liquidity is returning to the shipping industry
6-2 Trade & commerce Spanish and German shipbuilders adapt to the changing market. MOL focuses on emerging routes. Aker benefits from Brazil and subsea. Japan’s big three
27 Logistics: Shifting into transload gear Renewed interest in transloading freight from ocean boxes into domestic trailers and containers has encouraged more retailers to move discretionary freight through southern California ports. John Gallagher reports
32 Decision-makers: Taking responsibility Following the Deepwater Horizon oil spill, Tony Hayward , CEO of BP, is doing everything he can to avert a disaster for the environment – and for BP. Richard Clayton asks whether it could ever be enough
22-23 Regulation Courting a solution for piracy. New UK regulator warns of offshore overkill. Spanish port law reform
24-26 Technology Trimming operational costs. Storage and recovery of energy. Streamlining port surveying and maintenance
27-29 Logistics & supply chain Adriatic full of eastern promise. BMW revisits supply chain costs. Upturn awaited at JadeWeserPort
30-3 Shoes & ships Containers are setting a new urban trend: a café, housing and a sports hall
35 Movers & shakers 36 Shipping in numbers
Is your vessel using R-22?
If you would like specialist advice on this issue, we will be very happy to share our knowledge and experience with you.
The European Union phases-out R-22! www.wilhelmsen.com/shipsservice
13 May 2010
Richard Clayton Fairplay Editor
look out Looking beyond the Horizon The regulatory response to the Gulf of Mexico oil spill may ultimately benefit shipping The implications of the Deepwater Horizon spill, now threatening the coastline of Louisiana and neighbouring states, are potentially very serious for the shipping industry. Yet the consequences might ultimately benefit the tanker sector (see p4). That’s because the Obama administration is likely to reassess its policy on deepwater drilling. The risks of drilling further offshore to find new reserves of crude oil can be severe. The sheer scale of the latest spill, the rate at which oil is spewing to the surface and the potential disaster that seems to be unfolding in slow motion, all make conventional tanker shipping seem safe, controlled and environmentally friendly by comparison.
So stand by for OPA-10, a revisiting of the regulations that were enacted as a direct consequence of the Exxon Valdez spill. But there are significant differences between the two incidents. One was a grounding caused by failings in basic vessel operating procedure, the other clearly wasn’t. One involved shipping in all its vulnerability, the other didn’t. One was caused by human error on a single-skin tanker in a pristine environment. The sequence of events that led to the Deepwater Horizon incident has yet to be determined. One of the rules introduced under OPA-90 is that the leaseholders of an oil field must undertake clean-up of pollution, regardless of who was responsible. BP has mobilised resources offshore, on-
shore and sub-sea to remove as much oil from the environment as possible, while engineers attempt the staunch the flow from the well. And the energy giant, which has spent the past decade trying to move ‘beyond petroleum’, will be judged on the effectiveness of the response to the spill. BP’s CEO Tony Hayward (see p32) knows the reputation of his company is on the line. His own one-man crisis management operation is regarded as creditable, and is certainly energetic. In part, this is because Hayward, BP and President Obama have pinned their hopes on deepwater drilling to reduce dependence on foreign supplies of energy. If this thinking were to change, demand for double-hull shipping could only increase. F
Green is as green does For years, shipowners and many other maritime interests have built a green agenda into the way they do business. There might be a temptation to see it all as a waste of time when the best efforts of thousands of companies can be overwhelmed by a black tidal wave in the Gulf of Mexico, but
green is as green does. Attitude to the environment is all. Last month, Wallenius Wilhelmsen Logistics trumpeted the claim that it had managed to reduce its greenhouse gas emissions for 2009 by 32%. CEO Arild Iversen commented that an efficient supply chain is one of the best ways to cut
costs while benefitting the environment. This magazine has argued before that owners and operators can reduce operating costs by investing to protecting the environment. Best practice in operations complements environmental management: they are mutually encompassing.
Several companies have seen this to be the case in an economic downturn, when pressure to cut costs might have endangered other perspectives. The secret lies in thinking of shipping as part of the supply chain, and working to improve the efficiency of that supply chain as a whole. F
13 May 2010
story of the week
For the latest news:
on the Deepwater Horizon leak, see Fairplay 24 (www.fairplay.co.uk)
Fears on the
Horizon While BP fights the Deepwater Horizon oil leak, government and business are trying to assess what the regulatory response could mean for the tanker markets. John Gallagher reports
he BP oil spill is on its way to becoming the biggest environmental disaster in US history, dragging in its wake the potential for tougher new regulations that could reverberate through international tanker markets. Tanker rates began increasing almost immediately after the submersible rig Deepwater Horizon, owned by Transocean and leased by BP, sank 50n-miles off the coast of Louisiana in the Gulf of Mexico on 22 April, two days after it suffered a massive explosion. In one day, on 6 May, Aframax rates for TD9, from the Caribbean to the Gulf of Mexico, jumped from W155 to W160, holding at $20,000/ day, according to McQuilling Services. BP’s first attempt to cap the well on 8 May with a newly fabricated, 12m (40ft) high, 113-tonne pollution containment chamber failed, leaving oil to continue gushing out at a estimated rate of 5,000 barrels/day. At that rate it will surpass the 1989 Exxon Valdez disaster in terms of amount of 13 May 2010
oil released into the ocean in mid-June.That leaves open the question of whether an accident of that size – despite involving the failure of an oil rig and not an ocean vessel – will lead to an overhaul of the Oil Pollution Act of 1990, the legacy of the Exxon Valdez. Senior officials with the US Coast Guard, which is tasked with enforcing OPA-90 regulations as they pertain to ships, declined to speculate on that scenario. “I am focused on fighting this on the shore and on the water and I’m not going to look ahead and comment on potential legislation,” Coast Guard rear admiral Mary Landry, the federal on-scene co-ordinator for the Deepwater Horizon spill response, told Fairplay at a press briefing on 8 May. But the gears on Capitol Hill have already started turning. Politicians have scheduled at least five separate congressional hearings in the aftermath of the accident in the coming weeks. Both the House and Senate introduced legislation amending OPA-90
to require oil polluters to pay the full cost of oil spills, raising liability caps from $75M to $10Bn. While the bills seem to apply only to offshore facilities, legal experts say it would not take a significant leap to include vessels at some point. “If you increase the liability limits for offshore facilities it’s not a stretch to start looking at vessels and whether we have to reconsider our limits there as well,” said Vincent Foley, who specialises in oil spill claim litigation for Holland & Knight. “[Politicians] aren’t going to overlook a whole other sector of the industry that’s regulated by the same law.” BP has stressed that it will foot the bill for the accident, the estimate for which was increased from an initial $6M/day to $10M/ day as of 9 May. But in the short term, the mass of swirling oil lurking off the Gulf Coast could turn into a calamity not just for BP but for the maritime industry serving the region. Ports along the Gulf have set up cleaning www.fairplay.co.uk
story of the week
Also in this issue of Fairplay:
For more information on Tony Hayward, CEO of BP, see p32
A L A B A M A M I S S I S S I P P I
Mobile Mobile Bay
L O U I S I A N A
Gulf of Mexico
Mississippi River Delta
stations to avoid contaminating harbours with oil brought in on the hulls of ships navigating through the oil slick. Two of those stations are set up along the Mississippi river channel leading in and out of the Port of New Orleans, a major US bulk and breakbulk port. Cleaning a ship hull can take from two to three hours/ship, according to port spokesman Chris Bonura; this could easily cause a back-up and bring shipping to a standstill. As of 9 May no ships have had to use the cleaning stations. “The usual ‘bath tub ring’ is not going to warrant cleaning a hull, but if a ship is transferring heavy oil, it’s going to require being stopped and cleaned”, Bonura told Fairplay. “But it has to be set up so that delays are minimal. The best we can do is keep in touch with shipping lines and give them www.fairplay.co.uk
a level of comfort knowing they’ll be able to get through here without delays.” Alabama State Port Authority CEO Jimmy Lyons is not ruling out a worst case scenario that the drifting oil would require him to shut down the Port of Mobile, Alabama, which handled 54M tonnes of cargo last year. “We’ve seen it happen with hurricanes, and every day that goes by the consequences multiply and the costs start mounting,” Lyons explained. “Power plants run low on coal, or paper mills have to shut down. Whether the cost is on the shipping line or the shipper, someone has to pay. I hope we don’t even get there.” Outside of the Port of Houston, container shipping is
NOAA forecast, 11 May Oil concentration Uncertain Light Medium Heavy Potential beached oil
Deep Horizon oil rig Louisiana Oﬀshore Oil Port
[ Source: NOAA ] 13 May 2010 5
story of the week
considered a niche business in the Gulf, but box lines are keeping tabs as well. “We’re all breathing a sigh of relief,” commented a source from one major box carrier who declined to be identifi ed. “If this were to hit Houston, it would be a real disaster for this business. It’s considered the container port for the entire region.” Houston is also the largest oil port in the continental US, but the slick wouldn’t have to drift that far west to cause a major glitch for the tanker trade. Just west of the Mississippi river delta 20n-miles off shore is the Louisiana Off shore Oil Port (LOOP), the only VLCC port in the US. It handles about 10% of US foreign imports and 10% of US domestic oil production through two pipelines. “We’re going to continue as long as it’s safe for employees or the Coast Guard orders us to shut down,” LOOP spokesman Barb Hestermann told Fairplay on 7 May. “They would probably shut down commerce on the Mississippi before they shut us down,” if the slick were to reverse course, Hestermann said, because the river’s main shipping channel lies east of the LOOP. The perception that major shutdowns could still occur has added to contango – where the price of oil is higher for future delivery than for immediate delivery – in the oil trades. This is making it worthwhile for traders to use ships as inventory storage and wait for oil prices to continue to rise before selling. That’s pulling more tanker capacity out of service, adding to the upward pressure on charter rates. “Given that it costs about $0.90/month to store a barrel of crude and the three month spread to spot prices is about $4.60,
Oil spills since 1967 Deepwater Horizon (so far) 2010 7,000-10,000 tonnes (51,000-73,000 barrels) Exxon Valdez 1989
37,000 tonnes (271,000 barrels)
The 10 largest accidental spills Sea Star 1972
115,000 tonnes (843,000 barrels)
Torrey Canyon 1967
119,000 tonnes (872,000 barrels)
132,000 tonnes (968,000 barrels)
Haven 1991 Amoco Cadiz 1978 Castillo de Bellver 1983 ABT Summer 1991
144,000 tonnes (1.05M barrels) 223,000 tonnes (1.6M barrels) 252,000 tonnes (1.84M barrels) 260,000 tonnes (1.9M barrels)
Nowruz Oil Field 1983
272,000 tonnes (1.99M barrels)
Atlantic Empress 1979
287,000 tonnes (2.1M barrels)
Ixtoc 1 1979
476,000 tonnes (3.48M barrels)
the arbitrage window for storage is open, but not off ering a huge return,” opined Lazard Capital Markets analyst Urs Dur in a research note. “Should that widen, it would mean increasing demand for storage of crude and refi ned products on tankers, particularly VLCCs.” If the BP spill doesn’t lead to regulatory changes substantial enough to warrant a major re-write of OPA-90, it could give the international tanker market at least a temporary reprieve from a US domestic energy policy calling for more off shore production and less reliance on foreign imports. California governor Arnold Schwarzenegger has withdrawn his support for more
10,000 tonnes of oil (maximum) currently estimated to have leaked into the Gulf of Mexico off shore drilling off the coast of his state as a result of the BP spill. Meanwhile the Obama administration is putting a hold on its plan to lift a moratorium on off shore drilling in the Atlantic and the Gulf of Mexico until an investigation of the BP accident is completed. “We may not know the cause of this accident for months, and we may get [more onerous] regulations if Congress acts before the mid-term elections,” to show their constituents they’re doing something, Holland & Knight attorney Michael Cavanaugh told Fairplay. “This coming election is a huge looming cloud that’s aff ecting everything.” F
Deepwater and the single-hull ﬂeet Even though the BP oil spill has nothing to do with VLCCs, the accident could trigger new regulations that would accelerate the phase-out of singlehull tonnage. “This oil spill is likely to increase the focus on safety regulations in the Gulf of Mexico,” according to Martin Jaer, an analyst with Arctic Securities. “Since single-hulls do possess a larger oil spill risk than double-hulls, I believe it is an easy regulatory step to ban the use of the vessels in all US waters – if not for safety, then at least for politicians
6 13 May 2010
to satisfy public opinion.” Jaer pointed out that there are currently six VLCCs, owned by Saudi Aramco’s shipping arm Vela, carrying heavy crude from the Gulf to the Lousiana Offshore Oil Port, the only US destination allowing single-hull VLCCs. He noted that because these vessels are operating at close to full capacity, removing them by the end of 2010 would tighten capacity and drive up freight rates. However, maritime consultant Dennis Bryant, who supervised implementation of the Oil Pollution
Act of 1990 while serving in the Coast Guard, says any new regulation dealing with single-hull tankers probably wouldn’t affect overall capacity. While amendments to MARPOL require a dropdead phase out of single-hull tankers by 2015, the US opted to stick with the OPA-90 dates, which exclude single-hull tankers from US waters by the end of 2010, Bryant pointed out. “The real world reality is that at the end of this year we’re not going to allow those ships to operate in the US anyway,” Bryant told Fairplay.
Fairplay subscribers have access to listings of newbuildings, ship sales, fixtures and bunker prices on our website. Go to www.fairplay.co.uk and select the ‘Markets’ link in the top menu
Box lines: buying in to recovery Ukraine studies: LNG possibilities to relieve Russian oil dependence India: plugging its coal gap with imports Russia: putting the squeeze on Belarus with pipeline project
S&P markets watch currency turmoil Existing ship valuations may be sustained if Baltic indices continue to reflect current healthy demand So far, there are no indications as to whether the IMF/EU bailout of Greece will have any direct impact on the sale and purchase market. However, its initial effect has been on currencies, with the purchasing power of the euro in dollar terms falling abruptly over the past week, as well as a flight from the dollar to safer currencies such as the yen, reversing what was for Japanese shipping interests – especially potential ship sellers – a welcome weakening trend in the currency. It is still far too early to predict whether a second phase of 2008’s credit crunch is in the offing as a side-effect of Greece’s economic travails. In such a scenario, the current froth in the S&P market would probably disappear, with demand falling to match current levels of secondhand ship supply. But the market is driven primarily by freight earnings, and existing valuations may be sustained if the Baltic indices continue to reflect current www.fairplay.co.uk
healthy ship demand and credit remains available. A dearth of modern, charterfree sales candidates continues to affect the Panamax sector, although the Paiute (built 1995 Sanoyas, 69,183dwt) is reported to have been sold for $23.5M with a timecharter at $27,750/ day until October 2011 attached. This is a relatively firm price for a well-employed ship.
