May/June 2011

Get me to the port on time

Japan
n

Tankers

Malaysia

Car Carriers

Ship Registers

One safety solution. One global partner.

Drowning in budgets and forecasts? Let us give you a helping hand.

Does trying to coordinate safety equipment servicing leave you gasping for air? Dont despair theres help at hand. Our Shipowner Agreements are the industrys most comprehensive, customizable and flexible managed servicing plans. They cover safety equipment from a dedicated servicing network at 270 locations worldwide. With a variety of fixed price payment and equipment exchange plans, they can make your job surprisingly easy. To find out more, visit VIKING-life.com or call your local VIKING office today.
CTS DU RO P
GLO BA L

SAF ET Y

VIKING SHIPO
R AGREEM ENT
EN T

G ICIN RV SE

WNE

VIKING LIFe-SAVING equIPMeNT

- Protecting people and business

FIN

GE NA MA

CE

May/June 2011

Contents
AM CoveR stoRy 10 In 2010, container shipping looked as if the worse was over. From record losses in 2008, 2010 was a boom year. But this year is turning out to be a potential loser for liner services once more. With megaships joining services daily and 18,000 teu vessels in the offing, companies like Maersk and its rivals are seeking to differentiate themselves by levels of service and customer-centric approach to contracts. Industry data, however, indicates that liner companies have to overcome tall hurdles to get where they want to be. Not least of their problems is the inability of shippers to get their contracted cargoes to port. Is the dream of aviation-like efficiency an unattainable dream?

AM FeAtURes 14 BUNKERS China looks to lead 16 Tankers Owners stop splashing the cash 19 Japan hipowners look beyond Japan S 24 Ship registers More than enough for all 27 Car carriers Hope beyond the earthquake 30 Malaysia MISC enjoys box and gas options 24 32 Vietnam The good and the bad

14

May/June 2011

asiamaritime

May/June 2011

Contents

AM RegulaR ColuMns 4 Comment Bespoke shipbuilding Briefs Yards, ports, lines Commodities Shale oil and gas

8 8

13 Launched China King goes to foreign shipmanager 34 Technical Return to onboard training 36 Ships store Pitter, patter of tiny carbon footprints 13 37 Operations Charterers need to know their place 38 Logistics China market awaits 39 IMO Flagging up anti-piracy options 40 40 Green page Green ideas from DNV 41 Brief encounters Thin end of the social media wedge 42 Diary Merely moving and passing on 44 44 Maritimes back pages The NOL story

asiamaritime

May/June 2011

The indusTry in The Mirror

There is noThing quite like a downturn to focus the mind. Perhaps the 2008/9 debacle is too extreme an example. At the time those involved in the shipping industry were too busy working out how to hold on to their shirts, to spare time for cogent thought about how they might raise their fame. But if those two too awful years amounted to a storm, what the maritime industries are confronted with today is a severe depression that looks to settle upon the maritime industry for an extended period, of which few can yet determine the length. In some cases this is giving time for serious thought about how to improve. One happy result is that there are signs that ideas about improving products and services, with a sideways glance to environmental enhancements, have for the first time broken free of the commercial conference hall. This has been ,led by the likes of Seaspan Corps president and chief executive Jerry Wang, who conducted a high-profile game of bluff with shipyards before finally inking a deal worth $700m for seven 10,000 teu containerships from Jiangsu New Yangzi Shipbuilding in China. With his demand for swift delivery, super-sized and energy efficient vessels, the ships will be virtually tailor-made; a phenomenon rarely heard of in the boom years of the mid-noughties. With fuel prices exceeding capital costs many lesser-known shipowners are following in Mr Wangs steps. They are either insisting on fuel efficiencies from known yards or being lured away by others that are prepared to offer the frills rather than face an empty shipyard come the end of 2013. In shipping too boxlines such as Maersk, Orient Overseas Container Line, MSC, CMA CGM and latterly NOL are prepared to go for the lower costs (hopefully passed on to the customer) that can be reaped from vast investment in mega-boxships. And finally, you could not have missed Maersks New Normal an act of public self-flagellation wrapped up in a call for enhanced services in a transparent environment. There is an argument that much of what Maersk is calling for in the way of punctuality and ease of transaction should have happened a long time ago. But hey, better late than never, as the shipper never says. Welcome to the 21st century.]

PUBLISHER DaysOnTheBay Co Ltd EDITOR Mike Grinter mike.grinter@thisisasiamaritime.com COnTRIBUTORS Michael Grey Sandra Speares K K Chadha PRODUCTIOn EDITOR Lokyin Chun bchun@thisisasiamaritime.com ILLUSTRATIOnS Harry Harrison

ADVERTISInG ACCOUnT MAnAGER Tony Stein tony.r.stein@btinternet.com COVER Modern Terminals HOnG KOnG OFFICE 8A Greenfield Court Discovery Bay Hong Kong Tel: + 852 2987 8870 Fax:+ 852 2987 7780 mike.grinter@thisisasiamaritime.com SUBSCRIPTIOn SALES mike.grinter@thisisasiamaritime.com

PRInTInG Allion Printing Company 10/F Sze Hing Industrial Building 33-37 Lee Chung Street, Chai Wan, Hong Kong SAR THIS HAS BEEn A DAYSOnTHEBAY PRODUCTIOn

asiamaritime

May/June 2011

standard of excellence

global sales and support extensive range of products and services ongoing product developMent

clockwise from top left daMen fcs 2610 high speed support vessel daMen fast crew supplier 5009 daMen offshore patrol vessel 950 daMen fast ferry 3207 daMen asd tug 2810 daMen Multi cat 3013

D A M E N S H I P YA R D S G O R I N C H E M Industrieterrein Avelingen West 20 4202 MS Gorinchem P.O. Box 1 4200 AA Gorinchem The Netherlands phone +31 (0)183 63 99 22 fax +31 (0)183 63 21 89

Member of the DAMEN SHIPYARDS GROUP info@damen.nl www.damen.nl

ambriefs
n Lines

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

from nothing to become the worlds third largest bulk carrier by 2015, set off alarm bells in the minds of many. Such alarms rang louder in May when news emerged that the conglomerate was defaulting on charter payments. Among owners who must be ruing the day they banked on the Grand vision are Hyundai Merchant Marine, which is, so far, $7m out of pocket on two bulkers, and the Greek shipping duo Minerva Marine and the Vafias Group. Grand China insists that the problem is merely a cash flow blip. Alternative explanations include difficulty in obtaining US dollars at Chinese banks, but confidence too in the behemoth may soon be in short supply. Within a few weeks of OOCLs announcement it had ordered 10 13,000 teu boxships from Samsung Heavy Industries, news is out that it has found long-term employment for at least three of the giants. Japans Nippon Yusen Kaishan will charter the trio for three years when they will be deployed within the Grand Alliance service network in 2013. ]
MOL has had a rough time with the authorities in Europe and the US over the last few months

Thousands of miles from their headquarters in Asia, the European workforce of some of the top Asian lines had a rude awakening on 17 April, when EU Competition officials came knocking as the sun was rising. Those reluctantly answering the door included Hanjin Shipping, Cosco, OOCL, NYK, Mitsui OSK Lines and Neptune Orient Lines. Among European lines, Maersk, Hapag-Lloyd, Hamburg Sud and CMA CGM, also received the unwelcome wake-up call. Its far too early to tell what has sparked the spooks at the EU Commission. Would the fact that lines such as K Line and Hyundai Merchant Marine have, thus far, been left alone, suggest pre-raid knowledge? Or is it simply bafflement of an EU team not known for its maritime nous trying to work out how liner companies turned a slump into a windfall from 2009 to 2010? The answer will be a long time coming. With the threat of fines equivalent to 10% of annual turnover if lines are found guilty of anti-competitive practices, there will be a lot of twitchy shipping executives for some time to come. Mitsui OSK Lines must be feeling punch-drunk. At around the same time its European officers were welcoming the EU officials, across the Atlantic the Federal Maritime Commission in the US was telling the Japanese line to cough up $1.2m after the FMC said it had found evidence of misdemeanors over several years among them, misdescription of commodities; unlawful equipment substitution; providing transportation services to and entering into service contracts with unlicensed, untariffed and unbonded ocean transportation intermediaries; permitting use of service contracts by persons who were not parties to those contracts; and providing transportation that was not in accordance with the rates and charges set forth in MOLs published tariffs. The extraordinary growth of Grand China Logistics over the past few years, and its ambition to come

n Ports
The Philippines leading port operator International Container Terminal Services Inc once again demonstrated its nimbleness and an eye for an opportunity when at the end of May it put in an allcash offer for Singapore listed Portek International. Renowned for its ability to profit from medium-sized terminal operations in developing countries that top global players cannot reach, ICTSIs acquisition of Portek, which has operations in Indonesia, Malta, Gabon, Rwanda and Algeria, would appear to be a perfect match especially in pursuit of capitalizing on ever burgeoning growth in Africa. The news of the acquisition at a cost of $147m came just

weeks after the terminal operator announced a 25% increase in net earnings for the first quarter of 2011 at $28.5m. Russias Global Ports Investments, the countrys leading terminal operator, accounting for 30% of total box throughput, is to seek up to $750m from an initial public offering on the London Stock Exchange later this year. If successful, the company aims to shore up its position in Russia with further capital investment on the port sector. We hold the number-one position in Russian container handling and fuel oil exports and have strong capacity to accommodate expected market growth as well as the potential to expand our current terminal facilities, GPI board chairman Nikita Mishin revealed in a published statement.

asiamaritime

May/June 2011

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Also listing on the London Stock Exchange was DP World. The worlds fourth largest port operator debuted on the exchange on June 1. DP Worlds intention is to attract institutional investors it has been deprived of on the Dubai Nasdaq due to corporate governance restrictions. Some 830m shares were on offer. The potential for serious disruption at key terminals run by Australian stevedore Patrick in Sydney, Brisbane and Fremantle continues to exist despite the decision of the Maritime Union of Australia to lift work bans on May 26. Following the week-long action that provoked Patrick to close the terminals, both parties insisted that the dispute over pay has not yet been resolved, opening up the possibility of further industrial action. ]

ICTSIs flagship terminal in Manila. ICTSI has closed a deal for the acquisition of Portek International.

n Yards
If there is a crisis in shipbuilding, South Koreas Samsung Heavy Industries has missed it. Leading not only its compatriot rivals Daewoo Shipbuilding and Marine Engineering and Hyundai Heavy Industries, Samsung has been the worlds most successful yard thus far this year. Samsung has picked up orders worth $10.8bn in the first five months of 2011 ($3,2bn in vessel orders and $7.6bn in offshore contracts). Its order target set at the beginning of the year is an easily achievable $12bn. Ever a keen advocate of SHI, shipbuilding analyst James Yoon of BNP Paribas Seoul office says, It (Samsung) has essentially already surpassed the target by 22% if $3.8bn in options on existing orders for four LNG carriers and five drillships are included. As a result, the order book has expanded 20% year to date to an estimated $47.1bn, the highest level since the USD50.1b peak of 2008. The acclaim for SHI is not to suggest that its national rivals are suffering. At the time of going to press rumours abounded that both DSME and HHI were on the verge of jointly benefitting from the surge in LNG interest to the tune of $1.5bn, as Greeces Maran Gas look set to put in orders for four LNG carriers with options for a further four. Separately HHI picked up a $1.2bn order for two drillships from drilling contractor Rowan Companies. So far this year HHI has contracted nine drillship orders worth totally $5bn. Chances are that the 2010 Hong Kong-listed Chinese shipbuilder China Rongsheng Heavy Industry has been looking at SHI with a degree of envy. The bulker specialist saw its share price plummet 7.4% in May after Barclays Capital failed to endorse the shipyards current business model. According to Barclays China
HHI is in line to pick up an LNG quartet from Maran Gas

Rongheng has an orderbook entirely dominated by bulkers (62%) and tankers (32%). With both classes of ship almost inevitably seeing a decline in orders over the next three to four years future revenues look bleak. Compound this with delayed deliveries of vessels tied to key contracts such as the 12-ship Vale order for 400,000 dwt bulk carriers, and Barclays contention that China Rongsheng lacks the ability to quickly sidestep into offshore business seems to spell a slower upward trajectory than punters were expecting when the yard listed in November 2010. The beleaguered Japanese shipbuilding sector received a fillip at the end of May when it was announced the Greek shipowner Safe Bulkers was to receive loans totaling $122.4m through Japans official export credit system. Banking trio, Japan Bank for International Cooperation, the international arm of the Japan Finance Corporation and Citibank Japan agreed the deal that will go toward the financing of three new post-panamax bulk carriers thought to be contracted to Imabari Shipyard. ]

May/June 2011

asiamaritime

amcommodities

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

SHale oil iS looking pretty

Jeff Heslewood argues that crude oil prices could be a spur for shale alternatives
As the worlds oil reserves rapidly deplete, some nations are looking to alternatives to conventional crude oil extraction. One such route is oil shale, an organic-rich sedimentary rock that contains significant amounts of kerogen from which hydrocarbons, or shale oil, can be produced. The downside used to be the expense of shale oil over conventional crude, but as the price of oil has soared, suddenly shale oil becomes more attractive. Countries that have significant reserves of oil shale include China, Brazil, Russia and, of course, the United States. Of the 48 contiguous states in North America, almost all have some reserves of oil shale. Estimates of global reserves range between 2.8 and 3.3trn barrels. The U.S. Energy Information Administration (EIA) estimates that global shale gas reserves - that is technically recoverable but not proven reserves amount to 1400trn cubic feet (tcf) in China, 1150 tcf in the USA, 790 tcf in Argentina, 760 tcf in Mexico and under 500 tcf in both South Africa and Australia. To put it into perspective, 1000 tcf equates to approximately 166bn barrels of oil. Shale gas is found in shale plays which are shale formations containing significant accumulations of natural gas and which share similar geologic and geographic properties. A decade of production has come from the Barnett Shale play in Texas. Experience and information gained from developing the Barnett Shale have improved the efficiency of shale gas development around the country. Another important play is the Marcellus Shale in the eastern United States. Surveyors and geologists identify suitable well locations in areas with potential for economical gas production by using both surface-level observation techniques and computergenerated maps of the subsurface. Two major drilling techniques are used to produce shale gas. Horizontal drilling is used to provide greater access to the gas trapped deep in the producing formation. First, a vertical well is drilled to the targeted rock formation. At the desired depth, the drill bit is turned to bore a well that stretches through the reservoir horizontally, exposing the well to more of the producing shale. Hydraulic fracturing (commonly called fracking or hydrofracking) is a technique in which water, chemicals, and sand are pumped into the well to unlock the hydrocarbons trapped in shale formations by opening cracks in the rock and allowing natural gas to flow from the shale into the well. When used in conjunction with horizontal drilling, hydraulic fracturing enables gas producers to extract shale gas at reasonable cost. Without these techniques, natural gas does not flow to the well and commercial quantities could not be produced from shale.
8
easier to carry than a gallon of petrol

China has spent tens of billions of dollars buying into energy resources from africa to latin america
KKr invests
Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, announced recently that KKR has entered into a definitive agreement to acquire certain Barnett Shale properties from Carrizo Oil & Gas, Inc. for $104m. The transaction, which was expected to close in mid-May, is being made through KKR Natural Resources. The KKR partnership with Premier Natural Resources intends to pursue investments in North American oil and gas properties. Located in north-central Texas and producing out of the Barnett Shale formation, the assets contain 122.4 bcfe of total net proved reserves (based on a third party estimate) and comprise 75 gross (58.5 net) wells currently producing at a gross rate of 15.7 mmcfe/d (8.3 mmcfe/d net).
May/June 2011

asiamaritime

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Is this going to save the environment?

