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INSIDE THIS ISSUE MARKETS: Supramax shortfall COMMERCE: Distressed asset opportunities REGULATION: Recycling Convention costs TECHNOLOGY: Weather routeing

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INSIGHTS FOR PROFITABLE SHIPPING

4 November 2010 Volume 370 Issue 6607 Price £15.00 www.fairplay.co.uk

China expandsHow foreign investment by the Asian Powerhouse

is fuelling demand for shipping

INSIDE THIS ISSUE: STORY OF THE WEEK: Contracting peace MARKETS: The miller’s tale COMMERCE: Trans-Pacifi c box blues DECISION-MAKERS: Dick Welsh of Isle of Man Registry

POWERHOUSE – China: Banks extend their reach, crude dependence, turning to the water

4 November 2010 1www.fairplay.co.uk

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volume 370 issue 6607

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3 Look outOptimism and uncertainty. Furious debate

4-5 Story of the weekRebuilding relations

6-15 MarketsThe miller’s tale. Scanscot insolvency highlights project market woes. Dry revival on the cusp. Japanese-built bulkers still attracting premiums

16-20 Trade & commerceTrans-Pacifi c box blues. ASRY revenues to remain fl at. Italians banking on China. CMA CGM touts Dunkirk. China’s o� shore club. New rules for nuclear. Healthy quarter for box shipping

22-24 RegulationROs must learn to share in class. Can non-EU states scupper the scheme? Clean rules could prompt two-tier division. Do the customers care?

25 TechnologyShippers to take sulphur battle toEuropean Parliament

26-27 Logistics & supply chainNamibia’s Walvis Bay ups the ante.Turbine lift requirements increasing

29 ReviewsGreat British passenger ships. The complete chief o� cer

44-45 Decision-makers

47 Movers & shakers

48 Shipping in numbers

30-42 Powerhouse: China expands

44 Decision-makers: Man power Dick Welsh is passionate about the Isle of Man registry – but it is part of a grander plan to build a maritime centre of excellence, as he tells Richard Clayton

4 Story of the week: Rebuilding relationsShippers see an end to their war with carriers through better contracts – but mistrust remains a barrier. Andrew Spurrier talks to Nicolette van der Jagt, secretary-general of the European Ship-pers’ Council

22 Regulation:ROs must share in classAt a conference last month in Brussels, the EMEC explored the progress towards ‘mutual recognition’ by class societies in regard to Regulation (EC) No 391/2009, which was adopted by the European Parliament in March last year

16 Trade & commerce: Trans-Pacifi c trade bluesNew vessel capacity coming on stream in 2011 will challenge the liner industry’s newfound ability to tightly manage assets and raise rates in the Trans-Pacifi c. John Gallagher reports

[ Cover illustration: Roberto Filistad ]

Parliament in March last year

As China has continued to post remarkable growth, its expanding wealth has allowed it to invest massively in foreign resources – meaning more business for shipping. Bouko de Groot reports

30-42 Powerhouse: China expandsAs China has continued to post remarkable growth, its expanding wealth has allowed it to invest massively in foreign resources – meaning more business for shipping. Bouko de Groot reports

[ Cover illustration: Roberto Filistad ]

© 2010 Exxon Mobil Corporation. ExxonMobil and Signum are trademarks of Exxon Mobil Corporation or one of its subsidiaries.

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look outRichard ClaytonFairplay Editor

China’s soaring economic development and its strengthening ties to sources of raw materials around the world are good news for shipping. The country’s foreign investment, especially in emerging African nations blessed by bountiful pay-dirt, is seen as the rock on which the future of the global maritime industry will be built. In-deed, China will play a key role in shaping the future of shipping, according to Lloyd’s Register chief executive Richard Sadler.

However, there seems to be a discon-nect between this cheerful optimism and the harsh reality of dollars per day. The tidal wave of dry bulk ordering is a concern for analysts, but there is little consensus about ‘slippage’. Although the concept of dry bulk order cancellation has become

anathema in the shipbuilding sector – something to do with loss of face – ship-owners need to reconsider the state of the bulk market over the next two years.

This might suggest the wisdom of delay-ing delivery where possible. Some believe up to half the Capesize vessels on order will struggle to achieve breakeven before the end of 2012, especially as the Chinese and Brazilians build for their own account.

For owners based elsewhere, the esti-mates speak of a dry bulk fleet expansion of 8% this year (revised upwards from 5%). This is more than enough to offset the benefits of port congestion off east coast Australia and China. Panamax, Supramax and Handymax rates are all expected to come under pressure in 2011, and this will

continue into 2012 until the orderbook surge passes through the system.

The next two uncertain years will see fortunes gained and lost, as China’s mar-ket strength will not benefit all sectors of the dry market. With bankers unwilling to take risks where returns are, at best, unmanaged, owners should beware the siren voices of optimism and pessimism. Until orderbook pressures ease, equity investors will not be favourably inclined towards public dry bulk stocks, which is regarded as ‘relatively dead money’.

The China factor for shipping is not as clear cut as the economic analysts would have readers believe. Investors must research carefully or suffer in the tsunami of newbuilding deliveries. F

Optimism and uncertainty

Furious debateFor once, it was a real debate. Unlike most seminars and conferences, the European Marine Equipment Council’s gathering in Brussels exposed some genuine differences of opinion and revealed a degree of mistrust between equip-ment manufacturers and class societies (see p22-24).

It all hinged on the ‘Class

Regulation’, adopted by the European Parliament in March 2009, that requires the EU’s recognised organisations – mostly IACS members – to accept each other’s equipment approval certificates. In the arguments that led up to the regulation, manufacturers and class societies made no secret of their opposing views and,

China will be key to shaping the future of shipping – but it may not benefit all sectors

now that it is in force, the two camps are working together only out of necessity.

In public, class executives were being diplomatic: “The time for having a view is passed,” said one when asked what his organisation’s stance was. “We will do what we need to, to ensure compliance.” But another – speaking in advance of the conference – told Fairplay simply that “it will not work.”

There were thinly-veiled

suggestions that class – which is tasked with developing a system to make mutual recognition work – is dragging its feet and ignoring the ‘low hanging fruit’ that manufac-turers believe are there to be picked immediately.

On one thing, however, everyone was agreed: this new approach is not easy and it will require commitment to change on both sides. Brussels at least showed that it is talking. F

All about the rate

� 4 November 2010 www.fairplay.co.uk

story of the week

Given the warring nature of their public relationship, one would think that shippers and ocean carriers might be moving towards

greater concertation, in an effort to put their dealings onto a more harmonious footing.

As clients and suppliers respectively, they are two of the prime movers in keeping global commerce on an even keel, through the carriers’ provision of the best possible service and shippers through payment of a satisfactory price for it.

However, concertation is not what Nicolette van der Jagt, secretary-general of the European Shippers’ Council (ESC), thinks is needed. Doubtless the word and concept look too much like conferences, of the kind which the ESC and its national member organisations successfully fought hard to have abolished from liner shipping by the European Union (EU). Conferences were outlawed by the EU in October 2008.

Although she does not rule out concer-tation, and even co-operation, in certain

areas of mutual interest, Van der Jagt insisted to Fairplay that the commercial questions that continue to irk her members should be dealt with, as such, between individual shippers and carriers and not by some supra-national, consultative, conflict resolution structure.

Van der Jagt thinks what is more impor-tant is the provision of tools to help ship-pers achieve a “better balance of power” in their dealings with shipping companies.

On the subject of fuel surcharges, for example, which the ESC suspects are being used by carriers to generate additional prof-its, the council is working with academics on “a sort of mechanism” which will help shippers to negotiate over surcharges with carriers in future.

This mechanism could be ready as early as next year, she said. “It is not transparent at the moment,” she said of the way ship-ping companies impose fuel surcharges. “Shippers want some transparency.”

Fuel surcharges figure in a long list

of grievances that shippers have with shipping companies. Shippers contend that carriers tend to introduce measures unilaterally without forewarning, proper explanation or concertation.

The introduction of slow steaming by shipping companies to cut costs is another example, she says. The shipping companies have not taken into account the additional inventory costs, which they have imposed on shippers by lengthening transit times, and they have not passed on any of the savings shipping companies have made as a result.

“Shippers have to build more stocks to take account of the 10 additional days in the supply chain,” she said. “This has not been balanced by greater schedule reliability and lower charges.”

The ESC’s ‘parent’ grouping – the Global Shippers’ Forum – summed matters up in a statement issued after its annual meet-ing in Macau in September, claiming that the past year had “witnessed a variety of unacceptable shipping practices, ranging from the imposition of abrupt and oppor-tunistic rate increases and charges, cargo roll-overs, the limitation of shipping capac-ity and a general lack of adherence to rate agreements and contractual arrangements

The World Shipping Council, which speaks for most of the carrier industry, is not entirely sympathetic to the shippers’ views.

WSC president and chief executive officer Christopher Koch was not of a mind to give ground to shippers’ complaints when he spoke to Fairplay, arguing that they are largely responsible for their own problems.

Koch argued that many of the problems they raised are the result of their “single-issue focus on rates” and their reticence to commit to providing cargo

volumes over longer periods. “It’s all about the rate,” he said. “There are not the volume commitments as there are in the US trades. It tends to produce a lot of inefficiency in the network which one would hope could be addressed by better relationships and forecasting.”

Koch thinks proposals from shippers for longer contracts could bring a favour-able response from carriers in this respect.

“If there is sufficient agreement on that point, the market place certainly

Shippers see a way out of their war with carriers through better contracts – but mistrust remains a barrier. Andrew Spurrier reports

All about the rate


story of the week

on an unprecedented global scale”.The impression given is that shippers have

seen no improvement in shipping company behaviour since Brussels’ abolition, more than two years ago, of the block exemp-tion of liner shipping conferences from EU competition legislation.

This is basically an industry coming out of cartel

In her interview with Fairplay, van der Jagt almost assented to that impression, stopping short of doing so only to concede that the end of the block exemption was, in itself, a positive step. “We always said that we would not see results overnight, because this is basically an industry coming out of cartel. There has to be a change of mind set

and this will take at least five years.”Carriers need to end their fixation with

their own market shares and give greater attention to customer care and satisfaction, she said. She acknowledged that the global economic slowdown complicated the task of the shipping companies but argued that the ravages of the downturn would have been even more severe had conferences still been in activity.

Even so, the ESC head said, shipping companies often continue to act collec-tively rather than individually as is demon-strated by their common positions on such issues as capacity cuts, slow steaming and others. “If one introduces cuts, the others follow. You can say that they collectively agree to take out ships. That’s what we saw in the crisis.”

It was the same sort of behaviour, Van der Jagt added, which led shipping companies to defy the laws of sustainability by massively over-ordering newbuildings. “They should have been doing more to prevent the whole thing from happening. Before the crisis, they just continued buying ships – which we thought was not sustainable.”

The apparently irreconcilable philosophi-cal, not to say ideological, differences between shippers and shipping lines can

give the impression that the situation is hopeless; that they are condemned to con-tinue their guerrilla warfare forever.

That would ignore, however, that they are already managing to live with each other, albeit imperfectly, on a day-to-day basis at individual company level. Nor is the ESC pessimistic about the chances of achieving better relations with carriers in the future, apparently taking the view that the best instruments for doing so are the contracts which bind carriers and shippers together.

Van der Jagt admitted that shipping companies are not the only ones that need ‘educating’ about contracts. She said some of the ESC’s national member organisations are already working on recommendations to help their members draft their contracts better.“Shippers can learn more about drafting clearer contracts,” she said. “They cannot just leave things as they are. They have to work on that.”

She added that the ESC believes shippers would also benefit from having longer con-tracts, which would take them closer to their goals of service sustainability and reliability.

Van der Jagt stopped short of calling for multi-annual contracts but insisted: “They should be longer than the three, six and nine month contracts we have at present. F

allows it,” he said. “There is nothing to stop shippers and carriers from organising year-long contracts. There are a number of carriers who would see that as a very desirable improvement in the situation.”

More generally, he agreed with Nicolette van der Jagt that the end of the block exemption for liner shipping conferences in the EU has not brought any substan-tial improvement in relations between shippers and carriers.

“I think our members’ view overall is that the relationship with shippers is

not significantly better and that it is not significantly worse,” he offered. He also agreed with her, however, that the way forward is in the negotiation of better contracts between shippers and carriers in future. “There is probably some legitimacy on both sides that we could be doing this better,” he said, “and the way to do this better is to draw up firmer, clearer and more specific contracts.”

Founded in the US in 2000 by liner shipping company heads, the WSC is based in Washington, DC, and claims to represent 90% of global liner shipping capacity.


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

Affreightments and relets have given relief to VLCCs in the Gulf

VLCC Gulf rates firm on contracts and relets

Contracts of Affreightment (COAs) may have cleared out some tonnage and helped firm

VLCC rates in the Gulf last week. Unipec is reported to have taken eight Chinese vessels and afterwards the Japanese took four relets and the Koreans withdrew others for their use, say Braemar Seascope.

The resulting rates may not

have staying power according to market sources.

The developments increased owner sentiment and fixtures for Gulf-Japan rose from W60 to around W67 – a timecharter equivalent of $25,500-26,000/day. These are levels that enable

The miller’s tale

An order announced last week by Russian prime minister Vladimir Putin to extend the ban on wheat, rye, barley and corn exports until 1 July 2011 will make an excep-tion to allow Russian millers and traders to ship milled flour abroad.

If 1.4 tonnes of wheat makes one tonne of flour, the tonnage of wheat not allowed to be exported (which may be shipped as flour) may reach 1M tonnes – triple the volume of the flour trade in the year before the drought.

According to the decree signed by Putin on 20 October, the ban on exports of wheat imposed

between 15 August and 31 December will be maintained for another six months. A spokes-man for the prime minister has said there will be no loopholes for “unscrupulous exporters”.

The extension of the ban doesn’t simply reflect the 30% reduction in the summer season’s harvest due to drought. The winter planting, according to Putin, has been reduced by more than 3M ha – 20% less than a year ago. This will mean that the next harvest will also fall short of domestic consumption levels and stockpiling requirements, unless the control on exports remains in place. Fear of wheat price inflation is also driving the prime minister to make sure that, as next year’s parliamentary elec-tion campaign accelerates as poll-ing day in December approaches, Russian voters don’t let their

stomachs and their pockets rebel against the government and the ruling United Russia party.

President Dmitry Medvedev’s chances for re-nomination for the presidential poll, scheduled for March 2012, will be seriously damaged if the governing party is badly defeated in the parlia-mentary election, so he is keen to keep up appearances that he is

doing everything he can to assure the supply of grain into flour and flour into bread.

Putin told a meeting of farm policy officials in Rostov last week that he is offering the farm sec-tor subsidies to help cover their fertiliser costs; subsidies to lower their railway expenses; a postpone-ment of interest payments on agricultural loans; and subsidies for

Putin has ensured Russian grain traders will stay in the export business – despite the export ban. John Helmer reports

owners to at least cover operating costs (which would be in the region of $10,000-12,000/day on a modern VLCC). West-bound moves remain still show negative returns.

The timecharter rates for West Africa – Gulf of Mexico for VLCCs

� ��

An agreement on supplying flour to the very promising market of Indonesia has almost been reached

Russian exports of wheat flour2004/05 season2005/06 season

2006/07 season

2008/09 season2007/08 season

Thousand tonnes [ Source: Russian Customs statistics ]

Scanscot insolvency: highlights project market woes CMA sees dry market revival: on the cusp Japanese-built bulk carriers: still attracting premiums as trades in Panamax-size vessels and above remain healthy


markets

their spring planting costs. “It is important,” Putin said, “to reduce the financial burden on enter-prises, thereby stimulating them to increase acreage in the spring. Therefore, I propose to allocate an additional Rb1Bn ($32.5M) in sub-sidies for spring sowing, including the purchase of seeds.”

Victor Zubkov, the deputy prime minister in charge of agri-culture, added that, to make up

for the deficit in winter planting, additional subsidies for fuel and lubricants will be arranged in time to finance the spring planting. He also mentioned legislation and budget funding for improvement in agricultural insurance cover for farms and to establish irrigation of crops in the drought zone.

Alexander Korbut, of the Russian Grain Union, told Fairplay: “We

asked the government to exclude flour from the ban and they agreed. We are very grateful for this excep-tion. Flour exports will not do any harm to the Russian domestic mar-ket. On the contrary, it will keep the situation in balance.”

Exactly what this balance may be is indicated from the sharp rise in the Russian flour trade.

Since the 2006 season, the volume of wheat flour exported

has doubled, reaching 312,000 tonnes, according to the chart for 2008/2009. Adding other types of flour, the total exported in the 2008/2009 season came to 387,000 tonnes.

According to the Russian Customs data, for the first half of 2010, exports of wheat (includ-ing wheat mix or meslin) totalled 8.5M tonnes – up 1.5M tonnes

(almost 21%) on the same period of 2009. In value terms, these grain exports jumped from $1.2Bn to $1.5Bn.

Russia’s share of the global flour trade has also been growing fast. According to the Interna-tional Grains Council, before 2006 Russia’s flour exports were too small to count in the top 10 of the global trade. But in the past two growing seasons, Russia moved into fifth place behind Kazakhstan, Turkey, the European Union and Argentina. The main buyers of Russian flour are Mongolia, Afghanistan and other former Soviet countries in Central Asia and the Caucasus.

