Ship management · 53 ITM looks for growth A combination of the after-effects of the imposition of sanctions against Iran, increased vessel deliveries and a growth in third party

COVER STORY FIRST PERSON

10 Shipping leaders concernedover ‘supply problems’The heads of the leading shippingassociations have raised concerns over thegrowing tonnage oversupply problem with2013 being the earliest time some think amarket turnaround can be seen

11 Seafarers shun fixed contractsSeafarers are reluctant to enter into fixedemployment contracts mainly because theybelieve they can still shop around forhigher wage levels

11 DNV head in safety warningThe head of one of the world’s largestclassification societies has thrown thespotlight on the growing concerns overcrew competence by calling on shipping tofocus more on the human element asopposed to the environment

11 Safety in numbersDobson Fleet Management has devised theConvoy Escort Program (CEP)

12 CISM to gain 12 specialisedvesselsV.Ships and China Shipping Group (CSG)have announced the development of theirjoint venture company, China InternationalShip Management (CISM), which will takedelivery of 12 specialised vessels in thiscoming year

12 Braemar announces ‘robust’set of resultsBraemar Shipping Services plc hasreported a robust set of financials for theyear to the end of February backed up by astrong recovery in the Asian market and a7% rise in shipbroking earnings

12 Last days of a capturedship’s masterA disturbing account of the barbaricactions of the Somali pirates towardsseafarers kept hostage has emerged withthe master of one vessel losing his life dueto prolonged torture and neglect by hiscaptors

NOTEBOOK

8 STRAIGHT TALK - Are we getting the balance right?

14 Torben JanholtAt first sight, Denmark’sJ. Lauritzen looks like manyother tramp-trading shippingcompanies. But closerinspection reveals that it isunusual, if not exceptional

MAY/JUNE 2011 ISSUE 31 SHIPMANAGEMENT INTERNATIONAL 5

THE MAGAZINE OF THE WORLD’S SHIPMANAGEMENT COMMUNITY ISSUE 31 MAY-JUNE 2011

Round Table debate

p66 Puttingshipping backin order

18 How I WorkSMI talks to industry achieversand asks the question: How doyou keep up with the rigours ofthe shipping industry?

35 InsiderDr Hermann J. Klein, Memberof the Supervisory Board atGermanischer Lloyd

58 On The RecordSMI talks exclusively to JohnFredriksen about surviving thecrisis, acquiring new companiesand a spot of salmon fishing

SHIPMANAGEMENT FEATURES

NEWBUILDING

79 Competitive Prices, Bold Strategies Fuel Continuing Order FlowAfter the global market slump of 2008, Greek principals re-emerged as prime moversin newbuild contracting during 2010

38 Safety is as importantas the environmentThe most significant warning yet that safety levelsonboard ship are suffering at the hands of the globaldrive towards a cleaner environment has been given

40 Cloud computingClassNKand IBM Japan haveannounced a new joint projectto develop the world’s firstarchive centre

42 CoatingsA next generation tank coating has been unveiledin the chemical tanker market which promises tocut cleaning times and costs and increase theflexibility and volume of cargoes

74 Open your eyes topiracy’s special challengeMaritime piracy – it is hardlysurprising to hear that thisscourge is cited at the top ofthe list of urgent concerns forship operators and theirinsurance providers

MARKET SECTOR

Cloudcomputing

92 1940 TO 1970A fine vintageAn appreciation for the style and vehiclesof times past is stirring up an inspiring newfashion scene and some truly original daysout

REGIONAL FOCUS

54 A harrowing break in conventionEfforts to contain the piracy crisis have come to a political headwith the continued detention of seven Indian seafarers in Somalia,despite the payment of a ransom

56 Ensuring the bestform of defenceUnderstanding the threat of terrorism, violentcrime and anti-social behaviour within amaritime context takes years of frontlineexperience

60 Floater projects give LNG sector fresh impetusFloating LNG solutions are giving substantially wider commercialand technological dimension to the LNG sector

TRADE ANALYSIS

24 Strong nerves mean strong reservesOfficials from the International Monetary Fund and the EuropeanUnion couldn’t have picked a worse day to travel to Greece todiscuss emergency bailout plans for the country

32 I will not tax Greek ship ownersIn an exclusive interview with SMI, Yiannis Diamantidis, GreekMinister of Maritime Affairs, Islands and Fisheries assures Greekowners that their current tax status will not be compromised

48 Planning a sound pathDubai-based Polarcus is a pure play marinegeophysical company with a pioneeringenvironmental agenda

52 Operating under difficult conditionsIraq is one of the world’s most difficult theatres in which tooperate but according to Inchcape Shipping Services, the need forshipping is proving more crucial...

53 ITM looks for growthA combination of the after-effects of the imposition of sanctionsagainst Iran, increased vessel deliveries and a growth in thirdparty shipmanagement consultancy services could spell a year ofgrowth ahead for the V. Ships acquired International TankerManagement (ITM)

DISPATCHES

76 Ship owners warned over ailing coral reefsShip owners are facing mounting pressure to move theirtrade routes away from the coral reefs following a studyjust published by more than 20 specialist organisations

80 Iran struggles to hang onto the shipping lanesAgreement by the big reinsurance companies to refrainfrom providing cover for ships doing business with Iranhas unleashed a sea-change in the effectiveness of theUnited Nations sanctions mounted against theIslamic Republic

BUSINESS OF SHIPPING

36 Rotterdam mounts steel challengeA subtle change in European importing patterns is having a majorimpact on the breakbulk business carried out at Europe’s leading port.

63 AdHocTaking the tension out of travelWikborg Rein expands capabilities with Brazil allianceWatching out for the hazardsPlant a tree for the environmentISSA is all at seaMy View: Nikolay Khovrin, ILEA Chairman

LIVE

85 Objects of Desire Things that make you go oooh!

SHIPMANAGEMENT INTERNATIONAL ISSUE 31 MAY/JUNE 20116

REVIEW

88 BooksA Fifth Witness by Michael ConnellyHaynes RSM Titanic by DavidF.Hutchings & Richard de KerbrechStarman: the truth behind the legend YuriGagarin by Jamie Doran and Piers BizonySpanish Gold: Captin Woodes Rogers andthe Pirates of the Caribbean

90 MusicSongs for JapanPaul Simon: So Beautiful Or So WhatVancouver International Jazz Festival

90 FilmEdinburgh International Film Festival. Film-lovers will beflocking to the Scottish capital later this month for theEdinburgh International Film Festival

91 TheatrePremiering at New York’s Radio City Music Hall this month isCirque du Soleil’s breath-taking new production, Zarkana

91 ArtWatercolour A history of watercolour painting in Britain fromthe Middle Ages through to the present day is delightingvisitors to the Tate Britain in London

91 DiningFrantzén/Lindeberg Recently picking up the award for‘The One to Watch’ in the S. Pellegrino World’s 50Best Restaurants 2011, this small, intimate restaurantin Stockholm delivers a feast of surprises to its diners

LIFESTYLE


STRAIGHT TALK

The shipping business magazinetoday’s owners and managershave been waiting for

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May/June 2011 Issue No. 31

www.shipmanagementinternational.com

Editorial Director: Sean MoloneyJournalists: Helen Jauregui

Samantha GiltrowEditorial Support: Debra MunfordRegular Contributors: Margie Collins

Michael GreyJames BrewerThomas Ország-LandMartin ConwayRobert Ward

Technical Editor: David TinsleyAdvertisement Director: Jean WinfieldResearch Manager: Roger MorleyAccounts: Sarah NewmanDesign and layout: Tony GingerAssistant Designer Mike Argles

Editorial contributors: The best and most informed writers serving the globalshipmanagement and shipowning industry.

At a time when the crew element sits

firmly on top of the shipping industry’s

most important ‘to do’ list, it seems an

anathema to even contemplate that training

should be forced to reappear on the shopping

list of ship owner things to remember.

After all, the industry has just emerged from

a concerted period of wage inflation and crew

member poaching and concerns were raised two

years ago that rapid promotion policies

implemented by some ship owners and ship

managers were threatening to place in positions

of responsibility, some officers who were just

not up to the task. So it comes as a surprise that

shipping heavyweights such as DNV’s Tor

Svensen should start hoisting the ‘safety risk’

flag in a warning to the industry to stop moving

the public focus towards environmental risk and

away from human safety and personnel risk.

And he has a point, especially when you

consider that not only are there more ships

coming out of the world’s shipyards, but they

are bigger and more sophisticated. So greater

attention needs to be placed on training

standards and competency levels onboard ship!

Year-on-year improvements in ship safety were

now turning into a negative trend, he claimed,

with statistics showing that the accident

frequency has started to rise from an historic

low. “Technology, rules and compliance will

never bring us to the expected level of safety

without focusing more strongly on the human

element,” he said.

An airline Captain friend of mine remarked

to me the other day over a quiet pint that a

Boeing 777 pilot would not be qualified to fly an

Airbus equivalent – indeed, he would not even

recognise the controls in the cockpit. The only

similarity between the two aircraft he claimed,

was that they “both have wings”. So why is

there not this level of stringent checking of

competency when Captains and senior officers

move from ship to ship, or from older ship to

newer ship? Seafarer training is not just about

certification but has to be about pure

competency and this has to be checked, and

checked.

Claims that much of today’s training is of

poor quality has to set alarm bells ringing in the

shipping offices and practitioners have to start

spending more time on actual training as well as

start to measure the effects of their training.

Regular assessment of competency levels is

therefore crucial but managers and owners need

to think beyond compliance. Regulations

address safety management systems but there is

no guarantee for human performance.

But the industry is facing a dilemma, we all

know that. Its invisible image is doing very little

to attract quality recruits into the industry and as

we are hearing, wage levels are not dropping as

it is still a sellers’ market out there. But just

when the industry needs to start treating its

seagoing staff as valued company members

rather than just a commodity, there is still a

reluctance by seafarers to enter into fixed

employment contracts as they continue to chase

what they believe is a rising wage dollar.

Maybe the time has come to reignite the

zero tolerance perspectives that were laid out in

the much heralded, but now little heard of,

Poseidon Challenge. Their goals of zero

fatalities, zero pollution and zero detentions

were admirable aspirations and maybe they

should be visited once again. Zero tolerance of

inferior vessel safety should also be a key

performance indicator on every crew manager’s

operational dashboard.

Happy reading

Sean Moloney

Welcome to Ship Management International

Are we gettingthe balance right?


NOTEBOOKSHIPMANAGEMENT NEWS AND REPORTS FROM AROUND THE WORLD

The heads of the leading shipping

associations have raised concerns

over the growing tonnage

oversupply problem with 2013 being the

earliest time some think a market

turnaround can be seen.

Talking as part of a trade association

Round Table debate for SMI, Spyros

Polemis, Chairman of the International

Chamber of Shipping and President of the

International Shipping Federation, said

oversupply of tonnage was still a problem

together with the contraction in demand

because of the financial crisis. “Two things

now have to happen: ship owners have to

avoid ordering more ships and the world’s

economies need to improve. Because of

globalisation, economies have to improve

together rather than individually. In the past

we used to say that the US economy was the

driver. I don’t think this is the case anymore.

Because of globalisation we need to move

together in order to generate the necessary

demand,” he said.

Rob Lomas, Secretary General of

Intercargo, added: “We haven’t really seen

the volatile nature of the shipping industry

for some time and in the dry bulk sector in

particular, we have witnessed steady demand

and reasonably steady supply. But now we

are back to the traditional function of the

market which is a reaction to volatility.

“Although we have some cautious

grounds for optimism in the future – we have

China still powering ahead and India not too

far behind in terms of demand for dry bulk

shipping – the effects of this may take a little

time to come through. But until it does, we

are seeing operating costs and revenues in

disarray and we are just going to have to ride

out that particular storm. It should get better

in the next few months,” he told the Round

Table.

Robert Lorenz-Meyer, President of

BIMCO, said that while globalisation was

here to stay, there are some trends towards

re-regionalisation as well. “A lot of this has

to do with the environmental concerns of

consumers who are just not prepared to

accept a much larger carbon footprint for

products they buy. This will change the look

of shipping as well. There is a lot of product

sourcing which might be re-regionalised

later on.

“With regard to the order book, we are

looking at the youngest fleet we have ever

had and that is also positive but it is not the

most modern fleet and that is something we

have to take into consideration as well. A lot

of these ships were built based on

construction standards that are 10 to 15 years

old, These ships will last another 20 to 25

years and we all know what kind of

regulations are coming into the market; a lot

of these ships that have been ordered are not

fit to meet them.

Graham, Westgarth, President of

INTERTANKO, added: “In shipowning

terms, cautious optimism is positive. I think

that the supply/demand dynamic will resolve

itself. Our view is that we will typically have

another two trying years – it may be 2013

before we see a turnaround but the one thing

that hasn’t been mentioned and which

is significant, is the global shipbuilding

capacity, and in China specifically. Because

if ship owners stop building ships and China

decides that no matter what, its shipyards

should be building ships then the outcome

has nothing to do with supply/demand

dynamics, that is a political decision.”

Shipping leaders concernedover ‘supply problems’

NOTEBOOK


The head of one of the world’s largest

classification societies has thrown

the spotlight on the growing

concerns over crew competence by calling

on shipping to focus more on the human

element as opposed to the environment.

“A downward trend in safety statics

creates concerns and it is now time to

reinstall the balance between safety and

environmental risk,” said Tor Svensen,

President of DNV.

The positive trend in which the accident

rate was decreasing has now stopped, he

told reporters at the recent Nor-Shipping

show in Oslo. “In fact, it has been reversed,

and navigational errors still play a dominant

role. In addition, we are facing a future of

more sea transportation, more ships and

more technologically advanced ships,” he

said.

Due to the combined efforts of the

industry, including owners, charterers,

classification societies and port state

authorities, the accident rate decreased year

by year for more than 20 years. This trend

stopped almost a decade ago, and over the

past few years an increased rate has been

reported, DNV said.

“The shipping industry is facing

different challenges. There is now a high

focus on the environment, and this is

leading to major changes. In my mind, it is

now time to reinstall the balance between

safety and environmental risk. Zero

tolerance for loss of life is equally as

important as zero environmental damage,”

Mr Svensen said.

“The industry will always have to

balance safety and other priorities, but the

negative trend in accident rates indicates

that we are no longer managing to get the

balance right,” he added.

DNV has for years collected and

analysed data related to all aspects of safety

at sea. Thousands of feedback forms have

been addressed to major shipowners, and

these have been completed and returned by

all levels of these organisations – both

onshore and onboard vessels.

“We cannot design ourselves away

from the human elements. Safety can never

be completely regulated. Individual

competence and behaviour will always be

key elements in managing safety,” he

stressed.

DNV head invessel warning

Dobson Fleet Management has

devised the Convoy Escort Program

(CEP) – a unique venture in

assisting ships traversing the Gulf of Aden to

avoid hijackings.

Bob Maxwell, Managing Director, said

the plan is to provide a non-military escort

service with a fleet of 18 patrol boats

(including two spares), meaning eight

conveys of two boats each will be in action

simultaneously.

Dobson, which plans to provide the

sailing crew and technical management of the

patrol vessels, is in talks with flag states

interested in taking on the service. Mr

Maxwell said the CEP would be underwritten

by Lloyd’s and would also provide hull

breach and kidnap and ransom insurance

simultaneously.

He said: “Whatever flag state you are

with, there’s no firing from your ship. The

Captain doesn’t have to fear criminalisation.”

Safety in numbers

Seafarers are reluctant to enter into

fixed employment contracts mainly

because they believe they can still

shop around for higher wage levels, the

head of a leading tanker management

company has warned.

Lars Modin, President and CEO of

International Tanker Management in

Dubai, said efforts by the company to

install fixed employment contracts had not

really taken off because many seafarers

believed the employment market was still

operating in their favour and in so doing,

were waiting to see how it would develop

for them.

The company told this magazine in

November 2009 that it was looking at

introducing fixed contracts for officers on

its managed vessels as a way of boosting

crew loyalty and ensuring the recruitment

and retention of the best officers available.

The plan at the time was to target around

20% of officers for the fixed contracts.

Seafarers shunfixed contracts


NOTEBOOK

V.Ships and China Shipping Group

(CSG) have announced the

development of their joint venture

company, China International Ship

Management (CISM), which will take

delivery of 12 specialised vessels in this

coming year.

According to V.Ships President

Roberto Giorgi, this expansion is in line

with his initial vision for CISM, which was

founded in 2005: “The original idea was to

run eight 9,600teu containerships but

naturally, during the crisis, we postponed

our newbuildings to run four ships only.

Only recently, we have seen the market

improving so CISM has now expanded

with eight 14,100teu units.”

Following a recent meeting between

Mr Giorgi and Li Shaode, President of the

China Shipping Group, management of

these vessels will be the responsibility of

the JV, in addition to the operations of two

VLCCs and two VLOCs, which will be

ordered by CISM.

Describing the significance of this

move to V.Ships, Mr Giorgi said he expects

to see a surge of activity within the Chinese

shipowning and chartering, and “Shanghai

will become one of the biggest clusters,

such as has happened for Hong Kong and

Singapore”.

Praising the approach of his Far Eastern

colleagues, Mr Giorgi added: “The reality

is an extremely dynamic market with real

people, who are fast, intelligent and smart.

The dynamic in a market like China, is

difficult to find in Europe or the US and

younger generations are coming closer to

the shipping sector which is another plus.”

With strategically located offices in

China, India, Brazil and Australia – four

regions which Mr Giorgi cited as the main

drivers of the shipping economy, CISM is

well positioned to create a footprint in other

sectors, and has stated its intentions to

expand the Sydney office to deal with

cruise vessels and offshore. Mr Giorgi

concluded that there is ‘major potential’ to

expand the JV to offer services to third

party owners in China.

CISM to gain12 specialised vessels

Last daysof a capturedship’s master

Braemar Shipping Services plc has

reported a robust set of financials

for the year to the end of February

backed up by a strong recovery in the

Asian market and a 7% rise in shipbroking

earnings.

Revenue rose to £126.1 million from

£119m previously while pre-tax profits

before amortisation came in at £14.8m

against £15m 12 months ago. The company

reported an estimated forward order book

deliverable in 2011/12 of £23m ($36m)

(2010/11: £28m).

Chief Executive Alan Marsh attributed

these results to a high quantity of

transactions on a lower level: “When you

look at the figures of the requirements for

steel, for ore and for oil, these are all

increasing. Yes, there are more ships on the

water now than we would like – freight

rates and prices will be under pressure but

there are more deals out there for us to be

doing.”

James Kidwell, Finance Director, said

Far Eastern growth was ‘driving shipping’:

“Imports of crude oil into China are

growing at 15% per annum at the moment

– the principal trade out of the Gulf is East

not West and the same is true on the dry

bulk side with iron ore.”

Braemar also announced its acquisition

of BMT Marine and Offshore Surveys

Limited; a provider of Hull and Machinery,

P&I and Marine Warranty survey services,

from the administrator, Deloitte.

Braemar announces‘robust’ set of results

Adisturbing account of the barbaric

actions of the Somali pirates

towards seafarers kept hostage has

emerged with the master of one vessel

losing his life due to prolonged torture and

neglect by his captors.

According to communication sent by

one of his fellow crew and received by this

magazine, Captain Prem Kumar suffered

regular beatings at the hands of his captors.

Even though he was reported to have

suffered a couple of strokes he allegedly

received no medical assistance during his

captivity.

“At one point, he was so disabled that

he was paralysed in the left side of his body

and chose to lay motionless in his cabin for

a period of 12 days. And then (I guess the

blood clot had moved further away) and he

discovered he could move again. However,

his shipmates noted that the Master was

now stumbling in the passageways and on

the staircases, for no reason at all, and his

speech was sometimes slurred; he would

twitch for no reason,” his batch mate said..

“His nervous system was getting shot

and, I think, whenever the blood clot

moved, different symptoms were seen.

After 11 months the vessel was released

along with the crew of 34 and the Master.

He came home to New Delhi, to be with his

family but within the next two weeks he

was rushed to hospital as the euphoria of

reunion was quickly marred by the distinct

symptoms of stroke.

He was diagnosed as having suffered a

stroke and given no more than a few weeks

to live. He died within four days of being

admitted to hospital.

14

At first sight, Denmark’s J. Lauritzen looks

like many other tramp-trading shipping

companies. But closer inspection reveals that

it is unusual, if not exceptional.

It has weathered the downturn and stayed firmly in

the black throughout. As other companies have

hunkered down to brave out some of the industry’s most

difficult years in decades, Lauritzen has diversified,

investing in new shipping sectors and, today, continues

to grow at a cracking pace.

Though he has a strong team behind him, President

and CEO Torben Janholt has been the steady hand on

the corporate tiller. And he is the principal architect

behind the company’s moves out of reefers and into

product tankers, expansion in LPG tankers and, more

recently, significant investment in the offshore sector.

He has also been a prime mover in the company’s

strategy to build up its Asian presence out of a base in

Singapore – “a hell of a nice place to do business”.

Meanwhile, confounding many sceptics, he has

overseen the company’s wooing of heavy-hitters in the

energy industry with a virtually unique accommodation

service vessel, the Dan Swift, which could well form a

blueprint for a purpose-built unit or units, in due course.

And the 44,865dwt product-to-shuttle tanker

conversion Dan Eagle is now 18 months into a five

year with Petrobras and will soon be joined by two

new 59,000 dwt shuttle tankers which are nearing

completion at Cosco Nantong in China.

The company, originally established in 1884

by the Lauritzen family is owned today by the JL

Foundation. “It’s not a stock-listed company,”

explains Janholt, “but it is a shipping company

with lots of power – commercially, financially

– and it is one of the fastest growing

shipping companies in Denmark. Our

business is concentrated in four areas –

bulk, tankers, gas and our latest

activity, offshore.”

Torben JanholtPresident and CEO of J. Lauritzen

Since the sale of its 50% holding in reefer pool

NYK Lauritzen Cool in 2007, Denmark’s J

Lauritzen has diversified, grown and made

money. Now the company is considering

further expansion in the offshore sector



FIRST PERSON

“We are 150 vessels – I’m not happy

with 150 vessels on an average annual basis,

I believe it’s 180 – but it depends a little on

where you cut it. Here, we don’t take shorter-

term time-charters into consideration – if we

did that, it would be closer to 200.”

There is still a chunky orderbook, with

29 bulkers at various stages of construction.

These include owned and part-owned

tonnage, slightly more than half; nine time-

chartered vessels, with the balance

comprising vessels committed to the

company’s handysize pool, currently ranking

number five amongst global operators.

Janholt is not that concerned about dry

bulk rates despite poor earnings and the

significant volume of tonnage on order.

Apart from good contract coverage, the

company is adept at trading ships in the

market, he points out. And apart from nine

Capesize and four Panamax units, the

company’s fleet comprises handysize and

handymax vessels where demand is still

relatively buoyant.

Lauritzen’s financials demonstrate

continuing solid performance. EBITDA in

the three years from 2008 has been $252m,

$135m and $159m yielding profit margins

of 26%, 16% and 26% respectively.

Meanwhile solvency in the three years has

remained in the 50-60% range,

demonstrating the company’s judicious

approach to financing.

“During the crisis years, Lauritzen came

out with positive results on the bottom line

all the way through. On Friday we have our

annual general meeting,” he commented

recently. “As you can imagine – with one

shareholder – it’s actually a very nice event.

There are not that many questions!”

The company’s bulk division is by far

the largest activity, with invested capital of

$920m and EBITDA of $156m; investment

in gas totals about $460m with an EBITDA

of $31m; tankers, a relatively new activity

taken up after the move out of reefers,

focuses on product and chemical tankers and

accounts for investment of around $150m

and an EBITDA, admittedly in a pretty poor

market, of $12m; and offshore, with $416m

invested and revenue of $61m. These

offshore numbers will increase significantly

when finance is drawn down on delivery of

the two new shuttle tankers later this year.

Long-established shipping companies

can often get stuck in a rut and, in doing so,

lose the ability to compete effectively on a

global stage. Not so in the case of Lauritzen,

however, which operates very effectively

from a high-cost capital city in northern

Europe. Of course, the Danes are pretty good

at shipping, but few of Lauritzen’s

compatriots have the depth or spread of this

agile and entrepreneurial set-up.

Janholt is keen to stress the corporate

priorities that have brought the company

successfully through recent testing times.

“We introduced a new vision, new values,”

he says. “And that has actually guided and

helped us quite a lot, especially in the crisis

years from 2008.”

He stands behind the move out of

reefers. “We’ve been pleased with the

decision … because a lot of the cargo is now

transported by a smaller company down the

road,” he jokes, referring to the steady drain

of conventional reefer cargoes into

refrigerated containers. But the reefer exit

has actually laid the ground for much of the

company’s successful diversification since.

“To be a little proud, through the crisis,

we had one of the biggest newbuilding

programmes in Lauritzen’s history. We were

financing our ships as we have been doing

all the time – self-financing until the day of

delivery when the normal bank finance

would kick in. So, in a world where money

disappeared overnight and nobody was

willing to do anything, we continued. We

changed our strategy. We looked at risk

factors and the most important elements in

our strategy.”

He describes the company’s five “Must

Win” battles, introduced in 2009: financial

independence, which involved getting out of

some newbuilding contracts and

restructuring others; establishing a presence

in Brazil, considered essential for the

company’s new offshore business;

safeguarding the highest standards in ship

management – safety, security, environment

and training of the right staff; a sound Asian

base; and what he describes as corporate

advantages – “that’s our DNA – that’s why

people are proud to work here. When we

need to hire people, they are there. That’s

fantastic!”

“But the markets go up, and the markets

go down,” Janholt says pragmatically, “and

that’s where we make a lot of money. We are

not a liner company, we don’t have ships

sailing from A to B on a regular basis, not

necessarily … we have cargo contracts, but

we trade a lot of our ships in the market-

place.”

It has certainly not all been plain sailing.

And this year, the company will take a

significant hit to its bottom line as a result of

the Korea Line collapse and renegotiated

charters on capsize units with other parties

which Janholt will not name.

“Some of the major risks we have been

presented with over the crisis years have

actually been customers who have not been

able to perform the contracts which they

have made with us. And that is extremely

unfortunate. Whenever we do a contract, it

says 28, Sankt Annae Plads, Copenhagen.

We are not hiding behind some kind of funny

addresses in The Bahamas or Monrovia.”

“We are here and we hope to do

business with people who have the same

standing as us. But we have realised that the

world has changed somewhat over the crisis

years. The old saying ‘my word is my bond’

does not necessarily exist so much in

shipping today as it did just a couple years

ago.”

Pressed further on the likely impact on

Lauritzen’s bottom line, Janholt concedes

that the Korea Line collapse has involved

five ships – four handysize vessels and a

Capesize still under construction. The total

hit, involving these ships and a couple of

other Capesize charter renegotiated with

other parties, will not be far off $50m

although losses will be mitigated by re-

letting the ships in the market. The handysize

vessels are less of a worry, he says, because

rates for such units are still relatively healthy.

But the collapse of the Capesize deal will

leave a large hole, at least for the moment.

Janholt has strong words on standards of

behaviour and, as reports emerge of other

Korean shipping firms running into

difficulty, he says that some companies have

been too aggressive and have lacked

sufficient depth of funding. In the case of

Korea Line, he does not mince his words.

“They are now using a low market to

renegotiate and if they survive, we have a

competitor with cheap ships,” he declares.

But Janholt is eager to talk about more

positive developments – the company’s

successful entry into the offshore sector, for

example, and specifically the performance

of the Dan Swift, a ro-ro hull, ex Kraka,

bought for virtually nothing and converted

into an accommodation service vessel at

Blohm & Voss. She is a self-propelled

monohull with accommodation for around

250 charterer’s personnel and a crew of

around 40.

The DP2 unit, which Lauritzen

describes as a floating hotel, airport and

shipyard, underwent model tests at the Marin

Institute, has full station-keeping ability on

just half of her thruster capacity and has two

Marine Aluminium-built active heave

compensated telescopic gangways, the

longest installations of their type on any

vessel in operation today. Comfort on board

is enhanced by a Rolls-Royce anti-heeling

tank stability system and a 100-tonne active

heave compensated knuckleboom crane

serving a 600 square metre work deck,

supported by 250 square metres of

workshops.

Janholt admits that the conversion met

with plenty of scepticism in the market. Few

charterers believed that a dynamically-

positioned monohull, as compared with

semi-submersibles, would have the

necessary station-keeping performance in

hostile sea conditions offshore, and could be

liable to significant downtime. Now, based

on the Dan Swift’s success since delivery in

December 2009, Lauritzen is considering

placing an order for a purpose-built

accommodation service vessel or, in due

course, possibly several.

To be fair, the Dan Swift conversion

project was fraught with headaches – it ran

some 30% over budget and took months

longer than expected. But Janholt says this is

common in the offshore market, with many

projects taking longer and costing more than

expected.

“You have to get used to it. I have a

Board that showed us a lot of trust and

confidence.”

Then, although the redesigned vessel had

been converted with a Petrobras-suitable

specification in mind, the timing didn’t quite

work and the Brazilian state major had

no requirement when the vessel finally

delivered. However, in a Statoil charter off

the Brazilian coast lasting from December

2009 to February of this year, the Dan Swift

has blazed a highly successful trail and, since

then, has now completed a second two-

month charter for Shell on the Bonga field,

off the Nigerian coast, where the Bonga

FPSO has been shut down for routine

maintenance.

Janholt cannot disguise his pleasure at

receiving a thank-you letter from the oil

major, commending the vessel’s performance

in West Africa. She has now performed well,

with no downtime, on both contracts and that,

he says, has proven the critics wrong and

given the monohull accommodation service

vessel lots of credibility. Hook-up takes

minutes and the gangways disconnect in

seconds, should an emergency arise.