Chinas imminent shale rush comes at a critical point. It will soon overtake the United States as the worlds top energy user and is already the worlds biggest coal burner
export terminals, because its shale gas reserves are estimated to be big enough to meet domestic demand for 30 years. This is an American dream that China wants to emulate. Americas shale gas production alone has exceeded that of total Chinese gas output. That gives us a lot of confidence, said Zhang Dawei, deputy director of the Strategic Research Center for Oil and Gas in the Ministry of Land and Resources. Chinas confidence has been bolstered by a new report of its estimated reserves of shale gas, which shows them to be, by far, the largest in the world. Chinas imminent shale rush comes at a critical point. It will soon overtake the United States as the worlds top energy user and is already the worlds biggest coal burner. China also pumps more carbon dioxide into the atmosphere than any other country. Beijings bureaucrats thus face a daunting challenge: how to clean up its skies while meeting the worlds fastest growing energy demand. Natural gas burns more cleanly than other fossil fuels and installing gas-fired power generation is cheaper and easier than building nuclear plants. The problem is China cannot meet its rising demand for gas with its limited reserves of conventional gas. It faces the prospect of becoming as dependent on international markets for gas as it is for oil, where China is the worlds secondlargest importer. Shale gas may not be as clean as advertised, according to a study released recently by Cornell University in New York. This study argues that significant amounts of methane escape into the atmosphere during production in wells and distribution in pipelines.

With their significant proved developed producing reserve component in a reservoir we know well through our current operations in the region, the assets are a great fit for our KKR Natural Resources platform. We are pleased to add these assets to our oil and gas portfolio and remain excited about the opportunity to grow the KNR platform through the acquisition of additional oil and gas properties in North America, said Jonathan Smidt, a member at KKR and a senior member of KKRs energy and infrastructure business.

The Environment
Natural gas is cleaner burning than coal or oil. The combustion of natural gas emits significantly lower levels of carbon dioxide (CO2), nitrogen oxides, and sulphur dioxide than does the combustion of coal or oil. When used in efficient combined-cycle power plants, natural gas combustion can emit less than half as much CO2 as coal combustion, per unit of electricity output. However, there are some potential environmental concerns that are also associated with the production of shale gas. The fracturing of wells requires large amounts of water. In some areas of the country, significant use of water for shale gas production may affect the availability of water for other uses, and can affect aquatic habitats.

China biggest producer

China has spent tens of billions of dollars buying into energy resources from Africa to Latin America to slake the thirst for fuel from its growing industry and burgeoning cities. But China may have more energy reources under its own soil than policy makers in the worlds second-largest economy ever dared imagine. Just over a year ago, Beijing awakened to a technology revolution that has unlocked massive reserves of gas trapped within shale rock formations in the United States. Once deemed too costly to extract, shale gas has turned around US dependence on foreign gas imports. Just a few years ago, the United States was building scores of expensive facilities to import LNG, looking at long-term demand forecasts and wondering which countries would supply the huge volume of imports it needed. Instead, the United States is turning import facilities into
May/June 2011

PetroChina
PetroChina, the worlds second-most valuable energy company, announced in February it would buy a $5.4bn stake in Calgarybased Encana Corps shale gas assets. Analysts say PetroChina paid a large premium for that deal. But a CNPC executive said it was all about gaining expertise for shale. We dont care much about whether the market believes its a good or bad price. The top priority is gaining access to a resource and mature technology, he said. Price is only a secondary consideration. ]

asiamaritime

amnews line

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

The Maersk Challenge

Maersks declaration that its out to change container shipping for the better has met with mixed responses
In case you missed it the Steve Jobs-like appearance of Maersk Line chief executive Elvind Kolding at the TOC Europe conference in June had all the razzamatazz we have come to expect from Apple, including the drip-drip effect of the pre-publicity. Full marks to Maersk for taking a leaf out of Apples marketing handbook. But did Maersk match up to Apples ability to innovate? Mr Koldings chief propositions for the New Normal can be summed up as: 1, Improve punctuality 2, Simplify the shipping process and make more transparent (Booking cargo should be as easy as buying an airline ticket online) 3, Shift from price to customer service 4, collaborate with customers 5, Lower more transparent carbon footprint By contrast rival liner operator Mitsui OSK Line claimed to have achieved 90% reliability on its Asia US West Coast service in the same quarter and a 69% on-time service on the Asia US East Coast route, based on an arrival time within 24 hours of the original schedule. But its a sure bet that Drewry is applying a more stringent measure to on-time arrivals as its recent research awarded CSAV the crown of most reliable deep-sea containers carrier after the shipping line managed punctual delivery levels of 69.1%. According to Drewry the number of vessels across the top 20 largest carriers arriving at port on time was a mere 51% from January to end-March 2011. On this basis the industry has a huge hill to climb to reach target number one. Clearly, all participants are using different methods to calculate punctuality. Singapores APL claims that on its transpacific services 95% of its vessels arrived on time in 2010, within four hours of their scheduled arrival. The editor of the Drewry report Simon Heaney points out that his analysis focuses on services across multi-trades rather than picking on specific routes. But such large disparities between calculations leave some space for error. And frankly, shippers are skeptical. In a response published by Shippers Voice, the website of the Global Shippers Forum, entitled Shippers Voice applauds Maersk-inspired revolution, the subsequent article did nothing of the sort.

Get me to the port on time

On the matter of punctuality Maersk claims to deliver around 80% of its cargoes on time. On this point the findings of Drewry Shipping Consultants begs to differ, stating that during the first quarter of 2011, the worlds leading shipping line actually called on schedule just 66.4% of the time.

container service reliability and freight rate

$3,500 $3,000 $2,500 $2,000 $1,500 $1,000 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Note: Freight rates are US$ per 40ft container, which are updated bi-monthly and have then been averaged for each quarter. 75%

Drewry global container freight rate index On-time % (right axis)

70% 65% 60% 55% 50% 45% 40%

Source: Drewry Maritime Research

10

asiamaritime

May/June 2011

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Same old story

Yes, the writer liked that the fact that Mr Kolding and his company were prepared to stick their collective heads over the parapet and own up to shortcomings. But in the words of Shippers Voice: What Maersk said was nothing new: shippers and their representatives have been saying such things for many years. The article went on to conclude that unless Maersk and other liner companies are prepared to follow through on the promise they can expect harsh criticism. According to the Hong Kong Shippers Council, lines such as Maersk are going to have a hard time if they are to achieve punctuality without compromising on environmental promises. Executive director Sunny Ho says: Slow steaming has led to stretched delivery schedules and a decline in service. Shipowners are not prepared to guarantee the reliability of their schedules. Mr Ho says the lack of reliability has become particularly critical as shippers desire to reduce inventory levels due to uncertain market conditions means the need for reliable delivery schedules is higher than ever. Shippers need to respond to the market much faster, he says. This has resulted in some cargoes being transferred to air services. It is Mr Hos reference to an uncertain market that implicitly acknowledges one of the most serious problems faced by liner companies in delivering on time, i.e. non-arrival of contracted cargo. According to Mr Kolding this can account for as much as 30% of contracted volumes. Mr Ho was not prepared to accept such a high level of non-arrivals but did concede that under current market conditions shortage of cargo could be a factor. The market is very fragile and there are a lot of factors affecting cargo flow to the extent that some shippers may delay cargoes or even cancel. In order to attract cargo that is available reliability is the key even in the face of higher prices. One Asian liner company said in confidence that it was able to command a premium for on-time predictability. A typical scenario appears to be that a shipper will use air services for a small proportion of its shipment, a much larger proportion will be assigned to a reliable liner company and the rest would be handed over to the spot market, thus the shipper is commanding a three-tier, three price marine component within its overall supply chain. Ultimately, it isnt easy to see where container shipping can up the ante. Information technology has been put forward as a panacea by Maersk and others but Drewrys Mr Heaney thinks that offers such as IT-delivered track and trace loading and delivery notification should be a given rather than a lure for more business. Instead he suggests that Maersk has got it right to the extent that through the use of its own terminal network it can gain through priority booking. Finally he cites schedules as an area where some reality could be injected. It would appear that some published schedules are over-optimistic, he concludes.

The small shippers sTory of Confusion

CoinCidentally or not, in the aftermath of Maersks launching of its New Normal the maritime consultancy firm SeaIntel Maritime Analysis set out to investigate how a small customer would get on when trying to get a quote from the big carriers and NVOCCs. It turned out to be a demoralising experience. Under the guise of a new cargo owner (a small trading company) trying to ship two standard feu from Hong Kong to Los Angeles and from Hong Kong to Rotterdam, the analyst sought quotes from 33 carriers and NVOCCs on the Pacific and 27 carriers and NVOCCs on Asia-Europe. Out of 60 requests, 40 recipients did not provide a quote. In the battle to get its boxes abroad the invented trader encountered the following: When a carrier or NVOCC provides a quote for the same product, but from two different offices, the quotes are not identical; Requesting a quote through online web forms often results in no feedback at all; Using rate lookup on websites was either not possible or provided rates far in excess of the quotes received through email; The quote request was for 2 x 40 dry containers. No price negotiations were entered into. Yet the sharpest rates were significantly below the SCFI average spot rates; Where quotes were eventually received SeaIntels imaginary new customer was confronted with a baffling array of rarely explained acronyms, the worse example being the following: Collect only, CY/CY incl BAF/CAF/CP plus ISPS/THC/DF/ ENS/CK/HQ SE USD 100/SZ/AGS/OWS/WS (RULED) /Others if any collect only, From BDCGX CFS/CY incl BAF/CAF/POL THC/HQ SE/ENS plus ISPS/POD THC/DF/CK/SZ/AGS/OWS/ WS(RULED)/CG(RULED)others if any. Would this go some way to explaining those missing cargoes? For more details contact Lars Jensen at seaintel.com.

may/June 2011

asiamaritime

11

amnews line

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Slow SteaMing SMokeScreen

Shippers are up in arms about the veil liner companies have thrown over their slow steaming savings
Slow Steaming waS supposed to create a warm, fuzzy feeling among the liner shipping industry by cutting both emissions of carbon dioxide and other marine pollutants and the liners rapidly escalating fuel bills. But transpacific shippers have been left feeling anything but warm and fuzzy claiming that the box lines have been keeping the cost savings to themselves while shippers face higher inventory costs and possible equipment shortages. The divergent views on slow steaming emerged following an assessment by the United States Federal Maritime Commission on the issue and whether cost and other benefits had been passed on to shippers. The FMC is still carrying out an assessment of the 36 responses to its inquiry following the April 5 deadline submission, but it is clear the liner companies and shippers have differing views about the issue. Among the comments, seven came from exporters and shipper bodies, while 22 were from container lines and carrier groups. While shipping lines reiterated the benefits of slow steaming and its impact on their bottom line and the environment, they were more circumspect about making public the details. So while the information was given to the commission, lines insisted that when documents were made public, details such as how many sailings involved slow steaming or how much money was saved was blacked out or deleted. There was no such reluctance on the part of shippers, who while lauding the environmental benefits of slow steaming, were also critical of the way shipping lines introduced the measure without prior warning. Exporters and importers pointed out they were still largely unaware of services or loops that use slow steaming and those that operate at regular service speeds. The response by Jonathan Gold, a vice-president of supply chain and customs policy at the National Retail Federation was typical of most of the responses by shippers. He pointed out that NRF members supported the environmental benefits from slow steaming, but added: Members have not realised any benefits from slow steaming. Major benefits are only realised by the ocean carrier. Echoing the views of several shippers and other trade representatives, Mr Gold added: As a result of the practice, we have seen supply chains extended by several days, which adds costs back into the system for the retailer. The practice results in higher
12
Shippers are getting steamed up about slow steaming

inventory carrying costs for retailers and a decrease in the speed to market, which is critical for a retailers success. Shipping lines operated services both at reduced and normal speeds, but there was no difference in rates offered by carriers for slow steaming versus regular steaming, he said. Becton, Dickinson and Co, a medical supplies firm, said slow steaming added an extra two to five days in sailing time between ports. But it had been offered no choice, either by shipping lines or by freight forwarders, on whether cargo was moved on ships operating at normal speed or on vessels slow steaming. Some carriers alluded to the hoary issue that if carriers did not invest in ships then shippers would not be able to move their goods. A variation on this theme was offered by Maersk Line, whose representatives said fuel cost savings by sailing at a slower speed had been eroded by higher charter rates, which had risen from $8,000 to $28,000 per day. Any cost savings accrued by reduced fuel consumption has enabled Maersk Line to sustain its service levels in many US trades. Without such savings, Maersk Line would not be able to obtain a sustainable return on investment, the Danish shipping giant said. But one official rejected such thinking, pointing out that if slow steaming resulted in a 20% fuel saving on a particular loop, the shipper is correct to point out that the pre-slow-steaming bunker formula has now been transformed into a healthy profit centre for the carrier. It will be a few months before the FMC decides to take any follow up action, although it is it clear there are battle lines between carriers and shippers over slow steaming. ]
May/June 2011

asiamaritime

amlaunched

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

King in safe hands

Shanghai-baSed Zhong An Shipping has taken delivery of the Hong Kong-flagged 79,600 dwt panamax bulker King Peace from Chinas Wu Jia Zui Shipyard. But while the ship is Chinese built, owned and crewed, management is being undertaken by Britains Graig Ship Management. Ian Morgan, chief executive of Graig Ship Management, says: This is an important new contract, because it is the first opportunity for us as a UK ship manager to manage a Chinese-owned, Chinese-built and Chinesecrewed vessel. It makes a lot of sense, we know the ship inside out because we helped build it, we know bulk carriers and we know China. The firm said 22 of its current newbuilding supervision contracts are for Chinese owners. They comprise 18 76,000 dwt bulkers being built at Jiangsu Rongsheng for Minsheng Financial Leasing and four 45,000 dwt bulkers for Shanghai Xiang An Electric Power Shipping that have been ordered from Chengxi Shipyard. And in a warning to established Asian and Hong Kong-based shipmanagers, Mr Morgan said of Graigs management of King Peace, We see this as a first step to a growing business becoming a local ship manager for Chinese owners.