Handymax strength Demand remains strong for Handymaxes, although the reported $25M price paid for the Western Seattle (built 1999 Tsuneishi Cebu, 45,630dwt) appears to be slightly behind the market. Carrying the hull number SC-011, the vessel was one of the first Handymaxes to be built at Tsuneishi Shipbuilding’s Cebu yard and – given the likely contract price and the payback period – is certain to have been a profitable investment for the seller, Nisshin Shipping in Tokyo. The escalation in Handysize values seems to be continuing, with the Palawan (built 2007 Hakodate, 32,029dwt) reportedly sold for $28M by Orion, while Japanese seller P&F Marine has disposed of its Tri Arrows (built 2009 Imabari, 28,442dwt) to undisclosed buyers for a reported price of $29.5M.
Both prices are firmer than last done, when compared to the sale of Itochu’s equivalent resale Imabari unit to Union Commercial at $27.25M in March. The
Vela-controlled VLCC Pherkad Star has been acquired by Vale with four sisters for conversion into VLOCs
price each paid for the Pherkad Star and its sister ships (built 1995)
Tri Arrows reportedly will not be delivered until September. Container ship sales activity remains at a relatively low level, with most potential sellers hanging on grimly for a sustained upturn in the market. This week one 2,000teu-class gearless unit was sold: the Northern Fortune (built 1991 Gdańsk, 30,685dwt and 1,931teu) is thought to have gone for $5.5M, yet another ‘scrap plus’ level for an early1990s-built ship. In the tanker sector, brokers report that Vale has concluded
a five-ship en bloc deal to buy last-generation single-hull VLCCs for conversion to very large ore carriers. The Brazilian mining giant reportedly paid $117.5M – or about $23.5M each – for the 1994-built Vela-controlled 300,000dwt sisters Markab Star, Mirfak Star, Polaris Star and Shaula Star and Pherkad Star (built 1995). The deal is a repeat of a similar transaction concluded between the same parties last year and will take Vale another big step towards controlling its own ore supply chain to its Far Eastern, and primarily Chinese, industrial customers. Thai Oil Marine is believed to have paid $12.5M for the Cardiff Marine-controlled double-hull Aframax Tigani (built 1991 Koyo Dock, 97,114dwt), for use in what brokers understand is a storage contract. Two fully stainless, high specification chemical tankers were sold last week, with Essberger reportedly behind the purchase of Ahrenkiel’s double-hull, IMO 2 & 3 Multitank Batavia and Multitank Britannia (built 1996 and 1997 Viana do Castelo, 5,846dwt) for an en bloc level of about $17.7M. With 20 cargo tanks, the ships have a high number of segregations for their size, and are ideally suited to European short-range trading. F 13 May 2010
Box lines buy into recovery Box ship chartering is seeing a more broadbased recovery, but rates for some smaller sizes still have a way to go Strong trade growth, firming freight rates and improving forward confidence, signalled by the hike in purchasing manager indices around the globe, keep whipping up demand for container charter vessels. Availability of idle and spot tonnage has been slashed by fixing activity and reactivations to sufficiently buoy midsize and smaller cellular types. Last week’s fixtures and index changes testify to the growing momentum in the 1,0003,000teu segments, although rates have yet to get back into sync with Panamax and post-Panamax rates. The Howe Robinson Containership Index, covering the full spectrum of 500-4,300teu, rose by almost 7% last week, with brokers reporting healthy activity in most areas. “Feeder tonnage between 900teu and up to Wenchong 1,700teu types see a clear firming trend, with certain areas actually lacking suitable tonnage,” princi-
pals were advised by a major international broker. Rates for geared 1,700teu types, stuck in the low to mid-$4,000s for the better part of the year so far, are now heading for the mid-$5,000s. Several ships are reported fixed in Asia at $5,300-5,400 for short period. This compares with option rates of $4,300 some months back and now eagerly declared by their charterers. Vessels delivering in the Caribbean and Gulf of Mexico continue to obtain higher than last-done rates, with one high reefer 1,355teu type reportedly securing $1,000/day more than in the last comparable fixture.
Far East outpaces Europe The Far East markets are currently outpacing European benchmarks in 1,000-1,200teu and the 2,0003,000teu segments. Some 2,5002,800teu vessels fixed with CMA CGM, CSAV and CCNI in the east at $6,000-6,500 while ships in the Atlantic were concluded in the low to mid-$5,000s/day by HapagLloyd and Maersk Line. Even so, the Hamburg ConTex lends more confidence to owners as the benchmark rate for geared 2,500teu types surpassed the $8,000/day on 24 months basis
for the first time since February 2009. Meanwhile, the 4,000+teu Panamax and post-Panamax sectors are swinging more in owners’ favour, although the pace of increase has lessened slightly. A few Panamax vessels are report-
amount some charterers are willing to reimburse owners for retrofitting engines for slow steaming
edly under close negotiation, while more enquiries for late 2010 and even early 2011 are springing up. Hamburg shipowner and KG boss Hermann Ebel told a gathering of KG sales managers in the Hansestadt last week that his company, Hansa Treuhand, has been asked by one charterer to reinstate the original 2011 delivery dates for some 6,500teu vessels in exchange for a long-term charter. The owner has delayed the delivery of the newbuildings until 2012/2013. “We said no thank you,” Ebel pointed out, explaining that the offered hire rate of about $26,000/day for forward delivery was not attractive enough.
Reviewing reports of 4,300teu ships fixing at over $22,000/day, he assured owners and KG investors that “ships ordered before 2005 can get by on these rates. They regained the capacity to deliver payouts to investors.” But hire levels are still too low for the more expensive ships ordered during the boom of 2007/2008 to top breakeven levels, he pointed out. The stronger bargaining position of owners, he said, is also illustrated by the fact that charterers are prepared to reimburse owners for engine retrofits at costs of up to $50,000 to adjust them for slow steaming. Latest trading statistics and price indicators bode well for container slot and vessel demand. The European Liner Affairs Association reported 20-24% year-on-year growth in European container imports from the Far East and Australasia in the first quarter. Outbound container traffic was up 22% to the Far East and 46% to Latin America, the ELAA said. Meanwhile, the liner freight rate index by the German Statistics Office showed an increase from 111.1 to 192.3 index points for the Asia/North Europe trade in the first quarter. Rates have also picked up in the Europe/Africa trade (89.2 from 83.8) and the Europe/ North America trade (106.0 from 90.5) since 4Q09. F
Ukraine studies LNG possibilities Ukraine looks to LNG to lessen its dependence on Russian oil Ukraine’s Cabinet of Ministers has announced it has ordered the Fuel and Energy Ministry and state-run Naftogaz Ukrainy to seek investment in a potential LNG regassification terminal on the Black 13 May 2010
Sea coast. IHS Global Insight (IGI) reports that an executive order approved the plan for the terminal as well as a plan for securing LNG imports to supply Ukraine. The proposed feasibility study for this $1.33Bn project (which would also work at attracting foreign and domestic investors) hints at Ukraine’s desire to gain some measure of relief from its current
reliance on Russian gas. The idea was originally proposed in 2005 when the former Ukrainian president, Viktor Yushchenko, was in favour of the project. Current president Victor Yanukovych is more sceptical. A recent agreement saw Ukraine receive a 30% discount on gas in a contract extending from 2009-2019 in exchange for
a Russian Black Sea Naval Base. Without the prospect of a new conflict with Russia over gas supplies, IGI says Ukraine may simply be examining the feasibility of such a project. However, another former Soviet satellite, Belarus, has started importing oil from Venezuela (see p10-11) meaning there are no certainties . F www.fairplay.co.uk
India plugs coal gap with imports India’s massive domestic power expansion will require continuing coal imports – meaning more dry bulk business �������� India’s coal imports are set to rise, with the government setting ambitious power generation targets with thermal coal feeding most of the power plants. Demand for coking coal will also be heavy as steel plants beef up capacity. India is a major producer of coal, with hard coal reserves of 246Bn tonnes, 92Bn tonnes of ��� which�������������������������� are proven, according to the government. The quantity, however, is not sufficient as India scrambles to provide uninterrupted supply of electricity to industry and consumers. India imported 18M tonnes of coal in the fiscal year 2008-09 mainly from Indonesia, Australia and South Africa – but the quantity is expected to exceed 25M tonnes for the year ending 31 March 2010. India’s growing coal demand has provided opportunities for shipping companies to conclude long-term contracts, which provide earnings stability in contrast to the volatile spot markets where owners have lost heavily as rates plummeted during the downturn. STX Pan Ocean of South Korea
has been quick to tap the Indian opportunity, striking a shipping agreement with Dubai headquartered Coal & Oil Group to transport coal for a new power plant which the group is planning to build in the southeastern port city of Tuticorin. The 1,200MW plant is scheduled to come on stream in 2012 and STX has been awarded a 10-year contract worth $150M, sources at affiliate company Coastal Energen told Fairplay. STX is expected to order two or three geared Kamsarmax bulk carriers (82,000dwt each) on firm charter commitment. Coal & Oil is also active in India as a coal trader importing about 5M to 6M tonnes annually for distribution to domestic users. It has disposed of an ageing bulker and relies on chartered tonnage at present.
Fuelling growth Essar Energy, which recently announced a $2.5Bn London IPO, plans to install power plants with a total capacity of 10,250MW from 2011 to 2014. Meanwhile, group affiliate Essar Ports Shipping and Logistics is building a coal berth at Paradip in the eastern state of Orissa. “The power sector is crucial for fuelling the 10% GDP ����� growth we are aiming at,” prime minister Manmohan Singh told a meeting of the Planning Commission in March. India’s power
India’s hard coal reserves of
Coal imports by SAIL (M tonnes) 2007-08: 2008-09: 2009-10:
9.68 10.72 10.85
[ Source: Indian government, Ministry of Steel ]
tonnes are not sufficient
planned per annum growth in India’s GDP, which needs to be supported through coal imports
ministry recently approved five ‘super’ thermal power projects (about 4,000MW each) for grant of coal linkage. These plants together will add capacity up to 7,260MW by 2017. Indian power providers, including Essar and Mercator in the private sector and the government-owned National Thermal Power Corp, have acquired or are scouting for coal mines abroad to meet the demand for their expanding power and steel plants. India’s steel mills are also importing coal to meet shortfalls in the domestic supply of coking coal. Steel Authority of India Ltd (SAIL), a state-owned entity, consumed over 18M tonnes of coal in the financial year ending 31 March 2010, of which 10M
‘super’ thermal power projects (about 4,000MW each)� have ����� recently been ������������� approved ��������
tonnes were imported (see box). Other government-owned steel plants (such as Rashtriya Ispat Nigam, Visakhapatnam Steel Plant) imported over 3M tonnes of coal during the same period. While imported coal costs more than domestic coal, Sai ���� Pratha,���������������������������� Indian minister for steel, recently��������������������� said the quality of imported coal is different and prices are therefore “not strictly comparable.” Pratha�������������������� also revealed that expansion of hot metal capacity in SAIL plants would require an additional 23M tonnes of coking coal and 11M tonnes of boiler coal. The government is developing coking coal blocks to meet demand, but imports are expected to continue. F
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13 May 2010
Putting the squeeze on Belarus
The Lithuanians tried it more than a decade ago. The Belarussians are trying it now – and no one in Moscow believes it can be done. If the president of Belarus, Alexander Lukashenko, wasn’t held in such low regard by the Anglo-American press, there might be more curiosity about who will gain. Lukashenko’s government is testing tanker and rail delivery alternatives for the pipelinedelivered crude oil the Belarussian refineries need. The new source is Venezuela, whose president, Hugo Chavez, agreed on a trial shipment of up to 70,000 tonnes of crude in mid-March. The first shipment, a 4,400 tonne cargo, arrived from the Caribbean at Odessa, Ukraine, last month and was sent by rail to the Mozyr refinery. Mozyr has output capacity of 95,000bpd. The second Belarus refinery, Novopolotsk, has a 88,000bpd output capacity. Depending on the products refined, those combined levels of output require at least 180,000bpd of crude oil feedstock annually – about 9.5M tonnes. Belarussian media suggest crude requirements of 10M tonnes/year (206,000bpd) including domestic consumption, refining for export, and crude re-exports. Belarus prime minister Sergei Sidorsky was in Lithuania recently to consider whether the Venezuelan cargoes may be delivered via the Baltic Sea to the 0
13 May 2010
S ea tic
Who will beneﬁt from the Russian oil pipeline designed to bypass Belarus? John Helmer reports
Druzhba pipeline Baltic pipeline system 2
UKRAINE Imports of Venezuelan crude oil arriving at Odessa have been sent by rail to the refinery at Mozyr in a move that may decrease Belarus’ dependence on Russian pipeline supplies. Alternatively, supplies can be delivered via the Baltic Sea at Klaipeda and carried by rail to the Novopolotsk refinery.
Lithuanian ports of Klaipeda or just to the north at Butinge, with onward shipment by rail. Last year, Belarus reportedly imported 21.5M tonnes of crude from Russia; roughly one-third of the annual total of 60M tonnes, sent through the Druzhba pipeline which continues across Belarus to Poland, Germany and other central European markets. A maintenance fee was charged on most of that oil as it was pumped across Belarussian territory until December 2006, when Belarus announced it was imposing a transit fee in addition. That prompted the Russians to impose an export duty on the oil Belarus kept for its own refineries. At the time, Moscow argued that Belarus aimed to charge too much for transit and pay too little for the crude it took, refined, and re-exported as petroleum products.
In January 2007, presidents Lukashenko and Vladimir Putin, resolved the dispute by discounting, but preserving some of the new charges each had forced on the other which permitted resumption of crude deliveries on the Druzhba.