“We don’t have to prove to oil

companies that this is a ship that can do the

job. I’m not completely off if I say that they

are calling us to find out when it’s available.”

And he points out that, unlike semi-

submersibles, the vessel is instantly mobile

and could be deployed next in another

contract off the West African coast – in

Angola, for example – or just as easily head

back for Brazil. And gross rates of $150-

$160,000 a day, equivalent to a bareboat rate

of around $100,000, means “earnings are

higher than expected, even though costs were

higher”.

If the company goes ahead and contracts

for another similar vessel, it would be

larger, with capacity for 5-600 personnel.

Conversions are certainly possible, but based

on the company’s past experience, a

newbuilding would be more likely, possibly

from Korea.

“Yes, there are conversion

opportunities,” says Janholt, “but the

question is whether it would be easier to build

a new ship. It’s always difficult to convert

ships, especially when they are so highly

complicated.” But with a price tag of around

$200m apiece, such investment decisions

cannot be taken lightly. “Maybe we will have

a new contract within this year,” Janholt says,

“but we would prefer to order against a

charter.”

There are a number of potential charterers

in Brazil, he says, including BG, Petrobras

and Statoil. A joint venture is another

possibility and Janholt says discussions with

possible partners are under way.

Certainly, Lauritzen’s projections indicate

that such units will be in heavy demand over

the next few years as energy exploration

moves further offshore and floating

technology in both oil and gas requires

ongoing support, and accommodation

services for personnel. Moreover, much of

the existing fleet of semi-submersible

accommodation units is relatively old,

expensive to re-position and not necessarily

suited to remote locations in deep water and

hostile conditions.

There has been talk of spinning off

Lauritzen Offshore as a separate company but

Janholt dismisses this possibility for the

moment. It would need to be at least twice the

size for a listing to make sense, he says.

However, this could be a possible transaction

to watch closely – an initial public offering

would be one way for the company to fund a

series of new accommodation service units as

well as enabling investors to buy into a slice

of the J Lauritzen action. On the basis of

recent performance, this could be a sound

move. �

FIRST PERSON


HOW I WORKSHIPMANAGEMENT

workHow I

SMI talks to industry leaders and asks the questionHow do you keep up with the rigours of the shipping industry?

18

With a desire to see the world but

no family roots in shipping, you

might presume that as a young

man, Bjørn Højgaard spent his days

studying the conventional route to sea as a

cadet but in fact, the Danish national began

his career as a deckhand at a variety of small

shipping companies and gradually worked

his way up, learning as he progressed.

For Mr Højgaard, who joined Thome

Ship Management as Managing Director in

2008, early experiences within industry

included work onboard dredgers removing

sand in preparation for construction of the

Great Belt Bridge, in addition to time spent

on passenger vessels. These encounters with

seafarer life inspired Mr Højgaard to join the

Danish Navy where he became an officer,

prior to participating in the Maersk Advanced

Education Scheme for the training of officers.

Having completed his education with a

Ship’s Masters’ degree from the Svendborg

Navigationsskole in Denmark, Mr

Højgaard’s background includes high profile

roles at the AP Moller Group, which he

joined in 1993, including Managing Director

of AP Moller Singapore between 2000 and

2002, then Managing Director of a wholly

owned subsidiary of AP Moller in Hong

Kong.

In his current role at Thome, Mr

Højgaard specialises in the management of a

wide variety of vessels, particularly oil

tankers and gas carriers, and the company is

responsible for 140 fully-managed vessels.

As he told SMI, the company is enjoying a

particularly successful time, despite the

challenges posed to industry by low freight

rates: “Things are going well and our product

has been successful. It’s a continuous

improvement process for Thome with slow

but steady growth. There are many ships out

there so we can be quite selective.”

A notable strength of Thome is the

company’s ‘multi-national’ approach and

focus on the job satisfaction of its employees:

“As well as wanting to be the preferred ship

manager to our customer base, we also want

to be the preferred employer for those

working for us. We have good working

conditions and a management style that is

quite Scandinavian with an open door policy

and an approach which is not as ‘top down’

as perhaps some of our competitors in

industry. We are multi-national and interact

with our staff. We have over 20 different

passports in this office alone and embrace

diversity.” Mr Højgaard is fluent in Danish

and English and also practices conversational

German, French and Chinese.

However even having a head office in

the celebrated multi-national Republic of

Singapore can present some challenges for

ship management players: “If you have, as

we do, 95% of your operations in-store and

pay your staff in Singapore dollars, and the

exchange rate with the $US changes by 10%,

then it’s like losing 10% of your fleet, from

say, 140 ships to 126. In terms of revenue, it’s

challenging because you still have to take

care of the ships” Mr Højgaard explained.

He added that the Singapore dollar has

been strong and so, the country is looked

upon as a safe haven as the economy

continues to grow. However, he warned there

could be repercussions for ship management

companies if the exchange rate between the

S$ and US$ slides to below 1.15, as the sector

may experience difficulties when competing

with the fixed exchange rate of regions such

as Hong Kong. He warned this could also

encourage companies to relocate to lower

cost countries such as Kuala Lumpur, Jakarta

or Bangkok and said European staff such as

superintendents may be encouraged to move

away from Singapore in line with this.

Mr Højgaard explained that it can be

difficult to foresee such market conditions

long-term and so, planning for the immediate

future is especially important for Thome. The

company has adopted some cost-saving

measures, including setting up an office in

Manila which has created 100 jobs and deals

with business essentials such as accounting

and payroll. Mr Højgaard praised the

Philippines as a nation with great expertise,

particularly in offering high quality staff

with a keen understanding of process

management, though Thome’s frontline staff,

including superintendents and crew

managers, remain based in Singapore.

In the day-to-day activities of Thome, Mr

Højgaard noted there is a definite empathy

between staff members and said he is happy

to change his mind and take on the ideas of

colleagues: “Every morning I meet with my

five closest employees and we speak for half

an hour to an hour – it’s an open discussion

and we share opinions but if I have a different

opinion to the others, we go with the majority.

I don’t think things are right or wrong in that

BJØRN HØJGAARDManaging Director at Thome Ship

Managment, Singapore

MAY/JUNE 2011 ISSUE 31 SHIPMANAGEMENT INTERNATIONAL

HOW I WORK SHIPMANAGEMENT

19

sense as it’s all about the choices you make

and how you develop from these.”

“I am a hands-on ‘doer’ and am opposed

to the ‘pie in the sky’ view. I don’t think that

strategising is effective – I like to get on the

ground and get things done. In terms of my

style, I believe my employees would say I’m

clear on where we’re going but I don’t over-

involve myself in how we get there as I don’t

think you should micro-manage. It’s

important to agree on directions and plans

upfront.”

This dedicated and straight forward

approach also stems into Mr Højgaard’s

relationship with his customers, whom he

prides himself on visiting in person regularly,

leading to a busy travel schedule of 150 days

per year. A recent four week trip saw this

globetrotting Managing Director visit the

UK, Scandinavia, Turkey, Greece and

Croatia in one go, for business meetings with

customers and conferences. Noting that

regular travel and hearing customers’ views

has helped him to view company activities

from the ‘outside in’ rather than ‘inside out’,

Mr Højgaard said: “You must be present in

situations in order to make meaningful

changes to your company and product – you

must try and see what the customers’ see, as

opposed to just sitting in a company and

looking out.”

A fan of the great outdoors, Mr Højgaard

is a keen runner and hiker for whom regular

exercise is a way of life. Making use of his

gym membership every day and taking

efforts to find alternative facilities when

travelling, he has taken part in a number of

hiking expeditions, including the 100 km

long and 4,700m high Maclehose mountain

trail in Hong Kong, on which he spent 28

hours in 2006 and the 5,895m Mt. Kilimajaro

in Tanzania during 2007. Mr Højgaard also

makes time for weight lifting within his gym

schedule and is a keen golfer.

Having combined his love of health and

fitness with charitable causes, Mr Højgaard

most recently took part in a hike in aid of The

Sailors’ Society – a charity offering practical

assistance, emotional and spiritual support for

seafarers, in addition to financial assistance

and family liaison if necessary. Between 8th

and 11th April 2011, shipping industry teams

climbed high Mount Kinabalu in Borneo

which at 4,032m was no simple feat, but Mr

Højgaard confirmed that his team, which

consisted of Thome Ship Management

President Claes Eek Thorstensen and the

company’s Technical Director Carsten

Ostenfeldt, raised an impressive $16,000. A

total of 41 teams participated and raised

$600,000 overall.

Mr Højgaard described the hike as “a

great bonding experience” for his team, who

successfully climbed to the Laban Rata rest

house 3,314m up the mountain where they

stayed overnight before setting off at 3am on

Sunday morning for the summit, which

they reached by sunrise to enjoy breath

taking views of the mountain’s surrounding

landscapes. Mr Højgaard said that during the

hike, his team spotted wildlife including

brown squirrels, colourful birds and even a

monkey but luckily, no snakes!

Describing why Thome chose to support

this event, he told SMI: “The Sailors’ Society

makes a valuable contribution for seafarers.

Sometimes, crew may have personal

problems and someone’s got to be there for

them, to listen to them and help them. It’s a

worthwhile cause.” �

I am a hands-on ‘doer’and am opposed to the ‘piein the sky’ view. I don’t thinkthat strategising is effective – Ilike to get on the ground andget things done. In terms ofmy style, I believe myemployees would say I’mclear on where we’re goingbut I don’t over involvemyself in how we get there asI don’t think you shouldmicro-manage. It’s importantto agree on directions andplans upfront

““



Since his successful election to the

role of Chairman at the 2005 Annual

General Meeting of the International

Association of Dry Cargo Shipowners

(Intercargo) in Athens, Nicholas ‘Nicky’

Pappadakis has worked diligently to

promote and ensure safe, efficient and

profitable shipping operations but his

primary concern rests with seafarer

welfare. “Our main priority remains the

safety of the seafarer – clearly without

seafarers there is no shipping,” he said

when describing the inseparable issues of

seafarer well being and piracy – an

accelerating problem which, according to

Mr Pappadakis, is “the most important

challenge facing shipping today”.

Through his emphasis on ‘seafarer-

centric’ solutions available to industry

in tackling piracy, Mr Pappadakis has

highlighted the need for owners to retain a

keen focus on the human element within

their operations – an approach which no

doubt stems from his varied experience

within industry.

Mr Pappadakis began his shipping

career as an apprentice at sea prior to

working in London as a Management

Trainee at his family’s company, A.G.

PAPPADAKIS & CO., before heading

up the firms chartering and operations

activities. Now at the helm of his family’s

aviation and maritime interests, Mr

Pappadakis also serves as a Member of

the Board of Directors on numerous

organisations and bodies including the

Union of Greek Shipowners and the

Hellenic Committees of Germanischer

Lloyd, Lloyd’s Register and Det Norske

Veritas.

Whether raising the profile of

environmental issues, working with the

International Maritime Organization to

develop legislation or building on

relationships with other shipping

associations and regulators, Intercargo

plays a vital yet vast role in the maritime

world. Describing which issues he deems

especially pertinent for 2011, Mr

Pappadakis cited the industry’s excessive

order book for new vessels as an area of

concern and said: “The overhang of ships

on order is incredible and the competition

the industry is going to have from the Far

East is inevitable. Something people should

realise is that the number of Chinese

shipping companies increased in the last

year by one third.”

So, how does Mr Pappadakis intend to

build on his company’s assets during this

time of fresh competition from Far Eastern

players? “In Greece we have a good saying

which states: ‘He who has the watermelon

and the knife decrees which size the slice is’.

It’s inevitable – they have the transfer

requirements, they have the shipyards in

large numbers. That’s why I have been

saying for example, in my own organisation

– I hope the next chairman will be from the

Far East. We have around 870 members and

many of our members are from the Far

East.”

Commenting on his own firm,

Mr Pappadakis explained that vessels

commissioned in China and the Far East

have proven ‘fantastic’ as the quality has

been of a high standard. He added that

“building ships requires a good inspection

team during the course of construction” and

said his company has obtained such services

without issue.

But what hopes does this shrewd owner

and maritime personality have for 2011? Mr

Pappadakis simply stated: “I would hope for

peace because we live in trying times.”

Indeed, the issue of whether to place armed

guards onboard is of particular concern to

Mr Pappadakis and his competitors, as he

confirmed: “This is a topic which is fraught

with difficulties, legal and otherwise, so I

wouldn’t like to tell you what we do but

what I can tell you is we don’t use armed

guards, although as an ex-seafarer and as an

owner I would like, at times, to have used

them or to have been able to use them but

it’s a legal minefield if any of the crew get

hurt. The Greek Flag and Malta Flag don’t

allow armed guards so it’s a major

problem.”

Also committed to his responsibilities

as President of the Malta International

Shipping Council and Vice President of the

Greek Chamber of Commerce (to name just

a selection of his roles), Mr Pappadakis

holds a passion for shipping which is as

intense as he is prolific and, as he told SMI,

maritime affairs now play a dominant force

in his world: “At my age – I’m 72, shipping

is a way of life for me, it’s not just a way of

making money.”

By the nature of his role at Intercargo,

Mr Pappadakis also travels extensively but

he described this aspect of his working life

as a necessity “for the greater good of

shipping” and added that travel has assisted

in broadening his outlook through meeting

new people: “By nature I like to share my

own experience but I like to learn from

others and maybe some of them can learn

from me.” But how does Mr Pappadakis

manage to successfully work within the

confines of such a hectic schedule? Simply

put: “Somebody once said, for the bee to

make honey, it’s got to go to all the flowers

– and I try to!” �

Steering a respected ship owning firm

through acquisitions totalling almost

$2 billion is no mean feat but as

President and Chief Executive Officer of

the Overseas Shipholding Group, Morten

Arntzen has used his broad knowledge of

the markets to ensure this impressive

growth since his appointment in January

2004.

With a disciplined approach to financial

and investment opportunities and a strict

focus on balanced rather than excessive

growth, Mr Arntzen has drawn much from

his previous experience as Chief Executive

of US merchant banking firm American

Marine Advisors, where a focus on

NICHOLAS PAPPADAKISChairman, Intercargo

MORTEN ARNTZENPresident and Chief Executive Officer,

Overseas Shipholding Group

20

In Greece we have agood saying which states: ‘Hewho has the watermelon andthe knife decrees which sizethe slice is

“

“

At my age – I’m 72,shipping is a way of life for me,it’s not just a way of makingmoney

“ “

corporate restructuring, in addition to advisory services for

mergers and acquisitions, allowed him to further enhance

his knowledge of the markets.

Previous appointments also include heading up the

Global Shipping Group for the now consolidated bank

holding firm Manufacturers Hanover Trust Company and

Mr Arntzen has also worked at the helm of the Global

Transportation Group on behalf of Chase Manhattan Bank

and Chemical Bank.

Since his appointment at OSG, the fleet has expanded

significantly from 53 ships to almost 100 vessels dealing

with the transportation of products, petroleum and gas and

the company has expanded these core business areas. In

addition, OSG also owns 25 ships which are currently

employed in US Flag operations under the Jones Act, with

a fleet comprised of articulated tug barges and handysize

and lightering product carriers.

So it would appear that positive times abound for OSG,

but when SMI asked Mr Arntzen how the markets have

faired for his company in recent times, he frankly described

the period as ‘terrible’ and added: “The crude markets have

been very weak for January and February. March was much

better and April will be a little better – our US Flag business

has improved. The tanker market was better the first quarter

All those things in our business whichwe can control, we’re being extra vigilantabout but the things we can’t influence,such as spot market levels – all we can dois try to outperform the average marketbased on our contract portfolio

“

“


of this year than in the fourth quarter of last

year and will be materially better in the

second quarter so that’s a good job! But the

crude markets have continued to be weak –

they’re now better than the last six months

of 2010 but not good enough yet!”

Despite this testing outlook, Mr Arntzen

appeared upbeat and added that the industry

and markets are most likely “heading in the

right direction” for the near future. But what

is OSG’s strategy for progression during

these uncertain times? He confirmed that his

company has adopted a strict approach of

ensuring those aspects of business which

can be controlled in-house are kept well in-

check: “Our strategy has been this – there

are a lot of parts of our business which we

can influence ourselves, such as controlling

costs. We also ensure at sea, that when we

have those fixed contracts and difficult

projects to complete, we’ve done that.” He

added that elements of business which

needed to be renewed have also been

invested in as appropriate.

Concerning those aspects of OSG’s

business which do not lie in-house, Mr

Arntzen explained: This approach has paid

off for OSG, which has seen equity market

transactions of $1.04bn since Mr Arntzen’s

appointment.

The company has also acted wisely by

not getting drawn into the excessive vessel

purchasing which has proven so irresistible

to some competitors in the past and the firm

has not bought a ship for around four years.

As Mr Arntzen confirmed, OSG has no

plans to purchase vessels in the near future:

“We’ve been very careful with our money

and will continue to be patient and wait –

we don’t need to add ships as we’re big

enough.” He added that he would be

“delighted” to be able to “stand in front of

millions” to announce a ship purchase deal

which will be ‘accretive’ but added: “Only

when I can do that will we be back in the

game!”

The need to keep a careful eye on such

a wide variety of business components

might strike worry into the hearts of less

experienced players, but Mr Arntzen, who

gained a Masters degree in International

Affairs from Columbia University, is also

committed to a whole range of other

responsibilities and appointments. This

includes his role as a board member of the

New York and New Jersey based Seaman's

Church Institute and of Royal Caribbean

Cruises (where he is active on a committee

dedicated to the environment, safety and

security). Mr Arntzen also sits on the Board

of Trustees of New Canaan Country School

and Maine Maritime Academy.

With his working life split into such a

variety of components, how does Mr

Arntzen relax? Describing his experience at

the Sea Asia 2011 conference, he told SMI:

“Coming to Asia is relaxing – you get a

sense of adrenaline and people are upbeat

and optimistic. The US is depressed about

things but this is great!” He added that the

enjoyable aspect of travelling remains true

for him and said his wife travels with him,

so distance from family is never an issue for

Mr Arntzen, whose passion for all things

maritime shows no sign of decreasing, as he

concluded: “Shipping is fun – that’s why

we’re in it!” �

We’ve been very carefulwith our money and willcontinue to be patient andwait – we don’t need to addships as we’re big enough... wewould be delighted to be ableto stand in front of millions toannounce a ship purchase dealwhich will be accretive... Onlywhen I can do that will we beback in the game!

“

“

Officials from the International

Monetary Fund and the European

Union couldn’t have picked a

worse day to travel to Greece to discuss

emergency bailout plans for the country. A

planned national strike against the Greek

government’s austerity measures in early

May brought to a halt all road, rail and air

travel for the day and demonstrated in no

uncertain terms, the scale of the task facing

Greece’s politicians as they struggle to

wade through what is fast becoming an

economic quagmire.

The Greek economy is at a critical

point because the government denies it

needs to restructure its debt to avoid a

default, while a sceptical bond market has

pushed up Greece's borrowing costs to

unaffordable levels.

A year after being granted €110bn

(£97bn) in rescue loans in return for a

radical overhaul of its economy, Greece

remains struck in recession and looks

unlikely to be able to stand on its own feet

again by 2013, when the current bail-out

programme runs out.

To give Greece some breathing space,

eurozone nations were debating additional

support measures to keep the country from

having to default on part of its massive debt

– a step that officials warn would rattle

banks across Europe and could hurt the

continent's recovery.

Drastic times call for drastic measures,

believes StealthGas CEO Harry Vafias and

some measures have been taken to tackle

the crisis, but as he told SMI: “In reality,

serious measures still need to be taken to

resolve the crisis but no one has the guts to

do it. They need to sack more public

servants, reduce government costs by 50%

and sell state-owned business. In a country

with 10 million people and one million

public servants, the numbers don’t add up.”

Strong words indeed, but a viewpoint

backed up by Michael Bodouroglou, CEO

and Chairman of Paragon Shipping, who

pointed to the inflexible nature of the Greek

governmental system as being behind the

current crisis and potentially forming a

barrier to its future resolution.

“I am less optimistic today than I was a

year ago and that is because the necessary

reforms for the economy are not taking place

at the pace they should be taking place. I

would like to see happen, whatever has been

agreed under the loan agreement between

Greece, the EU and the IMF. I would also

like to see a reduction in the size of the cost

of the state because this is what caused the

problems in the Greek economy. Greece’s

economic problems were due to the

government and the Greek banking sector is

in turmoil because of the government.

“The public sector is too big and too

costly for the economy. There are also a lot

of inflexibilities built into the economic

model; we have a lot of closed professions

and a very inflexible labour law. People are

not changing their ways because they are

adopting a populist mentality. It will

definitely prolong the recovery and it may

put many things we have for granted at

risk,” warned Mr Bodouroglou.

He added: “I have no answer to the

theoretical question of what happens if

Greece refuses to comply with the

obligations it has under its Memorandum of

Understanding. What will the lenders do

and what is the cost? They can say they will

not give Greece the next instalment of the

finance package which would mean the

Strong nervesstrong reserves

mean

Harry Vafias, CEO, StealthGas

REGIONAL FOCUS

24 SHIPMANAGEMENT INTERNATIONAL ISSUE 31 MAY/JUNE 2011

GREECE

24

REGIONAL FOCUS

25MAY/JUNE 2011 ISSUE 31 SHIPMANAGEMENT INTERNATIONAL

GREECE

2525

country lacks the liquidity to pay salaries.”

Is pressure being brought to bear on

the government to sort it out? Michael

Bodouroglou again: “In my view not

enough. There are too many ifs and buts

and too many complexities. Public transport

for instance should be opened up to new

entrants; pharmacists should be allowed to

open up for more competition and even as

we speak, law firms are not allowed and no

one can set up a collective of law firms.

University students also have free meals

and accommodation irrespective of a

family’s income.”

Evangelos Pistiolis, CEO of Nasdaq-

quoted Top Ships, added to the debate: “If

the question is, could more be done to

improve the situation, then the answer is

yes, there are hundreds more things that

could be done. But talking far away from

the elected chair is always easier than

talking when you are in the elected chair.

There are definitely more things to be done;

one line of action would be to cut the

number of civil servants or at least cut their

benefits and bonuses. Some staff receive

bonuses for turning up on time when you

would have thought that this was part of

their agreement with their employer,” he

said.

“We might be hard critics of the

government sometimes, but I guess they are

trying to clean up the ‘30 year’ mess which

isn’t easy,” he added.

Two years ago Greece’s new centre

left administration wasted no time in

introducing radical proposals to reform and

administrate the shipping sector. In what

was seen by many as meddling, the former

shipping ministry was broken down into

two separate components. The major part

was amalgamated into a new Ministry of

Economy, Competitiveness and Shipping,

the balance, largely concerning ports and

security, including the coastguard service

was attached to a new department within

the Ministry of the Interior. This change had

a limited timeframe with the government

performing an about face just under a year

later and forming the Ministry for Maritime

Affairs, Islands and Fisheries.

This initial decision to do away with

the Ministry of Mercantile Marine caused

consternation among the country’s owners

with many asking why the government

chose to mess with the one area of the

country that was performing well. Coupled

with concerns that the government may

change the current taxation system for ship

owners raised the possibility that some

Greek owners could relocate from Greece

in favour of more sympathetic fiscal

clusters.

Harry Vafias again: “I think that the

government has realised that Greek ship

owners are the only segment that brings

money into the country, the only segment

that invests in the country and the only

segment that does charitable work in the

country. I think, and it is my own opinion,

that it realises that if it annoys the ship

owners, then it will hang itself. On the

shipping side we do not think anything

drastic will happen when it comes to

regulation and taxes. However, there have

been a lot of changes, different taxes on

other businesses and on real estate. This is

important because a lot of ship owners are

also into real estate. If the trust is lost, we

will see in the next two years if shipowners

will decide to invest further in Greece or

stop and look abroad.”

But how has this uncertainty affected

the way Greek owners operate their fleets.

Not a lot, according to a number of owners

interviewed, especially when you consider

the international nature of the industry.

“Everyone is on the fence,” said

Basil Mavroleon, Managing Director of

WeberSeas (Hellas) and Project Group

Manager at Charles Weber in Greenwich,

Connecticut. There is money still to be had

and everyone is looking out there but if you

look at the inventory of tankers, this is very

small and prices have come off this year –

but not significantly enough to interest

certain people. There are a lot of sellers and

few buyers. So what will give here? I am

inclined to say the price will give. If you

buy a ship today, you are buying it for the

future because the current market does not

support the current prices.

“The container sector is another

story because they are buying future

newbuildings and fixing them out ahead as

there are operators who want these efficient

newer ships. As far as tankers and bulkers

are concerned, it will be a real challenge for

owners moving forward to maintain their

current position and to take advantage of

opportunities that may come along,” he

said.

“Owners are taxed in a number of ways

through other investments and activities

other than their international shipping

activities,” stressed Michael Bodouroglou.

It is my firm belief that a great part of the

success of Greek shipping is due to its

institutional status. Law 89, which was set

up in Greece a few decades ago, was the

cornerstone for the growth and success of

the shipping business. Not only is there no

reason to change that but I am very pleased

Shipping represents 6%of the country’s GDP and ata time when Greece’s GDPis reducing, you can seeshipping’s importance. Youare also talking about tensof thousands of peopleemployed in the sector andyou have a few hundredhigh net worth individualswho live and spend theirmoney here... Michael Bodouroglou,CEO and Chairman, ParagonShipping

“

REGIONAL FOCUS


GREECE

“

to see that Law 89 has been adopted by

most European countries through their own

tonnage taxes.

“Shipping is an international business

and in order for people to be successful in it

they have to be competitive. In order to be

competitive they have to be taxed in the

same way as they are taxed elsewhere in the

world. If Greek ship owners were to be

taxed any differently then they would be

forced out of business. Even though they

may want to be patriotic and not move out

of Greece, they would eventually be driven

out of Greece through their lack of

competitiveness. They have to continue to

enjoy the current status as we have been

very successful as a result. Shipping

represents 6% of the country’s GDP and at

a time when Greece’s GDP is reducing, you

can see shipping’s importance. You are also

talking about tens of thousands of people

employed in the sector and you have a few

hundred high net worth individuals who

live and spend their money here and invest

in the country in many other ways. If

Greece lost that it would inflict a big blow

on its economy,” Mr Bodouroglou said.

While Greece’s economic problems

may not directly impinge on its ship

owners’ ability to trade internationally,

sentiment is important – not only when it

comes to motivation of their office based

staff but also the, motivation of

international investors who some believe

may be losing interest in what was once

considered an attractive alternative to

traditional investment opportunities like

pharmaceuticals and real estate.

“I just came back from the US a few

days ago and it is really about convincing

people that when something bad happens

something good generally comes out of it,”

said Top’s Evangelos Pistiolis. “So when

ship owners lost market capitalisation and

shipping shares dropped, what is the good

thing that can come out of the situation?

Well we can buy ships for 50% less than we

bought for years and years,” he said.

“When you buy ships today you will

make money in one, two or three years, it

doesn’t really matter. You will make money.

It is all about being financially healthy

otherwise you can’t take advantage of the

low prices. What matters is you have to

prepare your company properly for when

the upturn comes and when the market

changes.“

Three days after interviewing

Evangelos Pistiolis, Nasdaq-listed Top

Ships announced it was looking to raise

over $100m from its first equity issue since

the onset of the financial crisis. It said it

would use the cash from the fundraiser to

pay down debt and fund ship purchases,

potentially in the containership sector. The

company said it would issue stock worth

$115m, but just over $13m would be eaten

up by registration fees.

When asked by SMI what his fleet

strategy would be, Evangelos Pistiolis said:

“We did not raise money after Lehman and

this was a significant achievement when

you think that most of the other companies

if not all of them, raised a lot of money, not

for future healthy market investment but to

cover investments from the past. It is not

about criticising others but it is about the

facts of what happened at the end of 2008.

I was the only one who sold 18 big ships in

the first part of 2008 and I was the only one

who chartered the remaining 13 to 14 ships

out for five to 10 years, a month before

Lehman. Everyone else was ordering when

I was selling. We even reported profits in

2010 without raising money and without

restructuring, again one of very few

companies who didn’t restructure our

loans.”

But how are the public markets

viewing shipping? Is there still the interest

and excitement in the sector? “No the vast

majority, more than 90% of investors, hate

it said Harry Vafias. Some companies need

to raise money to bridge loan covenants and

if you need the money you have to sell your

shares at any price. If they don’t need the

The container sector isanother story because it is buying futurenewbuildings and fixing them out ahead as there areoperators who want theseefficient newer ships. As far as tankers and bulkers areconcerned, it will be a realchallenge for owners movingforward to maintain theircurrent position and to takeadvantage of opportunitiesthat may come alongBasil Mavroleon, ManagingDirector, WeberSeas (Hellas)and Project Group Manager,Charles Weber

““

REGIONAL FOCUS


GREECE

money they wait for better times to raise

capital. Raising money now is not a good

idea. You have to have a very serious reason

to raise money because ship values are low;

investor confidence is low and there is a

worldwide crisis in the majority of shipping

segments so why would you want to raise

money now.

“We are the only Greek group with 72

vessels and 90% period coverage which is

very important. It shows we don’t like to

gamble and that we like guaranteed inflow

of money so the shareholders of both our

private and public companies know what is

coming in. The banks are happy because

they know that whatever happens we are

going to make ‘x’ amount of money and we

are happy as managers and owners that we

can sleep well at night: we know our

obligations to the banks and suppliers are

taken care of. You may miss the peaks but

you also miss the troughs such as the ones

we are seeing now.