Capturing foreign marketsHow much more flour can Russian exporters and traders sell into the global market? Anton Shaparin, representing the Grain Union, said on 20 August: “Russian manufac-turers of flour have been capturing foreign markets for four years with great difficulty. An agreement on supplying flour to the very promis-ing market of Indonesia has almost been reached. It is easy to lose the captured foreign markets, but it’s very difficult to get them back.”

That said, it is possible to calcu-late that after the 30% reduction in this year’s wheat harvest, the volume of wheat available to export in the first half of 2011 would be that much less than the 7-8M tonne figure recorded as exported in the first half of 2009-

2010. That subtraction would leave between 5-6M tonnes, assuming the pre-drought level of foreign trade. Putin’s extension of the ban order means that none of this can be exported.

However, if flour exports are allowed instead, the millers can, in theory, convert these wheat volumes into roughly 3.6-5.7M tonnes of flour. Such volumes dwarf the flour export volumes which Russia has been shipping, even in the fast-growing global market. So long as the spread between the price of domestic wheat and export flour allows a sizeable profit for the conversion, the door to unlimited flour exports remains open. The export-limiting factor will be the price at which Russian flour marketers attempt to beat the competition in foreign markets. This level may support a projected jump in flour exports next year to around 1M tonnes, up from 312,000 tonnes this year.

Asked for their estimate of this number, two leading grain produc-ers, Russian Grain and Razgulyai, declined to comment. Korbut, of the Grain Union, however, acknowledges flour exports in the first six months of 2011 have doubled, equalling the volume exported over 2009. “We believe in January-June 2011 flour exports will reach 300,000-400,000 tonnes, not more. Flour and wheat export markets are different [but] we have never exported flour to Egypt, nor do we plan to now.” F

(TD4, W56.) finally exceeding those on the Suezmaxes (on TD5 around W74.2) for which TCEs were $12,000-13,000/day. Equity analysts mainly opted for a glass that was ‘half full’ (with Asian buyers replenishing inven-tories) rather than ‘half empty’ (record high US inventories), painting a positive picture for investors. Long-term dynamics,

specifically a worrisome tonnage oversupply, remain unchanged.

Short-term calculations of available vessels are the heaviest influence on sentiment. Queues

in the AG reached as high as 116 several weeks ago, before the recent surge, compared to the more typical 80 ships.

Johnny Kulukundis, writing for CR Weber, tied the run on tonnage to the market disloca-tions of the past few weeks in France, describing a situation where: “available tonnage slowly shrunk, charterers, who had been

in no hurry to fix their business based on an ever growing ton-nage list and declining World-scale rates decided they had better act.”

The broker team at CR Weber says that 39 vessels were fixed during the last week in October, and Kulukundis pointed to a possible post-Halloween wildcard – the November cargo list. F

� ��

312,000tonnes flour exports in 2009-10 growing season

1Mtonnes potential flour exports for 2010-11 growing season

World exports of wheat flour, 2008/09

The rates may not have staying power

%EU 12%

29% Others

17% Kazakhstan

16% Turkey

Argentina 11%

Pakistan 5%

RussiaUAE 5%

5%

[ Source: International Grains Council ]

Sale & Purchase of Ships • Contracting of Newbuildings

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markets

8 4 November 2010 www.fairplay.co.uk

Woes take a toll on heavy lift

The insolvency of Hamburg’s project/heavy-lift operator Scanscot has cast a harsh light on the growing supply/demand imbalance in one of shipping’s more robust sectors.

The company was put into administration after defaulting on ship mortgage loans for newbuild-ings ordered at Germany’s former Hegemann shipyard group during the boom years. By the time the 9,500dwt ships (with a combined lifting capacity of 700 tonnes) were delivered in late 2009/early 2010, freight rates and ship values had plunged to such an extent that Scanscot could not guarantee their profi table deployment anymore.

Only one of them was covering its costs, prompting the fi nanc-ing bank KfW Ipex to declare the loans in default and seize the ships, according to Scanscot managing director Michael von Brauchitsch. KfW Ipex refused to comment on the case.

Informed sources said that Com-merzbank subsidiary Deutsche Schi� sbank is also involved in the projects. The Scan Britania (under charter as Hyundai Britania) and Scan Espana are in Singapore, waiting to be sold or transferred to another owner/manager. Ask-ing prices are believed to be in the range of $35M/vessel, which market sources suggest is too

Low activity and rates are threatening heavy-lift sector companies

high, given the short-to-near term outlook for project freight.

However, it will be di� cult for the banks to o� er a discount on the ships, mainly for political rea-sons. The loans for the Britania and Espana are backed up by German state loan guarantees which means the banks would be reimbursed for their losses. However, a drawdown

of the guarantees could cause a political backlash and prompt federal and state governments to take a tougher line on applications for state support in the future.

The fate of the Scanscot ships may only be a foretaste of the battles yet to come: the heavy-lift sector is poised for steep growth over the coming years amid a severe lack of high-value project cargoes. The fl eets of the 17 lead-ing tonnage operators – counting only ships with combined lifting capacities of over 250 tonnes – is

set to double to 303 vessels over the coming years, according to a survey by Dutch research fi rm Dynamar.

Supply-side pressure will be the highest in the sub-segment of ships fi tted for 750 to 1,000-tonne lifts, where capacity will increase by a staggering 500%, according to Dynamar. Spot

freight rates for project modules have dropped by 30-50% over the past two years, with only the super heavy-lift segment above 700 tonnes holding reasonably steady. “We believe the higher load segments will come under more pressure because of all the newbuildings,” said Lars Rolner, managing director of German heavy-lift carrier SAL.

Even though project demand appears to be recovering, supply-side pressure will continue to dampen the market, said Peter

Bloch, commercial director at Rot-terdam’s Jumbo Shipping. “One year ago we were somewhat more optimistic about 2011. We thought 2010 would be dramatic, but now it looks as if next year will not be much di� erent,” Bloch told Fairplay.

Activity still lowProject start-ups are expected to increase in key markets, such as the Gulf and Australia, next year, but the usual time lag between project launches and peaks in material fl ows means that the lull is bound to drag on. “It takes one- and-a-half years from the award of the project contract to the EPC [engineering, procurement and construction company] until we as a carrier come into play. And the activity is still fairly low so the demand gap may continue next year,” Bloch explained.

The prospects and impact of scrapping pose a conundrum for sector specialists. About one-third of the wider multi-purpose ship fl eet is over 25 years old, foment-ing hopes that a supply/demand equilibrium can be found rather sooner than later.

The evidence so far is sober-ing. “There is still an appalling amount of very old MPP tonnage with lifting capacity of up to 150 tonnes trading in Africa and Asia,” noted Gerhard Janssen, general manager, marketing and sales, at Rickmers-Linie.

Emilio Reales-Bertomeo, managing director of Bremen-based Beluga Group also admit-ted in a recent speech in Bremen that scrapping activity has failed expectations so far. F

decrease in heavy-lift freight rates50%increase in number of heavy-lift ships (750-1,000 tonne capability)500% (750-1,000 tonne capability)500%

[ Photo: Dietmar Hasenpusch ]

www.zeeland-seaports.com

THE CONTINENTAL GATEWAY

markets


Dry revival on the cusp

The dry bulk market remains active, but Capesize momen-tum appears to be slowing, at least temporarily. The Baltic Exchange’s Capesize TCE aver-age, which had climbed as high as $46,000/day, slipped lower last week with a month-end dip below $44,000/day. Among the individual routes, trans-Atlantic round voyages (which had been fuelled by ore cargoes) were easing the most.

In a sluggish paper market, the curve remained downward sloping, but softened a bit in line with spot rates. The all-important 1Q11 Cape contract, which had been assessed above $30,000/day, pulled back below this important marker.

Period fixing continuedThe Calendar 2011 FFA position, reflecting views of four Capesize quarterlies, still remained above $26,000/day – discounted below period fixtures of comparable tenors. The spate of period fixing (an optimistic sign) continued, with a five-year fixture on the 2010-built Samjohn Solidarity; Cosco Tianjin took the ship at $27,750/day. Cargill did a one-year deal on the new Cape Venture at $32,500/day, being relet by Deiulemar. Classic Maritime booked a 1999-built unit for a

riding high. One attendee at the CMA event, Norman Barouch, a Capesize veteran now manag-ing ships through NB Maritime, expressed concern about moves by raw material shippers to con-trol freight rates.

Barouch, well known from his days at P&O Bulk, told Fairplay: “As I understand the programme that Vale has initiated, it is building sufficient tonnage to handle a very significant portion of its sales to China. Once the programme is in full swing, it will have a serious impact on the Capesize shipping market. I expect it will all but take Vale out of the market for candidates on the Brazil – China run and for the times that they do require market tonnage, it will no doubt result in very low freight rates.”

In the moneyEconomou’s presentation con-tained an investment analysis for hypothetical Capesize and Panamax vessels purchased in 2005 showing at a 10% return on equity could be generated by rates of $26,670/day and $20,362/day, respectively.

The Capesizes, at today’s spot rates (and using assump-tions of $6,500/day in operat-ing expenses) are clearly ‘in the money’; Panamaxes (with similar operating expenses) are on the cusp. The five-year Capesize TC, on the other hand, shows only marginal contributions to capital costs. Based on the downward forward rate structure, and big period discounts, Barouch’s views reflect the sentiment of traders booking physicals and paper. F

Up to a 40% slippage rate in newbuildings may take pressure off dry bulkers

very healthy $41,250, with the strong rate reflecting the delivery in Mundra (western India).

The Panamax spot TCE aver-ages had rallied slightly, up towards $20,000/day. In contrast to the Capesizes, short rates on Panamax period fixtures were above spot – several Panamax transactions were done for periods out to one year, at around $23,000/day. The 1Q11 and 2Q11 FFAs had reached similar levels, before pulling back to $22,000/day.

One bullish view of market prospects came from George

Economou, CEO of Dryships, which maintains a large presence in the dry bulk sector in spite of its recent focus on ultra-deep-water drillships.

Economou, speaking to an overflow luncheon audience at the Connecticut Maritime Asso-ciation, talked about an order-book characterised by slippage of approximately 40%, partly due to a lack of financing, after the Lehman Brothers collapse two years ago. He said that funding difficulties would continue for

several years. On the demand side, Economou waxed optimis-tically about Chinese demand continuing to propel the market forward, saying “the drivers are still alive”

The CMA lunch marked the beginning of the season of 3Q10 earnings; the relatively positive rate structure is benefiting at least one company set to release earnings. Analyst Scott Burk, from Oppenheimer & Co, in supporting an Outperform rating on Excel Maritime, said: “We see potential earnings upside with 4Q10 opportunities to re-charter

a large part of its fleet in what could be a strong rate environ-ment.” Burk’s company model assumed at $21,250/day rate on Panamaxes in 2011, with a 10% sensitivity worth $0.35/share – a significant boost to the bot-tom line compared to the base earnings estimate of $0.72/share. Expressed differently, if Panamaxes were to garner $23,375/day in 2011, Excel earnings would be 50% above this analyst’s base case forecast.

The big ships are presently

$23,000/day fixtures reported for Panamax one-year charters, trending above the Baltic Exchange TCE average spot rates of about $20,000/day

markets

�� 4 November 2010 www.fairplay.co.uk

The charter market remains relatively subdued, although the asset trade in modern over-Pan-amax and Panamax ships remains brisk, with each deal seemingly at firmer levels than before.

Both Greek and Chinese buyers are actively inspecting ships and bidding higher levels, with the usual premium on offer for higher-dwt Japanese ships. Even though the yen is potentially less than a few trades above the $80 level, Japanese owners continue to sell ships, especially in the dry sector where yen returns remain suf-ficient to produce a profit on the sale of older ships, the book values of which have been written down over long trading lives.

It is thought that the Ruby Stream (built 2005 Sasebo, 76,728dwt) has been committed to Odysea Carriers of Greece at a price level of about $39M basis prompt charter free delivery. By comparison, the same Japanese seller, Fukujin Kisen, sold its very similar 2005-built Ikan Kerapu, at the time a year younger, for $30.5M in April 2009.

The Handymax CS Fortune (built 2002 Minami Nippon, 47,305dwt) is reported to have been sold to Greek interests for a

price in the region of $28-29M, reflecting the ship’s sub-Supra deadweight but nonetheless a level which is more or less in line with recent sales of older vessels. In the Handy sector (but from the same builder), Orient Saori (built 1997 Minami Nippon, 30,835dwt) is said to be expected to sell for a price close to the $21M achieved by Cielo Di Vaiano (built 1998 Saiki, 31,962dwt) when offers are invited from buy-ers in the near future.

Despite reports of a fixture a few weeks ago, the Itochu and Iino joint venture-controlled ice-class MR Northern Dawn (built 2003 Koyo, 47,994dwt) is once again available for inspections, with price expectations unlikely to be lower than the $23M at which the ship was previously reported sold.

Tanker activityThe first generation double-hull Aframax Genmar Alexandra (built 1992 Shin Kurushima, 102,262dwt), originally con-tracted by Norden, has been sold at about $12M, a relatively soft price for a Marpol-compliant ship with no phase-out date.

Greek buyers are believed to be behind the purchase of two MR-type product tankers from Top Tankers’ fleet. The Doubt-less and Spotless (both built 1991 Halla, and 47,076dwt) achieved about $7M each, reflecting limited

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Japanese-built bulkers still attracting premiums

some time, government restric-tions placed on Korean banks from lending foreign currency in an effort to prevent further increases in the value of the won are limit-ing the number of deals concluded.

There are tentative signs that the gas charter market is picking up, and the number of purchase enquiries for LPG carriers appears to have increased accordingly. One reported sale, albeit for a vessel with fixed employment, has been that of Teekay’s 7,500m3 ethylene carrier Dania Spirit (built 2000 Hyundai, 8,669dwt) which has gone to undisclosed Dutch invest-ment buyers with its current long-term charter to Statoil attached.

With the similar, 7,200m3 pressure-type Loex (built 2001 Murakami Hide, 6,625dwt) having been sold by Geogas to Diamantis Pateras for $16.25M in October, it is likely that the slightly larger ves-sel will have done rather better on price, always subject to the charter terms that come with the deal.

Charter-attached sales also pre-vailed in the container market last week. Technomar has continued its fleet expansion by purchasing the 5,041teu sisters CMA CGM Orca and CMA CGM Dolphin (built 2006 & 2007 Hyundai Samho, 65,890dwt) for $52.5M each, with a charter back to the opera-tors at $24,500/day for two years.

In the general cargo sector, the MPP-type Prinsenborg (built 2003 Fujian Mawei, 20,396dwt) has reportedly achieved $16M from Greek buyers, who were prepared to pay up for its combination of three 35-tonne cranes and 658teu capacity, as well as its breakbulk capability. F

Trades in Panamax size and above remain healthy

earning prospects in the current market, as well as looming special surveys next year.

According to IHS Fairplay data, the ships last changed hands for about $24M each in 2008. Uyeno Transtech’s operated stainless chemical tanker, Sunrise Rosa (built 2004 Shin Kurushima, 8,626dwt) has been sold and deliv-ered to Dong Jin Shipping of Korea for a price of around $12M, more or less in line with recent sales of similar units.

While Korean tanker buyers are more active now than for quite

$21MOrient Saori is expected to sell for a price close to $21M [ Photo: Fotoflite ]

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Baltic dry indices

Capesize Index

This week: 4,262 3 mth high: 4,461Last week: 4,373 3 mth low: 1,939

Panamax Index

This week: 2,410 3 mth high: 3,396Last week: 2,219 3 mth low: 2,172 +7.9%

Supramax Index

This week: 1,750 3 mth high: 2,142Last week: 1,791 3 mth low: 1,722

Handy Index

This week: 897 3 mth high: 1,085Last week: 950 3 mth low: 897

Outlook: In the North Atlantic, Capesize rates approaching $70,000/day for ore cargoes (Narvik and St Lawrence) have been driving the market, say brokers. Brazil-China fixtures have been reported at $30/tonne. The Pacific may be firming, with rates for round voyages (C10_03) up to $39,850/day up $982. The Baltic Panamax index firmed to 241, up 191 points, but overall rates have been drifting. Brokers suggest firming sentiment for period fixtures which have been trading at higher levels to spot rates. Handy and Supramaxes have seen a charterer’s market as they withhold cargoes hoping for cheaper rates. The Supramax average of timecharters softened to $18,301/day.

shipping markets Weekly summary of all the key industry indices and data

ConTex

Outlook: Most size classes of box ships closed the week on losses as the amount of prompt tonnage in Asia builds up. Ships ranging from 2,000-4,000teu are most afflicted by the softening in rates, with fresh fixing activity down to a trickle. “When deals are concluded, they are likely to be at a significant discount to last done,” commented one broker. MSC and PIL secured older sub Panamax tonnage of 3,000-3,330teu at a few thousand dollars below current benchmarks.