Party for the Party at shiP launch

Supramax bulker, e r bern, is on its maiden commercial voyage in China after being delivered to E R Schiffahrt by Vietnams Hyundai Vinashin Shipyard at the end of May. The 56,000 dwt vessel is the eighth in the series of 11 ships ordered by the German shipowner. The ship is also the fourth newbuilding to be delivered by Hyundai Vinaship Shipyard this year. The shipyard aims to deliver 11 ships this year and a further 16 in 2012. The Liberian flagged ship was named by Mrs. Ngo Thi Thanh Canh, wife of Le Thanh Quang, who is secretary of the Khanh Hoa Communist Party. In June Hyundai Vinashin also laid the keel of the first of two 56,000 dwt Ice Class Bulk carriers for ESL Shipping of Finland.

May/June 2011

asiamaritime

13

ambunkers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

To levy or noT To levy

The decision by the ICS to back an international bunkers levy system has provoked widespread opposition
When the InternatIonal Chamber of Shipping concluded its meeting on 20 May, announcing it would back a bunker levy/ compensation fund-based mechanism as its preferred marketbased measure to reduce CO2 emissions, its a fair bet it wasnt expecting such an overwhelming backlash from so many other industry players. In support of the ICS decision that a levy-based system is the one that most shipping companies can live with in order to ensure a level playing field and the avoidance of serious market distortion, chairman Spyros Polemis said: The shipping industry has an instinctive dislike of unnecessary complication which will be the result of a system based on emissions trading. Governments are looking for leadership from the shipping industry about the market based measures we prefer to help reduce CO2, and to raise money for any environmental compensation fund that might be developed by governments. The meeting of our member national associations agreed on an MBM that is levy-based. Such a system should be developed by IMO, he added. After years of procrastination the ICS now finds itself fast steaming in a race against time to establish an international agreement on climate change within the International Maritime Organization before the European Union takes steps to establish its own carbon trading emissions regime. But, as if attacks from the EU were not enough, other organizations have also opposed the ICS initiative. Notably BIMCO. While BIMCO did not reject the ICS proposal outright, at its general meeting in Vancouver in June, members expressed fears that taking up any market-based measures could damage the campaign for the adoption of the Energy efficiency Design Index at the IMOs Marine Environment Protection Committee Meeting in July. Less surprisingly, the Global Shippers Forum has come out against the ICS move on grounds it would be the shippers that ultimately pay for the scheme. Lloyds List quoted GSF secretary general Chris Welsh who said that passing on shipping carbon costs to their customers via a bunker levy not only removes shipowner
14
no smoke without disputes

accountability, but also fails to reduce carbon emissions. Mr Welsh told the newspaper the GSF would welcome and support a voluntary shipping industry initiative to reduce the carbon emissions through the IMO. Shipowners need to introduce a rigorous scheme targeting operational efficiencies and other measures to reduce shipping carbon emissions, he added. Meanwhile representatives of the fuels that sit at the heart of the conflict, namely bunkers, are sitting on the fence waiting to see which way the wind blows. The chief executive of the International Bunker Industry Association Ian Adams told Asia Maritime The IBIA decided at its Annual Convention in Stamford, Connecticut in September 2010, not to take a position on the issue of climate change and in particular, the issue of Market Based Measures, he said. Our members being drawn from all aspects of the Bunker Industry (Buyer, Supplier and Service) felt it was too early for the Association to decide either way as there is still no definitive proposal from IMO. The Bunker Supply industry will adapt to the conditions of the market, he concluded. But if the ICS is to be believed, it too is looking ultimately to EEDI as the way forward. In its concluding remarks following the May meeting the organization said: The immediate priority for ICS however, is to ensure that a package of technical and operational measures to reduce CO2 emissions, which has been developed by the International Maritime Organization, will be adopted by the crucial meeting of the IMO Marine Environment Protection Committee in July, as amendments to MARPOL Annex VI. Most importantly this includes the Energy Efficiency Design Index. Agreement at IMO will be vital to maintain the principle of global rules for a global industry, which cannot be guaranteed if detailed emission reduction measures are left to the high-level climate change talks at UNFCCC, or the European Commission, which will be the likely result if agreement is not reached by governments at IMO this July. ]
May/June 2011

asiamaritime

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

China bids fOr singapOres bunker CrOwn

Only price stands between China and its bid to become the worlds largest bunker centre
Over the last few years China has repeatedly surpassed other nations, particularly in terms of consumption or production be it shipbuilding, manufacturing or the overall size of the economy. According to many, bunkers supplies are the next frontier. Given the huge amount of traffic going in and out of China, it would not be surprising to see the country near the top of the heap when it comes to bunkering. What supplied the drag up till recently was a remnant of the command economy a monopoly controlled by China Marine Bunker known as Chimbusco which wasnt broken until 2006. Commenting on the evolving Chinese market for bunkers, Ian Adams the secretary general of the International Bunker Industry Association says, The monopoly has been broken to a certain extent but the licenses have been restricted to Chinese companies. This is having a positive effect with regard to competition and therefore, prices. As far as opportunities for International Players is concerned this is currently limited to larger trading houses that are providing a service to the ship-owners. Mr Adams adds, China still needs to invest in its infrastructure such as storage, blending facilities etc but we fully anticipate that they will. As Mr Adams says, there are far fewer players than in Singapore. They are made up primarily of Sinopec subsidiaries namely, China Shipping & Sinopec Supplies, China Changjian Bunker, Sinopec Zhejian Zhoushan. The fifth player, Hong Kong-listed Brightoil stands out from the group because all of its customers are international liners. It established a presence in Shenzhen in 2006. From 2009 it expanded into Shanghai, Ningbo and Zhoushan with plans to move into Dalian, Tianjin, Qingdao and Rizhao in the near future. Brightoils Investor Relations manager Rachel So acknowledges that some demand is moving from Singapore to China but says that as an important gateway and bunker procurement centre Singapore will continue to have an important role to play. Brightoil sources most of its bunker fuel from Venezuela, the Middle East Gulf and Europe but because much of this fuel reaches China via Singapore, where Brightoil conducts a lot of its international supply and bunkering business, the Lion state is still able to offer better prices than its Chinese counterparts. Shanghai is currently around $20 per tonne more expensive. But Singapore is not sanguine about what it considers a real threat to its current supremacy. In a recent interview with BunkerMay/June 2011

given that scenario, shipowners would skip stopovers in singapore, which will allow them to save up to one days worth of steaming.
world the chairman of the Singapore branch of IBIA and regional manager for Asia at Integra Fuels Asia Pte, Mr Simon Neo said that China posed the biggest threat to Asia as the price gap closes. In just a year from March 2010 to March this year the price differential for 380 centistokes grade bunker fuel has narrowed from $39 per tonne to $22.50. According to industry estimates around 60% of vessels navigating around Asia pick up bunkers from Singapore. But its a fair bet that a large percentage of those ships are also calling at Chinese ports. Mr Neo envisages that in three to five years the price gap between China and Singapore would have eventually disappeared. When the price narrows down to marginal why should shipowners take bunkers in Singapore? he asked. Neo told Bunkerworld, Given that scenario, shipowners would skip stopovers in Singapore, which will allow them to save up to one days worth of steaming. If Shanghai or Shenzhen, for example, together takes 10m tonnes of bunkers a year, the volumes will definitely need to be taken from somewhere and its likely to be from Singapore, he added. ]
IBIa secretary General Ian adams

asiamaritime

15

amtankers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

WitH a little Help froM our friendS

Hong Kong based Wah Kwong Shipping acknowledges the quality of its counterparts in a battle against a poor market
Wah KWong Shipping, a leading Hong Kong-based tanker and dry bulk owner famously changed its mind about listing in 2008 for what appeared to be solid reasons at the time. But as the market has softened some listed tanker operators have been able to revert to the market to help fund their operations during the lean times that will continue to face the industry over the next few years. However, Wah Kwongs chief executive Tim Huxley stands by his companys decision. It was the right thing to postpone our IPO and we did not need to do it to fund our expansion - that went ahead in any case, he says. There are certainly benefits to being a listed company, but also some disadvantages. Some listed companies have indeed raised money in what would otherwise have been difficult times to help them through the downturn and others used the availability of finance to secure a war chest, which will be quite useful as opportunities arise. Our business model, and our conservative nature, means that we are probably better suited to being private right now, he adds. The Wah Kwong business model has so far managed to eschew the fickle and frequently ill-informed market investor by virtue of its ability to tap into important players in the worlds largest market for raw materials China. It is not simply a matter of proximity. Rather, it is the end product of backing the right horse nearly a lifetime ago and nurturing it ever since. Mr Huxley says, Wah Kwong has extremely strong Chinese roots - we are in many respects a Chinese company. Relationships are built over years and have to be mutually beneficial. Yes, we do have an enviable position in this respect and it certainly did not happen overnight. The companys chairman George Chao has been very loyal to China in many areas and has worked hard to establish the company there. Wah Kwong is in China for the long haul and not just because it is the current flavour of the month. Until recently, such strong ties did not stretch to Chinas shipbuilders. Previously Japans shipyards benefited because of a merited reputation for excellence and Wah Kwongs good relations with the nation arising out of the companys dependence upon Japanese charterers when it was established in 1952. But costs and a rise in the ability of Chinese shipbuilders have prompted a rethink in the last few years.
16
Wah Kwon Shipping chief executive Tim huxley. May/June 2011

We now have three VLCCs being built there, says Mr Huxley. Chinese expertise in tankers has come on in leaps and bounds in recent years and with Korea moving to high end products like offshore, LNG and the new generation of container ships, its no surprise that people are turning to China for conventional tankers, which means the products are getting more widely accepted. In 2003, when we contracted our current pair of VLCCs, China was not such a prominent VLCC builder and Korea was very competitive. Things have moved on and major owners dont have reservations about building tankers in China and major charterers have come to accept them, he adds. As Wah Kwong has stuck by its friends over the years so it has abided by a business strategy that goes back to its origins witness its declaration on the homepage of its website Our fleet grew to meet the growing post war industrial growth in Japan. In those days our ships were pre-fixed on long term time charters primarily to Japanese charterers with financing secured on the back of the time charters. The use of time charters reduced the exposure to market volatility, and is a chartering methodology that the Group maintains to this day. As recently as 2010, Mr Huxley was espousing the same message on news channel CNN and illustrates how the approach still works now: In the first five years, you would hope to break the back of depreciation and generate some decent returns, he says. It is always one of the great lotteries of shipping as to what the market is going to be like when you come off a long charter and the market is the market. We recently had a VLCC come free after a lengthy charter and we re-fixed her for a shorter period at what is still a profitable level. The real problem comes if you buy a ship at a sky-high price against a charter at a very high rate and then the charterer defaults. Thats why the quality of your counter-party is so crucial. Even in the worst of times, Wah Kwong has found that reliable counterparties have seen it through. Tankers have not been subjected to the same level of default as the dry cargo market and no, we havent had any issues on that front, he says. It certainly becomes tougher when you are in a bad market and your charterer is losing money - you have to work even harder to ensure there

asiamaritime

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Tanker shipping is in a spin

are absolutely no excuses for you to be put off-hire. Fortunately, our charterers are all with long term partners and we have ridden the highs and lows together. It is perhaps those deep ties with Chinese mainland charters that keeps Wah Kwong firmly on Hong Kong soil as its European peers have been increasingly lured to Singapore. Singapore has the refineries and a lot of oil companies have long had their regional base there. Also, Singapore has been a major ship repair centre and tankers do actually go past the port, so there are plenty of logistical reasons to run a tanker operation from there. However, Hong Kong is better located geographically for China and North Asia and that is one of the reasons we have a large number of Chinese shipping companies moving here, combined with the fact that we are still the leaders in shipping finance and have a recognised legal framework. For Wah Kwong, tankers are just part of our business and none of our customers are in Singapore. Hong Kong is our home and it is inconceivable that we would consider moving, pronounces Mr Huxley. Perhaps the only area in which Mr Huxley has moderated his
May/June 2011

stance in the face of an increasingly difficult market is that of market consolidation, which he dismissed in 2010. I think there will be some consolidation in the tanker sector, he concedes. And the latest takeover of Saga by Double Hull Tankers proves it is alive and well. I cant see a prolonged shipping downturn happening without John Fredriksen picking up a few choice companies as they come available either. Cash rich companies will always be there for good deals- whether it is taking over a company or buying a block of ships as in the case of the sale of the Cido tankers. It all depends on what is the best value, he says. Tanker operators generally might be having a bad time of it but a passing mention of business at Wah Kwong at the time of this interview might seem to belie that fact. We had a VLCC come free last month and we fixed her for eighteen months at a profitable rate. We have another VLCC coming free at the end of 2012, so its too early to start thinking about her, but she was acquired at a low price and has been gainfully employed all her life, so there is a fair bit of cash in the ship, Concludes Mr Huxley. ]

asiamaritime

17

amtankers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

RestRaint key to eventual RecoveRy

With attention focused on other ship classes tankers may avoid a debacle in the medium term
As with All other ship types tankers have not had an easy ride of it since the heady days of 2008. But it is something of a myth that 2010 was a disaster for the sector. Sure, the dying months of that year saw rates freight rates at dangerously low levels. But taking the year as a whole, where average time charter equivalent very large crude carrier earnings were around $38,000 per day, this was not only sustainable, but also higher than 2009 levels. In the medium term the outlook for tankers might not be described as rosy but its not blue either. The related reason for optimism is that after an orgy of ordering newbuildings in earlier years it is apparent that some self- restraint has entered the market. Clarksons data shows that 425 tankers were ordered in 2008, 131 further contracts were signed in 2009, and a further 233 were inked in 2010. So, with just 28 oil tankers ordered so far this year it is clear owners are finally holding back. Of course, a further reason is that with the upswing in orders for containerships and liquefied natural gas tankers, not to mention the increasing reliance among the top three Korean shipbuilders on offshore plant, there are few yards gagging for tanker orders. All this will be of little comfort to owners for the rest of this year, as slippage will ensure that ships ordered in 2008 and 2009 will continue to enter the market in ever greater numbers. The demand side of the equation is relatively perky as the projection for crude tanker deadweight demand growth in full year 2011 rose to 3.2% in May. This is largely as a result of increased demand from emerging economies and a real hope that Japans demand for crude will increase at least 1% over the year to touch 4.5m bpd. It is also forecast that the beleaguered nation will up its demand for gasoil and residual fuel oil as the reconstruction of the northeast of the country gains pace. This might not appear to add up to a major fillip but it should not be forgotten that predictions for Japans crude oil demand prior to the tragic earthquake was for a 3% fall. Unfortunately, the increase in demand for crude and product cargoes from the emerging economies will not be strong enough this year to counter the new tonnage hitting the water for the first time. According to Clarksons the sector is in for a deluge. In its market outlook in May the broker said: higher import levels will almost certainly be outstripped by the strongest annual growth in the overall tanker fleet since the mid-1970s. The total active crude fleet is projected to increase by 7.4% (22.6m dwt) with the
18
slow boat to China