Black Sea opposed by Transneft (the Russian pipeline operator) as there was no surplus crude to pump and the $4.5Bn financing appeared to be too costly. A series of events unfolded which led to the signing of an order in September 2007 and the
‘The statistics indicate Belarus is receiving much lower volumes of Russian crude under the old supply terms than it would like’ The deal also meant the commercial advantage of shipping oil to market through Belarus was significantly reduced and other routes – including a pipeline to bypass Belarus – became potentially more attractive. This 1,015km alternative was
commercial calculation began to change. A leading Russian oil trader proposed a Belarus bypass oil pipeline and a new tanker terminal at Ust-Luga, 80km from Primorsk, Russia’s main Baltic oil outlet. In December 2008, then-president Putin signed an www.fairplay.co.uk
order to start construction of the Baltic Pipeline System 2 (BPS-2), to pump the oil around Belarus to Ust-Luga. A report by private investment bank Troika Dialog said the move was “politically-driven… It is unclear where Transneft intends to find oil for the new pipeline, given declining oil production and exports and already ample spare capacity in the pipeline system. Moreover, some 450,000bpd of West Siberian crude will be re-routed to fill the first phase of the Eastern SiberiaPacific Ocean (ESPO) pipeline. Transneft therefore faces the prospect of paying up to $5Bn for a project that would bring no additional revenues.” In February 2010, Transneft told an industry publication that
leave our traditional markets in southern Europe, Germany and Poland. That would be quite wrong. Many plants in Europe are orientated to process Russian oil, and it would be unwise to abandon these markets. All of these Druzhba pipelines will be loaded the same way as they are now. The only thing that is realistic is the reorientation of the volume from foreign ports – Yuzhny [Ukraine], Gdańsk [Poland] – to our site in UstLuga,” Tokarev ������������� said. As for the previous charge – that the bypass was duplicating the delivery of oil to Primorsk, and would lack throughput – Tokarev now says: “the Primorsk port is overloaded. Its design capacity is 70M tonnes/ year, and currently it pumps 74M
10M tonnes potential crude oil imports/year from Venezuela to Belarus it plans to complete BPS-2 by December of next year. Transneft president Nicholai Tokarev described the need for priority in building the pipeline bypass. “Everyone knows in which connection we decided to build it: Russia and the European oil consumers were already tired of all this transit trouble. We don’t want to depend on someone in this matter,���������� ” he said. “And for the EU these are completely unnecessary problems. Negative points accumulate and create a very unpleasant atmosphere. Okay if it was for the atmosphere, but we suffer direct economic losses, and it is true not only for us, but for the oil companies and European consumers as well. BPS-2 is built to ensure, first and foremost, Russia’s export interests. “But we are not planning to www.fairplay.co.uk
tonnes/year. We cannot operate the facility for a long time in this mode. About 7M tonnes/year could be removed and redirected to Ust-Luga.” This is no plan for an oil blockade along the Druzbah pipeline, but the statistics indicate Belarus is receiving much lower volumes of Russian crude under the old supply terms than it would like. Transneft spokesman Igor Dyomin claims there is no dispute with Belarus – and no intention to bypass the country. “We do not want to lose clients in Belarus,” Dyomin told Fairplay. “By putting BPS-2 in operation we are reaching the following goals: we stop using the services of transit third-party states, for example the [Polish] port of Gdańsk, and instead develop our own infrastructure at Ust-Luga; also, the BPS-1 pipe-
line is currently overloaded, and launching BPS-2 will allow us to decrease the volume at BPS-1.” Some analysts in Moscow believe the Belarus-Venezuela link will end in costly failure – just as Lithuania’s attempt to feed its Mazeiku refinery with non-Russian crude ended up a decade ago.
‘No hopeless situations’ Alexei Bezborodov, head of Infranews.ru, a maritime news specialist, said Belarus may be able to free itself of the Russian chokehold. “It is quite logical to work through Klaipeda. There are no hopeless situations. This is the way the Polish and Lithuanian refineries operate, to some extent. So everything is possible. Except for the loss of profit margin [that was earned on] Russian oil. With that money Lukashenko was feeding the retired.” Lukashenko hinted last week that he believes the pressure on oil deliveries is commercial in nature, telling Reuters, “if Russians are as determined as accountants that they are doing too much for the Belarussian people, then that is slanted pragmatism.Unilateral pragmatism, introducing duties on oil and oil products for one member of the customs union, Belarus, and not for another, Kazakhstan, smells like corruption at a minimum…This year, Venezuela will supply 4-5M tonnes. We cannot take any more; next year we plan to refine up to 10M tonnes. We are starting to develop a field in Iran. If Russia is going to apply protective duties, we will look for oil where it is comfortable for us.” If 10M tonnes/year of Venezuelan oil are destined for Belarus, to either the ports of Odessa or Klaipeda, it would be another new Caribbean tanker route supporting tonne-miles and possibly spot rates. F
Tanker prospects Intertanko seminar weighs the state of the oil market A seminar hosted last week by Intertanko to mark its 40th anniversary, took stock of the prospects for the world economy and the tanker market. The geopolitics of demand are the key, according to Fareed Mohamed of PFC Energy, to the uncertainty weighing on oil markets. Private sector demand remains weak, and only when government stimuli are removed will the actual underlying rate of growth will be discerned, he said. The BRINK states – Brazil, Russia, Iraq, Nigeria and Kazakhstan –������������������ are ���������������� seen as the ones to watch. Oil has become an election issue in Brazil, Russia has seen declining oil production, Iraq has had problems meeting its production potential, Nigeria has problems with rebel attacks on oil infrastructure and Kazakhstan has extensive potential supplies. It could be 2016 before oil demand recovers to pre-recession levels, said Ben Holt of Wood MacKenzie. In the refining sector, the bulk of the cuts have occurred in the US and across Europe. Imposition of carbon costs is thought unlikely in the US, while in Europe the prospect is more real. This may change the sourcing of refined products to other regions, particularly for sour crude, which has the highest marginal cost of refining. Carbon taxes and more offshore processing of European transport fuels should also be expected, attendees heard. F 13 May 2010
Weekly summary of all the key industry indices and data
Baltic dry indices BDI: 3,608 254 (7%)
This week: 1,412 Last week: 1,356
3 mth high: 1,490 3 mth low: 1,030
���� ���� ����
BDI BFA BDI May �� BFA BDI �Q��
Outlook: The Capesize trade from Brazil to China has firmed to around $31/tonne for the first half of June. One ship
is reported to have a 15 May trip at $70,000/day. In the Western Australia to China ore trade, $47,900/day has been reported with the Baltic Capesize index standing at $12.49/tonne, up $1.60 from the previous week. Panamax rates found support in trans-Atlantic mineral trading, with daily rates increasing to nearly $35,000. An oversupply of tonnage in the Pacific is keeping rates steady, but not firming.
3 mth high: 2,929 3 mth low: 2,028
This week: 2,888 Last week: 2,715
3 mth high: 4,356 3 mth low: 2,910
This week: 4,062 Last week: 3,900
3 mth high: 4,411 3 mth low: 2,941
This week: 4,348 Last week: 3,936
[ Source: Baltic Exchange data ]�
Baltic tanker indices Outlook: VLCCs faced a quiet week with holidays in Japan and South Korea. Brokers are reporting that rates have softened, and are expected to continue sliding, despite a shortage of VLCC tonnage in the Atlantic as Suezmaxes are able to satisfy chartering requirements. All regions were subdued for the Suezmaxes. From West Africa, the majority of fixtures were to India, according to brokers, with a large number of cargoes not put on the market. Aframaxes saw steady activity in the North Sea and Baltic as rates rose to W116. Tight tonnage availability is expected to further firm rates In the Caribbean, the surging rates continued with voyages to the USG rated at W167, up 33 points in a week.
Dirty tankers Baltic dirty tanker index This week: Last week:
992 This week: 996 Last week:
Suezmax TCE $30,428/day This week: $37,178/day Last week:
Baltic clean tanker index
This week: Last week:
This week: Last week:
This week: $34.56/tonne Last week: $33.63/tonne
This week: $45.96/tonne Last week: $45.60/tonne
[ Source: Baltic Exchange ]
Currency rate vs $ 06 May 4,709 5,317 8,210 322
29 April 4,645 5,180 7,935 314
received more tail wind, with the lack of any larger sizes forcing charterers to shift their attention to these segments. The ConTex benchmark rate for the geared 2,500teu types climbed above $8,000/day on 24 months basis for the first time in 15 months. Maersk subsidiary MCC was reported to have fixed one unit at $8,300/day for 24 months in the Far East. Rates for 1,700teu types are now firmly established at over $5,000/day.
��� Type ���� Type ���� Type ���� ConTex �right scale�
Outlook: The 2,500-3,500teu sub-Panamax sectors
Container ship Timecharter Assessment
13 May 2010
ConTex 1,100teu 1,700teu 2,500teu ConTex
$32,387/day This week: $49,441/day Last week:
[ Source: Hamburg Shipbrokers’ Association (VHSS) ]
Last wk Last wk high low
Euro 1.3361 Pound 1.5335 Yen 94.99 Real 1.8959 Aus dollar 0.9079 Swiss franc 1.1245
1.2529 1.4026 1.4477 1.6069 87.95 94.99 1.7263 1.8975 0.8924 0.9389 1.0732 1.1245
3M low 1.2529 1.4477 88.14 1.7205 0.8579 1.0435
Outlook: Market risk was the driver for the dollar last week. Following the UK election and the debt crisis in the eurozone it will be interesting to see how this affects the dollar. One key report the markets will keep a close eye on is the US retail sales report, released on Friday. [ www.corporate-fx.co.uk/fairplay ] www.fairplay.co.uk
[ Source: Maritime Research Inc / www.maritime-research.com ]
Dry Fixtures Cargo
Coal Steamer (SK Shipping) Newcastle Coking coal Steamer (Hanjin) Norfolk Iron ore Steamer Pt Hedland Iron ore Cas De Catoira, 05 Seven Islands Iron ore Steamer (Oldendorff) EC SoAmerica Iron ore Xin Sheng, 80 Marmagoa
Kwangyang or Pohang Iskenderun Qingdao China Pohang or Kwangyang Xingang
141,000-10% 70,000-10% 170,000-10% 160,000-10% 150,000-10% 60,000-10%
May 17/31 May 15/25 May 20/30 May 1/15 Jun 8/22 May 1/10
16.40 27.50 10.80 35.00 29.83 21.50
Posco Erdemir FMG Rio Tinto Posco Sesagoa
FIO;50,000tShnc FIO;20,000tShinc FIO;ScLd/30,000t FIO;ScLd/30,000t FIO;ScLd/45,000t FIO;20,000t
TimECharters Consumption Vessel 14k/52t 14k/52t Unrptd 14k/35t 14k/34t 14k/33t 14k/30t Unrptd Unrptd Unrptd 13.5k/28t Unrptd 14k/19t
Del ExYardDalian Del Amsterdam Del Mailiao Del Kinuura Del Zhanjiagang Del Kunsan Del San Ciprian Del Tema Del Cristobal DelMississippiRv DlLazaroCardenas Del Indonesia Del Gothenburg
Redel So Korea Redel Skaw/CapePassero Redel Taiwan Unrptd Redel Japan Redel Singapore/Japan Redel San Ciprian Unrptd Redel Continent/Med Redel Spain Via USGulf Redel WC So America Unrptd Redel SEAsiaViaUK/Cont
180,263 178,394 92,000 77,834 74,716 73,902 70,296 52,454 47,324 35,239 35,025 28,387 26,758
May 4/5 May 12/15 May 4/6 May 13/15 May 4/7 May 11/12 May 5/10 May 4/12 May 2/5 May 5/6 May 9/19 May 25/30 May 6/10
35,000 44,000 30,000 29,000 35,000 30,000 35,000 36,000 46,000 35,500 17,000 18,450 25,500
PanOcean ClassicMar CSE PCL NYK Dreyfus Elcano CNR PanOcean D’Amico Ultrabulk PanOcean CNR
7,050,300GrnBl;EAusRd 6,967,900GrnBl;TransAtlRd BrazilRd 3,253,000GrnBl 3,237,600GrnBl 3,141,700GrnBl 2,888,900GrnBl 2,382,750GrnBl 2,086,200GrnBl 1,563,600GrnBl 1,489,600GrnBl 1,324,600GrnBl 1,197,300GrnBl
Cosmic Jewel, 97 Eneos Breeze, 03 Hamal Star, 94 Georgios ,09 Yannis P, 10 Oliver Jacob, 99 Da Yuan Hu, 04 Alterego II, 02 Mount Fuji, 10 Atalandi, 04 Seaprincess, 08 Pacific Empire, 08 Genmar Revenge, 94 Silvaplana, 03 King Douglas, 08 Summit Europe, 06 Hermione, 08 Energy Protector, 04 Stena Stealth, 02 Maple Express, 02 Bull, 09 Bow Prosper, 87
Caribbeans ME Gulf Basrah W Africa Novorossiysk Caribbeans Brazil W Africa Bonny Tallinn Sidi Kerir Kumul EC Mexico WC India ME Gulf Baltic ME Gulf St Croix UK/Continent Mediterranean WC India UK/Continent
Singapore op China China WC India USGulf UK/Continent Med China Chile Far East Vizagapatnam USGulf Sines Tianjin USGulf UK/Continent Med UK/Continent Med Japan Japan USAtlantic US Atlantic US Gulf US Atlantic US Gulf Japan W Africa
270,000 265,000 262,000 260,000 135,000 130,000 130,000 130,000 130,000 100,000 80,000 80,000 70,000 75,000 65,000 55,000 55,000 38,000 37,000 37,000 35,000 33,000
May 23 May 16 May 14 May 26 May 14 May 13 May 20 May 25 May 25 May 08 May 11 May 19 May 08 May 18 May 30 May 05 May 20 May 07 May 05 May 05 May 13 May 03
5,300,000 W90 W80 W110 W152 5,350,000 W180 W14 3,400,000 W95 W105 W90 W142 2,150,000 1,750,000 1,700,000 W135 W130 W165 W170 W162 W170