Container ship Timecharter Assessment 28 Oct 21 Oct1,100teu 7,381 7,3551,700teu 8,397 8,5492,500teu 12,803 12,998ConTex 565 574

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BDI: 2,678 49 (1.8%)

Baltic tanker indicesOutlook: VLCCs in the Gulf saw vessels removed from the spot markets, which broke weeks of unprofitable rates. From there to Japan (TD3), 280,000 tonnes was rated around W66.4, up about 22 points. Even to the Gulf of Mexico (TD1) rates climbed to W38.9, an increase of about eight points. In West Africa-Gulf of Mexico trading, the balance for charterers between taking a VLCC (TD4-W56 up four points) and a Suezmax (TD5-W74.2 down 6.6 points) became less clear cut. For Suezmaxes on the Continent, the Baltic (where rates have remained firmer than in West Africa) may be more attractive, particularly if Turkish Strait delays increase.

Baltic dirty tanker index

This week: 758Last week: 734

VLCC TCE

This week: $12,396/dayLast week: $3,446/day

Suezmax TCE


Aframax TCE


Baltic clean tanker index

This week: 627Last week: 638

MR-TCE


LPG 1

This week: $40.88/tonneLast week: $39.63/tonne

BPOIL

This week: $44.98/tonneLast week: $44.91/tonne

[ Source: Baltic Exchange ]

Dirty tankers

Clean tankers

[ Source: Baltic Exchange data ]

[ Source: Hamburg Shipbrokers’ Association (VHSS) ]

Currency rate vs $ Last wk Last wk 3M 3M high low high low

Euro 1.4080 1.3734 1.4080 1.2588Pound 1.6046 1.5657 1.6107 1.5297Yen 81.99 80.39 86.89 80.39Real 1.7246 1.6937 1.7822 1.6442Aus dollar 0.9974 0.9652 1.0004 0.8771Swiss franc 0.9929 0.9663 1.0624 0.9463

Outlook: This week could be pivotal in the markets with central bank meetings coming from the RBA, FOMC, BoE, ECB and the BoJ, as well as the all important nonfarm payrolls from the US on Friday. It is expected that the FOMC will be expanding the quantitative easing by a further $500Bn.

[ www.corporate-fx.co.uk/fairplay ]

-2.6%

-2.3% -5.9%


EuROPE 380CST 180CST MdO MGOd St Petersburg 353.50 363.50 503.00 589.00d Great Belt 476.00 500.00 632.50 677.50d Hamburg 447.00 458.00 580.00 641.50d Rotterdam 455.50 470.50 595.00 644.00d Antwerp 456.00 468.50 587.50 640.00d Le Havre 467.50 482.50 n/a 670.50d Falmouth 496.00 518.00 712.50 712.50 MEdITERRAnEAn 380CST 180CST MdO MGOd Istanbul 485.50 501.00 n/a 695.00d Piraeus 466.00 480.00 n/a 650.00d Valletta 465.50 483.50 n/a 644.00d Augusta 477.00 495.00 n/a 678.00d Fos/lavera 483.50 538.00 n/a 678.00d Gibraltar 463.50 478.50 650.00 675.00 AfRICA 380CST 180CST MdO MGOd Arzew 494.00 490.00 n/a 669.00d Durban n/a 512.50 657.50 667.50d Lagos 492.50 537.50 n/a 705.00d Dakar 512.50 542.50 n/a 700.00d Las Palmas 478.50 494.50 676.00 686.00

MIddLE EAST 380CST 180CST MdO MGOd Khor Fakkan 463.00 479.00 n/a 655.00d Aden 515.00 525.00 n/a 705.00d Jeddah 500.00 535.00 n/a 1,000.00d Suez 492.50 492.50 n/a 990.00d Dammam 465.00 475.00 n/a 660.00 ASIA 380CST 180CST MdO MGOd Tokyo 499.00 506.50 662.50 n/ad Sydney 590.00 600.00 n/a 800.00d Colombo 515.00 525.00 n/a 725.00d Singapore 470.00 485.00 652.50 652.50d Hong Kong 482.50 495.00 662.50 662.50d Kaohsiung 491.00 499.00 680.00 695.00d South Korea 492.00 504.00 677.50 677.50 AMERICAS 380CST 180CST MdO MGOw New York 458.50 468.50 662.50 n/aw Houston 461.50 468.50 635.00 n/aw Cristobal 470.00 504.00 701.50 n/aw Venezuelan Ports 467.50 495.00 677.00 685.00d Rio De Janeiro 506.00 524.50 n/a 713.00d Buenos Aires 472.50 492.50 702.50 717.50d La Libertad 487.00 527.00 n/a 1,014.00w Los Angeles 453.00 463.00 687.50 n/aw Seattle 481.00 491.00 682.50 n/aw Vancouver Bc 490.00 500.00 692.50 725.00

Bunker prices [ Source: Cockett Marine Oil Ltd. Tel: +44 1689 883400 ]

Latest mid-range prices listed in $ as at Monday 22 Feb 2010.d=delivered, w=ex-wharf. Ports listed regionally clockwise from NE.

for online bunker information: www.fairplay.co.uk/secure/markets.aspx or visit www.bunkerworld.com or www.cockettgroup.com

4 November 2010 ��www.fairplay.co.uk

EuROPE 380CST 180CST MdO MGOd St Petersburg 347.50 347.50 475.00 570.00d Great Belt 473.00 498.00 689.00 734.00d Hamburg 467.00 485.00 706.00 716.00d Rotterdam 457.00 481.00 720.00 720.00d Antwerp 459.50 482.00 714.00 714.00d Le Havre 456.00 475.00 n/a 722.50d Falmouth 494.00 684.00 772.00 772.00 MEdITERRAnEAn 380CST 180CST MdO MGOd Istanbul 491.00 511.00 n/a 742.50d Piraeus 468.50 495.50 n/a 727.50d Valletta, Grand Harbour 472.50 492.50 n/a 725.00d Augusta 477.50 535.00 n/a 752.50d Fos/lavera 532.50 557.50 n/a 755.00d Gibraltar 471.00 487.00 730.00 730.00 AfRICA 380CST 180CST MdO MGOd Arzew 506.00 526.00 n/a 772.00d Durban n/a 515.00 752.50 767.50d Lagos 507.50 535.00 n/a 786.00d Dakar 514.00 645.00 n/a 837.50d Las Palmas 487.50 500.00 750.00 750.00

MIddLE EAST 380CST 180CST MdO MGOd Khor Fakkan 482.50 502.50 n/a 740.00d Aden 485.00 495.00 n/a 745.00d Jeddah 495.00 510.00 n/a 765.00d Suez 508.00 517.50 n/a 805.00d Dammam 480.00 490.00 n/a 725.00 ASIA 380CST 180CST MdO MGOd Tokyo 527.00 532.50 735.00 n/ad Sydney 527.50 527.50 711.50 711.50d Colombo 527.50 527.50 n/a 731.50d Singapore 462.50 472.50 697.50 697.50d Hong Kong 477.50 487.50 712.50 712.50d Kaohsiung 500.00 510.00 720.00 735.00d South Korea 490.00 502.00 730.00 730.00 AMERICAS 380CST 180CST MdO MGOw New York 459.50 479.50 697.50 n/aw Houston 458.50 260.00 732.50 n/aw Cristobal 503.00 533.00 777.50 n/aw Venezuelan Ports 486.50 516.00 n/a 771.50d Rio De Janeiro 467.00 490.50 n/a 751.00d Buenos Aires 491.50 512.50 812.50 837.50d La Libertad 511.00 551.00 n/a 1,114.00w Los Angeles 473.50 493.50 757.50 n/aw Seattle 458.50 478.50 757.50 n/aw Vancouver BC 466.50 486.50 805.00 805.00

Bunker prices [ Source: Cockett Marine Oil Ltd. Tel: +44 1689 883400 ]

Latest mid-range prices listed in $ as at Monday 1 Nov 2010.d=delivered, w=ex-wharf. Ports listed regionally clockwise from NE.

Outlook: With crude oil futures trading in the $80/barrel range almost exclusively this month ($82 on average), this has supported bunker prices at higher monthly averages than since early this year. The BW380 index averaged $476/tonne for October, the third- highest monthly average behind April ($486) and January ($484).

Interestingly, crude oil values were slightly lower than current prices in January at $78 while in April it averaged $85/barrel. Bunker prices, therefore, were comparatively more expensive in January than in April.

Singapore reported no supply issues last week and moderate demand – price movements were muted. Average prices for IFO380 were $467/tonne and prices last week were in line with that level. These levels put prices well above September’s.

Fujairah saw no particular supply issues this week but did see a slight narrowing of its premium over Singapore towards the end of the week. Over the last three months, the premium averaged $5.60/tonne, widening from an average of $3 over the past twelve months. October saw average prices of $473/tonne for IFO380 in the port.

Despite the recent price increases, demand has been steady in Rotterdam recently and suppliers this week reported being booked until the end of the month. Like Singapore, prices for IFO380 in Rotterdam this week stayed close to the monthly average, in this case coming in at $458/tonne. Again, this is in marked contrast to September when the grade was $432/tonne on average.

Like other major ports, Houston reported relatively small daily price movements this week. Prices stayed

Bunker outlookBunkerworld index prices

BW380 cSt

$478 $4

BW180 cSt

$490 $3

BWDI distillate

$658 $3

[ www.bunkerworld.com/prices ]

generally close to Rotterdam levels, although the monthly average for October was $4 higher at $462/tonne.

The current situation, based on October averages, is good news for bunker buyers – lower prices relative to crude than seen at other times. The average premium of crude futures over the BW380 so far this year is $128/tonne. The current premium is $149, so global bunker prices are $21/tonne undervalued relative to crude.

Singapore, for example, posted IFO380 prices just over $500/tonne early in the year when crude oil was at similar levels. Bunker prices may be high currently compared to last month, but they still represent good value.

for online bunker information: www.fairplay.co.uk/secure/markets.aspx or visit www.bunkerworld.com or www.cockettgroup.com

To get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email [email protected] get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email [email protected] get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email [email protected]

newbuildings [ Source: IHS Fairplay ]

for full listings of sale and purchase deals: see www.fairplay.co.uk/secure/markets.aspx

To get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email [email protected] online bunker prices, visit www.fairplay.co.uk and select the ‘Markets’ tab in the top menuFor bunker news and information, visit www.bunkerworld.com or www.cockettgroup.com


Sale & purchase All details given in good faith but without guarantee

COnTAInER & MuLTI-PuRPOSE

Z CAPELLA(containership)ex-El Flaco:soldbyAlphaShip,Germany,toundisclosedinterests,Germany,$17M.2007.13,760dwt,9,928gt,1,098teu.BuiltJinlingShipyard,MAN-B&W/20kt.

CMA CGM dOLPHIn& CMA CGM ORCAsolden blocbyCMACGMHolding,France,toTechnomarShipping,Greece,$105M(bothcontainerships).

CMA CGM Dolphin:2007.65,890dwt,54,309gt,5,041teu.BuiltHyundaiSamhoHI,MAN-B&W/24kt.CMA CGM Orca:2006.65,890dwt,54,309gt,5,041teu.BuiltHyundaiSamhoHI,MAN-B&W/24kt.

BuLKERS

GREAT CEnTuRY: sold by China National Foreign Trade Transportation (Sinotrans), China, to undisclosed interests, China, $32M. 2000. 73,747dwt, 38,426gt.

Built Sumitomo HI, Sulzer, 10,261bhp/14kt.

GOLdEn QuEEn tbn Sag Bulk Germany: sold by Golden Ocean Group, Norway, to Salamon, Germany, $84.9M. 2010. 175,918dwt, 91,971gt. Built Jinhai Heavy Industry, MAN-B&W/14kt.

KAMSAR GOLd: sold by Doun Kisen, Japan, to undisclosed interests, Greece, $41.5M. 2006. 82,981dwt, 42,898gt. Built Tsuneishi, MAN-B&W/14kt.

SunnY SuCCESS: sold by Mitsui OSK Lines, Japan, to undisclosed interests, $16.5M. 1991. 42,203dwt, 23,275gt. Built Oshima, Sulzer, 7,200bhp/14kt.

TAnKERS

LOEX (LPG tanker): sold by Geogas Trading, Switzerland, to undisclosed interests, Greece, $16.3M. 2001. 6,625dwt, 5,764gt. Built Murakami Hide. B&W/15kt.

SAMHO GLORIA (chemical/oil products tanker): sold by Samho Shipping, South Korea, to undisclosed interests, $16M. 2008. 13,153dwt, 8,689gt. Built Samho, MAN-B&W/13kt.

nEWBuILdInG RESALES

TSunEISHI TAdOTSu 1422 (crude oil tanker): sold by Cyclops Ships, Cyprus, to Brightoil Petroleum, Hong Kong, $60M. 2010. 107,500dwt, 60,400gt. Built Tsuneishi Holdings Tsuneishi, MAN-B&W/16kt.

THOMAS SELMER ex-Taizhou Sanfu SF060110 (bulk carrier): sold by Oskar Wehr, Germany, to undisclosed interests, $32M. 2011. 57,000dwt, 32,300gt. Built Taizhou Sanfu Ship Engineering, MAN-B&W

SOLd fOR dEMOLITIOn

MSC VOYAGER (container ship) ex-Sea-Land Voyager: sold by Target Marine, Greece, $7.7M (468.00/ldt), 1980.

SELECTEd nEWBuILdInG ORdERS REPORTEd WEEK EndInG 5 nOVEMBER 2010

Shipbuilder no Owner/Operator delivery Type CapacityOshima 2 Rio Tinto 2012 Bulk carrier 73,000dwtSungdong 2 Akmar Shipping & Trading 2012 Bulk carrier 82,000dwtYangfan Group 2 John T Essberger 2012 Bulk carrier 34,500dwtYangfan Group 4 Ulusoy Denizyollari Isletmeciligi 2011 Bulk carrier 57,000dwtSPP 4 Metrostar Management 2013 Container ship 3,600teuHyundai Samho 2 Andriaki Shipping 2012 Crude oil tanker 164,730dwtMeyer Werft 2 NCL 2013 Passenger 4,000 passengersSTX Finland Cruise 1 Viking Line 2013 Passenger/ro-ro 2,800 passengersRemontowa 4 Torghatten Nord 2013 Passenger/ro-ro cargo ship 390 passengers

SELECTEd dELIVERIES REPORTEd WEEK EndInG 5 nOVEMBER 2010

Vessel Shipbuilder Owner/Operator delivery Type CapacityAttallia Tsuneishi Andriaki Shipping 2010/10 Bulk carrier 82,600dwtDarya Moti STX Chellaram Shipping (Hong Kong) 2010/10 Bulk carrier 80,545dwtEagle Klang Tsuneishi AET 2010/10 Crude oil tanker 107,500dwtGaschem Bremen Hyundai Mipo Hartmann Schiff ahrts 2010/10 LPG tanker 35,000dwtGCL Argentina Shanghai Jiangnan Changxing Brave Maritime 2010/10 Bulk carrier 177,700dwtHanjin Versailles Hanjin HI Danaos Shipping 2010/10 Container ship 3,398teuMaersk Nexus Astilleros y Servicios Navales AP Møller 2010/10 Off shore tug/supply ship 4,400dwtMagda P Cosco Dalian Common Progress Compania Naviera 2010/10 Bulk carrier 57,000dwtOrient Transit Samjin Interorient Navigation 2010/10 Bulk carrier 33,500dwtParamount Hatteras Sungdong AET 2010/10 Crude oil tanker 114,700dwtSafmarine Sumba Jiangsu Sugang SCL Reederei 2010/10 General cargo ship 18,000dwtSanta Clara Daewoo Hamburg Sud 2010/10 Container ship 7,100teuToki Arrow Oshima Gearbulk Holding 2010/10 General cargo ship 55,500dwt

for full listings of newbuilding orders and deliveries: see www.fairplay.co.uk/secure/markets.aspx

To get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.ihsfairplay.com or email [email protected]

newbuildings [ Source: IHS Fairplay ]

for full listings of sale and purchase deals: see www.fairplay.co.uk/secure/markets.aspx

To get the very latest information on shipbuilding activity, subscribe to the Daily Newbuilding News email service. Visit www.lrfairplay.com or email [email protected]

fixtures [ Source: Maritime Research Inc / www.maritime-research.com ]


dRY fIXTuRES

Cargo Vessel From To Tonnes Date Rate Chart Terms

Coal Steamer, (PG Shipp) Norfolk EC India 75,000-10% Nov 15/25 40.00 SAIL FIO;35,000tShex/20,000tShexCoal Steamer Mobile Swinoujscie 65,000-10% Nov 1/10 18.25 Arcelor-Mi FIO;25,000tShinc/22,000tShincHvy grain Steamer US Gulf China 55,000-5% Nov 15/24 57.00 MorganStan FIO;5days/8,000tHvy grain St Andrew, 96 R Plate Genoa 28,000-5% Nov 1/2 41.50 Dreyfus PtC;FIO;4\days/10,000tIron ore Steamer Pt Hedland Qingdao 170,000-10% Nov 10/20 12.00 BHP-Billit FIO;ScLd/30,000tIron ore Steamer, (Classicmar) Tubarao Qingdao 160,000-10% Nov 15/20 32.10 CNR FIO;ScLd/30,000tIron ore Tai Chang, 10 Seven Islands Taiwan 80,000-10% Nov 5/15 33.00 CSE FIO;60,000t/38,000tUrea Peace Tra� c, 09 Sur Oman Pipavav 30,000-5% Nov 1/3 14.50 POI/Transc FIO;12,000t/4,000t