products fleet on track to grow at an even more rapid rate of 7.7% (8.2m dwt). The overall projected growth rate has risen since last month [April]: with higher than expected deliveries of crude tankers in the year to date, the overall tanker fleet is set to increase by 7.5% year-on-year, Clarksons said. Despite the bleak picture, practitioners as opposed to analysts see some reprieve by 2012. In June, as part of a Capital Link Shipping tanker webinar, Tsakos Energy Navigation chief executive George Saraglou maintained that the plunge in orders so far this year would lead to an improvement in the market as early as 2012. Teekay Tankers chief executive Bruce Chan agreed that the supply side was going to be better in 2012 onward and concluded that it was a just a matter of surviving the onslaught this year. With few options for improving income the emphasis will have to be on saving for the rest of the year. Slow steaming has become as important for tankers as boxships, despite suffering more resistance from charterers. Even so it is likely there will be an increasing amount of slow boats to China and elsewhere for the foreseeable future. ]
May/June 2011

asiamaritime

amjapan

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

ConServative approaCh workS for SoMe

Sticking to tried and trusted operational strategies, Japans top three operators will weather the storm but can the same be said for the countrys shipowners?
All JApAns top shipping operators finished fiscal 2010 on March 31, with positive financial results but with a sting in the tail of the final quarter, and that was without taking on the effect of the earthquake that hit the country just 20 days earlier. Mitsui OSK Lines recorded a $700m profit, a quadrupled increase on its dire results in fiscal 2009, but the fourth quarter indicated turbulent waters, falling by Y2.2bn ($27.4m), or 78% compared to the previous quarter. Looking to the rest of the year MOL accurately predicted a slump in the car carrier trade due to post-earthquake trauma at the automakers sites. The company was perhaps less on the ball when it suggested only fuel prices would provide a drag on container fortunes for the rest of the year as freight rates continue to slide on the two main trade lanes. With dry bulk business still in the doldrums, MOL expects company-wide net income to drop 48.5% to Y30bn by the end of this fiscal year. Kawasaki Kishen Kaisha also managed a respectable $368m net profit for fiscal 2010. But K Line expects that figure to be slashed to $25m by the end of fiscal 2011, citing high fuel prices and oversupply in the bulk carrier sector. Finally, Nippon Yusen Kaisha, the largest of Japans operators, recorded net income of Y78.5bn compared with a Y17.4bn loss in fiscal 2009. In the light of the impact of the natural disaster and a downturn in market conditions NYK is predicting net income of just Y34bn by end of March 2012. Japanese shipowners in recent years, which have typically placed heavy reliance on long-term charters with the much larger operators. For some years now the shipowners have found themselves penalised by yen-denominated loans for newbuildings against earnings from charterers in US dollars that are worth less and less on an almost daily basis. All this is compounded by a 35% corporate tax rate. In the good times strong relationships between the shipowners and the charters and the local banks worked to everybodys benefit. Now the shipowners can no longer avail themselves of cheap 100% loans and the charterers are driving harder bargains. After years of having their backs to the wall, Japanese shipowners are showing signs of looking beyond the Japan Sea to recover their fortunes. A recent report in Lloyds List described shipowners around Shikuko Island as reaching a tipping point where many owners are considering setting up overseas in tax-friendly environments such as Singapore or Hong Kong. But this Asia Maritime writer exposed the Japanese shipowners dilemma more than three years ago when the finance conference organizer Marine Money made its first call at Imabari in 2008. At the time shipowners were bewailing the same adverse circumstances and low charter rates verses high operation costs. There are indications that Japanese shipowners are looking cautiously at foreign shipmanagers. Others are actively exploring moves to Singapore. But the majority are prepared to stick it out in the hope for better times. ]

Conservative good
None of the lines can be said to be in a comfortable position but they have born up better than many other international operators so far. Analyst Moodys stated in June that Japans elite trio had been affected less than other shipping companies because of their strong relationships with customers, their diverse fleets and a preponderance of long-term contracts. It has always been the way. And despite the braying of international shipowners and speculators when shipping cycles are at their peak, Japanese shipping operators have been happy to turn a more modest profit more consistently based on the attributes cited above.

Conservative bad
However, such conservatism has not worked for the lower profile
May/June 2011

asiamaritime

19

amjapan

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Notes oN possible adoptioN of aM MaRpol aNNex Vi at MepC 62

shinichiro otsubo, director for international regulations at the safety standards division of the maritime bureau at Japans Ministry of land, infrastructure, transport and tourism, is a leading advocate of eedi. in an exclusive article for asia Maritime, he dismisses the arguments of the naysayers
As is well known, CO2 emissions from international shipping have been rapidly increasing along with the growth of global seaborne trade. It reached around 870m tonnes of CO2 in 2007. According to the latest estimation by the IMO, CO2 emissions from international shipping would increase, without effective measures, three times the current level by 2050. Urgent action in the maritime field is needed to improve energy efficiency of ships and consequently to reduce their CO2 emissions. Marine Environment Protection Committee (MEPC) of the IMO has been discussing the measures for CO2 emissions reduction from international shipping, and developed the draft amendments to MARPOL Annex VI. The draft amendments to MARPOL Annex VI cover mandatory application of the Energy Efficiency Design Index (EEDI) for new ships and providing the SEEMP for both new and existing ships. The amendments to MARPOL Annex VI would require ships of 400 gt and above to calculate the EEDI values (attained EEDI) and require ships of certain size
Figure 1 Concept of the EEDI requirement

Figure 1 Concept of the eeDi requirement

Table1 Reduction factors (in percentage) for the eeDi relative to the eeDi Reference line
Phase 0 [1 Jan 2013 31 Dec 2014] 0 n/a 0 n/a Phase 1 [1 Jan 2015 31 Dec 2019] 10 0-10* 10 0-10* Phase 2 [1 Jan 2020 31 Dec 2024] 20 0-20* 20 0-20* Phase 3 [1 Jan 2025 and onwards] 30 0-30* 30 0-30*

ship Type

size

Bulk Carrier

20,000 DWT and above 10,000 20,000 DWT 20,000 DWT and above 4,000 20,000 DWT

Tanker

Reduction factor to be linearly interpolated between the two values dependent upon vessel size. The lower value of the reduction factor is to be applied to the smaller ship size.

20

asiamaritime

May/June 2011

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamammamamamamamamamamamamamamamam

eNdMeNts to
and above to satisfy the required EEDI which is determined by multiplying the reference line value (an average EEDI value of existing ships according on the size and ship type) by the reduction factor. The reduction factors are to become more stringent step by step. Table 1 shows the reduction factors of bulk carriers and tankers, which depend on the size of ship and the time of building contract, and Figure 1 shows the concept of the EEDI requirement. The EEDI can be categorized as one type of technical performance standards for new ships, and this type of regulation (technical performance standards for new ships) has been widely used in the field of safety and environment protection by IMO. Mandatory technical performance standards for ships means setting certain performance criteria in the form of regulations that ships shall comply with. The mandatory EEDI requirement is no different from other regulations developed by IMO, in the sense that certain performance standards are set and that ships shall do something technically in order to satisfy such standards.There are many options to satisfy the required EEDI, and shipping companies and shipbuilders can decide their own optimum technical solution for their newbuilds.Simply put, a low-tech solution (design speed reduction) and application of new technologies are available to improve the EEDI. The first type of solution (design speed reduction) is effective because the EEDI value is largely influenced by the ship speed, which appears in the denominator of EEDI formula, and the necessary power to enable such speed, which appears in the numerator of EEDI formula. The value of EEDI can be improved considerably by the reduction of design speed, since the necessary power is reduced by the cubic ratio of speed reduction. As regards the second type of solution (application of new technologies), there are numerous combinations of available and effective technologies. Normally, shipping companies and shipbuilders would discuss, during the early design and newbuilding negotiation stage, the selection of the technologies that would be applied in their new ships. The initial cost increase and the cost saving through the reduced fuel consumption would be the primary focus in the design stage; a possible investment criteria would be that the initial costs for newly applied technologies would not exceed the benefits of fuel saving (e.g., present value of saved fuel costs for several years). Table 2 shows the example of estimation for EEDI improvement potential. In fact, ships can satisfy the requirement of EEDI in cost-effective manner, without counting on the first option, i.e., the reduction in the ship speed and installed engine power. Optimum solutions, which may be the combination of the first
May/June 2011

and the second solution, varies according to each ship. Shipowner, operator and shipbuilder would discuss together and determine the optimum solution to satisfy the EEDI requirement. Such discussion would not prefix the speed reduction option as the sole solution; if the speed reduction causes longer lead-time, and if the ship is to carry time-sensitive cargoes, both shipowner and operator would hesitate to choose this option. However, if the lead time can be maintained because longer ocean voyage time is compensated by more efficient port services by the use of, e.g., the port entry reservation system which would reduce the offshore waiting time for incoming ships. In such a case, the speed reduction would not affect the quality of shipping service, and the stakeholders may choose such option. The draft amendments to MARPOL Annex VI do not prejudge specific measures to satisfy the EEDI requirement. However, there are a few critics who highlight that the mandatory EEDI requirement will result in a drastic reduction in installed power, in order to comply with the required EEDI. As mentioned above, speed reduction is one of effective measures. However, optimum speed for newly built ships would be decided by consultation among shipowner, operator and shipbuilder at design stage, taking into account the envisioned operational pattern and business model of each particular ship. Shipowner, operator and shipbuilder are not so stupid that they plan to build a ship whose speed cannot maintain the quality of service and put the ship at risk of safety. In addition, as a safeguard for potential risk that the ship with excessively low speed is designed and constructed, the draft amendments to MARPOL Annex VI includes a regulation: For each ship to which this regulation applies, the installed propulsion power shall not be less than the propulsion power needed to maintain the manoeuvrability of the ship under adverse conditions, as defined in the guidelines to be developed by the IMO. The draft guidelines will be considered at MEPC 62 and these guidelines will be further developed through input from all concerned parties. It is a primitive mathematics that the value of EEDI is improved by speed reduction. All qualified naval architects know it. However, whether they would use the speed reduction as the option in their newbuilds is a different matter. There is nothing wrong, as far as the global environment is concerned, in that the ship would run with slower speed with smaller power, as such ship, not only being certified as having lower EEDI value, would burn less fuel and emit less CO2. However, any naval architects know that simply slower ships would not be well received by ship owners/operators. That is why ship designers and naval architects all over the world, while being aware of the existence of the easy-way-out (speed reduction), have been seeking the optimal design using various technologies, without lowering the service quality and profit potential of ships, which would have a lower value of EEDI and at the same time reduce the fuel consumption in operation. Maritime industries have been using the EEDI in trials and on

asiamaritime

21

amjapan

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Table 2 Estimation for EEDI improvement potential by the application of the energy-saving technologies (Dry cargo carrier (77000DWT))
Component of resistance and propulsion Reduction of air and wind resistance Expected year Improvement effect the improvement of each reaches the technology(%) maximum 30 5 10 2 8 4 4 4 2019 2012 2020 2013 2013 2024 2013 2013
O O O O O

New technologies

2013-2017

2018-2022

2023-2027

Optimization of superstructure Low friction coating

Reduction of friction resistance Improvement of propeller efficiency Improvement of propulsion efficiency by shape of stern Waste heat recovery

Air lubrication method Stern duct CRP Sprit stern Stern duct Sprit stern Post-swirl system

O O

O O O O O

Present Improvement rate of FOCME (%) FOCME(t) for 8 years

Present Value of fuel cost reduction for 8 years M$

2013-2017 14.5% 81,315 5.05

2018-2022 25.5% 70,853 8.87

2023-2027 36.4% 60,521 12.65

95,127 -

a voluntary basis for several years. Some shipping companies have already published a concept of low-EEDI ships whose energy efficiency is considerably improved. Some shipbuilders also have completed the conceptual design of ships that will contribute to the economies of shipowner and operator. Furthermore, some classification societies, including class NK, DNV and GL have started issuing the EEDI certifications for trial. The EEDI concept was developed four years ago, and since then has been fine-tuned and tested by various stakeholders including the industries and the maritime administrations. As a cumula-

tive result of the international efforts of more than four years, the amendments to MARPOL Annex VI will be discussed for adoption at MEPC 62 held from 11 to 15 July 2011 at IMO headquarter. The draft amendments to MARPOL Annex VI have been carefully developed to improve the energy efficiency of ships without imposing an excessive burden on the maritime industry. Japan believes that adoption of the draft amendments to MARPOL Annex VI will contribute to the economy of shipowners and operators and enable the international shipping sector to achieve CO2 emissions reduction in an effective manner. ]

Inert Gas: the next generation.

Upgrade your tanker with Hamworthy know-how
We have recently developed cost effective, compact, technical solutions to meet your inert gas requirements, which can easily be retrofitted onboard tankers meeting both regulatory and commercial drivers. To find out more please visit our website.

www.hamworthy.com
Oil & Gas Systems Pump Systems Water Systems Inert Gas Systems Hamworthy Services

22

asiamaritime

May/June 2011

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamammamamamamamamamamamamamamamam

ClAssNK freed tO Offer New serviCes

On April 1, ClassNK became a generally incorporated foundation, thus freeing the organization to set up strategic subsidiaries
ThE marITImE InDusTry is constantly changing, and class societies are being called upon to play an ever-greater role in areas that extend beyond the realm of traditional ship classification. With the change in ClassNKs organizational status to a generally incorporated foundation, it has gained a far greater range of freedoms with regards to its future development, and can establish new subsidiary companies. It will now be easier for the organization to develop new services to address the changing needs of the maritime industry, while also maintaining its status as an independent and nonprofit organization. ClassNK chairman and president Noboru Ueda explains, For example, there is great demand for consulting services related to new conventions such as the Maritime Labour Convention or the ship recycling convention, and given our vast range of experience in these areas classification societies are often the organizations that are most capable of providing such services. Nevertheless, serving as both a consultant and certification body has always been something of a grey area. Thanks to the change in status, we can now establish separate entities to provide these kinds of services, thus directly addressing the growing needs of industry, while also creating greater transparency, he says. Under the new structure, subsidiaries can make a profit. But in order to optimise ClassNK operations, any excess funds generated will be returned from subsidiaries to the core foundation. However, our goal is to maximize safety and not profits, and as an independent, non-profit organization, such funds would be used to further our goals of ensuring the safety of life and property at sea, and protecting the marine environment, says Mr Ueda. President Ueda quickly dismisses any suggestion within the industry that with subsidiary profits coming in, independence would go out: As a third-party verification organization, independence, transparency, and competence are absolutely essential to our operations. It is for that reason that, even with the changes in domestic law and our change in legal status, we have chosen to remain a wholly independent, non-profit organization, he says. Mr Ueda is equally keen to assure its shipowner clients that there will be no let up on the core marine business as a result of the shake up: While there has been a trend for classification societies to expand their activities away from the maritime industry and into the onshore industrial sector, among other fields, at ClassNK we have no such intentions. We are and will remain dedicated to serving the maritime industry. As a result of the transition in April,
May/June 2011 ClassnK chairman and president noboru ueda

we will be expanding the range of our activities, this is aimed at providing better service and meeting the growing needs of the global maritime industry. Another reason for the need to breakdown the service offerings that ClassNK have is the increasing willingness of Japanese Maritime industries to seek out new technologies. The Japanese maritime cluster, and Japanese shipyards in particular, have the greatest potential to contribute to wider industry efforts to reduce greenhouse gas emissions, says Mr Ueda. The 22 different projects already being carried out by the Japanese maritime industry as part of a national project to reduce maritime GHG emissions are a perfect example of the way that the Japanese industry is taking a leading role in these efforts. While addressing the challenges of reducing maritime GHG emissions will require a global effort, and I applaud all such efforts being undertaken around the world, I know of no other such programme on the planet that compares in terms of size, scope or practicality to the efforts being undertaken by the Japanese maritime industry, he concludes. With cutting edge technologies like air lubrication and hybrid power systems already being outfitted on actual vessels, Japanese yards look set to lead the way with regards to emission reduction in the short term, and ClassNK is proud to be part of it. ]

asiamaritime

23

amship registers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

In the favour of the gods

Cyprus favourable tax regime is proving a lure for shipowners in europe and asia
The Cyprus flag has had been in a flap in the previous decade, hitting a peak of about 29 million gross tonnes in 2000 before falling back to around 20 million gt seven years later. In the past four years though, tonnage volumes have steadily climbed again to reach the current position of about 22m gt. With around 1,650 ships flying the Cypriot flag, the land of Aphrodite, who was born in the sea foam near Paphos following the union of Zeus and the Titan goddess Dione, has the worlds 10th largest merchant fleet. People involved in the countrys maritime sector are hoping the gods are again looking benignly on both the Cypriot flag and the countrys shipping sector in general. Pointing to the reasons for such benevolence, George Pamboridis, chairman of corporate services company Prudens, cites three main reasons why the Cypriot flag is more attractive to foreign owners. Possibly the key one is the European Commissions approval in March last year of a revised tonnage tax regime in Cyprus. Not only does this mean there are no taxes on the profits earned or the dividends paid by a Cyprus shipping company with Cypriot flagged ships operating in international waters, but the salaries of officers and crew are tax-free. Mr Pamboridis says the new taxation agreement goes far beyond any other tonnage tax regime in the European Union. He added: This competitive advantage is expected to improve Cyprus prospects in the shipping world. He points out the tonnage tax concession is available to any owner, charterer or ship manager. Mr Pamboridis added that shipping companies have the choice of either opting into the tonnage tax scheme or paying a 10% corporate tax rate, which is the lowest corporate rate in the European Union. But those choosing to join the tonnage tax must remain in the scheme for 10 years, although firms can withdraw if ships are sold or the relevant charter ends. In an effort to deter substandard ships, vessels on the Paris or Tokyo grey or black lists have to pay either 30% or 60% more in tonnage tax fees. Explaining the other reasons for growing interest in the shipping register, Mr Pamboridis says the Cyprus flag is no longer on the United States Coast Guards target list. The flag is also on the Paris and Tokyo MOUs white lists. He says there were also bilateral co-operative agreements covering merchant shipping with 32 countries including mainland China.
24

This means there is increasing interest in the Cyprus flag by Asian owners, Mr Pamboridis says. Cyprus has already started to call itself the Shipping Metropolis of Europe. While this might provoke cries of foul by its Greek neighbours, government figures show there are around 130 Cyprusbased shipping, ship management and shipping related companies who employ 60,000 seafarers and 4,000 shore-based personnel. Currently, about 4% of the global merchant fleet is managed from Cyprus, while the industry contributed about 5% of GDP last year. This comes at a time when energy companies are looking with mounting excitement at what are considered to be vast natural gas reserves in the eastern Mediterranean. Estimates suggest that the Leviathan gas field, which lies south-east of Cyprus, has around 2trn cu m of gas, making it the biggest find by US-based gas and oil company Noble Energy. The firm is expected to start exploratory drilling of this and neighbouring offshore blocks either by the end of this year or early 2012. Mr Pamboridis says if early estimates are correct Cyprus would only use one tenth of the reserves in the next 50 years. He adds that while there was no legal requirement to use Cyprus flagged vessels, such as offshore supply ships, the exploration and development of these offshore fields would spur the countrys maritime sector. The only issue that could spoil the ongoing renaissance in the Cyprus flag is the continuing ban on Cyprus flagged vessels calling at Turkish ports. Mr Pamboridis says a lifting of the ban would be conditional on Turkey joining the European Union.]
May/June 2011

asiamaritime

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Flagging up the Fight on piracy

the liberian registry has been at the forefront of the war on pirates
The Liberian regisTry currently comprises 3,570 ships totalling 115 m gt., the highest in its entire history. Since LISCR took over the management of the registry in 2000, the fleet size has more than doubled. The Liberian Registry is the second largest in the world and with size comes influence. The IMOs Maritime Safety Committee approved interim guidance on the employment of privately contracted armed security personnel onboard ships transiting the high-risk piracy area off the coast of Somalia and in the Gulf of Aden and the wider Indian Ocean at its 89th session in May 2011. This guidance is largely based on that which the Liberian Registry has been providing to its shipowners, ship operators, and
scott bergeron chief operating officer of the Liberian international ship & Corporate registry

But Asia is a vital market for the registry, and one where we are growing in strength on a daily basis, both in terms of existing tonnage and newbuildings. Japanese vessels, for example, have been registering with Liberia for over forty years, and executives from leading Japanese shipping companies have confirmed that they expect to see a further increase in Japanese ship registrations with Liberia. LISCR has a dedicated office in Tokyo and, fittingly, last year it was a Japanese vessel which took the registry over the historic 100m gt mark. Liberia is expanding its business throughout the Far East and is continuing to attract new business there because of its outstanding record for safety and service, and the proactive support it offers to owners in the region, he concludes. ]

ship masters, since 2010, says Scott Bergeron, chief operating officer of the Liberian International Ship & Corporate Registry, the US-based managers of the Liberian Registry. Given the recent interest by governments and shipping industry associations in the use of armed security personnel on ships, the Liberian Registry proposed that IMO undertake this work, as the competent UN agency for such matters, and provided its guidance to IMO for consideration by the MSC Working Group on Maritime Security and Piracy. The guidance includes sections on risk assessment, selection criteria, liability, command and control, management and use of weapons and ammunition at all times when on board and rules for the use of force as agreed between the shipowner, the private maritime security company and the master. To expedite finalisation and promulgation of the guidelines, an inter-sessional meeting of the MSC Working Group on Maritime Security and Piracy is proposed for September 2011 to review the guidelines for any amendments. Representatives of the Registry will participate. The Liberian Registry is working with the naval forces in piracy-affected areas to improve compliance of its registered fleet. It strongly urges shipowners and their masters to follow Best Management Practice, says Mr Bergeron. Meanwhile, the Liberian Registry is keen to get the message out to new clients and new ships as well as offer a wide range of services that can be found with one of the largest registers. Greece and Germany have traditionally been strong supporters of the Liberian flag, and continue to be so, says Mr Bergeron.

May/June 2011

asiamaritime

25

amship registers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Marshalling the forces of asia

asia is proving to be a rich hunting ground for the Marshall islands register
The conTInuIng rIse in the strength of the Marshall Islands Registry both in terms of tonnage growth and, more importantly, the quality of that tonnage has been extraordinary. As of June 2011, the MIR is the third largest and fastest growing registry in the world with 71.5m gt and more than 2,400 vessels. Also in June, the MIR qualified to be listed under the United States Coast Guards Qualship 21 program for the seventh year running. With this designation ship owners and operators of Marshall Island flagged vessels are able to apply to the USCG for a Qualship 21 certificate and the rewards that registration entails - a two-year limited port State control (PSC) oversight for freight ships to a possible reduction of scope for annual/mid-period exams for tank ships that have applied for and received Qualship 21 certification. According to the president of International Registries Inc that manages the MIR through its affiliates, Bill Gallagher nearly 18% of the vessels on the USCG Qualship 21 vessels list are Marshall Islands flagged ships. Further testimony to the quality of the MIR fleet has been its ability to maintain its white list status with both the Paris and Tokyo MoUs and has met the LRS criteria of the Paris MoU.
Annie ng managing director of International registries (far east)

ioM eyes asia

The Isle of Man Ship Registry continues to make inroads into the Asia Pacific markets with more owners from the region selecting the flag as their registry of choice. And now that focus is starting to pay off with several major owners from the region taking the decision to put some tonnage with the Isle of Man. Registry director Dick Welsh believes the flags high international standards, growing regional reach and highly cost effective fee structure mean the flag is naturally attractive to a wide range of owners. He believes the low cost structure and the fact that the IoM flag meets all the international benchmarking criteria makes it a strong alternative. The registry is making efforts to engage with owners and operators across Asia and has homed in on Singapore as one of Asias most dynamic international shipping centres. The flag has recently appointed Geoff Hutcheon as a surveyor in the Lion City and Dick Welsh and his colleague Anne Blyth, the flags senior registrar, makes regular visits to the region. ]

We welcome any competition

Asia is playing an increasingly dominant role in the growth of MIR, headed by the dynamic managing director of IIR for the Far East, Annie Ng. In just the last year or so Annie has been at the forefront of the establishment of new offices in Taipei, Imabari in Japan and is now on the hunt for the right personnel to open premises in Fuzhou, China. Ms Ngs office had been marketing in Taiwan for some years before setting up a service office. Pure marketing may be helpful to get shipowners our attention but to offer a true service to our clients a full service office with technical knowhow on hand is imperative in providing what the client wants and needs, she says. Pointing to the fact that other open registries are also experiencing good growth due the extraordinary number of vessels being delivered, Ms Ng says, We welcome any competition, there is always enough business for everybody. But she insists that those flags simply content with a marketing presence in the region will eventually lose out. ]

26

asiamaritime

May/June 2011

amcar carriers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Sun ShineS on the environMentally friendly

nyKs revolutionary new car carrier draws on a range of green sources for its power including the sun
In the drIve to cut fuel costs and reduce shippings carbon footprint many substitute forms of propulsion such as liquefied natural gas, electricity, hybrids, or even nuclear fuel have been put forward as possible alternatives. What makes Nippon Yusen Kaishas car carrier Auriga Leader truly innovative is the sheer range of alternatives there is packed into the hull and deck of one vessel. With the participation of Kawasaki Heavy Industries, ClassNK, and the Monohakobi Technology Institute, NYK now owns and will shortly operate the worlds first solar-power-assisted vessel that is fitted with a hybrid power supply system, ballast water management system and is also adapted to use low sulphur fuel. Originally built at the Kobe shipyard of Mistsubishi Heavy Industries, the Auriga Leader has a length overall of 199,99m, a breadth of 32.26m, depth of 34.52m and is capable of carrying 6,200 cars. The parties involved in the project, one of a number of such subsidised by the Ministry of Land, Infrastructure, Transport and Tourism, began shipboard tests in June. These tests will verify the effects of a jointly developed hybrid power supply system for vessels that will be installed on NYK Lines solar-power-assisted car carrier the 60,213 gt Auriga Leader. The vessel is also being fitted with a ballast-water management system and adapted to use low-sulphur fuel to further strengthen environmental measures. be adopted. At the same time KHI has been working to develop a
even if it rains the Auriga Leader will power on

nyK line and Mti will aim to develop an even larger solar power generation system for vessels, while Khi will seek to commercialize the hybrid power supply system for vessels.
hybrid power supply system for vessels through the use of its selfdeveloped large nickel hydrogen batteries known as Gigacell; and ClassNK is supporting all these projects as part of assistance provided through a joint research scheme based on industry demands. Charging and discharging a fluctuating amount of solar power generated by this hybrid power supply system will stabilise the supply to the vessels electrical power system. This will also minimise output fluctuations from the diesel power generator and secure a stable power supply. Shipboard tests on Auriga Leader will continue in the weeks to come with the aim of achieving a stable power supply under harsh marine conditions through the combination of solar power generation and the hybrid power supply system, and the effects will be verified. Based on the experiment results, NYK Line and MTI will aim to develop an even larger solar power generation system for vessels, while KHI will seek to commercialize the hybrid power supply system for other ships.]

Photovoltaic problems
The power generation and endurance of the photovoltaic panels on Auriga Leader have been undergoing shipboard tests since the completion of the vessel on December 19, 2008. The tests have shown that providing a stable power supply from the photovoltaic panels can be difficult because even a slight change in the weather may have a significant effect on the amount of power generated. It was also found that attempting to make the solar power system bigger to gain more output and to increase its dependency could result in problems with regard to stable operations due to fluctuations in the power supply.

each company contributed to the overall design

The hybrid power supply system has been studied since fiscal 2009. NYK Line and MTI, setting out with the aim of curtailing CO2 emissions, have pursued a stable onboard power supply in case an unstable renewable energy source such as solar power was to
May/June 2011

asiamaritime

27

amcar carriers

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Mixed picture for car carriers

china is providing more and more business for car carriers

the earthquake and tsunami in Japan has wreaked havoc in the car carrying business but emerging markets indicate a bright future
According to the latest figures available vehicle and auto parts exported from Japan in April were all but wiped out by the continuing fall out from the devastating earthquake and consequent tsunami of March 11. Just 126,061 units left Japan in April, a fall of 67.8% compared to the same month in 2010. Buses were the most seriously affected vehicles, witnessing an 83.2% fall off from the year before. But the signs are that Japans auto industry may now be over the worse. On June 13, president of Toyota Motor Corporation Akio Toyoda declared on the company website: Production in Japan is expected to return to 90% of normal levels in June. From July and after, the degree of production recovery will depend on the model, but production volume is expected to have recovered to almost normal levels. And, it is hoped to be able to make up for lost production from around October. However, Toyota appears to have been the least affected having lost only 20% of production in April. But Mitsubishi, which was hit by a 70% drop in production, shares Toyotas optimism that production will be close to normal by the fourth quarter. Further evidence that in the short-term cargo flows are accelerating comes with K Lines u-turn on its earlier decision to lay up two vessels in May and MOL reconsidering a similar move. Nevertheless the impact on the trade is bound to lead to a drag on full fiscal year figures come next spring. NYK, the largest of the Japanese car carrying firms in terms of capacity, downgraded its volume forecasts in May by 26% for the period until October and 11% or 2.8m units for the full calendar year. MOL said it could be carrying up to 30% less vehicles over the same period. And does not seem to anticipate much growth beyond this year. The company currently operates 114 PCTCs but despite a slew of new vessels joining the fleet this year and next, it only expects to be operating 110 ships by the end of 2012.

new cars new roads

It is good to know then, that while Japan may still be the most important export market for autos and parts, it is no longer the only game in town, as the head of China for Wallenius Wilhelmsen Logistics, Leroi Xavier can attest. Imports of cars into China were around 810,000 units in 2010. In the first four months of 2011, year-on-year the figures were 30% up on 2010. Exports from the country are faring almost as well. After 510,000 units were exported in 2010, exports grew year-on-year by 50% for the first four months of 2011. In order to cash in on the growth of the international trade in vehicles based in China WWL has invested in two strategic joint ventures, Tianjin RoRo Terminals with the Tianjin Port Group and the Shanghai Haitong International Terminal, together with the Singapore International Port Group, Anji Automotive Logistics and NYK. Mr Xavier says that the impact of the earthquake on Chinese business has been generally limited to a shortage of parts for the Japanese clusters in Tianjin, Beijing and Guangdong provinces. Imports from Japan have slowed by 10%, he says.