“There is no big strategy because no

one knows when we will be out of this

misery. I am very pessimistic about the dry

side which is why we sold 14 of our vessels

during the last three years. We are only

down to two new capes, again both on

period. On the tanker side all of our 21

crude and products tankers are on long-term

three to eight year bareboat charters. On the

gas side we have 70% period coverage. In

StealthGas’ case we never issued cheap

equity, we do not have to raise money as we

have a very low debt to values ratio and the

important thing is that StealthGas’ segment

is the only segment with a negative

orderbook which means that more ships are

reaching 20 years of age than are being

delivered, therefore the fleet has a negative

growth. In effect, more ships are being

scrapped than are being delivered.

John Phostiropoulos, Vice Chairman of

Almi Tankers, also commented on his

company’s strategy during the tough times:

“What was key to us was my father’s

decision not to order during the boom times

and not to buy second hand tonnage during

the boom. So when the crisis hit, we didn’t

owe anything to anyone or have any

expensive newbuildings to service. It is

all about timing. From an operational

perspective, it is all about quality and

reliability because shipping is really a

commodity.”

Mr Mavroleon added: “The public

companies exist for a reason and that is to

have access to capital. Pubic companies

will withstand difficulties longer because if

it is your personal wealth you will make a

decision at a certain point to cut and run, if

If the question is, couldmore be done to improve thesituation, then the answer isyes, there are hundreds morethings that could be done. Buttalking far away from theelected chair is always easierthan talking when you are inthe elected chairEvangelos Pistiolis, CEO,Nasdaq-quoted Top Ships

“

“

REGIONAL FOCUS GREECE

things are that bad. Public companies have no

choice. The Greeks are the cleverest. You

have to ask yourselves, why did the Greeks

re-establish their dominance of the world

of shipping in tankers and dry cargo in

particular; they were the first to recognise in

the late 1990s that the price of newbuildings

had never been cheaper and that the price of

money had also never been cheaper.

“Greece’s control of the dry cargo fleets

is the biggest they have ever had and they are

the best placed to survive what is coming,

there is no question about that. Times ahead

will be tough but it is not as if shipping has

not experienced this before. The difference

this time was the unprecedented length of the

good market. If you look at 2000 to 2008, we

had two blips in eight years; the rest of the

time ship owners were making a very good

return. Normally in shipping owners would

struggle for 10 years and then have six

months or 12 months of good times to get

them through the next 10 years. And that was

the challenge. The Greeks are survivors.

They backed away from the business in the

1990s because there was a 5% return on

business maybe at a huge risk but when those

things came into balance in their view – price

and price of money – they went in head first

and hence they were taking delivery of cheap

ships,” Mr Mavroleon said. �

Athens-based tanker manager

Almi Tankers has underlined

its commitment to quality

management of its fleet by employing

double crew complements of its senior

sea-going staff on its ships at an

investment cost of $3 million so its

senior officers are sufficiently trained to

take over command of its fleet of 12

newbuildings when they are delivered

from DSME in Korea.

Almi currently has two modern

LR2s trading on the water and is due to

take delivery of at least five of its

newbuildings in 2012.

“We have double complements

onboard our vessels,” said Capt

Panayiotis Drosos, CEO of Almi

Tankers “which means we have two

captains, two chief engineers, two chief

officers, etc. As a result the crew will

have had one year with us before taking

over control of the newbuilding. This is

a strategy of ours and we are proud to

invest about $3m but you cannot enter a

new industry and run a fleet of 14

tankers without having people. It is not

only the salary that counts, it is how you

treat people and how you communicate

with people and how you respect people

which is why I believe we have a very

good team. We have developed a team

with the same beliefs,” he said.

Almi employs Ukrainians and

Filipinos and will use Croatian officers

and Filipino ratings on the newbuildings.

It has also followed a certain industry

trend by installing total broadband

communication on the first of its 14

vessels. At the time of writing, the

Almi Spirit was being fitted with the

appropriate equipment to allow its crew

to use Facebook and to web chat with

their families at home.

Captain Panayiotis Drosos,

CEO, Almi Tankers


REGIONAL FOCUSGREECE

With the inauguration of the new

Ministry for Maritime Affairs,

Islands and Fisheries in autumn

2010, the Greek government was keen to

emphasise its commitment to the maritime

sector and pledged a renewed focus on port

modernisation, expansion of the Greek ship

registry and cruise market growth, in

addition to defending the income of Greek

fishermen and efforts to improve naval

education. This broad focus is in line with

the EU blueprint for shipping, apart from the

‘islands’ aspect, which is quite unique to

Greece, particularly as the archipelago

consists of 6,000 islands (227 of which are

inhabited).

With such a strong yet extensive remit

for maritime causes, Greek stakeholders may

worry that the government has placed all of

its nautical eggs in one basket with this new

Ministry. Ship owners have expressed

concerns that by accompanying commercial

shipping matters with a broader sphere of

responsibility, their interests may be

overlooked.

However, according to the Minister for

Maritime Affairs, Islands and Fisheries

Yiannis Diamantidis, owners are a distinct

focus of his concerns and need not fret that

their current tax privileges could be revoked:

“In the Greek shipping industry, we have a

specific tax situation. Greek shipping brings

in over $18 billion every year. We realise this

revenue is from international exchange and

if we taxed ship owners like other citizens,

this would not enforce the economy but

create a reverse situation. That’s why there is

no consideration about changing their tax

situation – there will be no change.”

Mr Diamantidis may have only been in

the job for nine months but he has been a

member of Parliament since 1989 and is a

member of the socialist PASOK party. As he

told SMI, he understands the importance of

the Greek shipping industry and is keen to

solve relevant problems: “The Greek industry

is powerful and the goal of the government

is for it to maintain this status. The

government, in co-operation with the Greek

union, ship owners and organisations

connected to the industry, are in co-operation

with the International Maritime Organization

and are trying to work out issues such as

climate change, pollution and piracy. This

effort will enforce the Greek maritime

industry and lead to development for the

cluster.”

Describing the importance of working

to solve the problem of piracy, Mr

Diamantidis added that regarding the ships

held in Somalia, many belong to Greek

owners or are Greek flagged. He said that

considering the Greek flag’s position on not

allowing arms onboard, his favoured

solution would involve more support from

navies of the world and said: “Ministers are

concerned we should not bring a situation

of war but unfortunately, navies may not be

effective in too large an area. Unfortunately,

the alternative solution of not passing

around Africa is too expensive.”

When asked about his plans to

encourage more young Greeks to take up

shipping as a career, Mr Diamantidis said

that although shipping is the most powerful

industry in Greece, young people need to be

more aware of the maritime sector. He

noted that to ensure the continued success

of industry “we don’t just need iron to build

ships but we must build the numbers of our

people too”. In order to ensure a high

quality naval education is available for

young people wanting to take on a career in

shipping, the Ministry is planning a new

law to “emphasise economic growth in

schools for seafarers”.

He added that if the Union of Greek

Shipowners would like to assist with these

plans, the Ministry may create private

schools for seafarers where a high level of

competition would be enforced. This law,

which is currently in its first phase has still

not yet been named, but may be referred to

as an ‘upgrade of naval education’. It is

expected to come into force in the summer.

Describing his focus on growing the

Greek fleet, the Minister added: “The Greek

flag is powerful but is not a flag of

convenience. We would like to enforce our

flag and retain this situation – all decisions

of the Ministry are helping to do that in

agreement with the unions. There is a

peaceful cooperation with the unions and if

GREECEREGIONAL FOCUS


I will nottax Greek ship ownersIn an exclusive interview with SMI, Yiannis Diamantidis, Greek Minister of Maritime Affairs, Islandsand Fisheries assures Greek owners that their current tax status will not be compromised

If we taxed ship ownerslike other citizens, this wouldnot enforce the economy butcreate a reverse situation.That’s why there is noconsideration about changingtheir tax situation

“

“

there is a disagreement, we will look for the

best solution together.”

He also noted the importance of

boosting the cruise market at this time:

“Now with the cruise industry we have a

huge perspective – we grow and enlarge our

ports. Greece has thousands of islands

which are tourist destinations and require

cruise vessels to take people there. My

personal goal is to make the Greek shipping

cluster the largest in the Mediterranean,

with focus on laws, education, ports,

etcetera. We are also working to find all

possible ways for Piraeus to become the

largest port in the Mediterranean.” A bold

statement indeed!

When asked how he intends to build on

the port’s status in this manner, he

explained that a new law focused on the

dynamic between the government and

Greek ports will assist in putting port

growth to the front of the Ministry’s

agenda.

He added that following an agreement

with the Chinese Government-owned

shipping line COSCO, new port

developments will also form a major aspect

of the Greek Government’s strategy: “On

one side of Piraeus there is a large

commercial space which in cooperation

with COSCO, will be developed and

upgraded. An agreement has been signed

with COSCO and there is the possibility to

make other significant agreements with

them in other locations and for other

activities.”

This agreement follows an official visit

to China where Mr Diamantidis met with

Weng Mengyong, Deputy Minister at the

Chinese Ministry of Transport, with the

aim of forging closer transport links

between the two nations.

Both parties also made a commitment

to strengthen the Memorandum of

Understanding concerning maritime affairs

which both governments signed in June

2010. With an action plan focused on state

and non-state shipping for both nations, in

addition to cargo handling, both countries

will improve their hub/port cooperation

and will work to obtain funding for the

construction of more Greek vessels in

China. The creation of a $5bn (€3.6bn)

development fund to assist with the finance

of these vessels has also been part of

China’s agreement with Greece.

Noting the reaction of Greek unions

to this agreement, Mr Diamantidis

acknowledged there had been some initial

objections but he confirmed that at this

time, the unions are on the Ministry’s

side: “When it was first announced, there

were of course some reactions from the

unions but now everybody understands that

this decision will assist in creating new

jobs and in building on the Greek

economy.”

Mr Diamantidis added that so far,

his time in the role has been a valuable

experience and concluded that the

wellbeing of the Greek shipping industry

is his first priority: “I enjoy finding

solutions and building relationships with

maritime quarters. I hope by the end of

my tenure, I will have done the best by my

people.” �

REGIONAL FOCUS


GREECE

33

With almost 7,000 staff worldwide with far-reaching

responsibilities, including traditional classification

services, consultancy, advanced engineering, expert

advice and certification, Germanischer Lloyd has retained its

position as one of the top five classification societies since it was

founded as a non-profit association in Hamburg by an assembly of

600 ship builders, owners and insurers in 1867.

Born in the city of Essen, in Germany’s Ruhr Region, Dr

Hermann J. Klein, Member of the Supervisory Board at

Germanischer Lloyd, studied Mechanical Engineering and Marine

Engineering at the Technical University of Hanover and holds a

Doctorate in Engineering from the Technical University of

Hamburg. Prior to joining the Germanischer Lloyd group eight years

ago, his roles included Director of Design at the Bremen Lürssen

shipyard and Chairman of the MWB Shipyard. In addition, Dr Klein

has undertaken positions as a private lecturer at German universities

and is Chairman of the Executive Board of the German Society for

Maritime Technology.

With a specialism in addressing the challenges of contemporary

shipbuilding technology, Dr Klein, who is based at the company’s

head office in Hamburg, told SMI that nowadays, shipping

companies expect an extensive service from classification societies

in line with modern environmental concerns and he noted that

Germanischer Lloyd has evolved to suit this: “The market has

changed. Today it’s not so much about tankers, bunkers and

container vessels, it’s much more about new topics such as energy-

driven vessels, which is an interesting alternative because LNG is

much cheaper than normal heavy fuel oil today or other kinds of

vessels like wind farm erection vessels. The environment is much

more on the agenda than ever before.”

Dr Klein explained that the US market, where his company

currently has 1,200 employees, has been particularly responsive to

the environmental facets of the Germanischer Lloyd business model

and he said American stakeholders have embraced his company’s

focus on renewable energy and erection vessels for offshore wind

farms: “I think the most important issue is that really, we are a full

service provider and whatever kind of provision you require,

whether it is classification, or a consulting service for vessels,

platforms or wind power stations, we can deliver this. This is most

important. We are also focusing on energy efficiency, especially for

the new, future-orientated vessels and everyone understands that this

is becoming more vital because it has such a great cost incentive.

The heavy fuel oil price has risen to around $600 per tonne now and

then we have the additional cost on the emissions side which is the

issue we are focusing on right now.”

So, as Germanischer Lloyd steadies its focus on environmental

business, what are Dr Klein’s hopes for the second half of 2011? He

noted that his first thoughts are with the Japanese people following

the earthquake crisis and problems caused by the damaged nuclear

power station.

“For Germanischer Lloyd, I hope that the market continues to

recover, especially on the newbuilding side where it has started to

recover already. The market has improved but on the other hand, I

think we have to be realistic. I don’t think we will see the same

market situation which we had in 2007 and we will not see such a

huge amount of newbuilding orders as we did four years ago – it

will be on a lower level but there will be a perceivable difference to

the market,” he added.

Dr Klein concluded by expressing his concerns over the need to

attract more young people to shipping: “My impression is that it’s

not easy to get new, young people into industry. We have to talk

much more about the industry – it’s an interactive industry and

worldwide it’s a maritime family where everyone knows everyone

and there are good opportunities. I think right now there are many

new students of naval architecture, especially in China and South

Korea but not so many in the US or Europe. As an industry, we have

to be much more visible to the public worldwide. We have problems,

including piracy but the general public doesn’t really recognise this

– we have to solve this. We have to be much more aggressive as an

industry but this is something we are not so well-trained in!” �

Dr Hermann J. KleinMember of the Supervisory Board atGermanischer Lloyd

A different class

INSIDER SHIPMANAGEMENT


INSIDER



Asubtle change in European

importing patterns is having a

major impact on the breakbulk

business carried out at Europe’s leading

port.

Rotterdam’s container traffic

dominates its public profile – a fact that is

unlikely to change. However, a shift is

occurring in the less celebrated breakbulk

market, as shippers who previously only

imported raw materials switch to semi-

finished products, reflecting a sea change

in the world’s manufacturing base.

According to Port of Rotterdam, which

is the leading European port in the steel

production supply chain, there is an

increasing trend among those previously

importing iron ore, for example, to also

bring in semi-finished products such as

slabs and billets.

While overshadowed by larger

container traffic and chemicals logistics

flows, Rotterdam’s breakbulk business has

exhibited remarkable growth in the last two

years, representing an important niche for

the port.

The basis for this success lies in the

major investment program which was

launched four years ago. Over €100

million was spent by the port authority and

stevedoring companies to increase steel

handling capacity; both infrastructure and

handling equipment. This investment

programme is described by Bart-Luc Olde

Hanter, Port of Rotterdam Business

Manager Breakbulk Shipping & Steel, as

the ‘Put your money where your mouth is’

campaign.

“The intention was to increase

capacity from 4.5m t to 12.5m t by 2015,”

said Mr Olde Hanter. “Given these

investments and our strategic location,

there is no reason why we cannot achieve

our ambition of challenging and ultimately

overtaking competing ports when it comes

to steel exports.”

Beyond creating storage and handling

capacity, and investing in hardware to

handle any type of steel in any quantity

(including slabs, billets, plates, pipes, tubes

and stainless steel products), the strategy

is being built on attracting new breakbulk

shipping services and an over-arching

drive to improve the Rotterdam ‘steel

cluster’ for shipping, trading, forwarding

companies, brokers and stevedores.

The fruits of these efforts are tangible:

over the last year alone, seven new

partnerships have been secured with the

world’s leading shipping companies to

set up new (semi) liner services to and

from Rotterdam. Ship operators are also

playing their part in terms of delivery. The

port’s new breakbulk shipping connections

include deep sea services from COSCO

Shipping (China), covering China, the

Middle East, India and the Mediterranean,

while Chipolbrok (China) has brought

services covering China, India, Antwerp,

Rotterdam and Houston. Deep sea

semi -liner services now include BBC

(Germany), covering the Andino service,

and Onego Shipping (Netherlands/Russia),

covering South America, the United States,

northwest Europe and Russia.

Also critical are short sea services that

include SCA Transforest (Sweden) linking

Sweden and Rotterdam, BroIntermed

(Italy), covering Rotterdam, North Africa

and Italy, RMS (Germany) linking

Duisburg, Rotterdam and Norway and

Nednor of the Netherlands, covering

Iceland, Norway and Rotterdam.

Further afield, companies in the US,

Russia, China, South Africa, South America

and India are also interested in developing

extra steel services via Rotterdam. The list

includes Fednav, Clipper Steel, Grieg Star

Shipping, Oldendorff, Gearbulk, Spliethoff,

Atlantic Ro-Ro, North Western Shipping

Company, Hanssy Shipping, BBC,, MACS,

Coscol, CCNI and Shipping Corporation of

India.

Furthermore, cooperation is being

sought with world’s largest steel players to

work towards creating more value for steel

business. Exemplary has been the port’s key

role in the new partnership between logistics

specialist C. Steinweg Handelsveem B.V.

and Thyssen Krupp. Thyssen Krupp Brazil

has increased its production capacity for

slabs significantly. For import into Europe,

Rotterdam was selected as the port of call. A

long term commitment has been given by

Thyssen Krupp, which enabled both

Steinweg and the Rotterdam Port Authority

to make dedicated investments in equipment

and facilities.

Now Rotterdam is looking to further

improve competitiveness by implementing

cost efficiency measures, including finding

return cargo, coordinating barge (liner)

connections to Duisburg with Danser,

Rhenus and Interrijn, and enhancing rail

links with Deutsche Bahn. Improved

trucking options with P&O Ferrymasters are

also part of the mix, with 650 coil/steel trailer

moves envisaged by the end of 2011.

Improving the ‘steel cluster’ will

encompass attracting trade offices and

creating a steel service centre. For this

reason, talks are in train with companies

including the large European and Chinese

steel traders.

These may seem idle claims, but today’s

focus of Rotterdam’s overall breakbulk plan

is to improve the port’s steel cluster based on

hard facts related to Rotterdam’s cost

effectiveness for shipping companies, its

competitive stevedoring costs and its port

costs’ comparison with competitors. �

BUSINESS OF SHIPPING

36

Rotterdammounts steel challenge

The most significant warning yet that

safety levels onboard ship are

suffering at the hands of the global

drive towards a cleaner environment, has

been delivered in no uncertain terms by the

head of one of the world’s leading

classification societies.

Indeed, so concerned is DNV President

Tor Svensen that he has called for a

re-establishment of the balance of the

so-called zero tolerance relating to the

environment with a zero tolerance relating

to the loss of life at sea. As if that was not

enough, he also said greater attention

needed to be focused on training standards

and competency levels onboard ship,

claiming that in some instances, training

standards were not good enough and

were proving ineffectual.

“Year on year

improvements in ship

safety are now

turning into a

negative

trend.

This is extremely worrying and requires a

stronger focus on competence development

both onboard and onshore,” Tor Svensen

claimed.

“Statistics show that the accident

frequency has started rising from a historic

low. This trend is supported by increased

pay-outs from the insurance companies.

Technology, rules and compliance will

never bring us to the expected level of

safety without focusing more strongly on

the human element,” he said.

“Historically, the safety focus on

shipping has been on technical

improvements. Most employees dealing

with the operation of the vessel in a

shipping company have a technical

background. Audits and inspections are

strongly focused on technical compliance.

This technical focus has brought major

improvements to ship safety. Now, is the

time to increase focus on the soft issues.

“The improvement potential is great,”

Mr Svensen claimed. “DNV has made

some observations when performing audit

and projects for shipping companies. These

show that much of the training offered

could be more effective with more time

spent on actual training of higher quality.

Shipping companies struggle to deliver

training on soft skills, and few companies

measure the effects of their training.”

Possible initiatives to improve

safety level include safety

culture

mapping, crew resource management

training, and safety performance

monitoring through leading and lagging

indicators.

“Public and regulatory focus has

moved towards environmental risk and

away from human safety and personnel

risk. We need to re-establish the balance

between safety and environmental risk.

Zero tolerance to loss of human life is

equally important as zero environmental

damage,” Tor Svensen stressed.

“Half of today’s accidents are still

being caused by navigational error and

there have been no improvements on this.

We used to have a tanker accident every 10

years but now it is every 58 years. So while

a tanker used to have an accident twice in

its lifetime, now it is every second ship that

has a single accident in its lifetime. But still

half the accidents are caused by navigation.

When you look at shipping companies,

training is not really good enough and is not

effective. We don’t spend enough time on

training and in delivering the soft skills and

hardly anyone is measuring the effect of

this,” he said.

“You still have to ask the question why

are we having so many accidents

due to mishaps?

Safety is as importantas the environment

MARKET SECTOR CLASSIFICATION


Tor Svensen, President of DNV

Drawing an analogy with the airline industry,

Mr Svensen said pilots were tested every six

months on a simulator. “But how much

simulator training do we have in shipping? It

is very limited and we need better testing of

competencies onboard ship. But there are

huge variations in the quality of training. We

can also better develop corporate safety

cultures as well as crew and bridge resource

management? We need to develop a safety

dashboard in the company to have leading

and lagging indicators on safety. All these

things will drive towards better quality

training.

“Today, if you are the master or chief

officer of one particular ship type with pretty

basic equipment onboard and you go on to

another more sophisticated vessel with totally

different equipment, there is no requirement

that says you have to go through additional

training. You just have a brief hand over

period. But if you were a pilot you cant jump

from a 737 to an airbus without full training.

So we need to start looking beyond

compliance,” he stressed.

He added: “If you look at everything that

has happened over the last 12 months – we

have gone from disaster to disaster and every

disaster has been worse than the one before

ending up with the Japanese tsunami. Until

the world slows down or stops consuming at

the rate it is consuming, this problem will not

be shipping’s problem; it is the world’s

problem and the only way this will go away is

when globalisation and the development of

the world comes to a pace that shipping can

cope with but in a sustainable manner. And to

me that is the nub of this problem.”

MARKET SECTORCLASSIFICATION


Class societies play an important

role in driving ship safety. Do you think

the time has come for the regulators to

appreciate and understand the true role of

class?

We always need to sell our story

better because corporate memory is

always short. At the same time you need

to be modern in your thinking in order to

do the right thing. We also have to be

humble and be ready to understand what

it is that the authorities want to do. We

need to understand what is their goal.

We can learn from the authorities and the

authorities need to learn from us. Our

goal of impartiality is important because

we do find ourselves in a dialogue with

authorities not as an interested party but

as a party with which the authorities can

actually have a debate.

ON THE

RECORD

A.

Thomas Thune Andersen, Chairman ofLloyd’s Register of Shipping

Q.

ClassNKand IBM Japan

have announced a new

joint project to develop

the world’s first archive centre to meet new

requirements included in the International

Maritime Organization’s (IMO) new Goal

Based Standards (GBS).

The new centre, which will take

advantage of cloud-based infrastructure

developed by IBM Japan, will be designed

to safely store the Ship Construction Files

(SCF) that will be required by the GBS, as

well as meet the rigorous requirements for

both data security and accessibility laid out

by the IMO’s Maritime Safety Committee.

As part of the new GBS, which will

enter into force in 2016, all newly-built

vessels will be required to maintain

copies of a Ship Construction

File (SCF) both onboard and at

an onshore archive centre. As

the SCF will include vital

information related to ship

safety as well as sensitive

intellectual property

related to the ship’s

design and construction,

ensuring both accessibility

and security of the SCF data

will be paramount in the

development of these new archive

centres.

According to ClassNK Chairman

and President Noboru Ueda, these

requirements mean that classification

societies will have an essential role to play

in the development of the new archives.

“As independent, third-party technical

organisations, we are uniquely suited to

developing and maintaining the archive

centres required by the GBS,” said Mr.

Ueda.

He added: “As part of our electronic

plan approval activities, we have already

developed the procedures and systems

necessary to ensure the security of vessel

plans, and earned the trust of the world’s

shipbuilders. The development of this new

archive centre is the next logical step in our

efforts to better support the wider maritime

industry.”

In line with the GBS, however, new

standards for archive centres will also need

to be established, and a new set of industry

guidelines developed by CESA, ICS,

INTERCARGO, INTERTANKO, BIMCO,

OCIMF, and ICS for the new archive centres

was submitted to the IMO at the 87th session

of the Maritime Safety Committee in

February of 2010. According to Mr. Ueda,

addressing the practical and usability

requirements for the new archive centres was

what led ClassNK to IBM. “Our goal in

developing the world’s first archive centre is

to set a new standard for the entire industry,

and with IBM we have found a partner who

can help us achieve just that.”

In addition to the development of the

new archive centre, ClassNK and IBM Japan

are also working together to develop new

software to support green ship recycling.

By collaborating on these projects,

ClassNK is able to combine its extensive

experience in the maritime industry, with

IBM Japan’s practical experience and

technical know-how in IT infrastructure

and cloud computing. Through its

partnership with ClassNK, IBM Japan

hopes to contribute to the continued

development and growth of the entire

maritime industry. �

MARKET SECTOR CLASSIFICATION

Cloudcomputing


MARKET SECTOR COATINGS

Anext generation tank coating has

been unveiled in the chemical

tanker market which promises to

cut cleaning times and costs and increase

the flexibility and volume of cargoes

which can be carried.

Downtime, as everyone knows,

means loss of income so new products

which enable ships to get back out to

sea quickly are being heralded as an

important investment.

So says International Paint which

recently unveiled its latest chemical

tanker cargo tank coating which enables

ships to carry all of the cargoes that the

standard epoxy phenolic technology can,

plus a further 25% of the large volume

cargoes that it cannot. It also has over

60% fewer cycling restrictions.

“Many cargoes previously classed as

easy chemicals are now classed as high

specification chemicals , so the challenge

is becoming greater,” said Andrew

Hopkinson, International Paint’s Business

Development Manager.

The main traditional ‘industry

difficult’ cargoes include ethylene

dichloride, styrene monomer and

benzene.

Up until now, coatings used have

been zinc silicate and the largely popular

epoxy phenolic but both have limitations

in that they absorb and retain cargo

resulting in lost earning potential as

lengthy cleaning processes are needed to

eliminate traces of the previous cargo.

For example, a tanker carrying

methanol from the Middle East to the Far

East and then carrying clean petroleum

products back into the Middle East would

need seven to 10 days of cleaning in

between if it had an epoxy phenolic

coating.

“From a paint company’s perspective

this phenomenon is putting a level of

stress on the coatings so we normally

evoke a recovery period, having carried

one of these cargoes, which usually takes

about 10 days,” explained Mr Hopkinson.

“If you cannot carry another

aggressive chemical for 10 days it clearly

affects the operational flexibility for the

owner.

“Cargo retention causes the cleaning

headache because we have to run the

cleaning machines long enough to

remove that retained material. If we don’t

spend the time and effort and costs,

in terms of bunker fuel we are

burning, we run the risk of contaminating

the subsequent cargo,” stressed Mr

Hopkinson.

Stainless steel tanks, which do not

require coatings, are an alternative option

as they do not absorb or retain cargoes

but they have become extremely

expensive, often to the point where it

is uneconomical for them to be used.

Indeed, stainless steel prices increased

New coating increases

cargo flexibility


four-fold from 2002-2007 and have stayed

at that level since.

Mr Hopkinson again: “We have

certainly seen, over the last few years, the

trend back towards coated mild steel

tonnage. Clearly owners and charterers

would like the attributes that stainless steel

offers but they want it as a cost-effective

coating solution.”

Interline9001, the latest coating

technology from International Paint, is a

bimodal epoxy coating which works with a

special combination of low and high

molecular weight polymers creating a

loosely bound, but highly cross-linked,

flexible network chain on ambient curing.

The result, said Mr Hopkinson, is a highly

chemical resistant film while maintaining

flexibility.

“It eliminates the limitations of zinc

silicates and the Achilles heel of epoxy

technology. You get the best of the epoxy

world without the limitation of absorption,”

he added.

“Flexibility is important because

vessels and their tanks are getting bigger.

Vessels are subject to flexing the bigger

they get and so the ability of the coating to

resist cracking on welds when the vessels

flex is very, very important.”

Along with greatly improving the

downtime, Mr Hopkinson said the actual

costs associated with cleaning are also

significantly reduced with Interline9001.

“The cleaning time is reduced by up to

70%. Because you don’t have to remove the

cargo from within the paint film, the

cleaning process essentially becomes a

surface cleaning prep. We also have a

significantly easier to clean surface.”

The company took the coating to a third

party tester – L & I Maritime (UK), an

industry cleaning consultancy. With one

full cleaning cycle following a styrene

monomer cargo, there was no detection of

the cargo and the same result was achieved

on a tank that had contained ultra low

sulphur diesel. With an epoxy phenolic

coating the cleaning cycles would have to

run many times before no cargo could be

detected.

MARKET SECTORCOATINGS

Many cargoes previouslyclassed as easy chemicals arenow classed as highspecification chemicals , so the challenge is becominggreaterAndrew Hopkinson,International Paint’s BusinessDevelopment Manager

“

“

The savings in fuel costs with the new

coating has been put at around $70,000 per

vessel.

International Paint is already in

contract negotiations for 14 vessels under

seven different companies – six are

newbuildings and the rest are for

maintenance and repair. And with the

chemical carrier market doubling over the

last decade with significant newbuild

activity and larger ships, the company is

hoping to achieve even more growth.

Mr Hopkinson estimates there are

currently about 7,000 chemical carriers in

the market – 4,000 chemical tankers and

3,000 product vessels – with a further 800

to 900 currently in production for each

sector.

He believes the new coating will hit

both newbuild and maintenance and repair

markets as vessels coated with epoxy

phenolic coatings in 2003/04 would now be

due for maintenance and repair.

“We also expect more orders to come

in for newbuilds over the next 12 to 18

months,” he added. “The projected growth

for the chemical market is 6 to 8% year on

year.”

Although Interline9001 comes at a

price – up to three times more than the

selling price of an epoxy phenolic coating –

Mr Hopkinson claimed payback would

come as soon as between six and 12

months.