PetroChina ExxonMobil IOC Statoil Clearlake PetroChina Chevron Petrobras HPCL Mercuria Petrogal Arcadia Citgo Reliance Shell Shell China Oil ST Shipp CSSA Saras CSSA ST Shipp
PtC;LS;Op$6,300,000 Part cargo Part cargo
Mineral Monaco, 05 Cape Garland, 09 Chantal Prem, 01 An Ho, 04 Primrose, 01 Asia Graeca, 04 Gerasimos, 96 Sam Tiger, 03 Jin Qiang, 98 Stella Kuma, 09 La Jolla Belle, 82 Gourniati, 96 Full City, 95
Wet fixtures Cargo Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil dirty Oil clean Oil clean Oil clean Oil clean Oil clean Oil clean Oil clean Oil clean Oil clean
Lump sum Part cargo Part cargo Part cargo PtC;lump sum Lump sum PtC;lump Sum Part cargo Part cargo
Part cargo Part cargo
F or more information on fixtures see: www.fairplay.co.uk/secure/markets.aspx www.fairplay.co.uk
13 May 2010
For online bunker prices, visit www.fairplay.co.uk and select the ‘Markets’ tab in the top menu For bunker news and information, visit www.bunkerworld.com or www.cockettgroup.com
Bunker prices Latest mid-range prices listed in $ as at Monday 10 May 2010. d=delivered, w=ex-wharf. Ports listed regionally clockwise from NE. Europe 380cst 180cst Mdo d St Petersburg 344.00 353.50 543.00 d Great Belt 479.00 504.00 694.00 d Hamburg 463.50 482.50 695.00 d Rotterdam 461.50 476.50 702.50 d Antwerp 453.00 471.00 655.00 d Le Havre 483.00 503.00 n/a d Falmouth 486.00 521.50 747.50 Mediterranean 380cst 180cst Mdo d Istanbul 491.50 510.50 n/a d Piraeus 453.50 477.50 n/a d Valletta, Grand Harbour 502.50 521.50 n/a d Augusta 512.50 640.00 n/a d Fos/Lavera 501.50 561.50 n/a d Gibraltar 472.50 484.00 712.50 Africa 380cst 180cst Mdo d Arzew 497.00 511.00 n/a d Durban n/a 485.00 705.00 d Lagos 535.00 570.00 n/a d Dakar 565.00 615.00 n/a d Las Palmas 492.50 508.50 743.50
Mgo 613.00 739.00 722.50 697.50 682.50 756.50 747.50 Mgo 732.50 682.50 747.50 775.00 762.50 732.50 Mgo 746.00 712.50 815.00 830.00 752.50
Middle East 380cst 180cst Mdo d Khor Fakkan 479.00 494.00 n/a d Aden 545.00 555.00 n/a d Jeddah 510.00 535.00 n/a d Suez 497.50 522.50 n/a d Dammam 505.00 515.00 n/a Asia 380cst 180cst Mdo d Tokyo 542.50 547.50 740.00 d Sydney 572.50 572.50 n/a d Colombo 532.50 542.50 n/a d Singapore 475.00 483.00 702.50 d Hong Kong 481.00 491.50 720.00 d Kaohsiung 507.00 513.00 730.00 d South Korea 522.50 535.50 745.00 Americas 380cst 180cst Mdo w New York 470.00 480.00 687.50 w Houston 459.50 472.00 682.50 w Cristobal 483.00 512.00 745.00 w Venezuelan Ports 510.00 539.00 n/a d Rio De Janeiro 496.00 514.50 n/a d Buenos Aires 527.50 547.50 780.00 d La Libertad 487.00 527.00 n/a w Los Angeles 456.00 476.00 742.50 w Seattle 470.50 490.50 767.50 w Vancouver BC 509.00 548.00 857.50
Mgo 755.00 765.00 840.00 790.00 730.00 Mgo n/a 752.50 797.50 702.50 720.00 745.00 737.50 Mgo n/a n/a n/a 795.00 800.00 795.00 1,021.00 n/a n/a n/a
[ Information supplied by Cockett Marine Oil Ltd. Tel: +44 1689 883400 ]
Bunker outlook Outlook: After last week’s report noting that oil prices seemed relatively settled in the $80/barrel range, as they had been for most of the past two months, a sudden evaporation of confidence saw prices crash. In three days of trading, Tuesday through Thursday, crude futures in New York dropped just over $9/barrel to the $77 range. Early action on Friday put prices below $75/barrel. Singapore reported falling product availability this week with steady demand and lower volumes of cargo arrivals. But the market was mostly following crude. Prices for IFO380 started the week close to $500/tonne but headed rapidly to the low $470s. To end the week prices stayed mostly flat at these levels. Fujairah saw no issues with fuel supplies this week but its bunker market did not soften to the same extent as Singapore’s. Fujairah’s price premium 13 May 2010
Bunkerworld index prices
$486 $10 BW180 cSt
$502 $9 BWDI distillate
widened to $8/tonne during the week for IFO380. To close, though, the gap on Friday narrowed to just $1 as Fujairah moved lower while Singapore stayed put. Rotterdam was pushing price highs not seen for several months early in the week before it too started to correct downwards in line with elsewhere. Price levels from early April, around $460/ tonne, were hit late in the week. Friday saw a drop to $450/tonne – a price level not seen since late March. In the Gulf of Mexico, Houston was initially slow to move in line with fundamentals and other ports. The market then moved quickly to catch up and prices were heard in the $460s/ tonne later in the week. Early trading put numbers below $450 and at lower levels than Europe. Despite the big shifts in markets in dollar terms, with most ports finishing
the week around $30/tonne lower, the weekly averages in these four major bunkering ports are still in line with recent activity. For example, averages for IFO380 in Rotterdam for this week were $467/tonne, the same level as April; Singapore’s average of $484 this week was just $2 above April’s average. Also interestingly, bunker prices have not fallen at the same rate as crude and the gap between the two narrowed noticeably this week. There remains much uncertainty on crude markets as prices look for new levels. If there is a bounce, bunkers may not have to play catch up; if oil prices stay at the mid-70 level, there is still room for further downward bunker moves. [ www.bunkerworld.com/prices ]
To get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email firstname.lastname@example.org
[ Source: Lloyds [ Source: Register-Fairplay IHS Fairplay ]
Selected newbuilding orders reported week ending 719MAY February 2010 2010 Shipbuilder No Shipbuilder No Owner/Operator Owner/Operator Delivery Delivery Guangzhou Hyundai HI Shipyard International 2 2 Shanghai North Tolani Sea Group Shipping 2011/10 2011 Hyundai Mipo 2 Ciner Shipping 2011/8 Keppel Selected Singmarine deliveries reported week 1 ending Koninklijke 7 MAY 2010 Boskalis Westminster 2011/12 SPP Plant 2 Iason Hellenic Shipping 2011/11 Vessel Shipbuilder Owner/Operator Delivery SPP 2 S Frangoulis (Ship Management) 2011/1 Abel Matutes Barreras Balearia Eurolineas Maritimas 2010/4 Taizhou Wuzhou Industry 3 China Merchants Steam Navigation 2011/4 Antares Star Daewoo Saudi Arabian Oil 2010/4 Biograd Jiangsu Eastern Tankerska Plovidba 2010/4 Selected deliveries reported week ending 19 February 2010 Brightoil Lion Tsuneishi Brightoil Petroleum 2010/4 Shipbuilder Owner/Operator CVessel Eternity Hyundai HI SK Shipping 2010/4 GloryTalara Mercy Huatai Heavy of China Cape New Times Industry (Nantong) SchoellerGovernment Holdings of The People’s Republic 2010/4 Golden Eagle IHI Marine United EagleKaisha Bulk Shipping Challenge Polaris Shin Kurushima Nippon Yusen 2010/4 Jewel Terminus of Eagle IHI - Shipping Clipper TsujiSA HI Technology Dockendale 2010/4 Indigo Felicity Imabari IMECS Dignity Guangzhou Shipyard International Sea Pioneer Shipping 2010/4 Moreton Jiangmen Nanyang Ship Engineering Formosa -Plastics CCape Intelligence IHI Marine United Marine 2010/4 Salta Jiangsu Eastern Heavy Industry Ahmet Bedrie Pancoast Trading Ince Ilgaz Shin Kasado Armatorluk 2010/4 Ugljan Jiangsu Tankerska Plovidba Inspiration STX Eastern Heavy Industry Arcadia Shipmanagement 2010/4 CapeEmerald Sun Jiangsu Rongsheng Government of The People’s Republic of China Kavo Jinling Shipyard Gourdomichalis Maritime 2010/4 GoldenBatu Beijing Jinhai Heavy Industry Golden Ocean Nautica Pahat Ningbo Dongfang Shipyard E A Bunkering Services Group 2010/3 Golden Future Jinhai Group Obrovac SPP Heavy Industry TankerskaGolden PlovidbaOcean 2010/4 Triton Hawk Sanoyas Hishino Meisho Peregrine Flensburger CobelfretSumitomo 2010/4 Vathy Minh Star Universal Quang Vinacomin ThaibinhSamos ShippingSteamship 2010/3 Thrasher Yangzhou Eagle BulkBank Shipping Rosemary Daewoo Dayang Korea Development 2010/4 Avocet Yangzhou Eagle Bulk Shipping United Fortitude New Times Dayang Marine Management Services 2010/5 Zambezi Star Hyundai Mipo Rigel Schiffahrts Wenxiang Shandong Baibuting Weihai Weitong Marine 2010/3 Buschur Yangzhou Kejin Shipyard W-O Shipping Group
Type Type Chemical/oil Bulk carrier products tanker Bulk carrier Pipe burying vessel Bulk carrier Type Bulk carrier Passenger/ro-ro cargo ship LPG tanker Crude oil tanker Bulk carrier Crude oil tanker Delivery Type Crude oil tanker 2010/2 Bulk carrier Products tanker 2010/1 Bulk carrier Products tanker 2010/2 Bulk Bulkcarrier carrier 2010/1 Bulk carrier Products tanker 2010/2 Bulk carrier Crude oil tanker 2010/2 Bulk Bulkcarrier carrier 2010/2 Bulk Bulkcarrier carrier 2010/1 Bulk Bulkcarrier carrier 2010/2 Bulk carrier Products tanker 2010/2 Bulk Bulkcarrier carrier 2010/2 Bulk Ro-rocarrier cargo ship 2010/2 Bulk Bulkcarrier carrier 2010/2 Bulk Bulkcarrier carrier 2010/2 Bulk carrier Crude oil tanker 2010/2 Chemical/oil tanker General cargoproducts ship 2010/1 Chemical/oil products tanker
Capacity 50,500dwt 81,340dwt 82,000dwt 20,000dwt 82,000dwt Capacity 35,000dwt 31,259gt 3,500dwt 319,400dwt 37,500dwt 107,518dwt Capacity 313,875dwt 37,302dwt 73,000dwt 56,300dwt 45,988dwt 56,300dwt 30,000dwt 28,050dwt 50,350dwt 31,800dwt 301,861dwt 37,500dwt 76,500dwt 37,300dwt 80,700dwt 176,000dwt 56,868dwt 176,000dwt 9,890dwt 176,000dwt 35,000dwt 78,000dwt 25,235gt 81,197dwt 8,800dwt 53,500dwt 179,742dwt 53,500dwt 113,000dwt 37,836dwt 2,768dwt 7,800dwt
F or full listings of newbuilding orders and deliveries: see www.fairplay.co.uk/secure/markets.aspx
Sale & purchase BULK CARRIER CONTAINER & MULTI-PURPOSE ERMIS: ex-Zen-Noh 1: sold JohnbyCAlpha Ship, CAPELLA (containerMaru ship)No. ex-El Flaco:bysold Hadjipateras & Sons, UK, to undisclosed interests, $8M. Germany, to Carsten Rehder Schiffsmakler und Reederei, Last Sale: $15.90M (1993), 1984. 64,379dwt, Germany, $15.5M. 2007. 13,760dwt, 9,928gt, 34,932gt. 1,098teu. Ishikawajima-Harima HI Co Ltd (IHI), Sulzer/14kt. Built Jinling Shipyard, MAN-B&W/20kt. HANJIN ISTANBUL: sold(general by Hanjincargo Shipping MANDALAY PRINCESS ship) Holdings ex-Oriental Co, South Korea, to undisclosed interests, Turkey, Sunrise: sold by undisclosed interests, to Eastern $16.40M.Lines, Last Sale: $15.00M (2009), 27,327dwt, Shipping Philippines, $6M. 1995.1997. 8,706dwt, 16,270gt. Built Hanjin HI Co Ltd, MAN-B&W/14kt. 6,275gt. Built Shin Kochi Jyuko. B&W, 3,740bhp/12kt. MEDI DUBAI: ex-Medi Monaco: sold by d’Amico Societa di BULKERS Navigazione SpA, Italy, to undisclosed interests, $25.75M. AGIOS52,523dwt, NEKTARIOS ex-PaulBuilt Keres:Sanoyas sold by Hishino FlanmareMeisho 2001. 29,367gt. Shipping, Greece, to undisclosed interests, $8M. 1988. Corp. Sulzer/14kt. 52,540dwt, 31,649gt. Built Sudostroitelnyy Zavod ORANGE TIARA: sold by Daishin Senpaku (Daishin ‘Okean’, B&W/14kt. Shipping Co), Japan, to undisclosed interests, China, GRIFFON ex-Seavsl Elegance: soldEastern by Eagle Bulk Shipping, $34M. rumoured sold to Far interests. 2002. USA, to undisclosed interests, Greece, $22M. Last
All details given in good faith but without guarantee Sale: $30M (2005), 75,846dwt, 38,871gt. 1995. Built46,635dwt, Sanoyas Hishino 27,011gt. Meisho Built Corp. Mitsui, MAN-B&W, 8,881bhp/14kt. Sale: $78M (2001), UBC SALVADOR: ex-Swiftnes: sold by Intership 2000. 298,552dwt, 159,397gt. Built Hitachi, B&W, Navigation Co, Cyprus, to undisclosed interests, Greece, 31,192bhp/16kt. $20M. 1999. 31,857dwt, 19,743gt. Built Saiki HI Co Ltd, Mitsubishi/14kt. XANADU ex-CMB Daisy: sold by DryShips, Greece, to undisclosed interests, China, $32M. Last Sale: $42.2M (2005), 1999. 72,270dwt, 37,722gt. Built Imabari. B&W, TANKERS 11,306bhp/14kt. DYNAMIC EXPRESS: (oil products tanker): sold by YAKIMA PRINCESS ex-Yakima: auction sale by TBS Mitsui OSK Lines (MOL), Japan, to Mercator Lines, India, International, Bermuda (British), to undisclosed $9M. 1993. 42,253dwt, 25,644gt. Built Minami-Nippon. interests, Hong Kong, $11.35M. Last Sale: $29M (2007), GAN-OCEAN & GAN-SWORD: (chemical/oil products 1990. 42,475dwt, Oshima, Sulzer, AS, tankers) sold en bloc23,515gt. by DunyaBuilt Denizcilik ve Ticaret 7,200bhp/14kt. Turkey, to undisclosed interests, Scandinavia, $37M. Gan-Ocean: TANKERS2007. 16,979dwt, 12,164gt. Built Tuzla Gemi Endustrisi A.S. MAN-B&W, 8,321bhp/14kt. Gan-Sword: Livia (crude oil tanker): soldBuilt by Vapores Suardiaz, 2007. 16,745dwt, 12,137gt. Turkter Tersane ve Deniz Spain, to undisclosed interests, Greece, $38M. 2003.
Isl. A.S. MAN-B&W/14kt. 105,889dwt, 57,314gt. Built Hyundai Samho HI, B&W/14kt. NAMUR: (crude oil tanker) ex-Ichiban: sold by Euronav NV, Belgium, undisclosed interests, India, $60M. Last TIGANI (crudetooil tanker) ex-Seafalcon: sold by Sale: $78M (2001), 2000. 298,552dwt, 159,397gt. Built OceanFreight (OCNF), Greece, to Thai Oil, Thailand, Hitachi Corp, B&W, 31,192bhp/16kt. $12.4M. Last Sale: $40M (2008), 1991. 97,114dwt, IRON MONGER 10: (crude tanker reported sold for 52,603gt. Built Koyo, Sulzer, oil 12,240bhp/14kt. demolition) ex-Tribuana: sold by TMT Co, Chinese Taipei, ZAO EXPRESS (oil products tanker): sold by Usui to TMT Co, Chinese Taipei, $8.48M (403/ldt), 1989.Kaiun (Isui Kaiun Co), Japan, to undisclosed interests, $24M. 2004. 45,744dwt, 27,969gt. Built Minami-Nippon. B&W/14kt. Newbuilding Resales SAMSUNG 1757 (crude oil tanker): sold by Genel Denizcilik Nakliyati, Turkey, to undisclosed interests, $60M. 2010. 116,000dwt, 61,342gt. Built Samsung HI, MAN-B&W, 15,671bhp/15kt.