TIMECHARTERS

Consumption Vessel From To Tonnes Date Rate Chart Terms

Unrptd Brisbane, 95 Del Pt Talbot Redel China 151,066 Nov 10/15 60,000 Pacifi cBlk Tripout via Pointe Noire14k/36t Navios Titan, 05 DelExYrdShanghai Redel China op India 82,936 Nov 22/26 17,500 BHP-Billit HayPtRd14k/36t Marco, 09 Del Davant Redel Immingham 81,393 Nov 9/14 20,000 CTranspor Trip out+$450,000bonus14k/32t North Friendship, 99 Del Guangzhou Redel Pass Muscat 74,732 Nov 1/5 24,500 ‘K’ Line TripViaAus/MEGulfUnrptd Fantastic, 10 Del US Gulf Redel Mediterranean 57,000 Oct30/Nov 5 28,750 PanOcean Trip outUnrptd Genco Warrior, 05 Del Haldia Redel India 55,435 Oct 25/30 14,000 Crossbridg RichardsBayRdUnrptd Ocean Star, 07 DlSailParanagua Redel Morocco 32,754 Nov 4/8 16,000 Clipper Trip outUnrptd Ocean Melody, 08 Del Inchon Redel ECSoAmViaNChina 29,572 Oct31/Nov 5 10,000 Merbulk TO, FertsUnrptd Callisto, 10 Del Haldia Redel China 25,009 Oct 30/31 10,000 CNR Trip out14k/52t Genco Constantine,08 Del Far East Unrptd 180,200 Oct 25/31 36,000 Oldendorff 4-6MoTrdg, ReletUnrptd Thelisis, 10 Del ExYard China Unrptd 59,000 Nov 4/6 19,100 Cargill 3-5MoTrdg13.5k/22.5t Mohave Maiden, 84 Del Pass Durban Redel Atlantic 28,074 Oct28/Nov5 15,000 XOShipping 3-5MoTrdg

WET fIXTuRES

Cargo Vessel From To Tonnes Date Rate Chart Terms

Oil dirty Western Jewel, 94 ME Gulf US Gulf 280,000 Nov 07 W30 ExxonMobil Oil dirty Marina M, 00 Kharg Island Spain op Via Suez 280,000 Nov 10 W32op W35 Repsol Oil dirty Tosa, 08 ME Gulf Japan 265,000 Nov 14 W45 NGT Oil dirty Falkonera, 91 ME Gulf Paradip 262,000 Nov 12 W45 IOC Oil dirty Pacifi c Voyager, 09 W Africa EC India 260,000 Nov 23 $2,590,000 IOC PtC;Lump sumOil dirty George S, 09 Novorossiysk UK/Continent 140,000 Nov 10 W90 Transway Oil dirty Delta Kanaris, 10 Ceyhan Terminal USAtlantic 135,000 Nov 10 W67 Sun Oil dirty Mindanao, 98 North Sea Portland 130,000 Nov 02 W77 Sun Oil dirty Narova, 92 W Africa USAtlantic 130,000 Nov 13 W67 Sun Oil dirty Remi, 91 ME Gulf Mangalore 90,000 Nov 05 W80 MRPL Oil dirty Minerva Astra, 01 Novorossiysk Mediterranean 80,000 Nov 05 W110 Shell Part cargoOil dirty KWK Esteem, 00 Bintulu Ulsan 80,000 Nov 10 W89 SK Shipp Oil dirty Amalthea, 06 Libya Mediterranean 80,000 Oct 29 W120 Petraco Part cargoOil dirty Genmar Princess, 91 EC Mexico US Gulf 70,000 Nov 02 W95 Citgo Part cargoOil dirty Moonlight Venture, 06 Banias US Gulf 55,000 Nov 03 W117 Mercuria Oil dirty Chemtrans Sun, 00 Venezuela USAtlantic 50,000 Nov 02 W130 Nustar PtC;OpW135High heatOil clean Elka Athina, 04 ME Gulf UK/Continent 90,000 Nov 02 $1,900,000 BP Lump sumOil clean Oriental Green, 98 Yenbo Japan 75,000 Nov 04 W92 NobleChart Part cargoOil clean Energy Centaur, 08 ME Gulf Japan 55,000 Nov 05 W107 CNR Part cargoOil clean Dl Cosmos, 07 Port Moresby Dalian 33,000 Nov 20 $380,000 DalianFuji PtC;lump sumOil clean Histria Ivory, 06 So Korea WC US 30,000 Oct 26 $950,000 Glencore Lump sumOil clean Bit Okland, 06 Newhaven UK/Continent 22,000 Nov 01 W207 Newton

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Italian shipping: banking on China China’s offshore climb: offshore sector has a long way to go CMA CGM: touts Dunkirk dynamo New rules for nuclear: on the cards Container shipping: toasts a healthy quarter

For trade and commerce news around the clock: www.fairplay.co.uk

New vessel capacity coming on stream in 2011 will challenge the liner industry’s newfound ability to tightly manage assets and raise rates in the Trans-Pacific.

After losing an estimated $15-20Bn in 2009 due to falling transport rates and rocketing fuel costs, carriers regrouped in 2010, successfully fighting the urge to flood idle capacity back onto the market when shipper demand began to heat up.

Industry insiders agree that the rate increases that followed will moderate as the autumn peak shipping season in the Asia-US trade weakens. But whether rates will continue to moderate, hold steady, or increase again dur-ing 1H11 will depend largely on whether carriers can continue the unprecedented capacity discipline they showed in 2010.

“Over the course of the last year, carriers have discovered some-thing they should have realised a long time ago: less capacity in the market means higher rates,” Mark Page, director of Liner Shipping for Drewry Shipping Consultants said recently. Scrupulous capacity management “is new to the liner trade”, Page said.

The world container fleet rose by 5.6% during 2009 from the previ-ous year, according to Alphaliner. That compares with an expected rise of 9.5% during 2010, 9.5% again during 2011 and 7.8% in 2012. The average growth forecast for the three years from January 2010 to January 2013 is 8.9%, Alphaliner estimates.

That growth should keep rates under sufficient pressure to keep carriers from trying to push them much above current levels, Hayden Swofford, executive director of the Pacific Northwest Asia Shippers Association, told Fairplay.

“[Carriers] always try for increases, that’s just the nature of the beast when you’re talking about imports”, Swofford said. “But additional new capacity

coming on will take away the abil-ity to make the same demands” on shippers that were made dur-ing early 2010”.

‘[Carriers] always try for increases; that’s the nature of the beast’

Carriers have a different view of the landscape. “It’s going to depend on the trade lane,” World Shipping Council president Chris Koch told Fairplay. “In the trans-Pacific, rates are still below 2008 levels, and everything seems to indicate there will be moderate

The Trans-Pacific box bluesCan carriers hold the line on rates in 2011? John Gallagher reports

volume growth next year, and I think there’s hope on the part of carriers that it will come with some revenue increase.”

A trade consultant who declined to be identified said major box shippers like Wal-Mart are expected to cut costs in anticipa-tion of big rate increases next year, despite the influx of capacity.

“They’re looking to relocate distribution centers, trying to find ways to reduce their private truck fleet fuel costs. It’s a reaction to a fear that rates are going to surge again in 2011,” he said.

Paul Bingham, an economist with Wilbur Smith, forecasts that trans-Pacific rates will increase in the low single digits “at best” for 1H11, with the possibility that they may end at the same level as last year. “The lessons are there for the carriers that if they manage capacity they certainly can have an influence on the rates they achieve despite the overriding fundamen-tals of the oversupply of vessel capacity,” Bingham told Fairplay.

But vessel operators will be reluctant to put capacity into lay-up for too long, Bingham asserts.

Even if carrier discipline allows rates to be sustained long enough above the fundamentals of avail-able supply, “you will get new entrants who will figure out how to put together strings of ships and start undercutting the bigger guys enough to capture that dif-ferential between the operating costs and the rates that are get-ting achieved.” F

Vessel capacity, such as that provided by China Shipping, is forecast to increase next year [ Photo: Danny Cornelissen ]


trade & commerce

Both carriers and shippers believe the Shipping Act of 2010, which would heavily curtail US anti-trust exemptions, has no chance of pass-ing by the end of the year. “This bill is essentially dead on arrival,” asserted Bruce Carlton, president of shipper group National Indus-trial Transportation League (NITL), during a Journal of Commerce forum last week.

“No action is expected in the [post-election] lame-duck session,” added Chris Koch, head of carrier group World Shipping Council.

The bill, HR6167, was intro-duced 22 September. Unless approved this year, it expires and must be re-introduced in the next

Congress. The practical ques-tion is what form legislation will take if it’s reborn in 2011. Koch underscored the key negatives in the 2010 draft: rates would be more volatile if discussion groups were ended, vessel-sharing agree-ments (VSAs) would be “drastically impaired”, and the Federal Mari-time Commission (FMC) would become “far more intrusive”.

“Is the assumption that elimi-nating rate discussion immunity will produce signifi cantly lower carrier revenues, and if so, to what e� ect?” asked Koch. “Every time carrier revenues and profi tability take a hit, carriers have no choice but to cut costs,” he emphasised.

Koch also explained how HR6167 cripples VSAs. “It says that no VSA may reduce capacity. The perverse incentive is that it would drive carriers to put in the

least amount of capacity possible, because they’d never be able to decrease it.”

Conrad agreed that the bill’s VSA language is “unworkable”. Never-theless, NITL is highly supportive of injecting competitive forces into the trans-Pacifi c and ending carrier anti-trust immunity. “The most disturbing aspect to League members was the manner in which carriers sought rate restora-tion,” said Conrad.

“Through legally sanctioned discussion agreements, carriers announced so-called voluntary guidelines that turned out to be virtually uniform, across-the-board rate increases among each of the carriers of the TSA [Trans-pacifi c Stabilisation Agreement]. There was no variation. Our customers had no choice but to pay the bill. I don’t know of any other

segment of the transport industry that has the privilege of moving prices up in lock-step.”

Conrad and Koch were asked how the next Congress, in the wake of this week’s mid-term elec-tion results, would approach the shipping reform debate.

“Republican leadership would be favourably inclined to normalise anti-trust competition rules,” opined Carlton. “But with equal vigor, Republicans would be very disinclined to create ‘super-regula-tory’ agencies,” he said, referring to HR6167’s pro-FMC language.

According to Koch: “If we do get into this in the next Congress, I’d hope the proposals that obliterate the present e� ciencies from ves-sel sharing and the regulatory bur-dens proposed in HR6167 would fall away, and that this would become a rational debate.” F

US anti-trust debate shifts to 2011Bill outlawing carrier discussion is dead, but could re-emerge

The Middle East’s ship repair industry is still under pressure, the chairman of Arab Shipbuilding and Repair Yard (ASRY) has said. The sector has entered into the fi nan-cial crisis last and should recover last, Shaikh Daij Bin Salman Bin Daij Al Khalifa commented.

“We are seeing an improve-ment in the shipping sector in general this year over last year – but the ship repair business is yet to recover. I think that we are on the road to recovery and will see that recovery next year,” he told Fairplay at the Seatrade conference in Dubai.

Despite this, ASRY expects

to remain in profi t this year. Al Khalifa said the repair fi rm will end this year with a similar num-ber of activities and revenues as they had last year. Although ASRY repaired 168 vessels last year (a 26% increase on the previous record-breaking year), revenue fell 37% to $131.4M in 2009.

“The market is very competi-tive and, as a result, there is an intense competition,” Al Khalifa said. “We’ve seen a lot of work at the yard but there have been some heavy discounts as well. We were profi table last year by $131M and we expect this year to be similar to that.”

ASRY’s net operating income in the fi rst nine months of this year stood at $106.3M. It has repaired 147 vessels but sales dropped due

to severe competition. “The improvement is yet to come,” he said. “We were the last to be a� ected negatively so we will probably be the last to recover.”

The ASRY is now focused on the $188M expansion plan it embarked on in January 2009 and is not looking at other expansion or merger/acquisition opportuni-ties. Al Khalifa said the

expansion is running smoothly, with most of the features to be completed before the end of 2011 and the rest by 2012.

The fi rst 400m of quay walls and the 180m return walls are expected to be delivered at the end of this year and the remaining 800m quay wall is expected to be completed by 4Q12.

With regard to the Electro-Mechanical Infrastructure,services required to be extended to the quay wall are to betendered soon and the main services are to be completed in parallel with the wall by the end of 2011. The auxiliary services will extend to 2H12. F

ASRY revenues will remain fl at, says chairman

tive and, as a result, there is an intense competition,” Al Khalifa said. “We’ve seen a lot of work at the yard but there have been some heavy discounts as well. We were profi table last year by $131M and we expect this year

ASRY’s net operating income in the fi rst nine months of this year stood at $106.3M. It has repaired 147 vessels

record-breaking year), revenue fell 37% to $131.4M in 2009.

“The market is very competi-tive and, as a result, there is an

embarked on in January 2009 and is not looking at other expansion or merger/acquisition opportuni-ties. Al Khalifa

end of this year and the remaining 800m quay wall is expected to be completed by 4Q12.

With regard to the Electro-Mechanical Infrastructure,services required to be extended to the quay wall are to betendered soon and the main services are to be completed in parallel with the wall by the end of 2011. The auxiliary services will extend to 2H12.

tive and, as a result, there is an intense competition,” Al Khalifa said. “We’ve seen a lot of work at the yard but there have been some heavy discounts as well. We were profi table last year by $131M and we expect this year

ASRY’s net operating income in the fi rst nine months of this year stood at $106.3M. It has repaired 147 vessels

said the With regard to the Electro-

Mechanical Infrastructure,services required to be extended to the quay wall are to betendered soon and the main services are to be completed in parallel with the wall by the end of 2011. The auxiliary services will extend to 2H12.

ME shipyard chairman believes recovery won’t arrive until 2011

Shaikh Daij Bin Salman Bin Daij Al Khalifa [ Photo: ASRY ]

trade & commerce


Italians banking on ChinaItalian shipping benefi ciaries say ‘si’ to Chinese bankers

Italian shipowners say they are benefi ciaries of a co-operation agreement between their association, Confi tarma, and the Export Import Bank of China.

The agreement highlights the availability of Chinese fi nance to European shipowners that order newbuildings from China. It follows hot on the heels of China’s recent $5Bn deal with Greece.

Confi tarma president Paolo d’Amico said the timing of the latest deal, signed on 6 October, is signifi cant as it follows an earlier co-operation deal between Confi tarma and Exim in January 2008. Italian owners have been loyal to China since then with few cancellations at Chinese yards, he told Fairplay.

Contract termsWhile Exim will facilitate contacts between Italian owners and Chinese shipbuilders, Confi tarma will create conditions for better relationships between owners and the bank. Confi tarma and Exim agree to open a direct link to exchange information on the shipping industry. “As many other

China’s o� shore climb

Italian shipowners, of course, I also warmly welcome the news,” Mariella Bottiglieri, MD of Giuseppe Bottiglieri shipping company, told Fairplay.

Bottiglieri said her father and former company chairman, Giuseppe, was the fi rst to speak to their Chinese shipyards and Chinese government to introduce a demolition premium: “This is the strategy to rebalance the tonnage supply and demand. He was right.”

She also commented that the recent Greek deal, which provides $5Bn of Chinese bank fi nance for Greek owners ordering vessels at Chinese yards, would not be confi ned to newbuildings: “In my opinion, the issue is not only building, but also scrapping.”

Exim said that more and more

foreign owners come to the Chinese banks to fi nance their vessels. Dan Li, director of the shipping fi nance division of the bank, suggested that this is because their fi nance is much wider than that of other banks. It includes ship-related sellers and buyers credit, in US dollars and Chinese renminbi respectively.

Exim has $3.2Bn outstanding in buyers’ credit at the moment, with more than 3,000 vessels exceeding 1M dwt fi nanced over the past 15 years. The good news for owners is that Exim also refunds guarantees on behalf of the Chinese yards. The only requirement for foreign buyers is that the yard must be Chinese-owned (private, listed or state-owned). Li pointed out that foreign buyers are likely to accept

Exim because “we have the same ranking as the government”.

The Confi tarma agreement encourages more owners to order vessels from China, Furio Samela, partner at Watson Farley & Williams o� ce in Rome, com-mented. “There are at least 16 Italian shipping companies with orders in China – we would expect all of them to be factoring in the possibility of borrowing from Chinese banks – with China Exim at the top of the list,” he said.

Some possible benefi ciaries of the Contifarma agreement are the owners that attended the signing at Contifarms Rome HQ in October. These included Persever-anza, Ca Li Sa, PB Tankers, Gruppo Lauro, d’Amico and Grimaldi.

Furio Samela commented: “From our perspective, China Exim has been very e� cient and pro-active in pursuing what is clearly a mandate from the Chinese government to support the export of ships built in China.”

Asked whether he thinks the Chinese banks might be more stringent with the loan terms if the ships are being built at Chinese yards, he said: “For the Chinese banks lending to international owners, their loans are broadly at market on the rates. They are sometimes willing to lend higher percentages than traditional ship fi nance banks and, most impor-tantly, they have the funds and are willing to lend.” F

O� shore o� ers a lucrative escape from shipbuilding’s overcapacity. However, “China remains at the lower end of capacity, compared

with Korea and Singapore,” said Matthew Flynn, CEO of World-yards.com. The exceptions are projects – “essentially in-house deals” for domestic players like CNOOC and COSL. Chinese yards have completed around 50 o� -shore exploration and production units, with more than 30 on order.