International Paint also expects the

coating to last twice as long as an epoxy

phenolic coating, which usually has a

lifetime of about seven and a half years.

“It is still extremely competitive

compared to the price of stainless steel,”

he said.

However, Eddie Bucknall, Technical

Director for Cypus-based Columbia

Shipmanagement said his company still

preferred to use stainless steel tanks for the

more difficult cargoes.

“We do have tankers with coated tanks

for what I class as easy chemicals. All of

our more difficult chemical tankers, of

which there are about 10, have stainless

steel tanks. Stainless steel is the most

expensive but it’s the easiest to clean form

of coating.”

He did agree that tank cleaning can

pose a headache, but only if coatings were

not maintained well.

“If your coating is in good condition

the tanks are very easy to clean, but if the

coating starts to break down you get

problems. It is essential that the coating

remains intact because if it does not cargo

can get trapped. Minute contamination can

wreck a cargo.”

He said Columbia Shipmanagement

did keep an eye on the coatings market and

what was becoming available. However, he

said the company would not want to go

about changing coatings on existing ships.”

“With a cargo coating, once you have

chosen a coating at newbuilding you are

really stuck with that for the rest of the

ship’s life. You don’t want to change the

coating as it becomes too expensive and too


If your coating is in goodcondition the tanks are veryeasy to clean, but if thecoating starts to breakdown you get problems.It is essential that thecoating remains intactbecause if it does not cargocan get trapped. Minutecontamination can wrecka cargoEddie Bucknall, TechnicalDirector ColumbiaShipmanagement

“

“

complicated to blast it all off and start

again.”

He said the cost issue of the stainless

steel was irrelevant as the chemical carriers

were expensive vessels anyway and quality

needed to be invested in.

However, Mr Bucknall did not rule out

the possibility of using Interline9001 in the

future.

He said: “It definitely would be

popular, if it works. We do look at new

coatings and if we were talking about

newbuildings we would look at it.

“If the tanker was carrying easy

chemicals, we already have a very good

experience with International Paint and its

cargo tank coatings – they are excellent and

we have no problems at all – but if the

vessel was going to carry more difficult

chemicals I would seriously have to look at

whether to use a coating or stainless steel.”

The cost of fuel is the largest variable

in the operational budget in the marine

industry and as with Interline9001 cutting

cleaning bunker fuel costs, many

companies are tapping into the ‘greener’

coatings market to reduce fuel and,

subsequently, environmental costs.

Netherlands-based Sigma Coatings

says fuel consumption is set to rise by about

117m tonnes by 2020, meaning a total cost

increase for global shipping of $60bn.

Longer range scenarios also show that

by 2020, in the absence of policies, CO2

emission from international shipping may

grow from 1,120m tonnes in 2007 to

1,457m tonnes.

In response to the financial and

environmental challenges, Sigma Coatings

launched its new coating, Sigmaglide 990,

a third generation fouling-release product.

Sigma says its pure silicone topcoat reduces

frictional resistance to the point where fuel

savings of a guaranteed 5% can be made.

Sijmen Visser, Sigma Coatings’ Global

Segment Manager Marine – Maintenance

and Repair, said it was vital to look at fuel

costs and ways of cutting back on the

amounts used within the shipping industry.

“With conditions improving within the

global economy, and the prospects of

continued growth in global trade, it is

foreseen that fuel consumption will

increase in the coming decade. Carbon

dioxide emissions will also develop at a

comparable pace.”

Since the launch of the Sigmaglide

system, more than 200 vessels have been

coated ranging from static vessels and

shuttle tankers to high speed ferries.

Another company making waves in the

greener coatings market is Gibraltar and

UK-based Brunel Marine Coating Systems.

Its EnviroMarine hull coating has been

around for over a decade now and was

the first and only hull coating to be

approved and certified by DNV as eligible

for a subsidy from the Shipowners’

Environmental Fund, due to its green

credentials.

While the industry is searching for

ways to extend dry-docking intervals and

MARKET SECTORCOATINGS

With conditionsimproving within the globaleconomy, and the prospectsof continued growth in globaltrade, it is foreseen that fuelconsumption will increase inthe coming decade. Carbondioxide emissions will alsodevelop at a comparablepaceSijmen Visser, GlobalSegment Manager Marine –Maintenance and Repair,Sigma Coatings

“

“

others trying to achieve a seven and a

half year docking interval, EnviroMarine

has been singled out as suitable for a

10-year docking interval. This will allow

an owner to apply a full coating of

Enviromarine at the vessel’s five-year

Special Survey and not dry dock again

until she is due for her 15-year Special

Survey and TMON requirements.

David Shreeve, Director and Co-

Founder of the UK’s Conservation

Foundation, praised the company’s green

credentials: “Whoever we are, wherever

we are, we all have an environmental

footprint. From what I have seen

of Brunel’s EnviroMarine, it certainly

helps the marine industry to reduce its

environmental footprint.”

Soren Valbro, Director of Brunel

MSC, said EnviroMarine was still selling

well and the company was concentrating

on more advances in technology.

“We are working on quite a few very

interesting new developments at the

moment – but as always in this business,

we are not at liberty to disclose anything

until the final approvals are in place,” he

said.

Advanced Marine Coatings, from

Norway, claims its products, trade-named

Green Ocean Coatings, could make a

significant difference to a ship’s speed

and fuel consumption.

It says it has harnessed a break-

through nano-science and a patented

dispersion technology to make a type of

paint with exceptional abrasion resistance

and smoothness. The way it works lies in

the carbon nano tubes (CNT) which are

distributed evenly in a liquid resin,

reducing viscosity and working as a tough

reinforcement to the coating.

These tiny, carbon tubes, AMC says,

will improve abrasion resistance by at

least 100% compared to traditional,

solvent-borne epoxy systems. The

company has partnered Finnish firm

Amroy Oy and has obtained worldwide

exclusivity to use this technology in

marine coatings.

Paal Skybak, Managing Director at

AMC, said: “This is an ideal partnership.

It has formed the foundation for

developing several subsea and topside

marine coatings with properties superior

to those of traditionally reinforced epoxy

coating systems.”

AMC receives sponsorship for Green

Ocean Coatings through a development

programme funded by Innovation Norway

and the Norwegian Research Council.

“Many companies are acutely aware

of the costs to the environment and

looking at ways to reduce these,”

concluded Columbia Shipmanagement’s

Mr Bucknall. �



Dubai-based Polarcus is a pure

play marine geophysical company

with a pioneering environmental

agenda, specialising in high-end towed

streamer acquisition from pole to pole.

Its unique seismic fleet is at the

forefront of maritime and seismic

innovation, well positioned to meet the

current and future demands of the industry

and its worldwide service capabilities

encompass conventional 3D surveys,

sophisticated wide and multiazimuth

projects as well as high density 4D

production surveys.

However, it is a new company, borne

out of the after-effects of a hostile takeover

of a company previously set up to exploit

the lucrative seismic sector.

Eastern Echo was founded in 2007 and

listed on the Oslo stock exchange in Oct

2007 but a week or so later was subject to

what the Polarcus management describes as

a hostile takeover bid by oil services

company Schlumberger. “We didn’t have

enough founders’ equity to protect the

company, we only had our employment

contracts so 90% of that team founded

Polarcus,” said Peter Zickerman, Executive

Vice President of Polarcus and part of the

founding team. “So now we have more

equity from the founding team to protect

the company and to create a seismic

company with a difference and that is what

we have done.”

Schlumberger had offered a per-share

price of NOK11 to NOK12, or $2.04 to

$2.23, with the final price dependent on the

offer's acceptance level. At an offer price of

NOK12, the bid valued Eastern Echo at

about NOK3.67 billion kroners, or $681.1

million.

Eastern Echo said at the time that the

offer price 'does not sufficiently reflect the

value potential of Eastern Echo.' The

company said it was actively seeking

alternative proposals.

Polarcus describes itself as having a

highly experienced senior management

team as well as 100 shore-based staff and

300 personnel offshore. But according to

Peter Zickerman, this could rise to 120 here


Peter Zickerman, ExecutiveVice President of Polarcus

Planninga soundpath

DUBAI & MIDDLE EASTREGIONAL FOCUS

in the office next year “and by 2012 close to

700 offshore. The management team has an

average experience from the industry of

about 25 years.

“We are three years old and during that

period the first thing we did was to order

six vessels that have been built by Dubai

Drydocks. Three have been delivered

and until the end of last year we had 24

months of operating experience of those

vessels. One is in West Africa, two are

down in the Falklands and we have three

still being built in Dubai. We have ordered

an additional two units to be built in

Ulstein yard in Norway. Two of the vessels

under construction will be delivered by the

end of this quarter and one by Q2 and with

the other two out in Q1 and Q2 2012,” he

said.

But why go back to Ulstein? Peter

Zickerman again: “When we ordered

the ships it was at the heyday and everyone

was ordering vessels left, right and centre.

The yards were booked up. Drydocks

Dubai had just developed its newbuilding

yard and we had had previously ordered

two of the Eastern Echo vessels so we had

things on a roll here.

“It is something of a perceived risk to

build high end vessels at a yard that doesn’t

have deckings of experience, however, we

beefed our site up team here to 30 people

and took onboard a project management

and built the six vessels. Now after the

recession, there is capacity at yards around

the world right now and the governments of

Norway and China are supportive to owners

wishing to build – something that is not the

case in Dubai. We got good support from

the Norwegian government on export

finance whereby they give us an interest

loan of 2.85% for 80% of the total vessel

for 12 years so the vessel is then financed

and we brought in the equity overnight and

we had two vessels on our books.”

What lessons have been learned

between the newbuilding projects? “From

the first to the second vessels we saved

about 12% of amount of labour used and

also built in increased efficiencies. We

believe there will be 65 high-end vessels in

the world in 2012 and there aren’t many

yards in the world that have the experience

to build these very compact and complex

$170m vessels.

Delivered in 2009, the Polarcus Nadia

is an ultra-modern 12 streamer 3D/4D

seismic vessel. Built to the ULSTEIN

SX124 design and incorporating the

innovative ULSTEIN X-BOW® hull, this

vessel combines the latest developments in

maritime systems with the most advanced

seismic technology commercially available.

The vessel is also amongst the most

environmentally sound seismic vessels in

the market with diesel-electric propulsion,

high specification catalytic convertors,

double hull, and advanced bilge water

cleaning system. The vessel also complies


DUBAI & MIDDLE EAST REGIONAL FOCUS

DUBAI & MIDDLE EAST REGIONAL FOCUS


with the stringent DNV CLEAN DESIGN

notation.

“The seismic industry involves very

expensive equipment and the vessel itself is

a very unique platform,” said Mr

Zickerman. In Polarcus we want to do

seismic with a difference hence being from

both the maritime and the seismic side we

have combined the two elements together

to create one management team – there are

no bridging documents which improves the

internal learning curves here as well. The

crew is the asset we have and if we take

direct responsibility for them we feel we

have a winning team,” he said.

But as a time of shipping industry

tonnage oversupply, has the lack of

newbuilding berths over the last year or so

benefited what is a very sophisticated vessel

sector? Peter Zickerman, Executive Vice

President of Polarcus and part of the

founding team, believes so.

“When we founded the company in

2008 and 2009, we were expecting a global

fleet of around 87 of the high-end vessels

by 2012. But we saw the recession as a

blessing in disguise. What happened was

that a lot of the older vessels, the

conversions and upgrades, were then retired

and while there was a building boom in

2007 and 2008, now there is flat growth

because the older vessels are less qualified

and don’t meet the standards that the oil

companies require anymore,” he said.

“It is a risk matrix and the older vessels

aren’t suited for the high end capabilities. It

is very difficult to take a PSV and make it

into a high end vessel because it is a PSV

and you would have to rip everything out

and install new equipment. It then becomes

very expensive – you either have an older

vessel over a shorter period of time or you

have a newer vessel for a longer period of

time. Then in your books it is cheaper to

have a brand new vessel with a higher

operating time, Mr Zickerman said.

“The day rates are now indicating there

is a balance in the market. Considering all

these vessels have been delivered in the

recession, there are no more being ordered

and the lead time to build a ship can be

three years. The market fundamentals are

very supportive of what we are doing.

Today’s day rates are $200K for a 10-12

streamer vessel. Good rates, depending on

your operating profile, but we have done

some good jobs in Nigeria and the Black

Sea and the North Sea. The projects can

vary from three weeks to six months. An

average is two to three months so it depends

on the project and the weather windows.

You can pitch the projects either on day

rates or turnkey. We are comfortable with

the way we operate and we are going more

into turnkey contracts when they become

available,” he added.

Reporting revenues of $48m and an

EBITDA of $4.6m with three vessels in

operation in the first quarter of 2011, the

company said these results were impacted

by unusually difficult operating conditions

as well as the new vessel transits.

Speaking to SMI a month or so before

the announcement of its Q1 results,

Polarcus said that charter rates when at the

trough were around $200K per day so it

didn’t get much lower than that for a 10-12

streamer vessel. “The first two vessels we

built are 10 streamers and the second two

are 12 streamers while the other two are

eight streamers while the ones we are

building in Norway are 14 streamers.”

Peter Zickerman added: “Many

analysts wonder about the comparison

between operating a six streamer when we

could operate a 26 streamer. But you need

to take a step back and look at what we are

actually doing when you are acquiring

seismic data. How do we get the best data?

Also if we have to go back to re-shoot a

field, this type of work doesn’t really cater

for a larger vessel because some surveys are

quite small. Larger vessels are more

expensive and they take longer to deploy,

there is more gear. By the time you have

deployed the larger vessels, the other

vessels have deployed and left. So the

smaller vessels can operate in their own

niche and growing market. However, at

Polarcus we want to cater for the whole

market spectrum.

To complement its marine services

operations, it has formed a partnership with

the data processing company GX

Technology to offer clients a full seismic

data services solution for faster projects

turnaround. It has also been developing a

Multi Client project business to supplement

its services activity, with the goal of

building a comprehensive data library.

Describing its operations as global, it says

its aims are to be the service provider of

choice in areas of high environmental

sensitivity including the Arctic Ocean.

“The expansion of the industry into

frontier and environmentally sensitive sea

areas is expected to drive a much higher

level of environmental compliance

worldwide as new legislation on emissions

to air and water are developed and

introduced. Our ultra-modern fleet,

investments in “green” technologies within

both maritime and seismic, and our

commitment to a pioneering environmental

agenda will help our clients to work safely

and efficiently within these constraints,” the

company said. �

The market fundamentalsare very supportive of whatwe are doing. Today’s dayrates are $200K for a 10-12streamer vessel. Good rates,depending on your operatingprofile, but we have donesome good jobs in Nigeriaand the Black Sea and theNorth Sea. The projects canvary from three weeks to sixmonthsPeter Zickerman, ExecutiveVice President of Polarcus

““

Iraq is one of the world’s most

difficult theatres in which to operate

but according to Inchcape Shipping

Services, the need for shipping is proving

more crucial that ever to a country that

needs to export oil in order to fund its

reconstruction.

ISS is the only international port

agency operation with its own people in

Iraq and it has been in the country

supporting the troops and the country’s

transport industry since 2003. But

according to Jim Robb, General Manager in

the area, the lack of basic essentials such as

electricity and power and the need for

significant port channel clearance and

wreck removal are hampering growth of the

shipping industry in a country which is still

producing around 2.4 million barrels of oil

per day and could be increasing this to 6m

barrels per day by the end of this

year/beginning of 2012.

“Oil and gas development still

generates a huge amount of revenue for

spending on Iraq’s infrastructure. Most of

the big fields are in southern Iraq and there

are big opportunities to raise large amounts

of revenue,” he told SMI.

“Sanctions have been in place since

1991 and realistically, the infrastructure has

probably gone backwards because of the

war damage. In 2009 security was the focus

and by 2010 attention returned to

regenerating jobs. There is a five year

public and private sector development plan

in place and that is a major driver in

the country,” he said. “But business is

predominately government driven because

there is not a free economy operating

in Iraq. As far as the infrastructure is

concerned, two million government houses

need to be built but power generation is a

major issue with Iraq producing only one

third of what it needs.”

Dredging of the port of Umm Qasr is

important to the continuation of Iraqi trade

and towards the end of last year the

dredging company Jan de Nul succeeded in

increasing the port’s draft to 12 metres,

and, in so doing, ending Iraq’s dependence

on neighbouring countries’ ports. This

compares to a depth of 7.5 metres in 2005

and 8.5 m in 2008. The Iraqi transport

ministry has signed a €52m contract witn

Jan de Nul to rehabilitate Umm Qasr to a

depth of 12.5 m.

“There is a lot of talk about other

dredging projects such as the south port and

the Shatt al-Arab waterway where there are

a lot of wrecks and ordinance that need to

be removed. There is also an $800m

contract to construct three offshore berths

at Basra oil terminal to export crude oil,”

Mr Robb said. �

DUBAI AND MIDDLE EASTREGIONAL FOCUS


Operating under difficultconditions

Svein EloffPedersen,CEO of Noah Ship Management

Why should shipping companiesconsider a start-up shipmanagement

company like Noah in Dubai?

While we are a small operationwe are not exactly newcomers to the

business. But why Dubai and why did

we choose Dubai? Well it is easier to getqualified labour here. I have been inSingapore for a number of years andpeople there change jobs every second

year. It is something overhanging from

before in Dubai that if you wereemployed by one company and left you

could not return for a year. Now thelabour laws have been changed but still

people are reluctant to change jobs. Sowhen you employ people here they tend

to stay and that is a good asset. It is alsoa cost effective place to work and a ship

manager based in Dubai can have easyaccess to the ship.

OVERHEARD

Q.

A.

REGIONAL FOCUS


Acombination of the after-effects of the imposition of

sanctions against Iran, increased vessel deliveries and a

growth in third party shipmanagement consultancy

services could spell a year of growth ahead for the V. Ships acquired

International Tanker Management (ITM).

Indeed, the winning of a sizeable tanker and VLCC management

contract from Oman after insurers were unable to work with the

original Iranian managers, due to the imposition of US and EU

sanctions against Iran, will mean the inclusion of an additional 15 to

20 VLCCs from Oman this year.

According to the ITM boss Lars Modin, the agreement covers

the management of all of their units. He said fleet growth levels this

year could be as high as 10% to 15%. “We are the same size as we

were a year ago, but we lost some vessels and gained some other.

But we have another number of ships coming in so maybe we will

have a managed fleet of 50 ships by the end of the year,” he added.

“We will not need to change our procedures but they are not

geared up for management of these ships so we have had to step in.

Oman has an agreement with the Iranians to manage the VLCCs but

had to back out at the beginning of the year because insurers were

unable to work with the Iranians because of the sanctions. We were

then asked if we would manage the ships. We have already taken on

management, seven VLCCs and there could be another eight,” he

told SMI.

“Then there is the fact that other owners have ordered more ships

and they are starting to come out of the shipyards so it all looks good

from that perspective,” he added.

One interesting development for ITM has been a growth in the

delivery of shipmanagement consultancy services to ship owners

keen to understand what makes the oil majors tick and how best to

pass oil major vettings and port state control inspections. Lars Modin

again: “We are mainly concentrating this service here in the Arab

world. So we are helping them follow oil majors and port state

control requirements and the owners are picking it up quickly. This

is an area of our competence we believe will grow.”

While business may be growing, it is concerns over the state of

the shipping markets and also competency levels of today’s seafarers

that continue to dominate ship managers’ attentions. Indeed, as Lars

Modin suggests, the poor market outlook could have an adverse

effect on management fee levels just at the time that seafarers are still

expecting to earn high salaries.

“Owners are not making money so our management fee levels are not

going up but going down a bit unfortunately, so here we have to concentrate

on volume. This is a very tricky situation we are in at the moment and we

have to look for smaller markets,” he said.

ITM announced over a year ago, plans to consider introducing fixed

contracts for officers on its managed vessels as a way of boosting crew

loyalty and ensuring the recruitment and retention of the best officers

available. However, when asked about the progress of this initiative, he

said it had not really happened largely because of a reluctance on the part

of the seafarers themselves. “We are still talking with them but the seafarers

are a little bit reluctant to enter into these agreements because they see it

as their market and believe they can still shop around,” he stressed. �

DUBAI & MIDDLE EAST

ITM looks for

growth

ITM boss Lars Modin

Efforts to contain the piracy crisis

have come to a political head with

the continued detention of seven

Indian seafarers in Somalia, despite the

payment of a ransom writes Helen

Jauregui.

Owners and managers’ hopes for a new

era in the fight against piracy appeared

to be granted on 7th April when in

Washington DC, 39 year old Jama Idle

Ibrahim of Somalia pleaded guilty to

conspiracy to commit piracy under the law

of nations, and conspiracy to use a firearm

during and in relation to a crime of violence.

He was sentenced to 25 years in prison

for committing a violent act of piracy

onboard the Clipper Group-owned cargo

vessel CEC Future – an ordeal which began

in the Gulf of Aden during November 2008

and lasted 71 days. Armed with AK-47s, a

rocket-propelled grenade and handguns,

pirates seized the vessel and held 13 crew

members hostage before receiving a

$1.7million ransom from the Clipper Group

and releasing the vessel on 16th January

2009.

This historic ruling marks the first

conviction in which an individual has

been sentenced for a hijacking, rather

than an attack of piracy alone and was hailed

by US Attorney Ronald C. Machen Jr. (who

announced the sentence) as “a

just punishment for this attack that

threatened international commerce and

human life”. This was a much welcome

development within an area of crime where

a policy of ‘catch and release’ has been

frequently used, owing to a lack of nations

prepared to undertake the diplomatic burden

of holding and prosecuting those individuals

accused of piracy.

However, this notable prosecution

was soon overshadowed by news of the

continued detention of seven Indian

seafarers in Somalia, despite the payment of

a ransom, in a move which represents a

major shift in expected practices between

vessel owners and pirates.

The 1991 built asphalt/bitumen tanker

The Asphalt Venture was captured on 28th

September 2010. Following an agreement

in which the full release of the vessel

and all 15 crew was stipulated, the ship

was released on 15th April but the Master

has confirmed that six officers and one

rating were taken off the tanker by the

pirates, who ordered them ashore. At

the time of going to press, the whereabouts

of these seafarers is still unknown.

One theory as to why the pirates chose

not to honour their agreement concerns the

arrest of Somali pirates by the Indian Navy

in the weeks prior to the incident. It is

thought the pirates may have chosen to

extend the incarceration of the seven

hostages in retaliation of these arrests and

this marks a significant change in expected

piracy negotiations, from being simply

between the ship owner and pirates, to

between the government also.

However, some quarters of industry

have expressed their disdain at the


A harrowingconventionbreak in

suggestion that negotiations are

no longer the responsibility of

the vessel owner, but that of the

Government of India solely.

Abdulgani Y. Serang, General

Secretary and Treasurer of the

National Union of Seafarers of

India (NUSI) said the owner

should not make attempts

to “shirk away from

its responsibility” towards

ensuring the safety of its

seafarers.

An organised gathering of

NUSI activists took place on 7th May

outside the Mumbai office of the

vessel’s management company, OMCI

Shipmanagement, as part of the union’s

campaign to ensure the well being of

detained seafarers remains a focal point,

amid fears that in cases where the vessel

and cargo have been returned, the crew

may become a lesser priority.

The NUSI also organised an extensive

protest across India on Wednesday 27th

April, with over 3,000 seafarers taking part

in rallies in Mumbai, Chennai, Diu, Kochi,

Tuticorin, Kolkata, Chiplun and Dehra

Dun. Marking the plight of captured crew

from The Asphalt Venture and beyond,

seafarers in each city handed petitions to

the authorities and marched in solidarity,

holding banners with slogans – one of the

most popular being a call for governments

to ‘wake up’ and make the seas ‘pirate

safe’. The case of The Asphalt Venture has

indeed been a rude awakening for industry

in highlighting how volatile and

unpredictable pirates have now become in

their tactics.

The Shipping Corporation of India

(SCI) has also been a victim of piracy in

recent months, as two vessels owned and

operated by the company had the

misfortune to be attacked. The Suezmax

Tanker Guru Gobind Singh was fired

upon during November

2010 and

sustained damage to

the hull, while on 28th February 2011,

the crude tanker Desh Prem was also

subject to an attempted hijacking. With

around 30 seafarers onboard each vessel,

both Masters followed best management

practices and speeded up/zigzagged the

vessels to successfully foil these attacks.

Capt Sunil Thapar, Director in charge

of the Shipping Corporation of India’s

Bulk Carrier and Tanker Division

acknowledged that his company is ‘on

tenterhooks’ while operating in affected

areas but said the SCI has been active in

protecting its fleet at large by adopting all

safeguarding precautions in line with

compliance circulars from sources such as

the IMO, BIMCO and the Indian Flag

administration.

Commenting on the problem of pirates

taking a ransom then failing to release

hostages, he added: “This is an extremely

unfortunate thing to have happened

because previously, we all thought piracy

was a question of ransom alone but now it

seems there are other angles to it because

the Indian navy has been proactive in

protecting its merchant vessels from piracy

attacks.”

As fears intensify over

such repercussions, the

Indian Flag is now debating

the issue of providing

armed guards onboard

its ships. Noting the

contentious nature of this

issue, Capt Thapar said:

“Personally I am not

sure if this is a good

idea. There is a

possibility that if

innocent merchant

vessels take arms

onboard, this could

encourage pirates

to use more force

in their attacks.

That said, statistics show

that so far, vessels which use armed

guards have not been attacked. Some of the

seafarers are asking for armed guards

onboard because they feel more protected

by this and I don’t blame

them. Tomorrow, any of

our employees could say

‘I’m not sailing through

there!’ Hand on my heart, I

feel for them. Best

management practices and

the assistance of the navies

of India and other countries

are extremely helpful.”

At this time, a vessel

owned by a subsidiary joint

venture company of the

Shipping Corporation of India

but which requested not to be

named, is being held ransom by

pirates. As a spokesperson told

SMI, the pirates are becoming more

unreasonable in their ransom demands:

“We have been upping the offers on this

side but nothing is happening because it

started as $11 million and now it’s stuck on

around $6million on the pirates’ side. Also,

it has to be done in cash.

The owners have been pleading with

the pirates to release the vessel but she is

still held for ransom off the Somali coast.”

There are over 20 seafarers onboard

the captured vessel. Apart from periods

where the crew are allowed access to

the deck in batches to perform ship

maintenance duties, they are under armed

guard on the bridge 24/7. Even if a seafarer

wishes to go to the toilet, he must be

escorted by a pirate.

Though many would presume

ransom negotiators to be Somali-based,

affected companies have described the

transformation of piracy into an organised

occupation which now transcends

conventional patterns.

Capt Thapar again: “I think piracy has

gone beyond the shipping companies and

expected norms to become an organised

business with major players said to be

sitting in London and Ireland. It is

understood that the moment a vessel gets

hijacked, the negotiator is the first person

to call up and he’s usually London-based.

Negotiations might start at something like

$10 million and if you don’t start to

negotiate with at least 35% of that, you will

not even come close.”

Capt Thapar added that countries

where deals are struck should act positively

in bringing ransom negotiators to justice,

while navies from other nations should join

their Indian counterparts under a common,

possibly UN command, in the fight against

hijackings – particularly since the location

of Somali pirate vessels may be readily

available through modern technology such

as satellite imagery.

He concluded that as the affected area

is now vast, the best solution may be to

fight pirates in their local area or to

confront mother ships directly. �

SECURITY AND PIRACY TRADE ANALYSIS


Understanding the threat of

terrorism, violent crime and anti-

social behaviour within a

maritime context takes years of frontline

experience but with the presence of

professional security staff, shipping

companies can have confidence in their

anti-piracy procedures.

Following a 20-year career in the Royal

Marines, Tim Crossin, Managing Director

of British-based company CS:5 Security, is

well-versed in the practical realities of

maritime security and anti-piracy measures.

Having worked in Afghanistan protecting

the Japanese Ambassador, in addition to

five years in Iraq as a bodyguard for the

Foreign Office, Mr Crossin’s expertise of

frontline security is far-reaching. He told

SMI: “For the last three years, the maritime

threat has increased. It used to be just the

Gulf of Aden but now for the whole of

the Indian Ocean, it is recommended that

best management practices are followed. I

believe that for vessels transiting hostile

waters, it’s unfair to expect a master

mariner and professional crew to fight

pirates.”

Though seafarers may be well-versed

in security protocol, the need to provide

dedicated security personnel onboard is

evident, particularly from a planning point

of view. From his experience in the field,

Mr Crossin said even the best intentioned

security measures can be out-smarted by

pirates and he described a security audit

whereby in order to test procedures, the

crew hid in a citadel. A security guard

onboard lifted a hatch and threw a coke can

at the party inside, which in theory could

have been a grenade.

This illustrates how even the most basic

security measures can be overlooked

by inexperienced personnel but as Mr

Crossin explained, the need to educate

and encourage seafarers while providing

expert security is far more effective than

scaremongering them: “Firstly, they have

to have some form of security presence and

it must be someone who understands

navigation, bridge protocol and radar – they

must know port from starboard. I have

seen horror stories in the past where the

security provided are excellent ex-military

personnel but they get onboard a vessel and


the bestform ofdefenceEnsuring

don’t understand even basic health

and safety skills such as fire

fighting. This calls into

question the capabilities and

training of these people.”

He added that CS:5 trains

security professionals in ship

operating procedures, ensuring

a skill set which covers how to

conduct themselves onboard and

to be of benefit to the crew. This

combination of security know-

how and maritime training all adds

up to what Mr Crossin regards to be

“the right pedigree and background”

for a security officer.