28

asiamaritime

May/June 2011

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Intra-Asia welcomes careful drivers

Like NYK, MOL and K Line, WWL has been developing intra-Asia services covering Southeast Asian destinations and reaching out to India. We are also reinforcing our China/Japan loop services. And from a deep-sea export perspective we have an ASOC trade covering pacific islands besides New Zealand and Australia. Also a few projects for new trades are being assessed, he adds. Key to servicing Southeast Asia and beyond is the use of Singapore as a hub. We have lately developed a High and Heavy preparation center for one of our major customers and certainly use Singapore as a hub both on the ocean and inland sides as part of our Supply Chain management solutions, says Mr Xavier. Through one of its parent companies WWL already operates Tonsberg the worlds largest car carrier and Mr Xavier sees this as part of a growing trend with the arrival of the first of four mark V carriers from Japans Mitsubishi Heavy Industries expected this year. Making larger vessels allows us to carry more cars in both a more economical way and a more environmentally friendly fashion, he says. There is no doubt that China will export to volume markets such as North America and Western Europe in the next three

years. When this happens, exporters will need reliable liner services and will have to focus more on the quality of their logistics. This means that RORO carriers will have to dedicate a service for Chinese exports and this also means that the freight rates will be higher, he adds. Out of the water WWL is growing a strong distribution network within China, offering an inland network through a joint venture with Citic. We operate three technical services centres in Shanghai and Tianjin and will continue this development in other major ports in China, he says. Our customers are based on the four major automotive clusters Guangzhou, Shanghai, Tianjin and Dalian. All logistics modes are utilised in China. Waterways are very well utilised on the Yangtze River, and trains are quite well utilised in northern China. So prospects are good but the car carrying business is yet to get back to the glory days of 2008. When might that be? I am not sure whether volumes can reach 2008 levels before China automakers penetrate European and American markets and start mass exportations. 2013 could be optimistic but 2015 might be a more realistic date, Mr Xavier concludes. ]

SERVICE & QUALITY ARE WITHIN YOUR REACH

INTERNATIONAL REGISTRIES (FAR EAST) LIMITED

The Marshall Islands Maritime and Corporate Administrators

TEL: +852 2526 6641 HONGKONG@REGISTER-IRI.COM

For a full list of offices, please visit: WWW.REGISTER-IRI.COM

May/June 2011

asiamaritime

29

ammalaysia

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

DeLIverIng on the proMISe

Liquefied natural gas is set for a positive cycle according to MISC, its largest carrier
Being in possession of the largest liquefied natural gas carrier fleet in the world, MISC is in as good position as any to capitalise on the recent surge in enthusiasm for the gas. But is the company convinced that the party wont be spoiled by too many guests coming to the table? Although growth rates from 2011 onwards are lower than the 2006-2010 period, LNG import growth translating to shipping demand is fairly balanced against growth in supply but with a period of demand outpacing supply between 2011 to 2015, the company says. Hence, during the next four years, the LNG shipping business is expected to be buoyant with a more balanced picture beyond 2015, MISC adds. The contractual nature of LNG business compared with some tanker and dry bulk shipping can provide a buffer against catastrophic losses. MISC observes that generally, the nature of LNG business (7080%) is based on long term charters and thus, it may not face the same risk of overcapacity as with other classes of vessels. Furthermore, a more recent innovation in how the fuel is stored and distributed means industry players can earmark their aged vessels for LNG offshore technology solutions.
MisC is watching the Lng market closely before making a move

also the damage to other nuclear plants. Furthermore, the long-term impact of the Fukushima shutdown and the resulting slowing of growth of nuclear power will also increase global LNG demand by 25m mtpa (equivalent to 3.2 Bcf/d of gas) to 401m mtpa by 2020, up from previous estimates of 378m mtpa, the company predicts. The immediate effect of the Japanese disaster has been a marked increase in short and medium term charters. After the incident, the number of LNGC sailing to Japan surged 29% since April and brokers also reported ship unavailability as most ships were locked for short and project term charter. Given the size of Japans LNG receiving facilities and those of China and the emerging nations in Asia, there has been a spike in orders for LNG carriers in the 145,000 cbm to 160,000 cbm range, with the prospect that Nakilats fleet of 220,000 cbm to 260,000 cbm vessels will continue to struggle for employment. On prospects of MISC joining the market for new vessels the company says, As mentioned earlier, MISC takes a prudent stance in the building of our LNG fleet and thus, the expansion depends on the project requirements.

In any event, MISC reviews its fleet deployment plan from time to time, and may embark on a LNG fleet expansion if it is supported by firm demand of new shipping requirements or LNG offshore technology solutions such as floating, storage and regasification units and other floating LNG projects.

on the brink of a golden age?

On an even more positive note, the International Energy Agency released a special report in June 2011 exploring the potential for a golden age of gas in which global use of gas is expected to rise by more than 50% from 2010 levels and will account for more than a quarter of global energy demand by 2035. But as far as MISC is concerned, the company says, our LNG shipping operation has remained stable and is shielded from spot rate volatility due to our committed long-term contracts. We have always maintained a prudent stance and only contract newbuildings on secured contracts. Of course, at the top of the list of spurs to growth in LNG exports was the disastrous earthquake and consequent tsunami. MISC estimates that Japan has an additional LNG requirement of 8-12m tonnes due not only to the Fukushima shutdown but
30

From gas to boxes

Whilst the operation of LNG vessels may be considered to be part of the elite top end of the shipping market, MISC is not afraid to be deeply involved in the more crowded market of intra-Asia box carriage. To cater for the growing regional demand, currently MISC owns and operates 22 containerships with capacities ranging from 700 to 4,900 teu on intra-Asia routes. MISC views the intraAsia liner business as regional trades covering east of the Suez Canal, bordering the Pacific Rim, including Oceania and South Africa.
May/June 2011

asiamaritime

mamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

There appear to be some complex issues involved in intraAsia trade today. On the positive side there continue to be an increasing number of free trade agreements being signed between China and its partners in Asia. Less positive perhaps, is the charge to intra-Asia trade by players better known for Asia-Europe and Asia-US trades. There also seems to be a slim threat to the business from Chinas move to build expressways from home to Indochina. But MISC is confident that its fleet of boxships is pitch perfect for the conditions. From our perspective, driven by the regions fast developing emerging markets and economies, and coupled with Chinas strong presence in Asias economic growth moving forward, the intra-Asia trade-lane will continue to be a beacon among other trade-lanes in the years to come, the company says. No doubt, the cascading of excess and larger tonnages for Asia-Europe and Asia-US trades will have an impact on intra-Asia trades. However, these larger vessels will be limited in their coverage as many port facilities and infrastructure in the intra-Asia region are still limited to handling nothing bigger than panamax size vessels. Furthermore, although the current overland development between areas in southern China and neighbouring countries within Asean have begun in earnest; cross-border volume and road / rail haulage of containerised cargo is still insignificant as they are compounded by various customs, border and infrastructure restrictions. Comparatively, it is still more cost effective to ship cargoes directly to the ports, which are closer to consumer markets, MISC concludes. ]

IEA predicts golden age for gas by 2035

May/June 2011

asiamaritime

31

amvietnam

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

NYKS loNg roAd iN VietNAM

NYK has a long history of providing logistics support to the Southeast Asian nation
NippoN YuseN Kaisha first began shipping services to Vietnam in 1956, at a time when the Cold War era military conflict was set to flare up and consume the country for the next 20 years. In fact NYKs service was not suspended until 1975, when the communists claimed victory and closed the doors to external trade. NYK was unable to ship goods to and from the country again until 1990. The company resumed a representative office in 1992 through its logistics arm Yusen Air & Sea Services. In 1996, NYKs logistics arm at the time, Yusen Air & Sea Services, opened an office in 1996. Now, under the new registered name Yusen Logistics, the company provides a nationwide network of trucking and 7,636 m2 of warehousing. Much has been made in the press of the exodus of manufacturing from Chinas Pearl River delta by some estimates as much as 25% of production has fled to countries like Vietnam and Bangladesh. But a swathe of Japanese manufacturers moved into the country some years before. It is, for the most part, these early arrivals that Yusen Logistics has come to serve. A Yu s e n L o g i s t i c s spokesperson says that 70% of its customer base in Vietnam is made up of Japanese manufacturers and traders. Although Yusen Logistics says it has expansion plans to meet the needs of the rapidly expanding manufacturing and trading base, it will have to act fast to catch up with international liner companies and their related logistics arms that have been investing large amounts in new ports and terminals. NYK s chief national rival Mitsui OSK Lines, as part of a joint venture including Hanjin Shipping, Saigon New Port and Wan Hai Lines officially opened the Tan Cang Cai Mep International Terminal in March this year. Just a stones throw from Vietnams commercial capital Ho Chi Minh City, the new terminal has a megaship capability draft of 15.8m and a capacity of 1.1m teu. Both Hanjin and MOL have Korean companies, the spokesperson says. Yusen Logistics has opened a representative office in Phnon Penh and is reinforcing its intelligence gathering. Since the capacity of Cambodias port and aiport network is small, Yusen Logistics would employ ocean barge and truck transportation through Ho Chi Minh. Unconfirmed reports however suggest that NYK will eventually make the plunge in terminal investments in the near future. An MOL official told Asia Maritime that a 2010 report linking it with NYK, Japanese trading house Itochu and local state-owned shipowner Vietnam Shipping Lines for a terminal joint venture in the north of the country is still under consideration. ]
hanjin shipping is a stakeholder in Vietnams Tan Cang Chai Mep Terminal

been making direct calls to the new terminal on their way to Europe since January this year. But Tan Cang Cai Mep is just the latest in a slew of terminals that have opened in the south of the country under the umbrella of the government nominated Cai Mep-Thi Vai Deep Sea Port Development Project. An A to Z of leading global port operators has jointly financed other projects. Hutchison Port Holdings joined up with Saigon Investment Construction and Commerce in the establishment of Saigon International Terminals. And HPHs rival and minority shareholder PSA sits close by at the SP-PSA terminal, courtesy of a joint venture with Saigon Port and local shipping line Vinalines. The list goes on: DP World has its stake in Saigon Premier Container Terminal with an estimated eventual capacity of 1.5m teu. APM Terminals has recently completed its Cai Mep International Terminal and begun operations at the 1.1m teu facility. Although, thus far NYK has been left out in the cold as far as priority bookings at southern ports is concerned it is eagerly eying logistics opportunities in neighbouring Cambodia. The market in Cambodia is set to expand in the next two-three years by Japanese and

32

asiamaritime

May/June 2011

In the coming issues of Asia Maritime youll find in-depth features on Asias most important maritime nations and those emerging. You will also gain important insights into industry sectors and the regions most important figures. For our regular columns we shall be trawling industry sectors deep and wide. As a result, youll find stories on the environment, logistics, industry and personal profiles, innovations, an in-depth investigation into a high-profile industry concernAnd a great deal more, all written in a direct and entertaining way so that you will find that Asia Maritime is not just a must-read but a want-to-read publication! Coming in Asia Maritime in July/August 2011 Russia/Australia/Marine Law/Shipmanagement Middle East/Special Innovations pull-out

amtechnical

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

STCW aMendMenTS SeT To give onboard Training a booST

The new amendments to STCW brings training full circle but with added technology
IA rAft of major revisions to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW Convention), 1978, and the STCW Code were adopted by the IMO in June, 2010, at a special Diplomatic Conference in Manila, the Philippines. Known commonly as the Manila amendments, these changes are set to enter into force on January 1, 2012 and collectively represent an important milestone in the ongoing efforts of the shipping industry to enhance safety at sea. The scope of the amendments is wide-ranging and their implementation will have a significant impact on many areas of ship operation, including training. Indeed the Manila amendments represent a vital first step in recognising the role of new technology, and distance learning methods, in the training of modern day seafarers. Many believe the amendments will act as a catalyst to accelerate the more widespread adoption of onboard training, including computerbased training (CBT) systems, to the mutual benefit of shipowners, ship managers and seafarers. Among the amendments adopted in Manila are new requirements relating to training in modern technology, such as electronic charts and information systems (ECDIS), and the introduction of modern training methodology, including distance and web-based learning, for the first time. There is also a focus on new training methods such as simulator-based training and eLearning. Demonstrating competence by approved simulator training is now included in more of the competence areas and there are 84 specific references to this in the document. Speaking at the Tanker Safety Conference in London last October, Captain Ashok Mahapatra, head of marine training and human element section at IMO, highlighted a number of other key changes that will have an impact on training regimes. He pointed out, for instance, that companies will be responsible for refresher training onboard ships, with the Manila amendments setting out requirements for the demonstration of continued competence in areas of basic safety training. The revised STCW requires continued proof of BST competence every five years, making an allowance for the assessment of competence ashore for those areas that cannot be assessed onboard. There are also provisions for environmental pollution awareness training, security training and training based on general anti-piracy related information. The Manila amendments further reorganise and update the competence tables for engineers to meet emerging and contem34
Charts are becoming increasingly electronic

porary technologies and to set specific competence requirements for personnel serving onboard different types of tankers, including guidance relating to CBT. Captain Mahapatra listed the key benefits of the STCW amendments including the introduction of training in modern technologies and the acceptance of modern training methods. However the IMO is reserving judgment as to what the future holds. According to the spokesman, The actual impact of specific amendments on training, and training providers, will be something that will only be seen once the amendments take effect. Shipowner groups have responded positively to the amendments and to the impact they will have on seafarer training regimes, which could represent the beginning of a period of significant change. James Langley, senior advisor for the International Shipping Federation (ISF) and the International Chamber of Shipping (ICS), says, The industry has perhaps not embraced CBT as much as many people expected, but the STCW amendments might mark the start of something different. Mr Langley highlights the requirement for refresher training, which has not been included in STCW before. He says, CBT could well come into this. For example, it might be possible for an online assessment to see if a particular crew member needs to demonstrate further competency and undertake refresher training. There are other elements of the amendments that could also give impetus to CBT adoption. Mr Langley says, Certainly, CBT would become increasingly popular and, for areas like ECDIS which beMay/June 2011

asiamaritime

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

come mandatory for many vessels in 2012, much of the training could be done onboard with CBT technology. He continues, Onboard training makes sense for shipowners and seafarers as it is less costly and less disruptive. It is one way of ensuring a happier crew, as seafarers appreciate the ability to have training onboard rather than ashore and it might provide a simpler way of getting additional training, aiding continuous professional progression. The ICS/ISF and their members are now discussing the implications of the Manila amendments with administrations, with a view towards ensuring a unified, common interpretation. Mr Langley says, The industry has to work together and administrations have a key role to play. Once administrations have set out their position on various issues, then shipowners will be better able to develop onboard training strategies around the revised STCW requirements. Overall though, Mr Langley cautions against thinking that the implementation of the revised STCW next year will have an instant impact on current training practices. This is a stepping stone, not a major step forward, certainly as far as onboard training using CBT is concerned, he suggests. Nonetheless, leading maritime training providers are confident that the new regulations will give impetus to more modern, cost effective and crew-friendly methods of training. Roger Ringstad, managing director of Seagull AS of Norway, says, We think this is a significant piece of regulation. While it is an evolution from past STCW versions, there are areas where it will have a particularly high profile impact, for example ECDIS training. The revised STCW is much clearer on this, setting out new requirements relating to training in modern technology such as Electronic Chart Display and Information Systems, which will become mandatory on new tankers from 2012. Seagull also notes that there will be new certification requirements for able seafarers. Up to now onboard competence verification has largely been restricted to officer level. However our reading of the amendments is that there will be an extension to include able seafarers as well, says Mr Ringstad. He continues, Certainly we expect this regulatory initiative will open up a greater requirement not just for training, but for re-training as well. It is perhaps not a revolution, but in some areas we will see a greater focus on onboard CBT and distance-based learning as a result of the changes made through the amendments. Seagull is now preparing to meet the changing requirements of shipowners and operators in the wake of these latest STCW revisions. Mr Ringstad notes. We started last year a systematic review of all our training modules to see where revisions might be necessary.
May/June 2011 As a result of the STCW amendments onboard training will regain its importance