F or full listings of sale and purchase deals: see www.fairplay.co.uk/secure./markets.aspx www.fairplay.co.uk
13 May 2010
For trade and commerce news around the clock: www.fairplay.co.uk
MOL shifts: focus onto emerging routes Brazil and subsea business: shines for Aker solutions Russian crude: keeps on coming to Poland Japan’s big three: towards a healthier 2010 Finland’s appetite: for co-operation
The changing face of trade/ship finance New trade patterns have created a need for more tonnage, a London seminar has heard. Hal Brown attended Fears of an oversupply of tonnage flooding the shipping industry over the next few years are unfounded due to a fundamental shift in trade patterns. This encouraging forecast, made by Alun Hatfield of Clarksons Financial Services at a recent seminar hosted by law firm Ince & Co, is sure to be a boon for owners concerned about a swollen orderbook wreaking damage on a recovering industry this year and beyond. The most significant change is in regular trade routes. For decades VLCCs have been sent to pick up crude in the Gulf for discharge in the east or west, returning to the Gulf in ballast. However, routes now typically encompass more regions and journeys, heading west, then to South America, then China, taking on bunkers, before returning with cargo to the Gulf. The increased time at sea means more tonnage is needed to cope with these new trade demands, offsetting an oversupply. “The rising volume of trade 13 May 2010
on the demand side, particularly from China, can absorb much of the available tonnage,” said Hatfield. Deferrals, cancellations and trimmed-down shipyards will also lessen the impact of a large orderbook, he explained. Shifting trade patterns will bolster the coffers of some owners, but a lack of distress sales – which most industry observers believed would occur in the aftermath of the economic crisis – will disappoint ambitious owners hungry for a bargain. “There are lots of vultures waiting on the fence, but they’re not going to have a good meal,” said Hatfield. A paucity of distress sales will, however, have a positive effect because the ‘vultures’ will be forced to inject liquidity into shipping businesses in order to receive a return.
In fact, the return of liquidity into the industry is happening already – 1Q10 saw liquidity increasing and bank lending slowly coming back, according to Clarksons Financial Services. Key to traditional bank lending – as opposed to bonds and IPOs,
‘There are lots of vultures waiting on the fence, but they’re not going to have a good meal’ which are now popular – returning to shipping is ensuring that banks fully understand and appreciate the rewards and risks. Presenting a well-constructed plan to the banks, said Hatfield, means “money will be available”. Greek owners deftly manage this balancing act with their banks. Greek shipping consists
Asian financial support for shipping Korea Exim and KEIC (both export credit agencies) are providing $7.6Bn to shipbuilders Korean government is providing an extra $9.2Bn for loans to domestic and foreign shipowners China Exim Bank has provided $5Bn in newbuilding loans to support Chinese shipbuilding Malaysia’s government has a $750M budget for a shipping fund to assist shipping companies to acquire modern tonnage and upgrade shipyards [ Source: Clarksons ]
of owners who have both tanker and dry interests, creating a wellbalanced portfolio that limits the need to downsize – which can worry lenders. Greek owners can still make $35,000/day, representing a good return in the current climate, which banks
appreciate. Hatfield emphasised that “it’s most definitely a bankers market, but if the banks can understand the risks they will continue to lend money.” Supplementing traditional bank lending is the rise of government support through export credit agencies (see box). Chinese and Korean export credit agencies in particular provide a healthy source of finance for owners, and Singapore is in the process of changing its constitution to develop its own export credit agency. And fortunately for owners of all nationalities, Korea’s government has $9.2Bn for loans to domestic and foreign shipowners, representing a shift eastwards as European banks cut their portfolios in the crisis last year. F www.fairplay.co.uk
trade & commerce
Spanish yards adapt to a changing market Spainish shipbuilder CNN�������������������� is benefiting both from credit guarantee schemes and the rise of renewable energy Spain’s Construcciones Navales del Norte (CNN) yard has moved closer to tapping into Europe’s expanding offshore wind market by winning access to a series of credit guarantee schemes to help secure an order for a jack-up installation ship. The vessel, to be used for work involving German company Bard Offshore, demonstrates CNN’s desire to enter the niche renewable energy and environment protection markets – all parts of the Spanish yard’s bid to adapt to the changing market, where economic crisis and excess capacity has left the facility without orders.
The offshore wind market is one of the key areas that will stimulate demand at European shipyards such as CNN. Approval of a credit guarantee scheme from Spain’s state-owned Credit Insurance Company for Exports (CESCE) has provided banks with financial guarantees to allow contract talks to move forward.
Range of schemes CNN and five other shipyards in the Basque autonomous community have the advantage of being able to benefit from schemes available at state level, and also those offered by the Basque autonomous government, which has tax-raising and legislative powers. Approved by the Basque government in February to assist companies hit by the crisis, an additional credit guarantee scheme covers up to 30% of the cost of an order, in the event of defaults on pay-
limit of order costs covered by a�� Basque credit guarantee in the event of defaults
€15M amount injected by the Basque government into the Pymar fund for small- and medium-sized yards
ments. “The application of this [credit guarantee] programme for the new ship order is now being studied,” Juan Garayar, the Basque government’s industry director told Fairplay. CNN is also poised to be eligible to receive financial assistance from
Spain’s Pymar Yard fund for small and medium-sized yards. CNN initially thought it was too large a facility and would not be eligible to benefit from the credit guarantees from Pymar funds financed from contributions from Spain’s pool of shipyards. However, exceptional circumstances – including the Basque government’s €15M ($19.6M) injection of finance to Pymar – have been made in light of the economic crisis, allowing CNN to win credit guarantee financial support. “Now that the financial basis for the contract [with Bard Offshore] has been laid down, the Basque government, Pymar, CNN and the pool of banks interested in financing the construction of the ship are working intensely to establish the precise details of the credit guarantees,” Garayar concluded. F
The new face of German shipbuilding shapes up The sale of shipbuilder Hegemann Rolandwerft demonstrates the rise of offshore wind turbine manufacturers The conversion of Germany’s shipbuilding industry from standard dry and wet cargo tonnage to more specialist market segments is gaining further momentum, with the takeover of ailing shipbuilding group Hegemann Rolandwerft by leading yacht builder Lürssen. Ownership of Rolandwerft, which delivered 10 container vessels of up to 1,000teu over the past two years, will be transferred on 1 June. The Bremen-based www.fairplay.co.uk
group ran into financial difficulties last year and had to be bailed out by the federal and state governments. The group will concentrate its merchant shipbuilding activities in Stralsund (Volkswerft) and Wolgast (Peenewerft) in the east of Germany. All 130 jobs and nine apprenticeships at Rolandwerft will be maintained under the new ownership.
A growing force The Hegemann yard, with its modern welding and lifting facilities as well as two berths on the river Weser, represents a significant capacity expansion for buyer Lürssen. Lürssen, supplier of some of the world’s largest private yachts, outstripped a number
of competitors in the tender for Rolandwerft, including Fassmer, Abeking & Rasmussen and windturbine tower manufacturer BVT. The price of the transaction was not disclosed, but the range of reported suitors demonstrates the growing force of specialist shipbuilders and offshore wind turbine manufacturers in the consolidation of the industry in Germany. For example, two major shipyards which formerly focused on container vessels, Bremerhaven’s Schichau Seebeck Shipyard and Nordseewerke Emden, are being reconfigured by new investors for the construction of offshore wind power modules. Wind turbine and blade manufacturers are scanning the
German North Sea coastline for new production sites in preparation for large-scale offshore energy developments. The modules need to be manufactured close to ports or within port limits, to allow for easy and direct transfer of the large machinery to the offshore construction sites. Meanwhile, o����������������� ther German shipyards, such as Nordic Yards, HDW and Sietas, are chasing projects for offshore installation vessels to compensate for the lack of merchant vessel orders. Offshore wind farm developer Bard, Beluga Hochtief Offshore and construction group Strabag/Züblin are all close to placing fresh contracts, with German yards tipped as frontrunners on some projects. F 13 May 2010
trade & commerce
MOL shifts focus to emerging routes MOL slumped in 2009, but has high hopes for 2010 as volumes rise and it focuses on emerging trade routes Mitsui OSK Lines (MOL) has reported a sharp decline in revenue and income for 2009, but the company is optimistic that the year ahead will be more profitable – and it sees opportunities to grow through a shake-up of its Africa trade services. MOL – the world’s biggest ship operator in terms of deadweight tonnage and fleet size – described
2009 as “a transitional period that saw the economic recovery rising from the global recession”. Cash flows from operating activities contracted from ¥118.98Bn ($126.84M) in 2008 to ¥93.43Bn in 2009. “It was a difficult year, but towards the end the figures were improving and we expect them to get better next year,” said spokesman Kazumi Nakamura. “We’re optimistic because the market is relatively good at the moment and even though our container ship division had a hard time in 2009, we are now seeing freight rates recovering and the volume of trade going up,” she explained.
MOL’s confidence is matched by its focus on emerging trades and economies. This initiative has led the company to change its
MOL is the only Asian carrier calling at Ngqura as a hub port Africa trade services to create a more reliable operation for the region. The shake-up sees its Mozambique Zuid Africa Service (MZX)
grow to cover Durban and become upgraded from 10-day intervals to a weekly service. MOL’s southbound CSW service will call at Ngqura port in South Africa and the company has set up a new Angola shuttle service to reap the rewards of growing trade requirements to and from Angola. MOL liner division general manager TK Konishi said the changes “help MOL enhance its network”, making use of Ngqura as a strategic hub port. MOL claims to be the only Asian carrier to call at Ngqura as a hub port, which can accommodate large ships and offers
Brazil and subsea business shine for Aker Solutions Aker sees a rapidly expanding subsea market – and is wisely putting its eggs in the Brazilian basket The subsea business is likely to expand at a rapid rate, estimated at up to 10%/year in the next five to 10 years. New development of oil and gas fields off Brazil’s coast are the driving force behind this business, according to Simen Lieungh, president and CEO of Aker Solutions, the Oslo-based engineering and technology group. In addition to new ventures, lifecycle services (whereby skilled service engineers and spare parts co-ordinators offer service to customers) present good prospects for the company in Brazil, where it is expanding its service base at Rio das Ostras. 13 May 2010
Aker emphasised in its 1Q10 interim report that it sees “significant” market potential in Brazil, and expects the country to provide a steady demand for lifecycle services in the future. Aker said it sees opportunities in major field developments in deepwater regions off the Brazilian coast, and the company expects to see an increase in revenue through its ‘key focus’ of a more complete offering of technology-driven services such as well intervention. In 1Q10, Aker’s subsea business area almost doubled its
order intake from last year to NKr 4.51Bn ($765M). Subsea accounted for 45% of the new orders won by the group, compared to 24% a year ago. In addition, development of new fields in the North Sea, West Africa and Southeast Asia are making headway, with some projects delayed last year expected to lead to a slew of new orders in 2010.
Strong fundamentals All this activity reflects positively on Aker’s products and technologies business – the ����
Focus on Aker Company Headquarters Net profit (NKr) Order intake (NKr) Revenue (NKr)
Aker Solutions Oslo, Norway 674M (1Q10) vs 619M (1Q09) 10.5Bn (1Q10) vs 10.7Bn (1Q09) 11.6Bn (1Q10) vs 14.9Bn (1Q09)
rate/year at which the subsea business is likely to expand in the next five to 10 years
medium- and long-term fundamentals are strong for newly built drilling rigs both in Asia and Brazil. In the products and technologies area, Aker said it foresees “considerable movement in the Brazilian market,” where it���������������������� already has a strong ��������������������� presence and remains committed to expanding its��������������� manufacturing �������������� and engineering capabilities. Aker’s products and technologies business badly needs the boost: the area saw its intake of orders slow down to NKr1.25Bn from NKr1.84Bn in 1Q09. Deepwater������������������ drilling ����������������� and the FPSO market will continue to be Aker’s main������������������ focus areas over ����������������� the next few years, the company stressed in its report. The group was able to slightly increase its net profit, to NKr674M, thanks to a 4% rise in the EBITDA margin that reached 11.5%, indicating a firm increase in operational efficiency. F www.fairplay.co.uk
trade & commerce
efficient transhipment. Transnet Port Terminals, which is developing the Ngqura terminal, certainly believes MOL’s involvement in Ngqura will significantly boost business. Transnet COO Nosipho Damasane has said the partnership with MOL will lead to the terminal enjoying volume growth of transhipment cargo that will be to both companies’ “mutual benefit”. MOL expects its Africa changes to play a part in its re-emergence as a profitable company. “Next year, we are expecting to break even or even record a profit,” said the MOL spokesman. For the fiscal year to 31 March 2011, MOL is anticipating revenues of ¥1.55Trn and a net income of ¥60Bn. F
Russian crude keeps on coming Flows of Russian oil to Gdańsk remain high, despite predictions The Naftoport oil terminal at Gdańsk has said it is handling higher than expected transhipments of Russian oil. The news comes despite predictions of drastic reductions of the oil flow to Poland made when Russian company Transneft said earlier this year it would be sending 3M tonnes of oil to a new terminal at Kozimo, near Vladivostok. It was believed this would signal problems for Gdańsk�������� �������������� , which had until then processed 3-5M
tonnes/year for the Russians. According to Naftoport CEO Dariusz Kobierecki the oil has continued to arrive in Gda������� ń������ sk at a higher rate than in 2009. “We have loaded some 2.5M tonnes of oil since the beginning of the year,” he said. Russian oil has for many years been sent to the port of Gdańsk � �������� via the Druzhba pipeline but, given the shipments to Kozimo, many observers felt the supply to Poland would steadily dry up. But the activities of a new player on the Russian-Polish export market have temporarily given Naftoport a boost. Recent harsh weather in the region has also played its part.
However, oil expert Andrzej Szczesniak told Fairplay that Gdańsk ’s �������������������� unexpected good fortune would not last – mainly because Russian petroleum firms are eager to cut out ‘middlemen’. Russian companies are also looking forward to the opening of a new terminal at the Baltic port of Ust Luga, the final destination for oil pumped through the Baltic Pipeline System-2 pipeline, to be operated by Transneft and completed in 2012. “When BTS-2 is ready, the flow to Druzhba will slow down. Small quantities will still be sent to Gdańsk ���������������������������� but it will not be able to withstand the competition from Ust-Luga,” said Szczesniak.� ������������ F
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13 May 2010
trade & commerce
Japan’s big three edge towards a healthier 2010 Japan’s three largest listed shipping companies have shown firm signs of recovery across most sectors After a torrid 2H08, forecasts for Japan’s three shipping majors in 2009 were dire, with Mitsui OSK Lines, NYK and ‘K’ Line all expecting dramatic falls in profitability, with revenue (which reflects overall business activity) expected to fall to a smaller degree. In fact, the year proved to be a mirror image of the previous reporting period, with losses stemming from a weak first half counterbalanced by a steady improvement in earnings in the second six months running up to the end of March 2010. Only MOL managed to make a net profit (albeit 90% less than 2008), while NYK and ‘K’ Line fell from strong profitability into significant losses. Container ships remain the hardest hit of all main sectors in which the Japanese majors operate – and even drastic
measures such as extensive layups, service reductions and a cut in steaming speeds had limited impact in helping to improve the bottom line. MOL observed that, while eastbound trans-Pacific container volumes fell by 10%, westbound volumes to Europe from Asia fell an astonishing 30% from their peak. This, coupled with higher bunker costs and falling revenue on a per-box basis, led to much wider losses in the sector compared to 2008.