Though within industry, security

personnel wanting to work onboard

must be trained as an ISPS Code Ship

Security Officer (SSO), this in itself is

not an anti-piracy course, but does act as

a code of conduct which dictates best

practice. Mr Crossin raised concerns that

those undertaking a three day course to

become an SSO will not receive an

adequate knowledge of anti-piracy

practices and should attend further training

to ensure they fulfil the requirements of an

SSO, in addition to being a capable member

of the crew who can be involved in the

basic running of the ship and provide

security.”

The issue of arms onboard is a

contentious subject in industry at this time,

as maritime authorities debate whether or

not to allow guns onboard, but as Mr

Crossin argued, an experienced security

officer can provide comfort to the crew if

seafarers are aware an individual with

experience of weaponry is onboard: “When

you take weapons into the equation,

shipping companies want security in an

advisory capacity to, as we say, give the

captain a positive feeling by having

someone there who has been shot at and

who has served in a hostile environment.

I wouldn’t say they’re used to it, as no one

ever gets used to being fired at by rocket

propelled grenades, but if you’ve been in

that situation a number of times, you’re

capable of making decisions.”

He added: “The captain is unlikely to

have had those experiences and it’s good to

know somebody onboard has dealt with

those problems in the past. The crew I use

are all ex-marines and have a detailed

knowledge of weapons and procedures but

if you get someone else with no experience

of weapons on an armed ship, it opens

up a whole different kettle of fish. The

procedures, training, recruitment and

vetting for our staff has to be increased.”

Mr Crossin said it is understandable

why some shipping companies and

maritime authorities may not want to take

arms onboard as it is difficult for the

industry to authorise or legislate the use of

guns. However, he warned that the

frequently used argument that bringing

arms onboard might exacerbate hostile

situations may not always apply: “In

security, I work on a field of increased

escalation and as things get worse, you have

to react to this. A colleague of mine who

accompanied me on a number of jobs was

faced with a rocket-propelled grenade.

They had no weapons but were prepared

with ship fortification and drills and that’s

what got them through – preparation,

advanced warning and the correct reaction

at the right time.

“They had six grenades fired at them,

which included a couple of overshoots – the

question is, if my colleague had had a

weapon and fired it back in response, in a

situation where he had already been fired

on by live rocket propelled

grenades and small arms fire – how can

this really be escalated? They

can’t suddenly bring in a

tactical nuclear weapon! It’s not

like the threat is simply paintball guns or a

phrase book of abusive language – they’re

already firing at the vessel.

I disagree that things can escalate from

this point because it’s already become

as big as its going to get.”

Describing a previous contract in

the Seychelles where Mr Crossin and

his team were protecting fishing

boats from pirate attacks, he

explained that in a situation where

barbed wire could not be used

(particularly owing to the need to

drop fishing nets and pull them

onboard), a 24/7 watch system

was put in place with weapons.

Thankfully, Mr Crossin did not

experience any problems but

some of his colleagues were

required to use force in order

to deter pirates. “When you

have no physical defences,

weapons may be necessary. It didn’t

escalate because the moment the pirates

came in and realised the security had guns,

they pulled off and left. They did a couple

of small probing attacks to find out what the

range of the machine gun on a fishing boat

was but when they realised this was about

300m more than their 7.62 AK-47s, they all

disappeared. It didn’t escalate because they

just left,” he said.

When asked about his view on the fear

of retaliation attacks against shipping

companies and navies who take a hard-line

approach against pirates, Mr Crossin

concluded: “I do have a commercial head

but I’m still a Royal Marine at heart. The

idea that if you put up any form of

resistance or make the pirates’ job hard, that

they may retaliate, brings only one option

– to have no security, so when a pirate

vessel appears, you have to stop the vessel

and let them up. You’ve got to make a

decision – if you’re worried about the navy

and security doing their job and protecting

you because if it goes wrong they may not

release hostages or may act in retaliation,

the only thing to do is to do nothing – give

them exactly what they want and then they

will take more vessels. From my experience

of work in Africa, I don’t believe armed

pirates respond to or respect the soft

approach.” �

TRADE ANALYSIS


SECURITY AND PIRACY

They had six grenadesfired at them, which includeda couple of overshoots – thequestion is, if my colleaguehad had a weapon and fired itback in response, in a situationwhere he had already beenfired on by live rocketpropelled grenades and smallarms fire – how can this reallybe escalated?

““

58

According to this year’s Sunday

Times Rich List, Norway’s John

Fredriksen is Norway’s richest

man and the seventh richest person in the

UK with a personal wealth reckoned to be

in the region of £6.2 billion. Shrewd

investments in oil exploration and seafood

companies saw his family fortune grow by

a huge £3.45bn since the 2010 Rich List. In

a rare and exclusive interview, he told SMI

Editorial Director Sean Moloney about the

opportunities that now exist as the shipping

industry struggles to emerge from its

deepest recession.

Born on Oslo's east side, Etterstad and

the son of a welder, John Fredriksen began

his working life as a trainee in a

shipbrokering company. At the age of 27

he started working for himself and quickly

made his fortune during the Iran-Iraq wars

in the 1980s when his tankers picked up oil

at great risk and huge profits. As described

by his biographer, "he was the lifeline to the

Ayatollah”. He is now the world’s largest

58

Timing iseverything

EXCLUSIVE

By Sean Moloney


SHIPMANAGEMENT ON THE RECORD

ON THE RECORD SHIPMANAGEMENT

tanker owner and has major interests in oil

rigs and fish farming.

There is a well known saying in the

shipping industry that you always learn

more in a bad market but have more fun in

a good market and with 50 years in the

shipping industry, John Fredriksen must feel

he has learnt all he needs to learn about

surviving a shipping crisis. After all, as the

Chinese character for crisis is made up with

two words - danger and opportunity – surely

there are significant opportunities available

for the right investment?

“When you talk about sentiment, it is a

strange feeling because we have had a good

market for almost 10 years. Personally I am

not that bothered about the crisis because we

have seen it coming for the last three years,”

he told SMI. “I would say it is just a question

of time. We are just waiting and I look at this

current situation as a new opportunity.”

Frontline, his company, very recently

delivered a modest net profit of $15.5m in

the first quarter of 2011, with earnings per

share of $0.20, despite the persisting poor

tanker market. It announced a cash dividend

of $0.10 for the quarter. Indeed, Frontline

Management Chief Executive Officer Jens

Martin Jensen said of the results that the

company has positioned itself “to withstand

a bad market for some time.”

This year’s first quarter figures included

a net gain of $13.2m on asset sales and

included a gain of $7.9m on the sale of the

VLCC Front Shanghai. It gained $5.3m in

compensation for the early termination of

two single-hull VLCCs. It also made non-

operating gains of $8.1m, including $8.8m

from an adjustment to a funding agreement

involving Independent Tankers Corp. These

gains were offset by a $3.3m loss on

Frontline’s sale of its shares in Overseas

Shipholding Group. Excluding the gains on

sales, it made a net loss of $6.3m

Press reports suggested there will be

further impacts in the second quarter

including total losses of $17.3m from the

termination of long-term charters for two of

its ore-bulk-oil carriers with Ship Finance.

But it will gain about $4.2m from the sale

of the VLCC Front Eagle, which was

purchased in the first quarter, with further

gains totalling about $13m over the two year

time charter back.

Frontline is looking to trim its fleet with

the disposal of non-core ships later in the

year. It has seven ships on order — five

VLCCs and two suezmaxes. Finance is in

place for two VLCCs but not yet for the

other five ships.

But will the current crisis also be a good

way of weeding out the poorer inefficient

players in the market? John Fredriksen

again: “The market has been so good and it

is good for all the serious players. I have

been in this industry for 50 years and one of

the few to have survived the crisis. It is very

interesting for me as I am not personally

bothered about the crisis. It is worse for the

new generation of players.”

But as the shipping crisis deepens, there

has been a tendency for some ship owners

to diversify into a variety of different vessel

sectors to chase the buck. But is survival

more about preparing your company for the

good times as well as the bad?

“We have 14 public companies and we

are the biggest in the world in salmon

farming and are active in other things: 15%

of our holding is in shipping at the moment

so we have prepared ourselves for the long

term. In this business, timing of course is

everything and I am patient. I am sure prices

aren’t going to be much lower in 10 months

from now. But we will buy companies; that

is what we are going to do. I am sure there

are going to be a lot of companies for sale,”

he told SMI.

And what of his love for salmon

fishing? Is it an ideal way to escape the

rigours of the industry? As he told SMI:

“Salmon fishing is the most important thing

this year.” �

Floating LNG solutions are giving

substantially wider commercial and

technological dimension to the LNG

sector, providing platforms for business

development and new trade flows In

addition to LNG storage, offtake, and

regasification, ‘floater’ projects also

include gas liquefaction. Issues of onshore

or offshore resource size and location,

relative costs and planning constraints for

fixed shoreside terminal facilities, and

asset flexibility, all have a bearing on the

current market interest in floating LNG

units.

A gas export project in Papua New

Guinea has provided the first commercial

endorsement of the floating gas liquefaction

and offloading solution developed by

Oslo-listed Flex LNG. Recently signed

agreements with US firm InterOil and

its joint venture partner Pacific LNG

have paved the way to construction and

operation of a production vessel to handle

gas from the onshore Elk and Antelope

fields in Papua New Guinea’s Gulf

Province.

Whether or not this proves to be the

first-ever floating facility to produce LNG

remains to be seen, as Shell is understood

to be at an advanced stage of planning for

its initial investment in its huge FLNG

(floating LNG) production concept.

Flex LNG was incorporated in 2006

with the aim of commercialising floating

natural gas liquefaction units, to provide a

cost-effective means of sourcing gas from

numerous potential offshore or onshore

locations worldwide where it may not be

otherwise desirable or viable to tap those

reserves.

Four LNG producer hulls were ordered

by Flex LNG from Samsung Heavy

Industries several years ago in anticipation

of securing project assignments. Work was

subsequently put on hold in the absence

of charters, and the agreement with the

shipyard was restructured. All previous

instalments paid to Samsung on the four

shipbuilding contracts are to be transferred

to the single vessel destined for the Papua

New Guinea project once the final

investment decision has been made,

expected before the end of 2011.

Commencement of LNG production

operations is targeted for 2014. The vessel

will fulfil a 25-year contract, and will be

operated by Flex LNG in conjunction with

Liquid Niugini Gas, a joint venture of

InterOil and Pacific LNG. With a nominal

production capacity of nearly 2m tons of

LNG per annum, the ’floater’ is expected to

be moored alongside a jetty, which will be

shared with Liquid Niugini’s land-based

LNG facilities.

Shell signed a master agreement with a

consortium comprising Samsung and

French engineering contractor Technip for

the design, construction and installation of

multiple FLNG vessels over a period of up

LNG/LPGTRADE ANALYSIS


Floater projects giveLNG sector fresh impetus

By David Tinsley

to 15 years, intended to monetise stranded

or smaller offshore gas fields. The

conceptual FLNG has main dimensions

of some 450m x 70m, with liquefaction

capacity of 3.5m tons per annum, plus

associated LPG and condensate production.

The first applications could be off

northwestern Australia, and to the north of

Australia in the Timor Sea.

Towards the end of last year, Papua

New Guinea’s executive council approved a

project involving an LNG-FPSO to be

stationed in the Gulf of Papua, to draw on

extensive gas resources. The standalone

scheme is known as the PNG Floating LNG

project, and has been jointly developed by

Petromin PNG Holdings, Hoegh LNG

and Daewoo Shipbuilding & Marine

Engineering.

Over a four-year period, Hoegh LNG

and its partners have prepared the requisite

LNG-FPSO design and technology. The

envisaged vessel and processing systems

would be constructed at Daewoo’s Okpo

yard, and will have an LNG production

capacity of 3m tonnes annually plus storage

for 220,0000m3. The parties are now

hoping to reach agreements with the PNG

Government, and gas suppliers and buyers,

with a view to bringing the unit into

operation by mid 2014.

Following on from the delivery of two

innovative, LNG shuttle and regasification

vessels (SRVs), Hoegh LNG has recently

made a further, major commitment to

the fast growing market for floating

regasification solutions. Utilising the

Norwegian company’s in-house design,

construction of two 170,000m3 floating

storage and regasification units (FSRUs)

has been provisionally awarded to Hyundai

Heavy Industries (HHI). Options appended

to the agreement provide for an ultimate

series of six Hoegh FSRUs from the

Korean yard.

Hoegh LNG believes that the floating

regasification sector will be the LNG

segment affording the strongest growth

over the medium-term, especially so in the

Asia-Pacific region, but also among certain

fast developing economies in the Atlantic

markets. The FSRU option is advocated as

the most cost efficient and quickest way for

a country to import LNG, increasingly

favoured as a fuel for power generation.

When the letter of intent was signed

with HHI in April this year, Hoegh LNG’s

President and CEO Sveinung J. Stohle

expressed confidence in future business

prospects. “Given the very strong LNG

market, with an expected growth of 6%-7%

on an annual basis over the next few years,

and our qualification to bid for all

new FSRU projects, we have with this

agreement with HHI put Hoegh LNG in the

position to compete for such projects based

on our new built FSRUs….”

The sector is currently served by 13

units worldwide, with three under

construction, and around 25 in various

stages of development.

Golar LNG was the first company to

convert a large LNGC into an FSRU. It is

currently involved in five floating solutions,

and earnings from the FSRU segment gave

a boost to the company’s income in 2010.

“Golar is in final discussions regarding firm

commitments for construction of multiple

FSRU carriers,” stated the organisation in

late April.

Meanwhile, Golar is making a huge

investment in the development of its LNG

carrier trading fleet. Little more than a week

after its recent award of four vessels

of 160,000m3 capacity to Samsung Heavy

Industries, the company upped the

programme by signing contracts for another

two ships. Four of the series are due to be

completed in 2013, and two are expected in

2014, and encapsulate a total value of

$1.2bn. In addition, Golar retains options

on a further two LNGCs, which would take

overall expenditure to at least $1.6bn.

Each vessel will employ dual-fuel

diesel-electric technology, favoured on

grounds of comparative fuelling costs over

steam turbine propulsion, the erstwhile

powering mode of choice in the world

LNGC fleet. Technical options built into

the agreement with Samsung afford the

owner the possibility to adopt regasification

equipment, and to incorporate ice

strengthening and winterisation.

The relatively early delivery dates

and nature of the option package make

this an attractive deal for Golar. “The

supply/demand balance for LNG shipping

looks increasingly attractive,” observed

Golar LNG’s Chairman John Fredriksen.

“It is clear from the continued strong global

LNG demand and supply growth that a

significant amount of new infrastructure,

including shipping, will be required over

the coming years,” he added.

Over the past couple of months, other

newbuild orders have been reported by

industry and broking sources to have been

placed with Korean yards, the pre-eminent

global force in LNG carrier construction.

Greek interests are behind a contract for a

vessel of 156,000m3 awarded to Daewoo,

while an undisclosed shipowner is said to

have placed two LNGCs in the 155,000-

160,000m3 category with Samsung.

China’s shipbuilding industry has

secured a prestigious entry into the export

market for LNG carriers, by way of a major

contracted sealed at the start of 2011,

and involving Japan’s Mitsui OSK

Lines(MOL). Hudong-Zhonghua booked a

series of four vessels, understood to be of

about 170,000 cubic metre capacity, for

delivery in 2015 and 2016. As the ships are

to be used in support of Chinese purchases

of gas, the authorities had stipulated that the

vessels be built in China. Hudong-

Zhonghua cut its teeth on LNGC

construction with the 147,700 cu m

Dapeng Sun-class.

The latest contract was steered by

MOL and ExxonMobil, and arises out of

the requirement for transportation capacity

to support shipments from LNG projects in

Papua New Guinea and Western Australia.

The four vessels will be jointly owned by

MOL and China Shipping. China’s overall

demand for LNG is growing as the country

seeks ways of increasing ‘clean’ energy

usage.

Addressing the specific requirements of

regional distribution of LNG, FKAB of

Sweden has designed a 16,500cu m vessel,

embodying three bi-lobe IMO type C

independent tanks with spherical heads and

served by six deepwell cargo pumps. A

dual-fuel main engine of 5,250kW figures

in the basic specification.

In the small-scale LNGC stakes,

Rotterdam-based owner Anthony Veder has

ordered a 15,600cu m vessel from Meyer

Werft. The Dutch gas tanker company’s

contract is the latest in a long line of

bold initiatives which have included

the construction of the 7,500cu m

LNG/LPG/ethylene carrier Coral Methane,

used in regional LNG trade since delivery

in 2006.

Veder’s fleet also features the world’s

first purpose-built carbon dioxide(CO2)

carrier, the diminutive, 1999-built Coral

Carbonic. Deployed in Baltic/northwest

European service, this IA ice class tanker

transports liquefied CO2 in a single cargo

tank of 1,250cu m capacity.

There are currently four coastal CO2

carriers operational in northern Europe,

serving the food and beverage and waste

treatment industries. The ships that would

be required for carbon capture and

storage(CCS) projects will have to be

substantially larger, although vessel design

issues would be similar to those addressed

in LPG carriers.

One of the major consequences of

global investment in LNG liquefaction

trains is the attendant affect on LPG

availability and export volumes, since

significant amounts of LPG are produced in

association with LNG.

Although delays in plant completions

have modified the extent of growth in

the LPG business since 2008, it is

anticipated that LPG volumes will increase

substantially in future years, other positive

factors being robust Asian demand and

the ramping-up of refined oil product

production, in which LPG is a by-product.

The earnings environment for the largest

LPG tankers, or VLGCs (very large gas

carriers), is set for solid improvement over

the next two years, according to analysts. �

LNG/LPG TRADE ANALYSIS


A


63

ADHOC BUSINESS OF SHIPPINGADHOC


AdHocAdHoc

For jet setters who relish the

face-to-face nature of

shipping, this international

industry can lead to long business

trips and extensive time on the road.

But although the chance to travel the

globe is a privilege, the lack of sleep

and distance from home which

accompany this can prove

challenging for even the toughest

business minds amongst us.

Thankfully, help is at hand as SMI

has uncovered some invaluable hints

and tips which will assist seasoned

travellers in limiting the stress of

globe trotting.

Bjørn Højgaard, Managing

Director at Singapore-based Thome

Ship Management, currently travels

for 150 days a year. As he explained,

efforts to plan your trip prior to

departure can pay dividends in

ensuring a smooth experience: “Up to

a week before I travel, I plan for each

day and pack accordingly. I also

ensure I have enough reading

material for the flight – I never watch

movies but send emails offline on the

plane – I like to be productive. Also,

when travelling, you should try the

local food! It’s about accepting that

it’s not your home turf and getting out

there.”

Depending on the class of travel,

it can be useful to carefully consider

your choice of seat on the plane, as in

economy, an aisle seat can offer a

little more space, while window seats

are purported to offer a more cozy,

sleep-friendly position than other

positions in business class. In

addition, an evening flight allows for

sleep during travel, while simple

requests such as ensuring your hotel

offers an early check-in service will

minimise unwelcome surprises on

arrival.

Using a travel itinerary website

such as TripIt.com can also take the

stress out of flight delays as regular

travel updates can be sent to the user’s

phone, in addition to E-tickets and

information about your destination,

including everything from weather

forecasts to car rental arrangements.

Ron Schroeder, Director for

Travel, Retail and Leisure at

MillerCoors (a supplier of beverages

to the maritime industry) is also

somewhat of an expert at the travel

game, having spent around 200 days

a year away from home during the

past 34 years of his career: “When

you travel frequently, there are things

you can do to maximise your time,

limit excess weight and keep alert.

Taking the tensionout of travel

ADHOCBUSINESS OF SHIPPING ADHOC


When packing, make a choice – light or dark

clothes for that week’s trip. That way, you

pack either black shoes or brown, but not

both. Select a sports coat in a colour such as

navy blue, which can be worn with either tan

or dark colored trousers. The longer the trip

the more important it is to minimise what

clothes you are taking.”

Mr Schroeder also noted the importance

of planning each day prior to travelling: “You

may be participating in a golf outing on the

second day of your trip but have a casual

night out the evening before. You may elect

to wear your golf shirt that evening before

and then for the golf outing the following

morning thus turning this two-shirt situation

into one. If packing for a two-week trip,

remember you’re seeing different people so

you can literally repeat your clothing

selection by sending out your laundry at the

hotel on day six, then you’re ready for the

following week.”

It can also be useful to use hand luggage

alone in order to avoid the 30 minute wait for

luggage collection. This might sound

impracticable for lengthy trips but Mr

Schroeder explained that one of his best trips

included one hand luggage case for a 21-day

trip: “It’s not as hard as you think. One set of

jeans, two pairs of slacks including one pair

you’re wearing. Take shirts that can match

both pairs of slacks and you should carry only

enough underwear and socks that you

actually need. If you’re carrying golf clubs,

it is a great place to put extra jackets, sweaters

or clothes.”

For those who wish to truly maximise

their time when on the road, Mr Schroeder

concluded with this final nugget of multi-

tasking advice: “When you arrive in your

room, normal procedure is to turn on the

computer but it can take a while to warm up

so during this time, place shirts, pants or

jackets that got wrinkled in your case in the

shower area – turn on a hot shower and let

steam do the ironing work for you! By the

time you’ve done this, your computer is

ready to go. Often, I only have around 15 to

20 minutes before heading out again, but this

way I can take care of critical emails before

leaving the room.”

Guarding against fatal or dangerous

accidents onboard ship should not be

left to chance and according to DVD

and computer-based training specialists

Videotel, it can sometimes take graphic

images and film of potential accidents

onboard ship to ram the safety message

home.

Videotel’s Hazard Series II module makes

extensive use of modern image techniques to

grab the viewer’s attention and shock crew

members into greater awareness of their own

safety and that of their colleagues.

It comprises 10 hard hitting short films

designed to both shock and teach the viewer.

Filmed using real crew doing real work, they

graphically illustrate common errors and then

show how, using correct procedures and

working techniques, incidents can be avoided

before they occur.

“Adequate training, safe working

practices and good safety management

systems all contribute to a safer working

environment on board,” said Nigel Cleave,

Videotel’s Chief Executive Officer.

Leading international law firm

Wikborg Rein has concluded an

alliance with one of Brazil’s main

law firms, Vieira, Rezende, Barbosa e

Guerreiro Advogados (VRBG), which will

have significant benefits for the international

clients of both firms.

The best friend alliance agreement

between the two firms will include co-

operation on client referrals and joint

assignments, and will also involve the

exchange of lawyers and competence

building.

Wikborg Rein Global Managing Partner,

Susanne Munch Thore, said: “Brazil has

developed into a high-priority market for

many of our clients, and it is important that,

as a leading provider of international legal

services, we have the capacity to support our

clients wherever business takes them.

“This is the first time one of the top

international shipping and offshore oil & gas

firms has made a commitment like this. It

demonstrates our understanding of the

commercial realities of the market, and where

growth will come from for our clients.”

Partner Finn Bjørnstad, who will shortly

be taking up the role of managing partner in

Wikborg Rein's London office, has

considerable experience in supporting clients

in Brazil. He said: “VRBG is internationally

recognised as one of Brazil’s leading law

firms, with an excellent track record in the

offshore oil and gas sector. It is ideally placed

to work with international clients looking to

develop opportunities in a market with such

great potential.”

For a number of years, Wikborg Rein has

supported its clients as they have developed

their Brazilian business interests, specifically

in the offshore oil & gas sector. However,

with an increase in offshore oil & gas

investment in Brazil, it recognised that there

was a need to provide high-quality ‘on the

ground’ legal support.

From June 2011, Wikborg Rein will have

one senior lawyer working out of the VRBG

office in Rio de Janeiro, and VRBG will have

one lawyer working out of the Wikborg Rein

office in Shanghai.

Wikborg Rein expandscapabilities with Brazilalliance

Continued from page 63 Watching outfor the hazards

ADHOC BUSINESS OF SHIPPINGADHOC


Ask Bernhard Schulte’s

Cyprus office what it

means to be green and

they will whisk you off to

Parekklisia village on the

island and show you the

400 trees and shrubs its

employees planted as part of its

May tree planting exercise.

The 400 shrubs, given to

the Parekklisia community by

the forest department, were

successfully planted by BSM staff

and families who willingly

volunteered to assist in this event.

Everyone, especially the children,

had a great time as it was also an

opportunity to get together and

have fun outdoors.

As the compnay said, the aim

of this event was to upgrade” the

quality of life of our fellow citizens

and to pass on the message that we

must all contribute towards a safer

and cleaner environment”.

It was arranged in combination

with the BSM (Cyprus) outing so

after the planting the team drove

up to the mountains for a special

lunch.

MyViewNikolay Khovrin, Chairman of theSwitzerland-based InternationalLaw Enforcement Agency (ILEA)

The fight against piracy should be

based on three elements. The first element is

a legal element. The archaic principal of the

universal criminal jurisdiction over piracy

should be abandoned while the natural right

of self-defence should be internationally

recognised. It is exactly because of the

UN advocation for the universal criminal

jurisdiction over piracy and against the

natural right of self-defense that the ILEA

agency stands outside the UN structures. We

believe the ILEA would make a difference.

ILEA, via its international net of legal

counsels, is well positioned to defend the

interests of member states.

The second element is exercising an

efficient criminal jurisdiction by the flag

states on their vessels. This is a duty under

UNCLOS. But what is more important is

that this is a natural second step for any state

serious about fighting piracy. The ILEA is

well positioned to offer its member states

well trained operatives or ship marshals to

police their vessels.

The third element is a proper use of

force at sea. ILEA is sponsoring an

International Harmonic Shooting Federation

(IHSF) which would play a key role in

selecting candidates to become ILEA

operatives or ship marshals. So far the

activity of the Navy is questionable. The

Navy is not trained for law enforcement. On

many occasions its actions can be qualified

as a grave war crime of willful killing. That

is because there are no recognised

specialists for precise or sniper shooting

from a moving object onto the moving

object.” �

“

Plant a tree forthe environment

ISSA is ‘all at sea’I

t was anchors ‘aweigh’ for nearly

200 ship chandler members of the

International Shipsuppliers &

Services Association as the trade

association held its annual

Convention onboard ship for the first

time.

ISSA delegates boarded the

DFDS cruise ferry Crown of

Scandinavia in Denmark and spent

three days networking, debating and

socialising as the ferry glided between

Oslo and back to Copenhagen. Apart

from a choppy second night’s sailing

from Copenhagen to Oslo, it was plain

sailing for the ISSA delegates as

they listened to presentations ranging

from the workings of the Finnish

customers, to the intricacies of ship

owner negotiations when a vessel gets

hijacked by Somali pirates.

ISSA will be holding its 2012

Convention in the Spanish port city of

Cadiz before retiring to London as the

base for its Convention until at least

2015.

In the latest instalment of its highly popular Round Table

Debates, SMI travelled to New York to exclusively gather

together the heads of the world’s main shipping trade

associations to garner their views on major issues such as the

effects of the Japanese earthquake and tsunami; the dominance of

China; the scourge that is Somali piracy; and the contentious issue

of the exclusivity of the subsidiary industry body that is the Round

Table of Trade Associations. The debate was chaired by SMI

Editorial Director Sean Moloney and he welcomed as panellists

Spyros Polemis, Chairman of the International Chamber of

Shipping and President of the International Shipping Federation;

Capt Graham Westgarth, President of INTERTANKO; Rob

Lomas, Secretary General of Intercargo; Robert Lorenz-Meyer,

President of BIMCO; Alastair Evitt, President of InterManager;

and Noboru Ueda, Chairman of the International Association of

Classification Societies (IACS).

Sean MoloneyHow prepared is shipping to come out of what is arguably the worst

recession in its history and to what extent will the ordering sprees of

a few years ago remain the bitter pill that the shipping industry has

to swallow for many years to come. Spyros, what are your views?

Spyros PolemisFirst of all I wouldn’t use the word bitter as it doesn’t apply but

shipping is obviously ready to come out of recession. It is just that

the oversupply of tonnage is still a problem together with the

contraction in demand because of the financial crisis. Two things

now have to happen: ship owners have to avoid ordering more

ships and the world’s economies need to improve. Because of

globalisation, economies have to improve together rather than

individually. In the past we used to say that the US economy was

the driver. I don’t think this is the case anymore. Because of

globalisation we need to move together in order to generate the

necessary demand.

Rob LomasIt has certainly not been the best start to 2011 for the dry bulk sector;

we have seen the oversupply of tonnage and a lot of the owners

failing to exercise self restraint in the ordering process. Starting the

year with issues such as floods in Australia and the tsunami in Japan,

it perhaps brings home to us the cyclical nature of shipping. We

haven’t really seen the volatile nature of the shipping industry for

some time and in the dry bulk sector in particular, we have witnessed

steady demand and reasonably steady supply. But now we are back

to the traditional function of the market which is a reaction to

volatility. Although we have some cautious grounds for optimism in

the future – we have China still powering ahead and India not too far

behind in terms of demand for dry bulk shipping – the effects of this

may take a little time to come through. But until it does, we are

seeing operating costs and revenues in disarray and we are just going

to have to ride out that particular storm. It should get better in the

SHIPPING ASSOCIATION ROUND TABLESHIPMANAGEMENT


DiscussionRound Table

If any of our readers have comments to make on the issues under discussion or the panellists’ replies thenplease email them to [email protected] and we will include them in future issues.

next few months. In terms of the numbers,

we don’t know exactly how many ships will

come out of the yards. We are also seeing an

imbalance through the growth of larger ships.

Examples are the VLOCs ordered by Vale which may

affect the capesize market. But it isn’t all doom and gloom,

we are starting to see some aspects of growth potential even in the

next few months with the smaller types of shipping. World demand

for energy and food isn’t exactly going to decrease over the next

year or two so we have some cautious grounds for optimism.