China’s expansion into o� shore has a long way to go

20M m2land reserved for new o� shore yards

Some yards have a good track record, but delays and problems are to be expected – the “teeth-ing problems of a starting indus-try”, as Flynn put it. “There is an

enormous uphill climb for China to master the o� shore arena,” he added. Yards are mainly building hulls, rather than inte-grated topsides, “but this is gradually changing”.

With 20M m2 of land reserved for new bases, overcapacity already lurks around the corner, but it’s experience, not hard-ware, that will make the di� er-ence, Flynn advised. F

3,000vessels Exim has fi nanced in

last 15 years

Mariella Bottiglieri: Italian shipowners will continue to show

their loyalty to Chinese yards[ Photo: North Downs Photography ]

Italians banking on China

3,000vessels Exim has fi nanced in

shipowners will continue to show their loyalty to Chinese yards

[ Photo: North Downs Photography ]

trade & commerce


CMA CGM touts Dunkirk dynamo

As Dunkirk dockers’ leader Franck Gonsse pointed out, CMA CGM will be the fourth operator to attempt to put the Nord France Terminal on the international container map.

APM Terminals tried, before deciding to cede the majority stake it acquired in November 2006 to CMA CGM last July in return for the latter’s 20% stake in the Mobile Container Terminal in the US. Before APM, however, the terminal was controlled by Interferry Boats, a subsidiary of Belgian rail operator SNCB, and, before that, by the former Compagnie Générale Maritime and Delmas.

The terminal has been developed over the years to the extent that it now o� ers 1,200m of quay length able to accommodate vessels drawing up to 16.5m and is served by fi ve super post-Panamax gantries.

CMA CGM is its principal user, accounting for more than half of total throughput, with more than 80,000teu during the fi rst nine months of this year. Its FAL 3 Asia-North Europe line calls there, as does its Panama Direct service to the South Pacifi c and its lines between northern Europe and the French Caribbean and Morocco.

Not the fi rst attempt

French major hopes to give port’s box terminal international status

The port of Dunkirk in northern France has not yet exploited the full potential of its proximity to the UK, according to the French con-tainer shipping group CMA CGM.

The group believes it can use the port’s position to boost through-put at Dunkirk’s Nord France container terminal, which it took over from the Maersk group’s APM Terminals in July.

It is looking to double through-put at the terminal to 400,000teu over the next three years, notably through new rail and feeder links with the UK.

Chairman Jacques Saadé, who was present at the inauguration of the change of management at the terminal on 11 October, explained the group’s thinking.

“There are plenty of English ports and cities that are not far from here and can be served from Dunkirk,” he said. Saadé added that the group would be looking at the possibility of creating a link via the Channel tunnel between Dunkirk and the British Midlands, where there was a concentration of major UK distributors.

Another option it would be exploring, he said, would be to use Dunkirk as a transhipment hub serving secondary ports in UK and Ireland by feeder.

Olivier Tretout, deputy chief executive of the group’s terminals

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subsidiary, Terminal Link, said that Dunkirk, by virtue of its position one-and-a-half hours of sea time from the Far East-North Europe trade lane, could o� er an attractive alternative to UK ports, which are considered to be expensive.

Saadé told guests at the inau-guration, however, that the group would not be relying solely on the UK market to develop container

tra� c at Dunkirk. He estimated that it could also win back tra� c destined for the French market, which was currently transiting through Belgian ports.

“In this fi eld, the action which needs to be taken involves French customs, which need to adopt more fl exible practices while still, of course, respect-ing European regulations,” he

said. Other possibilities the group would be exploring, he added, were the creation of full train services towards Paris and eastern France and the development of inland waterway tra� c between Dunkirk and Lille and the multi-modal platform at Dourges, just south of the northern French capital.

A cautious approachTretout said that the group was taking a cautious approach to increasing activity at the termi-nal. Its agreement with the port of Dunkirk provided for it to at least match the average growth registered by its neighbours in the northwest European range over the coming three years. But he confi rmed that the group believed that it could double throughput at the terminal, which stood at 212,464teu last year, over that period.

The group, which has had control of the new terminal since early July, has begun the task of bringing operating costs at the terminal down to the level of those at neighbouring Belgian ports.

It is working on that closely with the port’s dockers, whose leader, Franck Gonsse, created some surprise among CMA CGM executives at the inauguration ceremony when, untypically for a French dockers’ leader, he prom-ised the group full co-operation in achieving its objectives. “With CMA CGM, we really hope that things are going to take o� ,” he said to delighted applause. F

[ Photo: CMA CGM ]

CMA CGM touts Dunkirk dynamo‘There are plenty of

English ports and cities that can be

served from Dunkirk’Jacques Saadé, CMA CGM

trade & commerce


The dawn of a new era of nuclear-powered merchant ships is upon us, according to the marine risk adviser for classifi cation society Lloyd’s Register, as the rising costs of fuel and the threat of fi nes for pollution make owners rethink their future strategy.

Speaking to an audience of marine underwriters and brokers at Lloyd’s, Vince Jenkins said the classifi cation society was to present a new set of rules to its technical committee on nuclear propulsion. He added the expecta-tion was that the fi rst steel would be cut on a new breed of nuclear-powered ships within the decade.

“My view is that we will see numbers in the hundreds and not thousands,” he added. “The capital expenditure needed will limit the vessels only to the ‘blue chip’ shipping fi rms, which can a� ord the initial outlay.” He said the use of nuclear propulsion would see the vessels move to steam power,

which would create benefi ts through the removal of fuel tanks, greater cargo capacity and the ability for vessels to easily average 30 knots on the open seas, thus cutting down voyage times.

“The marine market may well mirror the aviation industry when it comes to the fi nance and use of nuclear engines,” he said. “In avia-tion, for example, British Airways will own the airframe but will lease the engines and it may well be the model for the use in the marine sector.” The engines will have a life of 4-5 years before they require new fuel rods.

“I believe what we will see are countries not companies develop-

ing a marine nuclear propulsion industry,” said Jenkins. “It may well be that we will see countries establishing an integrated nuclear engine industry which will include refueling sites.“Japan and Russia, for instance, may look to establish facilities where vessels can have their engine cores replaced.”

He added that the biggest barrier to nuclear propulsion is the fears that atomic energy engenders. “The expectation is that the fi rst nuclear-powered vessels will be brought into service on specifi c routes which will see the vessels using two ports. Ports will clearly decide on an individual basis whether they are prepared to allow

New rules for nuclear on the cardsLloyd’s to produce new rules for nuclear propulsion of vessels

Container shipping enjoyed a strong third quarter, with Neptune Orient Lines in Singapore saying that the average freight rate it obtained in the four weeks to 17 September matched those of the peak two years ago. Looking ahead, a lot depends on how the industry can react to changes in capacity.

For the near future, things appear to be under control. Arctic Securities in Oslo noted on 27 October in a daily market report that as the peak season is over, several major operators have cut capacity on the Asia-Europe route and the number of idle ships is ticking higher. “However, most brokers expect a rise in rates in the wake of the Chinese New Year and are thus not eager to charter vessels out on long-term charters,” they concluded.

Beyond this, owners will proba-bly need to adapt to a more volatile environment so that a 20-year life cycle of a vessel will include both very busy years and years when the ship is laid up for months. “This is a new situation, in which there is less and less control over the mar-ket,” summarised Alan Robertson, MD of the UK-based consultancy Webster Robertson.

Demise of the conference sys-tem removed a capacity control tool, which is now in the hands of

individual lines and alliances of operators. Robertson noted that this also concerns the supply of containers, not just vessels. “Also, it’s one decision to take ships out of service and another decision when to reintroduce them.”

While the industry is likely to expand in line with global growth, high cyclical and seasonal volatility mean that an old-established busi-ness model (whereby a strong cash fl ow was invested in new capacity) is now open to question. “Those companies that are able to respond quickly are likely to survive long-est,” Robertson told Fairplay. F

Good news for 3Q10 – but uncertainty lies ahead for box lines

Box shipping toasts a healthy quarter

access to nuclear-powered vessels and, therefore, we will see vessels coming into service on designated routes which encompass ports that are happy to accept them.”

Jenkins said the marine engines will utilise very low-grade nuclear material, meaning there is no risk of them causing any type of nuclear explosion. He added the ability of a terrorist group to use a vessel as a fl oating ‘dirty bomb’ was also extremely remote. The core drivers behind the growing interest in nuclear population are the rising cost of fuel and the prospect that owners could be fi ned for CO2 emissions in the future, he explained.

“We have been approached on a regular basis by owners and operators who are examining the use of nuclear propulsion,” he told the meeting. “There are already a range of Russian icebreakers that are not only nuclear powered but also able to carry passengers. The use of nuclear power is seen as a clean energy source and one where the technology is already in place and has been for many years.” F

Lloyd’s Register’s Vince Jenkins says shipowners will have to consider nuclear propulsion [ Photo: Lloyd’s Register ]


For the safety aspects of regulations see Safety at Sea International: www.safetyatsea.net

A conference last month in Brus-sels underlined how much remains to be done to bring into effect a European regulation intended to reduce cost and bureaucracy for marine equipment manufacturers.

The event, organised by the European Marine Equipment Council (EMEC), set out to find “the way forward” towards efficient classification. This, its sub-title declared, would be “a win-win-win situation for the maritime industry”.

The document that prompted October’s debate is ‘Regula-tion (EC) No 391/2009 of the European Parliament and of the Council on common rules and standards for ship inspection and survey organisations’ – or the ‘Class Regulation’ for short, which was adopted by the European Par-liament in March last year.

It entered force at that time but recognised organisations (ROs)– which are all class societies – have five years to comply with it. Pim van Gulpen, chairman of the European Marine Equipment Council, urged all parties to work as a team and not trip each other up. After that, the European Commission will review whether

enough progress has been made and report to the European Council and Parliament, which will decide whether additional measures need to be taken.

Of the regulation’s 19 articles, it is Article 10 that especially excites both manufacturers and class societies, as it calls on ROs to, “in appropriate cases, agree on the technical and procedural conditions under which they will mutually recognise the class cer-tificates for materials, equipment

and components.” This will mean, said a briefing note prepared by EMEC for the conference, that “equipment suppliers shall no longer be forced to apply for as many certificates as there are recognised organisations. Their products/services will be tested only once, according to the most demanding standards.”

The dilemma can be summed up in two quotes. One was made to Fairplay recently by an executive from a European class society:

“It will not work. It’s as simple as that.” The other is from Jesus Bonet Company, an expert within the European Commission’s Directorate General for Mobility and Transport, who addressed the issues surrounding data sharing between ROs during the EMEC conference: “the information needed for mutual recognition is small. It can be done.” ROs have been tasked with working together to harmonise their rules and develop a consistent interpre-

ROs must learn to share in classThe European Marine Equipment Council explores progress towards ‘mutual recognition’

The regulation requires class societies to recognise each other’s equipment approvals [ Photo: Malcolm Latarche ]


Whatever the European regula-tion says, non-European fl ag states can choose to ignore it. That was confi rmed in a letter sent in June by Siim Kallas, vice-president of the European Com-mission, to representatives of nine fl ag states that had written to his predecessor in November last year to raise concerns about the regulation.

Although the letters have not been published, they are widely available and Fairplay has obtained copies. In their November letter, the fl ag states express concerns that mutual recognition has an impact on sovereignty, safety and freedom of choice, all of which are dealt with in Kallas’s reply.

He pointed out that classifi ca-tion rules are technical, “they are not law,” he wrote. As for safety concerns, “I should like to dispel any fears that Article 10 could be implemented in such a way as to pressure recognised organisations to compromise safety standards,” he said. Far from restricting freedom of choice, he believes that the opposite is the case.

Nonetheless, “it is within the sovereign rights of any non-EU state to pass legislation contrary to the practice of mutual recogni-tion by its recognised organisa-

tions,” his letter concludes, while encouraging them to join the European Union’s eff orts to raise the standards applicable to clas-sifi cation societies worldwide.

For MEP Luis de Grandes Pascuel, who is the rapporteur for the Class Directive and Regula-tion at the European Parliament, Kallas’s letter made the right points. But he made what he described as “less diplomatic” comments to the Brussels meet-ing, saying that although the role of ROs is “widely accepted and diffi cult to substitute”, it was a

“diff erent story to try to elude the application of the regulation by claiming causes that cannot bear a critical examination”.

MisconceptionsFotis Karamitsos, director of the maritime transport section of the European Commission’s Directorate General for Mobil-ity and Transport, told the meeting that the November 2009 letter had expressed genuine concerns but contained “plenty of misconceptions.”

He also pointed out that “we see massive mutual recognition every time a ship changes class and no one objects to that.” But he later confi rmed to Fairplay that, while EU fl ags are bound to follow the regulation, others are not and he believes that those states that signed last Novem-ber’s letter – who claimed 57% of the world’s tonnage under their fl ags – will not abide by it. F

tation of the international conven-tions and it is hoped that this will be achieved by the end of this year. From next year, equipment suppli-ers themselves will be involved in the discussions.

It was clear from the Brussels meeting that many equipment companies believe that the process could have moved faster than it has. Martin Uhlig, sales director of Austria’s Brandschutztechnik-Döpfl , believes that it should be

possible to “take the low-hanging fruit” and allow mutual recogni-tion for many items of equip-ment immediately. But Karel Van Campenhout, chairman of the mutual recognition advisory board of the EU’s recognised organisa-tions and a senior vice-president in ABS’ Europe Division, told him that this had been investigated and found not to be possible. For two societies to do so might be possible, he said, “but with 12 societies, it’s more diffi cult.”

Tim Kent, technical director of Lloyd’s Register, speaking in a later session, assured delegates that “we aren’t dragging our heels” but that it takes time for 12 organisations to form a consensus. The ROs have selected 10 items of equipment to study “to prove the process”.

He had some sympathy from Robby De Backer, director of the newbuilding department at dredg-ing company Jan de Nul. “Who could be against it?” he said of

mutual recognition, but to agree the standards is not easy. “You have to put people in a room and expect them to agree that their standard is not the most rigorous.”

What became clear from the day’s discussions was that there was still much to be done, and “the clock is ticking,” Bonet Company reminded delegates. In his opening comments, van Gulpen had set out three principles that would lead to success: common sense, co-opera-tion and trust. F

The EU’s recognised organisations American Bureau of Shipping Bureau Veritas China Classifi cation Society Det Norske Veritas Germanischer Lloyd Hellenic Register Korean Register Lloyd’s Register Nippon Kaiji Kyokai Polish Register Russian Maritime Register Registro Italiano Navale

Can non-EU fl ag states scupper the scheme?Non-European states could cause trouble for class regulation

The EU’s recognised organisations American Bureau of Shipping Bureau Veritas China Classifi cation Society Det Norske Veritas Germanischer Lloyd Hellenic Register Korean Register Lloyd’s Register Nippon Kaiji Kyokai Polish Register Russian Maritime Register Registro Italiano Navale

Pim van Gulpen, chairman of the European Marine Equipment Council, urged players not to trip each other up[ Photo: EMEC ]

‘It is within the sovereign rights of any non-EU state to pass legislation [to the] contrary’

For more on this story: The Regulation can be found online at http://tinyurl.com/Class-regs

regulation

regulation


Implementing the European Union’s Class Regulation could lead to a two-tier division among its recognised organisations (ROs), which include some non-IACS classifi cation societies.

This emerged during discussions at the EMEC workshop (see p22), and appeared to surprise some delegates. “I don’t know how you could do it,” commented Karel Van Campenhout to Fairplay. He is chairman of the mutual recognition advisory board of the EU’s ROs and a senior vice-president in ABS’ Europe Division, and said that the intention had always been to develop a system that included all ROs.

This possibility emerged during discussion on one of the requirements in the regulation that requires ROs to recognise each other’s certifi cates

“taking the most demanding and rigorous standards as the reference.” But one paper – which described how Bureau Veritas and RINA had co-operated over a joint French/Italian navy project – prompted the question of whether it would be possible to have small groups of ROs co-operating.

That, said Bernard Anne, execu-tive vice-president of Bureau Veritas, “could help to make progress,” but he pointed out that BV and RINA’s co-operation on that project had been at the request of the French and Italian navies, saying that it would not be so easy to deal with a group of 12 organisations. And for navies, full mutual recognition would be “out of the question,” he said.

Fotis Karamitsos, director of the maritime transport section of European Commission’s Direc-

torate General for Mobility and Transport, under-

lined that societies should base their mutual recogni-tion on whatever

they agree to be the highest

standard.

Yet an expert from his direc-torate, Jesus Bonet Company, said that this could result in a group of societies recognis-ing higher standards among themselves while not recognis-ing those of other ROs. In that situation, he said, the other ROs would have to recognise certifi -cates issued by the higher-stan-dard organisations.

Although this possibility was unexpected by many at the event, it was no surprise to Pim van Gulpen, chairman of the European Marine Equipment Council. “If all IACS members had the same quality standards, mutual recognition would not be a problem,” he remarked to Fairplay. “But no IACS member wants to be sub-standard. That was always the problem.”