As a result we can see that we will need to look deeper into certain areas and we have begun that process. Updating the companys existing range of CBT modules to take advantage of the opportunities that are likely to open up for training providers will be a gradual process. As Mr Ringstad points out, the revised STCW has a fairly wide implementation window stretching from 2012 to 2017. One area of concern that is highlighted by Seagull is the need for flag states to harmonise their approach to the revised STCW. Flag states are not always in complete agreement with one another as to how regulations should be implemented and this is a headache for ship owners and operators, as well as for training providers such as ourselves. In the past we have seen regulations implemented differently from one flag state to another, and we hope this will not happen in this case. While regulations are an important driver behind the greater adoption of onboard CBT and distance learning, there are other factors that are also likely to encourage more shipowners and operators to embrace this approach. If you do training onboard you can use the actual equipment concerned, so it is widely agreed that this is the best way to go about training and companies like Seagull can provide the necessary structure, says Mr Ringstad. It is also more cost effective and surveys from the Nautical Institute have shown that seafarers are keen on onboard training as otherwise training can eat into their valuable leave time. With the recruitment of seafarers in some sectors of the shipping industry still proving problematic, ensuring they can spend more quality time with their families could become an ever more important consideration for owners and operators. ]

asiamaritime

35

amship's store

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

reducing crane MTM geTs The operaTion risk nod froM dnV
lloyds regisTers Knowledge Based Management team (KBM) has successfully created a pilot risk-based inspection and maintenance programme for Modern Terminals Limiteds (MTL) quay side and rubbertyred tire gantry cranes in Hong Kong. MTL operates four Container Terminals 1, 2, 5 & 9(S) in Hong Kong. At all these facilities, the management of equipment inspection and maintenance programmes is critical to continued effective operation. After MTL commissioned Lloyds Register to develop a risk model for the equipment, the KBM team saw that their Arivu risk-based solution was well suited to the clients needs. The Arivu product is a softwarebased system that generates maintenance and inspection plans and maps them directly onto an organisations risk tolerance and financial objective framework. Initially, the KBM team worked to understand MTLs objectives and then used the Arivu software to create port crane models. These models delivered a tailored task plan for each crane that factored in the cranes design, usage, age and condition. The models were successfully piloted and, by using KBMs risk-based maintenance strategy, the clients maintenance costs were reduced and operational reliability strengthened. Kenny Lam, Engineering and Planning Manager for MTL, said the company was pleased with the result of the pilot project. In this pilot project, the KBM project team worked closely with us to develop the risk models for our port equipment, Said Mr. Lam. The KBM team gave us excellent support during the entire project and also devoted adequate resources to achieve each project milestone. ] MTM MeTalizing, a player in the thermal spray coating industry has won the DNV approval certificate for its thermal sprayed zinc coating procedure. DNV has approved MTM Metalizings thermal sprayed zinc coating technology for use in ballast tanks, double-skin spaces, cofferdams and other enclosed spaces, under the International Marine Organization Performance Standard for Protective Coating requirements. Mr Bill Jordan, General Manager of MTM Metalizing noted that zinc has extensive anti-corrosion qualities. Zinc provides greater galvanic protection than other metals such as aluminium. It is the easier of the two metals to apply by either flame or arc spray. It can be deposited onto steel via spraying which is what MTM Metalizing specialises in, explains Jordan. MTM Metalizing is the first metalizing company in the world to obtain a DNV Certification of Approval for its thermal sprayed zinc coating technology. The certification is valid until 31st December 2013. MTM Metalizing gained the certification after extensive testing including accelerated corrosion tests. This is believed to be the first Alternative Coating approval issued under the IMO guidelines. The application speed that the IMC-patented equipment produces allows the use of metalizing as a realistic alternative for ballast tank coating. ]

eVac inTroduces orca iiis Tiny fooTprinT

evac, a supplier of wastewater collection and treatment solutions has introduced the ORCA III small footprint physicochemical advanced wastewater treatment unit. The ORCA III comes in six different sizes, with a hydraulic loading capacity ranging from 20cu.m./day down to 1.5cu.m./day. It is ideally suited for efficient wastewater treatment for vessels that stay idle part of the time, thanks to its physicochemical treatment technology. The system meets the requirements of MEPC 159(55) of the International Maritime Organization. With the ORCA III in production, Evac offers the whole range of advanced wastewater treatment systems for the marine industry, says Mika Karjalainen, General Manager of Evac Oy. Its predeces36

sor, the ORCA II unit, has been installed on several hundred vessels, and it complements our MBR biological membrane wastewater treatment units. In the ORCA III wastewater treatment system the sewage from the holding tank for black and grey water is transferred, using a macerator pump, to a sedimentation tank through a static mixer and flocculation dosing. In a separate second tank section the clarified liquid is re-circulated through a disc filter and the organic matter is oxidised with Hypochlorite, after which the clean wastewater is discharged overboard. ]
May/June 2011

asiamaritime

amoperations

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

The cusToMer is noT always riGhT

Michael Grey maintains many charterers are getting too big for their boats
Why do you hate charterers so much? a correspondent writes after a recent outburst which suggested that people who hire ships for a quick voyage have got no right to tell the shipowner how to run his ship. But it is not a matter of likes or dislikes I was complaining on behalf of ship operators who have seen a disturbing lack of balance in the contractual relationship between both sides in a charter party. You could argue that shipowners have themselves to blame. If they hadnt been so full of boundless optimism, they would not have built so many ships that they had to spend their days on their knees, grovelling in front of potential charterers who might deign to use them. It is astonishing that so few of the lessons of recent history; of the great overtonnage of the 1970s, which lasted into the 90s, seem to have registered with todays big spenders. But increasingly, voyage charterers seem to be pushing their luck in dictating to owners and managers how these ships are to be operated. Once it was enough that the customer agreed the basic terms for the voyage, which spelt out the origin and destination, the dates of commencement and completion, and a few other factors. A few years ago, aided by the new facility of weather routeing and its sinister auxiliary of hindcasting, charterers started to actually specify the route the vessel must take on her voyage, effectively challenging the role of the master and his traditional judgement. The courts seemed to think that this was unexceptional, and backed the charterers on numerous occasions, which disappointed the professionals no end. Charterers were increasingly throwing their weight around on the loading and discharging berth, ignoring the cargo plan of the master, doing whatever suited them best, and if the master objected on the grounds that he did not want his ship damaged, threatening the owner that his ship would be blacked, or demanding the master be replaced. Somewhere along the line, the give and take that characterised the relationship between charterers and shipowners became you give and I take! Today the charterers are determined to exercise a managerial control of the chartered vessel, even demanding the right to approve the appointment of the master and officers, with a lot of rules
May/June 2011

specifying the experience they must have in rank. They argue that there is a dearth of experience around, with so many senior officers retiring (it is worth asking them why this is the case!) and they cannot take the risk of their cargo ending up on the beach as a result of somebodys inexperience. It might appear a compelling argument, except that once again it treads on the owners clear responsibilities to man his ship with the people he thinks are competent and capable, and not those that might happen to suit the organisation which might charter his ship. Somebody has to employ a first trip mate or second engineer, master or cargo officer, and it is an outrageous liberty for a voyage charterer to start intruding into the specific manning of somebody elses ship. It is also making it nearly impossible to properly man ships, to determine a fair and responsible promotions policy, which will encourage the retention of good and ambitious officers. How does the employer reward talent and encourage good officers, if some charterer is allowed to influence the appointment of officers, rejecting those it deems are insufficiently experienced in their respective ranks? It is an unjustified infringement into the operation of another business that is not ones own and deserves to be robustly resisted by any shipowner with character. Is not this market dominance legally questionable? Now we have charterers telling owners not to employ armed guards aboard ships carrying their cargoes through pirate-infested waters, thus preventing the owners from exercising their duty of care for their employees, as they see fit. Will the charterers take responsibility for any consequences from their prohibition, if the ship is captured and harm comes to the seafarers? People who hire ships have no lack of contractual rights but the unbalanced market is enabling these customers to hugely increase their powers. Owners should tell charterers brokers to get lost when they submit unjustifiable demands. Maybe it wont always be the case that the charterer will always have the whip hand the cycles do come around and when this happens the ill-will that this sort of bullying control has generated will be remembered. ]

asiamaritime

37

amlogistics

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

The new fronTier

Asias leading sourcing, distribution and retail group has its eye on Chinas growing domestic market and the rise of Asean as consumer
For years Li & Fung has been sourcing 50% of its products, chiefly apparel, footwear and other fast moving consumer goods, from China for export to the lucrative western markets of the US and Europe. But the tide that was turning in terms of new world trade patterns prior to the global financial crisis has now become a positive swell. Vice president of the logistics arm of Li & Fung, LF Logistics Tommy Lui explains what this means for the company: Our business in goods from China to the US going forward can only be described as steady. Europe has already surpassed the US as the largest export market but the continent has some issues these days. Japan, has traditionally been Li & Fungs third largest market, but it has huge problems. Trade volumes will take a hit especially in the high value products sector, says Mr Lui. But the huge compensation factor is that a huge market is opening up on the companys doorstep in China. The rapid rise in costs of production in China may serve to slow volumes to Li & Fungs traditional markets but the increased affluence at home means Li & Fung will have to move fast to catch up with developments. The majority of our goods are still for export. Our domestic business is still in its infancy, says Mr Lui. Li & Fung has 3,000 trucks and 20 warehouses, some of which are the most advanced in China. We have set up a national distribution network for fast moving consumer goods that can be distributed to around 880 cities across China on a daily basis. But we have barely scratched the surface, he concludes. Many companies might be content to find and exploit a niche catchment area such as Guangdong. The southern province has a population of around 96m and commands 7% of the national economy, sufficient to make any savvy retailer rich. But Li & Fung has grander plans that may eventually centre on Shanghai. Mr Lui says the Chinese market consists of three-tiers and increasingly, four distinct geographical markets. As a retailer you have to have a presence in Shanghai, Beijing and Shenzhen. Its unlikely that you will make money in these cities they are saturated. But they are where customers seek out new products. By being situated slightly west of Shanghai products can be fed easily to the north to second-tier cities such as Tianjin and Qingdao, and to the southern counterparts such as Dongguan and Guiyang. But equally important are the western cities of Chengdu and Chongqing in Sichuan province. Both with urban populations of 10m they are important industrial centres that until now have been isolated from the rest of the country and only exposed to western brands in the last five years. Consumerism is high and
senior vice president of LF Logistics Tommy Lui.

customers are literally queuing out the door of western branded outlets. Through a series of free-trade agreements with Asean, China is rapidly becoming more than a sum of its parts. Inter-Asia is happening big time, Mr Lui declares. Extraordinarily ambitious government sponsored trans-Asian roads and railways will revolutionise business between China and its trading partners. We are most impressed by the expressways being constructed between China and Southeast Asia because the highway that connects Guangxi to Vietnam goes all the way up to Ho Chi Minh City and on to Laos and Cambodia. From there you will be able to cut across to Thailand and down to Malaysia and Singapore, he says. When that is built in three to four years there will be an immense amount of trade between China and Southeast Asia. Smallscale production will eventually migrate from China to Southeast Asia. China will concentrate on large-scale mass production and customisation. Each market will start to differentiate while working as a tightly integrated manufacturing network, he concludes. ]

38

asiamaritime

May/June 2011

amimo

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

Flag states role in the Fight against skull and crossbones

sandra speares reports from the iMo on the latest developments in the fight against piracy
Piracy was inevitably back on the agenda at the IMOs Maritime Safety Committee during the committees deliberations between May 11-20, although the precise role to be played by flag states over the question of armed guards and privately contracted naval support, remains unclear. At the meetings at MSC last month, interim guidance on the use of privately contracted armed security personnel on ships transiting the danger zone - which now extends not only to the Somali coast but the Gulf of Aden and the Indian Ocean - was agreed. Interim recommendations for flag states include the use of privately contracted armed security personnel on board ships in high risk areas and guidance to shipowners and operators as well as masters if they decide to use privately contracted armed security were approved to try to clarify the position of those deciding to provide armed guards for their vessels to counteract piracy threats. According to the IMO, The guidance to shipowners notes that flag state jurisdiction and any laws and regulations imposed by the flag state concerning the use of private security companies apply to their vessels. Port and coastal states laws may also apply to such vessels. The IMO has stressed that the use of private security personnel should not be considered as an alternative to the use of best management practices to deter piracy, as well as the use of protective measures. One continuing area of concern for the industry is the fact that many companies are not abiding by best management practices or reporting their presence to military authorities before transit across the target zone for attacks - which has become ever larger with the use of motherships. The IMO says, placing armed guards on board as a means to secure and protect the vessel and its crew should only be considered after a risk assessment has been carried out. It is also important to involve the master in the decision making process. The guidance includes sections on risk assessment, selection criteria, insurance cover, command and control, management and use of weapons and ammunition at all times when on board and rules for the use of force as agreed between the shipowner, the private maritime security company and the master. The IMO says that interim recommendations for flag states recommend that they have a policy on whether or not the use of private armed guards will be authorised. The flag state position is one that has raised a number of question marks. Clay Maitland, senior partner of IRI which runs the
May/June 2011 Flag states are carving out a role in the fight against piracy