Robert Lorenz-MeyerI agree with the case for cautious optimism, definitely. I think

globalisation is here to stay although we are seeing some trends

towards re-regionalisation as well – a lot of this has to do with the

environmental concerns of consumers who are just not prepared to

accept a much larger carbon footprint for products they buy. This

will change the look of shipping as well. There is a lot of product

sourcing which might be re-regionalised later on. With regard to the

order book, we are looking at the youngest fleet we have ever had

and that is also positive but it is not the most modern fleet and that

is something we have to take into consideration as well. A lot of these

ships were built based on construction standards that are 10 to 15

years old, These ships will last another 20 to 25 years and we all

know what kind of regulations are coming into the market; a lot of

these ships that have been ordered are not fit to meet them.

Sean MoloneyGraham, let me bring you in on this.

Graham WestgarthIn shipowning terms, cautious optimism is positive. I think that the

supply/demand dynamic will resolve itself. Our view is that we will

typically have another two trying years – it may be 2013 before we

see a turnaround but the one thing that hasn’t been mentioned and

which is significant, is the global shipbuilding capacity, and in China

specifically. Because if ship owners stop building ships and China

decides that no matter what, its shipyards should be

building ships then the outcome has nothing to

do with supply/demand dynamics, that is

a political decision. Of course,

China’s real focus is ensuring

it has employment for

its people. I think

technology is the potential game changer. We are seeing more

innovation in the shipping industry than we have seen in the last 30

years and I think we will see ships built to go at slower speeds but

with higher capacity, But we could potentially see different fuel

types being employed and also different hull shapes. If you look at

the basic aframax and suezmax hull, it is the same as it was 30 years

ago. So I think we will see more innovation and the next generation

of ships will be much more energy-efficient. The question is will

that marginalise the older tonnage? Because the shipping industry

is in a way conservative in its approach, not everyone will rush out

and order new tonnage, it will be a gradual thing, but I do think there

is an opportunity for shipping and it will be interesting to see how

things evolve.

Noboru UedaPersonally, I am very optimistic about the future. As the world

economy continues to grow, the global shipping industry will need

to grow as well. And so I am very confident about the long-term

prospects. In the shorter-term, we are witnessing challenging times

but on the shipbuilding side the boom is finally coming to an end.

But it is important that we do not just focus on the shipping market.

On the technical side there has been a wide shift on a variety of

issues over the past few years, especially in terms of safety and the

environment. It is important to realise that with all the problems with

the market over the last few years, we have taken tremendous steps

in these areas and the shipping industry is safer and greener than it

has ever been.

Alastair EvittShipmanagement is in a slightly different situation than owners and by

shipmanagement I don’t just mean third party managers but in-house

managers as well. As managers we have been less directly affected by

the market fluctuations and, in some instances, the manager has seen

business come in with the additional tonnage that has led to the market

overcapacity. So we tend to follow a less risky curve. We have seen

vessels come in and out of lay-up and I would like to think we have

seen the solution in increased operational efficiencies – maximising

the usage rather than looking to cost-cutting and I am very pleased to

say that I have not seen that happen through the recession. But the

recession is like a marathon and the winner is not the sprinter but the

last man standing at the end of the race. Managers have a role to play

in that they are the catalyst between investors and owners and charterers

and suppliers and they have a role to play to work with the owners to

get to the end of the marathon.

SHIPPING ASSOCIATION ROUND TABLE SHIPMANAGEMENT


“The oversupply of tonnage is still a problem together

with the contraction in demand because of the

financial crisis

““I think technology is the potential game

changer. We are seeing more innovation in the

shipping industry than we have seen in the last

30 years and I think we will see ships built to

go at slower speeds but with higher capacity

“


69

Graham WestgarthThere are more and more ships

coming into market and up until

October 2008, there was a real stress in

the industry in terms of the availability of crew

competence. That problem is coming back. But as

we come out of recession and more and more of these ships

come into operation then we will see pressure being placed on

the manning side and in particular, on the supply of manning. Also,

as more ships were ordered and delivered, suppliers were

subcontracting more of their supply needs so the quality of some of

the equipment delivered wasn’t meeting the requirement that it had

in the past.

Rob LomasI wanted to endorse what you have just said. We are beginning to

see a few stresses and strains on shore-based staff as well, not just the

seafaring staff. Last year the number of shipping companies set up

in China grew by one third and so we have a third of Chinese

companies that haven’t had more than one year’s experience running

and operating ships. That gives us a little bit of cause for concern

and the challenge for the future is where are we going to get people

experienced enough to run these companies efficiently, safely and

in an environmentally-friendly way.

Alastair EvittI absolutely agree with Rob because the numbers and statistics that

have recently been released have looked at the numbers of seafarers

rather than the capability of the seafarers and this is where I feel the

manager, be him in-house or third party, has to play a part and has

to garner the support of the owners and investors because we have

to be able to meet the demand when the good times come.

Spyros PolemisIt isn’t just the supply of good seafarers it is the fact that during the

good years there were a number of companies new to the business.

This meant that it wasn’t just the seafarers who were not up to the

job but the shipping companies themselves who were not following

the right standards and that is something we really have to watch. Of

course there are checks in place and we have all these instruments

available plus port state control but we have to keep an eye on this

development because it is inevitable that when the times are good all

kinds of people jump in because they see you can make good money

– so even though you weren’t a ship owner yesterday you might have

become a ship owner today and you don’t know what you are doing

in terms of managing a quality operation.

Sean MoloneyThat is a key factor. You have to manage a quality operation. But do

you believe the industry needs to look towards a paradigm shift

where you don’t have this massive cyclical boom and bust attitude

but you start to run your industry as other industries run theirs?

Robert Lorenz-MeyerThere is a long-term trend that we as a shipping industry have

become more of an industrialised service provider, taking care of the

transportation chain. And we earn our money by providing a service

rather than playing the market and buying low and selling high with

no real substance of value added in-between. Value added is one of

the key elements of the future. We have seen it in LNG terms where

shipping is a huge investment but is part of the logistics chain of a

broader industrial process. Margins are now smaller and maybe we

are looking at a different type of ship owner in the future as well. Of

course, owners will still try to buy low and sell high but we are

looking more to the future of larger entities, more commercial and

industrialised entities perhaps because regulations are putting a lot

of pressure on ship owners. We were talking about the experience

that ship owners and managers must have, but things are moving so

fast that experience alone is not the key to success. We have to be

ahead of the market and all the changes that are coming. For

example, I am not sure how many ship managers have started to

implement the consequences of the Maritime Labour Convention. I

think a lot of them are still shutting their eyes to it. The same applies

to ballast water treatment. How many ships ordered in China have

any space in the engine rooms for ballast water treatment systems?

So the ship owners who will really benefit are the ones who are

looking at keeping abreast of changes.

Graham WestgarthIndustrialisation is a long-term trend. When I think about legislation,

the challenge I see with the shipping industry is that legislation is

silo driven by conventions such as SOLAS and MARPOL. You have

all of these silos and we keep layering on more and more legislation

but I am not convinced this allows you to look at how you are

managing your overall risk. And I am not sure it is a sustainable

model. If you were to start again today you would adopt a different

approach. You would ask what is the enterprise risk and how do we

construct legislation to enable us to manage it in the right way. If

you created that kind of environment, that would also lead to what

we all want; professional shipping companies operating in a

professional way. Over time it would eliminate the asset players who

are coming in and out of the market.

Spyros PolemisI agree because before ISM came in, I was saying to people that

quality companies invented ISM. They were not asset players but

quality companies who were operating with this level of quality in

mind. Those fringe companies who do not aspire to the standards

laid down are not going to be able to survive and should not be

allowed to survive in the future.

Rob LomasI don’t think we have got anybody who is naturally born to be a ship

owner; we have an evolutionary aspect to shipping that has grown up

over the years. But we also have the recognition now that shipping

is profoundly able to adapt to its circumstances and to maintain an

equilibrium over the amount of regulation that is strictly necessary

to ward off the effects of the substandard operator versus the need for

people to react to the challenges of shipping in a mature way. This

is something shipping hasn’t received the necessary level of credit

for. In terms of regulation, we still need it but it throws up its own

challenges. We need to look at those residual regulatory functions

which the IMO has got, and look at them and say ‘you the IMO have

a lot more power and with IACS as the technical arm of shipping, we

will be looking more towards these regulations and demanding much

more from them while also keeping our own quality ethics right at

the forefront as owners’.

Noboru UedaOne area I believe where we need better cooperation as an industry

is in developing global regulations. We have already seen this with

regulations on low sulphur and ballast water. If our industry can’t

effectively regulate itself then local governments and interested

groups will be happy to do it for us and the outcome of these

regulations may not have the best interests of the shipping industry

at heart.

Graham WestgarthSean, you mentioned about the industry being over-regulated but it

SHIPPING ASSOCIATION ROUND TABLE SHIPMANAGEMENT


depends how you interpret that. There is too much legislation but

whether it is actually regulated correctly is the point. In the tanker

industry you have so many inspections that are totally uncoordinated

and conducted in a manner which means you are creating more work

for the ship owner. But if you can do it in a more cohesive way so

you get one picture of the ship and one picture of the company then

it would be more effective. There is too much legislation, but in

terms of the enforcement it is just totally fragmented and not

conducive to driving prudence in the industry.

Rob LomasIn terms of port state control, there isn’t a harmonised view around

the world. Once the standard has been achieved there needs to be a

lot more effort being put in to create a harmonised global system to

take serious steps forward.

Sean MoloneyCan we move on to our second question. China is emerging as the

shipowning and shipbuilding industries’ powerhouse. But what

effect will the Japanese earthquake and the resulting tsunami and the

financial crisis have on that inevitability?

Noboru UedaWhile the damage from the earthquake has been immense the effect

on the Japanese shipping and shipbuilding sectors has thankfully

been limited. A few shipyards in north eastern Japan were damaged

but the majority of building yards were unaffected. Just as with other

industries, there are some concerns about the logistical and supply

issues but these are unlikely to have a lasting effect on the Japanese

maritime industry. More importantly, Japanese shipbuilding

companies are developing some of the most important technologies

in issues such as GHG and improving ship efficiencies. And with

owners increasingly focused on these areas, I think the Japanese

shipbuilding industry has a strong future ahead of it. As for China,

it is one of the world’s largest economies so it is only natural that

China should play a large role in both shipping and shipbuilding.

However, this is not about China versus the world. Shipping and

shipbuilding are global industries and even as China grows in

importance I don’t expect that to change.

Robert Lorenz-MeyerWith China being steered by central government, it has clearly

said it wants to become number one in the shipping industry. That

was made very clear when they opened the Shanghai Maritime

Centre last year. They are number one in shipbuilding; they want

to be number one in shipmanagement; they want to become number

one in ship services; and they want to become number one in

ship finance. When I look at the difficulties well established

ship owners have today in raising finances even for good projects

we all have to look at what China can do. And that of course will

benefit the Chinese shipbuilding industry because Chinese finance

will be available for Chinese yards rather than Japanese and Korean

yards. So there is a power shift in place and China is playing a major

role.

Graham WestgarthShipping and shipbuilding as well as securing the supply chain

are probably the largest business objective that China is working on.

It won’t deviate from that path and will continue to build its

competence and capability. How it impacts on Japan and Korea is

more difficult to determine at this time. Shipbuilding, management

and ownership is a competence that takes many years to develop

so I don’t think it will be like switching a light on and off. It will

be a gradual transition but there is no doubt that China will be

a significant player in the shipbuilding and owning world in the

future.

Spyros PolemisFirst of all regarding Japan, what has happened is tragic and because

of that reason Japan will have to import more oil and coal but this

will not be the case long-term. Longer-term the Japanese shipyards

are developing new technologies and we already know about the

Green ship designs that are coming out of some of the yards. I am a

bit scared about China which is aggressively expanding its

shipbuilding capacity. And when one considers what the Chinese

Prime Minister said in Greece that he was going to give $5 billion

worth of financing in order to continue ordering in China. Well that

was dangerous because he is inducing people. Chinese shipbuilding

is then not being driven by market forces and that is dangerous

because it distorts competition. If because of this policy the Chinese

shipyards are able to outbid the Japanese or the Koreans then there

is a problem there. Also if you make it so cheap where it is difficult

to refuse then you make it difficult for shipowners to say no. If you

can order a ship for $20 million instead of $30m then people will

stop and think despite the oversupply situation. And this is what has

been happening with shipyards lowering their prices to attract

shipowners to order more ships. So overall we have to be careful

how we look at China and the effect their policies can have on every

aspect of shipping. As Graham said, the proliferation of shipyards in

China has been tremendous and their capacity to build ships is

significant. They are creating things without there being a need for

them. There are competency issues but that is where the class

societies come in.

Sean MoloneyAlastair, are ship managers concerned about China?

Alastair EvittFirst of all I would like to reiterate that we were all shocked about

what happened in Japan and we have to support all our friends and

colleagues there. Even before the tragic events there, there were

concerns in Japan about the high labour costs and the strength of the

Yen. We have seen shipbuilding orders go to China but at the end of

the day we will see orders go to that yard that can provide the right

product at the right quality and at the right cost and we will

eventually see pressure coming to China from other countries like

Vietnam and maybe the Philippines where we very recently saw an

order being placed. I think it is an evolution.

Rob LomasI would like to echo our condolences to the people of Japan for what

they have had to go through at the moment. Japan for us is the second

largest dry bulk owning country in the world and it is still very strong

in terms of its professionalism and outlook. We must always

remember that China is one of those countries which has come from

very little to a great deal in a short space of time whereas many other

countries have evolved their maritime sectors over many decades.

And China seems to have expressed an intention to reach a particular

position in world shipping in a short space of time. That will throw

up a lot of challenges in its own right. China Shipping recently

announced that its employment costs had risen by 7.5%; these are

stresses and strains on any shipowning operation which will, by

necessity, hamper growth so I think China has shown a potential, in

shipping terms, to deliver much better quality than it was doing

recently but we do need to keep a careful look out on what it is

defining its shipping policy as far as the way it affects the rest of the

world.

Sean MoloneyRobert let me get your views on this and also on the comment by a

ship broker recently that whenever there is a natural disaster shipping

is always a winner, especially when you look at the massive

rebuilding that will have to get underway in Japan?



Robert Lorenz-MeyerThat is a very difficult question to answer because we are all

commiserating with the Japanese people and I am amazed at the

discipline the Japanese people go about in rebuilding their country

and trying to solve the problems they have. But I agree to a certain

extent that any conflict or natural disaster leads to a rebuilding of

infrastructure and economies and that will probably be positive for

shipping, sad as it may be. We don’t want to have natural disasters

like that to help the shipping industry; that is clear.

Sean MoloneyI want to come onto the issue of piracy as that is dominating our

thoughts at the moment. But why does the shipping industry allow

itself and world trade to be held to ransom by what are, in effect, a

bunch of Somali thugs?

Graham WestgarthPiracy is not a shipping issue, it is a political issue and shipping is

the victim. We can’t resolve this issue, the governments of the world

have an obligation to resolve it. Often we talk about shipping being

fragmented and talking with different voices but this is one issue

where shipping is united in what it is saying. It is saying that this is

a political issue and there are certain things we need governments to

do, but we can’t do anything about the prosecution of pirates or

disabling the mother ships. The one thing we have to get out is that

this is a political issue and not a shipping industry issue.

Spyros PolemisI echo Graham’s views because it is a political issue and it starts with

world trade but also with the seafarers that man the ships. So it is by

definition a political issue. Two and a half years ago, officers

onboard warships in the area were saying to us publicly that piracy

was not their problem, ie the navies and the governments. And this

is crazy because it is a political issue and it is the governments who

have to supply the means to fight it. Who would ever have thought

that we should be arming ships, it is crazy. Merchant ships cannot

become warships and crewmembers are not trained to handle guns,

we would never allow that, so governments really have to think

carefully about what they are saying and what they are doing. We

have had a huge problem trying to convince them even to send

warships to the area. Now they believe that the problem is contained,

but the problem is not contained. Recently the pirates have started to

kill people in cold blood and that is unacceptable. There is nothing

shipping can do, but the seafarers are our people who are being

affected because irrespective of their nationalities, they are our

crews, they man our ships and they carry world trade. If you

imagined that these 750 hostages were Americans, or Europeans, the

governments would be there like a shot but because they are

Filipinos and others they do not pay sufficient attention.

Sean MoloneySo what can be done?

Spyros PolemisAs a top priority from a humanitarian and a world trade aspect, they

have to disable the mother ships at sea. That can be done easily. Not

in Somalia because the crew automatically become hostages. Also

you cannot then take the ship away. It will probably still have a cargo

onboard and more importantly people onboard. So the ships have to

be disabled at sea. That way you can bring them back to operational

condition quickly and efficiently. If you were to do this, just imagine,

you will cut by 90% the ability of the pirates to operate at any

distance from Somalia.

Sean Moloney This whole issue of releasing pirates is the most ridiculous thing in

the world.

Spyros PolemisYes, 800 of them last year.

Robert Lorenz-MeyerCatch and release policies have to stop, it is ridiculous. The risk

reward ration for the pirates is incredible and they make a lot of

money. This cannot go on.



Alastair EvittI agree that it is a political

solution not a shipping solution but the

shipping industry has to force that political will to

act. The shipping industry has been using the resources it has well

but unfortunately with Libya, Yemen and Bahrain happening at the

moment, the UN Security Council has many issues to deal with now

and shipping remains the invisible industry.

Sean MoloneyWe are lucky because we have the leaders of the shipping industry

around this table. And you are the ones being bullied by these thugs.

What would you like the political system to do to ensure that

shipping is not affected by piracy?

Graham WestgarthIf you go onto the website www.saveourseafarers.com it is clear

what we want the governments to do; it is to arrest and detain and it

is to disable the mother ships. There are five or six very clear

objectives. There was a recent meeting in London and we are now

talking about phase two. The industry accepts that to get the relevant

amount of public attention this is a campaign we will have to support

and fund for a considerable period of time.

Rob Lomas I think the downside to the options is that we fall into this frustration

trap that the governments seem to be wanting to perpetuate; we will

start to see a removal of warship support and we will see the

marginalisation of shipping and the thinking that maybe world trade

can cope with a certain degree of piracy. But all of us agree that the

eradication of piracy is the important aspect. Let’s face it, a third of

all bulk carriers were destined for the Middle East and North Africa

when they were pirated and this is something governments should

understand. Because if you start to remove shipping from that area

you will start to see a lot of regional governments coming under a lot

of pressure and this is something we should reinforce.

Graham WestgarthSuez is not the issue, the northern Indian Ocean is the issue. There

are a number of scenarios that could play out - one being that

seafarers just say we are not going to transit. It is a significant issue

for anyone who has been attacked or had their ships captured to have

their seafarers say they don’t want to transit. If you took that to its

ultimate conclusion, how long would it be before oil stopped coming

out of the Middle East?

Spyros PolemisThe pirates are able to hijack a huge tanker in Oman, that is crazy,

and then use it as a mother ship. We haven’t stopped approaching

all governments at the very top and we will continue to do this. We

are constantly discussing new moves and new approaches to heads

of governments – I am not talking secretaries and politicians.

Robert Lorenz-MeyerThe long-term solution is onshore Somalia and we will never be

successful eradicating piracy at sea. It is just not possible and that is

one of the big problems. No one has the political will to go into

Somalia.

Graham WestgarthIt is interesting to see that the skiffs being used in Somalia are being

shipped in from Dubai.

Sean MoloneyOn to our last question gentlemen; because more and more layers of

the shipping industry are facing shared problems, has the time come

for the Round Table of Trade Associations to open its doors to others

in the industry?

Alastair EvittInterManager is obviously a supporter of everything the Round Table

is doing on piracy. But what is the function of the Round Table going

forward? Well certainly not to take issues to the IMO so what can the

biggest industry body be that isn’t governmental? And that is the

Round Table as it stands now. I agree the Round Table will take the

support of any industry body that can give it the resource. As

InterManager we are standing there ready to give our support. The

Round Table is only a title and where that goes in the future I don’t

know.

Spyros PolemisAlastair is right in terms of support and that is welcome as it is from

IACS but I don’t think we should make too much of a play of the

Round Table because it so happens that the Round Table is made up

of purely shipowning organisations representing ship owners directly

and the reason for that is that the owners and their companies are

the people who are close to the ships and running the ships as distinct

to supporting organisations like InterManager and IACS and others.

It is not just piracy but there are other issues which are owner

specific. We do work with InterManager and IACS almost on a daily

basis.

Graham WestgarthIt is not whether the Round Table has four or 24 members it is a

question of how do we create an environment where on common

issues, we have one position and speak with one voice. I think the

Round Table should play a part in creating that nucleus of opinion

and reaching out to invite people into the debate to create a common

position. So I am not too hung up on organisations per se but we

need the wherewithal to get people into a room at the right time and

on the right subjects and come to the right outcome and be prepared

to go out publicly and voice that. We can do better and should do

better in inviting more participants in debating some of these key

issues.

Sean MoloneyGentlemen, thank you very much for your time. �


Maritime piracy – it is hardly

surprising to hear that this

scourge is cited at the top of the

list of urgent concerns for ship operators and

their insurance providers by Nigel Russell,

Marine Director of RFIB, one of the leading

international brokerages operating in marine

insurance and reinsurance.

While the activity of the brigands of the

high seas remains perhaps the most

damaging threat, there is much else in the

business environment to test the mettle of the

industry, Mr Russell makes clear. To specify

just three barbed hazards in its path:

governments over-reaching their own laws,

prosecutions and penalties against innocent

ships and their officers, and a crushing

burden of new regulation.

Piracy poses a special challenge, but one

that is not always fully appreciated even by

the insurance industry. Mr Russell opines: “It

seems to me that the insurance world has had

its eyes closed to the potential involvement

of terrorist groups in the Somali piracy

structure. It would certainly appear that some

areas of Somalia are very political, in an

extremist way, and therefore have terrorism

tendencies.

“This could lead to a breach of all the

insurance arrangements we make for clients

who have vessels going through the Indian

Ocean and Gulf of Aden. If there were to be

sanctions on payments of ransom to certain

groups, insurance arrangements would not

respond and that would be a major problem.

“If you are of the view that there will be

a ratcheting up of terrorism activity

following the killing of Osama bin Laden,

the terrorists could go out of their way to

prove their involvement in the Somali

situation. If there were no insurance

permitted for kidnap and ransom, that could

make conditions for world shipping pretty

difficult.”

Mr Russell is gratified by the widespread

realisation among mainstream ship owners

of the importance of kidnap and ransom

insurance; and he points out that if that were

not so, the banks that finance ships would

quickly insist that owners contracted

adequate cover to protect their assets. He

adds: “If you do not take out k&r insurance,

you are relying on a named peril, which

might have to be settled by general average,

and negotiating with the war risk

underwriter.”

He adds: “Among our clients, it is

very rare for a vessel to enter the danger

area without k&r insurance in place.”

Negotiations between owners and charterers

are such that it is usually the charterers who

pay for this cover. Importantly, the Court of

Appeal has just reaffirmed that the payment

of ransom to pirates is not against English

public policy; but there has been talk in the

US of making it illegal to pay.

We met the RFIB director at a time when

the attack on bin Laden and his family was

fresh in everyone’s mind, and co-incidentally

the day after another episode in the

increasingly fraught saga of modern piracy,

when a Spanish court had sentenced two

Somalis to terms of 439 years in prison for

the October 2009 hijacking of a fishing vessel

and seizure of the 36 crew. It was a case in

which a $3.3m ransom was said to have been

paid by an official organisation in Spain —

as usual, the authorities denied they had made

such payments.

The fundamental question is how to stem

the piracy outrages. Mr Russell is among

those who favour direct action, by way of the

United Nations changing the rules of

engagement so that merchant ships under

threat from marauders are allowed to fire

first, and so that navies are allowed to attack

pirate mother-ships. “The rules seem to

favour the pirates very much at the moment,”

says Mr Russell. “They imply that firing first

makes the armed guards themselves pirates.”

Ship owners have to defend themselves

against “friendly” governments too. Mr

Russell worries about a “mish-mash” of

liability regimes that has developed in what

is seen as an increasingly confrontational

environment. He says that “there are

governments which are just riding roughshod

over what is sensible, practical and can be

lived with,” making the lives of ship owners

more difficult and more expensive. Too many

governments view the industry as a source

of revenue by charging ridiculously high

penalties for shipping accidents which

happen within their jurisdiction.

The classic case of recent times involves

the very large crude carrier Hebei Spirit. This

resulted in the insurance industry having to

pay more than $300m for an accident “which

was no-one’s fault on the ship nor of anyone

connected to the ship.” While at anchor in

South Korea with a cargo of 260,000 tons of

crude oil, the ship was struck by a Samsung

Heavy Industry crane barge under tow. A spill

of 10,500 tons of crude led to the owner’s

P&I club paying some $150m in claims, with

a further $180m to come from the

International Oil Pollution Compensation

MARKET SECTOR INSURANCE


Open your eyesto piracy’s special challenge

By James Brewer

It seems to me that theinsurance world has had itseyes closed to the potentialinvolvement of terroristgroups in the Somali piracystructure. It would certainlyappear that some areas ofSomalia are very political,in an extremist way, andtherefore have terrorismtendenciesNigel Russell, Marine Directorof RFIB

“

“

Fund, and the South Korean government

meeting the balance, estimated at between

$120m and $170m. The tanker master and

chief officer were detained for 18 months,

ahead of being prosecuted for allegedly

failing to do enough to prevent the leak.

“That particular incident may not be

affecting you,” says Mr Russell, addressing

ship owners in general, “but the culture is. At

the end of the day, it is going to cost you more

in P&I premium because the amount of

compensation is going up. Countries are

whacking up limits of liability because they

want more money for themselves.”

He cites a disturbing case in which the

Australian federal and Queensland state

governments sought at least A$7.5m more

than the A$14.5m maximum set by the 1976

Convention on Limitation of Liability for

Maritime Claims. This related to an incident

in March 2009, when the multi-purpose ship

Pacific Adventurer lost 31 containers

overboard and released 270 tonnes of fuel oil

during tropical cyclone Hamish. The premier

of Queensland exerted pressure on Swire,

parent of the ship’s then owner China

Navigation Co, to improve its contribution to

clean-up costs, and threatened action against

the airline Cathay Pacific, another subsidiary

of the Swire group. Canberra went on to

increase by 17% the Protection of Sea Levy,

a tax on shipping which funds its National

Marine Oil Spill Contingency Plan.

Efforts from many quarters to push limits

of liability higher ignore the danger that P&I

clubs would find it difficult to offer adequate

cover, warns Mr Russell. A swing to

unlimited liability in the US, for instance,

could dissuade owners from trading to that

country, despite the freight rewards that

might be on offer.

Mr Russell advises operators to take

particular care over port calls in Venezuela,

where smugglers have attached what are

known locally as “narco-torpedoes” (hidden

cocaine consignments) to the hulls of

unsuspecting ships. Several vessels –

operated by German, Italian, Greek, Turkish

and other companies – have been detained for

long periods in recent years, and many ships

now cover vulnerable areas with protective

grilles.

Venezuela has just increased the

penalties for alleged involvement, including

prison terms of up to 25 years for mariners

even when they are not directly responsible.

What happened to the Ukrainian master and

first officer of the Cayman Islands-flag B

Atlantic still rankles in maritime circles.

The two, who insisted they were innocent,

were sentenced to nine years in a

Venezuelan prison, and only released to

serve their term in Kiev. Mr Russell says

that the Venezuelan authorities are not even

abiding by their own law which obliges a

vessel to be released if the owner is not

charged within 45 days.

In the light of all this, the advice is that

ship owners should review the whole

question of whether to send their ships to the

South American country. Mr Russell

recommends that if they do need to

participate in the trade, owners should buy

loss-of-hire cover against the risk of detention

following the discovery of drugs on or

attached to the ship, but reminds them that

such cover runs out after a stipulated period.

Despite all these uncertainties, it looks as

though ship operators can hope for a

reasonable amount of stability in their

insurance expenses. P&I premiums have

been less volatile in the last couple of years,

and the hull and machinery market has been

fairly flat for a long time. A central issue is

what will be the impact of a series of

catastrophes that have hit reinsurers hard: the

earthquake in Japan, the two ‘quakes in New

Zealand, floods in Australia, the 2010 ‘quake

in Chile, and the this year’s tornadoes and

floods in the southern US. A surge of red ink

in the recent results of reinsurance groups is

forcing them to take a harder line in seeking

rate increases from direct insurers, who in

turn will be asking their clients, including the

ship owners, for more.

MARKET SECTORINSURANCE


Clay Maitland, managing partner

of the International Registries

Inc (IRI), the administrator of the

Marshall Islands flag state, attempted to

put the record strait on the IRI’s anti-

piracy stance at a recent meeting in

London.

“The Marshall Islands cannot

accept military vessels,” Maitland said

emphatically.

He was replying to media reports

which suggested the flag state would

register vessels providing armed escorts

through the pirate infested water of the

Gulf of Aden and the Indian Ocean.

“Action must be undertaken under the

rule of law, but at present this doesn’t

exist,” he said. He went on to call for

naval vessels to be given ‘rules of

engagement’ when facing alleged pirate

vessels in Somali waters.

He said that the Marshall Islands flag

state was not against the use of armed

guards, but was definitely against the use

of a private navy. “Armed guards are a

better idea than people in 40 ft boats,” he

asserted.

Maitland said that although the naval

coalition forces had met with success in

the Gulf of Aden, this had resulted in

driving the pirates out into the Indian

Ocean, which is almost impossible to

effectively patrol.

“The ‘catch and release’ tactics

imposed by many governments on their

navies have not been helpful in containing

piracy, but where naval forces stop,

search, destroy and occasionally release

suspects, has been more effective in

deterring attacks,” he said.