He appeared to doubt, however, whether ROs would accept a two-tier solution, describing it as “politically sensitive” to identify some class societies as having higher standards than others.

Bernard Anne had summed up the situation in his fi rst contribu-tion to the debate: “I am pleased to see that everyone realises it’s complex,” he said. F

Class regulation rules could prompt a two-tier divisionClass regulation could divide recognised organisations

the intention had always been to develop a system that included all ROs.

the maritime transport section of European Commission’s Direc-




He appeared to doubt, however, whether ROs would accept a two-tier solution, describing it as “politically sensitive” to identify some class societies as having higher standards than others.

Bernard Anne had summed up the situation in his fi rst contribu-tion to the debate: “I am pleased to see that everyone realises it’s complex,” he said. F

included all ROs.This possibility

emerged during discussion on one of the requirements in the regulation that requires ROs to recognise each other’s certifi cates




standard.

Bernard Anne, executive vice-president of Bureau Veritas [ Photo: Paul Gunton ]

‘I am pleased to see that everyone realises that it’s complex’

As far as Pim van Gulpen, chair-man of the European Marine Equipment Council, is con-cerned, class societies should embrace mutual recognition “because their clients like it,” he told Fairplay. And it was clear that many do like it, from equipment manufacturers to a leading ship manager, SeaTec UK (part of the V. Ships group).

SeaTec UK’s engineering director, David Yuill, remarked that “any initiative to reduce paperwork is greatly appreci-ated” and spoke of the advan-tages of having a consistent and common baseline. He expected the Class Regulation to save money: “If we have a vessel classed by one society we can now choose equipment approved by another,” he said.

A shipowning company that sees benefi ts is the Grimaldi Group. Its purchasing director, Giancarlo Coletta, said that mutual recognition brought advantages because “a system in which costs are not clear doesn’t lead to trust”.

It will make classifi cation more e� cient and less costly, he believes. But Coletta won-dered whether the regulation represented “a solution or a fi rst step”. He decided it was the latter and proposed an even more radical second step: a joint seaworthiness requirement’, to match the airline industry’s ‘joint air-worthiness requirement’. F

Do the customers care?Many class society clients seem to like mutual recognition

Nicolette van der Jagt hopes that the European Parliament will be able to force the commission

to change its plans [ Photo: Andrew Spurrier ]


European shippers are preparing to involve the European Parlia-ment in their battle to prevent the European Union from introducing a strict new limit on the sulphur content of marine fuels in north-ern Europe in 2015.

Shippers’ bodies were promi-nent among the signatories of an open letter on the subject sent to the European Commission in May by a shipping-industry alliance comprising more than 50 national and international organisations.

In the letter, they warned of the danger that e� orts to shift freight from roads to sea could be reversed as a result of the additional cost the new sulphur limit would impose on shipping companies.

The commission, which has not responded to their call for talks to fi nd “an alternative way forward”, is proceeding with the planned revision of its existing ‘sulphur’ directive with a view to incorporating the new limit, which was adopted by the International Maritime Organization in 2008.

As things stand, the revised directive will set a 0.1% limit for the sulphur content of marine fuels in emission control areas in the Baltic Sea, the North Sea and

Shippers take sulphur battle to European ParliamentNew limit could force shippers to delocalise manufacturing sites

For in-depth coverage of technological innovations see Solutions: www.fairplay.co.uk

introducing the new sulphur limit.It has already indicated, how-

ever, that it does not believe that the new limit will have a major e� ect on the competitiveness of shipping and, by extension, indus-try in northern Europe.

A commission o� cial told Fairplay that its view was sup-ported by a recently published study it commissioned into the impact of environmental mea-sures on the competitiveness of short sea shipping. In any case, the ESC is not expecting any substantial change in position on the commission’s part.

“The European Commission is listening and saying they will take alleviatory measures,” said van der Jagt, “but we don’t really know what that means.”

She indicated that that the council was now looking to the European Parliament to help it to prevent the new limit coming into e� ect, either through postpone-ment of the date for its implemen-tation or through substitution of a less stringent limit.

She said that work had already begun on “raising awareness” on the issue among members of parliament in an e� ort to prepare them for the debate on the revised directive, which the commission is expecting to adopt next spring.

“The problem is the 0.1% sul-phur limit,” she said. “We have no problem with 0.5%.” F

“This will basically mean for shippers in some parts of industry that the prices of their products can increase by up to 30%,” she said.

The commission is in the process of launching a public internet con-sultation on the sulphur directive, which will allow for the discussion

of measures to alleviate the

additional costs of

the English Channel from 2015.European Shippers Council

(ESC) secretary-general Nicolette van der Jagt told Fairplay, however, that shippers remained extremely concerned about the consequences of imposing the new limit.

“A lot of shippers are panick-ing,” she said, adding that some industrial groups, notably in the Scandinavian pulp and papersector, believed that the increase in their transport costs, which the new sulphur limit would engender, could force them to relocate their manufacturing facilities to sites outside of Europe.

Nicolette van der Jagt hopes that the European Parliament will be able to force the commission

to change its plans

them for the debate on the revised directive, which the commission is expecting to adopt next spring.

phur limit,” she said. “We have no problem with 0.5%.”

sultation on the sulphur directive, which will allow for the discussion

of measures to alleviate the

additional costs of

of imposing the new limit.“A lot of shippers are panick-

ing,” she said, adding that some industrial groups, notably in the Scandinavian pulp and papersector, believed that the increase in their transport costs, which the new sulphur limit would engender, could force them to relocate their manufacturing facilities to sites outside of Europe.

0.1% new limit on sulphur content to be introduced in a new directive by the European Union [ Photo: Shutterstock ]0.1% new limit on sulphur content to be introduced in a new new limit on sulphur content to be introduced in a new directive by the European Union directive by the European Union [ Photo: Shutterstock ][ Photo: Shutterstock ]


Fairplay now looks at movement of cargo from manufacturer to customer (door-to-door)

Namibia’s Walvis Bay ups the anteNamibian port hopes to boost its role as the preferred gateway to southern Africa. Terry Hutson reports

The Namibian port authority, Namport, has announced its intention to invest nearly $400M to upgrade Walvis Bay port. The investment aims to double the port’s annual box capacity to 500,000teu. It will also include dredging its approaches to a minimum of 16m in anticipa-tion of larger ships as Namport markets Walvis Bay as a hub and alternate gateway into southern and central Africa.

For now, Walvis Bay is adequate for tra� c volumes to Namibia itself, but promoters have taken up the challenge of targeting trade routes into neighbouring SADC countries (South Africa, Namibia, Botswana, Lesotho, Swaziland, Mozambique Zambia, Malawi, Zimbabwe, Angola, and

of Durban and Ngqura, as well as ports in Mozambique and Das es Salaam in Tanzania.

Walvis Bay’s main advantage relates to vessels coming from or going to Europe and the Americas: the Namibian port provides an incentive of between three and fi ve days shorter sailing time compared to the South African ports further east, and even longer for those in East Africa. But this depends on the success of its transport corridors to its neighbours.

“The Walvis Bay Corridor has developed tre-mendously, not only in terms of the volumes it generates, but also with regards to service excellence,” Johny Smith, CEO of the Walvis Bay Corridor Group (WBCG), told Fairplay. He said that reducing transit time, remov-ing bottlenecks and improving corridor logistics through public- private partnerships remains the cornerstone of WBCG’s strategy.

WBCG is marketing three basic corridors: the Trans-Kalahari road, which extends through Botswana into South Africa, the Trans-Caprivi road that runs through

26 4 November 2010

Malawi, Zimbabwe, Angola, and the DRC). In so

doing, Walvis Bay will be competing with South Africa’s ports

the northeast of the country to Zambia in the Caprivi Strip, and the Trans-Cunene, an ambitious project involving rail and road that has Walvis Bay targeting the markets of southern Angola.

WBCG operates on a private-public partnership basis and has

A N G O L A

Walvis Bay

Land routes (rail and road) and sea routes around southern Africa. Walvis Bay is a major hub for routes to Europe, the Americas and Asia

S O U T H A F R I C A

N A M I B I A

B O T S W A N A

Z A M B I A

M O Z A M B I Q U E

Z I M B A B W E

M A L A W I

Maputo

Richards Bay Durban

Capetown

Dar es Salaam

‘We need to continually promote the Walvis Bay corridor as the preferred route in southern Africa and beyond’ Johny Smith, CEO, Walvis Bay Corridor Group

had limited success in establishing Walvis Bay as an alternate port for South African importers in Gauteng, who would normally look to Durban.


Agrexco, Israeli’s largest exporter of agricultural produce, is shifting its hub for exports to the EU from Vado Ligure in Italy to the French port of Sète, southwest of Montpellier.

“Sète will be used to distrib-ute our exports all over Europe, including Germany and Scan-dinavia,” Malchi Malinovitch, Agrexco Logistics vice-president told Fairplay. “A big part of our goods are destined for France

and, on top of this, Vado is not geographically positioned well to serve all of Europe,” he explained. Malinovitch added that Agrexco will begin to operate from Sète from next spring, when Orsero Group’s reefer terminal will be operative. He said the Sète will run for 12 years.

Agrexco’s 16,397dwt reefer ships Carmel Ecofresh and Carmel Bio-Top have been calling weekly at Vado Ligure, west of Genoa, since January 2009, when the company left its previous EU hub, Marseilles. Agrexco left France’s largest port after talks to renew a commercial deal with a local

operator failed to bear fruit. Malinovitch revealed to

Fairplay that the sale of the Israeli government’s 50% share of Agrexco is being discussed, but could not comment on the discussions. However, another source at Agrexco told Fairplay that privatisation talks could take up to two years because the company’s recently-appointed CEO, David Bondi, is still assess-ing possible outcomes.

Tel Aviv-based Agrexco exports an average 350,000 tonnes of fresh produce from Israel/year, yielding an annual turnover of $580M. F

Israel’s Agrexco switches Euro hubThe exporter is moving its EU base from Italy to France

Investors in specialist vessels for o� shore wind turbine installa-tions need to build enough slack into their ship and crane systems to cope with the logistical challenges associated with increasing module sizes, senior sector managers have warned.

Speaking at a forum in Elsfl eth, Germany, last week, the outgoing managing director of o� shore wind park developer Bard, Heiko Ross, said he expected bigger

o� shore turbines than today’s maximum 5-6MW units to be introduced in the North Sea over the coming years. “There is room for upscaling out there,” he said, pointing out that a German manufacturer has constructed a 7.5MW onshore turbine.

Larger power outputs gener-ally require bigger designs and hence larger and heavier project modules to be carried into the fi elds. Nacelle weights, today at just under 300 tonnes for big turbines, may increase to around 400 tonnes, some have suggested. Cargoes would also become bigger and bulkier,

with Ross suggesting that blade lengths of 60m could easily be increased to 70-80m. “This would not pose a problem,” Ross said. His former company, Bard, is one of the pioneers in wind park developments o� the Ger-man North Sea coast in water depths of more than 30m. Ross was replaced at the helm in early October but remains a leading fi gure in o� shore wind-energy.

Bard’s own vessel, Wind Lift I, delivered from Lithuania last year, was commissioned this year after technical rectifi cations. It is now “probably the most e� cient vessel” of its type, achieving the installation of 14 turbine found-ations in 40m water depths in the space of fi ve months this year.

“This is signifi cantly better than on the Alpha Ventus project,” Ross explained. Alpha Ventus is a joint pilot project by energy groups EWE, E.ON and Vattenfall for turbine operations on the high seas, 45km o� the German coast line. F

Turbine lift requirements increasing

Bigger o� shore wind turbines will require logistics innovations

‘There is room for upscaling out there’

[ Photo: iStockphoto ]

According to Smith, WBCG is hoping to increase the volume of tra� c along the Trans-Kalahari road corridor into South Africa. He said that by using Walvis Bay and this corridor, importers could save several days as opposed to shipping cargo through Durban. For time-sensitive cargo, there were obvious advantages, he pointed out.

WBCG faces numerous chal-lenges, not only regarding improve-ments at the port but also because volumes along the Trans-Kalahari road corridor remain lower than Namibia might have hoped. “We need to continually promote the corridors as the preferred route in southern Africa and beyond,” Smith said. “The development of the Walvis Bay Corridor would ensure economic development in Namibia and the region as we try to fi nd ways of reducing the cost of doing business in the region.”

Solution to border delaysOne tangible improvement is the establishment of a one-stop border crossing involving South Africa, Botswana and Namibia. This has resulted in delays of just 20-30 minutes at the respective border crossings, compared to three or four days or more else-where in southern Africa.

A major challenge in devel-oping the Walvis Bay Corridor involves building capacity in the transport and logistics industry to sustain the growth of the port and the corridors. Nevertheless, Smith remains positive about Namibia’s role as a gateway to the rest of the SADC region and said Walvis Bay and its corridor group is creating more interest both regionally and internationally.

With more direct shipping calls at Walvis Bay, improved e� cien-cies and shorter transit times, as well as strategic partnerships, the Walvis Bay Corridor routes are now in a robust position to serve the SADC market to the rest of the world, Smith concluded. F

logistics & supply chain


reviewsThe Great EscapeThe intensely-researched Great British Passenger Ships documents the more than 100-year history of UK passenger liners. Its 96 pages are divided into eight extensive sections, richly furnished with facts, archival material and intriguing photographs.

Author William Miller writes with an enthusiast’s passion and his attention to detail is deeply impressive.

In chapter two, we are told that the Aquitania was among the greatest liners to survive the First World War intact. Miller writes: “She was soon back in her Cunard fi nery – a long black hull, snow-white upper-works and that quartet of lofty funnels... coloured in Cunard’s distinc-tive orange red.” Miller is unsparing in his fl attery: “Having just the right balance and rake, she looked splendid, every inch the grand ocean liner.”

The book is well-designed and fea-tures a centre section showcasing rare posters from P&O, brochures from the mid-1960s, Cunard souvenirs and more. It is reminiscent of a time when liners spared no expense in their elaborate advertising campaigns.

Overall, this illustrated history charts the heyday of the British passenger ship – those great and grand vessels that connected the continents and colonial outposts of the Empire. While many remember the Cunarders, the less-known likes of Booth Line (which ventured to the Amazon) and Royal Mail (which sailed to Rio) are also recalled and celebrated here. F Miriam Fahey

Great British Passenger Ships, by William Miller, published by The History Press. Price: £19.99. www.thehistorypress.co.uk

This book is for the young o� cer aspir-ing to the position of chief o� cer, or one who has recently been promoted into the position. It is a practical book, rather than a theoretical manual, deal-ing in the ‘real world’ of the sea and discussing the various problems that can be encountered by a fi rst mate.

Written in an engaging style, the fi rst chapter explains how the chief o� cer’s job can be the best on board – but brings great responsibility: “It is your job to sur-mount these obstacles and ensure that the ship is e� cient in all aspects where

you have a jurisdiction,” Captain Lloyd writes.

Helpful advice on what to expect from di� erent vessels are also o� ered, along with a swathe of chapters outlining the roles of persons on board. Every topic – from security to

training to safety, ISM and even garbage disposal are considered – and

very little of importance is omitted. Some useful advice is o� ered, for

instance, in chapter 10 on the subject of cargo work in ice conditions with some tips on the behaviour of hydraulic oil: the colder the weather gets, the thicker the oil becomes. Therefore, if you do not have heaters for your hydraulic system,

switch the motors on well before they are needed.”

Another impressive chapter focuses on relationships, and the co-operation be-tween chief o� cer and deck o� cers, chief engineer, captain, bosun (chief petty of-fi cer, or right hand man on all matters re-garding seamanship) and crew. Especially helpful is a letter at the back of the book, which reminds the chief o� cer about the importance of good seamanship.

Witty, concise and written in a refresh-ingly direct style, this is a must-read for any aspiring chief o� cer. F

Miriam Fahey

The complete chief o� cer, by Capt Michael Lloyd, published by Witherby Seamanship. Price: £20. www.witherbyseamanship.com

reviewsThe Great Escape

The book is well-designed and fea-tures a centre section showcasing rare posters from P&O, brochures from the mid-1960s, Cunard souvenirs and more. It is reminiscent of a time when liners spared no expense in their elaborate advertising campaigns.

Overall, this illustrated history charts the heyday of the British passenger ship – those great and grand vessels that connected the continents and colonial outposts of the Empire. While many remember the Cunarders, the less-known likes of Booth Line (which

Good advice for a fi rst mateThis book is for the young o� cer aspir-ing to the position of chief o� cer, or one who has recently been promoted into the position. It is a practical book, rather than a theoretical manual, deal-ing in the ‘real world’ of the sea and

you have a jurisdiction,” Captain Lloyd writes.

to expect from di� erent vessels are also o� ered, along with a swathe of chapters outlining the roles of persons on board. Every topic – from security to

training to safety, ISM and even garbage disposal are considered – and

Good advice for a fi rst mate

��

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Growing domestic demand and the successful free trade zone within Southeast Asia have become new drivers of China’s fortunes. With its wealth constantly expanding, Beijing is

focused on fi xing the growing gap between rich and poor, solving its environmental issues and keeping infl ation in check – all vital for its ‘harmonious society’.

That growing wealth has meant that while the global fi nancial crisis caused demand for resources from the rest of the world to decline, China’s domestic demand continued to grow. “For cash-rich China, that was the time to buy,” explained Javier Cuñat, sourcing strategy manager at Bateman Beijing Axis.