Marshall Islands register said recently that the register was not prepared to sign any document endorsing the use of armed guards on vessels or indeed prohibiting their use. At the same time, he said such measures were now necessary in what was in all likelihood to become a shooting war in the near future. However, as Mr Maitland pointed out, once an escalated shooting war begins, seafarers are going to be exposed to friendly as well as hostile fire. One wonders how industry spokespersons will react when the casualty list begins to rise. The MSC also agreed guidelines to assist in the investigation of crimes of piracy and armed robbery against ships that are intended to assist an investigator to collect evidence, including forensic evidence, to support the submission of written reports which may assist in the identification, arrest and prosecution of the pirates that held the vessel and crew captive. International Chamber of Shipping secretary general Peter Hinchliffe says: ICS is very pleased to see that the IMO has endorsed two important sets of guidelines on the use of armed guards, one for companies and one for flag states although both need further development this year. It is pleasing that the legal pitfalls in the employment of private armed guards have also been recognised and that further work will be done on this. ICS believes that a robust international signal is required to demonstrate that further acts of piracy and the use of violence are not acceptable. In particular States are urged to take action to prevent further mother ship activity and to seek UN Security Council action to create a blue beret force of armed guards to be deployed to vulnerable ships. ]

asiamaritime

39

amgreen page

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

DesigN for chaNge

DNV unveils ore and crude carriers that leave a lighter footprint
Det Norske Veritas, the Norwegian classification society is unveiling a series of green ship designs. The first in the series was the Triality very large crude carrier that was publically launched at the end of last year although work on the project, by more than 35 DNV staff had been ongoing for some time. Kaveh Mansoorian, DNV senior customer relations manager in Hong Kong said some of the concept work was done by the firms offices in Asia, although there were no regional shipping companies involved. Commenting on the project, Jan Koren, DNV segment director for tankers, said the challenge was to develop a new concept VLCC with the same cargo carrying capacity and operational range as todays ordinary VLCC. He adds: The new concept was to be characterised by the following main features: LNG fuelled, ballast-free and capable of effectively recovering volatile organic compounds - significant volumes of cargo vapours which would otherwise be lost to the atmosphere. Mr Koren says: The Triality VLCC will not be contracted in the very near future, but the project points in specific directions for the development of future designs. It is worth noting that features incorporated in the Triality concept may well be applied to smaller tankers too. Five months on, DNV unveiled its Ecore design for a very large ore carrier which was produced as part of a joint maritime industry project. This has involved engine maker, MAN Diesel & Turbo, cargo equipment specialist Cargotec and other partners, FKAB and TGE Marine. DNV project manager Pl Wold says the aim was to develop a large ore carrier design that lowered fuel costs and improved loading efficiency. The curvaceous design one hesitates to call it sexy, although it does have a certain allure - features a more ballast friendly hull shape and a large centre cargo hold layout. There are also twostroke dual fuel ME-GI engines using liquefied natural gas and a highly efficient self-loading system. The vessel has two receiving hoppers, one on each side, and bulk material is loaded into one of these at up to 16,000 tonnes per hour by the shore-based loader. From the hopper, cargo is fed to the loading conveyor, which travels on rails in the upper part of the cargo hold and ensures continuous loading throughout the length of the hold. The conveyor is reversible so that it can distribute material to both ends.
40
Conveyance made easy

Cargotec sales director Johan Ericson says: The MacGregor material handling system is designed to overcome the problems that can be caused at bulk cargo loading terminals by the length and width of a vessel. It makes it possible for the shore-based loader to operate at a single point along the vessel, removing the need to move the loader, or the ship, or even both, during the loading process. Mr Wold says: Our goal was to combine proven systems and design concepts to demonstrate how fuel costs can be reduced and loading efficiency improved. The designers canvassed opinion from shipowners, cargo owners and brokers to ensure the project was consistent with market demand, while designing the vessel for a recognised iron ore trade - from Australia to China. Ecore is grounded in market reality and applies existing technology to real-world issues, Mr Wold adds. The concept specifications feature a 250,000 dwt vessel with a length of 330 m and a loaded draught of 18 m operating at a loaded service speed of 14.9 knots. The vessel features a ship-to-ship LNG and fuel oil bunkering system for locations off Shanghai or Western Australia. DNV estimates it would take nine to 15 hours to bunker the vessel with around 4,000 cu m of LNG. Mr Wold says that with a single cargo hold, the cargo centrehold layout and midship-form was developed to minimise the need for ballast, and enable more efficient cargo handling and allow space for LNG tanks to be stored below the main deck. ]
May/June 2011

asiamaritime

ambrief encounters

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

On the OtheR side Of the Pen

CC Kai meets Bernie B, dean of the PR men
There are many mansions in the house of Bernie B, the great operator in the public relations game. One is the home of the risktaker, for Bernie likes a bet or two and it was somehow typical we met on the fast catamaran to Macau, me en route to a cheap flight, him to splash the cash on the tables. A very hard man to categorise. Very affable face to face, fond of a drink or three but with the best distribution in the business. Bernie B has every little port paper in the world on his distribution. If you need a crane driver and you are the worst paying port operator in South Asia, Bernie can find you one (for a very reasonable fee). If you need to produce the glossy but stodgy sandwich of documents necessary for an IPO on one of the worlds stock exchanges, Bernies stable of designers, wordsmiths and lawyers will do the needful. But the killer ap for Bernie B is how prepared he is for when the sticky stuff hits the fan. Hours it seems after some bulker spills its guts on some picturesque coast, days before the dozy Clubs and insurers get their acts together, a grave faced company representative appears on the screens and in the breakfast newspapers, to the naked eye a company spokesman, to we few, one of the small team of actors employed by Bernie to help him manage the periodic crises arising in the industry. Like the villains in many Hollywood films, these character actors tend to be British, middle aged, weary looking and many times married. How Did Bernie B get to where he is today? Like many he began his rise in the field of PR as a journalist for a trade paper, Powered Ships, back in the early 1970s. Didactic, scary sub-editors hammered his command of good clean prose into him. Busy as he is, Bernie B can still knock out 400 words of crystal clear prose on any subject of the hour. Dozens of people in the industry first learned to endure the blue pencil wielded by Bernie B. Yet it is not entirely clear where he comes from. There is a touch of the middle European about him, but he swears he is part Belgian. He speaks English like a native, but can converse and swear in Cantonese to a standard that has made him famous in South China. Certainly he can work in German French or Russian when he needs to.
May/June 2011

He is very able at merging and demerging with much bigger companies. He has sold and resold companies like B Associates or B PR or some variation on that theme many times. He seems to profit from the knowledge that the big battalions never quite get shipping and transport, nor do they manage to proceed beyond the oily rag image that more or less prevails in the world for the industry. For Bernie Bs success rests on something like an innate ability to turn a profit married to the wonder and enthusiasm of an industry nerd. He is still something of a ship-spotter. He can still be found at the end of a quay scrutinising a ship. His address book of people who really know ship construction is a legend. He is rumoured to be in negotiation with a large PR conglomerate that is anxious to get into shipping. Will it be a deal too far? Will the man with the goatee prevail? How much longer can his liver endure the abuse? When will the Tai Tai get her way and force him to retire? All very hard to saysuch is the highwire act of Bernie B, dean of the PROs.]

asiamaritime

41

amdiary

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

Winners stand on ceremony at the seatrade Asia Awards in hong Kong

Hong Kong plays Host to sHippings finest

At lAst the spotlight moved to Hong Kong and away from its closest rival as the Seatrade Asia Awards event was shipped in to the Grand Hyatt on June 17. Award winners, Harry Banga of Noble Group (Seatrade Lifetime Achievement Award), Wah Kwongs vice chairman Sabrina Chao (Seatrade Young Person of the Year), and president of China Rongsheng Heavy Industries Group, Chen Qiang (Seatrade Personality of the Year), mingled amidst a gathering of more than 450 guests. Other notable winners included Pacific Basin (Bulk Operator Award), Thome Ship Management (Ship Manager Award), HSBC (Ship Finance Award), while China Rongsheng picked up its second award of the night in the Shipbuilding category. In a time of general gloom for the industry, a night of communal back-slapping is always a welcome event. ]

CHanging of tHe guard at nol

the impending exit of NOL chief executive Ron Widdows, announced at the end of April looks, as each day passes, like a tip of the iceberg moment. During his threeyear reign at the helm of NOL and a number of years previously with subsidiary APL, Mr Widdows has been a highprofile figure in a high-profile sector of the shipping industry. Apart from his full-time jobs he formerly led the Transpacific Stabilization Agreement and is current president of the World Shipping Council. And yet there is a sense that the magic was leaving this ultimate professional. Mr Widdows could be accused of holding out against the inevitable by refusing to join the megaship rush. His announcement that NOL was finally ordering 10 14,000 teu
Apl president eng Aik meng joins the exodus from Apl

42

asiamaritime

May/June 2011

amdiary

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamama

Winners stand on ceremony at the seatrade Asia Awards in hong Kong

Hong Kong plays Host to sHippings finest

At lAst the spotlight moved to Hong Kong and away from its closest rival as the Seatrade Asia Awards event was shipped in to the Grand Hyatt on June 17. Award winners, Harry Banga of Noble Group (Seatrade Lifetime Achievement Award), Wah Kwongs vice chairman Sabrina Chao (Seatrade Young Person of the Year), and president of China Rongsheng Heavy Industries Group, Chen Qiang (Seatrade Personality of the Year), mingled amidst a gathering of more than 450 guests. Other notable winners included Pacific Basin (Bulk Operator Award), Thome Ship Management (Ship Manager Award), HSBC (Ship Finance Award), while China Rongsheng picked up its second award of the night in the Shipbuilding category. In a time of general gloom for the industry, a night of communal back-slapping is always a welcome event. ]

CHanging of tHe guard at nol

the impending exit of NOL chief executive Ron Widdows, announced at the end of April looks, as each day passes, like a tip of the iceberg moment. During his threeyear reign at the helm of NOL and a number of years previously with subsidiary APL, Mr Widdows has been a highprofile figure in a high-profile sector of the shipping industry. Apart from his full-time jobs he formerly led the Transpacific Stabilization Agreement and is current president of the World Shipping Council. And yet there is a sense that the magic was leaving this ultimate professional. Mr Widdows could be accused of holding out against the inevitable by refusing to join the megaship rush. His announcement that NOL was finally ordering 10 14,000 teu
Apl president eng Aik meng joins the exodus from Apl

42

asiamaritime

May/June 2011

ammaritimes back pages

amamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamamam

All ChnAge At nOl

K K Chadha looks back to the origins of Singapores most successful shipping venture
Singapore container Shipping giant Neptune Orient Lines has been in the news following the announcement that Ron Widdows would retire as group president and chief executive officer at the end of this year. Mr Widdows, 57, has been with NOL for 30 years and will remain as a senior adviser when he is replaced by Mr Ng Yat Chung, a senior executive of Singapore Governmentowned investment company Temasek Holdings. Mr Ng, 49, spent 28 years in key leadership roles in the Singapore Armed Forces, including a stint as chief of Defence Force, before joining Temasek in 2007 as portfolio management managing director. Temasek Holdings owns about 68% of NOL. NOL says that Ngs appointment stems from the companys ongoing succession planning and leadership renewal process. Mr Widdows became NOLs CEO in 2008 after heading its container shipping business APL from 2003. NOL acquired APL (American President Lines) in 1997. fleet was 20-strong and by the mid-1970s NOL had turned its first profit under the leadership of managing director Goh Chok Tong, who went on to become Singapores second Prime Minister. The 1970s marked the true era of containerisation - an opportunity that NOL seized with investments in new purpose-built vessels. NOL entered the Asia-Europe trade as part of the ACE consortium with partners OOCL and K Line, while the companys foray into the key Trans-Pacific trade began with a standalone service. NOLs successful Initial Public Offering (IPO) in 1981 reflected its coming of age, raising S$155m (US$126m) to fuel further growth, expand the company and diversify ownership beyond the government. The maturing NOL group continued to grow landside capabilities to augment its liner business, and by the early 1990s had diversified into the lightering business with oil and petroleum product tankers - under the brands AET (American Eagle Tankers) and NAS (Neptune Associated Shipping). The NOL groups brands, APL and APL Logistics, are leaders in the global container transportation industry with more than 11,000 employees providing services in over 140 countries, helping to make NOL the largest shipping and transportation company listed on the Singapore Stock Exchange. As of today NOL is active in tackling a range of key issues in the global supply chain on behalf of its customers, from changing security requirements to the increasing importance of China and India, the challenges facing the Panama Canal and infrastructure-related congestion in North America. ]
May/June 2011 the neptune coral, one of the first cellular container vessels in the noL fleet, introduced in 1977

out of the box

APL was one of the first shipping lines in the world to sense the customer benefits of containerisation. In 1958 APLs CEO Ralph Davies, an oil man, sent a fact-finding mission to 26 major ports to assess the readiness for containers around the world. Despite a skeptical industry, around 25% of all APL cargoes in the Pacific were containerised a decade later, with the figure leaping to nearly 60% by 1973.

Birth of noL
NOL began life in December 1968 as Singapores national shipping line, wholly-owned by the government just as it was becoming clear that containerisation was the way of the future. Today, NOL group has grown to be a major force in global container transportation and logistics through its industry-leading container transport brand APL and its supply-chain management arm APL Logistics. The group now transports more than 2m feu annually. The companys initial fleet of five vessels faced tough competition from well-established players during those early days including large British and European consortia, which had dominated the major trade routes since the 1820s. Against tremendous odds, NOL charted a path of growth - expanding into new trades with new services. By 1973 the companys
44

asiamaritime

ASIA

5th Annual TPM Asia Conference

October 11-12, 2011
Intercontinental Shenzhen, China

TPM Asia presents a series of in-depth sessions with top-level speakers focusing on container trade and logistics in the Europe-Asia, Trans-Pacic, and Intra-Asia markets, from an Asian perspective. This conference will address these issues head-on, with keynote speakers, roundtable discussions and formal presentations. The objective is to give shippers, carriers, 3PLs, terminals and other industry professionals a detailed brieng on a range of urgent issues affecting container shipping and logistics in Asia.

Specic topics for discussion include:

Beyond the coast: big labor cost increases in traditional manufacturing regions in China are forcing the relocation of manufacturing and assembly deep into the hinterlands, creating urgency around inland transport connections including container on rail. To what degree should shippers seek to manage this? How are labor shortages impacting origin consolidation and other logistics activities? Capacity, supply and demand and rate outlook on the East-West trades. Global economic overview: Trade, consumer spending, global imbalances and performance of individual national economies all impact on container shipping volumes. South China economic development post-recession

Sponsorship opportunities are also available!

Greg March
Asia Director The Journal of Commerce Hong Kong Tel: +852 2585 6119 gmarch@joc.com

For more details, contact:

For general or registration inquiries, please email us at joc@events.com.

Silver Sponsor Organized by

Hosted by

Platinum Sponsors

Lanyard & Badge Sponsor