He attacked so called industry

spokesmen who advocated action without

offering specifics. Maitland expressed

concern that a “mindless escalation of

violence at sea will extract a heavy

price from seafarers, who are likely to

be held hostage and subject to summary

execution, much in the manner practised

by terrorists.”

Maitland also confirmed that the

flag state would welcome proposed

International Convention on the

Suppression of Piracy, currently being

discussed at the IMO.

He went on to outline the things that could

and should be done, such as:

• Persuade governments to enact strong

national laws, promoting the ability to

pursue and capture pirates and destroy

their ‘motherships’ by criminalising

‘conspiracy to carry out piratical acts’

• Implement UNCLOS and SUA 1988,

which provide adequate international

legislation to permit such national laws

to be enacted

• Continue to require the insurance

industry to demand the adoption and

following of best management

practices (BMP)

• Ensure that navies must become more

flexible and adaptable to the kind of

‘asymmetrical’ patrol and control work.

For which larger grey-hulled vessels

are proving inadequate

Maitland warned that the suppression

of piracy is going to require a much

greater level of specialised training. The

current convoy escort programme may be

more effective than is currently suggested,

perhaps in the hands of the Coast Guard

or naval forces.

Maitland in ‘rulesof engagement’ call

DISPATCHES

Ship owners are facing mounting

pressure to move their trade routes

away from the coral reefs following a

study just published by more than

20 specialist organisations led by the

authoritative World Resources Institute

(WRI) of Washington, writes Thomas

Orszag-Land. They warn that the reefs,

which provide the livelihood of some 275m

people, are gravely affected by ship-

generated pollution and other destructive

environment management practices.

Their action call issued after three

years of inquiries is in line with another

new report published by an independent

consultant into last year’s grounding of

the Chinese panamax Shen Neng 1 on

Australia’s Great Barrier Reef. It concludes

that a projected increase of shipping in the

area would make similar accidents

unavoidable.

The economically productive value of

the world’s coral reefs is put at more than

£60bn a year. The risks posed by shipping to

this global resource include the polluting

discharge of solid wastes, nutrients and toxins

and physical damage caused by anchors and

ship groundings. But ship-generated

pollution is only one of many immediate

threats generated by industrial development

to three-quarters of the coral reefs.

The other threats identified by the report

include destructive fishing techniques, short-

sighted coastal development planning and the

relentless assault of chemical and sediment

runoffs from the shorelines. These factors are

compounded by global warming and the

steady acidification of the oceans that have

led to bleaching – the exposure of the white

skeletons of coral reefs. Specialists reckon

that more than 90% of all the reefs will be

under acute stress within three decades.

These are the main recommendations of the

report of greatest interest to ship owners:

� Designate safe shipping lanes;

� Expand maritime protected areas to

safeguard reefs and adjacent waters;

� Reduce the disposal of waste by vessels

at sea;

� Increase regulation of ballast discharge

from ships; and

� Improve the management of offshore oil

and gas activities.

The report urges national authorities “to

restrict the areas where ships are permitted to

navigate to deep waters (in order) to protect

reefs from groundings by large vessels”. It

elaborates that “establishing areas where

vessels of all sizes may safely drop anchor

Ship owners warnedover ailing coral reefs

DISPATCHESDISPATCHES

76 SHIPMANAGEMENT INTERNATIONAL ISSUE 31 May/June 2011

and restricting all vessels from entering

certain critical habitats should protect reefs

from physical damage“.

The document – Reefs at Risk Revisited

(www.wri.org/publication/reefs-at-risk-

revisited) – includes case histories of several

current, collaborative coral reef management

and rehabilitation programmes, some in areas

adjacent to major shipping routes and even

harbours, launched in the hope of halting or

reversing the trend.

It is a seminal analysis that looks far

beyond the ground covered by WRI’s 1998

landmark study Reefs at Risk. That earlier

study was the first to expose the global

dimensions of the degradation of coral

reefs. It motivated the shipping industry,

governments and many other authorities

concerned with maritime transport, marine

ecology and coastal development planning to

confront the escalating tragedy.

Maritime shipping is growing rapidly

compared to other forms of transport,

observes the new report, with estimates of the

gross tonnage of international commerce up

by 67% between 1980 and 2003. As shipping

expands, the risk posed by invasive species

also increases since the bio-fouling on ships’

hulls and the threat of the accidental release

of ballast water remain difficult to manage.

Despite the last world recession, cruise

shipping has also continued to expand, with

the number of cruise passengers up by 7.4%

a year since 1980, and 118 new ships

launched since 2000. However, this trend has

been somewhat offset by a significant,

concurrent improvement of the waste

management standards of the cruise industry.

The report notes that some ships have

introduced advanced sewage treatment and

shipboard recycling programmes. They have

also increased the use of biodegradable

alternatives to plastics.

But the report makes gloomy reading. Dr

Jane Lubchenco, an eminent marine ecologist

and Under-Secretary of Commerce for

Oceans and Atmosphere in Washington,

describes it as “a wake-up call” for ship

owners and other business leaders as

well as policymakers, maritime transport

administrators and scientists everywhere.

Anyone who knows anything about the

oceans must be impressed by the beauty, the

huge variety of life and the enormous

economic benefits bestowed upon humanity

by the coral reefs, comments Al Gore, the

environment campaigner and former US Vice

President. He fears that, “if we fail to address

the multiple threats they face, we will likely

see these precious ecosystems unravel... We

simply cannot afford to let that happen.”

But Lauretta Burke, a lead author of the

WRI report, emphasises: “There is hope.

Reefs are resilient and we can buy time as we

find global solutions to preserve the reefs for

future generations.”

That is a fearsome challenge, its

magnitude illustrated by the lessons learned

from the Shen Neng 1 grounding on the Great

Barrier Reef in April 2010.

The 70,200-dwt, 1993-built Chinese ship

had sailed from the port of Gladstone in

Queensland fully laden with 72,000 tons of

coal and crashed at full speed into the

Douglas Shoal in a particularly fertile and

vulnerable ecological area. The ship also

carried 1,075 tons of heavy fuel oil, a large

volume for a projected two-week voyage

even for a ship that size, necessitated by

China’s notorious port congestions that might

have imposed on it a long wait before

unloading.

An analysis of the grounding by the

consultant Graham Miller, published by the

Queensland government makes ominous

reading.

It praises the “immediate, extensive and

effective” salvage operation that prevented a

potential environmental catastrophe. But it

also states that the experience “highlights the

vulnerability of Queensland's coastline to

significant oil spills... Increased shipping

movements and the continued likelihood of

severe climactic events suggest that the threat

of marine oil spills will remain and that future

oil spills are inevitable.”

Dr Gully Levelly, the Australian Director

of Conservation at the influential World

Wildlife Fund, has declared: “The current

lack of safeguards over shipping in the Great

Barrier Reef is akin to playing Russian

roulette with one of the world’s most

treasured natural icons.” All this may well

strengthen the call made by the WRI and its

associates for increased regulation to protect

vulnerable areas from shipping.

The WRI report projects a grim outlook

for that massive reef structure, most of which

now comprises the protected Great Barrier

Reef Marine Park. The report says the

greatest threat to its vulnerable ecosystem lies

in the intensifying effects of climate change

that have already led to widespread bleaching

as well as declining coral growth rates.

But it quantifies the threat of marine-

based pollution and damage as “moderate”

for Australia’s reefs, driven largely by the

relatively busy shipping lanes that traverse

the area particularly in the north. It describes

the Great Barrier as the largest and one of the

best managed coral reef ecosystems in the

world, supporting more than 50,000 jobs and

yielding an estimated annual revenue of

£3.45bn from fishing, recreational use and

tourism alone.

DISPATCHES

Anyone who knowsanything about the oceansmust be impressed by thebeauty, the huge variety oflife and the enormouseconomic benefitsbestowed upon humanityby the coral reefsAl Gore, the environmentcampaigner and former USVice President

“

“


The world’s reefs shelter more than

4,000 fish species and some 800 types of

coral. The new WRI report provides the most

detailed and reliable analysis ever assembled

of their fight for survival. Its conclusions are

starker and they are based on far more

scientific data than those contained in the

1998 study.

For example, it includes a new reef map

constructed from data obtained by remote

sensing space satellite technology providing

imagery whose resolution is 64 times greater

than that used for the previous analysis. It

also makes use of the latest studies in

industrial, economic and demographic trends

as well as huge advances in our experience

of shipping technology, oceanography and

climatology achieved during the past 13

years.

The hundreds of scientists contributing

to the WRI report consider that the severity of

the global emergency has increased by nearly

a third during that period. They reckon that

the marine-based sources of pollution and

damage alone, emanating mostly from the

ports and widely distributed along the

shipping lanes, threaten perhaps 10% of the

world’s reefs.

They identify the waters of the Atlantic,

the Middle East and Australia as the regions

most exposed to risks generated by the

shipping industry. The Atlantic is affected

mainly by shipping attracted by rich markets

and served by many freight terminals and

cruise ship ports in the area, the Middle East

by the hydrocarbon traffic and Australia by

the shipping lanes passing inside and across

the Great Barrier Reef.

And they name Comoros, Fiji, Grenada,

Haiti, Indonesia, Kiribati, Philippines,

Tanzania and Vanuatu as the most desperately

vulnerable among the 27 countries most

exposed to the social and economic effects of

coral reef degradation.

The WRI is an action-oriented

environmental think tank that collaborates

with industry, governments and civil society

in search of solutions to global challenges.

Its principal partners in the current

project included specialist units of the United

Nations Environment Programme as well as

the International Coral Reef Action Network

grouping many marine science organizations,

the Global Coral Reef Monitoring Network

active in more than 80 countries and the

Nature Conservancy uniting more than 100

marine protection programmes.

“Reefs offer multiple benefits to people

and the economy,” observes Dr Mark

Spalding, Senior Marine Scientist at the

Nature Conservancy and another lead author

of the report. “They provide food, sustain

livelihoods, support tourism, protect

coastlines and even help to prevent disease.

Well managed marine protected areas are

among the best tools to safeguard them.”

That is why, he explains, the advice

contained in the report for the protection of

the reefs is focused on “people as well as

nature: ensuring stable food supplies,

promoting recovery from coral bleaching and

acting as a magnet for tourist dollars.“

He goes on: “We need to apply the

knowledge we have to shore up existing

protected areas, and to designate new sites

where threats are the highest.”

The report recommends a long list of

remedies including environmental control

measures at the local level, which its authors

believe are “essential for mitigating marine-

based pollution and damage to reefs... Such

measures include developing infrastructure at

the ports to accept and properly dispose of

ship-generated waste, improving further the

wastewater treatment systems on cruise and

cargo ships, routing shipping traffic away

from reefs and developing effective oil spill

contingency plans.

“Regulations that require the disposal or

exchange of ballast water far offshore in deep

waters before ships approach the ports are

important for reducing the risk of invasive

species entering coastal waters. Expanding

the availability of fixed moorings for

recreational craft can reduce anchor damage

and the likelihood of groundings. Educating

shipowners can also help with compliance.

Monitoring should include assessments of

shipping practices and holding facilities

along the supply chain.”

More than a quarter of the world’s coral

reefs are under some form of protection in

various marine reserves, the report shows, but

it asserts that only 6% of that area is properly

administered. The report offers many

suggestions based on analyses of

management experience and scientific

observation to improve effectiveness. �

DISPATCHES


Examples:� Egypt – A coral reef in the Red Sea

near the Suez Canal is exposed to

pollution from a constant super-tanker

traffic, an adjacent major shipping port

and a busy coastal highway nearby. The

corals suffered a substantial oil

pollution and subsequent bleaching

incident in 2005, but they have

spontaneously recovered to thrive

unexpectedly under extremely harsh

environmental conditions. Marine

biologist Zaki Moustafa of Duke

University comments that the ability of

some corals to survive against such

odds “may hold the key to the

preservation of reefs elsewhere.”

� Florida – The major American ports

of Miami, Everglades and Palm Beach

have attracted thousands of big freight

and cruise ships a year to the large and

vulnerable South-east Florida Coral

Reef Ecosystem. Many ships have been

involved in grounding and anchor

dragging incidents during recent years,

causing substantial ecological damage.

Acting in conjunction with the shipping

industry and various federal, state

and civil organizations, the port of

Everglades moved its anchorage away

from the reefs in March 2008, ending

all such major incidents in the vicinity.

Following the year-long hiatus in

ordering after the global market

slump of 2008, Greek principals re-

emerged as prime movers in newbuild

contracting during 2010. Notwithstanding

still large order backlogs in the main vessel

sectors, with newbuild delivery levels

weighing down on recovering trade

volumes, Greek owners have continued to

enter into fresh commitments during 2011.

This unerring activity may be attributed

to a range of factors including lower

shipbuilding prices, the cash-rich situation of

many companies and concerns over

alternative investment avenues, selective

financing availability, new charter

opportunities and moves into different areas

of the market.

Signalling such a strategy, in entering a

new field, European Navigation recently

placed an $186m order with STX Offshore

& Shipbuilding of South Korea for two

suezmax-size shuttle tankers, due to be

delivered by April 2013. It is understood that

the vessels will be engaged on a long-term

project with Brazilian energy group

Petrobras.

Towards the end of last year, Tsakos

Energy Navigation (TEN) entered into a

similar employment agreement covering a

pair of 157,000dwt shuttle tankers contracted

from Sungdong Shipbuilding. The DP2-class

vessels are expected to be handed over by the

Korean yard in December 2012 and January

2013, and represent a combined purchase

cost of $184m.

Hyundai Heavy Industries(HHI)

announced in April that it had clinched an

order to build four 5,000 teu boxships to the

account of Container Carrier Corp of Greece.

The contract includes options on four further

vessels, and underscores the Greek

community’s increasing involvement in the

container liner segment as well as the general

upswing in fresh business for cellular

tonnage.

In the meantime, Greek owners have

continued to take measures which play to

their longstanding strengths in the most

populous tonnage categories. Almi Tankers

recently booked two 320,000dwt VLCCs in

Korea, keeping faith with Daewoo

Shipbuilding & Marine Engineering in a deal

worth around $210m, and following previous

contracts valued at about $650m all-told. The

crude carriers are due in the second half of

2013.

South Korea’s vigorous shipbuilding

industry was also the beneficiary in March of

a major new stage of fleet investment

initiated by one of Europe’s leading lights in

the north/south liner trades and refrigerated

container transportation. Hamburg-Sud

placed six 9,600 teu box ships with HHI, for

delivery between May 2013 and January

2014, and took out options on four further

vessels.

The design accommodates high-cube

boxes and up to 1,700 reefer containers, and

is destined to bring increased sailing capacity

and scale economies to the Hamburg-based

company’s east coast South American trades

with either Europe or Asia.

At the time of writing, A.P.Moller-

Maersk looked set to take up its first option

on 10 vessels of the 18,000 teu Triple-E class,

following the opening 10-ship deal with

Daewoo Shipbuilding & Marine Engineering

in February. The Maersk programme, and

reports of competitor groups aiming to raise

the capacity of existing newbuilds in the

’ultra-large’ category to around 16,000 teu,

underscored the industry’s bold drive for new

unitary scale in liner shipping.

While bespoke new construction, at a

cost of $190m per ship, shapes the group’s

latest, seminal stage of containership fleet

development, Maersk has taken a different

tack in the crude carrier domain. Expressing

the view that secondhand and resale deals in

the crude carrier category can presently offer

superior value over newbuilding, Maersk

Tankers purchased three VLCCs in hand at

HHI’s Ulsan yard from original contractual

owner Great Eastern Shipping of India. The

first of the tankers is due for completion in

January 2012.

National Shipping Company of Saudi

Arabia (NSCSA), one of the prime exponents

of deepsea ro-ro cargo transportation, has

chosen Hyundai Mipo Dockyard to build a

new generation of 26,000dwt vessels to serve

the operator’s liner trade between the US East

Coast, Red Sea, Arabian Gulf and Indian

subcontinent.

The contract encompasses four firmly-

ordered ships, due between the end of 2012

and end-2013, plus fifth and sixth sisters on

option. The series will supersede NSCSA’s

larger class of four delivered by Kockums in

1983. Designed by Knud E.Hansen of

Copenhagen, the newbuilds have a stronger

accent on ro-ro and project cargo, and far less

provision for containers than the company’s

existing con-ro class.

The development of a new solution to

tap the ocean floor’s mineral wealth, and the

formation of a strategic partnership between

a Canadian offshore mining group and a

German shipping and ship management

company, opens the way to an unusual

shipbuilding project.

Under the pact, a joint venture is to be

formed by Nautilus Minerals and Harren &

Partner to own and operate a production

support vessel to serve as the operational base

for the production of high-grade copper and

gold ore in the Bismarck Sea, off Papua New

Guinea. Harren will also provide the crewing,

logistics and shipmanagement services to the

joint venture.

Harren has completed the preliminary

design for the 18,800dwt vessel, of

multipurpose dry cargo ship type, which will

house some 30MW of generator power,

seafloor production tools and associated

pumping machinery. Construction is to be

placed with a German shipyard, and delivery

is sought during the first half of 2013. �

79

NEWBUILDCONTRACTSCOMPETITIVE PRICES,

BOLD STRATEGIES

FUEL CONTINUING

ORDER FLOW

By David Tinsley

NEWBUILDING


DISPATCHES

Agreement by the big reinsurance

companies to refrain from

providing cover for ships doing

business with Iran has unleashed a sea-

change in the effectiveness of the United

Nations sanctions mounted against the

Islamic Republic.

Less than a year ago, Iran’s maritime

transport strategists seemed able to sail

effortlessly through the Western-led

sanctions regime. But as previously reported

in SMI, the international shipping and

industrial classification giant Det Norske

Veritas is already refraining to bid for up to

five potentially winnable contracts a month

because of the sanctions (SMI, Jan/Feb

2011) and the trend may well intensify.

The effect of the change is being

felt throughout the shipping business and

in investment flows, trade, insurance,

banking, energy, construction and many

other related industries both in Iran and its

traditional trading partners.

Western ship owners are losing business

to their competitors in China

and other countries eager to seize the

consequent profit opportunities. Ships

smuggling proscribed nuclear

technology to Iran and

illegal weapon

consignments from Iran to Islamist terrorists

elsewhere are being arrested in Asia and

Africa. Ayatollah Ali Khamenei, the

supreme leader of the Iranian theocracy, has

just celebrated the Persian New Year by

calling for an “economic Jihad (struggle)”

to break the sanctions.

For the immediate future, Iran’s ability

to resist the will of the West as expressed

through intense commercial pressures may

well be decided by its battle to retain a

presence in the maritime trade routes. The

outcome will depend on Iran’s ability to

keep afloat its sanction-restricted commerce

onboard ships – its own as well as those on

charter – mostly sailing under foreign flags.

This involves a great deal of deception.

Iran has been subject to increasingly

tough sanctions authorized by the UN

Security Council in order to dissuade it from

attaining a nuclear war-fighting capability.

The Tehran government insists that its

feverishly accelerating nuclear power

development programme is

entirely peaceful.

But it has failed to give credible

assurances of that to the UN’s Vienna-based

International Atomic Energy Agency,

guardian of the crucial 1968 Nuclear Non-

Proliferation Treaty. The Western allies are

determined to defend the treaty, if possible

by peaceful means. The sanctions are in

place to avert war.

They date back to the Reagan

presidency, applied originally to punish Iran

for sponsoring international terrorism.Iran’s

secret nuclear development programme

began at about the same time, but it came

to light only in 2003. Today, Iran is within

three years of assembling a workable

nuclear bomb, according to weapons

scientists.

But its rapidly developing nuclear-

capable missiles can already hit any target

within the Middle East as well as

Southern Europe including

Russia. This

Iran struggles to hang on to the

shipping lanes


has unleashed a nuclear arms race in the Middle East,

with regional rivals putting their faith in the theory of

Mutually Assured Destruction (appropriately named

MAD) – a concept discarded by the super-powers 20

years ago at the end of the Cold War.

The last substantial tightening of the UN

sanctions screw was imposed in July 2010 banning

Iran’s trade in arms and nuclear technology and

hitting investment in the shipping, insurance and

other key industries. Further provisions have been

enacted separately by the US, the European Union,

Canada, Australia, Japan and many other countries.

This has led to the designation of many

enterprises connected with the troubled IRISL

worldwide – including the Maltese concerns Marble

Shipping, Bushehr Shipping and ISI Maritime,

several in Malaysia and Singapore and no fewer than

102 others in South Korea alone – on charges of

assisting proscribed nuclear activities in Iran.

Sean McGovern, General Counsel of Lloyd’s of

London, the biggest insurance market in the world,

immediately announced its compliance with the

sanction provisions. By August, the London marine

insurance market passed a clause to protect

underwriters from breaching the rules.

Neil Roberts, a Senior Technical Executive at

Lloyd’s Market Association, explained:

“Underwriters have taken steps to ensure they

do not contravene the sanctions. One of the

ways of doing that is to write carefully the

allowed business using an appropriate

exclusion or limitation clause.”

Similar action was taken by such other major

European financial concerns as Munich Re, Swiss

Re, Allianz, Pricewaterhouse Coopers, Ernst &

Young and KPMG. The field is now open to a few

fledgling Chinese and Russian reinsurers. But they

lack adequate financial capacity to meet the demand.

And even in cases where insurance cover is still

available for the Iran trade, albeit at exorbitant rates,

remittance of claims to clients would be difficult

because the big international banks are also obliged

to refuse handling such funds.

Several Western banks have agreed to pay

substantial penalties to clear charges of violating the

sanctions regime by transmitting funds secretly to

listed Iranian enterprises. The biggest banks that

have declared their intention to refrain from trade

in Iran or to restrict severely their operations

there include Barclays PLC, Credit Suisse AG,

Deutsche Bank, Lloyds TSB, Dresdner Bank and

Commerzbank.

One significant exception to the

banking rule has been Europaisch-Iranische

DISPATCHES


Citing the sanctions provisions,Russia has suspended a contractfor the delivery of an advanced$800m, S-300 air defence systemordered to protect Iran’s secreturanium enrichment facilities froman eventual Western attack

““

Handelsbank of Hamburg that has been

instrumental to the transmission of billions

of dollars from India to Iran for hydrocarbon

purchases.

The authoritative newsmagazine Der

Spiegel understands that the transactions

were tolerated by the Berlin government –

until a recent personal intervention by

Chancellor Angela Merkel, a passionate

critic of the Ayatollahs’ nuclear power policy

and human rights record – in order to

facilitate the release of two German

journalists imprisoned in Iran for

interviewing the son a woman condemned

there to die by stoning. The journalists have

now been freed. India has just been

persuaded to refrain from making further

money transactions to Iran through Germany.

Other major enterprises ending their

operations in Iran or declining to launch new

ones there include the following: the

Japanese shipping company NYK Line;

Infineum, a British joint venture with

ExxonMobil; Royal Dutch Shell; the French

oil company Total; the biggest Spanish oil

company Repsol; LUKoil of Russia; Statoil

of Norway; the Turkish oil refiner Tupras; the

Independent Petroleum Group of Kuwait;

Petronas of Malaysia; Reliance of India,

formerly one of Iran’s main gasoline

suppliers; the Italian transport, energy and

defence conglomerate Finmeccanica; the

Swiss-based commodities trader Glencore;

and the German chemical trader Helm, steel

maker ThyssenKrupp, gas and engineering

concern Linde, luxury carmaker Daimler and

engineering conglomerate Siemens. The list

is very long.

But Iran has just reached a trade accord

with the administration of President Robert

Mugabe of Zimbabwe in landlocked Central

Africa, another international pariah with a

dismal human rights record, for the export of

oil in exchange for large quantities of

uranium. Iran’s other strategic trade partners

include North Korea and China.

A veto-wielding permanent member of

the UN Security Council, China does not

approve of the sanctions regime. But it is

profiting by the effects of the sanctions that

have resulted in Iran’s growing dependence

on the hungry Chinese energy markets.

During the first two months of 2011, China

increased its oil imports from Iran by 62%

compared to the same period a year earlier,

according to Xinhua news agency. And

China's Sinohydro Corpn. has also just

signed a $2bn contract to build a

hydroelectric dam in Western Iran.

Russia, which has built the recently

completed $1bn Bushehr atomic reactor

at the heart of the Iran nuclear power

controversy, is another permanent UN

Security Council member. The Kremlin has

traditionally protected Iran from the brunt of

the UN sanctions and enjoyed a lucrative

arms export trade with its client. But it has

come to share the concern of the West over

Iran‘s true nuclear ambitions.

Citing the sanctions provisions, Russia

has suspended a contract for the delivery of

an advanced $800m, S-300 air defence

system ordered to protect Iran’s secret

uranium enrichment facilities from an

eventual Western attack.

It has also rejected a proposal by Khazar

Sea Shipping Lines of Iran for the outright

purchase of Alpha Port at Astrakhan on the

River Volga. The port can handle big ships

and has access to the Russian Railways. The

offer was declined, explains a spokesman

for the Russian committee on foreign

investment, because the Iranian shipping

enterprise had failed to disclose the identity

of its true owners and it was suspected of

being engaged in sanction breaking.

Iran has responded by announcing plans

to build rail and road links to the overland

freight transport infrastructures of its

allies Syria and Lebanon accessing their

Mediterranean ports. Another current

proposal is the erection of an international

transport hub and industrial centre linking

Iran and neighbouring Iraq. One way or

another, the ayatollah’s projected “economic

Jihad” is intended to counter’s Iran’s

progressive retreat from the maritime trade

routes.

Iran’s own 165-vessel fleet is probably

the biggest in the Middle East and the most

modern in the world. Its trade is mostly

concentrated on China and elsewhere in Asia

as well as Africa and South America. Many

IRISL ships are registered in Hong Kong,

Malta and Germany. These vessels carry a

high financial risk.

In the absence of reputable cover, their

insurance is provided by the virtually

unknown Iranian enterprise Moallem whose

own reinsurance supposedly guaranteed by

the Iranian state is in serious doubt. And in

the current climate of fear generated by

threats of nuclear terrorism, the ports are

inclined to search for dubious cargoes and

the banks to foreclose mortgages held by

unwelcome customers.

Five IRISL ships impounded during

recent weeks have been rescued from

bargain-hunters through a default payment

in excess of $200m to the French banks

Credit Agricole Corporate and Societe

Generale as well as the Export Import Bank

of Korea. Three of the ships had been held

in Singapore, one i n Hong Kong and one in

Malta.

Mohammad Dajmar, Chairman of the

Iranian shipping line, has vowed that no

other IRISL vessels would be seized ever

again for financial reasons. He could be

sure of that only if the company had

managed to settle its commitments early.

But it is burdened with heavy financial

exposure. Market watchers say 80 of the

new IRISL ships carry substantial

outstanding loans and many of its older

vessels were recently remortgaged.

Adam Szubin, chief of the American

Treasury’s office in charge of the sanctions,

reckons that the shipping line’s “successive

loan defaults and its threadbare insurance

coverage have left it with massive debts...

And in the meantime, IRISL cannot sail

into a foreign port without fear that its

vessel will be searched for contraband

under UN resolutions, or seized outright.”

Another US Treasury official adds that

the evasive tactics employed by Iran to beat

the sanctions include repainting or

renaming ships, falsifying shipping

documents and assigning vessel ownership

to front companies abroad.

Datuk Seri Hishammuddin Hussein,

the Malaysian home minister, believes his

country has emerged as a midshipment

transit point in the proscribed trade of

weapons of mass destruction. He made his

statement after the arrest in March of a

consignment of nuclear technology on

board a ship bound for Iran from China.

Secret diplomatic cables disclosed by

WikiLeaks have just named two more

Malaysian enterprises accused of acting as

Iran’s front companies.

Israel also arrested a vessel in the high

seas during March carrying a cargo of

sophisticated armaments including naval C-

704 missiles designed in China and

manufactured in Iran. The weapons were

bound for the Islamist organization Hamas,

a client of Iran, in the Gaza Strip.

Adm. Eliezer Marom, the Israeli Navy

commander, said the missiles would have

been effective against commercial shipping

and gas barges along the coastline as well

as warships.

Senegal and Gambia have severed

diplomatic relations with Iran following

the arrest in the port of Lagos late last

year of consignments of arms from that

country, intended for terrorist organisations

operating in their territories. Illegal Iranian

arms shipments disguised as civilian

cargoes have also been intercepted recently

in Italy, Turkey, Egypt, Sudan and

elsewhere. �

DISPATCHES


The Kremlin hastraditionally protected Iranfrom the brunt of the UNsanctions and enjoyed alucrative arms export tradewith its client. But it hascome to share the concernof the West over Iran‘s truenuclear ambitions

“

“

LIVE

Objectsofdesire

Build your own ship

A piece of maritime history could be yours for the making with thisHMS Victory model kit.

The HMS Victory is the only surviving warship to show theskills of 18th century shipbuilders and you can capture thecharm and craftsmanship involved with your very own ship-building.

The magnificent double-planked, laser-cut 1:75 scalereplica measures just under 53ins in length whenassembled. It is constructed from wood and brass and

comes with plans and step-by-step instructions to guide youthrough the building process.

HMS Victory Kit£299.99www.presentsformen.co.uk

Tap to the Tip

This funky little radio is great for when you are at home or on the move –all you have to do is tip it on its side to change radio stations.

Because it is an internet radio, the number of stations you can listento is huge – over 10,000. All you need to do is connect it to your computer,assign each side of the cube a radio station and get tipping!

The Tip & Tilt radio works via wireless broadband. There are no buttons tofiddle with and if you want to mute it, all you need to do is tip it onto its frontspeaker. Volume is controlled by simply tilting the radio backwards or forwards.

The radio is available in four different colours and has a rechargeable battery,mains adapter and headphone/line-out socket.