Savings and losses Cost savings found by MOL’s container division alone amounted to ¥48Bn (about $500M), mainly the consequence of slower operating speeds and substantially reduced services. As rate restoration and cargo volume increases started to take effect, the division’s losses fell from ¥20Bn in the first three months of the year to ¥6.7Bn in the final quarter, hinting at a gradual return to breakeven in the medium term. Considering MOL’s significant exposure to the container, car carrier and product tanker
Japan’s Big Three Fiscal year 2008 Profit/loss (¥) ‘K’ Line +32.4Bn MOL +127Bn NYK +56.1Bn Revenue (¥) ‘K’ Line +1.24 Trn MOL +1.87 Trn NYK +2.43 Trn
13 May 2010
Fiscal year 2009 -68.7Bn -13Bn -17.4Bn
-0.84Trn -1.35Trn -1.70Trn
NYK 2009 results
¥29Bn NYK’s forecast 2009 losses
¥17Bn NYK’s actual 2009 losses
markets, the company operates one of the world’s largest fleets of MR types. It is impressive that a net profit, however small, was maintained. The only positive spin that can be put on NYK’s year-end results is they were clearly better than the forecasts. At ¥17.4Bn, the net losses posted for the year were considerably lower than the ¥29Bn losses predicted as recently as January. With NYK’s liner
MOL, NYK and ‘K’ Line’s losses during 1H09 were balanced by a steady improvement in earnings during 2H09
division alone accounting for ¥51.7Bn losses, it is obvious where the company’s management priorities will lie in order to produce 2010’s predicted profits.
‘K’ Line’s losses Compared to its larger compatriots, ‘K’ Line suffered the most, posting ¥68.7Bn net losses for the full year, mitigated only by several preceding years of record earnings. Restructuring accounted for a substantial portion of the losses, as the company incurred heavy costs buying its way out of expensive charter commitments and converting newbuilding contracts in an effort to cut future liabilities. ‘K’ Line expects a return to modest profitability during the new fiscal year, with current forecasts suggesting that the red-funnel operator could post net income of ¥18Bn this time next year, as markets recover and losses are reduced. ‘K’ Line’s substantial fleet of Capesize bulkers, operating primarily on spot and in long-term COA business, are likely to be key ships in securing a return to profitability, as recovery in the container and car carrier sectors is expected to be a long and painful process. While the company lost less from tanker activity than NYK and MOL, the smaller size of its fleet limits its potential upside to improve its fortunes. Finally, the strength of the yen has loomed large across all Japanese international shipping activity recently. All three Tokyo majors are assuming a rate of ¥90/$ for the current fiscal year, but are hoping that the average figure turns out to be considerably higher, as the dollar makes a comeback after an improvement in US finances and continuing rapid growth in China. F www.fairplay.co.uk
trade & commerce
Finland’s appetite for co-operation A range of agreements benefit the recessionstruck Finns Finland is keen on co-operation these days, as demonstrated by the country’s recent efforts to reach out to the Arctic nations, alongside its agreement to work closely with Indonesia’s shipping industry. Perhaps it was the eventual agreement on a wage deal for Finland’s port workers, after a protracted strike that crippled Finnish ports and exports, that was the catalyst for Finland’s recent cooperation drive. The country breathed a collective sigh of relief when the twoweek strike – that is estimated
to have cost Finnish industry about €100M ($130M)/day – finally came to an end, perhaps encouraging Finns to keep faith in co-operative solutions. The Finnish move to work with Indonesia looks set to develop into a boon for the country, whose delicate economic recovery was badly hit by the ports strike.
€100M cost/day to Finnish industry from the country’s port strike
Finnish prime minister Matti Vanhanen spelled out the plan, telling Indonesia’s vice-president
Boediono in Jakarta recently that Finland will help “upgrade” Indonesia’s shipping and logistics sectors and increase investments in the Southeast Asian nation. It’s a partnership likely to bear fruit, given Finland’s shipping and logistics knowledge and experience in the Nordic and Baltic regions, and Indonesia’s burgeoning footprint in Asia, where companies such as Berlian Laju Tanker are showing an increasingly strong presence. Earlier this year, Finland also pledged to work with Vietnam’s shipbuilding industry – a partnership that will complement the Indonesia accord. As for Finland’s Arctic pronouncements, calls for co-operation in the Arctic are certainly
nothing new, but making those calls at an Arctic conference in Helsinki (effectively as hosts) shows other interested nations a clear-eyed vision of the region’s future if its resources are to be harnessed effectively. Finland’s position contrasts with some nations’ preference for unilateral action in the Arctic, scooping up the rewards with little thought for co-operation. Paavo Väyrynen, Finnish minister for foreign trade and development, said the Arctic’s fate hinges on a balance between wider access to natural resources, and protecting the Arctic environment. “It is important to see the Arctic in the context of co-operation, rather than competition,” he said. “A comprehensive approach is needed.” It’s a lesson Finland has learned the hard way. F
Novoship strengthens oil ties to boost profits Novoship’s profits fell last year, but it remains sanguine about 2010 Russian shipowner Novoship recorded a profit for 2009 of $75M – almost three times lower than in 2008. This has forced the company to channel its resources into consolidating partnerships with existing offshore clients in 2010. Sergey Frank, head of Novoship’s board of directors, said that despite the results, the company had decreased “the impact of
unfavourable market conditions during 2009, in spite of a 60% fall in spot market freight rates”. Frank commented that 2009 had been the shipping industry’s worst year in a decade. Nevertheless, he said Novoship demonstrated sustainability and will meet all its commitments to its customers and shareholders. The company will focus on competent fleet management and advance the development of relations with key customers, such as major Russian and international oil companies, Frank said.
But the threat of piracy off the coast of Africa looms large. On 5 May its vessel, Moskovskiy Universitet, was hijacked 350 miles off the coast in the Gulf of Aden. Sergei Frank: Novoship survived ‘unfavourable conditions’ The company stated that it was in constant contact with the Russian seafarers on the ship and was keeping their families informed.
But the incident showed that difficult times, which drain resources, still exist for the company, despite a slight upturn in shipping after the crisis. Novoship, based in the Black Sea port of Novorossiysk and part of the Sovcomflot group of companies, had 2009 revenues of $513M, a drop of 31.5% compared to 2008. Its EBITDA was $219.3M, down from $367.7M. As of 31 December 2009, Novoship’s fleet consisted of 55 ships totalling of 4.5M dwt, with assets valued at $2.38Bn. F
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13 May 2010
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Courting a solution for piracy Deterrence, not trial venue, is most important for shipowners and that means allocating money, reports John Gallagher Owners and vessel operators will be keeping close tabs on a US court in Norfolk, Virginia, this summer where the first piracy trial on US soil in over 70 years could change the way the crime is handled by governments around the world. On 23 April, federal grand juries in Norfolk indicted 11 Somalis on piracy and other charges in separate attacks on two US Navy ships in March and April. Piracy alone carries a mandatory penalty of life in prison.“The fact that the US is not only participating in protecting vessels against piracy in regions around the world but is taking on a trial... helps support the idea this has to be a multifaceted approach,” Marc Marling, a maritime law attorney with the Norfolk firm Williams Mullen, told Fairplay. The piracy spotlight in the US has shifted abruptly to Virginia from New York, where Aduwa Abdukhadir Muse, the alleged pirate in last year’s attack against the US-flagged cargo ship Maersk Alabama, is awaiting trial. The New York Times reported last month that Muse is negotiating a guilty plea agreement and has asked for a hearing on 10 May. 13 May 2010
35 out of 67
number of piracy events in 1Q10 for which Somali pirates were responsible
The UN Trust Fund has $2.1M for efforts to prosecute suspects The first six-count indictment charged that, on 31 March, two attackers, Gabul Abdullahi Ali and Abdi Wali Dire, opened fire from a small attack boat on what they believed to be a merchant ship. The ship turned out to be the Navy frigate USS Nicholas. Another attacker wielded a rocket-powered grenade launcher while two co-conspirators stayed behind to maintain a larger seagoing vessel. A second five-count indictment charges that on 10 April six other Somali pirates “maliciously attacked and set upon a vessel belonging to another” – the USS Ashland – with the intent to plunder, according to court documents. Ten of the 11 pleaded not guilty. A trial date has been tentatively set for July. Somali pirates were responsible for 35 of 67 piracy incidents reported worldwide during the first quarter of 2010, according to the International Maritime Bureau. The number of incidents is down from 102 attacks
reported during the same period a year ago – a reflection of both increased military escorts and increased use of private security. “Ships with armed escorts on board have yet to be successfully attacked,” said Jonathan Waldron, attorney with Blank Rome in Washington, DC.
Applying pressure When Somali pirates are caught they are usually taken to the Seychelles or Kenya for legal processing because Somalia lacks a functioning legal system. But Kenyan officials claim their judicial system is overburdened and needs help. Marling, the former US general counsel for CMA CGM, said the last time the US tried a piracy case was in 1937, when pirates boarded a gambling ship off the coast of California. In the Norfolk case, Marling said, “of greatest interest to the shipowning and operating community is they’ll see that the US
is willing to take these cases on when their ships are attacked, and hopefully they’ll put pressure on their respective flag states to take similar action when their ships are attacked”. The international community is trying to step up. In late April, the United Nations committed $2.1M for five projects backed by the UN Trust Fund, established in January to focus efforts on prosecuting piracy suspects. Several days later the UN Security Council appealed to all countries “to criminalise piracy under their domestic law and favourably consider the prosecution of suspected, and imprisonment of convicted, pirates apprehended off the coast of Somalia, consistent with applicable international human rights law.” Attention was given specifically to enhancing correction systems in Somalia, Kenya and the Seychelles. William Watson, vice-president of government affairs for the Maritime Security Council, which represents maritime security interests, told Fairplay that shipowners aren’t concerned as much about where pirates are tried as showing would-be pirates that there are consequences. Putting money toward more prosecutions is a start, he said. “Have things changed as much as we’d like them to? No, but with every case that’s tried, it raises the stakes for those that go out there to try it again”. F www.fairplay.co.uk
Regulator warns of offshore overkill Newly established Marine Management Organisation highlights concerns about the UK’s offshore capacity A new marine regulatory body has warned that more controls and inspections are needed amid the current boom of UK offshore projects. The Marine Management Organisation (MMO) has serious concerns about offshore capacity and the limitations of the technology involved in renewable energy projects such as wind farms. Recent proposals put before the MMO include the installation of wind turbines in deep water, which will involve considerable support from offshore vessels. However, the variety and strength of currents present in deep water
are likely to cause the turbines to bend and sway over time. “Somebody has to inject a bit of realism about new projects,” Chris Parry, chairman of the MMO, told a London seminar, hosted by solicitors LA Marine, last week. In addition to capacity and technology concerns, the MMO urged renewable energy companies to ensure their figures add up if they want to receive licences for offshore projects. “Be honest about the return on investment,” said Parry. “There is a need for healthy scepticism when dealing with licensing requests for offshore projects.” The MMO is a young organisation, having been established as a non-departmental public body (NDPB) just over a month ago. However, it is developing rapidly, ensuring delivery of its mission of making a significant contribution to sustainable development in the
marine area, and promoting the UK government’s vision for clean, healthy, safe, productive and biologically diverse oceans and seas.
‘Somebody has to inject a bit of realism about new projects’ The MMO works under the Marine and Coastal Access Act 2009, which is intended to bring together key marine decision-making powers and means of delivery. The idea was to create a ‘onestop shop’, ensuring a level playing field for businesses that comply with the act when planning offshore projects. A new appeals process has been implemented for companies aggrieved at having projects
rejected – if they impinge on heritage sites, for example, ‘sustainable heritage’ being a major part of the MMO’s work. That work is set to expand rapidly as the range of offshore projects increases: offshore islands, energy farms and commercial cables, which are doubling in quantity almost every six months. “Mankind is going offshore,” said Parry. With such an array of offshore activity, co-operation between ports and other stakeholders is important to shape government policy on marine management. “There are lots of areas where ports need to engage with the various authorities,” said Andrew Hignett, a partner at LA Marine. The positive news is that engagement is firmly on the agenda. “The authorities are open to engage, they want to hear from us to shape the policy which is sensible and commercial,” he added. F
Strike threat stifles Spanish port law reform Unions win concessions over implemention of a European directive Attempts to introduce wideranging liberalisation aimed at reducing cargo-handling costs and dues in Spanish ports have been watered down after threats of indefinite strike action from all unions representing stevedores. The ruling Socialist party and opposition conservatives parties had agreed to allow crew on ro-ro ships to handle goods, including vehicles, in the country’s latest attempt to implement the 2005 European Ports Directive. But the unions threatened to take strike www.fairplay.co.uk
action as from 11 May, resulting in the parties introducing fresh amendments on 30 April to allow stevedores to continue handling ro-ro trade. These will be debated this month but La Coordinadora, the largest stevedore union, suspended strike action after the amendments were tabled.
Ending a monopoly Under the proposals, both new private and existing state-run cargo-handling companies will be required to use stevedores for vehicle trades on condition that prices are set at the market rate. The current monopoly enjoyed by the pool of stevedores at Spanish ports means that labour prices are
higher than market average. In the downturn, car manufacturers and shipowners have put pressure on the government to bring in measures to reduce costs to make Spain’s largest ports more competitive. Unions say the move would put thousands of jobs at risk by allowing owners using non-EU seafarers to handle ro-ro cargo. They claim safety levels would fall if untrained workers and seafarers were used for cargo handling. Spain’s shipowners association Anave, a known advocate of liberalisation, declined to comment. A study from Spain’s car and truck manufacturers’ association, Anfac, says rates for terminal concession holders rose by 65%
between 2004 and 2008. Autoterminal, Spain’s leading vehicle terminal, says rates at Barcelona rose 150% in that period. But major port authorities in Spain, including Barcelona, complain that the reform proposals will not go far enough in giving them sufficient power to determine port dues and discounts for either terminal concession holders or shipowners. Currently, port authorities are only authorised by central government to provide discounts of 10% on port dues. The proposed amendments will increase scope for discounts but port authorities say these will be subject to bureaucratic controls by the Ministry for Public Works. F 13 May 2010
For more on fuel-reduction software, see the Environment supplement with May Solutions
Trimming operational costs Optimising energy efficiency calls for informed decisions onboard and fleetwide analysis ashore Reducing fuel consumption is an effective way of controlling operating costs, as slow steaming has shown, and also benefits the environment. How effectively owners and operators translate that fact into practice could depend on their ability to measure the actual performance of individual vessels and compare them across their fleets. The Vessel Management System (VMS), a means of collecting and analysing real-time performance data from several onboard sources, has been developed by the Finnish company Eniram. This forms the platform for the company’s Dynamic Trimming Assistant (DTA) and its Onshore Analytics Services. DTA, which has been installed on Oasis of the Seas under a six-ship agreement with Royal Caribbean Cruises, is a decision-support system that continuously calculates the key forces affecting the vessel’s operation and provides a real-time graphic display of current and optimal trim in the prevailing circumstances. It will be installed on 26 vessels in the Hamburg Süd fleet that are owned and maintained by Columbus Shipmanagement. According to Fred Deichmann, 13 May 2010
DTA in use on Norwegian Jewel: real-time support for optimising trim
Photo: Peter Forsgård
Data integration Attitude: Trim, list, draught Navigation: GPS, speed, gyro, depth, wind Propulsion: Torque, rpm, power delivered to propeller
MD of Columbus, savings of over $4M in the first year are expected from installation on the first batch of 12 vessels ($375,000/vessel). Real savings of 3-5% were demonstrated during an intensive trial on the container ship Aliança Maua. Data from all available onboard sources is collected in VMS and integrated with data from attitude sensors that measure actual trim (see box). The usual installation is one attitude sensor/100m of vessel – a Panamax would normally need three sensors, installed at the fore and aft perpendiculars and one midships, all on the centreline.