Increasingly, China is dependent on imported resources – at prices Beijing cannot control, despite at-tempts by the organisations like the China Iron and Steel Association. This dependency puts a strain on China’s price competitiveness. “That’s why Beijing has gone out to invest abroad, in everything, everywhere, though with a focus on resources,” he said. Foreign investment by China jumped from from $1Bn in 2000 to $12Bn in 2005. The total for this year is expected to top $65Bn.

As China has continued to post remarkable growth, its expanding wealth has allowed it to invest massively in foreign resources – meaning more business for shipping. Bouko de Groot reports

powerhouse

china

In several countries, China is now the largest foreign investor and “will be in the global top 10 of foreign investors within fi ve years”, Cuñat predicted.

A lot of Beijing’s money fl ows to developing countries, especially in Africa. Local infrastructure and Chinese construction companies benefi t from this. “Often, good road and rail infrastructure are a Chinese requirement for the investment deal,” Cuñat says. Beijing then off ers fi nance. China’s overseas investments are growing in both dollar size and effi ciency. In Brazil for example, the largest Chinese steel mill outside of China is being built. “This cuts down on ore transport cost and the depend-ency on the big mines,” Cuñat explains. Another example is the railway that runs from a Siberian mine straight to a steel mill in China.

With the vast reach of its overseas interests, shipping is only becoming more important to China. “As the emerging maritime superpower, China will play a key

china’s wealth fl ows abroad

$9.8BnEurope

its expanding wealth has allowed it to invest massively in foreign resources – meaning more

China’s2009foreigninvestmentChina’s2009foreigninvestment


powerhouse

china

‘china will be one of the global top 10 foreign investors within five years’

$1.1BnAfrica

$15.7BnAsia

$3.7BnLatin America

$10.5BnNorth America

$9.1BnOceania

[ Source: National Bureau of Statistics of China ]


role in shaping the future of shipping as it becomes the world’s primary maritime market,” said Richard Sadler, CEO of Lloyd’s Register at Shipping China in Beijing. The number of ships needed to serve the growing world population “will increase, along with emissions,” he added. With a huge domestic demand for freight, a ship-ping-reliant export economy, unprecedented shipbuild-ing capacity and growing strength as a maritime service

centre, Sadler stressesd that “China also has all the capabilities to be central to improved regulation.”

As long as Beijing keeps looking outward, it will mirror the west in leading in foreign investment and even regulation. “More Chinese companies are looking internationally for potential markets, new technology, and mineral and energy resources,” said Cuñat. “Expect China’s global aspirations to grow – and so too the footprint of China Inc.”

A welcome for China abroadChinese Wuhan Iron and Steel and Brazilian MMX Mineracao e Metalicos signed a 70%/30% joint venture deal last April worth up to $5Bn for the establishment of a steel mill in Rio de Janeiro. It’s China’s biggest invest-ment in Brazil and its largest overseas steel mill, expect-ed to be put into production within three years. Some of the mill’s 5M tonnes/year output will be exported to China. Earlier, Wuhan Iron and Steel bought a $400M share in MMX, who will provide the Chinese with at least 50% of the ore from Serra Azul for 20 years.

Baosteel and Indonesian nickel and gold producer PT Aneka Tambang will start construction of their $1.2Bn nickel plant on Kalimantan Island later this year. Its out-put will reach 500,000 tonnes of ferronickel/year.

China Development Bank provided a $1.2Bn loan to Gindalbie Metals to develop its $2.3Bn Karara iron ore project in Western Australia. It’s a joint venture between Gindalbie Metals and Chinese steel mill Ansteel to convert low grade iron ore into a premium product for export to China. When it opens next year, it will produce up to 10M tonnes of iron ore annually. Construction of infrastructure to support much higher production levels in anticipation of future expansions has already begun. F

powerhouse

china

2009 2010(est)

GDP $4,984.7Bn $5,758.6Bn

RealGDPgrowth 9.1% 10.3%

GDPpercapita $3,735 $4,288

Inflation -0.7% 2.9%

Unemployment 4.3% 4.2%

1,348MPopulation(2008)

$=6.68Rmb(27October2010)

Tradeprofile:China accounts for 9.62% of the world’s total exports. Almost 94% of its exports are manufactured, 3.4% are agricultural and 2.9% are fuels and mining products. Of its imports, 61.7% are manufactured, 7.6% are agricultural and 24.9% are fuels and mining products. 2009 saw 11M new jobs – and over 5M laid-off workers back in employment. Many of these were in labour-intensive sectors such as construction and manufacturing. At the same time, accelerated export growth suggests trade is recovering from the global crisis that battered Chinese exporters of shoes, toys and other low-cost products, and wiped out millions of jobs.

US 17%HongKong 13%Japan 8%SouthKorea 5%Germany 4%

Japan 13%SouthKorea 10%US 7%Germany 5%Australia 3%

Exportpartners(2008) Importpartners(2008)

[ Derived from IMF Direction of Trade Statistics ]

CHINAATAGlANCE source: www.ihsglobalinsight.com

� ��

Oceania

North America

Latin America

Europe

Asia

Africa

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��

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Selectedbulktrades/monthBulktype 2008 2009 2010Total coal imports 3.4M 10.5M 13.5MIron ore imports 37.0M 52.4M 50.7MCrude steel production 41.5M 47.2M 53.3M

Chinaoverseasinvestment,$Bn

[ Sources: National Bureau of Statistics of China, Commodore Research & Consultancy, Bateman Beijing Axis ]

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According to Anthony Zolotas, CEO of Eurofin, “in 2009, Chinese banks accounted for 5% of the $333Bn total portfolio of the 25 largest global shipping banks”. A year before, China’s

share, mainly from the Bank of China and the Indus-trial and Commercial Bank of China, was a meagre 0.5%.

However, Zolotas added that Chinese banks fund more, so a one-on-one comparison is not particuarly instructive. Finance from the Ex-port-Import Bank of China (Exim), for example, “is much wider than that of other banks,” said Dan Li, director of the Shipping Finance Division of the bank. It includes ship-related sellers and buyers credit, in US dollars and Chinese renminbi respectively. Sellers are top-tier Chinese yards, buyers are foreign owners. “More and more, foreign owners come to the Exim and other Chinese banks to finance their vessels, because western banks are reluctant to do so,” she explained.

Exim has $3.2Bn outstanding in buyer’s credit at the moment, with more than 3,000 vessels exceeding 1M dwt financed over the past 15 years. Li’s bank also offers refund guarantees on behalf of Chinese yards. The only requirement for foreign buyers is that the yard must be Chinese owned. This safeguards the workforce, another important reason why Chinese banks move into global ship financing. “More than 76% of finance for ships comes from banks,” said Zolotas – so China’s entry is welcome. Their new-found international outlook contrasts with for example “Greek and Italian banks, who really only look at domes-tic owners,” he added.

China’s banks were not as significantly affected by the crisis. At the same time, they had to help the yards con-tinue production. “Last year Chinese banks were cheaper than others,” said Antoine Gustin, head of export finance

Banks extend their reach in ship financeChina’s share of the global ship finance market has grown tenfold – to 5% – in just one year

Greater China of BNP Paribas. “Now it’s the other way around. At the moment, financing is expensive,” he admitted, “but at least it’s available.” One possible reason for the price hike is the banks’ inexperience in this sector, especially its risks.

“Risk can generate profitability,” said Philip Adkins, CEO of Fairstar Heavy Transport, which is building two semi-submersibles in China. “But that hinges on under-standing risk,” he added. According to Adkins, owners’ task is to explain their risk to financial institutions so they can be priced accordingly. “That takes time – to study and understand and manage those risks.” China’s banks are still in the process of doing this. To prevent

serious damage from inexperience’s inevitable risk mismanagement, China Export & Credit In-

surance Corporation’s Sinosure support the banks.

“We mainly do buyer credit insur-ance,” said Guang Xu, an underwrit-

er with Sinosure. “By mid-2010 we had $2.5Bn in our portfolio.” Sinosure also co-operates with foreign banks such as ING, Société Générale and BNP Paribas – as long as it in-volves Chinese yards. “Chinese content must be at least 50%,” explained Xu. Norden, Bernard

Schulte and STX are some of the foreign buyers that are involved.

Ideally, they pay in renminbi, at least from the yard’s point of view. That is another goal for the banks. “We will try to convince foreign

buyers to pay in renminbi,” confirmed Li. “It is possible for foreign owners to bor-

row in renminbi, but in reality it’s not easy,” she admitted. Foreign owners should have a cashflow

in renminbi – and that takes time to develop. “But big firms that have commodities and trades here, they have a renminbi cash-flow, so then it’s possible,” Li said. Or, if a foreign owner charters to a Chinese client, like a steel mill, revenue can be in the necessary renminbi.

“Some Indonesian owners have done it already,” added Xu, “Times are changing.” Those changes will take time, but Li thinks that “this is the trend for the next decade.” First though, Chinese banks must catch up to their western counterparts. “Chinese banks must develop a global approach,” said Zolotas.

Know the sector, learn the risks. “Then, over time, say in five years, I hope Chinese banks won’t need Sinosure and Exim anymore,” added Adkins F

powerhouse

china

[ Source: Minsheng Financial Leasing ]

Four biggest financing banks $25Bn

$4Bn Ship leasing

$3Bn Public debt issue

China ship finance, 2009

Untitled-2 1 20/10/2010 11:46:22


Despite growing domestic demand and a deep reluctance to import essential commodities, China’s own crude oil production decreased markedly last year. Ralph Leszczynski, head of

research at Banchero Costa, believes that “China’s crude production has failed”. But that failure is a boon to ship-ping. China has overtaken the US in long-haul oil imports from the Middle East, according to Steve Christy, head of research at Gibson Shipbrokers.

Over the past year, China’s crude imports have jumped by 2M bpd to around 5.5M bdp. “Last year, China needed to import 53% of its crude,” pointed out Nikhil Jain, research manager bulk shipping of Drewry Maritime Services India. By 2020, that number will have grown to 60% – almost all of which will come by ship.

Beijing works hard to lessen this dependence. Growth of its newly-discovered reserves barely keeps up with domestic demand, so part of the solution must come from abroad – by pipeline from Kazakhstan, for example. “It comes all the way from the Caspian sea, with a 7M tonnes/year capacity that will be upgraded to 20M tonnes/year,” explained Leszczynski.

More pipelines come in from Russia and by 2012, the one leading to Kozmino on the Pacific should be able to supply 80M tonnes/year, thanks to a $25Bn loan package from China, he said. Another pipeline branches off from this main line. “Construction starts this year for a planned capacity of 15M tonnes/year or 300,000bpd,” he added.

China’s crude dependence China is a net importer of coal and also buys foreign LNG – but those trades are minor compared to its ever-growing need for imported crude oil

Two-thirds of China’s imported crude comes from Africa and the Middle East, a VLCC lifeline that mean-ders through the bottlenecked Strait of Malacca. China is attempting to circumvent this with a 2,380km-long pipeline, running from Kyaukryu in Myanmar to Kunming. Construction of the parallel gas and oil pipeline started earlier this year. The finished pipeline will carry up to 22M tonnes/year and will completely bypass the Strait, short-ening the sea voyage by 1,200km.

An even more ambitious project is the planned link to Pakistan’s Gwadar, “just outside the Strait of Hormuz, the perfect place”, as Leszczynski put it. But high mountains and a restless Kashmir may prove to be greater impedi-ments than the Malacca bottleneck.

Demand in China grows so fast, however, that all new pipeline projects combined will scarcely change the country’s dependence on seaborne crude imports, which will require more VLCCs. China’s oil majors are, therefore, busy building more crude terminals to accommodate these carriers – an increasing number of which will be supplied by imported (but Chinese-owned) crude.

As with LNG, “Chinese national oil companies have boosted investments in overseas upstream activities through acquisition deals and loan-for-oil contracts - $40Bn in Iran alone,” said Jain. China’s overseas equity oil output thus rose from 140,000bpd in 2000 to 1.5M bpd this year. This means Beijing could supply almost one-third of its import needs from Chinese sources abroad. F

powerhouse

China

Beijing tries to solve its crude dependence by building pipelines, gaining ownership of foreign resources and exploiting its huge sea reserves, spurring on its domestic offshore industry along the way. A potential measure that has caused some anxiety among foreign shipyards and owners was the touting of a possible requirement that at least half of China’s oceangoing energy demand should be shipped in Chinese-built and owned vessels. However, such a regulation is unlikely to come to fruition. “That was just someone’s idea of what we could or should be able to do,” Kejun Li, president of the China Classification Society, told Fairplay. At the moment, the figure is around 18%. “People may now say that we must reach 60% or even 80% of transport self-sufficiency,” he said, “but look at the reality – creating a strategic petroleum reserve is a better way to ‘nationalise’ crude import than owning half the fleet.”

2005� 1272006� 1452007� 1622008� 1792009� 202[�Source:�Banchero�Costa�]

Crude imports, M tonnes

Middle�East� 41%Africa� 25%Asia�Pacific� 14%Russian�Federation� 10%Latin�America� 7%Others� 3%[�Source:�Banchero�Costa�]

2009� 932013� 1482016� 178[�Source:�Drewry�Maritime�Services�]

Crude imports, VLCC needs

Crude imports, origin

Crude import vessels, 2009

VLCC� 72%Aframax� 12%�Suezmax� 10%Panamax�etc� 6%[�Source:�Banchero�Costa�]

53%of China’s

crude oil was imported in

2009

Nationalising crude imports

Mitsui.indd 1 13/10/2010 15:57:23


At present, China’s railways only just manage to keep up with growing demand for transit. Its roads are of little assistance, with some routes experiencing tra� c delays that last several days.

“The movement of goods on water is going to be the real growth area of the future,” said Peter Murray, chief repre-sentative in Shanghai for Ince & Co.

In a country where environmental considerations are being pushed higher up the agenda, “carriage by water is far and away more environmentally friendly than by road,” Murray added. The Yangtze River has huge potential, but “this will not be fully developed unless the risk of pollution is kept under control”.

According to Xiaoyun Deng, researcher with the Institution of Water Transport, 800M tonnes of coal are shipped along China’s coast – or around a quarter of total freight volume. With regards to coal, she expected the three main inland waterways (the Grand Canal, the Xijiang and the Yangtze) to see only a “limited increase of coal transport” until 2020. She added, however, that there will be an increase in e� ciency, with power plants put next to rivers and equipped with high-capacity docks. The storage capacity of the northern coal ports, for example, has increased, to 1,100M tonnes.

China’s container ports and their throughput continue

Turning to the water

As China’s growing coal consumption overwhelms its rail and road infrastructure, water transport seems to be the way forward

to grow with Shanghai fi nally pushing Singapore from the coveted number one spot. VLCC crude terminals are being added in Dalian, Huangdao, Huizhou, Maoming, Ningbo, Rizhao, Tianjin, Zhoushan etc. It is estimated that, over the next fi ve years, 50% more VLCCs will be required to handle the expected growth in crude imports.

Weiping Hu, director of the oil & gas division of the Energy Bureau of the National Development and Reform Commission, said LNG will also see continued growth. “With its well-developed economy, large population, short supply of energy and strong consumption capability in

powerhouse

CHINA

Yangtze cargo, 2009 [ Source: Yangtze Transport ]

%Ore 22%Coal 20%Building materials 15%Grain etc 10%Oil etc 6%Others 27%

22% 20%

15%

10%6%

27%

[ Photo: iStockphoto ]

21%rise in China’s

container throughput

this year


powerhouse

CHINA

the coastal cities of China, the region has the potential to import a large amount of LNG,” he explained.

The railway network continues to o� er huge potential, despite its shortcomings, with coal accounting for more than half the country’s rail-freight volume. “China’s trains moved 1.75Bn tonnes of coal last year,” Shunhu Su, vice-director of the Transportation Department of China of the Ministry of Railways told Fairplay. This year will see solid growth, thanks to major investments.

Elsewhere, there is potential for infl uential growth as well. Container terminals, for example, are not always

Yangtze RiverThe world’s largest river in terms of cargo throughput, the Yangtze accounts for 80% of China’s inland waterway cargo volumes, carried in around 125,000 vessels. Yet the river remains an under-used resource, according to David Lammie, publisher of Yangtze Transport. For example, the average vessel is only 426dwt. Most of the cargo volumes are handled between Shanghai and Nanjing, 300km inland.

The biggest bottleneck to fully developing the Yangtze is the co-ordination between local and

central government e� orts to address issues such as dredging, vessel standardisation and safety. “Once a year all the major Yangtze port city mayors gather at a forum to agree on the macro direction,” Lammie told Fairplay, “but that leaves a lot of implementation work.” For example, with vessel standardisation, the central government requires these plans to be carried out within fi ve years, but money needs to be found to compen-sate owners of old vessels. Foreign operators have so far only been allowed to ship dangerous goods

in joint ventures. “Apart from that, foreign lines can enter a Yangtze port direct from overseas, but are not allowed to engage in internal transport,” Lammie said. And there is no immediate prospect of this changing. “Yangtze o� cials commonly site the example of the Mississippi, where similar poli-cies apply. “Maersk Line has been lobbying hard to adopt the practice on the Rhine,” he added. “The latest we know is that the Chinese have agreed to talk with the EC to discuss the issue as part of wider talks.”