Tip & Tilt Wireless Internet Radio£89.99www.iwantoneofthose.com


Mini microscope

You can transform your iPhone 4 into a pocket-size laboratory withthis Mini Microscope made especially for the handset.

Armed with a 60x zoom, the microscope comes complete with threeLEDs to illuminate your close ups and, incredibly, one of them will evenverify watermarks, so it is great for checking larger currency notes.

Of course, what you choose to zoom into it is entirely up to you, butyou could make use of it when bug-catching with children, taking up-close pictures, model-making or even inspecting parts of a ship.

iPhone Mini Microscope£29.99www.firebox.com

OBJECTS OF DESIRE

LIVE OBJECTS OF DESIRE

Carry cash in style

You can be confident in keeping your money secure with this new arrival to the LouisVuitton men’s range.

The Zippy Vertical wallet is the height of elegance in durable Damier Graphitecanvas with grained calf leather lining.

It offers a refined way of carrying cash, cards and coins with eight credit cardslots, a large compartment for notes, zipped coin compartment and two additionalcompartments for receipts and papers.

Louis Vuitton Zippy Wallet£420www.louisvuitton.com

Boating bling

Jewellery designer to the stars Theo Fennell, known as ‘The King of Bling’, countshis team of craftsmen as among the most the talented in the world and thisstunning solid silver model sailing boat is just one of the pieces offered by theLondon-based company.

The collection comprises exceptional and one-off pieces, from his signatureskull design jewellery to barware and curios.

The solid silver J-Class Yacht shown here measures 24 inches in height,but you could also commission a copy of your own favourite vessel to a scaleof 1:24, or as required.

Solid silver model boatfrom £10,000

www.theofennell.com

Photos in an instant

Do you have lots of photos trapped inside your mobile phone or digitalcamera? Even better, would you like to be able to print them off quicklywhile you are on the move?

This ultra-sleek inkless PoGo Instant Photo Printer, from Polaroid,would come in very useful for business trips and holidays.

All you do is send your pictures to the PoGo wirelessly viaBluetooth or with a USB lead and watch the gadget deliverimages on a 2ins x 3ins side of sticky-back photo paper in under60 seconds. The photos can then be stuck anywhere you like.Prints are smudge-proof, water resistant, fade resistant andtear-proof.

The PoGo Instant Photo Printer is powered by arechargeable battery or directly via mains and holds 10sheets of paper at a time.

PoGo Instant Photo Printer£39.99www.amazon.co.uk



Books

Haynes RMS Titanic1909-12 (Olympic class)

When RMS Titanic sailed away

on her maiden voyage on April

10th 1912 she was hailed as

‘the new wonder of the world’. A

remarkable feat of engineering, the ship

was the most luxurious ever seen. Five

days later she was lying at the bottom of

the Atlantic Ocean, having struck a huge

iceberg off the coast of Newfoundland.

One of the most famous, maritime

disasters in history left 1,523 people dead

and this manual, from Haynes, gives an

insight into the design, construction and

operation of the Titanic, showing just why

it was not ‘practically unsinkable’, as first

thought.

With next year marking the centenary

of the sinking of the Titanic, the book will

create a wave of interest among those who

like to soak up every snippet of trivia

associated with the White Star liner.

It is crammed full of fascinating facts

and figures, set out in various chapters

including The Titanic Story, Anatomy of

the Titanic and Engineer’s View. In classic

Haynes style there are also cutaways and

technical illustrations showing the ship’s

measurements – 882ft 9in in length from

stem to stern.

The reader is taken from the history of

the White Star Line and the ship’s building

at Harland & Wolff’s Belfast shipyard

through to the discovery of the wreck 73

years later. Photographs show the ship in

detail, along with just some of the luxurious

rooms the first class passengers could enjoy

on their way to New York, as well as the

cramped third class sleeping quarters.

There is also a poignant image, said to

be the last picture ever taken of the Titanic

as she leaves Queenstown, Ireland. The

photographer, Father Francis Browne, had

an invitation to stay on the liner but his

superior telegraphed ‘Get off that ship!’

Author David F. Hutchings served his

shipwright apprenticeship at the Royal

Dockyard, Portsmouth and followed a

career as a draughtsman, weights engineer

and technical librarian, while Richard P. de

Kerbrech served a marine engineering

apprenticeship with Shaw, Savill and

Albion Shipping Company and was

an inspector at the Admiralty Marine

Engineering Establishment before

becoming a lecturer.

By David F. Hutchings &

Richard de Kerbrech

Haynes Publishing £19.99

The Fifth Witness

Michael Connelly’s straight-

talking attorney, Mickey Haller,

puts in his fourth appearance in

clever thriller The Fifth Witness.

This time round, the criminal defence

lawyer’s practice is being hit by the

recession and subsequently not getting too

many cases – even people needing legal

representation to keep them out of jail are

having to make cut backs.

So, the firm starts to handle civil

cases, trying to protect clients whose banks

are imposing foreclosures on their homes

because they cannot afford to keep up with

the mortgage repayments.

One of Mickey’s clients is Lisa

Trammel but, as the stresses and strains of

possibly losing her house start to take their

toll, the bank she owes money to takes out

a restraining order to prevent her

protesting against their fraudulent

practices.

Unfortunately for Lisa, the bank’s

CEO is found murdered in the company

car park and she is arrested for the offence.

For Mickey, the case suddenly turns

back to what he knows best – criminal

defence – and by the time the verdict is in,

his whole world has been turned upside

down.

The Fifth Witness is, again, an

enthralling, intense courtroom drama from

Michael Connelly.

The author’s experience as a former

police reporter for the Los Angeles Times

gives him a great ability to know the ins

and outs of the legal system and work

them into what is a compelling novel.

By Michael Connelly

Orion £18.99


Books

Starman:The Truth Behind the Legend of Yuri Gagarin

This year marks 50 years since

intrepid adventurer Yuri Gagarin

became the first human to leave the

Earth’s atmosphere and travel into space.

Gagarin’s journey saw him become an

icon of the 20th century but this read gives

a fascinating insight into the pressures that

came with the fame. He died, aged just 34,

when he was killed in a plane crash.

Based on KGB files, restricted

documents from Russian space authorities

and interviews with his friends and

colleagues, this biography reveals a man in

turmoil, torn apart by political pressures.

It talks about his rivalry with Gherman

Titov, with whom he vied to be the first

man in space and gives a fascinating insight

into the workings of the early Soviet Space

Programme and the 1960s space race.

Following his trip into space he was touted

as a celebrity and forced to endure a

gruelling schedule of diplomatic

engagements which drove him to drink and

depression.

The book more or less stamps out the

conspiracy theory that says Gargarin was

murdered by the Brezhnev regime, saying

his death was nothing more than a tragic

accident. Contributors include Alexei

Leonov, who was close to Gagarin for

many years.

This new edition of Starman: The

Truth Behind the Legend of Yuri Gagarin

also includes a new afterword that

celebrates the importance of that

momentous expedition and reflects on the

cosmonaut’s legacy.

By Jamie Doran & Piers Bizony

Bloomsbury £8.99

Spanish Gold:

Today the word ‘piracy’ evokes

images of terrorists laying siege

off the coast of Somalia, but as

seen with Johnny Depp and the Pirates of

the Caribbean, it used to have a

whimsical and, dare we say, romantic

connotation.

This fabulous book from maritime

historian and writer David Cordingly

studies famous pirates such as Blackbeard

and Calico Jack to give us the bold and

ruthless truth.

When the Treaty of Utrecht ended the

War of the Spanish Succession in 1713

there was an explosion of piracy across

the Caribbean and along the eastern

seaboard of North America. Hundreds of

unemployed sailors roamed the ports and

many were tempted into piracy. The

narrative focuses on Captain Woodes

Rogers, a former privateer and his battle

against pirates.

Nowhere was the problem greater

than The Bahamas, so the British

Government was forced to act and

Captain Woodes Rogers was installed as

Governor of The Bahamas ‘to drive the

pirates from their lodgement’ with the aid

of three warships. His actions as Governor

restored order to the colony, inspiring the

fight against men like Blackbeard.

This swashbuckling true story of the

rise and fall of the Caribbean is engrossing

and full of trivia such as tales of Calico

Jack’s (Captain John Rackham) two

female crew – Anne Bonney, his lover,

and Mary Read who was taken on

disguised as a man.

It is a fantastic for anyone interested

in history and will no doubt appeal to

many with actor Depp reprising his role as

Captain Jack Sparrow in Pirates of the

Caribbean: On Stranger Tides, is now

showing at cinemas.

By David Cordingly

Bloomsbury £20

Captain Woodes Rogers and the

Pirates of the Caribbean

review


Films

Music

The world’s four biggest record

labels collaborated on this charity

album to raise money for the

Japanese Red Cross Society following

the earthquake and tsunami which

devastated parts of Japan in March.

The various artists who supplied the

38 tracks, along with the music labels and

publishers are all waiving their royalties

and proceeds and to date millions of

dollars have already been raised from

sales on iTunes. Now the album is

available in CD format.

Tracks cover many genres in the

world of music and include the re-

mastered classic Imagine, by John

Lennon, Elton John’s Don’t Let The Sun

Go Down On Me and teen favourite Justin

Bieber with Pray.

There are also songs from the likes of

Bob Dylan, Madonna, Eminem, Lady

Gaga, Shakira and U2 – a real melting pot

of musical talent.

Songs For JapanVarious Artists

Sony/EMI/Universal/Warner

Edinburgh International Film Festival

This 10-track

album, the first in

five years, from

Paul Simon is

vintage Simon,

going back to

songs crafted

around harmony

and song structure instead of the beat-driven

form of writing which has inspired him since

the mid-1980s.

Taking over a year to perfect, it has

much more in common with his acclaimed

first solo release, Paul Simon, back in 1972.

The songs blend R & B, gospel and

world music with great melodies and, in

some cases, a funky beat – most notably in

the African-inspired The Afterlife which

brings a feeling of warmth and sunshine.

Opening song Getting Ready for

Christmas Day starts the album with the dry

wit which continues through the rest of the

album, based on Simon’s musings on life,

love and God.

Best known for his success as part of the

duo Simon and Garfunkel, responsible for

such classics as Mrs Robinson and Bridge

Over Troubled Waters, the singer-songwriter

is sure to please many of his followers with

this offering.

Paul SimonSo Beautiful Or So What

Hear Music/Concord Music Group

The great and the good of the jazz world will

be descending on Vancouver later this month

for its annual International Jazz Festival.

The Canadian city’s signature festival

animates the city for 10 days and offers a rich

tapestry of jazz, blues, funk, Latin, fusion,

electronica and world music at venues big

and small, outdoor and indoor.

The festival, now in its 25th year, grew

out of a local jazz scene that centred around

Vancouver Co-op Radio, a community radio

station, in the early 1980s. The inaugral event

saw the likes of Miles Davis and Bobby

McFerrin take to the stage.

During this year’s festival there will be

over 400 concerts featuring over 1,800

musicians from Canada and around the

world.

Some of the big names include

Grammy award-winning trumpeter Wynton

Marsalis, playing with Jazz at Lincoln

Center Orchestra, guitarist Paco De Lucia

and his band, and French-American

singer/songwriter and guitarist Madeleine

Peyroux.

www.coastaljazz.ca

From 24th June – 3rd July 2011

Vancouver International Jazz Festival

Film-lovers will be flocking to the

Scottish capital later this month for

the Edinburgh International Film

Festival.

The event, now in its 65th year, has long

been seen as a platform for showcasing the

best in British movie talent and over the

years has also seen the launch of such

worldwide blockbusters as Dr Zhivago,

Blade Runner, Pulp Fiction, and most

recently The Hurt Locker.

This year’s line-up is no exception with

highlights including David Hare’s political

thriller, Page Eight, starring Rachel Weisz,

Michael Gambon, Ralph Fiennes and Bill

Nighy. Native Scot Ewan Mcgregor will also

be cropping up in sci-fi film Perfect Sense.

The festival takes place at venues across

the historic city and for those times in

between showings, there are numerous other

sights to soak up including the famous

Edinburgh Castle and the port of Leith, now

home to the Royal Yacht Britannia.

www.edfilmfest.org.uk

From 15th June – 26th June 2011

Theatre

Premiering at New York’s Radio

City Music Hall this month is

Cirque du Soleil’s breath-taking

new production, Zarkana.

The story is set within the walls of an

abandoned theatre, locked in time for 80

years, and follows magician Zark’s quest

to find his lost love and redeem his lost

powers. A dormant world awakens and he

finds himself plunged into a world

inhabited by surreal and mesmerising

creatures.

Described as beautifully odd and

delightfully twisted, Zarkana transports the

audience into a world of fantasy and

suspense where highly-acrobatic feats are

heightened by interactive multimedia

elements and live music, which has been

composed by Nick Littlemore, a protégé of

Sir Elton John.

Seventy one international artists come

together under the direction of the

internationally acclaimed Francois Girard,

who has directed films including Silk and

The Red Violin. He was also responsible

for directing Cirque du Soleil’s show ZED,

which continues to play at the Cirque du

Soleil Theatre in Tokyo.

Following its run at Radio City Music

Hall, the show will head to the Grand

Kremlin Palace in Moscow in February,

2012.

www.radiocity.com

Showing 9th June - 4th Spetember 2011

Zarkana

Art

Ahistory of watercolour painting in

Britain from the Middle Ages

through to the present day is

delighting visitors to the Tate Britain in

London.

The Watercolour exhibition shows

over 200 works including pieces by

historic artists such as William Blake,

Thomas Girtin and JMW Turner through to

modern day artists including Patrick Heron

and Tracey Emin.

Turner’s The Blue Rigi, Sunrise from

1842, one of the pieces on display, is

regarded by many among the finest

achievements not only of Turner but also

of the watercolour medium. In it he depicts

the Rigi, a Swiss mountain peak, rising

above Lake Lucerne at sunrise.

Watercolour is the most accessible of

all paint media and is used by professionals

and amateurs alike. This exhibition shows

the wide range of contexts in which it was

used including documentation of exotic

flora and fauna on Captain Cook’s voyages

to spontaneous on-the-spot recordings of

life on the battlefield by war artists such as

William Simpson and Paul Nash.

The great variety of techniques used

are also on display, ranging from loose,

vibrant washes of colour to precise

draughtsmanship, wet sponging and

scratching out. There really is something to

please everyone.

www.tate.org.uk/britain

Showing until 21st August 2011

Recently picking up the award for

‘The One to Watch’ in the S.

Pellegrino World’s 50 Best

Restaurants 2011, this small, intimate

restaurant in Stockholm delivers a feast

of surprises to its diners.

It does not have a menu, preferring to

offer daily dishes prepared according to

the seasons and formed around the latest

produce and fruit and vegetables picked

fresh from the restaurant’s two gardens

that morning.

The restaurant was opened just three

years ago by chefs Bjorn Frantzén and

Daniel Lindeberg who previously worked

together at the famous Edsbacka krog in

Sweden, and achieved two Michelin star

status in its first two years.

There are just six tables in the

restaurant and the chefs can be seen at

work in the open kitchen.

Diners can enjoy signature dishes

such as French toast ‘a la maison’ with

truffle thé, silver onions, parmesan and

100-year-old vinegar, and the ‘Tour de

France’ cheese platter with a map of

France on it, which comes complete with

an iPad placed in front of you informing

you of the cheese you are eating! For

dessert, you might be treated to the

delicious sounding oven-baked blueberry

ice cream with honey cress.

www.frantzen-lindeberg.com

Open Tuesday - Saturday

Frantzén/Lindeberg

Dining


Watercolour

Enjoy the lifestyle with

Ayoung family are sat picnicking on a

freshly mown bank, in the fine yet

unpredictable heat of an English

summer. The gentleman, dressed in an

impeccably smart Royal Air Force uniform

of rich blue, hugs his wife, who gazes at him

behind her cherry red cat’s eye sunglasses

and polka dot headscarf. They sip tea from

floral china cups as their infant son, dressed

in a flat cap and tweed three piece suit plays

on a tartan rug. The hum of a speeding Aston

Martin DB3 passes in the distance.

Observing this pair of well-turned out

baby boomers, it may seem that you’ve

stumbled onto the location of a high budget

film evoking 1950s suburbia but in fact, their

well-planned outfits indicate a particularly

modern trend – that of vintage living.

Whether your inspiration stems from the cool

dressing of Cary Grant, the hippie-flair of

John Lennon circa Sgt. Pepper's or the

rebellious leather-clad wardrobe of James

Dean, those with an appreciation for styles of

the past are living the look, at themed events

designed to quench their appetite for

nostalgia.

Of all occasions which champion retro

style, the most popular feature a dual

celebration of period clothing and vehicles,

where ladies and gents can dress to impress

and explore their motoring heritage

simultaneously. A leading light in this field is

the Goodwood Revival, a historic motorsport

and aviation event based at Goodwood

Estate, West Sussex, which encourages

punters to adopt the fashions of the 1940s,

1950s and 1960s. Between 1948 and 1966,

the Goodwood race track ranked alongside

Silverstone as one of Britain’s most important

homes for motorsport, where punters could


An appreciation for the style and

vehicles of times past is stirring up

an inspiring new fashion scene and

some truly original days out,

writes Helen Jauregui

LIFESTYLE

Enjoy the lifestyle with

enjoy the celebrated Goodwood Nine Hours

race, Tourist Trophy sports car race and even

Formula One, while savouring spectacular

views from the track’s surrounding green

bank.

Honouring the fashion, music and

vehicles from this ‘golden era’ of racing, the

Goodwood remit is broad, with attendees

celebrating everything from the big band

‘swing’ era of Frank Sinatra et al, to the

rockabilly scene first popularised by artists

such as Buddy Holly and Roy Orbison or the

hippie lifestyle of the psychedelic sixties.

Those attending the Revival, which takes

place from 16th-18th September, can expect

to see an impressive range of vehicles

competing on the authentic 2.4 mile track of

the Goodwood Estate. This includes a tribute

to the E-type Jaguar; a much-loved vehicle

amongst vintage enthusiasts which will

celebrate its 50th anniversary at Goodwood

with a 45 minute, two driver race between

different kinds of Jaguar which originally

competed up until 1966, including a mixture

of lightweight roadsters and coupes.

With around 85%-95% of ticket holders

taking the plunge and dressing in period

clothing, the Revival offers an immersive

experience, where all staff and racing

competitors must dress accordingly to

take part. As Janet Bradley, Motorsport

Representative for the Revival explained,

since it was established in 1998, this annual

event still draws mass appeal: “It’s a more

glamorous era. These days, everyone dresses

down a lot when they go to events but this is

how they used to dress, when racing

originally started here at Goodwood and this

is how we would like it to continue – it sets a

standard. One or two people have referred to

it as fancy dress but it’s not – it’s a standard of

period clothing and it’s not the fancy dress

aspect of it that appeals. People love to come

here because they’re stepping back into a time

which was much more leisurely and it also

has more of a social appeal.”

For Lord March, current owner of the

estate, the 2011 celebrations are especially

significant as the Revival will include a

celebration of the 80th anniversary of his

grandfather Freddie March, the Ninth Duke

of Richmond, winning an important race at

the track, with a re-enactment of the MG

team’s Brooklands paddock, to include a

selection of supercharged racing MGs from

the early 1930s. Other planned events include

a circuit parade tribute to Argentinean driver

Juan Fangio, on the centenary of his birth and

the 60th anniversary of his winning the first of

his five world championships. The Revival

will also mark 100 years of Ford in Great

Britain with a selection of different saloons,

sports cars and military vehicles, in addition

to a celebration of motorcross champions.

The aerodrome at Goodwood, which was

a satellite to RAF Tangmere during World

War II (from which RAF fighter ace Douglas


LIFESTYLE

Bader flew his last sortie), is also key to the

Goodwood estate and in celebration of 75

years of the spitfire, a spectacular mass

scramble will take place during the Revival.

There will also be a static display of pre-1966

aircraft, which can be viewed at the Freddie

March Spirit of Aviation Pavilion.

It’s no surprise the Revival has grown in

prominence, as Television and film are

inspiring individuals and society at large to

partake in the vintage fashion revolution.

Set in a 1960s Manhattan advertising

firm, the popular US drama series Mad Men

is lighting the path to vintage style, largely

owing to charismatic protagonist Don

Draper, whose vehicles (including a Buick

Electra 225 convertible and a 1959

Oldsmobile) are as classy as his finely

pressed suits. Cashing in on their experience

of providing outfits for the show, designers at

Brooks Brothers (the US’s oldest menswear

chain) created the ‘Mad Men Edition Suit’

which sold out early on, despite the $1,000

price tag.

With Grace Kelly-inspired frocks

cluttering up the catwalks and GQ magazine

offering advice on how to obtain Don

Draper’s ‘unfathomably impeccable hair’

there’s no doubt the Mad Men look is

injecting a dose of sixties-infused flair into

fashion but whatever their era of choice, how

does a 21st century gentleman perfect the

vintage look? According to Mad Men

costume designer Janie Bryant, “the same

rules apply when buying vintage as for off-

the-rack – it's all about fit”. Sharing her

fashion kudos in a ‘How to Dress’ guide

for influential men’s glossy Esquire, she

explained: “Normally, guys buy suits too big,

so when you're trying on vintage sizes, keep

going smaller until it's too small. Then buy

one size bigger.”

Other key pieces of advice from Ms

Bryant include sourcing one off pieces and

accessories from flea markets and getting

shirts specially made which emulate the

patterns and styling of your chosen era.

There’s no doubt that as the high street

continues to follow the vintage look, a quality

tailor will be part and parcel of the wardrobe

budget for those aiming to perfect their

vintage style into something truly original.

When attending events such as the

Goodwood Revival, this is especially key due

to the quality and authenticity of the outfits

worn by those you’ll be socialising with –

where no expense is spared in aiming to give

punters the impression they have stepped into

a fashion time warp.

Indeed, those who take immersion in a

previous era as a full time occupation may

find it a pricey route to stylish dressing.

Raven haired American model, actress

and burlesque artist Dita Von Teese has

popularised the ‘pin up look’ favoured by

1940s and 1950s icons such as Bettie Page

and Betty Grable, but as she explained to

online style guide The Frisky, her wardrobe

can put a strain on her Christian Dior purse

strings: “It’s really expensive, tailoring is

expensive; the constant moth control is

expensive. I have an assistant that takes care

of all of my clothes. When you wear vintage,

you have to fix everything. It’s like old cars:

you have to keep ‘em up.”

Indeed, it takes dedication to ensure full

submersion in the golden era at the

Goodwood Revival, where the vintage

atmosphere is enhanced with help from the

Goodwood Actors Guild, a troupe dedicated

to making the experience as authentic as

LIFESTYLE Enjoy the lifestyle with


Attendees celebrateeverything from the big band‘swing’ era of Frank Sinatra tothe rockabilly scene firstpopularised by artists such asBuddy Holly and Roy Orbisonor the hippie lifestyle of thepsychedelic sixties

possible. With thespians dressed as mods and

rockers (with leather and vespas in tow),

pearly kings and queens, or even the

particularly British institution that is the

‘spiv’ – with a horde of jewellery, watches,

nylons and other goods of dubious quality

hidden beneath his coat, ready to sell to naive

punters. Other characters include a 1950s-

style airline pilot accompanied by his team of

besotted female flight attendants and a rag

and bone man – another loveable rouge

known for collecting and trading unwanted

junk.

“We have talented people acting out

scenarios,” Ms Bradley explained. “We’ve

had painters with their easels conducting an

art class; a family on a picnic with their little

tent and pram; a female trio who sing 1940s

songs and a band teaching people to jive.

Lord March is keen that things must be

perfect – he’s very hands on and we must

ensure all aspects are true to how it was. This

is where the period clothing came in as he is

keen for it to be like it was when it was a

social event back in the 1940s and 1950s

when people would go dressed in their

Sunday best to a race meeting and that’s what

he wanted to recreate with the revival. I think

we’re pretty much on our way to doing that.”

One vintage expert who understands the

need for authenticity is Ollie Vee (AKA

Billie) – a familiar face on the vintage scene

and owner of Ollie Vee’s vintage clothes

boutique in Leighton Buzzard, Bedfordshire.

Dressing appropriately, usually in 1950s

clothing each day, Ms Vee is a true

ambassador for the feel good aspects of

vintage living, and has a scarlet lipstick smile

to match the shine of her shop’s light up juke

box. Deriving her moniker from ‘Rock

Around with Ollie Vee’, a song made famous

by pioneering rock icon Buddy Holly on his

1958 album That’ll Be The Day, Ms Vee

explained how the lyrics tell the story of a

fun-loving girl from Memphis, who Buddy

takes out to “rock to the rhythm and blues”

while, (taking fashion tips from Elvis),

wearing the “blue suede shoes” so obligatory

with his look.

With this anthem for the vintage era as

her mantra, it’s to be expected that Ms Vee is

open in lamenting the number of men seen in

tracksuit bottoms nowadays. However, she

explained how the look of characters from

popular culture such as Charlie Harper

(Charlie Sheen’s character in TV comedy

Two and a Half Men, known for his penchant

for 1950s bowling shirts) are encouraging

men to look beyond the high street for their

style and added that vintage garments such as

pegged-trousers are an especially popular

wardrobe staple for the stylish gentleman.

Having attended the Goodwood Revival

as a re-enactor herself (along with her 12 year

old son, 1950s tank top and shorts in tow) and

helped to style a number of customers

heading for vintage events, Ms Vee noted that

the vintage scene has great appeal,

particularly owing to a lack of ageism and

sexism: “There are people who get into

vintage later in life, perhaps in their 40s but

there’s no discrimination – you get

youngsters and older people joining in

together. It doesn’t matter what your

background is or how much money you have

either as you can pick up vintage clothes on

a budget. It’s not like years ago when you

used to be able to go to charity shops and pick

up vintage items but you can find the

occasional thing. Now, even charity shops are

wise to the trends and have their own

websites where they sell vintage items.”

Different routes to a vintage look for the

well-heeled and the hard-up are exemplified

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The fashion-forward paythousands of pounds foran original Biba outfit – yourmother’s Woodstockwardrobe could earn youa small fortune on Ebay

through fashion label Biba, which gained

popularity during the swinging sixties.

Nowadays, the fashion-forward pay

thousands of pounds for an original Biba

outfit but while your mother’s Woodstock

wardrobe could earn you a small fortune on

Ebay, Barbara Hulanicki, who founded the

label, is currently creating a sixties-inspired

collection for George – the budget clothing

range of British Supermarket giant Asda. In

The Sunday Telegraph, Ms Hulanicki was

recently quoted as saying: “Why should

fashion be only for the elite? It’s wonderful in

fashion shows...but it’s an art form there and

it’s very confusing for people, I think, to see

that and then realise that what is in the shops

is different.”

But whether you seek a look based on

expensive and authentic or cheap and chic,

what first sparks an interest in vintage for

fans of styles past? Ms Vee explained that for

her, a childhood love of Elvis films and

dressing up in her mother’s original 1950s

outfits led to her getting into the rockabilly

scene during the 1980s. “When I was 16, I

went out with a guy who had a really nice car

– a Vauxhall Cresta PB and we used to go

driving with rock and roll blaring out of the

radio,” she added.

When asked about her male clientele and

what draws men to vintage fashion, she

explained that it’s a popular look for men

who are into sharp dressing: “I think men

aspire to look like somebody – people who

are into rockabilly and rock and roll may be

inspired by Elvis, Eddie Cochran, Gene

Vincent – and men look great in this style of

clothes. For example, we get mods in the

shop looking for 1960s suits; men who are

into their fashion. I think people want to be

individual and within vintage, clothes are

often one-offs. It’s about expressing

individuality. Perhaps it’s also partly about

remembering what your parents were into –

there’s a connection there, but as for the

1940s and 1950s, I just think the music

was great, as were the films – though

romanticised!”

“There are many people getting into

vintage and more magazines are coming out

which celebrate this. With the burlesque

scene, it’s all crossed over as well. You’ll see

rockabilly, ska and northern soul evenings

combined at the same club night. Whereas

years ago this wouldn’t have happened, now

we’re all mixing together and the younger

ones who are coming into it are seeing this

blending of scenes and combining them all in

their own outfits,” Ms Vee concluded.

For some, the act of wearing vintage has

also become rather competitive, as men and

women strive to be the best dressed. This

friendly rivalry has been formalised through

contests such as on Ladies’ Day at

Goodwood, when a coveted award for the

most authentically dressed female leads to an

array of expensive attire and outlandish hats.

The vintage appeal has also attracted a

number of celebrities, including racing

legends such as Sir Stirling Moss, Sir Jackie

Stewart and Formula One drivers but as Ms

Bradley explained, those currently competing

in motorsport can only take part in tributes or

‘parade races’ at Goodwood and are not

allowed to race competitively on the estate,

particularly following the case of Polish

Renault F1 driver Robert Kubica, who in

February, suffered life-threatening injuries

after crashing during the Ronde di Andora

rally – an event he took part in during his

spare time but which has prevented him from

returning to F1 this year.

For those who enjoy authentic

motorsport but are unsure about the ‘dressing

up’ aspect of the event, Ms Bradley said an

aversion to retro dressing and appreciation

for period vehicles can be reconciled, but

as she concluded – if you turn up in jeans and

a t-shirt, you will miss out on much of the

fun: “For some people, perhaps it’s out of

their comfort zone. I know when I leave the

house in the morning wearing my Goodwood

Revival gear, I do feel rather conspicuous

but once you’re at the event, as soon as

you walk through the gate, you’re part of it

and I think that’s the joy people feel – they’re

not just there to be a spectator but they’re

taking part in the event and making it the

Goodwood Revival, which appeals to a lot of

people.” �

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Ship management · 53 ITM looks for growth A combination of the after-effects of the imposition of sanctions against Iran, increased vessel deliveries and a growth in third party

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