A large amount of data is collected by VMS but only that needed to optimise trim is actually processed onboard. DTA displays this on a standard 15” marine grade screen in easy-toread graphic form: green showing where trim should be kept; yellow warning; red indicating loss of more than 5% of propulsive power. This allows the crew to react in a timely way as circumstances change, usually by moving ballast, and to see the effects of any action. If the course is changed or a storm encountered, for example, the effect on power consumption can be seen immediately. Data is transmitted to Eniram’s data centre where it is analysed by mathematical algorithms and specialist staff on an individual vessel and fleet-wide basis, providing the information for the company’s Onshore Analytics Services, available to the owner through the web interface.
By excluding the effects of weather conditions and other variables, it is possible to normalise data for individual ships and create benchmarks for performance, and to compare and aggregate data across the client’s fleet. Several packages are available, providing various graphs over time and snapshot analyses. Typical reports include energy and power decomposition graphs, engine utilisation rates and trim-to-optimum comparisons. Comparing performance data before and after structural changes (such as addition of cabins) and maintenance operations (eg hull scrubbing) can quantify their impact. Not surprisingly, client requests for analysis have focused on areas known to improve hydrodynamic efficiency, including change of antifouling, propeller polishing, change of propeller boss, protective covers for stabilisers and thrusters, and placement of zinc anodes. Eniram claims the system is particularly good at tracking long-term changes in the drag of a vessel. Eniram currently has live DTA installations on 35 vessels and expects to have 50-60 by the end of this summer, and 75 by the end of the year. All stages of the complex process are currently handled by the company – from the onboard assessment to wiring diagrams, cabling, installation and the training of crew. F www.fairplay.co.uk
Lloyd’s Register of Ships online
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Storing and recovering energy Consortium looks for practical storage and recovery solutions Another area of focus for maximising shipboard energy efficiency is the propulsion system itself. Combining proven propulsion with solutions for energy storage, after-treatment and waste heat recovery has the potential to bring significant savings in fuel consumption while meeting existing and planned emissions regulations. Ricardo, a UK-based engineering consultancy, specialising in energy storage assessment and clean technology, believes operational fuel consumption reductions of 15-25% are possible by implementing nextgeneration energy management and propulsion technologies, compared with conventional existing marine propulsion configurations.
The company has been involved in development of hybrid propulsion systems, mechanical and electrical energy storage and fuel cell systems for a range of international clients and through its own technology R&D programme. In order to help the shipping industry realise this fuel-saving potential, Ricardo has set up a
Solutions will meet emissions regulations
possible reduction in fuel consumption identified by Ricardo
consortium project known as the Ship Efficiency & Energy Storage Assessment consortium (SeEsA). This pre-competitive consortium will investigate energy management of the propulsion and auxiliary power systems and identify potential technology solutions appropriate for the requirements of cruise ships, ro-ro ferries, tankers, bulk carriers, container ships and offshore and naval vessels. Flexibility of propulsion configurations to meet changing operating requirements will also be considered. The consortium’s work will be modular in format, with partners subscribing to a core programme of work that can be adapted to meet their specific needs. The first phase will focus on assessing the best energy storage solution combined with advanced energy recovery systems for a complete propulsion system under different operating
conditions, including normal operation, slow steaming and up to three additional duty cycles agreed by the consortium members. The range of energy storage solutions will include conventional and state-of-the-art battery technologies and ultra capacitators, flywheel-based systems, thermal and pressure-based storage, fuel reformers and liquid nitrogen systems. Prime movers covered will include diesel and gas engines, and gas and steam turbine systems, with auxiliary power systems also including possible fuel cells and Stirling (external combustion) engine applications. The second phase will focus on more detailed analysis and investigate the efficiency of the sub-systems, including engine combustion and air-handling methods. F For more information contact firstname.lastname@example.org
Streamlining port maintenance Better survey data will improve turnround for ship operators Ships calling at the Port of Rotterdam stand to benefit from a more comprehensive approach to inspection of marine infrastructure that will significantly improve the efficiency of maintenance.
13 May 2010
The port, one of the largest in the world, covers 10,000ha and its assets include almost 40km of quay walls, plus nearly 200km of miscellaneous embankments. Quality Positioning Services (QPS) has created a continuous digital terrain model by combining multibeam echosounding (of the seabed in front of the quay walls, slopes and other maritime
constructions) and light detection and ranging using a laser (of the Simultaneous surveying gives a complete picture of the marine infrastructure structures above the water level) in a simultaneous survey.
Both pieces of equipment were mounted on a survey vessel and a digital camera incorporated to interpret data. The combined acquisition increased the number of collected points by a factor between five and 10, with acquisition rates of 200,000 points/second. Algorithms were developed for the increased volumes and for representation in real time. F
Fairplay now looks at movement of cargo from manufacturer to customer (door-to-door)
Logistics shift into transload gear Southern California ports stand to beneﬁt as discretionary cargo breaks out of boxes. John Gallagher reports Renewed interest in transloading freight from ocean boxes into domestic trailers and containers is giving retailers a reason to move more discretionary freight through southern California ports. Leading the charge is Home Depot, one of North America’s biggest importers, which moved 25,000 containers into southern California last year. The company, which generated $66Bn in revenue in 2009, expects sales to increase 2.5% in 2010. A huge regional customer base in southern California and the economics of transloading containers at the ports of Long Beach or Los Angeles for inland locations suggest much of that increase will flow into those ports. “We’re thinking about fitting our international imports cargo into our domestic and regional distribution centre networks by increasing our transload business,” Jeff Siewert, Home Depot’s director of international logistics, told a ports meeting in Long Beach. “Some of our product definitely fits a faster flowing profile, and some, due to its movement (or product) category, needs to be more of a stocking product.” Transloading cargo from 20ft www.fairplay.co.uk
17-27 days saved on container returns
returning empty containers from long-haul intermodal markets,” the executive said. Transloading cargo out of their containers near the port represents loss of that asset for only 96 hours instead of 20-30 days, he noted.
Transloading freight from ocean containers to trailers at California Cartage warehouse in Los Angeles [ Photo: Port of Los Angeles ]
and 40ft ocean boxes into 53ft domestic containers and trailers “helps you divide what makes sense to go with one flow path versus the other,” Siewert explained. Transloading shipments at the port instead of sending intact, inbound Asia ocean containers via intermodal rail on the ocean carrier’s bill of lading to places like Chicago, Dallas, Denver or New York is more expensive on a per box basis. However, timing is everything when it comes to seasonal inventory such as clothing and outdoor furniture. Transloading gives shippers the ability to redirect such items at a point in the supply chain that’s much closer to
final destination. “Demand for seasonal goods is constantly changing, and if it’s not in the right place at the right time, the price might have to be marked down 50% in order to sell it,” Port of Long Beach trade relations director Don Snyder told Fairplay. “But you may have to spend just 1-2% more in transportation costs to transload.” It’s also an advantage for ocean carriers seeking tighter control of their equipment, according to a senior executive at a major West Coast transloading and warehousing company which requested anonymity. “Steamship companies love transloading because one of their biggest costs is that of
‘Steamship companies love transloading because one of their biggest costs is that of returning empty containers’
The array of liner services operating to southern California ports gives shippers an advantage in transloading there compared with other West Coast ports. A further advantage is the size of the local customer base. Home Depot, for example, has more than 200 stores in southern California that serve 10% of the retailer’s total customer base. That opens up more local and regional destinations for freight that has been transloaded and broken down into smaller shipments. “The beauty of transloading in southern California is you’re serving a market that can extend as far as Phoenix or Salt Lake City,” consultant Ted Prince told Fairplay. “That gives you flexibility you don’t have in Seattle or Oakland.” Competition from ports in Mexico, Canada and the US East Coast still lures business away from southern California, however, so the advantages that come with sheer size will always be pressured by lower terminal costs elsewhere, Siewert pointed out. “There will always be those cost elements to our decisions that we have to consider when doing what’s best for our supply chain.” F 13 May 2010 7
logistics & supply chain
Adriatic full of eastern promise A new grouping of European ports aims to convince Far East trade that the Adriatic is a cost-effective alternative Formation of the new North Adriatic Ports Association (NAPA) has been promoted by its four founding members as a ‘landmark’ move to help convert the Adriatic Sea into a busy corridor from Asia to Central Europe. The ports are Koper in Slovenia and its Italian partners in Trieste, Ravenna and Venice. In order to manage a projected increase in traffic, NAPA members have developed investment plans, to be supported by public and private funds (banks and relevant business operators), to strengthen infrastructure and enhance the competitiveness of the ports. Rok Stemberger, spokesman for Luka Koper, the company that runs the port of Koper, which will hold the presidency of NAPA for its first six months, told Fairplay: “The new organisation is the result of a year’s work during which the four ports committed themselves to different kinds of collaboration to enhance port services for the shipping market, which is increasingly focused on finding access to Eastern European markets.” He added that by coming together, the four ports would be contributing to a trend that has seen the Adriatic develop into a key alternative route for many shipping companies. “Until recently, the Adriatic was considered as a means of 28
13 May 2010
by-passing the congested seaports on the opposite side of the continent, but now some logistics providers find it to be a wise choice in terms of cost-reduction, in that it allows for shorter journeys to destinations east of Suez,” Stemberger explained.
SLOVENIA Trieste Koper
Safeguarding positions However, some independent voices in the region are sceptical about the potential of the new organisation to help the ports move onwards and upwards. Iztok Gaspar, managing director of Koper-based shipping agency and shipbroker Capris, told Fairplay: “I don’t think this association is going to change much. The port of Koper is unlikely to gain more cargo than before and the conditions at the other ports will more or less remain the same.” Gaspar bases his view on the fact that employees’ wages at the Italian ports tend to be somewhat higher than at Koper and that as a mainly state-owned concern, the Slovenian port is generally slower when it comes to innovation than Trieste, Venice and Ravenna. “What will probably happen is that [NAPA] will allow the ports to safeguard one another’s positions, in that they won’t ‘steal’ cargo from one another, if you like. But they’ll continue to work for themselves. Koper is not going to hand over any new freight it gets over to Trieste, for instance,” he said. Other operators based at the Slovenian port take a different view, believing they may well benefit from the opportunities NAPA could provide.
Adriatic Sea A
S I C I L Y
One such is logistics company Europacific. Ana Dezjot, the firm’s logistics manager, told Fairplay that while the proximity of Koper and Trieste meant that links between the two were longstanding, the new association could present Europacific with the chance to win more business via the other Italian ports. “This organisation should allow for a better flow of information so that our forwarding services might be improved,” she commented. “We could see sales possibilities open up for us via these two NAPA member ports as a result,” she concluded. F
Some logistics providers find the Adriatic to be a wise choice in terms of cost-reduction
Gregor Veselko: NAPA intends to turn the Adriatic Sea into a busy corridor
logistics & supply chain
BMW revisits supply chain costs BMW will save logistics costs by shipping more direct, promoting endto-end shipping and even sharing capacity The German vehicle manufacturer is planning big changes to its inbound component shipments for South Africa in a bid to lower its overall supply chain costs. Knudt Flor, director of the company’s Rosslyn plant in South Africa, told the Bremen Logistics Day in Bremerhaven that the company has a cost saving target of 30% on present logistics expenses. “We have to review everything we took for granted so far. Nothing can stay the way it is today,” he declared. The car maker is looking primarily at minimising wastage in its ocean-bound deliveries for Rosslyn where about 50,000 model 3 limousines are manufactured annually, mainly for export to North America and Japan. Eighty percent of all parts (stock
keeping units) required for the local production in South Africa are consolidated in Germany, repacked and then shipped to Rosslyn by container. Most product batches are repacked at least once in transit from first tier suppliers, via the German consolidation centre on to South Africa. “Repacking of ocean freight shipments is pure squander,” Flor said. The group is now setting out to increase its direct deliveries of full container loads to South Africa from other regions than Europe. “International sourcing for South Africa [outside Europe] will even be increased,” particularly in the US and the Far East, Flor explained. In order to reach the critical volume for full container shipments from ports in North America and Asia, BMW is even prepared to share capacity with competing car manufacturers or with overseas sub-suppliers of local South African, first tier suppliers of BMW, Flor said. “This used to be unthinkable, but today we are prepared to ship
BMW is reviewing everything it has taken for granted [ Photo: BMW ]
30% targeted cost savings
‘The emphasis in future will be more on inventory optimisation’ our parts in one container with a company like Daimler,” he said. “We used to be focused on optimum container utilisation ourselves, but the emphasis in future will be more on inventory optimisation,” he noted, adding that the group may outsource
more of its shipment planning and cargo consolidation to freight forwarders or logistics providers. The branching out of the Munich-based group’s shipping delivery networks is likely to create fresh opportunities for container lines on the Asia/South Africa and US/South Africa routes. Volumes on the north Europe/South Africa run could be adversely affected. Repacking is also to be eliminated on the ‘less than container load’ (LCL) component shipments that will continue to be consolidated in Germany and re-dispatched to South Africa. “We will only retain cross-docking to some extent”, with material containers or packages switching between modes, or carriers, without interim storage, Flor said. To that end, BMW South Africa will expand the circulation of reusable material containers from its overseas suppliers through to the Rosslyn plant. Thus far, most of the equipment has been turned around in consolidation centres or ports where the inbound products are repacked. F
JadeWeserPort waits for the upturn in volumes Bremen now considers its neighbour JWP to be a threat Bremen’s port sector is much agitated over the prospect of a punctual opening of the 2.7M teu JadeWeserPort at neighbouring Wilhelmshaven, as cargo volumes continue to flatline. The intention was that Wilhelmshaven, to be operated by a joint venture between Eurogate and Maersk, would complement www.fairplay.co.uk
Bremerhaven where throughput capacity was extremely tight during the boom years up to 2008. However, given today’s reduced cargo volumes, it is feared that JadeWeserPort may claw market share from Bremerhaven. “As a Bremen entrepreneur I am looking quite sceptically at the completion of the JadeWeserPort”, said Hans-Joachim Schnitger, president of the Bremen Port Association (BHV). The group includes around 230 companies from the local port services sector.