Port 2010 +/- 20091. Shanghai 21.6 +18.5%2. Shenzhen 16.9 +28.4%3. Ningbo-Zhoushan 9.8 +28.5%4. Guangzhou 9.1 +12.0%5. Qingdao 8.8 +15.3%6. Tianjin 7.4 +15.7%7. Xiamen 4.3 +26.5%

8. Dalian 3.8 +14.2%9. Lianyungang 2.9 +32.1%10. Yingkou 2.5 +24.6%– Other coast, total 9.8 +20.7%– River ports, total 10.6 +20.5%– National total 107.5 +20.7%

[ Source: Chinese Harbour Association ]

2010 forecast Units IncreaseDomestic throughput* 1,230M tonnes +10% y-o-yForeign trade 170M tonnes +14% y-o-yContainer throughput 8.5M teu +16% y-o-y

* including domestic transhipment of foreign trade

[ Source: Yangtze Transport, 3rd edition ]

Yangtze trunklineChina port container throughput (Jan-Sep, M teu)

perfectly connected to the railroads. Shanghai’s Yangshan Deep Water port is still e� ectively without a rail link. Su expects that by 2012 the bottleneck restriction of railway transport will “be relieved to some extent”.

But perhaps Su is too cautious. “Everybody has been very surprised by the massive scale of the high speed passenger rail network which has sprung up all over China,” said Murray. “If similar planning is applied to the freight rail network,” he added, “that will have a direct impact on waterborne carriage and will provide its greatest competition.” F

Estimated deliveries, M dwt/quarter


powerhouse

china

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Shujia Fang, chief engineer of CSIC and appointed expert of the State Council, observed that shipbuilding “overcapacity is especially huge in China”. Globally, 117M of the

scheduled 156M dwt was delivered in 2009, according to Clarksons, Hong Kong.

“Things have settled down in the shipbuilding in-dustry since the grim situation last year,” said Martin Rowe, managing director of Clarksons. For the next two years he expects more delays, but not cancella-tions. “No yard will accept an empty slot if they can build something.”

Unfortunately, from a global perspective, that ‘some-thing’ from most Chinese yards doesn’t cut it anymore.

“We should acknowledge that China’s shipbuilding is not yet up to demand and market requirements,” admitted Fang. According to him, China still lacks some high-spec technologies, while efficiency is also lagging. “Productivity in China still is far behind South Korea,” agreed Rowe.

To weather the crisis, Koreans also have a strong cash cushion to fall back on, which means they “are very unwilling to renegotiate prices – only a token 5-10%”, said Rowe. This, it seems, leaves Chinese yards with two options – either focus on the domestic mar-ket or compete on price.

However, because of a lack of money, “the trend implies that about 40% of scheduled deliveries will not materialise,” said Michael Bodouroglou, CEO of Paragon Shipping. “This way the financial crisis is actually saving the dry bulk sector from years of misery,” he added.

But it worsens the plight of Chinese yards, which now need domestic banks to help them survive by financing buyers or buying cancelled vessels. Which means “China has 66M dwt building capacity, but only needs half of that,” said Chunlin Wang, director of Pa-cific Basin. He expects many more Capesizes to be built than are needed. With an orderbook comprising as much as 65% of the global fleet, “the Capesize order-book worries me, others not so much,” he added.

There are, of course, exceptions to China’s conser-vatism. “Even though we are a newcomer, we have the biggest orderbook,” said Yaping Luo, chief engineer of Rong Sheng Heavy Industries. In the middle of the crisis, they managed to win plenty of orders, includ-ing VLOCs. “We didn’t get those orders on the basis of price, but on the basis of the technological advantage we have,” she told Fairplay. F

Yards slow to accept crisis Overcapacity has China’s yards looking to repair, recycling, offshore and renewable energy China South

KoreaJapan Others China South

KoreaJapan Others

1Q10 1.22 0.56 0.09 1.312Q10 1.01 0.06 0.49 1.253Q10 10.81 9.01 5.46 2.544Q10 12.2 13.12 6.45 3.861Q11 18.02 14.72 8.83 4.492Q11 14.12 13.1 6.9 2.763Q11 14.95 13.74 7.02 1.974Q11 15.87 16.8 8.15 2.491Q12 16.73 13.05 7.75 2.312Q12 13.34 11.7 5.48 1.523Q12 13.98 11.53 6.25 1.61

4Q12 11.2 10.59 6 1.081Q13 12.29 9.23 4.88 1.552Q13 7.64 5.86 2.87 1.173Q13 6.2 5.58 3.43 0.59 4Q13 4.08 3.6 2.98 1.251Q14 5.01 4.02 2.52 0.922Q14 2.78 0.94 1.57 0.123Q14 2.04 0.6 0.59 0.014Q14 1.5 0.09 0.35 0.01 [ Source: Clarksons Hong Kong ]

Untitled-4 1 04/12/2008 11:42:43


powerhouse

china

On 19 October, China surprised investors by raising interest rates. This sparked a worldwide sell-off in stocks, commodities and emerging-markets currencies as inves-tors lowered their expectations for Chinese growth.

In China we have seen growth at a double-digit pace and, as a result, this growth is seen as a key driver of the global economy. Independently, it would appear that the global recovery is starting to lose steam with talk of further quantitative easing from western nations on the way.

China, like many countries, had cut interest rates several times between September and December 2008 as the financial crisis took hold. This increase in interest rates is the first since December 2007.

One explanation for this is that inflation is at its highest level since November 2008. Meanwhile, raising rates will also aid in restricting lending and, at the same time, help cool the economy. Some forecasters are expecting a further two 25 basis-point rises over the next 12 months.

At the recent G20 meeting, currency was the hot topic of discussion as talk of ‘currency wars’ and protectionism had been high on the agenda. Central to this debate is the political pressure the Chinese renminbi continues to find itself exposed to. China has been openly criticised by the Obama administration of keeping the renminbi undervalued. One reason for the US pushing for the renminbi to be revalued is to help deal with its trade deficit. According to government statistics, US imports from China were worth $296.4Bn in 2009 while its exports to China accounted for only $69.5Bn, leaving a deficit of $226.9Bn.

After the G20 meeting, the Chinese renminbi strengthened from its steepest slide in 22 months, on the optimism that policy makers will heed calls from the US to strengthen the renminbi. US treasury secretary Timothy Geithner stated in an interview in late October that Chinese officials understand it is in the interests of domestic growth and global economic stability to let the renminbi strengthen.

However, in addition to the redressing global imbal-ances and pressure from the US, a more domestic-based case for revaluing the renminbi is starting to emerge.

Firstly, China wants to move away from a purely export-led economy and move towards a domestic-demand fuelled economy. As a result of China’s record pace of expansion, the modestly wealthy workforce has cash to spare. To add to this, a new breed of consumer is growing outside the centres (such as Shanghai) who desire foreign goods.

As a result of a weaker renminbi, it is harder for the Chinese consumer to satisfy this desire. If China is serious about boosting a domestic demand economy, it will have to let the its currency strengthen. This would, in turn, encourage the companies within China to start importing foreign goods to fuel this demand. This could ultimately have a ripple effect on the whole economy from shipping and transportation to retail and foreign direct investment throughout China.

It will be interesting to see how this situation develops. Beijing is attempting to cool the economy gradually by raising interest rates and restricting lend-ing – but this may not be enough. China is certainly making all the right noises and is letting the renminbi appreciate, albeit at a slower pace than many of its global counterparts would like.

With the worst of the global recession arguably behind us, China could well have got its timing right. The need to combat inflation and China’s growing appetite for foreign consumer goods gives the People’s Bank of China an appropriate backdrop to let the renminbi appreciate at a quicker pace.

Only time will tell if China is just playing diplomatic lip service or whether it is serious about addressing the global imbalances. F

commentThe domestic case for revaluationThere has long been widespread international pressure for China to revalue its currency. But a compelling domestic case for revaluation has recently emerged. Jamie Jemmeson of Corporate FX reports

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SHARING KNOWLEDGEAND EXPERIENCE


decision-makers

Dick Welsh

Dick Welsh, director of the Isle of Man ship register, sets himself tough targets. A hard-talking Manxman, Welsh is driven by a

passion to build a maritime centre of excel-lence on this jewel set in the Irish Sea. He is doing this by persuading Japanese ship-owners to think twice about registering ships in Panama and looking at the merits of what the Isle of Man (IOM) has to offer.

It’s a long, slow persuasion that involves relationship-building over many years. Yet Welsh is convinced that the traditional conservatism of the older generation of Japanese owners is turning. The new generation, wanting to go beyond regis-tration in Japan or Singapore, is assessing the many competing flags on the basis of quality of service, and no longer merely on cost. That’s Welsh’s starting point: “I can provide a far greater service level”, he assures Fairplay, adding that his maritime cluster “doesn’t stop with registration, it starts with registration”.

Welsh and his team have set up an agent in Tokyo and are planning to contract out surveyor services. The time and cost of flying down to London, then across to Tokyo is a concern, so the time has come to do the job properly. The need now is for a push to raise the image of the Isle of Man brand on the streets of Japan’s

shipping centres, where the IOM is known only for motorbike racing.

That’s another tough task for Welsh, but he knows that his initial success has

won the backing of his local government. In the recent administrative reshuffle, the IOM registry was transferred from the Department of Trade & Industry to the

Department of Economic Development. It’s a strategic move, one that signifies a change from the old silo mentality to a closer liaison with the government’s broader remit of building an independent economy. “The government is aware that it needs to be proactive,” he says. “Where is the next business coming from?”

Welsh has overseen steady growth in the number of commercial vessels – both merchant ships and superyachts – to the 500 mark, while the gross tonnage has leapt from 9M gt in mid-2008 to more than 12M gt. No doubt this has stemmed from inclusion on the US Coast Guard’s Qual-ship 21 scheme, one of only 15 of the 130 international registries that assesses safety performance of ships visiting US ports.

For ships visiting European ports, the IOM registry has maintained its position in the top third of the White List, and, most recently, a team of auditors appointed by the IMO was on the island in June to carry out a voluntary audit of the IOM’s capabilities. A report (described as “posi-tive, yet balanced”) has been put together that indicates areas of improvement but also contains encouraging statements about the quality of the fleet and the best practices on offer.

Welsh is not chiefly an administrator. Both his grandfather and father went to sea as engineers, and he joined up with T&J Harrison in Liverpool in the 1970s, moving on to Canadian Pacific. He came ashore with a second engineer’s certificate and kept a power station running, read-ing mechanical engineering at Liverpool Polytechnic (now John Moores University) as a mature student. He is passionate about personal development, excited that seagoing qualifications are now recog-nised ashore, and fully supports an IOM ‘opportunities fair’. “This used to be about school children,” Welsh explains, “but it’s now aimed at people looking for a change of direction. I want to push what the IOM has to offer”.

He is a gifted communicator, happy to address the IOM Association of Corpo-rate Service Providers – which represents financial and corporate management and administration services – or gatherings of students. “The registry is at the heart of the shipping industry on the Isle of Man,”

In the spotlightDick WelshCurrent position: Director, IOM Ship Registry (since March 2006)

Education: 1989-1992: B Eng (Hons) 1st class, mechanical engineering, Liverpool John Moores University 1979-1980: Engineer officer cadetship, marine engineering, Riversdale College of Technology

Family: Married with two children, 12 and nine- years old

Hobbies: Plays with Southern Nomads rugby club (which, despite the name, plays home matches at King William’s College in the south of the Isle of Man), Sunday morning sea swimming

ManpowerDick Welsh is passionate about the isle of Man ship Registry – but it is just part of a grander plan to build a maritime centre of excellence, as he tells Richard clayton

www.fairplay.co.uk

decision-makers

Dick Welsh[ Photo: Jim Willson ] Dick Welsh

he says, seeking to persuade customers that the fl ag passes what the Germans call the ‘substance test’.

The next step is to make it easier for companies to register their ships in the IOM. “We are hearing that operators are dissatisfi ed with their registries,” Welsh reveals. “All fl ags try to operate to the same quality standards but the key ques-tion is what’s the standard of service?’ Are the ships kept running whatever hap-pens?” The new fee scheme, priced at a competitive $1,000/ship, carries no annual inspection fee, no casualty investigation fee or consular fee – and there are incen-tives for multi-ship deals. However, IOM off ers more than competitive fees.

The tool under development is the Maritime Administration, Regulation and Information System (MARIS), which is expected to go live in 2012. This tool will replace all the piecemeal systems devel-oped over the registry’s 25 years, with all their potential for error. The plan is for one level of access for the public, lawyers and non-members, and another level for the companies committed to the fl ag. The aim is to have all seafarer documents online, so ship managers can do what they do best: manage ships.

MARIS will also help the registry’s staff to achieve more with fewer people. In bringing in change, Welsh stresses the importance of making sure everyone un-derstands each element of that change. The resource base is limited on an island of just 82,000 people, but there’s one fi nal factor that Welsh believes in – the innate attraction of the island itself. “There’s a time in every man’s life when he wants to come home,” he says – although not so many years ago there wasn’t much on the island to come home to. That has changed, and it’s not just former Manx residents who are returning; many ex-patriates from European companies are staying. “People no longer take a fi ve-year contract, then go home,” Welsh adds. They stay, and contribute to the maritime community.

The IOM will never be another Singapore, but it is witnessing the growth of a maritime cluster – with Welsh and his registry at its heart. F

4 November 2010 �

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Decision-makers from the worlds of energy, mining, manufacturing, industry, commerce and agriculture all a� ect shipping. Fairplay reports on the great and the good

VP for Ocean Freight

Tennesse-based OHL has hired Lars Huebecker as vice-president of Ocean Freight-Americas within the company’s freight management and logistics business unit.

Huebecker, formerly a senior director at freight forwarder Damco in the USA, will be responsible for development and procurement of all ocean freight services for OHL’s customers in the Americas, as well as for opera-tions standards and regulatory compliance.

GL appoints CEO

Germanischer Lloyd (GL) is tightening its board structure with the appointment of Erik van der Noordaa, former COO of the Netherland’s Damen Shipyards Group, as CEO.

Van der Noordaa has earned his stripes with university degrees in both naval architecture and mechanical engineering. He will succeed Dr Her-mann Klein as board member in charge of the group’s maritime service from December. Klein may be resigning but he will remain with GL in an advisory role.

The creation of a CEO role marks a departure from the class society’s traditional leadership structure. Until now, its executive board has com-prised three directors with equal authority. However, GL’s management and reporting structures have been under close review since the takeover of the group by private investor Günter Herz at the end of 2006. In its core maritime division, the group continued to gain market share in the classifi cation of container ships. Since 2003, its coverage of the worldwide box ship fl eet has risen from 34% to 40%, GL says.

movers shakersShipping eyes on Singapore

Shipbrokers and charter managers can expect great job mobility, even in today’s tight economic times, according to Mark Charman, CEO of recruiting company Faststream.

“We know of candidates in Singapore resigning from jobs without one to go to, so confi dent are they of fi nding lucrative employment quickly and easily,” he said. This is not the case in Europe or the US, but even in London, the weariness of the past 18 months is disappearing, he added, with candidates much more receptive to furthering careers by moving to di� erent companies.

Singapore has consolidated its role as a leading shipping centre. “In the past two years, we have seen the country develop from what was mainly a tanker chartering centre to one that covers dry bulk as well as niche trades, such as LNG, o� shore and heavy-lift trades,” he said.

Finance man for Lomar

London-based Lomar Shipping has promoted Achim Boehme, a former manager at ship fi nan-cier Deutsche Schi� sbank, to CEO. He joined the group in spring, initially as chief fi nancial o� cer, after leaving Schi� sbank amid the bank’s ongoing integration into parent group Commerzbank. Since Boehme’s arrival, Lomar – the shipping com-pany of the Logothetis family – has gained strength in the German market through a number of vessel acquisitions. The lawyer, who splits his time between the group head o� ce in London and Lomar’s o� ce in Bremen, is also a well-known player in Greek shipping circles through his previous posi-tion as head of Greek shipping at Schi� sbank.

Lomar Shipping stirred the market in late 2009 with its $325M takeover of Allocean Group including 26 ships. It had built its war chest through the disposal of 67 ships during the boom years 2004-06.


There is so little fairplay in the world. If our own efforts succeed, we shall have taken the first steps towards promoting the habit of calling things by their right name and looking at them through uncoloured spectacles… Founder: Thomas Hope Robinson, Fairplay, 18 May 1883

Member of the Audit Bureau of Circulations

Increase in number of heavy-lift ships (750-1,000 tonne capability)

shipping in numbers

26%Increase in ship repairs at Bahrain’s ASRY repair yard this year

20MSquare metres reserved for new shipyards in China

57%Proportion of world tonnage with flag states opposed to mutual recognition of equipment approvals

$�00MAmount being spent to upgrade Walvis Bay port in Namibia

$70,000Day rate for Capesize ships in the North Atlantic (Narvik and St Lawrence) ore trades

350,000Tonnes of fresh produce Israel’s Agrexco exports each year

$39MReported sale price for a 2005-built Japanese bulker of 76,728dwt

33%Gross tonnage increase in the Isle of Man Shipping Registry since 2008

500%

Average container fleet growth forecast for the three years until January 2013

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