Inauguration of the Wilhelmshaven facility as scheduled in late 2011 “can only be at the expense of Bremerhaven,” he cautioned. Maersk, the minority stakeholder in the JWP operating consortium, is reportedly pushing for a delay of two to three years, until container throughput is restored to pre-crisis levels. The German states of Lower Saxony and Bremen, which jointly develop the port infrastructure, are insisting on an early commissioning of the terminal at the end
of 2011. However, their alliance is undergreat strain, with Bremen’s state minister of ports and the economy, Martin Günthner, calling for greater consideration of Maerk’s commercial interests. The carrier is Bremerhaven’s largest customer and could reconsider its activities there if it is pushed too hard by the JWP landlords. “If you have such an important customer as Maersk in Bremerhaven , you must treat them with care,” Günthner told BHV members. F 13 May 2010
shoes ships Containers: a new urban trend Just when you think you’ve eaten in every conceivable offbeat café London can throw at you – from a coffee shop in a former Vespa scooter repair garage to a ‘hidden’ tea room that only divulges its secret address when you phone to book – along comes a new surprise. The Container Café in Stratford, East London, merits inclusion in the UK capital’s list of unusual dining experiences for the simple reason that it’s built out of shipping containers. Not that you’d think it from the inside, though. With its plush leather armchairs, 1950s Formica tables and airy atmosphere, it feels much like any other trendy London café, complete with genial staff who are only too happy to whip you up a bacon and avocado baguette and a cup of flat white. Outside, though, the café’s provenance is glaringly obvious. The corrugated steel of the containers, painted lurid yellow, glints
13 May 2010
in the May sunshine, announcing to anyone in the area that it is a colourful building about as far removed from your standard London brown brick as you can get. And so it should be, because just 200 yards opposite is the developing shell of the London 2012 Olympic Stadium, the capital’s showcase-to-be, projecting London on the world stage as a modern city willing to embrace eye-catching design. Indeed, the London 2012 Olympic games are the reason The Container Café was opened last summer, for upstairs is The View Tube, a viewing platform overlooking the Olympic site. Large sections have been cut out of the containers to create expansive windows, allowing a panoramic view of the Olympic Park, currently a vast building site. Nevertheless, it’s a mesmerising
scene, drawing the viewer in with its sheer scope and activity – the Olympic Stadium, the Velodrome and the Aquatics Centre lying on the horizon. But if observing the Olympic Park slowly taking shape isn’t to your liking, there’s always the classroom, setback from the platform, offering workshops on local history, wildlife conservation and the Olympic project. After that, you can sit at one of the café tables outside, gazing up at The View Tube to appreciate the sense of fun that this Lego-like, box building has brought to the East London skyline. “Most people think it looks quite cool,” Sarah Hewson, marketing manager for Urban Space Management (USM) tells Fairplay. “People like something different and funky.” USM, the company behind The View
USM’s school sports hall was built from boxes used to transport trainers
words: Hal Brown photo: USM
Tube, is enjoying the momentum gained from the popularity of its first project, Container City. Built in 2000, Container City, a residential block of shipping container apartments stacked three storeys high, is fast-gaining iconic status. It is now in such demand by London’s artistic community as the ideal live/work space that the waiting list is as long as a 15,000teu box ship. Perhaps surprisingly, residents appears to be attracted by the look of the containers, preferring the stark, box shape to the softer, wood-cladding over steel which USM offers as an option. Alongside their striking appearance, the containers’ ‘green’ credentials are a big factor in their appeal. Double insulation retains warmth in winter, while lots of porthole windows and doors generate natural ventilation in the summer. Minimal concrete foundations are required and noise pollution is kept low because construction occurs off site. Possible environmental features for the future include rain water harvesting, wind turbines and plant nurseries on roofs. The green theme is bolstered further because the containers, which mostly come from China, have been used at least once to bring goods over to the UK – an important point for USM because it stresses the importance of recycling. It also allows customers to relate to the life the containers had before being transformed into a building. This was brought into sharp focus last year, when the company built a school sports hall in South London from containers that had been used to import trainers from China. Telling the story of the sports hall’s construction to the children, said
shoes ships Alongside their striking appearance, the containers’ ‘green’ credentials are a big factor in their appeal Hewson, “helped the kids understand” the long and arduous journey their flashy new Nikes had made before reaching the shops. Simplicity of construction is a key selling point for USM. In fact, container buildings are so easy to construct, it is actually almost like working with Lego, albeit on a larger scale. Initial fit-outs are performed off site in Felixstowe. The containers are then transported to USM’s warehouse in East London, where they are slotted together at the corners, just as they are on the deck of a box ship. The entire building is then craned into place. The View Tube took two days to be craned into place in Stratford, but, even more impressively, the entire project, from conception to completion at the Olympic location, took just three months. With rapid installation times like that, perhaps USM should receive a gold medal for speed, in keeping with the Olympic theme. Failing that, USM is pleased to have won Best Small Building at the British Construction Industry Awards 2009 for its sports hall. With projects in Scotland, partners in the US and the potential for wider international expansion, USM is now seeing other
construction companies taking notice of the wisdom of affordable, container housing and buildings, particularly in the current difficult property market. These ambitious businesses will probably jump on the bandwagon, buying up second-hand containers from China as the market for alternative, cheap housing and building design grows over the next few years – a situation also likely to benefit shipping companies selling the boxes. The Guardian newspaper has backed the business as a positive social phenomenon, saying recycling shipping containers is both a green and affordable “solution to Britain’s housing crisis”. Other companies may be hoping to cash in on the trend, but for the time being USM appears to have carved out its own niche, forging ahead with its latest projects: a cinema in a 40ft container and the Electric Hotel – a four-storey moving theatre, built from containers and inspired by Bauhaus architecture, that allows the audience to watch and eavesdrop on performers locked into ‘hotel’ rooms. Container shipping may have taken a hefty knock during the economic crisis, but the boxes themselves are evidently going up in the world. F
Containing the costs The interior design of the containers has become more complex since 2000, but the buildings remain cheap compared to other constructions. Prices do vary, but container buildings cost about £60-90/ft² – roughly a third cheaper than regular buildings. All of USM’s profits are pumped into a trust, which is used to develop more affordable, sustain-
able container buildings in the UK. The economic crisis had little effect on USM’s business because funding was still available from a mix of private and public sources. Leaside Regeneration, London Thames Gateway Development Corporation, the Olympic Delivery Authority and Thames Water were all involved in The View Tube.
13 May 2010
Tony Hayward, CEO of BP, is doing all he can to avert a disaster for the environment – and for BP. Richard Clayton asks whether it will be enough
ony Hayward, CEO of energy giant BP, is becoming a familiar face on television screens across the US, as he attempts to calm nerves and limit the fallout of the Deepwater Horizon spill. When appointed to the position in May 2007, following the resignation of his mentor Lord John Browne, Hayward was already acquainted with the environmental sensitivities that go hand-in-hand with developing energy resources in the world’s largest consumer nation. Now, Hayward’s future – and the fate of the company he has served all of his professional life – rests on how effectively he tackles the situation. Hayward’s history with BP stretches back three decades. He joined as a rig geologist in Aberdeen, shortly after being awarded his doctorate in geology from the University of Edinburgh in 1982. He gained technical and commercial expertise during the 1980s working in London, France, China and Scotland. It is said that he first gained the attention of Lord Browne at a leadership conference in Phoenix, Arizona, in 1990. He was appointed Browne’s executive assistant soon after. Haywood was stationed in Colombia as exploration manager in 1992, moving on to head up BP’s operations in Venezuela in 1995. Two years later he returned to London as director of BP Exploration and a member of the Upstream executive committee, followed by the position of group VP of BP Amoco Exploration and Production.
13 May 2010
In the spotlight Tony Hayward Current position: Group CEO, BP (2007-) Career: 2003 CEO, Exploration and production, main board director 2002 Executive VP 2000 BP group treasurer 1999 Group VP, BP Amoco Exploration and Production 1996 Director, BP Exploration, member Upstream executive committee 1995 President BP operations (Venezuela) 1992 Exploration manager (Colombia) 1982 Joined BP, technical and commercial roles in London, France, China, Scotland Education 1982 PhD geology, University of Edinburgh Family: Married with two children
He added BP group treasurer and executive VP to his CV before landing the position of chief executive of BP’s Upstream activities in January 2003. This gave him control over the group’s exploration and production, and placed him on a shortlist of internal candidates for group CEO.
A series of environmental incidents has tarnished BP’s evolution ‘beyond petroleum’ over the past 10 years. These included an explosion at a Texas City oil refinery in March 2005, which killed 15 workers and injured more than 170. BP was fined a record $87M for life-threatening safety violations; the incident appeared to have led to the group’s head of refining, John Mazoni, being overlooked as a successor to Lord Browne. BP contested the charges brought by the US Occupational Health and Safety Administration, and Hayward showed willingness to take safety and environmental concerns seriously. However, questions were asked again when a corroded pipeline spilled oil into Alaska’s Prudhoe Bay in 2006. That spill marked Hayward’s first week in charge of BP’s US operations; he told Fortune magazine it was “the most difficult week” of his career. Hayward is well aware that helping the world to meet its growing need for energy comes at a price. “We strive to do that,” the BP website claims, “by producing energy that is affordable, secure and doesn’t damage the environment”. BP’s stated values are progressive and responsible – which means “no accidents, no harm to people and no damage to the environment”. But despite the aspiration, accidents do happen, people are hurt and damage is inflicted on the environment. As in the week following Prudhoe Bay in 2006, Hayward will be judged by how well he manages the response to Deepwater Horizon. Initial reaction to the recent spill was seen as slow, but BP quickly realised it was a potential game-changer. On 2 May the CEO reiterated his commitment that BP “will do anything and everything we can to stop the leak, attack the spill offshore and protect the shorelines of the Gulf coast”. Hayward has taken responsibility for the clean-up, assuring US politicians, fishermen and residents on the coast of five states that no effort would be spared in meeting the challenge. However, speaking to the BBC, he could give no indication of when the oil leak would be staunched or how much the effort would cost BP. Despite the uncertainty surrounding the incident itself, Hayward has focused on the clean-up before launching an investigation into the causes. Taking that step has been
decision-makers [ Photo: Reuters (main), BP (inset) ]
made easier for him because BP’s share price plunged by 14% in the two weeks after the explosion, wiping about £19Bn ($28.4Bn) from the group’s market value. The CEO had hoped the group turned a corner when the lessons of 2005 and 2006 were taken onboard. “I’m pleased to report we can see clear progress,” he told shareholders at the annual general meeting held in London just five days before the Deepwater Horizon explosion. “There has been a significant reduction in the frequency of recorded injuries and the number of major incidents related to integrity failures have also fallen... our focus on safe and reliable operations is now strongly embedded.” Hayward’s first three years as chief executive was characterised by strong momentum in BP’s core businesses, good progress in reducing costs and improving absolute and relative financial performance. In a press briefing in March, he said the group’s financial performance did not yet reflect the strength of its portfolio. “There is now a real opportunity to make this portfolio work harder for us,” he commented, adding that BP’s medium-term growth focused on three areas, the first of which was deepwater production.
‘We will do anything we can to stop the leak’ Whether Deepwater Horizon is staunched quickly or goes on to become even more damaging than Exxon Valdez, Hayward faces the toughest battle of his career: keeping investors on board. If they decide the risk of investing in BP is too high, Hayward’s career may join the long list of casualties of the spill. F
13 May 2010
IHS Fairplay and the United States Coast Guard are proud to host a special awards ceremony to honour those who have committed vessels and crews to the worldâ€™s oldest volunteer high seas rescue organisation, AMVER
National Press Club, 529 14th Street, NW, Washington DC 20045, USA From 17.30 hrs on Tuesday 18th May 2010 We thank our sponsors, who have lent their invaluable support to this prestigious event
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movers shakers Decision-makers from the worlds of energy, mining, manufacturing, industry, commerce and agriculture all affect shipping. Fairplay reports on the great and the good
Top Datamyner appointed
Lloyd Werft loses cool hand Lüken
Brendan McCahill has been appointed CEO of Datamyne, the database of international trade and import-export activity in trade areas. McCahill, who was executive VP, succeeds Pablo Milburn, who has returned to head office in Montevideo, Uruguay, after a threeyear assignment in Miami.
Werner Lüken, the 70-year-old shareholder and MD of Lloyd Werft, the conversion and newbuilding yard, is to retire from the executive board on 30 June after 23 years at the helm. He will remain as chairman of the supervisory board following his election in April, and continues as chairman of the German Shipbuilders Association. His departure from dayto-day management comes during a phase of heightened uncertainty for the Bremerhaven yard and its 400 workers. The orderbook is empty following the completion at the start of the year of a heavy lift semi-submersible for Bremen shipowner Harren & Partner. Lloyd Werft is also looking for new shareholders after Fincantieri announced its intention to dispose of its 21.5% shareholding. The state government of Bremen, which holds another
Cunningham goes down under Inmarsat director of maritime business Piers Cunningham surprised his employer last month by announcing his departure for SatComms Australia. In a glowing statement, he did not say why he had left Inmarsat, but did describe SatComms as being ‘highly motivated’. Cunningham had previously held sea and shore positions with CP Ships.
Stepping into the money at Golden Ocean
Rosa seeks new business for Costa
Birgitte Ringstad Vartdal has become finance chief at Golden Ocean Management. She steps up from her position as VP of investments at the dry bulk specialist Torvald Klaveness Group. She has a degree in physics and maths and an MA in financial maths.
Marco Rosa, mastermind of Costa Crociere’s recent UK growth, has been rewarded with the position of area director for the UK, Scandinavia and South Africa. His new role comes into effect on 1 June, and he will be based at the Genoa HQ of Carnival Corp.
Maersk rewarded for green thinking Maersk Shipping Hong Kong has received the Hong Kong Registry’s Green Innovative Award 2010 for its efforts to operate environmentally friendly ships. The company was praised for its QUEST software, which provides a temperature control system that halves energy consumption per refrigerated container, and its pioneering work on slow steaming. Tim Smith, head of Maersk’s North Asia region, said the award reflects “a rapidly developing movement toward sustainable shipping”.
13.16%, is also seeking to exit as shareholder in the longer run. Lüken was applauded for his project leadership during the conversion of the Queen Elizabeth 2 in 1985; he will be succeeded as chairman of the management board by Rüdiger Pallentin.
Strengthening dispute resolution services Imogen Rumbold, specialist in dispute resolution with expertise in shipping and commodity cases, has joined London shipping law firm Lax & Co as a partner. She has acted for shipowners, charterers and commodity traders, both in the high court and arbitration.
13 May 2010
shipping in numbers 50-100M
Barrels of crude oil estimated to be held in the Macondo field. The Deepwater Horizon was drilling in this field
Investment in infrastructure in Qatar, including a cruise terminal, at Mesaieed, south of the capital Doha
New jobs created within the US economy during April, the largest one-month gain in more than four years and the fourth job growth in a row
Sugar to be imported into Pakistan within the next six months to meet domestic demand until the new sugarcane is ready and the crushing season begins
Rise in the share price of UK company Rockhopper on the announcement it has struck oil off the Falklands
Syndicated loan secured by Brazilian grain exporter Multigrain. It will be used to increase soybean production
$930Bn Emergency funding facility agreed this week between the European Union and the International Monetary Fund in loan guarantees and credits to stabilise the eurozone
Estimate by Port of New Orleans of number of hours needed to scrub oil off arriving ships, as the spill from the Deepwater Horizon disaster drifted within two miles of the Southwest Pass on 7 May
Gazprom’s reduction in minimum take-or-pay volume of gas for Turkey
Output in 2009 of coking coal from the Raspadskaya mine in the Kemerovo region of Russia, the country’s leading producer. The mine suffered fatal explosions on 8 and 9 May, which are likely to affect exports
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